Assessment Report: OAS-V-15-05

September 30, 2015

Audit Coverage of Cost Allowability for Babcock and Wilcox Technical Services Y-12, LLC, During Fiscal Years 2013 and 2014 Through June 30, 2014, Under Department of Energy Contract No. DE-AC05-00OR22800

Babcock and Wilcox Technical Services Y-12, LLC, (B&W Y-12) managed and operated the Y 12 National Security Complex (Y-12) under contract with the Department of Energy (Department) from August 31, 2000, through June 30, 2014.  Y-12 is part of the Department's National Nuclear Security Administration, which has responsibilities that include ensuring the safety, security, and effectiveness of the Nation's nuclear weapons stockpile.  During fiscal years (FYs) 2013 and 2014 through June 30, 2014, B&W Y-12 incurred and claimed $1,030,375,777 and $771,905,330, respectively.

B&W Y-12 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.  Allowable costs are incurred costs that are reasonable, allocable, and in accordance with the terms of the contract, applicable cost principles, laws, and regulations.

Based on our assessment, nothing came to our attention to indicate that the allowable cost–related audit work performed by B&W Y-12'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 FYs 2013 and 2014 through June 30, 2014, audits of cost allowability, Internal Audit identified questioned costs totaling $499 and $32,825, respectively.  All FY 2013 questioned costs had been resolved.  For FY 2014 through June 30, 2014, we noted that $761 had not been resolved, so we are questioning this amount.

Topic: Management & Administration