Superfund Activities in the Environment and Natural Resources Division for Fiscal Years 2004 and 2005

Audit Report 07-43
September 2007
Office of the Inspector General

Executive Summary

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (known as CERCLA or Superfund), which was expanded by the Superfund Amendments and Reauthorization Act of 1986, established the Superfund program to clean up the nation’s worst hazardous waste sites.1 CERCLA seeks to make those responsible for the improper disposal of hazardous waste bear the costs for their actions. It also established the Hazardous Substance Superfund Trust Fund (Trust Fund) to finance clean up actions where a liable party cannot be found or the third party is incapable of paying clean up costs. The Trust Fund also pays for the Environmental Protection Agency’s (EPA) enforcement, management activities, and research and development.

Executive Order 12580, issued January 23, 1987, gives the Attorney General responsibility for all Superfund litigation. Within the Department of Justice (DOJ), the Environment and Natural Resources Division (ENRD) was assigned to administer cases against those who violate CERCLA’s civil and criminal pollution-control laws. In fiscal year (FY) 1987, EPA entered into interagency agreements with ENRD and began reimbursing ENRD for its litigation costs. EPA authorized reimbursements to ENRD of $27.9 million for FY 2004 and $26.9 million for FY 2005 in accordance with EPA Interagency Agreements DW-15-93796801 and DW-15-92194601, respectively.

The EPA and ENRD Statement of Work required ENRD to maintain a system that documented its litigation costs. To this end, ENRD used a cost distribution system designed and maintained by a private contractor. The system was designed to process financial data from the ENRD Expenditure and Allotment (E&A) Reports into: (1) Superfund direct costs by specific case, broken down between direct labor costs and all other direct costs; (2) non-Superfund direct costs; and (3) allocable indirect costs.2

As required by CERCLA, the DOJ Office of the Inspector General conducted this audit 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. We compared costs reported on the contractor-developed Accounting Schedules and Summaries for FYs 2004 and 2005 to costs recorded on DOJ accounting records to review the cost distribution system used by ENRD to allocate incurred costs to Superfund and non-Superfund cases.

In our judgment, ENRD provided an equitable distribution of total labor costs, other direct costs, and indirect costs to Superfund cases during FYs 2004 and 2005. However, we make three recommendations to improve ENRD operations and ensure compliance with DOJ directives: (1) update its case designation procedures (outlined in the ENRD December 20, 2001, memorandum, Determination of Superfund Cases) to encompass the reorganized Natural Resources, Wildlife and Marine Resource, Indian Resource, Law and Policy, and the Executive Office litigation sections; (2) ensure that travel authorizations are approved prior to a traveler proceeding on a trip; and (3) ensure all subobject code 2508 transactions are allocated to the correct Superfund case number.

  1. See Pub. L. No. 96-510, 94 Stat. 2767 (1980) and Pub. L. No. 99-499, 100 Stat. 1613 (1986)

  2. The E&A Report is a summary of the total costs incurred by ENRD during the fiscal year. The report includes all costs (both liquidated and unliquidated) by subobject class and a final indirect cost rate calculation for the fiscal year. Other direct costs charged to individual cases include special masters, expert witnesses, interest penalties, travel, filing fees, transcription (court and deposition), litigation support, research services, graphics, and non-capital equipment. Indirect costs are the net of the Superfund funding provided in the EPA Interagency Agreements less direct charges and are allocated based on the direct Superfund salary costs on each case.

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