INTERIOR:

IG expects the unexpected -- and is rarely disappointed

Amid the oil rig inspections, the embezzlement scandals and the financial audits, one case stood out in a recent semiannual report from Interior's inspector general: the arrest of a couple who had sexually abused their two children.

The Oregon residents had photographed their abuses, distributing sexual images of their 6-year-old daughter and disabled 14-year-old son to fellow pedophiles. Neither were associated with the Department of Interior, but an investigation into emails sent to an Interior employee sparked a wider case that eventually involved U.S. Immigration and Customs Enforcement, the National Center for Missing and Exploited Children and the local police department.

It is an investigation that elicits some pride in acting Inspector General Mary Kendall, who oversees an office that roots out fraud and abuse in one of the most diverse agencies in the federal government.

"It had the unpredictable consequence of changing the lives of children who were in just a horrific situation," she said in a recent interview. "Not that you can undo what has already occurred, but that kind of thing makes you think, 'Gosh, that makes me feel really good going home from work.'"

A child pornography investigation is rare for Kendall's office. But no case is routine. In the past year, her office has uncovered unsafe conditions in tribal detention centers, poor oversight of oil and gas production wells and a scheme to embezzle grant funds from the Bureau of Indian Affairs. Investigators closed 276 cases between Oct. 1, 2010, and March 31, 2011 -- and opened 244 more.

The diversity of cases is "incredible," Kendall said.

Kendall has headed the office since former IG Earl Devaney took a leave of absence to run the Recovery Accountability and Transparency Board, the main watchdog of stimulus funds. At a recent congressional hearing, Devaney announced that he would retire once the RAT Board sunsets in 2013; the Obama administration has not yet nominated a permanent replacement for his Interior spot.

With about 70,000 employees, Interior has a sprawling mission and numerous opportunities for theft, abuse and waste.

Kendall's 280 employees have to pick and choose what to pursue. But they also have the opportunity to make a difference beyond the agency's walls, as in the child pornography case.

"Fortunately, we rarely have such traumatic cases or such dramatic results," Kendall wrote in her preface to the semiannual report.

"A case such as this reminds us, however, that the impact of our efforts may well extend beyond the range of our vision. The importance of thorough, professional, independent, and objective work conducted by the Office of Inspector General cannot be overstated."

Chasing wild boar

Interior's large workforce and myriad responsibilities mean Kendall's office produces some of the more intriguing reports in the federal government. Most departments deal in programming controls and records managements; Interior has those issues, plus the criminal potential of a midsize city.

Last year, IG investigators looked into allegations that inspectors at the Bureau of Ocean Energy Management, Regulation and Enforcement were using helicopters to chase wild boar and attend lunches paid for by oil and gas companies. Most were not substantiated. But the summary of the investigation opened a window into BOEMRE inspectors' lives.

Inspectors admitted to watching television and playing video games while waiting to take helicopters to offshore drilling rigs.

"We have a TV in there, and a lot of days, they'll come down ... we're on weather hold, and we're sitting there waiting," one pilot said of inspectors. "Yeah, and we may throw in a movie, but we're just passing the time."

The Bureau of Indian Affairs is another troubled office that sparks several investigations and audits each year. Indeed, the child pornography case grew out of an investigation into emails sent to a BIA employee of lewd images.

In April, a House Oversight and Government Reform subcommittee held a hearing on American Indian job creation. Kendall used her written testimony to list the various problems within BIA: the costly fractionation of tribal land, violence in schools and millions of dollars in overbilling and waste. In one example, BIA funded a nonexistent fish hatchery for 14 years -- even after a superintendent visited the facility and saw that it was office space.

A March report on BIA detention centers also found that serious staffing shortages had led to unsafe conditions and at least one death. And although the state of the facilities was not part of the review, investigators wrote of "egregious physical conditions" that included leaky roofs, rusted toilets and at one facility, garbage bags used as shower curtains.

More problems inevitably exist. But Kendall's office can only fully investigate a small percentage of complaints.

"Pick a bureau -- we could put all our resources there and not have any downtime," said Kendall, who spent almost a decade in U.S. EPA's Office of Criminal Enforcement before moving to Interior in 1999.

"Sometimes, it just means picking the best of the best or worst of worst, if you will."

Pairing auditors, investigators

Of the office's hundreds of investigations and audits, perhaps none receive more media attention than those focused on BOEMRE.

The agency -- once known as the Minerals Management Service -- has been plagued with problems, including cozy relationships with oil and gas executives that led to colorful reports on sex and drug use.

Most recently, Kendall's office has focused on how BOEMRE could improve its oversight of offshore permitting and drilling operations in the wake of last year's BP PLC oil spill. The analysis included interviews with 140 BOEMRE employees and a review of more than 2,000 documents.

The result was an 88-page report that made a slew of recommendations including that Interior perform more unannounced inspections, improve managerial oversight and modernize the inspections process. Staffing was also an issue: When the report came out in December, BOEMRE employed 55 inspectors in the Gulf to oversee more than 3,000 production facilities.

The investigation was an example of the cooperation between investigators and auditors Kendall tries to encourage among her staff.

Between 45 and 60 employees worked on the review of then-MMS's outer continental shelf operations and "they did a phenomenal job of really kind of losing their professional identity," Kendall said.

"We have really blurred the lines between auditors and investigators," she said. "Traditionally, the two sides have felt that they are very different, but I think the difference lies more in their personalities and points-of-view."

Many IG offices separate the two: Auditors focus on financial reviews, and investigators follow up on criminal misconduct. But joint efforts can be fruitful.

Kendall recalled an MMS embezzlement case that was in progress when she joined Interior's IG office in 1999 as its deputy inspector general.

Investigators had taken the unusual step of asking an auditor to help out. The decision helped turn a case involving a few thousand dollars into one involving $400,000.

Then-MMS accountant Robin Bland had created fictitious vendors and authorized payments that ranged from about $2,000 to $39,000, using the money to buy cars, jewelry and vacations.

"It was significant in that it represented what you could do when you're willing to cross disciplines and share information and efforts," Kendall said. "And since that time, we've done more and more of that."

Learning on the fly

The office's employees are also developing expertise in areas with recurrent issues.

When the office first began investigating BOEMRE -- then MMS -- IG officials had to gain knowledge of oil and gas issues on the fly, Kendall said. Now, the office has employees in Lakewood, Colo., and New Orleans dedicated to oil and gas issues.

Last year's Gulf oil spill also inspired the office's next priority: safety inspections.

"Following the Deepwater Horizon explosion, we realized that we really hadn't for a number of years looked at the inspection and safety aspect. We had looked at the leasing, drilling and royalties part," Kendall said. "We've sort of stepped back and said, 'What other areas are there that we might be vulnerable for not having addressed?'"

Dam safety emerged as a top priority, and in the next year, Kendall's office will check the infrastructure of dams for the first time in years, starting with top-tier dams. Indeed, of the nation's 85,000 dams, more than 4,400 are susceptible to failure, according to a recent New York Times article.

"Ultimately, I believe that we do improves lives and programs and the like," Kendall said. "It's just not always easy to see readily and immediately."