Lawrence Berkeley National Laboratory: Further Improvements Needed to Strengthen Controls Over the Purchase Card Program: GAO-04-987R

Calbom, Linda M.
August 2004
GAO Reports;8/5/2004, p1
Government Document
The Lawrence Berkeley National Laboratory (Lawrence Berkeley) located in Berkeley, California, is a government-owned, contractor-operated Department of Energy (DOE) national laboratory. The University of California manages the lab under a cost-reimbursable contract with DOE. The university is paid a management fee to operate the lab and is reimbursed for all allowable costs charged to the contract. During the fall of 2002, the Federal Bureau of Investigation began investigating two Los Alamos National Laboratory employees for alleged misuse of lab credit cards. Other allegations of theft and misuse of government funds at Los Alamos soon followed. In light of the problems identified at Los Alamos, Congress asked us to review selected procurement and property management practices at two NNSA and two DOE contractor labs, including Lawrence Berkeley. This report summarizes the information provided during our June 14, 2004 briefing to GAO's staff on these issues as they relate to Lawrence Berkeley. Specifically, we reviewed Lawrence Berkeley's purchase card program and property management practices to determine whether (1) internal controls over the lab's purchase card (Pcard) program provided reasonable assurance that improper purchases would not occur or would be detected in the normal course of business, (2) purchase card expenditures made under the contract properly complied with lab policies and other applicable requirements and were reasonable in nature and amount and thus were allowable costs payable to the contractor under the contract, and (3) property controls over selected asset acquisitions provided reasonable assurance that accountable assets would be properly recorded and tracked. Our review covered selected transactions that occurred during fiscal year 2002 and the first half of fiscal year 2003 (October 1, 2001, through March 31, 2003), which were the most current data available when we requested the data for our review. Internal control weaknesses in Lawrence Berkeley's Pcard program increased the lab's risk of improper purchases. These included weaknesses in supervisory review and approval of transactions, documentation, and segregation of duties. Specifically, of the nonstatistical selection of 144 transactions obtained through data mining5 for fiscal years 2002 and the first half of fiscal year 2003, we found that cardholder monthly statements for 35 (24 percent) were not signed by approving officials in a timely manner or were not signed at all. We also found that 31 (22 percent) of the 144 nonstatistically selected transactions we reviewed, totaling $38,680, lacked sufficient documentation such as an invoice, credit card receipt, or other sales documentation necessary to validate the dollar amount, quantity, and nature of the items purchased. This was due in part to the fact that monthly approvers were not required to verify purchases listed in the cardholder statement against supporting documents. This weakness in the review and approval function combined with the insufficient documentation of transactions created an environment where improper Pcard purchases could occur with little risk of detection. Further, two key personnel responsible for overseeing the lab's Pcard program were also cardholders, creating a lack of independence between their cardholder role and their Pcard administration role. These control weaknesses likely contributed to the approximately $326,396 in improper, wasteful, and questionable purchases we identified during our review. While relatively small compared to the approximately $24 million in purchase card activity that occurred during the review period, it demonstrates vulnerabilities from weak controls that could be exploited to a greater extent. We also considered 23 transactions totaling $10,911 as wasteful because they were excessive in cost when compared to other alternatives and/or were of questionable need, such as $985 for three Bose noise-canceling headsets and $403 for an air purifier from The Sharper Image. We considered 51 transactions totaling $116,894 as questionable because they had insufficient documentation that would enable us or the lab to determine what was purchased and whether the purchases were proper and reasonable. Because we only tested a small portion of the transactions we identified that appeared to have a higher risk of fraud, waste, or abuse, there may be other improper, wasteful, and questionable purchases in the remaining untested transactions. Lawrence Berkeley did not ensure assets were accounted for and tracked properly and in a timely manner. All of the 100 assets selected for physical observation were either found or the lab provided documentation that the asset had been transferred or retired. However, we found several inaccuracies between the physical assets and the information recorded in the property database, including inaccurate serial numbers, incorrect property custodians, and inaccurate location information. These types of inaccuracies make the assets more susceptible to undetected loss or theft. Subsequent to our review period, the lab made a number of policy and procedural changes that, if properly implemented, should help improve internal controls over its Pcard program and accountability for property. This included the implementation of a new Pcard program that significantly changed the lab's Pcard process. However, additional improvements are needed to further reduce the risk of improper and wasteful purchases.



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