UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
SEP 211989
J
MEMORANDUM
OFFICE OF
THE INSPECTOR GENERAL
SUBJECT:
O^FROM
TO:
Audit Report P1SFF8-11-0048-9100488
Obligations and Disbursements Of The
Hazardous Substance Superfund For The
Fiscal Year Ended September 30, 1988
Ernest E. Bradley III
Assistant Inspector
neral for Audit (A-109)
Charles L. Grizzle
Assistant Administrator for Administration
and Resources Management (PM-208)
SCOPE AND OBJECTIVES
Leonard G. Birnbaum and Company (LGB&Co.) has completed an audit
of obligations and disbursements of the Hazardous Substance
Superfund for the fiscal year ended September 30, 1988. Their
report, based on field work performed from July 18, 1988, through
February 24, 1989, is attached. The audit was conducted in
accordance with generally accepted auditing standards, including
the U.S. General Accounting Office's Standards For Audit Of
Governmental Organizations, Programs. Activities, and Functions
(1981 Revision).
The audit objectives were to determine if the U.S. Environmental
Protection Agency:
1. Presented the Schedule of Obligations and the Schedule
of Disbursements fairly in accordance with applicable laws,
regulations, and guidelines;
2. Complied with laws and regulations which, if not
followed, might have a material effect on the Schedules; and
3. Established an adequate system of internal accounting
control to ensure the reliability of applicable financial
management records.
Additionally, the audit included a review of the status of
findings and recommendations included in the prior audit report
-------
Audit work was performed at the 10 regional offices, 3 major
laboratory facilities, the National Enforcement Investigations
Center, and Headquarters. At the completion of the field work at
each location, exit conferences were held with responsible Agency
officials. The Agency's position on the findings discussed at
the exit conferences, as well as the written comments provided to
the draft of this report, are summarized at appropriate locations
in the report. The complete written responses to the draft
report are included as appendix 3 of this report.
SUMMARY OF AUDIT RESULTS
The auditors concluded that the Schedule of Obligations and the
Schedule of Disbursements for fiscal 1988 were fairly presented.
However, they identified a material weakness in accounting for
and controlling personal property, and weaknesses in recording
and managing accounts receivable, allocating support costs, and
documenting and recording obligations and disbursements, includ-
ing those related to personnel compensation and benefits. None
of these weaknesses had a material effect on the Schedule of
Obligations or the Schedule of Disbursements.
The auditors found that managing personal property continued to
be an area requiring improvement during fiscal 1988. Some of
the property paid for during the year was not recorded in the
Personal Property Accounting System (PPAS) or could not be
located. For this property, the documentation for the correc-
tions made to PPAS should be kept for the auditors to review
later. In addition, the auditors found that, contrary to Agency
guidance, letters accepting assumption of custodial responsi-
bilities were not always submitted by the custodial officers.
The auditors recommend that the directive be enforced or changed.
Recording the amount of capital equipment in the accounting
system also continued to be a problem. Although the Agency's
long-range plans include implementing a module in the new
Integrated Financial Management System on property, the Agency
took interim measures to ensure the accounting system accurately
reflects Agency assets. However, most of these measures were
performed in fiscal 1989; the effects should be reflected during
the audit of fiscal 1989 or 1990. For example, the property
management directives are being substantially revised. The
auditors would like copies of the revised guidance documents.
To record Superfund accounts receivable in a more timely manner,
the Agency transferred responsibility for the function from
Headquarters to the regional offices. The delegation became
-------
effective late in fiscal 1988. To improve managing receivables,
the Agency is providing additional reports and, during fiscal
1989, implemented the accounts receivable module of the Inte-
grated Financial Management System. Because of these efforts,
the auditors are not recommending further corrective action in
this report.
The auditors identified some errors in the amounts recorded for
various obligations and disbursements, including support
services. Except for four disbursements questioned and the
understatement in the amount of support services recorded for
Region 1 and Cincinnati, the financial management officers
generally corrected the records. The documentation supporting
the corrections should be kept for the auditors to review later.
Concerning the support services in Region 1 and Cincinnati, the
auditors agree that the amounts are not material; however, the
budget ceilings should be monitored so Superfund will be allo-
cated its fair share of such costs. The auditors also recommend
that the disbursement transactions in question be appropriately
adjusted.
ACTION REQUIRED
As the action official, you are required under EPA Directive 2750
to provide this office with a written response to the audit
report within 90 days of the audit report date. Please reference
the audit report number in your response. Also, send a copy of
your response to the Agency Internal Control Official [ATTN:
Director, Resource Management Division (PM-225)] and the Audit
Follow-up Coordinator [ATTN: Program Operations Support Staff
(PM-208)].
Should you or your staff have any questions about this report,
please contact Kenneth D. Hockman, Divisional Inspector General
for Audit, Internal Audit Division at 382-4930, or Gordon
Milbourn of his staff at 382-4962.
Attachment
cc: See attached distribution list
-------
DISTRIBUTION OF THE AUDIT REPORT
A. Office of the Inspector General (A-109)
B. Headquarters Offices
Assistant Administrator for Administration and
Resources Management (PM-208)
Assistant Administrator for Enforcement and
Compliance Monitoring (LE-133)
Assistant Administrator for Solid Waste and
Emergency Response {OS-100)
Assistant Administrator for Research and
Development (RD-672)
Associate Administrator for Regional Operations (A-101)
Comptroller, Officer of the Comptroller (PM-225)
Director, Financial Management Division (PM-226F)
Chief, Headquarters Accounting Operations Branch (PM-226)
Chief, Superfund Accounting Branch (PM-226F)
Director, Office of Administration (PM-217)
Director, Facilities Management and Services
Division (PM-215)
Chief, Security and Property Management Branch (PM-215)
Director, Procurement and Contracts Management
Division (PM-214F)
Director, Office of Emergency and Remedial Response (OS-200)
Director, Office of Waste Programs Enforcement (OS-500)
Agency Follow-up Official [ATTN: Director, Resource
Management Division (PM-225)]
Audit Follow-up Coordinator [ATTN: Program Operations
Support Staff (PM-208)]
-------
C. Regional Offices
Regional Administrators, Region 1 through 10
Financial Management Officers, Regions 1 through 10
D. Others
Director, National Enforcement Investigations Center
Director, Office of Administration and Resources
Management, Research Triangle Park (MD-20)
Director, Financial Management Division, Research
Triangle Park (MD-32)
Director, Office of Administration, Cincinnati
Financial Management Officer, Cincinnati Financial
Management Center
Financial Management Officer, Las Vegas Accounting
Operations Office
-------
Hw
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
REPORT OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS
OF THE
HAZARDOUS SUBSTANCE SUPERFUND
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1988
§ HEADQUARTERS LIBRARY
~ ENVIRONMENTAL PROTECTION AGENCY
CM WASHINGTON, D.C 20460
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
REPORT.OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS
OF THE
HAZARDOUS SUBSTANCE SUPERFUND
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1988
TABLE OF CONTENTS
SCOPE AND OBJECTIVES 1
SUMMARY OF AUDIT RESULTS 2
BACKGROUND 13
INDEPENDENT AUDITOR'S REPORT ON THE SCHEDULES OF
OBLIGATIONS AND DISBURSEMENTS 15
INDEPENDENT AUDITOR'S REPORT ON INTERNAL ACCOUNTING
CONTROL 17
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS
AND REGULATIONS 20
FINDINGS AND RECOMMENDATIONS
1. IMPROVEMENTS ARE NEEDED IN ACCOUNTING FOR
AND CONTROLLING PERSONAL PROPERTY 22
2. EPA NEEDS TO MAKE IMPROVEMENTS IN RECORDING
AND MANAGING ACCOUNTS RECEIVABLE 29
3. WEAKNESSES WERE NOTED IN THE ALLOCATION OF
GENERAL SUPPORT COSTS TO SUPERFUND 34
4. OBLIGATIONS WERE QUESTIONED DUE TO RECORDING
ERRORS AND LACK OF DOCUMENTATION 38
5. DISBURSEMENTS WERE QUESTIONED DUE TO RECORDING
ERRORS AND LACK OF DOCUMENTATION OR APPROVAL 41
6. PERSONNEL COMPENSATION COSTS WEREQUESTIONED
< DUE TO RECORDING ERRORS AND LACK OF DOCU-
MENTATION 45
-------
TABLE OF CONTENTS (CONTINUED)
EXHIBITS
EXHIBIT I
EXHIBIT II
EXHIBIT III
EXHIBIT IIIA
EXHIBIT IV
EXHIBIT IV A
EXHIBIT IV B
EXHIBIT V
EXHIBIT VI
EXHIBIT VII
SCHEDULE OF OBLIGATIONS, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
SCHEDULE OF DISBURSEMENTS, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
SUMMARY SCHEDULE OF OBLIGATIONS
QUESTIONED, FISCAL YEAR ENDED
SEPTEMBER 30, 1988
DETAIL SCHEDULE OF NONPAYROLL
OBLIGATIONS QUESTIONED, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
SUMMARY SCHEDULE OF DISBURSEMENTS
QUESTIONED, FISCAL YEAR ENDED
SEPTEMBER 30, 1988
DETAIL SCHEDULE OF PAYROLL DIS-
BURSEMENTS QUESTIONED, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
DETAIL SCHEDULE OF NONPAYROLL DIS-
BURSEMENTS QUESTIONED, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
SUMMARY SCHEDULE OF OBLIGATIONS
ATTRIBUTE RESULTS, RECEIPT
OF OBLIGATING DOCUMENT WAS
TIMELY, FISCAL YEAR ENDED
SEPTEMBER 30, 1988
SUMMARY SCHEDULE OF OBLIGATIONS
ATTRIBUTE RESULTS, POSTING OF
OBLIGATIONS WAS TIMELY, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
SUMMARY SCHEDULE OF DISBURSEMENTS
ATTRIBUTE RESULTS, INVOICE WAS
PAID ON TIME BUT NOT EARLY,
FISCAL YEAR ENDED
SEPTEMBER 30, 1988
48
51
54
55
56
57
59
60
62
64
ii
-------
TABLE OF CONTENTS (CONTINUED)
EXHIBIT VIII
SUMMARY SCHEDULE OF DISBURSEMENTS
ATTRIBUTE RESULTS, POSTING OF
DISBURSEMENT WAS TIMELY, FISCAL
YEAR ENDED SEPTEMBER 30, 1988
66
APPENDICES
APPENDIX 1
APPENDIX 2
APPENDIX 3
SCOPE AND METHODOLOGY OF
STATISTICAL SAMPLING FOR A1-1
SUPERFUND AUDIT, FISCAL YEAR 1988
PROJECTIONS FROM THE SUPERFUND
AUDIT FOR FISCAL YEAR 1988 A2-1
AGENCY'S CONSOLIDATED RESPONSES
TO DRAFT AUDIT REPORT A3-1
iii
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
REPORT OF FINANCIAL AND COMPLIANCE AUDIT
OBLIGATIONS AND DISBURSEMENTS
OF THE
HAZARDOUS SUBSTANCE SUPERFUND
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1988
SCOPE AND OBJECTIVES
We have performed a financial and compliance audit of the obliga-
tions and disbursements of the Hazardous Substance Superfund
{Superfund) reported by the U.S. Environmental Protection Agency
(EPA) for the fiscal year ended September 30, 1988. Our audit
was performed in accordance with 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 Organizations. Programs. Activities, and
Functions (1981 revision). Our audit included tests of the
Superfund financial management records of EPA's servicing finance
offices (SFOs) located at the 10 regional offices, 3 major labo-
ratory facilities, and EPA Headquarters; examination of the
financial records at the National Enforcement Investigations
Center (NEIC); evaluations of internal accounting controls for
Superfund at these locations; and such other auditing procedures
as we considered necessary in the circumstances. Audit fieldwork
was performed from July 18, 1988, through February 24, 1989.
As a part of the audit, statistical samples were selected for
obligation and disbursement transactions for Superfund activi-
ties. The scope and methodology of the sampling is described in
Appendix 1. The audit included a study and evaluation of internal
accounting controls for Superfund, including a review of elec-
tronic data processing (EDP) controls. Additionally, we reviewed
the status of findings and recommendations included in the prior
audit report covering the fiscal year ended September 30,
1987.
The audit objectives were to determine if:
(1) The Schedules of Obligations and Disbursements are
presented fairly in accordance with applicable laws,
regulations, and guidelines;
(2) EPA management complied with laws and regulations
which, if not followed, might have a material effect
upon the Schedules of Obligations and Disbursements;
and
-------
SCOPE AND OBJECTIVES (CONTINUED)
(3) EPA established an adequate system of internal
accounting control to ensure the reliability of
applicable financial management records.
It was not within the scope of our audit to determine the allowa-
bility and allocability of the general support services cost
pools that were accumulated and allocated to Superfund, or to
verify the bases for these allocations. Our audit procedures for
cost allocations were limited to reviewing methodologies, testing
the accuracy of the mathematical computations, and verifying that
the allocations were made in a timely manner. Our review of EDP
controls was limited to the source document and data entry con-
trols on obligation and disbursement transactions.
SUMMARY OF AUDIT RESULTS
Based upon the results of our audit, it is our opinion that,
except for the scope limitation in determining the allowability
and allocability of general support services costs described
above, EPA's Schedules of Obligations and Disbursements, Exhibits
I and II, are presented fairly in accordance with applicable
laws, regulations and guidelines. The results of our tests for
compliance indicated that EPA management has complied with laws
and regulations which might have a material effect upon the
schedules identified above. Further, for compliance items not
tested, nothing came to our attention which indicated that EPA
had not complied with applicable laws, regulations and guidelines
which might have a material effect upon the schedules identified
above. We express no opinion on EPA's system of internal control
due to the limited purpose of the study and evaluation made as
part of our audit. We found that material weaknesses in account-
ing for and controlling personal property existed. However,
these weaknesses do not materially affect the schedules identi-
fied above.
Our audit disclosed that improvements are still needed in the
Agency's systems for accounting for and controlling personal
property, recording and managing accounts receivable, and allo-
cating general support services costs. We found that some im-
provement had been made in complying with EPA policies for re-
cording and documenting obligation, disbursement and payroll
transactions. However, we noted that improvements are still
needed in: receiving and recording obligation data timely;
entering commitment data for obligations over $25,000; paying
invoices and recording disbursements timely; requiring proper and
timely approvals of disbursements; and supporting certain payroll
transactions.
EPA obligated $1,462,291,365 and disbursed $790,352/173 from
Superfund during the fiscal year ended September 30, 1988. We
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
accepted $1,462,200,219 of obligations and $790,120,106 of dis-
bursements for fiscal 1988. We questioned $91,146 of obligations
and $232,067 of disbursements. The questioned costs included
$30,476 of obligations and $184,682 of disbursements which re-
sulted from errors disclosed in the statistical samples selected
for obligation and disbursement transaction testing. Also,
included in the questioned costs were $60,670 of obligations and
$47,385 of disbursements resulting from the improper allocation
of support services costs at Region 3. Additionally, our review
of accounts receivable disclosed an overstatement of $5,634,894,
as of September 30, 1988. The overstatement was not questioned
because the effect is on a balance sheet item and does not affect
the schedules in this report.
We recommended in our draft report that corrective action be
taken by the Assistant Administrator (AA) for the Office of
Administration and Resources Management (OARM) to improve the
Agency's systems and to require the resolution of the questioned
costs. [The AA referred to subsequently in this report is the AA
for OARM unless otherwise specified.] In response to our draft
report, the AA generally agreed with our recommendations and
indicated that corrective action had been or would be taken. We
revised the questioned costs in this report as a result of ef-
forts by Agency personnel to locate missing documentation, pro-
vide written Superfund justifications, and make other determina-
tions. In addition, Agency officials indicated that they have
corrected the majority of the remaining questioned costs in
fiscal 1989.
Our findings are summarized below and presented in detail in the
Findings and Recommendations and Exhibits.
FINANCIAL RESULTS OF AUDIT
Accepted and questioned costs are summarized as follows:
QUESTIONED
TOTAL ACCEPTED COSTS
FY 1988
Obligations $1.462.291.365 $1.462.200.219 S 91.146
FY 1988
Disbursements $ 790.352.173 $ 790.120.106 $ 232.067
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
Note: Questioned costs are costs that are questioned be-
cause of:
1 . INELIGIBLE COST - an alleged violation of a
provision of a law, regulation, contract,
grant, cooperative agreement, or other agree-
ment or document governing the expenditure of
funds;
2. UNSUPPORTED COST - a finding that, at the time of
the audit, the cost is not supported by ade-
quate documentation and/or has not been ap-
proved by responsible program officials;
3. UNNECESSARY/UNREASONABLE COST - a finding that an
expenditure of funds resulted in an expenditure
that was not necessary or was not reasonable.
FOLLOW-UP ON PRIOR AUDIT FINDINGS
The prior audit report, which covered the period from October 1,
1986, through September 30, 1987, identified weaknesses related
to: accounting for and controlling personal property; allocating
support services costs; monitoring letters of credit; and record-
ing and managing accounts receivable. The report also identified
noncompliance with certain EPA policies and procedures for obli-
gations and disbursements. Specifically, for obligation transac-
tions, the report cited deficiencies in: promptly providing
obligation documentation; recording obligations timely; requiring
adequate Superfund justification on obligating documents; using
correct appropriation numbers on documents; and entering commit-
ment information into the Financial Management System (FMS) for
commitments greater than $25,000. Deficiencies in disbursement
transactions included: authorized officials not approving dis-
bursement documents; not paying invoices timely or taking cash
discounts; not recording disbursements timely; and not properly
documenting Superfund personnel compensation and benefits trans-
actions .
The AA indicated in response to the prior audit that there was
agreement with the findings and corrective actions would be taken
in regard to: accounting for and controlling personal property;
timely recording of obligations; and making timely payments and
recording disbursements. The Agency disagreed with aspects of
the prior audit, which are summarized as follows, along with our
comments:
A. Personal Property
o Agency officials stated that they could not reconcile
the property records for fiscal year 1987 with the FMS due
-------
SUMMARY OF AUDIT RESULTS (CONTINUED1
to the disparity of the data bases.
o The AA disagreed that there was a conflict between the
Agency directive and the Region 2 General Counsel opinion
regarding the requirement of custodial officials to sign
the "Memorandum of Acceptance by Custodial Officers".
We believe that the Agency should have adopted interim
measures to ensure that property purchased and recorded in
the FMS was accounted for in the Personal Property Account-
ing System (PPAS). This would not have required a compre-
hensive reconciliation of the data bases, as indicated by
the Agency's response. However, it would have helped ensure
that capitalized property items purchased during the fiscal
year were accounted for in the Agency's property system.
We also believe that, since Agency policy requires custodial
officers to sign the memorandum, the policy should be en-
forced uniformly at all Agency locations.
B. Allocating General Support Services Costs
o Agency management contended that their allocation
methodology did not need to be modified. The differences
resulting from the current methodology and the method
suggested by the auditors would have been immaterial.
We agreed that the effect of using obligations as the basis
for allocations of obligations and disbursements resulted in
a timing difference, which was immaterial in fiscal year
1987. We also agreed that the differences resulting from
using budget ratios instead of actual ratios for allocating
certain costs was immaterial in fiscal 1987. We, therefore,
rescinded our previous recommendations. Agency management
agreed to review the effect on an annual basis to determine
if the differences are material.
C. Letters of Credit
o Agency officials disagreed that guidance should be issued
requiring Financial Management Offices (FMOs) to document
follow-up action taken on recipient noncompliance with
timely filing requirements for letters of credit. The
Grants Administration Division suggested that each region
develop a system to track when reports are due.
We believe that, since this issue has been recognized as an
Agency-wide problem, Agency guidance should be issued to
require documentation of follow-up actions taken with recip-
ients filing late reports.
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
The corrective actions described in the response to the prior
audit generally were not scheduled to take place until after
fiscal 1988. Therefore, our audit disclosed that corrective ac-
tions were still required in accounting for and controlling per-
sonal property, recording and managing Superfund receivables and
allocating general support services costs to Superfund. Findings
in these areas are summarized below and further discussed in the
Findings and Recommendations section of this report.
1 . IMPROVEMENTS ARE NEEDED IN ACCOUNTING FOR AND CONTROLLING
PERSONAL PROPERTY
Management of the Agency's personal property acquired for the
Superfund program needs to be improved with regard to capitaliz-
ing the costs in the accounting system and controlling personal
property. The Agency did not properly capitalize Superfund
property and equipment in the accounting system at the time
purchased or placed in service. The property management records,
which were used as the basis for capitalizing property in the
accounting system, were not adequate or reliable for this pur-
pose. Many items of Agency property were not recorded in the
property records and some personal property could not be located.
We also noted at some locations that no annual physical invento-
ries had been taken. In some cases, those responsible for the
property had not properly accepted custodial responsibilities.
Thus, Agency personnel had not complied with applicable laws,
regulations and directives in regard to accounting for, control-
ling and safeguarding personal property. We identified several
causes of the above deficiencies such as: (1) inadequate provi-
sions for capitalizing Superfund personal property in the ac-
counting system; (2) breakdown in the flow of documentation for
recording property in the property records; (3) the absence of
reconciliation of the property records with the financial manage-
ment records; and (4) noncompliance with existing policies and
procedures for physical inventories and custodial responsibili-
ties.
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management: obtain
certifications that omissions from the PPAS noted in this audit
are corrected and missing property is located; establish an
interim method requiring reconciliation of property items record-
ed in the accounting system to the PPAS; and emphasize to proper-
ty accountable officers the importance of complying with existing
guidance for physical inventories and designation and acceptance
of duties. The AA generally concurred with our recommendations
and indicated that corrective action had been or would be taken.
The AA indicated that certifications would be required for cor-
rections of omissions of property items which meet the revised
Agency criteria for inclusion in the PPAS. The AA also indicated
that new procedures had been developed in fiscal 1989 to identify
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
fixed assets for capitalization. In addition, the AA indicated
that common elements between the property and accounting systems
had been identified so that monthly reports could be developed
for reconciliation of the records and guidance on these proce-
dures will be issued. Finally, the AA agreed with our recommen-
dation regarding compliance with Agency policies for physical
inventories and designation of custodial duties. As for accept-
ance of custodial duties, the response stated that a signed
letter of acceptance is not required.
We are recommending that the certifications indicating that
corrections of property records have been made are retained for
audit along with supporting documentation. We are also recom-
mending that the guidance to be issued on procedures for recon-
ciliation of property and accounting records be provided to the
auditors for review. Finally, we are recommending that property
custodial officers be required to sign memorandums accepting
custodial responsibilities in accordance with existing Agency
policies, or the Agency policy be changed to eliminate the re-
quirements of acceptance memorandums.
2. EPA NEEDS TO MAKE IMPROVEMENTS IN RECORDING AND MANAGING
ACCOUNTS RECEIVABLE
In recording and managing accounts receivable, the Agency needs
to ensure that: (1) all receivables are recorded in a timely
manner; (2) action is taken to ensure collection of debts; and
(3) the dollar value of each receivable is recorded correctly in
the FMS. Our examination revealed instances in which: (1)
amounts due to the Agency for cost recovery actions or penalties
were not recorded in a timely manner; (2) deficiencies were found
in the monitoring, managing and collecting activities of overdue
accounts; and (3) the dollar value of accounts receivable were
incorrectly recorded in the FMS. The deficiencies in timely
recording of accounts receivable were caused primarily by delays
in the receipt of documents establishing the receivables from the
program offices, primarily Regional Counsels, and another federal
agency (Department of Justice). The accounting reports which we
reviewed did not supply the type of data needed to properly
manage and monitor aged accounts receivable. Also, the required
collection actions for past due accounts were not being followed
by all FMOs. Additionally, Superfund accounts receivable at year
end were overstated by $5.6 million at Headquarters due to re-
cording errors.
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management: monitor the
effect of shifting responsibility for receivables to regional
offices on the timeliness of recording accounts receivable from
cost recovery actions; ensure .that the implementation of an
aggressive effort to reduce and clean up old receivables is
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
carried out; and instruct the Director, Financial Management
Division (FMD) to modify the report for installment payment
accounts to indicate when the current portion is due. The AA
agreed with our recommendations and indicated that corrective
action had been or would be taken. The AA stated that procedures
which delineate responsibilities and describe collection, billing
and follow-up procedures for Superfund receivables have been
developed. In addition, the AA stated that the Financial Manage-
ment Division has been actively monitoring the transfer process
and resolving specific issues. Also, the AA stated that the new
accounts receivable module being implemented in the Integrated
Financial Management System (IFMS) includes improved aging and
reporting procedures that will assist the cash management proc-
ess.
Since the Agency has addressed our concerns, we are making no
further recommendations at this time.
3. WEAKNESSES WERE NOTED IN THE ALLOCATION OF GENERAL SUPPORT
COSTS TO SUPERFUND
Improvements in procedures for allocating general support serv-
ices costs need to be implemented to ensure that costs charged
to Superfund represent the actual benefits received. Our audit
disclosed that allocations of general support services costs as
well as personnel support costs were not always made, and that
the allocation methodology used to allocate telephone expenses at
Region 3 was not an authorized method. We questioned $60,670 of
obligations and $47,385 of disbursements, which were the differ-
ences between the unauthorized method used by Region 3 and the
authorized method, which requires using full-time equivalent
(FTE) ratios.
Also, at Region 1, due to administrative ceiling limitations,
$15,005 of allocable costs were not allocated to the Superfund
appropriation. In addition, Cincinnati's Financial Management
Center excluded 1,574 hours from their personnel support cost
allocation to Superfund, amounting to approximately $16,932, due
to ceiling limitations. From our analysis of Superfund ceiling
limitations Agency-wide, it appeared that the Region 1 and Cin-
cinnati costs could have been charged to Superfund.
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management: direct the
Comptroller to request the Regional Administrator of Region 3 to
recalculate the general support costs for telephone expenses and
make the appropriate adjustments to Superfund, and instruct the
Comptroller to review the budgetary ceilings at Region 1 and
Cincinnati and make any appropriate adjustments. The AA general-
ly concurred with our recommendations and indicated that correc-
tive action had been or would be taken. The AA stated that the
general support costs at Region 3 would be recalculated and
8
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
necessary adjustments made. Also, the AA indicated that Region 3
is currently using the approved allocation method for calculating
its general support costs. The AA agreed that budgetary ceilings
should be monitored and appropriate adjustments made. However,
the AA did not .concur that adjustments to fiscal 1988 costs were
warranted due to the immateriality of the amounts and that there
were no inappropriate charges to Superfund.
We are recommending that the documentation supporting the adjust-
ments to Region 3's cost allocations be retained for audit. We
are also recommending that the Agency review and monitor its
budgetary ceilings to ensure that all appropriate general sup-
port costs are charged to Superfund.
4. OBLIGATIONS WERE QUESTIONED DUE TO RECORDING ERRORS AND LACK
OF DOCUMENTATION
Based upon the results from statistical sampling of nonpayroll
obligation transactions, we questioned $30,355 of $1,353,293,706
nonpayroll obligations recorded in fiscal 1988. Obligations were
questioned primarily due to amounts being obligated twice and
obligated amounts not agreeing to the obligating documents. In
addition, the results of tests of 10 key internal control and
compliance attributes for nonpayroll obligations indicated unac-
ceptable levels (over 5%) of noncompliance with Agency policies
and procedures for certain attributes.
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management require the
appropriate FMOs to review and resolve the questioned obligation
transactions. The AA agreed with our recommendation and indicat-
ed that corrective action had been taken. The AA stated that, in
many cases, corrections had been made at the time of the audit
and these corrections were not acknowledged in the report.
Additionally, the AA stated that many items in the report were
not disclosed during the audit or at the exit conferences, and
that, in some cases, the questioned costs were erroneous and
adjustments were not warranted.
We acknowledge that some corrections were made by FMOs during our
audit fieldwork. However, these corrections were made after the
close of the fiscal year and were not reflected in the obliga-
tions in this report. We footnoted in this report the correc-
tions that the Agency indicated were made. Some of these correc-
tions were verified by us from documentation provided by the
Agency subsequent to their response to the draft report. Also,
we acknowledge that there were a few items not disclosed during
our fieldwork which were subsequently questioned during our
workpaper reviews. We did, however, provide copies of our work-
papers which disclosed questioned obligations to the Agency
officials at each audit location. We removed certain questioned
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
amounts from the report based upon information that was provided
by the Agency in their response and subsequent to the response.
We believe the Agency made a diligent effort to correct the
questioned costs, .therefore, we are making no further recommenda-
tions.
5. DISBURSEMENTS WERE QUESTIONED DUE TO RECORDING ERRORS AND
LACK OF DOCUMENTATION OR APPROVAL
Based upon the results from statistical sampling of nonpayroll
disbursement transactions, we questioned $148,757 of $682,390,811
recorded nonpayroll disbursements in fiscal 1988. Disbursements
were questioned primarily due to double entries of transactions
and other amounts which should not have been charged to Super-
fund. We also examined key internal control and compliance
attributes and found that the error rate exceeded five percent
for certain attributes.
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management require the
appropriate FMOs to review and resolve the questioned disburse-
ment transactions. The AA agreed with our recommendation and
indicated that corrective action had been taken. The AA stated
that, in many cases, corrections had been made at the time of the
audit and some items were disclosed for the first time in the
draft report. The AA also stated that some of the questioned
costs were erroneous and the information in the accounting system
was correct.
We acknowledge that some corrections were made by FMOs during our
audit fieldwork. However, as previously explained, these correc-
tions were made after the close of the fiscal year and were not
reflected in the disbursements in this report. We footnoted in
this report the corrections that the Agency indicated were made.
Some of these corrections were verified by us from documentation
provided by the Agency subsequent to their response to the draft
report. Also, we acknowledge that there were a few items not
disclosed during our fieldwork which were subsequently questioned
during our workpaper reviews. We did, however, provide copies of
our workpapers which disclosed questioned disbursements to the
Agency officials at each audit location. We removed certain
questioned amounts from the report based upon information that
was provided by the Agency in their response and subsequent to
the response.
We are recommending that the Agency further review the unresolved
questioned disbursements and make the necessary adjustments.
10
_
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
6. PERSONNEL COMPENSATION COSTS WERE QUESTIONED DUE TO RECORDING
ERRORS AND LACK OF DOCUMENTATION
Based upon the results of our statistical sampling of personnel
compensation transactions, we questioned $35,924 of $92,327,130
of payroll disbursements recorded in fiscal 1988. The questioned
costs were a result of lack of documentation to support transac-
tions, FMS data not agreeing with source information and input
errors. We also found that four of nine key internal control and
compliance attributes for payroll transactions exceeded an error
rate of five percent.
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management require the
appropriate program offices and FMOs to review the questioned
payroll transactions and advise Headquarters Accounting Opera-
tions Branch (HAOB) to make any necessary adjustments to the
payroll records. The AA agreed with our recommendation and
indicated that corrective action had been taken. The AA stated
that the majority of the questioned items were seen for the first
time in the draft report and that many of the items were correct
at the time of the audit.
We provided copies of our worksheets disclosing the questioned
payroll disbursements to the Agency officials at each audit loca-
tions during our fieldwork or at the exit conferences. We ac-
knowledge that some corrections were made by the FMOs during our
fieldwork. However, as previously explained, these corrections
were made after the close of the fiscal year and were not re-
flected in the disbursements in this report. We footnoted in
this report corrections that the Agency indicated were made. Some
of these corrections were verified by us from documentation
provided by the Agency subsequent to their response to the draft
report. We removed certain questioned amounts from the report
based upon information that was provided by the Agency in their
response and subsequent to the response.
We believe the Agency made a diligent effort to correct the
questioned costs, therefore, we are making no further recommenda-
tions.
AGENCY'S COMMENTS
Audit exit conferences were held with EPA officials at the 10
regional offices, the major laboratory facilities, the National
Enforcement Investigations Center and Headquarters at the conclu-
sion 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 EPA manage-
ment. A conference was held on May 8, 1989, with EPA officials at
Headquarters, to discuss the consolidated findings and recommen-
11
-------
SUMMARY OF AUDIT RESULTS (CONTINUED)
dations in the draft audit report.
On June 12, 1989, .we provided Agency officials with the draft
report. The AA for OARM provided us with formal written comments
on our draft report in two memorandums dated August 14 and August
18, 1989. To provide a balanced presentation of the issues, we
have summarized the Agency's position above and in detail in the
Findings and Recommendations section of this report. We have
included the Agency's memorandums as Appendix 3. In addition,
the Agency provided additional documentation to support certain
costs which had been questioned in the draft report. We reviewed
this information and made determinations regarding the adequacy
of the documentation to support the costs. This information was
too voluminous to include in this report and is retained in the
workpaper files for this audit.
12
-------
BACKGROUND
The Superfund program was established by the Comprehensive Envi-
ronmental Response, Compensation, and Liability Act of 1980
(CERCLA), Public Law 96-51O, enacted on December 11, 1980. The
Superfund program was created to protect public health and the
environment from the release, or threat of release, of hazardous
substances from abandoned hazardous waste sites (sites) and other
sources where response was not required by other Federal laws. A
Trust Fund was established by CERCLA to provide funding for
responses ranging from control of emergency situations to provi-
sion of permanent remedies at uncontrolled sites. CERCLA author-
ized a $1.6 billion program financed by a five-year environmental
tax on industry and some general revenues. CERCLA requires that
response, or payment for response, be sought from those responsi-
ble for the problem, including property owners, generators, and
transporters.
The basic regulatory blueprint for the Superfund program is the
National Oil and Hazardous Substances Contingency Plan {NCP), 40
CFR Part 300. The NCP was first published in 1968 as part of the
Federal Water Pollution Control Plan and has been substantially
revised to meet CERCLA requirements. The NCP provided two broad
categories of response: removals and remedial response. Remov-
als are relatively short-term responses and modify an earlier
program under the Clean Water Act. Remedial response is long-
term planning and action to provide permanent remedies for seri-
ous problems at abandoned or uncontrolled sites.
CERCLA recognizes that the Federal government can only assume
responsibility for remedial response at a limited number of
sites representing the greatest public threat. It, therefore,
requires the maintaining of a National Priorities List (NPL),
which must be updated at least annually. The NPL is composed
primarily of sites which have been ranked on the basis of a
standard scoring system which evaluates their potential threat to
public health. In addition, each State was allowed to name its
highest priority site without regard to the ranking system.
CERCLA Section 104(c) (3) provides that no remedial actions shall
be taken unless the State in which the release occurs enters into
a contract or cooperative agreement with EPA to provide certain
assurances, including cost sharing. At privately operated sites,
the State must pay 10 percent of the costs of remedial action.
Pre-remedial activities (preliminary assessments, site inspec-
tions}, remedial planning (remedial investigations, feasibility
studies, remedial designs) and removals may be funded 100 percent
by EPA. For facilities operated by a State or political subdivi-
sion at the time of disposal of hazardous substances, the State
must pay at least 50 percent of all response costs, including
removals and remedial planning previously conducted.
13
-------
BACKGROUND (CONTINUED)
CERCLA was revised and expanded by the Superfund Amendments and
Reauthorization Act of 1986 (SARA), Public Law 99-499, enacted on
October 17, 1986. SARA reinstituted the environmental tax and
expanded the taxing mechanisms available for an additional five-
year period. It authorized an $8.5 billion program for the
1987-1991 period. The Trust Fund was renamed the Hazardous
Substance Superfund.
CERCLA Section 111(k), as amended, states that the Inspector
General shall conduct an annual audit of all payments, obliga-
tions, reimbursements, or other uses of Superfund to assure that
Superfund is being properly administered.
14
-------
LEONARD G. BIRNBAUM AND COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
LSONA*0 9, •tUNBAUM
IC*MC A. klrPin
IKVINO J. (ANOLCK
DAVID (AKOr*
CA*OI. A, •CHNCIDIH
ALMftT M, rUKUOA
41 KIVCR KOAO
SUMMIT. NEW J«RMY O79OI
201-273-2844
OTHER OFFICES
•AN FRANCISCO. CA 4tfl.»S9-8814
WASHINGTON. O.C. 709-022-7822
TWXt 710 832-00BB
Mr. Ernest E. Bradley III CA«L«: LUPM D.c.
Assistant Inspector General for Audit
Office of the Inspector General
U.S. Environmental Protection Agency
Washington, D.C. 20460
INDEPENDENT AUDITOR'S REPORT ON THE SCHEDULES OF OBLIGATIONS AND
DISBURSEMENTS
We have audited the accompanying Schedules of Obligations and
Disbursements of the Hazardous Substance Superfund (Superfund)
reported by the U.S. Environmental Protection Agency (EPA) for
the fiscal year ended September 30, 1988, as presented in Exhib-
its I and II. These schedules are the responsibility of the
Agency's management. Our responsibility is to express an opinion
on the schedules based on our audit.
Except as discussed in the following paragraph, we conducted our
audit in accordance with 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 Organizations. Programs. Activities, and Functions
(1981 Revision). Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the
schedules are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the schedules. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall schedule presenta-
tion. We believe that our audit provides a reasonable basis for
our opinion.
The Schedules of Obligations and Disbursements contained obliga-
tions and disbursements for general support services costs which
were allocated to Superfund from another EPA appropriation.
Because of a scope limitation, we did not perform audit proce-
dures on the general support services cost pools or the calcula-
tions of the bases for the allocations of these costs to deter-
mine the allowability and allocability of the general support
services costs.
The Schedules of Obligations and Disbursements were prepared by
the EPA Financial Management Division from financial information
15
-------
INDEPENDENT AUDITOR'S REPORT ON THE SCHEDULES OF OBLIGATIONS AND
DISBURSEMENTS (CONTINUED)
contained in the Financial Management System for the fiscal year
ended September 30, 1988. As described in Note 1 to Exhibit I
and Note 1 to Exhibit II, these schedules were prepared in con-
formity with accounting policies and procedures which are legis-
latively established and promulgated through various Federal and
EPA policies and procedural standards, which is a comprehensive
basis of accounting other than generally accepted accounting
principles. These schedules are not intended to present either
the financial position or the financial results of operations in
conformity with generally accepted accounting principles.
In our opinion, except for the effects of such adjustments,
if any, that might have been necessary had we been able to deter-
mine the allowability and allocability of the accumulated cost
pools of general support services and the bases for the alloca-
tions, the Schedules of Obligations and Disbursements referred to
above, present fairly, in all material respects, the obligations
and disbursements of EPA Superfund for the fiscal year ended
September 30, 1988, on the basis of accounting described in the
Notes referred to above.
This report is intended for use in connection with the schedules
to which it refers and should not be used for any other purpose.
LEONARD G. BIRNBAUM & COMPANY
Summit, New Jersey
February 24, 1989
16
-------
LEONARD G. BIRNBAUM AND COMPANY
CERTIFIED PUBUC ACCOUNTANTS
UCONAItQ O. (IBNCAUM
ktSUIC A. k.(IPC*
mviMO j. •ANOct*
OAVIO MHO**
CAKOl A. •CMNCIBKK
Ak«CMT N. rUKUOA
41 HIVE* KOAO
SUMMIT. NEW JERSEY O79OI
ZOI-273'2*44
OTHER OFFICES
•AN FRANCISCO. CA 410-099-8814
WA4HIN9TON. D.C. 7O3-922-7S22
TWX: 710 032-00VB
CABLE: LE1PEM D.C.
Mr. Ernest E. Bradley III
Assistant Inspector General for Audit
Office of the Inspector General
U.S. Environmental Protection Agency
Washington, D.C. 20460
INDEPENDENT AUDITOR'S REPORT ON INTERNAL ACCOUNTING CONTROL
We have audited the Schedules of Obligations and Disbursements of
the Hazardous Substance Superfund (Superfund) reported by the
U.S. Environmental Protection Agency (EPA) for the fiscal year
ended September 30, 1988, and have issued our Independent Audi-
tor's Report thereon, dated February 24, 1989. As part of our
examination, we made a study and evaluation of EPA's system of
internal accounting control for Superfund to the extent we con-
sidered 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 Organizations. Programs,
Activities, and Functions (1981 Revision). For the purpose of
this report, we have classified the significant internal account-
ing controls into the following categories:
Budgetary
Obligations
Disbursements, including letter of credit drawdowns
Cost allocations
Property and equipment
Billings and receivables
Collections
EDP processing
Our study included all of the control categories listed above,
except that we did not evaluate the controls for payroll obliga-
tions. We considered our evaluation of controls for payroll
disbursements, from which payroll obligations are recorded and
adjusted, sufficient for this transaction category. Also, our
evaluation of controls for cost allocations was limited to re-
viewing the methodology, calculations and timely recording of the
allocation entries. We did not review the controls for deter-
mining the cost pools or calculations of the bases for alloca-
tions. Our review of EDP controls was limited to the source
17
-------
INDEPENDENT AUDITOR'S REPORT ON INTERNAL ACCOUNTING CONTROL
(CONTINUED)
document and data entry controls on financial transactions af-
fecting the schedules referred to above.
The purpose of our study and evaluation was to determine the
nature, timing and extent of the auditing procedures necessary
for expressing an opinion on the Schedules of Obligations and
Disbursements. Our study and evaluation was more limited than
would be necessary to express an opinion on the system of inter-
nal accounting control for Superfund 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
procedures. The objectives of a system of internal accounting
controls 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 management's authorization and recorded properly to permit
preparation of financial reports in accordance with applicable
Federal laws and regulations. The concept of reasonable assur-
ance recognizes that the cost of a system of internal accounting
control should not exceed the benefits derived and also recog-
nizes that the evaluation of these factors necessarily requires
estimates and judgments by management.
There are inherent limitations that should be recognized in
considering the potential effectiveness of any system of internal
accounting control. Because of inherent limitations in any
system 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 misunderstand-
ing instructions, mistakes of judgment, carelessness, or other
personal factors. Control procedures whose effectiveness depend
on segregation of duties can be circumvented by collusion. Simi-
larly, control procedures can be circumvented intentionally by
management, either with respect to the execution and recording of
transactions or with respect to the estimates and judgments
required in the preparation of financial reports. Further, pro-
jection 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 materi-
al weaknesses in the system. Accordingly, we do not express an
opinion on EPA's system of internal accounting control for Super-
18
-------
INDEPENDENT AUDITOR'S REPORT ON INTERNAL ACCOUNTING CONTROL
(CONTINUED)
fund taken as a. whole or on any of the categories of controls
identified in the first paragraph.
Our study and evaluation disclosed material weaknesses in ac-
counting for and controlling personal property. These weaknesses
resulted from both the absence of control procedures and noncom-
pliance with existing controls. As a result, property and equip-
ment was not properly recorded in the accounting system or con-
trolled within the personal property system, and may be subject
to waste, loss, unauthorized use and misappropriation. However,
these weaknesses do not materially affect the Schedules of Obli-
gations and Disbursements presented in Exhibits I and II.
Our audit also disclosed weaknesses in the following areas that,
although not considered material in relation to the Schedules of
Obligations and Disbursements, in our opinion, warrant the atten-
tion of management:
Recording and managing accounts receivable.
Allocating general support services costs.
Recording nonpayroll obligation and disbursement
transactions.
Recording personnel compensation transactions.
The above conditions are further discussed in the Findings and
Recommendations section of this report.
These conditions were considered in determining the nature, tim-
ing, and extent of the audit procedures to be applied in our
examination of the Schedules of Obligations and Disbursements for
the fiscal year ended September 30, 1988, and this report does
not modify our report dated February 24, 1989, on these sched-
ules.
This report is intended solely for the use of EPA management and
should not be used for any other purpose.
LEONARD G. BIRNBAUM & COMPANY
Summit, New Jersey
February 24, 1989
19
-------
LEONARD C. B1RNBAUM AND COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
LIOMAHO 9. *ltN«AUM
L»LIC A. LCIPXft
IftVIMO J. IAMOLIM
OAVID (AKOr*
CAKOU A. tCHKIlOtm
AL11KT N. rUKUOA
4t III VCR ROAD
SUMMIT. NEW JERSEY O7»O1
201.273-20*.*
OTHER OFFICES
SAN FRANCISCO. CA 4ig.«0a-«at4
WASHINGTON, o.c. To3-«aa.7«aa
TWX! 7tO 832-Ofl»8
CABLE: UC1PCR O.C.
Mr. Ernest E. Bradley III
Assistant Inspector General for Audit
Office of the Inspector General
U.S. Environmental Protection Agency
Washington, D.C. 20460
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULA-
TIONS
We have audited the Schedules of Obligations and Disbursements of
the Hazardous Substance Superfund (Superfund) reported by the
U.S. Environmental Protection Agency (EPA) for the fiscal year
ended September 30/ 1988, and have issued our Independent Audi-
tor's Report thereon, dated February 24, 1989. Except as ex-
plained in the third paragraph of our Auditors' Report, our
examination was performed in accordance with generally accepted
auditing standards and the standards for financial and compliance
audits contained in the U.S. General Accounting Office Standards
for Audit of GovernmentalOrganizations. Programs. Activities.
and Functions(1981 Revision). Accordingly, our examination
included such tests of the accounting records and such other
auditing procedures, including"tests of compliance with laws and
regulations, as we considered necessary in the circumstances.
The management of EPA is responsible for the Agency's compliance
with laws and regulations. In connection with our audit referred
to above, we selected and tested transactions and records to
determine EPA's compliance with laws and regulations, noncompli-
ance with which could have had a material effect on the schedules
referred to above. Our review of compliance with laws and regu-
lations did not necessarily cover all laws and regulations with
which EPA is required to comply.
The results of our tests indicated that for the transactions
tested, EPA complied with the terms and provisions of laws and
regulations for the financial transactions tested that could have
materially affected the schedules referred to above. Further-
more, in connection with our audit, nothing came to our attention
that caused us to believe that EPA was not in compliance with the
terms and provisions of laws and regulations for those transac-
tions not tested. However, our audit was not directed primarily
toward obtaining knowledge of such noncompliance.
20
-------
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULA-
TIONS (CONTINUED)
This report is intended for use in connection with the schedules
to which it refers and should not be used for any other purpose.
LEONARD G. BIRNBAUM & COMPANY
Summit, New Jersey
February 24, 1989
21
-------
FINDINGS AND RECOMMENDATIONS
1. IMPROVEMENTS ARE NEEDED IN ACCOUNTING FOR AND CONTROLLING
PERSONAL PROPERTY
Management of the Agency's personal property acquired for the
Superfund program needs to be improved with regard to capitaliz-
ing the costs in the accounting system and controlling personal
property. The Agency did not properly record capitalized proper-
ty and equipment because the accounting system was not designed
to record property as an asset when purchased or placed in serv-
ice. The property management records, which were used as the
basis for capitalizing property in the accounting system, were
not adequate or reliable for this purpose. Many items of Agency
property were not recorded in the property records and some
personal property could not be located. We also noted at some
locations that no annual physical inventories had been taken. In
some cases, those responsible for the property had not properly
accepted custodial responsibilities. Thus, Agency management had
not established an adequate system for accounting for and con-
trolling personal property. Also, Agency personnel had not
complied with applicable laws, regulations and directives in
regard to personal property.
The Agency maintains property management records in the automated
Personal Property Accounting System (PPAS). The PPAS, however,
was not designed to: (1) identify property purchased with funds
from more than one appropriation; (2) be reconciled to property
disbursement data in the accounting system; or (3) show a book
value, including depreciation. These weaknesses, in addition to
the errors and omissions from PPAS noted in this and prior Super-
fund audits, make PPAS an inappropriate source for capitalizing
property. Weaknesses in controls over personal property were
previously identified in the fiscal 1987 audit report and prior
audit reports dating to the inception of the Superfund program.
Corrective actions indicated by the Agency in response to the
1987 report were not expected to be implemented until after
fiscal 1988.
We selected random samples of Superfund disbursement transactions
recorded in the Financial Management System (FMS) during fiscal
1988. Included in these samples were Superfund property and
equipment items purchased at various audit locations. We at-
tempted to trace the property in the disbursement samples to the
PPAS listings, and to verify the existence of the items. In
addition, we reviewed documentation to determine compliance with
Agency policies for property officials, annual physical invento-
ries and other applicable procedures.
A. Property Was Not Recorded In The Property Records
Our tests of a sample of disbursement transactions, which includ-
22
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
ed 786 Superfund property and equipment items purchased during
fiscal 1988, disclosed that 303 items, costing approximately $2.2
million, should have been recorded in PPAS, but were not. In-
cluded in this amount was $516,301 of Superfund personal property
that was paid by the servicing finance office (SFO) at Research
Triangle Park (RTP) but delivered to other EPA locations. As a
result, the PPAS did not accurately reflect all Superfund person-
al property and equipment purchased during fiscal 1988.
Audit
Location
Headquarters
Region 3
Region 4
Region 5
Region 6
Region 7
Region 9
Region 10
RTP
NEIC
Cincinnati
Totals
Number of Items
Not Recorded In
PPAS From Sample
78
2
45
108
36
14
8
1
3
2
303
Cost
Of Items
Not Recorded
$ 90,273
79,283
540,520
640,939
305,984
97,736
133,393
14,159
217,231
114,821
7.050
$2,241,389
The above table represents only those items that were
disclosed from our audit samples and is not intended
to represent a complete listing of items that may have
been omitted from the PPAS.
Two of the major objectives of the internal control standards
issued by the U.S. General Accounting Office (6AO) pursuant to
the Federal Managers Financial Integrity Act [31 U.S.C. 3512 (b)]
are to ensure that all Government-owned assets are protected
against waste, loss, unauthorized use, and misappropriation; and
that accountability for assets is maintained. One of the inter-
nal control standards requires that transactions be promptly
recorded and properly classified.
The Facilities Management and Services Division (FMSD) issued
Policy Announcement No. 88-01, dated September 14, 1988, to
clarify EPA policies and procedures for the control and account-
ability of personal property, and to address the changes neces-
sary to accommodate Superfund requirements. The new policy raised
the threshold for accountable property from $50 to $300 on
sensitive items and from $300 to $1,000 on all other items. The
policy stated that for property acquired and received, a record
shall be established in the PPAS, a bar code decal will be af-
fixed to the property, and responsibility for the item shall be
assigned to a custodian.
23
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
There were various reasons why EPA property purchases were not
recorded in the property records. Receiving documents for
property and equipment items were not always sent by contracting
offices or custodial officers to property accountability officers
(PAOs), when property was ordered or received. For example, we
found that Superfund property valued at $516,301, paid by the SFO
at RTF but delivered to other locations, had not been recorded in
PPAS because documents were not forwarded to the PAOs. In addi-
tion, the Agency had no requirements for reconciling property
purchases in FMS with PPAS records. This lack of internal con-
trol increases the risk that omissions of property from PPAS
would not be discovered in a timely manner.
In response to the findings issued during our fieldwork, offi-
cials at Regions 4, 5, 6, 7, 9 and NEIC indicated that they have
taken action to correct the omissions from the PPAS. Region 3
officials indicated that all items were recorded in the PPAS at
the time of our audit. We were unable to verify this since we
had concluded our fieldwork. Region 6 indicated that, after a
planned annual inventory, all property items found not to be
recorded in the PPAS during our audit would be decaled and en-
tered into the PPAS. Region 10 responded to our findings but did
not indicate that the omitted item was entered in PPAS. Cincin-
nati reported that the property items were recorded into PPAS in
December 1988. RTP indicated that two of the three items had
been input into the PPAS after fieldwork ended and the third item
was for "liquidated damages" and should not be capitalized. Our
review of supporting documentation indicated that this transac-
tions was "a one-time charge of $12,900, billable upon acceptance
of the basic IBM 3090-300E system, to be paid by EPA for the
liquidated damages Clause F.9". We believe that this was payment
of a liquidated damages provision in the contract for the pur-
chase of computer equipment and should be included in the
equipment's cost. Headquarters did not respond to the items not
entered in PPAS because they were reported on a worksheet and not
in a formal finding,
B. Property Could Not Be Located And Physical Inventories Were
Not Performed
At Regions 3, 4 and 5 and Headquarters, EPA could not locate 95
items of personal property, valued at $321,307, which were in-
cluded in our 786 item sample. Also, no complete annual physical
inventories or reconciliations were performed for fiscal 1988 at
Regions 3, 4, 5, 6, 9, 10 and NEIC. Cincinnati, which has
property inventory responsibilities for several laboratories, did
not complete inventories for those labs located at Narragansett,
RI or Duluth, MN. Such physical inventories are required by
Agency directives. Omissions from the PPAS records might have
been identified through physical inventories and reconciliations
24
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
with PPAS and FMS records. The required annual physical invento-
ries would also have identified missing property. The following
number of items could not be located for physical inspection by
the auditors: " . .
Number of
Items Not Cost
Audit Located of Items
Location And Inspected Not Located
Region 3 4 $ 3,457
Region 4 16 18,585
Region 5 53 282,108
Headquarters 22 17.157
Totals 95 $321,307
The above table represents only those items that were
disclosed from our audit samples and does not repre-
sent a complete listing of items that may be missing.
Many of the items noted above could not be located because they
were not properly entered into the PPAS. When property is not
entered into the PPAS, no trail exists to identify the decal
number, custodial area or location of the property. At Headquar-
ters, we found that one property item had an incorrect decal
number assigned to it in the PPAS, which has since been corrected
as a result of the annual inventory. Two other items could not be
located at Headquarters because of miscommunication of the serial
numbers between a custodial officer and the site coordinator.
Headquarters officials contend that the items are in the custodi-
al area indicated in the inventory, which we were unable to
confirm subsequent to the completion of audit fieldwork. At
Region 5, custodial officers were not informed when property was
moved from one custodial area to another.
EPA Facilities and Support Services Manual, Volume 4830-2 Person-
al Property Management, PMR 2-26 states: "Capitalized nonexpend-
able equipment shall be inventoried at least annually as pre-
scribed in the Federal Property and Administrative Services Act
of 1949, as amended."
Failure to conduct annual inventories and require the use of
proper transfer documents resulted in inaccurate property re-
cords, thereby increasing the possibility of waste, loss, unau-
thorized use and misappropriation of Superfund property. Agency
officials, at the locations which did not perform physical inven-
tories, indicated that inadequate staffing and training of
property personnel, establishment of new property thresholds for
25
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
capitalizing property and lack of travel funds were the primary
reasons for noncompliance with this requirement.
In response to our findings issued during the audit, officials at
Regions 3, 4, 5, 6, 9, 10 and NEIC, indicated that procedures
would be initiated to conduct annual physical inventories. Offi-
cials at Cincinnati indicated that additional travel funds would
be requested so the annual physical inventories of laboratories
could be performed.
C. TheAaencv Did Not Properly Capitalize Superfund Property
And Equipment In The Accounting System
The accounting system was not designed to properly capitalize
Superfund property and equipment when purchased or placed in
service. When EPA purchased property and equipment, the dis-
bursements were charged to operating expense accounts, rather
than asset accounts. To record capitalized property and equip-
ment in asset accounts, EPA made periodic journal entries using
PPAS records of equipment valued at $5,000 or more. These proce-
dures do not meet the necessary requirements for capitalizing
Superfund property. Some of the problems with using property
records to record accounting transactions are: (1) PPAS is not a
proper record to be used as a source of entry for accounting
transactions; (2) PPAS contains errors in amounts and omissions
of property; and (3) PPAS does not have the capability to allo-
cate the costs of property between appropriations.
Title 2 of the GAP Policy and Procedures Manual for Guidance of
Federal Agencies requires that all property, plant and equipment
with an initial acquisition cost of $5,000 or more and an esti-
mated service life of 2 years or greater be capitalized when
placed in service.
The cause of the problems discussed above was that FMS did not
have transaction codes to record property and equipment asset
transactions in asset accounts when disbursements were made.
Also, although specific object class codes in the FMS were de-
signed to classify property and equipment that should be capital-
ized, we noted that the object class codes were not always prop-
erly utilized.
This finding was previously reported in our 1987 audit report.
Agency officials indicated that IFMS, to be implemented in fiscal
1989, would provide for the capitalization of property and equip-
ment.
26
-------
D.
FINDINGS AND RECOMMENDATIONS (CONTINUED)
Letters Of Acceptance Of Assumption Of Custodial Responsibil-
ities Were Not Prepared And Signed
Custodial officers at Regions 2, 3, 4, 6, 7, 9 and NEIC had
not accepted custodial responsibilities in the manner required by
the Agency directive. As a result, responsibility for Agency
property had not been properly acknowledged. Consequently, EPA
property was not under proper control, thereby increasing the
possibility of waste, loss, unauthorized use and misappropria-
tion.
EPA Facilities and Support Services Manual. Volume 4830-2 Person-
al Property Management, PMR 2-21 states in part:
Each custodial area shall be placed under the juris-
diction of a responsible custodial officer. This
individual shall be designated in writing by the head
of the activity that has property management authori-
ty Each custodial officer shall sign the assump-
tion memorandum indicating acceptance of custodial
responsibilities and submit it to his designated
Property Accountable Officer. Each custodial
officer shall be responsible for the care and
protection of all personal property assigned to his
custodial area, including sensitive items and con-
trolled property.
There were two primary reasons that custodial officers did not
sign assumptions of custodial responsibilities. Custodial offi-
cers doubted the accuracy of the PPAS records and physical inven-
tories of custodial areas were not always performed. Therefore,
accurate and complete records of property for which the officers
should be responsible were not available. As a result, some
custodial officers did not sign their memorandums.
In response to our findings issued during audit fieldwork, offi-
cials at Regions 3, 4, 6, 7, 9 and NEIC concurred with the find-
ings and indicated that corrective action had been or would be
taken upon completion of an annual inventory. Region 2 did not
concur with our finding due to their General Counsel indicating
that custodial officers were not relieved of any duties by not
signing the memorandum. Region 2 indicated that this issue
should be raised as a policy matter to the Agency Audit Action
Official. The AA's response to the fiscal 1987 Superfund audit
report disagreed that a conflict existed between the Agency
directive and Region 2's General Counsel. In our opinion, since
the requirement of a signed memorandum is an Agency policy, it
should be enforced uniformly at all Agency locations.
27
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
DRAFT REPORT RECOMMENDATIONS
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management:
o obtain certifications from the appropriate property
accountable officers that corrective actions have been
taken to record the omitted property items noted in this
report in the PPAS, and to locate property that was
missing at the time of our audit fieldwork;
o ensure that procedures have been established to properly
record capitalized property and equipment in the ac-
counting records;
o establish an interim Agency policy requiring the recon-
ciliation of property and accounting records; and
o emphasize to the appropriate property accountable offi-
cers the importance of complying with Agency policies
for physical inventories and designations and acceptance
of custodial duties.
AGENCY'S COMMENTS ON DRAFT REPORT RECOMMENDATIONS
The AA stated in response to our draft report recommendations
that the Agency agreed with all of our recommendations, except
with regard to the acceptance of custodial duties. The AA indi-
cated that a signed letter of acceptance by th'e custodial officer
is not required and does not affect the accuracy of PPAS.
In addition to agreeing with our recommendations, the AA stated
that the Agency had spent a great deal of time and effort in-
stalling a new PPAS. The Agency has built quality control and
quality assurance into the system; trained personnel in all
Regions; developed a new, comprehensive PPAS manual; and is per-
forming wall-to-wall inventories in all locations.
The AA also stated that FMD developed and issued new procedures
to the servicing finance offices regarding recording capitalized
property and equipment in the accounting records. These proce-
dures became effective during fiscal 1989 and were developed
using GAO's Policy and Procedures Manual for Guidance of Federal
Agencies (Title 2, Appendix I) and OMB's Financial Management and
Accounting Objectives as guides for the identification of fixed
assets.
28
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
Finally, the AA stated that, in an effort to develop both an
interim and final policy for the reconciliation of property and
accounting records, FMD and FMSD have identified the common
elements of the two systems. Using these common elements, FMD
and FMSD will be able to develop compatible reports necessary for
the reconciliation. These reports will be prepared on a monthly
basis and guidance on the procedures will be issued.
OUR EVALUATION OF THE AGENCY'S COMMENTS
The AA's response to our draft report recommendations and the
Agency's corrective actions taken and proposed corrective actions
are responsive to our recommendations, except for the response
regarding acceptance of custodial duties. According to Agency
Policy in the Facilities and Support Services Manual. Volume 4630
- Personal Property Management - Book 1, PMR 2-21, each custodial
officer is required to sign an assumption of custodial responsi-
bilities memorandum indicating acceptance of custodial duties and
submit it to his designated Property Accountable Officer. Since
this is the official Agency policy, we believe that this require-
ment should be enforced at all Agency locations. The memorandum
establishes responsibility for specific accountable property at a
specified date, indicates that an inventory was taken and re-
lieves the previous custodial officer of liability for account-
ability of property.
RECOMMENDATIONS
We recommend that the AA:
o require the appropriate property accountable officers to
retain copies of certifications that corrections of property
records have been made, along with supporting documentation, for
review by the auditors;
o require the Directors, FMD and FMSD, to provide the audi-
tors with copies of the guidance to be issued on procedures for
the reconciliation of property and accounting records; and
o require the Director, FMSD, to advise the custodial offi-
cers at Region 2 that they are required to sign Memorandums Of
Acceptance By Custodial Officers according to Agency policy; or
change the Agency guidance to eliminate the requirement for a
signed memorandum of acceptance.
2. EPA NEEDS TO MAKE IMPROVEMENTS IN RECORDING AND MANAGING
ACCOUNTS RECEIVABLE
Our review of Superfund accounts receivable indicated that im-
provements were needed to ensure that all receivables are record-
ed in a timely manner; the FMOs are actively monitoring the
29
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
collection of debts; and the dollar value of each receivable is
recorded correctly in the FMS. Accounts receivable, for the
purposes of this report, are defined as moneys due to the Agency,
such as refunds for overpayments of contracts, cooperative agree-
ments or grants, repayments of travel advances, penalties, and
cost recovery actions. Our review revealed instances in which:
(1 ) amounts due to the Agency for cost recovery actions or penal-
ties were not recorded in a timely manner; ( 2) deficiencies were
found in monitoring, managing and collecting overdue accounts;
and (3) the dollar value of accounts receivable were incorrectly
recorded in the FMS.
A. Accounts Receivable Were Not Recorded In A Timely Manner
We found that amounts due to Superfund as a result of cost recov-
ery actions and penalties were not recorded in a timely manner.
Our tests at Headquarters Accounting Operations Branch (HAOB) of
a non-statistical sample of 40 collections totaling $37,470,396,
out of total collections of $61,059,052, disclosed that 24,
totaling $25,928,734, were not recorded as receivables until
after a check in payment was received. At Region 4, of three
receivables totaling $17,245, we noted that one receivable in the
amount of $5,924 was entered 45 days after the original billing
date and one receivable in the amount of $10,898 was not recorded
until collection. The problem of not recording the receivables
timely most often resulted from the failure of program offices,
primarily Regional Counsels, and another federal agency (Depart-
ment of Justice) to forward documents to HAOB or the appropriate
FMO in a timely manner.
Title 2 of the GAPPolicy and Procedures Manual forGuidance of
Federal Agencies states that accounts receivable shall be record-
ed at the time the events occur that entitle an agency to collect
funds. According to the Financial Management Manual, Chapter 7,
the Agency's policy is to "promptly establish an account receiva-
ble in the accounting records for all amounts owed to EPA". To
achieve this, program offices must forward a copy of all action
documents establishing a debt to the appropriate FMO. Further,
the FMO must process bills within one work day after receipt from
the program office.
Agency officials cannot effectively manage receivables if they
are not recorded promptly in the FMS. Unrecorded receivables
could materially affect the financial statements of Superfund and
result in the loss of collections and interest earnings on Super-
fund receivables.
Agency management has addressed this problem of not recording
receivables until receipt of payment from the debtor by shifting
responsibility for Superfund receivables to the regional offices
30
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
for fiscal 1989. This measure, along with improved procedures
and close communications between program offices and FMOs, should
improve the timeliness in recording receivables.
B. Improved Monitoring Of Receivables Is Needed To Ensure That
Debtors Pay The Agency In A Timely Manner
Improved monitoring of accounts receivable is needed to ensure
that debtors pay the Agency in a timely manner. We noted that
Region 4 and Headquarters were not monitoring receivables as
Agency directives require. Agency reports identified accounts
due over 30 days in HAOB and in Region 4. The balance of ac-
counts receivable due over 120 days in HAOB was $8,406,002, out
of a total receivable balance of $12,009,426. Region 4's past
due receivables were $5,924 as of the end of fiscal 1988. Defi-
ciencies in collection activities were, in most cases, related to
the monitoring and managing of delinquent accounts receivable.
At Region 4, demand letters had not been sent to debtors for
receivables over 31 days old.
According to the Financial Reports and Analysis Branch (FRAB),
which has responsibility for monitoring HAOB receivables, the
majority of the $8.4 million in receivables outstanding over 120
days represented receivables with deferred payment arrangements,
referred to as approved installments. We determined that $6.9
million of the $8.4 million were installment receivables, leaving
$1.5 million of other receivables outstanding over 120 days.
These other past due receivables account for 13 percent of the
year end accounts receivable balance at HAOB. Since we identi-
fied these receivables based upon information provided after our
fieldwork, we did not determine if the Agency was following the
prescribed collection activities for these accounts.
We could not determine from our review of the Schedule Of Ac-
counts Receivable By Appropriation (FMO-22A) if the approved
installments were being paid timely. The accounts receivable
subsystem ages the approved installments based on when the ac-
count was originally established, not as of the date of the
current due portion. Thus, the FMO-22A report is misleading and
ineffective as a management report. The report should be modi-
fied to age the current portion from the due date and account for
and age the balance as installment receivables. Without proper
aging information on receivables, the Agency cannot ensure that
adequate collection actions are being taken.
The Agency directives require periodic contact with the debtor
and regular evaluations of the collectibility of the debt. The
EPA Accounting Manual. Chapter 17, Section 17.4 requires that
debtors (other than Federal agencies and common carriers) be sent
three demand letters if the debt is not paid within 31 days. The
31
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
letters should be sent to the debtor 31, 61 and 91 days after the
initial bill. Unless the debtor acknowledges the debt, the
debtor should be contacted by telephone before mailing the second
and third letters. The second and third letters should be sent
by registered mail, return receipt requested. Similar require-
ments are found in the EPA Financial Management Manual. Chapter
7, paragraphs 5d and 5k. In addition, paragraph 5g requires the
FMO to notify certain debtors that, if payment is not received
within 60 days of the due date, information regarding the debt
will be referred to credit bureaus. Fifteen days after the third
demand letter is sent, both directives require the FMO to evalu-
ate the situation. At this point, either: (1) more collection
action should be taken; (2) the debt should be written off by the
FMO if the principal is less than $2,000 and further collection
action would be useless; or (3) the debt should be transferred to
another office for action. Generally, the debts are transferred
to the EPA Claims Officer or Regional Counsel.
Non-performance of the prescribed follow-up procedures for con-
tact with debtors could result in the failure to collect receiva-
bles and interest earnings. Also, failure to perform regular
evaluations of debts could result in an overstatement of the ac-
counts receivable balance.
Region 4 officials indicated that accounts receivable will be
more closely monitored to ensure that demand letters are sent to
debtors 31, 61 and 91 days after the initial billing. FMD offi-
cials had initiated several corrective actions during fiscal
1988: (1) aggressive effort to reduce and clean-up old receiva-
bles; and (2) increase in write-off authority of FMD Directors
and FMOs. This effort calls for the distribution of a quarterly
Key Indicator Report, which highlights old receivables, to all
FMOs. The report is accompanied with instructions from the
Director, FMD, to take immediate action.
C. Duplicate And Incorrect Amounts Were Recorded In The FMS For
Accounts Receivable
During our audit, we found that incorrect amounts for accounts
receivable were entered into the FMS by FRAB. An account receiv-
able for $22,232 was incorrectly recorded as $222,232, resulting
in an overstatement of accounts receivable of $200,000. In
addition, the auditors noted that another receivable in the
amount of $2,717,447 was entered three times, resulting in an
overstatement of accounts receivable of $5,434,894. As a result,
Superfund accounts receivable at Headquarters were overstated by
$5,634,894 as of September 30, 1988.
32
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
The $22,232 account receivable represented the State of Massachu-
setts 10% share of the costs due EPA under a Superfund State EPA
contract for remedial actions. According to FRAB officials, the
account receivable transaction input form was coded in error as
$222,232 rather .than $22,232. The account receivable for
$2,717,447 was the result of cost recovery actions taken by EPA.
This receivable was originally input in duplicate, and upon
trying to correct the duplication it was mistakenly input a third
time.
The effect of the above errors resulted in an overstatement of
Superfund accounts receivable at year end amounting to
$5,634,894. Accounts receivable in the general ledger for Head-
quarters as of September 30, 1988, totaled $17,644,319. The
balance should have been $12,009,426, after adjusting for the
above errors. As a result, the year end balance of Superfund
accounts receivable at Headquarters was overstated 47 percent.
The Chief of the FRAB concurred with the overstatement of ac-
counts receivable and indicated that adjusting entries were
recorded in December 1988, as a result of our finding.
DRAFT REPORT RECOMMENDATIONS
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management:
o monitor the shifting of responsibility for Superfund
receivables to the Regional offices to determine if
receivables are being recorded in a more timely manner;
o ensure that the implementation of an aggressive effort
to reduce and clean-up old receivables is effective; and
o instruct the Director, FMD to modify the accounts re-
ceivable subsystem to age the current portion of in-
stallment receivables separately, in order to better
monitor the collection of these receivables.
AGENCY'S COMMENTS ON DRAFT REPORT RECOMMENDATIONS
The AA agreed with our draft report recommendations and indicated
that corrective action had been or would be taken. The AA stated
that the Agency had instituted measures prior to release of this
report to ensure methodical and systematic transferring of
Superfund receivables from Headquarters to the regions. The
responsibility for collecting Superfund receivables was trans-
ferred to the regional offices effective October 1, 1988. Train-
ing sessions were held for the regional offices, interim proce-
33
-------
FINDINGS AND RECOMMENDATIONS {CONTINUED)
dures were developed and issued and updated procedures are being
circulated prior to finalization. These detailed procedures
delineate roles and responsibilities and describe collection,
billing, and follow-up procedures for all participants in the
process. Additionally, FMD has been very aggressive in monitor-
ing the process and resolving issues as they occur.
The AA also stated that FMD is aggressively monitoring the
clean-up of old receivables. A special Agency quarterly report
was developed and used under the FMS to review old receivables.
FMD is working to develop a similar approach under the new IFMS.
Finally, the AA indicated that FMD currently is implementing the
new IFMS. The new accounts receivable module includes improved
aging and reporting procedures that will assist the overall cash
management process.
OUR EVALUATION OF THE AGENCY'S COMMENTS
The AA's response to our draft report recommendations was respon-
sive to our recommendations and indicated that corrective actions
had been or would be taken. Consequently, we make no further
recommendation regarding these issues at this time.
3. WEAKNESSES WERE NOTED IN THE ALLOCATION OF GENERAL SUPPORT
COSTS TO SUPERFUND
We found that Superfund was not always charged its proportionate
share of general support services costs and personnel support
t.' costs. Improvements in procedures for allocations of general
support services costs need to be implemented to ensure that
costs charged to Superfund represent the actual benefits re-
ceived. The allocation methodology used to allocate telephone
expenses at Region 3 was not an authorized method. We questioned
$60,670 of obligations and $47,385 of disbursements, which are
the differences between the unauthorized method used by Region 3
and the authorized method using the actual full-time equivalent
(FTE) ratio. At Region 1, due to administrative ceiling limita-
tions, $15,005 of allocable costs were not allocated to the
Superfund appropriation. Cincinnati's Financial Management Center
excluded 1,574 hours from the allocation of personnel costs to
Superfund, which amounted to approximately $16,932, due to ceil-
ing limitations. From our analysis of Superfund ceiling limita-
tions Agency-wide, it appeared that these costs could have been
charged to Superfund.
34
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
A. Method Used To Allocate Support Costs For Telephone Expenses
Was Not The Standard Plan
At Region 3, we.found that support costs for telephone expenses
were not allocated to Superfund in accordance with the Agency's
standard plan for cost allocations. Telephone costs were allo-
cated to Superfund based upon a 1986 regional cost study of
telephone usage, according to Region 3 personnel. This cost
study had indicated that 50% of the Region's telephone expenses
should be charged to Superfund. This method of allocating sup-
port costs is not an authorized method. Therefore, we questioned
$60,670 of obligations and $47,385 of disbursements, which were
the differences we calculated between the method used by Region 3
and the Agency's standard plan methodology, using the FTE ratio.
Resources Management Directives 2550D. Financial Management of
the Superfund Program, Chapter 5 - Allocation of Personnel and
Support Costs to the Superfund Appropriation, provides a standard
plan for allocating regional support costs between the Superfund
and non-Superfund appropriations. The methodology of the stand-
ard plan requires distribution of support costs based upon the
ratio of Superfund FTEs to total FTEs. This plan must be adhered
to by all offices responsible for distributing support costs.
Based on the methodology used by Region 3 as noted above, obliga-
tions totaling $163,770 and disbursements totaling $127,931 were
allocated to Superfund. Based on the final Superfund FTE ratio
at Region 3, we calculated that $103,100 of obligations and
$80,546 of disbursements should have been allocated to Superfund.
We questioned the differences between the method used and the
authorized method, amounting to $60,670 of obligations and
$47,385 of disbursements. No response was received during our
fieldwork from Region 3 officials in regard to this finding.
B. Allocations of General Support Services Costs And Personnel
Support Costs Were Not Always Made
Our audit disclosed that allocations of general support services
costs at Region 1 were not always made. We found that, during
September 1988, the final cost allocation was prepared at Region
1, however, due to administrative ceilings, allocable costs
totaling $15,005 were not allocated to the Superfund appropria-
tion. We previously noted in our audit report for fiscal 1987
that Region 1 did not allocate all Superfund costs for the same
reason.
On a monthly basis, Cincinnati's Financial Management Center
(CFMC) allocated personnel compensation and benefits (PC&B) from
the Salaries and Expenses appropriation to the Superfund appro-
priation based upon the ratio of Superfund transactions to total
35
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
transactions. The Superfund transaction percentage was applied
to the regular work hours to determine the total equivalent hours
to charge to the Superfund program. This complies with EPA
policy and the Superfund cost allocation plan for PC&B costs.
However, under instructions from FMD at Headquarters, a total of
1,574 hours for pay periods 15 through 19 was excluded from the
allocation process. The dollar value of the 1,574 hours was
approximately $16,932, based on the average hourly rates of all
CFMC employees for pay periods 15 through 19.
Resources Management Directives 2550D. Financial Management of
the Superfund Program, Chapter 3 - Budget and Resources Manage-
ment, paragraph 4a states that there is a legal limit on the
Superfund appropriation for administrative expenses. Specific
ceilings are distributed to individual Responsible Planning and
Implementation Officers (RPIO). RPIOs "should continually assess
the impact of the ceiling on projected and actual expenses... If
actual usage indicates that adjustments are needed, they must
request approval for an increased ceiling from the Budget Divi-
sion before obligations exceed the RPIO's currently authorized
ceiling."
Adjustments to budgetary ceilings should have been requested to
provide the necessary budgets for the general support and person-
nel costs of the Superfund program. Our review of the Superfund
administrative ceilings Agency-wide indicated that these ceilings
could have been adjusted to allow the charging of the Superfund
costs to the Superfund appropriation.
In response to our Notifications of Findings and Recommendations,
officials at Region 1 indicated that adjustments to regional
budgetary ceilings must be made by the end of August. At that
time, officials indicated that they had no way of identifying the
allocable support costs or the FTE ratios at year end. Since
these factors were unknown, no adjustments to budgetary ceilings
were requested. Cincinnati officials indicated that Superfund
payroll allocations for pay periods 15 through 19 were not proc-
essed per request from FMD at Headquarters. In addition, they
stated that once the established ceilings have been reached, all
Superfund hours are then charged to the Salaries and Expenses
appropriation.
DRAFT REPORT RECOMMENDATIONS
We recommended in our draft report that the Assistant Administra-
tor for Administration and Resources Management:
36
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
o direct the Comptroller to request the Regional Adminis-
trator of Region 3 to recalculate general support costs
for telephone expenses using actual FTE ratios and make
the necessary adjustments; and
o instruct the Comptroller to review the budgetary ceil-
ings at Region 1 and the Cincinnati Financial Management
Center and make any appropriate adjustments.
AGENCY'S COMMENTS ON DRAFT REPORT RECOMMENDATIONS
The AA generally agreed with our draft report recommendations and
indicated that corrective action was being taken. The AA indi-
cated that Agency officials were discussing the implications of
making the adjustments with Region 3 and Office of the Comptrol-
ler personnel. The AA stated that the general support costs will
be recalculated and the necessary adjustments made. The Region
is currently using the approved allocation method for calculating
its general support costs. As long as the regions adhere to
Agency policy, FMD will monitor the allocation of general support
costs.
The AA also stated that it is Agency policy to monitor and review
budgetary ceilings throughout the year. Where deficiencies are
noted, it is the Agency's policy that RPIOs request additional
Superfund FTEs for future fiscal years. Once granted, distribu-
tion is made according to budgetary needs in the Agency.
Finally, the AA stated that adjustments to FY 1988 figures are
not warranted, given the immateriality of the amounts and the
fact that there were not inappropriate charges to Superfund.
Further, the intent of the recommendation seems to be that EPA
better utilize its Superfund resources. We think the high per-
centage of resources used by those offices is evidence that
excellent budgetary management was exercised by both offices.
OUR EVALUATION OF THE AGENCY'S COMMENTS
The AA's response was generally responsive to our recommendations
and indicated that corrective action was being taken with regard
to the adjustments of support services cost allocations at Region
3. Our recommendation to review the budgetary ceilings at Region
1 and Cincinnati was intended to advise the Agency that Superfund
was being undercharged for support services at these locations.
We believe that Superfund should bear its fair share of costs,
within the confines of the Agency-wide Superfund budgetary ceil-
ings. We agree that the reported undercharges for fiscal 1988
are immaterial and any adjustments are discretionary.
37
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
RECOMMENDATIONS
We recommend that the AA:
o require the Regional Administrator of Region 3 to retain
documentation supporting the adjustments to Region 3's cost
allocations for review by the auditors; and
o instruct the Comptroller to review the budgetary ceilings
at Region 1 and the Cincinnati Financial Management Center to
ensure that all appropriate Superfund support costs can be
charged to Superfund in the future.
4. OBLIGATIONS WERE QUESTIONED DUE TO RECORDING ERRORS AND LACK
OF DOCUMENTATION
Based upon the results of our statistical sampling, we questioned
obligations of $30,355 from a total of $1,353,293,706 of nonpay-
roll obligations recorded in fiscal 1988. The $30,355 of ques-
tioned obligations are specific transactions in our samples,
which were ineligible or unsupported. (See Exhibit III A for
details.) The questioned obligations resulted from amounts being
obligated twice and obligated amounts not agreeing with the
obligating documents. In addition, the results of tests of 10
key internal control and compliance attributes for nonpayroll
obligations indicated unacceptable levels (over 5%) of noncompli-
ance with Agency policies and procedures with certain attributes.
Using statistical sampling techniques, we projected that the
universe of nonpayroll obligations probably contained questioned
costs within a range from $(32,517) to $278,155. Our projections
were made with a 95% confidence limit, i.e., we are 95% confident
that the projected questioned obligations fall within this range
of values. (See Appendix 2 for more details.) Since the amount
of the projected questioned obligations was immaterial in rela-
tion to the total recorded nonpayroll obligations, we questioned
only the specific transactions from our samples and accepted the
balance of recorded nonpayroll obligations.
The sampling universe of nonpayroll obligations was taken from
the fiscal 1988 allotment file in the FMS. The transactions in
this file were separated into three subuniverses: contracts;
cooperative agreements; and all other object classes, excluding
personnel compensation and benefits. We tested 10 internal
control and compliance attributes to determine the degree of
compliance with Agency policies and procedures. Our statistical
38
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
analysis indicated that the following projected error rates
exceeded our expected error rate of five percent:
Projected
Attribute and Subuniverse Error Rate
Receipt of obligating document was timely.
(See Exhibit V for details.)
Contracts 46.52%
Cooperative Agreements 27.86%
Ottier Object Classes 32.37%
Posting of obligation to FMS by FMO was timely.
(See Exhibit VI for details.)
Contracts 25.09%
Cooperative Agreements 39.99%
Other Object Classes 28.00%
Commitment was previously entered into FMS,
if obligation was greater than $25,000.
Contracts 13.17%
Other Object Classes 16.09%
Appropriation number was Superfund.
Contracts 11.85%
Other Object Classes 15.67%
Name of authorized official agreed with
authorized official's signature list
maintained by FMO.
Other Object Classes 9.17%
EPA Comptroller Policy Announcement No. 86-09 establishes poli-
cies, procedures and timeframes with which program, administra-
tive, and financial management offices must comply in order to
ensure prompt recording of obligations. This Policy Announcement
states that individuals with authority to obligate funds are
responsible for ensuring that the actual obligating documents,
or, in locations remote from the servicing finance office, other
evidence of the obligation are received by the servicing finance
office within three work days of execution of the obligating
document. The Policy Announcement further states that FMOs will
ensure that obligations are recorded in FMS within four work days
of receipt of actual obligating documents or other acceptable
written evidence. Also, the Policy Announcement states that
obligating documents will be date stamped upon receipt.
Comptroller Policy Announcement No. 87-06 states that Allowance
39
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
Holders must ensure that financial transactions exceeding $25,000
are committed in the Agency's FMS. Resources Management Direc-
tives 2520. Administrative Control of Appropriated Funds, Chapter
4 also states that the commitment must be entered in FMS, if it
is over $25,000. .
The failure to properly follow Agency policies and procedures for
recording obligations, as indicated above, could result in errors
and inappropriate charges to the Superfund. Also, noncompliance
with these policies impedes the ability of Allowance Holders to
monitor available funds, which increases the risk of over-obliga-
tion of funds and potential violations of the Anti-Deficiency
Act.
In comparison with the results from the prior year audit tests of
obligations, we noted that fewer attributes exceeded an unaccept-
able rate of five percent for fiscal 1988. The error rates were
also reduced from the rates reported in the prior year in most
cases. In addition, the Agency issued a memorandum dated Novem-
ber 15, 1988, emphasizing that FMOs must record obligations in a
timely manner and program offices need to forward obligation
documents to FMOs promptly. Consequently, we are making no
further recommendations regarding these issues at this time.
DRAFT REPORT RECOMMENDATION
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management require the
appropriate FMOs to review and- resolve the questioned obligation
transactions.
AGENCY'S COMMENTS ON DRAFT REPORT RECOMMENDATION
The AA agreed with our recommendation and indicated that correc-
tive action had been taken. The AA agreed that the FMOs should
correct errors found during the audit. In many cases, the FMOs
made the necessary correction at the time of the audit and pro-
vided documentation of the correction to the auditors. Although
corrections had been made, the auditors did not acknowledge those
facts in the report. Attachment II, in part, provides specific
regional and field office comments which indicate corrective
actions that were not recognized by the auditors.
Many items listed in the Exhibits to the report were not dis-
closed during the audit or exit conference nor were notifications
of findings provided to the auditee. The servicing finance
offices made adjustments where warranted; however, in some cases
as annotated on Attachment II, the questioned costs are erroneous
and the information in the accounting system was correct. At-
40
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
tachment II provides the status of the recommendation.
OUR EVALUATION OF THE AGENCY'S COMMENTS
The AA's comments were responsive to our recommendation and
indicated that corrective action had been taken. We acknowledge
that some corrections were made by FMOs during our audit field-
work. However, these corrections were made after the close of
the fiscal year and were not reflected in the obligations in this
report. We footnoted in this report the corrections that the
Agency indicated were made. Some of these corrections were
verified by us from documentation provided by the Agency, subse-
quent to their response to the draft report. Also, we acknowl-
edge that there were a few items not disclosed during our field-
work which were subsequently questioned during our workpaper
reviews. We did, however, provide copies of our workpapers which
disclosed questioned obligations to the Agency officials at each
audit location. We removed certain questioned amounts from the
report based upon information that was provided by the Agency in
their response and subsequent to the response.
We believe the Agency made a diligent effort to correct the
questioned costs, therefore, we are making no further recommenda-
tions.
5. DISBURSEMENTS WERE QUESTIONED DUE TO RECORDING ERRORS AND
LACK OF DOCUMENTATION OR APPROVAL
Based upon the results of our statistical sampling, we questioned
costs of $148,757, from a total'of $682,390,811 of nonpayroll
disbursements recorded in fiscal 1988. The $148,757 of ques-
tioned costs were specific transactions in our samples which were
ineligible or unsupported. (See Exhibit IV B.) The questioned
costs resulted from: double entries of transactions; improper
charges to Superfund; an unapproved payment; and input and allo-
cation errors. We also examined key internal control and compli-
ance attributes for which we found the error rate exceeded five
percent for certain attributes.
Using statistical sampling techniques, we projected that ques-
tioned costs within a range from $62,896 to $406,796 probably
existed in the universe of nonpayroll disbursements. Our projec-
tions of questioned disbursements were made with a 95% confidence
limit, i.e., we are 95% confident that the questioned costs fall
within this range of values. (See Appendix 2 for more details.)
Since the amount of the projected questioned costs was immaterial
to the total recorded nonpayroll disbursements, we questioned
only the specific transactions from our samples and accepted the
balance of recorded nonpayroll disbursements.
41
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
The sampling universe for nonpayroll disbursements was the fiscal
1988 detail history file in the FMS. The transactions in this
file were separated into three subuniverses: contracts; coopera-
tive agreements; and all other object classes, excluding person-
nel compensation and benefits. We tested 11 to 16 internal
control and compliance attributes to determine the degree of
compliance with Agency policies and procedures. Our statistical
analysis indicated that the projected error rates exceeded five
percent for the following attributes:
Projected
Attribute and Subuniverse Error Rate
Invoice was paid on time but not early.
(See Exhibit VII for details.)
Contracts 59.71%
Other Object Classes 52.13%
Posting of disbursement to FMS by FMO was timely.
(See Exhibit VIII for details.)
Contracts 5.95%
Cooperative Agreements 38.06%
Other Object Classes 34.91%
Account Number agreed with drawdown request.
Cooperative Agreements 11.25%
Authorized official's approval was indicated
on drawdown request.
Cooperative Agreements 23.47%
Authorized official's approval was timely.
Cooperative Agreements 12.27%
Project officer or approving official was
authorized to approve payment and approval
was indicated on disbursement document.
Other Object Classes 17.13%
Disbursement documents were perforated or
stamped "PAID" and indicated Treasury
schedule and date.
Other Object Classes 9.14%
Date approved by project officer or authorized
official was before date certified by
certifying officer.
Other Object Classes 9.60%
42
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
Attribute and Subuniverse
Cash discount, if available and cost effective,
was taken.
Other Object Classes
Property items were properly recorded in the
Personal Property Accounting System.
Other Object Classes
Existence of property items was physically
verified.
Other Object Classes
Projected
Error Rate
14.88%
35.66%
14.96%
EPA Comptroller Policy Announcement No. 86-09 states that in
order to report accurately and timely on funds status and other
financial results of Agency activities, data must be recorded in
EMS as promptly as possible after authorized officials take
actions {e.g., obligation of funds, disbursements) affecting that
status. We could find no specific Agency policy for timely
recording of disbursements in the FMS. Therefore, we used the
timeframes required for recording obligations in the FMS, within
4 work days. (See Finding No. 4.)
The failure to properly follow Agency guidelines relating to dis-
bursements, as indicated in the attributes above, could result in
duplicate payments, lack of proper documentation, or improper
charging of costs to Superfund.
One of the objectives in the audit of nonpayroll disbursements
was to determine if disbursements were made in accordance with
EPA's cash management policy and the Prompt Payment Act. The
Office of Management and Budget (OMB) Circular A-125, revised
June 9, 1987, requires federal agencies to make payments as close
as possible to, but not later than the due date, or if appropri-
ate, the discount date. In April 1988, EPA's Director of FMD
advised all FMOs of the changes made by the revised OMB Circular
A-125 and instructed them to make whatever adjustments necessary
in their payment procedures to implement the revised OMB instruc-
tions.
Our tests of the compliance with the Prompt Payment Act (OMB
Circular A-125) included 251 transactions, amounting to
$61,308,917. These transactions were selected in our year end
samples which were selected from the period June 1, 1988, through
September 30, 1988. The results of those tests disclosed the
following exceptions:
43
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
Total
Payment Made Number Amount
3 days or more before
the due date 25 $ 531,227
1 to 7 days after the
due date 74 $25,988,660
8 to 15 days after the
due date 14 $ 9,082,877
16 or more days after
the due date 10 $ 147,462
Interest penalties estimated at $358 should have been paid with
the late payments made 16 or more days after the due date, but
were not.
We made several recommendations in our prior audit report regard-
ing these issues. The Agency issued a memorandum to all FMOs
dated November 15, 1988, emphasizing the requirements for timely
payments and the timely recording of payments in the FMS. Conse-
quently, we are making no further recommendations on these issues
at this time.
DRAFT REPORT RECOMMENDATION
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management require the
appropriate FMOs to review and resolve the questioned disburse-
ment transactions.
AGENCY'S COMMENTS ON DRAFT REPORT RECOMMENDATION
The AA agreed with pur draft report recommendation and indicated
that corrective action had been taken. The AA agreed that the
FMOs should correct errors found during the audit. Many items
were corrected during the audit and some items were seen for the
first time in the draft report. The servicing finance offices
made adjustments where warranted; however, in some cases as
annotated on Attachment II, the questioned costs are erroneous
and the information in the accounting system was correct. At-
tachment II provides the status of the recommendation.
OUR EVALUATION OF THE AGENCY'S COMMENTS
The AA's response was responsive to our draft recommendation and
indicated that corrective action had been taken. We acknowledge
that some corrections were made by FMOs during our audit field-
work. However, as previously explained, these corrections were
44
-------
•ass
FINDINGS AND RECOMMENDATIONS (CONTINUED)
made after the close of the fiscal year and were not reflected in
the disbursements in this report. We footnoted in this report
the corrections that the Agency indicated were made. Some of
these corrections were verified by us from documentation provided
by the Agency subsequent to their response to the draft report.
Also, we acknowledge that there were a few items not disclosed
during our fieldwork which were subsequently questioned in our
workpaper reviews. We did, however, provide copies of our work-
papers which disclosed questioned disbursements to the Agency
officials at each audit location. We have removed certain ques-
tioned amounts from the report based upon information that was
provided by the Agency in their response and subsequent to the
response. There are four remaining questioned transactions which
the Agency stated were not duplicate transactions in the FMS.
However, our statisticians indicated these transactions .were
duplicate records in the detail history file, from which our
sample was drawn.
RECOMMENDATION
We recommend that the AA require the Comptroller to review the
unresolved questioned disbursements and instruct the appropriate
FMOs to make the necessary adjustments.
6. PERSONNEL COMPENSATION COSTS WERE QUESTIONED DUE TO RECORD-
ING ERRORS AND LACK OF DOCUMENTATION
Based upon the results of our,statistical sampling of personnel
compensation transactions, we questioned costs of $35,925 from a
total of $92,327,130 of recorded personnel compensation disburse-
ments. The $35,925 of questioned payroll costs were specific
transactions in our sample, which were ineligible or unsupported.
(See Exhibit IV A.) The questioned costs resulted from lack of
documentation to support transactions, FMS data not in agreement
with source information, and input errors. We also found that
four of nine key internal control and compliance attributes for
payroll transactions exceeded an error rate of five percent.
Using statistical sampling techniques, we projected that the
universe of personnel compensation disbursements probably con-
tained questioned costs within a range from $43,293 to
$1,703,761. Our projections were made with a confidence limit of
95%, i.e., we are 95% confident that the questioned costs fall
within this range of values. (See Appendix 2 for more details.)
Since the amount of the projected questioned costs was immaterial
to the total payroll disbursements, we questioned only the speci-
fic transactions from our samples and accepted the balance of
recorded payroll disbursements.
The sampling universe of personnel compensation transactions was
the fiscal 1988 paymerge file,; which totaled $92,957,683, as of
September 30, 1988. The recorded obligations and disbursements
45
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED1
for personnel compensation, amounting to $93,138,167 and
$92,327,130, respectively, as shown in Exhibits I and II, were
taken from the allotment file. The paymerge file contains de-
tailed payroll transactions and the allotment file contains
payroll accruals and reversals. The differences between the
paymerge totals and the obligation and disbursement payroll
totals were considered immaterial for our purposes. Our statis-
tical sampling of payroll benefits transactions during the inter-
im phase of our audit disclosed so few errors that we did not
select any additional transactions at year end.
We tested nine internal control and compliance attributes to
determine the degree of compliance with Agency policies and
procedures. Our statistical analysis indicated that projected
error rates exceeded five percent for the following attributes:
Estimated
Attribute Error Rates
Account number agrees with timecard or timesheet 5.14%
Leave time supported by application for leave or
timecard entry initialed by employee 27.04%
Overtime hours, compensatory time worked, and premium
pay supported by an approved request for and
authorization of overtime work 10.49%
Correction of previous timesheet entries supported by
revised timesheet and/or redistribution of payroll
charges 5.14%
Our statistical analysis of internal control and compliance
attributes indicated that the estimated error rates exceeded five
percent for four out of nine attributes as compared to ten of ten
in the prior year. Also the error rates were substantially
reduced from the results in the prior year for two attributes.
In October 1987, the Director, FMD, issued a memorandum emphasiz-
ing the importance of EPA's policies and procedures regarding
timecards and timesheets. Also, several training programs were
initiated to train administrative employees and Agency timekeep-
ers. The reduction in attribute exceptions and error rates indi-
cates improvements in compliance with EPA's timekeeping policies
and procedures. Consequently, we are making no further recommen-
dations on these issues at this time.
46
-------
FINDINGS AND RECOMMENDATIONS (CONTINUED)
DRAFT REPORT RECOMMENDATION
We recommended in our draft report that EPA's Assistant Adminis-
trator for Administration and Resources Management require the
appropriate program offices and FMOs to review the questioned
payroll transactions and advise HAOB to make any necessary ad-
justments to the payroll records.
AGENCY'S COMMENTS ON DRAFT REPORT RECOMMENDATION
The AA agreed with our draft report recommendation and indicated
that corrective action had been taken. The AA agreed that
adjustments to the payroll records should be made where errors
are disclosed. The majority of the items shown on Exhibit IV-A
of the report were seen for the first time in the draft report
and thirty-three percent of the items listed were correct at the
time of the'audit. We provided explanations in the response
legend section of Attachment II supporting why those items were
correct as stated. Had these items been discussed prior to the
issuance of the draft report, the auditors would not have includ-
ed them.
OUR EVALUATION OF THE AGENCY'S COMMENTS
The AA's response was generally responsive to our recommendation
and indicated that corrective action had been taken. We disagree
that the majority of items were disclosed for the first time in
the draft report. We provided copies of our worksheets disclos-
ing the questioned payroll disbursements to the Agency officials
at each audit location during our fieldwork or at the exit con-
ferences. We acknowledge that some corrections were made by the
FMOs during our fieldwork. However, as previously explained,
these corrections were made after the close of the fiscal year
and were not reflected in the disbursements in this report. We
footnoted in this report the corrections that the Agency indicat-
ed were made. Some of these corrections were verified by us from
documentation provided by the Agency subsequent to their response
to the draft report. We removed certain questioned amounts from
the report based upon information that was provided by the Agency
in their response and subsequent to the response.
We believe the Agency made a diligent effort to correct the
questioned costs, therefore, we are making no further recommenda-
tions.
47
-------
EXHIBITS
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D. C.
HAZARDOUS SUBSTANCE SUPERFUND
SCHEDULE OF OBLIGATIONS (NOTE 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1988
EXHIBIT I
Description
Personnel Compensation
Personnel Benefits
Total Personnel Com-
pensation & Benefits
Travel and Transportation
of Persons
Transportation of Things
Rent, Communications,
and Utilities
Printing and Reproduction
Other Contractual
Services
Supplies and Materials
Equipment
Land and Structures
Grants, Subsidies, and
Contributions
Insurance Claims and
Indemnities
Total Non-Personnel
Compensation & Benefits
Amount
93,138,167
15.859.492
108.997,659
9,178,351
596,886
18,220,192
838,868
1,084,809,993
3,105,565
15,275,588
35,175
221,093,417
139.671
1.353.293.706
Percent
of
Total
6.37
1 .08
7.45
.63
.04
1.24
.05
74.19
.21
1.05
15.12
.01
92.55
Total
$1,462,291,365
100.00
The accompanying notes are an integral part of this schedule.
48
-------
EXHIBIT I
(CONTINUED1
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
- NOTES TO SCHEDULE OF OBLIGATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1988
NOTE 1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis Of Presentation
The Schedule of Obligations was prepared by the EPA Financial
Management Division based on financial information contained in
the Financial Management System for the fiscal year ended Septem-
ber 30, 1988. EPA's policy is to prepare this schedule in con-
formity with accounting policies and procedures that are legisla-
tively established and promulgated through various Federal and
EPA policies and procedural standards, which is a comprehensive
basis of accounting other than generally accepted accounting
principles. This schedule is not intended to present either the
financial position or the financial results of operations in
conformity with generally accepted accounting principles.
Obligations, as presented in this Exhibit, were reported by EPA's
Financial System Branch in a Superfund Control Totals Report from
information contained in the Financial Management System "Allot-
ment File" for the current fiscal year appropriation. The total
obligations from this report,'amounting to $1,462,291,365, were
reconciled with the totals reported by EPA to the Office of
Management and Budget for appropriation 68-20X8145 for the period
ended September 30, 1988.
Obligations - Nonpavroll
Obligations are amounts of orders placed, contracts awarded,
services received, travel performed, and similar transactions
during a given period that will require payments during the same
or future periods. Such amounts reflect adjustments for differ-
ences between obligations previously recorded and actual dis-
bursements to liquidate those obligations. The term "obligation"
includes both obligations that have matured (legal liabilities)
and those that are contingent upon some future performance, such
as providing services or furnishing materials. Obligations
represent funds obligated in the current fiscal year against the
current fiscal year's appropriation, which may include carry-over
authority from prior years. Obligations are recorded for budge-
tary purposes at the time they are incurred.
49
-------
EXHIBIT I
(CONTINUED)
Obligations - Payroll
Payroll obligations, are based upon actual personnel compensation
and benefits recorded monthly in the payroll subsystem (paymerge
file) plus accruals generated at month-end. Personnel compensa-
tion and benefits obligations amounted to $108,977,659, which,
based on EPA policy, were recorded as obligations for budgetary
accounting purposes.
Administrative Expense Ceiling
Funding for the Superfund program is achieved through a separate
annual, no-year appropriation. The legal limitation set by Con-
gress on the Superfund appropriation requires the Agency to stay
within an administrative expense ceiling. Congressional intent
was to limit intramural expenses to ensure that the primary
function of the Superfund of cleaning up hazardous waste sites
was protected. Agency policy is that the legally binding admin-
istrative expense ceiling placed on the Superfund appropriation
be managed by the Office of the Comptroller through a distribu-
tion of specific ceilings to the individual Responsible Planning
and Implementation Officers (RPIO's).
Public Law 100-202 provided funding to carry out the Comprehen-
sive Environmental Response, Compensation, and Liability Act of
1980, with $1,128,000,000 for fiscal year 1988, to be derived
from the Hazardous Substance Superfund, consisting of
$888,900,000 as authorized by the Superfund Amendments and Reau-
thorization Act of 1986 and $239,100,000 as a payment from gener-
al revenues to the Hazardous Substance Superfund, with all of
such funds to remain available until expended. The law also
provides no more than $182,400,000, or 16.2% of total funding, to
be available for administrative expenses.
Our analysis of the administrative expenses for the year indicat-
ed that the Superfund program obligated $156,352,780, or 10.7% of
total obligations, for these administrative expenses, as defined
by Agency policy. The Agency defined administrative expenses to
include all object classes in the Schedule of Obligations except
Other Contractual Services, Land and Structures, and Grants,
Subsidies and Contributions. These amounts are within the dollar
limitation set by Congress, and are 85.7% of the administrative
expense ceiling of $182,400,000.
50
-------
EXHIBIT TT
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
SCHEDULE OF DISBURSEMENTS (NOTE 1)
FISCAL YEAR ENDED SEPTEMBER 30, 1988
Description
Personnel Compensation
Personnel Benefits
Total Personnel Com-
pensation and Benefits
Travel and Transportation
of Persons
Transportation of Things
Rent, Communications,
and Utilities
Printing and Reproduction
Other Contractual
Services
Supplies and Materials
Equipment
Land and Structures
Grants, Subsidies, and
Contributions
Insurance Claims and
Indemnities
Total Non-Personnel
Compensation & Benefits
Total
Amount
92,327,130
15.634.232
107.961.362
8,748,723
539,955
17,981,557
772,665
561,475,786
3,139,237
17,392,761
3,975
72,196,826
139.326
682.390.811
$ 790,352,173
Percent
of
Total
11 .68
1 .98
13.66
1 .11
.07
2.27
.10
71 .04
.40
2.20
9.13
.02
86.34
100.00
The accompanying notes are an integral part of this schedule.
51
-------
EXHIBIT II
(CONTINUED)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
NOTES TO SCHEDULE OF DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1988
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis Of Presentation
The Schedule of Disbursements was prepared by the EPA Financial
Management Division based on financial information contained in
the Financial Management System for the fiscal year ended Septem-
ber 30, 1988. EPA's policy is to prepare this schedule in con-
formity with accounting policies and procedures that are legisla-
tively established and promulgated through various Federal and
EPA policies and procedural standards, which is a comprehensive
basis of accounting other than generally accepted accounting
principles. This schedule is not intended to present either the
financial position or the financial results of operations in
conformity with generally accepted accounting principles.
Disbursements, as presented in this Exhibit, were reported by
EPA's Financial Systems Branch in a Special Superfund Audit
Report from information contained in the Financial Management
System Allotment File. The total disbursements from this 'report,
amounting to $790,352,173 were reconciled with the totals report-
ed by EPA to the Office of Management and Budget for appropria-
tions 68-20X8145 and 68-2068145 for the period ended September
30, 1988.
Disbursements - Nonpavroll
Disbursements represent the amount of cash outlays made to liqui-
date obligations. These cash outlays represent funds disbursed
during the current fiscal year against either prior years' or
current year's appropriations. Nonpayroll disbursements are
recorded on the cash basis of accounting.
Disbursements - Payroll
Personnel compensation and benefits disbursements amounted to
$107,961,362, which represented personnel compensation and bene-
fits during fiscal 1988 on an accrual basis.
Property and Equipment and Depreciation
EPA's policy is to capitalize property and equipment with a cost
52
-------
EXHIBIT II
(CONTINUED)
greater than $5,000 and a useful life of two years or greater.
However, disbursements for equipment recorded in this Exhibit are
presented on a cash basis as an operating expense, without ad-
justment for capitalized items. No depreciation was calculated
or recorded for purposes of this schedule.
53
-------
EXHIBIT III
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
SUMMARY SCHEDULE OF OBLIGATIONS QUESTIONED
FISCAL YEAR ENDED SEPTEMBER 30, 1988
Description Questioned Costs
Ineligible Unsupported Total Note
Rent, Communications,
and Utilities $ 60,670 $ 60,670 1
Other Contractual Services $ 135 - 135 2
Supplies and Materials 2,015 560 2,575 2
Equipment 27.766 - 27.766 2
TOTALS $ 29,916 $ 61,230 $ 91,146
Notes:
1 - See Finding No. 3 for additional details.
2 - See Finding No. 4 and Exhibit III A for
additional details.
54
-------
EXHIBIT III A
OBLIGATING
DOCUMENT
SFO CASE ID NUMBER
1 3010002 SFALLOCATE
3 3110001 8PB016NASA
4 3090018 8R09S5NCSA
7 23040005 OOOT190352
7 23160024 870463NBSX
27 21020009 OOOTI96583
33 23060001 8E039INNSA
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUNO)
DETAIL SCHEDULE OF NONPAYROLL OBLIGATIONS QUESTIONED
• . . FISCAL YEAS ENDED SEPTEMBER 30. 1988
DOCUMENT
CONTROL ACCOUNT
NUMBER NUMBER
SF0002
NC0042
EX0129
Ml0074
M20214
C90737
LS0873
8TEU01S700
8TFA03N700
8TFA04E700
8TFA07M700
8TFA07M700
6TEG60AOSF
8TEK63LOAO
OBJECT
CLASS
3103
2601
2601
2610
3101
2544
2604
FMS
rrw "••
AMOUNT
($0.69)
$8,286.68
$4,029.80
$120.00
$55,530.00
$135.00
$699.62
QUESTIONED
INELIGIBLE
$1.38
$2,014.90
$27.765.00
$135.00
$29.916.28
COSTS
UNSUPPORTED
$33.49
$20.00
$506.67
$560.16
EXPLANATION
1 *
2 *
3 *
2 *
3 *
4 *
2 •
* Con-acting entry was recorded In FY 1989
EXPLANATION LEGEND
1 Error 1n allocation program.
2 Recorded amount does not agree to obligating document.
3 Amount obligated twice.
4 Input
55
-------
EXHIBIT IV
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
SUMMARY SCHEDULE OF DISBURSEMENTS QUESTIONED
FISCAL YEAR ENDED SEPTEMBER 30, 1988
Description
Personnel Compensation
Rent, Communications,
and Utilities
Supplies and Materials
Equipment
Grants, Subsidies, and
Contributions
TOTALS
Questioned Costs
Ineligible Unsupported Total Note
$ 21,521 $ 14,404 $ 35,925 1
(5) 47,385
25,247
7,574 1,588
114.353
47,380 2,3
25,247 2
9,162 2
114.353 2
$168,690 $ 63,377 $232,067
Notes:
See Finding No. 6 and Exhibit IV A for
additional details.
See Finding No. 5 and Exhibit IV B for
additional details.
1
2
3 - See Finding No. 3 for additional details.
56
-------
EXHIBIT IV A
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUNO)
DETAIL SCHEDULE OF PAYROLL DISBURSEMENTS QUESTIONED
FISCAL YEAR ENDED SEPTEMBER 30,1988
AHRC
02L
03W
040
05M
06K
Q6<
06K
06K
07H
07M
07M
07M
07W
07W
07H
07H
07W
07W
07M
07H
07W
07W
07W
07W
07W
07W
07W
07W
07W
07W
080
080
080
08L
CASE ID
1030011
1070012
1130012
1080073
1180037
1180053
1180023
1180059
1010105
1010106
1010098
1010054
1180054
1180022
1180057
1180002
1180012
1180003
1180092
1180043
1180035
1180074
1180022
1180048
1180008
1180048
1180004
1180017
1180081
1180068
1160014
1050009
1110008
1160113
CODE
203
302
402
503
601
601
601
601
701
702
702
703
704
705
704
705
704
704
704
704
705
704
707
704
704
707
707
707
705
705
801
802
802
803
OAV
AorniiuT nairrr cue
rMT f*\tfW\sui* i wuvt\* ^
PERIOD NUMBER CLASS
03
04
23
07
SP
NO
JU
JN
10
24
07
10
NO
JU
AG
OC
JU
DE
MR
AP
FB
FB
JA
MY
NO
SP
NO
DE
DE
MR
IS
11
16
15
8TJB02L400
8TFA03W800
8TG804D4BM
8TET05M700
8TPR06K700
8TPR06K700
8TPR06K700
8TPR06K700
8TEN07H71X
8TFA07M700
8TGB07M51X
8TFA07M91X
8TFA07W700
8TFA07W700
8TFA07W700
...8TFA07W700
8TFA07W700
8TFA07W700
8TFA07W700
8TFA07W700
8TFA07W700
8TFA07W700
8TG807W400
8TFA07W700
8TFA07W700
3TG807W400
8TG807W400
8TGB07W400
8TFA07W700
8TFA07W700
8TJ308D400
8TEY08D646
8TEY08D400
8TGB08L400
1112
1159
1112
1112
1171
1171
1171
1171
1112
1112
1112
1112
11*1
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1171
1112
1112
1112
1112
i IKJ
HOURS
-2.00
0.00
52.00
20.70
174.00
174.00
174.00
174.00
-17.50
-34.00
-13.00
-8.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
174.00
66.70
0.80
43.20
68.00
PMS
r no
AMOUNT
($45.56)
$142.40
$882.96
$384.20
$4,685.10
$4.593.30
$4,685.10
$4,685.10
($255.73)
($707.88)
($265.33)
($106.24)
$4,002.90
$4,083.00
$4,083.00
$3,917.70
$4,083.00
$4,002.90
$4,083.00
$4,083.00
$3.996.00
$4,083.00
$3,110.40
$4,083.00
$4,002.90
$3.196.50
$3.049.50
$3,049.50
$3.917.70
$3.996.00
$1,666.67
$11.57
$612.72
$1,977.44
HOURS
pep
QUESTIONED COSTS
TC/TS INELIGIBLE UNSUPPORTED EXPLANATION
_
-
13.00
20.70
126.00
110.00
89.00
105.00
-
-
-
-
131.00
-
147.75
154.75
-
140.75
139.00
142.75
129.50
127.75
92.75
141.25
133.50
7. SO
37.00
38.50
164.25
133.25
66.75
0.75
42.75
67.00
($1.70)
$142.40
$662.22
($7.60)
$1,291.92
$1,689.30
$2,288.33
$1,857.45
($255.73)
($707.88)
($265.33)
($86.08)
$989.22
$4.083.00
$615.31
$432.73
$4,083.00
$764.24
$820.67
$732.66
$1,021.38
$1,084.71
$1.452.03
$767.86
$931.06
$3.058.72
$2.400.99
$2.374.59
$218.79
$935.25
($0.25)
$0.13
$6.95
$29.08
1 s
2 2
3 *
1 *
4 ¥
4 ¥
4 ¥
4 ¥
5 ¥
5 ¥
5 ¥
5 ¥
4 ¥
2 ¥
4 ¥
4 ¥
2 ¥
4 ¥
4 ¥
4 ¥
4 ¥
4 ¥
4 ¥
4 *
4 •
4 »
4 «
4 *
4 ¥
4 ¥
6
6
7
3 *
57
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
DETAIL SCHEDULE OF PAYROLL DISBURSEMENTS QUESTIONED
FISCAL YEAR ENDED SEPTEMBER 30,1988
EXHIBIT IV A
(CONTINUED)
AHRC
10F
33S
39L
42F
50H
50H
SIC
55F
55J
550
55J
55M
S5M
628
642
642
728
72E
77A
CASE ID
1080063
IT60146
1010109
1060007
1080065
1040003
1120009
1010070
1010065
1010089
1130010
1080068
1010055
1170071
1010061
1150092
1010089
1080042
1150053
AUDIT
CODE
001
401
402
403
N01
N02
H04
H06
H07
H08
H09
H10
H11
H12
HI 3
H14
HIS
HI 9
H24
PAY
PERIOD
17
09
05
02
05
01
22
11
01
07
17
14
01
03
24
01
07
26
22
ACCOUNT
"NUMBER-
8TJB10F611
8TPX33S900
8TEW39L700
8TGZ42F700
8TNZSOH400
8TFZ50H400
8TEP51C700
8TEP55F700
8TEP55J700
8TEP55J700
8TEP55J700
8TEP55M700
8TEP55M700
8TEJ62BOE2
8TED6420EO
8TED6420CO
8TFA72B700
8TFA72E900
8TJB77A400
OBJECT
CLASS
1112
1112
1112
1112
1159
1112
1165
1112
1112
1112
1112
1112
1112
1112
1112
1112
1112
1135
1112
FMS
HOURS
17.50
75.00
-55.00
5.10
0.00
0.00
0.00
-80.00
-14.20
-17.50
44.00
14.40
-12.80
80.00
0.00
56.00
-80.00
40.00
48.00
FMS
AMOUNT
$287.94
$1,677.75
($1,246.30)
$55.33
$204.24
($0.14)
$750.00
($878.40)
($296.52)
($542.70)
$888.36
$290.74
($366.26)
$2,117.60
($147.20)
$1,039.36
($1,484.80)
$258.80
$1,216.80
HOURS
PER
TC/TS
QUESTIONED COSTS
INELIGIBLE UNSUPPORTED EXPLANATION
17.60 ($1.58)
$22.66
$1,677.75
$55.33
$204.24
($0.14)
$750.00
80.00 ($1.756.80)
($6.70)
($11.92)
$2.76
$888.36
$290.74
$2.117.60
($147.20)
80.00 ($445.44)
($1,484.80)
44.00 $101.40
$258.80
7
8 •
3 *
2 >
2 z
2
2 9
7 «
1 a
1 x
8
8
1 x
8 x
2 *
9 x
7 *
8
3 ¥
* Correcting entry was recorded 1n FY 1989.
x Agency indicates Item 1s correct as 1s, however, document not provided to auditors.
¥ Agency Indicates correcting entry was made, not verified by auditors.
$21,520.60 $14,403.88
EXPLANATION LEGEND
1 Pay rate Incorrect.
2 Documentation not located.
3 Hours per tlmesheet do not agree.
4 Redistribution of hours was not recorded 1n FHS.
5 Redistribution of hours Improperly reversed.
6 Hours rounded.
7 Input error.
8 Tlmesheet not found.
9 Hours per tlmecard do not agree.
56
-------
EXHIBIT IV B
SFO
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C.
HAZARDOUS SUBSTANCE RESPONSE TRUST FUND (SUPERFUND)
DETAIL SCHEDULE OF NONPAYROLL DISBURSEMENTS QUESTIONED
. • • FISCAL YEAR ENDED SEPTEMBER 30. 1988
TRANSACTION
/REVERSE
CASE ID CODE
OBLIGATING
DOCUMENT
NUMBER
DOCUMENT
CONTROL ACCOUNT
NUMBER NUMBER
1
9
9
9
9
9
9
9
10
27
33
33
33
214013
306003
313005
309023
310011
310012
329002
330003
205002
304034
304012
307025
323006
181.
19«
1ST.
191.
191.
191.
236.
236.
181.
191.
191.
. 191.
236.
1
I'
1
1
1
1
1
1
1
1
1
1
1
OV001 70301
7S0896NBSA
7S0663NBSX
8S0787NBLX
OOOSFALLOC
OOOSFALLOC
OOOSFALLOC
OOOSFALLOC
OVC0033201
8C2122NDST
8E0425NNSA
8E0410NBSX
SFALLOCATN
X4QOOS
A05154
PP0062
PP0070
SY1013
SY1007
PP1013
SY1013
A2A121
SF0234
LS0966
LS0915
RR0001
7QFA01RR02
7TEU09E700
7TFA09B700
8TFA09B700
8TEU096UOO
8TEU09E700
8TEU09BUOO
8TEU09BUOO
7QGB810347
8TE562BOC1
8TEK63LOAO
8TEK63LOAO
8TNZ50R400
4185
3101
3103
3101
3108
2607
3101
3102
4185
3109
2601
3101
2311
L4065
C81S5
C8082
C8504
JV258
JV195
JV258
JV258
L3091
01449
P8713
P8767
IV064
* Correcting entry was recorded in FY 1989.
EXPLANATION LEGEND
FMS
AMOUNT
$113,853.00
$2.671.98
$90.027.00
$27,899.20
$56,504.00
$50.464.00
QUESTIONED COSTS
INELIGIBLE UNSUPPORTED EXPLANATION
$113.853.00
$328.13
$1,259.67
$13,949.60
$28,252.00
$25,242.00
($21.000.00) ($10,500.00)
($48,600.00) ($24,300.00)
$1,000.00
$374.71
$427.95
$5,003.05
($79.00)
$500.00
$149.89
$5.08
$22.36
($5.00)
1 *
2 *
2 *
1
1
1 *
1
1
1 *
3 *
4 *
4 *
5 *
$147.168.93 $1,587.80
1 Double entry of a transaction In FMS. appears twice \n Detail History File.
2 Amount charged not consistent with Super-fund Justification.
3 Project officer did not approve the payment.
4 Allocated Incorrect amount amount to Superfund.
5 Input error.
59
-------
GRANTS
LOCATION
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. OC
. HAZARDOUS SUBSTANCE SUPERFUND (SUPERFUND)
SUMMARY SCHEDULE OF OBLIGATIONS ATTRIBUTE RESULTS
- -• RECEIPT OF OBLIGATING DOCUMENT WAS TIMELY
FISCAL YEAR ENDED SEPTEMBER 30, 1988
EXHIBIT V
CONTRACTS
0-3
DAYS
4-10
DAYS
11-30
DAYS
OVER 30
DAYS
DOCUMENT
NOT
DATED
LOCATION
Region 1
Reg-ion 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
5
5
3
2
-
-
5
-
5
-
256
61
-
3
_
-
1
1
-
-
-
-
-
-
205
14
-
-
_
1
-
1
-
-
-
-
-
-
15
10
-
2
_
-
-
-
-
-
-
-
-
-
9
2
-
-
Region 1
Region 2
Region 3
Region 4
Region S
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
15
31
1
4
31
15
4
11
3
12
-
-
49
-
1
5
4
3
-
-
1
1
-
-
-
-
7
--
7
2
5
8
7
22
60
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC
HAZARDOUS SUBSTANCE SUPERFUND {SUPERFUND)
SUMMARY SCHEDULE OF OBLIGATIONS ATTRIBUTE RESULTS
• • RECEIPT OF OBLIGATING DOCUMENT WAS TIMELY
FISCAL YEAR ENDED SEPTEMBER 30. 1988
EXHIBIT V
(CONTINUED)
0-3
DAYS
4-10
DAYS
11-30
DAYS
OVER 30
DAYS
DOCUMENT
NOT
DATED
ALL OTHER OBJECT CLASSES
LOCATION
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 3
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
35
34
6
9
1
7
29
1
23
2
74
13
11
1
4
7
16
-1
2
7
4
5
4
22
2
9
Notes:
1 - Agency guidance (EPA Comptroller Policy Announcement No. 86 - 09) requires that
obligating documents be provided to the FMO within three work days of execution
of the obligating document.
2 - The above results represent rav data obtained from our tests of this attribute.
Calculation of error rates based upon this Information will not agree with the
projected error rates Indicated m Finding No. 4.
61
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC
HAZARDOUS SUBSTANCE SUPERFUND (SUPERFUND)
SUMMARY SCHEDULE OF OBLIGATIONS ATTRIBUTE RESULTS
- •• POSTING OF OBLIGATING DOCUMENT WAS TIMELY
FISCAL YEAR ENDED SEPTEMBER 30, 1988
EXHIBIT VI
CONTRACTS
LOCATION
0-4
DAYS
5-10
DAYS
11 - 30
DAYS
OVER 30
DAYS
DOCUMENT
NOT
DATED
Region 1
Region 2
Region 3
Region 4
Region S
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
5
5
2
4
-
-
3
-
5
-
478
83
-
6
-
2
1
-
-
-
-.
-
-
-
11
3
-
-
-
1
1
.
-
-
1
-
-
-
2
-
-
-
GRANTS
LOCATION
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
11
21
3
5
25
19
4
12
10
7
-
-
41
1
5
13
2
4
7
-
1
1
-
3
-
-
16
-
-
1
-
2
-
-
-
-
1
2
-
-
-
-
-
1
2
1
1
-
-
• -
-
-
-
-
-
-
1
-
7
1
3
3
7
22
7
-
-
-
-
-
62
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC
EXHIBIT VI
(CONTINUED)
HAZARDOUS SUBSTANCE SUPERFUND (SUPERFUNO)
SUMMARY SCHEDULE OF OBLIGATIONS ATTRIBUTE RESULTS
- - POSTING OF OBLIGATING DOCUMENT HAS TIMELY
FISCAL YEAR ENDED SEPTEMBER 30, 1988
0-4
DAYS
5-10
DAYS
11 - 30
DAYS
OVER 30
DAYS
DOCUMENT
NOT
DATED
ALL OTHER OBJECT CLASSES
LOCATION
Region 1
Reg-Ion 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
37
30
7
21
1
21
30
3
20
2
88
17
13
2
8
1
4
22
3
2
8
Notes:
1 - Agency guidance (EPA Comptroller Policy Announcement No. 86-09} requires that FMOs
ensure that obligations are recorded 1n the FMS within four work days of receipt of
the actual obligating document or other acceptable written evidence.
2 - The above results of our attribute testing represents raw data of actual transactions
tested. The calculation of error rates from this data will not produce the same error
rates as projected 1n Finding No. 4.
63
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC
HAZARDOUS SUBSTANCE SUPERFUNO (SUPERFUND)
SUMMARY SCHEDULE OF DISBURSEMENTS ATTRIBUTE RESULTS
• ' INVOICE WAS PAID ON TIME BUT NOT EARLY
FISCAL YEAR ENDED SEPTEMBER 30, 1988
EXHIBIT VII
CONTRACTS
0-27 DISCOUNT 28-30 31-37
DAYS TAKEN DAYS DAYS
38-43
DAYS
OVER 45
DAYS
DOCUMENT
NOT
DATED
LOCATION
Region 1
Region 2
Reg-Ion 3
Reg-ton 4
Region 5
Reg-ion 6
Reg-ton 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
107
25
1
171
7
58
3
38
2
1
ALL OTHER OBJECT CLASSES
LOCATION
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
2
2
4
-
7
2
2
-
-
-
13
-
2
4
2
7
4
1
3
-
2
-
2
2
13
-
8
1
1
4
11
3
1
2
1
5
5
4
28
13
17
3
1
1
-
2
6
2
3
4
3
8
24
1
1
S
-
1
1
3
6
1
-
2
'
1
4
-
-
4
1
1
1
6
10
-
-
2
-
-
32
1
3
2
1
-
-
-
7
-
-
-
-
-
1
1
2
3
64
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, OC
EXHIBIT VII
(CONTINUED)
HAZARDOUS SUBSTANCE SUPERFUND (SUPERFUND)
SUMMARY SCHEDULE OF DISBURSEMENTS ATTRIBUTE RESULTS
' ' INVOICE WAS PAID ON TIME BUT NOT EARLY
FISCAL YEAR ENDED SEPTEMBER 30, 1988
Notes:
1 - The Agency is required to comply with the Prompt Payment Act (P.L. 97-177) for payment of its bills.
OMB Circular A-125, revised June 9, 1987, prescribes policies and procedures to be followed by
federal agencies 1n payment for property and services. The Circular requires making payments as close
as possible to but not later than the due date, or if appropriate, the discount date. OMB Circular
A-125 requires that payments be made between the 28th and 30th day after receipt of an invoice, or other
date establishing the beginning of a 30 day payment period, unless a discount 1s taken. The Circular also
requires reporting the tlmeframes for payments made under the Prompt Payment Act.
2 - The above results of our attribute testing represents raw data of actual transactions. The calculation
of error rates from this data will not produce the same error rates as projected 1n Finding No. 5.
65
-------
I
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC
HAZARDOUS SUBSTANCE SUPERFUND (SUPERFUND)
SUMMARY SCHEDULE OF DISBURSEMENTS ATTRIBUTE RESULTS
. ' POSTING OF DISBURSEMENT WAS TIMELY
FISCAL YEAR ENDED SEPTEMBER 30. 1988
EXHIBIT VIII
0-4
DAYS
5-10
DAYS
11-30
DAYS
OVER 30
DAYS
DOCUMENT
NOT
DATED
CONTRACTS
LOCATION
Reg-Ion 1
Region 2
Reg-Ion 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
1
1
1
1
-
-
-
-
-
657
24
2
-
^
-
9
-
-
-
-
-
-
54
- 5
-
2
1
-
2
.
-
-
-
-
-
3
6
-
-
—
-
-
-
-
-
-
-
-
4
2
-
-
GRANTS
LOCATION
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
11
27
13
5
37
58
4
23
12
14
-
-
43
-
14
34
10
2
40
8
-
5
1
4
-
-
9
" -
18
5
8
-
8
1
5
-
1
-
-
-
1
-
66
-------
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC
HAZARDOUS SUBSTANCE SUPERFUNO (SUPERFUND)
SUMMARY SCHEDULE OF DISBURSEMENTS ATTRIBUTE RESULTS
' POSTING OF DISBURSEMENT HAS TIMELY
FISCAL YEAR ENDED SEPTEMBER 30, 1988
EXHIBIT VIII
(CONTINUED)
ALL OTHER OBJECT CLASSES
LOCATION
0-4
DAYS
5-10
DAYS
11 - 30
DAYS
OVER 30
DAYS
DOCUMENT
NOT
DATED
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Research Triangle Park
Cincinnati
Las Vegas
Headquarters
22
11
10
17
13
26
4
13
n
11
111
11
38
6
1
4
3
3
10
3
6
2
2
3
1
1
IS
Notes:
1 - Agency guidance does not specify a time-frame for recording disbursements. The criteria
for recording obligations timely (within four work days), established by EPA Comptroller
Policy Announcement No. 86-09. was utilized for the tests of this attribute.
Z - The above results represent raw data obtained from our tests of this attribute. Calculation
of error rates based upon this Information will not agree with the projected error rates
Indicated 1n Finding No. 4.
67
-------
APPENDIX 1
SCOPE AND METHODOLOGY OF STATISTICAL SAMPLING
FOR SUPERFUND AUDIT, FISCAL YEAR 1988
The primary objective of the Hazardous Substance (Superfund) audit was to
determine the dollar reasonableness of reported obligations and disbursements for fiscal year 1988.
The audit was designed to produce valid agency-wide estimates of the total dollar obligations and
disbursements by major object class, the discrepancy between the recorded and actual (audit)
amounts, the total dollar amounts questioned and set aside by the auditors, and the proportion of
transactions recorded in accordance with specified internal control or compliance attributes (e.g.,
the proportion of transactions for which the recording of obligations complied with established
internal controls or EPA policies and procedures, or the proportion of accounts for which the
recording of disbursements complied with established internal controls or EPA policies and
procedures). Statistical samples were selected for the audit from three separate data files provided
by the EPA Financial Systems Branch: (1) the "paymerge" file consisting of personnel
compensation and benefits transactions; (2) the "allotment" file consisting of summary records of
nonpayroll obligations; and (3) the "detail history" file consisting of nonpayroll transactions
recording disbursements. The procedures used to select the various audit samples and the methods
used to calculate the statistical projections are described in the sections below.
1. Sampling Procedures
1.1 Personnel Compensation and Benefits
The sampling frame (i.e., "universe" file of personnel compensation and benefits
transactions) was constructed from a cumulative file of Superfund payroll transactions provided by
the EPA Financial Systems Branch (FMSY.AUDIT.SFFY8813.PAYMERGE). This file is
referred to as the "paymerge" file and contained over 1.1 million individual transaction records
representing $108,348,228 in payroll disbursements. Of these, 679,000 transactions representing
$103,853,011 in disbursements were eligible for sampling. The eligible transactions included only
those transactions in object classes 11, 1210, and 1211. Table 1 summarizes the total dollar
disbursements recorded in the FY 1988 paymerge universe file by date of transaction and object
class.
-------
Table 1. Distribution of transactions and dollars in FY88 paymerge file
Major
object
class
11
12
13
Total
Period*
10/87-5/88
All other dates
Subtotal
10/87-5/88
All other dates
Subtotal
10/87-5/88
All other dates
Subtotal
Dollar
amount
59344,605
33,613,078
92,957,683
9,603,260
5,768,653
15,371,914
5,217
13,415
18,631
108,348,228
Number
of units in
universe
158,437
99,937
258,374
536,552
344,868
881,420
4
9
13
1,139,807
•Records dated 10/87-5/88 were sampled in Phase I. All other records were sampled in Phase II.
In FY 1988, the Superfund audit was conducted in two phases in order to spread
the workload over a longer period of time. In the first phase, a sample of over 1,600 transactions
was selected. These transactions included only those entered in the FMS between the dates of
10/87 to 5/88, the first eight months of the fiscal year. Later, in the second phase of sampling, an
additional sample of 560 transactions was selected from those which were entered in the FMS after
5/88 (i.e, the last four months of the fiscal year). In both phases, stratified samples of payroll
transactions were selected. The strata from which the samples were drawn were defined on the
basis of major object class and the size of the transaction. Within a major object class, the sample
was allocated1 to the size strata in a way that was expected to minimize the sampling error of the
projected audit amount Under this allocation, about 1 in 2 of the transactions exceeding $3,000 in
J Let Nn denote the total number of transactions in size stratum h, and let Sn denote the standard deviation of dollar
amounts (disbursements) of all transactions in stratum h, for h = 1, 2, ..., L. The values of Nn and S|, were
obtained directly from special tabulations of the paymerge file. Given the total sample size n, the approximately
optimum number of cases to be sampled from stratum h is then given by (e.g., see equation 5-25, chapter 5 in
Cochran (1977): Sampling Techniques. John Wiley & Sons):
Al-2
-------
major object class 11 were included in the sample, and all transactions exceeding $300 in major
object class 12 were included in the sample in Phase L Table 2 summarizes the counts of
transactions included in the sample in both phases. Note that the benefits transactions (object
classes 1210 and 1211) were not tested in Phase IL
Table 2. Distribution of payroll transactions by subuniverse and phase, and corresponding sample counts
Subuniverse
1. Major object
class 11
(compensation)
2. Object classes
1210, 1211
(payroll benefits)
TOTAL
Phase
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
I: 10/87-5/88
H: 6/88-9/88
Total for both phases
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
Total number
of transactions
in universe file
158,437
99,937
258,374
258.426
162,561
420.987
416.863
262,498
679,361
Total dollar
amount of
transactions in
universe
$59,344,605
$33,613,078
$92,957,683
$6,854,853
$4,040,475
$10,895,328
$66,199.458
$37,653,553
$103,853,011
Number of
transactions
in sample
833
564
1,397
842
0*
842
1,675
564
2,239
•Benefits were not tested in Phase II.
1.2
Nonpavroll Obligations
The sampling frame of nonpayroll obligations was constructed from a file of
Superfund obligation records provided by the EPA Financial Systems Branch (FMSY.AUDIT.-
MASTSRFY8813.H6150). This file is referred to as the "allotment" file and contained 168.0002
individual obligation records. From this master file, three separate "subuniverses" were defined
2The actual number of records in the allotment Tile is over 600,000. Only 168,000 of these had an SOF (source-of-
funds) code of "8," i.e.. applied to fiscal year 1988.
Al-3
-------
for sampling and analysis: (Al) contracts - major object class 25; (A2) cooperative agreements -
major object class 41; and (A3) all other object classes, except object classes 11, 12, and 13
(personnel compensation and benefits) and 21. About 26,000 obligation records are included in
the three subuniverses indicated above. The total amount recorded in the FMS (allotment file) for
the obligations in the three subuniverses is $1,344,115,3553. The distribution of the sampling
units and corresponding obligations is summarized in Table 3 by subuniverse.
The obligations samples were selected in two phases. In Phase I, a total of 809
obligation records was selected from those recorded in the FMS during the first eight months of the
fiscal year. In Phase II, an additional sample of 656 obligation records was selected from those
entered into the FMS during the last four months of the fiscal year. In each phase, a stratified
sample of obligation records was selected from each of the three major object class groups
(subuniverses). The strata from which the samples were drawn were defined on the basis of the
amount of the obligation as recorded in the allotment file. The sample was allocated to the strata in
a way that was expected to minimize the sampling error of the projected audit amount. Under this
allocation, records with the largest obligations were selected with certainty. Thus, for subuniverse
Al, all records with obligations of $600,000 or more in Phase I were included in the audit sample,
whereas for subuniverse A2, all records with obligations of $100,000 or more in Phase I were
included in the sample, and for subuniverse A3, all records with obligations of $25,000 or more in
Phase I were included in the sample. Similarly, for subuniverse Al, all records with obligations of
$800,000 or more in Phase II were included in the audit sample, whereas for subuniverse A2, all
records with obligations of $300,000 or more in Phase II were included in the sample, and for
subuniverse A3, all records with obligations of $50,000 or more in Phase II were included in the
sample. Within each of the remaining size strata, the universe file of obligation records was
randomly sorted, and a simple, random sample of the desired size was selected from the sorted file.
Table 3 summarizes the distribution of the sample by phase and subuniverse.
3This figure excludes major object classes 11.12,13 (personnel compensation and benefits) and major object class
21. Personnel compensation and benefits account for $108,997.660 in the allotment file, and major object class 21
accounts for $9,178,350. When added to the amount for the three subuniverses, the total obligations are
$1,462,291,365.
-------
Table 3. Distribution of obligations by subuniverse and phase, and corresponding sample counts
Subuniverse
Al. Major object
class 25
A2. Major object
class 41
A3. Other object
classes except
11. 12,13,21
TOTAL
Phase
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
Total number
of records
in universe file
5,202
7^80
12,782
338
473
811
5,136
7,223
12,359
10,676
15,276
25.952
Total dollar
amount of
obligations in
universe
$435,840,550
$648.969,443
$1,084,809,993
$94,871,460
$126,221,957
$221,093,417
$18,757.337
$19,454.608
$38,211,945
$549,469,347
$794,646.008
$1344,115355
Number of
obligation
records
in sample
420
240
660
150
135
285
239
281
520
809
656
1,465
1.3
Nonpavroll Disbursements
The sampling frame of nonpayroll disbursements was constructed from the twelve
monthly "detail history" files of Superfund non-payroll transactions provided by the EPA Financial
Systems Branch. The twelve monthly files contain over 211,000 transactions related to
disbursements (i.e., having transaction codes of 181, 191, or 236). The total amount recorded in
the FMS for these transactions is $682,810,911. Excluding major object classes, 11,12,13, and
21 which were not eligible for sampling, the total disbursements were $673,731,470.
Three separate "subuniverses" were defined for sampling and analysis: (Bl)
contracts - major object class 25; (B2) cooperative agreements - major object class 41; and (B3) all
other object classes, except object classes 11, 12, 13, and 21. Within each subuniverse,
Al-5
-------
transactions were stratified by size, and whether the transaction recorded a disbursement (group 1)
or reversed (credited) a disbursement (group 2)4. The counts of transaction records and
corresponding dollar amounts are summarized in Table 4 by phase and subuniverse.
<"•>
A total of 1,071 transactions related to nonpayroil disbursements was selected for
Phase I (transactions recorded in the period 10/87-5/88), and another 946 were selected for Phase
II (transactions recorded in the period 6/88-9/88). In each phase, a stratified sample of
disbursement transactions was selected from each of the three major object class groups
(subuniverses). The sample was allocated to the strata in a way that was expected to minimize the
sampling error of the projected total dollar disbursements. Under this allocation, records with the
largest amounts were selected with certainty. Thus, for subuniverse Bl, all records recording a
disbursement of $700,000 or more, and all records reflecting a reversal of $300,000 or more were
included in the audit sample. For subuniverse B2, all records recording a disbursement of
$200,000 or more, and all records reflecting a reversal of $150,000 or more were included in the
audit sample. Finally, for subuniverse B3, all records recording a disbursement of $50,000 or
more, and all records reflecting a reversal of $50,000 or more were included in the audit sample.
Within each of the remaining size strata, the universe file of disbursement transactions was
randomly sorted, and a simple random sample Of the desired size was selected from the stratum.
For each subuniverse, the goal in allocating the sample to the size/type strata was to achieve a
relative sampling error of about 1.5 percent or less (at the 95 percent confidence level) for an
estimate of total dollar disbursements. Table 4 summarizes the distribution of the sample by phase
and subuniverse.
Specifically, records having transaction codes of 181 or 191 and a reversal code ofl, or a transaction code of 236
and a reversal code of 2 were assigned to transaction group 1. These transaction codes record disbursements in the
FMS. Records having transaction codes of 181 or 191 and a reversal code of 2, or a transaction code of 236 and a
reversal code of 1 were assigned to transaction group 2. These transaction codes reverse or credit disbursements in
the FMS.
Al-6
-------
Table 4. Distribution of disbursements by subuniverse and phase, and corresponding sample counts
Subuniverse
Bl. Major object
class 25
B2. Major object
class 41
B3. Other object
classes except
11,12,13,21
TOTAL
Phase
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
I: 10/87-5/88
H: 6/88-9/88
Total for both phases
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
I: 10/87-5/88
II: 6/88-9/88
Total for both phases
Total number
of transactions
in universe file
60,512
39,680
100,192
2,066
1,683
3,749
9,728
8,004
17,732
72,306
49367
121,673
Total dollar
amount of
disbursements in
universe
$365,460,798
$196,046,276
$561,507,074
$43,523,292
$28,672,372
$72,195,664
$27,940,206
$12,088,526
$40,028,732
$436,924.296
$236,807,174
$673,731,470
Number of
disbursement
transactions
in sample
462
380
842
254
264
518
355
302
657
1,071
946
2,017
Al-7
-------
2.
Estimation Procedures
Two general types of estimates (projections) were made from the audit results:
(1) estimates of total dollars and differences between the audit and recorded amounts, and (2)
estimates of the number or proportion of units with specified attributes. The procedures used to
calculate the sample-based estimates and their corresponding sampling errors are described below.
The "subuniverses" for which estimates were calculated are summarized in Table 5.
Table 5. Definition of subuniverses (analytic classes)
Subuni verse
1
2
3
4
5
6
7
8
Description
A1: Obligations, major object class 25
A2: Obligations, major object class 41
A3: Obligations, other non-payroll object
classes, except object class 21
B1: Disbursements, major object class 25
B2: Disbursements, major object class 41
B3: Disbursements, other non-payroll object
classes, except object class 21
Personnel compensation
Personnel benefits
2.1
Estimates of Total Dollars
A "difference estimator" was used to obtain estimates of the total dollar value (i.e.,
the accepted or audit amount) for each of the subuniverses indicated in Table 5. The general form
of this estimator is:
where
the estimated total audit amount for subuniverse g;
Al-8
-------
gh
the number of sampling strata defined for subuniverse g',
die total dollar amount recorded in the FMS for all transactions
in phase/stratum h of subuniverse g;
the number of sample units in phase/stratum h of subuniverse g which
were tested5;
xghi = toe dollar amount recorded in the FMS for the ith sample unit
in phase/stratum h of subuniverse g',
"
gh i
i = the audit dollar amount for the ith sample unit in phase/stratum h
of subuniverse g.
The estimate yg" is expected to be efficient because of the high degree of correlation
between the recorded and audit values.
The estimated difference between the recorded and audit amounts for subuniverse g
is simply:
-------
~ =
CL~ = the estimated total questioned amount for subuniverse g;
d = the estimated total set-aside amount for subuniverse g.
sample as:
where
The questioned and set-aside amounts for subuniverse g were computed from the
dQ=
h=l gh i
, respectively,
the questioned amount for the /th sample unit in phase/stratum h
of subuniverse g;
the set-aside amount for the /th sample unit in phase/stratum h
of subuniverse g.
2.2
Estimates of Attributes
Attribute variables were coded as 1 (an exception), 0 (no exception), or N (not
applicable)6. Denoting the subuniverse by g, the phase/stratum by h, and the sampled unit by i,
the projected number of exceptions for a particular attribute for subuniverse g, zg', was computed
as:
where
h=i ngh i
= the number of sampling strata defined for subuniverse #;
= the total number of sampling units in the FMS in phase/stratum h
of subuniverse;;
6In a few cases (he sample unit was not tested. Although these "nonresponses" did not enter into the calculation of
the projections of attributes, they are reflected in the estimates of the number of exceptions.
Al-10
-------
ngh = the number of sample units in phase/stratum h of subuniverse g for
which the given attribute was coded as 0,1, or N.
zghi = 1 if the given attribute was coded as 1, and equals 0 otherwise.
For a given attribute, the estimated number of units in subuniverse g to which the
attribute applied was computed as:
».-
where bgh is the number of sample cases in phase/stratum h of subuniverse g for which the
attribute was coded as 1 or 0.
The corresponding estimated proportion of applicable cases which were exceptions
(i.e., error rate) was computed as the ratio:
2.3 Calculation of Sampling Errors
The estimates given in the preceding section (referred to as sample projections) are
based on one particular subset (sample) of transactions, and thus are subject to sampling
variability. The "standard error" of the estimate provides a measure of this sampling variability,
and was used to construct intervals within which we would expect the "true" population values to
lie. These intervals are referred to as confidence intervals, and have been computed for the sample-
based estimates described in the previous section.
For the projected audit amount, yg", using the difference estimator defined in
Section 2.1, 95 percent confidence limits around the "true" population total are given by the
expression yg"± 1.96 s(yg"), where yg" is the sample estimate, and s(yg") is the standard error of
the estimate. The standard error of the estimate was computed from the expression:
AMI
-------
") = v
^
where
N2
s2(V> = iT<1-5fr^yihi-»iM-yiii + **h}2/(ngh-n
' gn * gn i=l
and where ygh and xgh refer to the average audit and recorded dollar amounts per sample unit in
phase/stratum h of subuniverse g, respectively.
For attribute variables, 95 percent confidence limits around the total number of
exceptions in the population are given by the expression zg' ± 1.96 s(zg'), where zg' is the sample
estimate defined in Section 1.2, and s(z') is the standard error of the estimate defined by the
9
expression:
M
J
I
h=l
where
and
For an estimated proportion, pg, the corresponding standard error was computed
as:
(2-2)
where
wghi
AI-12
-------
1 "fh
w*-«£6
= tiT (W
The formulas given above are referred to as "normal approximations," and will
provide reasonably accurate confidence limits provided that the error rates in the population are not
too small. In particular, if the error rates are so low that no errors are found in the sample, use of
formulas (2-1) or (2-2) to calculate the standard errors will result in meaningless confidence
intervals. For estimates of proportions (error rates), an alternative method of constructing
confidence intervals based on the binomial distribution7 is available, but this method requires the
assumption that either the samples are simple random samples, or in the case of stratified samples,
that the error rates are constant from stratum to stratum. In those cases where the normal
approximation was not expected to be applicable, this method was used to construct upper
confidence limits for an error rate. Since the Superfund samples are stratified samples, the
confidence bounds obtained by this method should be considered to be very rough. An alternative
would be to provide no confidence limits, but this might lead to the mistaken conclusion that there
are no errors in the population.
A similar problem exists for estimates of questioned or set aside amounts. If no
exceptions are found, confidence limits cannot be computed from the usual formulas. However,
rough upper bounds on the corresponding error can be calculated using what are known as
"Stringer bounds8. These bounds can be used to obtain a rough indication of the magnitude of the
dollar error in the population even if no exceptions are found in the sample.
Stringer bounds can be calculated as follows: Suppose that there are k errors in the
sample. Denote the ith relative error (tainting) by t; = yK where di is the difference between the
Ai
FMS and audit amounts for the ith sample unit, and Xt is the FMS amount for the ith unit. Order
7See Conover, W. (1980) Practical Nonparametric Statistics. New Yofk: John Wiley & Sons.
8This is described in the paper by Ftenberg, S., J. Neter, and R. Leitch (1977). "Estimating the total overstatement
error in accounting populations." Journal of the American Statistical Association. Volume 72, Number 358, pages
295-302.
Al-13
-------
the nonzero taintings so that tt > t2 S ... > tk. The corresponding upper confidence bound is given
by:
k
Du,stringer = * Pu(n, 0; 1-a) + X I [P
-------
APPENDIX 2
PROJECTIONS FROM THE SUPERFUND AUDIT
FOR FISCAL YEAR 1988
The following tables summarize the projections made from the 1988 hazardous
substance trust fund (Superfund) audit. The projections include estimates of total dollar
obligations and disbursements, by major object class, and also estimates of the number of
exceptions and corresponding error rates for various attributes. The error rates shown in tables 4A
through 8 for the different attributes have different bases (denominators) depending on the
estimated number of transactions in the universe to which the particular attribute applied. The
formulas used to compute the projections are given in Section 2 of Appendix 1.
Also shown in the tables are estimates of sampling precision for the various
projections (i.e., standard errors and 95 percent confidence limits). The formulas used to calculate
the 95 percent confidence limits are referred to as "normal approximations," and are reasonably
accurate provided that (1) the sample sizes are sufficiently large, and (2) the actual error rates in the
population are not too low. For many of the statistics of interest in the Superfund audit (e.g., the
questioned and set-aside amounts, and the error rates for many of the attributes tested), the error
rates are quite low, and the resulting computed confidence intervals may imply that the estimates
are more accurate than they really are1. In particular, if no amounts in the sample were questioned
or set aside, the corresponding sampling error (and hence confidence limits) could not be
computed. Such instances are noted in the tables. While the absence of exceptions in the sample
does indicate that the actual error rates are low, this does not necessarily mean that there are no
errors in the population.
ipor example, see Neter, J. and J. Loebbecke (1977). "On the behavior of statistical estimators when sampling
accounting populations." Journal of the American Statistical Association, Volume 77, Number 359, pages 501-
507.
-------
List of Tables
Table
1 Estimates of accepted, questioned, and set-aside nonpayroil
obligations, by subuniverse.
1A Estimates of accepted, questioned, and set-aside nonpayroil
obligations, for major object classes 23,26, 31.
2 Estimates of accepted, questioned, and set-aside nonpayroil
disbursements, by subuniverse.
2A Estimates of accepted, questioned, and set-aside nonpayroil
disbursements, for major object classes 23, 26, 31.
3 Estimates of accepted, questioned, and set-aside payroll
disbursements, by major object class.
4A Projections of error rates for attributes related to obligations
for major object class 25 (contracts).
4B Projections of error rates for attributes related to obligations
for major object class 41 (cooperative agreements).
4C Projections of error rates for attributes related to nonpayroil
obligations for all major object classes except 21,25,41.
5A Projections of error rates for attributes related to nonpayroil
disbursements for major object class 25 (contracts)
5B Projections of error rates for attributes related to nonpayroil
disbursements for major object class 41 (cooperative agreements)
5C Projections of error rates for attributes related to nonpayroil
disbursements for all major object classes except 21,25,41.
6 Projections of error rates for attributes related to payroll
compensation transactions.
7 Projections of error rates for nonpayroil obligations, major
object classes 23,26, and 31.
8 Projections of error rates for nonpayroil disbursements, major
object classes 23,26, and 31.
A2-2
-------
Table 1. Estimates of accepted, questioned, and set-aside nonpayroll obligations, by subuniverse
Major object
class
25
Contracts
41
Cooperative
agreements
Other
object
classes [3]
Obligations
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [5]
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [S]
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [5]
Sample
estimate [2]
$1^)84,809^93
$1,084,782,014
$27,979
$0
$22I,093>417
$221,093,417
$0
$0
WJ11J4S
$38,117,105
$94340
$0
Standard
eiior
—
27.911
27.911
—
(4]
W
—
51,342
51.342
—
95 percent confidence limits [1]
Lower
limit
—
1,084.727,308
-26,727
—
—
—
—
38.016.475
-5.790
—
Upper
limit
—
1.084.836,720
82,685
—
—
—
—
38.217,735
195,470
—
[1] The actual confidence level may be less than nominal 95 percent because of the small numbers of exceptions found in the sample.
[2] For the accepted, questioned, and set-aside amounts, entries are projections. The corresponding FMS amounts are "universe" totals
obtained from files provided by the Financial Systems Branch.
[3] Excluding object classes 11.12.13.21.
[4] The standard error could not be computed because no exceptions were found in the sample.
[5] Not applicable.
A2-3
-------
Table 1 A. Estimates of accepted, questioned, and set-aside nonpayroll obligations, for major object classes 23,26,31
Major object
class
23
26
31
Obligations
F MS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [4]
F MS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [4]
F MS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [4]
Sample
estimate [2]
S18J20J92
$18,220,192
$0
$0
S3,105J65
$3,054,468
$51,097
$0
$ISJ7SJ88
$15,246,824
$28,764
$0
Standard
error
—
13]
(31
—
—
48,862
48.862
—
—
13]
f3]
—
95 percent confidence limits [1]
Lower
limit
—
—
—
—
—
2,958.698
-44,673
—
—
_
—
—
Upper
limit
—
—
—
—
—
3.150,238
146,867
—
—
—
_
—
[1 ] The actual confidence level may be less than nominal 95 percent because of the small numbers of exceptions found in the sample.
[2} For the accepted, questioned, and set-aside amounts, entries are projections. The corresponding FMS amounts are "universe" totals
obtained from files provided by the Financial Systems Branch.
[3] The standard error could not be computed because too few exceptions were found in the sample.
[4] Not applicable.
A2-4
-------
Table 2. Estimates of accepted, questioned, and sec-aside nonpayroll disbursements, by subuniverse
Major object
class
25
Contracts
41
Cooperative
agreements
Other
object
classes [3]
Disbursements
f MS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [5]
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [5}
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [5]
Sample
estimate [2]
$S61£07jan
$561,507,073
$0
$0
$72J95,664
$72,171,378
$24,286
$0
$40,028,732
$39318,172
$210^60
$0
Standard
czrof
W
w
—
24.034
24.034
—
63.695
63.695
—
95 percent confidence limits [1]
Lower
limit
—
—
—
72,124,271
-22.821
—
39.693,329
85.717
—
Upper
limit
—
—
—
72,218.485
7U93
—
39,943.015
335.403
—
[ 1 ] The actual confidence level may be less than nominal 95 percent because of the small numbers of exceptions found in the sample.
(2 J For the accepted, questioned, and set-aside amounts, entries are projections. The corresponding FMS amounts are "universe" totals
obtained from files provided by the Financial Systems Branch.
[3] Excluding object classes 11, 12.13. 21.
[4] The standard error could not be computed because no exceptions were found in the sample.
[5] Not applicable.
A2-5
-------
Table 2A. Estimates of accepted, questioned, and set-aside nonpayroUdisbmsementt, for major object classes 23.26,31
Major object
class
23
26
31
Disbursements
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [4]
FMS amount
Accepted (audit) amount
Questioned amount
Set-aside amount [4]
FMS amount
Accepted (audio amount
Questioned amount
Set-aside amount [4]
Sample
estimate (2]
$18,029J44
$1M23,27»
«,«*
$0
&J41J93
$3,0904«7
$50,68*
$0
$17,408JM
*
$17,254480
$153,808
$0
Standard
error
—
5.890
5,890
—
—
35,698
35,698
—
—
54.643
54,643
—
95 percent confidence limits [1]
Lower
limit
—
18.011.734
-5,478
—
—
3.020439
-19.282
—
—
17.147.479
46,707
—
Upper
limit
—
18,034,822
17,610
—
—
3,160,475
120.654
— -
—
17.361,681
260,909
—
[1] The actual confidence level may be less than nominal 95 percent because of the small numbers of exceptions found in the sample.
(2] For the accepted, questioned, and set-aside amounts, entries are projections. The corresponding FMS amounts are "universe" totals
obtained from fites provided by the Financial Systems Branch.
[3] The standard error could not be computed because too few <
[4] Not applicable.
found in the sample.
A2-6
-------
-------
c
r
i-i
i
i
C-.
-bsi agrc1',:-- .v.;h i, •
ji .yti!l.r..n;:^ wi;Cl
-------
ubic ;B. Projections of -rrur raws ibr attribute;; related 10 nonp-iyroi! uoiijwuu
(cooperative a tf": omen is)
iis n.-f Ji:a:or oo'c..": - ,;*.-> -
;r-;e:u •:on!icioiioc Usui;;;
Urn:'.
t'HU
E
F
"J.12T,,
0.00*
D.-LO'-ft
iow irr-jr ri'.us, i:pr!:fl! u; r •.•!.'
;':r;;:g i.!i>c L; merit ss cn-cly • ^ .:• iki> i .
; v\ r'MO is uneiy i< - clays/.
.i. .': - 5-5, ''«:•"). :i "cr::::;:i^rn: -.IT.I«: ;-,r--, i -.i:-!v
T :!-;.'.-.••• ..ilh 'ih!ii;n!i:i'; 'lo;;!:.'.!.1;:'.. iii'ii ji.c.1 nifii
:;.'-- •..'.;!. ,.i:i:L-.i::.nL! t>x;,jinciii
-------
Table ~C Projca;;>:;.-, or'orrar :us.c:, ;c;ra:cr;t>ui.cs related 10 nottpayroii obligations ;'or ul; iiuj^r obj,:;: ..
|
Aiiribuie ["2;
.-.)'.vor
i
A
3
D
ZS.\Vf-~c I
\.V~- j
O.iS'i i
I
I
ic*.v crrt;r r;i...-.•,, upper j'.:,ii^i.:av.j !:n:a.s .,.~e ui?f rc.xinuu
'.'.i :.:. An'.
-------
Tabie :.'-.. :"":<•.;.::.jr,j v jnvr me-; for ,KLT!()iUcs related 10 nonpayroil .;i>r!;r-«:r-:jrio for --t^., r s' •.:
j >lfliv!apj
• error
U.I Wr.
^.-. \; ,>..{
. '<'••- r.-.M-;v;,-.?r "r-n-.rf..- .ipTT.'jV.'ii t'^r-.'--; ;! iih'i C.'.'U !T .J:r*;;..r.i-:
11: L'lir:::.1:^- -*. -.3 :.-_ncr"-aro r-.Tfcrcie-'' s-'u ?t2r!'t>:c r.i''f
.r:\
-------
T-Lcio 53. Projections of :r:r-r rates for iitributcs related to nonpavroil disfcursernerii* for ;r:a.-sr .^b'.:.:
!i.00%
!J';V
3 n/% ;
5.50*
.•.-t.-::- :::i:-.:;, ;:ppi:r -.'";:;::enfj '.::
i: ;"i'c;r -n; ;..nirc; -iiinit-jra;::^ v. :;h !?ru
.': -\?fn-::i: •••.:. "ror ''A:; !>i:r -';r;r-;; .i^-cs -.v
.)• '-''iii'! or-!'•::!'.; v; '.VMS r-.^i-fjvc! ;fi F;\?.S :~nr'
~: O'-iy-.'l.v-.'j- "'I:' -iv-uk1 >'il!- a authfri?^! 'v:
i'ji-.'.i'ji; %T. .-.-.•..'.'-I --.r : .c'i. M..iiC rvi-^'-V*
•f :i|r:'
ciul ; .:ipf.';vai va>: i^riuJl::
nrai'S approv.iJ \vn!it;^r::y;
•'• \vu3 ;i~c!y -i' 5 'Jnys;.
i' i--:av-.i:.'vi! • r-ii:i :.i_;';:cs in aiViO'JiU pvSu:,.
i, ..
.'ij •".;•; •''•" rC^'iL'-v '~ • ti::. •;'i:-." • !-'f .
-til •!:':.-'.Yir-'vri rj.'jii-.'St .V L-..'•'••1>;':
: aayi.
. • l*:i :r ot';ra!u r^-sory vO"r '.'.•>:•(.''
ili:i:a'.:':^ i';••..• JTI T: : >..v..:v.
.1 ('._• Itr.jr.'.!:ii.;',!.• r .f .-; •
-------
Table 5C. Projections of error rales tor attributes related LO nonpayroll disbursements for ail major object
classes except 21, 25,41
Attribute [2}
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Projected
error rate
(percent [3|)
0.33%
0.33%
0.49%
0.56%
1.89%
17.13%
0-30%
9.14%
0.30%
0.83%
9.60%
52.13%
34.91%
14.88%
35.66%
14.96%
Standard
error
95 percent conlldence limits [1] j
j Estimated
Lower
limit
| n timber of
Upper j ,ipp'.it:nhic
limit irzKuxicns
i
i
j
! orv^'r i ' ';KV- r ^v;
0.17%
—
-
3.32%
—
2.49%
--
(j.W?c
0.00%
0.00c'c
0.00%
10.62%
0.00%
4.26%
0.00?e
i 0.00%
3.65%
5.36%
4.57V*
6.16%
7.36c,v
4.9'!%
2.44%
? i-'x"'.'-
0 •<;:•{; ! IA i-'.'.
_ . ^ V* 'o \ ' •*?.*'(O I
1.. <')«?•. j 1.1,. V74
23.:>4'"ii i ;:.f>-2
•> o •. "•;• 15 ; | ••
U.0'2r.9 10. '•-
- ' •
^ "*X;'f - •
». . c t_ , t « ,
I6.*o% •»c.:i'
<'C.-f4?c ' - -
-,\66"i i.',..-ro
26 ;:>>t 2,.,-,
J!0.0;.-/,'i ~.
2-0-- , -.
[1] For attributes with low error rates, upper confiJencc liniiLS arc appro.xiinjiions K:-.oti on tJic r-;n
distribution. OlherA'isc, the normal approxlrri.nion '~as iivumentx.
E: Valid obligation was recorded in FYIS prior 10 d:sf)i:r Jcniiini.
F: Project officer's or approving official's appro- al is indicated on .Jubursomsnt •.ioctsiTieni.-;.
C: Invoice, receiving reports, approval forms and obui;'Jt:on dtvutm.-i-iv .ire rri.ucn-ii i-.nu !n;i:'..i'.«; •
verification by voucher examiner or accomum.: technician.
H: Disbursement documents arc perforated .s.nd -.;:imjx-d p.;;.i
I: Check amount which includes the dishursv:!ti.:.:it-auiO^ni • :;rcu-.*•-'..'" :.f.\. ,- .. .1 ..._•.-..••. . ,
J: Certifying officer's signature is on treasury -..
K: Date approved by project officer or luuiu.r:.:
L: invoice was paid on time, but not early {•'. :'
M: Posting of disbursement to FMS *as •:;;:!<.•!,.
Nr: Cash discount, if available and cost-efr'c-. a-.
Property and equipment items (Object da>-e ^
O: Itemi'sj were properly recorded in the r>."'-.' •
P: iiemfsj existence was physically verified.
|3| Base of percentage is given in the last
-------
Table 6. Projections of error rates for attributes related to payroll compensation transactions
Attribute [2]
A
B
C
D
E
F
G -.
H
I - , .
Projected --•
error rate
(percent [3])
0.51%
2.57%
5.14%
3.84%
2.62%
4.26%
- - 27.04%
10.49%
5.14% .
- ••
- -.-..
Standard
error
0.92%
1.00%
1.08%
0.80%
1.18%
8.21%
5.13%
1.89%
95 percent confidence limits [1]
Lower
limit
0.00%
0.77%
3.18%
1.73%
1.05%
1.95%
10.95%
0.42%
1.44%
Upper
limit
4-. 75%
4.37%
7.11%
5.95%
4.18%
6.58%
43.12%
20.55%
8.85%
Estimated
number of
applicable
transactions
48,151
214,218
249,578
250.280
250,233
211,500
11,314
17,833
23,528
[1] For attributes with low error rates, upper confidence limits are approximations based on the binomial
distribution.
[2J Definition of Attributes:
A: Original timecard's existence was verified and examined by auditor (HQ only).
B: Original timesheet's existence was verified and examined by auditor.
C: Account number agrees with limecard (EPA form 2565-1, 2, or 3) or timesheet (EPA form 2560-28).
D: Timecard or timesheet certified by timekeeper.
E: Timecard or timesheet certified fay supervisor.
F: Timesheet certified by employee.
G: Leave time supported by "application for leave," (SF-71) or timecard entry initialled by employee.
H: Overtime hours, compensatory time-, worked, ami premium pay supported by apptoved-'rcquest for and
authorization of overtime work" (EPA form 2560-7) or approved by Approving official in remarks
column on timecard. - x ,. , ,- t ... ..,. . .„_..,.
I: Correction of previous timcshpst entries supported by revised timesheet and/or "redistribution of payroll
charges" (EPA form 2550-6)1
[3] Base of percentage is given in the last column (estimated number of applicable transactions).
A:-
-------
Table 7. Projections of error rates for nonpayroll obligations, major object classes 23,
26, and 31
Attribute [1]
A
&
C
... ., D
E
F
G
H
. I
J
K
L
M
N
0
"Major object
class 23
0.1%
0.1%
0.1%-
0.1%-
18.2%
12.6%
24;3%. -
26.9%..
.0.0%
,OJ%
0.1%
0.1%
0~1%
18.6%
0.3%
Major object
class 26
0.0%
2.0%
2.0%
0.4%
15.5%
6.5%
32.6%
28.3%
-.
3.3%
0.0%
0.0%
0.4%
13.2%
0.3%
Major object
class 31
1.7%
1.5%
1.5%
• - 2.8%
7.0%
3.4%
. 29.4%
.. ..17.4%
, 23.5%
,1.5%
0.6%
0.6%
0.7%
5.9%
2.4%
Total [2]
0.5%
r 1.2%
1.2%
- 1.0%
15.7%
9.2%
32.4%
.. 28.0%
16.1%
1.7%
0.2%
0.2%
0.4%
13.5%
2.6%
[1] Definition of Attributes (A-I were tested at SFO level, J-O were tested at AHRC):
A: Obligation document number agrees with obligating document.
B: Document control number agrees with obligating document.
. C: .Account number agrees with obligating document, and account number begins with 8.
D: Object class agrees with obligating document.
E: Appropriation number is Superfund (68-20X8145).
F: Name of authorized official agrees with authorized official's signature list maintained by FMO.
G: Receipt of obligating document is timely (< 3 days).
H: Posting to FMS by FMO is umcly (< 4 days).
I: If obligation amount > 525,000, a commitment was previously entered into FMS.
J: Obligation document number agrees with obligating document.
K: Document control number agrees with obligating document.
L: Account number agrees with obligating document, and account number begins with 8.
M: Object class agrees with obligating document.
N: Appropriation number is Superfund (68-20X8145).
O: Written Superfund justification/statement of need is on or attached to procurement request/order
(EPA form 1900-8).
[2| Total for subuni verse 3, i.e., ail nonpayroll object classes except 21, 25,-*!.
A2-15
-------
Table 8. Projections of error rates for nonpayroll disbursements, major object classes
23,26, and 31
Attribute (1]
A
B
C
D
E
F
G
H '
I
- J
K
L
M -
N
O
P
Major object
class 23
0.0%
0.0%
0.6%
0.0%
0.0%
15.5%
0.0%
6.0%
0.0%
- 0.5%
24.5%
47.3%
50^%
0.0%
—
--
Major object
class 26
0.0%
0.3%
0.3%
0.0%
• 4.6%
1 1.5%
0.0%
12.8%
0.1%
0.1%
10.5%
38.3%
43.7% .
21.0%
0.9%
4.3%
Major object
' class 31
0.6%
0.3%
0.4%
1.3%
0.2%
21.9%
0.4%
8.0%
0.3%
0.9%
4.1%
62.8%
20.2%
15.4%
39.0%
15.3%
Total [2]
0.3%
0.3%
0.5%
0.6%
1.9%
17.1%
0.3%
9.1%
0.3%
0.8%
9.6%. -
52.1%
34.9%
14.9%
35.7%
15.0%
[ 1} Definition of Attributes:
A: Obligation document number agrees with disbursement documents.
B: Document control number agrees with disbursement documents.
C: Account number agrees with disbursement documents.
D: Object class agrees with disbursement documents.
E: Valid obligation was recorded in FMS prior to disbursement
F: Project officer's or approving official's approval is indicated on disbursement documents.
G: Invoice, receiving reports, approval forms and obligation documents are matched and indicate
evidence of verification, by voucher examiner or.accounting technician. .
H: Disbursement documents are perforated and stamped paid.
(: Check amount which includes the disbursement amount agrees with treasury schedule amount.
J: Certifying officer's signature is on treasury schedule SF-1166.
K: Date approved by project officer or authorized official was prior to date certified by certifying offk
L: Invoice was paid on time, but not early (< 30 days and > 27 days, unless discount was taken).
M: Posting of disbursement to FMS was timely (< 4 days). •
N: Cash discount, if available and cost-effective, was taken.
Property and equipment items (Object classes 31 and 26):
O: !tem(s) were properly recorded in the personal property accounting system (PPAS).
P: Itcm(.s) existence was physically verified.
{21 Total for subuniverse 3; i.e., all nonpayroll object classes except 21, 25, -JI.
A 2-16
-------
APPENDIX 3
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
141989
MEMORANDUM
SUBJECT:
4/7-
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
Consolidated Response to Draft Audit Report
P1SFF8-11-0048 - "Obligations and Disbursements
of the Hazardous Substance Superfund for the
Fiscal Year Ended September 30., 19J38"/
FROM: Charles L. Grizzle
Assistant Administrator
TO: Ernest E. Bradley, III . .
Assistant Inspector General for Audit (A-109)
In response, to your memorandum, of June 12, 1989, we reviewed
the subject draft Superfund audit report,.and. attached our comments,
except for those related to the property recommendations. The
response to the property .recommendations will be forthcoming, but
is delayed because of. insufficient information in the report.
Although, we generally, agree with the..recommendations, in many
instances corrections were made during or prior to. the audit which
the auditors did not acknowledge. Additionally, as was the case
in property, many questioned costs were . not discussed with the
various auditees prior to the issuance of the draft report.
Attachment I to this memorandum contains our detailed response
to each recommendation;--exclusive of property. Attachment II
contains comments on the. status of specific items resulting in
questioned costs. We would also appreciate having our complete
comments included in your final report. Should you have any
questions, please contact Carl Dolinka in the Financial Management
Division on 382-5097. -
Attachments
cc: OC (RMD/FMD/BD)
OSWER
POSS
FMSD
A3-!
-------
ATTACHMENT I
PAGE 1 of 5
RESPONSE TO RECOMMENDATIONS
DRAFT AUDIT REPORT PlSFFS-il-0048
AUDIT OF OBLIGATIONS & DISBURSEMENTS UNDER
• HAZARDOUS SUBSTANCES SUPERFUND
This Attachment contains the Office of Administration and
Resources Management consolidated response to each recommendation
in the draft audit report excluding items related to accounting
for and controlling personal property. The consolidated
responses to the personal property items will be forwarded to the
OIG from the Assistant Administrator at a later date.
1. IMPROVEMENTS ARE NEEDED IN ACCOUNTING FOR AND CONTROLLING
PERSONAL PROPERTY
Recommendations/Responses
We recommend that EPA's Assistant Administrator for
Administration and Resources Management obtain certifications
from the appropriate property accountable officers that
corrective actions have been taken to record the omitted property
items noted in this report in the PPAS, and to locate property
that was missing at the time of our audit fieldwork.
Response will be forthcoming.
We recommend that EPA's Assistant Administrator for
Administration and Resources Management ensure that procedures
have been established to properly record capitalized property and
equipment in the accounting records.
Response will be forthcoming.
We recommend that EPA's Assistant Administrator for
Administration and Resources Management establish an interim
Agency policy requiring the reconciliation of property and
accounting records.
Response will be forthcoming.
We recommend that EPA's Assistant Administrator for
Administration and Resources Management emphasize to the
appropriate property accountable officers the importance of
complying with Agency policies for physical inventories and
designations and acceptance of custodial duties.
Response will be forthcoming.
A3-.1
-------
2.
ATTACHMENT I
PAGE 2 Of 5
EPA NEEDS TO MAKE IMPROVEMENTS IN RECORDING AND MANAGING
ACCOUNTS RECEIVABLE
Recommendations/Responses
We recommend that EFA's Assistant Administrator for
Administration and Resources Management monitor the shifting of
responsibility for Superfund receivables to the Regional offices
to determine if receivables are being recorded in a more timely
manner.
We agree with the recommendation and instituted measures
prior to release of this report to ensure methodical and
systematic transferring of Superfund receivables from
Headquarters to the regions.
The responsibility for collecting Superfund receivables was
transferred to the regional offices effective October 1, 1988.
To date, two training sessions were held for the regional finance
offices: one at the Superfund Conference and one at the Office of
the Comptroller Conference. Detailed interim procedures were
developed and issued prior to the transfer. Updated procedures
are now being circulated for Comment prior to finalization.
These detailed procedures delineate roles and responsibilities
and describe collection, billing, and follow-up procedures for
all participants in the process. Additionally, the Financial
Management Division has been very aggressive in monitoring the
process and resolving issues as they occur.
We recommend that EPA's Assistant Administrator for
Administration and Resources Management ensures that the
implementation of an aggressive effort to reduce and clean-up old
receivables is effective.
The Financial Management Division is aggressively monitoring
the clean-up of old receivables. A special Agency quarterly
report was developed and used under the Financial Management
System to review old receivables. The Financial Management
Division is working to develop a similar approach under the new
Integrated Financial Management System.
we recommend that EPA's Assistant Administrator for
Administration and Resources Management instruct the Director,
FMD to modify the accounts receivable subsystem to age the
current portion of installment receivables separately/ in order
to better monitor the collection of these receivables.
The Financial Management Division currently is implementing
the new Integrated Financial Management System. The new accounts
receivable module includes improved aging and reporting
procedures that will assist the overall cash management process.
A3-3
-------
ATTACHMENT I
PAGE 3 Of 5
3. WEAKNESSES WERE NOTED IN THE ALLOCATION OF GENERAL SUPPORT
COSTS TO SUPERFUKD
Recommendations/Responses
We recommend that the Assistant Administrator for
Administration and Resources Management direct the Comptroller to
request the Regional Administrator of Region 3 to recalculate
general support costs for telephone expenses using actual FTE
ratios and make the necessary adjustments.
We agree with the recommendation and are currently
discussing the implications of making the adjustments with Region
3 and Office of the Comptroller personnel. The general support
costs will be recalculated and the necessary adjustments made.
The Region is currently using the approved allocation method
for calculating its general support costs. As long as the
regions adhere to Agency policy, we will monitor the allocation
of general support costs.
We recommend that the Assistant Administrator for
.Administration and Resources Management instruct the Comptroller
to review the budgetary ceilings at Region 1 and the Cincinnati
Financial Management Center and make any appropriate adjustments.
We agree that budgetary ce-ilings should be monitored and
appropriate adjustments made. It is Agency policy to monitor and
review throughout the year. Where deficiencies are noted, it is
the Agency's policy that Responsible Planning and Implementation
Officers request additional Superfund FTEs for future fiscal
years. Once granted, distribution is made according to budgetary
needs in the Agency.
We do not think adjustments to FY 1988 figures are
warranted, given the immateriality of the amounts and the fact
that there were no inappropriate charges to the Trust Fund.
Further, the intent of the recommendation seems to be that EPA
better utilize its Superfund resources. We think the high
percentage of resources used by those offices is evidence that
excellent budgetary management was exercised by both offices.
4. OBLIGATIONS WERE QUESTIONED DUE TO RECORDING ERRORS AND LACK
OF DOCUMENTATION
Recommendation/Response
We recommend that EPA's Assistant Administrator for
Administration and Resources Management require the appropriate
FMOs to review and resolve the questioned obligation
transactions.
A3-4
-------
ATTACHMENT I
PAGE 4 of 5
We agree that the financial management officers (FMOs)
should correct errors found during the audit. In many cases, the
FMOs made the necessary correction at the time of the audit and
provided documentation of the correction to the auditors.
Although corrections had been made, the auditors did not
acknowledge those facts in the report. Having the offices go
back and research items that had been corrected during the audit
provides cumbersome and duplicate work for already understaffed
offices. Attachment II, in part, provides specific regional and
field office comments which indicate corrective actions that were
not recognized by the auditors.
Many items listed in the Exhibits to the report were not
disclosed during the audit or exit conference nor were notifica-
tions of findings provided to the auditee. The servicing finance
offices made adjustments where warranted; however, in some cases
as annotated on Attachment II, the questioned costs are erroneous
and the information in the accounting system was correct.
Attachment II provides the status of the recommendation.
5. DISBURSEMENTS WERE QUESTIONED DUE TO RECORDING ERRORS AND
LACK OF DOCUMENTATION OR APPROVAL
Recommendation/Response
We recommend that EPA's Assistant Administrator .for
Administration and Resources Management require the appropriate
FMOs to review and resolve the questioned disbursement
transactions.
We agree that the FMOs should correct errors found during
the audit. As we stated in finding number 4, many items were
corrected during the audit and some items were seen for the first
time by the auditee in this draft report. The servicing finance
offices made adjustments where warranted; however, in some cases
as annotated on Attachment II,:the questioned costs are erroneous
and the information in the accounting system was correct.
Attachment II provides the status of the recommendation.
A3-5
-------
ATTACHMENT I
PAGE 5 of 5
6. PERSONNEL COMPENSATION COSTS WERE QUESTIONED DUB TO
RECORDING ERRORS AND LACK OF DOCUMENTATION
Recommendation/Response
We recommend that EPA's Assistant Administrator for
Administration and Resources Management require the appropriate
program offices and FMOs to review the questioned payroll
transactions and advise HAOB to make any necessary adjustments to
the payroll records.
We agree that adjustments to the payroll records should be
made where errors are disclosed. The majority of the items shown
on Exhibit IV-A of the report were seen for the first time in
this draft report and thirty-three percent of the items listed
were correct at the time of the audit. We provided explanations
in the response legend section of Attachment II supporting why
those items were correct as stated. Had these items been
discussed prior to the issuance of the draft report, the auditors
would not have included them.
A3-6
-------
IH
W
2 fa
W O
U
< W
BS
CO
00
Cft
i-H
CO
EH
CO O
Ocon
U 2
O OS
Q H W
W EH DQ
2 < S
O U W
H HI EH
EH KH1 CM
CO 03 U
W O CO
D
~ " Q
I-H M
fa O Q
O OS 2
X W
2 <
O 04 OS
M 2 <
EH O W
P 2 ><
M
O fa J
CO O <
W U
OS CO
SPONSE
2
O
a,
X
CO
EH
CO
o
o
Q
Cd
2
O
l-H
EH
CO
P
O
Q
EH
OS
o
CX
04
P
CO
2
P
H
hJ
CO
hH
u
H
J
^H
Cd
2
H
in CM
in
orj
r~ o
o
o
in vo o t*H
CN at co
voo H n< r» a» vo vo
COM co in o vo CMO
o n o> o oj r> in|
r>
oo
o
o m a> o
vo r- ^r a»
* * • •
O\ 1-4 t*> •*•
O iH (N H
H TT O
»« ^
T CM
O
O
9
in
vo
r-
CN
o
o
in
o
oj
OJ
<^
CM
Ql
t-HI
CO!
H
fNr-)«3'inrHmcooocNr-fNO«-iotno
OOOOOOcHOOOOOOOOOO
ooooooooooooooooo
oooo W W
EH fa
U H 2
a Q o
EH p U
CQ Cd H
a x
Q EH W
U
OS O U
W EH B
fa EH
fa EH
O B E-(
O <
O OS
OS O
CQ
KWU
Q
2.
Cd
O
M
•J
Cd
CO
1
CO
- OQO
EH CO H EH
W
CO
EH H
OQ
W OS
Cd Cd CO
S5UCOK5fcHCQmoUOCOS*4 ZCO£na<
O2O <£H 22B-2COOEHHEH
HM2EHU2EH H WOOH2 EH
EnEHr-lOHWCOEHEH -WOOiEHlJa->OO
U
-------
H
H
r-
EH
*2j (i^
w o
£
K »o^
H H
•K
CO
CO
W rH
EH
C/2 ^ Z
O W 0 O
U EH n H
35 EH
Q fij p5 <;
W S W Z
z w ca <
o CQ s *J
H « W (X
EH D E-i X
CO CQ O, U
rHniHHotN'tTrm
U CA U
D H W *
OQ
Q
O rH Q
0 Z 0
£^ P£ &3 fy"]
0 >• EH
H < « «
EH cu m; o
D W (X
,_! Ct, >H cn cu
O O EH 3
« J cn co
w < o z
PS 0 OS
o o o r-
•<* VD TT O
• • . 1
CO O CN 0**
P- rH Tl- H
CO CO iH
w
in a
fa W
rH H
inHHrHVOvOVO^OOOOOvOfMvOVOCNVOrHVO1*
O
O
fl
CO
O
O
O
CO
o
EH J
CO
U
CQ
O
°3
w
z
(N
«a- o
T r»
• •
.rMnin.N
OOOOOOOOrHOOOOOOO
ooooooooooooo
rH n H r> Is- f~ r*
rH rH O O H O rH
rH rH rH rH H rH r-l
oooo
O
O O
O O O O O
o o o o o
o o o o o
o o o o o
uuuuowuuuuouwuuuuouuu
inOCOCOCOCOCOCOrHHHrHCOCOCOCOCOCOCOOOCO
rHrHOOHrHHrHOOOOrHHrHrHrHrHOHrH
rHrHHHrHHrHrHrHHrHHrHHrHrHHHHHrH
Q
Z
o
a
A3-8
-------
2 b
W O
E
gn
< H
EH O
EH <
«£ CLi
^s ^**
CO
CO
en
W^t
r-t
EH
W
O w o
U EH n
2
Q W K
W S W
2 W CQ
OWE
H a; w
EH D EH
w pa a
u en u
D M W
CXQ
Q
r_ t n r_-i
UH >— * M-J
0 J Q
O 2
2 « W
O >
M < 05
EH CU <
D W
•J &4 >H
0 O
W t-J
U <
« U
f /*
VJ
IH
b
M
EH
W
O
U
a
u
2
0
EH
W
K
g
&.
(/
2
g
y
b.
tt
*
2
O
H
'En
<
2
<
i—
CU
X
U
•K
Q
U
EH
cc
2
cu
D
W
2
^
i-3
00
M
U
H
J
U
2
M
Q
H
U
W
:'
CNJ(Nr^CNHCNrsiOJr^fNCJCOCOCOCNtHincOOrOCr»rHU^OOrHiHfH^^'
H r»^*^ro^o vc ^
O r* nr^HOn mt^
vo r- in *f o o o coo
H r- in o — •tn«* so
n VO CM [> rH CO OJ
H_J —I
rn n
coHnvo^voNcncnoininnincoo co vo o o r-»ocovoor»cr>inr-r>JCNrHcnor'a in vo co r» en
(HTj'oif'OHcoo^i'coinoovooNiH i-i CM VOVOH
(NCOinvO1— 'r->mO(s-Hr>«~' (N r» '-' CN Ift *— CNhOJ^lfr)O^"OtHCOVO«HOOrHCO^"VO^
-------
00
CO
CO «H
EH
C/3 "*
O W 0
U EH o
Z
Q W «
W S W
Z W DQ
0 CO 52
H a w
^ S P?
co ca cu
WWW
O H W
aa
a
fa J W
O J Q
O Z
z cc w
0 X
H < 05
EH CM <
D W
J &* SM
O 0
W »4
W <
a a
H
CO
E-t
CO
O
U
Q
O
1H
EH
CO
D
0
5PONSE
WJ
W
-tc
Z
o
H
EH
Z
t— 1
a,
X
w
*
Q
W
EH
O
a.
P-
D
C/3
z
Ed
•J
OQ
O
M
tJ
Z
M
O
M
U
CO
<;
U
r-fcO(NCTiCOrHir>r4fHLOtrjxl'COinTj*lDlO
^~. *—.
OO T OfMOO^O
VOCM If) COlftCvj^f-fM
• • * •• •• *t«
t~-r». vo con UDCN vot^-
rH^f pv Lf)^ CTIC4 ^^*
(H iH «T (NO (M•
^••^ .^^ *^^»
vo ^j-oooo m o
f" ^"COOOO p* ^"
tN inTpCNCOCN VO H
*j- co n H o o
•<}• ^r n H
l-l
•— '
if)i-p-'
00
ON
*
VO
(NJ
to
T
ON
^!
vo r^i
in o
f-i in
CN
O
Z
o
Q
Z
U
o
ij
•K
A3-10
-------
EH
2 fa
W O
O
< W
<< ft
CO
EH
CO
O CO
O EH
O W
W E
55 W
O CO
M OS
EH D
CO 03
W CO
D H
aa
fa j
O J
o
Z PS
O X
M <
EH ft
fa
O 0
CO
w
a
CO
CO
<3\
H
O
CO
OS
w
0
E
W
EH
ft
W
CO
Q
W
Q
Z
W
PS
<
w
>H
.4
<
O
CO
M
fa
2
> W
os w
< CO CO S
CO M M EH EH
CO W W
W CO CO CO W
U < < X
WE-" EH CO
2 M EH EH Z W
Q EH U EH U W S
EH CD PS w PS W S H
Z Q < O OS O PS EH EH
W W CO ft PS ft PS CO
S EH W M W O W O D O
EH rfl X PS 0 PS 0 b 2
co a EH co Q d
pft < W Z •- Z - < 1
2D O EH M (SJ H S
2 EH < N S3 U CO
Q
2
W
O
K
hJ
SPONSE
W
PS
«rinvO I*- CO
Q
w
Q X
PS J
WO OS
wo w w
PS W W ft
O OS OS O
< U OS
EH < ft
EH O S
Q O Z EH M
U Z O
EH CO 2 CO
< O « PS
u a CD o 3
2 a o Q o
W EH Q X X
EH EH W 2 Q
O EH < W D fa OSfa
WOOXOO < O
Q
2
W
U
w
i-4
H£
O
M
EH
,
Z
*?
ft
X
w
PS 2 Q CO fa O
PS M W 2 W Z
OZ EtnOQ EO
OOEHHOMW MM
2MOEH2EHQPSEHEH
HEnZ SZO DD
< OSEH03PSPSCQW
WEnQWWMOKWMCO
f , ita /y A rv« /^/ f*^ T*~\ f\ f^ f°S
MSKMWKHWtMKMH
< W < X EH H W
OSSOCOCOCOCOEHCOCO>
DWPSWMPSSOSMW
fc. . f \ to-4 ^^ ••« /™\ ^-^ rt H^, /™\ f^
>
fa
Q
Z
<
r>
CO
t
fa
O
EH
Q
W
EH
<
0
§
<
5
H
CO
M
CO
<
EH
0
W
PS
!
t*.
CO
a
fa
UP ON FMS ACCOUNT
EH
W
CO
EH
O
z
PS
w
CQ
g
2
EH
z
D
o
O
<
n
H
E ADVISED TO MAKE
; FOLLOW-UP WITH
LOCATE COPIES OF
TO DETERMINE
GE
00 2 PS
M WO O <
fa EH EH MX
fa < EH O
O O PS <
SW E W
Q S E
rtj J O EH
OS EH O fa
O OX 2 fa
O Z Z CO M O
OS O W EH
ft H CO O W W >
EH EH Z U OS EH
- O W < X O M
W W W S CO E Q
J PS X Q W M
CO OS CO M E CO J
<5 O W i-3 H Q «<
EH O S < EH W >
M W
EH Z
•* in
H rH
A3-I1
-------
1
w
EH
CO
00
CT1
W
Z
CO
m
W
w
H
O
M
EH
Z
5
fa*w
H£
£§
EAR E
u
(X
u
w
H
w
EH
Cfl
O
U
Q
W
Z
O
M
E"
W
W
J3
O
Q
U
E-
Pi
0
a.
a,
D
to
Z
CD
U
m
I— i
o
H
W
Z
M
o m r-
O H *o
* « «
OJ CO CTi
n oj in
c"\ n 04
o
CO
in
n
CO
o o o o o o o
o o o o o o o
Ctt CO O rH VO CO f*1
oj in o *r oj n in
—• o o in T in co
rg
n
O O O O O O
«> o o o o o
01 in 04 in o
P» O ^l1 OJ "— ' O\
i-H CTt rH
o o^
H 0
rH fO
M
vo O
0 <
CO
^ O
r- z
* LaJ
* ^^
n 3:
in Q
in h-1
O
Z
0
u
ojHojoj'fl'inninnin
OOOOOOrHOOO
oooooooooo
rn^D^ocococo^rinvoco
OJOJOJOJOJOJrHOOH
r»rHojojno)Ooj'«j'OJinvoo
OJrHrHOOOOJOnrHOJOn
ooooooooooooo
CT\oocr^oin^
-------
H
H
•fc_
r**
2 fa
Wo
v^
g<
£ r**
rt! W
Hti
v»/
EH <
< CU
00
00
CTl
CO H
«g •
O S 0
UAH >MH
w °
Q S OS
w S w
2 2 03
o 5 S
sl&J
RESOLUTION OF QUEf
OF NON PAYROLL DI
FISCAL YEAR ENDED SE1
'ION LEGEND
CH
^
2
<
^
CU
X
W
2
O
H
£H
ft
o
H
fa
H
EH
CO
ID
1 TO COOP AGREEMENT
STENT WITH SUPERFUND
ION IN FMS
,E ENTRY OF A CREDIT
[ENT NOT LOCATED
fT CHARGED NOT CONS I
,E ENTRY OF TRANSACT
1 ERROR
1-1 s a 1-1 H
PQ ID ID cQ D
D O O D Cu
0 0 E 0 2
Q Q < Q M
I-H -3 Q O CO
O J CO 2
OS iJ H O
CU < Q CU
CO
W
v£> r» eo K
O
H CO
U J
OS J
< H
X CQ
o
o
fa <
O Cu
o
w
OS fa
D O
Q
W CO
O W
O H
OS Cu US CO
Cu O # H
0 0
CO 3 CO
- Q Q <
>• U i-5
OS H W EH
D fa H O
CO H fa W
< EH PS
W OS OS C£
OS W H O
EH O W O
X
2 — EH
0 J Q
J fa W
Q H O iJ
u co m
CO 2 D
< w o o
CD X H Q
. EH EH
BEFORE P.O. 'APPROVAL
IOR TO EPA RECEIVING
LTDITORS BEFORE COMPLE
HE AUDIT
NOT SHOW ANY AMOUNTS
BILL - ALL ARE PAID
•s APPROPRIATION PR
E PROVIDED TO THE Al
CTION MADE DURING Tl
CTION MADE
AS OF 9/30/88 DOES
ENTATION LOCATED
i< est w w M £
O CU W OS OS 1 P
< W S K OS O O
Cu 0 0 S O
o o o fa a
«H (N 0 •«!• in
A3-13
-------
\
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
AU6 18 '\
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Response To The IG Draft Audit Report P1SFF8-11-0048 -
Obligations and Disbursements of the Hazardous Substance
Superfund For The Fiscal Year Ended September 30, 1988
(Personal Property Only)
FROM: Charles L. Grizzle
Assistant Administrator
TO: Ernest E. Bradley III
Assistant Inspector General for Audit
Attached you will find my responses to the personal property
portion of the above subject audit report. As I stated in the
first response to this report, the draft report contained erroneous
information which caused us to request clarifications from your
staff and the contractor. Your staff and the contractor agreed
that some of the information in the report was not sufficient for
us to respond and changed figures on three different occasions.
Over the last year we have spent a great deal of time and
effort installing a new Personal Property Accountability System
(PPAS). We have built quality control and quality assurance into
the system, trained personnel in all Regions, developed a new,
comprehensive PPAS manual, and are performing wall-to-wall
inventories in all locations.
If you or your staff need any additional information
concerning personal property issues, please contact Vincette L.
Goerl, Director, Facilities Management and Services Division, on
382-2030.
Attachment
A3-14
-------
ATTACHMENT I
PAGE 1 Of 2
RESPONSE TO RECOMMENDATIONS
DRAFT AUDIT REPORT P1SFF8-11-0048
AUDIT OF OBLIGATIONS & DISBURSEMENTS UNDER
HAZARDOUS SUBSTANCES SUPERFUND
This attachment contains the Office of Administration and
Resources Management's response to the draft audit report for
items related to accounting for and controlling personal
property.
IMPROVEMENTS ARE NEEDED IN ACCOUNTING FOR AND CONTROLLING
PERSONAL PROPERTY
RECOMMENDATION
We recommend that EPA's Assistant Administrator for
Administration and Resources Management obtain certifications
from the appropriate property accountable officers that
corrective actions have been taken to record the omitted property
items noted in this report in the PPAS, and to locate property
that was missing at the time of our audit fieldwork.
RESPONSE
We agree with this recommendation and will require necessary
certifications. Please note that the criteria for the inclusion
of items in PPAS have been revised; therefore, only those items
meeting the new criteria will be addressed by the certifications.
RECOMMENDATION
We recommend that EPA's Assistant Administrator for
Administration and Resources Management ensure that procedures
have been established to properly record capitalized property and
equipment in the accounting records.
RESPONSE
We agree with the recommendation. The Financial Management
Division developed and issued new procedures to the servicing
finance offices which became effective during Fiscal Year 1989.
GAO's Policy and Procedures Manual for Guidance of Federal
Agencies (Title 2, Appendix I) and OMB's Financial Management and
Accounting Objectives were used as a guide in developing
procedures for the identification of fixed assets.
A3-15
-------
ATTACHMENT I
PAGE 2 Of 2
RECOMMENDATION
We recommend that EPA's Assistant Administrator for
Administration and Resources Management establish an interim
Agency policy requiring the reconciliation of property and
accounting records.
RESPONSE
We agree with the recommendation. In an effort to develop
both an interim and final policy for the reconciliation of
property and accounting records, the Financial Management
Division and the Facilities Management and Services Division have
identified the common elements of the two systems. Using these
common elements, they will be able to develop compatible reports
necessary for the reconciliation. These reports will be
developed on a monthly basis and guidance on the procedures will
be issued.
RECOMMENDATION
We recommend that EPA*s Assistant Administrator for
Administration and Resources Management emphasize to the
appropriate property accountable officers the importance of
complying with Agency policies for physical inventories and
designations and acceptance of custodial duties.
RESPONSE
We agree with this recommendation, except with regard to the
acceptance of custodial duties. As we explained in response to
last year's audit, a signed letter of acceptance by the Custodial
Officer is not required and does not effect the accuracy of PPAS.
Letters to the Agency's Regional Administrators and the Property
Accountable Officers that emphasize the importance of proper
property management controls have already been prepared for
transmittal to these officials.
A3-16
------- |