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Auditors uncover trouble in books

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Federal auditors Wednesday highlighted a series of accounting deficiencies with Savannah River Site's former management contractor and laid part of the blame on U.S. Department of Energy managers who were supposed to help monitor the company.

"Until these deficiencies are corrected, we are unable to assess the allowability and allocability of the over $1.4 billion in costs incurred and claimed by Washington Savannah River Company," said a report prepared by the Energy Department's Office of Inspector General.

The audit report, which covered fiscal 2007, said that WSRC was required to conduct internal audits "to ensure that costs charged were allowable."

As a safeguard, federal managers at Savannah River Operations Office were supposed to exercise oversight of such audits by ensuring that auditors reported to an independent committee to prevent the auditors from "modifying results in favor of WSRC."

But investigators concluded that internal audit managers often "directed inappropriate changes to valid audit results," the report said. "Similarly, WSRC officials were permitted to provide after-the-fact justifications and approvals for violations of various internal procedures designed to prevent or detect unallowable costs."

Consequently, federal managers were not always provided with information they needed to detect errors.

"For example, one audit identified significant questioned costs, yet the questioned costs, which exceeded $900,000, were omitted from the final audit report."

Auditors also identified procurements that were not properly approved, but internal audit management allowed WSRC to provide such approvals three years after the fact, the report said.

Investigators found evidence that internal auditors questioned costs associated with eight situations involving more than $2 million. "However, the final report only identified $308,000 of questionable costs associated with two of the eight documented audit exceptions."

The Inspector General concluded that the site's internal audit activity "was not independent or objective" and needs improvement. "Based on issues identified in this report, we concluded that the work performed by Internal Audit in FY 2007 could not be relied upon."

Among the Inspector General's recommendations:

- Require all contractor internal audit reports to be given to the federal contracting officer for resolution of all questioned costs.

- Determine whether questioned costs identified by Internal Audit, but not reported, are allowable.

- Perform a review of WSRC audits for fiscal 2007 to ensure that the work of Internal Audit can be relied upon.

- Determine whether WSRC's fee should be reduced due to deficient performance by Internal Audit during fiscal 2007.

WSRC served as management contractor for SRS from April 1, 1989, to July 31, 2008, when a rival group -- Savannah River Nuclear Solutions -- was awarded a maintenance and operation contract valued at more than $4 billion.

Tom Clements, Southeast Nuclear Campaign coordinator for Friends of the Earth, called Wednesday's report "absolutely shocking."

The biggest problem, he said, is that such activities persisted over a long period before they were detected. "This report should serve as a signal to both SRS and the new site manager, Savannah River Nuclear Solutions, that questionable financial management and sloppy oversight will no longer be tolerated," he said.

The audit noted that WSRC has disputed parts of the report. Company officials said early Wednesday that they would issue comments about the report but in an after-hours e-mail said there would be no comment from WSRC. Jeffrey Allison, manager of DOE's Savannah River Operations Office, scheduled -- and subsequently canceled -- a conference call with reporters late Wednesday night to discuss the report.

Reach Rob Pavey at 868-1222, ext. 119, or rob.pavey@augustachronicle.com.

WHAT'S IT SAY?

To read the entire audit report, go to: http://www.ig.energy.gov/documents/IG-0811.pdf .

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SCEagle Eye
959
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SCEagle Eye 01/22/09 - 08:53 am
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This underscores that it's

This underscores that it's time to audit the MOX plant construction. The Government Accountability Office has pointed out to Congress irregularities in management of that multi-billion $ project & it's time for an audit that is public. High-cost projects which have little benefit for the public, such as MOX, should be targeted first.

pofwe
5
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pofwe 01/22/09 - 09:07 am
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WHAT? 9:08 AM & one post

WHAT? 9:08 AM & one post about "trouble in books," I'll fix this. When you have a license to steal, why not? The "culture of norms" for government entities.

Craig Spinks
818
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Craig Spinks 01/22/09 - 09:09 am
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Internal audit: An oxymoron.

Internal audit: An oxymoron. If the USDOE IG found problems, wait until the GAO auditors investigate.

donupham
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donupham 01/22/09 - 09:13 am
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It would be interesting to

It would be interesting to know if the new contractor is following DOE's 2004 requirement that the internal auditor report to the corporation's audit committee rather than to management. This might stop the problem in the future.

The big news, which was not included in the Aiken newspaper's story, is the IG's recommendation # 4: ."...determine whether WSRC's fee should be reduced..."

edwardc
1
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edwardc 01/22/09 - 09:40 am
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SRS has done its share to

SRS has done its share to contribute to the financial crisis this country is now in, with complicity by the SC Republican legislators in Washington. The policy has been to let the fox guard the henhouse at that site for a long time. I can only hope that something will finally be done about it, that it won't just be swept under the rug once again.

HYPOCRITES 08
7
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HYPOCRITES 08 01/22/09 - 11:33 am
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$1.4 Billion and you are

$1.4 Billion and you are worried about who paid for an inauguration?

jhvenier
0
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jhvenier 01/22/09 - 01:20 pm
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SRS or contractors of the MOX

SRS or contractors of the MOX are not the ones who did not adhere to the requirements or the audits. Read the article, it was Washington / URS. Do not put the blame except where it belongs. Whether or not it was reported is not a case for blame on anyone but the contractor. Accountability should be redirected at congress and the spending of our tax money in places where it does not need to go, that equals trillions not a mere billion, how come people are not all in arms about that or the spending of millions on un-necessary parties while our country is in peril. SRS helps keep this country on an equal for technology, we need that, we have already given enough away.

mar_1081
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mar_1081 01/22/09 - 02:43 pm
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internal audit is not an

internal audit is not an oxymoron. Internal auditors are required to maintain independence of the company and complete audits (not fiscally related on the most part). I have been an internal auditor for many companies and to me it just sounds like you found another slimey pollitican to head up this group. Do reference checks and you could probably eliminate most of this.

mable8
2
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mable8 01/22/09 - 03:13 pm
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Another fine example of

Another fine example of robbing the taxpayer.

TechLover
15
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TechLover 01/23/09 - 11:45 am
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It seems the privatize,

It seems the privatize, privatize, privatize supporters end up costing us more in the long run.

SCEagle Eye
959
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SCEagle Eye 01/25/09 - 10:05 am
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Where did the mentality

Where did the mentality develop that SRS is a financial vault to be plucked clean by special interests? Have those infamous "welfare queens" moved into the Aiken/Augusta area and are zeroing in on easy pickings thrown out by big government? Or, has socialism (for the few) opened a new front amidst us? Sounds like the same raw deal that took over Washington these past years - privatize profits and socialize risks.

bobthedinosaur
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bobthedinosaur 02/12/09 - 11:27 am
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There shouldn't be missing

There shouldn't be missing money. There is no excuse for that.

HOWEVER, I don't think you people understand the importance of the work being done at SRS. Among other things, radioactive materials from nuclear weapons are being converted to clean (mercury free, CO2 free) energy for nuclear power plants. Additionally, liquid waste that is left over from the manufacture of these weapons (accumulated from the 1950's to the 1980's) is being converted to solid waste. This conversion is important because solid waste doesn't leak into groundwater during an earthquake. These are very expensive and time-consuming operations. I don't think that cutting corners to save a few dollars will improve the safety of the workers and surrounding communities.

The nuclear materials are there. Something has to be done with them. You can't close the facility or cut costs. End of story.

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