A133 Audits and Department of Energy Compliance

When a company works with the Department of Energy, many times there is a feeling of "freedom" with respect to a government accounting system.  By this I mean that since the Department of Energy does not have the DCAA to come out regularly to check the awardee's accounting system, the burden of compliance falls more directly on the awardee themselves.  Many times, awards from the Department of Energy will specify in the contract or grant that the requirements of 10 C.F.R. § 600.316 apply.  While this regulation does not specifically call out an audit per OMB Circular A133, there are a lot of references that the audit should "generally follow" the guidelines of A133.  Since the A133 Audit was designed for non-profit organizations, it is really not appropriate to say that a full A133 audit is required.  None the less, an audit to meet the 600.316 guidelines can be expensive, especially for a small business.  Since the burden is on the awardee to pay for and have the audit performed, many times it is overlooked by the awardee and sometimes by the Department of Energy.  I have seen recently where the Department of Energy has recognized this deficiency, albeit down the road a ways.  The following are excerpts from an actual DOE letter to a grantee noticing problems as much as 7 years old!

"...As the recipient of a cost reimbursable grant with DOE and in accordance with applicable Federal Regulations for financial assistance awards, [company] was required to submit annual incurred cost proposals (ICP) for each fiscal year it has any active awards.  [company] failed to submit adequate proposals for fiscal year(s) [years] and is considered noncompliant with Federal Regulations."

"... Additionally, in accordance with 10 C.F.R. § 600.316 ("Audits"), [company] was required to submit an annual independent audit report for each fiscal year it expended $500,000 or more in federal funds.  [company] failed to submit adequate independent audit reports for fiscal year(s) [years] and is considered noncompliant with Federal Regulations."

"...If [company] fails to provide an acceptable corrective action plan by [date 2-weeks from letter] or does not take the appropriate corrective actions to correct the noncompliance, DOE may initiate suspension or termination proceedings for this award."

 This can be a huge problem for the awardee.  In this case, the issues were 6 years old which caused problems with records not to mention the company was not expecting an audit in the first place.  The cost of these audits is to be borne by the awardee so this can be an expense that relates to actions that are many years old and not associated directly with the efforts.  Finally, there are possible remedies available to the government, only one of which was proposed here (termination of the award).  The other available remedies (per 10 C.F.R. § 600.352) include:

  • Temporary withhold cash payments pending correction of the deficiency
  • Disallow all or part of the cost of the activity or action not in compliance
  • Wholly or partly suspend or terminate the current award
  • Withhold further awards for the project or program
  • Allpy other remedies that may be legally available

I would recommend that you check your terms and conditions in your award from the Department of Energy to see if these requirements are part of your award.  If they are, you may want to evaluate the risks of non-compliance vs. the cost of compliance.  ReliAscent can help you in this evaluation. 


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