Federal Reports

This letter to Congress reports on NCUA OIG's assessment of the NCUA's 2025 compliance under the Payment Integrity Information Act of 2019 (PIIA).

We found that the photovoltaic systems (PV) and water tanks installed in participant’s homes had deficiencies.  Such deficiencies included inverters and batteries with signs of rust; water intrusion that could lead to electrical shorts; electrical conduits that were degrading due to direct exposure to the sun; electrical conduits with water; and water tanks that were leaking, overflowing, or both.  Based on statistical projections, at least 57 percent of installations had at least one deficiency.  In addition, we noted that almost 33 percent of inverters and battery storage systems were not installed in accordance with the installer agreements and manufacturers’ specifications.  The contractors who installed the batteries and inverters exposed them to the elements and direct sunlight, contrary to the terms of the agreements and manufacturer specifications.  In addition, we determined that PRDOH’s installation oversight was inadequate.  PRDOH disregarded its own contract terms and the equipment manufacturers’ guidelines, which required the equipment to be protected from direct sunlight and the elements.  Although quality control inspections were performed, the inspections did not identify that the installations were improperly completed.  PRDOH’s actions could lead to manufacturers voiding equipment warranties, equipment lasting less than the required timeframe, and malfunction of improperly installed equipment.  Further, PRDOH spent more than $19 million on installation services that do not comply with the agreements and manufacturers’ specifications.

We also found that PRDOH did not provide adequate support to justify its contract amendments with installers to perform additional subtasks.  PRDOH provided a memorandum to support its contract amendment, which cited that 99 percent of repair cases needed corrections to electrical components to install the PV system.  However, PRDOH could provide support for only 2 percent of the repair cases, which significantly contradicts the 99 percent figure.  This condition occurred because PRDOH’s original scope of work and contract was vague and did not specifically list the preliminary electrical work and three subtasks that PRDOH’s installers completed as part of the installations.  By making these contract amendments, rather than clearly including the work in the original scope of work and contracts, PRDOH lost bargaining power and likely spent more than was necessary. As a result, PRDOH did not assist as many disaster recovery program participants as it could have without the costly $31 million contract amendments. Finally, we also found that the methodology PRDOH used when calculating household income for eligibility purposes of the CEWRI program led to inconsistent eligibility determinations among program participants with similar income amounts.  This occurred because PRDOH incorrectly interpreted and applied the IRS 1040 methodology when determining the participant’s household income.  As a result, PRDOH could not ensure that it adequately or appropriately distributed disaster recovery funds among low- and moderate-income program participants to whom the program is meant to benefit.

We recommend that the Director of the Office of Disaster Recovery instruct PRDOH to (1) remediate all outside installations that are directly exposed to sunlight and the elements or repay HUD more than $19 million from non-Federal funds, (2) submit supporting documentation so HUD can evaluate the basis of the contract amendments and determine the eligibility of more than $31 million in disaster recovery funds, (3) structure future contracts to ensure the scope of work is clearly defined so that all parties understand the agreement, and (4) re-evaluate the methodology used to determine income eligibility to ensure a consistent application that improves the outcomes of the program.

Since 1943, the Regents of the University of California have managed Lawrence Berkeley National Laboratory (LBNL) for the Department of Energy’s Office of Science. LBNL’s mission is to expand the frontiers of knowledge and deliver solutions for science and humankind. In support of this mission, LBNL acquires consultants to provide independent expert advisory and/or assistance services of a technical or professional nature on a fee or per diem basis. LBNL uses subcontracts to commit resources and formalize its relationships with consultants.

We initiated this audit to determine whether LBNL managed its professional and consultant services agreements in compliance with applicable laws, regulations, and contract requirements.

We found that LBNL did not manage its professional and consultant services agreements in compliance with applicable laws, regulations, and contract requirements. Specifically, we found that LBNL: (1) entered into professional and consultant services agreements that did not meet the Federal Acquisition Regulation definition; (2) did not always obtain required conflicts-of-interest disclosures; (3) entered into consultant agreements with former Laboratory employees in contradiction to its policy; (4) retained consultants for longer than 5 years; (5) determined price reasonableness exclusively on the General Services Administration’s labor rates tool; (6) paid invoices from consultants that often lacked sufficient detail to support the services rendered; and (7) may have paid unallowable travel costs. Finally, LBNL did not ensure segregation of duties within the procurement and oversight of professional and consultant services agreements.

We attributed these issues to weaknesses in LBNL’s internal policies and procedures, failure to adhere to internal policies and procedures, and misalignment of internal policy to Department policies. These weaknesses limit LBNL’s ability to provide reasonable assurance that professional and consultant services agreements comply with laws and regulations and that only allowable costs are incurred and claimed.

To address the issues identified in this report, we have made 10 recommendations that, if fully implemented, should help ensure that professional and consultant services agreements are managed in accordance with applicable laws, regulations, and contract requirements.    

This audit was performed by CohnReznick LLP (CohnReznick) on behalf of the Department of Energy Office of Inspector General and examined Honeywell Federal Manufacturing & Technologies, LLC’s (HFMT) costs incurred and claimed for fiscal years 2018 through 2020 under management and operating contract No. DE-NA0002839.

The audit’s objective was to determine if costs charged to Department contract No. DE-NA0002839 for fiscal years 2018 through 2020 were allowable, allocable, and reasonable in accordance with applicable laws, regulations, and contract terms.

CohnReznick performed the audit in accordance with generally accepted government auditing standards.

CohnReznick did not identify any questioned costs for direct and indirect labor, direct travel, and indirect costs included within HFMT’s Statements of Costs Incurred and Claimed submissions for fiscal years 2018 through 2020. Costs outside of these cost elements were outside of the audit’s scope.

No recommendations are being made with this report as it was determined that HFMT’s costs for direct and indirect labor, direct travel, and indirect costs within its Statements of Costs Incurred and Claimed submissions for fiscal years 2018 through 2020 were acceptable.

HFMT concurred with the audit results as reported.  

This audit was performed by the independent public accounting firm of KPMG LLP (KPMG) on behalf of the Department of Energy’s Office of Inspector General. KPMG audited the combined balance sheets of the Department’s Southwestern Federal Power Systems (SWFPS) as of September 30, 2024, and 2023, and the related combined statements of changes in capitalization, revenues and expenses, and cash flows for the years then ended, and the related notes to the combined financial statements.

The audit’s objective was to obtain reasonable assurance about whether the financial statements, as a whole, were free from material misstatement due to fraud or error and to issue an auditors’ report that included an opinion.

KPMG performed the audit in accordance with generally accepted government auditing standards.

KPMG concluded that the financial statements presented fairly, in all material respects, the financial position of SWFPS as of September 30, 2024, and 2023, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. KPMG also considered SWFPS’ internal control over financial reporting as part of its review and identified certain deficiencies in internal control that they considered to be a material weakness concerning post-retirement benefit expenses and workers’ compensation liability. In addition to the material weakness, KPMG also identified a significant deficiency over entity-level controls. KPMG tested for compliance with certain provisions of laws, regulations, contracts, and grant agreements that could have a direct material effect on the financial statements. The results of the auditors’ review disclosed no instances of noncompliance or other matters required to be reported under Government Auditing Standards, applicable Office of Management and Budget guidance, or the Federal Financial Management Improvement Act of 1996.

The Office of Inspector General issued Notices of Findings and Recommendations to management throughout the audit. All findings and recommendations will be detailed in a separate management letter that will be provided to Southwestern Power Administration. There are no formal recommendations that need to be tracked in the Departmental Audit Report Tracking System; therefore, an additional response is not required.

The Office of Inspector General engaged the independent public accounting firm of KPMG LLP (KPMG) to conduct the fiscal year 2024 combined financial statements audit of the Southwestern Federal Power System (SWFPS), subject to our review. As part of this audit, KPMG considered SWFPS’ internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing its opinion on the financial statements but not for the purpose of expressing an opinion on the effectiveness of SWFPS’ internal control.

KPMG performed the audit in accordance with generally accepted government auditing standards.

During the audit, KPMG identified certain deficiencies in SWFPS’ internal control related to entity level controls, post-retirement benefits, workers’ compensation, personal protective equipment, and operation and maintenance expenses that are included in the attached management letter.  

The attached letter contains 5 findings and 17 recommendations that were issued to Southwestern Power Administration during The Southwestern Federal Power System’s Fiscal Year 2024 Combined Financial Statements Audit. Management concurred with the findings and recommendations and had taken or planned to take corrective actions. Management’s responses are included with each finding.