Assessment Report: OAI-V-17-03

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May 11, 2017

Audit Coverage of Cost Allowability for Princeton University During Fiscal Years 2013 Through 2015 Under Department of Energy Contract No. DE-AC02-09CH11466

Since 1951, Princeton University has operated the Princeton Plasma Physics Laboratory (PPPL) under a contract with the Department of Energy. PPPL is part of the Department’s Office of Science dedicated to developing the scientific and technical knowledge base for fusion energy as a safe, economical, and environmentally attractive energy source for the world’s long-term energy requirements. During fiscal years (FYs) 2013 through 2015, Princeton University incurred and claimed $253,847,637.75 for PPPL.

As an integrated management and operating contractor, Princeton University’s financial accounts for PPPL are integrated with those of the Department, and the results of transactions are reported monthly according to a uniform set of accounts. Princeton 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 as well as applicable cost principles, laws, and regulations.

The Department’s Office of Inspector General, Office of Acquisition Management, and the integrated management and operating contractors and other select contractors have implemented a Cooperative Audit Strategy to make efficient use of available audit resources while ensuring that the Department’s contractors claim only allowable costs.  This strategy places reliance on the contractors’ internal audit function (Internal Audit) to provide audit coverage of the allowability of incurred costs that are claimed by the contractors.  To help ensure that audit coverage of cost allowability was adequate for FYs 2013 through 2015, the objectives of our assessment were to determine whether:
• Internal Audit conducted cost allowability audits that complied with professional standards and could be relied upon;
• Princeton University conducted or arranged for audits of its subcontracts when costs incurred were a factor in determining the amount payable to the subcontractor; and
• Princeton University adequately resolved questioned costs and internal control weaknesses affecting allowable costs that were identified in audits and reviews.

Based on our assessment, nothing came to our attention to indicate that the allowable cost-related audit work performed by Internal Audit for FYs 2013 through 2015 could not be relied upon. We did not identify any material internal control weaknesses with the cost allowability audits, which generally met the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing (IIA Standards). Further, Princeton University had conducted reviews and arranged for audits of subcontractors to PPPL when costs incurred were a factor in determining the amounts payable to the subcontractors. Internal Audit identified $1,173.53 in questioned costs during audits of cost allowability and PPPL subcontract reviews identified another $18,787.53 in questioned costs, all of which have been resolved.

Topic: Management & Administration