oversight

Department of Energy: Office of Environmental Management's and Defense Programs' Fiscal Year 2000 Budget Request

Published by the Government Accountability Office on 1999-07-30.

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

    United States
    General Accounting    Office
    Washington,   D-C. 20548

    Resources, Community,          and
    Economic Development           Division


    B-282974


July 30,1999


    Congressional Committees

    Subject: DeDartment of Enerrrv: Office of Environmental Management’s and Defense
             Programs’ Fiscal Year 2000 Budget Reauest

This report includes information on selected portions of the Department of Energy’s
(DOE) fiscal year 2000 budget request. Specifically, this report discusses (1) selected
projects and activities by the Office of Environmental Management in which part or all of
the fiscal year 2000 budget request or budget authority from previous years is not needed
and (2) our analysis of Environmental Management’s and Defense Programs’ carryover
funds from prior years to determine if funds are available that could be used to reduce
DOE’s fiscal year 2000 budget request. Our review of individual projects and activities
focused on the Environmental Management Program, which accounts for about one-third
of the Department’s budget. We examined requests for funds to support Environmental
Management’s privatization initiative’ and selected construction projects and operational
activities at the Hanford Site in Washington State, the Idaho National Engineering and
Environmental Laboratory, the Savannah River Site in South Carolina, the Oak Ridge Site
in Tennessee, and the West Valley Demonstration Project in New York State. Our review
of carryover balances focused on operation and maintenance funds for .both
Environmental Management and Defense Programs. This report updates information we
previously provided to your offices on April 13 and 14,1999. Enclosures I and II are
updated summaries of the materials used during those briefings.



We questioned about $259 million in funding for the Environmental Management Program.
(See enc. I.) Specifically, $164 million. in fiscal year 2000 funding for five privatization
projects is not needed because this budget authority exceeds the contractors’ expected
costs during fiscal year 2000. Another $95 million in fiscal year 2000 budget requests and
funding provided in previous years is not needed for construction projects and operating
activities because of various reasons, including the fact that a project’s scope had been
reduced but DOE plans to retain the funds for other purposes or DOE is requesting funding
a year or more in advance of when the funds will be needed.

’ DOE’s privatization initiative provides financial incentives to private contractors to design, finance, construct, and operate
facilities, such as waste cleanup plants, at a substantially reduced cost while maintaining an appropriate technical and
financial risk/reward balance between DOE and the contractors.


1                     GAO/WED-99-230R           Fiscal Year 2000 Budget Requests for Selected DOE Programs
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Our review of the Environmental Management Program’s projected carryover funds
indicates that no funds would be available to offset DOE’s fiscal year 2000 budget request.
Rather, the Environmental Management Program is projected to have about $58 million
less than the projected goal for carryover funds at the start of fiscal year 2000. A similar
situation exists for Defense Programs, where DOE is projected to have about $101 million
less than the projected goal for carryover funds at the start of fiscal year 2000. (See enc.
n-1

Background

To fund the activities of DOE and other agencies, the President submits an annual budget
request to the Congress. The annual appropriations provided by the Congress, along with
the funds appropriated but not expended in earlier years, make up the total amount of
funding available to those agencies. The fiscal year 2000 budget request for DOE totaled
nearly $18 billion, of which about one-third, or $5.9 billion, was to fund activities within
the Environmental Management Program. Environmental Management is responsible for
addressing the environmental problems resulting from the production of nuclear weapons,
nuclear energy activities, and energy research. Environmental Management’s request of
$5.9 billion for fiscal year 2000 includes $228 million for its privatization initiative and $3.3
billion for the Hanford Site, the Idaho National Engineering and Environmental
Laboratory, the Savannah River Site, the Oak Ridge Site, and the West Valley
Demonstration Project.

Each fiscal year, DOE requests obligational authority from the Congress to meet the costs
of running its programs.* Once DOE receives this authority, it obligates funds by placing
orders or awarding contracts for goods and services that will require payment during the
same fiscal year or in the future. Unobligated balances represent that portion of its
authority that the Department has not obligated. Uncosted obligations represent the
portion of DOE’s authority that the Department has obligated for goods and services but
for which it has not yet incurred costs. Carryover balances represent funding from prior
years’ budgets and consist of both unobligated balances and uncosted obligations. Some
carryover balances are needed at the beginning of a fiscal year to pay for the prior years’
commitments. To determine the appropriate amount of carryover balances, DOE has
established carryover bahmce targets for the various parts of its programs.

Funding      for Selected       Environmental           Management          Activities     Is Not Needed

Our review of specific projects and activities funded by Environmental Management
identified about $259 million for 14 projects that is either not needed as initially planned or
will not be needed until after fiscal year 2000. This amount includes $164 million for five
privatization projects that is not needed in fiscal year 2000 because the budget authority
exceeds the contractors’ expected costs. An additional $95 million for various
construction projects and operating activities is not needed in fiscal year 2000 for various
reasons, including the fact that a project’s scope has been reduced but DOE wants to
retain the funds for other purposes or DOE is requesting funding a year or more in advance
of when the funds will be needed.

 *Some appropriations do not restrict the time in which funds must be obligated but state that the funds are “to remain
 available until expended.” This is generally referred to as “neyear” authority DOE receives no-year authority for most of
 its activities.


2                     GAO/WED-99-230R          Fiscal Year 2000 Budget Requests for Selected DOE Programs
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Environmental Management officials generally did not agree with our characterization that
the funds are not needed. For example, concerning the $164 million request for five
privatization projects, the officials said that receiving budget authority in advance of need
would help to level out funding in future years and was needed to help ensure private
sector investment in the projects. While retaining excess funds may help level out future
funding needs, the officials were unable to demonstrate that retaining the funds would
help ensure that the private sector would be more likely to invest in the projects.

Regarding the $95 million for various construction projects and operating activities,
Environmental Management officials generally said that the funds would not be needed as
initially planned but were needed to (1) have an option to accelerate the work, (2) fund
other requirements at the sites, or (3) avoid delays in projects in case the next year’s
budget authority is delayed. However, in most cases, the officials could not provide us
with their plans for accelerating the work or explain how the funds would be used to meet
other requirements at the sites. Also, requesting the funds as a hedge against possible
delays in receiving the next year’s funding, a practice called prefinancing, is specifically
not allowed by DOE policy.

Environmental  Management’s                    and Defense Programs’                Carryover        Balances      May Be
Less Than Goal

On the basis of a carryover balance goal of 15 percent of total obligational authority,’ we
estimate that the Environmental Management Program would need about $867 million on
hand at the beginning of fiscal year 2000 to pay for prior years’ operation and maintenance
commitments that will not have been completed at the end of fiscal year 1999. In contrast,
we estimate that the Environmental Management Program will have about $809 million in
carryover balances at the beginning of fiscal year 2000 to use for those purposes. The $809
million is about $58 million less than the goal for Environmental Management’s carryover
balance.4

Using the same carryover balance goal of 15 percent of total obligational authority, we
estimate that Defense Programs would need about $588 million on hand at the beginning
of fiscal year 2000 to pay for prior years’ operation and maintenance commitments that
will not have been completed at the end of fiscal year 1999. In contrast, we estimate that
Defense Programs will have about $487 million in carryover balances at the beginning of
fiscal year 2000. The $437 million is about $101 million less than the goal for Defense
Programs’ carryover balance.

This situation largely has been the result of two factors. First, over the last several years
the Congress has reduced DOE’s budget request and recommended that the Department
use carryover balances in lieu of new funding. The Department has complied with this
recommendation and has reduced its balances. Second, both programs are projecting an
increased costing rate for operation and maintenance costs for fiscal year 1999. This

3The 15percent goal is a weighted averageof the targets that DOE establishedin September1998for different componentsof its
programs.

*or an analysis of fiscal year 1999 carryoverbalances,seeDepartmentof Enerw: Office of Environmental Manapement’sand
Defense Promms’ Fiscal Year 1999Budget Reauests(GAOIRCED-9%213R,July 24, 1998).



 3                                   GAO/RCED-99.230R Fiscal Year 2000 Budget Requestsfor SelectedDOE Programs
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increased rate of spending means that a lower level of carryover balances relative to the
goal can be expected.

Agency Comments

We provided a draft of this report to DOE for its review and comment. DOE generally
disagreed with our view that funding for several of the projects was not needed. DOE also
said that we did not fully adapt its target balances in our analysis of carryover balances.

Regarding our assessment that $164 million was not needed to ensure advance funding for
five privatization projects, DOE said that private sector investment is greatly enhanced
when the funding is readily available to support the projects and that certainty of funding
reduces the risk contractors face when seeking private capital. DOE said that its opinion
is supported by the daily functioning of the financial markets. We believe that the $164
million is not needed in tiscal year 2000 because DOE is already required to assure
contractors that sufficient funding will be available each fiscal year to cover contractor
costs for that year, including potential termination costs. This requirement should be
adequate assurance that contractors and their investors will recoup their total investment
if the contract is terminated. Therefore, we have not changed our presentation of this
issue in our report.

For most of the remaining projects we reviewed, DOE generally aclmowledged that most
of the funds we identified were not needed in fiscal year 2000: However, DOE said that it
should retain the funds because contractual and compliance commitments for these
ongoing projects will continue in future years. DOE said that if the fiscal year 2000 budget
for these projects is reduced, funding in future years would have to be increased above
what has been requested or planned. In our view, it would be more appropriate for DOE
to request these funds for the fiscal year it plans to use the funds. For fiscal year 2000, we
found that DOE either (I) had not fully developed plans or schedules to use the funds and
could not provide us with specific project scopes, clearly defined milestones, and tangible
deliverables as DOE’s own procedures require or (2) did not need or plan to obligate the
funds until after fiscal year 2000. Accordingly, we continue to believe that the funds are
not needed in fiscal year 2000 and can be used to offset DOE’s budget request for that year.

Concerning the Nuclear Material Storage project at Savannah River, we reported that the
funds were not needed for DOE’s original purpose because the actinide facility subproject
was suspended and DOE had proposed that the funds be reprogrammed for other uses in
fiscal year 1999. At the time we conducted our review at Savannah River, this proposal
had not been approved. However, because this proposal was approved in early July 1999,
the funds are no longer available for other purposes, and we deleted this project from our
report.

 With regard to our review of carryover balances, DOE said that it disagreed with basing
 the &percent target on total obligational authority and with applying the &percent target
 to departmental averages instead of program specific averages. The issue of what base to
 apply the 15-percent target to has been a continuing area of disagreement between us and
 DOE. As we have stated in prior reports, we continue to believe that total obligational
 authority is the correct base to which the 15 percent should be applied because this
 approach provides stable goals against which to judge DOE’s performance and also


  4                         GAOLRCED-99-230RFiscal Year 2000 Budget Requests for Selected DOE Programs
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accounts for DOE’s potentially large unobligated balances. In contrast, under DOE’s
approach of applying its target to costs, as the amount of spending goes up, the carryover
balance goals also go up, creating the appearance of a potential shortfall in carryover
balances. With respect to the use of departmental versus program-specific averages, DOE
has not developed program-specific targets; therefore, it is not possible to use anything
other than Department-wide averages. We used all of the targets DOE has developed to
construct our composite of 15 percent. Therefore, we have not changed our presentation
of this issue in the report.

DOE also provided several technical clarifications to the report, which we incorporated as
appropriate. DOE’s comments are included as enclosure III.



We performed our work from January through July 1999 in accordance with generally
accepted government auditing standards. See enclosure IV for details on our scope and
methodology. We will send copies of this report to the appropriate congressional
committees and to the Honorable Bill Richardson, the Secretary of Energy. We will also
make copies available to others upon request.

Please call me on (202) 5123341 if you or your staff have any questions.




 and Science Issues




                          GAO/RCED-99-230R Fiscal Year 2000 Budget Requestsfor SelectedDOE Program
B-282974




List, of Cornm3tees

The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Pete Domenici
Chairman
The Honorable Harry Reid
Ranking Minority Member
Subcommittee on Energy and Water Development
Committee on Appropriations
United States Senate

The Honorable Duncan Hunter
Chairman
The Honorable Norman Sisislq
Ranking Minority Member
Subcommittee on Military Procurement
Committee on Armed Services
House of Representatives

The Honorable Ron Packard
Chairman
The Honorable Peter Visclosky
Ranking Minority Member
Subcommittee on Energy and Water Development
Committee on Appropriations
House of Representatives




                         GAOIRCED-99.230R Fiscal Year 2000 Budget Requests for Selected DOI?,Programs
ENCLOSURE I


                                             Environmental     Management’s      Funding    Not Needed



Table 1.1: Environmental   Management’s Funding Not Needed in Fiscal Year 2000




Project                                   FY 2000 funds         Funds not   Reason funds not
number         Name or task/location          requested           needed    needed                  Agency response
Privatization projects


97-PVT-1        Tank Waste                 $106,000,000       $97,000,000   Budget authority       Additional budget authority allows the contractor to
                Remediation System                                          exceeds contractor’s   accelerate work, reduce future budget requests, and ensure
                Privatization Phase I-                                      expected costs.        private sector support and investment.
                Richland
97-PVT-2        Advanced Mixed Waste       $11 o,ooo,ooo        30,000,OOO Budget authority        The Department of Energy (DOE) needs to secure budget
                Treatment-Idaho                                            exceeds contractor’s    authority early in the privatization process to ensure private
                                                                           expected costs.         sector support and investment.
97-PVT-3        Transuranic Waste           $12,000,000         12,000,OOO Budget authority        DOE needs to secure budget authority early in the
                Treatment-Oak Ridge                                        exceeds contractor’s    privatization process to ensure private sector support and
                                                                           expected costs.         investment.
98-PVT-2        Spent Nuclear Fuel Dry        $5,000,000         5,000,OOO Budget authority        DOE needs to secure budget authority early in the
                Storage-Idaho                                              exceeds contractor’s    privatization process to ensure private sector support and
                                                                           expected costs.         investment.
98-PVT-5        Environmental               $20,000,000         20,000,000 Budget authority        Oak Ridge said that $14 million could be deferred to FY
                Management/Waste                                           exceeds contractor’s    2001. DOE headquarters said that DOE needs to secure
                Management                                                 expected costs.         budget authority early in the privatization process to ensure
                Disposal-Oak Ridge                                                                 private sector support and investment.

Total, privatization                                         $164,000,000




7                          GAO/RCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE I




Project          Name or                  FY 2000 funds      Funds not      Reason funds not
number           task/location                requested        needed       needed                  Agency response

Construction   projects

                                                                         -l-
94-D-407         Initial Tank Retrieval       $4,100,000       $9,800,000  Existing budget          Funds are needed (1) in case the vitrification project
                 Systems-Richland                                          authority is sufficient accelerates and additional funds are required in FY
                                                                           for expected costs in 2000 and (2) as contingency given project design
                                                                           FY 2000.                uncertainties.
00-D-40 1        Spent Nuclear Fuel           $7,000,000        1,500,000 Funds are not             Funds may be needed by the end of FY 2000, but
                 Treatment & Storage                                       expected to be          DOE does not have a formal schedule to demonstrate
                 Facility-Savannah                                         needed through FY       tiow the funds would be used.
                 River                                                    2000. As of April
                                                                           1999, the project
                                                                          underwent major
                                                                          changes.
96-D-471         Chiller Retrofit-             $931,000           931,000 Existing budget          Savannah River believes it needs the funds to avoid
                 Savannah River                                           authority is sufficient construction delay charges at the beginning of FY
                                                                          for expected             2001. DOE headquarters said that the funds are
                                                                          spending in FY           required for new work scope approved in April 1999.
                                                                          2000.
97-D-470        Regulatory Monitoring       $12,220,000        3,138,OOO Existing budget           Savannah River said the funds are needed for (1)
                and Bioassay Lab-                                         authority is sufficient possible cost increases in FY 2000 and (2) to avoid
                Savannah River                                            for expected             construction delays and cost increases at the
                                                                          spending in FY           beginning of FY 2001.
                                                                          2000.
99-D-402        Tank Farm Support            $3,100,000          536,000 Existing budget           The funds are needed to accelerate the project by 1
                Services, F Area-                                         authority is sufficient month. Plans for acceleration are in development.
                Savannah River                                            for expected
                                                                          spending in FY
                                                                          2000.
                                                             $15,905,000
total, construction




8                           GAO/RCEP99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE I



                                              FY 2000
Project                                         funds        Funds not
number       Name or task/location          requested          needed      Reason funds not needed       Agency response

Operating activity

ID-ER-       Radioactive Waste             $7,000,000       $7,000,000     Prior-year budget authority   The funds are not needed in FY 2000 but are needed
106          Management Complex                                            is available to meet          in future years to meet compliance requirements.
             Aemediation (OU7-1 O)-                                        requirements.
             Idaho
                                                            64,100,OOO Remaining budget authority         Prior-year budget authority is not needed in FY 2000,
                                                                       was carried over from the          but DOE needs the funds to meet future compliance
                                                                       Pit 9 Project for use on this      requirements.
                                                                       activity.
                                                           $71,100,000
Total, operating activity


Note: Table I.1 includes funds for projects and activities that DOE generally agrees are not required for fiscal year 2000.




9                           GAOIRCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
        ENCLOSURE I



        Table 1.2: Environmental       Management’s Funding Not Needed as initially Planned

                                                           FY 2000
        Project                                              funds          Funds not
        number        Name or task/location              requested             needed Reason funds not needed               Agency response
        86-R-830      Bethel Valley Low Level                     0         $S,OOO,OOOBudget authority was not              DOE plans to use $2 million to settle a contractor
                      Waste Collection and                                             needed at the completion             claim and $3 million to fund activities needed to meet
                      Transfer-Oak Ridge                                               of the project.                      enforceable Federal Facility Agreement milestones.
        94-E-602      Bethel Valley Federal                         0        3,400,OOO Budget authority was not             DOE plans to use the budget authority to fund
                      Facility Agreement                                               needed at the completion             activities needed to meet enforceable Federal Facility
                                                                                       of the p ro’ect.
                                                                                                  J                         Agreement milestones.

        Total
    I                                                                   I               I                                                                                            I
        Note: Table 1.2 includes funds for projects that are not needed for their original purpose but for which DOE has another purpose in mind.




        10                              GAOIRCED-99-230RFiscal Year 2000 Budget Requests for Selected DOE Programs
,
ENCLOSUREII


                                            Carrvover        Balances       and Goals


Table 11.1: Major Environmental Management Programs-Status                       of Carryover Balances for Operation and
Maintenance Funds

Dollars in thousands



                                 FY 1999                                        FY 2000
          FY 1999          adjusted new                                       projected               FY 2000
        beginning           obligational              FY 1999                beginning              carryover    Amount under
          balance              authority      projected costs                 balances j         balance goal 1            goal
        $883,143”             $5,744,950           $5,819,122                 $808,971 1             $867,09gb 1       $58,128

Note: Enclosure IV describes how the values in table II.1 were derfved.

‘Includes   both the uncosted balance ($847,434) and the unobligated   balance ($35,709).

“The carryover balance goal is 15 percent of the total obligational authority, which equals the unobligated   balance at the beginning
of fiscal year 1999 ($35,709) plus the fiscal year 1999 adjusted new obligational authority ($5744,950).          .


Table 11.2: Major Defense Programs-Status              of Carryover Balances for Operation and Maintenance Funds


Dollars in thousands



                                 FY 1999                                        FY 2000
          FY 1999          adjusted new                                       projected               FY 2000
        beginning           obligational              FY 1999                beginning              carryover    Amount under
          balance              authority      projected costs                 balances           balance goal 1          goai
         $503,692’            $3,897,240           $3,914,385                 $486,547               $587,724b 1     $101,177

Note: Enclosure IV describes how the values in table II.2 were derived.

‘Includes both the uncosted balance ($482,772) and the unobligated     balance   ($20,920).

“rhe carryover balance goal is 15 percent of the total obligational authority, which equals the unobligated   balance at the beginning
of fiscal year 1999 ($20,920) plus the fiscal year 1999 adjusted new obligational authority ($3,897,240)




11                              GAO/RCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE III

                           Comments        From the DeDartment             of Enerm



                                            Department of Energy
                                                 Washington,DC 20585
                                                   July 6, 1999


           Ms. Gary Jones
           Associate Director
           Energy, Resources,% SciencesIssues
           General Accounting Office, Rm 2T23
           441 J street, NW
           Washington, D.C. 20548

           Dear Ms. Jones:

           The Department of Energy appreciatesthe opportunity to review and comr&nt on the General
           Accounting Office draft report GAOIRCED-99-23OR, entitled “Fiscal Year 2000 Budget
           Requestsfor SelectedDOE programs.”

           Comments on the report are enclosed for your consideration in preparing the final report.



                                                       JamesM. Owendoff
                                                       Acting Assistant Secretary for
                                                        Environmental Management

           Enclosure




      12                     GAO/RCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSUREIII




                                        U.S. Department of Energy
                        Comments on the General Accounting Ofice Report Entitled
                      “Fiscal Year 2000 Budget Requests for Selected DOE Programs”
                                          GAOfRCED-99-230R

                                               Snecitic Comments

        1.     Page 5. GAO states that EM was unable to demonstrate that retention of $164
               million related to five privatization contracts “would help ensure that the private
               sector would be more likely to invest in the projects.”

               The Department believes that private sector investment in the projects selectedfor
               privatization is greatly enhancedwhen the requisite funding is readily available to support
               the project. Certainty of tinding provides the Department and the contractor with
               increasedleverage and risk reduction capability when the contractor enters the private .
               sector financial market to obtain capitalization for the project. This view is clearly
               supported by the daily tinctioning of a wide variety of financial markets.

               The Department continues to closely examine its use of funds acrossthe complex and
               utilize funds not imniediately required to fund unforeseen workscope or fund workscope
               which costs more than originally anticipated. In many instances our actual budget
               requests, as agreed to with the Congress, are offset by balancesavailabie from prior years.
               For example, concerning Project Number ID-ER-106, “Radioactive Waste Management
               Complex Remediation (OU7-IO)-Idaho,” DOE plans to use $43M of Pit 9 carryover
               funds in FY 2000 to maintain a stable Idaho tinding target to meet the Idaho Settlement
               Agreement. DOE agreesthat the subject funds are not required to meet FY 2000
               contractual commitments; however, these funds are absolutely necessaryto continue
               contractual and compliance commitments for FYs 2001 and 2002. Current out-year
               funding targets for EM reflect stable funding; to delete these finds from the FY 2000
               request will require increasesin the out-years to maintain contractual and compliance
               commitments.

               GAO statesthat “Also, holding the funds as a hedge against possible delays in receiving
               the next year’s funding, a practice called pre-financing, is specifically not allowed by DOE
               policy” in reference to several of the SavannahRiver projects( see.page9 of draft report).
               The DOE policy on pre-financing is that there will not be a conscious effort to provide for
               pre-financing when determining funding requirements for a project. DOE doesnot believe
               that has occurred and does not consider it pre-financing when current year costs are less
               than originally projected and those funds are then utilized for legitimate cost and
               workscope for the sameproject. Further, all four SavannahRiver projects are ongoing
               and uncompleted projects. Funding for eachproject has been included in both the FY2000
               Congressional Request and the FY2001 Corporate Review Budget. The GAO took the
               position that if projected cost through N 2000 was less than the amount appropriated to
               date and requested in the FY 2000 request, the excesswas not needed. However, the
               funds are needed to complete “approved-to-go” project work scope and to cover firm




   13                  GAO/RCED99-230R         Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE III




                legally binding commitments (encumbrances).

                Finally, as GAO indicates the E&I program is below the target threshold for uncosted
                balances and those balancesthat are available will be needed. The Department has
                continued to agree with the GAO position regarding the uncosted obligational balances,
                however the Department also believes that the impact of prior cuts and offsets is having an
                impact the Department’s ability to ensurecontinuity of op.erations.

          2.    Page 8. Table I.1 Project Number 97-PVT-3

                Currently there is a generic responsenoted for this project in the agency responsecolumn
                that is inaccurate and should be revised. The Department’s Oak Ridge Operation Office
                plans to obligate total project fimds in December2000 in compiiance with the contract,
                and, therefore $20,000,000 will be required in FY 2000.

          3.    Page 9. Table I.1 are the following four SR projects:

                00-D-40 1      Spent Nuciear Fuel Treatment & Storage Facility
                96-D-471       Chiller Retrofit
                97-D-470       Regulatory Monitoring and Bioassay Lab
                99-D-402       Tank Farm Support Services, F Area

                The Department does not agreewith the GAO finding. Ail four of the SavannahRiver
                (SR) projects are ongoing and uncompleted projects. Funding for each project has been
                included in the FY 2000 Congressional Request and additional funding will be required in
                FY 200 I. The GAO took the position that if projected cost through M 2000 was less
                than the amount appropriated to date and requestedin the FY 2000 request, the excess
                was not needed. However, the fimds are neededto complete “approved-to-go” project
                work scope and to cover firm binding commitments (encumbrances).If the FY 2000
                budget were reduced by the amounts reflected, funding in FY 2001 would have to be
                increased.

          4.    Page 11. Table I.2 is the following SR project: 97-D-450 Nuclear Material Storage

                The Department does not agreewith the finding. Athough’this project was suspendedin
                FY 1999, the associatedfunds (identified as “not needed” in the GAO draft report) were
                utilized as a FY 1999 reprogramming source to support other critical SR work scope. We
                request that this information be included in the agency response column to avoid a
                perception that these fbnds are available to offset the FY 2000 Congressional Request.

          5.    Page 15.

                GAO has not fuilj adapted DOE targets to their analyG. GAO indicates in the “Scope
                and Methodology” section (enclosure Iv) that they have had to “..ada.pt DOE targets..” to
                their analysis. As GAO noted in their report, the DOE Office of Chief Financial Officer




     14                    GAOIRCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE III




           did work with GAO to find an approachwhich would consider the more specific targets
           used by DOE for different types of funding. While we were able to agree on a
           methodology and a reasonablecompositegoal for this year’s review (15%) which would
           recognize that specific types of funding should be treated differently, the 25% does not
           represent a complete adaptation of DOE’s targets. This is because:a) DOE targets are
           against a Total Available to Cost (TAC) basewhile the GAO targets are applied to Total
           Obligational Authority (TOA); and, b) the 15% composite is basedon Departmental
           averagesversus program specific averages.

           While we understand GAO’s needfor one composite percentagewhich can be used as a
           ‘k~enertrl’Jgoal for the analysisof multiple programs, we want to stressthat using a
           composite percentagebasedon a weighted average does not My adapt DOE targets.




     15                GAOIRCED89230R         Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE    V


                                   Scope and Methodolom

To identify the fiscal year 2000 budget request for Environmental Management funds that are not
needed, we examined requests for funds to support Environmental Management’s privatization
initiative and specific construction projects and operating activities at the Hanford Site in
Washington State, the Idaho National Engineering and Environmental Laboratory, the Savannah
River Site in South Carolina, the Oak Ridge Site in Tennessee, and the West Valley
Demonstration Project located in New York State and managed by the Department of Energy’s
(DOE) Ohio Operations Office. To conduct our review of individual privatization and other
projects and activities, we reviewed program guidelines, budget request justifications, project
plans and cost estimates, and other pertinent documents related to the projects and activities.
We also interviewed the field managers for the projects and activities.

To identify carryover balances that may be available to reduce the fiscal year 2000 budget
request, we estimated potentially available carryover balances for both Environmental
Management’s and Defense Programs’ operations and maintenance activities. To estimate the
amount of potentially available operating fund balances for these programs at the beginning of
fiscal year 2000, we (1) projected their carryover balances at the beginning of fiscal year 2000,
(2) calculated a carryover balance goal for each program, and (3) analyzed the difference
between the goals and the projections.

We developed our projected carryover balances for these programs by adding carryover
balances at the beginning of fiscal year 1999 to new funding in fiscal year 1999. We then
obtained fiscal year 1999 cost estimates from the programs and compared them with cost
estimates we had made to satisfy ourselves that they were reasonable. We then subtracted the
programs’ fiscal year 1999 cost estimates from the total resources available to arrive at the
projected carryover balances for the beginning of fiscal year 2000.

To develop the minimum level of carryover balances needed to meet each program’s
requirements, we calculated the carryover balances needed to meet a goal of 15 percent for
operations and maintenance activities. The &percent goal is a weighted average of the targets
that DOE established in September 1998 for the different components of its programs. In
commenting on our analysis of carryover balances last year, DOE was concerned about how we
combined the targets for operations and maintenance and capital equipment into one
percentage, noting that it analyzes each area separately. In its September 1998 policy, DOE also
sets separate targets for its nonintegrated contractors and the subcontractors to its management
contractors that we also had not included in our analysis. As we reported in July 1998, we have
had to, adapt DOE’s targets to our analysis. We have had to do this because we are (1) using
total obligational authority as our base and (2) projecting total costs for the coming year. For
these two items, a detailed breakout of the different components-for      example, operating costs
 or capital equipment-does not exist. To address this concern, we proposed using data from the
prior year to develop a weighting system that would then be used to weight the targets for the
various areas to arrive at a composite goal. We discussed this approach with analysts in DOE’s
 Office of the Chief Financial Officer, who agreed that our methodology and the &percent goal
that resulted were reasonable. To determine the amount of carryover balances potentially
 available or if a shortfall in carryover balances existed, we then compared the goal amount for
 fiscal year 2000 with the projected carryover balances.




 16                     GAO/WED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSURE l-V


We adjusted our approach, where possible, to reflect individual program characteristics that
would affect the amount of carryover balances needed to meet the program’s unique
requirements. For example, we treated Environmental Management’s privatization projects in
the same way that we treat other line-item construction projects for our analysis because they
involve the construction of waste treatment facilities by private companies. Specifically, we
included the privatization projects with Environmental Management’s construction line items
and reviewed them separately.




17                    GAOIRCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
ENCLOSUREV


                    GAO Contacts     and Staff Acknowledements

,GAO Contact      (Ms.) Gary Jones, (202) 512-3841

Acknowledgments   In addition to the person named above, Margaret &men, Chris Abraham,
                  Gene Barnes, John Cass, Dwayne Curry, Carolyn McGowan, James Noel,
                  Tom Perry, and Bill Swick make key contributions to this report.




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 18                 GAOIRCED-99-230R Fiscal Year 2000 Budget Requests for Selected DOE Programs
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