3EPA
OFFICE OF ENFORCEMENT
CERCLA
fr A ,1
COST RECOVERY
NOTE
VOLUME II
Printed on Recycled Paper
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TABLE OF CONTENTS
I. CASE DEVELOPMENT AND '^REFERRALS
TAB
A Guidance on Pursuing Cost "" Recovery- Actions'* Under CERCLA,
August 26, 1983, (Price/OECM, Thomas / OSWER) , OSWER #9832.1
„ - i i-"VJ ' • ""' - j.1* * A* " . •"•,».,' -
B Cost Recovery Referrals, -September 6,*-l983~ (Sniff'/OBC)*1, r-
OSWER #9832.0 * ' - -1 - " •"',"-"• " J ' --
C Guidance Regarding" CERCLA Enforcement Against" Bankruptf
Parties, May 24, 1984, (Price/OECM) / OSWER #'-9832.7
D Small Cost Recovery" Referrals; July \.2r, 1985 (Stiehl'/'OECM,
Lucero/OWPE) "%- C < ~ - * '- -*v
E Revised Hazardous" Waste? Bankruptcy- Guidance ;• May 23-, 1986
(Mays/OECM) , OSWER #9832. 7-la ' • - rr'u<"~ °'" - " '"'L
F The Superfund Cost1 Recovery 'Strategy-,^ July1 '2 9:, 'l988,"r - '"
(Porter/OSWER) ,"OSWERC#9832.13 ' -> rf'^J "c :-^
G Model Litigation'- Report- for CERCLA Sections 106- and 107 and
RCRA Section 7003, June 21, 1989, (Reich/OECM) ,
OSWER #9835.11-1-^ ~* ' - °- ^ * ' J - - " -*^- * '"-- » "QQ
' „ >'• -y •>.-£•« r* .
H Guidance on Documenting Decisions Not to Take Cost Recovery
Actions, June 7, 1988 ( Cannon/ OSWER ), OSWER '#9832 .-if $£-. ~ •
I Introduction^ to* Cost- Recovery : - - Wh'atJ Do YbuJ NeedP To Know-
To Prepare a Cost Recovery
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COST DOCUMENTATION (continued) t - - -
TAB -' ^
E Guidance for Documentation and Maintenance of Regional
CERCLA Records, January 30, 1985, (CAN'T'FIND)
i
F Procedures for Documenting Costs for CERCLA Section 107
Actions, January, 30,-1985,. OSWER # 9832.0-ra
- \
G Travel Vouchers with Superfund"-Site-Specific Charges —
Requirements for Documenting'Time at Superfund Sites,
April 1, 1986 (Kinghorn/Comptroller)
H Financial Management Procedures for Documenting Superfund
Costs, September 1986
•v
I
A Schematic Representation of EPA's Three Stage Indirect Cost
Allocation Methodology (CAN'T FIND)'-,. -
*• ^i -
B Reimbursement 'of^lndirect Costs ,(HWMD) (CAN'T FIND)
C".'. v - ' *. '
C Superfund Indirect Cost Allocation Methodology,
, May 23, 198c"(Kinghojrn/EMD~) t ' .
D Procedures for Claiming Indirect Costs in CERCLA Section 107
Act-ions,-,Apr>l 15,-195,5r(Kinghorn/FMD)
E Stand-Alone pocument fox Allocating Indirect Costs to
- ' supttffiuicl ^Itea,~Ma"y 9>' 1985, (Kinghorn/FMD)
F Superfund Indirect Cost Manual For Cost Recovery Purposes FY
f y!9 8 3; j« ;FY fl98 6, March 19 8 6 (Kinghorn/ Comptro 11 er)
11
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INDIRECT COSTS (continued) - ~* "- **-' -- '-*
TAB
G Policy on Recovering ~Indirect*Cos'ts in CERCIA "Section 107
Cost Recovery Actions, June 27', 1986 "(Stiehl/OECM, *r
Stanton/OSWER) , OSWER #9832.5 -.
** ' - « "*^*- " t <- -\* ,. - ••
H Superfund Indirect Cost Update", 'January 5, 1987, (Goerl/FMD)
IV. INTEREST RATES'^ AND COLLECTION ='~;>v'"/ - -• ' i '••.'---*••' 1..
~ C ' "_
A Department of Treasury, Results of Treasury's Fifty, Two week
Bill Auction, Fiscal Years 198071983 *; ' "* ' ' " ' :
M ' ' „ 1,4 J ' " •*•!,!
B Love Canal Litigation: Pre judgment Interest on Superfund
Expenditures, December 11, ( 1985 :{DOJ' Law Clerk 'Memorandum)
— * ^ *. « *-^
C Interest Rates on Debts Recoverable Under the "Super fund'" •
Amendments and Reauthorization Act of 1986-1991,. (No: $7-17 ,,
88-01, 89-03, 89-32T 91-<0ir 92-01) (Ryan/ Comptroller) - '"• J
D Summary of Superfund Trust 'Fund " Investment RVtes,* August 16,
1991 (Bachaurd/FMD) ' * f' "- ' "^'^ " 'I , *;
E Hazardous Substance Superfund Investment Yield, October 7,
1991 (Iroff /Treasury)' "' '""' " ' ^ ~ *" ^ : ~ ~~rt{"
V. CONFIDENTIAL BUSINESS INFORMATION" '- ' "
- j_~-J^ ^ r,- - t [ r : - . -> I r
A Confidentiality of 'Business information Submitted in / *'
Contract Proposals and Related Documents, November 15, '1979
(Bickhart)
* "" ' ~ * "'
B Contractor Consent: ~to lthe Disclosure of Conif idehiti'al ' ** f
Business Information rin CERCLA Cost Recovery E Act ions,- ^J'"
December 14, 1987 '(Reich/OECM)
C Confidential-! ty"''(3f "SupexTfund ^Cost' Information:" /Potential'
Staleness of Overhead; Labor, and 'Profit 'Rates Older wTh'ah'
Three Years, November 4, 1991 (White/OE, Feldman/OGCI .. .
^ ^, !'"* c. - ;i L ' *'--',}. V J. "CC-'l .2"
D Sample Protective -'Order s#l Regarding Conf'identiality ° '"
*" J "* ^S
E Protective Order Governing ^Confidential fBusiness'infjdrma'tion
at the Stringfellow Super fund 'Site) 'f iie'd 9/I8/89"1--1 *» *'s'
in'
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VI. STATE COST DOCUMENTATION
TAB
A Treatment of State Recoveries from Responsible Parties,
December 15, 1982 (Hedeman/OERR)
B * Coordination of EPA and State Actions in Cost Recovery,
August 29, 1983, (Price/OCEM), OSWER #9832.2
C Draft Appendix%-Cost Documentation, -October 15, 1985
, (Wine/OSWER); . ; -
D State Superfund Financial Management and Recordkeeping
, Guidance, November 1987 (FMD) ,j;
\ *
E Interim Final Guidance Package on Funding CERCLA State
Enforcement, Actions at NPIr Site's; April 7, 1988
(Porter/OSWEKJ; OSWER #983J.6"- ~~ „'-,
vii. 'MISCELLANEOUS DOCUMENTS (aipabe'ticai -order)
A Arbitration Procedures' for Small Superfund Cost Recovery
Claims, May 22, 1989, (Linett/OECM), OSWER # 9832.17,
Federal Register 70!. ^5$, No. 102, May 30/.1989
B Contractor Cost Allocation Methodology, August 21, 1984 (Van
Slyke/OECM)
' - *
C Contracts: Historic Site-Specific Cost Reports for Superfund
.Contracts Active Prior to October 1, 1985, June 26, 1989
, CKatz/FHD) , ; ; t,
D Leaking Underground Storage Tanks'"" (LUST) : Allocation of
Agency FTEs .and FC&B Costs Amoncfr the ""salaries and Expenses,
Superfund and LUST Appropriations, November 6, 1987, No. 88-
01 -J ' ' ' » '/ *"
E LUST Trust Fund Cost "Recovery,Policy and Special Conditions,
October 7, 1988 .(Porter/OSWER), OSWER # 9610Y10
* ^ if
F OSC" Reporting Requirements under ttie NCP — Definition of
"Resources Committed," June 1, 1989, (Dunmire/Region V)
-* j O; - ~ * i "
G , _ Statute of Limitations: Cost Recovery Actions, June 12,
~198f, (Luc'ero/OWPE) , OSWER #9832.3-la
H SupJrfyind^Cost"Ttecovery an4 Debt Collection Alternatives,
September. 3,^1991, ^(Harper/FMD)
I Timing of CERCLA Cost Recovery Actions, October 7, 1985
(Pnce/OECM)
iv
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VIII.COST RECOVERY DECISIONS WITH ATTACHED MOTIONS AND BRIEFS
TAB
I
A United States v. Northeastern Pharmaceutical'" a'nd Chemical
Co. Inc.. 579.-F.Supp,823 (W.D. Mo. 1984), rey'd in part. 810
F.2d 726 (8th Cirj 1986) .- ^ \'' ,„ >"r \ % " - ~~ f
United States v. Northeastern Pharmaceutical and Chemical
Co. Inc.. 810 .Fj.2d.726-(8th Cir. 1986)t (reversing district
court on denial of, pre-enactmeht "CERCLA costs and affirming
the district court's holding that governmental- response ^
costs are presumed reasonable and recoverable unless
defendants prove those.costs are inconsistent.with the NCP)
« i * C * . j-c-i -" < ,» -
B United States v. Northernaire plating-Co?.,685' F. Supp. 1410
(W.D. Mich. 1988) aff''d sub nom>. United States v. Mever. 889
F.2d 1497 (6th-Cir. 1989)-(cost^documentationtneed only be
sufficient to provide,,accurate iaccounting^f. Federal cos^s
incurred, including documentation detailing source and -
computation of, each cps,t.>item^requested) t -t -
h - -k. * *, * f- *~ ^
1. United States' "Motion f or.. Summary,- Judgment on
Costs (with attached Documentation and
Declarations)^ .^^ —%-_ , _.; - •^•Vt- - i-)- ^, .
2. R.W. Meyer Inc .^SjBrief^irf"Opposition to£ United
States^ Motion" for, Summary^ Judgment on; Costs^,
United States v. Mever. 889 F.2d 1497 *(6th'Cir*. 1989)""(EPA
can recover indirect costs because costs^represented that
portion of EPAJs overhead expenses that'supported the v '•
government's response agtion-at the ^ Meyer property.)/., - ,
- . '•i « "*>o v~.*» ~i . '.'j *- '-> -O/'.x - + tfr r -'
1. BriefjOf Defendant-Appellant,-R.W.- Meyer v - .,
2. Brief of Amici Curiae.- Chemical Manufacturers .
Association,,
3. Brief^for the Plaintiff,-Appellee,, United States of
America j . , ~-.i_,V - ':.,.]? > ', i,-t" %" ,-.,"
4. Reply Brief of Defendant Appellant,-R^W. Meyer
O'Neil v. Picillo. 682 F.Supp. 706, (p. R.I^1988)
(defendants have burden of demonstrating that clean-up,
because of some variance from the plan, resulted in" "
demonstrably excess costs for 'which they should riot 6e ; c
responsible)
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COST RECOVERY DECISIONS (continued)
TAB - '
D United States v. Ottati & Goss. 694 F.Supp. 977 (D.N.H.
1988), aff »d in part. 900 F.2d 429 (1st Cir. 1990)
> United States v. Ottati- & Goss/ 900 F.2d 429 (1st Cir. 1990)
(remanded to the district court for further explanation of
its denial of EPA's indirect costs)
E - United States v, Hardaae. et al*. 733 F. Supp. 1424 (W.D.
Okla. 1989) (EPA awarded "all" direct and,indirect costs and
prejudgment interest) ' '
! 1. United States' Motion for Partial Summary Judgment
on Response Cost Issues (with attached
declarations)
H *
2. * United States' Supplemental Report on Revised
Prejudgment Interest Calculation on Response Costs
, t
3. United States' Second Supplemental Report on
Revised Prejudgment Interest.Calculation on
1 * Response Costs
F " United .States v. Bell Petroleum"Services. Inc.t et al.,
734 F". SuppT771 (W'.D.Tex. ~1990) (t*Ke"~court held EPA
resp'onse costs were consistent- with* NCP, including indirect
costs> and that the Government was entitled to
prejudgment interest)
"*• t
G United States v. Thomas Solvent Co,. 21 Chem. Waste Lit.
Rep,-185-(December 1990) (the court held the government does
not have to prove^reasonableness of-rtss response action nor
, does the fact that the selected action was not effective
imply that its selection ,was arbitrary and capricious)
4
1. r United States'- Memorandum in Support of its Motion
- - in Limine to Exclude Evidence
•J "2. Thomas' Supplemental Brief in Opposition to
the United States Motion in Limine
vi
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>j\ tu STMfcS EKVIhOUWbMAL PROTECTION
^WASHINGTON DC 20460
COMPTROLLER POLICY ANNOUNCEMENT
~J ; NO. 86-11
_i ' (. • •
*• t *
ADP I (QRR OFFICE of
Hrn I woo , ADV N 5-PtT Dv.
MEMORANDUM ' , , ' AND PE; '
SUBJECT: TravailVouchers pi£h syQerfund Site-Specific^Chargesf
rement fJojr'Bodurienting Time af Superf und~Sites
FROM: ^XTT^Mo
Comptroll
TO: AssiStant^Regional Administrators-
Management Division Directors
Senior Budget Officers
3 »- • r-
\ i *
'
This Policy/Announcement establishes*a procedure to improve
the accuracy of Superfund"'site-specific charges recorded in **
Superfund cost recovery documents and in the Financial Manage-
ment System. When employees submit travel vouchers with Super-
fund site-specific charges, the employee' must now attach-a copy
of the partially or fully corrpletej time sheet • • "'
In compiling Superfund cost recovery documentation, Agency
financial management staff occasionally find inconsistencies
between the information recorded on employee time sheets "and on
travel documents for"fe'he corresponding-period. . The'apparent
discrepancies can adversely af'fect the "Agency's position in cost
recovery cases, and considerable time is spent resolving these
differences. In order to reduce the frequency of such findings,
and to facilitate cost documentation efforts, a mechanism is
needed to identify errors early' in the processing of these
documents.
POLICY . ,«'
Whenever Superfund site-specific accounts are cited on a
.travel voucher, the employee and the employee's program manage-
ment are responsible for ensuring that the information on that
travel voucher and the corresponding time sheet{s) are consis-
tent. In instances where Superfund site-specific accounts are
to be charged, time sheets for the relevant periods must be
attached to travel vouchers when submitted for reimbursement.
-------
^ -2
j
If the travel voucher must be submitted prior to the end
of the relevant pay period, a copy of the partially completed
time sheet can be sub-rutted. Because time sheets are filled
out on a d^ily basis, this new procedure should not delay the
submission of travel vouchers.
EFFECTIVE DATE
This policy is effective immediately. Please disseminate
this information to any affectei staff within your respective
region or program.>
- , » •
If after the effective date, Agency financial management
offices receive travel vouchers,"with Superfund site-specific
accounts cited but without an a'ttached time sheet(3), the finan-
cial management office may return the unprocessed travel voucher
to the originator.
FOR INFORMATION CONTACT;
\
If you ha\'e any questions on th^is policy, announcement,
please contact Bob Cluck, Fiscal Policies and procedures Branch,
at 3-382-5160.
* - J
VT £*• /I**" f
cc: Financial Manajooent Officers
vjillian Henderson, "•Director '
"Resource Manaje^r^t Divisi :>-)
Dave Ryan, Director "~~
Budget Division
FMD & Budget Branch Chiefs
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ENVIRONMENTAL PROTECTION AGENCY
FINANCIAL MANAGEMENT
PROCEDURES FOR DOCUMENTING
SUPERFUND COSTS
OFFICE OF THE COMPTROLLER
FINANCIAL MANAGEMENT DIVISION
SUPERFUND ACCOUNTING BRANCH
AN AGING KOC//?i
SEPTEMBER 1986
NV
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PREFACE
One of ray goals as Comptroller of the U. S. Environmental
Protection Agency (EPA) has been to implement effective policies
for the financial management of EPA's Superfund Program. This
handbook represents a major accomplishment toward that goal. It
establishes Agency-wide procedures to ensure that documentation
of EPA's costs of cleaning up Superfund sites is complete and
accurate and can be provided to attorneys for litigation in a
s,
timely manner.
The handbook is written primarily for EPA's Financial Manage-
ment Offices (FMOs), which are responsible for documenting
Superfund costs and providing copies of the cost documentation
to EPA counsel. There are three chapters. Chapter I includes
background information and an overview of the cost recovery
process. Chapter II describes the filing and reconciliation
procedures for Superfund financial files. Chapter III describes
the guidelines and procedures for documenting Superfund costs
for cost recovery purposes.
This handbook was prepared by the Superfund Accounting
Branch of the Financial Management Division with assistance from
the Offices of Waste Programs Enforcement, General Counsel,
Enforcement and Compliance Monitoring, and the Management
Divisions in EPA's ten Regional offices. Questions oc sugges-
tions to inprove this handbook should be addressed to George
Alapas, Chief of the Superfund Accounting Branch, U.S.
Environmental Protection Agency, (PM-226), Washington, D.C.
n
C. Morgan/Kunghorn
Comptrx>l/er
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TABLE OF CONTENTS
Page Number
Preface
I. INTRODUCTION 1-1
A. Background 1-2
1. Purpose - . „ 1-2
2. Scope - 1-2
3. References 1-3
4. Program Goals and Objectives 1-4
3 Process Overview 1-6
1 ^ ,i i
L. Roles and Responsibilities 1-6
2. Procedural Overview 1-8
*»
II. FILING AND RECONCILIATION PROCEDURES II-l
f
A. Superfund Finance Files II-2
B. Active Site-Specific Filing Procedures II-4
1. Documentation Required II-4
2. File Updates •. -,,:„ II-5
3. Storage Media II-6
4. Reconcilration *- 11-7
5. Retention ., _,_-. II-7
III. COST DOCUMENTATION PROCEDURES . r ,-w III-l
A. Regional Office Cost -Recovery- Checklist III-2
B OWPE Requests For Documentation III-8
C SA3 Requests for Documentation ' 111-16
D. Required Documentation_- - •> - 111-21
1. Headquarters and Regional Office
Cost Documentation 111-21
2. Documentation Requirements For EPA
Contractors, Other Federal and State
Agencies" 111-25
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TA3LE OF CONTENTS
(Continued)
Pace Number
E Document Review and-Reconciliation 111-28
ff
F. Corrective Action ' 111-30
1. Missing Documents 111-30
2. Data Entry Errors 111-30
3. iTproper Distribution of Travel Costs 111-31
4. Inadequate Justification for Charging
A Superfund Site 111-31
5. Payroll Input Errors 111-33
6. Time Not Recorded IIt-36
G. Cost Summaries 111-37
H. Document Transmittal 111-52
I. Redacting 111-56
" *
1. Information Protected by the
Privacy Act 111-56
3 ' ' 1
2. Confidential Business Information 111-58
3. Non-Disclosure of Irrelevant
Information „ 111-60
4. Accounting for Disclosures in CERCLA III-6Q
Cost Recovery Actions
J. Litigation Responsibilities 111-63
11
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LIST OF EXHIBITS
NUMBER TITLE - Page Number
1 Cost Documentation Process Overview 1-9
2 Cost Recovery Checklist III-3
3 Sample OWPE Request Memorandum for
Documentation From SAB III-9
•
4 .Sample SAB Document Request Control Log III-ll
5 Sample Payroll Report 111-12
6 Sample SPUR Report - All Other Costs
(Excluding Payroll) 111-14
7 SAB Request Memorandum for Headquarters
Cost Documentation 111-18
8 SAB Request Memorandum for Regional Office
Cost Summaries " 111-19
9 Sample Format of Control Log Used by Region VII 111-20
10 Summary of Documentation Required For Cost
Recovery 111-22
11 Journal Voucher For Requesting Adjustments 111-32
to FMS
12 EPA Form 2550-6 111-34
,
13 Memorandum for Recuestng Payroll Adjustments
to the FMS , II1-35
14 Regional Office Cost Summary Format 111-38
15 OWPE Headquarters Cost Su-unary Format 111-45
16 Sa-nple 5A3 Transrrittal Menorandurr 111-53
17 EP^ Form for Accourting for Disclosures of
Privacy Act Information 111-62
18 Sample Affidavit Prepared for Use In a
Cost Recovery Case 111-64
111
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The Comprehensive Environmental' Response, Compens~ation and
Liability Act of 1980 (CERCLA) established the "Hazardous
Substance Response Trust Fund (the Superfund} to provide monies
tor tne identification, pnoritization, or 'remediation of the
nation's uncontrolled hazardous waste sites. The Act also
authorized the Federal Government, under Section 107 'to seek
' ' ' -T ,
reimbursement from liable parties of all costs, including
» • * ~ i
investigatory, cleanup, ^enforcement and administrative costs,
A-.curred by the United States government. One of tne Agency's
goals in the Superfund program is to obtain, through
CERCLA «|107 Judicial actions, reimbursement of Trust Fund
expecitures from the parties responsible for the contamina-
tion. Before the Government^ can recover such monies, however,
it must prove several things, including the amount ot its
expenditures. This nandoook is designed to help EPA and the
financial management^ officers meet the ..burden of proof and to
maximize recovery of_costs'incurred on specific Superfund sites.
Providing documentation for proof of expenditures is the
responsibility ot EPA's financial management officers in the
ten Regional offices, v the"- Office -of Administration and Re-
sources Management in Research Triangle -Park, North Carolina,
and the Headquarters "Financial- Management" Division. Documen-
tation of regional office 'expenditures is provided directly to
tne Regional Case Development Team, while documentation of
other expenditures is provided to the Office of Waste Programs
Enrorcement in .-.eadquarters oy the Superfund Accounting
Brancr*. Tnis handoook details the roles and 'responsibilities
of eacn of tnose of rices in the cost documentation process ana
uiscusses tne procedures to oe followed in detaining', organiz-
ing, and summarizing cost documentation for CERCLA 107 actions.
1-1
-------
• Comptroller Policy Announcement No. 86-11, "Re-
quirements For Documenting Time at Superfur.a
Sites" (April- 1, 198o) •> -
• EPA Memoranaum "Procedures for Redacting Privacy
Act and Confidential Business Intorruation on
Documents used in CERCLA Litigation"
• ' OSWER Directive 9375.1-4-u, "Cost Documentation
Requirements For Supertuna Cooperative Agree-
ments, Appendix U"
(4) Program Goals and Objectives
The following goals and objectives have been estab-
lished "tor documenting -Headquarters ana Regional office
costs in the cost recovery process. Where appropriate,
references are proviaea to seTected sections ot this hand-
book for a more detailed discussion of the procedures to
achieve these goals and oojectives.
• All requests for cost recovery documentation must
' Be processed within the time frames specified by
the Regional Case Development Team or the Office
0 ot" Waste Programs Enforcement (OhPE) . These time
* - ' r -frames will vary witn the type of request maae
(e.g., complete documentation or specific
f '" documentation) anc tne time "period through whicn
•^ costs are~cto be documented. Specitic guidelines
on these tine frames are provided in Chapter I,
Section B - Procedural Overview, and discussed in
related sections of tne Chapter III procedures.
1-4
-------
All documentation must be reconciled witn the
Financial Management System (FMb) and corrective
action is, when necessary, initiated in a timely
•
manner. Guidelines on the time frames for com-
pleting the reconciliation process and initiating
corrective action are described in the appropri-
ate sections of Chapters II and III.
All documentation must be thoroughly reviewed to
.ensure it , is complete and properly chargeable to
the Superfund program or tc the specific site
referenced on the document.
The resulting cost summaries, prepared by Head-
quarters ana the Regions, must be reviewed to
ensure that they clearly identity all documented
costs and accurately reflect the costs recoraed
in FMS. These cost summaries will be used by the
Agency to track the status of costs aocumented
for a Superfuna site and to provide the Depart-
ment of Justice with summary cost data in
handling cost recovery actions.
1-5
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B. PROCESS OVERVIEW
This section provides an overview of the cost documentation
process ana procedures for Superfuna cost recovery actions.
This includes a general discussion of the roles and responsi-
bilities of various EPA program, legal, ana financial oitices
in the cost documentation process.
(1) Roles and Responsibilities
Tne following discussion summarizes the roles and
responsibilities ot the offices involved in aocumenting
costs in the Superfund cost recovery process. The guide-
lines ana procedures to be followea by eacn of these
oft ices are describea in Chapter III of this handbook.
Additional detailed procedures used by each otfice are
contained under separate guidance documents wnich are
listed as references in this handbook.
• The Regional Superfund Program Office is respon-
sible for initiating the cost recovery process.
This is typically done by a member of the Case
Development Team. A "Cost Recovery Checklist,"
prepared and transmitted by this office, is used
by Headquarters OhPE "to begin the documentation
process. In adaition, the Regional Program
- - Ofrice"cooroinates-with Heaoquarters C^PE and tne
Regional Financial Management Office (FMO) in
reviewing and assembling the completea cost aocu-
me'ntation package for trar.smittal to Regional
Counsel.
• The Reg'ional Financial Management Office (FMO) is
responsible for aocumenting regional Superfund
I-o
-------
site-speciric costs. bite-specific cost reports,
generated by the Regions, serve as the basis for
the regional costs to be documentea. Regional
FMOs are also responsiole for preparing Regional
Office Cost Summaries or certifying to the
accuracy of summaries prepared outsiae their
office. A description of the regional costs to
be documented by the FMOs as well as the format
for preparing Regional Office Cost Summaries is
included in Chapter III.
• Regional Counsel is primarily involved in case
development. Prior to the release of cost docu-
mentation to Potentially Responsiole Parties
(PRPs) as a result of a discovery request or at
trial, Regional Counsel must seek a protective
order or redact all information entitled to
protection by the Privacy Act or confidential
business information regulations. Depending on
tne complexity of the case, Regional Counsel may
be responsible tor negotiations with the PRP. If
the 'case is referred to the Department of
Justice, Regional Counsel will assist in the
litigation.
• Tne Office of kaste Programs Enforcement (OViPE)
H
in' Headquarters uses tne "Cost Recovery Check-
list" to begin the documentation process. OfoPE
plays the major role in obtaining Headquarters
cost documentation, tracking receipt ot docu-
ments, ana packaging ana summarizing tne Head-
quarters cost documentation collectea. Trvis
includes collecting, reviewing, and summarizing
selected contractor costs whicn are not billed on
1-7
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a site-specific basis. In addition, OWPE is
responsible for maintaining tne Case Development
Management System (CDMS), which includes data on
the total amount of costs documented.
• "he Superfund Accounting Brancn (SAB) of the
Financial Management Division is responsible for
documenting Headquarters Superfund costs. Site-
specific cost reports, generated by SAB, serve as
the basis for the Headquarters costs to be docu-
mented. SAB will collect Headquarters cost
documentation from the Financial Management
Offices in Headquarters, Research Triangle Park,
Cincinnati, Las Vegas, and in Regional Financial
Management Offices when Headquarters funos are
charged. SAB will also serve as the focal point
to ensure that regional office costs are
* -"
documented and properly reconciled with FMS.
(2) Procedural Overview
Exhibit 1, on the following page, provides an overview
of the cost recovery documentation process. This flowchart
identifies the key activities performed, the Headquarters
and field .offices responsible, and the sequence of activi-
ties from initiation through completion of the documenta-
tion process. This process typically is completed within a
six week time frame and is briefly described below.
The cost recovery process is initiated by the Regional
Superfuno Program Office. A "Cost Recovery Checklist"
prepared ana transmitted bv the Regional Program Office
i
(usually the Site Manager) is used by Headquarters OWPE to
begin the headquarters documentation process. It is also
1-8
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EXHIBIT I
Cos! Pocumonlalipn Process Ovmviow
f4V AIJt/AIMI
AC I WHY
Otlico ul
l\t gofuJ
Coun.rf.-l
bu|M.ilu'id
i'rugrum
Ollico
Iligional
f iruncial
aAigr inunl
Ollice
(I MO)
Collocl
t RiKoncile
ItogioiHilCosI
Oocuminutliun
Prepare
Cosl Documancilioi
Package t
fioOTonal Cosl
Summary3
Ollics ol
Wjsle
PiogiaruB
Enfoicwnanl
(OWIt)
1 Tuntnii
IIQCod
DacumcnUtion
Sunwnary b
Regional Supwtunl
Pioyium QUct
flecelvt
Reg«nalCo6l
Sunvmryhu
Deu CaUoclnn
Purpose*
SupaluraJ
AccaunluiQ
Ilinnch
(SAD)
Ollice ol
Enloicemcnt end
Compliant*
Montlo'ing
(0 CM|
1 f MOs and SAO gorier a to SPUR repots Ihiough tfia costs Uuough* d>l« Ulml on the checklist. SAB will Qonaral* SPUM lepoils to Ihola Rugional FMOs who request >&ssaianc« SPUH Mporls ceive •* »>• basil
tor lha costs la be dacununlad by ttiese oll.ces CorrecUve tcbon may be required when reconciling dacumcnlaton wilh tie I US
2OWPt collcctt docurnonUilion lo sjpportconlracUx cotls lhal have nol been billed ill* specific (e g Conlitcl Ub «nd TtSContiacli)
3 Financial ollicns will lolAin original documents in win specific lies the nogional FUO Mnsmls tie negnnal Cost Summary and Uie compleled coil docutncnUinon package to »ie Regional
Supctlund Program Dike Copies ol Uio sumnuiy era liansrnillod la SAO «nd OWPC
4 flegrorial Supcilund PiogramOHice will eilhor tend Die enlira dacumonlalion package to Regional Counsel Ol retain Ihe documenlabon and send dw Cosl tununary only
5 Tlw Overall Surmiary will bo the Ui&is l« the nnlinl Itogalion relerral dine by Regional Counsel Ptivacy Act. ConliJunta! Ousirioii Wormalion and lelaionces la work pedormed on ohot CERCLA
sites or nCIU facilities aie irxlaclcil'pioieuod bcloie lh« documeols eio released duiing discovoty or at tlal
^ Ot'CM review is rni'lft to Hi>1r*fnnr>» t1fi\ff**f «>A 11 S« rftlerrr*'* ^ >* n n/> i «« i« «i I «-if, ^ * -ri/1« ri ^^^1^^ «.. n n iu^
-------
used by the Regional Financial Management Office to begin
the documentation process for Regional Superfund
site-specitic costs. Among other things, tne checklist
prescribes the aate (month/year) througn which costs are to
be Documented ana the date documentation is requirec by the
Case Development Team.
The collection, review, and reconciliation of cost
documentation involves the following offices:
• Regional FMOs are responsible for documenting
regional site-specit ic Superfund costs including
payroll, travel, purchase orders and Cooperative
Agreements and for computing indirect costs.
• Headquarters OWPE is responsible tor documenting
contractor costs which are not or previously were
not billed on a site-specific oasis ana request-
ing that SAB provide the cost documentation for
Headquarters Superfund costs. The checklist
identifies which contractors have been utilized
on the site. Based on this information, OfcPE can
determine which contractors must be contacted by
their office.
• SAB is responsible for documenting Keacquarters
Superfuna costs inducing payroll, travel, con-
tract and purchase order payments, ana Inter-
agency Agreements.
Otre_r offices sucn as the Servicing Finance Orfices at
Researcn Triangle Park, Cincinnati, ana Las Vegas also pro-
vide copies or cost documentation in support of SAB's re-
quests for headquarters cost documentation.
1-10
-------
Variations exist in the response time to complete cost
documentation requests depending on the type of request ana the
through date tor which the documentation is required.
• Requests for documentation of all costs (i.e.,
payroll, travel, contractor, purchase order,
cooperative agreement and interagency agreement
costs) are typically completed within 30 calendar
days (approximately 22 work days).
• Requests for specific documentation involve cost
documentation associated with laooratory invoices
or other historical contractor invoices not pre-
viously recorded on a site-specific basis. These
requests are typically completed within 14 calen-
dar days (approximately 10 work days). This does
not include letter reports required by OWPE from
certain contractors.
• Requests for SPUR reports that are needed to
obtain an indication of the costs incurred at a
specific site are usually responded to within
five work days.
After all required costs have been documented and recon-
ciled with FMS, a corrpletea cost documentation package is
assembled by the Regional Superfund Program Office. This
completed package includes Headquarters and Regional office
cost oocumentation as well as the cost summaries trans-
mitted by the responsible offices as indicateo on the
exhibit. The overall cost summary, prepared by the
*
Regional Superfuna Program Office, is then transmitted to
Regional Counsel for final review and processing by the
Case Development Team.
I-11
-------
Aaditional information on the procedures used by in-
aiviaual oft ices identiriea in the exhibit are contained in
separate guidance documents issued by those oftices. Rele-
vant portions ot those guidance documents are referenced
and briefly described in Chapter III.
1-12
-------
II. FILING AND RECONCILIATION PROCEDURES
v*ith cost recovery receiving increasing emphasis and an
expanded Superfund program on the horizon, it is necessary to
i
establish filing and retention procedures for Superfund cost
documentation to ensure Regional FMOs and SAB respond to
requests for documentation in a timely manner. The following
procedures incorporate EPA filing and retention stanaaras set
forth in the Comptroller's Draft Policy Announcement, "Estab-
lishing Active Site Files for Superfund Financial Transactions"
(June 26, 1986) .
II-l
-------
\
N
A. SliPLRFUKD FINANCE FILES
In orcer to ensure Superfund cost documentation integrity
ana to provide documents in an accurate and timely manner for
cost recover/ purposes, each Financial Management Office must
estaolish and maintain two sets of files as follows:
* Original Document Files
There is an established requirement that original
documents applicable to expenditures (which includes
pa/roll timesheets) on specific Superfund sites (sites
that have been assigned a Superfund site identifica-
tion number) must be provided during legal proceedings
if requested by tne Courts. For tnis reason, this
file must contain all original cost documentation
*hich includes charges to specific Supertund sites.
The file should be established in the same order as
files for all other cost documents and must be
retained indefinately.
• Site-Specific Files
These files must contain copies of original documents
which include charges to a specific site and must be
established for escn specific site. The cost documen-
tation files tor each Superfund site are "active
files" in that each file contains adequate documenta-
tion to support all charges to a specific site and
copies of documents are filed immediately after the
related input, edit, and update to the FMS are
completed.
II-2
-------
A specific site is identified in the last two posi-
tions of Supecfund account numoers (account numbers
having a "T", "?", "S", "u", "U" , or "I" in the second
position of the 10 digit account number). If the last
two positions are other than "ZZ" or "00", tnen this
is tne site identification numoer within a Region.
The Region is identified in the fifth and sixth
position of the regional account numbers ana the
seventh position of Headquarters account numbers.
»
EXAMPLE - Account fr 6TFA72^8J5. (Headquarters account
number)
Account I 6TFAO_2P8_35^ (Regional office
account number}
This is Superfund site #35 (Sinclair Refining) in
Region 02
II-3
-------
B. ACTIVE SITE-SPECIFIC FILING PROCEDURES
Tne following procedures are established to create ana
maintain active site files.
(1) Documentation Reguirea
The following summarizes the documentation required
for each type of transaction and the filing protocol which
should be used within each site-specific file folder.
• Payroll Charges are documented on,t timesneets
which must be filed by pay perioa within fiscal
year by errployee name (alphabetically) .
• Travel Charges are supported by the travel
autnonzation, travel voucher, and transportation
cnarges when Diners Club is not utilized. In
each site file travel authorizations and vouchers
(including attachments) should be stapled
together ana tilea alphabetically by traveler's
name and in Travel Authorization Number oroer.
If Diners Club is not used, a copy ot the
transportation oil! and applicable carrier ticket
snould be attacned to the appropriate travel
autnorization after payment is maae. Refunas for
unusea tickets snouia also be attached.
- • CoffTgrcial oayrrents are supportea by vendors
invoices or vouchers which must clearly reference
tre site nane or site number for w^icn cnarges
ace oillea. Invoices ana vouchers shoula be
tilea chronologically in obligation document num-
ber oraer.
II-4
-------
• Cooperative agreement payments ace supported by
Grantee arawnaown vouchers ana should be filed in
voucher number order within cooperative agreement
number.
• Interagency^ agreement payments are supported by
SF1081 or Agency mils ana snould be filed
chronologically in interagency agreement number
order.
• Treasury Scnedules (accomplished copies} shoula
oe filea in ascending order of Treasury Schedule
number in the Superfund Payment Transaction Files
maintained by the Financial Management Office.
Treasury Schedules are the only exception to
active site files. In the relatively infrequent
situation where the litigation team needs rele-
vant schedules, the schedules will be retnevea,
copied, and retiled. Each finance office must,
however, stamp or perforate the original payment
aocuments witn the Treasury Schedule number to
provide a clear crosswalk to the schedule.
(2) File Updates
As new tiiresheets ana payments are processed, tney
snould be added to tne active tiles on a continual basis
after the related transaction has been updated in the FMS.
The process is as follows. First, the properly reconciled
document is reviewed to aetermine the number of sites
coverea by the document. For example, a timesheet may show
that an employee worked on several different Superfund
sites during the pay period. Secona, copies should be made
for each site indicated on the document. Third, the
11-5
-------
original document should be cefiled in the original
Superfund transactions files maintained by the Financial
Management Office. Fourth, the photocopies are filed in
tne proper site files.
(3) Storage Media
Although the majority of the site files are relatively
small in size and may contain only a few documents, each
specific site file must be organized in a structured
manner. The following materials will be needed for these
structured files to make document storage ana retrieval
easier: Accordian folders; ana 8 1/2" X 11" file folaers.
At a minimum, accoraian file folders should be estab-
lished and labelea with the site identification number for
each site and filed in site number order witnin the
regional identifier.
Where charges to a site consist of more than one cate-
gory of costs, a separate file folder must be established
foe each category and placed in the accordian file as
follows:
•" Timesheets
• Travel/transportation vouchers
• Commercial payments
• Miscellaneous payments
• Cooperative agreements
• Contracts
• Interagency agreements
• Correspondence ana SPUR reports.
Each file folder should be appropriately labeled with the
site identification number as well as the category of
II-6
-------
cost. Vvhen multiple folaers are needed for a given sub-
ject or site, each should be clearly laoelea and numbered
sequentially.
(**) Reconciliation
To ensure that all site-specific files are complete
and accurate at all times and can be made available foe
cost recovery purposes in very short order, the files must
oe periodically reconciled with the FMS. This reconcilia-
tion is in addition to the routine uodate ar.d cash reconci-
* *
liation undertaken in eacn finance office.
Each Financial Management Office must adopt a reconci-
liation plan to ensure tnat each site-specific file is
reconciled no less often than semiannually. The periodic
reconciliation to be pertormed is the same as the review
and reconciliation procedure described in Section E of
Chapter III. The FMS reports to be used will be the same
SPUR reports used in the cost recovery process but which
are generated specifically for the perioaic reconci-
liation.
(5) Retention •
The documents in site-specific files shoula be
retained until such time wnen cost recovery action is
initiatea. Vvhen cost recovery action is initiated, Head-
quarters Financial Management Offices will be requested to
forward tne documents (two copies) to SAB. Tne Regional
ana SA3 will use tne files as described in Chapter III.
II-7
-------
Vnis cnapter provides guidelines and procedures tor pre-
paring Superfund cost documents and preparing the documents for
cost recovery purposes. This includes the responsibilities ana
procedures to be followed oy both Headquarters and Regional
oft ices involved in the documentation process. In addition,
time frames for completing specific steps in the cost documen-
tation process are provided where appropriate.
Specific procedures developed and utilized by Headquarters
and Regional offices for meeting individual office requirements
cjs well as related EPA cost recovery guidance material are only
referenced throughout this chapter. The reader may wish to
refer to those documents, as required, in carrying out his or
her respective responsibilities in the cost recovery documen-
tation process.
III-l
-------
A. REGIONAL. OFFICE COST RECOVERY CHECKLIST
The first task in the cost recovery process is the prepara-
tion of a Cost Recovery Checklist (Exhioit 2) by the Regional
Superfuna Program Office. The checklist is typically prepared
on the basis of the annual Superfund Comprehensive Accomplish-
ment Plan (SCAP) which is developed by each Regional office.
Among other things, the SCAP identifies particular sites to be
referred for cost recovery. Upon completion of the checklist,
it snould be immediately forwarded to headquarters OWPE. A
copy cf tre checklist is also provided to the appropriate Re-
gional FMO. The checklist must be used for new referrals as
well as requests for updates on previously referred cases.
The checklist laentifies the site, the costs to be aocu-
mentea, the aate through which costs are to be documented and
the date the documentation is required by the Region's Case
Development Team. For initial documentation requests, the
checklist should be completed and sent to OWPE allowing at
least six weeks trom the aate of the checklist for document
collection. The amount of time allowed for updates to previ-
ously referred cases will vary depending on the need for the
update. However, at least 22 work days from the aate of the
checklist should be given for document collection. Both Head-
quarters and Regional office costs will be documented through
tne "costs throucn" cate indicated in the checklist.
•
The "costs tnrough" aate on the checklist may be 'any aate
oerore or after the aate the checklist is initiated. If tne
"costs through" aate is later than the date of the checklist,
the six week tire frame begins on the "costs through" cate
because documentation carfnot be obtained until the document is
receivea ana recoraea by the Financial Management Office.
III-2
-------
COST P£CCV£:3Y OOC>!ENTAT:ON
DATE. OF CJ3C
-------
EXHIBIT 2(2)
CCST_RECCV£aY DCCJMSSTVTICN CPSCXLIST, P^tGE2
WAS LAB WORK OTHER THAN THROUGH VTAR USED? YES NO
IF YES, PLEASE GIVE LAB NAME AND CONTRACT NLiMSER:
8. WHICH IF WY OP THE TOLLOWING REM CONTRACTORS WERE USED?
(DESCRIBE TASKS WITH THE fCLLOWING: RAMP, IBM, RI/FS, DESIGN
CDNSTFL'CTION, COMMUNITY RELATIONS, EiNPCRCEMENT. OR OTHER)
A. BLACK & VEATCH (CONTRACT NO: 68-03-1614)
DATES OF VORK TASK
8. CAMP DRESSER £ MCXEE (Ol) (CONTRACT NO. 68-03-1612)
DATES OF WORK TASK
C. RCY F. WESTON (CCNTRACT NO. 63-03-1613)
DATES OF WORK TASK
0. NLS (ZONE I, CONTRACT SO. 68-01-6699)
DATES OF VORK TASK
E. C«2* HILL (ZONE II, CONTRACT !JO. (68-01-6692).
DATES OF VCRK TASK
F. CAKP DRESSER MCKEE (REM II CONTRACT NO. 68-01-6939)
DATES OF VORK TASK
G. EBASCO (REM III CONTRACT NO. 68-01-7250)
DATES OF VCRK TASK
4. CH2M Hill ( REM IV CONTRACT SO. 68-01-7251)
DATES OF WORK TASK
9. PLEASE PROVIDE TT TCLLOWT'C ISFC«,MAT:ON A80LT CCNT^ACTCRS
LET BY AN CSC OR EtfE'CE'OT RE>CVAL CLE.-V-L? (ERCS) CONTRACT-
CONTRACTOR:
CONTRACT »«D. DTir/roy ORDER Sc.
DATES OF WORK:
10. hAS WORK DONE E^ EyE'CE'CY RESPONSE TEAM (EDISON LA3) YES NO
PAYROLL i TRA'^EL COSTS ONT.Y
DATES OF VCRX: -
in-:
-------
CLAnioi i
r~e- arccv^av -ry^r".s>.TATICN CHECKLIST. oaGE 3
11. VAS WORK DONE THPQUGH EERU CONTRACT WITH IT CORP?
4. Mascn & Harder (CONTRACT NO. 68-01-2647) YES NO
8. IT CORP. {CONTRACT NO. 68-01-3069) YES NO
C. (F.W.) Enviresponse Inc.(CONTRACT NO. 68-03-3255) YES NO
DATES OF WORK:
12. WERE ANY OVERFLIGHTS DONE? YES NO
DATES OF OVERFLIGHTS: _;
13. WAS fcCRK DONE BY NEIC? YES
DATES OF WORK TASK
NO
H. VAS fti EVTDE'CE AtJDIT OR OTHER VORK DOSE THROUGH NEIC CDNTRACT»
A. with I-tera (OONTPACT SO. 68-01-6215) YES NO
3. WITH T3CH LAW (CONTRACT NO. 68-01-6838) YES NO
C. WITH TECH LAW (ODNTRACr ^. 63-01-7104) YES NO
DATES OF WORK
D. FRED C. HART (CONTRACT NO. 68-03-3136) or CONTRACT NO.(63-01-6640)
15. VHAS AWY WORK DONE UNDER THE TES I CONTRACT? YES NO
A. CONTRACT NO. 63-01-6769 (?RI«E CONTRACTOR: CCA)
/•
DATES OF WORK: TASKS PEREORMED:
B. WAS ANY WORK DONE UNEER THE TES II CONTRACT?
CONTRACT NO. 68-01-7037 (PRI«E CONTRACTOR:
DATES OF VCRX: TASKS PERFORMED:
C. WAS ANY WCRK DONE UNDER TES III CONTRACT?
crt.T=ACT ')0. 68-01-7331 (PRiyE CCST'ACTOR: COM)
DATES CF WCRX- TASKS PERFOP.M£3-
16. WAS ANY
YES
NO
DONE L".CE9 T"S PRE-TES CONTRACT5
A. LIFE SYSTEMS (Ca.TTACT *JO. 68-03-3136)
9. A.T. KEARNEY {CONTRACT NO. 68-01-6515)
DATES OF WORK-
YES
NO
NO
NAME ANY OTHER CONTRACTOR USED:
CONTRACT
DATES OF WORK
III-3
-------
EXHIBIT 2(4)
CpST.q£CCVS°Y DOCUMENTATION CHECKLIST. ?*GE 4
H. PLEASE PROVIDE THE FOLLOWING INFORMATION ABOUT OTHER FEDERAL AGENCIES THAT WORKED
ON THE SITE: ,
AGENCY _ tag I _ DATES OF WORK CONTACT PE3SCN/TELE?"ONS
HHS ___ ______ ___ _
COE _ _________
USCG _ __ __ _ __ _
FEMA
DOT _ _
DC! _
NCAA _
LSG3 _
BRIEF OESCRIPTICN OF WORK:
18. VAS THERE A STATE COOPERATIVE AGREEMENT OR ODNTSACT' ^YES NO
STATE: COOPERATIVE AGREEMENT »
CONTRACT No.
19. WERE ANY OTHER CONTRACTORS (e.g., R&O CONTRACTS) USED? IF SO, PLEASE PROVIDE THE
FOLLOWING:
CONTRACTOR: _
CONmACT Mo:
DATES OF VORK.
BRIEF DESCRIPTION OF
20. WE^E ANY REGIONAL COLA'S EL A?P°C°°IATICt^ ^OR LEGAL EXPENSES
USED'' 'TCS NO
21 PLEASE LIST THE REGIONAL OF^CES WHICH HAVE BEEN IWOLVED IN THE CASE:
22. ANY OTHER PERTINENT INFORMATION NOT PROVIDED ABOVE:
III-6
-------
It snould be notea that payroll costs through the ena of a
montn only include payroll recorded in the Financial Management
System at montn's ena. For example, payroll for pay perioa 16
enaing August 16, 19&6 will be the last payroll recordec as of
the ena of August. Payroll tor any pay perioa is recoraea on
or about the actual pay date which, for pay period Ifa, was
August 26, 19S6.
III-7
-------
B. OhPS REQUESTS FOR DOCUMENTATION
Witnin one work day of receiving the Cost Recovery Check-
list, Headquarters OWPE will prepare and transmit a request to
SAB (Exhibit 3) indicating the site name and number for which
Headquarters cost documentation is needed. This transmittal
letter will also laentify tne date through whicn costs are to
be documented and when the documentation is needed by OWPE.
OWPE will generally allow SAB 30 calendar days from the
cate cf the request to provide the cost documentation re-
quired, however, the time frames will vary with the types of
requests, which are briefly described as follows:
• Type 1, Complete Documentation - These are requests
for Headquarters documentation concerning payroll,
travel, contractor, purchase order and interagency
agreement costs charged to a specific site. These
requests typically are completed within 30 calendar
days, or approximately 22 work cays.
*
• Type 2, Specific Documentation - These requests
generally involve Headquarters cost documentation
a&sociated with laboratory invoices or other histori-
cal contractor invoices not previously recorded on a
site-specitic oasis. These requests are typically
completed within 14 calendar days, or approximately
10 work days. (This does not apply to letter reports
which are obtained by OKPE from certain contractors.)
• T^pe 3, SPUR Report Only - These involve Regional
Counsel, Department of Justice, ana Office of Enforce-
ment and Compliance Monitoring (ObCM) requests for
specitic cost reports to obtain an indication of costs
in-:
-------
bampie OWPE Request Memorandum for Documentation Iram SAB
UNITED STATES EvViaCN'-'ENTAl. PROTECTION AGENCY
WASHINGTON O C 204*0
FE3 3 F --
o">ei o«
FES 3
£25
SUBJITT. Cost Recovery tar-rent at ion - Keenest for FWD Cost
Docimentation for High Priority Cases
HCM-
TO
Cfcttle Pipkin
Office of Haste PrcQrars Enforcement
George AJapas, Chief
Soperfund Vccountirq Branch
purpose of this n»«-erafxJ>iiii 'a to revest cost rec3v«"Y
Uvrough J0f»'»ry 31, '186 *rd latest payroll for
priority case*.
The information that is needed for these sites is «s follows:
1)
t th*t Includes *I1
expenditures.
'S and
2) Copies of tinecJirtfs for *11 Aoency erployees:
He«lq%j»rter» «nd Lab, thit cliroed t>r« to the
relevant *cec»_nts. T!>e batch of tire- cards should
Include even tS^se that r-ty not be reflected In the
3) A trawl report for all C7A trplcvees- Xeqion*!, HQ
and Lib that charged travel to the relevant account.
4) Cop'e* of all travel author nations and travel
vouchers for all trips described in 13 above for
BO e-ploye«5.
5) Copies of paid invclces at! o=r-e* pooling treasury
schedules for site specific contracts which re
recorded In the S?-T* report.
6) Any associated i'/anwtion on' IACs.
7) Any assoc.ated lr\for-»tion on oooc«rative a«
Oft ur>> -stands t.-jit we will receive orCy tie S?-T
rercrt for t-Sese oast» and that doc*jwncation is
new reta.ned in the Re^icrnl Cff«ces.
Pleas* provide UPSATED InfortMtioo for the following site
Acct. No. Sec-estyi IXe Cate Sta>i.s
Harface/Criner 6T08 3/03/86 Re'erral
Please contact ne at 382-2032 if you have any Questions
eoncer-ung these requests IJ tSere ts anv need for our office
to assist you in gatV-ing this in/or-jtjon, please let ne
Thank you very nvch for your help in this natter.
III-9
-------
incurrea at a specific site. These requests are typi-
cally responded to witnin 5 work days.
Type< 1 requests are applicable to both initial (first) and up-
date (follow-up) requests from OWPE for Supertuna Headquarters
cost documentation at a specific site.
«•-»
Within 'one work day of receipt of the request, SAB will
complete the following steps:
• E-ter the request in the OVvPE Document Request Control
Log ("OWPELCG") to record ana monitor the handling of
the request in SAB (Exhibit 4).
• Generate site-specific SPUR reports, as shown in
Exhibits 5 and 6. In the event the OWPE request pre-
aates the end of the month through which costs are to
be documented, the reports will be generated on the
second work day of the following month.
111-10
-------
EXHIBIT 4
Sample SAB Document Request Control Log
M
M
1
H-
OAfftM
MUOI HMSI cmiio. 108
NfU*
4001
400
4 u»
400*
4 U
4-012
4 Oil
4 fll«
4 naawi SIKH
31 JO tWIBOtH
vwtot.Bta.iw
,i* MKIIMM
71(4 UllSVIUl
2111 S1X1X BSIifi
Ilii) U6I£ IHibUKS
HO* Q»aiMJII(« DIM
JIM ran MMiiiJi CM*
wuuous toe flcuv
110) 0110.11 1 OKS
1114 (OKI OCXIDIL
un natwiiiia
2101 IIMAI LAfCTIU.
210) l(M 0*1
114] *U AVOID M/tt W
ll/ll/ll II
ll/ll/ll »
ll/ll/ll M
ii/ii/ii a
04/11/44 W
12/20/4} W
/ / W
ll/ll/ll U
ll/ll/ll M
ll/ll/ll II
12/20/4) U
02/24/44 CM
01/29/44 01
ll/ll/ll W
12/21/4} M
/ / It
twic
CU TO
10/10/4)
10/04/43
10/13/43
IO/C4/4)
10/10/43
10/10/4)
10/10/4)
10/10/4)
IO/X/4)
10/25/13
11/01/4)
I1/I3/U
tl/ll/4)
10/11/4)
11/29/43
10/21/4)
11/03/4)
11/20/41
11/20/4)
11/13/4)
11/29/4)
11/29/4)
onic
SUIM1I
10
10/11/4)
10/01/4)
IO/D/4)
10/04/4)
10/21/4)
10/21/4)
10/10/4)
10/21/1)
11/12/4)
II/I2/I)
11/04/4)
11/20/4)
10/21 /I)
11/12/43
11/21/43
10/29/1)
l./0)/4)
11/20/43
11/20/4)
11/13/45
11/24/4)
1 1/27/4)
1 DAIS CMMXS/ «*UKS
CU Vi OPM
It
1
0
0
I
t
t
-U
-It IIP
-)
•t
21*
-12 IIP
1
0
0
0
0
0
1
i
2»
-------
F XI MBIT 5(t)
Sample Payroll Report
09-12-66
iMVIRONMEKTAL PROTECTION AGEMCT
FT 61 THRU 66 PAYROLL REPORT FOR HAZ SUB RESP REGION t
PAY PERIOD REPORT fOR SUE LOVE CAHU, NY IZ10S
THRU ff 24 AUGUST JO. 1906
i -i
I
I-
lo
SF SITING OS r«r««,. -. -wr
AMRC 72C
PJUME SOC SEC 1 SOF P ACCT A
P 2T4 C
T
T
5 1) TFA H
U IFA H
IS TFA H
17 TFA H
20 TFA H
TOTAL 3DF
TOTAL PSSN •
S 17 TFA H
16 TFA H
if TFA H
20 TFA H
TOTAL SOF
TOTAL P3SM
P 01 SFA H
TOTAL SOF
5 21 TFA N
TOTAL SOF
TOTAL PSSN
P II SFA H
TOTAL SOF
TOTAL PSSH
TOTAL AHRC
« n i w* *w *»v. v wwt v
PATR
HOURS
26 0
11 0
1) 0
17 0
20 0
91 0
91.0
IS 0
13 0
19 0
16 0
121 0
121.0
7 0
7 0
t 0
1 0
6 0
14 0
14 0
U.O
471.0
1 AITW *Jnn«iwi|
PATR
AMOUNT
391 05
IBI 9)
let 91
237 91
279 09
1,271 SI
1,271 SI
312 11
I.I7S 52
661 5
-------
EXHIBIT 5(2)
SPUR STATEMENT LIST IMS
PAGE
INPUT SOURCE = ALLOIMEHT LEDGER MASTER FILES
1
M
UJ
1 HEPORT-CU33 EPA
e fr ALL
3 IHFO SFSITEHO.AHRC.PIUME.PSSM.SOF.PP.ACCTWiSFATY, HOURS, PAMT.TRUOATE
<« III11T PEAPR EQ 'T'.'B', '3','U' AMHC ID 'til1 .'7«' i'771*, '761* . •»«'•
6 t5ZZf.iSSZ',<5,SOFH)
II TITLE FT 01 THRU C6 PAYROLL REPORT FOR HA2 SUB RE9P REGION t
It PAY PEP 100 PEPORT FOR SITE LOVE CAHAl, Nt I2TOJ
13 THRU PP Z^ AU">U3T 30, 1986
14 PREPARED BY SUPERFUtrD ACCDUIJTIHO BRANCH
Special Holes
1 II you want (he report to reflect Subobject Class within pay period, add OCSUO allor *PP" in lino 03
2 II you want lo run the report lor all sites within the region, delate (he limitation to site number in line 09
3 To limit (he report lo Regional ollico payroll, use your two r I coda In line 04 alter *AHRC EQ'
and delete lines 05 & 6
-------
EXHIBIT 6(1)
Sample SPUR Report All Costs Excluding Payroll
09-IS-86
KMV1ROW1ENTAL PROTECTION AGENCY
HAfAROOUS SUBSTANCt RESPONSE JITE SILVER DOM CHtCK. Hf IAI7Z
nOIJITORIMG REPORT BY ALLOWANCE HOLDER, Silt HUnMH AND ACTIV111 COHE
rno OBJECT CLASSES lExctuoitia OBJ CLASSES *ii' ,'it- i 'ii'
SAURIES * FRINGE IMRU AUGUST it. 19341
PREPARED BY SUPfHfUXD ACCOUNTING BHAHCII
sro
o«
M
M
AH SUE A OOC
RC C COHTHL
T NUMBER
Y
08L 11 H KLAtJT
Kl*71t
KLA/lf
KUZJt
KtllllT
Klli'ir
KLINU
KLIH1Y
KNInlT
KHHI1T
KMfiJY
KHHlf
KHUIY
KMALIT
KUUJt
KWH1T
IIVA1Y
ItViiT
ItVAJT
UVAJT
luam
IK0039
INOOIf
1 ISFGOl
LSIdOZ
«4M 2Z H M"»HJT
Hfuwzir
rwnHZi
MM*Her
HP urn
MPAR2Y
tlPARZT
HPARtY
ACCOUHT
JJWlfltH
SIFACBlHZt
SFFAOAIKZI
siFAoauttt
STFAOfilKtt
SIFAOBIH22
51f*QSLMJI
JifiaaiKZf
SIM091HJI
SIFAOaLXZt
STMOSLMJt
itf*D«lHJl
ITFAOailllZ
JIfAOSLMJZ
llf A08UI21
lutoatHZt
StMOfllHZZ
)TFA06LN2t
ilfiOftlHJl
11FAOALM2I
3IFAOALH22
PSFAOaiHZI
PSfAOaU<2Z
PSFAOOUiZZ
S1FA00LLZZ
stFAoauzz
siFAoanHti
sti /oa^ijz
sirAoaraiee
STFAoamzt
STFA06W22
STFAOOnilZZ
STFAOBHH22
STFA06HHZE
OBL15
OOCUMIHT
KU1BER
oimiJiesa
ooonsieaa
ooQTinaaa
ooOTineaa
omniiaz;
oooruia?;
oooTiJieu
0001151877
QTRUIJ76ZI»II
1760«?030a
T768V70S08
I7S8970J04
Oia|4Z6Z76
OOOT4Z6Z7*
OOOT4ZA276
V0004IS01I
vooamsoiz
OTHTIJI628
000111)628
000111)628
OOOTJ 75995
CTRTZ01.JZS
000120*12$
oooizosao*
OOOTZ0580*
MAJ CBJT IOC JIC HO TRAVELER CUMULATIVE
OC CU> IIAAVEL) HAME OBLUAT10NS
CURREHTt PRIOR
it
It
tl
tl
tl
11
ti
tl
tt
ti
tl
tl
tl
tl
tl
tl
tl
tl
tl
tl
tl
tl
tt
41
tl
tl
tl
tl
tl
tl
tl
tl
tl
IIIJ
(111
-------
EXHIBIT 6(2)
SPUR S TAT CHE NT USTIHO
PAGE
INPUT SOURCE «= ALLOTMENT LEDGER IUSTER HllS
I
M
O1
5
6
7
- o
. 9
10
11
12
I REPORT-CLASS EPA
2 fT ILL
3 INFO SFO,At>RC,SF5lTENO.SFATr,DCH,3rAeC,DOCNO,OCMAJ,OCSUB,TSSH,TS5NDE3,
4 QBlCUf1,P*IOCLI«,UMPO
LIMIT APPH EQ 'ifl-ZOXftKiS ',' 68-20661*5 ' AH EQ '08'. '79'
SFATY HE 'A'.'B'.'O' SfSITEHO Ht '00','ZZ'
SF3UEUO E<} 'ZZ1 OCHAJ NE ' 1 1 • , 'If i '!>•
LIMIT APFH fq •6s-2oxei'7ZA77a>,'7eo'
'5I8',1SJat,tS'«6','SSS>.'75a'
SfAlt HE 'A'.'B'.'O' SFSIIEHO NE '00', 'ZZ'
SFSITEHO EQ '22' OCMAJ NE ' 1 1 ' i ' 1 2 ' , ' 1 J1
1) TOTALS SFOIPl.AMRCm.SfSITENOUI.SFATmt
14 TITLE HAZARDOUS SUBSTANCE RE3PC4.SE SITE SILVER BOH CREEK. (IT I8T22
IS MONITORING REPORT BY AllOWlMCt HOLDER, SITE laJhfiER AMD ACTIVITY CODE
16 fttO OBJECT CLASSES CEXCLUD1MO 08 J CLASSES Mi* ,'IZ' t Ml'
17 SALARIES I FRINSE THRU AUGUST lit 1966)
18 PREPAHfO BY SUCEHfUIIO ACCOUUTIHG BRANCH
Special Moles
1 If you want a Last Action Data Column add "DATCL" to lino 04
2 If you do not want Suparfund activity codas or activity ™xle totals, deleta *SFATY" from line «3 and "SFATY(I)" from line 013
3 If you want to run the report for all sites within the F delete the limitation to site number In Ims 012
4 To limit Ilia report to Regional oflice payroll, use you >igit AH coda In line 04 alter "AHRC EQ' and delete lines 05 & 6
-------
C. SAB REQUESTS FOR DOCUMENTATION
SAB must ensure that Headquarters costs are properly docu-
mented and reconciled with the Financial Management System
•
(?MS) . Tne gathering of documentation and reconciliation with
FMS typically ranges between one ana three weeks depending on
whether it is an initial request for complete documentation or
follow-up request. The time frame also depends on the type of
request (e.g., complete documentation), and availability and
completeness of the documentation required and received. The
procedures highlighted in this section apply only to requests
for complete documentation.
Requests to the Headquarters Servicing Finance Offices
(SFOs) for Headquarters cost documentation must be prepared and
transmitted by SAB within one work day of receipt of the site-
specific SPUR report. Initially, SAB will determine it the
request is an initial or update request for documentation on
tne site by reviewing the specific SAB site file to identify
the existence of a previous transmittal of documentation to
OhPE.
• For initial requests, SAB will determine if the appro-
priate contract or other payment documentation is
available in SAB site and contract files. Where docu-
mentation is not on file, SA3 will highlight the SPUR
report to identify those costs for which documentation
is needed.
« If tne request is to update documentation on tne site,
SA3 will determine the additional documentation re-
quireo and highlight those items on tne SPUR report
(excluding those items for which documentation is
available in SAB site and contract files).
111-16
-------
SAB will prepare and transmit a document request transmit-
(Exnioit 7) with the annotateo SPUR report to the
appropriate SFO. The due date for receipt from the SFO ot the
requested documentation should be at least five work days prior
to the OhPE due date to allow sufficient time for SAB staff to
review, reconcile, prepare ana transmit the completed Headquar-
ters cost documentation package to OWPE.
^*
Within two work days, SAB will also prepare and transmit a
request to the Regional FMO (Exhibit 8) to document, review,
reconcile, and summarize Regional costs through the "costs
through" date on the checklist. Regional FMOs are required to
maintain a record of all requests received from SAB. Tnese
requests should oe recoraea in a manner similar to tne log used
by SAB to track and monitor cost documentation requests (as
shown in Exhibit 4). Regional FMOs may use an alternate format
to record these requests as long as the information captured in
the log pertains to those key activities performed by the Re-
gion and other significant milestones. A sample of tne log
usea in Region VII is included as Exhibit 9,
Each Regional FMO is responsible for generating their own
SPUR reports (shown as Exhibits 5(1) and 6(1)). The reports
must be generated for the "costs through" date indicated on the
cnecklist to ensure that Headquarters and regional costs are
documented through the same tine period. The SPUP statements
shown as Exhioits 5(2) ana 6(2) should be usea to generate the
reports.
in-r
-------
EXHIBIT?
SAB Request Memorandum lor Headquarters Cost Documentation
? UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
* WASHINGTON. 0 C 20460
Of
ADMIN STRAT10N
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Reqjest for S-j^erfund Cost Recovery Document* t Ion:
FRO": Robert Allveln, Cose Document *tIon Section (CCS),
Superfund Accounting Branch (SAB) (PM-226)
TO: Bruce Feldnan, FMO
Headquarters Accounting Operation*
Plea«e provide tvo copies of the docunentatIon checked
below for all transactions (unless otherwise Indicated) on
the attached SPUR Report:
*
_______ Contract or Purchase Order In vol ee/Voueh-r
_______ SF 1080, or 1081 or Xnteragency Agreement
Travel Authorisation and Travel Voucher
_____ Refund Collection Schedule! and Supporting
Documentation (where necessary)
______ Contirwed Treasury Schedule (Treasury Stamped)
________ Tlae Cards (Front and lacV) or Tlge Sheet-s for the
FY 83, 84, 85 and 86 reflected on attached list.
______ TX ' s (where used) and copies of Airline and Travel Agency
Silling
_______ Superfund Accounting Sheets where Travel is
apllt between aites
Please forward the docusents, along with a copy of
this request, to CDS, SAB, ATTN- by
_ If you have any questions, concerning
this request please call me on 382-5773.
111-13
-------
SA8 Request Memorandum for Regional otnce cost bummanes
; UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
f WASHINGTON D C 20460
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Cost Recovery Documentation
Site *
FROM. George Alapas, Chief
Superfund Accounting Branch
TO Financial Management Officer
ACTION REQUESTED BY
I aa requesting that /our office document and summarize
the regional office costs on the subject site. Please-
1. Oocutsent the PC&3 cost thru PP __ ending
and all other costs thru .
2, If the FMS is not In agreement with the supporting
documentacion, process an adjustment and verify that the
adjustment was correctly processed by generating an updated
SPUR report.
After completing the above steps, please provide ay office
with a copv of the regional office cost summary and forward a copy
to OWPE (JH-527) attention .
If »ou have aiv questions concerning this request, please
contact of the Cost Documentation Section on 382-5773.
111-19
-------
EXHIBIT 9
Sample Formal of Control Log Ucod By Region VII
Dalo flog Ddto 'onodCovoiodbyf NMGPackago Data
<,uportund Cu.ronl Counso( WS1M Ff**3 Dale _ . _ _ . r>"1'»ol SPUH „ _ ..
SH. c M Pmnly n»qiwes Hoqmras Targol FNMG Travel Pay Ponod UlH(tna) Repor| Date Slall
No SrteNan.o Nu(|itj0f ?^^ (>a(knge Dal9 Comptelad DoQ|n End Uog(n E|xJ nn.^.esl Ran Ass^nod Assigned
1
M
O
-------
D. REQUIRED DOCUMENTATION
This section outlines the cost documentation currently re-
quired as proof of expenditures in a cost recovery case. The
specific documents required for each type of cost as well as
the offices responsible (e.g., SAB and Regional FMQs) for pro-
viding those documents are identified. Information is also
provided on the documentation requirements for EPA contractors,
other Federal and State agencies in the cost recovery process.
A summary of the documentation requirements is included as
Exhibit 10. Additional procedural guidance on required docu-
mentation is contained in OWPE's Cost Recovery Procedures Man-
ual, Resources Management Directive 2550D, Interagency Agree-
ment Policy and Procedures Compendium, and Appendix U to the
guidance document "State Participation in the Superfund Reme-
dial Program."
(1) Headquarters and Regional Office Cost Documentation
At a minimum, copies of the following documentation
will be provided by SAB and the Regional FMOs. SAB is
responsible for providing Headquarters cost documentation
to OWPE. The Regional FMOs are responsible for providing
regional cost documentation to the Regional Superfund Pro-
gram Office (i.e., Regional Cost Recovery Coordinator).
• Payroll - Copies of timesheets or timecaras signea by
the employee and supervisor. Timesheets were required
to be used beginning FY 1985. Prior to FY iy85, time-
cards were the accepted medium for documenting payroll
costs. If, however, tiraesheets were used prior to
FY 19&5 and they are available, they should be used
for documentation purposes. In addition, if an em-
ployee's timesheet is amended or the time was redis-
tributed, an amended timesheet is required.
111-21
-------
EXHIBIT 10
Summary of Documentation Required for Cost Recovery
AREA OF COST
DOCUMENTATION REQUIRED
PROVIDED BY
Payroll
Travel
M
l-l
I
K>
tJ
Commercial Payments
Inleragency Agreements
Cooperative Agreements
Tirncsheels or Timecards
Travel Authorization
Travel Voucher (Including Hotel or Car Rental)
Carrier Dill
Governmenl Owned Vehicle Dills
1 ocal Travel Vouchers
Contractor Vouchers or Invoices
Contract Status Notification (Contracts Only)
Obligating Document to Verily Site Work (Where
Appropriate)
Agency Bill or SF 1001
Vouchers & Schedule ol Withdrawals
Work Plan
Signed Certification Statement
Cooperative Agreement & Amendments
Drawdown Vouchers
Grant Payment History Record
SAB for HQ Payroll & Regional Employees
Who ( hargo a HQ Allowance
Regional FMO (or Regional Payroll
• SAB lor Headquarters Travel & Travel by
Regional Employees between Regions
• Regional FMO lor Travel Within the Region
SAB lor Contracts Billed Sile-Specihc
& HQ Purchase Orders
OWPE lor Contracts Not Billed Sile-
Spccilic
Regional FMO (or Regional Office Purchase
Orders
SAB
Regional t MO
Note Accomplished copies ol Treasury Schedules on all payme xcluding payroll) will be provided il required by Regional Counsel
-------
SAB will proviae documentation for Headquarters
employees and Regional or Field Office employees
who cnarge a Headquarters allowance
Regional FMOs will provide documentation for
Regional office employees.
(Note: Criminal investigators assigned to do investigative
work on a specific site should not charge time to that
site. If their time is charged in error, an adjustment
must oe made as indicated in Section F of this chapter.)
• Travel - Copies of the travel authorization, tra-
veler's reimbursement voucher with accompanying re-
ceipts, carrier bill (including airline ticket),
government-owned vehicle bills, and local travel
voucners.
SAB will provide documentation for Headquarters
employees, Regional office employees who travel
to a site within another Region, and Fiela office
employees located in RTF, Cincinnati, or Las
Vegas.
Regional FXOs will provide documentation for
site-specific travel charges by regional em-
ployees for travel witnin the Region.
• Contracts or Purchase Oraers - Copies oi contractor
voucners or invoices, contract status notification
(contracts only) , and refuna schedules where appropri-
ate. Those documents which are not billed on a site-
specific basis will need to be supported by the obli-
gating document and work plan to verify the work done
at tne site.
111-23
-------
SAB will provide documentation for EPA contracts
which are billea site-specific as well as head-
quarters purchase orders.
OWPE will provide documentation for contracts
which are not billed site-specifically (see OWPE
"Procedures for Documenting Costs for CERCLA 107
Actions," January 30, 1985).
Regional FMOs will provide documentation for
regional oifice purcnase orders.
Interagency Agreements (IAG) - Copies of the IAG
agreement, the Agency oill or SF 1081 (which must
laentify the site and IAG number), vouchers and sched-
ule of withdrawals. Work plans (including the time
period during which the work was performed) and a cer-
tification statement signed by the Agency's (e.g..
Corps of Engineers) project officer indicating the
work was performed and was consistent with the work
plan will be required foe all lAGs entered into after
October 1, 1987. IAG documentation will be obtained
by SAB from the Cincinnati SFO. Additional guidance
on lAGs is provided in Interagency Agreement Policy
ana Procedures Compendium.
Cooperative Agreements (CA) - Copies of an executea CA
and amenarcents, drawdown vouchers, and a record of the
grant payment history. Regional FMOs are responsible
for providing CA cost cocumentation.
Evidence of Payment: All Financial Management Offices
should stamp or perforate all payment Documents (tra-
vel vouchers, contract vouchers, invoices, etc.) witn
111-24
-------
tne Treasury Schedule number and date paid. In the
event Regional Counsel requests Treasury Schedules, an
accomplished copy of the SF 1166 must be provided as
evidence of payment. In addition, a copy ot the mag-
t
netic tape listing identifying the payment and sched-
ule number must be provided if automated payments were
generated through Treasury.
(2) Documentation Requirements For EPA Contractors, Other
Federal and State Agencies
•
In addition to the cost documentation submitted to EPA
Financial Management Offices for payment (invoices, vouch-
ers, monthly or quarterly reports), Federal agencies and
contractors who perform services under the Superfund pro-
gram are generally required to retain the same level of
documentation required of EPA to support tneir own costs.
Altnough these documents will not necessarily be included
in the cost documentation packages prepared by the Regional
FMO or SAB, the documents must be available to EPA for use
as evidence in cost recovery cases as requested.
Although the documentation requirements are currently
being negotiated, the following are general EPA require-
ments for document retention:
* SPA Contractors. Documentation requirements for EPA
contractors will be included in the contract. Gener-
ally, contractor records must reflect the level ot the
Contractor's participation in tr.e project. At a mini-
mum, these records .must contain.
>
Bid records
111-25
-------
Contract/Statement of Work
Contract cellvery/work orders, invoices and
payment vouchers
Progress reports
Stop work orders "
Documentation concerning any claims or disputes
Accounting records in accordance with generally
accepted accounting practices.
wnere a contract is issued for work on more tnan one
site, tne records should include a breakdown of
expenditures reflecting the activities performed at
each site. Contractors also must maintain similar
records for all subcontractors.
F ea e r a1 Aae ncie s; Record retention ana disposition
requirements must be included in all Interagency
Agreements. For all work performed under an IAG,
Federal agencies must maintain the following
documentation:
Voucners
Billing Statements
Evidence ot payment
Audit Reports.
All vouchers must clearly identify the site name and
number ano tne time period during which the work was
perforned.
111-26
-------
* States: Cooperative agreements between the State ana
EPA must establish requirements for maintaining agree-
ment files. In general, State files must contain the
following aocumentation:
A
Agreement records
Accounting books
Audit reports
Records of all financial transactions, including
Financial Status Reports ana letter of credit
arawaowns
Progress reports submitted to the EPA
Internal reports
Records of site visits.
The States and other Federal agencies are also respon-
sible for ensuring their contractors maintain detailed
records by site.
Accitior.al cetailea guiaarce and procedures on" other State
anc Feaerai agency aocumentation requirements are contained in
OS'.xER Directive 9375, "Cost Documentation Requirements for
Supertuna Cooperative Agreements," Appendix U and EPA's Inter-
agency AgreeTent Policy and Procedures Compendium.
111-27
-------
E. DOCJr.ZNT REVIEW AND RECONCILIATION
The Superfund Accounting Branch and Regional Financial Man-
agement Offices must provide documentation, as described in
Section D (Requirea Documentation), for each transaction indi-
cated on the SPUR report and make certain that:
• Each document clearly indicates that the costs are
properly chargeable to tne site being documented.
• The - account number cited on each document agrees w»tn
the site name identified in the document.
• The timesheets are for the correct Social Security
Number (SSN) , and pay periods and that the number of
hours recorded in the FMS agrees with the tunesheet.
This would include a review to ensure that the account
number includes the correct site identifier.
• The amounts and document number (otner than payroll)
and account numbers are correctly recorded in the FMS.
• Travelers charged an appropriate amount of time to the
site to which they traveled. For travel " after
April 1, 1986, a timesheet must be attached to the
travel voucher (see Comptroller Policy Announcement
No. 86-11, April 1, 1586) .
• tohere more tnan one site is visited, tne travel costs
are properly distriouted to the sites visited. fchere
travel induces both site-specific ana other travel,
the travel costs are properly distributee between the
site-specific and other travel. (For additional in-
formation on the distribution of travel costs, see
111-23
-------
Chapter 3 of the Resources Management Directive 255QD,
"Financial Management of the Superfund Program.")
* Contractor vouchers ana invoices clearly reference the
specific site being aocumenteo. Those vouchers or
invoices that ao not provide a specific reference to
the site name or number should be traced back to the
obligating document to ensure the charges to the site
are appropriate* A copy of the obligating document
must be included with the voucher or invoice if the
voucher or invoice does not reference the site.
To ensure that all transactions are recorded in the FMS,
Regional FMOs should periodically review the Documents placed
in the active site fiaes against the most recent SPUR report
for that site. This review should occur no less otten that
seraiannually for each site. Similarly, when a SPUR report is
generated either in response to a cost documentation request or
tor internal aecisionmaking/review purposes, the transactions
recorded should be verified against the cost documentation
maintained in active site files, which are described in
Chapter II.
111-29
-------
F- CORRECTIVE ACTION
The nature of the corrective action required depenas on the
discrepancy to be resolved. Examples ot the corrective actio/i
descrioed in this section apply only to the nature of tne ac-
tion to be taken, not the specific desk, procedures that should
be used. Corrective action will be initiated by either the
Regional FMO or SAB, as appropriate. "
(1) Missing Documents
If a document is not available in the FMO or SAB,
every effort must be taken to obtain a copy from the appro-
priate program office. If the documentation cannot be ob-
tained, tne Servicing Finance Office responsible for the
transaction should process an adjustment to the site-
specific account ana charge an appropriate Supertuna non-
site-specific account. In the case of payroll, the charge
should be made to the employee's Fixed Account Numoer (FAN)
except where the FAN is a Salary and Expense (S&E) ac-
count. In those cases, the adjustment should be made to a
Superfund non-site-specific account. Should a document be
located at a later date, another adjustment will have to be
made.
(2) Data Entry Errors
khen any of the accounting data elements (cocument
numoer, account number, etc.) cited on the source documents
were recorced in error, a correction must be made by the
Servicing Finance Office that processed the original
transaction.
111-30
-------
(3) Irrpcoper Distnbutior Of Travel Costs
Vvhen d travel authorization indicates tnat the purpose
of the travel benefits more tnan one EPA program, or more
tnan one Superfund site, the cost of the travel must be
distributed on a reasonable basis, such as the amount of
time spent on each activity or at each site. If the travel
authorization does not include an explanation for the dis-
tribution, or the distribution does not appear to be defen-
sible, the program office that approved the travel should
be contacted. If accounts for the current fiscal year are
involved, tne program office should amend tne authoriza-
tion. If prior fiscal year accounts were charged, an
adjustment should be made supported with a Journal Voucher
as described below.
(4) Inaaea.uate Justification For Charging A Superfund Site
When tne source document does not adequately justify
charging the cost to tne specific site under review, cor-
rective action must be taken. An example 'would be where
the purpose of travel is to attend a seminar but a Super-
fund site was charged or where an account number on a time-
sheet does not apply to the site name referenced on the
timesheet. Another example would be a purchase order
which indicates the charge v.as for a site in Pegion III,
but tre account number is for a site in Region VII.
In these cases, an amendment to the Document should be
requested from the program office that initiated tne docu-
ment. In tne absence of the amendment, tne Servicing Fi-
nance Office nay elect to utilize a Journal Voucher (JV) as
shown in Exhibit 11 to support the adjustment. The JV
snouic induce a clear description of the reason for the
111-31
-------
Stock fo*m lOIT-G
Tnl« » GAO Min.nl
JOUKNAL VOUCHER
J V Xo
DfcL* . .. ... .
•irtxtNc*
.l^KATION
(Aopromation^
TOTAL,
OCtIT
CltCOIT
6
-------
adjustment in the explanation block. For prior fiscal year
funds, an aajustment shoula be processed to delete the
cnarge to tne site and apply it to a Superfund non-site-
specific account if the cost is appropriately chargeable to
tne Supertund program, or to an S&E account if a Superfund
account is not appropriate.
(5) Payroll Input Errors
When the payroll transaction indicated on the SPUR
report does not agree with the timesheet, the Payroll Ac-
counting Reaistnbution System (PARS) procedures should be
used if the payroll input error is within the availability
of the PARS to correct. If the error predates PARS avail-
aoility, tne error should be corrected as follows:
• Current Fiscal Year: Utilize the Payroll Redis-
tribution form (EPA Form 2550-6) as shown in
Exhibit 12 and transmit it to Headquarters Ac-
counting Operations office utilizing a transmit-
tal memorandum (Exnibit 13).
• Prior Fiscal Year: Prepare EPA Form 2550-6.
When processing an adjustment, the employee's FAN
for the pay perioa being corrected snoula be
utilized, unless the hours to be corrected were
improperly charged to anotner site or should have
been charged to another site. When processing an
acjustment to a prior fiscal year account, the
Master Code Descriptor File (MCDF) snoula be
queried to Determine that the account number is
still in tne file. If tne account number is no
longer in the file anc is for other than Super-
fund appropriations, tne account number shoula be
111-33
-------
FXHIOIT 12
EPA Form 2550 6
OHOHIl AltOM
ALLO«ANC( HOlOt I
REDISTRIBUTION OF PAYROLL CHARGES
O'lr*i« >•<>"I «' Tntt >ll tiittt**)
I U» (hit (otnt It |«|)U»I • djuilm«nl In InifUl
3 Onlr ttllti *rrounl numbiiB •pp«u»«J li| tk«
) Chftb «nt «f lh> dloikl l» II • il(M «nd «nl«i d«l* l>«lo« lion IK«
iHtliltiullun Krpoil KCU JA
p«rlull ch»f» t*l«**a tcceunl nu«b*f>
L'kbaf
SOCIAL IICUKI I V
NMMBf A
Mount
k*C tIA««
OKIOIHOL ACCOUNT
HUMBIII
fii »>
» DOB 1*1
CHICK ONf
1.1 AOJU
NUU*(M
III J«l
•••ct or
1O 'I.LO»"»» ••»»
CL •»» "InlOO SIAfUt
IK U) It I* II M It «0 «l MI »\
M
M
I
UJ
CMAIUMC Or INI1IAMN6 »t.LO»*NCt I'OLDtl OH
PHOHf NUHBC
or Rectiviwo ALLODAHCC HOLDCO on oc$< NIC PHONC MU
-------
15SBJ
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON 0 C 20460
MEMORANDUM
SUBJECT:
FROM.
TO
Payroll Adjustments,
Superfund Sice I __
ADMINISTRATION
AND RESOURCES
MANAGEMENT
Headquarters Accounting Operations Branch
A review of Che cost recovery document acIon on the subject
sice was conducted by this office. Based on chat review,the
adjustments Indicated on Che attached EPA Fora 2550-6's should
be processed by your office.
After these payroll adjustments are made, the Financial
Management System will be In agreement with Che documentaclon
available In this office. If you have aoy questions concerning
the adjustments, please call
When ehe adjustment* are made, please notify us by
completing the Information below and returning a copy of this
request Co chis office, Atcentloa
Upon receipt of your notification, we will run a SPUR
report Co verify chat the adjustments have been made. The reporc
will be Included In Che offlcal file as a permanent record of
Che adjus t me nc s .
The Payroll Adjustments requested for Superfund site
were completed on ^^^^^____^___ and should
be reflected In the FMS bv
(Signature)
(Date)
(Title)
JII-35
-------
reestablished by the Regional office. If the
account number to be charged is a Superfund ac-
count number, contact SAB to reestablish the num-
ber. Budget Division approval is not required to
charge prior year appropriations when documenta-
tion warrants such corrective action.
•-'
More detailed information on processing an adjustment
for prior year payroll input errors, can be founa in EPA
Memorandum "Payroll Adjustments for Superfund" (August 28,
1935).
{6) Time Not Recorded
When an employee charges travel to a specific site, an
appropriate amount of payroll (time) should be charged to
tnat site. When payroll is not charged, the FMO or SAB
should make an adjustment (as in the case of missing docu-
ments) to tne site-specific account and charge the em-
ployee's FAN using the travel authorization for justi-
fication. If the error involves current fiscal year funds
and the employee does not have a Superfund FAN, the
appropriate program office must be notified of the
adjustment.
111-36
-------
G. COST SUMMARIES
The Regional FMO must prepare a Regional Office Cost Sum-
mary upon completion of the documentation effort (for initial
and upaate documentation requests) . This cost summary, provides
totals of the regional costs documented as reflected in the FMS
and must accompany the completed cost documentation package
transmitted to the Regional Superfund Program Office. The cost
summary provides totals for regional payroll, travel, costs
incurred through State Cooperative Agreements, ana indirect
costs. An example of the format used to prepared the Regional
Office Cost Summary is included as Exhibit 14. This exhibit
includes instructions on how to'organize the data for each cost
category as well as the procedures for calculating indirect
costs.
The completed regional cost documentation package along
with the cost summary are transmitted to the Regional Superfund
Program Office. The transmittal memorandum accompanying these
documents and summary must also identify any adjustments to the
FnS that remain to be made if not completed before the release
of the documents. The Regional Superfund Program Office uses
the summary to prepare an overall cost summary (including both
Heacquarters and regional costs documented) for case referral to
Regional Counsel and the Office of Enforcement and Compliance
Monitoring (OECX). Copies of the Regional Cost Summary will
also be provided to headquarters OhPE and SAB.
OV»?E is responsible for preparing the Headquarters Cost
Summary upon completion of the Headquarters documentation ef-
fort. This summary provides totals of the Headquarters costs
documented as reflected in the FKS and will accompany the com-
pleted Heaoquarters cost documentation package transmitted to
the Regional Superfund Program Office. The transmittal letter
111-37
-------
ENVIRONMENTAL PROTECTION AGENCY
Region
Regional Cost Summary
As Of
for
Site N*ame and Numoer
Date Preparea
Narrative Summary/Statement of FACTS
1. The Unitea States Environmental Protection Agency has in-
curred costs of at least for Regional pay-
roll through pay perioa enaing (Page )
2. The Unitea States Environmental Protection Agency has in-
currea costs of at least for Regional travel.
(Page )
3. The Unitea States Environmental Protection Agency has in-
curred costs o£ at least through tne State Co-
operative Agreement. (Page )
4. The Unitea States Environmental Protection Agency has in-
currec costs of at least for Regional Inairect
Costs. (Pace )
5. The Unitea States Environmental Protection Agency has
incurrec costs of at least tor other Regional
Costs. (Page } «•
111-33
-------
EPA PA*ROLL - Region
EMPLOYEE
FISCAL YEAR
PAY PERIOD
NO. HOURS
AMOUNT
TOTAL PAYROLL
DOCUMENTATION: SPUR DATED
Copies of Timesheets
Copy of Form 2550-6 where applicable
List all reoional office oavroll by name of erroloyee
in alphabetical order- Incluae all docuraeutec tiue (as
eviaencec by official timesheets or timecards) whether
or not ic is properly recorded in the FMS. Suctctals
tor the nours ana aollar amounts by employee snould
•
aiso be listec. Indicate in transmittal memorandum
wnat payroll adjustments are oeing maae ana incluae &
copy or tre EPA Form 255U-6 to document tne aa^ustrrent.
III-3D
-------
EPA TRAVEL - Region
1A VOUCHER TICKET TREASURY SCHEDULE
EMPLOYEE NAME NUMBER AMOUNT AMOUNT NUMBER-DATE
TO'IAL TR^v'LL
DOCUMENTATION: SPUR DATED
Copies of Travel Voucners witn attachec receipts
Copies of Airline Bills (where Diners Club is
Not Usea)
List all Regional office employee travel by name in
alphabetical oraer ana proviae subtotals by name.
Include all documented travel whether or not it is
properly recorded in the FMS. Indicate in tne trans-
mittal memorandum if discrepancies exist and adjust-
ments are being maae.
111-43
-------
STATE COOPERATIVE AGREEMENT - Region
Cooperative Agreement with
(State Name)
[State Agency)
Agreement Number:
Account Number
Payments
DOCUMENTATION: SPUR DATED
Copy of State Cooperative Agreement
*
Copies of Agreement Amendments
Copies ot Drawdowns
Provice Account Number Breakdown, it any
111-41
-------
EPA OTHER COSTS - Region
OBLIGATION
VENDOR DOCUMENT VOUCHER SCHEDULE D^TE
NAf£ NUMBER SERVICE AiMOUNT NL.MBER PAID
TOTAL 01 HER COSTS
DOCUMENTATION*: SPUR DATED
Copies of Venaors Invoices
List ail expenditures incarrea on Purchase Orders, Blanket
?urcr.ase Agreements, or other miscellaneous purchases.
-------
REGIONAL OFFICE
Indirect Cost Calculation
Indirect Cost
Total Direct Hours X Rate = Suototal
F\ 1983
FY 1984
Fi 1*85
FY 1986
TOTAL INDIRECT COSTS TO
CLAIM IN COST RECOVERY
The calculation of indirect costs is basea on the direct EPA
hours charged to the site by responsibility centers. For
each tiscal year, the total number of documented (direct)
hours for Regional employees is determined anc multiplied
b^ the appropriate indirect cost rate, provided by SAB.
Reference the March 1986 Supertuna Indirect Cost Manual for
Cost Recovery Purposes issued by the Office of the
Comptroller for detailed instructions. Indirect cost
calculations should be one of the last steps performed in
preparing the site cost package in oroer to avoid
t
recalculations mace necessary by adjustments.
111-43
-------
accompanying these documents and summary must also identify any
adjustments to FMS that have been made. A sample of the format
used by OV.PE to prepare tne Headquarters Cost Summary is in-
cluaea as Exnib'it 15.
111-44
-------
EXHIBIT 1S{1)
OVVPE Headquarters Cost Summary Format
COST SUMMARY
Date Prepared:
EPA EXPENDITURES
EPA PAYROLL
EPA TRAVEL
REM/FIT CONTRACT
REM CONTRACT
TES CONTRACT
ERCS CONTRACT
INTERAGENCY AGREEMENT
NATIONAL LAR CONTRACT
TAT CONTRACT
OVERFLIGHTS
NATIONAL ENFCRCE'lENT INVESTIGATION CENTER
TOTAL E?n EXPENDITURES
111-45
-------
EPA PAYROLL — HEADQUARTERS
COST SO*.MARY
Prepared:
EMPLOYEE NAME
FISCAL YEAR/
PAY PERIOD
HOURS
AMOUNT
TOTAL HEADQUARTERS PAYROLL:
DOCUMENTATION: FMD SPUR Report aated
Copies of Applicable Timecaras/Tiroesheet.s
EPA PAYROLL -- REGIONAL
FISCAL YEAR/
?-i\ PERIOD
hOLRS
A!"OuNl
III-'lo
-------
EXHIBIT 15(3)
COST SUMMARY
Prepared:
EPA TRAVEL — HEADQUARTERS
TRAVEL VOUCHER TICKET TREASURY SCHEDULE
EMPLOYEE NA^E VVISR AMOUNT A"CVNT DUMBER Ab.D DATE
TOTAL riEttDQLARIERS TRAVEL.
FSD SPUR Report aatec
Copies of Applicable Paia Vouchers
III-4?
-------
COST SUMMARY
Pceparea.
ERGS CONTRACT
CONTRACTOR :
CONTRACT NO:
OFDER NO:
DATES OF SERVICE:
SUMMAPY OF SERVICE.
DOCUMENTATION: FMD SPUR Report dated
Copies of Applicable Paid Vouchers and Contract
Status Notirication
VOUCHER VOUCHER VOUCHER TREASURY SCHEDULE
NUMEE" DATE AMOUNT NU^-BER AKD DATE
TC1AL ERCS CONTRACT.
111-43
-------
EXHIBIT 15(5)
COST SUMMARY
Prepared:
INTSRAGENCY AGREEMENT
AGENCY:
IAG NO.
StiKMARY OF SERVICE.
DOCUMENTATION: Ft>>D SPUR Report dated
Copies of Applicable Paid Vouchers
VOUCHER
l.Li'lBSR
VOUCHER
VOUCHER
AMOUNT
TREASURY SCHEDULE
NLMBE? AND DATE
- IAG COST.
-------
LAB NArE
CONTRACT
NUMBER
CASE
NUMBER
CASE
COST
SMO
CCS1
INVOICE
NUMBER
COST SUMMARY
Prepared:
NATIONAL LAB CONTRACT
CONTRACTOR: Sample Management Office
PROJECT OFFICER: Stan Kovell
LAB C^SE COSTS
111-50
-------
CONTRACT CASE CASE SMO INVOICE
LAB NAME NUMBER NUMBER COST COST NUMBER
TOTAL LAB CASE COSTS:
DOCUMENTATION: Contractor Financial Summary dated
Copies of Applicable Paid Vouchers and Contract
Status Notifications
SPECIAL ANALYTICAL COSTS
SAS SAS SMO INVOICE VIAR CHECK
LAB NA^E ' NUMBER COSTS COSTS NUMBER NUMBER AND DATE
TOTAL SAS COSTS:
DOCUMENTATION: Contractor Financial Summary dateo.
Copies of Applicable Paid Invoices ana Can-
celled Checks
TOTAL NATIONAL LAB CONTRACT.
Lab Case Costs
Soecial Analytical Costs
111-51
-------
H. DOCUMENT TRANSMITTAL
Upon completion ana preparation of the cost aocumentation
package for transmittal, the Regional FMO ana SAB w^ll:
• Prepare a transmittal memoranaum (original and at
least one copy) whicn explains what documentation is
attached. This memorandum will include a signature
block for the Regional Cost Recovery Coordinator
(RCRC) to acknowledge receipt of the documents. A
copy of the transmittal memorandum should be signed
acknowledging receipt-and must be retained in the FMOs
site file.
• Attach a copy of the site-specific SPUR report witn the
transmittal memorandum. Revised SPUR reports must be
generated by SAB and tne Regional FMO ana provided to
OWPE (from SAB) or the RCRC (from the Regional FMO) if
adjustments were mace. If adjustments cannot be made
prior to release of the documents, the transmittal
memoranaum should note the adjustments as indicated on
the SPUR report with the nature ana amount of the
adjustment to be made.
An example of the transmittal memorandum used by SAB is
includec as Exhibit 16. The transmittal usea by the Regional
FaO will not incluae the costs as shown in Exhibit 16 out need
only reference the attached cost summary and contain an
"acknowledgement of receipt" signature block.
Prior to transmitting tne aocuments, SAB ana the Regional
Financial Management Office must make a copy of each document
and file by site in the same manner as aescribed in Chap-
ter II. This requirement is aesigned to expedite the resubmis-
sion of documents in the event the transmittea copies are
111-52
-------
EXHIBIT 16(1}
Sample SAB Transmittai Memorandum
$
UNITED STATES ENVIRONMENTAL PROTECTION AGEf'CY
WASHINGTON O C 20460
OFFICE O<-
ADMINISTRATION
ANO RESOURCES
MANAGEMENT
SUBJECT Cost Recovery Documentation for Superfund
Site So. _
FROM:
TO: > Regional Cost Recover/ Coordinator
This responds Co your request for cost document at ion
pertaining to the subject site. Attached are:
» Spur Report that includes Headquarters and Regional
PC&S charges thru PP ending and all
other relevent expenditures thru *
• Copies of tlae cards or cine sheets showing all PC&B
charges for Headquarters employee*.
v
* Copies of paid invoices and corresponding Treasury
schedules for site specific contracts which are
reflected in the SPUR Report.
• Copies of Invoices and corresponding Treasury
Schedules for Interagency Agreeneats.
• Copies of all travel authorizations, travel vouchers
and related confirmed Treasury Schedules for Headquarters
and Regional eaployees. We have also attached a copy of
TRT019977 OC 21.13 for $44.50 which was not included In
the SPUR Report. This will Increase Headquarters travel
costs from S328.22 to $372.72.
We frave been able to document the following costs charged
against this site. We have annotated the attached SPUR Report
with inforaaclon on any adjustaeats that reaaln to be made.
111-53
-------
EXHIBIT 16(2)
Documented Costs Coses Documented local Costs ,,-
( A11 ache d ) Previously Docuaen c ed
PC43:
Regional $ -0- 10.329.53 10,329. 53
»
PC&B:
Headquarters S 627.65 517.46 1. US. 11
Contracts 71 .570.24 749.426.97 820.997.21
Interagency
Agreements -0- 32,000.00 32,000.00
Purchase
Orders 1 .300.00 -0- 1.300.00
Tra ve 1 :
Headquarters -0- 665. 38 665 . 38
Field -0- 415.57 415.57
MOD'S 123.712.77 -0- 123.712.77
Total $ 73.497.89 749.944.43 823.442.32
tf you have any questions regarding the attached documenta-
tion please call of th-e Cose Documentation Section oa
382-5773.
At tachaent 3 (t )
Received
Date
111-54
-------
lost. It will also prove useful in resolving inquiries
concerning costs documented should they arise.
hhen the Comptroller develops and implements an automated
document retrieval system, the requirement will be rescinded.
111-55
-------
I. REDACTING
The Oft ice of Regional Counsel is responsible for ensuring
that cost recovery documentation is reviewed for information
entitled to protection under the Privacy Act and the Agency's
confidential business information (CBI) regulations and that
appropriate steps are taken to ensure that such information is
adequately protected. This will include determinations as to
wnat information is to be protected, how such protection will
occur (i.e., protective order or redacting), and at what stage
in the negotiation/litigation process this will be accom-
plished. The Offices of Regional Counsel will also be
required to maintain a record of oisclosures of information to
persons outside the Agency since the Privacy Act requires that
an accounting be kept of such disclosures (see 5 U.S.C.
(1) Information Protected By The Privacy Act
Documentation involving EPA payroll ana travel costs
produced during the cost recovery documentation process is
covered by tne Privacy Act. The Privacy Act prohibits dis-
closure of such documentation without the consent of the
individual in question unless one of the statutory excep-
tions to the non-disclosure rule .applies. The following
list identities tne types of information in cost recovery
documentation which are likely to be covered by tne Privacy
Act's prohibition against disclosure ana which are not
likely to fall within an exception to tne Privacy Act non-
disclosure rule. T^e information on this list should be
redacted before cost documentation is produced during dis-
covery or at trial:
ITI-56
-------
• Social Security Numbers
• Credit card numbers
•
*
• Type of credit cara (as indicated on either the
card imprint, on the pre-printed form, or hand
written)-
• Home address
• Home telephone number
o All non-business calls (place and number called,
time amount, and bill total) on personal tele-
phone bills
• Drivers license number
• Comments on travel voucher such as "stayed with
relatives"
• Annual and sick leave balances
• Timecard or timesheet comments
« Coaea information on front of timecara.
•
It must be noted that this list is not all-inclusive.
Because of the widely varying types of invoices, vouchers,
forms and otner documents that will be produced, there may
be other types of information, not identified here, that
are entitled to be withnela from disclosure. Inquiries
regarding Privacy Act considerations should be directed to
tne appropriate EPA legal oft ice.
III-51
-------
(2) Conf laential Business Information (CSI)
Documents neececi to support contractor costs may con-
tain information, such as contractor overhead rates, which
is subject to CBI considerations when defendants file a
request for tne production of documents. This is true of
most CERCLA contracts.
«c*
The regulations governing confidentiality of business
information are contained in 40 C.F.R. Part 2, Subpart B.
In general, those regulations state that CBI, including in-
formation claimed by a business or the EPA to be CBI, is
entitled to be withheld from disclosure to the public. How-
ever, 40 C.F.R. 2.209{a) allows CBI to be disclosed "in a
manner and to the extent ordered to be disclosed by a Fed-
eral court" so long as EPA provides "as much advance notice
as possiole to each affected business of the type of infor-
mation to be disclosed and to whom it is disclosed. . ."
It is important that EPA respond to defendants1 dis-
covery requests on a tiirtely basis. Under the applicable
legal rules, the Federal Rules of Civil Procedure, this
snould occur within thirty days of the request. Thus,
expeditious handling of requests concerning CBI is essen-
tial.
Tue major C5I redacting effort will ta^a place with
regard to contractor invoices. However, other types of
contractor documents, suci as the contracts themselves, may
also contain information considered confidential by tne
contractor. Tierefore, all contractor aocurrents, including
documents generated by EPA which incorporate contractor
information, should be reviewed for CBI purposes and pro-
duced only under a protective order or redacted in a manner
111-53
-------
tr.at will mask out the confidential information as well as
otner figures that would allow a mathematical calculation
to be performed to obtain the confidential information.
The Superfund Program Office is to notify the major
Superfund contractors tl-at certain types of documents
containing CBI will be released in the context of cost
recovery litigation or settlement negotiations. Specifi-
cally the notification will indicate that the United States
will attempt to protect the CBI portions of these documents
Srcm cistribution, by means of a protective order or by
redacting CBI, ana will include a copy of tne model pro-
tective order contained in OWPE's cost documentation
procedures.
The decision whether to redact and produce, or to
simply decline to produce tne documentation without a pro-
tective order, will be made on a case by case basis and
depend on: the strength of the CBI claim made by the per-
son requesting confidentiality; the number of documents
that are involved; the resources required to review and
redact all CBI; and the team's assessment of the possible
consequences of available options. In particular, the
litigation team should consider whether the defendants
would likely accept redacted material and the amount of
resources that would be required to oppose any motions to
compel discovery in the event all the material is withheld.
Additional information on the procedures to be
rollowea in addressing the CBI issue may be obtained from
OECM.
111-59
-------
(3) Non-Disclosure of Irrelevant Information
~~N
In addition to Privacy Act and CBI considerations, the ,
issae of relevancy should be considered ana any references
to work performed on other CERCLA sites or RCRA tacili-
ties should be redacted. This type of information may
appear on timesheets, timecards, or travel authorizations/
voucners. This will prevent responsible parties from
obtaining information about other sites where investiga-
tions or other EPA activities are underway.
e
(•*) Accounting for Disclosures in CERCLA. Cost Recovery
Actions
The Privacy Act requires Federal agencies to keep an
accounting of disclosures of Privacy Act records. The only
exceptions are internal Agency disclosures and disclosures
which are required under the Freedom of Information Act
(FOIA) in response to a written FOIA request. This
accounting must be made available upon request to the indi- N
"*"» i
vidual to whom the records pertain. '
CERCLA cost recovery documentation obtained by the
Offices of Regional Counsel contains information on EPA
employees taken from EPA payroll and travel files, which
are establisned Privacy Act systems of records. As
descrioed in the proceeding paragraph, certain disclosures
from these systems are subject to the accounting require-
ments of the Act. In order to comply with the accounting
requirements, tne tollowing procedures have been
establisnec.
• Eacn time SAB or the Regional FMO releases any
payroll or travel documents for cost recovery
111-63
-------
purposes, a copy of the Accounting of Disclosures
Form (Exhibit 17} will be attached. The SAB or
FMO will complete the first five items on the
form before release.
• As disclosures are made (except disclosures on a
need-to-know basis witnin EPA and those required
by the FOIA) the Office of Regional Counsel will
record each disclosure in the Record of Dis-
closures section of the form.
• When all cost recovery actions are completed and
the case is closed, the form will be returned to
the originator. The original will oe retained in
tne financial file maintained by SAB or the FMO
for five years or the life of the record, which-
ever is longer.
• A copy of the form must be retained by Regional
Counsel for the life of the case history file.
• All inquiries from current or former EPA
employees seeking access to payroll or travel
records on themselves in case history files or
access to the Accounting of Disclosures of these
records should be referred to SAB or FMO, as
appropriate.
*
• Upon receipt of such inquiries, the SAB or FMO
will make tne records of the Accounting of Dis-
closures available to the individual.
These procedures apply only to tne accounting of disclosures
of Privacy Act records by EPA personnel in the course of their
duties in CERCLA cost recovery proceedings.
III-G1
-------
EPA Form for Accounting for wisoosures o. rnvacy <->a •n.ormaiion
ACCOUNTING OF DISCLOSURES
From
( SAB or Regional FMO)
Site Number
Site Name:
Payroll Coat Document acIon Thru
Travel Cose Documentation Thru:
(Pay Period Ending Dace)
(SPUR Report As Of Date)
RECORD OF DISCLOSURES *
Date Records
Disclosed
Nature And Purpose
Of Disclosures
Name And Address Of
Recipient Of Records
* In the event that only a portion of the records covered by
this release are disclosed, the specific records disclosed
should be listed on an attachment to this fora.
III-C2
-------
J. LITIGATION RESPONSIBILITIES
During the discovery phase of a cost recovery case, the
Office of Regional Counsel or a Responsible Party may require
EPA staff/ such as financial management officers and program
staff, to attest to the accuracy of the documentation pro-
video. This information may be obtained through three dif-
ferent processes: interrogatories, affidavits, and depositions.
9 Interrogatories are a written set of questions sub-
ritted b^ eitner party in a lawsuit to tne opposing
party. Unless improper under applicable legal rules,
the questions must be answered. In the context of
cost documentation for a cost recovery case, the ques-
tions generally will be directed towards identifying
the nature of the documents included and process used
to compile/prepare the cost documentation package. A
written response is required.
• Affidavits are written statements of fact based on
personal knowledge and made voluntarily under oath
(see Exhibit 18} . In cost recovery cases, the affi-
davit will be prepared at the request of and with the
assistance of the Regional Counsel. Affidavits are
generally used as eviaence to support the accuracy and
reasonableness of the cost documentation provioea to
support the Agency's claim.
e Depositions are face-to-face interrogations of a wit-
ness by the attorney for the opposing party. A Depo-
sition is primarily a question ana answer session,
completed under oath, that is admissible as evidence
in court. In a cost recovery case, the aefense
attorney may use the deposition of an EPA employee to
111-63
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
UNITED STATES OF AMERICA,
**
Plaintiff,
v.
SOUTH CAROLINA DEPARTMENT
OF HEALTH AND ENVIRONMENTAL
CONTROL,
Plaintiff-lntervenor
v.
SOOTH CAROLINA RECYCLING
AND DISPOSAL, INC.; COLUMBIA
ORGANIC CHEMICAL COMPANY;
OSCAR SEIDENBERG; HARVEY
HUTCHINSON; MONSANTO COMPANY;
ALLIED CORPORATION; AQUAIR
CORPORATION; EATON
CORPORATION; and E.M.
INDUSTRIES, INC.,
Defendants-Third
Party Plaintiffs
v.
G.D. SEARLE t CO. and
V»ILL ROSS, INC. ,
Third Party Defendants.
CIVIL ACTION NO. 80-1274-6
AFFIDAVIT OF
lt , being duly sworn, depose and say:
1. That I am employed by the United States Environmental
Protection Agency (EPA), 401 M Street, S.W. Washington, D.C.
20460, as a Supervisory Operating Accountant in the Superfund
Accounting Branch, Financial Management Division (FMD) of the
Office of the. Comptroller. I have been employed in FMD for
16 years.
-------
2. Pursuant to section 111 of the Comprehensive Environ-
mental Response, Compensation, and Liability Act (CERCLA), 42
U.S.C. $ 9611, EPA maintains on file records documenting all
response costs incurred by EPA pursuant to section 104 of CERCLA.
Except for the documents described in Paragraph 3 below, FMJD
serves as the custodian of these documents, which include
employee timesheets and travel vouchers, contractor invoices,
treasury schedules, and interagency agreement vouchers. FMD
receives these documents from the various EPA Headquarters
offices in charge of implementing section 104 of CERCLA and from
the Financial Management Field Offices in charge of disbursing
CERCLA funds under the various EPA contracts, and interagency
agreements. FHD keeps these documents on file in the course
of its regularly conducted activity.
3. However, FMD does not maintain, and does not serve as the
*
custodian for, those documents pertaining to Region employee pay-
roll and travel expenditures, which are maintained in the Region-
al Financial Management Offices. Nor does FMD maintain, or serve
as the custodian for, those documents pertaining to the coopera-
tive agreements between EPA and various states, which are main-
tained in the Regional Financial Management Offices. Nor does
•
FKD maintain, or serve as the custodian for, those documents per-
taining to certain EPA contractor costs which are not site-
specific, which are maintained in the Financial Management Field
Offices and by the respective EPA contractors.
4. Upon receipt of all such documents described in Para-
graph 2 above, the Superfund Accounting Branch of FMD verifies
the accuracy of the documents against the site-specific
Financial Management System reports, known as the Software
111-65
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Package for Unique Reports (SPUR). The SPUR lists each item of
response costs incurred by EPA, broken down by site; it includes
the cost category of the expenditure (i.e., the type of expend!
ture), the amount of the expenditure, and reference numbers for
the corresponding supporting documents. This data is entered
into the Financial Management System by the Financial Management
Office at EPA Headquarters, the Financial Management Office at
EPA Region IV, and the Financial Management Field Offices in
t
Cincinnati, Ohio, Research Triangle Park, North Carolina, and
Las Vegas, Nevada, which make the actual disbursements.
5. FMD has maintained, and continues to maintain, records
documenting the response costs incurred by EPA pursuant to
section 104 of CERCLA for the "Bluff Road" site, except for those
documents described in Paragraph 3 above.
6. On December 2, 1985, FMD received from the EPA Office
of Waste Programs Enforcement (OWPE) a request for the SPUR on
Bluff Road, and for all supporting documents. In response to
this request, on December 24, 1985, I sen.t to the CERCLA Cost
Documentation Taskgroup of OWPE the SPUR for Bluff Road, and all
supporting documents, except for those documents described in
Paragraph 3 above. To the best of my knowledge, t-he SPUR and
supporting documents sent to OWPE represent an accurate and
complete documentation—with the exception of those documents
described in Paragraph 3 above—of the response costs incurred by
EPA for the Bluff Road site as of December 7, 1985 for Headquar-
ters employee payroll and travel costs, and as of November 30,
1985 for all other costs.
7. On December 2, 1985, FMD received from OWE a request
111-66
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CAI-IIDI1 18(4)
for the SPUR for Bluff Road. In reponse to this request, on
December 11, 1985, I sent to the EPA Region IV Financial .k - sge-
ment Office that portion of the SPUR for Bluff Road which lists
response costs incurred by Region IV for the Bluff Road site,
together with a request that the Region prepare a summary of
those costs and forward the summary to OWPE. (The supporting
documents for these costs are maintained in the Region IV
Office. )
*
I declare under penalty of perjury that the foregoing
is true and correct to the best of my knowledge.
Date: , 1986
U.S. Environmental Protection Agency
Washington, D.C. 20460
Subscribed and sworn to before me this ___^ day of
, 1986.
Notary Public
My Commission Expires:
TII-67
-------
determine if the cost documentation is accurate and
the costs are reasonable. Any EPA employee wno has
been served with a notice of deposition or is
otherwise scneduled to be deposed, will be accompanied
by an EPA or Department of Justice attorney.
Questions on these three processes should be referred to the
Office of Regional Counsel.
III-6S
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
OCT 6' 1988
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Issue paper on Cost Recovery
P
FROM: Gary M. Katz, Director V>e*^vV
Financial Management Divis
TO: David P. Ryan
Comptroller
Division/
Attached is the issue paper you requested as follow-up to
our previous analysis on the cost of cost recovery. The paper
discusses financial requirements supporting cost recovery and
identifies possible alternatives for minimizing the paperwork
and administrative irritants associated with cost recovery.
In developing the paper,,we _tried to follow your general
guidance and present options that address program concerns
regarding excessive paper imposed by the various financial
requirements. We also addressed the issues and concerns raised
by the Regional finance and legal staffs in our survey of
administrative irritants.
While some of the options presented require further analysis,
I feel the paper provides an excellent review of the perceived
problems and will be very useful in your discussion with
Bruce Diamond. I would like to point out that the options ,
presented in this paper are not necessarily supported by this f'
Division but were included to represent the level of discussion
and concern among Agency staff on this issue.
After you have an opportunity to read the paper, we would
like to meet with you to discuss the .various options and answer
any questions you may have.
Attachment
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?*• ,
- ENFORCEMENT CONFIDENTIAL/DELIBERATIVE PROCESS/FOIA EXEMPT
REDUCING THE IRRITANTS
IN EPA'S COST RECOVERY PROGRAM
A Review Of Financial Management Requirements
In The Superfund Cost Recovery Program
SDPERFOND ACCOUNTING BRANCH
FINANCIAL MANAGEMENT DIVISION
OFFICE OF THE COMPTROLLER
SEPTEMBER 30, 1988
SAK
-------
TABLE OF CONTENTS
EXECOTIVE SUMMARY
INTRODUCTION
IRRITANTS RELATED TO FINANCIAL REQUIREMENTS
- Filling Out Daily Tirnesheets — ,
- Completing Travel vouchers ,
1
- Managing Contracts Site-Specifically
- Requirement Imposed On States And Other Federal Agencies
SYSTEMIC IRRITANTS IN THE COST RECOVERY PROCESS
- Documentation Of Costs
- Reconciliation
- Redaction
- Accounting System
- Quality Assurance
- Policy\Procedure Issues
-------
REDUCING THE IRRITANTS IN
EPA'S COST RECOVERY PROGRAM
EXECUTIVE SUMMARY
Responses to surveys and informal discussions have indicated
that program personnel consider the cost recovery process as requiring
a burdensome amount of paperwork. This paper seeks to identify
opportunities for eliminating or simplifying this burden. It does
so by describing some of the requirements relating to financial
management which are perceived as irritants and by discussing possible
options for streamlining the process.
\
Many of the irritants relate to program personnel's role in
the preparation and/or processing of documents* needed in the cost
recovery p'rocess. One area is timesheets, used to account for
site-specific salaries and indirect cost assessment. Options for
change include limiting the number of employees required to complete
timesheets, allowing timesheets to be completed bi-weekly as opposed
to daily, charging a fee in lieu of actual costs, and discontinuing
accounting for site-specific salaries. A second area is travel
where the paperwork and the options are similar to timesheets.
Finally, the site-specific accounting requirements for contracts can
be burdensome for project officers. It is unlikely that significant
changes can be achieved here.
There are also systemic irritants directed at the cost recovery
process as a whole rather than individual documents. Many of these
concerns are being addressed by the Agencywide Cost Recovery Work
Group chaired by OWPE. Some will also be answered by the integrated
Financial Management System.
One such irritant is the sheer volume of paper required under
current procedures to document site-specific expenditures. This
effort may no longer be needed as improvements in the Agency's
accounting system have improved the quality and reliability of
financial reports. However, in the absence of changes in case law,
regulation, or legislation, the need for cost documents will remain
so long as PRP attorneys demand all documents through discovery or
as part of settlement negotiation.
One possible opportunity for reducing administrative effort is to
streamline or eliminate the periodic reconciliation of cost documents
to financial reports. The general improvement in EPA's internal
controls and quality assurance programs make this possible. Another
initiative to reduce administrative time is to improve redaction
procedures by redesigning forms.
* ..
There are numerous other minor irritants dealing with limitations
in the current accounting system (FMS) and miscellaneous policy
issues. Such issues are largely being addressed by IFMS and/or the
Cost Recovery Work Group.
-------
REDUCING THE IRRITANTS IN
EPA'S COST RECOVERY PROGRAM -
This issue paper on reducing the irritants in EPA's cost
recovery program was prepared at the request of David P. Ryan, EPA
Comptroller, Mr. Ryan had expressed concern that the financial .
management aspects of the cost recovery process might impose too
much paperwork on the over-burdened Superfund employees engaged in
cleanup efforts. He was also concerned that the financial management
documentation provided to support litigation might be so voluminous
and""complex that settlements and litigation were delayed.
. * i
INTPODUCTION
?
The Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), as amended by the Superfund
Amendments and Reauthorization Act of 1986 (SARA), provides for
cleanup of the Nation's hazardous waste sites and makes parties
responsible for polluting a site liable for all Federal cleanup
(response) costs. When the responsible parties cannot or will
not clean up a hazardous waste site, EPA conducts the cleanup.
Under SARA, EPA seeks to recover the response costs expended.
The purpose of the paper is to review irritants in the cost
recovery process and identify opportunities for simplifying the
financial management paperwork and processing associated with cost
recovery. This is not intended to be a comprehensive review of all
the documentation needed in-Superfund — there are a large number
of paperwork requirements related to execution of Superfund actions
(e.g., Record of Decision, Feasibility Study) that were not included
in this analysis because they are needed for purposes other than
cost recovery.
The remainder of the paper is organized into two sections.
The first section analyzes the financial management requirements
supporting cost recovery which regional personnel have raised as y
irritants. The second section analyzes irritants in the process
for assembling the financial documentation contained in the voluminous
cost recovery packages now required for successful recovery actions.
-------
IRRITANTS RELATED TO
FINANCIAL REQUIREMENTS
Financial requirements included here involve those activities
performed to document the costs of the cleanup work for cost recovery
purposes. EPA currently accounts for all Superfund costs on a
site-specific basis to the maxiirura extent possible. Such accounting
imposes certain burdens on program personnel who must provide the
basic accounting information in prescribed formats. A survey of
regional offices resulted in perceived issues related to timekeeping,
travel, and contracts. Each of these areas is presented below.
Filling Out Daily Timesheets
Because of the amount of time required to complete timesheets
and submit them to administrative personnel, this requirement is
widely perceived as being an inefficient use 01 program personnel
time. Approximately three percent of Agency Superfund site-specific
expenditures relate to costs recorded on timesheets.
The timesheet requirement is as follows. All EPA employees
are assigned a fixed account number to which their payroll expenses
are charged. A supplementary payroll Distribution Timesheet must
be completed for any given pay period whenever an employee performs
activities not covered by his or her fixed account number. All
employees who perform site-specific Superfund work must use a site-
specific account number, containing the appropriate site and activ"
code, on their timesheet to show hours chargeable to that site.
The timesheet requirement was established in 1983 in response
to audit findings and Congressional concern that EPA could not
document accurately the labor effort involved in cleanup. The
actions taken satisfied the auditors initially and have passed
review every year since then. The requirement to fill out the
timesheets daily was added in 1986 in response to concerns raised
by EPA attorneys; they noticed a large number of inaccuracies and
inconsistencies when program personnel waited until the end of the
biweekly pay period to complete the sheet.
j
f
Of the 2750 full-time equivalent personnel in Superfund,
approximately one thousand record site-specific hours on the
timesheet, with an average of two sites listed. Only ten minutes
per week is required to complete the timesheet.
-2-
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e^ The following- options regarding timekeeping may be used as
the basis for further study:
1. Maintain existing requirements. One view of the current
timekeeping process is that it satisfies commonly held cost
accounting requirements and that the information captured by
the system is necessary to the sensible development of cost
documentation. In addition, the current timekeeping system
has already been implemented, and time and effort have been
.invested in training and in setting up current processes and
procedures. Overall effort to comply appears relatively
.minor. For these reasons the current system for timekeeping
may sufficiently satisfy current Superfund requirements.
2. Continue to account for salaries site-specifically but reduce
the total paperwork required. There are several options
available. One option would be to eliminate the requirement
for daily filling out of timesheets and to allow personnel to
complete the timesheet at the end of the pay period. This could
lead to the inconsistencies noted by attorneys before the daily
requirement was imposed. Another option would be to require
only on-scene coordinators and remedial project managers to
complete timesheets, relieving other Superfund personnel of the
requirement. This would be less than full cost accounting and
could damage the credibility of the accounting records.
3. Charge PRPs a set fee to cover salary costs. A fee basis could
be developed which would treat salary costs in a manner analogous
to indirect costs. There would be a percentage of direct costs
charged to responsible parties. Such a system would free program
personnel from the paperwork burden of completing timesheets
and still allow for recovering time costs. As with the previous
' option, it would have to be reviewed to determine if such a
system would adhere to legislative cost recovery requirements.
It would also have to be determined if time charges accounted
for through a fee basis would be supportable in litigation.
^
4. Discontinue site-specific accounting for salaries. This option
would result in the elimination'of tiraesheet requirements.
Time expenses would no longer be recorded or recovered, reducing
the "hassle factor" felt by program personnel and allowing them
to spend time on cleanup activities. However, CERCLA/SARA
ceilings on removal action costs necessitate some type of site-
specific accounting for intramural costs, at least for the
removal program.
-------
Completing Travel Vouchers "—
Regional offices report concerns related to filling out
travel authori2ations and travel vouchers requesting reimbursement
for expenses. Approximately one percent of Superfund site-specific
expenditures relate to travel costs.
The requirements are as follows. As with all Government
travel, an employee must submit a travel voucher and ma3or receipts
to be reimbursed. When travel is for Superfund purposes, it must
be charged to the appropriate Superfund account number. Where
justification exists for a site charge, all Superfund travel costs,
such as transportation, lodging, and meals, should be charged to
specific sites and activities. When employees submit travel vouchers
with Superfund site-specific charges, -they must attach a copy of
their timesheet for the period covered by the travel voucher to
assure that the information on the travel voucher and timesheet are
consistent.
The travel voucher requirements are Government-wide. Site-
specific accounting requirements were established in 1981 to help
document cleanup costs. These latter requirements are needed because
costs for site-related travel performed under provisions outlined
in CERCLA are exempt from limitations imposed on non-site related
travel charged to the Superfund appropriation. The requirement to
append timesheets was added in 1986 in response to concerns raised
by EPA attorneys; they noticed a large number of inconsistent charges
when personnel submitted timesheets and travel vouchers independently.
Of the 2750 full-time equivalent personnel in Superfund,
approximately one thousand travel. Several hundred, mostly
on-scene coordinators and remedial project managers, travel
extensively. Appending the time sheet to the travel voucher
should involve little additional effort.
The following are options for streamlining travel.
1. Continue to account for travel site-specifically using existing
requirements. They appear to be effective, if somewhat irksome.
They conform to commonly held accounting standards and Government
wide rules and are well understood throughout the Agency.
2. Discontinue the requirement to append the timesheet. The
traveler and supervisor are responsible for assuring accuracy
of the records they sign. The appending requirement is
therefore duplicative. However, savings in this area might be
offset or exceeded by greater reconciliation effort necessary
in assembling an accurate cost recovery package.
3. Charge a fee for travel. A fee basis could be developed which
would treat travel costs analogous to indirect costs. The fee
would be applied as a percentage basis on top of direct costs.
-4-
®
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4. i~ Require only on-scene coord ina tor s*"*and remedial project
managers to account for travel site-specifically. These
categories of personnel perform most site-specific travel
anyway, so less people would be affected while most site-
specific travel would be included.
5. Discontinue site-specific accounting for travel costs. This
action would eliminate the "hassle factor" felt by program
personnel. However, as discussed previously, pro3ect ceilings
could make this infeasible for the removal program, and cost
recovery concerns could make it infeasible in general.
Managing Contracts Site-Specifically
There are two requirements unique to cost recovery which program
personnel perceive as labor intensive and burdensome. (Other contract
documents may be used in the cost recovery pr
-------
Financial Management Requirements Imposed
On States And Other Federal Agencies
Through various guidance documents, EPA has requested that
States and other Federal Agencies involved -in the Superfund Program
provide the same level of documentation as EPA produces. Any
relaxing, elimination, or improvement of requirements will apply
equally as well to the States and other Federal Agencies as to EPA.
• No regional or Headquarters offices raised issues concerning
financial requirements for cost recovery purposes associated with
Cooperative Agreements or interagency Agreements.
IPFITVTTS IN THE
COST RECOVERY PROCESS
Cost recovery is the means by which EPA attempts to reimburse
the Superfund by collecting the costs of cleanups from Potentially
Responsible Parties (PRPs) . This section describes the cost
documentation process which occurs during cost recovery (as distinct
from litigation, negotiation, and other purely legal matters) and
discusses alternatives for future action regarding the process.
Because of the type and amount of documentation required for
successful cost recovery, the cost documentation effort requires the
generation and review of a large amount of paperwork through all
phases of the cost recovery effort. The process as a whole is
widely perceived by Agency personnel to require an inordinate
amount of time to complete and to be a "hassle."
This section addresses problems, inefficiencies, paperwork
burdens, and other administrative "irritants" pertaining to the
overall cost recovery process. The 'analysis here is based on our
own observations as well as input from enforcement, legal, program,
and regional finance personnel.
Many of these issues are being addressed now in two ma^or
initiatives, the implementation of the new integrated Financial
Management System (IFMS) and the Agencywide Cost Recovery Work
Group chaired by OWPE. None of the issues is settled yet. /
The financial management offices are involved in several
aspects of the cost recovery process. The ma^or activities .which
occur during the cost recovery process and which are discussed here
are documentation of costs, reconciliation, redaction, accounting
system issues, quality assurance, and policy/procedure issues.
-6-
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Documentation Of Costs
The financial management offices are responsible for assembling
the .financial portions of the cost recovery package. Financial
documents required by the existing cost recove-ry policy established
by OSWER include primarily timesheets, travel vouchers, contractor
invoices, cooperative agreements, and interagency agreements.
Regional finance offices are responsible for collecting financial
documentation originating in the region, while Headquarters collects
documents originating in"Headquarters, including Research Triangle Park
(for contract documents) and Cincinnati (for interagency agreements).
Through 1985, the financial management organizations were
unable to provide complete and accurate financial documentation
to OWPE in the timeframes provided. " This inability seriously
jeopardized cost recovery. Beginning in 1986, all financial
organizations began using a standard filing protocol for all
Superfund financial management documentation. The* protocol
involves establishing a central repository for all original
documents (the Superfund financial documentation "original file")
and a related set of files for each Superfund site ("active files").
These files are currently maintained in the office originating
the transaction. A study is being conducted to determine the proper
procedures for transferring all active files to the region in which
the site is located. When this project is completed, all financial
documentation related to a site will be available in one location
for review by attorneys whenever needed.
The volume of paper dealing with Superfund financial management
transactions produced for cost recovery purposes, is huge; _estimates
are that several million pages will be produced through the SARA
era. (Program records are even more voluminous.) With regard to
financial records, copies of all documents may be needed because
few attorneys trust amounts reported in the Agency's Financial
Management System. Although this distrust was well deserved before
1986, extensive improvements have been made to assur6 that all
charges are included accurately in the System, including those from
the early years. To that extent, producing paper copies now may be
an unproductive effort — documents are copied and made available
to PRP attorneys, but when no discrepancies are noted, the.issue of
accuracy of cost documentation is dropped.
Options for simplifying the process of cost documentation
relate to the requirement to provide copies to the PRPs during
settlement negotiations, discovery, or litigation. If we must
provide copies, the existing process is efficient and effective,
even though expensive. However, if the requirement to produce
full documentation for all cases could be changed, the process
could be simplified dramatically. This could be done through case
precedents, regulation, or even legislative change.
-7-
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Rec o n.c i 1 i a t i o n "—•
v
Under present operating guidance, each of the fourteen
financial management offices is required to conduct extensive
semi-annual reconciliations of all Superfund original and site-specific
files to ensure their completeness and accuracy with the EPA
Financial Management System. These reconciliations are in addition
to the typical ongoing verifications and reviews conducted by any
financial management office in the daily business environment.
Moreover, at least one and often two reconciliations or qualj-ty
reviews are performed on each cost recovery package before transmittal
to attorneys.
In order to reduce the impact on resources due to this very
labor intensive requirement, the following options are availaoie.
1. Perform reconciliations only as needed. This option
would require that site-specific files be'reconciled and
that only files on those sites in which cost recovery, action
is initiated be reconciled. While this option could theoretically
delay completion of the package due to discrepancies, the delay
should not materially impact the process or result in reduced
cost recovery potential.
2. Perform reconciliations on a statistical sampling basis, under
this option, each financial management office would implement
an acceptable statistical sampling plan for reconciling a given
number of site files on a periodic basis. This option would
identify weaknesses in the cost documentation recording and
filing procedures and would identify need for corrective actio .
Delays could be experienced as indicated in number 1.
3, Rely on the Agency's Superfund Financial Management Internal
Control Program. Under this option, the control program, which
fully describes the Superfund financial policy, procedures, and
quality assurance reviews in place, would serve as assurance
that site-specific costs are accurate and fully documented.
This option would eliminate the need for any special reviews or
reconciliation in preparation of the cost documentation package.
Redaction
Under current legal requirements, the Agency must redact Privacy
Act and Confidential Business Information from all cost recovery
documentation before it is made available to anyone outside EPA or
the Department of Justice during cost recovery negotiations or
legal proceedings. Although not easily measured, this exercise
requires extraordinary effort throughout the Agency. Redaction,
especially the frequent all-night redacting parties, is one of the
ma^or complaints from the regional offices. This is not a financial
requirement but financial people often get involved redacting financis
documents at Regional Counsel request.
-8-
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..
In order to curtail or eliminate this use of valuable
resources, the following options should be considered.
1. institute a Guarantee/Certification mechanism. Under this
option, all potentially Responsible Parties or their legal
representatives would be required to certify or guarantee that
they will not divulge any Privacy Act or Confidential Business
Information to any party or parties outside the need-to-know
.legal proceedings. Under this option, no redaction would be
necessary; however, a one-time special effort would be required
__to determine how this option could best be implemented.
2. Develop and implement revised forms for employee and vendor
use. Under this option, the Agency would develop and implement
new timekeeping, travel, and voucher forms which would serve
the original intent of the forms, but yet^eliminate the need
to redact. Under this option, no redaction would be necessary;
however, an extensive effort would be required to redesign and
place into operation new forms.
3. Develop a process which would substantially reduce the redaction
effort. Under this option, the Agency would develop templates
which could be used to overlay sensitive information on standard
forms currently in use and where possible on standard contract
vouchers. This option would significantly reduce the redaction
effort but would require effort to develop new forms and templates.
AccountingSystem
The Agency's Financial Management System (FMS) provides the
official record of costs expended by EPA for_Superfund activities
and represents the start and end point for packaging and reconciling
cost for cost recovery. FMS is currently limited in its computing
capacity and therefore its responsiveness to certain financial
requirements related to Superfund. Examples include inability to
track costs by operable units and to obtain complete histories of
expenditures and costs by site without running several computer
reports. Because of these limitations, EPA staff is often required
to perform numerous manual tasks that otherwise could be accomplished
more^efficiently through automation. These limitations also contribute
to paperwork burden associated with cost recovery.
Many of these deficiencies will be resolved with the implementatio
of the Integrated Financial Management System (IFMS) in 1989-1990.
Continued efforts to increase automation is a viable option for
reducing the administrative burden associated with cost recovery.
-9-
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Quality Assurance ,_
« ' *"*^ ~~
The size and complexity of the Superfund program and the
likelihood of scrutiny during cost recovery raises the importance
of quality assurance. Examples of quality.assurance problems
noticed in the past have included duplicate site account numbers,
incomplete and/or unreconciled cost summaries, incomplete accounts
receivable data, and timing problems in posting charges to the
accounting system. In these instances, national policy has been
developed but not always followed properly in operations offices.
Several quality assurance initiatives are currently addressing
these problems. Some of these situations may also be rectified by
tl-e advent of IFMS, while others are covered on the agenda of the
Cost Recovery Work Group chaired by OWPE.
Some regional and Headquarters offices are concerned that
EPA's investment in quality assurance activities is too large.
The extensive commitment to accuracy without concern over cost has
become an irritant to them.
Policy/Procedure issues
This discussion addresses concerns involving established
policy. Several regional personnel expressed concern that existing
policies and procedures could be more clear and precise in areas '
such as language to be included in Administrative Orders and Consent
Decrees or the workflows within the cost recovery process. Some
people expressed a need for a direct costs standalone document, a
project nearly complete. In each of these areas, action is underwa
to address the situation and perceived irritations.
Finally, there are concerns that the policies and procedures
regarding site-specific contract payments need improvement.
Information in the Agency's accounting system does not include all
site-specific charges from contractors. For effective cost recovery,
enforcement personnel must contact each contractor and procure
"letter reports" detailing costs. This problem stems back to EPA's
delay (until FY 1986) in adopting site-specific accounting and
invoicing procedures. EPA has nearly completed a project reclassifyinc
pre-FY 1986 contract payments to site accounts. In addition, annual
allocation reports for post-FY 1986 non-site-specific contractor
payments should be reflected in. the accounting system in 1989.
Many of the issues and ideas in this paper require further
analysis and more detailed data gathering. The Office of the
Comptroller would appreciate any comments and questions. Please
contact Joe Dillon or George Alapas on FTS382-2268.
-10-
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t
-. UNITED STATES ENVIRONMENTAL PRC7ECUGN AGENCY
WASHINGTON. 0 C 20460
OFFICE Of
EtFOBfEMFNT AND
COMPliANft MONITOAIMi
I 5 (989
MEMORANDUM
SUBJECT- Cost Documentation Outline Prepared by Region V
FROM: Belinda Holmes
Attorney/Advisor
TO All OECM-Waste Attorneys
Attached is an outline prepared by Thea Dunmire in Region V
which lists the information required for a CERCLA Section 107
cost recovery referral and the supporting documentation needed.
During my mini-detail in Region V, Thea and Lynn Peterson gave an
excellent brown bag seminar on cost recovery. If you have any
questions about the outline, please let me know.
For more information on cost documentation or cost recovery
issues, also see Sandra Connors
Attachment
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COST RECOVERY REFERRAL — INFORMATION REQUIRED1
I. FACILITY / SITE INFORMATION
A. Name and Address
B. EPA ID # (Site/Spill Identifier Number)
C. Location/Description/Map (If available & helpful)
D. Title Search
E. NPL Scoring Package (if NFL/Remedial Site)
F. Volumetric Ranking
II. DEFENDANT INFORMATION^.
A. Name/Address/Telephone #/FAX #
B. Name/Address/Telephone #/FAX # of Legal Counsel
C. If a Corporation — Dunn and Bradstreet, State of
Incorporation, Principal Place of Business
D. EVIDENCE of Liability
E. EVIDENCE relating to Defenses
F. Information on Financial Viability/Insurance
G. Information on all prior Contacts [FOIAS /104(e) Info.
Requests/Depositions]
in. WITNESS INFORMATION!
A. Name/Address/Telephone #/FAX #
B. Name/Address/Telephone I/FAX I of Legal Counsel
C. Information on all prior Contacts
IV. RESPONSE INFORMATION
A. Administrative Record Index or Indices (There Should be one
for EACH response action decision and EACH action)
B. Decision Documents:
1. Removal Site — Actions Memo(s) / OSC Report
2. Remedial Site — RI/RA/FS/ROD
C. Site Sampling Summary with Chain of Custody Records
I/ Based on DRAFT guidance — "Model Litigation Report for
CERCLA Section 106 and 107 and RCRA Section 7003"
2/ This Information must be arranged in separate folders k
individual defendant.
3/ This Information must be arranged in seperate folders b
individual witness.
-------
V. ENFORCEMENT INFORMATION
A. Prior Consent Orders/Consent Decrees/Unilateral Orders/104(e)
Letter Noncoirpliance
B. Statute of Limitations Analysis
C. Case Management Plan
VI. COST DOCUMENTATION
A. Cost Summary — By Response Action / By Type
B. Audits — IG, OTA, etc,
C. Projected Future Costs
D. Supporting Documentations4
VII. OTHER INFORMATION
A. ATSDR Evaluation
B. Community Relations Information
C. State Relations Information
D. Department of Interior — Natural Resources Damage
Information
TDD 4/89
4/ See Attachment I and II.
-------
ATTACHMENT I
FIRST TIER COST DOCUMENTATION — REMOVAL ACTIONS1
COST SUMMARY
A. Cost Summary Report
B. SPUR Report
INTRAMURAL COSTS
A. GENERAL AUTHORIZATION AND PERFORMANCE DOCUMENTS
1. Copies of all Site-Specific Action Memoranda and Amendments
2. OSC Report — without appendices
B. REGION V PAYROLL
1. Payroll Costs Summary
2. Timesheets
3. Stand-Alone Package Supporting Method of Allocating Payroll
Costs to Superfund Sites
C. HEADQUARTERS PAYROLL
1. Payroll Costs Summary
2. Timesheets
3. Stand-Alone Package Supporting Method of Allocating Payroll
Costs to Superfund Sites
D. INDIRECT COSTS
1. Site-Specific Indirect Cost Worksheet
2. Appropriate Stand-Alone Packages Supporting Method of
Calculation of Indirect Costs
1 Payroll, Travel, and Contract Billing and Payment
Documents are compiled, reviewed and Batts stamped by Region V,
Financial Management Division. They should be put into the Cost
Documentation Package as a unit.
-------
E. REGIONAL TRAVEL COSTS2
1. Travel Costs Summary
%
2. Performance and Billing Document — Travel Voucher wi
Supporting Invoices (eg. Hotel bills and Rental Car receipts)
3. Authorization Document — Travel Authorization
4. Billing and Payment Documents — Payment Vouchers and
Treasury Schedules
5. Stand-alone Package of Travel-Related Regulations and
Guidance
F. HEADQUARTERS TRAVEL COSTS3
1. Travel Costs Summary
2. Performance and Billing Document — Travel Voucher with
Supporting Invoices (eg. Hotel bills and Rental Car receipts)
3. Authorization Document — Travel Authorization
4. Billing and Payment Documents — Payment Vouchers and
Treasury Schedules
5. Stand-alone Package of Travel-Related Regulations and
Guidance
CONTRACT COSTS4
A, REM CONTRACT
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. Scope of Work
C. Other Work Assignment Documents
2. Performance Documents:
A. Acknowledgement of Completion
B. Work Product — copies of RAMP, Community Relations
Plan, etc.
2 Arranged in chronological order by trip.
3 Arranged in chronological order by trip.
4 To the extent that Performance Documents — Work Product
Documents are in a completed administrative record for the Site,
they can be incorporated by reference.
-------
2. Performance Documents:
A. Acknowledgement of Completion
B. Work Product — copies of Site Assessment Report, Cost
Estimates, etc.
3. Billing and Payment Documents:
A. Contract Cost Summary
B. Invoices, Vouchers, and Treasury Schedules per Invoice
C. Letter Report (if developed and/or required)
B. ERCS CONTRACT
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. Delivery Order and Amendments and Modifications
C. Other Work Assignment Documents
2. Performance Documents:
A. Daily Work Order
B. Daily Summary CERCLA Cleanup
C. 1900-55 Forms
D. Receipts for Direct Charges5
E. Table of Applicable Contract Rates
F. Cost Summary Report
3. Billing and Payment Documents:
A. Contract Cost Summary
B. Invoices, Vouchers and Treasury Schedules per Invoice
4. Audit Documents:
A. Site-specific Audit Report (if any)
B. Follow-up Memos or Letters Relating to Audit Report (if
any)
C. OTHER CONTRACT COST — For any other contracts, identify
contractor and provide comparable authorization, performance,
billing and payment documents.
OTHER COST DOCUMENTS
•
A. DATED Demand Letter and accompanying Green Cards showing
receipt.
B. Copies of any payments or credits (e.g. checks) applied to
the costs incurred at the Site, and copies of consent decrees or
orders including terms relating to payment of specified costs
relating to the Site.
C. CBI-related Documents.
5 These need to be closely reviewed to insure they are
legible.
-------
ATTACHMENT II
FIRST TIER COST DOCUMENTATION — REMEDIAL ACTIONS1
COST SUMMARY
A. Cost Summary Report '
B. SPUR Report
INTRAMURAL COSTS
A. GENERAL AUTHORIZATION AND PERFORMANCE DOCUMENTS
1. NPL Listing
2. Copies of all Site-Specific Action Memoranda and Ar.endrier.t.s
3. Record of Decision(s)
B. REGION V PAYROLL
1. Payroll Costs Summary
2. Timesheets
3. Stand-Alone Package Supporting Method of Allocating Payroll
Costs to Superfund Sites
C. HEADQUARTERS PAYROLL
1. Payroll Costs Summary
2. Timesheets
3 Stand-Alone Package Supporting Method of Allocating Payroll
Costs to Superfund Sites
D. INDIRECT COSTS
1. Site-Specific Indirect Cost Worksheet
2. Appropriate Stand-Alone Packages Supporting Method of
Calculation of Indirect Costs by Year.
1 Payroll, Travel, and Contract Billing and Payment
Documents are compiled, reviewed and Batts stamped by Region V,
Financial Management Division. They should be put into the Cost
Documentation Package as a unit.
-------
E. REGIONAL TRAVEL COSTS2
1. Travel Cost Summary
2. Performance and Billing Document — Travel Voucher wi
Supporting Invoices (eg. Hotel bills and Rental Car receipts)
3. Authorization Document — Travel Authorization
4. Billing and Payment Documents — Payment Vouchers and
Treasury Schedules
5. Stand-alone Package of Travel-Related Regulations and
Guidance
F. HEADQUARTERS TRAVEL COSTS3
1. Travel Cost Summary
2. Performance and Billing Document — Travel Voucher with
Supporting Invoices (eg. Hotel bills and Rental Car receipts)
3. Authorization Document — Travel Authorization
4. Billing and Payment Documents — Payment Vouchers and
Treasury Schedules
5. Stand-alone Package of Travel-Related Regulations and
Guidance
CONTRACT COSTS4
A. TAT CONTRACT
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. Technical Direction Document
C. Other Work Assignment Documents
2 Arranged in chronological order by trip.
3 Arranged in chronological order by trip.
* To the extent that Performance Documents — Work Product
Documents are in a completed administrative record for the Site,
they can be incorporated by reference.
-------
3. Billing and Payment Documents:
A. Contract Cost Summary
B. Invoices, Vouchers and Treasury Schedules per Invoice
C. Letter Report (if developed and/or required)
B. FIT CONTRACT
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. Scope of Work
C. Othe'r Work Assignment Documents
2. Performance Documents:
A. Acknowledgement of Completion
B. Work Product -- copies of RI/FS Reports, etc.
3. Billing and Payment Documents:
A. Contract Cost Summary
B. Invoices, Vouchers and Treasury Schedules per Invoice
C. Letter Report (if developed and/or required)
4. Audit Documents:
A. Site-specific Audit Report (if any)
B. Follow-up Memos or Letters Relating to Audit Report (if
any)
C. NATIONAL LAB CONTRACT
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. QAPP
C. Chain of Custody Record
D. Sample Management Sample Tracking Report
2. Performance Documents:
A. Sample Results Reports
B. Quality Control Reports
3. Billing and Payment Documents:
A. Contract Cost Summary
B. Sample Management Financial Summary Report
C. Case Sample List
D. Invoices, Vouchers, and Treasury Schedules per Invoice
D. STATE COOPERATIVE AGREEMENTS
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. Action Memos relating to Cooperative Agreement
C. Cooperative Agreement and Other Work Assignment
Documents
D. Regulations relating to State Cooperative Agreements
-------
2. Performance Documents:
A. Progress Reports
B. Acknowledgement of Completion
C. Work Product — copies of RI/FS Reports, etc.
3. Billing and Payment Documents:
A. Cooperative Agreements Cost Summary
B. Front page and Signature Page of Cooperative Agreements
C. Letters of Credit — Drawdown Requests
4. Audit Documents:
A. Site-specific Audit Report (if any)
B. Follow-up Memos or Letters Relating to Audit Report (if
any)
E. INTERAGENCY AGREEMENTS
1. Authorization Documents:
A. Designation and Appointment of Project Officer
B. Interagency Agreement
C. other Work Assignment Documents
2. Performance Documents:
A. Acknowledgement of Completion
B. Work Product — copies of RI/FS Reports, etc.
3. Billing and Payment Documents:
^ A. Interagency Agreement Cost Summary
*? B. Letter Report
C. Treasury Schedules or lOTV's
4. Audit Documents:
A. Site-specific Audit Report (if any)
B. Follow-up Memos or Letters Relating to Audit Report (if
any)
C. OTHER CONTRACT COST — For any other contracts, identify
contractor and provide comparable authorization, performance,
billing and payment documents.
OTHER COST DOCUMENTS
A. DATED Demand Letter and accompanying Green Cards shoving
receipt.
B. Copies of any payments or credits (e.g. checks) applied to
the costs incurred at the Site, and copies of consent decrees or
consent orders requiring payment for specific items of cost.
C. Documents related to CBI-claims.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON D C 20460
AU6311989
O^lCE Of
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Superfund Proof of Payment "Under IFMS
FROM: Gary M. Katz, Director
Financial Management
TO: Regional Comptrollers
Financial Management Officers
This memorandum establishes policy and procedures for
documenting Superfund Proof of Payment Under IFMS.
Background
On March 27, 1989, we distributed a draft change in
established procedures for documenting Proof of Payment. Under
the Integrated Financial Management System (IFMS), it is no
longer possible to provide each Financial Management Office with
an Agency Confirmation Report. The Agency Confirmation Report
was used to support Proof of Payment for payments generated
through automated payment processes. The revised procedures
provide the same information but in a different format.
Revised Procedures
With the implementation of IFMS and the associated change in
the automated payment process, the documentation of "proof of
payment" may be provided in either of two methods: Hardcopy IFMS
Reports or IFMS Query Screens. Both methods use the same IFMS
data but in different formats. The FMOs may use the method which
best serves their filing protocols.
f^>
-------
A. Hardcopy Reports
Under this method, the following IFMS reports (which
are generated on a daily basis for all servicing finance
offices) will be used:
1. Voucher Selection 'Detail Report JRADAPD)
(Attachment A)
The Voucher Selection Detail Report lists those vouchers
which were paid on the latest disbursement run. The key
data elements on this report (for cost documentation
purposes) are the Vendor (i.e. payee), voucher number
(barcode), and the schedule number. The barcode number
uniquely identifies the source document while the
schedule number ties into the Treasury Reconciliation
Activity Detail Report which will serve as the "proof
of payment." This report replaces the payee listings
currently provided for pre-IFMS automated payments.
2. Treasury Reconciliation Activity Detail Report (RADARS2)
(Attachment B)
The Treasury Reconciliation Activity Detail Report
provides confirmation of payment schedules processed
through Treasury. For cost documentation purposes,
the key data elements are the schedule number, payment
voucher number (barcode), and the check number
(Treasury check number). This report replaces the
Agency Confirmation Report currently used for "proof of
payment."
B. IFMS Query Screens
(Attachment C)
t *
Under this method, the FMO will query the IFMS for the same
information provided on the Hardcopy Reports but need only
query for the site-specific payments. The following screens
will be accessed and printed for each site-specific payment:
1. Treasury Schedule Control Line Inquiry Screen fTSCIO
Among other things, this screen provides amount paid,
and the check number associated with the barcode number
(referred to as the payment voucher number) which ties
the payment back to the voucher, invoice, etc.
-------
2. Check Header Inquiry Screen (CHKH1
Among other things, this screen provides the payee name
and address and check date as well as the check number
which ties it back to the TSCL and the associated
payment document thru the barcode number.
*It is not necessary to print each screen separately.
You may leaf from the TSCL to the CHKH and print both
screens on the same page and attach this single sheet
to the payment document.
icabilitv
These procedures apply only to payments processed through
the IFMS payment module. All payments made prior to IFMS, manual
payments, and contract payments will be documented according to
established procedures.
If you have any questions concerning this procedure,
please contact Bob Allwein of the Superfund Accounting Branch
on 382-2268.
Attachments
cc: David P. Ryan
Assistant Regional Administrator
for Policy and Management
Regional Waste Management Division Directors
Office of Waste Programs Enforcement
Office of Enforcement and Compliance Monitoring
-------
T IDt RADAPD
DATES 03/18/89
UNITED STATES OF AMERICA
VOUCHER SELECTION DETAIL REPORT
PAGE; 50
TINE: Olt37
FOR DISBURSEMENT OFFICE KCOO NAME: KANSAS CITY 0.0. SFO 33 LV
SELECTION OATEl FROM 03/02/69 TO 03/21/89
PAYMENT DATE I 03/21/69
IULE CATEGORY: T
IULE NUMBER: M OOOA69076
•Y LOCATION CODE: 68 01 1200
JSURE CODE: 1
)Ri 010067
VENDOR NAME: CAMERA PLACE
VENDOR ADDRESS: S55 WASHINGTON ST
:Yi EPA ENVIRONMENTAL PROTECTION
MELLESLEY
MA 02181
'AYMENT SEQUENCE: 00000050
SFO: AP01 BOSTON
617/565-3343
INVOICE HOI 95109
TRANS CODEl PV
VOUCHER I 69001010855
TRAVEL ADVANCE DATE: / /
REC
TYPE
INV NO
DISC INT
INV DATE REF TRANS XO TYPE CODE
I
INTEREST REASON
PMT BASE ACCEPT
DATE DATE
AMOUNT
MO 9Z0254NASA
03/17/69
4 END JOB ACCOUNTING REV SUB REV SUB COST COST RPT PROGRAM GL CL OFF SUD
Y BUD FY FUND NUMBER TRANS TYPE OIV SOURCE SOURCE CRG ORG ORG SUD ORG CAT EXTENDED ACCT ACCT BOC OBJ
9T 700
01
35
35G
TEV
2610
va
VOUCHER TOT: PMT:
TOTAL PMTs PMT:
40.45 CR:
40.45 CR:
0 00 INT:
0.00 INT:
0 00 DISC:
0.00 DISC:
0.00 NET:
0.00 MET:
40.45
40.45
At achment A
N,
-------
OUT 10: RAD
t DATEI 03/
UNITED STATES OF AMERICA
TREASURY RECONCILIATION ACTIVITY OET
EPORT
PAGE! It
TIME* 01:37
ASURY CONFIRMATION RECORDED FOR THE FOLLOMIHC SCHEDULES.
FY
SCHD
TYPE
AGENCY
SCHEDULE NO
CONFIRM
DATE
CONFIRMED
AMOUNT
SUBMITTED
AMOUNT
CURRENT
ACTIVITY AMT
D 0.
NO PMTS
69
33V9197
03/10/69
5,750.01
5.750.01
5,750 01
SF33
10
VENDOR CODE
006428280
030367238
156429201
257668463
315700074
318466919
3293
-------
KCY is
*>'* lULrtoUKT
LC YPAK , GCtlflD
FMF VOUCHER NUM,
rY: ST9 DCHCDULE TYPE
INDI ATORS - TREAG ACT
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CODE TC
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PEC InfiMLNT CHm' POGT
ADV NUM I ti \ i'P AMOUNT NUnttCR INP
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AMOCO
AMOCO
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FV 89000540410
PV 89000540410
PV 89000540410
PV 89000548410
BUFFALO PV 8900054704fi
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D & P
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D * B
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1-
DP 89000540762
DP 89000548762
DP 89000548762
DP 89000540762
DP 0?
TAPLEIP CIIICH U5EPII;
*** CHECK HLAItEK
IS CHECK MUMPER, DISPUPSJrtG
CUECI-'
AMOUNT
PAYEE
PAYEE
PAYEE
PAYEE
NUM 1 74 f. 1201 D.O Kf.
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Attachment C
-------
PRIVILEGED: ATTORNEY WORK PRODtJCT/ATTORNEY CLIENT
STRINGFELLOW:
PKOOf OF CERCLA COSTS
Summary of the United states' Theory of Cost Recovery: The United
States expects the defendants in this case to argue for de novo,
micro-review of the myriad of contracting decisions and technical
judgments made by EPA in implementing response actions at and
around the Stnngfellow site. We expect them to seek judicial
review of the costs incurred for the response actions purportedly
to determine whether the project has been prudently, effectively
and efficiently managed by EPA and its contractors particularly
in light of the allegations of abuse surrounding the Ann
Burford/Rita Lavelle controversy. In short, we expect the
defendants to ask the Court to become an after the fact auditor,
efficiency consultant, and contract manager, substituting its
judgement for EPA's in determining how the Agency went about
fulfilling its task of protecting public health and the
environment.
In response to such arguments in other cases, the United
States has set out its theory of cost recovery. See the Motion In
Limire in the Thomas Solvent case (otherwise referred to
-------
r"IVILEGEDt ATTORNEY WORE PRODUCT/ATTORNEY CLIENT
spend the government's money. "Appropriations" become
"obligations" when some action is taken that creates a liability
or definite commitment on the part of the federal government to
make a disbursement at a later time. For a good general overview
of the approach to Congressional appropriations, budgets,
obligations, procurement policies, accounting and audits, see Bob
Bruffy's summary entitled "The Other Side of Tax Money."
Under the federal government's contracting authority, there
are four to five ways that Superfund money is expended. (1) EPA
Intramural Costs — EPA spends CERCLA monies directly and
indirectly to administer the CERCLA program. These are discussed
in Section I. below. (2) Interageney Agreement Costa —
Contracts between other federal government agencies and EPA under
which Superfund monies are spent are discussed in Section II.
below; (3) Cooperative Agreement Costs — Contracts between EPA
and other government entities, like states, are discussed in
Section III. below; (4) Contract Costs -- Contracts between EPA
and outside businesses are governed by federal contract and
procurement law and are discussed in Section IV. below.
EPA COST SUMMARY:
In all cost recovery cases, the place to start and the point
of reference to vhich all litigation actions and decisions Bust
be traced is the EPA cost summary. Upon request, a cost recovery
group within the Office of Waste Programs Enforcement at EPA
Headquarters is responsible for summarizing and collecting backup
documentation to support costs incurred in connection with a
specific Superfund site. The cost summaries list costs according
to the four categories described above. Nevertheless, because of
limitations in the cost summarization procedure, the summaries
rarely reflect all costs incurred or paid in connection with a
site and are rarely accurate. In the context of the Stringfellow
case, a tremendous amount of time and effort needs to be expended
by financial, contracts, grants, program and legal personnel
across the agency before we will able to produce an accurate and
complete cost summary for which we have all necessary supporting
documentation.
INSERT PARAGRAPH ON ORGANIZATION O? FUNCTIONS RELATED TO COSTS
WITHIN SPA
-------
PRIVILEGED; ATTORNEY'WORK PRODUCT/ATTORNEY CLIENT
I. EPA INTRAMURAL COSTS (intra-agency)
A. DIRECT COSTS
1. Time/Payroll (for both HQ and Region)
a. DOCUMENTATION
(1) Time sheets/Time Cards - Only a limited
number of regional office and
headquarters personnel bill their CERCLA
time site-specifically. These persons
complete time sheets similar to the pink
sheets we fill out at DOJ. The EPA time
sheets should provide the following
info: the case; the FY; the pay period;
the time period of the work; the number
of hours billed; and signatures by,the
employee, the supervisor, and the
timekeeper.
(a) Contacts: Documentation to support
these costs is pulled within both
HQ and the Region. At HQ, Bob
Coombs compiles necessary
documents. Within the region, a
representative of FMD {usually
referred to as the Regional Cost
Coordinator) pulls the documents.
(b) With the exception of a brief time
period, regional and HQ personnel
have not been, and still are not,
required to provide descriptions of
the work performed during the hours
billed.
(c) Also, be aware, that even if an
employee works/bills more than 40
hours a week, the maximum hours
listed per week on the time sheet
is always 40 hours.
(2) SPUR Report ('Software Program for
Unique Reports*)
(a) The SPUR report is generated by the
Financial Management Division at HQ
and purports to be a summary of HQ
-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
and regional time and travel
expenditures associated with the
site.
(b) Practical experience shows that the
hours listed in the SPUR report
(particularly for costs incurred
prior to FY 1988) frequently do not
agree w/ the hours billed on the
timesheet filled out by the
employee.
(c) The SPUR Report should be
compared/reconciled with the
corresponding time sheets and
travel documentation. If EPA has
already made a cost demand to the
PRPs, it must be determined whether
the demand is based upon the
erroneous SPUR entries and, if so,
when proving these costs, the cost
amount attributable to EPA payroll
must be adjusted to reflect the
amount of time billed on the time
sheets and the actual travel costs
allowed.
b. TIME SHEET ANALYSIS
(a) The litigating attorney should
arrange for someone to compile a
summary of the EPA time sheets by
necessary element (i.e a cnart
showing the elements listed above
. and whether all elements have been
filled in and are legible — SEE
SAMPLE RUBINO & McGEEHIN COMPUTER
SUMMARY).
(b) If one or more elements of the time
sheet are missing, the litigation
attorney must decide whether the
deficiency is sufficient to write
off that particular portion of
EPA's cost.
(c) Request EPA to correct or
supplement time sheet deficiencies
where possible: If copies of the
time sheets were used to compile
-------
PRIVILEGED! ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
the analysis, and the problem is
merely one of legibility or a poor
copy, then a list of these time
sheets should be provided to EPA
and a request made for production
of legible copies, if possible.
(d) NOTE: If the time sheet analysis
was prepared in any respect by an
expert witness, it is inadvisable
to provide the experts' work
product (time sheet summary and
analysis) to EPA when requesting
EPA to correct or supplement time
sheet deficiencies because of the
risk that this work product will
become discoverable in EPA's hands,
2. travel
(a) Documentation to support travel expenditures
consists of the travel authorizations,
payment vouchers and backup receipts,
treasury schedules showing payment.
(1) This documentation must also be
pulled within both KQ and the
Region. Bob Coombs at KQ and the
Regional Cost Coordinator are
likely to know where these
documents are kept and can pull
them.
(b) Like the timesheets, these documents should
be reconciled to the EPA cost summary so that
it can be adjusted to reflect only those
costs actually incurred and paid for regional
and HQ travel expenses.
3. other: purchases, xerox
The EPA cost summary frequently reflects "Other
Direct Costs* as an EPA Intramural cost category
We need to identify the nature of these costs,
determine whether they apply to HQ or the Region
or some of' both, determine what documentation
exists to support these costs and the identity of
the custodian of these records, and produce any
necessary records to support these costs.
-------
PRIVILEGEDt ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
B. INDIRECT
1. Definition: Indirect costs are internal EPA costs
with more than one cost objective (e.g. providing
benefit to more than one site) and should not be
confused with contractor indirect costs or
contractor overhead costs. Using various methods,
EPA allocates these costs to sites.
2. Indirect coat manuals: There are several indirect
cost manuals that explain how EPA determines its
indirect costs and then allocates these costs to
sites. These manuals are commonly referred to as
the 1983 and 1985 Standalone documents. For the
reason described below, EPA's indirect costs are
much lower than they could be, and this fact can
and should be used to our advantage in proving
EPA's intramural costs. Keep in mind that there
are two elements to EPA indirect costs: HQ
indirect and regional indirect costs.
2. indirect coats: Not* — There ia a better
description of these coats and methods in Charlie
Young'a manual and in the Nortnernaire appeal
bnaf and a relatively complete aet of explanatory
documentation within DOJ'a internal cost files.
All HQ indirect costs are placed into a pool of
costs. The pool is allocated across all regions
in a proportion equivalent to the region's share
of the total CERCLA costs for a fiscal year.
Accordingly, each region is assigned a percentage
of the HQ indirect costs. A significant
percentage of this allocation is then also written
off, so that only a very small percentage of EPA's
actual indirect costs are actually billed to
sites.
EPA generated cost summaries .only show indirect
costs related to the Region.* For any given site,
there are a lot of people in the regional office
who do work related to a specific site, but who do
not bill their time site-specifically. EPA
regional indirect costs are assessed only against
the direct rates of certain regional office
technical personnel who bill site-specifically.
These employees, although they have different
direct billing rates, have a uniform indirect rate
assessed against them. When PRPs argue that EPA's
indirect costs are too high, it is persuasive to
show that only a limited number of regional
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employees' rates are burdened by indirect costs.
Take advantage of this fact by creating the chart
described below.
3. CREATE A SUMMARY CHART FOR PROOF OF BOTH EPA
DIRECT AND INDIRECT TIME/PAYROLL COSTS:
a. show the direct and indirect rates for every
regional and HQ employee who has worked on
the case.
EPA TIME
DIRECT COSTS INDIRECT COSTS
Name Job Hrs/FY Rate Total Hrs/FY Rate Total
b. the regional office financial person assigned
to the case should be able to prepare the
chart if given sufficient lead time.
c. the chart should show that EPA direct costs
are very low because so many people have
worked on the case who do not bill their time
site-specifically.
d. the chart should also show that EPA indirect
costs are very low because, as the manual
describes, EPA writes off a majority
percentage of its indirect costs and only
then divides up the remaining indirect pool
of costs across only those limited number of
people in each region who bill their time
site-specifically.
C. Pinalization of EPA Direct and Indirect cost Rates
1. Annual Audits: Currently, EPA's indirect cost
rates are being charged at provisional rates
subject to annual audits required by SARA. These
audits are running several years behind.
Depending upon the findings of the audit, the
rates at which these costs were summarized are
likely to change. It is necessary, therefore, to
determine whether the annual audit of indirect
rates has been completed, obtain the final audit
and any supporting documentation, determine the
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findings of the audit, and adjust the cost summary
and demand accordingly.
2. Note: EPA is in the midst of planning a ma}or
change to the method it uses to calculate and
allocate indirect costs. Mo decision has been
made as to whether these changes in methodology
will be applied retroactively to pending cases
such as Stringfellow. The most knowledgeable
Contact Person on Indirect Cost Methodology within
EPA is Bill Cook within FMD at HQ.
2. Contact Person on Annual Audits: A special group
at EPA HQ is responsible for the annual audits of
EPA's direct and indirect cost rates. Jack
Zabretsky within FMD at HQ is the contact person.
Copies of the final audits and any supporting
documentation can be obtained by contacting this
group (not the IG).
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II. GRANTS
In the CERCLA context, grants are a ma;) or form of funding
vehicle for response actions. Grants fall into two general
categories: (1) Interagency Agreements (*IAG"s) ; and (2)
Cooperative Agreements ("COA") .
INTSRAGENCY AGREEMENT COSTS
General Background: As the name suggests, these costs
involve monies transferred from the Superfund lead
agency to another in connection with CERCLA. Under
each IAG, EPA and another government agency negotiate
tne conditions under which CERCLA-related work will be
performed and the amount of money available to be
expended {e.g. DOJ EES enforcement work) . [A STATE
COOPERATIVE AGREEMENT is also a form of IAG. Here, the
California State Cooperative Agreement is a transfer
allocation IAG (see below) . Proof of Cooperative
Agreement costs will be dealt with in more detail in
the next section but many of the points raised here are
applicable. ]
1. There are tvo methods for IAG funding — {1} Cost
Reimbursement, and (2) Transfer Allocation. The
documentation that exists to prove any specific
IAG cost will vary with the form of funding.
(a) Cost Reimbursement funding: The federal
agency performs the response action and
requests reimbursement after performance.
Funding is obligated prior to the work being
performed, -but disbursed after completion of
the response action. Documentation includes
the vouchers from the agency performing the
work requesting reimbursement or some form of
fairly detailed invoice. These vouchers are
forwarded by the regional project officer to
the Financial Management Office in
Cincinnati, Ohio. This office directs the
U.S. Treasury to transfer the approved
payments from the Superfund to the
participating agency's account. Therefore,
look for a treasury schedule showing the
authorization to pay or some form of transfer
document.
(b) Transfer Allocation funding: Money is
transferred to the performing agency before
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the work is performed. The contracting
agency (e.g. DOJ, a state) then draws down
against the allocated account as the work is
performed. Documentation includes, the IAG
itself and any amendments, which establishes
the existence of the account, the authorized
transfer amounts, and the documentation
requirements. Commonly, the transferee
agency must periodically account for
expenditures, usually by filing work reports
or some other required documentation
specified under the negotiated terms of the
IAG. There may also be some document showing
the authorization for the transfer of funds
and any correspondence transmitting the
agreement between the agencies.
2. The Players: The Office of Administration and
Records Management (OARM) at EPA HQ and the Grants
Administration Division (GAD), with
representatives at both EPA HQ and at each EPA
Region, are responsible for overseeing and
administering lAGs and Cooperative Agreements.
These offices are involved in very little actual
accounting of costs incurred because they are
responsible for merely allocating monies between
government entities.
a. Since 1985, all site-specific lAGs have been
awarded from the regional offices. Prior to
1985, lAGs were awarded at HQ by GAD, but all
records related to these lAGs have been
transferred to the appropriate regional
office.
b. There are two sets of regional staff to
contact for an IAG: (1) Grants Officers are
persons who work on the administrative
aspects of the IAG (see list supplied by
McMoran). These regional people are the
place to start in locating IAG related
documentation. (2) For the technical
aspects of the work performance under the
IAG, there is also likely to be a Regional
Project Manager or Deputy Project Manager for
the specific IAG.
3. This ia an area where costs can be overlooked or
missing, i.e., Transfer Allocations are additions
to the EPA cost summary. Costs incurred under a
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transfer allocation IAG will rarely appear in the
cost summary provided by EPA, and if they do, are
likely to need updating and correction. Monies
expended under this type of IAG are transferred
from the Superfund or EPA to another government
unit that actually spends the money and keeps
track of (or should keep track of} the costs as
they are incurred. Consequently, these costs do
NOT show up on EPA's computer system and will NOT,
therefore, be included in the EPA cost summary.
4. Typical lAGs
a*. Army Corps of Engineers ("COE") - funded by
transfer allocation.
b. Department of Justice ("DOJ") - funded by
transfer allocation up until FY 1989 when it
switched to cost reimbursement for certain
types of expenditures but not others.
c. Agency for Toxic substances Disease and
Registry ("ATSDR") - funded by cost
reimbursement ('?)
d. Department of Health and Human Services
("HHS") - funded by .
e. Federal Emergency Managment Agency ("FEMA") -
funded by .
f. Department of the Interior ("DOT") - funded
by .
g. U.S. Coast Guard - funded by .
B. WHERE TO FIND COST DOCUMENTATION FOR lAGs
a. In general/ documentation relevant to proof
of costs incurred under a transfer allocation
IAG are maintained by the transferee (not
EPA), and must be obtained by requesting them
from the transferee agency.
(1) lAG's are administered within EPA by the
Grants Administration Division (*GAD*).
The underlying document memorializing
the terms of the IAG may generally be
obtained by contacting the GAD regional
representative. Other documentation to
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prove these costs roust be obtained from
the agency/entity that actually receives
the funds and incurs the costs.
(a) It may be useful to request GAD
officials at EPA HQ to help the
litigating attorneys establish
contacts within the transferee
agency. Maintaining good rapport
with the transferee agency contact
is important as these contact
people will be used to obtain
general info., necessary cost
documentation, audit and audit
resolution information, etc.).
(2) After establishing contact with the
transferee agency, cost documentation is
not likely to be obtained without
visiting the agency, becoming completely
familiar with its document organization
and retention system, and then
developing a strategy for collection of
all documents relevant to the Superfund
site at issue. Note: Many of the IAG
transferee agencies do not organize
their files on a site-specific basis,
particularly for the early years of the
Superfund program. This fact is a
primary difficulty in locating relevant
documents.
(3) In trying to identify relevant documents
within the transferee agency, look to
the terms of the IAG itself. Most
document requirements will be in the
agreement: e.g., proof of an account
being set up, any required periodic
progress reports or cost reports, etc.
Note -- To the extent the IAG Agreement
itself requires the transferee agency to
keep certain documents, particularly
financial documents, and we are unable
to locate and produce these documents,
it is worth pondering whether this
creates a compliance problem sufficient
to jeopardize our recovery of associated
costs.
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(4) The Cincinnati Financial Management
Office is responsible for paying IAG
monies. Look to this office to locate
IAG invoices from the transferee agency
to EPA and any applicable treasury
schedules (although more recently,
certain lAGs are now paid by electronic
transfer, which will require a different
type of documentation to prove payment).
B. ARMY CORPS OF ENGINEERS ("COE") COSTS
1. General: Among the many lAGs, this is the most
critical in terms of cost recovery. Over 90 % of
all IAG monies granted to other agencies by EPA
are incurred by the COE for performance of
remedial design (RD) and remedial action (RA)
activities, primarily remedial construction
contracts. Like EPA, the COE performs little of
its own work, but rather spends 90-95% of its IAG
grant monies on contracts with third parties who
perform the work. Most RA contracts are let by
the COE under fixed price or unit price
competitively bid construction contracts. Most RD
contracts are Brooks Act procurements using a
cost-plus type contract.
2. Where to look for documents: The COE Headquarters
is in Omaha, Nebraska. Construction contracts for
all RD/RA activities are let from Omaha;
therefore, Omaha is the central documentation
facility for COE cost documents.
a. RO Records: For remedial design contracts
and. activities, both financial and technical
records are likely to be found in Omaha. All
procurement and award documentation is likely
to be located in Omaha. [Remember that pre-
award procurement documents are considered by
EPA sensitive and not to be released.
Stategy decisions must be made as to how we
will treat procurement records held by other
government agencies.] The COE contact in
Omaha is Bill Mulligan. Have Scott McMoran
of GAD at EPA HQ assist us in making the
initial contact with Mulligan.
b. RA Records: For remedial action contracts
and activities, financial records are likely
to be at the appropriate COE District Office
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although they nay have been transferred to
Omaha — check both. There are 38 COE
district offices around the- country; Bill
Mulligan can provide us with information on
which of the 38 district offices to contact
in order to locate award documents for
construction contracts, contractor invoices,
change orders, etc. Technical records are
likely to be found only in the EPA regional
offices, either with the regional IAG Grants
Officer or the Regional or Deputy Project
Manager for the specific IAG.
c. COE Indirect Cost rate: Every COE district
office has its own technical indirect cost
and administrative overhead rate. These
rates are currently averaging about 25%, and
we need to work with the COE to develop
documentation sufficient to prove the
district office rates applicable to
stringfellow.
d. Payment: The Cincinnati Financial Management
center is responsible for paying COE IAG
monies. IAG invoices from the COE will be
found in Cincinnati. Although some lAGs are
now paid by electronic transfer, EPA actually
writes a check to transfer IAG monies to the
COE; therefore, look for applicable invoices,
treasury schedules and confirmation reports.
e. Audits: Because there have been so few
audits on specific lAG's they are not now
hard to locate. Scott McMoran at EPA HQ
receives them and will provide copies of all
IAG audits to date.
C. DEPARTMENT OP JUSTICE (*DOJ») COSTS
1. General: Costs incurred by DOJ in connection with
CERCLA cases are charged against the DOJ IAG
account. There is a new and standardized process
being organized and implemented for summarizing
and compiling DOJ costs making it simpler than
other lAGs to develop an accurate surjnary and
collect relevant documentation. In short, a DOJ
cost documentation library is being established
that houses the backup DOJ cost documentation for
selected Superfund cases since 1982 (only cases of
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minimal monetary value or cases that have settled
are being excluded).
2. Separate systems apply to the determination/
documentation and summarization of DOJ direct and
indirect costs depending upon the fiscal year in
which the costs were incurred — SEE THE SEPARATE
NOTEBOOK DESCRIBING THE DOJ COST SUMMARY METHODS
AND DESCRIBING RELEVANT DOCUMENTATION FOR EACH FY.
a. FY 1982 — In FY 1982, DOJ was only involved
in 24 Superfund cases with costs of
approximately $1.8 million. Cost accounting
for FY82 was based upon actual costs:
professional staff salaries multiplied by the
number of hours worked; travel; experts;
litigation support; depositions; any other
direct costs (copying, etc.)? and a fixed
percentage charge for indirect costs
(employee benefits, supplies, etc.
Therefore, the types of documentation to be
gathered include tiinesheets, travel vouchers,
and invoices. These materials are held by
the Justice Management Division, except for
timesheets, which are microfilmed and are
controlled by the Executive office's Systems
Group.
b. FY 1983 and 1984 — In FY83 and FY84, the
approach to cost accounting was basically the
same with one significant difference: a lot
of the overhead previously claimed was
reduced. The only overhead expenses charged
were for secretaries and building rent ,
(SLUG). The approach to cost documentation
for these years is identical to FY82.
c. FY 1985 — In FY85, the approach to DOJ cost
accounting changed radically. Rather than
using actual costs, a percentage allocation
system was developed to determine amounts to ^
seek in cost recovery cases. This was done
in response to an audit of the prior years'
efforts. The allocation percentage was
derived by comparing the Superfund case hours
to total Division case hours and applying
that percentage to all the Division's costs
to determine an average hourly charge
(regardless of the type of employee or
grade). The hourly figure arrived at was
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$68. The total money to be recovered in any
case for FY 1985 was $68 multiplied by the
total number of hours billed to that case.
There was no distinction made between direct
and indirect costs. The only backup
documentation required for FY85 are,
therefore, timesheets and a copy of the
Expenditure and Allotment (E & A) Reports
maintained by FMG.
d. FY 1986 — In FY86, the FY85 approach to cost
accounting was used with the exception that
litigation support and expert'witness costs
were not included in the percentage
allocation, but were instead tracked directly
to the appropriate cases. In addition to
timesheets and the E & A reports, delivery
orders and invoices are needed to establish
the litigation support and expert witness
costs.
e. FY 1987 and beyond — Beginning in FY87, the
Division contracted out the Superfund cost
accounting reporting and cost document
compilation to the accounting firm of Rubino
& McGeehin. Arrangements have been made for
JMD to provide to Rubino and McGeehin copies
of the microfilm of all Lands Division
vouchers (with the exception of timesheets).
The Cost Library staff will compile and
maintain the time sheets for these years
until requested.
3. Who To Contact to Initiate the Determination of
DOJ Costs
a. For years prior to 1987, a request for a DOJ
cost summary and backup documentation must be
sent via e-mail to Ellen Cook on the DOJ-EES
staff, who will forward the request to the
EES Cost Library Staff. Once compiled, DOJ
costs must be added to the EPA cost summary.
Previous to the establishment of the cost
library, the Lands Division Financial
Management Group ("FUG") was responsible for
compiling documentation to support costs
incurred by DOJ.
(1) Terri Cahill, 272-5977 (601 Penn.
Building, Rm. 6517) was the Lands
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Division contact. She is on e-mail
(SS56).
(2) The DOJ cost summary process was
initiated by making a written request to
Terri Cahill'(above) to summarize DOJ
costs incurred in connection with the
case through a certain date and to
provide all back-up documentation. In
the written request, Tern needed the
case name; DJ #; name, phone I and room
number of the responsible attorney.
(3) Be aware that while the new Cost Library
system is being organized, compiling
back-up documentation may require at
least 4 weeks of lead time.
(a) Non-Time Related Expenses: Under
the previous system, the Justice
Management Division searched for
and provided to Tern Cahill all
back-up documents that were NOT
related to time.
(b) DOJ Tina Sheets: At the same time,
someone from the Lands Division
Financial Management Group, or
sometimes a DOJ paralegal, was
assigned the task of pulling all
DOJ time sheets related to the
case. The colored time sheet
listing all time spent on all cases
and sometimes the white Superfund
timesheets were pulled. Timesheets
for periods after 1987 are
transmitted to an outside
contractor to be summarized and
analyzed. A complete copy of all
timesheets for all years should be
retained here at DOJ, i.e. provide
only a copy of relevant timesheets
from 1987 to the present to Rubino
& McGeehin (see below).
b. For years after 1987, an outside contractor,
Rubino & McGeehin, has been retained to
summarize, analyze, and testify with regard
to DOJ costs.
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(1) Wiley Wright is our non-testifying
consultant in the Stringfellow case on
all aspects of costs, including DOJ
costs. Rubino & McGeehin is also under
a separate general contract with DOJ as
our testifying expert with regard to the
DOJ direct and indirect cost accounting
system developed for FYs 1987 to the
present.
3. TIME SHEET ANALYSIS (To be developed)
a. A time sheet analysis similar to that
perfcmed on EPA's time sheets should be
performed on DOJ tine sheets to determine
those time-related costs that can actually be
proved, if necessary, at trial.
COOPERATIVE AGREEMENT ("COA") COSTS
A. General Background: In the CERCLA context, a
Cooperative Agreement is a grant of CERCLA funds from
EPA to another government entity, in this case, the
State of California. Nearly half of the money expended
at the Stringfellow site has been incurred under this
form of funding.
1. EPA and the State negotiated the initial
agreement, which has been amended a multitude of
times (13 times??). The full agreement, including
all amendments, must be identified and its
provisions and requirements (e.g. specific
documentation requirements, the letter of credit
funding process, etc.) understood in order for the
litigating attorneys to fully evaluate all
criteria needed to establish this portion of the
Stringfellow costs.
2. Certain regulations and guidances govern the
handling and administration of a state cooperative
agreement: 40 C(F. R. Part 35, Subpart 0, and all
applicable manuals and EPA guidance on COAs is
maintained within DOJ's internal reference files
on costs.
B. The Process: The amount of the grant authorized under
a COA for a site appears in EPA's SCAP. The State then
submits an application to EPA seeking a grant of the
SCAP amount, and after receiving all completed
application papers (including a certification that the
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State will comply with all federal procurement
regulations and requirements), the Regional Office
awards the COA. It is then the State's responsibility
to provide or procure all services necessary to perform
under the COA. Consequently, if it exists in the first
instance, VIRTUALLY ALL documentation necessary to
prove that costs were incurred for work performed at
the Stringfellow site within the authorized scope will
be in the state's files. We will be looking for the
same type of documentation to prove the same type of
cost elements — State intramural costs, including
direct and indirect costs, and costs related to state
procured contracts,
C. COA Administrative Structure: Within EPA, the Grants
Administration Division (GAD) administers state
cooperative agreements. In general, EPA HQ provides
overall policy guidance; the HQ contact on COAs is
Richard Johnson. Site specific COAs, like
Stringfellow, are administered by the Region. Each
Regional Office has a Grants section, and all awards of
site-specific COAs are made by regional Grants' section
personnel. The Grants Administration Section contacts
within Region 9 are Melinda Taplin (Chief)/ Mary
Cahill, Kristin Gullatt, and Pat Young. In general,
the COA administrative structure in each regional
office provides an administrative component, a
financial management component, and a program office
component. Each of these offices or persons within the
region should be contacted to determine their role in
the State COA and the nature of available documents.
1. Financial Component: A COA is generally funded by
issuing a State a letter of credit against which
the state is entitled to draw down funds as they
are expended. As the amount authorized under the
letter of credit is depleted, the grantee state
may submit a request for additional funds. Unless
Finance, within the region, approves the request,
it automatically takes effect (is automatically
approved) within 24 hours. All changes to or draw
downs against the letter of credit are (should be)
reported to the Cincinnati Financial Management
Office or the Las Vegas Financial Management
.Office. A staff person Within the regional
Finance Office should then be reconciling all
Federal Cash Transaction Reports against the
Letter of Credit.
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2. Administrative Component: In order to monitor
progress and performance under a COA, regulations
and the State Cooperative Agreement itself sets
forth certain financial and program reporting
requirements. Compliance experience with these
requirements indicates that most states have
honored them more in the breach. Although EPA
administrative files on a specific COA should
contain monthly and quarterly financial and
technical progress reports, they are likely to
contain LITTLE IF ANY of these documents. Our
only real hope is to go to the State's files, and
hope we find them there.
D. Audits (See Part II.A.4 ahead for general info.)
The Project Officer for the COA makes the decision
whether or not to audit and close out the COA. In most
instances, no interim audits of a site-specific COA are
performed, although the Stringfellow COA has been
audited and millions of dollars were questioned.
1. To the extent we do not already have them, we need
to obtain relevant audits (Richard Johnson at HQ
or the regional audit coordinator -- see below —
can probably provide copies of certain audits more
quickly than working through the IG's office) and -
analyze the specific dollars audited, the findings
of the audits, and track the resolution of those
findings. Costa ultimately disallowed by EPA as
part of a final audit resolution should not be
included in our cost summaries as recoverable,
costs.
2. About 30-40 COA audits have been closed out.
Under the Single Audit Act, EPA is required to
perform certain audits every year (See Appendix to
40 C.F.R. Part 31]. The Department of Commerce
acts as a clearinghouse for these single annual
audits and we may have to work with GAD at HQ or
the regional audit coordinator to obtain any
relevant audits performed by a cognizant audit
agency other than EPA.
3. Each Region has an Audit Coordinator who can
generally be found within an office under the
Assistant Administrator for Management. Region 9
is an exception — the audit coordinator in Region
9 is the Grants Branch Chief (Melinda Taplin??).
The regional audit coordinator should maintain the
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auditors' reports for completed audits. For
"Questioned" costs, an Action Official in the
region (get list from Richard Johnson) is
responsible for revolving the audit and issuing a
final determination letter to the State. If the
Grantee disputes the determination, mandatory RA
review may be requested and discretionary AA
review. Once costs are finally "Disallowed," the
Debt Collection Act is the mechanism under which
EPA recoups these costs.
D. Procurement Function For Grants:
1. As a result of an audit of the California
procurement system several years ago finding that
California had falsely certified that its
procurement rules met the federal procurement
standards, EPA and the state worked out an
agreement. EPA now exercises pre-award review of
all State of California contracts — both the
regional Grants Office and the Regional counsel's
Office is involved in these reviews.
Consequently, documents that might not otherwise
be found in EPA files may in fact be in EPA's
possession. These should be specifically
searched.
2. All procurement rules governing COA contracts are
in 40 C.F.R. Part 31, Subpart 0. These
regulations prescribe prime contractor and first
tier subcontractor procurement requirements under
a COA. These requirements are, however,
relatively minimal and rely upon the state to
procure contracts and ensure compliance.
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III. CONTRACTS
A. Background
Because of the complexity of the federal contracting
regulations, EPA recognized early in the CERCLA program
that attempting to set up all CERCLA response work
under separate site-specific contracts would be unduly
cumbersome and time-consuming. Consequently, rather
than using a site-specific contracting strategy, EPA
developed a system of special contracting strategies
designed to get contracts in place more easily.
1. CONTRACT PROCUREMENT
a. The Players: Within EPA, contract
procurement and administration is under the
jurisdiction of the Procurement and Contracts
Management Division' (PCMD). Contact persons
are located both within EPA HQ and within
each EPA Region. Generally, a local contract
will be administered by a PCMD Contract
Officer in the Region while the Contract
Officer on a national or zone contract will
be located at HQ. In addition to the PCMD
contact persons, within each Region,
individual Remedial Project Officers (RPMs),
who are responsible for the technical work
under each contract, are knowledgeable about
the contracting procedures and the actual
work performed under a specific contract.
b. The Procurement Process
(1) Federal Contract Law and Regulations
apply.
Like any government contract, EPA's
contracts with outside third parties are
governed by federal contract law and
regulations. Currently, these include
the Federal Acquisition Regulations
(FARs). (The FARs replaced the Federal
Procurement Regulations (FPRs), which
applied primarily to the Dep't of
Defense and military procurement.) In
addition to the FARs, the Environmental
Protection Agency Acquisition
Regulations (EPAARs) govern EPA
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acquisitions. Contract terms are
dictated in large part by the governing
federal regulations.
*
For each contract at issue in the case
(this includes ZAGs and the cooperative
agreement) , the litigating attorney
needs to determine (a) whether federal
procurement law applies to that specific
contract; and (b) whether those who hold
sub-contracts under the primary contract
(i.e. sub-contractors) are in privity of
contract with the United States. Start
by checking the contract vehicle itself
and then by contacting the GAD or PCMD
contact for the case. This latter
element is necessary to determine, at
least, whether or not the sub-
contracting documents are relevant to
discovery or to proof of costs in the
case.
(2) The governing regulations set out the
required procurement process for each
type of contract, but the process can be
generalized as follows: PROCUREMENT,
HANAGEMENT, and CLOSE-OUT.
Under a competitive bidding procedure,
which governs most of EPA's national and
zone contracts, EPA puts out a Request
for Proposal, drafted by a panel within
EPA; the RFP is advertised; potential
contractors send in bids; the bids are
evaluated. [MOTE: Documents generated
up to this stage of the process are
voluminous and are maintained at PCMD
offices at HQ. These pre-award
documents are considered HIGHLY
SENSITIVE, and are not to be released
(unless and until there is a Court Order
requiring it) . Therefore, try to read
the discovery request narrowly enough so
as not to include these documents.
Leslie Allen has briefed the
applicability of the deliberative
process privilege to these documents in
her Time Oil case. This same process is
followed for sub-contracts under the
main contracts. If sub-contractors are
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in privity with the U.S., these same
decisions about the relevance and need
to produce documents must be considered
for the subcontract documents as well.]
Following bid evaluation, the contract
is awarded, performed and eventually
closed-out.
2. TYPES^OF CONTRACTING STRATEGIES
a. CONTRACT TYPE: The FARs and EPAARs define
and prescribe rules governing the
procurement, terms, and administration of
specific types of government contracts,
including EPA's contracts under the
Superfund. NOTE — Be aware that under these
regulations, there are certain types of
contracts that are illegal. Sometimes EPA
folks use illegal contract descriptors as a
shorthand. Make the trial witnesses aware
that "loose" use of incorrect contract
descriptors can be very damaging to the case.
The regulations include the following types
of contracts:
(1) Fixed Price -- This is a contract where
EPA puts out a competitive bid notice
and a third party agrees to do a fixed
task for a fixed price that is
negotiated up front. A good example is
a construction contract for an air
stripper. Payment is traditionally in a
lump sum before the work is performed,
i.e. grant up front. [NOTE: This type
contract is frequently used for site-
specific local contracts, and are rarely
at issue in a cost case because as long
as the contract was properly bid, the
amount, the payment and the work
performed is generally clear leaving
fewer issues to resolve. Only minor
checking is necessary. Need only
analyze whether (a) the contract was
properly procured? (b) EPA received the
completed deliverable' (c) any serious
complaints exist in the file? (d) any
contract modifications or change orders
exist and were complied with? (e) the
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bid and the paid price agree, and if
not, does the change order reconcile the
difference, i.e. compare the bid and
the paid price. If not the same, check
the change order. If none, check for
complaints in the file. Analysis over.
In Stringfellow, lota of money may have
been spent under these terms.]
(2) Cost Reimbursable/Level of Effort —
Under this type of contract, a third
party agrees to do a certain amount of
work and get paid for it after
performance. EPA fixes a rate at which
costs can be incurred typically by
setting a cap on the level of effort or
setting fixed rates for reimbursable
costs. The contractor performs the work
and then bills us. Payment can either
be at completion (completion payment) or
by periodic payment based upon vouchers
from the contractor.
(4) Coat-Plus-Award-Fee --
(a) Cost-plus contracts are technically
illegal under the FARs. Although
certain EPA contracts resemble cost-
plus contracts, they have certain
provisions that remove them from the
illegal category. The REM and REM/FIT
contracts, where money was spent under a
cost reimbursable time and level of
effort award fee contract with
provisional periodic payments, is a good
example. These contracts set an overall
limit on time and level of effort. EPA
draws down against the overall limit,
which is what brings the contract out of
the illegal cost-plus category. The
contractor need only provide best
efforts, not success.
(b) Award Fee is a form of incentive
payment for good performance. It is
generally evaluated in 3 phases. The
award fee is directly proportional to
the amount of money expended under the
contract associated with the site, but
can be evaluated either based upon
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performance at the site or under the
contract as a whole. The determination
of whether the evaluation is site-
specific or based on the contract
overall will affect the discovery
(location of responsive documents).
Typical award fee payments are phased as
follows — Phase 1: As long as the
contractor simply performs the work at
the site, it gets paid a 3% base fee
each month. Phase 2: EPA evaluates
quarterly how effectively the contractor
has performed under the contract and can
award a 4% fee.* Phase 3: EPA may award
an additional 3% fee based upon an
evaluation of performance at completion
of the work under the contract. [NOTE:
The evaluation documents are very
sensitive within the agency because of
the deliberative nature and the
competitive advantage given to
competitors if released.]
(5) Brooks Act — This is a special
contracting strategy mandated for
architectural and engineering services
contracts. These contracts need not be
performed by the lowest bidder.
Instead, the technical qualifications of
each bidder are ranked, and only then is
price considered among the highest
ranked qualifiers. Only certain
contractors who are sufficiently highly
ranked may be allowed to bid and the
contract may then be a fixed price
contract.
Rather than using site specific contracts
under CERCLA, EPA let various types of large
scale contracts, each designed to accomplish
a specific type of work across many or all
CERCLA sites. For each of the contract
strategies, EPA determined whether to make
the contract a ZONE, REGIONAL, or NATIONAL
contract. Each of these strategies during
each period of the contract has a specific
CONTRACT TYPE, which may or may not have
remained the same over the life of the
contract.
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(1) Field Investigation Team (FIT) Contracts
(2) Remedial (REM) contracts
(3) Removal Contracts (ERCS is largest)
(4) Technical Assistance Team (TAT)
Contracts
(5) Technical Enforcement Support (TES)
Contracts
(6) national Labs/VlAR Contract
(7) Techlaw Contract
c. Need to determine PRIVITY of these
contractors and any subcontractors at
threshold. Before beginning the analysis of
costs under a specific contract, check the
primary contract vehicle to determine whether
the sub-contractors are in privity of
contract with the federal government. This
determination will govern whether or not we
had the right/duty to authorize and supervise
the work being performed. It will also
determine whether the primes were required to
follow the federal procurement regulations
when letting contracts to subs.
3. HISTORICAL AND ANNUAL ALLOCATION OF CONTRACT COSTS
Background: Under a typical contract, EPA pays
the contractor for several different types of
costs « (a) Contractor direct costs (such as the
contractor's time, travel, labor) are billed
directly to EPA and may or may not be site
specific costs; (b) contractor indirect costs
(such as building rent, computer system costs,
support staff) are billed to EPA and must be
allocated to sites using some rational allocation
scheme; (c) program management costs represents
amounts EPA pays the contractor for managing the
contract (such as meetings with EPA officials at
HQ, "schmooz costs", evaluations) and these, like
- indirect costs, are not site specific.
a. Letter Reports: All contract costs incurred
prior to July 1985 have been allocated to
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sites rather than accounted for on a site
specific basis. Prior to July 1985, EPA
contractors were not required to bill site-
specifically. Nevertheless, some contractors
did bill EPA site-specifically and retained
site-specific billing records. For purposes
of litigating these costs, EPA requested its
contractors to submit "Letter Reports"
identifying and }ustifying the contractor's
costs attributable to a specific site. These
letter reports are usually prepared long
after the actual work is performed and
payment is made, and represent, first, the
contractor's best guess as to the costs
actually attributable to a specific site
(unless the contractor happened to maintain
site-specific records); and, second, an
allocation of the contractor's non-site-
specific costs.
Historical Cost Allocation System: Rather
than rely upon letter reports to support
contract costs prior to July 1985, EPA has
instituted its Historical Cost Allocation
System. Under the system, instead of
attributing costs site by site based upon
letter reports or upon the contractor's site-
specific records, EPA pools all pre-July 1985
contract costs and allocates these costs
across all NPL sites. The allocated dollar
amount is not the same as, and bears no
relationship to, the earlier letter reports.
Documentation of the Allocation: The
allocations are supported by Summaries of
Historical Costs (computer printouts showing
the amounts allocated to each site under each
contract) and Journal Vouchers (generally a
one page document showing the fact of a lump
sum transfer from one account under a
national or zone contract to another without
any specific site references and a
"Certification of Reasonableness," signed by
a HQ or Zone Project Officer should be
attached.). This documentation causes
serious litigation concerns including (1) the
letter reports when compared to the journal
vouchers show that EPA is transferring money
from one site to another but without
supporting rationale or documentation; (2)
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the numbers generated by the allocation
system are different and unrelated to the
amounts reported by the contractors in their
letter reports; (3) the allocated amounts are
unaudited; (4) the "Certification of
Reasonableness* is frequently dated before
the cost allocation report is, finalized, i.e.
before we say how we allocated and what we
allocated, we certified the allocation as
reasonable.
Importance to the Stringfellov cost proof:
EPA cost summaries reflect a "zero* site
specific amount (under the "Site Amount*
column) for any invoices dated prior to July
1985 because these costs have been allocated
under the Historical Cost Allocation
methodology. Decisions as to how we will
present proof of allocated contract costs
must be made as a matter of litigation
strategy given the significant problems with
the existing level of documentation for these
allocations. In addition, we must be careful
to prevent seeking double recovery of costs
that >have been included within the allocation
cost pool and show up elsewhere — a
potential source of such double counting is
program management costs, which sometimes are
included in a contractor's site-specific
invoice as a separate line item but may also
have been included within the historical cost
allocation pool.
4. AUDITS
We need to establish the existence of, obtain all
relevant documentation under, and analyze the
results of all audits relevant to Stringfellow
costs in order to determine whether or not the
cost demand should be adjusted to reflect the
findings of the audit.
(a) Determining the Existence of Relevant Audits:
Any aspect of any contract (including
contracts, lAGs or cooperative agreements)
can be audited at any time. Some audits are
necessary to the proof of our costs and
should be turned over to the defendants in
discovery. Other audits are generally not to
be produced. Some different types of audits
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with the general protocol for release are
listed below.
(1) Pre-Award Stage Audit - Auditors within
FCMD can audit anything they want to
prior to the award of the contract to be
sure that the contract procurement
process is functioning properly.
Contact: These audits will/should be
found in the contract file at PCMD.
Like all pre-award documents, are
considered highly sensitive in the
context of document releases.
(2) Program Audits - Certain program audits
are required by CERCLA itself. These
are not considered relevant to proof of
costs are not generally released in
response to cost documentation requests.
(3) Congress/OMB/Offlea of Technology
Assistance (OTA) - we do not consider
ourselves obligated to turn over these
congressional or related audits to the
defendants unless they are specifically
within our possession or control.
Contact: Office of Congressional
Liaison (get name of contact person from
Jerry Schwartz).
(4) Annual Audits by the FARs Cognizant
Auditor - Under the FARs, the
contracting agency that uses the
contractor the most (i.e. the big bucks
agency) audits the CONTRACTOR (not any
particular contract) once a year. When
a contractor bills EPA for work
performed, it is a bill based upon a
PROVISIONAL RATE. [This can become an
evidentiary and practical problem
because contractor invoices are
routinely stamped "Provisional" — a
flag to defendants that we are charging
them for costs not finally paid.] An
annual audit, which is currently about 2
years behind, performed by the FARs
Cognizant Auditor establishes the final
direct and indirect rate for that
contractor. The litigating attorney
must check whether there has been a
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final annual audit that may have changed
specific cost items for a particular
contractor. Contact: ???? A special
group within at EPA, headed by Jack
Zabretsky, functions as the FARs
cognizant auditor. These audits are
released to defendants, subject to CBI
and privilege screening.
(5) Site-Specific Audit - These are not
routine audits, but generally, may be
performed on cooperative agreements.
Most often they happen because Congress
requests a site-specific audit. We are
likely to have several of this type of
audit in Stringfellow. Contact: Lisa
Karpf or Pat Holt, EPA Inspector
General's Office (IG); Bob Frederic, OGC
attorney responsible for IG auditors.
These audits are released to defendants
subject to CBI and privilege screening.
(6) Overall Issues Related to Site - Certain
portions of contracts may be audited at
any time (e.g. an audit of purchases or
of a specific year) or a separate
portion of work under a contract may be
audited at close-out (e.g. an audit of a
separate subauthorization document such
as a specific TDD or work assignment).
There could be hundreds of these audits
that are not site-specific for any given
CERCLA site. Contact: Lisa Karpf or
Pat Holt, EPA Inspector General Office
(IG); Bob Frederic, OGC attorney
responsible for IG auditors. These
audits are released to defendants
subject to CBI and privilege screening.
(7) EPA Indirects - EPA indirect cost rates
are audited routinely to obtain a
finalized rate that then must be used to
adjust prior provisional rates.
Contact: Bill Cook at the Financial
Management Division at EPA HQ is
responsible for audits of EPA indirect
rates. These audits are released to the
defendants subject to CBI and privilege
screening.
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(8} Contract Close out - When all work
required under a contract, has been
performed, there is a contract close-out
audit to determine to what extent
payments to the contractor should become
final. Contact: Lisa Karpf or Pat Holt,
EPA Inspector General's Office; Bob
Frederic, OGC attorney responsible for
IG auditors. These audits are released
to the defendants subject to CBI and
privilege screening.
(9) Audits by Other Federal Agencies or by
the State - Certain audits authorized or
performed by other government agencies
or entities, such as audits of the State
Cooperative Agreement by the State of
California, may be relevant to the proof
of costs in the Stringfellow case.
These audits must be obtained by going
to the other agencies' IG Office or to
the State of California.
(b) Audit Documentation
(1) The final audit itself; No draft audits
are turned over. Any audits arguably
relevant must be reviewed for privilege,
CBI and draft status.
(2) Responses to the Audit. Most, if not
all, audits have related correspondence
and written comments concerning the
audit. Check with the IG or the
Contract or Grant Officer for this type
of documentation.
(3) Auditor's Work Papers. These work
papers are generally not treated as
privileged; therefore, it is EPA
procedure to release these to the
defendants.
(4) Any Requests for Audits. Sometimes
Congress or some other entity may
specifically request that an audit
related to a site be performed. It is
best to know about any documentation
that memorializes these requests and
whether the audit was performed because
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it can be embarrassing if no audit was
ever performed.
(c) How To Track Down Audits From the IG's Office
(1) The IG document retrieval system is very
hard to work with because of its search
logic. Audits are not maintained in the
system on a site-specific basis.
Nevertheless, we need to work with the
IG to search out any audits that may
relate to Stringfellow to determine
whether certain costs have already been
disallowed or questioned.
(2) For each contract and cooperative
agreement, there are different
authorization documents. Start by
giving the IG contact a list of all
contracts/coop-agreements at issue (the
top half of the cost summary page may
do), the contract number, and the number
of each authorization document under
each contract, the site-identifier, and
the site name. Then ask the IG to 'sort
by site; sort by final audit of
authorization document; sort by close-
out of contract; etc* and then to
"eliminate all but Str.F.*
(3) Consider whether to make the request to
the IG as a two-phase sort or a single
sort. Find out from the IG whether they
want to front load their effort to
search out all relevant audits now or
make specific sort requests now and
explain that we might be back later on
an emergency discovery request asking
for additional sorts. If all the IG can
give us is a computer printout with lots
of audits listed, then have the IG staff
go over the printout with the attorney
to identify/parse out only those audits
the litigating attorneys want to see.
f
(d) What is an audit and what does it tell you
(1) Audit Findings: Once an audit is
performed, the auditor can classify
costs into 3 categories:
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(a) allowed
(b) questioned - the auditor is saying
she needs more information.
(c) disallowed
(1) An audit is not a final determination;
it is only a recommendation. The
findings of the audit should sot be
considered a legal conclusion about the
ability to recover those costs. The
auditor does not allow or disallow
costs. Under federal contract law, the
Contract Officer (at EPA HQ) is the only
person who can allow or disallow costs.
The findings of the audit are,
therefore, simply a recommendation. All
parties to the contract may comment in
writing upon the audit findings.
(2) Final Audit Resolution: Some person
within HQ or the Region has
responsibility to RESOLVE THE AUDIT,
i.e. to make a final decision about
whether to disallow certain sums of
money under the contract. For
contracts, the Contract Officer, either
within EPA HQ or the Region, uses the
audit recommendation to negotiate with
the federal contractor about how much
the federal government will pay or not
pay under the contract. The aggrieved
party can then go to the federal Claims
Court to file a collection action in
order to get the money it believes it is
.owed.
(3) Determine Final Agency Position: If the
agency has made a final decision that
certain money be disallowed under a
contract, we should take that money off
the table even before the final
collection action-, because we will
eventually be made whole through a
recoupment action against the
contractor. If we demanded that the PRP
pay us this amount, it would be a double
payment for the same response action.
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PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
V. PRE-JUDGMENT INTEREST
VI. ACCOUNTS RECEIVABLE
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COST RECOVERY OUTLINE
PROOF OF COSTS UNDER CERCLA
JAMES G SHEEHAN
ASSISTANT UNITED STATES ATTORNEY
CHIEF, CIVIL DIVISION
U S ATTORNEY'S OFFICE
601 MARKET STREET
PHILADELPHIA, PA 19106
FTS 597-2305
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COST RECOVERY OUTLINE
1) Primary objective of civil litigation-obtaining a favorable
settlement. (in rrost cases).
2) Effective use of settlement-forcing techniques.
—early total settlement demand ($)
—early, authoritative calculation of amount due, interest
accruing (rate and amount)
—early discovery, motions to compel
—thorough requests for admissions
--Rule 16 proposed pretrial conference and order
—settlement conferences with Judges and magistrates
—the appearance of reasonableness
—discovery aimed at defendants' problems of embarassments,
--written communications which should be passed on to client
3) Effective use of discovery, evidentiary techniques
—to limit length of trial
--to serve as basis for summary judgment motions
—to persuade fact-finder of Government's efforts
4) Consideration of Trial Judge
--motivation to have case settle
--attitudes regarding discovery disputes, technical enforce-
ment of Rules of Evidence, privileges
--minimum assertion of privileges by government
—concern that money be spent on resolution, not litigation
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5) Packaging of case for trial
— saying makes it so
— binders, back up documents
COST DOCUMENTATION OUTLINE
(
RULE 803(6) hearsay exception for business records
RULE 803(6) permits introduction into evidence of records which
satisfy the following predicates
1 made at or near the time the matter recorded occurred;
2 made by, or from information transmitted, by person
with knowledge;
3. kept in the ordinary course of a business activity
(includes govt.),
4. it is regular practice to keep the specific report
in question,
5. 1-4 shown by admissible testimony of "custodian or
other qualified witness."
6 is truthworthy This is the most important predicate.
See, White Industries v Cessna Aircraft, 611 F.Supp. 1049 (W.D.
Mo 1985).
NOTE any document which plaintiff seeks to admit under the
hearsay rule must also satisfy the authenticity requirements of
Rule 901-3
PROCEDURE FOR USE OF 803(6) DOCUMENTS
1. Documents are ordinarily identified in your pretrial
memorandum. Depending on the trial nudge and the merits of their
defenses, defendants often decline to stipulate to admissability
At this same time, they will seek government stipulations to
their exhibits We have developed a procedure which permits
defense counsel to raise his admissability objections, while at
the same time limiting the amount of custodial testimony. Attached
is our evidentiary predicate list, which shows for each government
exhibit the predicates 1-6 above which the parties stipulate to,
and which ones are contested.
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2. Absent, such stipulations, trial counsel must be
prepared to present oral testimony by a person with knowledge of
each of the predicates listed "With knowledge" is to be given
the broadest possible interpretation - the witness need oily be
someone who understands the system. 4 Wsinstein & Eeicar-, ca-
dence, at 803-178. In the case of computerized data, i~he .'3tne«:c
must be familiar with the transmission and accuracy checks: ol -he
computer system as well as the underlying data
3. Demonstration of trustworthiness ir the roc- oc -^ex
portion of the proof. In Ro s enb er g v Collins, 624 F ?d 15: i b :'i
Cir. j.930) and United States v Findlev, 522 r 2d 1C I C~ i -.
1975) tne Cojrt required a showing of the folio-ir-j '_-. p_c"^
trustwortniness:
a) The records are kept puisuc^it tc .• o-.isi. i ?.:~
and routine procedure.
b) The records must be kept for sorae purpose thzr.
would tend to ensure accuracy (the Court specifically 'icte^ t^t
preparation for litigation is not ^uch a purpose;
c) The records themselves cannot be occi...'litions
of uninformed opinion or hearsay.
/
In the complex cost documentation cases, a '/itnes.. " uc c
have thorough familiarity with the basis for each leport.-d ,<. .
This familiarity can come from hearsay if part of legulor 2'~->
duties
4. In complex document cases, a single ' itncss .ay
provide foundation testimony for all documents from a _pec_iic
source (such as EPA) at one time. That witness can testif. cbout
of documents by type (e.g., manhour and reports) and need
not provide foundation separately for each document T^ n 11". d _S_^. a t e s
v. Keplirger, 776 F 2d 678 (7th Cir 1985)
5. Where records are computerized, the witness nuct
also testify that s/he understands the computatiors 01 iL'-t\c^3
resulting in the figures recorded in the records
s/he understands how the systen worses (a- \ nau
point inputs are received and from whom, is familiar ;if. r ai^a.il
governing when and how to input, and process of operation^;
s/he knows what safeguards and checking fyitsms
exist to ensure that information in the printout is accuic _e ?-id
that the safeguards and checks are adequate '
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PROBLEMS UNDER 803(6) in CERCLA CASES
1., The SPUR report may not be admitted as a business
record It is prepared in anticipation of litigation, see,
Paddack v. Dave Christensen, 745 F.2d 1254 (9th Cir. 1984) it is
sometimes not prepared at or near the time the matter recorded
occurred, much of the information upon which it is based is
hearsay from third parties. But see Ponderosa System v. Brandt,
767 F.2d 668 (10th Cir. 1935). (It may be admissible under Rule
1006).
2 Many contractors have in the past not kept site-
specific records (particularly national contractors). When cost
documentation is assembled, nany months after the fact, they
produce an "estimate" of site specific costs, together with an
overhead formula. Tnese "estimates" may be inadmissible as
business records, even on the contractor's testimony; they require
resort to Rule 702 for admission.
3 . There is no one individual in many ases with suffi-
cient knowledge to satisfy all the predicates under 803(6) for
specific categories of documents. The numerous witnesses required
to satisfy all evidentiary predicates try the patience of the
fact finder They also tend to be scattered in several states
and the District, unaware that they may need to testify, and shy
of appearing in court.
4. The contract documentation process involves a
complex series of reviews and balances, including finalization
and "definitization", reviews by the audit side of the Inspector
General, contracting officer negotiation documents, analyses by
the General Accounting Office, and Congressional oversight com-
mittee statements Few of us at EPA or DOJ are aware of all
these issues, and most witnesses can be impeached by some state-
ment from the "Government's own" documents
OUR PROPOSAL:
1. Cost documentation must be complete early in the
case, including all steps from initial TDD or similar work direc-
tive through payment voucher (and date). These documents should
be the subject of careful requests for admissions (form attached)
and later requests for stipulation concerning predicates (form
attached)
'2 Early in the case, a single EPA employee with
knowledge of botn the contracting procedures and cost documentation
should be assigned responsibility for developing a cost summary.
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This person should have soire background in governmental accounting
(either from on the nob or academic experience), should be prepared
to testify in the cases s/he has worked, and should be thoroughly
familiar with the underlying documentation and the data system
which generates spur reports
3. The cost documentation and support committee within
EPA should have a central source of information concerning govern-
mental materials discussing our cost processes.
Rule 803(8)
Permits use of Government Audit Reports, internal cost docamenta-
ticn memoranda and analyses, contract officer determinations of
reasonableness. See Blim v Western Electric, 731 F.2d 1473
(10th Cir. 1984)
Rule 1006 Summaries
Rule 1006, Federal Rules of Evidence permits use of
chart, summary or calculation, where
1 the contents of voluminous writings or records
cannot be conveniently examined in court.
2. the originals, or duplicates are made available for
examination or copying by other parties at a reasonble place and
time, i e., all of the "voluminous" supporting records are trade
available.
3 the underlying records supporting the summary would
themselves be admissable uder a hearsay exception with appropriate
witness.
4 the chart or summary is accurate, authentic, and
does not contain deceptive characterizations or conclusions
See, United States v Scales, 594 F 2d 558 (6th Cir 1979)
United States v Souland, 730 F 2d 1292 (3d Cir. 1984).
Procedure for use of chart or summary
1 Issue of use of summary, basis for use, and legal
requirements for its admission should be presented to the trial
court in the pretrial proceedings, either through detailed inclu-
sion in pretrial memorandum. This gives the Court opportunity to
consider governing law, and provides a record basis for appeal
under F R E 103 if erroneous ruling is made.
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Sample in limine motion attached.
2., Lay foundation for admissibility of chart.
a) testimony of witness who prepared summary
source documentation for information set
forth
tests or checks made by witness for
accuracy
familiarity with tests or checks used by
agency to determine accuracy of record-
keeping systems relied on by witness i \
preparing report.
methods used by agency to gather infor-
mation.
reliance on third parties for accuracy
of information.
summary is true and correct copy of
summary prepared by him from underlying
records.
attempt to meet 803(6) and/or 803(8)
requirements for underlying documents
ideal witness can qualify as expert
in preparation of financial summaries,
and express his opinion of chart's
accuracy (Rule 7'02) and that the
materials relied upon are of a type
and in a form reasonably relied upon
by experts in his field If witness
is qualified as expert and can give
this testimony, limits need for full
compliance with 803.
b) advise all defendants in writing of availa-
bility and location of underlying records.
c) be over-inclusive in obtaining supporting
underlying records.
d) the first draft of your summary submitted
to the Court and your opponent should be
the final draft.
- 7 -
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e) as a safety precaution, counsel may wish to
comply with the formal requirements of F.R E.
803(24) oy advising defendants:
make known use of the summary to defen-
dants well in advance of trial.
purpose of use.
name and address of declarants of under-
lying statements upon which summary is
based.
Leading cases concerning summaries
USA v Johnson, 594 F.2d 1253 (9th Cir. 1979)
" . the proponent of the summary must establish that the
underlying materials upon which the summary is based are admissable
into evidence."
Needham v. White Laboratories, 639 F.2d 394 (7th Cir. 1981)
Proponent's witness must have sufficient knowledge about prepara-
tion of summary and basis of underlying documentation to testify
that the summary is accurate Summary not admitted.
State Office Systems v Olivetti, 762 F.2d 843 (10th Cir. 1985)
Witness prepared summary, or helped to prepare it, and information
came from company's business records (Which were not offered in
evidence)
Paddack v. Dave Christensen, 745 F.2d 1254 (9th Cir. 1984)
How witness for summary can destruct on cross.
NATIONAL CONTINGENCY PLAN AND CERCLA LIMITATIONS
(40 C.F.R § 300 et. seq )
-USA entitled to recover all costs of removal or remedial
action "not inconsistent with NCP" 107(a)A)
V
defendant has burden of showing "inconsistency with NCP"
inconsistency is a fact issue In reviewing determinations made
by responding agency, determinations are not inconsistent with
the NCP unless arbitrary and capricious
- 8 -
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-Types of inconsistency which D's may argue:
— failure to. conduct a preliminary assessment
—failure to make a reasonable effort to have the discharger
voluntarily and promptly perform removal actions
—failure to terminate removal activity when a party responsible
for the release, or any other person is providing upprcpr:ate
response.
When we undertake a removal activity, there must be cr acor.-y
determination that the removal action will "prevent or -nii'<"Ci~o
immediate and significant risk of harm to human life or ".eri^h,
or to the environment.
-this determination is usually set forth in a decision v-'ocv • c^c,
Inmediate Removal Request for the XYZ Site and is approved py the
Regional Administrator This document is a checklist o~ rfC?
requirements and facts satisfying them. Litigating attorneys
should pay special attention to sections explaining i'—'^Jisce
threat to human health or environment.
-immediate removal actions are to be terminated either
-after SI million Las been obligated
-or six months have elapsed from the date of initial resiJC"~>
unless there is an additionaltagency determination of i u.oCi "o
risk to human health or environment, or continued respciut. * i-.
necessary to prevent the return of the problem
When we undertake a remedial action, there must be an e»gc».c_/
determination which includes careful evaluation of alternativci
approaches, an engineering analysis, an environmental impact
analysis and a determination that the selected alternative 'z
cost-effective 40 C F.R § 300.68- 70 The agency should i na
usually does develop a complete administrative record suprortir.a
its decision-making.
All response actions (both removal and remedial) should, J_c the
extent practicable, include
-encouragement of state participation
-encouraging private party cleanup
-rely on established tecnnology when feasible ana cost-efJective
-encouraging participation by industry and private parties *rO C.F ?
300 61
Early in any case in litigation, the requirements of the NCP in
effect at any time during the response action should be carefally
reviewed with the On-Scene Coordinator If the OSC is to be
deposed, he should be carefully prepared on his consideration of
rll relevant factors, and the individuals or entities he consulted
to satisfy each requirement
- 9 -
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TRIAL PREPARATION FOR COST
RECOVERY ACTIONS UNDER CERCLA
Mark W. Schneider
I. BACKGROUND - Ottatl & Goss trial
approximately 20 cost witnesses/15 trial days
II- ATTEMPT TO USE SUMMARIES
results: broad, extensive cross-examination by defendants
statements by Court re: "burden of proof"
--) need for education of Courts and preparation
for full-blown trial
i
III. FULL-BLOWN APPROACH
A. WITNESSES
1. Witness to authenticate and lay foundation for
admission of document and to testify regarding
amount of costs; witness to testify regarding
work performed.
2. Practical effect
B. DOCUMENTS
1. Site-specific Documents — e.g. for removal
action, have invoices and supporting documents
which ordinarily will qualify as business
records under Fed. R. Evid. 803(6); treasury
schedules which show payment should qualify
as public records under 803(8) or business
records under 803(6).
2. Non-Site Specific Documents
a. documentation created long after work
completed, not in ordinary course of business;
not a business record, insufficient underlying
documentation; not an admissible summary
under Fed. R. Evid. 1006.
-------
b. Encourage generation of more comprehensive,
admissible documentation (e.g. time sheets,
invoices, or computer recordsj to support
summary under Rule 1006t
c. Admission of "best evidence summary" under
Rule 1004. proponent must establish:
1) originals lost or destroyed; or
2) not obtainable through judicial
process; or
3) in possession of opponent
d. Admission under Rule 803(24)
IV. MISCELLANEOUS ISSUES
A. REASONABLENESS OF COSTS
1. Inquiry by defendants, over objection, into
reasonableness, cost-effectiveness of costs.
2. Audits
3. Offsets
4. Section 107(d): damages for gross nepligence
B. DIFFICULTIES IN ASSFMBLING PROOF
1. Missing witnesses/defunct companies
2. Confidential Business Information
a. release from contractors
b. protective order limiting access to documents
c. redaction of documents
-------
CONTRACTOR COST ANALYSIS
t . ctor: GCA Corporation
ontract: Technical Enforcement Support (TES) Contract
ost: $228,120.16
Dates of Work: 8/2/83 - 9/29/85
Services: Contractor provided expert witness support, litigation
support, and oversight of IMC drum removal. Specifically,
contractor:
1) oversaw IMC drum removal in 1984 (000380),
2) developed summary of data (003335);
3) hired subcontractor Geotrans (Mercer, Guswa) to develop
groundwater transport model and provide expert assistance on
hydrogeologic issues. (003347, 003349, 003597, 003626 and
003627);
4) hired Roy F. Weston (Guswa) to provide expert assistance
and testimony (003612 - 15).
5) hired subcontractor Meyer Environmental Consultants
(Dr. Eugene Meyer) to provide expert assistance and testi-
mony on waste stream analysis (003354, 003600, 01, 03),
6) hired Dr. Robert Gosselin to provide expert assistance
and testimony re tdxicological issues (003600, 003617);
7) hired subcontractor Versar, Inc. to testify regarding
analytic work performed on samples (003604-06); and
8) compiled cost-recovery report (000380)
Site: Of the $228,120.16 spent, $219,151.16 was spent for work con-
cerning both the O&G and GLCC sites, while $8969.00 concerned
only the GLCC site.
Documents in Support-
* Work Assignments describing specific tasks (see above for
document numbers)
* GCA summary of costs by work assignment- 000380
National Public Vouchers
National Treasury Schedules with payment to GCA
Contract Status Notification
-------
Contact Persons
Wiliara Farino, GCA (617)275-5444
John Zipeto, EPA
Witnesses:
William Farino, or other GCA employee re: basis of summary
description of work, and cost report
EPA custodian of records - Chris O'Connor
Remarks- 1) For this large sum of money, it might be helpful to have
William Farino or some other individual from GCA explain
the basis for the summary report. There are no GCA
records other than this one, so costs will be proven only
from this report and from treasury schedules.
2) The new documents from EPA (013019-69) include vouchers
demonstrating payment of $13,117.61. This may be for the
costs of preparing a cost recovery report, but it is
impossible to tell from documents.
3) There are discrepancies between the work described in the
TDDs for each work assignment number and the GCA cost
recovery summary. Specifically, WA-No. 83-36 appears to
be for the summary of data on wastes sent by generators,
see doc. no. 003335, but the cost summary report says
that WA 83-36 is for "expert hydrogeological support,"
see doc. No. 000380. The problem stems from the fact
that we want to break down costs by site, but this dis-
crepancy prevents us from doing it with any accuracy.
* 4) Note that in final public voucher (doc. no. 000638-47),
the costs listed per work assignment matches (or is close
to) the amounts listed on the cost summary. This document
shows the amounts paid for each work assignment. Chris
O'Connor can authenticate and explain this voucher at
trial. This will bolster proof of payment for each
specific task.
-------
CONTRACTOR COST ANALYSIS
Contractor: Kingston Fire Department
Contract: On-Scene Coordinator LET Contract
Cost.
Dates
of Work:
Services
Site
Documents
in Support.
Contact
Person
$1,694.80
1982
The Fire Department assisted in the drum removal activities.
It provided emergency assistance through the provision of
neutralization water and a water curtain to reduce ac.d \apor,
It also provided ambulance and fire prevention services.
All work performed related only to the O&G site.
EPA SPUR Report indicating payment of $1,694.80- 002065
* Kingston Fire Department Invoice itemizing each expense:
O.S.C. Certification of Completion: 002067
* Treasury Schedule indicating payment of $1,694.80 to
Kingston Fire Department- 002068
Request for Services, with description of tasks: 007761
Procurement Requests- no stamp numbers
Robert Ankstitus, EPA
Gordon Bakie, Fire Chief of Kingston Fire Department
007066
Witnesses
Remarks
Gordon Bakie, Kingston Fire Department Fire Chief
Custodian of Kingston Fire Dept. Records- to admit
Doc. #002066
These costs could be proven solely through introduction
of the Treasury Schedule and SPUR report by Chris
O'Connor. However, given that the witness should be
readily accessible, and that the invoice is so detailed,
we should have Mr. Bakie or other individual testify
about the activities and to explain the costs on the
invoice.
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COST RECOVERY STRATEGY IN LOVE CANAL TYPE CASES OR
HOW WE PUT TOGETHER SHELL'S COST DOCUMENTATION
Joseph E. Hurley
I. BACKGROUND
A. 56 million dollars needed to be documented over
10 year period.
B. 13 Army commands with different accounting systems.
1. Oct. 21, 1986 and Jan. 23, 1986 memoranda
(Attachments 1 and 2).
2. Auditor Declaration (Attachment 3).
II. GOALS OF COST DOCUMENTATION STRATEGY IN SHELL
A. Settlement.
*
B. Motion for Partial Summary Judgment on costs incurred.
C. Lay basis for Rule 1006 summary, if necessary.
III. EXPLAINING THE WORK PERFORMED
A. Method; Fact Sheets and Managerial Declarations
(Attachments 4-6).
B. Key Plavers; Army auditor, managers, financial people,
support staff.
IV. EXPLAINING THE ACCOUNTING SYSTEMS
A. Method; Financial Declarations (Attachment 7).
B. Authentication issues (Attachment 8).
C. Kev PIavers: Army auditors, financial managers,
support staff.
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- 2 -
V. REVIEW FOR SUFFICIENCY OF DOCUMENTATION
A. Contract type documents.
B. In-house type documents.
~ Uniformity issues (See Attachments 1 and 2)
C. Kev Players; Army Audit.
VI. REVIEW OF DOCUMENTS FOR AOMISSIBILITY
A. 803(6) and 803(8).
B. Best evidence.
~ Computer documents.
a. original under Rule 1001(3); Federal
Photocopy Statute, 28 U.S.C. § 1732,
July 31, 1986 memo (Attachment 9).
VII. PREPARATION OF RULE 1006 SUMMARY
A. By Army Auditor.
B. Use along with declarations in support of
Motion for Partial Summary Judgment.
VIII. DOCUMENTING FUTURE COSTS; PROPOSAL
A. Manual.
B. CPA.
C. Limited judicial review.
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Memorandum
DTB:JH:tmd
90-11-2-73
Subject
Government's Documentation in
United States v. Shell Oil Co.
Dale
October 21 , 1986
To Tom Bick From Joseph Hurley
Attorney, Environmental Attorney, Environmental
Enforcement Section Enforcement Section
INTRODUCTION
I recently had the opportunity to review in detail
the government's cost documentation in Shell. A summary of the
costs incurred is attached as Attachment 1 . This memorandum
discusses the cost documentation, the legal requirements
governing its admissibility and suggested courses of action.
BACKGROUND
The cost documentation is complex because of the
volume of documents (approximately 30,000) and because of the
thirteen Army commands involved with the Rocky Mountain Arsenal
(RMA). Moreover, the commands used different accounting systems
and generated different types of documents.
In January, 1984, the Army Audit Agency (AAA) was
tasked with obtaining the cost documentation by visiting the
commands. AAA's first review, Rocky I, documented the costs
incurred between July 1, 1974 and December 31, 1983. AAA's
second review, Rocky III, documented the costs incurred for •
calendar year 1984. 1_/
1_/ Rocky II merely recategorized the documented costs into
projects or a general category. After Rocky III, a DOJ
update to document litigation costs also was performed.
Attachment 1
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. 2 -
TYPES OF COSTS AND DOCUMENTATION
Costs can be divided into contract and in-house
costs. z/ Contract costs typically are evidenced by contracts
and by Invoices and vouchers. On the other hand, in-house costs
which reflect labor, materials, and other miscellaneous expenses
like travel, typically are evidenced by time cards and by
different type invoices and vouchers.
Overhead also is a form of in-house cost. It is
automatically calculated by a computer based upon a formula a
budget office prepares at least annually, before the start of
the fiscal year. In our case, however, not all the 13 commands
incurred overhead. Under Army regulations, only those commands
not funded upfront which perform a service for others, and
which have incurred labor costs, may charge overhead. In this
manner, the cost of maintaining and operating an installation
is recouped.
Fringe benefits also are a form of in-house cost. In
most cases, fringe benefit rates are included within labor costs
and are computed in the same manner as overhead:a budget office
calculates a formula and gives the the necessary information to
a data processing office which feeds it into to the computer. £/
Based on our discussion of overhead and fringe benefits,
it is clear that computer generated documents are also a form
of cost documentation. In fact, since most of the commands
used cocputers to store and generate information, AAA obtained
many types of conputer cost documentation or printouts. However,
in virtually every case the most detailed printout was a Cost
Report.
^/ Contract costs are incurred when a command asks another
entity to perform the work. In-house costs are incurred when
the command performs the work itself. However, in obtaining
managerial declarations, we learned that some of these terms
may have been misclassified. We also learned that AAA's project
and cost element category classifications and the amount of the
response costs incurred did not always agree with those of the
commands. Accordingly, changes will have to be made to AAA's
documentation and we recommend that AAA prepare an Amended
Review to reflect all necessary changes.
£/ AAA had to compute fringe benefits in a few cases because
the commands had failed to do so.
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. 3 -
The Cost Report identifies on a single sheet for a
given period all contract labor, material, other expenses and
overhead. Indeed, detailed cost reports are the only documents
which we presently have which do identify overhead and in most
cases, the laoor costs. The Cost Report also identifies the
cost code (the code number assigned by the commands to track
the costs) and the office incurring the costs. In all cases
except RMA, however, the cost reports obtained only cover the
cleanup, they do not cover all of the commands' transactions.
THE COMMANDS' DOCUMENTATION
AAA usually obtained copies of all funding'documents.
Funding documents are the documents which transferred the funds
to a command for the response actions at RMA. Except for a
small amount of money, the United States Army Armament Munitions
and Chemical Command (AMCCOM), the Army Toxic and Hazardous
Materials Agency (THAMA which also is the Project Manager for
the RMA cleanup), and the United States Corps of Engineers
(COE) funded all the RMA response actions.
Of the thirteen commands, only two commands, AMCCOM
and the Missile Command (M1COM) incurred contract costs. Three
other commands Environmental Hazard Agency (EHA), THAMA, and
the Army Research Office (ARO), incurred in-house costs only.
Six other commands, RMA, the COE, the Medical Research and
Development Command (MRDC), the Medical Bioengineering and
Development Laboratory (USAMBRDL), Waterways Experiment Station
(WES), and the Nacioial Space Technology Laboratory (NSTL),
incurred Doth contract and in«house costs. The remaining two
commands, the Chemical Research and Development Center (CROC),
and the Belvoir Research and Development Center (BRDC), require
further investigation since the costs may have been miscategorized
To better understand the documentation in this case,
it would be useful to examine each commands' documentation,
paying close attention to the documentation we presently have
to support contract, labor, materials, other possible costs,
and overhead. (The Major Costs). */
1. RMA (Contract, In-House and Overhead)
RMA has detailed costs reports identifying the major
costs contract, labor, materials and other expenses plus
^J . This section does not address funding documents unless
~ additional funding documents are involved. Except in a
few cases, this section also does not address the availability
of invoices to support contract costs- since additional review
is necessary. „
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• A -
overhead. RMA also has all the major contracts and vouchers
to support the contracts. However, numerous boxes containing
other printouts and vouchers also exist at the Arsenal which
AAA nevei obtained. The additional Information likely supports
material costs and other expenses in greater detail. Although
we have segregated the boxes, they have not been catalogued and
it would take four people several months to complete the Job.
2. COE (Contract, In-House and Overhead).
For Rocky I, AAA obtained cost reports which did not
identify the major costs. For Rocky III, AAA obtained "RATS",
a monthly printout which did identify the major costs. (AAA
did not obtain the cost reports for Rocky HI). For both Rocky
I and Rocky III, AAA also obtained all major contracts, invoices
and vouchers. At our request, Omaha also generated a printout
identifying the major costs by using preexisting data.
Like RMA, COE also has numerous boxes containing
vouchers which support travel, materials, and other costs in
greater detail. The boxes likely also contain most of the RATS
covering the Rocky I period. Although these boxes have been
segregated, they have not been catalogued. As in the case of
RMA, it would take four people several months to complete the
job.
3. WES (Contract, In-House and Overhead).
AAA only obtained billing documents from WES.
Although they identify the major costs, WES lively has detailed
cost reports which also identify the major costs.
4. NSTL (Contract, In-House and Overhead).
For Rocky I, AAA obtained a detailed cost report
identifying the major costs and a printout which did not identify
the major costs. For Rocky III, AAA obtained the non-detailed
printout. For both Rocky I and Rocky III, AAA also obtained
billings or invoices and additional funding documents. (THAMA
funded the response actions by forwarding funds to Dover which
in turn sent the funds, using an MIPR, to NSTL.) We do not know
whether NSTL has any additional documentation.
5. CROC (Presently In-House and Overhead).
Like NSTL, for Rocky I AAA obtained both detailed
cost reports identifying the major costs and a printout which
did not identify the major costs. For Rocky III, AAA obtained
the non-detailed printouts. Additionally, AAA obtained the
billings and additional funding documents from Dover to CROC.
We do no know whether CROC has any additional documentation.
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- 5 -
6. MlCOM (Contract)
Ml COM only Incurred contract costs and AAA obtained
the major contracts and vouchers. AAA did not obtain cost
reports and we do not know whether M1COM has any addtlonal
documentation.
7. ARO (Contract, In-house and Overhead)
Most of ARO's costs represented a long standing
contract with Battelle involving both RMA and non-RMA related
work. ARO also charged a flat 92, apparently for contract
administration, which it used to pay salaries. AAA categorized
the 9% costs as being in-house costs, a form of overhead. In
any event, AAA obtained all the modifications to the contract
affecting RMA and all the vouchers. AAA did not obtain any
cost reports and we do not know whether additional documentation
exists.
8. MRDC (Contract and In-House).
AAA obtained all the contracts and vouchers supporting
the contract costs. For in-house costs, AAA obtained billings
and documentation evidencing their payment but they do not
identify the major costs. AAA also did not obtain cost reports.
We do not know whether MRDC has any additional supporting
documentation,
9. USAMBRDL (Contract and In-House).
AAA obtained two different types of printouts. The
first, a cost report, identifies the major costs but the second,
a printout, does not. Although AAA also documented a $5,000
contract, AAA did not obtain the contract nor supporting vouchers
We do not know whether USAMBRDL has any additional supporting
documentation. " '
10. BRDC (Presently In-house and Overhead)
AAA documented that BRDC incurred only in-house costs.
However, the workpapers suggest that contract costs also might
have been incurred. For in-house costs, AAA obtained a
billings ledger which does not identify the major costs and a
cost report. However, the codes used in the cost report are
unclear and we must determine what they mean. We do not know
if any additional documentation exists.
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„ 6 •
11* EHA (In-Houee)
EHA Incurred only in-house costs involving the prepar-
ation of studies. For four of the studies, the costs were
documented by the Aberdeen Proving Ground and, for the remaining
two studies, the costs were documented by Fitrsimroons in Colorado,
AAA obtained detailed cost reports identifying all major in-house
costs for the tour studies but obtained manually prepared
documents identifying the same information for the Fitzsiroroons
studies. No other documentation was obtained and we do not
know whether additional documentation exists, including what
source documentation was used for the manually prepared documents
12. THAMA (In-House)
THAMA incurred in-house costs only. For Rocky I, AAA
obtained a manually prepared document identifying the labor
costs apparently for one office. However, for Rocky III, four
offices were identified as having incurred response costs. The
office previously identified in Rocky I now had a printout
identifying its labor and travel costs. For the other three
offices, a manually prepared document identified labor costs
only. Curiously, the Rocky III cost report also identified the
travel costs for all four offices. No other documentation was
obtained and the source documentation for the manual documents
was never explored. We do not know whether additional documen-
tation exists.
13. AMCCOM (Contract)
AMCCOM only incurred contract costs and AAA obtained
the contracts, vouchers and other documentation. AAA did not
obtain any cost reports and we do not know if additional docu-
mentation exists.
OVERVIEW OF ARTICLE X OF THE FEDERAL RULES OF EVIDENCE
All cost documentation oust ultimately satisfy the
legal requirements governing admissibility. Although hearsay
and authentication represent 2 major legal requirements, this
memorandum will focus primarily on the the third major require-
ment: the so-called Best Evidence Rule, which is primarily
governed by Article X of the Federal Rules of Evidence (FRE).
A brief overview of Article X follows.
Rule 1002 of the FRE requires that the original record
be introduced unless the rules or statutes provide otherwise.
In fact. Article X contains many exceptions.
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- 7 •
For example, Rule 1003 permits duplicates of originals
to be introduced unless there la a aerlous question as to the
authenticity of the original or unless It would be unfair to
introduce the duplicate. Similarly, Rule 1004 permits the
introduction of any secondary evidence where the original has
been lost or destroyed provided there has been no bad faith.
Rule 1005 also permits the introduction of certified copies of
public records if authenticated in accordance with Rule 902 or
it the authenticating witness has compared the copy with the
original. £/
At the same time, Rule 1006 permits the Introduction
of summaries where the underlying documents are voluminous. We
intend to primarily rely on this rule by arguing that the Amended
Rocky review summarizes all the cost documentation in this
case. £/
However, although our cost documentation clearly
satisfies the "voluminous requirement, Rule 1006 also requires
that the originals or duplicates be made available for inspection,
'/ A majority of the courts also require that the underlying
documentation be admissible and a minority of courts require the
actual introduction of the underlying documentation before
summaries can be used. In sum, we still will have to focus on
the best evidence issue and be ready to establish foundations
for the admissibility of the underlying documentation in support
of any summary.
The Federal Photocopy statute, 28 U.S.C. S 1732, also
is relevant to the admisssibility of our cost documentation.
The statute provides that if accurate reproductions of an
original are destroyed in the regular course of business, the
accurate reproductions are admissible. The statute further
provides that any facsimile of the original reproduction is
likewise admissible if the original is available for inspection.
_5/ Although AAA obtained "certified copies", it appears that
~ they were not always signed by the appropriate persons.
However, the certifications must be examined more closely.
Until they are, it is unclear whether we can rely on the certi-
fications as a basis for admissibility.
£/ (See footnote 2).
7/ Presumably, if the orignals and duplicates are destroyed
or lost in good faith, any secondary evidence can support
r£- tho Of Lginqlo, provided the summaries
the
accurately
summarize the secondary evidence.
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- 8 -
Although we have found no reported cases which have discussed
the statute, at least one commentator considers computer printouts
to constitute "facsimiles" under the statute.
•
LEGAL SUFFICIENCY OF OUR COST DOCUMENTATION
In our case, there are five types of cost documentation:
(1) funding documents, (2) cost reports; (3) contracts, invoices
and vouchers; (4) billing documents which often represent both
the invoice and voucher at least when the command being billed
approves the payment on the invoice and (5) other documents. Their
legal sutficiency will be discussed seriatim.
1. Funding documents
Copies of the funding documents should be admissible
as duplicates under Rule 1003 since it is unlikely that a serious
issue as to the authenticity of the originals would be successfully
raised or that it would be unfair to admit the duplicates.
2. Cost reports
We likely can successfully argue that cost reports are
"originals" under the FRE. Thus, Rule 1001 provides that originals
include "data compilations in any form". Cost reports are data
compilations.
Both federal and state cases also have held that computer
generated records constitute originals. However, the cases also
appear to require a more detailed foundation in order to establish
the trustworthiness of computer generated documents. At least
one court also found trustworthiness in part because the computer
generated documents were complete summaries of all the accounting
transactions, not mere extracts. £/
Even if the Court were to rule that our cost reports
are not originals, we can rely on the Federal Photocopy Statute
to gain their admission. Specifically, we would argue that
To meet the trusthworthiness requirement we intend to obtain
~" "financial" declarations from all the commands. These
declarations will address the commands' procedures for tracking
costs, for retaining documents and where applicable for storing
and generating computer information. By addressing the retention
policy and the accounting systems, the financial declarations
should also enable us to satisfy the Federal Photocopy Statute
and/or Rule 1004 as well as Rules 803(6) and (8), the business
records and public records exceptions to the hearsay rule.
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- 9 -
information from the original source documents vere inputed
into the computer thus creating accurate reproductions. The
original source documents then were destroyed in the regular
course of business. However, the accurate reproductions on a
tape or disc still are available for inspection with the cost
reports constituting facsimiles under the statute. Of course,
we also can argue that the cost reports are admissible as
secondary evidence'under Rule 1004.
3. Contract, invoices and vouchers.
In most cases, AAA obtained copies of contracts and
vouchers. These'copies and copies of invoices likely would be
admissible as duplicates under Rule 1003.
4. Billing documents
As previously mentioned, the billing documents often
represent both the invoice and the voucher. Except in the case
of WES, however, the billing documents do not identify the
major costs. Billing documents likely would be admissible as
duplicates under Rule 1003.
5. Other documents
Most of the other documents generally fall into 3
categories: (1) other types of computer printouts, (2) vouchers
for materials and travel costs located in the numerous boxes
found at RMA and at the COE, and (3) manually generated documents
usually involving labor costs prepared by an employee, possibly
for purposes of litigation. £/
The printouts would be admissible for the same reasons
cited as in the case of the cost reports. In most cases, however,
the printouts do not identify all of the major costs. The
vouchers found in the numerous boxes also would be admissible
either as originals under Rule 1002 or as duplicates under Rule
1003. The manually generated documents showing labor costs, if
admissible at all, should be admissable only as secondary evidence
under Rule 1004, or perhaps as summaries under Rule 1006.
^/ THAMA and EHA's manually generated documents appear to be
likely candidates. If true, these documents would not
satisfy Rule 803(6) , the business records exception to the
hearsay rule.
-------
- 10 •
DISCUSSION
For the nose part, AAA has successfully documented
that funds were sent to commands and that these funds were spent
for RMA response actions. The type of documentation obtained
by AAA also is generally admissible. The problem is that there
is no uniformity in the cost documentation obtained from all
the commands nor even in the cost documentation obtained within
the same command. Moreover, the documentation often fails to
breakdown how the costs were incurred according to contract,
labor, materials, other and overhead. The lack of uniformity
and of greater specificity can pose problems.
Thus, Shell may not be able to follow the cost documen-
tation and could conclude that we do not have the necessary
proof.- Similarly, Shell could conclude either that AAA did a
poor Job in documenting the past coats and/or that the various
commands have poor accounting systems.
Should negotiations fail, the lack of uniformity and
of greater specificity also may make it more difficult for a
judge or master to understand the evidence. It also would make
it more difficult for the trial attorney to present the evidence.
The cardinal rule in litigation - keep it as simple as possible
- would be violated.
Despite these problems, we likely can obtain uniformity
and greater specificity by obtaining detailed cost reports. We
would seek to obtain the cost reports from all commands which
incurred either contract and in-house costs or in-house costs
only. (For the commands which incurred only contract costs, we
still would rely on the duplicate contracts, invoices and
vouchers and seek to obtain any missing invoices). Given the
courts' concern that computer generated records be trustworthy,
we also would try to obtain the costs reports for all the
commands' transactions, not just the transactions involving the
RMA cleanup. Besides uniformity and greater specificity, there
are numerous other reasons why we should obtain the detailed
costs reports.
First, the cost reports are admissible as originals
under Rule 1002, as accurate reproductions under the Federal
Photocopy statute, or as secondary evidence under Rule 1004.
The cost reports also would lift the hearsay bar by qualifying
as business records under 803(6) or as public records under
803(8).
Second, we likely can obtain detailed cost reports in
most instances. Pending further investigation, there presently
are 10-11 commands which have incurred contract and/or in-house
costs. However, we believe that detailed cost reports exist
for at least 7 of Che commands, and perhaps for as many as 9 of
Che c ommand s.
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- 11 -
Third, the costs reports by their nature are detailed
and show at a glance the major costs (contract, labor, materials,
other expenses) plus overhead. In fact, the cost reports are
the only documents which we have which show overhead and in
most cases, the labor costs. Labor and overhead represent the
largest share of our response costs.
Although obtaining the detailed cost reports will
require additional effort, we already have to visit roost of the
commands to obtain financial declarations. Time constraints,
therefore, should not pose a major problem since we should be
able to perform both tasks together.
N_
Similarily, obtaining cost reports should not impose
any under hardships on AAA. For reasons previously discussed,
AAA should prepare an Amended Rocky Review. Since the cost
reports should merely corroborate the information AAA already
has, AAA would only have to compare the costs reports with that
information before preparing the Amended Review. This comparisor
also would obviate any Shell challenge that the Amended Review
does not accurately summarize the underlying source documentatior
RECOMMENDATIONS
For the foregoing reasons, 1 recommend that we obtain
nore uniform cost documention by acquiring detailed cost reports
rroo the commands which»did not incur contract costs only. The
"ost reports would serve as the primary documentation in support
of our summary. For commands incurring only contract costs, we
would continue to rely on the duplicate contracts, invoices and
vouchers as the primary documentation in support of the summary.
-------
UX3
^ L -:,j/|. , r.
1.*
me, 'IT, rt,
I'lflfc
04
,* 53
-------
Memorandum
DTB-JH:rap
90-11-2-73
PRIVILEGED AND CONFIDENTIAL. ATTORNEY WORK PRODUCT
Subject
Auditor Assignments
Due
January 23, 1987
TO Thomas K. Bick From Joseph Hurley, Attorney
Environmental Enforcement' Sectior
BACKGROUND
This memorandum discusses in detail the assignments to
be performed by the Army Audit Agency (AAA). A list of those
assignments is attached as Attachment 1. A review follows.
1. Man ag e r i a1 Sets
Four managerial sets still must be completed and
submitted to Shell. The sets are as follows: the Waterways
Experiment Station (WES) to be completed by WES; the United
States Toxic Hazardous and Materials Agency (USATHMA) to be
completed by Akers & McGaulley, the Medical Research and
and Development Command (MRDC) and the Medical Bioengineering
Research and Development Laboratory (USAMBRDL) to be completed
by Reuter and the remaining seven commands to be completed by
Campbell & Wynne. The seven commands are the Environmental
Hygiene Agency (EHA), the United States Army Armament Munitions
Command (AMCCOM), the Chemical Research and Development Center
(CRDC), the Belvoir Research and Development-Center (BRDC), the
Missile Command (MICOM), the Army Research Office (ARO), and the
National Space Technology Laboratory (NSTL).
In completing the four sets, all financial, AAA, and
other relevant documents in our possession need to be pulled.
We followed Che sane procedure in completing the sets for the
Corps of Engineers (COE), and for the Rocky Mountain Arsenal (RMA)
I Intend to assign Terry Mackey to complete this assign-
ment. The deadline Is Friday, January 23, 1987. \j
\J All of the deadlines identified in this memorandum have been
discussed with Terry Mackey.
Attachment 2
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- 2 -
2. Financial Declarations.
Neither AAA nor the managers are^sufficiently familiar
with the commands' accounting systems to be able to explain how
the commands tracked the costs incurred. However, persons
familiar with these accounting systems are needed to establish
the integrity of the accounting systems. Such persons also could
introduce the underlying documentation as business records and/or
public records under the Federal Rules of Evidence.
Accordingly, we have decided to obtain financial
declarations which will explain the commands' accounting systems.
To date, we have the necessary information to prepare financial
declarations for RMA and for COE. We also expect to receive
the necessary information to prepare WES' financial declaration
by mid-February, 1987. However, we still need to obtain information
from the other Finance and Accounting Offices (FAOs) in order to
prepare the remaining financial declarations. A list of these
FAQ's is attached as Attachment ?.
In November 1986, Terry Mackey wrote to the various
commands requesting information, including the identity of the
persons who could provide the necessary information for the
financial declarations. I will ask Terry Mackey to identify
these persons using the responses. I also will ask him to obtain
a sample of each type of document generated by the commands. The
financial managers then^can declare that the documents are public
records and/or business records used to track their costs. The
deadline for identifying the responsible persons and for obtaining
the sample documents is Friday, January 30, 1987.
3. Additional Documentation
In a memorandum dated October 21, 1986, I reviewed the
cost documentation in detail. Based on my review, I recommended,
and DOJ agreed, that we needed to secure more uniform documentation
to support in-house and contract costs by obtaining "detailed
costs reports" ("DCRs"). For contract costs, we also needed to
obtain all contracts and modifications as well as the supporting
invoices and vouchers. Although the October 21, 1986 memorandum
still should be consulted, this memorandum provides further
guidance on the subject.
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- 3 -
A. Identifying the Missing Contract Documentation
Nine Commands incurred contract costs. They are RMA,
COE, WES, NSTL, MICOM, ARO, MRDC, USAMBRDL, and AMCCOM. 2/ AAA
should seek to obtain all contracts and modifications as~well as
supporting invoices and vouchers to support these costs. 3/
AAA should be able to identify the missing contract
documentation by examining the packets prepared for the managers.
In each packet, the manager prepared a fact sheet explaining the
work performed and he identified the in-house office and/or
contractor that performed the work. If a contractor is identified
on the fact sheet, AAA should review the other documents in the
packet to determine if contract documentation is missing for that
contractor.
Cases exist in which the managers were unable to identity
all of the contractors. In those cases, before identifying the
known contractors, the facts sheets used the term "including."
AAA only needs to obtain the missing documentation for the contrac-
tors identified in such cases.
Certain cases also exist in which AAA identified contract
costs but the manager did not. AAA identified the contract costs
in its Rocky reviews and also in its AAA summary sheets. A
sample AAA summary sheet is attached as Attachment 3. Since the
manager is ultimately responsible for describing the work performed.
if the manager does not identify a contractor in his fact sheet,
AAA1 s Amended Review (to be discussed later in the memorandum)
and its corresponding summary sheets should be amended to reflect
the manager's version.
B. Identifying, the Missing In-House Documentation
Eleven commands incurred in-house costs. The commands
are: RMA, COE, WES, NSTL, CRDC, MRDC, USAMBRDL, BRDC, EHA, THAMA
and ARO. Unlike contract documentation, identifying in-house
2/ Previously, there had been some indication that CRDC and BRDC
also incurred contract costs. However,, since the managers
did not identify any contracts when they explained the work
performed, CRDC and BRDC will continue to be listed as having
incurred in-house costs only.
3/ Although DCRs also need to be obtained, DCRs are discussed
~" separately in the next section.
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- 4 -
documentation is more complicated. It is more complicated because
a. wide range of differing types of underlying documentation can
exist. Moreover, by definition, in-house costs can include
several categories. The categories can include labor, materials,
other miscellaneous expenses and overhead. For purposes of this
memorandum, all in-house and contract costs are hereafter referred
to as "Major Costs."
As previously noted, the October 21, 1986 memorandum
discussed the need to obtain DCRs to support the contract and
in-house costs. A brief review of DCRs follows.
DCRs are a command's computer generated documents which
compile the costs incurred by cost code and by all or some of the
major costs for a particular period of time. These reports are
relied on by Che command in tracking costs and were either prepared
or can be prepared from data compiled at or near the time the
costs were incurred.
Commands may prepare bi-weekly or monthly DCRs and also
may annually update the DCRs. The DCRs are checked for accuracy
before being finalized. Although it may be easier to obtain
annual DCRs, legally it does not matter which of the above DCRs
are obtained so long as the DCRs identify the total costs incurred
for each command.
DCRs also can exist in different formats. For some
commands, the DCRs may identify'all of the major costs together.
For other commands, the DCRs may identify only one or several of
the major costs and separate DCRs then will identify the remaining
major costs. In still other cases, the DCRs may group all in-house
costs together and then identify only the total in-house and
contract costs. Additionally, some DCRs may identify the major
costs in plain english (the DCRs will have columns for contract,
labor, material, other and overhead), while other DCRs may
assign codes (letters or numbers) which actually represent the
major costs when translated. 4/
4/ Although unlikely, it also is possible that certain DCRs will
~~ identify only the total costs incurred, not major costs. If
this situation exists and the DCRs are relied on by the command
to account for the funds, we likely will have to use them.
However, DOJ should be consulted before these DCRs are obtained.
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. 5 -
/
• AAA initially will need to review its own workpapers to
identify the major costs incurred for each command and the fiscal
yeara when the costs were incurred. 5/ AAA then will need to obtain
all of the appropriate DCRs which identify those costs. Where
codes are assigned to the DCRs, AAA also will need to obtain the
document which translates the codes into plain english.
To ensure that appropriate DCRs are obtained, AAA also
should seek to obtain complete DCRs, not mere extracts which identify
only the costs incurred on behalf of R11A. This should not present
a problem in most cases since commands prepare DCRs to account for
all transactions. The work performed on behalf of ?HA would be
identified in the DCRs along with the other work performed
by the commands. In the event AAA encounters difficulty in
obtaining complete DCRs, however, DOJ should be consulted.
To assist AAA in obtaining appropriate DCRs, we have
provided a brief summary of the relevant documentation for each
command. We also discuss the work to be performed by AAA for that
command.
1 . RMA. AAA documented that costs were incurred
for both Rocky I and Rocky III. 6/ AAA also apparently obtained
DCRs identifying all the major costs. AAA should review those
documents to ensure that they constitute appropriate DCRs.
2. WES. AAA documented that costs were incurred
for both Rocky I and Rocky III. Terry Hackey recently contacted
WES to inquire whether WES maintained DCRs. WES responded that
it did and promised to forward the DCRs in the near future. Once
they are obtained, AAA should review them to ensure that they
identify all the major costs incurred during the relevant periods.
AAA also should obtain complete DCRs for all the transactions. ]_/
3. and 4. NSTL and CRDC. These commands are discussed
together since the Dover FAO was responsible for tracking the
funds. AAA documented that both commands incurred costs for
Rocky I and Rocky III. In Rocky I, AAA obtained a "Sales Order
Status Report" which apparently identified all major costs for both
5/ If AAA cannot breakdown the types of in-house costs, AAA at
least needs to identify whether in-house and/or contract costs
were incurred.
6/ Rocky I or Rocky III sinply means that AAA documented the costs
during the Rocky I review (through December 31, 1983) or during
the Rocky III review (through December 31, 1984).
7/ Except for RMA, AAA did not obtain complete DCRs i.e. . DCRs
~* which identify all of the commands1 transactions.
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- 6 -
commands. AAA did not obtain this report in Rocky III. AAA
should review the Rocky I reports to ensure that they identify
all the major costs for the relevant periods. If they do, AAA
then should obtain the same reports for Rocky III and also obtain
complete OCRs for both Rocky I and Rocky III.
5. and 6. MRDC and USAMBRDL. These commands also
are discussed together since the Fort Detrick FAO was responsible
for tracking their funds. AAA documented that MRDC incurred
costs for Rocky I only and that USAMBRDL incurred costs for Rocky
I and Rocky III. For USAMBRDL, AAA obtained "Activity Detail
Cost Reports" which apparently identified all major costs, except
labor. AAA did not obtain the same reports for MRDC. AAA needs
to obtain a DCR which identifies all major costs, including
labor, for both commands. If such a DCR does not exist, AAA
should review USAMBRDL1s Activity Detail Cost Reports to ensure
that they identify all major costs but labor, obtain the DCR
which identifies USAMBRDL's labor costs, and then obtain the same
documents for MRDC. AAA also should obtain complete OCRs identifying
all the transactions for USAMBRDL and MRDC.
7. BRDC. AAA documented that costs were incurred
for Rocky I only. Although AAA obtained a "cost report," it
identified costs by using such codes as "AMC Direct" etc. Since
we do not have an index which translates the codes, it is unclear
if the report identifies all major costs. AAA should obtain the
necessary index and then determine whether the report identifies
the major costs. If it does, AAA should obtain complete OCRs for
all the transactions. If it does not, AAA should obtain complete
OCRs which identify the major costs incurred by BRDC for all
transactions.
8. ARO. AAA documented that costs were incurred for
Rocky I only. ARO raises some different issues since it charged
93, apparently for contract administration. AAA classified the
9% funds as in-house costs, perhaps a form of overhead. However,
it has been unclear whether ARO used the 9% to pay for its own
salaries and/or gave some of the funds to the contractor, Battelle.
(We have heard different versions.) Since the underlying documen-
tation does not identify nor explain the use of the 9% funds, AAA
should address this basic issue and then consult with DOJ.
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- 7 -
9. ERA. AAA documented that costs were Incurred for
Rocky I only. EHA prepared 6 studies. For four of the studies,
the FAO at the Aberdeen Proving Ground (APG) was responsible for
accounting for the funds. EHA's Regional Divison in Aurora, Colorado
was responsible for accounting for the remaining two studies.
AAA obtained Costs Reports for the four studies and a memorandum
(Deposition Forms) for the two studies. Initially, AAA needs to
examine the Cost Reports to ensure that they identity the major
costs. If they do, AAA also should seek to obtain complete OCRs
for all the transactions documented by the FAO at APG. Regarding
the other studies, since the APG has advised that it was not
responsible for accounting for those funds, AAA should seek to
obtain complete OCRs from the Regional Division.
10. THAMA. AAA documented that costs were incurred
for Rocky I and Rocky III. Although the FAO at the APG should have
been responsible for tracking the major costs (here labor and
travel), it apparently was not. In Rocky I AAA obtained a general
list of in-house costs manually generated by a THAMA employee.
In Rocky III, AAA was able to identify four distinct offices as
having incurred in-house costs. AAA also was able to obtain a
cost report from the FAO identifying the travel costs incurred by
the four offices. Curiously, the cost report only identified the
labor costs for one of the offices. Accordingly, AAA again had
to obtain a list manually generated by a THAMA employee which
identified the labor costs for the other three offices. Although
the FAO apparently does not have DCRs which identify the costs
for Rocky I and Rocky III, AAA should confirm that this is the case.
If true, AAA and DOJ need to review THAMA's documents. If untrue,
AAA should obtain complete DCRs identifying the major costs for
all transactions in Rocky I and Rocky III.
11. CO.E. AAA documented that costs were incurred for
Rocky I and Rocky III. For Rocky I, AAA obtained cost reports
which did not identify the major costs. In Rocky III, AAA obtained
documents entitled Register of Accepted Transactions ("RATS")
which listed all monthly transactions. Given the different
documentation, we asked COE whether it could prepare DCRs which
identified all major costs. Using preexisting data (a compilation
of the RATS), COE prepared DCRs for the RMA costs only. By
manipulating this information and by using additional preexisting
data, COE .also prepared a more detailed cost report breakdown
which identified, in plain english, the major costs. Both the
DCRs and the more detailed cost report breakdowns are included in
the COE managerial declaration sets, a copy of which has been
prepared for AAA. AAA needs to determine whether COE can prepare
complete DCRs for all the transactions.. Additionally, since Shell
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- 8 -
may request that the RATS be made available, AAA should advise
COE that a complete set of the RATS may be needed.
C. Deadline for tfhe Aodttional Documentation
I intend to task the new auditor with identifying all
missing documentation and with reviewing the existing DCRs for
sufficiency. 8/ Both assignments should be completed by the end
of February, T987.
The additional documentation then can be obtained as
part of the Rocky V review. Terry Mackey, who presently is
scheduled to return to San Antonio in early February, 1987 to
lead the Rocky V review, expects the review to begin by mid-February,
He also believes that the site work can be completed and the
documentation obtained, including the additional documentation,
by the end of March, 1987. However, the new auditor also may need
to make various site visits to the commands during this period of
time to obtain additional documentation,
4. Amended Summary
AAA also needs to prepare an Amended Summary as a
result of the many changes made during the managerial reviews.
The changes include the amount of costs incurred by different
commands and project, cost element category and contract versus
in-house classifications.
Terry Hackey will be tasked with preparing the Amended
Summary. However, since it cannot be completed until all of the
managerial declarations have been submitted to Shell and since
Terry Mackey will be involved in Rocky V, he will be unable to
prepare the Amended Summary until the end of April, 1987. Once
prepared, the Amended Summary also will need to be reviewed by
AAA Headquarters. Such reviews typically take 30 days to complete
from the time of submission.
5. More Concise Summaries
I expected that the new auditor would begin this assign-
ment once he had completed identifying the missing documentation.
However, Terry Mackey recently advanced several arguments that
both preliminary and final concise summaries should be prepared.
8_/ AAA has assigned a new auditor to the case. Since he has not
yet reported for duty and changes are possible, we have
referred to this individual simply as the "new auditor."
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- 9 -
The Rocky V auditors would use the preliminary summaries as guidance
when they obtain the additional documentation from each command.
The final concise summaries then would be prepared once all of
the additional documentation is obtained.
Although I agree with this approach, it means that the
preliminary concise summaries would have to be prepared before
Terry Mackey returns to San Antonio. This nay be an unrealistic
deadline and DQJ may need to request that Terry Mackey's departure
be delayed for several weeks. 9/
6« Calculation of Interest
I intend to task the new auditor with calculating the
interest owed on past costs once all of the managerial declarations
are submitted. We then will include that amount of interest in a
demand letter to Shell.
7. Houston Questions
At a meeting in Houston, we agreed to advise Shell as
to the existence of any and all underlying documentation. By
letter dated December 17, 1986, we provided that information for
RMA and for COE. By relying on the additional documentation
obtained and by reviewing the commands' responses to our November,
1986 request, we should be able to provide the necessary information
on the ^remaining commands by Hay, 1987. I will task the new
auditor with reviewing the commands' responses. I will task Terry
Hackey with forwarding to DOJ the additional documentation obtained.
8. Miscellaneous Matters
This memorandum has addressed only the existing tasks
which need to be performed by AAA. It has not addressed
additional tasks which may arise depending upon Shell's actions
(additional auditor meetings, reviewing Shell's past cost documen-
tation, etc.) This memorandum also has not addressed the need to
compile a manual which will establish guidelines for obtaining
all future documentation. Such matters will need to be addressed
separately with AAA.
9/ Should Terry Mackey's departure be delayed, the deadlines to
~~ complete certain assignments will be affected. Those deadlines
would be extended by the period of any delay.
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- 10 -
CONCLUSION
Any case involving the recovery of response costs
is decided largely on the cost documentation available. AAA,
therefore, plays a crucial role in the ultimate success of this
litigation. By working together to accomplish the tasks
identified in this memorandum, AAA and DOJ will greatly increase
the United States' chances of achieving ultimate success in this
litigation.
cc* Nancy Firestone
Richard May
Terry Mackey
-------
AAA Assignment
1. Pulling documents
for remaining
managerial sets
2. Identifying financial
managers and obtaining
sample documents
3. Identifying missing
documentation
4. Obtaining missing
documentation
5. Calculating interest
6. Preparing more concise
summaries
7. Amended Summary
8. Houston questions
Auditor
Mackey
Mackey
New Auditor
Deadline
January 23, 1987
January 30, 1987
February 27, 1987
Mackey/New Auditor March 5l, 1987 */
New Auditor March 31, 1987
Mackey/New Auditor May 1, 1987 */
Mackey
May 29. 1987 */
Mackey/New Auditor May, 1987
*/ kill be extended if Rocky V's commencement is delayed
Attachment 1
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FINANCE AND ACCOUNTING OFFICES (FAQs)
FAO, Red Stone Arsenal, Alabama
FAO, Research Triangle Park, North Carolina
FAO, Ft. Detrich, Maryland
FAO. Ft. Belvoir, Virginia
FAO, Aberdeen Proving Ground, Maryland
FAO, Dover, New Jersey
*/
COMMAND(S) INVOLVED
MI COM
ARO
MRDC & USAMBRDL
BRDC
EHA & USATHAMA
CROC & NSTL
AMCCOM
V Defense Contract Administration Services Regions (DCASR) were
responsible for the management of AMCCOM's costs. Since
several DCASRs were actually involved, the office responsible for
all DCASRs should be identified and contacted. If that proves
unsatisfactory, we should contact the St. Louis DCASR which was
responsible for most of AMCCOM's funds spent on behalf of RMA.
Attachment 2
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^CLASSIFICATION OF FESPDNSE COSTS t*&i ?,D. 506
Bi FPOJECT
COST CODE: MJ2iSyB4HlFL
JOB NO: 6290
COMMAND: ROCKY MOUNTAIN ARSENAL
FISCAL YEAR: 1982
APPRQPIAT10N: Onft
IN HOUSE: YES
PPDJECTj SENEGAL 'STUDIES AND ANALYSES;
iEIISN COSTS: 0
CON£TCU:TIQN COSTS: o
OFEFnTIUS COSTS: 0
CCNTn^ir^TlJN Sl'FvEtS: 0
f.;£E5E''E^TS. 0
T-:H :=v «• MFFLICHTIO^: u
JEUELQPMENT: 0
L C'EV & ANALf: 0
L STUDIES: 0
DPTA MANAGEMENT: 0
ADJECT I DESIGN SUPPORT: 0
FFOJECT MANAGEMENT: 4C",'32
"I I, b '31 /78)
-------
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
UNITED STATES OF AMERICA, ) s
)
Plaintiff, )
)
) Civil Action No. 83-C-2379
v. )
SHELL OIL COMPANY, )
)
Defendant. )
follows:
DECLARATION OF DONALD J. RIPP
I, Donald J. Ripp of San Antonio, Texas declare as
1. From June 1975 to the present, I have worked as a
government auditor with the U.S. Army Audit Agency ("AAA") and
presently function as an Audit Supervisor. Since December
1983, I have been working at the U.S. Army Audit Agency's
Southwestern Regional Office in San Antonio, Texas.
2. I graduated from the University of New Orleans in
New Orleans, Louisiana with a Bachelor of Science Degree in May
1975. My major area of study was accounting.
3. Since entering federal employment, I have
been employed in three of the AAA'a regions. From June 1975
to September 1979, I served on the Southern Region's mobile
audit team staff in Atlanta, Georgia and functioned as an (i)
Auditor-in-Charge, (ii) Lead Auditor, and (iii) Staff Auditor.
During the period October 1979 to May 1981, I served on the
audit staff at the Southern Region's field office in Savannah,
Georgia and functioned as an Auditor-in-Charge. In June 1981,
I transferred from the Southern Region to the European Region
and was assigned to the field office in Heidelberg. Germany.
I served on the audit staff at this field office and functioned
as an Auditor-in-Charge until December 1983. At this time I
was transferred to my current position as Audit Supervisor on
the Southwestern Region1s mobile audit team staff in San
Antonio, Texas. Since Joining AAA, I have functioned in
various audit staff positions involving numerous audits.
4. I have successfully completed AAA's Career
Field training by taking certain approved courses, including
(i) Senior Auditor, (ii) Intermediate Auditor, (iii) Junior
Attachment 3
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- 2 -
auditor, (iv) Intern Auditor, (v) Statistical Sampling, (vi)
Report Writing, (vii) Logistics Management for Auditors, and
(viii) AD? for Auditors. Additional professional training
includes: (1) Economic Crime Workshop, (ii) Auditing and
Investigating With Microcomputers, (ill) Public Managers
Workshop, (iv) Applied Supervision, (v) Management Introduction
to ADP, and (vl) Management Development Seminar. Additionally,
I have attended various Professional Development Seminars and
Symposiums conducted by the Association of Government Accountants
and the American Society of Military Comptrollers. Since
January 1976, I have been a member in good standing with the
Association of Government Accountants and have served as an
Instructor on Microcomputers for (1) an accounting course
conducted by the San Antonio Chapter of the Association of
Government Accountants and for (ii) a Professional Development
Seminar. I also* have been a member of the Department of
Defense Microcomputer User Group since April 1984.
5. AAA1 s audit mission is to provide an independent
and objective internal audit service to the Department of the
Army. Audits performed by AAA comply with the Standards for
Audit of Government Organizations, Programs, Activities and
Functions as established by the Comptroller General of the
United States. The scope of internal audit is unlimited -
extending to all Army organizations and operations, including
Army National Guard and Army Reserve activities and civil works.
It encompasses all aspects of management and management
controls, and all programs, functions, transactions, records
and documents.
AAA also performs special audits/reviews under
guidelines prescribed for the Quick Reaction Audit Program
established by the Auditor General of the Army. Audits or
reviews performed under the Program are similar to other high
priority, unprogrammed audits, with the major difference
being the commitment given to provide a quick response to
requests received from the Army Secretariat, the Department
of the Army Staff, or the Major Army Commands.
Rocky I
6. In connection with United States v. Shell Oil
Co. . the Department of Justice and the U.S. Army Judge Advocate
General requested the Auditor General of the Army, U.S. Army
Audit Agency, to provide support in the subject litigation.
AAA, Southwestern Region, was assigned the task of providing
the necessary support by conducting a "review of response
costs" Incurred in responding to environmental contamination
at the Rocky Mountain Arsenal (RMA). The review of response
costs was to be undertaken in accordance with the Quick
Reaction Audit Program. Besides the Rocky reviews, the South-
western Region has been involved in numerous other audita/rev lews
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- 3 -
under the Quick Reaction Audit Program since January 1984.
I have supervised at least three of these audits/reviews.
7. The first review to document response costs at
RMA was for the period July 1, 1974 through December 31, 1983
and is commonly referred to as "Rocky I". The specific
objectives were to document: (i) the amount of the response
costs; (ii) what .the response costs were for, such as construction,
operations, and studies; and (iii) whether the costs had
been paid (i.e., the response costs had been incurred for
environmental contamination at RMA).
8. I was appointed Auditor-In-Charge (AIC) of
Rocky 1. To ensure that the objectives established for Rocky I
were met, I supervised the work performed during the review.
I also prepared auditor instructions and review programs
entitled Review of Response Costs for Rocky Mountain Arsenal,
Auditor Instructions for T4-65QS (hereinafter "Guidelines").
These guidelines were reviewed and approved by Mr. Richard E.
May, Associate Regional Auditor General, Southwestern Region,
U.S. Army Audit Agency. The guidelines contained:
(i) information outlining responsibilities and duties of the
auditors assigned to the review; (ii) instructions to be
complied with throughout all phases of the review; and
(iii) review programs for obtaining response costs documentation,
reviewing overhead procedures for application and consistency,
and identifying accounting systems and regulatory documentation.
9. The Site Audi tors-In-Charge or the Lead Auditors of
the audit team assigned to the Rocky I review attended a workshop
in San Antonio, Texas conducted by Mr. Richard E. May and
myself. The purpose of this workshop was to explain the work
requirements of tne subject review, to discuss the review
objectives, and to explain the guidelines in detail. As AIC,
I delegated authority and responsibility to the Site Auditors-
In-Charge in order to ensure that the auditors under their
control followed the guidelines.
10. AAA conducted the Rocky I review from January
1984 through March 1984. As part of the review, the auditors
reviewed and obtained authenticated copies of material parts
of contracts and disbursement vouchers in order to document
contract costs, obtained cost reports to document in-house
costs, determined if overhead costs were consistently computed
and charged, and identified or collected manuals and directives
describing the accounting systems used by the commands that
incurred costs. The auditors also identified documented
costs by fiscal years, source of funds, contract as opposed
to in-house expenditures (i.e., work accomplished by personnel
outside of the command as distinguished from work accomplished
by personnel assigned to the command), and further identified the
response costs to 13 cost element categories.
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- 4 -
Mr. Robert Lingo, Army counsel employed by the U.S. Army
Material Command (AMC), provided the list of 13 cost element
categories prior to AAA beginning site work for Rocky I. At
the time he provided the list, Mr. Lingo was responsible for
coordinating the Army's response costs incurred in responding
to environmental contamination at RMA.
11. In order to document the response costs, AAA
visited 13 different commands which had incurred costs for
responding to environmental contamination at RMA.
The 13 commands are as follows:
Commands
U.S. Army Rocky Mountain Arsenal (RMA)
U.S. Army Engineer District, Omaha (USAEDO)
U.S. Army Environmental Hygiene Agency (USAEHA)
U.S. Army Toxic and Hazardous Materials Agency
(USATHAMA)
U.S. Army Engineer Waterways Experiment Station
(USAEWES)
U.S. Army Research Office (USARO)
U.S. Army Missile Command (USAMIC)
U.S. Army Chemical Research and Development
Center (USACRDC)
U.S. Army Medical Research and Development
Center (USAMRDC)
U.S. Army Belvoir Research and Development
Center (USABRDC)
National Space Technology Laboratory (NSTL)
U.S. Army Medical Bioengineering Research
and Development Laboratory (USAHBRDL)
U.S. Army Armament Munitions and Chemical
Command (USAAMCC)
Location
Denver, Colorado
Omaha, Nebraska
Edgewood Arsenal,
Maryland
Edgewood Arsenal,
Maryland
Vicksburg,
Mississippi
Research Triangle Parl
North Carolina
Redstone Arsenal,
Alabama
Edgewood Arsenal
Maryland
Fort Detrick, Marylan
Fort Belvoir, Virgini
Bay St. Louis,
Mississippi
Fort Detrick, Marylar
Rock Island, Illinois
12. AAA also visited or contacted the following entities
which were responsible for disbursing the funds-
Servicing Finance and Accounting Offices
FAO, Rocky Mountain Arsenal
FAO, U.S. Army Engineer District, Omaha
FAO, Aberdeen Proving Ground
Denver, Colorado
Omaha, Nebraska
Aberdeen Proving
Ground, Maryland
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- 5 -
FAO, U.S. Armament Research and Development
Center
FAO, U.S. Army Engineer Waterways Experiment
Station
FAO, U.S. Army Armament Munitions and Chemical
Command
FAO, U.S. Army Research Office
FAO, U.S. Army Engineer Center and Fort
Belvoir
FAO, Fort Detrick
FAO, U.S. Army Missile Command
Dover, Mew Jersey
Vicksburg, Mississippi
Rock Island, Illinois
Research Triangle Park
North Carolina
Fort Belvoir, Virginia
Fort Detrick, Maryland
Redstone Arsenal,
Alabama
Defense Contract Administration Services Region;1
St. Louis
Philadelphia
New York
Chicago
Defense Contract Administration Management Areas
Denver
Director Procurement. Aberdeen Proving Ground
St. Louis; Missouri
Philadelphia. PA
New York, New York
Chicago, Illinois
Englewood, Colorado
Aberdeen Proving
Ground, Maryland
13. .Once the auditors obtained the cost documentation
from a given command, the auditors summarized the response
costs on summary spreadsheets. In accordance with the guide-
lines, an auditor who did not prepare the summary spreadsheets
then verified that the information on the summary spreadsheets
was supported by the cost documentation. My staff and I also
entered the accounting data onto microcomputer-generated
electronic spreadsheets. The accuracy and completeness of
the electronic spreadsheets was verfied by using the same
controls used in verifying the summary spreadsheets. The
signatures of the auditors who prepared the summary spread-
sheets, and of the verifiers, appear on the summary spread-
sheets. Likewise, the signatures of the auditors who entered
the data, and of the verifiers, appear on the electronic
spreadsheets.
14. Using the microcomputer software, my staff and
I then summarized the costs and prepared summary sheets and
hard copy printouts for the 13 commands. This summary was
reported in AAA's Review Report: SV 84-602, dated April 9,
1984. The summary is commonly referred to as the "Rocky I
Report". Since the Rocky I Report was prepared, all cost
documentation and auditor files for this review have been
maintained under the direct control of the Southwestern
1 Documentation was certified by DCASR personnel and forwarded
to AAA's Review Team.
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- 6 -
Region, U.S. Army Audit Agency, at the Regional Office located
at 1222 North Main, Suite 900, San Antonio, Texas.
15. I declare, based on my involvement in and my
review of the work performed during Rocky I that the documented
response costs incurred by the commands were identified to
the cost element categories according to the list supplied,
that the costs were incurred by the United States Government,
and that the costs reflected in the documentation equal the
costs reported in the Rocky I Report.
Rocky II
16. Subsequent to the completion of Rocky I, the
Department of Justice requested that the response costs
reported in the Rocky I Report be reclassified according to a
specific project or, when a cost could not be completely
allocated to a specific project, to the general category.
At my direction, auditors reviewed the supporting cost documen-
tation and prepared summary sheets identifying the workpapers
which supported the cost documentation. Except for USATHAMA &
USAEDO, the summary sheets also summarized a description of
the work performed and identified a Cost Code number or PRON
number and, in the case of costs incurred by RMA, the Job
Order number. A Cost Code number is used in a generic sense
to identify any document needed to track the issuance a*4 I*
disbursement of funds. A PRON is a Procurement Work Directive
Request Order Number, a USATHAMA funding document. A Job
Order number is a number assigned by RMA to work performed by
or under the supervision of RMA. For USATHAMA & USAEDO, the
summary sheets referred to the specific workpapers for the
supporting cost documentation.
17. The actual re-classification of incurred costs
to projects or to the general category was performed by Mr.
Donald Campbell, the Deputy Program Manager for the RMA
Cleanup, who was employed by USATHAMA and by Dr. William McNeill,
the RMA Director of Technical Operations, who was employed by
RMA. I assisted the Deputy Program Manager in re-classifying
costs and Lewis Pena, the Site AIC at RMA for Rocky I,
assisted the RMA Director. The costs were re-classified ac
AAA's Southwestern Regional Office in San Antonio, Texas.
18. In re-classifying the costs, the Deputy Program
Manager and the RMA Director reviewed funding documents.
budget descriptions of Job orders (in the case of RMA) , other
workpapers, and cost documentation where necessary. After
reviewing the above, the Deputy Program Manager and the RMA
Director assigned the work performed and the costs incurred
to a specific project or to the general category. The
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- 7 -
product of this re-clasaification is commonly referred to as
"Rocky II". The specific projects and the general category
are identified as follows:
Project
0 - The General Category
1 - The Pilot North Boundary System
2 - Expanded North Boundary System
3 - Northwest Boundary System
4 - Irondale Boundary System
5 - Sewer Treatment Plant Carbon Filtration
6 - Basin F Evaporation System/Basin A Dust Control
9 - Lower Lakes Sediment Removal
10 * Deep Well Closure
11 - Basin F Closure
12 - Basin A/South Plants
19. Using the data reflected in the electronic
speadsheets prepared for Rocky 1 and the re-classification
of these response costs to specific projects or to the
general category, I developed and directed the entry of
this information into AAA's data base. A summary of this
information then was reported in AAA's Review Report:
SW 84*605, dated Jan. 22, 1985. The summary is commonly
referred to as the "Rocky II Report". Since the Rocky II
Report was prepared, all files, including the microcomputer
files, have been maintained under the direct control of the
Southwestern Region, U.S. Army Audit Agency, at the Regional
Office located at 1222 North Main, Suite 900, San Antonio,
Texas.
20. I declare, based on my invlovement in and
review of the work performed during Rocky II, that the Rocky
II Report accurately identifies the work performed and the
costs incurred to specific projects or to the general
category as assigned by the Deputy Program Manager and by *
the RMA Director.
Rocky III
21. On September 17, 1984, the Department of Justice
and the U.S. Army Judge Advocate General requested that the
response costs incurred during the period January 1 through
December 31 , 1984, be documented by AAA and used to update
the response costs previously documented and included in
the Rocky I and II Reports. The overall objective of the
review was to document response costs at RMA for this
period and to add these costs to those for the period July
1 , 1974 through December 31, 1983. The specific objectives
of this review and of Rocky I were the same. The specific
objectives are discussed in paragraph seven (7). This
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- 8 -
review is commonly referred to as "Rocky III.1*
22. I was appointed the AIC for Rocky III.
To ensure that the objectives established for Rocky III were
met, I supervised the work performed and I also updated the
guidelines used In Rocky I, entitled "Review of Response
Costs for Rocky Mountain Arsenal, Auditor Instructions
for T5-650S". Mr. Richard E. May, Associate Regional
Auditor General, Southwestern Region, U.S. Army Audit Agency,
also reviewed and approved the Rocky III guidelines. The
guidelines contained the same type of information, instructions
and review programs as discussed in paragraph eight (8).
23. Site Auditors-In-Charge or lead auditors of
the audit team assigned to the Rocky III review attended a
workshop at the Southwestern Regional Ofice in San Antonio,
Texas. The workshop was conducted by Mr. Richard E. May
and myself. The purpose of the workshop was to explain the
work requirements of the subject review, to discuss the
review objectives, and to explain the guidelines in detail.
The workshop included discussions on the use of microcomputers
and the data base created by AAA in Rocky II to account for
the documented response costs. As the AIC, I delegated
authority and responsibility to the Site Auditors-In Charge
in order to ensure that the auditors under their control
followed the guidelines.
24. AAA conducted Rocky III from January through
March 1985. As part of the review, the auditors obtained
and reviewed authenticated copies of material parts of
contracts and disbursements vouchers in order to document
contract costs, obtained cost reports to document in-house
costs, determined if overhead costs were consistently computed
and charged, and identified or collected manuals and directives
describing acountlng systems being used. AAA also identified
documented costs by fiscal years, source of funds, and
contract as opposed to in-house expenditures (i.e., work
accomplished by personnel outside of the command as distinguished
from work accomplished by personnel assigned to the command).
Likewise, AAA identified the response costs to the 13 cost
element categories according to the list previously provided.
Additionally, AAA identified costs to the specific projects
or to the general category based on the re-classifications
accomplished in Rocky II (for continuing costs) and through
discussions with appropriate management or operating personnel
at the commands involved (for new costs). The same locations
visited or contacted during Rocky I were visited or contacted
during Rocky III except as follows:
Defense Contract Administration Services Region 2
ChicagoChicago, 111! s
2 DCASR personnel at the other sites still certified and
forwarded the documentation to the Agency's Review lean,
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- 9 -
DefenseContract Administration Management Areas
Denver Englewoo'd, Colorado
25. Once the auditors obtained the cost documentation,
the auditors, using microcomputers, entered the data into
the data base, and printed out the data in hard copy. An
auditor who did not enter the data into the data base then
verified the information by comparing the hard copy with
the cost documentation. The signatures of the auditor who
entered the data and of the verifier appear on the hard copy
printout.
26. My staff and I subsequently ran audit retrievals
using the microcomputers to generate summaries of project
or general costs by command in accordance with the cost
elements identified. Using the microcomputer software, my
staff and I also summarized the costs and prepared summary
sheets and hard copy printouts. A summary of these response
costs was reported in AAA's Review Report: SW 85-607,
dated March 27, 1985. The summary is commonly referred to
as the "Rocky III Report".
27. Since the Rocky III Report was prepared, all
cost documentation and audit files for this review have been
maintained under the direct control of the Southwestern Region,
U.S. Army Audit Agenc, at the regional office located at 1222
North Main, South 900, San Antonio, Texas.
28. I declare, based on my involvement in and
review of the work performed during Rocky III, that the
documented response costs incurred by the commands were
identified to the cost element categories according to
the list supplied, that the incurred costs also were identified
to specific projects or to the general category based on
the re-classifications accomplished in Rocky II (for continuing
costs) and through discussions with appropriate management
or operations personnel at the commands involved (for new
costs), that the costs were incurred by the United States
Government, and that the costs reflected in the documentation
equal the costs reported in the Rocky III Report.
Rocky III - Update of Department of Justice Costs
29. On July 5, 1985, the U.S. Army Judge Advocate
General requested AAA to document the response costs incurred
by the Department of Justice for the period October 1, 1983
through December 31, 1984 and to add the costs to those for
the period July 1, 1974 through December 31, 1984. The
specific objectives of this review and of Rocky I and Rocky
III were the same. The specific objectives are discussed
in paragraph seven (7). The updated guidelines also were
in force and contained the same type of information,
instructions and review programs as discussed in paragraph
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- 10 -
eight (8). This review is commonly referred to as the
"Rocky III Update".
30, I was the AIC and the Site Auditor- In-Charge
for this update. Along with another auditor, I conducted
the update in Washington, D.C. in October 1985.
31. As part of the review, we obtained and reviewed
personnel time and wage reports, travel vouchers, contracts,
disbursement vouchers, and DOJ's Financial Management Information
System printouts (FMIS) from the Lands and Natural Resources
Division, DOJ. We also identified documented costs by
fiscal year, source of funds, and contract as opposed to
in-house expenditures (i.e., work accomplished by personnel
outside of the DOJ as distinguished from work accomplished
by personnel assigned to the DOJ). Based on a review
of the cost documentation and discussions with personnel of
the Land and Natural Resources Division, we also identified
the costs incurred to the cost element category of "Litigation",
according to the list supplied. Because the costs did not
apply to a specific project, all costs also were identified
to the "general category". In addition, we applied the
fringe benefit rates to the salaries documented based on
guidance provided in USAAA Regulation 36-151, "Guide for
Cost Comparison Activity Report." We also obtained copies
of user's manuals pertaining to the FM^S system as part of
the system documentation.
32. Once we obtained the cost documentation, using
microcomputers the auditor and I entered the data into the
data base established and printed out the data in hard
copy. The auditor not involved in entering the data verified
the information for accuracy by comparing the hard copy
with the cost documentation. The signatures of the auditor
who entered the data into the data base and the verifier
appear on the hard copy printout.
33. Subsequently, the auditor and I ran audit
retrievals using the microcomputers to generate cost summaries.
Using the microcomputer software, the auditor and I also
summarized the costs and prepared summary sheets and hard
copy printouts. A summary of these response costs was
reported in the U.S. Army Audit Agency's Review Report: SW
86-601, dated November 18, 1985. The summary is commonly
referred to as the "Rocky III Update Report".
34. Since the Rocky III Update Review Report was
prepared, the cost documentation and auditor files have
been maintained under the direct control of the Southwestern
Region, U.S. Army Audit Agency, at the Regional Office
located 1222 North Main, Suite 900, San Antonio, Texas.
35. I declare based on my direct involvement in
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- 11 -
and review of the work performed during the Rocky III
Update, that the documented response costs Incurred by DOJ
were identified to the cost element category of Litigation
according to the liat supplied, that the costs incurred also
were identified to the general category based on discussions
with appropriate management personnel, that the costs were
incurred by the United States Government and that the costs
reflected in the documentation equal the costs reported in
the Rocky III Update Report.
Terminal Review of RMA
, 36. During the Rocky III review, RMA personnel
informed AAA that on September 30, 1985, the Arsenal's
accounting function would be transferred to Headquarters,
USAAMCC at Rock Island Arsenal, Illinois and disbursing
functions would be transferred to USAAMCC's Arsenal Finance
and Accounting Office. Because of the transfer of accounting
and disbursing functions, AAA performed an update of costs
incurred by RMA for actions taken in response to environmental
contamination. The review is referred to as the "Terminal
Review of RMA". I supervised the work performed during
this review.
37. The overall objective of the review was to
document the response costs incurred by RMA only for the
period of January through September 30, 1985, and later to
add these costs to those costs reported in the previous
U.S. Army Audit Agency's Review Reports. The specific
objectives of this review and of the previous reviews were
the same. The specific objectives are discussed in paragraph
seven (7). The updated guidelines also were in force and
contained the same type of information, instructions and
review programs as discussed in paragraph eight (8).
38. However, in documenting RMA's response costs
for this period, AAA identified certain contract costs
incurred during the calendar year 1984 which had been
inadvertently excluded, from the Rocky III review (hereinafter
"excluded costs"). For those excluded costs, AAA obtained
copies of contracts and disbursement documents from the
Contracting Division at RMA. AAA also identified documented
costs by fiscal year, source of funds and contract as
opposed to in-house expenditures (i.e. , work accomplished
by personnel outside of the command as distinguished from
work accomplished by personnel assigned to the command).
AAA also identified the excluded response costs to the
cost element categories according to the list supplied. In
addition. AAA identified those response costs to a specific
project or to the general category based on the re-claasfications
accomplished during Rocky II and through discussion with the
Environmental Protection Specialist at RMA.
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- 12 -
39. Once the cost documentation was obtained,
the data was entered into the data base established and
printed out in hard copy. The auditor not involved in
entering the data verified the information on the hard copy
for accuracy by comparing it with the supporting cost
documentation. The signatures of the auditor who entered
the data and of the verifier appear on the hard copy
printouts.
40, For the excluded costs documented during the
RMA Terminal Review, AAA has not run audit retrievals,
summarized the costs, prepared summary sheets or prepared
hard copy printouts. A summary of those costs also has
not been reported in a Rocky Report. Auditor retrievals
will be run, the costs will be summarized, summary sheets
and hard copy printouts will be prepared, and the excluded
costs will be reported once the documentation of response
costs for the entire calendar year 1985 is ready to be
published.
41. I declare, based on my review of the work
performed during the Terminal Review of RMA, that certain
contract costs incurred in 1984 which had been inadvertently
excluded from Rocky III were identified, that these documented
costs were identified to the cost element categories according
to the list supplied, that the costs also were identified
to the appropriate project or general category based upon
the re-classification accomplished during Rocky II and
through discussions with appropriate management or operating
personnel, that the costs were incurred by the United States
Government and that these costs will be summarized and then
reported in the next Rocky report.
I declare under penalty of perjury that the
foregoing is true and correct.
Executed this /VK day of J*Hy, 1986.
DONALD JT RIPP
Auditor Supervisor
Southwestern Region
U.S. Army Audit Agency
-------
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OP COLORADO
» UNITED STATES OP AMERICA
Plaintiff,
v.
SHELL OIL COMPANY,
Defendant.
Civil Action No. 83-C-2379
follows
DECLARATION OP BRIAN ANDERSON
I, Brian L. Anderson of Denver, Colorado, declare as
1. I am presently employed as a hydraulic engineer
with the Program Manager's Office, Rocky Mountain Arsenal (RMA)
Contamination Cleanup. I was detailed to this position in
September 1985 and was officially transferred in December 1985.
2. I began working at RMA in June 1976 as a hydraulic
engineer with the Installation Restoration Program. Since
1976, my duties and responslbitles have included the supervision
of drilling operations, the collection of water level data
and analysis, field sample collection work, evaluation and
assessment of relevant data, and the preparation of maps, of- ~"
data tables, and of reports, I also have served in supervisory
positions with the Contamination Migration Branch, the Geohydrology
Branch, and tne Ecology Division.
3. Prior to working at RMA, I was employed as a
staff and project engineer for a consultant engineering firm
located in Denver, Colorado for approximately five years. In
that position, I was responsible for conducting field operations
involving drilling, construction and Inspection, material
testing, and soil and hydrologlc investigation and analysis.
I also evaluated field and laboratory data, drafted engineering
reports, and provided specialized field reviews on behalf of
individual clients and state and local government agencies.
4. I received a Bachelor of Science Degree in
Engineering Hydrology, Soils and ^l|ter Resources from the
University of Denver In 1070. I also"" have taken post-graduate
courses in Civil Engineering at the University of Colorado.
Attachment A
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- 2 -
5. The Army Audit Agency (AAA) perforated .
reviews of the coats incurred by the Army commands in responding
to the contamination problems at RMA. These reviewff*44entifed
ten specific projects and a general category wh^n the work did
not involve a specific project. The reviews also identified
thirteen cost element categories. Although the categories
may overlap, these categories represent the type of work
actually performed at the specific projects ortin the general
category.
6. During my employment at RMA, I 'have been involved
in and have supervised response actions undertaken by RMA
involving projects and cost element categories^Identified by
AAA in its reviews. I have also specifically reviewed various
response actions in order to document what wogk was performed,
Inclualng the cost of the work.
7. In addition to the general category, I have
reviewed response actions involving the following specific
projects
(1) The Pilot North Boundary System - This fifteen
hundred foot system was designed to pilot theiconcept of
interception and treatment of contaminated ground water-. The
site is located in the northern part of the arsenal, parallel
to the north boundary.
(2) The Expanded North Boundary System - This system
expanded the pilot system by extending the soil bentonlte
slurry cutoff wall, adding dewatering wells and recharge
wells and enlarging the treatment facility to-- intercept
ground water flows across a 6700 foot length^
(3) Basin A/South Plants - Basin A- is an evaporation
basin used in the 1940's/195Q's to dispose of;contaminated
liquid wastes. Basin A is located-in Section 36 of RMA.
South Plants refers to the manufacturing complex located along
Seventh Avenue in the center of the arsenal which also contains
contaminated wastes. These areas were combined into one
study area 1'or purposes of geohydrologic or geochemical
investigations and for purposes of project classification.
(4) Basin F Closure. Basin F is a 93 acre lined
evaporation basin containing contaminated liquids located in
Section 26 of RMA. Closure activities have been ongoing for a
period of time to permanently decommission and^ decontaminate
the basin.
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-3-
(5) Northwest Boundary System. This 2600 foot
system was designed to Intercept and treat contaminated
ground water and is located adjacent to a northern portion of
he northwest boundary.
(6) Irondale System. The United States incurred
response costs in monitoring Shell's hyarological .barrier
system to prevent off-post migration of chemical contaminants.
The United States monitored the system by collecting groundwater
level and quality data and having it analyzed by the Army.
The Irondale System is located adjacent to the southern
portion of the northwest boundary.
8. The actions associated with these projects
which I have reviewed Involve the cost element categories
of Operating, Contamination Surveys, Assessments, Project and
Design Support, Technology Development and Application, Data
Management and Project Management. The categories are defined
as follows:
*
(1) Operating. This represents the costs Incurred
in maintaining and operating the projects.
(2) Contamination surveys. This represents costs
incurred for the investigations of chemical contamination in
water and soil.
(3) Assessments. This represents costs Incurred
for the geotechnlcal and geohydrological investigation and
assessments which helped orient the remedial action program.
(U) Project and Design Support. This represents
costs incurred for engineering and administrative support for
cne conceptual uevelopment of remedial action projects.
(5) Technology Development and Application. This
represents costs incurred in developing and implementing
tecnnology to control the sources of ground and surface water
pollutants.
(6) Data Management. This represents costs incurred
to support computer data base development, data/transcription
retrieval, and evaluation of data management plans.
(7) Project Management. This represents costs
incurred in the planning, direction, allocation of resources,
personnel management, and the establishment and maintenance
of files and records as applied to the environmental response
programs for RMA.
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9. In documenting the work performed, I reviewed
financial documents which had code numbers assigned in order
to track the costs Incurred. These code numbers are hereafter
referred to as "Cost Codes" or "Job Orders". I also reviewed
documents prepared by AAA. I reviewed other documents as
well for the purpose of refreshing my recollection. The
financial documents that I reviewed Include funding documents,
contract type documents, Invoices/vouchers, and Job order
sheets. The Job order sheets contain information obtained,
from the working files of the Comptroller's Office at RMA.
The same information, in finalized form, also Is contained in
cost reports prepared by RMA. Upon information and belief,
these costs reports have been submitted to Shell Oil Co. The
AAA documents that I reviewed include summary sheets. Other
documents that I reviewed include Rocky Mountain Information
Center (RIG) documents which have RIG numbers assigned to
identify them, Resource/Workload Control documents and other
documents identified more fully in the fact sheets described
below.
10. As part of my review, I prepared fact sheets
to describe in greater detail the work performed for the Cost
Codes. In one instance, other Individuals and I prepared
fact sheets for the same Cost Code, with each of us describing
a portion of the work performed based on our familiarity and
expertise.
••i
11. The fact sheets prepared Identify the Cost
Codes used to track the costs incurred and the project, cost
element category and fiscal years when the costs were incurred.
An index of the fiscal years is attached as Attachment 1.
The fact sheets then identify (1) the offlce(s) (RMA CC's or
Cost Centers) and/or the contractors) which performed the
work; (2) the work that was done, including the objectives;
(3) the cost of the work, (4) the results of the work; (5)
reports prepared as a result of the work; and (6) the documents
that I relied upon in preparing the individual fact sheets.
These fact sheets and attachments thereto are attached to
this declaration as Exhibits 173A and 173-1 through 173-7;
174A and B and 17^-1 through 17U-8; 175A and B and 175-1
through 175-6; 176A and 176-1 through 176-3, 177A and 177-1
through 177-4; 178A and 178-1 through 178-3; 179A and 179-1
through 179-4; 180A and 180-1 through 180-6, 181A and l8l-l
through 181-6; 182A and 182-1 through 182-5, 183A and 183-1
through 183-3; 184A and 184-1 through 184-4; 185A and 185-1
through 185-6; 186A and 186-1 through 186-4, 187A and 187-1
through 187-3; 188A and 188-1 through 188-3; 189A and 189-1
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- 5 -
through 189-4; 190A and B and 190-1 through 190-9; 191A and
191-1 through 191-8; 192A and 192-1 through 192-9; 193A and
193-1 through 193-9; 194A and 194-1 through 194-3; 195A and
195-1 through 195-3; 1<»6A and 196-1 through 196-5; 197A and
197-1 through 197-13; 198A, and B and 198-1 through 198-13;
199A & B and 199-1 through 199-11; 200A and 200-1 through
200-8; 201A and 201-1 through 201-11; 202A i B and 202-1
through 202-8; 203A and 203-1 through 203-7; 204A and 20U-1
through 204-6; 205A B & C and 205-1 through 205-10; 206A and
206-1 through 206-11; 207A and 207-1 through 207-9; 208A and
208-1 through 208-3, 209A and 209-1 through 209-3; 210A and
210-1 through 210-7; 211A and 211-1 thourgh 211-4; 212A and
212-1 thourgh 212-5; 213A and 213-1 through 213-5; 214A and
214-1 through 214-9; 215A and 215-1 through 215-9; 216A and
216-1 through 216-13, 217A and 217-1 through 217-9; 218A and
218-1 through 218-9; 219A and 219-1 through 219-7; 220A and
220-1 through 220-13; 221A and 221-1 through 221-11; 222A and
222-1 through 222-4; 223A and 223-1 through 223-4; 224A and
224-1 through 224-14; 225A and 225-1 through 225-19; 226A and
226-1 through 226-7, 227A and 227-1 through 227-4; 228A and
228-1 through 228-16, 229A and 229-1 through 229-6; 230A and
230-1 through 230-6; 231A and 231-1 through 231-5; 232A and
232-1 through 232-3; 233A and 233-1 through 233-11; 234A B C
i D and 234-1 through 234 -17; 235A and 235-1 through 235-4;
236A and 236-1 through 236-8, 237A and 237-1 through 237-9;
238A and 238-1 through 238-6; 239A and 239-1 through 239-6;
240A and 240-1 through 240-5; 241A and 241-1 through 241-15;
242A and 242-1 through 242-3; 243A and 243-1 through 243-3;
244A and 244-1 through 244-7, and 245A and 245-1 through
245-4,
j>
12. Also attached to each fact sheet are key docu-
ments relating to that fact sheet. These Include funding
documents, Job order sheets, contract type documents, invoices/
vouchers, AAA summaries, and abstracts of RIG documents and
Resource/Workload Control documents. I -relied on these docu-
ments and on the other documents identified in the exhibits
in preparing the fact sheets to explain the work performed.
Additionally, I used the Cost Codes to document the cost of
the work performed.
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- 6 -
13. Baaed on my review of the documents discussed
above (including the documents contained in the exhibits),
I declare that the attached exhibits validly and accurately
represent the work performed as response actions and the cost
Incurred for those actions.
I declare under penalty of perjury that the foregoing
is true and correct to the best of my knowledge, information
and oelief . Executed this Z2- day of po/^. 1986.
Ti
BRIAN ANDERSON
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INDEX OP FISCAL YEARS
PY 1985 A
PY 1984 B
PY 1984 A
PY 1983
FY 1982
PY 1981 B
PY 1981 A
FY 1980
PY 1979
PY 1978 B
PY 1978 A
PY 1977
PY 197T
FY 1976
PY
1 October 1984
1 January 1984
1 October 1983
1 October 1982
1 October 1981
11 December 1980
1 October 1980
1 October 1979
1 October 1978
9 December 1977
1 October 1977
1 October 1976
1 July 1976
1 July 1975
1 July 1974
31 December 1984
30 September 1984
31 December 1983
30 September 1983
30 September 1982
30 September 1981
10 December 1980
30 September 1980
30 September 1979
30 September 1978
8 December 1977
30 September 1977
30 September 1976
30 June 1976
30 June 1975
Attachment 1
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PACT SHEET
Brian Anderson. RMA Engineer General
Individual's Name & Job Title Project
^ Contamination Surveys
Cost Element Category
1. Office or Contractor that performed the work: Envlornmental
Division, Contamination Migration Branch (CC32).
2. Description of work done, Including Its objectives: Groundwater
and surface water samples were collected from on-post and off-
post sites In support of the 360° Monitoring Program. Water
level data was also collected during sampling. The 360°
Program was undertaken to monitor the migration of contaminants
off the Arsenal. Data was evaluated and mapped and data
reports were prepared. Materials also were purchased including
sample Jars, bailers, and well cords.
3. Cost of the work: $84,074
4. Results of the work: Sampling was conducted, data was
co'llected and assessed and reports were prepared;.
5. Reports prepared as a result of the work: Water quality and
water level files maintained on Program Manager's data base
at Edgewood, Maryland and "Concentrations in MGL in 360°
Wells," RIC I81356R66.
6. Documents relied on in the preparation of this fact sheet:
AAA, financial and other documents including:
AAA Summary Sheets (Exhibits 213-1 and 213-2)
Job Order Sheet (Exhibit 213-3)
Funding document (Exhibit 213-4)
RIC document 081356R66 (Exhibit 213-5)
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PACT SHEET Attachment 6
o~/o 6
-------
r_ i DRAFT
' UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
i -i
UNITED STATES OF AMERICA, )
Plaintiff, )
v. ) Civil Action No. 83-C-2379
SHELL OIL COMPANY, )
Defendant. )
DECLARATION OF LUCY A. HAAS
I, Lucy A. Haas, of Omaha Nebraska , declare as follows,
1. I am presently employed by the United States
Army Corps of Engineers, Omaha District, (COE) as the Chief
of the Quality Assurance Section. I have served in this
capacity since October 1986. As the Chief of the Quality
Assurance Section 1 am responsible for ...
2. Throughout my employment with the COE, I have
been employed at the Omaha District office. Initially, in
May of 1975, I was employed by the COE in the Finance and
Accounting Office (FAO) as a data transcriber. In this
position, I was responsible for preparing computer input
cards and magnetic tape for updating the district's accounting
system and the COE's central payroll system.
3. From June 1977 to November 1977 I was an accounts
maintenance clerk in the FAO'a Civil Accounting Unit. In
this position, I was responsible for assigning document
numbers to accounting documents, for ensuring that all documents
were properly processed in the accounting system, for coding and
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- 2 -
processing disbursement transactions, and for balancing the
accounting entries against the actual documents.
4. Between December t977 and June 1980, I was an
accounting technician within the FAO's Civil Accounting Unit.
As an accounting technician, my duties included maintaining the
accounting records of the COE central payroll office, recording
obligations, processing payables, and performing data-base
maintenance on the accounting system whenever there were
changes in the automatic data processing (AOP) requirements.
During this period, I also served in the FAO's Disbursing
Section for seven months where I became familiar with all
aspects of the disbursing operation by preparing and recording
deposits, and by preparing month-end reports.
5. From July 1980 to December 1982. I was an
operating accountant in the FAO's Military Accounting Unit
and from January 1983 to April 1983, I was an operating
accountant in the FAO's Civil Accounting Unit. In both
positions, I was responsible for certifying the availability
of funds, scheduling accounting system updates, and preparing
month-end accounting reports for the Omaha District.
6. Beginning in May 1983, I served in supervisiory
capacities. From May 1983 to July 1983, I was the temporary
Chief of the FAO's Revolving Fund Accounting Unit and between
August 1983 and October 1984, I was the Chief of the FAO's
Military Accounting Unit. In both positions, I was responsible
for timely and accurate reporting of financial data, developing
internal control to ensure the accuracy of the accounting
transactions, coordinating computer system change requirements,
-------
and furnishing accounting-related assistance to local managers.
While serving as the Chief of the Revolving Fund, I also was
/ responsible for ensuring that costs incurred by Che District
4
were properly recouped.
7. From October 1984 to June 1985, t was the Chief
Quality Assurance Accountant. In this position, I was
responsible for developing and coordinating reviews of the
various FAO sections 1) to ensure compliance with applicable
laws and regulations and 2} to verify the integrity of the
accounting records. I also developed and implemented applicable
standing operating procedures.
8. In June 1985, I became the Deputy Finance and
Accounting Officer of the FAO. As Deputy, I was responsible
for the overall management, coordination, control, and policy-
setting of the automated accounting system for the COE Missouri
River Division. The division includes the Omaha District, the
Kansas City District, and various division-level offices. I
served in this positon until I began may present assignment
in October 1986.
9. I obtained B.S. degree from the University of
Nebraska at Omaha in 1986 with a major in Accounting. I also
have attended numerous COE and Army sponsored courses in
Management, Supervision, Personal Computers, and Accounting
and am currently enrolled in the Army's Comptroller Correspondence
Program. While employed by the COE, I also have been a
member of various committees including the Financial Management
Review Team and the Information Systems Priority Review
Committee. I also have participated in the development and in
the implementation of military accounting functions for .the
-------
North Pacific Division, the Tulaa District, and the Ohio River
Division of the COE.
10. The COE maintains an accounting system entitled
"the Corp of Engineers Management Information System" (COEMIS).
COEMIS is a data base system designed to provide necessary
data in order to review the financial results of work performed
and to analyze current financial conditions. Based on my
employment with the COE, 1 am thoroughly familiar with the
operation of COEMIS including funding control, input procedures,
documentation, and internal controls used to ensure the
accuracy of the accounting data.
11. I also am familiar with the rules, requirements
and regulations governing the COEMIS system. For example.
Engineer Pamphlet (EP) 37-345-1 governs the processing,
recording, and reporting of accounting data. EP 37-345-10
and EP 37-26-1 govern the accounting for military projects
and for revolving fund entries, repectively. Similarily,
__ governs the retention of all documents used in
the COEMIS system.
FUNDING
12. The Omaha District performs work either as
directed by Headquarters (MACOM) or as requested by various
military installations. In the case of Headquarter directives,
the work, a direct funded project, is funded by a Fund
Authorization Document (FAD). In the case of requests from
Military installation, the work is funded by Reimbursable
Orders. FADS & Reimbursable Orders are hereinafter referred
to as "Funding Documents."
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BUDGET OFFICE
13. Upon receipt of a funding document the Budget
Office at the Omaha District (Budget Office) contacts the
Technical Office involved in the Engineering or in the
Construction Division. The Technical Office then prepares a
disposition form (DF) 1) to confirm knowledge of the project,
2) to confirm that the funding is proper. 3) and to establish
the project starting date.
The Budget Office also notifies the FAO that
the funding document has been received and requests the FAO
to establish a funding level ADP workcode. For all funding,
the Budget Office is responsible for ensuring that the funds
are being used according to the schedule provided by the
Technical Office and for ensuring chat any excess funds are
returned on a timely basis.
FAQ
14. Upon notification that the funding document has
been received, the FAO establishes a funding level and
selects a six digit workcode based on the type of funds
involved. (The Technical Office selects the next 4 digits of
the work code and may distribute the funds 4nto different work
codes based on the tasks to be accomplished.) The funds can
involve either design funds or construction funds. A work
code is established in order to account for the use of the
funds. The FAO allocates all funding and also establishes a
miscellaneous obligation Co cover estimated labor and in-house
costs.
ENGINEERING DIVISION
15. Various technical offices within the Engineering
Division have been involved in performing work on behalf of
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- 6 -
Rocky Mountain Arsenal (RMA).
Upon receipt of the funding document, the
Engineering Division also receives a Project Book identifying
the purpose and requirements of the project. The Engineering
Division uses the project book in determining whether the design
of the project should be performed in-house or by an architect-
engineer (A-E). A project manager also is appointed.
The Program Control Office within the Engineering
Division also prepares a current work estimate (CWE) for each
funding document. The *FAO uses the CUE to establish the ADP
requirements and notifies the Engineering Division of the ADP
workcode to be used. The project manager and program control
technician are responsible for ensuring that all individuals
associated with the project are aware of the proper workcode.
The Program Control Office is responsible for
monitoring all funding to ensure that adequate funds are
maintained. This office also reviews all rejected labor and
other in-house transactions to ensure that proper corrections
are made to the accounting records.
CONSTRUCTIONDIVISION
16. Various technical offices within the Construction
Division also have been involved in performing work on behalf
of RMA. These offices first become aware that work is to be
performed when the work or project appears on the Bid Calendar.
At this point, the Construction Division a prepares Request for
Funds based on the project manager's pre-award estimate. The
request includes a certain percentage of the contract amount
for engineering and design support, for supervision and
administration (S&A), and for contingencies. As in the case
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- 7 -
of the Engineering Division, the Construction Division also must
prepare a CWE allocating the funds to a project.
Construction contractors submit their bids
once the project appears on the Bid Calendar. The bids are
good for sixty days aftar opening. If an award is not made
or if a time extension is not received within the sixty day
period, the job must be reopened for bidding.
The Procurement and Supply Division, in coordination
with the Office of Counsel, awards all construction contracts.
The contracts are awarded to on the lowest responsible tudder
17. In performing design or construction work, the COE
may incur different costs. These major costs are as follows
1) labor charges, 2) material charges, 3) contract costs,
4) AOP charges, and 5) overhead. The costs are hereinafter
referred to as "Major Costs". Based on my employment with
the COE, I am familiar with the major costs, and the manner
in which the COE tracks these & all costs incurred by the COE.
1 have described the system for tracking the major costs below
18. Labor charges
1) Each technical office appoints a timekeeper
who is responsible for submitting the time and attendence
cards (T&A) of individuals performing work to the COE payroll
office in Omaha. The T&A cards only show the hours worked,
not the workcode of the project involved. The F&A cards are
used to prepare paychecks.
2) The timekeeper also is responsible for
submitting monthly Labor Distribution Sheets to the FAO.
(The Engineering Division submits the Labor Distribution
Sheets twice per month.) The Labor Distribution Sheets show
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- 8 -
the workcode of the project Che individual is working on as
well as the number of hours actually worked,
3) When the FAO receives the Labor Distribution
Sheets, the data is keypunched onto punched cards and the
cards are fed into the computer during an accounting update
cycle. The system first accesses the personnel data base to
retrieve the individual's hourly race and applicable fringe
benefit rate, the system then computes the total labor cost.
The system also accesses the FAO data base to obtain the
district overhead and indirect labor overhead rates, which
are applied to the labor costs. If a labpr distribution
sheet is processed for an individual against a workcode to
which that individual is not allowed to charge, an exception
listing will be generated and the transaction will be rejected.
4) Pursuant to . the time distribution
sheets are maintained by the FAO Control Unit for a period of
six months. Pursuant to , the distribution sheets then
are retired to Records Holding in Omaha for a period of 6 years.
The sheets are maintained in Records Holding by cost center (The
office which has incurred the labor costs).
19. Material Charges
1) The technical office in need of materials,
supplies of equipment, sends a requisition to the Procurement
and Supply Division in order for that division to prepare a
purchase order (DD form 1155). Once the purchase order is
awarded, a copy of the purchase order is sent to the FAO for
processing an obligation. The purchase order reflects the
appropriate accounting classification and the workcode assigned
to the project.
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- 9 -
2) Upon receipt of the materials, supplies or
equipment, the office which requested the same prepares a
"payable document" (E&G Form 4480) and a receiving report and
then forwards the documents to the FAO The FAO prepares a
"payable" entry, which sets up an account payable in the
system and charges the cost to the applicable workcode.
Although payment may be made at a later date, once final
payment is made the purchase order is filed with the final
payment voucher. The original final payment voucher is
s
forwarded to (USAFAC). Pursuant to ,
a copy of the final payment voucher also is maintained in
Omaha for a period of 6 years and 3 months.
20. Contract Costs"
1 ) The accounting procedures for contract costs
are similar to those for purchase orders. The requesting
technical office prepares the specifications for the contract,
and forwards them to the Procurement and Supply Division.
The Procurement and Supply Division then prepares the required
paper work, and handles the solicitation and award process.
Once the contract is awarded, a copy is sent to the FAO for
processing an obligation.
2) On a periodic basis, a "pay statement" is
prepared, either by the contractor or by the COE and
authenticated by the contractor. The pay statement is
forwarded to the responsible technical branch for review and
certification for payment. The technical branch then prepares
a "payable document" (E&C Form 4480) , and sends it and the pay
statement to the FAO. The FAO prepares a "payable entry",
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- 10 -
which charges the cose to Che applicable workcode. As in
the case of material charges, payments for contracts may be
made at a later date.
3) Pursuant to , the contract and
invoices and vouchers are maintained for a period of
at the .
21 . ADP Charges
The COE also charges for the ADP coses it
incurs. The technical office requiring ADP services prepares
a "request for ADP" which shows the applicable workcode.
Before ADP services can be performed, however, the system
will complete a pre-edit to match workcodes on the request
with a list of acceptable numbers. A printout also is generated
each month Co show time charges for each workcode. FAO then
prepares an input document from the printout to charge the
ADP costs to the appropriate workcode.
22. Overhead
The COE charges three types of overhead (OH)
They are District OH, Indirect OH & Supervision & Administration
(S&A)
1) District OH - TJie District Budget Office
establishes this OH. Pursuant to , a COE
regulation, certain officer within each district are defined
as being overhead offices. For these offices, the accounting
system accumulates costs (labor, material/supplies, travel/training,
GSA rental charges for office space, computer processing,
reproduction, etc.) and the "income" generated by allocating
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- 11 -
expenses to a specific project. The Budget Office then
reviews these OH accounts at least quarterly to ensure
that the costs and the income remain within a plus or minus
five percent.
2) Indirect OH - The Chief of the Revolving Fund
establishes this rate and he follows the same basic procedures
as the Budget Officer does in establishing District OH.
Pursuant to __, accounts are established to accumulate
costs for those offices which are administrative in nature.
The indirect rates actually established are negotiated between
the Chief of the Revolving Fund and the responsible Manager
based on current OH balances and upcoming events which will
effect those balances. As in the case of direct OH, the costs &
income for the indirect OH accounts must remain within a plus
or minus of SOS.
3) (S&A)
Pursuant to , the COE also charges for
S&A, a type of OH applied directly to construction contract
costs. S&A is designed to recapture the costs of the Contracting
Division and other offices which which administer the contracts.
The S&A rate has remained fairly constant and presently is
five and one half percent for major construction contracts
and seven and one half percent for Operation and Maintenance
projects (i.e. repair work). The charges for offices involved
in contract administration are processed into a special
account, and charged-off at the five and one half or the seven
and one half percent rate. (The S&A charges are inputted
either manually or automatically computed by the system). At
month-end, the balances in the accounts for all districts are
funneled into a special Office of Chief Engineer (OCE) account.
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- 12 -
The OCC is responsible for reviewing the account to determine
if a race adjustment is required.
23. Controls on Data Input
*.
1) The FAO's Accounting Unit is responsible for
ensuring that the entries generated in that unit are processed and
processed only once. The operating accountant prepares all
funding entries. The entries are totaled and a batch control
total also is generated to ensure that all the entries have been
made. After an update cycle has been run, the accountant
checks the total change in funding between the current and
the previous cycle and also checks each individual project to
ensure that the funding entries were properly recorded. This
check is done since the COEM1S report on funding is used to
certify the availibility of funds. An error in recording1
could result in a funding violation under 31 U.S.C. S 1517.
Z) An accounting technician prepares all
obligating entries. The operating accountant provides ehe
technician with the documents and a batch total to balance
back to. If a discrepancy is discovered between the batch
total and the entries prepared by the technician, the discrepancy
is promptly resolved by the accountant & the technician.
3) The funding and obligating entries currently
are entered through a seperate program called "Funds Control"
This system was designed to assist the accountants in ensuring
that funds are adequate for obligations received. The entries
are made on-line through the Harris Computer The program
edits the format of the entries as they are being made
and checks for funding as it is reflected on the Funds Control
data base. After each update cycle has been run, a reconciliation
report also is generated. This report reflects any differences
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- 13 -
between the Funda Control data base and the COEMIS data base.
If differences exist, they must be reconciled before the next
update is run.
4) Accounting technicians also process all payable3
and control the batch totals. The batch totals are designed
to ensure that all entries prepared are processed.
S) The Key Punch Office receives all batches
in control folders. The lead technician is responsible for
ensuring that all folders and batches are returned, and for
ensuring that all entries are key punched. Prior to an
update, a pre-edit program ia run. The pre-edit checks the
total on the batch card against the generated total from the
transactions. It also checks for format errors. The lead
technician ensures that any errors and total discrepancies
are resolved prior to the update. However, should a batch total
error go undetected, the update program will not process any
other transactions in that batch. Except for cost distribution
errors, the entries are corrected by month-end and resubmitted
in the next update cycle. Cost distribution errors are corrected
before year end unless good cause exists.
6) The Control Unit is the unit responsible
for ensuring that all required transactions are loaded into
the update cycle. The transaction data cards are loaded into
a file through the DATA 100. The Control Unit then tells
the system through the Job Control Language (JCL) commands
which files to access. Once accessed, a copy of the file is
generated under a new file name and the original file is
deleted, thus ensuring that the same transactions are not
accessed for two updates. If a cycle must be rerun do to
computer problems, a control technician copies tne tiles oacK
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- U -
Co the update file for a rerun. The Control Unit maintain*
a log of the files used and the number of transactions in
each file. The number of entries are checked and a batch
edic also is generated and checked. The Control Unit also
maintains backup files of each update until the month-end
reports are completed.
7) Cost Distribution Transactions are sometimes
generated outside the FAO. The Reproduction Branch, for example,
prepares distribution entries from it own automated system.
It loads a requisition into the system along with the work-
code provided. When Che Job is complete the system then
determines the cost based on a pre-established rate and generates
the entry. The Reproduction Branch also edits the entries to
ensure the workcodes are valid. When the file is ready, the
Reproduction Branch notifies the Control Unit and the entries
are entered in Che next update cycle.
8) After each update cycle has been run. the
updated data base is stored on magnetic tape. Pursuant to
_, chese Capes are maintained until the monch end
reports are submitted. The last tape of the month is maintained
for the entire fiscal year. The cape files are maintained in order
to prevent loss of data should the computer system go down or
the update abort.
9) The COEMIS program has pre-established time &
file size limits that will cause an aborted cycle (the program will
stop without completing all the updates). These limits are
safeguards against program flaws. For example, if a program takes
more time than what is deemed reasonable for that program,
the system will automatically terminate the program based on
the time limit tnac was set. unce terminated, an aoort lock is
-------
is placed on the data base, thus preventing any further access.
To restart an update, the Control Unit must first determine
what caused the abort, and then unlock the data file, reload
the data base from a tape, re-establish the data files, etc.
All aborts caused by program errors must be reported to the
MACOM for correction since local programmers are not permitted
to alter COEMIS programs.
10) Standard JCL's are established for each
update and end of month report generating programs. The JCL
determines what programs must be run, what files are required,
and in what_sequence the programs^are run. The Control Unit
provides basic information for the JCL. The technician
determines and establishes the close of business date and
the update cycle number. The technician also determines
whether the system is to use the data base on the disk or if
the data base is to be loaded from a tape. The technician
also selects the available program options.
11) Once an update is completed, the Control
Unit reviews the update to ensure that all programs terminated
normally, that all programs were run, and that all batches were
accepted. The Accounting Unit also reviews the update for
accuracy.
12) To ensure the accuracy of the data base,
other checks are conducted, including a) a comparison
of the open payable listing with the actual documents, b) a
monthly comparison of the open obligation listing with the
actual documents, c) a monthly comparison of the open receivable
listing with the actual documents, d) an update & month-end
funding reconciliation based on a summary report received bv
the Budget Office, e) a disbursement & collections' reconciliation
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- 16 -
between COEMIS and a manual spreadsheet, £) monthly balancing of
general ledgers, and g) a reconciliation of upward reports
with'other managerial reports.
24. Miscellaneous Other Controls
1) The ADP Office controls all user passwords for
the computer system and changes the passwords monthly. Pass-
words are needed to access the computer system and they are
linked to specific programs. Therefore, passwords assigned
to the Engineering Office will not allow access to COEMIS
programs. All passwords are randomly generated by the
computer.
2) Computer operators run COEMIS updates
according to the JCL entered by the Control Unit. If a tape
is required, the computer operators ensure that the proper
tape is used and loaded. Each tape also has a tape number
magnetically coded on it. If the magnetically coded tape
number does not match the number on the JCL, the programs
will not run. The computer operators also are required to
transmit data saves to tape as the system requires and key in
the tape number the file is to be saved on. This then becomes
part of the executed JCL report which is received and maintained
by the Control Unit.
3) The computer operators do a daily save
of the computer disk files to magnetic tape. Pursuant to
, these tapes are maintained for seven days.
There also is a complete master save done weekly which
is maintained for fourteen days. These saves are in addition
to the data file tapes maintained by the Control Unit. Ail
tape saves are stored at an alternate site.
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- 17 -
4) All COEMIS programs are under the control
of MACOM. Local districts/divisions may generate programs
that utilize the information stored in the data base, but they
are not allowed to generate programs that will alter the data
base. All changes to the COEMIS system are received in a
magnetic tape format along with a narrative of the program
changes and a basis for making the changes. When a new
program library tape (PLT) is received, the programmers at
that division office are responsible for linking the new
system into the JCL. Additionally, the first update under
a new PLT is always given additional checks for accuracy.
* 25. I have attached exhibits 1 through 20 as part
of this declaration. Exhibits \ through 18 are representative
samples of the documents which the Army Audit Agency (AAA)
obtained from the COE as part of AAA'3 review of the costs
incurred on behalf of RMA. These exhibits also represent
records or data compilations of the accounting activities
used by the COE to account for its funds. A duty is imposed
by law on the COE to accurately account for its funds
26. Exhibits 1 through 18 also represent records
or data compilations which were made at or near the time
by a COE employee or from information transmitted by a COE
employee with knowledge. These records or data compilations
are kept in the course of. the COE'3 regularly conducted
business activity and it was COE'a regular practice to make
the records or the data computations.
27. Unlike the above exhibits, I personally prepared
exhibit 19, a cost report, in order to summarize the major
costs incurred by the COE on behalf of RMA. I prepared
exhibit 19 by using microfiche of cost reports which set
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- 18 -
forth certain accounting activities of the COE. The microfiche
is a record or data compilation made at or near the tine by a
COE employee or from information transmitted by a COE employee
with knowledge. The microfiche also is kept in the course of
the COE's regularly conducted business activity and it was
the COE's regular practice to make the microfiche.
28. After generating Exhibit 19, I took the information
contained on it and fed the information into a personal computer.
By manipulating this pre-existing information I then was able
to generate Exhibit 20. Exhibit 20, A More Detailed Cost Breakdown,
identifies certain of the major costs incurred by technical
offices involved in performing work on behalf of RMA.
I declare under penalty of perjury that the foregoing
is true and correct to the best of my knowledge, information,
and belief.
Executed this day of , 1986.
LUCY A. HAAS
-------
Memorandum
DTB: JH: and
90-11-2-73
Sukpct
Legal Sufficency of the Certificates
Obtained by the Army Audit Agency
(AAA) in the Shell Litigation
D«c
October 29, 1986
To
Thomas Bick
Attorney, Environmental
Enforcement Section
From Joseph Hurley
Attorney, Environmental
Enforcement Section
BACKGROUND
As part of its Rocky reviews, AAA obtained cost documen-
tation from the comnands which had incurred costs in the Shell
litigation. AAA also obtained certificates using a preprinted
stamp which provided as follows:
I
ill
certify that the attached
(2)
page
document with text on front/front and back is a true, accurate,
and complete copy of (3) . the original file copy of which
was obtained at (4) . fFom (5) , the custodian of
the document on (6)
AAA would insert information in each of the numbered
spaces above. In reviewing samples of the certificates obtained,
however, we discovered that in the first s.pace AAA inserted the
signature of the auditor, of the custodian, or of both. In the
second space, AAA inserted the number of pages of the document.
AAA also identified whether the document contained information
on the front or whether it contained information on the front and
back. In the third space, AAA identified the document obtained and
in the fourth and fifth spaces, AAA identified the office and
person providing the document. In the sixth space, AAA inserted
the date the document was obtained. After inserting the information
above, in many cases AAA also had the person providing the document
sign his name and indicate his position.
DISCUSSION
The government needs to obtain proper certificates
in order to self-authenticate the cost documentation. Self-
authenticating documents simply means that the documents are
Attachment 8
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- 2 -
admissible without the need of witnesses identifying what the
documents are. In our case, countless witnesses otherwise would
be needed to identify the cost documentation. However, for documents
to be self-authenticating, we must satisfy the requirements of
Rule 902 of the Federal Rules of Evidence (FRE). ^/
Since AAA always obtained copies of records, Rule 902(4)
governs. 902(4) provides that extrinsic evidence is not necessary
to admit a copy of a record or report or of a document authorized
by law to be recorded or filed and actually recorded or filed
in a public office, including data compilations in any form, if
the copy is certified as correct by the custodian or other
person authorized to make the certification and if the certificate
complies with 902(1) or 902(2).
Rule 902(1) is not applicable since it involves documents
obtained from an office which has its own seal. Accordingly, Rule
902(2) must be consulted.
Rule 902(2) has a two step process which must be followed
to self authenticate documents. First, the document must bear
tne signature of an officer or employee of a department or
agency of the United States certifying as to its authenticity.
Second, there must be an additional certification from a public
officer within the district of the officer or employee that the
officer or employee signed in his official capacity and that
the signature is genuine. The public officer also must affix his
seal.
RECOMMENDATIONS
It is clear that the certificates obtained by AAA are
not self-authenticating. In the first Instance, the appropriate
person did not always certify as to the correctness. Similarly,
a second certification and seal were not obtained.
V Rule 44 the Rules of Civil Procedure also provides for
self-authentication. However, since that rule is more
restrictive, we have discussed self-authentication under the
FRS.
-------
- 3 -
To prevent future deficiencies, we recommend that
the following guidelines be implemented.
1 . First Certificate
AAA should use the- following certificate for the
offices providing the documents:
1 (1) am the (2) of (3)
I certify that the attached (4) page document with text
on front/front and back is a true, accurate and complete copy
of (5) This document, (6) , was prepared by
or for (7) , as authorized by law.
*
Signed this (8) of (9) 198(10) .
(11)
signature
The printed name of the individual providing the
document should be inserted in the first space. The-individual's
position, the name of command and the commands location should
be inserted in the secord and third spaces. The number of
pages of the document obtained should be inserted in the fourth
space, and the actual name of the document should be inserted
in the fifth space.
Different individuals may provide the documents and
the sixth space reflects this reality. If the individual
providing the documents is the custodian or deputy custodian,
the sixth space should read "of which I am the custodian" or*
"of which I am the deputy custodian", as appropriate. If
neither the custodian nor deputy custodian provides the documents,
the sixth space should read "of which I am authorized to
make copies which are maintained in the files of ."
The individual should Insert the name of his office in this last
space.
The name of the command should be inserted In the
seventh space and the day, month and year should be inserted
in spaces eight through ten. The individual providing the
documents then should sign in the eleventh space.
-------
2. Second Certificate
AAA also should obtain a second certificate which
should read as follows:
*-
1 (1) am the (2) of (3)
I have reviewed the signature on the above (4) page
document and certify that (5) . By virtue of his/her
duties (6) is in a position to know that the copy of
the document is genuine.
Signed this (7) day of (8)
198(9).
(10)
Signature
The printed name of the individual supplying the second
certificate should be inserted in the first space. The individual's
position, name of command and location of the command should be
inserted in spaces two and three respectively. The number of
pages of the document should be inserted in the fourth space.
If the person providing the second certificate does
not know the signature of the person providing the first certificate,
he should witness the first person's signature and insert in
the fifth space "the signature is genuine". Alternatively, if
he knows the signature of the person providing the first certificate,
he should insert in the fifth space "I know the signature of
(name of first individual) and believe the signature to be genuine."
The printed name of the person providing the first
certificate should be inserted in the sixth space. The day,
month and year should be inserted in spaces seven through nine.
The person providing the second certificate then should sign in
the tenth space and affix his seal.
-------
Memorandum
»:VH:Cp
•5-1*0
I
Svtpct °**t
Preservation of
July 31. 1986
ToDavid T. Buente r** Robert Van Heuvelen
Chief Assistant Chief
Environmental Enforcement Section Environmental Enforcement Section
Nancy Firestone /^xx-'
P'.p^r/ Accictc*:t Thief ^—""^
Environmental Enforcement Section
Summary and Recommendation
You asked me to review the proposal of the Executive
Office to commit to microfilm all copies of Division attorney
and paralegal timesheets. It is my opinion that we will not
be dlsadvantaged by having to use microfilm copies of timesheets
cost recovery litigation, provided that the copies are made
the regular course of business and that they are or can
oe properly authenticated.
Discussion , -
The Lands Division Executive Office has proposed copying
onto microfilm all Lands Division attorney and paralegal timesheets'
and* destroying the originals. V Notwithstanding the admonition of
rule 1002 of the Federal Rules~of Evidence (original required
V It seems an article of faith that a record of all Division
~ attorney time sheets needs to be preserved. While I realize
it may be-essential to preserve at least copies of EES professional
time sheets for CERCLA cost recovery actions, it is not clear
to me that this is something which needs to be done Division-wide.
If the other, or many of the other, sections do not require
historical records, the Division could further reduce its
time, space and resource investment.
Attachment 9
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• 2 -
to prove content of « writing)*/. I believe we can safely pursue
.he microfilming project and still preserve competent evidence for
furposes of attorneys fees litigation In Environmental Enforcement
ection cases.
The production of original documents rule is principally
aimed at securing the best obtainable evidence, not the original
at all costs. The key Is to safeguard the accuracy of a
document's contents and to assure its presentation in court.
McCorraick, Evidence, SS 237-242. To further these aims, a
number of Federal Rules of Evidence and provisions in U.S.
Code have been adopted.
28 U.S.C. S 1732 (record made in regular course
cf hjsineSS ohOtOPrPrMc COnipO nrovfHp* «*«
If any department or agency of government,
in the regular course of business or activity
has kept or recorded any memorandum, writing,
entry, print, representation or combination
thereof, of any act, transaction, occurrence,
or event, and in the regular course of
business has caused any or an ot the same
to be recorded, copied, or reproduced by
any photographic, photostatic, microfilm.
... photographic, or other process which
accurately reproduces or forms a durable
medium for so reproducing the original,
the original may be destroyed in the regular
course of business unless its preservation
is required by law. Such reproduction,
when satisfactorily identified, is as
admissible in evidence as the original
itself in any Judicial or administrative
proceeding whether the original is In
existence or not and an enlargement or
facsimile of such reproduction is likewise
admissible in evidence if the original
reproduction is in existence and available
for inspection under direction of court....
This subsection shall not be construed to
exclude from evidence any document or copy
thereof which is otherwise admissible
V Rule 1002 provides, "lt)o prove the content of a writing,
recording, or photograph, the original writing, recording,
or photograph is required, except as otherwise provided in
these rules or by Act of Congress, (emphasis supplied}.
-------
under Che rules of evidence, (emphasis
supplied)
In shore, this provision of law operates to effectively
authorize committing to microfilm the time sheets, provided
this is done in the regular course of business and the product ia
satisfactorily identified.
The phrase lfin the ordinary course of business" has
been interpreted to mean not in preparation for trial.
Toso Buss an v. American President Lines. 265 F.2d ( _ Cir. 1959).
While many records would not be retained but for an expectation
of future litigation, the records are to be preserved as part of
a forraal Division program, as opposed to for one particular lawsuit.
T'-t fec'Jtivt Office's approiCu aKt>«aia to frdLisfy tins requirement.
It is critical that the copying effort include measures to
insure effective document authentication. S 28 U.S.C. S 1733
(Government records and papers; copies) provides additional
guidance. It reads:
(b) Properly authenticated copies or trans-
cripts of any books, records, papers or
documents of any department or agency of
the United States shall be admitted in
evidence equally with the originals thereof.
While the simplest form of authentication is the testimony
of a witness who swears that he/she signed the docunent, or
that he/she saw another person sign the document, this is not always
necessary. It is generally held that business records may also
be authenticated by one familiar with the books of the agency,
such as a custodian or supervisor, who has not made the
record or seen it made, but can state that the offered writing
is actually part of the records of the business. McCorraick,
Evidence $219. This suggests that since the custodian of
the time records for the Executive Office is generally familiar
with both the procedures for keeping and copying the sheets
(and perhaps signatures as well), authenticity and identification
questions would be satisfactorily resolved with that person's
records and testimony. ^J
^J In any event, the Rules of Evidence suggest that the
burden is on the opponent of the copy to establish a question
as to authenticity. See Rule 1003 (Adroissibility of Duplicates)
of the Federal Rules of Evidence, which reads:
A duplicate is admissible to the same extent
as an original unless (1) a genuine question
is raised as to the authenticity of the original
or (2) in the circumstances It would be unfai'r
to admit the duplicate in lieu of the original.
-------
• • ' - 4 .
"~\ Final support for the position that original* can be
stroyed ia found in Federal Rules of Evidence, Rule 1005
vPublic Records). It reads:
The contents of an official record, or
of a document authorized to be recorded
or filed and actually recorded or
filed, including data compilations in
any fora, if otherwise admissible, nay
be proved by copy, certified as correct
in accordance with rule 902 or testified
to be correct by a witness who has
compared it with the original. If a
copy which complies with the foregoing
cannot be obtained by the exercise of
reasonable diligence, then other evidence
of the contents nay be given.
Rule 1005 suggests that a few other loose ends should be tied.
Time sheets are documents "bearing the signature in his
official capacity of an... employee of (the United States]..."
as those terras are used in Fed.R.Evid 902 (1) and (2).
Consequently, to certify che timesheets, a public officer
having a seal (presumably the custodian of time sheets, or a
supervisor of this employee) may certify under seal that the
Igner has the official capacity (i.e. is employee as an
torney or paralegal) and that the signature is genuine.
Conclusion
Microfilming of time sheets (and destruction of originals)
is clearly authorized. It is necessary, however, that the system
be set up so that the copied records can be properly authenticated
and identified.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D C 20460 OLEC
KAY 29 AM 10= 24
23
ADMINISTRATION
AND RESOURCES
MEMORANDUM ^ MANAGEMENT
SUBJECT: Sug£rf/yid Indiyec^cost Allocation Methodology
FROM:
TO: See Attached List
We are prepared to move forward in implementing the
Superfund indirect cost allocation system proposed by Ernst
and Whinney by October, 1984. Your assistance and cooperation
in this effort will be needed over the coming months in order
to accomplish this effort. Implementing an indirect cost
allocation system for establishing rates for hazardous waste
sites will contribute significantly to the Agency's success in
recovering costs under the Superfund Program.
In March, I sent you a copy of this proposed indirect cost
allocation methodology for your review and comments. The
comments received are representative of concerns and
uncertainties expressed by numerous organizations since we
started this initiative, I have attached a matrix which
contains these comments and our responses to them. I am
hopeful that our responses will remove the concerns and
uncertainties and pave'the way for Agency-wide acceptance and
support of the methodology.
I have also attached for your information and review an
outline of the approach followed in developing the methodology
and an agenda which charts the next steps that will be taken to
implement the process. Your support in completing several of
these steps is important and we welcome the opportunity to
discuss your views or perspective on how best to carry out
this agenda.
I an planning a meeting for mid June to brief you and
representatives of your staff on the overall concept of
indirect costing and benefits of the system. Ernst and Whinney
will be available to give an on-line demonstration of the cost
allocation process. The demonstration will walk you through
the steps of (1) identifying and collecting the statistical
and cost data from the Financial Management System for input
to the Cost System (2) inputting the data through a timeshare
-------
- 2 -
network and (3) calculating test rates by sites. This will
enable both the financial and program managers to fully
understand the indirect costing methodology and also see actual
results of the process. The June meeting will also provide an
opportunity for us to address any remaining concerns that you
might have.
If you have questions or want more information about the
implementation plan please do not hesitate to contact Joe
Dillon, Chief of•the Fiscal Policies and Procedures Branch, on
PTS 382-5113.
Attachments:
1. Comments Matrix
2. Agenda for Implementing the Methodology
-------
Addressee Lists for: Superfund Indirect CostAllocation Methodology
Lee M. Thomas
Assistant Administrator
for Solid Waste & Emergency Response
Gene A. Lucero, Director
Office of Waste Programs Enforcement
Courtney M. Price
Assistant Administrator
for Enforcement and Compliance Monitorinc
John C. Martin
Inspector General
Information copy of Comments Matrix and Agenda to Joe Menchaca,
Ernst & Whinney
-------
FINANCIAL MANAGEMENT OFFICERS
t
Chris O'Connor
Region I
Ron Gherardi
Region II
Robert. Rood
Region III
William McBride
Region IV
Richard Walker
Region V
Richard Kenyon
Region VI
William Meyers
Region VII
Alfred Vigil
Region VIII
William Arming
Region IX
Mildred Martin
Region X
Richard Ruhe
Cincinnati, Ohio
Donald Hathis .
Durham, N.C.
Alan Lewis
Las Vegas, Nevada
Robert Allwein
IP-Financial Management
-------
REGIONAL MANAGEMENT DIVISION DIRECTORS
ASSISTANT REGIONAL ADMINISTRATORS
Lewis F. Gitto
Director, Administrative Services Division
Region I
Boston, MA
Herb Barrack
Assistant Regional Administrator for Policy
and Management
Region II
New York, NY
Alvin Moms
Assistant Regional Administrator for Policy
and Management
Region III
PhiladeIphia, PA
Howard Zeller
Assistant Regional Administrator for Policy
and Management
Region IV
Atlanta, GA
Bob Springer
Director* Planning and Management Division
Region V
Chicago, ILL
John S. Fleeter
Assistant Regional Adninistrator for Management
Region VI
Dallas, TX
Susan Gordon
Assistant Regional Administrator for Policy
and Management
Region VII _--
Kansas City, MO __ •—
Jack W. Hoffbuhr, Acting
Assistant Regional Administrator for Policy
and Management
Region VIII
Denver, CO
-------
Charles Murray
Associate Regional Administrator for Policy
Technical and Resources Management
Region IX
San Francisco, CA
Nora McGee
Director, Management Division
Region X
Seattle, WA
-------
Superfund Indirect Cost
Allocation Methodology
Inplementation Phase
Task Descript ion
Milestones
Target Pate
Decision Point/Issue
1. Coordination and user
acceptance
0 Issue Agenda outlining course of actions to
implement the Indirect Cost Allocation
Methodology by October 1, 1984; along with
matrix addressing questions and concerns
regarding the methodology.
0 Evaluate Agency responses to Agenda.
0 Contractor Demonstration of on-line
application of cost allocation process.
5/21/B4
6/15/84
6/20/84
Meet with key personnel
at select Region to brief
on overall concept of in-
direct costing and benefit:
of the system, including
on-line demonstration of
data preparation, input
processing and calclulatia
of indirect rates by site.
-------
Task Description
Milestones
Target Date
Decision Point/Issue
Select and test ADP
system
Select system approach
5/25/84
Options include: 1) pur-
chase of existing "turnkey"
system; 2) time sharing on
E & W system; or 3) develop
tailored system.
0 Prepare procurement request and justification
to obtain: 1) systems option; 2) Contractor
support to provide training and consultation
in implementing the cost allocation system;
and 3) assistance in calculating prior years
(82, 83, 84) indirect cost rates by sites.
0 Make award for contractor support and purchase
of system.
0 Test allocation process on in-house hardware
operated hy trained EPA personnel.
5/25/84
7/15/84
8/10/84
3. Revise policy and
procedures
Issue for Agency comment draft EPA order
revising timekeeping procedures and reporting
requirements.
Issue revised policy guidance identifying the
type of costs that will be charged to the
Superfund appropriation and administrative
costs supporting CERCLA that may be charged to
S&E.
6/15/84
6/29/84
The charging of some Super-
fund administrative costs
against S&E is supported by
a formal Office of General
Counsel opinion.
Time reporting categorie
must be expanded to capture
data as follows (1) General
Superfund (2) General
Emergency Response (3)
Emergency Response Site-
Specific (4) General
Remedial (5) Remedial Sites
with no planned actions (6)
Remedial Site-Specific.
-------
Task Description
Milestones
Target Date
Decision Point/Issue
3. Revised policy and
procedures (con't)
* Issue policy guidance on the treatment of
facilities and capital equipment.
7/31/84
Issue final Agency timekeeping procedures.
7/31/84
* Review Agency timekeeping functions to insure
proper transition to new time reporting
procedures.
(8/5/84)
through
implementation
The revision to reporting
categories primarily impact
program levels and should t
coordinated at this level.
Cost Accounting Standards
requires that cost of cap-
ital items be allocated to
service units based on
usage data. The Agency
must determine if it is
effective to establish p:
cedures to collect usage
data in order for sites to
be charged for costs of
equipment and other capital
items.
Currently reviews are undetj
way to determine whether I
certain preliminary site |
costs should be captured a
site specific and extent t
which the costs may be in-
cluded in the allocation
process. This decision wi
not affect the actual
implementation of the
allocation methodology.
-3-
-------
Task Description^
Milestones
Target Date
Decision Point/Issue
4. Training and
orientation
0 Designate and train Agency personnel to
maintain and operate the system.
8/5/84
The allocation process wi
operate separate from FMS
and will be centrally
located at Headquarters it
the Financial Reports and
Analysis Branch. However
point of contact must be
established at each servii
ing finance center to ass
in ensuring data integrit
and updating the allocati
statistics as appropriate
-4-
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COMMENTS MATRIX
ON
PROPOSED INDIRECT COST ALJjOCATION METHODOLOGY
COMMENTING REGION
Region VII
COMMENT
RESPONSE
Cost effectiveness and dependability
have been attested to in both the
preamble and body of the report, but
what assurances do we have that the
dollar volume of successful cost
recovery action will increase with
the addition of total allocable in-
direct costs? If indirect costs are
used as a negotiable point in
settlement actions or if they are
excluded in judgment resulting front
litigations, we may have a very
sophisticated indirect cost account-
ing system that is of questionable
benefit.
The E&W Report does not adequately
compare existing indirect cost
allocation procedures (e.g. a
rudimentary FTE allocation bases)
with those proposed to arrive at an
anticipated net increase in
recoverable indirect costs.
Assuming totally successful cost
recovery under both circumstances
(existing and proposed), will the
additional recovered indirect costs
justify the expense of the expanded
indirect cost accounting system.
Previous studies indicated that projected Superfund
indirect costs are significant ($559 million through
1988), and estimated that cost recoveries between
$22.4 million and $447 million could be achieved
through cost allocation if a supportable indirect
system was implemented. In addition, OGC has stated
that these types of costs can be recovered from
responsible parties if a defensible allocation system
is in place. Other government agencies with indirect
cost allocation systems have been successful in re-
covering full costs front responsible parties. Although
we are implementing a sophisticated allocation plan, its
costs to EPA has been nominal in comparison to the
potential recovery that could result from its use. The
Ernst & Whinney proposed plan only cost the Agency
$56,000. Even as a negotiable point this cost is
justified, however, we feel confident that the system
will result in a significant amount of administrative
costs being recovered.
The existing cost allocation plans do not provide a
mechanism for distributing indirect cost rates to
the individual clean-up sites level. These plans were
designed for the specific purpose of charging a pro-
portionate share of the Agency's support cost to the
Superfund appropriation. Consequently, a methodology
has to be developed in order to distribute cost at the
individual site level. A very conservative recovery
rate of 4% through cost allocation would translate
into an additional $22.4 million in recovered costs
which would far exceed the cost of implementing and
maintaining the proposed allocation system.
— l —
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COMMENTS MATRIX
ON
PROPOSED INDIRECT COST ALLOCATION METHODOLOGY
COMMENTING REGION
COMMENT
RESPONSE
Resources requirements are not
adequately addressed in the Report.
The costs estimated for hardware and
software are not defined as total
costs per installation. Staff hours
are mentioned as those saved through
the development and use of system
interfaces, but staff hour needs are
not identified relative to a fully
operational system.
Specific resource requirements will depend upon the agency
selection of the ADP options open to it. The most
suitable options and their estimated costs are as follows:
Option
1. Timeshare on
EfiW system
2. Purchase existing
"turnkey" system
Estimated Costs
Purchase computer and
approximately 1 to 2 processing
runs per year with timesharing
costs of $2,000 per processing run
Purchase hardware and software
system @ $50,000 to $100,000
(This option will not be available
until 10-12 months)
The report differentiates between
budgetary accounting and cost account-
ing identifying the difference in
objectives. We agree that these
differences are important and every
effort should be made to insure that
the budgetary accounting process does
not become subordinate to the indirect
cost accounting process. We agree with
the recormendation to develop such a cost
allocation system separate from EPA's
current financial management system.
This system will run independent and separate from the
FMS. Estimated staff needs under either of the
above options would involve less than .2 FTEs to update,
maintain and run indirect rates at a central location
once per year.
The cost allocation system will be developed separate from
EPA's current FMS. It will operate as a stand-alone
system and have no impact on the current budgetary
accounting process.
-------
COMMENTS MATRIX
ON
PROPOSED INDIRECT COST ALLOCATION METHODOLOGY
COMMENTING REGION
Region VI
COMMENT
RESPONSE
The need to establish Indirect cost
rates at the site level, in support
of Superfund cost recoveries, is
inparative. The proposed adoption
of the cross allocation or multiple
apportionment method does in fact
appear to be the most thorough as well
as the most difficult method for
developing indirect costs. If
adopted, it is only logical that an
automated cross allocation system
must be developed to handle the
workload of the process.
One major accounting concern that exist
in this package is the possibility
to put the agency in violation of the
"Antideficiency Act", 31 U.S.C. The
definition of "Allocable Costs" as
cited on page 26, Attachment A of the
package is as follows:
The cross allocation apportionment method was determined
to be the most accurate and effective means of allocating
indirect costs to the site level. As noted in the report,
the method could be accomplished manually but the
drawbacks (including extensive staff time, risk of errors
etc.) virtually rule this option out.
We also recognize that a simpler and less precise
allocation (single-step down method) could be used in
developing indirect costs. However, given the
availablity of existing software for the more precise
method at a lesser cost, we recommended the more precise
method.
The OGC has ruled on this issue by advising that based
on the legislative history of CERCLA, sane Superfund
administrative costs could be charged against EPA's
Salaries and Expenses Appropriation (Operating funds).
However, policy must be in place which defines the
specific categories of Superfund administrative expenses
that will be charged against operating funds. Once
defined these categories cannot be shifted during a
reporting period to avoid a funding violation under the
Antideficiency Act. To this end, current Agency policy
will be refined to address this concern prior to
implementation of the Indirect Cost Methodology.
(continued on next page)
- 3 -
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COMMENTS MATRIX
ON
PROPOSTED INDIRECT COST ALLOCATION METHODOLOGY
COMMENTING REGION
COMMENT
RESPONSE
Allocable Costs are allowable exists
which he allocated to a particular
cost objective to the extent of
benefits received by such an
objective. Any cost allocable to
a particular cost objective may be
shifted to other cost objectives
to overcome fund deficiencies, to
avoid restrictions imposed by law,
or for other reasons.
If the cost recovery process was to
link indirect costs to appropriations
versus individual site by site re-
coveries, it is possible to charge
more obligations and expenditures to
the Superfund appropriation than
appropriated by Congress.
Another concern is the implication
that is expressed in Exhibit 2
(page 17 of the package) that an
estimated 998 Regional employees
currently keeping timesheets will
benefit from the new system, through
their exemption from Superfund
timekeeping requirements. While
possibly true in theory, the real
impact will be minimal as Regional
program staff (Superfund program/
This comment is correct in that all individuals that work
on a site-specific activity will be required to report
their time on time sheets. However, the reduction in
overall regional timekeeping requintents is measured in
terms of the equivalent number of PTE's that would not
need to maintain tijnesheets to determine indirect costs
rates at the site level for cost recovery purposes. The
impact relates primarily to the large number of non
programmatic personnel (i.e., Financial Management, Office
of Personnel, Procurement, etc.) who charge tune to
Superfund non site-specific activity.
(continued on next page)
4 -
-------
COMMENTS MATRIX
ON
PROPOSED INDIRECT COST ALLOCATION METHODOLOGY
COMMENTING REGION
COMMENT
RESPONSE
Region III
organization units) and any individual,
regardless of Office, who works on a
site will continue to maintain Super-
fund time sheets on a perpetual basis.
The recommendation to reduce the
number of organizations subject to
time sheets maintenance to those which
directly support Superfund is good.
Also, the proposal to create four new
Superfund account categories for non-
site specific activities is supported
by the Region. Other ESW proposals
related to timekeeping are also
acceptable.
The current Superfund cost accounting
mechanism permits the direct charging
of personnel, travel, and contracts to
specific sites as appropriate. As of
December 31, 1983, these expense
categories account for 98% of all
charges to Superfund. Therefore, the
complex E&W plan for allocating in-
direct support costs to sites would
involve increased cost accounting
efficiencies related to only 2% of
total Superfund expenditures. A cost/
benefit analysis should be applied to
the E&W allocation proposal.
We agree, and are developing for Agency review revisions
to the timekeeping procedures and reporting requirements
which incorporate these recommendations*
Current policy not only permits, but requires, the direct
charging of costs to sites when the costs are site-
specific in nature; however there is no system in place to
charge indirect costs to sites. As of December 31, 1983,
FMS records show that only 15.4% of the total regional
Superfund obligations were site specific. This
low ratio of site specific costs can be attributed to non-
ccnpliance and deficiencies in capturing site-specific
costs. Even after corrective action is taken and
full compliance achieved, however, the percentage of
recoverable indirect costs will be significantly greater
than 2%. As previously stated prior feasibility studies
have determined that there is a cost effective basis
for EPA going forward with the development of a cost
allocation system for Superfund.
- 5 -
-------
COMMENTING REGION
COMMENTS MATRIX
ON
PROPOSED INDIRECT COST ALLOCATION METHODOLOGY
COMMENT
The E&W proposal to capitalize all
major equipment and amortize over 16
years is unsupportable based on cost
versus benefit. The maintenance of
hourly use records on a piece of
major equipment in order to allocate
1/16 of its cost to sites would mean
to go beyond the spirit and intent of
the CERCLA.
The E&W recommended method of computa-
tion of expenses allocation to specific
sites called "cross allocation or
multiple apportionment" is neither
clearly explained or mathematically
defined in the proposal.
RESPONSE
E&W reconnend data ret rived and
input for the proposed automated
allocation system be centralized to
insure consistency. We assume
centralized to mean in Headquarters.
However, since the majority of raw
data originates in the Regions,
collection problems would arise.
E&W proposed these changes because cost accounting
standards dictate such an allocation method. The study
further states on Page 19 that costs for capital equip-
ment have been excluded front the allocation process
except where allocated or charged by means of a usage
measurement. Unless the Agency starts distributing or
determining equipment charges based on usage measurement
all equipment charges must be excluded in calculating
indirect rates for cost recovery. This is a policy
issue that must be resolved.
The mathematical computation of indirect rates through t
cross allocation is fairly complex and aa result, will t
accomplished by an existing computer application. We fe
that a detailed discussion of the rate calculation tech*
nique would be of little use, in fact confusing, to the
reader in assessing the merit of the overall concept of
indirect cost allocation methodology. The method is
fully documented in other publications and will be made
available upon request. In addition, we plan on
conducting a meeting in early June to provide a detailec
explanation on the methodology.
With the exception of the number of press releases issue
the existing raw data required in this system, which
originates in the Regions, is now being entered into the
FMS. Under the proposed allocation system this data
which exists in the FMS will be extracted for input into
the cost allocation system. Therefore, any additional
effort to develop required cost or statistical data will
be minimal.
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Status
Superfund Indirect Cost
Allocation Methodology
ANALYSIS PHASE
DESIGN PHASE
IMPLEMENTATION PHASE
• Identify Agency Need
0 Define Requirements
0 Concept Formulation
0 Feasibility Analysis
0 Management Approval
X
X
0 Develop Allocation Methodology X
& General System Design
0 Identify Allocation Bases X
0 Obtain Management Approval X
of Methodology
0 Identify available ADP Options X
0 Obtain Management Approval of *
Implementation Plan
0 Announce Agenda for Implementing*
Indirct Cost Allocation Methodology
0 Coordination and User Acceptance*
0 Select and Test ADP Systems
0 Revise Policy and Procedures
Training and Orientation
*
*
Steps Completed (X)
In Progress (*)
-------
*
\
I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D C 20460
5 IS35
r, r-f>
I
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Prop^qures for Qla.imXnJg Indirect Costs in CERCLA
107 Act:
FROM r
Comptrollei
TO: Deputy Regional Administrators
The purpose of this memorandum is to provide guidance
and advance notice of the implementation of procedures for
claiming indirect costs in CERCLA Section 107 cost recovery
actions. It is the opinion of EPA's General Counsel and the
Department of Justice that the Agency's indirect costs are
recoverable from responsible parties. To this end, we have
been working to design and implement an Indirect Cost Allo-
cation System to distribute the Agency's program support
costs to individual Superfund sites.
The system that we are implementing was designed by the
accounting firm of Ernst & Whinney. This system takes Agency
personnel and program overhead costs such as employee super-
vision and fringe benefits, program management, administra-
tive support, rent, utilities, telephone and other indirect
costs and allocates them to the various Agency programs.
The portion allocated to Superfund is then allocated to spe-
cific sites based on direct EPA hours spent on that site.
At the Department of Justice's (DCJ) request, we are
preparing a "stand-alone document" that will allow a skilled
accountant to understand the details of the Ernst & Whinney
allocati9n process. It is DOJ's opinion that such a document
will have the following benefits.
It will:
Frequently avoid the necessity for defending
depositions on the subject;
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-2-
Provide a starting point for internal audits;
and,
Provide a written institutional knowledge for
purposes of up-dating and defending the
process in litigation.
We have calculated the indirect cost rates for FY 1983
and ara preparing the rates for FY 1984. We will be issuing
the FY 1983 rates and the "stand alone document" once the
document has been approved by DOJ. FY 1984 and provisional
FY 1985 rates will follow shortly thereafter.
The actual calculation of indirect cost allocable to
a site is rather simple. First, the documented hours of
Regional employees need to be separated by fiscal year since
tnere will be a different rate for each year. Once this is
done, multiplication of the appropriate rate times the hours
will result in the appropriate indirect costs. This compu-
tation should be performed by the individual or team respon-
sible for combining the Headquarters and regional cost
packages.
I suggest that the calculation and inclusion of in-
direct costs in the cost recovery claim be one of the last
functions performed in putting the cost package together.
This will avoid any recalculations caused if hours reflected
in the Agency's Financial Management System need to be
adjusted.
These procedures are not complex and the calculation
is straightforward. However, it is important that the
responsible personnel be identified and informed of these
responsibilities so that indirect costs can be incorporated
once the rates are available.
If you have any questions on the system or these pro-
cedures, please call Stan Fredericks on 382-5143.
cc: Courtney Price, AA/OECM
Gerald Yamada, General Counsel
Jack McGraw, AA/OSWER , . ,
John Martin, Inspector General
Fred Stiehl, Associate Enforcenre t Counsel
Lee DeHihns, Associate General Counsel
Gene Lucero, Director, OWPE
William Hedeman, Director, OERR
Assistant Regional Administrators
Regional Management Division Directors
Regional Air & Waste Management Division Directors
Regional Counsels
Regional Financial Management Officers
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY QLE€
WASHINGTON. D C 20460
1=35 KAY 10 FM k' tf
MAY 9 1933
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
Mr. George D. Lawrence, Jr.
Assistant Chief
Environmental Enforcement Section
U.S. Department of Justice »
Washington, D.C. 20530
Dear Mr. Lawrence:
Enclosed is our "stand-alone" document that describes
how EPA allocates the indirect costs its organizations
incur in supporting Superfund activities.. I believe this
document will serve the purposes outlined in your letter
to Gene Lucero of February 27, 1985. However, I would
appreciate receiving your comments on it prior to our
issuing it to our Regional Counsels.
If you have any questions, please call Stan Fredericks
on 382-5143.
Since,
C. Morgart King horn
Comptroller
Enclosure
cc: Gene Lucero, Director
Office of Waste Programs Enforcement
Frederick Stiehl, Associate Enforcement Counsel
Hazardous Waste Enforcement
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
STAND-ALONE DOCUMENT
FOR ALLOCATING INDIRECT COSTS
TO SUPERFUND SITES
MAY 1985
-------
INTRODUCTION
The Environmental Protection Agency contracted with the inter-
national accounting firm of Ernst and Whinney to develop the most
accurate method for allocating the indirect costs that EPA organiza-
tions incur in providing support to Superfund sites. Before dis-
cussing the allocation system, this document presents background
information on financial management at EPA. It also contains two
attachments. Attachment A outlines the support provided by Head-
quarters and regional organizations and explains how we allocated
their indirect costs. Attachment B presents three tables showing
how dollars are tracked through the allocation system.
FINANCIAL MANAGEMENT AT EPA
Appropriation Structure
EPA's funding generally falls into appropriations for Salar-
ies and Expenses, Research and Development, Abatement and Control,
Construction Grants, and Superfund. Administrative costs that are
allowable for allocation—i.e., costs that sup'port Superfund—
are expended from EPA's appropriations for Salaries and Expenses
and for Superfund. Therefore, only those two appropriations serve
as the base for collecting allocable cost data. Within those
appropriations, costs specifically excluded from allocation are:
(1) capital costs, which are considered investments, rather than
single-year operating expenses; (2) site-specific costs, to preclude
double collection in cost-recovery actions; and (3) Superfund con-
tracts that pertain to site-specific work and that are not yet
identified site specifically in EPA's Financial Management System.
Account Number Structure*
EPA uses a 10-digit account number, which is the primary link
between the organizational structure and the program budget struc-
ture. The account number allows identification of fiscal year,
program element, allowance holder, responsibility center, Superfund
activity code, and Superfund site number for every transaction.
Allowance holders are responsible for the daily management
of EPA resources. They include the Administrator, Assistant Admin-
istrators, and Regional Administrators. This responsibility is
further delegated to responsibility centers (RCs), which are usually
at the division level.
For purposes of this cost allocation-, the most detailed
organization level used in the account numbering system is the
division level. This allows for simplicity in data retrieval
because RC-level data generally equate with division-level
organizations. In a few cases, the Agency has had to g'o to the
program-element level to separate costs for some organizations.
However, this has been kept to a minimum to avoid cumbersome
techniques of data collection.
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-2-
Financial Management System
EPA financial data are processed through the Parklawn com-
puter facility of the Department of Health and Human Services in
Rockville, Maryland. EPA's Financial Management System functions
entirely through this facility but interfaces with other applica-
tions both inside and outside EPA. The Financial Management
Offices at EPA headquarters and in the regions are tied directly
into the computer facility by telephone links from terminals or
minicomputers at each location.
For internal control and efficient processing, a separate
master file is established for each accounting office. Each
file contains cumulative commitment, obligation, and disbursement
data. Detailed transactions for all costs except payroll are
separately entered by each regional Financial Management Office
and serve as monthly input to a single general-ledger master
file under central control. Payroll is centrally processed and
subsequently distributed to each accounting office file after
Headquarters updates its file. All files are consolidated monthly
for the production of agency-level general-ledger and internal
reports.
SYSTEM FOR ALLOCATING INDIRECT COSTS
> ~~
Principles Underlying the Allocation System
Following are some of the generally accepted cost-accounting
principles that guided development of this method.
0 Costs may only be allocated to the specific beneficiaries
that receive the support services.
0 An allocation must be based on an available statistic—that
is, it must be distributed on a basis that apportions cost
in relation to the level of service rendered. If other
available allocation bases are not proportional to service,
direct labor documented through actual timekeeping may be
used.
0 Data by which costs are allocated, and the costs themselves,
must be accurate and supportable.
0 Where dissimilar functions are in a single organizational
unit, and cost or statistical data cannot be separated out,
the statistic selected for the allocation basis should be
one that is expected to result in the least material
deviation from what might have been the case had the
functions been separable.
-------
0 To the extent possible, allocations should be made to
organizational units, rather than to programs.
0 A conservative approach should be adopted when clear-cut
options are not available due to organizational structure
or data availability,
Generally Accepted Allocation Methods
Some methods of allocation are more thorough than others.
Three basic methods exist, each progressively more accurate, but
each progressively more complex. These methods consist of (1)
one-step, or direct, allocation; (2) sequential, or step-down,
allocation; and (3) cross allocation, or multiple apportionment.
For reasons of practicality and accuracy, the EPA allocation
system follows the third method.
One-Step, or Direct, Allocation
Under one-step, or direct, allocation, t^e costs of
a support department, or indirect-service center, are allocated
directly to the departments that receive support. While this
is the simplest method, it is the least thorough. For example,
it does not recognize the interdependence among support
departments. In the, case of EPA Superfund sites—the final cost
objective—only support units directly working with either the
Superfund program or the sites themselves would be included
under this method. The services of units within the Office of
Administration, for example, would be excluded, since their
costs could not be allocated to the site level. Multiple iterations
of the allocation calculation would be required.
Sequential, or Step-Down, Allocation
j
Sequential, or step-down, allocation recognizes that some
support departments provide services for other support departments.
This process begins by allocating the cost of the support depart-
ment providing the most universally used services. It then
allocates the cost of the support department providing the next
most widely used services, and so on. While this method is more
thorough than direct allocation/ it still severely limits
the recognition of the interdependence between departments because
costs of lower-level support departments are not allocated
to higher-level departments.
Cross Allocation, or Multiple Apportionment
Cross allocation, or multiple apportionment, is the most
thorough method of developing indirect costs. Each department
is charged for a portion of the costs of each of the other depart-
ments from which it receives support. Multiple steps or iterations
of the cross-allocation process are required to arrive at an
accurate distribution.
-------
This interdependence is graphically depicted in Exhibit 1.
In this example, the Comptroller provides support to Data Process-
ing, but the support is mutual. Both of those departments, in turn,
separately support both the Assistant Administrator for the Office
of Solid Waste and Emergency Response and the Office of Emergency
and Remedial Response. The AA subsequently supports OERR. The
result is a network of cost allocation, which accurately reflects
the nature of interdependence among these organizational units.
Neither one-step nor sequential allocation is capable of re-
flecting the complexity of EPA's organizational interrelationships.
A significant degree of accuracy, and a commensurately significant
amount of cost, would be sacrificed unless cross allocation were
used. Accordingly, this method was implemented. \
Implementation of Cross Allocation
Ernst & Whinney studied all of EPA's organizations for in-
direct service relationships to other organizational units, the
Superfund program, and Superfund sites. This study produced alloca-
tion bases that best detailed the measure of support provided to
organizations and programs. When the best available measure of
support required costs to be allocated to programs (Superfund v.
other programs) instead of organizational units, Superfund and
non-Superfund cost pools were formed, and the Superfund pools were
allocated in a later stage. '
Because the computer's software capacity was insufficient for
a single run, Ernst & Whinney proposed a three-stage (or three-run)
system to track the allocation of indirect costs. The first stage
allocates the cost of Headquarters support organizations to
Headquarters Assistant Administrators and Regional Administrators.
The second stage allocates the support costs of the Headquarters
Assistant Administrators to their subordinate levels, and those
of the Regional Administrators and regional support organizations
to regional program organizations. The final stage, which because
of its size is also broken into three parts, allocates the
costs of the Headquarters subordinate organizations and regional
program divisions to Superfund sites. (Attachment A shows which
organizational support costs were allocated in each stage and the
bases used for allocating them.)
The EPA cross-allocation method uses Ernst & Whinney1s auto-
mated cross-allocation software on a time-sharing network. This
software calls for such information as organization names, alloca-
tion bases, allocation statistics that define recipients for all
allocation bases used, and support organizations' costs to be
allocated. With two exceptions, all required statistics and cost
data are compiled from the data base of EPA's Financial Management
System. (Press release statistics are manually counted by the
various public affairs offices and provided to the Financial Manage-
ment Division. Central Processing Unit data, which measure EPA
computer usage, are provided by EPA's National Computer Center at
Research Triangle Park, North Carolina). Therefore, all statistics
on which the allocation is based are supported by official Agency
records.
-------
-5-
EXHIBIT 1
EXAMPLE OF SUPPORT DEPARTMENT
INTERDEPENDENCE
OFFICE
OF THE
COMPTROLLER
AA FOR SOLID
WASTE AND
EMERGENCY
RESPONSE
OMISS
DATA
PROCESSING
OERR
-------
ATTACHMENT A
SUPPORT ORGANIZATIONS AND THEIR ALLOCATION BASES
This attachment briefly describes the Headquarters and
regional support organizations, their responsibilities, and the
bases used for allocating their indirect costs.
Headquarters Support Organizations and Cost Pools
The Headquarters organizations are grouped by stage and appear
in the order in which they are listed in Table 1 of Attachment B.
STAGE 1
Immediate Office of the Administrator. The Administrator is
responsible to the President for the supervision and direction
of all programs and activities of the Agency. Because the
Administrator's office lends support throughout the regions
and Headquarters, its support costs are allocated on the basis
of Agency full-time equivalents (FTEs). A full-time equivalent
is equal to the work of one full-time employee.
Headquarters Public Affairs Office. This office responds to
queries from the media on all EPA program activities. The best
measure of the support it provides is the number of press
releases it issues. Press releases are categorized as "Superfund"
or "Other Programs" because it is usually impossible to identify
the benefiting organizations because of the high degree of program
interdependence.
0ffice of Civil Rights. In accordance with applicable Civil
Rights Acts, Executive Orders, and implementing directives,
this office provides guidance on program policy and activities
to ensure equal opportunity and to prohibit discrimination in
employment in EPA. Agency FTEs are the best measure of support
that this office provides to other EPA organizations.
Office of Small and Disadvantaged^Busji/iess Utilization. This
office develops policy and procedures that implement the Small
Business Act. By enhancing the involvement of small and minority
businesses in EPA business, this office supports the Agency's
overall procurement process. ^The number of grants and contracts
issued for each organization is the best measure of support' this
office provides.
Office of Legislative Analysis. Serving in the capacity of
legislative counsel, this office is responsible for legislative
drafting and liaison activities relating to the Agency's programs.
Its costs are not allocable because government cost-accounting
principles specifically exclude costs of legislative activity
from allocation.
-------
A-2 Attachment A
Office of International Activities* This office develops
policies and procedures for directing the Agency's international
programs and activities. Because the costs of these activities
are not necessary for or incidental to the implementation of
the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA, known as the Superfund program), they are
not allocable.
Office of Federal Activities. This office serves as National
Program Manager for carrying out the responsibilities of
section 309 of the Clean Air Act, Section 404 of the Clean Water
Act, the National Environmental Act, and other acts. However,
because its responsibilities are not yet related directly to
CERCLA, its support costs are not allocable at this time.
Office of Administrative Law Judges. This office presides over
administrative disputes between Agency and non-Agency parties
and conducts formal hearings in accordance with the Administrative
Procedures Act. Because the costs of these, activities are not
necessary for or incidental to implementation of CERCLA, they are
not allocable.
Science Advisory Board. The board advises EPA management on
broad scientific, technical, and policy matters? assesses the
results of specific research efforts; assists in identifying
emerging environmental problems; and advises the Administrator
on the cohesiveness and currency of the Agency's scientific pro-
grams. Because the costs of these activities are not necessary
for or incidental to implementation of CERCLA, they are not
allocable.
Office of Intergovernmental Liaison. This office is the principal
point of contact with public-interest groups representing state
and local governments. It is also the principal source of advice
and information for the Administrator on intergovernmental relations,
Although it supports all Agency programs and activities, each
region has a similar office performing this function on a regional
level. Thus, the support costs of this office are allocated on
the basis of nonregional FTEs.
Office of the Inspector General. The Inspector General {IG)
assumes overall responsibility for audits and investigations
relating to programs and operations of EPA. It provides leadership
and coordination in this area and recommends policies for other
Agency activities designed to promote economy and efficiency and
to prevent and detect fraud and abuse. Cost-accounting literature
proposes allocating auditing and legal costs on the basis of
direct labor. The IG's costs are not billed to EPA organizations,
but they are identifiable to the extent they support the Superfund
program v. other programs. Hence, the basis used to allocate
those costs is how the IG charges its time to individual programs.
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A-3 Attachment A
~Irnrnedlate Office of Aditi11. n. iLs^t.rat ion. This office oversees the
development and conduct of programs for personnel policies,
procedures, and operations; organization and management systems,
control, and services; facilities property and space management;
personnel and property security; policies, procedures, and oper-
ations related to procurement through grants, contracts, and
interagency agreements; and occupational health and safety. Be-
cause this office provides guidance and support to its subordinate
organizations, its costs are allocated to them based on their FTEs,
Office of Adrnj^nistration - Cincinnati,Ohio (OA-Cinc). This
office provides and administers personnel, procurement, safety,
security, property, supplies, printing, distribution, facilities,
and other administrative service programs both at Cincinnati and
at other specified locations outside the purview of the Regional
Administrators. It is one of four organizations and one cost
pool that provide facilities and personnel support to nonregional
organizations. The other organizations are the Office of
Administration at Research-Triangle Park, N.C., the Facilities
and Support Services Division, and the Personnel Management
Division. The cost pool is the Headquarters Support and Services
cost pool.
The recipients of the support provided by each one of these
orgainzations are not identifiable within the Agency's account
structure. However, recipients of the nonregional support they
provide as a group are identifiable. Thus, for each of the five
organizations, we used the same nonregional FTE statistic. This
results in the least deviation from what would have been allocated
had each organization's recipients been individually identifiable.
OffjLce_ of Administration - Research Triangle Park, N.C. This
office provides support similar to that of OA-Cinc., above.
Office of Personnel and Organization. This office manages policy
development and operations in its three subordinate divisions: the
Personnel Management Division, the Management and Organization
Division, and the Occupational Health and Safety Staff. Its
support costs are best allocated to these divisions on the basis
of their FTE usage.
pjcclij>ational Health and Safety Staff. This group develops and
conducts comprehensive occupational health and safety programs
Agencywide. Thus, its support costs are allocated using Agency
FTEs.
Personnel Management Division. This division plans, develops,
implements, and administers Agency personnel programs in support
of the Agency's function and mission. However, the major portion
of its costs relate specifically to operation of the Headquarters
Personnel Office. In that regard, it provides a part of the
nonregional support discussed in the narrative for OA-Cinc.
This office's indirect costs are thus allocated on the basis of
nonregional FTEs.
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A-4 Attachment A
Management and Organization Division. This office designs and
promotes, on an Agencywide basxsr improved principles, standards,
policies, and procedures governing overall organization and
management systems. Its support is best measured by Agency FTEs.
Office ofFiscal and Contracts Management. This office manages
the recurring functions of financial management, grants admini-
stration, and contracting and procurement. The best measure
of the support it provides to its subordinate divisions that
perform these functions is their FTEs.
Procurement and Contracts Management Division. This division
develops, conducts, and coordinates the Agency's contracts manage-
ment program. Although the number of contracts charged to Agency
organizations is a good allocation basis, there is a better basis
because of the way the division is organized. Its work is separa-
ted into Superfund contracts and contracts for other programs. A
group of employees work only on Superfund contracts and charge
their time accordingly. Therefore, the FTE charges to Superfund
directly measure the Superfund support this division provides.
Financial Management Division. This division establishes fiscal
policies and procedures, develops and implements financial infor-
mation systems, directs the Agency's overall financial reporting
operations, and develops Agencywide accounting and fiscal services.
Because it serves the entire Agency, the beneficiaries of its
support are best identified by Agency FTE usage.
Grants Administration Division. This division develops and dis-
seminates policy and regulations for grants. It provides con-
tinuing monitoring, analysis, evaluation, and reporting on grant
program activities, and it manages the application and award
process for the grant programs administered by Headquarters.
The best measure of the support it provides is the number of
grant transactions it processes for each organization.
Office of Management Information and Support Services - Immediate
Office. This office manages its subordinate divisions, which
maintain the Agency's library system, data systems, and facilities.
Its support costs are allocated to its subordinate divisions, based
on their FTE usage,
Buildings and Facilities. Building and Facilities, Nationwide
Support and Services, and Headquarters Support and Services are cost
pools for facilities maintenance and support. They are segregated
for allocating their different types of costs to the different
recipients of their support. Of these three cost pools, buildings
and facilities costs were not allocated because they represent
current-year capital outlays. We anticipate allocating a portion
of these costs in the future when EPA begins calculations of
annual depreciation charges.
Nationwide Support andServices. Because of the nationwide
nature of these support services, their costs are best allocated
using Agency FTEs.
-------
A-5 Attachment A
Headquarters Support and Services. These costs are allocated on
the nonregional FTE statistic because they provide a part of the
nonregional support discussed earlier in the narrative for OA-Cinc,
*
Facilities and Support Services Division. This office develops
and coordinates programs relating to facility repairs and improve-
ments/ preventive maintenance, property and supply management,
printing, distribution, and other general services. It has re-
gio"nal counterparts, and its support is generally nonregional,
as described in the narrative for OA-Cinc. For these reasons,
its indirect costs are allocated on the basis of nonregional FTEs.
Headquarters Library Management and Support. This staff is
responsible for maintaining an Agency library system in support
of the Agency's mission. Because of'its Agencywide responsi-
bilities, Agency FTEs are the basis for allocating its indirect
costs.
Training. This cost pool is separated from the costs of the
Personnel Management Division because these training costs support
the Agency as a whole and require Agency FTEs as the allocation
basis.
Management Information and Data S_ystems Division. This division
manages both information systems and computers in EPA. The Agency
measures each organization'p use of computer time according to
its use of central processing units (CPUs). Therefore, CPUs are
the best measure of computer usage throughout the Agency and are
used as the basis for allocating these support costs.
Immediate Office of the Assistant^Administrator for Policy
and Resource Management. This office directly supports the
offices that perform the functions for which it is responsible.
Therefore, its support costs are allocated according to the FTE
use of those subordinate offices.
Office of the Comptroller. This office designs and oversees the
entire resource management process. It develops the Agency's
budget guidance; assists program and regional offices in formu-
lating, reviewing, and modifying workload analysis models; and
develops and disseminates a wide range of budget policy deter-
minations to support budget implementation and planning needs.
This office also manages all funds and provides all resource
data, analysis, and reports required or requested by Agency
officials, other federal agencies, OMB, and the Congress. Be-
cause its support is Agencywide, its indirect costs are allocated
on the basis of Agency FTEs.
Office of Policy Analysis. This office performs economic evalua-
tions of the Agency's programs, policies, standards, and regula-
tions on an Agencywide basis. As this type of evaluation is
connected more closely to programs than organizations, the best
measure of the support this office provides to the Superfund
program is how its employees charge their time to the Superfund
program v. other programs.
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A-6 Attachment A
Q.f f ic_e__o_f S tandards and Regulations . This office manages and
evaluates the Agency's process for developing standards, regula-
tions, and guidelines mandated by law. its support is best allo-
cated on the basis of the FTE use of the programs under the
Assistant Administrators (Air, Water, Toxic Substances and Pesti-
cides, and Solid Waste and Emergency Response) .
**
Office of Management Systems and Evaluation. This office directs
and coordinates the development, implementation, and administration
of Agencywide systems for planning, tracking, and evaluating the
accomplishments of Agency programs. Therefore, its support costs
are allocated on the basis of Agency FTEs.
Assistant Administrator for Legal and Enforcement Counsel and
General CounseJ.. This office directly supports its subordinate
,0 ^enforcement and general counsel organizations. Thus, its support
'^s are allocated on the basis of the FTE use of those organiza-
Office of General Counsel. This office provides legal counsel and
litigation support to all of the Agency's programs and activities.
Cost-accounting literature proposes allocating legal costs on
the basis of direct labor. While the Office of General Counsel's
costs are not billed to Agency organizations, they are charged
to the Superfund program when appropriate. Therefore, the best
measure of support this office provides are the FTEs that are
charged to Superfund v. other programs.
National Enforcement Investigation Center (NEIC). This center
serves as the principal source of technical expertise and point
of coordination for complex technical investigation and support
having national impact on EPA and state regulatory programs.
It has a system that allocates its support costs to the Superfund
appropriation. Because the actual dollar charges to NEIC accounts
accurately reflect NEIC support of the Superfund program, actual
dollars charged to Superfund v. other programs is the allocation
basis.
Regional Counsels. Counsels in each of the Agency's ten regional
offices operate as a component of the Office of Legal and Enforce-
ment Counsel and General Counsel. They serve as attorney-advisers
to the Regional Administrators and their program and administrative
staffs. As directed by cost-accounting literature and principles,
and like the costs of other legal offices in this allocation sys-
tem, costs of the support the regional counsels provide are allo-
cated by direct labor charged to Superfund v. other programs.
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A-7 Attachment A
STAGE 2
Assistant Administrator for the Office of SolidWaste and Emer-
gency Response^ (AA/OSWER). This office manages the subordinate
organizations that perform its responsibilities. Those duties
include^developing and evaluating program policies, developing
hazardous waste standards and regulations, ensuring compliance
with applicable laws and regulations, and conducting long-term
strategic planning and special studies. This office's costs are
allocated according to the FTE use of its subordinate organizations.
Office of Emergency and Remedial Response (OERR). This office
manages the subordinate organizations that perform its responsi-
bilities. Those duties include developing strategies, programs,
technical policies, regulations, and guidelines for controlling
hazardous waste sites and for responding to and preventing spills
of oil and hazardous substances. The office also guides and
supports Environmental Response Teams. Its support costs are
allocated according to the FTE use of its subordinate organizations.
Office of Policy and Program Management (OPPM). This office
provides staff support to OERR program divisions. Its costs are
allocated to those divisions on the basis of their FTE usage.
Headquarters Allocations—OSWER. These cost pools are formed from
the costs allocated in Stage 1. These costs are further allocated
on the same basis as used above (AA/OSWER, OERR, and OPPM). To
provide a clear audit trail, we have allocated them separately
from the above costs.
STAGE 3
Officeof Waste Programs Enforcement. This office develops
objectives, strategies, programs, evaluation criteria, and com-
pliance monitoring standards designed to control solid and
hazardous waste problems affecting the environment. It also
manages and carries out the Agency's enforcement activities in
this area. This office employs legal and technical people who
charge their time to Superfund as appropriate. Thus, its support
costs are allocated according to the FTE charges to Superfund v.
other programs.
Emergency Response Division. This office develops national policy,
regulations, and guidelines for regional offices and other author-
ities concerned with developing and administering programs to
prevent discharges of oil and hazardous substances. It responds
to emergencies involving the release of oil and designated hazardous
substances. It is also the focal point for regional contact during
environmental emergencies. The best measure of the support it
provides is its FTE charges to Superfund v. other programs.
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Attachment A
A-8
Hazardous Site Control Division. This office ensures that
effective discovery, investigation, containment, and control
(i.e., nonenforcement) programs are developed and implemented
to solve problems resulting from uncontrolled waste sites. It
develops the National Contingency Plan for uncontrolled hazardous
waste sites'and maintains the National Priority List of hazardous
waste sites. Because it totally supports Superfund and the waste
sites, its costs are allocated based on how all regional program
offices charged their time to sites and to Superfund in general.
Hazardous Response Support Division. This division provides
three distinct types of services: (1) an on-scene Emergency
Response Team providing technical expertise for field activities;
(2) a comprehensive program of collecting, processing, and dis-
seminating technical information on all aspects of the program;
and (3) common technical support services, such as sample analysis,
contract program liaison, contract administration, safety training,
and waste disposal. Again, FTE charges represent the best measure
of Superfund support v. other program support .^
Regional Support Organizations
EPA's ten regions perform similar activities and are generally
organized according to a standard regional structure. However,
because some Regional Administrators have tailored their organiza-
tional and financial structures according the the needs of their
regions, the methods used to allocate their support costs vary.
Following are sections explaining the standard organizational
structure in the regions, the standard concepts used for allocating
regional costs, the allocations common to all the regions, and
the specific allocations used by each region.
STANDARD REGIONAL STRUCTURE
Because there is no standard organizational structure for the
staff elements reporting to the Regional Administrator, this sec-
tion does not address them. However, all regions have programs
related to civil rights, public affairs, and congressional and
intergovernmental relations.
Regional Administrator
Regional Administrators are responsible to the EPA Adminis-
trator for carrying out EPA's regional programs and fot any other
responsibilities the Administrator may assign to them. They are
the Administrator's principal representatives in their regions
in contacts with federal, state, interstate, and local agencies,
industry, academic institutions, and other public and private
groups. They are also responsible for accomplishing national pro-
gram objectives within their regions, as established by the Admin-
istrator, Deputy Administrator, Associate Administrators, Assis-
tant Administrators, and heads of Headquarters Staff Offices.
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A-9
Attachment A
Regional Administrators develop, propose, and implement an
approved regional program for comprehensive and integrated envi-
ronmental protection. They must manage their regional resources
according to the guidelines provided by Headquarters, and they
exercise approval authority for proposed state standards and im-
plementation plans. They must translate technical program direc-
tion and evaluation provided by Headquarters offices into effective
and efficient operating programs within their regions. Finally,
they evaluate activities both within their own regional programs
and within state programs.
Administrative Offices
Deputy Regional Administrator
Deputy Regional Administrators assist the Regional Administra-
tors in carrying out their duties and serve as Acting Regional
Administrators in the absence of the Regional Administrators.
Assistant Regional Administrator
for Policy and Management
These Assistant Regional Administrators advise the Regional
Administrators, Deputy Regional Administrators, and all organiza-
ions within the regional office on policy planning and evaluation
and on management. They develop program strategies, such as
State/EPA Agreements, program evaluations, and analytical studies.
Their program activities must conform with the guidelines on
national strategy and policy. The functions of the division these
officials oversee include personnel management (including equal
employment opportunity), financial management, environmental impact
statements, regional program planning, automated data processing,
safety and security, library services, facilities and space manage-
ment, general services, and centralized grants administration.
Program Offices
Air and Waste Management Division
Under the supervision of a Director, this division recommends
to the Regional Administrator goals, priorities, and objectives
for the regional Air, Noise, Radiation, Pesticides, Toxic Substances,
and Waste Management programs. It is responsible for developing,
coordinating, implementing, evaluating, issuing permits for, and
monitoring these programs. It refers EPA enforcement cases to the
Department of Justice. The division's program recommendations and
activities must conform with the guidelines on national strategy
and policy.
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A-10 Attachment A
This division helps the states develop comprehensive air pro-
grams. In coordination with the Environmental Services Division,
it provides or arranges for technical assistance to state and local
agencies in developing state implementation and transportation con-
trol plans, monitoring systems, and collecting and analyzing data.
Environmental Services Division
i
Under the supervision of a Director, this division collects,
analyzes, and evaluates data in support of regional and national
monitoring requirements. These activities involve conducting
^al studies, surveys, and inventories of sources of pollution
the region. This division also coordinates monitoring
_. ams and provides analytical and laboratory support to state
and local agencies. Finally, it responds to emergencies
involving hazardous waste and oil spills.
Water Management Division
*
Under the supervision of a Director, this division recommends
to the Regional Administrator goals, priorities, and objectives
for the regional water programs. It is responsible for developing,
coordinating, implementing, evaluating, and monitoring" compliance
with these programs. Its program recommendations and activities
must conform with the guidelines on national strategy and policy.
*
This division helps the states develop comprehensive programs,
including implementation plans for achieving'water quality standards.
It operates a program for municipal waste-water systems and reviews
plans for specifications for facilities. It-monitors the construc-
tion program, including the external civil rights compliance and
minority business enterprise functions. It coordinates activities
for water-quality planning throughout the region and operates permit-
issuance and related compliance-monitoring programs. It develops
control strategies for ocean dumping and for discharges from
nonpoint sources of pollution and operates a drinking-water pro-
gram. In coordination with the Environmental Services Division,
it provides or arranges for technical assistance to state and local
agencies in developing and implementing these programs. Finally,
it refers EPA enforcement cases to the Department of Justice.
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A-ll Attachment A
REGIONAL ALLOCATION CONCEPTS
We used two standard concepts in allocating regional costs.
These are stated below and referenced as appropriate in the
section on specific regional allocations.
1. Regional employees are the beneficiaries of all adminis-
trative regional support provided, regardless of whether
the costs of such support are allocated to organizations
or cost pools in the EPA accounting system. Therefore,
all of these costs are allocated according to the FTEs
charged to. those organizations or pools. The one excep-
tion to this is if the costs of the region's Public
Affairs Office are separately recorded in the Agency's
accounting system. If this is the case, these costs are
allocated according to the number of press releases
issued on Superfund v. other programs. This method more
accurately distributes Superfund support provided by
the Public Affairs Office.
*
2. The costs of all of each region's program offices are
allocated among.the three categories of programs that
they support: . Superfund site-specific, Superfund in
general, and other programs. Each region's costs are
allocated on the basis of the number of hours charged to
each category by that region's program employees.
ALLOCATIONS COMMON TO ALL REGIONS
Four types of allocations are common to the ten regions.
Headquarters Allocations - Regions 1 Through 10
These are costs allocated to Regional Administrators in
Stage 1. They are allocated further on the same basis as were
the Regional Administrator's costs. To provide a clean audit
trail, we have allocated them separately in Stage 2.
Superfund Allocations
These cost pools are allocated in Stage 3 to Superfund site
and Superfund general categories, based on the number of hours
charged to these categories by regional program office personnel.
They are comprised of the Superfund portion of the allocation of
Regional Counsels, performed in Stage 1 and, if appropriate, the
Superfund portion of the allocation of the Public Affairs Office,
performed in Stage 2.
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A-12 Attachment A
Superf und j*un 1
These pools were formed by Headquarters organizations that
allocated their support costs to programs, rather than organiza-
tions (e,g., the inspector General's Office and the Public
Affairs Office). They are allocated to specific-site and general
cund categories in Stage 3 on the basis of total regional
hours charged to those categories.
Supjer.fund Run 3
These cost pools were formed in Stage 2 by the Supjerfund
allocations of the Office of Waste Programs Enforcement", the
Emergency Response Division, and the Hazardous Response Support
Division. They are further allocated in Stage 3 on the basis of
total regional program hours charged to sites v. Superfund in
general.
SPECIFIC REGIONAL ALLOCATIONS
•
The regions are organized sequentially in this section, with
explanations of how their costs are allocated in Stages 2 and 3.
Sta- 1 is irrelevant to this discussion, because that run only
deals with Headquarters support costs.
Region1
Stage 2
The Office of the Regional Administrator and the Administra-
tive Services Division, along with the cost pools for nonpayroll
regional support and training, comprise all of the administrative
support provided in Region 1. Region 1 has opted to track non-
payroll regional support costs and training costs as types of
-~e-«-=- (cost pools), rather than by the organization to which they
The costs of the Public Affairs Office, the Office of
.^governmental Liaison, and the Equal Opportunity Officer are
included with those of the Office of the Regional Administrator,
since those offices perform the responsibilities of the Regional
Administrator. All administrative support costs are allocated
as described in the first standard cost concept.
Stage 3
Region 1 conforms to the standard organizational structure,
except that it splits the air and waste activities into two dis-
tinct programs. However, this exception requires no special
treatment for cost allocation. The second standard cost concept
explains the treatment of Region 1 program divisions.
-------
A-13 Attachment A
Region 2
Stage 2
The account structure for Region 2 allows for identifying the
support costs of each of the region's organizations. The costs of
the Office of External Programs (i.e., Public Affairs) and the
Office of Intergovernmental Liaison are allocated separately from
the Regional Administrator's costs, as described in the first
standard cost concept. The other costs that comprise administra-
tive support costs for Region 2 are the Immediate Office of the
Regional Administrator and the Assistant Regional Administrator
for Policy and Management, which are also separately identified
in the accounting system.
Stage 3
The program divisions for Region 2 are the Caribbean Field
Office (created for servicing the Caribbean area) and the standard
divisions of Air and Waste Management, Water,.and Environmental
Services. These costs are treated according to the second standard
cost concept.
'•'egion 3
Stage 2
.
Using the standard cost concept is infeasible for Region 3
because of its time-charging practices. It charges Superfund time
either to one accounting responsibility center for site-specific
work or to another for non-site-specific work. Because there is
no readily available method to identify which organization
originally provided the support, it is also infeasible to separate
program division hours from administrative hours. Thus, we must
allocate all regional support costs according to the total regional
FTEs charged to cost .pools of Superfund and other programs.
Stage 3
The portion of the Stage 2 allocation assigned to Superfund
was added to the Superfund Allocation pool discussed under the
section on Allocations Common to All Regions. It was distributed
with those costs because the same allocation base was appropriate.
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A-14 Attachment A
Region 4
Stage 2
The support costs of Region 4 cannot be treated according to
the standard cost concept because of the region's policy of charging
all of its payroll costs to one of two responsibility centers. In
so doing, it prevents distinction between administrative and program
hours charged to Superfund and other programs. For this reason, we
treated these costs the same as we treated the costs of Region 3
during Stage 2.
Stage __3
The portion of the Stage 2 allocation assigned to Superfund
was added to the Superfund Allocation pool discussed under the
section on Allocations Common to All Regions. It was distributed
with those costs because the same allocation base was appropriate.
Region 5
Stage 2
rhe costs of the Office of the Regional Administrator, the
Pu^-Lic Affairs Office, and the Planning and Management Division,
along with the cost pools for Training and Regional Support, are
all separately identifiable in the accounts of this region. They
comprise all of the administrative support provided to the region
and are allocated according to the first standard cost concept.
Stage 3
Region 5 program divisions are Waste Management and Emergency
Response, Air, Water, Environmental Services, and the Great Lakes
Program. The costs associated with each of them are separately
identifiable in the accounting system and are treated according
to the second standard cost concept.
S t age 2
The Regional Administrator's Office, the Management Division,
and the cost pool for Regional Support are separately identifiable
in the accounting system and comprise all the administrative support
costs for the region. The costs of the Public Affairs Office and
Intergovernmental Liaison Office are charged to the Office of the
Regional Administrator and are not separately identifiable. These
costs are treated as explained in the first standard cost concept.
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A-15 Attachment A
Stage 3
Region 6 is organized according to the standard regional
structure. Its program costs are allocated on the bases of the
second standard cost concept.
Region 7
Stage 2
Region 7 can separately identify the costs associated with
the Offices of the Regional Administrator, Policy and Management,
Public Affairs, and Intergovernmental Liaison, and with the cost
pool for Regional Support. These costs represent all of the
administrative support costs for the region and are treated
according to the first standard cost concept.
Stage 3
Region 7 also can separately identify the costs associated
with the program divisions in the standard regional structure. It
~~ates its program costs according to the second standard cost
Stage 2
As in Region 7, Region 8 treats its administrative support
costs according to the first standard cost concept.
Stage 3
The program divisions of Region 8 generally conform to the
standard regional structure. The exception is an additional
program office that serves the state of Montana in all program
areas due to geographic separation from the regional office.
Again, the second standard cost concept explains how Region 8
allocates program costs in Stage 3.
Region 9
Stage 2
f t
The administrative support for Region 9 is provided by the
Regional Administrator, Policy and Resources Management, Adminis
trative Services Division, Public Affairs, and a cost pool for
Regional Support. These costs are allocated according to the
first standard cost concept.
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Attachment A
A-16
Stage 3
The structure of Region 9 varies slightly from the standard
regional structure. It has divisions for Waste (Toxics) Management
Air Management, and Water Management, but no Environmental Services
Division. This is because each program performs for itself what
"J be provided by an Environmental Services Division. No change
la wiie treatment of the region's program division costs is required,
so the second standard cost concept covers the allocation
of program costs in Stage 3.
Region 10
Stage 2
Administrative support is provided by the Regional Adminis-
trator, Management Division, and a Regional Support cost pool.
Consequently, the first standard cost concept covers the treatment
of these costs.
Stage 3
region 10 combines the standard program divisions of Air and
--er, has Hazardous Materials and Environmental Services Divisions,
and has Operations Offices for the states of Washington, Idaho,
Oregon, and Alaska to facilitate program operations there. The
support costs of these offices are allocated as described in the
second standard cost concept.
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ATTACHMENT B
INSTRUCTIONS FOR COMPUTER OUTPUT REPORTS
This section provides instructions on how to interpret the
tables produced using Ernst & Whinney's software package.* These
tables include (1) a List of Organizations and Bases for
Allocation (Table 1), (2) a List of Allocation Statistics by
Organization Unit (Table 2), and (3) a Summary of Allocated
Costs (Table 3).
The names of these tables are located on the fourth line
in the upper left corner of the first page of each report. An
additional identifier, telling the fiscal year and the stage
of allocation to which the report refers, is located to the right
of the report name in the form "SFXXY." It identifies the fiscal
year in the "XX" field and the stage of allocation in the "Y"
field. For example, SF831 refers to FY83, stage 1. The third
stage o£ allocation (allocation to sites) is so large that it
has to be split into more than one computer run. So any number
greater than two in the "Y" field refers to the third stage
(e.g., SF833, SF834, and SF835 all refer to FY83, stage 3).
Table 1: List of Organizations and Bases for Allocation
The first table contains three categories of information:
(1) the name of the organization providing and perhaps receiving
support, (2) the allocation basis for each organization (first
identified by a numeric code and then a description), and (3) a
nonallocable ratio. The stage of allocation is important in
defining the ratio. In the first two stages, it will simply
represent whether an organization's costs are allocable or not.
If they are allocable, this column will be left blank—i.e., 0%
are not allocable. If not, it will contain the number 1, meaning
that 100% of its costs are not allocable for the reason detailed
, . Attachment A. To further ensure that the costs of organizations
with a nonallocable ratio of 1 were not allocated, they were
given bases for allocation of accumulated costs, a base for which
no allocation statistics were developed.
In the third stage (runs SF833, SF834 and SF835 of Table 1),
the nonallocable ratio is used for two purposes. The first
purpose is to segregate the costs allocable to all regions into
the three parts necessary to accommodate this stage. For
instance, the Headquarters organizations allocated in Stage 3,
identified as organizations 1 through 4 (OWPE, ERD, HSCD and HRSD),
are allocable across all of the regions. The portion of these
costs allocable to Regions 1, 2, and 3 (run 1 of stage 3) is
31.37673%. This was calculated based on the FTEs of these regions
as a percentage of total regional FTEs. Therefore, the portion of
these organizations' costs not allocable to the regions in run 1
* These tables are for illustrative purposes only. They were
produced to provide preliminary data for FY 83. While the format
will not change for the final FY 83 runs, some of the numbers will.
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Attachment B
B-2
is 68.62327% (1 - .3137673). A similar calculation was made
for the regions in runs 2 and 3 of Stage 3. The total of the
allocable ratios (1 minus the nonallocable ratio) for these
three runs equals 1, meaning that all of the,costs for these
organizations were allocated.
The second1 purpose for using the nonallocable ratio is to
exclude costs of each region that are not allocable to Superfund.
For instance, in Region 1 (run SF833, Table 1), 87.74022% of the
region's costs are allocable to programs other than Superfund.
This was calculated by comparing the regional program hours
charged to Superfund versus the regional program hours charged
to these programs. The allocable portions of Region 1 costs .is
12.25978% (1 - .8774022). These costs are allocated over the
Region 1 program hours charged to Superfund.
Table 2t List of Allocation Statistics by Organizational Unit
The second table is a matrix of organizations and the actual
statistics that make up the allocation bases. • It identifies the
distribution of each allocation base across the organizations to
which costs are allocated. For example, Allocation Statistic
,'umber 1 which is Agency FTEs, lists the FTEs for every organiza-
ion. Accordingly, any organization that is allocated based on
,-cy FTEs will have 77/11,496 of its costs distributed to the
Immediate Office of the Administrator.
Table 3; Summary of Allocated Costs
The third table details the source and final distribution of
all dollars in that run. It lists the allocating support organiza-
tions across the top of the columns, with their allocable costs
and nonallocable ratios immediately beneath the names. The reci-
pient organizations and cost pools appear in rows down the left
side of the report. The first column of figures contains the
totals allocated to and remaining within each organization at
the end of the run.
For example, the distribution of the costs of the Immediate
Office of the Administrator (3,132,790) is shown under the column
for organization number 1. Costs allocated here to such organiza-
tions as the Office of Legislation (15) will go no further because
that recipient office has a nonallocable ratio of 1. However,
costs allocated to such offices as the Regional Administrators
(#56 through 165) will be further allocated in later runs. Costs
allocated to the Administrator's Office by organizations that
provided support to that office were reallocated through cross-
allocation and multiple-iteration techniques discussed earlier;
thus no costs remain in the Administrator's Office at the end of
run 1.
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Attachment B
B-3
Looking at the table another way, row 5 shows all of the
offices that support the Office of Legislation and the amounts
of that support. Because that office has a nonallocable ratio
of 1, not only does the initial cost it incurred ($1,322,065)
not get allocated, but the cost of support provided to it
(e.g., $11,376 from the Administrator) is also not allocated.
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ENVIRONMENTAL PROTECTION AGENCY
U'O I'JOr'ECT COST i'\XV\L
?v COST RSCOVE^Y PURPOSES
f I9-: throjah ?V 1936
flare". 19-'5
-------
Subject: Recovery of Superfund Indirect Costs
Recovering the costs of Superfund site clean-up from parties
responsible for the contamination will be one of the major sources
of replenishment of the Hazardous Substance Response Trust Fund
(the Superfund) in the years ahead. In that regard, it is critical
that EPA seek to recover all costs associated with clean-up. These
costs should include all direct and indirec t costs related to site
clean-up.
Indirect costs are the costs necessary to operate the program
but which cannot be attributed directly to specific aites. Examples
include oroaram manaaement, indirect salaries and fringe benefits,
administrative support, rent, and utilities. EPA has developed .
an indirect cost allocation system which allocates these indirect
personnel and program overhead costs down EPA's organizational
structure to Superfund sites. Determining the appropriate charges
for each site is the ultimate objective for cost allocation. '
While indirect costs are generally understood and accepted
in the business community, they are not normally used in the
government environment. Accordingly, I have directed that this
manual be prepared to (1) provide an explanation of what indirect
costs are and how EPA allocated them, and (2) to provide instructions
to regional financial management personnel for calculating the amount
of indirect costs which should be claimed in cost recovery actions.
The Suoerfund Accounting Branch, Financial Management Division,
at EP*k Headouarters will calculate indirect cost rates for each
region for each fiscal year, beginning with fiscal year 1983. As
rates for succeeding years are calculated, the Financial Management
Division will issue transmittals to keep this manual up to date.
This manual has been provided to regional Financial Management
Officers, Regional Counsels, Headguarters Legal Offices (CECM and
OGC) and all Headguarters and regional Superfund Program Division
Directors.
Suggestions for improvement or comments should be referred
to George Alapas, Chief, Superfund Accounting Branch at FTS
382-2268. The address is:
EPA Headguarters
Superfund Accounting Branch, PM-2?6
401 M Street, S.W.
Washington, D.C. 20.460
C. Morgan Kinrnorn
Comptroller, [pPA
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Table of Contents
Page
Preface i
Table Of Contents ii
Introduction iii*
Allocation Methodology 1-1
What Are Indirect Costs? 1-1
What Is Cost Allocation? '... 1-2
Why Did EPA Develop An Indirect Cost
Allocation Methodology For Suoerfund Sites?.. 1-2
How Was That Methodolooy Developed? 1-2
What Costs Are Allocated? 1-4
What Is The Conceotual Form of EPA's
Methodology? 1-5
How Does EPA Apply The Methodoloov To Determine
Indirect Cost Rates For Superfund Sites? 1-6
What Does The Indirect Cost Rate Represent? 1-7
EPA Headouarters Organization Chart 1-8
EPA Reaional Organization Chart 1-9
\
EPA Indirect Cost Rates And Explanation Of Use II-l
Rules For Applying The Pates II-l
Indirect Costs And The Cost Documentation
Package II-2
The Indirect Cost Rate Reference Sheet And
Worksheet II-3
11
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Introduction
The purpose of this nanual is twofold:
(1) To provide an explanation of how EPA's indirect cost
rates were developed, and
(2) To explain how those rates should be used to calculate
indirect costs allocable to individual Suoerfund sites.
The first section includes an explanation of what indirect
costs are, and why and how they are allocated so that an indirect
cost rate can be developed. "The purpose of the sect'ion is to
provide an understandinc of how this occurs so that Agency
representatives can become comfortable enough with the concepts
to defend then in negotiations and/or litigation.
The second section provides those rates that have been
calculated for each region and an explanation of how they should
be applied to derive indirect costs allocable to a given site.
These costs should be Pursued in cost recovery actions with the
same intensity as direct costs.
ill
-------
Allocation Methodoloav
The purpose of this section is to present EPA's methodology
for indirect cost allocation to Sunerfund sites in an understand-
able format for non-accountants. It is intended to assure the
reader that the indirect costs claimed in cost recovery actions
have been derived from the most accurate and defensible methodology
available using qenerally accepted accounting principles. As such
these indirect costs are valid and should be recognized as part of
the total recoverable costs incurred by the Government in clean-up
actions under the Comprehensive Environmental Response, Compensation,
and Liability Act (CERCLA). '
This section answers relevant questions about Superfund site
indirect costs. The specific Questions this section addresses
are as follows:
• What are indirect costs?
• what is cost allocation?
• Why and how did EPA develop an indirect cost allocation
methodology for Superfund sites?
• What costs are allocated?
*
* What is the conceptual for-n of EPA's methodology?
* How does EPA aooly the methodoloay to determine indirect
cost rates for Sunerfund sites?
• What does an indirect cost rate represent?
The answers to these questions should provide a sufficient under-
standing of the indirect costs of a Sunerfund sit* that the reader
will accept their validity as recoverable costs.
What are indirect costs'*
Indirect costs are those costs which are necessary to the
operation of the oroaram and support of site cjean-up efforts, but
which cannot be directly identified to the efforts at any one site.
They range from costs closely related to site work —pay
earned by on-scene-coordinators while in training or awaiting
the next clean-up assianment — to costs not so closely related
to site work —• a portion of the Administrator's time. While
these costs are very different in their relationship to any
1-1
-------
particular site, both are necessary and are incurred in support
of the site clean-up program.
Other examples of indirect costs are:
- costs of site clean-up personnel while they are not cleaning
specific sites* e.g., training, vacation, sick and holiday pay.
- all costs of non-site personnel, e.g., program managers: clerical
support; and personnel, finance, contracts and other administra-
tive support staff.
- office space costs such as rent and utilities for both site and
non-site staff. /
In summary, -indirect costs are all costs attributable to the
Superfund program that cannot be directly identified to'a specific
site.
what is cost allocation?
Cost allocation is the method by which indirect costs are
assigned to one or more cost objectives. A cost objective is any
activity for which a separate measurement of costs is desired.
Examples include departments or services, such as the clean-up of
Superfund sites. Cost allocation is done to develop the full
cost of a cost obiective including direct and indirect costs
for any number of reasons — for EPA the reason is cost reimbursemer
why did EPA develop an indirectcostallocation methodology for
SuPerfunci sit_es?
It is universally acknowledaed by the business world that
indirect costs are a real part of the total costs of any product
or service. In that context E'^ is concerned with indirect costs
because they are a real part of the total cost of response at
hazardous waste sites. As such, it is EPA policy to seek recovery
of "all costs...incurred by the United States Government," as
stated in Section 107 (a)(4)(A) of CERCLA.
How was that methodology developed?
To provide a sound and defensible basis for determining
indirect costs, EPA decided to develop a forraal indirect cost
allocation methodology. To ensure that the methodology would
be based on appropriate accounting principles, EPA contracted
with the international accounting firm of Ernst and Whinney.
Ernst and Whinney was tasked with developing an indirect cost
allocation methodology which would nost accurately reflect the
level of indirect support provided to Superfund sites by EPA
1-2
-------
organizations. This section describes the decision makinq process
EPA and Ernst and Whinney went through to decide upon the most
appropriate methodology.
Development of a cost allocation methodology requires 1)
selecting a method, 2) selecting how to accumulate costs, and 3}
selecting the allocation bases that link the cost objectives to
the costs themselves. An allocation base is that which defines
the various recipients of the support provided by an organization
as well as the proportionate amount of that organization's costs
which should be allocated to each of those various recipients.
Selecting the method
/
Selection of a particular method of allocation is dictated
by concerns about accuracy and practicality. The various levels
of accuracy provided by each of the generally accepted alternative
methods is dictated by the decree to which each method recognizes
the concept of sunport department interdeoendency. The following
is an illustration of this concept.
Example of Support Department Interdependency
OFFICE
OF THE
COMPTROLLER
OMISS
DATA
PROCESSING
AA FOR SOLID
WASTE AMD
EMERGENCY
RESPONSE
I
OFFICE OF
EMERGENCY AND
REMEDIAL
RESPONSE
1-3
-------
In this examole, the Comptroller provides suooort to Data Processing
but the support is mutual — in reality each supports the other.
Both support departments, in turn, support the Assistant Admin-
istrator for OSWER and OERR, separately.
Only the cross allocation method adequately recognizes the
type of support department interdependency displayed in this example
The cross allocation method is defined as explicitly recognizing
the mutual services rendered among all departments. For this
reason, the cross allocation method is universally considered
the most accurate and defensible of all methods. EPA's need for
just such a method led to the adoption of this method over less
Accurate methods.
' i
Selecting how to accumulate costs
EPA's Financial Management System (FMS) is designed to
accumulate costs by allowance holder. Allowance holders (AHs)
are responsible for the day to day management of EPA resources.
Allowance holders are generally identified with the Assistant
Administrator (AA) organizational level. Responsibility for
control of resources is further delegated to and accounted for
by responsibility centers (PCs). Responsibility centers are
usually assigned to division level organizations. This AH/PC
design allows identification of costs to organization units down
to division level. The ability to accumulate costs by division
enabled Ernst and Whinney and EPA to study EPA's organizational
units at the division level for support relationships to other
organizational units; to the Superfund program; and to Superfund
sites, the final cost objectives.
Selecting the allocation bases
Cost accounting literature provides guidance and principles
governina the selection of bases used for distributing support
costs. The guidance and principles are ,auite technical and are
not presented here. However, Ernst and Whinney adhered to those
principles in selecting the allocation bases that best reflect
the support provided by each of those organizations which are
allocable within the principles of cost allocation.
What costs are allocated*3
EPA's funding generally falls into appropriations for
Salaries and Expenses, Research and Development, Abatement and
Control, Construction Grants, Buildings and Facilities, and
Superfund. Indirect costs that are allowable for allocation —
i.e., costs that support Superfund ~ are expended from EPA's
appropriations for Salaries and Expenses and for Sunerfund.
Therefore, only costs paid from those two appropriations were
reviewed for possible allocation.
1-4
-------
Within those appropriations, costs specifically excluded
from allocation are 1) capital costs, which are considered
investments rather than operating expenses related to a given
fiscal year, and 2) costs charged directly to Suoerfund sites,
i.e., direct costs. Soecifically, the indirect costs which are
allocated are as follows:
salaries and fringe benefits
EPA travel and transportation
rent, communications, and utilities
printing and reproduction
supnlies and materials
other contractual services.
/
What is the conceptual for" of EPA's methodology?
EPA's cost allocation methodology is a three stage process
which allocates the indirect costs from higher level organiza-
tions down EPA's organizational structure through two intermed-
iate levels to the final cost obiectives — Superfund sites.
The first intermediate level is the Assistant Administrator
organizational level, and the second intermediate level is the
reoional oroaram division organizational level — that which
works most closely with the Superfund sites themselves.
Stace 1
The first stage's basic function is to allocate Headquarters
support costs to the Aaency's major "Assistant -Administrator (AA)"
organizational level, i.e. Headguarter's Program AAs ~ Pesticides
and Toxic Substances: Air, Noise and Radiation; Water; Research and
Development: and Solid" Waste and Emergency Response (OSWER) — and
Regional Administrators (RAs). An organization chart for EPA
Headouarters is presented at the end of this section (page 1-3)
to aid this discussion. Temporary cost pools are created to
receive the allocation to the "AA" level. Dollars allocated to
the cost pools for the Headauarters program AAs for Pesticides
and Toxics; Air, Noise and Radiation; Water; and Research and
Development are not brouaht forward to Stage 2 for allocation to
lower organizational levels because they are non-allocable.
They are considered non-allocable to Superfund because with
the exception of Research and Development, they do not support
Suoerfund. While Research and Development does support Superfund,
the beneficial relationship to actual site work is often tenuous.
Accordingly, we did not allocate it. The cost pools formed in
Staae 1 to accumulate costs that are allocated to the AA for
OSWER and the Recional Administrators are brouaht forward to
Stage 2 for further allocation because OSWER supports Superfund'
and the Regional Administrators support their regions.
1-5
-------
Stage 2 N,
/
The second stage's basic functions are (1) to allocate the
allocable cast pools formed in Stage 1 (OSWER and the Regional
Administrators) to lover organizational levels (division level)
within OSWER and the Reqions, (2) tc allocate OSHtR administrative
support organizations to lower level OSWER organizations and (3)
to allocate Regional administrative office costs (the Regional
Administrator, Regional Counsel, Policy and Management, etc.)
support costs to regional program divisions (Air Management,
Waste Management, Water Management, and Environmental Services).
The authorized regional organization chart is presented at the
end of this section (page 1-9) to provide a visual representation
of regional organizations. ,
gtaoe 3
The third stage's basic functions are 1) to allocate lower
level OSWER organizations to three final cost pools —• Suoerfund
sites, Suoerfund in general, and non-Superfundj and 2) to allocate
regional program division costs to those same three final cost
pools. Regional indirect cost rates can be calculated after
costs have been allocated in the third and final stage of the
allocation.
Automating the alloeation of costs ~-N
j
EPA chose to automate the allocation because the cross- '
allocation methodology adooted by EPA involves many repetitive
calculations. EPA chose to use Ernst and Whinney's cross-allo-
cation software (GOVCOST). This software is also used by several
State and local governments to perform their indirect cost allo-
cations. In that context, the GOVCnST software has been approved
by several Federal government agencies for use by State and local
governments in determining indirect costs that are allocable to
Federal programs and allowable for reimbursement.
How does EPAapply the methodology to determine indirect cost rates
for Superfund sites?
The basis on which costs are allocated from regional program
divisions to Superfund sites, Superfund in general, and non-
Superfund cost pools is according to the proportion of regional
program division employee hours charged to each of those categories.
This allocation basis is used because Ernst and Whinney and E^A
studied regional program divisions and determined that where t.he
employees of those divisions charged their time was the best
measure of support provided to each of those categories by those
divisions. Once costs have been allocated to the final three
cost pools mentioned above, EPA calculates an indirect cost rate
for each region. Using their individually derived rate, each
1-6
-------
region can apply
fund sites.
indirect costs to each of its individual Super-
The rate for any region is calculated by dividing the costs
allocated to that region's Sunerfund site cost pool by the number
of regional orogram division hours charged to sites. For example,
if the total cost allocated down EPA's organizational structure
to a region's Superfund site cost pool is SI,500,000, and the
total regional orogram div.ision hours charged to that region's
sites 1,5 21,000 hours, the indirect cost rate for that region is
S71 per hour of regional orogram division labor.
SI ,500,000
21 ,000
S71.43, or S71 rounded to the pearest dollar,
what does the indirect cost rate' represent?
Using the above examole, assume that the region had only
three sites, and the 21,000 regional program division hours were
charged to sites as follows:
Site A
Site B
Site C
1,noo hours
15,000 hours
5,000 hours
Total » 21,000 hours.
Indirect costs for those sites would be as follows:
Site A indirect costs * S7I x 1,000 hours * S 71,000
Site B indirect costs » S71 x IS,000 hours »• SI,065,000
Site C indirect costs » S71 x 5,0.~3 hours » S 355,000
Total 31,500,000.
The rate
share of
pool.
is merely a means of determining an individual site's
the indirect costs allocated to the Suoerfund sites cost
1-7
-------
do
u.s
I .
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-------
AUTHORIZED EPA REGIONAL ORGANIZATION
Public Affairs
REGIONAL ADMINISTRATOR
DEPUTY REGIONAL
ADMINISTRATOR Congrewonal and
' Liaison
HQ General
Counsel
Offict of Otfiot of Acsmm Regional
Regional Counsel Administrator for
Policy and Management*
Eaual EmoiovnMnt
Opoorainrcy Otficar
Water Managwiant Air Manj9wn«n »am Manaflwrwnt Environnwrrtil
Dtvuton D»vn*on** Divwon Diwuon
* Alternative Regional orientation may reflect Management Division coneeot.
'• Alternative Regional organization may ntfteei a ttngie Division mduding Air and Wane Management functions.
1-9
-------
EPA Indirect Cost Rates and Explanation of Use
This section has four ourposes:
1) provide rules to follow in apolying regional
indirect rates to individual Superfund sites;
2) issue instructions for including indirect costs
in a site's cost documentation package;
3) provide the regional indirect cost rates for
each region and fiscal year;
/
4) provide a worksheet to calculate the indirect
costs to be claimed in a Superfund site's cost
recovery action.
Rules for Aoplvino the
Pule tl
A region's indirect cojst rate must onlybeapplied to hours
charged to a site cv regional ""prog ranii division personnel. This
is because tnatrate has heen derived by dividing the indirect
costs allocated to a region's Sunerfund site cost pool by only
the number of hours charqed to sites by regional program division
personnel. For example, expanding the example used in Section I,
assume the total number of hours charged to sites is as follows:
Regional Program Regional Administrative Headguarters
Divisions Divisions Offices
Site A 1,000 200 50
Site B 15,000 3,500 2,000
Site C 5,000 1,500 500
Total 21,000 5,200 2,550.
If the S71 rate was applied to all regional hours charaed
to sites in the region, the total calculated indirect costs
for sites would be:
Site A: ( 1,000 hours + 200 hours) x S71 » S 85,200
Site B: {15,000 hours + 3,500 hours) x 571 • $1,313,500
Site C: ( 5,000 hours + 1,500 hours) x S71 * S 461,500
Total: (21,000 hours + 5,200 hours) x S71 = 51,860,200.
II-l
-------
This calculation of indirect costs is obviously incorrect
because the total indirect costs allocated to the region's
cost pool for Sunerfund sites was only $1,500,000 as developed
in Section I. This example reflects the critical importance of
this rule.
Exception to Rule j1
There is one and only one exception to rule II. The
exception applies only to regions 3 and 4. The exception is
required because the accounting structure of regions 3 and 4 do
not permit distinction between program division and administrative
division hours. Therefore, the total regional division hour
charges was the allocation basis used to allocate costs from
regions 3 and 4 proaram divisions to the Superfund si/te, Superfund
in general, and non-Suoerfund cost pools.
Additionally, the indirect cost rates for regions 3 and 4
were derived by dividing costs allocated to the Superfund site
cost pool by the number of hours charged to sites by all regional
divisions (program and administrative). Therefore, regions
3 and 4 must apply their indirect cost rates to all regional
hours charged to a site in order to calculate the correct amount
of indirect costs for that site.
Rule »2
Theindirect cost rate for a fiscal year must only be
applied to hours that relate to f.at fiscal year.Cost accounting
principles dictate that indirect cost rates should be calculated
for a specific period of time, generally a fiscal vear. EPA
calculates indirect cost rates for each fiscal year. EPA uses the
latest calculated rates as provisional rates until the next
fiscal year's rates can be calculated.
*
Indirect costs and the cost documentation package
This manual is intended to support and defend the indirect
costs that are being claimed in cost recovery actions. It has
been written for the non-accountant to best serve that role.
Therefore, the indirect cost portion of the cost documentation
package should consist of a copy of this manual with only the
applicable regional rate reference sheet and calculation work-
sheet. Any requirements for a more detailed discussion of EPA's
indirect costs claimed should be directed to the Superfund Accoun-
ting Branch.
II-2
-------
Indirect cost rate reference sheet and worksheet
The remainder of this section provides, by reqion, the
indirect cost rates for each fiscal year and a worksheet that
will display the application of a region's indirect cost rates
which produces the amount of indirect costs claira«d in cost
recovery for a Superfund site. The completed worksheet and a
copy of this manual should serve as the support and documentation
of the amount of indirect costs claimed. The fully documented1
regional prorjram division hours on which a site's indirect
costs are calculated are, and will continue to be, Part of the
documentation for direct site costs.
II-3
-------
RFT.ION I
E I: SITE NAMH:
Worksheet ftor Calculating Indirect Costs For Tost Recovery Purposes
Direct lloura toy Respondibility Center "RitaI llmiVs X Pate = Subtotal
QIC OIL 01N 01R
983 S66
904 S67
985 S67
986 $67
inrAC> INIHRRCT OPfiTS TO
C1AIM IN COST toCCVFRY
-------
RFT.HTN I
Reference Sheet For Calculating Indirect Costs For Cost Rocovery
Ion I's Indirect Gr>qt Rate
jr Direct Labor flour:
FY 11R1 FY 19B4 FY 1%5 FY 1986
S 66
$ 67
$ 67
$ 67
owance Holder/Re«5Don«?ibiHtV Centers Tb Wiich Hie Indirect Rate ^houM Be Applies!: .
cte
Title
Year Applicabin (X)
FY I9R3 FY 19R4 FY 19B5 FY 19R6
1C
1L
IN
1R
Air Division
Water Division
Environmental Ren/Ices Division
Waste tana*foment Division
X -
-------
RFT.inN TI
SITE I: SITE NAMP:
Vtorksheet Ftor Calculating Indirect Costs For Cost Recovery Purposes
Direct Hours By Responsibility Center Tbtnl Hours X Rate = Subtotal
C12C 020 02M 02N 02P
19HJ $72
1984 $75
19H5 $75
1'Mlfi ' $75
. INDIRRCT OTTTT; TO
HAIM IN OTKT
-------
PFCION II
Reference Sheet ForCalculating Indirect Costs For Cost Recovery
It's Indirect Cost Rate
Direct Labor Hours
FY 19R1 FY 19R4 FY 1985 FY 19R6
$ 72
S 75
S 75
$ 75
nee Holder/Responsibility Centers Tb Which The Indirect Rate Should Be Applied:
Title
Year Applicable (X)
FY 19H3 FY 19B4 FY 19B5 FY 1986
Caribbean Field Office
Dnertiency and Remedial Response Division
Air and Haste Management Division
Water Manaqement Division
Knvironmental Services Division
-------
RRGION III
•
SITE |J SI m NAMK
Worksheet For Calculating Indirect Costs'For Cost Recovery
Direct Hours (i.e., Tt>tal Rwnonal Hours) 1»>»al Hours X tote = Subtotal
$56
$59
$59
$59
TTTTAI, INDIW-XT OTKIS TO
CLAIM IN COST RECTMrRY
-------
WJGION TV
SITE I: SITR NAMI':
Worksheet Por Calculation Indirect Costs For Cost Recovery Purposes
Direct Hours (I.e., Total Regional Hours) Total Hours X tote » Subtotal
1903 563
1984 $61
19B5 $61
1986 $61
HTTAL INDIRFXTT CT«TS TO
( IAIH IN Cnsr RfKOVERY
-------
Reference ShoetFor CalculatingIndirect Costs For Cost Recovery
Reqion V's Indirect Cost Rate
Direct Lalx>r H«xir:
Allowance llolder/Responsibtl ity Centers *n> Which Ttie Indirect Rate Should He Applied:
Code
05E
05F
05G
0511
051.
OSP
05O
05R
OSW
05Y
05'/.
Title
Dtr. Office Waste Mr|mt/E)nr>rn. Response
Rnerqency and Remedial Response Branch
Hazardous Waste Enforcement Branch
Great Lakes Coordinator
Air Division
Water Division
Waste Manaqenjent/Dnertipncy Resi*mse Division
Environmental Sen/ires Division
Central Regional Mh
Eastern Office
*
Central District Office
FY 19R1
S 75
Should He
Year Anpl
FY 1983
X
X
X
X
X
X
X
X
X
X
X
FY 19R4
S 67
Applied:
iranle (X)
FY 1984
X
X
X
X
X
X
•n*
X
X
•
X
X
X
FY 1985
§ 67
FY 19B5
\
X
X
X
X
X
X
X
X
X
X
X
FY 1986
$ 67
FY 1986
X
X
X
X
X
X
X
X
X
X
X
-------
. 1
V
Pane 1 of 2
PROTON V
SITE I: SITE NAME:
Worksheet Por Calculating Indirect Costs Ftar Cost Recovery Purposes
Direct ttoura By Responsibility Onror Total tfcxirs X Rate = Subtotal
05E 05F OSG OSH
FY 1981 $75
*
t
PY 19R4 $67
FY 1985 $67
i
t
FY 1986 $67
SUB-TOTAL INDIRECT COSTS TO
CLAIM IN COST RECOVERY
(transfer to page 2) .=»=»=
-------
Paqe 2 C 2
RFT.rON V
SITF I:
SITR NAME:
Worksheet For Calculating TnciIrect Costs For Cost Rocovory Purposes
Direct Hours Hy Raspnnsjhi^ity fontor
osp 050 OSR nsw nr)Y nsz
llrMirs X Rate « Stihtotal
FY 1983
S75
' FY 1984
$67
FY 19fl5
$67
* FY 19B6
$67
Subtotal this
TOTAL INDIRECT COSTS TO
CIAIM IN COST REC30VERY
-------
RFGI VI
SITF I: RITK NW1R:
Worksheet For Calculating Indirect Posts For Cost Recovery Purposes
Direct Hours nyJRespnnsihility Cenror Tt>tal Itrxirs X Rate = Subtotal
0611 06J 06K 0^1, OfiH
19U1 $71
1 FY 1984 567
FY 19B5 $67
FY 19R6 $67
TOTAL INDIRECT ODSTS TO
CIAIM IN COST RECOVERY
-------
REGION VI
Reference Sheet For Calculating Indirect Tests For Cost Recovery
Region VI's Inrlirect Cost Rate
Per Direct tabnr Ikxjr:
Allowance HoMer/Rosixmsibility Centers In Which Ihe Indirect Rate Should Ro Applied:
dole
0611*
06J
OAK
06L*
06H
Title
Houston Lab
Air, Pesticides ft Tnxics Division
Water Management Division
Hazardous Haste Management Division
Environmental Services Division
FY 19R1 FY 1984
S 71 S 67
Should Ro Applied;
Year Applicable (X)
FY 198.1 FY 1984
X X
X X
X X
FY 1985 FY 1986
$ 67 $ 67
FY 1985 FY 19R6
X X
X
X X
X X
X X
* nr,n was Management Division in FY's 1983 and 1984 ami should not be used to calculate indirect costs for
those years.
Air ft Waste Management Division in FY*s '985| but, nontheless, should be used in
calculating indirect costs for those yea ,^_J
-------
vi r
SITK I: Sire NAMP:
Hbrhshcet For Calculating Indirect Costs For Cost Recovery Purposes
Dl rert Hours By ResponsiM II ty Center Tntal Hours X Rate = Subtotal
n?r O?K o?i. O?M n?w
FV 1083 S70
t
FY 19fl4 S72
FY 19R5 S72
V
FY 1986 S72
TOTAL INDIRBTT COSTS TO
IN COST RBOWERY
-------
RFfilON VII
Reference Sheet For Calculating Indirect Costs FfrrCrist Recovery
Region VII's Indirect Cost Rate
fter Direct Labor Hour:
FY 1981 FY 1984 FY 19flS FY 1986
$ 7() $72 S 72 $ 72
Allowance liolder/Responsibility Centers 1t> Which The Indirect Rate .Should no Applied:
Code
Title
Year Applicable
-------
PIT,ION VIII
SITE I: RITK NAMR:
Worksheet For Calculating Indirect Costs For Cost Recovery Purposes
Direct Hours Ry Responsibility Center Ttital Hours X Rate » Subtotal
flRK ORL ORM ORR ORS
FY 19fll $65
FY 19R4 $69
FY 19R5 $69
FY 19R6 $69
TOTAL INDIRECT OTSTS TO
IN COST REOWERY
-------
RRCIDN VI11
Reference Shoet F\nr Calculating Indirect Costs For Cosr Recovery
VIII*s Tndiroct Cost Rate
Per Direct Labor Ikxir:
Allowance Holder/Responsibility Centers 1>> IVhich The Indirect Rate Should He Applied:
Corte
08K
OBL
OflM
OBR
ORS
Title
Hater Division
Air and Hazardous Material Division
Surveillance & Analysis Division
Montana
Air and Hazardous Material Branch
FY 19R1 FY 19R4 FY 19B5
S f>r» S m $ 69
Should He Applied:
Year Applicable (X)
FY 19H3 FY 1984 FY 1985
XXX
XXX
XXX
X X X
XXX
FY 19B6
$ 69
FY 19B6
X
X
X
X
X
-------
rx
Reference ^heotPrn- Calculating Indirect Costs For Cost Recovery
Region IX Indirect Cost Rate
Per Direct Labor Hour:
FY 19R3 FY 19fl4 FY 19fl5 FY 19H6
S 69
70
S 70 S 70
Allowance Holder/Responsibility Centers Tb Much Tin* Irviiro
-------
ION ix
SITE I: SITK NAMKj
Hprksheet For Calculating Inrti rect Cost's For Tost Recovery Purposes
Pirort tinurs Ry ^sp»nsihi I Uy Contor -n-»r.il llntirs X Rate = Subtotal
FY 1981 $69
19H4 S70
FY 19fl5 S70
FY 1986 . $70
C. INOIRFJCT COSTS in
CI.AIM IN OOfiT RRC30VERY
-------
Page 2 of 2
RFTJON X
SITE I: SI'IK NAMF:
Worksheet ForCalculating Indirect Costs Pnr Tost Recovery Purposes *•
Direct Hours By Respnnsihn ity Cpnjer Tmaljlntirs X Rate * Subtotal
10R IOT 10W
FY 1981 Sfifl
1
FY 19R4 S68
FY 1985 S68
f
FY 1<»86 $68
Subtotal this paqe
TOTAL INDIRECT CX1STS TO
IN OOKT RECOVERY
-------
Faqe 1 of 2
RFttinw X
sin: i:
SITE NAME:
Worksheet For Calculating Inrlirvrt Coasts For Cost Rorovery Purposes
Direct Hours By Responsibility renter
inc IOG inn inN ion
Hours X Rate
Subtotal
FY 1983
$6R
FY 1984
$68
FY 1985
$68
FY 19R6
$68
SUB-TOTAL INDIRECT COSTS TO
CIAIM IN COST RECOVERY
(Transfer to page 2)
\
-------
REGION X
Reference Sheet For Calculating IndirectCosts For Cost Recovery
an X's Indirect Cost Rate
r Direct Labor Hour:
Holder/Responsibility Centers Tb Which Ttie Indirect Rite Should He Applied
Title
I**
Air and 1t»xics Division
Alaska Operations Office
Water Division
Hazardous Haste Division
Environmental Services Division
*
oreqon Operations Office
Idaho Operations Office
Washington Operations Office
FY 1981 FY
S fi8 S
lould He Applied
1984
6«
FY 19R5
$ 68
FY 1986
$ 68
Year Appl ic.ihle (X)
FY 1983 FY
X
X
X
X
X
X
X
X
1984
X
X
X
X
X
X
X
X
FY 198S
X
X
X
X
X
X
X
X
FY 1986
X
X
X
X
X
X
X
X
OC was Dnenjency Hesponse in FY's 19R1 and 1984} but, nonetheless, should fw use«1 in calculating indirect
costs for those years.
OM was Air and Mater Programs Division in FY's 1981 and 19fl4j hut, nonetheless, should he used in
calculating indirect costs for those years.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON D C 20460
JliN 2 T ,9i=
MEMORANDUM
SUBJECT Policy on Recovering Indirect Costs
in CERCLA Section 107 Cost Recovery Actions
FROM Frederick F. Stiehl^5(U
Associate Enforcement Counse
John J. Stanton, Director
CERCLA Enforcement Divisi
TO Regional Counsels
Regional Waste Management Division Directors
This memorandum is a clarification of the Agency's ^
policy regarding the recovery of indirect costs in CERCLA
cost recovery actions. Previous memoranda from the Financial
Management Division transmitting yearly indirect cost
multipliers have indicated that indirect costs must be claimed
in all cost recovery actions ("Recovering Indirect Costs
Related to Superfund Site Cleanup," Vincette Goerl to Regional
Financial Management Officers/Regions I - X, December 12, 1985,
"Superfund Indirect Cost Manual for Cost Recovery Purposes -
FY 1983 through FY 1986," Morgan Kinghorn, March 1986). However,
to avoid disruption of ongoing settlement negotiations with
PRPs in existing CERCLA Section 107 actions, and to avoid
placing the Agency in an apparently inequitable posture before
the court adiudicating the claim, it may not be appropriate to
seek indirect costs in all on-going cases.
The decision whether or not to seek indirect costs in
existing cases will be made by the Regions after consultation
with DOJ and with the concurrence of OECM and OWPE. The
decision, which will be made on a case-by-case basis, will
depend upon whether EPA has disclosed the overall cost figure
in either negotiations or formal discovery and whether that
figure has been the basis of the parties' settlement
negotiations. For those cases where no negotiations have
occurred (and therefore the parties have not relied upon a
specific cost figure), fiut a cost figure has been produced
during discovery, the litigation team should supplement the
pertinent discovery and seek indirect costs so long as the
-------
complaint (particularly the prayer for relief regarding costs)
is broad enough to include indirect costs */_*_
For those cases where indirect costs for past activities
will not be sought (i.e., those cascs.that meet the criteria
delineated aoove), the Region should notify the defendants at
the next appropriate opportunity, but no later than July 30,
1986, that indirect costs associated with Agency activities
undertaken after that date will be included in the Agency's
demands. The defendants should also be notified, where
appropriate, that all indirect costs will be sought if the case
proceeds to trial.
Of course, all new CERCLA Section 107 referrals must seek
indirect costs. Accordingly, cost recovery complaints filed in
new cases should include indirect costs as part of the total
amount sought and CERCLA demand letters must include indirect
costs as a portion of the total demand made upon potentially
responsible parties.
i *•* *
If you have any questions on this policy, contact
David Van Slyke (OECM-Waste) at FTS 382-3082 or Janet Farella
(OWPE) at FTS 382-2034.
cc: vincette Goerl, FMD
David Buente, DOJ
Depending upon the posture of the case, it may be possible to
amend the complaint to include a request for indirect costs.
-------
\5S2J UNITED STATES ENVIRONMENTAL PROTECTION AGENCY f\JA
%««rt^ WASHINGTON, O C 20480 /OlfX^w
OFFICE OF
ADMINISTRATION
_ AND RESOURCES
JAW - b I9#7 MANAGEMENT
MEMORANDUM
SUBJECT: Superfund Indirect Cost Update
FROM: Vincette L. Goerl, Director
Financial Management Division (PM-226)
TO: Assistant Regional Administrators
Regional Management Division Directors
Gene Lucero, Director
Office of Waste Programs Enforcement
Edward E, Reich
Associate Enforcement Counsel
For Hazardous Waste Enforcement
In March, 1986, the Comptroller issued the Superfund Indirect
Cost Manual for Fiscal Years (FY) 1983, 1984, 1985, and 1986 which
provided indirect cost rates to be used in Superfund cost recovery
actions. The manual also furnished guidance on the application
of the rates along with an explanation of the methodology employed.
The purpose of this memorandum is to update information con-
tained in the manual by (1) providing new rates for FYs 1983-86 and
a provisional rate for FY 1987, (2) clarifying the distinctions
between provisional rates and final rates, and (3) apprising you of
our plans regarding indirect costs during FY 1987.
Attached are revised pages to the Manual providing the new
rates which should be used by the regional financial management
offices in computing indirect costs for cost recovery actions.
The rates should be applied in the same manner as explained in
Section II of the Manual. You will-note that the rates for FYs
1983 and 1984 are labelled "Final" while the FY 1985-87 rates are
termed "Provisional." The general distinction is that final rates
are based on the actual costs incurred during the year, whereas
provisional rates are interim, temporary rates to be used until
actual costs are known and final rates can be computed. EPA's
policy for determining provisional rates is to use the rates from
the latest fiscal year for which rates based on actual costs have
been computed. Since FY 1984 is the latest such year, the FY 1984
rates are used as provisional rates for 1985-87.
-------
In addition to being based on the actual incurred costs for
the year, final rates also reflect adjustments recommended by
auditors from the Office of'the Inspector General (OIG). The OIG
has completed most of the fieldwork on audits of FY 1983 and
1984. They have recently begun the FY 1985 and FY 1986 audit.
Ideally, final rates should be the basis for determining the
indirect costs allocable to a site since they are based on actual
costs. In reality, many cost recovery actions are scheduled for
completion before final rates are known. In such cases, it is
acceptable to use the provisional rates. EPA's policy of provisional
rate determination based on latest known final rates is a common
and accepted practice utilized by numerous government contractors
and grantees.
Our goals regarding indirect costs for FY 1987 include the
following:
1. Computation and issuance of FY 1985 and 1986 final rates.
2. Analysis of the rate computation methodology for possible
revisions.
3. Evaluation of the existing indirect cost documentation with
an eye towards revision (e.g. the Manual) and/or issuance
of new material.
*
4. Conducting training courses or workshops on indirect costs
for Regional and Headquarters personnel.
5. Examining the feasibility of incorporating indirect costs
into the Superfund accounting and financial reporting process.
The attached pages should be substituted for the corresponding
pages in the Manual. Please direct any questions or comments to
William Cooke of the Superfund Accounting Branch on (202) 382-2880.
Attachments
cct David P. Ryan
Budget Division
Regional Comptrollers
-------
Page 2 of 2
REGICN X
SITE I:
SITE NAMEs
Worksheet Fear Calculating Indirect Costs Par Cost Recovery Purposes
Direct Hours (i.e., Total Regional Hours)
10R 10T 10W
Total Hours X Rate = Subtotal
$64
$61
$61
$61
$61
Subtotal this page
TOTAL INDIRECT COSFS TO
OA1M IN COSF RECOVERY
-------
REGION X
Reference Sheet For Calculating Indirect Costs For Cost Recovery
Final
Provisional
i X's Indirect Cost Rate
Direct Labor flour i
moe
de
Holder /Reflponsibility Centers To Which The
Title
FY 1983 FY 1984
FY 1985 FY
$ 64 § 61
Indirect Rate
Year
Should Be Applied t
Applicable (X)
FY 1983 FY 1984 FY
2*
Q
i
M**
M
)P***
)R
JT
3W
Air and Toxics Division
Alaska Operations Office
Water Division
Hazardous Waste Division
Environmental Services Division
Oregon Operations Office
Idaho Operations Office
Washington Operations Office
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
1985
X
X
X
X
X
X
X
X
$ 61 §
FY 1986
X
X
X
X
X
X
X
X
1986 FY 1987
61 $ 61
FY 1987
X
X
X
X
X
X
X
X
IOC was Bnergency Response in FYs 1903 and 1904? but, nonetheless, should be used in
calculating indirect costs for those years.
10M was Air and Water Programs Division in FYs 1983 and 1984: but, nonetheless, should be used in
calculating indirect costs for those years.
10P was Surveillance and Analysis Division in FYs 1983 and 1984; but, nonetheless, should be used in
* « s—. Jrviirort rr«t«; for thoge years.
-------
Page 1 of 2
REGION X
SITE ft
SITE NAME:
Worksheet For Calculating Indirect Costs For Poet Recovery Purposes
Direct Hours (i.e., Total Regional Hours)
IOC 10G 10M ION 10P
Hours X Rate - Subtotal
FV 1983
FY 1984
FY 1985
FY 1986
FY 1987
$64
$61
$61
$61
$61
SUU-TC/rAL INDIRECT COSTS TO
CIAIM IN CUOT RECOVERY
(transfer to pacje 2)
-------
REGION IX
Reference Sheet For Calculating Indirect Costa For Coat Recovery
Final
Provisional
I
1
lion IX 's Indirect Coat Rate
'er Direct Labor Hours
iMfence Holder /Responsibility Centers To Which The
Code Title
*
Ft 1983
FY 1984 FY 1985 FY 1986 FY
$65 $63 $ 63 $ 63 $
Indirect Rate Sliould Be Applied:
Year Applicable (X)
FY 1983
FY 1984 FY 1985 FY 1986 FY 1907
1987
63
09K
09L
09M
Toxics and Waste Management Division
Water Management Division
Air Management Division
-------
REGION IX
SITE It
SITE MftME:
Worksheet Par Calculating Indirect Costa For Cost Recovery Purposes
Direct Houra. U.e., Total Regional Hours)
09K 09L 09M
Total Hours X Rate
Subtotal
1983
1964
1985
1986
1987
$65
§63
$63
$63
$63
TOTAL INDIRECT COSTS TO
CIA1M IN OUST RECOVERY
-------
REGION VIII
Reference Sheet For Calculating Indirect Coeta Fur Coat Recovery
Final
m VIII'a Indirect Coot Rate
r Direct Labor Hour:
FY 1903
$ 60
FY 1984
$ 62
Provisional
FY 1985 FY 1986 FY 1987
$ 62 $62 $ 62
Mince Holder/Responsibility Centers To Which The Indirect Rate Should Be Applied:
fade
Title
Year Applicable (X)
FY 1983 FY 1984 FY 1985 FY 1906 FY 1987
8K
Water Division
Mr and Hazardous Material Division
)8M*
MR
Environmental Services Division
Montana
3BS
Air and Hazardous Material Branch
*Q8M was Surveillance and Analysis Division in FYs 1983-1986; but, nontheless, should be uoed in
calculating indirect costs for those years.
-------
REGION VIII
SITE It
SITE NAMEs
Worksheet For Calculating Indirect Poets For Coat Recovery Purposes
Direct Hours (i.e., Total Regional Houre)
08K 08L OEM 06R COS
Total Hours X Rate
Subtotal
f 1993
f 1984
t
If 1985
T 1986
Y 1987
$60
$62
$62
$62
$62
TOPAL INDIRECT COSTS TO
CLAIM IN OOST RtXXVLHY
-------
REGION VII
Reference Sheet For Calculating Indirect Costa For Cost Recovery
Final
Loci VII1 a Indirect Coat Rate
v Direct Labor Itourt
FY 1983
$ 68
FV 1984
$ 65~
Provisional
FY 19B5 FY 1986 FY 1987
$ 65
65
65
amnoa Holder/Responsibility Centers To Which The Indirect Rate Should Be Applied: ,
3ode
Title
Year Applicable (X)
FY 1983 FY 1984 FY 1985 FY 1906 FY 1907
07C
J7K
07L
07M
07W
Air and Water Management
Water Management Division
Air and Toxics Division
Environmental Services Division
Waste Management Division
-------
REGION VII
SITE 11 SITE NAME:
Worksheet For Calculating Indirect Coeta For Cost Recovery Purposes
\
Direct Hours (l.e«. Total Regional I tours) Total Ikpura X Rate - Subtotal
07C 07K 07L 07M 07W
/ 1983 $68
/ 1984 $65
Jf 1985 $65
* 1986 $65
Tf 1987 $65
Torw, INOIRHLT cosrs 1x3
CIAIM IN CXJbT
-------
REGION VI
Reference Sheet For Calculating Indirect Costa For Coat Recovery
Final
on VI'B Indirect Cost Rate
• Direct Labor Hcuri
FY 1983
66
FY 1904
$ 60
Provisional
FY 1995
$60 $ 60
1986 FY 19fl7
$ 60
iwanoe Holder/Responsibility Centers To Which Hie Indirect Rate Should Be A|f>lied:
fcde
Title
Year Applicable (X)
FY 1903 FY 19O4 FY 1905 FY 1906 FY 1987
36H*
>6J
36K
361,**
06M
Houston Lab
Air, Pesticides K. Toxics Division
Water Management Division
Hazardous Waste Management Division
Environmental Services Division
XXX
XXX
XXX
X
X X
X X
X X
X X
* 06H was Management Division in FYs 1903 and 1984 and should not be used to calculate indirect costs for
those years.
* 06L was Air & Waste Management Division in FYe 198J-1985? but, non the less, should be used in
calculating indirect costs Cor those years.
-------
PBGION VI
SITE ft
SITE NAME:
Worksheet For Calculating Indirect Costa ftar Goat Reoovery Purposes
Direct Hours (i.e., Total Regional Hours)
0611 06J 06K 06L 06M
Total Hours X Rate = Subtotal
1983
1984
1985
1986
1987
§66
?60
§60
§60
$60
TOTAL INDIRECT COSTS TO
CLAIM IN COST REOOVEHY
-------
Page 2 of 2
BBGION V
SITE It
SITE NAME:
VtarXaheet Etar Calculating Indirect Coete For Coot Recovery Purposes
Direct Hours (i.e.. Total Regional Hours)
05P 05Q 05R 05W 05Y 052
Total Hours X Rate
Subtotal
{ 1983
{ 1984
{ 1985
f 1986
* 1987
$71
$61
$61
$61
Subtotal this page
TOPAL INDIRECT CG6TS TO
OA1M IN O06T RHOOVEKY
-------
REGION V
Reference Sheet For Calculating Indirect Costs For Post Recovery
Final
Provisional
Lcn V*a Indirect Cost Rate
sr Direct Labor Hourt
FY 1983
3 TT
FY 1984
36T~
FY 1985
$ 61
FY 1986
$ 61
FY 19O7
$ 61
jwonce Holder/Responsibility Centera To Which The Indirect Rate Should Be Applied:
axle
D5E
05F*
050
0511
-5L
05P
050
05R
05W
05Y
05Z
05F
Title
Year Applicable (X)
FY 1983 FY 1984 FY 1985 FY 1906 FY 1987
Dir. Office Waste Mgmt/Emerg. Response
Waste Management Division - Super fund
Hazardous Waste Enforcement Branch
Great Lakes Coordinator
Air Division
Water Division
Waste Management Division - Non-Superfund
Environmental Services Division
Central Regional Lab
Eastern Office
SSA Central District Office
Emergency and Remedial Response Branch in FYs
indirect costs for those years.
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
but nonetheless shculd be used in calculating
-------
c
Page 1 of 2
RHGICN V
SITE It
SITE NAME:
Worksheet For Calculating Irelirect Costa For Poet Recovery Purposes
Direct Hours (i.e., Total Regional Hours)
05E 05F 05G 05H 05L
Total Hours X Rate = Subtotal
If 1983
* 1994
* 19B5
FY 1986
»Y 1987
$71
$61
$61
$61
$61
SUB-TOTAL INDIRtrjr COSTS TO
OAIM IN COCT REXXIVERY
(transfer to page 2)
-------
REGION IV
SITE ft
SITE NISME:
Worksheet For Calculating Indirect Coata For Coat Recovery Purposes
Direct Hours (i.e.. Total Regional Hours)
r 1963 (Final)
' 1904 (Final)
f 1985 (Provisional)
f 1986 (Provisional)
j
f 1987 (Provisional)
Total Hours X Rate = Subtotal
§59
$54
554
$54
$54
L INDIRECT CX)CTS TO
CIA1M IN COST
-------
REGION HI
SITE 11
SITE NftME:
Worksheet For Calculating Indirect Coats For Coat Recovery Purposes
Direct Hours (i.e., Total Regional Hours)
Y 1983 (Fiml)
Y 1984 (Final)
Y 1985 (Provisional)
Y 1986 (Provisional)
Y 1987 (Provisional)
TotalJ lours X Rate = Subtotal
$52
$52
$52
$52
$52
TOTAL INDIRECT COCTS TO
CLAIM IN UTKT RHXJVERY
-------
REGION II
Reference Sheet For Calculating Indirect CostsFor CoatRecovery
Final
on II'o Indirect Cost Rate
r Direct Labor Itourt
FY 1983
5 68
FY 1984
$ 60
Provisional
FY 1905 FY 1986 FY 1987
5 68 $ 68 $ 68
wance Holder/Responsibility Centers To Wlilch The Indirect Rate Should Be Applied:
ode
Title
2C
2D
2M
2N
»2P
Caribbean Field Office
Bnergency and Remedial Response Division
fdr and Waste Management Division
Water Mangement Division
Environmental Services Division
Year Applicable (X)
FY 1903 FY 1984 FY 1985 FY 1986 FY 1987
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
-------
f
REGION II
SITE It
SITE NAME:
Worksheet For Calculating Indirect COata For Post Recovery Purposes
Direct Ifaure (1.e. ( Tota1 jtegiona I tkxira)
02C 02D 02M 02N 02P
Total Hours X Rate
Subtotal
fY 1983
FY 1984
fY 1985
FY 1986
fY 1987
$68
$68
$60
$68
$68
TOPAL INDIRECT COSTS TO
C2AIM IN OU&r RBOOVETOT
-------
REGION I
Reference Sheet For Calculating Indirect Costs For Coat Recovery
Final
on I'a Indirect Cost Rate
r Direct Labor I tour»
FY 1903
S 62
FY 1984
$ 60
Provisional
FY 1985 FY 1986 FY 1987
$ 60 $ 60 $ 60
wanoe Holder/Responsibility Centers To Which The Indirect Rate Should Be Applieds
ode
Title
1C
1L
IN
1R
Year Applicable (X)
FY 1983 FY 1904 FY 1985 FY 1986 FY 1987
Air Division
Water Division
Environmental Service Division
Waste Management Division
X X
X X
X X
X X
X X X
XXX
X « X X
XXX
-------
r
RESIGN I
SITE I:
SITE NftME:
Worksheet ForCalculating Indirect Coeta For Cost Recovery Purposes
Direct Hours (i.e., Total Regional Hours)
01N 01R
Total flours X Rate = Subtotal
OIC1. \01L
983
1984
1985
1986
i
1987
$62
560
$bO
$60
$60
TOTAL INDIRBLT COSTS TO
CLAIM IN OOfaT
-------
ment of the Treasury » Washington, D.c. • Telephone 566-204?
FOR IMMEDIATE RELEASE September 2, 1982
RESULTS OF TREASURY'S 52-WEEK BILL ADCTIO}?
Tenders for $ 7,000 Billion of 52-week bills to be issued September 9, 1982,
and to mature September 8, 1983, were accepted today. The details are
as follows:
RANGE OP ACCEPTED COMPETITIVE BIDS:
Investment' Rate
Price Pis count Rate (Equivalent Coupon-issue Yield) It
High - 89.646 10 2401
Lov - 89.578 10 3071
Average - 89.600 10.286*
Tenders at the low price were allotted 81%.
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Received
$ 44,090
14,683,775
34,900
37,945
217,100
87,690
1,435,730
102,905
10,530
18,610
14,450
635,670
55,700
Type
Competitive
Nonconpetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
$17,379,095
§15,680,070
181,525
$15,861,595
1,300,000
217,500
$17,379,095
Accepted
$ 14,090
5,897,645
24,900
12,945
107,100
79,690
386,230
64,655
8,530
13,610
10,450
324,670
55.700
$7,000,215
$5,301,190
181,525
$5,482,715
1,300,000
217.500
$7,000,215
An additional $112,500 thousand of the bills will be issued
to foreign official institutions for new cash.
I/ The average annual investment yield is 11.647.. This requites an
annual investment yield on All-Savers Certificates of 8.15%.
-------
rtment of the Treasury • Washington, D.C. • Telephone 566-2041
FOR IMMEDIATE RELEASE September 3, 1981
RESULTS OF TREASURY'S 52-WEEK BILL AUCTION
Tenders for $ 4,752 million of 52-week bills to be issued September 10, 1981,
and to mature Septembers, 1952, were accepted today. The details are as
follows:
RAHGE OF ACCEPTED COMPETITIVE BIDS
Investment Rate
Price Discount Rate (Ecuivalent Coupon-issue Yield) —'
If
High
Lo.'
Average -
84.833
84 755
B /, m
15 000%
15 077%
15 056%
17.19%
17 29%
Terders at the low price were allotted 48%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Boston
I»ev York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas Cm
Dallas
San Francisco
Treasury
TOTALS
Type
Conpetitive
Noncompetitive
Received
$ 44,765
7,970,195
19,075
47,565
88,355
37,760
715,105
36,035
15,080
J6,435
607,790
32.935
$9,636,490
$8,177,435
254.055
Subtotal, Public $8,431,490
1,100,000
105.000
TOTALS $9,636,490
Federal Reserve
Foreien Official
Institutions
Accepted
$ 19,765
4,167,995
4,075
28,565
30,355
34,730
142,225
27,035
8.0BO
16,385
5,395
234,790
32.935
$4,752,330
$3,293,275
254.055
$3,547,330
1,100,000
105.000
$4,752,330
Pi
If The average annual investment yield as 18 01%. This requires^an
~~ annual investment yield on All-Savers Certificates of 12.61%.
-------
Department of theJREA$UR¥
FOR IMMEDIATE RELEASE
September 10, 1980
RESULTS OF TREASURY'S 52-WIEK BILL AUCTION
-
Tenders for $4,001 million of 52-week bills to be issued September 16, 1980,
and to mature September 10, 1981, were accepted today. The details are as
follows:
*
RAIJCE OF ACCEPTED COMPETITIVE BIDS
High
Low -
Average -
Price
90.137
90 000
90.061
Investment Rate
Discount Rate (Equivalent Coupon-issue Yield)
9.890%
10.028%
9 9672
10.84%
11.002
'10.93%
Tenders at the lov price were allotted 22%.
TENDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Conpetitive
Noncoopetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
$ 42,995
4,751,645
51,875
22,945
11,670
12,450
317,330
44,550
23,565
22,025
16,605
386,345
11,820
$5,715,P20
$4,356,580
157,495
$4,514,075
1,031,345
170,400
$ 27,995
3,358,645
1,875
7,945
11,220
12,450
205,430
30,550
21,565
22,025
15,605
273,845
11,820
$4,000,970
$2,641,730
157.495
$2,799,225
1,031,345
170,400
TOTALS
$5,715,820
$4,000,970
M-659
-------
Departmento
I!
FOR IMMEDIATE RELEASE
September 12, 1979
RESULTS OF TREASURY'S S2-WE2K BILL AUCTIOH
Tenders for $3,550 joillion of 52-week bills to be issued September 18, 1979,
and to mature September 16, 2980, "ere accepted today* The details are >s
follow*:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Price
High - 90,032
Lov - 89 980
Average - 89.997
Discount Rate
9 8582
9.910*
9.8932
Investment Rate
(Equivalent Coupon-issue Yield)
10.84Z
10.902
"TOfT
Tenders at the low price were allotted 37%.
THhfDERS RECEIVED AND ACCEPTED
(In Thousands)
Location
Received
Subtotal, Public $4,198,320
Federal Reserve
and Foreign Official
Institutions $1.552,345
Accepted
Boston
New York
Philadelphia
Cleveland
Richcond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Type
Competitive
Koneonpetitive
$ 10,415
4,813,425
1,495
13,335
5,325
32,710
437,315
39,790
19,445
14,155
3,840
350,955
8,460
$5,750,665
$4,083,055
115,265
$ 5,415
3,111,475
1,495
8,185
5,325
32,310
177,165
6,790
13,445
13,155
3,840
162,955
8,460
$3,550,015
$1,882,405
115,265
TOTALS
$5,750,665
$1,997,670
$1,552,345
$3,550,015
rnrai P
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1VA&11 IUJ dJIUUJll
DTB:JM/vam
90-5-2-1-865
Subject
Love Canal Litigation: PreJudgment
Interest on Superfund Expenditures
DMe
December 11, 1985
TO Bruce S. Gelber Fnm John Moore
Attorney, Environmental Law Clerk
Enforcement Section Environmental Enforcement
Section
John Wheeler, Attorney
Environmental Protection Agency
Office of Enforcement and Compliance
Monitoring
1. PreJudgment Interest Is Proper In Superfund Liability Cases.
Prejudgment interest Is well known in the law generally.
Where a statute's purpose is to provide adequate compensation pre-
Judgment Interest fulfills that purpose. Punkhouser v. J.B.
Preston Co.. Inc. . 290 U.S. 163, 168-69 (1933) (breach of contract).
CERCLA'B cleanup cost liability provisions were Intended by the
legislature to provide full and adequate compensation for monies
lost as a result of site clean up. See United States v. Shell Oil.
605 F. Supp. 1064, 1076-77 (D. Colo. 1985); United States v. Chern^
Dyne Corp.. 572 P.Supp. 802, 809 (S.D. Ohio 1983).Thus prejudg-
ment Interest is an appropriate component of "all costs Incurred."
United States v. Northeastern Pharmaceutical and Chemical Co..
579 P.Supp. 823, 852 (W.D. Mo. 1984). appeal docketed. No. 64-
1837-WM (8th Cir.)("NEFACCOn). Accord. United States v. Hollywood
Marine, Inc.. 519 P.Supp. 688, 692 (S.D. Tex. 1981); United States
v. Malitovsky Cooperage Co.. 472 P.Supp. 454, 458 (W.D. Pa., 1979);
United States v. M/V Zoe Colocotroni. 602 P.2d 12, 14 (1st Cir.
1979); United States v. M/V Big Sam. 505 P.Supp. 1029, 1035 (E.D.
La. 1981)» cert, denied. 103 s7ct. 3112 (1982). These four cases
Involved Clean Water Act cleanup cost suits, brought under ad-
miralty Jurisdiction. CERCLA's liability provisions were tailored
after those found In the Clean Water Act. See, e.g.. KEPACCO. 579
P.Supp. at 844. The Second Circuit has frequently awarded prejudg-
ment Interest. See, e.g., Moore-McCormack Lines, Inc. v. Richardson
295 P.3d 583, 592-95 T2d Clr. 1961), cert, denied. 368 U.S. 989. 82
S.Ct. 606 (1962)(tort personal injury case); EEOC v. County of Erie.
751 P.2d 79, 82 (2d Cir. 1984)(labor backpay case; awarded adjusted
prime rate).
2. What Interest Rate Is Given And What Is Its Basis?
Courts have awarded a variety of preJudgment interest
rates, . ncluding those specified in a state's pre or post-Judgment
inter sv* ate, the prime rate, the adjusted prime rate,
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- 2 - i
Treasury bill rates (the Federal post-Judgment interest statute,
28 U.S.C6 $ 1961) and other rates seeming logical and equitable
to the trial court. This is because both the award and the rate
lie in trial court's discretion, as guided by principles of equity.
See EEOC v. Vooster Brush Co. Employees' Relief Ass'n.. 727 F.2d
5oT, 579 (6th Clr. 1984)(labor backpay case; awarded T-bill rate);
Accord. Punkhouser, 290 U.S. at 168-69; Bricklayers TrustFund v.
Taiariol. 671 F.2d 988, 980 (6th Cir. 1982)(labor relations civil
damages case; remanded for determination of rate).
Some cases have suggested that a federal court in a
federal action must apply a state interest rate. See, e.g., '
United States v. United States Fidelity and Guaranty:....Co7. 056
F.2d 993 (5th Clr. 19&1)(breach of contract case). This appears
to be a minority view, however, and is in conflict with the later
cases of EEOC v. County of Erie. 751 F.2d at 82 (2d Clr. 1984)
and Wooster Brush, 727 F.2d at 579 (6th Clr. 1984). In diversity
cases, however, Interest rate would be part of the remedy, and
thus "substantive", requiring use of state law.
As said above, courts are free to use any rate which
is equitable. Regretably many federal courts apply the state's
statutory legal rate of interest or its pre or post-judgment
Interest rates. See, e.g., Malltovsky Cooperage. 472 F.Supp. at
458 (W.D. Pa.); M7v~ZoeTfa02 F.2d at 14 (1st Clr.); M/V Big Sam.
505 F.Supp. at 1035 (E.D. La.); NEPACCO. 579 F.Supp. at 852 (W.D
Mo). These cases give no Justification other than that the
state law is a good guide to fair Interest rates.
The Second and Sixth Circuits have awarded Interest on
backpay awards at the adjusted prime rate. EEOC v. County of
Erie. 751 p.2d at 82, stated that this rate "Is a good indicator
of interest rates generally." Wooster Brush indicated that the
purpose of awarding such Interest is to restore plaintiff to the
position he would be in but for the defendant's misconduct. 727
F.2d at 579. Wooster also considers linking the interest rate to
the defendant's cost of borrowing, since he was in essence borrow-
ing from plaintiff until the Judgment. Id. Thus Wooster affirmed
the lower court's awarding of interest at the adjusted prime
rate. Id^ (see lower court opinion at 523 F.Supp. 1267-68). See
also. Marshall v. Burger King. 509 F.Supp. 353, 356 (E.D.N.Y.
1981)(fair labor backpay case; adjusted [90JE] prime rate awarded
to employee because of the "particularly pronounced inflation"
facing consumers at that time).
T-B111 rates I/ may also be used. Wooster, 727 F.2d
at 579 (dicta); Garcia v. Burlington Northern R. Co.. 597 F.Supp.
See 28 n.S.*1 * 1961, which authorizes post-judgment inter-
*est at ratv " '*»- t ^ to nhe ccjpon Issue yield equivalent [of
•T-atlls]" - >f -•"h'jd to this memo.
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•S - 3 -
130'4, 1309 (D. Col. 1981)(Wrongful death federal statutory PELA
action; allowed rate set by the federal post-Judgment interest
statute. 28 U.S.C. $ 1961). Although the court in Olsen v. Shell
Oil, 708 F.2d 976. 984 (5th Clr. 1983), cert, denied, 104 S.Ct.
715 (1984), used a state prejudgment Interest rate in this federal
statutory wrongful death case, it held that 28 U.S.C. S 1961 "is
permissive on the matter of prejudgment interest." This suggests
that T-B111 rates could be applied by analogy. See also. Brick-
layers' Pension Trust Fund v. Taiariol. 671 P.2d~9~S87~9~B~9 (6th
Clr. 1992), a federal labor backpay case, holding that § 1961's
explicit reference to postjudgment rates "does not by its silence
bar the awarding of prejudgment interest. ..." Logic and analogy
thus seem to defend use of T-B111 rates.
Also notable is United States v. Hollywood Marine. Inc.,
519 P.Supp. 688, 692 (S.D. Tex. 1961), a Clean Water Act cleanup
cost recovery case which awarded 9J prejudgment interest without
stating how the rate was devised (Texas civil stat. S 5069-1.05
provides a 6% rate). -
3. Date Prom Which Interest is Computed
As with rates, courts have used a variety of time
periods for computing prejudgment interest. These include the
billing date (which may be the date of filing complaint), the
date of injury, and a "midpoint" date. Logic indicates that to
fully compensate for a loss the Interest should accrue as of the
date monies were expended. Authority is divided, however, and
most cases award from the billing date. See, e.g.. United States
y. Malitovsky Cooperage Co.. 472 P.Supp. ¥§"4", ¥58 (W.D. Pa. 1979)
{CleanWater Act cleanup case, awarded interest from the day the
Coast Guard made demand on defendant for payment); HEPACCO, 579
P.Supp. 823, 852 (W.D. Mo. 1984)(CERCLA case, date of demand);
United States v. M/V Big Sam. 505 P.Supp. 1029, 1035 (E.D. La.
1981) (Clean Water Act cleanup; Interest "from the date claim
was made on [defendant] by the United States. . . .").
Two Clean Water Act cost recovery cases have allowed
interest from the date the costs were incurred. Hollywood Marine.
519 P. Supp. at 692 (S.D. Tex. 1981); United States v. M/V Zoe
Colocotronl. 602 P.2d 12, 13 (1st Clr. 1979)(stating that in
Admiralty Interest from date of loss is proper). Cf., City of
Boston v. S.S. Texaco Texas. 599 P.Supp. 1132, 1141-42 (D. Mass.
1984)(Admiralty; tort damages from collision with pier, "the
purpose of awarding Interest to a party recovering a money judg-
ment is to compensate the wronged person for being deprived of
the monetary value of the loss from the time of the loss. ..."
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- u .
Only in an "exceptional circumstance", auch as inequitable delay
In forwarding bill, would a later date be used); Vooster. 727
P.2d at 578-579 (affirming trial court calculation found at 523
P.Supp. 1267-1268); Qarcia v. Burlington Northern R. Co*. 597
P.Supp. 1301, 1309 (D.Col. 1984)(Federal Tort PELA wrongful death
action; interest from date of injury).
The Second Circuit labor backpay cases, EEOC v.
County of Erie. 751 P.2d 82 (2d Cir. 1984) and Marshall v.
Burger King. 509 P.Supp. at 356 (E.D. N.Y..) calculated interest
"from the midpoint of the period w.lth respect to which back
wages are sought. ..." Id. A doubling formula is then applied
to approximate actual loss.
4. Is the Rate Simple orCompound and How Is It Computed?
The cases are devoid of specific mathematical analysis
of the rate regarding its compounding and yield. The T-Bill
cases follow 28 U.S.C. § 1961 which awards "the issue yield
equivalent ... of ... fifty-two week United States Treasury
Bills. ..." This "yield" would Include discounting but not
compounding, which is done annually. These rates from 1977 to
present can be provided by Bill Curtin, Office of Finance, Bur.
of Pub. Debt., U.S. Treasury at 376-4350. He is waiting to
assist us in this area.
The adjusted prime rate is set by the Board of
Governors of the Federal Reserve Board. It is an average of
the rates used by leading banks to their best customers. Some
cases speak of the adjusted prime rate used by the IRS for
delinquent accounts. Wooster. 727 P.2d at 579; Marshall. 509
P.Supp. at 356.I/ Until 1976, the IRS used 90? of the adjusted
prime rate as set by the Fed. Res. Bd.f thereafter using 1002.
The IRS will only change its rate, however, when the PRB's rate
changes by at least 1%. Thus, the IRS's adjusted prime rate has
probably fluxuated to a lesser degree. Bruce Miller of the IRS,
at 566-4117, is waiting to assist us in this area.
i/
Linda Jan S. Pack, a Department of Labor attorney who worked
on the EEOC v. County of Erie ca-se states that Labor's policy will
be to use the IRS rate, and apply the related IRS regulations, in
all future prejudgment cases. Department of Labor attorney Wendy
Bader. at 523-7652, can assist us in greater detail on both rate
calculations and the midpoint formula mentioned supra.
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\S3Hj UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
\t ,^8^ WASHINGTON. D.C. 20460
SEP 3 0 1987
COMPTROLLER POLICY ANNOUNCEMENT
' fl7- 17 • . OFFICE OF
*" ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Interest Rates for Dejbts Recoverable Under
the Superfund[ Ameipjim^n^s^and-Reauthorization
Act of 1986
FROM: David P.
Comptroll
TO: Assistant Regional Admimristrators
Management Division Directors
Senior Budget Officers!
Regional Comptrollers
This Policy Announcement establishes Agency policy and
procedures for interest to be assessed on debts recoverable under
the Superfund Amendments and Reauthorization Act of 1986 (SARA).
BACKGROUND
Section 107(a) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA) made responsible*
parties liable for the costs related to remedial and removal ac-
tions taken under that Act. Section 107(b) of SARA amended that
section to require that amounts recovered under the authority of
section 107(a) accrue interest at the same rate as interest on
investments of the Hazardous Substance Superfund ("Superfund").
The Treasury Department currently invests Superfund monies
in 52-week U.S. Treasury MK Bills (MK-bills) that mature in
early September of each year. When funds are needed for Super-
fund activities (e.g./ to pay EPA contractors conducting removal
actions), MK-bills are sold and the proceeds are used to pay EPA
coats. When funds are received (e.g., revenues or recoveries
deposited in the Superfund), additional MK-bills of the same
maturity are purchased. Thus, MK-bills of a single annual
maturity provide the basis for assessing interest for Section
107(a) debts.
-------
-2-
POLICY
In accordance with SARA, EPA will assess interest on-costs
recoverable under CERCLA section 107(a). Interest will accrue
from the later of (1) the date payment of a specified amount is
demanded in writing, or (2) the date of the expenditure concerned.
The MK-bill yield rate at the"time of Treasury's annual
purchase will be the interest rate used for the following fiscal
year in assessing interest on recoverable costs. Like the securi-
ties from which this rate is derived, interest will be compounded
annually. On October 1 of each year outstanding receivables, which
includes interest accrued during the previous fiscal year, will
begin accruing interest at the new rate.
The Financial Management Division will transmit annually, the
appropriate rates to all EPA financial management offices as soon
as it obtains the yield rate from Treasury.
INTEREST RATE FOR FISCAL YEAR 1987
The rate of 5.63% will apply for the period October 1, 1986,
through September 30, 1987.
FOR ADDITIONAL INFORMATION
Your servicing financial management office can provide
additional information on EPA's policies and procedures for
preparing billings, calculating interest rates, and other debt
collection questions.
If you have questions on this specific Policy Announcement,
please contact Bob Cluck, Fiscal Policies and Procedures Branch,
at FTS 382-5160.
cc: J. Richard Bashar
Alvin Pesachowitz
John J. Sandy
Vincette L. Goerl
J. Daniel Berry
Edward Reich
Financial Management Officers
FMD Branch Chiefs
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OCT 7 19??
OFFICE OF THE COMPTROLLER
TRANSMITTAL NO. 88-01
OFFICE OF
o'Su^c
MANAGEMENT
MEMORANDUM
SUBJECT:
FROM:
TO:
uperfund Debts
ctor
Financial Management Division
Assistant Regional Administrators
Management Division Directors
Senior Budget Officers
Regional Comptrollers
Financial Management Officers
The Department of the Treasury has }ust informed us of the
interest rate to be assessed for FY 1988 Super fund debts. The
interest rate to be used for Super fund debts for the period
October 1, 1987 through September 30, 1988 is 6.99%.
Please refer to Comptroller Policy Announcement 87-17 for
further information on the application of this rate. If you
need additional information, contact Joe Nemargut on 382-5657.
cc: J. Richard Bashar
Alvin Pesachowitz
John J. Sandy
Vincette L. Goerl
FMD Branch Chiefs
-------
EPA
OFFICE OF THE COMPTROLLER
TRANSM1TTAL NO. 39-03
OCT I 3
MEMORANDUM
TO:
§
Interest Rates for Superfund Debts
Gary M. Katz, Director uLy^Js^Z^C-L
Financial Management Division ^""X
Assistant Regional Administrators
Management Division Directors
Senior Budget Officers
Regional Comptrollers
Financial Management Officers
The Department of the Treasury has just informed us of the
interest rate to be assessed for FY 1989 Superfund debts. The
interest rate to be used for Superfund debts for the period
October 1, 1988, through September 30, 1989, is 8.39%.
For further information on the application of this rate,
please refer to Chapter 12 of the agency directive, "Financial
Management of the Superfund Program" (Resources Management
Directives System. 2550D). If you need additional information,
contact Mike Kurgan on 382-5159.
cc: David P. Ryan
J. Richard Bashar
John J. Sandy
Alvin M. Pesachowitz
.David Van Slyke
FMD Branch Chiefs
I
T)
i
FISCAL POLICIES AND PROCEDURES BRANCH
-------
A \
mj.
EPA
SEP 27
F
M
D
OFFICE OF THE COMPTROLLER
TRANSMITTAL NO. 89_32
MEMORANDUM
SUBJECT: Interest Rates for Superfund Debts
V
FROM:
TO
Gary M. Katz, Director
Financial Management Divis
n
o
u.
t
a.
Assistant Regional Administrators
Management Division Directors
Senior Budget Officers
Regional Comptrollers
Financial Management Officers
The Department of the Treasury has }ust informed us of the
interest rate to be assessed for FY 1990 Superfund debts. The
interest rate to be used for Superfund debts is 8.47% for the
period of October 1, 1989, through September 30, 1990.
For further information on the application of this rate,
please refer to Chapter 12 of the Agency directive, "Financial
Management of the Superfund Program" (Resources Management
Directive System, 2550D). If you need additional information,
contact Mike Kurgan on 382-5159.
cc: David P. Ryan
J. Richard Bashar
John J. Sandy
Richard M. Brozen
FMD Branch Chiefs
m
•o
Tl
O
FISCAL POLICIES AND PROCEDURES BRANCH
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D C. 20460
OFFICE OF
ADMINISTRATION
CCT I *"•* AND RESOURCES
' MANAGEMENT
OFFICE OF THE COMPTROLLER
TRANSMITTAL NO. 91-a^wM&/*^&t,L/
FROM: /Sallyanrie Harper, Director
/ Financial Management Division
TO: Assistant Regional Administrators
Management Division Directors
Senior Budget Officers
Regional Comptrollers
Financial Management Officers
The Department of the Treasury has just informed us of the
interest rate to be assessed for FY 1991 Superfund debts. The
interest rate to be used for Superfund debts is 7.99% for the
period of October 1, 1990, through September 30, 1991.
For further information on the application of this rate,
please refer to Chapter 12 of the Agency directive, "Financial
Management of the Superfund Program" (Resource^ Management
Directive System. 2550D). If you need additional information,
contact Nelson Price on 382-5331.
cc: David P. Ryan
J. Richard Bashar
John J. Sandy
Richard M. Brozen
FKD Branch Chiefs
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D C 20460
OCT -9 |99|
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
OFFICE OF THE COMPTROLLER
TRAHSMITTAL NO. 92-01
terest Raters for Sunerfund Debts
MEMORANDUM
SUBJECT:
FROM: / Sailyanrni Harper, D^ector
Financ^l Management Division
TO: Assistant Regional Administrators
J^PnTtyiuaa:iMaf'^'»l^Ji'iSiiusfrii uaa->aoira»gs-
Senior Budget Officers
Regional Comptrollers
Financial Management Officers
The Department of the Treasury has just informed us of the
interest rate to be assessed for FV 1992 Superfund debts. The
interest rate to be used for Superfund debts is 5.70% for the
period October 1, 1991, through September 30, 1992.
For further information on the application of this rate,
please refer to Chapter 12 of the Agency directive, "Financial
Management of the Superfund Program" (Resources Management
Directive System. 2550D) If you need additional information,
contact Nelson Price on 260-5331.
cc: David P. Ryan
J. Richard Bashar
John J. Sandy
Richard M. Brozen
FMD Branch Chiefs
Printed on Recycled Paper
-------
y"^>»
\ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
? WASHINGTON, D.C 20460
AUG I 6 ?co>
OFFICE OF
ADMINISTRATION
AND RESOURCES
MEMORANDUM MANAGEMENT
SUBJECT: Superfuna Tfust Fund Investment Rates
FROM: R0ri^B#ich4na, Chief
Accounting Branch
TO: Superfund Accountants
I am forwarding to you a quick reference summary of the
Superfund Trust Fund investment rates for Fiscal Years 1980 through
1991. RMDS 2550D, Chapter 12, section 5 remains the Agency's
official policy on the application of these rates, with
supplementary guidance found in the September 20, 1988, "Superfund
Accounts Receivable Desk Operating Procedures."
I would like to call your attention to a change from what you
may have seen earlier on the interest rates for Fiscal Years 1981
and 1983. These rates were based on the "T-bill" rate, because the
"MK-Bill" rate that we now use was not available prior to Fiscal
Year 1984. Instead, Treasury used the "MK-Bill" equivalent, which
was the 52-week MT-Bill" rate reported from the final auction of,
each of the earlier fiscal years.
In response to a recent inquiry about these early rates, we
researched the source documentation and found a minor error in the
Fiscal Year 1981 and 1983 rates that had been disseminated to some
offices in the past. The actual rate in both cases was about a
half percentage point higher than earlier quotes. In addition to
the corrected listing of rates, I am attaching copies of the
Department of Treasury "News" from which the rates were extracted.
Please pass this information on to any of your local offices which
must be aware of these rates. These revised rates should be used
in all future cost recovery cases with costs dating back to those
years.
If you have any questions about Superfund interest rates,
please contact Nelson Price at 8-382-5331.
Attachments
cc: Sallyanne Harper
Jack Shipley
Panted on Recycled i
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SUMMARY OF SUPERFUND TRUST FUND INVESTMENT RATES
Fiscal Year
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
Rate
7.99%
8.47%-
8.39%
6.99%
5.63%
7.43%
- 10 82%
9.40%
11.32%
17.26%
10.93%
10.88%
Instrument
MK-Bill
MK-Bil'l
MK-Bill
MK-Bill
MK-Bill
MK-Bill
MK-Bill
MK-Bill
T-Blll
T-Bill
T-Bill
T-Bill
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DEPARTMENT OF THE TREASURY
FINANCIAL MANAGEMENTSERVICC
WASHINGTON D C Z02Z7
ir<. Cluck.
OCT ? 199,
The yield on Hazardous Substance Superfund rollover investment of
$3,401,155,000 on August 31, 19-91 is 5.70% as calculated on the
enclosed worksheet.
If you have any questions, please call Mary Etheredge on
874-6594.
Sincerely,
Zroff, Manager
' Funds Accounting Branch
Bob Cluck, Acting Branch Chief
Environmental Protection Agency
Fiscal Policy and Procedure Branch
401 "M" Street, SW, PM:226F
Washington, DC 20460
Enclosure
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