Federal Reports

Since 1943, the Regents of the University of California have managed Lawrence Berkeley National Laboratory (LBNL) for the Department of Energy’s Office of Science. LBNL’s mission is to expand the frontiers of knowledge and deliver solutions for science and humankind. In support of this mission, LBNL acquires consultants to provide independent expert advisory and/or assistance services of a technical or professional nature on a fee or per diem basis. LBNL uses subcontracts to commit resources and formalize its relationships with consultants.

We initiated this audit to determine whether LBNL managed its professional and consultant services agreements in compliance with applicable laws, regulations, and contract requirements.

We found that LBNL did not manage its professional and consultant services agreements in compliance with applicable laws, regulations, and contract requirements. Specifically, we found that LBNL: (1) entered into professional and consultant services agreements that did not meet the Federal Acquisition Regulation definition; (2) did not always obtain required conflicts-of-interest disclosures; (3) entered into consultant agreements with former Laboratory employees in contradiction to its policy; (4) retained consultants for longer than 5 years; (5) determined price reasonableness exclusively on the General Services Administration’s labor rates tool; (6) paid invoices from consultants that often lacked sufficient detail to support the services rendered; and (7) may have paid unallowable travel costs. Finally, LBNL did not ensure segregation of duties within the procurement and oversight of professional and consultant services agreements.

We attributed these issues to weaknesses in LBNL’s internal policies and procedures, failure to adhere to internal policies and procedures, and misalignment of internal policy to Department policies. These weaknesses limit LBNL’s ability to provide reasonable assurance that professional and consultant services agreements comply with laws and regulations and that only allowable costs are incurred and claimed.

To address the issues identified in this report, we have made 10 recommendations that, if fully implemented, should help ensure that professional and consultant services agreements are managed in accordance with applicable laws, regulations, and contract requirements.    

This audit was performed by CohnReznick LLP (CohnReznick) on behalf of the Department of Energy Office of Inspector General and examined Honeywell Federal Manufacturing & Technologies, LLC’s (HFMT) costs incurred and claimed for fiscal years 2018 through 2020 under management and operating contract No. DE-NA0002839.

The audit’s objective was to determine if costs charged to Department contract No. DE-NA0002839 for fiscal years 2018 through 2020 were allowable, allocable, and reasonable in accordance with applicable laws, regulations, and contract terms.

CohnReznick performed the audit in accordance with generally accepted government auditing standards.

CohnReznick did not identify any questioned costs for direct and indirect labor, direct travel, and indirect costs included within HFMT’s Statements of Costs Incurred and Claimed submissions for fiscal years 2018 through 2020. Costs outside of these cost elements were outside of the audit’s scope.

No recommendations are being made with this report as it was determined that HFMT’s costs for direct and indirect labor, direct travel, and indirect costs within its Statements of Costs Incurred and Claimed submissions for fiscal years 2018 through 2020 were acceptable.

HFMT concurred with the audit results as reported.  

Our Objective(s)

To assess the Federal Railroad Administration's (FRA) (1) internal controls related to recording and monitoring of its accountable personal property (APP) records and (2) the accuracy and completeness of FRA's APP records. 

Why This Audit?

We have previously identified issues in the Department of Transportation's (DOT) Operating Administration property management, including incomplete or inaccurate inventory information. Specifically, our prior work found that FRA had not capitalized any of its eligible equipment worth up to $53 million. Effective APP management is crucial to facilitating accurate and complete Federal financial reports. 

What We Found

FRA's policies and procedures for recording and monitoring accountable personal property are outdated and ineffective. 

• FRA Order 4601.1E, Personal Property Management, which established policies and procedures for APP management, had not been updated since it was published in 1993 as of the end of fiscal year 2023. 
• The Order does not comply with the Federal Personal Property Management Act of 2018 because it does not meet its requirements for APP inventories. It also does not provide clear and complete guidance for accurate property management using the FRA Asset and Space Management (FASM) system. 

FRA's records for APP are incomplete and inaccurate.

• FRA does not record all APP timely and accurately. Of the 1,002 assets associated with FRA's Automated Track Inspection Program, FRA did not record 250 of these assets in FASM within a year of the system's inception and did not always correctly record asset location. 
• FRA's FASM contains inaccurate records for 21.82 percent of the 13,190 items in our APP universe, and 2.68 percent of the assets in the universe did not have a recorded acquisition date. FASM also does not contain acquisition documentation for 99.6 percent of the 13,190 APP items in our universe with a total value of over $50 million. 
• FRA's FASM does not meet Federal Financial Management System Requirements for a property management system. Specifically, the system cannot generate an audit trail, and it does not allow the calculation of the data necessary to support FRA's financial accounts. 
• FRA does not always remove its disposed-of APP assets from active asset tracking. Of 681 assets for which FRA provided disposal documentation, 69 percent were not marked as disposed in FASM. 

Recommendations

We made 8 recommendations to improve FRA's management of APP.

This audit was performed by the independent public accounting firm of KPMG LLP (KPMG) on behalf of the Department of Energy’s Office of Inspector General. KPMG audited the combined balance sheets of the Department’s Southwestern Federal Power Systems (SWFPS) as of September 30, 2024, and 2023, and the related combined statements of changes in capitalization, revenues and expenses, and cash flows for the years then ended, and the related notes to the combined financial statements.

The audit’s objective was to obtain reasonable assurance about whether the financial statements, as a whole, were free from material misstatement due to fraud or error and to issue an auditors’ report that included an opinion.

KPMG performed the audit in accordance with generally accepted government auditing standards.

KPMG concluded that the financial statements presented fairly, in all material respects, the financial position of SWFPS as of September 30, 2024, and 2023, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. KPMG also considered SWFPS’ internal control over financial reporting as part of its review and identified certain deficiencies in internal control that they considered to be a material weakness concerning post-retirement benefit expenses and workers’ compensation liability. In addition to the material weakness, KPMG also identified a significant deficiency over entity-level controls. KPMG tested for compliance with certain provisions of laws, regulations, contracts, and grant agreements that could have a direct material effect on the financial statements. The results of the auditors’ review disclosed no instances of noncompliance or other matters required to be reported under Government Auditing Standards, applicable Office of Management and Budget guidance, or the Federal Financial Management Improvement Act of 1996.

The Office of Inspector General issued Notices of Findings and Recommendations to management throughout the audit. All findings and recommendations will be detailed in a separate management letter that will be provided to Southwestern Power Administration. There are no formal recommendations that need to be tracked in the Departmental Audit Report Tracking System; therefore, an additional response is not required.

The Office of Inspector General engaged the independent public accounting firm of KPMG LLP (KPMG) to conduct the fiscal year 2024 combined financial statements audit of the Southwestern Federal Power System (SWFPS), subject to our review. As part of this audit, KPMG considered SWFPS’ internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing its opinion on the financial statements but not for the purpose of expressing an opinion on the effectiveness of SWFPS’ internal control.

KPMG performed the audit in accordance with generally accepted government auditing standards.

During the audit, KPMG identified certain deficiencies in SWFPS’ internal control related to entity level controls, post-retirement benefits, workers’ compensation, personal protective equipment, and operation and maintenance expenses that are included in the attached management letter.  

The attached letter contains 5 findings and 17 recommendations that were issued to Southwestern Power Administration during The Southwestern Federal Power System’s Fiscal Year 2024 Combined Financial Statements Audit. Management concurred with the findings and recommendations and had taken or planned to take corrective actions. Management’s responses are included with each finding.

We found that UCRC misclassified its agreements and did not verify whether subcontractors were on an exclusions list prior to awarding funds. 

We found that BOR complied with required laws and regulations when awarding drought mitigation funds but there are opportunities for improvement.