Bureau of Land Management: Improvements Needed in Internal Controls over Mining Law Administration Program Funds
Released: 2015-07-29T00:00:00

Letter

Background

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.”

Importance of Internal Controls

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.

BLM’s Mining Law Program Was Appropriated and Expended Almost $40 Million Annually in Fiscal Years 2011 through 2013

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.

BLM’s Deficiencies in the Design and Implementation of Internal Controls over Mining Law Program Expenditures Weaken Accountability for Program Resources

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.

Selected BLM Policies and Procedures on Mining Law Program Expenditures Are Outdated, Inconsistent, and Not Effectively Communicated

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.

BLM Did Not Effectively Implement Controls to Reasonably Assure That Mining Law Program Nonpayroll Expenditures Were Properly Recorded and Supported

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.

Transactions Lacked Evidence That Expenditures Were Related to or Reasonably Allocated to the Mining Law Program

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.

Transactions Lacked Authorization

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.

Transactions Lacked Evidence of Timely and Adequate Supervisory Review of Supporting Documentation

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.

Selected Adjustments to Mining Law Program Nonpayroll Expenditure Transactions Were Not Supported or Promptly Recorded

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.

Interviews Indicate Hours Worked Were Not Recorded Consistent with BLM Policy

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments

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.

Appendix I: Objectives, Scope, and Methodology

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.

Appendix II: Comments from the Department of the Interior

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.