iPhone reports large storage On My Phone, but I can't find that usage

If the airdrop transfer of a large file failed, iOS may delete it and put it in "recently deleted files" of Files app. You may check this folder.

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These numbers do not add up on iOS 13.6 and lower in my experience. Apple has started patching the system to make these more accurate on iOS 13.6.1

Be sure you check other storage in addition to the on my device portion after a clean power down and connect to power. I think the metadata collection and snapshot freeing run better when connected to power and that there is a gradual cleanup so the numbers are shifting daily in my experience for both my iPhone and iPad but they are aligning much better than before.

Tested this on an unused iPhone. After factory resetting, this screen shows 671 MB used. I have not activated iCloud, TouchID or such. I guess this is system related user data, which is otherwise nowhere accessible. (Caches, fonts, location tracking and temporary data etc.)

Under the part that says xx of yy used is a color scale that shows you what makes up the used portion of memory. That should tell you what is using over a GB of data. It is probably your photos.