Beginning in 1993, mining fees have included an annual $100 mining maintenance fee on unpatented mining claims and sites and a $25 location fee on new claims and sites. The maintenance fees are collected in lieu of the annual $100 worth of labor or improvements required by the Mining Law of 1872. In addition, the Department of the Interior appropriations act for fiscal year 1993 and each fiscal year since established an amount of BLM’s appropriation for MLR to be used for MLAP operations. However, the appropriations acts require that the mining fees that BLM collects be credited against the MLR appropriation used for MLAP operations until all MLR funds used for MLAP are “repaid.” To the extent that fees are insufficient to fully credit the MLR appropriation, the MLR appropriation absorbs the difference and therefore partially funds MLAP. At the end of the fiscal year, BLM issues a reverse warrant to the Treasury for the amount of fees collected. MLAP operations deal with locatable minerals, which include base and precious metals (also called “hardrock minerals”), on public lands. MLAP operations do not include work on nonlocatable or common variety minerals, such as sand or gravel, or oil and gas work. MLAP operations do include: reviewing and approving plans and notices of mining operations, conducting a comprehensive program of inspections and enforcement to ensure compliance with the terms of plans and notices of operation and related state and local regulations, identifying and eliminating cases of unauthorized occupancy of mining conducting validity examinations of mining operations in order to eliminate cases of mineral trespass, completing mineral examinations and processing of the “grandfathered” mineral patent applications, collecting and processing mining fees, and collecting and processing waivers of maintenance fees. We examined how labor was charged to MLAP by BLM during the first 10 months of fiscal year 2000. We also examined BLM’s methodology for identifying contracts and services that were improperly charged to MLAP during fiscal years 1998 and 1999 and evaluated the processes and procedures developed to correct the improper charges. We also asked employees whether they were familiar with the source of MLAP funding. To accomplish our first objective, we obtained records for MLAP’s fiscal year 2000 collections and labor obligations from BLM’s accounting and payroll systems and conducted a statistically representative survey o 125 BLM employees who charged time to MLAP during the period of October 1, 1999, to July 15, 2000. Our review focused on nine of BLM’s administrative states and offices: Alaska, California, Colorado, Eastern States, Nevada, New Mexico, Oregon, Utah, and Washington Office. To accomplish our second objective, we reviewed the documentation used in BLM’s review of the contracts and services over $1,500 charged to MLAP for fiscal years 1998 and 1999, a total of 491 contracts. These 491 contracts represented over $8.0 million, or 89.3 percent, of the contracts and services charged to MLAP during this time period. For our third objective we included a question in our survey asking employees whether they were aware of the source of funding for MLAP. We did not independently verify the reliability of the accounting data provided nor did we trace the data to the systems from which they came. We conducted our work from August 2000 through December 2000 in accordance with generally accepted government auditing standards. A detailed discussion of our objectives, scope, and methodology is contained in appendix I of this report. BLM provided written comments on a draft of our report. The comments have been incorporated as appropriate and are reprinted as appendix II. We considered but did not reprint the attachment referred to in BLM’s comment letter. The results of our survey indicated that BLM employees’ hours charged to MLAP were not a reliable record of hours actually worked on that program. According to employees, hours were often charged to MLAP in excess of hours worked or for work unrelated to mining. In addition, individuals received bonuses or awards from MLAP funds although they charged no labor to the program. An accurate accounting of MLAP costs is crucial for proper program management and accountability and serves as a basis for estimating future costs when preparing and reviewing budgets. Proper tracking and recording of MLAP costs is especially important since this program is partially funded through mining fees that Congress has made available only for mining law administration program operations. “Charging work tasks, employee salaries, procurement or contract items, or equipment purchases to any subactivity other than the benefiting subactivity violates the terms of the Appropriations Act. Similarly, when procurements are charged to a given subactivity simply because “money is available there” but have no direct relationship to 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.” While approximately one-half of the BLM employees stated that they worked and charged the same amount of time to MLAP, we found that 38.9 percent charged more time to MLAP than they actually worked. Of this 38.9 percent, 17.6 percent of the employees stated that they did not work on MLAP at all during the 10 months of our study period, although a portion of their labor had been charged to the program. In contrast, approximately 11.4 percent of BLM employees reported charging less time to MLAP than they actually worked. These results are summarized in table 1. Our survey results showed that there were wide variations between the hours worked and the hours charged to the program among the employees who did not work and charge the same amount of time to MLAP. For example, we found three respondents who reported working 50, 70, and 75 percent of their time on MLAP during our study period, but charged 100 percent of their time to the program. One respondent reported doing no work on MLAP and charging 60 percent of the work hours to the program. In contrast, another respondent reported working 60 percent of the time on MLAP and charging only 11 percent to the program. From our survey results, we were able to compute the total number of hours worked and charged to the program and calculate an estimated net overcharge to the program of about 10.8 percent. Based on this percentage being applied to the 10-month MLAP payroll of approximately $11.4 million for the nine administrative states and offices under review, we estimate the potential net dollar overcharge to MLAP to be about $1.2 million. The total MLAP payroll for all states and offices was approximately $24.0 million for fiscal year 2000. We asked the employees who stated that they charged more time to MLAP than they worked to explain why the additional time was charged to MLAP. During survey pretesting we had identified four possible explanations, including: (1) time was charged based on the funding allocations (in other words, charges were made to subactivities from which funds were available for obligation rather than from the subactivity related to the task), (2) time was charged based on the directions of a supervisor, (3) time was charged based on the directions of a budget officer, and (4) no other codes were available to charge (for example, the task being done may not have been anticipated in the budget allocation and therefore the proper subactivity code was not available to the office). The results of their responses are presented in table 2. Employees could provide more than one explanation for the overcharging; therefore the percentages in the table total to more than 100 percent. In addition, we asked the employees who stated that they charged more time to MLAP than they worked to specify the tasks that they had charged to MLAP. They reported charging time for such non-MLAP related tasks as processing and approving applications to drill oil and gas wells, working on environmental remediation projects, doing recreation management, and performing vehicle maintenance. BLM officials stated that work involving these tasks should not have been charged to MLAP. Employees also stated that they had charged MLAP for labor involved in preparing mineral reports for land exchanges and conducting work on common variety minerals, such as sand and gravel. BLM officials stated that charging these tasks to MLAP would be improper except for specific and unique cases—for example, preparing a mineral report on a land exchange involving a mining claim or making a validity determination on a mining claim involving sand and gravel deposits. Our survey did not address whether the tasks charged to MLAP were for any of these specific and unique cases. Some BLM employees expressed uncertainty as to which tasks were appropriate to charge to MLAP. For example, some employees stated that work on mineral reports for land exchanges or abandoned mine lands should not be charged to MLAP, while other employees told us that they believed that any mineral-related tasks, including work on sand and gravel operations, could be properly charged to MLAP. All of the employees were asked whether they alone determined which subactivity, including MLAP, would be charged for their labor. In our study population, 68.5 percent of the employees responded that they had received directions as to which subactivity to charge. Of these 68.5 percent, approximately 66.3 percent stated that they received either written or verbal direction from their supervisor and 55.7 percent stated that they received either written or verbal direction from the budget officer/official. In total, 93.7 percent of these employees received written or verbal direction from either a supervisor or budget officer. Labor obligations represent a significant portion of total MLAP obligations—about 73.6 percent in fiscal year 2000—therefore, improperly charging labor to MLAP could result in the Congress and program managers using program cost information that is significantly misstated. From BLM’s accounting records we identified 27 individuals who received approximately $34,000 in bonuses or awards financed by MLAP funds, but who had not charged any hours to the program. Because there were no hours charged, these individuals were excluded from our survey; however, we did contact BLM officials to determine the reasons for nine of the awards and bonuses. As stated previously, BLM’s policy is that labor associated with any task should be charged to the subactivity benefiting from that labor. In addition, we interviewed BLM’s Director of Budget to determine BLM’s policy for charging bonuses and awards. He stated that any bonuses and awards received as a result of the labor performed should also be charged to the subactivity that benefited from that labor. We found that five awards had been given to employees working on a special project requiring the collection of mining claim documents for the Department of the Interior’s Office of the Solicitor General. They received awards from MLAP funds, even though the hours and associated labor for the special project were not charged to MLAP. BLM officials stated that charging these awards to MLAP was appropriate and that the associated labor should also have been charged to the program. Not charging the associated labor costs to MLAP resulted in program costs being understated. The remaining four awards were given to individuals for (1) researching historical land data for a land withdrawal program, (2) assisting in the moving of a BLM office to a new facility, (3) selling a private residence as part of a lateral transfer and not using BLM’s relocation service, and (4) performance resulting in an end-of-year bonus to a Lands and Realty specialist. When asked why these four individual bonuses and awards had been charged to MLAP, BLM officials either could provide no explanation or stated that MLAP had been charged by mistake. These over- and under-charges to MLAP further distort the cost of the program and undermine the usefulness of MLAP operating data for decision-making or performance reporting purposes. As a result of findings discussed with BLM management and provided in an April 2000 congressional briefing, the Acting Director of BLM directed BLM’s administrative states and offices to review contracts and services costing over $1,500 that were charged to MLAP during fiscal years 1998 and 1999. The contracts reviewed represented over $8.0 million, or 89.3 percent, of the contracts and services obligated to MLAP during this time period. The methodology BLM used to identify contracts and services improperly charged to MLAP during fiscal years 1998 and 1999 was reasonable and resulted in BLM determining that about $716,000 in contracts and services should not have been charged to MLAP. These improper payments included: over $34,000 for janitorial services, $30,000 for the appraisal of federal coal leaseholds, $25,000 for an attorney in an Equal Employment Opportunity settlement for an employee who had not worked on MLAP tasks, $2,800 for a cultural survey of an area prior to an off-highway vehicle and motorcycle race, and $2,000 for a habitat survey of a threatened and endangered species of butterfly in an area with no active mining. In addition, on the basis of our review, we questioned whether an additional $40,000 for two contracts and services were improperly charged to MLAP. These contracts and services were for a cooperative agreement for Geographic Information System (GIS) support and a biological survey. BLM officials concurred and stated that correcting adjustments would be made to the proper appropriation for the additional $40,000. BLM prepared Instruction Memorandum 2000-148 (IM-148) to provide guidance on correcting the contracts and services charges that were improperly charged to MLAP in fiscal years 1998 and 1999. IM-148 required all offices that had improperly charged contracts and services to MLAP to develop implementation plans to replace the funds and submit those plans to BLM’s Director of Budget. Fourteen administrative states and offices developed and submitted implementation plans to make about $716,000 in correcting adjustments. These correcting adjustments must be made to the appropriations that were properly available when the obligations were incurred and BLM’s records adjusted accordingly to charge that appropriation. BLM officials have told us that they are identifying the appropriations for fiscal years 1998 and 1999 that should have been charged for the costs of these contracts and services and that there are sufficient funds to make the correcting adjustments of about $716,000. According to BLM’s Reports on Budget Execution filed with the Office of Management and Budget for the fourth quarters of fiscal years 1998 and 1999, MLR unobligated balances were $54 million and $32 million, respectively. On the basis of our review, we determined that BLM offices have complied with all of the requirements in IM-148. While the memorandum stated that all funds, not just MLAP funds, should be expended appropriately and costs properly recorded in BLM’s financial management systems, it did not establish any additional procedures on how to implement this policy to prevent future improper charging of MLAP funds. Therefore, until additional procedures specifically for MLAP are established and implemented, BLM has little assurance that improper charging of MLAP funds will not recur in the future. Finally, as requested, in our survey we asked BLM employees whether they were aware of the source of funding for MLAP. Approximately 47.7 percent of BLM employees stated that they were not aware of the source of funding for MLAP programs. In addition, of the 52.3 percent of employees who stated that they were aware of the source for this funding, about 42.5 percent did not know that the funding was based in part on mining fees and designated for MLAP operations. In total, an estimated 69.9 percent of BLM employees were either not aware of the source of MLAP funding or did not know that the program is partially funded by fees collected from miners that are legally available only for MLAP operations. The Congress and program managers need accurate cost information in order to make informed program and budgeting decisions. BLM’s Fund Coding Handbook recognizes that accurate records of costs and accomplishments are critical for planning and decision-making. However, the results of our work at BLM show that BLM’s financial records have not accurately reflected the true costs of its programs because the costs of some labor and a number of contracts and services costs were not charged to the appropriate program. Other subactivities have benefited from the charging of these improper costs to MLAP. Correspondingly, fewer funds have been available for actual MLAP operations. BLM has taken steps to make correcting adjustments for certain of these improper charges, including the development of an Instruction Memorandum. However, the memorandum dealt only with improper charges occurring in fiscal years 1998 and 1999 and did not establish specific guidance or procedures to prevent improper charging of MLAP funds from recurring in the future. Therefore, until additional procedures for MLAP are developed and implemented, the Congress and program managers can place only limited reliance on the accuracy of MLAP cost information. We recommend that the Director of the Bureau of Land Management take the following four actions: make correcting adjustments for improper charges to appropriation remind employees that time charges and other obligations are to be made to the benefiting subactivity as stated in BLM’s Fund Coding Handbook and develop a mechanism to test compliance; provide detailed guidance clarifying which tasks are chargeable to MLAP operations, such as those listed in the background section of this report; and conduct training on this guidance for all employees authorized to charge MLAP. In commenting on a draft of this report, BLM concurred with the findings and recommendations contained in our report. BLM’s response indicated a number of actions it planned to take to address the respective recommendations. Additionally, BLM indicated it would endeavor to improve monitoring guidance and training to ensure the accuracy of costs associated with MLAP. BLM’s comments have been incorporated as appropriate and are reprinted as appendix II. We considered but did not reprint the attachment referred to in BLM’s comment letter. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this report. At that time, we will send copies to the Ranking Members, Senate Committee on Energy and Natural Resources and its Subcommittee on Forests and Public Land Management; the Ranking Minority Members, House Committee on Resources and its Subcommittee on Energy and Mineral Resources; Honorable Gale Norton, the Secretary of the Interior; and Nina Hatfield, the Acting Director of the Bureau of Land Management. Copies will also be made available to others upon request. If you or your staff have any questions concerning this report, please contact me at (202) 512-9508 or Mark Connelly, Assistant Director, a (202) 512-8795. Key contributors to this assignment are listed in appendix III. Our review examined labor charged to the Mining Law Administration Program (MLAP) by the Department of the Interior’s Bureau of Land Management (BLM) during the first 10 months of fiscal year 2000. We also examined BLM’s methodology for identifying contracts and services that were improperly charged to MLAP during fiscal years 1998 and 1999 and evaluated the processes and procedures developed to correct those improper charges. Finally, we determined whether BLM employees were aware of the source of MLAP funding. To accomplish our first objective, we obtained the records for MLAP’s fiscal year 2000 collections and labor obligations from BLM’s accounting and payroll systems. During fiscal year 2000, BLM collected over $22.7 million in MLAP fees, with BLM’s Nevada State Office collecting approximately $11.1 million, or approximately 48.9 percent of the total collections. In the same year, MLAP reported obligations totaling approximately $32.6 million. As agreed, our review focused on BLM employees charging time to or receiving pay from the Mining Law Administration Program in Alaska, California, Colorado, Eastern States, Nevada, New Mexico, Oregon, Utah, and Washington Office for the period October 1, 1999, through July 15, 2000. The nine administrative states and offices reported MLAP obligations of over $23.4 million, representing approximately 72 percent of total MLAP obligations. BLM classified these obligations as either labor or operational in purpose. Labor obligations, including leave surcharge, for the nine administrative states and offices totaled over $17.4 million, over 74 percent of the total obligations for the nine administrative states and offices in fiscal year 2000. In order to evaluate labor charges to MLAP by BLM during fiscal year 2000, we conducted a statistically representative survey of BLM employees who had charged MLAP during this 10-month period. The survey included questions regarding employees’ time keeping and reporting practices during the survey period, the tasks they worked on, and the subactivities charged for their work. We specifically asked employees in our survey whether they were aware of the source of MLAP funding. Estimates included in this report are representative of the study population for this 10-month period. The study population consisted of 744 BLM employees for whom work was charged to MLAP appropriation account during the period of October 1, 1999, through July 15, 2000, in the nine administrative states and offices listed above. Excluded from the study population were those employees who did not charge work to MLAP, even if they had other charges to the funds appropriated for MLAP operations. The sample design for this study is a single-stage stratified sample of the employees in the study population. The nine administrative states and offices are the strata for our study population. The sample of 125 employees was selected from the strata in proportion to the study population in each stratum. We obtained 116 useable responses from this sample. The population, sample allocation, and sample disposition are summarized in the following table. The survey questionnaire was pretested twice and then distributed to survey participants in advance of the telephone interviews. Interviewers used a computer-assisted data entry program to conduct the telephone interviews and to input the sample data into a database. This was a telephone survey, with hard copy of the questionnaire made available to the respondent a couple days prior to the telephone interview. Data were collected between October 25 and November 20, 2000. Follow-up interviews were performed between November 21 and December 21, 2000. We received useable responses from 116 sampled employees for an overall response rate of 92.8 percent. The nonrespondents consisted of nine individuals who were no longer BLM employees and could not be located, had retired, or were on extended sick leave. Response rates by strata are summarized in table 3. After weighting survey responses to account for selection probabilities and nonresponses, estimates were produced for various characteristics of the study population. Because we followed a probability procedure based on random selections, our sample 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 (for example plus or minus 9 percentage points). This is the interval that would contain the actual population value for 95 percent of samples we could have drawn. As a result, we are 95-percent confident that each of the confidence intervals in this report will include the true values in the study population. In this report, all percentage estimates from MLAP survey have sampling errors of plus or minus 9 percentage points or less, unless otherwise noted. In addition to the reported sampling errors, the practical difficulties of conducting any survey may introduce other types of “nonsampling” errors. For example, differences in how a particular question is interpreted, the sources of information that are available to respondents, or the types of employees who do not respond can all introduce unwanted variability into the survey results. Although we did not verify respondents’ answers, we did include steps in the questionnaire design, data collection, data entry, and analysis processes to minimize nonsampling errors. Specifically, we modified our questions based on pretests to make them more understandable and easier to answer. We made repeated attempts to contact sample employees to encourage a high level of response that would reduce any potential nonresponse bias. As data were keyed, they were automatically checked for internal consistency and for out-of-range values. An additional review of survey estimates revealed internally inconsistent data between two questions for eight survey respondents. We made follow-up phone calls to these respondents and reconciled the noted inconsistencies. Another potential source of nonsampling error in this survey would be the reporting of information for the wrong time period. Estimates from this survey are only applicable to the time period from October 1, 1999, to July 15, 2000. In order to reduce the possibility that respondents might report on labor performed after the end of the study period, language was included with many of the survey questions to remind the respondent that they should only respond about labor performed during the study period. Estimates from this survey are only applicable to the time period from October 1, 1999, to July 15, 2000, and cannot accurately represent labor performed over the entire fiscal year. For example, if employees tended to charge more or less time than worked to certain programs during the last 2 months of the fiscal year, that labor would not be reflected in survey estimates. Our study population was limited to those BLM employees who charged work to MLAP during the study period. Consequently, the estimates from the MLAP survey would not reflect any labor by employees who worked on MLAP during the study period but did not charge the program. In addition to our statistically representative telephone survey, we conducted telephone interviews with judgmentally selected BLM employees who had received awards or bonuses from MLAP, but had not charged any time to the program. To accomplish our second objective, we reviewed the documentation used in BLM’s review of the contracts and services over $1,500 charged to MLAP for fiscal years 1998 and 1999, a total of 491 contracts. These 491 contracts represented over $8.0 million, or 89.3 percent, of the contracts and services obligated to MLAP during this time period. We conducted walkthroughs of the procedures BLM performed in that review and evaluated BLM’s criteria for determining appropriate use of MLAP funds. We also interviewed field office personnel regarding internal controls associated with the requisition and approval of contracts and services. In order to review BLM’s procedures for making correcting adjustments for improper charges to MLAP, we obtained and reviewed BLM’s Instruction Memorandum No. 2000-148 (IM-148), which required all offices that had improperly charged contracts and services to MLAP to develop implementation plans for the replacement of the miscoded MLAP funds and submit those plans to BLM’s Director of Budget. We then interviewed BLM officials responsible for coordinating the implementation of IM-148, reviewed the procedures taken to comply with IM-148’s requirements, and verified that the procedures had been followed by reviewing the pertinent documentation, including implementation plans, reports of budgetary transactions, and budget control printouts. We compared the contracts and services listed in the transactions reports prepared by BLM’s Man’agement Information System with the lists of contracts and services submitted by BLM’s administrative states and offices to test the completeness of BLM’s sample. Finally, we reviewed the 491 contract amounts using the documentation provided to BLM. We examined the amounts cited, the services provided, and the justifications given in order to verify that the charges to MLAP were appropriate. We did not independently verify the reliability of the accounting data provided nor did we trace the data to the systems from which they came. We conducted our work from August 2000 through December 2000 in accordance with generally accepted government auditing standards. Mark P. Connelly, Edda Emmanuelli-Perez, Lisa M. Knight, W. Stephen Lowrey, Miguel A. Lujan, Mark F. Ramage, Shannah B. Wallace, and McCoy Williams made key contributions to this report. The first copy of each GAO report is free. 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Summary: The Bureau of Land Management's (BLM) Mining Law Administration Program (MLAP) is responsible for managing the environmentally responsible exploration and development of locatable minerals on public lands. The program is funded through mining fees collected from the holders of unpatented mining claims and sites and by appropriations to the extent that fees are inadequate to fund the program. Congress and program managers need accurate cost information in order to make informed program and budgeting decisions. However, GAO found that BLM's financial records did not accurately reflect the true costs of its programs because the costs of labor and a number of contracts and services costs were charged to MLAP and not to the appropriate program. As a result, other subactivities benefited from the charging of these improper costs and fewer funds have been available for actual MLAP operations. BLM has taken steps to make correcting adjustments for improper charges to MLAP contracts and services; however, additional adjustments are needed to correct for labor costs that were improperly charged to MLAP. Until these adjustments for improperly charged labor are made, Congress and program managers can place only a limited reliance on the accuracy of MLAP cost information.