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Report of Audit
E1B67-11-0029-80779
flCCOUNTS RECEIUfiBLE
§HEADQUARTFRS LIBRARY
ENVtRfiMMFMTJi "ROTfCTION AGEMCY
wi--.-.i>ii '.•!, IJ.L 20460
CVJ
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TART.F, OF CONTENTS
PAGE
SCOPE AND OBJECTIVES !
SUMMARY OF FINDINGS 2
ACTION REQUIRED 6
BACKGROUND 6
FINDINGS AND RECOMMENDATIONS
1. ALMOST FORTY PERCENT OF THE DEBTS IN THE
ACCOUNTING RECORDS WERE UNDERSTATED OR
OVERSTATED 9
2. AGGRESSIVE COLLECTION ACTION IS NEEDED TO
ENSURE THAT DEBTORS PAY THE AGENCY IN A
TIMELY MANNER 19
3. ALL DEBTS OWED TO THE AGENCY SHOULD BE
RECORDED AS ACCOUNTS RECEIVABLE 26
EXHIBIT 1: MANY RECEIVABLES IN THE SAMPLE WERE
UNDERSTATED OR OVERSTATED DUE TO A
VARIETY OF REASONS 31
EXHIBIT 2: RECEIVABLES WITHOUT DOCUMENTATION 39
EXHIBIT 3: DELINQUENT RECEIVABLES FOR WHICH NO
DEMAND LETTERS WERE SENT 40
EXHIBIT 4: FIRST DEMAND LETTER FOR DELINQUENT DEBT
WAS SENT MORE THAN 60 DAYS AFTER
THE BILL 41
EXHIBIT 5: RECEIVABLES OVER 120 DAYS OLD FOR WHICH
THE FMO HAD TAKEN NO RECENT FOLLOW-UP
ACTION 42
EXHIBIT 6: INDEPENDENTLY DEVELOPED SUPPLEMENTAL
COMPUTER SYSTEMS OPERATING DURING THE
FIRST HALF OF FISCAL 1987 43
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TABT.E OF CONTENTS
CONT'D
PAGE
EXHIBIT 7: RECEIVABLES NOT RECORDED AS SUCH
AND THE COLLECTION STATUS 44
EXHIBIT 8: FMOS WITH OUTSTANDING RECEIVABLES FOR
FINES AND PENALTIES ON 12-31-86 AND
6-30-87 45
APPENDIX 1: SAMPLING AND ESTIMATION PROCEDURES FOR
THE ACCOUNTS RECEIVABLE AUDIT 46
APPENDIX 2: FEBRUARY 1, 1988 RESPONSE TO THE DRAFT
AUDIT REPORT 52
APPENDIX 3: DISTRIBUTION OF THE AUDIT REPORT 64
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
! 7 fCQQ
MEMORANDUM
SUBJECT: Audit Report E1A67-11-0029-30779
Accounts Receivable
FROM:
TO:
OF*
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1
Audit work similar to this phase was previously performed. The
most recent report resulting from such work was audit report
E1A86-11-0048-70619, dated January 28, 1987. It covered delin-
quent debts (i.e., accounts receivable that were not collected
within 30 days after the debtor was billed) as of September 30,
1986, for one FMO. Because of corrective action proposed^ or
underway, the audit report did not contain any recommendations.
However, the corrective action had not been completed as of
July 1987.
During phase two, we wanted to determine whether Agency program
offices were promptly providing the FMO with documents needed
to establish an account receivable. This is important to deter-
mine if all debts owed the Agency are recorded in the FMS. If
the FMO was not notified, we checked whether the program offices
tracked such billings to be sure that the debts were collected
promptly.
For this part of the audit, we interviewed program officials
in Headquarters and in Regions 1, 4, 5, 6 and 7 about activities
that may generate receivables and how the receivables were tracked.
If there should have been receivables, we traced some of the trans-
actions to the FMS. We tested 149 transactions that originated
in the program office during fiscal 1986 or 1987. We performed
this work from March through June 1987.
The controls we reviewed and our conclusions and observations
about them are detailed later in this report. We reviewed only
those internal controls needed to satisfy the objectives of the
audit. Tested items complied with applicable requirements to
the extent depicted in the report. Because we used a statisti-
cal sample for phase one, items not specifically tested which
were part of the audit universe are projected to have characteris-
tics as described in the report. Nothing further came to our
attention as a result of the specified procedures that caused
us to believe untested items did not follow applicable laws
and regulations.
SUMMARY OF FINDINGS
Improvements related to accounts receivable are needed to ensure
that: the dollar value in the FMS for each receivable is recorded
and adjusted according to Agency policy; the FMO is as aggressive
in collecting debts as they should be; and all receivables are
recorded. Except for the collection of civil penalties, the
Agency guidance related to accounts receivable was generally
adequate. Most of the problems were in implementing the guidance.
The operating problems facing the financial management officers
could be partially relieved by automating more of the activities,
as was successfully and independently done at three locations.
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Also, the program offices need prompting to fulfill their respon-
sibility to: (1) place the correct payment terms on the bills;
and (2) send a copy of all bills to the FMO.
I. MANY DEBTS IN THE ACCOUNTING RECORDS WERE
UNDERSTATED OR OVERSTATED
W«. project thac as of March 31, 1987, the recorded balances in
the FMS for about 40 percent of the accounts receivable were
not accurate. The extent of errors has serious implications
on the Agency's ability to collect money owed and support the
validity of the recorded balances. Several factors contributed
to the recorded value of an account receivable varying from
what it should have been. The primary factor causing the
differences was that the^EMe- was not accurately computing and
recording additional charges such as interest, handling charges
and penalties on delinquent/debts. Other factors included having
no documentation to support1* the validity of the transactions and
matching transactions to the\ wrong accounts,
Based on Agency policies and available intormation, the recorded
value for 119 of the 287 receivables in the sample were under-
stated by $4,213,453, and 50 were overstated by $1,226,187.
(Exhibit 1 provides details on this information.) Using pro-
jections of the receivables in the sample, Si£* estimate:; that 25
percent of the accounts in the universe were understated by
$5,361,710 and 14 percent were overstated by $2,994,774.
Instead of the $94,851,680 recorded in the Agency reports on
March 31, 1987, we believe with 95 percent confidence that the
recorded value of the accounts receivable should have been
between $95,273,292 and $99,163,936.
The law allows the Agency to collect additional charges from
most debtors. cJ^rDevaluation of the sample showed that addi-
tional charges were not accurately recorded for 113 receivables.
Either nothing was recorded for additional charges or the FMO
was recording an incorrect amount. As a result, these receiv-
ables were understated by $3.5 million. When projected to the
universe, the understatement may total $4.2 million. Respon-
sibility for assessing additional charges rests with both the
FMO and the office preparing the bill. Many times the bill did
not include the payment terms required by the Agency. The
regulations limit additional charges to those identified on the
bill to the debtor.
Uncorrected errors when entering transactions iii\FMS)7insuffi-
cient documentation, and other problems also contributed to the
understatements or overstatements for 82 receivables in the
sample. Most of these differences should be identified during
the required reconciliation between the FMS and account receiv-
able file. A report listing all transactions about individual
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1
receivables would also be helpful for the reconciliation. The
reconciliations were generally not performed because of resource
limitations. As a result, some of the errors remained in the
FMS a long time.
In his response to the draft report, the Comptroller stated that
proposed Agency guidance on receivables, planned for issuance
in April 1988, will require the FMO to: (l) maintain documentation
showing who completed the required reconciliation and when it was
completed; and (2) take appropriate action in cases where bills
lack correct payment terms. Also, Financial Management Division
(FMD) will: (1) make available to FMOs a copy of software and
documentation for an automated method that computes additional
charges; and (2) evaluate and test compliance to accounts receiv-
able policy when participating in various reviews. In addition,
we are recommending one immediate reconciliation of all files
and the FMS.
2. MORE AGGRESSIVE CQT/LECTfQN l^s NEEDED
*r
A large part of the receivables outstanding on March 31 were
substantially past due, increasing the^ likelihood that they
would not be collected in full. The^FMOs^were generally not
collecting receivables as aggressively as the Agency directives
required. They were not periodically contacting debtors or
regularly evaluating the debts to determine collection action
needed. For example, the sample included 102 bills "or which
the FMO was responsible for sending a demand letter to delinquent
debtors. For 95 of these bills, either demand letters were not
sent or were sent late. Additionally, the aging reports provided
through the FMS contained j.r,r->rrect information. Methods used
effectively by some FMOs, particularly supplemental computer
systems, could be adapted for use by others to improve the
timeliness P^ collections.
In ^responding to tuv draft audit report, the Comptroller said
the \ FMD will: (1) make available to FMOs a copy of the soft-
ware and documentation for an automated method that effectively
generates demand letters; and (2) evaluate and test compliance
with Agency policy to aggressively collect receivables when
participating in various reviews. In addition, we are recom-
mending one immediate review of outstanding receivables to
ensure proper followup action was taken.
I . ALL DEBTS OWED SHOULD BE RECORDED AS ACCOUNTS
He' Identified over $376,000 in debts that were owed the Agency
during fiscal 1986 and 1987 but were not recorded in the FMS as
accounts receivable. Of these debts, $375,000 were civil
penalties assessed against parties who violated environmental
laws. Although such debts were generally paid, failing to
record them could delay collection and create a climate for
fraud. The FMOs; knew that program offices did not always
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provide the bill but generally had not taken effective action
to correct the situation. Improved communication with the
program offices, as well as better coordination among the program
offices, is needed.
The Office of Enforcement and Compliance Monitoring is preparing
program guidance on this subject. Also, actions were taken in
several regions to improve coordination between the programs and
the FMO. Finally, the proposed Agency guidance on receivables
will require the FMOs to take appropriate action when program
offices do not provide required documents to the FMO.
AGENCY COMMENTS
We discussed problems identified during the audit with representa-
tives of the FMOs, regions and FMD. Where appropriate, we have
included their comments. We sent a draft of this audit report
to the Comptroller and the Director, Office of Enforcement
Policy, Office of Enforcement and Compliance Monitoring (OECM)
on December 23, 1987, and received joint comments signed by the
Comptroller on February 1, 1988. Our discussions of these
comments are included in the relevant sections of the report
and a copy of the comments are included as appendix 2. Exit
conferences were held with representatives of OECM on February 24,
and with FMD on March 2, 1988.
Ifce Agency generally .aareed with our-recommendations and stated
that the results of Our-audit were similar to other reviews con-
ducted internally. The Comptroller listed many of the accounts
receivable initiatives the Agency has already implemented. These
included continually stressing to Agency management officials the
critical importance of complying with EPA procedures for reporting,
billing, and collecting debts, performing reviews either internally
or by contract of accounts receivable, revising accounts receivable
policy and procedures, and working with* )EC> to strengthen controls
relating to the tracking of fines and .penalties under administrative
orders and consent decrees. The Comptroll^V*-also stated that they
will continue working with program offices 'whose support and coopera-
tion is essential to the accounts receivablry process to ensure that
all amounts due the Agency are accurately ^reflected in the Agency's
financial records. ' '
' — - - . (
Whiie—corrective-act ion is underway, -^fche—eomptrol-ler' disagreed
with the draft report's overall conclusion that the errors found
would materially impact reporting on accounts receivable. He
stated in the Agency's response to the draft report:
Your projected range of total accounts receivable in
comparison to the actual recorded accounts receivable
balance in the FMS, shows a discrepancy rate of between
.5 - 4.5%—a variance that is "insignificant11 and
"immaterial" by professional standards. Therefore,
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we believe-that the accounts receivable, as a whole, are
fairly staced and that the Agency is providing reliable
financial information.
Old-EVALUATION OF AGENCY COMMENTS
We' *re pleased with the various actions the Agency has taken or
plans to take to improve the accounts receivable process and to
strengthen.the. internal controls over accounts receivable.
However, w»-a£e concerned about the extent of errors in the
balances for individual accounts receivable. The average
difference between the recorded balance and what the balance
should have been was $32,187 for the 169 receivables in our
sample. This indicates a major problem which needs correction.
If the individual balances are incorrect, Agency officials do
not have available to them accurate information to properly
manage and control the receivables.
AJTION REQUIRED
In accordance ~ith EPA Directive 2750, the action official is
required to provide this office a written response to the audit
report within 90 days of the audit report date.
BACKGROUND
Current and former employees, vendors, grantees and others owe the
Agency money for a variety of reasons. When these accounts receiv-
able are collected, the money generally either increases Government
funds or offsets Agency expenses. Therefore, many organizations,
in addition to the Agency, are interested in how many debts the
Agency can bill and collect. The Office of Management and Budget
and the Treasury Department receive reports about accounts receiv-
able from the Agency. Congress receives related information for
each fiscal year through the Office of Management and Budget
("Management Of The United States Government") and for each six-
month period through the Inspector General's semiannual report.
The General Accounting Office has, through several reports to
Congress, stressed the need for efficient and effective debt
collection activity.
The interest of these organizations made recording, maintaining
and collecting receivables a highly visible function throughout
the Federal Government. For example, the Office of Management
and Budget's "Management of the United States Government" for
fiscal 1987 and 1988: (1) identified debt collection as one of
this administration's highest management improvement priorities;
and (2) described initiatives and progress related to credit
management and debt collection. They also contained a status
report on debt collection.
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Goverrunentwide guidance related to these debts is in the Debt
Collection Act of 1982 (Public Law 97-365). The act was implemented
through the Federal Claims Collection Standards (parts 101 through
105, Title 4 of the Code of Federal Regulations). The Agency
policies and procedures related to recording and collecting debts
are covered, primarily, by chapter 7 of the Financial Management.
Manual and chapter 17 of the EPA Accounting Manual. These
directives define the roles of the program offices, the FMOs,
the Director of FMD, and the EPA Claims Officer.
The program office has responsibility for establishing the
debt and the Agency's right to collect additional charges if
the debt is not paid promptly. Generally, the program office
either sends the bill or provides the information needed for
the FMO to send the bill. Whoever prepares the bill must be
sure that it contains the proper payment terms. If the program
office prepares the bill, a copy must also be sent to the FMO
so the debt can be recorded in the FMS. Often the program
office becomes involved in disputes with debtors about the
validity of debts. Of the $94.8 million recorded as outstanding
accounts receivable on March 31, 1987, $33.9 million (or 35
percent) was identified in the FMS as being under appeal.
There are 14 FMOs controlling the activities of 15 accounting
points in the Agency. (The FMO at Headquarters controls two
accounting points, one of which is Agencywide payroll activity.)
FMOs are located at Headquarters, at each of the Agency's 10
Regional Offices, and at three major laboratory facilities
(Research Triangle Park near Durham, North Carolina; Cincinnati,
Ohio; and Las Vegas, Nevada). They provide accounting support
for assigned facilities, organizations or functions.
The FMO has many responsibilities related to money owed the
Agency. As well as sending the bill when the program office
does not, these responsibilities include: recording the debt
initially as an account receivable in the FMS, and later recording
any adjustments, such as additional charges and funds collected;
establishing and maintaining a file of documents about the debt;
comparing the file with financial reports each month; regularly
contacting the debtor if the debt is not paid promptly; and,
when the collection actions are unsuccessful, either turning the
debt over to others to collect or writing it off in the FMS as a
bad debt.
The EPA Claims Officer (located in the Office of General Counsel)
and the Director, FMO, determine the final disposition of the debt
when the FMO is unsuccessful in collecting it. Of the $94.8
million recorded as outstanding accounts receivable on March 31,
1987, $2.1 million was identified in the FMS as referred to
these officials.
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During the first half of fiscal 1987, according to data provided
by the Director of FMD, the Agency collected $45.8 million and
wrote-off debts totaling $44,218. On March 31, 1987, the FMS
showed the following outstanding receivables at each accounting
point, part of which were not controlled by the FMO (as discussed
above and in Finding 2):
TABLE 1
OUTSTANDING RECEIVABLES
ON MARCH 31, 1987
DOLLARS (IN THOUSANDS)
ACCOUNTING
POINT
01
02
O3
04
05
06
07
08
09
10
15
22
27
33
99
LOCATION
BOSTON
NEW YORK
PHILADELPHIA
ATLANTA
CHICAGO
DALLAS
KANSAS CITY
DENVER
SAN FRANCISCO
SEATTLE
WASHINGTON
DURHAM
CINCINNATI
LAS VEGAS
WASHINGTON
RECE]
$
TOTAL
CVABLES
826
3,040
38,251
5,889
8,442
641
637
1,392
10,059
3,778
154
619
13,580
126
7,418
CONTROLLED
BY THE FMO
$ 577
1,323
32,735
1,303
368
74
169
86
551
84
99
105
183
14
2,258
TOTAL
$ 94,852
$ 39,929
8
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FINDINGS AND RECOMMENDATIONS
1. ALMOST FORTY PERCENT OF THE DEBTS IN THE ACCOUNTING
RECORDS WERE UNDERSTATED OR OVERSTATED
With 95 percent confidence we estimate that as of March 31,
1987, 25 percent of all recorded receivables were understated
by $5,374,188 {plus or minus $1,291,616) and 14 percent were
overstated by $2,969,843 (plus or minus $1,372,359). The extent
of errors in the accounts has serious implications on the ability
of the Agency to collect money which it is owed and to accurately
report on the balance of accounts receivable. When amounts due
the Agency are not correctly recorded, collecting the proper
amount becomes unlikely. Agency reports on accounts receivable
that are based on information in the FMS, such as those provided
to Congress and to the Office of Management and Budget, reflect
the errors in individual receivables. Several factors contributed
to the recorded value of an account receivable varying from what
it should have been. The most common correction needed was to
accurately compute and record additional charges (such as interest)
on delinquent debts. Other factors that caused differences,
including some receivables that had no documentation available to
support the validity of the transactions and mismatching accounting
entries, should have been identified during the required monthly
reconciliation of the file to the accounting records.
Agency directives require that accounts receivable be promptly
recorded in the FMS, adequately documented, and regularly reconciled.
Paragraph 5 of chapter 7 of the Financial Management Manual identi-
fies the FMOs responsibilities to include: processing bills from
the program office within one day of receipt; establishing and
maintaining an account receivable file for all documents pertaining
to a particular bill; preparing a "Subsidiary Record For A Delin-
quent Account Receivable;" maintaining the general ledger accounts
for accounts receivable and interest; reconciling the file and
the ledger each month; writing off a receivable under $150 when
it cannot be collected; and continuing to accrue additional charges
each month after the receivable is referred to the EPA Claims
Officer.
Similiar requirements appear in Chapter 17 of the EPA Accounting
Manual. For example, based on the bill, section 17.3 requires
that the receivable be recorded in the general ledger by debiting
(or increasing) one of two accounts. Section 17.6 further requires
that additional charges be debited (added) to the appropriate
general ledger account. Payments, on the other hand, should be
credited to (or reduce) these accounts according to section 17.8.
Continuing to accrue additional charges after referring the receiv-
able to the EPA Claims Officer is mentioned in section 17.9.
Sections 17.4 and 17.5 refer to the accounts receivable file.
Writing off receivables by crediting the appropriate account is
addressed in section 17.9.
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We selected a statistical sample of 287 receivables to test for
the accuracy of the recorded balance and that the Agency guidance
was followed. The sample was taken from FMS transactions related
to accounts receivable outstanding at some time during the first
six months of fiscal 1987. The data included over 22,000 trans-
actions related to 4,887 receivable numbers. Appendix 1 describes
the selection of the sample in more detail.
Of the 287 receivables in the sample, 118 had the correct value
recorded in the FMS on March 31, 1987. That is, the balance
reflected compliance with Agency guidance, according to available
information. However, as shown on exhibit 1, a different balance
should have been recorded for 169 receivables. For 119 of these
receivables, the actual recorded value should have been increased
by a total of $4,213,453. The actual recorded value should have
been decreased by a total of $1,226,187 for the remaining :'
receivables. The net effect of the differences was to unde tate
the recorded value of the sample by $2,987,266.
Understated receivables generally would be expected to result
in losses to the Agency. It is important to note, however, that
some receivables which we, out of necessity, labeled as overstated,
may also be losses to the Agency. For example, documents related
to receivable 86034 in accounting point 3 could not be located.
Since the recorded amount was not documented, we considered it
an overstatement for purposes of our sample. Should debtors
challenge recorded receivables that are undocumented, there is a
high probability that the Agency will be unable to collect.
However, these may be valid receivables if properly documented.
Several factors contributed to the recorded value of an account
receivable varying from what it should have been. More than one
factor could also affect a single receivable. The various factors
and the number of receivables affected are summarized on the
following page in table 2.
10
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TABLE 2
REASONS RECEIVABLES
WERE UNDERSTATED OR OVERSTATED
NUMBER OF
REASON RECEIVABLES
Nothing was recorded for certain
added charges although the debt
was delinquent. 72
Added charges were not recorded
in the correct amount for the
delinquent debt. 51
Funds collected or other
transactions were not matched
to a debt or were not matched
to the correct receivable. 30
There were multiple entries of
the same transaction. 8
Adequate documentation was not
available to support the
validity of the receivable. 10
Differences were due to other
reasons.
42
For the 169 receivables, the average difference between the
recorded balance and what the balance should be was $32,187.
Of these receivables, the absolute value of the difference was
sore than $100 for 65 percent. The chart on the following page
shows the number of receivables by size of the dollar difference
in the balance.
11
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CHART 1
v • • • u'
• • 'VI'
CE
= .29.OX
$10 on LESS
$11 TO $100
$101 TO $1.000
si.ooi TO $100.000
I I QVEB $!QQ. 000
51 - 30.3
We projected the results of the sample with 95 percent assurance
as follows. (The projections do not include unrecorded accounts
receivable, as discussed in Finding 3.) For 14 percent of the
receivables, the recorded value should have been decreased a
total of between $1,623,676 to $4,365,872. The recorded value
should have been increased by a total of between $4,069,741 to
$6,653,679 for 25 percent of the receivables. Although we con-
sidered the extent of error in either direction as the signifi-
cant concern, we also projected the overall balance. We project
that the value of accounts receivable, Agencywide, on March 31,
1987, should have been between $95,273,292 and $99,163,936.
This is from $421,614 to $4,312,258 more than the actual recorded
value.
Agency officials rely on the FMS for financial information about
EPA's operations. The information must be correct to: (1) reflect
the Agency's actual financial position; and (2) help manage and
control receivables. The FMS also serves as the basis for reports
sent to parties outside the Agency, such as Congress, the Treasury
Department, and the Office of Management and Budget.
12
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A. NOT CORRECTLY COMPUTING AND RECORDING ADDITIONAL CHARGES
WAS THE MOST COMMON PROBLEM WITH A RECEIVABLE
The FMOs did not always compute and record additional charges
correctly for receivables that were delinquent. The Debt Collec-
tion Act of 1982 or the Federal Claims Collection Standards
generally allow the Agency to collect interest and (except for
units of State and local government) handling charges and penal-
ties where the debtor does not promptly pay its bills. These
additional charges were not accurately recorded for 113 of the
287 receivables in the sample. The net effect was to understate
the receivables in the sample by $3.5 million. When projected
to the universe, the understatement may to'.. ^1 $4.1 million (plus
or minus $489,365 at the 95 percent confidence level). Reasons
usually cited by the FMOs for the problem were resource limita-
tions or not having the required payment terms on the bill. A
computer system could assist in computing and recording the
additional charges.
Governmentwide as well as Agency guidance permits additional
charges to be collected under certain circumstances. The Debt
Collection Act allows agencies to assess interest, a penalty
charge of not more than 6 percent if the debt is not paid
within 90 days, and administrative charges to cover the cost
of processing and handling delinquent claims. Regulations
implementing this act became effective in April 1984. Among
these regulations, 4 CFR 102.13 provides for assessing interest,
penalties and administrative costs on debts. However, the
Agency must give the debtor a written notice that explains the
charges.
The Financial Management Manual (chapter 7, paragraph 5) and
the EPA Accounting Manual (chapter 17, sections 17.4, 17.6 and
17.7) also permit collecting interest and handling charges
after 30 days, and a 6 percent penalty after 90 days. These
Agency requirements became effective in November 1984. Before
then, interest was sometimes included in the payment terms
based on common lav practices.
The FMOs identified two primary reasons for under-recording
the additional charges: additional charges were not included in
the payment terms on the bill sent to the debtor; and resource
limitations prevented them from following the requirements.
Also, in a few instances, the staff forgot or did not know they
should record the charges, or the computation used was slightly
different.
Agency guidance requires that the bill to the debtor include
payment terms. The exact wording is specified in the Financial
Management Manual, chapter 7, paragraph 4a(2) and in the EPA
Accounting Manual, chapter 17, section 17. 2. IE. Further,
4 CFR 1O2.13 only allows the Agency to demand payment of the
additional charges included on the bill (or a revised bill) .
13
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Thus, unless the debtor was informed of the charges, the Agency
may not collect them. Whenever possible the Agency should bill
and collect these charges to recover: (1) the administrative
costs of collection actions; and (2) the cost of being deprived
of the current use of funds.
Program offices, not the FMO, prepared many of the bills sent
to debtors. In these cases, according to chapter 7, paragraph
4, of the Financial Management Manual, the program office is
responsible for ensuring that the bill contains the proper
payment terms. The FMO, however, is responsible for assessing
and collecting the additional charges. Exhibit 1 (in notes
2, 5 or 8) identifies 34 receivables for which additional charges
were neither included in the payment terms nor recorded by the
FMO. (For 12 of the 34 receivables, we were told that the
terms should have been included on a separate page accompanying
the bill, but the FMO was not given a copy of this page to
confirm it was sent.)
If the correct payment terms had been on the 34 bills, the
Agency could have assessed additional charges totaling $205,487.
Based on a projection, 10.1 percent of the receivables in the
universe (at the 95 percent confidence level) had terms that
did not include interest. This is the most frequent additional
charge assessed. In the memorandum of February 1, 1988, the
Comptroller agreed to include in the new Agency guidance on
receivables a requirement that the FMO take appropriate action
when a bill lacks correct payment terms. The new guidance (HMDS
chapter 2540) is planned for issuance in April 1988.
Even when the payment terms provided for additional charges,
the charges were not always recorded correctly. For 39 receiv-
ables, no additional charges were recorded even though the
payment terms included such charges. (See exhibit 1, notes
1, 4 and 7). The added charges not assessed totaled $754,799.
For 51 receivables, the amount recorded for additional charges
was not correct, and was usually understated. (See exhibit 1,
notes 3, 6 and 9).
Resource limitations was one reason cited by FMOs for not
regularly recording additional charges. The computations needed,
as well as the related accounting entries, were many and time
consuming to perform. To reduce the activity, the FMO for
accounting point 99 had the computations performed but delayed
recording the results until the payment was received. Two FMOs
reduced the resources needed by using supplemental computer
systems to calculate certain additional charges.
The FMO for accounting point 22 operates a system that generates
the bill to the debtor and, if appropriate, computes interest
and the handling charge. This system operates on an IBM personal
computer. The FMO for accounting point 5 independently developed
a system that computes interest, the handling charge and the
14
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penalty for certain types of receivables. In addition, the
charges computed by the Region 5 system can be automatically
sent to the FMS. This system operates on the PRIME computer.
Both supplemental systems, to a limited extent, duplicate data
in the FMS. Records were not readily available documenting the
Agency's cost to develop these two similar systems.
Providing these or similar computer systems to the other FMOs
could reduce the work-years of effort needed to compute and
record additional charges. In a memorandum dated August 14,
1987, the Deputy Director of FMD directed the Financial Systems
Branch to modify the Region 5 system for use by the FMO at
Headquarters. (The system was modified and became operational
in September 1988.) Four other FMOs (accounting points 1, 8, 9,
and 10) are adopting these or similar systems. In his February l
memorandum, the Comptroller agreed to make available to the FMOs
a copy of the software and documentation for an automated method
to compute additional charges. However, according to the Deputy
Director of FMD, the systems will be replaced in two years when
the Agency implements its new accounting system. The new system
should have an automated subsystem to handle accounts receivable.
Considering the potential loss from understated billings, we
believe FMD should encourage all of the FMOs to adopt a supple-
mental system.
B- MONTHLY RECONCILIATIONS SHOULD REDUCE DIFFERENCES
CAUSED BY OTHER FACTORS
A variety of factors not related to additional charges also
contributed to the recorded value of 82 accounts receivable
varying from what it should have been. These included not
having documentation available to support the validity of the
transactions, not matching transactions to a debt, or matching
then to the wrong debt. Some of the errors remained in the FMS
without correction for a long time. Most, however, would have
been identified by an adequate monthly reconciliation of the file
and the FMS, as required by the Financial Management Manual.
The net effect of the factors was to overstate the receivables
in the sample by $506,800. The overstatements totaled $1,142,300
and the understatements $635,500.
The FMOs could not locate documentation supporting 10 of the
receivables in our sample. As noted above. Agency guidance
requires the FMOs to maintain a document file on each receivable.
The EPA Accounting Manual states in section 17.4.0 that "The
accounts receivable file is the basis for determining when there
is an outstanding debt." Without documentation, it is not possible
to determine if the receivables are valid. The receivables for
which no file was readily available are identified in exhibit 2.
The recorded value of the 10 receivables included a zero balance
for 1 receivable, balances due for 6 totaling $78,686, and
credit balances for the remaining 3 totaling $100. We concluded
that (for the purposes of exhibit 1) the balance of the 10
15
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receivables should have been zero on March 31, 1987. However,
we encourage the FMOs to determine if valid receivables, in
fact, exist.
Eight of the 10 receivables were in Headquarters, where the FMO
had already taken action to remove some of the undocumented
receivables from the FMS. Because of an earlier audit report
(E1A86-11-OO48-70619, dated January 28, 1987), the FMO at Head-
quarters was aware that documentation was not always available
in accounting point 99. The previous audit report noted that
accounting point 99 had prematurely retired account receivable
files. Files related to older receivables were stored while tne
FMS still showed the receivable was outstanding. In response
to that report the FMO had agreed to retrieve such files. They
were retrieving the files while we were performing the field
work for this audit. One of the receivables on exhibit 3 was
among those being retrieved because of the prior audit. For
accounting point 15, the same FMO had taker action in January
and February 1987, to write-off 26 receivab-.es that lacked
documentation, including five in the sample. Four of the five
were outstanding in FMS on March 31 because the EPA claims
Officer was processing the actions.
Another factor that contributed to differences in the recorded
balance of 30 receivables was matching transactions to the
proper receivable. The most common mismatch was recording the
collection against the wrong receivable or no receivable. The
former was usually due to incorrectly entering data into the
FMS. For example, accounting point 5 entered the collection
for receivable 87138 under th* number 81138. Incorrect matches
may be timing errors; that is, there was a delay in the FMO
getting the bill. As « result, the payment was entered in the
FMS before the receivable was recorded. In accounting point
99, for example, receivable H5103 was collected March 9, 1987,
and the receipt recorded before the information was entered
from the bill, which was dated February 26, 1987.
A review of receivables with an obvious mistake, those with a
credit balance, shoved that errors were not promptly corrected.
On March 31, 1987, there were, Agencywide, 174 receivables with
credit balances totaling $336,125. These receivables appear on
the Agency reports with a negative dollar value so they are
easily identified. Therefore, they should be corrected within
60 days. The sample included 35 receivables with credit balances,
On March 31, 1987, based on the posting dates, the 35 receivables
had credit balances from 8 to 987 days, with an average of 228
days. Eleven of the 35 appeared with negative balances on the
Agency reports as of June 30, 1987.
16
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The Financial Management Manual requires a reconciliation each
month between the account receivable file and the accounting
records. The staff for four of the FMOs said that they regularly
reconcile the two. The four accounting points were 3, 5, 8 and
9. As a group, these four accounting points had about the same
proportion of sampled receivables with differences in the balance.
However, the part of the receivables with differences due to
reasons other than additional charges was lower. With better
reviews of transactions by these and other FMC3, and more regular
and careful comparisons to the files, most factors causing differ-
ences could be quickly identified and corrected.
We recommended, in the draft audit report, that the Director,
FMD, initiate and oversee an effort by the FMOs to perform a
special reconciliation between the files and FMS. In the
February 1 response, the Comptroller agreed that FMOs should
reconcile the two, but believes quarterly (rather than monthly)
reconciliations would be more appropriate. Therefore, the new
Agency guidance, which should be issued in April 1988, will
require quarterly reconciliations by the FMOs. In addition,
the new Agency guidance will require that the FMO maintain
documentation showing who completed the work and when it was
completed. We agree that quarterly reconciliations should be
adequate after a special, one-time reconciliation between the
accounts receivable file and the accounting system is performed.
We continue to believe that this special reconciliation should
be performed immediately so the accounting records can be
corrected.
We believe a report that lists the transactions in the FMS for
the current receivables might be useful to the FMO when reconcil-
ing the file to the accounting records. The FMOs received feed-
back on what was in the FMS in several ways. One form was as
edits and transaction histories, that is, printouts listing
transactions entered and processed. These printouts give very
detailed information. Operating procedures of the FMOs generally
required that someone review the edits (printouts) of the data
entered into the FMS. More summarized information comes as
standard monthly reports identifying receivables outstanding on
a certain date for the FMO. These are identified as FM022
reports. The Financial Reports and Analysis Branch of FMD also
reviews the FMO22 reports on a routine basis. Finally, some
FMOs obtain special reports on accounts receivable in the system.
These reports generally combine some of the transactions for
each receivable, but do not provide details on all transactions.
A report with all the transactions would be helpful in pinpointing
differences between the FMS and the file, and their cause.
17
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In the draft audit report, we recommended that the Director,
FMD, make available to the FMOs an automated method that will
chronologically list the transactions for all (or selected)
accounts receivable, and require the FMOs to use this or
alternate information to identify and correct data entry
problems timely. The Comptroller, in his memorandum dated
February 1, 1988, agreed that data entry problems should be
identified and corrected in a timely manner. He believed
that processes in place, along with the routine reconciliations,
will help locate errors so corrections can be made. Therefore,
we are not recommending development of a report listing the
transactions.
RECOMMENDATIONS
S* recommendjthat the Comptroller:
1-; Direct the Director, Financial Management Division to
initiate and oversee an effort by the FMOs to, by a
certain date: (a) perform a special reconciliation
between the account receivable file and the accounting
system for receivables outstanding on either February 28
or March 31, 1988; and (b) correct the accounting records
for the proper additional charges and any other balance
differences identified during the reconciliation.
3L |?nsure that the Director, Financial Management Division
issues the guidance requiring the.
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2- AGGRESSIVE COLLEOTTOM ACTION
" '
GENCY
Collection action is needed to ensure that debtors pay the
Agency in a timely manner. The older a receivable becomes the
less likely it is that it will be collected. FMOs were not
generally following Agency guidance to be aggressive in collect-
ing receivables. For example, the first demand letter was sent
within 31 days in only 7 of the 102 required instances When
demand letters had been sent, files sometimes show collection
activity later stalled. For 26 receivables with a total princi-
pal outstanding on March 31 of $4.2 million, the document file
identified little or no recent followup action even though
the receivable was quite old. Although Agency guidance identified
the collection action needed, the exact procedures differed amona
the FMOs. Procedures of the FMOs included using such aids as
logs, filing practices, and supplemental computer systems. A
standard aging report was available to the FMOs. However the
data on the report about the age and type of receivable was
often incorrect so the report was not as useful as it should be
The Agency directives require periodic contact with the debtor
and regular evaluations of the collectability of the debt. The
EPA Accounting Manual, chapter 17, section 17.4.0 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 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
requirements are found in the 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 direc-
tives require the FMO to evaluate 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 $150 (less than $2,000 effective October 1987) 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. Another alternative
may soon be available. In a memorandum dated August 14, 1987,
the Deputy Director of FMD required his staff to establish
procedures for referring delinquent debts to a collection agency.
These procedures will be finalized when the Agency receives final
Treasury guidance.
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Collection a;tivity for most FMOs is very labor-intensive.
Files must De reviewed, the receivables requiring action identi-
fied, and the action taken. The primary actions involve making
telephone calls or sending letters, staff members for four
accounting points told us resource limitations prevent them
from performing these activities as often or as thoroughly as
perhaps they should. It was difficult to set aside a block of
time for collection activity so receivables remained uncollected
In a few cases, the FMO had the program office take the collec-
tion action. For example, until recently the FMO cf accounting
point 3 did not followup on delinquent debts related to requests
under the Freedom of Information Act. Another example where
the program office takes the collection action is receivables
recorded in accounting point 99 for the Superfund program.
When these became delinquent, the appropriate Regional Counsel
was informed so the Agency lawyers could take collection action.
The Deputy Director of FMD emphasized, in a memorandum dated
August 14, 1987, that followup is the FMOs responsibility.
Demand letters were not always sent 31, 61, and 91 days after
the initial bill. In the sample, 102 bills became delinquent
and needed at least one demand letter by March 31, 1987. The
action taken regarding the first demand letter for these 102
bills is summarized below.
CHART 2
WHEN AT LEAST ONE DEMAND LETTER
WAS REQUIRED, THE FIRST WAS
RARELY SENT BY THE 31st DAY
LETTER WAS SENT LATE
LETTER WAS SENT ON TIME
"iO LETTER WAS SENT
20
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As the chart shows, a demand letter was not sent for 42 of the
102 bills. As shown in exhibit 3, 39 of the 42 bills remained
outstanding on March 31 with a combined balance of $4.3 million.
Demand letters were sent for 60 bills, but for 53 of these the
first letter was sent after the 31st day. For these 53 receiv-
ables, the first letter was sent, on average, 126 days late.
As examples, exhibit 4 lists the 22 bills for which the first
demand letter was sent more than 6O days after the bill. As the
exhibit shows, the accounts were outstanding for lengthy periods
of time.
When projected to the universe, at least one demand letter was
needed for 36 percent of the receivables (at the 95 percent
confidence level). Of these, no letter was sent for 30 percent
(at the 95 percent confidence level), and a letter was sent on
time for only 17 percent of the bills where one was required.
Part of the receivables on exhibits 3 and 4 are several years
old and, according to some FMOs, do not reflect their current
practices on sending demand letters. Further analysis, however,
indicated the problem existed for bills sent in fiscal 1987.
At least one demand letter was required for 40 bills sent during
the first half of fiscal 1987. Of the 40 bills, no demand letter
had been sent for 16 (or 40 percent). A demand letter was sent
in compliance with Agency policy for five bills. For the remain-
ing 19 bills the demand letter was sent after the 31st day. For
these bills, the demand letter was sent, on average, 32 days
late. Thus, the problem seems less severe for the fiscal 1987
bills than for the sample as a whole, but the problem remains.
Based on the account receivable file, followup action had
stopped for some receivables. Although the debt had been out-
standing more than 105 days, it was not transferred to another
office, as required, and there was no recent collection action
by the FMO. Exhibit 5 identifies 26 such debts that were over
120 days old on March 31, 1987. As the exhibit shows, the
balance for these receivables on that date was $4.2 million.
When projected to the universe, 6 percent of the receivables
(at the 95 percent confidence level) had no recent follow-up
action. We believe it unlikely that the debtor would volunteer
to pay these old receivables unless the Agency takes action.
If the Agency shows it is serious about collecting a debt, we
believe the debtor will pay more promptly. The Agency demon-
strates its seriousness by contacting the debtor through demand
letters and telephone calls. The debtor will know the Agency
is serious when the contact is quickly and frequently made.
The older a debt becomes, the less likely the entire debt will
be collected. Although government collection efforts may be
more or less successful than private sector efforts, the follow-
ing information will help put the age of receivables in some
21
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perspective. Information from the private sector* shows that
when a receivable is 4-months past-due, the likely recovery
averages 80 cents on the dollar. After one year, the likely
recovery averages 45 cents on the dollar.
A large proportion of the Agency's outstanding receivables were
substantially past-due. Some of these receivables, however,
were not controlled by the FMO. Of the $94.8 million for receiv-
ables outstanding on March 31, 1987, the FMS identified $54.9
million as reimbursable interagency agreements, as receivables
being appealed, or as receivables being paid in installments.
Excluding these items, outstanding receivables totaled $39.9
million. Of this amount, based on FMS information, $19.2
million (or 48 percent) was for receivables over one year old
while $8.2 million (or 21 percent) was for receivables under 90
days old. As further discussed below, the aging information in
the FMS was not completely reliable.
B. ACCURACY OF INFORMATION ABOUT DEBTS
SHOULD BE IMPROVED
The Agency provided the FMOs with standard, monthly reports—
FMO22 reports—that show the age (in days) of all the outstanding
receivables. They come in several versions and are based on
data in the FMS. The most commonly used version is the FMO22C
report, "SCHEDULE OF ACCOUNTS RECEIVABLE - BY GENERAL LEDGER
ACCOUNT." However, the data related to the billing date and to
the type of receivable was not always accurate. The reports,
therefore, were not as useful as they should be.
The age shown on the report is based on a date that should be
the date of the bill. For 150 receivables in our sample, the
date was not the date of the bill. Usually the receivable was
older than tne FM022 report showed. When projected to the
universe, omy 40 percent of the receivables (at the 95 percent
confidence level) had the correct bill date in the FMS. without
the correct date, the aging report was misleading. As a result,
the report could not be relied upon to identify when the demand
letters should be sent. Also, the dollar value identified with
delinquent debts in various age categories was incorrect. This
information was used to calculate the allowance for doubtful
accounts and to prepare reports by the age of outstanding receiv-
ables.
The age of the receivables has two uses other than for collec-
tion action. One use is to estimate the allowance for doubtful
accounts. This account offsets the accounts receivable to
present a more realistic picture of the accounts receivable
that will be collected. The other use is in reporting, such as
the Inspector General's semiannual report to Congress. In a
*Source: Alexander Grant & Co., CPA's, New York, NY and others;
August 1980
22
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section on delinquent debts, the Inspector General's semiannual
report provides accounts receivable information by age category.
Thus, erroneous dates in the FMS impact the information provided
in the semiannual report. For example, our sample included 73
receivables with both a FMS date and a bill date, one of which
was between January 1 and March 31, 1987. These would be receiv-
ables under 9O days old on March 31. Using FMS data, there
were 62 such receivables with balances totaling $14 million.
Using the bill dates, there were 70 receivables with balances
totaling $18.6 million. The difference in the balances was
$4.6 million.
There were two common reasons for another date being in the FMS:
an error when entering the date, or using the date the data was
entered instead of the date of the bill. For example, accounting
point 27 had developed a supplemental computer system that gener-
ated the bill and automatically sent the billing information
into the FMS at the end of the month. Instead of the bill
date, the system entered the input date, so the debt could be
up to 3O days older than shown on the FM022 report. The FMO
corrected this problem, which was less severe than other cases.
The bill dates cannot always be corrected. According to a staff
member for accounting point 22, erroneous dates cannot be correc-
ted unless the date of the bill is before the date entered in
the system. The system allows them to make the debt older but
not more current. For example, the bill for receivable 5C074
in accounting point 22 was dated October 7, 1985. Because of
an entry error, the FMS shows the bill date as October 7, 1982.
Since October 1982 is before October 1985, the date in the FMS
cannot be brought closer to the date of the bill. Thus, some
data entry errors cannot be corrected because of system limita-
tions. We recommended in the draft audit report that the FMS
be modified so the date could be corrected.
In his response to the draft audit report, the Comptroller stated
that users can modify the bill date by reversing the erroneous
record and replacing it with the correct record. This requires
rekeying the entire entry. Using this method, the staff in
accounting point 22 is trying to correct the age for receivable
5C074. Assuming they will be successful, we changed the recommen-
dation to have FMD tell the FMOs how to change the date.
The FMO22 report uses a set of codes to identify the type (or
source) of receivable or, in certain circumstances, its status.
This information could be useful to the FMO in determining
whether collection action is needed. For example, demand letters
need not be sent for receivables that: involve refunds of
common carrier costs; the debtor is disputing or appealing; or
were transferred to another office for collection. Since the
codes would be useful, the FMO should make sure they are correct.
In a memorandum dated August 14, 1987, the Deputy Director of FMD
directed the Financial Reports and Analysis Branch to evaluate
use of the source codes.
23
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The source codes shown on the FMO22 report did not always
correctly reflect the source or status of ±h& receivable. For
42 of the 287 receivables, a different source code should have
been shown on the FMO22C report as of March 31, 1987. Twenty-
six of the differences involved receivables being appealed or
those referred to the Claims Office. For example, in June 1986
the debtor filed an appeal related to receivable 60249 in
accounting point 3, but the FMO22 report did not show this. On
the other hand, the FM022 report indicated that part of receiv-
able 20961 in accounting point 4 was in appeal and part was
not. The receivable file, however, contained documents showing
the Agency ruled on the appeal in 1985 and the debt had been
referred to the Claims Officer.
For the remaining 16 of the 42 receivables with differences,
two reasons were generally cited by the FMOs' staff for the
differences. One reason was that they were not using a current
list of source codes (although the list can be accessed through
the FMS). The other reason was that the codes were not changed
when circumstances changed to avoid entry errors.
The accuracy of the bill dates and source codes could be improved
in two ways. First, data entry problems should be identified
during the required monthly reconciliation of the account receiv-
able file and the accounting system. As discussed in Finding 1,
the FMOs did not always perform the reconciliation. Concerning
knowledge of the source codes, they are listed in the FMS and
therefore available to the FMOs. In addition, the Deputy Director
of FMD, in a memorandum dated August 14, 1987, required Financial
Reports and Analysis Branch to review the source codes.
We recommended in the draft audit report that the Director, FMD
require the FMOs (as part of the reconciliation recommended
earlier) to initiate needed followup action and correct the
accounting records. In the memorandum of February 1, 1988, the
Comptroller agreed that FMOs should reconcile the receivable
file to the accounting records (quarterly) and take appropriate
action to correct the records. Further, aging reports will be
used to monitor the status of receivables outstanding more than
120 days. In addition, the Comptroller indicated that when
participating in various reviews, FMD will evaluate and tervt
compliance to accounts receivable policy. Concerning followup
based on the reconciliation, we believe one should be performed
before the new Agency cfjidance is issued.
C. VARIOUS PROCEDURES WERE USffD TO TDENTXFY PE£EIvft&LE-?
THAT NEED COLLECTION ACTION
FMOs usually relied on their own systems, rather than the Agency
aging report, to begin collection action. These systems may
have included logs, certain filing practices, or a supplemental
computer system. The staff in accounting points 4, 5, 6, 8,
24
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22, 27, and 99 kept a receivables log although one was not
required by the Agency directives. The log was generally
maintained by hand rather than on a computer, and its content
varied from office to office.
Different filing practices were used by some of the FMOs to
draw attention to older receivables. The staff in four
accounting points (accounting points 4, 8, 27, and 99) filed
open receivables in a different location or manner than they
filed receivables that were collected. Documents related to
open receivables might be in a different drawer of the filing
cabinet or in a different type of folder. This created a sort
of "tickler" system for receivables needing collection action.
The staff for the FMO of accounting point 27 used different
colored labels each month for files established during the
month. That way, older files could be easily identified.
The supplemental computer systems developed in accounting points
5 and 22 also assisted with collection actions. The systems
aged the receivables, identified those that required demand
letters, and generated the appropriate letters. As in computing
the additional charges, the FMOs' staffs believed the computers
allowed more efficient use of resources. The system used in
accounting point 5 is being adapted and implemented by four other
FMOs. Exhibit 6 summarizes information about supplemental
computer systems related to accounts receivable. The Comptroller
also agreed to make available to the FMOs a copy of the soft-
ware and documentation for an automated method that generates
demand letters. However, he stated this was an interim step
to be replaced by the new accounting system.
RECOMMENDATIONS
We recommend that the Comptroller:
1. Provide a copy of the letter making available to the
FMOs an automated method that effectively generates
demand letters, and, in the interim, require the FMOs
to devote the necessary resources to properly complete
collection activity.
2*- Direct the Director, Financial Management Division, as
part of the special reconciliation of the accounts
receivable file and the accounting system (per recommen-
dation for Finding 1): to (a) initiate proper followup
action, if needed, for collecting the receivable, and
(b) correct the accounting records for any differences
in the source codes or bill date.
3 Direct the Director, Financial Management Division, to
instruct the FMOs how to modify the bill date identified
in the accounting records so it reflects the date on
the bill to the debtor.
25
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3- ALL DEBTS OWED TO THE AGENCY SHOULD BE RECORDED
AS ACCOUNTS RECEIVABLE
Debts totaling over $376,000 that were owed the Agency during
fiscal 1986 and 1987 were not recorded in the FMS as accounts
receivable. The accounts receivable, therefore, were under-
stated to the extent that these (and similar transactions) were
not recorded, of these debts, $375,000 originated from legal
actions taken in three Regions and Headquarters. Since we
reviewed only a sample of the legal actions at these locations,
we believe the total debts not recorded greatly exceed the
$375,000 that we identified. Money owed the Agency should be
recorded in the accounting system to properly reflect the Agency's
financial position and to help ensure that the funds are collected
and properly controlled. The FMOs became aware of the debts,
which were generally paid by the debtor in a prompt manner,
when the funds were collected.
According to the Financial Management Manual, chapter 7, para-
graph 2a, it is the Agency's policy to promptly establish an
account receivable in the accounting records for all amounts
owed to the Agency. To achieve this, paragraph 4a requires
that 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 workday after receipt from the
program office, according to paragraph 5a. Similar requirements
appear in the EPA Accounting Manual, chapter 17, sections 17.1.1,
17.2 and 17.3.
When comparing different types of receivables recorded by the
FMOs, we identified some inconsistencies. That is, the FMO22
reports for some FMOs did not include types of receivables that
were being recorded by other FMOs. As a result, we interviewed
personnel about certain activities at Headquarters and at Regions
1, 4, 5, 6 and 7 to see if the activities generated money owed
to the Agency. Except for Region 4, we also tested some trans-
actions that may have generated an account receivable. From
documents in the program office, we traced 149 transactions to
the accounting system. Four types of transactions were tested:
civil penalties assessed by the Agency against violators of
environmental lavs; bills related to requests for information
from the Agency for which the requestor had to pay at least
$25; grants under which the grantee was overpaid, usually based
on an audit report; and intergovernmental personnel actions under
which an Agency employee works for someone else and the other
organization reimburses the Agency for the employee's salary.
The number of each type of transaction tested is summarized
on the following page on chart 3.
26
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CHART 3
"OUR TYPES OF TRANSACTIONS
WERE TESTED
rOR RECORDATICN AS
ACCOUNTS RECEIVABLE
CIVIL PENALTIES
^^^ INTERGOVERNMENTAL PERSONNEL
INFORMATION REQUESTS
GRANT OVERPAYMENTS
We found that all debts owed to the Agency were not being
recorded as accounts receivable in the FMS. It is important
to note that the projections in finding 1 were based only on
recorded receivables. Consequently, these unrecorded receiv-
ables show the overall Agency balance is understated even
further. Although they involved money owed the Agency, 43
transactions valued at about $376,000 were not recorded as
accounts receivable. Exhibit 7 identifies these transactions.
The list consists primarily of civil penalties assessed in
Headquarters and Regions 1, 5, and 6. Such debts were consist-
ently not recorded in Headquarters and Regions l and 6. (They
were also usually not recorded in Region 4, where we performed
survey work but not audit work.) Region 5 inconsistently
recorded such receivables; some but not all were recorded.
Except for Region 6, the unrecorded debts had not been outstand-
ing for a lengthy period. When we visited Region 6, three of
the penalties assessed there had been outstanding for 141, 155
and 279 days. The total value of these three debts was $27,000.
Two were collected before July 1987. The remaining debt totals
$21,6OO.
27
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The transactions identified in exhibit 7 concerning legal actions
were not the only such transactions that should have been recorded
as accounts receivable. We reviewed only a sample of the legal
actions at the locations we visited. For example, we reviewed
two of 27 legal actions taken during the early part of fiscal 1987
in Region 5 related to the Resource Conservation and Recovery Act.
We were provided information showing that the 27 actions totaled
about $383,600. The two we reviewed totaled $39,746, of which
one for $10,500 is on exhibit 7. In Region 6 there were 21 legal
actions during fiscal 1986 and early 1987 that related to poly-
chlorinated biphenyls. The actions totaled about $108,200. We
reviewed nine, totaling $65,100, of which seven totaling $53,200
are on exhibit 7. This further shows that the understatement
of accounts receivable may be greater than what we identified
in our limited testing.
On June 30, 1987, the FM022C reports showed outstanding civil
penalties for nine of the regions. Exhibit 8 compares the
FMOs with outstanding receivables for penalties on that date
with those on December 31, 1986. At that time three FMOs had
no outstanding receivables for civil penalties. Although more
FMOs are recording civil penalties, all of them may not be
recorded. As discussed above, Region 5 was recording as accounts
receivable only part of the penalties. Recent audit reports
showed similar situations in Region 9 and in one Agency program.
In the December 19, 1986, audit report E1A56-09-012670434 (Review
Of EPA Region 9 Internal Controls Over Penalty Collections),
unrecorded penalties totalling $30,000 were identified. In the
October 7, 1987, audit report P5EH7-11-0022-80028 (Obligations
And Disbursements Under The Comprehensive Environmental Response,
Compensation, and Liability Act Of 1980, fiscal year ended
September 30, 1986), amounts due the Agency under one program
were not promptly recorded as accounts receivable. Part of
these unrecorded receivables resulted from cost recovery actions
involving the Agency's legal or enforcement personnel.
The receivables were not recorded because the program office
had not provided action documents to the FMO. Officials in the
program offices gave the following reasons for this. Officials
in Headquarters and in Regions 1 and 6 said they were not aware
of the requirements in the Financial Management Manual and the
EPA Accounting Manual. Therefore, action documents were not
sent to the FMO. Officials in Regions 4 and 5, however, said
they thought someone was sending the documents to the FMO but
no one was doing so. Thus, the problem is in either communica-
tion (i.e., being unaware of the requirements) or coordination
(i.e., knowing the requirements but believing someone else was
fulfilling them).
Communication could be improved by emphasizing the existing
requirements in program-related guidance. We recommended in the
draft audit report that the Director, Office of Enforcement
28
-------
Policy, Office of Enforcement and Compliance Monitoring (OECM),
emphasize in program guidance related to civil penalties that
Agency guidance requires the program office (or legal counsel)
to give the FMO a copy of administrative orders and other
documents that establish a debt. The Assistant Administrator
for Enforcement and Compliance Monitoring is the national
program manager for the Agency's enforcement and compliance
effort. Therefore, his office develops national policies and
procedures in connection with legal and other general compliance
and enforcement issues. The Agency's February 1 response
stated that future OECM guidance will address this issue. In
addition, OECM will encourage the Regional Counsels to follow
this guidance in regard to their own enforcement activities.
However, the staff from OECM pointed out at the exit conference
that the guidance applies only to civil penalties assessed by
a Federal court. Generally, guidance about administrative civil
penalties assessed by the Agency must be issued by the assistant
administrators for the various program offices.
The OECM staff prepared a draft handbook, "Handbook For Ensuring
Compliance With Judicial And Administrative Orders." It empha-
sizes that a copy of the order (whether issued by the Agency or
a court) must be sent to the FMO so a receivable can be estab-
lished. The handbook was developed with help from the FMD.
OECM staff plans to present the handbook to program enforcement
officials at a joint meeting scheduled for the middle of March
1988. If adopted, it will provide consistent treatment by all
programs for recording civil penalties. Meanwhile, the FMD has
prepared a memorandum from the Deputy Administrator that requests
the OECM, the Office of Solid Waste and Emergency Response, and
the Regional Administrators to send documents related to civil
penalties to the FMOs so that debts owed the Agency can be
properly recorded. Therefore, we are not recommending any
other action by OECM or the program offices.
The FMOs were aware that civil penalties were not always
recorded as accounts receivable in the FMS. When the funds
arrive, they have to research where they belong. Thus, the FMO
is in the best position to identify a problem with coordination.
The FMOs should not have to remind the program officials each
day to submit the required documents. However, we believe FMD
and the FMOs have responsibility to ensure the accounting
records are accurate and complete. Thus, FMD and the FMOs
should take whatever action is necessary, including repetitive
followups or elevating issues, to be sure the accounts are
accurate and complete. Otherwise, the accounts receivable will
be understated for items that were never sent to the FMO.
29
-------
When not recorded in the accounting system, there is less assur-
ance that debts owed to the Agency will be promptly and properly
collected. In addition, the possibility that someone other than
the Agency receives the funds is increased. Good internal controls
require separating responsibility for authorizing and recording
transactions, and controlling the related assets. Agency proce-
dures required that if the program office assessed (authorized)
the civil penalty, the FMO would record it as a receivable in
the FMS. The money would be sent to the lock box by the debtor.
Thus, responsibility is correctly separated.
As an example, assume the program office assessed a civil penalty
but did not inform the FMO. Consequently, a receivable was not
recorded in the FMS. Since only the program office had a record
of the civil penalty, responsibility was not correctly separate'.
In our example, the debtor sends a check to an Agency office
instead of the lock box. (Officials in Regions 5, 6 and 7 said
money for civil penalties was not always sent to the lock box.)
Further, assume that someone at the Agency lost the check. Sinea
a receivable was not recorded in the FMS, it could be quite a
while before anyone realized the problem. Therefore, we believe
the FMO should actively followup situations in which program
offices are not providing the action documents needed to record
accounts receivable. In addition, the followup should be pursued
at progressively higher levels until the situation is corrected.
In Regions 1 and 4, the coordination problem had been brought
to the attention of the program offices through memoranda dated
December 1986 and May 1985, respectively. Thus, the procedures
were not operating at the time we visited Region 4 and had just
been established in Region 1. Officials in Region 5 were also
revising their procedures to clarify who should provide the
action documents. In the memorandum of February 1, 1988, the
Comptroller agreed to require, in the new Agency guidance on
receivables, a requirement that FMOs take appropriate action
wnen program offices do not send the FMO the documents needed
so that accounts receivable can be properly recorded.
RECOMMENDATION
We recommends that the Comptroller ensure that the Director,
Financial Management Division, issues guidance that requires
tSesXFMO» to: (1) notify (in writing) the head of the program
office when action documents were not provided; and (2) send
copies of the notification to the addressee's supervisor and
the Director, Financial Management Division, when a program
office continually fails to provide documents from which an
account receivable should be recorded.
30
-------
No.
03/04/86
OHIBIT ]
RECEIVABLES IN THE SAMPLE
MERE UNDERSTATED OR OVERSTATED
DUE TO A VARIETY OF REASONS
ACCT.
ACCOUNT
RECEIV.
POINT NLf££R
Oi
02
01
01
01
01
01
01
02
08
02
0£
0£
0£
0£
OS
(A
CC
02
0£
0£
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
40665
43785
53986
59966
TWOS
7R007
7RO£0
7R028
OASS8
31912
50709
64045
85065
8622
S6£3£
87014
87056
870*:
87142
jvei!
K0£34
00007
00031
OOKl
OPOC'l
11360
11556
£0473
31089
3110*
3117£
3187£
40017
40370
40371
40464
40624
40906
41181
41379
50621
51234
51396
51539
BALANCE
OKPUTED
BY flUDITOR
189336.00
0.00
0.00
0.00
133561.85
157.04
5.56
6967.94
0.00
50509.00
738663.00
1054££.00
45.00
119.93
12947.72
45371.98
!£S500. 00
965471.00
3500.00
963.00
0.00
0.00
37.53
4407495. 00
25557.00
110351. 00
14634938. 52
3545649.71
583173.00
99519.00
0.00
108093.00
1367.00
60621.02
51485C..OO
409244.00
38636.00
19249.00
103565.00
165145.00
54335.00
1059910.00
119106.00
177679.46
BALANCE
RECORDED
IK FW
189338.00
356.40
0.00
0.00
123833.50
6043.86
953.00
6967.94
•0.00
50509.00
738669.00
1054£2.00
45.00
0.00
12449.73
45371.96
100000.00
956715. CO
3500.00
963.00
-2S. 00
1 3*439. £3
3740.51
4407*95. 00
22667.00
110351.00
13764671.34
3334807. 74
563173.00
99519.00
34344.00
108093.00
1367.00
48594.00
514650.00
409244.00
38636.00
19249.00
103565.00
165145.00
54335.00
1059910.00
219106.00
164528.00
DiFTOBCE
BETHEEN
BALANCES
0.00
-356.40
0.00
0.00
9748.35
-5666.84
-947.44
0.00
0.00
0.00
0.00
0.00
0.00
119.93
497.99
0.00
29500,00
12756.00
0.00
0.00
£6.00
-134439. £3
-3712. 98
0.00
2890.00
0.00
870267.18
210641.97
0.00
0.00
-34344.00
0.00
0.00
120£7.02
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
13161.46
M
3
3
1
£
2
1
1
3
1
3
3
1
1
NOTES
OTHER
COffCNTS
UNDER APPEA. PRIOR TO £-£1-36.
FKS DID NOT SrCU
FWS ALSO DID WT SKW 3-30-67 PfiYVEN~ :? 15.
WS ALSO DID NOT SHOW 3-3: -87
RECEIVABLE DATED 3-31-87.
REVERSING INTEREST.
IN APPEAL PRIOR TO 2-21-66.
IN APPEAL PRIOR TO £-21-86.
IN APPEAL PRIOR TO 2-21-66.
INTEREST ON FINE, REVERSES BOY.
INSTALLMENT PQYrOTS LATE FOS V^.'Y] N-.fBE5 :•
!«PRE5T FUND WT, UNDE3
REVERSING £*T«.
OX*T REDUCED ft/R TD 150.000 JK
UNDER fiPPEflt PRIOR TO a-21-86.
IK)£R AOPEAL AFTER £-£!-&
UNDER APPEAL PRIOR TD ,;-£:-&.
UNDER flPPEHL PfilOff TO £-£1-66.
ADJL'TED TH.RCLBH APPEfi^.
UNDER APPEPL PRIOR TQ 2-21-66.
UNDER APPEAL PRIOR TO £-21 -tt.
UNDER ttPEAL PRIOR
UNDER APPEAL PRICR
UNDER APPEAL PRIOR
IN APPEAL PRIOR TO
UNDER APPEAL PRIOR
UNDER APPEAL PRIOR
UNDER APPEAL PRIOR
UNDER APPEAL PRIOR
UNDER APPEAL PRIOR
UNDER APPEAL AFTER
TO £-£i-86.
TO £-£1-66.
TO 2-21-K.
£-£1-66.
TD £-£:-66.
TO £-£1-66.
TO 2-ai-«6.
TO 2-81-tf.
TO £-£!-66.
-------
Pigt No. 3
03/04/88
EXHIBIT 1
WNY RECEIVABLES IN THE S*Pt£
MERE (JKRSTATH) OR OVE*STftT£D
DUE TO A VARIETY OF REASONS
OT>€R
COW&TS
ACCOUNT
BALANCE
ACCT. RECEIV. OTPUTED
POINT .NJ*8£f?
05
05
05
05
05
05
05
05
05
05
05
05
05
05
05
05
05
05
05
C5
f'.e
o;
i*
0:
if
Cf
OS
C-5
05
0£
C>6
06
06
06
C*
06
06
06
06
07
07
07
07
07
30013
30230
41179
41460
50138
50165
50315
503*2
50362
504*e
50&8&
51103
51163
51530
60329
60485
60555
sirs
8i:.*fi
W'i
S7(-S''.
87:19
87 NO
6?1 Si
S7;."
£72!:
905C1
9063=
vwoc:
21IE5
6104<|
W.91
6Ai20
6A268
6*30?
6A311
7A043
7B07S
7BC'5r
41077
R6000
R6033
teou
R6139
8Y AUDITOR
70243. 00
883268.55
45130.37
30396.34
20000.00
55301.00
3750.00
1686.35
452233. 00
32105.00
102737.00
28802.00
190357.05
95446.00
231135.12
27!2S46.29
126065.06
3T26.7Z
2-:>. 89
53. i^
:.ov
1534.6*
0. 00
fiOOfj. 00
52.79
0.00
29*6£.0d
104377,00
2iS«.C*
477538.40
50995.00
181.41
21.68
0.00
0.00
0.00
0.00
0.00
20.19
12063.00
85460.00
6170.00
107500.00
652.50
BALANCE
RECORDED
IN FWS
103787. 17
635445.00
44838.53
503%. 34
20000.00
55301.00
7500.00
2099.00
452233.00
25000.00
102777.00
26802.00
189990.30
95446. 00
23!l51.7i
27506e». 50
;26001.?8
35736. : 4
•:5j.to
0. 00
O.W
1575.57
O.W
8000. M
32.60
O.W
29*6£.00
1 04377. dO
2S160.00
4765:6.95
50995.00
121.50
-325.40
-77.80
0.00
0.00
0.00
0.00
32.82
13&23.20
80132.80
5487.50
1062)6.40
549.50
DIFFERENCE
BETWEEN
BALANCES
-33544.27
247823. 55
291.84
0.00
0.00
0.00
-3750.00
-412.65
O.W
7105.00
-40.00
0.00
366.75
0.00
-16. tO
ise:.»:
67.fr:
0. 58
173.69
59.6^
0,00
19.07
0. 00
0.00
20.19
0.00
0.00
0.00
-3*40.00
1021.45
0.00
59.91
347.08
77.80
0.00
0.00
0.00
0.00
-12.63
-1540.20
5327.20
662.50
-716.40
103.00
NOTES
3
1
3
3
2, 5 i 8
3
3
2
3
3
1,4.1:1::
£
3 t 6
1 » 4
3
3
3, 6 I 9
1, 6 t li
11
1 1 4
3
3, 5 I 8
3, 5 t 8
3
3, 5 1 8
PC SrCULD NOT HPVE R£~
REVISED DEB' Oh 2-27-86.
NO TtfWS ON BILL AND BILL HAS
F«S DID NOT SHW 3-26-87 I <6TPL_«£T
FXQ NOT TOLD OF W*E«TS TO DCJ .'-*:
fi/R NC. ftSSIS'O TD £ Dl-E^T
!L. r< $.'•
DECIS:» 3-18-67
"OK6 =;; :i
IN ft33£ft. 3R1C* TD 2-21-85.
IN OOPEfl. P»IOS TO J-21-66.
P«0 5-CJ.3 fcCT H6V£ RiCDRritT' IT: =£5".
K. PRID* TO i-2i-6o.
F«S DID NOT S,<* 3-26-87 PQy«€>fT.
FW SHOULD WT HftVE RECORCCB IN-*E^£ST. IN
F«0 SHOUJ NOT HflVE K£2;^€D
DfiTED AFTER 2-21-66.
33
-------
Q3/04/S8
EIHIBH 1
NflNY RECEimES IN T1€
WERE UNDENTED OR OVERSTB'D
DIE TO fl VPRIETY OF REfiSCKS
CflHHtNT
flCOXJVT
far. ssiv.
POINT >*j«£S
15
15
15
15
:s
.5
15
15
15
15
15
If
5
15
15
• j
15
V
J
C
^
fr
t
22
22
Zrt
ci
2c
22
2;
-7
c7
27
£7
i^
27
27
27
27
27
27
27
27
27
27
27
2?
27
6P063
6P066
63103
6*118
6315:
3^:20
PR214
PR330
PR36C-
P&393
?»42a
PR534
P%38
P9f4:
R7C:?5
"7:05
97;j5
R7140
R7:4'
"7; 45
0«X!
5C:33
K~*r,^t
2--'. 4
fcl'.'i?
'i.'.i.i»
7^ifc9
£0798
EC-6--?
"><•: jj
70::2
7C-137
70: 32
70i(^
70272
70279
70264
70235
70267
70289
70290
70306
70322
70324
703*0
BALANCE
COfP'JTED
BY ALDITOfi
0. 00
1476.97
653.73
0.00
536.04
536.00
0.00
422.71
0.00
0.00
0.00
0.00
0.00
0.00
271. 12
1264.85
3£5.33
435. 79
359. 32
800.00
445*. 09
30:72.3*
4?9f2.S»
295525.53
0. C-';
2Sfc:£.!2
65:. 25
0.00
0.00
0.00
0.00
96.76
0.00
169063.07
38400.00
11993.72
33130.14
5933.27
50291.67
29923S.42
0.00
1103.52
16236.32
34&3B
BALANCE
RECCWD
IN FKS
0.00
1293.17
561.00
0.00
536.04
435.52
-507.24
422.71
0.00
0.00
1186.94
932.43
758.17
yn.ci
27:. 12
1264.35
365.33
43*. 75
1076.56
900. C(
34C-S, bA
25077.68
47054.58
295525. £9
0.00
2b8:6.:3
602.25
0.00
0.00
0.00
0.00
96.19
0.00
169063.07
38400.00
11999.72
33129.04
5933.27
50290.00
299225.50
0.00
1103.52
16236.32
5466.33
DIfTiRENCS
BET1€SN
BALANCES NOTES
0.00
183. 80 3, 6 t 7
92.73 3, 6 1 7
0.00
0.00
100.48 3, 4 t 7
507.2* 3 * 12
0.00
0.00
0.00 14
-1186.94 14
-932.43 14
-753.17 1*
-501.27 14
o. to
0. OC
o. yj
0.00
-7:3.2* 12 i li
0.00
:^<^. A? 3
5094.46 3. 6 t 9
35?. 3t 3. 6 t 9
0.00
0.00
0.00
49.00 3, 6 1 8
0,00
0.00
0.00
0.00
0.57 3
0.00
0.00
0.00
0.00
i.;o 3
0.00
1.67 3
9.92 3
0.00
0.00
0.00
0.00
(EVESSING DfTfiV.
DEBTOR SIVEN PfiYME>-' 1*5 IN
ENTRY £S3Qfi,
A/R WR
fl/R WRITTEN OFF SINCE FI.E COOi'
a/ft TD s£ wrra 0^= sivcs FI.E
fl/R T0 E€ URITTEK D^F SINCE • IE >
fl/fi P:IS6 U»rTE-s Qc? SINCE r
fl/R E€iM5 WRITTEN 2C? SIsCE
H -2JC.
APPEHLE0 ftF'ER 2-2:-86.
FHO ROUNDED KN CanPUTlNS I^E-Es*.
DO
FW ROUNDS) t*€N
FW SOUNDED UfN
INTEREST.
35
-------
P»g» No. 7
03/04/88
EXHIBIT 1
MANY RECEIVABLES IN THE SAMPLE
WERE UNDERSTATED OR OVERSTATED
DUE TO A VARIETY OF REASONS
» ACCOUNT
«CT. RECEIV.
POINT *KBER
99 S3408
99 S397*
99 54367
99 H0093
99 M0154
99 H0493
99 HOS07
99 H0964
99 H5:03
99 H5152
99 H5263
99 K54S9
99 H5679
99 H6156
oo ^^LA.'J'W
Jf ^V^W—
99 H6E07
39 H6523
99 H6odw
99 H660&
^^ 59 H6357
^fc 39 H6935
^^ 55 H69E9
r>Q . nrC TOLD IN 6-8? "-*" Bit. b£S ™'', "
NOT VfltID RECEIVABLE JCCAJSE *-E ~ll ••
13 6ILL UftS COUECTII' D-« 3-2(~S7.
3.6,9111
2 1 5
2 I 5
11 1 14
;-3"
81206093.87 7821842&.28 29872S5.59
37
-------
M«g« NO.
03/01/88
1
EXHIBIT
RECEIVABLES WITHOUT
^P ACCOUNTING
POINT
03
O4
15
15
15
15
15
99
39
93
^^ *** Total »»*
ACCOUNT
RECEIVABLE
NUMBER
36O34
316O8
PR399
PR428
PR534
PR538
PR541
H7096
G0418
3R073
BALflNCE
RECORDED
IN FMS ON
3-31-87
138. 14
75169. 00
0. OO
1 136. 94
332. 43
758. 17
501. 27
-34.2O
-21.07
-45. 00
2
DOCUMENTATION
APPROXIMATE
DATE OF
THE BILL
02/12/86
O7/ 18/84
O1/27/84
03/27/84
09/10/84
09/19/84
09/21/84
12/18/86
06/02/86
09/1 1/83
78583.68
39
-------
P«g» No.
03/oi/aa
ACCOUNTING
POINT
EXHIBIT 4
FIRST DEMAND LETTER FOR A DELINQUENT DEBT
WAS SENT MORE THAN 6O DAYS AFTER THE BILL
01
04
O4
04
06
OS
07
07
O9
09
15
IS
15
IS
15
22
27
33
99
99
99
99
»»» Total *»*
ACCOUNT
RECEIVABLE
NUMBER
7R005
29610
61193
K7022
61O4S
6A191
R6198
R8142
4OO01
90796
6P011
6P066
6R103
PR 120
PR214
OMOO5
60798
3R322
4R130
A1040
B1005
B4646
BALANCE
RECORDED
IN FMS ON
3-31-87
123833.30
183446. 80
93872. 00
29. 12
50993. 00
121.30
0. OO
2070. 84
168. 29
20O52. OO
0. 00
1293. 17
561.00
433. 52
-5O7. 24
3409. 64
602.25
27312.00
8822. 00
6O. 00
-20.00
265.62
DATE
OF THE
BILL
12/10/86
09/22/82
12/09/86
02/20/87
05/11/80
O1/07/86
09/13/86
01/30/81
10/11/83
12/18/79
09/09/85
01/08/86
1O/28/86
12/17/8O
05/14/82
08/19/80
09/22/86
12/13/82
09/28/84
O5/02/84
04/O3/83
01/18/85
DATE OF
FIRST
DEMAND
LETTER
06/O1/87
07/26/85
O4/3O/87
03/22/87
06/01/81
04/10/86
11/25/86
06/25/81
01/12/84
03/O7/86
08/2O/Q6
05/29/86
04/06/87
07/16/81
04/11/83
O2/17/81
12/10/86
02/18/83
10/10/85
01/23/85
09/11/85
O6/14/85
147929.41
NUMBER OF DAYS
BETWEEN THE
BILL AND THE
DEMAND LETTER
173
1038
142
91
386
33
71
146
33
2271
345
141
16O
21 1
332
182
79*
65
377
£66
159
147
* The debtor requested an extension to collect information related to the
bill. The FMO granted the extension and delayed sending the first demand
letter.
41
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EXHIBIT 6
INDEPENDENTLY DEVELOPED
SUPPLEMENTAL COMPUTER SYSTEMS
OPERATING DURING THE FIRST HALF
OF FISCAL 1987
ACTIVITY PERFORMED ACCOUNTING POINT
BY SUPPLEMENTAL
COMPUTER SYSTEM 5 22 27
NOTE 1
GENERATES THE BILL NO YES YES
GENERATES THE DEMAND LETTERS YES YES NO
COMPUTES THE INTEREST YES YES NO
COMPUTES THE HANDLING CHARGES YES YES NO
COMPUTES THE PENALTY YES NO NO
UPLOADS ACCOUNTING DATA TO FMS YES NO YES
NOTE 1: The computer system developed by accounting point 5
(Chicago) is being adapted by accounting points 1
(Boston), 8 (Denver), 9 (San Francisco), 10 (Seattle),
and 99 (Headquarters).
43
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1
EXHIBIT 8
FINANCIAL MANAGEMENT OFFICERS WITH
OUTSTANDING RECEIVABLES FOR FINES AND PENALTIES
(SOURCE CODES 3 AND 6)
ON DECEMBER 31, 1986, AND JUNE 30, 1987
OUTSTANDING?
12-31-86 6-30-87
01 - BOSTON
02 - NEW YORK
03 - PHILADELPHIA
04 - ATLANTA
05 - CHICAGO
06 - DALLAS
07 - KANSAS CITY
08 - DENVER
09 - SAN FRANCISCO
10 - SEATTLE
99 - HEADQUARTERS
NO
YES
YES
NO
YES
NO
YES
YES
YES
YES
YES
YES
YES
YES
YES
YES
NO
YES
YES
YES
YES
YES
45
-------
The selection of the audit sample was accomplished as follows: First, each of :he
4,337 accounts in the frame was assigned a uniform random number between 0 and 1. Next,
within each of the seven size classes defined in tabie 1, the universe file was sored by SFO, j.-J
then by :r.e previously-assigned random number within SFO. We note that sorting the file by SFO
has the effect of introducing geographical stratification within size class. Finally, sys;erru::c
samples were selected independently from each of the seven size classes. Table 1 sum-anzes :he
number of accounts selected from each stratum and the corresponding sampling rates.
Table 1. Distribution of eligible accounts and dollar balances in the frame, sample sizes and
sampling rales, by size stratum
Size stratum
(size of balance)
1. Negative
2. SO-25
3. $26-500
4. 5501-5,000
5. $5. 00! -100.000
6. Si 00.000-500,000
7, $500,000+
TotaJ
Number of
accounts in
frame
174
2,867
1.049
343
345
83
26
4,887
Aggregate
balance*
($336.122)
S2,414
$152,579
$597,298
$9.317,393
$17.475.583
$67,643,533
$94,852.680
Number of
accounts in
sample
35
46
35
34
69
42
26
287
Sampling
rate, 1 in ...
4.9"
62.33
29.97
10.09
S.uO
1.98
1.00
'Dollar balances recorded in FMS.
As can be seen in table 1, the distribution of dollar balances is highly skewed. We
note that almost 90 percent of the total balance is accounted for by only 2.2 percent of the eligible
accounts receivable. Moreover, the variability in account balances increases substantially from the
small size stratum to large size stratum. As a consequence, a proportional sample, i.e., one in
which the distribution of accounts by size class is the satv.e as the distribution in the population,
would be highly inefficient for estimation of aggregative measures that are correlated with reported
dollar balance. For such aggregative measures, an approximately optimum allocation would give
the larger size strata considerably greater representation in the sample. Since the primary objective
47
-------
NDIX 1
where yl-l = the audit balance for the ith sample account in stratum 1 was expected to provide a
more precise estimate of the stratum total. Consequently, an estimate of the total audit balance
(summed across aJl size strata) was computed from the formula
" =
h=2
The corresponding estimated total difference between the recorded and audit
amounts was then computed as:
d" = /- I Xh = (yj'
h=l
X(yh'- xh')
h=2
formulas:
where
Moreover, the estimated total under- and over-statements were computed from the
7 nh
Bunder" = Xl' + S Z
h=i i=l
£.?>
,hi
pos
h,
v, - x, if y.. > x,
* hi hi ' hi hi
0, otherwise
where
vh,
x, - y,. if y, < x, ;
hi 7hi 'hi hi
0, otherwise
the recorded balance for the ith sample account in stratum h;
the audit balance for the ith sample account in stratum h;
the number of sample accounts in stratum h.
Table 2 summarizes estimates of the total dollar balance, total difference, and total
under- and overstatements as computed from the formulas given above.
-------
and
where
sid" ) = / T s
ovcr V •„ ->
V .T-..
N
APPENDIX 1
and
The standard errors of the various sample projections as calculated from the
formulas given above, and the corresponding 95 percent confidence limits, are summarized in
table 2.
Table 2.
Sample projections, standard errors, and 95 percent confidence bounds i,in SI ,000s >
Statistic
Total audit balance, y"
Tola] difference, d"
TotaJ understatement
Total overstatement
Estimate
S97.2I9
52,367
55,362
52,995
Standard
error of
estimate
S993
S993
S659
5700
Lower
95%
confidence
bound
595,273
S42I
S4.070
51,624
Upper
951
confidence
bound
599,164
S4.312
$6.654
S4.366
51
-------
?3C3e 1 Of
RESPONSE TO RECOMMENDATIONS
DRAFT AUDIT REPORT NO S1A67-11-3329
AUDIT 3F ACCOUNTS RECEIVABLE
We have provided a response to each recommendation in the
report in this attachment. Additionally, we have the following
general comments concerning several issues discussed
n the report
Some of the projections in the report, such as the projection
on page 12 regarding the lack of documentation, seem questionable.
The report identifies ten receivables for which there was no
supporting documentation. It then projects that 3% of all
receivables (with 95% confidence) are undocumented. This
projection concerns us since eight of the ten receivables were in
one FMO . The undocumented receivables appear unique to one 3F~,
especially since a previous audit found that the FMO had
prematurely retired some accounts receivable files and was aware
that they were missing some documentation. Also, of this FMO ' s
eight receivables in the sample of ten, the report states that
four were in the EPA Claims Office awaiting processing of write-
off action. This would seem to further distort the 3% projection
unless it was considered as part of the analysis.
Your assessment of our processes highlights to us the many
accounts receivable accomplishments and improvements that we have
implemented. The Office of Management and Budget and the General
Accounting Office are not alone in realizing the importance of the
accounts receivable function. We have also realized its importance
and have emphasized throughout our financial community accouncs
receivable initiatives and the ongoing review of operations. "or
example :
o We have continually stressed to Agency management officials
the critical importance of complying with EPA procedures for
reporting, billing, and collecting debts.
o We have taken an active role in communicating to all Financial!
Management Offices the importance of a strong and effective
Quality Assurance Program which routinely reviews and tests
financial operations, including accounts receivable.
o During the last two fiscal years, an independent accounting
firm has reviewed and tested all financial operations,
including accounts receivable, at ten of our fourteen
finance offices.
o The Financial Management Division (FMD) has been actively
involved in a task force with the Office of Enforcement and
Compliance Monitoring (OECM) assessing the overall effectivene
of and strengthening controls relating to the tracking of
fines and penalties under administrative orders and consent
decrees.
53
-------
r~
Attachment :
Page 2 of 7
o Accounts receivable policy and procedures have recently
undergone extensive review with revised procedures to be
released
System.
as part or the Resources Management directives
.inder too'<
The FVD sta:
year 1387 on a wide range o
impiemented various actions
t s - =
an extensive analysis iuring fiscal
L. accounts receivable issues and
and imorovements to strengthen
our processes. An August 14, 1937 memorandum fro-n the
Deputy Director, FMD to the FMD Branches summarized this
analysis and outlined actions to be taken. The implementation
of these actions have since been monitored by FYD staff.
o Accounts receivable was included as a review area on all
Management Assistance Reviews conducted during FY 1937.
o Accounts receivable for Superfund was reviewed during
Internal Control Reviews of Superfund Financial
Management conducted during FY 1987 and will continue to
be reviewed in FY 1988.
o The Region I Comptroller sent a memorandum to all Region I
program officials reminding them of their
in the area of accounts receivable.
resoonsioilities
o A Financial Assistance Review conducted by ~MO in Region IX
included a review of accounts receivable and provided assistan:
to the region in drafting desk procedures for accounts
receivable.
Our numerous accounts receivable initiatives have proved
beneficial. Accounts receivable processes within the Agency have
improved and controls have been strengthened. Additionally', we will
continue working with program offices, whose support and cooperation
is essential to the accounts receivable process, to ensure that
all amounts due the Agency are accurately reflected in our financial
records.
Our responses to your specific recommendations follow:
ALMOST FORTY PERCENT OF THE DEBTS IN THE ACCOUNTING
RECORDS WERE UNDERSTATED OR OVERSTATED
Recommendations/Responses
1. We recommend that the Director, Financial Management Division
make available to the FMOs an automated method that will
chronologically list the transactions for all (or selected)
accounts receivable, and require the FMOs to use this or
alternate information to identify and correct data entry
problems timely.
54
-------
53
ns
Attachment
Page 3 of
We agree that data entry problems should be identified and
corrected in a timely manner and we have processes in place for
this to occur. We will continue to monitor all data entry ore-
edits and controls to ensure the accuracy of data input. In
addition, we review transaction listings and accounts receivabl
reports to help isolate any errors that may have occurred. The
steps, along with t~e routine accounts receivable reconci1iatio
:see our response to your next recommendation), will help locate
data entry errors so that corrections can be made. Also, as part
of our on-going Quality Assurance activities, we will continue to
routinely evaluate and monitor our controls and processes to
determine that they are meeting control objectives, and where
necessary we wil' take appropriate action to strengthen our ron
2. We recommend that the Director, Financial Management
5T •/i s i'o n initiate and oversee an effort by the'rMOs to, by a
certain date, (a) perform a special reconciliation between
the account receivable file and the accounting system for
receivables outstanding on February 28, 1988, and (b) correct
the accounting records for the proper additional charges and
any other balance differences identified during the reconcili-
at ion.
We agree that FMOs should reconcile the accounts receivable
file with the accounting system and, as a result, correct the
accounting records as necessary. Although current guidance
requires a monthly reconciliation, we believe that a quarterly
reconciliation is more appropriate. The RMDS Receivables Chapter
2540 will require quarterly reconciliations by the FMOs of the
accounts receivable file with the outstanding receivable balance
in the accounting system. The RMDS Receivables Chapter 2543 was
circulated in Striped Border and should be issued in April 1983.
3. We recommend that the Director, Financial Management Division
issue guidance requiring the FMOs to maintain documentation
showing, for the monthly reconciliation of the file to FMS,
who completed the work and when it was completed.
We agree. The RMDS Receivables Chapter 2543 will require
FMOs, when performing the quarterly accounts receivable reconcili-
ations, to maintain documentation showing who completed the wor'<
and when it was completed.
4. We recommend that the Director, Financial Management Division
include as part of quality assurance reviews on accounts
receivable, additional tests for compliance with Agency
policy.
We agree. The Financial Management Division, as part of its
Quality Assurance Reviews, Financial Assistance Reviews, and when
it participates in the Office of the Comptroller Management
Assistance Reviews, will evaluate and test compliance to accounts
receivable policy.
55
-------
Attachment
?aae 4
5. We recommend that the Director, Financial Management Division
make available tothe FMOsan_automated method'to compute
additional charges and, if possible, send the results" ro _FMS_.
If_ this is ngt_ possible, consider'and address FMO concerns
about resource limitations impacting their ability to prcserly
maintain accounts.
We agree. The Financial Management Division will -nake
avaiiaole to FMOs a copy of the software and documentation for an
automated method that generates demand letters for accounts
receivable and computes additional charges for receivables.
However, this is an interim step prior to IFMS Phase One
implementation, which will include an accounts receivable subsystem
containing a full range of accounts receivable functions and
providing greater efficiency of operations.
6. We recommend that the Director, Financial Management Division
issue guidance that requires the FMOs to tell the program
office to immediately send the debtors a revised bill when
a program office fails to include the correct payment terms on
a bill It generates. In addition/ when bills continually
lack payment terms, the guidance should require the FMOto
(a) notify (in writing) the head of the program office aoout
the problem-and (b) send copies ofthe notificationtothe
addressee's supervisor and the Director, Financial Management
Division, to bring about corrective action.
We agree that debtors need to be properly notified if the
initial bill did not contain correct payment terms. The RMDS
Receivables Chapter 2540 will contain guidance regarding this
notification and will instruct FMOs to take appropriate action in
cases where bills continually lack correct payment terms. As
mentioned earlier, this Chapter should be issued in April 1988.
AGGRESSIVE COLLECTION ACTION IS NEEDED TO ENSURE THAT
DEBTORS PAY THE AGENCY IN A TIMELY MANNER
Recommendations/Responses
1. We recommend that the Director, Financial Management
Division make available to the FMOs an automated method that
effectively generates demand letters, and, in the interTm,
require the FMOs to devote the necessary resources to
properly complete collection activity.
We agree. The Financial Management Division will make aval la:
to FMOs a copy of the software and documentation for an automated
method that generates demand letters for accounts receivable and
computes additional charges for receivables. However, this is an
interim step prior to IFMS Phase One implementation, which will
include an accounts receivable subsystem containing a full range
of accounts receivable functions and providing greater efficiency
of operations.
56
-------
Attachment I
Page 5 of "
2. We recommendthat the Director, Financial Management
, s: 3 n
include as part of quality assurance reviews on accounts
receivable, additional tests for compliance with Agency polirv
for aggressively collecting receivables.
We agree. The Financial Management Division, as part of its
Quality Assurance Reviews, Financial Assistance Reviews, and
when it participates in the Office of the Comptroller Management
Assistance Reviews, will evaluate and test for compliance tD
accounts receivable policy.
3. We recommend that the Director, Financial Management Division
as part of the special reconciliation of the accounts receivable
file and the accounting system (per recommendation for Findir.g 1'
(a) initiate proper follow-up action, if needed, for collecti-g
the receivable, and (b? correct the accounting records for any
differences in the source codes or bill date.
As we stated in our response to recommendation *2 on page 3 c:
this attachment, we agree that FMOs should reconcile the accounts
receivable file with the accounting system and take appropriate
action to correct the accounting records. Furthermore, the
Financial Management Division is preparing an accounts receivable
aging report that will be used to monitor the status of all
accounts receivable outstanding in excess of 120 days. This will
serve as a tool to help identify further actions.
4.
We recommend that the Director, Financial Management Div
modify the FMS so the bi 11 date identified in the accoun
records can be corrected to reflect the date on the bill to
the debtor.
We agree that correct bill dates should be -identified in the
accounting records. However, modifying the FMS is not needed to
accomplish the correction. Users can currently modify the bill
date by reversing the erroneous record and replacing it with che
correct record. This requires rekeying the entire entry. Due to
system logic that FMS is based on, this is the most suitable
procedure until the new IFMS is operational; otherwise substantive
resources would have to be devoted to systems modification, which
is not a viable alternative.
ALL DEBTS OWED TO THE AGENCY SHCJLD BE RECORDED
AS ACCOUNTS RECEIVABLE
Recommendations/Responses
1. We recommend that the Director, Office of Enforcement Policy,
Office of Enforcement and Compliance Monitoring;
(a) Emphasize in program guidance related to fines and
penalties that Agency guidance requires the program
'•«•-<
office (or legal counsel) to give the FMO a copy of
administrativeorders and other documents that establis
a debt;
57
-------
Attachment
Page 6 of '
(b) Identify any deviations neededfromtheFMO's normal
collection actions when dealing with fines and penalties
provide such information to the Director, Financial
Management Oivisio_n, and assist the Director in rey'isi^.g
the Financial Management Manual and the EPA Accounting
Manual to include specialcollection actions related to
fines and penalties.
(b)
CECM agrees with the recommendation. Future OECM guidance
documents, issued by the Assistant Administrator, will
address this issue, as appropriate. In addition, we will
encourage the Regional Counsels to follow this guidance
in regard to their own enforcement activities. However,
the recommendation should be modified to request other
program assistant administrators to make similar commit-
ments in regard to their own program guidance issuances.
Also, as a minor editorial comment, it should be noted
that the report apparently has assumed that fines and
penalties are both civil remedies. In fact, a fine is
considered a punishment and is therefore only available
in criminal cases. The correct term on the civil side is
"penalty."
The Financial Management Division has also
memoranda from the Deputy Administrator to
prepared
the Office
of
Solid
finance off
r •*«'
L -iC^
Enforcement and Compliance Monitoring, the Office of
Waste and Emergency Response, and the Regional
Administrators emphasizing and requesting that the
necessary documents and information relating to fines
penalties be forwarded to the appropriate
so that debts owed the Agency can be properly rec
This was done in response to the OIG Audit Report No.
P5EH7-11-0022-80028 (CERCLA Audit for FY 1986).
We agree that special collection actions related to fines
and penalties need to be identified and analyzed to deter-
mine the proper procedures to be followed. We have already
taken actions to accomplish this task. In FY 1987, three
reviews were performed jointly by the Office of Enforcement
and Compliance Monitoring {OECM) and the Financial Manage-
ment Division (FMD) regarding the exchange of information
between the Regional Counsel or program offices and the
finance office for judicial and administrative orders. An
analysis of the study was completed including appropriate
recommendations. A draft report of the OECM/FMD study has
been finalized and is currently undergoing review within
OECM. Comments will be incorporated into a final draft
for review by program and regional officials. After
considering these comments, guidance will be issued to the
effected offices.
58
-------
Attachment I
Page 7 3f 7
2. Werecommend that theDirector, Financial Management Division
issue guidance that requires the FMOs to (1) notify (in writi
the head of the program office when action documents were r.ct
provided and (2) send copies ofthenotificationto the
addressee's supervisor and the Director, Financial Manager-en*
division, when a program office continually fails to provide
documents from wnich an account receivablesnouldbe recorded
we agree that FMOs should take appropriate action when p:
offices do not provide the required documents to the FMO so \
accounts receivable can be properly recorded. The RMDS
Receivables Chapter 2540 will contain such guidance.
-------
Attachment
Page 1 of 4
SPECIFIC COMMENTS TO
DRAFT AUDIT REPORT SO. S1A67-11-0029
AUDIT OF ACCOUNTS RECEIVABLE
o ?age 3, Bottom of Page
It should be noted that FMOs have tested transactions of their
financial operations in fiscal years 1986 and 1987 (and are
currently doing so in FY 1988). These evaluations, an integral
aspect of our Quality Assurance Program in the financial community
demonstrate our commitment to assessing controls and improving
operations and help us fulfill our responsibilities under the
Federal Managers' Financial Integrity Act. In addition, Artnur
Young has tested accounts receivable during the last two fiscal
years at ten of our fourteen finance offices. Also, we have
reviewed accounts receivable as part of Financial Assistance
Reviews and Management Assistance Reviews.
o Page 5, Paragraph 3
"The EPA Claims Officer and the Director, FMD determine the
final disposition of the debt when the FMO is unsuccessful in
collecting it." During the audit, the Director, FMD had limited
authority to act on debts where the principal amount did not
exceed $600. This authority has been raised to $6300 by the
SPA Claims Officer, July 1987 and implemented October 1987.
o Page 5, Table 1
This table is misleading. It should include data by accounting
point that reflects the uncontrollable receivables you identified
on page 17 of the report, where you state "...$50.8 million as
unbilled, reimbursable, intergovernmental agreements, as raceivablel
being appealed, or as receivables being paid in installments."
o Page 12, Paragraph 1; Page 20, Paragraph 3 and Page 44,
"Note I14
In addition to accounting points 1,9 and 10, adapting a
supplemental computer system developed by accounting point
5, accounting point 8 is currently in the process of utilizing
an accounts receivable system.
o Page 15, Top of Page
You state that a standard aging report was available to the
FMOs. Furthermore, you state "the data on the report was
often incorrect so the report and the other aids were not as
useful as they should be." You did not specify what "data and
other aids" were incorrect. Then on page 17, bottom of page,
you make a conclusion that $21.2 million (or 481 of controllable
receivables) was for receivables over 1 year old. This conclusion
may be questionable if it is based on a standard aging report
which "was often incorrect."
60
-------
Attachment II
?aqe 2 of 4
Page 15, Paragraph 2
Procedures for collection agency referral will be finalized
when the Agency receives final Treasury guidance. At that r;~e,
appropriate policies and procedures will be distributed.
Page 15 , Paragraph 3
The FMOs1
32,000.30
1987.
write-off authority for debts has been raised to
by memorandum signed by the Director, ?MD on October "> ,
o Page 1 8 , Par a g r a p h 4
According to accounting point 27, changes have been made to
the supplemental computer system to record the bill date rather
than the input date.
o Page 23, Last Paragraph
We believe that the statements from the Deputy Director of ~MD
have been taken out of context and have been misinterpreted.
Your conclusion that we "have a limited role to play in getting
information when the receivables are generated by a program
office" is inaccurate. The point that we have made to you is
that FMOs and FMD cannot continually, on a daily basis, be
going to all program offices to see what receivables should oe
recorded. Procedures are in place that program offices are 10
follow and we will encourage them to do so, but we can only
record receivables of which we are aware. This is not a
limited view of our role. We are actively involved in
promoting the necessary interaction between program offices and
finance. We are involved in various accounts receivable
initiatives, including a joint study with OECM which addresses
the strengthening of controls to ensure more accurate records.
We will continue working with program officials to stress our
need for all required documents relating to debts owed the
Agency.
o Page 27, Exhibit 1
Accounts Receivable 87014, accounting point 2, is an install-
ment civil penalty. Interest on past due amounts has been
recalculated and agrees with the amount recorded in the FMS ,
not the auditors' calculation.
Accounts Receivable 87026, accounting point 2, is a civil penalty,
However, the consent decree provided options for compliance
by the respondent other than cash payment. The accounts
receivable was recorded as a possible debt of cash owed to the
Agency so as to not understate Accounts Receivable. A non-cash
payment option was accepted by our Office of Regional Counsel.
Until this decision was reached no interest was accrued. Tie
Accounts Receivable has subsequently been reversed out.
61
-------
Attachment :
Page 3 of 4
Page 30, Exhibit 1
Accounts receivable 50643, accounting point 8, indicates
a difference of $6,314.~3 in computed interest. This account
receivable was from a decision letter. According to Office c
Comptroller Transmittal v,'o. 36-39, dated March 5," 1936, decis
letters written before February 21, 1986 were to be processed
according to the Financial Management Manual, Chapter 7 (12;'
wnicn deferred any calculation of interest, handling and pena
charges. The date of referral of this account was September
1985; therefore, no interest should have been calculated and
the Region's records, in this case, were correct.
.3
f tn-
i on
b) ,
--'/
13,
Page 31, Exhibit
Exhibit 4
1; Page 36, Schedule 1-1; and ?aae 42,
Accounts receivable 60793, accounting point 27, concerned
an EPA employee who was billed for the average on a household
goods shipment. Prior to the end of the first 30 days, the
employee asked for an extension because there were professional
books in the shipment which would change the amount due EPA.
The extension was granted for an additional 33 days and interest
was waived. When the employee did not later comply, the receivabl|
was aged from the date of the extension. This is all documented
in our file and was explained to the auditor during the site
review. Our management understood this would not be a part of
the findings. If it is left in the report, further explanation
is needed.
o Page 41, Exhibit 3
Accounts receivable 86222, accounting point 2, was an
Intergovernmental Personnel Act (IPA) receivable with payment
received 6 days later. One follow-up letter was sent. This
item should not be in this exhibit,
o Page 43, Exhibit 5
Accounts receivable 85365, accounting point 2, was a civil penalty
Interest on this receivable was booked prior to notification
that a check had been collected through the lock-box process.
As such, the collection was made within the required timeframe
and no interest was due although the interest was not
reversed off the books.
o Page 44, Exhibit 6
A supplemental computer system is currently being utilized
by accounting point 99 (Headquarters) for Freedom of Information
Act (FOIA) receivables. The system generates demand letters,
computes the intarest, handling charges and penalties, as
well as uploads accounting data to FMS.
62
-------
Attachment II
?age 4 of 4
o Page 45
Exhibit 7 is misleading as it also should stress that the
receivables ara being collected although the receivables were
recorded. We are taking aggressive action in the regional
offices, along with Regional Counsel and the program offices,
record fines and penalties as accounts receivable.
63
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APPENDIX 3
DISTRIBUTION OF THE AUDIT REPORT
Recipient Copies
Action Official: Comptroller (PM-225) 2
Assistant Administrator for Administration
and Resources Management (PM-208) 1
Assistant Administrator for Enforcement
and Compliance Monitoring (LE-133) 1
Assistant Administrator for Water (WH-556) i
Assistant Administrator for Solid Waste
and Emergency Response (WH-562A) 1
Assistant Administrator for Air
and Radiation (ANR-443) 1
Assistant Administrator for Pesticides
and Toxic Substances (TS-788) 1
Regional Administrators, Regions l-io 10 I
Associate Administrator for Regional I
Operations (A-101) 1
Director, Office of Enforcement
Policy (LE-133) 1
Director, Financial Management Division (PM-226) 1
Financial Management Officers 14
Agency Followup Official, Resource Systems Management
Division (PM-225) 1
64
01
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