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Audit of LANL Notes Millions in Unresolved Costs in FY2010

on November 27, 2012 - 5:34pm

Staff Report

The U.S. Department of Energy Office of Inspector General has identified millions of dollars in "Questioned, Unresolved and Potentially Unallowable Costs" incurred by Los Alamos National Laboratory during Fiscal Year 2010 ending Sept. 30, 2010. 

In a memorandum released this month to the National Nuclear Security Administration, Rickey R. Hass of the Office of Inspector Geneneral reported specific problems uncovered by an audit of LANL's FY 2010 financial reports.

Here are excerpts from the memorandum:

We identified approximately $50,000 in questioned and unresolved costs claimed by Los Alamos during FY 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 resolution of questioned and unallowable costs ensures that costs charged to the Government are allowable, makes certain that taxpayer's money is spent wisely, and has the potential to free significant funds that would be better spent on Los Alamos' mission critical program activities...

We identified more than $6 million in subcontract costs incurred during FY 2010 that we considered unresolved pending review by Internal Audit based upon weaknesses noted in the ASM subcontract audit function and strategy...

In addition, we found over $17 million in subcontract costs incurred during FY 2010 requiring audit that had not been audited...

We reported nearly $1.4 million in prior years subcontract costs as unresolved questioned costs. During 2011, Internal Audit identified approximately $1.5 million in additional questioned subcontract costs that were incurred between FY 2003 and FY 2010...

During the course of our assessment, we 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 work 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. 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...

In our April 2012 contract report, we identified more than $439 million in prior year unresolved and questioned costs (see Attachment 2.) 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...


While some progress had been made, a significant percentage of the costs remained unresolved as of the completion of our review, Hass stated in the report.

To review the entire Special Report Memorandum, click HERE.


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