Geological Survey's Efforts To Correct Its Longstanding Financial Management Problems

The U.S. Geological Survey (USGS) is responsible for collecting the royalty income derived from oil and gas produced on Federal and Indian lands. Royalty collections have increased rapidly in recent years and can be expected to continue increasing due to increases in oil and gas prices. USGS has not placed a high enough priority on collecting oil and gas royalties, and financial management problems in the program persist. As a result, millions of dollars owed the Government in royalty income may be going uncollected each year, and because of this the Government's interest costs increase. USGS is attempting to correct its financial management problems. It has established royalty management as a separate entity and is designing and implementing a new royalty accounting system. USGS still relies almost entirely on production and sales data reported by the oil companies, and little effort is made to verify the accuracy of the data supplied. To alleviate this reliance on unverified data, USGS must determine what secondary sources of data are available among Government and State agencies and in the oil and gas industry. There was a breakdown of the automated royalty accounting system which allowed lease account records to be inaccurate and unreliable. USGS has been unable to ensure timely collection of royalties due. USGS must increase its auditing and monitoring of lease accounts to control royalty payments and explore the possibility of sharing its auditing and inspection responsibility and information with the States. USGS lease accounts contain many errors which could be eliminated, reduced, or identified through the use of the computer with control checks or edits to prevent errors and to identify problems. A list should be provided to help USGS follow up on late payments. The current collection system should be standardized. USGS appears to have not given adequate consideration to acquiring data on the number of leases and wells for which it is responsible, verifying the royalty computation, planning the production phase, and developing a comprehensive plan for audits and inspections.