Department of Energy, Office of Worker Advocacy

The Energy Employees Occupational Illness Compensation Program Act of 2000 (EEOICPA) authorized the Department of Energy (Energy) to help its former contractor employees file state workers' compensation claims for illnesses that could be linked to exposure to toxic substances during their employment. Concerned with the relatively small number of finalized cases and the overall effectiveness of the program, Congress asked GAO to review costs incurred by Energy to administer the program. Specifically, Congress asked GAO to determine whether (1) internal controls over program payments were adequately designed to provide reasonable assurance that improper payments to contractors would not be made or would be detected in the normal course of business and (2) program payments were properly supported as a valid use of government funds.

Energy did not establish an effective control environment over payments to contractors or overall contract costs. Specifically, because Energy lacked an effective review and approval process for contractor invoices, it had no assurance that goods and services billed had actually been received. Although responsibility for review and approval of invoices on the largest contract rested with the Space and Naval Warfare Systems Center, New Orleans (SSC NOLA) through an interagency agreement, Energy did not ensure that SSC NOLA carried out proper oversight. Energy also failed to maintain accountability for equipment purchased by contractors. Further, subcontractor agreements, which represented nearly $15 million in program charges, were not adequately assessed, nor were overall contract costs sufficiently monitored or properly reported. These fundamental control weaknesses made Energy highly vulnerable to improper payments. GAO identified $26.4 million in improper and questionable payments for contractor costs, including billings of employees in labor categories for which they were not qualified or that did not reflect the duties they actually performed, the inappropriate use of fully burdened labor rates for subcontracted labor, add-on charges to other direct costs and base fees that were not in accordance with contract terms, and various other direct costs that were improperly paid. Further, certain payments toward the end of the program for furniture and computer equipment may not have been an efficient use of government funds. These improper and questionable payments represent nearly 30 percent of the $92 million in total program funds spent through September 30, 2005, but could be even higher given the poor control environment and the fact that GAO only reviewed selected program payments.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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