/J
OFFICE OF AUDIT
312/353-2466
//.~£. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
' '/' OFFICE OF INSF-ECTOR GENERAL ^
'"f-'f'i- NORTHERN DIVISION v
1O W. JACKSON BLVD.. 4TH FLOOR
CHICAGO. ILLINOIS eo«O4
February 14, 1990
OFFICE OF INVESTIGATION
312/353-29O7
'SUBJECT: Audit Report No. E1SJF9-05-0274-0100152
\ Review of Superfund Cost Recovery Accounts
Receivable Establishment and Collection
PROM: Anthony C. Carrollo^
Divisional Inspector General for Audits
: Northern Division
TO: Greer C. Tidwell
Regional Administrator
Region 4
SCOPE AND OBJECTIVES
We performed an audit of Region 4' a collection of Superfund cost
recovery amounts. The purpose of the audit was to determine if:
1. Cost recovery amounts are recorded as accounts receivable in
EPA's financial records.
2. Cost recovery amounts are collected in a timely manner.
3. Interest is assessed upon late payment.
We reviewed Superfund cost recovery amounts which resulted from
cost recovery enforcement actions for Region 4 Superfund sites.
The review focused on amounts due from cost recovery actions
completed from October 1, 1986 to September 1, 1989.
We judgmentally selected to review the coat due from 17 of 56 (30
percent) cost recovery enforcement actions completed during
fiscal years (FT) 1987 through 1989. We also reviewed the
collection of oversight coata for two enforcement actiona, each
of which had two "billings. Therefore, we reviewed 21 (17 + 4)
coat recovery amounts due. We did not review the amounts due
from all coat recovery enforcement actiona because orders and
decrees were not readily available. Also, we are recommending
that Region 4 locate all order and decreea to determine whether
coat recovery amounts were collected.
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We recognize that, because our sample of enforcement actions was
a Judgmental sample and net a statistical random sample,
statistical projections cannot be made on the remaining
enforcement actions in the universe. However, while our findings
cannot be statistically inferred to the larger universe of
enforcement actions, our sample was sufficient to satisfy our
audit objectives.
EPA delegated the responsibility for tracking and collecting cost
recovery amounts owed to the regions at the beginning of FY 1989.
Therefore, Region 4 was responsible for all Superfund cost
recovery activities including the recording of accounts
receivable and ensuring the payments were collected in FT 1989.
For the prior fiscal years, Region 4 was responsible for all
other activities related to the collection of cost recovery
amounts owed except recording and collection.
We performed the audit in accordance with the Government Auditing
Standards issued by the Comptroller General of the United States
(1988 revision). Fieldwork was conducted from July 17, 1989 to
November 21, 1989. We reviewed reports, policies and procedures,
and cost recovery and accounts receivable files. Also, we held
discussions with regional Superfund, Counsel, and Financial
Management officials.
Significant instances of noncompliance with internal
administrative controls are detailed in this report. No other
issues came to our attention which were significant enough to
warrant expanding our review.
We discussed our findings and recommendations with Region 4
officials. Their comments and actions taken in response to our
findings are discussed in the body of this report. A copy of
Region 4's February 2, 1990 reply to our draft report is attached
as Appendix 1.
SUMMARY OF FINDINGS
Region 4 needs to (1) record Superfund cost recovery amounts due
on the region's financial records, (2) make timely collections,
and (3) collect Interest for late payments. Debts arising from
consent agreements In enforcement actions and Superfund cost
recoveries are; valuable government assets, and EPA procedures are
intended to psjetact these assets. Failure to report actions that
create these dfcbts, or failure to report them timely, results in
substantial losses to the Basardous Substance Superfund
(Superfund Trust Fund).
1.
Accounts R
ivabli
To Be Recorded
For all 21 settlement documents we reviewed, neither Headquarters
nor Region 4 promptly or accurately recorded accounts receivables
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amounting to about $2.6 million on the financial records of the
Agency. Thus, the Agency's control over monies owed to the
Superfund Trust Fund was ineffective. Because receivables were
not recorded, the Agency was not aware of what payments were due
the Superfund Trust Fund. As a result, a payment might be
diverted, lost, or not paid without anyone being aware of it.
This also results in late payments with resulting loss of
applicable interest as discussed in Finding Number 2.
The Agency was also not meeting internal control standards which
require that significant events be promptly recorded and properly
classified. The failure to record a receivable for amounts due
to the Superfund Trust Fund is a material weakness in internal
controls.
The FY 1989 Agency Operating Guidance stated that the success of
collecting cost recovery payments depends on being sure case
closing information is immediately sent to the regional financial
offices so the collections can be recorded properly and
receivable amounts can be accurately reported to management. We
found that accounts receivable were not recorded because: (a)
the Office of Regional Counsel and the Waste Management Division
did not forward the settlement documents to the Financial
Management Unit in all cases, and (b) the Financial Management
Unit did not promptly and accurately record accounts receivable
in the financial records when settlement documents were received
prior to payment. In addition, routine procedures had not been
established to regularly reconcile Waste Management Division and
Office of Regional Counsel records with the financial records.
In response to our draft report, Region 4 stated that its
Investigation and Cost Recovery Unit has assumed responsibility
for forwarding administrative settlement documents to the
Financial Management Unit. The Region will also adhere to
policies contained in the Financial Management Manual to promptly
record money due the Agency. During FY 1990, Region 4 will
perform a review to teat the controls that are in place to ensure
that all receivables are promptly recorded, promptly billed and
collected, or referred to collection agencies or Office of
Regional Counsel.
We recommend that the Regional Administrator ensure regional
officials complete their planned corrective action. Also, we
recommend that the Region Administrator take appropriate action
to ensure that judicial settlement documents are promptly
forwarded to the Financial Management Unit.
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2.
Prompt Action Needed To Collect Amounts Owed
Region 4 was not promptly collecting cost recovery amounts owed
to the Superfund Trust Fund because of (a) delays in sending
written notification of the effective date to responsible
parties, (b) late payment of amounts due, and (c) delays in
sending accounting data to the responsible party. These
conditions existed primarily because (a) the Waste Management
Division did not have a system to track when written notification
of effective dates are to be sent and (b) consistent action was
not taken to ensure collection of late payments. Delays in
collecting amounts owed resulted in lost interest to the
Superfund Trust Fund of at least $13,071.
Of the 21 settlement documents we reviewed, we found 6 cases (29
percent) where collection of amounts owed was delayed. The U.S.
Treasury Department currently invests Superfund monies in 52-week
U.S. Treasury MK Bills. When cost recovery amounts are not
promptly collected, the Superfund Trust Fund loses the interest
which would have accrued.
In response to our draft report, Region 4 stated that its
Investigation and Cost Recovery Unit has implemented a tracking
system to ensure that written notices are issued promptly. Also,
action has been taken to follow-up on late payments.
The actions taken by the Region, if properly implemented, will
substantially correct the deficiencies cited in our report, we
recommend that the Regional Administrator ensure regional
officials complete their planned actions.
3.
FMS Needs To Accuratelv Reflect Transaction Dates
The Integrated Financial Management System (IFMS) did not
accurately reflect the (a) date of the accounts receivable, (b)
due date, (c) collection date, and (d) interest rate for past due
amounts. Also, handling charge and penalty waivers were not
indicated. IFMS data were not accurate because (a) information
was not forwarded promptly to the Financial Management Unit, (b)
the Financial Management Dnit was not inputting data from source
documents correctly, and (c) the interest rate was not changed to
reflect the intsjrest charged on Superfund debts. As a result,
IFMS did not provide accurate financial reports, and demand
payment letters were not generated accurately.
In response to our draft report, Region 4 stated that accounts
receivable trill be inputted into the financial management system
within the tiae period required, as discussed in the "Manual on
Monitoring and Enforcing Administrative and Judicial Orders" and
EPA's Financial Management Manual. Also, a quality assurance
review will be performed late in FT 1990 on accounts receivable
to ensure that the procedures are followed.
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The actions planned by Region 4, when implemented, will
substantially correct the deficiencies cited in our report. We
recommend that the Regional Administrator ensure regional
officials complete their planned corrective actions.
ACTION REQUIRED
In accordance with EPA Order 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.
We have no objection to the further release of this report at
your discretion. Should there be any questions, please call me
or Lee Stevens.
BACKGROUND
In 1980, Congress passed the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA), commonly
known as Superfund. This law provides EPA with the authority and
necessary tools to respond directly or to compel potentially
responsible parties to respond to releases of hazardous
substances, pollutants or contaminants. CERCLA was reauthorized
and amended on October 17, 1986, by the Superfund Amendments and
Reauthorization Act (SARA).
CERCLA Section 107 states that generators and transporters of
hazardous substances, as well as past and present owners and
operators of hazardous waste sites/ are strictly, jointly, and
severally liable for the costs of cleanup. Once EPA undertakes a
response using Superfund Trust Fund monies, it can recover costs
from the responsible parties. EPA may recover Federal response
costs from any or all responsible parties involved in a remedial
action. The monies recovered go back into the Superfund Trust
Fund for use in the future.
A major goal of the Superfund program is to have potentially
responsible parties (PRPs) cleanup sites that are releasing or
threatening to release hazardous substances. The enforcement
process normally used by SPA to achieve this goal may involve
five major efforts. First, EPA attempts to identify PRPs as
early as possible. Second, EPA will encourage the PRPs to
cleanup the •it*. Third, if BPA believes the PRP is willing and
capable of cleaning up the site, an enforcement agreement is
negotiated. The agreement may be entered in court, or it may be
an administrative order. Under both agreements EPA oversees the
PRP. Fourth, if a settlement is not reached, a unilateral
administrative order may be issued to compel the PRP to perform
the cleanup. Fifth, if the PRPs will not perform the cleanup,
EPA will perform the cleanup and file a suit against the PRP to
recover the money spent.
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The Superfund Trust Fund is administered by the Treasury
Department. It is funded primarily by environmental taxes on
petroleum and on the sale or use of certain chemicals. Other
sources of funding for the Superfund Trust Fund are fines and
penalties paid by individuals and entities, cost recoveries, and
interest. EPA collects these funds and deposits them into the
Superfund Trust Fund. When amourts from any of these sources are
credited to Superfund Trust Fund, they are invested in U.S.
Treasury MK Bills. Monies in the Superfund Trust Fund not needed
for current expenditures remain invested, and only those amounts
required for current expenditures are redeemed. All earnings are
credited to and become part of the Superfund Trust Fund.
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FINDINGS AND RECOMMENDATIONS
Finding No. 1 - ACCOUNTS RECEIVABLE NEED TO BE RECORDED
For all 21 settlement documents we reviewed, neither Headquarters
nor Region 4 promptly or accurately recorded accounts receivables
amounting to about $2.6 million on the financial records of the
Agency. Thus, the Agency's control over monies owed to the
Superfund Trust Fund was ineffective. Because receivables were
not recorded, the Agency was not aware of what payments were due
the Superfund Trust Fund. As a result, a payment might be
diverted, lost, or not paid without anyone being aware of it.
This also results in late payments with resulting loss of
applicable interest as discussed in Finding Number 2.
The ultimate responsibility for good internal controls rests with
management. Internal controls should be recognized as an
integral part of the collection of Superfund cost recovery
amounts. Also, debts arising from consent agreements in
enforcement actions and Superfund cost recoveries are valuable
government assets, and EPA procedures are intended to protect
these assets. Failure to report actions that create these debts,
or failure to report them timely, results in substantial losses
to the Superfund Trust Fund. The failure to record a receivable
for amounts due to the Superfund Trust Fund is a material
weakness in internal controls.
The FT 1989 Agency Operating Guidance stated that the success of
collecting cost recovery payments depends on being sure case
closing information is immediately sent to the regional financial
offices so the collections can be recorded properly and
receivable amounts can be accurately reported to management. We
found that accounts receivable were not recorded becauses (1)
the Office of Regional Counsel (ORC) and the Waste Management
Division (WMD) did not forward the settlement documents to the
Financial Management Unit (FMU) in all cases, and (2) the FMU did
not promptly and accurately record accounts receivable in the
financial records when settlement documents were received prior
to payment. In addition, routine procedures had not been
established to regularly reconcile WMD and ORC records with the
financial records.
EPA's Financial Management Manual, Chapter 7, states that an
account receivable is to be promptly recorded for all amounts
owed. In order for a receivable to be recorded, settlement
documents need to be sent to the Financial Management Office
(FMO). BPA's Comptroller issued a December 9, 1986 memorandum to
all regions stating that Agency officials responsible for actions
creating debts must ensure that copies of the settlement
documents are forwarded to the FMO. The Comptroller also stated
the responsibility for debts arising from settlements is not
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solely a financial management function, but that all Agency staff
are accountable for these assets.
EPA's Resource Management Directive System (HMDS) Chapter 2550D
"Financial Management of the Superfund Program" (2550D), issued
on August 25, 1988, contains guidance on establishing receivables
for cost recovery. The guidance states that Superfund Branch
Chiefs should ensure that settlement documents are forwarded to
the FMO within one work day of final signature. As to
establishing accounts receivable, 2550D refers to RMDS 2540,
Chapter 9, "Receivables and Billings" for more information.
However, this guidance has not been issued to date.
The amount and timing of cost recovery amounts may be found in
documents such as responsible party agreements, consent decrees,
administrative orders, settlements, court orders, or judgments.
The documents may require payment of a fixed amount, or may state
that EPA will send the responsible party accounting data which
specifies the amount owed. Any documents, including accounting
data, which establish an amount owed we refer to as settlement
documents throughout the report.
We judgmentally selected to review the costs due from 17 of 56
(30 percent) cost recovery enforcement actions completed during
FYs 1987 through 1989. For each of the enforcement actions
selected, we reviewed the collection of monies due the Superfund
Trust Fund for costs incurred by EPA before the effective date of
the enforcement action* He also performed a limited review of
the collection of monies due the Superfund Trust Fund for cost
incurred after the effective date of the enforcement action
(oversight costs). The collection of oversight costs was
reviewed for two enforcement actions, each of which had two
billings. Therefore, we reviewed 21 (17 + 4) settlement
documents which established amounts owed for past costs and/or
oversight costs.
Policies and Procedures Were Not Followed
Accounts receivable* were not promptly or accurately recorded, as
required by the above procedures, prior to receipt of payment for
any of the 21 cost recovery amounts reviewed. The settlement
documents we. reviewed represented about $2.6 million due to the
Superfund TnMt Fund. Generally, a receivable was only recorded
when the payMnt was received by Headquarters FMO or Region 4
FMU. The primary reason receivables were not recorded was
because neither NMD nor ORC forwarded copies of settlement
documents to Headquarters FMO or Region 4 FMU in all cases.
Seventy-six percent (16 of 21) of the settlement documents
reviewed were not forwarded to FMOs.
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Settlement
Documents
Number Of Settlement Provided
Settlement Documents Not But A/R Not Costs
Documents Forwarded Accurately To Be
FY Reviewed* To FMO _ Recorded Recovered
1987 11 0 $ 560,000
1988 33 0 85,848
1989 II 12 i 1.956.645
Total
* Each responsible party agreement, consent decree,
administrative order, settlement, court order, or
judgment is counted as a settlement document. In
addition, for the two enforcement actions where we
reviewed the payment of oversight costs, each billing
is counted as a settlement document.
Settlement Documents Not Forwarded to FMO
Region 4 officials told us that ORC forwards all settlement
documents to the FMU. Region 4 officials were unable to locate a
document stating that ORC attorneys were responsible for
forwarding settlement documents. However, during our review,
some attorneys stated that where the settlement document includes
future Remedial Design /Remedial Action work and recovery of
costs, the Remedial Project Manager in WMD forwards the consent
decree to the FMO. Where there was only recovery of costs, the
ORC attorney would forward the settlement document. When we met
with Region 4 officials at the end of our fieldwork, we commented
on what was told us by the attorneys. Regional officials agreed
with what we had been told by the attorneys. In a memorandum to
us dated December 4, 1989, the Assistant Regional Administrator
for Policy and Management stated that the Cost Recovery Unit,
within WMD, will be responsible for forwarding all settlement
documents to the FMU.
ORC officials stated that one reason judicial orders and decrees
were not promptly sent to the FMU was because the documents were
not promptly sent by the Department of Justice (DOJ) to EPA. DOJ
sends a monthly tracking report on the status of referral to ORC.
The report list* the status of the referral, including whether
the order is entered. Judicial orders are effective when they
are entered by the court. However, ORC nay not receive the
monthly tracking report until two months after the order is
entered. It is important that BPA promptly obtain settlement
documents from DOJ. ORC officials need to work with DOJ to
ensure that settlements are promptly obtained from DOJ.
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When settlement documents are not forwarded to the FMO, payments
cannot be identified as being for cost recovery or fines and
penalties. As a result, payments cannot be promptly invested in
the Superfund Trust Fund.
Not Accurately Recorded
As shown in the schedule on page 8, settlement documents were not
forwarded to Headquarters FMO or Region 4 FMU in 16 of 21 cases.
Regarding the five cases (21 - 16) where settlement documents
were provided, neither Headquarters FMO nor Region 4 FMU followed
the procedures in the Financial Management Manual to promptly
record a receivable for the amounts due. Regarding the five
cases:
• Three receivables were recorded prior to the effective date
of the settlement document.
• One receivable was recorded 11 days after the effective date
of the settlement document.
• One receivable was recorded the sane day as the payment.
The three cases with receivables recorded prior to the effective
date were all administrative cost recovery agreements. Cost
recovery agreements are not effective until the responsible party
is sent written notice that a 30-day public comment period is
over. The receivables were recorded prior to the written notice
being sent to the responsible parties. The reason the FMU was
recording the receivables prior to written notice was because the
FMU was being sent the administrative order prior to issuance of
the written notice. The proper documents, specifically a copy of
the administrative order along with the written notice, need to
be sent to the FMU. In a memorandum to us dated December 4,
1989, the Assistant Regional Administrator for Policy and
Management stated that the Cost Recovery Unit will work with the
FMU to ensure that the correct receivable dates are used.
We also found one case where an accounts receivable was recorded
after the costs had been paid. Payments totalling $10,000 were
received on May 12 and 19, 1988, for Woodward Property. A
receivable MBS) subsequently recorded on January 31, 1989, eight
months later*. The reason the payment was recorded as a
receivable w*s because the Region 4 FMU was sent a copy of the
administrative order after the costs had been paid. Upon
receiving a copy of the order, Region 4 FMU recorded a receivable
without checking to see that the costs had already been paid.
The January receivable was still on the financial records when we
completed our fleldwork on November 21, 1989.
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Reconciliation Procedures Would Help Ensure
Receivables Are Recorded
Regular reconciliation of WMD and ORC records with FMS would
serve as an internal control to assure that all settlement
documents were forwarded to the FMU and the receivables were
recorded. RMDS Chapter 2S50D states that the FMU should
establish routine procedures with the Superfund Branch Chief and
Regional Counsel to regularly reconcile Program and Counsel
records with the financial records. In addition, the offices are
to exchange information on the status of debts, including cases
concluded by DOJ. Region 4 had not established these procedures.
WMD and ORC each have computer systems which include information
on cost recovery enforcement actions. The Comprehensive
Environmental Response, Compensation, and Liability Information
System (CERCLIS) is a historical database of the Superfund
program, containing the official inventory of CERCLIS sites, and
serving site planning and tracking functions. Headquarters
relies on CERCLIS as the source of data for plans and
accomplishments. The Enforcement Docket System (Docket) is the
main case-tracking system of Headquarters Office of Enforcement
and Compliance Monitoring. The docket system was established for
tracking and managing Judicial enforcement cases.
The ultimate objective of a computerized information system is to
collect all the data pertaining to an operation and to amass it
in computer files from which information and reports can be
readily extracted. In a June 18, 1986 speech, EPA's
Administrator stated that national program systems, such as
CERCLIS and Docket, have traditionally suffered from incomplete
and untimely data for a number of reasons s (1) imprecise
definitions of reporting requirements, (2) a lack of management
attention (there were no real consequences when reporting
requirements were not met), and (3) computer systems that have
been relatively inaccessible for either data entry or retrieval.
During our review, we attempted to identify cost recovery
enforcement actions completed from October 1, 1986 to June 30,
1989. We compared Information from CBRCLIS and the Docket. We
did not attempt to determine whether all cost recovery
enforcement actions are listed in CERCLIS or the Docket. We
found that, for civil enforcement actions, 68 percent were listed
in CERCLZS and 59 percent in the Docket. See Exhibit 1 for list
of enforcement actions.
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JSnfQrcement^Actions
Administrative Percent Judicial Percent:
Enforcement Actions
Identified 34
Listed in CERCLIS 34
Listed in the Docket *
100
22
15
13
68
59
* The Docket lists enforcement actions filed in court,
not administrative actions.
Enforcement actions need to be timely and accurately entered so
that accurate reports can be generated. ORC attorneys update the
information in the Docket. The cost recovery unit in HMD updates
the information in CERCLIS.
In a memorandum to us dated December 4, 1989, the Assistant
Regional Administrator for Policy and Management stated that the
Cost Recovery Unit will reconcile cost recovery enforcement
actions listed in CERCLIS with those listed in Docket. Further
reconciliation of the CERCLIS and Docket to the financial records
would ensure receivables are recorded and follow-up action is
promptly taken.
*****
The Federal Managers Financial Integrity Act (FMFIA) requires
that GAO internal control standards be followed when establishing
and maintaining systems of internal control. The objectives of
an internal control system include that (1) all assets are
safeguarded against waste, loss, unauthorized use, and
misappropriation, and (2) all revenues and expenditures are
recorded and accounted for properly so that accounts and reliable
financial reports may be prepared and accountability of assets
may be maintained. Specifically, the internal control standards
state that transactions and other significant events are to be
promptly recorded and properly classified.
Region 4's failure to record accounts receivable for amounts due
to the Superfund Trust Fund was a material weakness in internal
controls. OMB Circular A-123 defines a material weakness as a
specific Instance of noncompliance with FMFIA which would (1)
impair the €j£flllmant of an agency component's mission; (2)
deprive the public of needed services; (3) violate statutory or
regulatory requirements; or (4) significantly weaken safeguards
against waste, loss, unauthorized use or misappropriation of
funds. The failure to record receivables meets all these
conditions.
When receivables were not properly recorded, the financial
management system did not provide BPA management with timely and
accurate financial information. OMB Circular A-127 (A-127)
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states that an financial management system is to provide useful,
timely, reliable/ and complete information. A-127 and FMFIA
require that an Agency's financial management system provide for:
• Complete disclosure of the financial activities of the
agency,
• Adequate financial information for agency management and for
formulation and execution of the budget, and
• Effective control over revenue, expenditure, funds,
property, and other assets.
In a memorandum to us dated October 12, 1989, the Assistant
Regional Administrator for Policy and Management stated that a
priority for FT 1990 quality assurance program is the accounts
receivable area, including cost recovery collections. Region 4
intends to identify all internal control weaknesses in accounts
receivable and implement solutions to better manage collections.
Draft Report Recommendations:
We recommended that the Region 4 Regional Administrator take
appropriate action to:
1. Direct the applicable offices to develop a Memorandum of
Understanding to ensure that the:
a. Waste Management Division promptly forwards settlement
documents to the Financial Management Unit.
b. Financial Management Unit promptly and accurately
records accounts receivable for all cost recovery
amounts owed.
c. Office of Regional Counsel works with Department of
Justice to timely obtain orders and decrees.
d. Financial Management Unit, Office of Regional Counsel,
and Waste Management Division establish and implement
procedures to regularly reconcile Waste Management
Division and Office of Regional Counsel records with
financial management system and to exchange information
on toy changes in amounts due and on the status of
debts, including cases concluded by Department of
Justice.
e. Financial Management Unit, Office of Regional Counsel
and Haste Management Division reconcile their records
to ensure that cost recovery amounts due have been
collected. Where cost recovery amounts have not been
collected, the amount due should be recorded as an
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account receivable and appropriate action taken for
collection.
2. Perform an internal control review of the procedures in the
Memorandum of Understanding during the latter part of FY
1990 to determine whether the procedures are being followed
and whether they are adequate to ensure that receivables are
promptly recorded on the financial records.
Regional Reply to OIG Report
Region 4 did not see the necessity to write a Memorandum of
Understanding because of the extensive efforts the Agency has put
into developing a "Manual on Monitoring and Enforcing
Administrative and Judicial Orders". This manual outlines the
roles and responsibilities that the (1) Regional Program office,
(2) Office of Regional Counsel, (3) Department of Justice, (4)
Regional Financial Management Office, and (5) Regional Hearing
Clerk have in monitoring and enforcing Judicial and
Administrative orders. The manual also outlines a process for
working with EPA financial management offices and the Department
of Justice for monitoring and collecting penalties. Region 4
believes that the procedures outlined in this manual are adequate
to address the concerns of the audit.
Region 4's response to each of our draft recommendations listed
above was as follows:
la. The Investigation and Cost Recovery Unit has assumed
responsibility for forwarding all administrative settlement
documents to the Financial Management Unit.
Ib. Region 4 will adhere to the policies contained in EPA's
Financial Management Manual, Chapter 7, to promptly record
money due the Agency. The Region will review the billing
process to ensure the procedures are being followed.
Ic. The Office of Regional Counsel will continue to work with
the Department of Justice to obtain orders and decrees.
Id. The Financial Management Unit will request printouts from
CBRCLIS and Docket system quarterly in order to reconcile
with ttifc financial management system/ and ensure that all
account* receivable are properly recorded. In addition, the
Region will establish a work group of representatives from
Office of Regional Counsel, Regional Program office, and the
Financial Management Unit to meet at least quarterly to
discuss accounts receivable procedures.
le. Region 4 cost recoveries are either administrative or
judicial orders, and would be handled as outlined in EPA's
"Manual on Monitoring and Enforcing Administrative and
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Judicial Orders". Based on the manual, these cost
recoveries will be entered into EPA's financial management
system and tracked as any other receivable. If cost
recovery actions are 120 days in arrears/ it is referred to
the Office of Regional Counsel for action. In the case of a
Judicial Order, the Region will establish the receivable in
the financial management system for tracking and reporting
purposes. The Region will notify the Referring Official of
any missed payment due dates.
2. As part of its Quality Assurance Plan for FT 1990, Region 4
plans to perform a review of its accounts receivable. This
review will test the controls that are in place to ensure
that all receivables are promptly recorded, promptly billed
and collected, or referred to collection agencies or Office
of Regional Counsel.
Auditor's Comments
The "Manual on Monitoring and Enforcing Administrative and
Judicial Orders" is applicable for all orders, except Superfund.
However, Headquarters Financial Management Division officials
stated that the manual will be incorporated as part of their
directives which will be applicable to Superfund. Region 4's
implementation of the procedures contained in the manual, and the
recommendations listed below, will meet the intent of our draft
report recommendation that a Memorandum of Understanding be
developed.
Regarding the Region's reply to our draft report recommendations,
we offer the following comments:
la. The future actions outlined by the region, when implemented,
will substantially correct the deficiencies cited in our
draft report, as they relate to administrative settlement
documents. However, the response did not address judicial
settlement documents.
Ib. The future actions outlined by the region, when implemented,
will substantially correct the deficiencies cited in our
draft report.
Ic. The future actions outlined by the region, when implemented,
will substantially correct the deficiencies cited in our
draft report.
Id. We agree with the future actions outlined by the Region,
with the exception that the Financial Management Unit should
request printouts from CKRCLIS and the Docket, and reconcile
to the financial management system, on a monthly basis, as
opposed to quarterly. Payments due from cost recovery
enforcement actions are generally due within 30 days.
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Monthly reconciliation would ensure that payments are
recorded as receivables prior to the due date.
le. We agree that cost recovery receivables should be entered
into the financial management system and tracked just as any
other receivable. However, as stated in our finding,
accounts receivables were not promptly recorded. The intent
of our recommendation was that the Financial Management
Unit, Office of Regional Counsel and Waste Management
Division reconcile their records to ensure that all amounts
due in the oast have been recorded as accounts receivable
and collected, since receivables which were not recorded
would not be identified as being 120 days in arrears in the
financial management system.
2. The future action outlined by the region, when implemented,
will substantially correct the deficiencies cited in our
draft report.
Recommendations
We recommend that the Regional Administrator ensure that the
planned corrective actions are completed. Also, we recommend
that the Regional Administrator take appropriate action to ensure
that:
1. Judicial settlement documents are promptly forwarded to the
Financial Management Unit.
2. The Financial Management Unit monthly request printouts from
CERCLIS and Docket system, and reconcile the printouts to
the financial management system.
3. Financial Management Unit, Office of Regional Counsel and
Waste Management Division reconcile their records to ensure
that cost recovery amounts due in the past have been
collected. Where cost recovery amounts have not been
collected, the Financial Management Unit should ensure that
a receivable is recorded*
16
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Finding NO. 2 - PROMPT ACTION NEEDED TO COLLECT AMOUNTS OWED
Region 4 was not promptly collecting cost recovery amounts owed
to the Superfund Trust Fund because of (1) delays in sending
written notification of the effective date to responsible
parties, (2) late payment of amounts due/ and (3) delays in
sending accounting data to the responsible party. These
conditions existed primarily because (1) the Waste Management
Division (WHO) did not have a system to track when written
notification of effective dates are to be sent and (2) consistent
action was not taken to ensure collection of late payments.
Delays in collecting amounts owed resulted in lost interest to
the Superfund Trust Fund of at least $13,071.
Of the 21 settlement documents we reviewed, we found 6 cases (29
percent) where collection of amounts owed was delayed. See
Exhibit 2 for a listing of cases.
Number Lost
Reason For Delay Of Cases Interest
Delay in sending written notice
of the effective date 2 $ 167
Late payment 2 453
Delay in sending accounting data 2 12.451
Total S13.Q71
One of most important objectives of the Superfund program is to
recover the funds that EPA spends in cleaning up a Superfund
site. Recovery may be effected either through negotiation or as
a result of legal action against responsible parties. The costs
EPA tries to recover may be for (1) past expenditures, (2) future
work that EPA will do at the site, or (3) the costs of EPA
overseeing cleanup work that the responsible party may perform
under contract at the site.
Section 107(a) of the Superfund Amendments and Reauthorization
Act (SARA) requires that coat recovery amounts accrue interest at
the same rate a* investments of the Superfund Trust Fund. The
U.S. Treasury Department currently invests Superfund monies in
52-week U.S. Treasury MX Bills that mature in early September of
each year. When funds are needed for Superfund activities,
MK-Billa are cold and the proceeds are used to pay EPA costs.
When fund* are received, additional MK-Billa of the same maturity
are purchased. The MK-Bill rates for FT* 1987 to 1989 ares
17
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FY
1987
1988
1989
Interest Rate
5.63%
6.99%
8.39%
Delays in Sending Written Notice of Effective Date
WMD did not promptly send written notice of the effective date
for 2 of 6 cases where payments were delayed. Written notice was
not sent because NMD did not have a system to ensure that written
notices ara timely sent to responsible parties.
Nine of the 21 settlement documents in our review were cost
recovery agreements. (The other 12 settlement documents were
judicial orders or billings for oversight costs.) Administrative
cost recovery agreements require that, after the agreement is
signed by the responsible party and EPA, the agreement be
published in the Federal Register and be available for public
comment for 30 days. The agreement is effective when written
notice is given that the public comment period has closed. For
the nine cost recovery we reviewed, the average amount of time
from the last signature on the agreement to when written notice
was sent to the responsible parties (excluding the two late
cases) was 60 days.
In the two cases, Linecrest Way and Buff (CD), the costs had not
been paid at the time of our review because the responsible
parties had not been notified of the effective date of the cost
recovery agreement. Region 4 officials were not aware that the
written notice had not been sent. The amount of time from the
last signature to when the written notice was sent for Linecrest
Way and Buff (CD) was substantially longer than the average of 60
days.
Site
Linecrest Way
Buff (CD)
Date
Signed
01/26/89
02/15/89
Effective
Date
10/05/89
09/26/89
Elapsed
Davs
252
223
The lost interest to the Superfund Trust Fund due to delays in
collection for these two cases was $167.
We brought these two cases to the attention of Region 4 officials
in a memorandum on September 28, 1989. The $3,800 owed for Buff
(CO) was subsequently collected on October 10, 1989. For
Linecrest Way, written notification of the effective date was
sent by Region 4 on October 5, 1989. However, the $552 owed had
not been collected as of November 21, 1989.
18
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Regional officials stated that the reason the notices were not
sent was because the assigned staff for Linecrest Way was on
extended leave and the notice for Buff (CO) just was never sent.
In a memorandum dated December 4, 1989, the Assistant Regional
Administrator for Policy and Management stated that a tracking
system will be developed to ensure that written notices are
promptly issued for cost recovery agreements.
Late Payment of Amounts Owed
Payments of cost recovery amounts due were received after the due
date in 2 of 6 cases where payments were delayed. In one case,
action was taken by Office of Regional Counsel (ORC) and WMD to
affect collection. In the other case, no action was taken.
Site 'ame
Middlesboro Rehab Center
Bostic Drum
Due
Date
Collection
Date
03/28/89 not collected
10/31/88 04/06/89
The lost interest to the Superfund Trust Fund due to delays in
collection for these two cases was $453.
In the case of Middlesboro Rehabilitation Center, the order was
effective as of March 28, 1989. The payment of $6,800 was due
immediately upon receipt the March 28 letter. Regional officials
verified that payment had not been collected, and plan to file a
court action to collect the $6,800 due, plus interest. We
brought this case to the attention of Regional officials in a
memorandum on September 28, 1989.
The cost recovery amount due for Middlesboro Rehabilitation
Center was recorded as a receivable in the financial records.
Chapter 7 of the Financial Management Manual states that the FMO
is to send out demand payment letters for all debts 31 or more
days old. We found no evidence the Financial Management Unit
(FMU) sent demand payment letters for the $6,800 due for
Middlesboro Rehabilitation Center.
In the case of Bostic Drum, action was taken to collect the
amounts owed. ORC and WMD personnel called and sent letters to
the responsible parties to get them to pay.
Consistent action needs to be taken to ensure prompt collection
of cost recovery asKrants owed. To ensure that consistent action
to taken on late payments, the Assistant Regional Administrator
for Policy and Management stated, in a memorandum to us dated
December 4, 1989, that the Cost Recovery Unit will be responsible
for follow-up on late payments.
19
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Delays in Sending Accounting Data
There were delays in sending accounting data to responsible
parties in 2 of 6 cases where payments were delayed (Powersvilie
Landfill and Sangamo Weston). The lost interest to the Superfund
Trust Fund due to delays in collection for these two cases was
$12,451. The delay in the payment for Powersvilie Landfill was
because of some confusion on cost documentation. The consent
decree, effective December 13, 1988, stated that payment was due
within 30 days of receipt of accounting data. However, the
accounting data had already been sent. A letter was not sent
until January 26, 1989, 44 days after the consent decree was
signed. The cost documentation had already been provided during
negotiations of the consent decree.
In the case of Sangamo Weston, a billing for EPA oversight costs
was to be sent at end of each fiscal year. The oversight billing
for FT 1988 was not sent until June 25, 1989, nine months after
the end of the fiscal year. The Remedial Project Manager
thought it was the responsibility of the Cost Recovery Unit to
bill for oversight costs. However, during FT 1989, the Cost
Recovery Unit was only assisting the Remedial Project Managers
with oversight billings.
Starting in FT 1990, the Cost Recovery Unit is responsible for
ensuring the oversight billings are promptly issued. Operating
procedures were issued on October 30, 1989. The Cost Recovery
Unit is to (1) maintain a complete docket of all order requiring
payment of oversight costs, (2) prepare cost summaries and
billing letters, (3) institute a tracking system to ensure
billings are sent and payments are received, and (4) notify FMU
to record an account receivable. These procedures, if properly
implemented, should ensure that oversight billings are promptly
sent to all responsible parties.
Delays in (1) sending written notification of the effective date
to responsible parties, (2) collecting amounts due, and (3)
sending accounting data to the responsible party slows the
investment of cost recovery amounts due to the Superfund Trust
Fund. We reviewed $2,602,493 of costs due. If prompt action was
taken to collect the amounts owed, the funds could have been
invested by the Superfund Trust Fund at an earlier date and
additional interest earned of at leant $13,071.
20
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Draft Report Recommendati
ons
We recommended that the Region 4 Regional Administrator direct
the Haste Management Division to:
1. Implement a system to promptly issue written notices of the
effective date for cost recovery agreements.
2. Take prompt action to follow-up on late payments, including
Middlesboro Rehabilitation Center and Linecrest Way.
Regional Reply to Draft QIC Report
The Region agreed with our findings and outlined measures to
address our recommendations:
1. The Investigation and Cost Recovery Unit has implemented a
tracking system to ensure that written notices are issued
promptly. The Chief, Investigation and Cost Recovery Unit,
will monitor the system continuously.
2. Financial Management Unit is responsible for sending out
demand letters after the receivable is established.
Middlesboro Rehabilitation Center has been referred to the
Department of Justice and Linecrest Way is being pursued by
the Regional Office due to its amount. Two demand letters
on Linecrest were mailed out but returned as undeliverable .
However, the responsible party has been located and is
awaiting receipt of the third letter.
Auditor * s
The actions outlined by Region 4 in reply to our draft report
recommendations, if properly implemented, will substantially
correct the deficiencies cited.
Recommen
We recommend that the Regional Administrator ensure that the
planned corrective actions are completed.
21
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Finding NO. 3 - FMS NEEDS TO ACCURATELY REFLECT TRANSACTION DATES
The integrated Financial Management System (IFMS) did not
accurately reflect the {1} date of the accounts receivable, (2)
due date, (3) collection date, and (4} interest rate for past due
amounts. Also, handling charge and penalty waivers were not
indicated. IFMS data were not accurate because (1) information
was not forwarded promptly to the Financial Management Unit
(FMU), (2) the FMU was not inputting data from source documents
correctly, and (3) the interest rate was not changed to reflect
the interest charged on Superfund debts. As a result, IFMS did
not provide accurate financial reports, and demand payment
letters were not generated accurately.
EPA's financial management system was replaced by IFMS during
March 1989. IFMS includes an accounts receivable subsystem,
which contains a full range of accounts receivable functions.
The accounts receivable subsystem will automatically age billed
receivables, calculate interest, handling charges, and late
payment penalties on overdue receivables, and generate demand
payment letters.
The Federal Managers Financial Integrity Act (FMFIA) requires
that GAO internal control standards be followed when establishing
and maintaining systems of internal control. One objective of an
internal control system is that all revenues and expenditures are
recorded and accounted for properly so that reliable financial
reports may be prepared and accountability of assets may be
maintained. Internal control standards state that transactions
and other significant event* are to be promptly recorded and
properly classified.
Since receivables were not properly recorded, the IFMS does not
provide EPA management with timely and accurate financial
information. OMB Circular A-127 {A-127) state* that a financial
management system is to provide useful, timely, reliable, and
complete information. A-127 and FMFIA require that an Agency's
financial management system provide fort
• Complete disclosure of the financial activities of the
agency,
• Adequate financial information for agency management and
for formulation and execution of the budget, and
• Effective control over revenue, expenditure, funds,
property, and other asset*.
Our review included 11 payment* (for 10 ca*ec) received since
March 1989 which were recorded In IFMS. For the 11 payment*, we
found that generally the date* in IFMS did not accurately reflect
the actual date* identified during our review of case file*. For
22
-------
our review, we compared the effective date of the settlement
document to the document date in IFMS. For the collection date,
we compared the collection date on the Daily Superfund Trust Fund
Collection Report to the closing date in IFMS. See Exhibit 3 for
listir.,- of payments and dates. Of the 11 payments we found:
Date Reviewed
Receivable established
Due date
Collection date *
Number
of Dates
Inaccurate
10
10
6
Percent
91
91
67
* Amounts due had not been collected as of November
21, 1989 for two cases.
Receivable dates were incorrect because the (1) settlement
documents were not promptly forwarded to FMU and (2) effective
date of the settlement was not readily available. As discussed
in Finding Number 1, administrative cost recovery agreements were
sent to FMU before the effective date of the order. The FMU
recorded the receivable without knowing that written notice must
be given before the order is effective. Also, FMU personnel were
not always sure of the effective date of the settlement document
and were using any date found on the settlement document. In a
memorandum to us dated December 4, 1989, the Assistant Regional
Administrator for Policy and Management stated that the Cost
Recovery Unit will work with the FMU to ensure that the correct
receivable dates are used.
The due date is calculated by IFMS as 31 days after the document
date, unless another date is inputted. FMU personnel generally
allowed IFMS to calculate the due date, rather than inputting the
due date from the settlement document. The due dates in the
settlement documents we reviewed were as little as 10 days after
the effective date of the settlement. The due date needs to be
correct for accurate aging of receivables, calculation of
interest on late payment, and preparation of demand letters.
The collection date was not accurately recorded in IFMS in 6 of 9
cases (67 percent). Accurate collection dates were needed to
generate accurate financial reports. Also, cost recovery
collection* need to be correctly and timely recorded in IFMS in
order to balance with the monthly Statement of Treasury Status of
Hazardous Substance Superfund Trust Fund.
The interest rate for all payments reviewed was not the rate that
is to be assessed on Superfund debts. Section 107(a) of the SARA
requires that cost recovery amounts accrue interest at the same
rate as investments of the Superfund Trust Fund. The U.S.
Treasury Department currently invests Superfund monies in 52-week
23
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U.S. Treasury MK Bills. The interest rate for MK-Bills for FY
1989 was 8.39 percent. The interest rate in IFMS for the cases
reviewed ranged from 6 to 8.36 percent. See Exhibit 3 for
interest rates in IFMS for each case. The interest as calculated
by IFMS would be less than what should be calculated.
IFMS also calculates handling charges and penalties on late
payments unless a waiver of these charges is indicated. Handling
and penalty charges are not applicable for Super fund billings.
Therefore, a waiver must be indicated in IFMS for all Superfund
debts. We found that waivers of handling charges and penalties
were not indicated for any of the settlement documents reviewed.
The accounts receivable subsystem will automatically age billed
receivables, calculate interest, handling charges, and late
payment penalties on overdue receivables, and generate demand
payment letters. The dates in IFMS need to be accurate in order
to provide timely and accurate financial information. Also,
appropriate interest rates and waivers of handling charges and
penalties need to listed. Without accurate information in the
system, the aging of receivables will be incorrect, and interest
will not be calculated correctly. Also, demand payment letters
will not be generated at the right time and interest calculations
will be incorrect.
Report Recoifm|endation
We recommended that the Region 4 Regional Administrator direct
the Financial Management Unit to correctly and timely input
information for cost recovery receivables into IFMS. This area
should be included as part of the regions internal control review
in FY 1990.
Regional Reply to PIG Report
The Region agreed with our finding and outlined measures to
address our recommendation. The Region stated that accounts
receivable will be inputted into the financial management system
within the time period required, a* discussed in the "Manual on
Monitoring and Enforcing Administrative and Judicial Orders" and
EPA' s Financial Management Manual. A quality assurance review
will be performed late in FT 1990 on accounts receivable to
ensure that the procedures are followed.
The actions outlined by Region 4 in reply to our draft report
recommendation will substantially correct the deficiencies cited.
We recommend that the Regional Administrator ensure that the
planned corrective actions are completed.
24
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Page 3 of 3
Notes
2.
CERCLIS completion dates were obtained from a listing of
selected enforcement codes. The printout used was as of
June 30, 1989. Enforcement codes selected were:
NE Cost recovery negotiations
AC Administrative order on consent
AV Administrative/voluntary cost recovery
SV Section 107 litigation
CL Section 106/107 litigation
JG Judgement
CD Consent decree
CA Consent agreement
Enforcement Docket System completion dates were obtained
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of July 17, 1989. Only CERCLA Section 107 cases were
selected.
27
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Exhibit 2
Page 3 of 4
Notes
1
2,
4.
5.
6.
Lost interest was calculated on uncollected monies from the
date costs were due until costs were paid.
Payments for Medley Farms were received from eight
responsible parties. All payments were made timely.
Date Collected
02/20/87
05/28/87
05/28/87
07/29/87
07/29/87
07/29/87
07/29/87
08/04/87
Total
Amount
$105,952
13,552
7,448
261,184
110,992
39,592
14,952
6.328
S56Q.QQQ
An administrative order was signed for Sangamo Weston on
June 18, 1987. The order required that at the end of each
fiscal year, EPA was to submit an accounting of response
costs and oversight costs. The billing for oversight costs
incurred during FT 1988 was not sent until July 25, 1989,
nine months after the end of the fiscal year.
A partial payment of $93,831 was received on August 30,
1989. The responsible party requested additional
documentation for the remaining $49,514 ($143,345 - 93,831)
Two payments of $5,000 each were received for Woodward
Property on Hay 12 and 19, 1988. Both payments were
received timely.
Payment of $3,000 was due for Bostic Drum on October 31,
1988. The payment was not received until April 6, 1989,
five months later. Office of Regional Counsel (ORC) and
Waste Management Division (WMD) personnel did contact the
responsible party to collect the payment.
Payments were received from four responsible parties for
Brown Wood Preserving. All payments were timely.
Date Paid
11/03/88 $ 17,500
11/08/88 52,500
11/14/88 17,829
11/21/88 72.171
Total S16Q.OOO
30
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Exhibit 2
Page 4 of 4
There was a delay in the payment for P wersville Landfill
because of some confusion on cost documentation. The
consent decree, effective December 13, 1988, stated that
payment was due in 30 days of receipt of accounting data. A
letter was not sent until January 26, 1989, 44 days after
the consent decree was signed. The cost documentation had
already been provided during negotiations of the consent
decree.
Payments were received from two responsible parties for
Kershaw County Landfill. Both payments were timely.
Date Paid
02/17/89
03/03/89
Total
Amount
$14,000
14.000
$28.000
9. The order for Middlesboro Rehabilitation Center was
effective as of March 28, 1989. The payment was due
immediately upon receipt the March 28 letter. During our
review, regional officials found that payment had not been
collected. As a result of our inquiry, regional officials
plan to take action to ensure the payment is collected.
Costs had not been collected as of November 21, 1989.
10. The cost recovery agreement for Buff (CD) was signed on
February 15, 1989. Cost recovery agreements are effective
when EPA provides written notice to the responsible parties
that the public comment period is closed. After asking for
a copy of the written notification, Regional personnel found
that it had not been sent. Written notification was
subsequently sent on September 26, 1989.
11. The cost recovery agreement for Linecrest Way was signed on
January 26, 1989. Cost recovery agreements are effective
when EPA provides written notice to the responsible parties
that the public comment period is closed. After asking for
a copy of the written notification, Regional personnel found
that it had not been sent. Written notification was
subsequently sent on October 5, 1989. Costs had not been
collects* as of November 21, 1989.
31
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ID
7Q
Z5
Z5
Z5
Z5
3Q
Exhibit 3
Page 1 of 2
(see page 23)
SCHEDULE OF DATES ANO_INTEREST RATES RECORDED IN IPMS
AS COMPARED TO THOSE
Site Name
Bostic Drum
Receivable date (1)
Due date
Collection date (2)
Interest rate
Zenith Chemical
King and Spalding
Receivable date
Due date
Collection date
Interest rate
Zenith Chemical
P-I-E Nationwide
Receivable date
Due date
Collection date
Interest rate
Zenith Chemical
ACF Industries
Receivable date
Due date
Collection date
Interest rate
Zenith Chemical
KZM Manufacturing
Receivable date
Due date
Collection date
Interest rat*
Keshaw County Landfill
Reichlyn payment
Receirable date
Due data
Collection date
Interest rat*
IDENTIFIED DURING OUR
Identified
Durina Revi
10/21/88
10/31/88
04/06/89
8.39
02/02/89
02/12/89
02/13/89
8.39
02/02/89
02/12/89
02/17/89
8.39
02/02/89
02/12/89
03/03/89
8.39
03/22/89
04/01/89
04/10/89
8.39
02/21/89
03/23/89
02/17/89
8.39
REVIEW
Date
.ew in IFMS
04/06/89
10/06/88
04/20/89
6.00
12/01/88
12/31/88
02/03/89
7.00
12/01/88
12/31/88
04/20/89
7.00
12/01/88
12/31/88
04/20/89
7.00
03/10/89
04/09/88
04/06/89
7.00
04/21/89
02/20/89
04/28/89
7.00
32
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Exhibit 3
Page 2 of 2
m
3Q
EM
E9
H4
7X
SCHEDULE OF DATES AND INTEREST RATES RECORDED IN IPM
AS COMPARED TO THOSE IDENTIFIED DURING OUR REVIEW"
Site Name
Identified
Date
Kershaw County Landfill
Wannamaker payment
Receivable date
Due date
Collection date
Interest rate
Middlesboro Rehabilitation Center
Receivable date
Due date
Collection date
Interest rate
Marzone Chemical
Receivable date
Due date
Collection date
Interest rate
Buff (CD)
Receivable date
Due date
Collection date
Interest rate
Linecrest Hay
Receivable date
Date due
Collection date
Interest rate
Purina Review in IFMS
02/21/89
03/23/89
03/10/89
8.39
03/28/89
03/28/89
(3)
8.39
06/20/89
07/20/89
07/03/89
8.39
09/26/89
10/05/89
10/04/89
8.39
10/05/89
10/15/89
(3)
8.39
02/21/89
03/23/89
04/28/89
7.00
02/06/89
03/08/89
7.00
07/05/89
08/07/89
07/05/89
7.00
05/01/89
05/31/89
10/10/89
8.36
05/01/89
05/31/80
8.36
Notes
1. For our review, we compared tha document data in IFMS with
tha effective data of tha settlement document.
2. For our review, we compared tha closing data in IFMS with
tha collection data on tha Daily Suparfund Trust Fund
Collection Report. Three days was from collection data to
closing data in IFMS was considarad acceptable.
3. Payments had not been collactad as of November 21, 1989.
33
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\JSSK,'
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Appendix 1
Paoe 2 of 6
-2-
Recommendat ion:
a. Waate Management Division promptly forwards settlement
documents to the Financial Management Unit.
Region 4'8 Comments t
The Investigation and Cost Recovery Unit has assumed
responsibility for forwarding all administrative
settlement documents to Financial Management Unit. All
of this Unit's staff have been made aware of their
responsibility in forwarding these documents to the
FMU.
Recommendation:
b. Financial Management Unit promptly and accurately
record accounts receivable for all cost recovery
amounts owed.
Region 4's Comments:
EPA's Financial Management Manual, Chapter 7, Paragraph
5, establishes the policies that the Regional Offices
are to follow in promptly recording money due to the
agency. Region 4 will adhere to the policies of the
Agency. We will review the billing process to ensure
these procedures are being followed.
Recommendation:
c. Office of Regional Counsel works with the Department of
Justice to timely obtain orders and decrees.
Region 4's Commentsi
The Office of Regional Counsel will continue to work
with the Department of Justice (DOJ) to obtain orders
and decrees. However, the OIG must understand that
BV& has no direct authority over the DOJ and can only
seek DOJ's cooperation in this matter.
d. Financial Management Unit, Office of Regional Counsel,
and Waste Management Division establish and implement
procedures to regularly reconcile Waste Management
Division and Office of Regional Counsel records with
35
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Appendix 1
Page 3 of 6
financial management system and to exchange information
on any changes in amounts due and on the status of
debts, including cases concluded by Department of
Justice.
Region 4's Comments:
Chapters 2 & 3, of EPA's Manual on Monitoring and
Enforcing Administrative and Judicial Orders
establishes procedures to be followed by each office in
monitoring and collecting amounts assessed and due
EPA. The Financial Management Unit will request
printouts from the CERCLIS and Docket system quarterly
in order to reconcile with the Intergrated Financial
Management System (IFMS), and ensure that all accounts
receivable are properly recorded. In addition, we will
establish a work group of representatives from Office
of Regional Counsel, Regional Program Office and
Financial Management Unit to meet at least quarterly to
discuss accounts receivable procedures.
Recommendation;
e. Financial Management Unit, Office of Regional Counsel,
and Waste Management Division reconcile their records
to ensure that cost recovery amounts due have been
collected. Where cost recovery amounts have not been
collected, the amount due should be recorded as an
account receivable and appropriate action taken for
collection.
Reaion 4'8 Commentai
Our cost recoveries are either Administrative or Judi-
cial Orders, and would be handled as outlined in EPA's
Manual on Monitoring and Enforcing Administrative and
Judicial Orders. Based upon the Manual, these cost
recoveries will be entered into EPA's IFMS accounting
system and tracked just as any other receivable. If
cott recovery actions are 120 days* in arrears, it is
referred to the Office of Regional Counsel for action.
Zft the case of a Judicial Order, we will establish the
receivable in IFMS for tracking and reporting
purposes. We will not send out any billings or demand
letters but will notify the Referring Official of any
missed payment due dates.
!**• 1 an i
2. Perform an internal control review of the procedures in the
Memorandum of Understanding during the latter part of
36
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Appendix 1
Page 4 of 5
-4-
FT 1990 to determine whether the procedures are being
followed and whether they are adequate to ensure that
receivables are promptly recorded on the financial records
4's
In Region IVs Quality Assurance Flan for FT 90, we have
planned to perform a review of our accounts receivable.
This review will test the controls that are in place to
ensure that all receivables are properly recorded, promptly
billed and collected, or referred to collection agencies or
Office of Regional Counsel. We feel that this review will
be sufficient, as opposed to a formal internal control
review, to ensure that all accounts receivable are handled
properly.
II. Promot Action Needed To Collect Amounts Owed
We recommend that the Region 4 Regional Administrator direct the
Waste Management Division tot
Reco™1!? fixation i
1. Implement a system to promptly issue written notices of the
effective date for cost recovery agreements.
41' A ComBAn^fl t
The Investigation and Cost Recovery Unit has implemented a
tracking system to ensure that written notices are issued
promptly. The Chief, Investigation and Cost Recovery Unit
monitors the tracking system continuously.
2. Take prompt action to follow-up on late payments, including
Middlesboro Rehabilitation Canter and Linecrest Way.
Financial Management Unit is responsible for sending out
demaaeVletters after the receivable is established.
Middleeboro Rehabilitation Center has been referred to the
Department of Justice and Linecrest Way ia being pursued by
the Regional Office due to its amount. Two demand letters
on Linecrest were mailed out but returned as undeliverable.
However, the PRP has been located and ia awaiting receipt of
a third letter. Hopefully, Linecrest will be resolved
within a week or two.
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Appendix 1
Page 5 of 6
-5-
III. FMS NEEDS TO ACCURATELY REFLECT TRANSACTION DATES
RECOMMENDATION;
We recommend that the Regional Administrator direct the
Financial Management Unit to correctly and timely input
information for cost recovery receivables into IFMS. This
area should be included as part of the Region's internal
control review for FY 1990.
Reoion 4's Commentst
As expounded in the Manual on Monitoring and Enforcing Admin-
istrative and Judicial Orders, and EPA's Financial Manage-
ment Manual, we will input all accounts receivable into IFMS
within the time period required. We will perform a Quality
Assurance Review in late FY 1990 on all areas of our
accounts receivable to ensure that these procedures are
followed.
IV. OTHER COMMENTS
Generally, all of the findings of fact in the draft report
are accurate. However, we do not totally agree with several
of the conclusions drawn from these findings, including
those made on ineffective control, our knowledge of what
payments were due, and interest.
Ine f feet ive Contro1
In December of 1988, Reichold Chemicals submitted a check
for $1.0 million to the hazardous substance Super fund.
There was im settlement or content decree in place, there
was no action against the company and we had not demanded
the money* Obviously no account receivable existed. In at
least five other cases, PRPs have sent checks in prior to
final settlement, just to put the matter to rest. Despite
our directions to the PRPs, this continues to happen.
In an^ffort to tighten control of accounts receivable,
Waste Jtenagement Division (WMD) and the Financial Management
OfficfPntFMO) &*e working to implement the recommendations
of the draft report. However, the OIG should realize that
checks will continue to float in unannounced and that our
efforts, no matter how diligent, will not totally solve the
problem.
Knowledge of Payments Due
Region 4 has executed 31 small cost recovery agreements.
Due to the very special circumstances described in the draft
report, billing was delayed on three of them.
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Appendix 1
Page 6 of 6
-6-
Interest
Finding No. 2 - "Prompt Action" which begins on page 14 of
the Draft Report, requires a brief explanation. On any
Superfund cost recovery action, the Agency must prove five
case elements: Release, Response, Liability, Viability and
Costs:
* Release or threatened release of hazardous substance;
* Response in conforraance with the NCP;
* Liability has been established for an owner, operator
or generator;
* Costs are adequately documented.
If any of these elements are questionable, especially
viability, we are usually forced into settling a case for
less than one hundred percent. In extreme cases, we have
accepted as little as ten percent. Trying to collect
interest on a late payment of a minimal settlement such as
Bostic Drums is not cost effective and in most cases we will
not attempt it.
We hope our comments have fully addressed the report's recommen-
dations. If you have any additional questions, please contact Larry
Weeks, Audit Follow-up Coordinator, at PTS 257-7292.
cct Janice Hash-Regional Comptroller
Kirk Lucius-Chief, SISB
39
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Appendix 2
DISTRIBUTIQN
Region 4
Regional Administrator
Regional Audit Followup Coordinator
Office of Regional Counsel
Office of Public Affairs
Headquarters
Inspector General (A-109)
Assistant Administrator for Administration and
Resources Management (PM-208)
Office of General Counsel (LE-130)
Assistant Administrator for Solid Waste and
Emergency Response (OS-100)
Assistant Administrator for Enforcement and
Compliance Monitoring (LB-133)
Comptroller (PM-225)
Agency Followup Official (PM-225)
ATTNr Director, Resource Management Division,
Agency Followup Official (PM-208)
Director, Financial Management Division (PM-226)
Associate Administrator for Regional Operations (A-101)
Office of Public Affairs (A-107)
Office of Congressional Affairs (A-103)
40
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