June 28, 2016

Audit Coverage of Cost Allowability for the University of California During Fiscal Years 2013 and 2014 Under Department of Energy Contract No. DE AC02 05CH11231

The University of California (University) has managed and operated Lawrence Berkeley National Laboratory (LBNL) under contract with the Department of Energy and its predecessors since 1943.  During fiscal years (FYs) 2013 and 2014, the University incurred and claimed $1,564,917,499.

The University 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.  The Department’s 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 Internal Audit for FYs 2013 and 2014 could not be relied upon.  We did not identify any material internal control weaknesses with the cost allowability audits, which generally met the International Standards for the Professional Practice of Internal Auditing prescribed by the Institute of Internal Auditors.  Internal Audit identified $12,900 in questioned costs as part of its allowable cost audits and other reviews, all of which have been resolved or reimbursed to the Department.

Further, we found that the University generally arranged for audits of subcontractors when costs incurred were a factor in determining the amount payable to a subcontractor.  The subcontract audits did not identify any questioned costs.  However, we identified two subcontracts that incurred costs during FYs 2013 and 2014 that had not been audited.  The two subcontracts incurred total costs of $11,590,877.  LBNL has arranged to have Internal Audit perform one of the subcontract audits, which accounts for more than 98 percent of the unresolved costs.  LBNL is also working with the second subcontractor to ascertain the status of its Single Audit Act audit of FY ending June 30, 2014.  However, we consider $11,590,877 as unresolved pending audit.

Topic: Management & Administation