oversight

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)

                         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.

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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




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