The Department of Energy (DOE) has been reimbursing its contractors for settlement and law firm costs without consistently verifying that the payments are allowable, according to an Inspector General’s Office (IG) audit report released earlier this month. The report found that from fiscal 2009 through fiscal 2013, DOE reimbursed contractors over $84 million in legal costs. In 2009 the IG found that some reimbursements involved questionable legal costs and that the department made settlement reimbursement payments to the contractors without conducting post-settlement reviews to verify allegations of contractor management misconduct.
These reviews are required to determine cost allowability and to “ensure the actions surrounding a settlement did not stem from misconduct on the part of the contractor,” the IG said, noting that DOE continues to authorize settlement payments without necessarily conducting the required reviews. Moreover, the IG’s latest assessment found that 78 percent of 46 settlements worth over $62 million offered no documented evidence of a settlement review. Some of those cases involved allegations of discrimination by the contractor and “involved acknowledged improper conduct on the part of the contractor,” the IG found. It noted that costs are allowable only when in compliance with the terms of the contract, and that the DOE’s contracts prohibit discrimination against contractor personnel. These types of cases may not have qualified for reimbursement had the DOE conducted a review.
The IG said post-settlement reviews are necessary and beneficial, noting that it identified 10 cases in which conducting them saved DOE over $1 million in settlement costs. Without these reviews, the DOE might misuse public funds by “reimbursing contractors for settlement and legal costs that resulted from misconduct on the part of the contractor,” the IG said. The audit recommended that DOE develop procedures for conducting settlement reviews and document cost allowability decisions before reimbursing settlement costs. DOE management agreed to develop those procedures, the report said.
