DOE IG PRESSES DEPARTMENT ON SUBCONTRACT AUDITING

The Department of Energy’s Inspector General continued to press the Department to strengthen subcontract auditing practices for its management and operating contractors, noting in a report released yesterday that more than $906 million worth of subcontracts from Fiscal Year 2010 to FY 2012 had not been audited up to adequate standards. Los Alamos National Laboratory contractor Los Alamos National Security, LLC, appeared to be the biggest offender, according to the IG, which said the lab received a waiver from the Los Alamos Field Office to skip audits for subcontracts less than $15 million, resulting in audits of only two of 1,404 subcontracts worth nearly $343 million. The IG also said lab procurement officials had reviewed costs for another $165 million in subcontract costs, which did not “meet professional standards for independence, objectivity, due professional care and documentation.” Elsewhere across the weapons complex, the IG said Kansas City Plant contractor Honeywell Federal Manufacturing and Technologies was lacking internal procedures for auditing ongoing subcontracts worth almost $21 million, while Pantex Plant contractor B&W Pantex had $8.4 million in unaudited subcontractor costs. “While unallowable costs and imprudent use of resources have always been important factors that have routinely been examined during audits, ensuring the funds are spent wisely has become even more critical in this period of shrinking budgetary resources,” the IG said.

The report largely summarizes the DOE watchdog’s work over the last two years on subcontract auditing, but it said “greater Department-wide emphasis on auditing cost-type subcontracts is needed” and recommended that DOE and the National Nuclear Security Administration establish an auditing strategy that covers all M&O contractors and ensures that all audits meet national auditing standards. “The objective of this report is to highlight the issues we identified in previous reports and stress the need for a top-down emphasis to ensure that all M&O contractors develop robust procedures for subcontract audits,” the IG said. In a response to the report, DOE and NNSA officials said they were developing plans to comply with the IG’s recommendations.