December 19, 2019

Audit Coverage of Cost Allowability for Honeywell Federal Manufacturing & Technologies, LLC from October 1, 2014, to September 30, 2015, Under Department of Energy Contract No. DE‑NA0000622, and from October 1, 2015, to September 30, 2017, Under Department of Energy Contract No. DE-NA0002839

Since November 2000, Honeywell Federal Manufacturing & Technologies, LLC (Honeywell) managed and operated the National Security Campus, formerly known as the Kansas City Plant, under contract with the Department of Energy’s National Nuclear Security Administration.  The National Security Campus manufactures and procures nonnuclear weapon components including electronic, mechanical, and engineered parts that support the national laboratories, universities, and U.S. industry.  The National Security Campus was managed under cost-reimbursement management and operating contracts employing performance incentives which ran from October 1, 2010, through September 30, 2015, under contract number DE-NA0000622, and was extended from October 1, 2015, through September 30, 2020, under contract number DE-NA0002839.  From October 1, 2014, through September 30, 2017, Honeywell incurred and claimed costs totaling approximately $2.3 billion.

We initiated this assessment to determine whether: (1) Honeywell Federal Manufacturing & Technologies, LLC’s Internal Audit conducted cost allowability audits that complied with professional standards and could be relied upon; (2) Honeywell Federal Manufacturing & Technologies, LLC 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 affecting allowable costs that were identified in prior audits and reviews had been adequately resolved.

During our assessment, nothing came to our attention to indicate that the allowable cost-related audit work performed by Honeywell’s Internal Audit from October 1, 2014, through September 30, 2017, could not be relied upon. We observed that Honeywell’s Internal Audit identified approximately $193,760 in questioned costs, which have been resolved and reimbursement has been made to the Department.

Topic: Management & Administration