Federal Reports

We found that the Department complied with IPERA for FY 2013; however, improvements were needed in its improper payment rate estimation methodologies for the Federal Pell Grant and William D. Ford Federal Direct Loan programs, specifically with regard to ensuring the methodologies’ completeness. We also found that the Department calculated and reported an improper payment rate estimate for the Direct Loan program using an alternative methodology that relied heavily on the use of program reviews; however, many of those reviews were not included in the improper payment rate estimation calculation because the reports from these reviews had not yet been issued or the reviews did not test for improper payment transactions. Further, we also found that although the Department had shown progress in reducing and recapturing improper payments, it could still improve its efforts by establishing meaningful improper payment reduction targets, as we found that it did not actually set a target that, if met but not exceeded, would result in a reduction in improper payments.

We performed a required review of USDA’s fiscal year (FY) 2013 Agency Financial Report (AFR) and accompanying information to determine whether the agency was compliant with the Improper Payments Information Act of 2002, as amended in 2010.

This report is designated Sensitive But Unclassified. To obtain further information, please contact the OIG Office of Counsel at OIGCounsel@oig.treas.gov, (202) 927-0650, or by mail at Office of Treasury Inspector General, 1500 Pennsylvania Avenue, Washington DC 20220.

This report is an unclassified summary of a 168-page classified report that was issued on 10 April 2014 by the Inspectors General for the Intelligence Community, Central Intelligence Agency, Department of Justice, and Department of Homeland Security.

Whitelisting

Our audit found that the Department and the five SEAs reviewed had systems of internal control designed to prevent and detect inaccurate, unreliable, or incomplete Statewide test results; however, these systems did not always require corrective action if indicators of inaccurate, unreliable, or incomplete test results were found. Our audit found that the Department and the SEAs could take steps to improve the effectiveness of the systems and that the Department could help SEAs improve their systems of internal control by emphasizing, during its reviews of SEAs, the importance of using forensic analyses to more effectively identify schools with possible test administration irregularities.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements

The annual BAMR report initiated in 2012 provides detailed information about the project status of construction grants administered for the Appalachian Regional Commission by other Federal agencies

Grants for follow-up based on limited reported disbursements and grants with expired performance periods. The primary purpose was to determine actions initiated with respect to the prior report.

Review of available records and contacts with ARC staff and vendor and distributor representatives, including oral and written voluntary statements, the absence of witnesses, elapsed time, and the absence of inventory controls contributed to inconclusive determinations about these occurrences

We audited the Bureau of Land Management's (BLM) mineral materials sales program to determine whether the U.S. Department of the Interior obtained market value for materials removed from Federal lands. BLM sells mineral materials— which consist of common types of sand and gravel, stone, pumice, or other materials used mainly in construction and landscaping—under the authority of the Materials Act of 1947, as amended. The United States uses about 2 billion tons of mineral materials annually, and in fiscal year 2011, BLM issued about 2,800 contracts and permits to sell mineral materials, including 2,616 sales valued at approximately $17 million, as well as instances of free use for public purposes such as State and local roadway projects. We found that BLM's management of the program is hindered by outdated regulations and policies; does not always recover the processing costs for mineral materials contracts, resulting in $846,117 of lost revenue to the Government; or verify production volumes reported for sales.

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In the last six months, we issued reports on the Library’s FY 2013 financial statements audit and the alternate computing facility. We are pleased to report that for the eighteenth consecutive year, the Library received an unmodified opinion on its consolidated financial statements. We also continued a facilities planning review, completed an in-progress investigation of a former Library contractor, and obtained a nine-year criminal sentence in our nationally covered stalking case. Additionally, our long-tenured Inspector General, Karl W. Schornagel, retired.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements

The OIG reviewed Coal Operations' (CO) 4th quarter fiscal year (FY) 2012 and 2nd and 4th quarters FY2013 enterprise risk maps for asset performance vulnerability to assess whether risk mitigation plans and actions were established and properly designed to manage risks. We determined the 4th quarter FY2013 mitigation plans and actions were adequately designed to manage the risks. Although the risk rating and trend had increased from 2 years ago, in our opinion, mitigation plans and actions that consider utilization of assessment tools, replacing components during planned outages, development and implementation of projects and programs to avoid consequences, and reclassification of components to capital from operations and maintenance to increase investment in long-term improvements reasonably address the risk of asset performance vulnerability in CO. We also identified an opportunity to improve CO's risk mitigation documentation which was addressed during our audit.

During 2012, we completed an audit of TVA's Financial Trading Program (FTP) audit number 2011-14477. The program, which started in 2003, was designed to hedge or otherwise limit economic risk associated with the price of commodities recovered in TVA's fuel cost adjustment (FCA). Since the hedging of natural gas comprised the majority of the hedging program, we generally limited our scope to the gas hedging program. Although our audit determined the overall design of TVA's FTP control structure was appropriate, we also identified several areas where management oversight needed improvement to validate the usefulness and effectiveness of the program, as well as ensure TVA stakeholders' understanding of the program.As a follow-up to audit 2011-14477, we contracted with Mercatus Energy Advisors (Mercatus) to provide a third-party review of the final actions taken by TVA management with regard to the recommendations from our audit and determine if TVA's Financial Gas Hedging program was designed and functioning in a manner to achieve program objectives in the most efficient and effective manner.In summary, Mercatus agreed the overall design of TVA's FTP control structure was appropriate. However, Mercatus identified several additional areas regarding the design and function of the program that required attention. To address these areas, Mercatus recommended TVA>Determine risk tolerance and proper size of the FTP.Analyze volumetric risk on a regular consistent basis and communicate with stakeholders having a vested interest in this aspect of the FTP.Redesign hedging strategies to better match the characteristics of the exposures being hedged.Improve and consolidate performance reports.Cease using "Value at Risk" as a primary risk metric and replace it with at risk type of metric(s) that includes financial natural gas hedges and the physical exposures being hedged.Conduct stress testing on a routine basis.Ensure actions required by governance documents are adhered to or if language in the documents is inaccurate, revise the documents to reflect actual practices.Conduct a proper cost/benefit analysis of the FTP and compare all-in hedged cost of fuel to the cost of fuel without hedging (market price).Properly analyze and manage all of TVA's energy commodity exposure.TVA management generally agreed with the recommendations and provided a plan of action to address the recommendations.

In completing project number 2009-12883, Survey of TVA's Process for Determining Condition of Assets, with a report dated September 20, 2012, the OIG learned that asset condition assessments performed by the Nuclear Power Group (NPG) had determined some generation assets were in poor condition. As a follow up to our prior work, we performed a review to determine whether TVA was taking action to address NPG systems, components, and programs with poor ratings. Under NPG's health report process, actions were required when ratings were designated red or yellow. Red ratings are defined as requiring excessive monitoring/resources to maintain, and yellow ratings indicate a need for additional attention.We found 333 systems, programs, and components within NPG had been designated red or yellow. We randomly sampled 25 for detailed review. Our analysis showed at least two actions were taken to address 24 of the 25 samples. For 1 component, only one action was completed and other actions were awaiting approval. These actions resulted in an improvement in condition and a change in 14 cases to a white or green rating, while 11 had ratings that remained red or yellow. It is important to note that of the remaining 11 with red and yellow ratings, 2 changed from red to yellow, and 9 remained the same. In addition, 5 of the 9 that remained red or yellow had some asset condition improvement but not sufficient improvement to change the rating.

This report was withdrawn, revised, and reissued on July 9, 2015, as report number OIG-SBLF-14-005R, to reflect changes made on pages 2, 12, 13, 17, and 18. The changes clarify that the Office of Inspector General tested a sample of administrative expenses in this audit. These changes do not affect the findings, conclusions, and recommendations as reported.

This Report was withdrawn, revised, and reissued as OIG-SBLF-14-004R on July 2, 2015, to reflect changes made on pages 1, 2, 5, 6 and 7. The changes clarified the sample population of loans and investments tested and the amount of administrative costs that were reviewed by the Office of Inspector General as part of the sample. These corrections did not affect the findings, conclusions, and recommendations as reported.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements