Audit: DOE-OIG-24-29

September 23, 2024

UChicago Argonne, LLC Costs Claimed Under Department of Energy Contract No. DE-AC02-06CH11357 for Fiscal Year 2019

As part of their contracts with the Department of Energy, contractors are required to maintain an internal audit activity with the responsibility for conducting audits of the allowability of incurred costs claimed by the contractors.  Since fiscal year (FY) 2016, the Office of Inspector General has selected one management and operating contractor each year to perform the annual incurred cost audit in place of the internal audit group.  For FY 2019, UChicago Argonne, LLC was selected for our review.  The criteria used in our review included Federal Acquisition Regulation allowability requirements, Cost Accounting Standards, Department Directives, and Acquisition Letters, as well as clauses contained within UChicago Argonne, LLC’s contract with the Department.  Within the Department, the Contracting Officer, or the Cognizant Federal Agency Official, is responsible for administering the contract.

We initiated this audit to determine whether FY 2019 claimed costs incurred by UChicago Argonne, LLC were allowable, allocable, and reasonable in accordance with the terms of the contract, applicable cost principles, laws, and regulations.

We found that UChicago Argonne, LLC FY 2019 costs claimed may not have always been allowable, allocable, or reasonable in accordance with the contract terms, applicable cost principles, laws, and regulations.  Specifically, we found inconsistencies with its indirect cost accounting as well as inaccuracies in disclosed practices.  We also found weaknesses in our reviews of payroll and consulting agreement transactions.  In total, we questioned $169,198 in costs claimed, identified $3,933,746 in unsupported costs claimed, and observed $232,495,716 in costs needing further review to resolve, including $73,634,017 in subcontract costs that UChicago Argonne, LLC failed to audit as required.  We attributed these issues to UChicago Argonne, LLC engaging in practices inconsistent with Cost Accounting Standards and not following prescribed requirements.

We made six recommendations that, if fully implemented, should help ensure that FY 2019 claimed costs incurred by UChicago Argonne, LLC are allowable, allocable, and reasonable in accordance with the terms of the contract, applicable cost principles, laws, and regulations.  Management concurred with the recommendations and provided corrective actions that are consistent with our recommendations; therefore, a management decision is not required.