Lawrence Livermore National Laboratory: Further Improvements Needed to Strengthen Controls Over the Purchase Card Program
GAO-04-986R
Published: Aug 05, 2004. Publicly Released: Sep 07, 2004.
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Highlights
The Lawrence Livermore National Laboratory (LLNL) is a government-owned, contractor-operated national laboratory of the Department of Energy's (DOE) National Nuclear Security Administration (NNSA). The University of California manages the lab under a cost-reimbursable contract with NNSA. During the fall of 2002, the Federal Bureau of Investigation began investigating two Los Alamos National Laboratory employees for alleged misuse of lab credit cards. Other allegations of theft and misuse of government funds at Los Alamos soon followed. In light of the problems identified at Los Alamos, Congress asked us to review selected procurement and property management practices at two DOE and two NNSA contractor labs, including LLNL. This report summarizes the information provided during our June 4, 2004 briefing to Congressional staff on these issues as they relate to Lawrence Livermore. Specifically, we reviewed LLNL's purchase card program and property management practices to determine whether (1) internal controls over the lab's purchase card (Pcard) program provided reasonable assurance that improper purchases would not occur or would be detected in the normal course of business, (2) purchase card expenditures made under the contract properly complied with lab policies and other applicable requirements and were reasonable in nature and amount and thus were allowable costs payable to the contractor under the contract, and (3) property controls over selected asset acquisitions provided reasonable assurance that accountable assets would be properly recorded and tracked. Our review covered selected transactions that occurred during fiscal year 2002 and the first half of fiscal year 2003, which were the most current data available when we requested the data for our review.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| National Nuclear Security Administration | In order to address the issues identified in our review, the Administrator of NNSA should direct Lawrence Livermore National Laboratory's Director, to strengthen internal controls over the purchase card program and reduce the lab's vulnerability to improper, wasteful, and questionable purchases, to establish policies and procedures requiring that purchasers request and maintain a copy of the detailed sales receipt, invoice, or other independent support showing the description, quantity, and price of individual items purchased. |
Closed – Not Implemented
The contractor disagreed with the recommendation. Current policy requires these items to be kept if received, but does not require cardholders to obtain them. In October 2004, the lab began requiring virtually all purchase card orders to be entered into its Electronic Ordering System (EOS). Purchases are either "catalog" or "non-catalog". Catalog purchases, which are purchases from suppliers that have an agreement with the lab for specific goods and services, are transmitted directly from EOS to the supplier. Consequently, the item information in EOS for such orders must match what is purchased. For non-catalog orders, cardholders must still enter the information into EOS, but the actual purchase is still made by the cardholder in-store, by phone, or over the internet. Therefore, EOS does not provide independent support for non-catalog items purchased. The majority of the lab's purchase card purchases are non-catalog. Thus, we still believe independent support such as a receipt or invoice is necessary for non-catalog purchases.
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| National Nuclear Security Administration | In order to address the issues identified in our review, the Administrator of NNSA should direct Lawrence Livermore National Laboratory's Director, to strengthen internal controls over the purchase card program and reduce the lab's vulnerability to improper, wasteful, and questionable purchases, to require approving officials to review transaction documentation before approving transactions listed on the cardholders' monthly transaction summary reports. This should include determining that there is independent support for the description, quantity, and price of individual items purchased, and that the cardholder obtained and documented any required preapprovals before purchase. |
Closed – Not Implemented
Contractor disagreed with recommendation. The contracting officer stated they believe the approach the contractor is using to require all transactions to be entered into the Electronic Ordering System (EOS) is a more cost-effective approach to documentation of transactions. However, EOS information is entered by the cardholder and thus, for non-catalog orders (the majority of the lab's purchases), does not provide independent support for the item purchased.
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| National Nuclear Security Administration | In order to address the issues identified in our review, the Administrator of NNSA should direct Lawrence Livermore National Laboratory's Director, to strengthen internal controls over the purchase card program and reduce the lab's vulnerability to improper, wasteful, and questionable purchases, to consider modifying the Pcard system so that purchases that are not reconciled timely by the cardholder are charged to a temporary suspense account rather than to each cardholder's default account codes. |
Closed – Implemented
The contracting officer considered the recommendation and determined that the contractor's current process was adequate given certain mitigating controls that the lab has implemented. If a cardholder does not reconcile his transactions in their electronic ordering system (EOS) timely, the transactions will post to the cardholder's default account and EOS will send the cardholder a notification along with instructions to update EOS with the required order detail. In addition, the lab now generates a weekly report of unreconciled transactions that were automatically charged to the default account, and assigned responsibility to an internal review team to follow up on these items. The contracting officer stated that failure on the part of the cardholder to update the system may result in findings by the lab's self-assessment review team during their regular reviews and subsequent corrective action which could include withdrawing the cardholder's purchase authority. Consequently, the contracting officer believed the current process was adequate. These mitigating controls, if effectively implemented, are adequate to address our finding.
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| National Nuclear Security Administration | In order to address the issues identified in our review, the Administrator of NNSA should direct Lawrence Livermore National Laboratory's Director, to strengthen internal controls over the purchase card program and reduce the lab's vulnerability to improper, wasteful, and questionable purchases, to, in conjunction with the implementation of the lab's online training and recertification for cardholders and approving officials, include in such training an emphasis on (1) the lab's policy to obtain preapprovals for all purchases of items listed on the controlled items and services list, and (2) consideration of best value in making and approving purchases. Because the controlled items and services list is frequently updated, the training should include reviewing the items on the current list and any recent changes. |
Closed – Not Implemented
According to the Lab contracting officer, the cardholder training program provides comprehensive training regarding the importance of, and the process by which, approvals are required and obtained for items identified on the controlled items and services list. However, according to the contract officer, the training did not cover consideration of best value. In addition, it was not clear whether training for approving officials covered either of these topics. Consequently, these actions have not sufficiently address our concerns.
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| National Nuclear Security Administration | The Administrator of NNSA should direct the NNSA contracting officer for the lab to review the improper, wasteful, and questionable items we identified to determine whether any of these purchases should be repaid to NNSA. |
Closed – Implemented
The contracting officer provided a response on the results of his review of each of the transactions indicated. Some of the transactions had already been repaid during the course of our fieldwork, and he concluded that no other transactions required repayment. However, the contracting officer stated that the contractor made changes to its controlled items and services list (CISL) to preclude possible exploitation for some classes of items and services that we pointed out in our review. For example, we noted the February 2006 CISL now specifically requires preapproval for air purifiers, backpacks, electronic organizers (such as PDAs), hand lotions, sunscreen, headphones, and Gatorade -- all items that we questioned during our transaction review. None of these items were listed in the February 2003 CISL (the most recent CISL at the time of our review). In addition, written justification requirements and dollar limits were added to the CISL requirements for the purchase of non-protective clothing after we questioned some of their clothing purchases. Requiring preapproval for these and other items added to the CISL should help reduce the risk of improper and wasteful purchases.
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Topics
Credit salesFederal procurementFraudGOCOInternal controlsInventory controlLaboratoriesProcurement recordsProgram abusesProperty and supply managementQuestionable procurement chargesGovernment purchase cards