The objective of the audit was to determine if the cost allocation process used by ENRD and its contractor provided an equitable distribution of total labor costs, other direct costs, and indirect costs to Superfund cases during FYs 2004 and 2005. To accomplish the overall objective, we assessed whether: (1) ENRD identified Superfund cases based on appropriate criteria, (2) costs distributed to cases were limited to costs reported in E&A Reports, and (3) adequate internal controls existed over the recording of direct labor time to cases and the recording of other direct charges to accounting records and Superfund cases. We conducted our audit in accordance with Government Auditing Standards issued by the Comptroller General of the United States.

The audit focused on, but was not limited to, financial activities and the procedures used by ENRD to document, compile, and allocate direct and indirect costs charged to Superfund cases from October 1, 2003, through September 30, 2005. We compared total costs recorded as paid on the E&A Report to the amounts reported as Total Amounts Paid on the year end accounting schedules and summaries, and traced the costs to the Superfund cases for FYs 2004 and 2005. We also reviewed direct labor costs and indirect costs distributed to Superfund against the contractor-developed methodology for FY 2004 and FY 2005. We conducted a review of ENRD’s methodology for identifying Superfund cases by comparing a select number of cases against the ENRD case assignment criteria for FY 2005 and we performed detailed transaction testing of other direct costs for FY 2005.

For our assessment of internal controls over the compilation of direct labor charges, we relied on the results in the Office of the Inspector General Report number 01-19, August 2001, Environmental and Natural Resources Division Network Computer Security and Case Management System Internal Control Audit.