Mineral Revenues:

Options to Accelerate Royalty Payment Audits Need Further Consideration

RCED-89-167: Published: Jun 5, 1989. Publicly Released: Jul 6, 1989.

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Pursuant to a congressional request, GAO provided information on the Minerals Management Service's (MMS) audits of oil and gas royalty payments, focusing on the: (1) status of the MMS audit program; (2) effect of a 3-year audit acceleration effort by MMS; (3) MMS cost-benefit analysis that it used to support its proposal to hire contract auditors; and (4) possibility of auditor conflicts of interest and steps MMS has taken to address that issue.

GAO found that: (1) MMS had resident audit staffs at the 12 largest royalty payors, had completed audits of 16 other major payors, and had ongoing audits at 47 other major payors; (2) the 3-year acceleration effort will make the MMS audit program more current, and MMS will move from a 12-year audit cycle to a 6-year audit cycle by fiscal year (FY) 1993; (3) MMS did not prepare a cost-benefit analysis to support its decision to hire contract auditors or consider hiring temporary federal employees to complete the audits; (4) it could not determine whether MMS had taken sufficient steps to prevent auditor conflicts of interest; and (5) neither MMS nor the Department of the Interior adequately justified the proposal to hire contract auditors.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Although Interior requested $5 million in its FY 1990 budget submission to implement the first year of a 3-year effort to hire contractor auditors, Congress only appropriated $3.6 million and stipulated that one half can be used to fund cooperative agreements with states and Indian tribes to provide audit resources. Otherwise, the funds are to be used to hire additional MMS auditors.

    Matter: Because MMS has not adequately considered all the options available to accelerate its audits of royalty payors, Congress should not approve the funds Interior has requested for hiring contractor auditors in FY 1990 until Interior considers all options and adequately justifies whatever option it selects.


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