Federal Reports

This audit was performed by the Defense Contract Audit Agency (DCAA) on behalf of the Department of Energy’s Office of Inspector General and examined UChicago Argonne, LLC’s costs incurred and claimed for fiscal years 2021 and 2022 at the Argonne National Laboratory, under management and operating contract No. DE-AC02-06CH11357.

The audit’s objective was to determine if costs charged were allowable, allocable, and reasonable in accordance with applicable laws, regulations, and contract terms.

The DCAA performed the audit in accordance with generally accepted government auditing standards.  

The DCAA identified four audit findings and questioned over $13 million in indirect and direct costs, including $11,487,044 in performance fees. The performance fees represented a contractual incentive paid by the Department and were questioned by the DCAA because UChicago Argonne, LLC included the fee as a cost in the General and Administrative pool. The DCAA reconciled the performance fees to the general ledger, and the Department determined that the contractor was entitled to the earned fee. The DCAA also questioned: (1) $1,176,949 in Board of Governors expenses that were greater than the final approved expenses; (2) $47,183 in executive salaries that were more than the statutory compensation ceiling; and (3) $511,724 of direct laboratory purchase order/subcontract costs with universities because the costs were not incurred specifically for the contract.

If the issues identified by the DCAA are fully addressed, it should help ensure that costs charged to the Department are allowable, allocable, and reasonable in accordance with contract terms. We recommend that the contractor coordinate with the contracting officer to resolve the questioned costs identified in this report.

UChicago Argonne, LLC did not concur with the questioned costs and stated that like all management and operating contractors, it follows longstanding practices and Departmental guidance on performance fees and handles Board of Governors expenses per its contract.

The VA Office of Inspector General (OIG) initiated a healthcare inspection at the Richard L. Roudebush VA Medical Center (facility) in Indianapolis, Indiana, to assess allegations and concerns related to the availability of on-call interventional radiology services. In May 2024, VA clarified that fee basis provider duties must be related to direct patient care activities, which prevented VA from paying providers for being on call and available to provide patient care services. In response, the facility halted on-call interventional radiology services, which were later resumed intermittently using facility providers.  

The OIG did not substantiate the allegation that a waiver request should have been submitted prior to the reduction in coverage. However, the OIG substantiated that confusion and deficient communication of intermittent on-call coverage led to a patient being unnecessarily transferred after developing a gastrointestinal bleed, despite services being available at the facility. The resumption of coverage on an intermittent basis was communicated to staff and leaders through emails and daily calls. However, the patient’s intensive care unit (ICU) attending physician and the ICU director were not included in the email communication and did not participate in the daily calls. Further, the ICU fellow who transferred the patient did not consult with the ICU attending physician and the gastroenterology fellow did not document assessing the patient as required. 

The OIG determined that a clinical or institutional disclosure was not conducted, facility leaders did not conduct a comprehensive review of the event to understand staff’s involvement, and quality management staff did not process a related patient safety report in accordance with VHA policy.

The Facility Director concurred with the six recommendations and shared plans and actions taken to address communication, documentation, disclosure, patient safety reporting, mitigation of risks that contributed to the transfer, and rejected patient safety reports. 

Our objective was to assess the Space Weather Follow-On (SWFO) program’s progress in preparing the SWFO-L1 satellite for launch and operations. To meet our objective, we reviewed SWFO-L1 satellite environmental testing, planning for integration onto the launch vehicle as a rideshare, and operational readiness reviews. We also reviewed the extent to which NOAA had policies governing the launch of space weather satellites. Additionally, we compared the program management of risk, cost, and schedule against programmatic plans. We found that the SWFO program made adequate progress in preparing for launch and operations. However, we also found that the SWFO Program Office did not conduct vibration testing using the actual flight separation system, nor did it receive a formal waiver for this deviation from “Test-As-You-Fly” (TAYF) standards. This occurred because NOAA oversight officials, as the mission sponsors, did not provide sufficient oversight to enforce TAYF requirements during vibration testing. As a result, NOAA did not have assurance that the system would not fail during launch and that the government’s interest was adequately protected.

The Department of Energy uses management and operating (M&O) contracts to carry out 90 percent of the agency’s mission. The National Nuclear Security Administration’s (NNSA) M&O contractors for the Kansas City National Security Campus and Los Alamos National Laboratory are Honeywell Federal Manufacturing & Technologies, LLC (Honeywell) and Triad National Security, LLC (Triad), respectively. Both Honeywell and Triad utilize subcontracts to achieve their mission. The combined value of firm-fixed-price (FFP) subcontracts issued by Honeywell and Triad from December 2023 through January 2025 was over $1.6 billion.

We initiated this audit to determine if NNSA’s M&O contractors were classifying subcontracts in accordance with the Federal Acquisition Regulation.

We found that NNSA’s M&O contractors, Honeywell and Triad, generally classified subcontracts in accordance with the Federal Acquisition Regulation and had procurement policies for FFP subcontracts consistent with the Federal Acquisition Regulation. During our audit, we requested the universe of subcontracts from Honeywell. While compiling the universe of 14,006 subcontracts, Honeywell initially identified and disclosed 35 subcontracts that were classified as FFP but should have been classified as cost-plus-fixed-fee, and an additional misclassified subcontract was later identified. According to Honeywell officials, the subcontracts were misclassified due to human error, and it took corrective actions to prevent subcontract misclassification in the future. We reviewed a judgmental sample of 65 FFP subcontracts and did not identify any additional subcontracts that were improperly classified. At Triad, we reviewed a judgmental sample of 30 FFP subcontracts and found 1 subcontract that was improperly classified. In addition, a Triad internal audit identified an inconsistent subcontract classification within its procurement system.

A fundamental component of the procurement process is the selection of the appropriate subcontract type. Subcontracts that are incorrectly or inconsistently classified could lead to inaccurate reporting and insufficient oversight.

Because the sites took corrective actions, we are not making any recommendations. Going forward, M&O contractors should ensure subcontracts follow policies related to subcontract classification.

This audit was performed by the Defense Contract Audit Agency (DCAA) on behalf of the Department of Energy’s Office of Inspector General and examined the Regents of the University of California’s (UC Regents) costs incurred and claimed for fiscal year ending September 30, 2021, at the Lawrence Berkeley National Laboratory under management and operating contract No. DE-AC02-05CH11231.

The audit’s objective was to determine if cost charged to Department Contract No. DE-AC02-05CH11231 for fiscal year 2021 were allowable, allocable, and reasonable in accordance with applicable laws, regulations, and contract terms.

The DCAA performed the audit in accordance with generally accepted government auditing standards.

The DCAA identified two audit findings and questioned approximately $6.4 million in the management fee in the total cost rate pool. The DCAA questioned the management fee, which represented a contractual incentive paid by the Department of Energy, because the UC Regents included the fee as a cost in the total cost rate pool. The DCAA reconciled the proposed fee amount to the general ledger, and the Department determined that the contractor was entitled to the earned fee. In addition, the DCAA increased the UC Regents’ proposed allocation bases for three indirect cost pools because of the UC Regents’ error in the treatment of several purchase orders that resulted in understated allocation bases.  

If the issues identified by the DCAA are fully addressed, it should help ensure that costs charged to the Department are allowable, allocable, and reasonable in accordance with contract terms. We recommend that the contractor coordinate with the contracting officer to resolve the questioned and adjusted base costs identified in this report.