May 12, 2021

The Department of Energy’s Payment Integrity Reporting in the Fiscal Year 2020 Agency Financial Report

The Improper Payments Elimination and Recovery Act of 2010 (IPERA) amended the Improper Payments Information Act of 2002 and required agencies to identify and review all programs and activities they administer that may be susceptible to significant improper payments based on guidance provided by the Office of Management and Budget (OMB).  On March 2, 2020, the Payment Integrity Information Act of 2019 (PIIA) repealed prior laws but set forth similar improper payment reporting requirements, including an annual compliance report by Inspectors General.  The OMB requires that the Office of Inspector General perform an annual review of the Department of Energy’s improper payment reporting in its Agency Financial Report and accompanying materials to determine whether the Department was compliant with PIIA.  In accordance with PIIA and OMB requirements, our review included improper payments identified in the Department’s Fiscal Year (FY) 2020 Agency Financial Report.  We also found that the current Administration has identified payment integrity as a top priority, focusing on reducing improper payments and protecting taxpayer money.  The priority includes balancing payment integrity risks and controls to ensure funding is serving its intended purpose.  The objective of the audit was to determine whether the Department met OMB criteria for compliance with the PIIA.

The Department’s FY 2020 improper payment reporting was in accordance with OMB criteria.  Specifically, the Department published an Agency Financial Report for FY 2020 and posted that report, as well as accompanying materials, on its website.  The Department also conducted improper payment risk assessments for all applicable programs, as required. 

Although we determined that the Department met the criteria for compliance with OMB, we found that enhancements to the payment integrity process could result in more accurate and transparent reporting.  For example, the Agency Financial Report did not disclose that the Department was tracking nearly $200 million in unresolved questioned costs pending allowability determinations by contracting officers.  While the Department was not required to disclose unresolved questioned costs in the Agency Financial Report, doing so would provide greater payment integrity reporting transparency.  We also found that these questioned costs were not being resolved in a timely manner, as required by Federal regulations.  We acknowledge that only a portion of questioned costs have historically been deemed unallowable.  However, because of the amounts of questioned costs that have not been resolved, there is the potential that improper payments may be higher than currently reported.  Therefore, disclosing the amount of outstanding questioned costs within the Agency Financial Report could provide greater transparency.  Furthermore, we determined that certain locations did not appear to be reporting all improper payment information, which could have understated the amount of improper payments reported in the Department’s Agency Financial Report.  For instance, one location had expenditures of nearly $486 million from FY 2017 through FY 2019 but did not self-identify any improper payments.

Topic: Management and Administration