Functional Support Costs at DOE Facilities
RCED-98-193R: Published: Jun 12, 1998. Publicly Released: Jun 12, 1998.
Pursuant to a congressional request, GAO reviewed the functional support costs incurred at Department of Energy (DOE) facilities during fiscal years (FY) 1995 through 1997, focusing on: (1) the activities included in and the relationship between overhead, indirect, and functional support costs; (2) the amount of functional support costs incurred at DOE facilities; and (3) examples of costs incurred in areas that, according to GAO's prior work, may warrant a more detailed review.
GAO noted that: (1) DOE's functional cost reporting system divides functional support costs into two major types: (a) general support; and (b) mission support, which includes activities more closely aligned to mission efforts; (2) functional costs provide a broader measure of support costs than other measures because they include more expenditures; (3) overhead costs normally include only facilitywide costs that benefit operations as a whole but cannot be directly associated with specific programs; (4) indirect costs normally include overhead costs as well as other facility costs that may be associated with a specific program but cannot be directly charged to a specific project or activity funded by DOE or others; (5) functional support costs include both overhead and indirect costs, plus direct costs that fall into the functional support categories; (6) the amount spent DOE-wide on functional support costs is substantial but is declining; (7) for FY 1997, contractors at 21 DOE facilities reported functional support costs of $5.25 billion; (8) this amount is a reduction of $672 million from the level reported in FY 1995; (9) differing methodologies for categorizing and reporting costs at the facilities may result in some inaccuracies in reporting functional support costs; (10) DOE estimates that the reported costs are 80 to 90 percent accurate; (11) the facilities are now conducting peer reviews of each others' functional cost reporting practices in order to improve the accuracy of, and uniformity in, reporting these costs; (12) the peer reviews are scheduled for completion by the end of FY 1998; (13) although DOE facilities have reduced functional support costs, there are a number of functional cost categories that may benefit from further detailed review; (14) although DOE has established a broad performance goal of maintaining or reducing the overall percentage of total costs accounted for by functional support costs, it has not set facility-specific goals or targets for reducing functional support costs; and (15) although increases in functional support costs may be warranted in certain circumstances, the use of specific targets for individual facilities, if appropriately implemented, could lead to additional cost savings.