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subsidized petroleum products. The country took a decision to increase the price of diesel and
kerosene to become 110 fils per liter. The Ministry of Finance stated that it is expected that the
country would save about $500 million (KD150 million) every year as a result of the fuel price hike.
Changes in fuel prices weren’t the only reason why the fraud rate dropped but they certainly reduced
the INCENTIVE to commit fraud. However, if there were no improvements in control activities, the
OPPORTUNITY would still exist. Also, without punishment or consequences to fraudsters, the
RATIONALIZATION piece would still exist.
Case study from United States of America
Oil and gas on the high risk list since 2011: A case study on management of federal oil
and gas resources
This case study focuses on Federal oil and gas resources since they provide an important source
of energy for the United States, create jobs in the oil and gas industry, and generate billions of
dollars annually in revenues that are shared between federal, state, and tribal governments. The
Department of Interior reported collecting over $49 billion from fiscal years 2011 through 2015 from
royalties and other payments. This makes oil and gas resources one of the federal government’s
largest sources of nontax revenue.
Challenges faced by the Department of Interior
Since 2009, GAO has issued many reports on Interior’s management of federal oil and gas
resources, including its programs for verifying oil and gas production volumes and ensuring accurate
royalty collections. These reports raised questions about whether the government was collecting
all the revenue it was due and included 36 recommendations to strengthen royalty collection,
among other things. For example, in September 2008 and July 2009, GAO reported shortcomings
in Interior’s ability to ensure that royalty payment data were reasonable and complete. In addition,
in March 2010, GAO reported that Interior’s policies and practices did not provide reasonable
assurance that oil and gas produced from federal leases was being accurately measured. These
reports raised questions about whether the government was collecting all the revenue it was due
and included numerous recommendations intended to provide greater assurance that oil and gas
were accurately measured and that royalties were paid.
April 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico, resulting in 11 deaths,
serious injuries, and the largest marine oil spill in U.S. history. The Interior faced various human
capital challenges, including hiring and retaining staff and, as a result, had difficulty meeting its
responsibilities overseeing oil and gas activities on offshore federal leases. In addition, it did not
consistently and appropriately train offshore inspection and engineering staff. In response, in May
2010, the Interior first reorganized its offshore oil and gas management activities into separate
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