oversight

Energy Management: Better DOE Controls Needed Over Contractors' Discretionary R&D Funds

Published by the Government Accountability Office on 1990-12-05.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

I )t~cv~rlltM~r1!)!)(I
                                        ENERGY
                                        MANAGEMENT
                                       Better DOE Controls
                                       Needed Over
                                       Contractors’
                                       Discretionary R&
                                       Funds                                         _..-




                                                                                        143420
                                                                                 i




                         I                                    RELEASED
                             RESTRICFED --Not       to be released outside the
                             General Accounting ofplce unless specifically
                             approved by the Ofl’lce of Congressional
                             Relations.
Resources, Community, and
Economic Development Division

H-23578 1

December 5,199O

The Honorable Mike Synar
Chairman, Environment, Energy, and
  Natural Resources Subcommittee
Committee on Government Operations
House of Representatives

Dear Mr. Chairman:

In response to your January 10, 1989, request and subsequent discussions with your office,
this report discusses four issues relating to the discretionary research and development
activities of three Department of Energy (DOE) laboratories and DOE'S management controls
over these activities. Specifically, the report addresses the need for, uses of, and DOE
management controls over its laboratories’ discretionary R&D activities.

As arranged with your office, 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 the Secretary of Energy and other interested parties.

This work was performed under the direction of Victor S. Rezendes, Director, Energy Issues,
who can be reached at (202) 275-1441. Other major contributors are listed in appendix I.




                                     I
,J. Dexter Peach
Assistant Comptroller General
                                                                                                        ,
Executive Summary


                    The Department of Energy’s (DOE) nine multiprogram laboratories con-
Purpose             ducted discretionary research and development (R&D) activities costing
                    approximately $123 million during ,fiscal year 1989. Citing past exam-
                    ples of uncontrolled use of certain R&D funds by the laboratories, the
                    Chairman of the Environment, Energy, and Natural Resources Subcom-
                    mittee, House Committee on Government Operations, asked GAO to
                   -examine the authority and need for, uses of, and controls over DOE'S dis-
                    cretionary R&D funds. As agreed with his office, GAO focused the review
                    on the discretionary R&D activities at the Lawrence Livermore, Sandia,
           .        and Los Alamos National Laboratories.


                   Section 303 of Public Law 95-39, the Energy Research and Development
Background         Administration’s fiscal year 1977 authorization act, gives DOE specific
                   authority to approve the use of a reasonable amount of laboratory funds
                   to conduct employee-suggested R&D projects selected at the discretion of
                   the laboratory directors-discretionary   R&D.

                   In December 1983 DOE revised an internal order (DOE Order 5000.1,
                   Change 1; now codified as DOE Order 5OOO.lA) and formally established
                   a discretionary R&D program called Exploratory Research and Develop-
                   ment (Exploratory R&D). This order also established policies and proce-
                   dures governing the Exploratory R&D program, including criteria for
                   determining appropriate and inappropriate uses of Exploratory R&D
                   funding, and established program oversight responsibilities. Two of the
                   laboratories (Sandia and Los Alamos) conducted some discretionary R&D
                   activities prior to the formal establishment of the Exploratory R&D pro-
                   gram. In implementing the program, Sandia substituted Exploratory R&D
                   for its existing discretionary R&D efforts, Lawrence Livermore created
                   an Exploratory R&D program, and Los Alamos incorporated Exploratory
                   R&D as a component of its existing discretionary R&D program. Los
                   Alamos’ discretionary R&D program currently consists of two compo-
                   nents: Basic Research and Exploratory R&D.


                   Both DOE and laboratory officials support the need for some discretion
Results in Brief   on the part of laboratory directors in choosing R&D projects. Further, the
                   Congress has approved a “reasonable amount” of funding for such
                   activities. Notwithstanding this support, the absence of any formal WE
                   studies aimed at assessing the benefits resulting from the multiprogram
                   laboratories’ discretionary R&D activities leaves open to question DOE'S
                   plans to significantly increase the funding levels for these activities.



                   Page 2                                  GAO/RCED-91-18   Discretionary   R&D Funds
                         Executive   Sumawry




                         The vague wording of DOE'S existing criteria for use of discretionary R&D
                         funds makes judgments about appropriate and inappropriate uses of
                         funds difficult at best. When GAO examined these activities against its
                         reading of these criteria, it found that the laboratories had spent funds
                         on activities that are questionable.

                         DOE's management controls are weak over the administration and use of
                         discretionary R&D funds at the three laboratories GAO reviewed. DOE has
                         not effectively implemented the control mechanisms contained in the
                         DOE order, including the requirement that the operationsoffices review
                         the nature of projects carried out under the order and that the cognizant
                         secretarial officer annually visit the laboratories and review the results
                         of Exploratory R&D.

                         Further, DOE has not formally reviewed, nor set a funding ceiling appli-
                         cable to, the Basic Research component of Los Alamos’ program. DOE
                         does not have guidance on the use of funds from Los Alamos’ Basic
                         Research component and has no formal system of controls in place cov-
                         ering Basic Research.

                         DOE acknowledges these weaknesses. It has recently developed draft gui-
                         dance that, if approved and effectively implemented, should clarify the
                         criteria on appropriate uses of Exploratory R&D funds, strengthen DOE
                         oversight of the laboratories’ discretionary R&D activities, and apply to
                         Basic Research.



Principal Findings

Authority and Need for   The Congress, through the enactment of section 303 of Public Law 95-
Discretionary R&D        39, authorized DOE to approve the use of a “reasonable amount” of labo-
                         ratory funds for discretionary R&D activities. For its Exploratory R&D
Funding                  program, DOE determined that the maximum funding level should be
                         equal to 2 percent of the operating budgets at the three laboratories GAO
                         reviewed. DQE has never made any formal determination, however,
                         regarding the appropriate funding level for the Basic Research compo-
                         nent of Los Alamos’ discretionary R&D program, which Los Alamos
                         funds at a level equal to about 5 percent of its operating budget. DOE and
                         laboratory officials told GAO that the Basic Research component of Los
                         Alamos’ discretionary R&D program is not subject to the DOE order on



                         Page 3                                  GAO/RCED-91-18   Discretionary   R&D Funds
                          Executive   Summary




                          Exploratory R&D and DOE does not have any guidance that specifically
                          applies to Basic Research.

                          DOE and laboratory officials cited three studies as supporting the need
                          for discretionary R&D. The studies concluded that discretionary R&D
                          funding for the laboratories would enhance the laboratories’ capabilities
                          and improve their performance. However, these studies did not take into
                          account DOE'S experience in conducting discretionary R&D through its
                          Exploratory R&D program. DOE has also done little to assess the benefits
                          of its laboratories’ discretionary R&D programs. In GAO'S view, the
                          absence of such analysis leaves open to question DOE'S plans to increase,
                          by fiscal year 1991, discret#ionary R&D funding at the three laboratories
                          GAO reviewed by about 26 percent over the fiscal year 1988 level.



Vague Criteria Make       Guidance in the DOE order on Exploratory R&D is not clear enough to
Judging Use of            ensure that laboratories use these funds appropriately. When GAO
                          examined these activities against its reading of the criteria, it found that
Discretionary
-_-^. _       R&D FImds   the laboratories had spent funds on activities that are questionable. For
LNfficult                 example, the DOE order prohibits the purchase of general purpose capital
                          equipment, but it neither defines “general purpose” nor specifies the
                          types of equipment that may be purchased with these funds.

                          DOE has not established any guidance on how Los Alamos’ Basic
                          Research funds may be used. GAO found that Los Alamos used some dis-
                          cretionary R&D funds for activities that did not involve actual research.
                          Even more significantly, Los Alamos, with DOE'S knowledge, used over
                          $2.6 million of the Basic Research funds to pay uncollected costs for
                          reimbursable projects done at the laboratory.


Weak DOE Controls Over    IXIE lacks effective controls over laboratories’ discretionary funds.
Discretionary R&D         Weaknesses GAO observed include the following: (1) tm~ headquarters
                          did not conduct the annual program oversight reviews required by DOE
Activities                order, (2) the Albuquerque Operations Office did not review Explora-
                          tory R&D projects, (3) DOE provided virtually no oversight of Los Alamos’
                          Basic Research program, (4) DOE did not communicate spending provi-
                          sions contained in authorization and appropriations acts to its field
                          offices, and (5) DOE did not require that laboratories file project reports
                          with the DOE Scientific and Technical Information Center.




                          Page 4                                   GAO/RCED-91-11   Discretionary   R&D Funds
                  Executive   Summary




                  DOE has begun improving its controls over discretionary funds. For
                  example, its Office of Defense Programs and Albuquerque Operations
                  Office have recently conducted reviews of the laboratories’ programs.


                  GAO recommends that the Secretary of Energy (1) periodically assess the
Recommendations   benefits of the DOE laboratories’ discretionary R&D activities relative to
                  their costs, (2) review and revise DOE Order 5000.1A to clarify guidance
                  on appropriate and inappropriate uses of Exploratory R&D funds, and
                  (3) establish that the guidance applies to all discretionary R&D activities
                  carried out by the laboratories, including the Basic Research component
                  of Los Alamos’ program.

                  In addition, GAO makes a number of recommendations to the Secretary
                  aimed at improving DOE'S oversight of its laboratories’ discretionary F&D
                  activities.


                  To ensure that expenditures under section 303 of Public Law 95-39 are
Matter for        not excessive, the Congress may want to consider clarifying the term
Congressional     “reasonable amount” by establishing a specific funding ceiling for DOE'S
Consideration     discretionary R&D program.

                                                                      ‘I



                  GAO discussed this report with DOE and laboratory officials. They gener-
Agency Comments   ally agreed with the facts presented and suggested several changes that
                  were incorporated where appropriate. However, as requested, GAO did
                  not obtain official agency comments on this report.




                  Page 5                                  GAO/RCED-91-18   Discretionary   R&D Funds
Contents


Executive Summary
Chapter 1                                                                                             8
Introduction           DOE’s Multiprogram Laboratories
                       DOE’s Statutory Authority to Authorize Discretionary
                                                                                                      9
                                                                                                     10
                           R&D by Its Laboratories
                       DOE Order Creates Exploratory Research and                                    11
                           Development Program
                       DOE Inspector General Critical of Los Alamos’                                 14
                           Discretionary R&D Program
                       Objectives, Scope, and Methodology                                            15

Chapter 2                                                                                            19
DOE Needs to Better    Congress Has Not Set Specific Limits on Discretionary
                           R&D Funding
                                                                                                     19
Assessthe              DOE Allowed One Laboratory to Fund Discretionary R&D                          20
Appropriate finding        Activities Above the Ceiling It Set for Exploratory
Level for                  R&D
                       DOE Has Done Little to Assess the Need for and Benefits                       22
Discretionary R&D          of Discretionary R&D
                       DOE Had Not Informed a Congressional Subcommittee of                          24
                           the Full Extent of Discretionary R&D Expenditures
                       Conclusions                                                                   26
                       Recommendations to the Secretary of Energy                                    27
                       Matter for Consideration by the Congress                                      27

Chapter 3                                                                                            28
DOE Guidance on        DOE Has Not Provided the Laboratories With Clear
                           Guidance on the Use of Exploratory R&D Funds
                                                                                                     28
Laboratories’ Use of   DOE Has No Guidance Covering $48 Million in Annual                            32
Discretionary R&D          Discretionary R&D Expenditures
                       Conclusions                                                                   35
Funds Is Unclear       Recommendations to the Secretary of Energy                                    36




                       Page 0                                GAO/RCED-91-18   Discretionary   R&D Funds
Chapter 4                                                                                           37
DOE Needs to Improve   Control Mechanisms Are Not Utilized or Do Not Exist                          37
                                                                                                    40
                       DOE Has Not Communicated Statutory Spending
Controls Over              Provisions to the Laboratories
Laboratories’          DOE Guidance Does Not Incorporate All Pertinent                              42
Discretionary R&D          Requirements of Public Law 95-39
                       Conclusions                                                                  43
Activities             Recommendations to the Secretary of Energy                                   44

Appendix               Appendix I: Major Contributors to This Report                                46

Table                  Table 2.1: Exploratory Research and Development                              25
                           Allocations




                       Abbreviations

                       DOE       Department of Energy
                       DOE IG    DOE Inspector General
                       EnAH      Energy Research Advisory Board
                       ERDA      Energy Research and Development Administration
                       I’Y       fiscal year
                       GAO       General Accounting Office
                       IHCLD     Institutional Research and Development
                       ISRD      Institutional Supporting Research and Development
                       Ii&D      research and development


                       Page 7                                GAO/RCED-91-18   Mscretionary   R&D Funds
Chapter 1                                                                                                       T
Introduction


               The Department of Energy (DOE), through its nine multiprogram labora-
               tories, conducts a broad range of defense- and energy-related research
               and development (R&D) activities. Most of the R&D conducted by DOE is
               under the direction of DOE’s program office managers and is financed by
               the program offices and funds from other users of the laboratories. DOE
               also has authority, under the fiscal year (FY) 1977 authorization act for
               the Energy Research and Development Administration, to approve the
               use of a reasonable amount of laboratory funds for conducting
               employee-suggested R&D projects selected by the laboratory directors.

               On December 13, 1983, DOE revised a departmental order (DOE Order
               5000.1, Change 1) to establish the Exploratory Research and Develop-
               ment (Exploratory R&D) program, authorizing the multiprogram labora-
               tory directors to conduct some R&D of their choosing. Research and
               development of this nature is called discretionary R&D. Unlike the pro-
               gram-directed R&D, which is funded and managed by the program office
               managers, discretionary R&D is managed by the laboratory directors and,
               in most cases, is financed through an assessment against the laborato-
               ries’ operating funds, The purpose of the Exploratory R&D program is to
               provide the laboratories with the opportunity to investigate innovative
               and creative scientific and technological ideas. The nine multiprogram
               laboratories conducted discretionary R&D costing approximately $123
               million during FY 1989.

               Citing DOE’S increasing demand on the federal dollar and past examples
               of uncontrolled use of certain R&D funds by the laboratories, the
               Chairman of the Environment, Energy, and Natural Resources Subcom-
               mittee, House Committee on Government Operations, in his letter of Jan-
               uary 10, 1989, asked us to examine the authority and need for, uses of,
               and controls over DOE’S discretionary R&D funds. As agreed with his
               office, we focused our review on the discretionary R&D activities carried
               out by three defense laboratories-the    Lawrence Livermore, Sandia,
               and Los Alamos National Laboratories.’ In addition, because a 1989
               report by DOE’S Office of the Inspector General (IG) had found problems
               with Los Alamos’ discretionary R&D program, we expanded our work at
               Los Alamos to include discretionary R&D activities carried out in FYS
               1986 and 1987.




               ‘We focusedour review on the laboratories’FY 1988activities becausethis was the most recentyear
               for which completedata were available.



               Page 8                                             GAO/RCEDBl-18     Discretionary   R&D Funds
                           Chapter 1
                           Introduction




                           DOE, established on October 1, 1977, is responsible for conducting a
DOE’s Multiprogram         broad program of energy- and defense-related R&D. DOE and its prede-
Laboratories               cessor agencies have traditionally utilized the multiprogram laboratories
                           for this purpose. There are nine DOE multiprogram laboratories owned
                           by the government and operated by contractors. They receive program-
                           matic direction from DOE'S program offices and contractual oversight
                           and administrative support from DOE'S field operations offices.

                           The nine multiprogram laboratories serve as DOE'S primary mechanism
                           for conducting energy and defense R&D. These laboratories are large and
                           diverse and employ scientists and engineers who conduct basic and
                           applied research in a broad range of disciplines. The reservoir of scien-
                           tific and technical knowledge accumulated at the laboratories through
                           R&D can be used and re-used by other laboratories, state and federal gov-
                           ernments, industry, and universities for solving problems and exploring
                           new areas of technology.

                           These multiprogram laboratories are operated for the government by
                           contractors from universities and private industry. For example, AT&T
                           Technologies is under contract to operate Sandia, and the University of
                           California is under contract to operate Lawrence Livermore and Los
                           Alamos. During FY 1988, funding for the nine contractor-operated mul-
                           tiprogram laboratories was approximately $4.1 billion, or about 30 per-
                           cent of DOE'S overall FY 1988 budget. The DOE funding levels for the nine
                           multiprogram laboratories were approximately $4.3 billion in FY 1989
                           and $4.8 billion in FY 1990.

                           Since it conducts energy- and defense-related R&D, DOE has arranged the
                           nine multiprogram laboratories into two groups, the energy laboratories
                           and the defense laboratories. The energy laboratories are under the cog-
                           nizance of the Director of Energy Research. The defense laboratories,
                           under the cognizance of the Assistant Secretary for Defense Programs,
                           conduct primarily defense-related R&D, including energy R&D related to
                           defense issues, For example, these laboratories design nuclear weapons
                           and develop other technologies needed to ensure national security.


Organizational Structure   DoE'S headquarters Office of the Assistant Secretary for Defense Pro-
for Managing the Defense   grams (Defense Programs) provides general oversight to the laboratories
                           and specific direction for activities conducted under the DOE weapons
Programs Laboratories      program, while the field operations offices provide contractual over-
                           sight and administrative support. According to Defense Programs offi-
                           cials, Defense Programs provides general direction for activities


                           Page 9                                  GAO/RCED-91-18   Discretionary   R&D Funds
                                                                                                                              .
                          Chapter 1
                          lntroductkm                                                                             \




                          conducted under the weapons program to ensure that the laboratories
                          conduct R&D that coincides with Defense Programs’ general program
                          objectives. The field operations offices provide a formal link between
                          DOE headquarters and the laboratories. Each operations office is respon-
                          sible for contract management at the laboratories under their jurisdic-
                          tion For example, the Albuquerque Operations Office administers the
                          contracts for Los Alamos and Sandia, while the San Francisco Opera-
                          tions Office administers the contract at Lawrence Livermore. According
                          to DOE officials, the operations offices are also responsible for overseeing
                          (1) procurement for and by laboratories under their jurisdiction, (2)
                          safety matters at the laboratories, (3) security at the laboratories, and
                          (4) the financial operation of the facilities.


                          DOE has general authority   to conduct or manage a broad range of R&D
DOE’s Statutory           deemed necessary by the Secretary of Energy. Several different enabling
Authority to              statutes, including the Atomic Energy Act, the Energy Reorganization
Authorize                 Act of 1974, and the Department of Energy Organization Act, provide
                          the authority for its R&D activities. In addition, under section 303 of
Discretionary R&D by      Public Law 95-39, the Energy Research and Development Administra-
Its Laboratories          tion FY 1977 authorization act, DOE has specific authority to approve the
                          use of laboratory funds to conduct employee-suggested R&D projects
                          selected at the discretion of the laboratory directors.2


DOE’s Enabling Statutes   DOE cites a number of different statutes as providing authority for con-
                          ducting a wide range of R&D activities. For example, the Atomic Energy
                          Act of 1954, as amended (42 U.S.C. 2011 et seq.), provides DOEwith
                          broad, discretionary authority to carry out R&D activities in the field of
                          nuclear energy. One purpose of the Atomic Energy Act is to provide for
                          a program of conducting, assisting, and fostering R&D. The Atomic
                          Energy Act directs DOE to, among other things, exercise its powers to
                          ensure the continued conduct of R&D, and to assist in acquiring theoret-
                          ical and practical knowledge.

                          One of the purposes of the Energy Reorganization Act of 1974, as
                          amended (42 U.S.C. 5801 et seq.), is to have DOE (formerly the Energy
                          Research and Development Administration) direct federal R&D activities
                          for all sources of energy and to carry out basic research activities.
                          Under the Energy Reorganization Act, DOE is responsible for planning,

                          %OE has not clearly articulated its views as to the relationshipbetweensection303 and its general
                          authority under its enablingstatutes.We are continuingto examinethis matter.



                          Page 10                                              GAO/RCEDBl-18     Discretionary   R&D Funds
                           Chnpter 1
                           Introduction




                           coordinating, supporting, and managing, as well as for encouraging and
                           conducting, energy R&D for all energy sources, with respect to both near-
                           term and long-range energy needs. The Secretary has broad authority
                           under the Energy Reorganization Act to determine the areas or fields of
                           R&D activities to be pursued; the persons or institutions to perform the
                           R&D; and the form of payment. Further, he is authorized to take
                           whatever steps he considers necessary or appropriate to perform the
                           functions for which he is responsible.

                           The Department of Energy Organization Act (42 U.S.C. 7101 et seq.),
                           which created DoE, consolidated and granted to the Secretary and ME
                           the responsibility for R&D that was formerly fragmented among several
                           federal agencies. Under the DOE act, DOE is responsible for planning,
                           coordinating, supporting, and managing a balanced and comprehensive
                           energy R&Dprogram.


DOE’s Specific Authority   In addition to its general authority to manage or conduct energy R&D
                           activities, DOE also has specific statutory authority to approve the use of
                           a portion of laboratory operating funds to conduct some R&D projects
                           selected at the discretion of the laboratory directors. Section 303 of
                           Public Law 96-39, the Energy Research and Development Administra-
                           tion Authorization Act for FY 1977, permits the direct&s of DOE'S labora-
                           tories, with the approval of the Secretary, to use a “reasonable amount”
                           of the laboratories’ operating budgets to fund “employee-suggested
                           research projects up to the pilot stage of development.”


                           In furtherance of its mission of conducting defense- and energy-related
DOE Order Creates          R&D, DOE has historically allowed the laboratory directors to conduct
Exploratory Research       some R&D at their discretion. However, in December 1983 DoE issued a
and Development            revised order formally establishing the Exploratory R&D program. DOE
                           created the Exploratory R&D program to provide a formal mechanism
Program                    through which the laboratories could foster the development of new sci-
                           ence and technology ideas related to their defense and energy missions.
                           This order also established policies and procedures governing the
                           Exploratory R&D program, including criteria for determining appropriate
                           and inappropriate uses of Exploratory R&D funds, and established pro-
                           gram oversight responsibilities. DOE later revised and re-issued the order
                           as DOE Order 5000.1A in September 1986.

                           DOE Order 5OOO.lA authorizes the laboratories’ directors to utilize a por-
                           tion of their operating budgets-the   specific amount to be approved


                           Page 11                                 GAO/RCED-91-M   Discretionary   R&D Funds
                         Chapter 1
                         Introduction




                         annually by the Assistant Secretary for Defense Programs or the
                         Director of Energy Research-to fund the early exploration and
                         exploitation of creative and innovative scientific and technological con-
                         cepts developed in the course of the laboratories’ work. Also, under the
                         order Exploratory R&D expenses are considered an allowable overhead
                         cost under the laboratories’ operating contracts. During FY 1989 the nine
                         multiprogram laboratories conducted discretionary R&D costing approxi-
                         mately $123 million, $77 million of which was categorized as Explora-
                         tory R&D. The three defense laboratories we reviewed accounted for
                         approximately $50 million, or 66 percent of the total Expioratory R&D
                         program expenditures by the nine laboratories.

                         The three laboratories we reviewed developed and submitted proposals
                         to the Albuquerque and San Francisco Operations Offices demonstrating
                         how they planned to implement the Exploratory R&D program. Two of
                         the three laboratories had conducted discretionary R&D activities prior
                         to the formal establishment of the Exploratory R&D program. In imple-
                         menting the program, Sandia substituted Exploratory R&D for its
                         existing discretionary R&D efforts, Lawrence Livermore created an
                         Exploratory R&D program, and ,Los Al amos incorporated Exploratory
                         R&D as a component of its existing discretionary R&D program. Los
                         Alamos’ discretionary R&D program currently consists of two compo-
                         nents: Basic Research and Exploratory R&D.


Sandia’s Discretionary   Sandia’s discretionary R&D program is called Independent Research and
                         Development (Independent R&D). According to Sandia officials, a com-
R&D Program              mittee known as the Applied Research and Technology Activity Com-
                         mittee annually selects the projects to receive Exploratory R&D funding.
                         Sandia accumulates funds for Independent R&D through charges against
                         non-ooE reimbursable work.3 According to Sandia officials, this is cur-
                         rently a 5-percent assessment, which in FY 1988 amounted to approxi-
                         mately 1.3 percent of Sandia’s total operating budget. In FY 1988 Sandia
                         funded 39 Exploratory R&D projects totaling approximately $14.6
                         million.




                         3Reimbursablework refers to work or servicesperformedor to be performedfor another federal or
                         nonfederalentity for which DOEis compensatedby a specifictype of offsetting collection,known as
                         reimbursement,which may be creditedas authorizedby law to the appropriationor fund accountof
                         DOE. The reimbursablework or servicesperformedby DOEare financedby the funds of the ordering
                         federal entity or by cashadvancesfrom a nonfederalentity.



                         Page 12                                            GAO/RCED-91-M     Discretionary   R&D Funds
                            Chapter 1
                            Introduction




Lawrence Livermore’s        Lawrence Livermore’s discretionary R&D program is called the Institu-
Discretionary R&D           tional Research and Development (IR&D) Program. In, 1988 it consisted of
                            four components: (1) Exploratory Research, which allows the discipli-
Program                     nary departments and divisions to promote pioneering work in the
                            various scientific disciplines (chemistry and materials science, com-
                            puting, physics, etc.); (2) Director’s Initiatives, which supports a few
                            large projects chosen by the laboratory director with the potential to
                            develop into large, multiyear programs; (3) Individual Awards, which
                            provides Lawrence Livermore’s researchers with the opportunity to
                            develop their innovative ideas by competing for seed funding outside of
                            the normal programmatic channels; and (4) the University of California
                            Institutes, which supports the mutual interests of the laboratory and the
                            nation’s academic and research establishments.4 Lawrence Livermore
                            utilizes a committee to recommend to the director research proposals
                            that should receive Exploratory R&D funding. Unlike Sandia, Lawrence
                            Livermore funds its IR&D program through an assessment against both
                            reimbursable work and all DoE-funded programs at the laboratory. This
                            assessment generally equates to a total funding level of about 2 percent
                            of the laboratory’s total operating budget. Lawrence Livermore’s
                            Exploratory R&D funding for FY 1988 amounted to approximately $18
                            million, with which Lawrence Livermore funded 85 Exploratory R&D
                            projects. These included four University of California Institutes, which,
                            in turn, were made up of a number of smaller projects.


Los Alamos’ Discretionary   The Los Alamos National Laboratory incorporated Exploratory R&D into
R&D Program                 a larger, existing, discretionary F&D program. Los Alamos’ discretionary
                            R&D program, Institutional Supporting Research and Development (ISRD),
                            consists of two components, Basic Research and Exploratory R&D.
                            According to Defense Programs officials, Los Alamos established the
                            Exploratory R&D component by renaming a portion of the existing ISRD
                            program and categorizing those projects meeting the criteria of DOE
                            Order 5000.1, Change 1, into its Exploratory R&D component. Los
                            Alamos utilizes peer and management groups to review project pro-
                            posals and recommend projects for funding. Like Lawrence Livermore,
                            Los Alamos funds its ISRD program through an assessment against all
                            DOE-funded programs and reimbursable work. Unlike Sandia and Law-
                            rence Livermore, Los Alamos’ assessment level from FY 1984 through
                            1988 ranged from a low of 7.2 percent to a high of 7.9 percent, aver-
                            aging out to an annual assessment against Los Alamos’ total operating

                            4LawrenceLivermore removedthe University of California Institutes from its Exploratory R&D pro-
                            gram beginningin FY 1989.



                            Page 13                                            GAO/RCED-91-18     Discretionary   R&D Funds
                         Chapter 1
                         Introduction




                         budget of about 7.6 percent. This assessment level, broken down by ISRD
                         components, shows that on the average Los Alamos financed Explora-
                         tory R&D at a level of 2.3 percent of its total operating budget and Basic
                         Research at 5.4 percent. Los Alamos’ total FY 1988 discretionary R&D
                         funding was $66.8 million, $17.9 million of which was categorized as
                         Exploratory R&D.


                         In May 1989 DOE’S Office of the Inspector General (IG) completed a
DOE Inspector General    review of Los Alamos’ discretionary R&D program for FYs 1986 and
Critical of LOS AhlOS'   1987.6 The IG found several problems at Los Alamos. For example,
Discretionary R&D        during FYS 1986 and 1987, Los Alamos’ actual discretionary R&D expend-
                         itures totaled $131.4 million, or approximately 7 percent of its total
Program                  operating budget. Thus, the IG concluded that Los Alamos exceeded its
                         Exploratory R&D funding limit- 2 percent of its operating budget-by
                         $97.7 million over the 2-year period. In addition, Los Alamos spent
                         $26.9 million on projects the IG considered to be inappropriate for
                         Exploratory R&D funding. Finally, the IG recommended that the Assis-
                         tant Secretary for Defense Programs seek a legal opinion from the DOE
                         General Counsel as to the propriety of assessing DOE’S budgeted pro-
                         grams to finance discretionary R&D projects.

                         Los Alamos disagreed with the IG’s conclusions because, according to
                         Los Alamos, they were the result of the IG’s narrowly focused interpre-
                         tation of DOE Order 5000.1A and inappropriate use of the order to audit
                         its entire ISRD program. According to Los Alamos, the IG inappropriately
                         applied the criteria in DOE Order 5000.1A to projects funded under the
                         Basic Research component of Los Alamos’ discretionary R&D program.
                         Los Alamos maintained that the Basic Research component of its pro-
                         gram is not governed by this order and therefore is not subject to its
                         policies and procedures.

                         DOE headquarters accepted the IG’s report as factually correct but com-
                         mented that the IG did not consider other factors that would have
                         affected its conclusions. Further, DOE concurred with Los Alamos’ posi-
                         tion that the Basic Research portion of the laboratories’ discretionary
                         R&D program was not subject to the funding criteria and limits estab-
                         lished under DOE Order 6OOO.lA.



                         “Exploratory Researchand DevelopmentFundsat Los Alamos National Laboratory, U.S.DOE,Office
                         of InspectorGeneral,Report No. DGE/OIG-0267,May 17,1989.



                         Page 14                                         GAO/RCRD-91-18    Dbcredonary   R.&D Funds
                        Chapter 1
                        Introduction




                        As a result of the IG’s report, the Assistant Secretary of Energy for
                        Defense Programs tasked the Deputy Assistant Secretary for Military
                        Applications with conducting a review of the defense laboratories’ dis-
                        cretionary R&D activities to provide a basis for his response to the DOE
                        IG’s report on these activities at Los Alamos. In its May 3, 1990,
                        response to the IG, DOE agreed, among other things, to seek a legal
                        opinion from its Office of General Counsel on the propriety of assessing
                        budgeted programs and using the resulting funds for discretionary
                        projects. DOE further agreed to review Los Alamos’ procedures for the
                        non-exploratory R&D (Basic Research) portion of its discretionary R&D
                        program and approve or revise them. The study group report has not
                        yet been completed, but the draft report found, among other things, that
                        (1) a laboratory’s having more than one discretionary R&D program is
                        likely to cause management difficulty and misperception, (2) Defense
                        Programs does not have a structured approach for reviewing and deter-
                        mining appropriate funding levels for discretionary R&D, (3) the criteria
                        in DOE Order 5000. IA regarding appropriate and inappropriate uses of
                        Exploratory R&D funds are subject to a wide range of interpretations,
                        and (4) neither operations offices nor Defense Programs has had ade-
                        quate procedures for overseeing the defense laboratories’ discretionary
                        R&D programs in the past.

                        In response to these findings, DOE has developed draft guidance which, if
                        implemented, will address most of the concerns raised by the study
                        group. The version of the draft guidance we reviewed would, among
                        other things, (1) apply to all discretionary R&D activities carried out by
                        the laboratories, (2) provide a structured approach for determining the
                        maximum discretionary R&D funding level for each laboratory, (3)
                        clarify the criteria on appropriate and inappropriate uses of discre-
                        tionary R&D funds, and (4) revise and reiterate the oversight responsibil-
                        ities of DOE headquarters and field offices.


                        The objectives of this review were to examine (1) the need for DOE labo-
Objectives, Scope,and   ratories to be able to carry out discretionary R&D (including DOE'S justifi-
Methodology             cation for the funding levels it allowed), (2) how the funds are being
                        used by the laboratories, and (3) DOE controls over discretionary R&D
                        funds at DOE'S national laboratories. In addition, we examined DOE'S
                        authority to authorize its laboratories’ discretionary R&D programs. To
                        address these questions, we performed work at DOE headquarters, the
                        San Francisco and Albuquerque Operations Offices, and the Lawrence
                        Livermore, Los Alamos, and Sandia National Laboratories. We also



                        Page 16                                  GAO/RCED-91-18   Discretionary   R&D Funds
Chapter 1
Introduction




reviewed relevant work done by the DOE IG and determined that addi-
tional audit work was necessary in order to adequately respond to the
requester’s questions. We focused our review on discretionary R&D pro-
grams at the three laboratories during Fy1988 because this was the most
recent year for which complete data were available. These laboratories
accounted for 70 percent of the total Exploratory R&D expenditures and
82 percent of the overall discretionary R&D expenditures for FY 1988 of
which we are aware. We placed additional emphasis on the Los Alamos
discretionary R&D program because of the problems identified by the DOE
IG and the laboratory’s disagreement with the IG’s findings. Accordingly,
we also selected and reviewed eight FY 1986 and 1987 discretionary R&D
projects at Los Alamos that the DOE IG identified as being inappropriate
for discretionary R&D funding.

To examine the authority for the laboratories’ accumulating and
spending government funds on R&D of their choosing, we (1) obtained an
analysis of the authority for this type of discretionary R&D from the DOE
controller; (2) identified and examined the authority and basis for the
discretionary R&D programs at these laboratories; and (3) examined
whether assessing budgeted programs to fund discretionary R&D activi-
ties violates specific provisions of authorization acts or the acts pro-
viding the majority of DOE'S appropriations (the Energy and Water
Development and Interior and Related Agencies Appropriations).

To determine the need for discretionary R&D funds, we (1) reviewed
studies identified as documenting the need for discretionary R&D funds
at DOE laboratories and (2) examined Los Alamos’ justification for dis-
cretionary R&D funds in excess of the 2 percent approved by DOE
headquarters.

To determine the uses of discretionary R&D funds, we selectively
reviewed a total of 37 discretionary R&D projects funded at Los Alamos
during FYS 1986-88 and at Sandia and Lawrence Livermore during FY
1988, to determine if they met the DOE criteria for such funding as speci-
fied in DOE Order 5000.1A. Specifically, we selected and examined eight
FY 1988 Exploratory R&D projects at Sandia, nine FY 1988 Exploratory
R&D projects at Lawrence Livermore, and six FY 1988 Exploratory R&D
projects at Los Alamos. In addition, we reviewed six FY 1988 Los Alamos
projects that were funded from the Basic Research component of Los
Alamos’ discretionary R&D program. We also reviewed one Exploratory                  ,
H&D and seven Basic Research projects at Los Alamos funded in FYS 1986




Page 16                                 GAO/RCED-91-18   Discretionary   R&D Funds
Chapter 1
Introduction




and 1987 and identified by the DOE IG as being inappropriate for discre-
tionary R&D funding. We used Los Alamos’ internal policies and proce-
dures for Basic Research to evaluate if such funds were expended for
allowable purposes. We selected some projects to review in detail on the
basis of our initial assessment that the projects appeared not to meet
one or more of the criteria in DOE Order 5000.lA and selected additional
projects on basis of size to ensure that we reviewed both large and small
projects. Because we selectively chose projects for review rather than
choosing them randomly, our findings are not necessarily representative
of all projects at the three laboratories or ME-wide. The 23 FY 1988
Exploratory R&D projects we examined accounted for about 12 percent
of the total number of Exploratory R&D projects and about 18 percent of
the total Exploratory R&D funding at the three laboratories included in
our review.

To assess the controls over discretionary R&D funds at DOE'S laboratories,
we reviewed applicable DOE orders, guidance, reports, evaluations, and
other documents related to discretionary R&D programs to determine
whether an adequate system of management controls is in place to
ensure that discretionary R&D funds are spent only for legitimate R&D
projects meeting DOE criteria for such funding.

We interviewed DOE officials from the Office of the Deputy Assistant
Secretary for Military Applications and the Office of the Deputy Assis-
tant Secretary for Planning and Resource Management, both under the
Office of the Assistant Secretary for Defense Programs; Office of the
Assistant Inspector General for Audits, the Capital Regional Audit
Office, and the Western Regional Office, all within the Office of the
Inspector General; the Policy, Financial Policy, and Budget Offices
within the Office of the Assistant Secretary for Management and
Administration; the Office of Field Operations Management within the
Office of Energy Research; the Office of Civilian Radioactive Waste
Management; and the Albuquerque and San Francisco Operations
Offices. We also interviewed management officials and project partici-
pants at the three national laboratories. Finally, we interviewed officials
from the Office of Management and Budget’s Energy Group and the
Department of Defense’s Cost Pricing and Financing Office.

We performed our work from March 1989 through September 1990 in
accordance with generally accepted government auditing standards. As
requested, we did not obtain comments from the agency. However, we
did review the facts developed through our review with responsible
agency and laboratory officials who generally agreed with the accuracy


Page 17                                  GAO/RCED-91-18   Discretionary   R&D Funds
Chapter 1
Introduction




of the facts presented. We have incorporated their comments where
appropriate.




Page 18                               GAO/RCED-91-18   Discretionary   R&D Funds
Chapter 2

DOE Needs to Ektter Assessthe Appropriate
FundingLevel for Discretionary F&D

                          In authorizing DOE to allow its laboratories to conduct discretionary R&D,
                          the Congress limited such expenditures to “a reasonable amount” of the
                          laboratories’ operating budgets, Under its Exploratory R&D program, DOE
                    csi   has authorized the laboratories we reviewed to spend up to 2 percent of
                          their operating budgets for discretionary R&D. However, Los Alamos has
                          spent an additional 5 percent of its operating funds on discretionary R&D
                          activities carried out under what DOE and Los Alamos had considered to
                          be a related but separate program. DOE has not formally reviewed, nor
                          set a funding ceiling applicable to, the Basic Research component of Los
                          Alamos’ discretionary R&D program. According to DOE officials, DOE will
                          approve Los Alamos’ entire FY 199 1 discretionary R&D program as
                          Exploratory R&D.

                          DOEcites three studies as supporting the laboratories’ need for discretion
                          in selecting some R&D projects for funding. The studies concluded, in
                          part, that discretionary R&D funding for the laboratories was necessary
                          to enhance the laboratories’ capabilities and improve their use and per-
                          formance. The studies do not consider the 5 years of experience that DOE
                          has acquired since the implementation of its Exploratory R&D program.
                          DOE has not carried out a detailed assessment of the benefits accruing to
                          the Department as a result of the discretionary R&D activities it has
                          authorized. Further, until this year DOE did not disclose, in response to
                          inquiries by its House Appropriations Subcommittee Chairman, the full
                          extent of discretionary R&D expenditures at the defense laboratories.




Discretionary R&D         ations Authorization Act of 1977 (P.L. 95-39) provides DOE with specific
                          authority to allow its laboratories to conduct discretionary R&D, it does
Funding                   not set forth a precise limit on how much funding should be made avail-
                          able for this purpose. Rather, section 303 of Public Law 95-39 states,

                          “Any Government-owned contractor-operated laboratory, energy research center,
                          or other laboratory performing functions under contract to the Administration
                          [DOE], may, with the approval of the Administrator [the Secretary of Energy], use a
                          reasonable amount of its operating budget for the funding of employee-suggested
                          research projects up to the pilot stage of development . . ..“[Emphasis added.]’


                          ‘The ERDAact of .June1977,under which DOEcarries out researchand developmentactivities,
                          refers to the Administrator of the EnergyResearchand DevelopmentAdministration. Sincethe crea-
                          tion of DOEin October1977,theseactivities have beenperformedby the Secretaryand the Depart-
                          ment. For consistency,in this report, generallywe will refer only to the Secretaryor DOE.



                          Page 19                                            GAO/RCED-91-18    Discretionary   R&D Funds
                       Chapter 2
                       DOE Needs to Better Amess the Appropriate
                       Funding Level for DLscrctlonary R&D




                       We were unable to determine from the legislative history of Public Law
                       95-39 a specific definition of the term “reasonable amount.” The confer-
                       ence report on a predecessor to the bill that became Public Law 95-39
                       refers to the intended funding level foP.employee-suggested R&D as being
                       “very modest.” The Senate version of the predecessor bill contained no
                       provision comparable to what became section 303. However, the House
                       version would have authorized the agency to permit a laboratory to use
                       “up to one-half of one percent of its operating budget” for such activi-
                       ties @en. conf. rept. 1327 on H.R. 13350,94th Cong., 2nd Sess. at 59).


                       In implementing the exploratory R&D program established under Order
DOE Allowed One        5000.1 A, DOEhas determined that an appropriate maximum funding
Laboratory to Fund     level is 2 percent of the operating budgets for the laboratories we
Discretionary R&D      reviewed. However, DOEhas made no such formal determination
                       regarding the appropriate funding level for activities carried out under
Activities Above the   the Basic Research component of Los Alamos’ discretionary R&D pro-
Ceiling It Set for     gram. DOEhas allowed Los Alamos to regularly fund its discretionary
                       R&D program in excess of 7 percent of its operating budget. According to
Exploratory R&D        DOEand laboratory officials, the portion of Los Alamos’ discretionary
                       H&D program funded in excess of the approved 2 percent is not subject to
                       WE Order 5OOO.lA and, thus, is not subject to the 2-percent ceiling set
                       by DOEunder the order. We saw no basis for this distinction. Further,
                       WE: officials informed us that Defense Programs will approve Los
                       Alamos’ entire FY 1991 discretionary R&D program as Exploratory R&D
                       under DOEOrder 5OOO.lA.

                       DOEOrder 5OOO.lA authorizes the laboratories’ directors to utilize a por-
                       tion of their operating budgets-the specific amount is to be approved
                       annually by the Assistant Secretary for Defense Programs or the
                       Director of Energy Research-to fund the early exploration and
                       exploitation of creative and innovative scientific and technological con-
                       cepts developed in the course of the laboratories’ work. Also, under the
                       order, Exploratory R&D expenses are considered an allowable overhead
                       cost under the laboratories’ operating contracts. DOE’SAssistant Secre-
                       tary for Defense Programs is responsible, under DOEOrder 5000.1 A, for
                       annually approving the Exploratory R&D funding level for the three lab-
                       oratories we reviewed. For each year since FY 1985, the level has been
                       equal to about 2 percent of the laboratories’ operating budgets.

                       However, Los Alamos’ total discretionary R&D program has, since the
                       creation of the Exploratory R&D program, been funded at a level sub-
                       stantially greater than the level set by the Assistant Secretary for


                       Page 20                                     GAO/RCEDBl-18   Discretionary   R&D Funds
Chapter 2
DOE NW     to Better Assess the Appropriate
Fundlng Level for Discretionary R&D




Defense Programs for Exploratory R&D. Los Alamos, since 1984, has con-
sistently spent over 7 percent of its operating budget for discretionary
R&D. This equates to a yearly difference of $35 million to $50 million
between the explicitly approved and actual spending levels for FYs 1984
through 1988.

Los Alamos’ discretionary R&D expenditures have exceeded the formally
established funding limit for Exploratory R&D primarily because, in
implementing its Exploratory R&D program, Los Alamos incorporated
Exploratory R&D into its existing, larger discretionary R&D program. Los
Alamos’ discretionary R&D program now has two components-Explora-
tory R&D and Basic Research. DOEand Los Alamos had considered the
Basic Research component of the laboratory’s program to be outside of
the Exploratory R&D program and, thus, not subject to the spending limi-
tations set by the Office of Defense Programs for Exploratory R&D under
DOEOrder 5000. IA.

In our view, there appeared to be little difference between the Basic
Research and Exploratory R&D components of Los Alamos’ program. Los
Alamos informed us that the Basic Research component of its program
is, as the name suggests, intended to be used to fund basic scientific and
engineering research and related activities supporting development of
externally funded basic research programs at the laboratory. The labo-
ratory further informed us that Exploratory R&D is intended to fund
applied scientific and engineering research and research activities sup-
porting development of externally funded applied programs in defense,
energy, environment, industrial applications, and space at the labora-
tory. The order defines Exploratory R&D as “work funded solely at the
discretion of a laboratory director for early exploration and exploitation
of creative and innovative scientific concepts developed in the course of
the laboratory’s normal technical work.” (Emphasis added.) We believe
that the types of activities described by Los Alamos as falling within the
Basic Research component of its discretionary R&D program, laboratory-
directed basic scientific and engineering research, could also be accom-
modated by DOE'Sdefinition of Exploratory R&D.

No DOEdirectives or guidance specifically govern the Basic Research
component of Los Alamos’ program, nor has DOEformally established a
funding level for the component. DOE'SController and officials in the
Office of Defense Programs informed us, however, that Los Alamos has
annually informed it of the activities associated with the Basic Research
component of Los Alamos’ program. In addition, according to a written
response to a series of questions we posed to DOE,because it has not


Page 2 1                                      GAO/RCED-91.18   Discretionary   R&D Funds
                         Chapter 2
                         DOE Needs to Better Assess the Approplliate
                         F’undimg Level for Diecretionary R&D




                         taken exception to the expenditures, DOEhas tacitly approved them. DUE
                         has now determined that there is no specific value to a laboratory’s
                         having more than one system of discretionary R&D activities and, in fact,
                         having different sources and criteria for discretionary R&D “is likely to
                         cause management difficulty and misperception.” Defense Programs’
                         officials told us that, beginning in FY 1991, they will treat Los Alamos’
                         entire discretionary R&D program as one program under DOEOrder
                         5000.1A and any subsequent guidance DOEissues,


                         DOEand laboratory officials believe that laboratories need to be able to
DOE Has Done Little      carry out discretionary R&D and cited two studies as support for this
to Assess the Need for   view. These studies predate the creation of DOE'SExploratory R&D pro-
and Benefits of          gram and thus do not take into account DOE'S5 years of experience with
                         a formal discretionary R&D program since the implementation of the
Discretionary R&D        Exploratory R&D program. DOEhas done little to evaluate the discre-
                         tionary MD activities it has authorized to determine the extent to which
                         the results have benefited DOE'Sprograms,


Officials Belie ve       Officials in DCIF,
                                          Defense Programs and its Office of Energy Research, as
Discretidnary R&D Is     well as laboratory management officials at the three laboratories we
                         reviewed, generally stated that discretionary R&D funding for the labora-
Needed                   tories is necessary and the program has been a success. Several DOEand
                         laboratory officials also told us that discretionary R&D focuses on devel-
                         oping innovative and creative ideas that serve as the basis for future
                         programmatic R&D work at the laboratories. Officials in DOE'SOffice of
                         Energy Research told us that the Exploratory R&D program is an excel-
                         lent tool for identifying promising new ideas and technologies and
                         weeding out the bad without using a substantial amount of funds.

                         These officials cited three studies as demonstrating the need for discre-
                         tion on the part of the laboratory directors in choosing some of the R&D
                         activities they carry out for the government. The studies concluded, in
                         part, that discretionary R&D funding for the laboratories was necessary
                         to enhance the laboratories’ capabilities and improve their use and per-
                         formance. While one study focused on all federal laboratories, the others
                         focused only on DOE'Smultiprogram laboratories. The studies recom-
                         mended that the laboratories be allowed to use a percentage (5 to 10
                         percent) of their annual funding to support R&D conducted at the labora-
                         tory director’s discretion.




                         Page 22                                       GAO/RCED-91-18   Discretionary   R.&D Funds
                            chaptar 2
                            DOE Need6 to Bettm Amesm the Approprhte
                            F’unding Level for Mscretionary R&D




                            The Energy Research Advisory Board’s (ERAB) study of the DOE mul-
                            tiprogram laboratories recommended that each laboratory be permitted
                            to use a portion of its capital and operating budgets to fund R&D at the
                            laboratory director’s discretion. The Deputy Secretary of Energy
                            requested this study to assist DOE in shaping the future of its mul-
                            tiprogram laboratories. The ERAB study, issued in September 1982 and
                            updated in December 1985, concluded that the capabilities of the mul-
                            tiprogram laboratories could be better utilized. As a result, the ERAB
                            panel recommended that to enhance the laboratories’ capabilities the
                            laboratory directors should be permitted to conduct some R&D at their
                            discretion. The panel recommended that 1 to 2 percent of the laborato-
                            ries’ capital and operating budgets be designated for this purpose. This
                            range of recommended discretionary funding was revised to 5 to 10 per-
                            cent in the ERAB panel’s 1985 update.

                            Subsequent to the first ERAB study, a study by the White House Office of
                            Science and Technology Policy also recommended that a portion of the
                            federal laboratories’ annual funding be used for discretionary R&D. This
                            study, completed in May 1983 and referred to as the “Packard study”
                            after the panel’s Chairman, David Packard, addressed all 700 federal
                            laboratories. The panel concluded that the U.S. government needed to
                            improve the use and performance of the federal laboratories to offset
                            some of the increasing challenges to the nation’s economic and military
                            competitiveness. Consequently, the panel recommended that the labora-
                            tories be allowed to explore new and creative scientific ideas by
                            allowing the laboratory directors the flexibility to conduct some R&D of
                            their choosing. The panel recommended that “at least 5 percent and up
                            to 10 percent” of the laboratories’ annual funding be available for dis-
                            cretionary R&D. The panel further recommended that agencies establish
                            a mechanism to evaluate the results of such work and that the size and
                            existence of discretionary funds should be related to laboratory
                            performance.


DOE Has Done Little to      To what extent have the multiprogram laboratories’ discretionary R&D
Assess the Programmatic     programs benefited DOE programs? DOE does not know because it has not
                            carried out any formal assessments of the benefits accruing to its pro-
Benefits of Discretionary   grams as a result of the discretionary R&D activities it has allowed its
R&D Activities              laboratories to conduct2 In June 1988 the DOE Office of Energy Research

                            2As discussedin ch. 4, both DOEheadquartersand the DOEoperationsoffices have carried out some
                            reviews of Exploratory R&D activities. However,thesereviews have not assessedthe relative costs
                            and benefitsof the activities.



                            Page 23                                            GAO/RCED-91-18    Discretionary   R&D Funds
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                      DOE Needs to Better Assess the Approprlate
                      Funding Level for Discretionary R&D




                      did evaluate the Exploratory R&D programs of the five multiprogram
                      laboratories it oversees. However, the study focused on the structure
                      and procedures of the programs carried out at the laboratories, not the
                      benefits of the projects they carried out relative to the foregone
                      programmatic work. The report noted that “the ultimate measure of the
                      Exploratory R&D program’s success lies not in an analysis of its structure
                      and procedures, but in an assessment of outcomes and impacts.” How-
                      ever, the study said that such an assessment was beyond its scope. As
                      noted in chapter 1, in 1989 DOE’S Office of Defense Programs also
                      reviewed the defense laboratories’ discretionary R&D programs, but this
                      study also focused on procedures and program structure.

                      Because Los Alamos and Lawrence Livermore fund their discretionary
                      R&D activities through assessments against DOEprogram funds and reim-
                      bursable work, an increase in the proportion of the funds used for dis-
                      cretionary R&D will result in a corresponding decrease in the proportion
                      of the funds available for conducting other DOER&D activities.3 For this
                      reason, we believe that an assessment of the benefits accruing to DOE'S
                      programs relative to the programmatic work that would be foregone is
                      appropriate before any decision is made to increase the proportion of
                      funds assessed for discretionary R&D. An assessment of the program-
                      matic benefits of the laboratories’ discretionary R&D activities could be
                      accomplished by having DOE’S program offices review the results of dis-
                      cretionary R&D activities relevant to their programs and provide feed-
                      back to the Assistant Secretary for Defense Programs or the Director of
                      Energy Research.


                      WE has not consistently reported all discretionary R&D expenditures by
DOE Had Not           its defense laboratories in response to specific inquiries by a House
Informed a            appropriations subcommittee. The Chairman, House Appropriations
Congressional         Subcommittee on Energy and Water Development, has annually asked
                      DOE,since its FY 1986 appropriation hearings, to disclose what is in its
Subcommittee of the   budget for discretionary funding for the laboratory directors. The dis-
Full Extent of        cretionary R&D funding level set by DOEfor the laboratories is not explic-
Discretionary R&D     itly identified in DOE’S budget request because discretionary R&D is
                      treated as an overhead expense by the laboratories and DOE.In addition,
Expenditures          in its response DOEhad consistently provided information on expendi-
                      tures made only under the Exploratory R&D program. Expenditures

          Y



                      “As noted in ch. 1, Sandia’sdiscretionaryR&D activities are funded through an assessmentagainst
                      non-DOEreimbursablework.



                      Page 24                                             GAO/RCEDBl-18      Discretionary   R&D Funds
                                              ChapEer 2
                                              DOE Needs to Better Assess the Appropriate
                                              Funding Level for Discretionary R&D




                                              through the Basic Research component of Los Alamos’ overall discre-
                                              tionary R&D program, which included Exploratory R&D, have not been
                                              reported to the Subcommittee. As shown in table 2.1, these unreported
                                              expenditures totaled over $200 million during the period covered by the
                                              incomplete DOEresponses.


Table 2.1: Exploratory Research and Development Allocations
Dollars in millions                                                     -__---___
National laboratory                   1984                 1985                1986           1987              1988                Total
                                                                         Reported to the Subcommittee
Los Alamos                        _... $15.1 --.____-
                                    . __-_-...-.           $15.7              $17.6           $16.7             $17.9              $83.0
Lawrence Livermore                       0.01                3.7               15.8            16.8              18.0
                                                                                                                 -_.               $64.3
Sandra                                    2.1                6.6                7.4            11.1              14.6              $41.8
                                                                                                                                  __-~-.-
                                                                      Not Reported to the Subcommittee
Los Alamos                            $31.9                $34.3              $37.0           $49.5             $47.9             $200.6


                                              DOEofficials offered a number of possible explanations for why this
                                              information was not given in response to the Chairman’s inquiries, but
                                              could not provide a precise explanation. DOEofficials speculated that the
                                              information on the Basic Research component of Los Alamos’ program
                                              was omitted from DOE'Sresponses in previous years as a result of the
                                              Assistant Secretary for Defense Programs’ interpreting the question as
                                              referring only to the Exploratory R&D portion of laboratories’ discre-
                                              tionary R&D funds, The basis for this speculation was that the question
                                              was first asked shortly after the implementation of the Exploratory R&D
                                              program. These officials further speculated that, in recent years, the
                                              people who prepared the information in response to the Chairman’s
                                              questions were following the example set by their predecessors by not
                                              including information on the Basic Research component of Los Alamos’
                                              program. Further, on the basis of discussions with DOEDefense Pro-
                                              grams and Albuquerque Operations Office officials, it appears that Los
                                              Alamos and DOEdid not want to highlight the disparity between the size
                                              of Los Alamos’ program and those of the other defense laboratories. The
                                              DOEoffice responsible for obtaining and assembling DOE'Sresponse to the
                                              Chairman’s questions said that for the 1990 hearings, it included the
                                              Basic Research information for Los Alamos’ discretionary R&D program
                                              in the form of a footnote in its original draft response to the Subcom-
                                              mittee. However, when we reviewed the 1990 hearing record, we could
                                              not locate the footnote, and DOEcould not explain why the footnote was
                                              not included in the response to the Subcommittee except to speculate
                                              that it was dropped as a result of a clerical error.


                                              Page 25                                         GAO/RCED-91-18   Discretionary   R&D Funds
              Chapter 2
              DOE Needs to Better Assess the Appropriate
              Funding Level for Discretionary R&D




              During the FY 1991 appropriation hearings, DOE,in its response to the
              Chairman’s questions, did provide information on the level of funding
              for the Basic Research component of Los Alamos’ program. It also noted
              that its general policy on laboratory-directed R&D has not been imple-
              mented uniformly, citing the Basic Research component of Los Alamos’
              discretionary R&D program. DOEfurther informed the Chairman that (1)
              the Basic Research component of Los Alamos’ program was not included
              in the Exploratory R&D program at its inception and (2) DOE'Soversight
              of the Basic Research component of Los Alamos’ program has not been
              adequate. DOEinformed the Chairman that it has drafted a policy state-
              ment that will ensure uniform compliance with relevant DOEorders and
              set a uniform funding level for the discretionary R&D activities of the
              defense laboratories, including the Basic Research component of Los
              Alamos’ program (see ch. 1).

              DOE’Sresponse to the Chairman also indicates that DOEintends to
              increase the approved funding for the laboratories’ Exploratory R&D
              activities from about $50.5 million in FY 1988 to $124.4 million in FY
              1991. The projected 1991 funding includes $39.1 million for the Basic
              Research component of Los Alamos’ program, which, according to the
              information it provided to its appropriations Subcommittee Chairman
              and GAO,DOEintends to incorporate into its Exploratory R&D program.
              This represents a 26 percent increase in the overall discretionary R&D
              budgets of the three laboratories between FYS 1988 and 1991, and 6.2
              percent of Los Alamos’, 1.5 percent of Sandia’s, and 4.3 percent of Law-
              rence Livermore’s projected FY 1991 operating budgets.


              While there may be a need for DOElaboratory directors to carry out R&D
Conclusions   at their own discretion, DOEhas done little to assess the extent to which
              the discretionary R&D that has been carried out to date has been benefi-
              cial to the Department and the relative costs of the activity in terms of
              foregone programmatic work. In our view, such information is needed in
              order for WE to determine the appropriate level of discretionary R&D to
              be carried out by the laboratories. We believe that, until it has con-
              ducted such an analysis, DOElacks a firm basis for increasing the
              amount of discretionary R&D carried out by the laboratories.

              We also saw no basis for Los Alamos’ maintaining a discretionary R&D
              program with two components, one of which DOEand Los Alamos had
              determined falls outside of the scope of DOEOrder 5OOO.lA. We
              encourage DOEto establish a funding level that will cover all of the dis-
              cretionary RCLDactivities carried out by its laboratories, not just those


              Page 26                                      GAO/RCED-91-18   Discretionary   R&D Funds
                       Chapter 2
                       DOE Needs to Better Awese the Appropriate
                       Funding Level for Discretionary R&D




                       under the Exploratory R&D program. DOEalso needs to ensure that infor-
                       mation provided to the Congress on its discretionary R&D activities is
                       complete and accurate. Information that DOEprovided to the House Sub-
                       committee as part of its FY 1991 appropriation submission indicates that
                       the reporting problem is being corrected.

                       Finally, in our view, the Congress may wish to consider establishing a
                       specific funding level for discretionary R&D activities. The legislative his-
                       tory of section 303 of Public Law 95-39 indicates the Congress’.desire
                       that funding levels for such activities be “very modest.” However,
                       because the legislative history is not totally clear, it cannot be deter-
                       mined whether the level of funding DOEhas allowed Los Alamos to carry
                       out, and which it plans to allow other laboratories to carry out in the
                       future, exceeds or will exceed a “reasonable” level.


                       We recommend that the Secretary of Energy periodically assess the rela-
Recommendations to     tive benefits and costs of past discretionary R&D activities. This could be
the Secretary of       done by including a requirement that the annual reports on discre-
Energy                 tionary R&D submitted by the laboratory directors be reviewed by the
                       various DOEprogram offices in order that they may judge the value of
                       past discretionary activities to their programs and provide feedback to
                       the Assistant Secretary for Defense Programs. Further, this input by the
                       program offices could be considered by the Assistant Secretary in rec-
                       ommending to the Secretary a discretionary R&D funding ceiling for each
                       laboratory. We also recommend that the Secretary ensure that the
                       funding level established for each laboratory cover all discretionary R&D
                       carried out at the laboratory. As discussed in chapter 1, the proposed
                       guidance on discretionary R&D developed by DOE,in its current form,
                       would apply to all discretionary R&D activities carried out by the labora-
                       tories and, when implemented, satisfy this recommendation.


                       To ensure that expenditures under section 303 of Public Law 95-39 are
Matter for             not excessive, the Congress may want to consider clarifying the term
Consideration by the   “reasonable amount” by establishing a specific funding ceiling for DOE'S
                       discretionary R&D program.
Congress

          Y




                       Page 27                                     GAO/RCED91-18   Discretionary   R&D Funds
DOE Guidance on Laborahries’ Use of
Discretionary R&D F’unds Is Unclear

                                  DOEhas not developed clear criteria on how laboratories may use discre-
                                  tionary R&D funds. DOEOrder 5000. IA contains criteria on appropriate
                                  and inappropriate uses of Exploratory R&D funds; however, some of the
                                  criteria are not clear and therefore are subject to a variety of interpreta-
                                  tions, Further, DOEhas provided no guidance that covers the Basic
                                  Research component of Los Alamos’ discretionary R&D program. While
                                  the majority of the projects we reviewed appeared to be employee-sug-
                                  gested, some funds were used for activities that were questionable when
                                  examined against our reading of the criteria.


                      DOEguidance contained in DOEOrder 5000.1A is not clear enough to
DOE Has Not Provided ensure    that DOElaboratories use Exploratory R&D funds appropriately.
the Laboratories With Wh’ 1 e lmost of the projects we reviewed appear to be consistent with
Clear Guidance on the section   303 of Public Law 95-39 and Order 5000.1 A, in some cases labo-
                      ratories have spent funds on activities that appear inappropriate. How-
Use of Exploratory    ever, we could not make a clear determination in most of these cases
R&D Funds             because of the vague language used in the order.

                                  DOEOrder 5OOO.lA provides criteria on how DOElaboratories may use
                                  Exploratory R&D funds. It contains a list of activities that are allowable
                                  and a list of activities that are prohibited. However, some of the criteria
                                  contained in the order are vague. Because of this, the laboratories have
                                  developed their own interpretations of the criteria in the order. DOEand
                                  laboratory officials agreed that some of the order’s provisions are
                                  ambiguous. More specifically, we found that the three laboratories used
                                  Exploratory R&D funds to

                              l purchase capital equipment,
                              . substitute for or increase funding for projects funded from other
                                sources,
                              . fund relatively large projects,
                              . initiate projects whose funding appeared to create a commitment to mul-
                                tiyear funding, and
                              l fund a project that did not appear to involve actual research.

                                  Again, we could not make a firm determination as to the appropriate-
                                  ness of these uses of Exploratory R&D funds because of the vague lan-
                                  guage in DOEOrder 5000. IA.

               Y




                                  Page 28                                  GAO/RCED-91-18   Discretionary   R&D Funds
                           Chapter 3
                           DOE Guidance on Laboratories’ Use of
                           Discretionary R&D Funde IIS Unclear




Laboratories Purchase      Seven of the 24 Exploratory R&D projects we reviewed involved the
Capital Equipment With     purchase of capital equipment at some point over the life of the projects.
                           DOEOrder 5000.lA states that, “[elxploratory R&D expenditures may not
Exploratory R&D Funds      be used to . . . fund capital expenditures of a general purpose nature.”
                           However, the order does not define the term “general purpose.” As a
                           result, the three laboratories have interpreted the order as allowing the
                           purchase of capital equipment so long as it is related to the Exploratory
                           R&D project being funded. For example, according to Los Alamos’ policies
                           and procedures,
                           I‘
                                .purchase of general purpose equipment is allowable if that equipment is pur-
                                    .   .


                           chased for use by the [Exploratory R&D] project during the project’s lifetime. It is
                           not permitted to use funds from an ERD [Exploratory R&D] project to buy capital
                           equipment for use by projects other than the ERD project, including general support
                           activities on a Laboratory-wide basis.”

                           The order, by using the undefined term “general purpose,” is not clear
                           as to the classes of equipment that can and cannot be purchased for
                           Exploratory R&D projects. For example, one Sandia project required the
                           purchase of a $25,000 computer for an Exploratory R&D project. A com-
                           puter could have a variety of other applications after the completion of
                           an Exploratory R&D project. It is not clear whether, under the DOE order,
                           the computer should be considered “general purpose capital
                           equipment.”


Laboratories Use           Thirteen of the 24 projects we reviewed received funding from at least
Exploratory R&D Funds to   one other source in addition to receiving Exploratory R&D funds.
                           According to DOEOrder 5000.1 A, Exploratory R&D funds may not be
Substitute for or to       used to “substitute for or increase funding for tasks normally funded by
Increase Other Funding     DOE or other users of the laboratory.” The meaning of this criterion is
                           not clear. One possible interpretation is that Exploratory R&D projects
                           should not receive funding from other sources while receiving Explora-
                           tory R&D funds.

                           Two of the laboratories we reviewed developed significantly different
                           interpretations of this criterion, both of which permit the funding of
                           projects with Exploratory R&D and other funds. Lawrence Livermore
                           interpreted the order as prohibiting the use of Exploratory R&D funds to
                           resurrect a previously canceled program or project. Lawrence Livermore
                           added Exploratory R&D funds to projects funded from other sources. Los
                           Alamos, on the other hand, interpreted the order as allowing an Explor-
                           atory r&b-funded project to also receive funding from other ‘bources, as



                           Page 29                                       GAO/RCED-91-18   Discretionary   R&D Funds
                                                                                                                .
                            Chapter 3
                            DOE Guidance on Laboratories’ Use of                                     L
                            Dkretionary  R&D Funds Is Unclear




                            long as the Exploratory R&D tasks are separate and distinct from those
                            funded from the other sources. Los Alamos further interpreted this pro-
                            vision of the order as prohibiting the use of Exploratory R&D funds to
                            “augment” funding for tasks normally funded by others. Los Alamos’
                            interpretation was that “[b]y augment, the order meant not to duplicate
                            identical research tasks . . . .”

                            The 13 Exploratory R&D projects we reviewed that had received addi-
                            tional funding included a Los Alamos project that received both Depart-
                            ment of Defense and Exploratory R&D funds in FYS 198589. The Los
                            Alamos project manager submitted two proposals: one to the Depart-
                            ment of Defense and another to the laboratory for Exploratory R&D
                            funds. The double funding was appropriate, according to the Los
                            Alamos project manager, because the tasks for each proposal were sepa-
                            rate and distinct. Upon reviewing the proposals, however, we could find
                            no clear distinction.

                            Additionally, two Lawrence Livermore projects could be inconsistent
                            with the language of the DOEOrder. One project began in 1982 and
                            received DOEfunds from several laboratory program divisions. In 1984,
                            when the Exploratory R&D program began, Exploratory R&D funds were
                            used to supplement the project’s other DOEfunds. Total project funds, in
                            FYS 1982-88, were $9.6 million, $3.1 million of which was Exploratory
                            R&D funds.

                            The other project began in fiscal year 1986 and, by the end of fiscal year
                            1988, had received funding of about $1.1 million, $400,000 of which was
                            Exploratory R&D funds. Because the Exploratory R&D and DOEfunds had
                            been combined, Lawrence Livermore officials were unable to distinguish
                            how the Exploratory R&D funds were spent.


Laboratories Used           The DOEOrder specifies that appropriate Exploratory R&D includes, but
                            is not limited to, “relatively small projects.” The criterion that funded
Exploratory R&D Funds       projects should generally be “relatively small” was added to the order in
for Projects That May Not   1986 to restrict the size of funded projects, according to a DOEreview of
Be “Relatively Small”       Exploratory R&D at its research laboratories. Yet the order does not
                            define, in dollars or other parameters, what constitutes a “relatively
                            small project.” On the basis of discussions with laboratory officials and
                            a file review, we determined that the laboratories have not developed
                            specific interpretations of this criterion.




                            Page 30                                 GAO/RCEDQl-18   Discretionary   R&D Funds
                        Chapter 3
                        DOE Guidance on Laboratories’ Use of
                        Diecretionary R&D Funds Is Unclear




                        The laboratories have funded projects ranging from $20,000 to $11.8
                        million. For purposes of illustration, we observed that 14 of the 24
                        Exploratory R&D projects we reviewed received funds in excess of
                        $600,000 over the life of the project, and 9 received over $1 million in
                        discretionary R&D funding. One of the five Los Alamos projects funded
                        at over $500,000, for example, began in FY 1987 and, by the end of FY
                        1990, will have received a total of $3.3 million, One of the five Lawrence
                        Livermore projects funded in excess of $500,000 began in FY 1984 and
                        received a total of $3.9 million. One of the four Sandia projects was a 3-
                        year project that began in FY 1986 and received a total of $1.3 million in
                        Exploratory R&D funds. Laboratory officials pointed out that these
                        projects are “relatively small” when looked at in the context of
                        advanced R&D.


Laboratories Funded     The majority of the projects we reviewed received Exploratory R&D
Multiyear Exploratory   funding for at least 3 years, and many appeared to require multiyear
                        funding to achieve the stated project objectives. DOEOrder 5OOO.lA pro-
R&D Projects            hibits the use of Exploratory R&D funding to “. . . create an implicit com-
                        mitment of multi-year funding by initiating projects which will require
                        significant funding in future years to reach a useful stage of comple-
                        tion” However, this criterion is difficult to interpret because “useful
                        stage of completion” and “significant funding” are not defined.

                        The criterion could be interpreted to mean that each project should
                        result in some useful product after the first year of funding so that if
                        future funding is unavailable, the resources committed to the project
                        will not have been wasted. DOEofficials told us that while the criterion
                        could be read this way, they would not consider this interpretation rea-
                        sonable because most projects require more than l-year’s funding to
                        develop a product, The laboratories have generally interpreted it to
                        mean that the project’s progress should be reviewed prior to awarding
                        each year’s funding and a project should not be funded for more than 3
                        years, Laboratory officials told us that multiyear funding is generally
                        necessary for these projects.

                        The Exploratory R&D projects we reviewed ranged in length from 20
                        days to 8 years; the majority of the projects received funding for 3 years
                        or more. The funding of some of the projects appeared to create an
                        implicit commitment to multiyear funding. For example, the proposal
                        for one Los Alamos Exploratory R&D project stated that several years’
                        funding would be necessary to achieve the project objectives. Similarly,
                        a Lawrence Livermore Exploratory R&D project proposal noted that the


                        Page 31                                  GAO/RCEDQl-18   Discretionary   R&D Funds
                          Chapter 3
                          DOE Guidance on Laboratories’ Use of
                          Discretionary R&D Funds Is Unclear




                          project would cost approximately $3.6 million and would take about 4
                          years to complete. A Sandia Exploratory R&D project proposal clearly
                          indicated that the project would require funding for 3 years. According
                          to the project proposal, the first 2 years were devoted to developing
                          materials and conducting measurements. The project required funding
                          for a third year to reach the point where it was ready for
                          demonstration.


One Funded Project Did    One of the 24 Exploratory R&D funded projects we examined did not
Not Appear to Invol .ve   appear to involve actual research by the laboratory, as prescribed in DOE
                          Order 5000.1A and section 303 of Public Law 95-39. DOEOrder 5000.1A
Actual Research           defines Exploratory R&D as the “early exploration and exploitation of
                          creative and innovative scientific concepts developed in the course of
                          the laboratory’s normal technical work.” This implies that these funds
                          should be used for actual R&D work carried out by the laboratory. This
                          provision is consistent with section 303 of Public Law 95-39, which
                          authorized DOEto allow its laboratory directors to fund employee-sug-
                          gested research projects.

                          One Lawrence Livermore project we reviewed, funded for $25,000, paid
                          for membership in North Carolina State University’s Precision Engi-
                          neering Center and did not appear to involve actual research by the lab-
                          oratory. According to Lawrence Livermore officials, the membership
                          enabled the laboratory to gather and exchange information on new
                          products and studies in precision engineering. These officials consider
                          the membership an appropriate use of Exploratory R&D funds under
                          their interpretation of the DOEorder. In our view, this project does not
                          fall within the definition of Exploratory R&D because it does not involve
                          the “early exploration and exploitation of creative and innovative scien-
                          tific concepts developed in the course of the laboratory’s normal tech-
                          nical work.”


                          DOEhas not established any guidance covering the use of funds from the
DOE Has No Guidance       Basic Research component of Los Alamos’ discretionary R&D program.
Covering $48 Million      This program accounted for about $48 million of Los Alamos’ approxi-
in Annual                 mately $66 million in FY 1988 discretionary R&D expenditures. We found
                          that Los Alamos used some funds for activities that did not involve
Discretionary R&D         actual research. Even more significantly, Los Alamos, with DOE'Sknowl-
ExpendituresY             edge, has used over $2.6 million in Basic Research program funds
                          between FYS 1984 and 1987 to cover uncollected costs for reimbursable
                          work at the laboratory.


                          Page 32                                GAO/RCEDBl-18   Discretionary   R&DFunds
                              Chapter 9
                              DOE Guidance on Laboratories’ Use of
                              Discretionary   R&D Funds Is Unclear




Order 5000.1A Does Not        Both DOEand Los Alamos interpret Order 5000.1A as not applying to the
Apply to Basic Research       Basic Research component of Los Alamos’ discretionary R&D program.
                              DOEhas not issued any other formal guidance that describes how Basic
                              Research funds are to be used. In 1982 Los Alamos did issue an internal
                              policy memorandum covering the Basic Research component of its dis-
                              cretionary R&D program; the memorandum was revised in 1986 and
                              again in 1980. These documents provide general guidance on appro-
                              priate uses of these funds and the process for selecting projects for
                              funding. The 1982 guidance predates the creation of the Exploratory
                              R&D program; the 1986 guidance covers Los Alamos’ entire discretionary
                              R&D program, including Basic Research, but makes no distinction
                              between the two components; and, the 1989 revision does distinguish
                              between the Exploratory R&D and Basic Research components of Los
                              Alamos’ discretionary R&D program. DOE'SOffice of Defense Programs
                              has not officially adopted this guidance nor has it reviewed Basic
                              Research projects to determine whether projects funded were allowable.
                              In addition, the DOEIG'S 1989 review of selected projects, including Basic
                              Research projects carried out in FYS1986 and 1987, found that Los
                              Alamos used funds on many of the projects for purposes that were
                              inconsistent with provisions of Order 5000. IA. DOEofficials believe that
                              the majority of the Basic Research projects currently being funded at
                              the laboratory would meet a more reasonable interpretation of the cri-
                              teria contained in DOEOrder 5OOO.lA.


Basic Research Used for       Los Alamos used funds for purposes that, in our view, are not consistent
Questionable Activities       with section 303 of Public Law 95-39. In particular, we reviewed three
                              projects in which Los Alamos used FY 1986 discretionary R&D Basic
                              Research funds to cover costs it incurred for canceled reimbursable
                              projects. Los Alamos also used Basic Research funds for activities that
                              are not actual research.

                              The following three cases describe instances in which Basic Research
                              funds were used to cover the costs of reimbursable projects that were
                              canceled without DOE'Sreceiving full payment for the work performed.

                          l   Multiparameter Light Scattering Project. Mesa Diagnostics, a small pri-
                              vate company, proposed and sponsored the reimbursable project.
                              According to MOE,payment for work done at the DOElaboratories for
                              nonfederal government and private organizations must be received by
                              DOEbefore work begins. Los Alamos began work in 1985 after the com-
                              pany paid DOEfor the first year’s work. However, Los Alamos continued



                              Page 33                                 GAO/RCEDdl-18   Discretionary   R&D Funds
    Chapter 3
    DOE Guidance on Laboratories’ Use of
    Discretionary R.&D Funds Is Unclear




  the project beyond the first year, incurring expenses totaling $1.8 mil-
   lion, even though DOE had not received advance payment for the addi-
  tional work. When DOE sought payment for these expenses, Mesa
  Diagnostics stated that it did not have the funds and could not continue
  the project. DOE subsequently settled this matter with Mesa Diagnostics,
  which agreed to pay WE $300,000. Los Alamos charged the remaining
  $1.6 million in costs to a newly created Basic Research project.’
. Army Blast Over-pressure Project. Los Alamos also used Basic Research
  funds to pay unreimbursed expenditures for a terminated reimbursable
  project sponsored by the U.S. Army. The Army Blast Over-pressure Pro-
  ject was to develop a new standard for noise exposure for soldiers. The
  project was to place Army volunteers in a cement-lined shed, detonate
  small explosive devices surrounding the shed, and test the subjects’
  hearing. DOE’S Under Secretary canceled the project because it was not
  within DOE’S mission and would involve experimentation on human sub-
  jects. DOE allows its laboratories to conduct approved work for other
  federal agencies, with reimbursement subsequent to commencement of
  the work. The Army refused to pay the $1.1 million cost incurred by Los
  Alamos because the project was terminated. Los Alamos transferred the
  $1.1 million in expenses to a Basic Research project.   I*,
l Animal Biomedical Project. DOE cancelled another proj;t in conjunction
  with the Army’s Blast Over-pressure Project. The Animal Biomedical
  Project involved testing the effects of explosive shock waves on sheep.
  When the project was cancelled prior to its completion, the Army again
  refused to pay for the work done and Los Alamos used Basic Research
  funds to cover the costs incurred for the project.

    Los Alamos created each of these projects with DOE’S knowledge. Los
    Alamos and DOE Albuquerque Operations Office officials told us that
    charging these costs to the Basic Research component of Los Alamos’
    discretionary R&D program was appropriate because the research activi-
    ties that resulted in the costs were mutually beneficial to the laboratory
    and the project sponsors, However, in our view, these projects are
    clearly outside the scope of section 303 of Public Law 95-39 because
    none of the projects involved employee-suggested R&D. Further, in both
    cases Los Alamos, with DOE’s knowledge, circumvented the laboratory’s
    procedures for selecting Basic Research projects. Laboratory officials
    agreed that the process leading to the decision to fund these projects did
    not comply with Los Alamos’ internal policy guidance.

    ‘The DOEInspectorGeneralis reviewing DOEand Los Alamos actionson this project; its report is
    due later this year. GAO’s Office of SpecialInvestigationsis alsoexaminingissuesrelating to this
    project.



    Page 34                                              GAO/RCEDBl-18      Discretionary   R&D Funds
,
              Chapter3
              DOE onldulce on Laboratories’Uee of
              Dhcretionary R&D Funds Is Unclear




              Los Alamos also used Basic Research funds for activities that were not
              actual research. For example, funds were used for recruiting, secretarial
              support, and consultant fees. Additionally, Los Alamos designated a
              research and development center as a Basic Research project and used
              Basic Research funds to pay the center’s entire fiscal year 1988
              expenses of $1.7 million. Basic Research funds were also used to pay for
              a $36,000 engineering design for the center’s office space. Los Alamos
              also funded, in part, another research and development center from
              Basic Research funds. Los Alamos used these funds to pay for facility
              maintenance costs, visitor expenses, workshops, and one-half of the
              administrative staff’s salaries.

              Los Alamos officials told us that these costs were allowable under the
              laboratory’s policies, procedures, and guidance. They said that with
              regard to the use of Basic Research funds to pay for the administrative
              expenses of the R&D center, the center was established to manage and ’
              conduct a set of programs involving related science and technology. Fur-
              ther, like all division-level organizations in the laboratory, the adminis-
              trative costs of the center are distributed equitably to the research
              programs carried out by the center. Because these costs were not for
              actual research, as specified in section 303 of Public Law 95-39, we
              question whether these costs can be paid from funds authorized specifi-
              cally for conducting employee-suggested research.


              DOE has not provided its laboratories with sufficiently clear guidance on
Conclusions   discretionary R&D to ensure that the funds are spent on appropriate
              projects and activities. Some of the guidance that DOE has provided in
              DOE Order 5OOO.lA is unclear; as a result, criteria are subject to varying
              interpretations. Without clear guidance, neither the laboratories nor
              those responsible for oversight of their discretionary R&D activities will
              be able to accurately determine whether expenditures are appropriate.
              We found that the three laboratories have had to interpret some of the
              criteria themselves and have spent funds on activities that are question-
              able when examined against the WE order.

              Even more significantly, there is no DOE guidance for the Basic Research
              component of Los Alamos’ discretionary R&D program. DOE has allowed
              Basic Research program funds to be used to cover some costs that are, in
              our view, inconsistent with section 303 of Public Law 95-39.




              Page 35                                 GAO/RCED-91-M   Discretionary   R&D Funds
                        Chapter 3
                        DGE Guidance on Laboratories’Use of
                        Dbcretionan R&D Funds Is Unclear




                        We recommend that the Secretary of Energy review and revise DOE
Recommendationsto       Order 6OOO.lA to clarify guidance on the appropriate and inappropriate
the Secretary of        uses of Exploratory R&D funds. Areas requiring further definition and/
Energy                  or elaboration include

                    . the permissible conditions under which, and the general types of, capital
                      equipment that can be purchased for use on Exploratory R&D projects;
                    l the appropriateness of funding Exploratory R&D projects jointly with
                      related activities funded from different sources;
                    l the appropriate size of Exploratory R&D projects; and
                    l the appropriate duration of Exploratory R&D projects,

                        We also recommend that the Secretary establish guidance that applies to
                        all discretionary R&D activities carried out by the laboratories, including
                        the Basic Research component of Los Alamos’ program, and establish
                        controls to ensure that discretionary R&D funds are used only for
                        employee-suggested R&D activities, as specified in section 303 of Public
                        Law 95-39. As discussed in chapter 1, DOEhas developed draft guidance
                        that will address most of these recommendations, and we encourage the
                        Secretary to review and implement this guidance with these recommen-
                        dations in mind.




                        Page 36                                 GAO/WED-91-19 Mecretionary   R&D Funds
Chapter 4

DOE Needs to Improve Controls Over
Laboratories’Discretionary F&D Activities

                            DOElacks effective controls over the administration and uses of labora-
                            tories’ discretionary funds. The DOEmanagement control weaknesses we
                            observed include the following: (1) DOEheadquarters did not conduct the
                            annual oversight reviews required by DOEOrder 5000.1A; (2) the Albu-
                            querque Operations Office did not review the nature of Exploratory R&D
                            projects as required by the DOEorder; (3) DOEprovided virtually no over-
                            sight of discretionary R&D activities carried out under the Basic
                            Research component of Los Alamos’ discretionary R&D program; (4) DOE
                            did not identify and communicate provisions governing spending con-
                            tained in authorization and appropriations acts to its field offices; and
                            (6) DOEdid not.require that laboratories file project reports with its
                            Office of Scientific and Technical Information. However, DOEhas begun
                            making improvements in its controls over discretionary funds,


                            DOEhas done little to review discretionary R&D projects carried out at the
Control Mechanisms          three laboratories we reviewed. DOEhas not consistently implemented all
Are Not Utilized or Do      of the control mechanisms contained in Order 5000.1A. In addition, DOE
Not Exist                   has no formal system of controls in place, comparable to a DOEorder, to
                            cover the Basic Research component of Los Alamos’ discretionary R&D
                            program.


Headquarters Review         DOE’SOffice of the Assistant Secretary for Defense Programs, the office
Mechanism Rarely Utilized   responsible for overseeing the utilization of Exploratory R&D funds at
                            the three laboratories, has not regularly conducted the annual on-site
                            reviews required by DOEOrder 5000. IA. The order requires that the cog-
                            nizant Secretarial Officer-the Assistant Secretary for Defense Pro-
                            grams- “Overview the utilization of [Elxploratory R&D by laboratory
                            managements. . . .” According to DOE,these reviews for the three
                            Defense Programs laboratories were intended to be the primary head-
                            quarters oversight mechanism.

                            However, DOEhas conducted only two of these reviews at the three labo-
                            ratories we reviewed since the DOEorder creating its Exploratory R&D
                            program was issued in December 1983. The first reviews were con-
                            ducted on September 25 and 26 and October 10,1984, at Sandia, Los
                            Alamos, and Lawrence Livermore, respectively. The second reviews
                            were conducted on October 21, 22, and 23, 1986, at Sandia, Los Alamos,
                            and Lawrence Livermore, respectively.

                            Defense Program officials told us that the reviews have often been
                            deferred because of other higher priority issues within the Office of


                            Page 37                                 GAO/RCED-91-18   Discretionary   R8zD Funds
                                chapter 4
                                DOE Need      to Improve Cantmla Over
                                Idoratoried      Dbcret~onary R&D Activities




                                Defense Programs. They also cited management turnover within the
                                Office as a major reason for not conducting the reviews required by the
                                DOEorder.


             _-rsight by the    The DOEAlbuquerque Operations Office has done little to oversee
          LlAorque Operations   Exploratory R&D activities at Los Alamos and Sandia. This has been due,
                                in part, to confusion over the delineation of oversight responsibilities
VlllCt!                         between Defense Programs and Albuquerque.

                                DOEOrder 6OOO.lA gives responsibility for reviewing the uses of Explor-
                                atory R&D funds to both the Assistant Secretary for Defense Programs
                                and the DOEOperations Offices. The order requires that (1) the Assistant
                                Secretary for Defense Programs, as discussed above, overview the utili-
                                zation of Exploratory R&D by laboratory managements during the annual
                                on-site review and (2) the manager of the responsible operations office
                                review the nature of Exploratory R&D expenditures and report the find-
                                ings to the Assistant Secretary for Defense Programs.

                                However, it appears that the DOEAlbuquerque Operations Office’s
                                reviews of Exploratory R&D expenditures at Los Alamos and Sandia
                                have, until recently, been limited to determining if Exploratory R&D
                                expenditures at the laboratories exceeded the funding ceiling for such
                                activities. The reviews concluded that the programs were being con-
                                ducted in accordance with DOEOrder 5000.1 A, despite the apparent lack
                                of project-specific review by the Albuquerque office of FYS1986 and
                                1987 projects to determine whether they were consistent with criteria
                                established in Order 5000. IA that govern the use of Exploratory R&D
                                funds. DOE'SSan Francisco Operations Office has provided somewhat
                                greater oversight of the discretionary R&D activities at Lawrence
                                Livermore by reviewing a draft of the laboratory’s annual report on its
                                Exploratory R&D activities. Defense Programs officials do not feel that
                                this has been an especially critical review and do not consider it to have
                                been adequate.

                                The Albuquerque Operations Office official responsible for overseeing
                                the discretionary R&D activities at Sandia and Los Alamos told us that
                                the Office’s review had been limited because of its view that it was
                                responsible only for (1) ensuring that the laboratories’ Exploratory R&D
                                expenditures did not exceed the limit set by the Assistant Secretary for
                                Defense Programs and (2) reporting the Office’s findings to Defense Pro-
                                grams. In his view, Defense Programs was responsible for reviewing the



                                Page 38                                        GAO/RCED-91-18   Discretionary   R&D Funds
‘

                           Chapter 4
                           DOE Needs to Improve Covtrols Over
                           Laberatorles~ Dbcretionary R&D Activities




                           actual uses of the funds at the annual on-site review it is required to
                           conduct at the laboratories.

                           The Albuquerque office has recently taken steps to improve its over-
                           sight of the uses of Exploratory R&D funds at Los Alamos and Sandia.
                           Albuquerque required that Los Alamos submit a list of projects funded
                           in F Y 1988 along with a brief summary of each; it then selected and
                           reviewed six projects for compliance with the criteria found in DOE
                           Order 5000.lA. Albuquerque lim ited its review of Sandia’s FY 1988 dis-
                           cretionary R&D activities to an informal discussion with Sandia officials.
                           Operations office officials told us that they provided less stringent over-
                           sight at Sandia because the DOEIG did not find any problems at Sandia
                           and more extensive oversight therefore is not warranted.

                           Defense Programs recognizes that oversight of these activities needs to
                           be improved. Defense Programs officials told us that DOEwill issue poli-
                           cies and procedures to clarify oversight responsibilities for these activi-
                           ties and stress their importance.


Little Oversight of the    DOElacks policies and procedures regarding oversight responsibilities for
Basic Research Component   the Basic Research component of Los Alamos’ discretionary R&D pro-
                           gram . According to DOEand Los Alamos officials, the oversight require-
of Los Alamos’             ments contained in DOEOrder 5OOO.lA do not apply to this component of
Discretionary R&D          Los Alamos’ program . However, as of September 1989, DOEhas not
Program                    issued any other guidance that sets forth oversight responsibilities for
                           the Basic Research component.

                           As a result, there has been little DOEoversight of the activities con-
                           ducted under the Basic Research component of Los Alamos’ discre-
                           tionary R&D program . The Albuquerque Operations Office official
                           responsible for overseeing Exploratory R&D activities at Los Alamos told
                           us that the Office is not responsible for overseeing, nor does it oversee,
                           the discretionary R&D activities conducted within the Basic Research
                           component of Los Alamos’ program .

                           Defense Programs has also done little to oversee Basic Research. One
                           Defense Programs official told us that DOEprovides some oversight
                           through the weapons program budget review as part of the DoE budget
                           process, but he recognized that this oversight is not adequate. A Defense
                           Programs official, formerly responsible for reviewing the defense labo-
                           ratories’ budget submissions, agreed that the budget review process pro-
                           vides m inimal oversight and the primary headquarters review


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                           DOE Needs to Improve Controls Over
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                           mechanism is the annual on-site review. However, as discussed above,
                           only two of these reviews have been conducted since 1984.


                           We found that at least one authorization and one appropriations act con-
DOE Has Not                tain provisions governing assessments against the funds pr0vided.l
Communicated               However, DOElacks the controls needed to ensure that these provisions
Statutory Spending         are considered when its laboratories make assessments against the
                           appropriations to provide funding for discretionary R&D. The two acts
Provisions to the          we identified that contain the provisions governing spending are the
Laboratories               Nuclear Waste Policy Act of 1982 and the Interior and Related Agencies
                           Appropriation Acts2


Nuclear Waste Policy ACt   The Nuclear Waste Policy Act (P.L. 97-425)limits the use of funds from
                           the Nuclear Waste Fund to non-generic R&D. The Nuclear Waste Fund is
                           made up of fees paid to the Secretary of Energy by producers and
                           owners of high-level nuclear waste. Section 302(d) of the act states that
                           the Secretary may make expenditures from the waste fund “only for
                           purposes of radioactive waste disposal activities under titles I and II,
                           including . . . the conducting of nongeneric research, development, and
                           demonstration activities under this Act.” Title I of the act concerns the
                           disposal and storage of radioactive waste; title II sets forth a program of
                           research, development, and demonstration regarding disposal of radio-
                           active waste.

                           The term “nongeneric” is not defined in the act, but our reading of the
                           act leads to the conclusion that funded research, development, and dem-
                           onstration activities should be limited to those directly related to the
                           siting and development of licensed repositories for covered radioactive
                           waste, and to the demonstration of handling, storage, and management
                           of this waste at such sites. Our review of the legislative history of the
                           act supports this conclusion, Accordingly, any assessments against the
                           waste fund that are used for discretionary R&D must be used for projects
                           directly related to the siting or development of licensed repositories for
                           high level waste and spent fuel and related demonstration activities.


                           ‘As discussedin ch. 1, we did not attempt to review all of the appropriationsacts that have provided
                           funds usedto carry out discretionaryR&D activities.
                           2Therestriction containedin the Interior and RelatedAgenciesAppropriation Act first appearedin
                           the 1983act and has beenrepeatedin eachsubsequentact through the FY 1990Interior and Related
                           AgenciesAppropriation Act.



                           Page 40                                               GAO/RCEDBl-18      Discretionary   R&D Funds
                         Chapter 4
                         DOE Need6 to Improve Controls Over
                         Laboratories’ Discretionary R&D Activities




                         Neither DOEnor its laboratories have established any controls that rec-
                         oncile the amount of discretionary R&D funds assessed from the Nuclear
                         Waste Fund with the amount of funds used for discretionary R&D
                         projects that are allowable under the Waste Act. As a result, DOEcannot
                         be assured that it is in compliance with the act’s requirements. During
                         FY 1988 Los Alamos and Lawrence Livermore assessed approximately
                         $946,000 and $355,000, respectively, from the waste fund for their dis-
                         cretionary R&D activities. In FY 1989 those amounts were about $1 mil-
                         lion and $420,000, respectively.

                         Officials from DOE'SOffice of Civilian Radioactive Waste Management
                         are aware of the laboratories’ practice of assessing monies spent at the
                         laboratories for their discretionary R&D activities. An official in DOE'S
                         Office of Civilian Radioactive Waste Management told us that the Office
                         recognizes that assessing monies from the waste fund for discretionary
                         R&D may be a violation of the act and referred the issue to the DOEIG
                         about 2 years ago. According to this official, the IG in turn referred the
                         issue to the DOEGeneral Counsel, who has not yet determined whether
                         the practice is permissible. She added that the Office of Civilian Radio-
                         active Waste Management will take whatever action the General
                         Counsel recommends.

                         The Lawrence Livermore official responsible for Exploratory R&D activi-
                         ties at the laboratory told us that he believes that the waste program is
                         a net beneficiary of the Exploratory R&D program. This is because more
                         waste-related work is conducted under the Exploratory R&D program, he
                         believes, than the waste program contributes to the laboratory’s Explor-
                         atory R&D program. He added, however, that the laboratory has not con-
                         ducted the analysis necessary to prove it.


Interior and Related     The Department of the Interior and Related Agencies Appropriation Act,
Agencies Appropriation   which contains appropriations for DOE'Sfossil energy programs, has,
                         since 1983, contained a general provision prohibiting the levying of any
Act                      assessments against funds provided by the act without first notifying
                         the Appropriations Committees. Specifically, section 309 of the FY 1988
                         act states that, “No assessments may be levied against any program,
                         budget activity, subactivity, or project funded by this Act unless such




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                      DOE Needs to Improve Controls Over
                      Laboratories’ Discretionary R&D Activities




                      assessments and the basis therefore are presented to the Committees on
                      Appropriations and are approved by such committees.“3

                      Lawrence Livermore and Los Alamos both assessed funds provided
                      under the act without DOE’S having notified the Committees. For FY 1988
                      DOE fossil energy programs contributed approximately $103,000 to Law-
                      rence Livermore’s Exploratory R&D program and $97,000 to Los Alamos’
                      overall discretionary R&D program. For FY 1989 these amounts were
                      about $104,000 and $108,000, respectively.

                      The Deputy Director of DOE’S budget office told us that DOE has no spe-
                      cific policies and procedures for reviewing authorization and appropria-
                      tion act language. Further, he believes that communicating information
                      on special provisions is the responsibility of the headquarters offices
                      that fund the laboratories’ programs. The Director of the budget office
                      within DOE’S Office of Fossil Energy told us that he believes that it is his
                      Office’s responsibility to review appropriations and authorization act
                      language for these types of restrictions, but the Office does not pay very
                      much attention to the general provisions sections as they rarely change
                      from year to year. He was not aware of the general provision in the Inte-
                      rior and Related Agencies Appropriations Acts that prohibits assessing
                      funds provided by the acts without notification to and prior approval
                      from the Appropriations Committees.

                      Officials at the San Francisco and Albuquerque Operations Offices told
                      us that DOE’S Office of Budget is responsible for identifying these limita-
                      tions or requirements because they apply across the agency.


                      DOE Order 5000. IA does not incorporate the requirement contained in
DOE Guidance Does     section 303 of Public Law 95-39 that project reports be filed with DOE’S
Not Incorporate All   Scientific and Technical Information Center (renamed the Office of Sci-
Pertinent             entific and Technical Information) in Oak Ridge, Tennessee, at the com-
                      pletion of each project. As a result, two of the three laboratories we @
Requirements of       reviewed are not complying with this requirement.
Public Law 95-39
                      According to the National Science Board, disseminating the results of
                      basic scientific research, whether successful or not, is important if that
                      research is to be of value to other researchers. An official at DOE’S Office

                      ‘IThis legislativeprior approval provision appearsto violate the so-calledChadhadecision,I.N.S.v.
                      Chadha,462 U.S.919 (1983),which held that a one-Housecongressionalveto is unconstitutional.he
                      onstitutionality of this provision has not beenjudicially challenged,however,and a discussionof
                      this issue-and how it might be resolvedby the courts-is beyondthe scopeof this report.



                      Page 42                                             GAO/RCED-91-18     Discretionary   R&D Funds
              Chapter 4
              DOE Needs to Improve Controls Over
              Ldorntdes’   Discretionary R&D Activities




              of Scientific and Technical Information reiterated this point: By main-
              taining research results at a central location, DOEhopes to minimize the
              potential for duplicative research and maximize the usefulness of the
              results of R&D conducted by its contractors. Thus, submitting Explora-
              tory R&D project reports could prevent duplication of efforts and wasted
              costs.

              Sandia and Los Alamos do not routinely submit required project reports
              at the completion of each project to DOE'SOffice of Scientific and Tech-
              nical Information. Sandia and Los Alamos officials said they are
              required to submit only an annual report to DOE'SAlbuquerque Opera-
              tions Office. The annual reports include project summaries that state the
              general project objectives, but these summaries are generally no longer
              than one paragraph and do not include detailed project information.

              Lawrence Livermore, on the other hand, prepares a detailed annual
              report that is widely distributed, including submission to DOE'SOffice of
              Scientific and Technical Information.


              DOEhas not carried out the oversight of discretionary R&D activities that
Conclusions   is needed for assurance that laboratories are spending funds appropri-
              ately. DOEhas not carried out key responsibilities contained in Order
              5OOO.lA for overseeing Exploratory R&D funds. Further, it has estab-
              lished no requirements for overseeing Los Alamos’ Basic Research activ-
              ities, and its review of these activities has been minimal. DOEalso lacks
              controls needed to ensure that it is complying with applicable provisions
              contained in authorization and appropriations acts and that laboratories
              send project reports to the DOEOffice of Scientific and Technical Infor-
              mation, as required by section 303 of Public Law 95-39.

              DOEhas acknowledged that better oversight is needed and has begun
              making improvements in some of these areas. We note that DOEOrder
              5000.1A contained oversight requirements that, if they had been effec-
              tively implemented, could have obviated some of these oversight
              concerns.




              Page 43                                     GAO/RCED-91-18   Discretionary   R&D Funds
                                                                                                            .
                        Chapter 4
                        DOE Needs to Improve Controls Over
                        Laboratories’ Discretionary R&D Activities




                        We recommend that the Secretary of Energy direct the Assistant Secre-
Recommendationsto       tary for Defense Programs and the Director, Office of Energy Research,
the Secretary of        to
Energy              l carry out the on-site reviews, or other headquarters oversight reviews,
                      required in DOEOrder 5000.1 A, or any superseding guidance;
                    l expand the oversight provisions of Order 5000.1 A, or any superseding
                      guidance, to cover all discretionary R&D activities, including the Basic
                      Research component of Los Alamos’ discretionary R&D program;
                    l incorporate into Order 5000.1A, or any superseding guidance, the
                      requirement contained in Public Law 95-39 that project reports be sub-
                      mitted to DOE'SOffice of Scientific and Technical Information at the com-
                      pletion of each project; and
                    * clarify with operations office managers how oversight responsibilities
                      listed in Order 5000.1 A, or any superseding guidance, will be conducted
                      so as to ensure that all requirements contained in the guidance are car-
                      ried out.

                        As discussed in chapter 1, DOEis aware of the control weakness dis-
                        cussed in this chapter and has informed us that it intends to issue
                        revised guidance that we believe will, if effectively implemented,
                        address most of these recommendations.

                        We further recommend that the Secretary direct the Director, Office of
                        Budget, to establish the necessary controls to ensure that DOElaborato-
                        ries’ assessment of funds for discretionary R&D complies with applicable
                        provisions in appropriation and authorization acts.




                        Page 44                                      GAO/RCED-91-18
                                                                                Discretionary   R&D Funds
Page 46                       GAO/RCED91-18   Discretionary   R&D Funds



          :       ,, ;‘“j”;     ‘;,   .’       ‘.



              I
Appendix I                                                                                             L
Major Contributors to This Report                                                              ‘


                            Judy A. England-Joseph, Associate Director, Energy Issues
Resources,                  Richard A. Hale, Assistant Director
Community, and              Jonathan N. Kusmik; Evaluator-in-Charge
                            Rebecca L. Johnson, Staff Evaluator
Economic
Development Division,       Molly MacLeod, Repofis Analyst

Washington, DC,
                        A
                            Susan W. Irwin, Attorney Advisor
Office of the General
Counsel

                            Peter Fernandez, Regional Management Representative
Denver Regional             Edward Sanchez, Regional Assignment Manager
Office                      Charles Trujillo, Staff Evaluator
                            Jocelyn R. Duran, Staff Evaluator




(306606)                    Page 46                               GAO/WED-91-18   DSacretionaQ’ It&D Fund@
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