Federal Reports

In 2019, the Office of Inspector General initiated an investigation related to Pantex Plant’s (Pantex) management and operating contractor, Consolidated Nuclear Security, LLC (CNS), after CNS disclosed to the Government credible evidence that production technicians fraudulently recorded timesheet hours that they did not work. The investigation found that CNS submitted payment claims for production technicians’ hours worked and recorded on timesheets; however, the hours had not been worked. In 2024, the case was settled and CNS paid the Department $18,400,000 to capture the loss of claimed labor hours.
We initiated this audit to determine whether the CNS timekeeping irregularities that occurred at Pantex had adverse impacts to operations.

CNS timekeeping irregularities at Pantex resulted in adverse impacts to operations. Specifically, CNS experienced:

• Production delays; 
• Negative impacts to conduct of operations, which was a program put in place to ensure worker, public, and environmental protection;
• Additional costs for training and security clearances of $8.4 million to replace the production technicians who were terminated or placed on administrative leave; and 
• Increases in weapons quality incident reports following the termination of production technicians.

We attributed the adverse impacts to operations to a lack of CNS oversight over timekeeping. CNS responded by implementing an attendance verification process and requiring production technicians to badge in and out upon arrival to and departure from the plant; CNS was actively monitoring the implementation of its attendance verification process. The current contractor, PanTeXas Deterrence, LLC., will take over the attendance verification process.

We did not have any recommendations. Pantex’s contractors, CNS and PanTeXas Deterrence, LLC., took action to address the primary causes of the timekeeping internal control failures.

At the request of the Tennessee Valley Authority’s (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for (1) outage and supplemental maintenance and modification services and (2) support services at TVA’s nuclear plants.  Our examination objective was to determine if the cost proposal was fairly stated for a planned $975 million contract.

In our opinion, the contractor’s cost proposal was overstated.  Specifically, we determined the application base for the contractor’s proposed markup rate for the recovery of general and administrative (G&A) costs did not reflect TVA’s intent as provided for in the request for proposal (RFP).  We notified TVA of the inconsistencies for use in their negotiations.  Subsequently, TVA informed us the parties agreed to (1) apply the G&A markup rate to unburdened noncraft wages to more accurately reflect TVA’s intent for reimbursing G&A costs, (2) reduce the G&A rate, and (3) remove the G&A application on noncraft staff augmentation labor.  In addition, the contractor did not propose a rate for long-term temporary assignments, as requested in the request for proposal. 

What Office of Inspector General Evaluated

The objectives of this engagement were to:

• Determine compliance with the requirements for grant awards issued to Waynesburg University, Illinois State University, and Metropolitan State University of Denver.
• Determine whether these universities are administering, awarding, and monitoring subawards in compliance with the Uniform Guidance, program requirements, and their respective requirements.

What Office of Inspector General Found

• Inadequate procedures to continue Teaching with Primary Sources awards.
• Ineffective controls for indirect cost approval and monitoring.
• Non-compliance with matching requirements.

What Office of Inspector General Recommends

We recommend that the Library:

• Update its Grants and Cooperative Agreements Guidelines and Procedures to limit the number of times the Library can continue the cooperative agreements, taking into consideration subgrantees’ record retention requirements.
• Update its policies and procedures to require Contracts and Grants Directorate to perform an annual review of relevant policies and procedures (e.g., Grants and Cooperative Agreements Guidelines and Procedures and Teaching with Primary Sources Administrative Requirements), including identifying any significant changes to the process (such as incorporating indirect costs into the budget proposal) that would require Contracts and Grants Directorate to update—or develop— control activities to help ensure that the Library and the regional partners are meeting the Teaching with Primary Sources objectives and appropriately mitigating risks.
•  Update Grants and Cooperative Agreements Guidelines and Procedures to address the monitoring of indirect costs, including: 
• Adding a requirement for Contracts and Grants Directorate to review the documentation supporting the basis for any changes in a regional partner’s indirect cost rate percentage. The procedures should include how Contracts and Grants Directorate will conduct and document this review. 
• Adding periodic reviews of regional partners’ application of their indirect cost rates to ensure that the application of the rate is in accordance with the approved indirect cost plans, and costs used to calculate indirect costs are allowable, reasonable, and allocable under the grant requirements and regional partners are not claiming indirect costs as both direct and indirect costs. 
• Review regional partners’ indirect cost plans to substantiate the basis for their proposed indirect cost rates or confirm that an approved negotiated rate exists before approving the cooperative agreements and any continuances, as well as maintain documentation supporting that Contracts and Grants Directorate performed this review. The review should help to ensure that the costs used to calculate indirect costs are allowable, reasonable, and allocable under grant requirements. 
• Update Contracts and Grants Directorate's procedures to ensure that the Request for Advance or Reimbursement form identifies indirect costs as a cost category.
• Update Contracts and Grants Directorate's procedures to clearly indicate how regional partners should document their indirect costs on their Federal 
• Financial Reports and include a requirement for Contracts and Grants Directorate to perform periodic monitoring of the regional partners’ compliance in maintaining support for the indirect costs claimed on their Federal Financial Reports.
• Create guidance for the regional partners that demonstrates how to calculate the matching requirement in accordance with the cooperative agreements. 
• Create procedures/internal controls to ensure that personnel comply with the defined methodology during the budget approval process, including budgeting matching costs as a separate line item to facilitate review and approval of the budget from a compliance standpoint.
• Create guidance and associated procedures/internal controls to help ensure that Contracts and Grants Directorate sufficiently reviews matching costs using Federal Financial Reports to provide a basis for determining reasonableness and allowability in accordance with 2 Code of Federal Regulations Part 200 and the cooperative agreements. This should include defining and documenting the methodology used for reviewing the underlying support, such as expenditure receipts and invoices, in substantiating the reasonableness and allowability of the matching costs. 
• Assist the regional partners by communicating clear monitoring procedures for them to use in ensuring that they have sufficiently reviewed subgrantees’ matching costs to provide a basis for determining reasonableness and allowability in accordance with 2 Code of Federal Regulations Part 200 and the subgrantee awards. This should include: 3.
• Defining and documenting the methodology the regional partners should use in reviewing the underlying support, such as expenditure receipts and invoices, to help substantiate matching costs. 
• Establishing a financial reporting protocol that clearly identifies the match cost incurred.
• Identifying corrective actions the regional partners should take if they determine that subgrantees do not meet the match requirements.

In August 2024, we conducted unannounced inspections of four 3 U.S. Customs and Border Protection (CBP) short-term holding 4 facilities in the San Diego area — two Border Patrol facilities and 5 two Office of Field Operations ports of entry.  We found that CBP 6 facilities generally met the National Standards on Transport, 7 Escort, Detention, and Search for food and beverages, supplies 8 and hygiene items, bedding, and medical care.  We also found 9 areas of noncompliance at the facilities, including: 10  11 • One Border Patrol facility did not comply with duration of 12 13 14 15 16 17 18 19 20 21 detention standards, which generally limit time in custody to 72 hours.  The facility held more than half of its detainees longer than this standard.    • CBP did not comply with relevant standards of processing, documenting, and storing detainees’ personal property.    • All facilities could not always provide U.S.-equivalent medication to detainees in a timely manner.    22 • One Border Patrol station did not meet cleanliness and 23 24 sanitation standards.   

The Federal Emergency Management Agency’s (FEMA) Port Security Grant Program (PSGP) reimbursements — totaling more than $280 million — were allowable and paid in accordance with requirements, based on our review of records for fiscal years 20182021.  We did, however, question $281,045 in non-Federal cost share expenditures for which recipients either did not maintain adequate documentation or purchased items that were not allowable under the program, resulting in $199,083 in funds that may need to be returned to FEMA to meet non-Federal cost share requirements. 

TVA began hedging natural gas prices in April 2022 under the reinstated Financial Hedging Program (FHP). The program’s stated objectives are to reduce fuel rate volatility and balance operational and financial risks. From its reinstatement in April 2022 through February 2025, TVA’s FHP experienced losses of approximately $645 million.  We performed an audit of the FHP due to the financial risks associated with hedging. Our audit objective was to determine if TVA’s FHP is achieving its objectives of reducing fuel rate volatility and balancing operational and financial risks.

We determined the FHP achieved its objective of reducing fuel rate volatility between April 2022 and February 2025.  Over the 35-month period, fuel rate volatility was reduced by an average of about 3.5 percent.  However, we were unable to determine if TVA met its objective of balancing financial and operational risks because the objective is unclear and TVA has not defined parameters to define successful achievement of the objective. 

Although the fuel rate volatility was reduced over the entire time frame, the FHP resulted in (1) approximately $645 million in losses that were passed on to TVA’s customers and (2) a 2 percent increase in fuel rate volatility in fiscal year 2024.  We also found TVA had not performed the required back testing to measure volatility reduction and the effectiveness of the FHP.  At our request, TVA performed the back testing that showed the program had reduced fuel rate volatility. 

Additionally, we identified an opportunity for TVA to improve the information provided to the TVA Board, Tennessee Valley Public Power Association, and Tennessee Valley Industrial Committee related to FHP fuel rate volatility and FHP gains/losses.