33 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY / \/ OFFICE or THE INSPECTOR GENERAL ,^ •o.V EASTERN DIVISION PF *N> BO CHURC* STREfT SUITE 6S2 IV- Cfi-Ji».-. S*-ee NEV. VORi-. NtW VOR". 1OOCT EostO'-, Ht 0?!l« P.O. 6o» 103 F. 0«g?i». fwe-al Bid? JUL 2 6 1983 -• ^c'Xr^'ooj.e I83»! 75JM672 Report on Evaluation of Credit Period and Preagreement Costs Claimed for the Picillo Waste Site, Coventry, Rhode Island by the Rhode Island Department of Environmental Management Audit Report No. E5cH3-01-0073-31471 PURPOSE AND SCOPE OF AUDIT We have completed a review of the Rhode Island Department of Environmental Management's (DEM) claimed credit period costs of $556,385 and preagreement '. costs of $985,949 for the Picillo hazardous waste site, Coventry, Rhode Island. These costs were claimed under the Comprehensive Environmental Response, Com- pensation and Liability Act of 1980 (CERCLA) as credits against the State's matching requirements for remedial actions. he purpose of our audit was to determine the acceptability of costs claimed 'by DEM in accordance with (i) Section 104 (C)(3) of CERCLA for direct out-of-pocket nonfederal funds expended or obligated between January 1, 1978 and December 11, 1980 (credit period), and (ii) a deviation granted by EPA from 40 CFR 30.345-4, allowing the State to incur costs prior to the execution of the State/EPA Cooperative Agreement (preagreement costs). We performed the audit in accordance with the "Standards for Audit of Governmental Organizations, Programs, Activities and Functions" issued by the Comptroller General of the United States. The scope of our audit included determining whether the costs claimed were incurred for the purposes and uses as set forth in Section lll(a) and (C) of CERCLA; and whether they were in accordance with EPA guidance and other documents such as the "Letter of Assurance" allowing the State to expend funds prior to executing the State/EPA cooperative agreement. We evaluated the support for the costs claimed including paid invoice vouchers. We reviewed contract documents and reports issued by companies under contract with DEM, and we obtained pertinent information from DEM and EPA Region I officials. HEADQUARTERS LIBRARY § ENVIRONMENTAL PROTECTION AGENClf WASHINGTON, D.C. 20460 10 CM ------- 1 viy,' w D? rcweo ------- BACKGROUND CERCLA was passed as Public Law 96-510 on December 11, 1980 to provide for liability. compensation, cleanup, and emergency response for hazardous substances released into the environment and the cleanup of inactive hazardous waste disposal sites. Section 104 (C)(3) of the Act provides that no remedial actions shall be taken unless the State in which the release occurs first enters into a contract or cooperative agree- ment with assurances that include to pay or assure payment of 10 percent of the costs of the remedial actions or at least 50 percent of costs if the facility was owned by the State or a political subdivision at the time of any disposal of hazardous substances, This section also provides for the State to receive a credit against the share of the costs for which it is responsible for any documented direct out-of-pocket non- federal funds expended or obligated between January 1, 1978 and December 11, 1980 for cost eligible response actions and claims for damages compensable under.Section 111 of the Act. Section lll(a) set forth the following purposes for which the Fund can be used. (1) payment of governmental response costs incurred pursuant to Section 104 of this title, including costs incurred pursuant to the Intervention on the High Seas Act; (2) payment of any claim for necessary response costs incurred by any other - person as a result of carrying out the national contingency plan estab- lished under .Section 311(c) of the Clean Water Act and amended by Sec- tion 105 of this title; provided, however, that such costs must be approved under said plan and certified by the responsible federal official; (3) payment of any claim authorized by subsection (b) of this section and finally decided pursuant to Section 112 of this title, including those costs set out in Subsection 112 (c)(3) of this title; and (4) payment of costs specified under subsection (c) of this section. Subsection (c) specifies the uses of the Fund. The uses pertinent to this review are: (1) the costs of assessing both short-term and long-term injury to, destruction of, or loss of any natural resources resulting from a release of a hazard- ous subs tance; (2) the cost of Federal or State efforts in the restoration, rehabilitation, or replacement or acquiring the equivalent of any natural resource injured, destroyed, or lost as a result of a release of a hazardous material; and (3) subject to such amounts as are provided in appropriation acts, the costs of a program to identify, investigate and take enforcement and abatement action against releases of hazardous substances. ------- ------- In addition to the above statutory provisions, in April of 1981, EPA through a ."Letter of Assurance" from the Acting EPA Administrator to the Governor of Rhode Island, granted the State a deviation from 40 CFR 30.345.4. This devia- tion allowed the State to incur costs prior to the execution of the State/EPA cooperative agreement. The "Letter of Assurance" also provided that costs incurred would be eligible toward the State s ten percent share of remedial action taken at the Picillo site if federal funds were subsequently provided for the project, jand if specified conditions were met. In May of 1981 EPA Region I and DEM executed "Memorandum of Understanding" further defining conditions that must be met for |jthe costs incurred to be eligible toward the State's ten percent of remedial costs. j jfficillo Hazardous Waste Site 'The Picillo site is located in a rural area of Coventry, Rhode Island. Approximately 20,000 drums of toxic wastes plus an undetermined volume of other liquid chemical wastes were disposed into four trenches on a 7.5 acre area of the farm. The problem was discovered on September 30, 1977 when a fire and explosion occurred at the site. Significant quantities of PCBs, benzene, toluene, nitrobenzene, trichlorethylene, and other toxic organic chemicals were identified. Investigations by Rhode Island offi- cials led to the discovery of hazardous waste leachate in nearby ground and surface water. Shortly after the fire and explosion, and until mid-1979, DEM conducted field studies to quantify the seriousness of the situation. Subsequently, DEM and EPA have provided funds at various times to (1) conduct further field studies to quantify the seriousness of the situation, and (ii) excavate and remove buried waste. On February 5, 1982 a State/EPA cooperative agreement was executed for remedial activities at the site. I Credit Application DEM submitted a letter dated January 21, 1982 to EPA Headquarters, State and Regional Coordination Branch claiming the following credits towards the required matching share for the cooperative agreement: Credit Period Costs (1-1-78 / 12-11-80) Preagreement Costs (4-13-81 / 2-5-82) Total Claimed $ 556,385 985.949 $1,542,334 These credits represent contracting costs for various work Including hydrogeologic investigations and the removal and disposal of hazardous waste. ------- ------- SUMMARY OF AUDIT RESULTS The results of audit are summarized below and discussed In the ensuing paragraphs, They also are discussed in Exhibits A and B. Amount Credit Period Costs Preagreement Costs Total Claimed $ 556,385 985,949 Accepted Questioned $ 545,839 873,058 $1,542.334 $1,418,897 $ 10,546 112,891 $123,437 Reference Exhibit A Exhibit B As discussed in the following exhibits, the credit period costs questioned in this report represent claimed costs incurred for an obligation after the credit period expired. Preagreement costs questioned represent claimed costs incurred prior to the effective date of the deviation, and costs which the EPA project officer deemed unnecessary for the safe and efficient conduct of the job. Recommendation Based on our review of the costs claimed by DEM, we recommend that $1,418,897 be accepted as eligible for credit under CERCLA towards DEM's cost-sharing requirements under coop- erative agreements. The remaining amount of $123,437 is questioned and therefore not allowable as credits toward cooperative agreements. ».. Exit Conference No final exit conference was held with representatives of DEM. However, we provided them a copy of our draft report, dated April 13, 1983. DEM's comments are attached to this report as Exhibit C and our response to each comment is included in the following notes. FOR THE INSPECTOR GENERAL 4 ------- ------- ------- OOC- TRANSMITTAL SLIP From Reference or Collection Devt staff to Cataloging REFERENCE COLLECTION I. GENERAL COLLECTION I. EPAX COLLECTION I HAZARDOUS WASTE COLLECTION REF GENERAL WATER COLLECTION REF GENERAL EPAX INTERNATIONAL COLLECTION REF GENERAL EPAX MANAGEMENT I 1 POLLUTION PREVENTION I I ADP 1 ! INITIALS DATE ------- Audit Report No. E5cH3-01-0073- 31471 Exhibit A Costs a aimed $ 12,674 58,514 600 484,597 $556,385 Accepted $ 12,674 58,514 600 474,051 $545,839 Questioned $ 10,546 $10,546 Summary of CERCLA Credit Period Costs Claimed and Results of Audit for the Picillo Hazardous Waste Site Coventry, Rhode Island Vendors Claimed Accepted Questioned Reference Coastal Services, Inc. MITRE Corp. George Mann & Co. Jet Line Services, Inc. 484,597 474,051 10,546 Note 1 Total Notes 1. Represents $10,546 of payments made to the contractor for an obligation under a contract amendment of January 1981, after the credit period expired. DEM .Comments DEM concurred with $2,008 of the $51,253 questioned in our draft report. They how- ever stated that $49,245 should be accepted because the costs were obligated prior to the expiration of the credit period. These costs are as follows: $40,707 - Payment for services incurred from 14 October 1980 to 6 November 1980. $ 7,705 - Rental of trailer from 16 December 1980 to 17 April 1981. This trailer contained material that had to be stored on site and was procured in August 1980. Until the USEPA arranged for disposal (see attachment) in April 1981, RIDEM had to incur trailer rental costs until April 1981. $ 58 - Adjustments from previous voucher (preceding 11 December 1980) for security for Colbert Security, Inc. $ 775 - Adjustment from previous voucher preceding 11 December 1980 for disposal of hazardous wastes. ------- ------- PICA Response We concur with DEM s comments on the $40,707 for services provided in October and November of 1980 and have accepted these costs. We however continue to question the $7,705 for trailer rentals because these costs were both incurred and obligated after the credit period had expired. We also continue to question the $833 that DEM stated were for adjustments, because documentation does not support DEM 's claim. ------- ------- Audit Report No. E5cH3-01-0073 Exhibit B Summary of Preagreement Costs Claimed and Results of Audit for the Picillo Hazardous Waste Site Coventry, Rhode Island Vendors Claimed Accepted Questioned Reference Peabody Clean Industry, Inc. $985,949 $873,058* $112.891 Note 1 * While we did not audit the contractor's records, we determined the rates billed were equal to or less than those billed to other customers using the contractor's price list. We, therefore, are accepting the above claims. Notes 1. Represents $112,891 in contractor cleanup costs questioned as follows: (a) Costs incurred prior to the preagreement start date of April 13, 1981 as stated in the DEM/EPA 'Memorandum of Understanding.' These costs were incurred between February 9 and April 12, 1981. $ 86,133 (b) Costs incurred for air monitoring which duplicated monitoring con- ducted by EPA. 25,586 (c) Costs incurred for transit ($520), book ($496) and a carrying case ($156). 1,172 Total Cost Questioned $112,891 We reviewed the procedures followed by DEM and EPA related to the granting of this deviation from 40 CFR 30.345-4 in accordance with guidance issued for "Cooperative Agreements and Contracts, with States under CERCLA." Based on our review, we determined that all actions were in accordance with the requisite procedures. DEM Comments 1. (a) DEM stated that costs incurred prior to the preagreement start date amounted to $84,516 not the $86,133 stated in our draft report. PICA Response We reviewed documentation submitted to us by DEM. This documentation supports the $86,133 that we have questioned. ------- ------- DEM Comments 1. (b) DEM stated that the $25,586 for air monitoring was not duplicative of monitoring conducted by EPA and was conducted under terms developed by EPA with concurrence by DEM. PICA Response We continue to question the $25,586 because the EPA project officer stated the monitoring was duplicative, and that DEM was told that EPA would not certify the costs. Under the terms of the i"Memorandurn of Understanding" the EPA project officer is required to monitor State actions "...and shall certify that expenditures for which the State will receive credit...shall be for reasonable costs." In this case the EPA project officer concluded that the air monitoring conducted by the State should not be credited. DEM Comments 1. (c) DEM stated that the costs for the transit and carrying case — $676 should be accepted because the equipment was used to survey the site enabling DEM to construct drainage swales. PICAResponse ; We continue to question the $676. The EPA project officer told us that prior to DEM incurring these costs, all site preparation work including the installation of drainage swales had already been conducted. DEFl CojnmentB DEM provided us with worksheets, paid invoices and backup data for $476»059 in costs that we questioned in our draft report. PICA Response Based on our audit of these documents and review by the EPA project officer,-we have accepted these costs. ------- ------- STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS DEPARTMENT OF ENVIRONMENTAL MANAGEMENT 75 Davis Street - 204 Cannon Building Providence, R.J. 0290S 9 May 1983 Mr. Sanford Wolfe Divisional Inspector General For Audits Environmental Protection Agency Office of Inspector General Eastern Division 90 Church. Street, Suite 802 New York, NY 10007 Dear Mr. Wolfe: In response to your letter of 13 April 1983, RIDEM is offering comments on the draft report on Evaluation Of Credit Period And Prearrangement Costs Claimed For The Picillo Hazardous Waste Site, Rhode Island, (Audit Report No. E5cH3-01-0073). The credit period costs are addressed first followed by comments on prearrangement costs covered through the letter of assurance of April 1981 and memorandum of understanding of 12 May 1981. Credit Period Costs of $51,253. paid to Jet Line Services, Inc. are questioned as having been payments following expiration of the credit period. Section 104C(3) of CERCLA allows for direct out-of-pocket non-federal funds expended or obligated between 1 January 1978 and 11 December 1980. Of the $51,253. questioned, $49,245. was obligated prior to 11 December 1980 although payment was made following the window period expiration. These costs are as follows: $40,707. - Payment for services incurred from 14 October 1980 to 6 November 1980 $7,705. - Rental of trailer from 16 December 1980 to 17 April 1981. This trailer contained material that had to be stored on site and was procured in Aupust, 1980. Until the USEPA arranged for disposal (See Attachment) in April, 1981, RIDEM had to incur trailer rental costs until April, 1981. $58-. - Adjustments from .previous voucher Cnrecedir* 11 December 1980) for securitv for Colbert Securitv, Inc. $775. - Adjustment from previous voucher preceding 11 December 1980 for disposal of hazardous wastes. $49,245. - Total Claim i - . ------- ------- /ir. Sahford Wolfe W -2- W 9 >lav 1983 RIDEM requests that $49,245. of the $51,253. questioned be Accepted lor credit. Prearrangement Costs i A total of $568,950. in contractor cleanup costs have been questioned. Reference is made to page 6 of Audit Report No. E5cH3-01-0073, Exhibit B, Note 1. The costs are discussed in the order presented: a. Costs' incurred prior to the prearrangements start date of 13 April 1981 amount to $84.516. not $86,133. as stated for the period 9,February 1981 to 12 April 1981. Therefore, we requested that $1,617. be restored as an accepted claim. b. Air Monitoring - $25,586. These costs did not duplicate monitoring conducted by EPA. Under the terms of the Personnel Safety Plan, Ficillo Hazardous Waste Site, Coventry, Rhode Island, developed by EPA with concurrence by RIDEM. under "Personnel Health Guidelines" page 12, the following statement was made: "An ambient air monitoring program should also be initiated to accumulate quantitative date." The program and costs in question were for ambient air monitoring, as recommended by EPA's safety plah> In addition, selection and use of an explosion/oxygen meter was made under this program offering significant aid in worker -protection. Therefore, the ^5,586. should be allowed in this claim. c. Costs for transit ($520.) and carrying case for the transit ($156.) should be allowed. This equipment was used to survey the site enabling OEM to construct drainage swales and aided in the excavation plan for the site. A claim of $676. should, therefore, be allowed. d. Attached are copies of all work sheets, paid invoices and back up data for expenses challenged in the audit of costs from April 13 - May 21 and July 24. Thereafter for Peabody Clean Industry, Supervisor for EPA, were represented on-site at all tines during the period 13 April 1981 thru 31 December 1961 and had ample opportunity to review documentation of RIDEM work effort. We strongly object to the disallowance of $476,059. and request that these invoices and worksheets be examined and that these costs be accepted. In summary, the following should be reflective of the costs claimed by RIDEM. Amount Credit Period Costs Prearrangement Costs Total Claimed $556,385. $485,949. $1,542,334. Accented $554,377. 8900,937. $1,455,314. Questioned $2,008. $85,012. $87,020. •it ------- ------- Mr. Sanford Wolfe -2- 9 May 1983 If you have any questions, feel free to contact me at (401) 277-2771. Very truly yours, Robert L. Bendick, Jr. Director RLB/kz ------- ------- |