a

GAO

United States Government Accountability Office

Report to Congressional Committees

August 2005 NUCLEAR 

NONPROLIFERATION

Better Management 

Controls Needed for 

Some DOE Projects in 

Russia and Other 

Countries

GAO-05-828
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-828.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gene Aloise, 

202-512-3841, aloisee@gao.gov. 

Highlights of GAO-05-828, a report to 

congressional committees 

August 2005

NUCLEAR NONPROLIFERATION

Better Management Controls Needed for 

Some DOE Projects in Russia and Other 

Countries 

Two NNSA offices, the Office of Nuclear Risk Reduction (designated by 

NNSA as NA-23) and International Material Protection and Cooperation (NA25), documented management controls for almost all of their contracts that 

we reviewed, but the third office, the Office of Nonproliferation and 

International Security (NA-24), did not document controls for most of their 

contracts because they could not provide the required documentation. More 

specifically, for eight of the nine NA-23 and NA-25 contracts we reviewed, 

the NA-23 headquarters staff and the laboratory staff that manage the 

contracts for NA-25 provided to us complete records of deliverables and 

invoices, as well as evidence that technical officials reviewed and approved 

the deliverables and contract officers reviewed and approved the invoices. 

(For the ninth contract, NA-25 provided us with incomplete documentation 

of its controls.) In addition, NA-23 and NA-25 each apply procedural 

guidance that assists managers in maintaining these controls. However, 

according to an NNSA official, none of the three offices currently perform 

periodic reviews to ensure their existing management controls remain 

appropriate. 

In contrast, we were unable to determine if NA-24 implements management 

controls because, for seven of the nine contracts we reviewed, the 

documentation it provided to us was in most cases either incomplete or it 

provided no clear audit trail that we could follow. (Documentation was 

complete for the eighth and ninth contracts.) The types of documents that 

were missing varied across and within some contracts. In addition, NA-24 

does not provide its contract managers with procedural guidance on how to 

maintain its management controls, nor does it perform a periodic review of 

its controls to ensure the controls are effective and appropriate. 

NNSA Documentation of Management Controls in Nuclear Nonproliferation 

Contracts, by Number of Contracts 

NNSA Office 

Documents 

complete and 

management 

controls evident

Documents and/or 

approvals 

incomplete 

Documents 

provide no clear 

audit trail Total

NA-23 2 0 0 2

NA-24 2 4 3 9

NA-25 6 1 0 7

Source: GAO. 

The National Defense 

Authorization Act for FY 2004 

mandated that we assess the 

management of threat reduction 

and nonproliferation programs that 

the Departments of Defense and 

Energy each administer. The 

objective of this report is to assess 

how the Department of Energy’s 

National Nuclear Security 

Administration (NNSA) implements 

management controls, which we 

define here to be the processes 

ensuring that work done under a 

contract meets contract 

specifications and that payments 

go to contractors as intended. 

What GAO Recommends

To create effective management 

controls, we recommend that the 

Secretary of Energy, working with 

the Administrator of NNSA, require 

that: (1) NNSA develop guidance 

for implementing and documenting 

management controls, (2) program 

managers have quick access to key 

contract records, regardless of the 

records’ location, and (3) NNSA 

perform periodic reviews of its 

management controls to ensure 

their effectiveness. NNSA accepted 

our recommendations but took 

issue with our assessment of 

management controls in some 

cases. We believe that the facts 

support our assessment and that 

the implementation of our 

recommendations will improve the 

effectiveness of the management 

controls we reviewed. 
Page i GAO-05-828 Nuclear Nonproliferation

Contents

Letter 1

Results in Brief 5

Management Controls Are in Place for Two of the Three NNSA 

Offices Administering Contracts for Nuclear Nonproliferation 

Projects 7

Conclusions 11

Recommendations 11

Agency Comments and Our Evaluation 12

Scope and Methodology 15

Appendixes

Appendix I: NNSA Contracts 19

Appendix II: Documentation of Management Controls – GAO Assessment 

by Contract 20

Appendix III: Comments from the Department of Energy 21

Appendix IV: GAO Contact and Staff Acknowledgments 26

Table Table 1: NNSA Documentation of Management Controls in Nuclear 

Nonproliferation Contracts, by Number of Contracts 8
Contents

Page ii GAO-05-828 Nuclear Nonproliferation

Abbreviations

BNL Brookhaven National Laboratory

CRDF U.S. Civilian Research and Development Foundation

DOD Department of Defense

DOE Department of Energy

FRAEC Foundation for Russian American Economic Cooperation

GIPP Global Initiatives for Proliferation Prevention

HEU Highly Enriched Uranium

INL Idaho National Laboratory

IPP Initiatives for Proliferation Prevention

ISTC International Science and Technology Center

LANL Los Alamos National Laboratory

LBNL Lawrence Berkeley National Laboratory

LEU Low Enrichment Uranium

LLNL Lawrence Livermore National Laboratory

NNSA National Nuclear Security Administration

ORNL Oak Ridge National Laboratory

PNNL Pacific Northwest National Laboratory

SNL Sandia National Laboratory

STCU Science and Technology Center of Ukraine

TST Technical Survey Team

This is a work of the U.S. government and is not subject to copyright protection in the 

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reproduce this material separately.
Page 1 GAO-05-828 Nuclear Nonproliferation

United States Government Accountability Office

Washington, D.C. 20548

A

August 29, 2005 Letr

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Duncan Hunter

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

In March 2000, the National Nuclear Security Administration (NNSA) 

assumed responsibility for carrying out the Department of Energy’s (DOE) 

national security and nuclear nonproliferation responsibilities.1

 These 

nuclear nonproliferation projects, most of which have been undertaken in 

Russia but also reside in many other foreign countries,2

 involve DOE’s 

national laboratories,3

 U.S. contractors, and Russian scientists and 

contractors and entail activities such as upgrading the security of nuclear 

weapons sites and “blending-down” weapons-grade highly enriched 

uranium so it can be used in nuclear power plants to generate electricity. 

From fiscal year 2001 through fiscal year 2004, DOE obligated $1.7 billion 

on these projects, which are comprised of multiple contracts for 

construction work or the provision of services.

1

Title 32 of the National Defense Authorization Act for Fiscal Year 2000 (Pub. L. No. 106-65 

(1999)) created NNSA as a separately organized agency within DOE.

2

Countries in the former Soviet Union receiving these contracts include Ukraine, Armenia, 

Georgia, Kazakhstan, Uzbekistan, and the Kyrgyz Republic. Other countries involved in 

NNSA nonproliferation projects include Greece and Turkey. However, of the 72 

nonproliferation projects that NNSA provided us, 66 of the projects, representing over 99.4 

percent of their dollar value, involved work in Russia. 

3

DOE oversees the largest laboratory system of its kind in the world. The mission of DOE’s 

23 national laboratories has evolved over the last 55 years. Originally created to design and 

build atomic bombs under the Manhattan Project, these national laboratories have since 

expanded to conduct research in many disciplines—from high-energy physics to advanced 

computing at facilities throughout the nation. Nine of DOE’s laboratories are large, 

multiprogram national laboratories that dominate DOE’s science and technology activities. 
Page 2 GAO-05-828 Nuclear Nonproliferation

Three offices within NNSA administer most of the nonproliferation 

projects:4

• The Office of Nuclear Risk Reduction (designated by NNSA as NA-23) 

seeks to reduce the risk of accidents at foreign nuclear facilities by, 

among other things, strengthening foreign governments’ abilities to 

respond to nuclear emergencies. For example, two current projects aim 

to enable two Russian cities, Seversk and Zheleznogorsk, to replace 

nuclear power reactors that produce weapons-grade material that the 

cities currently use for heat and electricity production with fossil-fuel 

electricity plants.5

 NA-23 staff provide the day-to-day management of the 

contracts for these projects.

• The Office of Nonproliferation and International Security (NA-24), 

counters proliferation and strengthens the nonproliferation regime by 

promoting transparency and verification in the dismantlement of 

weapons of mass destruction (WMD), denying acquisition of WMD by 

terrorists and illicit trade in nuclear technology, and encouraging 

international partners to strengthen their export controls and redirect 

the work of former nuclear scientists, technicians, and engineers toward 

projects with commercial potential, such as the development of titanium 

alloys for medical applications. DOE’s national laboratories provide 

most of the day-to-day technical management of the contracts for these 

projects.

• The Office of International Material Protection and Cooperation (NA-25) 

administers projects designed to, among other things, improve the 

security of weapons-usable nuclear and radiological material and 

enhance detection infrastructure at sites that currently store these 

4

Two other NNSA offices also do nonproliferation work in Russia: the Office of Global 

Threat Reduction (NA-21) and Office of Fissile Materials Disposition (NA-26). NA-21’s 

mission is to identify, secure, remove, and/or facilitate the disposition of vulnerable, highrisk nuclear and other radiological materials that pose a threat to the United States. Many of 

NA-21’s projects were previously administered by NA-24 and NA-25. NA-26’s mission is to 

reduce inventories of surplus fissile materials in a safe, secure, transparent, and irreversible 

manner. NA-26’s projects were not included because at the time we began our work, they did 

not have significant nonproliferation contracts under way outside the United States.

5

See GAO, Nuclear Nonproliferation: DOE's Effort to Close Russia's Plutonium Production 

Reactors Faces Challenges, and Final Shutdown Is Uncertain, GAO-04-662 (Washington, D.C.: 

June 4, 2004).
Page 3 GAO-05-828 Nuclear Nonproliferation

materials. The national laboratories provide most of the day-to-day 

management of the contracts that carry out these projects. 

The three NNSA offices use essentially the same process to ensure 

contractors’ work and payments made to them meet the specifications of 

the contract. After contractors or scientists complete a task, they send a 

deliverable (a technical report or other documentation of the work 

performed) and an invoice to the appropriate national laboratory or NNSA 

office for technical review and approval. If the technical reviewer approves 

the deliverable, he or she documents approval and forwards the 

documentation of the approval, along with the invoice, to the contract 

officer at the national laboratory or NNSA office. If the contract officer 

approves the invoice, in most cases, the national laboratory then makes 

payment to the contractors or scientists.6

 In other cases, the deliverable 

and invoice then proceed to the relevant NNSA office for further review, 

and either the office or another organization makes the final payment to the 

contractors or scientists.7

A key way for federal program managers to ensure accountability within 

such contracting processes, as well as to improve outcomes and minimize 

problems in their programs, is to implement appropriate management 

(internal) controls. As described in two GAO documents, Standards for 

Internal Controls in the Federal Government and Internal Control 

Management and Evaluation Tool, management controls can address 

6

For some contracts under the auspices of NA-24’s Initiatives for Proliferation Prevention 

(IPP) program, the International Science and Technology Center (ISTC) in Moscow, or the 

Science and Technology Center of Ukraine (STCU) in Kiev manage the contract and make 

all payments. In these cases, quarterly payments may be made before the technical review is 

completed but, if the technical reviewer is not satisfied with the progress of the work, the 

next quarter’s payments may be withheld until the issue is resolved. These centers were the 

subject of an earlier GAO report, see GAO, Weapons of Mass Destruction: State Department 

Oversight of Science Centers Program, GAO-01-582 (Washington, D.C.: May 10, 2001). See also 

Nuclear Nonproliferation: DOE's Efforts to Assist Weapons Scientists in Russia's Nuclear Cities 

Face Challenges, GAO-01-429 (Washington, D.C.: May 3, 2001).

7

Those IPP contracts not managed by one of the science centers are managed by a national 

laboratory or NNSA headquarters directly. In these cases, the process for technical approval 

of deliverables is similar, but NNSA headquarters must also approve deliverables before 

payments are approved. The actual payments are made via the U.S. Civilian Research and 

Development Foundation (CRDF). All IPP program deliverable payments are made via third 

parties (ISTC, STCU, and CRDF) directly into former Soviet weapons scientists’ or 

engineers’ bank accounts in order to comply with the congressional requirement that all 

payments be made tax free; these three organizations have the legal and technical 

wherewithal to do so.
Page 4 GAO-05-828 Nuclear Nonproliferation

many activities in a program or organization. Therefore, it is important that 

a program’s management controls relate directly to its processes and 

activities. Thus, in the context of NNSA’s nuclear nonproliferation projects, 

appropriate management controls mean that the three offices do the 

following with each component contract:

• maintain complete records of deliverables and technical officials’ 

review and approval of them;

• maintain complete records of invoices and contract officers’ review and 

approval of them;

• maintain documentation of the above records for ready access by 

agency program managers, either at a national laboratory or 

headquarters, to facilitate active monitoring of the contract; 

• use formal, procedural guidance that specifies processes for 

maintaining management controls; and

• periodically review management control processes and documentation 

to ensure they remain appropriate and effective.

The National Defense Authorization Act for Fiscal Year 20048

 mandated 

that we assess the management controls used to carry out nonproliferation 

and threat reduction projects administered by DOE and the Department of 

Defense (DOD) and the effect of these controls on the execution of the 

projects. In response, we have issued two reports to date. The first report 

assessed how DOD and NNSA use their own strategies to guide their 

respective threat reduction and nonproliferation projects and how well the 

agencies have coordinated their strategies.9

 The second report examined 

DOD’s management controls for its Cooperative Threat Reduction 

program.10 This report, which completes our response to the mandate, 

assesses NNSA’s implementation of management controls for its nuclear 

nonproliferation projects.

8

Pub. L. No. 108-136, § 3611 (2003).

9

See GAO, Weapons of Mass Destruction: Nonproliferation Programs Need Better Integration,

GAO-05-157 (Washington, D.C.: Jan. 28, 2005). 

10See GAO, Cooperative Threat Reduction: DOD Has Improved Its Management and Internal 

Controls, but Challenges Remain, GAO-05-329 (Washington, D.C.: June 30, 2005).
Page 5 GAO-05-828 Nuclear Nonproliferation

To perform this assessment, we obtained from the three relevant NNSA 

offices a list of contracts for nuclear nonproliferation projects that were 

active between June 2001 and June 2004. From this list, we then identified 

contracts whose value exceeded $1 million. Going down this list, we 

selected a nonprobability sample of the largest 18 dollar-value contracts: 

two from NA-23, nine from NA-24, and seven from NA-25.11 This mix 

reflected the proportion of contracts among the three offices that were 

active from June 2001 through June 2004 and included at least one contract 

from each of the national laboratories cited on the original list of 

nonproliferation contracts that we received from NNSA—Brookhaven in 

New York, Los Alamos and Sandia in New Mexico, Lawrence Berkeley and 

Lawrence Livermore in California, Oak Ridge and the Y-12 National 

Security Complex in Tennessee, Pacific Northwest in Washington, and the 

Idaho National Laboratory. In addition, we obtained documents on the 

three offices and the 18 contracts and interviewed officials from each of the 

offices and national laboratories.12 A more detailed description of our 

methodology is included at the end of this letter.

We conducted our work from May 2004 to July 2005 in accordance with 

generally accepted government auditing standards.

Results in Brief Two NNSA offices, NA-23 and NA-25, documented management controls 

for almost all of their contracts that we reviewed; but the third office, NA24, could not provide us with complete records related to its contracts, and 

thus could not document its management controls. Regarding NA-23 and 

NA-25, for eight of the nine contracts we reviewed, the staffs that manage 

these contracts provided to us complete records of deliverables, invoices, 

and evidence that technical reviewers approved the deliverables and 

contract officers approved the invoices. NA-23 and NA-25, as evidenced by 

their ability to provide us with key contract records, maintain the key 

contract documents at headquarters and the national laboratories, 

respectively, such that the records are quickly accessible for active 

monitoring by contract and program managers. In addition, NA-23 and NA11Results from nonprobability samples cannot be used to make inferences about a 

population, because in a nonprobability sample, some elements of the population being 

studied have no chance or an unknown chance of being selected as part of the sample.

12Although one of the contracts we examined involves work in Ukraine, the other 17 

contracts involve work in Russia, so we refer to all work as being in Russia for simplicity of 

discussion.
Page 6 GAO-05-828 Nuclear Nonproliferation

25 each use formal procedural guidance on how to maintain management 

controls for their contracts. Finally, according to NNSA officials, neither of 

the offices performs periodic reviews of their management control 

processes, although NA-23 had a review performed on its management 

controls at the outset of its projects. 

Regarding NA-24, staff could not provide a complete set of deliverables, 

invoices, and approvals of deliverables and invoices for seven of the nine 

contracts we reviewed. The types of missing documents differed among 

contracts. For example, for one contract, NA-24 documented that a 

technical official had approved work performed but provided no proof that 

a contract officer had approved the invoice for the work. On another 

contract, NA-24 provided us with fewer than half the deliverables and onefifth of the invoices. Moreover, although NA-24 officials told us that the 

national laboratories maintain key contract records so that NA-24’s 

managers have quick access to them, the inability of NA-24 to obtain these 

records suggests that this may not be the case. In addition, NA-24 does not 

use formal, procedural guidance on how to maintain management controls 

for its contracts. Finally, like NA-23 and NA-25, NA-24 does not periodically 

review its management control processes, as suggested by GAO 

management control standards, to ensure that the controls remain 

appropriate and effective.

We are recommending that the Secretary of Energy, working with the 

Administrator of the National Nuclear Security Administration, require 

NNSA to take a number of actions designed to strengthen its management 

control processes. Specifically, we recommend that (1) NNSA develop 

formal, procedural guidance for its program managers that clearly states 

management control processes; (2) NNSA’s program managers maintain 

quick access to key contract records such as deliverables and invoices that 

relate to management controls, regardless of the records’ location; and (3) 

NNSA perform periodic reviews of its management controls to ensure their 

effectiveness. 

In its written comments to a draft of this report, NNSA stated that it will 

undertake a series of actions in response to our recommendations, but it 

believes that our report creates an inaccurate perception that the Defense 

Nuclear Nonproliferation Program, particularly NA-24, is lacking in the 

application of management controls. In response, we believe that the facts 

support our assessment and that the implementation of our 

recommendations will improve the effectiveness of the management 
Page 7 GAO-05-828 Nuclear Nonproliferation

controls we reviewed. We have incorporated technical changes into the 

report where appropriate. 

Management Controls 

Are in Place for Two of 

the Three NNSA 

Offices Administering 

Contracts for Nuclear 

Nonproliferation 

Projects

Two NNSA offices, NA-23 and NA-25, documented management controls 

for almost all of their contracts that we reviewed; but the third office, NA24, could not provide us with the complete records necessary to document 

these controls. Similarly, NA-23 and NA-25 provide their technical 

reviewers and contract managers with procedural guidance that assists in 

maintaining these controls, while NA-24 did not provide this type of 

guidance. In addition, NA-23 and NA-25 maintain the key contract 

documents at headquarters and the national laboratories, respectively, in 

such a way that the records are quickly accessible for active monitoring by 

contract and program managers, as evidenced by their ability to provide us 

with key contract records. 

NA-23 and NA-25 

Documented Management 

Controls for the Contracts 

We Reviewed 

Two NNSA offices, NA-23 and NA-25, documented management controls 

for most of their contracts that we reviewed. As shown in table 1, for eight 

of the nine contracts we reviewed from these two offices, NA-23 staff and 

national laboratory officials who manage NA-25’s contracts provided us 

with complete records of deliverables and invoices as well as evidence that 

technical reviewers and contract officers reviewed and approved 

deliverables and invoices, respectively. (For the ninth contract, which 

involved comprehensive physical protection upgrades to a strategic rocket 

forces site in Russia, Oak Ridge National Laboratory did not provide 

complete documentation of approvals for deliverables.) For example, the 

two contracts we reviewed from NA-23—which are designed to construct 

or refurbish fossil-fuel plants for the Russian cities of Zheleznogorsk and 

Seversk so that each city can shut down its plutonium-producing nuclear 

reactor that it currently uses to generate heat and electricity—involve 

multiple contractors in the United States and Russia. Despite being by far 

the largest contracts by dollar value in our sample ($390 million for Seversk 

and $570 million for Zheleznogorsk—the next largest contract was valued 

at $29 million), NA-23 headquarters provided us with, among other things, 

complete documentation of all invoices; photographs of the deliverables 

(i.e., construction work) completed to date; and evidence of the reviews 

and approvals of the invoices and payments to the foreign contractors and 

subcontractors. NA-23 also provided us with detailed breakdowns of work 

(called Work Breakdown Structures), work authorizations, and cost 

evaluations for each project. The documentation NA-23 provided us was 
Page 8 GAO-05-828 Nuclear Nonproliferation

among the most complete and organized of all the contracts we reviewed. 

An NA-23 official told us that this office makes efforts to specify in acute 

detail the work to be done and the costs for that work because this enables 

the office to effectively monitor and maintain a degree of control over the 

work of foreign contractors and subcontractors. 

Table 1: NNSA Documentation of Management Controls in Nuclear Nonproliferation 

Contracts, by Number of Contracts 

Source: GAO.

NA-25 officials also provided us with complete documentation of 

management controls for the contracts they manage. As shown in table 1, 

for six of the seven contracts we reviewed, the national laboratories that 

manage these contracts provided complete records of deliverables and 

invoices as well as evidence that technical reviewers at the national 

laboratories and/or contract officers at the national laboratories and/or 

NA-25 reviewed and approved the deliverables and invoices, respectively. 

(The seventh contract is the Oak Ridge contract, mentioned above.) For 

example, for the two contracts we reviewed that Brookhaven National 

Laboratory manages for NA-25, each invoice on the contracts received at 

least one approval from technical reviewers at the laboratory, and each 

financial transaction received two approvals from contract managers. In 

another contract involving the purchase of nuclear detection devices for 

deployment in Russia, the national laboratory managing the contract— 

Pacific Northwest—provided us with purchase orders for the contract as 

well as a receipt of delivery so that we could verify that the goods 

purchased had reached their destination prior to final delivery in Russia. 

Both NA-23 and NA-25 maintain copies of key records, such as deliverables 

and invoices within quick access to program and contract managers, as 

evidenced by the ability of each office to provide these records to us. NA-23 

maintains these records at headquarters, while NA-25 maintains the 

records at the national laboratories that provide the day-to-day 

management over the contracts. However, it is important to note that the 

NNSA 

Office

Documents complete

and management

controls evident

Documents and/

or approvals

incomplete

Documents

provide no clear

audit trail Total

NA-23 2 0 0 2

NA-24 2 4 3 9

NA-25 6 1 0 7
Page 9 GAO-05-828 Nuclear Nonproliferation

laboratories should be able to provide NNSA managers with complete and 

quick access to contract records, as the national laboratories are 

contractors to DOE, and it is NNSA that is ultimately responsible for 

monitoring the nonproliferation projects. 

NA-23 and NA-25 each apply formal, procedural guidance that assists 

technical reviewers and contract managers in maintaining management 

controls. For example, because the contracts involve capital procurement 

or acquisitions exceeding $5 million, NA-23 must apply the rules and 

procedures specified in DOE Order 413.3, Project Management for the 

Acquisition of Capital Assets. NA-23’s contract managers receive program 

guidance through work authorizations signed by an authorized official at 

NNSA headquarters and guidance on the payment process via DOE’s 

Contract Specialist Guide 42.8, which specifies procedures for review and 

approval of vouchers and invoices so that contract managers will handle 

them in a timely and efficient manner. According to NA-23 officials, Federal 

Acquisition Regulations also stipulate many of the specific steps that NA23 must undertake in the planning, implementation, and review of the 

contracts that make up the Seversk and Zheleznogorsk projects. NA-25 

developed its own procedural guidance, known as the Project Management 

Document, for technical reviewers and contract officials. This guide 

provides instructions on, among other things, project planning, funds 

management, reporting of a project’s ongoing progress and costs, contract 

management, and procedures for putting important contract data into NA25’s Program Management Information System. 

Finally, according to NNSA’s Director of Policy and Internal Controls 

Management and an NNSA official in charge of acquisitions in the Office of 

Defense Nuclear Nonproliferation, neither NA-23 nor NA-25 perform 

periodic reviews of their management control processes, although NNSA’s 

Office of Engineering and Project Support, at the outset of NA-23’s projects, 

did perform a general review of NA-23’s management controls. GAO’s 

management control guidelines state that agencies should monitor and 

regularly evaluate their control activities to ensure that they are still 

appropriate and working as intended.

NA-24 Provided Insufficient 

Documentation on 

Management Controls

NA-24 could not provide evidence of the records necessary to document its 

management controls. Despite our numerous inquiries from January 2005 

to June 2005 and discussions with agency officials—including one with 

NNSA’s Principal Assistant Deputy Administrator—the documentation we 

received on seven of the nine contracts we examined from this office was 
Page 10 GAO-05-828 Nuclear Nonproliferation

either incomplete or did not provide a clear audit trail that we could follow. 

(For the two other contracts, one managed by Brookhaven National 

Laboratory and one managed by Los Alamos National Laboratory, 

laboratory officials provided complete documentation of management 

controls.) For example, for one contract managed by the Idaho National 

Laboratory involving the discovery of bioactive compounds in Russia that 

may be used in watershed protection or carbon sequestration: 

• Ten of the 35 invoices did not include a document showing that NA-24 

had authorized payment to the Russian contractors. 

• Fourteen invoices on this contract did not include evidence that Idaho 

National Laboratory’s technical reviewer for the contract approved the 

deliverable on which the invoice was based. 

For another contract managed through NA-24 headquarters, Foundation 

for Russian American Economic Cooperation (FRAEC), NA-24 provided us 

with documentation, but we were able to determine very little about the 

contract on the basis of this documentation because of the following 

reasons:

• there appeared to be no explanation of the linkages between the work 

products outlined in the contract, the deliverables, and the invoices, and

• we received fewer than half of the invoices for the contract and fewer 

than one-fifth of the deliverables for the contract.

Senior officials with NA-24 told us that it doesn’t need to keep copies of key 

contract documents because the documents are maintained at the national 

laboratories managing the contracts and accessible to NA-24. However, the 

fact NA-24 was unable to obtain complete sets of records on seven of the 

nine contracts we reviewed suggests otherwise. In addition, NA-24 did not 

provide us with formal, written guidance that provides managers with the 

procedures on how to process and maintain key contract records, and the 

office appears to rely on each national laboratory to provide its own 

procedural guidelines.

Finally, NA-24, like NA-23 and NA-25, does not perform periodic reviews of 

its management control processes. GAO’s management control guidelines 

state that agencies should monitor and regularly evaluate their control 

activities to ensure that they are still appropriate and working as intended.
Page 11 GAO-05-828 Nuclear Nonproliferation

Conclusions On the basis of our review of the contracts, it appears that, if an NNSA 

program office provides its managers with procedural guidance on how to 

maintain management controls, the office does a better job at 

implementing and documenting these management controls. In our view, 

procedural guidance enables program and contract managers to implement 

and document management controls in a systematic way, as evidenced by 

the fact that NA-23 and NA-25 each use procedural guidance and were able 

to document their controls.

In addition, maintaining managers’ quick and complete access to key 

contract records—regardless of whether the records are located at the 

national laboratory or NNSA headquarters—appears to coincide with 

maintaining and documenting management controls. Officials at NA-24 told 

us that they have access to all contract records through the laboratories 

that manage their contracts, yet the office was unable to provide us with 

these records.

Finally, as required by GAO standards for management controls, periodic 

reviews of management controls would help the NNSA offices that we 

reviewed determine whether they are adhering to their management 

controls and whether these controls are relevant and effective. For 

example, if NA-24 had performed a review of its management control 

procedures, it might have discovered that it did not have on hand complete 

sets of invoices and approvals of deliverables for each of the office’s 

nonproliferation contracts.

Recommendations To ensure that each NNSA office that we reviewed maintains complete 

documentation of its management controls, we recommend that the 

Secretary of Energy, working with the Administrator of the National 

Nuclear Security Administration, require NNSA to take the following three 

actions:

• each NNSA office use formal, procedural guidance that clearly states 

management control processes;

• NNSA’s program managers maintain quick access to key contract 

records such as deliverables and invoices that relate to management 

controls, regardless of whether the records are located at a national 

laboratory or headquarters; and
Page 12 GAO-05-828 Nuclear Nonproliferation

• NNSA perform periodic reviews of its management control processes to 

be certain that each program office’s management controls can be 

documented and remain appropriate and effective.

Agency Comments and 

Our Evaluation

We provided the Department of Energy’s National Nuclear Security 

Administration (NNSA) with a draft of this report for its review and 

comment. NNSA’s written comments are presented as appendix III. In its 

written comments, NNSA notes that it will undertake a series of actions in 

response to our recommendations, but also states that our report creates 

an incorrect perception that the Defense Nuclear Nonproliferation 

Program, particularly NA-24, is lacking in the application of management 

controls.

In their comments to our draft report, NNSA’s major points are as follow:

1. We reviewed only contracts from a portion of NA-24, Global Initiatives 

for Proliferation Prevention (GIPP), and we did not receive complete 

documentation from NA-24 because we did not speak to the 

procurement officer for the GIPP program;

2. NA-24 has implemented “very stringent” management controls;

3. We mischaracterize the management controls on two contracts—one 

managed by the Idaho National Laboratory (INL) and the other 

managed by NA-24 headquarters staff;

4. For an NA-25 contract managed by Oak Ridge National Laboratory, we 

received incomplete documentation because of an initial 

misunderstanding by the laboratory rather than a control problem 

within NA-25, and that managers at Oak Ridge sent us the missing 

documents on August 16, 2005.

5. NA-25 does conduct external program management reviews of its 

management controls through a Technical Survey Team (TST).

First, regarding the scope of our review, at the outset of our work, we 

asked NA-24 for a list of all its contracts in Russia and other countries that 

were active from the beginning of June 2001 through the end of June 2004, 

then took a nonprobability sample of those contracts. We did not 

intentionally focus solely on NA-24’s GIPP program. Regardless, as we state 

in the report, results from nonprobability samples cannot be used to make 
Page 13 GAO-05-828 Nuclear Nonproliferation

inferences about a population, and our statements about NA-24 relate to its 

ability to document the management controls for the contracts we 

examined. Regarding NNSA’s comment that we did not meet with the GIPP 

procurement officer, it is unclear to us why NNSA is making this point. For 

most of the contracts we reviewed, NA-24 provided us with documents 

directly. After providing NA-24 with a fact sheet stating that we received 

incomplete documentation for seven of the nine the contracts we reviewed, 

we met with NA-24’s Assistant Deputy Administrator on June 27, 2005, who 

provided us with additional documentation that she characterized as 

“complete”. After a thorough review, we found much of this additional 

documentation to be incomplete, indecipherable, and often duplicative of 

the information we had already been given earlier in our review. On August 

17, 2005, after submitting our draft report to NNSA for comment, we met 

again with the Assistant Deputy Administrator as well as the Associate 

Assistant Deputy Administrator, the Principal Assistant Deputy 

Administrator for Defense Nuclear Nonproliferation, and the GIPP 

procurement officer. At this meeting, the procurement officer provided us 

with no new documentation, and the NA-24 officials again asserted that the 

documents they provided us in June were “complete”. Furthermore, during 

the meeting, while discussing some of the documents that we found to be 

missing, we asked the officials to produce a few of these documents at 

random from the materials they gave us in June. In most cases, they were 

unable to do so. In fact, in the case of one missing document, an NA-24 

official stated that it “had to be somewhere in there” (included in the 

materials submitted in June), but it was not. 

Second, we disagree with NA-24’s contention that it has implemented “very 

stringent” management controls. Although NNSA cites a number of actions 

that NA-24 has taken to strengthen its controls, the fact remains that NA-24 

did not provide us with sufficient documentation for seven of the nine 

contracts we reviewed despite numerous requests from us to do so. For 

example, on one contract managed by the Y-12 National Security Complex, 

rather than providing a “real-time” technical reviewer’s approval for each 

deliverable, NA-24 provided us with a single email from the technical 

reviewer, dated June 24, 2005, that purported to cover two years’ worth of 

missing approvals. This post-hoc approval does not represent a satisfactory 

management control. Based on what NA-24 provided us, we believe that the 

office’s controls for some contracts we reviewed are weak. In our view, NA24 needs to implement actions that address and strengthen the specific 

management controls we identify in the report, and we are encouraged that 

NNSA has agreed to implement our recommendations. 
Page 14 GAO-05-828 Nuclear Nonproliferation

Third, for the INL-managed contract, NNSA asserts that it provided us in 

June with the documentation we sought. However, the documents were 

indecipherable to us because most were unlabeled, presented in no 

particular chronological order, and rely on emails in which neither the 

sender’s nor recipients’ positions were identified. For the headquartersmanaged contract, NNSA contends that, at our meeting on August 17, 2005, 

it explained how the process of deliverables and invoices for this contract 

(providing assistance to the Foundation for Russian American Economic 

Cooperation) differs from the processes of other contracts we examined. 

Although this may be the case, the documents that NA-24 provided did not 

clearly explain or illustrate those processes. More importantly, the 

documents that NA-24 provided comprised fewer than one-half of the 

deliverables and one-fifth of the invoices that we identified in June as 

missing.

Fourth, although we have fewer concerns about NA-25’s management 

controls, in the case of one of the contracts managed by Oak Ridge 

National Laboratory, managers provided acceptable documentation of 

technical reviewers’ approvals on only three of six deliverables. Although 

we agree with NNSA that officials at the laboratory did not initially provide 

us with complete documentation of technical approvals, as we state in the 

report, NNSA is ultimately responsible for the controls on its contracts, 

even if the contracts are managed day-to-day by someone else. In addition, 

the documentation that officials at the laboratory sent us on August 16, 

2005, did not provide all the information that was missing. Rather, they 

provided documentation of one additional technical review and 

resubmitted materials that we had already informed Oak Ridge managers 

did not represent acceptable documentation. As a result, we stand by our 

recommendation that NNSA perform periodic reviews of management 

controls for each of the three offices we examined.

Fifth, regarding NNSA’s statement that TST performs external reviews of 

NA-25’s management controls, it is important to note that the TST is a panel 

of experts established by DOE to determine if DOE-installed security 

systems at Russian nuclear sites meet departmental guidelines for 

effectively reducing the risk of nuclear theft. Moreover, we spoke to NNSA’s 

Director of Policy and Internal Controls Management on August 26, 2005, 

and he agreed that, while the TST provides useful project oversight, it does 

not provide the kind of comprehensive review of program management 

controls examined in our review. More importantly, during the course of 

our work, NA-25 did not provide evidence of any reviews of their 

management controls.
Page 15 GAO-05-828 Nuclear Nonproliferation

Finally, we believe it is important to note that management controls were 

most evident on NA-24 and NA-25 contracts managed by national 

laboratories from which we were able to obtain all the necessary 

documentation directly, without any NNSA headquarters involvement. This 

was especially noteworthy in the case of NA-24 because both of this office’s 

contracts that we determined demonstrated effective management controls 

were managed by a national laboratory – Brookhaven or Los Alamos – and 

in both cases we obtained all the necessary documents directly from the 

laboratory managers. 

Scope and 

Methodology

To assess the effectiveness of the NNSA’s management controls of its 

nonproliferation projects, we identified the three offices within NNSA that 

currently oversee and manage the nonproliferation projects that fell within 

the scope of our work: (1) the Office of Nuclear Risk Reduction 

(designated by NNSA as NA-23), (2) the Office of Nonproliferation and 

International Security (NA-24), and (3) the Office of International Material 

Protection and Cooperation (NA-25). To identify what constitutes 

management controls, we consulted two GAO documents: Standards for 

Internal Controls in the Federal Government and Internal Control 

Management and Evaluation Tool. Using these documents, we focused on 

the management controls associated with NNSA’s nonproliferation 

contracts. More specifically, we examined the supervisory actions designed 

to ensure that the work performed under the contract (known as 

“deliverables”) meet the contract’s specifications and that payments for 

that work receive required approvals and reach the intended recipients. To 

do this, we sought from NNSA the following documents for each of the 

contracts we reviewed:

• statement of work;

• contract deliverables (or summary of the deliverable – as practicable);

• technical approval from an NNSA or national laboratory official for each 

deliverable;

• invoices for all deliverables;

• documentation of an independent payment authorization and review for 

each deliverable, which should include at least one signature from a 

national laboratory financial office official supervising the contract 

and/or one official at NNSA headquarters;
Page 16 GAO-05-828 Nuclear Nonproliferation

• approval letter from NNSA or the national laboratory authorizing the 

final payment of the contractors for a deliverable (as applicable);

• a guide to the process each national laboratory uses to approve a 

deliverable and authorize payment.

To select a nonprobability sample of contracts, we obtained, from the three 

offices in NNSA, a list of all their nonproliferation contracts in Russia and 

other countries that were active from the beginning of June 2001 through 

the end of June 2004. We identified contracts whose value exceeded $1 

million and arranged them in descending dollar value. We chose the 15 

contracts with the largest dollar value, subject to the constraints that (1) no 

more than two contracts come from NA-23, 7 contracts from NA-24, and six 

contracts from NA-25 and (2) a single national laboratory manages no more 

than three contracts in our sample.13 We chose these constraints so that (1) 

the mix of contracts among the three offices in our sample roughly 

reflected the mix of contracts among the three offices in our original list 

and (2) the sample would reflect a diversity of laboratories. Finally, we 

included one contract from each of the three remaining laboratories that 

were not yet included in our sample, bringing our final list to 18 contracts.

To ensure that NNSA’s lists of its nuclear nonproliferation contracts were 

sufficiently reliable for our purposes, we obtained responses to a series of 

questions covering issues such as data entry, data access, quality-control 

procedures, and the accuracy and completeness of the data for the eight 

databases from which these data were drawn. Follow-up questions were 

added, whenever necessary. Based on our review of this work, we found 

these data to be sufficiently reliable for the purpose of using these lists to 

select a nonprobability sample of 18 contracts for review.

In addition to contract documents, we also interviewed NNSA officials in 

Washington, D.C., and Germantown, Maryland. To gather information 

about the contracts we selected for review, we traveled to Brookhaven 

National Laboratory in New York and Los Alamos and Sandia National 

Laboratories in New Mexico to meet with laboratory officials and program, 

project, procurement, and contract managers to explain our review; to 

learn about NNSA programs and projects, as well as procedures for 

implementing management controls; and to determine the kinds of project 

documents we would need. To gather information and documents on the 

13Only two contracts from NA-23 had dollar values exceeding $1 million.
Page 17 GAO-05-828 Nuclear Nonproliferation

remaining contracts, on the basis of what we learned during these trips, we 

sent detailed written communications and conducted teleconferences, 

numerous and frequent in some cases, with the requisite staff in 

headquarters and at other national laboratories. Specifically, we contacted 

staff at the Lawrence Berkeley and Lawrence Livermore National 

Laboratories in California, the Oak Ridge National Laboratory and the Y-12 

National Security Complex in Tennessee, the Pacific Northwest National 

Laboratory in Washington, and the Idaho National Laboratory. We focused 

on identifying the controls implemented to ensure that former Soviet Union 

partners meet contract terms before the invoices for the deliverables are 

paid. 

After we gathered and evaluated all the available documentation from 

NNSA headquarters and the various national laboratories for each contract, 

we assessed the contracts on the basis of the completeness of their 

documentation and overall evidence of the implementation of management 

controls. We placed each contract in one of three categories: (1) contracts 

for which all or almost all of the necessary documentation was provided— 

especially the major contract documents (statement of work and task 

orders), deliverables, and technical and independent contractual/financial 

approvals of each deliverable—providing clear evidence of the systematic 

implementation of management controls throughout the life-cycle of the 

contract; (2) contracts for which most of the documents were provided, 

suggesting that systematic implementation of management controls may be 

occurring but not clearly indicating as much; and (3) contracts for which 

there were significant gaps in necessary documentation, providing no basis 

to conclude that systematic management controls are implemented.14

We conducted our review between May 2004 and July 2005 in accordance 

with generally accepted government auditing standards.

We are sending copies of this report to interested congressional 

committees and the Secretary of Energy. We will also make copies available 

14The Federal Acquisition Regulation and the Department of Energy Acquisition 

Regulation provide regulatory requirements that may apply to NNSA and laboratory 

contracts. These requirements include, for certain contracts, systems for filing and 

maintenance of documents and the necessity for implementation of management controls in 

accordance with Comptroller General standards. We did not evaluate whether the contracts 

reviewed for this report were managed and documented in accordance with any applicable 

contracting regulations.
Page 18 GAO-05-828 Nuclear Nonproliferation

to others upon request. In addition, the report will be available on the GAO 

Web site at http://www.gao.gov.

If you have any questions regarding this report, please contact Mr. Aloise at 

(202) 512-3841 or aloisee@gao.gov. Contact points for our Office of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO contacts and staff acknowledgements are listed in 

appendix IV.

Gene Aloise

Director, Natural Resources and Environment
Page 19 GAO-05-828 Nuclear Nonproliferation

Appendix I

NNSA Contracts ApApenednxidexiIs

The following table lists all NNSA contracts that we reviewed.

Source: GAO.

Project NA Managing Lab $ Contract

Zheleznogorsk Fossil Fuel Plant NA-23 HQ $570,500,000

Seversk Fossil Fuel Plant Refurbishment NA-23 HQ $390,000,000

Luch - Task Order 1 – Blend-down HEU to LEU NA-25 BNL $29,024,700

PBZ-C2 Comprehensive Physical Protection Upgrades to Russian Navy Site NA-25 SNL $10,737,740

CBC-B2 Comprehensive Physical Protection Upgrades to Russian Navy Site NA-25 SNL $10,716,770

TVZ01-Minatom Guard Railcar Procurement NA-25 ORNL $9,262,000

COMP2BR-Comprehensive Physical Protection System Upgrades NA-25 ORNL $9,050,000

Aquila – Purchase of Equipment to enhance the monitoring of nuclear 

materials

NA-25 BNL $8,825,572

FRAEC –Technical and administrative assistance in planning, establishing, 

and operating the international development centers.

NA-24 HQ $3,716,319

Pipe Coating Facility (#63544) – Establish a production facility within the city 

of Snezhinsk for the production of insulated pipes. 

NA-24 BNL $2,600,628

T2-0192-RU – Development of a 3-D neutronics optimization algorithm for 

application to cancer treatment facilities.

NA-24 LBNL $1,620,000

Nuclear Non-Proliferation Center –The Analytical Center for Nuclear NonProliferation will carry out research on several projects, including a Quarterly 

Information Bulletin and Internet Analysis and creation of an Internet page.

NA-24 HQ $1,500,000

T2-0186-RU – Development of a Tank Retrieval and Closure Demonstration 

Center in the Mining and Chemical Combine (MCC) to help in retrieval and 

processing of radioactive wastes generated during production of plutonium for 

nuclear weapons.

NA-24 SNL $1,350,000

T2-0194-RU – The use of new technologies to process important Ti alloys for 

medical applications and aerospace industries. 

NA-24 LANL $1,290,000

T2-0204-UA – Welding and Reactive Diffusion Joining (RDJ) repair technologies 

for use in aircraft and land-based turbine engines.

NA-24 ORNL/

Y-12

$1,260,000

SAIC/P.O. # 14436 – Nuclear material detectors for border guards NA-25 PNNL $2,330,700

T2-0244-RU – Development of an explosives detection system. NA-24 LLNL $1,260,000

T2-2002-RU – Discovery of bioactive compounds from selected environments

in Russia for products such as watershed protection and carbon sequestration.

NA-24 INL $1,110,000
Page 20 GAO-05-828 Nuclear Nonproliferation

Appendix II

Documentation of Management Controls – 

GAO Assessment by Contract ApendxiI

Source: GAO.

NNSA 

Office Managing lab Project

Documents complete

and management

controls evident

Documents

and/or

approvals

incomplete

Documents

provide no clear

audit trail

NA-23 HQ Zheleznogorsk Fossil Fuel Plant 1

NA-23 HQ Seversk Fossil Fuel Plant 1

NA-25 BNL Luch Task Order 1 – Blend-down 

HEU to LEU

1

NA-25 SNL PBZ C2 – Security Upgrades to 

Russian Navy Site

1

NA-25 SNL CBC B2 – Security Upgrades to 

Russian Navy Site

1

NA-25 ORNL TVZ01– Minatom Guard Railcar 

Procurement

1

NA-25 ORNL COMP2BR – Comprehensive 

Physical Protection Systems 

Upgrades

1

NA-25 BNL Aquila – Enhanced nuclear materials 

monitoring systems

1

NA-24 HQ FRAEC – Technical and 

administrative assistance in planning, 

establishing, and operating 

international development centers.

1

NA-24 BNL SEST #63544 – Pipe Coating Facility 1

NA-24 LBNL T2-0192-RU – Neutronics Algorithm 

for Cancer Treatment

1

NA-24 HQ Nuclear Non-Proliferation Center 1

NA-24 SNL T2-0186-RU – Tank Retrieval 1

NA-24 LANL T2-0194-RU – Ti Alloys for Medical 

Applications

1

NA-24 ORNL/Y-12 T2-204-UA – Welding and Reactive 

Diffusion Joining 

1

NA-25 PNNL SAIC/P.O. #14436 – Nuclear material 

detectors for border guards

1

NA-24 LLNL T2-0244-RU – Explosive Detection 

System

1

NA-24 INL T2-2002-RU (subcontract 240) – 

Discovery of Bioactive Compounds

1

Total 10 5 3
Page 21 GAO-05-828 Nuclear Nonproliferation

Appendix III

Comments from the Department of Energy ApendxiI
Appendix III

Comments from the Department of Energy

Page 22 GAO-05-828 Nuclear Nonproliferation
Appendix III

Comments from the Department of Energy

Page 23 GAO-05-828 Nuclear Nonproliferation
Appendix III

Comments from the Department of Energy

Page 24 GAO-05-828 Nuclear Nonproliferation
Appendix III

Comments from the Department of Energy

Page 25 GAO-05-828 Nuclear Nonproliferation
Page 26 GAO-05-828 Nuclear Nonproliferation

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact F. James Shafer (202) 512-6002

Staff 

Acknowledgments

In addition, Nancy Crothers, Greg Marchand, Judy Pagano, Daren Sweeney, 

and Kevin Tarmann made significant contributions to this report.

(360470)
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