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
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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.

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 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.

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 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

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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

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                                               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.

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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.

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                                                   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.

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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.

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                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   -          .

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         /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

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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

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