Summary: GAO testified on S. 2305, a bill to improve the accounting and control of revenues due from Federal and Indian lands. Several deficiencies in the collection system which GAO identified over 20 years ago still persist today, with large sums going uncollected each year. The proposed legislation and a new royalty accounting system should provide the foundation for resolving these longstanding financial management problems. S. 2305 would require that the Secretary of the Interior be notified when any new leased well begins production or of any lease assignments or changes in responsibilities for royalty payments or recordkeeping. GAO supports a proposal which requires that each lessee develop a site-security plan since site security has been extremely lax. Because of inadequate lease inspection and monitoring, and because there are not enough inspectors to provide adequate coverage, thefts and violations on Federal and Indian lands have gone undetected. GAO also supports a legislative proposal which would require that anyone transporting mineral resources from a Federal or Indian lease must maintain documentation showing from whom such resources were obtained. GAO suggested that the legislation be amended to provide civil fines and penalties for failure to comply with the provisions of the bill. GAO supports a requirement that all individuals associated with a lease must maintain and provide records as specified by Interior. GAO also supports legislation that would allow the refund or credit of any overpayment made to the Government for leases without congressional approval. S. 2305 provides for charging interest on all late royalty payments. These interest payments would be shared by the Government and the States. GAO believes that a provision should be added to share the interest charges with the trust beneficiary of the Government's share of the interest, the Indians. GAO supports the provision for Interior to enter into cooperative agreements with the States and Indian tribes to share the royalty management functions. A provision of a self-sustaining fund for the operation of the royalty management function should be clarified as to whether this fund would cover the costs of audits of oil and gas companies and the cost of developing the new accounting system. The proposed legislation may encumber the authority of Interior to collect reasonable fees to cover the cost of work performed by Indians.
