February 12, 2015

Audit Coverage of Cost Allowability for Babcock & Wilcox Technical Services Pantex LLC During Fiscal Year 2013 Through June 30, 2014, Under Department of Energy Contract No. DE-AC54-00AL66620

Babcock & Wilcox Technical Services Pantex LLC (B&W Pantex) managed and operated the Pantex Plant (Pantex) under contract with the Department of Energy (Department) from February 1, 2001, through June 30, 2014.  During fiscal year (FY) 2013 through June 30, 2014, B&W Pantex incurred and claimed costs totaling approximately $966 million.

B&W Pantex 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.  A Cooperative Audit Strategy makes efficient use of available audit resources while ensuring that the Department’s contractors claim only allowable costs.

Based on our assessment, nothing came to our attention to indicate that the allowable cost–related audit work performed by B&W Pantex’s Internal Audit for FY 2013 through June 30, 2014, 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.  During its FY 2013 through June 30, 2014, audits of cost allowability, Internal Audit identified questioned costs totaling $1,348,050, of which $1,180,723 had been resolved.  Thus, we are questioning the remaining $167,327.

Topic: Management & Administration