July 29, 2016

Audit Coverage of Cost Allowability for UT-Battelle LLC During Fiscal Year 2014 Under Department of Energy Contract No. DE-AC05-00OR22725

Since 2000, UT-Battelle LLC (UT-Battelle) has managed and operated the Oak Ridge National Laboratory under a contract with the Department of Energy.  Oak Ridge National Laboratory is part of the Office of Science and supports the Department’s national missions of scientific discovery, clean energy, and security technologies through leadership in four major areas: neutron science, high-performance computing, materials research, and nuclear technology.  During fiscal year (FY) 2014, UT-Battelle expended and claimed $1,350,109,646.

UT-Battelle 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.  The Department’s 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.  

Based on our assessment, nothing came to our attention to indicate that the allowable cost-related audit work performed by UT-Battelle’s 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 Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing.  During its FY 2014 audits, UT-Battelle’s Internal Audit identified questioned costs totaling $602, all of which have been resolved.  Thus, we are not questioning any costs associated with these audits.  Also, the contracting officer determined that UT-Battelle had generally addressed subcontract audit strategy concerns and had resolved costs previously determined to be questionable or pending audit for years prior to FY 2014.  However, we identified a total of $134,106,144 in subcontract costs incurred through FY 2014 that we consider unresolved pending audit.

Topic: Management & Administration