In other words, federal agencies require statutory authority to  contract with each other. When DOE agrees to carry out R&D for another agency and conducts the  work in one of its laboratories, DOE asks the contractor who operates its  laboratory to undertake the R&D tasks. LDRD is a cost that DOE incurs, both statutorily and  contractually, whenever the laboratory’s contractor performs work for  DOE. DOE has issued a departmental order for the LDRD program and clarifying  memoranda and guidance to ensure departmental compliance with  statutory requirements and congressional direction in committee reports. On April 30, 2002, the Secretary of  Energy issued a memorandum to the Under Secretary for Nuclear  Security and the Under Secretary for Energy, Science and Environment  that provided guidance directing that all DOE agreements to perform  R&D for other federal agencies provide notice about each participating  laboratory’s LDRD program, including (1) the applicable indirect-cost  rate, (2) an estimate of the associated cost, and (3) an explanation of the  LDRD program’s purpose. Question 5:  To what extent does the leadership of federal agencies that  give funds to DOE for its laboratories to conduct R&D on their behalf fully  understand that up to 6 percent of the funds may be diverted under DOE’s  LDRD program to purposes that have nothing to do with the purpose for  which the Congress originally appropriated the funds? Specifically, the senior officials in the Office of the Chief Financial Officer  (CFO) and/or the Office of General Counsel at each agency told us that the  LDRD program’s inclusion as an indirect cost does not limit their ability to  comply with their agency’s statutory or appropriations requirements. Managers at the five Office of Science laboratories told us that the LDRD  program is important for their efforts to recruit and retain scientists. For the 6 years from fiscal year 1998 through fiscal year 2003, DOE’s nine  laboratories spent a total of $1.8 billion, or an average of $296 million per  year, on LDRD. In fiscal year 2003, the laboratories received $7.7 billion  from DOE and other federal agencies, through reimbursement to DOE, and  spent $347 million, or 4.5 percent, on LDRD. DOD and the intelligence agencies accounted for $41 million, or 12  percent. Scope and Methodology

To assess DOE’s statutory authority for charging other federal agencies for  LDRD, we researched and analyzed statutes and legislative histories and  referred to principles of appropriations law. To assess whether the LDRD program is a necessary tool for recruiting and  retaining laboratory scientists, we obtained information from cognizant  officials at each of DOE’s nine laboratories about the role that LDRD plays  in recruiting and retaining scientists and obtained documentation. To provide data on the sources and amounts of LDRD funding, we obtained  data from each laboratory on its operating and LDRD funds for fiscal year  1998 through fiscal year 2003.
Why GAO Did This Study

The Department of Energy's (DOE) contractor-operated laboratories perform mission-related research and development (R&D) for DOE and other federal agencies. In 1992, DOE established the Laboratory- Directed Research and Development (LDRD) program, under which laboratory directors may allocate funding to scientists to conduct worthy independent research. DOE allows participating laboratories to support their LDRD programs by including a charge of up to 6 percent of the total project cost in the indirect costs for R&D performed for DOE and other federal agencies. GAO was asked to address 11 specific questions on DOE's LDRD program regarding: DOE's statutory authority for charging other federal agencies for LDRD, DOE's policies and procedures for ensuring departmental compliance with statutory requirements and committee report direction, the extent to which DOE believes the LDRD program is a necessary tool for recruiting and retaining laboratory scientists, and the sources and amounts of LDRD funding that each laboratory received from fiscal year 1998 through fiscal year 2003. In commenting on the draft report, DOE agreed with its factual accuracy.

What GAO Found

By law, when DOE conducts R&D for other federal agencies and uses a laboratory contractor to carry out the tasks, DOE must recover from the other agency all costs, including LDRD, DOE owes its contractor in performing the work. DOE has issued a departmental order and clarifying memoranda and guidance to ensure LDRD program compliance with statutory requirements and congressional direction. For example, the Secretary of Energy's April 2002 guidance requires that agencies funding work at its laboratories be notified about the LDRD program, including the laboratory's indirect-cost rate and an estimate of the associated cost. According to senior budget, legal, and research program officials at six federal agencies that fund work at the DOE laboratories, inclusion of funding for the LDRD program as an indirect cost does not limit their agency's ability to comply with statutory or appropriations requirements. Managers at the four DOE laboratories that primarily conduct nuclear weapons and environmental management R&D told us that LDRD is vital for recruiting and retaining top scientists, while managers at the five Office of Science laboratories said that LDRD plays an important, but less vital, role in recruiting and retaining top scientists. From fiscal year 1998 through fiscal year 2003, DOE's contractor-operated laboratories spent a total of $1.8 billion, or an average of $296 million per year, on LDRD. DOE accounted for 84 percent and the Department of Defense and the intelligence agencies, through their payments to DOE, accounted for 12 percent of the federal support for the LDRD program in fiscal year 2003.