The U.S. Department of Energy isn’t doing enough to cut back on the risk of fraud among its contractors, including at Hanford, according to a Government Accountability Office report released Monday.
The agency issued the report, requested by Sen. Claire McCaskill, D-Mo., after high-profile incidents of alleged fraud by DOE contractors, including two at the Hanford nuclear reservation.
“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.”
In one case, several employees of former contractor Fluor Hanford Inc. charged purchases, including appliances and TV, for their own use to federal credit cards or they received kickbacks for purchases they made.
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Fluor paid $4 million to settle with the government in 2011.
In the second case, Hanford vitrification plant contractor Bechtel National and its subcontractor AECOM agreed in November to pay $125 million to settle a lawsuit over allegations that they had charged DOE for parts and work that could not be shown to meet the agency’s strict standards for nuclear facilities.
The $17 billion-plus vitrification plant is being built to turn 56 million gallons of radioactive waste into a stable glass form.
The companies have denied wrongdoing. But these cases and others over the years underscore the challenges facing DOE, which relies more heavily on contractors than any other civilian agency in the federal government.
The most troubling part is that the agency seems unwilling to acknowledge this is a problem.
Sen. Claire McCaskill, D-Mo.
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.
DOE relies heavily on contractors to police themselves and it is ironic that much of the fraud discovered at DOE, including the issue that led to the vitrification plant settlement, was reported by whistleblowers, McCaskill said.
Because issues were not detected through DOE risk management, “DOE has little assurance that the types of conduct reported by these whistleblowers are not widespread,” the GAO report said.
DOE declined to comment for this story.
In a written response attached to the DOE report, the agency said it agreed “in principle” with five of the GAO’s six recommendations to improve its practices for managing fraud.
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 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 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. The most troubling part is that the agency seems unwilling to acknowledge this is a problem.
Sen. Claire McCaskill, D-Mo.
The GAO criticized 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.
Hanford reported that it was performing data analytics, but the GAO said it could not substantiate that.
GAO 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 GAO report said.
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, the GAO report said.
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.
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.
GAO report on DOE practices to manage the risk of fraud
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.
She wants to know what steps will be taken at Hanford to assess limitations in contractor data identified in the report, including its tracking of subcontractor purchases, substantial per-diem payments reported as lump sums rather than for individual workers, and purchases reported to be made on holidays.
The GAO was concerned that scrutiny may be needed to ensure that goods and services provided by subcontractors affiliated with the main contractor are competitively priced.
DOE responded to concerns about Amazon purchases made on Christmas day, that Dec. 25 was the transaction date and purchases were made only. It said that preparing individual charges for $7.8 million in per-diem “travel-to-the-site” payments, some of them daily, would be onerous and inefficient, according to the report.
The report found that Hanford was the only one of six sites to sample 75 to 100 paid invoices to review on a quarterly basis. The invoices were selected based on potential risk.
However, the reviewed invoices accounted for a small percentage of payments. For fiscal years 2013 through 2015 the reviews found just $9,078 in costs that DOE said were not allowed, according to the report.