1. ONRR Compliance Process
February 12, 2019

2. Disclaimer
The statements or opinions expressed in all ONRR presentations and panel discussions at the 2019 PASO-Tulsa Federal/Indian Royalty Compliance Workshop do not necessarily represent the views of ONRR or the Department of the Interior.

3. ONRR Compliance Process Improvement Initiative
Improve Compliance Business Processes
Align Sufficient and Skilled Resources
Leverage Technology - Operations Management Tool (OMT)

4. Process Improvements Increased Productivity
Eliminated unnecessary steps and duplication
Implemented status tracking and transparency
Standardized Phases, Milestones and Tasks to track status and progress
Established aggressive deadlines and refined goals
Mitigated Overlap of Compliance Activity
Organizational realignment
Centralized work management
Centralizes management of all compliance work (Audit Management, Compliance Management & STRAC)
Identifies and flags overlap properties and companies
Shows current production/royalty information
Identifies compliance targets

5. Process Improvements Established Standard Compliance Processes
Uniform workflow and procedures
Consistent file structure
Structured supervisory/management review process
Escalation process when companies do not respond
Framework for defining systemic issues
Sampling standards
Thresholds to manage work
Implemented ONRR-Wide Work Products
Internal uniformity
Consistent communication to industry

6. Process Improvements
Maximized Results and Improved Resource Management
Focus resources on areas of potential misreporting
Allocating sufficient and experienced resources for efficient conduct of audit
Continue to pursue filling vacant positions
Utilize internal experts to provide consistent guidance and training
Enhanced auditor training program

7. Process Improvements
OMT is an Integrated ONRR-Wide Tool that automates planning, execution, monitoring, measurement, and reporting on all compliance processes
Increases management visibility and insight into processes.
Simplifies processes while increasing quality.
Reduces time to perform compliance activities.
ONRR-Wide Benefits:
Work Management
Standardized Process
Transparency
ONRR-wide (and STRAC) automation
Automated work management & risk analysis
Business process metrics to drive process improvement
Optimized for multiple users
Enhanced automation to speed process closure
Mitigation of overlapped work
Consistent work products
Process standardization and sustainability
Standardized milestones
Electronic document & case file storage in one central tool
Electronic “workpapers”
Data security
Electronic file backups
Fast accumulation of data for metrics tracking
Ease of high level activity transparency
Shared view of case & status

8. OMT Status Compliance Reviews (ONRR) January 2017
Audit (ONRR - Process Only) March 2017
Compliance Reviews (STRAC) Pilot Dec 2017
Data Mining January 2018
Audit (ONRR Pilot) Summer 2019
Audit (ONRR) September 2019

9. ONRR Organization Office of Natural Resources Revenue Greg Gould
Director
Jim Steward
Deputy Director
Audit Management
Jeff Carlson
Program Director
Revenue, Reporting, &
Compliance Management
Kimbra Davis
Coordination, Enforcement, Valuation, and Appeals
John Melhoff

10. Coordination, Enforcement, Valuation & Appeals

11. Centralized Work Planning & Compliance Strategy
Data Analytics
Audits
Compliance Reviews
Data Mining
STRAC

12. Compliance Strategy Apply Insight Work Plan Take Data
OGOR | 2014 Reports
Risk Tool
Compliance Feedback
Apply Insight
Collaborate
Set Priorities
Work Plan
Data Mining
Compliance Review
Audit
STRAC

13. Revenue, Reporting, & Compliance Management
Revenue, Reporting, and Compliance Management
Kimbra Davis, Program Director
Compliance Management
Jennifer Goldblatt, Program Manager
Compliance Team B
James Smith, Manager
(303)
2 Volume Comparison Teams
2 Compliance Assurance Teams
Agreement Monitoring Team
Compliance Team A
Amanda Martinez, Manager
(303)
Reporting Analysis Team
Data Mining Exception Processing:
Conduct the first analysis of data that has passed ONRR’s reporting edits to provide reasonable assurance that company-reported royalty and production data is accurate
Compliance Reviews:
Ensure company compliance with lease terms, laws, and regulations by reviewing the components of the royalty equation to determine if they are correctly reported and paid

14. Data Mining Processes Volume Comparison Agreement Monitoring
Detects missing 2014s
Identifies and resolves high-volume discrepancies between OGOR reported sales volumes and 2014 reported sales volumes
Identifies and resolves lease and agreement misreporting
Volume Comparison
Reviews every new and revised communitization agreements (CA)
Verifies that all leases in the CA are receiving the correct amount of royalties based on the allocation schedule contained in the terms of the CA
Agreement Monitoring
Net Negative – Analyzes net negatives at the company/property/sales month/product code level to ensure proper reporting and payment
Ad hoc – Analyzes data and tests assumptions to develop future processes, such as original offsetting positive lines for negative adjustments, adjustments to closed or audited time periods, and other misreporting
Reporting Analysis

15. Compliance Review Process
Ensure that the components of the royalty equation (volume, value, allowances, royalty rate) are correctly reported and paid
Compare elements of the royalty equation to an expected value to determine if variances exist
Allow for quick resolution of errors
Provide reasonable assurance that all or part of the royalty equation is paid and reported correctly
Perform Indian Gas Major Portion, Dual Accounting and Indian Oil Major Portion CRs

16. Audit Management

17. Audit Management

18. Audit Process Closure Planning Analysis Resolution
Send Engagement Letter/Data Request
Conduct Preliminary Audit Work
Select Sample
Finalize Audit Plan
Analysis
Conduct Fieldwork
Send Data Requests
Resolution
Send Preliminary Determination
Send Order Letter
Confirm Compliance
Closure
Hold Exit Conference
Send Audit Report*
* Note: If audit terminated,
Send Closure Letter

19. Process Improvement Results
Provides structure and clear guidance leading to a more efficient process
Decreases review and processing time by using system generated work products
Minimizes time lost when transferring cases between employees
Allows audit closure where no findings exist (RSFA)
Ensures GAGAS standards (audits) are met reducing the risk of peer review findings
Improves management oversight

20. Process Improvement Results
Decreased Backlog
As of Dec 2018, 5 audit cases open more than 3 years

21. Process Improvement Results
Reduced Cycle Times
Downward trend – decreasing time by nearly a year
Expect efficiencies with OMT implementation

22. How does ONRR notify you of compliance issues?
Phone Call
Letter
/MessageWay

23. What does it mean when ONRR contacts you?
Audit
Compliance Review
Data Mining

24. How do you determine the compliance type?

25. What should you do when ONRR contacts you?
Follow all instructions within the specified time period. If you need more time, you may need to sign a tolling agreement
Refer to identifying information (such as, Case No.) when responding to communications
Contact the ONRR employee listed on the correspondence if you need assistance
You may appeal or request a hearing on the record, if applicable
Failure to follow instructions can result in Notice of Noncompliance, Civil Penalties, or other enforcement actions

26. How do you locate the due date and case number?

27. ONRR Escalation Process
Action Type
Due Date
Auditor/Analyst Extension
(Optional)
Supervisor Extension
Manager
Extension 1
Next Steps
Data Request
Maximum 30 Days (less if applicable)
N/A
One 15-Day Extension from the Due Date or Revised Due Date
One to multiple 15-Day Extensions from the Due Date or Revised Due Date
Refer to Office
of Enforcement
Data Request w/Engagement Letter
Earlier of:
Entrance Conf. Date OR
Maximum 30 Days
One 15-Day Extension from the Due Date
Preliminary Determination
Order Letter
Order Letters
30 Days from Receipt Date (60 Days for OTP)
of Enforcement IF Not Appealed
1 Multiple extensions may require approval from Program Manager.

28. What’s next?
Business Process Reengineering

29. Questions Jennifer Goldblatt 303-231-3925 jennifer.goldblatt@onrr.gov
Shawna Schimke