UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 10460
MAR 22 088
OFFICE Of
THE INSPECTOR GENERAL
MEMORANDUM
SUBJECT: Audit Report No. M5BH8-11-0027-80803
Audit of Superfund Interagency
Agreements with the Department of
Transportation
FROM: yErnest E. Bradley
yj^ssistant Inspector General for Audit (A-109)
/I
TO: Charles Grizzle
Assistant Administrator for Administration
and Resources Management (PM-208)
J. Winston Porter
Assistant Administrator for Solid Waste
and Emergency Response (WH-562A)
On August 19, 1986, we requested the| Inspector General, Depart-
ment of Transportation (DOT^, to perform an audit of Superfund
interagency agreements entered into between EPA and the U.S.
Coast Guard. DOT's report of December 30, 1987, is attached.
The report concludes that $518,089 oif the costs reviewed could
not be readily supported and an additional $12,500 for oil
spill cleanup costs were not valid Superfund costs.
Since we received the report in early January, we have met with
DOT auditors to clarify certain issues raised in the report.
These discussions revealed information which will assist EPA
managers in responding to the report! Correction of the internal
control weaknesses described in the report will aid future cost
recovery efforts.
DOT's report, which addresses obligations and expenditures during
fiscal 1984 through 1986, does not identify specific interagency
agreements which were audited or to which questioned costs apply.
According to DOT auditors, this is because the Coast Guard does
not maintain records in such a manner that costs pertaining to
any interagency agreement are readily identifiable. DOT auditors
U.S. Snvironaental Protect Ion
library, Room 2404 FM-211-4
401 M Street, S.W.
Washington. DC 90480
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explained to us that the Coast Guard field office, which responds
to the emergency situation, generally completes the work, and
then prepares the following documents: (1) a case file summary
report which includes a schedule of
all costs incurred; and (2)
which reconciles to the case
a draft interagency agreement {IAG)
file summary schedule of costs. The field office sends these
documents to Coast Guard Headquarters; Headquarters then submits
the draft IAG to EPA for approval. { The field office also forwards
a copy, of the draft IAG to their District Accounting Office for
reimbursement of costs. The accounting office prepares an
interagency transfer voucher (ITV) to recoup the costs from.Coast
Guard Headquarters accounts. After) the IAG has been signed by
both agencies, Coast Guard Headquarters bills EPA for the work
performed using the IAG number. '
Once the interagency agreement is in place, the Coast Guard does
not place the applicable interagency agreement number on all
supporting documents or establish a
numbers assigned by Coast Guard and
link between the document
EPA's interagency agreement
number. As a result, gathering the I supporting documents, while
possible, can be a very time consuming process.
The lack of a proper audit trail presented a very difficult situa-
tion for DOT auditors. The auditors reviewed the case file and
supporting documentation available at the field locations visited
to determine if the files contained'the necessary support (time
sheets, travel vouchers, purchase orders, etc.) for the costs
charged. The $518,089 of unsupported costs referred to on page 3
of the report represent costs which could not be supported during
these file reviews. The auditors then requested program managers
to locate the supporting documentation and notify them. At the
end of the audit, $518,089 of costs'audited had not been adequately
supported.
DOT auditors believe that supporting documentation likely exists
and can be provided if sufficient emphasis is placed on gathering
the information by those who know wh|ere to look. Should EPA
request all supporting documents for, an incident and provide the
location and time of the incident, Coast Guard will likely be
able to support the costs claimed eyen though it may be unneces-
sarily time consuming. '
I
Other auditors who are performing work similar to DOT's have.
discussed the difficulty in auditing Superfund interagency
agreements because each agency maintains a separate identifica-
tion system for work performed. Only with great difficulty can
other agency supporting records be tied to EPA interagency
agreement numbers.
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The conditions described above will| hinder the cost recovery
process if the Coast Guard cannot provide the documentation
when requested by EPA. We believe EPA program managers should
meet with their counterparts in the Coast Guard to develop a
better means for readily identifying Superfund interagency
agreement costs and maintaining the applicable records. For
the subject audit, we do not believe that EPA should reimburse
the Coast Guard for any costs which cannot be adequately supported
Accordingly, we are making the following recommendations.
RECOMMENDATIONS '
We recommend that the Assistant Administrator for Administration
and Resources Management: '
1. Obtain a legal opinion from the Office of General
Counsel concerning whether EPA can withhold payment or
request reimbursement from[another Federal agency for
costs which are not adequately supported.
i.
2. Not reimburse the Coast Guard for $518,089 costs
which were not adequately supported if EPA has
the authority to do so. If reimbursement has been
made, the amount reimbursed should be recovered or
deducted from future payments.
3. Recover the $12,500 of ineligible costs or deduct
this amount from future payments.
ACTION REQUIRED i
In accordance with EPA Directive 2750, the action official is
required to provide this office with' a copy of the proposed
determination on the findings within 90 days of the audit
report date. The Assistant Administrator for Administration
and Resources Management is the action official for this
report. !
Should your staff have any questions concerning this report,
please have them contact John Walsh on 475-6753.
Attachment
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DISTRIBUTION OF REPORT
Director, Office of Emergency and Remedial
Response (WH-548)
Comptroller (PM-225)
Director, Financial Management Division (PM-226)
Director, Grants Administration Division (PM-216)
Chief, Grants Information and Analysis Branch (PM-216F)
Agency Followup Official
Attnr Resource Management Staff (PM-208)
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ItampanaMon
Office
or tan
Office of
INSPECTOR GENERAL
REPORT W AUDIT OF
i
SUPERFUHD ACTIVITIES
{FISCAL YEAHS 1984 - 1986)
UNITED STATES COAST 6UARD
iREPORT NUMBER: AV-C6-8-007
DATE ISSUED: DECEMBER 30, 198?
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•pOf'tllMIII Of
Transportation
Office of the Seaeiary
ofTranspongtion
Office of Inspector General
Memorandum
sub.ec. TSH;. ^^r* on Audl-t °f Superfund
sUb(ea JcTOTties (Fiscal Years 1984-1986) . oa.e
United States Coast Guard
Report No. AV-CG-8-007
10
Aim of
From Raymond J. DeCarlivjx^^^t.1 KM «-*-«^ Atln °f JA-20:366-4165
Assistant Inspector General for Auditing,
To Chief of Staff, United States Coast Guard
I. INTRODUCTION
This is the final report on our audit of the United States Coast
Guard's (USCG) Hazardous Substance ;Trust Fund (Superfund) activities.
The audit was "pquested by the Environmental Protection Agency (EPA).
The objectives of the audit were to: (i) review costs incurred and
claimed by the Coast Guard applicable to the Superfund and determine
their reasonableness, allowability,| and allocability; (ii) determine
whether the Coast Guard can provide monthly site-specific cost
information to EPA that can be veriified to the accounting system; and
(iii) determine if the deficiencies noted in our prior audit report
(AV-OA-4-021, April 9, 1984) were corrected.
A. Background
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, hereinafter referred to as CERCLA, estab-
lished authority and funding to respond to hazardous substance
releases into the environment. The President delegated the
authority to the EPA and DOT tO|carry out the requirements of the
Act. EPA has entered into agreements with the Coast Guard to
perform oversight and cleanup1duties for hazardous substance
releases.
3. Scope of Review
The audit was performed at Coast Guard Headquarters, the Third,
Seventh, Eighth, and Twelfth Districts, and at the Atlantic,
Gulf, and Pacific Strike Teams. He reviewed 57 percent of the
$7.4 million expenditures Incurrjed during Fiscal Years (FY) 1984
through 1986. The* audit was performed in accordance with the
"Standards for Audit of Governmental Organizations, Programs,
Activities, and Functions" as prescribed by the Comptroller
General and included such tests of policies, procedures, records,
reports, and other documents as considered necessary in the
1
-------
circumstances. We held interviews and reviewed internal controls
which related to recognizing, recording, and billing CERCLA costs
and assuring that applicable reimbursements were received.
II. FINDING AND RECOMMENDATIONS
Finding. Documenting and Recouping CERCLA Costs
i
The Coast Guard's controls over CERCLA transactions during FYs 1984
through 1986 were generally adequate to assure their reasonableness,
allowability, and allocability. We reviewed $4.2 million of the
$7.4 million of expenditures and identified approximately $1.4 million
that was not billed to EPA, and $518,000 that was not supported
(Exhibit A). An additional $12,500 was ineligible for reimbursement.
During the audit, the Coast GuarcJ billed EPA for $868,081 of the
unbilled costs and is in the process of preparing billings for the
remainder. '
The site-specific cost information on CERCLA activities cannot be
provided by the current accounting system. The Coast Guard can, as it
has in the past, provide such information manually. EPA officials
advised us that this procedure will'satisfy their requirements.
The deficiencies identified in our prior audit report (AV-OA-4-021,
dated April 9, 1984) included questioned costs totaling $1,075,313,
the majority of which represents unsupported costs ($1,048,520). The
remainder of the questioned costs included overstated labor and
excessive overtime charges, an undated cost certification, an
excessive subcontractor fee, and an ineligible charge. Except for the
unsupported and ineligible costs found during our current audit, the
deficiencies identified in the prior audit report have not recurred.
The unbilled, unsupported, and ineligible costs found during the
current audit are discussed in the jfollowing paragraphs and shown in
detail in the Exhibits to this report.
Unbilled Costs
As of July 1, 1987, the Coast Guardi had not billed EPA for $1,449,294
of CERCLA costs (Exhibit A). Personnel costs constituted $930,914 of
the unbilled amount. Such billingsl are required by the Memorandum of
Understanding (MOU) and the Interagency Agreements (IAG) between the
Coast Guard and EPA, as well as Part 4, Chapter 11 of the Coast Guard
Comptrollers Manual. As a result1, all expenditures applicable to
Superfund transactions were not forwarded to EPA for reimbursement.
The MOU, lAGs, and the Comptrollers Manual prescribe the process
for obtaining reimbursement for all CERCLA costs. Although funds
reimbursed for personnel costs are not generally retained by an
agency, such costs are already funded and paid from Us own
appropriations. These costs and all other CERCLA expenses should be
accurately recorded in- accounting records and billed to EPA as
expenditures of the Superfund. '
-------
Coast Guard officials stated that savings could be realized if EPA
were to reimburse the U.S. Treasury directly for the personnel costs.
Administrative costs for preparing such bills and payment documents
could be eliminated rather than reimbursing the Coast Guard who must
then forward the funds to the jTreasury. However, by excluding
personnel costs from the Superfund transactions, the Coast Guard's
financial records do not disclose that these personnel costs were
incurred for Superfund activities but rather for routine Coast Guard
operations.
The issue of unbilled costs was discussed with Coast Guard officials
during the audit. They agreed to bill EPA for all unbilled CERCLA
costs incurred and subsequently billed EPA for $868,081. This amount
includes personnel costs totaling $506,916. The Coast Guard is in the
process of preparing billings for the remainder of the unbilled costs
($581,213) which includes personnel I costs of $423,999 (Exhibit B).
Unsupported and Ineligible Costs
Costs totaling $518,089, incurred for CERCLA response actions during
FVs 1984, 1985, and 1986, were not supported (Exhibit C) in accordance
with the documentation requirements of the MOU, lAGs, and the
Comptrollers Manual. Without the required documentation, the validity
of the costs could not be validated.1
The MOU, lAGs, and Comptrollers Manual establish a requirement for
current information on CERCLA funded response actions and their
related costs. CERCLA authorizesj EPA to recover from responsible
parties all Government costs incurred during a response action. To
ensure successful recovery of CERCLA funds by EPA, these guidelines
require the Coast Guard to maintain documentation for all personnel
and other costs incurred during CERCLA response actions. This infor-
mation and documentation must be available for audit or verification
by the EPA Inspector General.
The Coast Guard Districts and StrikejTeams we visited during the audit
did not always retain documentation in their case files to support
costs incurred for CERCLA activities. In addition, payment schedules
or unit voucher files that did contain such documentation often were
not referenced to the applicable case files and therefore, could not
be identified with any particular response action. We found instances
in which payment and voucher files contained no documentation. By not
maintaining the documentation required to support CERCLA costs
incurred, the validity of the costs could not be verified.
The Coast Guard mistakenly billed ERA and MS reimbursed $12,500 from
CERCLA funds ••epresentlng the cost of monitoring cleanup efforts for
two oil spills. These costs were ineligible for reimbursement under
CERCLA.
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Recommendations
We recommend that the Coast Guard:
1. Locate and retain the required documentation for the unsupported
costs. If the documentation .cannot be located, certifications
should be prepared and placed lin the case files attesting to the
validity of the claimed costs(and that they were incurred in the
performance of reimbursable CERCLA activities..
2. Implement procedures to retain(documentation for all CERCLA costs
incurred. The documentation should be kept in the applicable
CERCLA case files. If it is maintained with payment schedules or
voucher case files, there should be appropriate cross-referencing
to facilitate retrieval of the documentation.
i
3. Return the $12,500 to EPA on adjust future billings for the
ineligible costs reimbursed to the Coast Guard for monitoring the
cleanup of two oil spills.
4. Complete the billing to EPA of the remainder of the unbilled costs
identified during the audit $581,213.
5. Estatl-'s^ and implement procedures requiring the. timely oil ling of
all CERCLA costs (personnel and|0ther) to EPA. BiTlt'ngs should be
submitted to EPA no later th'an 30 days after the costs are
incurred and the lAGs approved. :
Management Response
The December 15, 1987 response to the draft report expressed agreement
with the audit finding and state|d that steps are being taken to
implement the recommendations. A copy of the response is attached as
an Appendix to this report.
Audit Comments
Although the response to the draft report concurred with the audit
finding, it did not state the specific actions taken or planned to
implement the recommendations.
III. ACTION REQUIRED
In accordance with DOT Order 8000.IB, please advise our office within
90 days of the specific actions taken or planned for each
recommendation.
-*-
Attachment
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PART IV
EXHIBITS
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EXHIBIT A
AUDIT OF SUPERFUM)
SlfWRY OF COSTS REVIEWED AND QUESTIONED
FISCAL YEARS 1984. 1985, AND 1986
Coast Guard Unit
Third Coast Quard District
Seventh Coast Guard District
Eighth Coast Guard District
Twelfth Coast Guard District
Atlantic Strike Team
Gulf Strike Team
Pacific Strike Team
Headquarters
Total
Total Cost
Reviewed
$ 80,544
64,553
82,033
59,290
723,214 a/
279,951 ~
982,047
1,908,000
Costs Questioned
unsupported
$ 32,358
5,500
5,115
-0-
371,010
104,106
-0-
-0-
UnbflJed
$ 10,352
6,777
14,902
-0-
396,432
130,759
890,072
-0-
$4,179,632
$ 518,089 b/ $1,449,294 £/ d/
NOTES;
a/ $12,500 of this amount Mas for oil spills and1 therefore, ineligible for reimbursement
"~ from the Super-fund.
b/ See Exhibit B for details. .
£/ Of this amount, $581,213.20 remains unbilled. See Exhibit B for details.
d/ A total of $193,025 was unsupported.
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AUDIT OF SUBFIIC1
SWDULEO7
UNBILLED COSTS
FISCAL YEARS 1994, 1985, AM) 1996
Case File Location
Ihlrd Coast feard District
260023 Lafayette, W
260025 East Brunswick, NJ
260052 Raritan Bay, NJ
260054 Belle Terre, NY
Subtotal
Seventh Coast Guard District
7P11404 MV Inootrans
Subtotal
Eighth Coast Sard District
Non-Incident Specific
60630314 Ouirrtano
2D136.85P Mustang/Padre Islands
20457.8SP Mustang/Padre Islands
20457.8SP Matagorda Islands
Subtotal
Qjlf Strike lean
Not Assigned Barge 263
Not Assigned MV Mjquoi
Not Assigned St. Louis, K>
Not Assigned FrlendSMOd, IX
02A014 Padrevttetang Islands
D2A014 PadreyHstang Islands
D2A014 Padre/totang Islands
Not Assigned Paducah, KY
055 Mercer, M
Not Assigned St. Louis, W
Hbt Assigned ftilffrrt, MS
Not Assigned MSMvyLee
EZ100 Clark Properly. WV
86-015 Swissvale, PA
86-036 Detroit, MI
86-029 Collins, MS
Total
$ 3,801.35
3,774.21
1,394.90
1,381.50
$ 10,351.96
$ 6,777.19
$ 6,777.19
$ 1,523.30
1,946.73
4,746.77
4,715.13
1,970.48
$ 14,902.41
6,103.52
27,459.00
1,394.50
483.00
11,845.50
7,344.00
1,056.00
8,838.00
10,262.00
4,988.80
464,00
8,473.50
2,047.50
11.111.10
17,487.75
11,410.67
IHrilled
Salaries
$ 0.00
418.14
91.00
214.50
S 723.64
$ 1,059.75
S 1,059.75
i
$ 0.00
1,152.00
4,482.00
4,537.50
1,864.50
$ 12,036103
0.00
27.459JOO
1,394.50
483.00
11,845.50
7,344.00
1,056.00
8,838. T
10,262.00
4,988.80
454.00
8,473,50
2.047.50
11.111.10
17,487.75
8,996.25
Costs
Other
t 3,801.35
3,356.07
1,303.90
1,167.03
$ 9,623.32
$ 5,717.44
$ 5,717.44
$ 1,523.30
794.73
264.77
177.63
105.98
$ 2,866.41
6,103.52
0.03
aoo
0.03
aoo
0.03
0.00
0.03
aoo
0.00
aoo
aoo
aoo
aco
aoo
2.414.42
DWIBITB
Page 1 of 2
Costs
I 3,801.35
1,281.95
1,394,90
.1,381.53
$ 7,859.71
Subtotal
$130,758.84
6,103.52
6.922.60
1,394.50
483.03
11,845.50
7,344.03
1,056.00
0.03
10,262.00
4,988.80
aoo
0.00
2,047.50
3,893.00
5,625.00
0.00
161,965.42
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BWBITB
Page 2 of 2
AUDIT OF SUPERRIP
i
SCHEDULE OF UBILJLH) COSTS ffcorttfnued)
FISCAL YEARS 1964. 1985. AM) 1986
Case F1Te Location
ftdftc Strike Team
Total
194
195
205
211
214
216
219
238
244
251
267
280
281
285
flOQ
aay
290
292
Bucada, MA
(ban
Samoa
Santa Fe Springs,
Brokings, SD
Escondido, CA
Anaheln, CA
Butte, NT
Everett, W
Toole city, ur
Salt Lake City, UT
Denver, CO
Butte, KT
Blackhwk, CO
tftndflBre, NO
Garden Valley, CA
Denver, CO
StAtotal
Total
$ 8,868.77
30,616.00
9,828.00
CA 15,878.00
7,194.95
4,746.24
38,000.00
139,569.99
73,566.72
17,753.00
13,201.56
14,963.00
32,017.00
4.015.00
1,272.80
5,481.18
1,450.59
$418,422.80
$581,213.20
Costs
salaries
$ 5.595.50
30,616.00
9,823.00
15,878.00
7,194.95
2,677.50
38,000.00
65,324.00
42,557.00
0.00
12,039.00
14,963.00
32,017.00
4,015.00
1,272.80
4,773.00
1,183.00
$267,938.75
$423,999.04
(Milled Costs
Jtot Snorted
$ 3,273.27
0.00
0.00
0.00
a oo
2,066.74
a oo
74,245.99
31,009.72
17,753.00
1,162.56
0.00
a oo
0.00
0.00
708.18
262.59
$130.484.05
$157,34.16
$ 69,825.13
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AUDIT OF SUPEREUND
SD€DU£ OF UNSUPPORTED
FISCAL YEARS 1964. 1985. AM 1966
DWIBITC
lof 3
Case File
Atlantic Strike T«
84-017
84-021
84-031
84-034
84-035
84-036
84-044
84-046
84-052
84-057
84-063
85-001
85-006
85-007
85-014
85-015
85-018
85-019
85-030
85-058
85-064
86-005
86-007
85-010
86-012
86-016
86417
86-030
86-033
Subtotal
Total Unsupported Cost Location
$ 690.00
26,400.49
912.00
37,952.67
1,050.00
5,684.45
19,519.78
27,801.39
232.60
2,643.60
2.691.06
30,735.44
17,237.89
42.00
4,262.14
7,23a91
8,339.41
20.885.64
21,646.40
10,410.28
17,923.37
19,776.04
21,050.54
8,498.69
14,022.45
544.00
1,682.00
35,871.12
5.274.00
Nitro, WV
Cape Cod, W
Sunapee, W
Bruin Lagoon, PA
feoretead City, NC
Beltsville, M)
Lewis tun, PA
Pittsburgh,PA
ColHer, PA
Perryville, »
HAto. PA
Mfnden, WV
Exk^stone, PA
Bedcltf, W
Punxsutatmey, PA
Pittsbur^, PA
Pottstowi, PA
Sprlngdale, PA
Scranton, PA
Pittsbur^i, PA
Roanoke, VA
Mil ford To«ship, PA
Ution Ton, PA
New Castle. OE
Bensalan, PA
fcrquette, MI
Pittsburgh, PA
Cheltenham, »
\ternon, NY
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EXHIBIT C
Page 2 of 3
AUDIT OF SUPERFUM
SCHEDULE OF UNSUPPORTED COSTS (continued)
FISCAL YEARS 1984. 1985. AND 1986
Case File
Gulf Strike Team
Not Assigned
Not Assigned
Not Assigned
Not Assigned
84-064
86-015
86-031
£2100
Not Assigned
Not Assigned
Not Assigned
Not Assigned
Not Assigned
Not Assigned
Not Assigned
Subtotal
Third Coast Guard District
260025
260023
260052
260054
Non-Incident Specific
Subtotal
Total UisupportPd r»ct Location
t 648.00
6,103.52
3,012.99
9,248.00
20,245.00
3,893.00
5,625.00
2,047.50
6,922.60
4,677.46
19,503.00
10.262.00
3,025.25
8,021.80
871.30
1104.106.42
a/
a/
?
a/
I/
I/
8
J 1.281.96 a/
3,801.35 a7
1,394.90 ?/
1.381.50 ?/
24.498.30
I32.358.0ll
Jacksonville, FL
Barge 263
Houston, TX
Otaha, NE
Padre/Matagorda Is., TX
Swissvale, PA
Detroit. MI
Charleston, HV
MVNuquen
Ohio River
New Orleans, LA
Mercer, PA
St. Louis, MO
St. Louis, MO
Frlendswood, TX
East Brunswick, NJ
Lafayette, PA
Rarltan Bay, NJ
Belle Terre, NY
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EXHIBIT C
Page 3 of 3
AUDIT OF SUPERFUND
SCHEDULE OF UNSUPPORTED COSTS (continued)
i
FISCAL YEARS 1964, 1985. and 1986
Case File
Seventh Coast Guard District
Non-Incident Specific
Subtotal
Eighth Coast Quard District
Non-Incident Specific
Subtotal
Total
Total Unsupported Cost Location
i ™i™"1•""••™•"•
$ S.SOOJOO N/A
$ 5.500.00
$ 5.114.77 N/A
$ S.114.77
$518.089.56
NOTES:
a/ These amounts are also unbilled.
b/ Includes unbilled costs of $6.866.30.
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PART V
APPENDIX
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APPENDIX
US Department
of Transportation
United Stat»s
Coast Guard
Memorandum
RESPONSE TO DOT-IG DRAFT AUDIT OF SUPEKFUND
ACTIVITIES (FY84 - FY66)
O~ Commandant, U. S. Coast Guard
1 5 DEC 1987
16465
B^,V „ 267-0426
».'-. Z A.R. THUIING
TO Inspector General
Hef: (a) DOT-IG nemo JA-20 of 26 OCT 97
1. Ve have reviewed this audit, and also: met with the audit team to discuss
their findings. The Coast Guard concurs with the audit findings and is taking
steps to implement; its recommendations.
R. E. :.... .;
Co,-:;' . v1.':. Coa:t Guard
Cep'Jty Ch.if cf Staff
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