The Department's national laboratories, since their establishment, have been permitted to conduct a limited amount of discretionary research activities. The Department's Defense Program laboratories, such as the Lawrence Livermore National Laboratory, generate funding for Laboratory Directed Research and Development (LDRD) programs by charging their total laboratory operating and capital equipment budgets a flat surcharge of up to 6 percent. The ceiling was mandated by the Congress in authorization legislation. This audit was performed to determine whether the LDRD program at Lawrence Livermore was managed in accordance with applicable laws and regulations. Audit work was conducted at the Department's Headquarters and at Lawrence Livermore. Discussions were also held with representatives of the Oakland Operations Office.