- the work was completed (or received);
- the State was billed for the cost; and
- the State paid for the cost.
b. DOCUMENT AND OTHER COST RECOVERY REQUIREMENTS
Each document serving as evidence to support costs claimed by the State must meet a number of legal requirements in order to be considered reliable and authentic. The document must have been produced at roughly the same time as the expense was incurred, it must be produced and utilized in the normal course of business and expert witness must be available, if requested, to testify as to the authenticity and reliability of the document.
Records that prove that expenses were reasonable and necessary must be retained by the State. Violation of EPA or State procurement regulations make it difficult to demonstrate reasonable and necessary conditions. If auditors discover improper practices, the costs associated with these practices may be disallowed, resulting in increased State costs.
c. CHALLENGES TO STATE EXPENSE RECORDS
Cost documentation may be successfully challenged by a responsible party if any of the standards or requirements are not met. State personnel may be questioned under oath on issues such as record keeping practices, financial management, procurement practices, and similar matters and may be required to respond to written questions on these matters. Furthermore, all supporting expense records may be examined for completeness, inaccuracies, inconsistencies and other flaws. If the State receives a request from EPA the defendants in a federal cost recovery for production of documents, it must comply.
State personnel may also be asked procedural questions under oath as to how the State determined various types of costs. If the cost documentation does not meet the requirements in this manual, State personnel will be asked to explain the reasons therefore. Examples where further explanation may be required include: procedures to accurately account for employee time, bid evaluation methods, consistency or completeness of records, methodology for calculating equipment usage rates, etc.
d. PROTECTED INFORMATION
Certain personal and business information may be protected from disclosure and the Attorney General’s (AG’s) office must always be contacted in deciding on information to be withheld. Examples of information that may be withheld from disclosure, but are not limited to: social security numbers, credit card numbers, vacation and sick leave balances, and home addresses. An example of business information that may withheld is confidential trade or financial information
2. PREPARING COST DOCUMENTATION
Each MDE organization involved in initiating an activity, processing a request or undertaking other Superfund response activities is a link in the chain of cost documentation. These units include ERRP, OAS, Procurement, AG’s office, Fiscal Services and other entities referred to in other groups. Specific descriptions of the activities of each of the various units involved are described in Section C,3.
The process used to provide cost documentation is initiated when the State program managers receive a request for a package detailing the State’s expenses at a site. The request may come from sources such as EPA, the State’s legal staff or a responsible party.
- The documents requested must be provided.
- Where a large number of documents is requested, the cost documentation package should contain an up-to-date summary of costs. This summary, which breaks out costs by category (salaries, travel, supplies and equipment, etc., as requested), should be placed at the front of the package (See Appendix 1)
- The remainder of the package is divided into sections containing supporting documents for each of the cost categories in the summary.
- A section summary should be included where there are a large number of records in any one section.
- Reconciliation of all the expense records in each section is the final step in preparing the cost documentation package. No cost documentation should be submitted to EPA, the legal staff, etc, until the expense records reconcile exactly with the cost summary. The attached checklist should be completed to ensure reconciliation. (See Appendix 2).
3. EPA AUDITS
EPA may audit a Superfund CA to determine whether a) the costs that the State has claimed under the agreement are allowable and allocable to the project under the terms of the CA and applicable regulations; and b) controls and procedures in the State’s financial and project management, recordkeeping, accounting, procurement and property management meet EPA and other Federal requirements. Major issues concern the State’s ability to provide a) responsible accounting, b) timely and accurate reporting and c) effective procedures for indirect cost allocation, equipment purchases and contractor procurement. The procedures as outlined in this manual must be followed to ensure the successful meeting of audit considerations.
4. COST ACCOUNTING
a. VOUCHER PROCESSING
Vouchers are processed quarterly and are broken down by program cost account codes according to site, OU and activity. These breakdowns include invoices and direct invoices, purchase orders, petty cash and travel expense-related items. Expense-related petty cash is processed utilizing the standard statewide processing system. Purchase orders that have previously been given authority are system matched with receiver reports and processed as is. Purchase orders that haven’t received authority are first sent to the Administrative Office for review and approval and then through the process outlined above. This information is sent to the State’s General Accounting Office where the reference numbers are processed and matched with the comptroller’s reference numbers. All vouchers and journal adjustments are filed by fiscal year and date. Original documents are retained there for three years and then returned to OAS for further storage and retention.
b. COMPUTERIZED COST TRACKING
FMIS, the State computerized accounting system, tracks all costs by site, OU and activity. Where vouchers allow costs to be charged to multiple sites, this information is allocated to the appropriate PCA codes under FMIS. The system provides detailed documentation to substantiate site-specific charges and provides an audit trail. It allows the State to reconcile source documentation with financial accounting system information. Together with FMIS reports, proof of payment can be established with reports that include the date paid and the check number.
c. REPORTING REQUIREMENTS
In accordance with CFR, Title 40, Part 31 and Part 35, Subpart “O”, a number of reports must be submitted to EPA. These include, but are not limited to, the following:
- Quarterly progress reports covering activities delineated in the Statement of Work are submitted quarterly by ERRP, within 30 days of the end of each Federal fiscal quarter. Key items to be reported upon include:
· Details of work accomplished during the reporting period, delays, or other problems and corrective actions planned. For pre-remedial CAs, the report must include a list of site-specific products completed and estimated technical hours spent to complete each product.
· A comparison of the percentage of project completed to the project schedule and explanation of discrepancies.
· A comparison of funds spent to date to planned expenditures and an explanation for significant discrepancies.
¨ Compare per task basis for remedial, enforcement and removal tasks.
· An estimate of time and funds needed to complete work required in the CA, a comparison with actual time and funds remaining and justification for any increase.
- Notification of significant developments covering events which may occur between scheduled reporting dates, and having significant impact on CA supported activity, should be given by OAS to the EPA project officer as soon as the condition becomes known.
- Inventory reports shall be submitted as described in Section F2 of this manual.
- A Department of Labor report must be submitted to the DOL Regional Office of Compliance for each construction project expected to exceed $10,000 within a 12 month period and a copy must be sent to EPA. This report shall be submitted by OAS to DOL within 10 days of each such construction contract and contain the following information:
· Award amount
· Estimated start and completion dates
· Project number, name and site location.
- Minority and Women’s Business Enterprise (MBE/WBE) reports must be submitted by OAS to the award official covering the use of MBE and WBE firms within 30 days after the end of each Federal fiscal quarter. A report on the efforts to encourage MBE participation in the Superfund program may be submitted quarterly, but is required November 1 of each year.
- Financial Status Reports (FSRs), complying with requirements in CFR, Title 40, Part 31 and Part 35, Subpart “O”, shall be submitted by OAS. FSRs include financial information by site, OU and activity, as applicable.
· OAS Administrative Officer prepares the report and submits to Fiscal Services to ensure figures match FMIS and then forward to EPA.
· A final FSR must have no unliquidated obligations.
¨ If any obligations remain unliquidated, the FSR is considered as an interim report; a final report must be submitted after liquidating all obligations.
· FSRs shall be submitted as follows:
¨ Annually, due 90 days after the end of the Federal fiscal year or as specified in the CA; if quarterly or semiannually, due 30 days after the reporting period.
¨ Within 90 days after completing each CERCLA-funded response activity at a site.
¨ Within 90 days after termination or closeout of the CA.
- Federal Cash Transaction Reports (FCTRs), covering grant payments (by letter or credit, Treasury check advances or electronic transfers of funds), shall be submitted by FS.
· To prepare a FCTR, expenditure data from the grant tracking spreadsheet and data from individual draw requests is obtained. Instructions on the back of the FCTR form are utilized to enter data onto the FCTR preparation sheet. This form is then filled in and mailed to the Regional office.
· FCTRs are due quarterly, within 15 working days after the end of the quarter.
5. RECORDKEEPING GUIDANCE
Effective recordkeeping is essential for cost recovery. Good recordkeeping provides a complete set of expense related records for each site and timely access to these records. It is important to emphasize that cost documentation procedures apply both to the State and to the State’s contractors.
Direct access to the files should be restricted. Files should be maintained in a locked file cabinet. Responsibility for maintaining the files shall be assigned to OAS Administrative Officers and/or specifically designated OAS clerical or administrative staff.
a. PROCEDURES FOR USING THE FILE MAGIC ELECTRONIC FILING SYSTEM
Original documents are scanned and indexed using File Magic 5 Software. The following procedures should be followed when using this system. A File Magic manual is available for further information.