Assessment Report: OAI-V-16-01

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October 27, 2015

Audit Coverage of Cost Allowability for Lawrence Livermore National Security, LLC, During Fiscal Year 2013 Under Department of Energy Contract No. DE-AC52-07NA27344

The National Nuclear Security Administration awarded a contract to Lawrence Livermore National Security, LLC, (LLNS) to manage and operate Lawrence Livermore National Laboratory through September 2019.  During fiscal year (FY) 2013, LLNS incurred and claimed costs totaling $1,517,258,319.

LLNS is required by its contract to account for all funds advanced by the Department of Energy annually on its Statement of Costs Incurred and Claimed, to safeguard assets in its care, and to claim only allowable costs.  A Cooperative Audit Strategy places reliance on the contractors’ internal audit function (Internal Audit) to provide audit coverage of the allowability of incurred costs claimed by contractors.  Consistent with the Cooperative Audit Strategy, LLNS is required by its contract to maintain an Internal Audit activity with responsibility for conducting audits, including audits of the allowability of incurred costs. 

Based on our assessment, nothing came to our attention to indicate that the allowable cost–related audit work performed by Internal Audit for FY 2013 could not be relied upon.  We did not identify any material internal control weaknesses with the cost allowability audits, which generally met the International Standards for the Professional Practice of Internal Auditing prescribed by the Institute of Internal Auditors.  Internal Audit identified $700,707 in questioned costs as part of its allowable cost audits, all of which have been resolved.

We did, however, identify an issue that needs to be addressed to ensure that only allowable costs are claimed and reimbursed to the contractor.  Specifically, our testing of a judgmental sample of 15 out of 111 employees’ relocation and change-of-station transactions, which was performed independent of Internal Audit’s cost allowability audit work, identified questioned costs of $205.75.

Topic: Management & Administration