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45. ODECO

61. Sonat Exploration Co. 46. Oxy Petroleum, Inc.

62. Southland Royalty Co. 47. Patrick Petroleum Co.

63. Southwest Prod. 48. Peabody Coal Co.

64. Stephens Prod. 49. Pennzoil Prod. Co.

65. Sun Exploration Co. 50. Petrofina Delaware

66. Terra Resources Inc. 51. Petro-Lewis

67. Texas Oil & Gas Corp. 52. Pioneer Gas Products

68. TRANSCO 53. POGO

69. Turner Smith & Assoc. 54. Reading & Bates Petro.

70. Unit Drilling & Expl. 55. Ricks Expl. Co.

71. Western Nuclear 56. Quinoco Petro., Inc.

72. Westmoreland Resources 57. San Juan Coal

73. Williston Basin Interstate Pipeline 58. Santa Fe Energy Co.

Co. 59. Santa Fe Minerals

74. Wil-Mc Oil Corp., The 60. Service Drilling Co.

75. Woods Petroleum Corp. INSPECTOR GENERAL'S AUDIT COMMENTS Mr. BETTENBERG. Mr. Chairman, I think again that we are talking about priorities and a question of when you can get to things. I think that the Inspector General's office perhaps has not been as complete as it might have been in describing the progress that has been made and in noting the fact that we had the large number of comprehensive audits underway at the time that they were pursuing their examination.

Mr. YATES. Did you make that known in your reply to the Inspector General's report?

Mr. BETTENBERG. I don't recall whether we had that in there or not. We responded with specific comments.

Mr. YATES. Why would you not? If that's the answer, why would

you not?

Mr. BETTENBERG. Well, we

Mr. YATES. I mean, the IG, according to the information they give us—and the copies of the reports that you received-stated that there is no reference made to that.

Mr. BETTENBERG. Well, our response is here.

Mr. YATES. I don't find anything. Do you find any reference to comprehensive audits that you were making in any of the IG’s re ports? On the contrary, at least in the copies that we have received, and I'm looking at report Number 88-65, for April 1988, page three, it says this:

“the Service did not provide adequate audit coverage of the lease universe.” The lease universe. That's a pretty big area.

Mr. BETTENBERG. Yes, the lease universe-includes a couple thousand payors.

Mr. YATES. Yes, but why didn't you tell them that they didn't-
Mr. BETTENBERG. Well, if you'll look in-
Mr. YATES. I am.

Mr. BETTENBERG. You'll recall that in 88-65 they did not give that to us for a response.

Mr. YATES. But your response, I have a response here--
Mr. BETTENBERG. If you look at 88-63.

Mr. YATES. I have that, and let's look at page 21. Management concurs is what this says, and maybe they misquoted you. But on page 21, Status of Audit Report Recommendations, under A.1, it says, "Management concurs additional information required.”

quired."

Number A.2: "Management concurs, additional information required."

Number A.3: “Resolved, not implemented.” Number A.4: "Management concurs, additional information re Is this the fault of the IG in not having correctly depicted your attitude in not having-

Mr. BETTENBERG. No, what I'm addressing are the comments made yesterday, or my understanding of the comments made yesterday. What I told you was in terms of the direction of the pro gram, toward comprehensive audits, we agree. We don't disagree with their conclusions.

What the audit report-
Mr. YATES. How do you disagree with them?

Mr. BETTENBERG. Their characterization of past actions as I'm told they were presented at yesterday's meeting.

Mr. YATES. Well, yes. But that's what they said in yesterday's hearing and that's stated in report Number 88–65, and 88-63 apparently is an earlier report, judging by the number.

Mr. BETTENBERG. It's still this month.
Mr. YATES. Yes.

And the impression that I have is that if there was any reason that you gave for having not performed in accordance with the way that the IG thought you should perform that would have been stated. I don't find it stated in here. You're stating facts now-is it your contention that the IG knew of these advances that you were making and didn't state them to us?

Mr. BETTENBERG. Well, the Inspector General's office.
Mr. YATES. Well, the IG himself was here yesterday.

Mr. BETTENBERG. I don't know about the IG himself. I don't know about what he knew.

Mr. YATES. He was the one who told us. He was the one who made the remarks that you say were bad and were unfair.

Mr. BETTENBERG. Let me respond to your earlier comment in two separate ways.

First, page 21, the status of the audit report recommendations simply summarizes the response to a recommendation, not to findings or the narrative. You have to go back to the audit report, where it says we recommend that you do the following things.

Mr. YATES. Okay.

Mr. BETTENBERG. Now, as to that part of it, the way I characterized it in talking to our auditors was that it reminded me of the description of a consultant. A consultant is somebody who comes in and looks at your watch and tells you what time it is. Our people briefed the Inspector General on this strategy back in August. The second part of our response on page 15 of the same document says we agree with your overall message, and we've been taking appropriate action on the recommendations. We do not believe that the draft audit recognizes MMS' efforts to resolve the issues. Then we go through pages 16 and 17 addressing some of those kinds of things.

You will note that we have a six-page response that is published in the back of that. In our response on page 19, we mention the 75 company audits. That's in our budget justification as well, I understand.

Mr. YATES. Well, why in the world would the IG himself have said what he said yesterday?

Mr. BETTENBERG. I wouldn't want to speculate on what things he knew.

Mr. YATES. Well, we have somebody from the IG's office here.
Mr. BETTENBERG. I think that he just wasn't fully apprised.

Mr. YATES. Who's here from the IG's office? I asked somebody to be here?

Well, Ms. Fleischman. Ms. FLEISCHMAN. Good morning, Mr. Chairman. Mr. YATES. Would you like to come up here, Ms. Fleischman, where we can hear you, and I'd like to ask you a couple of questions? Why did you treat Mr. Bettenberg so unfairly?

INSPECTOR GENERAL'S REQUEST FOR AN AUDIT PLAN Ms. FLEISCHMAN. Well, I don't think that we realized that we had treated him so unfairly. We certainly don't believe that.

Mr. YATES. Yes.

Ms. FLEISCHMAN. Mr. Chairman, I have brought with me three auditors who are responsible for these audits, as a matter of fact.

The first person is Mr. Robert Williams, who is the regional audit manager for the Eastern Region, out of which region these audits were conducted.

Ms. Charlotte Olson was the supervisory auditor for these audits.

Mr. Robert Romanyshyn is our desk officer in Headquarters for Lands and Minerals.

Each of these three people has had extensive experience with the management program. Each, as I say, has had a part in producing these audits.

The first thing I should say is that we do not disagree with MMS. MMS has come a long way. I believe that we stated that in our biennial report for the Congress.

However, we did not find an audit plan in MMS, and we have so stated. Mr. Bettenberg in his comments in response to that recommendation commented as he has said this morning that they concurred with us.

We have requested additional information so that we may resolve that audit finding. That is to say that we have requested that they provide us with what we perceive to be and believe to be an audit plan. To date, they have not done that.

Mr. YATES. How long has that been?

Ms. FLEISCHMAN. When did we issue the draft report to MMS with the recommendation for an audit plan?

Mr. WILLIAMS. Last February.
Mr. YATES. February of this year?
Ms. FLEISCHMAN. February of this year, yes.
Mr. Yates. And there's been no response as of yet?
Ms. FLEISCHMAN. No, sir.
Mr. WILLIAMS. They responded to the draft report.

[graphic]

Ms. FLEISCHMAN. They responded to the draft report, but they have not produced an audit plan. We expect them to be able to do that. They have concurred, and we anticipate that they will provide an audit plan.

Mr. YATES. Well

Mr. BETTENBERG. Mr. Sant advises me that this is not the recommendation in the report 88-63.

Mr. YATES. Well, now, page 7 of 88-63, number 2 says what?

Mr. BETTENBERG. It says "Develop an audit plan that ensures comprehensive audit coverage of the lease inventory over a 6-year period." The plan should include auditing the revenues collected during 1982 before the records are no longer available.

Part of that audit plan, which they are aware of, is our activities at 13 companies which we call the resident audit teams. That covers 65 percent or more of the revenues for the periods that they are discussing in here.

Mr. YATES. Why-if that's true, Ms. Fleischman, why do you want an audit plan?

Is that an audit plan?
Ms. FLEISCHMAN. No, sir, it is not.
Mr. YATES. Okay.
What is an audit plan? Is that an audit plan in your concept?

Mr. SANT. Well, as Mr. Bettenberg said, we have about half of them under review, and that will be, as Ms. Fleischman said, the evidence that we are following their recommendations.

Mr. Yates. Well, it's more important than anything else to get an audit plan. Is the IG wrong in asking for an audit plan?

Mr. SANT. I don't think so.
Mr. BETTENBERG. That's an important thing to have.
Mr. YATES. Right. Well, why don't you get it to them?

AUDIT SCHEDULE Mr. BETTENBERG. An audit plan consists of a variety of things. It consists of a strategy, describing how you go about it. It consists of your procedures, and it also consists of a schedule. We gave them a schedule, I think, probably just yesterday or the day before.

Mr. YATES. A schedule of what?

Mr. BETTENBERG. A schedule of when we anticipate doing audits over a six-year span.

Mr. YATES. Well, that's part of a plan.
Mr. BETTENBERG. That's part of a plan, too.

Mr. YATES. When will you have a plan prepared? You want to make Ms. Fleischman happy, don't you?

Mr. BETTENBERG. Absolutely. [Laughter.]
Mr. YATES. Okay.

If you want to make Ms. Fleischman happy, why don't you give her a plan. When do you want to give her a plan?

Mr. BETTENBERG. Well, I think that we've given them the basic elements of it right now. We'll have detailed plans for each individual residency. As you do the audit you will have a plan for doing that particular audit. If you look at the Inspector General's audit plan, they spell out which audits they're going to do over the next year, and they have a brief description of them. In our case you don't need a description of them in the same sense, since it's the same description for each one.

Mr. YATES. Why don't you give Ms. Fleischman and her boss, the IG, the plan, so that they don't criticize you any more before our committee?

Mr. BETTENBERG. Well, I think that we think we've given them the basic elements of it.

Mr. YATES. Have you given them a plan?
Mr. BETTENBERG. Yes.

As we have detailed plans for the residencies and that sort of thing, we'll give them those as well.

Mr. YATES. When will you give her the plan?

Mr. BETTENBERG. Well, I think that what we have now constitutes a plan.

Mr. YATES. No, he doesn't agree with you.

Mr. BETTENBERG. How would you characterize what we've given you up to this point?

Mr. WILLIAMS. We've had a

Mr. YATES. Isn't the important thing that the IG doesn't say that it's a plan? Are you telling the IG that you've given him a plan?

You've given him a strategy, that's what you've given him. And you gave him that a couple of days ago. They say that the strategy is not a plan. Do you agree with that?

Mr. BETTENBERG. Yes.
Mr. YATES. Okay.
When are you going to give him a plan?
Mr. BETTENBERG. It's part of a plan.
Mr. YATES. When are you going to give him the plan?

Mr. BETTENBERG. We have also now given them a schedule, and I think that that is the other essential ingredient of a plan.

Mr. YATES. Is this the only difference between you?

Ms. FLEISCHMAN. Well, as I understand it-I'm not an auditor by profession, I'm an attorney -but I have three professional auditors here. I would ask Mr. Williams if he could define or reiterate the definition of an audit plan, which I believe the GAO has defined in their audit standards.

Mr. Williams, would you come up here?

Mr. YATES. Come up here, Mr. Williams. Maybe we can reconcile this so that we can get the plan.

What is the plan according to the GAO?
This is Mr. Williams of the IG's office.

GAO STANDARDS FOR AUDIT PLAN

Mr. WILLIAMS. As I recall, the GAO has not really defined a plan, but what the standards are in proper planning for conducting the activities of a particular organization.

Mr. YATES. Okay.

Mr. WILLIAMS. Again, in terms of what Mr. Bettenberg is talking about, they have provided a strategy, and we have looked that over and given him comments on the strategy. This says how, basically, we are going to audit all the particular revenues.

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