DOE Management: Funds for Maintaining Contractors' Operations Could Be
Reduced and Better Controlled (Letter Report, 10/25/93, GAO/RCED-94-27).

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.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-94-27
     TITLE:  DOE Management: Funds for Maintaining Contractors' 
             Operations Could Be Reduced and Better Controlled
      DATE:  10/25/93
   SUBJECT:  Budget obligations
             Contractor payments
             Obligated budget balances
             Financial management
             Cost analysis
             Forward funding
             Internal controls
             Contract administration
             Budget authority
             Funds management
IDENTIFIER:  Strategic Petroleum Reserve
             Naval Petroleum Reserve
             SPR
             
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