y TABLE OF CONTENTS
SCOPE AND OBJECTIVES ..... . . ......... .... 1
SUMMARY OF FINDINGS .................... 3
'
fVACTION REQUIRED ....................... 5
' '
BACKGROUND ......................... 5
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PREVIOUS AUDIT REPORTS ................ ... 6
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FINDINGS AND RECOMMENDATIONS
1 . Accounts Receivable Need To Be Recorded ........ 8
2. Prompt Action Needed To Collect Amounts Owed ..... 23
EXHIBITS
1. Schedule Of Settlement Documents Forwarded To
FMO And Accounts Receivable Timely Recorded
Fiscal Year 1989 ................... 33
2. Schedule Of Super fund Cost Recovery Collections
Reviewed And Reasons For Lost Interest To The
Superfund Trust Fund, Region 3 .... ........ 36
3. Schedule Of Superfund Cost Recovery Collections
Reviewed And Reasons For Lost Interest To The
Superfund Trust Fund, Region 4 ............ 39
4. Schedule Of Superfund Cost Recovery Collections
Reviewed And Reasons For Lost Interest To The
Superfund Trust Fund, Region 5 ............ 43
APPENDICES
1. Assistant Administrator's Reply To OIG
Draft Report ........... ..... ..... 47
2. Distribution . .................... 55
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HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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•N.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 204*0
March 28, 1990
OFFICE OF
THE INSPECTOR GENERAL
MEMORANDUM
SUBJECT: Audit Report E1SJF9-05-0 2 74-010.0,2 07
Review of Superfund Cost Recovery Accounts
Receivable Establishment and Collection
FROM: Kenneth A.
Assistant Inspector General f<& Audit (A-109)
TO: F. Henry Habicht
Deputy Administrator (A-101)
SCOPE AND OBJECTIVES
We performed an audit of the collection of Superfund cost
recovery amounts. The purpose of the audit was to determine if:
1. Cost recovery amounts were recorded as accounts receivable
in EPA's financial records.
2. Cost recovery amounts were collected in a timely manner.
0
3. Interest was assessed upon late payment.
We reviewed Superfund cost recovery amounts which resulted from
cost recovery enforcement actions for Regions 3, 4 and 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 cost
recovery enforcement actions completed during Fiscal Years (FY)
1987 through 1989. We also reviewed the collection of oversight
costs for selected enforcement actions in our sample.
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Total
Enforcement Oversight Settlement
Actions Costs Actions
Region Selected Percent Reviewed Reviewed
3 11 of .44 25 3 14
4 17 of 56 30 4 21
5 16 of 52 II _4 .20.
Total 44 of 152 29
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, the regions were responsible for all Superfund cost
recovery activities including the recording of accounts
receivable and ensuring the payments were collected in PY 1989.
For the prior fiscal years, the regions were responsible for all
other activities related to the collection of cost recovery
amounts owed except recording and collecting. These activities
included forwarding settlement documents to financial management,
and billing responsible parties for oversight costs.
Our regional reports were issued as follows:
Location Report Number Date Issued
Region 5 0100126 January 25, 1990
Region 4 0100152 February 14, 1990
Region 3 0100172 March 6, 1990
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
January 19, 1990. We reviewed reports, policies and procedures,
and cost recovery and accounts receivable files. Also, we held
discussions with Headquarters and 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 the expanding of our review.
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We discussed our findings and recommendations with Financial
Management officials. Their comments and actions taken in
response to our findings are discussed in the body of this
report. A copy of the Assistant Administrator for Administration
and Resources Management's (OARM) March 15, 1990 reply to our
draft report is attached as Appendix 1.
SUMMARY OF FINDINGS
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. These assets
were not adequately protected because (1) cost recovery amounts
due were not recorded on the Agency's financial records, (2)
collections were not timely, and (3) interest was not collected
in all cases.
1. Accounts Receivable Need To Be Recorded
Neither Headquarters nor the regions timely recorded accounts
receivable on the financial records of the Agency. For FY 1989,
$5.3 million of $5.9 million (90 percent) of the payments we
reviewed were not timely recorded as accounts receivable. Thus,
the Agency's control over monies owed to the Super fund 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 a resulting loss of the 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 accounts 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. This ensures that collections can be properly recorded
and.receivable amounts can be accurately reported to management.
We found that accounts receivable were not recorded because: (a)
internal controls were not established for forwarding settlement
documents to the Financial Management Office, (b) judicial orders
were not promptly obtained from the Department of Justice, and
(c) the Financial Management Office did not timely record
accounts receivable on the financial records when settlement
documents were received prior to payment. In addition, the
regions did not establish routine procedures to regularly
reconcile Superfund and Office of Regional Counsel records with
the financial records.
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In response to our draft report recommendations, the Assistant
Administrator for Administration and Resources Management
outlined several measures to strengthen the control over accounts
receivable. He also stated that all regions will be provided a
copy of the final report. Each region will be requested to
continue to strengthen procedures for internal controls over
Superfund accounts receivable. The actions outlined by the
Assistant Administrator, when implemented, will substantially
correct the deficiencies cited in our draft report.
We recommend that the Deputy Administrator ensure that the
Assistant Administrators for (a) Administration and Resources _
Management, (b) Solid Waste and Emergency Response, and (c)
Enforcement and Compliance Monitoring, the General Counsel, and-
the Regional Administrators work together to complete the planned
corrective actions.
2. Prompt Action Needed To Collect Amounts Owed
Neither Headquarters nor the regions were promptly collecting
cost recovery amounts owed to the Superfund Trust Fund. This
resulted from (a) delays in sending accounting data to
responsible parties, (b) late payment of amounts due, (c) delays
due to responsible party requests for further documentation
and/or dispute of cost billed, and (d) delays in notifying
responsible parties of the effective date. These conditions
existed primarily because (a) the regions did not have a system
for tracking when accounting data were needed and (b) consistent
action was not taken to ensure prompt collection of payments.
Delays in collecting amounts owed resulted in lost interest to
the Superfund Trust Fund of $103,856.
Of the 55 settlement documents reviewed, we found 22 cases (40
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 recommendation/ the Assistant
Administrator for Administration and Resources Management stated
that guidance for Monitoring and Collecting Oversight
Reimbursement was distributed to the regions on February 20,
1990. Also, review procedures will be established to ensure that
oversight billings are promptly issued. The actions outlined by
the Assistant Administrator, when implemented, will substantially
correct the deficiencies cited in our draft report.
We recommend that the Deputy Administrator ensure that the
Assistant Administrators for (a) Administration and Resources
Management, (b) Solid Waste and Emergency Response, and (c)
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Enforcement and Compliance Monitoring, the General Counsel, and
the Regional Administrators work together to complete the 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.
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
Reauthorizetion 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 Hazardous Substance Superfund (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
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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.
PREVIOUS AUDIT REPORTS
CERCLA Section lll(k) states that the Inspector General shall.
conduct an annual audit of all payments, obligations,
reimbursements, or other uses of the Superfund Trust Fund to
assure that it is being properly administered. The objective of
the annual audits include whether the Agency complied with laws
and regulations and established an adequate system of internal
accounting control. The reports have consistently found that
amounts due the Superfund Trust Fund as a result of cost recovery
actions were not recorded timely.
Fiscal Date
Year Report Number Issued .
1983/1984 " 71911 09/16/87
1986 80028 10/07/87 *
1987 81917 09/21/88
1988 9100488 09/22/89
* A report on internal controls was not issued for FT
1985.
In response to the FT 1983/1984 draft report, the Comptroller
issued a memorandum to all regions emphasizing the importance of
notifying financial management of all debts as they arise so that
they may be recorded and collected timely. Also, an internal
control review was conducted during FY 1987. In response to the
FY 1986 draft report, the Agency delegated the responsibility for
recording accounts receivable and collection of cost recovery
payments to the Regions on October 6, 1988.
In response to the FY 1988 draft report, the Assistant
Administrator (AA) for Administration and Resources Management
(OARM) indicated that corrective action had been or would be
taken. The AA stated that the Agency had instituted measures to
ensure methodical and systematic transfer of Superfund
receivables from Headquarters to the regions. Training sessions
were held for regional offices, and interim procedures were
developed and issued. Also, Headquarters Financial Management
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Division (FMD) had been very aggressive in monitoring the
transfer of Superfund receivables and resolving issues as they
occur. In addition to transferring responsibility of Superfund
receivables to the regions, the AA stated FMD is aggressively
monitoring the clean-up of old receivables. Since the report was
recently issued (September 22, 1989) we did not perform audit
work to determine whether the corrective action had been
completed.
Each of the reports warned the Agency that a large number of
unidentified receivables precludes the ability to manage
receivables and collections, and could result in a material
amount of lost interest. The AA for OARM stated that the
transfer of responsibility to the regions was intended to improve
controls over Superfund accounts receivable. Our review found
that controls over receivables have not improved, and has
resulted in lost interest to Superfund Trust Fund.
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FINDINGS AND RECOMMENDATIONS
FINDING NO. 1 - ACCOUNTS RECEIVABLE NEED TO BE RECORDED
Neither Headquarters nor the regions timely recorded accounts
receivable on the financial records of the Agency. For FY 1989,
$5.3 million of $5.9 million (90 percent) of the payments we
reviewed were not timely recorded as accounts receivable. 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 a resulting loss of the 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, result in substantial losses to
the Superfund Trust Fund. The failure to record accounts
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. This ensures that collections can be properly recorded
and receivable amounts can be accurately reported to management.
We found that accounts receivable were not recorded because: (1)
internal controls were not established for forwarding settlement
documents to the Financial Management Office (FMO), (2) judicial
orders were not promptly obtained from Department of Justice
(Justice), and (3) the FMO did not timely record accounts
receivable on the financial records when settlement documents
were received prior to payment. In addition, the regions did not
establish routine procedures to regularly reconcile Superfund and
Office of Regional Counsel (Regional Counsel) records with the
financial records.
SPA'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 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
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settlements is not solely a financial management function, but
that all Agency staff are accountable for these assets.
EPA's Resource Management Directive System (RMDS), 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, as discussed below, 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 document, including accounting
data, which establishes an amount owed we refer.to as a
settlement document throughout the report.
Headquarters was responsible for tracking .and collecting cost
recovery amounts owed during FY 1987 and 1988. This area was
included as part of the annual audits of the Superfund Trust
Fund. The number of settlement documents we'reviewed for each
fiscal year were: -
Region FY 1987 FY 1988 FY 1989 Total
3 .077 14
4 1 . 3 17 21 . ' • ,
5 1 11
Total ,2 21 J£
The following summarizes our review for FY 1989 in Regions 3, 4,
and 5.
Internal Controls Not Established
The Headquarters Financial Management Division (FMD) did not
ensure that internal controls were established for forwarding
settlement documents to the regional FMOs. ' When the
responsibility for Superfund receivables was delegated to the
regions, FMD issued Desk Operating Procedures. The Desk
Operating Procedures state that one responsibility of the. FMO,
Regional Counsel, and Superfund program offices is to develop
administrative procedures and internal controls over the flow of
documents and information affecting Superfund receivables. We
found that Regions 3,4, and 5 had not established these
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procedures. As a result, settlement documents were generally not
forwarded to the FMOs.
The settlement documents reviewed in Regions 3, 4, and 5
represented $5.9 million due to the Superfund Trust Fund. For
the 32 settlement documents reviewed, 59 percent (19 of 32) were
not forwarded to the FMOs.
Number Of Settlement Settlement
Settlement Documents Not Documents Costs
Documents Forwarded Forwarded To Be
Region Reviewed* To FMO To FMO Recovered
3 7 2- 5 $1,166,175
4 17 12 5 1,956,645
5 _£ _5 1 2,784.324
Total & 19 ii S5. 907. 144
* Each responsible party agreement, consent decree,
administrative order, settlement, court order, or
judgment is counted as a settlement document. In
addition, for the seven settlement documents where we
reviewed the payment of oversight costs, each billing
is counted as a settlement document. For one of the
settlements in Region 3 (Maryland Sand and Gravel), the
billing for oversight costs had' not been prepared as of
January 3, 1990, the end of our fieldwork in Region 3.
Settlement Documents Not Provided
We found that settlement documents were not consistently
forwarded to the FMOs because Regions 3, 4, and 5 did not have
internal controls over the flow of documents and information
affecting Superfund receivables. The total value of the 19
settlement documents was $4,363,453. (See Exhibit 1 for listing
of cases . )
Number of Costs
Settlement To Be
Region Documents Recovered
3 2 Of 7 $ 547,500
4 ' 12 Of 17 1,862,772
5 • 5 of 8 ' 1.953.181
Total 19 of 32 S4. 363. 453
Region 3
Region 3 officials stated- that Regional Counsel,
specifically the Regional Hearing Clerk, was. responsible for
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forwarding all settlement documents, to the FMO. FMO in turn
was to date stamp the settlement document when it was
received. We found that the settlement documents were
generally not date stamped by FMO. Also, Regional Counsel
did not keep a log of when settlement documents were sent to
FMO. Without a log or date stamp, we could not determine
when the document was sent by Regional Counsel or received
by the FMO. Also, Region 3 had no assurance that settlement
documents, when forwarded by Regional Counsel, were received
by the FMO.
Region 4
Region 4 personnel were not consistently forwarding
•settlement documents to the FMO. Where there was only the
recovery of costs, Regional Counsel attorneys were to
forward the settlement documents to the FMO. However, when
the settlement document included future Remedial
Design/Remedial Action work and recovery of costs, the
remedial project managers in Superfund were to forward the
settlement document to the FMO. In a memorandum to us dated
December 4, 1989, the Assistant Regional Administrator for
Policy and Management stated that the Superfund Cost
Recovery Unit will be responsible for forwarding all
settlement documents to the FMO.
Region 5
On June 25, 1987, the Deputy Regional Administrator issued a
memorandum assigning responsibility for forwarding
settlement documents to the FMO. Superfund was responsible
for forwarding administrative agreements and Regional
Counsel was responsible for forwarding judicial agreements
to the FMO. However, this was not accomplished. We found
that settlement documents were not forwarded to the FMO
because (1) Superfund management did not clearly assign the
responsibility and (2) Regional Counsel had no procedures to
ensure that settlement documents were forwarded to the FMO.
Within the Superfund program, remedial project managers
assumed that the Cost Recovery Unit was forwarding
settlement documents to the FMO. Personnel in the Cost
Recovery Unit assumed remedial project managers were
forwarding settlement documents. To clarify who is to
forward settlement documents, Superfund program officials
issued a memorandum on October 6, 1989, stating that the
remedial project manager is to send a copy of the settlement
document to the FMO. . .
Region 5 Regional Counsel supervisors were not
systematically reviewing attorney's work to ensure that
settlement documents were forwarded to the FMO. To ensure
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that: settlement documents were promptly sent to the FMO, a
memorandum was issued during the second quarter for FY 1989
assigning the responsibility for sending all Superfund
settlement documents to the FMO to a specific person.
Region 5 is formalizing operating procedures between the
offices Involved in cost recovery. Regional Counsel,
Superfund and FMO are preparing a Memorandum of Understand
(MOU) concerning Superfund cost recovery procedures.
According to a November 13, 1989 draft of the MOU, Superfund
will be responsible for providing the FMO with all
administrative orders. Regional Counsel will be responsible
for providing all judicial consent decrees and orders.
An Office of Inspector General report (number 80779) on Accounts
Receivables, issued on March 17, 1988, found that debts owed the
Agency, generally from civil enforcement actions, were not being
recorded as accounts receivable. The report found that
receivables were not recorded because settlement documents had
not been provided to the FMO. The report recommended that FMO
instruct the FMOs to notify the head of the program office when
settlement documents were not provided.
In response to the report, the Comptroller stated that guidance
on action the FMO should take when settlement documents were not
provided would be included in RMDS 2540, Receivables and Billings
Chapter 9. The guidance was to have been issued by the end of FY
1988. However, the guidance had not been issued as of November
14, 1989, more than one year later. According to FMD officials,
the guidance was reviewed with two offices not concurring. A
contract was awarded to a CPA firm to make the required changes
to the guidance. The CPA rewrote the entire chapter, and the
contract was cancelled before finishing. FMD personnel are now
working on completing the guidance, and sending it out for
review.
Settlement documents must be promptly forwarded to the FMO so
that receivables can be timely recorded. FMO needs to ensure
that each region develops administrative procedures and internal
controls over the flow of documents and information affecting
Superfund receivables.
Judicial Orders Not Promptly Obtained From Justice
Regional Counsel officials in Region 4 and 5 stated that one
reason judicial orders and decrees were not promptly sent to the
FMO was because the documents were not promptly sent by Justice
to EPA. Justice sends a monthly tracking report -on the status of
referral to Regional Counsel. The report lists the status of the
referral, including whether the order was entered. Judicial
orders are effective when they are entered by the court. We
.found that Regional Counsel did not receive the monthly tracking
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report until two months after the order was entered. By that
time, the due date of the amount due may have past.
Office of Waste Program Enforcement (OWPE), within Office of
Solid Waste and Emergency Response, yearly negotiates an
Interagency Agreement (Agreement) with Justice to provide legal
representation and associated support services for all Superfund
legal matters. The Agreement includes a commitment of support
for EPA management goals and timeframes for filing/ prosecuting,
and resolving cases. The Agreement for FYs 1987 through 1989 did
not include timeframes for forwarding completed orders to EPA.
OWPE needs to work with Justice to include prompt forwarding of
settlement documents as part of the Agreement.
Settlement Documents Provided But Receivable
Not Timelv Recorded
As shown on the schedule on page 10, settlement documents were
not forwarded to the FMOs in 19 of 32 cases. Regarding the 13
cases (32 - 19} where settlement documents were provided, the
FMOs in Regions 4 and 5 did not consistently follow procedures .in
the Financial Management Manual to timely.record a receivable for
the amounts due. (See Exhibit 1 for a listing of cases.)
Timely Not Timely Could Not
Region Recorded Recorded (l\ Determine (2Y
3 20 3
405 0
5 £ 1 0
Total 2, £ 1
(1) Receivables were recorded prior to the effective date
of the settlement document, when payments were
received, or after costs had been paid.
(2) We could not determine when the receivable was recorded
in three cases because the information that we obtained
from financial records did not indicate the date the
receivable was established. The'information we
obtained indicated the document date, which is the
effective date of the order, and not the date the
. receivable was established.
The total dollar value of the 8 settlement documents not timely
recorded as accounts receivable was $925,016.
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Number of Costs
Settlement To Be
Region Documents Recovered
45 S 93,873
5 1 831.143
Total B S925.Q16
Region 4 •
In Region 4, the proper documents needed to record a
receivable, specifically a copy of the administrative order
and written notice of the effective date, were not sent to
the FMO. We found three cases where receivables were
recorded prior to the effective date. 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 FMO was recording the receivables prior to written
notice was because the FMO was being sent the administrative
order prior to issuance of the written notice. 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 FMO 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 was subsequently recorded on January
31, 1989, eight months later. The reason the cost due was
recorded as a receivable was because the Region 4 FMO was
sent a copy of the administrative order after the costs had
been paid. Upon receiving a copy of the order, Region 4 FMO
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 fieldwork on
November 21, 1989.
Region 5
Region 5 recorded receivables only when payments were
received, even when settlement documents were forwarded to
the FMO. In addition to the settlement documents provided
by Superfund and Regional Counsel, the FMO 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 were sent to Ormet on May 23, 1989. Costs due to the
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Superfund Trust Fund were $385,845. The settlement document
was hot forwarded to the FMO. On August 1, 1989, we
provided the FMO with a copy of the settlement documents
heeded to record a receivable. Even after providing the
settlement documents, the FMO had not recorded a receivable
for the $385,845 owed, as of the end of fieldwork on
November 17, 1989.
In a memorandum dated August 30, 1989, the Region 5 FMO
outlined interim procedures for Superfund accounts
receivable. The interim procedures designated a person
responsible for ensuring that amounts owed are recorded as
receivables. Also, Region 5 plans to locate all settlement
documents which were not forwarded to the FMO, and determine
whether cost recovery amounts were collected. Where amounts
were not collected,vthe FMO will record the amount owed as
an account receivable and follow up with Regional Counsel
and Justice to affect collection.
For one case, Northernaire Plating, Regional Counsel
officials stated that 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.
EPA's Financial Management Manual, Chapter 7, defines an
accounts receivable as an amount owed to EPA. Further
guidance'is not given as to when an amount is considered
owed to EPA. However, 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.
c
Accounts receivable are to be recorded for all amounts owed
in order to ensure- control over receivables and to promote
aggressive collection efforts. Specific guidance needs to
be provided to the regions on when amounts owed should be
recorded as accounts receivable. Language similar to the
15
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Treasury Financial Management Manual should be included in
HMDS 2540, Receivables and Billings, Chapter 9.
EPA needs to ensure that accounts receivable are timely recorded,
as required by the Financial Management Manual. Also, each
region should implement procedures, similar to Region 5, to
locate settlement documents which have not been forwarded to the
FMO, and determine whether cost recovery amounts were collected.
Where amounts were not collected, a receivable needs to be
recorded and follow up action taken to affect collection.
Reconciliation Procedures Would Help Ensure
Receivables Are Recorded
Regular reconciliation of Superfund and Regional Counsel records
with the financial records would serve as an internal control to
assure that all settlement documents have been forwarded to the
FMO and the receivables have been recorded. RMDS Chapter 255OD
states that the FMOs are to establish routine procedures with the
Superfund Branch Chief and Regional Counsel to regularly
reconcile Superfund and Regional Counsel records with the
financial records. In addition, the offices are to exchange
information on the status of debts, including cases concluded by
Justice. Regions 3, 4, and S had not established these
procedures.
The Superfund program and Regional Counsel 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.
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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. We
did not attempt to determine whether all cost recovery
enforcement actions are listed in CERCLIS or the Docket. We
found that neither CERCLIS or the Docket contained a complete
list of all cost recovery enforcement actions. Enforcement
actions need to be timely and accurately entered so that accurate
reports can be generated. These reports can then be used to
reconcile to the financial records.
Regions 4 and__5
After we began our audit, Regions 4 and 5 took steps to
reconcile the information contained in CERCLIS and the
Docket. A Region 5 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, Regional Counsel and Superfund will periodically
reconcile their tracking system reports. In a memorandum to
us dated December 4, 1989, the Region 4 Assistant Regional
Administrator for Policy and Management stated that the
Superfund Program office will reconcile cost recovery
enforcement actions listed in CERCLIS with those listed in
Docket. Additional reconciliation to the financial records
would ensure that settlement documents have been forwarded
and receivables recorded.
Region 3
Region 3 has the information needed to reconcile program and
counsel records, but the reconciliation process has not been
formalized. Regional Counsel has its own tracking system
for penalty payments, which the region refers to as the
"Administrative and Judicial Penalties" tracking system.
The Regional Hearing Clerk uses the system to track
administrative and judicial enforcement cases. Cases are
tracked by defendant name. The system tracks the status of
settlement documents, when payments are due, and whether the
debt had been paid.
The Regional Hearing Clerk was to send a copy of the
tracking system report each month to the FMO.. However, FMO
officials stated on January 3, 1990, that they do not
receive the tracking system report on a regular basis. The
report can be used to determine whether all settlement
documents had been received from Regional Counsel. Formal
procedures are needed to ensure that the tracking system is
regularly reconciled to the financial records.
Each region was to establish procedures to regularly reconcile
program and counsel records to the financial records. This
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reconciliation would have served as an internal control to assure
that receivables were recorded. EPA needs to ensure that
reconciliation procedures are established.
*****
The Federal Managers' Financial Integrity Act (FMFIA) requires
that U. S. General Accounting Office 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.
•
The failure to record accounts receivable for amounts due to the
Superfund Trust Fund is 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
Agency meets all these conditions by not recording receivables.
When receivables were not properly recorded, the financial
management system did not provide EPA management with timely and
accurate financial information. OMB Circular A-127 (A-127)
states 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 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.
Draft Report Recommendations .
We recommended in our draft report that the Assistant
Administrator for Administration and Resources Management provide
all regions a copy of our report and take appropriate action to:
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1. Work with the Deputy Administrator, and coordinate with the
Assistant Administrator for Solid Waste and Emergency
Response and the General Counsel., to require all regions to
provide assurance that their:
a. Financial Management office, Superfund program office,
and Office of Regional Counsel have established and
implemented administrative procedures and internal
controls over the flow of documents and information
affecting Superfund receivables.
b. Accounts receivable are timely recorded for all cost
recovery amounts owed.
c. Financial Management office, Superfund program office,
and Office of Regional Counsel reconcile their records
to ensure that cost recovery amounts due have been
collected. Where cost recovery amounts have not been
collected, the amount due must be recorded as an
account receivable and appropriate action taken for
collection.
d. Financial Management office, Superfund program office,
and Office of Regional Counsel establish and implement
procedures to regularly reconcile Superfund and
Regional Counsel records with 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.
e. Include, as part of their annual Headquarters review of
regional programs, steps to determine whether the
assurances provided have been implemented and are
adequate to ensure that receivables are promptly
recorded on the financial records.
The reason we asked that the Assistant Administrator for
Administration and Resources Management work with the Deputy
Administrator is because we recognize that senior program
officials do not have line authority over regional offices.
2. Promptly complete and issue Resource Management Directive
System 2540, Receivables and Billings Chapter,9. The
guidance should include a specific definition of when
amounts owed are to be recorded as accounts receivable.
3. Coordinate with the Assistant Administrator for Solid Waste
and Emergency Response to require the Office of Waste
Programs Enforcement to include the forwarding of completed
judicial orders to EPA as part of the Interagency Agreement
with the Department of Justice.
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Assistant Administrator for Administration and Resources
Management Reply J:o Draft OIG Report:
In response to our draft report, the Assistant Administrator
stated that all regions will be provided a copy of the final
report. Each region will be requested to continue to strengthen
procedures and internal controls over Superfund accounts
receivable. The Assistant Administrator provided the following
comments to our draft report recommendations.
la. All regions should assure that administrative procedures and
internal controls over the flow of documents and information
affecting Superfund receivables are established and
implemented. As acknowledged in the draft audit report,
regional offices have taken steps to address the roles and
responsibilities for coordinating processes over the flow of
documents and information affecting accounts receivable.
As in the past, the Agency is continuing to strengthen
controls by forming task forces, holding conferences,
executing Memorandums of Understanding, and issuing
guidance. Also, the Office of Solid Waste and Emergency
Response (OSWER) and the Office of Administration and
Resources Management (OARM) jointly addressed accounts
receivable procedures during a Cost Recovery Conference.
Detailed guidance was provided to .regional staffs on
operational procedures for timely and accurate establishment
of accounts receivable for cost recovery.
The Agency will continue to strengthen the processes. The
Agency as a whole realizes the importance of good cash
management.
Ib. Accounts receivable should be recorded in a timely manner.
The Director, Financial Management Division (FMD), will
reiterate to all Financial Management Officers and
Comptrollers the importance of recording receivables. Each
finance office reviews the recording of receivables to
ensure compliance with the General Accounting Office's Title
II. Also, as part of FMD's FY 1990 annual certification on
the Agency's accounting system, an independent contractor
will perform internal reviews at four regional finance
offices. The scope of the reviews will include a
determination on the timely recording of Superfund
receivables.
Ic. It is important to ensure that cost recovery amounts due
have been collected, and that proper follow-up be performed
where collection is not made. Several steps taken by
regional and headquarters offices include (1) forming
cooperative task forces to address cost recovery issues, (2)
developing procedures which include reconciliation of
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records, and (3) reconciling records on a monthly basis with
Superfund program offices and regional counsels.
Id. As stated, in the response to the previous recommendations,
through cooperation with the various offices, the Agency is
actively taking several steps to strengthen controls over
cost recovery issues, including reconciling finance and
program records. Also, OSWER began developing management
reports that compare data from the financial management
system with CERCLIS files related to cost recovery-
settlements. These draft reports were first distributed to
the Regions in August 1989.
le. In addition to the steps in place, during various reviews, .
PMD will include a review of the .regional finance offices'
processes to determine if receivables are promptly recorded
in the financial records. OSWER will cooperate with the
appropriate OARH lead office to include an evaluation of
accounts receivable as part of the annual OSWER review
process.
2. The Resource Management Directive System 2540, Chapter 9, is
currently being finalized for initiation into the Green
Border review for Agency-wide clearance. Guidance to define
when amounts owed are to be recorded as accounts receivable
is "Within five days of realizing that a debt is'owed to
EPA, the responsible EPA office must prepare and send a bill
to the debtor
3. The Department of Justice (Justice) should provide copies of
completed judicial orders to EPA. The February 2, 1990,
draft of the Interagency Agreement with Justice contained a
special condition that copies of all judicial orders should'
be provided to EPA within 30 days of lodging"or entry.
Also, Justice issued a memorandum to all United States .
Attorneys on February 8, 1990, instructing them to provide
copies of all file-stamped and court-signed judicial orders
to the appropriate regional counsels.
Auditor's Comments
The Deputy Administrator needs to ensure that the Assistant
Administrators for (1) Administration and Resources Management,
(2) Solid Waste and Emergency Response, and (3) Enforcement and
Compliance Monitoring, the General Counsel, and the Regional
Administrators work together in order to complete the planned
corrective actions. The Deputy Administrator also needs to
ensure that all regions take corrective action.
The actions outlined by the Assistant Administrator for
Administration and .Resources Management, when implemented, will
substantially correct the deficiencies cited in our report.
However, we offer the following comments on issues that require
further action.
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Ic. We agree that it is important to ensure that cost recovery
amounts due have been collected. However, as stated in our
finding, Regions 4 and 5 did not take steps to regularly
reconcile records until after we began our audit. Also,
Region 3 did not have formal procedures to regularly
reconcile Superfund and Regional Counsel records with the
financial management system. The intent of our
recommendation was that each regional financial management,
regional counsel, and Superfund program offices reconcile
their records to ensure that all amounts due in the past
have been recorded as accounts receivable and have been
collected.
Id. In addition to reconciling finance and program records,
controls over accounts receivable would be strengthened by
the financial management office notifying the appropriate
program office when settlement documents are not timely
provided.
2. We stated in our finding that a further definition is needed
of when an amount owed is to be recorded as an accounts
receivable, particularly when the amount is under appeal or
in litigation. The statement that within five days of
realizing a debt is owed, EPA must prepare and send a bill
to the debtor does not provide guidance as to when amounts
under appeal or in litigation are to be recorded as accounts
receivable.
Recommendations
We recommend that the Deputy Administrator ensure that the
Assistant Administrators for (1) Administration and Resources
Management, (2) Solid Waste and Emergency Response, and (3)
Enforcement and Compliance Monitoring, the General Counsel, and
the Regional Administrators work together to complete the planned
corrective actions.
We also recommend that the Deputy Administrator take appropriate
action to ensure that Regional Administrators and Offices of
Regional Counsel 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 amount due must be
recorded as an account receivable and appropriate action taken
for collection. Further, the Financial Management office should
notify the Regional Administrator when settlement documents are
not provided timely for appropriate corrective action.
•
In addition, we recommend that the Deputy Administrator ensure
that the Assistant Administrator for Administration and Resources
Management provide guidance on when amounts owed, particularly
when the amount in under appeal or in litigation, should be
recorded as accounts receivable.
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FINDING NO. 2 - PROMPT ACTION NEEDED TO COLLECT AMOUNTS OWED
Neither Headquarters nor the regions were promptly collecting
cost recovery amounts owed to the Superfund Trust Fund. This
resulted from (1) delays in sending accounting data to
responsible parties, (2) late payment of amounts due, (3) delays
due to responsible party requests for further documentation
and/or dispute of cost billed, and (4) delays in notifying
responsible parties of the effective date. These conditions
existed primarily because (1) the regions did not have a system
for tracking when accounting data were needed and (2) consistent
action was not taken to ensure prompt collection of payments.
Delays in collecting amounts owed resulted in lost, interest to
the Superfund Trust Fund of $103,856.
Of the 55 settlement documents reviewed, we found 22 cases (40
percent) where collection of amounts owed was delayed. (Cases
have more than one reason for delay.)
Reason for Delay
Delay in sending accounting data
Late payment
Request for further documentation
and/or disputed costs
Delay in notifying responsible
party of effective date
Number of
Cases
13
8
4
3
These delays resulted in lost interest to the Superfund Trust
Fund of $103,856, as shown in Exhibits 2, 3, and 4.
Region
3
4
5
Total
Lost interest
$ 11,553
13,071
79.232
S103.856
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 achieved 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 cost recovery amounts accrue interest at
the same rate as investments of the Superfund Trust Fund. The
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U.S. Treasury Department currently invests Superfund monies in
52-week U.S. Treasury MK Bills. Interest begins to accrue when
funds are invested. 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:
FY Interest Rate
1987 5.63%
1988 6.99%
1989 8.39%
Delays In Sending Accounting Data
EPA policy is to recover response costs where potentially
responsible parties (PRPs) have been identified, including the
cost of overseeing PRP response actions. Section 104(a)(l) of
CERCLA, as amended by SARA, specifically requires that for
remedial investigation/feasibility studies conducted by PRPs, the
PRPs must agree to reimburse EPA for the cost of overseeing the
work. As a matter of general operating procedure, oversight
reimbursement should also be pursued in all other removals and
remedial design/remedial actions-performed by PRPs. In addition
to billings for oversight costs, some settlement documents
require that accounting data be sent to responsible parties for
past costs incurred by EPA.
Office of Waste Program Enforcement (OWPE) issued "Proposed
Guidance on Tracking and Collecting the Reimbursement of
Oversight Costs from PRPs" on June 27, 1988. The guidance was
sent out for review, but it was suggested that it serve as
interim guidance until final guidance was issued. According to
the proposed guidance, CERCLIS will be used for oversight
tracking and collection. OWPE officials stated that the guidance
had not been finalized because of problems in getting the program
to work in CERCLIS.
There were delays in sending accounting data to responsible
parties in 13 of 55 cases reviewed. Accounting data were not
promptly sent because (1) the responsibility was not clearly
assigned and (2) there was no tracking system for when oversight
billings are to be sent to responsible parties. The proposed
guidance needs to be completed and implemented by.the regions to
ensure that accounting data are promptly sent to responsible
parties.
In several cases there were significant delays in sending
accounting data for billing of past cost and oversight costs.
For example: .
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The administrative order for Ormet Corporation was
effective on May 11, 1987. Region 5 was to send Onset
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 consent order for Shriver's Corner (Region 3} stated
that SPA was to submit an accounting of response oversight
costs at the end of each year. The order was effective
March 10, 1987. Therefore, the first billing should have
been prepared for cost incurred through December 31, 1987.
The billing was not prepared until September 11, 1989. The
billing was late because the Superfund office did not have a
complete list of all billings needed for oversight costs.
Region 3
In Region 3, the Cost Recovery Section within the Superfund
program office is responsible for preparing the cost
summaries for the billing of oversight costs. The Superfund
Branch is responsible for ensuring that the Cost Recovery
Section is notified when oversight billings are needed. At
the beginning of each year, the Cost Recovery Section
requests, from the Superfund Branch section chiefs, a list
of all orders and decrees which require the payment of
oversight costs.
During FT 1987 and 1988, the request for orders and decrees
requiring oversight billings were worded in rather general
terms. Because the request was not specific, not all orders
and decrees were identified by the Superfund Branch. Having
recognized the problem, the FT 1989 request for orders and
decrees requiring oversight billings was more specific and
the response improved. The Cost Recovery Section became
aware of older orders and decrees, such as Shriver's Corner,
that required billing of oversight costs. Even though the
response improved, the Cost Recovery Section still had no
assurance that all orders and decrees, which require
oversight billings, were being reported by the Superfund
Branch.
Region 4 *
In Region 4, the responsibility for oversight billings was
not clearly assigned. In the case of Sangamo weston, a
billing for EPA oversight costs was to be sent at the end of
each fisca.l year. The oversight billing for FT 1988 was not
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sent until July 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 FY 1989, the remedial
project managers were to prepare the oversight billing with
the assistance of the Cost Recovery Unit.
Region 5
In Region 5, the Superfund program office is.responsible for
notifying the Financial Management Office (FMO) 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 Superfund. A
memorandum was issued on August 3, 1987, stating that the
remedial project managers (RPM) in the CERCLA enforcement
section were responsible for notification of responsible
parties of amounts due. In March 1988, the Superfund
program office 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 realized that the responsibility for notifying
responsible parties of amounts due was not specifically
assigned to either the Remedial Response or Program
Management Branches.
Regions 3, 4, and 5 have recently initiated procedures to
promptly forward accounting data to the responsible parties.
Region 5 prepared a draft Memorandum of Understanding formalizing
cooperative procedures for cost recovery, which includes ensuring
that billings for oversight costs are promptly prepared. Region
4 issued operating procedures on October 30, 1989, on oversight
billings. Region 3 also had draft procedures outlining the
responsibility of various offices for oversight costs.
The "Proposed Guidance on Tracking and Collecting the
Reimbursement of Oversight Costs from PRPs" issued by OWPE on
June 27, 1989, stated that a review of all settlement documents
should be performed to identify those with oversight
reimbursement provisions. Regions 4 and 5 have taken, or plan to
take action, to identify all settlement documents. Region 4 has
developed its own system for keeping track of when oversight
billings need to be prepared. We recommended that Region 3
establish a* tracking system to identify all orders and decrees
which require oversight billings.
Collections of past and oversight costs replenish the Superfund
Trust Fund, and can be used for future cleanups. Delays in
sending* accounting data to responsible parties delays the
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investment of funds in the Superfund Trust Fund. The guidance on
tracking and collecting the reimbursement of oversight costs
needs to be completed and implemented. Also, each region needs
to have formal procedures between its FMO, Superfund program
office and Regional Counsel to ensure that oversight billings are
promptly prepared.and sent to responsible parties.
Late Payment Of Amounts Owed
Payments of cost recovery amounts due were received after the due
date in 8 of 55 cases reviewed. Payments were delayed because
(1) consistent action was not taken to,collect amounts due and
(2) settlement documents were not promptly sent to the FMO, as
discussed in Finding No. 1.
Number of Cases
Region FY 1988 FY 1989
311
402
5 II
Total 41
The Superfund Trust Fund audit reports for FT 1987 and 1988 found
that improved monitoring of receivables was needed to ensure that
debtors pay in a timely manner. The FY 1988 draft report
recommended that the Director, Financial Management 'Division
(FMD), modify the accounts receivable subsystem to age
receivables in order to better monitor the collection of
receivables. In response to the draft report, the Assistant
Administrator for Administration and Resources Management stated
the accounts receivable module of the Integrated Financial
Management System includes improved aging and reporting
procedures that will assist in the overall cash management
process. The accounts receivable module has recently become
operational. The improved aging and reporting procedures should
ensure that consistent follow up action is taken.
Requests For Further'Documentation And/Or Disputed Costs
In Region 5, responsible parties requested further documentation
or disputed the costs billed in four cases where accounting data
were provided. The four cases were Ormet Corporation, Hagen Farm
(oversight), Spiegelberg Landfill, and Powell Road Landfill.
There were no delays because of requests for further
documentation and/or disputed costs in Region 3 and 4. 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
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"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 KCP".
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.
SABA requires that cost recovery amounts accrue interest.
Interest begins to accrue from the date when the accounting data
are sent to the responsible parties. Responsible parties should
be. required to pay interest for late payment of amounts due, even
when further documentation is requested or costs are disputed.
Region 3 recently signed a consent decree containing such
language. The consent decree for Henderson Road, effective May
3, 1989, stated that if oversight costs were disputed and found
to be payable, interest will accrue from the due date in the
billing. Similar language needs to be included in all
settlement documents, including billings for oversight costs.
Delays In Sending Written Notice Of Effective Date
There were delays in notifying responsible parties of the
effective date of settlement documents in Region 3 and 4. There
were no delays in notifying responsible parties of the effective
date in Region 5.
Region 4
In Region 4, 9 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
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agreement is effective when written notice is given that the
public comment period has closed.
In 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. We brought these
two cases to the attention of Region 4 officials in a
memorandum on September 28, 1989.
Date Effective Elapsed
Site Name Signed Date Days
Linecrest Way 01/26/89 10/05/89 252
Buff (CD) 02/15/89 09/26/89 223
The $3,800 owed for Buff (CD) 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.
Region 4 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 (CD) 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.
Region 3
In Region 3, costs were not timely collected in one case
because of a miscommunication between Justice and Regional
Counsel. In the case of Palmerton Zinc Pile, the settlement
document was effective October 14, 1988. The first payment
of $50,000 was due in 60 days, or by December 13, 1988. The
first installment was not paid until June 8, 1989, six
months later. However, the responsible party was not
notified for five months that the decree had been entered
and payment was due. Justice thought Regional Counsel
notified the responsible party the case had been entered and
Regional Counsel thought Justice did. Therefore, the
responsible party did not know the settlement document had
been entered and did not know that costs were due.
Delay in notifying responsible parties, that settlement documents
are effective and costs are due, slows the collection and
investment of amounts due the Superfund Trust Fund. Region 4
found that at a tracking system for administrative cost recovery
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agreements was needed to ensure that responsible parties were
promptly notified of the effective date. Each region needs to be
aware that delays can occur in notifying responsible parties of
the effective date. Additional controls, such as a tracking
system, may be needed to ensure that responsible parties are
promptly notified of the effective date.
*****
Delays in (1) sending accounting data, (2) collection of amounts
due, (3) responsible party requests for further documentation
and/or dispute of cost billed, and (4) notifying responsible
parties of the effective date, slow the investment of cost
recovery amounts due to the Superfund Trust Fund. We reviewed
$10,897,897 of cost 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
of at least $103,856 could have been earned.
Draft ReportRecommendations
We recommended in our draft report that the Assistant
Administrator for Administration and Resources Management take
appropriate action to:
1. Coordinate.with the Assistant Administrator for Solid Waste
and Emergency Response to require the Office of Waste
Programs Enforcement to complete and implement the guidance
on tracking and collecting reimbursement of oversight costs.
2. Work with the Deputy Administrator and coordinate with the
Assistant Administrator for Solid Waste and Emergency
Response to:
a. Require each EPA Region to provide formal assurance
.that the guidance on tracking and collecting
reimbursement of oversight costs has been fully
implemented and procedures have been established to
ensure that oversight billings are promptly sent to
responsible parties.
b. Include, as part of the annual Headquarters review of
regional programs, a determination of whether the
procedures and controls have been implemented and are
adequate to ensure that oversight billings are promptly
sent to responsible parties.
The reason we asked that the Assistant Administrator for
Administration and Resources Management work with the Deputy
Administrator is because we recognize that senior program
officials do not have line authority over regional offices.
30
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3. Work with the Deputy Administrator/ and coordinate with the
General Counsel and the Assistant Administrators for Solid
Waste and Emergency Response and Enforcement and Compliance
Monitoring, to: . . .
a. Require that all administrative and judicial orders and
decrees include a statement that interest will accrue
from the due date when disputed costs in oversight
billings are found to be payable.
b. Require that oversight billings a statement that
interest will accrue from the due date if disputed
costs are found to be payable.
Assistant Administrator for Administration and Resources
Management Reply to Draft PIG Report
The Assistant Administrator substantially agreed with our draft
recommendations and provided the following comments.
1. Office of Solid Waste and Emergency Response (OSWER) took
action on this recommendation. The guidance on Monitoring
and Collecting Oversight Reimbursement was distributed to
the Regions on February 20, 1990.
2a. Progress made on processing oversight billings should be
reviewed. An acceptable review procedure to ensure that
oversight billings are promptly sent to responsible parties
will be developed.
2b. The Financial Management Division will review financial
management office procedures and controls for oversight
billings. Also, OSWER will continue to work with other
Agency offices to strengthen the collection of oversight
costs from responsible parties.
3a. CERCLA legislation is clear on the issue of assessing
interest. The inclusion or omission of an interest
statement should have no impact on the Agency's authority to
collect interest. Also, OSWER and Office of Enforcement and
Compliance Monitoring (OECM) co-authored draft model consent
and unilateral orders. The models are in final review and
should be published in the near future. The draft models
incorporate the idea that interest will accrue from the due
date when disputed costs in oversight billings are found to
be payable.
3b. Once the guidance models are issued final, Office of
Administration and Resources Management and OSWER will
cooperate in establishing the appropriate statement for
billings.
* .
31
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Auditor's Comments
The actions outlined by the Assistant Administrator, when
implemented, will substantially correct the deficiencies cited in
our report.
Recommendation
We recommend that the Deputy Administrator ensure that the
Assistant Administrators for (1) Administration and Resources
Management, (2) Solid Waste and Emergency Response, and (3)
Enforcement and Compliance Monitoring, the General Counsel, and
the Regional Administrators work together to complete the planned
corrective actions.
32
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EXHIBIT 1
Page 3 of 3
Notes;
1. Effective date is the date of the order or decree, except
where accounting data was provided to the responsible
parties. Where accounting data was provided, the effective
date is the date of the billing.
2. We reviewed the timeliness of the recording of the
receivable only in those cases where the settlement document
was provided to the Financial Management Office.
3. Settlement documents were not date stamped by the Region 3
FMO. Therefore, we could npt determine when the settlement
document was received by the FMO.
4. We could not determine when the receivable was recorded in
three cases because the information that we obtained from
the Region 3 financial records did not indicate the date the
receivable was established. The information we obtained
indicated the document date, which is the effective date of
the order, and not the date the receivable was established.
35
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EXHIBIT 2
Page 2 of 3
Notes;
1. This amount represents the total value of the settlement
documents reviewed. The total cost due or collected to EPA
as of January 3, 1990, the end of OIG fieldwork in Region 3,
was $3,466,103.
-Total value of settlement documents $3,723,565
Plus: Interest collected for Raymark
Industries 26.705
$3,750,270
Less: Installments payments not due
Harvey & Knott Drum
($350,000 - $70,000) 280,000
United Rigging-and Hauling
($10,000 - $5,833) 4.167
Costs reviewed $3.466.103
2. Lost interest was calculated on uncollected monies from the
date costs were due until costs were paid.
3. Payment of $350,000 for the Harvey & Knott Drum Site was to
be paid in installments over 10 years. The first $35,000
payment was collected September 29, 1988. The second was
received on May 9, 1989.
4. The consent decree required regular billing of oversight
costs. The billing was to be sent on the anniversary date
of the decree, or April 21, 1989. As of January 3, 1990,
the end of 016 fieldwork in Region 3, the billing had not
been sent. We calculated lost interest due to the delay in
oversight billing was $2,011, based on Region 3's estimated
oversight costs of $35,000.
5. According to the financial management system printout, the
account receivable of $711,000 for past costs for the Holder
Chemical Corporation was accurately recorded but not timely
established. The account receivable, established on June
15, 1988, was 47 days after the effective date of the
settlement document April 29, 1988. No payment had been
made for Holder because the responsible party has been in a
nursing home and was deemed incompetent. The property is
now the only asset of the corporation, which the state has a
lien against.
6. The consent agreement for United Rigging & Hauling requires
$10,000 to be paid in 24 monthly installments of $416.66
each plus interest. .As of October 27, 1989, 14 payments
totalling $5,833.24 have been collected. The last
collection date was September 18, 1989.
37
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Exhibit 2
Page 3 of 3
7. The consent decree for Saltville Waste Disposal requires
costs of $456,000 be paid in two installments. The first
installment of $228,000 was collected timely. The second
installment was due September 15, 1989. Headquarters was
responsible for collecting the payment. The second
installment was not collected as of November 15, 1989, the
end of 016 fieldwork in Headquarters.
8. The consent decree for Saltville Waste Disposal stated that
oversight billings were to be sent on January 1 of each
year. The billing for FY 1989 was not sent until March 20,
1989, resulting in lost interest of $320.
9. The consent decree for Palmerton Zinc, effective October 14,
1988, stated -that $100,000 was to be paid in two
installments of $50,000 each. The payment was due within 60
days, or by December 13, 1988. The payment was not made
until June 8, 1989, six months later. The payment was not
received promptly because the responsible party was not
timely notified of the ^effective date of the consent decree.
The second installment of $50,000 was due on October 14,
1989. The payment was received on October 13, 1989.
10. The consent decree for Raymark Industries required $512,500
costs, plus accrued interest, be paid. The decree stated
that the responsible parties had transferred $1,125,000
between April 1, 1988 and July 1, 1988 to the United States.
The money was deposited in an interest bearing escrow
account established by the Clerk of the District Court for
the Eastern District of Pennsylvania.
Within 10 days of entry of the decree, $512,500 plus accrued
interest was to be paid to the EPA for response costs. The
total amount collected was $539,205, which included $26,705
interest. The settlement document was effective February
21, 1989. The payment was made on April 27, 1989, about two
months later. The collection was not timely because the
Court collected the payment and delayed transferring the
collection amount to EPA. Lost interest was not computed in
this instance because the problem was with Justice and
beyond EPA's control.
11. The consent order for the Shriver's Corner Site required
oversight billing to be submitted at year end. The billing
for calendar year 1987 oversight costs was not timely
submitted. Lost interest is calculated from the date the
billing should have been made, January 1, 1988, until the
date the billing was made, September 11, 1989. The payment
was collected November 24, 1989.
38
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EXHIBIT 3
Page 3 of 4
Notes
1. Lost interest was calculated on unco1leeted monies from the
date costs were due until costs were paid.
2. Payments for Medley Farms were received from eight
responsible parties. All payments were made timely.
Date Collected Amount
02/20/87 $105,952
05/28/87 13,552
05/28/87 7,448
07/29/87 261,184
07/29/87 110,992
07/29/87 39,592
07/29/87 14,952
08/04/87 6.328
Total
3. 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 FY 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).
4. Two payments of $5,000 each were received for Woodward
Property on Hay 12 and 19, 1988. Both payments were
received timely.
5. 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 and Waste
Management Division personnel did contact the responsible
party to collect the payment.
6. Payments were received from four responsible parties for
Brown Wood Preserving. f All payments were timely.
41
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EXHIBIT 3
Page 4 of 4
Date Paid Amount
11/03/88 $ 17,500
11/08/88 52,500
11/14/88 17,829
11/21/88 72.171
Total $160.000
7. There was a delay in the payment for Powersville 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.
8. Payments were received from two responsible parties for
Kershaw County Landfill. Both payments were timely.
Date Paid Amount
02/17/89 $14,000
03/03/89 14.000
Total $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
collected as of November 21, 1989.
42
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EXHIBIT 4
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
• 44
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EXHIBIT 4
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.
. 'i
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
45
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EXHIBIT 4
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.
Date Due 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.
46
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Appendix 1
Page 1 of 8
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
MAR | 5 I99Q
OFFICE OF
ADMINISTRATION '
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Response to Draft Audit Report E1SJF9-05-0274
"Review of Superfund Cost Recovery Accounts
Receivable Establishment and Collection"
FROM: Charles L. Grizzle VjL K-
Assistant Administrator I t*^
TO: Kenneth A. Konz
Acting Assistant Inspector General
for Audit.
Attached is the Agency's consolidated response to the
subject draft audit report.
We realize the importance of good cash management practices
and continually take steps to improve controls over accounts
receivable. Prior to this audit, we coordinated our efforts with
various Assistant Administrators and developed guidance and
procedures which address the controls over the flow of documents
establishing accounts receivable. To further improve accounts
receivable controls, some of our regional offices are developing
Memorandums of Understanding between the Regional Counsels,
Superfund Program Offices and the Financial Management Offices.
Memorandums of Understanding help to establish responsibility for
the processes which cross lines of authority.
The attachment includes general comments concerning my role
as action official for implementation of the recommendations.
Specific comments address recommendations in the draft report.
We will continue to strengthen the processes as outlined in our
response. We would also appreciate having our complete comments
included in your final report. Should you have any questions,
please contact Jack Shipley, Deputy Director, Financial
Management Division, on 382-5097.
Attachment '
cc: OC (RMD/FMD)
OSWER
• OECM
OGC
47
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Appendix 1
Page 2 of 8
ATTACHMENT
RESPONSE TO RECOMMENDATIONS
DRAFT AUDIT REPORT E1SJF9-05-0274
REVIEW OF SUPERFUND COST RECOVERY ACCOUNTS
RECEIVABLE ESTABLISHMENT AND COLLECTION
GENERAL COMMENTS
We agree that all offices involved in the cost recovery
process should work together to develop a system whereby all
parties receive information pertinent to their operation.
As Agency follow-up official, the Assistant Administrator,
OARM has overall responsibility for Agency-wide audit resolution
and implementation of corrective actions. OARM will ensure that
action officials have been designated who have responsibility for
resolution of audits, and that audit recommendations spanning
more than one program or administrative function are properly
coordinated and corrective actions taken. However, the action
official is either the respective Regional Administrator or
Assistant Administrator who is responsible for ensuring that
timely, adequate responses and determinations are transmitted on
findings and recommendations contained in audit reports and that
corrective actions are implemented. Each Assistant Administrator
having responsibility over a program area addressed in the report
should be named as the action official.
As in the past, OARM will continue to work with the other
Assistant Administrators and their staffs to further.identify
methods to improve internal controls in establishing and
collecting accounts receivable.
SPECIFIC COMMENTS
FINDING MO. 1 - ACCOUNTS RECEIVABLE NEED TO BE RECORDED
We recommend that the Assistant Administrator for Administration
and Resources Management provide all regions a copy of our report
and take appropriate action to:
1. Work vith the Deputy Administrator, and coordinate with the
Assistant Administrator for Solid Waste and Emergency
Response and the General Counsel, to require all regions to
provide assurance that their:
a. Financial management office, Buperfund program office,
and Office of Regional Counsel have established and
implemented administrative procedures and internal
controls over the flov of documents and information
affecting superfund receivables.
1
48
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Appendix 1
Page 3 of 8
ATTACHMENT
As requested, we will provide all regions a copy of the
final report, and a request that they continue to strengthen
procedures and internal controls over Superfund accounts
receivable. We believe that, in the future, the Office of
Inspector General .should distribute audit reports to the offices
charged with acting on report recommendations. ,v
.*:? '?'•
"e j.'
We agree that all regions should assure that administrative
procedures and internal controls over the flow of documents and
information affecting Superfund receivables are established and
implemented. As in the past, the Agency is continuing to
strengthen controls by forming task forces, holding conferences,
executing Memorandums of Understanding (MOUs), and issuing
guidance.
As acknowledged in the draft audit report, regional offices
have taken steps to address roles and responsibilities for
coordinating processes over the flow of documents and information
affecting accounts receivable. MOUs have been executed or are in
the development process. These MOUs specify the flow of
documents and information needed to establish accounts
receivable, and assign responsibility to the various offices
involved in the process.
The Office of Enforcement and Compliance Monitoring (OECM)
and OARM have been working with the Department of Justice (DOJ)
to ensure the distribution of court-approved consent decrees
under environmental statutes into EPA's systems. On February 8,
1990, DOJ issued a memorandum to all United States Attorneys on
behalf of EPA, requesting that each United States Attorney Office
provide copies of file-stamped and court-signed consent decrees
to the appropriate EPA regional counsel's office. Copies of the
DOJ memorandum were provided to all regional finance offices,
counsels, processing personnel and cost recovery support staff.
The Office of Solid Waste and Emergency Response (OSWER) and
OARM jointly addressed accounts receivable procedures during a
Cost Recovery Conference. Detailed guidance was provided to
regional staffs on operational procedures for timely and accurate
establishment of accounts receivable for cost recovery,
penalties, and oversight reimbursement.
OSWER incorporated guidance to facilitate currency and
accuracy in the establishment and management of accounts
receivable in the following directives: 1) OSWER Directive
9832.13, Superfund Cost Recovery Strategy, and 2) Draft Guidance
on Monitoring and Collecting Oversight Reimbursement.
2
49
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Appendix I
Page 4 of 8
ATTACHMENT
The Agency will continue to strengthen the processes. The
Agency as a whole realizes the importance of good cash management
practices.
b. Accounts receivable are timely recorded for all cost
recovery amounts owed.
We agree that accounts receivable should be recorded in a
timely manner. The Director, Financial Management Division
(FMD), will reiterate to all Financial Management Officers (FMOs)
and Comptrollers the importance of recording receivables into the
system once documents establishing a receivable are received in
the finance offices. On a cyclical basis, as part of the
financial community's formal Quality Assurance Program, each
servicing finance office reviews the recording of receivables to
ensure compliance with the General Accounting Office's Title II.
In addition, as part of FMD's Fiscal Year 1990 annual
certification on the Agency's accounting system, an independent
contractor is in the process of being engaged to perform internal
control reviews at four regional finance offices. The scope of
the reviews will include a determination on the timely recording
of Superfund receivables.
As we discussed in the prior recommendation, regional
offices have undertaken steps to address roles and
responsibilities for coordinating processes over accounts
receivable issues. The MOUs in effect or in process, and the
guidance being developed should help ensure the timely recording
of receivables.
c. Financial Management office, Superfund program office,
and Office of Regional counsel reconcile their records
to ensure that cost recovery amounts due have been
collected. Where cost recovery amounts have not been
collected, the amount due must be recorded as an
accounts receivable and appropriate action taken for
collection*
We agree that it is important to ensure that cost recovery
amounts due have been collected, and that proper follow-up be
performed where collection is not made. Several steps taken by
both regional and headquarters finance offices, counsels, and
program offices include the following:
o forming cooperative task forces between regional
finance/counsel/Superfund offices to address cost
recovery issues,
o developing procedures which include reconciliation of .
records, and
j
3
50
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Appendix 1
Page 5 of 8
ATTACHMENT
o reconciling records on a monthly basis with the
Superfund program offices and regional counsels.
Since responsibility for Superfund'receivables vas delegated
to the regional finance offices, FMD has continually monitored
the regions' implementation. This monitoring includes ensuring
that regional FMOs are following FMD policy and guidance, and
providing quality data to the Agency, Congress and the public.
FMD's monitoring includes reviewing, comparing and reconciling
each FMO's Superfund reported collections to Treasury reports.
Any discrepancies noted are resolved. FMD works with newly
assigned staff in the regions and provides copies of desk
procedures so that new staff are sufficiently trained in the
Superfund receivables functions.
d. Financial management office, Superfund program office/
and Office of Regional Counsel establish and implement
procedures to regularly reconcile Superfund and
Regional Counsel records with 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.
We agree. As stated in our response to the above
recommendations, through cooperation with, the various offices,
the Agency is actively taking several steps to strengthen
controls over cost recovery issues, including reconciling finance
and program records. We will continually explore other methods
to improve the process.
In addition, OSWER began developing management reports that
compare data from the Integrated Financial Management System
(IFMS) accounts receivable and CERCLIS files related to cost
recovery settlements. These draft reports were first distributed
to the regions in August 1989. OARM is working closely with
OSWER to develop periodic reports which assist the regions in
reconciling accounts receivable data with CERCLIS settlement
data.
e. Include, as part of their annual Headquarters review of
regional programs, steps to determine whether the
assurances provided have been implemented and are
.' adequate to ensure that''receivables are promptly
recorded on the financial records.
In addition to steps in place, during various reviews, FMD
will include a review of the regional finance offices' processes
to determine if receivables are promptly recorded in the
financial records. OSWER will cooperate with the appropriate
4
51
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Appendix 1
Page 6 of 8
ATTACHMENT
OARM lead office to include evaluation of accounts receivable as
part of the annual review process.
2. Promptly complete and issue Resource Management Directive
system 2540, Receivables and Billings Chapter 9. The
guidance should include a specific definition of when
amounts owed are to be recorded as accounts receivable.
The Resources Management Directives System 2540, Chapter 9,
Receivables and Billings, is currently being finalized for
initiation into the"Green Border review for Agency-wide
clearance. Guidance to define when amounts owed are to be
recorded as accounts receivable is included in Chapter 9 as
follows:
Paragraph 3, "Within five days of realizing that a debt
is owed to EPA, the responsible EPA office must prepare
and send a bill to the debtor."
3. Coordinate with the Assistant Administrator for Solid Waste
and Emergency Response to require the Office of waste
Programs Enforcement to include the forwarding of completed
judicial orders to EPA as part of the Interagency Agreement
with the Department of Justice.
He agree DOJ should provide copies of completed judicial
orders to EPA. OSWER is negotiating with DOJ concerning the
terms of the Fiscal Year 1990 Interagency Agreement (IAG). The
February 2, 1990, draft of this document which has been presented
to DOJ for review and concurrence contained the following special
condition: "DOJ/LNRD will provide copies of all lodged and
entered consent decrees, within 30-days of their lodging or :
entry, to the designated Office of Regional Counsel, Regional
Waste Management Division, and OECM contacts."
In addition to the IAG process, the Agency has taken steps
to work closely with DOJ. As stated in the response to the first
recommendation, the Assistant Attorney General, DOJ instructed
all United States Attorneys by memorandum on February 8, 1990, to
provide copies of all file-stamped and court-signed consent
decrees to the appropriate regional counsels.
During Fiscal Year 1989, Agency workshops were held which
included representatives from DOJ. The purpose of the workshops
was to better define roles and responsibilities for the
applicable finance, legal and enforcement staffs. .
5
52
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Appendix 1
Page 7 of 8
FINDING NO. 2 - PROMPT ACTION NEEDED TO
ATTACHMENT
MOUNTS OWED
We recommend that the Assistant Administrator for Administration
and Resources Management take appropriate action to:
1. Coordinate with the Assistant Administrator for Solid Waste
and Emergency Response to require the office of Waste
Programs Enforcement to complete and implement the guidance
on tracking and. coll acting reimbursement of oversight costs.
OSWER took action on this recommendation. The guidance on
Monitoring and Collecting Oversight Reimbursement was delayed
pending changes in CERCLIS. These changes were completed and the
CERCLIS guidance on tracking oversight reimbursement was
distributed to the regions on February 20, 1990.
2. Work with the Deputy Administrator and coordinate with the
Assistant Administrator for solid Waste and Emergency
Response to:
a. Require each EPA Region to provide formal assurance
that the guidance on tracking and collecting
reimbursement of oversight costs has been fully
implemented and procedures have been established, to
ensure that oversight billings are promptly sent to
responsible parties.
We agree that progress made on processing oversight billings
should be reviewed. We will take this recommendation under
consideration and will work on developing an acceptable review
procedure. .
b. Include, as part of the annual Headquarters review of
regional programs/ a determination of whether the
procedures and controls have been implemented and are
adequate to ensure that oversight billings are promptly
sent to responsible parties.
FMD will review FMO procedures and controls for oversight
billings. In addition, OSWER has participated and will continue
to work with other Agency offices to strengthen the collection of
oversight costs from responsible parties.
4
As mentioned before, OARM is engaging an independent
contractor to review Superfund internal controls, including
accounts receivable. In addition, the Office of Inspector
General, in its annual review of the Superfund Trust Fund,
includes accounts receivable processing. The results of these
6
53 .
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Appendix 1
Page 8 of 3
ATTACHMENT
reviews will assist OARM in assessing whether procedures and
controls are adequate.
3. work with the Deputy Administrator, and coordinate with the
General- Counsel and the Assistant Administrators for Solid
Waste and Emergency Response and Enforcement and Compliance
Monitoring, tot
a. Require that all administrative and judicial orders and
decrees include a statement that interest will accrue
from the due date when disputed costs in oversight
billings are found to be payable.
The CERCLA legislation is clear on this issue. It states,
"Such interest shall accrue from the later of (i) the date
payment of a specified amount is demanded in writing, or (ii) the
date of the expenditure concerned," The inclusion or omission of
an interest statement in an order or billing should have no
impact on the Agency's authority to collect interest. However,
we will take this recommendation under consideration and will
work on developing an acceptable process.
OSWER and OECM co-authored draft model consent and
unilateral orders. The models are in final review and should be
published in the near future. The draft models incorporate the
idea that interest will accrue from the due date when disputed
costs in oversight billings are found to be payable. This will
continue to be a requirement in future consent decrees and
unilateral orders.
b. Require that oversight billings include a statement
that interest will accrue from the due date if disputed
costs are found to be payable.
Once the guidance models are issued in final, OARM and OSWER
will cooperate in establishing the appropriate statement on
billings.
7
54
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Appendix 2
J DISTRIBUTION
Inspector General (A-109)
Deputy Administrator (A-101)
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 Pollowup Official (PM-225)
ATTNi Director, Resource Management Division,
Agency Followup Official (PM-208)
Audit Followup Coordinator (PM-208)
ATTN: Program Operations Support Staff
Director, Financial Management Division (PM-226)
Associate Administrator for Regional Operations (A-101)
Office of Public Affairs (A-107)
Office of Congressional Liaison (A-103)
55 -
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