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Audit Review Report Released By DOI Inspector General

The Department of the Interior Inspector General (DOI IG) recently conducted a review of the Minerals Management Service (MMS) Compliance and Asset Management (CAM) Program. The program has generated more than $3 billion in additional funds through MMS’s audit and compliance efforts on Federal and American Indian leases since 1982, when the MMS was created.

MMS auditors use the CAM program to review royalty payments to ensure timeliness and factual accounting. Over the past 24 years, the CAM program has generated an annual average return of more than $125 million, which is a total of more than $3 billion dollars flowing to the American public. Conclusions from the DOI IG report include:

bullet Compliance reviews are a legitimate tool for MMS to use in evaluating the reasonableness of company-reported royalties;
bullet Compliance reviews allowed for broader coverage of royalties received, while requiring fewer resources than a traditional audit; and,
bullet Audit and compliance review data are maintained in multiple information systems that were inaccurate and incomplete.

In response to recommendations in the DOI IG report:

bullet MMS will continue to use compliance reviews in conjunction with audits as part of a coordinated compliance strategy for collecting royalty payments due the American people;
bullet MMS will notify companies of pending compliance reviews to allow for greater visibility to the public and assist in more accurate reporting;
bullet MMS is working toward making more electronic tools available to state and Tribal auditors in the coming year to assist them in their oversight duties; and,
bullet MMS is in the process of implementing the DOI IG’s other recommendations, which include:
 
bullet Addressing data reliability issues with compliance performance measures;
bullet Consolidating systems where appropriate and developing activity based costing information at individual audit and compliance levels;
bullet Strengthening the compliance review process by expanding existing procedures for direct analysis of the Compliance Information Management System, the Government Performance Results Act, and both the Liquid Verification System and the Gas Verification Systems; and,
bullet Implementing a pilot program to further develop and implement risk-based strategies.
 
It should be noted there were questions raised about why actual natural gas royalties did not increase at the same rate as gas prices. The Government Accountability Office (GAO) coordinated a review that disagreed with the criticism and concurred with MMS’s figures. The GAO summarized its findings in the final June 21, 2006, report:
 

bullet “In summary, federal and Native American royalty revenues did not increase at the same pace as oil and natural gas prices between 2001 and 2006 principally because the volumes upon which royalty are based declined substantially during this time.”
 

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Media Contact:
   Gary Strasburg (202) 208-3985

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Last Updated: 10/12/2007, 04:22 PM Central Time