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 Departments Office of Inspector General.
The audit report, which covered fiscal 2007, said 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 that would prevent auditors from modifying results in favor of WSRC.
However, investigators concluded 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 the sites 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 Generals 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 WSRCs 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 groupSavannah River Nuclear Solutionswas awarded a new maintenance and operation contract valued at more than $4 billion.
Tom Clements, Southeast Nuclear Campaign coordinator for Friends of the Earth, called Wednesdays report absolutely shocking.
The biggest problem, he said, is that such activities persisted over a long period of time 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 were expected to issue comments about the report later today.
To read the entire audit report, go to: http://www.ig.energy.gov/documents/IG-0811.pdf.