March 9, 2016

Audit Coverage of Cost Allowability for UChicago Argonne LLC During Fiscal Years 2010 Through 2013 Under Department of Energy Contract No. DE-AC02-06CH11357

UChicago Argonne LLC (UC Argonne) operates the Argonne National Laboratory under a contract with the Department of Energy (Department).  For fiscal years 2010 through 2013, UC Argonne expended and claimed $3,012,190,788.

UC Argonne 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 was implemented 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 claimed by contractors.

Based on our assessment, nothing came to our attention to indicate that the allowable cost–related audit work performed by Internal Audit 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.  Additionally, we found that UC Argonne had conducted or arranged for 21 cost-type subcontract audits totaling $57.7 million for the period under review.  Internal Audit had identified $63,877 in questioned costs, which were resolved.  In addition, subcontract audits performed by the Defense Contract Audit Agency and Health and Human Services identified $93,354 in questioned costs that were recovered during the period of our review.

While we did not identify any material control weaknesses that would affect overall reliance on cost-allowability work performed by Internal Audit, we noted concerns that need to be addressed to ensure that only allowable costs are claimed by and reimbursed to UC Argonne.

Topic: Management & Administration