Assessment Report: DOE-OIG-18-25

March 14, 2018

Audit Coverage of Cost Allowability for Oak Ridge Associated Universities, Inc. During FY 2012-2015 Under DOE Contract Contract No. DE-AC05-06OR23

Since 1992, Oak Ridge Associated Universities, Inc. (ORAU) has managed and operated the Oak Ridge Institute for Science and Education (ORISE) under a contract with the Department of Energy.  The entity was managed under a cost-plus-award-fee Federal Acquisition Regulation contract, which ended December 31, 2015.1 On March 10, 2016, the Department competitively awarded ORAU a new ORISE contract. During fiscal years (FYs) 2012 through 2015, ORAU incurred and claimed costs totaling $1,003,914,318.94.  

The Department’s Office of Inspector General, Office of Acquisition Management, integrated management and operating contractors, and other select contractors have implemented a Cooperative Audit Strategy 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 ORAU Internal Audit could not be relied upon. We did not identify any material internal control weaknesses with the allowable cost reviews, which generally met the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. Internal Audit identified $3,340.74 in unallowable costs during its FYs 2012 through 2015 allowable cost reviews, all of which had been resolved by the time of our assessment.

Finally, nothing came to our attention to indicate that questioned costs and internal control weaknesses affecting allowable costs that were identified in audits and reviews had not been adequately resolved. We did, however, identify issues regarding Internal Audit’s documentation of their sampling methodology and ORAU’s use of the contract’s Letter of Credit bank account that need to be addressed. These issues did not adversely affect our ability to rely on Internal Audit’s work or the costs claimed in the Statements of Costs Incurred and Claimed. However, we are questioning $6,639.91 in transaction fees for ORAU’s use of the Letter of Credit bank account for its corporate use of shared resources.

Management agreed with the findings and concurred with the recommendations.

Topic: Management & Administration