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Assessment Report: OAI-V-16-03

January 19, 2016

Audit Coverage of Cost Allowability for Brookhaven Science Associates LLC During Fiscal Years 2012 and 2013 Under Department of Energy Contract No. DE-AC02-98CH10886

Since 1998, Brookhaven Science Associates LLC (BSA) has managed and operated the Brookhaven National Laboratory under contract with the Department of Energy (Department).  Because BSA is an integrated management and operating contractor, its financial accounts are integrated with those of the Department, and the results of transactions are reported monthly according to a uniform set of accounts.  BSA is required by its prime contract to (1) account for all funds advanced by the Department annually on its Statement of Costs Incurred and Claimed, (2) safeguard assets in its care, and (3) claim only allowable costs.  

Based on our assessment, nothing came to our attention to indicate that the allowable cost–related audit work performed by BSA’s Internal Audit could not be relied upon.  We did not identify any material internal control weaknesses with cost allowability audits.  However, Although BSA acted on the recommendations in our prior report, BSA had not fully addressed a weakness with subcontract audits to ensure only allowable costs are claimed by and reimbursed to the contractor.  BSA did not arrange for or conduct interim audits of subcontracts when costs incurred were a factor in determining the amount payable to a subcontractor, and did not ensure that preaward, interim, or closeout audits were conducted for its time-and-materials subcontracts.

We concluded that inadequate audit coverage occurred because BSA did not have a fully documented risk-based strategy in its policies defining its required subcontract audit responsibilities.  Although officials stated that they had considered guidance outlined in the Department’s Acquisition Letter 2014-01, BSA’s policies had not been revised accordingly.

Topic: Management & Administration