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Audit Report: OAS-L-13-07

April 11, 2013 

Allocation of Direct and Indirect Costs – Cost Accounting Standard 418 – at Lawrence Livermore National Laboratory

The Office of Inspector General contracted with an independent certified public accounting firm, KPMG, to determine if Lawrence Livermore National Laboratory's (Livermore) policies, procedures, and practices used to estimate, accumulate, and report costs on Government contracts and subcontracts complied with the requirements of Cost Accounting Standard (CAS) 418 for Fiscal Year 2012.  CAS 418 requires contractors to be consistent in the way they classify costs as direct or indirect and to maintain a written statement of accounting policies and practices for classifying direct and indirect costs, establishes criteria for accumulating indirect costs in homogeneous indirect cost pools, and provides guidance on allocating indirect cost pools to cost objectives in reasonable proportion to the beneficial or causal relationships of the pooled costs to cost objectives.  Livermore's written policies and procedures relevant to CAS 418 compliance include cost accounting changes, determining direct versus indirect costs, monitoring and processing cost transfers, time and effort reporting, monitoring and liquidating indirect variances, and policies and procedures relating to the composition of each indirect cost pool.  KPMG found that Livermore's policies and procedures were complete with regard to the areas required to support compliance with CAS 418.  KPMG tested Livermore's current use of its policies and procedures governing cost accounting changes, monitoring and liquidating indirect rate variances, monitoring and processing cost transfers, and the composition of homogeneous cost of select indirect cost pools.  KPMG did not identify any findings as a result of the work performed; therefore, no recommendations were made in the report.

Topic: Management & Administration