IG-1
 
INFORMATION:  Report on "Follow-up Inspection of the
		       Double Funding of Security for Special Nuclear
		       Material at the Richland Operations Office"
 
The Secretary
 
BACKGROUND:
On June 3, 1993, the Deputy Assistant Inspector General for
Inspections issued a Letter Report to the Department's Acting Chief
Financial Officer which stated that during Fiscal Year 1993 the
Department had requested and received $60 million, double the
funding needed, for the safeguard and security of special nuclear
material at the Richland Operations Office.  In response to that
Report, the Acting Chief Financial Officer took control of the funds
and placed them into a management reserve account.  A follow-up
inspection was initiated to:
1) identify contributing factors to the double funding;
2) identify corrective action needed to prevent it from reoccurring; and
3) review Departmental managers' response to the double funding
issue.
 
DISCUSSION:
The follow-up inspection identified three factors that contributed
to the Department receiving double funding for the safeguard and
security of nuclear material at the Richland site.  The first
contributing factor was that neither Headquarters Defense Programs
nor Environmental Management officials had determined who would be
responsible for the budgeting of the safeguard and security for
nuclear material prior to finalizing the Fiscal Year 1993 budget.
As a result, Richland officials requested funding from both Defense
Programs and Environmental Management.  The second contributing
factor was the failure of Departmental officials to notify the
Office of the Chief Financial Officer of the double funding issue.
In that regard, the inspection revealed that the budget process did
not require that Departmental officials notify the Office of the
Chief Financial Officer of issues that need to be resolved prior to
the submission of the budget to Congress.
 
The third factor which contributed to the double funding was that
Environmental Management and Defense Programs budget documents did
not separately identify the funding requirement for security of the
special nuclear material at Richland.  For this reason, we believe
it is unlikely that the double funding would have been identified by
Headquarters officials through a review of Environmental Management
and Defense Programs budget documents.
 
The follow-up inspection also found that, as a result of the June
1993 Letter Report, the Acting Chief Financial Officer and the
Assistant Secretary for Environmental Management took corrective
action by withdrawing $30 million from Richland and placing the
funds in a Headquarters reserve account on July 16, 1993.  In
September 1993, these officials authorized the use of the extra $30
million for other environmental projects at the Savannah River and
Richland Operations Offices.  Although corrective action was taken,
Department officials did not notify Congress of the extra $30
million, as we believe was required by the Department's procedures.
 
Finally, based on our review of 1992 budget documents, the
inspection disclosed that Departmental officials may have received
double funding for the safeguard and security of special nuclear
material at the Richland Operations Office during Fiscal Year 1992.
Headquarters Environmental Management and Budget officials agreed
that double funding may have occurred in Fiscal Year 1992.
 
In response to recommendations in the report, Headquarters Office of
the Chief Financial Officer stated that additional guidance had been
incorporated in the Fiscal Year 1997 Budget Call requiring
Departmental officials to identify directly to the Headquarters
Chief Financial Officer any issues which need to be resolved during
budget preparation.  The Headquarters Office of the Chief Financial
Officer also agreed to informally advise staff of the cognizant
Congressional committees about the double funding which occurred in
Fiscal Year 1993.  Finally, the Office of the Chief Financial
Officer agreed to confer with the Office of Environmental Management
and Richland Operations Office officials to determine if a similar
instance of double funding occurred in Fiscal Year 1992.
 
 
                                                           John C. Layton
                                                        Inspector General
 
Attachment
cc:
Deputy Secretary
Associate Deputy Secretary for Field Management
Mr. J. Solit, Office of the Secretary
Manager, Richland Operations Office
Director, Audit  Liaison Division
 
 
 
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                    U.S. DEPARTMENT OF ENERGY
 
                   OFFICE OF INSPECTOR GENERAL
 
 
                    U.S. DEPARTMENT OF ENERGY
                   OFFICE OF INSPECTOR GENERAL
 
 
 
 
 
 
                           REPORT ON
 
           FOLLOW-UP INSPECTION OF THE DOUBLE FUNDING
 
            OF SECURITY FOR SPECIAL NUCLEAR MATERIAL
 
                AT THE RICHLAND OPERATIONS OFFICE
 
 
The Office of Inspector General wants to make the distribution of
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Customer Respone Form attached to the report.
 
 
 
 
 
 
 
 
 
 
 
 
Report No. : DOE/IG-0378                  Office of Inspections
Date Issued: August 29, 1995              Washington, D.C. 20585
 
 
 
FOLLOW-UP INSPECTION OF THE DOUBLE FUNDING OF
              SECURITY FOR SPECIAL NUCLEAR MATERIAL
AT THE RICHLAND OPERATIONS OFFICE
 
TABLE OF CONTENTS
 
 
 
                                                           Page
 
I.   INTRODUCTION AND PURPOSE .............................. 1
II.  SUMMARY RESULTS OF INSPECTION ......................... 1
 
III. BACKGROUND ............................................ 5
IV.  SCOPE AND METHODOLOGY ................................. 6
 
V.   RESULTS OF INSPECTION.................................. 7
 
  A.  CONTRIBUTING FACTORS TO THE FISCAL YEAR 1993
      DOUBLE FUNDING REQUEST
 
  B.  MANAGEMENT'S RESPONSE TO THE FISCAL YEAR 1993
      DOUBLE FUNDING
 
  C.  POSSIBLE DOUBLE FUNDING DURING FISCAL YEAR 1992
 
 
VI.  RECOMMENDATIONS AND MANAGEMENT COMMENTS................26
 
     Attachment
 
       A - Chronology of Selected Actions Related to
           the Fiscal Year 1993 Double Funding of
           Security for Special Nuclear Material
           at the Richland Operations Office
 
 
 
 
          FOLLOW-UP INSPECTION OF THE DOUBLE FUNDING OF
             SECURITY FOR SPECIAL NUCLEAR MATERIAL
               AT THE RICHLAND OPERATIONS OFFICE
 
 
I.  INTRODUCTION AND PURPOSE
 
In a June 3, 1993, Office of Inspections Letter Report, the Office
of Inspector General notified the Department's Acting Chief
Financial Officer that the Department had requested and received $60
million, double the funds needed, for the safeguard and security of
special nuclear material at the Department's Richland Operations
Office in Fiscal Year 1993.  In response to the Letter Report, in a
June 28, 1993, memorandum, the Acting Chief Financial Officer
advised the Office of Inspector General that the extra $30 million
received by the Office of Environmental Management would either be:
1) applied to unanticipated requirements in Fiscal Year 1993;  2)
applied to the anticipated Congressional reduction to the
Department's Fiscal Year 1994 budget request;  or 3) used as an
offset to the Fiscal Year 1995 budget request.
 
The purpose of this follow-up inspection was to review the
circumstances surrounding the Fiscal Year 1993 double funding for
the security of special nuclear material at Richland.  The principal
objectives of this inspection were to: 1) identify contributing
factors to the double funding and corrective actions needed to
prevent the double funding from reoccurring;  and 2) review
Departmental Managers' response to the double funding issue.
 
 
II. SUMMARY RESULTS OF INSPECTION
 
Consistent with its objectives, the follow-up inspection identified
three factors that caused the Department to receive $60 million in
Fiscal Year 1993 -- $30 million more than needed for special nuclear
material security at the Richland Operations Office.  The inspection
also disclosed that in response to our June 1993 Letter Report,
senior Departmental Officials took immediate control of the extra
funds and eventually reallocated them within the Department.
Despite these steps, Departmental officials did not notify Congress
of the extra $30 million as we believe was required by the
Department's procedures.  The inspection did not, however, disclose
evidence that Departmental Officials had violated Federal laws or
regulations in their actions regarding the Fiscal Year 1993 double
funding.  Finally, the inspection disclosed budget documents that
suggest the Department may have also received an extra $30 million
for security of special nuclear material at Richland in Fiscal Year
1992.
 
The following summarizes the key elements of these findings.
 
Three Factors Caused The Fiscal Year 1993 Double Funding
 
The Inspection identified three factors which, we believe caused the
double funding for security of special nuclear material at the
Richland Operations Office.  One of the three factors caused
Richland Officials to request the extra $30 million.  The two other
factors contributed to Departmental officials failure to identify
the double funding request before the budget was submitted to the
Congress and the extra funds were received.
 
	One Factor Contributed To The Double Funding Request
 
The factor which we believe contributed to the Richland Operations
Office officials' request for double funding was that a decision had
not been made as to which Headquarters organization, Defense
Programs or Environmental Management, would be responsible for the
budgeting of security for special nuclear material at Richland until
after the Fiscal Year 1993 budget was prepared.  According to
Richland officials, the uncertainty regarding which organization was
responsible for funding the security of special nuclear material and
their perception that this was an item that had to be funded, caused
them to request $30 million each from Defense Programs and
Environmental Management.
 
	Two Factors Contributed To The Failure To Identify The
	Double Funding Request
 
One of the two factors which we believe contributed to the failure
to identify Richland's double funding request was that the
Department's budget preparation process did not require that the
Office of Chief Financial Officer be notified of issues, such as
this double funding request, that needed to be resolved.  For
example, certain officials of the Hanford Site's management and
operating contractor, the Richland Operations Office, and the
Headquarters Office of Environmental Management were aware of the
double funding requested by Richland.  However, these officials had
not notified the Office of Chief Financial Officer that the double
funding request was an issue that needed to be resolved before the
Department's Fiscal Year 1993 Congressional Budget Request was
submitted to Congress in February 1992.
 
 
Because of ongoing changes in the Department's organizations and
missions, we believe that it would be a useful internal control for
the budget process to include a specific requirement that managers
preparing budget requests identify to the Chief Financial Officer
budget issues that should be resolved before the Department's budget
is finalized.
 
A second factor that we believe contributed to the failure to
identify the double funding request was that, even though security
for special nuclear material had a projected cost of $30 million,
various documents used in the budget process did not separately
identify the funding requirement for security.  Thus, we believe
that even if a detailed comparison between the Defense Programs and
the Environmental Management budget requests had been made, it is
unlikely that the double funding request would have been identified
at Headquarters.
 
Senior Departmental Officials Reallocated the Extra Funds
 
As a result of our June 1993, Letter Report, the Acting Chief
Financial Officer and the Assistant Secretary for Environmental
Management controlled the $30 million by placing it into a reserve
account at Headquarters until an alternate use for the $30 million
was approved.  In September 1993, the Acting Chief Financial Officer
and the Assistant Secretary for Environmental Management authorized
the use of the excess $30 million for other environmental projects
at the Department's Richland and Savannah River Operations Offices.
 
Congress Should Have Been Notified of the Double Funding
 
The inspection found that the Department had procedures that stated
that if appropriated funds are to be used in ways that are different
than originally intended, there may be requirements for notifying
Congress and reprogramming the funds.  Criteria which related to
whether Congressional notification was needed, included: 1) whether
the proposed action is a significant programmatic departure -- that
is, a reallocation of funds between activities;  2) use of funds for
purposes other than those presented to Congress;  or 3) the
adjustment of activities involving areas of known Congressional
special interests, concerns, or sensitivities.
 
The then Acting Chief Financial Officer stated that she did not
believe that these procedures required that the Congress be notified
before the excess $30 million was approved for other uses in
September 1993.  She stated that she had approved the use of the
funds during Fiscal Year 1993 based on information that the proposed
use of the funds was the same as originally intended and represented
to Congress.  She also stated that she was not aware of any "special
interest" that Congress had in the areas where these funds were to
be spent.  However, another Chief Financial Officer Official
responsible for reprogramming actions believed that Congress had a
"special interest" in the funding of security at Hanford and should
have been notified about the double funding.  This official had not
been aware of the double funding until our discussion in June 1994
-- after the Acting Chief Financial Officer had approved the use of
the extra $30 million for other purposes.
 
Possible Double Funding During Fiscal Year 1992
 
In reviewing the actions associated with the excess $30 million for
Fiscal Year 1993, we found documents which indicated that double
funding for the security for special nuclear material at Richland
may have also occurred during Fiscal Year 1992.  Budget officials at
Headquarters agreed that it appeared that double funding may have
also occurred in Fiscal Year 1992.
 
General Management Comments
 
The Offices of the Assistant Secretary for Environmental Management;
the Assistant Secretary for Defense Programs the Chief Financial
Officer at Headquarters;  and the Chief Financial Officer of the
Richland Operations Office generally agreed with the findings and
recommendations in this report.
 
The Headquarters Office of the Chief Financial Officer commented
that the Fiscal Year 1997 Budget Call included guidance for the
Field Chief Financial Officers to identify directly to the
Headquarters Chief Financial Officer "any" issues which need to be
resolved including matters of double funding where funding
responsibility may not yet be resolved.  Consistent with this
comment, the Office of the Assistant Secretary for Defense Programs
agreed to establish procedures to ensure that facility transition
issues are resolved in sufficient time to be incorporated into the
Department's budget requests.  Headquarters Office of the Chief
Financial Officer officials also agreed to informally notify the
cognizant Congressional staff of the double funding for Fiscal Year
1993.  Furthermore, Headquarters Office of Chief Financial Officer
officials agreed to determine if a similar instance of double
funding of security for special nuclear material occurred in Fiscal
Year 1992.
 
 
 
III.  BACKGROUND
 
Facility Transition
 
The Department has a number of facilities, including some at the
Hanford Site, that are no longer required for defense production
purposes.  These surplus facilities are transferred to the Office of
Environmental Management for deactivation, decontamination, and
possible future use.  At the Hanford Site, the Plutonium Uranium
Extraction (PUREX) facility was transferred in Fiscal Year 1991;
and the N-Reactor and Plutonium Finishing Plant were transferred in
Fiscal Year 1992.
 
Budget Formulation
 
Fiscal Year 1993 included the period from October 1, 1992, through
September 30, 1993.  However, preparation of the Department's Fiscal
Year 1993 budget began well before October 1, 1992.  The Department
of Energy's budget preparation instructions for Fiscal Year 1993
were issued to the field on January 18, 1991, in the form of the "FY
1993 'UNIFIED' FIELD BUDGET CALL." Richland submitted their Fiscal
Year 1993 budget requests in April and May 1991.  The five volume
"United States Department of Energy FY 1993 Congressional Budget
Request" was dated January 1992 and was transmitted to Congress
early in February 1992.
 
Allegation Regarding The Funding Of Security For Special Nuclear
Material
 
In May 1993, the Office of Inspector General received an allegation
that the management and operating contractor and the Richland
Operations Office requested, and received, funds in both the
"Defense Environmental Restoration and Waste Management" and
"Material Production and Other Defense Programs" appropriations.
The allegation stated that the amount of the funds in each
appropriation was approximately $25 million.
 
 
Based upon inspection activity by our office, we determined that the
funding included in each appropriation was actually $30 million for
a total of $60 million.  We issued a Letter Report on June 3, 1993,
in order to provide information concerning this double funding as
rapidly as possible to the Department's managers.
 
During this follow-up inspection, we found that the requested $60
million was intended to be used for four items related to the safe
and secure storage for special nuclear materials projected to cost
only $30 million: $132,000 for Program and Environmental Management;
$657,000 for security at the Plutonium-Uranium Extraction
(PUREX)/Uranium Oxide (U03) Plant;  $25,501,000 for security at the
Plutonium Finishing Plant;  and $3,710,000 for security at the 300
Area Fuel Supply facility.  In this report, we use the term
"security for special nuclear material at Richland" to encompass all
four of these uses.  Also, in this report we will refer to the
former Office of Environmental Restoration and Waste Management by
its current name, Environmental Management, that was approved in
January 1994.  Furthermore, we are using the term "double funding"
as the receipt by the Department of funds in two appropriations to
support the same program, activity, or purpose.
 
 
IV.  SCOPE AND METHODOLOGY
 
This follow-up inspection was conducted during the period June 1994
through March 1995.  The scope of this inspection was generally
limited to actions related to the double funding of security for
special nuclear material at the Richland Operations Office in Fiscal
Year 1993.  Although Department of Energy Fiscal Year 1993
operations were funded by a number of appropriations, this
inspection was limited to the two Fiscal Year 1993 appropriations in
which the double funding occurred -- "Materials Production and Other
Defense Programs" and "Defense Environmental Restoration and Waste
Management."
 
As part of the inspection we reviewed applicable Federal laws and
regulations, and applicable policy and procedures.  We reviewed
relevant documents including the Fiscal Year 1993 budget requests
from Richland to Headquarters, and from the Department to Congress.
We also interviewed program and financial management personnel of
DOE Richland Operations Office, DOE Headquarters and the
Westinghouse Hanford Company, the management and operating
contractor for the Hanford Site at Richland.  At DOE Headquarters,
the financial management personnel interviewed included officials
from the Office of the Chief Financial Officer;  the Office of the
Assistant Secretary for Defense Programs;  and the Office of the
Assistant Secretary for Environmental Management.
 
This inspection was conducted in accordance with the Quality
Standards for Inspections issued by the President's Council on
Integrity and Efficiency.
 
 
V. RESULTS OF INSPECTION
 
As a result of this follow-up inspection, we identified one factor
that we believe contributed to the request for double funding in the
two Richland budget requests -- at the time the Richland budget was
being prepared a decision had not been made on which Headquarters
organization would be responsible for the budgeting of security for
the special nuclear material.  There were also two factors that we
believe contributed to the failure to identify the double funding
contained in the budget requests.  One factor was that the budget
preparation process did not include a specific mechanism to ensure
that issues, such as the failure to decide on the responsibility for
the budgeting of security and the subsequent double funding in the
Richland budget request, were identified so that they could be
resolved before the Department's Congressional Budget Request was
finalized.  The second factor was that various budget documents used
in the budget process did not separately identify the funding
requirement for security and this would have hindered the
identification of the duplicate request.  We also found that in
response to our Letter Report, the Acting Chief Financial Officer
directed that the extra $30 million be controlled to ensure that the
funds were used for appropriate purposes.  In this regard, we found
that the Department had procedures which, we believe, suggest
Congress should have been notified that the Department received an
extra $30 million in its Fiscal Year 1993 budget.  We did not find
evidence, however, that Federal laws or regulations had been
violated due to the actions of Departmental officials regarding the
double funding.  Finally, we found documents indicated that the
Department may have also received an extra $30 million for security
of special nuclear material at Richland in Fiscal Year 1992.
 
The detailed results of our inspection are presented in the
following sections: (A) Contributing Factors to the Fiscal Year 1993
Double Funding Request;  (B) Management's Response to the Fiscal
Year 1993 Double Funding;  and (C) Possible Double Funding During
Fiscal Year 1992.
 
 
 
A.  CONTRIBUTING FACTORS TO THE FISCAL YEAR 1993 DOUBLE FUNDING
    REQUEST
 
The inspection identified one factor that we believe contributed to
the Richland submission of the double funding budget request;  and
two factors that we believe contributed to the failure of the
Department's Office of Chief Financial Officer to identify the
double budget request before the Department's Fiscal Year 1993
budget request was finalized.
 
Factor Contributing to the Richland Double Funding Request
 
A factor that we believe contributed to the Richland request for
double funding in their budget requests was that at the time the
Richland Fiscal Year 1993 budget was being prepared a decision had
not been made on which organization, Defense Programs or
Environmental Management, would be responsible for budgeting and
then funding of security for the special nuclear material.  Several
Headquarters, Richland, and contractor financial management and
program officials stated that they believed that the Office of
Defense Programs would ultimately have responsibility to fund
security of special nuclear material after the facilities
transitioned to Environmental Management.  However, the earliest
approved decision document that we found on the subject of this
funding responsibility was a joint memorandum from the Offices of
Defense Program and Environmental Management dated October 28, 1991.
In order for Richland to correctly budget for the security of
special nuclear material, we believe that this funding
responsibility should have been decided before the Richland budgets
were submitted to Headquarters.  We noted that the joint memorandum
was dated October 1991, some five months after Richland had
submitted its Fiscal Year 1993 budget requests to Headquarters in
April and May 1991.  And the overall joint plan on the transfer of
surplus Defense Programs facilities to Environmental Management was
not completed until November 1992, a month after Fiscal Year 1993
had already started.
 
In preparing the Fiscal Year 1993 budget, contractor and Richland
officials perceived the security for the special nuclear material as
an item that had to be funded.  For example, one Richland official
commented "...  the special nuclear material could not be put in the
parking lot ...." Several other officials made statements that
characterized funding of security as a "must fund item." In response
to a draft of this report, the Richland Chief Financial Officer
stated this more articulately as "Known national security policy
dictates the nation's weapons grade nuclear material be safeguarded
from possible diversions by terrorists or conspirators." Thus,
because of the lack of a decision on funding responsibility at the
time the Richland budget requests were to be submitted to
Headquarters, Richland requested the required $30 million from both
Defense Programs and Environmental Management.  During this
follow-up inspection, several management and operating contractor
and Richland officials stated they were aware that the $30 million
required for security was included in both the Fiscal Year 1993
budget request submitted to Defense Programs and the budget request
submitted to Environmental Management.  Most of these officials,
however, stated that they did not expect the double funding to be
received.  The officials stated that they expected the issue of
responsibility to fund the security for the special nuclear material
to be resolved at Headquarters, before the Department's budget was
finalized.
 
 
Factors That Contributed To The Failure To Identify The Double
Funding Request
 
We identified two factors that we believe contributed to the failure
at Headquarters to identify the double funding in Richland's Fiscal
Year 1993 budget requests.  One factor was that the budget
preparation process did not include a specific mechanism to ensure
that issues such as double funding were identified so that they
could be resolved before the Department's Congressional Budget
Request was finalized.  In this regard, we reviewed the Fiscal Year
1993 budget preparation instructions issued by the Office of Chief
Financial Officer during the period December 1990 through April
1991.  These instructions did not include a specific requirement
that field officials identify to Headquarters program officials any
sensitive or critical issues that needed to be resolved before the
Department's budget request was finalized.  For example, we believe
that the budget preparation instructions could have provided that
these type issues should be identified in the budget transmittal
documents from the field to Headquarters.  Likewise, the budget
preparation instructions we reviewed did not specifically address
how known issues would remain visible until they were satisfactorily
resolved.  For example, we believe that any issue identified should
have been tracked by the Headquarters Office of Chief Financial
Officer.
 
We believe that the need for a specific requirement to identify and
maintain visibility of issues that need resolution before the
Department's budget is finalized is supported by the fact that we
did not find anyone in the Headquarters Office of Chief Financial
Officer who was aware of the double funding issue until May 1993.
They learned of it, at that time, as a result of our previous
inspection.  The branch chief who was responsible for the Defense
Programs portion of the Department's budget stated that he did not
remember a specific issue on the $30 million for security of special
nuclear material at Richland when the Fiscal Year 1993 budget
request was being developed.  The branch chief responsible for the
Environmental Management portion of the Department's budget also
stated that he was not aware of the double funding in the Fiscal
Year 1993 budget request.  Both branch chiefs stated that they
became aware of the double funding issue near the time that our
Letter Report was issued in June 1993.  And the then Acting Chief
Financial Officer stated that she did not remember hearing of this
issue prior to our June 1993 Letter Report.
 
We did find that certain officials of the Hanford Site's management
and operating contractor, the Richland Operations Office, and the
Headquarters Office of Environmental Management were aware that
funds had been requested by Richland in both of their budget
submissions.  Following is a discussion of the pertinent information
that these officials provided us.
 
	Management and Operating Contractor
 
At the management and operating contractor, the official responsible
for planning the facility transition and preparing both budget
requests stated that he knew that the $30 million was requested in
both budget requests.  This official stated that the funds were
requested in both budget requests because the contractor had
received written direction from Richland to do so in a March 1991
letter signed by the then Department's Operations Division Director
at Richland.  The management and operating contractor official also
stated that he had expected the issue to be resolved at higher
levels.
 
 
	Richland
 
At Richland, several officials in the Budget Division and the
Operations Division, which was responsible for the facility
transition program, stated that they were aware that the two budget
submissions from the contractor to Richland and from Richland to
Headquarters contained the double funding request.  The then
Richland Operations Division Director acknowledged that he was aware
that the funds were requested twice -- once from Defense Programs
and once from Environmental Management.  Richland officials also
stated that they had expected resolution of the funding issue at
Headquarters.  In commenting on a draft of this report, the Richland
Chief Financial Officer stated that since the Department's Fiscal
Year 1993 Congressional Budget Request was finalized at
Headquarters, Richland officials did not realize that a double
funding issue existed until after DOE published its Fiscal Year 1993
financial plan.
 
 
	Headquarters Office of Environmental Management
 
At the Headquarters Office of Environmental Management, a program
management official stated that in May or June 1991 he had been
informed that the budget request for Environmental Management
contained $30 million for security for special nuclear material at
Richland.  He stated that this information was provided to him
during a meeting held at Richland to review Richland's Fiscal Year
1993-1997 Activity Data Sheets.  The official stated that at the
time he agreed that the funding requirement should be included in
the Environmental Management budget request, since Defense Programs
had not committed to Fiscal Year 1993 funding of security for
special nuclear material at Richland.  The official stated that a
key factor was that the security had to be funded.  The official
stated that upon his return to Headquarters, he did not take further
action to make others aware of the potential issue because he was
preoccupied with much bigger problems at Richland.  As an example,
he cited funding for the Vitrification Plant that he characterized
as a problem of over $200 million.
 
We did not find any evidence that either the Richland or
Headquarters officials had identified the issue to the Acting Chief
Financial Officer.  We also did not find evidence of any official in
the Headquarters Office of Defense Programs who were aware of the
double funding request in the Fiscal Year 1993 Congressional Budget
Request.  As demonstrated by the double funding request in the
Department's Fiscal Year 1993 Congressional Budget Request, no
officials had taken effective action to ensure that the issue was
resolved before the Department's Fiscal Year 1993 Congressional
Budget Request was finalized and submitted to Congress in February
1992.  In order to ensure that future issues, such as double
funding, are resolved before the Department's budget is finalized,
we believe that it would be a useful internal control in the budget
process to provide a specific requirement that managers preparing
budget requests identify to the Chief Financial Officer issues that
should be resolved before the Department's budget is finalized.  We
believe that this type of requirement would facilitate resolution of
budget issues in a timely manner.  The need for this type of
internal control may be especially applicable at this time given the
ongoing changes in the Department's organizations and missions.  We
believe that in an environment of changing organizations and
missions it is not unlikely that officials submitting budget
requests will have issues affecting their budget that require
resolution at a level above their own organization.  A second factor
that we believe contributed to the failure to identify the double
funding in the budget request was that various budget documents used
in the Department's budget process did not separately identify the
funding requirement for security and thus hindered the
identification of the double funding.  Specifically, even though the
security for special nuclear material at Richland had a projected
cost during Fiscal Year 1993 of $30 million, it was not separately
discussed or identified in the Department's budget or in the
Activity Data Sheets supporting the budget request.  We reviewed the
Activity Data Sheets prepared by Richland to support their Fiscal
Year 1993 budget request for Environmental Restoration and Waste
Management.  And we also reviewed the applicable portion of the
Department's Fiscal Year 1993 Congressional Budget Request.  The
results of our review are discussed below.
 
	Activity Data Sheets
 
The $30 million total funding requested for security for the special
nuclear material was not separately described, and the funding
request was not separately identified in any of the four Activity
Data Sheets that supported Environmental Management's Fiscal Year
1993 budget request.  As previously noted in the "Background"
section of this report, the term "security for special nuclear
material at Richland" encompassed four uses.  Each of the four uses
was included on a different Activity Data Sheet.  We noted that none
of the four Activity Data Sheets used by Richland to request funding
for the security for special nuclear material in the Defense
Environmental Restoration and Waste Management portion of their
Fiscal Year 1993 budget request separately stated the funding being
requested for security.  A contractor official stated that the
funding requirement for security was included in the total funding
requirement on the Activity Data Sheets.  For example, Activity Data
Sheet 435-KE, that pertained to the Plutonium Finishing Plant,
requested $88.7 million for operating expenses during Fiscal Year
1993.  The portion of the $30 million security funding requirement
that was for the Plutonium Finishing Plant, $22.4 million, was
included in the $88.7 million.  The contractor official provided the
information on the $22.4 million from supplementary backup
information he maintained.
 
There were also two other less significant reasons for difficulty in
identifying the security related funding in the Activity Data
Sheets: 1) the large number of Richland Activity Data Sheets, and 2)
the administrative process used to submit and review the Richland
budget requests.  First, we were provided information that the
Richland Fiscal Year 1993 environmental program eventually consisted
of some 164 Activity Data Sheets, including the four for security,
with a net total funding of $844.7 million.  In our view, this large
number of Activity Data Sheets further decreased the likelihood that
the double funding request would have been identified.  Secondly,
although the same contractor and Richland officials prepared or
reviewed both Richland budget requests, the Richland budget requests
were submitted to two separate Headquarters offices -- the Office of
the Assistant Secretary for Defense Programs and the Office of the
Assistant Secretary for Environmental Management.  Within the Office
of the Chief Financial Officer, the two Richland budget requests
were reviewed by separate branches that were widely separated
geographically -- one was in Germantown, Maryland while the other
was in the Forrestal building.
 
In commenting on a draft of this report, the Richland Chief
Financial Officer stated that if a detailed comparison between the
field and Headquarters budget requests had been performed, in their
opinion it was likely that the double funding request could have
been identified.
 
	Fiscal Year 1993 Congressional Budget Request
 
We also noted that neither of the two applicable portions of the
Department's Fiscal Year 1993 Congressional Budget Request, used to
support the President's Budget, separately stated the funding being
requested for security of special nuclear material at Richland.
Officials from the Offices of Defense Programs and Environmental
Management stated that the figure "$30 million" could not be found
in either the portion of the Fiscal Year 1993 Congressional Budget
Request for "Materials Production and Other Defense Programs" or the
portion for "Defense Environmental Restoration and Waste
Management." An official from the Office of Defense Programs stated
that the Fiscal Year 1993 funding request of $30 million for
"Materials Production and Other Defense Programs" was included as a
part of two activities, $5 million for Richland and $25 million as
part of a Headquarters activity totalling $30.35 million.  And
another official from the Office of Environmental Management stated
that the Fiscal Year 1993 funding requirement of $30 million for
"Defense Environmental Restoration and Waste Management" was
included in the total operating expense funding of $2.19 billion for
the activity entitled "Waste Management."
 
There were also two other less significant reasons for difficulty in
identifying the security related funding in the Fiscal Year 1993
Congressional Budget Request: 1) the information in the
Congressional Budget Request was widely separated, and 2) the
narrative description in the Environmental Management portion of the
Fiscal Year 1993 Congressional Budget Request stated that the
program activities concerned "waste," which we believe did not
accurately characterize the special nuclear material at Richland.
First, we noted that what limited information there was in the
Fiscal Year 1993 Congressional Budget Request on the two funding
requests was submitted in two widely separated portions of the
Department's Fiscal Year 1993 Congressional Budget Request.  The
"Materials Production and Other Defense Programs" request was on
page 254 of Volume 1, a 423 page document while that for "Defense
Environmental Restoration and Waste Management" was on page 268 of
Volume 5, itself a 497 page document.  And, secondly, the two
narrative descriptions of "Waste Management" activity, found on
pages 170 and 241 of the Fiscal Year 1993 Congressional Budget
Request, did not state that the requested funding was for security
of special nuclear material at Richland, or any other site.  Rather,
both narratives stated that the program activities included the
storage of radioactive "waste."
 
Because the funding for security was not separately identified in
the Fiscal Year 1993 Congressional Budget Request documents, even if
a detailed comparison between the Defense Programs and the
Environmental Management budget requests had been made, in our
opinion it was unlikely that the double funding request would have
been identified at Headquarters.
 
 
B.  MANAGEMENT'S RESPONSE TO THE FISCAL YEAR 1993 DOUBLE FUNDING
 
We found that Richland and, at Headquarters, the Offices of
Environmental Management and Chief Financial Officer became aware of
the double funding at different times and took certain actions in
response to the double funding.  These actions are described below.
 
Richland
 
At the beginning of Fiscal Year 1993, which began October 1, 1992,
the Department's Office of the Chief Financial Officer provided
funding to the Manager, Richland Operations Office.  The funds for
both the "Materials Production and Other Defense Programs" and
"Defense Environmental Restoration and Waste Management"
appropriations each included $30 million in funding for the security
of special nuclear material at Richland.  A Richland budget analyst
stated that in reviewing the Fiscal Year 1993 funding and work
authorization, in late October 1992, he recognized that the $30
million had been received in both appropriations.  Thus a total of
$60 million had been received, even though only $30 million was
required.  Recognizing the double funding, the budget analyst stated
that only the $30 million from Defense Programs was provided to the
contractor to fund the security for the special nuclear material.
He stated that the $30 million in the environmental program that was
requested for security, but was not needed for security, was
retained at Richland and was not provided to the contractor.
 
We found no evidence that Richland officials notified Headquarters
officials of the double funding at that time.  A Richland program
and budget official told us that they did not notify Headquarters
officials of the extra $30 million because Richland was aware that
Headquarters Environmental Management planned to direct that a
management reserve of approximately five percent of the
environmental funding be established at each Field Office, including
Richland.  The official stated that the extra $30 million was
planned to be used to meet the management reserve requirement.  The
memorandum from the Headquarters Office of Environmental Management
requesting that a management reserve be established was dated
November 4, 1992.
 
Headquarters Office of Environmental Management
 
At the Headquarters Office of Environmental Management, officials
stated that they learned of the double funding in December 1992.
Environmental Management's recognition of the double funding was a
result of their actions to establish a management reserve of five
percent of their environmental funding at each Field Office,
including Richland.  This directive was provided to the Field
Offices through a memorandum dated November 4, 1992.  Richland was
requested to establish a reserve no later than January 1993.
 
In response to this directive, Richland identified the $30 million
to Headquarters Environmental Management officials for the
management reserve in a memorandum dated December 10, 1992.  On
December 16, 1992, Office of Environmental Management officials
agreed to place the $30 million in a management reserve at Richland.
A program analyst in the Headquarters Office of Environmental
Management stated that he queried Richland budget officials about
the workscope that was associated with the $30 million.  The program
analyst stated that Richland budget officials then advised him that
no workscope would be given up since the funds for the security had
also been received from Defense Programs.  We found no evidence that
the Headquarters Office of Chief Financial Officer was notified of
the double funding at this time.
 
 
Headquarters Office of Chief Financial Officer
 
At the Headquarters Office of Chief Financial Officer, officials
first learned of the double funding in May 1993, during our
inspection that resulted in our Letter Report of June 3, 1993.  In a
memorandum dated June 28, 1993, the Headquarters Office of Chief
Financial Officer's Office of Budget advised the Office of
Environmental Management's Financial Management Officer that the $30
million targeted for security of special nuclear material should be
pulled back to Headquarters from Richland.  And the memorandum
stated that "We would like to ensure that these extra resources were
not expended without prior approval from [the Assistant Secretary
for Environmental Management] and [the Acting Chief Financial
Officer]." In a memorandum dated July 15, 1993, Headquarters
Environmental Management officials requested that the Office of the
Chief Financial Officer withdraw the $30 million from Richland.  On
an Advice of Allotment dated July 16, 1993, the Headquarters Office
of the Chief Financial Officer withdrew the $30 million from
Richland and the $30 million was subsequently placed into a
Headquarters reserve account until an alternate use for the $30
million was approved.
 
In a separate memorandum dated June 28, 1993, the Office of the
Chief Financial Officer advised the Office of Inspector General that
the $30 million would either be applied to unanticipated
requirements in Fiscal Year 1993;  applied to the anticipated
Congressional reduction to the Department's Fiscal Year 1994 budget
request;  or used as an offset to the Fiscal Year 1995 OMB request.
In September 1993 the Acting Chief Financial Officer and the
Assistant Secretary for Environmental Management authorized the use
of the excess $30 million for other environmental projects -- $27.4
million at Richland and $2.6 million at Savannah River.  The
approval was processed as two separate actions.
 
First, in a memorandum dated September 29, 1993, the Assistant
Secretary notified the Richland Manager that they had approved the
use of $8.4 million for work related to the Plutonium Finishing
Plant.  Second, in a memorandum dated September 30, 1993, they
approved the use of the additional $21.6 million, $19.0 million for
Richland and $2.6 million for Savannah River.  At Richland, $17
million was to be used to fund tasks related to tank safety issues
while another $2 million was to be used for infrastructure upgrades
related to safety.  At Savannah River the $2.6 million was to be
used to accelerate work in support of Defense Waste Processing
Facilities Radioactive Start-Up.  As an action separate from the
approval memorandum discussed above, the funds were provided to
Richland and Savannah River by the Office of Chief Financial Officer
as a part of an Advice of Allotment to each Operations Office dated
September 28, 1993.
 
	Requirements To Notify Congress
 
If appropriated funds are to be used in ways that are different than
originally intended, there may be requirements for notifying
Congress and reprogramming the funds.  There were a number of
criteria that relate to the decision whether Congress should be
notified.  DOE Order 5160.1B, "REPROGRAMMING, RESTRUCTURING, AND
APPROPRIATION TRANSFER PROCEDURES," established the applicable major
policies, criteria, and procedures applicable to making a
determination as to whether Congressional notification, either
formal or less formal, was appropriate before alternative uses of
the $30 million was approved.  For the purposes of reviewing the use
of the excess $30 million, restructuring and appropriation transfer
did not apply;  only "reprogramming" was applicable.
 
The Order defined "reprogramming" as "The utilization of funds in an
appropriation account for purposes other than those contemplated by
the Congress during appropriation action." The Order also provides a
description of when a reprogramming action which would require
notification of Congress occurred.  This is summarized in Figure 1.
 
 
                     FIGURE 1
               Reprogramming Actions
 
((((((((((((((((((((((((((((((((((((((((((((((((((
(                                                (
( "Reprogramming actions result where there is:  (
(                                                (
((1) Any departure from a program baseline as    (
(    described in the Departmental base table and(
(    amplified in Congressional reports (House,  (
(    Senate, or Conference) accompanying         (
(    authorization and appropriation acts;       (
(                                                (
(    or                                          (
(                                                (
((2) To the extent not covered by [(1)] above,   (
(    any significant programmatic departure      (
(    from that described in Congressional        (
(    budget narrative justifications (as         (
(    approved by OMB and Congress) and           (
(    Congressional testimony ....                (
(                                                (
(    These departures may be identified as:      (
(                                                (
(   (a) The reallocation of funds from one       (
(       activity, program, function, etc., to    (
(       another within an appropriation.  Most   (
(       of these actions normally result in      (
(       base table changes; however, there may   (
(       be changes that qualify as reprogramming (
(       actions but do not result in base table  (
(       changes.                                 (
(                                                (
(  (b) The use of funds for purposes other than  (
(      those presented to and approved by        (
(      Congress, such as a new start within a    (
(      generic line or a significant change in   (
(      scope.                                    (
(                                                (
(  (c) The adjustment of activities involving    (
(      areas of known Congressional special      (
(      interests, concerns, or sensitivities."   (
((((((((((((((((((((((((((((((((((((((((((((((((((
                   Source: DOE Order 5160.1B
 
 
The Order also provides information regarding the adjustment of
activities involving areas of known Congressional special interest,
concerns, or sensitivities, which was referred to as item (2)(c) in
Figure 1. This information is summarized in Figure 2.
 
                     FIGURE 2
 
  Representative Examples of Factors and Events
     To Be Considered In Determining Whether
    A Particular Event or Occurrence Warrants
     Congressional Notification As An Area Of
     Known Congressional Interest Or Concern
((((((((((((((((((((((((((((((((((((((((((((((((((
(                                                (
(  (1) Politically sensitive issues.             (
(  (2) Changes in operations that affect         (
(      employment levels, program goals, or      (
(      funding requirements.                     (
(  (3) Slippages in production schedules.        (
(  (4) Potential impacts on national security.   (
(  (5) Emergencies.                              (
(  (6) Congressionally directed actions.         (
(  (7) Changes in obligational control levels as (
(      reflected in annual funding programs.     (
(  (8) Changes from program, project, or contract(
(      scopes contemplated by Congress during    (
(      appropriation action.                     (
(  (9) Large dollar divergences within the       (
(      baseline.                                 (
((((((((((((((((((((((((((((((((((((((((((((((((((
                      Source: DOE Order 5160.1B
 
The Order identified two methods of notifying Congress of a
reprogramming action: (1) Congressional notification through the
submission of formal reprogramming proposals;  and (2) Congressional
notification of the Department's intentions using less formal
procedures.
 
1. Congressional notification through the submission of formal
reprogramming proposals.  The Order stated "...  Congress requires
the Department to ensure that the appropriate committees are
promptly and fully notified whenever a necessary change to the
approved program baseline is required." [The concept of "program
baseline" contained in the Order is included in Figure 1.] The Order
stated that "Accordingly, notifications of such changes [to the
approved program baseline] are provided to Congress through
submission of formal reprogramming ...  proposals."
 
In this case, the Order stated that the execution of a reprogramming
proposal shall be initiated only after appropriate Congressional
responses had been received by the Chief Financial Officer.
 
2. Congressional notification using less formal procedures.
The Order also authorized Congressional notification using less
formal procedures.  The order stated that "As a potential
reprogramming proposal is reviewed, it may be determined that such
action does not constitute a reprogramming as defined ...  [in the
Order], and therefore does not require formal reprogramming
procedures.  However, in keeping with the full disclosure policy
described [earlier in the order] ..., it may be necessary to notify
Congress of the Department's intention through less formal
procedures.  In these cases, the CFO's [Chief Financial Officer's]
informal discussions with the appropriate committee or a Secretarial
Officer's correspondence with the appropriate committee will serve
as sufficient notification of the impending action."
 
In this case, the Order did not require the Department to wait for
Congressional approval before the action to use the funds could be
implemented.
 
The Department approved the alternate uses of the $30 million
without notifying Congress, either through the submission of a
formal reprogramming proposal or through less formal procedures.  We
interviewed financial management personnel in the Offices of
Environmental Management and the Chief Financial Officer to ask
their views as to why Congressional notification, either formal or
less formal, had not been made.
 
	Office of Environmental Management
 
An official of the Office of Environmental Management stated that in
his opinion, a reprogramming or notification was not required.  He
stated that Defense Environmental Restoration and Waste Management
was a lump-sum appropriation.  The official also noted that the
budget did not specifically identify the use of the funds as
security for special nuclear material;  the alternate use did not
result in a change to the base table;  and the funds had been
justified as operating funds and they were used for operating
expense purposes.  Furthermore, he stated that because of the lead
time for budget submission a good deal of flexibility was required
for budget execution since environmental work is very dynamic.
 
 
	Office of Chief Financial Officer
 
The then Acting Chief Financial Officer stated that she did not
believe a reprogramming was required before the excess $30 million
was approved for other uses in September 1993 because she had
approved the use of the funds based on information provided to her
that: (1) the proposed use was the same, the alternative uses were
also operating expense type items;  (2) the Department received a
broad generic description in the appropriation which did not
restrict the use of the funds;  and (3) she believed that the use of
the funds was within the parameters presented to Congress.  The then
Acting Chief Financial Officer also stated that she had not been
aware of any particular Congressional interest in this matter.  And
she stated that notification of Congress of the extra $30 million
was a matter of judgement and that in her opinion a reprogramming or
notification was not required.
 
We also discussed the issue of the need for Congressional
notification of the double funding with the Headquarters Office of
Chief Financial Officer official responsible for reprogramming
actions.  She stated that she was not aware of the double funding
issue or that the $30 million had been approved for alternative uses
until she was interviewed by us in June 1994.  She stated that she
believed the Congress should have been notified of the double
funding and the alternative uses of the $30 million because she was
aware that Congress had expressed interest in the Hanford facilities
at Richland.  She cited Senate Report 102-344, dated July 27, 1992,
in which the Committee on Appropriations had addressed the topic of
the cost of maintaining Hanford reservation facilities.
 
The applicable portion of Senate Report 102-344 contained an
introduction describing the transfer of Hanford facilities from
defense programs to environmental management.  The report stated
"The Committee is concerned, however, with the high cost of
continuing maintenance of these former defense programs facilities.
Inasmuch as the Department has indicated that these facilities are
no longer required, the Department should proceed expeditiously with
decommissioning and decontamination activities.  The Committee also
directs the Department to submit, prior to the hearings on the
fiscal year 1994 budget, a plan and schedule for the decommissioning
and decontamination of PUREX, N-reactor, and PFP [Plutonium
Finishing Plant]."
 
We believe that the Department's Chief Financial Officer should
reconsider notifying Congress that the Department received an extra
$30 million for the security of special nuclear material at Hanford.
We believe that Congressional notification would have been
appropriate for three reasons.  First, we believe that the statement
in the Committee on Appropriations Report indicated "Congressional
interest" in the transfer of the Hanford facilities, especially the
costs associated with maintaining the facilities.  Second, we
believe that the fact that the $30 million had been included in two
appropriations introduced an additional element of sensitivity to
the issue.  We noted that adjustment of activities involving areas
of known Congressional special interest concern or sensitivities
were specifically identified in the DOE Order as situations where
Congress should be notified.  And third, the DOE Order stated "That
compliance with the requirements associated with reprogramming is
largely a matter of maintaining 'full faith and credit' with
Congressional committees." In our view, Congressional notification
in this case would help to maintain "full faith and credit" with
Congressional committees.
 
In response to a draft of this report, an official from the Office
of the Chief Financial Officer stated that:
 
"This Office has reviewed the information pertaining to the FY 1993
double funding and does not agree that the action taken allowing the
Environmental Management program to use the $30 million from the
double funding issue constituted a reprogramming.  However we do
agree that we have an obligation to maintain 'full faith and credit'
with our Congressional committees, and on that basis, should err on
the side of at least informal notification when any matter of
potential committee interest arises.  The Director of the Office of
Budget will informally advise staff of the cognizant Congressional
Committees of this instance of double budgeting [funding] ...."
 
 
	Other Considerations
 
We considered whether the double funding request to Congress or the
subsequent approval of the alternative uses may have been a
violation of Federal laws and regulations.  We reviewed the statutes
and regulations relating to the management and control of
appropriated funds, such as the requirements of the Anti-Deficiency
Act.  In our review of Departmental officials' actions which
resulted in the receipt, subsequent control and reallocation of the
extra $30 million for security at Richland, we did not find evidence
that Federal statutes or regulations had been violated.  Despite the
fact that we did not find evidence that Federal statutes or
regulations had been violated, this report does identify areas where
we believe the Department of Energy can strengthen procedures to
provide assurance that double funding does not occur in the future.
 
 
C.  POSSIBLE DOUBLE FUNDING DURING FISCAL YEAR 1992
 
In reviewing the actions associated with the excess $30 million for
Fiscal Year 1993, we found documents which indicated that double
funding for the security of special nuclear material at Richland may
have also occurred during Fiscal Year 1992.  Due to the loss of
budget background records by the Headquarters Office of
Environmental Management, officials from Headquarters Office of
Environmental Management and Office of Chief Financial Officer
stated they were unable to confirm whether double funding occurred
in Fiscal Year 1992.  Environmental Management budget officials at
Headquarters agreed that it appeared that double funding had also
occurred in Fiscal Year 1992.
 
 
	Indication of Fiscal Year 1992 Double Funding
 
The primary document that suggested that double funding may have
also occurred in Fiscal Year 1992 was Activity Data Sheet 428-KE-O,
which was approved in March 1991 after the Fiscal Year 1992
Congressional Budget Request dated February 1991 was prepared.  The
Activity Data Sheet recorded a negative $30 million for Defense
Environmental Restoration and Waste Management activities Fiscal
Year 1992 operating funds for Richland.  The reason stated on the
Activity Data Sheet was to "Document funding guidance from Defense
Programs in FY92 to support residual material management
activities." A contractor official stated that the management of
residual materials essentially meant the same as the security for
special nuclear material.
 
The activity scope on Activity Data Sheet 428-KE-O stated:
 
"DOE-HQ Defense Programs (DP) and Environmental Management (EM) are
currently in the process of negotiating the transfer of the Hanford
Nuclear Material Production (NMP) facilities to EM.  The transfer of
the facilities we assumed to occur beginning with PUREX in the
fourth quarter of FY 1991;  the remaining facilities at the
beginning of FY 1992.  Based on funding guidance from DOE-HQ, DP
will provide funding in FY 1992 to help support the costs associated
with the 'management of residual materials'.  Current guidance is
that DP's allocation for this activity in FY 1992 is $30M [million].
The allocation beyond FY 1992 has not been determined.  Once decided
this ADS will be modified accordingly.  This activity data sheet
(ADS) was prepared to document this assumption.  In effect, this ADS
reduces the total funding requirements from Environmental Management
in FY 1992 and beyond, as appropriate."
 
The portion of the Activity Data Sheet labeled "FIVE-YEAR PROJECT
PLAN" stated "Funding from Defense Programs is assumed to be in FY
1992 only.  Guidance relating to FY 1993 and beyond has not been
provided."
 
Because the Activity Data Sheet reduced the Fiscal Year 1992 funding
for security at Richland in March 1991, after the Fiscal Year 1992
Congressional Budget Request had been submitted in February 1991, we
believe that the Department's Fiscal Year 1992 Congressional Budget
Request for environmental purposes may have been prepared to include
$30 million to fund the security of special nuclear material at
Richland.
 
 
	Review at the Headquarters Office of Environmental
	Management
 
We requested that officials from the Headquarters Office of
Environmental Management determine whether they requested and
received $30 million for security for special nuclear material at
Richland in the Fiscal Year 1992 Congressional Budget Request and
the Fiscal Year 1992 appropriation, respectively.  Office of
Environmental Management officials at Headquarters agreed that it
appeared the funding was included in the budget, but they were
unable to definitively confirm whether or not the $30 million for
security at Richland was included in the Fiscal Year 1992 budget.
 
o One official stated that Activity Data Sheet 428-KE having been
prepared on March 18, 1991, after the Fiscal Year 1992 budget was
submitted to Congress does indicate that the same problem of double
funding existed in Fiscal Year 1992.
 
o Another official responsible for financial management also stated
that Activity Data Sheet 428-KE would suggest that the funds were
included in the Fiscal Year 1992 Congressional Budget Request.  This
official also stated that the only reason a negative Activity Data
Sheet would have been required was if the $30 million had been
included in the Fiscal Year 1992 budget request.
 
The Office of Environmental Management was unable to definitely
confirm the "Waste Management" activity in the Fiscal Year 1992
Congressional Budget Request because all of the Activity Data Sheets
were not available in their files.  One summary report for the Waste
Management activity identified that approximately 300 Activity Data
Sheets supported the Fiscal Year 1992 Congressional Budget Request
for Waste Management.  However, the responsible official could only
provide 183 Activity Data Sheets from their records.  And the 183
Activity Data Sheets that were provided were not complete since they
did not contain the narrative portion of the Activity Data Sheets.
 
Another official from the Office of Environmental Management stated
that the detailed backup for the Fiscal Year 1992 Congressional
Budget Request that was maintained by Environmental Management's
Budget Office was lost during the office's move.  Due to the loss of
the budget files for the preparation of the Fiscal Year 1992
Congressional Budget Request, we did not review the possibility of
double funding during Fiscal Year 1992 further.
 
Regardless, we believe that Departmental Managers should determine
if double funding of security also occurred in Fiscal Year 1992, and
if so consider whether to notify Congress.  Other Headquarters
officials from the Offices of Environmental Management, Defense
Programs, and Chief Financial Officer stated that during Fiscal Year
1992 the security was funded by Defense Programs.
 
Regarding the loss of the budget background records, we noted that
according to Environmental Management's Records Inventory and
Disposition Schedule "Budget Background Records" were not to be
destroyed until six years after the close of the fiscal year covered
by the budget.  The Records Inventory and Disposition Schedule
stated that "Budget Background Records" files included working
papers, cost statements, and rough data accumulated in the
preparation of annual budget estimates.  Under this schedule, the
Fiscal Year 1992 records should still be available.
 
We also noted that the Department's records management function was
established pursuant to law, specifically 44 U.S.C.  Chapter 31,
required the head of each Federal agency to make and preserve
records containing adequate and proper documentation of the
decisions and essential transactions of the agency.  The same
Chapter required the head of the agency to establish safeguards
against the removal or loss of records determined to be necessary.
These records management provisions are enforced by various
available sanctions.  For example, 18 U.S.C.   2071 provides
criminal sanctions for willful and unlawful removal or destruction
of documents.  A Departmental records management official also
stated that administrative actions, such as counselling or
consideration in performance evaluations, may also apply where the
loss does not meet the requirements of the criminal statute.
 
We believe that it would be appropriate for Departmental managers to
further review the circumstances surrounding the loss of the "Budget
Background Records," specifically the Activity Data Sheets used for
planning for the Department's Fiscal Year 1992 Congressional Budget
Request, and consider if disciplinary action is appropriate.
 
 
VI.  RECOMMENDATIONS AND MANAGEMENT COMMENTS
 
We recommend that the Chief Financial Officer:
 
  1.  Consider whether the Department's budget formulation
      instructions should be revised to incorporate procedures
      requiring Departmental officials to identify to the
      Headquarters Chief Financial Officer significant budget
      issues that should be tracked to ensure they are resolved
      before the Department's budget is finalized.
 
  2.  Review the information pertaining to double funding in
      Fiscal Year 1993, and reconsider notifying the appropriate
      Congressional committees that the Department received an
      extra $30 million in Fiscal Year 1993 for the security of
      special nuclear material at Richland.
 
Regarding recommendation 1, the Office of the Chief Financial
Officer stated that "In response to your recommendation, the Office
of the Chief Financial Officer has included guidance in the Fiscal
Year 1997 Budget Call for the Field Chief Financial Officers to
identify directly to the Headquarters Chief Financial Officer any
issues which need to be resolved, including matters of double
funding where funding responsibility may not yet be resolved." The
Office of the Assistant Secretary for Environmental Management
agreed with the recommendation to identify significant budget issues
for tracking during the budget process.
 
Inspections Comments
 
This action is partially responsive to the recommendation.  However,
controls are needed to ensure that all future budget calls include
guidance to identify, to the Headquarters Chief Financial Officer,
issues that need to be resolved during the budget process.
 
Regarding recommendation 2, the Office of the Chief Financial
Officer stated:
 
"This Office has reviewed the information pertaining to the FY 1993
double funding and does not agree that the action taken allowing the
Environmental Management program to use the $30 million from the
double funding issue constituted a reprogramming.  However, we do
agree that we have an obligation to maintain 'full faith and credit'
with our Congressional committees, and on that basis, should err on
the side of at least informal notification when any matter of
potential committee interest arises.  The Director of the Office of
Budget will informally advise the staff of the cognizant
Congressional Committees of this instance of double budgeting and
provide the Inspector General's report as background for their
information."
 
We recommend that the Assistant Secretary for Environmental
Management and the Chief Financial Officer:
 
  3.  Determine whether double funding for security of special
      nuclear material at Richland occurred in Fiscal Year 1992.
       If double funding did occur in Fiscal Year 1992, consider
      notifying the appropriate Congressional committees that the
      Department received an extra $30 million in Fiscal Year
      1992 for the security of special nuclear material at
      Richland.
 
The Office of the Chief Financial Officer stated that "This office
will also confer with the Office of Environmental Management and the
Richland Chief Financial Officer in an attempt to determine whether
or not a similar instance of double funding for this activity
occurred in FY 1992." The Office of the Assistant Secretary for
Environmental Management concurred with the recommendation stating
that they would confer with the Chief Financial Officer.
 
Although the recommendation was not addressed to Richland, the
Richland Chief Financial Officer provided comments stating that:
"Previously provided copies of our FY 1992 field budget submission
indicate no special nuclear material double funding was contemplated
among DOE Defense Program (DP) and Environmental Management (EM)."
 
Inspections Comments
 
Although Richland officials provided information which they believe
shows that double funding did not occur in Fiscal Year 1992, the
Office of Inspector General will defer to the Office of the Chief
Financial Officer to provide an overall response to the
recommendation.  In this regard, Richland officials advised us that
they provided copies of these comments to the Headquarters Office of
the Chief Financial Officer.
 
We recommend that the Assistant Secretary for Environmental
Management work with the Assistant Secretary for Defense Programs;
the Chief Financial Officer;  and other Program Officers as
appropriate, to:
 
  4.  Establish procedures to ensure that facility transition
      issues, in particular those impacting on funding
      requirements, are resolved in sufficient time to be
      incorporated into the Department's budget requests.
 
The Office of the Assistant Secretary for Environmental Management
stated that while they concurred in principle with the
recommendation, they cannot establish procedures to ensure that
facility transition issues are resolved in sufficient time to be
incorporated into the Department's budget request.
 
The Office of the Assistant Secretary for Defense Programs stated
that they concurred in principle with the recommendation.  They
stated that as strategic realignment of the Department is again
underway, there is increasing likelihood that important Departmental
policy and organizational issues, including facility transition,
will not be resolved in advance of the budgetary process.  Thus,
they agreed with the recommendation to identify significant budget
issues for tracking during the lengthy budget formulation process.
The Office of the Chief Financial Officer stated that they are
working with the Office of Environmental Management to establish
procedures for the orderly transition of surplus facilities not only
from Defense Programs, but from any program office within the
Department.
 
We recommend that the Assistant Secretary for Environmental Management:
 
  5.  Review the circumstances surrounding the loss of the Budget
      Background Records, specifically the Activity Data Sheets
      used for planning for the Department's Fiscal Year 1992
      Congressional Budget Request, and consider if disciplinary
      action is appropriate.
 
  6.  Ensure that appropriate internal controls are established
      to properly safeguard against the loss of records such as
      these Budget Background Records.
 
Regarding recommendation number 5, the Office of the Assistant
Secretary for Environmental Management concurred in principle with
the recommendation, stating that files were lost during the
Environmental Management's Budget Office move and efforts had been
made to locate the lost files.  Regarding recommendation number 6,
Environmental Management officials stated that while sensitive to
records management, the inadvertent loss of records occurred during
Environmental Management's Budget Office move.  The officials
further stated that the events which took place during the move will
be analyzed in an effort to assure that records are not lost in the
future.
 
                                                    ATTACHMENT A
 
             CHRONOLOGY OF SELECTED ACTIONS RELATED TO
              THE FISCAL YEAR 1993 DOUBLE FUNDING OF
               SECURITY FOR SPECIAL NUCLEAR MATERIAL
                AT THE RICHLAND OPERATIONS OFFICE
 
o In a memorandum dated January 18, 1991, Subject: FY 1993 "UNIFIED"
FIELD BUDGET CALL, the Headquarters Controller provided guidance for
the preparation of the field budget data.
 
o In a memorandum dated April 12, 1991, Richland submitted its FY
1993 budget submission for Nuclear Material Production to the
Assistant Secretary for Defense Programs.
 
o In May 1991, the Richland Fiscal Year 1993 budget for Defense
Environmental Restoration and Waste Management was submitted to
the Office of the Assistant Secretary for Environmental Management.
 
o In a joint memorandum dated October 28, 1991, the Assistant
Secretary for Defense Programs and the Director, Office of
Environmental Management, advised the Acting Manager of the Richland
Operations Office (then referred to as the DOE Field Office,
Richland) that the Office of Defense Programs continues to budget
for materials disposition activities of the stored inventories of
special nuclear materials.
 
o In early February 1992, the Department submitted its "United
States Department of Energy FY 1993 Congressional Budget Request,"
dated January 1992.
 
o On October 1, 1992, Fiscal Year 1993 began.
 
o In a memorandum dated October 1, 1992, the Office of Defense
Programs provided Fiscal Year 1993 Defense Program Work
Authorizations, including $30 million for storage and disposition
activities for Defense Programs special nuclear material.
 
o On an Advice of Allotment dated October 1, 1992, the Headquarters
Office of the Chief Financial Officer provided funds to the Manager,
Richland Operations Office for the "Material Production and Other
Defense Programs" appropriation.  On a separate Advice of Allotment,
also dated October 1, 1992, funds were provided to Richland for the
"Defense Environmental Restoration and Waste Management"
appropriation.  Both included funding for the security for special
nuclear material at Richland.
 
o In late October 1992, a budget analyst at Richland stated that in
reviewing the funding and the work authorization they had received,
the analyst recognized that the required $30 million had been
received in the two appropriations.
 
o In a memorandum for the Secretary dated November 2, 1992, the
Assistant Secretary for Defense Programs and the Assistant Secretary
for Environmental Management stated that they had agreed on the
roles and responsibilities for transition.  The general
responsibilities section of the memorandum stated that for special
nuclear materials, Defense Programs would be responsible for
concentrated special nuclear materials and Environmental Management
would be responsible for lean residues and liquids.
 
The Joint Plan for Transferring Surplus Defense Facilities from DP
to EM, an attachment to the memorandum, stated that "The Hanford
site was surplused by DP and management responsibilities were
transferred to EM with the exception of ...  storage and disposition
of the nuclear materials at the Plutonium Finishing Plant (PFP) and
the 300 area ...." The plan also stated that "Defense Programs will
continue to retain current and outyear budget responsibility for the
nuclear materials storage and safeguards and security."
 
o In a memorandum dated November 4, 1992, the Headquarters Office of
Environmental Management requested that a management reserve be
established at each Field Office, including Richland.  The
memorandum also stated that the funds should be held as a reserve at
the Field Office, and that the reserve should be submitted in the
December Annual Funding Program but no later than the January 1993
Annual Funding Program submission date.
 
o In a memorandum dated December 10, 1992, the Richland Operations
Office identified the $30 million in question as a part of the five
percent Environmental Management reserve requirement.  The $30
million consisted of $132,000 from Program Management and
Environmental Management funds;  $657,000 from PUREX/U03 funds;
$25,501,000 from Plutonium Finishing Plant funds;  and $3,710,00
from 300 Area Fuel Supply funds.
 
o In December 1992, a program analyst from the Headquarters Office
of Environmental Management queried Richland budget officials about
the workscope that was associated with the $30 million.  The Analyst
stated that Richland budget officials advised him that no workscope
would be given up and identified the double funding.
 
o In a memorandum dated December 16, 1992, the Headquarters Office
of Environmental Management sent a memorandum to the Office of Chief
Financial Officer requesting changes to the January 1993 Financial
Plan for the Office of Environmental Management.  Included in the
transactions were the transactions placing the $30 million in Fiscal
Year 1993 Defense Environmental Restoration and Waste Management
funds into a Richland management reserve.
 
o In an informal note dated May 24, 1993, a copy of which was
provided to Richland on May 26, 1993, the Headquarters Office of
Environmental Management provided initial guidance on the process to
be used for allocating the Fiscal Year 1993 five percent management
reserve.  The information required included (1) a list of
prioritized activities or needs planned to be accomplished with the
five percent reserve and (2) a list of additional prioritized waste
management activities/needs essential to the Field Office's mission
which fell beyond the five percent management reserve.
 
o In a memorandum dated May 28, 1993, Richland submitted five
activities for use of the five percent management reserve: (1) $6.4
million for the Plutonium Finishing Plant for additional work
associated with the Plutonium Refining Facility restart effort;  (2)
$3.7 million for the Plutonium and Uranium Extraction facility for
destruction of organic materials necessary for facility
deactivation;  (3) $3.5 million for K-basin for completion of roof
repairs thereby removing safety issues impacting fuel encapsulation
efforts;  (4) $13.4 million for Fiscal Year 1993/4 requirements
resulting from current Tri-Party Agreement negotiations, and from
regulator and stakeholder input;  and (5) $3.0 million for Fiscal
Year 1993/4 risk analysis requirements resulting from EM-1, RL, and
Regulator (EPA and Washington Department of Ecology) comments that
RL was very deficient in this area of planning.
 
o On June 3, 1993, the Office of Inspector General issued Letter
Report INS-L-93-03 to the Acting Chief Financial Officer on our
inspection of double funding.  In the Letter Report, we stated that
we understood that the Offices of Defense Programs and Environmental
Management each provided $30 million for the safeguard and security
of special nuclear material, Plutonium 239, at the Plutonium
Finishing Plant in Fiscal Year 1993.  The Letter Report stated that
we were continuing to review this matter and might issue a separate
report at a later date that addresses this matter in more detail.
And we requested that the Acting Chief Financial Officer let us know
what action, if any, the Acting Chief Financial Officer would take
regarding this matter.
 
o In a letter dated June 25, 1993, the Westinghouse Hanford Company
requested Richland approve a change request to use $8.4 million to
continue the Plutonium Reclamation Facility restart and Operational
Readiness Review efforts in Fiscal Year 1993.  The recommended
funding source was the $30 million management reserve.
 
o In a memorandum dated June 25, 1993, from the Richland Operations
Office to the Office of Environmental Management, Richland requested
release of $15.6 million of the $30 million in the Fiscal Year 1993
management reserve.  The purposes cited were for the Plutonium
Finishing Plant ($8.4 million for issues uncovered by the Defense
Nuclear Safety Board and the Operational Readiness Review Board in
preparation for restart of the Plutonium Finishing Plant);  PUREX
($3.7 million for disposing of low-level radioactive organic
material from storage tanks);  and at K basins ($3.5 million for
unfunded roof repairs).
 
o In a memorandum dated June 28, 1993, in response to the OIG Letter
Report, the Headquarters Office of the Chief Financial Officer
informed the Office of Environmental Management that the $30 million
targeted for safeguards and security of special nuclear material
should be pulled back to Headquarters from Richland.  The memorandum
also stated that we would like to ensure that these extra funds are
not expended without prior approval from the Assistant Secretary for
Environmental Management and the Acting Chief Financial Officer.
 
o In a memorandum dated July 13, 1993, Richland certified that the
funds were available for withdrawal.
 
o In a memorandum dated July 15, 1993, the Headquarters Office of
Environmental Management requested the Headquarters Office of Chief
Financial Officer to withdraw the $30 million from Richland.  The
funds were to be held at Headquarters and would not be expended
without prior approval from EM-1 and CR-1.
 
o On an Advice of Allotment, change number 13, dated July 16, 1993,
the Headquarters Office of Chief Financial Officer withdrew the $30
million from Richland.
 
o In a memorandum dated September 29, 1993, the Director,
Headquarters Office of Environmental Management advised the Richland
Manager that he and the Acting Chief Financial Officer had approved
the use of $8.4 million for work at the Plutonium Finishing Plant.
 
 
o In a memorandum dated September 24, 1993, the Headquarters Office
of Environmental Management requested the Headquarters Office of
Chief Financial Officer to issue emergency allotments of $30 million
-- Richland was to receive $27.4 million and Savannah River was to
receive $2.6 million.
 
o On change number 17, dated September 28, 1993, to the Advice of
Allotment for the "Defense Environmental Restoration and Waste
Management" appropriation, the Headquarters Office of Chief
Financial Officer provided Richland with the approved $27.4 million.
And on change number 13, dated September 28, 1993, to the Advice of
Allotment for the "Defense Environmental Restoration and Waste
Management" appropriation, the Headquarters Office of Chief
Financial Officer provided Savannah River with the approved $2.6
million.
 
o In a memorandum dated September 30, 1993, the Director, Office of
Environmental Management, provided written approval for the use of
the remaining $21.6 million, $19.0 million for Richland and $2.6
million for Savannah River.  Richland received a total of $27.4
million (i.e., the previously approved $8.4 million and the $19.0
million);  and Savannah River received the $2.6 million.
 
 
 
 
 
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hold the following but do not use
 
The Richland Chief Financial Officer later stated that if Activity
Data Sheet 428-KE had been recognized by Environmental Management an
immediate $30 million reduction in the Hanford budget "would have
avoided the entire FY 1993 double funding issue." [RL#12] We agree
that one outcome of Richland's submission of Activity Data Sheet
428-KE could have been to again bring to the attention of
Environmental Management officials at Headquarters the continuing
issue regarding who was responsible for funding the security of
special nuclear material.  Another point that may have raised
interest in this matter were the apparently conflicting statements
contained in the Activity Data Sheet regarding what fiscal years
were affected: "The allocation beyond FY 1992 has not been
determined." and "In effect, this ADS reduces the total funding
requirements from Environmental Management in FY 1992 and beyond, as
appropriate." However, we believe that it was clear from the numeric
portion of the Activity Data Sheet that the change of $-30 million
only applied to Fiscal Year 1992 and so we do not believe that there
would have been an immediate impact on Fiscal Year 1993.
 
 
	Review of the Richland Fiscal Year 1992 Budget Submission
 
The Richland Chief Financial Officer provided us with an excerpt,
from the files of the management and operating contractor, of
Richland's Fiscal Year 1992 budget submission of 1990.  This excerpt
lent support for the Richland Chief Financial Officer's view that
Richland did not double budget for the security requirement in their
1990 submission of their Fiscal Year 1992 budget request.  However,
since the excerpt represented only the Richland submission, we
believe that the excerpt was not totally conclusive that double
budgeting for the Fiscal Year 1992 security requirement had not
occurred somewhere in the Department.  And the excerpt did not
directly address whether the Department's Fiscal Year 1992
Congressional Budget Request double budgeted for the security of the
special nuclear material.
 
The excerpt, which included six Richland Activity Data Sheets that
were last updated on April 26, 1990, lent some support for the
Richland Chief Financial Officer's view that Richland had not double
budgeted because the total funding requested on the Activity Data
Sheets for Environmental Management purposes was less than the
stated $30 million requirement for security.  In reviewing the six
Activity Data Sheets, we noted that the operating expense funds for
Fiscal Year 1992 contained in the six Activity Data Sheets totalled
only $4,840,000.  Since the estimated cost of security was
$30,000,000, the six Activity Data Sheets appear to support the
statement of the Richland Chief Financial Officer that "These FY
1992 plans indicate only environmental activities were budgeted for
EM, and [the] Plutonium Finishing Plant's special nuclear material
vaults still remained under Defense Program budget jurisdiction."
 
However, we also noted that the excerpt represented only the
Richland submission, and, as a result, we believe that it was not
totally conclusive that double budgeting for the Fiscal Year 1992
security requirement had not occurred somewhere in the Department.
In particular, if the $30 million was not included in the
Department's Activity Data Sheets used to support the preparation of
the Department's Fiscal Year 1992 budget request, it is not clear
why Activity Data Sheet 428-KE, a downward adjustment of
$30,000,000, would have been approved on March 29, 1991.  By
themselves the total operating expense funding of these seven
Activity Data Sheets, the original six for $4,840,000 and 428-KE for
$-30,000,000, would have left a net Richland Fiscal Year 1992
funding "requirement" of $-25,160,000.
 
And as another consideration, the Richland records did not directly
address whether double budgeting had occurred in the Department's
Fiscal Year 1992 Congressional Budget Request.
 
 
 
 
We found that Richland and, at Headquarters, the Offices of
Environmental Management and Chief Financial Officer became aware of
the double funding at different times and took certain actions in
response to the double funding which are described below.
 
	Richland
 
In late October 1992, a Richland budget analyst discovered that a
total of $60 million had been received from Defense Programs and
Environmental Management, even though only $30 million was needed
for security of special nuclear material.  Recognizing the double
funding, the budget analyst provided only the $30 million from
Defense Programs to the contractor.  The $30 million in the
environmental program that had been requested for security was
retained at Richland and was not provided to the contractor.  We
found no evidence that Richland notified Headquarters officials of
the double funding at that time.  A Richland budget official told us
that they did not notify Headquarters officials because they were
aware of a pending requirement from the Headquarters Office of
Environmental Management to establish a management reserve.  The
official stated that the extra $30 million was planned to be used to
meet the management reserve requirement.  The memorandum from the
Headquarters Office of Environmental Management requesting that a
management reserve be established was dated November 4, 1992.
 
	Headquarters Office of Environmental Management
 
Headquarters Office of Environmental Management officials learned of
the double funding in December 1992 after they directed in early
November that each Field Office, including Richland, establish a
management reserve.  In response to this directive, Richland
identified the $30 million to Headquarters Environmental Management
officials for the management reserve.  In response to an
Environmental Management official's question regarding the
programmatic impact of setting aside the $30 million, Richland told
the official that there was no impact due to the double funding.
Office of Environmental Management officials agreed to place the $30
million in a management reserve at Richland.  We found no evidence
that the Headquarters Office of Chief Financial Officer was notified
of the double funding at this time.
 
 
 
This factor was that at the time the Richland budget was being
prepared a decision had not been made on which Headquarters
organization would be responsible for the budgeting of security for
the special nuclear material.
 
One of these factors was that the budget preparation process did not
include a specific mechanism to ensure that issues, such as the
double funding request, were identified so that they could be
resolved before the Department's Congressional Budget Request was
finalized.  The second of these factors was that various documents
used in the budget process did not separately identify the funding
requirement for security and thus, we believe, hindered the
identification of the double funding request.
 
The Acting Chief Financial Officer and the Assistant Secretary for
Environmental Management had the extra $30 million placed in a
management reserve account until deciding on an appropriate use for
the funds.
 
IG Report No. DOE/IG-0378
 
CUSTOMER RESPONSE FORM
 
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Please include your name and telephone number so that we may contact
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continued footnote
 
footnote continues next page
 
do not use this section -- for historical purposes only