DCCUMPNT FESUME 03715 - [A2794026] [Need for Better Accountability for Cost of Offsite Radiological Monitoring Service]. EMD-77-69; B-178726. Sptember 27, 1977. 6 PP. Report to Robert W. Fri, Acting Administrator, Energy Research and Development Administraticn; by J. Dexter Peach (for Monte Canfield, Jr., Director, Energy and Minerals Div.). Issue Area: Accounting and Finaiicial Reporting (2800). Contact: Energy and Minerals Div. Budget Function: Natural esources, Environment, and Energy: Pollution Control and Abatement (304); Natural Resources, Environment, and Energy: Energy (305). Organizaticn Concerned: Departme:it of Energy; Environmental Protection Aqency; Environmental Protection Agency: Environme.' il Monitoring and Support Lab., Las Vegas, NV. Congressional Relevance: House Committee on Science and Technology; Senate Committee n Energy and Natural Resources. Authority: Departrent of Energy organization Act (P.L. 95-91). The Environmental rotection Agency (EPA) has a cost-reimbursable agreement with the Energy Research and Development Administration (ER)A) under which EPA's Environmental Moni-.oring and Support Laboratory-Las Vegas (E[:SL) conducts offsite radiological monitoring of ER£A's Nevada Test Site and is reimbursed by ERDA for providing those services. ERDA's responsibilities under the agreement will be transferred to the new Department of Energy. Findings/Conclusions: EPA has been substantially overcharging ERtA for ESL's services. The exact amount of the overcharges was not determined, however, due to inadequate accountability by EMSL for costs incurred under the agreement and uncertainty about which costs should be reimbursable under the agreement. During the first 6 months of fiscal year 1977, ESL had charged RDA $949,9C0 for costs of providing agreement services, about 95% of which costs were labor charges. EMSL was generally not charging ERDA for the actual labor costs of the employees who were actually doirg the monitoring, but rather for persons scheduled tc perform the monitoring. Recommendations: The existing agreement should be revised to provide for specific identification of costs or cost elements that should be reimbursed. The Acting Administrator of ERDA should take the initiative to revise the agreement and to require that EPA fully document charges submitted for reimbursement. (SC) UNITED STAMTE GENERAL ACCC UNTING OFFICE WASINGTON, D.C. 20548 .RY D rPMALU SEP 2 7 77 5-178726 I' The Honorable Robert W. Fri O acting Administrator, Energy Research and Development Administration Dear Mr. Fri: We have reviewed the accountability for costs incurred by the Environmental Protection Agency (EPA) in providing. radiological monitoring services under a cost-reimbursable agreement with the Energy Ressarch and Development Administra- tion 'JRDA). Under his agreement (agreement nos EY-76-A-08- 0539,, EPA's Environmental Monitoring and Support Laboratory- Las Vegas (EMSL) conducts offsite radiological monitoiing of ERDA's Nevada Test Site and is reimbursed by ERDA for roviding those services. Pursuant to the Department of Energy Organi- zation Act (Public Law 95-91), ERDA's responsibilities under this agreement will be transferred to the new Department of Energy, which i.s scheduled to begin operations on October 1, 1977. We found theft EPA was substantially overcharging ERDA for EMSL's services. The exact amount of overcharge is indetermi- nable, however, because of (1) inadequate accountability by EISL for costs incurred under the agreement and (2) uncertainty about which costs should be reimbursable under the agreement. Accordingly, we recommend that you take the initiative: to revise the agreement to (1) specifically identify hich cost elements are to be reimbursed and (2) require that EPA fully document charges submitted for eimbursement. In a separate letter, we are also recommending that the Administrator, EPA, issue instructions requiring EMSL employees to rcord and main- tain appropriate records of the actual costs ncurred f each cost element under the agreement and that such records support all future charges submitted to ERDA and the Department of Energy for reimbursement. We conducted our review at ERDA's Nevada Operations Office and EMSL, which are located in Las Vegas, Nevada. We discussed END-77-69 (30032) B-178726 our findings with ERDA and EPA headquarters officials in Washington, L.C., whose comments have been recognized in this report. BACKGROUND EMSL is one of three laboratories within the Office of Monitoring and Technical Support under EPA's Office of Research and Development. In addition to the offsite moni- toring agreement with ERDA, EMSL is engaged in various other EPA- and ERDA-related programs such as developing and optimizing methods, systems, and strategies for monitoring environmental pollutants and understanding how radioactive materials in the environment are transferred to man. The present offsite radiological monitoring agreement was originally executed between the former Atomic Energy Com- mission (AEC) and EPA on June 1, 1971, and has been honored by ERDA since ERDA's inception in January 1975. Under the agreement EMSL is to determine the radiation exposure to man and the environment resulting from nuclear explosives testing. The total costs charged by EPk for EMSL's work were about $12 million through September 30, 1976. Additional costs of about 2.1 million are expected to be charged during fiscal year 1977. The offsite monitoring constitutes approximately 18 percent of EMSL's total budget. INADEOUATE ACCOUNTABILITY FOR ZOSTS INCURRED UNDER AGREEMENT During the first 6 months of fiscal year 1977, EMSL had charged ERDA $949,900 for costs of providing agreement ser- vices. Approximately 95 percent of these costs were labor charges prorated at an annual rate equivalent to about 90 staff years of effort. EMSL generally was not charging ERDA for the actual labor costs of employees who were actually doing the moni- toring. Instead, labor costs were being charged on the basis of predetermined assignments of employees to the monitoring effort. For example, if EMSL believed beforehand that a given employee would be assigned to work under the monitoring agree- ment, that employee's regular time and associated labor costs wsie charged to the agreement even if the employee had not worked on the assignment. Cinversely, labor costs associated with EMSL employees normally assigned t EP-funded work were being charged against EPA funds on a similar predetermined basis, regardless of which work they were actually performing. Costs or overtime, however, were being charged to those pro- grams on which the employees actually worked. 2 B-178726 According to EPA and EMSL officials, EMSL's pred:termined charging of regular salary costs to programs and activities is in accordance with EPA's system of accounting for similar labor costs. Under this system--the Departmental Integrated Payroll Services (DIPS) system--a specific work code is assigned to each position and the cost of all regular time worked by the individual in that position is routinely charged to the assigned work code. EPA and ESL officials pointed out that they account for all overtime by the actual work code on which the costs are incurred because overtime must be athorized in advance by each program. Thus, EMSL is required to assure that overtime charges are incurred only on authorized programs or work codes. Of the 90 staff years charged to.the agreement, 76 were associated with the regular hours of permanent, full-time employees whose related salary costs were charged on a pre- determined basis. The 14 remaining staff years were attributed to part-time and temporary employees (whose costs were also charged on a predetermined basis) and direct overtime charges. Because of EMSL's predetermined charging of the regular working hours of its employees, ESL's timekeeping records did nt provide a reliable basis to test the reasonableness of the equivalent 90 staff years charged to the agreement. However, a detailed analysis of available records and inter- views with EMSL personnel (including the project manager for the offhite radiological monitoring agreement) enabled us to estimate the amount of labor being put into the agreement by EMSL. This estimate showed that, during the first half of fiscal year 1977, the actual time worked by EMSL personnel on the offsite monitoring effort was equivalent to about 64 staff years, about 26 staff years less than the time that EMSL charged ERDA. Thus, based on MSL's average staff year cost of $20,000, EMSL was overcharging ERDA about $520,000, as shown in the following table. 3 B-178726 Estimate of Prcjected Overcharges fo' Fiscal Year 1977 note a) Equiva ont staff =dars CostS EMSL's labor charges to ERDA 90 i1,800,000 Our estimate of actual labor charges 64 1,280,000 Amount of projected overcharges 26 $ 520,000 a/Based on actual EMSL charges versus our estimate for the first 6 months of fiscal year 1977 and the difference. projected through the rest of the year. Although EMSL's predetermined charging o labor costs is provided for under the DIPS system, we found that the reverse side of employee timecards provided space for employees to charge their time directly to the programs or codes that -hy actually worked on. Requiring employees to do o would assure that future labor chargos to ERDA and the Department of Energy are appropriate. Commenting on our review results, the Director, EMSL, agreed that EMSL's practice has led to losing track of ome costs and that certain salary costs charged to ERDA were not related to work under the reimbursable agreement. He pointed out, however, that a study EMSL made ifter our reiew showed that an estimated 70 staff years were being spent for offsite monitoring, as opposed to che 64 staff years shown by our, estimate. He said that the amounts overcharged to ERDA for labor were more than offset by certain overhead costs, such as space rental and general and administrative expenses at EPA headquarters, that were not charged to ERDA. EPA and ERDA officials advised us, however, that such costs are nor- mally waived under interagency agreements involving wor in which the agencies have a mutual programmatic interest, such as in carrying out the radiological monitoring. NEED TO REVISE EXISTING AGREEMENT There is a need to revise the existing agreement to pro- vide for specific identification of costs cr cost elements that should be reimbursed. The original agreement between EPA and the former AEC has remained essentially unchanged since it became effectiv- in June 1971. With respect to reim- bursable costs, the agre. ent merely states that ERDA is to 4 B-178726 reimburse EPA for reasonable costs incurred in providing services. However, the agreement does not define the term "reasonable costs" and does not specify. cost elements which should be reimbursed. Nearly all charges EMSL made were for labor--only a small portion was attributed to incidental materials and supplies. The bulk of the materials and supplies were pro- vided to EMSL by RDA's Nevada Operations Office. EMSL and ERDA officials said there was no specific agreement on what the term reasonable costs" meant and cu).d not demonstrate that the costs charged to ERDA were reasona'1le. EKSL officials said that EMSL's practice of overcharging ERDA for labor costs and abstaining from charging ERDA for over- head costs were offsetting and, therefore, the costs charged to ERDA were reasonable. On the other hand, ERDA officials said that they let RESL determine what constitutes reasonable costs. According to an official within RDA's Office of the Controller, ERDA's interagency agreements are usually more specific in stating which cost elements are to be reimbursed and in requiring that related billings b supported by each cost element. He added that the monitoring agreement pre- ceded RDA's inception and therefore did not contain some of the standard "boiler plate" language on reimbursable cost elements. CONCLUSIONS AND RECOMENDATIONS Although the exact amount of labor costs that should have been charged to ERDA cannot be determined, we believe that direct anJ indirect labor costs should be systematically determined and used as the basis for agreement charges. Neither EPA nor ERDA have any assurance at this time that the amounts charged by EWSL for the monitoring are rea- sonable. Similarly, there is no assurance that the funds are being used as the Congress intended when it approved ERDA's appropriations. We are, therefore, recommending that you take the ini- tiative to revise the agreement to (1) specifically identify which coot elements are to be re' ursed and (2) require that EPA fully document charges submit '~r reimbursement. In a separate letter, we are alsc rcom :' q that the Administra- tor, EPA, issue instructions requi; 'ASL employees to record and maintain appropriate rec/,Js of the actual costs incurred for ach cost element under the agreement and that 5 B-178726 such records support all future charges submitted to ERA and the Department of Energy for reimbursement. As you know, section 236 of the Legislative Reorganiza- tion Act of 1970 requires the head of a Federal agency to submit a written statement on actions taken on our recomen- dations to the House Committee on Government Operations and the Senate Committee on Governmental Affairs not later than 60 days after the date of the report and to the House and Senate Committees on Appropriations with the agency's first request for appropriations made more than 60 days after the date of the report. Copies of this report are being sent to the Director, Office of Management and Budget; the Chairmen, House Commit- tees on Appropriations and Government Operations and the Senate Committee on Governmental Affairs; and oversight com- mittees for the agency. We appreciate the courtesy and cooperation extended to our staff during the review. Sincerely yours, . . .. .-Monte Canfield, Jr. Director 6
Need for Better Accountability for Cost of Offsite Radiological Monitoring Service
Published by the Government Accountability Office on 1977-09-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)