UNITED STATES ENVIRONMENTAL PROTECTION AGENCY <^° *" ~?
WASHINGTON. D.C, 20490
DEC 3 I P'':b OFFICE OF
THE INSPECTOR GENERAL
MEMORANDUM
*
SUBJECT: Audit Report No. P5EH5-11-0021-70474
Report on Financial and Compliance Audit
Obligations and Disbursements Under the
Comprehensive Environmental Response,
Compensation, and Liability Act of 1980,
Fiscal Years Ended September 30, 1984 and 1983
FROM: Kenneth D. Hockman
Divisional Inspector General for Audit
Internal Audit Division (A-109)
TO: James M. Seif
Regional Administrator, Region 3
Attached are two copies of the above referenced report.
SCOPE AND OBJECTIVES
A certified public accounting (CPA) firm performed a financial and
compliance audit of the portion of the Hazardous Substance Response Trust
Fund (Superfund) reported by Region 3 Philadelphia, Pennsylvania (Allowance
Holder 03), for the fiscal years ended September 30, 1984 and 1983. The
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA) [{section lll{k)] states that the Inspector General shall
audit as appropriate all payments, obligations, reimbursements, or other
uses of Superfund to assure that Superfund is being properly administered
and that claims are being appropriately and expeditiously considered.
Audit procedures were performed to determine if the costs to administer
Superfund were "necessary for" and "incidental to" the implementation of
CERCLA [(section 111 (a)]. As part of the audit, the CPA made a study
and evaluation of the system of internal accounting control as well as an
audit of costs obligated and disbursed under the Superfund appropriation
for the fiscal years ended September 30, 1984 and 1983. Additionally,
the CPA reviewed the status of findings and recommendations included in
the prior audit report.
U.S. Environmental Protection
Library, Room 2404 FM-211-A
401 M Stroet, S.W.
Washington. 00 20460
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As part of the audit, transactions obligated and disbursed for Superfund
activities were selectively tested. The audit objectives were to determine
if:
a. The Statements of Obligations and the Statements of Disbursements
present fairly the results of financial operations in accordance
with applicable laws, regulations, and guidelines;
b. EPA management complied with laws and regulations which, if not
followed, might have a material effect upon the Statements of
Obligations and the Statement of Disbursements; and
c. EPA established an adequate system of internal accounting control
to ensure the reliability of accounting and management records.
SUMMARY OF FINDINGS
EPA, Region 3 {Allowance Holder 03), obligated $7,650,471 and disbursed
$3,906,583 during the fiscal year ended September 30, 1984. During the
fiscal year ended September 30, 1983, $2,502,122 was obligated and
$1,738,221 was disbursed.
The CPA set-aside $2,305,591 in obligations and $2,333,222 in disbursements
for fiscal 1984 and $880 in obligations and $20,405 in disbursements for
fiscal 1983. Also, the CPA questioned costs of $4,113 and $3,301 for
fiscal 1984 and 1983, respectively. The majority of obligations and
disbursements set-aside in fiscal 1984 were Personnel Compensation and
Benefits (PC&B) amounting to $2,300,711 and $2,296,607, respectively.
PC&B costs were set-aside because the statistical analysis indicated a
potential error rate of 17 percent, which was considered excessive. In
addition, PC&B costs totaling $4,113 in fiscal 1984 and $3,301 in fiscal
1983 were questioned because of discrepancies within the system used to
charge PC&B to the Superfund appropriation.
The audit also disclosed weaknesses in three internal and management control
areas. First, timekeeping for Superfund Personnel Compensation and Benefits
needs improvement. Second, control and accountability over non-expendable
personal property should be improved. Third, support for aggregate
centra! support services costs allocated to Superfund must be maintained.
Similar findings were also reported in the prior audit for fiscal 1982.
Because of problems in these areas, the CPA's scope of work was not
sufficient to enable them to express, and they did not express, an opinion
on the Region's financial statements.
1. TIMEKEEPING FOR SUPERFUND PERSONNEL COMPENSATION AND BENEFITS
NEEDS IMPROVEMENT
The CPA set-aside fiscal 1984 PC&B obligations of $2,300,711 and
disbursements of $2,296,607. These costs were set-aside because the
statistical analysis indicated a potential error rate of 17 percent,
which was considered excessive. Also payroll obligations and disburse-
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ments in the amounts of $3,694 and $2,982 were questioned for fiscal
years 1984 and 1983, respectively. In addition, the CPA questioned
related personnel benefit costs of $419 and $319 in fiscal years 1984
and 1983, respectively. These costs were questioned because: time-
sheets and T&A cards were missing; timesheets and T&A cards did not
agree with each other; or timesheets and T&A cards did not agree with
the Region's automated payroll system. Finally, the CPA determined
that four internal control weaknesses associated with timekeeping
existed. Two of the four weaknesses were significant internal accounting
control weaknesses attributable to improper separation of timekeeping
duties and two were significant internal administrative control system
weaknesses where Region 3 employees often estimated their time when
recording Superfund activity rather than identify their actual time.
All of these conditions were caused by the Region not adequately
implementing or complying with the June and November 1982 EPA
Superfund Charging Policies Memorandums.
2. CONTROL OVER NON-EXPENDABLE PERSONAL PROPERTY SHOULD BE IMPROVED
The CPA found that 24 of 27 equipment purchases (costing $204,698)
were not recorded on the Region's Personal Property Accountability
System (PPAS), and 3 of the 27 units (costing $1,595) could not be
located. These problems appeared to be attributable to a failure in
sending equipment receiving reports to the Property Accountability
Officer and a failure to perform annual physical inventories. An
annual physical inventory of non-expendable personal property was
not performed by Region 3 for fiscal 1983 and a physical inventory
was started, but not completed for fiscal 1984. This was a result of
not following the relevant Environmental Protection Agency Property
Management Regulations (PMR), formerly EPPMR. The failure to conduct
annual physical inventories could lead to the inability to detect
excess stock and idle non-expendable property ,in a timely manner. It
also could impair the Region's ability to identify missing and misused
property. Finally, custodial officers for the various property
accountable areas were not appointed in fiscal years 1983 and 1984.
This occurred because a complete inventory had not been taken and, as
a result of various reorganizations within the Region in fiscal years
1984 and 1983, property was not transferred to the proper accountable
area. When such appointments are not made, control over property can
be lost and responsibility cannot be easily fixed.
3. SUPPORT FOR THE AGGREGATE CENTRAL SUPPORT SERVICES COSTS ALLOCATED
TO SUPERFUND MUST BE MAINTAINED
The Region did not utilize a system that provided a clear trail to
readily determine the aggregate central support services costs
allocated to Superfund during fiscal years 1983 and 1984. For fiscal
years 1983 and 1984, the CPA attempted to identify aggregate costs
allocated to major object classes within the Superfund appropriation
to determine the materiality, of these support service allocations.
The CPA was advised that, after the third quarter of fiscal 1983,
allocations other than common support services charges were made to
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the Superfund based on personnel full-time equivalent (FTE) ratios on
an individual transactions basis. The ratio was developed by dividing
the total Superfund actual FTEs by total Regional FTEs on a cumulative
basis. Common support service charges were to be charged on a quarterly
basis for the first three quarters and on a monthly basis for the fourth
quarter using the same ratio. Region 3 had not accumulated, and did
not have the personnel resources available during the CPA's audit
fieldwork to reconstruct the aggregate costs allocated to Superfund
for fiscal years 1983 and 1984. Without this information, a determina-
tion of the costs allocated to Superfund could not be made, and the
Agency will have difficulty adequately supporting these costs in cost
recovery actions.
REGION 3'S COMMENTS ON FINDINGS AND THE CPA'S EVALUATION
An exit conference was held on April 30, 1985, with the following officials
of Region 3: Deputy Assistant Regional Administrator for Policy and
Management; Chief, Administrative Management Branch; Chief, Budget and
Accounting Section, Office of Comptroller; Operating Accountant, Office of
Comptroller; Property Officer; and Audit Follow-up Coordinators (2),
Office of Comptroller. The purpose of the exit conference was to present
the findings and recommendations and to ensure a clear understanding of
our report by Region 3 management. At this conference and during the
course of the audit, Region 3 officials discussed their position relative
to the findings and recommendations. In addition. Region 3 provided us
with formal written comments on the draft report in a memorandum dated
August 8, 1986. The Assistant Regional Administrator for Policy and
Management concurred with three of our five findings and recommendations
and indicated corrective actions were taken or were planned to resolve
the related issues cited in the report. Region 3 indicated partial
agreement with the remaining two findings and recommendations. We reviewed
additional documentation provided by Region 3 and resolved one of the
draft report findings and deleted all references from this report. To
provide a balanced understanding of the issues, we summarized Region 3's
position at appropriate locations in the report and included the complete
response as Appendix 1.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 3:
0 Perform a feasibility study to determine whether the fiscal 1984
payroll adjustments can be made cost effectively; and provide a
copy of the study and final decision.
0 Direct the Comptroller to ensure that the Regional payroll clerk
does not perform incompatible duties, such as receiving and
distributing paychecks or acting as the designated agent.
0 Direct the Comptroller to reconstruct aggregate costs allocated to
Superfund along with supporting documentation and retain for follow-
up during the next audit.
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA
REPORT OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION, AND LIABILITY ACT OF 1980
FOR FISCAL YEARS ENDED
SEPTEMBER 30, 1984 AND 1983
'TC
TICHENOR, RESLER & EICHE
CERTIFIED PUBLIC ACCOUNTANTS
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA
REPORT OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION, AND LIABILITY ACT OF 1980
FOR FISCAL YEARS ENDED
SEPTEMBER 30, 1984 AND 1983
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA
REPORT OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION, AND LIABILITY ACT OF 1980
FOR FISCAL YEARS ENDED
SEPTEMBER 30, 1984 AND 1983
TABLE OF CONTENTS
Page
SCOPE AND OBJECTIVES 1
SUMMARY OF FINDINGS 2
BACKGROUND 6
AUDITORS' REPORT ON FINANCIAL STATEMENTS 7
AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE9
FINDINGS AND RECOMMENDATIONS
1. TIMEKEEPING FOR SUPERFUND PERSONNEL
COMPENSATION AND BENEFITS NEHP5
IMPROVEMENT13
2. CONTROL OVER NON-EXPENDABLE PERSONAL
PROPERTY SHOULD BE IMPROVED17
3. SUPPORT FOR THE AGGREGATE CENTRAL SUPPORT
"SERVICES COSTS ALLOCATED TO SUPERFUND^MUST
BE MAINTAINED21
4. MINOR FINDINGS - CORRECTIVE ACTION TAKEN BY
REGION 3 ' 22
EXHIBITS
0 EXHIBIT I: STATEMENT OF OBLIGATIONS, FISCAL
YEAR ENDED SEPTEMBER 30, 1984 26
0 EXHIBIT II: STATEMENT OF DISBURSEMENTS,
FISCAL YEAR ENDED SEPTEMBER 30,
1984 27
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TABLE OF CONTENTS (CONTINUED)
EXHIBIT III: NOTES TO STATEMENTS OF OBLIGATIONS
AND DISBURSEMENTS, FISCAL YEAR
ENDED SEPTEMBER 30, 1984
EXHIBIT IV:
EXHIBIT V:
EXHIBIT VI:
APPENDIX
APPENDIX 1
STATEMENT OF OBLIGATIONS, FISCAL
YEAR ENDED SEPTEMBER 30, 1983
STATEMENT OF DISBURSEMENTS, FISCAL
YEAR ENDED SEPTEMBER 30, 1983
NOTES TO STATEMENTS OF OBLIGATIONS
AND DISBURSEMENTS, FISCAL YEAR
ENDED SEPTEMBER 30, 1983
REGION 3'S RESPONSE TO DRAFT AUDIT
REPORT
28
30
31
32
35
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA
REPORT OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION, AND LIABILITY ACT OF 1980
FOR FISCAL YEARS ENDED
SEPTEMBER 30, 1984 AND 1983
SCOPE AND OBJECTIVES
We have performed a financial and compliance audit of the portion
of the Hazardous Substance Response Trust Fund (Superfund) re-
ported by the U.S. Environmental Protection Agency (EPA), Region
3 (Allowance Holder 03), for the fiscal years ended September 30,
1984 and 1983. Superfund was established under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
(CERCLA). CERCLA [section lll(k)] states that the Inspector Gen-
eral shall audit as appropriate all payments, obligations, reim-
bursements, or other uses of Superfund to assure that Superfund
is being properly administered and that claims are being appro-
priately and expeditiously considered. Audit procedures were
performed to determine if the costs to administer Superfund were
"necessary for" and "incidental to" the implementation of CERCLA
[section Lll(a)]. Contract, grant, and interagency agreement
costs were examined only to the extent necessary to determine if
valid obligation and disbursement transactions were properly re-
corded and records were properly maintained. Audits of con-
tracts , grants, and interagency agreements performed at a later
date may disclose questioned costs. As part of the audit, we
made a study and evaluation of internal accounting controls as
well as an audit of costs obligated and disbursed under the Su-
perfund appropriation for the fiscal years ended September 30,
1984 and 1983. Additionally, we reviewed the status of findings
and recommendations included in the prior audit report.
The audit was performed in accordance with generally accepted
auditing standards and the Standards for Audit of Govern-
mental Organizations, Programs, Activities, and Functions (198T
revision) promulgated by theU.S.Comptroller General.Accord-
ingly, the examination included such tests of the accounting re-
cords and such other auditing procedures as we considered neces-
sary in the circumstances. Audit fieldwork was performed from
February 19, 1985 through April 30, 1985.
As part of the audit, transactions obligated and disbursed for
Superfund activities were selectively tested. The audit objec-
tives were to determine if:
(1) The Statements of Obligations and the Statements of
Disbursements present fairly the results of financial
operations in accordance with applicable laws, regu-
lations, and guidelines;
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SCOPE AND OBJECTIVES (CONTINUED)
(2) EPA management complied with laws and regulations
which, if not followed, might have a 'material effect
upon the Statements of Obligations and the Statements
of Disbursements; and
(3) EPA established an adequate system of internal account-
ing control to ensure the reliability of accounting and
management records.
SUMMARY OF FINDINGS
EPA, Region .3 (Allowance Holder 03), obligated $7,650,471 and
disbursed $3,906,583 during the fiscal year ended September 30,
1984. During the fiscal year ended September 30, 1983,
$2,502,122 was obligated and $1,738,221 was disbursed. We set-
aside $2,305,591 in obligations and $2,333,222 in disbursements
for fiscal 1984 and $880 in obligations and $20,405 in disburse-
ments for fiscal 1983. Also, we questioned costs of $4,113 and
$3,301 in fiscal years 1984 and 1983, respectively.
The majority of obligations and disbursements set-aside in fiscal
1984 were personnel compensation and benefits (PC&B) amounting to
$2,300,711 and $2,296,607, respectively. PC&B costs were set-
aside because our statistical analysis indicated a potential
error of 17 percent, which was considered excessive. In addi-
tion, we questioned PC&B costs totaling $4,113 in fiscal 1984 and
$3,301 in fiscal 1983 because of discrepancies within the system
used to charge PC&B to the Superfund appropriation.
Our audit also disclosed weaknesses in three-internal and manage-
ment control areas: timekeeping for Superfund personnel compen-
sation and benefits; control and accountability over non-expenda-
ble personal property; and support for aggregate central support
services costs allocated to Superfund.
FINANCIAL RESULTS OF AUDIT
Questioned and set-aside costs are summarized below and detailed
in the Exhibits.
Obligations
Disbursements
FY 1984FY 1983Totals
FY 1984
FY 1983
•Totals
Questioned
costs $
Set-aside
costs 2.305,591
4,113 $3,301 $ 7,414
880 2,306,471
4.113 $ 3,301 $
7,414
2.333.222 20.405 2.353.627
Totals $2.309,704 $4.181 $2.313.885 $2.337,335 $23.706 '$2,361,041
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SUMMARY OF FINDINGS (CONTINUED)
Questioned costs represent costs that are unallowable under the
provisions of applicable laws, regulations, policies, or program
guidelines. Set-aside costs are costs that cannot be accepted
without additional information or evaluations and approvals by
responsible Agency program officials.
FOLLOW-UP ON PRIOR AUDIT FINDINGS
The prior audit report, which covered the period from October 1,
1981 through September 30, 1982, identified weaknesses related to
equipment, supplies and materials, rent, communication and util-
ities, other contractual services, and personnel compensation and
benefit costs. Our testing disclosed that the prior findings re-
lated to taking discounts offered for prompt payment of invoices
and deobligating contract costs that were inappropriately charged
to Superfund were resolved satisfactorily. The following prior
audit findings were not satisfactorily resolved and are disclosed
in the Findings and Recommendations section of this report: (1)
ensuring that the Property Management System was accurate and
complete; (2) preparing the Statement of Accountability and
Statements of Custodial Responsibility as required by the EPA
Property Management Regulations (PMR) 2-20; (3) performing annual
inventories as required by PMR 2-26; (4) ensuring that all Super-
fund personnel expenditures were accurately recorded; (5) ensur-
ing that timesheets showing Superfund activities were prepared
and agreed with time and attendance reports; and (6) reviewing
labor distribution reports to ensure the accuracy of payroll
charges to Superfund.
TIMEKEEPING FOR SUPERFUND PERSONNEL COMPENSATION AND BENEFITS
NEEDS IMPROVEMENT
We set-aside fiscal 1984 personnel compensation and benefits
(PC&B) obligations of $2,300,711 and disbursements of $2,296,607.
These costs were set-aside because our statistical analysis
indicated a potential error of 17 percent, which was considered
excessive. We also questioned payroll obligations and dis-
bursements in the amounts of $3,694 and $2,982 for fiscal years
1984 and 1983, respectively. In addition, we questioned related
personnel benefit costs of $419 and $319 in fiscal years 1984 and
1983, respectively. These costs were questioned because: time-
sheets and time and attendance (T&A) cards were missing; time-
sheets and T&A cards did not agree with each other; or timesheets
and T&A cards did not agree with the Region's automated payroll
system. Finally, we determined that four internal control
weaknesses associated with timekeeping existed. We noted two
significant internal accounting control weaknesses attributable
to improper separation of timekeeping duties and two significant
internal administrative control system weaknesses where Region 3
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SUMMARY OF FINDINGS (CONTINUED)
employees often estimated their time when recording Superfund
activity rather than identifying their actual time. All of these
conditions were caused by the Region not adequately implementing
or complying with the June and November 1982 EPA Superfund
Charging Policies Memorandums.
CONTROL OVER NON-EXPENDABLE PERSONAL PROPERTY SHOULD BE IMPROVED
We found that 24 of 27 equipment purchases (costing $204,698)
were not recorded on the Region's Personal Property Account-
ability System (PPAS) and 4 of the 27 units (costing $1,595)
could not be located. These problems appeared to be attributable
to Region 3 personnel not sending equipment receiving reports to
the Property Accountability Officer and not performing annual
physical inventories. An annual physical inventory of Region 3
non-expendable personal property was not performed for fiscal
1983 and a physical inventory was started, but not completed for
fiscal 1984. This was a result of not following the relevant
Environmental* Protection Agency Property Management Regulations
(PMR), formerly EPPMR. The failure to conduct annual physical
inventories could lead to Region 3's inability to detect excess
stock and idle non-expendable property in a timely manner. This
also could impair the Region's ability to identify missing and
misused property. Finally, custodial officers for the various
property accountable areas were not appointed in fiscal years
1983 and 1984. This occurred because a complete inventory had
not been taken and, as a result of various reorganizations within
the Region in fiscal years 1983 and 1984, property was not trans-
ferred to the proper accountable area. When such appointments
are not made, control over property can be lost and responsi-
bility cannot be easily fixed.
SUPPORT FOR THE AGGREGATE CENTRAL SUPPORT SERVICES COSTS ALLOCAT-
ED TO SUPERFUND MUST BE MAINTAINED
The Region did not utilize a system that provided a clear trail
to readily determine the aggregate central support services costs
allocated to Superfund during fiscal years 1984 and 1983. For
fiscal years 1984 and 1983, we attempted to identify aggregate
costs allocated to major object classes within the Superfund ap-
propriation to determine the materiality of these support service
allocations. Region 3 officials advised us that, after the third
quarter of fiscal 1983, allocations were made to Superfund based
on personnel full-time equivalents (FTE) ratios on an individual
transactions basis. The ratios were developed by dividing the
total Superfund actual FTEs by total Regional FTEs on a cumula-
tive basis. Common support service charges were calculated on a
quarterly basis for the first three quarters of fiscal 1983.
However, the Region was unable to show that the 3rd quarter
calculation was posted to the Financial Management System (FMS)
or that any allocations were made for the -4th quarter of fiscal
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SUMMARY OF FINDINGS (CONTINUED)
1983. Region 3 was unable to provide any documentation of fiscal
1984 cost allocations and indicated that allocations were made on
an individual transactions basis. Region 3 had not accumulated,
and did not have the personnel resources available during our
audit fieldwork to reconstruct the aggregate costs allocated to
Superfund for fiscal years 1984 and 1983. Without this informa-
tion, a determination of the costs allocated to Superfund could
not be made within the scope of our audit, and the Agency will
have difficulty adequately supporting these costs in cost
recovery actions.
REGION 3'S COMMENTS ON FINDINGS AND OUR EVALUATION
An audit exit conference was held on April 30, 1985, with the
following officials of Region 3: Deputy Assistant Regional
Administrator for Policy and Management; Chief, Administrative
Management Branch; Chief, Budget and Accounting Section, Office
of Comptroller; Operating Accountant, Office of Comptroller;
Property Officer; and Audit Follow-up Coordinators (2), Office of
Comptroller, to present our findings and recommendations and to
ensure a clear understanding of our report by Region 3 manage-
ment. At this conference and during the course of the audit,
Region 3 officials discussed their position relative to our find-
ings and recommendations. In addition, Region 3 provided us with
formal written comments on our draft report in a memorandum dated
August 8, 1986. The Assistant Regional Administrator for Policy
and Management concurred with three of our five findings and rec-
ommendations and indicated corrective actions were taken or were
planned to resolve the related issues cited in the report. Re-
gion 3 indicated partial agreement with the remaining two find-
ings and recommendations. We reviewed additional documentation
provided by Region 3, and resolved one of the draft report
findings and deleted all references from this report. To provide
a balanced understanding of the issues, we summarized Region 3's
position at appropriate locations in.the report and included the
complete response as Appendix 1.
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BACKGROUND
On December 11, 1980, --the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA) was signed into
law (Public Law 96-510). CERCLA provides for liability, compen-
sation, cleanup, and emergency response for hazardous substances
released into the environment and uncontrolled and abandoned haz-
ardous waste sites.
CERCLA broadly defines two types of response actions: (1) re-
moval and (2) remedial. The former term represents relatively
short-term responses, while the latter represents actions of
longer duration leading to permanent resolution.
To fund removal and remedial actions, CERCLA , Title II, Subtitle
B established the Hazardous Substance Response Trust Fund (Super-
fund). The Superfund is financed by an imposed tax on the man-
ufacturers , producers, and importers of petroleum, petroleum
products, and certain "taxable" chemicals, and from general tax
revenue.
A National Priorities List (NPL) identifying hazardous, waste
sites for remedial responses is maintained and updated at least
annually. Virtually all remedial planning is done at proposed
and final NPL sites, and all remedial actions are at final NPL
sites. The removal program responds to needs which often arise
very quickly, and is not limited by the NPL. States with the
capability of performing remedial responses may enter into
cooperative agreements with EPA. At the time of remedial action,
a State must enter into either a contract or cooperative
agreement with EPA to provide the assurances required by Section
104(c)(3) of CERCLA: (1) cost sharing (10 percent of remedial
action, except for 50 percent or more of all response costs if
the site was publicly owned); (2) availability of. an acceptable
disposal facility, if needed; and (3) provision for all required
future maintenance of the remedy.
Section 111(a) of CERCLA limits the use of the money in Superfund
to response costs; claims asserted and compensable but unsat-
isfied under Section 311 of the Clean Water Act} claims for inju-
ry to, or destruction or loss of, natural resources; and related
costs described in Section lll(c). When cleanup costs are
charged to Superfund, EPA may recover the costs from the respon-
sible parties through litigation. Section 111(a) further limits
administrative costs or expenses in that they may not be paid out
of the fund unless such costs or expenses are "reasonably neces-
sary for" and "incidental to" the implementation of CERCLA.
On August 14, 1981, President Reagan, by Executive Order 12316,
delegated to Federal agencies the authority vested in him by
CERCLA to use the money in Superfund, to settle claims asserted
against Superfund, and to designate Agency officials who may ob-
ligate funds.
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TICHENOR. RESLER & EICHE
CERTIFIED PUBLIC ACCOUNTANTS
THE SUMMIT. SUITE 200
4350 BROWNSBORO ROAD
LOUISVILLE. KENTUCKY 40207
(502) 893-0700
Mr. Kenneth D. Hockman
U.S. Environmental Protection Agency
Divisional Inspector General for Audit
Internal Audit Division
Office of Inspector General
Washington, D.C. 20460
AUDITORS' REPORT ON FINANCIAL STATEMENTS
We have examined the Statements of Obligations and the Statements
of Disbursements of the U.S. Environmental Protection Agency
(EPA), Region 3 (Allowance Holder 03) portion of the Hazardous
Substance Response Trust Fund (Super fund) for the fiscal years
ended September 30, 1984 and 1983 as presented in the Exhibits.
Except as explained in the following paragraphs, our examination
was performed in accordance with generally accepted auditing
standards and the Standards for Audit of Governmental Organiza-
tions, Programs, Activities, and Functions (1981 revision),
mulgated by the U.S. Comptroller General. Additionally, the U.S.
Environmental Protection Agency Hazardous Substance Response
Trust Fund Audit Guide (revised February 22, 1985) was used as a
guide in our examination. Accordingly, except as noted in the
second paragraph below, our examination included such tests of
the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
The Statements of Obligations and the Statements of Disbursements
referred to above contained obligation and disbursement costs
related to contracts, grants, and interagency agreements. Our
audit procedures were limited to determining if valid obligation
and disbursement costs were properly recorded. Accordingly, we
did not apply audit procedures to determine if contract, grant,
and interagency agreement costs were allowable in accordance with
applicable Federal regulations and within the terms of specific
contracts, grants, and interagency agreements. Audits of con-
tracts, grants, and interagency agreements performed at a later
date may disclose questioned costs.
As explained in the Findings and Recommendations section of this
report, the Region 3 Financial Management Office was unable to
identify the aggregate support service costs that were allocated
to the Superfund appropriation during fiscal years 1984 and 1983.
Also, we noted an excessive number of errors and missing documen-
tation pertaining to personnel compensation costs in fiscal years
1984 and 1983 that were combined with four significant internal
control weaknesses in the Region's timekeeping system for
recording Superfund personnel compensation.
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AUDITORS' REPORT ON FINANCIAL STATEMENTS (CONTINUED)
As part of our examination, we determined the allowability of
obligations and disbursements incurred by EPA, Region 3 (Allow-
ance Holder 03), portion of Superfund in accordance with applica-
ble Federal laws, regulations, policies, and program guidelines.
The statements referred to above are presented in the Exhibits
and set forth the costs which are questioned and set-aside. The
notes to the statements include an explanation of the reasons
such costs were questioned and set-aside.
The Statements of Obligations and the Statements of Disbursements
were prepared for EPA use by EPA Financial Management Division
and are based on Allowance Holder financial information contained
in the Financial Management System (Superfund Status Jtepprts,
dated September 30, 1984 and 1983). These statements are not
intended to present either the financial position or the finan-
cial results of operations in conformity with generally accepted
accounting principles in that allowable costs and accounting pol-
icies and practices are legislatively established and promulgated
through various Federal and EPA policy and procedural standards.
Because EPA Region 3 was unable to identify the aggregate central
support service costs that were allocated to the Superfund appro-
priation during fiscal years 1984 and 1983 and, because of the
number of errors and missing documents pertaining to personnel
compensation costs in combination with the internal control weak-
nesses that were noted in the Region's timekeeping system for
recording Superfund personnel compensation, the scope of our work
was not sufficient to enable us to express, and we do not ex-
press, an opinion on the financial statements referred to above.
This report is intended for use in connection with the statements
to which it refers and should not by used for any other purpose.
TI.CHENOR, RESLER & EICHE
Louisville, Kentucky
April 30, 1985
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TICHENOR. RESLER & EICHE
CERTIFIED PUBLIC ACCOUNTANTS
THE SUMMIT. SUITE 200
4150 8ROWNSBORO ROAD
LOUISVILLE. KENTUCKY 40207
(502) 893-0700
Mr. Kenneth D. Hockman
U.S. Environmental Protection Agency
Divisional Inspector General for Audit
Internal Audit Division
Office of Inspector General
Washington, D.C. 20460
AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL AND COMPLIANCE
We have examined the Statements of Obligations and the Statements
of Disbursements of the U.S. Environmental Protection Agency
(EPA), Region 3 (Allowance Holder 03), portion of the Hazardous
Substance Response Trust Fund (Super fund) for the fiscal years
ended September 30, 1984 and 1983, and we have issued our Audi-
tors' Report on Financial Statements thereon dated April 30,
1985. As part of our examination, we made a study and evaluation
of EPA, Region 3, portion of Superfund system of internal ac-
counting control to the extent we considered necessary to evalu-
ate the system as required by generally accepted auditing stan-
dards and the standards for financial and compliance audits con-
tained in the U.S. General Accounting Office Standards for Audit
of Governmental Organizations, Programs, Activities, and
tions (1981 revision)" For the purpose of this report, we have
classified the significant internal accounting controls into the
following transaction categories:
Obligations
Disbursements
Payroll
Purchases
Property and equipment
Electronic data processing
Our study included all of the transaction categories listed
above .
The purpose of our study and evaluation was to determine the na-
ture, timing, and extent of the auditing procedures necessary for
expressing an opinion on the Statements of Obligations and the
Statements of Disbursements. Our study and evaluation was more
limited than would be necessary to express an opinion on the sys-
tem of internal accounting control taken as a whole or on any of
the categories of controls identified above.
EPA management is responsible for establishing and maintaining a
system of internal accounting control. In fulfilling this re-
sponsibility, estimates and judgments by management are required
to assess the expected benefits and related costs of control pro-
cedures. The objectives of internal accounting control are to
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AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE (CONTINUED)
provide reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition,
and that transactions are executed in accordance with manage-
ment's authorization and recorded properly to permit preparation
of financial reports in accordance with applicable Federal laws
and regulations. The concept of reasonable assurance recognizes
that the cost of a system of internal accounting control should
not exceed the benefits derived and also recognizes that the
evaluation of these factors necessarily requires estimates and
judgments by management.
There are inherent limitations that should be recognized in con-
sidering the potential effectiveness of any system of internal
accounting control. Because of inherent limitations in.any sys-
tem of internal accounting control, errors or irregularities may
nevertheless occur and not be detected. In the performance of
most control procedures, errors can result from misunderstanding
instructions, mistakes of judgment, carelessness, or other per-
sonal factors. Control procedures whose effectiveness depend on
segregation of duties can be circumvented by collusion. Similar-
ly, control procedures" can be circumvented intentionally by man-
agement, either with respect to the execution and recording of
transactions or with respect to the estimates and judgments
required in the preparation of financial .statements. Further,
projection of any evaluation of internal accounting control to
future periods is subject to the risks that the procedures may
become inadequate because of changes in conditions and that the
degree of compliance with the procedures may deteriorate.
Our study and evaluation, made for the limited purpose described
in the first paragraph, would not necessarily, disclose all mate-
rial weaknesses in the system. Accordingly, we do not express an
opinion on the system of internal accounting control of EPA, Re-
gion 3, portion of Superfund taken as a whole or on any of the
categories of control identified in the first paragraph. Howev-
er, our study and evaluation disclosed the following conditions
that we believe result in more than a relatively low risk of er-
rors or irregularities in amounts that would be material in re-
lation to the Statements of Obligations and the Statements of
Disbursements of EPA, Region 3, portion of Superfund may occur
and not be detected within a timely period:
0 Internal accounting and .administrative controls over
timekeeping for Superfund personnel compensation and
benefits need improvement.
0 Improved control is needed over non-expendable personal
property.
* Support fpr the aggregate central support services
costs allocated to Superfund must be maintained.
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AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE (CONTINUED!
In addition, our audit disclosed the following weaknesses, which
were not considered material in relation to the Statements of
Obligations and the Statements of Disbursements, however, are
considered minor findings that warrant the attention of manage-
ment:
0 A signature list of personnel authorized to approve
obligations should be used by the Financial Management
Office.
0 The Regional payroll clerk should maintain an
up-to-date list of timekeepers.
0 Document control registers should be utilized as in-
tended.
0 Support for all obligation and disbursement trans-
actions should be retained.
0 Improved control is needed for letter of credit pay-
ments to states with cooperative agreements.
The above conditions are further discussed in the Findings and
Recommendations. These conditions were considered in determining
the nature, timing, and extent of the audit tests to be applied
in our examination of the Statements of Obligations and the
Statements of Disbursements for the fiscal years ended Septem-
ber 30, 1984 and 1983, and these conditions do not modify our
Auditors' Report on Financial Statements dated April 30, 1985.
The U.S. Environmental Protection Agency Hazardous Substance
Response Trust Fund Audit Guide, (revised February 22, 1985)
requires a review and evaluation of the adequacy of the internal
accounting controls of EPA, Region 3, portion of the Superfund as
a basis for reliance thereon and for the determination of the
resultant extent of the tests to which auditing procedures.are to
be restricted. The audit guide also requires a review of CERCLA,
other regulations, policies, and guidelines to determine if
Federal funds are being expended in accordance with provisions of
CERCLA, other regulations, policies, and guidelines.
The results of our tests indicate that for items tested, EPA,
Region 3, complied with the provisions of CERCLA, other regu-
lations, policies, and guidelines except for the conditions de-
scribed in the Findings and Recommendations. Further, for the
items not tested, based upon our examination and the procedures
referred to above, nothing came to our attention which indicated
that EPA, Region 3, had not complied with the provisions of
CERCLA, other regulations, policies, and guidelines referred to
above, beyond the conditions described in the Findings and Rec-
ommendations.
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AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE (CONTINUED)
This report is intended solely for the use of EPA management and
should not be used for any other purpose.
TICHENOR, RESLER & EICHE
Louisville, Kentucky
April 30, 1985
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FINDINGS AND RECOMMENDATIONS
1. TIMEKEEPING FOR SUPERFUND PERSONNEL COMPENSATION AND BENE-
FITS [JEEPS IMPROVEMENT
We set-aside fiscal 1984 personnel compensation and benefits
(PC&B) obligations of $2,300,711 and disbursements of $2,296,607.
These costs were set-aside because our statistical analysis
indicated a potential error of 17 percent, which was considered
excessive. We also questioned payroll obligations and disburse-
ments in the amounts of $3,694 and $2,982 for fiscal years 1984
and 1983, respectively. In addition, we questioned related
personnel benefit costs of $419 and $319 in fiscal years 1984 and
1983, respectively. These costs were questioned because: time-
sheets and time and attendance (T&A) cards were missing; time-
sheets and T&A cards did not agree with each other; or timesheets
and T&A cards did not agree with the Region's automated payroll
system. Finally, we determined that four internal control
weaknesses associated with timekeeping existed. We noted two
significant internal accounting control weaknesses attributable
to improper separation of timekeeping duties and two significant
internal administrative control system weakness where Region 3
employees often estimated their time when recording Superfund
activity rather than identifying their actual time. All of these
conditions were caused by the Region not adequately implementing
or complying with the June and November 1982 EPA Superfund
Charging Policies Memorandums. The above conditions are dis-
cussed greater detail under the three captions below.
A. Payroll Costs May be Materially Misstated in Fiscal 1984
Based upon the results of our statistical analysis of the payroll
transactions sample for fiscal 1984, we set-aside PC&B obliga-
tions and disbursements amounting to $2,300,711 and $2,296,607,
respectively. Our audit tests were separated into three areas:
attribute, aggregate pay rate test, and difference or ratio es-
timation. The costs were set-aside because our statistical sam-
ple indicated that we can be 95 percent confident that total Su-
perfund PC&B disbursements should have fallen in a range from a
lower limit of $2,345,169 to an upper limit of $2,694;014.
However, the recorded Superfund PC&B disbursements were
$2,300,711. Therefore, the PC&B costs recorded could be mis-
stated as much as $393,303, or 17 percent of total PC&B, calcu-
lated as follows:
Upper limit $2,694,014
Recorded amount 2,300,711
Difference $ 393,303
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B.
FINDINGS AND RECOMMENDATIONS (CONTINUED)
Timesheets Were Missing, T&A Cards Were Missing,and Au-
tomated Pay ro IT Records Were Missing or Did Not Agree with
One Another
During our examination of randomly selected statistical samples
of Superfund personnel compensation transactions for each of the
fiscal years 1984 and 1983, we noted instances where timesheets
could not be located, and time recorded on the Region's automated
payroll records did not agree with T&A cards and/or timesheets.
Additionally, EPA personnel could not locate the RCB-3A (a
bi-weekly payroll distribution report) for pay periods 1 through
15 of fiscal 1983.
The following errors were noted during our testing of the 80
transactions that were selected in fiscal 1984:
0 Eleven instances where the employees' timesheets could
not be located and one instance where the employee's
T&A card could not be located to support the charges to
the Superfund program.
0 Seven instances where the T&A cards and the amounts
recorded in the Region's payroll system did not agree.
0 Four instances where the timesheets and the amounts
recorded in the Region's payroll system did not agree.
0 One instance where the same entry was recorded twice in
the Region's payroll system.
The following errors were noted during our testing of the 79
transactions selected in fiscal 1983:
0 Thirty instances where copies of the original time-
sheets could not be located.
0 Sixteen instances where the hours per the T&A cards
and/or timesheets did not agree with the hours and/or
account number charged per the payroll records.
* EPA personnel at Region 3 could not locate the RCB-3A
for fiscal 1983, pay periods 1 through 15. Any trans-
actions falling between pay periods 1 through 15 inclu-
sive could not be traced to the RCB-3A.
The above conditions resulted from a deficiency in the record
retention system and management's failure to effectively recon-
cile the Superfund timesheets and T&A reports with the Region's
automated payroll system. Taken as a whole, these inadequacies
constitute evidence of significant lack of conformance by the
Region with1the Superfund time charging policies. Within the
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
scope of our audit, we were unable to conclude with reasonable
assurance that PC&B charges were accurately recorded and support-
ed by proper documentation.
C. Internal Administrative Control Procedures for Timekeeping
Need Strengthening
In addition to our tests of the randomly selected statistical
sample items discussed above, we made inquiries concerning proce-
dures used during fiscal years 1984 and 1983 at selected respon-
sibility centers to process T&A cards and timesheets. As a re-
sult of our inquiries, we identified four internal control weak-
nesses that individually and taken together have the potential
for creating material errors in the PC&B charges to the Superfund
appropriation. A fifth weakness, which was unrelated to the
weaknesses disclosed below and was considered minor, is discussed
later in this report.
First, we determined that T&A cards were returned to the
timekeepers for forwarding to the Regional payroll clerk after
approval by supervisors. This procedure was weak from an in-
ternal control standpoint because the T&A cards could be altered
by the timekeepers after they were approved by the supervisors.
In accordance with paragraph 3.c, Chapter 1, of the EPA
Timekeep ing Manua 1, T&A cards must not be returned to the
timekeepers after they have been approved by the supervisors.
Second, the Regional payroll clerk performed duties that should
have been divided between two or more personnel. The clerk re-
ceived blank timecards, processed timecards out for the Region,
received and processed corrections for payroll edit lists, and
received and distributed paychecks as the designated agent for
the Region. The lack of proper checks and balances could result
in a loss of Government funds. Paragraph 3.e, Chapter 1, of the
SPA Timekeeping Manual specifies the duties of designated agents
that are essentially those listed above. By following the manu-
al, the Regional payroll clerk violated good internal control
practices.
Third, we determined that some employees were not keeping their
timesheets on a daily basis, instead, they filled their
timesheets out at the end of the pay period. This was not in
accordance with the Superfund Charging Policies Memorandum, dated
June 17, 1982. Fourth, our inquiries showed that many employees
estimated Superfund time for Thursday and Friday, the last 2 days
of the pay period, because they had to turn the timesheets in to
the timekeepers by 3:00 p.m. on the last Wednesday of the pay
period. Again, this was not in accord with the Superfund charg-
ing policies, because approximately 20 percent of the Superfund
time charges by these individuals was estimated.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
EPA's Superfund Charging Policies Memorandum, dated June 17,
1982, states in part:
The information on these daily timesheets must be used to
fill out the bi-weekly T&A reports and must reconcile with
the hours recorded on the T&A reports.
The memorandum further states that:
At a minimum, the Superfund daily timesheets must include:
...total hours spent on Superfund and non-Superfund work on
each day,...and either the employee's or immediate supervi-
sor's signature, depending on their bargaining unit status.
These weaknesses were identified in the prior Superfund audit
report covering fiscal 1982. We provided Regional personnel two
"Point Sheets" and corresponded by letter concerning the above
findings. We communicated the finding concerning the possibility
of material misstatement of 198A PC&B to the Assistant Regional
Administrator for Policy and Management by letter and provided a
copy to the Region 3 Comptroller. We contacted the Comptroller
and asked if he would like to meet to further discuss the
finding. He responded that he wanted to see the finding in the
draft report and, after that, he may request a meeting. The
response to the point sheets was that new procedures were
developed and implemented to eliminate the'discrepancies noted.
We understand that for fiscal 1985, EPA eliminated the dual sys-
tem of recording payroll information from timesheets to the T&A'
cards to distribute Superfund payroll costs. Distribution of
payroll will be input directly from the timesheet which should
eliminate the errors caused by transferring data from the
timesheets to the T&A cards.
CORRECTIVE ACTION TAKEN BY REGION 3
In response to our recommendation that Region 3 implement the
reconciliation of" the RCB-3A report with the timesheets, the
rAssistant Regional Administrator for Policy and Management stated
that the RCB-3A will be reconciled with timesheets to ensure all
time is recorded in the system as shown on the original document.
The Region's response to the recommendation that EPA employees
charge actual Superfund time on their timesheets rather than
estimates stated that: "Procedures have always required
employees to report actual time rather than estimated on
timesheets. Current processing procedures have eliminated the
potential errors associated with estimating time." The above
actions, coupled with the Agency's fiscal 1985 revised, payroll
distribution system, should alleviate these problems.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
REGION 3's COMMENTS ON FINDINGS
In response to our recommendation that Region 3 assess the fea-
sibility of examining fiscal 1984 payroll costs to establish
whether adjustments can be made cost effectively, the Assistant
Regional Administrator for Policy and Management stated: "...we
will consider the feasibility of making retroactive adjustments
to the FY 1984 payroll."
In response to our recommendation, that Region 3 coordinate with
EPA Headquarters' the advisability of clarifying the EPA Time-
keeping Manual to eliminate the internal control weaknesses
specified therein, Region 3 stated: "The recommendation regard-
ing the Timekeeping Manual should be directed to Headquarters."
OUR EVALUATION OF REGION 3'S RESPONSE
The Region's response did not establish a timeframe or indicate
the type of feasibility assessment to be made regarding retro-
active adjustments to the FY 1984 payroll. Also, the Region's
response did not address the internal control weaknesses identi-
fied in the finding and the need for corrective action. We
understand that changes in the EPA Timekeeping Manua 1 must be
processed by EPA Headquarters. Nevertheless, Region 3 should
correct specific deficiencies at the Regional level.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 3:
0 Perform a feasibility study to determine whether the fiscal
1984 payroll adjustments can be made cost effectively; and
provide a copy of the study and final decision.
0 Direct the Comptroller to ensure that the Regional payroll
clerk does not perform incompatible duties, such as
receiving and distributing paychecks or acting as the
designated agent.
2. CONTROL OVER NON-EXPENDABLE PERSONAL PROPERTY SHOULD BE IM-
PROVED
We found that 24 of 27 equipment purchases (costing $204,698)
were not recorded on the Region's Personal Property Accountabil-
ity System (PPAS) and that 4 of these 27 units (costing $1,595)
could not be located. These problems appeared to be attributable
to Region 3 personnel not sending equipment receiving reports to
the Property Accountability Officer and not performing annual
physical inventories. An annual physical inventory of Region 3
non-expendable personal property was not performed for fiscal
1983 and a physical inventory was started, but not completed for
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
fiscal 1984. This was a result of not following the relevant En-
vironmental Protection Agency Property Management Regulations
(PMR) formerly , EPPMR. The failure to conduct annual physical
inventories could lead to Region 3's "inability to detect excess
stock and idle non-expendable property in a timely manner. This
also could impair the Region's ability to identify missing and
misused property. Finally, custodial officers for the various
property accountable areas were not appointed in fiscal years
1983 and 1984. This occurred because a complete inventory had
not been taken and, as a result of various reorganizations within
the Region in fiscal years 1983 and 1984, property was not
transferred to the proper accountable area. When such appoint-
ments are not made, control over property can be lost and respon-
sibility cannot be easily fixed.
The property management requirements that must be observed by the
Region were contained in the PMR. The identified weaknesses
generally were caused by the Region's failure to observe these
regulations as required. A discussion of these weaknesses fol-
lows below under captions that summarize the problems we noted.
A. Annual Physical Inventories Were Not Performed
Region 3 did not conduct annual physical inventories of
expendable and non-expendable supplies and equipment for fiscal
years 1983 and 1984. EPA regulations, PMR 2-26, requires that
annual physical inventories of personal property be performed. >
The failure to conduct annual physical inventories can lead to
the inability to detect excess stock and idle non-expendable pro-
perty in a timely manner. This also can impair the Region's
ability to identify missing and misused property in a timely man-
ner. This condition was caused by the Deputy Regional Adminis-
trator for Policy and Management not ensuring that annual .physi-
cal inventories were taken. This weakness was identified in the
prior Superfund audit report covering fiscal 1982.
We provided a "Point Sheet" on this condition to.the Deputy As-
sistant Regional Administrator for Policy and Management. No
explanation was offered to indicate why an inventory was not tak-
en for fiscal 1983. For fiscal 1984, however, the response in-
dicated that the inventory was not completed because of resource
shifts to prepare for the move to the new building. The response
pointed out that inventories were performed at the Wheeling Field
Office, the Central Regional Lab, and the Chesapeake Bay Program,
and that the Regional Office inventory was 80 percent completed.
There was no indication as to when the inventories would be com-
pleted.
B. Custodial Officers Were Not Appointed
Custodial officers for the various property accountable areas
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
were not appointed in fiscal years 1983 and 1984. The PMR
requires that custodial officers be appointed for each of the
property accountable areas, and that their acceptance of
custodial responsibilities be in writing. The appointment should
be made using an Accountable Officer's Statement of Account-
ability as required by PMR 2-20. When appointments are not made,
control over property can be lost and responsibility cannot be
easily fixed. This weakness was identified in the prior
Superfund audit report covering fiscal 1982.
We provided the Deputy Assistant Regional Administrator for Poli-
cy and Management a "Point Sheet" on this finding. His response
was as follows:
Custodial officers cannot be appointed until a complete 100Z
inventory is done in order to account for all equipment and
supplies located within an accountable area. As a result of
the various reorganizations within the Regional Office dur-
ing FY83 and FY84 property was not transferred to the proper
accountable area because no one was assigned the property
management function for about 9 months. After property is
100Z, then proper accountable area and Custodial Officers
can be appointed. We eKpect to complete a 100Z inventory of
the Philadelphia Office this year (1985) but inventories of
Annapolis, Chesapeake Bay, and Wheeling Field offices may
not be accomplished this year due to travel money con-
straints and the possibility that the existing Property Man-
agement Officer may be transferred to other duties (the re-
. suit of an Administrative Judge's order) and no other per-
sonnel are available to assume these duties or have the
proper training.
C. Discrepancies Were Found in the Region's Inventory Listing
and Purchased Property Could Not Be Located
We selected a sample of 10 items of equipment for fiscal 1983 and
17 items of equipment for fiscal 1984.for tracing to the Personal
Property Accountability System (PPAS) and for physical verifica-
tion. All these items were from major object class 3100 and were
shown in the obligations SPUR printout furnished to us by the
Region for the applicable year.
From the sample of 10 items of equipment purchased during fiscal
1983, 8 items costing $8,225 were not recorded in the PPAS.
Three of the items costing $1,289 could not be located and phys-
ically verified. We set-aside the cost of the items that the
Region was unable to find (Exhibit VI, Note 8).
From the sample of 17 items of equipment purchased during fiscal
1984, 16 items costing $196,473 were physically verified, howev-
er, they were not recorded in the PPAS. One item costing $306
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
could not be located and the cost was set-aside (Exhibit III,
Note 6).
These conditions were caused by EPA Region 3 not: (1) sending
receiving reports to the Property Accountability Officer (PAO)j
and (2) performing annual physical inventories, as required by
the relevant property management guidelines, PMR 2-26, As a
result, the asset account for equipment was understated by
$204,698 and equipment costing $1,595 apparently was lost.
We provided the Deputy Assistant Regional Administrator for Poli-
cy and Management a "Point Sheet" on this finding. The response
was as follows:
In the past, receiving of equipment was problematic in that
equipment sent to the Regional Office was delivered directly
to the program office that ordered it and not thru the
Administrative Management Branch (AMB) for proper receiving
report preparation and tagging for inclusion into the prop-
erty management system. We have recently begun to implement
procedures to ensure that all equipment and supplies are
delivered to AMB directly.
In addition, we noted that there were no Agency policies or pro-
cedures to require the reconciliation of purchases of property
and equipment entered into the Financial Management System (FMS)
with the input into the PPAS. The omission of the 24 items of
equipment, valued at $204,698, might have been discovered on a
timely basis by management had this been a requirement. The
reconciliation (at least annually) would help ensure that all
items purchased are included as accountable property in the PPAS.
We will be making a recommendation in the Superfund consolidated
audit report that EPA's Financial Management Division, in
conjunction with the Facilities and Support Services Division,
establish policies and procedures to require reconciliation of
property and equipment purchases from the FMS with accountable
property recorded in the PPAS on a periodic basis.
CORRECTIVE ACTION TAKEN BY REGION 3
We recommended in our draft audit report that the Regional
Administrator, Region 3, ensure that physical inventories are
performed annually for all expendable supplies, materials and
non-expendable property and equipment, and that records be
adjusted accordingly. We also recommended that custodial
officers be appointed; that equipment receiving reports be sent
to the property accountability officers; and that accountability
and custodial officers comply with PMR 1-02. The Assistant
Regional Administrator for Policy and Management stated in his
response that he concurs with the recommendations. • He stated
that an inventory of the Region's property should be completed by
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
October 1, 1986, and that an annual inventory will be conducted
each year after that, and that records will be updated. He also
stated that custodial officers had been appointed and that
receiving reports are being properly distributed. These actions
are responsive to the recommendations. Consequently, we are
making no further recommendations.
3. SUPPORT FOR THE AGGREGATE CENTRAL SUPPORT SERVICES COSTS
ALLOCATED TO SUPERFUND MUST BE MAINTAINED
The Region did not utilize a system that provided a clear trail
to readily determine the aggregate central support services costs
allocated to Superfund during fiscal years 1984 and 1983. For
fiscal years 1984 and 1983, we attempted to identify aggregate
costs allocated to major object classes within the Superfund ap-
propriation to determine the materiality of these support service
allocations. Region 3 officials advised us that, after the third
quarter of fiscal 1983, allocations were made to Superfund based
on personnel full-time equivalent (FTE) ratios on an individual
transactions basis. The ratios were developed by dividing the
total Superfund actual FTEs by total Regional FTEs on a cumula-
tive basis. Common support service charges were calculated on a
quarterly basis for the first three quarters of fiscal 1983.
However, the Region was unable to show that the 3rd quarter
calculation was posted to the Financial Management System (FMS)
or that any allocations were made for the 4th quarter of fiscal
1983. Region 3 was unable to provide any documentation of fiscal
1984 cost allocations and indicated that allocations were made on
an individual transactions basis. Region 3 had not accumulated,
and did not have the personnel resources available during our
audit fieldwork to reconstruct the aggregate costs allocated to
Superfund for fiscal years 1984 and 1983. Without this informa-
tion, a determination of the costs allocated to Superfund could
not be made within the scope of our audit, and the Agency will
have difficulty adequately supporting these costs in cost
recovery actions.
The October 3, 1983, memo signed by the Director, Financial Man-
agement Division, Headquarters, approving the Regional allocation
plan states that:
...adherence to these charging policies will provide unifor-
mity and consistency among the Regions and Headquarters Of-
fices. Also, the use of your allocation plan will provide
the necessary documentation to support the costs charged to
Superfund and subsequent audits and reviews of the Superfund
program.
During discussions with members of the Comptroller's staff, we
asked about the feasibility of reconstructing the aggregate costs
allocated to Superfund during fiscal years 1984 and 1983. We
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
were advised that it would require an unrealistic amount of staff
time to develop the information and that the staff was not then
available.
REGION 3'S COMMENTS ON FINDING
We recommended in our draft report that the Regional Adminis-
trator direct the Comptroller to maintain documentation necessary
to support the costs charged to Superfund. We also recommended
that costs allocated .to the Superfund for fiscal years 1984 and
1983 be identified. In his response to our report, the Assistant
Regional Administrator for Policy and Management stated that he
concurred with the recommendations. He also stated that documen-
tation to support costs allocated to Superfund for fiscal years
1984 and 1983 is available for review.
OUR EVALUATION OF REGION 3'S RESPONSE
We reviewed the documentation made available by Region 3 and
revised our finding accordingly. However, we concluded that the
available documentation was not adequate to identify the aggre-
gate cost allocations made to Superfund in fiscal years 1984 and
1983.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 3:
0 Direct the Comptroller to reconstruct aggregate costs
allocated to Superfund along with supporting documenta-
tion and retain for follow-up during the next audit.
0 Revise the Region's cost allocation method so that
aggregate cost allocations can be readily identified.
4. MINOR FINDINGS - CORRECTIVE ACTION TAKEN BY REGION 3
A. A List of Officials Authorized To Approve Obligating Docu-
ments Should Be Used By the Financial Management Office
The Financial Management Office did not maintain or.use a list
containing the signatures and titles of officials authorized to
approve and/or certify obligating documents. EPA Voucher Ex-
amination Manua1 requires that "the accounting office must Be
furnished with a list of persons by title to whom...authority I to
authorize documents] has been delegated." The list would assist
accounting clerks in assuring that only valid documents are input
and processed. .This is especially important where there is a
high turnover rate or frequent reorganization.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
CORRECTIVE ACTION TAKEN BY REGION 3
We recommended in our draft report that the Regional Administra-
tor, Region 3, direct the Comptroller to ensure that a list of
officials authorized to approve or certify obligations be pre-
pared and distributed to appropriate personnel and that the list
be updated periodically. The Assistant Regional Administrator
for Policy and Management concurred with the recommendation and
stated: "We will request, in writing, a list of approving offi-
cials from the operating divisions and periodically update the
information as recommended." This action is responsive to the
recommendation, and we make no further recommendation.
B. The Regional Payroll Clerk Should Maintain an Up-to-Date
List of Timekeepers
The person performing the duties of Regional payroll clerk did
not maintain an up-to-date list of divisional timekeepers and
their signatures. Also, there was no listing of supervisors au-
thorized to certify T&A cards for each division and there was no
listing of those authorized in fiscal years 1984 and 1983. The
Regional payroll clerk had been in the position for about 5 years
and did not think that such a listing was necessary. Reviewing
time card signatures usually was left up to the divisions. With-
out proper review, erroneous timecards could have been inserted
into the payroll system, resulting in erroneous payments.
CORRECTIVE ACTION TAKEN BY REGION 3
The Assistant Regional Administrator for Policy and Management
concurred with our recommendation to verify the current list of
timekeepers and update the files, develop a list of certifying
supervisors' names and signatures, and update both lists as
changes occur. He stated that: "We will request a current list
of timekeeper's and certifying supervisor's names and signatures
from all organizations within the Region. We will maintain the
list on a current basis." This action is responsive to the
recommendation and we make no further recommendation.
C. Document Control Registers Should Be Utilized As Required
The three document control registers (OCRs) maintained at EPA
Region 3 did not fulfill the requirements in the EPA Fund Control
Manual. The DCRs did not: (1) provide the responsibility cen-
ters(RCs) information on the available balance; (2) provide as-
surance that all commitment and obligation documents initiated by
the RCs were properly recorded in the Financial Management Sys-
tem; and (3) provide a link between the phases of a transaction
(in the OCRs). The cause of these conditions was Region 3 not
following the procedures outlined in Chapter 4 of the EPA Fund
Control Manual. Consequently., the DCRs did not provide the in-
formation intended for the users.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
REGION 3'S COMMENTS ON FINDING
The recommendation in our draft report suggested that Region 3
OCRs provide information on available fund balances and that the
Region implement procedures to ensure that commitment and
obligation documents are properly recorded. The Assistant Re-
gional Administrator for Policy and Management did not agree with
this recommendation, stating that:
The Region maintains a centralized OCR which is used to en-
sure all spending documents are accounted for. We provide
fund balances through the use of other local Software Pack-
age for Unique Reports [SPUR] designed reports. The DCR
entries are reconciled to the financial management system
periodically during the year. We anticipate implementing
the automated DCR system but to date this has not been
available for our use.
OUR EVALUATION OF REGION 3'S RESPONSE
Although the response indicates that the Region does not agree
with the recommendation, the actions taken indicate that a suit-
able alternative to the recommendation was adopted. Accordingly,
we make no further recommendation.
D. Support For All Obligation and Disbursement Transactions
Must Be Retained
Our testing showed that, for fiscal 1983, support was not avail-
able for seven disbursement transactions amounting to $19,116
(see Exhibit VI, Notes 4, 5, 6, and 7) and for six obligation
transactions amounting to $880 (see Exhibit VI, Note 2). The
testing showed that, for fiscal 1984, support was not available
for an obligation transaction amounting to $4,880 and for 3 dis-
bursement transactions amounting to $36,309 (see Exhibit III,
Notes 4, 5, and 6). Consequently, the recorded amounts were
set-aside. The EPA Accounting Systems Design Manual and the EPA
Records Retention Schedule specify that support for these trans-
actions should have been retained for audit.
CORRECTIVE ACTION TAKEN BY REGION 3
The Assistant Regional Administrator for Policy and Management
stated in the response:
We have reviewed available documentation for the set aside
transactions and believe all are adequately supported.
Documentation for obligations and disbursements must be
retained as required by the record retention schedules. As
previously stated we had moved twice within a short time
period and had not completed unpacking when the audit began.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
We recommended that the Region determine whether the transactions
are valid and can be supported, and that support for future
obligations and disbursements be retained in the files. The
actions taken indicate that the recommendations were adopted.
The Region should retain all supporting documentation correspond-
ing with these set-aside costs for examination during the next
Superfund audit.
E. Improved Control Is Needed For Letter of Credit Payments to
States With Cooperative Agreements
Our testing showed that funds for cooperative agreements dis-
bursed through letters of credit sometimes were released by Trea-
sury to State accounts in excess of the balance of funds avail-
able for the specified agreements. This could result in funds
designated for Superfund being spent on other programs. We were
advised that Treasury was supposed to check fund availability
before releasing the funds. Region 3 became aware that Treasury
was not performing these checks when a copy of the letter of
credit arrived and the financial file was pulled and the dis-
bursement was posted. When funds were released for a specific
agreement in excess of funds available, funds for another agree-
ment were reduced by the Region and transferred to the overdrawn
agreement. Region 3 personnel indicated that the approximate
7-day delay between Treasury approval of the disbursement and EPA
receipt of the payment voucher contributed to the problem. Part
IV, Chapter 7, of the Accounting System Design Manual, as well as
the EPA Letter of Credit Users'"Manual, outline the procedures to
be followed when processing assistance agreements.
CORRECTIVE ACTION TAKEN BY REGION 3
The recommendation in our draft audit report was that Region 3
coordinate with Treasury to ensure that the release of funds in
excess of available balances does not recur. The Assistant
Regional Administrator for Policy and Management stated in his
response that the condition was permanently rectified with the
implementation of the new Letter of Credit—Treasury Financial
Communications System (LOC-TFCS). This action is responsive to
the recommendation; consequently, we make no further recommen-
dation.
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EXHIBITS
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EXHIBIT I
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF OBLIGATIONS (Note 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Description Total Accepted Set-Aside Questioned Notes
Personnel Compensation $2,070,754 $ - $2,067,060 $3,694 3
Personnel Benefits 234,070 - 233.651 419 3
Total Personnel
Compensation and
Benefits 2.304.824 - 2,300.711 4.113
Travel and Transpor-
tation of Persons 201,947 201,947
Transportation of
Things 5.174 5.174
Total Travel and
Transportation 207.121 207.121
Rent, Communicat ions,
and Utilities 58,566 53,686 4,880
Printing and Repro-
duction 800 800
Other Contractual
Services 4,478,131 4,478,131
Supplies and Materials 112,684 112,684
Equipment 251,345 251.345
Total Supplies,
Materials, and
Equipment 364,029 364.029
Land and Structures 5,000 5,000
Grants, Subsidies,
and Contributions 232,000 232,000
Insurance Claims and
Indemnities
Grand Total $7.650.471 $5,340.767 $2,305.591 $4.113
The Notes to the Statements of Obligations and Disbursements are
an integral part of this statement.
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EXHIBIT II
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
' REGION 3
PHILADELPHIA, PENNSYLVANIA
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF DISBURSEMENTS (Note 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1984.
Description
Total
Accepted
Set-Aside Questioned Notes
Personnel Benefits
Total Personnel
Compensation and
Benefits
Travel and Transpor-
tation of Persons
Transportation of
Things
Total Travel and
Transportation
Rent, Communications,
and Utilities
Printing and Repro-
duction
Other Contractual
Services
Supplies and Materials
Equipment
Total Supplies,
Materials, and
Equipment
Land and Structures
Grants, Subsidies,
and Contributions
Insurance Claims and
Indemnities
Grand Total
$2,066,630
234,090
2,300,720
177,471
4,191
181,662
56,443
619
508,798
93,374
175,730
269,104
$ - $2,062,936
233,671
2,296,607
177,471
4,191
181,662
28,443 28,000
619
506,659 • 2,139
93,374
169,254 6,476
262,628 6,476
$3,694 3
419 3
4,113
_
_
4
-
•_ e;
^
6
589,237
589,237
$3.906.583 $1,569.248 $2.333.222 $4,113
The Notes to the Statements of Obligations and Disbursements are
an integral part of this statement.
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EXHIBIT III
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30t 1984
Note 1. Accounting Practices
The Statement of Obligations and the Statement of Disbursements
were prepared for EPA use by EPA Financial Management Division
and are based on Allowance Holder financial information contained
in the Financial Management System (Superfund Status Reports,
dated September 30, 1984 and 1983).
Obligations as presented in the Statement of Obligations repre-
sent funds obligated against that fiscal year's appropriation.
Disbursements as presented in the Statement of Disbursements rep-
resent funds disbursed during that fiscal year against either
prior years' or current year's obligations.
Note 2. Support of Obligation Transactions
Our testing showed that support (such as a standard level user
charge billing document or an allocation or adjustment document)
for an obligation of $4,880 to Account Number 4TFA03RAOO for Ob-
ject Class 2300 was not available, as more fully described in
Finding Number 4.D., "Support For All Obligation and Disbursement
Transactions Must Be Retained"; therefore, the amount was
set-aside.
Note 3. Personnel Compensation and Benefits
Personnel compensation in the amount of $3,694 was questioned
because of discrepancies within the system used to charge person-
nel compensation and benefits to the Superfund appropriation.
These discrepancies are discussed in Finding Number 1,
"Timekeeping For Superfund Personnel Compensation and Benefits
Needs Improvement." Related personnel benefits in the amount of
$419 also were questioned.
Based upon the results of our statistical analysis of the payroll
transactions sample for fiscal 1984, we set-aside the balance of
personnel compensation and personnel benefits disbursements,
amounting to $2,062,936 and $233,671, respectively. A detailed
discussion is presented in Finding Number 1.
Note 4. Rent, Communications, and Utilities
Our testing showed that support (such as a standard level user
charge billing document or an allocation or adjustment document)
for a disbursement of $28,000 to Account Number 4TEU03RAOO for
Object Class Number 2300 was not available. Therefore, the
amount was set-aside as more fully described in Finding Number
-28-
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EXHIBIT III (CONTINUED)
4.D., "Support For All Obligation and Disbursement Transactions
Must Be Retained."
Note 5. Other Contractual Services
Our testing showed that support (such as a purchase order or in-
voice) for a disbursement of $2,139 to Account Number 3TEU03RAOO,
Document Number CB0755 for Object Class 2500, was not available.
Therefore, the amount was set-aside as more fully described in
Finding Number 4.D., "Support For All Obligations and Disburse-
ments Must Be Retained."
Note 6. Equipment
We selected a sample of 17 items of equipment for tracing to the
Property Management System and for physical verification. We
could not locate one item costing $306 and set-aside this amount,
as more fully described in the Finding Number 2, "Control Over
Non-Expendable Personal Property Should Be Improved."
Our testing also showed that support (such as a receiving report
or duplicate purchase order) for a disbursement of -§6,170 on Doc-
ument Number NH3260 to Account Number HSFA03RAOO, was not avail-
able. Therefore, the amount was set-aside as more fully de-
scribed in Finding Number 4.D., "Support For All Obligations, and
Disbursements Transactions Must Be Retained."
Note 7. Documents Not Available for Audit Tests
As explained in Finding Number 3,, "Support for the Aggregate
Central Support Services Costs Allocated to Superfund Must Be
Maintained", EPA Region 3 was unable to identify the aggregate
support services costs allocated to the Superfund appropriation
in fiscal 1984.
The scope of our examination did not allow us to test any alter-
nate documentation the Region may have to satisfy our audit
objectives. We consequently express no opinion on the accompany-
l ing Statements of Obligations and Disbursements.
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EXHIBIT IV
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA,
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF OBLIGATIONS (Note 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Description Total Accepted Set-Aside Questioned Notes
Personnel Compensation $1,241,358 $1,238,376 $ - $2,982 3
Personnel Benefits 131,395 131.076 - 319 3
Total Personnel
Compensation and
Benefits 1.372.753 1.369.452 - 3.301
Travel and Transpor-
tation of Persons 121,731 120,851 880 - 2
Transportation of
Things 2.991 2,991 - -
Total Travel and
Transportation 124,722 123,842 880
Rent, Communications,
and Utilities 20,492 20,492
Printing and Repro-
duction 1,474 1,474
Other Contractual
Services 95,826 95,826
Supplies and Materials 74,171 74,171
Equipment 176.083 176,083
Total Supplies,
Materials, and
Equipment 250.254 250.254
Land and Structures 601 601
Grants, Subsidies,
and Contributions 636,000 636,000
Insurance Claims and
Indemnities
Grand Total $2.502,122 $2,497.941 $ 880 $3.301
The Notes to the Statements of Obligations and Disbursements are
an integral part of this statement.
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EXHIBIT V
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
PHILADELPHIA, PENNSYLVANIA
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF DISBURSEMENTS (Note 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Description
Total
Accepted Set-Aside Questioned Notes
Personnel Benefits
Total Personnel
Compensation and
Benefits
Travel and Transpor-
tation of Persons
Transportation of
Things
Total Travel and
Transportat ion
Rent, Communications,
and Utilities
Printing and Repro-
duction
Other Contractual
Services
Supplies and Materials
Equipment
Total Supplies,
Materials, and
Equipment
Land and Structures
Grants, Subsidies,
and Contributions
•f
Insurance Claims and
Indemnities
Grand Total
$1,229,624
131,395
•1,361,019
116,470
3,050
119,520
23,767
1,052
82,676
81,779
68,053
149,832
$1,226,642 $ - $2,982
131,076 - 319
1,357,718 - 3,301
114,807 1,663
1,670 1,380
116,477 3,043
11,094 12,673
1,052
79,276 3,400
81,779
66,764 1.289
148,543 1,289
3
3
4
5
6
7
8
355
355
$1.738.221 $1.714.515
$20.405
$3.301
The Notes to the Statements of Obligations and Disbursements are
an integral part of this statement.
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EXHIBIT VI
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
REGION 3
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Note 1. Accounting Practices
The Statement of Obligations and the Statement of Disbursements
were prepared for EPA use by EPA Financial Management Division
and are based on Allowance Holder financial information contained
in the Financial Management System (Superfund Status Reports.
dated September 30, 1984 and 1983).
Obligations as presented in the Statement of Obligations repre-
sents funds obligated against that fiscal year's appropriation.
Disbursements as presented in the Statement of Disbursements rep-
resent funds disbursed during that fiscal year against either
prior years' or current year's obligations.
Note 2. Travel and Transportation of Persons
Our testing showed that support (such as a travel authorization)
for the following obligations was not available and the total was
set-aside, as more fully described in the Finding Number 4.D. ,
"Support For All Obligations and Disbursements' Transactions Must
Be Retained."
Obligation
Account Number Document Number Recorded Amount
3TFA03RAOO OTRT798794
3TFA03RH24 OTRT798802
3TFA03RH12 OOOT810496
3TFA03RAOO OTRT798680
3TFA03RAOO OTRT927940
3TFA03RAOO OTRT984526
Total $880
Note 3. Personnel Compensation and Benefits
Personnel compensation in the amount of $2,982 was questioned
because of discrepancies within the system used to charge person-
nel compensation and benefits to the Superfund appropriation.
These discrepancies are discussed in Finding Number 1,
"Timekeeping For Superfund Personnel Compensation and Benefits
Needs Improvement." Related personnel benefits in the amount of
$319 also were questioned. All details pertaining to these
discrepancies were furnished to the Comptroller, Region 3.
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EXHIBIT VI (CONTINUED)
Note 4. Travel and Transportation of Persons
Our tests showed that support (such as a paid travel voucher) for
the following disbursements for Object Class 2100 was not avail-
able, and the total was set-aside as more fully described in
Finding Number 4.D., "Support For All Obligation and Disbursement
Transactions Must Be Retained."
Account Number
3TJB03RAOO
3TFA03RAOO
Obligation
Document Number
NODCNO
NB1076
Total
Recorded Amount
$ 871
792
$1.663
Note 5. Transportation of Things
Our testing showed that support (such as a Government Bill of
Lading or an adjustment document) for a disbursement of $1,380
charged to Account Number HSFA03RAOO was not available. There-
fore, the amount was set-aside ,as described in Finding Number
4.D. , "Support For All Obligations Must Be Retained."
Note 6. Rent, Communication, and Utilities
Our testing showed that support (such as a standard level user
charge billing document or an adjustment document) for the fol-
lowing disbursements was not available and the amounts were
set-aside as described in Finding Number 4.D., "Support For All
Obligation and Disbursement Transactions Must Be Retained."
Account Number
HSFA03RAOO
3TEU03RAOO
Obligation
Document Number
NODCNO
NODCNO
Total
Recorded Amount
$12,526
147
$12,673
Note 7.Other Contractual Services
Our testing showed that support (such as a contract document or
an adjustment document) for the following disbursements was not
available and the amounts were set-aside as described in Finding
Number 4.D., "Support For All Obligation and Disbursement
Transactions Must Be Retained."
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EXHIBIT. VI (CONTINUED)
Obligation
Account Number Document Number Recorded Amount
HSFA03RAOO NODCNO $1,560
2TET03RAOO JA0247 1,840
Total ' ... $3,400
Note 8. Equipment
We selected a sample of 10 items of equipment for tracing to the
PPAS and for physical verification. Three of the items, total
cost of $1,289, could not be located and, therefore, we set-aside
this amount, as more fully described in Finding Number 2,
"Control Over Non-Expendable Personal Property Should Be
Improved."
Note 9. Documents Not Available for Audit Tests
As explained in Finding Number 3, "Support For the Aggregate
Central Support Services Costs Allocated to Superfund Must Be
Maintained", the Region was unable to identify the aggregate
support services costs allocated to the Superfund appropriation
in fiscal 1983.
The scope of our examination did not allow us to test any alter-
nate documentation the Region may have to satisfy our audit
objectives. We consequently express no opinion on the accompany-
ing Statements of Obligations and Disbursements.
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APPENDIX
Note 1. We examined the documentation provided by Region 3 in
response to Finding Number 4 referenced in this
Appendix and concluded that the documentation was
adequate to resolve the finding. Consequently, we
deleted this finding and all references from this
report.
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APPENDIX 1
SUBJECT:
FROM:
TO:
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION III
641 Chestnut Building
Philadelphia. Pennsylvania 19107
Draft Audit. Reoort,Pto.P5lSH5-ll-0021 _
Report on Financial and Compliance Audit
Obligations and Disbursements Under the
Comprehensive Environmental Response, DATE:
Condensation, and Liability Act of 1980,
Fiscal Years Ended September 30, 1984 and 1983
William T. Wisniewski
Assistant Regional Administrator
for Policy & Management (3PMOO)
Kenneth D. Hockman
Divisional Inspector General for Audit
Internal Audit Division (A-109)
AUG
81986
Attached is our response to the subject Draft Audit Report. If you
have any questions, please contact William Hoffman at 597-8229.
Attachment
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APPENDIX 1
(CONTINUED)
1. Management Response
Time sheets are maintained by the Region. During the early years of
Superfund, guidance and procedures were sometimes unclear, contradictory,
and frequently revised. In 1983 Headquarters required, and we ensured,
labor distribution entries were compared to the recorded payroll. On
more than one occasion the "system" was not available for labor redistri-
bution and current adjustments could not be made. When this occurred,
'labor redistribution was not accomplished timely and the payroll records
would not reflect superfund hours charged.
The process for corrections, at that time, required preparation of key
punch sheets by the Region, transmittal to headquarters, actual key
punching of time card corrections and eventual entry in the DIPS.
Corrected entries did not appear in the records for several weeks or
months after the pay period being corrected.
The automated process (PARS) began during fiscal year 1984 and cor-
rections and adjustments are.now processed timely. We will consider
the feasibililty of making retroactive adjustments to the FY 1984 payroll.
Procedures have always required employees to report actual time
rather than estimates on timesheets. Current processing procedures
have eliminated the potential errors associated with estimating time.
The RGB 3A,will be reconciled with time sheets to ensure all time is
recorded in the system as shown on the original document.
The reccmendation regarding the Timekeeping Manual should be directed to
Headquarters.
2. Management Response
Concur with reconmendation. A physical inventory of the entire Region
was initiated in March 1986. By October 1, 1986, we anticipate the
inventory will be completed at the Regional Office, the Annapolis
Laboratory, the Chesapeake Bay Program Office, and the Wheeling Field
Office. An annual inventory will be conducted each year after that in
accordance with regulatory requirements. Once the inventory is complete,
we will update and maintain the PPAS.
Custodial Officers were appointed in December 1985. The Property
Accountability Officer, located in the Regional Office, does get
copies of the receiving reports. The Custodial Officers in the field
are submitting to the PAO, reports of equipment received by them for
inclusion in the PPAS.
4
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APPEM3K 1
(CONTINUED)
3. Management Response
Concur. Documentation to support costs allocated to Superfund for
fiscal year 1983 and 1984 is available for review. Charges were
accumulated for several documents and consolidated for entry into the
financial management system. All documentation is currently maintained
and available for review.
4. Management Response
Concur. The journal voucher entries were located and copies
forwarded to Cotton and Company on December 10, 1985.
At the time of the audit the Comptroller's office had moved twice
„ in two years. Each move required the "boxing" of all records
including items needed for day to day operations as well as
historical files. When the audit began the Comptroller's office
had not completed unpacking and was unable to properly set up
files, desks etc.
5. Management Response
A. Concur. The Planning and Analysis Branch periodically prepares
organizational charts which serve this need. We will request,
in writing, a list of approving officials from the operating
divisions and periodically update the information as recommended.
B. Concur. We will request a current list of timekeeper's and certifying
supervisor's names and signatures from all organizations within the
Region. We will maintain the list on a current basis.
C. We do not agree. The Region maintains a centralized OCR which is
used to ensure all spending documents are accounted for. We
provide fund balances through the use of other local SPUR designed
reports. The OCR entries are reconciled to the financial management
system periodically during the year. We anticipate implementing
the automated OCR system but to date this has not been available
for our use.
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APPENDIX 1
(CONTINUED)
Management Response (continued)
D. Vie have reviewed available documentation for the set aside
transactions and believe all are adequately supported.
Documentation for obligations and disbursements must be
retained as required by the record retention schedules.
As previously stated we had moved twice within a short time
period and had not completed unpacking when the audit began.
E. This condition has been permanently rectified with the inplemen-
tation of the new Letter of Credit - Treasury Financial Connunications
System (LOC-TFCS). We now have the ability to disapprove payments
prior to the Treasury release of the drawdowns. If no funds are
available on a particular grant, the payment is disapproved irregard-
less if funds are available on other grants to the same grantee,
and Treasury does not release the funds.
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