The Inspector General's Statement of Management Challenges

The management challenges have changed since FY 2005 along with the order. The following is a crosswalk between the FY 2005 and the FY 2006 management challenges. Following this crosswalk is a description of the challenges and then the bureau responses to the challenges.

Challenge 1: Strengthen Department-Wide Information Security

In the five years since enactment of the Federal Information Security Management Act (FISMA), government agencies have devoted significant resources to improving the security of information stored on their computer systems. At the Department, information technology (IT) security has been a top management challenge, and has been a Federal Managers’ Financial Integrity Act (FMFIA) material weakness since 2001.

To eliminate the material weakness, the Department has established a certification and accreditation (C&A) improvement process for IT systems. In FY 2006, the Office of the Chief Information Officer (OCIO) reviewed improved bureau C&A packages as they became available, and provided the Office of the Inspector General (OIG), for the Department’s FISMA review, the packages for high and moderate impact systems considered to be of sufficient quality. The Department’s inventory contains 229 such systems. OCIO received 22 improved C&A packages for these systems in time to forward for the Department’s FISMA review, and determined 12 to be of sufficient quality. The Department evaluated 11 of the 12 packages (which were all for Department-owned systems), as well as four packages for contractor systems (which did not go through the improvement process) in time for FISMA reporting. The review identified significantly improved quality of risk assessments and system security plans overall for Department systems, but found that certification testing still needs improvement. OIG concluded that five of the 11 improved Department systems and none of the contractor systems met the C&A criteria established by Departmental IT security and Office of Management and Budget (OMB) policy, and National Institute of Standards and Technology (NIST) standards and guidelines. Based on the limited number of improved C&A packages and its review, OIG concluded that the Department lacks a consistent and effective process for performing C&A. The result is that (1) systems are authorized for processing without demonstrating that their operational and technical controls are, in fact, in place and operating as intended, and (2) authorizing officials lack adequate information on the remaining vulnerabilities.

Challenge 2: Effectively Manage Departmental and Bureau Acquisition Processes

The Department spends nearly $2 billion annually on goods and services—roughly a third of its annual appropriation—and each year relies more on contractors to support its mission-critical work. Adequate oversight of acquisition planning and execution is essential to ensuring that taxpayers’ dollars are spent effectively and efficiently and procurement laws and regulations are followed.

For example, the Census Bureau’s contracting for products and services to support 2010 decennial operations continues to bear watching. The Bureau estimates that 17 percent ($1.9 billion) of its 2010 budget will be spent on contracts for IT systems, advertising, and leases for local office space.¹ One key IT program—Field Data Collection Automation (FDCA)—will develop the handheld mobile computers that field staff will use to collect 2010 decennial information. This is a critical piece of the Bureau’s re-engineered strategy. The Census Bureau originally planned to develop this equipment in-house but determined in early 2004 that it lacked the management and technical resources to do so, and on March 31, 2006 awarded a system development contract. However, the late decision to use a contractor and the initial slow pace in planning the acquisition shortened the amount of time available for awarding the contract and developing FDCA. These delays have been a major contributor to the recently-announced one-month delay in address canvassing, the first major field operation of the dress rehearsal for the 2010 census.

Challenge 3: Strengthen Internal Controls Over Financial, Programmatic, and Business Practices

Internal controls are the steps agencies take to make sure their operations are effective, efficient, and in compliance with laws and regulations. Internal controls also ensure that financial reporting is reliable, and assets are safeguarded from waste, loss, or misappropriation, according to OMB. Two documents, the FMFIA and the 2004 revision of OMB Circular A-123 (Management’s Responsibility for Internal Control), set out internal control requirements for the federal government: the Department and all federal agencies must define and document major financial internal control processes and test key financial controls to determine whether they are effective as of June 30, 2006.

Although OIG noted recent improvement in the Department’s management and financial accountability as well as in program and operational effectiveness, OIG audits continually indicate more work is needed to strengthen internal controls over programs, operations, and administrative areas.

OIG expects the new federal emphasis on strong internal controls to create a number of new demands for OIG reviews in the coming years. For example, the Digital Television Transition and Public Safety Act of 2005 passed in 2005 puts the National Telecommunications and Information Administration (NTIA), one of the Department’s smaller agencies, in a position of having to manage an enormous national project with an even larger budget than had been anticipated. Successfully implementing this act will constitute a significant management challenge for the Department. OIG will share lessons learned from its work in other areas to help the Agency design strong, well-structured programs and minimize opportunities for fraud.

Challenge 4: Ensure that USPTO Uses Its Authorities and Flexibilities as a Performance-Based Organization to Achieve Better Results

Since March 2000 when the Patent and Trademark Office Efficiency Act transformed the U.S. Patent and Trademark Office (USPTO) into a performance-based organization designed to operate more like a private corporation than a government agency, OIG has paid close attention to a number of aspects of the organization’s internal management structures and practices.

At the same time, USPTO faces numerous challenges, such as a continuing increase in applications, training over 1,000 newly hired examiners in Patents and Trademarks, and transitioning to an electronic processing environment. In addition, USPTO’s expanded authority over personnel decisions and processes, procurement, and IT operations needs to be effectively and efficiently utilized.

OIG has issued nearly a dozen reports examining problems at USPTO since 2001. The Bureau has generally taken decisive action to address some problems OIG identified in the past, and OIG has been pleased that USPTO has been receptive to OIG recommendations. But ultimately, OIG believes that many of the problems USPTO suffers are serious and require the sustained commitment of senior managers to resolve. OIG will continue to monitor the Bureau’s progress.

Challenge 5: Control the Cost and Improve the Accuracy of the Decennial Census

Even after adjusting for inflation, the 2010 census will be the country’s most expensive decennial ever—estimated to cost $11.3 billion. The Census Bureau has established a rigorous testing schedule to monitor development and implementation of the strategy, identify problems, and incorporate solutions in time for the decennial.

During the last six months, OIG built on the work it did in 2005 and early 2006 which reviewed the 2006 test address canvassing operation. OIG completed a review of the Census Bureau’s test to enumerate the group quarters population.

Although most U.S. residents live in residential housing units, such as single-family houses, apartments, and mobile homes, more than seven million people live in situations such as college dormitories; nursing homes; prisons; and group homes, collectively known as group quarters. OIG reviewed the group quarters testing operation at the Census Bureau’s test site in Travis County, TX.

OIG’s review found that although the Bureau is working on new methods to better enumerate the group quarters population, it continues to face a number of challenges. For example, non-traditional student housing, such as private dorms and student cooperative housing, did not easily fit into any of the Census Bureau’s group quarters definitions. Sometimes these units were defined as private residences and received housing unit questionnaires. In those cases, there was an increased likelihood that the unresponsive students had already moved out of their residence before the follow-up operation. When this occurred, enumerators relied on records kept in administrative offices, which often lacked Hispanic origin and race information. OIG also found that 42 percent of the validation workload was associated with large apartment complexes erroneously identified as potential group quarters during address canvassing. This caused problems in the group quarters validation and the nonresponse follow-up operations.

OIG also found that the Census Bureau should take additional steps to count the student population, such as working closely with fraternity and sorority campus oversight organizations and exploring the use of the Internet as a response option for this computer-oriented generation. Finally, OIG noted that some additional group quarters processes and procedures warrant management attention. OIG continues to look at various aspects of Bureau planning and preparations for the 2010 census, including update/enumerate operation at the Cheyenne River Reservation and Off-Reservation Trust Land in South Dakota.

Challenge 6: Effectively Manage the Development and Acquisition of Environmental Satellites

Over the next five years, the Department, through the National Oceanic and Atmospheric Administration (NOAA), will spend several billion dollars in contracts for the purchase, construction, and modernization of environmental satellites.² These systems, operated by NOAA’s National Environmental Satellite, Data, and Information Service (NESDIS), collect data to provide short and long-range weather forecasts and a variety of other critical environmental and climate information.

Complex, high-cost acquisitions such as these are extremely difficult to manage within cost and schedule goals, as was revealed in OIG’s audit during this reporting period of the National Polar-orbiting Operational Environmental Satellite System (NPOESS).

NPOESS is intended to replace the current generation of civilian and military weather satellites as they reach the end of their useful lives. By September 2005, NPOESS was $3 billion over budget and well behind schedule, yet the contractor had received more than $123 million in award fees. OIG uncovered two overarching management and contract weaknesses that contributed to the unchecked cost and schedule overruns.

First, OIG found that while the sensor problems were communicated to the program’s executive committee (EXCOM), the EXCOM did not effectively challenge the integrated program office’s optimistic assessment of their impact. Though it was clear by December 2002 that both costs and delays were increasing, the program director—a NOAA employee—maintained that these problems would be solved within available funding reserves and that NPOESS remained on schedule, and his assessment was never effectively challenged. Three years later it was clear the first satellite launch was going to be delayed, but it was too late to turn the program around.

Second, the NPOESS experience shows that the incentive structure used to reward contractors does not always result in top performance. Despite ongoing, significant delays and cost overruns, OIG found the prime contractor was awarded nearly the maximum fee amounts for the first five billing periods. These payments were permissible because the fee plan’s evaluation criteria did not sufficiently tie incentive earnings to completion of the most critical or high-risk tasks.

Since OIG’s report was released, the Deputy Secretary of Commerce has stressed the importance of NPOESS to the Department’s mission and national responsibilities and noted that he now receives monthly NPOESS progress reports from NOAA.

The GOES-R series is the next generation of geostationary satellites (GOES) that will replace existing GOES satellites in the next decade. The Department’s investment for GOES-R for FY 2006 to FY 2010 is projected at about $2 billion. OIG has initiated a joint review of the GOES-R program with the National Aeronautics and Space Administration’s (NASA) OIG. The shared objective is to determine whether the Department and NASA have created a management structure to ensure effective oversight of the many risks associated with the GOES-R program.

OIG’s acquisition focus will be on the program office’s overall approach to procuring key satellite instruments, identifying potential risks, and implementing associated mitigation strategies. OIG will also assess the acquisition contracts’ award fee plans to determine whether they are structured to promote excellent performance.

Challenge 7: Promote Fair Competition in International Trade

The Department accomplishes its goals of promoting trade, opening overseas markets to U.S. firms, and protecting U.S. industry from unfair competition by imports primarily through the work of the International Trade Administration (ITA). ITA also works with USPTO and NIST to assist U.S. companies on intellectual property rights (IPR) and standards. Over the past several years, OIG has focused a number of reviews on the Department’s efforts to increase U.S. market opportunities, provide assistance to U.S. exporters, and overcome trade barriers in difficult foreign markets.

In September 2006, in response to OIG recommendations made to ITA in several recent reports, the ITA’s U.S. and Foreign Commercial Service Program (US&FCS) announced extensive changes in its procedures for verifying export success claims, its primary performance measure. US&FCS stated that the new procedures were necessary because, in a significant number of cases, OIG had found discrepancies in the reported export successes. These discrepancies raised doubts about the integrity of the data US&FCS reports to Congress and the Administration on its accomplishments. The new US&FCS procedures require improved documentation, supervisory confirmation of a sample of export success reports, and verification that US&FCS provided value-added assistance.

OIG conducted on-site inspections of US&FCS posts in Brazil, Argentina, and Uruguay. Significant export opportunities are opening in these countries as Brazil’s large economy continues its steady growth, Argentina recovers from its 2001-2002 economic crisis, and Uruguay pursues closer trade relations with the United States. OIG inspections focused on the management, program operations, and financial and administrative practices of these three South American posts. It issued its report on US&FCS’s operations in Argentina and Uruguay in September with 20 recommendations, and OIG will publish its report on US&FCS’s larger post in Brazil before the end of the calendar year.

OIG’s review of US&FCS Argentina and US&FCS Uruguay found that the posts are providing useful export assistance to U.S. companies and have established collaborative relationships with key U.S. government offices and non-governmental organizations (NGO) both in those countries and in the United States. OIG’s review found effective administrative management practices at both posts, but it also identified some financial management and accounting concerns that warrant the attention of Department managers.

Challenge 8: Effectively Manage NOAA’s Stewardship of Ocean and Living Marine Resources

NOAA is charged with monitoring the health of the nation’s ocean, coastal, and Great Lakes resources; administering civilian ocean programs; and protecting and preserving the nation’s living marine resources through scientific research, fisheries management, enforcement, and habitat conservation.

During the past year, OIG followed up on its audit of the National Marine Fisheries Service’s (NMFS) preparation of a biological opinion for California’s Central Valley Project, one of the nation’s major water conservation efforts. In response to OIG’s audit recommendations, NOAA commissioned two independent scientific reviews of the opinion, both of which found the scientific information used in the biological opinion was not the best available. In light of these findings, OIG asked NOAA officials to submit to it a plan that identifies actions they will take to address the deficiencies and implement the related recommendations made by the independent review organizations.

OIG also continued its series of reviews of salmon recovery programs, auditing a tribal subgrantee funded by NOAA’s Pacific Coastal Salmon Recovery Fund. Much like the audits OIG detailed in its 2004 and 2005 semiannual reports, it questioned costs and noted some administrative weaknesses.

NOAA’s challenges include its efforts as a steward of marine resources, the Agency’s consultation process, and its management of fisheries and marine mammals.

Challenge 9: Aggressively Monitor Emergency Preparedness, Safety, and Security Responsibilities

The Department has a dual responsibility in the area of emergency preparedness, safety, and security; not only must it be ready to protect 38,000+ employees and hundreds of facilities, but because several Department programs are critical to national preparedness and recovery efforts, it must support U.S. efforts to prepare for, respond to, and promote recovery from major disasters.

OIG continues to monitor the Department’s progress in resolving departmental emergency preparedness and security weaknesses it identified in assessments conducted in 2002 and 2005. Although the Department has made significant improvement in emergency preparedness to address vulnerabilities, OIG found, among other things, the need for better departmental guidance and oversight of emergency programs, risk assessments, occupant emergency plans, and security forces at its domestic operations, as well as better oversight of security upgrades and greater attention to security at its overseas offices.

Challenge 10: Enhance Export Controls for Dual-Use Commodities

The Department’s Bureau of Industry and Security (BIS) oversees the federal government’s export licensing system for dual-use commodities and technology and is charged with advancing U.S. national economic security interests by administering and enforcing export controls. The primary goal of the licensing and enforcement system is to prevent hostile nations and terrorist groups from acquiring sensitive technologies and materials that have both civilian and military applications by controlling their export.

The National Defense Authorization Act (NDAA) for FY 2000, as amended, directed the inspectors general of the Departments of Commerce, Defense (DOD), Energy (DOE), and State, in consultation with the directors of the Central Intelligence Agency (CIA)³ and the Federal Bureau of Investigation (FBI), to report to Congress by March 30, 2000, and annually until the year 2007, on the adequacy of export controls and counterintelligence measures to prevent the acquisition of sensitive U.S. technology and technical information by countries and entities of concern. (OIG at the Department of Homeland Security [DHS] also has participated since its establishment in 2003.) In addition, the NDAA for FY 2001 requires the IGs to discuss in their annual interagency report the status or disposition of recommendations made in prior-year reports submitted under the act.

OIG has recently initiated its eighth and final NDAA required review, this time looking at the effectiveness of U.S. controls on dual-use exports to India. India presents unique challenges to U.S. commercial interests and export control policy. As one of the fastest growing economies in the world, India offers expanding trade opportunities for U.S. exporters but also increased competition for U.S. industry and labor.

OIG will detail the findings of its India evaluation in its March 2007 semiannual report. And though this will conclude OIG’s statutory reporting requirements under NDAA, it will continue to monitor BIS’s efforts to implement and enforce dual-use export controls, given the importance of this mission to the nation’s security. OIG will also follow up on its previous NDAA recommendations and report on BIS’s progress in implementing them in its next semiannual report.

¹ http://frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.21&filename=d06465t.pdf&directory=/diskb/wais/data/gao.
Accessed April 7, 2006. (back)
² http://www.osec.doc.gov/bmi/Budget/05APPR/PAR05.pdf, page 210. (back)
³ The Intelligence Reform and Terror Prevention Act of 2004 [Public Law 108-458], dated December 17, 2004, established the Director of National Intelligence to serve as the head of the U.S. intelligence community. (back)