3EPA
OFFICE OF ENFORCEMENT
    CERCLA
            fr	A	,1
COST RECOVERY
   NOTE
   VOLUME II
             Printed on Recycled Paper

-------
                 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
-------
     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

-------
     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'

-------
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

-------
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)

-------
     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

-------
       >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

-------
   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

-------
                             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

-------
                       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

-------
                   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

-------
                        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

-------
    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

-------
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

-------
          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

-------
                                                                                   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

-------
              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

-------
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

-------
                            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

-------
            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

-------
?*•  ,
 - 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-

-------
   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-
                                                                  ®

-------
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-

-------
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-

-------
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-

-------
     ..
     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-

-------
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-

-------
      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

-------
         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
-*.      ^*——.—. — ^-—-P
M
CODE   TC
                    NUMDEP.
 bUILDULL COMfr.UL L It'E  IWJlJfro'  CLKPEN ***
"m-'E,  tCHCn t'Urt,  VENIKTU'  CfU»C, PHI  VOUCHER  TK CODL,
TRAVEL AI-VANCE  NUhi'EK ,  PnT VUULl.'LT' LINE, IU LOKl>  Tti't!
M SCHEDULE NUMUfU  OOuAOVl 415
 C POGT TREAS ACT  Y POST DETAILS   Y f.XP   r I'ACKOUT  M
      	PEC        InfiMLNT         CHm'    POGT
    ADV NUM  I ti  \ i'P         AMOUNT         NUnttCR  INP
3
3
3
3
3
S3
3
3
3
3
AMOCO
AMOCO
AMOCO
AMOCO
FV 89000540410
PV 89000540410
PV 89000540410
PV 89000548410
BUFFALO PV 8900054704fi
D ^ Ft
D & B
D & P
D & B
D * B
CTION R

EY
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.
41 V. 6'''
NAMF AMUCO OIL CO
ADDRESS LINE 1 F U
ADDPESC5 I I ME 2
ADDPCSS LINE 3 LHIC
U01
002
003
004
001
001
002
003
004
005
ECOfJ
IjNOli] FtY l"<
' OFF ICE

•jrt FAYIF
r i r;v cr

TU'I- -zv:e

ACO
F
p
p
p
F
F-
F
P
P
F

.CHECf


~X A
tllJ'ULE

113
35
130
139
806
2,875
3,734
92
45
3

*»• »•


ntjco niEn«
Nunruru M oowi
LAN LEI 1 ED IrJI>
.51
. 1
C
^
.95
.99
.30

.0
.3
.3
.1




!•
AJ".
N
MANUA



1L .-,0673


a
,-,
4
V
3




 1




Ot>
„,

301
301
301
301
302
303
303
303
303
303




2t>


^
Y
Y
>
Y
Y
'T
)
}
Y




09


CIIFCI' IND








    CHECK  NUM  17461302 U.O  M"-^
       1UNT                Of:.- .30 f'Y
       EE  NAME  tUFPALO C»ur F I 1
      .YfE  ADDI'CGS  LINE 1    2 ,' m juil
    PAYEE  MDPRCGG  LINE .''
    PAYEE  ADDRC.GG  LI HI  3    POULPLP
                                f A> I I
                                                   KUFTAI o   nirc.i-  DATL   o^ 2!. 87
                                                     rJUnlillR  ii OO. .,VJV 1 ^ -,
                                                    i ANPLL L Ll>  f.40  N
                                                                n.ir^Vil. ' I !l"i I  J/'I>

                                                    CM  fjMi.t;
                                                                  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

-------
PRIVILEGED: ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

               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

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

               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).
                                 8

-------
PRIVILEGED: ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
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

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                    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

                                10

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

               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

                                11

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
                         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.
                                12

-------
PRIVILEGED: ATTORNEY WORKPRODUCT/ATTORNEY  CLIENT

                    (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

                                13

-------
PRIVILEGED: ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                    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


                                14

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

               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

                                15

-------
;  ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

          $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

                      16

-------
PRIVILEGEDI  ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                         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.
                                17

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                    (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

                                13

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

          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.
                                19

-------
PRIVILEGED; ATTORNEY WORK PRQDPCT/ATTORNEY CLIENT

          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

                                20

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

               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.
                                21

-------
PRIVILEGEDI  ATTORNEY WORK PRODUCT/ATTORNEY CLIENT


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

                                22

-------
PRIVILEGED: ATTORNEY WORK PRODUCT/ATTORNEY CLIEKT
                         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

                                23

-------
PRIVILEGED: ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                         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

                                24

-------
PRIVILEGED;  ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
                         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

                                25

-------
PRIVILEGED! ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
                         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.

                                26

-------
PRIVILEGED! ATTORNEY WORK PRODUCT/ATTORNEYCLIENT


                    (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

                                27

-------
PRIVILEGED! ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
                    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)

                                28

-------
PRIVILEGED! ATTORNEY WORKPRODUCT/ATTORNEY CLIENT
                    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

                                29

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                    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

                                30

-------
PRIVILEGED: ATTORNEY WORK PROPPCT/ATTORKEY CLIENT
                         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.
                                31

-------
PRIVILEGED! ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                    (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

                                32

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT

                         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:

                                33

-------
PRIVILEGED; ATTORNEY WORK PRODUCT/ATTORNEY CLIENT
                         (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.

                                34

-------
PRIVILEGED; ATTORNEY WORK  PRODUCT/ATTORNEY  CLIENT











V.   PRE-JUDGMENT INTEREST






VI.  ACCOUNTS RECEIVABLE
                                35

-------
   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

-------
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
                          - 2 -

-------
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.
                          - 3 -

-------

          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  '
                           -  4  -

-------
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.
                          - 5 -

-------
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.
                          - 6 -

-------
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 -

-------
               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 -

-------
-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 -

-------

-------
                  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.

-------
        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.

-------
                              - 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.

-------
 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

-------
                              . 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.

-------
                              . 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. „

-------
                              •  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.

-------
                              -  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.

-------
                              „ 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.

-------
                              - 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.

-------
                              -  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.

-------
                              - 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.

-------
                              - 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

-------
                              - 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.

-------
                               -  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.

-------
                              - 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.

-------
                               .  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.

-------
                              - 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.

-------
                              - 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

-------
                              - 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."

-------
                               -  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.

-------
                              - 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

-------

-------
 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

-------
                     ^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

-------
                            - 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

-------
                             - 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.

-------
                             - 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

-------
                             - 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.

-------
                             - 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

-------
                             - 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

-------
                           - 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,

-------
                           - 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

-------
                          -  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

-------
                             -  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.

-------
                             - 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

-------
                            - 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.

-------
                             -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.

-------
          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

-------
                            - 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.

-------
                             - 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

-------
                       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

-------
                            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)

-------
                            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

-------
                            - 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."

-------
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

-------
                            - 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

-------
                            - 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

-------
                            - 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.

-------
                            - 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",

-------
                            - 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

-------
                            - 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.

-------
                            - 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

-------
                            - 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

-------
                            - 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

-------
                            - 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.

-------
                            - 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

-------
                            - 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

-------
                             - 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

-------
                              •  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-

-------
                                                      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  —

-------
                                                     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 -

-------
                                                      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.

-------
                                                        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;

-------
                             -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.

-------
                               -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.

-------
                              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.

-------
                              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.

-------
                                 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.

-------
                              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.

-------
                                                    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.

-------
                              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.

-------
                            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.

-------
                              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.

-------
                               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.

-------
                               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.

-------
                               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.

-------
                                                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.

-------
                           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.

-------
                                                    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.

-------
                                                      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.

-------
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

-------
                       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

-------
                          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 .
•IMItMl
taitifl IMION M
. Environmental Protection Agency
i
c
1
t
SfAf f Off ICCC
^-T,C ,^.7J; iiS.1 .wmiiitt
IMA1ON 	 T»o«**iiiill ***"*'*' "wi1* 1
AIAII • urtAiwAHiAMo nrriir
»>U«t«Ul«UAI«M »»..„..«. i
<.dMLI AOVlMMf •)»>«> AOMIN1&IA

I J
•
•

I off* f or
^tftrttr
MMMIUMIKM
^ol^*l of
srarsr
t OffCI Of It*
^"~"Wf•^^l^
NUHAM M tUUW.fl
M*N»l,tM|Nl
i BTTifrBr
I—I IMWAIK1II
1 MWIUWII
1 UAMAhlMII*J



AlAfllAMl •lH«IIAt
twwKiMKi «Mt *mmwi
•KMIOM4






1 I
4»»«i«ii — .. *y*!*** rtm
•*'•• IMMMMCIMIMMM

^Ollfl of w«n* j o«ici of
IWOHlfUIMl -| ftO.UH.tll
^Of^>^I Of WAIiH IWIMCINCf AHO
MGMAtlOMt H»llt I^»W»|}|
J 1 ftf ' Cf Of
J WI.CItt»
| CMkH'IKC, Wlllfl

ifiMIII«4l» VVAllJI
r«ui|t IMM

...,-!-, 1 I (

* 	 1 tMOCUII 4«MW|IA>10* 1
A10M " 1 >O«M»DMM onuiicwt |


1 1 T


AUflAHl
MMXWllUKMfOI

Of f 
iHAibMtCN

^Hr^

I OMlCI Of MUM
Haim of

HOIII Of
1 OiKIOf
M IIIMfMI

1 1


rsSrl

l orrcc or ill |
OffCCOf
MMKl SOkMCIt
|l 2u*15i 1

MMMO* 1 • A 1  Jlf.tofUI.DUf
OfflClor
IHV MtOLItMIt
of f ici or

OflclOr
MtlADCn
Of » «Ct or
im«» 1 I MIAMI I I Muunt 1 1 MOMMI 1 1 MCUMI
•kMICM J | M,M (Of* J fMIAMir»**| AIIAMlA | | OM.AOO J ] BAtiA* J | «AMVkJCjn| | MNVl*

IMtMMl 1
«AMfHAM 1

I MOiOM M 1
1 MAtlll |

-------
    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

-------
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,

-------
                            - 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.

-------
•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. ..."

-------
                            - 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.

-------
\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

-------
        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

-------
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

-------
                   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

-------