Accounts Receivable Management Practices in Region 6
January 2001
SUPERFUND
REGION 6's ACCOUNTS RECEIVABLE
MANAGEMENT PRACTICES
Joint OSRE/OCFO/OIG Review
Review # 2001-S-5
January 2001
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Accounts Receivable Management Practices in Region 6
January 200 J
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JAi; 3 9 2001
MEMORANDUM
SUBJECT: Superfund: Joint OECA/OCFO/OIG Review ;
Region 6 Final Report on Superfund Accounts Receivable Management
FROM: L{ Paul N. Connor, Director
y
Policy and Program Evaluation Division 0
Office of Site Remediation Enforcement
Office of Enforcement and Compliance Assurance
JuftetteMcNeil, Acting Director
Financial Management Division
Office of the Comptroller
Office of the Chief Financial Officer
. John T. Walsh, Divisional Inspector General ^dt'A'" / ^* •^6^-
Headquarters Audit Division //
Office of the Inspector General .
TO: Myron O. Knudson, Director
Superfund Division, Region 6
Lawrence Starfield, Regional Counsel
Office of Regional Counsel, Region 6
Mr. John Eagles, Chief
Accounting Section
Management Division, Region 6
The purpose of this memorandum is to transmit our attached "Superfund: Regional
Accounts Receivable Management Practices" Region 6 final report. As you know, a headquarters
team from the Office of Enforcement and Compliance Assurance (OECA), the Office of the Chief
Financial Officer (OCFO), and the Office of Inspector General (OIG) jointly conducted the review
in your region. This final report incorporates comments received from your staff in Region 6. It
cites several areas where the region could improve its Superfund accounts receivable process and
also includes recommendations to address these areas.
-Internet Address (URL) • http://Www.epa.gov
R.cycted/R.cydabl. . Printed wth Vegetable O* Based Inks en Recycled Paper (Minimum 25% Postconsutner)
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We thank you for your time and-attention during our visit and your comments and actions
taken as a result of this review. Should you or your staff have any further questions or concerns
about this report, please contact Bruce Pumphrey on 202-564-6076.
Attachment
cc: Buddy Parr, Region 6
Mark Peycke, Region 6
Barry Breen, OSRE
Joseph Dillon, OC
Greg Marion (2201 A)
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Accounts Receivable Management Practices in Region 6
January 2001
TABLE OF CONTENTS
CHAPTER 1 - INTRODUCTION 1
BACKGROUND 1
PURPOSE '. " .' 2
SCOPE AND METHODOLOGY ; 3
Interviews with Program, ORC and FMO Staff. 3
Site Specific Review of Selected Accounts Receivable : 3
Reconciliation of Regional Data in EPA and DOJ Tracking Systems 4
CHAPTER 2 - REVIEW OF SUPERFUND ACCOUNTS RECEIVABLE PROCESS IN
REGION 6.... : '. 5
Results of Site Specific Review of Selected Accounts Receivable 8
Results of EPA DOJ Reconciliation 8 _
MATTERS FOR CONSIDERATION 9
Information Exchange/Timely and Accurate Recording of
Superfund Accounts Receivable ' .....9
Internal Regional Communications/Information Exchange 11
National and Regional Data Management/Data Quality 12
Accounts Receivable Enforcement/Collection of Delinquent Debt and
Write-offs 14
CONCLUSION : 16
APPENDIX A - SUMMARY. OF SITE SPECIFIC REVIEW OF SELECTED
ACCOUNTS RECEIVABLE
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Accounts Receivable Management Practices in Region 6
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Accounts Receivable Management Practices in Region 6
January 2001
CHAPTER 1
INTRODUCTION
This report summarizes the results of our review of Region 6's procedures for managing
Superfund accounts receivable from establishment through collection, with an emphasis on
tracking and collecting overdue accounts receivable. This program evaluation review was a
joint, cooperative endeavor involving three separate EPA offices: the Office of Enforcement and
Compliance Assurance's Office of Site Remediation Enforcement (OSRE), the Office of the
Chief Financial Officer's Financial Management Division (FMD), and the Office of Inspector
General (OIG).
We believe this review highlights the importance of the Agency's, as well as the
Department of Justice's (DOJ), management of its Superfund accounts receivable and the many
related issues challenging both Headquarters and Regional offices. The results of this review
will benefit the EPA Superfund and financial management programs by: 1) highlighting the
issues raised by representative Headquarters and Regional EPA managers and staff; 2)
reinforcing positive existing practices; and 3) proposing recommendations for improving future
collection activities.
BACKGROUND
In 1980, Congress established the Superfund program by passing the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) and amended it in 1986
with the Superfund Amendments and Reauthorization Act (SARA.) The Superfund program
provides Federal clean-up authority and funds to address problems posed by abandoned or
uncontrolled hazardous waste sites. Under CERCLA, a trust fund (i.e., Hazardous Substance
Superfund) was established to help finance the costs of cleaning up these sites. CERCLA also
provides the President with authority to pursue potentially responsible parties (PRPs) to perform
or pay for the study and clean up of Superfund sites.
Section 107 of CERCLA authorizes EPA to recover all Federal costs (including
oversight) associated with cleaning up a Superfund site. This authority is instrumental in
replenishing the Superfund Trust Fund and also provides incentives to Potentially Responsible
Parties (PRPs) to perform the clean up themselves. Recovery is initiated through negotiation
with or legal action against a Superfund PRP. DOJ works with EPA to recover these costs and
also has responsibilities for enforcing and collecting debts arising from Superfund cost recovery
actions.
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Accounts Receivable Management Practices in Region 6
January 2001
Since the beginning of the Superfund program, EPA has obtained approximately $4
billion in commitments/settlements from PRPs or court-ordered judgments against PRPs to
reimburse the Agency for past costs, bills to pay oversight costs, fines, penalties and cash-out
settlements for future response work. Of that amount, over $2.8 billion has been collected and
returned to the Superfund Trust Fund. Approximately $200 million has been written off as
uncollectible, primarily the result of judgements against insolvent parties. Approximately $976
million remains uncollected, some of which has yet to come due.
PURPOSE
The Agency is currently working on several initiatives to improve its fiscal management
of the Superfund enforcement program. During 1998-1999, both OSRE and FMD made a
concerted effort to achieve an up-to-date billing for Superfund oversight costs. After improving
the billing process, attention shifted to the collection of outstanding accounts receivable (i.e., cost
recovery, fines and penalties, and cashouts) to return monies owed to the Federal government
resulting from these enforcement actions to the Superfund Trust Fund. For this collection
initiative, several analyses of accounts receivable data have been completed.
At the time of the Region 6 review, in March 2000, our analysis indicated that nationally
there was approximately $420 million in total outstanding accounts receivable greater than 120
days delinquent. Of the $420 million, EPA had collection responsibility for $138 million, and
DOJ had collection responsibility for $282 million. Also, $166 million was considered
potentially collectible, $114 million was under appeal at DOJ, and $140 million was deemed
doubtful for collection. Region 6 had approximately $127 million (or 30% of the total) in
outstanding accounts receivable of which $3 million is at EPA and $124 million at DOJ. Of the
$127 million, $4 million was considered potentially collectible, $104 million was under appeal at
DOJ, and $19 million was deemed doubtful for collection.
Because of the important mission of the Superfund program and the large amount of
dollars involved in cost recovery, the OIG had planned to do some work in this area. However,
upon receiving OSRE's invitation, we decided to join OSRE and FMD to jointly review EPA's
management of the Superfund accounts receivable process. The purpose of this joint review was
to:
• identify accounts receivable management issues;
identify best practices that facilitate the management and collection of outstanding
Superfund receivables; and
develop recommendations for improving and/or streamlining the process for
better efficiency at EPA Headquarters, regions, and DOJ.
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Accounts Receivable Management Practices in Region 6
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SCOPE AND METHODOLOGY
OSRE, FMD, and the OIG formed a team to develop a methodology for conducting the
review. The team concluded that the most effective approach for accomplishing our objective
was to conduct on-site reviews in several regions to:
discuss and gain a better understanding of the Region's policies and procedures
for managing Superfund accounts receivable and collections; and
• identify areas in the regional and national process that could be improved,
including areas where Headquarters should provide better guidance and support.
*
The team selected Region 6 as the first of three regions to be reviewed based on the
relatively large dollar amount and age of their delinquent accounts receivable.
Interviews with Program, ORC and FMO Staff
The team held a joint meeting with personnel within the Superfund Division (referred to
herein as the Program Office (PO)), the Superfund Branch of the Office of Regional Counsel
(ORC), and the Financial Management Office (FMO) to discuss the overall polices and
procedures supporting the regional Superfund accounts receivable process. Prior to our visit, we
provided the Region with a questionnaire which formed the basis of our discussions. The
questionnaire was a global survey regarding the accounts receivable process with subjects
ranging from establishing and recording accounts receivable, through billing and handling of
overdue and uncollectible debts.
Site Specific Review of Selected Accounts Receivable
To further facilitate our analysis of regional policy for handling accounts receivable, we
selected a representative sample of overdue accounts receivable for site specific review. Data in
EPA's Integrated Financial Management System (IFMS) as of 1/14/00 showed that Region 6 had
26 outstanding accounts receivable greater than 120 days delinquent totaling $127.1 million. Of
the $127.1 million, the region had referred $123.8 million to DOJ for collection and EPA had
responsibility for addressing the remaining $3.2 million which could include referrals to DOJ.
We selected 11 of the 26 overdue receivables totaling approximately $109 million for our site
specific review. We included at least one receivable from each status code entered by the Region
focusing on those having large past due amounts that were also significantly overdue. We
included a larger number of receivables in status code 21 (i.e., oversight under appeal) because
16 of the Region's receivables were reported in that category. The age of the receivables
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Accounts Receivable Management Practices in Region 6
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reviewed ranged from 409 to 2996 days delinquent. We interviewed staff responsible for the
receivable, in most cases the ORC and FMO, to identify reasons for the delinquency, actions
taken by the Region to obtain payment or resolution, and any future efforts to be undertaken. We
discuss the results of our review in Chapter 2 of this report. Appendix A contains a more detailed
summary of each site we reviewed.
Reconciliation of Regional data in IFMS and DOJ Tracking Systems
As part of this initiative, EPA is working with DOJ to reconcile all Superfund open
accounts receivable (current and past due) recorded in IFMS as being DOJ's collection
responsibility with the data found in DOJ's tracking systems. The purpose of this reconciliation
is to identify inconsistencies between the respective tracking systems, determine whether or not
EPA referred amounts are consistent with those at DOJ and ensure that there is mutual
understanding of each agency's respective collection responsibilities. We chose Region 6 as the
first region for this systems reconciliation because it manages a comparatively small number of
Superfund accounts receivable. In addition, DOJ has two offices (i.e., Executive Office of the
United States Attorneys (EOUSA) and Nationwide Central Intake Facility) that process
Superfund accounts receivable using two separate data systems. Both offices process collections
for Region 6 which enabled us to reconcile EPA amounts against DOJ's systems.
Upon completion of the national reconciliation, we intend to present our results to DOJ
and work cooperatively with them to develop procedures for enhancing the tracking of Superfund
receivables in both Agencies' systems.
The Joint Management Review was conducted to improve Agency operations and was
not an audit. The review was conducted by a team of Agency personnel not all of whom were
auditors. Therefore, the review was not conducted using auditing standards. Any resultant
products are not according to generally accepted government auditing standards as described in
the June 1994 Revision of GAO's Government Auditing Standards. However, some auditing
techniques were used by the joint management team during its review.
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.CHAPTER 2
REVIEW OF SUPERFTJND ACCOUNTS RECEIVABLE PROCESS IN REGION 6
During the Region 6 review, we determined that there are three primary offices in the
Region that have a role in the accounts receivable process: the POi.ORC; and FMO. Each office
has a distinct role in ensuring that: accounts receivable documentation is prepared and/or
forwarded timely; accounts receivable are properly recorded and tracked, changes in accounts
receivable status are communicated between offices; and proper follow up actions for disputed
and delinquent accounts receivable are initiated as required. In Region 6, the PO, in particular
the Cost Recovery Section, plays an important role as the "middle man" for the ORC and FMO
by acting as a liaison to both offices on all accounts receivable issues requiring ORC follow up.
To ensure that each office-involved-in'the cost documentation process understand their
roles and responsibilities, the Region developed a Memorandum of Understanding (MOU) and
standard operating procedures. The MOU was developed in 1993 to define the individual roles
and responsibilities of the ORC, PO and FMO in the cost documentation process and describe
the actual steps for establishing and recording accounts receivable. Additionally, the Region has
"a'set of "Desk Procedures for Accounts Receivable" which specify, procedures for establishment,
collection, billing and handling of delinquent accounts. The region has also documented policy
on "Oversight Billing Procedures."
Region 6 is generally following Agency policy provided in Chapter 14, Superfund
Accounts Receivable and Billings, of the OCFO's Resources Management Directives System
(RMDS ) 2550D and Chapter 9, Receivables and Billings,.RMDS 2540 when managing its
Superfund accounts receivable. For example, Chapter 14 states that the FMO or the PO is to
prepare and send a bill to the debtor within 5 days of determining that a debt is owed to EPA. If
the PO prepares the bill, a copy of the bill and all supporting-documentation must be provided to
the FMO in order to establish the account receivable. Region 6 has documented procedures
which conform to these'requirements. The PO prepares a Cost Documentation Schedule and
delivers to the FMO which is used as a guide for requesting packages. The FMO assembles,
reconciles, evaluates'ahd certifies all cost documentation, prepares the total cost documentation
package or the unreconciled SCORES report and forwards it to the PO for review. The PO will
mail out the bill with a cover letter and supporting cost documentationrand then return a dated
billing document with cover letter to Finance. Upon receipt of the dated billing document from
the PO, the FMO sets up the account receivable. - "
Based oh our discussions with'each office,-we have determined that their roles and
responsibilities in the regional Superfund accounts receivable process are as follows:
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Accounts Receivable Management Practices in Region 6
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Results of Site Specific Review of Selected Accounts Receivable .'
As discussed in Chapter 1, we selected several accounts receivable for site specific review.
Generally, our results indicate that most of Region 6's overdue accounts have been around for
some time and are difficult to resolve — although the Region has put considerable effort into
doing so. The Region also has made the decision to give priority to newer accounts receivable
ensuring that they do not become delinquent rather than devote extensive resources to pursuing
the older receivables with little or no chance of collection. As such, at the time of the review,
there were no delinquent accounts receivable for cost recovery actions or oversight bills issued in
the previous 13 months. The individual results of our site specific review are summarized in
Appendix A.
Some of the problems we identified during our site specific review are listed below:
• . One receivable (VERTAC) in the amount-of $ 104 M accounted for approximately 80%
of the Region's total overdue amount. It is the result of a court ordered judgement that is
currently under appeal. Region 6 estimates that it will be at least one year before there is
any resolution. Thus, collection activities will be suspended pending the outcome of the
. appeal.
• The Region has reservations about writing-off a receivable in the amount of $263,336,
delinquent by 2996 days, because the write-off might establish a precedent with the PRP
who is also a PRP at numerous other Superfund sites. . •
• A claim against two deminimis parties for, $3,642, 1054 days delinquent, was forwarded
to treasury for collection on 12/2/98.
• . Several cases have remained in informal dispute resolution for lengthy periods of time
without resolution based on PRP claims such as: 1) EPA's failure to bill according to the
terms of the settlement agreement, 2) the bill included inadequate cost documentation,
.and 3) disputed costs were contained in the bill. In several cases, the Region indicated
that recent discussions had occurred and they expected resolution of .the dispute shortly.
We will use IFMS to track the progress of these overdue accounts receivable.
Results of EPA DOJ, Reconciliation .
EPA's initial review in August 1999 found six cases totaling $122.9 million in IFMS
which could not be reconciled with reports generated from DOJ systems, and three cases totaling
$26.7 million reflected in IFMS that could not be identified by DOJ. DOJ began reconciling
these discrepancies and was able to provide us with information on the status of all nine cases.
We provided Region 6 with the results of the reconciliation for their information.
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One significant finding that came out of the Region 6 reconciliation is that while there is
a common data link, the Superfund Site Spill ID number (SSID), that could allow EPA to
positively match accounts receivable with DOJ information, this data has not always been
entered into DOJ's systems. DOJ has agreed that the SSID number will be required for all cases
in their systems thus providing this"important link.
MATTERS FOR CONSIDERATION
Based on our review we have identified four general areas where changes could be made
in Region 6 which could improve the accounts receivable process and lead to increased
collections.
We have not included formal recommendations because this report is designed to provide
information as the result of a joint, cooperative review between OSRE, FMD, and OIG. Region
6 may want to consider some of the recommendations discussed below in managing Superfund
accounts receivable:
1. Information Exchange/Timely and Accurate Recording of Superfund Accounts
Receivables
Issue: Certain Superfund Accounts Receivable are not being recorded in a timely manner.
The Agency does not record Superfund accounts receivable in its IFMS accounting
system until legal liability has been proven/established in the form of a settlement agreement or
judgment. In accordance with the current DOJ IAG, DOJ/ENRD will provide a copy of the cover
page and signature page of entered consent decrees, or a copy of the court order indicating entry
of the decree, to EPA's FMD within seven days of receipt. FMD will transmit the documents to
the appropriate Regional FMO. Region 6 stated that they had experienced delays of several
months in receiving these documents from DOJ. Although the situation has improved greatly
within the past 6 months to a year, the Region indicated that it continues to encounter delays in
receiving final entered judicial documents. Delays in receiving this information can have the
following impact on the accounts receivable process:
• Accounts Receivable are not established/recorded in a timely manner
• Payment may be received by the Region, but due to the delay in establishing the
receivable there is no record against which to post payment The payment will then go
into EPA's "Suspense account" until the supporting documentation is received to
establish the account receivable. While these amounts are in suspense, they cannot be
deposited in the Superfund Trust Fund and do not accrue interest.
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Accounts Receivable Management Practices in Region 6
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• The region may be unaware that a receivable is already delinquent; consequently, they
cannot accurately, or timely, calculate interest related to the delinquency.
Issue: In a limited number of cases, Regions were not notified when DOJ determined that
a judgement had been appealed or a particular debt was uncollectible.
On occasion, DOJ has failed to forward sufficient documentation or correspondence
advising the Agency of changes in the status of debts or close outs. When DOJ fails to notify
EPA of changes in the status of debts or when they close their claims files, these debts will
continue to languish unnecessarily on the Agency's books which then inflates the Agency's
assets as reported in its financial statements.
Recommendations
DOJ
• Require DOJ to notify EPA in writing (e.g., Debt Closeout and Surveillance Letters) and
to provide source documents (e.g., bankruptcy settlements and associated discharge
notices) concerning changes affecting the collectibility or final disposition of debts. EPA
recommends that the IAG be modified to require DOJ to provide such documents to the
ORC and FMO within 30 days of entry of the decree or judgement or change in status of
the collectibility of the debt.
• Establish one point of contact for judicial source documents at DOJ.
• Request that DOJ provide the Region with the newly created payment report on a
quarterly basis.
Region 6
• Request that all three regional offices continue to place more emphasis on discussing the
status of outstanding delinquent debts to determine final disposition (e.g., ORC follow
up, refer to DOJ, write-off) of these debts.
Headquarters/DOJ/Region 6
• Revise provisions of the EPA/DOJ Memorandum of Understanding (and associated
portions of the EPA/DOJ IAG) to ensure that documents necessary to establish accounts
receivable and update changes in the status are transmitted to EPA by DOJ in a timely
fashion.
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• Conduct an analysis of the lag time between: 1) the entry of the consent decree and
receipt of the documentation by EPA and 2) the receipt of the consent decree by EPA and
the establishment of the associated account receivable in order to identify specific
instances where accounts receivable are not being established in a timely manner.
• Examine the resulting information to identify: 1) which accounts receivable are not being
established in a timely manner because EPA or DOJ did not provide the necessary
documentation 2) any EPA regions or U.S. Attorneys Offices regularly experiencing
significant delays. Provide the findings to FMD for review and discussion with DOJ at
quarterly meetings.
Continue to explore the options and legal ramifications of establishing accounts
receivable through the electronic notification process or other alternative means (e.g.,
electronic facisimile of info, e-mail). Region 6 reported that the information currently
provided in electronic format the DOJ "Debts Assessed Report" has been useful.
II. Internal Regional Communications/Information Exchange
ISSUE: Although the three offices involved in managing Superfund Accounts Receivable
have established close working relationships, changes to the internal communications
procedures could result in a more efficient process.
While Region 6 has regular communications/discussions regarding the status of accounts
receivable, their process appeared somewhat inefficient with communications between the FMO
and the PO, and separate communications between the PO and ORC. While Regions 6's process
seems to be effective in communicating the status of accounts receivable, its efficiency could be
enhanced by having all affected parties (i.e., FMO, Program, and ORC) communicating
concurrently. Numerous issues regarding the status, disposition and planned action regarding
overdue receivables could be resolved more easily and quickly through periodic face-to-face
discussions between all three offices and would provide a better understanding of specific issues
affecting collection and information needs of each office.
Recommendations
Region 6
• Establish a standing Accounts Receivable Team with representatives from each of the
three affected offices and schedule regular team meetings (e.g., monthly or quarterly).
One of these meetings should occur at or near fiscal year end to help ensure the accuracy
of the accounts receivable numbers within IFMS and the Agency's annual financial
statements.
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• Alternatively, address this issue by way of existing cost recovery teams that include these
offices and establish overdue accounts receivable as a standing agenda item at those
meetings.
III. National and Regional Data Management/Data Quality
Issue: Region 6 created a separate data system for tracking Superfund accounts
receivable because neither IFMS or CERCLIS contain all the information needed to
manage its accounts receivable. In addition, it is difficult to retrieve data using the MARS
reporting system.
The region uses two separate information systems to track aging accounts receivables.
The primary tracking system is EPA's IFMS located at EPA Headquarters. Receivables are
recorded and tracked in IFMS by the FMO. As the Agency's official accounting system, IFMS
is also the Agency's official system for tracking accounts receivable. The FMO staff tracks the
status of receivables on a monthly basis and provides information for all receivables to the PO.
IFMS generates the "Aged Billing Report" daily and the "Accounts Receivable Dunning" report
based on the delinquency period of the acount receivable. Using these reports, the FMO staff
identifies all overdue accounts receivable.
The Superfund Cost Recovery Section developed a second PC based system, the
Accounts Receivable Tracking System (ARTS), to track accounts receivable at a greater level of
detail than that provided in IFMS. In some cases, IFMS did not contain the data fields necessary
to track accounts receivable. For example, IFMS tracks accounts receivable at the debtor level
but does not contain the CERCLIS site name or DOJ case name to allow users to easily identify
the site and corresponding receivable. In addition, IFMS cannot track the name of the EPA case
attorney responsible for coordinating enforcement of the overdue receivable. ARTS, however,
allows the Region to track detailed comments on the status of outstanding receivables and create
custom reports for specific purposes. The PO does not have access to IFMS therefore ARTS is
the mechanism that allows adequate tracking of accounts receivable in that office. The IFMS is
the regional recognized system.
Further, retrieving data from IFMS in a report format that meets the Region's accounts
receivable tracking needs is difficult. Although the OCFO has made substantial strides in this
area by making accounts receivable data available though the Data Warehousemen EPA's
intranet site, additional work in this area would be helpful in meeting the Region's data needs.
The FMO and PO meet monthly to conduct a base reconciliation of the information in
ARTS and IFMS, and perform a more in-depth reconciliation every six months. At this meeting
aging receivables are identified, allowance for doubtful accounts updated, and the appropriate
IFMS accounts receivable status codes are assigned.
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While this approach appears to be effective, maintaining a separate system to meet the
Region's needs results in the inefficiency of all of the regional systems and may result in data
quality problems inherent with duplicative data entry.
Issue: Much of the data required by the Regions is contained in several information
systems (i.e., CERCLIS, IFMS, and DOJ's TALON and CLASS).
The region requires information from all of these systems in order to effectively track and
report on Superfund accounts receivable. Although these systems generally contain a common
identifier (i.e., EPA SSID number) that could be used to link the data, the data resides on
different platforms and is written in different software applications making it difficult to
integrate. Although the ability to use the common identifier exists, it has not always been
* required in DOJ's systems and is not necessarily available when trying to reconcile data.
Issue: The Region has reported overdue status codes inaccurately or inconsistently in
IFMS.
During our site specific interviews, we found several instances where the IFMS overdue
status codes were coded incorrectly. This occurs for a number of reasons. In some instances, the
FMO is not properly informed of changes in the status of an account receivable. This was the
case with VERTAC which was coded as SC 3, Referred to DOJ, when it should have been coded
as SC 16, On Appeal at DOJ, because the PRP is appealing a cost recovery judgment.
In other cases there was confusion over the use of IFMS' Accounts Receivable status
codes. It was determined that there was some ambiguity in the codes that limited their utility.
For example, we reviewed IFMS for Superfund accounts receivable that were in a bankruptcy
status for the Region. The data system has two accounts receivable status codes that identify
whether a site is in bankruptcy, codes 11 and 15. Code 11 classifies the debtor as in bankruptcy
due to delinquent debts. Code 15-classifies the debtor as in bankruptcy with the case being
handled by DOJ. We reviewed two bankruptcy sites in Region 6 and held discussions with
regional personnel about the sites. Region 6 coded one site (William Gurley) 15 and another site
(Gurley Refining Company) 11. We discovered an additional site (R. A. Caldwell, Jr.) after we
held further discussions with Region 6 personnel. They coded this site 10. IFMS classifies
accounts receivable status code 10 as "delinquent debts that EPA has referred to regional counsel
for further deliberation."
We held discussions with FMD about the difference in the status codes. The FMD
official explained that the difference is DOJ's involvement in the bankruptcy. In our discussions
with ORC, they confirmed that all three sites identified during our review were in a bankruptcy
status. We believe a clearer or more detailed definition of the accounts receivable status codes
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January 2001
would help regional personnel correctly identify the receivable's status. Also, upon notification
from ORC, the accounting section can ensure that IFMS shows the appropriate status code.
Recommendations
To address the issues identified above, it is suggested that the following steps be taken:
Region 6
• Consistent with the recommendations in section II above, Regions should initiate.routine
reviews and reconciliations to determine the accuracy of IFMS accounts receivable data
and corresponding accounts receivable Status Codes.
Headquarters - OCFO/OSRE
• Examine the feasibility of integrating data from existing information systems (i.e., IFMS,
CERCLIS, and TALON and CLASS) to meet the Regions' information needs for
effective receivables management.
Headquarters - OCFO
• Identify and implement short term enhancements to the Data Warehouse that would
facilitate and enhance accounts receivable management pending the findings of the
workgroup results of recommendation 2 above.
• Review existing IFMS AR Status Codes to eliminate any overlap and ambiguity in
interpretation by adding new or revised codes as required. Existing AR Status Code
definitions should be reviewed to determine if they need to be clarified or revised to
ensure that they can be properly applied and recorded in IFMS.
DOJ
Determine if DOJ. would allow EPA to access its TALON and CLASS systems similar to
its now defunct Lands Docket Tracking System.
IV. Account Receivable Enforcement/Collection of Delinquent Debt and Write-Offs
Issue: In Region 6, there were specific cases where debts had been determined to be
uncollectible but the Region was unclear on the appropriate write-off procedures
pertaining to Superfund debts.
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Specifically, the Regions are uncertain under what authority these debts can be written-
off and which Agency official(s) has the authority to write-off the debt. In addition, a recent
Headquarters workgroup developing policies related to the enforcement of accounts receivable
identified issues unique to the collection and write-off/compromise of CERCLA settlement
funds/claims. This workgroup raised issues concerning whether the prevailing authorities (i.e.,
Federal Claims Collection Act (FCCA), Debt Collection Act (DCA), Debt Collection
Improvement Act (DCIA), or CERCLA) used for non-Superfund debt also apply to the collection
or write-off of overdue CERCLA settlement funds. To clarify the process for
enforcing/collecting overdue accounts receivable, on April 6,2000 OSRE issued the "Interim
Guidance on the Referral Process and Timing for Collection of Delinquent Debts Arising under
Superfund Judicial or Administrative Settlements." This guidance interprets CERCLA as the
prevailing authority for the enforcement/collection of overdue Superfund receivables. However,
the write-off process for post-settlement/post-judgement CERCLA debts remains unclear;
consequently, uncollectible Superfund debts shown as being open in IFMS continue to accrue
interest and inflate the Agency's assets and claims to accounts receivable. Due to the lack of
specific authorities and guidance for writing-off Superfund debts, the Agency has used the
authorities provided under the FCCA, DCA, and DCIA to write-off Superfund debts in the past.
Under the DCIA, debts may not be written-off by the Agency until the debts have been provided
to Treasury for cross-servicing (i.e., debt collection). If the amount referred to Treasury cannot
be collected and is returned to the Agency, this amount may be written-off only at that time.
Issue: Although the Region has clearly established roles and responsibilities for the three
offices involved in the Superfund accounts receivable process, it needs to develop and
document the requirements for each of the offices more fully as to procedures for
delinquent and uncollectible debts.
The Region has an MOU in place which outlines the respective roles and responsibilities
of the Program, Finance, and Office of Regional Counsel with respect to Superfund cost
documentation and Desk Procedures for Accounts Receivable. The content of this
documentation, relates primarily to the preparation of cost and work performed documentation in
support of cost recovery negotiations, litigation, and issuance of bills for "future response costs"
(e.g., oversight costs). The MOA contains no mention as to the respective roles and
responsibilities in regard to enforcement/collection, and write-off of accounts receivable. .
Recommendations
Headquarters -OCFO OSRE OGC/DOJ
• OSRE, in conjunction with OCFO, DOJ, the Regions, and Office of General Counsel
should establish a workgroup to develop a policy on the authorities and procedures for
writing-off CERCLA debt. OSRE has already begun researching this issue in an attempt
to determine under what.authorities CERCLA debts can be written off. OSRE's research
PJ.3. EPA Hesdqisrtera l&nay
fctefl cede 3201
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Accounts Receivable Management Practices in Region 6
January 2001
to date indicates that DOJ has the authority to write-off these amounts. Although
research will continue in this area, DOJ is uncertain if they can redelegate this authority
to EPA.
OCFO, in conjunction with OSRE should prepare accounts receivable training and
workshops to be conducted for regional POs, FMOs and ORCs.
The OCFO should revise its Chapter 14, RMDS 2550D, "Superfund Accounts Receivable
and Billings" to ensure that the roies and responsibilities section of this document is
current and all remaining sections are also revised to make the document as current as
possible. Specifically, situations unique to the billing , collection, enforcement, and write
off of Superfund debts should be addressed..
Region 6
• Ensure that allowances for doubtful accounts are established and/or revised as needed.
This action requires the FMO and PO to review the status of delinquent accounts
receivable to determine the likelihood of collection and establishing, or adjusting,
allowances for amounts deemed to be uncollectible.
• Discuss and revise the MOUs and Desk Procedures between the FMO, PO, and ORC to
clarify their respective roles and responsibilities with respect to all aspects of cost
recovery actions, including the establishment, tracking, enforcement/collection, and
write-off of accounts receivable.
• More direct involvement with the ORC in the monthly discussions with the FMO and PO
on aging accounts receivable and sites which are in dispute. Provide all attorneys with
Superfund montly reports from ARTS on overdue receivables.
• Routinely enforce the provisions of the CD or AOC pursuant to stipulated fines and
penalties. Regions should use discretion in assessing penalties depending on the facts of
the case.
CONCLUSION
Although we have cited several areas where the Region can make improvements, we
believe that overall the Region is doing an effective job of managing its accounts receivable. It
is apparent that each office involved in the accounts receivable process knows its role and
successfully carries it out. When the accounts receivable process changes or is not clear, the
Region promptly issues guidance clarifying these changes. More importantly, an open line of
communication between these offices has enabled them to effectively manage their accounts
receivable. The ability to communicate and discuss changes in the status of accounts receivable
is perhaps the most important key to managing accounts receivable. Without constant
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Accounts Receivable Management Practices in Region 6
January 2001
communication, open accounts receivable that should either be closed or referred could languish
unnecessarily for extended periods of time.
On the other hand, there are a number of outstanding receivables, which have been
around for several years (See Appendix A). All three regional offices should continue to place
more emphasis on discussing the status of outstanding delinquent debts to determine final
disposition (e.g., ORC follow up, refer to DOJ, write-off) of these debts. Routine follow up on
these delinquencies will enable the Agency to enforce and collect debts when possible, and to
more accurately report the status of its assets.
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Accounts Receivable Management Practices in Region 6
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APPENDIX A
SUMMARY OF ISSUES AT SELECTED SITES
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Accounts Receivable Management Practices in Region 6
January 2001
Site
Age
Amount
Issues
Resolution
VERTAC
SC16
409
S104M
Final judgment in favor of U.S. for past
costs at the Vertac site plus any
additional response costs incurred by the
U.S. after 5/31/98. Hercules and
Uniroyal Chemical filed notices of
appeal. Issues include: 1) claim that
retroactivity is unconstitutional 2) due
process 3) divisibility of harm; 3) cancer
potency factor for dioxin should have
been subjected to rulemaking 4) EPA
Worker safety provisions and 5) claim
that EPA conducted arbitrary and
capricious risk assessments.
On March 16,2000, the Region filed a
brief in response to the PRPs appeals.
The Region has concerns regarding the
strength of liability for some of the
issues. Oral arguments were set for June
12th. The PRPs have indicted that if
they lose the appeal they will go to the
Supreme Court. The ORC indicates that
it will be at least a year before any
potential resolution.
ARCO
SC10
2996
S263K
The PRPs have invoked dispute
resolution. This is an AOC for RI/FS.
EPA entered into an agreement with
Amoco and ARCO specifically citing in
the enforcement agreement sum certain
past cost of 39k. The PRPs have paid
this amount and are disputing liability for
any past costs other than the 39K.
Approximately $106k is in dispute.
ORC plans to brief management and
recommend that the disputed amount be
written off or adjusted including
approximately $80k in interest. Region
has reservations about writing this off
because ARCO and AMOCO are PRPs
at numerous other Superfund sites and
they do not want to establish a precedent.
Time frame for completion depends on
ORC resources.
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Accounts Receivable Management Practices in Region 6
January 2001
Site
Age
Amount
Issues
Resolution
GURLEY REFINING
CO.
sen
2822
$2.2M
Gurley Pit Site is a fund financed
Remedial Action which is completed.
PRPs were held liable for costs incurred
and issued a declaratory judgment for
future response costs. Gurley declared
bankruptcy but a bankruptcy court ruled
that he had fradulently placed assets in
his wife's name. This placed these
substantial assets into Mr. Gurley's
bankruptcy estate. The Gurleys have
appealed.
Awaiting appeals court judgment. Which
may take two to three years to resolve.
The bankruptcy court recently authorized
a payment of $500k in partial
reimbursement of the 1992 judgment for
the Gurley Pit now intends to file a cost
recovery action for its remaining
Gourley Pits costs pursuant to a 1992
declaratory judgment for future site
costs.
MARCO OF IOTA
SC 18 (Referred to
Treasury)
1054
$3.6k
This is a $5 million cleanup at an Oil
Recycling ifaciIity. EPA settled with 121 de
minimi parties three of which did not pay.
One was a bankruptcy. The two remaining
parties, B&M Operating and Brown &
McKenzie are responsible for this
delinquent.
EPA forwarded this to Treasury for cross
servicing on 12/2/98. EPA has not heard
from the Treasury Department or the de
minimi parties. EPA is considering
withdrawing contribution protection.
EPA also plans to contact Treasury for
status report.
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Accounts Receivable Management Practices in Region 6
January 2001
Site
Age
Amount
Issues
Resolution
PRAT REFINERY (4
ARS)
SC21 (Disputed
Oversight Costs)
2922
S1.2M
The site is an abandoned crude oil refinery
in MM where PRPs ENO and ARC are still
addressing groundwater contamination.
Under an AOC El Paso Natural Gas and
ARC completed the Rl/FS from 10/89 to
4/92.
Issue is disputed oversight costs, EPA has
demanded $1.2 M for oversight of RI/FS.
PRPs dispute amounts in two categories:
EPA costs and contractor costs and believe
indirect costs are excessive.
PRPs also contend bills have not been
timely.
The Region has made two demands for
payment. EPA has been unable to provide
the PRPs with the cost documentation they
have requested. The Region had a meeting
planned for 4/20/00 to discuss a potential
resolution.
PRP is paying undisputed costs.
SOL date is approaching on this site.
BAYOU SORREL
STEERING
SC21 (Disputed
Oversight Costs)
1740
$252k
The Bayou Sorrel Steering Committee
(BSSC) disputes EPA oversight costs under
CD. EPA's original oversight bill for
JO/1/93 - 9/30/94 was for S245K. Bayou
Sorrel has paid $48.5K as
payment in full. BSSC has requested cost
documentation to establish that adjusted
oversight amount of $ 143,435 are
"necessary costs". BSSC also questions
whether the charges are for previous fiscal
years.
The Region adjusted the original amount of
"undocumented prior costs - annual
allocation for Fluor Daniel Contracting"
from SI84.7K to $143 .'4k in 1995
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Accounts Receivable Management Practices in Region 6
January 2001
Site
Age
Amount
Issues
Resolution
DUTCH TOWN
SC21 (Disputed
Oversight Costs)
1726
1762
$4 59k
$262k
Subject to an AOC and CD settling parties,
including Shell, Exxon, BP as well as local
parties, agreed to reimburse oversight and
response costs incurred by EPA. On 7/17/92
they invoked dispute resolution citing
insufficient documentation. Also claim
untimely billing, indirect costs are not
properly chargeable as response costs or
oversight costs, costs inconsistent with N.P.
Charges at site are now up to $776.7 and
parties have continued to invoke dispute
resolution.
The Region scheduled a meeting with the
settling parties for 3/29/00 to discuss
outstanding cost reimbursement issues, On
3/20/00 the Region summarizing
outstanding costs in anticipation of the
meeting. Since 7/29/97 the Region has not
billed approximately $162k.
Settling parties have paid undisputed
amounts.
Time frame for completion depends on OR
resources.
DALLAS HOUSING
AUTHORITY
SC 21 (Disputed
Oversight Costs)
592
$377k
This was an AOC for one OF(2) which in
1993 was divided into 5 Our. The Region
allocated costs incorrectly to this OF. EPA
had to adjust these costs amount the 5
operable units which took approximately
three years. EPA then billed DHA for this
three year period.
On 6/16/98 DHA informally appealed over
nine areas of concern including: 1) EPA did
not comply with term of AOC re: annual
billing 2) OF 2 closed in 95 but some
assessed costs are for 1996, 1997 & 1998 3)
questions regarding indirect costs and
annual allocation.
EPA met with DHA on 6/19/98 to discuss
the areas of concern. Most issues were
resolved. DHA wants to make installment
payments. EPA has good relationship with
PRPs and would like to comply. Region
thinks DHA will pay their fair share. OR is
to prepare letter to DHA. Time frame for
completion depends on OR resources, and
EPA
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Accounts Receivable Management Practices in Region 6
January 2001
Site
Age
Amount
Issues
Resolution
MID-SOUTH WOOD
SC 21. (Disputed
Oversight Costs)
2678
$280k
This site is a wood treatment plant still in
use. O&M Trust Fund was established
and approximately 300k deposited to
cover funds estimated to be needed for
O& M. By invoice in 92 and 94 EPA
requested payment of O&M, On
6/30/95, O&M Trust invoked dispute
resolution based on EPA not billing for
three years and Rohm-Haas.
Trust has made offer of all of O&M
Trust's remaining cash arid cash
equivalent plus assignment to EPA of
remaining capital credits in exchange for
release, assumption and covenant not to
sue.
EPA is considering options since site is
showing new signs of contamination.
Negotiations were to begin shortly on
new contamination and exactly how best
to pay for treatment::
Funds from PRP trust could be used to
complete work
EPA could provide funding to state to
complete site work and treat this amount
as a cost recovery and use fund dollars to
complete site work.
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