December 26, 2019

Audit Coverage of Cost Allowability for Oak Ridge Associated Universities, Inc. from October 1, 2015, through September 30, 2017, Under Department of Energy Contract Nos. DE-AC05-06OR23100 and DE-SC0014664

Oak Ridge Associated Universities, Inc. (ORAU) has managed and operated the Oak Ridge Institute for Science and Education (ORISE) under contracts with the Department of Energy since 1992.  ORISE advances science education and research programs, and creates opportunities for collaboration through partnerships with other Department contractors, Federal agencies, academia, and industry.

ORAU’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.  ORAU utilizes a Letter of Credit to perform drawdowns of funds from the Federal Reserve through a special bank account.  ORAU is required by its contracts 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.

During our assessment, nothing came to our attention to indicate that allowable cost-related audit work performed by ORAU’s Internal Audit for FYs 2016 and 2017 could not be relied upon.  We did not identify any material internal control weaknesses with allowable cost audits, which generally met Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing.  We did, however, identify issues regarding Internal Audit’s risk assessment process, the bank service charges incurred from ORAU’s use of the ORISE contract’s Letter of Credit bank for shared resource costs, and the payment of ORAU Foundation expenses through the ORISE contract’s Letter of Credit bank account.  During the course of our assessment, ORAU took corrective action to address our concerns.  As a result, our report contains no formal recommendations.

Topic: Management & Administration