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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE INSPECTOR GENERAL
EASTERN AUDIT DIVISION
JF KENNEDY FEDERAL BUILDING
Room '911
Boston. Massachusetts 02203-22H
(617, 565-3160
FTS 8-835-3160
NEW YORK OFF'CE
90 C^u'cr SfOfe:
Su •€> 802
March 23, 1989
MEMORANDUM
SUBJECT: Report on Audit of Credit Period Costs
Claimed by the New York State Department
of Environmental Conservation for Love Canal
Audit Report No. P5ŁG2cr02-0083 - 9100221
FROM! Paul D. McKechn
Divisional Inspec
Eastern Division
TO: William J. Muszynski
Acting Regional Administrator
Region 2
or
SCOPE AND OBJECTIVES
We have completed a final audit of credit period costs claimed
by the New York State Department of Environmental Conservation
(DEC) for Love Canal under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA),
which included costs incurred by the Urban Development
Corporation (UDC), New York State Department of Transportation
(DOT) and New York State Department of Health (DOH) for
activities at Love Canal, City of Niagara Falls, New York,
between January 1, 1978 and December 11, 1980. The audit was
performed by the contract auditors, Samuel M. Fisher Company,
CPAs. The audit field work began on July 22, 1987 and was
completed on February 23, 1988.
The purpose of our audit was to determine the acceptability of
costs claimed by DEC for credit under Section 104 (c) (3) of
CERCLA for direct out-of-pocket non-Federal funds expended or
obligated at Love Canal between January 1, 1978 and December 11,
1980. Our examination was made in accordance with generally
accepted auditing standards and the "Standards for Audit of
Governmental Organizations, Programs, Activities and Functions,"
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issued by the Comptroller General of the United States. The
audit included tests of the accounting records and other
auditing procedures as we considered necessary in the
circumstances. The Environmental Protection Agency's Audit
Guide for Credit Period and Pre-Award Costs under CERCLA
Program was also used as a guide in our examination.
SUMMARY OF FINDINGS
We are unable to accept the total costs of $17,619,773 claimed
by DEC for credit under Section 104 (c) (3) of CERCLA for
direct out of pocket non-Federal funds expended or obligated at
Love Canal between January 1, 1978 and December 11, 1980.
While we are accepting $12,479,270, we have questioned
$3,335,323 and have set aside $1,805,180. The amount of
questioned and set aside costs is net of costs reimbursed by
other Federal agencies and costs incurred after the cut off
date of December 11, 1980. These costs were included in the
individual line items of the claim; however, the DEC had
adjusted the total so as to not include them in the total
claimed amount.
We have questioned costs in this report due to lack of adequate
supporting documentation rather than reporting them as set
aside where we believe that DEC has had more than ample
opportunity to provide the necessary documentation. This
office audited the State's initial claim for credit period
costs and issued a report in March 1983. At that time $13.8
million of the $14.6 million claimed was set aside, principally
due to lack of adequate supporting documentation. DEC was
again given the opportunity to provide adequate supporting
documentation during the course of this audit. In fact,
issuance of the report was delayed to provide DEC additional
opportunities to provide the necessary documentation.
The costs questioned and set aside are summarized on Exhibit A
of the audit report. Details of these costs are provided as
follows:
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UDC (Schedule A-l) - A total of $1,002,442 was questioned less
$483,019 attributable to costs incurred after the claim period
cut-off date of December 11, 1980 resulting in net questioned
costs of $519,423. Questioned costs consisted of property
acquisitions, relocation, closing, taxes, insurance, administra-
tive and personal service costs, all of which could not be
substantiated by UDC's accounting books and records.
DOT {Schedule A-2) - A total of $900,853 was questioned less
$340,411 reimbursed by other Federal agencies participating in
the Love Canal clean-up and $154,916 not claimed, resulting in
net questioned costs of $405,526. Questioned costs consisted
of $817,377 of personal services and related expenses incurred
in State fiscal years 1979 and 1980 for which the supporting
time sheets and payroll records were destroyed by DOT, and
$83,476 of fencing costs which were not supported by detailed
supporting cost schedules, vendor invoices or pricing schedules.
We also set aside $4,231,441 of housing and relocation
expenditures claimed by DOT pending submission of adequate
documentation to support these claimed costs. This total was
reduced to a net set aside amount of $1,805,180 based on
reimbursement payments of $2,426,261 received from other
Federal agencies participating in the Love Canal clean-up
program.
DOH (Schedule A-3) - A total of $3,750,714 was questioned less
$633,726 reimbursed by another Federal agency participating in
the Love Canal clean-up and $706,614 attributable to expendi-
tures after the December 11, 1980 credit period resulting in
net questioned costs of $2,410,374. Questioned costs consisted
of $928,514 of personal services expenditures which were not
supported by time sheets and payroll records, and applicable
fringe benefits costs of $288,890 and indirect costs of
$247,508; $413,394 of contractual services, $1,014,666 of
equipment costs, $800,289 of supply costs, and $57,453 of
travel costs all of which were disallowed because supporting
cost schedules could not be reconciled with DOH furnished
vendor invoices as well as a failure to provide applicable
contracts and contract procurement documentation.
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Details of our audit results, subject to litigation in
progress, if any, which may lead to recovery of claimed costs,
are contained in Schedules A-l, A-2 and A-3 and the related
supporting notes. The contents of the report have been
discussed with DEC, who responded in a letter dated December 30,
1988. DEC'S comments were given full consideration in the
preparation of the final report.
we recommend that Region 2 not allow credit under Section 104
(c) (3) of CERCLA for the unallowable costs of $3,335,323
claimed by DEC. Further, we recommend that the action official
evaluate the appropriateness of allowing such credit for the
set aside costs of $1,805,180 in light of the comments
contained in Schedule A-2 and the related notes.
ACTION REQUIRED
In accordance with EPA Directive 2750, the action official is
required to provide this office with a copy of the proposed
determinations on the findings within 90 days of the audit
report date.
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ENVIRONMENTAL PROTECTION AGENCY
REPORT ON AUDIT OF CREDIT PERIOD COSTS CLAIMED BY THE NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION FOR LOVE CANAL
FOR THE PERIOD JANUARY 1, 1978 TO DECEMBER 11, 1980
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TABLE OF CONTENTS
PURPOSE AND SCOPE OF AUDIT
BACKGROUND
SUMMARY OF AUDIT RESULTS - EXHIBIT A
SUMMARY OF COSTS CLAIMED, ACCEPTED
AND QUESTIONED - EXHIBIT A
SCHEDULE OF COSTS CLAIMED, ACCEPTED AND
QUESTIONED, URBAN DEVELOPMENT
CORPORATION - SCHEDULE A-l
NOTES TO SCHEDULE A-l
SCHEDULE OF COSTS CLAIMED, ACCEPTED AND
QUESTIONED, NEW YORK STATE DEPARTMENT
OF TRANSPORTATION - SCHEDULE A-2
NOTES TO SCHEDULE A-2
SCHEDULE OF COSTS CLAIMED, ACCEPTED AND
QUESTIONED, NEV) YORK STATE DEPARTMENT
OF HEALTH - SCHEDULE A-3
NOTES TO SCHEDULE A-3
AUDITORS' COMMENTS ON ACCOUNTING
SYSTEMS - EXHIBIT B
CORRESPONDENCE - EXHIBIT C
SUMMARY OF GRANTEE COMMENTS AND AUDITOR
RESPONSE TO COMMENTS
PAGE
1
1-3
4
6
7-8
9
10-15
16
17-19
20
21
22-27
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SAMUEL M. FISHER COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
401 PARKWAY
BKOOKAJLL. PEXKSYLVAJCI
1219) 328 3»00
PURPOSE AND SCOPE OF AUDIT
We have completed a review of the $17,619,773 claimed by the New York State
Department of Environmental Conservation (DEC) as a credit against its share
of costs Incurred under the Comprehensive Environment Response, Compensation
and Liability Act of 1980 (CERCLA) for activities at Love Canal, City of
Niagara Falls, New Tork. The claim included costs for New York State
Department of Transportation (DOT), Urban Development Corporation (UDC), and
New York State Department of Health (DOH) for costs incurred from January 1,
1978 through December 11, 1980.
The purpose of our audit was to determine the acceptability of costs claimed
by DEC for credit under Section 104 (c) (3) of CERCLA for direct out-of-pocket
non-Federal funds expended or obligated at Love Canal between January 1, 1978
and December 11, 1980.
Our examination was made in accordance with generally accepted auditing
standards and the "Standards for Audit of Governmental Organizations,
Programs, Activities and Functions" revised by the Controller General In 1981.
The Environmental Protection Agency's Audit Guide for Credit Period and
Pre-Award Costs under the CERCLA Program was also used as a guide in our
examination.
BACKGROUND
The Act 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 agreement with assurances that the
State will pay or assure payment of 10 percent of the costs of the remedial
actions or at least 50 percent of coats if the facility was owned by the State
or a political subdivision at the time of any disposal of hazardous
substances. Section 111 (a) sets 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 established under section 311 (c) of the Clean Water Act and
amended by section 105 of this title; provided, however* that such
costs must be approved under said plan and certified by the
responsible Federal official;
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(3) payment of any claim authorized by subsection (b) of thla 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 hazardous substance;
(2) the cost of Federal or State efforts in the restoration,
rehabilitation, or replacement of acquiring the equivalent of any
natural resource Injured, destroyed, or lost as a result of a
release of a hazardous material;
(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;
(4) the costs of epidemiologlc studies, development and maintenance of a
registry of persons exposed to hazardous substances to allow long-term
health effect studies and diagnostic services not otherwise available
to determine whether persons in populations exposed to hazardous
substances in connection with a release or a suspected release are
suffering from long-latency diseases; and
(5) the costs of permanent and temporary relocation of residents and
businesses.
Love Canal landfill is a 16-acre tract of land located In the southeast end of
the City of Niagara Falls. Hooker Chemical admits to depositing, between 1942
and 1953, 21,800 tons of chemical wastes from its plants in Niagara Falls.
During the 1950's, hone building adjacent to the site was accelerated and a
public school was built on the property. In the mld-1970's chemical odors
were cited by residents, barrels surfaced and chemical wastes were exposed.
On August 7, 1978, tbe President of the United States declared Love Canal as
an emergency area under the Disaster Relief Act of 1974 (Public Law 93-288)
and authorized action necessary to save lives and protect property. President
Carter declared a second Federal emergency at Love Canal on May 22, 1980 to
provide Federal aid to relocate the more than 700 families who still lived
near the toxic vaste dump. The second emergency declaration resulted in
Congress passing an Emergency Appropriations Bill which provided * $7.5
million advance and a $7.5 million grant to the State, which the state had to
match with $5 million.
Under the provisions of the Disaster Relief Act, monetary assistance was
provided to the State by the Federal Emergency Management Agency (FEKA),
originally the Federal Disaster Assistance Agency (FDAA). Assistance was
provided for temporary and permanent relocation for residents of Love Canal,
purchase of homes within the Love Canal area, and remedial construction at the
site.
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DEC submitted « letter, dated January 14, 1982, to the EPA Headquarters State
and Regional Coordination Branch claiming $14,611,500 as a credit towards the
required matching share for current or future cooperative agreements. These
costs were purportedly Incurred by various State and local agencies as
described below:
Department of Environmental Conservation ($2,^91,500)
Represents costs for the construction of a leachate collection system for the
North and Central Zones at Love Canal and for health and environmental testing
services.
Department of Transportation ($2,000,000|
Represents costs relating to in-house salary, travel, overtime and other
expenses and remedial construction costs incurred by the City of Niagara Falls.
Urban Development Corporation ($3,600,000^
Represents money spent on the permanent relocation and acquisition of homes
within Rings I and 2.
Department of Health ($5,500,000)
Represents claimed expenditures for analytical services, health and
epldemlological studies at Love Canal.
City of Niagara Falls ($620.000)
Represents costs for the remedial construction at the Southern Zone of the
Canal.
The above described costs were reviewed by the EPA Office of the Inspector
General (01C), Eastern Division. In their Audit Report No.
E5cH3-02-0022-30753, dated March 21, 1983, OIC accepted $800,000 of DOT
personnel service costs and questioned $13,811,500 due principally to the
inability of the State agencies concerned to identify the costs claimed in
their accounting records and submit supporting schedules and documentation
therefor. In response to this audit report, DEC requested that in view of
differences of opinion relating to the availability of data to be audited, the
audit be reopened and addressed in a more comprehensive manner.
On September 11, 1986, DEC submitted a revised claim for credit period costs,
as follows:
Urban Development Corporation
New York State Department of Transportation
New York State Department of Health
TOTAL
This revised claim is now the subject of our audit.
$ 9,340.000
3,465,030
4.814.743
$17.619.773
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SUKKAJRY OF AUDIT RESULTS - EXHIBIT A
Based on our review of information provided by the aforementioned State
agencies, it is our opinion that subject to litigation In progress, if any,
which may lead to recovery of claimed cost«, $12,479,270 of the $17,619,773
claimed by DEC if- acceptable as credit to the State share under cooperative
agreements for Love Canal, Our opinion is based on the premise that costs
claimed, amounting to $5,140,503, were unacceptable as such credit because the
purpose for which costs were incurred was not identified, expenditures claimed
were not reconcilable to agency records and not adequately documented.
Details of our findings are provided In the ensuing paragraphs of this report.
This report is Intended for use in connection with credit period costs claimed
under CERCLA by DEC for Love Canal and should not be used for any other
purpose.
Broomall, Pennsylvania
February 23, 1988
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EXHIBIT A
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
SUMMARY OF COSTS CLAIMED, ACCEPTED AND QUESTIONED
JANUARY 1, 1978 TO DECEMBER 11, 1980
FINAL AUDIT
CLAIMED ACCEPTED QUESTIONED
Srban Development Corporation $ 9,340.000 $ 8,820,577 $ 519,423
Department of Transportation 3,465,030 1,254,324 405,526
Department of Health 4.814.743 2,404.369 2.410.374
TOTAL $17.619,711 $12.479.270
SET ASIDE SCHEDULE
$ A - 1
1,805,180 A - 2
1 A - 3
$1.805.180
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SCHEDULE A-l
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
SCHEDULE OF COSTS CLAIMED, ACCEPTED AND QUESTIONED
URBAN DEVELOPMENT CORPORATION
JANUARY 1. 1978 TO DECEMBER 11, 1980
FINAL AUDIT
Property acquisition costs
Relocation costs
Closing costs
Taxes
Insurance
dministrative expenses
rsonnel costs
TOTAL
Less expenditures
after 12/11/80
TOTAL CLAIMED
CLAIMED
$7,368
1.442
108
73
45
711
72
$9.823
483
,690
,400
,221
,831
,436
.931
,510
,019
,019
ACCEPTED
$7.124
1,422
98
73
41
59
$8,820
_
.621
.706
,042
.831
.854
,523
_
.577
QUESTIONED
$ 244
19
10
3
652
72
$1,002
483
,069
.694
,179
-
.582
,408
,510
,442
,019
NOTES
1
2
3
4
5
6
7
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NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
URBAN DEVELOPMENT CORPORATION
NOTES TO SCHEDULE A - 1
FINAL AUDIT
NOTE 1. PROPERTY ACQUISITION COSTS
We accepted property acquisition costs shown in a record of
acquisitions and relocation expenses with sufficient details as to
persons, location of property, purpose, check numbers and dates of
payment, Our test of the close out folders for these costs proved
that they vere adequately documented and traceable to the record of
acquisition. However, the total costs in this record of
acquisitions amounted to only $7,124,621, while the costs claimed
totaled $7,368,690. We therefore questioned the difference of
$244,069.
NOTE 2. RELOCATION COSTS
Similarly, ve accepted a total of $1,422,706 of relocation costs
sufficiently detailed In a disborsement ledger for this item. These
costs were tested satisfactorily for documentation and traceability
to the ledger. The costs claimed, however, amounted to $1,442.400.
Ve therefore questioned the unsubstantiated costs of $19,694.
NOTE 3. CLOSING COSTS
The record of acquisition and relocation expenses referred to in
Note 1 included details of closing costs expended for each of the
properties acquired. Our tests of the close out folders for these
costs proved they were adequately documented and traceable to the
disbursement ledger and record of acquisition, and to cancelled
checks. However, the total costs in the record of acquisition
amounted to only $98,042, while the costs claimed totaled $108,221.
We therefore questioned the difference of $10,179.
NOTE 4. TAXES
The record of acquisition and relocation expenses referred to in
Note 1 included details of taxes paid for each of the properties
acquired. Our tests of the close out folders for these costs proved
they were adequately documented and traceable to the disbursement
ledger and record of acquisition, and to cancelled checks. The
total costs in the record of acquisition amounted to $88,364, while
the costs claimed totaled only $73,831. Although the total costs in
the acquisition register exceeded those claimed by $14,533, our
audit cover* only costs claimed. Ve therefore accepted cost*
claimed of $73,831.
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NOTE 5. INSURANCE
We accepted a total of $41,854 of insurance costs which were tested
satisfactorily to supporting documentation. The costa claimed,
however, amounted to $45,436. We therefore questioned the
unsubstantiated costs of $3,582.
NOTE 6. ADMINISTRATIVE EXPENSES
We accepted a total of $59,523 of Administrative expenses,
representing security expenses which were tested satisfactorily to
supporting documentation. The costs claimed, however, amounted to
$711,931. We therefore questioned the unsubstantiated costs of
$652,408.
NOTE 7. PERSONNEL COSTS
Since no disbursement ledgers or supporting schedules and
documentation were provided, we questioned total claimed costs of
$72,510.
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SCHEDULE A-2
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
SCHEDULE OF COSTS CLAIMED, ACCEPTED AND QUESTIONED
NEV YORK STATE DEPARTMENT OF TRANSPORTATION
JANUARY 1, 1978 TO DECEMBER 11, 1980
FINAL AUDIT
Personal service, additive
and related expenses
State payment to City of
Niagara Falls
Standby bus service
Housing and relocation:
Transient housing
Relocation costs
Security
Drainage
Fenc ing
Boarding
Homeowners* consultant
Human services grant
Sub-Total
Less:
FDAA and FEMA
reimbursement
Amount not claimed
TOTAL
CLAIMED
$1,617,377
1,200,000
424,362
1,437,385
1,594,056
85,516
11,500
83,476
13,097
45.000
195,000
$6,706,769
3,086.823
154,916
ACCEPTED QUESTIONED SET ASIDE NOTE
$ 800,000 $817,377 $ - 1
1,200,000 2
424,362 - -
1,437,385 3
1,594,056 4
85,516
11,500
83,476 - 5
13,097
4*. 000
195,000
$1,574,475 $900,853 $4,231,441
320,151 340,411 2.426,261 6
154,916 - 7
$3.465.030
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NOTE 1,
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT
NEW YORK STATE DEPARTMENT OF TRANSPORTATION
NOTES TO SCHEDULE A-2
FINAL AUDIT
PERSONAL SERVICE, ADDITIVE AND RELATED EXPENSES
a)
b)
For Fiscal Year (FY) 1978-79 and FY 1979-80. we were informed
that the time sheets and payroll records had been destroyed.
No other documentation was provided in support of these costs.
We, therefore, questioned the costs of $817,377 for these
fiscal years.
Our test of personal service costs for FY 1980-81 proved to be
satisfactory. Although we were only provided with an overall
summary of personal service costs from January 1, 1978 to
December 11, 1980, we reconstructed FY 1980-81 costs as follows:
PROJECT I.D.
NUMBER
5800-76-001
5800-76-101
5800-76-301
TOTAL
BASIC
PLUS
ADDITIVE
OVERTIME
PLUS
ADDITIVE
TOTAL
$347,175 $164,869 $512.044
167 - 167
36.384 16.148 52.532
However, this total of $564,743 was well within the $800,000
accepted in the OIG interim audit, which we have also accepted.
c) Questioned costs were calculated as follows:
Costs claimed
Less accepted above
Questioned
$1,617,377
800.000
NOTE 2. STATE PAYMENT TO CITY OF NIAGARA FALLS
The only documentation for this item was New York State payment
vouchers and an appropriation of $1.200,000 in partial
reimbursement to the City of Niagara Falls for remedial
construction work and leachate treatment in the southern zone
of the abandoned Love Canal chemical dump. We were informed
that the State of New York performed an audit of these costs
but notwithstanding our several requests, we were not furnished
a copy of the audit report thereon. Long after the completion
of our field audit and the preparation of the first draft of
our report DOT ultimately submitted a copy of the audit report
of the State of New York Department of Audit and Control (DAC)
on the Disaster Claim of the City of Niagara Falls, Project
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Application No. FDAA 3066 EM4, together vith related
correspondence. Our review of this audit report shoved that
while the auditors performed a commendable job, we noted the
following comments:
a) The scope of the audit was limited due to failure to
access the records of the prime contractor.
b) Although the prime contract was negotiated under emergency
conditions, the auditors concluded that contract unit
prices were exorbitant and had to disallow $1,623,840, or
261 of costs incurred of $6,278,869, based oo available
documentation only. Also, the award of this contract la
currently the subject of a civil suit for Racketeer
Influenced and Corrupt Organizations (RICO) damages by the
State of New York and the City of Niagara Falls.
c) In addition to the exorbitant unit prices, the prime
contractor was reimbursed $1,528,088 for special insurance
coverage under a direct reimbursement item in the
contract. The auditors did not audit this cost since the'
Federal government had not approved funding therefor at
the time of the audit.
In an inter-office memorandum dated October 14, 1980, enclosed
with the audit report, DAC stated that $1,036,811 can be paid
by the State as follows:
Allowable Insurance Cost (as adjusted
from $1,528,000 to the amount actually
paid by the contractor)
Less Maximum Federal Reimbursement
(as approved subsequently by FEMA)
$1.318,922
282,111
SI.036.811
The $1,036.811 was paid to the City of Niagara Falls under DOT
Voucher 7835, which is part of the $1,200,000 claimed for
credit period cost.
Also, the EPA OIC interim audit report questioned the claim for
$1,200,000 as representing liability insurance costs per
information furnished by the Deputy Controller for the City of
Niagara Falls.
With so many significant doubts attendant to this claim,
foremost among which is the failure to comply with the spirit
and intent of EPA procurement regulations as set forth in 40
CFR Part 33, we set aside the entire claim of $1,200,000.
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NOTE 3. TRANSIENT HOUSING
Support of these costs vas evaluated as follows:
a) New York State Appropriation Ledger Abstract, showing total
expenditures up to December 11. 1980 amounting to $1,437,385-
Although this Abstract is in agreement with costs claimed of
$1,437,385, it was not sufficiently detailed to enable the
tracing of individual vouchers selected for testing to the
individual expenditures shown in the Appropriation Ledger
Abstract.
b) Monthly Detail Ledgers for Love Canal projects-
These Ledgers contained a mixture of all expenditures for Love
Canal, without sufficient detail and a summary of transient
housing costs that tie in to the costs claimed.
c) A schedule showing details of payments made to hotels, motels,
and others for temporary housing of Love Canal evacuees, the
total for which amounted to $1,566,253-
This schedule contains sufficient details to trace payments,
but does not agree with costs claimed, aod DO reconciliation
therewith was furnished. Although this schedule was submitted
very late In the audit IB sectional spreadsheets which we had
difficulty in assembling, we attempted, with the assistance
of the Auditee, to reconcile it with the costs claimed but were
unable to do so.
d) New Tork State duplicate vouchers covering payments for
temporary housing of Love Canal evacuees-
These vouchers were initially presented to us without any
supporting documentation at all. Ve went to the
State Archives to obtain the documentation for our test sample
vouchers. However, ve were unable to obtain backup
documentation supporting these vouchers as part of the claim.
In addition, we were not furnished the contracts with the various
vendors, without which their bills could not be verified. Neither
were we provided documentation as to how these contracts were
procured.
As pointed out in the Interim audit report, it is incumbent upon the
State Agencies concerned to provide adequate supporting schedules
and documentation for costs claimed to be eligible for credit.
In light of the foregoing comments, we set aside all costs claimed
for transient housing amounting to $1,437,385.
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NOTE 4. RELOCATION COSTS
Initially the only schedules and documentation presented to support
these costs were the Monthly Detail Ledgers and duplicate copies of
State vouchers, many of which were Illegible without any supporting
invoices, statements or receipts, As indicated in Note 1 above, the
Monthly Detail Ledgers consisted of all Love Canal expenditures,
without sufficient detail and summary of relocation costs that tie
in to the costs claimed. Nevertheless, ve tested expenditures in
these ledgers under Object Class 2503 and traced them to the
vouchers. Ve went to the State Archives to obtain documentation and
legible copies of vouchers. Ve were informed that Object Class 2503
covered transient housing and relocation costs. Pursuant to this
information, and In an effort to at least approximate the costs
claimed for both transient housing and relocation costs, we
summarized all 2503 expenditures up to December 11, 1980, resulting
in a total of $2,535,697. We attempted, with the assistance of the
Auditee, to reconcile this amount with the costs claimed of
$3,031,441, but were unable to do so.
In view of the lack of supporting documentation, as explained above,
ve had to set aside the relocation costs claimed in the amount of
$1,594,056.
NOTE 5. FENCING
We were not furnished with a detailed schedule and vendor invoice*
for these costs. Ve were provided a copy of the agreement with the
vendor which did not include a pricing schedule. No contract
procurement documentation was presented for our examination. We
therefore questioned these costs amounting to $83,476.
NOTE 6. PDAA AND FEMA REIMBURSEMENT
According to supplemental schedules of Love Canal Reimbursement for
FEMA Claims 3066 EM-4 and 3080-DR 92003, furnished to us by DOT, the
State was reimbursed by FDAA and FEMA for the following costs:
-13-
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NOTE 6. FDAA AND FEMA REIMBURSEMENT (Continued)
Personal service and
related expenses
Transient housing and
temporary housing
and relocation
Boarding
Security
Fencing
TOTAL
FPAA FEMA
$187,300 $ 370.635
399,202 2,027,059
13,097
31,084
58,446
TOTAL
$ 557,935
2,426,261
13,097
31,084
58,446
$2.397.694
We distributed the total reimbursement between accepted and questioned
costs on a basis proportionate to like costs accepted and questioned on
Schedule A-2, as follows:
Personal service
and related costs
Transient housing,
temporary housing
and relocation
ACCEPTED QUESTIONED SET ASIDE
TOTAL
$275,970 $ 281,965 $
- $ 557,935
2.426,261 2.426,261
Boarding
Security
Fencing
TOTAL
13,097
31.084
_
5320.151
-
-
58.446
$ 340.411
13,097
31,084
58.446
$2.426.261 $3.086.823
-14-
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NOTE 7. AMOUNT NOT CLAIHED
On September 11, 1986 DEC submitted a claim for DOT expenditures of
$3.465,030, which represented gross housing and relocation costs.
On October 20, 1986 DEC submitted additional information to include
other costs shown in Schedule A - 2 and reimbursements by FDAA and
FEMA, summarized as follows:
Total Expenditures
Less Total Reimbursements
Net Expenditures
$6,706,769
3,086,823
$3.619.946
However, since DEC maintained costs claimed at $3,465,030, we
considered only these claimed costs in our audit.
-15-
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SCHEDULE A-3
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
SCHEDULE OF COSTS CLAIMED. ACCEPTED AND QUESTIONED
NEV YORK STATE DEPARTMENT OF HEALTH
JANUARY 1, 1978 TO DECEMBER 11, 1980
FINAL AUDIT
Personal service
Fringe benefits
Indirect overhead
Contractual service
Equipment
Supplies
Travel
Sub-total
LESS:
FEKA reimbursement
Expenditures after
December 11, 1980
TOTAL
CLAIMED
$2,545,724
788,728
1,204,441
413,394
1.014,666
800,289
57,453
ACCEPTED
$1,617,210
499,838
956,933
-
-
-
-
QUESTIONED
$ 928,514
288,890
247,508
413,394
1,014,666
800,289
57,453
NOTES
1
2
3
4
4
4
4
$6,824,695 $3,073,981 $3,750,714
633,726 - 633,726
1,376,226 669,612 706,614
$4.814.743 $2.404.369
-16-
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NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
NEW YORK STATE DEPARTMENT OF HEALTH
NOTES TO SCHEDULE A-3
FINAL AUDIT
NOTE 1. PERSONAL SERVICE
(a) For FY 1978-79, we found that labor hours for Love Canal
activities shown on the time and effort records vere not based
on employee's time sheets, which had no analysis of hours
vorked for specific tasks. We vere unable to obtain the
support documentation for these manually prepared time and
effort records. Ve therefore questioned $461,660.
(b) For FY 1979-80, we were provided support documentation only for
$459,208 out of the total claimed of $926,062. Based on
satisfactory test results In our review of the time sheets and
payroll records to support personal service costs of $459,208*'
ve accept this amount, and question the balance of $466,854.
(c) For FY 1980-81, since ve vere provided time sheets in support
of time and effort records, ve obtained satisfactory teat
results in our review of personal service costs. Ve therefore
accepted $1,158,002 before deduction for costs pertaining to
the period December 12, 1980 to March 31, 1981 as explained
below.
NOTE 2. FRINGE BENEFITS
For reasons stated in Note 1 above, ve questioned fringe benefits of
$136,975 for FY 1978-79, and $151,915 for FY 1979-80, but ve
accepted $149,426 for FY 1979-80 and $350,412 for FY 1980-81 before
deduction of costs pertaining to the period December 12, 1980 to
March 31, 1981 as explained in Note 5 below.
NOTE 3. INDIRECT OVERHEAD
Since these costs are directly related to personal service costs,
for the same reasons in Note 1 above, ve questioned $247,508 for FY
1979-80 but ve accepted $243,453 for FY 1979-80 and $713,480 for FY
1980-81 before deduction for costs pertaining to the period December
12, 1980 to Harch 31, 1981 as explained in Note 5 below.
-17-
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NOTE 4. CONTRACTUAL SERVICE, EQUIPMENT SUPPLIES AND TRAVEL
We questioned these costs for Che following reasons:
(a) To support these costs we were initially furnished vendor
invoices with taped summaries which did not agree with the coat
claimed. Ve were informed that the taped summaries were based
on the accrual method while the costs claimed were based on
cash expenditures. Ve attempted, with the assistance of the
Auditee, to reconcile the accrued costs with the costs claimed
but were unable to do so. We also attempted to summarize Love
Canal costs by class code from the daily Journal (R-6), but
were unable to do so manually. Auditee*s computer was not
programmed to provide this Information.
(b) Our test verification of randomly selected items showed that
almost all tested items were Insufficiently documented.
(c) We were not shown contracts and contract procurement
documentation.
(d) Our review of equipment purchased showed that many items could
be used for general applications, such as an entire computer
system. We were informed that they were used exclusively for
Love Canal purposes but no equipment usage reports or other
proof was submitted in support of this Information.
(e) Subsequently we were provided with yearly cost summaries which
agreed with the costs claimed. However, we could not trace
these yearly summaries through the voluminous maze of monthly
and daily journals comprising all DOH transactions to the
source documents of costs claimed.
We therefore questioned the following costs:
Contractual service $ 413,394
Equ ipment 1,014,666
Supplies 800.289
Travel 57.453
TOTAL $2.285.802
-18-
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NOTE 5. EXPENDITURES AFTER DECEMBER 11, 1980
Personal service costs of $1,158,002 claimed for FY 1980-81 included
expenditures thru March 31, 1981. The cut-off date for eligible
credit period costs was December 11, 1980 and costs incurred
thereafter were not allowable for credit against the State share
under cooperative agreements. Since we were not provided with «
monthly analysis of personal service costs, we calculated unallowable
costs from December 12, 1980 thru March 31, 1981, a period of 110
days, by pro-rating on a time basis the costs claimed as follows:
Personal service
Fringe Benefits
Indirect overhead
Pro-ration factor 110 Days
365 Days
Costs incurred after December
$1,158,002
350,412
713.480
$2,221,894
.30137
11, 1980 $ 669.612
-19-
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EXHIBIT B
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
COMMENTS ON ACCOUNTING SYSTEMS
During our audit of this claim by New York State we worked with the accounting
systems of the New York State Departments of Health and Transportation and of
the New York State Urban Development Corporation. We had no particular
difficulties with any of these systems which appeared adequate to meet the
needs of these organizations. Our difficulties were with the development of
the claim itself which made it, in many instances, impossible to identify the
amounts claimed In the system and, even where such costs could be identified,
a lack of the documentation required to relate such costs to the Love Canal
Project and to substantiate their allowability.
Specifically, our difficulties were as follows:
URBAN DEVELOPMENT CORPORATION
1) Cash Disbursement ledgers did not agree with claimed costs.
2) Lack of schedules detailing claimed costs.
3) Lack of documentation such as purchase orders, invoices and
contracts.
DEPARTMENT OF TRANSPORTATION
1) Lack of time sheets supporting allocation of personal service
costs to Love Canal.
2) Lack of schedules detailing claimed costs.
3) Inability to examine purchase orders, invoices, receiving
reports, contracts and cancelled checks.
4) Inability to Identify a cutoff date of December 11, 1980.
DEPARTMENT OF HEALTH
1) Lack of schedules or inadequate detail on schedules supporting
claimed costs.
2) Lack of time sheets and payroll records.
3) Inability to examine procurement records, invoices, cancelled
checks, signed agreements and contracts.
ID the course of our audit these items were requested; copies, of our final
requests are attached as a part of this report.
-20-
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EXHIBIT C
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
CORRESPONDENCE
-21-
-------
SAMTTZL M. FJSHZB COMPAKT
ru»uc ACCOUNTANT*-
«0\
§!••§§«•
Barcb 11, 19M
Kr. larr? lii»*r
t?A» Offica of tbt Xa*f4ttor Central
fC Churcb Strati
•tv Tori, IT 1000?
D**r lArryi ^
I calltd Md ajrok* to Dick Irocb of ITCSEDCt and lamtj tiatabut of ITDOH, OB
K*rcb 7, 1988, ta wt a(tttd at out itctat BtttUft IB jour offiet OB
M*rch 4, 1988, X t^oU to S«tl»h C. (4 of rzSUK on Xtrct S, 19M.
Kt I b*yt t*tt Btu^li to TMcb JM S»lti of HTDOT. All tbrtt tadlTldu*!*
* »l»rttd to tbt ffttt th*t tbtj vould Vt rtctiri&t » Ittttt outlining
dtttil tbi rtqutttd o>»cu»«nutio« itill &iid»d OB tb« ten C*AA! ^
ljT>cl vu §ppr»cJ§ttTt of tbt fact tbtt tbis ififorMtioB would W
MKitLittd to tb« tbrtt dtpkttAtnt biftdc at tbi «feai tUi b« vouli
ivi bii ififorutiot to tbtt bt vlll b» *tlt to eoordlMtt tbt »etiTiti»f»
i to tb*t BO idditloBAl ttai vlll b« lo»t IB oVt«iAiB| tbt otetttiiy
l&Torutioa*
Ki. 10m*7 tittBbot taUtd tVout tbt fact that lift dtp*rt»tat hat 4.000
taplejtti a&d 26 ft? ptriodi, »d tbtrtfort» tbty b&vt ortt IOO.QQO .tiaa
Tteordft. It v*i cottctr&td about tbt tlat It vovld tabt to oVtaia tbt tiaa
zoc&xdft fox aaj atl»ct»d ptriod. It v»nt»d to bov if alttr&att IbformatiOB
eovld bt uitd, tueb a» aalarj blttotj rtcordt tbat r»eotd (ay ratal aad
•»pioyB>e&t dtta, but b*»t BO llttltt of boura. Bt adaittti tbat all of tba
ttmi abttta prtvioualj rto,ut»ttd vtrt Bot at tbat tiBt available* and IB
fact* II vtrt Bii»i&i of tbo»t rtquttttd. It vtt eurioua aa to vbttbar or
aot avn»«rit*d tt»i aod activity r»&ordi could bt vitd ia litu of ti»a
»bttta» or vbttbar aa *ttbcj jriet out of rtpcrttd tiat could bt Batd* la
•lao atattd tbat ai&ct tb«»t iadiriduali raetivad a atttt cback Md aiaea
tbt ailarj blttorj card could or v»i piovidtd» it vai Bot cltar ia bia «la4
vbat otbtr ieformatiofi ottd bt prtteottd. I triad to Btlt it cltar to bla
tbat docutttotttlon vti rto,utrtd if fundi vtrt cltiatd» and tbat vitbout
adt^uata d&euatatatioa of Bteettitj, tbt coat would bt q,utitioaad.
I talbtd to Mr. 6
-------
X b*T» not ytt ba«t abli to talk to Jo« 8*ltb el ITDOT, altbot»|b I hart itft
*eiaat«s oa both Koadtj and Tutadaj. Tb« pur^ott of ttt* Ittttr 1* •tHply to
you vf to ditt tfttr our »ost r«e«at •••tiaf*
K. FIRE*. CFA
Ł«autl K. flabtr Covptaj
CK7/ba
ets Paul KtKtcfanla
Ztlda Vrottloraky
Tom Vataoa
Ho Una
?.I. I ttlkti to Jot 6»lth of ITDOT. on tUrcfe 11, 1981. Bt tutts tliat la
kit opinion, all tb« inforMtiob tvaila^lt om a oat alttraativt data txlita
•t ttaua tbae an&tbtt f*dtral apoc; acetpttd otbtr material is lltu of
tl»t ah««ti vhlch be MJ« MJ not bt avallabla.
-------
Ptbaa Otvtloptigat Corp. (TOC) I Of 2
•j of 2/23/88
(T»r Coaftrtac* f I7C EPA 016)
Acc.pt.d - *«r TOC D«t*il
of
roc
»*t< d«t.Ui of tltit co.it «* *oc««t.tton la
Cott
*
f*«t
ft Tltlt pcltcU»
| 22.200.00
of tb«.
Cltlmed I DlttllewW
Ve have nt 4ocu»*nt»ticm ruck u bills . purcfcttt ordtri la iupport of
tbe»e coats. Ve btv« ofii CbtcV Ke|t»t*r piftt at follovat
* tovt Canal lac. ovntd froptrty
Tuct on
Ipturaaeo
Vc btvt ao tchedult tuaiBtrXiiat tfcest cottt. BO invoictt or furclata
ordcrt. or copttt of in»ur*cct policiaa.
-------
** •
Doei»«utiot» ta;Bir»4 * BDC
(CcmttaUd)
2 of 2
Adalntatrattva Ccata
CUia*d tan
Vt trra BO »cb.*dula tvmrlfiai tbtaa eoata. Be
a» toutracta or otbar dtcuKtotatlo*. tk do
•a follewss
k
t
Security Contract 4 Security Cuppliti
CcDtr»ct«
$ 6.056.1?
Offict
13.405.25
76.454.09
6.991.02
Ccitt
CUUtd t DUallovU
Vc !uvt BO •cfctdult •uBtt«riclA| than eeitt. BO pirionxttl tacorda,
payroll racorda, or othtr docusaotatlofi tu aupport of tbtaa coata.
-------
P«pirt»«t>t •* rrmtfrortittcm (DOTl
tntmoa Mquir«4
A, Of 2/23/S8
1 of
CF«r CotJtrtaet »t IIC
OK)
'• ""'"'•
,
• 1^.091
- "<
-------
* .
Doctatatatlon l*quir*4 » MI
lof 3
Sttvletj Mdittvt trtd
ftrforM* *7
•cctp"« tht «*»« •*«— —
jpi 016* ' __ .>.. ^^
.T .^j|. !•(•••
ri«i»t4 tfio pii»**w»*^
V
-------
l*qoir*4 • DOT
U.793.12*
|Vft86.iai
TOAA mi
t«loe§tlo»
Ftr»90tl Strriti Coit
Tot»I-t«?ot.rilj
eotti
-------
_P«j>aTt»«nt of Baaltb (DOij
Documentation taquirad
a* of 2/23/88
(far Coafsrancs at ITC K?A OIC)
1 of 2
Ttracmal Strrieas
Accepted
••t
pr0rida4)
I2.W5.724
l.m.OOi
Allovad costs arc for fiacal year 1980-81*
Vc need lit* sheets for 1975-1979. Uvt Canal eotu for 1979-1980
V« identifitd atftc* ?«r»Mic*l aiiiptd to t«nrt Canal ebat|a< all tfctir
tU* to that project, rrta if tb«y icturllj vorUd on a diffar*&t
project. •
Uatfitt
$ 786.721
Acctptad
«at
Saat iaforaatloa aa i» raqoirad for Parional Strrlcaa.*
Xodirtet 0»trt«li
ll.204.Ui
713,480
Acciptad
iof&r»Jiloa at it rtqulrad for »ir»cmal atrrieaa.*
* Thcst eosti vill ea rtducai by tbi aitiftitttf costs laeurrsi frcm 12/12/80 to
3/31/81 (Cuirt&t ealevlfttiM la (6(3.515).
Contractual
Claiatd I Disillova4
We nead th* vorVsheets shoving the eoaposttton of this ite»» contracts.
purchase orders, receiving report*, invoices aad cancelled cbecfca for tba
coapoaent tti
and Diaallovai
Saae inforaation at for Contractual Services. Also, vt need information
on the location, condition, use or diapoiltion of all iteas costing at
least $1.000 and "aansitiva" itema (convartibla to personal use) costing
between $50 and $1.000.
-------
DoctmattUoB feqvlnd *
(C»ducttoi> for
vorKih»tts
tbi
of thU ttt»* tr«v«l
docuatotttiott tbtrtfor*
Vt o*td • »cbtdul* ftbovifi( dttilU of roik rtiaVuitt&tats nd tbtir
telttlot to eo»ti cl»l*td. Alto» tut iftfonatloa for FDtt
ttiabur«tBiott t«c*iv*d *ft»r 12/11/60 but covtriaj cotti laevrrod on or
fetfort 12/11/80, and rupportini
Pedvietloa for txptnditvttt ift»r 12/11/>0
ci*u»d
Vt teeporarilj tllovtd 4 pro-rtt»d ^ortlcm of * •rteaftl Strrlet frc
V» ettd aebtdulct »bovin| details of tbtst txptodlturtt a&d tbilr
rclitloB to •pictfie eo»tt elaiatd »od support ta| docuatatatlon.
-------
NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION
CREDIT PERIOD AUDIT FOR LOVE CANAL
Summary of Grantee Comments and Auditor Response to Comments
FINAL AUDIT
Th« preliminary contents of the draft report were discussed with the grantee
prior to the issuance of the draft report. The grantee responded to the draft
report in a letter dated December 30, 1988, a copy of which is attached.
The following summarizes the grantee's comments with our response to their
comments.
URBAN DEVELOPMENT CORPORATION - SCHEDULE A-l
Administrative Expenses (Note 6)
We questioned costs of $652,408 for being unsubstantiated.
Grantee Comment:
Auditor Response:
The grantee states that the auditors acknowledged the
existence of a check register in the amount of $312,086.31
and the cancelled checks therefor and that since these are
valid business records prepared in the regular course of
business, the auditors Bust accept the aforesaid amount.
Ve believe the grantee has confused competence or
admlssibillty of evidence with sufficiency of evidence.
The check register and the cancelled checks for
$312,086.31, while admittedly competent evidence, are not
sufficient proof to establish the validity of the
transactions they represent. We also requested the
invoices, purchase orders, contracts and other
documentation for these expenditures which were not
furnished by the grantee. We, therefore, continue to
question these cost*.
NEW YORK STATE DEPARTMENT OF TRANSPORTATION (DOT) - SCHEDULE A-2
Personal Service, Additive and Related Expenses (Note 1)
We questioned $817,377 for the fiscal years 1978-79 and 1979-80 due to the
non-availability of the time sheets and payroll records for these periods.
Grantee Comment:
The DOT states that the auditors' statement to support
Personal Services costs is not correct since the following
documentation had been provided:
a) A letter from the Federal Highway Administration
attesting to the reliability of the Department's
payroll cost distribution system which is the same
system that was used during the two years in
question.
-22-
-------
b) Detail ledgers shoving personal service costs charged
to Love Canal Project Identification Numbers (PINS)
and identifying these costs as JE9015 and shoving the
pay period date, payroll line number, employer social
security number and other relevant data.
c) Payroll histories confirming that the Department's
payroll distribution system allocated costs based on
the employee's correct wage rate.
The DOT further states that time sheets for the two years
in question were disposed of in accordance with the New
York State's Retention/Disposal Procedures but were
available to the auditors when this audit was previously
commenced about five years earlier.
In addition, NYSDOT claims that the personal service costs
incurred for fiscal year 1980-81 is $661,007 rather than
the $564,743 reported in the draft report.
Auditor Response:
The Love Canal Disaster Project was a new and unique
project and as such called for new and unique procedures.
Even with routine projects, our experience has shown that
cost accumulation for one project is not necessarily the
same for another project, or that for one year, not
necessarily the same for another year. Changes in
personnel, systems, procedures and other circumstances can
affect cost accumulation from project to project or from
year to year. With due respect to the Federal Highway
Administration, we cannot assume that their attestation
holds true with the present audit since the costs and
projects they audited were different. Nor can we assume
that since we were satisfied with the documentation for
personal service costs In FT 1980*81 the same acceptance
should be accorded those for FT 1978-79 and 1979-80. We
need to know that the personnel for which salaries and
related costs were claimed actually worked on the project
and the amounts claimed were accurate for these two years.
In the absence of time sheets and payroll records, we
cannot accept these costs on the basis of assumptions.
The detail ledgers provided us constitute only a part of
the required documentation and by themselves are not
sufficient evidence of the transactions they represent.
The payroll histories made available to us relate to FT
1980-81.
-23-
-------
As to Che claim of the DOT that the amount Incurred for
FT 1980-81 should be $661,007 rather than the $564,743
reported in the draft report, the figures in the draft
report comprise only basic and overtime salaries plus
their respective additives while the costs claimed by DOT
include, in addition to the foregoing, travel and
equipment costs. We did not accept the latter costs since
we were not furnished the documentation therefor. In this
connection, we accepted a total of $800,000 for personal
service costs, which is more than sufficient even for the
$661,007 claimed by NYSDOT. We also wish to state for the
record that Schedule A, shoving the yearly summary of
personal service and related costs, was provided to us
only now.
State Payment to City of Niagara Falls (Note
3)
We set aside $1,200,000 paid to the City of Niagara Falls due to significant
doubts attendant to the nature of these payments.
Grantee Comment:
Auditor Response:
The grantee states that the State legislation authorizing
the payment to the City required that It include only
costs not reimbursed by the Federal Government that were
"... considered reimbursable under existing rules of the
Department of Audit and Control (DAC)...", that with full
knowledge of this requirement of the authorizing
legislation, the Comptroller approved the payments to the
City^, and, therefore, it is Inaccurate and inappropriate.
to refer to the Comptroller's Audit as a basis for
disallowing the payments to the City.
Our reference to the Comptroller's Audit was necessary
since the comments in their report were relevant to our
reason for questioning these payments. In addition, we
also referred to as inter-office memorandum of (DAC) dated
October 14, 1980, copy enclosed with the grantee'*
response, showing the application of $1,036,811, which it
part of the $1,200,000 claimed, to the allowable Insurance
cost of the contractor. The DAC audit report showed
$2,607,304 in eligible costs not reimbursed by FEMA,
excluding $1,528.008 for insurance cost. DOT did not
address the issue why with $2,607,304 in unreimbursed
eligible costs, the same office (DAC) that performed the
audit should apply this payment to insurance cost, which
to date remains undocumented except for the DAC memo,
and was not even audited. Also, we mentioned that there
was a dearth of information provided to us during the
field audit. We were Informed that DAC performed an audit
of the expenditures of the City of Niagara Falls but when
we first asked for a copy of the audit report* we were
told that we would have to know the audit report number
for its retrieval, which answer amount* to begging the
question.
-------
la a follow up letter requesting a copy of the same
report, we were Informed that the City did not respond to
the grantee'i request therefor. Only after we had
completed the preliminary draft of our report, showing the
disallowance of this cost, did the grantee provide us with
the requested report. All these delays, notwithstanding a
reminder by the Divisional Assistant Inspector General of
EPA that it is the grantee's responsibility to support and
document all costs claimed, further added to our doubt aa
to the alienability of this cost. For these reasons, we
continue to set aside $1,200,000.
Standby Bus Service (Bote 3)
We questioned the entire claim of $424,362 due to insufficient documentation.
Grantee Comment:
Auditor Response:
The grantee submitted with its response the additional
documentation required, together with explanations about
the variations in hourly rates and the necessity of the
Standby Bus Service.
Ve find the additional documentation and pertinent
explanations satisfactory and accordingly we have accepted
these costs.
Transient Housing (Note 4) and Relocation Costs (Note 5)
We set aside $1,437,385 for Transient Housing and $1,594,056 for Relocation
Costs due to lack of supporting documentation.
Grantee Comments:
Auditor Response:
The grantee submitted comments stating that the DOT Real
Estate division has all the records and documentation for
these costs, which could be traced to the detail ledgers.
la addition, the DOT notes that $2,426,261 out of
$3,031,441 incurred for these costs was reimbursed by FEMA
based on DAC audit reports.
In the draft report we stated the details showing how and
why these costs were disallowed for insufficient
documentation. The DOT'* response that the records and
documentation are available at the Real Estate Division
does not resolve the question that these records,
consisting of the detail ledgers and worksheets with
deletions, changes, incomplete extensions and totals, do
not tie up with costs claimed. As to the audit reports of
DAC, in light of the difficulties and problems we
encountered in our field audit, we cannot rely on these
reports. In addition, considering the fact that five
years have elapsed since the EPA OIG interim audit, DOT
bad ample time to prepare and make available all the
records and documentation necessary to support and agree
with the costs claimed but this has not been the case in
our field audit, during which we ourselves had to obtain
legible copies of vouchers and supporting documentation
and to attempt to do the required reconciliation. We,
therefore, continue to set aside these costs.
-25-
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Fencing (Note 6}
We questioned the entire cost claimed of $83,476 for insufficient
documentation.
Grantee Comment:
Auditor Response:
The DOT states that the correct expenditures incurred
should be $58,446, which was reimbursed by FEMA
therefore no longer claimed for credit.
and
Pending appropriate amendment of costs claimed by the
grantee, ve continue to question $83,476. Further, we
note that this is an instance, among others, where the
grantee claimed an incorrect amount.
Honeovners' Consultant (Note 7)
We questioned the entire cost claimed of $45,000 due to insufficient
documentation.
Grantee Comment: The grantee submits the required contract, together with
an explanation of controls for progress payments.
Auditor Response: We find the grantee'* comments responsive to our
requirements. We, therefore, accept this cost in full and
have so adjusted our report.
FDAA and FEMA Reimbursement (Note 8)
Based on supplemental schedules furnished to us by the DOT, we distributed
FEMA and FDAA reimbursements for Love Canal costs as shown in Note 8.
Grantee Comment:
Auditor Response:
The DOT states that our distribution in incorrect and
encloses a corrected distribution as Schedule A.
He stated in our report that our distribution was based on
supplemental schedules supplied by the DOT, copies of
which are enclosed. If the DOT maintains that these
schedules are Incorrect, then this is another instance
where we have been furnished incorrect information.
However, on the assumption that the grantee's distribution
per their Schedule A is indeed the correct one, we have no
objection to revising our report to conform therewith.
Amount Not Claimed (Note 9)
The claim of DOT was restricted to $3,465,030 per letter dated October 20.
1986 of the grantee, the New York State Department . of Environmental
Conservation(DEC)* although additional information was submitted.
Grantee Comment:
The DOT seeks to revise its claim for credit from
$3,465,030 to $3,594,916.
-26-
-------
Auditor Response:
The grantee (DEC) agreed to limit the claim for DOT to
$3,465,030. It is not within our authority to alter this
amount. The DOT claim is another instance where the
grantee has submitted several different figures as
follows:
a) $2.000,000, submitted on January 14, 1982 based on a
best estimate of expenditures and subject of the EPA
01G interim audit.
b) $3,465,030, submitted on September 11, 1986,
representing gross housing and relocation costs.
c) $3,619,946, submitted on October 20, 1986, adding
other costs and deducting FEMA and FDAA
reimbursements. However, DEC restricted the DOT
claim to the previous amount of $3,465,030.
d) $3,594,916, submitted with the DOT response to this
draft report, seeking to increase the claim from
$3,465,030.
We believe that the grantee, in view of its
Inconsistencies over a span of more than six years, should
be precluded from further revising the costs claimed for-
DOT.
NEW YORK STATE DEPARTMENT OF HEALTH - SCHEDULE A-3
We questioned a total of $2,410,374 for costs with inadequate documentation.
Grantee Comment: The grantee agrees to the questioned costs.
Auditor Response: Our findings stand affirmed.
-27-
-------
NYS DEPARTMENT OF TRANSPORTATION
SUPPLDtNTAL SCHEDULE OF LOVE CANAL REI«URSQtMT
FOR FEMA CLAIM 3080-OR 32003
PERSONAL SERVICE RELATED EXPENSES
SUPPORT SERVICES
• 82,955.65
HOUSING t RELOCATION
TRANSIENT HOUSING
CONVENTIONAL HOUSING
SUPPORT SERVICES
TOTAL HOUSING ft RELOCATION
• 1,578,161.00
343,529.00
393,048.15
• 2,314,738.15
-------
f •
NYS DEPARTMENT OF TRANSPORTATION
SUPPLEMENTAL SCHEDULE OF LOVE CANAL REIMBURSEMENT
FOR FEMA CLAIM 906S EW-4
LOVt CANAL i - CLAIM FEMA 9066 EM-4
PERSONAL SERVICE I RELATED EXPENSES
»
OOAROING t MINTER1ZATION
SECURITY
FENCING
EXTRA-ORDINARY PAYROLL
ADO: LEAVE CREDITS APPROVED
TOTAL P/S t RELATED EXPENSES
t 40,645.96
973.25
8,482.81
132,659.86
27,977.96
• 210,739.26
HOUSING * RELOCATION
TEMPORARY HOUSING i RELOCATION
BOARDING I H1NTERIZATION
SECURITY
FENCING
390,961.12 ;
•
7,354.80 '
• «
30,110.32-
49,983.68 -
TOTAL HOUSING t RELOCATION «_ 478,369.90 ;
-------
GRANTEE COMMENTS
-------
lew York State Department of Environmental Conservation
Wolf Road, Albany, Ntw York 12233
Thomas C. Jortlng
CommlMlon*r
30 1?
Mr. Paul D. McKechnle
Regional Inspector General for Audit-
Eastern Division
United States Environmental Protection Agency
JFK Federal Bldg. Km. 1911
Boston. KA 02203-1911
Dear Mr. HcKechnlt:
This 1s In response to your letter to me of November 21, 1968 enclosing
four copies of a revised draft report No. P2CW8-02-0083 covering the audit of
costs claimed by New York State as a credit for cost Incurred under CERCLA for
activities at Love Canal, Niagara Falls, New York. As you know, the audit
included costs Incurred by the New York State Departments of Environmental
Conservation, Health and Transportation, and the Urban Development
Corporation. I provided a copy of the revised draft report to principals 1n
each of those agencies for comment.
In relation to the Department of Health, New York State claimed expendi-
tures of $4,814,743, $2,204,369 of which has been accepted by the auditors. We
accept the questioned costs totaling $2,410,374.
In relation to the Urban Development Corporation, New York State claimed
expenditures of $9,340,000, $8,820,577 of which has been accepted by the
auditors. In his letter to me of December 15, Mr. Satlsh C. Sood makes •
convincing argument, which we support, for acceptance of an additional
$312,086.31 In administrative expenses (as detailed on page 6 of schedule A-l of
the Tentative Draft Audit Report) based on the auditors' own acknowledgement and
admissions. (See page 2 of attachment to December 15 letter from Satlsh Sood.)
In relation to the Department of Transportation, New York State claimed
expenditures of $3,465,030, $922,379 of which has been accepted by the auditors
and $2,542,651 questioned. The State has Identified material Inaccuracies In
the tentative draft audit report which were pointed out 1n our previous response
to the preliminary audit report, but which were apparently disregarded by the
auditors. Additional specific concerns are outlined 1n a December 13, 1988
letter from the Department of Transportation's Deputy Assistant Commissioner for
Management and Finance Joseph C. Smith to me. I have Included his comments and
supporting Justification 1n their entirety.
-------
-2-
DespHe New York State's official financial records disposition timetable
of six years, and that the audit period extended from January 1, 1978 to
December 11, 1980, a period 1n excess of eight years ago, an overwhelming
preponderance of evidence reviewed by the auditors would Indicate the
reliability of the State's accounting system. Given the historic nature of
the period being audited, and the Inherent, statutoHly mandated
separation of functions related to Incurring and liquidation obligations, as
well as the frequent and ongoing audits performed by the New York State's
Department of Audit and Control and numerous Federal agencies. It seems more
than reasonable to conclude that the State's claim to the expenditures made
during the period In question can be reasonably deduced to have occurred, and
that the State's Inability to exhaustively document one-hundred percent of those
expenditures should not preclude reaching the reasonable conclusion that credit
should be extended for all costs claimed by the State.
We urge your close examination of the Information provided once again In
this response, and trust that a substantial revision to the tentative draft
audit report will result.
Sincerely,
Richard R. _,..—
Director of Fiscal Management
Enclosure
RRL/sar
cc: Samuel M. Fisher Company w/enc.
Romey C. Elsenhut w/o enc.
Satlsh C. Sood w/o enc.
Joseph C. Smith w/o enc.
-------
Ntw York State
Urban D«v*lopm*nt
Corporation
1515
New York, NY 10036-8960
212/930-9000
December 15, 1988
Richard Lynch
Director of Fiscal Management
New York State Dept. of
Environmental Conservation
50 Wolf Road
Albany, New York 12233-3750
Dear Mr. Lynch:
Pursuant to the first round audit (draft) report dated February
2, 1988, audited by Samuel Fischer and Company, UDC's Administrative
Cost in the amount of i711,931, was disallowed because of the lack
of back-up documentation (see attached). However, the auditors
acknowledged the existence of check register in the amount of
$312,086.31 for which the cancelled checks were provided as evidence.
For all practical purposes, the check register pages and the
cancelled UDC/Love Canal Subsidiary checks are valid business
records, prepared during the regular course of business. Therefore
the auditors must accept at least $312,086.31 of UDC's cost for
administrative expenses.
If you have any questions please call me at (212)
930-0384. Thank you.
Very truly yours,
Satish C. Sood
Director Project Administration
/mda
0139m
-------
Co't»
^SSi
JUqul
M tf 2/23/M
C?«r Goaf trtaea I ITC DA 0X6)
Iff 1
AcBoltltioi -
- P«r OK 9ot*ll
IT.MMIO
S.flO.SOf
nttd
titit eottf
»U
Ceiti •
Ace«pt*4 - **r CDC
11,442,400
.422.TJ
»f
«t atid detail* of tbttt eottt tad doeumeniatioa la turport of
Cloita^ CottO
ciiiMd ft oitoio^d > WiKl
«« E*vt ao doeu.tat.ttem - «| lavole....nretoM ordtrt. d.tatli of
eottt. Vt only Lrrt eve
ft«i
S.«rcb » Titlt
U|i«t«r
$ 22.200.00
.572.03
*•
Cl*l»td I
Vt ^*vt fto docuAtntttlOB tveb tt Viltt. purcfetM ord«rt la tupport «f
tbts« eottt. V« btv* on* Cktct It*|ltttr pip at follovtt
Ttztt «ft UDC - tovt CtftAl Ice. ovntd ?rop«rty S
Vt K»v» ao tchedult tvnaritiat tben co*tt» no tovoiett or purcbut
ord*rt, or copitt of ibiortaet oolleiot.
-------
2* 2
Cort»
Vt trrt ao febfrtal* »u»jrlilat tb«M eoft»» •» isroictt.
order* » eontr*ctf or otb«r d»oa«ot«tie«. »• 4o lurt Ch«ck t*|i«t«r
I 4,051.17
U3.Uf.IS
13.48S.25
76,454.01
MU.02
fS.»7.23
PtllltiAJ
?itaotul
Co&tmt A I»«tlt7 fupplttt
Co&ttMt*
Caotr*et«
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Va luv* BO tchtdult •vtaariilcg ttitti eeiti, fto ptrtMtoti
ptyroll raeerdt, or othtr doeu»tec«tiea ia tupport of thttt eons.
-------
NYSDEC
STATE OF N EW YORK
DEPARTMENT OF TRANSPORTATION
ALBANY. N.Y. 12232
PltANKUM C WMITI
COMMISSION!*
December 13, 1988
DIRECTOR OF
FISCAL MWtAGEMENT
Mr. Richard R. Lynch
Director of Fiscal Management
NYS Dept. of Environmental Conservation
50 Wolf Road
Albany, New York 12233
Dear Mr. Lynchi
Your letter of December 1. 1988 asked for comment* on the accuracy of the revised
rfr.ft audit report P2CW8-02-0083, covering the USEPA Inspector General'* audit
of State coats claimed a* a credit under CERCLA for activities at Love Canal,
Niagara Falls, New York.
•L-
at of the notes to Schedule A-2 and Exhibit B of this tentative draft audit
report are very similar to statements included in the preliminary draft report.
These items were addressed in great detail when the Department responded to your
office on that report. Attached to this letter is the original comments we made
along with the complete package of additional background material we had referred
to in that response. The information provided by the attachment appears to have
been ignored in the revised draft audit report.
Our comments concerning the notes on Schedule A-2 are as follows, and include
references to the attached material.
Note 1 - Personal Service, Additive and Related Expenses
The statement "No other documentation was provided" to support Personal Services
costs since the earlier years timesheets were destroyed is not correct. The other
documentation provided is explained In the attachment to this letter which ve
had forwarded in response to the preliminary audit. Also, as referenced on the
attachment, the actual personal service costs Incurred during 1980-81 is $661,007
rather than the $564,743 indicated in the draft audit report.
Hote 2 - State Payment to City of Niagara Falls
The audit report states "With so many significant doubts attendant to this
claim. ...we questioned the entire claim of $1,200,000". The New York State Office
of the State Comptroller as cognizant audit agency conducted the audit of City
of Niagara Falls costs for FEMA, and this audit also became the basis for the
}State Comptroller certifying and approving the two payments to the City totaling
$1,200,000. Although the Comptroller's audit did question the reasonableness
of some cost items, these were attributable to the emergency nature of that
situation, the lack of knowledge regarding the types of chemicals buried at the
-------
Mr. Lynch
Page Two
.December 13, 1988
Love Canal and the potential dangers to the public of not completing the remedial
vork expeditiously. The State legislation authorizing the payment to the City
required that it include only costs not reimbursed by the Federal Government that
were "...considered reimbursable under existing rules of the Department of Audit
and Control..." with full knowledge of this requirement of the authorizing
leEislation. the Comptroller approved the payments to the City. Therefore, it
is inaccurate and inappropriate for the draft audit report1* refer to the
Comptroller's Audit as a basis for disallowing the payments to the City. Further,
information was also provided by the attachment to our earlier response which
is also attached hereto.
Note 3 • Standby Bus Service
Additional documentation was provided previously in response to the questions
raised in the preliminary draft audit. This Included emergency evacuation plans
and correspondence describing the conditions that required approval of standby
bus service by State, Federal and local officials. This documentation and our
previous comments responding to this issue are attached.
Note 4 - Transient Houstnt / Note 5 - Relocation Costs
The questions or problems cited concerning Transient Housing and Relocation Costi
were responded to by the attached comments to the preliminary audit report. These
^comments reference additional supporting documentation which our Real Estate
Division has available for review to support this claim. Also, it should be
re-emphasized that FEMA reimbursed the Department for S2,426.261 out of the total
of $3 031,441 incurred based on audits performed by the HYS Office of the State
Comptroller and FEMA involvement in the authorization process for most of these
costs The costs not allowed by FEMA for reasons explained in the correspondence
In the attached package of information are properly includable in this claim.
Note 6 - Fencing
As stated on the attached previous response, ail of the Fencing expenditures were
reimbursed by FEMA and our claim does not Include any costs for this category.
Wote 7 - Homeowner's Consultant
A copy of the requested contract is attached and was also forwarded with our
response to the preliminary audit. The other questions raised are answered by
the attached preliminary audit response.
Note 8 - FDAA and FEMA Reimbursement
The attached response to the preliminary audit shows a corrected distribution
^ the FD^ and Fm reimbursement received. This ha. been ignored in the tentative
draft final audit report.
-------
Mr. Lynch
Page Three
December 13, 1989
>
Rote 9 - Amount Hot Claimed
As explained In our attached comments to the preliminary draft audit report, the
total unreimbursed costs for the Department are $3,59^,916 rather than the amount
of $3,465,030 submitted by DEC in based on preliminary information. This corrected
amount should be considered the amount of our claim.
The Department's responses to inaccuracies in Exhibit B of the draft audit report
are as followst
Statement1 "Lack of timesheets supporting allocation of personal service costs
to Love Canal"
Responset Other supporting documentation exists and has been reviewed by the
auditors as referenced in the attached preliminary response on Personal Service
Costa.
Statement 2 "Lack of Schedules detailing claimed costs"
Responset The Department's accounting system is an automated Integrated Accounting
System. Even though manually prepared schedules vere not available for the
categories requested by the auditors, it vas explained to the auditors bov to
reconcile all categories of costs to our automated system by utilizing the detail
^ledgers vhich list all transactions charged against the eligible project
dentification numbers (PINS). In fact, the auditors used the detail ledgers
to request samples of timeiheets, and vouchers for temporary housing and relocation
costs. Summary worksheets were provided which showed how each category as veil
as our total claim reconciled to these detail ledgers.
Statement 3 • "Inability to examine purchase orders, invoices, receiving reports,
contracts and cancelled checks"
Responset "The attached response to the preliminary draft audit addresses the
problems referenced by the auditors on lack of documentation. All documentation
requested by the auditors vas provided with the exception of the destroyed
timesheets for the two earlier years. If the documentation vas not readily
available, it was made available for the next visit of the auditors or mailed
directly to the auditing firm. It should be pointed out that some documentation
vas not forwarded until the time of the preliminary audit report since the auditors
did not ask for the contractual documents and other support until their last visit
prior to the preliminary audit being issued. It is true that the cancelled checks
vere destroyed. However, the Department provided certification by the Office
of the State Comptroller and documentation by the State's Department of Taxation
and Finance that the vouchers had been paid and that no checks vere outstanding.
The auditor who reviewed this material agreed that this would be completely
acceptable in place of the cancelled checks. The revised draft audit report la
inconsistent with that agreement.
-------
Mr. lynch
Page four
ecember 13, 1988
Statement 4 - "Inability to identify a cutoff date of December 11, 1980"
Responset The Department provided schedules which indicated what expenditures
were incurred through December 11, 1980. The auditors were shown how to verify
thia through our Integrated Accounting Syatem by using the detail ladgera and
other supporting documentation. The detail ledgers provide a record date for
every transaction.
In summary, there are material inaccuraclea in the tentative draft audit report
which we have pointed out in both this letter and in the previous response to
the preliminary audit report. Many of the assertions of the auditors regarding
documentation are the same as for the preliminary draft. This Department expended
considerable time and effort in retrieving and assembling supporting information
and preparing the package of materials uaed to respond to the preliminary draft,
and for the auditora use in verifying thia documentation. Either that response
waa not received by the auditors or it waa ignored when this final draft audit
waa prepared. For that reason, a copy of that information is included again with
thia response. The questioning of costs due to lack of documentation is groaaly
inaccurate aince the Department has fully demonstrated that the documentation
waa and is available to support the expenditures claimed.
Many of the difficulties experienced in the several audita of this claim seemed
o be caused by an almost complete lack of communication by the auditors, and
their failure to inform this Department, through exit conferencea or other
procedures usually employed in auch audita, of their tentative findings or
deficiencies in documentation. For example, when the auditor (Mr. Shabbir Moosajae")
made his laat visit to the Department to review warranta he was asked by the
Director of the Accounting Bureau, Mr. Cobb, if there was any documentation that
waa needed to complete the audit that had not been provided. The auditor's response
to this question waa negative. Therefore, we were completely surprised, as we
were with the earlier draft reports, when we received the latest report which
again attributed the auditors questioning or disallowance of coats to "lack of
documentation,"
Please advise what further information or action by this Department may be needed
to reaolve this matter.
Sincerely yours,
' A 4
OSEPH C. SMITE
Deputy Assistant Commissioner
for Management and Finance
jJCSiRDRiadd
Attachment
-------
NEW YORK STATE DEPARTMENT OF TRANSPORTATION
LOVE CANAL CREDIT PERIOD AUDIT
NOTES TO SCHEDULE" A - 2
NOTE 1. PERSONAL SERVICE, ADDITIVE AND RELATED EXPENSE
A IT WAS INDICATED IN THE TENTATIVE AUDIT DRAFT THAT PERSONAL SERVICE
COSTS FOR FISCAL YEAR 1980-81 WERE SATISFACTORY BUT THAT SINCE 1978-79.
AND 1979-80 TIMESHEETS WERE DESTROYED, THESE PERSONAL SERVICE COSTS
WOULD SOT BE ALLOWED. THE PERSONAL SERVICE FOR THESE EARLIER TWO YEARS
SHOULD BE ACCEPTED BASED ON THE FOLLOWING:
1 THE AUDITORS ACKNOWLEDGED THAT THE 1980-81 TIMESHEETS THEY
REVIEWED WERE CONSIDERED SATISFACTORY AND THAT THE HOURS WERŁ POSTED
CORRECTLY TO THE DETAIL LEDGERS FOR THE LOVE CANAL PROJECTS.
2 THE ATTACHED LETTER (EXHIBIT I) FROM THE FEDERAL HIGHWAY
ADMINISTRATION DATED 2/22/88 ATTESTS TO THE RELIABILITY OF THE
DEPARTMENT'S PAYROLL COST DISTRIBUTION SYSTEM WHICH IS THE SAME
SYSTEM THAT WAS USED DURING THE TWO YEARS IN QUESTIOK. DATA PRODUCED
BY THIS SYSTEM DISTRIBUTES EMPLOYEE PAYROLL COSTS TO PROJECTS AND
OTHER COST OBJECTS BASED ON PAYROLL TIMESHEETS SUBMITTED BY EACH
EMPLOYEE AND APPROVED BT THEIR SUPERVISORS IN ACCORDANCE WITH THE
DEPARTMENT'S MANUEL OF ADMINISTRATIVE PROCEDURES. THE SYSTEM
GENERATES PERSONAL SERVICE COST TRANSACTIONSCBY EMPLOYEE/PAYPERIOD)
APPEARING ON THE DETAIL LEDGERS FOR THE LOVE CANAL PROJECTS. AS NOTED
THEREIN THE FEDERAL HIGHWAY ADMINISTRATION AND THE USDOT OFFICE OF
THE INSPECTOR GENERAL CONSIDER THE SYSTEM GENERALLY TO BE A RELIABLE
BASIS FOR APPROVING REIMBURSEMENTS TO THIS DEPARTMENT FOR OVER $50
MILLION PER YEAR IN PERSONAL SERVICE COSTS OF DEPARTMENT EMPLOYEES
CHARGED TO FEDERAL-AID HIGHWAY PROJECTS.
3 IT IS HOT TRUE THAT NO OTHER EVIDENCE WAS PROVIDED TO SUPPORT
PERSONAL SERVICE COSTS. ALL OF THE PERSONAL SERVICE WAS CHARGED TO
LOVE CANAL PINS AND THE DETAIL LEDGERS LISTING THESE CHARGES WERE
PROVIDED TO THE AUDITORS. THESE DETAIL LEDGERS CLEARLY IDENTIFY AU.
PERSONAL SERVICE TRANSACTIONS AS JE9015 AND SHOW THE PAY PERIOD
ENDING DATE, PAYROLL LIHE NUMBER, EMPLOYEE SOCIAL SECURITY NUMBER,
ORGANIZATION NUMBER AND OTHER RELEVANT DATA.
4 IN ADDITION, PAYROLL HISTORIES WERE PROVIDED TO THE AUDITORS TO
CONFIRM THAT THE DEPARTMENT'S PAYROLL DISTRIBUTION SYSTEM ALLOCATED
COSTS BASED ON THE EMPLOYEE'S CORRECT WAGE RATE.
S THE TLMESHEETS FOR THE TWO EARLIER YEARS WERE DISPOSED OF BECAUSE
OF THE STANDARD RETENTION PERIOD IN ACCORDANCE WITH THE NEW YORK
STATE'S RECORDS RETENTION/DISPOSAL PROCEDURES. THESE TIMESHEETS WERE
AVAILABLE TO THE AUDITORS WHEN THIS AUDIT WAS PREVIOUSLY COMMENCED
ABOUT FIVE YEARS EARLIER. AT THAT TIME, NO QUESTIONS WERE RAISED
ABOUT THE ACCURACY OF THE PERSONAL SERVICE CHARGES FOR THOSE YEARS.
« THE TOTAL PERSONAL SBVICE AND RELATED EXPENSES BY FISCAL YEA1 IS
SHfJ.VscSmS A? iSTAMOUNT ACTUALLY INCURRED DURING 1980-81 IS
$6^0™ ESS!™ IB$564,743 REPORTED IN THE TENTATIVE DRAFT AUDIT
REPORT.
-------
NOTE 2. STATE PAYMENT TO CITY OF NLACAUA FALLS
ATTACHED (EXHIBIT D) IS CORRESPONDENCE FROM THE DEPARTMENT
OF AUDIT AND CONTROL INCLUDING THEIR AUDIT REPORT NO.AL-MISC-69-80
WHICH IDENTIFIES COSTS INCURRED BY THE CITY THAT ARE ELIGIBLE FOR
REIMBURSEMENT FROM THE $1.2 MILLION STATE APPROPRIATION. THERE WERE
TWO VOUCHER PAYMENTS WH1CB TOTAL TO THE $1,200,000 PAID TO THE CITY OP
NIAGARA FALLS. THE AUDITORS PREVIOUSLY REVIEWED THE OFFICE OF THE
STATE COMPTROLLER COPY OF VOUCHER #8651 DATED 11/14/80 FOR $163,189.
ATTACHED IS A PHOTOCOPY OF THE OFFICE OF THE STATE COMPTROLLER COPY OF
VOUCHER #7836 (EXHIBIT D-l) FOR $1,036,811.00 DATED 10/16/80.
NOTE 3. STANDBY BUS SERVICE
A THE SERIES OF ATTACHMENTS TO THIS RESPONSE INCLUDE CORRESPONDENCE
WHICH OUTLINES THE MEDICAL AND OTHER REASONS STANDBY BUS SERVICE HAS
NECESSARY (EXHIBIT E). ATTACHMENT E ALSO INCLUDES A NOTICE DISTRIBUTED
AT A MEETING OF LOVE CANAL RESIDENTS SUMMARIZING THE CONSTRUCTION PLANS
AND THE SAFETY PLAN TO PROVIDE PROTECTION TO RESIDENTS AND WORKERS
DURING THE REMEDIAL CONSTRUCTION WORK. A KEY ELEMENT OF THIS IS THE
EVACUATION PROCEDURES USIHC THE STANDBY BUSES. IN ADDITION, ATTACHED
IS ONE OF THE PURCHASE ORDERS FOR THIS SERVICE AND RELATED CONTRACTUAL
CORRESPONDENCE (EXHIBIT E-l) AS REQUESTED BY THE AUDITORS.
B THE ISSUANCE OF A PURCHASE ORDER AFTER A SERVICE IS RENDERED OFTEN
DOES OCCUR AND IS A NORMAL PROCESS WHERE THE AWARD IS MADE AND THE
TRICE AND OTHER ITEMS ARE ESTABLISHED THROUGH THE PROCUREMENT PROCESS,
BUT THE ACTUAL QUANTITIES CANNOT BE DETERMINED UNTIL AFTER THE SERVICE
IS PROVIDED. THIS IS OFTEN THE CASE IN AN EMERGENCY SITUATION SUCH AS
LOVE CANAL. THE DEPARTMENT IS REQUIRED TO CERTIFY THAT VOUCHERS
SUBMITTED FOR PAYMENT ARE IN COMPLIANCE WITH THE CONTRACTUAL AGREEMENTS
AND PURCHASE ORDER PRIOR TO CERTIFYING THEM FOR PAYMENT. THIS IS DONE
BY SIGNATURE OF AN AUTHORIZED EMPLOYEE ON THE VOUCHER. IN ADDITION, THE
OFFICE OF THE STATE COMPTROLLER ALSO AUDITS THE VOUCHERS TO INSURB THAT
THEY ARE IN COMPLIANCE WITH THE PRICE AND OTHER TERMS OF THE APPROVED
CONTRACTUAL PROVISIONS.
NOTE 4 AND 5. - TRANSIENT HOUSING/RELOCATION COSTS
THE DEPARTMENT'S REAL ESTATE DIVISION HAS A DETAILED LISTING OP
VOUCHERS ISSUED FOR TRANSIENT HOUSING AND TEMPORARY HOUSING AND
RELOCATION. THE REAL ESTATE DIVISION'S COPIES OF THESE VOUCHERS ALONG
WITH THE SUPPORTING DOCUMENTATION IS AVAILABLE FOR REVIEW. THE REAL
ESTATE DIVISION ALSO HAS REGISTERS SHOWING PAYMENT DATES FOR THESE
VOUCHERS. THESE PAYMENTS CAN BE TRACED TO THE DEPARTMENTS INTEGRATED
ACCOUNTING SYSTEM AND THE INDIVIDUAL TRANSACTIONS LISTED ON THE DETAIL
LEDGERS FOR THE PROJECT IDENTIFICATION NUMBERS (PINS) IN SUPPORT OF THE
DEPARTMENT'S CLAIM.
-------
THE AUDITOR'S STATED THAT FOR A FEW VOUCHER'S THE DOCUMENTATION
ATTACHED TO THE OSC COPY OF THE VOUCHER WAS NOT SUFFICIENT. THEREFORE,
WE ASKED THAT A LIST BE PROVIDED OF THE VOUCHERS WHICH LACKED
SUFFICIENT DOCUMENTATION. WE WERE GIVEN A LIST OF ONLY 6 VOUCHERS THAT
REQUIRED FURTHER SUPPORT. THESE VOUCHERS AND SUPPORTING DOCUMENTATION
WERE THEN PULLED FROM THE REAL ESTATE DIVISION'S FILES AND WERE
REVIEWED DURING THE AUDITOR'S LAST VISIT AT THIS DEPARTMENT. WE WERE
TOLD THE ADDITIONAL DOCUMENTATION WAS COMPLETELY ACCEPTABLE.
ANY ADDITIONAL PAYMENTS REQUESTED BY THE AUDITOR'S CAN BE TRACED TO THE
OFFICE OF THE STATE COMPTROLLER'S COPY OF THE VOUCHERS AND THE REAL
ESTATE DIVISION'S RECORDS AS WAS DONE WITH THE ABOVE VOUCHERS.
IT SHOULD BE NOTED THAT $2.426,261 OUT OF $3,031,441 INCURRED FOR THESE
TWO CATEGORIES WAS REIMBURSED BY FEMA BASED ON THE AUDIT REPORTS ISSUED
BY THE DEPARTMENT OF AUDIT AND CONTROL AS COGNIZANT AUDIT AGENCY. THIS
FURTHER DEMONSTRATES THAT THE SUBJECT EXPENDITURES ARE SUFFICIENTLY
SUPPORTED.
NOTE 6. - FENCING
THE EXPENDITURES INCURRED RAVE BEEN CORRECTED TO $58,446 WHICH IS EQUAL
TO THE FEMA REIMBURSEMENT STATED IN THE OSC AUDIT REPORT. THEREFORE,
NO CREDIT IS BEING CLAIMED FOR THIS CATEGORY.
NOTE 7. HOMEOWNER'S CONSULTANT
THE AUDITORS WERE PROVIDED WITH ALL SUPPORTING DOCUMENTATION THAT IS
REQUIRED WHEN CONTRACT PROGRESS ESTIMATES ARE INITIALLY PAID. THE
APPROVAL OF PROGRESS PAYMENTS FOR A CONTRACT DO NOT REQUIRE TESTING OF
TIMESHEETS, TRAVEL DOCUMENTATION, ETC. PROGRESS PAYMENTS ARE APPROVED
BY THE DEPARTMENT'S REPRESENTATIVE (ENGINEER IK CHARGE) BASED ON HIS
KNOWLEDGE OF RESOURCES BEING APPLIED TO THE PROJECT BY THE CONTRACTOR.
INVOICES OR MATERIALS CERTIFICATIONS FOR DIRECT MATERIALS MAY ALSO BE
REQUESTED Bl THE ElC. THE CONTRACTOR'S COMPLETE SUPPORTING COST
DOCUMENTATION IS REVIEWED IN DETAIL BY THE DEPARTMENT'S AUDITING BUREAU
WHEN THE FINAL AUDIT OF THE CONTRACT IS PERFORMED. THE DEPARTMENT'S
AUDITING BUREAU HAS A DETAILED FILE SUPPORTING THEIR AUDIT OF THE
CONTRACT WITH WORKPAPERS AND COPIES OF SUPPORTING SOURCE DOCUMENTATION.
A COPY OF THE CONTRACT AS REQUESTED BY THE AUDITORS IS ATTACHED AS
EXHIBIT R.
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NOTE 8. FDAA AND FEMA REIMBURSEMENT
THE DISTRIBUTION OF FEDERAL REIMBURSEMENT AS SHOWN IN THE TENTATIVE
AUDIT REPORT IS NOT CORRECT, THE PROPER DISTRIBUTION BASED ON THE
EARLIER AUDIT REPORTS PREPARED BY THE DEPARTMENT OF AUDIT AND CONTROL,
AS COGNIZANT AUDIT AGENCY, AND ACCEPTED BY FDAA AND FEMA IS SHOWN
BELOW.
1. PERSONAL SERVICE AND
RELATED EXPENSE
2. TRANSIENT AND
TEMPORARY BOUSING
AND RELOCATION COSTS
3. BOARDING
. SECURITY
5. FENCING
TOTAL
FDAA
3066 EM-4
187,300
399,202
13,097
31,084
58,446
689,129
FEMA
3080-DR
92003 TOTAL
370,635
2,027,059
2,397,694
557,935
2,426,261
13,097
31,084
58,446
3,086,823
EXPLANATION OF REVENUE DISTRIBUTIONS
1. PERSONAL, SERVICE AND
RELATED EXPENSE
A) EXTRAORDINARY PAYROLL
AS STATED IN AUDIT 132,660
B) LEAVE CREDITS APPROVED 27,978
69,036
132,660
97,014
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C) THE SUPPORT SERVICES
FOR FEMA 3080 AUDIT
INCLUDES PERSONAL SERVICE
AND LEAVE CREDITS AS SHOWN
18 THE AUDIT BY THE INCREASE
IN THE "SUPPORT SERVICES"
CATEGORY BY $69,036
FOR LEAVE CREDITS. THERFORE,
TBE DIRECT LABOR CAN BE
COMPUTED AS FOLLOWS
$ 69,036
*«• W*W WM*^W WW«M*^«W»«0 g
.2289 (60/81) LEAVE RATE
0. WINTERI&ATION AS SHOWN
IN DOTE 1. OF AUDIT REPORT
PERSONAL SERVICE $26,406
EQUIP. UTILIZATION 256
301,599
301,599
26,662
TOTAL PERSONAL SERVICE
AHD RELATED EXPENSE
187,300
370,635
26,662
557,935
2. THE TWO CATEGORIES
TRANSIENT HOUSING AND
TEMPORARY ROUSING AND
RELOCATION BAVE BEEN
COMBINED SINCE THERE IS HO
CLEAR DISTINCTION
BETWEEN THESE PHASES AND TBE
CODING OF THE EXPENDITURES
HAS SIMILAR FOR BOTH.
CATEGORIES STATED
CLEARLY IN THE AUDITSI
TEMPORARY HOUSING AND
MOVING EXPENSE
TRANSIENT BOUSING
CONVENTIONAL HOUSING
390,961
390,961
1,578,161 1,578,161
343,529 3*3,529
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SCHEDITE A
NVS DEPARTMENT OF TRANSPORTATION
SCHEDIT-E OF PERSONAL SERVICE AND
RELATED EXPENDITURES
BY FISCAL YEAR
1073/79
1079/80
1030/31*
REGULAR
PERSONAL SERVICE
FRINGE k LEAVE
357,600
207,547
333,717
S 948. 3C4
OVERTIME
PLRSONAL SERVICE
FRINGE & LEAVL
230.907
70.069
J81.026
S <.82,U02
TRAVEL
t<
EQUIPMENT
50,5*3
:s.8is
96.152
s is:. sio
COST
CLMER
W
579
112
S 000 >
TOTAL
6JO.--J3
317.010
i«,i.OC7
1.017.3*5
* COVERS PEI:IOl> 4/1/80-12/11/80
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OTHER DISTRIBUTIONS
A) BOARDING AMD WINTERIZATION
TOTAL IN AUDIT 48.000
LESS PERSONAL SERVICE (26,406)
LESS EQUIP. UTILIZATION (236)
LESS BOARDING (13.097) 8,241
B) SUPPORT SERVICES
TOTAL AUDIT 476,004
LESS PERSONAL SERVICE 370,635
8,241
IDS,369 105,369
TOTAL HOUSING COSTS
399,202
2,027,059 $2,426,261
3. BOARDING - STATED
IN AUDIT AS BEING
COMBINED WITH
WINTERIZATION
' 4. SECURITY - STATED
SEPARATELY IN AUDIT
13,097
31,084
13,097
31,084
5. FENCING - STATED
SEPARATELY IN AUDIT
NOTE 9, AMOUNT NOT CLAIMED
56,446
58,446
THE DEC SUBMITTED AMOUNT OF $ 3,465,030 WAS IN ERROR AND SHOULD HAVE
BEEN $ 3,619,946 AS STATED IN THE TENTATIVE AUDIT REPORT. DUE TO THE
CORRECTION TO FENCING EXPENDITURES, THE REVISED TOTAL UNRELKBURSED
COSTS ARE $ 3,594,916. THIS AMOUNT SHOULD BE CONSIDERED AS THE
DEPARTMENT'S CLAIM RATHER THAN THE $ 3,465,030.
INCLUDED HEREWITH IS AN APRIL 18,1988 MEMORANDUM TO FILE FROM J.C.
SMITH WITH ADDITIONAL DOCUMENTATION ATTACHED TO PROVIDE BACKGROUND
INFORMATION TO SUPPORT EXPENDITURES INCURRED FOR LOVE CANAL. SEVERAL
ITEMS OF THIS DOCUMENTATION HAVE ALSO BEEN REFERENCED IN RESPONSE TO
THE SPECIFIC NOTES TO SCHEDULE A-2 OF THE TENTATIVE DRAFT AUDIT REPORT.
LC
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SAMUEL M. FlBHEH GOHPAXY
PUtLIC ACCOUNTANTS
4*1 FAtKWM
*Li» Penan.* AH* i
rtb 21.
Hr» lichard X>. lacor. Aatoeiatt Ateouataat
Eava&ut Dnlt, Dtpartaant of transportation
Ivildias '3
1220 ITaahington *ra.
Albany, lav tort 12232
Xfea* fttr. taeori
•
Vhra X talkad vith yon today* I indicated that tht information you iruVmlttad IB your
Ttbruary 19, 1988 lattar vat in* 4* quiet for « to vork vlth, It It trut that yen
•uVmltttd •eb*4ul*a of »ori than 50 pt(ti vltb a variety of uuattti oo th* pa(ts.
Tbtrt va« no •uaaury to ladieatt hov tboii tcb»dult» titt ovt vith tbt aaoirett clalstd.
Zt la tbtrtfor«» »ot tbt ibformatioa «t rt^unttd, nor la it prtpartd ta a maoaar
that l&dieatad tbt docuktatatin for tbt aaov&ti
1 haft *tteloa*a a thrat pajt llatlA^ of tbt documentation raquirad. Zt la vy nadar-
ataadtai that Hz. Sadtb hai altaady taeaivad thla lafor»atio&. It la ftot out lataat
to otrform aay additional vorl oa tbt elala of tbt Dtp*rc»tat of Tratxtportatloa oatil
•ucb tlat at vt havt tbt ia/ormatioa rtquttttd la tbt doeuatatatioa rtquttt* da tad
23. 19SB.
f you art abla to makt a autmary of tbt «at trial that yon pxarioualy aobmlttad.
"it»d It ac?mt vay abov bov tbott itt» rteooeilt to aay of tbt aaouatt clalatd, vt vould
bt pittitd to «erk vitb tbt »attrlal; hovtvar. it ia aot our lataat to try to raeoa*
•truet tbt rtcordt of tbt P«p»rt»tat of Traaiportatloa fro» tbttt acbtdulat.
Tbt pur>ota of thit Itttar it •t*plj to iadleatt formally to yoti that vt hart «ot
racaivad tbt docuacctatioa rtqulrtd. Tbtrt la a lialtad a»»uat of tlat that vt havo
btte tivaa to audit tbt d&cuat&tatloa. Our iattrvetloaa art to ittut a rtport vitbia
• aptclfltd »triod» aad that it vbat vt shall do vitb or without tbt documentation
vt hart rt^utttad.
Z vant to mala it eltar that if tht Department of Tra&aportatlon tuVnltt no additional
fettarial. or dott not proTidt tbt inf&raation that abovt bov tbt docuatntt tubalttod
ajrtt vitb the additioaal iofomatlon nttdad to support tbt cltia, our rtport vill
at and at ia. vitb tbott eottt appearing at o,utttiootd cottt*
tary t»ly yovrt.
M. FlSBOt, CPA
Saoutl M. f labtr Coapaqj
tne*
eci Paul KeKtcknio
Zelda Vrottlovaky
Tom Vataom
Crtg Molina
Shabblr Kootajat
Richard Lyneli
iarr| Silvar
•-D
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