Interior Has Not Solved Indian Oil and Gas Royalty Payment Problems

IMTEC-86-13: Published: Mar 31, 1986. Publicly Released: Apr 22, 1986.

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In response to a congressional request, GAO examined the Department of the Interior's initiatives to ensure the timely and accurate collection and distribution of Indian oil and gas royalties, specifically Interior's efforts to: (1) provide useful royalty payment explanations to individual Indians; (2) resolve royalty overpayments; and (3) ensure that Indian leases are included in its exception processing system. GAO also evaluated the possibility of using the Mineral Management Service's (MMS) new computer to help solve royalty payment problems.

The Oil and Gas Royalty Management Act requires Interior to provide Indian royalty owners with explanations of their royalty payments. The Bureau of Indian Affairs (BIA) developed an automated system to provide this information. However, GAO found that BIA was not complying with the act, because: (1) 18,000 of 27,000 Indian royalty owners were not receiving royalty payment explanations; (2) the payment statements did not include the royalty rate; (3) 40 percent of those who received royalty explanation statements found them difficult to understand because of their small print and technical language; and (4) BIA has not taken action to resolve about $450,000 in overpayments made prior to installation of the automated system. GAO also found that MMS: (1) has made progress in ensuring that Indian leases are included in its exception processing system; (2) identification of late payments could result in an additional $375,000 in annual revenue to Indians; (3) has not implemented procedures for identifying other payment exceptions and for collecting an estimated $2.3 million in backlogged Indian royalty revenues; (4) has proposed a new computer system for its royalty management program, but the system will not resolve Interior's problems in information dissemination, royalty overpayments, and exception processing; and (5) will modify its system to generate royalty rate information and to reduce the number of adjustments and overpayments.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: BIA stated that it completed implementation of the system in all Indian areas.

    Recommendation: To ensure that Interior complies with section 105 of the Federal Oil and Gas Royalty Management Act of 1982, the Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to promptly implement the Royalty Distribution and Reporting System throughout BIA.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: According to BIA, all statements now contain calculated royalty rates.

    Recommendation: To ensure that Interior complies with section 105 of the Federal Oil and Gas Royalty Management Act of 1982, the Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to change the BIA Royalty Distribution and Reporting System to provide royalty rates on the statements generated by the system.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: BIA will use a contractor for this redesign and has submitted a contract statement of work to the General Services Administration for review.

    Recommendation: To ensure that Interior complies with section 105 of the Federal Oil and Gas Royalty Management Act of 1982, the Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to redesign the royalty payment statement provided to allottees to make it easier for them to understand and use.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: BIA is developing a request for proposal to accomplish this task using a contractor.

    Recommendation: The Secretary of the Interior should require the Assistant Secretary for Indian Affairs to promptly resolve, by collection, offset, or write-off, the $450,000 in overpayments resulting from not properly accounting for negative royalties in the Anadarko area.

    Agency Affected: Department of the Interior

  5. Status: Closed - Implemented

    Comments: BIA agreed with this recommendation and plans to take appropriate action.

    Recommendation: After the Auditing and Financial System becomes operational on the new MMS computer, the Secretary of the Interior should require the Director, MMS, to assess the feasibility of expanding the MMS exception processing system to include other exception types, as well as those currently being performed.

    Agency Affected: Department of the Interior

 

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