Audit Report 

U.S. Department of Energy 

Office of Inspector General 

Office of Audit Services 

Management Controls over 

Meal Expenses at Management 

and Operating Contractors 

OAS-M-05-04 April 2005 


REPORT ON MANAGEMENT CONTROLS OVER MEAL 

EXPENSES AT MANAGEMENT AND OPERATING 

CONTRACTORS 

TABLE OF CONTENTS 

Reimbursement of Meal Expenses

Details of Finding ....................................................................................................1 

Recommendations....................................................................................................3 

Comments ................................................................................................................4 

Appendices

1. Objective, Scope, and Methodology...................................................................6 

2. Prior Audit Reports.............................................................................................8 

3. Management Comments .....................................................................................9 

 

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Page 2 Details of Finding 

because it considered them to be a personal expense of the 

individual. Pacific Northwest National Laboratory's 

contract only permits local meals at formal conferences and 

specifically prohibits meals at routine internal meetings and 

at in-house functions. Also, Idaho National Engineering 

and Environmental Laboratory's policy prohibits meals at 

company sponsored local training and at working staff 

meetings. Further, the Yucca Mountain Project followed 

the procedure outlined by the Office of Civilian 

Radioactive Waste Management which states that meals for 

training, staff meetings, and other routine meetings are not 

allowable. 

Our finding related to the reimbursement for local meals is 

not unique. Our report on the University of California's 

Costs Claimed and Related Internal Controls for Operation 

of the Los Alamos National Laboratory (DOE/IG-0596, 

April 2003) projected that $3.7 million out of $4.2 million 

claimed in FYs 2000 through 2002 represented 

questionable costs for local meals provided to employees. 

In addition, our audit of Central Office Expenses for the 

Thomas Jefferson National Accelerator Facility

(DOE/IG-0629, December 2003) found that the 

Department had reimbursed the contractor for local meals 

provided to employees. 

Department Oversight Questionable local meal costs were reimbursed because the 

Department and the program offices responsible for the 

contractors who incurred questionable local meal expenses 

had not issued guidance to ensure that contracting offices 

and contractors were consistent in their treatment of local 

meals. 

In our opinion, guidance to contractors regarding when it is 

appropriate and reasonable to provide local meals would 

provide the Department with greater assurance that meal 

costs are treated consistently across the complex. During 

our audit, both Department and contractor representatives 

told us that they believed there was a need for clear 

guidance regarding the appropriateness of these costs 

Furthermore, responsible contracting offices did not 

provide sufficient oversight in this area. In particular, we 

found no evidence that the contracting offices reviewed the 

contractors' written policies for local meals or provided 

specific guidance to the contractors as to the circumstances 

where local meal costs would be appropriate. The written 

 

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Page 4 Recommendations and Comments 

3. Enhance financial oversight, by performing 

periodic reviews of meal costs, to ensure that 

future payments only cover allowable expenses. 

 

MANAGEMENT NNSA generally agreed with our recommendations. 

REACTION Specifically, NNSA stated that by September 30, 2005, the 

contracting officers for the Sandia Site Office and the Y-12 

Site Office will make a cost determination for the 

questionable meal costs identified in our report. NNSA 

stated that by March 2006, its Senior Procurement 

Executive will issue a policy related to meals and the 

allowability of their associated costs based on best business 

practices. NNSA noted that it disagreed with the 

implication that there was any wrongdoing or laxity on the 

part of its contract administrators. NNSA pointed out that 

it has taken action to enforce the stated goals of its Senior 

Procurement Executive to improve contract administration 

holistically and improve the oversight function on the part 

of its site offices. 

The CFO provided comments for Science and EM. The 

CFO generally concurred with recommendations 1 and 3 

and partially concurred with recommendation 2. 

For recommendation 1, the CFO stated that Science will 

direct its contracting officers to determine the allowability 

of costs questioned in the audit and recover those costs 

determined to be unallowable. The CFO will monitor the 

contracting officers' conclusions to ensure consistency with 

Government-wide policy and contract terms. 

For recommendation 2, the CFO did not agree with a 

statement in a draft version of this report that the 

Department and responsible program offices had not 

developed policies regarding the extent to which 

reimbursement for meals was permitted. The CFO 

indicated that the Department's policy is the same as the 

Federal Acquisition Regulation (FAR). However, the CFO 

agreed that contracting activities should be refreshed as to 

the FAR/contract requirements and agreed to provide 

additional guidance on how to apply them. The CFO 

agreed to develop application guidance suitable for use by 

contracting personnel and coordinate the product with the 

Office of Inspector General. 
 

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Page 5 Comments 

For recommendation 3, the CFO stated that contracting 

activities will be required to: (1) review contractor internal 

policies, procedures, and internal controls on claiming 

contractor meal expenses as allowable costs; (2) ensure 

those policies and procedures are compliant with the 

FAR/contract requirements; and, (3) require contractors to 

direct the attention of their internal audit staffs to these 

costs. 

In addition, the CFO pointed out that a draft version of our 

report did not sufficiently reflect that the FAR provides the 

applicable Government-wide standards for cost allowability 

including meal costs. The CFO also pointed out that the 

policies of other Federal agencies and the Defense Contract 

Audit Agency's (DCAA's) audit guidance are not more 

restrictive than the FAR standard regarding reimbursing 

meal costs. 

Management's comments are included in their entirety as 

Appendix 3. 

AUDITOR COMMENTS Management's comments and planned actions are 

 responsive to our recommendations. 

With respect to NNSA's concern that our report implied 

wrongdoing or laxity on the part of its contract 

administrators, we did not identify any instances of 

wrongdoing by contract administrators. However, for the 

four contractors where we identified questionable costs, we 

found no evidence that the contracting offices had reviewed 

and/or approved the contractors' written policies regarding 

meal charges. 

We agree with the CFO's comments that the FAR provides 

Government-wide standards for determining cost 

allowability and the Department's policy is to follow FAR 

standards. We have modified our report to clarify this issue 

and have removed the reference to the DCAA Audit 

Manual mentioned in management's comments. While we 

do not disagree with management's opinion that the DCAA 

audit guidance does not modify or impose more stringent 

reimbursement requirements, we believe it does reflect a 

generally held audit interpretation of FAR requirements for 

a large, and in some cases, similarly situated Federal 

agency. In that connection, we concur with management's 

plan to develop "application" guidance that would serve the 

same purpose for the Department. 
Appendix 1 _______________________

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Page 6 Objective, Scope, and Methodology 

OBJECTIVE To determine whether the Department's contracting offices 

were consistent in their approach to reimbursing 

contractors for the cost of local employee meals. 

SCOPE The audit was performed between November 2003 and 

April 2005 at Department Headquarters, Washington, DC 

and at various contractors. Specifically, detailed testing 

was performed at Lawrence Berkeley National Laboratory, 

in Berkeley, CA; East Tennessee Technology Park, Y-12 

National Security Complex, and Oak Ridge National 

Laboratory, in Oak Ridge, TN; Sandia National 

Laboratories in Albuquerque, NM and Livermore, CA; and, 

Fermi National Accelerator Laboratory in Batavia, IL. In 

addition, we reviewed contractor policies and procedures 

applicable to local meal costs for Pacific Northwest 

National Laboratory, Savannah River Site, Idaho National 

Engineering and Environmental Laboratory, Yucca 

Mountain Project, Brookhaven National Laboratory, 

Princeton Plasma Physics Laboratory, and Argonne 

National Laboratory. Our testing was limited to non-travel 

related meal costs charged to contracts during FY 2003. 

METHODOLOGY To accomplish our audit objective, we: 

• Obtained and reviewed applicable laws, 

regulations, contract terms, and applicable 

Department contracts and contractor policies; 

 Reviewed schedules of non-travel related meal 

transactions for FY 2003; 

• At Berkeley Laboratory, tested a randomly 

selected sample of 287 transactions valued at 

$73,945, identified $43,282 of questionable costs, 

and projected questioned costs to be $148,395 

using statistical sampling software provided by 

the Defense Contract Audit Agency; 

• At Sandia, tested a judgmental sample of 

167 meal transactions valued at $829,472 and 

identified $70,484 of questionable costs; 
Appendix 1 (continued) _______________________

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Page 7 Objective, Scope, and Methodology 

• At Y-12, tested a judgmental sample of 85 meal 

transactions valued at $54,560 and identified 

$29,762 of questionable costs; 

• At Fermi, tested a judgmental sample of 24 meal 

transactions valued at $60,066 and identified 

$6,784 of questionable costs; and, 

• Interviewed Department and contractor 

representatives concerning local meals provided 

to on-site employees. 

The audit was conducted in accordance with generally 

accepted Government auditing standards for performance 

audits and included tests of internal controls and 

compliance with laws and regulations to the extent 

necessary to satisfy the audit objective. Because our 

review was limited, it would not necessarily have disclosed 

all internal control deficiencies that may have existed at the 

time of our audit. We did not identify any performance 

measures or goals applicable to local meal costs as required 

by the Government Performance and Results Act of 1993. 

We relied on computer-processed data to accomplish the 

audit objective. When appropriate, we performed limited 

test work of data reliability and determined that we could 

rely on the computer-processed data. 

Management waived the exit conference. 

.
Appendix 2______________________________________

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Page 8 Prior Audit Reports 

PRIOR AUDIT REPORTS

• University of California's Costs Claimed and Related Internal Controls for 

Operation of Los Alamos National Laboratory, (DOE/IG-0596, April 2003). 

The Department reimbursed the contractor approximately $14.6 million for 

questionable costs, including $3.7 million for "working" meals. Control 

weaknesses existed that contributed to an environment in which potentially 

unallowable costs could be incurred and claimed. As a result of identified 

weaknesses, the Department had less than adequate assurance that costs 

claimed by Los Alamos National Laboratory were allowable under the 

contract. 

• Central Office Expenses for the Thomas Jefferson National Accelerator 

Facility, (DOE/IG-0629, December 2003). This audit questioned about 

$4.6 million of the $4.8 million claimed by and paid to the contractor for 

central office expenses from November 1999 to September 2002. Questioned 

costs included central office expenses that were specifically not allowable and 

local meal expenses, as well as expenses that were not adequately supported 

or documented. Lack of attention by Federal administrators to contractor 

claims created an atmosphere in which the contractor sought and received 

reimbursement for questionable and inadequately documented home office 

expenses. The federal funds used to pay these claims should have been 

employed directly for advancing the scientific mission of Jefferson 

Laboratory. 
Appendix 3 

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Page 9 Management Comments 
Appendix 3 (continued) 

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Page 10 Management Comments 
Appendix 3 (continued) 

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Page 11 Management Comments 
Appendix 3 (continued) 

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Page 12 Management Comments 
Appendix 3 (continued) 

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Page 13 Management Comments 
Appendix 3 (continued) 

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Page 14 Management Comments 
Appendix 3 (continued) 

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Page 15 Management Comments 
IG Report No. OAS-M-05-04

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