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Billions of taxpayer dollars could be lost on 40 unaudited Energy Department contracts

BY ETHAN BARTON |
FEBRUARY 10, 2015 | 5:20 PM
(iStock)

Billions of improperly spent tax dollars may be unrecoverable because of a massive backlog of unaudited Department of Energy contracts.

The DOE’s Office of Environmental Management awarded more than 40 contracts mostly for environmental cleanup and construction projects, valued at more than $90 billion with annual expenditures of about $5 billion, according to an inspector general report made public Monday. Some of the contracts were awarded as long ago as 2005, but because they are awaiting audit, there is no way of knowing if all of the money was spent properly.

The failure to audit properly the 40 contracts exposes the DOE “to an unacceptable level of financial risk,” the inspector general said.
In the past, the Defense Contract Audit Agency provided auditing services for the DOE, but more recently "as responsible department officials confirmed, DCAA has been unable to perform many of its audits on a timely basis," the inspector general report said. "It does not appear that any resolution of this problem is likely for a number of years."

Officials said some of the pending DOE audits would be delayed for more than eight years. That means some improperly spent portions of the $90 billion will be unrecoverable due to a 1994 law that put a statute of limitations on such claims.

"It is likely that unallowable costs that are identified ... that are more than six years old will not be recoverable,” the inspector general said. Already, some contracts are seven years overdue for an audit.

Among the 16 largest contracts, collectively worth more than $47 billion, seven had never been audited and six had only been audited for costs in 2010 or earlier. Only three were audited for costs in 2012 or earlier.

Another issue related to the backlog is the inability to promptly correct systematic errors that allowed improper expenditures. By the time contracts are audited, management practices or staff may have changed, “which significantly reduces the value of such audit work.” Also, because contractors are only required to retain certain data for three years after their work ends, audits conducted after this period may take significantly longer and cost more, because auditors “must resort to time-consuming searches for records,” the inspector general said.

Additionally, if contractor employees left their position and data is missing, “there is a real risk that a lack of documentation may handicap the audit process,.

The DOE made some attempts to alleviate the auditing backlog by going outside of DCAA such as contracting with independent accounting firms and using contractors' internal audits, but “these approaches have not been completely effective.”

The DOE concurred with the IG’s recommendation to continue to supplement DCAA’s audit coverage until the backlog is eliminated.

Previously, the inspector general reported on DOE’s failure to perform required decontamination of facilities hazardous to the environment and the public due to financial constraints. One of the main tasks of unaudited contractors was to "perform site environmental cleanup," the inspector general said.

A DOE spokesman said her department "is committed to making prudent and responsible decisions with its contracts, to better serve the mission of safe cleanup of the environmental legacy brought about from nuclear weapons development and government-sponsored nuclear energy research.

"The department takes its responsibility of managing the largest environmental cleanup program in the world seriously, and has made substantial progress-- reducing the nuclear legacy waste footprint by 74 percent and the number of sites across the country from 107 to 17-- and is focused on continuing this work in the years to come while managing its budget judiciously."

This story has been updated to include the DOE spokesman's comment.
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