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Audit and Compliance Standards - Office of Natural Resources

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									     Office of Natural Resources Revenue (ONRR)



                        ONRR: Collecting Every Dollar Due
                                      Presented by:
                              Gregory J. Gould, Director ONRR

                      AGA Professional Development Conference
                                   April 26, 2012




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Industry Compliance          Accurate Revenues & Data           Professionalism & Integrity
                           Overview


  •   Creation of ONRR
  •   ONRR Mission and Contributions to the U.S.
  •   ONRR Restructuring and Strategic Review 
  •   Mission Work: ONRR Program Areas
  •   Recent ONRR Achievements 
  •   New Emerging Initiatives:
      – Royalty Reform
      – Extractive Industries Transparency Initiative (EITI)

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Industry Compliance   Accurate Revenues & Data   Professionalism & Integrity
                       The Creation of ONRR

      On October 1, 2010, ONRR was formally established and moved under the Office 
      of the Assistant Secretary for Policy, Management and Budget.
      ONRR has worked closely with the Assistant Secretary for Policy, Management 
      and Budget to enhance the organization’s ability to deliver timely compliance on 
      every dollar due, make accurate on-time payments, and earn public trust.
      ONRR used the reorganization to spark an agency-wide transformation and 
      develop a strategic framework to prioritize new and ongoing initiatives for 
      implementation.  

  “This is significant not only for moving
  forward with our overall reorganization,
  but also for the American taxpayers,
  whose interests will be better protected
  by the improved collection and
  management of revenues from energy
  development on our public lands and
  oceans…”
                     -- Secretary Ken Salazar
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Industry Compliance           Accurate Revenues & Data            Professionalism & Integrity
                  DOI: Prior to Restructuring




                                                                               4

Industry Compliance   Accurate Revenues & Data   Professionalism & Integrity
                      DOI: After Restructuring




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Industry Compliance      Accurate Revenues & Data   Professionalism & Integrity
                         ONRR: Who We Are

   Responsible for the management of revenues associated with federal offshore 
   and federal and American Indian onshore mineral leases, as well as revenues 
             received as a result of offshore renewable energy efforts  




  Dallas                                                               Houston 

  Denver                                                           Oklahoma City

Farmington                                                              Tulsa

Ft. Berthold                                                      Washington, D.C.




                                                                                       6

 Industry Compliance       Accurate Revenues & Data      Professionalism & Integrity
              Cumulative Mineral Lease
          Revenue Disbursement ~ $231 Billion

                                                 • Since 1982, 
                                                   approximately $231 
                                                   billion in revenues was 
                                                   distributed from onshore 
                                                   and offshore lands to the 
                                                   Nation, states, and 
                                                   American Indians

                                                 • The distribution to the 
                                                   U.S. Treasury is one of 
                                                   the Federal government’s 
                                                   greatest sources of non-
                                                   tax income




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Industry Compliance   Accurate Revenues & Data   Professionalism & Integrity
       Contributing to the Nation’s Economy

 • FY 2011 Disbursements -- $11.16 Billion
     – $ 6.05 Billion to the U.S. Treasury
     – $ 891 Million to the Land & Water Conservation Fund
     – $ 150 Million to the Historic Preservation Fund
     – $ 1.53 Billion to the Reclamation Fund
     – $ 2 Billion to 37 States
     – $ 538 Million to the Department’s Office of the Special Trustee on 
        behalf of 36 Indian tribes and approximately 30,000 individual 
        Indians
 • Approximately $10 billion in revenue is disbursed annually
                                                                                    8

Industry Compliance      Accurate Revenues & Data     Professionalism & Integrity
                               ONRR Strategic Review
                                and Reorganization

                                          December 17, 2010                        October 1, 2011 
    October 1, 2010                                                                ONRR FY 2012 
    ONRR created                          Strategic Review 
                                          results presented                        Reorganization 


                    October 28, 2010                          March 2011
                    ONRR Strategic                            Implementation Work 
                    Review begins                             Groups formed

Results:
•     Developed a new Strategic Framework to guide decision making
•     Clearly communicated organizational priorities proliferating ownership, optimism and enthusiasm 
      across the organization
•     Launched new initiatives to improve compliance, organizational health and inter-agency collaboration
•     Instituted new ways to make decisions, hold people accountable, measure success and ensure effective 
      results                                                                                               9

      Industry Compliance             Accurate Revenues & Data              Professionalism & Integrity
   Three Outcomes Define ONRR’s Success

      Companies timely comply 
      with laws, regulations, and 
      lease terms and pay every 
      dollar due

                              States, Tribes, Indian mineral 
                              owners, US Treasury, and 
                              other entities receive timely 
                              and accurate revenues and data


                                                      The public trusts ONRR’s 
                                                      professionalism, integrity, 
                                                      efficiency and quality

                                                                                       10

Industry Compliance        Accurate Revenues & Data      Professionalism & Integrity
                        Mission Work:
                      ONRR Program Areas

  Financial and Program 
      Management

                      Audit and Compliance 
                           Management

                               Coordination and Enforcement
                                       Management
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Industry Compliance      Accurate Revenues & Data   Professionalism & Integrity
            Financial and Program Management

     Financial Management                   Production Reporting & Verification

§ Collect, verify, distribute all          § Receive, process and verify industry-
  rent, royalties and bonuses                submitted production reports
§ Receive, process and verify              § Error correction for all Federal and 
  industry-submitted royalty                 Indian production
  reports                                  § Oversee meter inspections for 
§ Perform Data Mining functions              production verification


                                     Asset Valuation
                 § Issue valuation guidance and determinations
                 § Review and respond to transportation and    
                   processing allowance requests
                 § Draft and publish valuation rulemakings
                                                                                         12

Industry Compliance        Accurate Revenues & Data        Professionalism & Integrity
         Financial Management Accomplishments

      FY 2011 Reports Received:
       1,950 payors (Form 2014)                                           FY 2011 Transaction
      1,900 operators (Oil and Gas                                         Lines Processed:
          Operations Report)


                                                                     4.7 million           5.7 million 
                                                                    royalty lines       production lines 
         The PeopleSoft                                              @  99.2%              @ 97.4% 
     accounting system was                                         accuracy rate         accuracy rate
     one of the first in DOI to 
         satisfy OMB and 
        Federal Managers                                                     Financial operations 
      Financial Integrity Act                                                and internal controls 
         financial system                                                     contributed to DOI 
           requirements                                                     achieving unqualified 
                                                                             opinions* during the 
                                                                              annual CFO audits 
  *Unqualified opinion (Clean Audit) -  In conformity with U.S. 
  generally accepted accounting principles  (GAO-09-946SP)
                                                                                                            13

Industry Compliance               Accurate Revenues & Data                    Professionalism & Integrity
                    ONRR DATA ACCURACY EFFORTS
                                                                                                                         Timeline

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                                      LVS/GVS, High Level Analyses of Sales Values, 




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                                                                                                                          7 Years        
                                                                                                                 (Fed. oil & gas)       14

Industry Compliance                     Accurate Revenues & Data                        Professionalism & Integrity
          Audit and Compliance Management

                              A 3-year cycle to
                                review and/or
                               audit revenues
All audits performed          was established
     according to                                         Compliance reviews
Generally Accepted                                        are an analysis that
     Government                                              determines the
Auditing Standards                                         reasonableness of
                                                           reported revenues




        Properties and
  companies are selected                            Audit and Compliance
  for review or audit using                          ensures that Federal
      a risk assessment                               and Indian mineral
       across the entire                                revenues are
   universe of properties                            accurately reported
        and companies                                      and paid
                                                                                       15

Industry Compliance      Accurate Revenues & Data        Professionalism & Integrity
        Audit and Compliance Accomplishments

        Received a “pass”
                                            Since 1982, audit and
       opinion on 2011 Peer
        Review of our audit               compliance activities have
             activities                       collected $3.9 billion


  In FY 2011 ensured                                      In FY 2011
     compliance for                                     completed 311
  about $5.5 billion in                                audits and 1,059
    royalty revenues                                  compliance reviews

                       For every dollar spent on compliance
                      activities between FY 2009-2011, ONRR
                       returned approximately $4.00 back to
                                     taxpayers
                                                                                    16

Industry Compliance        Accurate Revenues & Data   Professionalism & Integrity
       Coordination and Enforcement Management:
              State and Tribal Coordination

– Audit agreement support and coordination 
  with ten States and six Tribes                           Alaska        North Dakota
                                                           California    Oklahoma
– Conduct Outreach
                                                           Colorado      Texas
– Serves as an advocate for the fulfillment of 
                                                           Montana       Utah
  ONRR trust responsibility and to resolve 
  Indian mineral-related issues                            New Mexico    Wyoming

– In FY 2011, States and Tribes completed 244 
  audits and 171 compliance reviews
                                                      Blackfeet          Southern Ute
– In FY 2011, held 98 outreach sessions and 
                                                      Navajo Nation      Ute
  resolved over 12,500 royalty-related inquiries
                                                      Shoshone/Arapaho   Ute Mountain Ute
– For every dollar spent on compliance 
  activities between FY 2009-2011, States and 
  Tribes returned $3.39 back to taxpayers
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Industry Compliance        Accurate Revenues & Data          Professionalism & Integrity
    Coordination and Enforcement Management:
               Office of Enforcement

 Office of Enforcement Functions:
§ Alternative Dispute Resolution
§ Litigation 
§ Enforcement Operations


                  New Enforcement Strategy Emphasizing:
§ Deterrence – resolve to sanction repeat offenders
§ Appropriate Enforcement Actions – aggressively issuing civil penalties
§ Communication – provide training/information to managers and 
  employees; publicize collected civil penalties
§ Continuous improvement – balance and improve staff expertise
§ Partnership – collaborate on creative enforcement solutions                    18

Industry Compliance     Accurate Revenues & Data   Professionalism & Integrity
               Office of Enforcement Penalties

•   The civil penalties program is a tool ONRR uses to encourage compliance by 
    issuing civil penalties when companies fail to comply with, or knowingly 
    violate, applicable regulations or laws. Such penalties are authorized by the 
    Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA).
•   ONRR regulations at 30 C.F.R. § 241 provide a cure period of at least 20 days 
    for regulatory violations such as failure to submit reports.  Violations not cured 
    within the period are subject to civil penalty assessments, until they are cured: 
          • As much as $500 per day; 
          • $5,000 per day after 40 days; 
          • Certain violations - as much as $10,000 or $25,000 per violation for each day the violation 
            continues.

•   Some violations are also crimes under Title 18, U.S.C. or False Claims under 31 
    U.S.C. 3729. ONRR works in partnership with the Department’s Office of the 
    Inspector General and the U.S. Attorney’s Office in pursuing these violations.

                                                                                                           19

Industry Compliance             Accurate Revenues & Data                 Professionalism & Integrity
          Office of Enforcement Accomplishments

Civil Penalties
•  $28.8 Million in penalties collected since FY 2000 
•   1,112 cases opened since FY 2000 and 964 cases closed 
(637 or 66% with compliance achieved)

                             Alternative Dispute Resolution
                             •   $185 million received in settlement cases from FY 
                             2009 - FY 2011 (25 ADR case facilitations resulting in
                             Compliance)

Litigation Support
•   624 debts referred to Treasury between FY 2009 - FY 2011 involving over 
$3.2 million in principal + interest
•   21 Bankruptcy Proofs of Claim filed since FY 2009 involving over $27 
million principal + interest
                                                                                           20

 Industry Compliance          Accurate Revenues & Data       Professionalism & Integrity
                       Recent ONRR Achievements

                                         ü Increased Industry Education:
                                                Targeted Reporting Training to help industry 
                                                comply

                                         ü Implemented new e-commerce technology that
                                           places additional onus on companies to report
                                           correctly

                                         ü New data mining business processes:
                                               Collected approximately $12 million in additional 
                                               revenues since 2010
ü Piloting an integrated compliance            Monitor adjustments outside 6-year statute of 
  approach with a large independent            limitations
  producer                                     Volume comparison between royalty and 
                                               production reports
ü Professionalism and Integrity:
       3-year Auditor Training Program   ü Established a Meter Inspection Team:
       High employee involvement in             Joint partnership with Bureau of Safety and 
       ONRR continuous improvement              Environmental Enforcement 
       initiatives                              Automated Production Metering Feasibility Study 21

   Industry Compliance          Accurate Revenues & Data            Professionalism & Integrity
                       Emerging Initiatives:
                         Royalty Reform


 Federal Oil &                                       Federal &
     Gas                                            Indian Coal
  Valuation                                          Valuation




Indian Oil Valuation Negotiated Rulemaking
                                                                                  22

 Industry Compliance     Accurate Revenues & Data   Professionalism & Integrity
                    Emerging Initiatives:
                Improving Data Transparency

  Extractive Industries Transparency Initiative (EITI)
    President Obama announced the U.S. intention to implement EITI September 2011  


Parallel disclosure from companies of                     Voluntary framework for governments 
what they have paid the government in                     to disclose revenues received from oil, 
royalties, rents, bonuses, taxes and other                gas and mining assets belonging to 
payments                                                  state




                     INDUSTRY                EITI REPORT             GOVERNMENT 
                       discloses               payments are          discloses receipt of 
                      payments                independently               payments
                                          reconciled and verified
                                                                                                         23

Industry Compliance                 Accurate Revenues & Data               Professionalism & Integrity
                      The Future of ONRR

  ONRR’s future is bright because we are…
  ▪ Constantly adapting to find innovative improvements and 
    operational efficiencies to best serve the American people
  ▪ Holding our self and our employees accountable for performance 
    while maximizing talent and knowledge development
  ▪ Working cross-functionally and cross-departmentally to achieve 
    critical goals
  ▪ Committing to transparency for the American people and other 
    nations looking to be leaders in the energy field
  ONRR expects to achieve…
  ▪ Timely compliance from companies and payment of every dollar due
  ▪ Timely and accurate revenues and data distributed to recipients
  ▪ Trust in ONRR’s professionalism, integrity, efficiency and quality
                                                                                 24

Industry Compliance     Accurate Revenues & Data   Professionalism & Integrity
                       Questions & Comments


                           Please Contact

                                Gregory J. Gould
         Acting Deputy Assistant Secretary for Natural Resources Revenue
                 Director, Office of Natural Resources Revenue
                                 (202) 254-5573
                              greg.gould@onrr.gov 




                      http://www.onrr.gov                                                25

Industry Compliance        Accurate Revenues & Data        Professionalism & Integrity

								
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