Assessment Report: DOE-OIG-18-26

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March 15. 2018

Audit Coverage of Cost Allowability for Fluor Federal Petroleum Operations, LLC from Apr. 1, 2014 - Sept. 30, 2016, under DOE Contract No.DE-FE0011020

Since April 1, 2014, Fluor Federal Petroleum Operations, LLC (FFPO) has managed and operated the Strategic Petroleum Reserve under a contract with the Department of Energy. The Strategic Petroleum Reserve is the world’s largest Government-owned emergency crude oil stockpile with, as of January 2018, approximately 664 million barrels of crude oil stored in a series of underground salt caverns along the coastline of the Gulf of Mexico. During the period of April 1, 2014, through September 30, 2016, FFPO incurred and claimed $427,880,175.

The Department’s Office of Inspector General (OIG), Office of Acquisition Management, integrated management and operating contractors, and other select contractors have implemented a Cooperative Audit Strategy to make efficient use of available audit resources while ensuring that the Department’s contractors claim only allowable costs. This 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 FFPO Internal Audit could not be relied upon. We did not identify any material internal control weaknesses with the allowable cost reviews Internal Audit conducted, which generally met the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. In audits performed since our last assessment, Internal Audit questioned $171,575.25 in costs, which had all been resolved. Additionally, we found that FFPO conducted or arranged for audits of subcontractors when costs incurred were a factor in determining the amount payable to a subcontractor, and had resolved all costs questioned in those audits.

Topic: Management & Administration