August 29, 2018
Audit Coverage of Cost Allowability for Brookhaven Science Associates LLC During FY 2014-2016 Under DOE Contracts DE-AC02-98CH10886 and DE-SC0012704
Since 1998, Brookhaven Science Associates LLC (BSA) has managed and operated the Brookhaven National Laboratory under contract with the Department of Energy. Brookhaven National Laboratory conducts research in the physical, biomedical, and environmental sciences, as well as in energy technology and national security. During fiscal years (FYs) 2014 through 2016, BSA incurred and claimed costs of $1,796,193,152.04.
As a management and operating contractor, BSA’s financial accounts are integrated with those of the Department, and the results of transactions are reported monthly according to a uniform set of accounts. BSA 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. Allowable costs are incurred costs that are reasonable, allocable, and allowable in accordance with the terms of the contract, applicable cost principles, laws, and regulations.
The Department’s Office of Inspector General, 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 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. Consistent with the Cooperative Audit Strategy, BSA is required by its contract to maintain an Internal Audit activity with the responsibility for conducting audits, including audits of the allowability of incurred costs. In addition, BSA is required to conduct or arrange for audits of its subcontractors when costs incurred are a factor in determining the amount payable to a subcontractor.
During FYs 2014 through 2016, BSA’s Procurement and Property Management Division was responsible for ensuring that subcontract audits were conducted. To help ensure that audit coverage of cost allowability was adequate for FYs 2014 through 2016, the objectives of our assessment were to determine whether: (1) BSA’s Internal Audit conducted cost allowability audits that complied with professional standards and could be relied upon; (2) BSA conducted or arranged for audits of its subcontractors when costs incurred were a factor in determining the amount payable to a subcontractor; and (3) questioned costs and internal control weaknesses impacting allowable costs that were identified in prior audits and reviews have been adequately resolved.
Based on our assessment, nothing came to our attention to indicate that the allowable cost-related audit work performed by BSA’s Internal Audit could not be relied upon. We did not identify any material internal control weaknesses with the cost allowability audits 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 identified internal control weaknesses and questioned costs totaling $50,108.20. The internal control weaknesses and the questioned costs previously identified by Internal Audit had all been resolved before we completed this assessment.
Topic: Management & Administration