Bureau of Land Management: Improvements Needed in Internal Controls over Mining Law Administration Program Funds
Published: 2015-07-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: BLM's mining law program is responsible for managing the exploration and development of minerals, such as gold, silver, and copper, on federal land. The program is funded through fees collected from holders of mining claims and sites, subject to limits in annual appropriations acts, and is appropriated funds from the Department of the Treasury to the extent that the actual fees collected fall short of such limits.
GAO was asked to review the funding and spending of the mining law program. This report discusses (1) the amounts appropriated and expended for the program and (2) the extent to which BLM designed and implemented internal controls to reasonably assure that designated funds are spent only on mining law program operations. To address these objectives, GAO (1) reviewed relevant BLM policies and procedures and financial data, (2) conducted tests on a statistical random sample of fiscal year 2013 nonpayroll expenditures, and (3) interviewed BLM officials and employees.
section_title: What GAO Found
paragraphs: The Department of the Interior's (Interior) Bureau of Land Management's (BLM) Mining Law Administration Program (mining law program) was appropriated and expended almost $40 million annually from fiscal years 2011 through 2013. Funds are to be used for mining law program activities such as administering mining claims and processing notices for mineral exploration. The mining law program's largest expenditures include personnel compensation and contractual services and supplies, which account for over 96 percent of its expenditures.
BLM has designed internal controls, including policies and procedures over mining law program funds, but some of them are inconsistent, outdated, and not effectively communicated. GAO's statistical tests of fiscal year 2013 nonpayroll mining law program expenditures showed that BLM did not effectively implement controls to reasonably assure that such mining law program transactions were properly recorded and supported.
In addition, in interviews conducted at selected BLM offices, GAO found that some employees were charging hours of work to the mining law program based on funding allocations or supervisor instructions rather than the actual work performed, as required by BLM policies. While these examples cannot be generalized to all BLM employees, they illustrate control deficiencies that increase the risk that BLM employees are not charging the program correctly.
GAO found that internal control implementation deficiencies were the result of design flaws in BLM's policies and procedures as well as the lack of training and monitoring to reinforce them. Because of these deficiencies, BLM does not have reasonable assurance that mining law program expenditures relate to or are reasonably allocated to the program. As a result, the information in BLM's financial records may be at risk of not reflecting the actual cost of the mining law program.
section_title: What GAO Recommends
paragraphs: GAO recommends that BLM (1) review and update its mining law program policies and procedures, as necessary; (2) establish procedures for communicating such changes; (3) develop and implement a related training program; and (4) regularly monitor compliance with its policies and procedures. Interior generally agreed with the findings, concurred with GAO's recommendations, and described actions taken or planned to address each recommendation.

section_title: Letter
paragraphs: The Department of the Interior’s (Interior) Bureau of Land Management  (BLM) is the nation’s largest land management agency and has  responsibility for managing 13 percent of the nation’s surface land and  about one-third of its mineral resources. BLM manages and conserves  resources for multiple uses, including mineral resources development.  Within BLM, the Mining Law Administration Program (mining law  program) is responsible for managing the environmentally responsible  exploration and development of locatable minerals on public land. This  program is funded through mining claim fees collected from holders of  mining claims and sites. From fiscal years 2011 through 2014, BLM has  reported collecting from $58 million to $66 million in mining claim fees  annually while annual appropriations ranged from $37 million to   $40 million. Specifically, BLM reported that it collected about $58.5 million  in mining claim fees in fiscal year 2014, sufficient to fully offset the annual  appropriation of approximately $39.7 million for mining law program  operations in that fiscal year.
In March 2001, we reported on improper personnel charges to BLM’s  mining law program that resulted in a potential overcharge of about   $1.2 million for the nine BLM state offices and administrative offices  included in the review. We were asked to provide an update to the March  2001 report and to review the funding and spending related to mining law  program operations. This report discusses (1) the funding amounts  appropriated to and expended for BLM’s mining law program during fiscal  years 2011, 2012, and 2013 and (2) the extent to which BLM has  designed and implemented internal controls to reasonably assure that  designated funds are spent only on mining law program operations.
To determine the amounts appropriated to and expended for the program,  we reviewed pertinent appropriations laws, Office of Management and  Budget reports, BLM financial reports, and BLM’s calculation and  explanation of the program’s fiscal year 2013 appropriated amount after   We also obtained and summarized detailed expenditure  sequestration. data extracted from BLM’s financial management system for fiscal years  2011 through 2013. To assess the reliability of the data, we reviewed  documentation, discussed the data with knowledgeable officials, and  performed data reliability checks. Based on the results of the procedures  performed, we determined that these data were sufficiently reliable to be  used for our purposes.
Sequestration is the cancellation of budgetary resources provided by discretionary  appropriations or direct spending laws. Under the authority granted by section 251A of the  Balanced Budget and Emergency Deficit Control Act of 1985, as amended, the Office of  Management and Budget determined that the mining law program appropriation was to be  included in the fiscal year 2013 base as discretionary spending that is subject to  sequestration. See 2 U.S.C. § 901a; Office of Management and Budget, OMB Report to  the Congress on the Joint Committee Sequestration for Fiscal Year 2013 (Washington,  D.C.: Mar. 1, 2013), and GAO, March 1 Joint Committee Sequestration for Fiscal Year  2013, B-324723 (Washington, D.C.: July 31, 2013).
BLM’s Arizona and Nevada state offices to determine how controls were  implemented, and we reviewed relevant supporting documentation. We  interviewed BLM officials to clarify policies and procedures for using  mining law program funds. We also interviewed officials from 8 of the 12  BLM state offices to obtain an understanding of controls over employee  time and attendance and how funds are allocated to the BLM state  offices.
To test the implementation of controls over the use of mining law program  funds, we conducted tests on a random probability sample of 100  nonpayroll transactions from the mining law program’s fiscal year 2013  expenditures and projected the results of our probability sample tests.  Our review of fiscal year 2013 expenditures showed that approximately  24 percent of the transactions were adjustments. Therefore, we also  selected a nonprobability sample of 30 adjustment transactions to  examine supporting documentation and determine the nature and  appropriateness of the adjustments. We also interviewed a nonprobability  sample of 43 employees from BLM’s Arizona and Nevada state, district,  and field offices to determine how time and attendance controls were  operating at these offices.
We conducted this performance audit from March 2014 to July 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix I provides additional  information on our scope and methodology.
subsections: section_title: Background
paragraphs: BLM, a bureau of the Department of the Interior, administers millions of  acres of public land for a variety of uses, including mineral resources  development. BLM’s mining law program is responsible for managing the  environmentally responsible exploration and development of locatable  minerals on public land under the General Mining Law of 1872 and the  Federal Land Policy and Management Act of 1976. The General Mining  Law allows individuals and corporations to prospect for mineral deposits  on public lands and locate a claim on the deposits discovered. Since  1993, claimants have been required to pay an annual maintenance fee for  each mining claim and site in lieu of performing assessment work as  previously required under the General Mining Law. Mining claimants  locating new claims or sites must pay a onetime location fee, processing  fee, and initial maintenance fee. Thereafter, the maintenance fee is paid  annually. Currently, the annual per-claim maintenance fee is $155, the  per-claim location fee is $37, and the processing fee is $20. BLM has  authority to use receipts from mining claim fees for mining law program  operations, although the use of these fees cannot exceed the limits  prescribed in BLM’s annual Management of Land and Resources  appropriation.
BLM headquarters in Washington, D.C., and its 12 state offices manage  and oversee mining law program operations. BLM headquarters provides  guidance and oversight for the program. Specifically, within headquarters,  the Energy, Minerals, and Realty Management group, Division of Solid  Minerals, is responsible for overseeing the program. Each state office is  headed by a state director who reports to the Director of BLM at  headquarters. The state offices manage BLM programs and land in the  geographic areas that generally conform to the boundary of one or more  states. The state offices are Alaska, Arizona, California, Colorado, Idaho,  Montana, Nevada, New Mexico, Oregon, Utah, Wyoming, and Eastern  States. The state offices also provide oversight and program guidance to  the district and field offices. Each BLM state office, with the exception of  Eastern States, has several district offices and many field offices. The  state offices also record and adjudicate mining claims. The district and  field offices perform program fieldwork, such as reviewing and approving  plans and notices of mining operations, conducting inspections and  mineral examinations, and taking enforcement actions. In addition to the  state offices, BLM also operates its National Training Center, National  Operations Center, and National Interagency Fire Center to provide  support to all BLM programs. See figure 1 for a map of BLM state offices  and their administrative jurisdictions.
The mining law program includes the following activities: processing notices for exploration, processing and approving plans of operations for exploration and  recording and adjudicating mining claims,  collecting location and annual maintenance fees,  production,  inspecting notices and plans of operations to ensure compliance with  their terms and conditions,  taking enforcement actions when terms and conditions have been  violated,  identifying and eliminating cases of unauthorized occupancy of mining  claims,  reviewing reclamation plans and financial guarantees, and  conducting mineral examinations to determine valid existing rights  under the mining laws.
BLM is responsible under applicable appropriations laws to ensure that  funds appropriated for a specified purpose—such as those funds that  BLM’s annual appropriations provide for mining law program operations— are used for that purpose only and are not augmented with funds  appropriated for different purposes. As such, BLM issues annual budget  directions for all programs, including the mining law program, to outline  the importance of proper budget coding and accounting. BLM records  all mining law program costs of activities under one subactivity code.  BLM’s policy recognizes the importance of accountability for program  funds. Specifically, its Fund Coding Handbook states the following:  “harging work tasks, employee salaries, procurement items, or  equipment purchases to any subactivity other than the benefitting  subactivity violates the terms of the Appropriation Act. Similarly, when  procurements are charged to a given subactivity simply because ‘money  is available there’ but have no direct relationship to that subactivity’s  program accomplishment,  is a violation of the integrity of managers’  financial management responsibility and both the specific policy decisions  and the direction of proper authorities in setting those requirements.  Future year program needs and requirements are based in part on the  record of past years’ costs and accomplishments. Therefore, records of  actual costs and accomplishments must be accurate as possible.”
subsections: section_title: Importance of Internal Controls
paragraphs: To reasonably assure that designated funds are spent only on mining law  program operations, BLM is responsible for designing and implementing  an effective system of internal control. Internal control is an integral  component of an organization’s management that when properly  designed, implemented, and operating effectively, provides reasonable  assurance that the following objectives are being achieved:   (1) effectiveness and efficiency of operations, (2) reliability of financial  reporting, and (3) compliance with laws and regulations. Internal control  represents an agency’s plans, methods, and procedures used to meet its  mission, goals, and objectives and serves as the first line of defense in  safeguarding assets and preventing and detecting errors, fraud, waste,  abuse, and mismanagement.
section_title: BLM’s Mining Law Program Was Appropriated and Expended Almost $40 Million Annually in Fiscal Years 2011 through 2013
paragraphs: According to our review of BLM’s data, reports, and relevant  appropriations laws, BLM was appropriated for its mining law program  approximately $37 million, $40 million, and $38 million for fiscal years  2011 through 2013, respectively. These appropriated funds are available  until expended, meaning that BLM may also carry over any unused  amounts to subsequent years. Table 1 summarizes the resources  available to the program for fiscal years 2011 through 2013.
Interior’s appropriation laws require that amounts appropriated to BLM for  its mining law program be reduced (i.e., repaid) using mining claim fees  that BLM collects. In recent years, BLM has collected funds through its  claim fees that more than fully repay its appropriated amounts. For  example, according to BLM’s budget documents, it reported mining claim  fee collections of approximately $64 million each in fiscal years 2011 and  2012 and $66 million in fiscal year 2013. At the end of the fiscal year,  BLM deposits the amount of fees collected into the Department of the  Treasury’s General Fund. BLM recorded mining law program  expenditures of about $38 million annually for fiscal years 2011, 2012,  and 2013. The program’s largest expenditure was for personnel  compensation and benefits, ranging from 76 to 80 percent of the  program’s total expenditures, over the 3 fiscal years. Its second largest  expenditure was for contractual services and supplies, ranging from 17 to  20 percent of the program’s total expenditures. This category includes  many types of expenditures, such as travel, communications, utilities, and  training. Overall, total reported expenditure trends appeared consistent  from year to year. Table 2 summarizes BLM’s reported expenditure  amounts for its mining law program by major budget category.
section_title: BLM’s Deficiencies in the Design and Implementation of Internal Controls over Mining Law Program Expenditures Weaken Accountability for Program Resources
paragraphs: BLM has designed internal controls, including policies and procedures,  over mining law program funds. However, some of BLM’s policies and  procedures are outdated, inconsistent, and not effectively communicated.  Our review of transactions also showed that BLM did not effectively  implement controls to reasonably assure that mining law program  expenditures were properly recorded and supported. Furthermore, our  interviews with employees indicated that some employees were not  recording hours worked consistent with BLM policy.
subsections: section_title: Selected BLM Policies and Procedures on Mining Law Program Expenditures Are Outdated, Inconsistent, and Not Effectively Communicated
paragraphs: BLM has a directives system that includes permanent and temporary  policies and procedures. Permanent BLM policies and detailed  instructions needed to carry out those policies are contained in BLM’s  manuals and handbooks and have continuing application to BLM  programs. These include the Fund Coding Handbook and the Charge  Cards and Convenience Checks for Travel, Purchase, Fleet, and  Uniforms section of the BLM Manual, which provide policies related to  charging the mining law program as well as other BLM programs. To  update its policies, BLM issues instruction memorandums, which are  intended to be temporary new policy or instructions that must reach BLM  employees quickly. In addition to instruction memorandums, BLM may  transmit supplemental information through information bulletins.has policies and procedures that have been updated or revised through   BLM  these temporary directives. They contain specific policies and procedures  for the use and coding of mining law program expenditures and other  financial and business processes. However, some of these policies and  procedures are outdated, inconsistent, and not effectively communicated.
Two instruction memorandums that alert employees to the importance of  appropriately charging expenditures to the mining law program include  important coding information and provide guidance about charging  operational expenditures to the correct account or subactivity. However,  these instruction memorandums exclude key information and have not  been updated.
Instruction Memorandum 2001-144, Obligations from the Mining Law  Administration Program, is intended to convey coding policies for  charging expenditures to mining law program-related activities, but it  does not include updated coding instructions for charges related to  reviewing reclamation plans and financial guarantees or an updated  expiration date. BLM amended regulations in 2001 to require all  mining operations to provide bonds or other financial assurances  before beginning exploration or mining operations on BLM land. This  is an important mining law program activity because having adequate  financial guarantees to pay reclamation costs is critical to ensuring  that the land is reclaimed if the mining operators fail to do so. The  memorandum was reissued in March 2003, but was not updated to  include coding instructions for charging expenditures related to this  activity. In addition, Instruction Memorandum 2001-144 also contained  inconsistencies in its expiration date information, which could be  confusing to users of this guidance. Specifically, the memorandum  was reissued in fiscal year 2003 but showed a fiscal year 2002  expiration date.
Instruction Memorandum 2004-047, Proper Coding within the Solid  Minerals Subactivities, was issued to provide additional guidance on  proper coding but lists a priority program element code that is no  longer used by BLM for the mining law program.fiscal year 2012, BLM changed the code that was used to capture the  cost for mining law program work activity related to trespass and  unauthorized occupancy cases. The memorandum shows an  expiration date of fiscal year-end 2005.
In addition to the deficiencies identified in these mining law program  instruction memorandums, policies and procedures used for the review  and approval of charge card purchases are also inconsistent. BLM issues  government charge cards to its employees for travel and purchases of  supplies and services. Many of the mining law program expenditures  were paid using charge cards as they are required for travel transactions   In 2008, Interior issued its Integrated  and preferred for micro-purchases. Charge Card Program Policy Manual, which states that within 30 calendar  days of the charge card statement, the approving official must review,  sign, and date the statements and supporting documentation.
Micro-purchases are purchases of up to $3,000 for supplies and $2,500 for services.
Bureau of Land Management, Integrated Charge Card Program Management –  Purchase Business Line, Information Bulletin No. 2011-073 (June 23, 2011). review.Internal Control in the Federal Government states that internal control and  all transactions and other significant events need to be clearly  documented, and that all documentation and records should be properly  managed and maintained.
This inconsistency can create further confusion. Standards for  Further, issues in communicating BLM policies and procedures on  properly coding mining law program funds also contributed to employees  not following such procedures. For example, while instruction  memorandums clarifying the proper coding of BLM activities can be  accessed through BLM’s intranet, BLM officials said that these  memorandums, which are over 10 years old, may be difficult to locate  because they are stored in reverse chronological order by issuance date,  and BLM’s online repository does not include an effective search function.  During our interviews at the Arizona and Nevada state offices, we spoke  with BLM employees who charged the mining law program, and some  employees stated that they were not aware of program-specific policies  for use of mining law program funds.
BLM officials told us that instruction memorandums on properly coding  mining law program funds were not updated because BLM determined it  was more advantageous to use directives included in its annual budget  process to communicate updates on the coding of costs to subactivities  and program elements rather than incorporate these interim policies into  formal policy. However, such directives, which are mainly used by budget  and managerial employees, may not be reviewed closely by specialists in  the field who carry out BLM activities and charge the related codes.  Standards for Internal Control in the Federal Government states that  information should be recorded and communicated to management and  others within the entity who need it and in a form and within a time frame  that enables them to carry out their internal control and other  responsibilities.
Without consistent and up-to-date policies and procedures on the use of  mining law program funds that are readily accessible and communicated  to all employees, BLM lacks adequate controls to reasonably assure that  expenditures are properly recorded to the mining law program. BLM  officials said that they plan to (1) issue a new instruction memorandum  that incorporates the policies set forth in both instruction memorandums  on the importance of appropriately charging the mining law program and  properly coding labor and operational expenditures, (2) clarify information  about the 14-day time frame for the charge cardholder to ensure timely  reviews of the reconciliation, and (3) improve BLM’s capabilities to enable  employees to effectively search policies and guidance on its intranet. In  addition, BLM officials told us that officials from the mining law program  will work with BLM’s Division of Budget to determine how to best update  the Fund Coding Handbook to include the mining law program policies.  BLM plans to issue the revised handbook by December 31, 2015.
section_title: BLM Did Not Effectively Implement Controls to Reasonably Assure That Mining Law Program Nonpayroll Expenditures Were Properly Recorded and Supported
paragraphs: BLM did not effectively implement key control activities to reasonably  assure that mining law program expenditures were properly recorded and  supported. Specifically, we tested a random probability sample of 100  nonpayroll expenditure transactions for fiscal year 2013 for evidence that  each expenditure (1) was accurately recorded to the correct fund,  subactivity, fiscal year, and budget category; (2) was related to or was  reasonably allocated to the mining law program; (3) was authorized; and  (4) underwent supervisory review and approval of supporting  documentation. We found exceptions during each test.
We also found control deficiencies through testing of a nonprobability  sample of 30 accounting adjustment transactions for fiscal year 2013,  including (1) lack of timely supervisory review and therefore delayed  recording of adjustments and (2) inadequate documentation to support  the adjustments.
Figure 2 summarizes the estimated percentages of control deficiencies  found in our nonpayroll expenditures testing.
On the basis of our testing of controls for the random probability sample  of 100 nonpayroll mining law program expenditure transactions, an  estimated 13 percent of the 15,829 fiscal year 2013 mining law program  nonpayroll expenditure transactions were either not recorded accurately  or did not have sufficient documentation for determining whether each  expenditure was accurately recorded to the correct fund, subactivity,  fiscal year, or budget category.consideration whether (1) supporting documentation or BLM officials’  explanations clearly showed another subactivity should have been  charged or (2) BLM did not provide any documentation or the  documentation provided was insufficient. Specifically, in the instances  where evidence or documentation was provided by BLM, the information  showed that the transaction was intended to be recorded to another  subactivity outside of the mining law program. The majority of these were  charge card transactions in which recording errors may have occurred  because the mining law program code was assigned as the default code  to the charge card account, and BLM did not reallocate or adjust the   For these exceptions, we took into  charge to the correct benefitting subactivity. The following examples  illustrate the problems we found.
BLM-provided electronic travel data showed that an employee’s travel  was conducted under the subactivity code for oil and gas  management activities. However, travel costs of $1,069 were  erroneously recorded to the mining law program.
An expenditure for $348 under a contract for mail services was  recorded to the mining law program. However, the contract order did  not contain the mining law program as the chargeable subactivity.
An expenditure for $460 was recorded as office supplies and  materials to the mining law program. BLM provided screenshots from  its financial management system but was unable to provide any  supporting documentation, such as invoices or receipts for the items  purchased.
BLM’s policy is that procurement items, including travel, and equipment  purchases should be charged to the benefiting subactivity. In addition, for  charge card transactions, the cardholder is required to reconcile charge  card statements, annotate the correct accounting code on the charge  card statement, and include supporting documentation. Supervisors are  required to review and approve the charge card statements. BLM also  requires that supporting documentation for transactions be retained.
We identified the lack of training to reinforce policies as a contributing  factor in the implementation issues found in our control tests. BLM  officials told us that they developed a general online course for managers  in January 2013 to provide an overview of the BLM budget process.  Among other objectives, the course was created to help managers plan  and execute the BLM budget and provide guidance on spending  operating funds correctly and using appropriate cost structures and  funding codes. According to BLM officials, the training is not mandatory  but is encouraged for managers and is available to all employees.  However, this course does not address procedures and related controls  specific to the coding and supervision of mining law program expenditure  charges. Additionally, BLM training records showed that only 14 of 128  BLM employees who enrolled in the course had completed it as of   March 10, 2015.
subsections: section_title: Transactions Lacked Evidence That Expenditures Were Related to or Reasonably Allocated to the Mining Law Program
paragraphs: An estimated 14 percent of fiscal year 2013 mining law program  nonpayroll expenditure transactions either (1) lacked evidence to  demonstrate that an expenditure was related to or reasonably allocated to  the mining law program or (2) contained evidence suggesting that other  subactivities should have been charged. The following examples  illustrate the charges to mining law program that were not related to or  reasonably allocated to the program.
An expenditure of $6,525 for patrolling services on all BLM lands was  charged to the mining law program. While reviewing this item, we  noted that the entire $25,000 contract was fully obligated to the mining  law program although it included specific nonmining locations, such  as campgrounds and recreational areas.
An employee who did not perform work for the mining law program  and is employed at a BLM office that does not conduct any mining law  program activities charged the program for travel expenses in the  amount of $260. The purpose of travel was to attend nonmining  training on producing educational exhibits related to environmental  sustainability.
An employee charged the mining law program $539 for a vehicle  rental during the employee’s travel to conduct land surveys in support  of the BLM Legacy Well Program. This program encompasses the  plugging of oil and gas wells in Alaska that are currently not  operational and is not related to the mining law program.
Legal services of $673 were charged to the mining law program.
These services were for legal mediation of administrative grievances  from BLM employees who did not perform work on the mining law  program.
BLM’s policy, in accordance with applicable appropriations laws, is to  assure that mining law program funds are properly expended and that  any costs charged to the program directly relate to or benefit the mining  law program. Also, its Instruction Memorandum 2001-144 states that  overhead support costs and shared service costs must be shared  equitably among benefitting subactivities. Therefore, costs of shared  services that include the mining law program must be equitably allocated  to the mining law program along with other subactivities. As previously  mentioned, BLM did not offer training that addressed procedures and  related controls specific to the coding and supervision of mining law  program expenditure charges.
section_title: Transactions Lacked Authorization
paragraphs: We estimate that 16 percent of fiscal year 2013 mining law program  nonpayroll expenditure transactions lacked evidence that a supervisor or  other approving official authorized the transactions in accordance with  prescribed BLM policies.lacking evidence of authorization were travel transactions recorded using  GovTrip, BLM’s travel system in fiscal year 2013. The following examples  illustrate mining law program nonpayroll transactions that lacked proper  authorization.
The majority of the expenditure transactions
For 11 travel transactions, authorization was not approved by a  supervisor or approving official before travel commenced. These  included 5 instances where travel was completed before the  authorization was approved. The Federal Travel Regulation requires  that an authorization be obtained prior to travel unless it is not  practicable or possible to obtain such authorization. trips appeared to have been for nonemergency activities, such as  training and site visits.
A transaction for lodging costs totaling $161 was incurred, but the  costs were not included in the trip authorization to provide evidence of  prior approval.
41 C.F.R. § 301-2.1.
BLM did not provide supporting documentation for one of the selected  travel transactions to demonstrate that the travel was authorized.
Standards for Internal Control in the Federal Government states that  qualified and continued supervision should be provided to ensure that  internal control objectives are achieved. In its May 2013 audit report,  Interior’s Office of Inspector General also reported similar findings with  travel transactions recorded in GovTrip. In fiscal year 2014, Interior  implemented a new electronic travel system and also issued new travel  guidance, which BLM officials said they expected would improve its  processes for the approval, processing, and payment of authorized travel  expenditures. However, as noted in the next section, BLM did not have a  monitoring process to evaluate employee and supervisory compliance  with mining law program policies.
section_title: Transactions Lacked Evidence of Timely and Adequate Supervisory Review of Supporting Documentation
paragraphs: We found that an estimated 31 percent of fiscal year 2013 mining law  program nonpayroll expenditure transactions lacked evidence that a  supervisor or approving official timely and adequately reviewed required   Examples follow:  transaction support in accordance with BLM’s policy.
In four sampled transactions, supervisory review of charge card  transactions’ supporting documentation was inadequate. For example,  supporting documentation lacked a description of goods purchased,  and in one instance, the charge card statement was not signed by the  cardholder or the supervisor, as required by BLM policy.
We found six instances of charge card statements that were not  approved in a timely manner. For example, one charge card  statement was not approved until 3 months after the statement date.
Our travel sample included eight travel vouchers that were not  submitted for review promptly after the traveler’s return. In two such  cases, vouchers were submitted 57 and 76 business days,  respectively, following trip completion. The Federal Travel Regulation,  which BLM follows, requires that a travel voucher be submitted within  5 working days after completion of trip or period of travel.
For eight transactions, we could not verify whether there was  adequate supervisory review of supporting documentation because  BLM could not locate the supporting documentation, such as receipts,  credit card statements, and travel vouchers, that should be  maintained for these transactions, as required by its policies and  procedures.
BLM’s charge card policies require that cardholders (1) verify that all  transactions are valid and correct by matching each transaction to  receipts and invoices; (2) reconcile their statements and include a  concise, detailed description for each transaction; (3) annotate the  applicable accounting code if the code associated with the cardholder’s  account (default code) is not applicable for the transaction; and (4) sign  and date the statement and include supporting documentation in the  package. Policies also state that supervisors must review and certify  reconciled statements. However, while BLM’s policies include controls for  documenting and reviewing purchase card transactions, these policies  are not consistent on the required deadline for statement reconciliation by  the cardholder. In addition, updates to charge card policies were  transmitted to BLM headquarters, state office, and district office officials  rather than to all BLM employees who are cardholders. Since charge  card purchases are paid automatically, it is critical that all cardholders and  approving officials promptly reconcile and review charge card  transactions so that erroneous charges can be quickly disputed with the  vendor, and fraudulent, improper, or wasteful purchases can be quickly  detected and acted upon. These reviews are also critical to ensuring that  the correct program codes have been charged if the code assigned to the  cardholder’s account differs from the code benefiting from the  expenditure.
Standards for Internal Control in the Federal Government states that   (1) internal control and all transactions and other significant events need  to be clearly documented and the documentation should be readily  available for examination and (2) all documentation and records should  be properly managed and maintained. These standards also state that  qualified and continued supervision should be provided to ensure that  internal control objectives are achieved. Supervisors are a key control in  approving and reviewing transactions to reasonably assure that the  transactions are properly supported and that appropriate codes are used.
However, BLM did not have a monitoring process to evaluate employee  and supervisory compliance with mining law program policies. While BLM  has procedures in place to periodically review purchase card transactions  and check for charge card reconciliations, these reviews are not intended  to identify expenditures that do not relate to the mining law program. BLM  officials told us that they performed a review of contracts charged to the  mining law program in 2000, but they have not since performed any other  similar reviews. Given the significant percentage of transactions that we  estimated (1) lacked evidence of adequate supervisory review of  supporting documentation, (2) were erroneously charged to the program,  and (3) lacked supporting documentation, monitoring compliance with  policies is especially important.
section_title: Selected Adjustments to Mining Law Program Nonpayroll Expenditure Transactions Were Not Supported or Promptly Recorded
paragraphs: Our review of the mining law program’s fiscal year 2013 total nonpayroll  expenditures showed that approximately 24 percent of these transactions  were adjustments to the expenditure accounts. Given the large number of  adjustments to expenditures coupled with the large number of  transactions lacking adequate supervisory reviews, as previously  discussed, we randomly selected a nonprobability sample of 30  accounting adjustments and examined supporting documentation to  determine the nature and appropriateness of these adjustments. The  adjustments consisted of reductions to the expenditures charged to the  program. Many adjustments to mining law program expenditures are  caused by the reallocation of charge card purchases, which occurs when  a BLM employee makes a purchase for the benefit of a program other  than the program to which his or her charge card account was assigned  (i.e., the default program code to the charge card account). Per BLM  policies, BLM employees are required to reconcile their charge card  statements each month and annotate the correct accounting code for  each item. Supervisors are required to review supporting documentation  and approve the individual transactions and the statement reconciliations.
We found issues with 12 of the 30 adjustment transactions selected.  These problems largely involved (1) failure to record the adjustment in a  timely manner because of delays in supervisory review and   (2) inadequate documentation to support the adjustment. Examples  follow:
A charge card statement with charges totaling over $1,100 was not  reconciled by the cardholder and reviewed by the approving official  until 7 months after the statement date.
BLM did not provide documentation to support an adjustment for  $2,257 recorded as supplies transferred out of mining law program  expenditures. Therefore, it was unclear what the charge was for and  what subactivity the expenditure benefited.
Although one non-mining law program expenditure for freight costs  was correctly adjusted, our review of the transaction data showed that  it was charged to the mining law program twice and only adjusted  once, resulting in the freight cost of about $3,000 being paid by the  mining law program.
Standards for Internal Control in the Federal Government states that  internal control activities help ensure that management directives are  carried out and that control activities, which include management and  supervisory reviews, proper documentation, and recording of  transactions, are effective and efficient in accomplishing the agency’s  objectives. Given the large number of accounting adjustments recorded,  effective supervisory review of transactions is key to reasonably assuring  proper accounting of mining law program funds. As discussed previously,  the lack of monitoring was a contributing factor in the issues we found  with the adjustments.
section_title: Interviews Indicate Hours Worked Were Not Recorded Consistent with BLM Policy
paragraphs: Our interviews of a nonprobability sample of 43 employees from two BLM  state office jurisdictions—Arizona and Nevada—indicated that some  employees were not accurately charging their hours to the mining law  program. These two BLM state offices had the highest amounts of  personnel compensation charged to the mining law program in fiscal year  2013, totaling about $9.3 million, or 32 percent of total personnel  compensation charges. BLM’s policy, in accordance with applicable  appropriations law, states that transactions should be charged to the  benefitting subactivity. BLM’s Instruction Memorandum 2001-144 also  emphasizes the importance of charging the mining law program only for  mining law-related transactions. It assigns supervisors the responsibility  to ensure that employee charges to the mining law program are the result  of work that is directly related to program activities. However, over half  of the employees interviewed indicated that they were not aware of the  BLM mining law program policy for recording work hours.
In particular, 18 of the 43 employees interviewed stated that they were  charging time to the mining law program on their time cards based on  work plans developed for budgetary purposes or supervisor instructions  rather than work as it was actually performed. time was also confirmed at another state office we interviewed. Work  plans are designed to aid the funding allocation process for personnel  compensation and are based on factors such as (1) the funds  appropriated and allocated to each BLM state office and (2) an estimate  of the work needed to accomplish program objectives. Although these  plans provide an amount budgeted for labor to each subactivity, the  amounts are estimates of hours to be worked and are likely to be different  from hours actually worked. Examples follow:
Eleven direct-labor employees stated that they charged their hours to  the mining law program based on the work plans provided or  instructions from their supervisors and not in accordance with work  actually performed. Seven of these employees also stated that they  were not familiar with the instruction memorandums that discuss  mining law program charges and coding or did not know the correct  codes for charging certain mining law activities.
The work plans are developed to plan costs based on available budgeted amounts and  provide guidance to employees on codes to charge.
Labor data for one BLM employee in which she self-identified that she  was not working on the mining law program showed over 100 hours  charged to the program in fiscal year 2013. The employee stated that  she did not know the mining law program codes and did not  remember charging them.
One BLM employee noted that managers have instructed employees  to charge one of the codes listed on the work plan first until it is  exhausted. This employee discussed relying on the plan to charge  work hours even though program codes charged do not always align  with the work actually performed.
A temporary BLM employee, who subsequently became a permanent  employee and whose work directly benefitted the mining law program,  stated that he did not charge time to the program in fiscal year 2013  because funds were not allocated for his position. The employee was  instructed to charge hours to another subactivity. The employee  stated that mining law program funds were allocated for his position in  fiscal year 2015 after he brought this situation to the attention of  management.
Although these examples cannot be generalized to all BLM employees,  they illustrate control deficiencies that increase the risk that BLM  employees are not charging their hours to the programs for which they  actually performed work. These findings are similar to the findings in our  March 2001 report.
Of the 18 employees who stated that they were charging the mining law  program based on work plans developed for budgetary purposes or  supervisor instructions rather than work as it was actually performed, 11  conducted work directly related to the mining law program, which included  positions such as environmental coordinator, land law examiner, surface  specialist, and cartographic technician. For employees who perform direct  work for the mining law program, accurate recording of actual hours is  especially important to BLM ensuring that its records are as accurate as  possible and that it is able to use past year records as a basis for  estimating future program needs. The other 7 employees performed  support functions, such as office personnel, information technology, and  finance, which provided services across multiple BLM programs. BLM  allocates the costs of employees who perform support functions across  several subactivities using either of two alternative methods to assess  support costs: (1) actual labor expenditures or (2) base funding.  However, because the actual labor expenditures method relies on actual  charges, it is also important for support employees to properly charge  their time to the activities they supported.
As noted previously for the issues we identified in our tests of nonpayroll  expenditures, our interviews with sampled employees also indicated that  the lack of training to reinforce policies may have contributed to the errors  in charging the mining law program. For example, over half of the 43  employees interviewed at the two largest BLM state offices said that they  were not aware of the policies and procedures related to BLM’s guidance   In addition, the  for charging expenditures to the mining law program. BLM Nevada state office conducted a budget review of the mining law  program in 2012 and recommended training on budget use and coding to  address issues related to mining law program charges identified through  its budget review. However, this training was not conducted for the state  office.
Personnel compensation expenditures represent the majority of the  mining law program recorded expenditures—about 76 percent in fiscal  year 2013. Therefore, improperly charging work to the mining law  program or not recording work to the mining law program could result in  program cost information that is inaccurate for making program  management decisions and for accountability of public resources.
section_title: Conclusions
paragraphs: BLM has policies and procedures for the use and coding of mining law  program charges and other financial and business processes that apply  to all programs. Its policies recognize the importance of accurate cost  records to reasonably assure compliance with applicable appropriations  law and to enable informed decision making and program planning.  However, our review showed that deficiencies in the design and  implementation of BLM’s internal controls resulted in costs erroneously  charged to the mining law program or other programs. Until BLM updates  its policies and procedures and properly implements them through  effective communication, training, and monitoring, there is increased risk  that the mining law program may be charged for future transactions that  do not benefit the program and that its reported information will not  accurately reflect the actual costs of the program or reasonably assure  accountability of program funds.
section_title: Recommendations for Executive Action
paragraphs: To strengthen BLM’s controls and reasonably assure accountability over  mining law program expenditures, both payroll and nonpayroll, we  recommend that the Secretary of the Interior direct the Director of the  Bureau of Land Management to take the following four actions:
Perform a comprehensive review of applicable temporary directives,  including instruction memorandums, related to mining law program  expenditures and update or incorporate them into permanent policies  in BLM’s Fund Coding Handbook or relevant manuals, as appropriate.
Establish procedures for regular and timely communication to all BLM  employees on policy and procedural changes affecting the mining law  program’s expenditure-related processes.
Develop and implement a training program that provides all BLM  employees with an understanding of the use of the mining law  program funds to reasonably assure uniform application and effective  execution of BLM policies and procedures. This training, to be  successful, should be provided to all BLM employees who charge the  program and communicate clear instructions on how employees  should charge, document, and review transactions related to mining  law program expenditures.
Develop and implement internal control activities for regularly  monitoring compliance with expenditure-related policies and  procedures in the mining law program. These activities should, at a  minimum, (1) determine whether transactions were recorded to the  correct subactivity and verified by an approving official and (2) assure  that documentary evidence of review is maintained, as required in  BLM’s policies and procedures.
section_title: Agency Comments
paragraphs: We provided Interior with a draft of this report for review and comment. In  written comments, reprinted in appendix II, Interior generally agreed with  our findings, concurred with our recommendations, and described actions  taken or planned to address each recommendation. Interior also provided  technical comments, which we incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until seven days from the  report date. At that time, we will send copies to the Secretary of the  Interior, the Director of the Bureau of Land Management, appropriate  congressional committees, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff members who made key contributions to  this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to determine (1) the funding amounts appropriated to  and expended for the Mining Law Administration Program (mining law  program) during fiscal years 2011, 2012, and 2013 and (2) the extent to  which the Bureau of Land Management (BLM) has designed and  implemented internal controls to reasonably assure that designated funds  are spent only on mining law program operations.
To determine the amounts appropriated to and expended for the mining  law program, we reviewed pertinent appropriations laws, Office of  Management and Budget reports, BLM financial reports, and BLM’s  calculation and explanation of the program’s fiscal year 2013  appropriated amount after sequestration. We also obtained detailed  expenditure data for fiscal years 2011 through 2013 from BLM’s financial  management system, the Financial and Business Management System   We analyzed expenditures by major budget object categories.  (FBMS).To assess the reliability of the data extracted from FBMS, we reviewed  available documentation and interviewed Department of the Interior and  BLM officials on the procedures used to enter and verify information  entered into FBMS. We also performed data reliability checks that  included conducting electronic testing for obvious errors, such as  duplicate entries and missing values. We found the FBMS data elements  that we used to create our summaries to be sufficiently reliable for the  purpose of reporting mining law program expenditures for fiscal years  2011, 2012, and 2013.
To assess the design of controls related to the use of mining law program  funds, we obtained, reviewed, and assessed relevant policies and  procedures, using Standards for Internal Control in the Federal  Government as criteria.and procedures for the use of mining law program funds. We also  interviewed officials from 8 of the 12 BLM state offices to obtain an  understanding of controls over employee time and attendance and how  funds are allocated to the BLM state offices. The BLM state offices where  we interviewed officials were Alaska, Arizona, California, Idaho, Nevada,  Oregon, Utah, and Wyoming. We also reviewed documents from the BLM  state offices to gather information about BLM’s policies and procedures   We interviewed BLM officials to clarify policies  and controls over mining law program spending. We conducted site visits  at two BLM state offices—Arizona and Nevada—to interview officials and  examine documents on BLM’s processes and controls related to mining  law program spending. We selected transactions at BLM’s Arizona and  Nevada state offices to obtain an understanding of how controls were  implemented and reviewed relevant supporting documentation. These  two BLM state offices had large amounts of total expenditures charged to  the mining law program in fiscal year 2013. The BLM Nevada state office,  including its district and field offices, had $8.2 million, or 22 percent, of the  total mining law program expenditures in fiscal year 2013. The BLM  Arizona state office, including its district and field offices, had about   $3.6 million, or 9 percent, of the total mining law program expenditures in  fiscal year 2013.
To test the implementation of controls over the use of mining law program  funds, we conducted tests on a random probability sample of 100  nonpayroll transactions from the mining law program’s fiscal year 2013  expenditures. With this probability sample, each record in the population  had a nonzero probability of being included, and that probability could be  computed for any record. To select the expenditures for review, we used  BLM’s detailed listing of fiscal year 2013 mining law program  expenditures as discussed for our first objective. The total nonpayroll  expenditures population from which we sampled contained 15,829  records totaling $11.6 million in credits (expenditures) and 5,133 records  totaling $2.6 million in debits (adjustments). Since the adjustments  constituted about 24 percent of the records, we also selected a  nonprobability random sample of 30 adjustment transactions to examine  documentation and determine the nature and appropriateness of the  adjustments. To assess the reliability of the information, we reviewed  available documentation and interviewed knowledgeable Department of  the Interior and BLM officials about the data. We also conducted  electronic testing, for example, looking for duplicate entries and missing  values. We found that the data elements we used were sufficiently  reliable for selecting samples of mining law program nonpayroll  expenditures for review.
Because we followed a probability procedure based on random  selections, our sample of 100 nonpayroll expenditures is only one of a  large number of samples that we might have drawn. Since each sample  could have provided different estimates, we express our confidence in the  precision of our particular sample’s results as a 95 percent confidence  interval (e.g., plus or minus 9 percentage points). This is the interval that  would contain the actual population value for 95 percent of the samples  we could have drawn. Confidence intervals are provided along with each  sample estimate in the report. We used a tolerable error rate of 5 percent  to test internal controls. If the lower bound of the 95 percent confidence  interval was greater than 5 percent, then we considered the control to not  be implemented effectively. The results from our sample apply to the  universe of nonpayroll mining law program expenditures recorded from  October 1, 2012, to September 30, 2013.
With regard to implementation of controls over labor charges, we selected  for interview a nonprobability sample of employees from the two BLM  state offices with the highest amounts of personnel compensation  charged to the mining law program in fiscal year 2013. These two BLM  state offices—Arizona and Nevada, including district offices and field  offices within their jurisdictions—had personnel compensation costs  totaling about $9.3 million, or 32 percent, of the total personnel  compensation costs in fiscal year 2013. We interviewed employees from  the following BLM offices: Arizona and Nevada state offices; Phoenix and  Carson City district offices; and Hassayampa, Lower Sonoran, Sierra  Front, and Stillwater field offices. We obtained BLM data on hours  charged to the mining law program for fiscal years 2011, 2012, and 2013.  We performed analyses of the labor data, including comparing hours from  year to year and by state office. We used the fiscal year 2013 data to  select employees to interview from the selected offices. We selected the  employees based on several factors, including (1) large total number of  hours charged to the program, (2) high average hours charged per pay  period, (3) different grade levels, (4) varying job titles, and (5) varying  suboffices. We conducted face-to-face interviews with 43 BLM employees  to determine how time and attendance controls were operating at these  state offices using a standard set of questions that were developed based  on GAO’s internal control guide, Maintaining Effective Control over  Employee Time and Attendance Reporting.
We conducted this performance audit from March 2014 to July 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of the Interior
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Elizabeth Martinez (Assistant  Director), Mai Nguyen (Auditor-in-Charge), Laura Bednar, Carl Barden,  Maxine Hattery, Jason Kelly, Diana Lee, Jerome Sandau, and Sam Slater  made key contributions to this report.