July 13, 2020
Audit Coverage of Cost Allowability for Sandia Corporation, from October 1, 2015, through April 30, 2017, under the Department of Energy Contract No. DE-AC04-94AL85000
From October 1, 1993, to April 30, 2017, Sandia Corporation, a Lockheed Martin Corporation, managed and operated the Sandia National Laboratories under contract with the Department of Energy’s National Nuclear Security Administration. Sandia is a multi-program laboratory with critical national security responsibilities, which include research and production to help ensure the safety, security, and reliability of the Nation’s nuclear weapons stockpile.
As a management and operating contractor, Sandia Corporation’s financial accounts were required to be integrated with those of the Department, and the results of financial transactions were required to be reported monthly according to a reciprocal set of accounts. Sandia Corporation 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 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 the allowable cost-related audit work performed by Sandia Corporation’s, and now National Technology and Engineering Solutions of Sandia, LLC’s, Internal Audit for costs incurred from October 1, 2015, through April 30, 2017, could not be relied upon. We conducted our assessment as a review attestation. A review is substantially less in scope than an examination or audit. Our review was limited and would not necessarily have disclosed all internal control deficiencies that may have existed at the time of our review. Based on our limited sampling, we did not identify any material internal control weaknesses with allowable cost audits, which generally met the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing prescribed by the Institute of Internal Auditors. Further, Sandia’s Contract Audit Department had conducted or arranged for audits of subcontractors when costs incurred were a factor in determining the amount payable to a subcontractor.
We observed that Sandia Corporation’s Internal Audit identified $372,311 in questioned costs in audits performed between October 1, 2015, and April 30, 2017, which have been resolved and reimbursement has been made to the Department. While we did not identify any material internal control weaknesses with either cost allowability or subcontract audit, we are questioning $6,755,738 in unresolved questioned costs identified by Sandia’s Contract Audit Department.
Topic: Management & Administration