Superfund Activities in the Environment and Natural Resources Division
for Fiscal Years 2000 and 2001

Report No. 03-34
September 2003
Office of the Inspector General

Superfund Costs For FY 2000 And 2001

We reviewed financial activities and procedures used by the ENRD to document, compile, and allocate direct and indirect costs charged to Superfund cases.  Based on the results of the audit, in our judgment the ENRD provided an equitable distribution of total labor costs, other direct costs, and indirect costs to Superfund cases during FY 2000 and FY 2001.  The ENRD does need to ensure that all travelers receive approved authorizations for official travel in advance of the beginning of such travel, and we made one recommendation to address this issue.

We designed the audit to compare reported costs on the contractor developed Accounting Schedules and Summaries for FY 2000 and FY 2001 (Appendix III and Appendix IV) to that recorded on Department of Justice accounting records, and to review the cost distribution system used by the ENRD to allocate incurred costs to Superfund and non-Superfund cases.  To accomplish this we performed the following steps:

• Compared total costs recorded as paid on the E&A Reports to the amounts reported as Total Amounts Paid on the year end Accounting Schedules and Summaries, and traced such costs to the reported cost distribution to Superfund cases.


• Reviewed the ENRD’s methodology for identifying Superfund cases on its Superfund case list by comparing a select number of cases against the ENRD case assignment criteria.


• Reviewed direct labor costs and indirect costs distributed to Superfund against the contractor-developed methodology.


• Compared Other Direct Costs to source documents to validate their allocability.

We examined these items to ensure that costs distributed to Superfund and non-Superfund cases were based on the total of actual costs for each fiscal year, that the distribution methodology used and accepted in prior years remained viable, and that selected costs were supported by documentation that evidenced their allocability to Superfund and non-Superfund cases.  This would permit us to determine if the ENRD provided an equitable distribution of total labor, other direct costs, and indirect costs to Superfund cases during FY 2000 and FY 2001.  Following are the results of our review.

Reconciliation of Accounting Schedules and Summaries to E&A Reports

The E&A Reports for FY 2000 and FY 2001 provided the following amounts paid for total ENRD expenses:

We compared these E&A amounts to those in Schedule 6, Reconciliation of Total ENRD Expenses, of the Accounting Schedules and Summaries for each fiscal year to ensure that the distribution of costs to Superfund and non‑Superfund cases was limited to total costs incurred.  We found that the Schedule 6 amounts reconciled to the E&A Reports.  We then reconciled these amounts to the distributions to Superfund on Schedule 5, Superfund Costs by Object Classification, and Schedule 2, Superfund Obligation and Payment Activity During 2000 (and 2001) By Fiscal Year of Obligation.  We also found that the amounts on these schedules reconciled through Schedule 6 to the E&A Reports.

Our review then focused on determining that the summary amounts on Schedule 2 represented an equitable distribution of costs to Superfund.  The Superfund costs in Schedule 2 of the Accounting Schedules and Summaries for FY 2000 and FY 2001 reported the following:

Our starting point for reviewing the distribution system was to be able to identify and reconcile the ENRD cases as Superfund or non-Superfund.  This enabled us to extract only Superfund data from the ENRD data to compare to the Accounting Schedules and Summaries.

Superfund Case Reconciliation

The ENRD litigates non-Superfund and Superfund cases, which have unique identifying numbers in order to control the processing of cases.  The ENRD maintains an annual cumulative database of all Superfund cases; this database identified 4,996 cases in FY 2000 and 5,285 in FY 2001.  We reviewed the database to establish the method used by the ENRD to identify Superfund cases, and if the cases were identified in accordance with established ENRD criteria for case identification.

We randomly selected 30 cases from the FY 2001 cumulative Superfund universe database (see Appendix II) to test if the ENRD sections adhered to the procedures and identified the cases properly (we used the

FY 2001 Superfund universe database to select our sample because the database is cumulative and includes FY 2000 cases).⁴  We reviewed the cases against the ENRD case data, including case intake worksheets, case opening forms, case transmittals, and emails.  The ENRD used the case data entering forms to record summary information from the case.  The information referred to laws, regulations, or other language that established the cases as either Superfund or non-Superfund for tracking purposes. We found that 29 cases reviewed contained proper referencing documentation in its case file.  The ENRD could not locate one case file we selected for review that the Appellate Section had sent to archives.

Superfund Cost Distribution

Since we found that the ENRD’s case identification method adequately identified Superfund cases, we next reviewed: (1) the system used by the contractor to distribute direct labor and indirect costs, and (2) other direct costs charged to Superfund.  Following are the results of our review of the cost categories.

Labor

The contractor continued using the labor distribution system from prior years, which we reviewed and accepted in prior audits.  The ENRD provided the contractor with electronic files that included employee time reporting information and biweekly salary information downloaded from the National Finance Center, which processes biweekly salaries for the ENRD employees.  The contractor uses the following formula to distribute labor costs monthly.

We selected one month in each fiscal year (December 1999 and December 2000) to review the effective hourly rates by employee calculated by the contractor.  We found no reportable differences.

For purposes of our review, we:

• Matched the total Superfund and non-Superfund labor costs to that reported on the E&A reports for FY 2000 and FY 2001.


• Acquired and reviewed electronic labor files and selected salary files that the ENRD provided to the contractor and the resultant electronic files prepared by the contractor to summarize costs by employee and case.


• Extracted and reconciled Superfund case costs from the contractor files by using the validated case numbers discussed earlier in this report.

Since the E&A and Accounting Schedules and Summaries amounts matched, this assured us that the distribution method, which parallels a management information system and not an accounting system, was limited to allocating just the total of costs paid for each fiscal year.  We traced the Direct Labor for Superfund cases ($7,399,102 in FY 2000, and $7,190,961 in FY 2001) from the E&A Reports through the schedules of the Accounting Schedules and Summaries.  We found that the contractor’s distribution was limited to the total costs in the E&A reports.

In the next phase of the audit, we performed selected database matches to compare the employee time and case data against the contractor’s schedules used to prepare the Accounting Schedules and Summaries, and to identify Superfund case data.  As previously mentioned, we were able to rely on the Superfund case database to match the ENRD case list to the contractor’s completed schedules.  We then compared the Superfund billed time data, which included 1,267 transactions in FY 2000 and 1,200 transactions in FY 2001, against the electronic files prepared by the contractor.  The contractor’s files included 5,200 records in FY 2000 and 5,486 records in FY 2001.  We found no reportable differences in the total number of Superfund cases with direct labor costs for each fiscal year.

Overall, we were able to verify the accumulation of reported hours, the development and application of hourly rates, and the extraction of the labor costs to Superfund cases.  Therefore, in our judgment this process provided for an equitable distribution of direct labor costs to the ENRD cases.

Indirect Costs

In addition to direct costs incurred against specific cases, the ENRD also incurs indirect costs that it allocates to all cases.  These include primarily salaries, benefits, travel, freight, rent, printing, services, supplies, and equipment.  The contractor distributes indirect costs to individual cases using an indirect cost rate that is calculated on a fiscal year basis.

According to its indirect cost methodology, the contractor uses actual payments by the ENRD as the basis for the indirect cost base and expense pool for calculation of the indirect cost rate.  The base is comprised of total direct labor.  The contractor extracts indirect costs from the E&A report and removes all direct costs incurred to arrive at net indirect costs.  The contractor divides this amount by total direct labor for the period to calculate the ENRD indirect cost percentage.  Additionally, the contractor identifies indirect costs that support only Superfund activities and uses these costs to develop a separate Superfund specific indirect rate, which is calculated by dividing these costs by Superfund direct labor.  The rates for FY 2000 and FY 2001 follow.

We reconciled the total E&A amounts to the Accounting Schedules and Summaries, Schedule 4 to ensure that the contractor used only paid costs to accumulate the expense pool.  Costs used by the contractor were extracted properly from the E&As.  The contractor then calculated the rates accurately by dividing the indirect expenses by applicable direct labor costs.

Other Direct Costs

The amounts of other direct costs incurred by the ENRD and distributed to Superfund during FY 2000 and FY 2001 are provided in the following table.

We reviewed selected transactions in the following four subobject codes:

• 1157 - Expert Witness Fees,


• 2100 - Travel and Transportation,


• 2508 - Reporting and Transcripts- Deposition, and


• 2529 - Litigation Support.

For FY 2000, these four subobject codes comprised 84 percent of the transaction universe and 96 percent of the dollar universe. For FY 2001, these four subobject codes comprised 89 percent of the transaction universe and 97 percent of the dollar universe.  We stratified the high dollar transactions within these subobject codes and tested 100 percent of these transactions.⁶  We reviewed other transactions based on a statistical sample.

For purposes of our review, we selected the highest dollar transaction from each duplicated voucher for the statistical sample.  This sample consisted of no more than one transaction per voucher; therefore, there were no duplicate vouchers.  For FY 2000 our sample universe contained 2,060 vouchers comprised of 2,151 transactions totaling $5.3 million and for FY 2001, 1,685 vouchers comprised of 1,781 transactions totaling $4 million.

We reviewed 236 transactions totaling $2.1 million and 194 transactions totaling $1.6 million for FY 2000 and FY 2001, respectively.  We designed our review of the transactions in other direct costs to determine if the selected FY 2000 and FY 2001 transactions included adequate support against the following four attributes:

• Correct subobject code classification


• Correct Superfund/non-Superfund classification


• Correct dollar amount


• Proper approval

For each of the transactions in our sample, we reviewed the payment vouchers and supporting documentation.  Our testing verified the following: the correct subobject code was used to classify the cost; the case number appearing on the documents matched the case number in the cumulative Superfund database; the dollar amounts listed in the other direct costs database matched the amounts on the supporting documentation; and the proper approval was obtained on the vouchers paying the other direct costs.

Our tests resulted in no exceptions in the transactions tested against the four reviewed attributes for subobject codes 1157, 2508, and 2529.  In subobject code 2100 we did note that on two vouchers in each fiscal year travel expenses claimed were not accurately split among Superfund cases, non-Superfund cases, and administrative activities involved.  Based on our statistical sampling methodology and the results of our testing, we are 95 percent confident that exceptions, if any, do not exceed 3 percent of the transaction universe for the subobject codes tested.  The error rates we identified fell below 3 percent and were not considered material.  Accordingly, we did not take exception to the errors or project the results to the total universe of transactions in FY 2000 and FY 2001.

Notwithstanding the results of the financial assessment, we did note one issue that requires attention by the ENRD.  We found that of the 204 travel authorizations reviewed 6 (voucher numbers A11443149, A11439717, A09643338, A11601217, A12599816, and A12608872) were approved after the traveler returned from travel, a finding we reported in previous OIG audit reports.⁷  The authorization serves not only to initiate the obligation of the costs but also to ensure that the traveler is protected by an official authorization during periods of official travel.  The ENRD needs to initiate a procedure for ensuring that a record is made prior to official travel.

Overall Summary

Based on the results of the audit, in our judgment the ENRD provided an equitable distribution of total labor costs, other direct costs, and indirect costs to Superfund cases during FY 2000 and FY 2001.  With respect to travel authorizations, the ENRD needs to ensure that all travelers receive approved authorizations for official travel prior to initiating/commencing such travel. 

Recommendation

We recommend that the Assistant Attorney General, ENRD:

1. Implement a procedure for ensuring that ENRD officials responsible for authorizing official travel for staff document approval of the official travel in advance of such travel.

4. The ENRD Sections included were the Environmental Crimes, Appellate, Land Acquisition, General Litigation, Environmental Enforcement, and Environmental Defense.


5. In FY 1998 and FY 1999, the contractor converted salary data on a monthly basis. Now, the contractor converts salary data on a biweekly basis to increase accuracy of reporting labor costs.


6. The dollar values of the transactions in subobject code 2100 were not considered high dollar transactions; therefore, these transactions were included in our randomly selected sample of the transactions.


7. OIG report number 96-12, May 1996, Superfund Activities in the Environmental and Natural Resources Division for Fiscal Year 1994; and OIG report number 00-08, March 2000, Superfund Activities in the Environmental and Natural Resources Division for Fiscal Year 1997.