DEPARTMENT OF ENERGY
                              
                 OFFICE OF INSPECTOR GENERAL
                              
                              
                              
                              
                              
                      SEMIANNUAL REPORT
                         TO CONGRESS
                              
                         
                              
                              
                         APRIL 1997
                              
                    
                    
                    Department of Energy
                    Wahsington, DC 20585
                              
                       April 30, 1997
 
The Honorable Federico Pena
Secretary
Department of Energy
Washington, D.C.  20585
 
Dear Secretary Pena:
 
This Semiannual Report for the first half of Fiscal
Year 1997 is submitted to you by the Office of
Inspector General for transmittal to the Congress,
pursuant to the provisions of the Inspector General
Act of 1978.
 
During this reporting period, the Office of Inspector
General continued to advise Headquarters and field
managers of opportunities to improve the efficiency
and effectiveness of the Department's management
controls, with particular emphasis on coverage of
issues addressed in the Department's Strategic Plan.
We also have supported the Department's reinvention
and streamlining initiatives by evaluating the cost
effectiveness and overall efficiency of Department
programs and operations, placing special emphasis on
key issue areas which have historically benefited
from Office of Inspector General attention.
 
In our Office's planning and operations, we continue
to target available audit, inspection, and
investigation resources to our customers most
immediate requirements.  However, the Office of
Inspector General faces an unprecedented challenge to
comply with new mandates, such as the Government
Management Reform Act of 1994 which requires audited
consolidated financial statements for the Department
of Energy.  This and other unfunded mandates make it
increasingly difficult to provide the level of audit
coverage of the Department that we consider adequate.
Nevertheless, our overall focus remains on assisting
Department management to implement management
controls necessary to prevent fraud, waste, and
abuse; helping to ensure the quality of Department
programs and operations; and keeping you and the
Congress fully informed.
 
                                Sincerely,
 
                                   //S//
                                John C. Layton
                                Inspector General
Enclosure
 
 
                MISSION AND VISION STATEMENTS
                              
                              
                              
                      MISSION STATEMENT
                              
                              
   The Office of Inspector General promotes the effective, efficient, 
   and economical operation of Department of Energy programs through 
   audits, inspections, investigations and other reviews.
                              
                              
                              
                      VISION STATEMENT
                              
                              
    We do quality work that facilitates positive change.
 
 
                          CONTENTS
                            
 
Executive Summary
 
Some Significant Actions
 
Consolidated Financial Statements Audit
 
Section I:  Overview
 
     Mission
     Organization and Staffing
     Inspector General Resource Concerns
     Management Referral System
     Legislative and Regulatory Overview
 
Section II:  Performance Measures
 
     Recommendations Accepted/Implemented
     Audit/Inspection Savings, Recoveries and Funds
     Legislative & Regulatory Compliance
     Complaints Resolved
     Investigation Recoveries/Fines and Funds
 
Section III:  Reports Issued
 
     Audit Reports
     Inspection Public Reports
     Reports Availability
 
Section IV:  Statistics
 
     Definitions
     Office of Audit Services
     Office of Investigations
     Office of Inspections
 
                      EXECUTIVE SUMMARY
                              
                      OVERALL ACTIVITY
 
   This Office of Inspector General Semiannual Report to the
Congress covers the period from October 1, 1996, through
March 31, 1997.  The report summarizes significant audit,
inspection, and investigative accomplishments for the
reporting period which facilitated Department of Energy
management efforts to improve management controls and ensure
efficient and effective operation of its programs.
   Narratives of our most significant reports are grouped by
measures which the Office of Inspector General uses to gauge
its performance.  The common thread that ties the
performance measures together is their emphasis on
supporting Department efforts to produce high quality
products at the lowest possible cost to the taxpayer.  Five
such performance measures were used during this semiannual
period to present outcomes of Office of Inspector General
work in terms of improvements in Department programs and
operations.
   During this reporting period, the Office of Inspector
General issued 38 audit and 11 inspection reports.  For
reports issued during the period, the Office of Inspector
General made audit recommendations that, when implemented by
management, could result in $58 million being put to better
use.  Management committed to taking corrective actions
which the Office of Inspector General estimates will result
in a more efficient use of funds totaling $36 million.
Office of Inspector General actions in identifying
attainable economies and efficiencies in Departmental
operations have recently provided a positive dollar impact
of about $4 million per audit employee per year.
   Office of Inspector General investigations led to 13
criminal convictions, as well as criminal and civil
prosecutions which resulted in fines and recoveries of about
$2.3 million.  The Office of Inspector General also provided
21 investigative referrals to management for recommending
positive change.
 
                  OIG RESOURCE LIMITATIONS
 
   Several new statutory mandates and additional
responsibilities have been placed upon the Office of
Inspector General over the past few years with no additional
resources.  A primary example is the passage of the
Government Management Reform Act of 1994 which gave the
Office of Inspector General the responsibility of auditing
the consolidated financial statements of the Department.
This effort consumes about 50 staff years and requires the
expert assistance of a major accounting firm on a
contractual basis.  These experts, for whom it is not cost
effective to retain as Federal employees, provide
specialized skills in areas such as petroleum engineering,
cost modeling, and actuarial services.
   Another example of increased costs with no funding
provided is the statutory requirement to provide
investigators with availability pay which amounts to
additional expenditures of $1 million annually.  Another
unfunded mandate is our requirement to audit and pay into
the Departments Working Capital Fund, which amounts to
almost $2 million annually.
   Also, the Department's former Office of Contractor
Employee Protection was transferred without funding to the
Office of Inspector General in Fiscal Year 1996.  Since
then, the Office of Contractor Employee Protection has been
disestablished, but the workload remains.  As a result of
newly mandated tasks, the Office of Inspector General will
serve fewer customers specialized needs and has already
diverted resources from other reviews that had focused on
significant programs and operations where major
vulnerabilities may exist.
   During organizational downsizing and changes in internal
control structures such as the Department is now
experiencing, there may be increased vulnerabilities,
opportunities for fraud and waste, and increased numbers of
complaints requiring resolution.  Furthermore, the workload
of the Office of Inspector General is driven by the number
of Departmental programs rather than the Departments staff
size.  Reducing Office of Inspector General resources in
consonance with those of the Department inhibits the
detection and prevention of fraud, waste, and abuse at a
time when vulnerability is heightened.  As a result of our
resource constraints, we now  have a higher threshold for
investigative case openings and inspection of administrative
allegations, resulting in less coverage and less deterrent
effect.  Office of Inspector General investigative efforts
have been redirected toward cases of increased severity,
including cases of serious criminal violations, large civil
fraud matters, and significant administrative misconduct.
 
                   TRACKING AND REPORTING
            ON THE STATUS OF OIG RECOMMENDATIONS
 
   The Inspector General Act of 1978 requires that the
Semiannual Report of the Inspector General include an
identification of each significant recommendation described
in previous Semiannual Reports on which corrective action
has not been completed.  In the Department of Energy, the
Office of Compliance and Audit Liaison within the Office of
Chief Financial Officer has responsibility for the audit
followup system.  Thus, this information is included as part
of the companion submission to this report which is provided
by the Secretary of the Department of Energy.
   Although the followup system is operated by the
Department's Chief Financial Officer, the Office of
Inspector General provides oversight in the form of audits
of the followup system or its components, and semiannual
reviews of the progress of corrective actions on audit and
inspection reports.  In addition, the Office of Inspector
General conducts periodic followup audits or verifications
in which the objective is to determine if prior audit and
inspection report recommendations were implemented and, if
so, whether they were effective.  Also, at the start of each
new audit or inspection, the Office of Inspector General
conducts a review of prior reports on related topics, a
review of the recommendations included in these prior
reports, and an evaluation of the corrective actions that
were taken.
   During this reporting period, there were no reports made
to the Secretary noting unreasonable refusal by management
to provide data to the Office of Inspector General.
 
                  SOME SIGNIFICANT ACTIONS
 
The Office of Inspector General completed significant audit,
inspection, and investigative reviews of Department of
Energy programs and operations during this reporting period.
These reviews include:
 
Audit of the Department's Consolidated Financial Statements
is Completed (IG-FS-97-01):  On February 24, 1997, the
Office of Inspector General issued its report on the "Audit
of the U.S. Department of Energy's Consolidated Financial
Statements For Fiscal Year 1996."  The report included the
Office of Inspector General's opinion that the Department's
financial statements presented fairly, in all material
respects, the financial position of the Department as of
September 30, 1996, and the results of its operations and
changes in net position for the year then ended.  The report
was a hallmark event for the Department in that it was the
culmination of a multi-phased effort by the Office of
Inspector General to audit the statements of the Department
of Energy, providing nationwide coverage of the Departments
financial management activities including 29 financial
reporting entities which were subject to detailed testing.
Additionally, the audit of the statements was completed
within the statutory reporting date of March 1, 1997,
established by the Government Management Reform Act.
 
Inspection Identifies Internal Control Weaknesses in the
Planning and Execution of Foreign Travel (IG-0397):  At the
request of the Secretary of Energy, the Office of Inspector
General reviewed the Secretary's 16 foreign travel trips
taken over a 30-month period.  An inspection identified
$4.58 million, excluding salaries and overtime, spent for
these trips.  Four of the 16 trips, costing $3.42 million,
were trade missions to India, Pakistan, China, and South
Africa.  Although the Department identified numerous non-
monetary outcomes resulting from the trade missions, the
Department was not always clear in describing the monetary
outcomes.  While the monetary outcomes reported by the
Department include the signing of 143 business agreements
with a potential value of $19.7 billion, these agreements
are not all firm contracts and they do not represent actual
dollars going to U.S. companies.
 
Audit Reports Identify Need to Improve Construction Planning
Process (IG-0398):  In Fiscal Year 1996, the Department of
Energy's budget submission of about $18 billion included
approximately $1.1 billion for construction projects.  The
Office of Inspector General issued an audit report that
synthesized issues from 1994 and 1995 audit reports which
addressed construction projects, highlighting additional
opportunities to improve the construction planning process.
The audit report recommended that the Department emphasize
the need for effective evaluations of the Department's
current and future mission needs as part of the annual
approval process for ongoing and planned construction
projects.
 
Substantial Savings Could Be Realized Through the Disposal
of Nonessential Land  (IG-0399):  The Department of Energy
and its predecessor agencies acquired control of about 2.4
million acres of land to carry out wide-ranging programs.
Federal regulations require that executive agencies hold
only that land necessary to economically and efficiently
support mission related activities.  An audit found that
rather than dispose of nonessential land, the Department
issued a land use policy expanding land management
activities and began seeking public and private ideas for
new land uses.  As a result of the Department's actions,
land valued at $126 million could be transferred to other
Federal or state agencies, or a portion sold for private
uses.  The Department's liability for payments in lieu of
taxes on purchased land could be reduced by $1.7 million
annually.
 
$13.6 Million in Unreasonable and Unallowable Contractor
Employee Relocation and Temporary Living Costs Are
Identified (IG-0400):  This summary audit report highlights
systemic problems with contractor charges for contractor
employee relocation and temporary living costs.  Over the
past 5 years, the Office of  Inspector General has issued
nine audit reports that identified almost $13.6 million of
unreasonable or unallowable charges by contractors for
employee relocation and temporary living costs.  These
unreasonable and unallowable costs were charged because the
Department did not use clearly defined contractual
provisions that were consistent with the Federal Acquisition
Regulation and the Department of Energy Acquisition
Regulation, as applicable, to establish reasonable and
allowable charges for contractors.  Management has
established a plan of action to address this issue.
 
Inspection Identifies Internal Control Weaknesses in the
Management and Administration of a $14.22 Million
Performance Based Incentive (PBI) Program (IG-0401):  The
inspection found that the Fiscal Year 1995 PBI Program at
the Department's Richland Operations Office had not made the
best use of incentive dollars paid to the management and
operating (M&O) contractor.  For example, the inspection
disclosed:  (1) an instance where the fee paid was excessive
when compared with the cost of labor and material to perform
the PBI work, (2) instances where PBI fees were paid for
work that was accomplished prior to the establishment of the
PBI Program at Richland, (3) instances where PBI fees were
paid for work that was not completed, (4) instances where
PBI fees were paid for work that was easily achieved by the
M&O contractor, and (5) an instance where quality and safety
were compromised by the M&O contractor to achieve a PBI fee.
 
Inspection Finds Deficiencies in Design and Construction of
a Department Nuclear Materials Storage Facility (INS-0-97-
01):  A complainant alleged that the Department's Nuclear
Materials Storage Facility at the Los Alamos National
Laboratory was so poorly designed and constructed that it
was never usable and that the Department proposed to
renovate the entire facility to store large amounts of
plutonium.  An inspection concluded that the complainant's
allegations concerning the design and construction of the
facility were accurate.  The inspection also concluded that
there was not sufficient basis for the Government to recover
damages from any contractors on the project.  A Root Cause
Analysis Report, prepared by the Department's Los Alamos
Area Office, stated that Department officials and the
management and operating contractor were responsible for
inadequate design requirements for the facility.  The report
also stated that there was inadequate construction
management by the Department and its contractors.
 
Inspection Identifies a Contractor to be in Noncompliance
with Federal and Department Policies on Tape Recording of
Conversations (S94IS094):  The Office of Inspector General
received an allegation concerning the tape recording of
conversations at a Department of Energy Site.  The
inspection found that the contractor employee did record
approximately 30 telephone conversations between himself and
a Department of Energy employee.  About 25 percent of these
recordings were made on the Federal site.  The inspection
did not find evidence that the tape recording of those
telephone conversations was contrary to state law.  The
inspection concluded, however, that the tape recording of
the telephone conversations was contrary to both Federal and
Departmental policies.
 
False Claims for Cost Mischarging Lead to a $2.7 Million
Civil Settlement (I93LL016):  An Office of Inspector General
investigation of Work-For-Others projects at Lawrence
Livermore National Laboratory disclosed evidence of cost
mischarging related to overruns, loans, non-deobligations
(unused funds were not returned to a sponsor after a project
was completed), and transactions that were inadequately
explained and/or supported.  The Assistant U.S. Attorney
issued a demand letter to the Laboratory and a settlement
agreement for $2,718,291 was signed by the Laboratory and
the U.S. Attorney's Office.  A total of $2,925,451 was
received from the laboratory for all transactions and for
administrative and legal costs.
 
An Asbestos Removal Subcontractor Falsifies Certifications
(I95IF007):  The U.S. Attorney's Office and the
Environmental Protection Agency requested assistance from
the Office of Inspector General on an investigation of
allegations that a company had falsified medical survey
records and certificates of training related to Government-
funded asbestos removal subcontracts.  The company performed
asbestos removal for local school districts and for Federal
Government agencies, including the Department of Energy at
the Idaho National Engineering Laboratory.  The company and
its president were convicted of environmental and fraud-
related crimes as part of a plea agreement.  The court fined
the defendants a total of $25,750 and sentenced the
president to 6 months incarceration.
 
A Civil Action Results in Voluntary Debarment and Cash
Settlement by Contractor Principals (I89RL008):  The Office
of Inspector General investigated allegations that two
principals of a Government contractor had directed their
employees to falsely charge non-Department work to the
contract.  The investigation determined that the total loss
to the Department was about $1,652,173.  Both defendants
pled guilty in the criminal case and were sentenced to 33
months and 18 months, respectively.  The company was also
fined $30,000 and debarred for 3 years.  The two principals
and the Government also recently signed a civil settlement
agreement wherein they agreed to pay $25,000 and $15,000 to
the Government and to a self-debarment of 5 and 3 years,
respectively.
 
Two Hanford Site Subcontractor Employees Falsely Claim Over
$30,000 in Per Diem (I95RL019):  An investigation determined
that two subcontractor employees, a husband and wife, both
fraudulently obtained per diem subsistence based on false
representations that they maintained a permanent residence
outside of Richland.  The subjects received about $31,653 in
false per diem claims.  The U.S. Attorney's Office filed an
indictment against both subjects.  The husband was sentenced
to 6 months home detention with electronic monitoring and
required to pay restitution in the amount of $24,560.  The
wife entered into a pretrial diversion agreement, requiring
restitution in the amount of $7,093 plus a $1,000 penalty,
and supervision for a 24-month probationary period.
 
             AUDIT OF THE DEPARTMENT OF ENERGY'S
              CONSOLIDATED FINANCIAL STATEMENTS
 
     On February 24, 1997, the Office of Inspector General
issued its report on the Audit of the U.S. Department of
Energy's Consolidated Financial Statements For Fiscal Year
1996.  The report included the Office of Inspector
General's opinion that the Department's financial statements
presented fairly, in all material respects, the financial
position of the Department as of September 30, 1996, and the
results of  its operations and changes in net position for
the year then ended.  The Department's Consolidated
Statement of Financial Position reported total assets of $94
billion and total liabilities of $264.5 billion including an
Unfunded Environmental Liability of $227.7 billion which
represented the environmental remediation costs of nuclear
weapons production.  The Department's Consolidated Statement
of Operations and Changes in Net Position reported total
revenues and financing sources of $25 billion and total
expenses of $33.9 billion.
     The report identified three internal control reportable
conditions that did not materially affect the financial
statements but were significant in that they could adversely
affect the Departments ability to ensure that control
objectives are achieved.  These conditions included the need
to refine its process for estimating environmental
remediation cost for the Department's active facilities, to
fully integrate and provide adequate controls over financial
management systems, especially by integrating the Power
Marketing Administrations into the Department's Primary
Accounting System, and to strengthen internal controls over
property, plant and equipment.
     Additionally, the Office of Inspector General reported
a number of other conditions relating to the Department's
internal control structure that were not material to the
financial statements including control weaknesses over the
verification of performance measurements reported in the
Department's Overview to its financial statements.  These
matters were reported in 11 separate reports to Headquarters
and field level managers.
     The report on the Department's Fiscal Year 1996
consolidated financial statements was a hallmark event for
the Department.  It was the culmination of a multi-phased
effort by the Office of Inspector General to audit the
statements of the Department of Energy.  Phase I focused on
the Department's Fiscal Year 1995 Consolidated Statement of
Financial Position and provided the Department with early
notification of significant weaknesses that needed to be
corrected prior to the statutorily required statements for
Fiscal Year 1996.  This early notification allowed the
Department to take corrective actions in time for the Phase
II audit of the Fiscal Year 1996 statements.  Additionally,
the audit of the statements was completed within the
statutory reporting date of March 1, 1997, established by
the Government Management Reform Act.
     The consolidated financial statements audit is a
mandated yearly requirement which is unprecedented in its
scope and resource demands on the Office of Inspector
General.  For example, the Fiscal Year 1996 audit provided
nationwide coverage of the Departments financial management
activities including 29 financial reporting entities which
were subject to detailed testing.  Although the vast
majority of staff resources for this effort were provided by
Office of Inspector General personnel, an independent public
accounting firm and internal audit staffs provided
significant support to the audit.
     During the Fiscal Year 1997 audit, the Office of
Inspector General will have to increase the scope of its
work to focus on how the Department is implementing new
standards, such as the Federal Accounting Standards Advisory
Boards Managerial Cost Accounting Standards, as well as new
reporting requirements such as the Federal Financial
Management Improvement Act.  This increased workload and
associated resource demand continues to be of special
concern to the Office of Inspector General given the
decreasing resources available to meet statutory
requirements for financial and performance audits.
                              
                          SECTION I
                              
                              
                          OVERVIEW
                              
 
 
      This  section  describes  the  mission,  staffing  and
organization  of  the  Office  of  Inspector  General,   and
discusses  key  Office of Inspector General  concerns  which
have  potential  to  impact  the  accomplishment  of  audit,
inspection, or investigative work.
 
                           MISSION
 
   The Office of Inspector General operates under the
Inspector General Act of 1978, as amended, with the
following responsibilities:
 
1.  To provide policy direction for, and to conduct,
supervise, and coordinate audits and investigations relating
to the programs and operations of the Department of Energy.
 
2.  To review existing and proposed legislation and
regulations relating to programs and operations of the
Department of Energy, and to make recommendations in the
semiannual reports required by the Inspector General Act of
1978 concerning the impact of such legislation or
regulations on the economy and efficiency in the
administration of programs and operations administered or
financed by the Department, or on the prevention and
detection of fraud and abuse in such programs and
operations.
 
3.  To recommend policies for, and to conduct, supervise, or
coordinate other activities carried out or financed by the
Department of Energy for the purpose of promoting economy
and efficiency in the administration of, or preventing and
detecting fraud and abuse in, its programs and operations.
 
4.  To recommend policies for, and to conduct, supervise, or
coordinate relationships between the Department of Energy
and other Federal agencies, state and local government
agencies, and nongovernmental entities with respect to:
 
7    All matters relating to the promotion of economy and
  efficiency in the administration of, or the prevention and
  detection of fraud and abuse in, programs and operations
  administered or financed by the Department.
 
7    The identification and prosecution of participants in
  such fraud or abuse.
 
5.  To keep the Secretary of the Department of Energy and
the Congress fully and currently informed, by means of the
reports required by the Inspector General Act of 1978,
concerning fraud and other serious problems, abuses and
deficiencies relating to the administration of programs and
operations administered or financed by the Department of
Energy, to recommend corrective action concerning such
problems, abuses, and deficiencies, and to report on the
progress made in implementing such corrective action.
 
                  ORGANIZATION AND STAFFING
 
   The activities of the Office of Inspector General are
performed by four offices.
   The Office of Audit Services provides policy direction
and supervises, conducts and coordinates all internal and
contracted audit activities for Department of Energy
programs and operations.  Audits are planned annually
through a prioritized work planning strategy that is driven
by several factors, including the flow of funds to
Departmental programs and functions, strategic planning
advice, statutory requirements, and expressed needs.  The
Office of Inspector General audit staff has been organized
into three regional offices, each with field offices located
at major Department sites:  Capital Regional Audit Office,
with field offices in Washington, DC, Germantown, and
Pittsburgh; Eastern Regional Audit Office, with field
offices located at Cincinnati, Chicago, New Orleans, Oak
Ridge, Princeton, and Savannah River; and Western Regional
Audit Office, with field offices located at Albuquerque,
Denver, Idaho Falls, Las Vegas, Livermore, Los Alamos, and
Richland.
   The Office of Investigations performs the statutory
investigative duties which relate to the promotion of
economy and efficiency in the administration of, or the
prevention or detection of, fraud or abuse in programs and
operations of the Department.  Priority is given to
investigations of apparent or suspected violations of
statutes with criminal or civil penalties, especially
procurement fraud, environmental, health and safety matters,
and matters which reflect on the integrity and suitability
of Department officials.  Suspected criminal violations are
promptly reported to the Department of Justice for
prosecutive consideration.  The Office is organized into
four regional offices, each with reporting offices located
at major Department sites:  (1) the Northeast Regional
Office is located in Washington, DC, with reporting offices
in Pittsburgh and Chicago; (2) the Southeast Regional Office
is located in Oak Ridge, with reporting offices located in
Cincinnati and Aiken; (3) the Southwest Regional Office is
located in Albuquerque, with a reporting office in Denver;
and (4) the Northwest Regional Office is located in
Richland, with reporting offices in Idaho Falls and
Livermore.  The Inspector General Hotline is also
organizationally aligned within the Office of Investigations.
   The Office of Inspections performs inspections and
analyses, including reviews based on administrative
allegations. In addition, the Office investigates contractor
employee allegations of employer retaliation for engaging in
activities protected under Section 6006 of the Federal
Acquisition Streamlining Act of 1994, or the Department of
Energy Contractor Employee Protection Program (10 CFR Part
708).  The Office also processes referrals of administrative
allegations to Department management.  The Office of
Inspections includes two regional offices.  The Eastern
Regional Office is located in Oak Ridge, with a field office
in Savannah River.  The Western Regional Office is located
in Albuquerque, with a field office in Livermore, California.
   The Office of Resource Management directs the
development, coordination, and execution of overall Office
of Inspector General management and administrative policy
and planning.  This responsibility includes directing the
Office of Inspector General's strategic planning process,
financial management activities, personnel management
programs, procurement and acquisition policies and
procedures, and information resources programs.  In
addition, staff members from this Office represent the
Inspector General in budget hearings, negotiations, and
conferences on financial, managerial, and other resource
matters.  The Office coordinates all activities of the
Presidents Council on Integrity and Efficiency in which the
Inspector General participates.  The Office is organized
into three offices:  Financial Resources, Human and
Administrative Resources, and Information Resources.
 
             INSPECTOR GENERAL RESOURCE CONCERNS
 
   The Office of Inspector General has an outstanding record
of identifying waste, fraud, and abuse in Department of
Energy programs and operations and in identifying programs
which are no longer needed; streamlining Departmental
operations; and identifying programmatic funds which can be
put to better use.  The Office of Inspector General
consistently provides the Department with meaningful
recommendations for program improvements and has a proven
track record of returning more in savings and funds put to
better use than it costs to operate the office.  For
example, Office of Inspector General actions in identifying
attainable economies and efficiencies in Department
operations have recently provided a positive dollar impact
of about $4 million per audit employee per year.  This
confirms that the operations of the Office of Inspector
General are "revenue positive."
   The Office of Inspector General has also established
itself as a major player in the investigative area as
evidenced by its successful criminal and administrative
investigations which have been the subject of commendations
from U.S. Attorneys throughout the nation.  For example, the
Office of Inspector General has significantly increased the
number of cases accepted for criminal and civil prosecution
and more than doubled the number of criminal convictions
from previous years.  As a result of these and other
investigative efforts, significant dollar recoveries have
occurred and criminal activity within the Department and its
contractor community has been investigated and prosecuted.
   In terms of its own organization, the Office of Inspector
General has continued to streamline its processes and
downsize its staff consistent with the objectives of the
National Performance Review.
     The Office of Inspector General staff, over the last
several years, has been reduced by 20 percent in order to
meet downsizing targets.  The Office of Inspector General
must reduce its workforce even further, thus making it
extremely difficult to fulfill our statutory obligations and
meet customer expectations.  This has come at a time when
additional programmatic responsibilities, resulting in
increased workload, have been levied upon the Office without
the provision of additional resources.  For example, passage
of the Government Management Reform Act of 1994 gave the
Office of Inspector General the responsibility of auditing
the consolidated financial statements of the Department.
These audits provide assurance as to the integrity of the
Departments financial management systems which Congress has
been highly critical of in the past.  This effort consumes
about 50 staff years and requires the expert assistance of a
major accounting firm on a contractual basis.  These
experts, for whom it is not cost effective to retain as
Federal employees, provide specialized skills in areas such
as petroleum engineering, cost modeling, and actuarial
services.  Other examples of increased costs with no funding
provided include the statutory requirement to provide
investigators with availability pay which amounts to
additional expenditures of $1 million annually; and the
requirement to audit and pay into the Departments Working
Capital Fund, which amounts to almost $2 million annually.
In addition, the Office of Inspector General has been
required to cover normal salary increases without additional
funds.
     Savings as a result of reduced staff levels have been
offset by increased program and financial responsibilities.
Therefore, expenditure levels have remained relatively
constant over the last few years.  However, operating
program requirements have far exceeded appropriation
amounts.  Some activities, such as training, contract
audits, and permanent changes of station, have been
restricted to minimal funding.  The use of carryover funds
has helped mitigate somewhat the impact of the funding
shortfall.  However, all carryover funds are expected to be
used in FY 1997.
   The Office of Inspector General has always accepted the
need to participate with the Department in its effort to
downsize and streamline operations.  However, further
resource reductions may be inadvisable as they will inhibit
the detection and prevention of fraud, waste and abuse.
During organizational downsizing and changes in internal
control structures, such as the Department is now
experiencing, there may be increased vulnerabilities,
greater frequency of fraud and waste, and increased numbers
of complaints requiring resolution.  Furthermore, the
Offices workload is driven by the number of Departmental
programs, rather than the Departments staff size.  The
Department's downsizing effort is focused more on reducing
program budgets than eliminating programs.  As a result of
our resource constraints, we now have a higher threshold for
investigative case openings and inspection of administrative
allegations, resulting in less coverage and less deterrent
effect.  The Office's investigative efforts have been
redirected toward cases of increased severity, including
cases of serious criminal violations, large civil fraud
matters, and significant administrative misconduct.
   Since the early 1990s, successive Secretaries of Energy
have highlighted the shortage of audit resources as a
Department of Energy material weakness in annual Federal
Managers' Financial Integrity Act  reports to the President.
Now the Department is experiencing significant realignment
and downsizing which may increase vulnerabilities and
organizational turbulence resulting in weaker internal
controls.  This type of  environment would tend to require
greater, not less Office of Inspector General oversight.
   The Office of Inspector General matched increased work
demands with Fiscal Year 1996 staffing and funding levels in
part by further reducing the volume of audit, inspection,
and investigation work performed.  During Fiscal Year 1996,
we:
 
7    Continued implementation of the Chief Financial
  Officers Act of 1990 and the Government Management Reform
  Act of 1994 audit requirements.
 
7    In coordination with the Department, relied on our
  Cooperative Audit Strategy where contractor internal audits
  provide reasonable assurances that the procedures used to
  determine costs and charges to the Government are accurate,
  complete, and in compliance with Department contracts.
 
7    Worked highest priority issues, categorized as "most
  significant," and addressed remaining issues afterward until
  resources are exhausted.
 
7    Raised thresholds for accepting complaints for Office
  of Inspector General action and referred more complaints to
  Department management for resolution.
 
7    Investigated as a high priority those cases with the
  best potential for successful criminal or civil prosecution,
  and only investigated the remainder as resources permit.
  Criminal cases which did not score high were referred to
  other law enforcement agencies for their consideration, put
  on hold in the event that resources might become available,
  referred to Department management for action, or delayed
  indefinitely.
 
7    Conducted administrative allegation inspections (which
  are highly focused fact-finding reviews) only in response to
  more significant allegations of waste or mismanagement.
 
   The Office of Inspector General still faces further
staffing reductions.  Under the Departments Strategic
Alignment Initiative, the Office of Inspector General is
required to reduce its work force an additional 29 percent
by Fiscal Year 2000.  This added reduction to our resource
levels during a time of major internal control change and
downsizing within the Department of Energy will have a
serious impact on the Office of Inspector Generals ability
to perform its statutory mission.  The Office of Inspector
General will continue to do its best to accomplish its
statutory mission with the remaining resources.  However,
diminished Office of Inspector General resources affect our
ability to provide reasonable assurance to the Secretary
that the Department is operating with integrity, and may
erode taxpayer confidence.
 
                 MANAGEMENT REFERRAL SYSTEM
 
   The Office of Inspections manages and operates the Office
of Inspector General Management Referral System.  Under this
system, selected matters received through the Office of
Inspector General Hotline or from other sources are referred
to the appropriate Department managers or other Government
agencies for review and appropriate action. We referred 166
complaints to Department management and other Government
agencies during the reporting period.  We asked Department
management to respond to us concerning the actions taken on
64 of these matters.  Complaints referred to the Department
managers included such matters as time and attendance abuse,
misuse of Government vehicles and equipment, violations of
established policy, and standards of conduct violations.
The following are examples of the results of referrals to
Department management.
 
7    As a result of a management review having substantiated
   an allegation that documents were inappropriately purged
   from a Department of Energy employee's personnel security
   file by site management, the site initiated steps to develop
   guidelines for managers and to train managers on Privacy Act
   requirements.
 
7    In separate cases, allegations were substantiated that
   an employee had used a Government computer for personal
   matters and another employee was inappropriately using a
   Government computer and Internet access to solicit private
   business.  The first employee received a verbal reprimand,
   and the other employee received a verbal warning.
 
7    Concern was expressed to the Office of Inspector
   General about certain aspects of the Department's
   participation in a for-profit forum at a resort location.
   Management determined that the Department's participation
   was appropriate, however, Department management advised that
   the conference sponsor has been informed that future
   Department participation will be dependent upon the
   conference being held in a "more appropriate location."
   Also, management was initiating action to disseminate
   guidance to Departmental employees reminding them of the
   Departments policy on conference attendance.
 
7    An allegation that a high-ranking Department official
   made a political trip at Government expense to a Department
   site under the guise of announcing a site initiative was
   refuted: the trip was not paid for by the Department, nor
   was Government-rate airfare used.
 
             LEGISLATIVE AND REGULATORY OVERVIEW
 
Congressional Requests
 
   During the reporting period, congressional committees or
subcommittees, members of Congress, and their respective
staffs made 54 requests to the Office of Inspector General.
We responded by providing 7 briefings and providing data or
reports in 69 instances, including 16 interim responses and
54 final responses.  Interim responses are provided for open
matters which remain under review by the Office of Inspector
General.
 
Legislative Review
 
   In accordance with the Inspector General Act of 1978, the
Office of Inspector General is required to review existing
and proposed legislation and regulations relating to
Department program and operations, and to comment on the
impact which they may have on economical and efficient
operations of the Department.  During this reporting period,
the Office coordinated and reviewed 2 legislative and
regulatory items.
                              
                              
                         SECTION II
                              
                              
                    PERFORMANCE MEASURES
 
 
 
     Significant Office of Inspector General work is
presented in this section under performance measures which
were used to gauge the effectiveness and efficiency of
Office of Inspector General products in meeting the needs
and expectations of its customers.
 
            PERFORMANCE MEASURE:  Recommendations
            Accepted or Implemented by Management
 
Explanation:  Management concurs with or implements
recommendations contained in a published Office of Inspector
General report.  Partial concurrence may be counted as
acceptance if the proposed or implemented action by
management is responsive to the recommendation.
 
ANNUAL SAVINGS OF AT LEAST $500,000 COULD BE ACHIEVED
THROUGH IMPROVED COORDINATION OF CONTRACTORS GROUNDWATER
MONITORING
 
   The Department's Richland Operations Office is
responsible for ensuring that its contractors' tasks are
mission-oriented and are completed at the least cost to the
Department.  Three of Richland's prime contractors perform
cleanup work at the Departments Hanford Site.  A part of
those cleanup efforts is monitoring waste source areas such
as tank farms, ponds, and landfills to determine if
contaminants have been released into the groundwater.  In
Fiscal Year 1996, Richland provided $48 million to the three
contractors to perform groundwater monitoring, remediation,
and surveillance activities such as well drilling and
maintenance, groundwater sampling and analysis, and
reporting.
   An Office of Inspector General audit showed that while
Richlands groundwater monitoring was mission essential, it
was not performed in the most cost-effective manner.  Work
performed by the three principal contractors overlapped,
resulting in duplicative groundwater monitoring activities.
Because of duplicative efforts, the Department spent at
least $700,000 more than it should have in Fiscal Years 1995
and 1996, and could save at least $500,000 annually by
implementing action to ensure coordination of contractors
work for Hanfords groundwater monitoring.
   The auditors recommended that Richland give mission
authority to the groundwater monitoring group to develop a
management strategy to coordinate Hanford Site contractors
groundwater monitoring activities.  Department management
concurred with and took action that was responsive to the
recommendation to develop the management strategy. (WR-B-97-
03)
 
INSPECTION IDENTIFIES INTERNAL CONTROL WEAKNESSES IN THE
PLANNING AND EXECUTION OF FOREIGN TRAVEL
 
   At the request of the Secretary of Energy, the Office of
Inspector General reviewed the Secretarys foreign travel
taken over a 30-month period.  The Secretary traveled
overseas on 16 occasions between June 1993 and December
1995.  An inspection identified $4.58 million, excluding
salaries and overtime, spent for these trips.  Four of the
16 trips, costing $3.42 million, were trade missions to
India, Pakistan, China, and South Africa to help advance
U.S. international economic and policy objectives, and help
create business for U.S. firms.  Although the Department has
identified numerous non-monetary outcomes resulting from the
trade missions, the Department has not always been clear in
describing the monetary outcomes.  While the monetary
outcomes reported by the Department include the signing of
143 business agreements with a potential value of $19.7
billion, these agreements are not all firm contracts and
they do not represent the actual dollars going to U.S.
companies.
   The inspection also found:
(1)Internal control deficiencies existed in the
   administration of the Secretary's foreign trips in such
   areas as support costs and chartering aircraft.
(2)The Department lacked written internal control
   procedures for planning, coordinating, and executing
   international trade missions.
(3)The Department could not accurately account for who
   participated in the Secretary's 16 foreign trips.
(4)Department procedures for invitational travel were not
   followed.
(5)Travel vouchers reviewed by inspectors (which had been
   filed as a result of the four trade missions) showed
   that almost all the Department participants claimed full
   per diem.
(6)Several internal control weaknesses existed in the
   process used by Department officials to obtain support
   from U.S. embassies and to control embassy support
   costs.
   The inspection report contained 31 recommendations for
corrective action.  Department management concurred with the
recommendations and has made significant progress in
implementing corrective actions.  (IG-0397)
 
AUDIT REPORTS IDENTIFY NEED TO IMPROVE CONSTRUCTION PLANNING
PROCESS
 
   In Fiscal Year 1996, the Department of Energy's budget
submission of about $18 billion included about $1.1 billion
for construction projects.  Ensuring that these construction
projects meet bonafide existing or future Departmental needs
becomes increasingly important as the Department's missions
evolve and as it faces additional budget reductions.
   Office of Inspector General reports issued in 1994 and
1995 identified recurring problems when changes in mission
needs were not fully considered in initially approving
funding of new or ongoing construction projects.  In
addition, these reports identified instances where
Department management did not fully consider viable
alternatives to construction of new facilities.  Further,
the Department's construction plans were not always updated
to reflect emerging program and mission changes resulting in
the potential construction of unneeded or oversized
facilities.  Although the problems identified were at single
locations, the magnitude of the construction program and the
length of the planning process created a potential for the
recurrence of similar problems.  While management did not
agree with all aspects of the audit reports, it canceled or
downsized several of the construction projects.
   In November of 1996, the Office of Inspector General
issued an audit report that synthesized issues from the 1994
and 1995 audit reports. This report highlighted issues
dealing with additional opportunities to improve the
construction planning process.  An analysis of the
construction program planning process indicated that the
budget validation process did not provide information to
facilitate program office assessments of continued mission
need.  Without documentation that there is a continued
mission need, higher level management cannot effectively
evaluate the assertion in the budget validation process.
   The 1996 audit report recommended that the Department
emphasize the need for effective evaluations of the
Departments current and future mission needs as part of the
annual approval process for ongoing and planned construction
projects.  To its credit, the Department recognized that
opportunities existed to improve the construction planning
process and has initiated a number of process improvements
that are designed to enhance the construction planning
process.  However, many of the Department's initiatives have
not been fully implemented or tested, and therefore their
effectiveness cannot be evaluated at the present time.
Except for the Office of Energy Research, Department
management agreed with the recommendation.  (IG-0398)
 
$13.6 MILLION IN UNREASONABLE AND UNALLOWABLE CONTRACTOR
EMPLOYEE RELOCATION AND TEMPORARY LIVING COSTS ARE
IDENTIFIED
 
   The Office of Inspector General issued an audit report to
alert senior Department of Energy managers of an area of
contracting that requires Departmental attention. Over the
past 5 years, the Office of  Inspector General has issued
nine audit reports that identified almost $13.6 million of
unreasonable or unallowable charges by contractors for
employee relocation and temporary living costs.  These
unreasonable and unallowable costs were reimbursed because
the Department did not use clearly defined contractual
provisions that were consistent with the Federal Acquisition
Regulation and the Department of Energy Acquisition
Regulation, as applicable, to establish reasonable and
allowable charges for contractors.
   The nine audit reports showed that the Department
reimbursed contractors for employee relocation costs of
about $2.2 million that, in the opinion of the Office of
Inspector General, were unreasonable and unallowable.  An
additional $3.4 million was charged and reimbursed for
specifically unallowable income taxes related to relocation
costs.  The audits also identified problems with charges for
temporary living and associated travel.  Temporary living
expenses and associated travel costs are authorized for
employees who work away from their official or permanent
duty locations and incur additional living expense.
However, the audits of temporary living expenses and
associated travel costs performed on several subcontractors
identified charges of about $8 million that did not meet
that requirement.
   In November 1994, Department management issued a
memorandum to all operations offices and contracting
personnel that identified measures designed to reduce the
amount of unreasonable or unallowable costs claimed by and
reimbursed to contractors.  Corrective action was also taken
by Department field elements and their respective
contractors for site specific problems. In order to resolve
the root cause of the problem and enhance contract
administration, the Office of Inspector General recommended
in this summary report that the Department use clearly
articulated Federal Acquisition Regulation and Department of
Energy Acquisition Regulation standards and criteria for
reasonableness and allowability for employee relocation and
temporary living costs in its contracts and, when
appropriate, in advance agreements.  The Department
concurred with the recommendation and provided a plan to
improve contractual coverage of these costs.  (IG-0400)
 
INSPECTION IDENTIFIES INTERNAL CONTROL WEAKNESSES IN THE
MANAGEMENT AND ADMINISTRATION OF A $14.22 MILLION
PERFORMANCE BASED INCENTIVE PROGRAM
 
   While conducting other inspection work at the Department
of Energy's Richland Operations Office, the Office of
Inspector General identified the Fiscal Year 1995 Richland
Performance Based Incentive (PBI) Program as an area of
concern.  Specifically, the inspection work was unable to
identify any written policies describing implementation
procedures or program controls for this $14.22 million
program.  As a result, the Office of Inspector General
initiated an inspection to review (1) Department policies
and guidance for the establishment and implementation of PBI
Programs at the Departments Operations Offices, (2) the
guidance developed by the Richland Operations Office for the
administration of the Fiscal Year 1995 PBI Program, (3) the
process used by Richland to nominate and select projects for
the PBI Program, and (4) the establishment of PBI objectives
at Richland and the justification for specific PBI award
amounts.
   The inspection found that the Fiscal Year 1995 PBI
Program at Richland has not always made the best use of
incentive dollars paid to the management and operating (M&O)
contractor.  For example, the inspection disclosed:  (1) an
instance where the fee paid was excessive when compared with
the cost of labor and material to perform the PBI work, (2)
instances where PBI fees were paid for work that was
accomplished prior to the establishment of the PBI Program
at Richland, (3) instances where PBI fees were paid for work
that was not completed, (4) instances where PBI fees were
paid for work that was easily achieved by the M&O
contractor, and (5) an instance where quality and safety
were compromised by the M&O contractor to achieve a PBI fee.
Specific examples include:
(1)The payment of a $225,000 PBI incentive fee to the M&O
   contractor to procure and install a ventilation fan with
   a total Fiscal Year 1995 cost of only $24,766.
(2)The payment of a $225,000 PBI incentive fee to the M&O
   contractor to complete the installation of alarm panels
   in seven tank farms when all the work was not completed
   prior to the PBI completion date as claimed by the
   contractor.
(3)The payment of a $185,870 incentive fee to the M&O
   contractor for the replacement of compressed air systems
   in 10 tank farms when all the work was not completed
   prior to the PBI completion date as claimed by the
   contractor.
(4)The payment of a $100,000 PBI incentive fee to the M&O
   contractor for the implementation of laboratory
   software, when, in fact, the software installation was
   completed prior to the incentive fee being offered.
   The inspection also found $950,000 in penalties that
should be assessed against the M&O contractor for incomplete
PBI work.
   Numerous PBI Program weaknesses were also found in the
implementation of the Fiscal Year 1995 PBI Program at
Richland.  For example, this program was established without
any specific written policies and procedures for the
management and administration of an incentive fee program.
As a result, the rationale for selecting PBI Performance
Objectives was unclear, the justification for specific PBI
fee amounts could not be determined, the scope of the PBI
work and the criteria for acceptance were not always clearly
defined, and the expected financial and operational benefits
from individual projects selected under the PBI Program were
undefined in most cases.
   The inspection report included 19 recommendations to
improve the PBI Program.  Department management concurred
with all 19 recommendations.  (IG-0401)
 
ALLEGATION OF DEFICIENCIES IN DESIGN AND CONSTRUCTION OF A
DEPARTMENT NUCLEAR MATERIALS STORAGE FACILITY
 
   A complainant alleged to the Office of Inspector General
that the Department of Energy's Nuclear Materials Storage
Facility at the Los Alamos National Laboratory was so poorly
designed and constructed that it was never usable and that
the Department proposed to renovate the entire facility to
store large amounts of plutonium.  The complainant believed
it imperative that the public receive some assurance that
this waste will not recur and that the facility will be made
safe.
   An inspection was conducted to determine if the
allegations were accurate, and if so, to determine if the
Government could recover damages from the Architect/Engineer
and/or the construction contractor.  The inspection also
reviewed the Departments proposed actions to renovate the
facility.
   The inspection concluded that the complainant's
allegations concerning the design and construction of the
facility were accurate.  Office of Inspector General
inspectors learned that deficiencies in the facility were so
serious that they rendered the facility unusable for its
intended purpose.  These deficiencies included, for example,
the inability to control and balance the heating,
ventilation, and air conditioning (HVAC) system to maintain
acceptable negative pressures within the facility.  The
inspection determined that deficiencies alleged by the
complainant were similar to deficiencies that had been
identified by the Department and the contractor.
   The inspection also concluded that there was not a
sufficient basis for the Government to recover damages from
any contractors on the project.  A Root Cause Analysis
Report prepared by the Departments Los Alamos Area Office
stated that Department officials and the management and
operating contractor were responsible for inadequate design
requirements for the facility.  The report also stated that
there was inadequate construction management by the
Department and its contractors.
   As a result of the inspection, the Office of Inspector
General made several recommendations for corrective actions
that management should take to ensure the facility is
successfully renovated.  Management generally concurred with
the recommendations and is taking corrective action.  (INS-0-
97-01)
 
INSPECTION FINDS WEAKNESSES IN COMPLYING WITH DEPARTMENTAL
POLICY TO REPORT FRAUD, WASTE, AND ABUSE TO THE OFFICE OF
INSPECTOR GENERAL
 
   The Office of Inspector General conducted an inspection
of the Department of Energy's Savannah River Site to
determine whether the site was fully complying with the
provisions of a Departmental policy on reporting fraud,
waste, and abuse to the Office of Inspector General.
Departmental Order 2030.4B, Paragraph 6c, specifically
requires Departmental contractors to (1) annually notify
their employees of their duty to report allegations of
fraud, waste, abuse, corruption, or mismanagement; (2)
display and publish the Office of Inspector General Hotline
telephone number in common areas of buildings; (3) publish
the Office of Inspector General Hotline number in telephone
books and newsletters; and (4) notify the Office of
Inspector General regarding cases referred to other law
enforcement entities.  The Order applies to all integrated
and management and operating contractors performing work for
the Department as provided by law and/or contract.
   The inspection found that the Savannah River Sites
management and operating contractors were not fully
complying with three of the four specific requirements in
Paragraph 6.c. of the Order.  First, the inspection found
that the management and operating contractors were not
annually notifying their employees of their duty to report
allegations of fraud, waste, abuse, corruption, or
mismanagement in the Department's programs, operations,
funds, or contracts to appropriate authorities and, when
appropriate, directly to the Office of Inspector General.
Second, the inspection disclosed that the management and
operating contractors were not adequately displaying and
publishing the Office of Inspector General Hotline number in
common areas of buildings.  Third, the inspection determined
that the management and operating contractors were either
incorrectly publishing or not publishing the Hotline number
in telephone books and in newsletters under the contractors
cognizance.  The inspection found, however, that the
applicable management and operating contractor had notified
the Office of Inspector General of alleged incidents of
fraud, waste, and abuse that had been referred to Federal,
State, or local law enforcement entities.
   Department management agreed with the report
recommendations and took positive actions to comply with the
Departments Order.  (INS-O-97-02)
 
                    PERFORMANCE MEASURE:
          Audit/Inspection Savings, Recoveries and
               Funds Identified for Better Use
 
Explanation:  Costs which are recovered, saved, disallowed,
or identified for better use (detailed definition appears in
Section IV of this Semiannual Report).  For the Office of
Audit Services, dollar amounts discussed for this
performance measure are included in the audit statistics
presented in Section IV of the Semiannual Report.
 
SUBSTANTIAL SAVINGS COULD BE REALIZED THROUGH THE DISPOSAL OF
NONESSENTIAL LAND
 
   The Department and its predecessor agencies acquired control
of about 2.4 million acres to carry out wide-ranging programs.
However, recent changes in the worlds political climate have had
a profound impact on the Department's mission and its need for
this land.  The Department's mission is now focused on weapons
dismantlement, environmental clean-up, technology development,
and scientific research.  Because of these mission changes, the
Office of Inspector General initiated an audit to determine
whether the Department has any land holdings that are excess to
current and anticipated future needs.
   Federal regulations require that executive agencies hold only
that land necessary to economically and efficiently support
mission related activities.  The audit found that Department
sites at Hanford, Oak Ridge, and Idaho retained about 309,000
acres of land which, in the opinion of the Office of Inspector
General, are not essential to carrying out current and
foreseeable mission requirements.  The audit also found that
rather than dispose of nonessential land, the Department issued a
land use policy expanding land management activities and began
seeking public and private ideas for new land uses.  Therefore,
the Department is holding land valued at $126 million that could
be transferred to other Federal or state agencies, or a portion
sold for private uses.  Further, the Department's liability for
payments in lieu of taxes on purchased land could be reduced by
$1.7 million annually.
   The audit recommended that the Department  (1) dispose of
nonessential land holdings at Hanford, Oak Ridge, and Idaho, (2)
reevaluate requirements for all remaining Departmental land
holdings against current and foreseeable requirements and dispose
of nonessential land, and (3) reevaluate the policy of defining
ecosystem management as a valid new use and a basis for retaining
Department owned or controlled real property.  Department
management did not concur with the audit finding and
recommendations, stating that the Department should finish
realigning itself to new missions before identifying and
disposing of excess properties.  Also, management stated that the
recommendations appeared to be contrary to the Administration's
ecosystem management policies.  (IG-0399)
 
COST SAVINGS COULD BE ACHIEVED BY REDUCING A NEED FOR LEASED
WAREHOUSE SPACE
 
   The Department of Energy and its contractors use warehouses
for storing furniture, equipment, and office supplies.  The
Department spends over $2.5 million annually to lease about 3.5
million total square feet of warehouse space of which about
493,400 square feet was leased from outside sources.
   An Office of Inspector General audit assessed the efficiency
of the Department's use of warehouse space and whether the
Department was minimizing the need for warehouse space for
storing furniture, office supplies, and equipment.  Although
Federal Property Management Regulations require Government
agencies to continuously review the need for space, the audit
found that this was not always being accomplished throughout the
Department.  A review of four entities (entities are both
Department and contractor operations) showed that the Department
had more space than needed because about 76,000 square feet of
warehouse space was used to store unusable, unneeded and/or
excess furniture and equipment.  In addition, office supplies
were warehoused instead of adopting a just-in-time or equivalent
delivery system.
   The audit report recommended that Department management take
action to dispose of excess and unneeded property, reduce the
storage of office supplies, and establish stock levels for any
furniture and office supplies that need to be warehoused.  The
report also recommended that specific actions be taken at three
of the four entities reviewed that dealt with specific conditions
identified at these locations.  Department management agreed with
the finding and three of the four recommendations.  Management
did not agree to relinquish leased warehouse space at Department
Headquarters until further studies are completed.  (CR-B-97-01)
 
$1.35 MILLION IN COSTS COULD BE AVOIDED BY ELIMINATING
DUPLICATIVE ELECTRICAL COMMUNICATIONS PROJECTS
 
   During the Cold War, the Department of Energy used the Nevada
Test Site to test nuclear weapons.  In order to meet the mission,
Nevada had to construct many facilities, and maintain
infrastructure support.  However, the Cold War has ended and a
Presidential Directive in October 1992 placed a moratorium on
nuclear testing that is still in effect.  Because these events
changed the Test Sites mission substantially, the Office of
Inspector General performed an audit to assess whether Nevada was
structuring cost effective projects with defined mission needs.
   In response to changes in its mission, Nevada changed and
rescoped several projects.  The audit found that two projects
contained electrical communications systems that were
duplicative.  The first project included digital-microwave and
fiber-optic communications at a cost of $1.1 million; the second
included a pure fiber capability costing $2.6 million.  By its
own estimate, Nevada could avoid about $1.35 million by taking
action to eliminate this duplication.  This situation occurred
because of Nevada's uncertainty with the funding levels that
would be provided for the pure fiber-optic system.
   The audit report recommended that Department Management pursue
the most cost-effective option that meets overall technical
requirements.  Management concurred with the recommendation. (WR-
B-97-01)
 
REDUCTIONS IN BUS SERVICE SUBSIDIES AT A NATIONAL LABORATORY
COULD SAVE AN ESTIMATED $7.2 MILLION PER YEAR
 
   The National Performance Review report, Making Government Work
Better and Cost Less (September 1993), and the Secretary of
Energys strategic alignment plan recommended reducing subsidies
for services that could be more fully paid for by their users.
An Office of Inspector General audit assessed whether bus service
subsidies at the Department's Idaho National Engineering
Laboratory were still necessary or reasonable.
   Since May 1992, the Idaho Operations Office and the
Laboratory's contractors have issued a series of bus operations
reports that included recommendations to make the Laboratory's
bus service smaller and less costly to operate.  The audit found
that these recommendations had not been implemented; therefore,
the Laboratory's bus service was neither cost-effective nor
efficient.  Further, ridership was less than a desired rate per
bus, and ticket fares were significantly lower than the costs to
provide this service. The Department of Energy's subsidies
averaged more than $14.6 million per year for the Laboratory's
bus service since Fiscal Year 1993.
   An Office of Inspector General report recommended that Idaho
decrease the bus service subsidy by adopting a park and ride
system, minimizing overtime costs, increasing ticket prices,
setting and maintaining a system-wide minimum occupancy level,
increasing use of Laboratory buses, and periodically comparing
bus service costs with ticket sale revenues.  The Office of
Inspector General estimated that the Department could save as
much as $7.2 million per year by implementing these
recommendations.
   Management partially concurred with one recommendation and
fully concurred with the others, but did not provide proposed
actions and completion dates for these recommendations.  (WR-B-97-
02)
 
HANFORD SITES $58 MILLION RAILROAD SYSTEM IS NOT FULLY USED
 
  As a part of its stewardship responsibilities, the Richland
Operations Office must ensure that all available physical assets
at the Department's Hanford Site are integrated into the project
management process and used in a cost-effective manner to
accomplish the Department's missions.  An Office of Inspector
General audit determined that the $58 million railroad system at
the Hanford Site was not fully used to support Richland's
environmental programs.  This asset was not integrated into
Hanford's activities because Richland did not fully ensure its
contractor fully evaluated transportation alternatives for moving
large quantities of material within the Hanford Site.  Also,
Richland planned to excess and dispose of the system.  This
discouraged potential system users from considering it for use in
their cleanup plans.
  The audit showed that if Richland incorporated the railroad
system into the transportation segment of one ongoing project,
the Department could save about $29 million over the life of that
project.  In addition, by using the railroad system to transport
the material, the risk of accidents is significantly reduced.
  The audit report recommended that Richland fully implement the
project man-agement principles outlined in Department regulations
and make every effort to cost-effectively use the railroad system
and other physical assets at the Hanford Site.  Management
indicated partial concurrence with the audit recommendations and
stated it would take every effort to cost-effectively use the
Hanford railroad system.  (WR-B-97-04)
 
   PERFORMANCE MEASURE:  Legislative and Regulatory Compliance
     Related to Office of Inspector General Recommendations
 
Explanation:  Department adoption of principles and guidance
contained in statutes, executive orders, and U.S. Code of Federal
Regulations based on Office of Inspector General recommendations.
 
AUDIT QUESTIONS COSTS AWARDED UNDER ECONOMIC DEVELOPMENT GRANTS
AND A COOPERATIVE AGREEMENT
 
   As a result of the end of the Cold War, the Department of
Energy has downsized many of its facilities.  Because this
downsizing may have a negative impact on many communities that
were heavily dependent on Departmental operations for economic
stability, Section 3161 of the National Defense Authorization Act
for Fiscal Year 1993 required the Department to plan workforce
restructuring initiatives so as to minimize the social and
economic impacts on workers and communities.  To meet the
requirements of the law, the Department has encouraged the
formation of community reuse organizations.  These organizations
are responsible for acting on behalf of the community to
determine and sponsor initiatives to offset the consequences of
the Departments downsizing.  One such initiative has been the
award of economic development grants and a cooperative agreement
to several local not-for-profit organizations located in East
Tennessee.
   An Office of Inspector General audit found that a large
majority of funds awarded to East Tennessee not-for-profit
organizations were being used for their intended purposes.
However, significant amounts awarded to the East Tennessee
Economic Council (ETEC) were not.  For example, ETEC used about
$161,000 to purchase furniture, equipment, and services that were
outside the grants' approved scope(s) of work.  Also, ETEC used
about $29,000 to purchase equipment that was not held by ETEC and
was not used specifically for grant purposes.  These conditions
occurred because the Department considered certain types of costs
to be allowable even though they were outside the grants'
approved scope(s) of work, and because reviews of ETEC's invoices
did not reveal all items that should not have been billed or were
billed in error.  As a result, the Department reimbursed ETEC
$220, 000 in questionable costs.
   Federal regulations require that cash advances be limited to
the minimum amount needed to meet grant recipients immediate
cash requirements and that interest earned on cash advances be
deposited in the U.S. Treasury.  However, the Department advanced
ETEC about $1.4 million more than ETEC needed to establish a
revolving loan fund and then allowed ETEC to hold about $148,000
in interest earned on the advanced funds.  This occurred because
the Oak Ridge Operations Office officials responsible for
awarding and administering these grants were not familiar with
Federal rules on cash advances and interest earned on cash
advances.
   Management agreed with the findings and recommendations and
will take appropriate action to correct the conditions disclosed
in the report.  (ER-B-97-01)
 
AUDIT IDENTIFIES INTERNAL CONTROL WEAKNESSES IN CASH ADVANCES
 
   The Office of Inspector General performed an audit to
determine whether funding provided for economic development at
the Mound Plant was used for the Department's intended purposes.
Overall, the audit found that the Department's funds were used
for their intended purposes.
   However, contrary to Federal regulations, the Department
advanced the City of Miamisburg, Ohio, $2.6 million more than the
minimum funds needed to meet immediate cash requirements, and the
City kept the majority of the funds in non-interest-bearing
accounts.  The funds were provided to fulfill commitments
previously made to the City by senior Department officials, and
the Department did not require the City to comply with Federal
regulations or grant terms regarding cash advances.  As a result,
the City held a cash advance of $2.6 million for more than a year
and remitted only $10,000 in interest earned on the advance.
Federal regulations require that cash advances be limited to the
minimum amount needed to meet grant recipients immediate cash
requirements, that each advance be kept in interest-bearing
accounts, and that interest earned on cash advances be promptly
deposited in the U.S. Treasury.
   The audit recommended that Department management  (1) ensure
that any cash advances made under economic development grants are
needed for immediate disbursement and maintained in interest-
bearing accounts; (2) require that any interest earned on cash
advances be promptly returned to the Department for remittance to
the U.S. Treasury; and (3) require the City of Miamisburg to
refund excess cash advances in accordance with Federal
regulations and grant terms.
   Management agreed with the finding and recommendations and
initiated the appropriate corrective actions.  (ER-B-97-02)
 
INSPECTION FINDS A CONTRAC-TOR TO BE IN NONCOMPLIANCE WITH
FEDERAL AND DEPART-MENT POLICIES ON TAPE RECORDING OF
CONVERSATIONS
 
   The Office of Inspector General received an allegation
concerning the tape recording of conversations at a Department of
Energy site.  Specifically, the complainant alleged that an
employee of a Department contractor tape recorded conversations
between himself and a Department of Energy employee at the site,
without the Department employees knowledge.
   An inspection found that the contractor employee had recorded
approximately 30 telephone conversations between himself and the
Department of Energy employee.  These conversations were recorded
by the contractor employee both at the Department of Energy site
and at the home of the contractor employee.  The inspection
confirmed that the tape recordings were made without the
knowledge of the Department employee.
   The inspection concluded that the tape recording of telephone
conversations on site was contrary to both Federal and Department
provisions on "Consensual Listening-in to or Recording
Telephone/Radio Conversations."
   Department management is taking corrective actions to
implement the nine recommendations in the inspection report.
(S94IS094)
 
            PEFORMANCE MEASURE:  Complaints Resolved
 
Explanation:  Complaints and allegations resolved as a result of
Office of Inspector General work.  Complaints and allegations are
considered resolved when a case is closed.  Prosecutions and
exonerations are included in this measurement.  Complaints and
allegations which are referred to management without requiring a
management response and referrals to other agencies do not count
as resolutions and will not be included in this statistic.
 
WEATHERIZATION CONTRACTOR IS CONVICTED OF BRIBERY
 
   The Department of Energys Kansas City Area Office reported to
the Office of Inspector General allegations involving kickbacks
and collusion in the weatherization program.
   The investigation focused on theft of funds from a $309,793
Department of Energy weatherization grant.  The investigation
determined that a weatherization contractor provided kickbacks,
amounting to $740, to a grant inspector in return for
weatherization jobs.  The contractor was found guilty of bribery
and sentenced to one year in prison.  (I93KC006)
 
CONFLICT OF INTEREST INVOLVES THE PRESIDENT OF A DEPARTMENT OF
ENERGY GRANT RECIPIENT
 
   The Office of Inspector General received an allegation that
the president of an educational consortium that receives
Department of Energy grant money hired his spouse as a
consultant.  The educational consortium administers Department of
Energy educational grant funds that will amount to $50 million in
the year 2000.
   The investigation developed additional information indicating
potential lobbying activities associated with the consortium's
eastern office in Arlington, Virginia.  The Office of Inspector
General determined that the president hired his spouse as a
consultant just prior to their marriage, which had been disclosed
to the consortium's executive committee and to the Department.
In an effort to avoid a conflict of interest, all consulting
agreements subsequent to the disclosure were approved by the
chair of the executive committee.  Despite the disclosure and
avoidance actions, an apparent conflict of interest remained
because the president continued to oversee his spouses work.
Department management responded to recommendations by the Office
of Inspector General by directing the president to provide the
contracting officer with a written statement assuring that he has
removed himself from all oversight responsibilities for his
spouse.
   While there was no evidence that the consortium was using its
eastern office as a conduit for lobbying activities, there were
indications that the eastern office was being used to further the
consortiums non-Department expansion goals.  Department
management told the consortium that the costs for the eastern
office will no longer be allowable after September 30, 1996.
Additionally, the contracting officer will take action to ensure
that any expansion efforts by the consortium are not charged to
the Department's grants.  (I95IF008)
 
 
CONTRACTOR EMPLOYEE FAILS TO DISCLOSE OUTSIDE INTEREST
 
     Information was received by the Office of Inspector General
which alleged a Department of Energy National Laboratory employee
failed to disclose outside financial interests.  The
investigation revealed that the contractor employee had failed to
disclose financial interests in companies which were recently
prosecuted criminally and civilly for false statements and false
claims by another government agency.  When the employee was
confronted she failed to provide complete statements of those
interests as required by the Laboratory.
     The terms of the Department's performance-based management
contract with the contractor for the operation of the Laboratory
specify that the disciplining of Laboratory employees is strictly
within the purview of the contractor and Laboratory management.
Based on an administrative report issued to the Department's
management, the Laboratory employee was reprimanded for having
twice failed to disclose those outside financial interests, and
the contractor also withdrew the employee's annual raise of
$1,100, which would have a cumulative effect over the remainder
of the employee's working career at the Laboratory.  (I96HQ007)
 
IMPROPER USE OF GOVERNMENT TELEPHONES
 
   The Office of Inspector General received allegations that
contractor personnel at the Department's Savannah River Site
misused telephone access codes to make long distance domestic
calls and international telephone calls, including calls to adult
entertainment lines in Sao Tome, South Africa, while on official
duty.  A review of the site's telephone records listed the
telephones from which the calls were made.  However, not every
telephone used to make calls to the adult entertainment lines
could be identified with a specific office or user.  Many of the
telephones that were used to place these calls were located in
"public" use areas, hampering specific identification of the
callers.  The investigation determined that over 100 calls were
made to several adult entertainment lines located overseas.  One
contractor employee admitted making a number of the calls and was
terminated.
   The Office of Inspector General issued a report to Department
management which  addressed administrative concerns relating to
the misuse of the access code.  Department officials concurred
with the report's recommendations and tasked the contractor to
initiate actions to block site telephones from accessing specific
international telephone exchanges and to ensure established
procedures and guidelines for the assignment and use of telephone
authorization codes are disseminated to all the appropriate site
employees on a recurring basis.  (I96SR025)
 
CONTRACTOR EMPLOYEE REPRISAL COMPLAINTS
 
7    The Office of Inspections issued a Report of Reprisal
  Inquiry and, pursuant to 10 C.F.R Part 708, provided copies to
  Department management, the contractor, and the complainant.  The
  complainant alleged that he made protected disclosures of
  information regarding health and safety issues which led to the
  termination of his employment and the referral of information
  regarding his case to local policy authorities for possible
  criminal prosecution.  The contractor asserted that the
  complainant was terminated for the unauthorized use of another
  employees computer password, and the dissemination of three
  electronic mail messages which contained obscene and threatening
  language directed at a fellow employee.  The Report of Reprisal
  Inquiry found that, on at least one occasion, the complainant
  made good faith disclosure regarding a health and safety issue,
  but that he failed to establish, by a preponderance of the
  evidence, that the contractor's actions were related to his
  disclosure.  (S96IS042)
 
7    The Office of Inspections issued a Report of Reprisal
  Inquiry and, pursuant to Part 708, provided copies to Department
  management, the contractor, and the complainant.  The complaint
  alleged reprisal against a contractor employee who had his
  employment terminated through a reduction-in-force (RIF).  The
  employee (who had complained to a Member of Congress in 1988
  about his job assignment following his participation in a
  congressional investigation) also alleged additional past acts of
  reprisal, including promotion denials, low performance ratings,
  and his failure to be hired for other positions.  The
  investigation concluded that the employer did rely upon business-
  related reasons in terminating the employee through a RIF, and
  that available evidence did not support a finding of reprisal.
  (S96IS038)
 
 PERFORMANCE MEASURE:  Investigation Recoveries/Fines and Funds
                    Identified for Better Use
 
Explanation:  Applies to investigations and allegation-based
inspections only, and consists of recoveries and fines which were
collected as a result of management actions based on Office of
Inspector General work, as well as funds identified in reports
for better use.   Statistics on investigative recoveries/fines
are collected separately and are included in Section IV of the
Semiannual Report.
 
A CIVIL ACTION RESULTS IN DEBARMENT AND CASH SETTLEMENT
 
   The Office of Inspector General investigated allegations that
two principals of a Government contractor had falsified their
qualifications as professional engineers in conjunction with a
Department of Energy contract.  The principals also were  alleged
to have directed their employees to falsely charge non-Department
work to the contract.  The investigation determined that the
total loss to the Department was approximately $1,652,173.
   Both defendants had pled guilty in the criminal case, and one
of the principals was sentenced to 33 months confinement while
the other was sentenced to 18 months confinement.  The company
was also fined $30,000 and debarred for 3 years.
   A Department of Justice attorney notified the Office of
Inspector General that the two principals and the Government also
recently signed a civil settlement agreement wherein one
defendant agreed to pay $25,000 to the Government and to a self-
debarment of 5 years.  The other defendant agreed to pay $15,000
to the Government and to a self-debarment of 3 years.  (I89RL008)
 
FALSE TIMECARDS ARE SUBMITTED AT A NATIONAL LABORATORY
 
   The Office of Inspector General received an allegation that
several University of California employees located at Los Alamos
National Laboratory were fraudulently claiming overtime.  The
employees were located in a secure area at the Laboratory.
   The investigation revealed that seven University of California
employees had claimed overtime to which they were not entitled.
Entry and exit records were reviewed and compared to time and
attendance records.  It was determined that a total of 783 hours
in excess overtime had been claimed.  The case was referred to
the U.S. Attorney's Office for the District of New Mexico, and it
was declined for prosecution in lieu of administrative remedies.
   As a result of an Administrative Report to management, the
Department recovered $13,477 from the University of California.
(I92AL005)
 
A SUBCONTRACTOR EMPLOYEE SUBMITS FALSE RELOCATION VOUCHERS
 
   The Office of Inspector General investigated possible false
claims filed by the former Finance Director of a subcontractor at
the Department of Energy's Pantex Plant.
   The investigation determined that the former Finance Director
submitted false claims totaling about $14,000 pertaining to
relocation expenses.  The former Finance Director pled guilty and
was placed on 3 years probation and ordered to make restitution.
(I92AL030)
 
FALSE CLAIMS FOR COST MISCHARGING LEAD TO A $2.7 MILLION CIVIL
SETTLEMENT
 
   An Office of Inspector General review of Work-For-Others
projects at Lawrence Livermore National Laboratory disclosed
evidence of cost mischarging.  An investigation validated the
reviews finding and determined additional cost overruns were
charged to a Laboratory overhead account and subsequently divided
among numerous other Work-For Others sponsors.  The investigation
identified four categories of mischarging for the transactions:
overruns, loans, non-deobligations (unused funds were not
returned to a sponsor after a project was completed), and
transactions that were inadequately explained and/or supported.
   The Assistant U.S. Attorney accepted the case for civil
prosecutive consideration, and the Laboratory conducted an
internal audit to determine the extent of cost mischarging.  The
Laboratory offered to repay the $1 million it calculated as the
loss to taxpayers.  An investigation by the Office of Inspector
General determined that the cost mischarging was greater than $1
million; therefore, the U.S. Attorney's Office accepted $716,906
from the Laboratory as a downpayment to cover the calculated
mischarging; and the Laboratory paid $207,160 for audit and legal
costs during the audit.
   The Assistant U.S. Attorney issued a demand letter to the
Laboratory and a settlement agreement for $2,718,291 was signed
by the Laboratory and the U.S. Attorney's Office.  The Laboratory
paid a balance of $2,001,385.  A total of $2,925,451 was received
from the Laboratory for all transactions and for the audit and
legal costs.  (I93LL016)
 
CASHIERS WILL MAKE FULL RESTITUTION FOR STEALING TRAVEL ADVANCE
FUNDS
 
   The Office of Inspector General received allegations that two
Department of Energy cashiers submitted false travel documents
which resulted in their embezzlement of approximately $12,000 in
travel advances.
   The cases against the two cashiers were accepted for
prosecution by the U.S. Attorney's Office in the District of
Columbia.  They both pled guilty to the thefts and agreed to make
full restitution to the Department for the amounts of their
theft.  In addition to restitution, one cashier was sentenced to
5 years supervised probation and 300 hours of community service,
and the other was sentenced to 18 months supervised probation and
25 hours of community service.  One cashier also tendered her
resignation.
   In response to an investigative report, management established
an accounts receivable to recover the money, pursuant to court
ordered restitution, and made procedural changes which when
implemented should prevent similar thefts in the future.
(I95HQ009 and I95HQ010)
 
IDAHO OPERATIONS OFFICE SUBCONTRACTOR SUBMITS INFLATED INVOICES
 
   An Idaho Operations Office contractor notified the Office of
Inspector General of allegations that a subcontractor employee at
the Idaho Hazardous Training Center, Pocatello, Idaho, submitted
questionable invoices to the Department.  The Office of Inspector
General investigated the matter with assistance from the
contractor audit staff that was responsible for identifying the
situation.  The investigation determined that the subject had
submitted numerous fraudulent invoices containing approximately
$8,667 in inflated labor charges.  In addition, the investigation
determined that the subcontractor had stolen approximately $450
worth of Government tools.
   The U.S. Attorney's Office, District of Idaho, allowed the
subject of the investigation to participate in a Pretrial
Diversion Program in exchange for the Government deferring
prosecution of the subject for submitting false claims.  The
Pretrial Diversion Agreement required that the subject comply
with certain terms and conditions, including probation for a
period of not more than 12 months and making restitution of
approximately $9,117.  The restitution payment was made in full
and returned to the Department program from which it had been
taken.  (I95IF002)
 
AN ASBESTOS REMOVAL SUBCONTRACTOR FALSIFIES CERTIFICATIONS
 
   The U.S. Attorney's Office and the Environmental Protection
Agency requested assistance from the Office of Inspector General
on an investigation of allegations that a company had falsified
medical survey records and certificates of training related to
Government-funded asbestos removal subcontracts.  The
investigation revealed that records relating to the required
medical surveys and asbestos removal training for some of its
employees were missing or altered.  The company performed
asbestos removal for local school districts and for Federal
Government agencies, including the Department of Energy at the
Idaho National Engineering Laboratory.
   The company and its president were convicted of environmental
and fraud-related crimes as part of a plea agreement.  The court
fined the defendants a total of $25,750 and sentenced the
president to 6 months incarceration.  The company, its president
and five related companies or individuals were debarred from
performing Government contracts as a result of the investigation.
(I95IF007)
 
DEPARTMENT EMPLOYEES VIOLATE TRAVEL POLICY
 
   The Office of Inspector General received separate complaints
on two senior Department employees assigned to the Naval
Petroleum Reserves in California alleging that they used frequent
flyer miles, accrued from Government travel, for personal travel.
In addition, one of the employees was alleged to have submitted
false travel vouchers for payment.  Official travel vouchers
revealed that both employees received credit on their frequent
flyer accounts for Government travel.  Inspector General
subpoenas were issued for both employees' frequent flyer
accounts.  The accounts confirmed that all of the frequent flyer
miles were accrued from Government travel.  The investigation
also revealed that one employee submitted travel vouchers for
parking expenses while on annual leave and that, on more than one
occasion, the employee claimed per diem to which the employee was
not entitled.
   As a result of the two investigations, management received
restitution from the employees amounting to a total of $8,033.50
and both employees were reprimanded.  (I94LL035 and I95LL003)
 
TWO HANFORD SITE SUBCONTRACTOR EMPLOYEES FALSELY CLAIM $30,000 IN
PER DIEM
 
   The Office of Inspector General received allegations from a
Richland Operations Office contractor that a subcontractor
employee submitted fraudulent claims for per diem reimbursement
while employed at the Hanford Site, Richland, Washington.  The
Office of Inspector General investigation determined that the
subcontractor employee and his wife, who was also temporarily
employed at the Hanford Site, both fraudulently obtained per diem
subsistence.  Their per diem payments were based on false
representations that they maintained a permanent residence
outside of Richland.  The subjects fraudulently received
approximately $31,653 in false per diem claims.
   In response to the investigative report, the U.S. Attorney's
Office for the Eastern District of Washington filed a one count
indictment against both subjects for making false statements to
the Government.  The husband pled guilty in a plea agreement and
was sentenced to 6 months home detention with electronic
monitoring and required to pay restitution in the amount of
$24,560.  The wife entered into a pretrial diversion agreement,
requiring her to make restitution in the amount of $7,093 plus a
$1,000 penalty, and to be supervised for a 24- month probationary
period.
   As a result of an Office of Inspector General Administrative
Report to Management, the Department recovered $4,051 in indirect
overhead costs that were associated with the fraudulent per diem
payments.  (I95RL019)
 
AN OAK RIDGE CONTRACTOR EMPLOYEE PLEADS GUILTY TO THEFT
 
   The Office of Inspector General received information that an
employee of an Oak Ridge prime contractor was suspected of the
theft of equipment from the Y-12 facility, Oak Ridge, Tennessee.
   An investigation disclosed that the employee had stolen a copy
machine and a laser printer.  During an interview, the employee
claimed to have disposed of the equipment in a garbage dumpster.
The employee subsequently pled guilty to the theft in Federal
District Court and received 18 months pre-trial diversion and 100
hours community service.  The employee was also ordered to
reimburse the Department $2,060.  (I96OR003)
 
STRATEGIC PETROLEUM RESERVE CONTRACTOR DID NOT COMPLY WITH
PROPERTY MANAGEMENT PROCEDURES
 
   A Strategic Petroleum Reserve official reported to the Office
of Inspector General that the property manager for the Reserve's
prime contractor excessed a marsh buggy valued at $77,000 for
$2,087, and that the successful bidder resold the buggy for
$70,000.
   The investigation revealed weaknesses in the contractor's
property management procedures.  The contractor excessed the
equipment without complying with the Reserve's supply service
manual, and detailed justification for excessing the equipment
could not be located.  The Office of Inspector General review of
the contractors procurement of the replacement buggy revealed
evidence of unjustified sole sourcing or restrictive
specification writing.  However, a competitor advised the Office
of Inspector General that it could not have entered a bid lower
than the successful vendor.  A report to management recommended
recovery of funds to pay for replacement of the marsh buggy and
for random reviews of site property management activities to
ensure that this matter is not systemic.  The Reserves
management fully concurred with the report's findings and issued
a demand to the contractor for a refund of $65,175.  (I96OR008)
                                
                                
                           SECTION III
                                
                                
                         REPORTS ISSUED
 
 
     The 38 audit reports issued during this semiannual reporting
period are listed below in three categories:  contract and grant,
operational, and financial reports.  Significant financial
results associated with each report are also presented when
applicable.  Inspection reports are listed separately.
 
                 CONTRACT & GRANT AUDIT REPORTS
                                
ER-C-97-01  Report on the Interim Audit of Costs Incurred Under
Contract No. DE-AC24-92OR21972 From October 1, 1994, to September
30, 1995, Fernald Environmental Restoration Management
Corporation, Fernald, Ohio, December 20, 1996
Questioned Costs: $660, 000
 
ER-C-97-02  Audit of Selected Indirect Cost Rates for Fiscal
Years 1993 Through 1996 Oak Ridge Associated Universities, Oak
Ridge, Tennessee, February 10, 1997
 
 
                    OPERATIONAL AUDIT REPORTS
 
IG-0398  Special Report on the Audit of the Management of
Department of Energy Construction Projects, November 21, 1996
 
IG-0399  Audit of the U.S. Department of Energys Identification
and Disposal of Nonessential Land, January 8, 1997
Savings:  $8,500,000
 
IG-0400  Summary Audit Report on Contractor Employee Relocation
and Temporary Living Costs, January 27, 1997
 
CR-B-97-01  Audit of the Department of Energys Warehouse Space,
January 28, 1997
Savings:  $756,000
 
CR-L-97-01  Audit of the Departments Utility Purchase, October 11, 1996
 
CR-L-97-02  Assessment of Pittsburgh Naval Reactors Internal
Audit Function, December 6, 1996
 
CR-L-97-03  Federal Managers Financial Integrity Act, December 20, 1996
 
CR-L-97-04  Assessment of Schenectady Naval Reactors Office
Internal Audit Functions, February 28, 1997
 
ER-B-97-01  Audit of Economic Development Grants and a
Cooperative Agreement With East Tennessee Not-for-Profit
Organizations, October 22, 1996
Savings:  $1,400,000    Questioned Costs:  $367,785
 
 
ER-B-97-02  Audit of the Department of Energys Grant for
Economic Development at the Mound Plant, February 14, 1997
 
ER-L-97-01  Audit of the Use of Administratively Uncontrollable
Overtime in the Department of Energy, November 14, 1996
 
ER-L-97-02  Audit of the Department of Energys Economic
Development Activities at the Pinellas, Mound, and Rocky Flats
Plants, February 7, 1997
 
WR-B-97-01  Audit of Electrical System Construction Projects at
the Nevada Operations Office, November 6, 1996
Savings:  $1,350,000
 
WR-B-97-02  Audit of Bus Service Subsidies at the Idaho National
Engineering Laboratory, November 7, 1996
Savings:  $36,000,000
 
WR-B-97-03  Audit of Groundwater Monitoring at Hanford, November 15, 1996
Savings: $2,484,600    Questioned Costs:  $100,000
 
WR-B-97-04  Audit of the Use of Hanford Site Railroad System,
March 20, 1997
Savings:  $7,000,000
 
WR-L-97-01  Survey of Integrated Contractor Collection, October 4, 1996
 
WR-L-97-02  Audit of Use of Firing and Testing Ranges in the
Albuquerque Complex, November 8, 1996
 
WR-L-97-03  Audit of Waste-Handling Facilities at the Rocky Flats
Environmental Technology Site, November 27, 1996
 
WR-L-97-04  Audit of Procurement Activities at Sandia National
Laboratories, February 21, 1997
 
 
                     FINANCIAL AUDIT REPORTS
 
CR-FC-97-01  Federal Energy Regulatory Commissions Fiscal Year
1996 Financial Statement Audit, February 14, 1997
 
CR-FS-97-01  Report on Results of Audit Procedures Performed at
the Pittsburgh Naval Reactors Office During the Audit of the
Department's Consolidated Fiscal Year 1996 Financial Statement,
March 21, 1997
 
CR-V-97-01  Assessment of Changes to the Internal Control
Structure and Their Impact on the Allowability of Costs Claimed
by and Reimbursed to Lockheed Martin Corporation's Knolls Atomic
Power Laboratory Under Department of Energy Contract No. DEAC12-
76SN000052, February 28, 1997
 
CR-V-97-02  Assessment of Changes to the Internal Control
Structure and Their Impact on the Allowability of Costs Claimed
by and Reimbursed to Westinghouse Electric Corporation's Bettis
Atomic Power Laboratory Under Department of Energy Contract No.
DE-AC11-93PN38195, February 28, 1997
 
ER-FC-97-01  Isotope Production and Distribution Program's Fiscal
Year 1996 Financial Statement Audit, February 3, 1997
 
ER-FC-97-02  Department of Energys Uranium Enrichment
Decontamination and Decommissioning Fund Fiscal Year 1996
Financial Statement Audit, March 6, 1997
 
ER-V-97-01  Assessment of Changes to the Internal Control
Structure and Their Impact on the Allowability of Costs Claimed
by and Reimbursed to Fermi National Accelerator Laboratory Under
Department of Energy Contract No. DE-AC02-76CH0300, January 15,
1997
 
ER-V-97-02  Assessment of Changes to the Internal Control
Structure and Their Impact on the Allowability of Costs Claimed
by and Reimbursed to EG&G Mound Applied Technologies, Inc., Under
Department of Energy Contract No. DE-AC24-88DP43495, January 24,
1997
 
ER-V-97-03  Assessment of Changes to the Internal Control
Structure and Their Impact on the Allowability of Costs Claimed
by and Reimbursed to MK-Ferguson of Oak Ridge Company Under
Department of Energy Contract No. DE-AC05-91OR21900, February 26, 1997
 
WR-FC-97-01  U.S. Department of Energy Naval Petroleum and Oil
Shale Reserves 1996 Financial Statement Audit, February 14, 1997
 
WR-FC-97-02  Alaska Power Administration's Fiscal Year 1996
Financial Statement Audit, February 27, 1997
 
WR-FC-97-03  Western Area Power Administration's Fiscal Year 1996
Financial Statement Audit, February 13, 1997
 
WR-FC-97-04  U. S. Department of Energy Naval Petroleum Reserve
Number 1, 1996 Financial Statement Audit, March 19, 1997
 
WR-FS-97-01  Report on Matters Identified at the Oakland
Operations Office During the Audit of the Department's
Consolidated Fiscal Year 1996 Financial Statements, March 27,
1997
 
WR-V-97-01  Assessment of Changes to the Internal Control
Structure and Their Impact on the Allowability of Costs Claimed
By and Reimbursed to Allied Signal Federal Manufacturing &
Technologies\Kansas City Under Department of Energy Contract No.
DE-AC04-76DP00613, February 27, 1997
 
IG-FS-97-01  Audit of the U.S. Department of Energy's
Consolidated Financial Statements for Fiscal Year 1996, February
26, 1997
 
*WR-FC-96-05  Western Area Power Administration's Boulder Canyon
Power System Fiscal Year 1995 Financial Statement Audit, April 5,
1996
 
*WR-FC-96-06  Western Area Power Administrations Parker-Davis
Power System Fiscal Year 1995 Financial Statement Audit, April 8,
1996
 
*WR-FC-96-05 and WR-FC-96-06 were overlooked last reporting
period.  They were not included in the October 1996 Semiannual
Report, but they were accounted for in the PCIE/ECIE Annual
Progress Report to the President for Fiscal Year 1996.  These two
reports had no dollar impact.
 
                                
                    INSPECTION PUBLIC REPORTS
 
IG-0397  Inspection of the Secretary of Energy's Foreign Travel,
October 7, 1996
 
IG-0401  Inspection of the Performance Based Incentive Program at
the Richland Operations Office, March 10, 1997
 
INS-O-97-01  Inspection of Alleged Design and Construction
Deficiencies in the Nuclear Materials Storage Facility at the Los
Alamos National Laboratory, January 16, 1997
 
INS-O-97-02  Report on Inspection of Compliance With DOE Order
2030.4B at the Savannah River Site, March 24, 1997
 
INS-L-97-01  Inspection of Martin Marietta Energy Systems -
Employment Status of Independent Subcontractors, November 1, 1996
 
INS-L-97-02  Inspection of Possible Falsification of Documents at
the Paducah Gaseous Diffusion Plant, December 4, 1996
 
INS-L-97-03  Inspection Report on the Intelligence Oversight
Inspection of the Oak Ridge Operations Office, January 22, 1997
 
 
             INSPECTOR GENERAL REPORTS AVAILABILITY
 
On the Internet
 
   Office of Inspector General reports are available in plain
text format (ASCII) to anyone with Internet Gopher (a simple
client/server protocol used to organize access to Internet
resources), or file transfer protocol (FTP) capability.  Users
can find the reports at gopher.hr.doe.gov, selecting "Department
of Energy Information" from the first menu, and then selecting
"DOE Inspector General Reports." Published reports can also be
obtained via anonymous FTP at vm1.hqadmin.doe.gov.  Once at that
location, the user can go to the IG directory to download
available reports.
 
By U.S. Mail
 
   Persons wishing to request hardcopies of reports to be mailed
to them may do so by calling the automated Office of Inspector
General Reports Request Line at (202) 586-2744.  The caller
should leave a name, mailing address, and identification number
of the report needed.  If the report's identification number is
unknown, then the caller should leave a short description of the
report and a telephone number where the caller may be reached in
case further information is needed to fulfill the request.
 
Requests by Telefax
 
   In addition to using the automated Office of Inspector General
Reports Request Line, persons may telefax requests for reports to
(202) 586-3636.  Telefaxing requests may be especially convenient
for people requesting several reports.
 
Point of Contact for More Information
 
   Persons with questions concerning the contents, availability,
or distribution of any Office of Inspector General report may
contact Wilma Slaughter by telephone at (202) 586-1924 or via the
Internet at wilmatine.slaughter@hq.doe.gov.
                                
                                
                           SECTION IV
                                
                                
                           STATISTICS
 
 
     This section lists audit reports issued before the beginning
of the semiannual reporting period for which no management
decisions have been made by the end of the reporting period, the
reasons management decisions have not been made, and the
estimated dates (where available) for achieving management
decisions.  This section also presents audit statistics on
questioned costs, unsupported costs, and dollar value of
recommendations resulting from audit reports issued during this
reporting period.  In addition, this section presents statistics
on inspection and investigative results achieved during this
semiannual reporting period.
 
                           DEFINITIONS
                                
The following definitions, based on the Inspector General Act of
1978, apply to terms used in this Semiannual Report.
 
Questioned Cost:  A cost which the Inspector General questions
because of:
 
       An alleged violation of a provision of a law, regulation,
     contract, grant, cooperative agreement, or other agreement or
     document governing the expenditure of funds;
 
       A finding that, at the time of an audit, such cost is not
     supported by adequate documentation; or
 
       A finding that the expenditure of funds for the intended
     purpose is unnecessary or unreasonable.
 
Unsupported Cost:  A cost which the Inspector General questions
because the Inspector General found that, at the time of an
audit, such cost is not supported by adequate documentation.
 
Disallowed Cost:  A questioned cost which Department management,
in a management decision, has sustained or agreed should not be
charged to the Government.
 
Recommendation That Funds Be Put to Better Use ("Savings"):  An
Inspector General recommendation that funds could be used more
efficiently if Department management took actions to implement
and complete the recommendations, including:
 
       Reduction in outlays;
  
       Deobligation of funds from programs or operations;
  
       Withdrawal of interest subsidy costs on losses or loan
     guarantees, insurance or bonds;
  
       Costs not incurred by implementing recommended improvements
     related to Department operations, contractors, or grantees;
  
       Avoidance of unnecessary expenditures noted in preaward
     reviews of contract or grant agreements; or
  
       Any other savings which are specifically identified.
 
Management Decision:  The evaluation by Department management of
the findings and recommendations included in an audit report and
the issuance of a final decision by Department management
concerning its response to such findings and recommendations,
including actions concluded to be necessary.
 
Final  Action:  The completion of all actions that Department
management has concluded, in its management decision, are
necessary with respect to the findings and recommendations
included in an audit report.  In the event that Department
management concludes no action is necessary, final action occurs
when a management decision has been made.
                                
                     AUDIT REPORT STATISTICS
                                
The following table shows the total number of operational and
financial audit reports, and the total dollar value of the
recommendations.
 
                           Total       One-Time    Recurring          Total
                          Number        Savings      Savings        Savings
 
Those issued before the
reporting period for
which no management
decision has been made:      7     $347,679,462  $23,179,360   $370,858,822
 
Those issued during the
reporting period:           36      $14,165,905  $43,792,480    $57,958,385
 
Those for which a
management decision was
made during the reporting
period:                     16      $22,228,405  $21,167,040    $43,395,445
 
Agreed to by management:            $15,407,312  $20,511,040    $35,918,352
Not Agreed to by management:         $6,821,093     $656,000     $7,477,093
 
Those for which a
management decision is
not required:               21               $0           $0             $0
 
Those for which no
management decision had
been made at the end of
the reporting period*:       6     $339,616,962  $45,804,800   $385,421,762
 
*NOTE:  The figures for this item include sums for which
management decisions on the savings were deferred.
 
                     AUDIT REPORT STATISTICS
                                
The following table shows the total number of contract and grant
audit reports, and the total dollar value of questioned costs and
unsupported costs.
 
                      Total      Questioned    Unsupported
                     Number           Costs          Costs
 
Those issued before the
reporting period for
which no management
decision has been made:  18     $17,510,370       $111,370
 
Those issued during the
reporting period:         2        $660,000             $0
 
Those for which a
management decision was
made during the
reporting period:         9      $8,830,620        $27,129
 
Value of disallowed costs:       $1,039,146             $0
Value of costs not disallowed:   $7,791,474       $27, 129
 
Those for which a
management decision is
not required:             0              $0             $0
 
Those for which no
management decision had
been made at the end of
the reporting period:    11      $9,339,750        $84,241
 
               REPORTS LACKING MANAGEMENT DECISION
                                
The following are audit reports issued before the beginning of
the reporting period for which no management decisions have been
made by the end of the reporting period, the reasons management
decisions have not been made, and the estimated dates (where
available) for achieving management decisions.  These audit
reports are over 6 months old without a management decision.
 
The Contracting Officers have not yet made decisions on the
following contract reports for a variety of reasons.  They
include delaying settlement of final costs questioned in audits
pending negotiation of indirect cost rates, awaiting review of
independent research and development costs, and litigation.
Also, tentative agreements on allowable costs have been reached,
but final vouchers indicating these agreements have not been
submitted by some contractors.  The Department has a system in
place which tracks audit reports and management decisions.  Its
purpose is to ensure that recommendations and corrective actions
indicated by audit agencies and agreed to by management are
indeed addressed and effected as efficiently and expeditiously as
possible.
 
WR-CC-90-32    Audit of Costs Claimed Under Contract No. DE-AC01-
               80RA32049 for the Operation Period From October 1,
               1984, Through April 30, 1985, and the Post
               Operation Period from August 1, 1985, Through
               November 30, 1987, Williams Brothers Engineering
               Company, Tulsa, Oklahoma, May 10, 1990
 
WR-C-92-01     Report on the Final Audit of Costs Incurred by
               EWA, Inc., Environmental and Water Resources
               Management, Minneapolis, Minnesota, Under Its
               Contract with the Yakima Indian Nation, United
               States Department of Energy Grant DE-FG06-
               83RL10545, for the period May 14, 1984, Through
               December 22, 1988, April 6, 1992
 
ER-CC-93-05    Report Based on the Application of Agreed-Upon
               Procedures With Respect to Temporary Living
               Allowance Costs Claimed Under Contract No. DE-AC09-
               88SR18035, October 1, 1987, to September 20, 1990,
               Bechtel National, Inc., San Francisco, California,
               and Bechtel Savannah River, Inc., North Augusta,
               South Carolina, May 3, 1993
 
WR-C-95-01     Report on Independent Final Audit of Contract No.
               DE-AC34-91RF00025, July 26, 1990, to March 31,
               1993, Wackenhut Services, Inc., Golden, Colorado,
               March 13, 1995
 
ER-C-96-04     Final Audit of Princeton University's Costs
               Claimed for Subcontract XD-O-10076-1 Under
               National Renewable Energy Laboratory's U.S.
               Department of Energy Contract DE-AC02-83CH10093,
               May 7, 1996
 
ER-C-96-06     Final Audit of Princeton University's Costs
               Claimed for U.S. Department of Energy Contract DE-
               AC02-76ER03072, September 25, 1996
 
WR-C-96-01     Review of Mason & Hangar-Silas Mason Company,
               Inc., Cost Accounting Standards Compliance,
               October 30, 1995
 
WR-C-96-03     Review of Lawrence Livermore National Laboratory
               Cost Accounting Standards Board Disclosure
               Statement Adequacy and Cost Accounting Standards
               Compliance, January 4, 1996
 
WR-C-96-04     Review of Lawrence Berkeley National Laboratory
               Cost Accounting Standards Board Disclosure
               Statement Adequacy and Cost Accounting Standards
               Compliance, January 8, 1996
 
Additional time was necessary to develop management decisions for
the following reports.  Further explanations for the delays
follow each audit report.
 
AP-B-95-01     Audit of Management and Control of Information
               Resources at Sandia National Laboratories,
               November 1, 1994
 
               The finalization of the management decision on
               this report is awaiting  resolution of one
               outstanding issue.  It is estimated that this will
               occur by July 31, 1997.
 
WR-B-96-07     Subcontracting Practices at the Nevada Operations
               Office and its Management and Operating
               Contractor, May 10, 1996
 
               The finalization of the management decision on
               this report is pending the resolution of several
               complex issues.  This should occur by
               August 15, 1997
 
                    INVESTIGATIVE STATISTICS
                                
    The investigative statistics below cover the period from
             October 1, 1996, through March 31, 1997
 
Investigations open at the start of this reporting period:   285
Investigations opened during this reporting period:           74
Investigations closed during this reporting period:           65
Investigations open at the end of this reporting period:     294
 
Debarments/Suspensions                                        26
Investigations Referred to Management for 
    Recommended Positive Action                               21
Complaints Referred to Management for Review and Followup      0
Administrative Disciplinary Actions Taken                     14
 
Investigations Referred for Prosecution                       17
     Accepted                                                 16
     Declined                                                 16
 
     Indictments                                              12
     Convictions                                              13
     Pretrial Diversions                                       3
 
Fines, Settlements, and Recoveries                 $2,338,809.90
 
Some of the investigations accepted or declined during this 6-month 
period were referred for prosecution during a previous reporting period.
 
Some of the money collected was the result of Task Force Investigations.
 
 
 
                       Hotline Statistics
                                
Complaints Received via the Hotline                      254
Complaints Received via the General Accounting Office      5
Total Complaints Received                                259
 
Investigations Opened on Hotline Complaints               16
Complaints Resolved or Pending Resolution                146
Complaints That Required No Investigation by OIG          97
Total Complaints Disposition                             259
 
                      INSPECTION STATISTICS
 
      The inspection statistics below cover the period from
             October 1, 1996, through March 31, 1997
                                
                                
  Allegation-Based, Reprisal, and Management System Inspections
                                
Inspections open at the start of this reporting period:         207
Inspections opened during this reporting period:                 17
Inspections closed during this reporting period:                 34
Inspections open at the end of this reporting period:           190
 
Reports issued                                                   11
Allegation-based inspections closed after preliminary review     10
 
Reprisal complaints completed during this reporting period        6
     Reprisal complaints dismissed                         1
     Reports of reprisal inquiry issued                    2
     Reprisal complaints settled                           2
     Reprisal complaints withdrawn                         1
 
Inspection recommendations
     Accepted this reporting period                              67
     Implemented this reporting period                           85
 
Complaints referred to Department management/others             166
     Number of these referrals requesting 
     a response for OIG evaluation                               64
 
Personnel management actions taken as a result of inspections
     or complaints referred to management                         1
 
Questioned Costs                                         $1,971,870
 
Reports include non-public reports such as administrative
allegation reports.
 
 
 
                         FEEDBACK SHEET
                                                          
 
The  contents of the April 1997 Semiannual Report to  Congress
comply  with the requirements of the Inspector General Act  of
1978, as amended.  However, there may be additional data which
could  be included or changes in format which would be  useful
to  recipients  of  the Report.  If you have  suggestions  for
making  the  report  more responsive  to  your  needs,  please
complete this feedback sheet and return it to:
 
                     Department of Energy
                     Office of Inspector General (IG-13)
                     Washington, D.C.  20585
 
                     ATTN: Wilma Slaughter
 
 
Your name:
 
Your daytime telephone number:
 
Your  suggestion  for improvement: (please  attach  additional
sheets if needed)
 
 
 
If  you  would  like to discuss your suggestion with  a  staff
member  of the Office of Inspector General or would like  more
information, please call Wilma Slaughter at (202) 586-1924  or
contact her on the Internet at wilmatine.slaughter@hq.doe.gov.