Todd Jacobson
NS&D Monitor
9/26/2014
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 this week. The Aug. 13 report, released publicly Sept. 23, 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 were prohibited from being reimbursed by DOE according to a 2007 agreement between the lab and the contracting officer, and the money charged to the government has been repaid, the IG said. However, 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.
Internal Control Structure ‘Warrants Further Management Attention’
The IG also found that $497,796 in lease-to-own insurance that covers damage to computer and telecommunications equipment while it is being leased by the lab was unnecessary because the lab is already “self-insured for fire, vandalism and malicious mischief” and covered by the government for the equipment. Lab policies have since been revised to eliminate the need for additional property damage insurance, the IG said. Another $323,103 reimbursed by the government from FY 2008 to FY 2012 for fiduciary liability insurance should have been paid by the lab’s Benefits and Investments Committee trust fund, the IG said. The lab charged the fiduciary liability insurance payments to the government with the expectation that the trust fund would pay the funds back, but it did not. Lab procedures have been changed so that the trust fund directly pays the insurance premiums.
While the IG said it did not find any issues with the lab’s cost allowability audits—the initial intent of the assessment—it called on the lab and NNSA to direct more attention to the lab’s internal control structure. It also called on the lab to formally submit insurance types not required by law to the contracting officer for approval. “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,” the IG said.
In a response to the report, National Nuclear Security Administration chief Frank Klotz said the lab’s contracting officer was working to determine by May of next year whether penalty clauses in the lab’s contract would be applied.
