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)

                         DCCUMENT BFSUMF

03716 - [B279140271

rNeed for Better Accountability for Cost of Offsite Radiological
Monitoring Service]. ED-77-70; B-1665t6. September 27, 1977. 6
PP.
Report to Douglas . Costle, Administrator, Envircnmental
Protection Agency; by Baltas E. Birkle (for Henry Eschwege,
Director, Community and Economic Development Div.)

Issue Area: Accounting and Financial Reporting (2800).
Contact: Energy and Minerals Div.
Budget Function: Miscellaneous: Financial Management and
    Information Systems (1C02); Natural Resources, Environment,
    and Energy: Pollution Control and Abatement (304).
Organizaticn Concerned: Department of Energy; Bnergy Research
    and Development Administration; Environmental Protection
    Agency: Environmental Monitoring and Support Lab., Las
    Vegas, NV.
Congressional Relevance: House Committee on Public Works and
    Transportation; Senate Cnittee on Envircruent and Public
    Works.
Authority: Department of Energy Organization Act (P.L. 95-91)
          The Environmental Protection Agency (PA) has a
cost-reimbursable agreement with the Energy Research and
Development APiinistration (ERDA) under which EPA's
Environmental Monitoring and Support Laboratory-Las Vegas (EKSLj
conducts offsite radiological monitoring of EREA'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 shcrtly. Findings/Conclusions:
EPA has been ubstantially overcharging ERDA fcr EMSL's
services. The exact amount of overcharge was indeterminable,
however, due to inadequate accountability by EFSL for costs
incurred under the agreement and uncertainty about which costs
should be reimbursable under the agreement. During the first six
months of fiscal year 1977,     SL had charged ERtA $949,900 for
costs  of providing  agreement services, about 95% of which costs
were  labor charges.  EMSL was generally not charging RDA for the
actual labor costs of the employees who were dcing the
monitoring. Recommendations: The existing agreement should be
revised to provide for specific identification of costs or cost
elements that should be reimbursed. The Administrator of EPA
should issue instructions requiring ESL employees to record and
maintain appropriate records of the actual costs incurred for
each cost element under the agreement and that such records
support all future charges submitted to ERDA and the Department
of Energy for reimbursement. i.C)
                               UNITED STATES GENERAL ACCOUNTING OFFICE
                                       WASHINGTON, D.C. 2I5


OtMMUIIY        AND ECO4OMIC
    tILVINt   MMcr  DIVIXON
                 T DVSEP                                           2 7 1977
         B-166506


         The Honorable Douglas M. Costle
         Administrator, Environmental
           Protection Agency
         Dear Mr. Costle:
               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 Research and Developmert Administra-
         tion (ERDA). Under this agreement (agreement no. EY-76-A-08-
         0539), EPA's Environmental Monitoring and Support Laboratory-
         Las Vegas (EMSL) conducts offsite radiological monitoring of
         ERDA's Nevada Tes: Site and is reimbursed by ERDA for prcviding
         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 is cheduled to begin operations on October 1,
         1977.
              We found that EPA was substantially overcharging ERDA
         for EMSL's services. The exact amount of overcharge is
         indeterminable, however, because of (1) inadequate accounta-
         bility by EMSL for costs incurred under the agreement and
         (2) uncertainty about which costs should be reimbursable under
         the agreement.
              Accordingly, we recommend that you issue instructions
         requiring EMSL emrioyees to record and maintain appropriate
         records of the actual costs incurred for each cost element
         under the agreement and that such records support all future
         charges submitted to ERDA and the Departmens of Energy for
         reimbursement. In a separate letter, we are also recommending
         that the Acting Administrator of ERDA take the initiative to
         revise the agreement to (1) specifically identify which cost
         elements are to be reimbursed and (2) require that EPA fully
         document charges submitted for reimbursement.


                                                                              EMD-77-70
                                                                              (30032)
B-166506


     We conducted our review at ERDA's Nevada Operations
Office and ESL, which are l.ocated in Las Vegas, Nevada. We
discussed our findings with ERDA and EPA headquarters offi-
cials in Washington, D.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 offsate moni-
toring agreement with ERDA, ESL is engaged in various other
EPA- and ERDA-related programs such as developing and optimi-
zing methods, systems, and strategies for monitoring environ-
mental pollutants and understanding how radioacti.e 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 EPA for EMSL's work were about $12
million through September 30, 1976. Additional costs of about
$2.1 million ar* expected to be charged during fiscal year 1977.
The offsite monitoring constitutes approximately 18 percent of
EMSL's total budget.
INADEQUATE ACCOUNTABILITY FOR
COSTS INCURRED UNDER AGREEMENT
     During the first 6 mohths of fiscal year 1977, EMSL had
charged ERDA $949,900 for costs of providing agreement services.
Approximately 95 percent of these costs were labor charges pro-
rated 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 wJho were actually doing the monitoring.
Instead, labor costs were being charged on the basis of pre-
determined 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 agreement, that
employee's regular time and associated labor costs were
charged to the agreement even if the employee had not worked
on the assignment. Conversely, lator costs associated with
EMSL employees normally assigned to EPA-funded work were being
charged against EPA funds on a similar predetermined basis,
regardless of which work they were actually performing. Costs

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B-166506


for overtime, however, were being charged to ths-e prolrams
on which the employees actually worked.
     According to EPA and EMSL oficials, EMSL's predeter-
mincd charging of regular salary costs to programs and acti-
vities is in accordance wi';h EPA's system of accounting for
similar labor costs. Undez this system--the Depart ..ntal
Integrated Payroll Services (DIPS) system--a specific work
code is assigned to each position and the cost o all regular
time worked by the individual in that position is routinely
charged to the assigned work code,
     EPA and EMSL officials pointed out they account for all
overtime by the actual work code on which the costs are
incurred because overtime must be authorized 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 taff years charged to the agreement, 76 were
associated with the regular hours of permanent, full-tilme
employees whose related salary costs were charged on a pre-
determined basis. The 14 remaining staff years were attri-
buted to part-time and temporary employees (whose costs were
also charged on a predetermined basis) and direct overtime
cnazges.
     Because of EMSL's predetermined charging of the regular
working hours of its employees, EMSL's timekeeping records
did not 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 offtite radiclogical 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 EMSL's average staff year
cost of $20,000. EMSL was overcharging ERDA about $520,000,
as shown in the following table.




                              3
B-166506



              Estimate of Projected Overcharges
                for Fiscal Year 1977 (note a)

                                    Equivalent
                                    staff years        Costs

EMSL's labor charges to ERDA            90         S1,800,000

Our estimate ot actual
  labor charges                         64          l1280,000

Amount of projected overcharges         26         $ '520000


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 of 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 they
actually worked on. Requiring employees to do so would assure
that future labor charges to ERDA and the Department of Energy
are appropriate.

      c:ommenting'on our review results, the Director, EMSL,
agreel that EMSL's practice has led to losing track of some
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 after our review showed
that an estimated 70 staff years were being spent for offsite
monitoring, as opposed to the 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
normally waived under interagency agreements involving work
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 r cost elements
that should be reimbursed. The original agreement betwsie
EPA and the former AEC has remained essentially unchanged
since it became ef?:ctive in June 1971. With respect to
reimbursable costs, the agreement merely states that ERDA


                               4
B-166506


is to 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 ERDA's Nevada Operations Office.
     EMSL and ERDA officials said there was no specific agree-
ment on what the term "reasonable costs" meant and could not
demonstrate that the costs charged to ERDA were reasonable.
EMSL 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 EMSL determine what constitutes reasonable
costs.
     According to an official within ERDA's Office of the
Controller, ERDA's interagency agreements are usually more
specific in stating which cost elements are to be reimb,;rsed
and in requiring that related billings be supported by each
cost element. He added that the monitoring agreement pre-
ceded ERDA's inception and therefore did not contain some of
the standard "boiler plate" language on reimbursable cost ele-
ments.
CONCLUSIONS AND RECOMMENDATIONS
     Although the exact amount of labor costs that should
have been charged to ERDA cannot be determined, we believe
that direct and 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 EMSL for the monitoring are rea-
sonable. Similarly, there is no asurance that the funds
are being used as the Congress intended when it approved
ERDA's appropriations.
     We are, therefore, recommending that you issue instruc-
tions requiring EMSL employees to record and maintain appro-
priate records of the actual osts incurred for each cost
element under the agreement    ' that such records support all
future charges submitted to        ne the Department of Energy
for reimbursement. In a sepa        etter, we are also recom-
mending that the Acting Admin.     oaor of ERDA, take the ini-
tiative to revise the agreemen Zo (1) specifically identify

                              5
B-161,506


which cost elements are to be reimbursed and (2) require
that EA fully document charges submitted 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 recommenda-
tions to the House Comnmittee on Governmeit Operations and the
Senate Committee on Governmental Affairs not later than  50
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 then 60 days after te Oate of
the report.
     Copies of this report are being sent to the Director,
Office of M?.aagement and Budget; the Chairmen, House Commit-
tees on Appropriations and Government Operations and the comn-
Senate Committee on Governmental Affairs; and oversight
mitteis for the agencyv
     We appreciate the courtesy and cooperation extended to
our staff during the review.
                               Sincerely yours,


                               Henry Eschwege
                               Director




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