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Audit Report: IG-0867

June 18, 2012 

National Nuclear Security Administration Contractors' Disability Compensation and Return-to-Work Programs

The National Nuclear Security Administration (NNSA) had not ensured that its contractor sites always managed their disability plans effectively and reduced costs by implementing return-to-work programs.  Specifically, Lawrence Livermore National Laboratory (Livermore), Sandia National Laboratories, and the Y-12 National Security Complex (Y-12) provided disincentives to employees to return to work by supplementing workers' compensation with payments that gave employees more net income when they were on disability payments than when they were working; Livermore purchased guaranteed cost workers' compensation insurance with no deductible, which may not be the most cost-effective plan available; Livermore incurred, charged and was subsequently reimbursed approximately $1.26 million by NNSA in potentially unallowable broker compensation for Fiscal Years 2008 through 2011; Livermore, Los Alamos National Laboratory (Los Alamos) and Y-12 did not implement best practices associated with non-occupational disabilities; Livermore and Los Alamos did not adopt some other best practices that have been proven to reduce workers' compensation costs; and, NNSA did not implement cost savings opportunities recommended by a consultant that could have saved between $1.2 million and $2.2 million annually.  These issues occurred because NNSA, NNSA site offices, and contractor officials did not exercise adequate oversight of, or provide resources necessary to improve, contractor disability plans.  By increasing its oversight of contractor disability programs and implementing its consultant's recommendations, NNSA could save more than $3.3 million annually.  Management generally agreed with the findings and recommendations in the report and initiated corrective actions.  Specifically, management indicated that Site Office officials had discussed the issues with the contractors and planned actions to address each of the recommendations in order to provide well managed, cost effective workers' compensation and disability programs.

Topic: Human Resources