The U.S. Interior Department inspector general's report also found ethical lapses and fears of retaliation against whistle-blowers, The New York Times reported.
The report -- which grew out of auditor complaints that senior administration officials had blocked them from recovering money from oil companies that underpaid the government -- stopped short of accusing top officials at the Minerals Management Service of wrongdoing, the newspaper said.
But Inspector General Earl Devaney suggested that the agency was too cozy with oil companies and that internal critics had good reason to fear punishment, the Times said.
Investigators also found a "profound failure" in the agency's technology for monitoring oil and gas payments.
"It demonstrates a Band-Aid approach to holding together one of the federal government’s largest revenue-producing operations, Devaney concluded.
The auditors' claims are separate from earlier charges the agency executed flawed royalty contracts that allowed oil companies to underpay for oil pumped during the Clinton administration.
Agency Director Randall Luthi said his agency would study the report to decide how to bolster royalty and interest collection.
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