United States General Accounting Office Report to the Chairman, Subcommittee GAO on Oversight and Investigations, Committee on Energy and Commerce, House of Representatives --.-- April 1990 NUCLEAR SECURITY DOE Oversight of Livermore’s Property Management System Is Inadequate GAO,‘RCED-90-122 l&sources, Community, and Economic Development Division B-232906 April l&l990 The Honorable John D. Dingell Chairman, Subcommittee on Oversight and Investigations Committee on Energy and Commerce Houseof Representatives Dear Mr. Chairman: This report respondsto your request that we determine the extent of property lossesat the Lawrence Liver-moreNational Laboratory and assessthe adequacy of the laboratory’s controls over government-owned property in its custody. The laboratory is owned by the Department of Energy and is operated by the University of California at Livermore, California. We also assessedthe adequacy of the Department’s oversight of the laboratory’s property managementsystem for government-owned properties. As agreed with your office, we will report separately on the lossesof and controls for special nuclear materials and classified documents. Unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies of this report to appropriate congressionalcommittees; the Secretary of Energy; and the Director, Office of Management and Budget. We will also make copies available to others upon request. This work was performed under the direction of Victor S. Rezendes,Director, Energy Issues, at (202) 276-1441. Major contributors to this report are listed in appendix II. Sincerely yours, J. Dexter Peach Assistant Comptroller General __ Ekecutive Summary Inventories of government-owned equipment at the Department of Energy’s (DOE)Lawrence Livermore National Laboratory located in Liverinore, California, were acquired for over $903 million. In June 1988, the Subcommittee on Oversight and InvestigaGons,HouseCommit- tee on Energy and Commerce,held hearings to investigate, among other things, allegations that government-owned equipment at the laboratory was being stolen to finance the purchase of illegal drugs. Following these hearings, the Subcommittee Chairman requested that GAOdetermine the extent of property lossesat the laboratory and assess the adequacy of the laboratory’s controls over government-owned prop erty in its custody. The Chairman expressedparticular interest in losses of selecteditems, including word p mcessorsand typewriters, video equipment, cordless hand tools, and highly explosive materials. In addi- tion, GAOassessedthe adequacy of DOE’S oversight of the laboratory’s property managementsystem for government-owned properties. The laboratory is a nuclear weapons research and development facility. It is government-owned and contractor-operated by the University of California. Under the contract, due to expire September30,1992, the university is responsible for managing government-owned property at the laboratory. DOE’sSan Francisco Operations Office has oversight responsibility with respect to property managementat the laboratory. DOEproperty managementregulations provide guidance on DOEstan- dards, practices, and controls to be applied in the managementof gov- ernment-owned property. The regulations state, for example, that controls shall be established for (1) physically protecting property against loss, theft, or unauthorized use and (2) taking physical invent+ ries of property, consistent with generally acceptedaccounting procedures. Laboratory management cannot account for a substantial amount of Results in Brief government-owned property in its custody. For example, as of mid-Jan- uary 1990, laboratory managers could not locate 16 percent, or 27,628, of the items recorded in the laboratory’s property managementdata base.On the basis of the results of an internal laboratory inventory, this missing property has an acquisition value of over $45 million. In addi- tion, for the specific items of interest to the Subcommittee,GA0esti- mates that the laboratory has lost accountability for about 14 percent of them, worth about $2 miIlion when acquired. Despite the substantial Executive Summuy number of missing items, the contract between DOE and the university generally protects the university against liability for such losses. The laboratory doesnot have adequate accounting controls to ensure that property in its custody is safeguarded against theft, unauthorized use, or loss. In addition, there are insufficient physical controls to pre- vent laboratory employeesand subcontractors from taking government property from the premises without proper authorization. DOE has not provided adequate oversight of the laboratory’s property managementsystem and, in essence,has allowed the university to pre- scribe the terms of the contract. DOE has not required the laboratory to conform with departmental property managementregulations, nor has it approved the laboratory’s property managementsystem, as required by regulation. Further, in lieu of the departmental property manage- ment regulations, DOE has not developed or provided guidance to the lab- oratory spelling out the criteria for performance of property management functions. Consequently, EXNcannot ensure that the labo- ratory is adequately safeguarding property in its custody. principal Findings Substantial Number of A substantial number of government-owned items at the laboratory can- not be located. The results of the laboratory’s comprehensiveinventory Items Missing of all the property contained in its managementdata base show that about 6 percent of the capital equipment items, 20 percent of the non- capital items, and 3 percent of the attractive items were missing as of mid-January 1990. (In general, capital equipment denotes property with an acquisition cost of $6,000 or more; non-capital equipment denotes property with an acquisition cost of between $600 and $6,000; and attractive items include those with an acquisition cost of at least $160 and judged by laboratory managers as prone to theft.) This missing property has an acquisition value of $20.6 million, $24 million, and $3 million, respectively. The laboratory’s inventory also shows that a sub- stantial number of the specific items of interest to the Subcommittee cannot be located. For example, as of mid-January 1990, the laboratory was missing 206 typewri~rs/word processors, 841 items of video equip ment, and 3,677 calculators. The results of GAO'S independent statistical analysis verify that a substantial number of the items of interest to the Subcommittee cannot be located. On the basis of GAO'S sample of 276 P8ge 3 GAO/acED-mlee Lhwmom Pmperty Bhnagement items of interest contained in the property managementdata base,GAO estimates that 6,868 items with an acquisition cost of about $2 million are ltlissing. GAO could not determine the extent of missing items for someproperty such as hand tools and video tapes. No consistent data are collected on acquisitions of these items, and tool acquisitions are made by numerous organizational units that use different control procedures. Similarly, ~2~0 could not determine whether any highly explosive materials were miss- ingbecausethedatanecessaq todosoarenotmaintained. Despite the fact that a substantial number of government-owned prop erty items at the laboratory cannot be located, the contract between DOE and the university generally places the risk of such lossesupon the gov- ernment. According to the contract, the university is at risk only if the loss of government property is the result of willful misconduct or bad faith by corporate officers. To date, none of the missing items at the laboratory have been attributed to these reasons. Controls Over Property controls at the laboratory do not ensure that govemment- owned property is adequately safeguarded. For example, the laboratory doesnot have laboratory-wide pohcies and procedures for controlling items with an acquisition cost below $1,000. Becausecontrol of these items is left up to individual user groups, no coirsistent data on their acquisition are collected. Consequently, it is difficult to identify how many of these items have been purchased. Similarly, GAO found that the laboratory does not independently verify government-owned invento- ries of precious metals such as gold and platinum that are in the custody of subcontractors. As a result, the laboratory cannot readily verify the reasonablenessof reported consumption of these metals. GAO also found that individuals leaving the laboratory site face little risk of having their vehicles searched.Consequently, the likelihood of detect@ theft of government property also Fem8LTL8 low. For example, in 1088 about 17 vehicle searcheswere conducted daily-a small number compared to the approximately 7,000 vehicles that enter and leave the laboratory daily. Inadequate Oversight of In order to retain the University of California’s services,DOEdid not require inclusion of its standard property managementprovision in the the Laboratory contract with the university. This provisiOn, nOImdy included in all DOE p-4 Fhecntlvesununuy management and operating contracts, requires contractors to operate in accordancewith departmental property management regulations. In lieu of this provision, the contract provides for a “mutually approved sys- tem.” The terms neededfor approval of this system, however, were never developed nor agreed upon. Further, although the university was opposedin principle to the inclusion of federal property management procedures in the contract, it indicated its willingness to consider such procedures when developing and implementing its own procedures and manuals if guidance was provided by DOE. However, DOE never provided this guidance to the laboratory. BecauseDOE has not developed or reached agreement on the terms for a “mutually approved system” nor approved the property management system that the laboratory is using, it has no clear criteria against which to judge and assesscontractor performance. Consequently, it cannot ensure that the laboratory’s system provides the samelevel of protec- tion as that provided by federal and departmental regulations. Recommendations GAO makes a number of recommendations in chapters 2 and 4 to the Sec- retary of &IergY on actions to StN?I@hen oversight of the labora- DOE'S tory’s property management system. These recommendations include (1) identifying areas in the laboratory’s property managementsystem that do not provide the same level of protection for government-owned prop erty as that provided by federal and departmental regulations, (2) advising the laboratory of identified deficiencies and establishing a mutually * upon time frame for completing the corrective actions, and (3) clearly defining, with the agreement of the laboratory, the terms and provisions of the “mutually approved system.” GAO ciiscwd the factual information contained in a draft of this report Agency Comments with responsible DOE and laboratory officials. DOE officials generally agreed with the facts presented, noting that while the information was hard hitting, it was factually correct. Laboratory offxials made a number of specific comments regarding the factual accuracy of the information presented. GAO reviewed these comments and made changes, as appropriate. Laboratory officials noted, in particular, that the recon- ciliation processis ongoing and that a number of capital and attractive items have been located since midJanuary. GAO notes this in the body of the report but was not able to verify the updated figures before the report was issued. As requested, GAO did not obtain official agency com- ments on the report. P8ge 5 QAo/ItcEDm11LlvemomPrqaerty bfuu@ment contents Executive Summary Chapter 1 10 Introduction Background Federal Property ManagementResponsibilities and 10 11 Requirements Categoriesof Property and Property Management 13 Controls Objectives, Scope,and Methodology 16 Chapter 2 17 A Sub&anti& NW&r Results of Physical Inventory Show a Substantial Number 17 of Missing Items of Items at the Inventory Also Shows a Substantial Number of Missing 19 Laboratory Are Special Interest Items Missing Amount of SomeMissing Property Cannot Be Reliably 21 Estimated Reported Lossesof Precious Metals Are Low 21 NoLossesof precursOr Chemicals Were Found 21 Conclusions 23 Recommendations 24 Chapter 3 26 The Laboratory Does Criteria for AssessingProperty ManagementControIs at the Laboratory 26 Not Have Adequate Property ManagementManuals Are Not Adequate 26 Property Controls Property ManagementControls Are Not Adequate or 27 Effectively Implemented Conclusions 32 Chapter 4 34 WE Has Not provid& DOE Did Not Require Inclusion of Its Standard Property 34 Management Provision in the Contract Adequate Oversight of Terms for the “MutuaIly Approved System” Have Not 36 the Laboratory J3=WP=dUpon The Operations Office Has Not Ensured Corrective Action 37 on AU Identified Deficiencies Conclusions 39 Recommendations 39 Pye 0 GAO/limwo4P Livermm Property rhMgement Appendixes Appendix I: Methodology Used to Examine the 42 Laboratory’s Property ManagementData Base and Procurement System Appendix II: Major Contributors to This Report 60 Tables Table 2.1: Summary of Missing Equipment as of Mid- 18 January 1999 Table 2.2: Summary of Items of Interest Missing 20 Following the Laboratory’s Inventory Table 2.3: Results of GAO Sample of Items of Interest Table 3.1: Vehicle Searchesat the Laboratory, 1986-89 iii Table 1.1:GAO Universe of Items of Interest 43 Table 1.2:Results of GAO Sample of Items of Interest 44 Table 1.3:Estimated Missing Non-Capital and Attractive 46 Items Table 1.4:Estimated Acquisition Cost of Missing Non- 46 Capital and Attractive Items Table 1.6:Number of Line Items in the Universe and the 47 Sample Table 1.6:Number of Estimated Equipment Items and 47 Acquisition Cost in PARIS Universe Table 1.7:Equipment Items and Associated Acquisition 48 Cost in the PARISSample Table 1.8:Estimated Number and Percent of Items Not 48 Recordedon the Data Base Table 1.9:Estimated Acquisition Cost of Items Not 49 Recorded on the Data Base The Lawrence Livermore National Laboratory is a government-owned, contractor-operated nuclear weapons research and development facility. Government-owned equipment inventories at the laboratory have an acquisition cost of over $903 million. They are located in over 400 build- ings and trailers on a one-squaremile site in Livermore, California, and at a nearby test site. This large complex is operated by the regents of the University of &Ii- fornia under a “cost plus a fixed management allowance” contract with the Department of Energy (DOE).' Under the contract, (1) the contractor is responsible for managmg government+wned property at the labora- toryand(2) ~~~ha~therighttoovemee andensure the effective man- agement of such property. In addition to the contract, federal and departmental regulations outline DOE'S responsibilities with respect to managementof government-owned property, including property man- aged by contractors. We were asked by the Chairman of the Subcommittee on Oversight and Investigations, HouseCommittee on Energy and Commerce,to determine the adequacy of the laboratory’s property controls and the extent of the property 1~. The Subcommittee expressedparticular interest in the lossesof selectedproperties, including computers, word processorsand typewriters, video equipment, cordless hand tools, precious metals, chemicals that can be used to manufacture i&gal drugs, and highly explosive materials. The Lawrence Livermore National Laboratory was established in 1962 as a nuclear weapons research and development fatAli@. Its overall mis- sion is to serve as a scientific, technical, and engineering resource for the federal government, particularly as these functions relate to national security. M&n- programs at the laboratory inch& (1) resear&, devel- opment, and testing fksmcM& with nuclear weapons, (2) inertial con- finement fusion directed at understanding weapons physics, (3) laser isotope separation, and (4) magnetic fusion energy and other energy research programs. The laboratory has been operated since its establishment by the regents of the University of California. The contract is subject to renewal every - 6 years. The current contract was signed on September 18,1987, and expires September 30,1992. Federal requirements for control and accountability of government- Federal Property owned property are contained in the Federal Property ManagementReg- Management ulations (41 CFRChapter 101) issued by the U.S. General Services Responsibilities and Administration. The Department of Energy Property ManagementRegu- lations (41 CFRChapter 109) are consistent with the federal regulations Requirements and serve to implement and supplement them. The regulations set forth the responsibilities and general policies that the Department must follow managing government-owned property. They cover, among other znhings,DOE's property managementprogram objectives and responsibili- ties, personal property managementstandards and practices, and con- tractors’ personal property managementprograms. Program Objectives and The objectives of DOE'S property managementprogram are two-fold. Responsibilities They are (1) to provide a system for effectively managing government personal property in the custody or possessionof DOE organizations and DOE contractorS and (2) to provide uniform principles, policies, stan- dards, and procedures for economical and efficient managementof gov- ernment personal property that are sufficiently broad in scopeand flexible in nature to facilitate adaptation to local needsand various kinds of operations. Responsibility for ensuring that these objectives are met is shared between DOE headquarters and its field offices. At headquarters, the Director, Property and Equipment Division, is responsible for, among other things, developing and maintaining departmental personal prop erty policies, standards, and procedures and conducting reviews and appraisals of departmental personal property management functions. The heads of DOE field offices,2in turn, are responsible for establishing and adminkering a personal property managementprogram within their organizations which will provide for effective managementof gov- ernment personal property in the custody of DOE and DOE contractors, consistent with applicable laws and regulations. They are also responsi- ble for developing and maintaining complete and accurate inventory 2”Headaof field off&s,” atedefined by departmentalregulation, are the headsof any DOEoffice locatedoutsidethe Wahington, DC., metrogditan area Page 11 GAO/BcED90122 Livenwre Property Management control and accountability record systems and conducting periodic man- agement reviews to ensure compliance with prescribed policies, regula- tions, standards, and procedures. In addition, contracting officers at the field offices are generally directed to ensure that all contracts that involve property contain the Department’s standard property clause, which, among other things, requires a contractor to maintain and admin- ister a property management system in accordancewith sound business practice and in accordancewith DOEproperty managementregulations. Personal Property Subpart 109-1.61of DOE’sregulations provides general guidance on DOE Management Standards standards and practices to be applied in the managementof government- owned personal property. This subpart covers, among other things, the and Practices identification and marking of government property, the physical protec- tion of such property, and the physical inventorying of property, consis- tent with generally acceptedaccounting procedures. For example, the regulations state that controls shall be established for identifying and marking government property as such and that property susceptible to unauthorized personal use, such as hand tools, should be considered for marking as U.S. Government property, and by numbering for control purposes. The regulations also state that controls such as property pass systems and perimeter fencing shall be established to prevent loss, theft, or unauthorized movement of property from the premises on which such property is located. Policy and Responsibilities Subpart 109-1.62of DOE’S regulations prescribes policy and responsibili- for Contractors’ Personal ties for the establishment, maintenance, review, and appraisal of a con- tractor’s program and system for the managementof government Property Management personal property. Specifically, this subpart states that PrOgramS “(a) Contractors shall establish, maintain, and administer a program for the effec- tive management of government personal property consistent with the terms of the contract and directives for the contracting officer. “(b) Contractors shall maintain their personal property management systems in writing on a current basis. “(c) Contractors shall require those subcontractors provided government property under the prime contract to establish and maintain a system for the management of such property. Procedures for assux4ngeffective property management shall be included in the contractor’s property control system.” Pue 18 Both the contractors’ and subcontractors’ systems for property control are to provide for, at a minimum, adequate records, controls over acqui- sitions, identification as government property, physical inventories, and proper care, maintenance, and protection. The systems are also sup posed to provide for reporting, redistributing, and disposing of excess and surplus property and a retirement work procedure to account for property that is worn out, lost, stolen, destroyed, abandoned,or dam- aged beyond economical repair. Periodic reporting of physical inventory results and of the total acquisition cost of government property is also required as is an internal surveillance system to ensure that property is being managed in accordancewith established procedures. Property acquired at the laboratory is placed in one of several catego- Categories of Property ries-capital equipment, non-capital equipment, attractive items, ~dproperty “other” equipment, and special materials items. For control purposes, Management Controls these categories are either centrally controlled, user controlled, or spe- cially controlled. Categories of Property The basic categoriesof property at the laboratory are defined as follows: . Capital equipment denotesproperty or equipment items with an acquisi- tion cost of $6,000 or more and a useful life of 2 years or more. Exam- ples of items fitting this category include x-ray generators and oscill~pes. As of mid-January 1000 the laboratory had an inventory of 30,362 capital items with a total acquisition cost of $681 million. 9 Non-capital equipment generally denotesproperty or equipment items with an acquisition cost of $600 or more. The laboratory further divides this category into two sub-categories-low value equipment and minor equipment. In general, propem costing between $1,000 and $6,000, with a useful life of 2 years or more, is referred to as low value equip ment and includes such items as sophisticated photographic equipment and selectedtypewriters. In contrast, minor equipment generally has an acquisition cost of $600 to $899 and includes such items as personal computer software, printers, and modems.As of mid-January 1900 the laboratory had an inventory of 129,086 non-capital items with a total acquisition cost of $187 million. . Attractive items, also known as sensitive items, include those that cost at least $160 (with no upper limit) and are judged by laboratory mana- gers as prone to theft or misuse. As of mid-January 1900 the laboratory had an inventory of 14,638 attractive items with a total acquisition cost Pye 18 of $36.3 million. The attractive items list changes periodically but cur- rently includes binoculars, still cameras,cellular telephones,telescopes, video cameras,tape recorders and players, personal computers, and electronic balances. l “Other” equipment includes property costing below $600 that is not labeled as “attractive.” This equipment is not categorized,per se, by the laboratory. Examples of such property include cordless hand tools and video tapes. Becausethe laboratory does not inventory items costing below $600, other than the attractive items, the total acquisition cost of this property is not known. l Special materials items include special nuclear materials such as pluto- nium, precious metals such as gold and silver, and chemicals that could be used to manufacture illegal drugs. Chemicals that can be used to manufacture illegal drugs are known as precursor chemicals. As of the end of fiscal year 1989, the laboratory had an inventory of approxi- mately 1.6 million grams of precious metals with a market value of about $10.2 million. The laboratory maintains similar data on special nuclear materials but that information is classified. Comparable data on precursor chemicals are not maintained by the laboratory. Property Management For control purposes, the various categoriesof property at the labora- tory are either centrally controlled, user controlled, or specially con- Controls trolled. In general, centrally controlled items include capital, non-capital, and attractive items. Minor equipment and property with an acquisition cost below $600 are user controlled. Special materials items are specially controlled. Laboratory procedures require centrally controlled items to be tagged (labeled) with a DOE identification number and entered on the labora- tory’s property management data base, called the Movable Equipment Management Information Center. Items on the property management data base are inventoried every 2 years, except attractive items, which are inventoried annually. The laboratory reconciles and reports lossesof capital and attractive items to DOE. Losses of these items are written off in the property management data base.Lossesof non-capital items are neither reconciled nor written offjn the property management data base. Items that are user controlled differ from centrally controlled i terns largely in that they are neither tagged with a DOE identification number nor entered on the property managementdata base.Someof these items are engraved with “LLNL” (which stands for Lawrence Livermore Page 14 GAO/BCEDB@1!22 Livenmore Property .Manqpment National Laboratory) or receive other permanent markings identifying them as government property. Special controls exist for each of the special materials items. For exam- ple, special nuclear materials have specific physical and accounting con- trols outlined in DOEOrders. Further, controls for precious metals are specified by the laboratory’s Materials Management Division and con- trols for precursor chemicals are specified by the laboratory’s Chemical Tracking committee. In a July 12,19SS, letter, the Chairman of the Subcommittee on Over- Ob&xtives,Scope,and sight and Investigations, HouseCommittee on Energy and Commerce, Methodology asked us to assessthe adequacy of controls at the Lawrence Livermore National Laboratory to protect government property in its custody and to determine the extent of property lossesat the laboratory. The Chair- man expressedparticular interest in lossesof the following items: Computers and computer equipment, including hand-held computers and calculators. Specializedtechnical equipment, e.g., balance scalesand measuring devices. Word processorsand typewriters. Photographic equipment. Video equipment, including recorders, monitors, and tapes. Cordless hand tools. Precious metals. Chemicals that could be used to manufacture illegal drugs. Highly explosive materials. The request was made following June 16,19SS, hearings on the labora- tory’s and DOE’S termination of operation Snowstorm, an undercover investigation of alleged drug activities at the laboratory. During the hearings, the Subcommittee Chairman expressedconcern about allega- tions that equipment and other items was being stolen to finance the purchase of illegal drugs by laboratory employees.We also assess4 the adequacy of DOE’S oversight of the laboratory’s property management system for government-owned properties. As subsequently agreed with your office, we plan to report separately on lossesof and controls for special nuclear materials and classified documents. We performed our work at DOE headquarters, the DOE San Francisco Operations Office in Oakland, California, and the Lawrence Livermore Laboratory in Livermore, California, from December1988 to January 1990. This work was done in accordancewith generally acceptedgov- ernment auditing standards. To determine the adequacy of controls and oversight for government- owned property at the laboratory, we reviewed, analyzed, and discussed with DOE and laboratory officials: (1) GAO standards for internal controls in the federal government,3federal property managementregulations, and the current contract for management and operation of the labora- tory and (2) written laboratory policies and procedures for management of govemment+xvned property. In addition, we reviewed recent nor3 property system appraisals, University of California internal audit reports, and DOEInspector General reports as well as related reports by private consulting firms pertaming to property management at the labo ratory. We also reviewed DOE'S fiscal years 1988-M annual statements and reports required by the Federal Managers’ Financial Integrity Act @IA)of 1982 to identify property managementcontrol weaknessesand actions taken or planned to resolve them. None of the FM reports identi- fied property management control weaknesses. To determine the extent of laboratory property losses,we audited inven- tory data basesand analyzed theft statistics and procurement transac- tions. We used a statistical sample of the items of interest that are centrally controlled to determine the extent of losses.This sample allowed us to estimate lossesfor the universe of these items. Appendix I contains a more detailed discussion of the sampling methodology we used. Since the laboratory maintains no data baserecords for most prop erty costing less than $1,000, we were unable to determine 1~ for such items as cordless hand tools and video tapes. We did, however, test the system of controls for these items at the user level by tracing indi- vidual procurements to the user level to confirm whether or not pur- chased items were on hand. For the special materials that are not managed as part of normal property management activities, we reviewed internal reports of lossesand related controls. P8ge 16 Chapter 2 A Substantid Number of Items at the Laboratory Are Missing A substantial percentage of government-owned property is missing from the laboratory. The results of the laboratory’s comprehensive inventory of all the property contained in its property management data base show that about 6 percent of the capital equipment items, costing $20.6 million; 20 percent of the non-capital items, costing $24 million; and 3 percent of the attractive items, costing $.8 million, were missing as of mid-January 1990. Our independent statistical analysis also confirms that a substantial number of the items of interest to the Subcommittee cannot be located. These unaccounted-for items do not include potential lossesof items that are not controlled on the laboratory’s property man- agement data base.For example, we could not determine the extent of missing items for someproperty such as hand tools, nor could we deter- mine whether there were any video tapes missing. Despite the substan- tial number of missii items, the contract between DOE and the university generally protects the university against liability for such losses. Results of Physical comprehensive (wall-towall) inventory of all the property contained in Inventory Show a the property managementdata base,the Movable Equipment Manage- Substantial Number of ment Information Center (MEMIC),and reconcile all relevant property control and financial accounting records1 In May 1989, the laboratory Missing Items began the physical inventory. Table 2.1 summarizes the results of the laboratory’s inventory as of mid-January 1990,2at which time the laboratory could not locate a total of 27,628 items, or 16 percent of the items recorded in the property management data base.This missing property has an acquisition value of over $46 million-6 percent of the total acquisition value of all the property in the data base-and consists of about 6 percent of the labo- ratory’s capital equipment items, 20 percent of the non-capital items, and 3 percent of the attractive,items. For capital and attractive equip- ment, these missing items have accumulated since 1987, when the last ‘Recondliationrequirrathatanexhaustive~confinnthatitemsareactuallymissingsothata losscanberecordedinpropertyandf~ ==-m3systems. 2The physical inventory of items in the pwpezty maq@men t data base was completed in May 1989. Following the inventory, ~oftheitemsbegsnandtsstillongdng.InMarch1990,labora- toryo~~toldusthatsincemMJsrmary199otheyhad~someofthe~capitaland attra&veitma.TheymaJntalnthatthepercentpimiasing~ftena,hps deaased from 6 per- cent to about 1.9 pexent, the percent of misdng atmbctive items from 3 peramt to 2.4 percent, and theperoentofnoncrpitplitenrsfrom#)perantto18.2~.Becaueethiereportwasinfinal p~rrtthetimethesengureswereprovidedtoua,wewereunabletovwifythembeforeour reportwasimued. Page 17 tao/llCED&l88 lhermore Roperty Mana8ement inventory was completxxL3Becauselossesof non-capital items have not been reconciled by the laboratory nor written off in the property man- agement data base,missing non-capital items at the laboratory could include items that have been missing since the early days of the laboratory. Table 2.1: summary of Mwng EquIpmat as of Mid-Jmunry 1820 Dollars in millions lmfentoq Miuinp ewivment ~hoory Numbs Value Number Percent Value Percent Capital 30,362 $660.7 1,605 5 $20.6 3 Non-capital 129,066 187.0 25,516 20 24.0 13 Attractive 14,638 35.3 407 3 .a 2 Total 174086 swJ2.o 27,528 $45.4 In November 1988, the laboratory agreed with DOE’S San Franci~co Oper- ations Office to reconcile all capital, non-capital, and attractive equip ment upon completion of the inventory. Subsequently, however, it decided not to reconcile non-capital equipment that is more than 6 years 6ld. According to laboratory officials, this change was made becauseof the extensive resourcesthat would be required to make a reconciliation of all non-capital equipment and becauseDOE regulations do not require reconciliation of noncapital items by management and operating con- tractors. DOE Operations Office officials told us, however, that the issue of non-capital reconciliation is not resolved; they continue to believe that all missing non-capital equipment should be reconciled. Conse- quently, they have not yet approved the laboratory’s plan to reconcile only non-capital equipment that is less than 6 years old. Unless all noncapital equipment is reconciled, there is no way to obtain an accurate picture of actual lossesof such items and accounting records cannot be a@sted to accurately reflect the results of the inventory. Further, part of obtaining a more accurate picture of unlocated non-cap ital items during an inventory period is the establishment of an “accept- able” loss standard for non-capital equipment. Up until March 1990, the laboratory had not established such a standard. At that time, the labora- tory established a loss standard of 2 percent for non-capital items pur- chasedwithin the last 6 years; it did not establish a similar standard for non-capital items purchased before the &year period. (DOE has not yet P8ge 18 . .-- approved this standard.) Becausethis standard does not apply to all non-capital items, an accurate picture of actual lossesof such items can- not be obtained. Given that the laboratory cannot account for 20 percent (as of mid-January) of its non-capital equipment, reconciling such equip ment and the establishment of a loss ratio standard for all such equip ment would help to demonstrate the laboratory’s commitment to managing government-owned property in accordancewith good busi- nesspractices. Further, for comparison purposes, the laboratory’s current acceptable loss standard for the number of capital equipment items that can be missing from inventory is .6 percent. The laboratory’s inventory results as of mid-January 1990 show that the number of missing capital equip ment items was 6 percent, or 10 times the acceptablestandard, demon- strating that the laboratory’s actual loss ratio for capital equipment was substantially higher than the acceptablelevel. According to laboratory officials, the number of missing capital items has decreasedsince that time to about 1.9 percent (as of March 16,1990), largely as a result of ongoing reconciliation. However, even with such a decrease,the number of missing capital equipment items is still about three times the labora- tory’s prescribed loss ratio standard. The laboratory’s inventory of all the property contained in the property Inventory Also Shows data base also shows that a substantial number of the specific items of a Sub&a&al Number interest to the Subcommittee cannot be located. Of the items of interest,4 of Missing Special the following are contained in the data base: Interest Items . Computers and certain computer-related equipment. . Specialized technical equipment (e.g., balance scalesand measuring devices). Word processorsand typewriters. Photographic equipment. Video equipment, including recorders and monitors. Due largely to the fact that the laboratory does not maintain the inven- tory records neededto determine losses,we could not determine the 4C%rtainitemsofinteresttotheSubcommittee do not flt excbively into a given category of prop erty. For example, personal computem are dedgwtd as at&active items. However, other computers, flepawgontheircostandleveIofsophi&icPtlon,are axm&red to be either capital or norwapital eql&ment. stmil8rly, word proceaom and phowgqw equipment m8y fall intO different categories, depending on their co& The m&&y of items of interest to the SuMttee fit into either the non- capital or attwtive property categories. P8ge 19 number of missing items for the remaining items of interest-video tapes, cordless hand tools, precious metals, chemicals that could be used to manufacture illegal drugs, and highly explosive materials. Table 2.2 shows the results of the laboratory’s inventory of items of interest to the Subcommittee, as of mid-January 1990. Table 2R: summaty of Items of hterest Nunaerof misahglWns AcquisRlon cost Microcomputers 49 686,055 Micro accessories 969 1,612,941 Video equipment 641 1,018,669 Tvoewriters/word orocessors 205 191.117 Balance scales 101 68.768 Cameras/related equipment 388 104,991 Calculators 3,677 224,915 Total 6.260 S3.307.276° %cludes some capital equipment end other oste9ories of equipment that were excluckd from the uni- verse from which our sample was taken; therefore, the results sre not directly compsrabfs with our sarn@e results. The results of our independent statistical analysis verify substantial lossesof the items of interest to the Subcommittee. We statistically sam- pled 276 items of interest from the property managementdata base.Of these items, the laboratory could not locate 38 (14 percent) of them. Table 2.3 shows the results of our sample. TabfeR3:RosatsofaAOEampkof ltemsofI- YZt A~UlOitbl ample mia~ Mimputers 81 1 $1,249 Micro accessories 69 4 2,848 Video equipment 36 5 4,557 Typewriters/word processors 21 3 1,195 Balance scales 7 0 . Cameras/related equipment 10 2 512 cakulators 52 23 2,471 OM;;bE;p, modular 0 0 0 TOWI 276 26 $12,662 P-e 20 On the basis of our sample of items of interest contained in the property management data base, we estimate that 6,868 items with an acquisition cost of about $2 million cannot be accounted for. Appendix I provides additional details on these estimates. We could not determine the extent of missing items for someproperty Amount of Some such as cordless hand tools, nor could we determine whether there were Missing Property any video tapes missing. No consistent data are collected on acquisitions Cannot Be Reliably of these items, and tool acquisitions are made by numerous organiza- tional units that use different control procedures. For example, one type Estimated of cordless hand tool-a Makita cordless power drill-is acquired and stocked centrally at a laboratory store-type facility, but it has also been purchased by other organizational units using blanket purchase orders. Many items purchased under blanket purchase orders, as discussedin chapter 3, are not identified individually in the property management data base.Consequently, it is difficult to tell how many of these items have been purchased or lost. In essence,control over these items has been lost. Similarly, we could not determine whether any highly explosive materi- als or precious metals were missing; the data necessaryto determine if lossesof highly explosive materials have OcculTedare not maintained. Unexplained lossesof precious metals-i.e., the difference between Reported Lossesof inventory and reported usageas determined by the Laboratory’s Mate- Precious Metals Are rial Management Division- have been low. For fiscal years 1987-89,the LOW laboratory’s highest unexplained loss occurred in 1987. This loss, with a market value of about $13,900, was .13 percent. However, while docu- mentation for the acquisition and consumption of precious metals is maintained and periodically verified by physical measurementof the quantities on-hand, reports of consumption of the metals are not inde- pendently verified. Without verification there is no way to ensure that the reported consumption is accurate. We did not identify any lossesof chemicals that can be used to manufac- No Lossesof Prewrsor ture illegal drugs. These include barbituric acid, benzyl chloride, pento- Chemicals WeE Found barbital, and morpholine. They are tracked from ordering through delivery. In 1937, the laboratory formed a chemical tracking committee to control and monitor procurement, receipt, and delivery of chemicals that can be used to manufacture illegal drugs. The committee developed Page 21 GAO/BCElM%l22 Ltvenmm? Property Muu@ment chapter 2 ASubatanthlNumberofIte~rtthe ---YAnu controls for 27 chemicals that it identified as precursors. In September 1988, the laboratory further improved controls to prevent possible mis- use of precursor chemicals by limiting procurement to special orders by five persons (designated by the procurement manager); issuing instructions to suppliers to provide these chemicals through spe- cial orders only; establishing procedures to hand-carry the chemicals to users, obtain signed receipts, and place the chemicals under lock and key; eliminating precursor chemicals as a stock item in laboratory stores; and quarterly reporting of precursor chemical purchasesto the laboratory’s security office for monitoring and investigating purchasesthat appear to be unusually large or otherwise suspicious. According to the laboratory’s procurement manager and the labora- tory’s chief investigator, the purchase of precursor chemicals is infre- quent and the quantity ultimately purchased is small, largely because such items are seldom used at the laboratory. Most chemists use non- controlled substitute chemicals in their work, if needed.The laboratory’s chief investigator told us that he is confident that existing controls are working as intended and that no illegal drug manufacturing is going on at the laboratory. We reviewed two 1989 safeguards and security reports (January and June) for precursor chemical purchases and verified that the quantities purchased since the control system was implemented have been very small. We also verified that signature receipt records were maintained and matched with purchase reports for precursor chemicals. Although a substantial percentage of government-owned property is The University Is missing from the laboratory, the contract between DOE and the univer- Essentially Protected sity generally places the risk of lost, damaged,or destroyed property upon the government. Specifically, the contract between DOE and the Against Liability for LOSSeS “The University shall not be liable for loss or destruction of or damageto Govern- ment Property in the University’s possessionor custody unless such loss, destruc- tion or damageis caused directly by bad faith or willful misconduct on the part of someCorporate Officer or Officers of the University or of any person acting ss Lab- oratory Director, or unless such loss, destruction or damage results from a willful failure on the part of someCorporate Office or Officers of the University or of any P8ge 22 chpterz ASabmtantlalNomberofIteme~tthe L8bor8tory Am Misdng person acting as Laboratory Director, to take reasonable steps to comply with any appropriate written directives of the Manager, San Francisco Operations . . . , to safeguard such property . . . .” According to a September 1989 DOE Inspector General’s report,5 DOE’S fundamental indemnification policy is, with few exceptions, to com- pletely indemnify its managementand operating contractors, bear sub- stantially all risks, both nuclear and non-nuclear, and pay all costs associatedwith running its facilities. DOE’S contract with the university is no exception to this fundamental policy. At the laboratory, none of the missing items have been attributed to bad faith or willful miscon- duct on the part of the university or laboratory directors. Consequently, the cost, accountability, and responsibility for these missing items is ultimately DOE’S. Moreover, the San FIancisco Operations Office has not provided written directives to safeguard government property in the university’s possessionor custody, as provided for in the contract. On January 26,1990, the Secretary of Energy proposed an amendment to the Department’s acquisition regulations that would make manage- ment and operating contractors liable for certain costs, claims, and lia- bilities currently reimbursed by DOE. These proposed nonreimbursable costs include lossesof government property resulting from theft, embez- zlement, or unauthorized use. However, as written, this proposed rule would affect only those contractors that receive profits under their con- tracts. Consequently, according to DOE’S Director, Office of Review and Analysis, even if this proposed rule becomesfinal, it will not affect property management at the laboratory since the university operates the laboratory on a nonprofit basis. Becausethe contract between DOE and the university essentially protects Conclusions the university against the risk of lost, damaged,or destroyed property, the university’s accountability for missing items at the laboratory is minimal. Similarly, the incentive to limit abuseof such property is also minimal. DOE has the authority to include in its managementand operating con- tracts risk-of-loss provisions that would require a contractor to more closely managegovernment property in its custody. However, in the Q&RU@Z&IXI of the Departmentof Energy’sWt and OperatU Contractors(Sept.19W, DOEInspecmrGeneral. Page 28 GAO/ItCED#122 Liwxmme Property Management -2 ASabmuntidNamberofItemaatthe L8bomtory AN3 Mhsing caseof the Lawrence Livermore National Laboratory, the contract lan- guage makes DOE liable for the loss of property almost without excep tion. The contractor is currently at risk only for willful misconduct by corporate officers. It is not at risk for lack of prudent businessjudg- ment. In our opinion, by negotiating and accepting the terms of the cur- rent contract’s risk-of-lm provision, DOE forfeited a significant opportunity to enhancethe accountability of the university with respect to government-owned property at the laboratory. To enhance accountability over governmentowned property at the labo- Recomxnendations ratory, we recommendthat the Secretary of Energy direct the San Fran- cisco Operations Office Manager to . provide appropriate written directives to the university to safeguard and protect government property in the university’s possessionor cus- tody as provided for in the current contract and l modify the contract with the university in 1992 by identifying addi- tional circumstances under which the contractor will be held liable for the loss of government-owned property in its custody. P8ge 24 GAO/IWEMlbl~ Livmmom Property ru8Mgement The Laboratory Does Not Have Adequate property Controls The Lawrence Liver-moreNational Laboratory does not have adequate controls to ensure that property in its custody is safeguarded against theft, unauthorized use, or loss. For example, the laboratory has not tagged, marked, or otherwise identified as government property someof the items it has acquired for use in weapons and energy research and development. Further, there are no laboratory-wide policies and proce- dures for controlling items with an acquisition cost below $1,000; as a consequence,no consistent data are collected on their acquisition. The laboratory also doesnot independently verify the consumption of pre- cious metals such as gold and platinum held by laboratory employees. Moreover, an audit trail doesnot exist by which lossesof highly explo- sive materials can be detected and measured. In addition, there are insufficient physical controls to prevent laboratory employees and sub- contractors from leaving the laboratory with government property without proper authorization. When such we&nesses are taken together, the likelihood of detecting theft of government property is low. I for Assessing Criteria ifomia sets out the rights and responsibilities of the two parties with Property Management respect to property and propem management.The language in the Controls at the clause is general and the clause covers a number of topics, including the identification and protection of government property and property man- Laboratory agement.Although the contract between DOE and the University of Cali- fornia for managing and operating the laboratory states that the university shall take all reasonableprecautions to safeguard and protect government property in the university’s posses&onor custody-as dire&d by DOE, or in accordancewith sound businesspractice-it does not further define what is meant by “reasonable precaution” or “sound businesspractice.” Criteria do exist, however, against which to assesswhether government property is being adequately safeguarded and protected. In GAO'S Stan- dards for Internal Controls in the Federal Government, for example, we note that as part of safeguarding and protecting government property, adequate internal controls are neededto help prevent against waste, loss, unauthorized use, and misappropriation of assets.Internal control techniques include, but are not limited to, such things as specific poli- cies, procedures, plans of organization(including separation of duties), and physical arrangements (such as locks and fire alarms). In addition, the DOE property management regulations discus& in chapter 1 pro vide a framework for assessingthe adequacy of property controls. Fur- ther, in early September 1988, DOE's San Francisco Operations Office -3 . TheL&mmtoqDoeeNotEaveAdequt.e Propetty- Controb requested the accounting firm of Deloitte, Haskins, and Sells to provide guidance on what constitutes an effectively functioning property control system. In its September 27,1988, responseto DOE’S request, the firm stated that positive answers to the following questions, among others, would be an indication of an effectively functioning property control system. . Are adequate accounting records maintained regarding the description, value, location, etc., of each item of property? l Are physical controls adequate to keep property from being removed without authorization? l Are accurate physical inventories of all property taken regularly, and are the accounting records adjusted to the results of the physical inventory? . Is the loss/misplacement of property identified during physical invento- ries consistently negligible? The laboratory has two internal manuals that address property manage- PropertyManagement ment-the Administrative Policies and ProceduresManual and the ManualsAreNot Office ProceduresManual. While both manuals provide broad state- Adequate ments of policies and pmcedums for property management,they are ambiguous and do not include the specific steps that users should follow in managing property. For example, the Admin&rative Manual includes a brief description of the property management data base.But it does not explain how the data baseis to be used to support property controls, what types of equipment or property are to be recorded in the data base,or what controls are to be applied to property that is not recorded in the data base.We were told by laboratory property management office officials that, in addition to these manuals, a &aft document enti- tled “LLNL[Lawrence Livermore National Laboratory] Property Manage- ment Task Procedures” is a source of guidance for property controls. Although this draft guidance contains more detailed property manage- ment functions than either of the two manuals, it is not comprehensive. For example, the task procedures contain a detailed description of how attractive property will be controlled and how physical inventories will be taken of attractive and capital equipment, but the draft does not establish controls for property that does not fall into these two categork?s. P8ge 26 GAo/-mED-m122 LIvemom Property Management Weaknessesin the laboratory’s property managementmanuals were also found by the accounting firm of Coopersand Lybrand in 1988,’ a review conducted at the request of laboratory management.While the firm’s final report did not identify significant weaknessesin the substanceof the laboratory’s property managementpolicies and procedures, it noted that neither of the laboratory’s property managementmanuals presents the specific steps that a user must follow to conduct property manage- ment-related activities. To improve the existing policies and procedures, Coopers and Lybrand recommendedthat the laboratory consider (1) consolidating the property management-related sectionsof these manu- als into a single volume so that the property managementpolicies and procedures in both manuals provide exactly the same information and (2) strengthening the tone and format of the manuals to improve their effectiveness. Although laboratory officials agreed with these recom- mendations, they did not implement them. The reason given for not act- ing on the recommendations was inadequate staff and funds. Property Management theft, unauthorized use, or loss becausepolicies and procedures either Controls Are Not are not adequate or have not been effectively implemented. We found Adequate or weaknessesin specific property controls for centrally controlled, user controlled, and some specially controlled items. For example, we found a Effectively 34 percent error rate in the laboratory’s property managementdata Implemented base when we attempted to verify inventories of the items of interest to the Subcommittee. We also found weaknessesin physical controls in that individuals leaving the laboratory site face little risk of having their vehicles searched.When such weaknessesare taken together, the likeli- hood of detecting theft of government property is low. Controls for Laboratory controls for centrally controlled items-generally those with &ntpllv-= F Amtrolled Items an acquisition cost greater than $1,OOO-are not adequate to protect government-owned property, as indicated by the large number of items AreN ‘ot Followed included in our statistical sample which were not at the location indicated. Centrally controlled items are supposedto be recorded in the labora- tory’s Movable Equipment ManagementInformation Center data base. The system includes data on the type of item, location, and operating ~~~wre!nazLivermore Nation& Laborataies Review and Analyds of the Property Management Func- -tion (Nov. 2,lf488), Caopers and Lybrand. P8ge 27 GAO/EED@O-122Ltvennore Roperty Management condition. procedures call for property expediters2to report property movement and other changesin status so that the system can be updated and used as a source for inventory. Data accuracy is a necessarycomponent of an effectively functioning property control system. Without accurate data, there is no assurance that property is being properly and effectively managed.However, we found a 34 percent error rate in the laboratory’s property management data base when we attempted to verify inventories of the items of inter- est to the Subcommittee. (Seeapp. I.) One in 3 of the 276 items included in our statistical sample was not in the location indicated in the data base.Further, it took laboratory property managementpersonnel sev- eral months to locate over half of the 94 misplaced items; the remaining 38 missing items-14 percent of the 276 items included in our sample- have not been located. Laboratory officials are aware that property expediters do not always report relocations of centrally controlled property as required. And, in their opinion, this is the most likely causeof the property not being at the location indicated in the data base.To help address this problem, laborato~property managementofficials told us that they are consider- ing forwarding a proposal to laboratory managementthat would replace the current property expediters, who perform this function in addition to their regular duties, with about 30 full-time people. Although they would like these positions to be new positions, they said that budget constrainti may not allow for this. Laboratory Controls for Laboratory controls for user-controlled items-generally those with an acquisition coat below $l,OOO-are not adequate. The laboratory has no User-Controlled Items Are laboratory-wide policies and procedures for controlling these items; con- Not Adequate trol is left up to individual user groups3 Further, not all tools purchased through blanket purchase orders have been marked as government Property. Neither of the two property managementmanuals nor the task proce dures manual provides guidance on how to control the majority of items P8ge 28 GAO/RCED4&122 Llvermore Roperty Muuqemant costing below $1,000.4Becausecontrol of these items is left up to indi- vidual user groups, no consistent data are collected on acquisitions of these items. Therefore, it is difficult to tell how many of these items have been purchased by the laboratory. For example, cordlesstool acquisitions are made by numerous organizational units that use differ- ent procurement procedures. To illustrate, one type of cordless hand tool-a Makita cordless power drill-is acquired, permanently marked as government property, and stocked centrally at a laboratory store- type facility. However, this tool has also been purchased by other orga- nizational units using blanket purchase orders. Items purchased through blanket purchase orders may or may not be marked as government property, depending on the user group. Such orders expedite procure- ments from local sourcesoutside the normal competitive procurement process,but the laboratory’s procurement data base for managing blan- ket purchase orders does not identify the individual items purchased. The loss of accountability for items purchased with blanket purchase orders is potentially significant. The laboratory told us that it has approximately 1,700 materials and equipment purchase orders with a funding level of $40 million. (This excludes blanket purchase orders involving utilities and services.) We also found that not all tools purchased through blanket purchase orders have been marked as government property. For example, of the 10 cordless hand tools that we attempted to trace from blanket purchase order transactions to the organizational unit that purchased them, we could verify only that 5 were on hand, and of these, only 1 was perma- nently marked as government property. Similarly, of the four items of computer equipment that we attempted to trace, only one was on hand and it was not marked as government property. Laboratory Controls for Laboratory controls for somespecially controlled items, including highly explosive materials and precious metals, are not adequate to ensure SomeSpeciaUy Controlled against loss or misuse. First, as with user-controlled items, there are no Items Are Not Adequate laboratory-wide policies and procedures for accounting for highly explo sive materials. Consequently, different procedures have been developed by those laboratory organizations responsible for controlling such mate- rials, resulting in the lack of full accountabihty. The I&oratory Doea Not Have Adequate Property Chtrob While the laboratory has no record of lossesof highly explosive materi- als, the control system for these materials is not adequate to ensure that losseshave not occurred. Within the laboratory, controls and accounta- bility for highly explosive materials are delegated to six different orga- nizational units that use the materials. Each unit has different control procedures for storing and handling highly explosive materials. Further, five of the units do not require periodic verification of quantities on hand against inventory records. Moreover, one of the five units doesnot maintain records on the quantities of highly explosive materials that it receives and disburses. Without such information an audit trail cannot be established by which lossescan be detected and measured. With respect to precious metals, we found that weaknessesin the labo- ratory’s controls for such metals may have allowed undetected losses. (Precious metals include platinum, gold, silver, rhodium, osmium, irid- ium, ruthenium, and palladium.) Specifically, we found that the labora- tory does not independently verify government-owned inventories of precious metals in the custody of subcontractors nor does it require the 284 users of precious metals to maintain a log showing the individual user, type, and form of metal and the time, place, and purpose of each use. As a result, the laboratory cannot readily verify the reasonableness of reported consumption of these metals. Recordsof a subcontractor with a large platinum inventory, for exam- ple, indicated no usageof the material for a 7-year period. The subcon- tractor subsequently reported that the entire inventory-with an acquisition cost of $76,000-was used during a 6-month period to make glass for lasers to be used at the laboratory. The laboratory’s precious metals manager questioned this much usagein such a short period and told us that someof the platinum may have been used for customers other than the laboratory. While a subsequentinvestigation of this inci- dent by the DefenseContract Audit Agency did not indicate that any of the platinum had been used for other customers,the Agency found that the contractor did not separately account for government-owned prop erty in its possessionduring the period audited. Consequently, there was no way to readily verify the reported consumption of the government- owned platinum. In addition, we observed an inventory verification procedure for pre- cious metals to determine if it reasonably assured that such metals were appropriately used and consumedat the laboratory. At the conclusion of the weighing, the inventory technician told the user how much less pre- cious metal was on hand than was indicated in inventory records. The Pyle 30 GAO/lKXD@H22 Lhnno n Ropertv MMasement ‘Ibe Laboratory Does Not Have Adequate Propdy controls user replied that this missing quantity-four grams of rhodium-had been used in experiments. Given this statement, the inventory techni- cian recorded the adjusted inventory by subtracting the “consumed” quantity and prepared a form to record this amount as a write-off. We asked the user’s superior, who signed the writeoff document, if the signature certified the accuracy of the reported usage.This individual said that the procedure means that he has general knowledge of what the user is doing and that the reported usageseemsto be reasonable; however, his signature is not a certification that the amount written off has actually been used as reported. We do not believe that this proce dure provides a reasonable assurancethat such metals have been appro- priately used and consumed. A 1988 study conducted by Vierra Investigations,6an investigative ser- vices firm, cautioned that the laboratory’s system for controlling pre- cious metals is based on a high degreeof trust and noted that there is somevulnerability to theft due to the nature of precious metals use and the difficulty in verifying use. It concluded that this vulnerability is greatly reduced by supervisory/managerial review of precious metals use. In responseto this study, the laboratory concluded that while this report was extremely candid and offered an independent third-party view of property managementprocedures at the laboratory, theft of property at the laboratory is “not at a level which would suggesta marked inadequacy of the current physical protection of [the] property system.” Consequently, the laboratory did not change its procedures for controlling precious metals. Physical Controls Over Physical controls over exiting vehicles at the laboratory are not ade- Exiting Vehicles Are Not quate to ensure against theft. Specifically, individuals leaving the labo- ratory site in vehicles face little risk of having them searched. Adequate Consequently, the likelihood of detecting theft of government property also remains low. Laboratory security statistics indicate, as shown in table 3.1, that while the number of vehicle searcheshas increased every year except one since 1986, the number has remained small relative to the number of vehicles that move through the laboratory daily. For example, in 1983, the year of the greatest number of searches,about 17 vehicle searches 5&m uvemm NM Laboratory: Theft/Loss Vulnerabili~ Amlysis (Nov. 19881,Vierra IlWm rc3. P8ge 31 GAOjXCED8@122 Livermore property lbfamwment -3 TheL&watmyDoesNotJiweAdequate Pmperty Co&rob were conducted each day.6Approximately 7,000 vehicles enter and sub- sequently leave the laboratory daily. According to laboratory security officials, fewer gate searcheswere made in 1989 becauseof increased security requirements elsewhere in the laboratory, leaving fewer officers available for gate vehicle searches.Table 3.1 shows the number of searchesfor the last 4 years. T8bi83.1:wlkJa&ucho8tim Labaawy, lffl-89 Yew smmchea 1986 1.211 1987 21739 1980 4,321' 1989 1.379 aExcludes searches for one facility within the laboratory complex where all vehiis are routinely searched. At this facility, 4,929 searches were conducted during 1988 and 4,219 during 1989. Further, only about one-half of the searchesmade during each year (1986-89) were exit searches.J&it searchesare supposedto deter theft of government property and classified materials. Entry searches,on the other hand, are aimed at preventing anyone from bringing in contra- band--firearms, explosives, listening devices, cameras,and drugs. Given that only about one-half of the searchesmade during each year were exit searches,it is questionable how effective such searchesare in deterring theft of government property and classified materials. The laboratory does not have an effectively functioning property con- Conclusions trol system. Property controls are inadequate and a substantial number of items are missing, as discussedin chapter 2. Moreover, positive answers cannot be provided to the questions of: l Are adequate accounting records maintained regarding the description, value, location, etc., of each item of property7 . Are physical controls adequate to keep property from beii removed without authorization? l Are accurate physical inventories of all property taken regularly, and are the accounting records adjusted to the results of the physical inventory? %aaed an the Vierra Inv~ns report data of 260 bushens days and the laboratory’s vehicle seprch~.~laboratory’satotbtiesindudeseprchcsforboshthelpboratoryandSite300.) Thevierraxnv~reportrecanmendedthatofthe approldmptely 7,000 vehicles entering and zysz the bbomtmy daily, at least 1 percent, or 70 vehicles, should be stopped and l Is the loss/misplacement of property identified during physical invento- ries consistently negligible? While it is the university’s responsibility to take all reasonable precau- tions to safeguard and protect government property in its custody, it is DOE's responsibility to ensure that the university does so. It is also DOE’S responsibility to ensure that the laboratory’s property ckntrol system is effective. In chapter 4, we discusshow DOE has fallen short of meeting these responsibilities and provide recommendations to DOE on ways to improve property controls at the laboratory. P8ge 88 __--. DOE Has Not provideded Adequate Oversight of the Laboratory DOEhas not adequately overseenthe laboratory’s property management system. DOEdid not require inclusion of its standard property manage- ment provision in the contract with the University of California. This provision, normally included in all DOEmanagementand operating con- tracts, requires that a contractor maintain and administer a property management system in accordancewith sound businesspractice and in accordancewith DOE’Sproperty managementregulations. Moreover, in lieu of this provision, DOEhas not developed or provided guidance to the laboratory, spelling out alternative criteria for performing the labora- tory’s property management functions. Furthermore, even though the contract between DOEand the university provides for establishing a “mutually approved system” for property management,the terms of this system have not been developed nor agreed upon. In addition, the Operations Office has not ensured corrective action of deficiencies iden- tified during its appraisals of the laboratory’s property management system. As a result, DOEcannot provide assurancethat govemment- owned property at the laboratory is being adequately safeguarded and protected. The DOESan F’ranciscoOperations Office did not require inclusion of its DOE Did Not Require standard property managementprovision in the contract with the Uni- Inclusion of Its versity of California. The contract was signed on September 18,1987, Standard Property and expires September30,19!32. !l’his provision, which the regulations generally require DOEto include in its management and operating con- Management Provision tracts, states that in the Contract “The contractor shall maintain and administer a property management system, sub- ject to the approval of the contracting officer, of accounting for and control, utiliza- tion, maintenance, repair, protection and preservation of Government property in its possessionunder the contract. The contractor’s property management system shall be maintained and administered in accordance with sound business practice, and in accordance with Department of Energy Property Management Regulations, and such directives or instructions which the contracting officer may from time to time prescribe.” Replacing this particular provision in the contract is the following language: “The University shall take all reasonable precautions, as directed by the Manager, San Prancisco Operations or his authorized alternate, or in the absenceof such directions in accordance with sound business practice, to safeguard and protect Government Property in the University’s possessionor custody. . . . The I’nlversity Page 34 shall keep up-to-date the mutually approved property management system [empha- sis added], as it may be modified with the approval of the DOEcontracting officer, of accounting for and control by the University of property owned by the govern- ment within the custody of the University.” According to DOE’sContracting Officer at the San Francisco Operations Office, DOEtried to insert its standard provision into the contract during the most recent negotiations (1987), but the university opposed its inclu- sion, arguing that such a requirement would impose a superior/ subordinate relationship upon government and contractor rather than the historical relationship of mutuality and consent. DOEagreed to drop this as a negotiating point, stating in its negotiation summary report that “Although DOEwas concerned about the degree of its ability to exercise oversight and control and about the university’s occasional lack of responsiveness to DOE’s concerns (emphasis added], the Department recognized that administrative require- ments are basically being complied with and determined that the Laboratory’s per- formance . . . far outweighed the administrative problems.” Other excerpts from the negotiation summary report provide additional insight into DOE’S reasoning for excluding the exact language of its standard property management provision in the contract. For example, the negotiations report states that the university rigidly insists “upon. the principle that the government’s role is to establish broad policy and provide general dir&ion for the conduct of the work, and that the uni- versity’s role is to managethe work as it believes appropriate . . . .*’ In recommending the contract for approval, the report concluded that “Although the contract differs substantially from what is prescribed as a standard for Y&O [management and operating] contracts, the basic concepts and the relation- ship that this contract has historically represented have served the Department well in terms of accomplishing its mission. The omissions and deviations from what mi#ht be desired are administrative matters rather than statutorily material deficiencies.” tinsequently, as acknowledged by LIOESan Francisco operations Office officials, rather than jeopardize retention of the university as the con- tractor, DOEdecided not to insist on including the provision in the con- tract and stated that it would exercise its oversight responsibilities through management actions outside of the contract itself. What form these “management actions” would take, however, was not specified. OAO/WEDMHZ2Llvemom PmpertyNnt -- -4 DOEHamNot Rovided Adequte Overulght of theL8bor8tory More importantly, in lieu of this provision, the contract gives DOEthe right to direct-through guidance-the property managementopera- tions of the university. It did not do so, even though the university had indicated its wilhngness during contract negotiations to consider such guidance in developing and implementing laboratory procedures and manuals. The Operations Office’s property administrator made an effort in March 1988 to draft someproperty management guidelines, but these guide- lines were never approved. The guidelines were returned unapproved to the property administrator by the Operations Office Contractor Manage- ment Division stating that “the contract property clause does not allow DOEthe right to changethe University’s property management system without mutual agreement.” Following this rejection, the Operations Office took no further action to develop property management guide- lines for the laboratory. Even though the contract between DOEand the university provides for Terms for the the establishment of a “mutually approved system” for property man- “Mutually Approved agement, the terms of this system have not been developed nor agreed System” Have Not upon. When we asked laboratory managers about this “mutually approved system,” they referred us to the laboratory’s property man- Been Agreed Upon agement manuals-the Administrative Policies and Procedures Manual, the Office Procedures Manual, and the Lawrence Livermore National Property Management Task Procedures.The task procedures, however, have not been formally approved by DOE. Also, DOE’sheadquarters Office of Review and Analysis for Procurement and Assistance Management noted in its May 1988 review’ of property management functions at the San Francisco Operations Office that, although the contract references the establishment of a mutually approved property management system, “Discussions with AIS [Administrative and Information System (sic) Division] prop erty administrators and the Division Director indicate uncertainty regarding the existence of such systems or the terms of approval.” To address this problem, the report recommendedthat, “in the absence of the standard DOEproperty clause,” the field office should ‘Part II: PemonalPropertyYarrpgement Review(PPMR)(May1888),DOE. P8ge 96 GAO/RCED-W122 Livennore Property Management l determine the status of the mutual agreementswith the laboratory; . review mutually agreed upon terms to ensure conformance with federal and departmental property management regulations; and . identify those areas where discrepancieswith the regulations exist which would affect the San F’ranciscoOperations Office’s ability to man- age personal propem effectively and include mutually agreed upon changesto areas so identified. In responseto these recommendations,the Operations Office stated that it reviews the laboratory’s property management policies and proce- dures during its scheduled appraisals of the laboratory and that when deficiencies are identified, it makes recommendations for corrective action. However, while the Operations Office’s November 1988 appraisal of the laboratory’s property managementsystem identified some deficiencies in the laboratory’s system, it did not “determine the status of the mutual agreementswith the laboratory,” or “review mutu- ally agreed upon terms to ensure conformance with federal and depart- mental property managementregulations,” as recommended.According to Operations Office officials, these recommendations were not imple- mented due to staff shortages. Approval of a contractor’s personal property system is required by reg- ulation. BecauseDOE has not met this regulatory requirement, it cannot provide assurancethat government-owned property at the laboratory is beii adequately safeguarded and protected. Corrective Action on rection of identified deficiencies is required by regulation. All Identified Subpart 199-1.62of DOE’S implementing regulations requires the prop Deficiencies erty admMstrator to appraise the contractor’s property management operations at least every 2 years (with a maximum period of 3 years) after the execution date of the contract. The appraisal may be baaedon a formal, in-depth appraisal on site or a series of formal appraisals of the functional segmentsof the contractor’s property managementsys- tem to determine if the contractor is managing the government personal property in its custody in accordancewith previously approved policies, procedures, and applicable regulations. Appropriate follow-up is required by the property adminWrator to ensure that corrective actions are taken. In 1985, the San F’ranciscoOperations Office appraised the laboratory’s personal property managementsystem.2This appraisal revealed defi- ciencies in the system, including a failure by employeesand property expediters to (1) update the property managementdata base and (2) tag property delivered directly to users. To correct these deficiencies, the Operations Office recommended,respectively, (1) that management emphasizeemployee responsibilities for supporting the property man- agementsystem and its importance for controlling DOE equipment and (2) thit property managementfollow up on and tag all untagged equip ment as soon as possible. These recommendations have yet to be satis- factorily implemented, even though the contract was renegotiated and approved again in 1987. A subsequentappraisal of the laboratory’s property managementsys- tem, completed in November MS,8 again reported on the failure of employees and property expediter%to keep the property management data base up to date regarding property movement. DOE recommended that (1) “laboratory staff and their supervisors should be made fully aware of their personal property responsibilities, held personally accountable for property in their custody and penalized for abuse” and (2) the current biennial inventory “should be a lOGpercent inventory and reconciliation of laboratory equipment, including all capital, non- capital, and sensitive items.” DOE made completion of the 190~percent inventory and reconciliation a condition for DOE approval of the labora- tory’s property management system. Althoughthe laboratory initially agreed to take corrective action on these deficiencies, the laboratory, as discussedearlier, no longer plans to reconcile non-capital equipment purchased over 6 years ago. The issue of reconciling non-capital equipment is still being discussed-14 months after the recommendation was made. The laboratory did issue, on December 12 MS, a memorandum to laboratory staff emphasizing the importance of personal property responsibilities. However, the Opera- tions Office has not yet evaluated the effectiveness of the laboratory’s actionsinthisarea Lawrence Livermore National Laboratmy )I&port,LawnmxUvmreNationalLaborato~ sanRaluhcoopartbnomee. DOEhas not provided adequate oversight of the laboratory’s property Conclusions management system. DOE’s responsibility is to ensure that a contractor’s system adequately safeguards and protects government property. DOE cannot provide these assurances- it has not approved the laboratory’s existing system nor has it developed or provided guidance to the labora- tory, spelling out the criteria for performance of property management functions. Without an approved system, DOE has no clear criteria against which to judge and assesscontractor performance. And without such clear criteria, it cannot provide assurancethat government personal property is being adequately managed. As discussedin chapter 2, the number of missing items of government property at the laboratory has been substantial-the result, at least in part, of inadequate property controls at the laboratory. Had DOEpro vided adequate oversight of the laboratory’s property management sys- tem, the internal control weaknessesleading to these lossesshould have been identified and corrective actions taken. Further, DOE’s wihgneS!bi to allow the contractor to prescribe the terms of the contract raises questions about DOE’s commitment to ensuring ade- quate oversight. The negotiations summary report prepared by the San Francisco Operations office provides troublesome insights into DOE's approach for dealing with the contractor. In the report, DOEacknowl- edgesthat the contract differs substantiahy from what is prescribed as a standard for management and operating contracts and acknowledges that it acceptedthe contractor’s refusal to include the standard federal property managementclause in the contract in order to retain the ser- vices of the university. It is also troublesome to note that DOEaccepted what was, in its own view, the contractor’s insistence upon the principle that the government’s role is to establish broad policy and provide gen- eral direction for the conduct of the work, and that the university’s role is to managethe work as it believes appropriate. DOE’S role, by federal and departmental regulation, is more than a policy maker and a pro- vider of direction-the Department is ultimately responsible for assur- ing that government-owned property is adequately safeguarded and protected. In the caseof the Lawrence Liver-moreNational Laboratory, DOEhas fallen short of meeting this responsibility. To improve oversight of the laboratory’s property management system, Recommendations we recommend that the Secretary of Energy direct the San Francisco Operations Office Manager to: - Pyre 3s GAO/IKZDUbleZ Lhwmore Pmperty Management chptsr’ DOEHuNOtPNWidd Adequate OveNight of *- . Identify areas, including internal controlweaknesses, in the laboratory’s current property managementsystem that do not provide the samelevel of protection for government-owned property as that which is provided by federal and departmental regulation. Following identification of these wealmesses,the San Francisco Operations Office should, as required by regulation, advise the laboratory of the deficiencies that need to be corrected, and establish an agreed upon time frame for mutu- ally resolving and completing the corrective actions. . Develop and provide written guidance to the laboratory, spelling out the criteria for performance of property managementfunctions. l Clearly define, in conjunction with the laboratory, written terms and provisions of the agreedupon “mutuahy approved system.” . Correct the deficiencies identified during its appraisals of the labora- tory’s property managementsystem as well as those internal control weaknessesGAO identified during this review. These include, among other things, the need to (1) tag, mark, or otherwise identify as government property all items of equipment that the laboratory acquires for use in its weapons and energy research and development programs; (2) independently verify the (a) consumption of precious metals such as gold and platinum held by laboratory employeesand (b) precious metal inventories held by laboratory subcontractors; (3) establish and implement physical controls to prevent laboratory employees and subcontractors from removing government property from the laboratory without proper authorization; and (4) establish a loss ratio standard for all non-capital equipment. . Include its standard property managementprovision in the contract with the University of California when the contract is renegotiated in 1902. Pye 40 GAO/l!cEDmlBB LhrmonE Property rbhugemnt - Methodology Used to Examine the Laboratory’& Property Management Data Base and Procurement System During our review, we estimated lossesof centrally controlled equip- ment at the laboratory. Such lossesresult from (1) equipment listed on the property management data basethat cannot be located or (2) purchases of accountable equipment that are not recorded on the prop erty managementdata base.To estimate the extent of such losses,we used statistical sampling surveys to (1) evaluate the extent of lossesof items recorded on the property managementdata base,the Movable Equipment Management Information Center (MEMIC), and (2) determine the extent to which items recorded on the F?ocurement-Accounting- Receiving Information System (PARIS) were not being recorded on the property managementdata base,when required. PARIS tracks equipment purchases by means of individual purchase orders. Equipment pur- chasedusing blanket purchase orders was reviewed using judgment samples from releaseorders becausethe Procurement Information Center, the laboratory’s procurement data baseused to control blanket purchase orders, does not contain a description of items purchased. All sample surveys provide range estimates of the universe characteris- tics being estimated. Such ranges, called confidence intervals, are devel- oped at stated confidence levels. The width of a confidence interval denotes the reliability of an estimate. Narrow confidence intervals denote high reliability and wide confidence intervals, low reliability. All estimates in this report were developed at the 96 percent confidence level. This means that the chancesare 19 out of 20 that the equipment and dollar lossesbeing estimated are within the confidence interval indi- cated. In the following pageswe also define the universes sampled in our survey. Becausethese universes are unique to this survey, sample results are not directly comparable with results from other laboratory StUdieS. We identified the universe of equipment items on the laboratory’s prop TheProperty erty management data base by manually screening a list of all nomencla- Management Data tures on the data base and selecting those of interest to the BaSe Subcommittee. As of February 28,1989, the overall data base contained over 179,000 items valued at about $941 milli0n.l Using the property managementdata basenomenclature, we identified a universe of about 43,000 items as being in the categoriesof interest to *IIWIU~~~ items from the laboratory, We 300, and the NevadaTest Site. Page 42 GAO/WED-f@122 Livermore Property IManagement -- T&l8 1.2:R88ult8 of GAO SampI of It8nlo of lntuw A- NWM8r C-fPY in wmpk rtf?z!z nti8&-4 Micro computers 81 1 $1,249 Micro accessorii 89 4 2,848 Video equipment 38 5 4,557 Typewriters/word processors 21 3 1,195 Balance scales 7 0 0 Cameras/related equipment 10 2 512 Calculators 52 23 2,471 Other (binoculars, rn@Mu telephones) 0 0 Tow 276 28 In addition to the above 276 items, all of which were either non-capital or attractive equipment, we randomly selected31 capital equipment items, each valued at over $6,606. These items consisted primarily of minicomputers and computer mainframe-related equipment. Accompanied by property managementpersonnel, we were able to phys- ically locate 182, or 66 percent (66 to 72)p, of the 276 sample items and 24 of the 31 capital items. To verify the property managementsystem data base,we checkedthe DOE property number, the location, and, where feasible, the manufacturer’s serial number. We found that all of the site 306 items included in our sample were physically located at the place designated by the data base.In contrast, 94 of the 276 non-capital items, or 34 percent (28 to 46), included in our sample were not at the locations indicated on the prow managementdata base.In addition, 7ofthe31capitalitemswereatlocationsotherthanshownontheprop erty management data base.Even though the laboratory had updated the locations shown in our copy of the data basethe week before we began our inventory, these items could not be located during our physi- cal inventory. The results of our initial efforts to locate items basedon the data base were consistent with other inventory efforts at the Iaboratory. Following our inventory, we provided the laboratory with a list of the items not found, all of which were supposedto be at the laboratory. A Property Management representative was assignedto locate the items. 5Jumbasinpventheeisrefertothe~canlidrnce intervalcomputedattheBspercentumfi- demelevel. Pye 44 GAo/lkcEMm22ISIlaraaonProputy~t the Subcommittee. Of this number, we selecteda statistically simple ran- dom sample of 276 items. Table I.1 shows the universe of items of inter- est to the Subcommittee from which we selectedour sample. T8bh 1.1:GAO Unlvern oi ltmr of -- Numb8rofltmnr -WWY llatod 011MeMlC Acqulrluon coot Micro computersa 12,199 $29333,899 Micro accessoriesb 11,066 19,672,696 Video equipmeW 5,925 6,679,965 Typewriters/word processors 2,808 3,315,292 Balance scalesd 882 1,212,Oll Cameras/related equipmeW 2,214 1,163.736 Calculators 7,345 612,145 Other (binoculars, modular telephones)’ 67 196,416 Tbtd 42,846 262,712.284 %cludes primarily personal computers and computer workstations. %cludes primarily disk drives, keyboards, modems, printers, monitors, and other types of related equipment. Yndudes primarify TV cameras and monitors and video cassette recorders. dlncludas primarily all types of hafancs scales except floor, triple baam, and weight scales *Includes primarily cameras and camera-associated equipment, except for specialized equipment such as oscilbscope cameras, microscope cameras, and 8 x 10 portrait cameras. ‘Includes cnfy squipmant items designated as attractive by LLNL, other than those included in the abovecstsgories. Before finalizing our sample, we discussedit with laboratory property managementpersonnel. On the basis of their comments and those of officials from the laboratory’s Safeguards and Security Division, we excluded certain osciIloscopeand other highly technical cameras that were not among the items of special interest to the Subcommittee Chair- man. Table 1.2shows our sample of the items of interest to the subcommittee. GAO/ltCQ4@122 Lhrmom Property Monuement As of October 31,1989, after considerable time and effort on the part of laboratory property managementpersonnel, an additional 66 of the 94 missing items were located. Also, the sevenmissing capital items were found. Thirty-six items were located during the laboratory’s 100~percent inventory. Thirty-eight, or 14 percent (9 to 18), of the 276 non-capital and attractive items could not be located. While we do not know if these items are still at the laboratory, accountability of these items has been lost. Twenty-three of the 38 items yet to be found are calculators. Rxcluding the 62 calculatoxq 16, or 6.7 percent (3.4 to lo), of the 224 items are still missing. Reviews of item descriptions for the remaining 16 items indicate that 2 were designated as attractive items-one personal computer valued at $1,249 and a video cassetteplayer valued at $926. On the basis of our sample, we estimate that, of the items in the data base,6,868 items of interest to the Subcommittee are missing. These items cost about $2 million. Most of the missing items are calculators. Other items consist of microcomputers; micro-computer accessories such as modems,disk drives, and printers; video-associatedequipment such as TV cameras and monitors; and office equipment such as type- writers. Tables I.3 and I.4 show the estimated number of missing items and their acquisition and cost, respectively. TawII-Mi88hlgMon~l 8ndAtmdv8lwn8 em confwnw~8l8tth -p ~~ to n-m Micro computers 1%. 4 826 Micro accessories 617* 164 to 1,466 viiequipment 771’ 275 to 1,662 Typewiters/wordprocessors 103 to 1,264 wancescales (r 0 to 360 Camem/felated equipment 40 to 1,052 calcul8tom 2,523 to 4,813 z 4,128 to 7,580 The satnpb was dasi~ned to provide an ovedf e8timate of the bu of equipment items of interest to m s. using pod atmtifi#tkn, we sapuatd the overatl sampk into its subcompoMmts to d&rmine tha dooma of kmses at thaw bvek. Losses for the subcomponents are much less reliable thantheovmns8mple. GAO/XEDUM22 lhermom Proper0 hbmement Tabh I.4 Eatlmatod Acq@bwtlon coat ot Mlaahg lwkcapltal and Attmctlva lmnr -Yi&ZWH Cakgoy Lowor llmit Uppar umlt Micro computers $193,W $1,249 to $570,000 Micro accessories 439,m 2.847 to 893.ooo Video eauioment 702,OCV 81,000 to 1,320.ooo Typewriters/word processors 194,W 1,195 to 444,ooo Balance scales P Cameras/related eaubment 79.m 512 to 234.olN Calculators 381 ,ooo 174,000 to Total Sl,878,wo $1,loomo to a:: ‘The sampk was dedgned to provide an overall estimste of the loss of equimt items of in&red to the Subcommittee. Using post stratificatii, we separated the overall sample into its subcomponents to determine the degree of losses at those levels. Losses for the s&components sre much less relii than the overall sample. We also made tests to determine whether equipment that should be Tracing Equipment listed on the property managementdata base,as required by laboratory Acquisitions to the criteria, is in fact being listed. Pro$erty Management Three mJor procurement processescan be used by laboratory staff to DataBase acquire new equipment. Equipment entering the laboratory through any one of these pm should be recorded on the property management data base if laboratory criteria specify such monitoring. The three pro curement processesare purchasing equipment through (1) the labora- tory’s automated Procurement-Accounting-ReceivingInformation System, (2) blanket purchase orders, and (3) laboratory stores. We did not test stores, since most items acquired in this manner are below the criteria for recording on the property managementdata base. In tracing equipment acquisitions from PARIsto the property manage ment data base,we restricted the universe to include fii year 1988 purchasesof items of interest to the Subcommittee that, according to laboratory criteria, required recording on the laboratory’s property managementdata base.PAEUS records procurements by purchase order number. A purchase order can include more than one line item, each of which correspondsto ordering one or more units of identical equipment. Our sampling unit was the purchase order line item. We selecteda uni- verse of line items from PARIS by manually screening a list of the nomen- clatures on the data base for purchasesin equipment groupings of interest to the Subcommittee. Becausethe nomenclature used by PARIS could mislead us as to whether the item was one of actual interest to the ------ Subcommittee, a determination to include the item in the universe was made during the sample evaluation phase. Consequently, the number of equipment items in the universe and the associatedacquisition costs had to be estimated from sample results. Table I.6 shows the number of line items in the universe and the sample. hbkI.kNumbwofLlneltem8lnth@ lJlblwwandtha8alnpla --off Numbarofllna Numbwofllnaltetna fmipnnnt WP. unlvaraa n”uks In the sampI Ofhlwroatbwludd Micro-comcwters 288 108 72 Comwter eauipment 1,088 189 44a Video equipment 253 132 74a Belancesoales 83 83 w Cameras eauitament 142 89 1B The samples were sebcted on the basis of unit costs of $150 or higher for attractive items. For other items, the sample evaluation process included only equipment with a unit cost of $1 ,ooObut less than s5,ocm bOnly line items corresponding to equipment with unit costs of more than Sl ,000 but less then S5,OW were used in the sample evaluatiin process. The estimated number of equipment items in the universe and the asso- ciated acquisition cost are shown in Table 1.6. ~quipcmnttrP@ -Y!Es Micro-computers 245 159- 331 $1.11 $0.48 - $1.77 Computer equipment 443 314- 572 0.98 0.88- 1.28 Video equipment 278 212- 340 0.43 0.34 - 0.53 Balanoesoales 39 b 0.08 b Camerae equipment 21 20-22 0.03 0.03 - 0.04 ha?4 as6 - 1,192 $243 $1.81 - $3.3s QrMsncs interval at the 95 percent confidence level. bAHlins items were evaluated in these equipment types. Overall sample results were developed using a combination stratified/ cluster sample. Each n@or equipment category constituted a strata from which a proportional random sample of line items was selected. The proportion and unit cost selection criteria varied for each strata. For attractive items, such as personal computers, a lower unit cost limit of $160 was used. All other equipment was included only if unit costs were in the range of greater than $1,000 but less than $6,000. The number of equipment items, the associatedacquisition costs, and the number of items missing and their costs are shown in table I.7 below. Total Numbar Acqul8ltlon acqumw a tort ot ml Equlpnrmt VP@ @Gil& s Micro-computers 97 $439,738 5 13,457 Computer equipment 77 170,209 4 8,715 Video and etauipment 144 226,495 4 8,507 Balanoe stalk’ 39 77,617 3 5,599 Cameras and equipment 10 16,570 0 0 Tatal 367 awlA b b l Aa of February28,1989. bOnly weighted totals am meaningful. Using automated techniques, we compared the equipment items in the sample with items listed on the laboratory’s property managementdata base as of February 28,1989. Items purchased in fiscal year 1988 that were not listed by that time were counted as not having been recorded on the data base.A list of missing items was provided to the laboratory for verification that the items were missing from the data base.On August 31,1989, after the laboratory’s lOO-percentinventory, we again checked the property managementdata base for these items. The number of items missing, the associatedacquisition cost, and the corresponding statistical confidence intervals at the 96 percent confi- dence level are shown in tables I.8 and I.9 as of February 28 and August 31,1989. T&lOI.bhth@tdNunkrUBd~ otltunaNotno8ododontho~Boao i!t!is ConWow lntonml at the ltmwnot I parcant c- rocododParoont Feb. 26,1989 46 4.50 24 to 68 Aug. 31,1969 34 3.32 15to53 GAo/BcEDm-1e8- Property Management T&tol.~:AAoquirilknCoatot ,.-.,. ItafmNa-onthaD8taBaaa Dolkr8inthousands Feb.28,1989 $110 4.17 s5otosl6o Aug.31,1989 $70 2.65 smtos120 Overall, statistically weighted sample results indicate that of the sam- pled equipment items purchased in fiscal year 1088 that should have been listed on the laboratory’s property management data base(1) about 4 percent costing about $110,000 were not recorded as of Febru- ary 28,1989, and (2) about 3 percent valued at about $70,000 were still not recorded as of August 31,1080, following the laboratory’s lOO-per- cent inventory. This applies to all types of equipment sampled, except stillcameras,becausenoneofthe1O~camerasandrelateditemsin our sample was missing. Becausethe laboratory’s Promrement Information and Control system Bla&etPurchase doesnot identify individual items, acquisitions through blanket pur- Orders chaseorders were extremely difficult to acceptusing random sampling Whniques. For blanket purchase orders, we used a casestudy approach to demonstrate, by example, how laboratory staff can by-pass central laboratory controls. Appendix II Major contributors to This Fteport Carl J. Bannerman, Assistant Director Resources, Doris E. L. Cannon, Assignment Manager Community, and Beverly A. Daniel, Advisor William M. Seay, Staff Evaluator Economic Molly W. MacLeod,Reports Analyst Development Division, Washington, D.C. Robert W. Brown, Evaluator-in-Charge San Francisco David Moreno, Staff Evaluator Regional Office Ira B. Carter, Staff Evaluator Terrence T. Shenks,Advisor Hans R. Bredfeldt, Advisor P8ge 60 GAO/BCED4&12Z Livermore Property Management
Nuclear Security: DOE Oversight of Livermore's Property Management System Is Inadequate
Published by the Government Accountability Office on 1990-04-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)