GAO called to probe Fernald


BY TIM BONFIELD and MIKE GALLAGHER
The Cincinnati Enquirer

The U.S. General Accounting Office has been called in to investigate reports of financial wrongdoing by the company hired to manage the cleanup at the former uranium processing plant at Fernald.

The congressional investigative agency Monday received requests from U.S. Reps. Rob Portman and Steve Chabot to initiate a probe after reports of safety problems and financial mismanagement were revealed in an ongoing series in The Enquirer.

Meanwhile, officials of the Fernald Environmental Restoration Management Corp. (FERMCO) denied Monday reports of financial wrongdoing and safety problems. Officials from the U.S. Department of Energy said their ongoing investigation of the reports so far has not uncovered any financial wrongdoing. Their comments came during a press conference called in response to a four-part Enquirer investigative series that began Sunday and continues through Wednesday.

J. Phil Hamric, head of the Energy Department's Ohio field office, and Jack Craig, its Fernald Area Supervisor, denied Monday that the department had been lax in its oversight responsibilities.

Mr. Hamric and Mr. Craig also said they had found no evidence yet of wasted money or secret projects, but said the department's investigation was not yet completed. They stressed that safety has improved at the Fernald cleanup and that the project is saving taxpayer money.

FERMCO and its parent company, Fluor Daniel of Irvine, Calif., also denied any wrongdoing. Rather, company officials said, The Enquirer misinterpreted various documents it obtained in determining there were financial improprieties.

In response, Enquirer Editor Lawrence K. Beaupre, said, ''We stand by the stories as published. They are documented, substantiated and accurate.''

Energy Department and Fluor Daniel - FERMCO officials said they welcomed a GAO investigation and would work with any other independent investigators assigned to review problems at the troubled site.

''We look forward to having an audit team come in and look at all the facts . . . We are prepared to cooperate fully,'' said Mr. Hamric.

Don Ofte, president of FERMCO, said, ''We totally support a separate, independent inquiry.''

Inquiry support wide


Mr. Portman, R-Cincinnati, and others are calling for independent investigations because they are concerned about the findings reported in The Enquirer.

''Serious allegations regarding the possible misuse of taxpayer dollars at Fernald have been brought to my attention,'' Mr. Portman wrote in a letter to Charles Bowsher, the GAO's Comptroller General.

''Specific allegations relate to unauthorized control accounts, safety violations, secret projects, excessive severence pay, improper time charges, travel costs, intentionally high cost estimates and false progress reports.''

Mr. Portman's concerns were echoed Monday by U.S. Sen. Mike DeWine, R-Ohio, who said, ''These are very serious allegations and they cause me a great deal of concern . . . We need to have an impartial investigation of these serious allegations.''

Mr. Chabot said again on Monday he supports a GAO investigation.

GAO spokesman Cleve Corlett said, ''It's much too early to talk about what, if anything, will be done.''

In his letter to the GAO, Mr. Portman requested an interim report on their progress within the next 45 days.

Mr. Hamric also said Monday that Thomas Grumbly, the Energy Department's Acting Undersecretary, has asked his department's Office of the Inspector General to investigate the problems at Fernald.

''The (Energy) department here at headquarters is working closely with Phil Hamric and the Ohio field office to track the issue. We feel the GAO can objectively assess the allegations,'' said Carmen MacDougall, Energy Department spokeswoman in Washington D.C.

Changed plan


In 1992 when FERMCO was hired, the Energy Department estimated the overall cost and completion time for the Fernald cleanup project would be about $12.2 billion over 25 years. FERMCO now is proposing a plan that would cut the cleanup time to 10 years and estimates it will cost $4.8 billion. The Energy Department said it has not received FERMCO's complete proposal and has not approved that plan.

Mr. Hamric defended FERMCO's work at the site.

''FERMCO has not been perfect, but it should be noted that they have achieved most milestones on time and under budget,'' he said.

Energy Department and FERMCO officials disputed several specific aspects of the Enquirer's findings:

Unauthorized spending:

The Enquirer reported that FERMCO had set up 236 control accounts and charge numbers, worth several million dollars, without full authorization as required by the Energy Department.

Members of an internal FERMCO audit team said the Enquirer looked at the wrong documents. The Energy Department requires authorization at the ''control'' accounts level, but not for ''charge'' accounts, said audit team member Dennis Hart. ''Our control accounts were entirely correct and in accordance with DOE directives,'' he said. ''FERMCO has not charged DOE for unauthorized expenditures.''

Overstated progress reports: The Enquirer reported that FERMCO intentionally did not correct inaccurate progress reports, using an internally developed computer program that prevented the Energy Department from tracking FERMCO's actual progress.

Meanwhile, FERMCO collected millions in performance fees based on the inaccurate progress reports.

Mr. Ofte said FERMCO was following DOE directives that discouraged ''re-creating history.'' Members of a Fluor Daniel - FERMCO internal audit team said that the computer program in question simply caught minor data errors, which had no overall impact on performance fees.

Contract to demolish Plant 7: The Enquirer reported that FERMCO knew in 1993 that demolishing the Plant 7 building at Fernald would cost $1.8 million, after initially telling the Energy Department it would cost $5.5 million. They then deliberately delayed correcting the inflated estimate so that the company could collect a performance fee.

FERMCO officials said the bids were opened and the contract awarded to a demolition subcontractor too late to update master plans to the Energy Department, which would have alerted them to the reduced cost. However, FERMCO officials said the Energy Department was aware of the lower bids for the project shortly after they were opened.

Travel scandal: The Enquirer reported that FERMCO - Fluor Daniel was paid more than $15 million in travel expenses over three years based on unsubstantiated invoices. Of $1.2 million in disputed travel expenses in 1993, FERMCO repaid $509,625 to the Energy Department. Other disputed fees remain in negotiation.

Mr. Hart said Monday they were following an internal policy that allowed traveling employees to choose between receiving a per diem payment or direct reimbursement. That policy did not require keeping receipts for those who received per diem payments. An Energy Department audit later found the company was wrong, and was legally responsible for maintaining the receipts. In 1995 the department ordered them to begin doing so. Fluor Daniel - FERMCO has complied since the Energy Department ordered the company to keep receipts, Mr. Hart said.

Safety: The Enquirer investigation revealed that more than 1,000 serious safety-related problems have occurred since Jan. 1, 1993, including seven ''criticality'' incidents where drums of radioactive waste were stored dangerously close together and that nearly 80 workers had been exposed to radioactive material.

Mr. Hamric said that workers have been encouraged to report safety problems and that the project's track record has improved. Fernald's safety record is three times better than other heavy industries, Mr. Hamric said.

''We take very seriously our responsibility to provide for the safety of our employees and the public,'' Mr. Ofte said.

Published Feb. 13, 1996.