September 22, 2014

DOE IG: LLNL Could be Penalized for Billing Unallowable Costs to Government

By ExchangeMonitor

Lawrence Livermore National Laboratory could be subject to penalties from its federal overseers for charging unallowable insurance costs to the government, according to a Department of Energy Inspector General assessment report released yesterday. The report notes that from Fiscal Year 2008 to FY 2012 the lab unjustly billed as operating costs $621,900 in directors and officers insurance—which provides personal protection for the lab’s key personnel—and $304,158 in insurance costs for its daycare from FY 2010 to FY 2012 despite guidance from the lab’s federal contracting officer that the costs were unallowable. The IG said Livermore was told in November 2010 that the directors and officers insurance could not be reimbursed as operating costs and it was directed to analyze whether the directors and officers insurance could be an allowable cost as part of the compensation package for key personnel, but it did not.

The daycare insurance costs had been repaid, the IG said, but the IG said the issue raised questions about the lab’s procedures. “Although the daycare insurance costs were repaid, this situation showed that LLNL’s existing internal control structure was not adequate to detect and prevent these types of occurrences,” the IG said, adding: “LLNL’s accounting practice of charging insurance costs that were mutually agreed to be unallowable to the contract and the inability of LLNL’s internal control structure to detect that practice warrants further management attention, including possible imposition of a penalty, to ensure that similar types of potential unallowable costs are not billed to the Department in the future.” In a response to the report, National Nuclear Security Administration chief Frank Klotz said the lab’s contracting officer was working to determine whether penalty clauses in the lab’s contract would be applied by May of next year.

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