Office of the Inspector General

U.S. Department of Justice

OVERSIGHT ★ INTEGRITY ★ GUIDANCE

Audit of the Superfund Activities in 

the Environment and Natural 

Resources Division for Fiscal Year

2018

 

Audit Division 20-058 April 2020
Executive Summary 

Audit of the Superfund Activities in the Environment and Natural Resources 

Division for Fiscal Year 2018 

Objective 

The Office of the Inspector General (OIG) conducted an 

audit to determine if the cost allocation process used by 

the Environment and Natural Resources Division (ENRD) 

and its contractor provided an equitable distribution of 

total labor costs, other direct costs, and indirect costs to 

Superfund cases from fiscal year (FY) 2018. To 

accomplish this objective, we assessed Superfund case 

designation, costs distributed to these cases, and the 

adequacy of the internal controls over the recording of 

charges to Superfund cases. 

Results in Brief 

The ENRD provided an equitable distribution of costs to 

FY 2018 Superfund cases. We found that the cost 

allocation process used by the ENRD provided an 

equitable distribution of total labor costs, other direct 

costs, and indirect costs to Superfund cases. However, 

we identified one exception pertaining to the billing of 

charges associated with a case that the ENRD incorrectly 

classified as a Superfund case upon its opening in FY 2018. 

This resulted in $164,087 in unallowable expenses that 

were incorrectly billed to the U.S. Environmental 

Protection Agency (EPA). 

Recommendations 

Our report provides two recommendations pertaining to 

ENRD addressing $164,087 in erroneous charges billed to 

the EPA. The ENRD agreed with both recommendations. 

Audit Results 

In 1980, Congress passed the Comprehensive 

Environmental Response, Compensation, and Liability 

Act (CERCLA or Superfund) to clean up hazardous 

waste sites throughout the United States. The ENRD 

administers cases against those who violate CERCLA’s 

civil and criminal pollution-control laws. The EPA 

entered into interagency agreements with the ENRD to 

reimburse its litigation costs related to its Superfund 

activities. 

Our overall assessment of Superfund charges for 

FY 2018 determined that the ENRD generally provided 

an equitable distribution of total labor costs, other 

direct costs, and indirect costs to Superfund cases. 

Specifically, while the ENRD generally adhered to its 

procedures for designating cases as Superfund or nonSuperfund, we identified one exception pertaining to the 

billing of charges associated with a case that should not 

have been classified as a Superfund case. This resulted 

in $164,087 in unallowable expenses that were 

incorrectly billed to EPA. We were able to reconcile 

ENRD’s accounting records to costs reported in the 

system designed to process Superfund related financial 

data from the ENRD’s Expenditure and Allotment 

Reports. We also found that the ENRD appropriately 

allocated incurred costs to Superfund and non-Superfund 

cases, based on the correct totals for the fiscal years. 

Further, we found that selected costs charged to 

Superfund were adequately supported and allocable to 

Superfund. 

i 
AUDIT OF THE SUPERFUND ACTIVITIES IN THE ENVIRONMENT 

AND NATURAL RESOURCES DIVISION FOR FISCAL YEAR 2018 

TABLE OF CONTENTS 

INTRODUCTION............................................................................................ 1 

Audit Objective.................................................................................... 3 

AUDIT RESULTS ........................................................................................... 5 

Reconciliation of Contractor Accounting Schedules and Summaries to 

E&A Reports............................................................................... 5 

Superfund Case Reconciliation ............................................................... 5 

Superfund Cost Distribution .................................................................. 6 

Direct Labor Costs ...................................................................... 7 

Indirect Costs............................................................................. 8 

Other Direct Costs ...................................................................... 9 

CONCLUSION AND RECOMMENDATIONS ........................................................ 11 

SCHEDULE OF DOLLAR-RELATED FINDINGS ................................................... 12 

APPENDIX 1: OBJECTIVE, SCOPE, AND METHODOLOGY .................................. 13 

APPENDIX 2: FY 2018 CASES IN SAMPLE REVIEW .......................................... 15 

APPENDIX 3: FY 2018 ACCOUNTING SCHEDULES AND SUMMARIES .................. 16 

APPENDIX 4: ENVIRONMENT AND NATURAL RESOURCES DIVISION’S 

RESPONSE TO THE DRAFT AUDIT REPORT............................................. 25 

APPENDIX 5: OFFICE OF THE INSPECTOR GENERAL ANALYSIS AND 

SUMMARY OF ACTIONS NECESSARY TO CLOSE THE REPORT ................... 27 
 

AUDIT OF THE SUPERFUND ACTIVITIES IN THE ENVIRONMENT 

AND NATURAL RESOURCES DIVISION FOR FISCAL YEAR 2018 

INTRODUCTION 

Congress passed the Comprehensive Environmental Response, 

Compensation, and Liability Act (CERCLA or Superfund) to clean up hazardous 

waste sites throughout the United States.1 The law addressed concerns about the 

need to clean up abandoned hazardous waste sites and the future release of 

hazardous substances into the environment. When CERCLA was enacted, the 

U.S. Environmental Protection Agency (EPA) was assigned responsibility for 

preparing a National Priorities List to identify sites that presented the greatest risk 

to human health and the environment. Waste sites on the National Priorities List 

were generally considered the most contaminated in the nation, and EPA funds 

could be used to clean up those sites. The cleanup of these sites was to be 

financed by the potentially responsible parties – generally the current or previous 

owners or operators of the site. In cases where the potentially responsible party 

could not be found or was incapable of paying cleanup costs, CERCLA established 

the Hazardous Substance Superfund Trust Fund (Trust Fund) to finance cleanup 

efforts. The Trust Fund also pays for EPA’s enforcement, as well as research and 

development activities. 

Under Executive Order 12580, the Attorney General is responsible for all 

Superfund litigation. Within the Department of Justice (DOJ), the Environment and 

Natural Resources Division (ENRD) administers cases against those who violate 

CERCLA’s civil and criminal pollution-control laws. Superfund litigation and support 

are assigned to the following ENRD sections: Appellate, Environmental Crimes, 

Environmental Defense, Environmental Enforcement, Land Acquisition, Natural 

Resources, and Law and Policy. 

Since FY 1987, the EPA has entered into interagency agreements with the 

ENRD to reimburse the ENRD for its litigation costs related to its CERCLA activities. 

As shown in Table 1, cumulative budgeted reimbursements for Superfund litigation 

totaled over $849 million between FYs 1987 and 2018, which represented over a 

quarter of the ENRD’s total budget during this period. 

1 42 U.S.C. §103 (2018). Because certain provisions of CERCLA were set to expire in fiscal 

year (FY) 1985, Congress passed the Superfund Amendments and Reauthorization Act (SARA) in 

1986. SARA stressed the importance of using permanent remedies and innovative treatment 

technologies in the cleanup of hazardous waste sites, provided the EPA with new enforcement 

authorities and settlement tools, and increased the authorized amount of potentially available 

appropriations for the Trust Fund. 

1 
 

Table 1 

Comparison of the ENRD’s Appropriations and Budgeted 

Superfund Reimbursements 

(FYs 1987 through 2018) 

FY ENRD 

APPROPRIATIONS 

BUDGETED SUPERFUND 

REIMBURSEMENTS 

TOTAL ENRD 

BUDGET 

1987 - 2009 $ 1,441,251,000 $ 647,509,160 $ 2,088,760,160 

2010 109,785,000 25,600,000 135,385,000 

2011 108,010,000 25,550,000 133,560,000 

2012 108,009,000 24,550,000 132,559,000 

2013 101,835,764 23,050,000 124,885,764 

2014 107,643,000 23,050,000 130,693,000 

2015 110,024,350 21,430,000 131,454,350 

2016 110,512,000 20,145,000 130,657,000 

2017 110,512,000 20,145,000 130,657,000 

2018 110,512,000 18,828,000 129,340,000 

Totals $2,418,094,114 $849,857,160 $3,267,951,274 

Source: ENRD Budget History Report for FYs 1987 through 2018 

The EPA and the ENRD Statement of Work required the ENRD to maintain a 

system that documented its Superfund litigation costs. Accordingly, the ENRD 

implemented a management information system developed by a private contractor. 

This system is designed to process financial data from the ENRD’s Expenditure and 

Allotment (E&A) Reports into: (1) Superfund direct costs, including direct labor 

costs and other direct costs; (2) non-Superfund direct costs; and (3) allocable 

indirect costs.2 

The EPA authorized reimbursements to the ENRD in the amount of 

$18.8 million during FY 2018 in accordance with the most recent EPA Interagency 

Agreement DW-015-92496201-1.3 

The funding for Superfund is comprised of appropriations from EPA’s general 

fund, interest, fines, penalties, and recoveries.4 Consequently, the significance of 

the ENRD’s Superfund litigation can be seen in the commitments and recoveries 

that the EPA has obtained. Between FYs 1987 and 2018, the EPA received nearly 

2 The E&A Report is a summary of the total costs incurred by the 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 total 

amounts paid in the E&A Reports less direct charges and are allocated based on the direct Superfund 

salary costs on each case. 

3 EPA interagency agreement funds are considered no-year money. ENRD advised that it 

applied unused funds from previous interagency agreements to supplement the FY 2018 agreement’s 

authorization. 

4 Excise taxes imposed on petroleum and chemical industries, as well as an environmental 

income tax on corporations, maintained the Trust Fund through 1995, when the taxing authority for 

Superfund expired. Since that time, Congress has not enacted legislation to reauthorize these taxes. 

2 
 

$15 billion in commitments to clean up hazardous waste sites and recovered over 

$9.6 billion from potentially responsible parties, as shown in Table 2.5 

Table 2 

Estimated Commitments and Recoveries 

(FYs 1987 through 2018) 

FY COMMITMENT ($ MILLION) RECOVERY ($ MILLION) 

1987 - 2009 $7,361 $5,516 

2010 753 726 

2011 902 376 

2012 118 132 

2013 1,051 637 

2014 49 163 

2015 2,548 1,769 

2016 335 63 

2017 1,659 176 

2018 171 89 

Totals $14,947 $9,647 

Source: ENRD Commitment and Recovery Reports, FYs 1987 to 2018 

Audit Objective 

The objective of the audit was to determine if the cost allocation process 

used by the ENRD and its contractor provided an equitable distribution of total labor 

costs, other direct costs, and indirect costs to Superfund cases during FY 2018. To 

accomplish our objective, we assessed whether: (1) the ENRD identified Superfund 

cases based on appropriate criteria, (2) costs distributed to cases were limited to 

costs reported in the 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 designed the audit to compare 

costs reported in the contractor’s accounting schedules and summaries for FY 2018 

(see Appendix 3) to the information recorded in DOJ’s 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 tests: 

 We reviewed the ENRD’s methodology for categorizing Superfund cases 

by comparing a select number of Superfund cases to the ENRD’s 

Superfund case designation criteria. 

 We compared Superfund total costs recorded as paid in the E&A Reports 

to the amounts reported as Total Amounts Paid in the contractor’s yearend accounting schedules and summaries, and we traced the costs to 

Superfund cases. 

5 Commitments are estimated funds from potentially responsible parties for the cleanup of 

hazardous waste sites. Recoveries are actual funds received by the EPA that include Superfund cost 

recovery, oversight costs, and interest. 

3 
 

 We reviewed the contractor’s methodology for distributing direct labor 

and indirect costs to Superfund cases, and we compared other direct 

costs to source documents to validate their allocability to Superfund 

cases. 

We performed these steps to ensure that costs distributed to Superfund and 

non-Superfund cases were based on total costs for FY 2018, that the distribution 

methodology used and accepted in prior years remained viable, and that selected 

costs were supported by evidence that documented their allocability to Superfund 

and non-Superfund cases. We used the test results to determine whether the 

ENRD provided an equitable distribution of total labor, other direct costs, and 

indirect costs to Superfund cases during FY 2018. 

Appendix 1 contains a more detailed description of our audit objective, 

scope, and methodology. 

4 
 

 

AUDIT RESULTS 

Our assessment of FY 2018 Superfund charges determined that the ENRD 

generally provided an equitable distribution of total labor costs, other direct costs, 

and indirect costs to Superfund cases. While the ENRD generally adhered to its 

procedures for designating cases as Superfund or non-Superfund, we identified one 

exception pertaining to the billing of charges associated with a case that should not 

have been classified as a Superfund case. This resulted in $164,087 in unallowable 

expenses that were incorrectly billed to EPA. Further, we were also able to reconcile 

ENRD’s accounting records to costs reported in the system designed to process 

Superfund-related financial data from the ENRD’s E&A Reports. We found that the 

ENRD appropriately allocated incurred costs to Superfund and non-Superfund cases, 

based on the correct totals for the fiscal years. Further, we found that selected 

costs charged to Superfund were adequately supported and allocable to Superfund. 

Reconciliation of Contractor Accounting Schedules and Summaries to 

E&A Reports 

To ensure that the distribution of costs to Superfund and non-Superfund 

cases was limited to total costs incurred for each fiscal year, we reconciled the 

amounts reported in the ENRD’s E&A Reports to those in the contractor’s Schedule 6, 

Reconciliation of Total ENRD Expenses. According to the E&A Reports, total ENRD 

expenses were over $133 million in FY 2018, as shown in Table 3. 

Table 3 

Total ENRD Expenses 

DESCRIPTION FY 2018 

Salaries $78,442,623 

Benefits 24,166,386 

Travel 2,881,101 

Freight 58,646 

Rent 16,718,016 

Printing 9,510 

Services 10,408,540 

Supplies 362,329 

Equipment 40,869 

Total $133,088,020 

Source: ENRD E&A Reports for FY 2018 

We then reconciled the ENRD E&A Report amounts to the distributions in the 

contractor’s Schedule 5, Superfund Costs by Object Classification, and Schedule 2, 

Superfund Obligation and Payment Activity by Fiscal Year of Obligation. We found 

that Schedules 1 through 6 reconciled to the E&A Reports. 

Superfund Case Reconciliation 

The ENRD assigned unique identifying numbers to all Superfund and nonSuperfund cases and maintained an annual database of Superfund cases. To 

ensure that the contractor used the appropriate Superfund database, we reconciled 

5 
 

 

 

 

the contractor’s Superfund database to the ENRD’s original Superfund database. 

The reconciliation identified 697 Superfund cases in FY 2018 for which the ENRD 

incurred hourly direct labor costs. 

We also reviewed the Superfund case designation criteria and associated 

case files to identify the method used by the ENRD to categorize Superfund cases 

and to determine if Superfund cases were designated in accordance with 

established criteria. We confirmed that the ENRD memorandum entitled 

Environment and Natural Resources Division Determination of Superfund Cases 

provided the methodology for designating Superfund cases. 

We judgmentally selected 17 cases from across different ENRD divisions as 

listed in the FY 2018 Superfund database to test whether the ENRD staff adhered to 

case designation procedures outlined in the ENRD Superfund case determination 

memorandum.6 We compared the case number in the Superfund database to the 

ENRD case file documents including case intake worksheets, case opening forms, 

case transmittals, and other correspondence. These documents referenced laws, 

regulations, or other information used to categorize the cases as either Superfund 

or non-Superfund for tracking purposes. Of the 17 sampled cases, we found 1 

exception pertaining to the charges of case number 90-13-9-15339 from the 

ENRD’s Appellate section. ENRD had tracked labor costs associated with this case 

as Superfund work beginning in FY 2018. An ENRD official from the Appellate 

section stated that an ENRD staff member mistakenly opened the case as a 

Superfund case and redesignated unbilled work hours to a non-Superfund case 

number (0-13-9-15339/1). However, ENRD did not redesignate charges stemming 

from FY 2018 work hours as it had already billed those charges to the EPA. The 

FY 2018 time amounts to 824.25 hours and reflects $164,087 in expenses that the 

ENRD incorrectly identified as Superfund hours and billed to the EPA.7 Considering 

that these erroneous billings are not allowable under the terms of ENRD’s 

interagency agreement with the EPA, we recommend that the ENRD remedy 

$164,087 in questioned costs. To mitigate the risk of future improper case 

designation, we also recommend that the ENRD instruct those who designate cases 

in each section on how to identify Superfund case criteria. 

Superfund Cost Distribution 

Because we found that the ENRD’s case identification method adequately 

identified Superfund cases, we proceeded to review the system used by the 

contractor to distribute direct labor, indirect costs, and other direct costs charged to 

Superfund cases. Our starting point for reviewing the distribution system was 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. The Superfund costs in Schedule 2 of the 

accounting schedules and summaries for FY 2018 are shown in Table 4. 

6 See Appendix 2 for the cases we sampled. 

7 Of the $164,087 in unsupported costs, $109,074 constituted indirect costs. 

6 
 

 

-

-

-

-

Table 4 

Superfund Distributed Costs 

COST CATEGORIES FY 2018 

Labor $4,937,219 

Other Direct Costs 2,083,088 

Indirect Costs 9,788,964 

Unliquidated Obligations 6,883,605 

Total $23,692,876 

Note: The amounts listed in this table reflect obligations and 

payments during FY 2018. These amounts are also allocated 

to prior year interagency agreements, as detailed in the 

accounting schedules and summaries included at Appendix 3 

of this report. 

Source: Schedule 2 of the contractor’s accounting 

schedules and summaries. 

Direct Labor Costs 

The contractor continued using the labor distribution system from prior 

years, which our prior audits had reviewed and accepted. The ENRD provided the 

contractor with electronic files that included employee time reporting information 

and bi-weekly salary information downloaded from the National Finance Center.8 

Figure 1 shows the formula the contractor used to distribute labor costs monthly. 

Figure 1 

Monthly Distribution of ENRD Labor Cost 

Employee Bi‐weekly

Salary

_______________

Employee Reported

Bi‐weekly Work Hours

Bi‐weekly

Hourly Rate

Employee

Reported Monthly

Superfund

and Non‐

Superfund Case

Hours

Distributed

Individual

Monthly

Labor Case Cost

Source: OIG analysis of contractor labor cost calculation 

8 The National Finance Center processes bi-weekly payroll information for many federal 

government agencies, including DOJ. 

7 
 

 

For the purposes of our review, we: 

 compared total Superfund and non-Superfund labor costs to costs 

reported in ENRD E&A Reports for FY 2018; 

 reviewed the ENRD labor files listing billable time, selected ENRD salary 

files provided to the contractor, and the resultant files prepared by the 

contractor to summarize costs by employee and case; and 

 extracted Superfund case costs from the contractor files by using 

validated Superfund case numbers. 

We completed reconciliations between ENRD and contractor data files to: 

(1) compare extractions from ENRD employee time and case data against the 

contractor’s accounting schedules and summaries and (2) identify Superfund case 

data. 

Using ENRD data, we determined that ENRD employees spent a total of 

77,401 hours working on 697 Superfund cases in FY 2018. We verified that the 

contractor made a similar determination in its billing schedules. To determine if the 

contractor’s billing summary for direct labor totaling $4,937,219 was accurate 

based on data provided by the ENRD, we traced and verified the total direct labor 

costs for Superfund cases using the contractor’s calculated labor rates, ENRD’s time 

reports, and ENRD’s list of identified Superfund cases for FY 2018. 

Overall, we were able to verify the accumulation of reported hours and the 

extraction of labor costs for Superfund cases. Therefore, we believe that this 

process is adequately designed to provide an equitable distribution of direct labor 

costs to Superfund cases. 

Indirect Costs 

In addition to direct costs incurred for specific cases, the ENRD incurred 

indirect costs that were allocated to its cases. These costs included salaries, 

benefits, travel, freight, rent, communication, utilities, supplies, and equipment. 

The contractor distributed indirect costs to individual cases using an indirect cost 

rate calculated on a fiscal year basis. 

The indirect cost rate was derived from an ENRD indirect rate and a 

Superfund-specific indirect rate. To calculate the ENRD indirect rate, the contractor 

subtracted the amount of ENRD’s direct costs from the total costs incurred 

according to the ENRD’s E&A report and divided the remainder by the total direct 

labor costs for the period. To calculate a Superfund-specific indirect rate, the 

contractor identified indirect costs that supported only Superfund activities and 

divided these costs by the Superfund direct labor costs for the period. The rates for 

FY 2018 are shown in Table 5. 

8 
1r:::::::::::r::1 

Table 5 

Indirect Cost Rates 

CATEGORY FY 2018 

ENRD Indirect Rate 169.55% 

Superfund-Specific Indirect Rate 28.72% 

Combined Indirect Cost Rate 198.27% 

Source: Schedule 4 of the contractor’s accounting schedules and 

summaries, percentages rounded to nearest tenth of a percent. 

Using the E&A Reports and the contractor’s electronic files, we reconciled the 

total indirect amounts to Schedule 4, Indirect Rate Calculation, to ensure that the 

contractor used only paid costs to accumulate the expense pool. We determined 

that the total amount of indirect costs for FY 2018 was $79,775,581, of which 

$9,788,964 was allocated to Superfund cases. We found that this process generally 

provided for an equitable distribution of indirect costs to Superfund cases during 

FY 2018. 

Other Direct Costs 

Table 6 presents the other direct costs, by subobject code, incurred by the 

ENRD and distributed to Superfund during FY 2018. 

Table 6 

Superfund Other Direct Costs 

SUBOBJECT 

CODE 

DESCRIPTION FY 2018 

11804 Expert Witness Fees $1,333,007 

21000 Travel and Transportation 213,963 

23000-

24000 

Reporting and Transcripts 1,944 

25000 

(except 25105) 

Research Services 117,055 

25105 Litigation Support 416,879 

26000 Supplies 241 

Total $2,083,089 

Source: Contractor files for FY 2018 

We selected three FY 2018 other direct cost subobject codes to test: 

(1) 11804 – Expert Witness fees; (2) 21000 – Travel and Transportation, and 

(3) 25105 – Litigation Support. We note that for FY 2018, these three subobject 

codes comprised 52 percent of the number of transactions in the other direct cost 

universe (1,445 of 1,665 transactions) and 94 percent of the FY 2018 other direct 

cost expenditures ($1.96 million of $2.08 million). Considering the possible 

variation between these three types of transactional activity measures, we 

employed a stratified random sampling design to provide effective coverage and to 

obtain precise estimates of the test results’ statistics. The set of transactions in the 

universe was divided into two subsets: high-dollar value transactions and non-high 

dollar value transactions. We reviewed 37 percent of high-dollar transactions 

9 
 

within these three subobject codes. In total, we reviewed 150 transactions totaling 

$1,020,659, as detailed in Table 7. 

Table 7 

Sampled Other Direct Costs 

SUBOBJECT 

CODE 

DESCRIPTION 

NUMBER OF 

TRANSACTIONS 

AMOUNT 

11804 Expert Witness Fees 44 $679,865 

21000 Travel and Transportation 54 31,527 

25105 Litigation Support 52 309,267 

Totals 150 $1,020,659 

Source: OIG 

We designed our review of other direct cost transactions to determine if the 

selected transactions included adequate support based on the following four 

attributes: 

 Subobject code classification – verified that the correct subobject code 

was used to classify the cost; 

 Superfund/non-Superfund case classification – verified that the case 

number appearing on the documents matched the case number in the 

Superfund database; 

 Dollar amount – verified that the dollar amount listed in the other direct 

costs database matched the amounts on the supporting documentation; 

and 

 Proper approval – verified that the proper approval was obtained on the 

vouchers paying the other direct costs. 

Our tests resulted in no exceptions. 

10 
CONCLUSION AND RECOMMENDATIONS 

We found that the cost allocation process used by the ENRD provided an 

equitable distribution of total labor costs, other direct costs, and indirect costs to 

Superfund cases during FY 2018. However, we found one discrepancy in our 

testing of Superfund case designation where the ENRD erroneously designated a 

case as a Superfund case when the case opened in FY 2018. Charges associated 

with this incorrectly designated case resulted in $164,087 in expenses that should 

not have been billed to EPA. 

We recommend that the ENRD: 

1. Remedy $164,087 in questioned costs. 

2. Instruct those who designate cases in each section on how to identify 

Superfund case criteria. 

11 
 

 

SCHEDULE OF DOLLAR-RELATED FINDINGS 

Description Amount Page 

Questioned Costs:9 

Unallowable charges associated with case number 

90-13-9-15339 $164,087 6 

TOTAL DOLLAR-RELATED FINDINGS $164,087 

 

9 Questioned Costs are expenditures that do not comply with legal, regulatory, or 

contractual requirements; are not supported by adequate documentation at the time of the audit; or 

are unnecessary or unreasonable. Questioned costs may be remedied by offset, waiver, recovery of 

funds, the provision of supporting documentation or contract ratification, where appropriate. 

12 
APPENDIX 1 

OBJECTIVE, SCOPE, AND METHODOLOGY 

Objective 

The objective of this audit was to determine if the cost allocation process 

used by the ENRD and its contractor provided an equitable distribution of total labor 

costs, other direct costs, and indirect costs to Superfund cases during FY 2018. 

Scope and Methodology 

To accomplish the overall objective, we assessed whether: (1) the ENRD 

identified Superfund cases based on appropriate criteria, (2) costs distributed to 

cases were limited to costs reported in the 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. 

The audit covered, 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, 2017, through 

September 30, 2018. We compared total costs recorded as paid on the ENRD’s 

E&A Report to the amounts reported as Total Amounts Paid on the contractor’s year 

end accounting schedules and summaries, and traced the costs to the Superfund 

cases for FY 2018. We also reviewed the contractor’s methodology for distributing 

direct labor costs and indirect costs to Superfund cases for FY 2018. In addition, 

we reviewed the ENRD’s methodology for categorizing Superfund cases by 

comparing a select number of Superfund cases to the ENRD’s Superfund case 

designation criteria for FY 2018. 

Statement on Compliance with Generally Accepted Government Auditing Standards 

We conducted this performance audit in accordance with generally accepted 

government auditing standards (GAGAS). Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objectives. 

We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

Internal Controls 

In this audit we performed testing, as appropriate, of internal controls 

significant within the context of our audit objectives. A deficiency in internal control 

design exists when a necessary control is missing or is not properly designed so 

that even if the control operates as designed, the control objective would not be 

met. A deficiency in implementation exists when a control is properly designed but 

not implemented correctly in the internal control system. A deficiency in operating 

effectiveness exists when a properly designed control does not operate as designed 

13 
 

 

 

 

or the person performing the control does not have the necessary competence or 

authority to perform the control effectively.10 

Through this testing, we did not identify any deficiencies in the ENRD’s 

internal controls that are significant within the context of the audit objectives and 

based upon the audit work performed that we believe would affect the ENRD’s 

ability to effectively and efficiently operate, to correctly state financial and 

performance information, and to ensure compliance with laws and regulations. 

Sample-based Testing 

To accomplish our audit objectives, we performed sample-based testing of 

other direct costs for FY 2018. Considering the possible variation between 

subobject codes 11804, 21000, and 25105, we employed a stratified random 

sampling design to provide effective coverage and to obtain precise estimates of 

the test results’ statistics. We reviewed 37 percent of transactions (75) in one 

stratum that consisted of high-dollar transactions within these three subobject 

codes. 

Additionally, we employed a stratified sample design for the non-high dollar 

transactions with 95 percent confidence interval, 3-percent precision rate, and 

weighted average of 3-percent estimated exception rate. The non-high dollar 

sample size was 75 transactions. We determined the transaction costs were 

properly charged and approved; therefore, we have no exception in the non-high 

dollar sample strata. Since there were no noted errors we did not project any 

errors to the universe. 

In addition to this effort, we also employed a judgmental sampling design to 

obtain broad exposure to numerous facets of the cases and areas we reviewed. 

This non-statistical sample design did not allow projection of the test results to the 

universe from which the samples were selected. 

Computer-Processed Data 

During our audit, we obtained information from the Unified Financial 

Management System. We did not test the reliability of those systems as a whole, 

therefore any findings identified involving information from those systems were 

verified with documentation from other sources. 

10 Our evaluation of the ENRD’s internal controls was not made for the purpose of providing 

assurance on its internal control structure as a whole. The ENRD management is responsible for the 

establishment and maintenance of internal controls. Because we are not expressing an opinion on the 

ENRD’s internal control structure as a whole, this statement is intended solely for the information and 

use of the ENRD. This restriction is not intended to limit the distribution of this report, which is a 

matter of public record. 

14 
 

APPENDIX 2 

FY 2018 CASES IN 

SAMPLE REVIEW 

COUNT CASE NUMBER CLASSIFICATION 

1 90-1-23-10202 General Lit 

2 90-1-23-14081 General Lit 

3 90-11-6-16908 Defense 

4 90-11-6-05232 Defense 

5 90-11-6-18099/1 Defense 

6 90-11-6-21247 Defense 

7 90-11-6-21361 Defense 

8 90-11-3-643/17 Enforcement 

9 90-11-3-90/4 Enforcement 

10 90-11-3-194/2 Enforcement 

11 90-11-3-11966 Enforcement 

12 90-11-3-11815 Enforcement 

13 198-50-01044 Criminal 

14 198-01380 Criminal 

15 198-01667/1 Criminal 

16 90-13-9-15339 Appellate 

17 90-12-15375 Appellate 

15 
AFA Consulting, LLC 

14505 Edenmore Ct, Laurel MD, 20707 

Ma) 7, 20 19 

Mr. Andrew Collier 

U.S. Depa1tment of Justi ce 

Em ironment and Natural Resources Division 

uite 2038 

601 D treet N.W. 

Washington, DC. 20004 

Dear Mr. Collier: 

Enclosed please find the foll owing final fiscal year 20 18 year end accounting schedules and 

summa ries relating to cost incurred by the United tatcs Department of Ju tice (DOJ), 

Environment and Natural Re ources Division (ENRD) on behalf of the Environmental Protection 

Agency (EPA) under the Comprehensive Environmental Re ponse, Compensation and Liability 

Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986 (SARA or, 

hereafter, Superfund): 

0 EPA Billing Summaf) - Schedules 1-7 

September 30, 2018 

0 DOJ - Superfund Case Cost Summary (electronic copy) 

As of September 30, 2018 

0 DOJ - Superfund Cases - Time By Attorney/Paralegal 

Year Ended September 30, 20 18 (electronic copy) 

0 DO.I - uperfund Direct Costs (electronic cop)) 

Year Ended September 30,2018 

APPENDIX 3 

FY 2018 ACCOUNTING SCHEDULES AND SUMMARIES 

16 
The schedules represcnl the fina l fiscal year 2018 amounts and establ ish an indirect cost rate 

applicable to the entire liscal year. As a result, the summari es included supersede all prior 

preliminary information processed by us relating to fiscal yea r 20 18. 

The schedules, summaries and calculations ha e been prepared by us based on information 

supplied to us by the ENRD. Professional time charges, sa lary data, and other case specific cost 

expenditures ha e been input or translated by us to produce the aforementioned repo11s. Total 

costs incLmed or obligated b) the ENRD as reflected in the Expenditure and Al lotmem Reports 

(E&A) for the period have been used to calculate the total amount due from EPA relating to the 

uperfu nd cases. Computer-generated time reporting infonnation supplied to us by DOJ (based 

on ENRD's accumulation of attorney and paralega l hours) along with the resulting hourly rate 

calculations made by u based on EN RD-supplied employee sa lary files, have been reviewed by 

us to assess the reasonableness of the calculated hourly rates. A 1l obligated labor amounts reflected 

on the E&A's as of September 30, 2018. which are not identified as case specific. have been 

classified as indirect labo r. 

Our requested scope of services did not constitute an audit of the aforementioned schedules and 

summaries and, accordingly, we do not express an opinion on them. However. the methodology 

uti Ii zed by us to assign and allocate costs to specific cases is based on generally accepted 

accounting principles, including references to cost allocation guidelines outlined in the Federal 

Acquisition Regulations and Cost Accounting Standards. ln add ition, 1,ve understand that the DOJ 

audit staff wi ll continue to perform periodic audits of the source documentation and summarized 

time reporting information accumulated by ENRD and supplied to us. Our accounting reports, 

schedules and summaries will, therefore, be made available to DOJ as part of this audit process. 

Beyond the specific representations made above, we make no other form of assurance on the 

aforementioned schedules and summaries. 

Very trul) yours, 

William Kime 

AFA Consulting. LLC 

Page2 

17 
Schedule l 

BIT.LING SUMMARY 

SL~ 1M,\RY OF AMOlJ1'TS DUE 

BY ThTER,\GEJ\"CY ..\.GREEiVIE:--T 

September 30, 2018 

Fiscal Years 

2018 2017 2016 2015 2014 2013 

:EPA Billing Summary - Amount Paid $ 14,459,150 (a) s 17,918,421 (b) $ 19,515,727 (b) $ 20,675,660 (b) $ 22,052,280 (b) s 22,717,605 (b) 

.-\dd: 

Payments in FY 2018 for 2017 (a) 1,991,365 

Pa~111ents in FY 2018 for 2016 (a) 340,689 

Payments in FY 2018 for 2015 (a) 4,830 

Payments in FY 2018 for 2014 (a) 13,237 

Payments in FY 2018 for 2013 (a) 

Subtotal 14,459,150 19,909,786 19,856,416 20,680,490 22,065,517 22,717,605 

Unliquidated Obligations(<) 4,194.068 2.562,518 57,92 1 1,503 67,595 

Total $ 18,653,218 s 22,472,304 $ 19,914,337 s 20.681,993 $ 22,133,112 s 22,717,605 

(a) See EPA Billing SUll11lla!)', Schedule 2, September 30, 2018 

(b) See EPA Billing Summary, Schedule I, September 30, 2017 

(c) See EPA Billing SUll11lla!)', Schedule 3, September 30, 2018 

18 
hedule 2 

EPA BILLING SUMMARY 

SUPERFUl'H) OBLIGATIOJ\" AND PAY \'IENT ACTIVITY DURING 2018 

BY FISCAL YEAR OF OBLIGATION 

Fiscal Years 

2018 2017 2016 2015 2014 Total 

Amounts Paid: 

Labor $ 4,937,219 $ $ $ $ $ 4,937,219 

Other Direc.t Costs 1,108,227 948,721 15,120 3,823 7,197 2,083,088 

Indirect Costs 8,4 13,704 1,042,644 325,569 1,007 6,040.33 9,788,964 

Subtotal 14,459,150 1,991,365 340,689 4,830 13,237 16,809,271 

Unliquidatecl Obligations (a) 4,194,068 2,562,518 57,921 1,503 67,595 6,883,605 

Totals $ 18,653,218 $ 4,553,883 $ 398,610 $ 6,333 $ 80,832 $ 23,692,876 

(a) See Sc.hedule 3 

2 

19 
Schedule 3 

A BILLING SUl\11\IARY 

FISCAL YEARS 2018, 2017, 2016, 2015, AND 2014 UNLIQUIDATED OBLIGATIO:KS 

September 30, 2018 

Fiscal Years 

2018 2017 2016 2015 2014 

ENRD Unliquidated Obligations 

at September 30, 2018 $ 38,847,929 $ 10,706,877 $ 3,704,979 $ 1,001,584 $ 578,404 

Less: Unliquidated Obligations: 

Section I 595 (a) 15,678,065 6,036,429 3,121,661 1,000,074 121,174 

Section I 596 (b) 5,050,000 829,925 126,644 6 64 

Section I 598 ( c) 2,561,518 2,382,933 7 1,503 5 

Subtotal 23,289,583 9,249,287 3,248,312 1,001,583 121,243 

Net Unliquidated Obligations - ENRD 15,558,346 1,457,590 456,667 457,161 

Superftuid percentage ( d) 10.4931% 12.3207% 12.6818% 13.4825% 14.7848% 

Superftuid portion ofUnliquidated 

Obligations 1,632,550 179,585 57,9 14 67,590 

Add - Section 1598 Unliquidated 

Obligations 2,561,518 2,382,933 7 1,503 5 

Total Superfuncl Unliquidated Obligations (e) $ 4,194,068 $ 2,562,518 $ 57,921 $ 1,503 $ 67,595 

(a) Section 1595 relates to reimbursable amounts from agencies other than EPA. 

(b) Section I 596 relates to non-Superftn1d charges. 

(c) Section 1598 relates to charges that are Superftn1d specific. 

( d) Superftuid percentage of tutliquidated obligations was calculated by dividing year to date Superftuid 

direct labor by the total direct labor for each of the fiscal years. 

(e) Relates 01tly to unliquidated obligations for the fiscal year indicated. 

3 

20 
Sthedule ~ 

EPA BILL[\°G SUM~URY 

J:\l>IRECI RATE CALCULATION 

FISCAL YEAR 2018 

Total 

.Amounts 

escription Paid (a) 

Indirect labor (b) $30,643,067 

Fringes 24,166,386 

Indirect travel 360,394 

Freight 58,596 

Office spa<e and utilities 16,693,175 

Pri.nti.ng(form'>, etc.) 105 

Training and other sen, ,es 7,452,073 

Supplies 360,915 

Non-capitalized equipment and miscellaneous 40869 

Subtotal 79,775,581 

Total Direct Labor 47,052,143 

ENRD Indirect Costs Rate - F/Y 2018 Obligations 169.5472% 

Plus: Superfund Indirect Costs for Prior Year Obligations (c) and Superfund Specific Costs ( d) 

2018 $ 42,789 

2017 1,042,644 

2016 325,569 

2015 1,007 

2014 6,040 

Total 1,418,049 

Supernmd Direct Labor 4,937,219 

Supernmd Indirect Rate 28.7216% 

Total Indirect Rate. 198.2688% 

(a) Indirect <Ost rate. <aiculatious are presented on a fiscal year-t~ate basis. AD 

case. specific. and other unallowable. <osts (Section 1595 and 1596) have. been 

removed. 

(b) Indirect labor and fringes include certain ruoDIMDd obligation ae<ruals. 

(c) Indn-ect cost pa}ments for the prior ye:ir obligations iuc-luded in the totili: presented 

are as follows; SJ,004,277; S325,569; $1,007 and $6,040; for F/Y 2017 

through F/Y 2014 re,-pectively. 

(d) The. balance of the. d1a,ges in the totals presented were paid during fis<al year 2018 

to maintain Supernmd case infonnation or perfonn other Superfund Specific 

activities. These charges were. initiated as a result ofSupernmd and are 

of benefit only to the Superfund Progran, They have beeo allocated only to 

Superfund cases through this separate indirect approach. The charges are $42,789; 

and $38,367; F/Y2018 and F/Y 2017 respectively. 

4 

21 
Schedule 5 

EPA BILLING SUMMARY 

SUPERFUND COSTS BY OBJECT CLASSIFICATION 

September 30, 2018 

t Direct Iuclired Unliquiclatecl 

Class. Descl'iption Expenses Expenses Obligations (b) Total 

11 Salaries (a) $ 5,641,876 $ 3,258,147 $ 2,192,904 $ 11,092,927 

12 Benefits 2,535,798 98,006 2,633,804 

21 Travel 211,805 37,816 2 1,600 271,222 

22 Freight 6,149 4,379 10,528 

23 Rent 1,769 1,751,628 169,792 1,923,190 

24 Printing 175 11 2,933 3,1 19 

25 Services 189,580 781,996 1,518,977 2,490,552 

26 Supplies 241 37,871 271 38,383 

,1 F.qnipme.nt 4,?.RR 1 R'i,?.O'i 1 R9,494 

Total $ 6,045,446 $ 8,413,704 $ 4,194,068 $ 18,653,2 18 

(a) Includes costs for direct. labor, special masters and expert \\~tnesses. 

(b) Represents the Superfund portion of unliquidated obligations. 

5 

22 
 

dule 6 

EPA BILLING SUM:\1AR Y 

RECONCILM.TIO N OF TO TAL El\'RD PAID EXPENSES 

Septembe.- 30, 2018 

Indirect 

--Supel'fund-- -1\on-Superfund--- Section Total 

Object Direct Indirect Dil'ect Indirect 1595 & 1596 Amounts 

Class. D escription Expenses Expenses Expenses Expenses Expenses Paid 

11 Salaries $ 5,641,876 $ 3,258,147 $ 42,114,935 $ 27,427,666 $ $ 78,442,624 

12 Benefits 2,535,798 21,630,588 24,166,386 

21 Travel 211,805 37,816 2,110,696 322,577 198,206 2,881,101 

22 Freight 6,149 50 52,447 58,646 

23 Rent 1,769 1,751,628 23,072 14,941,547 16,718,016 

24 Printing 175 11 9,230 941 9,510 

25 Services 189,580 781,996 2,161,324 6,670, 12 1 605,519 10,408,540 

26 Supplies 241 37,871 1,173 323,044 362,329 

31 &42 Equipment 4,288 36,581 40,869 

Total $ 6,045,446 $ 8,413,704 $ 46,420,480 $ 71,404,665 $ 803,725 $ 133,088,021 

6 

23 
 

7 

DEPARTMENT OF JUSTICE 

El.\'V IRONMEl\'T AND l\"ATURAL RESOURCES DIVISION 

September 30, 2018 

Section Hours Direct Labor Other Direct Costs Iudired Total Cases 

Appellate 1,264 $ 84,953 $ $ 168,435 $ 253,388 4 

Criminal 246 18,378 1,167 36,438 55,983 3 

Defense 972 65,754 130,370 196,124 22 

Enforcement 74,892 4,766,184 2,081,921 9,449,856 16,297,961 664 

Bank I 42 83 125 

Policy 3 273 540 813 I 

General Lit 23 1,635 3,242 4,877 2 

Total 77,401 $ 4,937,2 19 $ 2,083,088 $ 9,788,964 $ 16,809,271 697 

7 

24 
APPENDIX 4 

ENVIRONMENT AND NATURAL RESOURCES DIVISION’S 

RESPONSE TO THE DRAFT AUDIT REPORT 

U.S. Department of Justice 

Environment and Natural Resources Division 

Executive Office Telephone (ZOZ) 616-3100 

150 M Street, N.E., ztd Floor Facsimile (ZOZ) 616-3531 

Washington, DC Z0530 Andrew.Collkr@psdoj.gov 

April 14, 2020 

Jason R. Malmstrom 

Assistant Inspector General for Audit 

Office of the Inspector General 

150 M Street, N.E., 12th Floor 

Washington, DC. 20530 

Re: Audit of Superfund Activities in ENRD for Fiscal Year 2018 

Dear Mr. Malmstrom: 

I am writing to thank you for the professional and careful audit work performed by staff from 

the Office of the Inspector General ("OIG") during the recent audit of the Superfund program 

in the Environment and Natural Resources Division ("ENRD"), and to address the draft audit 

report's recommendations. For more than 30 years, ENRD has relied on your office to provide 

sound advice to help ensure that our accounting systems and operations meet rigorous 

standards for quality. Through the constructive process of regular audits, ENRD has 

strengthened its accounting, which has helped the government recover billions of dollars in 

cost recovery litigation over the years. These audits are instrumental in maintaining the 

integrity, reliability and accountability of the Division's Superfund program. We greatly 

appreciate the role that the OIG plays in this process. We also appreciate the opportunity to 

review the draft audit report and to respond to the recommendations. 

The objective of this 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 the subject fiscal year. We are pleased with OIG's 

conclusion that "ENRD appropriately allocated incurred costs to Superfund and 

non-Superfund cases, based on the correct totals for the fiscal years ... [ and] further, we found 

that selected costs charged to Superfund were adequately supported and allocable to 

Superfund." 

We agree with the recommendations described in the draft audit report, and we have described 

below the corrective actions we plan to take to address the recommendations. 

RECOMMENDATION # I: Remedy $164,087 in questioned costs. 

25 
 

RESPONSE: We concur with this recommendation. As described in the draft audit 

report, charges associated with a case in ENRD's Appellate Section (Sierra Club vs. 

Army Corps of Engineers, et. al, DJ #90-13-9-15339) were incoJTectly charged against 

the Superfund interagency agreement in FY 2018. ll1e case was changed (by way of 

establishing a new DJ Number) to "non-Superfund" for FY 2019 and subsequent years. 

To remedy this recommendation, ENRD will credit-bill EPA $164,087. Once 

completed, we will provide OIG with doctunentation supporting that the transaction has 

been completed. 

RECOMMENDATION #2: Instruct those who designate cases in each section on how to 

identify Superfund case criteria. 

RESPONSE: We concur with this recommendation. We will distribute to the Case 

Managers, and others in the sections who designate cases as Superfund/non-Superftu1d, 

a document outlining how to dete,mine/identify Superfund eligible cases and matters in 

the Division. We will provide OIG with the document and evidence of its distribution 

once this action has been completed. 

ENRD is committed to maintaining a reliable and efficient system for allocating Superfi.md 

costs. This audit significantly benefits the government's efforts to recover federal funds spent 

to clean the environment. In this era of tight budgets, we very much appreciate the Inspector 

General's willingness to conduct audits of the Superfi.md program. Should you or your staff 

require further infonnation, please do not hesitate to contact me. 

~ 

Sincerely, 

Andrew T. Collier 

Executive Officer 

Environment and Natural Resources Division 

- 2 -

26 
APPENDIX 5 

OFFICE OF THE INSPECTOR GENERAL ANALYSIS AND SUMMARY 

OF ACTIONS NECESSARY TO CLOSE THE REPORT 

The OIG provided a draft of this audit report to the ENRD. We incorporated 

the ENRD’s response in Appendix 4 of this final report. In response to our audit 

report, the ENRD concurred with our recommendations and discussed the actions it 

will implement in response to our findings. As a result, the status of the audit 

report is resolved. The following provides the OIG analysis of the response and 

summary of the actions necessary to close the report. 

Recommendations for the ENRD: 

1. Remedy $164,087 in questioned costs. 

Resolved. The ENRD concurred with our recommendation. The ENRD stated 

in its response that charges associated with a case in ENRD’s Appellate 

Section were incorrectly charged against the Superfund interagency 

agreement in FY 2018. The case was changed (by way of establishing a new 

DJ Number) to “non-Superfund” for FY 2019 and subsequent years. To 

remedy this recommendation, ENRD stated it will credit-bill EPA $164,087. 

This recommendation can be closed when ENRD provides evidence that the 

$164,087 credit has been made. 

2. Instruct those who designate cases in each section on how to dentify 

Superfund case criteria. 

Resolved. The ENRD concurred with our recommendation. The ENRD stated 

in its response that it will distribute to its Case Managers, and others who 

designate cases as Superfund or non-Superfund, a document outlining how 

to determine and identify Superfund eligible cases and matters. 

This recommendation can be closed when ENRD provides evidence of the 

creation and distribution of guidance about how to identify Superfund or nonSuperfund case criteria for Case Managers and others who designate cases. 

27 
 

 

 

-

The Department of Justice Office of the Inspector General (DOJ OIG) is a 

statutorily created independent entity whose mission is to detect and deter 

waste, fraud, abuse, and misconduct in the Department of Justice, and to

promote economy and efficiency in the Department’s operations.

To report allegations of waste, fraud, abuse, or misconduct regarding DOJ 

programs, employees, contractors, grants, or contracts please visit or call the

DOJ OIG Hotline at oig.justice.gov/hotline or (800) 869-4499.

U.S. DEPARTMENT OF JUSTICE OFFICE OF THE INSPECTOR GENERAL

950 Pennsylvania Avenue, NW

Washington, DC 20530 0001

Website Twitter YouTube

oig.justice.gov @JusticeOIG JusticeOIG

Also at Oversight.gov