Energy Dept. CFO Faulted for Risking Violations of Anti-Deficiency Act

A probe of Energy Department finances that sometimes got testy led the agency’s inspector general last week to fault the chief financial officer for being dismissive of reports that one program might have violated the Anti-Deficiency Act to the tune of $16 million.

The April 26 report from acting watchdog April Stephenson reflected four months of interviewing finance officials about whistleblower complaints alleging inaccurate fiscal 2017 spending reports concerning the department’s Electricity Delivery and Energy Reliability account.

“Due to a clerical error, approximately $23 million was requested in a line for reimbursable work rather than the intended line for direct funding,” the report stated. “This left the direct funding line of the account at approximately $198 million rather than the intended amount of approximately $221 million,” which caused the CFO’s office to send the Office of Management and Budget an inaccurate summary of spending from one year to the next. The officials running the electricity account “continued to obligate funds against this account for the remainder of the fiscal year, ultimately obligating about $214 million, or approximately $16 million more than permitted,” the IG found.

The Office of the Chief Financial Officer, the report said, was alleged to have “attempted to hide the violation from external auditors. Specifically, it was alleged that the Deputy Chief Financial Officer instructed staff to correct the issue and make the matter go away, and did not follow procedures for assessing the violation and notifying General Counsel.”

The IG team concluded by substantiating “the allegation that the department obligated more funds than were apportioned for the specific account reviewed.” The lack of proper internal controls, auditors found, “contributed to the issues identified surrounding the potential Anti-Deficiency Act violation.” The  IG continued: “While the issues identified would not have prevented the clerical error, we found that policy and procedures weaknesses existed that impacted the department’s ability to identify and resolve the clerical error that led to the potential violation in a timely manner.”

The test work and examination of records did not, however, substantiate “the allegation that management attempted to hide the potential Anti-Deficiency Act violation from external auditors and oversight organizations,” the IG reported. “While our discussions with officials and review of emails indicated the unusual nature of the transactions and a significant desire to correct the clerical error due to the… reporting deadline and year-end financial reporting, we did not identify emails that indicated intentions to deliberately cover up the potential violation.”

In an unusual narrative of unresolved conflicts, the acting IG accused the deputy CFO of claiming to have completed a thorough review of the possible violation of the Anti-Deficiency Act when subsequent interviews indicated the review was not complete.

Managers reviewing the draft, as expressed in a letter by later CFO John Vonglis, accused the IG of “erroneous… characterizations, assumptions, and conclusions,” and expressed puzzlement at why the auditors combined a criminal investigation with a “more time-consuming review” of a possible Anti-Deficiency Act violation. Why a criminal probe when the CFO’s office had reported the clerical error to OMB and the general counsel? CFO Vonglis asked. The IG’s delay in preparing the department’s fiscal 2017 Consolidated Financial Statement Audit, he added, was disruptive and negatively impacted departmentwide financial reporting.

The IG acknowledged that the inspection “involved significant resources and, unfortunately, the timing of the allegations resulted in a delay in issuing the financial statement audit report. However, we stand by our action as appropriate and necessary under the circumstances.”

The IG recommended more effective financial controls as well as improvements in communication, training and understanding of the Anti-Deficiency Act.

After a testy April 10 meeting to discuss a draft of the report, management withdrew its comments, but on April 20 wrote a letter accepting most recommendations “in principle.”

Still, the IG faulted the CFO’s office for a lack of timetable for corrective actions. “We are disappointed,” the report added, “by management’s assertion that the allegations made to the OIG were baseless, and we are concerned about, what is in our opinion, OCFO senior leadership’s dismissive view of complaints received by the OIG Hotline.”

Correction and Clarification: This story has been updated to reflect that the Energy Department's chief financial officer who responded to a draft of the IG report by letter, John Vonglis, was not yet in office when the alleged violations of the Anti-Deficiency Act took place. The acting CFO at the time was Deputy CFO Alison Doone, though the main report contained no names. In an update, Energy’s general counsel’s office in October 2018 sent a letter stating that clerical errors created a wrong impression, and that in fact, the Anti-Deficiency Act had not been violated.