The Institute is a nonprofit corporation, in Alexandria, Virginia, that operates three federally funded research and development (R&D) centers to provide objective analyses of national security issues, requiring scientific and technical expertise, and to conduct related research on other national challenges. Two of the federally funded R&D centers are sponsored by DoD and one is sponsored by the National Science Foundation. The Institute expended $226.8 million in Federal awards for the fiscal year ended September 24, 2010, under one Federal program, the R&D cluster. Of the $226.8 million, $215.8 million was expended for DoD programs.
The PricewaterhouseCoopers office in McLean, Virginia, and the DCAA Chesapeake Bay Branch Office performed a coordinated audit. PricewaterhouseCoopers was responsible for the audit of the financial statements and the Schedule of Expenditures of Federal Awards. DCAA performed the audit of the R&D program cluster. Appendix B lists the compliance requirements that the DCAA considered applicable to the FY 2010 single audit.
DCAA did not comply with Circular A-133 requirements, auditing standards, and DCAA guidance for the FY 2010 single audit. Specifically, the auditors did not adequately plan, perform, and document the audit procedures to support their conclusions on the ten compliance requirements applicable to the R&D cluster (Finding A). We also identified deficiencies in the performance of fraud risk assessment procedures (Finding A) and the completion of the Circular A-133 report (Finding B). Therefore, additional audit work is needed before Federal agencies can rely on the audit for assurance that the Institute managed Federal awards in compliance with laws, regulations, and award provisions.
The PricewaterhouseCoopers audit of the financial statements and Schedule of Expenditures of Federal Awards met auditing standards and Circular A-133 requirements.
The Institute generally met Circular A-133 requirements except that the corrective action plan was not submitted with the single audit reporting package when it was initially filed with the Federal Audit Clearinghouse (Finding B).
Management Comments and DoD IG Response
The Defense Contract Audit Agency and the Institute agreed to take the recommended actions. DCAA management comments were partially responsive; therefore additional comments are requested on Recommendation 1a. Management comments are included in their entirety at the end of this report.