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Audit Report: OAS-L-10-09

September 30, 2010

Subcontract Auditing at Lawrence Livermore National Laboratory

Livermore's contract incorporated Department of Energy Acquisition Regulation clauses 970.5232-3 and 970.5244-1 that required Livermore to provide for periodic post-award audits of cost-reimbursement subcontractors and subcontracts where costs incurred are a factor in determining the amount payable. To ensure the integrity and reliability of contractor cost data, the Office of Inspector General (OIG), the Office of the Chief Financial Officer, the Office of Procurement and Assistance Management, and the Contractor Internal Audit Council, developed the Cooperative Audit Strategy (Strategy). The Strategy became a contractual requirement under Department of Energy Acquisition Regulation 970.5232-3, in November 2004, through Acquisition Letter 2005-04. Under the Strategy, contractors must provide an Implementation Design plan which includes identifying what auditing standards will be used and the plan for pre-award and post-award audits of subcontractors. As part of the Strategy, contractors may use their own internal auditor staff, engage contract auditors, or use the services of the Defense Contract Audit Agency (DCAA) to audit subcontractors. The Strategy also requires that internally performed audits must, at a minimum, meet The Institute of Internal Auditors (IIA) Standards for auditing that provide criteria for, among other things, measuring the quality of internal audits.

Topic: Management & Administration