Tuesday, May 2, 2017

DOE is Lax on Fraud

The GAO (Government Accountability Office) issued a report yesterday claiming that DOE's (Department of Energy) lax management and oversight of its contractors puts its contract management at a High Risk. The audit was requested by Senator McCaskill who was herself, at one time, an auditor. For example, the GAO noted that in November 2016, DOE contractors constructing a nuclear waste treatment plant agreed to pay $125 million to settle a lawsuit alleging, among other things, that a contractor improperly used federal funds for lobbying purposes.

The GAO found that DOE does not use leading practices for managing fraud risks - such as data analytics - that can help agencies detect fraudulent spending or other improper payments. The GAO made several recommendations aimed at reducing DOE's risk of fraud and improper payments. These include, but are not limited to:

  • Creating a dedicated anti-fraud entity to lead fraud risk management activities
  • Conducting regular fraud risk assessments that are tailored to the program
  • Developing and documenting a strategy to mitigate assessed fraud risks
  • Designing and implementing specific control activities such as data analytic activities to prevent and detect fraud.

The recommendation concerning enhanced use of data analytics is problematical and the only GAO recommendation that DOE did not concur.
It is not possible to fully employ data analytics as a tool to identify potential indicators of fraud or other improper payments at DOE because of limitations in contractor-maintained cost data. Much of the cost data maintained by the two DOE contractors GAO selected for data analytic purposes could not be used because these data did not include a complete universe of transactions that was reconcilable with amounts billed to DOE or did not contain details necessary to determine the nature of costs charged to DOE. Because DOE does not require its contractors to maintain sufficiently detailed transaction-level cost data that are reconcilable with amounts charged to DOE, it is not well positioned to employ data analytics as a fraud detection tool.
Effective fraud risk managers collect and analyze data and identify fraud trends and use them to improve fraud risk management activities, according to leading practices that GAO has previously identified. Without the detailed data necessary to conduct such analysis, DOE is missing an opportunity to develop, refine, and improve its experience with data analytic tools and techniques.
 DOE does not concur with this recommendation because it would require its contractors to submit data not required by any other Government contractor. GAO is not convinced however because they see DOE as a special case where 90 percent of its entire budget is paid out to contractors. No other Agency relies as much on a contractor workforce.

You can read the entire GAO report by clicking here.

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