CHAPTER III, SECTION 2 The prior method of distributing engineering ‘costs on a percentage of construction cost basis was discontinued, and design costs were charged directly to the item of construction being designed. Engineering indirect expenses and Los Angeles administrative expenses were then charged to a direct cost on a pro rata basis. Construction engineering was charged to Job I construction on a predetermined percentage of the direct costs. Effective December 1957, special order work was segregated into three classifications on the cost reports: namely Construction, Camp Operations, and Maintenance. Beginning in December 1957, Jobsite began using standard labor rates for the distribution of engineering labor, and in April 1958 standard labor rates were used for the distribution of general and administrative expense labor. PAYROLLS AND TIMEKEEPING. Payroll and timekeeping functions were di- vided between Jobsite and Home Office. The Jobsite function consisted of maintaining primary payroll records such as daily and/or weekly time cards (approved by the employee's supervisor), daily brass records, employee field checks, and overtime authorizations and of preparing of all accounts, with the exception of travel expenses covering employees traveling to Jobsite under Employee Agreements which were paid at Jobsite. The majority of materials purchased was shipped by vendors directly to Oakland, California, for export packing and reshipment to Jobsite. The packer was required to transmit receiving information immediately to enable the Accounts Payable Section to remit to vendors promptly and thereby avoid the loss of cash discounts. From 1 September 1956 through 30 June 1958 this section processed and paid vendors’ invoices totaling approximately $28,263,000, after deducting cash discounts in excess of $113,600. Procedures and methods used in processing per diem and travel expense payments were in accordance with established companypolicy and in compliance with the provisions and requirements of the contract. From 1 September 1956 through June 1958, a total of 4135 travel orders were processed covering single and multiple movement of personnel. Travel expenses of approximately $294,000 were processed and paid. Approximately 21,500 checks were issued in payment of travel expenses, vendors’ invoices, and other miscellaneous accounts payable. employee weekly payroll summary cards from these basic records. The employee weekly summary cards from both EPG and Johnston Island were consoli- dated into weekly overseas payroll by the Home Office, and checks were drawn and forwarded to the employee-designated allottee. Each Jobsite employee was advanced two successive weekly pay checks for the amount stated in the Employee Agreement, and at time of termination the amount advanced was deducted from that due for the final two work weeks. This method permitted the employee’s allottee to receive pay- roll checks weekly from the time of hiring with- out regard to the time lag caused by transmitting weekly payroll cards from Jobsite by mail. In accordance with Modification No. 41 to the contract, the cost of transportation to Jobsite was advanced to each employee, and weekly deductions were made from the earnings of the employee until the amount advanced was re- paid. From September 1956 through June 1958 a total of 167,031 payroll checks in the amount of $32,224,000 for overseas employees were pro- cessed. In April 1958 the overseas payroll operation served a peak of 3209 personnel. ACCOUNTS PAYABLE. The Accounts Payable Section was respon- sible for the expeditious processing and payment PROPERTY. In August 1957, a physical inventory of oncontinent property was taken, and records were adjusted accordingly. New methods for recording and identifying property were instituted. Policing and periodic test checks were made to ensure the proper use of all property. That which was of no use to the project was declared as excess in accordance with AEC Manual instructions and was disposed of, when possible. On 2 June 1958, new standard service life rates, for depreciation purposes, were approved by the AEC. Generally, the AEC Manualrates, plus some additions and a few changes, were the basis for an adjustment to the Reserve for Depreciation currently recorded. Present year adjustments 1958. were accomplished on 30 June INTERNAL AUDIT. The function of the Internal Audit Section was to conduct a comprehensive audit program in accordance with the provisions of the contract and the AEC Manual which would provide the basis for determination relative to the effectiveness of internal controls and the reliability of records and reports. Audits were performed of the following functions: Page 337