SUMMARY OF OIG ACTIVITIES [including a description of

Act)] . . . . . . . . . . . . . . . . . . . . . . . . . . 1

AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . 1

INVESTIGATIONS. . . . . . . . . . . . . . . . . . . . . . 2

LEGISLATIVE AND REGULATORY REVIEWS. . . . . . . . . . . . 2

OIG RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . 3

OIG RESOURCES. . . . . . . . . . . . . . . . . . . . . . . . . 4

CFTC PROGRAMS AND OPERATIONS . . . . . . . . . . . . . . . . . 4

COMPLETED WORK . . . . . . . . . . . . . . . . . . . . . . . . 5

(Mandated by Section 5(a)(6) and (7) of the Act). . . . . 5 INVESTIGATIONS. . . . . . . . . . . . . . . . . . . . . . 7

LEGISLATIVE AND REGULATORY REVIEWS. . . . . . . . . . . . 8

AUDIT REPORTS OVER SIX MONTHS OLD. . . . . . . . . . . . . . . 11

CORRECTIVE ACTION NOT COMPLETED [including an

by Section 5(a)(3) of the Act)] . . . . . . . . . . . . . 11

CORRECTIVE ACTION COMPLETED. . . . . . . . . . . . . . . 11

(Mandated by Section 5(a)(10) of the Act)]. . . . . . . . 11

SUMMARY OF MATTERS REFERRED TO PROSECUTIVE AUTHORITIES and

the prosecutions and convictions which have resulted

(Mandated by Section 5(a)(4) of the Act). . . . . . . . . 11

SUMMARY OF EACH REPORT MADE TO THE AGENCY HEAD under

Section 5(a)(5) of the Act) . . . . . . . . . . . . . . . 11

REVISED MANAGEMENT DECISIONS [including description and explanation of the reasons for any significant revised management decision made during the reporting period (Mandated by Section 5(a)(11) of the Act)]. . . . . . . . 12

INSPECTOR GENERAL DISAGREEMENT [including information

(Mandated by Section 5(a)(12) of the Act)]. . . . . . . . 12

CURRENT AUDITS . . . . . . . . . . . . . . . . . . . . . . . . 12

GAO LIAISON. . . . . . . . . . . . . . . . . . . . . . . . . . 14

STRATEGIC PLAN . . . . . . . . . . . . . . . . . . . . . . . . 15

CONTACTING THE OFFICE OF THE INSPECTOR GENERAL . . . . . . . . 20

TABLE 1 -- REPORTS ISSUED WITH QUESTIONED COSTS (Mandated

by Section 5(a)(8) of the Act). . . . . . . . . . . . . . 21

TABLE 2 -- REPORTS ISSUED WITH RECOMMENDATIONS THAT FUNDS

BE PUT TO BETTER USE (Mandated by Section 5(a)(9) of

the Act). . . . . . . . . . . . . . . . . . . . . . . . . 22

Section 5(a)(1). . . . . . . . . . . . . . . . . . . . . . . . 1

Section 5(a)(2). . . . . . . . . . . . . . . . . . . . . . . . 1

Section 5(a)(3). . . . . . . . . . . . . . . . . . . . . . . . 11

Section 5(a)(4). . . . . . . . . . . . . . . . . . . . . . . . 11

Section 5(a)(5). . . . . . . . . . . . . . . . . . . . . . . . 11

Section 5(a)(6). . . . . . . . . . . . . . . . . . . . . . . . 5

Section 5(a)(7). . . . . . . . . . . . . . . . . . . . . . . . 5

Section 5(a)(8). . . . . . . . . . . . . . . . . . . . . . . . 21

Section 5(a)(9). . . . . . . . . . . . . . . . . . . . . . . . 22

Section 5(a)(10) . . . . . . . . . . . . . . . . . . . . . . . 11

Section 5(a)(11) . . . . . . . . . . . . . . . . . . . . . . . 12

Section 5(a)(12) . . . . . . . . . . . . . . . . . . . . . . . 12

The primary objectives of the Office of the Inspector General (OIG) are to help promote long-term efficiency and effectiveness in the administration and operation of the Commission and to protect against fraud and abuse. This reporting period's OIG audit activities which are listed below reflect these objectives.

The following are the audits being conducted during the current reporting period and continuing into the next reporting period. (For additional details, see the section on current audits beginning on page 12.)

The following are the audits completed during this reporting period. (For additional details, see the section on completed audits on page 5.)

The Inspector General Act of 1978, as amended, provides that the Inspector General may receive and investigate complaints or information from the Commission's employees concerning the possible existence of an activity constituting a violation of law, rules or regulations, or mismanagement, abuse of authority, or gross waste of funds, or a substantial and specific danger to the public health and safety.

No investigations were pending as of the beginning of the reporting period. The OIG opened two investigations during the reporting period and completed two investigations. No investigations remained open at the end of the period. (For more detailed descriptions of these investigations, see the section on investigations beginning on page 7.)

The OIG reviews proposed and final CFTC regulations and legislation and selected exchange rules using the following basic criteria: Whether the agency: (1) has identified specifically the problem(s) to be addressed by the proposal; (2) has defined through case study or data analysis a clear link between the proposed solution and the identified problem(s); (3) has specified clearly the means to effectively and efficiently enforce the proposal; (4) has assessed the likely efficiency and effectiveness of alternative solutions; (5) can reasonably document that the proposal will yield positive net benefits over the long term; and (6) has met the requirements of the Regulatory Flexibility Act and the Paperwork Reduction Act.

The Regulatory Flexibility Act requires the agency to evaluate the impact of its regulations on small entities. The Paperwork Reduction Act requires the agency to manage effectively and efficiently its information collections so that they are the least burdensome necessary to achieve the stipulated objectives. (For more detailed descriptions of these reviews, see the section on legislative and regulatory reviews beginning on page 8.)

Regulations reviewed during this period include:

The Office of the Inspector General in the Commodity Futures Trading Commission (CFTC) was created in accordance with the Inspector General Act of 1978 (P.L. 95-452), as amended by the Inspector General Act Amendments of 1988 (P.L. 100-504). The OIG was established to create an independent unit to:

Given that the CFTC does not have extensive contracts or grant making authority, the OIG's efforts have been focused on the review of legislative and regulatory proposals and the monitoring of internal CFTC operations.

The OIG consists of the Inspector General, two professional staff members, and a secretary. One professional position has been vacant since October 1997. The present Inspector General assumed his position on October 7, 1990.

The OIG, on December 4, 1989, signed a Memorandum of Understanding with the Office of General Counsel (OGC). This Memorandum details the procedures that will be used to provide the OIG with OGC legal services. An OGC staff member has been assigned to provide such services to the OIG on an as-needed basis.

The basic objectives of the CFTC are to prevent manipulation of the markets, abusive trade practices, and fraudulent activities; to maintain effective oversight of the markets and self-regulatory organizations; and to enforce the Commodity Exchange Act and Commission rules without hindering the futures markets' provision of price discovery and risk shifting services. The CFTC regulates the futures activities of brokerage firms, salespersons, floor brokers, floor traders, commodity pool operators, commodity trading advisors, introducing brokers, and leverage transaction merchants. In addition, the agency ensures the effective enforcement of exchange rules, reviews the terms and conditions of proposed futures contracts and the registration of firms and individuals who provide advice or handle customer funds, and oversees the activities of the National Futures Association.

The OIG is required to conduct, supervise and coordinate audits of CFTC programs and operations and to ensure that the audits are conducted in accordance with generally accepted government auditing standards. The OIG is also required to recommend changes to existing and proposed CFTC programs and operations to promote economy, efficiency, and effectiveness and to prevent and detect fraud and abuse.

The purpose of these audits is to ensure that:

The following audit reports have been issued during the reporting period.

Objectives.

The purpose of the audit was to determine whether the

imprest fund was liquidated in compliance with the

Department of the Treasury Manual of Procedures and Instructions for Cashiers (Treasury Manual), and the Treasury Financial Manual

(I TFM 4-3000). The audit was designed to ensure that all funds were properly accounted for, the cashier followed procedures that adequately protected the funds from loss or misuse, and the cashier did not make unauthorized use of the funds during the period that the imprest fund was in operation. The audit covered the period from May 29, 1996 through September 2, 1997.

Results.

A report issued on January 14, 1998 disclosed that all funds were properly accounted for, the cashier followed procedures that adequately protected the funds from loss or misuse, and the cashier did not make unauthorized use of the imprest fund. On July 10, 1997, the $8,000 advance of the Washington, D.C. imprest fund was reduced to $2,000. On September 2, 1997, the imprest fund was liquidated and the total amount was deposited to CFTC’s account at the U.S Treasury, and the designations of the principal cashier and alternate were revoked.

Objectives.

The purpose of the audit was to determine whether the

imprest fund was liquidated in compliance with the

Department of the Treasury Manual of Procedures and Instructions for Cashiers (Treasury Manual), and the Treasury Financial Manual

(I TFM 4-3000). The audit was designed to ensure that all funds were properly accounted for, the cashier followed procedures that adequately protected the funds from loss or misuse, and the cashier did not make unauthorized use of the funds during the period that the imprest fund was in operation. The audit covered the period from February 3, 1997 through the August 1997 liquidation of the fund.

Results.

A report issued on November 7, 1997 disclosed that all funds were properly accounted for, the cashier followed procedures that adequately protected the funds from loss or misuse, and the cashier did not make unauthorized use of the imprest fund. In August 1997, the imprest fund was liquidated, the total amount of the imprest fund was deposited to CFTC’s account at the U.S Treasury, and the designations of the principal cashier and alternate were revoked.

Objectives.

In support of OMB Circular A-123 (Revised), the Inspector General evaluates, provides technical assistance, and advises the agency head as to whether the agency's review and evaluation process was conducted in accordance with the circular's requirements.

Status.

The OIG reviewed all of the draft internal control reviews produced by the Commission and provided comments to the originating divisions. The OIG reported the results of its review of the final submissions to the Chairperson in its annual assurance letters dated December 22, 1997. The OIG also attended the 1998 planning meeting of the CFTC Internal Control Committee on March 13, 1998 and offered its services as advisor and consultant on conducting and reporting on internal control reviews.

The Inspector General Act of 1978, as amended, provides that the Inspector General may receive and investigate complaints or information from the Commission's employees concerning the possible existence of an activity constituting a violation of law, rules or regulations, or mismanagement, abuse of authority, or gross waste of funds, or a substantial and specific danger to the public health and safety.

There were no investigations pending as of the beginning of the reporting period. The OIG opened and closed two investigations during the reporting period. No investigations remained open at the end of the period.

In response to an employee allegation that a poor performance rating was motivated by his previous assistance to the Office of the Inspector General, the OIG opened an investigation. The OIG interviewed all relevant employees and determined that the subject employee’s help in the matter under OIG investigation was mentioned approvingly in the employee’s performance appraisal and that discussions of alleged poor performance on the part of the employee were held between the field office and headquarters prior to the initiation of the OIG investigation. This investigation was, therefore, closed.

When it was brought to our attention that there were apparently inconsistent employee signatures recorded on the Transit Subsidy Certifications for the period from May/June 1995 through January/February 1998, the OIG asked the Office of Financial Management (OFM) to review the documentation. In a January 16, 1998 memorandum, OFM reported their findings. Inconsistencies disclosed were reported to the responsible supervisors and the relevant employees were questioned. All employees contacted indicated that they had indeed made the questionable signatures and verified that they had consistently received their transit subsidy vouchers throughout the course of the transit subsidy program. No evidence of fraud was uncovered.

Accordingly, this investigation was closed.

As specified in Section 4(a)(2) of the Inspector General Act of 1978, the OIG reviews the impact of existing and proposed legislation and regulations on CFTC programs and operations and makes recommendations regarding more effective or efficient alternatives or protections against fraud and abuse. The OIG also reviews exchange rule proposals and changes.

The OIG has notified the responsible Division as to any concerns with draft and final documents for the legislation, rules or investigations listed below. Formal comments were not filed with the Commission. A summary of the principal legislation, regulations and investigations reviewed and the OIG review results follows.

Summary of Rule.

The CFTC proposed amendments to Regulation 1.35 that would permit orders submitted on behalf of multiple customer accounts not to have individual identifying account numbers if the person placing the orders has investment discretion as to each account and the executing FCM has a single series designation for all the accounts. The designation has to contain a predetermined order allocation applicable to all listed individual accounts.

The amendments would also permit specified institutional accounts for certain futures and options orders to be exempt from the account identification requirement if executed as part of an intermarket strategy involving securities. Such orders would have to be allocated no later than the deadline for final submission of trade data to clearing on the day the order is executed.

OIG Review.

OIG commented on various sections of the rule and its accompanying explanation. The comments focused on the coverage of the institutional accounts and the reach of disqualifying interest in the specified accounts. The Commission published a proposed two-part amendment on May 3, 1993. The first part, paragraph (5), proposed guidance for the execution and allocation of bunched orders generally by use of predetermined allocation methodology. Those provisions have since been addressed in the Commission’s Notice of Interpretation and Approval Order, effective June 9, 1997, which approved an NFA Interpretive Notice and provided additional regulatory guidance. Accordingly, the first part of the proposed amendment has been withdrawn. On the second part, old paragraph (6) now (5), the Commission, on January 7, 1998, published a Notice of Proposed Rulemaking requesting public comment on a proposal to amend Commission Regulation 1.35(a-1) to permit certain customer orders to be placed on a regulated futures exchange without individual customer account identification either at the time of order placement or at the time of report of execution. The comment period ended March 9, 1998. Comments have been received and are being reviewed.

2. Exemption from Dual Trading Prohibition (CFTC Rule 155.5(d))

Summary of Rule.

Several exchanges submitted petitions for exemptions for various contracts from the dual trading prohibitions in Commission Regulation 155.5. The prohibition prevents a broker from trading for his own account and other specified accounts during the same trading session in which he has executed customers orders in an affected contract market.

OIG Review.

OIG discussed the issue with relevant staff and made comments and raised questions. The Commission has approved unconditional exemptions for the COMEX Division of the New York Mercantile Exchange, the New York Cotton Exchange, and the Coffee Sugar & Cocoa Exchange. The Commission is currently considering exemptions for the Chicago Board of Trade and the Chicago Mercantile Exchange.

The Division of Trading and Markets is analyzing additional data submitted by the Chicago Board of Trade and Chicago Mercantile Exchange to assist the Commission in finalizing the disposition of both exchanges’ dual trading exemption petitions, and the Division will draft appropriate documents.

1. Regulation of Noncompetitive Transactions

Summary of Action.

The CFTC sought comments on its approach to the regulation of noncompetitive transactions subject to the rules of a contract market.

OIG Review.

The OIG suggested clarification of potentially confusing discussions of duration relating to bonds and bills. Staff did appropriate clarification.

2. Amendment to CFTC Rule 1.17(c)(5)(iii)

Summary of Action.

The CFTC proposed an amendment eliminating a charge against an FCM’s net capital based on the market value of options sold by its customers.

OIG Review.

The OIG suggested changes to the explanations of the lack of continued need for the rule.

3. Amendment to CFTC Rule 1.35(a-1)

The CFTC proposed an amendment allowing eligible customer orders to be placed on a contract market without specific customer account identification either at the time of order placement or at the time of execution.

The OIG offered suggestions as to explanations for the proposed amendments.

4. Proposed repeal of CFTC Rule 33.4(a)(2).

The CFTC proposed repeal of the rule to permit futures-style margining of commodity options.

The OIG raised questions about the explanation of the proposed costs of the repeal.

There were no instances of audit reports over six months old where corrective action had not been completed.

There were no instances of reports issued before the commencement of the reporting period for which corrective action had been completed by the end of the reporting period.

There were no instances of reports issued before the commencement of the reporting period for which a management decision had not been made by the end of the reporting period.

No matters were referred to prosecutive authorities during the reporting period.

No reports were made to the agency head under section 6(b)(2) concerning information or assistance unreasonably refused or not provided.

No management decisions were revised during the reporting period.

The Inspector General does not disagree with any management decisions on OIG recommendations.

The audit agenda and priorities for the OIG are determined based on the following factors:

The audit agenda and summary of progress for each audit which has not yet been completed is summarized below. New agenda items periodically will be added, as appropriate, along with a description of the audit objective for each.

Objectives.

The mission of the Division of Enforcement is to investigate and prosecute fairly and effectively violations of the Commodity Exchange Act and the Commission's regulations in order to safeguard the integrity of U.S. futures and options markets and to protect market participants and futures and options customers. In the course of its activities, the division, with headquarters and regional components, plans and follows an often complex course to achieve its objectives and receives and creates a huge volume of documents which must be logically stored and regularly accessed. To support the accomplishment of these tasks, the division is relying on a collection of very old manual and automated systems to track the progress of activities and to store and retrieve documents. The objectives of this review are to determine what the information needs of all levels in the division are, whether the information needs are being met, and if the required information can be created, stored, and retrieved in a more effective and efficient manner.

Status.

The joint OIG/Enforcement team produced extensive and detailed narrative flow charts of the current operational and administrative functions and processes of the Division of Enforcement and delivered them to the Division of Enforcement and the Office of Information Resources Management (OIRM). These products were designed to inform the analysts of OIRM of the inner workings of the Division of Enforcement and to serve as the base on which the information requirements of the Division of Enforcement will be defined.

In September 1997, in a joint meeting of representatives of the Division of Enforcement, the Office of the Inspector General, and the Office of Information Resources Management (OIRM), the principals made commitments of six staff years of effort from OIRM and approximately three staff years of effort from Enforcement to define the system requirements of Enforcement.

The Division of Enforcement and OIRM have agreed that the first priority will be the development of a system to track documents in the Division in accordance with the Division’s Enforcement Procedure Number 3. This initial system is expected to be delivered to Enforcement for testing on April 6, 1998. The second phase will be devoted to installing a system to track production within the Division and to report that information in the required formats to management of the Division. Phase two is expected to require approximately five months to complete after the delivery of phase one. Phase three will concentrate on moving the functions of the attorneys and investigators from paper to computer screen and using the resulting information to improve the tracking of productivity information and the sharing of information within the Division.

Objectives.

The OIG will review expenditures from the two remaining CFTC imprest funds to determine compliance with the Department of the Treasury Manual of Procedures and Instructions for Cashiers. Specifically, the audits are designed to verify that all funds were properly accounted for; the cashier followed procedures that adequately protected the funds from loss or misuse; the cashier did not make unauthorized use of the funds, and appropriate closing procedures were followed. Both the Kansas City and the Chicago imprest funds have been closed.

Status.

The OIG has scheduled final audits of the now liquidated Chicago and Kansas City imprest funds for the second half of the fiscal year.

The OIG is charged with providing policy direction for, and conducting, supervising, and coordinating audits and investigations relating to CFTC programs and operations. In addition, the OIG is required to recommend policies for, and conduct, supervise, and coordinate with other Federal agencies, state and local Governmental agencies, and nongovernmental entities, audits, investigations, and evaluations regarding the economy, efficiency, and effectiveness of CFTC programs and operations.

GAO also conducts audits of CFTC activities, and OIG plans its audits so as not to duplicate GAO's efforts. Moreover, OIG in its audit activities identifies the goals of each audit and the methods of reaching the goals so as to minimize the requirements placed on CFTC resources.

The Office of the Inspector General (OIG) in the Commodity Futures Trading Commission (CFTC) was created in accordance with the Inspector General Act of 1978 (P.L. 95-452), as amended by the Inspector General Act Amendments of 1988 (P.L. 100-504). The OIG was established to create an independent unit to:

Accordingly, the OIG has established three programs to carry out its responsibilities: audit, investigation, and legislative and regulatory review. A summary of those programs follows.

The primary objectives of the OIG are to promote long-term efficiency and effectiveness in the administration and operation of the Commission and to protect against fraud and abuse.

The key to effectively and efficiently managing the Commodity Futures Trading Commission is information. Top level managers and decision makers require a steady stream of organized data on the effects of their policy decisions and resource allocations on the operations of the Commission. Once having made the decision to change resource levels or policy, managers must receive accurate and timely reports of the operational effects of their decision so they can determine if the change is in the direction and of the magnitude predicted. In the absence of such information, top level managers cannot adequately perform their jobs.

A number of obstacles to acquiring and transmitting the desired information to decision makers may exist in some programs. Principal among them is the Commission's apparent difficulty in many instances in tracking the progress of a particular action across organizational lines within the Commission.

A simple example is the Reparations Program prior to the installation of an OIG recommended unified, Commission-wide tracking system. Complaints are received and processed and hearings are held in the Office of Proceedings; appeals of initial decisions in reparations cases are transmitted to the Office of General Counsel where proposed Commission opinions are drafted; and appeals are decided by the Commission with the paperwork being handled by the Office of the Secretariat. Each office involved in the process had a separate tracking system without ties to the tracking systems in the offices preceding them or following them in the process. Each office treated the case as if it were brand new to the Commission when they received it. As a result, there was no provision for tracking information across organizational lines. If the Chairman wanted to know how much time was spent on the average reparations case of a particular description at each stage in the process, that information was unavailable without an extensive expenditure of manual labor.

A related problem is the difficulty the Commission has in associating resources devoted to an activity with the results of that activity. The Commission does a good job of tracking resources expended. It can determine how much staff time and material at what cost was spent in a particular activity. Some Commission organizations can even associate costs with particular projects. What a program manager may have great difficulty doing, however, is telling a decision maker that for a specific level of increase in resources, the program manager will deliver a specific level of increased output. Without this information from all programs competing for limited resources, decision makers cannot make reasoned resource allocation judgments. Decision makers are forced to rely on intuition and anecdotal evidence.

To increase the efficiency and the effectiveness of the management of CFTC programs and operations, the OIG will, in addition to the conduct of mandatory audits, concentrate its audit resources on the identification of information voids and the lack of continuity in the flow of information across organizational lines from the beginning of a process until its conclusion. The OIG will recommend the implementation of any system improvements where the benefits of implementing the changes exceed the costs.

In addition to our efforts to bring technology to bear on the information requirements of the Commission, the OIG has been following the Commission’s development of measures and systems of measurement in response to the Government Performance and Results Act (GPRA). As the Commission implements GPRA, the OIG will devote significant resources to monitoring agency performance to insure that the data is accurately gathered and that the measures reported are the best available for demonstrating program performance.

The Inspector General Act of 1978, as amended, provides that the Inspector General may receive and investigate complaints or information from the Commission's employees concerning the possible existence of an activity constituting a violation of law, rules or regulations, or mismanagement, gross waste of funds, abuse of authority or a substantial and specific danger to the public health and safety.

The OIG has to date conducted only a reactive investigative program chiefly relying on unsolicited employee complaints as the source of investigative leads. This reactive program has resulted in only a handful of investigations per year. This strategy was followed because the OIG believed that an independent regulatory agency such as CFTC without grant money or substantial contracts to award was not likely to generate a substantial investigative workload.

To insure that employee complaints could easily reach the OIG, a 24 hour hotline was established in February 1993 to receive complaints. The hotline's existence is publicized on the back cover of the agency-wide telephone book and in this semiannual report.

Because of the reactive nature of the OIG's investigative program, no investigative agenda has been established.

Because of the importance of this activity in an economic regulatory agency, the OIG reviews proposed and final CFTC regulations and legislation and selected exchange rules using five basic criteria: Whether the agency: (1) has identified specifically the problem(s) to be addressed by the proposal; (2) has defined through case study or data analysis a clear link between the proposed solution and the identified problem(s); (3) has specified clearly the means to effectively and efficiently enforce the proposal; (4) has assessed the likely efficiency and effectiveness of alternative solutions; (5) can reasonably document that the proposal will yield positive net benefits over the long term; and (6) has met the requirements of the Regulatory Flexibility Act and the Paperwork Reduction Act.

The Regulatory Flexibility Act requires the agency to evaluate the impact of its regulations on small entities. The Paperwork Reduction Act requires the agency to manage effectively and efficiently its information collections so that they are the least burdensome necessary to achieve the stipulated objectives.

Because the OIG does not initiate legislation or, generally, regulations, the OIG legislative and regulatory review program is reactive to the legislative and regulatory proposals developed by others. Accordingly, no independent legislative and regulatory review agenda has been established.

The following audit is performed on an annual basis.

In support of OMB Circular A-123 (Revised), the Inspector General will evaluate, provide technical assistance, and advise the agency head as to whether the agency's review and evaluation process was conducted in accordance with the circular's requirements.

The OIG intends to focus the balance of its audit resources on insuring that the Chairperson, the Commissioners, and program managers have timely, useful information on the progress of CFTC's programs in meeting their goals and objectives. For example, emphasis will be placed on determining whether all managerial levels engaged in a process can track the progress of their various programs. The tracking systems required in many, though not all, programs will cross formal organizational lines.

These audits will entail a cataloging and description of all of the manual and automated systems used by an organization to gather information on its use of resources, the results of the devotion of those resources (including definitions of measurements of accomplishment), and the reporting of results and associated costs to the upper level managers in the Division and to the Chairman and the Commissioners. Cataloging of these decision support systems will be followed by an assessment of whether all concerned officials are timely receiving the information they require to efficiently allocate resources to those uses which best accomplish the priorities of the Commission. If any elements are lacking in the information systems, they will be identified and improvements will be recommended if they can be implemented in a cost/beneficial manner.

If recommendations are successfully implemented, the proposed systems should allow the Chairman, the Commissioners, and concerned program managers to track progress of a particular program across organizational lines and to quickly determine the effects, if any, of changes in policy, procedure, or staffing.

The first step in accomplishing this goal will be to concentrate on documenting, and recommending the improvement and/or development of tracking systems in every program element throughout the Commission.

The OIG estimates that approximately one and one-half staff years of effort will be devoted over each of the next five years to the audits described in "Other Audits" above. The "Annual Audits" are expected to consume approximately one-half staff year per year.

The OIG is located at 1155 21st Street N.W., Washington, D.C. 20581. The telephone number is (202)418-5110. The facsimile number is (202)418-5522. The hotline number is (202)418-5510. Regular business hours are between 8:30 AM and 5:00 PM, Monday through Friday, except Federal holidays.

(October 1, 1997 - March 31, 1998)

Dollar Value

Number (Thousands)

------- --------------------- Questioned Unsupported Costs Costs

---------- -----------

A. For which no management decision

has been made by the commencement

of the reporting period............... 0 0 0

B. Which were issued during the

reporting period...................... 0 0 0

Subtotals (A + B)..................... 0 0 0

C. For which a management decision

was made during the reporting

period................................ 0 0 0

(i) dollar value of

disallowed costs................. 0 0

(ii) dollar value of

costs not disallowed............. 0 0

D. For which no management decision

has been made by the end of the

reporting period...................... 0 0 0

Dollar Value

Number (Thousands)

------ ------------

A. For which no management decision

has been made by the commencement

of the reporting period............... 0 0

B. Which were issued during the

reporting period...................... 0 0

Subtotals (A + B)..................... 0 0

C. For which a management decision

was made during the reporting

period................................ 0 0

(i) dollar value of

recommendations that

were agreed to by

management........................ 0 0

(ii) dollar value of

recommendations that

were not agreed to by

management........................ 0 0

D. For which no management decision

has been made by the end of the

reporting period...................... 0 0

April 30, 1998

Chairperson

FROM: A. Roy Lavik

Inspector General

SUBJECT: Semiannual Report of the Office of the Inspector General

Attached is the Semiannual Report of the Office of the Inspector General for the period from October 1, 1997 through March 31, 1998. This report is submitted to you in accordance with the requirements of Section 5 of the Inspector General Act of 1978, as amended.

I appreciate your continuing support of this office.

Attachment