December 26, 2019

Audit Coverage of Cost Allowability for Los Alamos National Laboratory from October 1, 2013, to September 30, 2016, Under Department of Energy Contract No. DE-AC52-06NA25396

Beginning June 2006, Los Alamos National Security, LLC (LANS) operated the National Nuclear Security Administration’s Los Alamos National Laboratory (Los Alamos) for the Department of Energy.  Los Alamos is a multi-program laboratory with critical national security responsibilities, including research and a limited production mission that helps to ensure the safety, security, and reliability of the Nation’s nuclear weapons stockpile.

Because LANS was an integrated management and operating contractor, its financial accounts were integrated with those of the Department, and the results of financial transactions were reported monthly according to a uniform set of accounts.  LANS was 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 claim only allowable costs.  Allowable costs are incurred costs that are reasonable, allocable, and allowable in accordance with the terms of the contract and applicable cost principles, laws, and regulations.

During our assessment, nothing came to our attention to indicate that the allowable cost-related audit work performed by LANS’s internal audit (Ethics and Audit) activity for FYs 2014 through 2016 could not be relied upon.  We found that Ethics and Audit’s cost allowability audits generally met the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing; however, we identified issues with the identification of questioned costs, as well as workpapers that did not meet Ethics and Audits Division Audit Manual policies.  Specifically, we are questioning $14,348 in costs that Ethics and Audit did not question, despite identifying these costs in findings associated with control weaknesses over cost allowability.  In addition, we are questioning $8,437,970 in costs questioned by Ethics and Audit, as well as $6,648 questioned in subcontract audits.  To address these issues, we made three recommendations for corrective action.

Topic: Management & Administration