Feds In the Dark on Billions in Contractor Payments

Audit backlog leaves more than 40 DOE contracts worth over $90 billion vulnerable to waste and abuse

Department of Energy / DOE Website

Washington River Protection Solutions is working on a $7.4 billion environmental remediation contract for the Department of Energy (DOE). However, as is the case with at least 40 other DOE contracts worth more than $90 billion, taxpayers have no idea if the money is being properly spent.

That contract, like a number of others for work on remediation and construction projects for the DOE, has never been subject to a federal audit. Other audits for multi-billion-dollar contracts are years behind schedule.

According to the department’s inspector general, the Defense Contract Audit Agency (DCAA), which audits DOE contracts, has a backlog of between one and eight years. That could mean billions in overpayments and improper costs are currently unaccounted for.

"Over the past several years, as responsible Department officials confirmed, DCAA has been unable to perform many of its audits on a timely basis," DOE’s inspector general wrote in a report released on Monday.

"In fact, DCAA itself reported delays from 1 year to more than 8 years" for many of those contracts.

According to the inspector general, DOE contractors are currently servicing more than 40 "non-management and operating contracts" worth more than $90 billion. Of the 16 largest such contracts, seven have never been audited and six have not been audited since 2010.

"Given the value of these contracts, the intricacies of contractor accounting systems, and the inherent inability of Federal contracting/reviewing officials to gain complete transaction level knowledge of contractor operations, comprehensive periodic audits are critically important," the  inspector general noted.

Due to the lack of DCAA oversight, it is impossible to know how much taxpayer money could be recovered as a result of audits that have not been performed.

However, the inspector general noted that audits of DOE’s management and operation contracts have turned up $1.1 billion in questioned costs, data that the inspector general said "is useful in putting the current situation with the non-M&O contractors in perspective."

Non-management and operations contractors are primarily working on construction and nuclear waste cleanup projects. Two of the largest include an $11.3 billion contract with Bechdel National that hasn’t been fully audited since 2007 and a $2.5 billion contract with Fluor for which DCAA does not even have an audit planned.

In response to the report, DOE officials assured the inspector general that "corrective actions had been taken or were planned to address the identified issues."

One of its proposed solutions was to offer "alternatives" to DCAA for audit services. But the inspector general's report noted that efforts to offload some of DCAA’s backlog onto external auditors "were not well coordinated, in some instances did not comply with professional audit standards, and do not, in our judgment, close the significant gap in audit coverage for non-M&O contractors."

However, that might be the department’s only option. Agency officials expressed skepticism that DCAA can eliminate its backlog and perform all necessary auditing tasks.

"Whatever good intentions DCAA has, its track record makes it prudent to avoid assuming a marked change in DCAA's support," the agency told the inspector general.