Energy Management:

Contract Audit Problems Create the Potential for Fraud, Waste, and Abuse

RCED-92-41: Published: Oct 11, 1991. Publicly Released: Nov 8, 1991.

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Pursuant to a congressional request, GAO examined the Department of Energy's (DOE) contracting practices, focusing on: (1) audit coverage of DOE management and operating (M&O) contractors and DOE contracts; (2) the problems that may occur when contract audits are not performed; and (3) factors that have impeded contract audit coverage.

GAO found that: (1) due to staffing and resource limitations, DOE has not provided the necessary cyclical audit coverage it established to determine whether costs from M&O contractors are accurate, allowable, and reasonable; (2) many of the internal auditors working for M&O contractors are not performing the required allowable-cost audits; (3) since many non-M&O contracts go unaudited for years, DOE does not know if it pays fair and reasonable prices for such contracts and whether the costs claimed are accurate and allowable; and (4) lack of guidance, procedures, and aid to offices in monitoring contracts has hindered appropriate audit coverage.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOE used the semiannual report for the period ended March 31, 1992, to report that the Secretary requested 29 additional audit FTE to strengthen the audit program. Accomplishment report A-RCED-92-78 was approved on October 5, 1992.

    Recommendation: The Inspector General, DOE, should describe, in the next semi-annual report to Congress, the actions being taken by his office and those being taken by the Secretary of Energy to provide the Office of the Inspector General with the audit resources needed to reasonably assure DOE that the integrated M&O contractors are operating economically, efficiently, and in the federal government's best interest.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: DOE developed a Contract Audit Tracking System Software Program and required it or a similar system to be used to track audits. A follow-up survey on the effectiveness of field activities' audit tracking programs was completed in the quarter ending September 30, 1993. DOE processed an assurance certificate, dated December 17, 1993, stating that the recommendations contained in the audit report and the necessary corrective actions have been completed. GAO plans to prepare an accomplishment report in the near future.

    Recommendation: To aid operations offices and M&O contractors in monitoring and following up on all contract audit activities, the Secretary of Energy should develop and implement guidance on establishing target dates for accomplishing all needed contract audit activities and a procedure for tracking progress against those target dates.

    Agency Affected: Department of Energy


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