March 6, 2023

Audit Coverage in Office of Science Grants

Prior Office of Inspector General reports identified inadequate controls related to the Department of Energy’s administration and oversight of financial assistance awards, and the Department had not ensured that annual independent audits were performed, as required.  Financial assistance audits are intended to determine whether the grantee has an internal control structure that provides reasonable assurance that grants are managed in compliance with Federal laws and regulations and award terms and conditions.

We conducted this audit to determine whether the Office of Science (Science) ensured that for-profit grantees were compliant with the audit requirements for Federal awards.

We found that Science did not always ensure that for-profit grantees were compliant with audit regulations, including unaudited award expenditures, late audit report submissions, use of incorrect regulations or audit type, and incomplete reporting packages.  These issues were due to Science lacking a system or tracking mechanism for monitoring grantees’ expenditures that may require an audit.  Further, Science did not adequately review reporting packages or follow its reporting package review process.  Finally, reduced staffing contributed to inadequate grant oversight.

Award expenditures totaling $56,835,650 that were not audited, as required per 2 Code of Federal Regulations § 910, exposes the Department to an increased risk of fraud, waste, and abuse.  Therefore, we are questioning $56,835,650 in award expenditures as unresolved costs pending audit.  Not adequately reviewing the reporting package and not following the review processes increases the risk of undetected noncompliance with Federal program requirements and grant award terms and conditions.  Grantees who did not have the required audits performed have a higher risk of charging unallowable costs to the Department.  Although the scope of this audit was grants to for-profit grantees within Science, it is important that the Department consider the report findings across the complex because the Department received significant funding under the Infrastructure Investment and Jobs Act and Inflation Reduction Act of 2022, and some of this funding will be awarded through financial assistance instruments, including grants.

To address the issues identified in this report, we have made five recommendations that, if fully implemented, should help ensure that grantees are compliant with Federal grant audit regulations.

In response to our Final Report on Audit Coverage in Office of Science Grants, four grantees provided written responses for the purpose of clarifying or providing additional context to specific references in the report.  Three grantees did not agree with the dates of independent audit reports submitted to the Office of Chief Financial Officer (OCFO).  One grantee submission date was prior to the date Science had previously provided to the Office of Inspector General and one grantee concurred with the date reported.  The OCFO concurred with the original submission dates provided by two grantees.  However, the OCFO disagreed with the submission dates provided by the other two grantees, asserting the submission dates were later than stated by the grantees.  The dates provided by the grantees differed from Science and the OCFO because the Department’s visibility into its data is lacking; however, establishing a new tracking system as recommended in our report, should reduce future discrepancies.