The Department of Energy has not used leading practices to manage the risk of fraud and other improper payments to its contractors and subcontractors, according to a Government Accountability Office report released Monday.
The report found inconsistent review of invoices, too little data for oversight, and a lack of centralized and detailed policies. “Improper payments, which include fraudulent payments, are a significant problem in the federal government,” the GAO report said.
Sen. Claire McCaskill (D-Mo.), the ranking member on the Senate Homeland Security and Governmental Affairs Committee, requested the review following several high-profile fraud cases at DOE sites.
The GAO report cited the example of former contractor Fluor Hanford paying $4 million in 2011 to resolve false claims allegations as the Department of Justice prosecuted some of its employees. Three workers used government credit cards to purchase items such as home appliances for their personal use and other employees accepted kickbacks for purchases made for use at the Hanford Site in Washington state. Fluor denied it knowingly participated in any wrongdoing.
In a more recent case, Hanford Waste Treatment Plant prime Bechtel National and subcontractor AECOM agreed in November 2016 to pay $125 million to resolve allegations they charged DOE for materials and work that did not meet the exacting standards required for nuclear facilities. Bechtel and AECOM admitted no wrongdoing in the settlement agreement.
“DOE relies heavily on contractors to police themselves and it is ironic that much of the fraud that is discovered at DOE, including the activities which led to the $125 million settlement, only comes to light because of whistleblowing – considering DOE’s troubled history with regard to protecting its whistleblowers,” McCaskill wrote in a letter to Energy Secretary Rick Perry on Monday. The settlement is an example of DOE’s inability to sufficiently oversee contracts to ensure tax dollars are used correctly, she said in the letter.
McCaskill called out DOE’s practice, as reported in the GAO report, of conducting only very limited sampling of subcontractor invoices after payment. Between 2012 and 2015, DOE sampled 1 percent of $437 million in subcontractor costs, failing to review the majority of expenses. “Furthermore, much of the data generated by contractors is difficult to reconcile because it is not sufficiently detailed, which is not in line with federal internal control standards,” she said.
The Department of Energy generally concurred with five of six GAO recommendations intended to help DOE take a more strategic approach to managing risk of improper payments and fraud. The department agreed to establish a DOE-wide invoice review policy; to create an internal structure to oversee fraud risk management; to conduct fraud risk assessments and develop a fraud risk profile; to develop and document an antifraud strategy; and to implement specific activities, such as fraud awareness training, to prevent and detect fraud.
The agency declined to comment on the GAO findings, but the report said it had implemented or was in the process of implementing the first five recommendations.
DOE did not concur with the sixth recommendation, requiring contractors to maintain sufficiently detailed transaction-level cost data that may be reconciled with amounts charged to the government. The recommendation would require the department to establish agency-specific requirements for its contractors that are more prescriptive than current federal requirements. Its management and operations contractors, not DOE, are responsible for performing data analytics and determining what data are needed for the analytics, it told the GAO. However, DOE said it would discuss the merits of government-wide guidance for applying data analytics to contract costs with the data-analytics working group that the White House Office of Management and Budget is required to establish under the Fraud Reduction and Data Analytics Act of 2015. The GAO report said that based on DOE’s response “we are concerned that it does not fully appreciate its responsibility for overseeing contractor costs.”
McCaskill asked Perry for more information to better understand DOE’s responses to the GAO’s recommendations. She wants to know how much risk of fraud DOE is willing to tolerate as a matter of course and how the department concluded that its risk of fraud is low. The lawmaker also asked Perry how DOE would address some specific issues identified at Hanford, such as per-diem payments made in lump sums rather than linked to specific employees and purchases apparently made on Christmas Day. According to the GAO report, DOE said it would be onerous and inefficient to request payments for daily trips to the Hanford Site by hundreds of employees eligible for per diem. DOE also said, the GAO report says, that the Christmas Day dates were transaction posting dates for purchases made earlier.
