UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20440
SEP 161967
MEMORANDUM
SUBJECT: Audit Report No. P5EH5-11-0034-71911
Consolidated Report 'of 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 19J33
OFFICE Of
THE INS*ECTO« GENERAL
FROM: Ernest E. Bradley 1..^
Assistant Inspector General for Audit (A-109)
TO: C. Morgan Klnghorn
Acting Assistant Administrator for Administration
and Resources Management (PM-208)
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 the U.S. Environmental Protection Agency
(EPA) 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 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
expedltlously considered. Audit procedures were performed to determine
1f the costs to administer Superfund were "necessary for" and "Incidental
to" the Implementation of CERCLA [section lll(a)]. As part of the audit,
the CPA made a study and evaluation of the system of Internal accounting
controls 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.
*"*'
401 M Streat, S.W.
Washington. DO 80400
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The audit was performed in accordance with generally accepted auditing
standards and the Standards for Audit of Governmental Organizations^
Programs. Activities, and Functions (1981 revision) promulgated fay the
U.S. Comptroller General.The CPA1 s examination included tests of the
accounting records of the 10 regional offices, 3 major laboratory
facilities, the National Enforcement Investigation Center (NEIC) and EPA
Headquarters; evaluations of Internal accounting controls; and such other
auditing procedures as were considered necessary in the circumstances.
Audit exit conferences were held with responsible Agency officials at each
audit location where the CPA performed work. The purpose of the exit con-
ferences was to present the findings and recommendations and to ensure a
clear understanding of the audit by Agency management. Component audit
reports were issued to the appropriate EPA "Action Officials" for review
and to solicit written comments on the report material* EPA's Action
Officials were in general agreement with the findings and recommendations
presented in the component audit reports, except as indicated in the
Findings and Recommendations section of this report. This report represents
a consolidation of the information and findings presented in the component
audits at the above locations.
SUMMARY OF AUDIT RESULTS
The CPA found that improvements had been made in the overall implementation
of Agency guidance to account for Superfund costs. However, the CPA also
noted that compliance with existing policies and procedures still needed
to be improved and additional controls needed to be developed to ensure
accurate accounting for the Superfund program.
EPA obligated $424,824,942 and disbursed $255,167,353 from Superfund
during the fiscal year ended September 30, 1984. During the fiscal year
ended September 30, 1983, Superfund obligations were $213,460,419 and
disbursements were $145,111,944. For both fiscal years combined, the CPA
set aside $19,536,711 and questioned $1,149,127 of obligations and
disbursements.
The set-aside and questioned costs resulted from: insufficient documenta-
tion to ensure that contract disbursements were charged to the proper
appropriation; lack of compliance with Superfund charging policies for
Personnel Compensation and Benefits; Inadequate documentation for
Superfund obligations and disbursements; and Improper cost allocations of
support services. The audit further disclosed the Improvements needed to
be made In the areas of: property management; letter of credit accounting;
taking and recording cash discounts; and recording of CERCLA Trust Fund
receivables. The findings are presented 1n detail 1n the Findings and
Recommendations and Exhibits sections of the attached report.
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I
.1
AND RESOURCES MANAGEMENT'S COMMENTS ON FINDINGS
The Office of Administration and Resources Management (OARM) provided us
with formal written comments on our draft report in a memorandum dated
July 29, 1987. The Acting Assistant Administrator, OARM generally concurred
with the findings and recommendations, except as noted in the Findings
and Recommendations section of this report, and indicated that corrective
actions were taken or were planned to resolve the issues cited in the report,
The CPA concluded that OARM's comments were generally responsive to the
findings and recommendations. To provide a balanced understanding of the
Issues, the CPA has summarized OARM's position at appropriate locations
in the report and included the complete response as appendix I.
ACTION REQUIRED
EPA Directive 2750 requires the Action Official to provide us with a
written response to our audit findings and recommendations within 90 days
of the audit report date. Your written response to the draft report
included an acceptable corrective action plan with specific milestone
dates for completion. However, as of September 11, 1987, you had failed
to meet some of the milestone dates specified. Accordingly, we request
that you provide us with a current status report of dates and actions
accomplished and revised realistic milestone dates for the Implementation
of uncompleted actions.
Should your staff have any questions, please have them contact Kenneth D,
Hockman, Divisional Inspector General for Audit, on 382-4930.
Attachments
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
CONSOLIDATED
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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DISTRIBUTION
Copies
A. Office of Inspector General (A-109) 15
Inspector General (1)
Deputy Inspector General (1)
Assistant Inspector General
for Audit (1)
Divisional Inspector General
for Audit - All Divisions {6}
Director, Audit Operations Staff (4)
Chief, Program Analysis Unit (2)
B. Regional Office
Regional Administrator, Regions 1 through 10 (2 each) 20
C. Headquarters Office
Associate Administrator for Regional Operations (A-101) 2
Assistant Administrator for Administration and
Resources Management (PM-208) 2
Director, Office of Administration (PM-217) 1
Director, Facilities Management and Services Division 1
Director, Procurement and Contracts Management
Division (PM-214) 1
Director, Office of Administration and Resources
Management - RTP (MD-20) 2
Director, Fanancial Management Division - RTP (MD-32) 1
Director, Office of Administration - Cincinnati 1
Comptroller, Office of the Comptroller (PM-225) 1
Director, Financial Management Division (PM-226) 1
Chief, Superfund Accounting Branch, FMD (PM-226) 1
Financial Management Officer, Cincinnati
Financial Management Center 1
Financial Management Officer, Las Vegas Accounting
Operations Office 1
Assistant Administrator for Enforcement and
Compliance Monitoring (LE-133) 2
Director, National Enforcement Investigations Center,
Denver • 1
Assistant Administrator for Solid Waste and
Emergency Response (UH-562A) 2
Director, Office of Waste Programs Enforcement,
OSWER (WH-527) 1
Director, Office of Emergency and Remedial Response
(Superfund), OSWER (UH-548) 1
Assistant Administrator for Research and Development
(RD-672) 2
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
CONSOLIDATED
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 AUDIT RESULTS 2
SUMMARY OF FINDINGS 3
BACKGROUND 7
OF OBLIGATIONS
.. . -
AND STATEMENTS OF DISBURSEMENTS 8
AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE 10
FINDINGS AND RECOMMENDATIONS
FISCAL ACCOUNTABILITY
1. CONTRACT DISBURSEMENTS SHOULD BE CHARGED TO
THE PROPER APPROPRIATION 13
2. COMPLIANCE WITH SUPERFUND CHARGING POLICIES
FOR PERSONNEL COMPENSATION AND BENEFITS
NEEDED IMPROVEMENT 16
3. IMPLEMENTATION OF PROCEDURES FOR ALLOCATION
OF REGIONAL SUPPORT SERVICES COSTS NEEDED
IMPROVEMENT 21
A. DOCUMENTATION FOR SUPERFUND TRANSACTIONS
SHOULD BE IMPROVED 24
OTHER AREAS REQUIRING MANAGEMENT ATTENTION
5. PERSONAL PROPERTY MANAGEMENT PROCEDURES
SHOULD BE STRENGTHENED 29
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TABLE OF CONTENTS (CONTINUED)
PAGE
8.
EXHIBITS
LETTER OF CREDIT ACCOUNTING PROCEDURES NEEDED
IMPROVEMENT
COST EFFECTIVE DISCOUNTS SHOULD BE TAKEN OR
RECORDED AS LOST
CERCLA TRUST FUND RECEIVABLES SHOULD BE RECORD-
ED TIMELY
EXHIBIT I:
EXHIBIT II:
EXHIBIT Ills
EXHIBIT IV:
EXHIBIT V:
EXHIBIT VI:
SCHEDULES
SCHEDULE Is
SCHEDULE II:
SCHEDULE III:
SCHEDULE IV:
SCHEDULE V:
34
36
39
STATEMENT OF OBLIGATIONS, FISCAL YEAR
ENDED SEPTEMBER 30, 1984
STATEMENT OF DISBURSEMENTS, FISCAL YEAR
ENDED SEPTEMBER 30, 1984
NOTES TO STATEMENTS OF OBLIGATIONS AND
DISBURSEMENTS, FISCAL YEAR ENDED
SEPTEMBER 30, 1984
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
SCHEDULE OF PERSONNEL COMPENSATION AND
FRINGE BENEFITS, FISCAL YEAR ENDED
SEPTEMBER 30, 1984
SCHEDULE OF TRAVEL AND TRANSPORTATION
OF PERSONS AND THINGS, FISCAL YEAR
ENDED SEPTEMBER 30, 1984
SCHEDULE OF RENT, COMMUNICATIONS AND
UTILITIES, FISCAL YEAR ENDED
SEPTEMBER 30, 1984
SCHEDULE OF PRINTING AND REPRODUCTION,
FISCAL YEAR ENDED SEPTEMBER 30, 1985
SCHEDULE OF OTHER CONTRACTUAL SERVICES,
FISCAL YEAR ENDED SEPTEMBER 30, 1984
42
43
44
49
50
51
55
56
57
58
59
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TABLE OF CONTENTS (CONTINUED)
PAGE
SCHEDULES
SCHEDULE VI:
SCHEDULE VII:
SCHEDULE VIII:
SCHEDULE IX:
SCHEDULE X:
SCHEDULE XI:
SCHEDULE XII:
SCHEDULE XIII:
APPENDIX
APPENDIX 1:
SCHEDULE OF SUPPLIES, MATERIALS AND
EQUIPMENT, FISCAL YEAR ENDED
SEPTEMBER 30, 1984 60
SCHEDULE OF GRANTS, SUBSIDIES AND CON-
TRIBUTIONS, FISCAL YEAR ENDED
SEPTEMBER 30, 1984 61
SCHEDULE OF PERSONNEL COMPENSATION AND
FRINGE BENEFITS, FISCAL YEAR ENDED
SEPTEMBER 30, 1983 62
SCHEDULE OF TRAVEL AND TRANSPORTATION
OF PERSONS AND THINGS, FISCAL YEAR
ENDED SEPTEMBER 30, 1983 63
SCHEDULE OF RENT, COMMUNICATIONS AND
UTILITIES, FISCAL YEAR ENDED
SEPTEMBER 30, 1983 64
SCHEDULE OF PRINTING AND REPRODUCTION,
FISCAL YEAR ENDED SEPTEMBER 30, 1983 65
SCHEDULE OF OTHER CONTRACTUAL SERVICES,
FISCAL YEAR ENDED SEPTEMBER 30, 1983 66
SCHEDULE OF SUPPLIES, MATERIALS AND
EQUIPMENT, FISCAL YEAR ENDED
SEPTEMBER 30, 1983 67
OFFICE OF ADMINISTRATION AND RESOURCES
MANAGEMENT'S RESPONSE TO DRAFT AUDIT
REPORT 68
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UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, B.C.
CONSOLIDATED
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) for the
fiscal years ended September 30, 1984 and 1983. Superfund was
established under the Comprehensive Environmental Response, Com-
pensation, and Liability Act of 1980 (CERCLA). CERCLA [section
lll(k)] states that the Inspector General shall audit as appro-
priate all payments, obligations, reimbursements, or other uses
of Superfund to assure that Superfund is being properly adminis-
tered 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 "inci-
dental to" the implementation of CERCLA [section 111(a)]. Con-
tract, grant, and interagency agreement costs were examined only
to the extent necessary to determine if valid obligation and dis-
bursement transactions were properly recorded and records were
properly maintained. Audits of contracts, grants, and interagen-
cy 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 ob-
ligated and disbursed under the Superfund 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 Governmental
Organizations. Programs, Activities, and Functions (1981 re-
vision)'promulgated by the U. S. Comptroller General. Our ex-
amination included tests of the accounting records of the 10 re-
fional offices, 3 major laboratory facilities, the National En-
orcement Investigation Center (NEIC) and EPA Headquarters; eval-
uations of internal accounting controls» and such other auditing
procedures as we considered necessary in the circumstances. This
report represents a consolidation of the information and findings
presented in the component audits at the above locations. The
recommendations developed during each component audit were pre-
viously discussed with and provided to appropriate responsible
Agency officials for comment. Audit fieldwork was performed from
January 14, 1985 through May 30, 1985.
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SCOPE AND OBJECTIVES (CONTINUED)
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;
(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 AUDIT RESULTS
We found that improvement had been made in the overall implemen-
tation of Agency guidance to account for Superfund costs. How-
ever, we also noted that compliance with existing policies and
procedures still needed to be improved and additional controls
needed to be developed to ensure accurate accounting for the
Superfund program.
EPA obligated $424,824,942 and disbursed $255,167,353 from Super-
fund during the fiscal year ended September 30, 1984. During the
fiscal year ended September 30, 1983, Superfund obligations were
$213,460,419 and disbursements were $145,111,944. For both fis-
cal years combined, we set aside $19,536,711 and questioned
$1,149,127 of obligations and disbursements.
The set-aside and questioned costs resulted from: insufficient
documentation to ensure that contract disbursements were charged
to the proper appropriation} lack of compliance with Superfund
charging policies for Personnel Compensation and Benefits (PC&B);
inadequate documentation for Superfund obligations and disburse-
ments; and improper cost allocations of support services. Our
audit further disclosed that improvements needed to be made in
the areas of: property management; letter of credit accounting;
taking and recording cash discounts; and recording of CERCLA
Trust Fund receivables. Our findings are summarized below and
presented in detail in the Findings and Recommendations and
Exhibits.
FINANCIAL RESULTS OF AUDIT
Questioned and set-aside costs are summarized below and detailed
in the Exhibits, Notes, and Schedules.
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SUMMARY OF AUDIT RESULTS (CONTINUED)
FY 1984 Obligations
FY 1984 Disbursements
Totals
Set-aside Costs
$ 2,473,690
4.802.917
$ 7.276.607
Questioned Costs
$ 310.312
(137,885)
$ 172,427
FY 1983 Obligations
FY 1983 Disbursements
Totals
$ 4,557,940
7.702.164
$12.260.104
$ (984)
977.684
Grand Totals
$19.536.711
$1.149.127
Questioned costs represent costs that are unallowable under
the provisions of applicable laws, regulations, policies, or
program guidelines. Negative questioned costs are costs
that are allowable under the provisions of applicable laws, .
regulations, policies, or program guidelines; however, were
not charged to the program. Set-aside costs are costs that
cannot be accepted without additional information or eval-
uations and approvals by responsible Agency program offi-
cials.
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: implementation of Agency guidance in recording Personnel
Compensation and Benefits (PC&B); allocations of support ser-
vices; control over contract disbursements; recording payments
(drawdowns) on letters of credit under cooperative agreements;
discounts lost; and property management. Our review disclosed
that improvements still needed to be made in all the areas
identified as weaknesses in the prior audit report, as indicated
in the Findings and Recommendations.
SUMMARY OF FINDINGS
FISCAL ACCOUNTABILITY
1. CONTRACT DISBURSEMENTS SHOULD BE CHARGED TO THE PROPER APPRO-
PRIATION
Our review of contract disbursement transactions processed by the
Financial Management Offices (FMOs) at Research Triangle Park
(RTP), Cincinnati, and Las Vegas disclosed that the supporting
documentation often did not contain sufficient information to
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SUMMARY OF FINDINGS (CONTINUED)
ensure the correct distribution of costs to the benefiting appro-
priations. Primarily, the contracts involved were level-of-ef-
fort type contracts funded by multiple appropriations or program
elements within appropriations. These contracts generally pro-
vided for specific work assignments that should be directly
linked to the funding sources (appropriations and program ele-
ments). Disbursements should have been identified by project
officers to specific appropriations, accounts, or work assignment
numbers, then entered into the Financial Management System (FMS)
by the FMOs, based on the project officers' instructions.
In the exceptions noted, work assignments were either: (1) not
sufficiently identified in the contracts; (2) not adequately ref-
erenced to costs billed on contractor vouchers; (3) not provided
by the project officers to identify the relationship to costs
vouchered; or (4) not utilized by the FMOs in costing disburse-
ments. Instead, disbursements were sometimes entered into the
FMS based upon: first appropriation-in/first appropriation-out
basis; one-year appropriated funds liquidated before multi-year
appropriations; or available source of funds basis.
It is extremely important that costs be charged to the correct
appropriations and accounts to avoid potential violation of pub-
lic law and congressional requirements. In addition, because of
the cost recovery provisions of the Superfund program, it Is es-
sential that costs be accumulated properly to ensure recovery of
costs through litigation.
2. COMPLIANCE WITH SUPERFUND CHARGING POLICIES FOR PERSONNEL
COMPENSATION AND BENEFITS NEEDED IMPROVEMENT
Our audit of personnel compensation and benefits (PC&B) indicated
that there were potential errors in the total recorded PC&B at
Regions 1, 3 and 4. In addition, we noted specific errors in
transactions at Regions 1, 2, 3, 4 and NEIC and missing or inade-
quate documentation at Headquarters and Las Vegas. The con-
ditions that caused the set-aside and questioned costs were:
hours recorded in the payroll distribution records that did not
agree with the supporting documentation [timesheets, time and
attendance (T&A) reports]; errors or omissions of hours and ac-
count numbers from timesheets and/or T&A reports; and missing or
inadequate documentation (timesheets, T&A reports, supervisory
signatures, overtime approval forms). These conditions resulted
from program offices not complying with Superfund charging pol-
icies for PC&B and the failure of management to properly monitor
PC&B charges. The majority of errors could have been corrected
if the responsible Allowance Holders had required the review and
reconciliation of the payroll distribution records with the sup-
porting documentation, as required by EPA's Timekeeping Manual.
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SUMMARY OF FINDINGS (CONTINUED)
A similar finding was previously reported in Che fiscal 1982 au-
dit report. Although we noted improvement in the overall Agency
compliance with Superfund charging policies for PC&B, the lack of
compliance by the regional and program offices noted in this
finding resulted in questionable charging of PC&B costs to Super-
fund. The failure to effectively implement policies for PC&B
costs also affects the accurate allocation of support services
costs in these Regions, which are based upon the ratio of Super-
fund PC&B costs to total PC&B costs. Also, the failure to accu-
rately record PC&B costs could adversely affect cost recovery
actions.
3. IMPLEMENTATION OF PROCEDURES FOR ALLOCATION OF REGIONAL SUP-
PORT SERVICES COSTS NEEDED IMPROVEMENT
During our review of cost allocations, we noted improper methods
of allocating regional support services costs. We set aside and
questioned costs resulting from: disbursements charged to object
class accounts which were not in Region 1's cost allocation plan;
missing documentation supporting Region 1's allocations for one
quarter of fiscal 1983; an improper method of calculating cost
allocations using estimates for fiscal 1983 at Region 4; and Re-
gion 4 not adjusting fiscal 1984 calculations to reflect the ac-
tual full-time equivalent (FTE) percentage. Regional personnel
cited year-end workloads and budgetary restrictions as reasons
for not making final adjustments. Region 1 officials indicated
that they did not believe modifications of their cost allocation
plan required approval. As a result of the above conditions, the
allocations of regional support services costs to the Superfund
program did not accurately reflect the benefits received by the
program.
4. DOCUMENTATION FOR SUPERFUND TRANSACTIONS SHOULD BE IMPROVED
Our audit disclosed that documentation for Superfund transactions
needed to be improved. We noted that documentation was not
available or that the available documentation did not contain
sufficient information to justify charging the Superfund program.
The primary reasons for missing documentation were deficiencies
in regional record retention systems. The lack of written justi-
fication was due to program offices not providing complete infor-
mation on obligating documents to evidence the need for charging
Superfund. Regional personnel indicated that there was a lack of
Agency guidance on specific requirements for written justifica-
tion. The failure to maintain proper supporting documentation or
provide sufficient written justification of obligations and dis-
bursements precludes assurance that charges to Superfund were
"necessary for" and "incidental to" the implementation of the
program, as required by CERCLA, Section 111(a).
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SUMMARY OF FINDINGS (CONTINUED)
OTHER AREAS REQUIRING MANAGEMENT ATTENTION
Our audit also disclosed that Superfund personal property manage-
ment procedures should be strengthened, letter of credit account-
ing procedures needed improvement, cost effective discounts
should be taken or recorded as lost and Trust Fund receivables
should be recorded timely.
OFFICE OF ADMINISTRATION AND RESOURCES MANAGEMENT'S COMMENTS ON
FINDINGS AND OUR EVALUATION
Audit exit conferences were held with responsible Agency offi-
cials at the 10 regional offices, 3 major laboratory facilities,
National Enforcement Investigation Center (NEIC) and EPA Head-
quarters at the conclusion of fieldwork at each audit location.
The purpose of the exit conferences was to present the findings
and recommendations and to ensure a clear understanding of the
audit by Agency management. Component audit reports were issued
to the appropriate EPA "Action Officials" for review and to so-
licit written comments on the report material. EPA's Action Of-
ficials were in general agreement with the findings and recommen-.
dations presented in the component audit reports, except as in-
dicated in the Findings and Recommendations section of this re-
port.
In addition, the Office of Administration and Resources Manage-
ment (OARM) provided us with formal written comments on our draft
report in a memorandum dated July 29, 1987. The Acting Assistant
Administrator of OARM generally concurred with our findings and
recommendations, except as noted in the Findings and Recommenda-
tions section of this report, and indicated that corrective
actions were taken or were planned to resolve the issues cited in
the report. We concluded that 0ARM'S comments were generally
responsive to our findings and recommendations. To provide a
balanced understanding of the issues, we summarized OARM'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 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 Super fund 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 co-
operative 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 assurance required by Section 104(c)(3)
of CERCLA: (1) cost-sharing (10 percent of remedial action, ex-
cept for 50 percent or more of all response costs if the site was
publicly owned); (2) availability of an acceptable disposal fa-
cility, if needed; and (3) provision for all required future
maintenance of the remedy.
Section III(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 III(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
OIRTintn PUBLIC ACCOUNTANTS
THE SUMMIT. SUITE 200
4.150 BROWNSBORO KOAI)
LOUISVILLE. KENTUCKY 40207
(502) X
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AUDITORS' REPORT ON STATEMENTS OF OBLIGATIONS AND
STATEMENTS QF DISBURSEMENTS
.
ports , dated September 30, 1984 and 1983). These statements are
not intended to present either the financial position or the
financial results of operations in conformity with generally ac-
cepted accounting principles, in that allowable costs and ac-
counting policies and practices are legislatively established and
•promulgated through various Federal and EPA policy and procedural
standards.
In our opinion, except for the effects of such adjustments, if
any, as might have been necessary had we been able to determine
the allowability of contract, grant, and interagency agreement
costs in accordance with applicable Federal regulations and the
terms of specific contracts, grants, and interagency agreements,
and subject to the effects of such adjustments, if any, resulting
from EPA' s ultimate resolution of the questioned and set-aside
costs discussed in the third paragraph, the Statements of Obliga-
tions and the Statements of Disbursements present fairly the fi-
nancial information in accordance with applicable Federal laws,
regulations, policies, and program guidelines for the fiscal
years ended September 30, 1984 and 1983.
This report is intended for use in connection with the statements
to which it refers and should not be used for any other purpose.
TICHENOR, RESLER & EICHE
Louisville, Kentucky
May 30, 1985
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TICHENOR, RESLER & EICHE
CERTIFIED PUBLIC ACXOUNTANIS
THl; SUMMIT. SUITE 200
4350 HROWNSIIOKO ROAD
I.OUISVH.I.C. KENTUCKY 40207
(502) 89) -0700
Mr. Ernest E. Bradley III
Assistant Inspector General for Audit
Office of Inspector General
U.S. Environmental Protection Agency
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) portion of the Hazardous Substance Response Trust Fund (Su-
per fund) for the fiscal years ended September 30, 1984 and 1983,
and we have issued our Auditors' Report thereon, dated May 30,
1985. As part of our examination, we made a study and evaluation
of EPA's Superfund system of internal accounting control to the
extent we considered necessary to evaluate the" system as required
by generally accepted auditing standards and the standards for
financial and compliance audits contained in the U.S. General
Accounting Office Standards for Audit of Governmental Organiza-
tions, Programs. Activities, and Functions (1981 revision). For
the purpose of this report, we have classified the significant
internal accounting controls into the following transaction cat-
egories:
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
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
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AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE (CONTINUED!
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's
portion of Superfund taken as a whole or on any of the categories
of control identified in the first paragraph. However, our study
and evaluation disclosed the following conditions that we believe
result in more than a relatively low risk of errors or irregular-
ities in amounts that would be material in relation to the State-
ments of Obligations and the Statements of Disbursements may oc-
cur and not be detected within a timely period:
0 Contract disbursements were not always charged to the
proper appropriation.
0 Lack of compliance with Superfund charging policies for
personnel compensation and benefits.
0 Inadequate documentation for Superfund obligation and
disbursement transactions.
0 Unsupported or improper cost allocations of support
services costs.
In addition, our audit disclosed the following weaknesses, which
are not considered material in relation to the Statements of
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AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
"AND COMPLIANCE (CONTINUED)
Obligations and the Statements of Disbursements, however are con-
sidered significant findings that warrant the attention of man-
agement:
0 Implementation and development of property management
controls needed strengthening.
0 Letter of credit accounting procedures needed improve-
ment.
0 Cash discounts should be taken or recorded as lost.
0 CERCLA Trust Fund receivables should be recorded in a
timely manner.
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 these statements, dated May 30, 1985.
The U.S. Environmental Protect ion Agency Hazardous Substance Re-
sponse Trust Fund Audit Guide, (revised February 22, 1985) re-
quires a review and evaluat ion of the adequacy of the internal
accounting controls of EPA's portion of Super fund as a basis for
reliance thereon and for the determination of the resultant ex-
tent of the tests to which auditing procedures are to be re-
stricted. The audit guide also requires a review of CERCLA, oth-
er 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 com-
plied with the provision of CERCLA, other regulations, policies,
and guidelines, except for the conditions described in the Find-
ings 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 had not
complied with the provisions of CERCLA, other regulations, pol-
icies, and guidelines referred to above, beyond the conditions
described in the Findings and Recommendations.
This report is intended solely for the use of EPA management and
should not be used for any other purpose.
TICHENOR, RESLER & EICHE
Louis vi lie, Kentucky
Hay 30, 1985
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FINDINGS AND RECOMMENDATIONS
FISCAL ACCOUNTABILITY
1. CONTRACT DISBURSEMENTS SHOULD BE CHARGED TO THE PROPER APPRO-
PRIATION
Our review of contract disbursement transactions processed by the
Financial Management Offices (FMOs) at Research Triangle Park
(RTP), Cincinnati, and Las Vegas disclosed that the supporting
documentation often did not contain sufficient information to
ensure the correct distribution of costs to the benefiting ap-
propriations. Primarily, the contracts involved were lev-
el-of-effort type contracts funded by multiple appropriations or
program elements within appropriations. .These contracts general-
ly provided for specific work assignments that should be directly
linked to the funding sources (appropriations and program ele-
ments). Disbursements should have been identified by project
officers to specific appropriations, accounts, or work assignment
numbers, then entered into the Financial Management System (FMS)
by the FMOs, based on the project officers' instructions.
We questioned $735,300 and set aside $3,213,514 of contract dis-
bursements for fiscal 1983 and questioned ($660,683) and
set aside $2,288,030 for fiscal 1984. In addition, we questioned
($20,334) and $52,004 of obligations in fiscal years 1983 and
1984, respectively, relating to the questioned disbursements.
Also, we noted that, from the 1982 consolidated audit report
which set aside $33,440,839 of obligations, $4,885,824 of related
disbursements remained set aside and $143,087 were questioned.
The set-aside and questioned contract obligations and disburse-
ments resulted from transactions for which the supporting docu-
mentation did not contain sufficient information to determine the
proper distribution of costs.
In the exceptions noted, work assignments were either: (1) not
sufficiently identified in the contracts; (2) not adequately re-
ferenced to costs billed on contractor vouchers; (3) not provided
by the project officers to identify the relationship to costs
voucheredj or (4) not utilized by the FMOs in costing disburse-
ments. Instead, disbursements were sometimes entered into the
FMS based upon: first appropriation-in/first appropriation-out
basis; one year appropriated funds liquidated before multi-year
appropriations; or available source of funds basis.
A finding regarding costing of disbursements was reported in the
prior audit reports for RTP, Cincinnati, and Las Vegas and in the
consolidated audit report for fiscal 1982. As a result, on
March 31, 1983, a policy memorandum was issued which required
contracts to identify specific work assignments or tasks within
each appropriation and required contractors to identify vouchered
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
costs accordingly. This policy was applicable Co all new con-
tracts and modifications of existing contracts.
Effective April 1, 1984, the Contracts Management Manual, Chapter
9, established policies and procedures to ensure proper account-
ing for appropriations in contracts awarded after April 1, 1984.
The policy generally stated that each contract be funded from
only one appropriation. The new policy also provided procedures
for those contracts that benefit more than one appropriation;
required provisions in contracts that require the contractor to
voucher costs by work assignment; and required the project offi-
cer to provide the basis for the servicing FMO to charge
vouchered costs. However, efforts by the FMOs to implement these
policies were not completely successful because of previous
costing actions on existing contracts; inability to require
contractors to provide breakdowns of vouchered cost* because of
existing contract provisions; or the project officers not
providing the necessary information to link the vouchered costs
to work assignments identified in the contracts.
Our review of contract disbursements processed by the FMOs at.
RTF, Cincinnati, and Las Vegas originally included tests of all
disbursement transactions of $150,000 or greater that were
charged to Superfund. In addition, we examined samples of 40
transactions from each fiscal year at each FMO. During our ex-
amination of the original samples, we noted various inconsisten-
cies in charging disbursements and lack of documentation in the
contract payment files. In an effort to resolve substantial pre-
liminary set-aside costs, we expanded our scope on 15 contracts
in fiscal 1984 and 25 contracts in fiscal 1983 where we noted
questionable charging of disbursements.
The questioned and set-aside costs were reduced substantially
from our preliminary finding as a result of the efforts of EPA
officials in providing additional documentation and justification
available within the Agency or from contractors outside the Agen-
cy. An explanation of the specific reasons for the questioned
and set-aside costs contained in this finding was provided in
detail by contract in the Notes to the Statements of Obligations
and Disbursements in the Headquarters and RTF audit reports. The
responsibility for responding to and resolving the questioned and
set-aside costs was accepted by the Director, Office of Adminis-
tration and Resources Management, RTF, and the Financial Manage-
ment Officer at RTF. In response to our RTF draft report, the
Director, Office of Administration and Resources Management, RTF
indicated that efforts to obtain additional documentation and
justification to resolve the questioned and set-aside costs were
continuing.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
In response to the Headquarters report, EPA's Comptroller stated
that prior errors were identified and adjusted and that new pro-
cedures were implemented to assure these types of errors do not
occur in the future. In addition, an independent CPA firm has
completed a review and analysis of disbursements charged to the
Superfund appropriation for fiscal 1985. On January 29, 1987, we
received copies of the final reports issued by the independent
CPA firm.
It is extremely important that costs be charged to the correct
appropriations and accounts to avoid potential violation of pub-
lic law and congressional requirements. Because of the cost re-
covery provisions of CERCLA, it 'is important that costs are pro-
perly accumulated in the Financial Management System. The cost-
ing of disbursements to the proper appropriation is essential to
the effective accumulation of costs to be recovered in cost re-
covery actions. The proper costing of disbursements to the ap-
propriate account number is the basis for accumulating site-
specific costs, which are recoverable in cost recovery actions.
As a result of the our audit finding, which was discussed with
EPA officials at the RTF exit conference, EPA's Comptroller and
the Director, Office of Administration, Headquarters prepared a
memorandum, effective Hay 14, 1985, that provided new procedures
for identifying contract costs. We believe that when these pro-
cedures are implemented, substantial steps will have been taken
to correct the cause of this finding and prevent it from recur-
ring in the future.
CORRECTIVE ACTION TAKEN
We recommended in our draft report that Agency offices implement
and monitor the effectiveness of new procedures for identifying
contract costs and properly recording Superfund disbursements in
the Financial Management System. The Acting Assistant Adminis-
trator of the Office of Administration and Resources Management
(OARM) stated in response to our recommendation:
0 The new procedures, effective May 14, 1985, requiring
program offices Co identify the distribution of multi-
ple appropriations prior to contract obligation and
requiring project officers to provide the servicing fi-
nance office with the costing distribution at the time
of disbursement were clarified for EPA program offices
on June 1, 1987 by the Directors of Procurement and
Contracts Management Division (PCMD) and Financial
Management Division (FMD). Subsequent reviews by the
U.S. General Accounting Office (GAO) and an independent
CPA firm in 1986 confirmed that the project officer
approval process does provide FMD with the required
costing data.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
0 In April 1985, FMD-Research Triangle Park entered into
a contract with an independent CPA firm to reconcile
all open contracts funded from multiple appropriations.
This project was completed on September 9, 1986.
0 FMD is requiring those contractors with site-specific
costs prior to October 1985 to provide reconciled costs
by site and appropriation for input into the Financial
Management System. This project is scheduled to be
completed by December 1987.
0 FMD has included a section on financial management of
contracts in the Resources Management Directives System
2550 D, "Financial Management of the Super fund Pro-
gram." This document is currently in draft form and is
targeted for release by September 30, 1987.
• FMD's transaction testing program reviews contract dis-
bursements as part of its annual review program of fi-
nancial controls to ensure the integrity of all Super-
fund transactions.
In response to the audit findings, the Acting Assistant Adminis-
trator of OARM stated that PCMD will emphasize the importance of
ensuring that Agency contracting and program personnel recognize
the need to record the proper allocation of funds in accordance
with these procedures. This emphasis will be accomplished
through orientation workshops for Superfund contract specialists
and seminars on procurement subjects highlighting new or changed
regulation or policies. In addition, PCMD requires program
offices to nominate trained and certified individuals to serve as
project officers, who are required to complete two training
courses which include the subject of multiple appropriations.
The corrective action taken and the proposed action is responsive
to our recommendation and, consequently, we make no further rec-
ommendations.
2. COMPLIANCE WITH SUPERFUND CHARGING POLICIES FOR PERSONNEL
COMPENSATION AND BENEFITS NEEDED IMPROVEMENT
We set aside $2,311,419 and $2,307,315 of Personnel Compensation
and Benefits (PC&B) obligations and disbursements, respectively,
in fiscal 1984. We set aside $4,328,422 and $4.328,168 of PC&B
obligations and disbursements, respectively, in fiscal 1983. In
addition, we questioned $(3,967) and $(4,467) of PC&B obligations
and disbursements, respectively, in fiscal 1984. We also ques-
tioned $11,457 of PC&B obligations and disbursements in fiscal
1983.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
The set-aside costs resulted primarily from analyses of our sta-
tistical samples of PC&B transactions at Regions 1, 3, and 4,
which indicated that the potential error in the recorded PC&B was
not within an acceptable range. As a result, we set aside the
total PC&B recorded at Regions 1 and 4 in fiscal 1983 and Region
3 in fiscal 1984, pending further review by appropriate Agency
officials. In addition, we set aside specific transactions in
our statistical samples which may not have been properly
recorded. The set-aside costs at Headquarters resulted from
missing timesheets supporting PC&B costs for the Office of Waste
Programs Enforcement (OWPE) in fiscal 1983, and from an
inadequately supported adjustment to PC&B at the Las Vegas
Environmental Monitoring Systems Laboratory (EMSL). The
questioned costs resulted from specific instances noted in our
statistical and non-statistical samples at Regions 2, 3, NEIC,
and Headquarters (Las Vegas) where PC&B charges were in error,
resulting in overcharges and undercharges to Superfund. (See
Exhibits I through VI and Schedules I and VIII for additional
details).
The conditions that caused the set-aside and questioned costs
were: hours recorded in the payroll distribution records that
did not agree with the supporting documentation [timesheets, time
and attendance (T&A) reports]; errors or omissions of hours and
account numbers from timesheets and/or T&A reports; and missing
or inadequate documentation (timesheets, T&A reports, supervisory
signatures, overtime approval forms). These conditions resulted
from program offices not complying with Superfund charging pol-
icies for PC&B and the failure of management to properly monitor
PC&B charges. The majority of errors could have been corrected
if the Allowance Holders had required the review and
reconciliation of the payroll distribution records with the
supporting documentation, as required by EFA's Timekeeping
Manual.
A similar finding was previously reported in the fiscal 1982 au-
dit report. Although we noted improvement in the overall Agency
compliance with Superfund charging policies for PC&B, the lack of
compliance by regional and Headquarters program offices noted in
' this finding resulted in questionable charging of PC&B costs to
Superfund. The Agency's inability to effectively implement pol-
icies for PC&B costs also affects the accurate allocation of sup-
port services costs in these Regions, which are based upon the
ratio of Superfund PC&B costs to total PC&B costs. Also, the
failure to accurately record PC&B costs could adversely affect
cost recovery actions.
PC&B May Be Materially Misstated At Regions 1,3. and 4
Based upon our analyses of random statistical samples at each
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
audit location, we set aside the total PC&B costs for Regions 1
and 4 in fiscal 1983 and Region 3 in fiscal 1984. These
set-aside costs, amounted to $2,823,317 and $2,823,063 of obliga-
tions and disbursements, respectively, in fiscal 1983, and
$2,300,711 and $2,296,607 of obligations and disbursements, re-
spectively, in fiscal 1984. The set-aside costs were caused by
errors identified in our samples, which, when projected to the
universe of PC&B transactions, indicated that the potential error
in the recorded PC&B or the total recorded PC&B were not within
acceptable ranges.
Other Set-aside And Questioned PC&B Costs
During our examination of statistical and non-statistical samples
at each audit location, we noted instances which indicated that
specific transactions were not or may not have been properly re-
corded. We set aside $10,708 of obligations and disbursements at
Region 1 in fiscal 1984, as a result. We questioned $(4,467) and
$11,457 of obligations and disbursements at Regions 2 and 3, NEIC
and Headquarters (Las Vegas) in fiscal years 1984 and 1983, re-
spectively, due to specific errors in PC&B transactions. We also-
set aside $1,437,051 of obligations and disbursements at Head-
quarters because the timesheets supporting 1983 FC&B charges from
the Office of Waste Programs Enforcement (OWPE) were not avail-
able. Additionally, we set aside $68,054 of PC&B costs at Las
Vegas in fiscal 1983 because an adjustment was not supported by
adequate documentation.
Causes Of Set-aside And Questioned Costs
We noted the following conditions which primarily caused the
set-aside and questioned costs:
0 Hours recorded in the payroll distribution records that
did not agree with the supporting documentation
(timesheets, time and attendance (T&A) reports).
0 Errors or omissions of hours and account numbers from
timesheets and/or T&A reports.
* Hissing or inadequate documentation (timesheets, T&A
reports, supervisory signatures, overtime approval
forms).
Some of the reasons cited by management for the errors identified
in our testing were:
* Failure of program offices to forward correction data
(EPA Form 2550-6) to the FMO for Input.
0 Errors in transcribing information from timesheets to
T&A reports.
0 Charges were based upon budgetary hours rather than
actual hours due to budgetary restrictions.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
We also noted that deficiencies in the record retention systems
at Regions 1, 3, 5, 8, Las Vegas and Headquarters, which caused
some of the set-aside costs, were apparently due to the lack of
centralized recordkeeping for payroll records.
Compliance With Agency Policies For PC&B Needed Improvement
The majority of the errors noted in our testing could have been
corrected by management if a reconciliation of the "Payroll Dis-
tribution Report" (RCB-3A) with supporting documentation
(timesheets) had been performed on a regular basis. The RCB-3A
is a standard Agency report issued to the Allowance Holders for
each pay period, which lists by employee the hours and PC&B
recorded in each account. The Timekeeping Manual, Chapter 7,
(revised July 27, 1983), requires that the report be reconciled
with the originating documents (timesheets). Reconciling the
timesheets to the RCB-3A should disclose any errors in
distribution of PC&B charges. Without this verification process,
there was no assurance that only appropriate Super fund PC&B ex-
penses were charged or that all Superfund PC&B charges were prop-
erly recorded.
In fiscal 1985, EPA eliminated the the dual system of recording
payroll information from timesheets to the T&A cards to distri-
bute Superfund payroll costs. Distribution of payroll is direct-
ly input from timesheets. This procedure should eliminate the
errors caused by transferring data from the timesheets to the T&A
cards.
Weaknesses In Internal Controls
We also noted one or more of the following internal control weak-
nesses at several audit locations:
0 T&A cards were returned to timekeepers after approval
by supervisors.
0 Payroll data was input prior to supervisory review and
approval.
0 Payroll clerks had one or more incompatible duties
which should have been performed by other personnel.
0 Employees were not keeping timesheets on a daily basis
and were estimating time at the end of the payroll pe-
riod.
Because of these control weaknesses, EPA did not have assurance
that only valid payroll transactions were processed and that they
were processed correctly and completely.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
CORRECTIVE ACTION TAKEN
We recommended in our draft report that the Assistant
Administrator for Administration and Resources Management estab-
lish a time frame for reviewing the set-aside and questioned
costs by appropriate Agency officials and for adjusting Agency
financial records based on review results. The Acting Assistant
Administrator of OARM stated in response to our recommendation:
0 The OIG has reviewed our efforts to resolve set-aside
and questioned costs for the Environmental Monitoring
Systems Laboratory/Las Vegas and has agreed that no
further adjustments are necessary.
0 In response to the Headquarters draft audit, the Comp-
troller stated that the Office of Waste Programs En-
forcement "had made several attempts to locate the
timesheets and believes any further attempts to locate
them would be futile." In the final report the OIG
accepted this response.
0 Region 1 is in the process of reviewing and reconciling
data from program offices to assure all Personnel Com-
pensation and Benefits (PC&B) costs are properly ac-
counted for and that supporting documentation is avail-
able. Upon completion of this review, Region 1 will
submit a report to the OIG in August 198? on the dispo-
sition of costs set aside in the audit.
0 Region 2 reports that they have reviewed the questioned
costs and have completed the necessary adjustments to
the Agency finance system.
9 Region 3 has completed its review of FY 84 and has ad-
justed the Agency financial records per the recommenda-
tions.
* Region 4 submitted all corrections to the FY 83 pay-
rolls on August 25, 1986. The Region reports the OIG
must audit the corrections before the payroll can be
restored.
0 The National Enforcement Investigations Center (NEIC)
has requested the documentation for the time period in
question. They will then proceed to process the labor
redistributions and adjust those questioned costs.
NEIC will send the change orders to their payroll of-
fice by July 24, 1987.
0 One of the procedures in the "Action Site File Proj-
ect," a project being undertaken to prepare documenta-
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
tion files for every Superfund site, is to reconcile
all site payroll charges with timesheets or timecards.
During this process, all undocumented site costs will
be reclassified to the appropriate account.
We also recommended that the Assistant Administrator for Adminis-
tration and Resources Management re-emphasize policies and proce-
dures requiring the reconcilation of hours on timesheets with the
hours recorded in the payroll distribution reports (RCB-3A) for
each pay period. The Acting Assistant Administrator of OARM
stated in response to our recommendation:
0 FMD is completing revised guidance (Resources Manage-
ment Directives System 2550 D) for the Superfund pro-
gram, which includes timekeeping for Superfund. This
fuidance is scheduled for release by September 30,
987.
0 FMD's transaction testing program includes an extensive
review of the Agency's PC&B charges.
0 During the recent implementation of the new Payroll
Accounting and Reporting System (PARS), FMD conducted
training sessions for every program office in Headquar-
ters emphasizing Superfund PC&B charging policies. The
PARS training sessions covered documentation require-
ments for Superfund charges and included specific in-
structions for preparing timesheets and payroll redis-
tributions.
The corrective action taken and the proposed action is responsive
to our recommendations and, consequently, we make no further
recommendations.
3. IMPLEMENTATION Qg PROCEDURES FOR ALLOCATION OF REGIONAL SUP-
FORT SERVICES COSTS NEEDED IMPROVEMENT
We set aside $136,455 and $162,102 of obligations and disburse-
ments, respectively, in fiscal 1984, and $24,323 and $97,144 of
obligations and disbursements, respectively, in fiscal 1983, due
to improper methods of allocating support services costs at
Regions 1 and 4. We also questioned $7,400 of obligations in
fiscal 1983 at Region 4 due to the duplication of obligations in
the costs allocated to Superfund. In addition, Region 3 was un-
able to identify the total costs allocated to Superfund in both
fiscal years 1984 and 1983. We also noted that NEIC calculated
allocations based upon budgetary rather than actual full-time
equivalents (FTE) workyears for both fiscal years, and Region 10
used budgetary FTEs for the calculation of the first quarter al-
locations in fiscal 1983.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
The set-aside costs resulted from: disbursements charged to
object class accounts which were not in Region 1's cost allo-
cation plan; missing documentation supporting Region 1's allo-
cations for one quarter of fiscal 1983; an improper method of
calculating cost allocations using estimates for fiscal 1983 at
Region 4; and Region 4 not adjusting fiscal 1984 calculations to
reflect the actual FTE percentage. Regional personnel cited
year-end workloads and budgetary restrictions as reasons for not
making final adjustments. Region 1 officials indicated that they
did not believe modifications of their cost allocation plan
required approval. As a result of the above conditions, the al-
locations of regional support services costs to the Superfund
program did not accurately reflect the benefits received by the
program.
Section 111(a) of CERCLA limits the charging of administrative
costs to Superfund to those which are "necessary for' and "inci-
dental to" the implementation of the program. Therefore, an al-
lowable cost is allocable to Superfund to the extent of benefits
derived by the expenditure. The Superfund Charging Policies Mem-
orandum, dated June 17, 1982, addressed the allocation of support-
service costs that benefit a group of programs. In addition, the
Assistant Administrator, Office of Administration, EPA Headquar-
ters, issued a memorandum dated November 16, 1982, "Procedures
for Allocating FY 83 Regional Support Services Coats to Super-
fund" which outlined the method of using FTEs to allocate support
services costs to Superfund.
The allocation of support services were set aside at Region 1
because disbursements amounting to $30,531 and $14,796 in fiscal
years 1984 and 1983, respectively, were charged to object class
accounts not listed in the Region's approved cost allocation
plan. Also, disbursements of $26,538 were set aside because Re-
gion 1 could not provide supporting documentation for costs allo-
cated for April, May, and June 1983. The balance of Region 1's
allocations in fiscal 1983, amounting to $39,332, was set aside
because Superfund PC4B costs, which were the basis of the allo-
cations, were set aside. We also noted that Region 1 did not
make allocations for portions of both fiscal years.
Region 3 did not utilize a system that readily identified the
total support services cost allocated to Superfund. Consequent-
ly, we could not determine the materiality of the support ser-
vices allocations at Region 3 or perform any testwork on the al-
locations.
We set aside $136,455 of obligations and $131,571 of disburse-
ments, in fiscal 1984 at Region 4, due to the improper calcu-
lation of support services allocations. We also questioned
$7,400 of obligations, and set aside $24,323 and $16,748 of
obligations and disbursements, respectively, at Region 4 in fis-
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
cal 1983, due to the duplication of obligations in the allocated
costs and an improper method of calculating the allocations.
Region 4 did not adjust the allocations to reflect the actual
cumulative percentage of Superfund full-time equivalents (FTEs)
at year-end for fiscal 1984, nor make allocations for the final
month, due to budgetary restrictions. In fiscal 1983, Region 4
utilized an estimate of Superfund FTEs as a basis for allocating
support services costs, and also assumed that one month's support
services costs would approximate the estimated percentage of an-
nual support services costs.
In allocating support services costs for the first quarter of
1983, Region 10 utilized budgetary data as the basis and, conse-
quently, undercharged Superfund by $5,000 to $10,000. This meth-
od was changed for subsequent allocations, however, no adjustment
was made for the first quarter due to the difficulty in identify-
ing the allocated charges.
NEIC allocated support services to Superfund based upon the bud-
geted ratio of Superfund FTEs to total FTEs for both fiscal years
1984 and 1983. NEIC management did not adjust the allocations
using actual FTEs at year-end, although this had been a prior
audit finding, because actual FTE data was not readily available.
The Superfund Charging Policies Memorandum and additional Agency
guidance on allocating support services costs to Superfund were
issued to ensure that support services costs were allocated to
the benefiting programs using a basis that results in an equita-
ble distribution of costs. By not complying with the Superfund
charging policies for allocating support services costs, the
above Regions and NEIC may have caused an inequitable dis-
tribution of costs to Superfund and other EPA programs.
CORRECTIVE ACTION TAKEN
We recommended in our draft report that the Assistant Administra-
tor for Administration and Resources Management:
0 Require all appropriate Agency offices to implement the
June 17, 1982, Superfund Charging Policies Memorandums
"Procedures for Allocating Fiscal Year 1983 Regional
Support Service Costs to Superfund," dated November 16,
1982; and subsequent Agency guidance regarding allo-
cations of support services costs.
0 Monitor all appropriate offices to ensure that each has
formally developed, submitted for approval, and imple-
mented a support services cost allocation plan with the
provision to adjust the distribution basis from budget-
ed to actual data.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
0 Review the set-aside support services costs to deter-
mine whether it is feasible and cost effective to
adjust the amounts charged, in order to accurately
reflect Superfund's proportionate share. If so, direct
the appropriate offices to make the adjustments.
The Acting Assistant Administrator of OARM stated in response to
our recommendations:
0 Both Chapter 17 of the Financial Management Manual,
which supercedes the procedures referred to by the OIG,
and the draft Resources Management Directives System
2550 D which will supercede Chapter 17, require the
implementation of a standard support cost allocation
plan that meets the OIG criteria.
0 The FMD Financial Managers Quality Assurance Guide re-
quires that the cost allocation be reviewed to assure
that it follows the standard plan. The standard plan
is one of the items routinely checked during the Man-
agement Assistance Reviews.
* Region 1 is in the process of reviewing and reconciling
data from program offices to assure all PC&B costs are
properly accounted for and the supporting documentation
is available. Upon completion of this review, Region 1
will submit to the OIG in August 1987 a report on the
disposition of PC&B and other costs set aside in the
audit.
0 Region 3 reports that the allocation of regional sup-
port was reaudited during FY 86 Trust Fund Audit and
that the Regional office provided hard copy documenta-
tion to the auditors to support the Region's allocation
method for FY 83 and FY 84.
0 Region 4 submitted to the OIG contract auditors on
April 28, 1987 the recalculations of the fiscal years
1983 and 1984 Superfund cost allocations in accordance
with the Superfund charging policies.
The corrective action taken and the proposed action is responsive
to our recommendations and, consequently,'we make no further rec-
ommendations .
4. DOCUMENTATION FOR SUPERFUND TRANSACTIONS SHOULD BE IMPROVED
We set aside $165,863 and $61,779 of obligations and disburse-
ments, respectively, in fiscal 1983, and $25,816 and $42,564 of
obligations and disbursements, respectively, in fiscal 1984, be-
cause Regions 1, 3, 4, and 9 could not locate documentation to
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
support Superfund charges, or the available documentation did not
contain sufficient information to justify charging the Superfund
program. We also questioned $8,362 and $130 of obligations? and
disbursements, respectively, in fiscal 1984, and $245 of obliga-
tions and disbursements in fiscal 1983, because supporting
documentation at Regions 4 and 9 indicated that a program other
than Superfund should have been charged.
In addition, we noted that written justification for charging
Superfund was not on obligating documents at Regions 7 and 10,
although we were able to verify Superfund allowability using al-
ternative procedures. Further, Region 10's journal vouchers did
not indicate evidence of review and approval. Also, journal
vouchers prepared by the Financial Management Offices (FHOs) at
RTF, Cincinnati, and Las Vegas were not always properly supported
by or referenced to adequate documentation.
The primary reasons for missing documentation were deficiencies
in regional record retention systems. The lack of written justi-
fication was due to program offices not providing complete infor-
mation on obligating documents to evidence the need for charging.
Superfund. Regional personnel indicated that there was a lack of
Agency guidance on specific requirements for written justifica-
tions. The failure to maintain proper supporting documentation
or provide sufficient written justification for obligations and
disbursements precludes assurance that charges to Superfund were
"necessary for" and "incidental to" the implementation of the
program, as required by CERCLA, Section 111(a).
The EFA Handbook for Property Management, Section B, paragraph 1
states!"A justification and statement of need must be included
on every Procurement Request/Order, regardless of commodity, ser-
vice or type of transaction. The justification is a narrative on
what the item is used for and why it is required."
EPA Records Management Manual, Chapter 1, Paragraph 5, states:
"The Agency will make and preserve records to provide adequate
and proper documentation of...essential transactions..." Also,
the EPA Records Management Manual generally requires that docu-
mentation supporting obligation and disbursement transactions be
retained in the office for three years or until audited.
There was inadequate guidance from EPA, Headquarters as to the
extent of supporting documentation required to be retained and
referenced to journal vouchers. Such guidance was limited to
that provided by the EPA Accounting Manual, "Glossary of Finan-
cial Terms," which states: "the journal voucher usually contains
an entry or entries, explanations, references to documentary evi-
dence supporting the entry or entries, and the signature or ini-
tials of one or more properly authorized officials."
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
Supporting Documentation For Obligations And Disbursements Was
Missing
We set aside $1,573 of disbursements in fiscal 1983 because Re-
gion 1 could not locate the supporting documentation. At Region
3, we set aside $880 and $19,116 of obligations and disburse-
ments, respectively, in fiscal 1983, for lack of supporting docu-
mentation. We also set aside $4,880 and $36,309 of obligations
and disbursements, respectively, in fiscal 1984, because Region 3
was unable to locate supporting documentation. Region 4 could
not support $20,155 and $16,576 of obligations and disbursements,
respectively, in fiscal 1983, and these amounts were set aside.
Without obligation and disbursement documentation, we could not
determine if the set-aside costs benefited Superfund. The prima-
ry causes of missing documentation were deficiencies in the re-
cord retention systems at these Regions. The lack of adequate
documentation for obligations and disbursements could result in
improper or inaccurate data being recorded in the Financial Man-
agement System (FMS).
Written Superfund Justification Should Be On Supporting Documents
We set aside $20,320 and $144,540 of obligations, and $5,639 and
$24,226 of disbursements, in fiscal years 1984 and 1983, respec-
tively, at Region 4, due to the lack of statement of need or
written justification for charging the Superfund program. We
questioned $8,362 of obligations, In fiscal 1984 at Region 4,
because the supporting documentation indicated the obligation
should have been charged to another program. We also questioned
$130 of disbursements. In fiscal 1984 at Region 4, due to a dis-
crepancy between the documentation and amounts disbursed.
At Region 9, we set aside $616 and $288 of obligations and dis-
bursements in fiscal years 1984 and 1983, respectively, because
the supporting documents did not contain sufficient information
to justify the validity of the charges as Superfund related. We
also questioned $245 of obligations and disbursements, in fiscal
1983 at Region 9, because the documentation indicated that a
non-Superfund program should have been charged. At Regions 7 and
10, we noted that in many cases the obligation documents did not
contain sufficient information to justify the charges to the Su-
perfund program. However, additional audit procedures indicated
Superfund allowability, and no costs were questioned or set
aside.
The failure to provide adequate written evidence was due primari-
ly to the program offices or project officers not recording all
the necessary information on the obligation or disbursement docu-
ments to demonstrate the allowability of the Superfund charges.
Regional personnel indicated that guidance from EPA Headquarters
regarding the requirements for written justification and state-
ments of need for Superfund charges was inadequate.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
The lack of written documentation of the need and justification
for charging Superfund increases the likelihood that costs which
do not benefit Superfund may be charged to the program. It is
extremely important that costs be charged to the correct program
in order to avoid potential violation of public law.
Requirements For Documentation Of Journal Vouchers Needed Im-
provement
During our review of transactions processed by the FMOs at RTF,
Cincinnati, and Las Vegas, we noted that journal vouchers were
not always properly referenced to or supported by adequate docu-
mentation. Due to the lack of documentation, we were unable to
determine the propriety or accuracy of several journal vouchers,
which resulted in set-aside costs included in Finding No. 1.
Journal entries prepared by the FMO at Region 10 did not always
indicate that the entries were reviewed and approved by someone
other than the preparer.
There were no written EPA policies or procedures establishing
specific requirements for supporting documentation to be retained'
and referenced to journal vouchers. Good accounting practices
provide for the retention of documentation supporting the basis
for all journal vouchers with a clear audit trail to the initial
posting of the transactions being adjusted. The lack of adequate
documentation for journal vouchers could result in improper or
inaccurate data being recorded in the FMS. In addition, due to
the cost recovery provisions of the Superfund program, lack of
appropriate documentation to support costs could result in the
delay or failure to recover costs incurred from responsible
parties.
The Office of the Comptroller issued a Policy Announcement on
Hay 7, 1986, on use of journal vouchers. The Policy Announcement
was addressed to EPA Financial Management Offices Agency-wide.
It included requirements that were recommended in our audit re-
ports issued at Las Vegas and Cincinnati. Consequently, we make
no further recommendations regarding journal vouchers in this re-
port.
CORRECTIVE ACTION TAKEN
We recommended in our draft report that the Assistant Administra-
tor for Administration and Resources Management:
" Notify all Agency offices of the record retention re-
quirements for documentation supporting Superfund
transactions.
0 Establish a time frame for obtaining documentation in
support of the set-aside costs and for adjusting the
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
Agency's financial records if documentation is not ob-
tained.
0 Develop policies and procedures to provide specific
requirements for written justifications and statements
of need on obligation and disbursement documents for
Superfund transactions.
The Acting Assistant Administrator of OARM stated in response to
our recommendations:
* The revised Resources Management Directives System 2550
D, "Financial Management of the Superfund Program" to
be issued by September 30, 1987 includes policies and
procedures on records retention and on including suffi-
cient information on Superfund-related documents to
ensure that Superfund is the correct appropriation to
charge.
0 Region 1 is scheduled to submit to the OIG in August
1987 a report on the distribution of set-aside costs'
from the audit report.
0 Region 3 obtained the documentation to support Super-
fund transaction set-aside costs and provided the docu-
ments to the auditors during their FY 86 Trust Fund
Audit.
0 Region 4 submitted a response to the 016 dated Septem-
ber 16, 1986 addressing all but one of these set-aside
obligations and disbursements. The OIG responded on
September 24, 1986 that Region 4's proposed actions
were responsive to the auditrs findings and recommenda-
tions. To obtain the necessary documentation on the
remaining $20,300 in FY 84 obligations set aside, Re-
gion 4 ha* requested help from RTF. RTF has recently
located the supporting documentation. Region 4 will
submit this to the OIG by September 1, 1987.
0 Region 9 reports that all set-aside and questioned
costs were researched in 1986 after the Region received
the audit report. The questioned costs were covered
and additional documentation was obtained to support
the set-aside costs. This documentation was provided
to the OIG on June 13, 1986.
The corrective action taken and the proposed action is responsive
to our recommendations and, consequently, we make no further rec-
ommendations.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
OTHER AREAS REQUIRING MANAGEMENT ATTENTION
5. PERSONAL PROPERTY MANAGEMENT PROCEDURES SHOULD BE STRENGTH-
ENED
During our review of the Superfund personal property management
system, we found 96 items purchased with CERCLA funds, amounting
to $751,648, that were not recorded in the Personal Property
Accounting System (PPAS). The omission of these items occurred
at Regions 1, 3, 4, 5, 6, 7, 8, 9, 10 and Las Vegas. In addi-
tion, we noted errors in amounts and quantities recorded in the
PPAS at Regions 1 and 4. Also, Region 6 had not reclassified
non-Superfund items in the PPAS identified in the prior audit.
Finally, Region 3 could not locate three items, valued at $1,596,
from a sample of items selected for physical verification.
Our review of internal controls for Superfund property, disclosed
a significant procedural weakness in the system and various in-
stances of non-compliance with established internal controls.
The procedural weakness was the lack of Agency policies or proce-
dures requiring the reconciliation of purchases of property and.
equipment recorded in the Financial Management System (FMS) with
items entered into the PPAS. The omission from the PPAS, of the
items identified above, would have been disclosed in a reconcil-
iation, or if there was an interface between the two systems.
The failure to record items in the PPAS was primarily due to con-
tracting or receiving offices not providing documentation to the
property management offices. We also found that annual physical
inventories were not always performed at Regions 1, 3, 7, 8, and
9; and the inventories taken at Region 10 and Las Vegas were con-
ducted only by custodial officers. Additionally, we found that
the custodial officer system and the requisite written as-
sumptions of responsibility for property were not completely im-
plemented at Regions 1, 2, 3, 4, 9, and 10. Regional personnel
indicated that the reasons for not implementing property manage-
ment controls were lack of staffing and training for property
management personnel.
The EPA Facilities and Support Services Manual includes Volume
4830 - Personal Property Management - Book 1 which established
Property Management Regulations (PMRs) for EFA's property manage-
ment system. In addition, the EPA "How-To Handbook Procedures
for Property Management" provides additional guidance for ac-
countability of EPA property. Specific criteria from these
sources were cited in the component audit reports addressed to
Regional Administrators and appropriate Agency officials.
We noted that there were no Agency regulations* policies, or pro-
cedures requiring the reconciliation of purchases of property and
equipment entered into the FMS with the input in the PPAS. The
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
omission of the items from the PPAS identified during our audit
would have been discovered by EPA management had this been a re-
quirement. The reconciliation (at least annually) would ensure
that all items purchased are included as accountable property in
the PPAS.
Property Items Not Recorded In The Personal Property Accounting
System
At each audit location, we selected samples of Superfund property
and equipment items purchased during fiscal years 1983 and 1984,
which were recorded in the FMS. We physically verified the exis-
tence of these items, except as previously noted, and attempted
to trace the items to the PPAS listings, which are the official
EPA property accountability records. As a result of these tests,
we found the following omissions from the PPAS:
Number Of Items Dollar Value
Not Recorded In Of Items
Audit Location PPAS From Sample Not Recorded
Region 1 4 $ 4,978
Region 3 24 204,698
Region 4 1 51,273
Region 5 11 24,214
Region 6 1 239,341
Region 7 7 123,750
Region 8 3 5,013
Region 9 28 52,662
Region 10 16 33,434
Las Vegas 1 12.285
Total
The above listing represents only those items that were disclosed
from our audit samples and is not intended to represent a com-
plete listing of items that may have been omitted from the PPAS
listings. The above items were reported in our component audit
reports and Agency officials indicated that corrective actions
were taken to record these items in the PPAS and to implement
procedures to prevent omissions in the future.
Errors In Amounts And Quantities in PPAS
We also noted the following errors in amounts and quantities re-
corded in the PPAS listings:
.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
Errors
Audit Location
Region 1
Region 3
Region 4
Region 4
Region 6
Number Of Items
7
3
2
4
10
Quantities
4
10
Amounts
643
1,596*
10,143
1,645
12,099
* items not located, costs set-aside
The above errors were reported in our component audit reports and
Agency officials indicated that corrective actions were taken to
adjust the errors in quantities and amounts in the PPAS.
Causes Of Omissions And Errors In PPAS
The primary cause cited by Agency personnel at the audit lo-
cations where items were omitted from the PPAS listing was that
contracting or receiving offices did not forward the appropriate
documents to the Property Management Offices. In some cases,
this was due to the contracting offices not being located in the
same regional office as the property accountable area. However,
in many cases, the receiving offices did not forward receiving
documents to the property offices. This situation could have
been corrected had the property management offices established
follow-up procedures for open purchase orders for property and
equipment, since copies of purchase orders should have been on
file in the property offices.
Internal Control Weaknesses And Non-Compliance
We found a significant internal control weakness which, had this
control procedure been required, would have disclosed the omis-
sion of items from the PPAS. Obligations and disbursements are
recorded for property and equipment items in certain object class
accounts in the FMS. Specific accounts are designed to record
capitalized property which is also required to be accounted for
in the PPAS. There was no correlation or interfacing between the
two systems to ensure that purchases recorded in the FMS were
also entered in the PPAS. Additionally, since there were no EPA
policies or procedures requiring the reconciliation between the
systems, there was no assurance that Superfund property purchases
recorded in the FMS were under property accountability controls
in the property management system.
We also noted that annual physical inventories were not taken or
were not properly taken at Regions 1, 3, 7, 8, 9, 10 and Las
Vegas as required by EPA Property Management Regulations. We
also found that the Custodial Officer system, requiring appoint-
ments of personnel responsible for specific items of property.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
was not completely in place or was not properly documented at
Regions 1, 2, 3, 4, 9, and 10. Two memos, "Assumption of Ac-
countability Responsibilities" and "Assumption of Custodial Re-
sponsibilities", which are designed to establish and document the
Property Accountability Officers' and Custodial Officers' respon-
sibilities, were not prepared as required. Without those memos,
there was no assurance that EPA personnel responsible for ac-
counting and safeguarding property, were aware of and performing
their duties and responsibilities.
Additionally, we noted, at Regions 2 and 9, that controls over
sensitive property needed strengthening, by using custody cards
and implementing a sign-out log. At Regions 4 and 9, we found
that input of property items into the PPAS was not always done on
a timely basis. At Headquarters, we noted that all furniture
items were assigned to one custodial area and were not assigned
to custodial officers in the actual area where the property was
located.
As a result of the procedural weakness and non-compliance with
internal controls, we concluded that the Agency did not have ade-
quate control over and accountability for Superfund property.
The failure to account for personal property items in the PPAS
and implement internal controls diminishes the probability that
EPA management could detect the loss, misuse, or misappropriation
of Superfund property.
CORRECTIVE ACTION TAKEN
We recommended in our draft report that the Assistant Administra-
tor for Administration and Resources Management:
* Ensure that all accountable property items purchased
with CERCLA funds since the inception of the program
are accounted for and entered into the PPAS listing for
each accountable area.
• Coordinate with the Director, Facilities and Support
Services Division and establish policies and procedures
requiring capitalized personal property accounts in the
FMS be reconciled with items and amounts recorded in
the PPAS on a periodic basis (at least annually).
0 Instruct the Director, Facilities and Support Services
Division to establish policies and procedures to be
implemented by the Property Management Offices, for
follow-up on open purchase orders for property and
equipment.
0 Provide additional staffing and training, as necessary,
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
instructing property management personnel in their
duties, emphasizing the weaknesses and instances of
non-compliance with existing controls indicated in this
report.
The Acting Assistant Administrator of OARM stated in response to
our recommendations:
0 We are currently upgrading the Personal Property
Accounting System (PPAS) to allow Agency users to
identify multi-appropriations and account numbers.
This should significantly improve our ability to track
Superfund property, as well as Superfund property
purchases which are split funded. We plan to have the
new PPAS implemented in September 1987, and an
Agency-wide policy in place by September 1988. This
policy will require each accountable officer to review
his/her data and ensure entry of all Superfund account
numbers in the new system.
0 The Facilities Management and Services Division and the
Financial Management Division have already begun to
work together to improve reconcilation procedures for
property reported in FMS and PPAS. This will be com-
pleted in conjunction with Phase Two of the Integrated
Financial Management System (IFMS) plans for FY 88.
0 Generally, accountable officers have a system to track
purchase orders for property and equipment. However,
the focus of this activity is on the receipt of proper-
ty, rather than on the entry of data into PPAS. We
will review this issue in FY 1988 and make recommenda-
tions to the accountable officers by September 1988 for
improved data entry.
0 We have requested additional resources for property
management in the Agency's FY 1989 budget process in
order to strengthen our efforts as National Program
Managers for property.
0 A major Agency-wide Property Management Task Force has
been established to review all current EPA property
policy. The goal of this 'Task Force is to issue in
draft form, by September 30, 1987, one EPA Order which
standardizes property management policies, encompasses
all Superfund personal property acquisitions and
addresses cost recovery and Trust Fund reimbursements.
These policies and procedures will be finished and
distributed to all property management personnel by
September 1988 and will be incorporated in the training
of these individuals.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
0 In addition, we are sponsoring an EPA Institute course
on property management that will be offered in
Cincinnati in August 1987. We are also developing a
course for Headquarters custodial officers that will be
available by the middle of FY 1988.
The corrective action taken and the proposed action is responsive
to our recommendations and, consequently, we make no further rec-
ommendations .
6. LETTER OF CREDIT ACCOUNTING PROCEDURES NEEDED IMPROVEMENT
We found that procedures for letter of credit accounting at
Regions 2, 3, 5, 7. 8, 9, and 10 were not always adequate to en-
sure that the EPA Financial Management System (FMS) reflected the
correct status of cooperative agreements. We noted that Federal
Cash Transactions Reports (SF-272) were often submitted late or
were not submitted by recipients as required by the EPA Letter of
Credit Users Manual. The failure of recipients to file SF-272s
timely precluded the Regions from assurance that the recipients'
disbursements equaled or exceeded letter of credit drawdowns or
that effective cash management procedures were followed. Addi-
tionally, the information contained in the reports could not have
been entered into the FMS to accurately reflect the status of
cooperative agreements on a timely basis.
The regional offices did not have adequate procedures to ensure
that recipients submitted accurate and timely reports. As a re-
sult, the monitoring of letters of credit for cooperative agree-
ments may have been Ineffective. In addition, EPA policies for
accounting for letters of credit did not require periodic rec-
onciliation of available balances from FMS records to U.S. Trea-
sury's records. Failure to require reconciliation of these bal-
ances did not provide adequate control to ensure that all au-
thorizations and disbursements on letters of credit were properly
reflected in the FMS or Treasury records.
EPA*s Letter of Credit Users Manual requires that letter of cred-
it recipients submit the Federal Cash Transactions Report to the
appropriate EPA Financial Management Office (FMO) within 15 work-
ing days following the end of each calendar quarter. Letter of
credit accounting procedures in Chapter 25 of the EPA Accounting
Manual require SF 272s be 'reviewed for differences between dis-
bursements and drawdowns, disposition of late reporting, and
analysis of cash of hand.
The Treasury Fiscal Requirements Manual. Chapter 6, paragraph
2080.20 requires the Federal program agency review a recipient
organization's use of funds. The chapter further specifies that
the review be performed periodically, but not less frequently
than each calendar quarter. In order to meet these criteria, the
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
Federal agency must be able to determine the available balance of
each letter of credit, account for drawdowns, review reported
disbursements and analyze cash balances.
We noted instances of late reporting or lack of reporting of the
required Federal Cash Transactions Report (SF 272) by cooperative
agreement recipients at Regions 2, 3, 5, 7, 8, 9, and 10. The SF
272 is a Federal cash balance report by which the FMO at each
Region can monitor the financial status of cooperative agree-
ments. Without submission of timely and accurate SF 272 reports,
monitoring procedures over Federal funds disbursed to recipients
through the letter of credit system may have been ineffective.
Our testing at Region 3 showed that funds for cooperative agree-
ments were sometimes disbursed by letter of credit in excess of
the balance available for specified agreements. When this oc-
curred, funds were transferred from another agreement to offset
the excess disbursement. Region 3 personnel indicated that the
delay between Treasury's disbursement of funds and EPA's receipt
of the payment voucher contributed to this situation. Addition-
ally, Region 3 personnel indicated that Treasury was supposed to
check fund availability before releasing funds.
At Region 9, we noted discrepancies between the amounts of
drawdowns reported by recipients on SF 272 reports and FMS re-
cords. These conditions resulted because recipient disbursements
exceeded drawdowns and Region 9 personnel thought that this was
reflective of the status of unreimbursed expenditures. At Region
10, we noted that the FMS records did not reflect all letter of
credit activity, and the balance of one cooperative agreement per
the "Grant Payment History Form" did not agree with the FMS re-
cords. Additionally, SF 272s received by Region 10 were not
properly monitored for differences between drawdowns and
disbursements nor did the Region periodically determine available
letter of credit balances.
EPA accounting policies did not require the reconciliation of
available letter of credit balances between FMS records and U.S.
Treasury records. Also, although EPA policies required the re-
cording of payment vouchers (TFS Form 5401) for drawdowns and the
resulting balance of the letter of credit on the Grants Payment
History Form, there was no requirement to reconcile the vouchers
to the drawdowns reported by recipients on SF 272s.
The regional offices were generally responsive to the recommenda-
tions in our draft reports and indicated that they implemented
actions to improve recipient reporting. In addition, in fiscal
1985, EPA converted its letters of credit to the new Letter Of
Credit-Treasury Financial Communications System (LOC-TFCS). The
LOC-TFCS allows the Agency 24 hours to approve or reject
drawdowns on letters of credit. This system should provide EPA
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
the ability to more closely monitor recipient financial activity
and available balances on letters of credit prior to disburse-
ments of funds.
CORRECTIVE ACTION TAKEN
We recommended in our draft report that the Assistant Adminis-
trator for Administration and Resources Management coordinate
with the Comptroller to:
0 Develop policies and procedures to be incorporated.into
the EPA Accounting Manual requiring periodic reconcili-
ationoTavailableletter of credit balances and
drawdowns from FMS records to U.S. Treasury records and
recipient reports.
0 Establish a formal monitoring system to ensure that
recipients of letters of credit are filing the required
reports timely and accurately.
The Acting Assistant Administrator of OARM stated in response to
our recommendations:
' FMD, through its Fiscal Policies and Procedures Branch,
will review by September 30, 1987 its current letter of
credit procedures to ensure that the appropriate
reconcilations are included.
0 FMD will study the current requirements and procedures
to determine, by,September 30, 1987, if any additional
monitoring of recipients of letters of credit is
necessary.
* The responsibility to ensure that recipients comply
with the letter of credit procedures primarily rests
with regional offices. The Grants Administration
Divison (GAD) will monitor regional compliance with
letter of credit requirements through their management
oversight reviews. During these reviews GAD will
evaluate the regional offices' letter of credit
procedures, in particular the findings in the audit,
through a random file search.
The corrective action taken and the proposed action is responsive
to our recommendations and, consequently, we make no further
recommendations.
7. COST EFFECTIVE DISCOUNTS SHOULD BE TAKEN OR RECORDED AS LOST
We found that the Financial Management Office (FMO), Research
Triangle Park (RTP) did not take available cash discounts or
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
record the discounts lost in the appropriate account for the
eight transactions that offered discounts in our 1984 and 1983
disbursements samples. The 1984 and 1983 discounts lost amounted
to $8,102 and $28,525, respectively. From our samples, of the
discounts lost which were not recorded, $34,960 ($6,435 in 1984
and $28,525 in 1983) were cost effective. Therefore, a minimum
of $34,960 of EPA funds were disbursed from the FMO, RTF during
fiscal 1984 and 1983 due to inefficiencies in the disbursements
processing system.
The reason for the discounts lost not being recorded was that an
accounting technician did not follow proper procedures. The
cost effective discounts were not taken due to a lack of emphasis
on taking cash discounts because of the volume of invoices
processed at RTF. Additionally, the required review and project
officer approval process before the disbursement can be processed
often extended beyond the cash discount period. Agency guidance
requires that the project officer review and certify contractor
invoices prior to payment and send them to the paying office
within seven calendar days of receipt of the invoice.
A finding regarding the failure to record discounts lost was pre-
viously reported in the fiscal 1982 audit report. The Financial
Management Officer, RTF concurred with our finding and stated
that he would re-emphasize the policy and procedures to the ac-
counting technicians.
The EFA Accounting Manual, Chapters 3 and 15, and the Financial
Management Manual, Chapter 14 require that all lost discounts be
recordedInthe general ledger (account number 601.8) and all
cost effective discounts be taken. The use of the discounts lost
account provides a good control for management by increasing the
"visibility" of such losses. Upon evaluation of the account, if
lost discounts are recorded properly, management can determine
the extent of actions necessary to eliminate or lessen the loss
of discounts.
We recommended in our RTF draft audit report that the Director,
Office of Administration and Resources Management, RTF require
the Financial Management Officer, RTF to establish procedures for
processing invoices which offer cost effective discounts and a
system to ensure timely receipt of project officer approved in-
voices for processing. The Director stated in his response that
the recommendations will be implemented.
CORRECTIVE ACTION TAKEN
We recommended in our draft report that the Assistant Adminis-
trator for Administration and Resources Management coordinate
with the Comptroller to:
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
0 Review the procedures established by the FMO, RTF for
processing invoices which offer cost effective dis-
counts and determine if the system is cost effective
for other Agency offices.
0 Emphasize to the Financial Management Offices the im-
portance of expediting the processing of invoices in
instances where discounts are offered for prompt pay-
ment.
0 Instruct the Financial Management Offices to use gener-
al ledger account number 601.8, Discounts Lost, to re-
cord discounts offered but not taken on vendors' in-
voices.
0 Emphasize to all project officers, on-scene coordina-
tors , and their supervisors the need and requirement to
process contractor invoices within seven days after
receipt so the Agency can take advantage of discounts
offered for prompt payment.
0 Require performance standards on timely processing of
invoices offering discounts be incorporated into
performance agreement for project officers, on-scene
coordinators, their supervisors and other appropriate
personnel.
The Acting Administrator of OARM stated in response to our
recommendations:
0 FMD, though its Fiscal Policies and Procedures Branch,
will review the procedures established by the FMO-RTP
for processing invoices which offer cost effective
discounts.
• FMD will re-emphasize, by September 30, 1987, to the
Financial Management Offices the importance of pro-
cessing invoices in a timely manner, especially where
discounts are available.
0 FMD will also instruct the Financial Management Offices
on the use of account number 601.8, Discounts Lost, by
September 30, 1987.
• FMD's transaction testing program reviews transactions
for the proper handling of discounts offered.
* FMD-RTF issued a delivery order on May 12, 1987 to an
independent contractor to provide suggested alterna-
tives to the current project officer approval process
to develop a more efficient and expeditious system.
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
The contractor's proposals are expected to be presented
and evaluated by December 31, 1987.
0 We do not agree with the recommendation to require a
specific performance standard on timely processing of
invoices offering discounts be incorporated into per-
formance agreements. To monitor contractor perform-
ance, EPA already requires that all personnel with
these responsbilities have a standard contract ad-
ministration duties. This extent and nature of the
standard is left to the discretion of each employee and
supervisor.
The corrective action taken and the proposed action is responsive
to the our recommendations and, consequently, we made no further
recommendations.
8. CERCLA TRUST FUND RECEIVABLES SHOULD BE RECORDED TIMELY
Amounts due Superfund, as a result of cost recovery actions and
State cost-sharing agreements, were not being recorded in a time-
ly manner. The failure to record cost recovery decrees and or-
ders timely was the result of a lack of compliance with Agency
policy and guidance by: (1) EPA Headquarters Financial Manage-
ment Division (FMD)j (2) Office of Waste Programs Enforcement
(OWPE); (3) Office of Enforcement and Compliance Monitoring
(OECM); and (4) Offices of Regional Counsel. The failure to re-
cord State cost-sharing agreements timely was the result of a
lack of compliance with Agency policy and guidance by: (1) EPA
Headquarters FMD; (2) EPA Headquarters Office of Emergency and
Remedial Response (OERR); and (3) EPA Regional Offices.
The effect of these conditions was that Superfund receivables
attributable to cost recovery actions and State cost-sharing
agreements were not recorded on the accrual basis of accounting
as required by GAP Policy and Procedures Manual for Guidance of
Federal Agencies, Title 2—Accounting.Adequate receivables and
collectionsmanagement depends in part on timely and complete
identification of the receivables due the Agency. A large number
of unidentified receivables precludes the ability to adequately
manage receivables and collections and could result in a material
amount of lost interest.
The EPA Hazardous Substance Response Trust Fund Collection Moni-
toring Reports listed a total of 37 cash collections during fis-
cal 1984 and 22 cash collections during fiscal 1983. These col-
lections amounted to $3,119.915 and $2,805,519 in the respective
years, and represented the Agency's total collections under both
State cost-sharing agreements and cost recovery actions. We se-
lected a total of 20 collections; 10 each in fiscal 1984 and 1983
-39-
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L
FINDINGS AND RECOMMENDATIONS (CONTINUED)
for audit testing. As a result of this testing, we found that
the Agency submitted invoices for amounts due to the Trust Fund
for 2 of the 10 collections during fiscal 1984, and for 4 of the
10 collections during fiscal 1983. Thus, our sample indicated
that Trust Fund collections often were received by Headquarters
FMD before FMD knew that valid accounts receivable existed.
EPA's Financial Management Manual requires:
0 The Region will forward all Superfund State Con-
tracts to the Office of the Comptroller, Financial
Management Division. The Superfund State Contract
document will describe the specific billing proce-
dures such as amount owed, billing address, when
due, etc.
' When OECM signs a consent decree or OWPE issues an
administrative order containing penalties due, a
copy of the decree or order is to be sent immedi-
ately to the Office of the Comptroller's Financial
Reports and Analysis Branch.
* OECM will forward to Financial Reports and Analy-
sis Branch all consent decrees or court orders
that identify a responsible party or parties and
an amount due.
0 The Headquarters Accounting Operations Office will
establish and liquidate accounts receivable, bill
responsible parties and receive all Superfund col-
lections.
State cost-sharing agreements currently originate in and are
administered by the Regions. The transfer of authority from
Headquarters to the Regions was effective in two stages.
Responsibility for State agreements was transferred to the
Regions in April 1984, with the budgetary support transferred in
October 1984. Until April 1984, responsibility for these agree-
ments came under the authority of the Office of Emergency and
Remedial Response (OERR). The same conditions, described above,
existed in our audit period when administration of the State
agreements was the responsibility of OERR.
Cost recovery actions are the result of actions taken or
identified by Offices of Regional Counsel, OECM, or OWPE.
Superfund receivables information on cost recovery actions
originates at the Offices of Regional Counsel and is tracked by
the Offices of Regional Counsel, OECM, and OWPE.
The condition involving the untimely recording of Superfund
accounts receivable was caused by a lack of compliance by the
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FINDINGS AND RECOMMENDATIONS (CONTINUED)
Regions, OECM, OERR, and OWPE with the Agency guidelines. These
guidelines require coordination and communication between:
The Regions, OECM, OERR, and OWPE; and
0 Headquarters Financial Management Division
Such coordination and communication were inadequate for the peri-
od covered by this audit.
CORRECTIVE ACTION TAKEN
We recommended in our Headquarters report that the Comptroller
coordinate with the Regions, OECM, OERR, and OWPE to ensure that
EPA Headquarters FMD be sent copies of settlement documents or
State cost-sharing agreements when they become due or effective.
The Comptroller stated in his response that existing policies and
procedures, if followed, would result in documents being provided
to FMD and allow for timely recordation of receivables. On De-
cember 9, 1986, the Comptroller issued a memorandum to Agency
management emphasising the importance of notifying financial.
management officers of debts as they arise so that they may be
recorded and collected timely. Also, the area will be subjected
to an internal control review during fiscal 1987. In addition,
FMD has been working with OWE to obtain monthly reports on an-
ticipated settlements from the "Case Managment System," and are
transferring responsibility for accounting for cost-sharing re-
ceipts to the regional finance offices since the originators of
cost-sharing agreements are now in the regional program offices.
The actions discussed were responsive to the findings and recom-
mendations. Consequently, we make no further recommendations.
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EXHIBITS
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EXHIBIT I
UNITED STATES !
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF OBLIGATIONS (Note 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Description Total Accepted Set-aside Questioned Note
%
Personnel Compensation $ 32,782,785 $ 30,710,521 $2,076,724 $ (4,460)
Personnel Benefits 3.542.069 3.306.881 234,695 493
Total Personnel Com-
pensation & Benefits 36.324.854 34,017.402 2.311,419 (3.967) 3
Travel and Transportation
of Persons 3,133,704 . 3,131,840 616 1,248
Transportation of Things 161.292 156,172 5,120 -
Total Travel and
Transportation 3.294.996 3.288.012 5.736 1,248 4
Rent, Communications,
and Utilities 4,950,275 4,899,195 51,080 - 5
Printing and Reproduction 251,573 250,973 600 - 6
Contractual
Services 272,068,159 271,712,925 50,955 304,279
Supplies and Materials 1,186,968 1,158,268 28,700
Equipment 4,050.650 4,016,698 25.200 8.752
Total Supplies, Materials
and Equipment 5,237.618 5.174.966 53.900 8.752
Land and Structures 5,596 5,596
Grants, Subsidies and
Contributions 102,688,866 102,688,866
Insurance Claims and
Indemnities 3.005 3.005 - -
Grand Total $424.824.942 $422.040.940 $2.473.690 $310.312
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
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF DISBURSEMENTS (Notes 1, 2)
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Description
Total
Accepted
Set-aside Questioned Note
Personnel Compensation $ 32,412,155 $ 30,344,015 $2,072,600 $ (4,460)
Personnel Benefits 3,451,648 3.216,940 234.715 U)
Total Personnel Compen-
sation & Benefits 35.863,803 33.560.955 2.307.315 (4.467)
Travel and Transportation
of Persons 3,005,409 3,004,614 665 130
Transportation of Things 142.867 138.370 4.497 -
3.148.276
3.142.984
5.162
Contractual
Services
Supplies and Materials
Equipment
1,179,202
3.310.245
1,142,883
3.288.569
36,319
21.676
Total Supplies, Materials
and Equipment 4.489.447
4.431.452
57.995
Land and Structures
Grants, Subsidies and
Contributions
Insurance Claims and
Indemnities
Grand Total
11,826
28,065,156
3.017
11,826
27,623,843
3.017
5255,167^353 $250.502.321 $4.802.917
130
Total Travel and
Transportation
Rent, Communications,
and Utilities 4,884,351 4,810,148 74,203
Printing and Reproduction 231,460 230,860 600
178,470,017 176,687,236 2,357,642 (574.861)
441,313
5
6
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
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Note 1. Accounting Policies
,i - .. " ^
The Statement of Obligations and the Statement of Disbursements
were prepared for EPA 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). These Statements are not intended
to present either the financial position or the financial results
of operations in conformity with generally accepted accounting
principles, in that allowable costs and accounting policies and
practices are legislatively established and promulgated through
various Federal and EPA policy and procedural standards.
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. Reporting Differences
Total disbursements reported in the Superfund StatusReport, dat-
ed September 30, 1984, amounted to $254,464,536.Total disburse-
ments in the Statement of Disbursements presented as Exhibit II
amounted to $255,167,353, as prepared by EPA Financial Management
Division. The difference of $702,817 represents the net effect
of Personnel Compensation and Benefits (PC&B) accruals from Sep-
tember 30, 1984 and September 30, 1983, amounting to $700,695,
and an unidentified difference of $2,122. Due to the
immateriality of the difference, the PC&B accruals were not re-
flected in the Statement of Disbursements when the statement was
prepared on an allowance holder basis.
Note 3. Personnel Compensation and Benefits (PC&B)
Set-aside Costs
PC&B costs, amounting to $2,300,711 of obligations and $2,296,607
of disbursements, were set-aside at Region 3 based upon the
analysis of our statistical sample of payroll transactions, which
indicated that the recorded costs did not fall within the
expected range of values. PC&B obligations and disbursements,
amounting to $10,708, were set-aside at Region 1 due to specific
transactions in our statistical sample which may not have been
properly recorded.
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EXHIBIT III
(CONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Questioned Costs
PCSB obligations and disbursements amounting to $(4,490) at Re-
gion 2 were questioned because Superfund time reported on time
and attendance reports was not charged to the Superfund appro-
priation. PC&B obligations and disbursements of $4,113 at Region
3 were questioned due to specific errors in recording payroll
transactions, which were noted in our statistical sample. We
questioned $500 of PC&B obligations at Region 4 because the
obligations should have been deobligated. We questioned $(4,090)
of PC&B obligations and disbursements at NEIC as a result of
specific errors in recording or failing to record payroll
transactions.
See Finding Number 2 and Schedule I for additional details.
Note 4. Travel and Transportation of Persons and Things
Set-aside Costs
We set-aside $5,736 of obligations and $5,162 of disbursements
for travel and transportation costs at Regions 1, 4, and 9. The
set-aside costs at Region 1, amounting to $1,746 of disburse-
ments, resulted from costs allocated to Superfund which were not
in the approved cost allocation plan. Travel costs were
set-aside at Region 4 because no written justification or
statement of need for Superfund obligations of $2,320 was
documented; and $2,800 of obligations and disbursements were
charged to Superfund through an improper cost allocation method.
Obligations and disbursements of $616 were set-aside at Region 9
because there was insufficient evidence to document the travel
costs as Superfund-related.
Questioned Costs
At Region 4, obligations totaling $319 and disbursements of $130
were questioned because the amounts should have been deobligated.
We questioned $929 of obligations at Region 9 because two adjust-
ing entries were duplicated, causing an overstatement of obliga-
tions.
See Finding Numbers 3 and 4 and Schedule II for additional de-
tails.
Note 5. Rent, Communications and Utilities
We set-aside $51,080 of obligations and $74,203 of disbursements
-45-
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EXHIBIT III
^CONTINUED!
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 19^84
at Regions 1, 3 and 4 for rent, communications and utilities
costs charged to Superfund. At Region 3, an obligation of $4,880
and a disbursement of $28,000 were set-aside because supporting
documentation was not available. Obligations and disbursements
amounting to $46,200 were set-aside at Region 4 because an
improper method for calculating allocations of support services
costs was used. At Region 1, an obligation of $3 was set-aside
because the costs were not in the approved cost allocation plan.
See Finding Numbers 3 and 4 and Schedule III for additional de-
tails.
Note 6. Printing and Reproduction
We set-aside $600 of obligations and disbursements at Region 4
for printing and reproduction costs because an improper method of
calculating cost allocations of support services was utilized.
See Finding Number 3 and Schedule IV for additional details.
Note 7. Other Contractual Services
Set-aside Costs
We set-aside $50,955 of obligations and $2,357,642 of disburse-
ments for other contractual services at Regions 1, 3, 4 and
Headquarters. The set-aside of an $8,000 obligation at Region 4
was caused by a lack of written justification or statement of
need or the obligating document for charging Superfund. Addi-
tionally, $42,955 of obligations and $38,945 of disbursements at
Region 4 were set-aside due to an improper method of calculating
cost allocations for support services. At Region 1, we set-aside
$28,528 of disbursements because the object classes for the costs
charged were not in the approved cost allocation plan. We
set-aside $2,139 for a disbursement at Region 3 for which sup-
porting documentation was not available. At Headquarters, we
set-aside $2,288,030 of contract disbursements processed by the
FMOs at RTF, Cincinnati, and Las Vegas because the supporting
documentation did not contain sufficient information to ensure
the correct distribution of costs to the benefiting appropria-
tion. (Specific details were previously reported in the
Headquarters audit report.)
Questioned Costs
We questioned $304,279 of obligations and $(574,861) of disburse-
ments at Regions 4, 5 and Headquarters. Obligations totaling
-46-
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EXHIBIT III
TCONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
$582 at Region 4 were questioned because the obligations should
have been deobligated. At Region 5, we questioned $(647,424),
which was offset by questioning $647,424 at Headquarters, because
an obligation was erroneously charged to a Headquarters account
number instead of Region 5. In addition, at Headquarters, we
questioned $101,693 because an obligation was obligated twice,
and questioned $150,000 due to an over-obligation on a contract.
Also, at Headquarters, we questioned $85,822 of disbursements,
which were recorded by the FMO at Region 4, because the services
provided were not Superfund-related. We also questioned
$(660,683) of contract disbursements and $52,004 of related
obligations because the disbursements were improperly charged or
were not properly charged to the Superfund appropriation.
(Specific details were previously reported in the Headquarters
audit report).
See Finding Numbers 1, 3, and 4 and Schedule V for additional-
details.
Note 8. Supplies, Materials and Equipment
Set-aside Costs
We set-aside $53,900 of obligations at Region 4 because $43,900
was charged using an improper method of allocating support ser-
vices costs and an obligation for $10,000 did not have a written
justification or statement of need on the obligating document.
We set-aside $254 of disbursements at Region 1 because the costs
allocated were not in the approved cost allocation plan. At Re-
gion 3, we set-aside $6,170 of disbursements because the support-
ing documentation was not available, and $306 of disbursements
for one item that could not be located during our physical veri-
fication of property items. At Region 4, we set-aside $43,026 of
disbursements due to an improper method of calculating allo-
cations of support services costs and $5,639 of disbursements for
a lack of written justification or statement of need for charging
Superfund. We set-aside $2,600 of disbursements at Region 10
because the disbursement was made without written evidence of
receiving the goods.
Questioned Costs
We questioned $8,362 of obligations at Region 4 because the ob-
ligating documents indicated that the purchase of office equip-
ment was to be used by a non-Superfund employee. We also ques-
tioned $25 of obligations at Region 4 that should have been
deobligated. At Region 10, we questioned $365 of obligations
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EXHIBIT III
(CONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
because this portion of the obligation should have been
obligated.
See Finding Numbers 3, 4, and 5 and Schedule VI for additional
details.
Note 9. Grants, Subsidies and Contributions
We questioned $441,313 of disbursements at Headquarters for three
grants which were transferred from the Las Vegas Financial
Management Office to Region 8. The old obligation numbers at Las
Vegas were not deleted and the grants were included twice in the
Financial Management System.
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EXHIBIT IV
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF OBLIGATIONS (Note 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Description Total Accepted Set-aside Questioned Nott
Personnel Compensation $ 23,896,640 $ 19,964,126 $3,922,142 $10,372
Personnel Benefits 2.509,524 2.102.159 406,280 1,085
Total Personnel Compen-
sation & Benefits 26,406.164 22,066.285 4.328.422 11,457 3
248
Travel and Transportation
of Persons
Transportation of Things
Total Travel and
Transport at ion
Rent. Communications,
and Utilities
Printing and Reproduction
O^er Contractual
Services
Supplies and Materials
Equipment
Total Supplies, Materials
and Equipment
2,276,885
107.034
2,383.919
3,505,533
223,274
138,706,800
1,324,276
3,604.548
4.928.824
2,275,469
105.130
2,380,599
3,459,071
220,923
138,557,007
1,317,006
3,596,667
4,913,673
1,168
1,904
3,072
39,062
2,351
169,882
7,270
7.881
15,151
Land and Structures 12,916 12,916
Grants, Subsidies and
Contributions 37,292,932 37,292,932
Insurance Claims and
Indemnities 57 57
248
7,400
(20,089)
Grand Total - $213.460.419 $208.903.463 $4.557.940 $ (984)
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
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
STATEMENT OF DISBURSEMENTS (Notes 1, 2)
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Description Total Accepted Set-aside Questioned Not
Personnel Compensation $ 23,884,495 $ 19,952,235 $3,921,888 $ 10,372
Personnel Benefits 2.476.137 2,068.772 406.280 1,085
Total Personnel Compen-
sation & Benefits 26,360,632 22.021.007 4.328.168 11.457 3
Travel and Transportation
of Persons 2,069,035 2,066,804 1,983 248
Transportation of Things 94.300 90,889 3,411 -
Total Travel and
Transportation 2.163.335 2.157.693 5.394 248 t
Rent, Communications,
and Utilities 3,542,767 3,476,826 65,941 - :
Printing and Reproduction 184,431 180,705 3,726 - (
f1
Se
er Contractual
ervices 95,203,196 90,975,560 3,261,657 965,979
Supplies and Materials 1,364,486 1,345,550 18,936
Equipment 2.400.586 2.382,244 18.342
Total Supplies, Materials
and Equipment 3.765.072 3.727.794 37.278
Land and Structures 1,440 1,440
Grants, Subsidies and
Contributions 13,891,014 13,891,014
Insurance Claims and
Indemnities 57 57 -
Grand Total $145.111.944 $136.432.096 $7.702.164 $977,684
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
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Note 1. Accounting Policies
The Statement of Obligations and the Statement of Disbursements
were prepared for EPA 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). These Statements are not intended
to present either the financial position or the financial results
of operations in conformity with generally accepted accounting
principles, in that allowable costs and accounting policies and
practices are legislatively established and promulgated through
various Federal and EPA policy and procedural standards.
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. Reporting Differences
Total disbursements reported in the Superfund Status Report, dat-
ed September 30, 1983, amounted to $144,864,917.Total disburse-
ments in the Statement of Disbursements presented as Exhibit V
amounted to $145,111,944, as prepared by EPA Financial Management
Division. The difference of $247,027 represents the net effect
of Personnel Compensation and Benefits (PC&B) accruals from Sep-
tember 30, 1983 and September 30, 1982, amounting to $268,116,
and an unidentified difference of $(21,089). Due to the
immateriality of the difference, the PC&B accruals were not re-
flected in the Statement of Disbursements when the Statement was
prepared on an allowance holder basis.
Note 3. Personnel Compensation and Benefits (PC&B)
Set-aside Costs
We set-aside PC&B obligations of $1,163,513 and disbursements of
$1,163,259 at Region 1 because the analysis of our statistical
sample indicated that the recorded PC&B may have been misstated
by as much as 15Z. At Region 4, we set-aside $1,659,804 of PC&B
obligations and disbursements because the results of our statis-
tical analysis of a random sample indicated a potential error of
+ 10.13Z of the recorded PC&B. At Headquarters, we set-aside
$1,437,051 of obligations and disbursements because timesheets
supporting the charges to Superfund could not be located. We
also set-aside $68,054 of obligations and disbursements at Head-
quarters because the Las Vegas FMO could not provide adequate
supporting documentation for an adjustment to PC&B costs.
-51-
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EXHIBIT VI
(CONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Questioned Costs
We questioned $3,301 of obligations and disbursements at Region 3
due to specific errors in recording transactions noted in our
statistical sample of PC&B transactions. At NEIC, we questioned
$1,864 of obligations and disbursements as a result of differ-
ences between amounts recorded in the payroll records and the
supporting documentation. We questioned $6,292 of obligations
and disbursements at Headquarters because Las Vegas incorrectly
charged PC&B costs to Superfund fixed account numbers for
employees time charges that should have been charged to another
appropriation.
See Finding Number 2 and Schedule VIII for additional details.
Note 4. Travel and Transportation of Persons and Things
Set-aside Costs
We set-aside $1,904 of obligations and $2,063 of disbursements at
Region 1 because the Region was unable to locate supporting docu-
mentation for a portion of the costs allocated to Superfund;
costs were allocated that were not in the approved cost allo-
cation plan; and the basis for cost allocations (PC&B) was
set-aside in total. At Region 3, we set-aside $880 of obliga-
tions and $3,043 of disbursements because supporting documenta-
tation was not available. At Region 9, we set-aside $288 of
obligations and disbursements because there was insufficient
documentation to indicate the relationship to the Superfund
program.
Questioned Costs
We questioned $248 of obligations and disbursements at Region 10
because the cost charged for an airline ticket was for
non-Superfund purposes.
See Finding Numbers 3 and 4 and Schedule IX for additional de-
tails.
Note 5. Rent. Communications and Utilities
Set-aside Costs
At Region 1, we set-aside $14,739 of obligations and $27,788 of
disbursements because the total support services costs allocated
to Superfund were set-aside due to the set-aside of total PC&B
-52-
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EXHIBIT VI
(CONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
costs, which was the allocation basis. Additionally, Region 1
was unable to locate supporting documentation for a portion of
the costs allocated. At Region 3, we set-aside $12,673 of dis-
bursements because supporting documentation was not available.
At Region 4, obligations of $24,323 were set-aside because the
Region used an improper method of allocating support services
costs to Superfund. Also, we set-aside $16,421 of disbursements
for lack of supporting documentation and $9,059 of disbursements
because there was no written justification or statement of need
on the supporting documents.
Questioned Costs
We questioned $7,400 of obligations at Region 4 because duplicate
obligations were recorded in the support services costs allocated
to Superfund.
See Finding Numbers 3 and 4 and Schedule X for additional de-
tails.
Note 6. Printing and Reproduction
Obligations of $2,351 and disbursements of $3,726 were set-aside
at Region 1 because the Region was unable to locate supporting
documentation for a portion of costs allocated to Superfund and
the basis for cost allocations (PC&B) was set-aside in total.
See Finding Numbers 3 and 4 and Schedule XI for additional de-
tails.
Note 7. Other Contractual Services
Set-Aside Costs
We set-aside $5,342 of obligations and $22,823 of disbursements
at Region 1 because either the Region was unable to locate
supporting documentation for a portion of costs allocated to
Superfund ($2,717); the object class accounts for the charges
were not on the approved cost allocation plan ($14,764); or the
basis (PC&B) for cost allocations was set-aside in total
($5,342). We also set aside $132 of disbursements because Region
1 could not locate the supporting documentation. At Region 3, we
set-aside $3,400 of disbursements because supporting
documentation was not available. At Region 4, we set-aside a
-53-
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EXHIBIT VI
(CONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
NOTES TO STATEMENTS OF OBLIGATIONS AND DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
$20,000 obligation because the Region could not locate supporting
documentation. Also, at Region 4, we set-aside $19,540 of
obligations and $5,040 of disbursements because the obligating
documents did not contain a written justification or statement of
need. We also set-aside $16,748 of disbursements at Region 4
because the Region used an improper method of allocating support
services costs to Superfund. At Headquarters, we set-aside
$125,000 of obligations because the obligating documents recorded
at Region 4 contained no written justification for the obligation
of Superfund funds. Additionally, we set-aside $3,213,514 of
disbursements at Headquarters because the supporting documenta-
tion at RTF, Cincinnati, and Las Vegas did not contain sufficient
information to ensure the correct distribution of costs to the
benefiting appropriation.
Questioned Costs
We questioned $245 of obligations and disbursements at Region 9
because costs for a training course were not related to the Su-
perfund program. At Headquarters, we questioned $(20,334) of
obligations and $735,300 of disbursements which did not contain
sufficient information on the supporting documentation to deter-
mine the distribution of costs to the benefiting appropriation.
Additionally, at Headquarters, we questioned the disbursement of
duplicate invoices paid by the FMO at RTF, amounting to $230,434.
See Finding Numbers 1, 3, and 4 and Schedule XII for additional
details.
Note 8. Supplies. Materials and Equipment
We set-aside $14,996 of obligations and $24,266 of disbursements
at Region 1 because the Region was unable to locate supporting
documentation for a portion of costs allocated to Superfund
($9,270) and the basis (PC&B) for cost allocations was set-aside
in total ($14,996). Also, we set-aside $1,441 of disbursements
because Region 1 was unable to locate supporting documentation.
At Region 3, we set-aside $1,289 of disbursements for three items
which could not be located during our physical verification of
property items. At Region 4, we set-aside $155 of obligations
because supporting documentation could not be located. We also
set-aside $10,282 of disbursements at Region 4 due to a lack of
written justification or statement of need or the supporting
documentation.
See Finding Numbers 3, 4, and 5 and Schedule XIII for additional
details.
-54-
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SCHEDULE I
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF PERSONNEL COMPENSATION AND FRINGE BENEFITS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
OBLIGATIONS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 1,815,019
2,850,800
2,304,824
2,599,392
3,655,859
1,798,251
1,850,823
920,610
1,459,633
1,091,019
1,384,750
14,593.874
$36.324.854
Accepted
$ 1,804,311
2,855,290
-
2,598,892
3,655,859
1,798,251
1,850,823
920,610
1,459,633
1,091,019
1,388,840
14,593,874
$34.017.402
Set-aside
$ 10,708
-
2,300,711
-
-
-
-
-
-
-
-
-
$2.311.419
Questioned
$ -
(4,490)
4,113
500
-
-
-
-
-
-
(4,090)
-
$(3.967)
DISBURSEMENTS
Total
$ 1,816,001
2,853,359
2,300,720
2,599,113
3,262,060
1,820,994
1,808,751
913,767
1,483,614
1,070,016
1,384,750
14,550,658
$35.863.803
Accepted
$ 1,805,293
2,857,849
-
2,599,113
3,262,060
1,820,994
1,808,751
913,767
1,483,614
1,070,016
1,388,840
14,550,658
$33.560.955
Set-aside
$ 10,708
-
2,296,607
-
-
-
-
-
-
-
-
-
$2.307.315
Questioned
$ -
(4,490)
4,113
-
-
-
-
-
-
-
(4,090)
-
$(4,467)
.55-
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-------
SCHEDULE II
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF TRAVEL AND TRANSPORTATION OF PERSONS AND THINGS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Audit Lgcation
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
OBLIGATIONS
Total
$
1
$3
•••••••i
126,627
212,725
207,121
264,901
477,716
216,353
171,443
103,112
175,769
92,990
193,595
,052,644
.294.996
Accepted Set-aside Questioned
$ 126,627
212,725
207,121
259,462
477,716
216,353
171,443
103,112
174,224
92,990
193,595
1,052,644
$3.288,012
$ -
-
-
5,120
-
-
-
-
616
-
-
-
$5,736
$ -
-
-
319
-
-
-
-
929
-
-
-
$1,248
DISBURSEMENTS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 108,219
199,005
181,662
251,932
419,005
202,163
171,892
104,375
161,145
88,341
199,269
1.061,268
Accepted Set-aside Questioned
$ 106,473
199,005
181,662
249,002
419,005
202,163
171,892
104,375
160,529
88,341
199,269
1.061,268
$1,746
-
-
2,800
-
-
-
-
616
-
-
-
$ -
-
-
130
-
-
-
-
-
-
-
-
$3.148.276 $3.142.984
$5.162
$130
.
-56-
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SCHEDULE III
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF RENT, COMMUNICATIONS AND UTILITIES
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Audit Location
Region 1
2
3
It
5
6
7
8
9
10
NEIC
Headquarters
Totals
OBLIGATIONS
Total
$
4
$4
45,338
161,151
58,566
49,044
69,440
46,449
67,462
10,704
35,269
40,061
55,827
,310,964
.950,275
Accepted
$ 45,338
161,151
53,686
2,844
69,440
46,449
67,462
10,704
35,269
40,061
55,827
4,310,964
$4 . 899_. 195
Set -aside Questioned
$ -
-
4,880
46,200
-
-
-
-
-
-
-
-
$51,080
$ -
-
-
-
-
-
-
-
-
-
-
-
$ -
DISBURSEMENTS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 45,396
162,377
56,443
52,995
57,331
46,443
64,464
10,704
33,843
39,714
40,247
4.274,394
Accepted
$ 45,393
162,377
28,443
6,795
57,331
46,443
64,464
10,704
33,843
39,714
40,247
4,274,394
Set-aside Q
$ 3
-
28,000
46,200
-
-
-
-
-
-
-
-
uestione
$ -
-
-
-
-
-
-
-
-
-
-
-
$4.884,351 $4.810.148
$74.203
-57-
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-------
SCHEDULE IV
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF PRINTING AND REPRODUCTION
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 6,444
3,378
800
600
19,660
17,405
22,968
1,276
2,462
2,885
2,066
171.629
$251.573
OBLIGATIONS
Accepted
$ 6,444
3,378
800
19,660
17,405
22,968
1,276
,462
,885
Set-aside Questioned
2,
2,
2,
066
171.629
$ -
600
$
$600
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
DISBURSEMENTS
Total
$ 6,244
2,194
619
600
16,702
11,198
15,908
297
5,065
5,196
1,604
165.833
Accepted Set-aside Questioned
$ 6,244 $ -
2,194
619
600
16,702
11,198
15,908
297
5,065
5,196
1,604
165.833
$ -
-
-
-
-
-
-
-
-
-
-
-
$231.460
$600
$ -
-58-
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-------
SCHEDULE V
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF OTHER CONTRACTUAL SERVICES
FISCAL YEAR ENDED SEPTEMBER 30, 1984
OBLIGATIONS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$
2
1
4
2
1
2
1
253
$272
,065
,527
,478
,610
,408
330
,763
546
551
642
,420
,721
^068
,974
,600
,131
,094
,985
,663
,577
,582
,706
,381
,707
,759
.159
Accepted
$ 2
1
4
2
2
2
1
252
$271
,065
,527
,478
,558
,056
330
,763
546
551
642
.420
,770
,712
,974
,600
,131
.557
,409
,663
,577
,582
,706
,381
,707
,638
,925
Set -aside Questioned
$ -
-
-
50,955
-
-
-
-
-
-
-
.
$50.955
$
-
-
582
(647,424)
-
-
-
-
-
-
951.121
$304.279
DISBURSEMENTS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 123,378
414,034
508,798
924,049
343,495
79,354
103,267
105,029
157,550
123,993
448,485
175.138,585
Accepted"
$ 94,850
414,034
506,659
885,104
343,495
79.354
103,267
105,029
157,550
123,993
448,485
173,425,416
Set-aside Questioned
$ 28,528
-
2,139
38,945
-
-
-
-
-
-
-
2.288.030
$
-
-
-
-
-
-
-
-
-
-
(574,861
$178.470.017 $176.687.236 $2.357.642 $(574.861)
-59-
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SCHEDULE VI
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF SUPPLIES, MATERIALS AND EQUIPMENT
FISCAL YEAR ENDED SEPTEMBER 30, 1984
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
OBLIGATIONS
Total
$ 110,214
536,052
364,029
421,139
501,804
82,141
313,571
49,422
127,023
99,640
545,270
2.087,313
Accepted Set-aside Questioned
$ 110,214 $
536,052
364,029
358,852 53.900
501,804
82,141
313,571
' 49,422
127,023
99,275
545,270
2.087,313
$ -
-
-
8,387
-
-
-
-
-
365
'
-
$8,752
DISBURSEMENTS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 204.915
172,979
269,104
231,164
354,213
91,566
283,608
131,699
147,123
99,987
658.725
1.844.364
Accepted
$ 204,661
172,979
262,628
182,499
354,213
91,566
283,608
131,699
147,123
97,387
658.725
1.844.364
Set-aside Questioned
$ 254
-
6,476
48,665
-
-
-
-
-
2,600
-
-
$ -
-
-
-
-
-
-
-
-
-
-
-
$4.489.447
$57.995
$ -
-60-
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SCHEDULE VII
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF GRANTS, SUBSIDIES AND CONTRIBUTIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1984
OBLIGATIONS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Total
$ 30,000
-
232,000
-
-
10,000
-
-
-
67,300
-
102,349,566
Accepted
$ 30,000
-
232,000
-
-
10,000
-
-
-
67,300
-
102,349,566
Set-aside Questioned
$ - $
- -
-
-
_ _
-
-
-
-
-
-
-
Totals
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
$102,
688,866
$102.688.866 $
$
DISBURSEMENTS
Total
$
24 1
$28.
177,931
358,723
589,237
618,939
622,591
561,179
153,886
231,962
429,943
155,334
165,431
065,156
Accepted Set-aside
$ 177,931 $
358,723
589,237
618,939
622,591
561,179
153,886
231,962
429,943
155,334
23.724,118
$27,623,843 $
Questioned
$
-
-
-
-
-
-
-
—
441,313
$441,313
-61-
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-------
SCHEDULE VIII
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF PERSONNEL COMPENSATION AND FRINGE BENEFITS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
OBLIGATIONS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Total
$ 1,163,513
1,765,141
1,372,753
1,659,804
1,810,381
1,196,967
1,292,695
610,942
1,048,402
825,972
1,069,012
12,590,582
Accepted
$
1,765,141
1,369,452
-
1,810,381
1,196,967
1,292,695
610,942
1,048,402
825,972
1,067,148
11,079,185
Set-aside
$1,163,513
-
-
1,659,804
-
-
-
-
-
-
-
1.505,105
Questioned
$ -
-
3,301
-
-
-
-
-
-
-
1,864
6,292
Totals
$26.406.164
$4.328.422
$11.457
DISBURSEMENTS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Total
$ 1,163,259
1,730,211
1,361,019
1,659,804
1,810,335
1,196,954
1,292,695
610,942
1,048,810
825,973
1,069,012
12.591.618
Accepted
$
1,730,211
1,357,718
-
1,810,335
1,196,954
1,292,695
610.942
1,048.810
825,973
1,067,148
11.080,221
Set-aside
$1,163,259
-
-
1,659,804
-
-
-
-
-
-
-
1.505.105
Questioned
$
-
3,301
-
-
-
-
-
-
-
1.864
6,292
Totals
$26.360.632
$4.328.168
-62-
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-------
SCHEDULE IX
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF TRAVEL AND TRANSPORTATION OF PERSONS AND THINGS
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
OBLIGATIONS
Total
$
1
$2
64,559
142,704
124,722
166,254
219,191
108,124
179,481
46,787
93,769
55,505
176,120
,006.703
,383,919
Accepted Set-aside Questioned
$ 62,655
142,704
123,842
166,254
219,191
108,124
179,481
46,787
93,481
55,257
176,120
1.006,703
$2.380,599
$1,904
-
880
-
-
-
-
-
288
-
-
-
$3.072
$ -
-
-
-
-
-
-
-
-
248
-
-
$248
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
DISBURSEMENTS
Total
$ 62,908
119,866
119,520
159,503
192,493
105,598
152,280
42,486
92,664
53,088
152,872
910.057
Accepted
$ 60,845
119,866
116,477
159,503
192,493
105,598
152,280
42,486
92,376
52,840
152,872
910.057
Set -aside Questioned
$2,063
-
3,043
-
-
-
-
-
288
-
-
-
$ -
-
-
-
-
-
-
-
-
248
-
-
$2,163.335 $2.157.693
$5,394
$248
-63-
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-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
SCHEDULE X
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF RENT, COMMUNICATIONS AND UTILITIES
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
OBLIGATIONS
Total
$
3
$3
34,173
111,520
20,492
33,041
27,924
41,360
94,179
7,390
17,885
21,888
31.606
,064,075
,505.533
Accepted
$ 19,434
111,520
20,492
1,318
27,924
41,360
94,179
7,390
17,885
21,888
31,606
3.064,075
$3.459.071
Set -aside Questioned
$14,739
-
-
24,323
-
-
-
-
-
-
-
-
$39,062
$ -
-
-
7,400
-
-
-
-
-
-
-
-
$7,400
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
DISBURSEMENTS
$
Total
33,728
117,241
23,767
26,080
28.378
45.191
75,451
8,984
16,000
21,385
30,192
3.116.370
Accepted
$ 5,940
117,241
11,094
600
28,378
45,191
75,451
8.984
16.000
21,385
30,192
3.116,370
Set-aside
$27,788
-
12,673
25,480
-
-
-
-
-
-
-
-
Questioned
$ -
-
-
-
-
-
-
-
-
-
-
-
$3.542.767 $3.476.826
-64-
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-------
SCHEDULE XI
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF PRINTING AND REPRODUCTION
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Audit_Location
Region 1
2
3
4
5
6
7
8
9
10
HE 1C
Headquarters
Totals
OBLIGATIONS
Total
$ 8,382
1,309
1,474
204
3,640
13,728
17,493
185
16,817
2,053
2,912
155,077
$223,274
i
Accepted
$ 6,031
1,309
1,474
204
3,640
13,728
17,493
185
16,817
2,053
2,912
155,077
$220,923
Set-aside
$2,351
-
-
-
-
-
-
-
-
-
-
-
$2.351
Questioned
$ -
-
-
-
-
-
-
-
-
-
-
-
$ -
DISBURSEMENTS
Total
$ 3,802
1,309
1,052
349
3,618
19,182
14,092
185
14,543
954
2,750
122,595
$184,431
Accepted
$ 76
1,309
1,052
349
3,618
19,182
14,092
185
14,543
954
2,750
122,595
$180.705
Set-aside
$3,726
-
-
-
-
-
-
-
-
-
-
-
$3.726
Questioned
$ -
-
-
-
-
-
-
-
-
-
-
-
$ -
-65-
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-------
SCHEDULE XII
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF OTHER CONTRACTUAL SERVICES
FISCAL YEAR ENDED SEPTEMBER 30, 1983
OBLIGATIONS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$ 109,628
241,144
95,826
74,006
72,190
65,556
89,891
107,038
134,807
41,962
1,004,719
136,670,033
$138,706.800
Accepted
$ 104,286
241,144
95,826
34,466
72,190
65,556
89,891
107,038
134,562
41,962
1,004,719
136,565.367
$138.557.007
Set-aside
$ 5,342
-
-
39,540
-
-
-
-
-
-
-
125.000
$169.882
Questioned
$
-
-
-
-
-
-
-
245
-
~
(20,334)
$(20.089)
DISBURSEMENTS
Total
$ 80,992
242,983
82,676
67,744
57,711
46,012
70,722
18,606
147,416
40,380
821,771
93,526,183
$95.203.196
Accepted
$ 58,037
242,983
79,276
45,956
57,711
46,012
70,722
18,606
147,171
40,380
821,771
89,346,935
$90.975.560
Set-aside
$ 22,955
-
3,400
21,788
-
-
-
-
-
-
-
3.213.514
$3.261.657
Questioned
$
-
-
-
-
-
-
-
245
-
-
965,734
$965.979
-66-
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-------
SCHEDULE XIII
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
SCHEDULE OF SUPPLIES, MATERIALS AND EQUIPMENT
FISCAL YEAR ENDED SEPTEMBER 30, 1983
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
OBLIGATIONS
Total
$ 178,573
117,488
250,254
105,906
253,014
325,045
601,508
117,191
76,778
103,036
967,836
1,832,195
$A,928,82A
Accepted
$ 163,577
117,488
250,254
105,751
253,014
325.045
601,508
117,191
76,778
103,036
967,836
1,832,195
$4,913,673
Set-aside
$14,996
-
-
155
-
-
-
-
-
-
-
-
$15,151
Questioned
$ -
-
-
-
-
-
-
-
-
-
-
-
$ -
DISBURSEMENTS
Audit Location
Region 1
2
3
4
5
6
7
8
9
10
NEIC
Headquarters
Totals
Total
$
1
$3
46,963
111,488
149,832
68,203
284,918
315,218
486,480
38,286
69,907
107,172
462,694
,623,911
,765,072
Accepted
$ 21,256
111,488
148,543
57,921
284,918
315,218
486,480
38,286
69,907
107,172
462.694
1,623,911
$3,727,794
Set-aside Questioned
$25,707
-
1,289
10,282
-
-
-
-
-
-
-
-
$37,278
$ -
-
-
-
-
-
-
-
-
-
-
-
$ -
-67-
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-------
APPENDIX
-------
-------
APPENDIX 1
»
\
9 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
' WASHINGTON. D.C. 20460
JUL 2 9 I98T
OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Response to Draft Audit Report No. P5EH5-11-0034
Consolidated CERCLA Fuiancial and Compliance Audit
ligationa/^nd Disbursements for FY 1984 and 1983
FROM: j^>^£,. M<5rgan/>fCinghoi
.stant ^Administrator
TO: Ernest E. Bradley III
Assistant Inspector General for Audit
In response to your memorandum of May 26, 1987, this memo
transmits our response to the subject draft consolidated audit
report.
Initially, I would like to say I believe EPA has made
significant strides in improving the overall-management of the
Superfund program since its inception. The previous assistance
of the Inspector General in identifying areas for improvement
and the commitment of our managers to implement these and other
improvements have led us to achieve the progress we have.
We have reviewed very carefully each of the recommendations
contained in the audit. In coordinating our response with regional
offices, we have not duplicated their responses to earlier audits
nor addressed followup actions they have completed. Rather, our
response deals with the consolidated audit which is focused
primarily on Headquarters issues.
The attachment to this memorandum provides the individual
responses to every finding and recommendation identified in the
report. For those recommendations where action is still pending
or new action is planned, we have provided milestone dates.
This response covers the audit's four major findings and
recommendations addressing fiscal accountability: contracts
disbursements; personnel compensation and benefits charging;
allocation of Regional Support Service costs; and Superfund
documentation. We have also addressed those other areas in
the audit requiring management attention: personal property
procedures; letter of credit procedures; and cost discounts.
-68-
-------
-------
APPENDIX 1
(CONTINUED)
If you have questions on this audit response, please
contact John Sandy, Director of the Resource Management Division
at 382-4160.
-69-
-------
-------
APPENDIX 1
(CONTINUED)
Attachment
DETAILED RESPONSE TO IG AUDIT FINDINGS
Finding No. 1•
CONTRACT DISBURSEMENTS SHOULD BE CHARGED TO THE PROPER
APPROPRIATION
RECOMMENDATION
* Ensure that the appropriate Agency offices implement
and monitor the effectiveness of the new procedures for
identifying contract costs and properly recordiag Super-
fund disbursements in the Financial Management System.
RESPONSE
As stated in the audit, effective May 14, 1985 procedures
were changed to require project officers to allocate the
invoice total to the correct appropriation. The procedures
require EPA program offices to identify, prior to contract
obligation, how multiple appropriations will be distributed
among the various activities of the contract. At time of
payment, the project officer identifies for the servicing
finance office the specific appropriation from which
disbursements are made.
These procedures were clarified for EPA program offices on
June 1, 1987 by the Directors of Procurement and Contracts
Management Division (PCMD) and Financial Management
Division.
EPA contracts contain a provision requiring contractors to
identify vouchered costs by work assignment or delivery order
This "break out" of costs assists the project officer in
identifying the proper appropriation for disbursement.
Nonconforming vouchers are returned for correction.
A subsequent review by GAO in early 1986 of 302 invoices
selected at random revealed that the project officers are
providing in all cases the necessary accounting data for
the Financial Management Division (FMD) to properly
process multi-appropriation contract disbursements.
Additionally, review by the CPA firm of Tichenor and Eiche
during the FY 1986 Superfund Trust Fund Audit confirmed
the project officer approval process implemented in June
1985 does provide FMO with the required costing data.
In April 1985, FMD-Research Triangle ParX entered into a
contract with the independent CPA firm Arthur Young to
reconcile all open contracts funded fro» multiple appro-
priations- This project was completed on September 9,
1986.
-70-
-------
-------
APPENDIX 1
CONTINUED)
FMD is requiring those contractors with site-specific
costs prior to October 1985 to provide reconciled costs
by site and appropriation for input into the Financial
Management System. This project is scheduled to be
completed by December 1987.
FMD has included a section on financial management of
contracts in the Resources Management Directives System
2550 D, "Financial Management of the Superfund Program."
This document is currently in draft form and is targeted
for release by September 30, 1967.
FMD's transaction testing program reviews contract -
disbursements as part of its annual review program of
financial controls to ensure the integrity of all Super-
fund transactions. We have conducted this transaction
testing at Headquarters, Research Triangle Park (RTP),
Cincinnati and Las Vegas for 1987. In FY 88, FMD will
again conduct this transaction testing in these locations.
Regional offices are required to conduct their own transaction
testing on an annual basis. This is one of the items
routinely checked during the Management Assistance Reviews
of Regional offices.
In response to the audit findings, PCMD will emphasize
the importance of ensuring that Agency contracting and
program personnel recognize the need to record the proper
allocation of funds in accordance with these-procedures.
1) We have recently hired a number of contract specialists
for Superfund. We have scheduled ten orientation work-
shops for these employees beginning July 31, 1987.
Proper disbursement and recording of appropriations
will be the subject of a workshop.
j.' PCMD conducts seminars on procurement subjects for
its personnel during each fiscal year. These seminars
highlight new or changed regulations or policies as
well as identify problem areas requiring renewed
attention. Problem areas described in the audit
report will be the subject of a seminar given in FY
1988.
3) PCMD requires program offices to nominate trained and
certified individuals to serve as project officers.
An essential function of a program officer is to
identify the proper appropriation from which voucher
payments are disbursed. PCMD will revise the Contracts
Management Manual by November 1987 to require the
program offices to name an "alternate" project
officer. This will assure that at least one person
is always available to review and approve vouchers.
and to recommend disbursements from the proper
appropriation.
-------
-------
APPENDIX 1
(CONTINUED)
4) PCMD requires two training courses for all project
officers. One course specifically addresses pre-award
contract matters. The subject of multiple appro-
priations is addressed in both courses. Emphasis
will be devoted to this subject in all future courses.
-72-
-------
-------
APPENDIX 1
(CONTINUED)
Finding No. 2.
COMPLIANCE WITH SUPERFUND CHARGING POLICIES FOR PERSONNEL
COMPENSATION AND BENEFITS NEEDS IMPROVEMENT
RECOMMENDATION
* Establish a timeframe for reviewing the set-aside and
questioned costs by appropriate Agency officials and for
adjusting Agency financial records based on review results.
RESPONSE
The OIG has reviewed our efforts to resolve set-aside and
questioned costs for the Environmental Monitoring Systems
Laboratory/Las Vegaa and has agreed that no further
adjustments are necessary.
In the response to the Headquarters draft audit, the
Comptroller stated that the Office of Waste Programs
Enforcement "had made several attempts to locate the
missing timesheets and believes any further attempts to
locate them would be futile." In the final report the
OIG accepted this response.
Region I is in the process of reviewing and reconciling
data from program offices to assure all Personnel
Compensation and Benefits (PCfcB) costs are properly
accounted for and that supporting documentation is
available. Upon completion of this review. Region I
will submit a report to the OIG in August 1987 on the
disposition of costs set-aside in the audit.
Region II reports that they have reviewed the questioned
costs and have completed the necessary adjustments to the
Agency finance system.
Region III has completed its review of FY 84 and has
adjusted the Agency financial records per the
recommendations.
Region IV submitted all corrections to the FY 83 payrolls
on August 25, 1986. The Region reports the OIG must
audit the corrections before the payroll can be restored.
The National Enforcement Investigations Center (NEIC) has
requested the documentation for the time period in question,
They will then proceed to process the labor redistributions
and adjust those questioned costs. NEIC will send the
change orders to their payroll office by July 24, 1987.
-------
-------
APPENDIX 1
(CONTINUED!
One of the procedures in the "Action Site File Project,"
a project being undertaken to prepare documentation files
for every Superfund site, is to reconcile all site payroll
charges with timesheets or timecards. During this process,
all undocumented site costs will be reclassified to the
appropriate account.
RECOMMENDATION
Re-emphasize policies and procedures requiring the recon-
ciliation of hours on timesheets with the hours recorded
in the payroll distribution reports (RCB-3A) for each pay
period.
RESPONSE
FMD is completing revised guidance (Resources Management
Directives System 2550 D) for the Superfund program, which
includes timekeeping for Superfund. This guidance is
scheduled for release by September 30, 1987.
FMD's transaction testing program, referenced in our
response to finding/recommendations number 1, includes an
extensive review of the Agency's PC&B charges.
During the recent, implementation of the new Payroll,
Accounting and Reporting System (PARS), FMD conducted
training sessions for every program office in Heaquarters
emphasizing Superfund PC&B charging policies. The PARS
training sessions covered documentation requirements for
Superfund charges and included specific instructions for
preparing timesheets and payroll redistributions.
_
-74-
-------
-------
APPENDIX 1
(CONTINUED)
Finding No. 3.
IMPLEMENTATION OF PROCEDURES FOR ALLOCATION OF REGIONAL. SUPPORT
SERVICES COSTS NEEDS IMPROVEMENT
RECOMMENDATION
* Require all appropriate Agency offices to implement the
June 17, 1982, Superfund Charging Policies Memorandum;
"Procedures for Allocating Fiscal Year 1983 Regional
Support Services Costs to Superfund," dated November 16,
1982; and subsequent Agency guidance regarding allocations
of support services costs.
* Monitor all appropriate offices to ensure that each has
formally developed, submitted for approval, and implemented
a support services cost allocation plan with the provision
to adjust the distribution basis from budgeted to actual
data.
RESPONSE
Both chapter 17 of the Financial Management Manual, which
supercedes the procedures referred to by the IG, and the
draft Resources Management Directives System 2550 D which
will supercede chapter 17, require the implementation of
a standard support cost allocation plan that meets the IG
criteria.
The FMD Financial Managers Quality Assurance Guide requires
that the cost allocation be reviewed to assure that it
follows the standard plan. The standard plan is one of the
items routinely checked during the Management Assistance
Reviews.
RECOMMENDATION
Review the set-aside support service costs to determine
whether it is feasible and cost-effective to adjust the
amounts charged, in order to accurately reflect Superfund's
proportionate share. If so, direct the appropriate offices
to make the adjustments.
RESPONSE
Region I is in the process of reviewing and reconciling
data from program offices to assure all PC&B costs are
properly accounted for and the supporting documentation
is available. Upon completion of this review, Region I
will submit to the OIG in August 1987 a report on the
disposition of PC&B and other costs set aside in the
audit.
-------
-------
APPENDIX 1
(CONTINUED)
Region III reports that the allocation of regional support
was reaudited during the FY 86 Trust Fund Audit and that
the Regional office provided hard copy documentation to
the auditors to support the Region's allocation method for
FY 83 and FY 84.
Region IV submitted to the IG contract auditors on
April 28, 1987 the recalculations of the fiscal years
1983 and 1984 Super fund cost allocations in accordance
with the Superfund charging policies.
-76-
-------
-------
APPENDIX 1
(CONTINUED)
Finding No. 4.
DOCUMENTATION FOR SUPERFUND TRANSACTIONS SHOULD BE IMPROVED
RECOMMENDATION
" Notify all Agency offices of the record retention
requirements for documentation supporting Superfund
transactions.
• Develop policies and procedures to provide specific
requirements for written justification and statements of
need on obligation and disbursement documents for Superfund
transactions.
RESPONSE
The revised Resources Management Directive System 2550 D,
"Financial Management of the Superfund Program" to be
issued by September 30, 1987 includes policies and
procedures on records retention and on including sufficient
information on Superfund-related documents to ensure that .
Superfund is the correct appropriation to charge.
RECOMMENDATION
Establish a timeframe for obtaining documentation in
support of the set-aside costs and for adjusting the
Agency's financial records if documentation is not obtained
RESPONSE
Region I is scheduled to submit to the OIG in August 1987
a report on the distribution of set-aside costs from the
audit report.
Region III obtained the documentation to support Superfund
transaction set-aside costs and provided the documents to
the auditors during their FY 86 Trust Fund Audit.
Region IV submitted a response to the OIG dated September 16,
1986 addressing all but one of these set-aside obligations
and disbursements. The OIG responded on September 24, 1986
that Region IV1s proposed actions were responsive to the
audit's findings and recommendations. To obtain the
necessary documentation on the remaining $20,300 in FY 84
obligations set-aside. Region IV has requsted help from
RTF. RTF has recently located the supporting documentation.
Region IV will submit this to the OIG by September 1, 1987.
-77-
-------
-------
APPENDIX 1
(CONTINUED;
Region IX reports that all set-aside and questioned costs
were researched in 1986 after the Region received the
audit report. The questioned costs were covered and
additional documentation was obtained to support the
set-aside costs. This documentation was provided to the
OIG on June 13, 1986.
-78-
-------
-------
APPENDIX 1
(CONTINUED)
Finding No. 5.
PERSONAL PROPERTY MANAGEMENT PROCEDURES SHOULD BE STRENGTHENED
RECOMMENDATION
• Ensure that all accountable property items purchased with
CERCLA funds since the inception of the program are
accounted for and entered into the PPAS listing for each
accountable area.
RESPONSE
We are currently upgrading the Personal Property Accounting
System (PPAS) to allow Agency users to identify multi-
appropriations and account numbers. This should significantly
improve our ability to track Superfund property, as well
as Superfund property purchases which are split funded.
We plan to have the new PPAS implemented in September
1987, and an Agencywide policy in place by September
1988. This policy will require each accountable officer
to review his/her data and ensure entry of all Superfund
account numbers in the new system.
RECOMMENDATION
Coordinate with the Director, Facilities Management and
Services Division and establish policies and procedures
requiring capitalized personal property accounts in the
FMS be reconciled with items and amounts recorded in the
PPAS on a periodic basis (at least annually).
RESPONSE
The Facilities Management and Services Division and the
Financial Management Division have already begun to work
together to improve reconciliation procedures for property
reported in FMS and PPAS. This will be completed in
conjunction with Phase Two of the Integrated Financial
Management System (IFMS) plans for FY 88.
RECOMMENDATION
Instruct the Director, Facilities Management and Services
Division to establish policies and procedures to be
implemented by the Property Management Offices, for
follow-up on open purchase orders for property and
equipment.
-------
-------
APPENDIX 1
(CONTINUED)
RESPONSE
Generally, accountable officers have a system to track
purchase orders for property and equipment. However, the
focus of this activity is on the receipt of property,
rather than on the entry of data into PPAS- We will
review this issue in FY 1988 and make recommendations to
the accountable officers by September 1988 for improved
data entry.
RECOMMENDATION
Provide additional staffing and training, as necessary,
instructing property management personnel in their duties,
emphasizing the weaknesses and instances of non-compliance
with existing controls indicated in this report.
RESPONSE
We have 'requested additional resources for property
management in the Agency's FY 1989 budget process in order
to strengthen our efforts as National Program Managers
for property.
A major Agency-wide Property Management Task Force has
been established to review all current EPA property policy.
The goal of this Task Force is to issue in draft form, by
September 30, 1987, one EPA Order which standardizes
property management policies, encompasses all Superfund
personal property acquisitions, and addresses cost recovery
and Trust Fund reimbursements. These policies and procedures
will be finished and distributed to all property management
personnel by September 1988 and will be incorporated in
the training of these individuals.
In addition, we are sponsoring an EPA Institute course on
property management that will be offered in Cincinnati in
August 1987. We are also developing a course for Headquarters
custodial officers that will be available by the middle of
FY 1988.
-80-
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-------
APPENDIX 1
(CONTINUED)
Finding No. 6.
LETTER OF CREDIT ACCOUNTING PROCEDURES NEED IMPROVEMENT
RECOMMENDATIONS
* Develop policies and procedures to be incorporated into
the EPA Accounting Manual requiring periodic reconcili-
ation of available letter of credit balances and
drawdowns from FMS records to U.S. Treasury records and
recipient reports-
" Establish a formal monitoring system to ensure that
recipients of letters of credit are filing the required
reports timely and accurately.
RESPONSES
FMD, through its Fiscal Policies and Procedures Branch,
will review by September 30, 1987 its current letter of
credit procedures to ensure that the appropriate
reconciliations are included.
FMD will study the current requirements and procedures
to determine, by September 30, 1987, if any additional
monitoring of recipients of letters of credit is necessary.
The responsibility to ensure that recipients comply with
the letter of credit procedures primarily rests with
regional offices. The Grants Administration Division (GAD)
will monitor Regional compliance with letter of credit
requirements through their management oversight reviews.
During these reviews GAD will evaluate the regional offices'
letter of credit procedures and spot check compliance
with these procedures, in particular the findings in the
audit, through a random file search.
GAD has tentatively scheduled these 1987 reviews of
Regional offices as follows:
Regions
Region I
Region II
Region III
Region IV
Region V
Region VI
Region VII
Region VIII
Region IX
Region X
Week of
November 9
November 16
November 30
October 12
August 10
October 19
August 3
December 14
October 5
October 26
-81-
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APPENDIX 1
(CONTINUED;
Finding No. 7.
COST-EFFECTIVE DISCOUNTS SHOULD BE TAKEN OR RECORDED AS LOST
RECOMMENDATION
Review the procedures established by the FMD-RTP for
processing invoices which offer cost-effective discounts
and determine if the system is cost-effective for other
Agency offices.
RESPONSE
FMD, through its Fiscal Policies and Procedures Branch,
will review the procedures established by the FMO-RTP for
processing invoices which offer cost-effective discounts.
This review will be completed by September 30, 1987.
RECOMMENDATION
Emphasize to the Financial Management Officers the importance
of expediting the processing of invoices in instances where
discounts are offered for prompt payment -
Emphasize to all project offices, on-scene coordinators,
and their supervisors the need and requirement to process
contractor invoices within seven days after receipt so the
Agency can take advantage of discounts offered for prompt
payment.
Require performance standards on timely processing of
invoices offering discounts be incorporated into performance
agreement for project officers, on-scene coordinators,
their supervisors and other appropriate personnel.
RESPONSE
FMD will re-emphasize, by September 30, 1987, to the
Financial Management Offices the importance of processing
invoices in a timely manner, especially where discounts
are available.
We do not agree with the recommendation to require a
specific performance standard on timely processing of
invoices offering discounts be incorporated into performance
agreements. To monitor contractor performance, EPA
already requires that all personnel with these responsi-
bilities have a standard on contract administration
duties. The extent and nature of the standard is left
to the discretion of each employee and supervisor.
-82-
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APPENDIX 1
(CONTINUED)
RECOMMENDATION
Instruct the Financial. Management Officers to use general
ledger account number 601.8, Discounts Lost, to record
discounts offered but not taken on vendors' invoices.
RESPONSE
FMD will also instruct the Financial Management Offices
on the use of account number 601.8, Discounts Lost, by
September 30, 1987.
FMD's transaction testing program reviews transactions
for the proper handling of discounts offered.
FMD-RTP issued a delivery order on May 12, 1987 to an
independent contractor to provide suggested alternatives
to the current project officer approval process to develop
a more efficient and expeditious system. The contractor's
proposals are expected to be presented and evaluated
by December 31, 1987.
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APPENDIX 1
(CONTINUED
Finding No. 8.
CERCLA TRUST FUND RECEIVABLES SHOULD BE RECORDED TIMELY
No recommendation was made.
-84-
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SCHEDULES
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