&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
'•
-------
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
-------
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.
-------
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
-------
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
-------
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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