UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
TH£
OF
GENERAL
MEMORANDUM
SUBJECT:
Superfund Interagency Agreements
with the National Bureau of
Standards, Department of Commerce
Audit Report No. M5BH8-11-Q032-80571
FROM: Ernest E. Bradley III
Assistant Inspector General for Audit
TO: J. Winston Porter
Assistant Administrator for Solid
Waste and Emergency Response (WH-562A)
At our request, the Office of Inspector General, U.S.
Department of Commerce (DOC), performed the subject audit.
The final report is attached. The report does not present any
information which would warrant corrective action by EPA officials
Accordingly, we are closing this report in our Audit Tracking and
Control System upon issuance.
The Inspector General, DOC, informed us in a separate
memorandum that the National Bureau of Standards (NBS) can
provide site-specific cost information which can be verified to
NBS' accounting system. This can be done if (1) EPA establishes
separate interagency agreements for work to be performed at each
site and (2) requires cost reporting by agreement.
Should your staff have any questions concerning this
memorandum, please have them call John Walsh on 475-6753.
Attachment
to
CVJ
HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C ?0460
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DISTRIBUTION
Associate Enforcement Counsel for
Hazardous Waste Enforcement (LE-L34S)
Director, Financial Management Division (PM-226)
Chief, Superfund Accounting Branch (PM-226)
Agency Followup Official (PM-225)
Attn: Resource Management Staff
Director, Grants Administration Division (PM-216)
Chief, Grants Information and Analysis Branch {PM-216}
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**»!•<»•'
UNITED STATES DEPARTMENT OF COMMERCE
Office of Inspector General
Wasnmgton Q C 20230
JAN 2 7 1988
MEMORANDUM FOR:
FROM:
SUBJECT:
Dr . Ernest Ambler
Director, National
Bureau of Standard^,
Frank
Acting
General
Audit of Two Interagency
Agreements with EPA
Report No. 1-176-8-002
Through the use of interagency agreements, the National Bureau
of Standards (NBS) performs work on a reimbursable basis for
various federal agencies, including the Environmental Protection
Agency (EPA). In response to EPA's request, we have completed
an audit of NBS costs charged against two of the reimbursable
agreements with EPA. We found that NBS's charges, totaling
about $62,300 under the two agreements, were adequately
supported. However, under one of the agreements, NBS incurred
approximately $3,900 of costs which were charged to NBS's
appropriation rather than to the EPA agreement, thereby
resulting in a corresponding underbilling to EPA.
Purpose and Scope of Audit
Our audit focused on the following two interagency agreements
between EPA and NBS: agreement numbers AD13F2A245 and DW13038301.
EPA advised that these agreements were funded with money
provided under the superfund legislation. The purpose of our
audit was to identify the amounts which NBS charged to these
agreements during fiscal years 1984 through 1986 and to
ascertain whether these costs were determined in accordance
with policies and requirements applicable to reimbursable
work performed for other agencies.
We evaluated the adequacy of internal controls applicable to
the identification and assignment of costs to specific
agreements. Also, our work included tests to establish the
appropriateness of costs actually charged under the terms of
the two agreements. During our review, we examined pertinent
records and interviewed selected personnel at NBS's offices
in Gaithersburg, Maryland.
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Two issues regarding the scope of our review should be noted:
In reviewing indirect costs, we limited the scope of our
work to determining whether these costs were charged in
accordance with established NBS overhead rates and on a
basis consistent with the rates charged to NBS units and
other agencies. We did not assess the accuracy of N'BS's
various overhead rate components because such a review
would require a major commitment of audit resources, and
we could not divert such resources from higher priority
audits at this time.
We have not determined whether the provisions of the two
interagency agreements were consistent with the statutory
authority governing EPA's expenditure of superfund monies.
We believe such determinations are more appropriate for
EPA's Inspector General.
Our audit was performed under the authority of the Inspector
General Act of 1978 and Department Organization Order 10-13,
dated May 22, 1980. The audit was conducted in accordance
with generally accepted government auditing standards.'
FINDINGS AND RECOMMENDATIONS
Pertinent facts about the two agreements are provided below:
Agreement Number AD13F2A245
Under this agreement, NBS was to provide a computer readable,
digitized data base pertaining to an automated chemical
information system. Before project work began, EPA transferred
550,000 to NBS's Working Capital Fund to provide financing
for this reimbursable project. Actual NBS charges to the
project totaled $50,000.
Agreement Number DW13038301
This agreement provided for NBS to perform on-site work at
two landfill sites near Bloomington, Indiana. Specifically,
NBS personnel were to assess the possibility that buried
electric capacitors containing PCB could be perforated
by corrosion. The interagency agreement authorized NBS to
incur costs up to $25,000 for this work, with payments to be
made as costs were incurred by NBS and billed to EPA. Actual
NBS billings totaled $12,300.
Project Costs were Adequately Supported
Based on our evaluations and tests, we concluded that the two
agreements were adequately controlled by NBS to ensure that
r•(~lo^e i~harrteH *• n fho an r oomon t-c uo r p Hirar«h1v rAl^hoH t-o work
costs
nents were adequately controlled by NBS to ensur
charged to the agreements were directly related
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performed. We found no evidence of improper charges. We
noted, however, that NBS did not identify and bill about
53,900 of costs incurred under one of the agreements, as
described later in this report.
NBS's controls include separate accountability for funds
under each reimbursable agreement. This includes appropriate
general ledger accounts for recording both obligations and
costs. Entries in the accounts are required to be supported
by records showing the basis for charging costs to the agree-
ments. For example, the controls provide for direct labor
costs to be charged on the basis of staff time expended on
the projects, as reported by employees and certified by
supervisors.
We tested costs charged under
that:
the two agreements and found
The labor charges were supported by appropriate work-
sheets and timecards.
Charges for travel,
were substantiated
materials, and other direct costs
by supporting documentation.
Indirect costs were charged in accordance with established
NBS overhead rates and on a basis consistent with the
rates charged to NBS units and other agencies.
Costs Not Billed
Under agreement number DW13038301, NBS incurred about $3,900
of costs which were never charged to the project or billed to
EPA. This underbilling resulted because, at the beginning of
the project, three NBS personnel traveled to the work site in
Bloomington, Indiana but, at that time, an NBS cost center
number for the reimbursable project had not yet been established
Lacking a cost center number, the costs of direct labor, travel,
and overhead applicable to this initial trip were charged to
NBS's appropriated funds, rather than to the EPA reimbursable
project. This is contrary to NBS's policy which requires
that costs be identified with and charged to specific cost
centers authorized to cover clearly defined activities. We
believe it is important for NBS to ensure that its personnel
understand the importance of not performing reimbursable work
until a cost center number has been assigned so that costs
can be charged to the appropriate organization.
Final Billings Not Submitted for Small Amounts
In some cases, final project billings are not sent to the
reimbursing agency because the amounts due are relatively
small. We noted that for agreement number DW13038301, NBS
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personnel did not issue a final bill for $30 that was due
from EPA. In response to our inquiry on this point, N'BS
personnel advised that, when the amounts owed are for rela-
tively small amounts (under $50), a final billing is waived.
However, NBS has no written procedures or other formal
approvals governing such waivers. Written procedures should
be established to ensure that there is a clear understanding
about this matter and to provide for consistency of approach
by the current and future employees who may be involved in
administering the billing function.
Recommendations
We recommend that the Director, NBS, provide for the following
actions:
1. Emphasize to NBS personnel that no reimbursable project
work is to be performed for another organization until
NBS's Office of the Comptroller has established a cost
center number.
2. Provide NBS personnel with written guidance explaining
when it is appropriate to waive the issuance of billings
to other organizations.
NBS Response -- In reply to our draft report, NBS agreed with
our recommendations and described specific implementing
act ions.
We appreciate the cooperation and courtesies extended by NBS
officials during our review. NBS's complete response to our
draft report is attached as Appendix I. As required by
Department Administrative Order 213-5, please provide us
within 90 days an action plan for each of our recommendations.
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K
UNITED STATES DEPARTMENT OF COMMERCE
National Bureau of Standards
ana 2CS3S APPENDIX I
OFC I I tgo,;
MEMORANDUM FOR John R. Stpanka
Assistant..Inspector General for Auditing
' /^ ^
Froa: Guy W. Chamberlin,\ J^r/'
Director of Administration
"
Subject: Audit of Z?A n
In response to the draft audit report, ?TB3 agrees with both
recommendations made.
Recommendation 1. Emphasize to NBS personnel that no reimbursable
project work is to be performed for another organization until NBS's
Office of the Comptroller has provided a cost center number to be used
in assigning all applicable costs to the reimbursable project.
'/e recormend that the word ''provided" be replaced with the words
"established in the accounting systen."
We will send a ™ezor«iflun to TB3 Executive Officers reninrlir.g thes of
this r«quirenent.
Recori'Tindation 2. Provide ''33 persor_r:^l with written guidance regarding
the circunstances when it is appropriate to waive the issuance of
billins documents to other organisations for anounts due under
reimbursable agreements.
Procedures have been drafted for the Billing and Collections Group
regarding the circumstances when it is appropriate to waive the issuance
of invoices to other organizations for snail anounts of cost due under
reimbursable agreements. These draft procedures are being reviewed.
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