In 1980, the Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) to clean up hazardous waste sites throughout the United States for fiscal years (FY) 1981 through 1985.3 The law addressed growing 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 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 listed on the National Priorities List were generally considered the most contaminated in the nation, and EPA funds could be spent to clean up those sites. The clean up 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 were incapable of paying clean up costs, CERCLA established the Hazardous Substance Superfund Trust Fund (Trust Fund) to finance clean up efforts. The Trust Fund also pays for EPA’s enforcement, management, and research and development activities.
Because CERCLA was set to expire in FY 1985, Congress passed the Superfund Amendments and Reauthorization Act (SARA) in 1986.4 SARA stressed the importance of using permanent remedies and innovative treatment technologies in the clean up of hazardous waste sites, provided EPA with new enforcement authorities and settlement tools, and increased the authorized amount of potentially available appropriations for the Trust Fund to $8.5 billion for FYs 1987 through 1991.
Executive Order 12580, issued January 23, 1987, gives the Attorney General responsibility for all Superfund litigation. Within the Department of Justice (DOJ), the Environment and Natural Resources Division (ENRD) was assigned to administer cases against those who violate CERCLA’s civil and criminal pollution-control laws. ENRD performs Superfund litigation and support through its following sections: Appellate, Environmental Crimes, Environmental Defense, Environmental Enforcement, Land Acquisition, Natural Resources, Law and Policy, Wildlife and Marine Resources, Indian Resources, and the Executive Office.
Beginning in FY 1987, the EPA entered into interagency agreements with ENRD to reimburse ENRD for its litigation costs related to its CERCLA activities. As shown in the following table, budgeted reimbursement for Superfund litigation represented, on average, about one-third of ENRD’s total budget during the 19-year period from FY 1987 through FY 2005.
Comparison of ENRD’s Appropriations
and Budgeted Superfund Reimbursements
(1987 to 2005)
|Source: ENRD Budget History Report for FYs 1987 through 2005|
The EPA and ENRD Statement of Work required ENRD to maintain a system that documented its Superfund litigation costs. Accordingly, ENRD instituted a management information system designed by Rubino & McGeehin, Consulting Group, Incorporated (contractor). The system was designed to process financial data from ENRD’s Expenditure and Allotment (E&A) Reports into: (1) Superfund direct costs by specific case, broken down between direct labor costs and all other direct costs, (2) non-Superfund direct costs, and (3) allocable indirect costs.5
The EPA authorized ENRD reimbursements of $27.9 million for FY 2004 and $26.9 million for FY 2005 in accordance with Interagency Agreements DW-15-93796801 and DW-15-92194601, respectively.
Excise taxes imposed on the petroleum and chemical industries as well as an environmental income tax on corporations maintained the Trust Fund through December 31, 1995, when the taxing authority for Superfund expired. Since that time, Congress has not enacted legislation to reauthorize the tax. Therefore, the only funding for the Trust Fund are monies recovered through Superfund litigation. Consequently, the significance of ENRD’s Superfund litigation can be seen in the commitments and recoveries the EPA has obtained, with the EPA receiving over $5.9 billion in commitments to clean up hazardous waste sites and recovering $4.4 billion from potentially responsible parties for FYs 1988 - 2005, as shown below.6
Estimated Commitments and Recoveries
(1988 to 2005)
|Source: ENRD Commitment and Recovery Report for FYs |
1987 – 2003, and Interagency Agreement for FYs 2004 and 2005
The objective of the 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 FYs 2004 and 2005. To accomplish our objective, we assessed whether: (1) ENRD identified Superfund cases based on appropriate criteria, (2) costs distributed to cases were limited to costs reported in 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.7
The E&A Report is a summary of the total costs incurred by 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 net of the Superfund funding provided in the EPA Interagency Agreements less direct charges and are allocated based on the direct Superfund salary costs on each case.
Commitments are estimated funds from potentially responsible parties for the clean up of hazardous waste sites. Recoveries are funds actually received by EPA that include Superfund cost recovery, oversight costs, and interest.