Financial Management:

Energy's Material Financial Management Weaknesses Require Corrective Action

AIMD-93-29: Published: Sep 30, 1993. Publicly Released: Sep 30, 1993.

Additional Materials:

Contact:

Linda M. Calbom
(202) 512-8341
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO examined the Department of Energy's (DOE) efforts to: (1) improve financial control and accountability over its integrated contractors' financial operations; and (2) correct the financial management-related weaknesses cited in its Federal Managers' Financial Integrity Act report.

GAO found that: (1) DOE contract provisions do not fully protect the government's interests or permit DOE to exercise adequate oversight and financial management control over its contractors; (2) the DOE financial management system cannot provide all the information needed to effectively oversee integrated contractors; (3) field office staffing levels are insufficient to perform needed reviews of contractors' financial management practices and procedures; (4) DOE does not promptly complete required audits of contractors' allowable costs; (5) DOE has prematurely upgraded the status of its financial management problems from material to nonmaterial weaknesses; and (6) DOE has not fully completed the reforms it initiated to resolve these problems.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOE reported that its financial management systems weaknesses have been corrected. DOE did not report any financial management weaknesses in its FMFIA report. The IG reviewed and concurred with the FMFIA report.

    Recommendation: The Secretary of Energy should direct the DOE CFO to ensure that Federal Managers' Financial Integrity Act reports disclose financial management as a material weakness until such time as corrective actions and their effectiveness are validated.

    Agency Affected: Department of Energy

  2. Status: Closed - Not Implemented

    Comments: The Inspector General disagreed with this recommendation and believes that the cooperative audit strategy involving the M&O contractors' internal auditors adequately protects the government's interest. No further action planned.

    Recommendation: The Inspector General should review the alternatives presented in this report, identify other alternatives, and choose an approach that best protects the government's interest.

    Agency Affected: Department of Energy: Office of the Inspector General

  3. Status: Closed - Not Implemented

    Comments: The Inspector General disagreed with this recommendation and planned no further action.

    Recommendation: The Inspector General should consider alternatives to increased reliance on the integrated contractors' internal auditors to perform allowable cost audits.

    Agency Affected: Department of Energy: Office of the Inspector General

  4. Status: Closed - Implemented

    Comments: The CFO was granted indirect authority over field finance office operations when the most recent CFO organizational plan was approved by OMB. The CFO exercises functional but not administrative control or guidance over the field finance offices.

    Recommendation: The Secretary of Energy should provide the CFO authority over field finance office staffing allocations and direct the CFO to develop strategies to achieve adequate staffing levels.

    Agency Affected: Department of Energy

  5. Status: Closed - Implemented

    Comments: An internal study group reviewed DOE's operating environment and recommended improvements in the financial information available to DOE managers. In response to the group's recommendations, the CFO streamlined the budget formulation process and began to standardize procedures to promote consistency among the integrated contractors. The CFO also made revisions to the cost structure used by DOE contractors to conform to required reports and achieve consistency. Other improvements have been completed to further improve the financial information managers receive.

    Recommendation: The Secretary of Energy should direct the CFO to improve financial information that managers use to oversee integrated contractor operations by: (1) defining the financial information program managers and Congress need; and (2) developing ways to gain more consistency in integrated contractors' program category cost data.

    Agency Affected: Department of Energy

  6. Status: Closed - Implemented

    Comments: The CFO sent a memorandum to field CFOs that stipulates the applicability of cost accounting standards to M&O contractors. The memo was issued on November 24, 1993. The non-liability for cost accounting standards clause was added in first quarter of 1996.

    Recommendation: The Secretary of Energy should direct the CFO to require that the cost accounting standards clause be included in the CFO list of standard contract clauses related to financial management.

    Agency Affected: Department of Energy

  7. Status: Closed - Implemented

    Comments: DOE has developed and implemented a process to ensure that a standard non-liability clause is included in all new M&O contracts. The process includes CFO review of proposed contracts to ensure that the standard clause is used.

    Recommendation: The Secretary of Energy should direct the Office of Procurement Assistance and Program Management to: (1) include all pertinent standard financial management clauses in future integrated contractor contracts, with exceptions approved in advance by the Chief Financial Officer (CFO); and (2) with respect to the cost accounting standards, eliminate the use of contract clauses that limit contractor liability.

    Agency Affected: Department of Energy

  8. Status: Closed - Implemented

    Comments: The most recent CFO organization plan extends the CFO some authority over the field offices, but this authority is limited. This action does not fully address the recommendation.

    Recommendation: The Secretary of Energy should extend CFO authority to the remaining 12 finance offices. Exceptions may be appropriate for individual offices based on CFO assessments that confirm whether an office is adhering to CFO financial management and reporting policies.

    Agency Affected: Department of Energy

 

Explore the full database of GAO's Open Recommendations »

Sep 20, 2016

Sep 6, 2016

Aug 19, 2016

Aug 12, 2016

Jul 29, 2016

Jul 28, 2016

Jul 13, 2016

Jul 11, 2016

Jun 13, 2016

Looking for more? Browse all our products here