A comprehensive analysis by the University of California Auditor has favorably resolved 96% of procurement card transactions at the Los Alamos National Laboratory that were previously questioned during an external review. The new UC audit, released today (February 10, 2003), identified $195,246 in transactions that are being questioned for their allowability under the Department of Energy contract, due to incomplete documentation, technical deficiencies (e.g. missing approvals) or other reasons, including documentation destroyed in the Cerro Grande fire. From the University of California:
UC Auditor Releases Interim Report on Los Alamos Transactions
A comprehensive analysis by the University of California Auditor has favorably resolved 96% of procurement card transactions at the Los Alamos National Laboratory that were previously questioned during an external review.
The new UC audit, released today (February 10, 2003), identified $195,246 in transactions that are being questioned for their allowability under the Department of Energy contract, due to incomplete documentation, technical deficiencies (e.g. missing approvals) or other reasons, including documentation destroyed in the Cerro Grande fire.
In addition, continuing the University’s aggressive efforts to reform the business practices of the laboratory, the audit makes a series of recommendations for improved management of the procurement card system at the laboratory and requests the laboratory to develop an implementation plan within two weeks.
A copy of the report can be obtained by clicking, www.universityofcalifornia.edu/news/losalamos/reports/audit.pdf.
“We are pleased that LANL was able to locate support documentation or justification for the majority of the transactions that were referred from the earlier review,” said University of California Auditor Patrick Reed. “However, we are unable to determine definitively if the remaining transactions are truly inappropriate or simply lack appropriate documentation.”
“Therefore, we are recommending that such costs be reimbursed to the federal government and have recommended management changes that should go a long way toward correcting the deficiencies that create such ambiguity,” Reed said.
Reed stressed that the scope of the UC audit did not extend to other procurement methods (e.g., Just In Time System, Local Vendor Agreements, Blanket Purchase Orders, etc.), which are separately under review in a second phase of the External Review Team’s effort.
Additionally, property control matters, including the interface of purchasing and property control systems (e.g. bar coding of purchased equipment valued at over $5,000 and sensitive items under $5,000 in value) are the subject of separate reviews. Los Alamos National Laboratory Director Pete Nanos previously has announced that a “wall-to-wall inventory” of equipment is also soon to begin.
“Readers of this report should take care to understand its limited purpose and the broader related efforts being undertaken,” said Reed.
BACKGROUND
The audit, undertaken at the request of University of California Office of the President officials by the University Auditor’s Office (UAO), was designed to verify and validate efforts by LANL to review and dispose of matters referred for follow-up from an external review team report of the purchase card program.
The external review team was ordered in August 2002 by UC immediately upon becoming aware of possible inappropriate use of purchase cards. The team was headed by former Department of Energy Inspector General John Layton, with the assistance of PricewaterhouseCoopers and former Department of Labor Inspector General Charles Masten. The team reviewed documentation and data covering $120 million in transactions incurred over a 45-month period (October 1, 1998 through June 30, 2002), and conducted interviews of cardholders, requesters, approvers and managers. It also conducted a range of investigative data analyses, including data mining, random sample selection and targeted sample selection.
The external review team report was issued on December 12, 2002, and referred for follow up $1.1 million of potentially questionable costs and unresolved disputed charges as well as $3.8 million of “unreconciled” purchase card statements, for a total of $4.9 million from the approximately $120 million population of purchase card transactions reviewed.
The purpose of the UC review was to verify and validate the results of the LANL follow up effort. UAO auditors reviewed the LANL approach and methodology for review and disposition of the questioned items, selected samples of transactions and statements for detailed review, physically inspected selected purchased goods and interviewed cardholders and designated approvers.
While LANL reported in late December 2002 that it had reconciled all but $120,000 of the transactions, the UC Auditor subsequently added to that figure another $591,677 in transactions associated with individuals whose names appeared on “sensitive names lists” provided by LANL management and the Office of Inspector General. These transactions were subjected to a broader scope and higher degree of scrutiny by LANL and UAO.
THE FINDINGS
As stated above, the external review team identified for follow up by LANL $1.1 million of potentially questionable costs and unresolved disputed charges as well as $3.8 million of “unreconciled” purchase card statements, for a total of $4.9 million from the approximately $120 million population of purchase card transactions reviewed.
After verification and validation of LANL’s review by the UC Auditor, $4.7 million was favorably answered, resolved and reconciled. The remaining $195,246 includes the following:
$47,983 in transactions that are being questioned as to whether they are allowable under the DOE contract after review of full documentation. These costs are questioned for reasons such as lacking required DOE approvals or because disputed charges should have been followed-up for bank credit but were not. $65 of this amount appeared to be an improper expenditure by an intern on an Internet music site.
$147,263 in transactions that lack complete documentation. Review of available documentation disclosed no apparent indicators of impropriety, but documentation was insufficient for definitive determination.
While the scope of the audit was limited to the $4.9 million in transactions referred from the external review, the audit separately identified an additional $125,000 in costs questioned as to allowability due to over-expended award funds in 1999. These are contractually provided funds for “spot awards” given in various forms including gift certificates obtained with purchase cards, which is how this matter came to the auditors’ attention.
The allowability of these costs ultimately will be resolved in the normal course of LANL’s dealings with the DOE contracting officer and the laboratory will reimburse the Department of Energy for all expenses ultimately determined to be fraudulent and unallowable.
In addition, the UC Auditor recommended a number of changes that need to be made to improve LANL’s purchase card program, including steps to improve training and the assignment of responsibilities, to reduce the large number of employees who are cardholders, and to review the entire purchase system and its linkages to other financial processes.
The University of California manages Los Alamos National Laboratory for the U.S. Department of Energy’s National Nuclear Security Administration.
NOTICE OF MEDIA AVAILABILITY
University of California senior vice president and interim vice president for laboratory management Bruce B. Darling, UC Auditor Patrick Reed, and Lawrence Livermore National Laboratory Director Michael Anastasio will be available to the media today (Monday, February 10) at 1:30 pm PST to discuss the interim report and other ongoing laboratory administration and business practice issues.
Access information: Toll Free Dial-In Number: (888) 422-7128 Participant Code: 517330