The U.S. Department of Energy isn’t doing enough to cut back on the risk of fraud among its many contractors, according to a government audit obtained by McClatchy.
The nonpartisan Government Accountability Office issued the audit, requested by Sen. Claire McCaskill, D-Mo., after high-profile incidents of fraud by the DOE’s contractors, including two at the Hanford Site nuclear reservation in Washington state.
In one case, employees of contractor Fluor Hanford Inc. were accused of receiving kickbacks for hundreds of wasteful purchases from 2003 to 2008.
Fluor paid $4 million to settle with the government.
In the second case, contractors at Hanford — Bechtel National and AECOM — agreed to pay $125 million to settle a lawsuit over allegations that they had charged the DOE for 13 years for subpar parts that weren’t compliant with the agency’s strict standards for nuclear facilities.
The companies have denied wrongdoing. But these cases and others over the years underscore the challenges facing the DOE, which relies more heavily on contractors than any other civilian agency in the federal government.
About 90 percent of the DOE’s $27 billion annual budget goes to contracts and major capital asset projects. Since 1990, the GAO has flagged the agency’s poor management of its contractors as an area at high risk for fraud, mismanagement and abuse of taxpayer dollars.
“The Department of Energy is responsible for maintaining large parts of our nuclear arsenal, and an inability or unwillingness to root out contracting fraud endangers not only taxpayer dollars but our national security,” McCaskill, a former auditor, said in a statement. “The most troubling part is that the agency seems unwilling to acknowledge this is a problem.”
The DOE declined to comment for this story.
In a written response attached to the audit, the agency said it agreed “in principle” with five of the GAO’s six recommendations to improve its practices for managing fraud.
The DOE said it would set up a departmentwide invoice review policy and beef up other fraud-detection practices.
The agency disagreed with the sixth recommendation, which suggested that the DOE require its contractors to maintain the kind of detailed transaction records that would allow them to match them to the actual costs charged by contractors.
The agency said it did not want to make data-collection demands on its contractors that exceeded governmentwide requirements.
“DOE’s response to these recommendations is troubling,” McCaskill said in a letter to Energy Secretary Rick Perry.
McCaskill, who serves as the top Democrat on the Senate Homeland Security and Governmental Affairs Committee, asked Perry to provide a detailed response by May 19 explaining how his agency will address the audit’s findings.
The GAO criticized the DOE as lacking consistent policies or well-documented procedures for reviewing invoices. The agency also found the DOE doesn’t routinely use “leading practices” to detect fraud, such as fraud-prevention training and data analytics.
Credit card companies and banks have long used data analytics software to identify transactions that break from expected patterns. Anything out of the ordinary serves as a red flag that could prompt further investigation.
Auditors said DOE officials told them they did not use leading practices for managing the department’s risk of fraud because they thought the risk was low.
“DOE officials told us that, unlike other federal agencies, DOE is not at the highest risk for fraud and improper payments and therefore cannot be expected to commit the resources necessary to independently identify, evaluate, adapt and implement private industry leading practices,” the auditors wrote.
Even if the DOE wanted to, the agency couldn’t “fully employ” data analytics for fraud prevention because its contractors aren’t required to keep records that are detailed enough, auditors said.
Lindsay Wise: 202-383-6007, @lindsaywise