Test Site equipment sales cost taxpayers

Monday, March 17, 2003 | 11:15 a.m.

The Nevada Test Site in the past 10 years shortchanged taxpayers by millions of dollars when it sold off surplus equipment, according to a new federal audit.

In one example, the Test Site sold 23 trucks, valued together at nearly $450,000, for an average of 17 cents each, according to the report released last week by the Department of Energy Inspector General.

The Energy Department's Nevada office "made little, if any, effort to determine the current market value of the property," the report said.

The sales of Energy Department equipment began after the national ban on nuclear weapons testing in 1992. Congress approved the sale of surplus equipment from the Nevada Test Site, roughly 65 miles northwest of Las Vegas, to needy community development groups around the nation, with the understanding that in some cases sales might be made at less than fair market value.

But in some cases the Energy Department did not come close to striking a balance between aiding community groups and getting a fair shake for taxpayers, the report said.

"We found that the taxpayers were frequently shortchanged in this process," the 18-page report said.

Roughly $5 million in taxpayer funds were lost in the equipment sales, Department of Energy Inspector General Gregory Friedman said in the report.

The report also said the Test Site sold off equipment that other Energy Department sites could have used.

In response, the Energy Department's National Nuclear Security Administration, which manages the Test Site, acknowledged that organizations that bought Test Site equipment resold it for profit.

NNSA officials also agreed with the report's recommendation that the department should receive "reasonable consideration" -- a fair price -- for equipment sold. But NNSA associate administrator for management and administration Anthony Lane, in written comments that were part of the audit report, said the department still needs to formalize the definition of "reasonable consideration."

An NNSA spokesman in Washington today was not available to comment further on the equipment sales.

Among numerous transgressions, the NNSA sold a drill rig from the Test Site for $50,000, rather than offering it up for a competitive sale through the General Services Administration, the audit said.

The community organization that bought the drill rig then sold it to an equipment broker in Texas for $248,000 -- and the broker has it on the market today for $3.9 million, Friedman said.

Neither the broker nor the Texas town involved in the transaction was named in the report.

"While we have no way of knowing whether the Texas broker will ultimately sell the drilling rig for this price, the broker stands to make a considerable profit without providing a direct and substantial benefit to the community," Friedman wrote.

Among other findings the audit reported:

"Clearly, the department should not have to use its scarce resources to purchase additional equipment that already exists within its own inventory," Friedman said.

The NNSA agreed with the inspector general's recommendation that the agency in the future should check with other DOE facilities to find out if the other facilities need equipment that the Test Site intends to sell, Lane said.

The inspector general said that files and documents from the transactions were reviewed from August to December 2002 for the audit. Inventory lists were analyzed and interviews with both DOE officials and contractors were conducted for the audit.

"Because our audit was limited, it would not necessarily have disclosed all internal control deficiencies that may have existed at the time of our audit," Friedman said.

Sen. Harry Reid, D-Nev., has not seen the report but he plans to review it to determine whether changes beyond the inspector general's recommendations are needed, Reid spokeswoman Shannon Eagan said.

It is common for federal departments to sell off equipment below market value, but the Energy Department's sales are perhaps the most outrageous in recent memory from a taxpayers' perspective, said David Williams, vice president for policy with the watchdog group Citizens Against Government Waste.

The NNSA's contention that there were no clear rules about equipment sales is a "huge cop-out," Williams said.

"Trucks for 17 cents? I mean, come on, don't these people have any common sense?"