U.S. Department of Energy
                 Office of Inspector General
 
 
 
 
 
 
            AUDIT OF PROPOSAL TO ACQUIRE LAND AT
        THE FERNALD ENVIRONMENTAL MANAGEMENT PROJECT
                              
 
 
 
 
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Report Number: ER-B-97-03       Eastern Regional Audit Office
Date of Issue: June 5, 1997     Oak Ridge, Tennessee  37830
 
            
            
            AUDIT OF PROPOSAL TO ACQUIRE LAND AT
        THE FERNALD ENVIRONMENTAL MANAGEMENT PROJECT
 
 
 
 
                      TABLE OF CONTENTS
                                                 PAGE
 
SUMMARY . . . . . . . . . . . . . . . . . . . .    1
 
PART I -  APPROACH AND OVERVIEW  . . . . . . .     3
 
          Introduction  . . . . . . . . . . . .    3
 
          Scope and Methodology . . . . . . . .    3
 
          Background  . . . . . . . . . . . . .    4
 
          Prior Audit Reports . . . . . . . . .    4
 
PART II - FINDING AND RECOMMENDATION . . . . . .   5
 
          Acquisition of Nonessential Land  . . .  5
 
PART III -  MANAGEMENT AND AUDITOR COMMENTS. . . . 8
 
PART IV - APPENDIX . . . . . . . . . . . . . . . . 9
 
          Related Reports Issued by the Department 
          of Energy's Office of Inspector General..9
 
 
 
 
                   U.S. DEPARTMENT OF ENERGY
                   OFFICE OF INSPECTOR GENERAL
                    OFFICE OF AUDIT SERVICES
                                
                                
                                
            AUDIT OF PROPOSAL TO ACQUIRE LAND AT THE
            FERNALD ENVIRONMENTAL MANAGEMENT PROJECT
 
 
Audit Report Number:  ER-B-97-03
 
 
                             SUMMARY
                                
                                
     The U.S. Department of Energy (Department) obtained an
appraisal and developed a cost estimate to acquire 78 to 100 acres
of privately-held land adjoining the Fernald Environmental
Management Project (FEMP) as an additional buffer for a waste
disposal facility.  The objective of this audit was to determine
whether the proposed purchase of land was essential to support the
site's mission.
 
     Federal regulations require that executive agencies acquire and
retain only that land necessary to support mission related
activities.   However, the Department proposed to acquire 78 to 100
acres of land adjoining the FEMP even though current land holdings
met the minimum mission requirements.  The Department obtained an
appraisal and developed a cost estimate to acquire the additional
land without confirming that a valid need for the land existed.  If
the land is acquired, the Department could spend between $655,000
and $2.2 million unnecessarily.  Additionally, the Department could
incur unnecessary maintenance and security costs to maintain the
land after acquisition.  We recommended that the Manager, Ohio Field
Office, dismiss the proposal to acquire the additional land.
 
     Management agreed with the recommendation, stating that the
acquisition could not be justified at this time.  However,
management did not agree with the finding that the Department
obtained an appraisal and developed a cost estimate without
confirming that a valid need for the land existed.  Management
stated that the appraisal and cost estimate were principal and
necessary to determining whether a need for the land existed.
Management also stated that sufficient funding was not available for
the acquisition without reprioritizing remedial activities, which
cannot be justified at this time.
 
     We concluded that the appraisal and cost estimate should not
have been performed because a valid need for the land was never
established.  Also, we concluded it would be inappropriate to
reconsider the proposal to acquire the land at a later date if
additional funds become available, unless a valid need for the 
land is first established.
 
                                                              
                                   _____________/s/___________
                                   Office of Inspector General
 
                             
                             
                             PART I
 
                      APPROACH AND OVERVIEW
 
 
INTRODUCTION
 
     In May 1995, the U.S. Department of Energy (Department) and the
U.S. Environmental Protection Agency agreed on the remedial actions
needed to clean up Operable Unit 2 of the Fernald Environmental
Management Project (FEMP).  The agreement called for the
construction of an on-site disposal facility for waste near the
FEMP's eastern boundary.  In August 1995, the Department requested
that the U.S. Army Corps of Engineers (Corps) provide an appraisal
and prepare a plan for the acquisition of 78 to 100 acres of
privately-held land near the disposal facility as an additional
buffer.  We conducted this audit to determine whether the proposed
purchase of land was essential to support the site's mission.
 
 
SCOPE AND METHODOLOGY
 
     The audit was performed from November 12, 1996, through March
18, 1997, at the FEMP in Fernald, Ohio, and the Ohio Environmental
Protection Agency in Dayton, Ohio.  To accomplish our objective, 
we:
     
     o Reviewed requirements for the on-site disposal facility 
       and the associated buffer zone;
     
     o Evaluated local zoning requirements and restrictions for 
       the land proposed to be acquired;
     
     o Analyzed cost and budget information related to the 
       planned acquisition of land; and
     
     o Reviewed Federal, State of Ohio (State), and Departmental
       regulations, pertaining to on-site disposal of radioactive 
       waste.
 
     The audit was performed 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.
Accordingly, we assessed significant internal controls related to
the Department's real property acquisition process.  Because our
review was limited, it would not necessarily have identified all
internal control deficiencies that may have existed.  Also, we did
not conduct a reliability assessment of computer-processed data
because no computer-processed data was used during the audit.
 
BACKGROUND
 
     In May 1995, the Record of Decision for Operable Unit 2 was
adopted by the Department and the U.S. Environmental Protection
Agency.  Local stakeholder groups participated in the decision-
making process and agreed with the Record of Decision.  The selected
remedy for Operable Unit 2 was the construction of an on-site
disposal facility, to be located near the eastern boundary of the
site, and the installation of monitoring wells.
 
     The location of the disposal facility was determined in
accordance with Ohio Solid Waste Disposal Regulations.  The
regulations require that the disposal facility not be located in a
regulatory flood plain; near a stream, lake, or wetland; within
1,000 feet of an existing water-supply well; or near enough to an
existing public water-supply well so that contaminants may reach the
well within a 5-year period.  Further, the facility must have at
least 300 feet of buffer between the waste and the property line and
must not be within 1,000 feet of an existing residence whose owner
has not consented in writing to the location of the facility.
Finally, the distance between the uppermost part of the aquifer
system and the bottom of the soil liner must be greater than 15
feet.  The Department obtained a waiver from the State so that the
disposal facility could be located over a sole-source aquifer.
 
     In August 1995, the Department established an interagency
agreement with the Corps requiring that the Corps provide a gross
appraisal and prepare a plan for the acquisition of additional land
in support of the on-site disposal facility at the FEMP.  The Corps
evaluated options for the acquisition of between 78 and 100 acres of
land owned by 4 of the FEMP's neighbors.  The Corps estimated that
the acquisition of the land could cost the Department between
$655,000 and $2.2 million, depending on the option selected.
 
 
PRIOR AUDIT REPORTS
 
     Although the Office of Inspector General has not issued any
prior reports dealing with the acquisition of nonessential assets,
we have issued many reports dealing with the divestiture of
nonessential assets.  The prior reports are listed in Part IV of
this report.
 
     Our audit disclosed a material internal control weakness that
management should consider when preparing its yearend assurance
memorandum on internal controls.
                             
                             
                             PART II
                                
                   FINDING AND RECOMMENDATION
 
 
                Acquisition of Nonessential Land
 
FINDING
 
     Federal regulations require that executive agencies acquire
and retain only that land necessary to support mission related
activities.  However, the acquisition of land as an additional
buffer for the waste disposal facility at the FEMP is not
necessary to support the site's mission.  The Department obtained
an appraisal and developed a cost estimate to acquire the land
without confirming that a valid need for the land existed.   If
the land is acquired, the Department could spend between $655,000
and $2.2 million unnecessarily.  Additionally, the Department
could incur unnecessary maintenance and security costs to maintain
the land after acquisition.
 
 
RECOMMENDATION
 
     We recommend that the Manager, Ohio Field Office, dismiss the
proposal to acquire additional land as a buffer for the on-site
waste disposal facility.
 
 
 MANAGEMENT REACTION
 
     Management agreed with the recommendation, stating that the
acquisition could not be justified at this time.  However,
management did not agree with the finding that the Department
obtained an appraisal and developed a cost estimate without
confirming that a valid need for the land existed.  Management
stated that the appraisal and cost estimate were principal and
necessary to determining whether a need for the land existed.
Management also stated that sufficient funding was not available for
the acquisition without reprioritizing remedial activities, which
cannot be justified at this time.  Comments received from management
are summarized and addressed in Part III of this report.
 
 
                       DETAILS OF FINDING
 
 
REQUIREMENTS FOR ACQUIRING AND RETAINING LAND
 
     Federal regulations require that executive agencies acquire
and retain the absolute minimum amount of land necessary to
economically and efficiently support mission requirements.  The
Federal Property and Administrative Services Act of 1949, as
amended, requires all executive agencies to periodically review
their real property holdings to identify property that is "not
needed," "underutilized," or "not being put to optimum use."
Following are some of the questions the General Services
Administration has developed for executive agencies to consider in
identifying valid real property needs:
 
     o   Is all the property essential for program requirements?
     
     o   Will local zoning provide sufficient protection for
         necessary buffer zones without Government ownership?
     
     o   Are buffer zones kept to a minimum?
     
     o   Is the present property inadequate for approved future
         programs?
 
 
PRESENT PROPERTY IS ADEQUATE
 
     The Department does not need to acquire additional land to
meet Federal or State requirements for an on-site disposal
facility.  The Department's current land holdings meet the minimum
requirements for a 300-foot buffer around the disposal facility.
Acquisition of the adjacent properties would extend the buffer to
between 800 and 1,300 feet.
 
     Although there are advantages to acquiring additional land,
the advantages do not justify the estimated cost.  Fluor Daniel
Fernald (Fluor Daniel) identified three advantages to acquiring
adjacent properties.  First, the acquisition would provide an
additional buffer in which the public could not construct
residences or install wells.  Second, the acquisition could reduce
the risk of litigation with neighbors over the impact of the waste
disposal facility on the value and use of the neighbors'
properties.  Finally, the acquisition could simplify the remedial
processes in the event of an inadvertent release affecting
adjacent properties, and could allow greater flexibility in
controlling and monitoring storm water run-off.  A discussion of
each of these advantages follows.
 
     The risk of neighbors constructing new residences or
installing wells should be minimal.  Portions of the land
considered for acquisition are zoned Heavy Industrial and Flood
Plain.  Both classifications generally prohibit the construction
of residences within the zoned areas.  Further, the land lies
under or near two high-voltage transmission lines.  The Cincinnati
Gas & Electric Company holds an easement estate which precludes
the construction of residences within transmission lines rights-of-
way.
 
     Also, construction of the disposal facility should not create
a significant risk of litigation involving the FEMP's neighbors.
The Fernald Residents for Environmental Safety and Health and the
Fernald Citizens Task Force, two citizens groups representing
various facets of the local community, participated in the
decision-making process and agreed with the decision to construct
the waste disposal facility at the site.  Furthermore, the
Department has already provided financial compensation (between
$800 and $54,000 per residence) to its neighbors for the loss of
property values caused by the Department's presence.
 
     Finally, the Department could acquire portions of the
adjacent properties after the facility becomes operational in the
event contaminants are inadvertently released.  However,  a
properly designed and constructed facility should not permit
inadvertent releases or storm water run-off.
 
 
VALID NEED NOT CONFIRMED
 
     This condition occurred because the Department proposed the
acquisition of land without confirming that a valid need for the
land existed.  The Department requested that the Corps perform a
gross appraisal and prepare an acquisition plan in August 1995.
At the time the agreement was established, the Department had not
formally assessed the need for additional land.
 
     Moreover, until a need for the land is justified, evaluating
the cost to acquire the land is premature.  During our audit,
Fluor Daniel issued a report outlining the advantages and
disadvantages of acquiring additional land.  In its report, dated
January 31, 1997, Fluor Daniel recommended that the Department
further evaluate the potential costs and benefits prior to making
a final decision whether or not to acquire the land.  The report
states that the Department may request that either Fluor Daniel or
the Corps prepare a formal Preliminary Real Estate Plan once a
final decision is made to pursue the acquisition.  Also, Fluor
Daniel recommended that a life-cycle cost analysis be performed as
part of the evaluation process, and that the Department begin the
stakeholder involvement process as early as practicable.
 
 
POTENTIAL COST
 
     As a result of this condition, the Department could spend
between $655,000 and $2.2 million to purchase land that is not
essential to its mission.  The cost estimate is based on the
Corps' assessment of the 78 to 100 acres of land currently under
consideration, and does not include the cost of additional
appraisals and studies that might be performed by the Corps and
Fluor Daniel to assist the Department in its acquisition.  Also,
the Department could incur unnecessary maintenance and security
costs to maintain the land after it is acquired.
                           
                            
                            
                            PART III
                                
 
                 MANAGEMENT AND AUDITOR COMMENTS
                                
      Management agreed that there was not adequate justification
to support the acquisition of land at this time and concurred with
the audit recommendation.   However, management stated that
obtaining the appraisal was principal and necessary to determine
the need for the property.  Management's comments are summarized
and addressed below.
 
Recommendation.  We recommend that the Manager, Ohio Field Office,
dismiss the proposal to acquire additional land as a buffer for
the on-site waste disposal facility.
 
     Management Comments.   Management concurred with the
recommendation and stated that the Department has no plans to
acquire the property at this time.  Based on information received
from the Corps and Fluor Daniel, the decision was made not to
pursue the acquisition.  Management stated that the Department
engaged the Corps to conduct the gross appraisal so that a more
informed decision could be made whether or not to pursue the
acquisition.  Management stated the appraisal was principal and
necessary to determine whether a need for the land existed.
Management also stated that there is no funding available for the
acquisition without reprioritizing remedial activities, which
cannot be justified at this time.
 
     Auditor Comments.   We disagree with management's statement
that it was principal and necessary to obtain the Corps' appraisal
to determine whether a need for the land existed.  We believe that
the appraisal and cost estimate should not have been performed
because a valid need for the land was never established.  Also, we
believe it would be inappropriate to reconsider the proposal to
acquire the land at a later date if additional funds become
available, unless a valid need for the land is first established.
 
Report Number: ER-B-97-03
Appendix
                                                  Page 1 of 2
 
                             PART IV
 
      Related Reports Issued by the Department of Energys
                   Office of Inspector General
                                
 
Report                         Report Title
Number
             
IG-FS-97-01  Audit of the U.S. Department of Energy's
             Consolidated Financial Statements for Fiscal Year
             1996, February 1997
             
DOE/IG-0402  Audit of the Management of the Department of
             Energy's Leased Administrative Facilities, April
             1997
             
IG-FS-96-01  Audit of the U.S. Department of Energy's
             Consolidated Statement of Financial Position (As
             of September 30, 1995), February 1996
             
DOE/IG-0399  Audit of the U.S. Department of Energy's
             Identification and Disposal of Nonessential Land,
             January 1997
             
DOE/IG-0385  Special Audit Report on the Department of
             Energy's Arms and Military-type Equipment,
             February 1996
             
DOE/IG-0375  Audit of DOE's Management of Precious Metals,
             June 1995
             
DOE/IG-0362  Audit of Light Vehicle Fleet Management in the
             Department of Energy, December 1994
             
DOE/IG-0360  Audit of the Transfer of Government-owned
             Property at the Mound and Pinellas Plants,
             November 1994
             
DOE/IG-0344  Summary Report on DOE's Management of Personal
             Property, March 1994
             
DOE/IG-0343  The Inspection of the Management of Excess
             Personal Property at Sandia National Laboratory, 
             Albuquerque, New Mexico, March 1994
             
DOE/IG-0338  Audit of Personal Property Management at Los
             Alamos National Laboratory, December 1993
             
             
 
 
Report Number:                                    Appendix
                                                  Page 2 of 2
 
 
Report                        Report Title
Number
             
DOE/IG-0329  Inspection of Management of Excess Personal
             Property at Rocky Flats, May 1993
             
DOE/IG-0320  Disposal of Excess Capital Equipment at the
             Fernald Environmental Management Project,
             Fernald, Ohio, February 1993
             
CR-B-97-01   Audit of the Department of Energy's Warehouse
             Space, January 1997
             
WR-B-96-04   Audit of Fuel Processing Restoration Property,
             October 1995
             
ER-B-95-02   Audit of Property Management at Fernald
             Environmental Restoration Management
             Corporation, November 1995
             
ER-B-94-07   Audit of Shipment of Low-Level Waste from
             Fernald to the Nevada Test Site, June 1994
             
CR-B-94-05   Audit of Aircraft Management at the
             Albuquerque Operations Office, September 1994
             
WR-B-93-07   Audit of Light Vehicle Fleet Management at the
             Idaho National Engineering Lab, September 1993
             
WR-B-93-06   Audit of Controls Over Firearms and Ammunition
             at the Central Training Academy and the 
             Transportation Safeguards Division, Albuquerque, 
             New Mexico, August 1993
                                   
                                   
                                   IG Report No.  ER-B-97-03
                                                            
                                                            
                                
                                
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