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The Department of Energy Inspector General issued an audit report on costs incurred by the Los Alamos National Laboratory during Fiscal Year 2010 and the National Nuclear Security Administration management team agreed with it.
Millions of dollars in questioned and unresolved costs at LANL have been under review for some time. The final IG report released this month does not point to any clear path for resolution in terms of how the millions in taxpayer money may have been expended at the national lab.
The report stated, “We identified approximately $50,000 in questioned and unresolved costs claimed by Los Alamos during Fiscal Year 2010. We also identified nearly $24 million in subcontract costs requiring audit; nearly $1.4 million in unresolved questioned subcontract costs; and, approximately $10.7 million in unresolved costs pertaining to a potential Anti-Deficiency Act violation.
“Finally, we identified more than $434 million in previously reported unresolved costs from prior years. The National Nuclear Security Administration’s management agreed with the findings and recommendations and provided proposed corrective actions.”
As of July 2012, the contracting officer and NNSA’s Office of Field Financial Management were working with Los Alamos to resolve the questioned costs.
This is what the report said about the $6 million in subcontract costs.
“Los Alamos management reassigned the responsibility for the subcontract audit function from ASM to Internal Audit as of August 2010 following an assessment of ASM’s subcontract audit function in which Internal Audit concluded that ASM’s subcontract audit function was ineffective. The Office of Inspector General also identified material weaknesses in ASM’s subcontract audit strategy during its review of FY 2008 and FY 2009 costs.
The DOE Inspector General said in its April 2012 report that the NNSA needs to reevaluate Los Alamos’ audit strategy.
The report also found that more than $17 million in subcontract costs incurred during FY 2010 requiring audit that had not been audited. Los Alamos deferred audit of these costs until after the contract under which the costs were incurred closed on Dec. 31, 2010. The report stated the costs are currently under audit by Internal Audit.
The report also addressed the $1.4 million in prior years subcontract costs as unresolved questioned costs, and also noted that the Department was reviewing a potential Anti-Deficiency Act (ADA) violation of approximately $10.7 million.
“The potential violation arose from Los Alamos expending nearly $10.3 million more than appropriated on the Waste Management Risk Mitigation (WMRM) line item construction project. The total project costs exceeded original estimates due to Los Alamos having to correct defective works performed by the general contractor hired to design and construct the WMRM project. Therefore, Los Alamos filed a claim against the general contractor in court to recoup costs for correcting defective work,” the report stated.
“Los Alamos continued to incur costs on the WMRM project and legal fees of about $425,000. The lawsuit filing the claim was unsuccessful and Los Alamos did not receive any funds from the legal proceedings. As of September 2012, these costs were unresolved, and therefore, we reported the nearly $10.3 million of costs incurred in excess of approved funding and the $425,000 in legal fees associated with the WMRM project as unresolved costs.”
Finally, the report identified more than $439 million in prior year unresolved and questioned costs.
“These costs included approximately $437 million in FY 2007 to FY 2009 unresolved subcontract costs pending audit or review by Internal Audit, and nearly $2 million questioned costs,” the report stated.
In May 2012, Internal Audit submitted an action plan to the Los Alamos Site Office proposing an audit strategy to address unresolved subcontract costs reviewed by ASM and the subcontracts requiring an audit from FY 2007. And as of August 2012, the Site Office had not made a determination on the adequacy of the action plan proposed by Internal Audit. The IG also noted that approximately $57,000 in unresolved questioned FY 2008 and 2009 costs identified by Internal Audit had been resolved.
The report made the following recommendations:
• That the manager of the Los Alamos Site Office, direct the contracting officer to make a determination regarding the allowability of questioned and unresolved costs identified in this report and recover those costs determined to be unallowable.
• The NNSA Field CFO ensures that Los Alamos completes corrective actions to address CFO concerns. These recommendations, if fully implemented, should help NNSA recover funds that would be better spent on program activities and improve institutional controls to eliminate the recurrence of similar questioned and unallowable costs in the future.
The report indicated that the NNSA management concurred with the findings and recommendations, and identified corrective actions.
“In addition to making a determination as to the allowability of the questioned subcontract costs, management committed to the contracting officer continuing efforts to review and resolve other previously identified questioned costs. Further, management said the contracting officer will monitor the status of contractor efforts to complete subcontract audits. Management also plans to continue to monitor the contractor’s progress in addressing concerns raised by the NNSA Field CFO. Finally, the Director, Office of Financial Risk, Policy and Controls stated that they continue to work with the General Counsel’s office and NNSA in assessing the potential Anti-Deficiency Act violation.”
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