March 16, 2020
Audit Coverage of Cost Allowability for University of California from October 1, 2014, to September 30, 2017, Under Department of Energy Contract No. DE-AC02-05CH11231
The University of California (University) has managed and operated Lawrence Berkeley National Laboratory under contract with the Department of Energy and its predecessors since 1943. Lawrence Berkeley National Laboratory is a member of the national laboratory system supported by the Department through its Office of Science. Lawrence Berkeley National Laboratory conducts unclassified research across a broad range of scientific disciplines.
The University’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. The University 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 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 the University’s Internal Audit from October 1, 2014, through September 30, 2017, 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. We did identify questioned costs related to conference and meeting expenses as a result of our independent tests of transactions. In addition, we identified certain audit standards that were not always followed. However, these issues did not affect the overall reliance on the cost allowability audits performed by the University’s Internal Audit. From October 1, 2014, through September 30, 2017, the University’s Internal Audit identified $53,985 of questioned costs as part of its allowable cost audits and other reviews, all of which had been resolved.
Further, we found that the University generally arranged for audits of subcontractors when costs incurred were a factor in determining the amount payable to a subcontractor. However, we identified one subcontract that incurred costs totaling $4,061,038 during fiscal year 2017 that had not been audited as required; we consider these costs unresolved, pending audit.