DOE Management:

Funds for Maintaining Contractors' Operations Could Be Reduced and Better Controlled

RCED-94-27: Published: Oct 25, 1993. Publicly Released: Oct 25, 1993.

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GAO reviewed the amount of prefinancing that the Department of Energy (DOE) obligates to its management and operating (M&O) contractors, focusing on whether: (1) current prefinancing funding levels are appropriate; and (2) prefinancing funding controls adequately ensure that funds are being used for their intended purpose.

GAO found that: (1) although DOE has traditionally provided prefinancing to its M&O contractors to ensure that operations continue if funding lapses, it lacks adequate justification for maintaining current prefinancing levels; (2) the need for prefinancing is questionable, since other available funds could be used to continue operations during funding lapses, most funding lapses are brief, and essential activities can continue for a limited time without funding; (3) DOE prefinancing funding controls may not be adequate to ensure that contractors are using funds for their intended purpose, since they do not require contractors to maintain separate balances for prefinancing funds and allow contractors to integrate prefinancing funds with operating or construction funds; (4) DOE has used prefinancing funds to offset budget cuts; and (5) DOE needs to reconsider its prefinancing policy to ensure that prefinancing is justified, minimize the amounts of prefinancing it provides, and implement appropriate controls to ensure prefinancing funds are being used for their intended purpose.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOE has taken actions to reduce prefinancing amounts. DOE has reduced prefinancing by $168 million (from $218 million to $50 million) since GAO issued this report. Further, DOE expects that most, if not all, of the remaining prefinancing funds will be eliminated as a result of ongoing budget reductions. In this regard, Congress has directed DOE to use nearly $1 billion of carryover funds--of which prefinancing is a part--to fund fiscal year 1996 programs.

    Recommendation: To minimize the need for prefinancing funds and to better control any such funds, the Secretary of Energy should justify all prefinancing funds for M&O contractors. Such justification should, at a minimum: (1) be based on a detailed analysis of the number of days contractors would likely be without funding at the beginning of the fiscal year; and (2) clearly show that other funds would not be available to maintain facility operations in the event of a funding lapse. Prefinancing funds that cannot be adequately justified should be eliminated.

    Agency Affected: Department of Energy

  2. Status: Closed - Not Implemented

    Comments: DOE has agreed with this recommendation; however, since prefinancing funds are being eliminated this recommendation is no longer applicable.

    Recommendation: To minimize the need for prefinancing funds and to better control any such funds, the Secretary of Energy should, for all prefinancing funds that are adequately justified, establish controls that ensure that the funds: (1) are readily identifiable; and (2) used only for their intended purpose.

    Agency Affected: Department of Energy


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