OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
EPA Could Improve Its
Redistribution of Superfund
Payments to Specific Sites
Report No. 2006-P-00027
July 31, 2006
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Report Contributors: Paul Curtis Kevin Ross
Margaret Bastin Shannon Schofield
Arthur Budelier Juliet Stebbens
Alfred Falciani Wendy Swan
Robert Evans
Abbreviations
CERCLA Comprehensive Environmental Response, Compensation, and Liability Act
CFO Chief Financial Officer
EPA U.S. Environmental Protection Agency
OARM Office of Administration and Resources Management
OCFO Office of the Chief Financial Officer
OFM Office of Financial Management
OFS Office of Financial Services
OGD Office of Grants and Debarment
OIG Office of Inspector General
OSWER Office of Solid Waste and Emergency Response
RMDS Resources Management Directive System
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2006-P-00027
July 31, 2006
Catalyst for Intpruving the Environment
. -•
a i;ite-specific level to enable ;;
EPA Could Improve Its Redistribution of
Superfund Payments to Specific Sites
What We Found
EPA did not make timely redistributions of Superfund cooperative agreement,
interagency agreement, and small purchase payments from the general site
identifier "WQ" to the specific Superfund sites or other general site identifiers.
The finance offices that we reviewed recorded the payments to "WQ" instead of
redistributing them to the appropriate general or site-specific identifiers, as
required. As of January 2006, $39 million was recorded in "WQ" for those
funding vehicles. The payments remained undistributed for periods ranging from
2 months to 10 years. As a result, the $39 million may not be considered in
settlement negotiations and oversight billings. Consequently, these funds may not
be recovered from responsible parties and be available for future site cleanup
activities.
We found various reasons why EPA did not timely redistribute the "WQ" costs.
EPA did not establish "WQ" procedures, consistently monitor the "WQ" accounts,
and provide "WQ" training. EPA also did not require cooperative agreement
recipients to provide the site-specific cost detail needed.
Subsequent to our audit, EPA provided unaudited data reports that indicated the
undistributed "WQ" was reduced to $13 million as of May 12, 2006.
What We Recommend
We recommend that EPA (1) develop written "WQ" procedures, including
timeliness standards and monitoring procedures; (2) provide training; (3) change
cooperative agreement conditions to require recipients to provide cost details
within 24 hours of drawing down funds, and enforce those conditions; and
(4) redistribute the remaining historical "WQ" costs.
EPA began corrective action on several of our recommendations before we
completed the audit, and generally agreed with all recommendations.
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&)
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
July 31,2006
MEMORANDUM
SUBJECT:
EPA Could Improve Its Redistribution of Superfund Payments to
Specific Sites
Report No. 2006-P-00027
TO: Lyons Gray
Chief Financial Officer
Susan Parker Bodine
Assistant Administrator for Solid Waste and Emergency Response
Luis A. Luna
Assistant Administrator for Administration and Resources Management
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the
problems the OIG has identified and corrective actions the OIG recommends. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determination on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures. The estimated cost of this report - calculated by
multiplying the project's staff days by the applicable daily full cost billing rates in effect at the
time - is $322,000.
Action Required
In accordance with EPA Manual 2750, the Office of the Chief Financial Officer (OCFO), as the
primary Action Official, is required to provide a written response to this report within 90
calendar days. OCFO should work with the Office of Solid Waste and Emergency Response and
the Office of Administration and Resources Management to coordinate the response, which
should include a corrective action plan for agreed upon actions, including milestone dates. We
have no objection to the further release of this report to the public. This report will be available
at http://www.epa.eov/oig.
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If you or your staff have any questions, please contact Paul Curtis at (202) 566-2523 or
curtis.paul@epa.gov, or Meg Bastin at (513) 487-2366 or bastin.margaret(5).epa.gov.
Sincerely,
Roderick
Acting Inspector General
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EPA Could Improve Its Redistribution of Superfund Payments to Specific Sites
Table of Contents
1 Introduction
Purpose
Background
Scope and Methodology.
2 EPA Could Improve Its Superfund "WQ" Site Cost Redistribution Process.
EPA Did Not Timely Redistribute "WQ" Site Costs
Various Factors Contributed to Untimely Redistributions
Untimely Redistributions Impact Cost Recovery
Agency Actions to Date
Recommendations
Agency Response and OIG Comment
4
5
6
6
7
8
Status of Recommendations and Potential Monetary Benefits.
A Details on Scope and Methodology 10
B Undistributed "WQ" Costs by Region and Funding Vehicle 12
C Causes of Untimely Redistributions by Applicable Location
and Funding Vehicle 13
D Full Text of Agency Response 14
E Distribution 20
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Purpose
We performed this review to examine a potential Superfund cost recovery issue
noted during our audit of the U.S. Environmental Protection Agency's (EPA's)
fiscal year 2003 financial statements. As of August 2003, EPA had recorded
payments of $97 million for Superfund response costs to a general site identifier
';WQ" that should have been redistributed to specific site identifiers to improve
EPA's cost recovery. The objective of our current review was to answer the
following questions:
1) Does EPA make timely redistributions of Superfund costs recorded in the
"WQ" general site identifier to the specific Superfund sites?
If EPA does not make timely redistributions:
2) What is the cause of untimely redistributions?
3) What is the effect of untimely redistributions?
4) What actions are needed to ensure timely redistributions?
Background
EPA established the Superfund program in 1980 under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA). Since its
inception, the Superfund program has given EPA the authority to respond directly
to releases or threatened releases of hazardous substances that may endanger
public health or the environment. The Agency has the authority to seek the
recovery of its costs of responding from those parties responsible for release of
the hazardous substances.
Since fiscal year 2004, the Superfund Trust Fund has been primarily supported by
appropriations from general tax revenues. Replenishing the Trust Fund through
EPA's cost recovery has decreased significantly over several years and the Trust
Fund no longer receives tax revenue. Therefore, Superfund cost recovery is
critical to EPA's continued efforts under CERCLA.
Since EPA seeks cost recovery from responsible parties, it is essential that EPA's
financial management system account for response costs at a site-specific level.
Therefore, EPA tracks Superfund costs at sites using unique alphanumeric
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identifiers. The first four characters of the identifier are known as the site/spill
identifier. The first two digits are numeric, and represent the EPA region (1 of
10) where the site is located. The next two characters identify the site.
EPA established general site identifiers for costs that are not immediately
identifiable to a specific site or are unrelated to a site. EPA uses the general site
identifier "WQ" to obligate amounts funded for a site-specific response, when the
precise amounts applicable to the individual sites cannot be determined at the time
of obligation. According to the Superfund Program Implementation Manual,
Fiscal Year 2006/2007, "WQ" is used to obligate bulk or block funding only,
i.e., where site/spill identifiers exist but funds are not committed to a specific site.
However, when disbursement/payments are made for "WQ" obligations, they
must be associated with a site. For example, EPA could obligate management
assistance funds to the "WQ" site identifier under a multi-site cooperative
agreement, giving the recipient the flexibility to shift resources as needed among
different sites. Additional general identifiers are "ZZ" for preliminary site
assessment costs on sites that have not been assigned an identifier number and
"00" for indirect costs not related to a specific site that will be allocated to the
Superfund indirect cost rate.
EPA disbursed "WQ" costs on four types of funding vehicles: contracts,
interagency agreements, cooperative agreements, and small purchases. EPA
processes contracts and small purchases at the Research Triangle Park Finance
Center and interagency agreements at the Cincinnati Finance Center. EPA is
transferring the processing of cooperative agreements from the regional offices to
the Las Vegas Finance Center.
Cooperative agreements and interagency agreements were the primary funding
vehicles for EPA's undistributed "WQ" cost payments, as shown in the following
table.
Funding Vehicles
Cooperative Agreements
Interagency Agreements
Small Purchases
Subtotal
Contracts (unaudited)
Total
Undistributed
"WQ" Costs as of
January 2006
$31,532,427
6,165,253
1,798,890
39,496,570
1,806,639
$41,303,209
A cooperative agreement is a legally binding obligating document through which
EPA often provides funding to a State to carry out removal and/or remedial
activities. Cooperative agreements with "block funding" provide States increased
flexibility to shift resources among multiple activities. An interagency agreement
is a written agreement between Federal agencies under which goods and services
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are provided. The Superfund program uses interagency agreements to request
certain Federal agencies to assist with site cleanups and associated activities and
to provide ongoing support or services.
Three offices have primary responsibility for the areas covered in this report. The
Office of the Chief Financial Officer (OCFO) is responsible for EPA's financial
management and Superfund cost recovery system. The Office of Solid Waste and
Emergency Response (OSWER) manages the Superfund program. The Office of
Administration and Resources Management (OARM) is responsible for
administering grants and cooperative agreements.
Scope and Methodology
We performed this audit in accordance with Government Auditing Standards,
issued by the Comptroller General of the United States. We conducted our audit
from January 4, 2006, through March 29, 2006. Appendix A contains a more
extensive discussion of this section.
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While EPA has timely redistributed "WQ" costs paid through contracts, its
redistribution process for costs paid through cooperative agreements, interagency
agreements, and small purchases could be improved. Various factors contributed
to certain untimely redistributions, which possibly hindered EPA's ability to
recover the costs from responsible parties. EPA did not establish "WQ"
procedures, consistently monitor the "WQ" accounts, and provide "WQ" training.
Also, EPA did not require cooperative agreement recipients to provide the site-
specific cost detail needed. The $39 million of Superfund costs not redistributed
to specific sites may not be considered in settlement negotiations and oversight
billings. Therefore, these funds may not be recovered from responsible parties
and be available for future site cleanup activities.
EPA Did Not Timely Redistribute "WQ" Site Costs
EPA did not make timely redistributions of Superfund cooperative agreement,
interagency agreement, and small purchase payments from the general site
identifier "WQ" to the specific Superfund sites or other general site identifiers.
As of January 2006, the undistributed "WQ" for those funding vehicles totaled
$39 million. Appendix B contains a table of undistributed "WQ" costs by region
and funding vehicle. EPA's Comptroller Policy Announcement No. 96-01 states
that disbursements will not be recorded against the "WQ" identifier. Once
obligations are liquidated and disbursements are made, these costs must be
redistributed from the "WQ" account to the appropriate site/spill identifier. The
finance offices that we reviewed recorded the payments to the general site
identifier "WQ" and did not redistribute payments to the appropriate general or
site-specific identifiers, as required.
The payments in "WQ" remained undistributed for periods ranging from
2 months to 10 years. Although EPA did not establish a definition of timeliness,
we consider these extended periods to be untimely. The project officers and
finance personnel we interviewed generally believed that a timely period for
redistributing "WQ" costs would be 1 business day for cooperative agreement
costs, 30 days for small purchases, and 60 days for interagency agreements.
Some locations have implemented effective procedures resulting in timely "WQ"
redistributions. For example, the Research Triangle Park Finance Center
redistributes contract costs within 1 business day of the project officer invoice
approval. The Las Vegas Finance Center requires cooperative agreement
recipients to provide the site-specific cost detail within 24 hours of drawing down
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funds. Region 1 requires a recipient of a block-funded cooperative agreement to
provide the site- specific cost information with its draw down request.
Various Factors Contributed to Untimely Redistributions
We found various reasons why EPA did not timely redistribute the "WQ" costs
for cooperative agreements, interagency agreements, and small purchases.
Appendix C contains a table that matches the following causes with the applicable
locations and funding vehicles:
• EPA did not establish procedures to ensure the timely redistribution of
Superfund costs, except for contracts. Although Comptroller Policy
Announcement 96-01 provided guidance for using the "WQ" identifier,
EPA did not establish operating procedures or set timeliness standards for
cooperative agreements, interagency agreements, and small purchases to
implement the policy. For contracts, Research Triangle Park Finance
Center was proactive in identifying untimely redistributions and
establishing operating procedures and timeliness standards.
• EPA did not consistently monitor the amounts charged to "WQ" in the
regional finance offices, Program Offices, and Finance Centers. Some
offices that we reviewed monitored the "WQ" account consistently while
others monitored on an irregular basis or not at all.
• EPA did not provide training in the "WQ" cost redistribution process.
Project officers and finance personnel were unaware of their
responsibilities to redistribute "WQ" costs. According to Comptroller
Policy Announcement 96-0 1 , project officers are responsible for
redistributing "WQ" disbursements in a timely manner to ensure the
accuracy of the Agency's reporting and supporting accounting data
contained in the Agency's financial system.
• EPA did not establish "WQ" performance standards for project officers,
and did not hold them accountable for their responsibilities related to
"WQ" redistribution.
• EPA did not provide interagency agreement project officers a standard
format for transmitting redistribution information to the Cincinnati
Finance Center.
• EPA did not always request cooperative agreement recipients to provide
the site-specific cost detail needed for redistributions. According to
40 Code of Federal Regulations 35, Subpart O, Cooperative Agreements
and Superfund State Contracts for Super/and Response Actions, Section
35.6280, the recipient must identify and charge costs to specific sites,
activities, and operable units, as applicable, for drawdown purposes as
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specified in the cooperative agreement. Neither the project officers nor
the finance office requested the cost detail, although the recipients had the
capability to provide the detail.
• EPA did not include appropriate terms and conditions in some cooperative
agreements requiring recipients to provide timely site-specific cost detail.
For example, some cooperative agreements had a programmatic condition
allowing the recipient to provide site-specific cost detail only once every
6 months, preventing the region from making timely "WQ"
redistributions.
• EPA did not include a review of undistributed "WQ" costs in the closeout
process for cooperative agreements. As a result, EPA closed some
agreements without making the redistributions.
Untimely Redistributions Impact Cost Recovery
Superfund costs not redistributed to specific sites may not be considered in
settlement negotiations and oversight billings. Therefore, these funds may not be
recovered from responsible parties and be available for future site cleanup
activities. Consistent and accurate site-specific charging strengthens the
program's cost recovery by ensuring that potentially responsible parties pay their
fair share of site cleanup costs.
According to EPA Comptroller Policy Announcement No. 96-01, the Agency
needs financial information at the site level to perform analyses and make
resource management decisions. When Superfund costs are not redistributed to
specific sites, Agency management does not have the accurate financial
information it needs.
Agency Actions to Date
EPA began corrective action on several of our findings before issuance of our
report:
• OCFO agreed to establish written procedures for the "WQ" cost
redistribution process.
• EPA is working with cooperative agreement recipients to change a
programmatic condition allowing the recipient to provide site-specific cost
detail only once every 6 months to a more favorable condition requiring
the recipient to provide the information within 24 hours after every draw
down of funds.
• During our audit, EPA reduced the undistributed "WQ" costs in
cooperative agreements, interagency agreements, and small purchases
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from $39 million to $24 million. Most of the reduction occurred in
cooperative agreements where Region 4 redistributed $12 million "WQ"
costs to the appropriate site identifier. Region 5 committed to
redistributing its "WQ" costs, having obtained the cooperation of its
recipients to provide the necessary site-specific cost detail. The Cincinnati
Finance Center worked with interagency agreement project officers to
reduce the undistributed interagency agreement "WQ" costs from $6
million to $4 million. Subsequent to our fieldwork, EPA provided data
reports as of May 12, 2006, that indicated further reductions in the
undistributed "WQ" costs from $24 million to $13 million. (Appendix B
contains a table of undistributed "WQ" costs by region and funding
vehicle.)
Region 5 began requiring cooperative agreement recipients to provide
detailed site identifier cost information when the recipients draw down
funds.
Recommendations
We recommend that OCFO, OSWER, and OARM:
1. As agreed, develop written procedures for implementing EPA's Superfund
site-specific accounting policies related to the general site identifier
"WQ," including a timeliness standard for redistributions for each funding
vehicle, an explanation of project officers' responsibilities, monitoring
procedures, and "WQ" cost reviews at the time of closeout. Develop a
standard format for project officers of interagency agreements to transmit
cost redistribution information to the Cincinnati Finance Center.
2. Evaluate the need for training on "WQ" redistribution procedures for each
type of funding vehicle and provide the appropriate level of training to the
responsible personnel.
3. Continue working with the regions to redistribute the historical costs
remaining in the "WQ" site identifier.
We recommend that OSWER and OARM:
4. Complete ongoing efforts to change the cooperative agreement conditions
to require the recipient to provide site-specific cost details within 24 hours
of drawing down funds, and enforce those conditions.
5. Amend the closeout process for cooperative agreements to include
procedures to verify that "WQ" costs are redistributed.
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6. Promote accountability for "WQ" redistributions among project officers
and finance office personnel.
Agency Response and OIG Comment
EPA agreed with our findings and recommendations. For each recommendation,
EPA provided a corrective action plan, milestone date, and the responsible office.
We consider EPA's actions to be appropriate. The Agency's full response to the
draft report is in Appendix D.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $OOOs)
Rec.
No.
1
2
3
4
5
6
Page
No. Subject
7 Develop written procedures for implementing
EPA's Superfund site-specific accounting
policies related to the general site identifier
"WO.," including a timeliness standard for
redistributions for each funding vehicle, an
explanation cf project officers'
responsibilities, monitoring procedures, and
"WQ" cost reviews at the time of closeout.
Develop a standard format for project officers
of interagency agreements to transmit cost
redistribution information to the Cincinnati
Finance Cen:er.
7 Evaluate the need for training on "WQ"
redistribution procedures for each type of
funding vehicle and provide the appropriate
level of training to the responsible personnel.
7 Continue working with the regions to
redistribute the historical costs remaining in
the "WQP site identifier.
7 Continue working to change the cooperative
agreement conditions to require the recipient
to provide site-Specific cost details within 24
hours of drawing down funds, and enforce
those conditions.
7 Amend the closeout process for cooperative
agreements :o include procedures to verify
that "WQ" costs are redistributed.
8 Promote accountability for 'WQ'
redistributions among project officers and
finance office personnel.
Status1 Action Official
0 CFO,
Assistant Administrator
forOSWER, and
Assistant Administrator
forOARM
0 CFO,
Assistant Administrator
forOSWER and
Assistant Administrator
forOARM
0 CFO,
Assistant Administrator
forOSWER, and
Assistant Administrator
forOARM
0 Assistant Administrator
for OSWER and
Assistant Administrator
forOARM
0 Assistant Administrator
for OSWER and
Assistant Administrator
forOARM
0 Assistant Administrator
for OSWER and
Assistant Administrator
forOARM
Planned
Completion
Date
October
2006
November
2006
Ongoing
Completed
October
2006
October
2006
November
2006 and
Ongoing
Incurred Agreed To
Amount Amount
$0 $0
$0 $0
$13,000 $13,0002
$26,000 $26,000*
$0 $0
$0 $0
$0 $0
10 = recommendation is open with agreed-to corrective actions pending;
C = recommendation is closed with all agreed-to actions completed;
U = recommendation is undecided with resolution efforts in progress
2 In the response to the Draft Report, the Agency agreed to redistribute the remaining $13 million recorded in the WQ site identifier.
3 During the course of the audit, the Agency redistributed an aggregate of $26 million in costs recorded in WQ.
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Appendix A
Details on Scope and Methodology
We reviewed EPA's processes for Superftind "WQ" site cost redistributions. To gain an
understanding of the processes, we interviewed finance office personnel in Regions 1 and 5; the
Finance Centers at Cincinnati, Research Triangle Park, and Las Vegas; and the Program Costing
Staff within OCFO.
We obtained data reports of undistributed "WQ" costs for cooperative agreements, interagency
agreements, small purchases, and contracts.
We conducted field work for cooperative agreements and small purchases in Regions 4 and 5,
the locations with the highest levels of undistributed "WQ" costs. We conducted field work for
interagency agreements in the Cincinnati Finance Center where the interagency agreement
processing occurs. We tested a sample of undistributed "WQ" costs to determine whether EPA
redistributed them timely and, if not, the causes and effects of untimely redistributions. We did
not test contract costs because we found during preliminary research that EPA monitored the
"WQ" contract costs and redistributed them timely.
We used the monetary unit method of statistical sampling to select undistributed "WQ"
payments for testing. We conducted sample testing of cooperative agreements and small
purchases in Regions 4 and 5. We gathered additional information in Region 7 because it had
unfavorable cooperative agreement terms with its recipients that prevented timely "WQ"
redistributions. For testing interagency agreements, we selected a statistical sample from the
universe of undistributed "WQ" costs in all locations. The resulting samples included "WQ"
costs from Headquarters and Regions 1, 4, 5, and 9. The Headquarters interagency agreement
samples covered activities in Regions 1, 2, 3, 4, 5, 7, and 10.
We assessed EPA's internal controls related to obligating, disbursing, and redistributing "WQ"
costs. We gained an understanding of the internal controls through interviews of finance office
and grant management personnel, Superfund project officers, and cooperative agreement
recipients. We also reviewed internal controls by examining supporting documentation for
selected "WQ" disbursement transactions. We did not review the internal controls over EPA's
Integrated Financial Management System from which we obtained data reports, but relied on the
review conducted during the audit of EPA's fiscal year 2005 financial statements. For our
current review we identified deficiencies in internal controls and recommended improvements.
Although there were no prior reports on Superfund cost recovery related directly to the "WQ"
general site identifier, we reviewed the following five EPA OIG reports related to cost recovery
and management of assistance agreements:
10
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Prior Reports Reviewed
Report Title
EPA Can Better Manage Superfund
Resources
EPA Managers Did Not Hold Supervisors and
Project Officers Accountable for Grants
Management
Additional Efforts Needed to Improve EPA's
Oversight of Assistance Agreements
Superfund Consolidated Cooperative
Agreement Awarded to Ohio EPA
Superfund "ZZ" Accounts
Report No.
2006-P-00013
2005-P-00027
2002-P-00018
2000-P-00020
E1SFF2-1 1-005 1-3 100266
Date
February 28, 2006
September 27, 2005
September 30, 2002
September 15, 2000
July 2, 1993
We reviewed EPA's internal study released in April 2004, SUPERFUND: Building on the Past,
Looking to the Future, commonly known as the 120-Day Study, that made recommendations for
improving Superfund. The 120-Day Study did not identify any findings or recommendations
directly related to the "WQ" general site identifier.
11
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Appendix B
Undistributed "WQ" Costs by Region
and Funding Vehicle
The table below illustrates the undistributed "WQ" costs by region and funding vehicle at the
beginning and end of our audit and the subsequent date of May 12, 2006.4
Region
Cooperative Agreements
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Undistributed "WQ"
January 2006
$545,825
0
0
11,900,245
16,894,959
0
2,141,975
0
0
49,423
$31,532,427
March 2006
$304,400
0
0
33,864
17,299,651
0
816,857
0
0
0
$18,454,772
May 12, 2006
(Unaudited)
$0
0
0
0
7,343,954
0
73,277
0
0
0
$7,417,231
(Decrease) Increase
In "WQ"
January 2006 to
May 12. 2006
$(545,825)
0
0
(11,900,245)
(9,551,005)
0
(2,068,698)
0
0
(49,423)
$(24,115,196)
Intorageney Agreements
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
HQ
$593,716
480,215
42,308
616,549
493,126
50,057
41,475
740,901
306,976
67,615
2,532,315
$6,165,253
$51,000
468,351
42,308
82,332
413,126
1,126
6,475
252,821
180,935
67,615
2,532,315
$4,098,404
$51,000
562,144
42,352
16,532
213,126
1,126
0
53,023
182,587
74,070
2,589,268
$3,785,228
$(542,716)
81,929
44
(800,017)
(280,000)
(48,931)
(41,475)
(687,878)
(124,389)
6,455
56,953
$(2,380,025)
Small Purchases
Region 1
Region 2
Region 3
Region 4
Regions
Region 6
Region 7
Region 8
Region 9
Region 10
Totals
$25,455
0
11,145
872,108
493,474
0
65,589
293,481
32.638
5,000
$1,798,890
$39,496,570
$32,858
0
11,145
830,812
493,474
0
65,083
262,456
32,638
5,000
$1,733,466
$24,286,642
$27,581
0
11,145
840,222
493,474
0
65,083
262,456
32,638
5,000
$1,737,599
$12,940,058
$2,126
0
0
(31,886)
0
0
(506)
(31,025)
0
0
$(61,291)
$(26,556,512)
4 Subsequent to our audit, EPA provided updated data reports for undistributed "WQ" costs as of May 12, 2006. We
did not audit this data.
12
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Appendix C
Causes of Untimely Redistributions by Applicable
Location and Funding Vehicle
Causes of Untimely Redistributions
EPA did not:
Establish procedures or set timeliness
standards for redistributions.
Consistently monitor the "WQ" amounts.
Provide training in the "WQ" cost
redistribution process.
Establish "WQ" performance standards for
project officers and hold them accountable
for "WQ" redistributions.
Provide interagency agreement project
officers a standard format for transmitting
cost redistribution information to the
Finance Center.
Require cooperative agreement recipients
to provide the site-specific cost detail
needed for redistributions.
Establish a cooperative agreement
condition requiring the recipient to provide
timely site-specific cost detail.
Review undistributed "WQ" costs during
the closeout process.
Applicable Locations and
Types of Funding Vehicles
Cooperative
Agreements
Regions 4, 5
Regions 4,5
Regions 4, 5
Regions 4, 5
Region 5
Region 7
Region 5
Interagency
Agreements
Regions 1 , 4,
5, 9, and HQ*
Regions 1 , 4,
5, 9, and HQ
Regions 1 , 4,
5, 9, and HQ
Regions 1,4,
5, 9, and HQ
Regions 1 , 4,
5, 9, and HQ
Small
Purchases
Regions 4, 5
Region 4
Region 4
Region 4
* We reviewed five interagency agreements assigned to a Headquarters project officer that
included activities for Regions 1, 2, 3, 4, 5, 7, and 10.
13
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Appendix D
Full Text of Agency Response
July 13, 2006
MEMORANDUM
SUBJECT: Response to OIG Audit "Superfund Could Improve its Redistribution to Specific
Sites" dated May 22,2006
FROM:
TO:
Lorna McAllister, Director /s/
Office of Financial Management
Milton Brown, Director /s/
Office of Financial Services
Mike Cook, Director /s/
Office of Site Remediation and Technology Innovation
Howard Corcoran, Director /s/
Office of Grants and Debarment
Paul C. Curtis, CPA, Director
Financial Statement Audits
We appreciate the opportunity to respond to the findings and recommendations made in
the audit report, "Superfund Could Improve its Redistribution to Specific Sites." Attached is our
response to the specific audit findings and recommendations made in the report.
We would like to express our appreciation for the Office of Inspector General's
recognition of various actions and initiatives taken by the OCFO to resolve current and prior
bulk funding findings related to the redistribution of Superfund payments from the general site
identifier (WQ) to specific sites.
If you have any questions concerning the audit response, please contact Ofelia Moore,
Financial Policy and Planning Staff, at 564-4943.
Attachment
cc: Maryann Froehlich
Josh Baylson
Bill Samuels
Art Budelier
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Tina Vanpel t
lantha Gilmore
Raffael Stein
Alan Lewis
Jim Wood
Douglas Barrett
Ofelia Moore
Lorna McAllister
Milton Brown
David Bloom
Krista Mainess
Regional Comptrollers
Regional Superfund Accountants
Linda Yancey, OARM
Johnsie Webster, OSWER
Vince Velez, OECA
Margaret Bastin
Rita Wilson
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ATTACHMENT
EPA Responses to Specific Findings and Recommendations
In general, all offices and regions agree with the findings and recommendations of the
audit. EPA is aware of the need for timely site redistribution of the WQ accounts. Even before
the audit began, regions had been working to close out old WQ balances on Cooperative
Agreements, Simplified Acquisitions, and Interagency Agreements. Due to the consolidation of
duties for processing these transactions at the EPA finance centers, EPA is now taking an
opportunity to streamline and standardize the financial policies and procedures in the Las Vegas,
Cincinnati, and Research Triangle Park finance centers. In addition, the Office of Financial
Management (OFM) is in the process of updating the Resource Management Directive Systems
2550D (RMDS) to consolidate financial and accounting policies into one manual. This will
allow us to update and expound on the WQ portion of the Comptroller Policy Announcement 96-
01 - Superfiind Site Specific Accounting.
A. OIG Findings and EPA Responses
1. EPA Did Not Timely Redistribute WQ Site Costs
EPA did not make timely redistributions of Superfund cooperative agreements,
interagency agreements, and small purchase payments from the general site identifier
WQ to the specific Superfund sites or other general site identifiers. As of January 2006,
the undistributed WQ for those funding vehicles totaled $39 million. However, by May
12,2006, the total was tremendously reduced by $26 million to $13 million.
EPA concurs with this finding.
2. Untimely Redistributions Impact Cost Recovery
Superfund costs not redistributed to specific sites may not be considered in
settlement negotiations and oversight billings. Therefore, these funds may not be
recovered from responsible parties and be available for future site cleanup activities.
Consistent and accurate site-specific charging strengthens the program's cost recovery by
ensuring that potentially responsible parties pay their fair share of site cleanup costs.
According to EPA Comptroller Policy Announcement No. 96-01, the Agency
needs financial information at the site level to perform analyses and make resource
management decisions. When Superfund costs are not redistributed to specific sites,
Agency management may not have the accurate financial information it needs.
EPA concurs with this finding.
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B. Agency Actions to Date
EPA began corrective action on these findings before issuance of the OIG report, as
outlined below:
• EPA agreed to establish written procedures for the WQ cost redistribution process.
• EPA is working with cooperative agreement recipients to change a programmatic
condition allowing the recipient to provide site-specific cost detail only once every
6 months to a more favorable condition requiring the recipient to provide the
information on a more timely basis.
• Subsequent to the IG's audit, EPA provided data reports as of May 12,2006 that
indicated further reductions in the undistributed WQ costs from $39 million to $13
million or a 67% drop from the start of the audit. Most of the reduction occurred in
cooperative agreements where Region 4 redistributed $12 miliion WQ costs to the
appropriate site identifier.
• The Cincinnati Finance Center worked with interagency agreement Project Officers
to reduce the undistributed interagency agreement WQ costs from $6 million to $4
million.
• Region 5 began requiring cooperative agreement recipients to provide detailed site
identifier cost information when the recipients draw down funds.
C. OIG Recommendations and EPA Planned Corrective Actions
We recommend that OCFO, OSWER, and OARM:
1. As agreed, develop written procedures for implementing EPA's Superfund site-
specific accounting policies related to the general site identifier WQ, including a timeliness
standard for redistributions for each funding vehicle, an explanation of project officers'
responsibilities, monitoring procedures, and WQ cost reviews at the time of closeout.
Develop a standard format for project officers of interagency agreements to transmit cost
redistribution information to the Cincinnati Finance Center.
EPA Corrective Action; For all funding vehicles, OCFO will or has begun drafting
appropriate WQ accounting policies to enhance the Comptroller Policy Announcement
96-01. WQ redistribution procedures will be incorporated into Chapter 4 "Direct Site
Charging" of the RMDS 2550D, also known as "Financial Management of the
Superfund Program," which is in the process of being updated by OCFO/OFM.
OCFO/OFS is also developing standard operating procedures for simplified
acquisitions similar to Superfund contracts for the processing of payments.
Milestone Date: October 2006
Responsible Office: OCFO
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2. Evaluate the need for training on WQ redistribution procedures for each type of
funding vehicle and provide the appropriate level of training to the responsible personnel.
EPA Corrective Action: OSWER and OARM, in cooperation with OCFO/OFM, will
evaluate the need for training on WQ redistribution procedures for each type of
funding vehicle. OCFO/OFM has provided OARM with project officer training
materials for lAGs to include in its on-line officer training course.
Milestone Date: November 2006
Responsible Office: OSWER, OARM
3. Continue working with the regions to redistribute the historical costs remaining in the
WQ site identifier.
EPA Corrective Action: EPA has prioritized this issue in order for the balances to come
in line with current WQ payments only and is working with States and other Agencies
to ensure compliance. For instance, Region III has a small backlog that they plan to
eliminate. Region V is working to eliminate the backlog before the Cooperative
Agreement processing migrates to OFS/LV this winter and has already redistributed
$9.6 million. Region V is also committed to redistributing the balance of $7.3 million by
December 2006, having obtained the cooperation of its recipients to provide the
necessary site-specific cost detail. OCFO/OFS has aggressively worked to redistribute
simplified acquisition backlog and has provided the regions with reports for their use in
eliminating their own backlog. The Las Vegas Finance Center, in coordination with the
regions and grant recipients, has already redistributed to the correct sites all
outstanding cooperative agreement WQ balances for the regions it services.
Milestone Date: Ongoing
Responsible Offices: OCFO, OARM, and OSWER
4. Continue working to change the cooperative agreement conditions to require the
recipient to provide site-specific cost details within 24 hours of drawing down funds, and
enforce those conditions.
EPA Corrective Action: OCFO and OSWER are currently working together to agree on
the time frame to provide site specific cost details within one business day of the
payment draw down. This will include providing the award officials with appropriate
programmatic terms and conditions to be included in future grants. OCFO has
updated the Cooperative Agreement WQ site distribution policy which is being
included in a draft of Chapter 9, RMDS on Cooperative Agreements and has updated
the chapter to address the OIG's recommendation.
Milestone Date: October 2006
Responsible Offices: OCFO, OARM/OGD, Regional Grants Management offices
and OSWER
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5. Amend the closeout process for cooperative agreements to include procedures to
verify that WQ costs are redistributed.
EPA Corrective Action: OCFO, OARM, and OSWER will coordinate changes in
closeout procedures to ensure and verify that WQ costs are redistributed. OCFO, and
OSWER are in the process of amending the latest draft of 2550D Chapter 9 to include
language that would require all WQ payments to be redistributed at the time of Grants
closeout.
Milestone Date: October 2006
Responsible Office: OCFO, OSWER
6. Promote accountability for WQ redistributions among project officers and finance
office personnel.
EPA Corrective Action: OCFO, OARM, and OSWER will issue guidance that assigns
specific responsibilities to ensure that WQ costs are redistributed in a timely manner.
As discussed above, OCFO, OARM, and OSWER will promote such accountability
through the update and revision of relevant policies and the evaluation of training
needs on an ongoing basis. OCFO/OFS will continue to monitor WQ payment balances
for all funding vehicles on at least a quarterly basis to ensure that appropriate project
officers and grantees are held accountable.
Milestone Date: November 2006 and Ongoing
Responsible Offices: OCFO, OARM and OSWER
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Appendix E
Distribution
Office of the Administrator
Assistant Administrator for Solid Waste and Emergency Response
Assistant Administrator for Administration and Resources Management
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Director, Office of Financial Management
Director, Office of Site Remediation and Technology Innovation
Director, Office of Grants and Debarment
Audit Liaison, Office of the Chief Financial Officer
Audit Liaison, Office of Solid Waste and Emergency Response
Audit Liaison, Office of Administration and Resources Management
Agency Followup Official (the CFO)
Agency Followup Coordinator
General Counsel
Regional Administrators (1-10)
Assistant Regional Administrators (1-10)
Regional Comptrollers (1-10)
Audit Followup Coordinators, Regions (1-10)
Acting Inspector General
vv
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