DOE Management

Funds for Maintaining Contractors' Operations Could Be Reduced and Better Controlled Gao ID: RCED-94-27 October 25, 1993

Prefinancing refers to the budget authority that contractors maintain to continue operations at Department of Energy (DOE) facilities in the event of a funding lapse at the start of a fiscal year. At the end of fiscal year 1992, prefinancing funds among DOE contractors totaled $219 million. GAO concludes that the amount of prefinancing funds can be cut and, for some contractors, eliminated. DOE allows its contractors to keep enough money on hand to finance operations for 20 days. GAO questions the need for this funding because (1) other money is available that can be used to continue operations if funding lapses; (2) any lapses in funding are likely to be shorter than 20 days; and (3) some essential activities, such as running the nuclear weapons facilities, can legally be continued for a limited time without appropriated funds. DOE's prefinancing funds are not adequately controlled. For example, prefinancing funds are not specifically requested and justified in DOE's annual budget. Furthermore, DOE does not require the contractors to maintain separate balances for prefinancing funds, allowing them instead to mingle prefinancing funds with operating or construction funds. In addition, DOE has used prefinancing money to offset budget cuts rather than to bridge funding lapses.

GAO found that: (1) although DOE has traditionally provided prefinancing to its M&O contractors to ensure that operations continue if funding lapses, it lacks adequate justification for maintaining current prefinancing levels; (2) the need for prefinancing is questionable, since other available funds could be used to continue operations during funding lapses, most funding lapses are brief, and essential activities can continue for a limited time without funding; (3) DOE prefinancing funding controls may not be adequate to ensure that contractors are using funds for their intended purpose, since they do not require contractors to maintain separate balances for prefinancing funds and allow contractors to integrate prefinancing funds with operating or construction funds; (4) DOE has used prefinancing funds to offset budget cuts; and (5) DOE needs to reconsider its prefinancing policy to ensure that prefinancing is justified, minimize the amounts of prefinancing it provides, and implement appropriate controls to ensure prefinancing funds are being used for their intended purpose.

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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