Assessment Report: DOE-OIG-20-34

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March 5, 2020

Audit Coverage of Cost Allowability for Battelle Energy Alliance, LLC from October 1, 2013, to September 30, 2015, Under Department of Energy Contract No. DE-AC07-05ID14517

Since fiscal year (FY) 2005, Battelle Energy Alliance, LLC (BEA) has managed and operated the Idaho National Laboratory under contract with the Department of Energy.  As a management and operating contractor, BEA’s financial accounts are integrated with those of the Department, and the results of transactions are reported monthly.  BEA is required by 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.  The Department’s Office of Inspector General, Office of Acquisition Management, integrated management and operating contractors, and other select contractors implement the Cooperative Audit Strategy to make efficient use of available audit resources while ensuring that the Department’s contractors claim only allowable costs.  The Cooperative Audit Strategy places reliance on the contractors’ internal audit activities to provide audit coverage of the allowability of costs claimed by contractors.  Consistent with the Cooperative Audit Strategy, BEA’s contract requires it to maintain an internal audit activity (Internal Audit) with the responsibility for conducting audits, including audits of the allowability of claimed costs.  In addition, BEA 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. 

The objectives of our assessment for FYs 2014 through 2015 were to determine, based on our limited sampling, whether BEA’s Internal Audit conducted cost allowability audits that complied with professional standards and could be relied upon; BEA’s Internal Audit conducted cost allowability audits that complied with professional standards and could be relied upon; and BEA resolved questioned costs and internal control weaknesses affecting allowable costs that were identified in prior audits and reviews.  During our assessment, nothing came to our attention to indicate that allowable cost-related audit work performed by BEA’s Internal Audit for FYs 2014 and 2015 could not be relied upon.  Based on our limited sampling, we did not identify any material internal control weaknesses with allowable cost audits, which generally met the International Standards for the Professional Practice of Internal Auditing prescribed by the Institute of Internal Auditors. 

Although we ultimately determined that we could rely on Internal Audit’s work for this assessment period, we identified potential internal control weaknesses and Cost Accounting Standards (CAS) noncompliance while performing concurrent work on another Office of Inspector General audit that may affect FYs 2014 and 2015.  Additionally, in our previous report, Assessment of Audit Coverage of Cost Allowability for Battelle Energy Alliance, LLC under Department of Energy Contract No. DE-AC05ID14517 during Fiscal Year 2013 (OAS-V-14-16, September 2014), we noted that BEA had unresolved questioned costs of $16,087.  However, because management’s intended actions are responsive to our concerns and questioned costs have since been resolved, we did not make any formal recommendations in this report.

Topic: Management and Adminstration