Review of Region 1 Accounts Receivable Process
January 2001
SUPERFUND PROGRAM REVIEW
Accounts Receivable Process
Region 1
Joint OECA/OCFO/OIG Review
Review #2001-S-3
January 2001
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Review of Region 1 Accounts Receivable Process
January 2001
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JAN I 9 2001
MEMORANDUM
SUBJECT: Superfund: Joint OECA/OCFO/OIG Review
Region 1 Final Report on Superfund Accounts Receivable Management
FROM:
Paul N. Connor, Director |M . &JU\
v Policy and Program Evaluation Division M
Office of Site Remediation Enforcement
Office of Enforcement and Compliance Assurance
JuT£tie"McNeiI, Acting Director
Financial Management Division
Office of the Comptroller
Office of the Chief Financial Officer
John T. Walsh, Divisional Inspector Gener;
Headquarters Audit Division
Office of the Inspector General
TO: Patricia Meaney, Director
Superfund Division, Region 1
Joanna B. Jerison, Legal/Superfund Manager
Office of Environmental Stewardship, Region 1
Mike Manlogon, FMO, Region 1
The purpose of this memorandum,is to transmit our attached "Superfund: Regional
Accounts Receivable Management Practices" Region 1 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. It cites several areas
where the region could improve their Superfund accounts receivable process and also includes
recommendations to address areas needing improvement.
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.
Internet Address (URL) http://Www.epa.gov
. Printed w*h Vegetable O» Based Inks CD Recycled Paper (Mkitnum 25% Posteonsumer)
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Attachment
cc: Joan Maddalozzo (Region 1)
Lee Clouthier (Region 1)
David Tornstrom (Region 1)
Sharon Fennelly (Region 1)
Bruce Gelber, DOJ
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TABLE OF CONTENTS
CHAPTER 1 2
INTRODUCTION :' 2
BACKGROUND 2
PURPOSE 3
SCOPE AND METHODOLOGY 4
Interviews with Program, Superfund Legal and FMO Staff 4
Site Specific Review of Selected Accounts Receivable 4
Reconciliation of Regional data in IFMS and DOJ Tracking Systems 5
CHAPTER 2 6
REVIEW OF SUPERFUND ACCOUNTS RECEIVABLE PROCESS 6
Office of Environmental Stewardship 6
Program Office 7
Financial Management Office 7
Results of Site Specific Review of Selected Accounts Receivable 8
Results of EPA DOJ Reconciliation 9
MATTERS FOR CONSIDERATION 10
Information Exchange/Timely and Accurate Recording of Superfund Accounts Receivables . 10
RECOMMENDATIONS 11
Headquarters 11
DOJ 11
Region 1 12
Headquarters/DOJ/Region 1 12
Internal Regional Communications/Information Exchange 12
RECOMMENDATIONS 12
Region 1 - 12
National and Regional Data Management/Data Quality 13
RECOMMENDATIONS 15
Region 1 15
Headquarters - OCFO/OSRE 16
Headquarters - OCFO 16
DOJ '. 16
Account Receivable Enforcement/Collection of Delinquent Debt and Write-Offs 16
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RECOMMENDATIONS 17
HeadquartersOCFO, OSRE, OGC, DOJ 17
Region 1 17
CONCLUSION 18
ATTACHMENT A 19
SUMMARY OF ISSUES AT SELECTED SITES 19
ATTACHMENT B 23
ACCOUNTS RECEIVABLE STATUS CODES 23
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CHAPTER 1
INTRODUCTION
* The report summarizes the results of the program evaluation of procedures for managing
Superfund accounts receivable from establishment through collection. Emphasis for the
evaluation focused on tracking and collecting overdue accounts receivable. This review
highlights the importance that the Agency, as well as the Department of Justice (DOJ), places on
the management of its Superfund accounts receivable, and the many related issues challenging
both Headquarters and Regional offices.
i ' ' .
The evaluation was conducted as a joint, cooperative effort 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 (01G). This review was not conducted as
an audit. The team welcomed the informal interaction and communication with the regional
management and staff. The results of this evaluation 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 accounts receivable 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 Trust Fund) 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 entering into cost recovery settlements on behalf of the United States, as
well as enforcing and collecting debts arising from Superfund cost recovery actions.
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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 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 to
the Superfund Trust Fund which resulted from these enforcement actions. For this collection
initiative, several analyses of accounts receivable data have been completed.
At the time of the Region 1 review, in June 2000, our analysis of data from the EPA's
Integrated Financial Management System (IFMS) indicated that nationally there was
approximately $526.8 million in total outstanding accounts receivable greater than!20 days
delinquent. Of the $526.8 million, EPA had collection responsibility for $125.4 million and DOJ
had collection responsibility for $401.4 million. Of the $526.8 million over 120 days delinquent,
$252 million was considered potentially collectible, $206 million was under appeal at DOJ, and
$68.6 million was deemed doubtful for collection. Region 1 had approximately $6.2 million (or
1% of the total) in outstanding accounts receivable of which $4.5 million is at EPA for collection
action and $1.8 million is DOJ's collection responsibility. Of the $6.2 million, $5.1 million was
considered potentially collectible, $229.6K was under appeal at DOJ, and $909.6K was deemed
doubtful for collection.
Because of the important mission of the Superfund Program and the large amount of
dollars involved in cost recovery, OSRE, FMD, and the OIG planned a joint review of EPA's
management of the Superfund accounts receivable process. The objectives were 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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SCOPE AND METHODOLOGY
The review team developed a methodology for conducting the review and concluded that
the most effective approach for accomplishing the objectives was to conduct on-site reviews in
several regions. The objectives were 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 and DOJ should provide better guidance and
support.
Regions 6,5, and 1 were selected as the regional pilots. Region 1 was selected primarily
based on the relatively small dollar amount of their delinquent accounts receivable in order to
determine if the Region had any unique practices that may have contributed to the low delinquent
receivable balance.
Interviews with Program, Superfund Legal 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 Environmental
Stewardship (Superfund Legal), 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 the analysis of regional policy for handling accounts receivable, we
selected a sample of overdue accounts receivable for site-specific review. Data in IFMS as of
April 6,2000, showed that Region 1 had 75 outstanding accounts receivable greater than 120
days delinquent totaling $6.2 million. For the site-specific review, we selected 23 of the 75
overdue receivables totaling approximately $3.4 million. These accounts receivable related to 16
sites. These sites were comprised of at least one receivable from each accounts receivable status
code categories (See Attachment B-List of Status Codes) having large past due amounts and the
age of the debt was also significantly overdue. A larger number of receivables in status code 08 (
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i.e., Delinquent in Dunning Cycle) were selected because 12 of the Region's receivables were
reported in that category. The age of the receivables reviewed ranged from 141 to 4281 days
delinquent.
Our interviews were conducted with the staff responsible for tracking and collection
follow up activities for that receivable, in most cases the Superfund Legal and FMO. Our
expectations were to identify the reasons for the delinquency, actions taken by the Region to
obtain payment or resolution, and any future efforts to be undertaken. In addition, we hoped to
identify common problems across the range of delinquent receivables which could be addressed
and improved through future EPA HQ, DOJ, and regional actions. The results of our review are
discussed in Chapter 2. Attachment A contains a more detailed summary of each site.
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) that are currently reported in IFMS as being the DOJ's
responsibility for collection. We compared the data recorded in IFMS identified as 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. 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. This fact made the reconciliation more lengthy and challenging and thus, the final
reconciliation for Region 1 could not be completed prior to issuance of the report. However,
some preliminary findings and recommendations resulting from the reconciliation are contained
in this report.
Upon completion of the national reconciliation, we will present the results of the review
to DOJ and work with them cooperatively to develop procedures for enhancing the tracking of
Superfund receivables.
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Review of Region 1 Accounts Receivable Process
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CHAPTER 2
REVIEW OF SUPERFUND ACCOUNTS RECEIVABLE PROCESS
The Region 1 Financial Management Office generally follows Agency policy and
procedures provided in Chapter 14, Superfund Accounts Receivable and Billings, RMDS 2550D
and Chapter 9, Receivables and Billings, RMDS 2540 when managing its Superfund accounts
receivable. Although Chapter 14 specifically addresses the management of Superfund accounts
receivable, this document cross-references those sections in Chapter 9 that are also applicable to
Superfund.
During the Region 1 review, we determined that there are three primary offices in the
Region that have a role in the accounts receivable process: the PO, Superfund Legal, and FMO.
Each office has a distinct role in ensuring that: accounts receivable documentation is prepared
and/or forwarded timely to the respective office; accounts receivable are properly recorded and
tracked; changes in accounts receivable status are communicated between offices, including
DOJ; and proper follow up actions for disputed and delinquent accounts receivable are discussed
and initiated as required.
The Region maintains a Memorandum of Understanding (MOU) developed in October
1989 and a memorandum dated January 1993, establishing the roies and responsibilities for the
PO and the FMO. The Superfund Legal is not specifically included in the MOU; however, the
roles and responsibilities for them are defined in Volume I, Chapter 9 of the regional training
manual and also in a memo dated August 1988. In addition to these documents, the FMO
developed procedures for oversight billing dated October 1998. During our review, we found
that the PO serves as the "middle man" or liaison to both the Superfund Legal and FMO on all
accounts receivable issues.
Based on our discussions with each office, we determined that the roles and
responsibilities in the regional Superfund accounts receivable process are as follows:
Office of Environmental Stewardship
Forwards copies of all legal documents (e.g., CDs, judgments, and AOCs), and
other supporting-documents, that establish accounts receivable to the PO;
Works and communicates with PO concerning changes in the status of accounts
receivable (e.g., dispute resolution, bankruptcy, or other reasons);
Follows up with delinquent debtors to determine the status of their payments;
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Follows up with DOJ to determine the status of delinquent judicial debts;
Follows up on bankruptcy cases and refers proof of claim to DOJ on behalf of
EPA;
Makes decisions concerning the referral of delinquent debts to DOJ for
enforcement/collection; and
Serves as a case site team member for settlement negotiations.
Program Office
Forwards copies of all legal documents received from Superfund Legal
establishing accounts receivable to FMO;
Coordinates with Superfund Legal on accounts receivable issues as they arise;
Prepares correspondence requesting the FMO to prepare bills for collection;
Follows up with Superfund Legal with respect to delinquent debts;
Extracts data from enforcement agreements and provides this information to the
FMO for entry into IFMS;
Advises FMO of any changes in the status of the debt or the debtor;
Reviews and approves bills prepared by the FMO for future cost/oversight bills;
Prepares transmittal letter for future cost/oversight bills;
Reviews, reconciles, and approves cost recovery packages (i.e., cost and work
performed documentation);
Tracks all cases and related accounts receivable; and
Serves as a case site team member and assists Superfund Legal with settlement
negotiations.
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Financial Management Office
Records accounts receivable for amounts reflected in legal documents received
from the PO within three workdays from receipt;
Prepares final recovered SCORES report and cost recovery packages for PO and
Superfund Legal;
Prepares and issues bills for collection in accordance with requests from PO;
Records and tracks the status of accounts receivable using own regional data base;
Advises PO and Superfund Legal of overdue receivables;
Provides PO and Superfund Legal with monthly accounts receivable report
concerning the status of amounts collected, amounts to be collected, and
delinquencies;
Performs reconciliation between regional accounts receivable data base records
and IFMS data;
Assigns and updates accounts receivable status codes;
Researches unidentified payments that come in prior to receiving the source
documents necessary to establish accounts receivable, and obtains source
documents; and
Forwards all collections to Headquarters for investment in the fund within 24
hours of receipt.
Results of Site Specific Review of Selected Accounts Receivable
As discussed in Chapter 1, we selected 23 accounts receivable for site-specific review.
Prior to our visit, the region reviewed these sites and provided us with a status update. Although
the outstanding amounts for five of the receivable sites had been collected, the remaining amount
listed on the overdue report for these sites was determined to be unbilled interest. In addition,
one site had been referred to the Department of Treasury for collection. The review team found
that most issues identified during the site specific review were relatively minor, and with the
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appropriate coordination and communication among the three offices could be easily resolved.
(The site specific reviews are summarized in Attachment A.)
The following are some issues identified during our site specific review.
Overlapping settlements on the site left the billing unclear. It was difficult to determine
based on EPA's accounting in IFMS, the costs associated with each settlement. There
was a single regional work assignment for multiple tasks which are addressed in each
settlement which caused the problem and the resulting dispute. The Region is working to
manually disaggregate the costs and assign them to each settlement. Once completed,
Superfund Legal will then inform FMO to reissue a revised bill or the PRP will pay the
old bill.
One receivable was part of a large National bankruptcy case. HQ negotiated the
settlement and the Region provided comments on the dollar amount. A portion of the
original debt and the remainder was discharged as a judgment. However, the region is
unsure if the funds were to be applied against the Region's open receivable. HQ and the
region will work together to resolve this issue.
These receivables consist of installment payments under the terms of five agreements.
The PRP filed for Chapter 11 bankruptcy, reorganization. Although the region filed a
proof of claim under the bankruptcy, Superfund Legal will not receive a discharge notice
because of the type of bankruptcy. Thus, the receivable will remain open and collections
made consistent with the final bankruptcy reorganization plan.
At this site, an amount equal to the principal amount of the bill was paid in full, however,
since the 1st and 2nd bills were paid late, the overdue amount is the late fee plus accrued
compounded interest. However, due to accounting practices which require payments to
be made first against interest and then against the principal, the amount outstanding in
IFMS remains recorded in IFMS as unpaid principal. The region has requested that HQ
provide a written writeoff policy specifically addressing de minimis amounts of unpaid
interest prior to writing off the costs.
Results of EPA DOJ Reconciliation
EPA's initial review in April 2000 found 29 cases to be reconciled in both the EPA and
the DOJ systems. Out of the 29 cases, 11 cases with outstanding balances totaled approximately
$3,500. Upon completion of a National writeoff policy, the region should close out these cases
due to small balances. These balances could represent unpaid interest due to payment received
late and interest accrued during that time frame. There were 3 cases in both the IFMS and DOJ
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systems where the collection amounts and outstanding balances did not agree, 12 cases totaling
$14,946,891 that were in IFMS but not recorded in DOJ's systems, and 3 cases totaling $278,641
that were recorded in DOJ's systems, but not in IFMS. This reconciliation is currently ongoing
at the DOJ and we are awaiting the results of their review.
One significant finding came out of the reconciliation between the two systems. 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, however, this data has not always
been entered into DOJ's systems. After discussions with DOJ, they now require that the SSID be
entered for all cases in their systems, thus providing this important link.
MATTERS FOR CONSIDERATION
Based on our review, we identified four general areas where actions could be taken in
Region 1 which could improve the accounts receivable process and lead to increased collections.
This report does not include formal recommendations because it is designed to provide
information based on the results of an informal, cooperative exchange between the review team
and the region. Therefore, the Region may want to consider some of the recommendations that
are discussed below in managing Superfund accounts receivable.
I. ' -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. Thus, delays in recording receivables could result in potential lost interest. 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'sFMD within seven days of receipt. In an effort to improve the timeliness of
recording accounts receivable for CDs, DOJ has begun advising EPA of entered CDs via
electronic notification. DOJ notifies the FMOs and Superfund Legals weekly of entered CDs
using their EPA Debt Assessed Report which is transmitted by electronic mail. FMD transmits
the documents to the appropriate Regional FMO. FMO stated that they receive all
documentation through the PO. Although the FMO does not encounter any problems receiving
copies of AOCs, they have experienced delays in receiving judicial documents that are sent to the
Superfund Legal from DOJ. DOJ is aware of the problem and the region has indicated that this
has improved. .
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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.
Where source documents are not provided in a timely manner, the Region may be
unaware that a receivable exists and is already delinquent; consequently, they cannot
accurately calculate interest related to the delinquency.
i
Issue: In a limited number of cases, the Region was not notified when DOJ
determined that a judgment 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 and accrue compounded interest
which then inflates the Agency's assets as reported in its financial statements.
RECOMMENDATIONS
Headquarters
Revise the current DOJ IAG to emphasize the timely transmittal of final judicial .
documents from DOJ (e.g., entered consent decrees) needed by EPA to record accounts
receivable. This would complement the July 19, 1998, memo from Steven A. Herman
entitled "Effective Debt Management".
Request that FMD add the PO as an addressee to receive the electronic notification of
judicial enforcement agreements.
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DOJ
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
Superfund Legal and FMO within 30 days of any action which formally changes the
status of the collectibility of the debt.
" Establish single point of contact for judicial source documents at DOJ.
Provide the Region with the newly created payment report on a quarterly basis.
Region 1
Superfund Legal should include delinquent accounts receivable as a standing agenda item
in regional Superfund Legal, DOJ docket reviews.
Regional PO may want to participate in the Docket Reviews because this office plays an
integral part, in the accounts receivable process.
Headquarters/DOJ/RegLoii1
Continue to explore the, option of enhancing the timely establishment pf accounts
receivable through the electronic notification process. Region 1 reported that the
information currently provided in electronic format (the DOJ "Debts Assessed Report")
has been useful.
i*
II. Internal Regional Communications/Information Exchange
Issue: Although .the three offices are involved in managing Superfund Accounts
Receivable, changes to the internal communications procedures could result
in a more efficient process.
The Region's process for managing accounts receivable appeared somewhat inefficient.
There are communications between the FMO and the PO and separate communications between
the PO and Superfund Legal. Having all affected parties (i.e., FMO, PO, and Superfund Legal)
communicating concurrently should be more efficient: Numerous issues regarding the status,
disposition and planned action regarding overdue receivables could be resolved more easily and
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quickly through periodic face-to-face discussions between all three offices and would provide a
better understanding of specific issues affecting the collection and information needs of each
office.
RECOMMENDATIONS
Region 1
Revise the regional MOU among the FMO, PO, and Superfund Legal to specifically
address roles and responsibilities with respect to Superfund accounts receivable
management. Although the roles and responsibilities for the PO, Superfund Legal, and
the FMO are included in other documentation, the MOU will serve to establish, clarify,
and formalize the current roles for each office in the accounts receivable process.
Add the FMO to the standing Accounts Receivable Case Site Team. By participating on
the team, the FMO can become more involved in the activities specifically related to the
payment terms of proposed settlements which would have a positive affect on financial
management.
Request that the Superfund Legal and PO review and provide comments to the FMO
monthly accounts receivable report. This review will assist in determining if follow up
actions (e.g., referrals, write-off, or status code changes) are needed for any outstanding
receivables.
Schedule regular team meetings with respect to cost recovery issues (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. Establish overdue accounts receivable as a standing agenda item at
these meetings.
Conduct annually a comprehensive review of open accounts receivables. Establish or
revise allowances for doubtful accounts, as needed., This action requires all three offices
to review the status of delinquent accounts receivable to determine the likelihood of
collection and establishing, or adjusting, allowances for amounts deemed uncollectible
(e.g., bankruptcy cases). Discussions may require contact with DOJ to determine current
disposition of debts under their purview.
Conduct regular reviews of IFMS accounts receivables status codes and record new or
revised IFMS accounts receivable status codes in IFMS. Any changes made should be
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properly recorded in IFMS by the FMO. This action requires all three offices to routinely
discuss the status of delinquent debts and the proper assignment of the status codes.
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., Superfund
Legal follow up, refer to DOJ, write-off) of these debts.
Implement Headquarters guidance on the referral and collection process of delinquent
debts.
III. National and Regional Data Management/Data Quality
Issue: Region 1 has created a separate data system for tracking Superfund accounts
receivable because neither IFMS or CERCLIS contain all the information
needed to effectively manage its accounts receivable. In addition, Region 1
indicated that it is difficult to retrieve data using the MARS reporting system
for accounts receivable tracking and management.
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.
The FMO developed a second internal database in Microsoft Access to track accounts
receivable. The internal database records oversight bills and is able to specifically track
oversight bills easier than IFMS. In the regional system, the Region is able to easily develop
custom reports to meet its needs, and is able to identify IFMS site spill IDs and billing document
numbers. The Region uses this database to identify delinquent debts.
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 through the Data Warehouse, on EPA's
intranet site, additional work in this area would be helpful in meeting the Region's data needs.
Using the regional data base, the FMO creates a monthly report providing information on
the outstanding accounts receivable. The FMO uses the comment field on the report to highlight
specific information pertaining to each site. The report is then distributed electronically to both
the PO and the Superfund Legal. The PO would then provide a follow up response to the report
describing the current status of each site. On occasion, the FMO receives site status updates
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directly from Superfund Legal staff. Using this information, the FMO translates the information
into the HQ/FMD accounts receivable status codes, and assigns and records them into IFMS for
each site.
While this approach appears to be effective for the region, 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, parallel 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: Dunning Letters are a Requirement in Chapter 14 of the "Superfund
Accounts Receivable and Billings " document
When it is determined that an accounts receivable has become delinquent, the FMO
advises the PO and Superfund Legal of the overdue receivable, and the PO, in turn, follows up
with Superfund Legal in regard to this debt. Although dunning letters are currently a
requirement in Chapter 14 of the "Superfund Accounts Receivable and Billings" document,
Headquarters has recently issued a guidance which supersedes Chapter 14. It is entitled
"Referral Process and Timing for Collection of Delinquent Debts" dated April 6,2000. The
Region indicated that it is their practice not to send out dunning letters to PRPs to follow up on
delinquent debts. They rely on the terms and conditions established in the enforcement
agreements specifying the amount owed and the time frame in which this amount should be paid.
Issue: The Region has reported accounts receivable status codes inaccurately or
inconsistently in IFMS.
During the site specific interviews, we found that out of the 23 sites where we conducted
follow up interviews, in most cases the status codes were incorrect in the system. As discussed
above, the FMO is responsible for assigning the accounts receivable status codes with input from
the PO and Superfund Legal. Inaccuracies in recording accounts receivable status codes could
have resulted from translating the notes from the regional monthly report into the current IFMS
status codes. Region 1 indicated that the codes were assigned incorrectly due to confusion over
14
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r
Review of Region 1 Accounts Receivable Process
January 2001
the definition of the IFMS accounts receivable status codes and some ambiguity in the codes that
limited their utility. For example, using the Region's site backup dated from April 6,2000, there
were 75 overdue receivables with outstanding amounts greater than 120 days. Out of the 75
receivables, 47 (63%) were coded as a status code 08, Delinquent in the Dunning Cycle.
RECOMMENDATIONS
Region 1
Initiate routine reviews and reconciliations with FMO, Superfund Legal and the PO to
determine the accuracy of IFMS accounts receivable data:and corresponding accounts
receivable status codes. This is consistent with the recommendations in Section II.
Follow procedures in the "Interim Guidance on the Referral Process and Timing for
Collection of Delinquent Debts Arising under Superfund Judicial or Administrative
Settlements" regarding the issuance of "Notice of Non-Compliance with Payment
Provision" to overdue accounts receivable.
Participate on the HQ workgroup, when established, to review existing IFMS AR Status
Codes.
Headquarters - OCFO/OSRE
Establish a work group (OCFO arid OSRE), including Regional FMOs, PO, Superfund.
Legals, and DOJ, to examine the feasibility of integrating data from existing information
systems (i.e., IFMS, CERCLIS, TALON, and CLASS) to meet Regional information
needs for effective receivables management.
Headquarters - OCFO ;
Establish a workgroup (OCFO) to 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 from the above recommendation.
Establish a workgroup (OCFO) to review existing IFMS accounts receivable status codes
to eliminate any overlap and ambiguity in interpretation. Add new or revised codes, as
necessary. Review existing AR Status Code definitions to determine if it is necessary
that they be clarified or revised to ensure that they can be properly applied and recorded
in IFMS. '
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Review of Region 1 Accounts Receivable Process
January 2001
DOJ
* Determine if DOJ would allow EPA to access its TALON and CLASS systems similar to
its now defunct Lands Docket Tracking System in order to facilitate regional access to
DOJ receivable and payment information.
IV. Account Receivable Enforcement/Collection of Delinquent Debt and Write-Offs
Issue: In Region 1, 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.
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-judgment 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.
RECOMMENDATIONS
HeadquartersOCFO. OSRE. OGC. DOJ
Establish a workgroup (OSRE, in conjunction with OCFO, DOJ, the Regions, and Office
of General Counsel) 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
16
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Review of Region 1 Accounts Receivable Process
January 2001 .
determine under what authorities CERCLA debts can be written off. OSRE's research 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 re-delegate this authority to EPA.
Revise (OCFO) Chapter 14, RMDS 2550D, "Superfund Accounts Receivable and
Billings" to ensure that the roles and responsibilities section of this document, as well as
all remaining sections, to ensure that trie document is as current as possiblespecifically
addressed should be situations that are unique to the billing, collection, enforcement, and
write off of Superfund debts.
Region 1
Discuss and revise all internal documents among the FMO, PO, and Superfund Legal to
clarify the 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. .
Provide all attorneys, in addition to branch and section chiefs, with Superfund monthly
reports provided by the FMO on overdue receivables. More direct involvement with the
Superfund Legal in the monthly discussions with the FMO and PO on aging accounts
receivable and sites which are in dispute would be beneficial in resolving issues more
efficiently. , *
CONCLUSION
While the region has made progress in managing their accounts receivable, this report
cites several areas where they could improve the effectiveness and efficiency of the accounts
receivable process or where guidance or support from Headquarters would be useful. The"
Region could significantly improve the way it manages its accounts receivable by simply
improving the way the offices involved in the accounts receivable process interact and
communicate among themselves.1 The ability to establish, track, and effectively communicate
and discuss changes concerning the status of accounts receivable is the key to successfully
managing accounts receivable. Without routine communication, open accounts receivable that
should be closed or referred to DOJ might languish unnecessarily for extended periods of time
and will subsequently inflate the Agency assets as reported in its annual financial statements.
With this thought in mind,,we ask that all three offices begin engaging in more routine
discussions concerning changes in accounts receivable and the status of delinquent debts to
17
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Review of Region 1 Accounts Receivable Process
January 2001 ^^
determine appropriate follow up actions for any uncollectible amounts. 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.
18
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Review of Region 1 Accounts Receivable Process
December 2000
ATTACHMENT B
ACCOUNTS RECEIVABLE STATUS CODES
01 Noncurrent, non delinquent receivables. All receivables, installment and non-
installment receivables, not due and collectible within the next 12 months
02 Referred to Collection Agency - Outstanding debts at a private collection agency.
03 Referred to or originally litigated at the Justice Department - Outstanding debts
that are in litigation at the Department of Justice with the statutory authority to
litigate.
05 Unmatured Asbestos Loan - Undisbursed Asbestos Loans.
07 Collection Action Suspended - Outstanding debts are put on hold. The prospect
of future collection justifies retention of the debt for periodic review and there is
no risk of expiration of the statute of limitation during the period of suspension.
08 Delinquent in Dunning Cycle - Delinquent Outstanding Debts with no legal
processes involved. This includes delinquent installment receivables.
10 Referred to Regional Counsel - Delinquent debts that are referred to regional
counsel for further deliberation.
11 Debtor in Bankruptcy - Delinquent collateralized or uncollateralized debts in
bankruptcy.
12 With FMO for Write-off Decision
13 Current receivable, including but not limited to installment receivables, that are
not delinquent.
15 Debtor in Bankruptcy with DOJ
16 Debts Under Appeal with DOJ
17 Debts Forwarded to Claims Coordinator for Cross Servicing to Treasury
18 Debts Claims Coordinator Forwarded to Treasury for Cross Servicing
19 Debts written off with Liens
21 Superfund oversight debts under appeal. Debts currently in formal or informal
appeals process.
96 EPA Claims Office - Debts referred to OGC (Office of General Counsel) for
further processing.
97 Debts Under Appeal - Debts in formal appeals process. The result of which
affects the validity and/or the dollar amount to be collected.
24
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