UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
of net or iNSPCCTO* GENERAL
NORTHERN DIVISION
tO W. JACKSON BLVD.. ATM FLOOR
CHICAGO. ILLINOIS 0O0O4
350R90032
OFFICE OF AUDIT
312/3S3-2484
January 25, 1990
OFFICE OF INVESTIGATION
312/393-23O7
SUBJECT: Audit Report No. E1SJF9-05-0274-0100126
Review of Superfuncf Cost Recovery Accounts
Receivable Establishment and Collection
for Audits
FROM: Anthony C. Carrollo
Divisional Inspect
Northern Division
TO: Valdas V. Adamkus
Regional Administrator
Region 5
SCOPE AND OBJECTIVES
We performed an audit of Region 5's 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 5 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 cost due from 16 of 52 (31
percent) cost recovery enforcement actions completed during
fiscal years (FT) 1987 through 1989. We also reviewed the
collection of oversight costs for four enforcement actions in our
sample. Therefore/ we reviewed 20 (16 * 4) cost recovery amounts
due. We did not review the amounts due from all cost recovery
enforcement'actions because orders and decrees were not readily
available. Also, as discussed in Finding 1, Region 5 plans to
locate all order and decrees to determine whether cost recovery
amounts were collected.
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We recognize that, because our sample of enforcement actions was
a judgmental sample and not a statistical random sample,
statistical projections can not 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 5 was responsible for all Superfund cost
recovery activities including the recording of accounts
receivable and ensuring the payments were collected in F7 1989.
For the prior fiscal years, Region 5 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 17, 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.5
officials. Their comments and actions taken in response to our
findings are discussed in the body of this report. A copy of
Region 5's January 17, 1990 reply to our draft report is attached
as Appendix 1.
SUMMARY OF FINDINGS
Region 5 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 protect these assets. Failure to report actions that
create these debts, or failure to report them timely, results in
substantial losses to the Hazardous Substance Superfund
(Superfund Trust Fund).
1. Accounts Receivable Need to be Recorded
For all 20 settlement documents we reviewed, neither Headquarters
nor Region 5 recorded accounts receivable amounting to about $5
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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)
Office of Regional Counsel (ORC) and Waste Management Division
(WHO) did not forward the settlement documents to the Superfund
Accounting Section (SFAS) in all cases, and (b) SFAS did not
establish accounts receivable in the Financial Management System
(FMS) when settlement documents were received prior to payment.
In addition, routine procedures have not been established to
regularly reconcile WMD and ORC records with FMS.
Region 5 is currently formalizing procedures between the offices
involved in cost recovery. ORC, WMD and SFAS are preparing a
Memorandum of Understand (MOU) concerning Superfund cost recovery
procedures. According to a November 13, 1989 draft of the MOU,
WMD will be responsible for providing the SFAS with all
administrative orders. ORC will be responsible for providing all
judicial consent decrees and orders.
In response to our draft report, the Regional Administrator
stated that the Memorandum of Understanding is expected to be
fully executed by the end of January 1990. Also, an internal
control review of accounts receivable, which will include a
review of the procedures in the Memorandum of Understanding, is
scheduled in February 1990.
The actions planned by the Regional Administrator, when
implemented, will substantially correct the deficiencies cited in
our report. We recommend that the Regional Administrator ensure
regional officials complete their planned actions.
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2. Prompt ActionNeeded to Collect Amounts Owed
Region 5 was not: promptly collecting cost recovery amounts owed
to the Superfund Trust Fund because of (a) delays in sending
accounting data to responsible parties/ (b) responsible party
requests for further documentation and/or dispute of cost billed,
and (c) late payment of amounts due. These conditions exist
primarily because the responsibility for sending accounting data
was not clearly assigned within the Waste Management Division
(WHO). Delays in collecting amounts owed resulted in lost
interest to the Superfund Trust Fund of at least $79,232.
Of the 20 settlement documents we reviewed, 12 required that
accounting data be sent to the responsible parties as a billing
of cost incurred by EPA. In 10 of 12 cases where accounting data
was required, there were delays in the collection of amounts due.
In another case, the responsible party is contesting the court
order and has not paid the cost due.
The 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.
Our draft report recommended that Region 5 (a) establish formal
procedures between the Waste Management Division, the Office of
Regional Counsel, the and Superfund Accounting Section to
identify all settlement documents which include provisions for
billing of oversight costs and forwarding settlement documents to
Superfund Accounting Section, and (b) instruct Superfund
Accounting Section to develop an automated tracking system for
billings. In response to our draft report, the Regional
Administrator stated that the Memorandum of Understanding will
ensure that settlement documents are promptly forwarded to the
Superfund Accounting Section. Also, an automated tracking system
for billing oversight costs will be included as part of the newly
developed Cost Documentation Monitoring System.
The actions planned by the Regional Administrator, when
implemented, will substantially correct the deficiencies cited in
our report. We recommend that the Regional Administrator ensure
regional officials complete their planned 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.
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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 EPA 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 site. Third, if EPA 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.
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 amounts 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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FINDINGSAND RECOMMENDATIONS
Finding No. 1 - ACCOUNTS RECEIVABLE NEED TO BE RECORDED
For all 20 settlement documents we reviewed/ neither Headquarters
nor Region 5 recorded accounts receivable amounting to about $5
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 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: (1)
Office of Regional Counsel (ORC) and Waste Management Division
(WMD) did not forward the settlement documents to the Superfund
Accounting Section (SFAS) in all cases, and (2) 5FAS did not
establish accounts receivable in the Financial Management System
(FMS) when settlement documents were received prior to payment.
In addition, routine procedures have not been established to
regularly reconcile WMD and ORC records with FMS.
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). EPA'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
solely a financial management function, but that all Agency staff
are accountable for these assets.
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EPA's Resource Management Directive System (HMDS) Chapter 2550D
"Financial Management of the Superfund Program" (2550D), issued
on July 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.
x
We judgmeritally selected to review the cost due from 16 of 52 (31
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. We also performed a limited review of the
collection of monies due the Superfund Trust Fund for cost
incurred by .EPA after the effective date of. the enforcement
action (oversight costs). We reviewed the collection of
oversight costs for four of the enforcement actions in our
sample. Therefore, we reviewed 20 (16 + 4) settlement documents
which established amounts owed for-past costs and/or oversight
costs.
Region 5 recognized the need for a systematic method for tracking
amounts owed, to the Government and the payment of reimbursements
resulting from enforcement actions. On.June 25, 1987, the Deputy
Regional Administrator issued a memorandum assigning responsi-
bility for forwarding settlement documents to the SFAS. WMD
would be responsible for forwarding administrative agreements and
ORC would be responsible for forwarding consent agreements to the
SFAS. However, as discussed below, this was not accomplished.
Policies And Procedures Were Not Followed
Accounts receivables were not recorded, as required by the above
procedures, prior to receipt of payment for any of the 20 "cost
recovery amounts reviewed. The settlement documents we reviewed
represented about $5 million due to the Superfund Trust Fund. A
receivable was only recorded when the payment was received by
Headquarters FMO or Region 5 SFAS. The primary reason
receivables were not recorded was because neither WMD nor ORC
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forwarded copies of settlement documents to Headquarters FMO or
Region 5 SFAS in a-11 cases. Seventy-five percent (15 of 20) of
the settlement documents reviewed were not forwarded to FMOs.
Settlement
Number Of Settlement Documents
Settlement Documents Not Provided Costs
Documents Forwarded But A/R To Be
FY Reviewed* To FMO Not Recorded Recovered
1987 11 0 $ 124,000
1988 11 9 2 1,920,978
1989 _8 _§. 1 2.784.323
Total ,22 14 £ 34.829,301
* Each responsible party agreement, consent decree,
administrative order, settlement, court order, or
judgment is counted as a settlement document. In
addition, for the four settlement documents where we
reviewed the payment of oversight costs, each billing
is counted as a settlement document.
Settlement Documents Not Forwarded To FMO
ORC officials stated that one reason judicial orders and decrees
were not promptly sent to the SFAS 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 referrals to
ORC. The report lists the status of the referral, including
whether the order is entered. Judicial orders are effective when
they are entered by the court. However, ORC may not receive the
monthly tracking report until two months after the order is
entered. DOJ has recently agreed to directly provide ORC with
monthly status printouts to better allow ORC to determine and
track the status of cases awaiting final judicial approval. ORC
officials stated that the monthly status printouts would be an
improvement over the DOJ tracking report.
ORC and WMD need to ensure that settlement documents are
forwarded to the SFAS. We found that settlement documents were
not .forwarded to the SFAS because (1) WMD management did not
clearly assign the responsibility and (2) ORC had no procedures
to ensure that settlement documents are forwarded to the SFAS.
The responsibility for forwarding settlement documents was not
clearly assigned within WMD to the Remedial Response Branch or .
the Superfund Program Management Branch. The remedial project
managers (RPMs), who are in the Remedial Response Branch, are
responsible "for developing administrative enforcement actions and
assessing compliance with administrative and judicial agreements
and orders. The PRP/Cost Recovery Unit, within the Superfund
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Program Management Branch, is responsible for cost recovery
information collection and documentation for .Section 107 actions.
We found that RPMs assumed that the PRP/Cost Recovery Unit was
forwarding settlement documents to the SFAS. Personnel in the
PRP/Cost Recovery Unit assumed the RPMs were forwarding the
documents to the SFAS. Part of this confusion may have occurred
when the Superfund program reorganized in 1988. At that time,
the PRP/Cost Recovery Unit was part of the CERCLA Enforcement
Branch, which was responsible for all aspects of the enforcement
program.
To clarify who is to forward settlement documents, a memorandum
was issued on October 6, 1989, stating that once an
administrative order is signed, a copy is to be sent to the SFAS.
However, the memorandum did not clearly state who was responsible
for sending a copy to the SFAS. A regional official stated that
the RPM is to send a copy of the administrative order to the
SFAS.
ORC supervisors were not systematically reviewing attorney's work
to ensure that settlement documents were forwarded to the SFAS.
ORC section chiefs stated that they do monitor attorneys in their
section to ensure that this is accomplished. However, several .
regional attorneys were not aware of the requirement. To ensure
that settlement documents are promptly sent to the SFAS, a
memorandum was issued during the second quarter of FY 1989
assigning the responsibility for sending all Superfund consent
decrees and administrative order to SFAS to a specific person
within ORC.
Region 5 is currently formalizing procedures between the offices
involved in cost recovery. ORC, WMD and SFAS are preparing a
Memorandum of Understand (MOU) concerning Superfund cost recovery
procedures. According to a November 13, 1989 draft of the MOU,
WMD will be responsible for providing the SFAS with all
administrative orders. ORC will be responsible for providing all
judicial consent decrees and orders.
As shown in the schedule on page 8, settlement documents were not
forwarded to Headquarters FMO or Region 5 SFAS in 15 of 20 cases.
Regarding the 5 cases (20 - 15) where settlement documents were
provided, neither Headquarters FMO nor Region 5 SFAS followed the
procedures in the Financial Management Manual to record a
receivable for the amounts due. For example:
A consent order was signed on May 6, 1988, in the
Northernaire Plating case. The order required Northemaire
to pay $268,818 to reimburse EPA for past costs spent in
cleaning up the site. Northemaire had not reimbursed EPA
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for the costs because the consent order was being appealed
in court. The consent order created an .obligation for the
responsible party to pay for past costs, and should have
been recorded as a receivable. No receivable was recorded
. for the costs due the Superfund Trust Fund. A copy of the
consent order was forwarded to SPAS, but not the
Headquarters'FMO. SFAS should have forwarded the
information to the Headquarters FMO so that a receivable
could be recorded in the FMS.
According to ORC officials, the accounts receivable was not
recorded because the responsible parties have filed an
appeal. The appeal has not yet been decided and it could
result in a change to the amount the responsible parties
will owe.
The Treasury Financial Manual codifies instructions for the
guidance of departments and agencies of the Federal government.
The Treasury Financial Manual defines a receivable as an amount
owed the Government from an individual, organization, or other
entity in satisfaction of a claim. It further states:
Any amount that is under appeal or in litigation should
continue to be classified as "delinquent" or "not
delinquent" and should be carried in its original
status as a current receivable until the Government
changes its position regarding the amount that is due
and payable, through ,either a decision of the courts or
an administrative settlement directed by a responsible
Government official.
Accounts receivable are to be recorded for all amounts owed in
order to ensure control over receivables and to promote
aggressive collection efforts. Amounts owed are to be recorded
as receivables even if they are subject to change or appeal.
The remaining four cases where Headquarters FMO or SFAS did not
record the accounts receivable even though they had the
settlement documents were Fadrowski Drum Disposal ($25,650),
Spiegelberg Landfill ($650,108), Alburn ($155,157) and Fadrowski
Drum Disposal (Oversight - $25,878).
In addition., to the five cases where settlement documents were
provided by WMD or ORC, SFAS did not record an account receivable
after we provided a settlement document. Ormet Corporation
signed an administrative order that required payment of past
costs and yearly oversight costs based on accounting data
provided by EPA. The accounting data was sent to Ormet on May
23, 1989. Costs due to the Superfund Trust Fund were $385,845.
WMD did not forward a copy of the accounting data to the SFAS.
On August 1, 1989, we provided the SFAS with a copy of the
settlement documents needed to record a receivable. Even after
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providing the settlement documents, the SFAS had not recorded a
receivable for the $385,845 owed, as of the end of fieldwork on
November 17, 1989.
The draft November 13, 1989 MOU states that the SFAS will
establish accounts receivable for amounts due. Also, in a
memorandum dated August 30, 1989, the SFAS outlined interim
procedures.for Superfund accounts receivable. The interim
procedures designated a person responsible for ensuring the
information-on the amount owed is forwarded to the Finance and
Accounting Section, who records the receivable in FMS. The SFAS
also plans to locate settlement documents which were not
forwarded to the SFAS, and determine whether cost recovery
amounts were collected. Where amounts were not collected, the
SFAS will record the amount owed as an account receivable and
follow up with ORC and DOJ to affect collection.
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 5'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 fulfillment 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 FMS did not
provide EPA management with timely and accurate financial
information. OMB Circular A-127 (A-127) states that an FMS is to
provide useful, timely, reliable, and complete information.
A-127 and FMFIA require- that an Agency's FMS 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
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Effective control over revenue, expenditure, funds,
property, and other assets.
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 have been forwarded to the SPAS and the receivables
have been recorded. HMDS Chapter 2S50D states that the FMOs
should establish routine procedures with the Superfund Branch
Chief and Regional Counsel to regularly reconcile Program and
Counsel records with FMS. In addition, the offices are to
exchange information on the status of debts, including cases
concluded by OOJ. Region 5 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 the Headquarters Office of
Enforcement and Compliance Monitoring (OECM). 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 any information and all reports can
be readily extracted. In a June 18, 1986 speech, EPA's
Administrator stated that national program systems, such as
CERCLIS and the Docket, have traditionally suffered from
incomplete and untimely data for a number of reasons: (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 CERCLIS and the Docket.
Also, we identified during our review settlement documents in the
SPAS for enforcement actions not listed in either. CERCLIS or the
Docket. We did not attempt to identify all cost recovery
enforcement actions not listed in CERCLIS or the Docket.
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As shown in the table below, we found that CERCLIS listed 80
percent (16 of 20} of the administrative enforcement actions. As
for judicial enforcement actions, we found that 72 percent (23 of
32) were listed in CERCLIS and 75 percent (24 of 32} were listed
in the Docket. See Exhibit 1 for list of enforcement actions.
Enforcement Actions
Administrative Percent Civil Percent
Enforcement Actions
Identified 20 32
Listed in CERCLIS 16 80 23 72
Listed in the Docket * 24 75
Enforcement Actions in
Neither System 3 20 13
* The Enforcement Docket System 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. In the past, RPMs updated the
information in CERCLIS. The responsibility for updating cost
recovery enforcement actions in CERCLIS was transferred to the
PRF/Cost Recovery Unit in a memorandum dated October 6, 1989.
The November 13, 1989 draft MOU includes the establishment of a
consolidated tracking system for cost recovery as a area for
possible future refinement. In the interim, ORC and WMD will
periodically reconcile their tracking system reports. Further
reconciliation of the tracking system reports to the FMS would
ensure receivables are recorded and that follow-up action is
promptly taken.
Draft Report Recommendations
We recommended that the Region 5 Regional Administrator take
appropriate action to:-
1. Instruct Waste Management Division, Office of Regional
Counsel, and Superfund Accounting Section to complete the
Memorandum of Understanding and implement the procedures.
2. Perform an internal control review of the procedures in the
Memorandum of Understanding during 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.
3. Instruct the Financial Management Branch to implement its
Superfund Accounts Receivable - Interim Operating
Procedures, as outlined in its August 30, 1989 memorandum,
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to identify settlement documents not forwarded to Superfund
Accounting Section. Where cost recovery .amounts have not
been collected, the amount owed should be recorded as an
account receivable and action.taken for collection.
4. Instruct Office of Regional Counsel and Waste Management
Division to establish a consolidated tracking system for
cost recovery. Until a consolidated tracking system, is
established, require the Office of Regional Counsel and the
Waste Management Division to continue to reconcile their
tracking system reports. Also, require that tracking
reports be provided to Superfund Accounting Section.
5. Instruct Superfund Accounting Section to regularly reconcile
tracking.reports provided by Office of Regional Counsel and
Waste Management Division to the financial management
system.
Regional Reply to Draft OIG Report
Region 5's response to our draft recommendations was as follows:
1. We agree with the recommendation. The final version of the
Memorandum of Understanding is expected to be fully executed
by the end of January 1990.
2. We agree with the recommendation. A review of accounts
receivable is scheduled for February 1990, and will include
of review of the procedures in the Memorandum of
Understanding.
3. We agree with the recommendation. Financial Management
Branch has initiated action to implement these procedures.
4. While we understand the benefits that a consolidated system
could produce, we do not agree that this should be required.
However, we do agree that Office of Regional Counsel and
Waste Management Division must continue to reconcile their
tracking system reports and provide the tracking reports to
Superfund Accounting Section.
5. We agree with the recommendation and believe the new
procedures will help in performing this function.
Auditor's Comments
The actions outlines by Region 5 in reply to our draft
recommendations, when implemented, will substantially correct the
deficiencies cited in our draft report.
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Recommendations
we recommend that the Regional Administrator ensure that the
planned corrective actions- are completed.
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Finding No. 2 - PROMPT ACTION NEEDED TO COLLECT AMOUNTS OWED
Region 5 was not promptly collecting cost recovery amounts owed
to the Superfund Trust Fund because of (1) delays in sending
accounting data to responsible parties, (2) responsible party
requests for further documentation and/or dispute of cost billed,
and (3) late payment of amounts due. These conditions exist
primarily because the responsibility for sending accounting data
was hot clearly assigned within the Waste Management Division
(WMD). Delays in collecting amounts owed resulted in lost
interest to the Superfund Trust Fund of at least $79,232.
Of the 20 settlement documents we reviewed, 12 required that
accounting data be sent to the responsible parties as a billing
of cost incurred by EPA. In 10 of 12 cases where accounting data
was required, there were delays in the collection of amounts due.
(Each case may have more than one reason for delay.) See Exhibit
2 for a listing of cases.
Number
Reason For Delay Of Cases
Delay in sending accounting data 8
Request for further documentation
and/or disputed costs 4
Late payment 4 .
In seven of the eight cases (20 - 12) where no accounting data
had to be sent, the collection of funds was timely. In the
remaining case, the responsible party is contesting the court
order and has not paid the cost due.
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 affected either through negotiation or as
a result of legal action against responsible parties. The costs
EPA tries to recover may be for (I) 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 cost recovery amounts accrue interest at
the same rate as investments of the Superfund Trust Fund. The
Treasury Department currently invests Superfund monies in 52-week
U.S. Treasury MK Bills that mature in early September of each
year. When funds are needed for Superfund activities, MK-Bills
are sold and the proceeds are used to pay EPA costs. When funds
are received, additional MK-Bills of the same maturity are
purchased. The MK-Bill rates for FYs 1987 to 1989 are:
16
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Interest Rate
1987 5.63%
1988 6.99%
1989 8.39%
Delays In Sending Accounting Data
\
Accounting data were not promptly sent to the responsible parties
in 8 of 12 (67 percent) cases where accounting data were
required. In 6 of the 8 cases, WMD did not promptly (1) request
the accounting data from the Superfund Accounting Section (SFAS)
and/or (2) send the accounting data to the responsible parties.
In the other.two cases, the SFAS did not promptly prepare the
cost documentation packages.
According to EPA's "Financial Management Procedures for
Documenting Superfund Costs" (September 1986), when accounting
data are needed, WMD is to prepare a cost recovery checklist.
The checklist identifies the (1) site, (2) costs to be
documented, (3) date through which costs are to be documented/
and (4) date the documentation is required. The checklist is to
be forwarded to the Headquarters Office of Waste Program
Enforcement (OWPE) and SFAS. OWPE is responsible for obtaining
documentation of Headquarters costs and contractor costs which
are not billed on a site-specific basis. The SFAS is responsible
for documenting regional site-specific costs. WMD can request
either a cost documentation package or a SPUR (Software Package
for Unique Reports) report.
A cost documentation package includes documentation of all costs
and is typically completed within 30 calendar days. However,
Region 5 found that cost documentation packages take two to four
months to complete. SPUR reports are computer summaries of the
charges to a specific site as contained in the Financial
Management System (FMS). Requests for SPUR reports are usually
responded to within five work days. Based on the cost
documentation package or SPUR report, WMD sends a letter billing
the responsible parties for the costs due.
Region 5 recently revised its procedures for cost documentation
because of the large number of requests for cost documentation
and the amount of time required to prepare cost documentation
packages. When accounting data are needed to bill responsible
parties, an annotated SPUR report will be used. The annotated
SPUR report includes a one page summary of major costs
categories. The summary is backed up by computer reports on
payroll, travel, indirect costs, and individual reports on
contract, cooperative agreement, and interagency agreement costs.
The annotated SPUR reports take about three weeks to complete.
The annotated SPUR report will provide more information to the
17
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responsible party than a standard SPUR report, a:»d will take less
time to complete than a cost documentation package.
In 6 of the 12 (SO percent) cases where accounting data were
required, WMD did not promptly (1) request the accounting data
from OWPE and SFAS and/or (2) send the accounting data to the
responsible parties. The six cases were Ormet Corporation, Hagen
Farm, Hagen Farm (oversight), Reilly Tar and Chemical, South
Point Plant (oversight),' and Fadrowski Drum Disposal (oversight).
See Exhibit 2 for details of each case. In several cases there
were significant delays in requesting accounting data. For
example,
The administrative order for Ormet Corporation was
effective on Kay 11, 1987. EPA was to send Ormet an
accounting of all response costs incurred prior to
April 1, 1987. In addition, yearly billings were to be
made for oversight costs starting in April 1988. The
billing, for (1) past costs and (2) two years of
oversight costs, was not sent until May 23, 1989, two
years after the administrative order was signed. In a
letter to Ormet, Region 5 said that the billing was
late because of "administrative oversight".
The administrative order for Fadrowski Drum Disposal
stated that at the end of each 12 month period
beginning with the effective date of the order, EPA was
to submit an accounting of all oversight costs. The
order was effective on May 11, 1987. Therefore, the
first billing of oversight costs should have been in
May 1988. However, a SPUR report on oversight costs
was not requested until January 26, 1989, eight months
later.
WMD is responsible for notifying SFAS that accounting information
is needed to bill responsible parties and sending the bill to the
responsible parties. However, the duties were not clearly
assigned within WMD. A memorandum was issued.on August 3, 1987,.
that the remedial project managers (RPM) in the CERCLA
enforcement section were responsible for notification of
responsible parties of amounts due. In March 1988, WMD was
reorganized, combining enforcement and program RPMs in a Remedial
Response Branch. According to the Chief of the Remedial Response
Branch, this responsibility was reassigned to the Cost Recovery
Unit in the Program Management Branch when the division
reorganized. During our review, the Chief of the Program
Management Branch found that the responsibility for notifying
responsible parties of amounts due was not specifically assigned.
In the November 13, 1989 draft MOU, the responsibility for
billing responsible parties was transferred to SFAS. In order to
ensure that billings for oversight costs are promptly prepared,
18
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SFAS officials, stated that they plan to locate all settlement
documents which require billings for oversight costs. SFAS is
also developing an automated system for keeping track of when
billings are to be prepared. Once all settlement documents are
located, SFAS. will have the information necessary to ensure*
billings for oversight'costs are promptly prepared. An automated
tracking system should also improve the timeliness of the
billings. * .
According to the "Financial Management Procedures for Documenting
Superfund Costs", cost documentation packages are typically
completed in 30 days. In 2 of 12 cases reviewed, Powell Road
Landfill and Fadrowski Drum Disposal, which required accounting
data, the cost documentation packages took four to five months.
In the future, Region 5 will use annotated SPUR reports to bill
responsible parties. The annotated SPUR reports take less time
to prepare than cost documentation packages. \
Requests For Further Documentation Qr Disputed Costs
Responsible parties have requested further documentation or have
disputed the costs billed in 4 of 12 cases (33 percent) where
accounting data were provided. The four cases were Ormet
Corporation, Hagen Farm (oversight), Spiegelberg Landfill, and
Powell Road Landfill. Examples of the type of documentation
requested by responsible parties include:
In a letter dated July 26, 1988, the responsible.party
for Powell Road Landfill asked EPA to provide
"documentation to show that the U.S. EPA contract costs
were incurred in connection with the Powell Road
facility and incurred not inconsistently with the NCP".
Contract costs represented 59 percent of the costs
billed for the site.
Ormet Corporation, in a letter dated June 2, 1989,
requested additional documentation such as (1)
indication of the.nature of the work performed by
employees, (2) summary of travel showing destinations
and purpose of travel, and (3) description of the work
performed by contractors.
One of the elements of proof needed for a cost recovery action is
that the actions taken were not inconsistent with the National
Contingency Plan (NCP). The Agency's policy .is to maintain
evidence that response actions are not inconsistent with the NCP.
The scope of this review was limited to the collection of cost
recovery amounts. We did not perform a review of EPA's ability
to provide documentation to responsible parties that showed costs
incurred were not inconsistent with the NCP.
19
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Late Payment Of CostaDue
Payment of cost recovery amounts due were received after the due
date in 4 of 12 cases (33 percent) where accounting data were
required. The payments were received from 11 to 81 days after
the due date.
Site Name Date Due Date Paid Days Late
Fadrowski Drum Disposal 11/21/87 02/11/88 81
American Anodco 11/29/87 02/05/88 68
South Point Plant
(oversight) 10/30/88 01/03/89 65
Hagen Farm 02/06/88 02/17/88 11
SFAS is responsible for sending out demand payment letters for
all debts 31 or more days old. However, with the exception of
Fadrowski Drum Disposal, the settlement documents were not
forwarded to FMO. Without a copy of the settlement document, the
FMO cannot take action to follow-up on delinquent debts.
Delays in (1) sending accounting data, (2) responsible party
requests for further documentation and/or dispute of cost billed,
and (3) late payment of amounts due, slow the investment of cost
recovery amounts due to the Superfund Trust Fund. We reviewed
$4,829,301 of costs due. If prompt action had been 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 least $79,232.
Draft Report Recommendations
We recommended that the Region 5 Regional Administrator take
appropriate action to: .
1. Establish formal procedures between the Waste Management
Division, the.Office of Regional Counsel, and the Superfund
Accounting Section to identify all settlement documents
which include provisions for billing of oversight costs.
The procedures should include forwarding settlement
documents to Superfund Accounting Section.
2. Instruct Superfund Accounting Section to develop an
automated tracking system for billings.
3. Instruct Waste Management Division to promptly notify
. Superfund 'Accounting Section of all oversight billings
required, until all settlement documents are forwarded to
Superfund Accounting Section arid/or an-automated tracking
system is developed.
20
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4. Instruct the Superfund Accounting Section to promptly
prepare accounting data and send billings to responsible
parties.
Regional Reolv to Draft PIG Report
The Regional Administrator agreed with our finding and outlined
. measures to address our recommendations.
1. The Superfund Cost Recovery Memorandum of Understanding
formalizes, clarifies and expands on the existing
procedures. Through these procedures, the Region insures
that documents establishing responsible party obligations to
reimburse the Superfund Trust Fund for oversight costs are
promptly provided to the Superfund Accounting Section. The
Memorandum of Understanding also allocates the
responsibility for tracking and billing oversight costs to
the Superfund Accounting Section. The Office of Regional
Counsel provides assistance with Interpretations where
necessary, and Waste Management Division provides assistance
with compilation of certain documentation.
2. Action has been initiated to include an automated tracking
system for billings as an enhancement to the newly developed
Cost Documentation Monitoring System.
3. The procedures in the Memorandum of Understanding regarding
the transmittal of settlement documents from Waste
Management Division to Superfund Accounting Section will
control this function.
4. The Region recognizes the importance of timely action.
Auditor's Comments
The actions outlined by Region 5 in reply to our draft
recommendations, 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. .
21
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Exhibit
Page 1 of 3
(see Page 13)
ADMINISTRATIVE AND CIVIL ORDERS AND DECREES
ISSUED AFTER OCTOBER 1, 1986
REGION 5
State
IL
OH
MI
MI
OH
IN
WI
HI
IN
IN
MI
WI
HI
OH
OH
IN
MI
OH
OH
OH
Total
IL
IL
IL
IL
MN
IL
MI
Site Name
Alburn Inc
Alsco Anaconda
American Anodco Inc
Bendix Corp
Dover Chemical
Dowden Landfill
Fradowski Drum Disposal
Hagen Farm
IJ Recycling
Lakeland Disposal Serv Inc
Midland Dow Hell
Muskego San Landfill
Oak Creek Naphtylamine Spill
Ormet Corp
Powell Road Landfill
Reilly Tar & Chemical Indiana
Roto-Finish Co
South Point Plant
Summit Natl Liquid Disposal
Hade Park Chemical
Administrative Agreements
A&F Material Greenup
Alburn Inc
Alburn Inc
Belvidere Municipal Landfill
Bernard Rumple Property
Brightly Galvanized
Butterworth #2 Landfill
FMS
ID
F3
1Y
2N
AS
BS
3Y
Tl
3C
CA
7B
61
J5
X3
12
H4
D4
4X
J6
04
B7
17
F3
F3
C7
K9
D6
Type of
Agreement
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Admin
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Completion
Date In
CERCLIS
(1)
10/09/86
02/15/87
10/23/87
03/17/88
07/27/87
03/30/89
10/18/88
08/14/87
03/21/88
02/15/87
11/12/87
03/31/87
12/18/87
03/31/87
12/22/88
01/20/87
u.
08/09/88
10/21/88
12/15/87
04/22/87
Completion
Date In Other
The Docket Aareements
(2) (3)
_
02/13/89
09/02/88
05/11/87
03/20/89
4
09/06/88
10/21/88
04/12/89
10/05/87
04/22/87
22
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Exhibit I
Page 2 of
ADMINISTRATIVE AND CIVIL ORDERS AND DECREES
State
IN
OH
OH
IL
IL
HI
IN
IN
IL
MN
MN
MN
IL
OH
MI
WI
MI
MI
IL
MI
MI
OH
WI
IN
MI
MI
ISSUED AFTER OCTOBER 1. 1986
REGION 5
Site Name
Calumet Container Corp
(J. Jagiella)
Chemical & Mineral Reclamation
Chemical & Mineral Reclamation
Film Recovery System Chips
Film Recovery System Chips
Folkerstma Refuse
(Oliver Machinery)
Fort Wayne Reduction Dump
Gary Dog Pound
Gebhart Fertilizer Co
Isanti Farmers Creamery
Isanti Farmers Creamery
Isanti Solvent
Johns Manville
Laskin/ Poplar Oil
Liquid Disposal
(Diamond Reo Truck)
Mallable Iron Range'
Northernaire Plating
Northernaire Plating
Outboard Marine
Peerless Plating Co Inc
Peerless Plating Co Inc.
Peters JV & Co (David Shillman)
Rogers Laboratory
Seymour Recycling Corp
Spiegelberg Landfill
Thomas Solvent (Verona Well)
FMS
Ifi
66
08
08
H6
H6
W9
IK
D9
43
43
43
A5
03
62
8B
83
83
G2
G2
H3
G3
01
A6
P9
Type of
Agreement
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial
Judicial v
judicial
Completion
Date In
CERCLIS
U)
02/15/87
06/11/87
04/04/88
05/20/88
02/21/89
10/08/87
11/15/86
12/10/87
12/10/88
01/22/88
03/23/88
10/01/87
05/06/88
09/02/88
05/18/87
09/15/87
08/05/88
08/18/88
Completion
Date In Other
The Docket Agreements
(2) (3)
03/15/89
06/11/87
05/20/88
01/10/89
10/09/87
10/27/86
12/10/87
04/30/89
04/07/89
09/21/87
05/06/88
04/28/89
05/18/87
11/10/87
12/26/87
08/05/88
12/01/88
1 1 / >*> /Ol
l^/2//oi
12/29/86
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Exhibit 1
Page 3 of 3
ADMINISTRATIVE AND CIVIL ORDERS AND DECREES
ISSUED AFTER OCTOBER I. 1986
REGION 5
State
Site Name
IN Tri State Plating (J. Padgett)
IL Velsicol Chemical Corp
FMS
ID
A2
Type of
Agreement
Judicial
Judicial
Completion
Date In
CERCLIS
(1)
05/18/89
Completion
Date In
The Docket
(2)
03/13/89
Other
Agreements
(3)
Total Judicial Agreements
23
24
Notes
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 from a listing, of concluded
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cases as of
July 17, 1989. Only CERCLA Section 107 cases were selected.
We reviewed the FMO's Superfund accounts receivable files to determine whether there were
any other cost recovery agreements that were not listed in CERCLIS or the Docket. Copies
of the agreements listed as "other agreements" were found in FMO files.
24
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Page 1 of 4
(see Page 16)
SCHEDULE OF SUPERFUND COST RECOVERY COLLECTIONS REVIEWED
ID Site Name
12 Ormet Corporation
2N American Anodco
3C Hagen Farm
3C Hagen Farm (Oversight)
83 Northernaire Plating
A6 Spiegelberg Landfill
B5 Dover Chemical
D4 Reilly Tar and Chemical
F3 Alburn, Inc
Gl Midland Dow Hell Site
G2 Peerless Plating
H4 Powell Road Landfill
H6 Film Recovery Systems
J6 South Point Plant
J6 South Point Plant (Oversight)
J6 South Point Plant (Oversight)
K9 Bernard Ruple Property
Tl Fadrowski Drum Disposal
Tl Fadrowski Drum Disposal
(Oversight)
AS Bendix Corporation
Total
AND REASONS FOR LOST
Cost
" Recovery
$ 385,845
14,133
39,203
54,795
268,818
650,108
45,724
.152,156
155,157
1,425,000
50,000
259,629
265,000
124,000
t) 63,664
t) 72,638
737,000
25,650
25,878
14,903
84,829.301
Effective
Date of
Settlement
Document
05/11/87
10/30/87
09/14/87
05/06/88
12/28/88
09/02/88
07/07/87
10/21/88
04/10/89
11/10/87
02/01/88
05/20/88
07/16/87
12/10/87
05/11/87
02/13/89
INTEREST TO THE SUPERFUND TRUST FUND
Date
Accounting
Data Sent
05/23/89
11/09/87
12/08/87
01/11/89
N/A
11/18/88
N/A
N/A
N/A
N/A
05/04/88
N/A
N/A
08/31/88
03/09/89
N/A
10/22/87
02/17/89
05/08/89
Date
Costs
Paid
02/19/88
02/29/88
04/24/89
02/11/88
09/15/87
01/03/89
05/05/89
02/04/88
02/11/88
03/13/89
Reasons For Lost Interest
Delay in
Sending Requested Lost
Accounting Late Further Interest
Data Payment Documentation / 1 ) Note
X X $28,303 (2)
X 165
X- X 390 (3)
X ' ' X 3,199 (4)
(5)
X . 24,308 (6)
(7)
X 2,794 (8)
<9>
v
*
X X 12,684 (10)
(11)
X X 4,790 (12)
X X 1,084 (13)
x 1,515 (14)
fl 4 ' _4_ if?? f 232
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Exhibit 2
Page 2 of 4
Notes
1. Lost interest was calculated on uncollected monies from the
date costs were due until costs were paid. For those cases
where there were delays in sending accounting data, we
estimated that accounting data were sent to the responsible
parties within seven days of the effective date of the
settlement document. For the nine settlement documents
where there were delays -in sending accounting data,
Financial Management System summary data (SPUR) reports were
used as accounting data in four instances and cost
documentation packages in five instances. SPUR reports are
typically completed in 5 workdays, and cost documentation
packages in 30 calendar days. Even though 30 days are
needed to prepare cost documentation packages, the cost
documentation package can be requested during the 30 day
public comment period prior to the issuance of the
administrative order. Also, the Proposed Guidance on
Tracking and Collecting the Reimbursement of Oversight Costs
from PRPs (June 27, 1988) recommends that SPUR reports be
used as accounting data.
2. An administrative order was signed with the Ormet
Corporation on May 11, 1987. EPA was to send Ormet an
accounting of all response costs incurred prior to April 1,.
1987. In addition, yearly billings were to be made for
oversight costs starting in April 1988. The billing for
past costs and two years of oversight costs was not sent
until May 23, 1989, two years after the administrative order
was signed. In a letter to Ormet, Region 5 said that the
billing was late because of "administrative oversight". On
June 2, 1989, Ormet requested additional documentation of
the cost incurred by EPA. Costs had not been paid as of
September 1, 1989.
3. The administrative order for Hagen Farm was effective on
September 14, 1987. The order stated that accounting data
would be provided- on the amount due for past costs.
Accounting data was requested by Waste Management Division
(WMD) from the Superfund Accounting Section (SFAS) on July
1, 1987, but not until October 5, 1987 from OWPE. The
accounting data were sent to the responsible party on
December 8, 1987.
4. Accounting data for oversight costs for Hagen Farm were to
be sent to the responsible party at the end of each twelve
month period beginning with the effective date of the order.
The first billing for oversight costs should have been made
on September 14, ,1988. Accounting data were not sent until
January 11, 1989, four months later. Costs had not been
26
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Exhibit 2
Page 3 of 4
paid as of September 1, 1989, because the responsible party
is disputing the costs billed.
5. Responsible parties are, contesting the court order for
Northernaire Plating. Past costs have not been paid.
6. The responsible party for Spiegelberg Landfill was sent
accounting data on past cost of $650,108 on November 18,
1988. Costs of $344,859 were collected on April 13, 1989.
The responsible party is disputing the remaining cost due of
$305,249. The responsible party is disputing the allocation
of costs for a cooperative agreement for two sites,
Spiegelberg and Rasmussen Dump. Payment had not been
received as of September 1, 1989.
7. Costs were paid in installments for Dover Chemical. All
payments were collected timely.
Date Due Date Paid Amount
12/31/88 09/23/88 $15,241.38
04/30/89 01/18/89 15,241.38
04/30/89 05/10/89 15,241.38
8. The administrative order for Reilly Tar and Chemical was
effective on July 7, 1987. The cost documentation package
used to bill the responsible party for past costs was dated
April 3, 1987, prior to the effective date of the order.
However, the billing for past costs was not sent to the
responsible party until November 2, 1987, almost four months
after the effective date of the order. According to the
cost summary dated April 3, 1987, the total EPA expenditures
were $152,156. However, the first billing for past costs
incorrectly stated cost due as $150,948. A revised bill was
sent on June 23, 1988 for the remaining costs due of $1,208.
Both payments were made timely by Reilly Tar.
Date Billed . Date Paid Amount
11/02/87 12/09/87 $150,948
06/23/88 07/11/88 1,208
9. Payments for Alburn were received from five responsible
parties. All payments were made timely.
Date Collected ' Amount
10/21/88 ' $107,012
10/21/88 4,034
10/21/88 825
11/23/88 41,182
11/23/88 2,105
27
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Exhibit 2
Page 4 of 4
10. Accounting data were sent to the responsible parties for
Powell Road Landfill on May 4, 1988, for past costs incurred
of $259,629. A cost documentation package was requested by
WMD on January 5, 1988/ but was not completed until July 19,
1988. A SPUR report was also requested on January 30, 1988.
The SPUR report, rather than the cost documentation package,
was used to bill the responsible party on May 4, 1988.
A payment of $106,521 was made by the responsible party on
August 4, 1988. Responsible parties requested further
documentation of cost incurred for the remaining $153,108.
Based on further documentation, a payment of $82,153 was
received on March 28, 1989. The responsible parties
requested further documentation on the remaining $70,955 in
order to show that the costs were consistent with the
National Contingency Plan.
11. The consent order for Film Recovery Systems allowed for
payment of past costs in installments. The first payment of
$225,000 was due on June 19, 1988. The remaining $40,000
was to be paid in four yearly installments of $10,000 plus
interest. Payments due through September 1, 1989, have been
made timely.
DateDue Date Paid Amount
06/16/88 06/23/88 $225,000
05/20/89 05/26/89 13,124
12. The administrative order for South Point Plant stated that
within 60 days of the end of the calendar year, EPA would
provide an accounting of all oversight costs. A SPUR report
on oversight costs was requested by WMD on August 2, 1988,
eight months into the year. The accounting data was sent to
the responsible party on August 31, 1988.
13. The administrative order for Fadrowski Drum Disposal was
. effective on May 11, 1987. A cost documentation package was
requested by WMD on May 20, 1987. The cost documentation
package was completed September 29, 1987, four months later.
14. The administrative order for Fadrowski Drum Disposal stated
that, at the end of each 12 month period beginning with the
effective date of the order, EPA was to submit an accounting
of all oversight costs. The order was effective on May 11,
1987. The first billing of oversight costs should have been
May 1988. A SPUR report on oversight costs was not
requested until January 26, 1989, eight months later.
Accounting data were sent to the responsible party on
February 17, 1989.
28
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Appendix 1
Page 1 of 5
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION V
JAN 1 7 1990 ^
DATE: Draft Audit Report NO. E1SJF9-05-0274
Review of superfund cost Recovery Accounts
SUBJECT: Receivable Establishment and Collection
valdas Adamkus
FROM: Regional Administrator
TO. Anthony C. Carrollo, Divisional Inspector General
for Audits, Northern Division
I appreciate the opportunity to. review the draft audit report on the
Review of Superfund Cost Recovery Accounts Receivable Establishment
and Collection. We have reviewed the report and the following
information represents Region 5's response to the draft audit report.
MO.JL - Accounts Rec;e;i,vgi?ji,e Need to be Recorded
Accounts receivable were not recorded because: (a) Office of Regional
Counsel (QRC) and Waste Management Division (WMD) did not forward the
settlement documents to the superfund Accounting Section (SFAS) in all
cases, and (b) SEAS did not establish accounts receivable "in the
Financial Management System (EMS) when settlement documents were
received prior to payment. Also, no procedures have been established
to require regular reconciliation of WMD and ORC records with EMS.
econmendat ion 1
Hie Regional Administrator should instruct WMD, ORC, and SEAS to
complete the Memorandum of Understanding (MXJ) currently being
prepared concerning Superfund cost recovery procedures and to
implement the procedures listed therein.
Reion v
We agree with the reconmendation. The final version of the MXJ is now
in circulation and it is expected that it will be fully executed by
the end of January 1990. The extensive consideration of the cost
recovery process by WMD, ORC, and FWD that has produced this MOU has
also led to valuable clarifications, and increased coordination, of
the existing procedures that are formalized in the MDU. As such,
please note that we had recognized the need for this action and
initiated action to prepare this M3U prior to this audit. .
Audit Recaui'ffl'ifiiflf-'ion 2:
Perform an internal control review of the procedures in "the MCU during
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.
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Recfion V Response
We agree with the recommendation, and the FAS. in the FMB has scheduled
a review of accounts receivable in February, 1990 which will include a
review of the procedures in the MOU.
Financial Managanent Branch should implement its Superfund Accounts
Receivable - Interim Operating Procedures, as outlined in its
August 30., 1989 memorandum, to identify settlanent documents not
forwarded to Superfund Accounting Section. Where cost recovery
amounts have not been collected, the amount should-be recorded as an
account receivable and action taken for collection.
Region V Response
We agree with the recommendation. FMB has initiated action to
iinplanent these procedures.
4:
Ine Regional aAninistrator should instruct ORC and WMD to establish a
consolidated tracking system for cost recovery. Until a consolidated
tracking system is established, ORC and WMD must continue to reconcile
their tracking systan reports. Also, tracking reports must be
provided to SFAS.
Region V Response
While we understand the benefits that a consolidated system could
produce, we do not agree that this should be required. Because of
their different areas of responsibility and expertise, the tracking
systems now used by WMD and ORC have different emphases and track
different milestones. A consolidated tracking systan that could
effectively serve the needs of OSC, WMD, and SFAS would require
careful planning and considerable retrofitting of whichever existing
tracking system would be used for creation of a consolidated system.
That is , the benefits of such a system may not outweigh the amount of
time and resources that would be necessary to establish .such a system.
However, we do agree that ORC and WMD must continue to reconcile their
tracking systan reports and provide the tracking reports to SFAS.
*
SFAS should regularly reconcile tracking reports provided by ORC and
WMD to the financial management systan.
Region V Responqg
We agree with the recommendation and believe that the new -procedures
(referred to previously) will help in performing this function.
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Findiiw ran. 2 - Prompt action Needed To collect amounts Quad
Cost recovery amounts owed to the Super fund Trust Fund were'not
promptly collected because of (a) delays in sending accounting data to
responsible parties, (b) responsible party requests for further
documentation and/or dispute of cost billed, and (c) late payment of
amounts due. These conditions exist primarily because the
responsibility for sending accounting data was not clearly assigned
within WD. - . . .
l;
The Regional administrator should establish formal procedures between
WD, CRC, and SFAS to identify all settlement documents which include
provisions for billing of oversight costs. The procedures should
include forwarding settlement documents to SFAS.
Region V Response
We agree with the reconnendation. The Superfund cost Recovery MDU
formalizes , clarifies , and expands on the existing procedures through
which the Region (1) insures that documents establishing responsible
party (RP) obligations to reimburse the Fund for oversight costs are
promptly provided to SFAS; and (2) allocates responsibility for
tracking and billing those costs to SFAS, with ORC providing
assistance with interpretation where necessary, and WMD providing
assistance with compilation of certain documentation. In combination
with the ongoing process of completing the compilation of all
historical documents creating cost recovery obligations, .
Recommendation 1 will be fully satisfied.
As noted in the draft audit report, the timeliness of CRC's provision
of decrees and court judgments to SFAS is constrained by the fact
that in most court cases, the finalized cost recovery documents are
initially possessed only by the Department of Justice (DOT) . This
fact makes the goal of a 1-day turnaround stated on page 7 of the
draft audit report impracticable in many cases. QRC has made DOT
aware that DOJ must provide the final documents to the Region as
quickly as possible, and DOJ has agreed to provide CSC a copy of DOJ's
regular tracking reports so that CRC can determine promptly if newly
finalized documents are outstanding.
In addition, Region V would like to reinforce that it may often be
appropriate to delay collection of oversight billings, or portions
thereof, that are legitimately in dispute. As the draft audit report
notes, RPs have a statutory right to be assured that the expenditures
for which they are billed were consistent with the National
Contingency Plan. Region V is trying, whenever. possible, to collect
oversight payments on the basis of an annotated SPUR report rather
than a full cost recovery documentation. The Region believes that in
many cases, the annotated SPUR provides adequate documentation to
establish the appropriateness of costs or, at the very least, narrow
the areas of dispute. Therefore, the Region believes that its
approach is the most efficient use of Agency resources. Moreover,
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work done toward preparation of the annotated SPUR also helps lay the
foundation for a full documentation package if such a package becomes
necessary.
Where possible, Region V is working to reduce the number and scope of
oversight cost disputes, consistent with the .-statutory rights-of RPs.
For example, in the model administrative order on consent for removal
actions, the RPs agree to pay oversight costs based on the annotated
SPUR, thereby limiting the permissible areas of inquiry with respect
to those costs.
SEAS should develop an automated tracking system for billings.
Region V Response
We agree with the reconroendation and have initiated action to- include
such a system as an enhancement to the newly developed Cost
Documentation Monitoring System. -
3 ;
WMD should promptly notify SFbS of all oversight billings required,
until all settlement documents are forwarded to SFAS and/or ah
automated tracking system is developed. - .
Region V Response
We agree with the recomnendation and believe that procedures '
established in the M3U regarding the transmittal of settlement
documents from WMD to SFkS will control this function.
SEfcS should promptly prepare accounting-data and send billings to
responsible parties.-
Region V Response ' ' '
We agree with the recomnendation and recognize the importance of
timely action.
It should be noted however, that Region V, consistent with the rest of
the Agency, interprets "an accounting of costs" to mean an itemized
bill, cost Documentation packages are not required for oversight
billings.
Additionally,'the following errors/omissions relate to the schedule
that appears on page 24 of the draft audit report:
' T * - '
1. Regarding Site Afi-Spiegelberg Landfill, $344,858:55 was
received on April 13, 1989. '
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2. Regarding Site B5-Dover Chemical, $15,246.38 was received on
September 23, 1988, $15,241 .-38 was received on January 18
1989, and $15,241.35 was received on May 10, 1989. '
3., Regarding Site D4-Reilly Tar Chemical, $150,947.23 was
received on December 9, 1987 and $1,208.29 was received on
July 11, 1988^
4. Regarding Site H6-Film Recovery Systems, $225,000 was received
on June 23, 1988 and $13,124 was received on May 26, 1989.
5. Regarding Site AS-Bendix Corporation, accounting data was sent
within 90 days as required by the order.
Valdas
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Appendix 2
DISTRIBOTION
Region 5
Regional Administrator (5 RA)
Regional Audit Followup Coordinator (5 MFA)
Office of Regional Counsel (5 C) . .
Office of Public Affairs (5 PA)
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 (LE-133)
Comptroller (PM-225)
Agency Followup Official (PM-225)
ATTN: 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)
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