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Audit Report: OAS-L-13-08

April 19, 2013

Home Office Expenses Submitted by Fluor Federal Services, Inc., on Savannah River Nuclear Solutions, LLC's U.S. Department of Energy Management & Operating (M&O) Contract No. DE-AC09-08SR22470

The Department of Energy awarded Management and Operating (M&O) Contract No. DE-AC09-08SR22470 to Savannah River Nuclear Solutions, LLC (SRNS), a for-profit joint venture, established between Fluor Federal Services, Inc. (Fluor), Newport News Nuclear, Inc., and Honeywell International.  SRNS commenced performance on the M&O contract on August 1, 2008.  Fluor has a majority share in the joint venture.

The Office of Inspector General contracted with an independent certified public accounting firm to assess the accuracy and completeness of the results and conclusions reported by SRNS Internal Audit on its Corporate Reachback Floor Check Review of invoices for loaned employees from Fluor.  Additional testing was performed on an invoiced Fluor "loaned employee" to determine whether home office expenses were included in the invoiced costs, and if so, quantify the amount of questioned costs.  The SRNS contract, Clause H-20, entitled Home Office Expenses, states "Home office expenses, whether direct or indirect, relating to activities of the Contractor are unallowable, except as otherwise specifically provided in the Contract or specifically agreed to in writing by the Contracting Officer consistent with DEAR 970.3102-3-70." 

The firm concluded that the results and conclusions reported by SRNS Internal Audit on its Corporate Reachback Floor Check Review of invoices for loaned employees from Fluor was accurate and complete as they related to their audit objectives.  The results disclosed that SRNS' costs incurred for contract DE-AC09-08SR22470, for the period August 1, 2008 through August 21, 2012, included home office expenses of $1,256,481 and $36,763 in Facilities Capital Cost of Money resulting from its use of Fluor loaned employees.  Subsequent to the completion of audit field work, the Savannah River Operations Office Contracting Officer initiated action to disallow the $1,256,481 in home office expenses.  Therefore, no recommendations were made in this report.