&EPA
            United Status
            Environmental Protection
            Agency
            wni^e of Administration
            Resources Management
            (PM-226F)
EPA220M-8'.'
  jry 1989
Superfund
Financial Management
And Recordkeeping
Guidance For
Federal Agencies
                            '•


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             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, D.C.  20460
                                                           OFFICE OF
                                                         ADMINISTRATION
                                                         AND RESOURCES
                                                          MANAGEMENT
To EPA's Federal Partners In The Superfund  Program


     Prior to the reauthorization of  the  Superfund legislation
in 1986, we undertook an extensive program  to  enhance EPA's cost
recovery effort.  Our first emphasis  was  to get  our own financial
cost documentation in order.  Having  successfully reached that
objective, we believed it necessary to  reach out to the States
and other Federal Agencies who were facing  the same problems we
experienced.

     One significant step in that "Outreach" program is concluded
with the issuance of this document.   As Superfund clean-ups are
completed over the next few years, cost recovery from Responsible
Parties will become an ever more important  and complex respon-
sibility.  The effective approach to  document  Superfund costs
offered in this document recognizes the independence of each
Federal Agency, yet permits us to achieve consistency in the way
we approach cost recovery.  It is for this  reason that we believe
this document will provide you with valuable guidance as you plan
to participate in future cost recovery  actions.
                                       Charles  if.  Grizzled
                                       Assistarm Administrator

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Superfund
Financial Management
And Recordkeeping
Guidance For
Federal Agencies
 Cover photo
 Big Bend National Park, Texas
 by George Jett

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The policy and procedures set forth herein, and internal office procedures adopted
pursuant hereto, are intended solely for the guidance of attorneys and other employees
of the U.S. Environmental Protection Agency and for other Federal Agency personnel
with Superfund-related responsibilities. They are not intended to, nor do they constitute,
rulemaking by the Agency, and may not be relied upon to create a right or benefit,
substantive or procedural, enforceable at law or in equity by any person. The Agency may
lake any action which is at variance with the policies or procedures contained in this
guidance, or which is not in compliance with internal office procedures that may be
adopted pursuant to these materials.

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Contents
I. Introduction
  A. Purpose	 1
  B. Scope	 1
  C. Intended Audience 	 1
  D. Structure  	 3
  E. Reference  	 3
  F. The Legal  Basis For Cost Recovery 	 3
     1. General Legal Requirements	 3
     2. Records Required To Document Expenditures 	 4
     3. Requirements For Documents Submitted As Evidence 	 4
     4. Testing Of Agency Expense Records In Litigation	 5
  G. An Overview Of Cost Documentation Objectives 	 5

II. Financial Management Guidance 	 11
  A. Overview	 11
     1. Superfund Financial Management Objectives
       For Federal Agencies	 11
     2. Accurate Site and Activity Specific Cost Information  	 11
     3. Complete Site and Activity Specific Cost Information	 11
  B. Guidance	 12
     1. Superfund Accounting Objectives	 13
     2. Accounting For Direct Costs 	 15
     3. Accounting For Indirect Costs	 15
     4. Superfund Reporting Requirements 	 15
     5. Accounting For Superfund Property	 15

III.  Recordkeeping Guidance 	 16
  A. Overview	 16
     1. Agency Superfund Recordkeeping Objectives	 16
     2. Inability Of Non-Centralized Recordkeeping Systems
       To Meet Superfund Recordkeeping Objectives  	 16
     3. Active Site Filing  	 17
     4. Recordkeeping Planning	 17
  B. Guidance	 18
     1. Establishing Site Files 	 18
     2. Records To Be Retained In Site Files	 18
     3. Reconciling Site Files	 22
     4. Storage Media And Record Safety Procedures	 22
     5. Record Retention Requirements	 23
Appendices
  A. Agency Legal Responsibilities	  24
  B. Where To Go For Further Information 	  26
  C. Audits	  28
Index   	 30

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Introduction                                                                    Page 1

I.  INTRODUCTION                                  -   Financial management of Super-
                                                           fund expenditures
   The Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CER-            -   Recordkeeping necessary for cost
CLA) established the Hazardous Substance Re-                recovery
sponse Trust Fund (Superfund) to provide monies
for the identification, prioritization, and remedia-       •    Acquaints Agencies with some of the
tion of the nation's uncontrolled hazardous waste            legal  aspects of the Superfund cost
sites.  CERCLA, as amended by the Superfund            recovery program
Amendments and Reauthorization  Act of 1986
(SARA), provides for the recovery from respon-       •    Provides guidance on where to go for
sible parties of all response costs incurred by the            further information.
Federal Government.  Response costs generally
include expenses for investigatory, cleanup, en-   B.     SCOPE
forcement and administrative activities.
                                                  This handbook summarizes  Superfund  fi-
   The resulting need to document costs by site to   nancial management and recordkeeping guidance
facilitate Superfund cost recovery actions creates a   for Federal Agencies participating in Superfund
complex  set  of financial  management  and   Interagency Agreements with EPA (see Exhibit I-
recordkeeping problems. By pulling together all   1 on the following page). Because it applies to a
Superfund financial management and recordkeep-   broad range of Federal Agencies, it focuses primar-
ing guidance for Federal Agencies in a  single,   ily on how Agencies can develop financial man-
comprehensive  presentation,  this  handbook is   agement and recordkeeping systems that satisfy
designed to help Agencies receiving Superfund   EPA  cost recovery documentation needs.  The
monies to understand and meet their site-specific   handbook provides a conceptual understanding of
financial management and recordkeeping respon-   EPA's financial  management and recordkeeping
sibilities.                                      objectives, so that Federal Agency managers have
                                              a framework for developing their own procedures
     In addition to the cost recovery responsibili-   to  meet  those objectives.  In  no way does this
ties described herein, Agencies receiving Super-   document suggest that costs incurred prior to the
fund lAGs face certain reporting  requirements   adoption of the guidelines presented here may not
imposed by Congress.  Under CERCLA Section   be  recoverable.  In addition, this document con-
105(f), EPA is  required  to include in its  annual   tains an overview discussion of several legal con-
report to Congress information on its and other   cepts;  however, any analysis of law contained in
Agencies' use of minority contractors for Super-   this guidance is necessarily general and does not
fund work. Further information on how Agencies   and is not intended to constitute binding interpre-
should provide  this information to EPA  can be   tations of law by the Agency.
obtained from EPA's Office of Small and Disad-
vantaged Business Utilization (703-557-7777).     C.   INTENDED AUDIENCE

A.   PURPOSE                                   This handbook was written with the widest
                                              possible audience in mind.  It is intended for all
     This handbook serves several purposes:      Federal Agency personnel with Superfund-related
                                              responsibilities, including staff outside the Super-
     •    Establishes  consistent and complete   fund program area who may have an important cost
          guidance covering  Federal Agency   documentation role (for example,  staff in  an
          Superfund objectives in two areas:      Agency's comptroller's office).

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Introduction                           Exhibit I-1                             Page 2
          Agencies Participating in Superfund Interagency Agreements
               Department of Health and Human Services
                  Agency for Toxic Substances and Disease Registry
                  National Institute for Environmental Health and Science

               Federal Emergency Management Agency

               Department of Transportation
                  U.S. Coast Guard

               Department of Justice

               Department of the Interior
                  Bureau of Reclamation

               Department of Labor
                  Occupational Health and Safety Administration

               Department of Commerce
                  National Oceanic and Atmospheric Administration

               Department of Defense
                  Army Corps of Engineers
                  Navy

               Department of Agriculture

               Library of Congress

               ACTION

               National Aeronautics and Space Administration

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 Introduction                                                                      Page 3

 D.   STRUCTURE                           F.  THE LEGAL BASIS FOR COST
                                                  RECOVERY
     The handbook is divided into three chapters
 and three appendices. The remainder of this chap-       The primary purpose of the financial man-
 ter explains the legal framework for cost recovery  agement and recordkeeping objectives described
 actions, and provides an overview of EPA'sfinan-  in this handbook is to facilitate Superfund cost
 cial management and recordkeeping objectives for  recoveries.  Tax revenues, plus recoveries from
 Superfund. Chapter two details Federal Agency  responsible parties, are the main sources of funds
 financial management guidance for the Superfund  for cleaning  up hazardous  waste  sites, and  the
 program. Chapter three provides guidance on the  amount of money that can be raised through taxes
 maintenance and retention of supporting Super-  is of course strictly limited.  Recoveries have the
 fund cost documentation  -  time  sheets, travel  potential of playing a major role in replenishing the
 vouchers, contractor invoices, technical progress  Superfund, thereby providing funds for additional
 reports, explanations of fringe benefit and indirect  clean-up work.
 cost calculations, and other records - in individual
 site files.                                           It is important for administrative and pro-
                                              gram managers as well as their staffs to understand
     Appendix A, "Agency  Legal Responsibili-  the legal principles underlying the cost recovery
 ties" provides information on what types of docu-  objectives outlined  in this text.  Management
 mentation and assistance agencies are expected to  should review all Superfund financial manage-
 provide during litigation of a cost recovery case,  ment procedures  to assess whether  the expense
 Appendix B, "Where To Go For Further Informa-  documentation their system produces satisfies the
 tion" is discussed below. Appendix C, "Audits"  standards outlined in this section.
 provides Agency managers with information on
 audits of Superfund expenditures.                     The remainder of this section is divided into
                                              five parts. The first part provides an  overview of
 E.   REFERENCES                          CERCLA cost recovery cases, and  explains  the
                                              role of cost documentation in the cases against the
     While this handbook is intended to be  the  responsible parties.   The three following parts
 primary source of Superfund financial manage-  detail the specific requirements that may have to be
 ment and recordkeeping guidance for Federal  met in cost recovery cases. The final part of this
 Agencies, other EPA manuals and directives con-  section explains briefly how the  government's
 tain procedural guidance and background informa-  expense claims are tested in litigation,  a topic
 tion on many of the topics discussed here. Appen-  covered in more detail in Appendix A. Examples
 dix B is designed to help Agency managers deter-  are provided throughout to illustrate  the legal is-
 mine which reference materials cover the topics in  sues involved.
 which they are interested.
                                              1.   General Legal Requirements
     Federal Agency managers should not limit
 themselves to consulting reference materials. EPA       In order to pursue a CERCLA cost recovery
 regional staff, or Headquarters if necessary, should  action against a responsible party, the government
 be consulted for clarification or further detail on  generally must be able to show, from  a cost docu-
EPA objectives. EPA Headquarters staff will work  mentation standpoint,  two points:  first, that  the
with regional staff to fully answer any questions  government  did  work at the  site  to remedy or
from Federal Agencies on the topics discussed in  prevent a  release  of a hazardous substance; and
this manual.                                    second, that the government can accurately docu-

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  Introduction                                                                       Page 4

  mcnt the cost of the remedy or prevention.  This  contractor's efforts were authorized, a copy of the
  handbook will focus on the documentation a Fed-  contract should of course be retained. But in this
  eral Agency  may have to provide  to EPA and  case, the Agency's authorization process begins
  Department of Justice attorneys during a recovery  with a Request For Proposal (RFP) and  detailed
  action to successfully prove the cost of the remedy,  evaluations of contractor bids; consequently, these
                                                should also be retained. Similarly, proving that the
  2.   Records Required To Document           agreed-upon work was reviewed and accepted
      Expenditures                             requires not just the Agency's final sign-off on the
                                                contract, but also technical progress reports detail-
      Over the course of work on a site, a Federal  ing contractor activity at each stage of the project.
 Agency may incur costs  in  several categories:  Copies of contractor invoices satisfy the require-
 direct labor by the Agency's personnel, travel,  ment for billing records, while records showing
 supply and  equipment  costs, contractor costs,  payment dates, amounts and reference or check
 construction costs, and administrative and over-  numbers  would be required to demonstrate pay-
 head ("indirect") costs.  An Agency may have to  ment of invoices.1
 demonstrate four  points about each  category of
 cost to sustain EPA's cost claims in court:               Employee labor costs are somewhat easier to
                                                document. Specific written employee assignments
      •     That the work or purchase was author-   to a site  are not required, since a supervisor can
           ized by the Agency.                   support employees' authorization to perform the
                                                work. Timesheetscan provide proof of the remain-
           That the work or purchase, or portion   ing  points  under  most  circumstances.   The
           thereof to be paid for, was received and   timesheet, which is similar to the vendor's bill, is
           accepted.                             the Agency's evidence documenting payment, as
                                                long as any subsequent corrections are attached.
           That the Agency was  billed  for  the   The signature of the employee and the employee's
           work or purchase.                     supervisor generally should be used to  certify that
                                                hours on the timesheet were spent working on the
      •     That the Agency actually paid for the   site.
           work or purchase.
                                                3.   Requirements For Documents Submitted
Together, these four points establish the "history"       As  Evidence
of an expense item.
                                                    To  be admissible as evidence in court, each
      Clearly,  demonstrating  all  four of these   document submitted as evidence to support costs
points for each  type of expense would require   claimed by a Federal Agency must meet a number
supporting records from various sources. A de-  of legal requirements generally specified in the
tailed list of what  types of records should be re-  Federal Rules of Evidence.  These legal require-
tained for each category of expense is provided in  ments, designed to ensure  the authenticity and
chapter three; the aim of this section is to provide  reliability of evidence, are as follows:
Agency personnel  with an understanding of why
specific documents should be kept. To illustrate  	—	
the four requirements, some examples are pro-  ' AnAgcncy'scontractorsmaybcrcquircdtoprovidcdocu-
  • j j u  i   .                                      mentation dcmonstraung authorization, completion, bill-
                                                 ing and payment for their own expenses, such as  salaries,
                                                 supplies and equipment, subcontractors and so on. Sec
     Contractor  costs  may  require  extensive    chapter three for details on documentation requirements
documentation. In order to demonstrate that the    for ASency contractors.

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Introduction                                                                     Page 5

     •    The  document must have been pro-  tivity, staff and management need to be able to
          duced at roughly the same time as the  view specific objectives as part of a larger process.
          expense was incurred.
                                                   The focus of this section is a four-page ex-
          The  document must be produced and  hibit depicting a hypothetical or "model" financial
          utilized in the normal course of busi-  management and recordkeeping system that meets
          ness.                               all EPA  Superfund-related objectives, with  an
                                              emphasis on cost documentation for successful
In addition, to  have the document  admitted  as  cost recovery actions. The system depicted in the
evidence, an Agency witness may  be required to  exhibit is not "the answer" to meeting the objec-
testify to the authenticity and reliability of the  tives presented in this handbook. There is no one
document.                                     answer applicable to all Federal Agencies; each
                                              Agency has developed or will develop its own
4.   Testing Of Agency Expense Records In    system, according to its own management, struc-
     Litigation                               ture and  internal  procedures.   The aim of the
                                              exhibit, and of this section, is simply to start man-
     A cost documentation package submitted by  agers  thinking about financial management and
a Federal Agency in a cost recovery action may be  recordkeeping objectives in a systematic way.
challenged by lawyers for the responsible party if
any of the standards described above  are not met.       Six "functional areas" are used in the exhibits
Opposing counsel can question Agency personnel  which follow page 6:  Legal, Contracts Admini-
under oath on Agency recordkeeping, financial  stration, Program  Office, Recordkeeping, Ac-
management, procurement practices and any other  counting Operations, and Paying Agent. In many
topics relevant to the lawsuit. They may be able to  Agencies, several of these functions will be housed
require Agency managers to respond to written  within the same organization. For example, the
questions on these subjects.  In addition, they may  "Program Office" and "Contracts Administration"
be able to examine all supporting expense records  may well be part of the same group. Or, "Contracts
to search for inaccuracies, inconsistencies or other  Administration"  and "Accounting  Operations"
documentation flaws.  Appendix A provides fur-  could be separate offices under the  Agency's
ther  information  on the kinds  of inquiries  an  comptroller's office. Whatever organization they
Agency may have to respond to in litigation, as  are part of, each of the six areas is likely to have a
well as Agency  responsibilities for assisting gov-  different primary supervisor, and hence is treated
ernment lawyers in their handling of a cost recov-  as a separate function.
ery case.
                                                   Activities in the financial management and
G.   AN OVERVIEW OF COST              recordkeeping model  presented here  generally
     DOCUMENTATION OBJECTIVES      occur in three phases, which are described b.elow.
                                              Cost documentation is the "thread" which joins all
     This section provides a systematic overview  three phases, since cost documentation activities
of all the financial management and recordkeeping  begin the moment an IAG is executed for work at
objectives discussed in this handbook.  The term  a site and do not end until work is finished and the
"systematic" applies because successfully meeting  Interagency Agreement is closed out.  The three
EPA'sSuperfundobjectivesintheseareasrequires  phases of activity are described below.
coordinated action by staff  in several functional
areas over a long period of time. In order to initiate  1.  Initiation describes  the initial steps taken
and maintain this kind of closely-coordinated ac-  when work (other than a preliminary assessment)

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 Introduction                                                                      Page 6

 begins at a site. Exhibit I-2(a), the first of the four   accomplish, not how they should be accomplished.
 exhibit pages, outlines the initiation phase.         Procedures for implementing a system that meets
                                                EPA's  Superfund  financial management  and
 2.   Ongoing Activity represents the day-to-day   recordkeeping objectives can only be designed by
 financial management and recordkeeping activi-   Agencies themselves,  although EPA can assist
 ties that take place during work at the site.  Phase   Agencies in implementing  cost  documentation
 two is depicted in Exhibit I-2(b) and I-2(c), the   systems if requested.
 second and third exhibit pages.

 3.   Cost Documentation Package Preparation
 begins when Agency program managers receive a
 request from EPA or the Agency's own legal staff
 for a package detailing Agency expenses at the site.
 The key document in a cost documentation pack-
 age is an up-to-date summary of costs. This sum-
 mary, which should break out costs by category
 (salaries, travel, supplies  and equipment,  con-
 tracts, etc.) goes in the front of the package.  The
 rest of the package is divided into sections contain-
 ing supporting documentation for each of the cost
 categories listed in the summary.  Reconciliation
 of all the expense records in each section to the cost
 summary is the final step in the preparation of acost
 documentation package.  No  cost documentation
 should be submitted to legal staff until the expense
 records in the package reconcile exactly with the
 cost summary. Exhibit I-2(d) on the fourth exhibit
 page describes the process of preparing a cost
 documentation package.

     Of course, the activities  described in the
 following exhibit fall out from specific guidance
 detailed later in this handbook. Readers may want
 to return to the exhibit  after  they have read the
 remainder of  the  handbook;  initially, however,
 they should focus on trying to look at Superfund
 financial management and recordkeeping func-
 tions as an interrelated cost documentation system.

     As intended, the exhibit leaves much unsaid
 about the specific procedures  used to ensure that
 the six functional areas do exactly what they are
 supposed to, when they are supposed to. EPA's
financial management and recordkeeping objec-
tives for Superfund, which will be incorporated in
the special conditions of all lAGs, have been de-
fined in terms  of what Agencies are expected to

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Initiation Phase: An Example
c
o


o'
Functional
Area

Legal


Contracts
Administration
Program
Office
Record-
keeping


Accounting
Operations
Paying
Agent








Informs other
offices that
work will begin
at site





















^
W















Generates site
identifier;
informs other
offices











f












^-
W
^-

•N^
^^






Activity




Drafts contract
for work at
site
Informs
program staff
of site
identifier
Opens
file and
original file





f

Reviews contract
with FAR
Charges contract
development time
to site, forwards
timesheets
































^




^










Awards contract
and forwards
copies to
recordkeeping


Retains Contract
Administration
timesheets in site
and original files

Loads time
charged to site
system









Work
begins
Retains copies
bid evaluation
records














































W
X
cr
r+
t-H
1
s— '





13
(TO
-O

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                                         Ongoing Activity: An Example
                                                                                                                                c
                                                                                                                                o
                                                                                                                                f—f
                                                                                                                                o"
                                                                                                                                p
 Functional
     Area
                                                Activity
     Legal
   Contracts
Administration
   Receives
 invoices from
  contractor
                   Codes invoices
                      with site
                    identification
  Program
   Office
 Pro gram staff
records time and
 travel by site
  and activity
Approves bills;
 provides tech.
information on
  work done
                                                                    W
                                                                    ET
                                                                    51
                                                                                                                                                   to
   Record-
   keeping
                   Retains copies of
                    time and travel
                  records in site file
                   and original file
                   Retains invoice
                   approval in site
                   file and original
                        file
Retains copies
of invoices in
 site file and
 original file
Retains copies of
payment records
 in site file and
  original file
 Accounting
 Operations
                    Loads time and
                    travel charged
                     to site into
                     accounting
                   	system
                                         Loads contract
                                         costs by site
                                        into accounting
                                           system
    Paying
    Agent
                                                                               Pays contractor;
                                                                               forwards proof of
                                                                                   payment
                                                                                                                                                   Crp
                                                                                                                                                   a
                                                                                                                                                   oo

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                                  Ongoing Activity: An Example
                                                                                                                o
                                                                                                                «-*
                                                                                                                o"
                                                           Activity
                                                                                              Functional
                                                                                                 Area
                                                                                                                     Legal
                                                                                                                   Contracts
                                                                                                                 Administration
                                                                                                                                     w
                                                                                                                                     x
                                                                                                                                    ^o
                                                                                                                                    'rT
                                                                                                                     Program
                                                                                                                      Office
                                       Gets supporting
                                       documentation
                                         on indirect
                                          charges
                                        Reconciles
                                       summary with
                                        supporting
                                        documents
                                                         Retains copy of
                                                          SF 1080/1081
                                                         or SF 133 in site
                                                         and original Hies
                                      Record-
                                      keeping
  Computes
  Superfund-
related indirect
   charges
Adds indirect
 charges to
direct charges
  Produces
  summary
reports of all
costs for site
  Sends SF
1080/1081 or
  SF 133 to
   EPA
Accounting
Operations
                                                                                                                     Paying
                                                                                                                      Agent
                                                                                                                                    *U
                                                                                                                                    (2
                                                                                                                                    
-------
        Cost Documentation Package Preparation Phase: An Example
                                                                                                         I
                                                                                                         c
                                                                                                         o
                                                                                                         r-f
                                                                                                         o"
                                                                                                         3
 Functional
    Area
                                       Activity
    Legal
                                                                         Reviews cost
                                                                          package for
                                                                        consistency and
                                                                         completeness
  Contracts
Administration
                w

                cr
                r-f
                I—I
                K>
  Program
   Office
 Initiates cost
documentation
  package
 preparation
                                    Sends cost
                                    package to
                                      EPA
   Record-
   keeping
                   Requests
                  up-to-date
                 cost summary
 Reconciles
summary with
 supporting
 documents
Is prepared to
  provide
testimony on
cost package
 Accounting
 Operations
                                      Forwards
                                       cost
                                      summary
   Paying
    Agent
                                                                                                                         (TO

                                                                                                                          >—*
                                                                                                                          O

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Financial Management Guidance
                                  Page 11
II.   FINANCIAL MANAGEMENT
     GUIDANCE

     This chapter provides guidance to Federal
Agency  management personnel  charged with
meeting EPA's objective of recording Superfund
expenses by  site  and activity.  The Superfund
program requires  Agency financial management
and accounting systems to track expenses by site
and activity.  This is necessary to ensure that the
Federal government  can  effectively recover its
expenses on a site from responsible parties.  In
addition, site  and  activity specific  accounting in-
formation provides a crucial check on the com-
pleteness of a Federal Agency's  Superfund ex-
pense records.

A.   OVERVIEW

     This initial section provides a general over-
view of the capabilities Federal Agency account-
ing systems should have, and discusses the role of
accounting and financial management systems in
the cost documentation process. The second sec-
tion of this chapter provides specific guidance on
meeting site and activity specific accounting and
financial reporting objectives.

1.   Superfund Financial Management
     Objectives For Federal Agencies

     The Superfund financial management guide-
lines presented in this handbook are designed to
ensure that site and activity  specific expenditure
information is available to managers at Federal
Agencies, enabling them to file accurate financial
reports  with  EPA, make site-by-site budgeting
decisions, and accurately document site cleanup
costs. To achieve this goal, Federal Agencies are
expected to implement site and activity specific
accounting systems.   An integral part of those
systems are control procedures to ensure that site
and activity specific accounting information is:

     •    Accurate; i.e. that only costs attribut-
          able to a site are charged.
     •    Complete; i.e. that all costs, including
          allowable indirect costs, attributable to
          an Agency's Superfund effort are re-
          corded and charged to individual sites
          and activities.

These two primary objectives are discussed further
below.

2.   Accurate Site and Activity Specific Cost
     Information

     Financial management offices  at Federal
Agencies must ensure that site and activity specific
accounting information is accurate.  Accounting
system accuracy problems can be caused by:

          Inaccurate direct labor charging, due to
          clerical errors or questionable time and
          attendance reporting practices.

     •    Incorrect allocation of administrative
          and overhead costs.

     •    Inconsistent  charging practices,  for
          example, where  a cost is charged di-
          rectly on some lAGs but not on others.

     There are two procedures to reduce or elimi-
nate the types of financial management problems
described above. First, Agency managers should
thoroughly review  pertinent financial and IAG
management procedures. Secondly, site and activ-
ity specific accounting reports should be periodi-
cally reconciled  to  supporting cost records, e.g.
timesheets,  vouchers,  and  contractor  invoices.
Such a reconciliation should be performed at least
twice a year.

3.   Complete Site And Activity Specific Cost
     Information

     It is crucial for both program management
and cost recovery purposes that accounting infor-
mation provided by an Agency's financial man-
agement office record  all Superfund  costs.   In

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Financial Management Guidance
                                   Page 12
particular, staff who maintain files of supporting
cost documentation rely heavily  on accounting
information to decide  what expense records to
obtain and file. Site and activity expense reports
serve as a "roadmap" of the costs the Agency has
incurred. Expenses that do not show up in account-
ing reports  cannot be adequately documented;
moreover, management will be unable to plan for
these expenses in its budgeting process.

      Given the importance of recording all Super-
fund expenses, Federal Agency managers should
review their financial management procedures to
ensure that all allowable costs -  as defined by
Federal regulations and the Agency's interagency
agreement with EPA -  are recorded by  site and
activity in their accounting system. In reviewing
Superfund accounting practices and in reading the
remainder of  this  handbook, some distinctions
between the various types of costs an Agency's
accounting system must process should be kept in
mind:

     •    Direct costs are those expenses which
          are or should be charged to sites using
          timesheets, vouchers and other site and
          activity  specific records.  The second
          section of this chapter provides specific
          guidance on which costs should be
          charged directly to sites.

         Indirect costs are expenses that support
          a Federal Agency's overall Superfund
         effort but are not directly attributable to
         individual sites.  Within this broad
         category of costs, it is important  to
         distinguish between two types of indi-
         rect costs:

               General (Agency-wide) Indirect
               Costs are incurred by an Agency
               in supporting all programs. This
               category  includes  common
               Agency charges for rent, data
               processing, centralized financial
               operations and other services, as
               well as salary costs for top depart-
                mental managers.  EPA Comp-
                troller Policy Announcement 87-
                10 provides that Agencies may
                bill EPA only for indirect costs
                specifically associated with per-
                formance  under lAGs; conse-
                quently, general or Agency-wide
                indirect costs are not allowable
                under Superfund lAGs unless an
                Agency is specifically authorized
                by Congress to  charge  for such
                costs. (EPA's policy is based on a
                pronouncement  by  the  U.S.
                Comptroller  General;  see  57
                Comp. Gen. 674, 681-683.)

                Superfund  Indirect Costs are
                administrative and other non-site
                and activity specific costs associ-
                ated with an Agency's Superfund
                program.1  These costs are bil-
                lable  to EPA as indirect  costs
                under lAGs and recoverable from
                responsible parties.

Using these distinctions, Agency financial manag-
ers can catalog their Agency's Superfund costs,
assess whether they are completely accounted for,
and develop methods to include all Superfund
costs in site and activity specific accounting re-
ports.

B.   GUIDANCE

     This section presents EPA's accounting and
financial management guidance for Federal Agen-
cies participating in Superfund Interagency Agree-
ments. The  first part of the section discusses site
and activity specific accounting  objectives, and
provides suggestions on overcoming accounting
system software limitations. The two following
parts provide specific guidance on accounting for

1  Some portion of an Agency's Superfund administrative
  expense is usually paid for by an administrative support
  (generic) IAG which is  recoverable by EPA through its
  indirect cost model.

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 Financial Management Guidance
                                    Page 13
 direct and indirect costs by site and activity. Infor-
 mation on site and activity specific reporting under
 Superfund lAGs is provided in the last part of this
 section.

 1.    Superfund Accounting Objectives

      The primary Superfund accounting objective
 is that Federal Agency accounting systems should
 be capable of producing reports  for each Inter-
 agency Agreement that break out costs by  site,
 then by operable unit, then by activity, and then by
 the object class categories provided for in the IAG.
 EPA has defined  eight activities which are indi-
 cated in lAGs and  should be used in all cost reports
 submitted.  The activities and their EPA account
 codes are as follows:

           J - Pre-remedial Activities

           L - Remedial Investigation/Feasibility
           Study

      •     N - Remedial Design

      •     P - Oversight

      •     R - Remedial Action

           S - Operation and Maintenance2

      •     E - Removal Action

      •     2 - Judicial Enforcement

      •     U - Laboratory Analysis

In order to produce reports at such a level of detail
that  are both  accurate and  complete, Federal
Agency accounting systems should record site,
activity and expense class information with each
accounting entry for Superfund direct costs. Agen-
cies may use their own accounting codes for track-
ing costs by site and activity, but the EPA site/spill
ID and activity codes should be used in all financial
documents sent to  EPA.
      Many Agencies have developed accounting
systems to track expenses by Interagency Agree-
ment number which can readily be adapted to meet
Superfund site and  activity specific accounting
objectives.  Many site and activity specific ac-
counting systems reviewed by EPA in the past have
calculated direct charges to sites using budgeted,
"estimated" or average data, rather than actual
salary, travel, and other costs. While these systems
may have been used in the past and may still be ap-
propriate, actual costs provide a desireable basis
for all reports of direct site charges, and accounting
systems that cannot report actual costs by site and
activity should be updated (except in those Agen-
cies involved strictly in emergency removal activ-
ity, as noted on page 11).

2.    Accounting For Direct Costs

      Superfund direct costs should be charged to
specific sites  and  activities on a regular basis.
Some Federal Agencies simply charge all direct
expenses  to specific sites and activities as the
outlays occur.  Some Agencies, however, charge
direct expenses to a general purpose account, and
then make periodic accounting entries to transfer
charges from that account to site/activity accounts.
If such a procedure is used, direct charges should
be "backed  out" of general purpose accounts at
least monthly, so that the accounting entry is made
at roughly the same time the expenses are incurred.
The following sections provide detailed guidance
on accounting for  the major categories of direct
costs.
2 It is not EPA's policy to fund operation and maintenance
  of a completed remedy. EPA will, however, fund that part
  of remedial action, for a period up to one year, to ensure that
  the installed remedy is operational and functional. EPA
  will fund the operation of such treatment or  measures
  involved with the restoration of contaminated ground or
  surface water for up to 10 years or until levels that assure
  protection of human health and the  environment arc
  achieved, whichever comes first. Both of these  situations
  are considered part of remedial action, and therefore, must
  be funded under the "R" code.

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Financial Management Guidance                                                    Page 14

a.   Agency Salary Costs                      entirely to that site (the site should be credited for
                                               the salvage value of equipment that does not re-
     Salaries of staff whose time is to be charged  main on site as part of the remedy; see section five
to  specific  sites  should fill out  site-specific  of this chapter for more information on Superfund
timesheets for input of site and activity specific  property management and disposition). Forequip-
charges into the accounting system. A daily log of  ment used on multiple sites, a "usage rate" should
staff activities  kept by appropriate supervisory  be developed. Some Agencies already have calcu-
personnel could be used if timesheets are not avail-  lated hourly or daily charges for certain common
able.   Once used to enter information into the  types of equipment. For equipment not covered by
Agency's accounting  system, the timesheet or  such standard charges, a usage rate is calculated as
activity log  becomes the primary salary expense  follows: if a piece of equipment is expected to last
record to be retained by the recordkeeping staff.  10,000 hours, and its  cost - purchase price plus
Staff whose  entire salary is included in the cost  estimated maintenance less salvage value - equals
base for an Agency's  indirect cost rate cannot  $100,000, then the usage rate is $10.00 per hour.
charge any  hours directly.   (Agency managers  Agencies should set up a voucher system to record
should contact their comptroller's office for infor-  by site the hourly usage of each piece of Superfund
mation on the composition of their Agency's indi-  equipment, and then use the applicable equipment
rect cost rate.)                                  usage rates to calculate direct equipment charges.

b.   Travel Expenses                          d.   Supply Costs

     All transportation,  meal and lodging  ex-       Like equipment, supplies used on site work
penses incurred traveling to and from sites or on  should be charged to the specific sites on which
site-specific business should be recorded on a site  they were used. An inventory log for signing out
and activity specific basis.   // is essential that  supplies to individual sites could be used as the
employee timesheets and travel vouchers agree. If  basis for site and activity specific supply charges in
an employee submits a voucher for travel to site X,  an Agency's accounting system.
the employee's time sheet should  also show time
charged to site X for that day.  Inconsistencies be-  e.   Contractor Costs
tween time sheets and travel vouchers make recov-
ery of those  costs difficult.                            Contractor costs should also be accounted for
                                               on a site and activity specific basis.  EPA requires
     Expenses for travel to multiple sites should  its contractors to submit invoices with costs broken
be divided among the sites in a logical way  and  down by site and activity within each site; other
charged directly.  Depending on  circumstances,  Agencies should do likewise. Contractor invoices
travel costs can be charged in several ways. Inmost  should be organized in such a way that Agency
cases, apportioning the total travel cost between  staff reviewing  the invoices  for  payment  can
sites based on the relative amount of time spent at  quickly identify which  charges apply to which
each site is acceptable. An Agency's travel vouch-  sites, and, if the contractor has not already done so,
ers and travel authorizations should provide space  mark the invoices with designated  site codes for
for charges to multiple sites.                     input into the Agency's accounting system.

c.    Equipment Costs                         f.    Construction  Costs (In-House)

     Equipment costs should be charged on a site       In-house construction costs, like contractor
and activity  specific basis. Equipment purchased  costs, should be accounted for on a site and activity
for use on one site only can of course be charged  specific basis.

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 Financial Management Guidance                                                   Page 15

 g.    Other Costs                              in their lAGs. Reports of expenditures for transfer
                                               allocation lAGs are required monthly on EPA's SF
      Costs falling into categories not mentioned   133.
 above should be accounted for on a site and activity
 specific basis wherever possible. Agencies should   5.    Accounting For Superfund Property
 be sensitive to the fact that the cost of developing
 a site and activity specific charging mechanism        Agencies face certain property management
 may be excessive given the size of some types of   and accounting  requirements  when  purchasing
 miscellaneous expenses.                         property or equipment under a Superfund IAG.
                                               EPA  will retain title to all property  purchased
 3.    Accounting For Indirect Costs             through a Superfund IAG.  As a user of EPA
                                               property, an Agency must maintain an accurate
      As discussed in the overview to this chapter,   inventory of such property in its accounting rec-
 Agency-wide  indirect  costs are  not  allowable   ords.   Information on purchase  cost, location,
 under lAGs unless specific Congressional author!-   condition and maintenance must be maintained. At
 zation for such charges exists.  Superfund-related   termination of an IAG, EPA must be contacted for
 indirect costs are allowable and recoverable, how-   disposal instructions for any equipment that is not
 ever.  In order to include data on these expense   remaining on site.  EPA must receive reimburse-
 items in site and activity specific  accounting re-   ment for the fair-market value of any property
 ports, a methodology for allocating expenses to   disposed of or employed by an Agency for non-
 individual sites is necessary. EPA's policy is that   Superfund activities.  EPA's property manage-
 Agencies  develop  rational, defensible  allocation   ment requirements for lAGs are discussed in detail
 methods for claimed Superfund indirect costs (not   in the Property Management Order (see Appendix
 reimbursed by EPA  on Administrative Support   B for reference).
 lAGs) so that they can be recouped in the cost re-
 covery process.

     Developing a method of allocating Super-
 fund indirect costs to individual sites is particularly
 critical  for  those  Agencies receiving funding
 through allocation transfer lAGs.   Therefore,
 Agencies  receiving allocation  transfers are ex-
 pected to  develop  and  document cost allocation
 plans  for  their Superfund indirect costs.  These
 allocation plans should be structured to allocate all
 Superfund indirect costs to Superfund sites.

 4.    Superfund Reporting Requirements

     Reporting  requirements  under Superfund
 lAGs  differ from those under  other agreements
primarily in that financial reports must include site
and activity specific expense information. Agen-
cies performing work on a reimbursement basis
should file EPA's SF 1080 or SF 1081 as called for

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  Recordkeeping Guidance
                                    Page 16
  III.  RECORDKEEPING GUIDANCE

       Federal Agency recordkeeping procedures
  for Superfund cost documentation are receiving
  increased attention at EPA due to the growing
  number of cost recovery actions likely to be initi-
  ated in the next several years.  This chapter pro-
  vides guidance to Agency personnel charged with
  implementing EPA's objectives for the collection,
  filing and retention of Superfund cost records.  It
  discusses in  detail one  approach  to  Superfund
  recordkeeping which has proven effective at EPA,
  called active site filing, which we are suggesting
  that Federal Agencies with Superfund lAGs adopt.
  (Agencies with administrative lAGs  should  be
  aware that the guidance presented here applies to
  administrative IAG recordkeeping also.)

      It is important to note that the cost documen-
 tation objectives described in this chapter apply to
 both the Agency and its contractors. Agencies are
 encouraged to move their contractors toward adop-
 tion of the recordkeeping approach outlined in this
 chapter through the use of specific language in all
 procurements.

 A.   OVERVIEW

      Effective recordkeeping procedures are es-
 sential to cost recovery.  This overview describes
 the  objectives Federal Agency recordkeeping
 functions are expected to meet, and outlines some
 of the reasons for EPA's adoption of active site
 filing as the preferred way to meet those objectives.
 Suggestions on recordkeeping planning are also
 provided.

 1.   Agency Superfund Recordkeeping
     Objectives

     The recordkeeping guidance presented here
 has two objectives:  first, a complete set of ex-
 pense-related records for each site, and second,
 timely access to those site records. As discussed in
 the introduction to  this handbook,  incomplete
documentation of cleanup expenditures seriously
  weakens a cost recovery action.  Similarly, EPA
  and Department of Justice (DOJ) legal staff need
  speedy access to Agency expense records to pursue
  cost recovery actions effectively.  Frequently, the
  litigation team requires documentation in less than
  30 days.

  2.   Inability Of Non-Centralized
      Recordkeeping Systems To Meet
      Superfund Recordkeeping Objectives

      Active site filing, described in detail below,
  was developed in response to numerous cost docu-
  mentation problems encountered at EPA. Expense
  records could not be obtained quickly enough to
  meet litigation schedules, and they were frequently
  incomplete.  The problems resulted from several
 factors:

      •     Records were stored in numerous loca-
           tions, making retrieval a time-consum-
           ing task involving coordination  with
           each  location.

      •     Superfund expense records were co-
           mingled with other expense records.

      •     Records were not stored in a standard
           order.   Timesheets from  one  EPA
           Region might be ordered by pay period
           and employee name,  while  another
          EPA Region would order them by sec-
          tion and employee  number.

          Required expense records were some-
          times not retained  due to  confusion
          over who was responsible for their re-
          tention.

      The problems described above are a by-prod-
uct of not having a centralized recordkeeping sys-
tem for Superfund expense records. Active site
files and standard agency-wide filing procedures
were developed at EPA to centralize the location
and standardize the format of Superfund expense
records.

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 Recordkeeping Guidance                                                           Page 17

 3.    Active Site Filing
                                                          Staff responsible for maintaining site
      Active site filing is a simple, straightforward            files have access to detailed site-spe-
 solution to many of the recordkeeping problems            cific accounting reports, as a check on
 described above. A unique file or set of files should            the completeness  of  their files (see
 be set up for each site.  As money is spent on the            "Reconciling Site Files"  in the next
 site, expense records are generated, and photocop-            section).
 ies of the expense records pertaining to each site
 should be  placed  in the active site file for each       In summary, after a Superfund site and activ-
 affected site. The original expense records should  ity specific  document  is processed  through  an
 then be filed in separate "Superfund original/offi-  Agency's accounting system, the original must be
 cial document files." In some Agencies, expense  separately filed and reconciled as soon as possible
 records all go to a central record storage site.  In  with the accounting system to ensure that charges
 such  cases, it is advisable to physically separate  are correctly processed.  In  addition, a copy or
 Superfund records from other Agency records at  copies should then be made and filed in the site file.
 the storage site, in order to prevent them from being  This  file should be periodically reconciled for
 disposed of when  other  Agency  records are  completeness and accuracy.
 "purged."  (Retention requirements and micro-
 filming standards for Superfund originals are dis-  4.    Recordkeeping Planning
 cussed at the end of this chapter.)
                                                     A recordkeeping system to meet the objec-
      The importance of the active site filing sys-  tives described in this chapter cannot be developed
 tern becomes apparent when expense records con-   without some planning in advance. In developing
 tain charges  to more than one site.  For  those   a recordkeeping system for  Superfund expense
 records, multiple photocopies are to be made, one  records, Agency managers need to consider some
 copy  for each site-specific file.  This will ensure   of the following questions:
 that the original document of a particular multi-site
 transaction does not become misplaced if the docu-        •    Who should be responsible for collect-
 ment is frequently needed for numerous cost re-            ing and filing records  in original and
 covery packages.  In order to facilitate quick re-            site files?
 trieval of Superfund expense  documents, the site
 files should be all arranged in the  same way, and       •    Which  offices generate the  expense
 filing procedures should  be documented, to ensure            documents  that  recordkeeping staff
 that records are filed correctly.   A list of the            need to pull and copy for site files and
 expense records thatAgencies would copy fortheir            then store in original files?
 site files is provided in the second section of this
chapter, along with requirements for how long the       •    How should the expense  records be
original expense records must be retained.                   ordered in original and site files?

     EPA has found that active site filing works       •    What arrangements should be made for
    if:                                                   cost-effective and safe  long-term stor-
                                                         age for expense records, once activity
          The site files are under centralized            at the site has ceased and the files are no
          control, since they are likely to be better            longer being updated?
          organized if only a few staff members
          have  day-to-day  responsibility for       •    What measures should  be taken to
          updating them.                                  ensure that the site files and original

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Recordkeeping Guidance
                                   Page 18
           files are protected from fire, water and
           other damage?

     •     What arrangements should be made to
           ensure that EPA/DOJ have ready ac-
           cess to the site files?

B.   GUIDANCE

     This section provides Federal Agency man-
agers with specific guidance on Superfund expense
record retention. It discusses what types of docu-
ments  should be retained by an Agency, ways
Superfund document files could be ordered, how
long the files should be retained, and procedures
for periodic  reconciliation of expense  records.
Much  of the discussion  in the section revolves
around  active  site  filing,  the  Superfund
recordkeeping approach preferred by EPA. Man-
agers at Agencies which  elect to use some other
recordkeeping approach should read this  section
carefully, however, since, for oversight as well as
cost recovery, EPA is requii ing that Agencies have
the capability of promptly producing all of the
records listed in this section.

1.   Establishing Site Files

     As discussed in the  previous section, active
site filing involves the maintenance of a separate
set of files for each site and procedures for copying
original expense records and filing the copies in the
site files.1 In order to minimize the copying burden
on the Agencies which adopt active site filing, EPA
has designated certain expense-related records,
primarily documents that apply to multiple sites, as
exempt from  site filing.  Exhibit ffi-1 on the  fol-
lowing page  lists those documents that Agency

1  While charges to administrative support lAGs  may not
  always relate to any one site, the same types of documen-
  tation  necessary for  a site-specific IAG (payroll, travel,
  etc.) should be retained to  support administrative IAG
  charges, which are also recoverable from responsible par-
  ties (through EPA's indirect cost model). Therefore, it may
  be helpful to think of an administrative IAG as a "multi-
  site," and set up an "administrative IAG file" for photocop-
  ies of expense records of each site.
recordkeeping staff should have ready access to,
but which should not be kept in site files. An in-
depth description of the documents that should be
kept in site files follows in the next section.

     Whether an Agency adopts active site filing
or not, EPA is requiring that its system for keeping
Superfund  expense records meet  the following
objectives:

a.   Consistent Filing Protocol

     All Superfund expense files  should be ar-
ranged in the same  way, and  Agencies should
develop a single "filing protocol" for Superfund
expense records, in both original and site files. In
site files, records for the various types  of costs
should be kept in the same order; for example, the
site file might begin with  employee timesheets,
followed by employee travel costs, followed by
contractor invoices, and so on.  Within each  cost
category, records should be filed the same way in
original and site  files.  For example, employee
timesheets might be filed by pay period, division,
and employee number. Each Agency will have its
own filing protocol; what's important is that docu-
ments be filed in a consistent order in all expense
files that may have to be used in cost recovery.

b.   Timely Response To EPA
     Documentation Request

     Agency recordkeeping systems must be  able
to provide EPA with complete expense documen-
tation for any site the Agency has worked on within
deadlines set by each EPA Regional office. Typi-
cally EPA  allows 30 calendar  days for internal
compilation of its own, state and contractor costs,
so a Federal Agency would be expected to respond
to EPA's cost documentation request within  that
time frame.

2.   Records To Be Retained  In Site Files

     This section discusses in general terms what
types of documentation should be copied and filed

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Recordkeeping Guidance
      Exhibit m-1
Page 19
           Summary Of Documents To Be Retained, But Not In Site Files
     AREA OF COST
         DOCUMENTS RETAINED
          Payroll
        Contractor
         Services
       Supplies and
        Equipment
       Indirect Costs
         IAG and
       Amendments1
      Administrative
        IAG Costs
Position titles of staff
Salary of staff (annual or hourly rate)
Methodology for determining fringe benefit rate
Time and travel policies
Proposal
Contractor cost data
Cost/price analysis of proposal and record of negotiations
Proposal evaluations
Contract
Work orders and change orders
Reports on contractor work
Audits of contractor
Type(s) of materials and supplies furnished
Type(s) of equipment
Contracts
Leases
Purchase orders
Receiving reports
Explanation of "usage rate" or "standard cost rate"
calculation
Explanation of indirect cost rate (each time rate is changed)
Interagency Agreement (executed copy)
Amendments (executed copies)
Bill/payment records
Correspondence
All documentation described for categories above (may
be for multiple sites)
1 For lAGs entered into with other Agencies

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 Recordkeeping Guidance
                                   Page 20
 in active site files; in addition, notation is made as
 to  what documents recordkeeping staff should
 have ready access to.

     Records documenting the following  areas
 should be retained for cost recovery purposes:

     •     Payroll

     •     Travel

     «     Contractor Services

     •     Construction (In-House)

     •     Supplies and Equipment

     •     Indirect Costs

     Each category of records is discussed more
 completely below. Exhibit III-2 on the following
 page summarizes those records that should be
 retained in site files.

 a.   Payroll

     Records that show  time  or attendance of
 individuals at specific sites should be copied and
 retained in site files. Subsequent adjustments to
 any timesheet should be photocopied and clipped
 to the  copy  of  the timesheet in each site file.
 Recordkeeping staff should also have  available
 documentation on the position titles and salaries of
 the staff who worked on that site, as well as up-to-
 date copies of the Agency's time and travel charg-
 ing policies.

     If the Agency's accounting system does not
 automatically calculate fringe  benefit  charges,
each site file should contain worksheets showing
 how fringe benefit charges  were calculated for that
 site. In addition, notation should be made of which
Agency official approved the fringe benefit alloca-
tion methodology.
 b.    Travel

      The following records relating to travel ex-
 penses should be retained in site files: travel au-
 thorizations (containing site names) that document
 the purpose of the trip; travel vouchers submitted
 by employees showing starting point and destina-
 tion,  transportation method, and the number and
 name(s) of person(s) traveling; receipts provided
 by employees showing actual costs incurred (only
 major receipts need to be included  in site files -
 hotel, airline, car rental, etc.); and proof that the
 travel vouchers were paid,2

 c.    Contractor Services

      An Agency should  be able to completely
 document its relationship with its contractors. Site
 files should contain:

      •    Contractor  invoices   (contractors
          should break out costs by site and activ-
          ity)

      •    Project officer approval of each invoice

      •    Proof of payment of the invoices

In addition, procurement or recordkeeping  staff
should have available  the following records for
each  contractor  doing Superfund  work for the
Agency:

      •    The contractor's proposal/bid

      •    The contractor's cost data, submitted
          as part of its proposal

      •    Cost/price  analysis of proposals re-
          ceived

      •    Other documents relating to  the
          Agency's evaluation of contractor pro-
          posals

2 For proof of payment, Agencies need only retain a copy
  of the Treasury report listing the payment

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Recordkeeping Guidance
      Exhibit III-2
Page 21
         Summary Of Financial Documents To Be Retained In Site Files
    AREA OF COST
         DOCUMENTS RETAINED
         Payroll
          Travel
        Contractor
         Services
       Construction
        (in-house)
       Supplies and
        Equipment
      Indirect Costs
      Administrative
        IAG Costs
Time attendance records
Time attendance amendments
Worksheet showing fringe benefit calculations (if not calculated
by accounting system)
Travel authorizations (if used by the Agency)
Vouchers showing:
   Starting point and destination
   Transportation method
   Number and names of persone on trip
Receipts (airline, hotel, etc.)
Proof of payment1
Contractor invoices
Project officer approval of invoices
Proof of payment1
Approvals
Project progress reports
All documentation described above for Agency employees
Invoices
Proof of payment1
Hourly records of equipment use
Worksheet showing calculations (if not calculated by accounting
system)
All documentation described for categories above (may
be for multiple sites)
  Proof of payment must be documented for each expense charged to a site. A copy of the Treasury report
  listing the payment is sufficient.

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Recordkeeping Guidance                                                          Page 22

     •    The contract/statement of work        Recordkeeping staff should also have available
                                              documentation on the indirect cost rate used for
     •    Work orders and change orders        EPA lAGs (documentation on each revision of the
                                              rate should be retained).
     •    Technical progress reports submitted
          by the contractor                     g.   IAG and Amendments (with Other
                                                   Agencies)
     •    Agency audits of the contractor
                                                   Recordkeeping staff should have access to
d.   Construction (In-House)                  copies of the executed IAG for each site, as well as
                                              any amendments, correspondence, and bill/pay-
     Each site file should contain copies of inter-  ment records.
nal work  authorizations for work performed at
Superfund sites.  Progress reports detailing major  h.   Administrative Support (Generic) IAG
accomplishments or  milestones  should also be       Costs
retained in site files. All documentation described
above  for Agency employee salary and travel       Recordkeeping staff should have available a
should of course be retained.                     copy of executed administrative support (generic)
                                              lAGs, any amendments, correspondence, and bill/
e.   Supplies and Equipment                  payment records.  In addition, an "administrative
                                              support IAG file" should be set up for timesheets,
     Each site file should contain equipment pur-  travel vouchers, equipment information and in-
chase invoices, contractor invoices, or equipment  voices, and all other relevant records described
lease bills for all equipment used at the site. Proof  above.  Agency managers should note that these
of payment records should also be provided in site  LAGs may cover costs at multiple sites.
files.  If  EPA was charged a "usage rate"  for
equipment, hourly records of equipment use at the  3.   Reconciling Site Files
site should be included in the site file.
                                                   To ensure that all active site files are corn-
     Agencies should also have  available docu-  plete, the files should be periodically reconciled
mentation on the type of materials or supplies  with summary reports produced by the Agency's
purchased for use on the site, and copies of pur-  accounting system. This procedure will identify
chase orders, receiving reports, leases, and con-  needed records not included in the site files.  In
tracts for  supplies.   For purchased or Agency-  order to make reconciliation and subsequent copy-
owned equipment that is shared between multiple  ing of missing documents a manageable task, EPA
sites, a "usage rate" or "standard cost rate" is  recommends  that  active site files be reconciled to
calculated, and the Agency should be able to pro-  accounting system reports at least twice a year.
vide a written explanation of how the usage rate
wasdevelopedforeachpieceofequipmentusedon  4.   Storage Media And Record Safety
a Superfund  site.                                    Procedures

f.    Indirect Costs                                 Agencies should store site files and original
                                              files in locations as secure as possible from fire,
     If an Agency's accounting system does not  water and other damage. Once activity has ceased
automatically calculate indirect charges for each  at a site, similar provisions must be made for safe
site,  site files should contain copies of worksheets  long-term storage of site files. At this time, micro-
used to  make  indirect  cost  calculations,  film copying  of inactive site files and original

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 Recordkeeping Guidance                                                          Page 23

 expense records is allowed by EPA, provided the
 microfilming meets  certain technical standards
 (see Appendix B for references).

 5.   Record Retention Requirements

     An Agency and its contractors are required to
 retain the documents described in this chapter for a
 minimum often years after submission of a final SF
 1080/1081  or SF 133 for a site, after which the
 Agency and its contractors must obtain written
permission from the appropriate regional award
 official before disposing of any of the records de-
 scribed in the chapter.

     In the future, Agencies may be requested
 simply to  forward  the  expense documentation
described in this chapter directly  to  EPA after
completion of work at a site. As of the date of
publication of this manual, however, EPA does not
yet have the capability of accepting Agency Super-
fund records for permanent storage.

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APPENDICES

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 Appendix A                                                                     page 24

 APPENDIX A
                                               B.   Affidavits
 AGENCY LEGAL RESPONSIBILITIES
                                                    Affidavits  are  written statements  of fact
      As noted in the introduction, claims for ex-  based on personal knowledge that are made under
 penses incurred by a Federal Agency under a  oath.  Federal Agency financial management and
 Superfund IAG can be questioned in  litigation,  recordkeeping staff may be asked by EPA or DOJ
 Unless both parties "stipulate" in advance as to the  legal staff to prepare affidavits on recordkeeping
 correctness of the Agency's expense claims, which  practices and site expenditures that can be used as
 is extremely unlikely, legal counsel for the respon-  evidence to support elements of the Agency's cost
 sible party is entitled to review the evidence that  documentation package.
 constitutes or backs up the Agency's claims, while
 the government's lawyers are allowed to introduce  C.   Depositions or Trial Testimony
 documents and testimony in proof of those claims.
 Information on the Agency's expenses  under the       A deposition is typically an oral question and
 IAG can be included in the court record in four  answer  session,  completed under oath,  that is
 ways:                                         admissible as evidence in court. In a cost recovery
                                               action, the potentially responsible parties may
      •    Interrogatories                       depose Agency financial  management  or
                                               recordkeeping staff.  Alternatively, this testimony
      •    Affidavits                           may be required during the trial itself. Attorneys
                                               for  the responsible party will want  to question
      •    Depositions or trial testimony          Agency staff in order to highlight any weaknesses
                                               in the cost documentation package.
      •    Review of expense documents
                                                    Witnesses for the cost documentation por-
 Federal Agency responsibilities in each of these  tion of a CERCLA cost recovery case are typically
 areas are described below.                       asked detailed procedural questions about how the
                                               Agency calculated various types of costs.  If the
 A.    Interrogatories                           cost documentation  provided  to  the court falls
                                               short in any area, the witness will be asked about
      Interrogatories are a written set of questions  those points.
 submitted by either party in a lawsuit to the oppos-
 ing party. Such questions are  part of the pre-trial      Cost records that meet the requirements dis-
 "discovery" portion of the litigation. Unless im-  cussed in this handbook section make the witness'
 proper under applicable legal rules,  the questions,  job easier. Effective preparation is also important.
 which may be broadly-worded, must be answered.  The witness should be thoroughly familiar with the
 In a  cost recovery case,  questions directed to  portion of the cost documentation package he or
 Agency recordkeeping and financial management  she is to testify on, especially the more complex
 staff generally will be directed toward identifying  parts of the package, such as the methodology for
 the nature of documents submitted in the Agency's   calculating equipment usage rates, or procedures
cost recovery package  and the process used to   used in preparation of cost summaries. Any Fed-
compile that package.  EPA or DOJ legal staff  eral  Agency employee scheduled to be deposed
litigating a cost recovery case will generally coor-   should be accompanied by an EPA or DOJ lawyer,
dinate responses to interrogatories.                and any Agency activities in connection with a cost

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Appendix A
                                  Page 25
recovery case should be coordinated through the
appropriate EPA Regional Legal Counsel.

D.   Review Of Expense Documents

     Attorneys for the responsible party are en-
titled to re view andobtain copies of all Agency rec-
ords that are not protected by a legal privilege.  If
the Agency receives a request for production of
documents, it must contact EPA's office of Re-
gional Counsel  in the applicable region. Certain
types of personal and business information often
contained in cost documents are protected under
Federal laws and regulations, however. To protect
such information, EPA  or DOJ legal staff may
petition the court to be allowed to exclude docu-
ments containing such information from the pack-
age to be delivered to opposing legal counsel, or
they may block out sensitive information con-
tained in the documents, a process called "redact-
ing."  The following types of information are
protected:

1.   Personal Information

     The Privacy Act governs disclosure of infor-
mation relating to individuals (see Appendix B for
reference). In general, non-business  information
contained in Agency records is  protected from
disclosure. The following list, which is not all-
inclusive, identifies the kind of information that
should be removed from documents given to op-
posing legal counsel:

     •    Social security numbers

     •    Credit card numbers

     •    Type of credit card

          Home addresses

     •    Home telephone numbers

     •    Non-business calls on  personal tele-
          phone bills
     •    Drivers license numbers

     •    Comments on travel vouchers

     •    Vacation and sick leave balances

     •    Timecard or time sheet comments

     •    Coded information on the front of time-
          cards

2.   Business Information

     EPA's regulations governing the disclosure
of business information are contained in 40 C.F.R.
Part 2, Subpart B, "Confidentiality of Business
Information."  Many Agencies have regulations
protecting business information similar to EPA's.
Any information that would allow a competitor to
deduce an Agency  contractor's  actual costs is
generally considered confidential  by the contrac-
tor. Invoices and cost data submitted with propos-
als typically fall under the protection of the regula-
tions,  although other documents may also.

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 Appendix B
                                 Page 26
 APPENDIX B

 WHERE TO GO FOR FURTHER INFOR-
 MATION

      This appendix provides  Federal  Agency
 managers with information on available reference
 materials.  The appendix lists and gives a brief
 synopsis of the EPA and other Federal reference
 materials that could be useful to Agency managers.

      The references listed below contain informa-
 tion that Agency managers can use to develop their
 approach to the  financial management  and
 recordkeeping guidance presented in this hand-
 book. Some of the manuals do not specifically
 address Federal Agency guidance issues, but they
 contain useful background information. Most of
 the references listed can be obtained through  the
 EPA's regional offices or by contacting EPA head-
 quarters directly.  Materials  published by other
 government Agencies can be obtained  by calling
 the Agency directly; legal references can be ob-
 tained through Agency legal departments.  Sug-
 gested reference sources are as follows:

 A.   Interagency Agreement Policy And
      Procedures Compendium

      This EPA  manual provides policy guidance
 and detailed procedures for headquarters and re-
 gions on administering LAGs.

 B.    Assistance Administration Manual,
 Chapter 51

      This EPA manual describes specific require-
 ments for all EPA assistance recipients; ChapterSl
 contains general instructions for EPA headquarters
 and regions on administering lAGs.

 C.   Financial Management Procedures For
     Documenting Superfund Costs

     This EPA manual, known as the Blue Book,
provides complete information on Superfund le-
 gal,  accounting,  financial  management  and
 recordkeeping requirements. The Blue Book was
 written for the ten EPA regional financial manage-
 ment offices and can be used for general back-
 ground information on Superfund financial man-
 agement and recordkeeping requirements.

 D.   Financial Management Procedures For
      Processing Superfund Interagency
      Agreements

      This EPA manual provides guidance on ini-
 tiating and processing Superfund lAGs.

 E.   Internal Control Review Program For
      Superfund Financial Management

      This EPA manual provides guidance to EPA
 financial managers in planning, conducting  and
 implementing the results of their Superfund inter-
 nal control reviews.

 F.    Superfund Program: Regional Inter-
      agency Agreement Handbook

      This EPA manual will contain copies of na-
 tional MOUs and model lAGs for EPA regions to
 use in initiating TAGS.

 G.   Resource Management Directive System
     2550 D

     This EPA manual  provides  agency-wide
 policies and procedures for the Superfund pro-
 gram.

 H.   Property Management Order

     This EPA manual will provide comprehen-
 sive property management guidance to Agencies
participating in Interagency Agreements with
EPA.

I.    Federal Rules of Evidence

     The body of rules relating to the admissibility

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 Appendix B

 of documents as evidence in Federal court pro-
 ceedings is called the Federal Rules of Evidence,
 and can be found under Title 28 of the United States
 Code (28 U.S.C.).

 J.    The Privacy Act

      Federal requirements for the protection from
 public disclosure of personal information can be
 found under Title 5 of the United States Code (5
 U.S.C.).  Specific Agency recordkeeping require-
 ments under the Act can  be found  at 5 U.S.C.
 Section 522,

 K.   Hardcopy Standards Set

      The American National Standards Institute
 sets technical standards for microfilming of rec-
 ords that should be followed by Agencies wishing
 to microfilm Superfund expense documents. The
 complete  set of microfilm standards, called the
 Hardcopy Standards Set, is available from:

      Association For Information And Image
     Management
      Suite 1100
      1100 Wayne Avenue
     Silver Spring, MD 20910
     (301) 587-8202

Also the  Federal Microform Technical Require-
ments (promulgated  by  the  National Archives)
should be  referred to.

      Agencies with specific questions not an-
swered in the materials listed above should contact
EPA directly.   The Agency's contacts at  EPA
regional offices can offer assistance, or one of the
headquarters offices below may be contacted:

     •    Superfund Accounting Branch, Office
          of the Comptroller (accounting and
          records management issues)

     •    Grants  Information  and Analysis
          Branch, Office of Administration (IAG
                        Page 27
policy issues)
Resources Management Section, Of-
fice of Solid Waste and Emergency
Response  (IAG policy and financial
management issues)

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 Appendix C	                     Page 2fc

 APPENDIX C                                          .     National  Oceanic and  Atmos-
                                                             pheric Administration
 AUDITS
                                                   •    Department of Defense
      Under the  Superfund  Amendments  and            -     Army Corps of Engineers
 Reauthorization Act of 1986  (SARA), Federal            -     Navy
 Agencies with designated responsibilities under            -     Air Force
 the Act are required to perform an annual audit of
 all transactions involving  the Trust Fund.   The       •    Library of Congress
 following Agencies have specific designated au-
 thorities:                                           «    Department of Agriculture

          Department of  Health  and Human       •    Action
          Services
               Agency for Toxic Substances and       •    National Aeronautics and Space Ad-
               Disease Registry                          ministration
               Public Health Service
               National Institutes of Health           Audits  required by SARA are  concerned
                                              primarily with financial transactions involving the
          Federal  Emergency Management  Trust Fund. Audits may touch on some or all of the
          Agency                             following subjects:

          Department of Transportation               •     Documentation of claimed expendi-
               U.S. Coast Guard                         tures

          Department of Justice                     •     Internal control procedures

      •    Department of the Treasury                 •     Procurement
               Internal Revenue Service
                                                   •     Indirect costs
      •    Department of the Interior
                                                   •     Property acquisition and management
      •    Department of Energy
                                              Each of these subjects is discussed in detail below.
          Department of Labor
                                              A.   Documentation of Claimed Expenditures
          Nuclear Regulatory Commission
                                                  Audits will investigate  whether Agency
          Environmental Protection Agency      recordkeeping systems are capable of providing
                                              supporting documentation  for  expenditures
In addition, Agencies without designated authori-   charged against the Trust Fund (either directly or
ties which perform work for EPA under Inter-   through an IAG with EPA).
agency Agreements may  also  be  required to
perform annual audits of Trust Fund transactions.   B.   Internal Control Procedures
Agencies falling into this category include:
                                                  Agency procedures for monitoring and con-
         Department of Commerce              trolling expenditures charged  against  the Trust

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Appendix C                                                                    Page 29

Fund may  be  examined during an audit.   The
Agency's funds control process and internal recon-
ciliation procedures may be reviewed in detail.

C.   Procurement

     The Agency's compliance with the Federal
Acquisition Regulation  (FAR) on procurements
involving Trust Fund monies may be reviewed by
Agency auditors.  A review of the procurement
function would focus on topics such as competitive
bidding procedures and records of bid evaluations.

D.   Indirect Costs

     Charges for indirect  costs billed to  EPA
under lAGs will be reviewed for compliance with
the Economy Act of 1932 (31 U.S.C.A. 1535) and
EPA Comptroller's Policy Announcement 87-10,
which state that only indirect costs specifically
arising from performance of the IAG are billable.

E.   Property Acquisition and Management

     Agency procedures for acquiring property
with Trust Fund monies, and the subsequent man-
agement of that property, may  be examined by
auditors.  Records of acquisition, property inven-
tory records and property disposal practices may
be reviewed.

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Index
                                             Page 30
Accounting
       system capabilities for Superfund  11,12
       procedures for  13-15
       by site  13
       by activity  13
       by object class category   13

Active site files -  see also, "Recordkeeping"
       contents   18-22
       background on   16
       filing procedures   17-18
       microfilming  22,27
       how long to retain  23

Activities, description of   13

Affidavits   24

Audits
       timing  28
       authority for  28
       procedures for scheduling  28
       topics covered  28-29

CERCLA
       reauthorization   1
       cost recovery  1

Confidential Information
       general procedures for protecting  25
       types of information protected  25

Contractor Costs
       accounting for  14-15
       keeping records of 20-21
       how contractors should invoice  14

Administrative (generic) lAGs
       keeping records of expenses under  22

Depositions 24-25

Direct Costs
       description of   13
       categories of   14-15
       accounting for  14
       keeping records of  18-22

Equipment
       accounting for  14
       keeping records of  22
       storage and disposition requirements   15, 26

Financial Reporting
       types of reports required   15
       frequency of reporting   15
       reporting costs by site  15
Fringe Benefit Costs
       accounting for  20
       keeping records  20

Indirect Costs
       accounting for  15
       keeping records of  22

Interrogatories   24

Labor Costs
       accounting for  14
       keeping records of  20

Materials - see "Equipment"

Microfilming
       when permitted  22
       technical standards   27

Original Expense Records - see "Recordkeeping"
       filing procedures  17
       microfilming  22
       how long to retain  23

Payroll - see "Labor Costs"

Privacy Act - see "Confidential Information"

Reconciliation
       procedures   6,11-12
       importance to cost recovery   6

Recordkeeping
       importance for cost recovery   4
       procedures   18-22
       acceptable storage media  22
       retention requirements  23
       planning for  17-18

Record retention - see "Recordkeeping"

Redacting  25

References  26-27

SARA  1

Travel Costs
       accounting for  14
       keeping records of  20

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