April 12, 2016

Audit Coverage of Cost Allowability for National Security Technologies LLC During Fiscal Years 2012 Through 2014 Under Department of Energy Contract No. DE AC52 06NA25946

National Security Technologies LLC (NSTec) has managed and operated the Nevada National Security Site for the National Nuclear Security Administration Nevada Field Office under contract with the Department of Energy since July 1, 2006.  During fiscal years (FYs) 2012 through 2014, NSTec incurred and claimed costs totaling approximately $1.5 billion.

NSTec is required by its contract to account for all funds advanced by the Department annually on its Statement of Costs Incurred and Claimed, to safeguard assets in its care, and to claim only allowable costs.  A Cooperative Audit Strategy places reliance on the contractors’ internal audit function (Internal Audit) to provide audit coverage of the allowability of incurred costs claimed by contractors.

Based on our assessment, nothing came to our attention to indicate that the allowable cost–related audit work performed by NSTec’s Internal Audit for FYs 2012 through 2014 could not be relied upon.  We did not identify any material internal control weaknesses with the cost allowability audits, which generally met the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing.  During its FYs 2012 through 2014 audits of cost allowability, Internal Audit identified $292,650 in questioned costs, all of which had been resolved.  Further, we found that NSTec had conducted or ensured that audits of subcontractors were conducted when costs incurred were a factor in determining the amount payable to a subcontractor.

In addition, the Office of Inspector General Inspection report Concerns with Consulting Contract Administration at Various Department Sites (DOE/IG-0889, June 2013) identified questioned costs totaling $20,923 and internal control weaknesses at the Nevada National Security Site related to payments made on invoices that lacked detail necessary to support that the agreed-to services had been provided.  We found that all of the questioned costs and the internal control weaknesses had been resolved.

Topic: Management & Administration