$14.6 Million in Los Alamos Lab Charges Questioned by U.S. Audit

Weak financial controls at Los Alamos National Laboratory allowed about $14.6 million in questionable charges for meals, travel and inadequate internal audits in the last three years, according to a U.S. Energy Department investigation released Monday.

The probe by the department’s Office of Inspector General also criticized the University of California, which runs the lab for the department, for being less careful with federal funds at times than with its own. Meals paid with university funds required approval “two supervisory grades higher” than those paid with government funds, the audit said.

The report, the latest in a series of critical audits and reviews, comes as UC struggles to save its 60-year-old contract to manage the nuclear weapons research lab.

Energy Secretary Spencer Abraham is expected to decide by the end of the month whether to allow the university to keep the prestigious contract or allow others to bid on it.

In Monday’s report, Inspector General Gregory Friedman recommended that the Energy Department require UC to repay any of the $14.6 million found to be unallowable after further review and to improve its system of financial controls. Because of the weaknesses identified, the department has “had less than adequate assurance” that costs claimed by the lab are allowed under the contract, Friedman wrote.

The audit examined the $5.2 billion in costs charged to the contract for fiscal 2000, 2001 and 2002. Of that, it identified $14.6 million in questionable costs, including $3.7 million in potentially unallowable “working meals,” $7.4 million for travel costs above the contract limits and $3.5 million for an internal audit that did not meet department requirements, the report said.

UC and laboratory officials said they disagreed with the audit’s conclusions.

George P. Nanos, interim director of Los Alamos since January, said in a statement released Monday that he took “strong exception to the conclusions of this particular report.” He defended the costs for meals, travel and audits, saying those expenditures were consistent with the government contract.

UC spokesman Michael Reese called the report flawed. Specifically, Reese said, the university rejected the report’s contention that UC gave less scrutiny to the expenditure of federal funds for working meals than it did when university money was spent.

He also said university and lab officials had accepted most previous criticisms from the inspector general and outside auditors in recent months.

UC’s management of Los Alamos has been under close federal and public scrutiny since November, when lab managers fired two former investigators after they went public with allegations of theft and fraud by employees at the nuclear weapons facility. The university has rehired both men.

Also Monday, the university released the findings of an external review by Ernst & Young of key business practices at the lab.

The reports recommend stricter controls over such areas as property management and payroll but largely echo earlier reviews.