government performance and results...april 30, 1998 the honorable federico peña secretary u.s....

April 30, 1998

The Honorable Federico PeñaSecretaryU.S. Department of EnergyWashington, D.C. 20585

Dear Secretary Peña:

This Semiannual Report to Congress for the first half of Fiscal Year (FY) 1998 is submitted bythe Office of Inspector General for transmittal to the Congress, pursuant to the provisions of theInspector General Act of 1978.

During this reporting period, the Office of Inspector General continued to advise Headquartersand field managers of opportunities to improve the efficiency and effectiveness of the Depart-ment's management controls, with particular emphasis on coverage of issues addressed in the De-partment's Strategic Plan. We also have supported the Department's streamlining initiatives byevaluating the cost effectiveness and overall efficiency of Department programs and operations,placing special emphasis on key issue areas which have historically benefited from Office of In-spector General attention. For example, in this and prior periods, we have concentrated on re-viewing performance-based contracts, performance outcomes, cost reduction incentive programs,and performance information systems. We view these efforts as assisting the Department in im-plementing the Government Performance and Results Act (the Results Act), which requires theDepartment to establish strategic planning and performance measurement.

For the remainder of the fiscal year and in FY 1999, we plan to concentrate our efforts in the fol-lowing areas: auditing the Department’s consolidated financial statements, reviewing the De-partment’s implementation and execution of the Results Act, reviewing Department “high risk”areas such as performance-based contracting, conducting performance reviews at several majorDepartment facilities, and emphasizing complex criminal and civil investigations with the greatestpotential for prosecution and/or civil recovery. These efforts are resource-intensive and will bepursued to the extent resources permit. Our overall focus remains on assisting Department man-agement in preventing fraud, waste, and abuse; helping to ensure the quality of Department pro-grams and operations; and keeping you and the Congress fully informed.

Sincerely,

Gregory H. FriedmanActing Inspector GeneralEnclosure

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CONTENTS

Executive Summary ....................................................................................1

Some Significant Actions.............................................................................3

Section I: OIG Strategic Goals and Relevant Work Efforts ..............9

Section II: Progress in Accomplishing OIG Strategic Goals.............33

Section III: OIG Mission and Administration

Mission ......................................................................................................... 39Organization and Staffing............................................................................. 39Inspector General Priorities.......................................................................... 41Congressional Requests ................................................................................ 41

Section IV: Reports Issued

Audit Reports ................................................................................................ 45Inspection Public Reports ............................................................................. 49Reports Availability ...................................................................................... 50

Section V: Statistics

Definitions .................................................................................................... 53Office of Audit Services................................................................................. 55Office of Investigations ................................................................................. 59Office of Inspections ..................................................................................... 60

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OIG Mission Statement

The Office of Inspector General promotes the effective, efficient, and economical operation of De-partment of Energy programs through audits, inspections, investigations and other reviews.

OIG Vision Statement

We do quality work that facilitates positive change.

OIG Strategic Goals

♦ Conduct statutorily required audits of the Department, and its four business lines (Energy Resources, National Security,Environmental Quality, and Science and Technology), enabling the public to rely on DOE’s financial and managementsystems.

♦ Conduct performance reviews which promote the efficient and effective operation of the Department’s business lines.

♦ Conduct investigations to enhance the credibility of the Department and integrity of its business lines by aggressively pur-suing fraud, waste, and abuse, and reporting on those engaged in such practices.

♦ Conduct inquiries which assist the Department in fostering public confidence in the Department’s integrity, commitmentto fairness, and willingness to take corrective action.

DOE‘s Strategic Goals

♦ The Department of Energy and its partners promote secure, competitive, and environmentally responsible energy systemsthat serve the needs of the public.

♦ Support national security, promote international nuclear safety, and reduce the global danger from weapons of mass de-

struction. ♦ Aggressively clean up the environmental legacy of nuclear weapons and civilian nuclear research and development pro-

grams, minimize future waste generation, safely manage nuclear materials, and permanently dispose of the Nation’s ra-dioactive wastes.

♦ Deliver the scientific understanding and technological innovations that are critical to the success of DOE’s mission and

the Nation’s science base. ♦ The Department of Energy continuously demonstrates organizational excellence in its environment, safety and health

practices, communication and trust efforts, and its corporate management systems and approaches.

EXECUTIVE SUMMARY

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This Office of Inspector General (OIG) Semiannual Report to the Congress covers the period fromOctober l, 1997, through March 31, 1998. The report summarizes significant audit, inspection, and investi-gative accomplishments for the reporting period that facilitated Department of Energy (Department) effortsto improve management controls and ensure efficient and effective operation of its programs.

This report highlights OIG accomplishments in support of its Strategic Plan. Narratives of the Office’smost significant reports are grouped by the strategic goals against which the OIG measures its performance.

To put the OIG accomplishments for this reporting period in context, the following statistical informa-tion is provided:

♦ Audit and Inspection reports issued: 47♦ Recommendations that funds be put to better use: $356,257,856♦ Management commitment to taking corrective actions: $289,106,445♦ Criminal indictments/convictions: 8♦ Fines and recoveries: $1,612,932♦ Investigative reports to management recommending positive change: 21

SOME SIGNIFICANT ACTIONS

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This section highlights some significant OIG accomplishments during this reporting period.

Divestiture of Elk Hills Naval PetroleumReserve (NPR) to Private Owners

The OIG assisted the Department inthe largest divestiture of Federal property inthe history of the U.S. Government. TheDepartment and Occidental Petroleum Cor-poration concluded the divestiture of Federalproperty in February 1998. Occidental paid$3.65 billion for the Government’s interestin the NPR. This valuable oil field propertyhad been owned by the Federal Governmentsince President Taft created the reserve in1912. This transfer completed a privatiza-tion process that began in 1995 when theAdministration proposed selling the Elk Hillsreserve which is near Bakersfield, California.

At the request of the Department’sinvestment banker, the OIG audited the fi-nancial statements prepared by the Depart-ment to support the sale. The OIG con-cluded that management’s representation ofthe financial position of the NPT for periodsleading up to the final sale was presentedfairly, in all material respects, and that theresults of its position and cash flows fo rtheperiod preceding the sale were in conformitywith the applicable accounting policies. TheOIG was informed that its report was an in-tegral part of the documentation supportingthe sale. (WR-FC-98-02) Department Acts to Reduce UnnecessaryCosts Incurred in Disposing of Contami-nated Waste During this reporting period, the De-partment established a Center for Excellencefor low-level and mixed low-level waste.The Center will function as a“clearinghouse” for information and provide

a single point of contact for Departmentfield offices. This action was based, in part, on anOIG review which disclosed that the De-partment’s contractors did not always usethe most favorable rates available for dispos-ing of waste at a private sector treatmentfacility. The Department disposes of someof its contaminated waste at a commercialtreatment and disposal facility in Clive, Utah.Although contracts with discounted priceswere available, two of the Department’scontractors awarded subcontracts to thecommercial facility with rates that werehigher than available Departmentwide rates.This occurred because the Department didnot require contractors to use the most fa-vorable, volume-discounted rates available.As a result, the Department incurred unnec-essary costs to dispose of contaminatedwaste. During the audit, one of the contrac-tors reopened negotiations with the com-mercial facility and obtained a lower rate,which will save the Department about $3.2million over the next 3 years. (ER-B-98-05) Department Acts to Improve Occupa-tional Injuries and Illnesses Recordkeep-ing

An audit of occupational injuries andillnesses recordkeeping resulted in Depart-mental action to implement a system to bet-ter identify organizations with reportingproblems. As a result of that report, butduring this reporting period, the AssistantSecretary for Environment, Safety andHealth required each field element managerto: (1) review occupational recordkeepingand reporting processes to validate compli-ance with Departmental requirements and


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report back with the results by January1998; and (2) establish quality assurancesystems to identify potential underreportingof occupational injuries and illnesses andidentify areas for improvement. Addition-ally, a workshop was held in Aiken, SouthCarolina, on recordkeeping and reportingrequirements. (IG-0404)

Consultant Convicted of Tax Evasion

A consultant to a Department con-tractor was convicted of tax evasion. Ajoint investigation by the OIG and the U. S.Internal Revenue Service (IRS) revealedthat the consultant provided a false taxidentification number to avoid paying taxeson substantial sums earned through consult-ant work for the Department.

The U.S. Attorney’s Office, Districtof Maryland, accepted the case for prosecu-tion. The consultant pleaded guilty to taxevasion and was sentenced to 8 months con-finement, 2 years supervised probation, and200 hours community service; and was or-dered to pay a $15,000 fine. The consultantfiled amended tax returns for the years 1990,1991, 1993, and 1994 and paid $494,250 inadditional taxes and interest. The IRS hasassessed the consultant $238,632 in fraudpenalties.

As a result of OIG AdministrativeReports to Management, the Departmentdebarred the consultant and the companyfrom Government contracts andsubcontracts for 3 years. (I93OR023)

A Private Physician’s Office Manager isConvicted for Filing False Healthcare In-surance Claims

An OIG investigation confirmed anallegation that an office manager for a pri-vate physician had submitted 66 false claims

worth $69,066 to employee healthcare in-surance providers for the Department’sSandia National Laboratory (SNL). Theoffice manager submitted the claims forcosts associated with services she claimedshe and her husband received. Her husbandis a retired SNL employee. The physicianadvised, however, that he never treated theoffice manager’s husband and that he nevercharged the office manager for treatment.

The investigation disclosed that theoffice manager had a criminal history forhealth care fraud. The office manager con-fessed to submitting the false claims andsubsequently using the money for personalitems. As a result, the office managerpleaded guilty to a felony for filing false,fictitious, and fraudulent claims against theUnited States. She was sentenced to 12months and 1 day in prison and ordered topay over $69,000 in restitution. (I95AL033)

The Department Needs to Improve Inte-gration of Research and DevelopmentProjects

The Congress, independent taskforces and advisory groups have pointed outthe need for the Department to improve itsintegration of research and development(R&D) projects. In the past, R&D man-agement was carried out by different pro-gram offices with the research being per-formed both internally and externally to theDepartment.

In its review of the R&D process,the OIG found that the Department did nothave a systematic process to ensure thatR&D projects were jointly planned, budg-eted, and managed. Further, the Departmenthad developed a 5-year plan for improvingthe integration of basic energy research withother energy programs, but never imple-mented the plan. This occurred because the


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Department had not clearly established or-ganizational responsibility or authority forintegrating research across programs. Inde-pendent of the OIG review, the Secretaryhad reached similar conclusions about theneed for greater integration of the Depart-ment’s R&D programs. Consequently, theUnder Secretary has instituted a number ofactions for improving the integration ofR&D projects.

To facilitate the Under Secretary’sefforts, the OIG recommended that organ-izational authority and responsibility be de-signed to integrate R&D projects.

Department management concurredwith the recommendation and initiated cor-rective action. (IG-0417)

Grant Awardees Not Meeting ReportingRequirements

The Department awards grants tocolleges and universities, state and localgovernments, individuals, small businesses,and non-profit corporations. As of July 15,1996, the Department administered over7,400 grants valued at about $8 billion withpurposes ranging from basic research toweatherization projects.

An OIG audit identified many grant-ees who did not provide final technicaland/or financial reports. For example, at thefive procurement offices audited, the OIGprojected that the Department had not re-ceived final deliverables on 718 inactivegrants valued at about $232 million. Inother cases, officials inappropriately ex-tended performance periods so that the grantinstrument would continue to be classified asactive. The Department did not effectively

implement existing procedures or establishother monitoring procedures that ensuredgrantees fulfilled their grant obligations.

The OIG recommended that the De-partment take several actions to ensureproper accounting for grant activities, suchas awarding additional grants only whengrantees have met the terms and conditionsof prior awards.

Department management concurredwith the recommendations. (IG-0415)

Contractor is Rewarded for PerformanceThat Could Not be Validated

An OIG audit disclosed that theperformance measures included in theBechtel Nevada Corporation’s (Bechtel)contract did not conform to the Depart-ment’s requirements for performance-basedcontracting. The Nevada Operations Office(Nevada) established performance mile-stones after Bechtel had actually completedthe work. Further, many of the performancemeasures did not clearly state the requiredresults. Thus, Nevada rewarded perform-ance that could not be objectively validated.Ultimately, the problems placed at risk thesuccess of performance-based contracting atNevada.

The audit report recommended thatDepartment management establish clearly-stated and results-oriented performancemeasures before the work is performed andvalidate the results before disbursing incen-tive fees.

Department management concurredwith the recommendation. (IG-0412)

OIG STRATEGIC GOAL NO. 1: Conduct statutorily required audits of the De-partment, which has four business lines (Energy Resources, National Security, EnvironmentalQuality, and Science and Technology), enabling the public to rely on the Department of Energy’sfinancial and management systems.

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In fulfilling the requirements of the Government Management Reform Act, and the OIG5-year Strategic Plan, the OIG completed the audit of the Department’s Fiscal Year 1997Consolidated Financial Statement.

Consolidated Financial StatementsAudit

On February 26, 1998, the OIGissued its report on the "Audit of the U.S.Department of Energy's Consolidated Fi-nancial Statements for Fiscal Year 1997."The report included the OIG's opinion thatthe Department's financial statements pre-sented fairly, in all material respects, thefinancial position of the Department as ofSeptember 30, 1997, and the results of itsoperations for the year then ended. TheOIG also reported on the Department'ssystem of internal controls and on itscompliance with laws and regulations ap-plicable to financial statement audits. TheDepartment's Financial Statements re-ported net assets of $97 billion, total li-abilities of $222 billion, including envi-ronmental liabilities of $179 billion, andtotal revenues and financing sources of$25 billion. The Department's expenses of$19 billion were significantly impacted bya reduction in the Department’s unfundedenvironmental liability.

The OIG report on the system ofinternal controls identified problems in twoareas that were considered reportable in-ternal control deficiencies. First, the OIGreported that a systematic process neededto be developed and implemented to im-prove the method of estimating the envi-ronmental liability. Second, the OIG re-

ported that controls over performancemeasure information presented in theoverview to the consolidated financialstatements need to be strengthened to en-sure that information is adequately sup-ported and properly presented.

Additionally, the OIG reported anumber of other conditions relating to theDepartment's system of internal controls.The recommendations made in these re-ports were designed to strengthen internalcontrols or improve operating efficiencies.

As described in the audit opinion,the Department is faced with a number ofuncertainties. The most significant ofthese is the environmental liability esti-mate. In addition to the uncertainty inher-ent in any long-term estimate, uncertaintiesalso exist with regard to the realization ofDepartmental plans regarding funding,facility end-states, anticipated regulatoryapprovals, and projected savings fromproductivity and efficiency improvements.Similar concerns exist with regard to theresolution of various administrative andlegal proceedings to which the Departmentis a party, including issues involving theNuclear Waste Fund.

The OIG, along with the Offices ofthe Chief Financial Officer and the Assis-tant Secretary for Environmental Man-agement, had to contend with an evolvingestimate of the Department's environ-mental liabilities. The enormity and com

OIG STRATEGIC GOAL NO. 1: Conduct statutorily required audits of the De-partment, which has four business lines (Energy Resources, National Security, EnvironmentalQuality, and Science and Technology), enabling the public to rely on the Department of Energy’sfinancial and management systems.

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plexity of the liability represented a signifi-cant audit obstacle. Despite the complex-ity, the OIG completed the audit of thestatements within the statutory reportingdate of March 1, 1998, established by theGovernment Management Reform Act.

For the upcoming year, the OIGwill be faced with increasing the scope ofits work to focus on how the Department

is implementing new accounting standardsand OMB Form and Content Guidance.This increased workload and associatedresource demand continue to be of specialconcern to the OIG given the limited re-sources available to meet statutory re-quirements for financial and performanceaudits. (IG-FS-98-01)

OIG STRATEGIC GOAL NO. 2: Conduct performance reviews which promote theefficient and effective operation of the Department’s business lines.

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During this reporting period, the OIG completed the following audit and inspection reviews toconform to the goals, objectives, and performance measures outlined in the OIG’s 5-year Stra-tegic Plan:

Contractor is Rewarded for Perform-ance That Could Not Be Validated

As part of its contract reform ini-tiatives, the Department has adopted per-formance-based contracting for managingand operating its major facilities. Underthis approach, the Department evaluates acontractor’s performance against perform-ance measures that are clearly stated, re-sults-oriented, and established prior toperformance. The performance measures,which reflect the Department’s expecta-tions of the contractor, are the basis forrewarding superior contractor perform-ance through the use of incentive fees.

An OIG audit disclosed that theperformance measures included in theBechtel Nevada Corporation’s (Bechtel)contract did not conform to the Depart-ment’s requirements for performance-based contracting. The Nevada Opera-tions Office (Nevada) established perform-ance milestones after Bechtel had actuallycompleted the work. Further, many of theperformance measures did not clearly statethe required results. Thus, Nevada re-warded performance that could not be ob-jectively validated. Ultimately, the prob-lems placed at risk the success of perform-ance-based contracting at Nevada.

The audit report recommended thatDepartment management establish clearly-stated and results-oriented performancemeasures before the work is performedand validate the results before disbursingincentive fees. The report also recom-mended that Nevada review all perform-ance measure incentive fees paid and seekrecovery where the work was accom-

plished prior to setting the measure, wherethe performance measure was not met, orwhere the savings cannot be demonstrated.

Department management con-curred with both recommendations. (IG-0412)

The Department Needs to Recover$46.3 Million in Fuel Costs From NASASpace Mission

The Department’s Advanced Ra-dioisotope Power Systems Programmaintains the sole national capability andfacilities to produce radioisotope powersystems for the National Aeronautics andSpace Administration (NASA), the De-partment of Defense, and other Federalagencies. Projects are conducted withthese agencies in accordance with writtenagreements and are dependent on costsharing by the user agencies. NASA isone of the Department’s primary custom-ers for the power systems. For the past 7years, the program emphasis has been onproviding these systems for NASA’sCassini mission to Saturn, which waslaunched in early October 1997.

Departmental policy requires fullcost reimbursement for fuel used inNASA’s radioisotope power systems. AnOIG audit determined, however, that theDepartment has not recovered any fuelcosts for the Cassini mission. The OIG es-timated that the Department should havecollected about $46.3 million from NASAfor fuel used in Cassini radioisotope powersystems. The reimbursement from NASAfor the Cassini mission was to be handledin accordance with two interagency


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agreements. The first agreement set up thereimbursement requirements for all Cassiniradioisotope power systems costs exceptfuel costs. A second agreement wouldcover reimbursements for fuel costs for theCassini mission and other future NASAmissions. Although the Department andNASA completed and implemented theCassini agreement, they did not complete afuel agreement.

The Office of Nuclear Energy, Sci-ence and Technology (Office of NuclearEnergy) asked the Controller to waive thefull cost reimbursement policy for fuelprovided for NASA’s space missions. TheController denied the request and laterstated that any fuel reimbursementagreement with NASA should state thatthe final price will be the actual, fully-allocated cost determined at the time ofproduction. Because the Office of NuclearEnergy never reached any agreement withNASA, the Department did not recoverthe fuel costs from NASA for the Cassinimission.

The audit report recommended thatthe Director, Office of Nuclear Energy,establish an interagency agreement withNASA and recover the total cost of fuelprovided for the Cassini systems.

Department management con-curred with the findings and recommenda-tions, stating that negotiations with NASAwould be revitalized. (IG-0413)

Management Controls Over Field Con-tractor Employees Need Strengthening

An audit report found that the De-partment had not fully resolved previouslyreported OIG concerns regarding contrac-tor employees working at Headquarters.The Department did not effectively man-

age the use of field contractor employeesassigned to Headquarters and other Fed-eral agencies. Specifically, the Departmentwas unable to identify all contractor em-ployees assigned to the Washington, DCarea or determine the total cost of main-taining them. Some employees were pro-viding routine support and administrativeservices rather than unique program ex-pertise, and several of the Department'scontractors had assigned their employeesto work in other agencies without receiv-ing full reimbursement for their services.After performing a reconciliation of data,over 850 field contractor employees wereidentified in the Washington, DC area.

In addition, the Department did notfully implement the corrective actions itagreed to in the prior audit report. A July1996 OIG report identified weaknesses inthe Department’s monitoring of the use ofcontractor employees in Headquarters. Inresponse to the report, the Deputy Secre-tary issued a memorandum reiterating theSecretary’s concerns and requested athorough review to ensure that contractoremployees at Headquarters were not beingused inappropriately.

The OIG recommended a series ofsteps designed to strengthen earlier effortsto address this problem. The OIG recom-mended that program offices develop andmaintain a complete inventory of fieldcontractor employees assigned to theWashington, DC area (including otherFederal agencies); coordinate with the Of-fice of Procurement and Assistance Man-agement to continuously update andmaintain the database of contractor em-ployees; establish a baseline of criticalskills needed from the field; discontinueuse of contractor employees that do notprovide these critical skills; establish policy


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and procedures that require the Depart-ment to evaluate the cost of and the needfor field contractor employees before theyare assigned to the Washington, DC area;and implement existing policies and proce-dures requiring approval of contractoremployees prior to assignment.

Department management agreedwith the findings and generally concurredwith the recommendations. Departmentmanagement stated that it has been work-ing for some time to improve managementcontrols in this area and intends tostrengthen this initiative further. (IG-0414)

Grant Awardees Not Meeting Report-ing Requirements

To help meet legislatively man-dated and programmatic mission require-ments, the Department awards grants tocolleges and universities, state and localgovernments, individuals, small businesses,and non-profit corporations. As of July15, 1996, the Department administeredover 7,400 grants with purposes rangingfrom basic research to weatherizinghomes. The Department’s share of thesegrants was about $8 billion.

The Code of Federal Regulationsrequires that grants benefit the generalpublic. This is demonstrated throughtechnical and/or financial reports that eachgrantee is required to deliver. These re-ports should describe the final results ofthe grant effort and provide the Depart-ment with a basis for evaluating granteeperformance.

An OIG audit identified manygrantees that did not provide final techni-cal and/or financial reports. For example,at the five procurement offices audited, the

OIG projected that the Department hadnot received final deliverables on 718 in-active grants valued at about $232 million.In other cases, officials inappropriatelyextended performance periods so that thegrant instrument would continue to beclassified as active. The OIG found thisoccurred because the Department did noteffectively implement existing proceduresor establish other monitoring proceduresthat ensured grantees fulfilled their grantobligations.

To ensure proper accounting forgrant activities, the OIG recommendedthat the Department: (1) retain a portionof the award amount until the granteemeets all the terms and conditions of thegrant; (2) discontinue the practice ofwaiving grant deliverables to accommo-date the award close-out process; (3)award additional grants to grantees onlywhen they met the terms and conditions ofprior awards; and (4) extend grant per-formance periods only when appropriate.This recommendation is consistent withthe intent of the Government Performanceand Results Act of 1993.

Department management con-curred with the recommendations. (IG-0415)

Departmental Support Service Acquisi-tion Policy Not Being Followed

Department policy prohibits theuse of support service subcontractors hiredby management and operating contractorsto directly support Headquarters or fieldoffice employees. When support is neces-sary, program offices must use the Head-quarters procurement organization, not themanagement and operating contractors.Since August 1981, Department seniorofficials have communicated this policy in


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several memoranda. Despite this policy,however, the OIG has reported severalinstances of noncompliance with the De-partment’s policy and the extensive use ofsubcontractor employees by Departmentprogram offices.

An OIG audit disclosed that fourmajor program offices used 24 subcon-tracts awarded by Argonne National Labo-ratory (Argonne) to acquire support serv-ices in FY 1996. The Department reim-bursed Argonne about $2.9 million for theservices under 24 subcontracts during FY1996. These four offices acquired subcon-tractor services through Argonne becausethey believed that its procurement organi-zation could provide the services fasterthan the Headquarters procurement or-ganization. As a result, the Departmentmay have paid more than necessary for theservices, while many of the safeguardsagainst noncompliance with laws andregulations that the Department’s pro-curement process normally provides werelost.

The audit recommended that theprogram offices: (1) direct their programmanagers to discontinue the practice ofacquiring support services from subcon-tractors hired by Argonne; and (2) estab-lish management controls to ensure thatprogram managers acquire support serv-ices through the Department’s normal pro-curement process, and not through man-agement and operating contractors.

The program offices agreed withthe finding and recommendations and ini-tiated corrective action. (IG-0416)

The Department Needs to Improve In-tegration of Research and DevelopmentProjects

The Congress, independent taskforces, and advisory groups have pointedout the need for the Department to im-prove its integration of research and de-velopment (R&D) projects. In the past,R&D management was carried out by dif-ferent program offices with the researchbeing performed both internally and exter-nally to the Department. Because programoffices were managed independently, therewas little effort to coordinate the planningand budgeting of research across programlines. The Department spent about $6.5billion on R&D activities during FiscalYear 1997 and plans to spend about $6.7billion in Fiscal Year 1998.

In its review of the R&D process,the OIG found that the Department did nothave a systematic process to ensure thatR&D projects were jointly planned, budg-eted, and managed. Further, the Depart-ment had developed a 5-year plan for im-proving the integration of basic energy re-search with other energy programs, butnever implemented the plan. This oc-curred because the Department had notclearly established organizational respon-sibility or authority for integrating researchacross programs. Therefore, the Depart-ment may be missing opportunities to useR&D dollars more effectively. Independ-ent of the OIG review, the Secretary hadreached similar conclusions about the needfor greater integration of the Department’sR&D programs. Consequently, the Under


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Secretary has instituted a number of ac-tions for improving the integration ofR&D projects.

To facilitate the Under Secretary’sefforts, the OIG recommended that organ-izational authority and responsibility bedesigned to ensure a system is in place tointegrate R&D projects.

Department management con-curred with the recommendation and initi-ated corrective action. (IG-0417)

Substantial Annual Savings Could beAchieved by Exploring AlternativeWeapons Testing Sites

Since the 1950s, the Departmentand its predecessor agencies have per-formed weapons testing at the TonopahTest Range (Tonopah). Beginning in theearly 1990s, the number and types of testsat Tonopah declined coincident with vari-ous international events. These events in-cluded the signing of treaties such as theIntermediate Range Nuclear Force Treaty,the Strategic Arms Reduction Treaties,and the Comprehensive Test Ban Treaty.In addition, some types of tests weretransferred to other ranges. Consequently,Tonopah is left with only a portion of theDepartment's bomb testing and somework-for-others testing.

During the early 1990’s the De-partment’s Albuquerque Operations Office(Albuquerque) and Sandia National Labo-ratories (Sandia), which operate Tonopahfor the Department, explored the alterna-tive of testing elsewhere. Some of thedata gathered by Albuquerque and Sandiaindicated that testing at another rangewould be practical and economical.

An OIG audit, which followed upon the Albuquerque/Sandia studies, indi-

cated that testing could be done elsewhere,at a potential cost savings of several mil-lion dollars annually. Therefore, the OIGrecommended that Albuquerque conduct acomprehensive study of all testing alterna-tives. In addition, the OIG recommendedthat, if the study found that it was not fea-sible or economical to move the testingelsewhere, Albuquerque should reduce thecost of Tonopah to the minimum levelnecessary to support testing requirements.

Albuquerque agreed to implementthe recommendation to conduct the study,but raised technical questions regardingissues such as environmental permits,scheduling flexibility, and cost compo-nents. Albuquerque also agreed to reducethe cost of Tonopah to the minimum levelnecessary and stated that it and Sandiacontinued to actively pursue cost reduc-tions at Tonopah. (IG-0418)

Controls Over Working Capital FundNeed Strengthening

In July 1996, Congress approvedthe Department’s implementation of theWorking Capital Fund (Fund) and directedthe OIG to conduct periodic audits of theFund. Accordingly, the OIG conducted anaudit to determine if the Department es-tablished an effective system of controlsover the Fund.

The audit disclosed that Fund man-agement needs to strengthen controls inthe following areas. First, managementneeds to implement policies and proce-dures to periodically compare actual coststo estimates used as a basis of customerbillings. Second, management needs toestablish policies and procedures address-ing funding excesses and shortages, andmanagement roles, responsibilities and


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authorities. Additionally, managementneeds to simplify the process for allocatingthe costs of contract audits. Finally, fundmanagers should provide Departmentaldecision-makers information on all costsassociated with managing the fund.

Management generally concurredwith the findings and recommendationsand is planning corrective actions. (CR-B-98-01)

Audit Discloses Weaknesses in theManagement of Laboratory DirectedResearch and Development Program

Since their establishment, the De-partment’s national laboratories have beenpermitted to conduct a limited amount ofdiscretionary research activities. Over theyears, these activities have been referred tounder various names such as specialstudies, exploratory studies, discretionaryresearch and development, and currently,Laboratory Directed Research and Devel-opment (LDRD). The Department’s De-fense Programs laboratories, such as theLawrence Livermore National Laboratory(Livermore), which is operated for theDepartment under contract with the Uni-versity of California, fund LDRD pro-grams by charging their total laboratoryoperating and capital equipment budgets aflat surcharge of up to 6 percent of thecongressionally mandated ceiling.

The OIG audited the LDRD pro-gram at Livermore to determine whether itwas managed in accordance with applica-ble laws and regulations. The audit dis-closed that the Department and Livermoresystems to select and manage LDRD proj-ects were in general compliance with re-

quirements specified in Department Or-ders. However, actions taken in FiscalYears 1996 and 1997 by the Departmentand the management and operating con-tractor had, in effect, increased the fundingfor discretionary research work conductedat Livermore by $19 million annually. TheDepartment’s research programs absorbedthose expenses.

This increased level of discretion-ary research was primarily obtained at theexpense of Department directed research.The audit identified several factors for theincreased level of funding for discretionaryresearch. For example, the Departmentdirected that its laboratories not add acharge for general and administrative ex-penses to Fiscal Year 1997 LDRD proj-ects. The Department also permitted boththe requesting and performing laboratoryto assess LDRD charges on intra-Departmental requisition projects. This, ineffect, doubled the LDRD assessment onthese efforts. In addition, the Departmentallowed the contractor to fund a supple-mentary discretionary research program atLivermore. Finally, Congress enactedlegislation that permitted the laboratoriesto use a portion of license and royalty feesfor discretionary research.

The OIG recommended that De-partment management analyze the impactof the actions discussed in the OIG reportand determine if the level of discretionaryresearch at Livermore and other DefensePrograms laboratories is appropriate andpermits the Department to accomplish itscongressionally-mandated mission.

Department management con-curred with the audit recommendation.(CR-B-98-02)


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The Department Needs to Establish anEffective Plan for Disposing of SurplusContaminated Facilities

In 1988, the Department changedthe mission at the Savannah River Site(Site) from producing nuclear materials tomanaging the waste products generated.As a result, many site facilities becamesurplus to the Department’s needs. West-inghouse Savannah River Company(Westinghouse) manages the Department’soperations at the Site. In Fiscal Year1996, the Site had 162 surplus facilitiesand anticipated that 118 more would be-come surplus within the next 5 years. TheOIG conducted an audit to determinewhether the Savannah River OperationsOffice (Operations Office) and Westing-house had economically and promptly de-activated, decontaminated, and disposed ofsurplus facilities. Until facilities are dis-posed of, they require surveillance andmaintenance to manage safety and healthrisks.

Westinghouse had disposed of onlyone facility and did not completely deacti-vate or decontaminate any of the 162 fa-cilities identified as surplus at the Site inFY 1996. This occurred because the Op-erations Office did not compile a Site-widelist to identify the activities which werenecessary prior to the disposal of surplusfacilities, establish priorities, or providesufficient funding for the deactivation, de-contamination, and disposal of surplusfacilities. As a result, the Department in-curred unnecessary costs for the surveil-lance and maintenance of surplus facilities.The Department could have avoided an-nual surveillance and maintenance costs ofabout $1.3 million by spending $1.2 mil-lion to deactivate the P-Reactor process-

water storage tanks. The Operations Of-fice could have funded the project out ofits unobligated FY 1996 operating fundsthat were returned to Headquarters at theend of the fiscal year.

The OIG recommended that De-partment management: (l) compile andmaintain a list of all deactivation and de-contamination activities which are neces-sary prior to the disposal of surplus facili-ties at the Site; (2) establish Site-wide pri-orities for the deactivation, decontamina-tion, and disposal of surplus facilities atthe Site in accordance with DepartmentalOrder 5820.2A; and (3) annually requestfrom the Department sufficient funding toimplement an effective deactivation, de-contamination and disposal plan.

Department management con-curred with the finding and recommenda-tion and initiated corrective action. (ER-B-98-01)

Audit Finds Construction of New Labo-ratories May Not be Needed

The Department’s EnvironmentalMonitoring and Health Physics Laborato-ries at the Savannah River Site (Site) areover 40 years old and are approaching theend of their useful lives. The managementand operating contractor, WestinghouseSavannah River Company (Westinghouse),and the Savannah River Operations Office(Operations Office) proposed to build twonew facilities to replace them.

Department and Federal regula-tions require that the Department examineall options before acquiring new facilitiesto ensure that funds and existing facilitiesare used effectively. An OIG audit de-termined that alternatives to on-site con-struction were not fully evaluated beforeWestinghouse proposed and the Opera-


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tions Office approved construction of newenvironmental monitoring and physicslaboratories. Specifically, Westinghousedid not perform life-cycle cost analyses orperiodically reassess construction projectsto determine the most cost-effective alter-native, as required by Department andFederal regulations. Despite these re-quirements, the Operations Office ap-proved plans to construct these laborato-ries without ensuring that Westinghousehad properly performed the requiredanalyses. As a result, the Departmentplanned to spend at least $30 million tobuild laboratories that may not be needed.Based on current cost and pricing data, theOIG determined that the Departmentcould save $25 million over the life of theproject by contracting the environmentalmonitoring activities to outside vendors.

The OIG recommended that theDepartment: (1) direct Westinghouse toperform cost and benefit analyses to de-termine whether constructing the new en-vironmental monitoring and health physicslaboratories is more beneficial than con-tracting out those activities; and (2) de-velop procedures to ensure that futurevalidation of construction projects at theSavannah River Site include a thoroughevaluation of all viable alternatives.

Management did not concur withRecommendation l, but did concur withRecommendation 2. Management is re-considering its position on Recommenda-tion 1 and a decision is pending. (ER-B-98-02)

Audit Finds Acquisition of New Facilityto be Unnecessary and Not Cost Effec-tive

In 1991, Lockheed Martin EnergySystems (Energy Systems) identified theneed for new bioassay and environmentalsampling laboratories to meet increasingworkload and staffing requirements. En-ergy Systems proposed, and the Depart-ment approved, a solicitation for a privatecompany to construct a facility, UnionValley Sample Preparation Facility(UVSPF), which Energy Systems wouldlease back on behalf of the Department.

The OIG audited the cost effec-tiveness and necessity of acquiring the fa-cility. The audit disclosed that EnergySystems did not base the UVSPF acquisi-tion on valid mission requirements. En-ergy Systems did not follow Departmentalprocedures in planning and developing thelease, and the Department approved thelease without adequate justification. As aresult, the Department planned to spendbetween $4 million and $18.9 million tolease a facility that was not necessary.Contrary to Federal regulations, EnergySystems restricted the facility’s location toan approximate 16-square-mile area with-out establishing a programmatic need forthe restriction. This restriction gave anEnergy Systems’ subcontractor a competi-tive advantage over other potential biddersand may have caused the Department topay more than necessary for the facility.


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The OIG recommended that De-partment management: (1) direct EnergySystems to follow Department policies andprocedures and base acquisitions of prop-erty on valid mission requirements and ananalysis of all viable alternatives; (2) directproject managers to follow Departmentorders and require approvals of construc-tion projects and property leases to include(a) verification that the projects are essen-tial to meet mission requirements and (b)an analysis of all viable alternatives; (3)direct Energy Systems to give the required365-day notice and discontinue the lease;and (4) direct Energy Systems to discon-tinue the practice of restricting the locationof facilities acquired or leased on the De-partment’s behalf unless the restrictionsare justified to meet mission requirements.

Department management did notconcur with the recommendation to directEnergy Systems to discontinue the lease,but concurred with the other recommen-dations. The OIG has asked managementto reconsider its position and a decision ispending. (ER-B-98-03)

Audit Discloses Violations in the Use ofGovernment-Funded Agreements

The Defense Contract AuditAgency advised the OIG that several Prin-ceton employees, including two principalinvestigators, also worked for a commer-cial business. These two principal investi-gators were responsible for 28 Govern-ment-funded agreements at Princeton be-tween October 1, 1986, and December 31,1996. Consequently, the OIG initiated anaudit of the allowability of $19 million incosts claimed for 20 of the 28 cost reim-bursement agreements assigned to the twoprincipal investigators.

The OIG identified the followingconditions that called into question theamount of labor effort and expendituresincurred on the 20 Princeton agreements:

• The OIG could not distinguish be-tween work performed by Princetonemployees and work performed by thecommercial business. Both Princetonand the commercial business had someagreements, in the same specializedfield, funded by the same Federalagencies and procurement offices. Thedistinction between work at Princetonand the commercial business was fur-ther obscured because one individualworked on the research effort and su-pervised staff at both Princeton and thecommercial business.

• Extensive violations of Princeton’spolicy on outside paid professional ac-tivities had occurred. At various timesduring the audited agreements, theprincipal investigators and 14 otherPrinceton professional employees as-signed to the agreements worked for acommercial business.

• Princeton’s policy on nepotism hadbeen violated. Princeton’s policy pro-hibited employees from initiating orparticipating in decisions that resultedin a direct benefit to those related byblood or marriage. Princeton claimedsalary and wage costs of $16,960 foran hourly employee who was also amember of the principal investigator’simmediate family.

• Princeton’s support for direct laboreffort was not adequate because Prin-


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ceton did not always have timely after-the-fact activity reports.

The OIG recommended that De-

partment management furnish the auditresults to the contracting officers respon-sible for the agreements audited and en-sure that Princeton implements correctiveactions to address the conditions identifiedin the audit. The OIG also recommendedthat the contracting officers recover coststhat they determine to be unallowable.Additionally, the OIG recommended thatDepartment management alert procure-ment offices responsible for the agree-ments audited that some individuals werebeing funded on a full-time or nearly full-time basis at more than one entity.

Department management agreed toensure that Princeton University imple-ments corrective actions to address theconditions identified in this report. Inaddition, Department management agreedto alert the responsible procurement of-fices. (ER-B-98-04)

Department Incurs Unnecessary Costsin Disposing of Contaminated Waste

The Department is responsible forprotecting human health and the environ-ment by providing an effective and effi-cient system that treats, stores, and dis-poses of contaminated waste at Depart-ment sites across the nation. The Depart-ment disposes of some of its contaminatedwaste at Envirocare of Utah, Inc.(Envirocare), a commercial treatment anddisposal facility in Clive, Utah. The OIGperformed an audit to determine whetherthe Department and its contractors wereusing the most favorable rates available fordisposing of waste at Envirocare.

The Department’s contractors didnot always use the most favorable ratesavailable. Although volume discountswere available under Departmentwidecontracts, two of the Department’s con-tractors awarded subcontracts to Enviro-care with rates that were higher than theDepartmentwide rates. This occurred be-cause the Department did not require con-tractors to use the most favorable ratesavailable. As a result, the Department in-curred unnecessary costs to dispose ofcontaminated waste. During the audit, oneof the contractors reopened negotiationswith Envirocare and obtained a lower rate,thereby saving the Department about $3.2million over the next 3 years.

During the audit, several legal is-sues arose involving the owner of Enviro-care and a former state official in the UtahDepartment of Environmental Quality,Division of Radiation Control. In re-sponse to these issues, the Department andEnvirocare signed an agreement wherebythe owner of Envirocare resigned and willhave no role in the management and con-trol of the company until the legal issuesare resolved.

The OIG recommended that theDeputy Assistant Secretary for Environ-mental Restoration distribute a list ofavailable Departmentwide contracts andrates and direct field activities to requireall contractors to use the most favorablerates available to the Department fortreating and disposing of waste.

Department management con-curred with the finding and recommenda-tion and initiated appropriate correctiveaction. Such action included establishinga Center for Excellence for low-level andmixed low-level waste, which will functionas a “clearinghouse” for information and


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provide a single point of contact for De-partment field offices. (ER-B-98-05)

Alternative Radioactive Liquid WasteTreatment Operations Could Result inSubstantial Savings

The University of California oper-ates the Los Alamos National Laboratory(Los Alamos) for the Department. AnOIG audit disclosed that Los Alamos’costs to treat radioactive liquid wasteswere significantly higher than similar pri-vate sector costs. This situation occurredbecause Los Alamos did not perform acomplete analysis of privatization or pre-pare a “make-or-buy” plan for its treat-ment operations, although a “make-or-buy” plan requirement was incorporatedinto the contract in 1996. As a result, LosAlamos may be spending $2.15 millionmore than necessary each year and couldneedlessly spend $10.75 million over thenext 5 years to treat its radioactive liquidwaste. Additionally, Los Alamos pro-posed to spend an estimated $13 million toconstruct a new processing facility, replac-ing the 30-plus-year-old treatment facility.

The OIG recommended that De-partment management: (1) require LosAlamos to prepare a “make or buy” planfor its radioactive liquid waste treatmentoperations; (2) review the plan for ap-proval; and (3) direct Los Alamos to selectthe most cost effective method of opera-tions while also considering other factorssuch as mission support, reliability, andlong-term program needs.

Department management con-curred with the recommendations andagreed to take corrective actions to im-prove the cost effectiveness of the treat-

ment of radioactive liquid waste. (WR-B-98-01)

Deficiencies in Unsolicited ProposalReview Process

The OIG received an allegationthat actions by a senior Department officialmay have compromised the Department’sunsolicited proposal review process. Al-legedly, these actions occurred during thereview of an unsolicited proposal fromChevron for the management and opera-tion of the Department’s Elk Hills NavalPetroleum Reserve (Elk Hills).

The OIG initiated a review to de-termine whether the Department handledthe review of the Chevron unsolicited pro-posal according to the requirements ofDOE Order 4210.9A, “UNSOLICITEDPROPOSALS.” The inspection found thatthe Department’s review of the Chevronunsolicited proposal proceeded accordingto the requirements of the Order. How-ever, the inspection found administrativedeficiencies in the processing of requireddocuments during the review process.Specifically, none of the officials involvedin the proposal process executed a re-quired conflict of interest form. Addi-tionally, two senior Department officialsinvolved in the review process did notexecute the required procurement integrityform. Further, the inspection disclosedthat timely written approval from the Di-rector, Office of Clearance and Support,was not obtained once the proposal washeld beyond the 6-month time framespecified in the Order. As a result, De-partment negotiators requested retroactiveapproval to hold the unsolicited proposalfor an extended period.


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The OIG recommended that theDepartment take the following action: (1)revise DOE Order 4210.9A, to include anexample of a Conflict of Interest form, andtake appropriate actions to ensure that thisform and the Procurement Integrity Certi-fication form are completed at the appro-priate times during future unsolicited pro-posal reviews; (2) revise DOE Order4210.9A to require written approval by theDirector of the Office of Clearance andSupport to stop an unsolicited proposalevaluation and to begin direct negotiationswith the submitter of the proposal;

and (3) ensure that advanced written ap-proval, as specified in DOE Order4210.9A, is provided by the Director ofthe Office of Clearance and Support,should the need arise to hold future unso-licited proposals beyond the allowed 6-month time frame.

Department management con-curred with the OIG recommendations andtook corrective actions to improve the un-solicited proposal review process. (INS-O-98-01)

OIG STRATEGIC GOAL NO. 3: Conduct investigations to enhance the credibilityof the Department and integrity of its business lines by aggressively pursuing fraud, waste, andabuse, and reporting on those engaged in such practices.

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During this reporting period, the OIG completed the following investigative cases to conform tothe goals, objectives, and performance measures outlined in the OIG’s 5-year Strategic Plan.

Investigation Leads to Conviction ofSubcontractor Employees and Identi-fies Deficiencies in Property Account-ability System

While reviewing invoices at ascrap dealer, OIG agents discovered thattwo supervisory employees of an OakRidge Operations Office subcontractor,performing a demolition project at theDepartment’s K-25 facility in Oak Ridge,had stolen 10 and one-half tons of copper.

The investigation determined thatthe employees sold one load of copper toa metals dealer for over $25,000 in cashand attempted to sell a second load ofcopper valued at $19,755. OIG agentsintervened, and recovered stolen coppervalued at over $44,000, along with the$25,000 in cash that the metals dealerpaid for the first load of stolen copper.

As a result of the investigation,the U.S. Attorney’s Office, Eastern Dis-trict of Tennessee, accepted the case forprosecution. Both employees pleadedguilty to one count of conspiracy. Oneemployee was sentenced to 8 months in-carceration and 3 years supervised proba-tion, and was ordered to pay $1,181 inrestitution. The second employee wassentenced to 3 years supervised probationand ordered to pay $4,591 in restitution.

The investigation also identifieddeficiencies in the Department’s contrac-tor safeguards and property accountabilitysystem that contributed to the theft. As aresult of OIG Administrative Reports toManagement, the Department took sev-eral corrective actions for positivechange. The contractor’s management

reviewed existing material control proce-dures and implemented procedures toprevent further thefts. The subcontractorpaid the Department $19,000 in costs in-curred as a result of the thefts. The sub-contractor dismissed both employees.The Department debarred the two em-ployees from Government contracting for3 years. (I95OR029)

A Department Contractor Employee atthe Los Alamos National LaboratorySubmits False Small Purchase Reim-bursement Claims

The OIG received an allegationfrom a Department contractor that a LosAlamos National Laboratory (LANL)contractor employee submitted fraudulentSmall Purchase Reimbursement (SPR)claims to LANL. The SPR program al-lows LANL employees to use personalfunds to purchase work-related materialscosting $500 or less. Employees maysubmit a SPR claim with the purchase re-ceipt and receive prompt reimbursementfrom LANL.

The contractor’s Internal Evalua-tion Branch assisted the OIG during theinvestigation. The investigation deter-mined that the employee submitted 69false SPR claims to LANL and receivedfull reimbursement. The employee hadfabricated the invoices and submittedthem to LANL. In addition to the falseinvoices, the employee submitted onefalse travel voucher to LANL. The OIGreferred the investigation to the U.S. At-torney’s Office, District of New Mexico,where it was accepted for prosecution.


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Following a guilty plea of two counts ofsubmitting false claims, the employee wassentenced to 5 years probation and 6months electronic monitoring, andordered to pay $34,342 in restitution.

As a result of an OIG Administra-tive Report to Management, the Depart-ment’s contractor dismissed the em-ployee. (I96AL010)

Department Contractor EmployeeGains Personal Financial Benefit andAccepts Gratuities

Following a referral from Depart-ment management, an OIG investigationdisclosed that a contractor employee atthe Brookhaven National Laboratory: (1)used images taken with Government-owned high tech photography equipmentfor personal benefit; (2) failed to reportoutside business activities; and (3) ac-cepted gratuities from laboratory vendors.

The investigation determined thatthe employee used these images for per-sonal financial gain by submitting them toa photo stockhouse which maintains animage bank for magazines. The employeereceived a commission whenever a photowas used. He also entered and wonphotography competitions using the im-ages. The investigation also determinedthat the employee had not reported any ofhis outside business activities as requiredby the contractor’s internal policy. Theinvestigation further determined that hehad accepted gifts with nominal valuefrom two vendors doing business with thelaboratory. The investigation did notdisclose favoritism by the employee to-wards these vendors.

In response to an OIG Adminis-trative Report to Management, contractor

management took the following actions:(1) the employee received a written letterof reprimand in which the contractor re-quired the employee to reimburse thelaboratory $7,500 and attend special eth-ics training; and (2) the contractor identi-fied a need to strengthen the laboratory'sethics program. (I97PT004)

Los Alamos National Laboratory Ex-ports Software to Russia and ChinaWithout Required Export Licenses

The U.S. Department of Com-merce, Office of Export Enforcement,informed the OIG that the Department’sLos Alamos National Laboratory (LANL)violated regulations by exporting softwareto Russia and China without obtaining theproper export licenses from the U.S. De-partment of Commerce.

Working jointly with the Office ofExport Enforcement, the OIG determinedthat LANL signed a noncommercial re-search software agreement with four dif-ferent research institutes in Russia andChina. Subsequent to signing the agree-ment, the software was electronicallytransmitted to each institution via the In-ternet.

According to the Office of ExportEnforcement, regardless of the circum-stances, U.S. Export AdministrationRegulations and licensing requirementsmust be followed when sending sensitivesoftware to certain countries. LANL didhave a general license that allowed it toexport the software to certain approvedcountries, but not to Russia and China.The investigation showed that requiredlicenses had not been obtained prior to thesoftware transfer.


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An OIG Administrative Report toManagement recommended that theManager, Albuquerque Operations Office,take appropriate action regarding the im-proper export of the software. The OIGalso recommended that Department man-agement implement procedures to preventfuture irregular exports. The Department’s AlbuquerqueOperations Office manager took correc-tive action. LANL implemented formal-ized export procedures for software. TheDirector, LANL, issued a policy state-ment to all employees reaffirming thecontractor’s commitment to strict adher-ence with all U.S. export control laws andregulations. (I98AL001)

Government-Owned Computers BeingUsed to Search for Pornography(Including Child Pornography) on theInternet

As a result of referrals from De-partment and contractor management, theOIG completed four investigations, withthe assistance of the Department andcontractor computer security staff, whichsubstantiated that three Department em-ployees and one contractor employeeused Government-owned computers toaccess and view pornographic images onthe Internet.

One investigation determined thata Department employee at the Albuquer-que Operations Office accessed multipleInternet sites containing sexually explicitimages. As a result of an OIG Adminis-trative Report to Management, the De-partment took action to suspend the em-ployee.

A second investigation determinedthat a Department employee at the Los

Alamos Area Office intentionally accessedInternet sites containing pornographicmaterial. As a result of an OIG Adminis-trative Report to Management, the De-partment took action to suspend the em-ployee.

A third investigation determinedthat a Department employee at the RockyFlats Environmental Technology Sitemisused a Government-owned computerby accessing pornographic websites anddownloading files to his Governmentcomputer. As a result of an OIG Admin-istrative Report to Management, the De-partment took corrective action. Theemployee was suspended.

A fourth investigation involved acontractor employee at the Department’sSandia National Laboratory. The em-ployee admitted that he intentionally ac-cessed pornographic sites on the Internetusing his Government-assigned computer.The employee also admitted that hesearched for pornographic images of pre-teens, which he defined as ages 11-13.As a result of an OIG Administrative Re-port to Management, Department con-tractor management took corrective ac-tion and terminated the employee.(I98AL004, I98AL002, I98DN002,I97AL010)

Department Employee Falsifies Infor-mation on a Bid Quotation Sheet

An OIG investigation revealedthat a Department employee falsified a“Credit Card Telephone Quotation Work-sheet” to procure $20,000 in trainingservices. The worksheet outlines assortedadministrative data about a credit cardpurchase, including appropriation and


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funding codes, a description of services,and vendor quotations.

The investigation disclosed thatthe employee provided false informationto the person who handled the adminis-trative requirements associated with us-ing the credit card. Specifically, theemployee reported having obtainedquotes from two companies to providetraining services to the Department.Two quotes are required under procure-ment regulations. The investigation dis-closed, however, that one company hadnot provided a bid as the employeeclaimed. The employee obtained a quotefrom only one company and subse-quently signed the inaccurate quotationworksheet.

This matter was declined forcriminal prosecution in favor of adminis-trative remedies. In response to an OIGAdministrative Report to Management,Department management removed theemployee as an approving employee forcredit card purchases. (I96HQ012)

A Private Physician’s Office Manageris Convicted of Submitting FalseHealth Care Claims

The OIG received an allegationfrom a Department contractor that falseclaims were submitted to employee healthcare insurance providers for the Depart-ment’s Sandia National Laboratory(SNL). The OIG initiated an investiga-tion and substantiated the allegation. Theoffice manager for a private physiciansubmitted 66 false claims worth $69,066to two insurance companies for costs as-sociated with services she claimed she andher husband received. Her husband is aretired SNL employee.

The physician advised that henever treated the office manager’s hus-band and that he never charged the officemanager for treatment. A review of theclaims showed that the insurance pay-ments were mailed directly to the patients-- the office manager and her husband --since costs for the services were claimedto have been already paid by the patients.The investigation disclosed that the officemanager had a criminal history for relatedhealth care fraud. The office managerconfessed to submitting the false claimsand subsequently using the money forpersonal items. She informed investiga-tors that her husband was not aware shesubmitted the claims. The OIG referred the investigationto the U.S. Attorney’s Office, District ofNevada, where it was accepted for prose-cution. The office manager pleaded guiltyto a felony for filing false, fictitious, andfraudulent claims against the UnitedStates. She was sentenced to 12 monthsand 1 day in prison; ordered to pay$69,066 in restitution; and, upon comple-tion of her prison term, undergo 3 yearsof supervised release. (I95AL033)

Consultant is Convicted of Tax Eva-sion

The OIG received informationfrom the Oak Ridge Operations Officethat a consultant to a Department con-tractor may have falsely billed the con-tractor. The investigation revealed thatthe consultant provided a false tax identi-fication number to avoid paying taxes onsubstantial sums earned through consult-ant work for the Department.

The OIG contacted the IRS and,as a result of a joint OIG and IRS investi-


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gation, the U.S. Attorney’s Office, Dis-trict of Maryland, accepted the case forprosecution. The consultant pleadedguilty to tax evasion and was sentenced to8 months confinement, 2 years supervisedprobation, and 200 hours of communityservice; and was ordered to pay a $15,000fine. The consultant filed

amended tax returns for the years 1990,1991, 1993, and 1994 and paid $494,250in additional taxes and interest. The IRShas assessed the consultant $238,632 infraud penalties.

As a result of OIG AdministrativeReports to Management, the Departmentdebarred the consultant and the companyfrom Government contracts and subcon-tracts for 3 years, and agreed to reviewthe actions of the consultant to determinethe consultant’s eligibility or continuedeligibility for a Department security clear-ance. (I93OR023)

OIG STRATEGIC GOAL NO. 4: Conduct inquiries which assist the Department infostering public confidence in the Department’s integrity, commitment to fairness, and willing-ness to take corrective action.

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OIG complaints referred to DOE management and other Government agencies, and the review ofexisting and proposed Department legislation and regulations conform to the goals, objectives,and performance measures outlined in the OIG 5-Year Strategic Plan.

Management Referral System

The Office of Inspections managesand operates the OIG Management Refer-ral System. Under this system, selectedmatters received through the OIG Hotlineor other sources are referred to the appro-priate Department manager or other Gov-ernment agency for review and appropriateaction. The OIG referred 121 complaintsto Department management and otherGovernment agencies during the reportingperiod. The OIG asked Department man-agement to respond concerning the actionstaken on 46 of these complaints. Com-plaints referred to Department manage-ment may include such matters as time andattendance abuse, misuse of Governmentvehicles and equipment, violations of es-tablished policy, and standards of conductviolations. The following are examples ofthe results of referrals to Department man-agement during this reporting period.

• An allegation about a possible theft ofthe proceeds from three sales of scrapmetal removed from a DOE site raisedconcerns about possible systemicproblems with site scrap disposal. Amanagement inquiry determined thatthe theft did not occur; however,shortcomings in site policies and pro-cedures and their dissemination wereidentified, and corrective actions weretaken.

• A DOE employee was counseled as aresult of inappropriate use of a Gov-ernment computer.

• Management at a DOE site took action

to improve purchase card policies andprocedures as a result of weaknessesidentified by an inquiry into allegedmisuse of the cards.

• Management advised that a contractor

employee’s comments about the man-agement of high-level waste at a DOEsite will be considered as part of thedevelopment of an environmental im-pact statement.

Contractor Employee Reprisal Com-plaints

The Office of Inspections con-ducted a number of inquiries into contrac-tor employee complaints filed pursuant to10 C.F.R. Part 708. These complaintsconcerned allegations that employees dis-closed fraud, waste, abuse, mismanage-ment, or health and safety issue informa-tion or engaged in other activity protectedby Part 708 and that the disclosure(s)contributed to adverse action by contrac-tor management against the employees.Inquiries were also conducted into allega-tions that the Department’s personnel se-curity program was used to retaliateagainst employees. Fourteen cases werecompleted either through dismissal, set-tlement by the parties, or issuance of Re-ports of Inquiry. In addition, as a stream-lining initiative, the Office offered the par-ties to twelve Part 708 complaints an op-portunity to by-pass the inquiry process

OIG STRATEGIC GOAL NO. 4: Conduct inquiries which assist the Department infostering public confidence in the Department’s integrity, commitment to fairness, and willing-ness to take corrective action.

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and go directly to a hearing before the De-partment’s Office of Hearings and Ap-peals. The parties in two of these com-plaints availed themselves of the oppor-tunity to go directly to a hearing.

The following is an example of theresults of the Office’s reprisal inquiries:

A complaint was received from acontractor employee who alleged that hemade disclosures regarding improper stor-age of excess property to his managementand the OIG. The complainant allegedthat as a result of making these disclo-sures, he was reassigned to a less desirablejob and subsequently terminated. Thecontractor asserted that the employee wasreassigned due to organizational require-ments, and terminated because he hadfalsified timecard information and subse-quently lied to management. The OIG in-quiry concluded that the employee had notmade a disclosure nor engaged in activitiesprotected by Part 708, and that the

contractor was able to show by clear andconvincing evidence that it would havetaken the actions against the complainantregardless of whether there had been aprotected disclosure. The report recom-mended that the employee’s request forrelief pursuant to Part 708 be denied.

Legislative Review

In accordance with the InspectorGeneral Act of 1978, the OIG is requiredto review existing and proposed legisla-tion and regulations relating to Depart-ment programs and operations, and tocomment on the impact which they mayhave on economical and efficient opera-tions of the Department. During this re-porting period, the OIG coordinated andreviewed 13 legislative and regulatoryitems. The OIG also participated with theIG community in commenting on draftlegislation to protect intelligence agencyemployees who report concerns involvingclassified information.

SUMMARY OF PROGRESS IN ACCOMPLISHING OIGSTRATEGIC GOALS

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OIG Strategic Planning Accomplish-ments

The planning of OIG work sup-ports the goals, objectives, and strategiesoutlined in the OIG’s 5-year StrategicPlan. The OIG organizes and prioritizesits workload to ensure that audits, inspec-tions, and investigations help the Depart-ment in enhancing the overall performanceof its core business lines (Energy Re-sources, National Security, EnvironmentalQuality, and Science and Technology).Several key external factors affect theOIG’s achievement of its goals and objec-tives. These factors have significant im-pact on assigning workload, formulatingbudgets, assessing organizational struc-ture, evaluating procedures and establish-ing priorities. These factors include nu-merous mandatory, statutory, and regula-tory requirements, and taskings from ex-ternal sources.

During this Semiannual reportingperiod, the OIG worked diligently towardachieving its strategic goals and objectives.A summary of the OIG’s progress in ac-complishing its strategic goals follows.

The Office of Audit Services(OAS) set a goal to conduct statutorilyrequired audits of the Department to en-able the public to rely on DOE’s financialand management systems. The objectivesin meeting that goal are: (1) to completeaudits required by the Chief Financial Offi-cers (CFO) Act and the Government Man-agement Reform Act (GMRA), and otheraudits by established due dates to enablethe Department to improve its fiscal in-tegrity; and (2) to identify and report sig-nificant systems’ deficiencies, enabling theDepartment to take corrective action and

demonstrate improved stewardship ofpublic resources.

The performance measures defin-ing the achievement of the objectives are:(1) to complete required financial state-ment audits by due dates designated inlaw; (2) to opine annually on the Depart-ment’s consolidated financial statements,system of internal controls, and compli-ance with laws and regulations; (3) to co-ordinate with Department managementand other interested parties to identify andprioritize audit opportunities each fiscalyear; (4) to complete at least 60 percent ofaudits planned for the year and replacethose audits not started with more signifi-cant audits which identify time-sensitiveissues needing review; (5) to achieve an 85percent acceptance rate on recommenda-tions made in audit reports, thereby allow-ing DOE managers to take corrective, costsaving, or recoupment action(s); and (6) todevote at least 10 percent of available re-sources to subsequent reviews of areas todetermine if the Department’s commitmentto the acceptance of previous recommen-dations has resulted in implementation ofcorrective actions.

OAS set another goal of conduct-ing performance reviews which promotethe efficient and effective operation of theDepartment’s business lines. The objec-tive was to focus performance reviews onthose issues and programs having thegreatest potential for the protection or re-covery of public resources.

The performance measures defin-ing the achievement of the objective are:(1) to complete reviews of key programs,identifying areas with weaknesses orproblems where resources are at risk; (2)to recommend actions for the Departmentto diminish or alleviate the risks identified


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in these reviews; and (3) to achieve an 85percent acceptance rate on recommenda-tions made in performance review reports,thereby allowing Department managers totake corrective, cost saving, recoupmentor disciplinary action(s).

During the first half of the year,OAS completed the audit of the consoli-dated statements of the Department ontime, and rendered an opinion on the fi-nancial statements, the system of internalcontrols, and compliance with laws andregulations. With half of the year gone,OAS is meeting its objectives in audit re-ports issued and in recommendations ac-cepted.

The Office of Investigations set agoal to conduct investigations to enhancethe credibility of the Department and theintegrity of its business lines by aggres-sively pursuing fraud, waste, and abuse,and reporting on those engaged in suchpractices. The objectives in meeting thatgoal were: (1) to focus investigations onallegations of serious violations of Federallaw to permit successful prosecutions thatmaximize the recovery of public resourcesand the deterrence of future wrongdoing;and (2) to increase inter-agency coopera-tive efforts to combat fraud, waste, andabuse.

The performance measures defin-ing the achievement of the objectiveswere: (1) to gain acceptance of 75 percentof cases presented for prosecution, thuspermitting prosecutors to pursue maxi-mum monetary recovery from, and pun-ishment of, wrongdoers; and (2) to in-crease joint agency/task force activity by10 percent, affording the opportunity toprotect and deter criminal activity whilemaximizing resource use efficiency.

The Office of Investigations is wellon its way to achieving its goal and objec-tives. During this reporting period, 73percent of cases presented for prosecutionwere accepted, and 24 percent of the casesopened were joint agency/task force in-vestigations, as compared to last year’s 19percent.

The Office of Investigations madea personnel resource commitment withregard to increased work with the De-partment of Justice (DOJ). For example,the Office of Investigations is currentlyworking with DOJ on 18 qui tam cases.Additionally, the Office of Investigationssuccessfully increased its efforts and re-sources applied toward the AffirmativeCivil Enforcement Program, which is de-signed as a highly efficient vehicle for IGsand U.S. Attorneys to work together tocombat fraud against the Government.The U.S. Attorney, District of New Mex-ico, recently commended the Office of In-vestigations for its “willingness to workclosely with the civil division of the U.S.Attorney’s Office” and for its “overallgrasp of the potential of civil fraud actionsin addition to criminal actions.”

The Office of Inspections estab-lished a goal to conduct performance re-views which promote the efficient and ef-fective operation of the Department’sbusiness lines. One objective under thisgoal is to prevent violations of public trustby conducting oversight of DOE’s intelli-gence programs. A performance measurefor this objective is to provide the Intelli-gence Oversight Board (IOB) with re-quired quarterly reports of OIG intelli-gence oversight activity to increase confi-dence that Departmental intelligence ac-tivities are conducted appropriately. An-


35

other objective under this goal is to focusperformance reviews on those issues andprograms having the greatest potential forthe protection or recovery of public re-sources. A performance measure for thisobjective is to achieve an 85 percent ac-ceptance rate on recommendations.

The Office of Inspections also es-tablished a goal to conduct inquiries whichassist the Department in fostering publicconfidence in the Department’s integrity,commitment to fairness, and willingness totake corrective action. One objective un-der this goal is to conduct inquiries intocontractor employee whistleblower repri-sal allegations to enhance public trust byfostering an open, non-retaliatory envi-ronment throughout the Department. Theperformance measure for this objective isto decrease the average number of days toprocess whistleblower reprisal cases by 5percent.

During the first half of the year, theOffice of Inspections issued three quarterlyintelligence reports and briefed the Coun-

sel to the IOB on the intelligence oversightactivities of the OIG. The Office alsoachieved a 100 percent acceptance rate onrecommendations made in performancereviews and has initiated additional re-views that are expected to have significantrecommendations about, among otherthings, Departmental contracting andworker safety.

The Office of Inspections is alsotaking action to reduce the number of daysto process reprisal complaints by focusingresources on investigating whistleblowerallegations. It should be noted that theDepartment published a “Notice of Pro-posed Rule Making” that proposedamendments to Part 708, Title 10, Code ofFederal Regulations, DOE ContractorEmployee Protection Program. The De-partment is currently evaluating commentson the proposed notice. The final notice isexpected to significantly impact the Part708 process and may impact the relatedobjective and performance measure.

OIG MISSION AND ADMINISTRATION

39

Mission

The Office of Inspector General (OIG) operatesunder the Inspector General Act of 1978, asamended, with the following responsibilities:

♦ To provide policy direction for, and to conduct,supervise, and coordinate audits and investiga-tions relating to the programs and operations ofthe Department.

♦ To review existing and proposed legislation andregulations relating to programs and operationsof the Department, and to make recommenda-tions in the semiannual reports required by theInspector General Act of 1978 concerning theimpact of such legislation or regulations on theeconomy and efficiency in the administration ofprograms and operations administered or fi-nanced by the Department, or on the preventionand detection of fraud and abuse in such pro-grams and operations.

♦ To recommend policies for, and to conduct, su-

pervise, or coordinate other activities carried outor financed by the Department for the purposeof promoting economy and efficiency in theadministration of, or preventing and detectingfraud and abuse in, its programs and operations.

♦ To recommend policies for, and to conduct, su-

pervise, or coordinate relationships between theDepartment and other Federal agencies, state,and local government agencies, and nongov-ernmental entities with respect to:

◊ All matters relating to the promotion of

economy and efficiency in the admini-stration of, or the prevention and de-tection of fraud and abuse in, programsand operations administered or fi-nanced by the Department.

◊ The identification and prosecution of

participants in such fraud or abuse. ♦ To keep the Secretary of the Department of En-

ergy and the Congress fully and currently in-formed, by means of the reports required by theInspector General Act of 1978, concerning fraudand other serious problems, abuses and defi-ciencies relating to the administration of pro-

grams and operations administered or financedby the Department of Energy, to recommendcorrective action concerning such problems,abuses, and deficiencies, and to report on theprogress made in implementing such correctiveaction.

♦ To provide a status of the number of unreason-

able refusals by management to provide data tothe OIG. There were no such instances this re-porting period.

Organization and Staffing

The activities of the OIG are performed by fouroffices.

The Office of Audit Services provides policydirection and supervises, conducts, and coordinatesall internal and contracted audit activities for De-partment programs and operations. Audits areplanned annually through a prioritized work plan-ning strategy that is driven by several factors, includ-ing the flow of funds to Departmental programs andfunctions, strategic planning advice, statutory re-quirements, and expressed needs. The Office ofAudit Services has been organized into three re-gional offices, each with field offices located at ma-jor Department sites: Capital Regional Audit Office,with field offices located in Washington, DC, Ger-mantown, and Pittsburgh; Eastern Regional AuditOffice, with field offices located in Cincinnati, Chi-cago, Oak Ridge, Princeton, and Savannah River;and Western Regional Audit Office, with field of-fices located in Albuquerque, Denver, Idaho Falls,Las Vegas, Livermore, Los Alamos, and Richland.

The Office of Investigations performs thestatutory investigative duties which relate to thepromotion of economy and efficiency in the admini-stration of, or the prevention or detection of fraud orabuse in, programs and operations of the Depart-ment. Priority is given to investigations of apparentor suspected violations of statutes with criminal orcivil penalties, including investigations of contractand grant fraud, environmental violations, andmatters which reflect on the integrity and suitabilityof Department officials. Suspected criminal viola-tions are promptly reported to the Department ofJustice for prosecutive consideration. The Office isorganized into four regions with field and satelliteoffices within each region. The four regions andcorresponding offices are: Northeast Regional FieldOffice in Washington, DC, with satellite offices in


40

Pittsburgh and Cincinnati; Southeast Regional FieldOffice in Oak Ridge, with a satellite office in Savan-nah River; Northwest Regional Field Office in Den-ver, with satellite offices in Richland, Idaho Falls,and Chicago; and the Southwest Regional Field Of-fice in Albuquerque, with a satellite office in Liver-more. The Office of Investigations also operates theInspector General Hotline.

The Office of Inspections performs inspec-tions and analyses, including reviews based on ad-ministrative allegations. In addition, the Office in-vestigates contractor employee allegations of em-ployer retaliation, pursuant to Department of EnergyContractor Employee Protection Program (10C.F.R. Part 708) or Section 6006 of the Federal Ac-quisition Streamlining Act of 1994. The Office alsoprocesses referrals of administrative allegations toDepartment management. The Office of Inspectionsincludes two regional offices. The Eastern RegionalOffice is located in Oak Ridge, with a field office inSavannah River. The Western Regional Office islocated in Albuquerque, with a field office in Liver-more.

The Office of Resource Management directsthe development, coordination, and execution ofoverall OIG management and administrative policyand planning. This responsibility includes directingthe OIG’s strategic planning, financial management,personnel management, procurement, and informa-tion resources programs. In addition, staff membersfrom this Office represent the Inspector General atbudget hearings, negotiations, and conferences onfinancial, managerial, and other resource matters.The Office also coordinates activities of the Presi-dent’s Council on Integrity and Efficiency. The Of-fice is organized into three offices: Financial Re-sources, Human Resources, and Information Re-sources, all located in Washington, DC.

Inspector General Priorities

The OIG takes a realistic view of its availableresources and uses them as efficiently and effectivelyas possible. Areas where we are focusing these re-sources include:

♦ Audit of the Department’s consolidated finan-cial statements as required by the GovernmentManagement Reform Act of 1994.

♦ Review of the Department’s implementation and

execution of the requirements of the Govern-ment Performance and Results Act of 1993.

♦ Review of Department “high risk” areas, such as

laboratory management, contract management(specifically, performance-based contracting),national security, safety and health, work forcerestructuring, economic development, and envi-ronmental remediation.

♦ Conduct of performance reviews at several ma-

jor Department facilities, such as LawrenceLivermore and Lawrence Berkeley NationalLaboratories, with annual obligations of about$1.4 billion.


41

♦ Emphasis on complex criminal and civil inves-tigations, targeting those matters with the great-est potential for prosecution and/or civil recov-ery, such as contract and grant fraud, and envi-ronmental violations.

♦ Assistance to Departmental effort to ensure that

the mission critical computer systems of the De-partment and its contractors are Year 2000compliant.

.Congressional Requests

During the reporting period, the OIG received47 requests for data from the Congress, all which

were responded to in a timely manner. The Officetestified at two Congressional hearings before theOversight and Investigations Subcommittee of theHouse Energy Committee. The Inspector Generaltestified on these occasions on two extremely signifi-cant matters, Department laboratory managementand performance-based contracting. Additionally,OIG staff provided briefings to Committee staff onfour occasions and data or reports were provided tothe Congress in 63 instances.

REPORTS ISSUED

45

AUDIT REPORTS

CONTRACT AUDIT REPORTS

ER-C-98-01 Final Audit of Princeton University’s Costs Claimed for Sub-contractor XR-11265-1 Under National Renewable EnergyLaboratory’s Department of Energy Contract DE-AC02-83CH10093, November 3, 1997

OPERATIONAL AUDIT REPORTS

CR-B-98-01 Audit of the Internal Control Structure of the Department ofEnergy Working Capital Fund, October 8, 1997

CR-B-98-02 Audit of Management of the Laboratory Directed Research andDevelopment Program at the Lawrence Livermore NationalLaboratory, November 14, 1997

CR-L-98-01 Survey of the Department’s Energy Conservation Program,February 10, 1998

CR-L-98-02 Federal Managers’ Financial Integrity Audit Report, December 18,1997

ER-B-98-01 Audit of the Deactivation, Decontamination, and Disposal of Sur-plus Facilities at the Savannah River Site, October 23, 1997Savings: $5,200,000

ER-B-98-02 Audit of Environmental Monitoring and Health Physics Laborato-ries at the Savannah River Site, November 3, 1997Savings: $30,000,000

ER-B-98-03 Audit of the Union Valley Sample Preparation Facility at OakRidge, November 7, 1997Questioned Costs: $4,000,000

ER-B-98-04 Audit of Selected Government-funded Grants and Contractsat Princeton University, December 2, 1997

REPORTS ISSUED

46

ER-B-98-05 Audit of the Department of Energy’s Contracts With Envirocareof Utah, Inc., December 10, 1997Savings: $3,180,000

WR-B-98-01 Audit of the Radioactive Liquid Waste Treatment Facility Opera-tions at the Los Alamos National Laboratory, November 19,1997Questioned Costs: $2,150,000 Unsupported Costs: $8,600,000

WR-L-98-01 Audit of Equipment Use at Battelle-Pacific Northwest NationalLaboratory, November 14, 1997

IG-0412 Audit of the Contractor Incentive Program at the NevadaOperations Office, October 20, 1997Unsupported Costs: $1,420,100

IG-0413 Audit of Funding for Advanced Radioisotope Power Systems,October 17, 1997Questioned Costs: $46,300,000

IG-0414 Audit of the Department of Energy’s Management of FieldContractor Employees Assigned to Headquarters and OtherFederal Agencies, December 5, 1997

IG-0415 Audit of Departmental Receipt of Final Deliverables for GrantAwards, December 4, 1997Savings: $232,856,519

IG-0416 Audit of Support Services Subcontracts at Argonne NationalLaboratory, December 23, 1997

IG-0417 Audit of the Department of Energy’s Management of Researchand Development Integration, March 13, 1998

IG-0418 Audit of Alternatives to Testing at the Tonopah Test Range,March 13, 1998Savings: $22,304,600

FINANCIAL AUDIT REPORTS

CR-FC-98-01 Federal Energy Regulatory Commission’s Fiscal Year 1997 Finan-cial Statement Audit, February 24, 1998

REPORTS ISSUED

47

CR-FS-98-02 Management Report on the Audit of the U.S. Department of En-ergy’s Consolidated Financial Statements for Fiscal Year 1997, March 26, 1998

CR-FS-L-98-01 Audit of the ADP General Controls at Idaho National Engineeringand Environmental Laboratory, February 27, 1998

CR-FS-L-98-02 Audit of the ADP General Controls at Oak Ridge Complex, Febru-ary 27, 1998

CR-FS-L-98-03 Report on Results of Audit Procedures Performed at the PittsburghNaval Reactors Office During the Audit of the Department’sConsolidated Fiscal Year 1997 Financial Statements, March 6, 1998

ER-FC-98-01 Southeastern Federal Power Program Fiscal Year 1996 FinancialStatement Audit, December 9, 1997

ER-FC-98-02 Alaska Power Administration’s Fiscal Year 1997 Financial State-ment Audit, March 25, 1998

ER-FC-98-03 Isotope Production and Distribution Program’s Fiscal Year 1997Financial Statement Audit, March 27, 1998

ER-FS-98-01 Results of Audit Procedures Performed at the ChicagoOperations Office During the Audit of the Department’sConsolidated Fiscal Year 1997 Financial Statements,March 27, 1998

ER-FS-98-02 Results of Audit Procedures Performed at the Savannah RiverOperations Office During the Audit of the Department’sConsolidated Fiscal Year 1997 Financial Statements,March 27, 1998

ER-FS-98-03 Matters Identified at the Oak Ridge Operations Office Duringthe Audit of the Department’s Consolidated Fiscal Year 1997Financial Statements, March 30, 1998

ER-FS-98-04 Matters Identified at the Strategic Petroleum Reserve During theAudit of the Department’s Consolidated Fiscal Year 1997Financial Statements, March 31, 1998

REPORTS ISSUED

48

ER-V-98-01 Assessment of Changes to the Internal Control Structure andTheir Impact on the Allowability of Costs Claimed by andReimbursed to Associated Universities, Inc. BrookhavenNational Laboratory Under Department of Energy ContractDE-AC02-76CH016, October 3, 1997

ER-V-98-02 Assessment of Changes to the Internal Control Structure andTheir Impact on the Allowability of Costs Claimed by andReimbursed to Westinghouse Savannah River Company UnderDepartment of Energy Contract No. DE-AC09-89SR18035,October 15, 1997

ER-V-98-03 Assessment of Changes to the Internal Control Structure andTheir Impact on the Allowability of Costs Claimed by and Reimb-ursed to Lockheed Martin Specialty Components, Inc., UnderDepartment of Energy Contract No. DE-AC04-92AL73000,October 28, 1997Questioned Costs: $178,399

ER-V-98-04 Assessment of Changes to the Internal Control Structure andTheir Impact on the Allowability of Costs Claimed by andReimbursed to EG&G Mound Applied Technologies, Inc.,Under Department of Energy Contract No. DE-AC24-88DP43495, February 24, 1998

WR-FC-98-01 Southwestern Federal Power System Fiscal Year 1996Financial Statement Audit, December 4, 1997

WR-FC-98-02 U.S. Department of Energy Naval Petroleum ReserveNumber 1, Fiscal Year 1997 Financial Statement Audit,February 12, 1998

WR-FC-98-03 Western Area Power Administration’s Fiscal Year 1997Financial Statement Audit, February 26, 1998

WR-FC-98-04 Western Area Power Administration’s Parker-Davis PowerSystem Fiscal Year 1997 Financial Statement Audit,March 18, 1998

REPORTS ISSUED

49

WR-V-98-01 Assessment of Changes to the Internal Control Structure andTheir Impact on the Allowability of Costs Claimed by and

Reimbursed to Lockheed Martin Idaho Technologies UnderDepartment of Energy Contracts No. DE-AC07-94ID13223and No. DE-AC07-94ID13299, November 13,1997Questioned Costs: $68,238

WR-V-98-02 Assessment of Changes to the Internal Control Structure andTheir Impact on the Allowability of Costs Claimed by andReimbursed to Sandia Corporation Under Department of EnergyContract No. DE-AC04-94AL85000, November 10, 1997

WR-V-98-03 Assessment of Statement of Costs Incurred and Claimed byReynolds Electrical and Engineering Company, Inc. UnderDepartment of Energy Contract No. DE-AC08-94NV11432,December 29, 1997

WR-V-98-04 Assessment of Statement of Costs Incurred and Claimed byEG&G Energy Measurements Under Department of EnergyContract No. DE-AC08-93NV11265, December 31, 1997

WR-V-98-05 Assessment of Statement of Costs Incurred and Claimed byRaytheon Services Nevada Under Department of EnergyContract No. DE-AC08-91NV10833, January 2, 1998

IG-FS-98-01 The U.S. Department of Energy’s Consolidated FinancialStatements for Fiscal Year 1997, February 26, 1998

INSPECTIONS REPORTS

INS-O-98-01 Report on “Inspection of Concerns Regarding DOE’sEvaluation of Chevron U.S.A.’s Unsolicited Proposalfor the Elk Hills Naval Petroleum Reserve,”November 17, 1997

INS-L-98-01 Report on “Inspection of the Department of Energy’sNew Iberia Ethanol Plant,” February 9, 1998

REPORTS ISSUED

50

INSPECTOR GENERAL REPORTS AVAILABILITY

On the Internet

Office of Inspector General reports are available electronically through the internet atthe following address: http://www.hr.doe.gov/ig/.

By U.S. Mail

Persons wishing to request hardcopies of reports to be mailed to them may do so bycalling the automated Office of Inspector General Reports Request Line at (202) 586-2744. The caller should leave a name, mailing address, and identification number of thereport needed. If the report’s identification number is unknown, the caller should leave ashort description of the report and a telephone number where the caller may be reached incase further information is needed to fulfill the request.

Requests by Telefax

In addition to using the automated Office of Inspector General Reports Request Line,persons may telefax requests for reports to (202) 586-1660. Telefaxing requests may beespecially convenient for people requesting several reports.

Point of Contact for More Information

Persons with questions concerning the contents, availability, or distribution of anyOffice of Inspector General report may contact Wilma Slaughter by telephone at (202)586-1924 or via the Internet at [email protected].

STATISTICS

53

DEFINITIONS

The following definitions, based on the Inspector General Act of 1978, apply toterms used in this Semiannual Report.

Questioned Cost: A cost which the Inspector General questions because of:

1. An alleged violation of a provision of a law, regulation, contract, grant, cooperativeagreement, or other agreement or document governing the expenditure of funds;

2. A finding that, at the time of an audit, such cost is not supported by adequate docu-

mentation; or

3. A finding that the expenditure of funds for the intended purpose is unnecessary or un-reasonable.

Unsupported Cost: A cost which the Inspector General questions because the InspectorGeneral found that, at the time of an audit, such cost is not supported by adequate documen-tation.

Disallowed Cost: A questioned cost which Department management, in a management deci-sion, has sustained or agreed should not be charged to the Government.

Recommendation That Funds Be Put to Better Use (“Savings”): An Inspector Generalrecommendation that funds could be used more efficiently if Department management tookactions to implement and complete the recommendations, including:

1. Reduction in outlays; 2. Deobligation of funds from programs or operations; 3. Withdrawal of interest subsidy costs on losses or loan guarantees, insurance or bonds; 4. Costs not incurred by implementing recommended improvements related to Depart-

ment operations, contractors, or grantees; 5. Avoidance of unnecessary expenditures noted in preaward reviews of contract or grant

agreements; or 6. Any other savings which are specifically identified.

STATISTICS

54

Management Decision: The evaluation by Department management of the findings and rec-ommendations included in an audit report and the issuance of a final decision by Departmentmanagement concerning its response to such findings and recommendations, including actionsdetermined to be necessary.

Final Action: The completion of all actions that Department management has determined, inits management decision, are necessary with respect to the findings and recommendations in-cluded in an audit report. In the event that Department management concludes no action isnecessary, final action occurs when a management decision has been made.

STATISTICS

55

AUDIT REPORT STATISTICSOctober 1, 1997 through March 31, 1998

The following table shows the total number of operational and financial audit reports, andthe total dollar value of the recommendations.

Total One-Time Recurring TotalNumber Savings Savings Savings

Those issued before thereporting period forwhich no managementdecision has been made: 9 $64,962,477 $126,363,760 $191,326,237

Those issued during thereporting period: 44 $332,324,256 $23,933,600 $356,257,856

Those for which amanagement decision wasmade during the reportingperiod: 26 $317,069,619 $43,933,600 $361,003,219

Agreed to by management: $289,106,445 $0 $289,106,445Not agreed to by management: $6,894,775 $16,693,600 $23,588,375

Those for which amanagement decision isnot required: 18 $0 $0 $0

Those for which nomanagement decision hadbeen made at the end ofthe reporting period*: 9 $101,285,513 $133,603,760 $234,889,273

*NOTE: The figures for dollar items include sums for which management decisions on thesavings were deferred.

STATISTICS

56

AUDIT REPORT STATISTICS

The following table shows the total number of contract audit reports, and the total dollarvalue of questioned costs and unsupported costs.

Total Questioned UnsupportedNumber Costs Costs

Those issued before thereporting period forwhich no managementdecision has been made: 4 $6,717,811* $84,241

Those issued during thereporting period: 1 $0 $0

Those for which amanagement decision wasmade during the reportingperiod: 1 $139,000 $0

Value of disallowed costs: $98,000 $0Value of costs not disallowed: $41,000 $0

Those for which amanagement decision isnot required: 1 $0 $0

Those for which nomanagement decision hadbeen made at the end ofthe reporting period: 3 $6,578,811 $84,241

*This figure has been adjusted downward by $269 to the correct figure shown due to round-ing on one monetary impact report submitted to the Office of Inspector General.

STATISTICS

57

REPORTS LACKING MANAGEMENT DECISION

The following are audit reports issued before the beginning of the reporting period for whichno management decisions had been made by the end of the reporting period, the reasons man-agement decisions had not been made, and the estimated dates (where available) for achievingmanagement decisions. These audit reports are over 6 months old without a management de-cision.

The Contracting Officers have not yet made decisions on the following contract reports forthe following reasons. They include delaying settlement of final costs questioned in auditspending completion of review of work papers and heavy workloads delaying the closingprocess. The Department has a system in place which tracks audit reports and managementdecisions. Its purpose is to ensure that recommendations and corrective actions indicated byaudit agencies and agreed to by management are indeed addressed and effected as efficientlyand expeditiously as possible.

ER-CC-93-05 Report Based on the Application of Agreed-Upon Procedures WithRespect to Temporary Living Allowance Costs Claimed Under Con-tract No. DE-AC09-88SR18035, October 1, 1987, to September 20,1990, Bechtel National, Inc., San Francisco, California, and BechtelSavannah River, Inc., North Augusta, South Carolina, May 3, 1993(Estimated date of closure: June 30, 1998)

WR-C-95-01 Report on Independent Final Audit of Contract No. DE-AC34-91RF00025, July 26, 1990, to March 31, 1993, Wackenhut Services,Inc., Golden, Colorado, March 13, 1995(Estimated date of closure: July 1998)

ER-C-97-01 Report on the Interim Audit of Costs Incurred Under Contract No.DE-AC24-92OR21972 From Octobe r1, 1994, to September 30, 1995,Fernald Environmental Restoration Management Corporation, Fernald,Ohio, December 20, 1996(Estimated date of closure: October 1998)

STATISTICS

58

Additional time was necessary to develop management decisions for the following reports.Further explanations for the delays follow each audit report.

CR-B-97-02 Audit of Department of Energy’s Contractor Salary Increase Fund,April 4, 1997

The finalization of the management decision on this report is awaiting resolution of one outstanding issue. It is estimated that this will occur byJuly 31, 1998.

IG-0399 Audit of the U.S. Department of Energy’s Identification and Disposal of Nonessential Land, January 8, 1997

The management decision is awaiting the Secretary’s approval, which should occur by June 5, 1998

IG-0407 Audit of the U.S. Department of Energy’s Science and Technical Information Process, June 17, 1997

The management decision is under Secretarial review. Finalizationis expected to occur by June 30, 1998

IG-0411 Audit of Contractors’ Incentive Programs at the Rocky Flats Environ-mental Technology Site, August 13, 1997

The finalization of the management decision on this report is pendingthe resolution of one outstanding issue. This should occur by June 30,1998

STATISTICS

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INVESTIGATIVE STATISTICS

The investigative statistics below cover the period fromOctober 1, 1997, through March 31, 1998

Investigations open at the start of this reporting period ................................................ 318Investigations opened during this reporting period ......................................................... 58Investigations closed during this reporting period .......................................................... 74Investigations open at the end of this reporting period ................................................. 302

Debarments/suspensions ................................................................................................ 12Investigations referred to management for recommended positive action........................ 21Administrative disciplinary actions taken........................................................................ 10

Investigations referred for prosecution........................................................................... 22Acceptedu ......................................................................................................... 16Declinedu .......................................................................................................... 19

Indictments .......................................................................................................... 5Convictions.......................................................................................................... 3Pretrial diversions ................................................................................................ 0

Fines, settlements, and recoveriesuu ............................................................$1,612,931.60

uSome of the investigations accepted or declined during this 6-month period were referredfor prosecution during a previous reporting period.

uuSome of the money collected was the result of Task Force Investigations.

Hotline Statistics

Complaints received via the Hotline............................................................................. 294Complaints received via the General Accounting Office ................................................... 4Total complaints received ............................................................................................ 298

Investigations opened on Hotline complaints ................................................................. 13Complaints resolved or pending resolution................................................................... 101Complaints that required no investigation by OIG........................................................ 184Total complaints disposition ........................................................................................ 298

STATISTICS

60

INSPECTION STATISTICS

The inspection statistics below cover the period fromOctober 1, 1997, through March 31, 1998

Allegation-Based, Reprisal, and Management System Inspections

Inspections open at the start of this reporting period.................................................... 171Inspections opened during this reporting period............................................................. 29Inspections closed during this reporting period .............................................................. 35Inspections open at the end of this reporting period ..................................................... 165Reports issuedu ............................................................................................................... 8Allegation-based inspections closed after preliminary review............................................ 4Reprisal complaint actions during this reporting period ................................................ ..16

Reprisal complaints dismissed ..................................................................9Reports of reprisal inquiry issued ............................................................1Reprisal complaints settled .......................................................................1Reprisal complaints withdrawn.................................................................1Reprisal complaints completed by other means.........................................4

Inspection recommendationsAccepted this reporting period ........................................................................... ..3Implemented this reporting period...................................................................... 29

Complaints referred to Department management/others ............................................... 121Number of these referrals requesting a response for OIG evaluation ................... 46

Personnel management actions taken as a result of inspectionsor complaints referred to management................................................................. .1

u Reports include non-public reports such as administrative allegations and personnel se-curity reports.

STATISTICS

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FEEDBACK SHEET

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The contents of the April 1998 Semiannual Report to Congress comply with the require-ments of the Inspector General Act of 1978, as amended. However, there may be addi-tional data which could be included or changes in format which would be useful to recipi-ents of the Report. If you have suggestions for making the report more responsive to yourneeds, please complete this feedback sheet and return it to:

Department of EnergyOffice of Inspector General (IG-13)Washington, D.C. 20585

ATTN: Wilma Slaughter

Your name:

Your daytime telephone number:

Your suggestion for improvement: (please attach additional sheets if needed)

If you would like to discuss your suggestion with a staff member of the Office of InspectorGeneral or would like more information, please call Wilma Slaughter at (202) 586-1924 orcontact her on the Internet at [email protected].

government performance and results...april 30, 1998 the honorable federico peña secretary u.s....

Documents