-- NUCLEAR WASTE DOE Needs to Ensure Nevada’s Conformance With Grant Requirements / .. fl llllllllllllll ll 141843 Jt.ESTRICTED --Not to be released outside the General Accounting Of&e unless spemcal,ly approved by the Office of Congressional lWltiOns. RELEASED 5ecm5 Resources, Community, and Economic Development Division B-202377 July 9, 1990 The Honorable J. Bennett Johnston Chairman, Committee on Energy and Natural Resources United States Senate Dear Mr. Chairman: As requested, we have reviewed the Department of Energy’s program to provide financial assistance to the state of Nevada under the Nuclear Waste Policy Act of 1982, as amended. This report discusses Nevada’s use of about $32 million in grant funds provided through June 1989 and the Department of Energy’s administration of the grants. 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 to appropriate congressional committees, the Secretary of Energy, the Governor of Nevada, Nevada’s Agency for Nuclear Projects, and other interested parties. We will also make copies available to others upon request. This work was performed under the direction of Victor S. Rezendes, Director, Energy Issues, who may be reached on (202) 275-1441. Other major contributors are listed in appendix I. Sincerely yours, J. Dexter Peach Assistant Comptroller General Ekecutive Summary The state of Nevada opposes the Department of Energy’s (DOE) develop- Purpose ment of a nuclear waste repository at Yucca Mountain, Nevada. This opposition has created an environment conducive to disputes over the appropriate use of the financial assistance DOE provides Nevada to pay the state’s repository program costs. At the request of the Chairman, Senate Committee on Energy and Natural Resources, GAO reviewed Nevada’s use of $32.3 million in grant funds provided through June 1989 and DOE'S administration of the grants. GAO reviewed in detail the state’s use of the $11 million provided for the year ended June 30, 1989, and relied on independent audits of prior years’ expenditures. The Nuclear Waste Policy Act of 1982 charged DOE with investigating Background potential sites for licensing, constructing, and operating a nuclear waste repository. December 1987 amendments to the act limited DOE's investi- gation of candidate sites to Yucca Mountain. Nevada’s legislature, how- ever, has passed resolutions opposing use of Yucca Mountain for a repository and has enacted legislation banning nuclear waste storage in the state. The state believes these actions constitute a notice of disap- proval, as permitted by the act, of the Yucca Mountain site. Accordingly, in January 1990 Nevada sued DOE and asked the Ninth Circuit Court of Appeals to order DOE to terminate all site investigation activities. Shortly thereafter, DOE initiated its own suit in the U.S. District Court asking that Nevada be (1) required to act on the work permits DOE needs to begin site investigations and (2) prohibited from unlawfully interfering in DOE'S site investigation activities. These cases are not expected to be settled until sometime in 1991. DOEmust provide financial assistance grants to Nevada and affected local governments for the general purpose of overseeing DOE's waste program activities within their jurisdictions. Guidance on the use of grant funds is provided by the nuclear waste act, court decisions, appro- priations acts, Office of Management and Budget circulars, and DOE reg- ulations. Formal grant agreements and periodic amendments to the @reements eetablish the terms under which DOEgrsvidas &%nt funds, DOE then primzu-ily r&z3 on annual audits made by independent accounQ@g fjrfig TQ qnqvre cornp&mqe with laws, regulations, and grant provisions, These audits are required by the Single Audit Act (31 US&, 7501-7507). Nevada improperly spent about $1 million of its $32.3 million in grant Results in Brief funds. Specifically, the state Page 2 GAO/RCED-99-173Nevada Grant Requirements ExecutiveSummary -_--. . used as much as $683,000 for lobbying and litigation expenses that were not authorized or were expressly prohibited by law, court decision, or grant terms; . exceeded a legislative spending limit on socioeconomic studies by about $96,000; and . used, contrary to grant terms, about $275,000 from one grant period to pay expenses incurred in the prior year. Also, the state did not always exercise adequate internal controls over grant funds, such as timely liquidation of funds advanced to contractors. A recent independent audit also questioned the state’s use, with DOE’S approval, of grant funds for legislative expenses. GAO concluded, how- ever, that the nuclear waste act provides DOE with sufficient discretion to approve the use of grant funds for this purpose. A permissive approach to grant administration by DOE contributed to Nevada’s inappropriate use of grant funds. For example, DOE did not always obtain agreement on grant terms before, or even after, releasing funds to the state. Furthermore, DOE has not taken corrective action on the annual audit findings including, for example, the recovery of funds spent for unallowable purposes. Principal Findings Nevada Improperly Used Although Nevada properly used most grant funds, it spent some funds SomeFunds for activities that were not authorized and/or were expressly prohibited by law, regulation, court decision, or grant provision. Specifically, Nevada: l Spent up to $608,000 of grant funds on congressional lobbying activities during the 3 years ended in June 1989. Lobbying was expressly prohib- ited by a provision DoE added to the grant for the period beginning March 1987 and by DOE'S fiscal year 1988 and 1989 appropriations acts. Also, lobbying is not authorized by the nuclear waste act. 9 Used up to $75,000 to pay expenses incurred in litigation against ME, until a federal court ruled in September 1987 that litigation is not one of the purposes of financial assistance grants listed in the nuclear waste Page 3 GAO/RCED-90-173Nevada Grant Requirements - ExecutiveSummary act. The independent auditors’ reports of 1986-88 took exception to liti- gation expenses for the same reason. . Exceeded by about $96,000 a spending limit of $1.5 million, contained in DOE'S fiscal year 1989 appropriations act, for socioeconomic studies. Nevada also did not always have effective internal controls over grant funds. For example, the state used $275,000 from one grant period to pay expenses incurred in the prior period and did not adequately control about $226,000 in advances of funds to contractors. One of the advances effectively resulted in an interest-free loan of $210,000. An independent audit for the year ended June 1988 also questioned the state’s use of $69,000 of grant funds for state legislative activities because federal guidelines prohibit, and there is no explicit statutory authority for, the use of grant funds for this purpose. DOE had approved this use of grant funds. On the basis of the nuclear waste act and appli- cable court rulings, GAO concluded that DOE had sufficient discretion to approve the use of grant funds for this purpose. Weaknessesin DOE Grant In 1986 a federal court held that DOE is required to fund Nevada’s pro- Administration posed tests and studies related to DOE'S investigation of Yucca Mountain if they meet certain conditions. Subsequently, because of the court’s decision and other factors, DOE adopted a permissive approach to administering the state’s grant that has contributed to Nevada’s improper uses of funds. Specifically, DOE provided funds to the state without reaching agreement on all terms for the grants made from May 1986 through June 1990. Nevada altered grant agreements signed and executed by DOE- including deleting the provision prohibiting lobbying that DOE had included in the grant for the period beginning March 1987-and signed and returned the revised agreements to DOE. DOE did not agree to these changes but nonetheless released grant funds to the state. Independent auditors subsequently found that Nevada had used grant funds for lob- bying. After GAO discussed the lack of resolution of disputed grant terms with WE management, DOE notified the state in writing that the changes Nevada had made to the approved grant terms for the period ending in September 1990 were not acceptable. GAO found that DOE is not taking corrective actions on annual audit report findings in a timely manner. Although DOE regulations require that reported problems be resolved within 6 months of the date that the reports are formally presented to DOE'S program staff, this is not being Page4 GAO/RCED-9%173NevadaGrantRequirements .. Executive Summary done. Informational copies of the audit reports are available to DOE'S program staff within about 6 months after the audit period; however, the reports are not formally presented to DOE for resolution of audit findings for about another 9 months. This is because the reports must be subjected to the quality control procedures called for by the Single Audit Act, including a quality review by DOE'S Office of the Inspector General. Thus, DOE'S program staff have several months to familiarize themselves with the reported problems before they formally receive the reports and the 6-month action period begins. In addition, DOE has not acted to recover as much as $75,000 that Nevada spent on litigation against DOE. The state’s use of grant funds for this purpose was first questioned by the independent auditors in a June 1986 audit report but DOE has not yet recovered these funds by with- holding the amount from new grants. Instead, DOE is considering recov- ering the amount from certain payments that a different provision of the act requires DOE make to the state-payments that are equal to the taxes the state would receive if it were authorized to tax DOE'S site char- acterization activities. GAO is recommending that DOE take a number of specific actions to Recommendations improve its administration of the grant program and to help ensure that activities funded by grants fully comply with applicable laws, regula- tions, and grant agreements. Because of the requester’s time-critical need for this report, GAO did not Agency Comments obtain comments on the report from DOE and the state of Nevada. GAO did, however, discuss the results of its review with DOE and Nevada offi- cials and considered their comments in preparing the report. Page 6 GAO/RCED-90-173Nevada Grant Requirements Contents Executive Summary 2 Chapter 1 Introduction Nevada Opposes the Yucca Mountain Project Grant Program Purpose, Funding, and Administration Objectives, Scope, and Methodology Chapter 2 14 Nevada Has Used Nevada Used Most Grant Funds Properly 14 Nevada Used Grant Funds to Lobby the Congress 16 SomeGrant Funds Nevada Used Grant Funds to Pay Litigation Expenses 19 Contrary to Laws, Congressional Funding Limitation on Socioeconomic 21 Regulations, and Grant Studies Exceeded Use of Grant Funds to Pay Expenses of State Legislature 22 Terms Internal Control Weaknesses Result in Improper Uses of 26 Grant Funds Chapter 3 29 DOE’s Weak Grant DOE Did Not Reach Agreement on All Grant Terms Before 29 Releasing Funds Administration DOE Has Not Enforced Laws, Regulations, and Grant 31 Contributed to Terms Improper Uses of Views of Responsible Agency Officials 32 Conclusions 33 Funds Recommendations 36 Appendixes Appendix I: NWPA Provides DOE With Considerable 36 Discretion in Approving Uses of Grant Funds Appendix II: Major Contributors to This Report 41 Tables Table 1.1: Summary of Grant Obligations 11 Table 2.1: Budget and Expenditures for the Year Ended 15 June 30,1989 Table 2.2: Costs to Support Socioeconomic Studies 22 Page 6 GAO/RCED-90-173Nevada Grant Requirements . Contents Abbreviations DOE Department of Energy NRC Nuclear Regulatory Commission NWPA Nuclear Waste Policy Act of 1982 OCRWM Office of Civilian Radioactive Waste Management OMB Office of Management and Budget Page7 GAO/RCED-9iS178Nevada Grant Requirements Chapter 1 ’ Iintroduction In 1982 the Congress found that federal efforts to dispose of radioactive waste accumulating at nuclear power plants had not been successful and that this waste had become a major source of public concern. To help ensure safe disposal of the waste, the Congress enacted the Nuclear Waste Policy Act of 1982 (NWPA). The NWPA established a process for identifying and selecting candidate repository sites for two geologic repositories, charged the Department of Energy (DOE) with implementing the program, assigned responsibility to the Nuclear Regulatory Commis- sion (NRC) to license and regulate the repositories, and established a Nuclear Waste Fund to be used to finance the program. In December 1987 the Congress amended NWPA.' The amendments directed DOE to characterize (investigate) only the Yucca Mountain, Nevada, site for possible use as a repository. The amendments also suspended, for about 20 years, all site-specific activities directed toward identifying candidate sites for a second repository. In enacting NWPA the Congress recognized that state and public partici- pation in planning and developing the repositories was essential to pro- mote public confidence in the nuclear waste disposal program. In addition, the Congress included in the act a mechanism by which a state could express its disapproval of a repository site within its borders. Spe- cifically, the act permitted, after the President had recommended selec- tion of a repository site, either the governor or the legislature of a state to file a notice of disapproval of the President’s recommendation. Such disapproval would become effective unless overridden by resolution of the Congress. Therefore, the NWPA provided for the active participation of affected states and required DOE to provide financial assistance (grants) to ensure that these states could participate in the program. The state of Nevada opposes DOE'S Yucca Mountain project. Legislative Nevada Opposesthe and administrative actions by Nevada and legal challenges by both the Yucca Mountain state and DOE in the last year illustrate this opposition. In April 1989, for Project example, the Nevada legislature passed two joint resolutions opposing the Yucca Mountain repository. The first expressed the legislature’s “adamant opposition” to a nuclear waste repository in the state and the second refused the state’s consent for a repository at Yucca Mountain. Nevada also enacted legislation in July 1989 making it “unlawful for any person or governmental entity to store high-level radioactive waste in Nevada.” ‘The NuclearWastePolicy AmendmentsAct of 1987,containedin Title V of the OmnibusBudget ReconciliationAct of 1987(P.L. 100-203). Page 8 GAO/RCED-90-173Nevada Grant Requirements . Chapter 1 Introduction On the basis of these resolutions and legislation, Nevada has refused to act on DOE’s applications for the environmental permits necessary to begin site investigations. In the state’s view, the two resolutions consti- tuted a valid and effective notice of its disapproval, under section 116 of NWPA, of the Yucca Mountain site. Therefore, on January 6, 1990, Nevada sued DOE and asked the Ninth Circuit Court of Appeals to, among others things, order DOE to terminate all site characterization activities at the site. In addition, Nevada sued DOE on two previous occa- sions, which resulted in court decisions affecting the way that DOE administers the state’s grant and the way that Nevada uses the grant funds. On January 26, 1990, DOE sued Nevada in the United States District Court, District of Nevada, and, among other things, asked the court to l require Nevada to act on all pending permits needed by DOE to perform exploratory efforts at Yucca Mountain, and . prohibit Nevada from unlawfully interfering in DOE’S site characteriza- tion of Yucca Mountain.2 A DOE attorney told us that he anticipates that Nevada’s suit will be decided by the Circuit Court before the end of the year. DOE’S suit, which is stayed pending the outcome of Nevada’s suit, would then have to be decided. If Nevada loses and does not file an appeal, the attorney said that DOE’S case could be decided sometime in January 1991. DOE makes grants from the Nuclear Waste Fund to Nevada and affected Grant Program local governments so they can participate in oversight of DOE’S waste Purpose, Funding, and program activities. The fund, which is a separate Treasury account, con- Administration sists of fees paid by generators and owners of nuclear waste and interest earned on investments of funds that are surplus to the current program needs. The fees collected and interest earned are government funds, and DoE can obligate from the fund only moneys that have been appropriated by the Congress. The NWPA, as amended, provides that grants shall be made to enable the grantee to ‘For a morecompletediscussionof theselawsuits, seeNuclearWaste:Quarterly Reportasof Sep- tember30,1989 (GAO/RCED-90-103,Mar. 2,199O). Page 9 GAO/RCED-90-173Nevada Grant Requirements Chapter 1 Introduction l review DOE'S activities at Yucca Mountain to determine the potential eco- nomic, social, public health and safety, and environmental impacts of a repository on the state and its residents; . develop a request for financial and technical assistance to mitigate the effects of construction of a repository; 9 engage in any monitoring, testing, or evaluation activities related to DOE'S site characterization program; l provide information to Nevada residents about ME, NRC, and state activ- ities with respect to the site; and . request information from, and provide comments and recommendations to, the Secretary of Energy regarding DOE'S nuclear waste repository program activities, The act precludes the use of grant funds for salary and travel expenses that the grantee would ordinarily incur. Concerned about the rising costs of the grant program and the type of activities being financed by the grants, the Congress began limiting the amount of funds DOE could provide to Nevada and placing restrictions on the use of the funds. In July 1988 the Congress, through DOE'S fiscal year 1989 appropriations act (P.L. lOO-371), limited the amount of funds available to Nevada from July 1, 1988, through June 30,1989, to $11 million. This was less than one-half of the $23.1 million requested by the state in its March 3, 1988, application. The Congress also prohib- ited use of Nuclear Waste Fund moneys to influence the Congress and to lobby. It also limited the amount of the funds that Nevada could spend for transportation and socioeconomic studies to $1.5 million in each category. The Congress placed even tighter restrictions on the fiscal year 1990 grant program. In DOE'S appropriations act for fiscal year 1990 (P.L. lOl-lOl), the Congress again included the prohibition on use of funds for influencing the Congress and lobbying, and . provided $5 million to Nevada, of which (1) $1 million was earmarked for infrastructure studies at the University of Nevada-Reno and (2) no more than $1 million could be spent for both socioeconomic and trans- portation studies, and . gave the Secretary of Energy the discretion to provide the state with an additional $6 million to conduct appropriate NWPA grant activities. Page 10 GAO/RCED-90-173Nevada Grant Requirements chapter 1 Introduction In addition, the act provided the University of Nevada, Las Vegas, with $10 million for computing resources to support the state’s independent analyses and oversight responsibilities and for use by the university. DOE has obligated funds under two grants and several grant amendments to provide funds for specific budget periods. The first grant was in effect between March 3, 1983, and February 28,1985. On February 1, 1986, DOE issued a new grant and thereafter extended the grant, by means of several amendments, through June 30,1989. Although the two grants overlapped, DOE did not provide funds under the first grant after September 30, 1984. DOE had obligated about $32.3 million to support Nevada’s oversight activities between March 1983 and June 1989. (See table 1.1.) Table 1.1: Summary of Want Obligations Approximate months in Amount Period budget period obligated March 1983-September 1983 7 $350,000 October 1983-February 1985 ..___ 17 646,083 Februarv 1985-April 1986 15 1,898.7% May=-February 1987 - 10 4,418,754 March --- 1987-June 1968 --__ 16 13,998,663 Julv 1988-June 1989 12 11 .ooo.ooo Total $32,312,278 Source: Compiled from DOE data DOE'S Office of Civilian Radioactive Waste Management has overall responsibility for administering the grant program at the national level. WE'S Nevada Operations and Yucca Mountain Project Offices administer the grant program at the local level. Nevada’s Agency for Nuclear Projects-the grantee-administers the grant for the state. The grantee submits its grant applications to DOE'S Nevada Operations Office for review and approval. DOE reviews the applications, which show planned activities and budgetary data, to ensure that the activities proposed by the grantee (1) reasonably relate to the oversight of the Yucca Mountain Project; (2) are allowed by NWPA, subsequent related court decisions, congressional restrictions, and Office of Management and Budget (OMB) circulars; (3) do not interfere with or delay DOE'S planned activities; and (4) are consistent with the grant terms. Fol- lowing this review, DOE awards grants on the basis of the activities and funding levels proposed and reviewed. The grantee is required to submit Page 11 GAO/RCED-90-173Nevada Grant Requirements Chapter 1 Introduction periodic progress and financial reports to DOE. DOE relies principally on annual audits performed by independent accounting firms under the Single Audit Act to monitor compliance with applicable laws, rules, and regulations.” The Chairman, Senate Committee on Energy and Natural Resources, Objectives, Scope,and requested us to review Nevada’s use of DOE’S grant funds and DOE’S Methodology administration of the grants. Because the state’s use of grant funds through Nevada’s fiscal year 1988 had been audited by independent accounting firms, the Chairman’s office agreed that we should concentrate our review on the funds expended for the year ended June 30,1989. For the earlier period, we identified expenditures questioned by prior audits. We also reviewed rel- evant activities occurring after June 30, 1989. To accomplish our first objective, we identified Nevada’s grant fund expenditures for July 1, 1988, through June 30, 1989. We interviewed state officials and reviewed appropriate documents, such as invoices, vouchers payable, and correspondence relating to these expenditures. We also reviewed the appropriateness of these expenditures under the provisions of the NWPA and DOE appropriation acts, federal regulations (such as OMB circulars and DOE’S regulations), and the grant agreements and periodic amendments to the basic agreements. Finally, as requested by the Chairman’s office, we identified whether grant funds for the period were spent within or outside the state of Nevada. The House- Senate Conference Report on DOE’S fiscal year 1989 appropriations act stated that the Congress intended that grant funds be spent to the max- imum extent possible within the state of Nevada. We used the address on the grantee’s contracts with firms and individuals as our criterion for determining if contracts were awarded to firms and individuals within Nevada. For expenditures of grant funds prior to July 1, 1988, we used informa- tion contained in the annual audits and correspondence concerning the resolution of these audit findings. We obtained additional information from the audit organization regarding selected findings contained in the audit reports for the years ended June 30,1987 and 1988. “The act requiresstate and local governmentsthat receivespecifiedamountsof federal financial assistanceto have a single audit conducted. Page 12 GAO/RCED-90-1’73 Nevada Grant Requirements Chapter 1 Introduction To accomplish our second objective, we reviewed DOE'S procedures for (1) reviewing and approving grant applications, (2) monitoring grant activities, and (3) resolving annual audit findings. We interviewed DOE officials and reviewed appropriate documents, such as grant applica- tions, DOE staff evaluations of grant applications, and relevant corre- spondence. We also used information in our prior reports, such as our report to the Secretary of Energy on DOE'S budgeting procedures for Nevada’s grant funds.4 Because federal court rulings affect certain aspects of the administra- tion of the program, we obtained and reviewed the Ninth Circuit Court of Appeals rulings relating to DOE, Nevada, and the NWPA. We also reviewed information, such as state hearings and legislation, related to the state legislative activities funded by the grant. Our review was conducted primarily at DOE'S Nevada Operations and Yucca Mountain Project Offices in Las Vegas, Nevada, and at the state of Nevada’s Agency for Nuclear Projects in Carson City. We discussed the results of our review with (1) DOE officials at the operations and project offices and at DOE headquarters and (2) grantee officials. Subse- quent to our discussion with grantee officials, the grantee’s Executive Director provided additional comments on the results of our review in a letter of March 14,199O. We considered the comments of all of the DOE and Nevada officials, including those comments made in the grantee’s March letter, in preparing our report. Also, we included the officials’ comments in our report where appropriate. Our review was conducted between August 1989 and April 1990 in accordance with generally accepted government auditing standards. “Nuclear Waste:DOE’sBudgetingProcessfor Grantsto NevadaNeedsRevision(GAO/RCED-90-20, Oct.20, 1989). Page 13 GAO/RCED-90-173Nevada Grant Requirements Nevada Has Used SomeGrant F’undsContrary to Laws, Regulations, and Grant Terms Nevada spent most of the $32 million in nuclear waste act grants prop- erly; however, about $1 million of the $32 million was used for activities that were not authorized and/or were expressly prohibited by law, regu- lation, court decision, or grant terms. Specifically, the grantee l used as much as $608,000 for lobbying; . used about $75,000 to pay costs of litigation against DOE; and . exceeded, by about $96,000, the limit on spending for socioeconomic studies for the year ending in June 1989. A recent independent audit also questioned the state’s use, as approved by DOE, of grant funds for legislative expenses because of a prohibition in federal guidelines and the absence of explicit statutory authority. After reviewing the nuclear waste act and applicable court rulings, we concluded that it is within DOE'S discretion to approve the use of grant funds for this purpose. Finally, because of weaknesses in the grantee’s internal controls over grant funds, the grantee used $275,000 from one grant period to pay claims from a prior grant period, did not adequately control advances of funds to contractors, and did not require annual audits of all sub- recipients of grant funds in accordance with the requirements of the Single Audit Act. DOE provided Nevada with about $32.3 million in grants through June Nevada Used Most 1989. The major portion of these funds was used properly to contract Grant Funds Properly for independent studies, technical studies, and review of program activi- ties. For example, our detailed review of the $11 million budgeted for the year ended June 30, 1989, showed that the grantee spent about $10.2 million primarily to finance studies on the suitability of the Yucca Mountain site, the effects of a repository on Nevada residents, and transportation matters. A detailed breakdown of the amounts budgeted and spent is shown in table 2.1. About $8 million of the $10.2 million the grantee expended for the year ended June 30, 1989, was used to contract for independent studies, tech- nical advice, and reviews of DOE'S waste program activities. Other expenditures included about $1.2 million to fund the grantee’s direct operating expenses (including $434,000 for five individuals hired on a contract basis), $435,000 to local governments and Indian tribes, $230,000 for legal services, and $83,000 for a Nevada legislative com- mittee. Our audit of the grantee’s expenditures for that year showed Page 14 GAO/RCED-90-173Nevada Grant Requirements Chapter 2 Nevada Has Used SomeGrant F’unde Contrary to Laws, Regulations, and Grant Terms that the amounts Nevada reported as spent were accurate and that all funds were accounted for, Table 2.1: Budget and Expenditures for the Year Ended June 30,1989 Category Budget Expenditures Agency - support - Salaries and fringe benefits $904,729 $919,558 Travel costs 84.344 90.891 Operatina expenses 184,460 154,591 Equipment purchases 16,275 5,526 Subtotal $1,189,808 $1,170,566 Contract services Legal services 330,000 230,538 Public information _---- --____-__-__-. 242,000 198,515 CPA assistance ...--_____ 50,000 13,406 Hydrology 2,400,OOO 2,563,760 Geology 1,520,OOO 1,382,833 Socioeconomic 1,500,000 1.438,542 Transportation -.-.-L-- 1500,000 1,007,787 Quality -__-- assurance 100,000 66,776 Repositorv enaineerina 200.000 246.861 Environmental _..___- 750,000 746,127 Subtotal $8,592,000 $7,895,145 Technical advisors Hydrology advisor 112,000 172,162 .-_____ physicist Health --- --advisor 10,000 3,750 Materials science advisor 25.000 12.642 Plannina advisor 300,192 159,860 Geology -- advisor 50,000 69,966 Transportation advisor -subtotal -Support to others ____-.--.--__ Legislative ___- 75,000 82,500 Local aovernments and tribes 536,000 434,761 Other state agencies ---.---____ 110,000 59,994 Subtotal $721,000 $577,255 Total $11 ,ooo,ooo $10,157,679 aTransportation advisor costs included with the planning advisor Source: GAO table developed from DOE and Nevada data. Nearly all the grant funds were used to hire individuals and firms under contracts. In the year ended June 30,1989, the grantee had 80 contracts, Page 15 GAO/RCED-90-173Nevada Grant Requirements Chapter 2 Nevada Has Used SomeGrant Funds Contrary to Laws, Regulations, and Grant Terms worth $9.4 million, with 69 contractors. Of the 80 contracts, 48 were awarded to Nevada contractors, for a total of about $6.9 million (63 per- cent), and 32 were awarded to out-of-state contractors, for a total of $3.6 million (37 percent). Although the Congress included prohibitions against lobbying in DOE’S Nevada Used Grant fiscal year 1988 and 1989 appropriations acts, Nevada employed law F’undsto Lobby the firms between July 1986 and June 1989 that, among other things, per- Congress formed lobbying activities, Also, DOE included a specific provision in a 1987 grant amendment prohibiting lobbying. The amounts spent for lob- bying during the 3-year period could have been as much as $608,000. Lobbying Not Permitted Lobbying activities are not expressly included in NWPA as one of the pur- poses for which financial assistance grants are provided. In 1987, how- ever, an attorney in the chief counsel’s office of DOE’S Nevada Operations Office learned from a newspaper article that the grantee might have contracted with a Washington, D.C., law firm to, among other things, lobby the Congress1 This attorney reviewed the grantee’s contract with the law firm and the grantee’s supplemental grant appli- cation and concluded that there was reason to caution the grantee against using grant funds to lobby. The grantee’s contract with the law firm requires the firm to assist the office with its overall congressional strategy and with its relations with key members of Congress and their staffs regarding the siting of a high-level radio- active waste repository; provide policy analysis relative to the Agency’s [Nevada’s Agency for Nuclear Projects] legislative mandate; critique and analyze congressional and/or federal agency initiatives and actions regarding high-level radioactive waste disposal; represent the Agency at key meetings; and provide general advice and assistance to the Agency on issues pertaining to high-level radioactive waste disposal. Because of this contract, DOE included a provision in the grant amend- ment from March 1987 through June 1988 prohibiting the use of grant funds to influence federal legislation2 The grantee, however, deleted this provision and, in a January 1988 letter, the grantee’s Executive Director told the Nevada Operations Office that “Nevada objects to and IThis firm was registeredas a lobbyist for the grantee,on mattersrelating to nuclear wastelegisla- tion, under the FederalRegulationof LobbyingAct, from August 1987through March 1990. ‘In addition to the grant provision, DOE’sappropriationsact for fiscal year 1988,enactedin December1987,containeda DOEwide lobbying prohibition. Page 16 GAO/RCED-90-173Nevada Grant Requirements Chapter 2 Nevada Haa UsedSomeGrant Funcla Contrary to Laws, Rqulatlom~, and Grant Terma will not comply with” the provision. The reasons for the grantee’s objec- tions were that the provision was “arbitrary, unreasonable, and violates the intent of the NWPA, and would likely lead to legal action if the condi- tion remains intact.” Although the grantee asked DOE to acknowledge the retraction, DOE did not do so. Beginning with the grant amendment for the year ended June 30,1989, DOE revised the grant terms to include the lobbying prohibition con- tained in DOE’S fiscal year 1989 appropriations for the Nuclear Waste Fund. The language in that provision states that none of the funds herein appropriated may be used directly or indirectly to influ- ence legislative action on any matter pending before Congress or a state legislature or for any lobbying activity as provided in 18 U.S.C. 1913.” The grantee did not delete this grant provision. Auditors Questioned The Single Audit Act audit report on Nevada’s grant for the year ended Funds Used for Lobbying June 30, 1988, said that the Washington, D.C., law firm’s vouchers showed that the grantee was billed and paid for lobbying services. The Through June 1988 auditors questioned the entire $240,000 that the law firm was paid but said that the law firm’s billings were often too vague to determine what specific services were rendered. The auditors also noted that in the pre- vious year the grantee had spent about $155,000 of grant funds for sim- ilar services under the same contract. The grantee’s Executive Director disagreed with the finding. He stated that NWPA authorizes Nevada to have extensive interaction with the Congress. He also interpreted a December 1985 decision of the Ninth Circuit Court of Appeals as stating that NWPA must be read permissively regarding Nevada’s use of grant funds.4 In that decision, the court found that sections of DOE’S guidelines intended to minimize the state’s inde- pendent testing and studies of the Yucca Mountain site were unlawful because they undermined the independent oversight role that the Con- gress envisioned for affected states. The court ruled that NWPA supports funding for independent site testing as long as the testing is essential to an informed “statement of reasons” for disqualifying a site under sec- tion 116(b) of NWPA, the “disapproval” provision. The court also ruled, “This statute (18 USC. 1913)defineslobbying ss any activity intendedor designedto influence in any manner a Memberof Congressto favor or oppose,by vote or otherwise,any legislationor appro priation by the Congress.This statute appliesto federal officers and employeesonly, not to grantees and their employees. 4Stateof Nevadav. Herrington, 777 F.2nd629(9th Cir. 1985). Page 17 GAO/RCED-90-173Nevada Grant Requirements Chapter2 Nevada Haa Used SomeGrant Funds Contrary to Laws, Regulations, and Grant Terms however, that the state is not entitled to carte blanche access to the Nuclear Waste Fund; rather, the state’s testing activities (1) must be sci- entifically justifiable (reasonable), (2) must be performed by demon- strably competent contractors, and (3) cannot unreasonably interfere with or delay DOE’S waste program activities. The Executive Director also cited an opinion by the Nevada Attorney General’s Office that the law firm’s activities fell within the scope of the state’s review of DOE’S waste program activities and Nevada’s informa- tion-gathering and dissemination role. The Executive Director added that a unique relationship exists between DOE and Nevada in that Nevada must obtain its funding from the agency it is overseeing and described the relationship between DOE and Nevada as “adversarial.” In this regard, the Executive Director later told us that DOE has tried to limit, interfere with, and influence Nevada’s oversight role through its control of grant funds. Although the auditors acknowledged the Executive Director’s argu- ments, they concluded that the grantee was lobbying and that NWPA does not authorize lobbying. Furthermore, the final audit report cited an October 1987 memorandum from the Executive Director to the Budget Analyst for the state stating that the law firm’s activities were “clearly in the area of lobbying.” This memorandum stated: With regard to the types of activities this Raw1 firm is undertaking, in my estima- tion, they are clearly in the area of lobbying. The firm contacts various congres- sional renresentatives at our reauest. transmits nositions. information. materials, etc., as well as attends meetings at my request with various federal agencies on behalf of the State of Nevada, including the Department of Energy, the Nuclear Reg- ulatory Commission and others. (Underscoring supplied.) Use of 1989 Funds for For the year ended June 30, 1989, we found that the grantee had Lobbying retained the legal services of an Olympia, Washington, law firm. From June 1987 to July 1988, this firm was a registered lobbyist for the state, under the Federal Regulation of Lobbying Act, on all matters relating to NWPA. The firm’s billings included activities such as contacting congres- sional staff members and drafting legislation. We could not readily determine the actual cost of lobbying activities from the billings for the year ended June 30, 1989, because this firm also provided other legal services to Nevada; however, the total expenditure from grant funds was $213,000. Page 18 GAO/RCED-W-173Nevada Grant Requirements Chapter 2 Nevada Has Used &me Grant Funda Contrary to Laws, Regulatione, and Grant Terms In response to our finding, the grantee’s Executive Director said NWPA requires Nevada to interact with the Congress and that providing infor- mation about Nevada’s grant activities is not lobbying. He stated that, although his staff and attorneys had numerous congressional contacts, grantee staff and attorneys are not authorized to initiate congressional contacts. Furthermore, Members of Congress and their staffs initiated these contacts and grantee staff and attorneys responded by answering questions, furnishing information, and writing questions. In a March 14, 1990, letter to us elaborating on his earlier comments, the Executive Director stated that the issue of lobbying, especially before the fiscal year 1989 appropriations act language, is a “grey area.” In his view, the Olympia, Washington, law firm did not engage in any lobbying activities. Also, he further claimed that the state had an obligation to inform the Congress of its findings and experiences relative to the nuclear waste program. We found that each firm was formally registered as a lobbyist for the state during at least a part of the period covered by the appropriation acts for fiscal years 1988-89. Documents we reviewed show numerous congressional contacts, many of which appear to have been initiated by the law firms. Furthermore, the state is not prohibited from spending its own funds for activities in what the Executive Director calls a “grey area.” Nevada used grant funds to pay expenses incurred in suing DOE. Nevada Used Grant Although specifically prohibited by the grant terms, the state had main- Funds to Pay tained that such expenses were allowable under NWPA." In a June 1986 Litigation Expenses report on an audit of the grantee’s activities for the years ended in June 1984 and 1985, the auditors said that at least a portion of $22,600 in legal costs incurred by the grantee during the S-year period was for legal action or claims against the U. S. government-activities that are clearly prohibited by the grant agreement. In commenting on a draft of that audit report, the grantee’s Executive Director said that NWPA did not provide DOE with the authority to impose this prohibition and that Nevada intended to sue DOE over this issue. Eventually, Nevada did sue DOEover this issue. “The provision statesthat any costsincurred by the state of Nevadafor litigation againstthe U.S. governmentare unallowableunder the grant. Page 19 GAO/RCED-99-173Nevada Grant Requirements Chapter2 Nevada Has Used SomeGrant Funda Contrary to Imva, Regulations, and Grant Temw In September 1987 the Ninth Circuit Court of Appeals ruled against the state by finding that litigation against DOE is not an activity that the Congress intended to finance from the NuclearWaste Fund.” As dis- cussed below, however, DOE has not determined or recovered the portion of the approximately $75,000 that Nevada spent on litigation against DOE prior to the court’s decision. Audits of the grantee performed under the Single Audit Act questioned the following subtotals of the $75,200 in litigation expenses: . about $22,600 for the years ended June 30,1984, and 1985; . about $42,700 for the year ended June 30,1987; and . about $9,900 for the year ended June 30,1988 (expenses incurred prior to the September 1987 court decision). DOEmaintains that these litigation costs were never allowable, and that the court’s decision reaffirmed that NWPA does not allow such use of grant funds. The grantee has not reimbursed DOE for these expenditures because, in the opinion of the grantee’s Executive Director, the court’s decision was not retroactive. We note that, traditionally, judicial deci- sions are regarded as expressions or interpretations of preexisting law. Therefore, with a few exceptions that do not apply here, they are cus- tomarily given retroactive effect. The Executive Director told us that the grantee has not spent grant funds for litigation against the United States since the court’s decision. Our review of expenditures for the grant period ended June 30, 1989, supported his statement. Also, in his March 14, 1990, letter to us, the Executive Director said that Nevada has never refused to pay these costs and has, in fact, proposed alternatives to offsetting the amount that the state is willing to discuss with DOE. One such alternative is to reduce the unexpended portion of Nevada’s current grant if such a reduction would not impair accomplishing the objectives of the state’s program. According to the Executive Director, Nevada is waiting for DOE’S response to the state’s proposals. %tate of Nevada,et al., v. Herrington,827 F.2d 1394(9th Cir. 1987). Page 20 GAO/ECED-90473Nevada Grant Requirements . Chapter 2 Nevada Haa UeedSomeGrant Funds Contrary tu Laws, Regulatious, and Grant Terms The grantee, without the knowledge of DOE, exceeded the congressional Congressional Funding limit on the amount of money that could be spent on socioeconomic Limitation on studies for the Year ended in June 1989.7 This occurred because the Socioeconomic Studies grantee excluded costs of individuals under contract to the grantee who assisted other contractors on the studies. As a result, the $1.5-million Exceeded limit was exceeded by about $96,000. DOE’S fiscal year 1989 appropriations act limited the amount of money that Nevada could spend on socioeconomic and transportation studies to $1.5 million each. Before the act was passed, Nevada had submitted its grant application for about $23 million, of which $3.4 million was for socioeconomic studies. The $3.4 million included $150,000 for a tech- nical review committee to evaluate the methodology, scientific quality, and direction of the socioeconomic studies. Following enactment of DOE'S appropriations act, DOE did not provide Nevada with any guidance on how to ensure that the grantee would not exceed the spending limit. Nevertheless, the grantee scaled down its request for funds to cover the costs of socioeconomic studies to the $1 .5-million limit specified in the act. It excluded from this amount, however, the previously included cost of the technical review committee. This cost item was moved to a sepa- rate account, totaling $300,192, for “advisory services in socioeconomic and transportation planning.” DOE approved the grantee’s funding request and amended the grant accordingly. During the year ended June 30,1989, the grantee had 80 contracts with 69 contractors. We examined the scope of work for all 80 contracts and identified 15 contractors (and 15 contracts) that were directly or indi- rectly involved in socioeconomic studies. Three contractors were actu- ally conducting socioeconomic studies. The other 12 contractors include 10 members of the technical review committee and 2 other advisors. According to their contracts, the review committee members and advi- sors were to assist the grantee in designing, managing, and critiquing the socioeconomic studies. We included the costs of all 15 of these contrac- tors in calculating the amount of grant funds spent on socioeconomic studies (see table 2.2). 7Suchstudiesare madefor the purposeof determiningthe socialand economicimpactsthat the repository programwill have on the community. Page 21 GAO/RCED-90-173Nevada Grant Requirements chapter 2 Nevada Has bed &me Grant Fun& Contrary to Laws, Regulations, and Grant Terms Table 2.2: Costs to Support Socioeconomic Studies Category Amount spent Contractors $1.438542 Advisors Technical Review Committee 82,200 __-Others -- 75,133 Total $1 S95.875 Source: Nevada Agency for Nuclear Projects We performed a similar analysis of the grantee’s expenditures on trans- portation studies and found that the total amount spent, including advi- sors, was about $1.1 million. DOE did not track the grantee’s expenditures for socioeconomic and transportation studies, and as a result, it had no way of preventing the grantee from exceeding the legislative limitations on the use of grant funds for these purposes. Although the grantee is required to submit quarterly reports to DOE, the reports do not show the amount of expendi- ture by budgetary category. According to the grantee’s Executive Director, the legislative limit on socioeconomic studies was not exceeded because only the costs for the three contractors actually performing the studies should be counted toward the limit. In his March 1990 letter, the Executive Director said that the advisors advise the state and help the state administer a variety of programs and activities. He considers these expenses to be administrative overhead and thus not a part of what is meant by “studies” in the appropriations act. Also, he noted that DOE approved the proposed expenditures. We believe that all costs pertaining to the socioeconomic studies should be counted toward the limitation, including the costs of all contractors that assisted in all aspects of planning, conducting, and reviewing the studies. For the last 2 years included in our review, the grantee requested, Use of Grant Funds to obtained, and used over $150,000 of grant funds to pay expenses of the Pay Expenses of State state’s nuclear waste legislative committee. The Single Audit Act audit Legislature ” report for the year ended June 30,1988, questioned the grantee’s use of funds for this purpose because it is contrary to OMB guidance and there is no explicit statutory authority that allows such use of grant funds. Page 22 GAO/RCED-90-173Nevada Grant Requirements Chapter 2 Nevada Haa Used SomeGrant Funds Contrary to Laws, Regulations, and Grant Terms The auditors recommended that the grantee seek OMB'S approval to use grant funds for legislative expenses. DOE had approved the grantee’s budget requests for legislative expenses without comment. Officials in its Nevada office told us that they had approved the grantee’s requests on the basis of OMB'S policy allowing funding of “advisory councils.” We believe that the OMB guidance is inapplicable to the determination of whether the funding of these expenses is proper. In our view, the rele- vant criteria for this determination must be found within NWPA itself. Furthermore, under the act and applicable court rulings, DOE has consid- erable discretion in determining which expenses are properly chargeable to the grant. The Grantee Requested In 1985 the Nevada legislature created the Committee on High-Level Funds for Legislative Radioactive Waste. This standing committee of the legislature is author- ized to Expenditures . study and evaluate information and policies regarding a repository in Nevada, as well as any other policies relating to the disposal of high- level radioactive waste; identify the potential adverse effects and ways to mitigate the effects of such a repository; and recommend legislation to the Nevada legislature. According to the committee’s enabling legislation, per diem allowances, salary, and travel expenses of the committee members are to be paid from the state legislative fund. Whether this provision precludes reim- bursement of these expenses with grant funds is a matter of dispute within the state. The state Attorney General’s office believes they are a responsibility of the state legislature. The Legislative Counsel Bureau believes they should be paid with NWPA funds. In 1987 the committee recommended two resolutions urging the federal government to take specific actions regarding the repository and one amendment clarifying its own implementing legislation. In 1987 the Nevada legislature passed the clarifying amendment and one of the res- olutions. The resolution urged the Congress and the President to take all measures necessary to mitigate the adverse effects of a repository in Nevada. Page 23 GAO/RCED-90473Nevada Grant Requirements I *. Chapter 2 Nevada Has Used SomeGrant Funds Contrary to Laws, Rqnlatlons, and Grant Terma The grantee contracted with the Nevada Legislative Counsel Bureau to support the Nevada legislature.R For each of the last 2 budget years included in our review, the grantee included an amount for legislative expenditures in the budget requests it submitted to DOE and that agency approved these line items without comment. More than $150,000 was spent for legislative expenses over the 2-year period between July 1, 1987, and June 30,1989. This amount included about $69,000 for the first year and $82,500 for the second year. Also, the grantee had con- tracted to support the Nevada legislature in earlier periods. However, because the amounts of these contracts were not separately identified in the DoE-approved grant amendments, we did not take the additional time necessary to identify the actual amounts of grant funds used to pay leg- islative expenses in the earlier periods. Auditors Question Use of In the Single Audit Act audit report for the year ended June 30, 1988, Grant Funds for the auditors questioned the grantee’s use of about $69,000 of grant funds to pay expenses of Nevada’s legislature. The report stated that Legislative Expenses OMB Circular A-87 provides that legislative expenses, except travel expenses that directly benefit a grant program, are not an allowable charge to federal grants.” OMB Circular A-87 sets federal policy on the use of grant funds. Attachment B to this circular states that “salaries and other expenses of the State legislature or similar local governmental bodies . , . whether incurred for purposes of legislative or executive direction, are unallowable.” The auditors also noted that the provisions of the circular may be over- ridden by statutory authority and that NWPA indicates that state partici- pation in the repository siting decision includes the involvement of the state legislature. However, the auditors also noted, no explicit statutory authority exists that allows legislative expenditures to be charged to the state’s grant. Finally, the auditors recognized that DOE had approved funding of legislative expenses by approving the grantee’s budget request. On the basis of these findings, the auditors recommended that the grantee request approval from OMB to expend grant funds for the state legislature. ‘The NevadaLegislativeCounselBureauis the staff agencythat provides legal,research,and fiscal support to the Nevadalegislature,which meetson a biennial basis.It alsoreceivesits funding from the state legislative fund. ‘Cost Principles for Stateand Local Governments(OMB/A-87,Jan. 28,1981). Page 24 GAO/RCED-90-173Nevada Grant Requirements chapter2 Nevada Has Used &me Grant Funds Contrary to Lawa, R.egulatlons,and Grant Terms DOE and Nevada Believe DOE has funded expenses of the Nevada legislature’s Committee on High- Legislative Expenses Are level Radioactive Waste and an earlier subcommittee since the beginning of the state’s grant. DOE did not have any documentation in its grant files Allowable that showed the basis on which it permitted the grantee to use funds for this purpose. However, a Nevada Operations Office attorney and the program analyst for Nevada’s grant told us that, according to DOE'S interpretation of the legislation establishing the two committees, they qualify as “advisory councils” under OMB Circular A-87. That circular states that costs incurred by state advisory councils or committees established pursuant to federal requirements to carry out grant pro- grams are allowable. The cost of like organizations is allowable when provided for in the grant agreement, Therefore, these officials said, the expenses incurred by the two committees can be paid with grant funds. In addition, the program analyst stated that the committees were estab- lished as the direct result of the nomination and selection of Yucca Mountain for site characterization. For this reason, any expenses incurred by the committees are a result of this nomination and selection and should not be considered “ordinary expenses” that, according to NWPA, cannot be paid with grant funds. In responding to the 1988 audit report, the Executive Director wrote that it is DOE'S responsibility, not the state’s, to ensure that the proposed use of grant funds is allowed by the NWPA and OMB. The grantee’s Execu- tive Director believes these noE-approved legislative expenses are allow- able. In his March 1990 letter, the Executive Director said that the NWPA specifies a role for both the state’s executive and legislative branches in overseeing DOE'S nuclear waste program. He also said that funding of the state’s legislative involvement in the program has been recognized and supported by DOE since the beginning of the grant program. NWPA Provides DOE With In our view, the relevant criteria for determining if grant funds can Considerable Funding properly be used to pay expenses of Nevada’s legislature must be found within NWPA rather than OMB Circular A-87. This is the same approach Discretion adopted by the Ninth Circuit Court of Appeals in its September 1987 decision on the allowability of Nevada’s litigation expenses. On the basis of our analysis of NWPA, the 1987 amendments to the act, and the December 1986 and September 1987 Circuit Court decisions on the use of grant funds, we conclude that DOE has considerable discretion to determine which expenses are properly chargeable to the grant. Page 25 GAO/liCED-90473 Nevada Grant Requirements Chapter 2 Nevada Has Used Some Grant Funds Contrary to Laws, Regulations, and Grant Terme Accordingly, it was not improper for DOE to approve funding of the expenses the state legislature committee under the NWPA grant. Appendix I discussess both why we believe that the circular is not appli- cable criteria and our analysis of the grant funding discretion DOE has under NWPA, as amended, and the related Circuit Court rulings. The grantee has internal control weaknesses that place NWPA funds at Internal Control risk. The grantee (1) used grant funds received in one period to pay WeaknessesResult in approximately $275,000 in expenses incurred during the prior period, Improper Uses of (2) made and allowed advance payments to be used improperly, and (3) did not require audits of subrecipients of grant funds. For some of these Grant Funds weaknesses, the grantee has begun corrective actions. Use of 1989 Fu.nds for In September 1988 the grantee requested additional funding of $272,067 1988 Expenses for the grant period that had ended June 30, 1988. The DOE Nevada Operations Office denied this request in a December 30, 1988, letter saying, among other things, that in accordance with the grant agreement Nevada has sole liability for the costs incurred in excess of the amount authorized for the grant period. In January 1989 the grantee appealed DOE’Sdenial but DOEdid not answer this appeal. After DOE had denied the grantee’s request for additional 1988 funding, the grantee used about $275,000 in funds provided for the year ended June 30,1989, to pay for claims from the year ended June 30, 1988. The grant agreement stipulates that the amounts of funds obligated for the performance of grant activities during the applicable grant period- in this case from July 1, 1988, to June 30, 1989--is the limit of DOE’S liability under the grant. It also states that any cost incurred in excess of this amount is the sole responsibility of the state. Thus, since DOE disap- proved the grantee’s request for additional funding, the $275,000 expen- diture of funds provided for the year ended June 30, 1989, to pay claims for a prior year is not an allowable expense. Advances Improperly OMB Circular A-102 and DOE regulations require the amount of time Administered between the transfer of funds from the U.S. Treasury and their dis- bursement be kept to a minimum. lo Further, DOE regulations prohibit “‘Grants and CooperativeAgreementsWith Stateand LocalGovernments(OMB/A-102,Mar. 3, 1988). Page 26 GAO/RCED-W-173Nevada Grant Requirements chapter 2 Nevada Has Used SomeGrant Funds Contrary to Laws, Re~tions, and Grant Terms advances to be used to ensure timely payment of actual cash disbursements. The Single Audit Act audit for the year ended June 30, 1988, found weaknesses in the grantee’s controls over advances. The grantee advanced an entire year’s funds of about $85,000 to the Nevada Attorney General’s Office in August 1987. In response to the audit, the grantee said it would minimize the time between fund disbursement and use. Because of this previously identified weakness, we examined all the advances made by the grantee for the year ended June 30,1989. The grantee made five advances for about $283,000, of which we questioned two that totaled about $226,000. A November 1988 advance of $210,000 to the University of Nevada, Las Vegas, College of Engineering, was not liquidated until August 1989. Moreover, during this period, the univer- sity billed, and was paid, for services rendered without drawing down on the advance. Thus, the entire amount of the advance remained out- standing for about 10 months. The university’s grants supervisor told us that the university wanted the advance to ensure timely payment and also stated that this advance had been invested to earn interest. The grantee also advanced the city of Caliente, Nevada, about $16,000 in July 1988. Although the advance was reduced and replenished during the year, the grantee neglected to make a final reconciliation of the advance at the end of the contract period. When we called this to the grantee’s attention, it made a final reconciliation to recover the out- standing balance of the advance. Subrecipients A re Not Annual audits of certain subrecipients, as defined by OMB, are required Being Audited under the Single Audit Act and OMB Circulars A-l 10 and A-128.” Single Audit Act audits for the years ending in June 1987 and 1988 questioned why the grantee’s local government and university subrecipients were not audited each year. The grantee responded that it considered these to be contractors, not subrecipients, and therefore not required to have annual audits. The auditors disagreed with this response because, in their opinion, some of the grantee’s contractual agreements constituted a recipient/subrecipient relationship. ’ ‘Grants and AgreementsWith Institutions of Higher Education,Hospitals,and Other Non-Profit Organizations(OMB/A-110,July 30,1976) and Audits of Stateand LocalGovernments(OMB/A-128, Apr. 12, 1986). Page 27 GAO/RCED-90-173Nevada Grant Requirements Chapter 2 Nevada Has Used SomeGrant Funds Contrary to Laws, Regulations, and Grant Terms OMB defines a subrecipient as an entity that receives funds from the grantee to carry out programs that will assist in meeting the grant objec- tives as opposed to contractors who just provide goods and services. Both subrecipients and contractors may be employed by contracts; thus the existence of a signed agreement does not mean the entity is a contractor. The 1988 audit also cited the grantee for lack of control over contractor expenditures. To correct this weakness, the grantee hired an accounting firm to develop a contracts management system. In developing the system, the accounting firm found it necessary to accurately differen- tiate between contractors and subrecipients. In July 1989, the accounting firm asked the DOE Nevada Operations Office to comment on the interpretation it developed on the basis of research performed to differentiate between a contractor and a subrecipient. DOE did not respond, however, until January 1990, after we had questioned why there had been no response until then. At that time, a contract specialist in DOE’S Nevada office verbally notified the accounting firm that DOE had no problems with the firm’s interpretation. Page 28 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s Weak Grant Administiation contributed to Improper Uses of Funds Considering its lax grant administration, DOE must share responsibility for Nevada’s improper uses of grant funds. Over the last several years, for example, DOE has released grant funds without first reaching agree- ment with the state on all grant terms. In addition, DOE has made limited efforts to ensure that the funds were used according to applicable laws, regulations, and grant terms. Finally, DOE has not tracked grantee expenditures to ensure compliance with congressional limitations and has not resolved and, as appropriate, recovered costs questioned in prior audits of the grantee. In part, these administrative weaknesses occurred because of DOE'S permissive attitude toward the administration of Nevada’s NWPA grants. WE and the grantee have not formally agreed to all of the terms of the DOE Did Not Reach grant amendments award documents under which the grantee is funded. Agreement on All DOE regulations provide that the grant award is valid when it is in Grant Terms Before writing and signed by a DOE contracting officer. These regulations also require the grant applicant to acknowledge acceptance of a grant, ReleasingFunds including provisions governing the uses of grant funds, by signing and returning a copy of the grant to DOE. After acknowledgement, the terms and conditions of the grant may be changed unilaterally only by DOE. Over the last several years, however, the grantee has objected to various grant provisions either by marking out specific wording before signing grant documents or by taking written exception. Furthermore, the grantee considers the altered version of the grant amendments to be valid. DOE asserts that the grant amendments stand as initially offered, but agreed that it did not take appropriate actions to convey its position to the grantee. Because the grantee did not accept the grant as offered and did not receive approval of its “amendments,” the parties did not reach agreement on the questioned grant terms and conditions. There- fore, DOE should not have provided the grant funds until it had obtained a final agreement on all grant terms. In a May 1986 letter to DOE'S Nevada Operations Office, the grantee’s Executive Director took exception to two provisions in the grant amend- ment for the period from May 1 through December 31,1986. The first provision disallowed litigation costs while the second withheld grant funds until the grantee provided documentation on its plans for inde- pendent tests and studies related to the investigation of the Yucca Mountain site. DOE had requested documentation on the grantee’s test and study plans as a result of a December 1985 court decision requiring DOE to fund such tests and studies if certain conditions were met. Page 29 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s WeakGrant Administration Contributed to Improper Usesof Funds Although DOE did not respond to the grantee’s letter, it released the funds once the grantee had provided the requested documentation. In a March 1987 letter to DOE, the grantee again took exception to the same two provisions in the grant amendment for the period from March 1 through December 31,1987. In the view of DOE’S Nevada Operations Office, however, the grant provisions remained in force. In the grant amendment for the period from March 1,1987, through June 30, 1988, the grantee’s Executive Director crossed out a grant pro- vision prohibiting the use of grant funds for lobbying and restricting grantee/congressional communications. As discussed in chapter 2, DOE had inserted this provision into the grant to caution the grantee against using the funds for lobbying. An attorney in DOE’S Nevada Operations Office drafted a letter informing the grantee that DOE could not accept the deletion of the provision. In part, the draft response stated that the [provision] was expressedin terms of a separatecondition to caution the State that expenditures using grant funds for such ‘consulting services’ which go beyond those reasonably contemplated by the NWPA should not be made and would be sub- ject to disallowance. However, the letter was never sent to the grantee. Furthermore, DOE officials in the Nevada Operations Office could not explain to us why the letter had not been sent but said that they should have sent it. For the July 1,1989, through June 30,1990, grant amendment, the grantee changed the ending date to September 30, 1989, and deleted parts of three provisions.1 The DOE draft response concurred with short- ening the grant period but did not agree to delete the three grant provi- sions. Once again, however, DOE did not send this letter to the grantee and no&Nevada officials could not explain why they had not done so. For the grant amendment covering the period from October 1,1989, through September 30, 1990, the grantee’s Executive Director struck out two grant provisions2 The DOE Nevada Operations Office drafted two responses that it did not send. After we questioned why they were not sent, a response was drafted and sent on February 9, 1990. In this letter ‘Theseprovisions were entitled: Monitoring, Testing,or Evaluation Activities; External Paymentsor Transfer of Grant Funds;and DGEImplementationof StevensAmendment,Section8136,to the Departmentof DefenseAppropriations Act. eThesetwo provisions were:Monitoring, Testing,or Evaluation Activities, and External Paymentsor Transfer of Grant Funds. Page 30 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s WeakGrant Adminietration Contributed to Improper Useeof Funds the grantee was told that only the DOE contracting officer could change the award and therefore the existing provisions were in effect. According to the chief counsel of DOE'S Nevada Operations Office, the grant terms remained as submitted to the grantee by DoE regardless of the changes the grantee made. In retrospect, however, DOE officials now believe that they should have sent the response letters to the grantee. In fact, the DOE Yucca Mountain Project Manager was surprised when we informed him that some of DOE'S response letters had not been sent. The Project Manager thought the grantee had been notified that it could not change the conditions of the award. The grantee’s Executive Director told us DOE is untimely in issuing the grant amendments for grantee acceptance and little time is left to nego- tiate terms and conditions. Therefore, unilateral changes to the grant provisions were made to make them acceptable to the grantee. Further- more, the grantee’s position is that the changes constituted amendments of the grant conditions and that DOE agreed to the changes by awarding the funds. As discussed earlier, on two occasions the grantee deleted grant provi- DOE Has Not Enforced sions prohibiting lobbying, and DOE did not resolve the disagreements Laws, Regulations, over the lobbying provision before releasing grant funds. Also, DOE has and Grant Terms not yet determined the best way to recover grant funds used for unal- lowable purposes. As discussed in chapter 2, several audits questioned the grantee’s use of up to $75,000 in grant funds for litigation expenses, and a court also ruled that litigation expenses were not legitimate expenses to be funded by NWPA. However, DOE has yet to recover these unallowable expenses from the grantee either by requiring direct repayment from the grantee or by withholding the appropriate amounts from subsequent grant awards. The DOE Nevada Operations Office Manager, the contracting officer for this grant, believes the best way to recover these expenses is to deduct them from future payments equal to taxes that it will make to the state of Nevada once DOE begins site characterization of Yucca Mountain. DOE headquarter officials told us, however, that a final deci- sion on how the funds will be recovered has not been made. NWPA, as amended, requires DOE to pay to the state each fiscal year, and to the local government in which the Yucca Mountain site is located, an amount equal to the amount that these governmental units would Page 31 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s WeakGrant Administration Contributed to Improper Usesof Funds receive if they were authorized to tax site characterization activities. As yet, however, DOE has not determined just how these payment will be made, how much they will be, and when they will begin. On March 7, 1990, DOE published in the Federal Register for public comment a Pro- posed Notice of Interpretation and Procedures on payments equal to taxes. However, these proposed procedures do not provide for recouping unallowable grant expenses from payments DOE is authorized to make under other provisions of the act. In addition, DOE did not provide the grantee with guidance on how to ensure that the grantee did not exceed the congressional spending limi- tations, nor did DOE track the grantee’s expenditures to ensure that the limitations were not exceeded. DOE officials told us that their primary tool for reviewing grantee expenditures was the after-the-fact Single Audit Act audits. While this might ordinarily be satisfactory, we found that DOE is not resolving audit findings in accordance with its regula- tions, which require that such findings be resolved within 6 months from the date that the audit reports are formally presented to DOE for audit resolution. Informational copies of audit reports are available to the the Nevada Operations Office, which is responsible for resolving any grantee-related audit findings, generally within about 6 months after the audit period; however, the audit reports are not formally presented to the office for resolution until about 9 months later. The 9 months includes the time needed to process the reports through the quality control checks required by the Single Audit Act, including a quality review by DOE'S Office of the Inspector General. Thus, the program staff have several months to familiarize themselves with the reported problems before they formally receive the reports for audit resolution. Finally, DOE has not acted to ensure that the grantee’s internal controls over grant funds comply with federal standards. As discussed in chapter 2, we and the independent auditors found several weaknesses in the grantee’s internal control system. We discussed the results of our review with (1) DOE officials at the oper- Views of Responsible ations and project offices and at DOE headquarters and (2) grantee offi- Agency Officials Y cials. Subsequent to our discussion with grantee officials, the grantee’s Executive Director provided additional comments on the results of our review in a letter of March 14, 1990. In preparing our report, we consid- ered the comments of all of the DOE and Nevada officials, including those Page 32 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s WeakGrant Administration Contributed to Improper Usesof Funds comments made in the grantee’s March letter. Also, we included the comments of DOE and Nevada officials in our report, where appropriate. In his March letter, the grantee’s Executive Director said that our report should recognize the uniqueness of the state/federal relationship estab- lished by NWPA and the wide-ranging implications of that relationship for the grant program that funds the state’s oversight activities. Also, because of this special relationship between DOE and Nevada, the grant program must be viewed as different from other traditional federal assistance programs. Moreover, our report should adequately address the special circumstances surrounding this unique grant program and our findings in the program administration area should be viewed in the context of this special relationship. The Executive Director also told us that the state’s frustration with DOE'S attempts to subvert Nevada’s oversight activities had led to the legal actions the state took in January 1990 and in earlier years. In the Executive Director’s opinion, only NWPA and subsequent court decisions, not DOE, govern how the state can use its grant funds. Accordingly, he said, Nevada does not seek guidance from DOE on how it may use grant funds. For their part, DOE officials in Nevada said that they adopted a more permissive approach to funding Nevada’s proposed grant activities fol- lowing the December 1985 decision of the Ninth Circuit Court of Appeals, discussed earlier, on Nevada’s challenge to DOE'S guidelines on nuclear waste program grants. On the basis of this decision, these offi- cials decided not to object to funding any of the state’s proposed activi- ties that reasonably relate to the Yucca Mountain project. They also said that less stringent review of Nevada’s funding requests was needed once the Congress limited the amount of NWPA funds the state could receive and the amount it could spend on certain activities. In this regard, the Yucca Mountain Project Manager interprets the congressional limita- tions and restrictions contained in DOE'S 1989 and 1990 appropriations acts to mean that the Congress, not DOE, will provide grant program direction to Nevada. Nevada may use the funds made available by the Congress in whatever way it wishes, within the limits of NWPA. NWPA, as amended, charges DOE with investigating the suitability of Conclusions Yucca Mountain as a site for a nuclear waste repository and, if the site is found suitable and is selected, to seek authorization from the Nuclear Regulatory Commission to construct a repository at the site. However, Page 33 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s WeakGrant Administration Contributed to Improper Usesof Funds the grantee vigorously opposes DOE'S Yucca Mountain project. These opposing points of view toward the project create an environment con- ducive to disputes over DOE'S administration of the grant and the appro- priate uses of funds by the grantee. Regardless of their opposing positions on the Yucca Mountain project, DOE and Nevada are responsible for ensuring that activities funded by the grant are consistent with NWPA and other applicable laws, regula- tions, court decisions, and grant terms. To do this, DOE needs to improve its administration of the grant by settling disputes over grant terms before releasing funds to the state. In addition, DOE needs to advise the grantee on methods for implementing any legislative restrictions on the use of grant funds, resolve audit findings within 6 months and recover any amounts used for unallowable purposes, and ensure that the grantee’s internal controls over grant funds comply with federal stan- dards. Likewise, the state, as the grantee, has the responsibility to ensure that it fully complies with all applicable laws, regulations, and grant provisions. State and DOE officials have liberally interpreted the uses of grant funds allowed by NWPA. Nevada officials believe that NWPA provides them with considerable latitude in deciding how to use grant funds. Although DOE officials who administer the grant at the local level did not fully agree with this view, they stated that the 1985 court decision on funding Nevada’s independent tests and studies and the Congress’ recent deci- sions to impose restrictions on Nevada’s grant contributed to their more relaxed approach to administering the grant. The liberal interpretations by state and DOE officials of how grant funds can be used has, we believe, contributed to the Congress’ becoming more restrictive in both the amount of money appropriated for the state’s grant and in the activities that may be funded. NWPA, as amended, requires that grant funds shall be used for those purposes stated in the act, and in DOE'S last two appropriations acts the Congress has specifi- cally restricted the activities that can be funded with grants paid from the Nuclear Waste Fund. These actions clearly demonstrate that the Congress intends that grant funds be used only for purposes that fur- ther the goals of NWPA, as amended. Thus, it is incumbent on both the state and DOE to take all necessary steps to ensure that grant funds are used for appropriate purposes. Page 34 GAO/RCED-90-173Nevada Grant Requirements Chapter 3 DOE’s Weak Grant Administration Contributed to Improper Usesof Funds To better ensure that grant funds are adequately protected and that Recommendations recipients of these funds comply with applicable laws, regulations, court decisions, and grant provisions, we recommend that the Secretary of Energy obtain properly executed grant agreements and amendments to the agreements before releasing funds to grantees; provide timely guidance to the grantee on the methods to be followed in implementing any congressional restrictions placed on the grantee’s use of funds; resolve all audit findings within 6 months as required by current DOE regulations; determine the amount of grant funds expended for unallowable pur- poses, seek repayment of unallowable expenditures, and, if timely repayment is not forthcoming, recover these expenditures by with- holding the amount due from the state’s subsequent grant award; and . ensure that the grantee’s internal controls over grant funds comply with federal standards. Page 35 GAO/RCED-90-173Nevada Grant Requirements , Appendix I NWPA Provides DOE With Considerable Discretion in Approving Usesof Grant Funds The relevant criteria for determining if grant funds can properly be used to pay expenses of Nevada’s legislature must be found within NWPA rather than OMB Circular A-87. This is the same approach, for example, adopted by the Ninth Circuit Court of Appeals in its September 1987 decision on the allowability of Nevada’s litigation expenses. Further- more, on the basis of our analysis of NWPA, the 1987 amendments to the act, and the December 1985 and September 1987 Circuit Court decisions on the use of grant funds, we have concluded that DOE has considerable discretion to determine which expenses are properly chargeable to the grant. Accordingly, it does not appear to be improper for DOE to approve funding of the expenses of the committee of the state legislature under the NWPA grant. The cost principles of OMB Circular A-87 state generally that expenses of The OMB Circular Is state legislative bodies are unallowable. Primarily for this reason, the Not Applicable Single Audit Act report questioned this use of NWPA grant funds. How- ever, when DOE attempted to rely on another provision of this circular, concerning states’ litigation expenses under NWPA, the Ninth Circuit ruled, in its September 1987 decision, that “[rleliance on this circular is clearly inappropriate.“’ The Court noted, in part, that the circular itself states that its principles are not intended to dictate the extent of federal participation in a particular grant, and the Court based its decision instead on the provisions of NWPA. On the basis of NWPA, subsequent judicial construction of the act, and the NWPA Provides DOE 1987 amendments to the act, we believe that DOE has sufficient discre- With Considerable tion to determine that expenses of a Nevada state legislative committee Discretion on the Use are properly chargeable to the grant. of Funds Original Statutory Under subsection (c) of section 116 of NWPA as originally enacted, the Provisions Congress provided authority and established criteria for various grants to states to be made out of the nuclear waste fund, Paragraph (c)(l)(A) directed the Secretary of Energy to make grants to each state receiving notification that it contained a “potentially acceptable” repository site. Y The NWPA provided a definition of the term “potential acceptable site,” but did not establish a numerical limit on the states that might have ‘State of Nevada, et al. v. Herrington, 827 F.2d 1399 (9th Cir. 1987). Page 36 GAO/RCED-90-173Nevada Grant Requirements Appendix I NWPA provides DOE With Considerable Diacmtion in Approving Usesof Grant Funds such sites. At most, the Secretary’s notification was required to take place within 180 days after January 7, 1983, the date of enactment of NWPA. States were to receive such grants “for the purpose of partici- pating in activities required by” sections 116 and 117 of the act, or authorized by written agreement entered into pursuant to subsection 117(~).~ Salary and travel expenses that would ordinarily be incurred by the state were specifically determined to be ineligible for funding. No other statutory guidelines were prescribed for paragraph (c)(l)(A) grants. Paragraph (c)(l)(B) directed the Secretary to make grants to each state having a “candidate” repository site approved by the President, based on recommendations of the Secretary of Energy. The Secretary’s recom- mendations, based in turn on his nomination of at least five sites pur- suant to guidelines to be issued within 180 days of NWPA’S enactment, were to be made to the President not later than January 1, 1985. The Secretary was to recommend three sites to the President, whose approval (or disapproval) was required within 60 days of the Secre- tary’s recommendation. Grants made pursuant to paragraph (c)(l)(B) were to be “only” for purposes of enabling a state to undertake five listed categories of activities, which essentially involve independent state oversight and analysis of the impacts of DOE’S site characterization activities. Consideration must also be paid to the state site disapproval process under NWPA. Under subsection 116(b) of the act, once the President has recommended a site for the repository, unless otherwise provided by state law, either the governor or the legislature of the state in which the site is located may submit to the Congress a notice of disapproval. In the bill considered on the House floor in 1982, the text of the subsection as originally drafted required the notice to be submitted jointly by the gov- ernor and the legislature. As the result of an amendment offered by Rep- resentative Markey, the provision was changed to permit either the governor or the legislature to file a notice of disapproval. Floor debate on the amendment makes it clear that its purpose was to provide the state with the maximum flexibility to determine the means by which to present the state’s disapproval: Mr. Udall. The gentleman’s amendment as I understand it says to the State, You have a veto. We hereby grant you the further power to decide who will exercise that State veto. 2Thereis no section 117 written agreement between DOE and Nevada. Page 37 GAO/RCED-90-173Nevada Grant Requirements Appendix I NWl’A provides DOE With Considerable Discretion In Approving Usesof Grant Funds It could be the Governor alone, the legislature alone, it could be a special commission set up under State law or any other formulation or arrangement the State wanted to put into effect. Mr. Markey. That is the intention of the amendment.” In 1985, in order to be prepared to carry out its statutory authority to submit a notice of disapproval, should it be necessary, the Nevada legis- lature enacted NRS 459.0085, creating the Committee on High-Level Radioactive Waste to study and evaluate certain issues raised by the potential location of a nuclear waste repository in the state, and to rec- ommend appropriate legislation. In the preamble to NRS 459.0085, the state expressed its determination that both the governor and the legisla- ture would participate in the disapproval process as follows: The legislature hereby finds, and declares it to be the policy of this state, that the study of the disposal of high-level radioactive waste in the State of Nevada and related activities is essential to the preservation of the public health and welfare. This study must involve the governor, the legislature and local governments as direct participants. (Emphasis added).4 It is obvious that the activities of the legislative committee are consid- ered by the state to be an integral part of the state’s role under NWPA. Judicial Construction In 1984, following DOE’S denial of a Nevada request for funding of cer- tain proposed hydrologic and geologic studies of the Yucca Mountain site, Nevada sued DOE for a declaratory judgment that DOE’S Internal General Guidelines on Nuclear Waste Repository Program Grants were unlawful, and that the funding request should be approved. The issue arose at a point prior to the Secretary’s recommendation and the Presi- dent’s approval of “candidate sites,” which would have triggered the authority provided by paragraph (c)(l)(B) of section 116 of NWPA. Thus, only the grant program authorized by paragraph (c)(l)(A) was directly involved in this litigation. The court held that Nevada was entitled to the requested funding and that sections of DOE’S Guidelines that sought to “minimize” independent state collection of primary data were unlawful. On the basis of its analysis of the purposes and structure of the NWPA, the Court concluded that paragraph (c)(l)(A) “must be read as a “128 Cong. Rec. H8598 (daily ed. Nov. 30, 1982). 4Ch. 680, Nev. Stats. 1985. Page 38 GAO/RCED-90-173Nevada Grant Requirements Appendix I NWPAProvides DOE With Considerable Discretion in Approving Usesof Grant Funds catchall provision that authorizes funding in other circumstances not already specifically ‘required by sections 116 or 117 or authorized by written agreement.“’ (Emphasis in original).” The Court also observed that this paragraph provides a basis for funding the proposed studies, if they would be essential to the informed “statement of reasons” that might be needed later under subsection 116(b) to explain a state’s disap- proval of a recommended repository site. The Court found that this statement of reasons is “required by section 116,” and thus the pro- posed studies were eligible for funding under paragraph (c)(l)(A). Even though a state may never have to file a statement of reasons, activities in advance of such a statement were held to be eligible for funding under this authority. Finally, in the act’s legislative history, the Court found support for its analysis of the act’s purpose and structure. And the Court quoted Senate committee report language indicating that a state’s rights under NWPA were to be given the broadest possible interpretation. Nevada, joined by other states, later sued DOE to overturn the Secre- tary’s denial of eligibility for grant funding of litigation expenses incurred to finance judicial review of DOE actions under the NWPA. This matter arose after the President had approved three “candidate” sites for characterization, thus meeting the condition, with respect to two of the petitioners, for grant funding under paragraph (c)(l)(B). However, three of the other petitioning states did not contain “candidate” sites, but only “potentially acceptable” sites. Therefore, the extent of funding eligibility for those states would normally be governed by paragraph (c)(l)(A), for, as the Court noted, “[tlhere are specific statutory provi- sions requiring funding to states at different stages of the site selection process.“ci The Court considered the principal issue to be whether litigation expenses attendant to judicial review were an activity “required” by sections 116 and 117 of NWPA. However, having thus phrased the issue in terms of paragraph (c)(l)(A), the analysis proceeded on the basis of paragraph (c)(l)(B). The Court held that paragraph (c)(l)(B) “sets forth an exhaustive list of activities for which a state may use grant funds.” (Emphasis added.)7 For this conclusion the Court twice quoted the lan- guage of paragraph (c)(l)(B), which still contained the word “only.” The “State of Nevada v. Herrington, 777 F.2d 529 at 532. “State of Nevada, et al. v. Herrington, 827 F.2d 1394 at 1398. 7State of Nevada, et al. v. Herrington, at 1398, 1399. Page 39 GAO/RCED-90-173Nevada Grant Requirements Appendix I NWPAProvides DOE With Considerable Discretion in Approving Usesof Grant Funds Court held that litigation expenses, not being expressly or impliedly cov- ered in paragraph (c)(l)(B), were not to be funded by NWPA grants. NWPA Amendments Three months later, the Congress enacted amendments to NWPA. Among the amendments was the deletion of the word “only” from paragraph (c)(l)(B). Paragraphs (c)(l)(A) and (c)(l)(B) were retained as distinct funding authorities, even though the previous phased process of site selection was changed so that site characterization activities were to be focused on Nevada instead of on three states. The word “only” was deleted at the conference report stage of the 1987 NWPA amendments. While there is no explanation in the report or floor debate for the purpose of this deletion, there clearly must have been some reason for this legislative action. One possible reason for this amendment was to overturn the recent restrictive court interpretation of the NWE’A funding provisions, since it is generally presumed that the Congress is knowledgeable about existing law pertinent to the legislation it enacts,x and that the Congress has knowledge of the judicial interpre- tation given to a prior statute, at least insofar as it affects the new statute.” On the basis of this analysis, we conclude that DOE has considerable dis- Conclusions cretion under NWPA to determine which expenses are properly charge- able to the grant. Specifically, under the authority of paragraph (c)( 1 )(A) of NWPA, as interpreted by the Ninth Circuit in State of Nevada v. Herrington, DOE could properly determine that funding the state legis- lative committee from the NWPA grant was proper, inasmuch as state policy, as permitted by the NWPA, was to involve the legislature inte- grally in the site disapproval process. In addition, the later 1987 NWPA amendments can be viewed as confirming DOE’S funding flexibility under the act. Therefore, it does not appear to be improper for DOE to approve funding of the expenses of this committee of the state legislature under the NWPA grant. “Goodycar Atomic Corp. v. Miller, 486 U.S. 174 (1988), and Sutton v. United States, 819 F.2d 1289 (5th Cir. 1987). %xillard v. Pans, 434 17,s.575 (1978) Page 40 GAO/RCED-M-173Nevada Grant Requirements Appendix II Major Contributors to This Report Judy England-Joseph, Associate Director Resources, Dwayne E. Weigel, Assistant Director Community, and Richard A. Renzi, Assignment Manager Economic Development Division, Washington, D.C. Regional Office Eugene P. Buchert, Staff Evaluator Susan W. Irwin, Attorney Office of General Counsel (YOlBH7) Page 41 GAO/RCED-90-173Nevada Grant Requirements il i “I . ..- -- -.-. -.--~.--_ _.._. 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Nuclear Waste: DOE Needs to Ensure Nevada's Conformance With Grant Requirements
Published by the Government Accountability Office on 1990-07-09.
Below is a raw (and likely hideous) rendition of the original report. (PDF)