SUPERFUND ACTIVITIES IN THE
ENVIRONMENT AND NATURAL RESOURCES DIVISION
FOR FISCAL YEAR 1995
Audit Report 97-20, (7/97)
TABLE OF CONTENTS
APPENDIX I - OBJECTIVES, SCOPE, AND METHODOLOGY
APPENDIX II - EPA BILLING SUMMARY AS OF SEPTEMBER 30, 1995
For Fiscal Year (FY) 1995 the Environment and Natural Resources Division (ENRD) was authorized reimbursements from the Environmental Protection Agency (EPA) not to exceed $33,879,860 for litigation activities in accordance with the EPA Interagency Agreement DW15937373-01-0, and subsequent amendment. We selected a sample of transactions to assess internal controls and evaluate the allocability of costs, and we tested the reliability and accuracy of expenditure information reported by Superfund case.
In our judgment, the Superfund case costs as accumulated by ENRD present fairly in all material respects the expenses incurred by the ENRD in litigating Superfund cases. Our audit disclosed the following.
Our audit objectives, scope, and methodology are contained in Appendix I. The EPA Billing Summary is contained in Appendix II.
On December 11, 1980, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (known as CERCLA or Superfund), was signed into law. It provided for liability, compensation, cleanup, and emergency response for hazardous substances released into the environment and uncontrolled and abandoned hazardous waste sites. This legislation was subsequently amended by the Superfund Amendments and Reauthorization Act of 1986. Implementing procedures are contained in the National Contingency Plan set forth in Executive Order 12580 of January 23, 1987. This Executive Order provides that the Attorney General is responsible for the conduct and control of all litigation arising under Superfund.
To fund Superfund activities, Executive Order 12580 required the Administrator, EPA, to transfer appropriation accounts to other agencies from the Hazardous Substance Response Trust Fund. This affords the Administrator the authority to determine and transfer from Superfund amounts needed by participating agencies to conduct their activities.
In FY 1987 under the statutory authority of 31 U.S.C. 1535, the EPA began transferring appropriated funds to the Department of Justice through interagency agreements. These agreements authorized the ENRD to be reimbursed for direct and indirect costs incurred in performing the activities budgeted for and specified in the interagency agreements. The agreements also required special accounting and reporting of recoverable case-related costs. In the same fiscal year, the ENRD instituted a system of accounting designed by the ENRD's certified public accounting firm contractor (hereinafter, the contractor). According to ENRD officials, EPA sanctioned ENRD's decision to use a contractor for this purpose. The contractor designed a system for processing accounting data from Expenditure and Allotment 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.
OBJECTIVES, SCOPE, AND METHODOLOGY
The Office of the Inspector General, Audit Division, has completed an audit of FY 1995 Superfund activities relating to the costs incurred by ENRD in litigating Superfund cases. The purpose of the audit was to assess the system used by ENRD to account for FY 1995 Superfund case cost charges. The objectives of the audit were to: (1) determine whether adequate internal controls existed to ensure fair accumulation of costs incurred for Superfund cases, and (2) determine the allocability of costs incurred and assigned to Superfund cases. The audit included a review of the ENRD's: (a) methods and procedures for identifying, recording, and allocating direct and indirect costs; (b) accuracy and completeness of reports; and (c) costs incurred. The audit focused on, but was not limited to, financial activities and the procedures used by the ENRD to document, compile, and allocate, direct and indirect costs charged to Superfund cases from October 1, 1994 through September 30, 1995. As an essential element of our review, we assessed the Superfund cost accumulation system designed and operated by a contractor.
Our review included an assessment of internal controls in the areas of the execution of
transactions, the recording of transactions, and the documentation of supporting
transactions. In assessing the preceding three areas, we considered
labor and nonlabor transactions.
Nonlabor - We reviewed transaction documentation for indication that costs were authorized by proper ENRD officials.
Nonlabor - We compared data from source documents, such as vouchers and invoices, to the cost report used to accumulate specific Superfund case charges other than time charges.
Nonlabor - We reviewed documentation such as vouchers, invoices, and purchase orders.
We reviewed each transaction to determine its allocability to a Superfund case cost incurred. For each labor transaction, we reviewed documentation supporting time charges and verified that the transaction amount was calculated and allocated to the appropriate case. For each nonlabor transaction sampled, we reviewed substantiating documentation and verified that the amount was properly recorded and charged to the appropriate case in relation to similar ENRD costs and our prior audit experience.
The EPA reimbursed ENRD $25,908,122 for the costs of litigating Superfund cases. The
ENRD incurred an additional $6,288,867 in unliquidated obligations, as of September 30,
1995, for a total of $32,196,989.
To determine the allocability of costs charged directly and indirectly to Superfund cases, we selected two statistical samples of transactions. In the aggregate, we reviewed 90 transactions totaling $106,144. This consisted of 45 labor transactions totaling $10,381 and 45 nonlabor transactions totaling $95,763. The samples were selected from individual universes of labor and nonlabor transactions totaling $35,328,713 and $41,613,256, respectively, which represented all ENRD Superfund and non-Superfund expenditures in FY 1995.
In addition to reviewing labor and nonlabor transactions we reconciled the object classes identified as indirect costs in the EPA Billing Summary, Schedule 4, to the applicable subobject classes which comprise those identified object classes. We also recalculated the prior fiscal year obligations, and verified whether the indirect rate was accurately applied to Superfund cases.
Our audit was conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States and included such tests of the accounting and management records as were deemed necessary to achieve our audit objectives. Audit work was performed at the offices of the ENRD, the Justice Management Division, and the contractor.
EPA BILLING SUMMARY AS OF SEPTEMBER 30, 1995