AUDIT REPORT 

Audit of the NRC’s Warehouse Operations 

OIG-09-A-09 March 31, 2009 

All publicly available OIG reports (including this report) are accessible through 

NRC’s Web site at: 

http:/www.nrc.gov/reading-rm/doc-collections/insp-gen/ 
UNITED STATES 

NUCLEAR REGULATORY COMMISSION 

WASHINGTON, D.C. 20555-0001 

OFFICE OF THE 

INSPECTOR GENERAL 

 March 31, 2009 

MEMORANDUM TO: R. William Borchardt 

Executive Director for Operations 

FROM: Stephen D. Dingbaum /RA/ 

 Assistant Inspector General for Audits 

SUBJECT: AUDIT OF NRC’S WAREHOUSE OPERATIONS 

(OIG-09-A-09) 

Attached is the Office of the Inspector General’s (OIG) audit report titled, Audit of NRC’s 

Warehouse Operations.

The report presents the results of the subject audit. Agency comments provided at the 

March 19, 2009, exit conference have been incorporated, as appropriate, into this 

report. 

Please provide information on actions taken or planned on each of the 

recommendations within 30 days of the date of this memorandum. Actions taken or 

planned are subject to OIG followup as stated in Management Directive 6.1. 

We appreciate the cooperation extended to us by members of your staff during the 

audit. If you have any questions or comments about our report, please contact me at 

415-5915 or Steven Zane, Team Leader, Financial and Administrative Audit Team, at 

415-5912. 

Attachment: As stated 
Electronic Distribution

Edward M. Hackett, Executive Director, Advisory Committee on Reactor 

 Safeguards 

E. Roy Hawkens, Chief Administrative Judge, Atomic Safety and 

 Licensing Board Panel 

Karen D. Cyr, General Counsel 

John F. Cordes, Jr., Director, Office of Commission Appellate Adjudication 

Jim E. Dyer, Chief Financial Officer 

Margaret M. Doane, Director, Office of International Programs 

Rebecca L. Schmidt, Director, Office of Congressional Affairs 

Eliot B. Brenner, Director, Office of Public Affairs 

Annette Vietti-Cook, Secretary of the Commission 

R. William Borchardt, Executive Director for Operations 

Bruce S. Mallett, Deputy Executive Director for Reactor 

 and Preparedness Programs, OEDO 

Martin J. Virgilio, Deputy Executive Director for Materials, Waste, Research, 

 State, Tribal, and Compliance Programs, OEDO 

Darren B. Ash, Deputy Executive Director for Corporate Management 

 and Chief Information Officer, OEDO 

Vonna L. Ordaz, Assistant for Operations, OEDO 

Timothy F. Hagan, Director, Office of Administration 

Cynthia A. Carpenter, Director, Office of Enforcement 

Charles L. Miller, Director, Office of Federal and State Materials 

 and Environmental Management Programs 

Guy P. Caputo, Director, Office of Investigations 

Thomas M. Boyce, Director, Office of Information Services 

James F. McDermott, Director, Office of Human Resources 

Michael R. Johnson, Director, Office of New Reactors 

Michael F. Weber, Director, Office of Nuclear Material Safety and Safeguards 

Eric J. Leeds, Director, Office of Nuclear Reactor Regulation 

Brian W. Sheron, Director, Office of Nuclear Regulatory Research 

Corenthis B. Kelley, Director, Office of Small Business and Civil Rights 

Roy P. Zimmerman, Director, Office of Nuclear Security and Incident Response 

Samuel J. Collins, Regional Administrator, Region I 

Luis A. Reyes, Regional Administrator, Region II 

Mark A. Satorius, Region III 

Elmo E. Collins, Jr., Regional Administrator, Region IV 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

i

EXECUTIVE SUMMARY 

BACKGROUND

The Nuclear Regulatory Commission (NRC) maintains two warehouses, 

referred to as the main warehouse and the annex, located about a mile 

away from the agency’s main headquarters buildings. These warehouses 

are used to receive, store, and deliver property, equipment, and supplies 

needed for NRC operations. The main warehouse also contains a 

security lockup cage used to store sensitive property. As of February 

2009, the two warehouses contained almost 16,000 pieces of property 

and equipment with an initial acquisition cost of approximately $5.1 million. 

The NRC Office of Administration (ADM), Directorate for Space Planning 

and Consolidation, Property and Labor Services Branch, is responsible for 

managing warehouse operations. The Office of the Inspector General 

estimates that the total resources ADM dedicated to operating the 

warehouse amounts to approximately $1.1 million annually. These 

resources include NRC employee salaries, labor services contract costs, 

leases for each warehouse, leases for delivery vehicles, and security 

costs. 

ADM uses two information management systems to account for the 

agency’s property. The Space and Property Management System 

(SPMS) is NRC’s official property management information system. 

Warehouse staff use a separate dBase III application system that does not 

interface with SPMS to track the specific locations of warehouse property. 

PURPOSE

The purpose of this audit was to determine whether NRC has established 

and implemented an effective system of internal controls for maintaining 

accountability and control of agency property stored in the warehouses. 

RESULTS IN BRIEF

NRC’s warehouse operations support the agency’s mission by ensuring 

that property is received, stored, and delivered to NRC staff as needed. 

The warehouse also provides logistical support for office moves and 

assistance with special events. However, opportunities exist to: 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

ii

• Enhance safety and security. 

• Increase inventory accuracy and operational efficiency. 

• Improve contract administration. 

Safety and Security Evaluations Not Conducted and Segregation of 

Duties Not Implemented 

Federal law and guidance require that NRC evaluate the safety and 

security of its facilities and use sound physical security practices to protect 

agency property. However, NRC has not conducted the required periodic 

safety inspections of the NRC main warehouse and annex or a required 

security assessment of the NRC annex. Additionally, despite internal 

control standards that require segregation of duties, warehouse staff, 

responsible for the day-to-day operation of the agency’s warehouses, also 

control and monitor the video surveillance system located at the main 

warehouse. Management inattention to the required safety inspections 

and security assessment as well as the failure to implement segregation of 

duties, leaves NRC staff potentially vulnerable to workplace hazards, while 

exposing NRC to a heightened risk of property loss. 

Space and Property Management System Contains Incomplete and 

Inaccurate Location Information 

Property management system guidance and internal control standards 

require agency personnel to record information accurately and timely to 

maintain accountability and control over Government property. Despite 

these requirements, NRC’s official property management system, SPMS, 

contains incomplete and inaccurate location information. This condition 

exists because: 

• SPMS’ full capability is not being used. 

• Property locations are changed in SPMS prior to actual property 

movement. 

• Periodic SPMS monitoring measures have not been 

implemented. 

Incomplete and inaccurate location information results in inefficient, 

duplicative work efforts, heightens the risk for lost property and 

information, and may result in unnecessary expense. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

iii

Contract Administration Deficiencies 

NRC is required to administer the contract for warehouse support services 

in accordance with agency policy and the contract provisions. However, 

the following contract administration deficiencies exist: 

• Incomplete contractor security packages are submitted to the 

Division of Facilities and Security. 

• Registration procedures are not followed for unbadged 

contractor representatives. 

• Contractor performance is not measured. 

These contract administration deficiencies exist because warehouse 

employees responsible for managing the contract have not completed the 

agency required project manager training. Without adhering to the 

required policy and contract provisions, NRC lacks assurance that 

contractors working at NRC facilities do not pose a security risk. In 

addition, NRC may be paying excess contract costs by failing to consider 

disincentive provisions contained in the contract. 

RECOMMENDATIONS 

This report makes recommendations to improve the agency’s warehouse 

operations. A consolidated list of these recommendations appears in 

Section V of this report. 

AGENCY COMMENTS 

At an exit conference on March 19, 2009, agency management stated 

their agreement with the findings and recommendations in this report. 

Management also provided information that has been incorporated into 

this report as appropriate. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

iv

[Page intentionally left blank.] 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

v

ABBREVIATIONS AND ACRONYMS 

ADM Office of Administration 

DFS Division of Facilities and Security 

HR Office of Human Resources 

GAO Government Accountability Office 

MD Management Directive 

NRC Nuclear Regulatory Commission 

OIG Office of the Inspector General 

OSHA Occupational Safety and Health Act 

PM Project Manager 

SPMS Space and Property Management System 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

vi

[Page intentionally left blank.] 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

vii

TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................. i 

ABBREVIATIONS AND ACRONYMS......................................... v 

I. BACKGROUND .................................................................. 1 

II. PURPOSE ......................................................................... 2 

III. FINDINGS........................................................................... 3 

A. SAFETY AND SECURITY EVALUATIONS NOT

CONDUCTED AND SEGREGATION OF DUTIES

NOT IMPLEMENTED........................................................ 3 

B. SPACE AND PROPERTY MANAGEMENT SYSTEM

CONTAINS INCOMPLETE AND INACCURATE

LOCATION INFORMATION ................................................ 9 

C. CONTRACT ADMINISTRATION DEFICIENCIES................... 13 

IV. AGENCY COMMENTS..................................................... 18 

V. CONSOLIDATED LIST OF RECOMMENDATIONS......... 19 

APPENDICES 

A. SCOPE AND METHODOLOGY ....................................... 20 

B. BEST PRACTICES........................................................... 22 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

viii

[Page intentionally left blank.] 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

1

I. BACKGROUND 

The Nuclear Regulatory Commission (NRC) maintains two 

warehouses, located about a mile away from the agency’s main 

headquarters buildings, that receive, store, and deliver property, 

equipment, and supplies needed for NRC operations. Along 

with performing these day-to-day activities, warehouse staff 

provide support for office relocations and special projects. In 

addition, the warehouse staff facilitate the donation, destruction, 

and abandonment of excess property. Excess property is 

stored in an NRC warehouse while awaiting final disposition. 

 NRC Main and Annex Warehouses 

The agency refers to its two warehouses as the main 

warehouse and the annex. NRC’s main warehouse, the larger 

facility, is approximately 22,000 square feet and contains 

equipment,1 office furnishings, supplies, and systems furniture 

used to construct office workstations. This main warehouse 

also contains a security lockup cage with an open top (see the 

photograph below and on page 6) used to store sensitive 

property.2

Photograph 1: Security lockup cage within the main NRC warehouse 

 

1

 NRC Management Directive (MD) 13.1, Property Management, defines accountable 

property as any equipment, excluding furniture and supplies, that is complete in itself, is of a 

durable nature with an expected life of 2 years or more, does not ordinarily lose its identity or 

becomes a component of another article, and is not consumed in its useful life. Accountable 

property is classified either as “sensitive” or as “non-sensitive” (e.g., microfiche reader, slide 

projector). 

2

 MD 13.1 defines sensitive property as property that is desirable for personal use and can be 

easily removed from the premises (e.g., laptop computers, cell phones, etc.). 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

2

NRC obtained the annex in 2008 to house equipment and 

furniture for relocations to newly acquired office space. The 

annex, the smaller of the two warehouses, is approximately 

7,000 square feet. The annex is not staffed on a daily basis, 

although warehouse employees work at the annex about twice a 

week. 

As of February 2009, the two warehouses contained almost 

16,000 pieces of property and equipment with an initial 

acquisition cost of approximately $5.1 million. 

 

Resources Allocated 

OIG estimates that the total Office of Administration (ADM) 

resources dedicated to operating the warehouses amounts to 

approximately $1.1 million annually. These resources include 

NRC employee salaries, labor services contract costs, leases 

for each warehouse, leases for delivery vehicles, and security 

costs. ADM, Directorate for Space Planning and Consolidation, 

Property and Labor Services Branch, designates three full-time 

NRC employees to operate the warehouses. Furthermore, the 

Property and Labor Services Branch managed a warehouse 

labor services contract with Alutiiq International Solutions, LLC, 

to perform daily labor services, for the period March 1, 2008, 

through February 28, 2009. This contract provided three fulltime contract personnel and allowed for obtaining additional 

support, as needed. 

Information Management Systems Used 

ADM uses two information management systems to account for 

the agency’s property. The Space and Property Management 

System (SPMS) is NRC’s official property management 

information system. Warehouse staff use a separate dBase III 

application system that does not interface with SPMS to track 

the specific locations of warehouse property. 

II. PURPOSE 

The purpose of this audit was to determine whether NRC has 

established and implemented an effective system of internal 

controls for maintaining accountability and control of agency 

property stored in the warehouses. 

See Appendix A for a description of the audit scope and 

methodology. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

3

III. FINDINGS 

NRC’s warehouse operations support the agency’s mission by 

ensuring that property is received, stored, and delivered to NRC 

staff as needed. The warehouse also provides logistical support 

for office moves and assistance with special events. However, 

opportunities exist to: 

• Enhance safety and security. 

• Increase inventory accuracy and operational 

efficiency. 

• Improve contract administration. 

A. Safety and Security Evaluations Not Conducted and 

Segregation of Duties Not Implemented 

Federal law and guidance require that NRC evaluate the safety 

and security of its facilities and use sound physical security 

practices to protect agency property. However, NRC has not 

conducted the required periodic safety inspections of the NRC 

main warehouse and annex or a required security assessment 

of the NRC annex. Additionally, despite internal control 

standards that require segregation of duties, warehouse staff 

responsible for the day-to-day operation of the agency’s 

warehouses also control and monitor the video surveillance 

system located at the main warehouse. Management 

inattention to the required safety inspections and security 

assessment as well as the failure to implement segregation of 

duties, leaves NRC staff potentially vulnerable to workplace 

hazards, while exposing NRC to a heightened risk of property 

loss. 

Safety, Security, and Segregation of Duties Requirements 

NRC is required to evaluate the safety and security of its 

facilities and use sound physical security practices to protect 

agency property. A brief explanation of each of the relevant 

safety, security, and segregation of duties requirements follows: 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

4

Safety Requirements 

Federal law3 and Executive Order 12196, Occupational safety 

and health programs for Federal employees, require periodic 

inspections of all agency workplaces by personnel with 

equipment and competence to recognize hazards. 

MD 10.130, Safety and Health Program Under the Occupational 

Safety and Health Act, establishes the standards and 

procedures for NRC's safety programs. This MD provides that 

the Director, Office of Human Resources (HR), appoint an 

Agency Safety and Health Program Manager, who is required, 

to conduct periodic safety inspections of NRC facilities in 

accordance with the Occupational Safety and Health Act 

(OSHA). 

 

Security Requirements 

The Interagency Security Committee provides Federal guidance 

in its Security Standards for Leased Space, which states that 

security assessments must be performed prior to entering into a 

new lease. Furthermore, Facility Level Determinations for 

Federal Facilities states that agencies should make facility 

security level determinations early in the space acquisition 

process to (1) implement countermeasures, if required and (2) 

reconsider the acquisition if minimum physical security 

requirements cannot be met. 

The Government Accountability Office (GAO) Standards for 

Internal Control in the Federal Government explains the 

importance of segregation of duties. This is a critical control 

because key duties and responsibilities for authorizing, 

processing, recording, and reviewing transactions and handling 

any related assets need to be divided or segregated to reduce 

the risk of error or fraud. 

Evaluations Not Conducted and Segregation of Duties Not 

Implemented 

NRC has not conducted the required periodic safety inspections 

of the main warehouse and annex or a required security 

assessment of the annex. Additionally, the agency has not 

implemented internal control standards that require segregation 

of duties as related to the video surveillance system located in 

the main warehouse. 

 

3

 29 US Code of Federal Regulations 1960.8(c), Agency responsibilities. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

5

Safety and Security Evaluations Not Conducted 

 

Safety Inspections

The Office of the Inspector General (OIG) interviewed and 

requested documentation from warehouse staff and HR 

representatives to determine if the required safety inspections of 

the warehouses have occurred. Warehouse staff recalled that 

safety inspections had been conducted in the past, but not 

recently. HR management confirmed that safety inspections of 

the warehouses had not been conducted recently.4 

 

Security Assessment

OIG interviewed ADM staff to determine if the required security 

assessments of the warehouses have occurred. Staff from 

ADM, Division of Facilities and Security (DFS), provided OIG 

with the Building Security Assessment of the main NRC 

warehouse, completed by a Federal Protective Service 

inspector on May 2, 2007. A previous security assessment had 

been completed on May 13, 2003. DFS managers explained 

that a security assessment for the NRC annex had not been 

completed and could not recall arranging for a security 

assessment when NRC leased the space in 2008. 

During a visit to the NRC warehouses, OIG identified 

opportunities to strengthen security within each warehouse. A 

brief description of each follows: 

o The low height of the open top of the security lockup cage in 

the main warehouse, coupled with the placement of storage 

racking against the outside of the cage, increases the risk of 

theft for sensitive items (ADM staff noted that this risk is 

mitigated, to a degree, by the warehouse access controls.) 

The warehouse racking labeled in the photograph that 

follows is approximately 6 feet above ground. 

 

4

 The lease document for the main warehouse contained the Fire Protection Prelease Survey 

that was last completed by General Services Administration on July 1, 2005. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

6

Photograph 2: Accessible space at the open top of the security 

lockup cage located within the main NRC warehouse 

o The annex does not have an intrusion detection system and 

a video surveillance system. 

 

Segregation of Duties Not Implemented 

Despite internal control standards that require segregation of 

duties, warehouse staff responsible for the day-to-day operation 

of the agency’s warehouses also control and monitor the video 

surveillance system located at the main warehouse. Installed 

about 10 to 15 years ago, the video surveillance system at the 

main warehouse consists of a time lapse video recorder, a 

monitor, tapes, and video cameras located throughout the 

warehouse. Warehouse personnel periodically change the 

tapes and record over previously used tapes. A better security 

control would be for the headquarters security guard staff to 

remotely control and monitor the warehouse video surveillance 

system. 

Management Inattention Results in Vulnerability to Hazards 

and Risk of Loss 

Management inattention to the required safety inspections and 

security assessment as well as the failure to implement 

segregation of duties, leaves NRC staff potentially vulnerable to 

workplace hazards (such as stacked items that may fall) while 

exposing NRC to a heightened risk of property loss by its own 

employees. 

 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

7

Office of Human Resources Management 

HR management has not taken necessary actions to complete 

warehouse safety inspections although during this audit they 

readily acknowledged their responsibility to do so. HR officials 

stated that the agency currently lacks the in-house expertise to 

conduct the inspections because NRC’s OSHA trained staff 

member left NRC several years ago and has yet to be replaced. 

HR is looking to recruit someone to fill the vacated position. 

HR management committed to expedite the warehouse safety 

inspections through an existing contract with an environmental 

testing company that has the expertise to do the required safety 

inspections. 

Office of Administration Management 

ADM management did not take actions necessary to complete 

the annex security assessment because they have not 

implemented a process to identify this need when entering into 

a lease. ADM management conveyed awareness of their 

responsibility to complete the security assessment. They stated 

that the agency’s immediate need to store newly acquired 

systems furniture caused NRC to occupy the annex without first 

completing a security assessment. Additionally, ADM stated 

that since NRC staff do not work in the space every day, a 

completed security assessment was not a priority. During the 

course of this audit, ADM initiated the process for completing 

the security assessment at the annex and anticipates that 

Federal Protective Service can expedite its completion. 

ADM management stated that the warehouse staff controls its 

own video surveillance system because the warehouse 

surveillance video system is not integrated with the NRC 

headquarters video system. The main warehouse has an 

intrusion detection alarm system that is monitored remotely by 

security staff who respond if alerted to a warehouse alarm. In 

addition, the headquarters security guard staff makes daily 

rounds to the warehouses. ADM staff stated that an upgrade, 

allowing for remote security guard monitoring of the main 

warehouse video surveillance system, is part of federally 

mandated physical protection updates and should be completed 

in October 2009. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

8

Safety Hazards and Security Risk of Loss 

Management inattention to warehouse safety and security 

matters leaves NRC staff potentially vulnerable to workplace 

hazards, while exposing NRC to a heightened risk of property 

loss. Without a current safety inspection performed by 

personnel with the proper equipment and competence to 

recognize hazards, staff, property, and the warehouse facilities 

may not be adequately protected from workplace hazards. 

Without a security assessment, staff and the annex may not be 

adequately protected from threats. Additionally, an increased 

risk of property loss exists by allowing warehouse staff to 

monitor and operate the video security surveillance system 

installed at NRC’s main warehouse. 

Recommendations

OIG recommends that the Executive Director for Operations: 

1. Conduct the required safety inspections for the NRC main 

warehouse and annex. 

2. Conduct the required security survey of the NRC annex. 

3. Designate the headquarters security guard staff to monitor 

and operate the warehouse video surveillance system. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

9

B. Space and Property Management System Contains 

Incomplete and Inaccurate Location Information 

Property management system guidance and internal control 

standards require agency personnel to record information 

accurately and timely to maintain accountability and control over 

Government property. Despite these requirements, NRC’s 

official property management system, SPMS, contains 

incomplete and inaccurate location information. This condition 

exists because: 

• SPMS’ full capability is not being used. 

• Property locations are changed in SPMS prior to 

actual property movement. 

• Periodic SPMS monitoring measures have not been 

implemented. 

Incomplete and inaccurate location information results in 

inefficient, duplicative work efforts, heightens the risk for lost 

property and information, and may result in unnecessary 

expense. 

Requirements for Complete and Accurate Information 

The Financial Systems Integration Office,5 Property 

Management Systems Requirement, stipulates that a property 

management system must be able to collect accurate, timely, 

complete, reliable, and consistent information to establish and 

maintain accountability and control over Government property. 

Additionally, GAO Standards for Internal Control requires that 

transactions be recorded accurately and timely. 

SPMS Location Information Is Incomplete and Inaccurate 

OIG used judgmental sampling to test the accuracy of SPMS 

location information of NRC property stored in the warehouses. 

The following property areas were tested: 

• Equipment stored in the main NRC warehouse (including 

security lockup cage items). 

 

5 The Financial Systems Integration Office, formerly known as the Joint Financial 

Management Improvement Program, is a joint undertaking of the Office of Management and 

Budget, GAO, the Department of the Treasury, and the Office of Personnel Management, to 

work in cooperation with each other and with other agencies to improve financial 

management practices throughout the Government.
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

10

• Furniture and supplies stored in both NRC warehouses. 

The results of these tests show that NRC’s official property 

management system, SPMS, contains incomplete and 

inaccurate location information. 

Incomplete Location Information in SPMS 

In conducting tests of the equipment inventories, OIG found that 

SPMS lacks complete warehouse location information. 

Specifically, SPMS identifies equipment stored in either the 

main warehouse or the annex with one location name, "WHSE" 

(meaning warehouse). SPMS does not differentiate between 

the two warehouses with separate names for location 

designations. Additionally, specific warehouse location 

designations such as aisle, bay, shelf, or bin are not maintained 

in SPMS even though the system has the capability to store this 

information. 

Currently, NRC warehouse staff use a dBase III application that 

is separate from SPMS to track and locate agency equipment 

within the warehouse aisles, shelves and bins. This dBase III 

application is an unofficial and antiquated, "stovepipe" system 

that has deficiencies. First, technical support for the dBase III 

application software is difficult to obtain because the application 

was created such a long time ago. Second, data from the 

system will not print out on laser printers; a dot matrix printer 

with 14-inch wide “green bar” paper must be used for any 

printed reports. 

Inaccurate Location Information in SPMS 

OIG judgmentally sampled 64 equipment items out of a universe 

of 320 pieces of equipment stored in the main NRC warehouse. 

Our test disclosed that 8 of 64 items (12.5 percent) shown in 

SPMS as being located in the warehouse could not be located.6

 

Warehouse staff explained that even though paperwork 

requesting transfer of these items had already been processed, 

the items had not yet been physically relocated to the 

warehouse. Property history documentation verified that the 

eight items were all in the process of being transferred and 

warehouse staff subsequently located the eight items for OIG 

verification. 

 

6

 Since this is not a statistical sample, the results of this test were not projected to the 

universe. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

11

Another test revealed additional inaccurate location information 

in SPMS. Specifically, SPMS identified 58 standalone system 

units as being stored in the main warehouse since September 

2006. These items had a total acquisition cost of approximately 

$35,000. However, further investigation determined that the 58 

standalone system units were not physically located in the main 

warehouse as SPMS indicated. The corresponding paperwork 

indicated that the 58 standalone system units had been 

transferred to a headquarters building after being stored in the 

warehouse for approximately 3 months. OIG verified the 

existence of 56 of these 58 system units and notified agency 

representatives of the 2 missing system units so that they could 

take appropriate action. 

Reasons for Incomplete and Inaccurate Location 

Information 

Location information is incomplete and inaccurate in SPMS 

because: 

• Full capability of SPMS is not being used. 

• Property locations are changed in SPMS prior to actual 

property movement. 

• Periodic monitoring of the accuracy of SPMS warehouse 

information has not been fully implemented. 

 

Full Capability of Property System Not Used 

Location information is incomplete in SPMS because staff do 

not fully use the system capabilities to differentiate between the 

main warehouse and the annex or to record specific property 

location information for equipment stored in the warehouses. 

The SPMS "Sub location" field does not adequately describe 

property locations. The SPMS "Sub location" field could be 

populated with aisle, bay, shelf, or bin location data, allowing for 

specific location information to be recorded in SPMS. However, 

OIG review indicated that the "Sub location" field is not used in 

this manner. 

Property Locations Changed Prior to Actual Movement 

Property location information is inaccurate in SPMS because 

staff change property locations and accounts in SPMS prior to 

physically relocating the property into the warehouse. For 

example, when staff at headquarters receive a request to 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

12

transfer equipment to the warehouse, they immediately begin to 

process the request by changing the location and account in 

SPMS. The request is later sent to the warehouse. The 

process to transfer equipment to the warehouse may take a few 

days based on availability of resources. Upon delivery, 

warehouse staff then verify receipt of the equipment and mail 

the completed request back to headquarters. ADM staff noted 

that the delay would have to occur on the front end or the tail 

end of the property movement since transfers cannot be made 

instantaneously. 

SPMS Monitoring Not Fully Implemented 

Another reason that property location information is inaccurate 

in SPMS is that warehouse staff have not developed and 

implemented monitoring procedures to periodically produce 

reports to facilitate accountability and control of warehouse 

property (i.e., all property stored in the warehouse for more than 

1 year). OIG concludes that such periodic monitoring would 

serve to help identify property location errors. 

Adverse Consequences of Faulty Location Information 

Incomplete and inaccurate location information results in 

inefficient, duplicative work efforts; heightens the risk for lost 

property and information; and may result in unnecessary 

expense. Accurate and reliable information on the location of 

property is essential for NRC to assure the optimum use of 

property and the efficient use of staff time. 

Recommendations

OIG recommends that the Executive Director for Operations: 

 

4. Maintain the agency’s dBase III system application until 

location information for all agency property stored in the 

warehouses is reflected in SPMS. 

5. Use only SPMS to identify property locations in the 

warehouses. 

6. Develop and implement a procedure for timely and 

accurate recording of property movements. 

7. Produce periodic reports to facilitate accountability and 

control of warehouse property. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

13

C. Contract Administration Deficiencies 

NRC is required to administer the contract for warehouse 

support services in accordance with agency policy and the 

contract provisions. However, the following contract 

administration deficiencies exist: 

• Incomplete contractor security packages are submitted to 

DFS. 

• Registration procedures are not followed for unbadged 

contractor representatives. 

• Contractor performance is not measured. 

These contract administration deficiencies exist because 

warehouse employees responsible for managing the contract 

have not completed the agency required project manager (PM) 

training. Without adhering to the required policy and contract 

provisions, NRC lacks assurance that contractors working at 

NRC facilities do not pose a security risk. In addition, NRC may 

be paying excess contract costs by failing to consider 

disincentive provisions contained in the contract. 

Contract Administration Requirements 

NRC is required to administer the contract for warehouse labor 

services in accordance with agency policy and the contract 

provisions. NRC policies and the agency’s contract with Alutiiq 

International Solutions, LLC (Alutiiq), contain specific 

requirements pertaining to: 

• Submittal of preliminary background checks. 

• Contractor entry into NRC facilities. 

• Contract performance measurement. 

According to MD 11.1, NRC Acquisition of Supplies and 

Services, it is the responsibility of the NRC PM to ensure that 

these contract administration requirements are met. The 

contract with Alutiiq names the PM and two alternates 

responsible for contract administration. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

14

Submittal of Preliminary Background Checks 

NRC’s warehouse labor services contract requires Alutiiq to 

perform preliminary background checks of contractor employees 

proposed to work under the contract. It is the PM’s 

responsibility to make sure that two copies of each of the 

contractor’s pre-screening results are provided to DFS, along 

with the NRC badge access application package. 

Contractor Entry into NRC Facilities 

NRC policy contains registration requirements for contractor 

representatives who are awaiting badge access approval. The 

agency policy includes guidance for entry into NRC facilities and 

for presenting identification. MD 12.1, NRC Facility Security 

Program, requires that unscreened contractors7

 enter facilities 

by reporting to the appropriate guard or receptionist desk to 

complete the required registration process, which includes 

presenting valid picture identification. Unscreened contractors 

who enter NRC facilities must be issued a badge that is 

displayed in plain view at all times. 

 Contract Performance Measurement 

In accordance with NRC’s contract with Alutiiq, the PM is 

required to measure contractor performance against established 

standards for property documentation, work prioritization, 

security package completion, and warehouse duty completion. 

The PM may apply disincentives, such as payment deduction, if 

the standards are not met. 

Contract Administration Deficiencies 

NRC has not administered the contract for warehouse support 

services in accordance with agency policy and the contract 

provisions. The following contract administration deficiencies 

exist: 

 

• Incomplete contractor security packages are submitted to 

DFS. 

 

7

 For purposes of this report, OIG uses the term “unscreened contractors” to refer to 

contractor representatives who are awaiting badge access approval. This differs from 

MD 12.1, NRC Facility Security Program, which uses the term “uncleared contractors” to refer 

to contractor representatives awaiting badge access approval. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

15

• Registration procedures are not followed for unbadged 

contractor representatives. 

• Contractor performance is not measured. 

Incomplete Security Packages Submitted 

The NRC PM routinely does not submit complete badge access 

application packages to DFS when seeking access approval for 

warehouse contractor employees. Although packages have 

been submitted for a number of individuals to receive building 

access, none of the packages included the contractor’s 

preliminary background check as required by the contract. The 

PM was not familiar with the requirement to obtain preliminary 

background checks. 

The purpose of the preliminary background check is to preclude 

individuals with a criminal history from working at NRC facilities. 

The preliminary background check identifies the following 

information related to an individual’s history: felony and alcohol 

related arrests, record of any military court-martial convictions, 

illegal use of narcotics or other controlled substances, and 

delinquency on any Federal debts or bankruptcy. This 

screening provides a reasonable indication of whether 

contractor representatives will eventually receive NRC 

unescorted access approval. 

During this audit, OIG learned of two cases where preliminary 

background checks were not submitted for individuals who were 

later denied access to work at NRC. Prior to NRC’s access 

denial, these individuals worked in NRC headquarters facilities 

on at least 36 occasions. 

Registration Procedures Not Followed 

The PM and warehouse staff do not routinely follow agency 

registration procedures for unbadged contractors. When 

unscreened contractors are called to work only at the NRC 

warehouse, they report directly to the warehouse without first 

registering with a guard or receptionist to show their 

identification. The PM and warehouse staff said they were not 

concerned about the risk posed by unscreened contractor 

employees who work only at the NRC warehouse because 

contractor representatives are escorted while working in the 

warehouse.
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

16

Contractor Performance Not Measured 

NRC’s PM does not measure contractor performance in 

accordance with standards identified in the contract provisions 

pertaining to property documentation, work prioritization, 

security package provisions, and accuracy of warehouse duties. 

The PM and an alternate PM stated that they do not measure 

contractor performance and that they were not aware of the 

potential for disincentive deductions. 

For example, the contract contains a standard that requires the 

contractor to provide the PM with documentation containing

signatures for all property picked-up or delivered. This provision 

calls for the PM to review the number of occurrences that the 

standard is not met, and take payment deductions accordingly. 

This contract also allows the PM to reduce payments to Alutiiq 

when the contractor is not timely in submitting security 

packages. The PM and one of the alternate PMs are now 

aware of the disincentive provisions and have expressed an 

interest in using them. 

The PM did not measure performance; therefore records do not 

exist for the agency to disallow any contract costs related to 

contractor poor performance. 

Project Manager Training Not Completed 

 

Contract administration deficiencies exist because the PM and 

alternate PMs have not completed the agency required project 

manager training. NRC requires that prospective project 

managers complete a minimum of five acquisition training 

courses to obtain Project Manager Certification. One of these 

courses addresses security requirements and the monitoring of 

contractor work performance. In addition, project managers are 

required to complete recertification training every 3 years. 

Although the PM was grandfathered in as a certified PM in 

2002, he was due to complete the recertification training in 

August 2005. However it did not occur. It is noted that one 

alternate PM became a certified project manager in February 

2009, after OIG brought this matter to the agency’s attention. 

Security Risks and Potential for Excess Contract Costs 

Without following the required policy and contract provisions, 

NRC lacks assurance that contractors working at NRC facilities 

do not pose a security risk. In addition, NRC is potentially 

paying excess contract costs by failing to consider disincentive 

provisions contained in the contract. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

17

OIG concludes that having unscreened contractor 

representatives working in the warehouse, coupled with the low 

height of the security cage and the placement of racking (as 

mentioned in Finding A), results in an increased risk of theft of 

items contained in the security cage. ADM management has 

completed a request to purchase and install wire mesh panels 

or fencing to enclose the security cage. 

Recommendations

OIG recommends that the Executive Director for Operations: 

8. Require the Project Manager and alternates to fulfill NRC’s 

initial and recertification mandatory training requirements for 

Project Managers. 

9. Modify the security cage and/or the placement of storage 

racks in the main NRC warehouse to prevent easy access to 

sensitive property stored inside the security cage. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

18

IV. AGENCY COMMENTS

At an exit conference on March 19, 2009, agency management 

stated their agreement with the findings and recommendations 

in this report. Management also provided information that has 

been incorporated into this report as appropriate. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

19

V. CONSOLIDATED LIST OF RECOMMENDATIONS 

OIG recommends that the Executive Director for Operations: 

1. Conduct the required safety inspections for the NRC main 

warehouse and annex. 

2. Conduct the required security survey of the NRC annex. 

3. Designate the headquarters security guard staff to monitor 

and operate the warehouse video surveillance system. 

4. Maintain the agency’s dBase III system application until 

location information for all agency property stored in the 

warehouses is reflected in SPMS. 

5. Use only SPMS to identify property locations in the 

warehouses. 

6. Develop and implement a procedure for timely and accurate 

recording of property movements. 

7. Produce periodic reports to facilitate accountability and 

control of warehouse property. 

8. Require the Project Manager and alternates to fulfill NRC’s 

initial and recertification mandatory training requirements for 

Project Managers. 

9. Modify the security cage and/or the placement of storage 

racks in the main NRC warehouse to prevent easy access to 

sensitive property stored inside the security cage. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

20

Appendix A 

SCOPE AND METHODOLOGY 

OIG obtained and analyzed pertinent laws, regulations, 

authoritative guidance, NRC policies and procedures, and prior 

relevant NRC OIG reports to identify Federal and agency 

requirements and best practices relevant to warehouse 

operations. 

OIG used judgmental sampling to test the accuracy of SPMS 

location information of NRC property stored in the warehouses. 

Additionally, OIG reviewed the Office of Administration’s 

property program metrics and performed various tests of 

internal controls associated with property recorded in SPMS. 

OIG conducted interviews with warehouse staff and selected 

headquarters officials to: 

• Gain an understanding of NRC’s warehouse operations. 

• Determine current issues, problems, or known deficiencies. 

• Assess internal controls. 

OIG interviewed staff from other Federal agencies to learn of 

their best practices related to warehouse operations. These 

best practices are described in Appendix B for the agency’s 

consideration. 

Internal controls related to the audit objective were reviewed 

and analyzed. Throughout the audit, auditors were aware of the 

possibility or existence of fraud, waste, or misuse in the 

program. 

The work was conducted from September 2008 to January 2009 

in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform 

the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our 

audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

The work was conducted by Steven Zane, Team Leader; Vicki 

Foster, Audit Manager; Yvette Mabry, Senior Auditor; Michael 

Steinberg, Senior Auditor; and Robert Woodward, Senior 

Auditor. We performed the audit work at NRC Headquarters 

and both warehouses located in Rockville, Maryland. 
Audit of the Nuclear Regulatory Commission’s Warehouse Operations 

21

[Page intentionally left blank.] 
Audit of the Nuclear Regulatory Commissio

22

BEST PRACTICES 

National Aeronautics 

and Space 

Administration 

Federal Aviation 

Administration 

Department of Commerce General Se

Training • Property Management 

Training Video: NASA Property, Everyone’s Business. 

• Recommended 

Courses: 

• Warehousing, 

Operations and Disposal – USDA. 

• Personal 

Property Management, Utilization and Disposal – GSA. 

• Training Video for civilian 

and contract employees on use of the property system. 

• Required training for 

Property Management Officer, Accountability Officer, and Custodian. 

• Government Ethics, 

Applications in Personal Property Accountability – USDA. 

• Property Official 

Certification Program. 

• E-learning course in 

development soon, Employee Property Training. 

• Initial logis• Profession

managem

Procedures NASA Procedural 

Requirements: NASA Materials Inventory Management Manual. 

Policy and Procedures Guide: FAA uses a policy guide as they update and revise training for various process functions. 

• Department Personal 

Property Management Manual. 

• Personal Property 

Procedures Manual, Office of the Secretary. 

• Policy and 

developmedisseminamanagemand guida

• GSA sugg

operations which polic