Oil and Gas Royalty Collections--Serious Financial Management Problems Need Congressional Attention

FGMSD-79-24: Published: Apr 13, 1979. Publicly Released: Apr 13, 1979.

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A significant portion of domestically produced oil and natural gas comes from Federal and Indian lands leased to the private sector. During 1977, the U.S. Geological Survey (USGS) collected about $1.2 billion in royalties on these lands from the oil and gas industry. Extensive congressional interest in government debt collection procedures prompted a review of the system and related controls used by the agency in collecting these royalties.

Serious deficiencies in the way USGS maintained records of amounts due the government under the leases resulted in losses of millions of dollars. Statements of lease accounts contained numerous errors and omissions. Failure to perform an adequate number of lease account reconciliations and audits meant that the agency had to rely on unverified data from the oil and gas industry to compute and collect royalties due. Lack of interest charge provisions resulted in delayed receipt of payments. Understaffing was a chronic condition. Many factors beyond the control of the agency contributed to the breakdown in the collection system.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: For the short range, the Secretary of the Interior should require the Director, USGS, to: (1) inform field personnel of the need to determine the reasonableness of inventory and sales data shown on production reports, making accounting personnel aware of any discrepancies; (2) include on lease account records codes identifying reasons for account adjustments on lease; (3) provide for and charge appropriate administrative fees and interest on delinquent accounts; and (4) encourage companies with computer capabilities to provide direct tape input of report data. For the long range, the Director should: (1) modify or redesign the collection system to reduce the volume of reports submitted by the industry for processing; (2) consider lessee dependability and prior reporting and paying record in selecting accounts for reconciliation and audit; (3) provide for cross-service audit agreements with the Department of Energy; and (4) designate one office as responsible for establishing agencywide collection policies.

    Agency Affected:

 

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