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IGsSemiannual

Report

to Congress

March 2009

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CONTENTS

From the Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Major Challenges for the Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Overcome the Setbacks Experienced in Reengineering Decennial Processes, and Conduct a Successful 2010 Census . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Effectively Manage the Development and Acquisition of NOAAs

Ensure NTIA Effectively Carries Out Its Responsibilities Under the

Better Position the Department to Address Information Security Risks . . . . . . . . . . . . . . . . . . . . . . . . 5

Two Environmental Satellites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Establish a Safety Culture at NIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Digital Television Transition and Public Safety Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Other Issues Requiring Significant Management Attention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

OIG Recovery Act Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Work in Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Agency Overviews

Bureau of Industry and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Economic Development Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Economics and Statistics Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

National Oceanic and Atmospheric Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

National Institute of Standards and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

National Telecommunications and Information Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

United States Patent and Trademark Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Department-Wide Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Office of Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Office of Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Other OIG Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Tables and Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

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FROM THEINSPECTOR GENERAL

We are pleased to present the Department ofCommerce Office of Inspector Generals SemiannualReport to Congressfor the 6 months ending

March 31, 2009.

This report summarizes the work we have completedand initiated during this semiannual period on anumber of critical departmental activities. Amongother things, we identified the top management challenges facing the Department for the incomingAdministration, issued a report with recommendations for modifying the contract type and fee structure of the Field Data Collection Automation(FDCA) contract, which aided Census in the renegotiation of this critical decennial contract, and report

ed on the fraud, waste, and abuse program for thedigital-to-analog converter box coupon program. Inaddition, our investigative activities this reportingperiod resulted in two convictions and more than$75 million in fines, restitutions, and recoveries.

Also during this semiannual period, the AmericanRecovery and Reinvestment Act of 2009 became law.The Act provides nearly $8 billion for stimulusprojects for the Department, including $4.7 billionfor the Broadband Technology OpportunitiesProgram. This presents the Department, and ouroffice, with new responsibilities and challenges tospend funds provided under the Act in a transparent

and accountable manner, while also meeting thepurposes of the Act.

We had the opportunity in March to testify beforeCongress on what we consider the major areas of riskfacing the Department in spending stimulus fundseffectively. These areas will be the basis for themajority of our Recovery Act work in the upcomingreporting period. We are taking steps to providerecommendations to the Department and its bureausupfront in order to help prevent problems. We alsoestablished an OIG Recovery Act Task Force to leadthe oversight efforts required under the Act and willwork closely with key decision-makers.

We look forward to working with the Departmentand the Congress to address these many challenges.We thank the Secretary, senior officials throughoutthe Department, and members of Congress andtheir staffs, for their support of our work duringthis reporting period and for their responsiveness to our recommendations for improvingCommerce operations.

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MAJOR CHALLENGESFOR THE DEPARTMENT

In NovemberThese are listchallenges wit

also discussed belo

2008, we issued a report emphasizing the key challenges facing the new Administration.ed in detail below. Since that time the Department has been confronted with newh the passage of the American Recovery and Reinvestment Act. These new challenges arew.

The Reports Consolidation Act of 2000 requiresinspectors general to identify the top managementchallenges facing their departments. For FY 2009Commerce OIG has identified five top challenges thatrequire immediate and significant action from theDepartment, and four longer term issues that requiresustained attention. These challenges provide the focusfor much of our work, as we assess the Departments

progress in meeting them.

TOP 5 MANAGEMENT CHALLENGES

1. Overcome the Setbacks Experienced inReengineering the Decennial Processes, andConduct a Successful 2010 Census.

2. Better Position the Department to AddressInformation Security Risks.

3. Effectively Manage the Development andAcquisition of NOAAs Two EnvironmentalSatellites.

4. Establish a Safety Culture at NIST.

5. Ensure that NTIA Effectively Carries OutIts Responsibilities Under the DigitalTelevision Transition and Public SafetyAct.

Challenge 1

Overcome the Setbacks Experienced inReengineering Decennial Processes, andConduct a Successful 2010 Census

The Census Bureaus ability to carry out a successful2010 population count continues to be one of the

most critical challenges facing the Department: thefirst major operation of the 2010 censusaddresscanvassingis already under way and deadlines forseveral others are approaching. The time lost inrevamping operations to accommodate theDepartments late decision to scale back use ofhandheld computers has left Census little or nowindow for testing a number of its replacementprocesses, procedures, and strategies beforeconducting live operations. At this point in the lifecycle, the new Secretary will have little opportunity

to impact the 2010 decennial. The new Secretarydoes have the opportunity to impact planning for the2020 census. We believe that applying the lessonslearned from the 2010 decennial to the planning andreengineering of the 2020 decennial should be a highpriority and begin as soon as possible.

The 2010 census was to be the first high-tech countin the nations history, with employees using

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March 2009Semiannual Report to Congress

Challenge 2

Better Position the Department to AddressInformation Security Risks

As in many federal agencies, putting properinformation security controls in place has been anintractable problem at the Department of Commerceand a long-standing item on OIGs watch list.Despite significant expenditures to mitigate theproblem, the Department has reported informationsecurity as a material weakness every year sinceFY 2001.

The reason for the material weakness is ineffectivecertification and accreditation (C&A): the FederalInformation Security Management Act (FISMA) and

OMB policy require agencies to certify that theirsystems and data are protected with adequate,functioning security controls before authorizing(accrediting) a system to operate. But year after yearour FISMA reviews have found ineffective C&Aprocesses that do not adequately identify and assessneeded controls and ultimately fail to assure thatsystems and data are protected.

Securing systems from cyber threats is clearly themost difficult piece of the challenge because thesethreats represent a moving target: they increase innumber and sophistication almost daily. And asagencies incorporate wireless and other technologiesto support their operations and workplaceflexibilities, they invite new risks that must beanticipated and mitigated.

To be effective in this environment, the DepartmentsIT security program must be proactive and flexible,staffed by IT security professionals who have theappropriate skills, experience, and clearances toimplement required security controls, assess their

effectiveness, and anticipate and respond to emergingthreats. Key to the Departments success inestablishing such a program are the following:

Improved IT security staffing. Our assessmentsover the years have found that IT securitystaff lacks adequate understanding ofCommerce IT security policy, NIST stan-

Major Challenges for the Department

dards and guidance, and security technology,and therefore cannot appropriately applythem. We are auditing the efforts within theDepartment to address these problems andstrengthen IT workforce capabilities, as wellas future plans for maintaining sufficientstaff expertise.

Consistent, repeatable C&A processes. We continue to work with the Department to eliminate the material weakness by the end ofthis calendar year under a jointly developedplan that incorporates realistic milestonesand measurable steps for building consistentand repeatable C&A practices. Our FISMAreviews have increased their emphasis on theDepartments efforts to conduct continuous

monitoringa crucial strategy for eliminating the material weakness, by which agenciesregularly assess and adjust their security controls to maintain or improve protectivemeasures. The limited number of reviews forwhich we have completed fieldwork thusfarwhile not sufficient to draw final conclusionshave found improved C&Aprocesses.

Cyber Security Assessment and Management(CSAM) tool. As part of the effort to build

repeatable processes, Commerces ChiefInformation Officer (CIO) initiated a pilotproject to facilitate Department-wideimplementation of CSAMa softwareapplication developed by the Department ofJustice that allows users to take a 360-degreeapproach to C&A. They can input systeminformation as they begin the C&A processand, among other things, generate andimplement a security plan that complieswith FISMA requirements, analyze security

requirements, and track resolution ofvulnerabilities and the results of securitycontrol monitoring.

The six bureaus participating in the pilot are usingCSAM to certify and accredit one of their operationalsystems with the goal of identifying challenges to andrequirements for integrating the tool with currentC&A processes. The project is scheduled for

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completion in June 2009. When fully integratedthroughout the Department, CSAM should bringgreater consistency to the C&A process across allCommerce bureaus.

Finally, in response to growing cyber threats andcyber security incidents, the Department has takensignificant steps toward shoring up IT security atheadquarters. It has established a network securityoperations center that uses state-of-the-artmonitoring tools to provide real-time identificationof potential threats, isolated certain critical networksand enhanced their security measures, and is creatinga specialized stand-alone network for processingextremely sensitive information.

Challenge 3

Effectively Manage the Developmentand Acquisition of NOAAs TwoEnvironmental Satellites

NOAA is modernizing its environmental monitoringcapabilities, spending billions of dollars on twosatellite systems that provide critical data: theNational Polar-orbiting Operational EnvironmentalSatellite System (NPOESS) and GeostationaryOperational Environmental Satellite-R Series

(GOES-R).

Space acquisitions like NPOESS and GOES-R arehighly technical and complex and have a history ofcost overruns, schedule delays, and performanceshortfalls. The costs and schedules of both of thesesystems have significantly increased since the projectscommenced. They therefore require careful oversightto minimize any further disruption and to preventany gaps in satellite coveragea situation that couldhave serious consequences for the safety and securityof the nation.

More Setbacks for NPOESS. The NPOESS project isintended to provide continu

o

itor

us weather and environmental data for longerterm weather forecastng and climate moniing through the coming

two decades.1 The initial plan called for the purchaseof six satellites at a cost of $6.5 billion, with a firstlaunch in 2008. But problems with a key sensortheVisible/Infrared Imager/Radiometer Suite (VIIRS)were a major contributor to the programs June 2006restructuring, which increased the estimate to $12.5billion, reduced the number of satellites to four, andpushed the first launch back to 2013. (See September2006 Semiannual Report to Congress, pages 9 and 29.)

In December the NPOESS total life cycle cost wasrevised to $14 billion. The updated estimate reflectedadditional costs for the development of VIIRS as wellas revised operations and support costs. Subsequently,NOAA announced in March it would delay the firstlaunch by another yearto 2014because ofcontinuing problems with VIIRS. It also slipped the

NPOESS Preparatory Project (NPP)2

launch datefrom 2010 to 2011.

Preliminary analysis by a team of independentsatellite experts indicates among other things that theNPOESS program as currently defined has a lowprobability of success, that the current estimate of$14 billion should be increased, and that the decisionmaking by the triagency committee of senior NOAA,NASA, and the Department of Defense officialscontinues to be ineffective. Although currentsatellites are expected to operate until 2014, a launch

failure or delays beyond 2014 could result in gaps inthe availability of long-term environmental data.

Under the American Recovery and Reinvestment Actof 2009, $74 million will be used for developmentactivities to mitigate NPOESS cost and schedule riskand for instruments that will monitor factorsaffecting climate change.

GOES-R Acquisitions are Underway. The $7.7 billionGOES-

un

q

res

i

wwe

R system will offer annterrupted flow of high-

uality data for short-rangeeather forecasting andarning, and climatearch through 2028. An

1 The cost of the NPOESS program is shared equally by NOAAand the Department of Defense.

2 NPP was planned as a risk reduction effort to test NPOESS newinstruments in flight. NASA is the lead on this effort.

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March 2009Semiannual Report to Congress Major Challenges for the Department

inadequate acquisition and management processcontributed to underestimated costs for GOES-Rand planned satellite capabilities that were tooambitious. As a result, the projected cost of GOES-Rhas increased from $6.2 billion to $7.7 billion, amajor sensor has been removed, and the number ofsatellites to be purchased has decreased from fourto two.

Currently NOAA is evaluating the ground segmentproposals, and contract award is planned for summer2009. NASA awarded the spacecraft contract inDecember 2008, but the award was protested toGAO and NASA issued a stop work order shortlythereafter. Since then, NASA re-evaluated theproposals and re-awarded the contract in May.

Reining in additional costs and delays in bothprograms requires very specific action and vigilantoversight. For NPOESS, the three agenciesdeveloping the systemNOAA, NASA, and theDepartment of Defensemust (1) control andresolve the continuing problems with VIIRS,(2) identify the best approach to minimize a potentialgap in data continuity, and (3) improve triagencydecision making. Because NPOESS is the only sourceof critical weather and environmental data, it isespecially important that VIIRS problems be resolvedand congressional confidence in and support of the

program be maintained.

For GOES-R, (1) the Department needs to followbest practices in overseeing the acquisition whileawaiting development of formal Commerce oversightpolicies and procedures to guide such projects, and(2) the Department and NOAA need to work withCongress to update the baseline life-cycle costestimate used in its annual reporting on thesatellite system.

Challenge 4

Establish a Safety Culture at NIST

A June 2008 plutonium spill at the National Instituteof Standards and Technologys Boulder, Colorado,laboratory raised serious concerns about NISTsability to perform state-of-the-art research withradioactive and other dangerous materials while

protecting the safety of workers and the communityat large.

The plutonium spill was one of several incidentsreported at NIST labs in the past few years that haverevealed management flaws and a lax safety culture atthe agency. But it was by far the most serious in termsof the potential for widespread harm.

The plutonium spill prompted a series of reviews byindependent health and safety experts, theDepartment of Energy, and NISTs IonizingRadiation Safety Committee. NIST also arranged foran independent consultant to analyze the root causeof the plutonium spill. All of the experts shared acommon findinga commitment to safety atNIST Boulder is seriously lacking. (These reports are

available at http://www.nist.gov/public_affairs/releases/boulder-incident.html)

One area related to safety is facility maintenance.Two studies conducted by NIST identified a backlogof more than $500 million in facility maintenanceand repair requirements. A 2004 study found$458 million in deficiencies at NISTs Gaithersburgcampus and a 2008 study identified $48 million indeficiencies at Boulder. Many of the items relatedirectly to safety.

NIST noted that it should be investing at least$50 million to $70 million annually to bring itsfacilities to a fair condition and stay ahead offurther deterioration. It will have nearly double thatamount to spend on the backlog in FY 2009: theagency reported its FY 2009 appropriation included$68.3 million to address the backlog at Boulder andGaithersburg, to which it added another$11.9 million ($3.7 million for Boulder, $8.2 millionfor Gaithersburg). The Recovery Act allocated$39 million for addressing the backlog in FY 2009,

for a total of $119.2 million. Additionally, theRecovery Act allocated $26.5 million specifically forsafety improvements at Boulder and Gaithersburg.

While these funding commitments will be helpful inimproving the safety and physical condition ofNISTs facilities, it is clear from the circumstancessurrounding the plutonium incident and subsequentrevelations that, at a minimum, NIST must make

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Major Challenges for the Department March 2009Semiannual Report to Congress

safety a primary concern at all organizational levelsand strictly comply with all federal requirements andindustry standards. It must establish and enforcestringent policies and procedures for handlinghazardous materials and strict lines of accountabilityfor implementing them.

We have been monitoring NISTs efforts to improvesafety since the incident and, as part of our RecoveryAct oversight, we will closely watch how effectivelythe agency uses related allocations specificallydedicated to the backlog and safety issues. Followingthe plutonium spill, NIST established the position ofspecial assistant to the director for environment,safety, and health. It also is developing a system forcompiling all findings and recommendations relatedto NIST safetythose from the many experts who

reviewed the spill as well as those from other reportsissued over the yearsand for tracking relatedimplementation activities. Separately, we are assessingthe status of NISTs efforts to implement safety-related recommendations.

Challenge 5

Ensure NTIA Effectively Carries Out ItsResponsibilities Under the DigitalTelevision Transition and Public Safety Act

The Digital Television Transition and Public SafetyAct of 2005 assigned the National Telecommunications and Information Administration responsibilityfor implementing a $2.5 billion initiative for the conversion to digital television and improvements topublic safety communications. The act authorizesNTIA to use $1.5 billion to support the nationsswitch to all-digital broadcasting by offering couponstoward the purchase price of converter boxes that willenable analog television sets to receive digitalbroadcasts.

A primary purpose of the switch is to free up radiofrequencies for advanced wireless emergencycommunications at state and local levels. NTIA willuse approximately $1 billion to fund grants for publicsafety interoperable communications (PSIC) projectsin all 50 states, the District of Columbia, and theU.S. territoriesa total of 56 entities.

The authorizing legislation requires NTIA tocoordinate with the Department of HomelandSecurity in administering the PSIC program and seta statutory deadline of September 30, 2010, toexpend grant funds. Subsequent legislation set astatutory deadline of September 30, 2007, toaward grants.

Converter Box Coupon Program Is Progressing. OnFebruary 11, 2009, President Obama signed theDTV Delay Act, which moved the date for the switchto all-digital broadcasting from February 17 toJune 12, 2009. The delay responded to concerns thatcertain hard-to-reach populationssuch as ruralresidents and the elderlywere not yet digital ready.Though NTIA had made substantial progresspreparing television viewers for the switch by

dispensing converter box coupons, the agencyreported it had a waiting list of over 4.3 millioncoupon requests as of February 25, 2009, becauseCommerce had reached the $1.34 billion fundinglimit for the coupons. As a result, NTIA could sendout new coupons only as unredeemed ones reachedtheir 90-day expiration date.

The DTV Delay Act extended the deadline forcoupon requests to July 31, 2009, and authorizedNTIA to issue replacement coupons to consumerswho had allowed their original coupons to expire.The Recovery Act provided $650 million foradditional coupons and related activities such aseducation and outreach to vulnerable populations. Asof March 24, the waiting list had been cleared, andNTIA was filling coupon requests as they came.

Maintaining strict accountability for the programrequires careful oversight and strong internal controlsto, among other things, guard against waste, fraud,and abuse among retailers, and to adapt to evolvingprogram requirements. We have been carefully

monitoring NTIAs program administration. Ouraudit of the agencys oversight, completed during thissemiannual period, found that NTIA has madesignificant progress in implementing an initiative todeter waste, fraud, and abuse, but needed to revisethe plan detailing its waste, fraud, and abuseactivities. NTIA took numerous corrective actions toaddress our findings and recommendations before

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March 2009Semiannual Report to Congress Major Challenges for the Department

our report was issued and continues to augment itswaste, fraud, and abuse activities. (See page 39.)

The delay in transitioning to digital programming,coupled with the stimulus funding, adds newchallenges for NTIA in administering the converterbox coupon program. The agency needs to continueto maintain an effective waste, fraud, and abusedetection effort, meet requests for coupons, andavoid comingling program and Recovery Act funds.The Recovery Act also provides funding to allowNTIA to continue to work with stakeholdersrepresenting at-risk groups, and the FCC, whichhas primary responsibility for consumer educationand outreach, to ensure a smooth transition todigital television.

PSIC Grantees May Not Be Able to Finish ProjectsWithin the Mandated Time Frame. The PSICprogram is a one-time grant opportunity to targetspecific funds and resources toward improving theinteroperability of local and state voice and datacommunications. But grantees are moving slowly,and whether they can complete their projects by thestatutory deadline of September 30, 2010, isquestionable.

As of March 2009, grantees had spent less than9 percent of the available $1 billion, which leaves

them only 18 months to complete their projects orlose funding. In March 2009 we contacted21 grantees, including 18 of the 20 receiving thelargest grants. Only two stated they planned toacquire most of their interoperable communicationsequipment within the first half of 2009. Ten told usthey will start acquiring equipment in late FY 2009and 2 at the beginning of FY 2010. Seven of the21 grantees contacted were concerned that they may

be unable to finish projects by September 30, 2010.Given all that must follow the purchase ofequipmentinstallation, operational testing, andtraining at a minimumgrantees who are still in theacquisition stage as late as FY 2010 face the very realpossibility of arriving at the programs September 30,2010 deadline with partially completed projects butwithout funding to finish them out.

Source: OIG, December 2008

Police car outfitted with a communication system from aPSIC grant.

NTIA should expeditiously identify grantees who are

at high risk of not meeting the statutory deadline forcompleting their projects, give them the technicalassistance they need to accelerate the process,carefully monitor their progress, and keep Congressinformed of the PSIC programs status towardachieving its objectives. If any entities seem stillunlikely to meet the deadline, NTIA should workwith Congress to obtain the authority to extend thedeadlines for these entities.

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OTHER ISSUESREQUIRING SIGNIFICANT

MANAGEMENT ATTENTION

Weaknesses in the Departments AcquisitionOversight and Acquisition Workforce

Acquisition and contract management has been aconsistent watch list item for inspectors general, asrelated government spending has ballooned in recentyears without a commensurate growth in theacquisition workforce or the higher-level skillsneeded to properly oversee complex procurements.Cost overruns, fraud, and a lack of oversight andaccountability are common findings in IG audits andGAO reviews government-wide.

Our top management challenges report described anacquisition infrastructure at Commerce that does nothave coherent policies to guide systems acquisition oreffective oversight mechanisms. Hiring and retaininga skilled acquisition workforce has been difficult atthe Department, as it has been for all federal agencies.The Department has a limited number of contractingspecialists to meet its multibillion-dollar workload. Ithas no reliable count of its program and projectmanagers or contracting officer representativescritical positions in the contracting oversight chain.

The billions of new dollars available to Commerce foracquisitions grants, and contracts under the RecoveryAct, coupled with the acts call for acceleratedspending and fixed price contracts when practicable,will undoubtedly further tax an already overwhelmedacquisition workforce and exacerbate acquisitionmanagement weaknesses. Our procurement auditshave found repeated instances in which the

Departments lack of skilled contracting and projectmanagement professionals has resulted in inadequate

contract management, and significant cost andschedule overruns and performance shortfalls.

Our recent audit of the Census Bureaus Field DataCollection Automation contract (see page XX) foundthat poorly defined requirements were a significantcontributor to the problems encountered indeveloping the handheld computers for automatingkey operations and the resulting $3 billion increase inestimated costs for conducting the 2010 census. Thisaudit and an audit of a satellite acquisition at NOAA

found that contractors were receiving high award feesfor projects that were experiencing seriousperformance shortfalls and large cost overruns.

The Department has taken several steps to addresssome of its contract and procurement weaknesses. Itis working to complete revisions to its major systemsacquisition procedures. It has improved itscertification program for contracting officerrepresentatives, in response to our recommendation.And it has taken additional steps intended tosupport sound management of Recovery Act funds:

for example, it combined the Commerce IT ReviewBoard and the Acquisition Review Board into asingle Investment Review Board, which hasscheduled reviews for programs that will receiveRecovery Act funding.

Also notable are several actions by the DepartmentsOffice of Acquisition Management: it recently issued

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March 2009Semiannual Report to Congress Other Issues Requiring Significant Management Attention

Implementation of the American Recovery andReinvestment Acta quick guide for the acquisitionworkforceand created a Risk Management andOversight Plan, currently in draft, to highlightcontracting and grant risks and help agency programleaders and acquisition staff prepare mitigation plans.

But these efforts will not be enough to improve theDepartments overall acquisition operations withoutcommensurate improvements in the size and skill ofits acquisition workforceneeds that must beaddressed immediately to oversee Recovery Actspending effectively. In the short term, theDepartment reports that it plans to take advantage ofall hiring flexibilities made available by the Office ofPersonnel Management and use contractors toaugment its acquisition staff for both Recovery Act

and normal acquisition spending.

Apart from these plans, the Department needs acomprehensive human capital strategy that addressesboth its immediate and long-term hiring needs. Thatstrategy must, among other things, (1) explicitlydefine the requisite acquisition skills andcompetencies, (2) tap into government-widerecruiting initiatives, and (3) offer professionaldevelopment and other incentives to attract and keepqualified candidates.

Special Acquisition Challenges FaceNOAA and NIST

A significant portion of Recovery Act funding goingto NOAA and NIST will be used for constructionprojects to build science facilities. Monitoringconstruction projects poses special challenges: theseinitiatives are often at risk for anticompetitivepractices, and substandard workmanship, defectivematerials, nonperformance, and corruption. Ouraudits and investigations of public works projects, for

example, have identified significant instances ofnonperformance and misuse of federal funds.

These are just some of the potential problems NOAAand NIST grants and procurement specialists mustbe attuned to. Negotiating fair terms for constructionprojects and managing the work requires a distinctlydifferent skill set from that needed to oversee researchprojectsthe ability to evaluate architectural and

engineering proposals, work schedules, and laborrates, and assess whether proposed and actualmaterials costs are reasonable, to name a few. NOAAand NIST, as well as the other Commerce agencies,must ensure they have the necessary skills andexpertise to carry out these projects.

USPTOs Long and Growing PatentProcessing Times, and Its FinancingVulnerabilities

The efficiency with which the U.S. Patent andTrademark Office processes patent applications has adirect bearing on how well it achieves its mission ofpromoting U.S. competitiveness. Meeting thedemand for new patents in a timely manner has beena long-standing challenge for USPTO. Increases in

both the volume and complexity of patentapplications have lengthened application processingtimes and backlogs dramatically. In 2004, USPTOhad a patent backlog of nearly a half-millionapplications and processing times of 27 months. By2007, processing times averaged nearly 32 months,with wait times for communications-related patentsas long as 43 months.

As of September 30, 2008, USPTO reported abacklog of 750,596 applications and estimated that

the backlog will exceed 860,000 by September 2011.USPTOs current estimates put that backlog at740,000 applications by the end of FY 2009, whichis a decrease of 10,000 applications over end of FY2008 numbers. The USPTO needs to furtherdecrease the backlog by continuing to implementmeasures discussed in its 2007-2012 strategic planthat have a significant impact on reducing thebacklog, such as shortening application review times,improving examiner error rates, and continuing itsinitiatives to improve the hiring, training, andretaining skilled examiners. In addition, the USPTO

will persist in pursuing and implementing, wherepossible, other measures such as international worksharing and cooperative efforts to aid in decreasingthe backlog and enhancing examiner efficiencies.

USPTOs unique financing structure also presentschallenges. There is a complex relationship betweenthe number of patent applications filed, the size ofthe application backlog, the number of patents

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Other Issues Requiring Significant Management Attention March 2009Semiannual Report to Congress

Ecosystem Management Definedissued, and the fees USPTO collects in connectionwith the patent process. The agency uses feescollected today to pay for patent applications filedand examined in prior years. In our Novemberreport, we cautioned that with the backlog growing,processing times increasing, and the number ofpatents issued flattening, this method of financing isbecoming increasingly risky because of the potentialshortfall in future fee collections. This has quicklybecome an immediate concern. For FY09, USPTOis projecting that it will likely end the year collectingroughly $100 million below what it had projected.The current model for financing USPTOs criticalmission warrants attention to ensure that it willcontinue to provide sufficient funding to process allbacklogged applications as well as any newly filedapplications.

NOAAs Ability to Conserve the NationsFragile Oceans and Living MarineResources While Ensuring a VitalU.S. Commercial Fishing Industry

According to NOAA, 3.5 million square miles of ourcoastal and deep ocean waters and the Great Lakessupport over 28 million jobsone of every sixinthe United States, and the value of the U.S. oceaneconomy tops $115 billion. But these economic

benefits come at great cost as the health of our oceanand coastal ecosystems continues to decline in theface of increasing coastal development, pollution,overfishing, climate change, and the destructiveimpact of invasive species.

Charged with maintaining and improving theviability of marine and coastal ecosystems whilesupporting global marine commerce andtransportation, NOAA manages a significant portionof the federal governments investment in livingmarine resources. It faces difficult challenges in

promoting the health of these resources whileensuring they sustain the vital economic benefits wederive from them. The difficulty is perhaps mostapparent in NOAAs management of commercialfisheries, and its enforcement of numerous relatedstatutes and regulations.

An ecosystem is a geographically specified systemof organisms, including humans, theirenvironment, and the processes that control their

dynamics. NOAA defines an ecosystemapproach to management as a geographicallyspecified, adaptive approach that takes accountof ecosystem knowledge and uncertainties,considers multiple external influences, andstrives to balance diverse societal objectives.Implementation will need to be incremental andcollaborative. NOAA recognizes that transitionto and implementation of an ecosystem approachto management needs to be incremental andcollaborative.

http://ecosystems.noaa.gov

During this semiannual period, we responded to acongressional request to investigate a series of issuesregarding the quality of the science used to determinecatch limits for New England commercial fisheriesand related allegations from the fishing industry andnon-NOAA scientists (see page 31)a situation thatepitomizes the difficult balance NOAA mustmaintain in fulfilling its mission. Overall we foundNOAA met the best available science requirementsof the Magnuson-Stevens Fishery Conservation andManagement Act in setting catch limits to protectand rebuild compromised species. But the history ofcontention between the groundfish industry andNOAA in the Northeast Region, coupled withNOAAs ineffective communications and limitedprogress in improving transparency, among otherthings, set the stage for challenging the limits andassailing NOAAs objectivity in setting them.

Open communications and transparency are essential

to a productive NOAA-industry partnership thatsucceeds in balancing commercial interests withconservation goals. But also critical are ecosystemapproaches to fisheries management, as these supportmore comprehensive assessments of species andbetter inform resulting regulations. NOAA is slowlymaking the transition to ecosystem management, andits efforts in this regard must be monitored. NOAAsecosystem-based management approaches should

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March 2009Semiannual Report to Congress Other Issues Requiring Significant Management Attention

assist NOAA officials in addressing difficulties inissuing or revising fishing regulations to minimizebycatch of protected species, including marinemammals, turtles, and birds, or overharvested fishand mollusks.

Ecosystem management must also consider activitiesoccurring outside of the U.S. exclusive economiczone,3 where illegal, unreported, and unregulated(IUU) fishing depletes migratory fish stocks,degrades bottom habitat, increases bycatch, and canlead to a fisherys collapse. The Magnuson-StevensReauthorization Act gave NOAA new authorities tocombat IUU fishing. It is important to monitorNOAAs use of these authorities in protecting U.S.and global fisheries.

Finally, approximately $210 of the $860 millionNOAA received in stimulus funding is expresslydedicated to restoring marine and coastal habitats,addressing backlogs in hydrographic surveys(measuring the depth and bottom configuration ofwater bodies), and issuing biological consultationsrequired by the Endangered Species Act. Forexample, NOAA plans to invest up to $167 millionto support restoration projects addressing coral reefconservation, the restoration of fish habitats, therecovery of endangered species such as salmon andsea turtles, and the improvement of coastal resiliency

in response to sea level rise and natural hazards. Ouroffice plans to monitor how effectively NOAA spendsthese funds and implements these programs.

BIS Setbacks in Modernizing ItsObsolete Information TechnologyInfrastructure to Strengthen the Dual-UseExport Control System

In January 2007, GAO added the Bureau of Industryand Securitys dual-use export control system to its

government-wide high-risk list. One of the keychallenges facing BIS in ensuring that the dual-useexport control system is properly equipped toadvance U.S. national security, foreign policy, andeconomic interests is the replacement of its obsolete

3 The exclusive economic zone (EEZ) is the 200 nautical milesextending from a nations shores. Nations control the undersearesources, primarily fishing and seabed mining, in their EEZ.

Export Control Automated Support System(ECASS). BIS core export administration andenforcement business processes are directly supportedby ECASS. Approximately 450 federal staff and28,000 exporters currently use the system. However,the database structureoriginally deployed in1984is complex and no longer supported by thetechnology industry. The effort to modernizeECASS began in 1996, but the project has beenbeset by technical problems, schedule slips, andfunding shortages.

The current projected completion date for theECASS modernization is FY 2014. Based on ourinterviews, the total funding requirements forECASS modernization are not clearly established.BIS must provide a comprehensive plan for what is

required to modernize ECASS, including how muchit will cost and how it will avoid the management andtechnical problems experienced in pastmodernization attempts.

Enhancing the performance of ECASS and ensuringcontinued operation of an effective licensinginformation system are far too important to postponeany longer. BIS must demonstrate that it has amodernization strategy and plan in place toconvincingly make the case for increased funding, ordevelop a plan to implement its ECASS

modernization effort with existing resources (i.e.,reallocate existing funding).

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OIG RECOVERY ACT OVERSIGHT

On February 17, 2009, the President signed theAmerican Recovery and Reinvestment Act of 2009into law. The Recovery Act requires anunprecedented amount of transparency andaccountability and sets out specific responsibilities forthe OIG to provide oversight of the Departmentsactivities under the Act and its spending of funds

appropriated by the Act. The Department ofCommercefive bureaus, plus the Office ofInspector Generalreceived $7.946 billion in theRecovery Act, as follows:

Economic Development Administration:$150 million for economic developmentassistance programs.

Bureau of the Census: $1 billion forperiodic censuses and programs.

National Telecommunications and Information Administration: $4.7 billion for theBroadband Technology OpportunitiesProgram and $650 million for the Digitalto-Analog Converter Box Program.

National Institute of Standards andTechnology: $220 million for scientific andtechnical research and services, $360 million for construction of research facilities,

$20 million to be transferred from theDepartment of Health and Human Servicesfor continued work on advancing health careinformation enterprise integration, and$10 million to be transferred from theDepartment of Energy to implement section1305 of Public Law 110140, the EnergyIndependence and Security Act of 2007.

National Oceanic and Atmospheric Administration: $230 million for operations,research, and facilities and $600 million forprocurement, acquisition, and construction.

Office of Inspector General: $6 million forgeneral oversight of funds provided to

Commerce bureaus under the Act and$10 million to be transferred from NTIAfor audit and oversight of funds providedfor the Broadband Technology Opportunities Program.

The OIG is in the process of developing a risk-basedoversight plan. In the meantime, we have put inplace an interim plan to guide our work. Under thisplan, we

Established a Recovery Act Task Force andidentified specific oversight priorities including fraud prevention, grants; procurements;science and research; broadband; digital TVconversion and Census.

Are participating on the DepartmentsRecovery Act Steering Committee and working groups as advisory members to providetechnical assistance and advice on risk assessment, operational procedures, and internalcontrols.

Developed and are delivering fraud awarenessbriefings for Departmental procurement,grants and program officials and procurement and grant recipients. The briefingsfocus on risk management for Commerce-specific programs and emphasize whistle-blower protection and reporting to OIG.

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March 2009Semiannual Report to Congress OIG Recovery Act Oversight

Developed expedited reporting processes Established a Recovery Act web page onand issued our first flash report entitled, the OIG web site for making OIG reportsNTIA Should Apply Lessons Learned from and related Recovery Act information avail-the Public Safety Interoperable Communications (PSIC) Program to Ensure SoundManagement and Timely Execution of the

able to the public (see http://www.oig.doc.gov/recovery/).

$4.7 Billion Broadband TechnologyOpportunities Program.

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Agency Amount Purpose (From Joint Explanatory Statement)

EDA $150,000,000 Leverage private investment, stimulate employment and increase incomes in economicallydistressed communities.

$50,000,000 Economic Adjustment Assistance to help communities recover from sudden and severeeconomic dislocation and massive job losses due to corporate restructuring.

$50,000,000 May be transferred to federally authorized, regional economic development commissions.

Census $1,000,000,000 To hire additional personnel, provide required training, increase targeted media purchases,and improve management of other operational and programmatic risks.

$250,000,000 Up to $250,000,000 shall be for partnership and outreach efforts to minority communitiesand hard-to-reach populations.

NTIA $4,700,000,000 Broadband Technology Opportunities Program (BTOP), to be available untilSeptember 30, 2010. For competitive grants to accelerate broadband deployment inunserved and underserved areas and to strategic institutions that are likely to create jobs orprovide significant public benefits.

Up to $350,000,000 To establish the State Broadband Data and Development Grant program, as authorized byPublic Law 110-385 and for the development and maintenance of a national broadbandinventory map as authorized by division B of this Act.

Not less than

$200,000,000 For competitive grants for expanding public computer center capacity.

Not less than

$250,000,000 For competitive grants for innovative programs to encourage sustainable broadband adoption.

OIG $10,000,000 To be transferred to the Department of Commerce Inspector General for audits andoversight of funds provided under this heading.

NTIA $650,000,000 For additional implementation and administration of the digital-to-analog converter boxcoupon program, including additional coupons to meet new projected demands andconsumer support, outreach and administration.

$90,000,000 Of the amounts provided, up to $90,000,000 may be use for education, and outreach tovulnerable populations including one-on-one assistance for converter box installation.

NIST

Scientific and $220,000,000 For research, competitive grants, additional research fellowships and advancedTechnical research and measurement equipment and supplies.Research

and Services$20,000,000 Provided by transfer from the Health Information Technology (HIT) initiative within this Act.

For HIT activities, NIST is directed to create and test standards related to health security andinteroperability in conjunction with partners at the Department of Health and Human Services.

$10,000,000 Provided to implement section 1305 of Public Law 110140 Energy Independence andSecurity Act of 2007. SEC. 1305. SMART GRID INTEROPERABILITY FRAMEWORK.The Director of the National Institute of Standards and Technology shall have primaryresponsibility to coordinate the development of a framework that includes protocols andmodel standards for information management to achieve interoperability of smart griddevices and systems.

Construction of $360,000,000 To address NIST's backlog of maintenance and renovation and for construction of newResearch Facilities facilities and laboratories.

$180,000,000 Of the amounts provided, $180,000,000 shall be for the competitive construction grantprogram for research science buildings, including fiscal year 2008 and 2009 competitions.

NOAA

Operations, $230,000,000 To address a backlog of research, restoration, navigation, conservation and management activities.Research, andFacilities

Procurement, $600,000,000 For construction and repair of NOAA facilities, ships and equipment, to improve weatherAcquisition and forecasting and to support satellite development.Construction

$170,000,000 Of the amounts provided, $170,000,000 shall address critical gaps in climate modelingand establish climate data records for continuing research into the cause, effects and waysto mitigate climate change.

OIG $6,000,000 To remain available until September 30, 2013.

OIG Recovery Act Oversight March 2009Semiannual Report to Congress

American Recovery and Reinvestment Act of 2009

Department of Commerce Funding

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WORK IN PROGRESSOffice of Inspector General audits and evaluationsthat were initiated or underway during thereporting period:

BIS

IT Infrastructure System

Determine whether continuous monitoring ofinformation security controls is (1) keeping theauthorizing official sufficiently informed about theoperational status and effectiveness of securitycontrols; and (2) resulting in prompt mitigation ofany identified security control deficiencies. Alsoassess whether BIS has resolved deficiencies weidentified in our FY 2006 Federal InformationSecurity Management Act evaluation.

Export Control Cyber-InfrastructureSystem

Determine whether (1) the C&A process producedsufficient information about remaining systemvulnerabilities to enable the authorizing official tomake credible risk-based accreditation decisions,(2) continuous monitoring is keeping the authorizingofficial sufficiently informed about the operationalstatus and effectiveness of security controls and(3) implemented controls adequately protect thesystem and its information.

Census

2010 Decennial Census CommunicationsCampaign

Evaluate the development and delivery ofpromotional materials produced to determinewhether the materials met contract requirements for

quality and timeliness, and were appropriate for thetarget audiences. Also, review contract requirements,plans, deliverables, timelines, and funding, andfollow up with separate audits of any problemareas identified.

Decennial Response Integration System

(DRIS)

Assess DRIS contract requirements, deliverables,funding, and timelines, as well as review award feespaid to the contractor, the $170 million contractmodification executed in August 2007, and any othercontract changes made to accommodate the Census'sdecision to conduct paper non-response follow-up.Also analyze the findings of unsupported anddiscrepant proposed costs reported by the DefenseContract Audit Agency in 2005.

Decision Documents and Expendituresfor the 2010 Decennial Census

Identify the decision documentation and otherinformation used to support allocations and spendingfor the 2010 census and determine whether theyare consistent with planned activities andbudget requests.

Field Data Collection Automation System

Determine whether (1) the C&A process producedsufficient information about remaining systemvulnerabilities to enable the authorizing official tomake credible risk-based accreditation decisions,(2) continuous monitoring is keeping the authorizingofficial sufficiently informed about the operationalstatus and effectiveness of security controls and(3) the C&A process produced sufficient informationabout remaining system vulnerabilities to enable the

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March 2009Semiannual Report to Congress Work in Progress

consistent with the Department's grants manual, and(2) how they compare with best practices detailed inthe Guide to Opportunities for Improving GrantAccountability, published by the Domestic WorkingGroup--a coalition of 19 federal, state, and localaudit organizations and led by the ComptrollerGeneral of the United States

Commerce IT Security Workforce Issues

Review ongoing and planned initiatives theDepartment and operating units are using tostrengthen their workforce and identify best practices

for improving the IT security capabilities ofresponsible staff. Cover a sample of high-andmoderate-impact systems at eight operating units,including the Office of the Secretary, and the dutiesand qualifications of their associated IT securitypersonnel.

Recovery Act Oversight

As outlined on page 15, the OIG will conductongoing oversight of all Commerce programs thatspend funds appropriated under the Recovery Act.

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he Bureau of Innations system ffunctions include

applications; conductingconducting industry outrprimary operating units:

Export Administration im

BUREAU OFINDUSTRY AND SECURITY

Tdustry and Securityis primarily responsible for administering and enforcing theor controlling exports of sensitive dual-use goods and technologies. BIS major

formulating and implementing export control policy; processing export license

various policy, technical, and economic analyses; promulgating regulations;each; and enforcing the Export Administration Act and regulations. BIS has two

plements U.S. export control and nonproliferation laws and policies through exportlicensing, commodity classifications, and advisory opinions; technical, economic, foreign availability, andpolicy analyses; promulgation of regulations; and industry outreach. It also conducts various defense industryactivities and enforces industry compliance with arms control treaties.

Export Enforcementparticipates in reviews of export license applications and conducts criminal andadministrative investigations relating to the export control portions of the Export Administration Act andregulations. It also administers and enforces the antiboycott provisions of the act and regulations.

implementation and compliance. The subcommitteeIssues Related to the Bureauand committee posed a series of questions related to

of Industry and Securitys BIS use of funds designated for international treatyimplementation and compliance, the curtailment of aBudget and ResponsibilitiesChemical Weapons Convention attach posted in

for International Treaty The Hague, and BIS managements decision todiscontinue spending on a project to compile theImplementation and ComplianceU.S. Additional Protocol (AP) declaration using an(IPE-19463)electronic system.

We reported to the subcommittee and committeeGovernment Management, the Federal Workforce,The Senate Subcommittee on Oversight of

that conference report language accompanying theand the District of Columbia, Committee on FY 2006 appropriations bill stated that the fundingHomeland Security and Governmental Affairs, and previously spent on international treatythe Senate Committee on Foreign Relations asked implementation and compliance activities could nowthe Office of Inspector General to investigate the be spent on national security related programs.Bureau of Industry and Securitys budget Based on this language, BIS started funding othermanagement practices related to international treaty programs with the funding previously dedicated

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Economic Development Administration March 2009Semiannual Report to Congress

During this semiannual period, we audited fourgrants issued between 2002 and 2005 for a varietyof infrastructure and building improvements. Thefour have combined total project costs of$13.4 million. Two were issued to the SanBernardino International Airport Authority, one wasissued to the Inland Valley Development Authority,and one was issued jointly to both agencies. For theperiod of our audit, the four had claimed combinedproject costs of $10,819,511. We sought todetermine whether claimed costs were reasonable,allowable, and allocable to the award, and whethergrantees had complied with award terms andconditions and were achieving project objectives.

In all four cases, we found the grantees had madeacceptable progress toward achieving project goals

and objectives. We did, however, question $637,082in claimed costs for failure to adhere to a variety ofuniform administrative requirements and federal costprinciples applicable to the awards. For example,grantees did not maintain adequate or completedocumentation for a number of critical procurementsand lacked a system capable of tracking such

documentation; had no written policies andprocedures defining each agencys projectmanagement responsibilities and duties; lackedappropriate controls over contract change orders andmodifications; and had no defined contractadministration system. In addition, the granteesfinancial management systems did not meetminimum federal standards for tracking labor andfringe benefits, or for accounting for incomegenerated by the project.

We recommended that EDA disallow the questionedcosts, recover the federal share of $573,375, andensure grantees make the necessary improvements toprogram administration and financial managementsystems to fully comply with federal requirements.EDA disallowed the costs as recommended and the

grantee paid off the debt in full. EDA also sustainedaudit recommendations requiring the grantees toinstitute construction management controls, policiesand procedures and to comply with uniformadministrative requirements pertaining to financialmanagement, procurement, records retention,program income and property management.

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Economics and Statistics Administration March 2009Semiannual Report to Congress

Dress Rehearsal of AddressCanvassing Revealed PersistentDeficiencies in Approach toUpdating the Master Address File

(OSE-18599)

During dress rehearsal for Census 2010, Censustested decennial systems and operations under real-time conditions. The test of address canvassing wasconducted from May through June 2007 in SanJoaquin County, California, and a nine-county areasurrounding Fayetteville, North Carolina. Wereviewed dress rehearsal activity for the NorthCarolina site, and the impact of that activity on thequality of the master address file.

The MAF is intended to be a current, comprehensivelist of every address in the nation representing a livingquarterwhether occupied or vacantcompiledfrom, among other things, Censuss 2000 address list,U.S. Postal Service data, and local governmentaddress information provided primarily through anoperation known as LUCALocal Update of CensusAddresses.

The Censuss mechanism for collecting andtabulating decennial census data is to link (geocode)MAF addresses to the Censuss digital map known asTIGER (Topologically Integrated GeographicEncoding and Referencing). Only geocodedaddresses are included in the address canvassingoperation, and only geocoded addresses receivecensus questionnaires.

We had evaluated activities to update the MAF andrelated maps during the 2006 census test andidentified missing, duplicate, and erroneous addressesin the listproblems that would hinder Censuss

ability to get a complete and accurate count duringan actual census. Our review of the 2008 dressrehearsal for a sample of assignment areas before andafter address canvassing found that many of the issueswe noted in 2006 remain.

Our Findings

Ungeocoded Addresses and Incorrect Zip Codes in theMAF Set the Stage for Problems in Address Canvassing.According to Census officials, the MAF contains

some 6 million ungeocoded addresses. Becauseungeocoded addresses are not on the list given toaddress canvassers, the burden is on listers to find theassociated locations and correctly record the addressinformation. Census will not mail questionnaires toungeocoded addresses that remain in the MAF andnonresponse follow-up enumerators only contacthouseholds that received but did not return aquestionnaire. Therefore, residents at addresses thatremain ungeocoded after address canvassing areunlikely to be counted.

In addition, several hundred addresses in our samplewere duplicates except for the ZIP code. Up-to-dateaddresses were added by a LUCA operation but theupdates were not recognized as the same housing unitin the MAF because the ZIP codes were different.Therefore, the LUCA addresses did not override theoutdated entries.

Address Canvassing Remains an Unreliable Approachfor Improving the MAF. As in our earlier reviews, wefound that address canvassing cannot be counted onto reliably record the information needed to geocodeungeocoded addresses, identify and add missingunits, or eliminate certain address errors. Theoperation is especially challenged when dealing with(1) nontraditional mailing addressesfor example,multiunit residences whose individual householdaddresses do not conform to the typical streetnumber and name format; (2) hidden dwellings,such as sheds and makeshift garage apartments; and(3) trailer parks that display both lot numberscorresponding to a units physical space within thepark and unit numbers that are part of the mailing

address. Examples of missed or misidentifiedresidences we noted include the following:

1. A 352-unit apartment complex in our samplewas in the MAF but not geocoded andtherefore was not on an address canvassinglist. The lister missed several addresses whenadding the complex. The missing addressesremained ungeocoded and will not receive a

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March 2009Semiannual Report to Congress Economics and Statistics Administration

questionnaire unless they are added duringthe live canvassing operation.

2. A 391-unit retirement community was listedin the MAF in two different waysby thecomplexs location addressactual streetname and unit numbersand by thevanity address (complex name andnumbers), which is used by the PostalService and not geocoded in the MAF.Listers added the vanity addresses for someunits, allowing them to geocode, but not forothers. Subsequent changes to canvassingprocedures and the handheld software willprevent listers from making this correction,which means that entire complexes such asthis one may not receive mailed

questionnaires.

3. Almost 600 hidden units in our samplewere identified by listers but not added tothe MAF because listers did not sufficientlydifferentiate the hidden dwelling from theprimary residence.

4. Numerous trailer park residences werelisted twice in the dress rehearsal listsonceby street address and once by lot number.During dress rehearsal, canvassers often

eliminated the correct street listing and keptthe erroneous lot number listing.

Finally, we identified problems with Censuss revisedquality control procedures.

We found instances in which quality controlstaff reinstated addresses that had beencorrectly deleted by the canvasser and otherwise incorrectly added addresses tocanvassers lists.

We noted that the 2010 procedure of havingthe same individual do both the quality control check of canvassed assignment areas andthe recanvassing of areas that fail the checkmay compromise the results by promptingquality control staff to shortcut the recanvassing processa situation we observed inthe field.

To improve the master address file for 2010, werecommended several short-term actions. Theseincluded

1. mailing questionnaires to ungeocodedpostal addresses, and geocoding as manyaddresses as possible for forms returned fromvalid housing units;

2. exploring ways to identify ungeocodedvanity and other unique mailing addresses inthe MAF, and linking them to correspondinglocation addresses;

3. enhancing instructions and training forlisting nontraditional mailing addresses; and

4. closely monitoring quality control pass/fail rates nationwide for indications ofimproper recanvassing practices.

To eliminate the recurring problems our work hasidentified and improve the MAF for 2020, we furtherrecommend that Census regularly update the filethroughout the decade in lieu of canvassing the entirenation only once, in proximity to Census Day.

Revised Field Data CollectionAutomation ContractIncorporated OIGRecommendations, But ConcernsRemain Over Fee AwardedDuring Negotiations(CAR-18702)

The mounting problems with the Census Bureaus

original Field Data Collection Automation (FDCA)contract prompted the decision in April 2008 tomodify the contract and reduce Harris Corporationsrole in providing 2010 decennial systems andservices. The renegotiations allowed Census to revisitthe contract type and fee structure and modify themas appropriate.

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Economics and Statistics Administration

To aid the Censuss contract restructuring andnegotiations, we audited FDCAs original contractterms to determine whether (1) award fees paid toHarris for the first two performance periods wereappropriate, (2) the incentive fee structure was themost effective for motivating excellent performance,and (3) the cost plus award fee contract arrangementwas the most suitable for acquiring the neededsystems and services.

The FDCA contract was for a mix of relatively high-risk deliverables and standard IT products andservices. Complete requirements for both types ofdeliverables were unknown at the time of contractaward in 2006 and their costs were therefore difficultto predict. Under the Federal Acquisition Regulation,a cost plus award fee contract is appropriate when

high-risk deliverables are involved because theyrepresent new, untested concepts for which thegovernment should bear the greater risk.

Source: Census Bureau, FDCA Contract Award Determination Plan

Award Fee Determination Process

March 2009Semiannual Report to Congress

Our Findings

We found that although the cost plus award feecontract was appropriate for FDCA, the award feestructure was not tied to measurable performance

criteria or milestones, and Census did not establishfixed pricing for applicable items. As a result:

Award fees were excessive and not supported bytechnical assessments of Harris Corporationsperformance. Harris received 93 percent($3.2 million) and 91 percent ($11 million)of available fees for the first two performanceperiods, respectively, despite serious performance problems noted by Censuss technical reviewers. Harris received no awardfee for the third period. And the fee deter

mination process lacked key featuressuch as qualitative measures and mid-pointassessmentsfor ensuring awards wereappropriate.

The award fee structure did not effectively promote excellent performance. Lacking definedperformance criteria, the fee structure contained no quantitative goals for dictatingpotential fee amounts as an incentive forachievement. Contract provisions furtherallowed unearned award fees to be rolledover to subsequent periods, giving Harris theopportunity to earn any withheld amountsand minimizing the motivational impactthat a fee reduction is intended to have.

Census missed opportunities to control costs andmanage risk. The FDCA Acquisition Planidentified several elements that would befixed price, such as mobile computingdevices and office furniture. The bureau ultimately awarded the contract for full cost-

reimbursement but did not document why.

We briefed Census on our audit findings in August2008. We made recommendations for improving theFDCA contract by, among other things, establishingmeasurable criteria for assessing performance anddetermining fees; modifying the fee structure topromote excellent performance and limit the practice

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March 2009Semiannual Report to Congress Economics and Statistics Administration

of rolling over fees; and incorporating fixed pricingfor deliverables, whenever possible.

Census signed the contract modification onNovember 20, 2008, and incorporated a number ofour recommendations, including those pertaining tofixed pricing, performance incentives, and feerollover. However, Census agreed to a fixed feeamount of 9.5 percent for work conducted duringthe contract renegotiation period May 1 September30, 2008, which would be invoiced at the time themodification was signed. Although the fixed fee is lessthan the 13 percent maximum allowed under theoriginal award fee plan, 9.5 percent is a highlyquestionable amount to guarantee to a contractor thebureau felt was performing poorly.

Delays in Address CanvassingSoftware Development andTesting, Help Desk Planning, andField Office Deployment HaveIncreased Operational Risk(OIG-19171)

The renegotiated FDCA contract significantly

reduced Harris Corporations responsibilities andrequirements for the 2010 census. Among thecontract changes, the bureau required far fewerhandheld computersthe result of the decision toabandon their use for nonresponse follow-up. Censusalso took back responsibility for several major tasksthat had been assigned to Harris, such as collectingdata for large blocks (those containing 1,000 or moreaddresses) and providing help desk support.

Under the Censuss revised decennial schedule,Harris was to deliver improved handheld computersto early local census offices by February 3, 2009, sothat listers could begin training for the April 6 startof address canvassing.

We assessed the Censuss progress in developing andimplementing planned activities for the addresscanvassing operation and identified a number ofconcerns:

Source: Photograph by the U.S. Census Bureau, Public Information Office (PIO).

The mounting problems with the FDCA contract prompted thedecision to abandon use of the handhelds during nonresponsefollow-up while keeping them for address canvassing--the first

major operation of the 2010 census.

Potential for unexpected handheld problems.Census missed scheduled dates for testinghandheld components and the integratedsystem, and was left with only 8 days forfield testing the entire system prior to thelive canvassing operation. This short test

period increases the risk that unexpectedproblems may surface during address canvassing, possibly affecting the productivity oflisters and the accuracy of the results.In addition:

Census eliminated some hydrographic information from map filesso that each regions maps could fiton a single digital card in thehandhelds. But the move leaveslisters with fewer reference points toguide them through assignmentareas, which might make canvassingmore difficult.

Census chose the AutomatedListing Mapping Instrument(ALMI) to list large blocks, becausethese have been a problem for the

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Economics and Statistics Administration March 2009Semiannual Report to Congress

handhelds. AMLI handles largedata-collection tasks in certain

Slow deployment of early local census offices. Asof late November 2008, Census had opened

nondecennial surveys. But it defines only 87 of the 151 early local census officescollection areas differently from the needed to conduct address canvassing.handhelds, increasing the potential Despite having deployed 144 offices as offor duplicates in a decennial early February 2009, Census continued toenvironment, and does not use GPS encounter delays with its rollout schedule.technology. In decennial field tests, As a backup, Census planned to have nearbycanvassers had difficulty completing operational offices handle the canvassingcertain tasks using ALMI. Census preparations and workload of those officesneeded to finalize its large block not yet open. Census needed to ensure theapproach based on field test results operational offices had the space andto ensure the information collected resources to handle the added work.is accurate and reliable.

We made no recommendations in this report because Short time frame for establishing help

desk services. The Censuss decision inof the little time Census had to complete its addresscanvassing preparations. But we continued to

July 2008 to manage help desk support monitor how it (1) finalized its approach to largebeginning in January 2009 left little time to block canvassing, (2) developed and conductedplan for and establish these services by the training for help desk staff, and (3) deployed localstart of address canvassing. Given the limit- census offices while preparing to implement itsed handheld testing and the uncertainty of contingency plans as necessary.their performance, solid help desk servicesmust be in place to field potentially high callvolumes and ensure a successful operation.

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NATIONAL OCEANIC ANDATMOSPHERIC ADMINISTRATION

The Natithe protand ma

onal Oceanic and Atmospheric Administration studies climate and global change; ensuresection of coastal oceans and the management of marine resources; provides weather services;

nages worldwide environmental data. NOAA does this through the following organizations:

National Weather Servicereports the weather of the United States and provides weather forecasts and warningsto the general public.

National Ocean Serviceprovides products, services, and information that promote safe navigation, supportcoastal communities, sustain marine ecosystems, and mitigate coastal hazards.

National Marine Fisheries Serviceconducts a program of management, research, and services related to theprotection and rational use of living marine resources.

National Environmental Satellite, Data, and Information Service observes the environment by operating a nationalsatellite system.

Office of Oceanic and Atmospheric Research conducts research related to the oceans and Great Lakes, the lowerand upper atmosphere, space environment, and the Earth.

Office of Program Planning and Integration develops and coordinates NOAAs strategic plan, supportsorganization-wide planning activities, guides managers and employees on program and performancemanagement, and integrates policy analyses with decision-making.

Review of the Quality of ScienceUsed by the National MarineFisheries Services Northeast

Fisheries Science CenterDuring this semiannual period, we investigated aseries of issues regarding the work and scientificmethods of the NOAAs National Marine FisheriesServices (NMFS) Northeast Fisheries ScienceCenter at the request of Senators Snowe, Collins,Kennedy, and Kerry. Specifically, we investigatednine allegations concerning either the quality of the

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science used to determine catch limits for NewEngland commercial fisheries or related issues raisedby the fishing industry and non-NOAA scientists.These allegations were centered on the two fisheriesthat generated the most concernsnortheast

groundfish (specifically, Atlantic cod, haddock,pollock, and yellowtail flounder) and Atlantic seascallops. We also reviewed NMFS implementationof National Standard 2 of the Magnuson-StevensFishery Conservation and Management Act.National Standard 2 requires that conservation andmanagement measures in fishery management plansbe based on the best scientific information available.Finally, we addressed concerns that NMFS has

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denied the fishing industry access to underlyingscientific data by examining one particular dataaccess issue that arose from a request under theFreedom of Information Act (FOIA).

Overall we found that the Science Center meets thebest available science requirements of NationalStandard 2. However, we also found an underlyinglack of confidence in NOAA among industrymembers in the Northeast Region. There is a historyof contention between the groundfish industry andNOAA in the northeast, where industry viewsNOAA as biased towards conservation goals. Thechallenges inherent to balancing a sustainable fisherywith industrys interests, coupled with ineffectiveefforts to rebuild stocks, have contributed to thisunproductive relationship. In our view, the lack of

trust and confidence in NOAA by the groundfishindustry manifests itself as doubt in the science. Ofthe nine allegations we examined, we concluded thatsix are the result of ineffective communications andongoing tension between the groundfish industryand NOAA. Without an improved relationship, webelieve the science will continue to be questioned. Toaddress this concern, we made severalrecommendations to NOAA to improve itsrelationship with the groundfish industry.

Additionally, we found that NOAAs poor handlingof a 2008 FOIA request also contributed to itsreputation in the Northeast Region as an agency thatis unconcerned with transparency. In reviewing theFOIA request, we found that the FOIA process wasloosely managed, with both internal NOAA andstatutory deadlines not being met. We recommendedthat NMFS examine why deadlines were not met forthis particular FOIA request, and take steps to ensurethat it meets statutory FOIA requirements andNOAAs internal guidelines for future FOIA requestsby holding responsible staff accountable for

process deadlines.

Finally, several issues arose during the course of ourreview that reinforced the need for NOAA to moreaggressively pursue ecosystem approaches to fisheries

management. Presently, three tiers of stockassessments exist. The first and most basic assessmentis the single-stock assessment. The next level is amultispecies assessment that examines how species

Source: Environmental Assessment Regulatory Impact Review, Initial RegulatoryFlexibility Analysis for Northeast Multispecies Fishery Management Plan,

National Marine Fisheries Service, Gloucester, Massachusetts, January 16, 2009

Northeast U.S. Shelf Ecosystem

interaction affects growth and mortality. Finally, thetop tier is an ecosystem assessment that wouldinclude single and multispecies effects as well asenvironmental factorsthe physical, chemical andbiological processes in a marine ecosystem, and theinterrelationships with human activity. We foundthat NOAA scientists have been and are currentlyworking within the first tier of single stock

assessments, but are working toward multispecies andecosystem approaches. We recommended thatNOAA more aggressively pursue ecosystemapproaches to fisheries management, which willrequire additional data, new models, and analysis.

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Personnel Inaction and ProcessBreakdowns Delayed NOAAsRelease of Fact Sheet, But PoliciesHave Been Clarified

(BSD-18407)

In 2006, several journal and online articles allegedthat the Department and NOAA had delayed releaseof a research report on climate change and hurricaneintensity. At about the same time, NOAA and NASAscientists were complaining that their climate studieswere being suppressed. A September 2006 letter from14 senators to the Commerce and NASA inspectorsgeneral expressed concerns about possiblesuppression, and asked specifically whether

Commerce had blocked release of a hurricane/globalwarming report. In response, we assessed Commercepolicies regarding public release of research data andthe events surrounding the purported report.

Our review documented the following chain ofevents: in November 2005, NOAA published anarticle in its online NOAA Magazinecontending thatits research indicated natural cycles in tropical climatewere the cause of increased Atlantic hurricane activitysince 1995, not the greenhouse effect of globalwarming. The statement drew criticism from someNOAA scientists, who believed it failed to reflect thefull spectrum of the agencys research on hurricanesand global warming. In response, NOAA decided inJanuary 2006 to prepare a fact sheet that wouldpresent a balanced view of the agencyshurricane/climate change research. The fact sheet wasapproved in May 2006, but was not released until thefollowing September.

We determined the document was not a reportcontaining new research but the fact sheet approved

in May 2006. The fact sheet did not contain newscience but was an overview of various scientificopinions within NOAA. We attributed the delay inpublishing the document to three principal factors:

1. Changes in senior-level personnel atNOAA overseeing the fact sheetsdevelopment and distribution, which

resulted in a lack of senior-level attention atNOAA.

2. Submission of the document throughinformal review channels.

3. Inaction by a senior policy advisorwho provided limited assistance to NOAA inobtaining departmental clearance for the factsheet despite receiving at least six drafts overa 4-month period.

We also found that at the time NOAA had preparedthe fact sheet and initiated the approval process, itwas operating under Commerce and NOAAcommunications policies that were out of date,confusing, and burdensome, and contained

conflicting guidance. These policy deficienciesresulted in delays in disseminating press releases andscientific research.

The Department updated its communications policyin May 2007. NOAA issued a formal policy forpreparing fact sheets that is consistent with theDepartments new policy. Both give specific guidancefor sharing findings from fundamental research.However, at the time of our review, NOAA had notincorporated the fact sheet policy into the agencysdirectives system or publicized it agencywide.

We recommended that

procedures developed for preparing factsheets be incorporated into NOAAs directives system and posted to the NOAA website, and

state of the science fact sheets requiringDepartment approval be routed through theOffice of the Secretary Executive Secretariat.

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NATIONAL INSTITUTE OFSTANDARDS AND TECHNOLOGY

The Naticompetieconom

Innovation Pro

onal Institute of Standards and Technologypromotes U.S. innovation and industrialtiveness by advancing measurement science, standards, and technology in ways that enhanceic security and improve quality of life. NIST manages four programs: the Technology

gram, the Manufacturing Extension Partnership program, the Baldrige National QualityProgram, and NIST Research Laboratories.

Hollings ManufacturingExtension Partnership (MEP)Program: Audits Question$20 Million in Costs Claimedby Three MEPs

Congress established the MEP program in 1988 tooffer technical and business management assistanceto manufacturers, with the goal of improvingtheir profitability, productivity, and globalcompetitiveness. The program, operated by NIST,provides partial federal funding to nonprofitorganizations to operate MEP centers that offer anarray of services to business and industry clients. Thefunding is made available through cooperativeagreements that require nonfederal matching funds

from state or regional partners to support centeroperations. Today there is at least one center in everystate and a total of 59 MEP centers located acrossthe country.

During this semiannual period, we audited theoperations of three MEP centers, located in SouthCarolina, Florida, and Massachusetts, to determinewhether their claimed costs were allowable under the

terms of their MEP agreements and whether they hadcomplied with all other MEP operating guidelines,award terms, and conditions. We also examined(1) the costs submitted by certain entities thatreceived cooperative agreement funding(subrecipients) from the MEP centers to provideservices to clients, and (2) in the case of Florida,

third-party in-kind contributions.

South Carolina MEP Award No.70NANB5H1187 (ATL-18567)

The South Carolina Manufacturing ExtensionPartnership (SCMEP) received a NIST cooperativeagreement in 2005 that, as amended, fundedoperations of its MEP center for 2 years (July 2005

June 2007). Total estimated costs of the project were$13.6 million. The federal share was capped at$4.5 million.

The Partnership claimed costs totaling $11.4 millionfor the period July 2005 through March 2007, andreceived federal reimbursements of $3.8 million. Ouraudit found that the recipient could not properlysupport approximately $3.4 million in costs claimed

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by four of its subrecipients, largely for contract,matching share, and in-kind expenses incurred whileproviding MEP services. Three subrecipientsGreenville Technical College, South Carolina ExportConsortium, and University of South Carolinadidnot provide complete, verifiable documentation tosupport their claims or program income (generatedby fees, etc., from firms that use MEP services). ThefourthClemson Universityclaimed costs thatwere largely outside the scope of the MEP project.We questioned the $3.4 million in claimed costs.

In addition, the subrecipients MEP agreements didnot contain the required budget information, andnone had written procedures in place to determinewhether amounts reported to SCMEP were allowableunder federal cost principles.

Finally, two of three subrecipients that qualified forsingle audits4 did not separately identify the NISTMEP program. Therefore these grants were notsubjected to the proper audit techniques requiredunder the Single Audit Act.

We recommended that NIST take the followingactions:

1. Disallow $3,409,409 in questioned costsand recover excess federal funds of

$1,136,736.

2. Require the recipient to ensure itssubrecipients have appropriate budgets andwritten policies and procedures that meetfinancial system requirements prior togranting any future subawards. The writtenprocedures should direct subrecipients tocomply with the Single Audit Act.

4 The Single Audit Act requires nonfederal entities that expendfederal awards from more than one agency totaling $500,000 ormore in a year to undergo a single audit, conducted by anindependent auditor.

Florida MEP Award No.70NANB3H2002 (ATL-18568)

The Florida MEP received a NIST cooperativeagreement in 2003 that, as amended, funded the

operations of its MEP center for approximately4 years (August 2003-June 2007). Total budgetedcosts for the project were $17.1 million. The federalshare was capped at $5.8 million.

The MEP claimed costs totaling $19.1 million forthe period July 2005 through March 2007, andreceived federal reimbursements of $5 million. Wequestioned $12.6 million of the claimed costs. Thebulk of this amount$11.4 mi