Detailed Information on the
Minerals Management Service - Minerals Revenue Management Assessment

Consolidate and integrate compliance tracking and accomplishment data to provide one source for reliable, consistent compliance information (by September 30, 2009).

Improve the quality of compliance management information to address the December 2006 Inspector General recommendations, including: (1) establishing and implementing additional controls for updating and maintaining MMS' Compliance Information Management (CIM) system and performance measurement tracking tools and (2) amending the MMS compliance review and audit manuals to reflect changes recommended by the OIG (by November 30, 2007).

Develop FY 2008 audit and compliance work plans, based on interim risk-based compliance criteria and strategy and implement a pilot project to further evaluate, develop, and refine the risk-based compliance criteria and strategy (by February 29, 2008).

Establish and implement new risk-based strategy and measure(s), based on the results of the pilot project (by September 30, 2008).

Implement outstanding May 2006 GAO recommendations regarding geothermal royalties, including: (1) updating the MMS Minerals Revenue Reporter Handbook to reflect the reporting requirements in the new geothermal regulations and (2) performing compliance reviews on two identified geothermal properties (November 30, 2007).

Measure: Estimated net return to the government through RIK

Explanation:MMS's goal is to collect royalties in kind if there is economic advantage to the Government, because of increased revenues, greater administrative efficiency, and/or security needs of the Nation. With this measure, MMS monitors the outcome of MRM's decision to take royalties in kind. It is a net measure of increased revenue and cost avoidance, and targets are cumulative from FY 2005 forward.

Measure: Percent of Federal and Indian revenues disbursed on a timely basis per statute

Explanation:MMS's goal is to timely collect, account for, and disburse Federal and Indian mineral revenues. This measures 1) how timely MRM disburses Federal onshore funds to states (funds impacting late disbursement interest); and 2) how timely MRM distributes Indian lease ownership data to BIA (so that BIA can complete mineral revenue disbursement to the appropriate Indian recipients).

Measure: Percent of royalties for which lease data provided to BIA by first semi-monthly distribution

Explanation:MMS's goal is to provide timely lease distribution data to BIA, so that BIA can ensure more timely mineral revenue disbursements to Indian recipients. The MRM program transfers Indian mineral revenue payments to Office of the Special Trustee for American Indians (OST) the next business day after receipt. Per agreement with BIA/OST, MMS schedules two distributions of lease data monthly to BIA, and this measures how much data MMS provides by first semi-monthly distribution.

Measure: Percent of companies' royalty information reported accurately the first time

Explanation:MMS's goal is to influence company reporting accuracy, which is integral to our success in timely disbursing funds. The MRM receives and processes more than 3.1 million lines of royalty report data each year from companies, and this is a measure of how accurately they report.

Measure: RIK administrative cost efficiency

Explanation:MMS's goal is to reduce cost per Barrel of Oil Equivalent (BOE) while continuing to expand RIK volumes. This will measure MRM's cost effectiveness in administering the RIK program during the last 3 years of the 5-Year RIK Business Plan.

Measure: Late disbursement interest costs

Explanation:MMS's goal is to decrease taxpayer dollars spent on late disbursement interest (LDI) by 90% over 5 years. Per statute, revenue is due the states not later than the last business day of the month following the month of receipt, and interest is due to for onshore revenues not disbursed timely to states. Focusing on reduction in interest will promote all areas of MRM to evaluate reasons for the increased LDI, and to pursue process and systems improvements to increase MRM's overall efficiency.

Measure: Compliance cost/benefit efficiencies

Explanation:MMS's goal is to collect all the money that is due through effective compliance and audit activities. To mitigate variances in collections, thus providing better management information, this is measured as an average over the previous 3 years. MRM costs and collections, as well as those of state and Tribal auditors, are included in this measure.

Measure: Cumulative percent of unique mineral royalty companies covered by compliance activities (2008-2012)

Explanation:Measures the cumulative percent of unique royalty companies covered by MMS/MRM audits, compliance reviews, or royalty-in-kind (RIK) reconciliations.

Measure: Cumulative percent of unique mineral royalty properties covered by compliance activities (2008-2012).

Explanation:Measures the cumulative percent of unique royalty properties covered by MMS/MRM audits, compliance reviews, or royalty-in-kind (RIK) reconciliations.

Is the program purpose clear?

Explanation: The Department of the Interior, through the Minerals Management Service's (MMS) Minerals Revenue Management (MRM) Program, is responsible for managing the revenues generated from offshore and onshore Federal mineral leases and from producing Indian mineral leases. MRM program responsibilities, as outlined in authorizing statutes and the program's strategic plan, include mineral valuation, revenue collection and distribution, and compliance and reporting. The program is authorized to take federal royalties either in-value (RIV) or in-kind (RIK).

Evidence: 1) Authorizing statutes include: The Mineral Leasing Act of 1920; the Indian Leasing Acts of 1909 and 1938; the Outer Continental Shelf Lands Act of 1953; the Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA), as amended by the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA); the Indian Mineral Development Act of 1982 (IMDA); the Debt Collection Improvement Act of 1996; the Chief Financial Officer's (CFO) Act of 1990; the Energy Policy Act of 2005. 2) MRM Strategic Business Plan, December 2005.

Does the program address a specific and existing problem, interest, or need?

Explanation: The Federal Government is the largest single land owner and mineral leasing entity within the United States, and revenues collected by the MRM program are one of the largest sources of non-tax revenue to the Federal Government. Following the enactment of the Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA), the Secretary of the Interior created MMS through Secretarial Order 3087, designating MMS as the bureau responsible for fulfilling the Secretary's obligations to ensure proper fiscal accountability and management of the mineral revenues (rents, royalties, and bonuses) from Federal and Indian lands, in compliance with laws, regulations, and lease terms. In FY 2006, MMS disbursed more than $12 billion in mineral revenues to states, other Federal agencies, U.S. Treasury accounts, and the Office of the Special Trustee for American Indians (OST) for distribution to Indian Tribes and individual owners. MMS's current workload includes the collection and distribution of revenues from over 65,000 mineral leases. This program is needed to ensure that beneficiaries receive their governmentally-determined shares from the disposition of these public and Indian mineral revenue assets.

Evidence: 1) Fiscal Accountability of the Nation's Energy Resources report (Linowes Commission Report); this report formed the basis for FOGRMA. 2) FY 2008 Budget Justification.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: There is no other Federal program that collects and processes producing mineral lease revenue for Federal and Indian lands. MRM collections over the last five years averaged nearly $9 billion annually from approximately 65,000 leases. MRM disburses minerals revenues to state, Federal, and Indian accounts. Industry benefits from uniform rules, regulations, and reporting requirements that result from centralized authority and responsibility and standardized operations. While the MRM program is similar in some respects to private and state operations, it is vastly more complex in scope and scale of activity, variety, and complexity of lease terms and statutes. MRM has to comply with various Federal laws in a way that makes many MRM functions unique. MRM's Royalty-In-Kind (RIK) program is somewhat similar to a royalty-in-kind operation in one state; however, the MRM program encompasses a much larger universe and utilizes multiple marketing options. Although the RIK program performs some functions that would otherwise be performed by private industry, these activities are not necessarily duplicative, and the performance of these functions by MRM creates some advantages to the government, including reductions in other compliance costs and the ability to accumulate production volumes along pipeline legs and receive discounts on transportation and/or processing charges that a single producer may not receive. MRM also has a unique Indian Trust responsibility, as set forward in treaties, statutes, executive orders, and court decisions, to ensure the accurate collection, reporting and disbursement of royalties to Indian Tribes and individual Indian mineral owners from mineral leasing and extraction activities on their lands.

Evidence: 1) Key reengineering benchmarking reports include State Benchmarking Study of Royalty Programs in Wyoming, New Mexico, Louisiana, and Texas. 2) Fiscal Accountability of the Nation's Energy Resources report (Linowes Commission Report). 3) MMS Reported Royalty Revenues (http://www.mrm.mms.gov/MRMWebStats/).

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The MRM program does not appear to suffer from any major design flaws, a conclusion which has generally been confirmed in frequent reviews by the Government Accountability Office (GAO), DOI's Office of the Inspector General (OIG), and others (although these reviews have resulted in many recommendations for operational improvements to ensure sustained and rigorous oversight of high-risk revenue collection activities). A primary objective in forming MMS was to centralize and standardize reporting, payment, accounting, and disbursement operations for Federal and Indian mineral revenues. This provided increased efficiency and internal control over the previous geographically decentralized approach. In 1997, after 15 years of experience, MRM reassessed its program structure, benchmarked itself against others, and reengineered its business processes to become more efficient, cost effective, customer responsive, and to take advantage of current technology. MRM continues to ensure its program design is responsive to changes, as demonstrated by its current Strategic Business Planning Initiative, implementation in 2003 of new RIK business processes, and an information technology support system. Although no major design flaws are obvious, there are minor areas where design could be improved. The MRM has recently prepared suggestions for legislative initiatives for the Federal staff to the Royalty Policy Committee's (RPC) Subcommittee on Royalty Management (Subcommittee) to explore during their review of MRM activities. Also, a recent report by the Subcommittee identified a recommendation for MRM, in addition to several recommendations for BLM, regarding retroactively approved communitization and participating areas agreements.

Evidence: 1) CFO Audit Report for FY 2006; 2005 CPA Peer Review Opinion regarding MRM audit functions, and GAO Closure documentation (related to 2004 RIK Report). 2) Reengineering Road Map to 21st Century, November 1998; RIK Road Map, January 2001; and Five-Year RIK Business Plan (2005-2009). 3) MRM Strategic Business Planning Timeline. 4) MMS/MRM Suggestions for Legislative Initiatives, April 2007. 5) RPC Oil and Gas Reporting Subcommittee Report (2006): "Royalty Reporting for Retroactively Approved Communitization and Participating Areas Agreements."

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: To ensure that MMS properly accounts for and distributes mineral revenues in a timely and accurate manner, MRM resources are targeted to four primary mission areas, as defined in the MRM Strategic Business Plan for 2007-2012 (Asset Management, Financial Management, Compliance, and Indian Trust). MRM ensures that state and Tribal beneficiaries are actively engaged in monitoring activities on their properties by delegating authority to carry out certain auditing and investigating activities for leases in their jurisdiction. RIK operations build on industry-proven approaches to marketing oil and gas production while ensuring fair market value is received for the Nation's oil and gas resources. MRM assigns geographic areas to some staff, allowing specialization on issues unique to specific states, Tribes, and/or individual Bureau of Land Management (BLM), Bureau of Indian Affairs (BIA), or Offshore Minerals Management (OMM) offices. MRM provides the mineral industry guidance through geographically-based training to facilitate improved reporting and compliance. MRM frequently participates in collaborative activities with states, Tribes, and industry, such as negotiated rule-makings, state and tribal audits, and the reviews by the RPC. Revenues collected by MRM directly benefit the U.S. Treasury, other Federal agencies, special purpose funds, 34 states, 32 Indian Tribes, and an estimated 30,000 individual Indian mineral owners.

Evidence: 1) MRM Strategic Business Plan, December 2005. 2) RIK Five-Year Plan. 3) MRM ABC Cost Allocation for FY 2006.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The MRM program has made significant progress in instituting a comprehensive strategic planning process and developing new long-term performance measures linked to the program's key goals. Since the original PART evaluation in 2003, MRM has refined certain measures to focus more on the program's end goals and has developed a new measure to estimate the net return to the government through its royalty-in-kind (RIK) operations, a key measure given the continued expansion of this program. Mineral revenue collection activities are inherently complex (much like tax collection for the Internal Revenue Service (IRS)), making the identification of good outcome-based performance measures especially challenging. In some cases, the current performance measures are more output-focused than would be preferred, and the agency needs to continue to work to identify new measures that can either replace or supplement the existing measures. MRM is examining a risk-based compliance approach as a part of its strategic business planning initiative. The Office of Inspector General (OIG) recommendations, received in December 2006, are consistent with MRM transitioning to this risk-based approach. The results of this effort may form the basis for development of a new or revised compliance measure that would demonstrate that the program is maximizing the value of its compliance work.

Evidence: 1) PART Measures (see attached). 2) MRM Strategic Business Plan for 2007-2012, December 2005. 3) Government Performance and Results Act (GPRA) measures published in FY 2006 DOI Performance Accountability Report (annual GPRA Report) and FY 2008 Budget (Annual GPRA Plan). 4) Compliance Business Plan Assessment Document, November 2006. 5) OIG Report: "MMS's Compliance Review Process", December 2006. In response, on December 28, 2006, MRM formally submitted an "Action Plan to Strengthen Minerals Management Service Compliance Program Operations."Service Compliance Program Operations."

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: The MRM program has baseline data and quantifiable targets for each of its current long-term measures, however, it is difficult to assess whether the program's targets for some key measures are ambitious due to underlying data concerns. In FY 2004, the Government Accountability Office (GAO) conducted a review of MRM RIK activities that raised concerns about MRM's RIK data collection and performance measurement methodology, and recommended changes to address these concerns. Based on an initial evaluation, GAO indicated that MMS had taken action to address the measurement concerns GAO raised in its 2004 review. However, GAO is now working on a more in-depth follow-up evaluation to determine if additional problems might exist with MMS's collection and use of data on the RIK program, particularly in light of the continued expansion of RIK as a method of collecting royalties within the MRM program. Also, the need to consider other risk factors in focusing compliance efforts makes it difficult to determine whether the royalty compliance target is appropriate. The long-term compliance measure may be refined or supplemented as MRM establishes a more dynamic, risk-based compliance approach to ensure appropriate compliance coverage of revenues as well as companies and properties, consistent with OIG's recommendations.

Evidence: 1) PART Measures (see attached). 2) GPRA measures published in FY 2006 DOI Performance Accountability Report (annual GPRA Report) and FY 2008 Budget (annual GPRA Plan). 3) RIK FY 2005 annual report; Five-Year RIK Business Plan. 4) MRM Compliance Risk Approach Planning Document; OIG Report - "MMS's Compliance Review Process", December 2006; "Action Plan to Strengthen Minerals Management Service Compliance Program Operations."

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: Four primary MMS performance measures serve as both annual and long-term measures, so the program's annual measures link directly to its long-term measures, and annual targets provide ongoing indicators of progress toward achieving the program's long-term goals. In addition, MMS monitors other annual measures that directly link to achievement of long-term measures. An example is MRM's measure of company reporting accuracy, which is integral to the program's success in disbursing mineral revenues to beneficiaries in a timely manner. As with its long-term measures, some of the current annual measures are more output-focused than would be preferred, and the agency needs to continue to work to identify new measures that can either replace or supplement the existing measures.

Evidence: 1) PART Measures (see attached) - several measures serve as both long-term measures and annual measures. 2) GPRA measures published in FY 2006 DOI Performance Accountability Report (annual GPRA report) and FY 2008 Budget (annual GPRA Plan).

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Because MMS has reported and monitored performance data over several years, baselines and prior trend data is available for most MMS measures. The MRM program has identified specific annual targets for each of its long-term performance measures, and monitors progress quarterly for most and annually for RIK. MRM has also set specific annual targets for key annual measurement indicators that directly link to achieving long-term measures and program efficiencies. Although several of the MRM annual measures have the same data issues as the program's long-term measures, these measures are also supplemented by several additional annual measures that focus on key program goals and help to provide a more complete picture in terms of annual performance.

Evidence: 1) PART Measures (see attached) - several measures serve as both long-term measures and annual measures. 2) GPRA measures published in FY 2006 DOI Performance Accountability Report (annual GPRA Report) and FY 2008 Budget (annual GPRA Plan).

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: MMS relies heavily on partnerships to accomplish its MRM program mission, and engages partners in agreements to support achievement of MRM goals and objectives. MRM has numerous service level agreements in place with the system contractor to monitor its performance in critical areas that support MRM's performance goals. MRM also coordinates closely with the state and tribal audit groups to achieve compliance goals for targeted mineral properties within the states and reservations within 3 years of the date royalties are paid. In FY 2007, MRM sent letters to each delegation documenting their approved plan and the percent of revenues the State or Tribe plans to cover (by audit or compliance review) towards MRM's overall 3-year compliance goal. Memorandums of Understanding with the Office of the Special Trustee for American Indians (OST) and the Bureau of Indian Affairs (BIA) document each partner's responsibility in ensuring the DOI's Indian trust responsibilities are carried out in a timely manner. The MRM entered into agreements with Wyoming, Texas, Alabama, and Louisiana for RIK programs that directly affected their share of royalties from Federal lands. Additionally, MRM coordinates with the Department of Energy (DOE) to ensure that the President's goals to fill the Strategic Petroleum Reserve (SPR) are met.

Evidence: 1) System contractor Service Level Agreements. 2) The Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA) Sections 202 and 205, and the Royalty Simplification and Fairness Act (RSFA) - state and Tribal delegations and cooperative agreements. 3) Onshore RIK - Wyoming Memorandum of Understanding (MOU) or Invitation for Offer (IFO); Cooperative agreements with Louisiana, Alabama, and Texas. 4) MOU with DOE - delivery of RIK oil volumes for SPR. 5) Example of FY 2007 letter from MRM to each State and Tribal delegation documenting performance plan. 6) MOU with OST and BIA.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Because MRM's activities result in a major source of revenue to the Federal government, states, and Tribes, the MRM program has, particularly in the last few years, been the subject of frequent reviews by GAO and the OIG. The full scope of the MRM program has been covered by multiple external evaluations. In FY 2004, GAO reviewed the program's RIK activities. Many of the program improvements highlighted in the agency's RIK business plan are a direct result of this and other recent reviews. Congress has recently requested GAO to perform a new review of the agency's RIK activities. During FY 2006, GAO also completed a review of MRM's geothermal royalty management and looked at the effect of rising natural gas prices on MRM royalty collections. During FY 2005, the MMS engaged an external certified public accounting firm to perform a peer review of the MRM program audit functions. During 2006, the OIG completed an audit of MRM's compliance review process, and in response to recommendations, MRM developed and is implementing an action plan. The MRM program also has several external reviews pending, including the annual OIG review of MMS's implementation of the Federal Information Security Management Act (FISMA) requirements and the annual CFO audit by KPMG, on behalf of OIG, of MRM mineral revenue custodial accounts. In addition, the Assistant Secretary of the Interior for Land and Minerals Management announced the formation of an independent panel to review and provide advice to the department on aspects of mineral revenue collection from Federal and Indian lands. The new panel will operate under the auspices of the RPC.

Evidence: 1) RIK Risk Profile Assessment August 2005, RIK Risk Assessment Report (January 2005). 2) Review of MMS RIK Performance Measurement Process October 2004. Cost and Revenue Information Needed to Compare Different Approaches for Collecting Federal Oil and Gas Royalties (GAO) April 2004, Gas RIK in the Gulf of Mexico (PMI) October 2004. 3) OIG Report - "MMS's Compliance Review Process" - December 2006, and MMS's December 2006 "Action Plan to Strengthen Minerals Management Service Compliance Program Operations". 4) Documentation of upcoming GAO review of RIK activities. 5) FY 2006 Annual Assurance Statements. 6) Internal Quality Control Reviews (IQCR) and Alternative Internal Control Reviews (AICR) Schedules. 7) 2004 independent peer review qualified opinion regarding MRM's audit function; 2005 CPA Peer Review Opinion regarding MRM audit functions. 8) OST risk assessment of Indian trust functions. 9) MRM Enterprise Wide Risk Assessment.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The MRM budget requests address resource needs required to maintain current operations, meet future demands, and achieve Departmental and Bureau-level performance goals. In general, budget initiatives are performance based and are presented in a transparent manner. The MRM budget formulation process involves forecasting future funding needs to maintain high service and performance levels, projecting new requirements, and exploring new and more efficient methods for accomplishing the mission. New requests are prioritized based on their impact on increased performance and risk mitigation, their ability to enhance service delivery, and opportunities to gain new efficiencies. Operations are routinely analyzed for areas where new efficiencies and cost savings can be realized. These savings are used to either offset new costs internally or are offered as budget decreases to offset new initiatives. In 2003, MMS implemented new Activity Based Costing (ABC) and Performance Data Gathering tools to improve the focus on performance during budget execution. Using ABC data, MMS can fully cost its MRM program costs to long-term measures and assign direct and indirect costs to each of the four primary MRM program mission areas (Asset Management, Financial Management, Compliance, and Indian Trust.) These management tools also provide the capability to determine MRM's Federal and Indian operational costs, and to view costs by budget subactivity and DOI Strategic goal. As a result of FY 2005 appropriation language, administrative costs related to RIK are no longer budgeted for through appropriations, but are funded from RIK receipts. MRM needs to continue its efforts to ensure its RIK administrative costs are well-justified and appropriately documented. MRM uses ABC data to monitor and track all RIK and royalty-in-value (RIV) administrative costs, both appropriated and those funded with receipts.

Evidence: 1) FY 2008 Budget Justification. 2) Initial Budget Requests from the Divisions for FY 2007.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: MRM has strengthened its strategic planning efforts to guide the direction of the organization and continues to work to improve the program's performance measures and data. MRM completed its most recent planning initiative, and published the MRM program-wide Strategic Business Plan in December 2005. This strategic guidance for future program operations was developed in close consultation with MRM employees and stakeholders, and the Plan will guide continuous MRM improvement processes through 2012. This Plan provides for development and implementation of operational business plans by 2008, aligned with four primary MRM program mission areas (Asset Management, Financial Management, Compliance, and Indian Trust) and the Resource and Information Management business processes. These operational business plans will be designed to improve, modernize, and fully integrate the MRM mineral revenue business processes and systems; introduce new and ambitious longer-term performance measures with strong internal controls; and efficiently and effectively utilize available human resources and information technology. As a part of the Asset Management mission area, MRM has already completed and is implementing a Five Year RIK Business Plan for FY 2005-2009. When completed, the operational business plans will provide strategies and improvement actions by mission area, to be implemented through 2012. These plans will draw on the results of the MRM Enterprise-Wide Risk Management initiative, which MRM initiated in FY 2005, and for which MRM issued an action plan to mitigate risks and enhance internal controls. MRM also fully implemented a 39-action Audit Quality Improvement Plan in 2005 to address previously-identified deficiencies. MRM is also developing an Enterprise Architecture (EA) Business Reference Model (BRM), linking systems, lines of business, ABC costs, business processes, and the MRM Strategic Business Plan, in full alignment with the DOI EA BRM and Strategic Plan.

Evidence: 1) MRM Strategic Business Plan, December 2005. 2) Enterprise-wide Risk Management Initiative Report. 3) MRM Audit Quality Improvement Plan, completed 2005. 4) Five Year RIK Business Plan for FY 2005-2009. Reviews completed by GAO and independent accounting firm on RIK/RIV comparative costs report (GAO closure documentation related to 2004 RIK Report). 5) IT Governance Board and IT Information Resource Board (IITB-IITGB) PowerPoint; Charter for ITGB. 6) Compliance Business Plan Assessment Document - November 2006. 7) Financial Management Business Plan Assessment Phase (As-Is) Report - November 2006.

Has the agency/program conducted a recent, meaningful, credible analysis of alternatives that includes trade-offs between cost, schedule, risk, and performance goals, and used the results to guide the resulting activity?

Explanation: MRM conducts risk adjusted cost analysis of alternatives including cost, schedule, risk, and performance goals in the development of each of its MRM Support System (MRMSS) subsystems. Recently, MMS analyzed several alternatives and the trade-offs between cost, schedules, and performance in developing and implementing provisions of the Energy Policy Act of 2005 to determine the preferred approach and solution. In another case, MRM analyzed whether or not to implement a second User Acceptance Test environment, and determined that it would be neither beneficial nor cost effective. The MRM Strategic Business Planning Initiative will provide the foundation to guide analysis of alternatives for future Information Technology investments. In the interim, MRM is completing a re-compete of its current MRMSS Operation and Support contract, as mandated by the Federal Acquisition Regulations (FAR). A necessary and critical part of this re-compete is an analysis of alternatives for both contracting and support that balance transition, schedule, performance, and cost goals, and includes opportunities to take advantage of new technology. A further part of this alternatives analysis is to ensure MRM's continuing alignment with the Departmental Enterprise Architecture including maximum use of commercial off-the-shelf software as well as fully supporting MMS integration into the DOI common infrastructure. MRM also conducts analysis of alternatives when it makes asset management decisions about whether to take royalties in kind or in value, determining to utilize RIK if there is ‎economic advantage to the Government because of increased revenues and/or greater ‎administrative efficiency.

Evidence: 1) FY 2008 Capital Asset Plan (300). 2) Operations and Support (O&S) Recompete PowerPoint presentation to ITIRB 2/28/2006. 3) Alternatives Analysis - Energy Policy Act. 4) RIK revenue metric calculation methodology; Review of MRM RIK Performance Measurement Process, October, 2004.

Are all regulations issued by the program/agency necessary to meet the stated goals of the program, and do all regulations clearly indicate how the rules contribute to achievement of the goals?

Explanation: So that MMS can accurately collect, account for, and verify that companies have properly met their obligations to the Federal, state and Indian lessors under the terms of their leases and/or agreements, MMS regulations clearly state what specific information (i.e. production reports, sales reports, contracts, affiliations, lease and agreement documents, gas plant information, pipeline information) companies need to submit to MMS. MMS executives meet regularly to approve and prioritize pending regulations, ensuring from the beginning that a regulation is the only way to accomplish the requirements. All MRM program regulations address requirements of the Paperwork Reduction Act and the Regulatory Flexibility Act. The rulemaking procedures also ensure that the public understands how the regulations fit into overall achievement of program goals by holding public workshops and consulting with Tribes. The MRM rulemaking plans are included in the Department's Semiannual Regulatory Agenda. Most recently, MMS regulatory efforts have been focused on implementing terms of the 2005 Energy Policy Act, rulemaking for valuation of oil produced from tribal and allotted Indian lands, and the continued implementation of the Royalty Simplification and Fairness Act. Only regulations that MMS considers necessary to accomplish the program mission and goals are promulgated. Determination is based on standards in Executive Order (EO) 12866.

Evidence: 1) Concept papers submitted to MMS Executive Committee (EC) provide details behind the proposed rule changes. 2) DOI Semiannual Regulatory Agenda. 3) Example of public workshop notices. 4) Regulations Flow Chart showing key regulations by MRM program mission areas. These regulations provide the mineral producing industry the specific information they need to submit to MMS.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The MMS collects and monitors quarterly performance data for each of the four primary MRM program mission areas (Asset Management, Financial Management, Compliance, and Indian Trust). The MRM program managers hold regular reviews and discussions of quarterly performance and unit cost data and redirect resources or address process issues, as needed. The MRM maintains current documentation of the calculation methodology for each performance measure, and reviews performance measures as a part of each Alternative Internal Control Review. However, recent reviews by GAO and OIG have raised questions about the value of the program's performance measures and the quality of certain program data. In December 2006, the OIG provided recommendations on MRM's performance measures and management information related to its compliance review process. The OIG recommended that MRM: (1) Develop and implement a plan to provide reliable data for managing and reporting on compliance program operations, addressing data reliability issues in various compliance databases; (2) Strengthen the compliance review process by including additional procedures to provide greater compliance assurance; and (3) Revise performance measures to better reflect compliance operations. MMS has developed an action plan to address the compliance measurement issues noted by the OIG and is working with a consultant to improve the compliance measures and related internal controls. The royalty-in-kind (RIK) measures and underlying methodology were reviewed by GAO in 2003 and 2004, with resulting recommendations. Based on an initial evaluation of the action MMS has taken to address GAO's concerns, GAO considers the recommendations related to these reports closed, including the recommendations related to the RIK performance measures. However, GAO is now working on a more in-depth follow-up evaluation to determine if additional problems might exist with MMS's collection and use of data on the RIK program, particularly in light of the continued expansion of RIK as a method of collecting royalties within the MRM program.

Evidence: 1) Quarterly Performance Report; example, Management Certification. 2) Activity Based Cost (ABC) book and ABC Pie Charts - FY 2006. 3) Quarterly performance/cost data discussed with accountable managers. 4) MRM analysis of state and tribal audit costs - business case vs. current budget allocations.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: MRM utilizes its performance appraisal system to build accountability into all of MMS's Senior Executive Service (SES) manager's performance standards, including responsibility toward annual strategic goals and other mission objectives, such as the President's Management Agenda. Performance responsibility cascades to 100% of MRM managers and staff. Responsible MRM managers certify that they have reviewed performance and workload metrics, and that reported data, internal controls, and support documentation provide reasonable assurance of accuracy. The MRM Associate Director reviews quarterly cost and performance data, discusses concerns with accountable managers, and if needed, develops action plans to address issues. MRM performance-based service level agreements hold the system operations and support contractor accountable for cost, schedule and performance results, and MRM regularly monitors contractor performance. MRM performs Internal Quality Control Reviews (IQCR's) annually on a 3-year rotating basis on State and Tribal royalty auditing contracts to assure compliance with auditing standards, policies and procedures, and applicable laws. IQCR and Alternative Internal Control Review (AICR) action plans are immediately implemented and monitored through completion to address corrective action recommendations. MRM also conducts annual contract reviews to ensure that states and Tribes are held accountable for costs and that contract reimbursement requests meet the terms and conditions of the agreements and MMS standards. In 2003, MRM established a Project Management Office (PMO) to manage Information Technology (IT) and other critical projects, and provide quarterly results to management. Also, SES Performance Standards hold MRM managers accountable to ensure material weaknesses and reportable conditions, non-compliance with laws and regulations, and OIG and GAO audit recommendations are addressed within designated timeframes.

Evidence: 1) MRM examples FY07 (Cascading GPRA Performance Measurements). 2) Quarterly performance and cost data discussed by AD with accountable managers. 3) Accenture Service Level Agreements presentation to MRM. 4) Example of FY 2007 letter from MRM to each State and Tribal delegation documenting performance plan. 5) Evidence of 202/205 contract review. 6) AICR Example of an Action Plan. 7) Example project plan (Negotiated Settlements AICR) and document showing implementation status. 8) MRM SES Performance Standards example of A-123 and audit recommendation accountability. 9) Management certification of quarterly performance results example.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: At the beginning of each fiscal year, MMS senior management develops initial detailed funding requirements for the full fiscal year based on mission requirements of the strategic plan and known upcoming funding requirements. MRM makes final allocations shortly after passage of the budget, or in the case of extended continuing resolutions, tentative allocations are made as soon as practical. In recent years, MRM consistently has obligated over 98% of appropriated funds by the end of the fiscal year, carrying over any remaining funds for anticipated projects in the new fiscal year. MMS and MRM managers periodically review and analyze comparisons of planned versus actual obligation status, generally at mid year and third quarter, to ensure that available funds are being used as planned. MRM reports financial data accurately using the capabilities of its financial system. MRM records approved allocations into the Financial Business Management System (FBMS) (formerly ABACIS), the Bureau's financial system, as financial plans for major components and offices within MRM, to be compared with actual year-to-date obligations throughout the fiscal year. The MMS operating budget staff evaluates disbursements/obligations on a monthly basis, and adjusts funding allocations quarterly to meet unanticipated circumstances. Reprogramming guidelines established by the Appropriations Committee in annual Conference Reports are strictly adhered to, ensuring that obligations are reported accurately. Based on management analysis and a series of internal control review techniques, MMS has determined that none of its programs are risk-susceptible for making significant improper payments at or above the threshold levels set by OMB. Budget controls, including signature authority limitation, also ensure that funds are obligated in a timely manner and spent for the intended purpose. MMS has never been in violation of the Anti-Deficiency Act.

Evidence: 1) Initial budget requests from Divisions FY 2007. 2) MMS Status of Funds Briefing, June 2006. 3) Review of FY 2002-2006 carryover, showing appropriated fund balances of approximately $1 million or less each year on total appropriations of between $78 and $86 million.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: In addition to reviewing quarterly performance results, MRM managers also monitor and discuss quarterly unit costs for several business outputs and analyze significant variances to determine whether process streamlining or staff redirection is necessary. The MRM program has procedures in place to measure and monitor efficiency in key mission areas. In 2005, MRM developed procedures to annually monitor cost efficiency of RIK vs. royalty-in-value (RIV), using ABC and performance data. During FY 2007, based on that methodology, MRM is implementing its efficiency measure to reduce RIK cost per barrel of oil equivalent (BOE) over the last 3 years of the Five-Year RIK Business Plan (FY 2007-2009). MRM also has procedures to monitor and track costs of late disbursement interest (LDI), resulting from late payments to states. MRM managers set a target to significantly reduce LDI, and have developed an action plan. In order to meet this goal, MRM must work with the Bureau of Land Management (BLM) to improve the accuracy and timeliness of updating of lease accounts and related reference data base information; focus companies on improved accuracy of reporting and payment; and enhance automated systems analytical tools to support improved error correction activities. The MRM developed a collection/cost ratio to measure efficiencies of audits and compliance reviews. In December 2006, the OIG recommended some improvements to this measure, which MRM will implement by February 2008, as targeted in the action plan. In addition, MRM is working with a contractor to analyze how to refine MRM's approach to measuring compliance efficiency and how to incorporate additional compliance benefits, beyond collections. Further, MRM monitors monthly performance results for key IT contracts. MMS's recent consolidation of common IT support functions enterprise-wide aligns with DOI's future direction. MMS also utilizes competitive sourcing in the MRM program to ensure effectiveness and efficiency in carrying out our mission, and has completed studies on over 60 full-time equivalents (FTE).

Evidence: 1) MRM Quarterly Unit Cost reports to managers. 2) MRM program guidance on RIK efficiency measurement. 3) OIG Report - "MMS's Compliance Review Process", December 2006, and MMS's December 2006 "Action Plan to Strengthen Minerals Management Service Compliance Program Operations" (Section IV-C).

Does the program collaborate and coordinate effectively with related programs?

Explanation: MRM actively collaborates with a variety of programs and constituents. In coordination with the Bureau of Indian Affairs (BIA) and Office of Special Trustee for American Indians (OST), MRM provides timely revenue and lease data transfer to ensure appropriate distribution of funds to Indian Tribes and individual Indian mineral owners. The development of MRM's RIK program has been a collaborative effort with Wyoming, Texas General Land Office, Louisiana Department of Natural Resources, and Alabama. MRM also collaborates with the Department of Energy (DOE) to respond to directives to fill the Strategic Petroleum Reserve (SPR). MRM coordinates with state and Tribal audit partners on audit policy and audit plans. MMS also meets with the Royalty Policy Committee (RPC), a Federal Advisory Committee with representatives from the energy industry, Federal Government, states, Indian Tribes, and the public, to discuss and recommend improvements to royalty management policy. In addition, MRM is currently coordinating with BLM to exchange data on compliance work performed by both agencies and inspection work BLM is performing, and on what properties. MRM managers participate in the DOI Indian Energy Minerals Steering Committee to coordinate Indian trust policy issues. MRM continuously works with MMS's Offshore Minerals Management Program (OMM), BIA, OST, BLM, and other programs on issues of mutual concern. The MRM program also works actively with other Trust Bureaus on Fiduciary Trust Business Model architecture issues to ensure appropriate data exchanges between the Department's Indian Trust systems. MRM also consults with States, Tribes, and Industry Trade Groups to discuss proposed rulemakings or business process changes.

Evidence: 1) RIK Memorandums of Understanding (MOUs) with Wyoming, Texas, Louisiana, and Alabama. 2) MOUs with BIA and OST. 3) MMS/DOE MOU for Strategic Petroleum Reserve. 4) Information sharing with State and Tribal auditors (meeting agenda example)/Action items from MRM meetings with state and tribal auditors.

Does the program use strong financial management practices?

Explanation: In 2005, an independent CPA firm issued MRM a clean opinion regarding MRM audit functions, with no material weaknesses and no reportable conditions. Annual Chief Financial Officers Act audits of MMS have consistently resulted in unqualified audit opinions for the MRM custodial statements. There has been only one material weakness in the last 5 years which occurred in FY 2004 (related to Debt Management Act compliance) and it was changed to a reportable condition for the FY 2005 and FY 2006 audits. MMS has made significant progress in resolving the issue, and has developed a new corrective action plan for FY 2007, to be implemented by September 30, 2007. The contractor, on behalf of OIG, performs an assessment of MRM's financial internal controls as part of its assessment. In November 2001, MRM implemented an accounting system that is Joint Financial Managers Improvement Program (JFMIP) compliant, further enhancing our financial controls. MRM uses sound cash management practices by complying with Treasury reporting requirements, reconciling to Treasury balances on a monthly basis, and distributing mineral revenue to the appropriate recipients on a timely basis. Reconciliations of receivables and cash from the subsidiary ledgers to the general ledger are performed on a monthly basis to ensure that the amount accrued as a reduction to accounts receivable is reasonable. The use of commercial off-the-shelf (COTS) software with periodic version upgrades ensures MRM Support System (MRMSS) remains compliant with current Federal Government accounting standards and requirements. To meet the requirements of OMB Circular A-123, MRM formed a cross- organizational project team to systematically and proactively (1) develop and implement appropriate, cost-effective internal controls for results-oriented management, (2) assess the adequacy of internal controls in our programs and operations, (3) separately assess and document internal controls, (4) identify needed improvements, (5) take corresponding corrective action, and (6) report annually on internal control through management assurance statements. Corrective actions resulting from this effort are underway. To remain current with DOI guidance, the MRM is a member of the MMS-wide Coordinators Liaison Group and has implemented a MRM-wide project team that includes the MRM risk officer and internal control manager to assure the Circular requirements are successfully achieved. Also MRM has implemented risk procedures to ensure compliance with the RIK risk policy goals and objectives. In 2006, MRM also published a RIK Risk Metrics Program Prototype Manual, identifying three RIK risk metrics.

Evidence: 1) CFO Audit Reports FY 2004 and 2005 and 2006. 2) 2005 CPA Peer Review Opinion regarding MRM audit functions. 3) MRM A-123 Documentation. 4) RIK Risk Procedures Manual and RIK Risk Metrics Program Prototype Manual, January 2006, identifying three RIK risk metrics.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: MRM has institutionalized management processes for continuous review and improvement, utilizing a mix of external oversight reviews, internal reviews, and contracts for independent reviews. MRM has procedures to develop corrective action plans to proactively address any identified deficiencies. MMS's Audit & Evaluation Module provides the capability to track and monitor the status of identified action items. Internal control and external audit recommendations and completion dates are reported quarterly MMS-wide through the MMS Management Quarterly. In 2002, MRM realigned the MRM Internal Quality Control Team within the Office of the Deputy Associate Director to conduct IQCRs and AICRs, and to monitor and track completion MRM-wide of resulting recommendations. To strengthen MRM-wide decision making, the Executive Committee and the Quality Steering Committee are briefed regularly by the internal quality control manager to assure follow-up and implementation of internal control corrective actions. The Five-Year RIK Business Plan includes action plans for deficiencies found in previous internal and external reviews, identifying milestones and accountability. Through the MRM Strategic Business Planning Initiative, MRM is continuing to evaluate risks and deficiencies, and will develop strategies and objectives to resolve and mitigate future risks. To facilitate the remediation of IT weaknesses, the MRMSS Plan of Action and Milestones (POA&M) process is used as a means of monitoring, tracking, and reporting on the remediation of vulnerabilities in accordance with DOI requirements

Evidence: 1) MRM External and Internal Review (AICR/AMCR/IQCR) Audits or Reviews by FY (2003-2007) - Status of recommendations. 2) PO&AM - Status of Recommendations (FY 2004 - 2007) and example of independent review completion. 3) Business Recovery Testing Results - June 2006. 4) Achievements in MRM Audit and Compliance Program -- 2006. 5) Example of corrective action plan.

Is the program managed by maintaining clearly defined deliverables, capability/performance characteristics, and appropriate, credible cost and schedule goals?

Explanation: MRM employs a dedicated Project Management Office (PMO) to ensure the appropriate establishment and tracking of MRM project schedules and costs including the independent reporting of project milestones and quarterly reports to the MRM IT Governance Board, the MMS IT Information Resource Board, and the MRM Quality Steering Committee. This proactive tracking and visibility early highlights any issues with deliverables, schedule, or cost that require management attention for resolution on a timely basis. Deviations from schedule, cost, or functionality must be formally requested by the project manager and approved by the management sponsor, typically the Deputy Associate Director. MRM has proactively pursued the development of critical project management expertise and now has 10 Project Management Professionals (PMPs). Further, the principal MRM Operation and Support (O&S) contractor is certified at the Capability Maturity Model Level 4 for software development and has a number of certified PMPs assigned to the MRM contract. MRM establishes clearly identified functional requirements and objectives for all its MRM Support System (MRMSS) projects and tasks that are then jointly translated with developers and implementers into viable credible, cost and schedule goals. This includes the appropriate recognition of risks and mitigation strategies. Projects involving the IT contractor are issued as fixed price performance-based task orders with defined deliverables and cost. The contractor then reports weekly on project activities including any management issues that require resolution.

Evidence: 1) FY 2008 Capital Asset Plan (300). 2) ITGB & ITIRB MRMSS Status Reports. 3) Example of MRM Report to Managers on Project Status.

Did the program seek and take into account the views of all affected parties (e.g., consumers; large and small businesses; State, local and tribal governments; beneficiaries; and the general public) when developing significant regulations?

Explanation: The Royalty Policy Committee (RPC), a Federal Advisory Committee with representatives from the energy industry, Federal Government, states, Indian Tribes, and the public, meets regularly to discuss and recommend improvements to royalty management policy and provides subcommittee recommendations to assist MRM in the development of rules. In addition, in every rulemaking, MRM provides opportunity for comments from the public (mineral industry, state, local and Tribal governments, as well as consumers, beneficiaries and large and small businesses) throughout the process. All comments are considered and many incorporated into the various rules. The MRM program frequently holds workshops to discuss rulemakings with key stakeholders in advance of publishing initial proposed rules. Recent examples include public workshops held during development of the proposed takes versus entitlements rule, the proposed Indian oil and Federal gas valuation rules, and the proposed geothermal valuation rule (joint MMS/BLM workshop). MRM has also held separate consultation sessions with Tribes, ensuring that they were directly involved in the rulemaking process. Among other executive and legislative considerations, each of the MRM rulemakings considers federalism implications in accordance with Executive Order (EO) 13132. Likewise, MMS's rulemaking process considers the impact of the rules under the Unfunded Mandates Reform Act (UMRA).

Evidence: 1) MRM Federal Register Notices announcing workshops; "Dear Tribal Leader" letters announcing consultation sessions with Tribes. 2) Examples of Regulatory Comments. 3) RPC Recommendations and Status Reports; RPC Geothermal Subcommittee Report.

Did the program prepare adequate regulatory impact analyses if required by Executive Order 12866, regulatory flexibility analyses if required by the Regulatory Flexibility Act and SBREFA, and cost-benefit analyses if required under the Unfunded Mandates Reform Act; and did those analyses comply with OMB guidelines?

Explanation: As part of the rulemaking process, MRM routinely analyzes potential royalty and other impacts on the Federal government, States, Indian Tribes and individual Indian mineral owners, and the mineral industry. MRM's published rulemakings have been in compliance with requirements of EO 12866, the Regulatory Flexibility Act (RFA), the Small Business Regulatory Enforcement Fairness Act (SBREFA), and the UMRA. No recently-published MRM regulation has been an economically significant regulatory action ($100 million or more impact); however, some have raised novel legal or policy issues.

Evidence: Recent rulemakings include MMS's Federal Gas Valuation Final Rule (March 2005) and Indian Oil Valuation Proposed Rule (February 2006) demonstrate compliance with EO 12866, RFA, SBREFA, and UMRA.

Are the regulations designed to achieve program goals, to the extent practicable, by maximizing the net benefits of its regulatory activity?

Explanation: The MMS executives meet regularly to approve and prioritize pending regulations, ensuring from the beginning that a regulation is the best way to accomplish the requirements, while providing maximum benefits and/or cost effectiveness. The executives analyze all existing MRM regulations supporting its key mission areas, and in some cases, determine that a regulation is not required. The executives ensure that regulations are developed to ensure that the information requested is the minimum necessary to carry out its mission and places the least possible burden on all respondents, including small businesses. As possible, MRM provides alternative methods for complying with regulations and guidance. For example, most reporting is electronic, minimizing the burden on the majority of constituents; however, paper reporting is allowed as necessary, to minimize the impact on small businesses. No recently-published MRM regulation has been an economically significant regulatory action ($100 million or more impact); however, some have raised novel legal or policy issues.

Evidence: 1) 2004 MMS Regulations Policy - Director Email. 2) Regulations Flow Chart showing key regulations by MRM program mission areas. These regulations provide the mineral producing industry the specific information they need to submit to MMS. 3) Example of providing alternatives (Electronic Reporting Rule).

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The MMS has demonstrated significant progress toward meeting some of the MRM program's long-term performance goals, and has been making a concerted effort to address outstanding deficiencies. However, the program's key measure for its royalty-in-kind (RIK) activities (i.e., the net return to the government) has only recently been established, and although the trend data appears promising, some questions about the quality of this data remain, particularly in light of the continued, significant growth in RIK program activities. In addition, the lack of additional more outcome-focused performance measures dealing with the critical issue of whether or not the agency is collecting (either through RIK or royalty-in-value (RIV)), to the maximum extent possible, all royalties that are owed makes it difficult to state with greater certainty that the agency is making progress in achieving its long-term goals. MMS data shows that over the last few years the program has met, or largely met, its performance goals with respect to financial management, compliance reviews, and Indian trust data reporting. However, the recent OIG review has highlighted a weakness in the program's reliance on a single revenue-based compliance measure, and MMS has adjusted its out-year targets for this measure downward to reflect an anticipated shift in focus away from this sole measure.

Evidence: 1) PART Measures (see attached) 2) FY 2007 and 2008 Performance Budget, FY 2005 & FY 2006 DOI Performance Accountability Reports (Government Performance and Results Act (GPRA) Annual Reports). 3) Achievements in MRM Audit and Compliance Program - 2006. 4) RIK Program Annual Revenue Report (net return to government results), 2004 and 2005. 5) Audit and Compliance Review completion data. 6) Chief Financial Officer's (CFO) Audit Report for FY 2006.

Does the program (including program partners) achieve its annual performance goals?

Explanation: For the measures used by the MRM program, the annual performance trends show that MRM historically meets or exceeds most of its annual goals -- a strong indicator of progress toward its long-term goals. In cases where MMS has not met the goal, managers have made decisions on redirecting staff resources to increase progress. MMS's State and Tribal partners' progress is calculated in with MRM's progress in achieving the 3-year compliance goal, so MRM actively coordinates with States and Tribes to ensure their progress toward MRM goals.

Evidence: 1) PART Measures (see attached). 2) FY 2007 and 2008 Performance Budget and FY 2005 & FY 2006 DOI Performance Accountability Reports (GPRA Annual Reports). 3) Example of FY 2007 letter from MRM to each State and Tribal delegation documenting performance plan.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The MRM strives to ensure that its existing fiscal resources are distributed to maintain current operations, meet future demands, and achieve Departmental and Bureau-level performance goals. MMS has estimated that RIK administrative costs were 26 percent lower than RIV costs when measured on a barrel of oil equivalent (BOE) basis, resulting in $1.6 million in cost avoidance in 2004. In 2005, the result was 42 percent, resulting in an estimated $3.74 million in cost avoidance. In FY 2006, the result was 31 percent, resulting in an estimated $2.3 million in cost avoidance. Between FY 2003 - 2005, MMS collected $3.27 for each dollar spent on compliance reviews and $2.06 for each dollar spent on audits. In addition, MRM has analyzed cost, performance, and risk data to apply "best business case" criteria to allocate resources available for the Section 205 State Delegated Agreement Program and Section 202 Tribal Cooperative Audit Program. The MRM has consulted with Congress and has begun implementing a "phased-in" reallocation of funding to states and Tribes, based on "best business case" funding decisions. Further, MMS has completed A-76 competitive sourcing studies for over 60 MRM program FTE. The cost savings estimated for the FY 2005 Yellow Book Auditor competition was $4.7 million over 5 years. The MRM program has continued to perform these functions at targeted performance and cost levels.

Evidence: 1) PART efficiency measures (see attached). 2) RIK Program Annual Revenue Report, 2005 and RIK efficiency measure 2004 and 2005 baseline trend data. 3) Compliance Collection/Cost Ratio documentation for FY 2003-2005; MRM analysis of state and tribal audit costs. 4) MRM Performance and Activity Based Cost (ABC) Quarterly/Annual Reports and Performance Charts in FY 2008 Budget Justifications. 5) FY 2005 A-76 Report to Congress on completed Competitive Sourcing activities and associated savings.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Comparisons have been sought over the years, through benchmarking research; however, MRM has not been able to identify a comparable organization in terms of purpose and scale. There are other programs that perform functions similar to some of MRM's specific functions, but there is no other program that performs at the comprehensive scope and complexity of MRM. In 2003, an independent contractor performed a review of the Alberta, Canada RIK program in comparison to MRM's RIK pilots, and though the review provided valuable insights to MRM, the report also pointed out significant differences between the Canadian and U.S. energy markets and their respective political environments. Though MRM has not identified other organizations that provide the comprehensive mineral revenues management services provided by MRM, MMS has and continues to incorporate "best practices." For example, the RIK program uses standard industry contracts and credit management terms to collect revenues and minimize Government risks. The MRM is committed to continued benchmarking, and the MRM Strategic Business Planning initiative places emphasis on benchmarking as each of MRM's mission areas perform operational evaluations, determine future requirements, and prepare future business designs. The MRM acknowledges that its state and Tribal audit offices perform the same audit and compliance work as MRM does for Federal properties in their jurisdiction. A recent internal review suggests that during FY 2003-2006, MRM collected $2.51 for every direct labor dollar spent on audits and compliance reviews for onshore properties compared to $2.24 collected for each direct labor dollar spent by state and Tribal auditors for onshore properties during the same time period.

Evidence: 1)Final State Benchmarking Study; Final Report on Benchmarking Work with Norway 1996; Benchmark Visit to Alberta, Canada Department of Energy 1997. 2) MRM Strategic Business Plan, December 2005. 3) 4-year comparison of MRM and State/Tribal collection/cost ratios.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Over the last four years MRM has had and continues to have external evaluations covering the full scope of MRM mission activities. These reviews have highlighted a number of problems and/or causes for concern in core MRM functions of audit and compliance and in the rapidly expanding RIK portion of the program. However, MMS has addressed a number of the issues identified in these reviews, and the findings to date do not appear to suggest that the program as a whole has not been performing. During FY 2006, OIG performed an audit of MRM compliance reviews, resulting in three recommendations related to management information, the compliance review process, and performance measures. In response to OIG recommendations, MRM is currently implementing an "Action Plan to strengthen Minerals Management Service Compliance Program Operations." In FY 2004, the Government Accountability Office (GAO) conducted a review of MRM RIK activities that raised concerns about MRM's RIK data collection and performance measurement methodology and recommended changes to address these concerns. Based on an initial evaluation of the action MMS has taken to address GAO's concerns, GAO considers the recommendations related to these reports closed, including the recommendations related to the RIK performance measures. However, GAO is now working on a more in-depth follow-up evaluation to determine if additional problems might exist with MMS's collection and use of data on the RIK program, particularly in light of the continued expansion of RIK as a method of collecting royalties within the MRM program. GAO also recently performed a review at the request of Congress related to news articles about royalty revenues. The June 2006 GAO Report included no recommendations for MMS, and in its report GAO "agreed with reasons MMS cited as to why natural gas royalty revenues have not kept pace with rising natural gas prices." The GAO also "generally agreed with MMS's portrayal of the impact these reasons had on the royalty revenues." During FY 2006, GAO performed a review of MRM's geothermal activities and found that MRM did not collect sufficient data to ensure the proper collection of royalties from geothermal energy production. In July 2006, MMS published a proposed geothermal rulemaking, and once the final geothermal rule is published, MRM expects to be able to complete implementation of the GAO recommendations. The MMS received unqualified audit opinions on its financial activities and MRM program mineral revenue custodial accounts in FY 2006. In FY 2005, the MRM program was successful in resolving debt collection management issues in order to remove a material weakness noted in the FY 2004 CFO audit. A reportable condition was noted in FY 2005, and in response, an action plan was fully implemented by the end of FY 2006. A new reportable condition was noted in FY 2006, and in response, MRM has developed a detailed corrective action plan that has been reviewed and approved by the department.

Evidence: 1) 2005 CPA Peer Review Opinion regarding MRM audit functions. 2) 2005 & 2006 CFO Annual Financial Reports. 3) Debt Management Issue documentation (2005 and 2006 CFO Report). 4) GAO closure documentation (related to 2004 RIK Report). 5) Review of MMS RIK Performance Measurement Process October 2004. 6) GAO Report, June 21, 2006- "Royalty Revenues: Total Revenues Have Not Increased at the Same Pace as Rising Oil and Natural Gas Prices due to Decreasing Production Sold." 7) OIG Report - "MMS's Compliance Review Process" - December 2006. In response, on December 28, 2006, MRM formally submitted an "Action Plan to Strengthen Minerals Management Service Compliance Program Operations." 8) Geothermal recommendations - Status and Request for Extension.

Were program goals achieved within budgeted costs and established schedules?

Explanation: The MMS project cost and schedule targets for the MRM Support System (MRMSS) are being met as indicated by the monthly Earned Value Management System (EVMS). The MRMSS EVMS data is reported monthly to the department as part of their Integrated Baseline Review. MRMSS is not experiencing any significant delays or problems and the subject MRMSS investments are delivering their desired benefits. The original development of the core of the MRMSS (Re-engineering and RIK) was completed within cost and one month of schedule. Subsequent commercial off-the-shelf (COTS) package updates have largely been on schedule. The PeopleSoft upgrade late 2004/early 2005 resulted in a cost variance and variance at completion of less than 1.6%. This variance was caused by a timing conflict with the CFO audit. More recently, a cost variance of less than 1% occurred in the implementation of the Energy Act. This variance was limited to this low level by catching an error in requirements definition early in the development process before it became more serious. Other development efforts were completed within budget/schedule. MRM has done a risk adjusted cost analysis of alternatives including cost, schedule, risk, and performance goals in the development of each of its subsystem development efforts leading to the current MRMSS. These alternative analyses include system enhancements such as those required by the recent Energy Policy Act.

Evidence: 1) Monthly Earned Value Management System (EVMS) data. 2) FY 2007 Capital Asset Plan (300). 3) Information Technology Information Resources Board (ITIRB) Status Report FY 2005 Q4 and FY 2006 Q1 (<1.6% variance). 4) ITIRB Status Report FY 2007 Q1 (<1.0% cost variance).

Were programmatic goals (and benefits) achieved at the least incremental societal cost and did the program maximize net benefits?

Explanation: The MRM ensures least incremental societal costs on a regular basis through its information collection request (ICR) process. Within a three year period, MRM revisits MMS and industry burden impacts, including Small Business impacts on each ICR. In calendar year 2005, MRM initiated a major consolidation project combining ICRs. This allows MRM and its partners to view information collection requirements on an overall program level, reducing redundancy between ICRs, and reducing publication and MRM staff costs on a continuing basis. As of FY 2007, MRM has reduced their number of ICRs from 33 to 15. The MRM addresses Small Business impacts in all of its rules. For example, regulations require most reporters to submit reports electronically, but they also include exceptions designed to minimize the impact on small businesses. In addition, MRM reduces burden on companies by routinely conducting training sessions, providing toll-free telephone assistance, and providing online access to important pricing and valuation information. As documented in the MRM program's OMB-approved ICRs, the net impact of the reengineered reporting amendments and other changes, was an overall estimated annual savings in industry reporting costs (on a continuing basis) of $2.2 million. Utilizing Alternative Dispute Resolution (ADR), MRM has reduced burden on companies while realizing significant benefits to MRM and the Government. Benefits of ADR include reduced time to resolve disputes, avoidance of costly litigation, increased certainty for past and future royalty payments, and a proper return to the Government for its mineral assets. MMS regulations also provide for MRM to periodically perform a "Determination of Need," by publishing a Federal Register Notice to assess whether small and independent eligible refiners have access to ongoing supplies of crude oil at equitable prices within current market conditions. When MMS determines the need, MMS may conduct a sale of RIK oil to eligible refiners. In FY 2005, MRM made available more than 15 million barrels of RIK oil to eligible refiners in the Gulf of Mexico and Pacific Outer Continental Shelf (OCS), valued at more than $700 million.

Evidence: 1) QSC ICR Merge Document; OMB-approved ICRs & burden hours. 2) Example of ICR analysis of Small Business impact. 3) RIK FY 2005 Annual Report -methodology on eligible refiners. 4) Draft Reporting and Amendments Rule.