EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
                                    Paae i
                         TABLE OF CONTENTS
       S LIBRARY
hiNGION, D.C. 20460


EPA Office of the Inspector General Superfund Strategic Planning Document. January 1992	Page 1


      EPA's Superfund program, begun in fiscal 1981, now uses almost one-
quarter of the Agency's resources.  In addition, it is a particularly complex and
technically difficult program.  For many years, the Office of the Inspector  General
(OIG) has devoted much of its resources to Superfund audits and investigations.
We have repeatedly found the program vulnerable to inefficiencies,
mismanagement and contract abuses.

      in 1985, the OIG Office of Audit issued a Superfund Strategic Audit Plan
that assessed the need for Superfund audits in the  next few years.  We have now
performed audit work in most of these areas. The  program has matured and
made many changes in its approach and operation.  We believed it was time to
take another comprehensive look at the Superfund program to determine OIG
priorities over the next several years.

      Since coordination between our audit and investigative offices is critical,
we formed a joint task force from both  organizations for this effort.  This task
force included field auditors and investigators from different parts of the country
with experience reviewing aspects of the Superfund program.  The task force
assessed the  different areas of the Superfund program to determine OIG priorities
for the next several years.

      This document summarizes the results of the task force's work, as
reviewed and approved by OIG management.  In this document, we assess the
program's vulnerabilities and establish priorities for OIG Superfund efforts. The
document is not a detailed planning document. Instead, it  provides a framework
to guide the existing OIG planning process in the Superfund area. Both the Office
of Audit and the Office of Investigations prepare Annual Plans, and  update these
quarterly. We will review  and adjust our fiscal 1992 plans in the light of the
priorities in this document.  These priorities will guide the Superfund parts of our
Annual Plans  for the next five years, modified as the program  continues to
change and we continue to learn from our audits and investigations.

      Most program results figures in this document are unaudited numbers
supplied by the program. We do not know how accurate they are.

EPA Office of the Inspector General Superfund Strategic Planning Document. January 1992

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      The Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA) of 1980, Public Law 96-510, enacted December 11,  1980,
established the Superfund program to address hazardous waste sites. This law
provided funding for five years.  The Superfund Amendments and Reauthorization
Act of 1986 (SARA), Public Law 99-499, enacted October 17, 1986,
reauthorized the program.  This law extensively revised CERCLA and provided
funding for an additional five years.  The Omnibus Budget Reconciliation Act of
1990, Public Law 101-508, enacted November 5, 1990, extended the
authorization for CERCLA for three more years and the tax provisions for four
more  years. This action avoided the gap caused by the expiration of the
Superfund taxing authority under the original CERCLA  long before the approval of
SARA.  It also gave Congress time to consider carefully what further changes in
the Superfund program are advisable. The Superfund program received $8.9
billion in appropriations in its first decade, and  now receives about $1.6 billion
annually. Most of these funds come from special taxes on petroleum and

      EPA may learn of hazardous waste sites in several ways: required
notifications by those releasing hazardous substances, reports by States, reports
from citizens, discoveries during response to known sites, etc.  As of
September 30,  1991, EPA had entered 34,618  sites into the Comprehensive
Environmental  Response, Compensation, and Liability Information System
(CERCLIS) site inventory. EPA must review each such site. The first step is a
preliminary assessment, which consists  primarily of a review of already available
information on this site.  If the results of this assessment show a need for further
review, EPA performs a site inspection {SI}.  The SI usually includes the taking
and analysis of samples from the site.  The Hazard Ranking System  (HRS) rates
the site's hazards.  The HRS is a system to score the relative risks to public
health and the environment posed by different  sites.  If the site scores high
enough, EPA places it on the National Priorities List (NPL) for further Federal
action.  As  of September 30, 1991,  1,245  sites were on or proposed for the
NPL, or had been deleted from the NPL as requiring no further action. EPA calls
the part of the Superfund process beginning with site discovery and going
through NPL listing the site assessment program.

      EPA has two principal means of responding to threats from hazardous
waste spills and sites: removal actions and  remedial actions.  Removal actions are
relatively short-term actions designed to address immediate threats.  They may
cost no more than $2,000,000 and last no more than one year,  but EPA may
waive these limits in certain circumstances.  EPA may take removal  actions at any
spill or site, regardless of NPL status. As of September 30, 1991, one or more
removal actions had been completed at 403 NPL and 1,409 other sites.  EPA
calls the part of the Superfund process that identifies the need for and takes
removal actions the removal program.

      EPA is responsible for seeing that any needed  long-term response is taken
at NPL sites.  This response begins with a study phase EPA calls the remedial
investigation/feasibility study (RI/FS).  The RI/FS includes investigation of the
nature and extent of contamination at the site and the study of the feasibility of

EPA Office of the Inspector General Stmerfund Strategic Planning Document. January 1992	Page 3

different cleanup options.  After the completion of the RI/FS, EPA decides what
remedy to use in a formal record of decision (ROD).  EPA calls the engineering
design of  the selected remedy the remedial design (RD).  The implementation of
the design is the remedial action (RA), sometimes called the construction phase.
After completion of the RA, the site may require operation and maintenance
(O&M) to  keep the remedy functional. Site response may include several operable
units, each with its own RI/FS, ROD, RD, RA and O&M.  As of September 30,
1991, at least one RI/FS had  begun at 1,128 of the  1,245 NPL sites, and some
phase of RA had begun at 383 NPL sites.  EPA calls this part of the Superfund
process the  remedial program. The two  remedial program areas are remedial
planning, consisting of RI/FS,  ROD  and RD, and remedial implementation,
consisting of RA and O&M.

      Congress based the Superfund program on the "polluter pays" principle. At
each site, EPA tries to identify the  parties responsible for the contamination
causing the  threat.  These "responsible parties" may be owners, operators,
generators, transporters or disposers. CERCLA requires responsible parties to
perform or pay for the cleanup of a site.   EPA may reach agreement with the
responsible parties for them to cleanup the site, order them to respond to the site
or sue them for recovery of its costs to respond to the site. As of
September 30,  1991, responsible parties have agreed to  perform or pay for
responses with an estimated value  of about $5.1  billion.  EPA calls this part of
the Superfund process the enforcement program.

      There are serious hazardous waste problems at many sites owned by
Federal agencies.  EPA calls these sites Federal facilities.  CERCLA,  as amended,
requires Federal agencies to clean up these facilities  using the same standards
applied to private sites.  Superfund does not pay  for responses at Federal
facilities.  Instead, the Agencies must clean their  sites up using funds
appropriated to them. EPA is responsible for overseeing responses at Federal
facilities, and must approve all remedies  selected.

      There are several important support functions for the Superfund program.
Analytical services are vital in determining the level of contamination at  sites.
Research and development is  important, due  to the need  for new methods to
clean up hazardous waste sites.  Management information systems are critical to
management of this complex  program.

      We further explain these program areas in the  analyses of their
vulnerabilities and our priorities.

 EPA Office of the Inspector General Superfund Strategic Planning Document. January 1992
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                        OIG RESPONSIBILITIES
      The Inspector General Act of 1978, as amended, requires the EPA OIG to
conduct, supervise and coordinate audits and investigations related to EPA
programs and operations. The Comptroller General classifies audits as financial
audits or performance audits.  Financial audits determine if an audited entity fairly
presents its financial statements and information, according to established criteria
and financial compliance requirements. Financial audits include audits of
contractors  and recipients of grants, cooperative agreements and interagency
agreements. Performance audits evaluate a  program's or organization's economy,
efficiency, effectiveness and adherence to applicable laws and regulations.
Performance audits conducted by EPA OIG are normally reviews of aspects of
EPA management.

      Investigations result in the detection of fraudulent,  wasteful or abusive
actions; the prosecution of individuals and business  entities who perpetrate willful
acts of fraud against the government; bringing administrative or civil action
against such individuals and business entities; and instigating  program and policy
changes which result in monetary savings for the government. Much
investigative activity results from complaints or allegations received, including
referrals by  auditors. We refer to this activity as reactive. In addition,
investigators perform proactive investigations in areas identified as vulnerable but
in which they have no  specific complaints or allegations of fraudulent activity.

      CERCLA, as amended, imposes several specific Superfund audit and
reporting requirements  on the EPA OIG. We outline these Superfund-specific
requirements below.

Trust Fund

    CERCLA requires "... an annual audit of all payments, obligations,
reimbursements, or other uses of the Fund in the prior fiscal year .  . . ."  We call
this our Trust Fund audit. It is a financial audit of EPA obligations and
disbursements from the Hazardous Substance Superfund during the fiscal year.
Starting with the fiscal 1992 audit, we will conduct this  audit as part of the
requirements of the Chief Financial Officers Act, Public Law 101-576.


    CERCLA requires an annual audit to assure "... that claims are being
appropriately and expeditiously considered . . . ."  Since  SARA did not allow the
Superfund to pay for natural resource damage claims, the only claims provided in
CERCLA, as amended,  are response claims.  EPA requires preauthorization of
response claims. EPA uses the response claim mechanism primarily in "mixed
funding settlements" in which responsible parties perform the response, but EPA
pays part of the cost.  In fiscal 1991, EPA paid its first response claim.

Cooperative Agreements

    CERCLA requires audits "... of a sample of agreements with States (in
accordance  with the provisions of the Single Audit Act) carrying out response

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992	Page 5

actions under this title . . . ." We perform financial audits of cooperative
agreements with States and political subdivisions.  Some of these audits also
review program performance.  In addition, we sometimes conduct performance
audits of EPA regional management of the cooperative agreement program.

Remedial Investigations/Feasibility Studies (RI/FS)

    CERCLA requires our "... examination of remedial investigations and
feasibility studies prepared for remedial actions .  . . ." Our RI/FS examinations
provide a technical rev levy of the adequacy of the studies to provide a sound
technical basis for remedial action  decisions.  These examinations may be done as
part of audits of EPA management or as special reviews by our technical staff.

Review of the Agency's Superfund Progress Report

      CERCLA, as amended, requires the EPA Administrator to report annually to
Congress "... on the progress achieved in implementing this Act during the
preceding fiscal year." CERCLA requires the OIG to review this report "... for
reasonableness and accuracy and submit to Congress, as a part of such report a
report on the results of such review."

Inspector General Annual Superfund Report

      CERCLA, as amended, requires the Inspector General to report annually to
Congress on the mandated Trust Fund, claims, cooperative agreement and RI/FS
reviews.  To provide a fuller picture of OIG Superfund work, we also include
summaries of other Superfund audit and investigative work.

EPA Office of the Insoactor General Superfund Strategic Planning Document. January 1992
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       Over the years since enactment of CERCLA,  the Agency's Superfund
spending patterns have changed.  In the remedial response area, remedial design
(RD) and remedial action (RA) spending has tended to increase as the program
has matured.  Correspondingly, remedial investigation/feasibility study {RI/FS)
spending has declined. An increasing Agency  emphasis on "enforcement first" is
reflected in increased spending on enforcement. Agency spending on removal
actions has changed little from year to year since the enactment of SARA.  The
following chart shows the trends  in Superfund obligations since the enactment of

                                (dollars in millions)
               FY81    FY82   FY83   FY84
FY86   FY87   FY88   FY89   FY90  FY91

  Remedial Design *
  Remedial Action
  Operations & Maint.
 Remedial Subtotals

 Removal Actions

 Emerg. Resp. Team

 Lab Analysis

 Army Corps/BuRec

 Other Response






                      {Subtotals and totals may not add exactly due to rounding)
1. Only the extramural dollars obligated for each response activity are reflected in the detail provided. The work year
   costs associated with these activities are included in the Other Response category.
2. In FY84, Remedial Designs were not tracked separately from RI/FS costs. An estimated $6.3 million was obligated
   for Remedial Designs in that year and is reflected in that category in this report.
3. Includes Initial Remedial Measures (IRMs). (IRMs were tracked separately through FY83 and later incorporated into
   the Remedial Action category.) This category does not include Other Federal Agency obligations for Remedial Action
   activities, principally Federal Emergency Management Agency relocation totaling $38.0 million over time. These costs
   •re reflected in the Other Federal Agencies category.
4. Includes Title III resources.
5. Actual obligations for the Department of Justice are added to Enforcement, subtracted from Other Federal Agencies.
                            (SOURCE: EPA Office of the Comptroller!

      There have also been changes in the  pattern of Superfund audits. The

largest category of audits has always been contract audits,  although they have

not required a correspondingly large part of audit resources  since performance

audits are more resource-intensive. The number of contract audits has varied

greatly, depending upon the Agency's procurement efforts.  Many of our contract

audits have been pre-award audits to help the Agency negotiate contracts  with

companies responding to  EPA Requests for Proposals.
294. 1
1 1 1 .7*

EPA Office of the Inspector General Suoarfund Strategic Planning Document. January 1992
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      From the beginning of CERCLA, we have had a mandate to audit the
Superfund trust fund. In the early years, we issued separate reports for each
Agency accounting point, but in recent years have issued just one consolidated
report.  We have also audited the Agency's internal  indirect costs rates
periodically. From the early days  of the program, we have audited cooperative
agreements with States to conduct Superfund response and EPA's administration
of such agreements.   More recently, we have also audited a few grants and
cooperative agreements with other recipients.

      In the performance audit area, we concentrated on the removal program in
the early years.  This was the  program area in which EPA was completing many
projects, and it had an inherently  high vulnerability.  In more recent years, as the
program has matured, our audits have covered a much wider range of Superfund
activities.  Below is a chart showing the distribution of our Superfund audit
reports since the enactment of CERCLA.

                                            Fiscal Years
Audit Area

Site assessment 1
Remedial Planning '
Remedial Implementation 1
Removal '
Enforcement 1
Research & Development 1
Analytical Services '
Federal Facilities '
Management  Info. Systems '
Other Management 2
Trust Fund
Coop Agmts/CA Mgmt/Grants
Interagency Agreements


                                   72   68  66   63 107   86  62   68  77
    1.  Includes only performance audits.
    2.  Performance audits not focusing on any one of the program areas.
    3.  Includes audits of the Superfund trust fund and of Agency internal indirect

      Initially, we concentrated our investigative resources on emergency removal
actions.  We devoted almost all available Superfund investigative resources from
1984 to  mid-1986 on four major clean-up investigations. We used more than 3.8
staff years during this period on these investigations,  three of which were grand
jury investigations.  Beginning with the fall of 1987, we directed our Superfund
investigative resources at the Agency's Contract Laboratory Program (CLP).
Below is  a chart summarizing Superfund investigative activity since fiscal 1984.

EPA Office of the Inspector General Superfund Strategic Planning Document. January 1 992 _ Page

                       SUPERFUND INVESTIGATIONS

                                           Fiscal Years
                            fi4£5    fififilSfi    £22221

    Superfund Positions      1     1     2.7   5.4   5.4   6    11    13

    Investigations Initiated    5     10    14   38   29    31    37    33

      The results of the 197 Superfund investigations initiated since 1984 include
36 indictments, 21  convictions, 36 administrative actions and $5.5 million in
fines and civil recoveries.

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992	Page 9

                   CONTRACTS:  A KEY ELEMENT

      Cross-cutting alt program areas is EPA's heavy reliance on contractors to
carry out its Superfund responsibilities. EPA has paid about three-fourths of the
program's money to contractors.  EPA obligates more than $1 billion a year to
Superfund contractors. These contractors perform in all program areas.  EPA
largely carries out the Superfund program through contractors, operating with
oversight by EPA, other Federal agencies or States.

      Because of the Agency's heavy reliance on contractors, the EPA OIG has
been increasing its efforts to audit and investigate contractors and EPA's contract
management.  Until recently, the Defense Contract Audit Agency (DCAA) was
conducting most financial audits of EPA contractors.  However, DCAA was
unable to  keep up with the demand for incurred cost  audits.  Recently, the EPA
OiG has taken over audit cognizance of several major EPA contractors from DCAA
and is stationing contract auditors full-time at these companies.  A recent analysis
concluded there were 45 more EPA contractors, of which 37 do some Superfund
work, for which the EPA OIG should consider taking cognizance.  These
contractors have EPA contracts with over $5  billion maximum potential value with
a total potential Superfund value of over $4.2 billion. Investigators are also
increasing their efforts aimed  at EPA contractors, and plan to establish a
Procurement Integrity Unit.

      In 1989, the  OIG established a task force to study the adequacy of audit
coverage for EPA contracts.  An issue paper presented to senior OIG management
in March 1990 contained the task force's conclusions and recommendations.
During 1990, the OiG began acting to improve audit coverage for EPA contracts.
Further  work in this area  led to an Implementation Plan for OIG Contract Audits,
issued October 30,  1991. This outlined several activities needed,  assigned
responsibility for them, and set fiscal 1992 milestone dates for them.  Activities
needed  to provide a structure for the OIG program included development of
training curriculum,  work with other Federal audit agencies on interagency
agreements, issuance of contract audit guides, policies and OIG Manual chapters,
and an assessment  of the Office of Audit organizational structure. Steps needed
to carry out the Plan at the field audit divisions included development  of a fiscal
1992 audit plan for each cognizant contractor, identification of new firms for
audit cognizance and arranging change of cognizance, deciding that contractors
require a resident office, implementation of the new OIG Manual Chapter 37 and
other new procedures, and conducting financial monitoring reviews.

      We are giving priority to the Agency's 45 Alternative Remedial Contracting
Strategy (ARCS) contracts. These are  10-year contracts providing for engineering
services throughout the Superfund process. The work done under these
contracts includes site assessment work, RI/FSs, RDs, RAs and oversight of
response by responsible parties.  These contracts have a maximum potential value
of over  $6.6 billion, although the contractors billed less than  $250 million as of
the end of fiscal 1991. The contracts are cost-plus-award-fee contracts, a type
of contract considered highly vulnerable to fraud and excessive billings.

      OIG Manual Chapter 37 establishes policies and procedures to coordinate
ail OIG efforts related to major EPA contractors. We  have assigned responsibility

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
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for overseeing and coordinating audits and investigations of each major EPA
contractor to a specific OIG field divisional office.  The responsible office will
maintain a file on each contractor containing information on the contractor, its
contracts, audits performed or requested, investigations conducted or planned,
suspension and debarment activity, allegations about the company, etc. Auditors
and investigators will meet periodically about each contractor to  assess the
implications of ongoing audit and investigative efforts and determine the need for
new initiatives.

      In each program area, the OIG will devote much  of its resources to audits
and investigations of contractors and EPA's contract management.  We address
these program areas iater in this document, and include discussion of contracts
and contract management in each area.

EPA Office of the Inspector General Suoerfund Strategic Planning Documant. January 1S92	Pane 11


      We divided the Superfund program into nine program areas, and evaluated
each for its vulnerabilities to fraud, waste and mismanagement. For each
program area, a member of the Task Force researched the area for background
information and an assessment of vulnerabilities.  We also reviewed OIG coverage
in the program area to date.  We assigned priorities based on program
vulnerabilities and the level to which we have addressed those vulnerabilities. We
ranked priorities for financial audit work, performance audit work and proactive
investigative work.  Because these three OIG activities are so different, the need
for them in any particular program area may vary greatly.   In some cases, we
project priorities to increase or decrease over the next five years.  We base these
projections on two factors: 1) expected changes in the level of program activity,
and 2) the need to follow up on audit work conducted in  the recent past or now
in progress.  We describe our evaluations of each program area later in this
document. Below we summarize the rankings assigned to each program area.
Program Area

Site Assessment

Remedial Planning

Remedial Implementation



Research and Development

Analytical Services

Federal  Facilities



Medium t





Performance   Proactive
Audit         Investigation
Management Information Systems   High







Medium t









    t Priority projected to increase, I Priority projected to decrease

     To implement the priorities and approaches outlined in this plan, we will use
it to guide our annual planning process for Superfund. We will ask our audit and
investigative staffs to develop suggestions for Superfund performance audits and
proactive investigations based on the directions outlined in this document.  We
will evaluate the suggestions based upon their quality, the priorities we set in this
plan, and resources available. As we achieve good audit and investigative
coverage in higher priority areas, we will be able to shift priorities to other
aspects of the Superfund program.  For financial audits, we will consider the size
and vulnerability of the contracts, as well as the level of effort required to
conduct the audits. We will continue work required by statute and investigations
in response to fraud allegations in all program areas.

 EPA Office of the Inspector General
Document. January 1982
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                   SITE ASSESSMENT PROGRAM
      The site assessment program determines response priorities for threatened
 or actual releases of hazardous substances, pollutants or contaminants, in
 accordance with section 104(b)(1) of CERCLA, as amended. The program
 conducts preliminary assessments and site inspections, and ranks sites according
 to their danger to public health and the environment.  EPA places those sites
 considered the most significant threats or potential threats to public health and
 the environment on the National Priorities List (NPL).

      Possible hazardous waste sites coming to the  attention of EPA go through a
 screening process.  The first step is a  preliminary assessment (PA).  The PA
 consists primarily of a review of records already available on the site, including
 any studies of contamination. This may determine that the site needs no further
 attention, or that it needs further review to determine if it presents a threat
 requiring a Federal response.  If further review is needed, a  site inspection  (SI) is
 conducted.  The site inspection in recent years usually includes two stages - a
 screening site inspection (SSI) and a listing site inspection (LSI). The SI normally
 involves the taking and analysis of a few site samples to get a general idea of the
 nature and extent of contamination. If an SSI finds enough evidence that
 contamination may be severe enough to warrant Federal-response, an LSI is
 conducted to obtain adequate information to rank the site.

      EPA ranks sites using a standard system, called the Hazard Ranking System
 (HRS), codified as an appendix to the National Oil and Hazardous Substances
 Contingency Plan (NCP), 40 CFR Part 300.  When Congress enacted the
 Superfund Amendments and Reauthorization Act of  1986 (SARA), it required EPA
 to revise the HRS to better evaluate relative hazards.  EPA published the revised
 HRS December 14,  1990.   It became effective March 14, 1991. SARA provides
 that sites placed on the NPL through the old HRS do not need to be reranked.
 EPA places sites scoring above 28.5, an arbitrary cut-off point, on the NPL. The
 NPL is also an appendix to the NCP, and all proposed changes  to the NPL go
 through the full regulatory  process. As of September 30, 1991, 34,618 sites had
 been identified for initial screening, and 1,245 had been listed on or proposed for
 the NPL. EPA had determined that 19,897 sites should  not be on the NPL. EPA
 had completed an SI on 6,068 additional sites for which it had not decided
 whether they should be on  the NPL. EPA may spend money for remedial actions
 only on NPL sites.


      In its 1990 Report on Internal Controls, the Office of Solid Waste and
 Emergency Response (OSWER) listed three material  weaknesses needing
 corrective action.  They were:  (1} NPL Listing Consistency, (2) Addressing the
Worst Sites, Worst Problems First, and (3)  Lack of Guidance for Disposal of
Waste Stemming from Pre-Remedial Site Investigations.  The Agency has tried to
address the second through an Environmental Priority Setting Initiative.  EPA
addressed the third in May 1991, when it issued guidance.  The site assessment
program has low vulnerability in the financial area, because of the relatively low

EPA Office of the Inspector General Simerfund Strategic Planning Document. January 1992
Pane 13
dollar amount involved, but high vulnerability concerning human health and the
environment. Based on the first material weakness reported and because of the
lack of much audit and investigative work, the development of the HRS score is
highly vulnerable.

      In addition, there is vulnerability to corruption.  There is considerable
incentive for potentially responsible parties (PRPs) to try to  bribe Agency officials,
Agency contractors and State employees to  keep sites off the NPL. Placement  of
a site on the NPL could cause PRPs to incur a  large liability for the cost of
cleaning up the site. Because of this liability, financial institutions may be
reluctant to offer credit to the PRPs.

      Bribery could occur at any point in the scoring and listing processes: during
the PA and SI, during scoring, and before and after proposal. A  control weakness
increasing the possibility of corruption is that Headquarters does  not require
Regional officials to propose all sites with a score of 28.5 or higher.
Headquarters' officials  do not have independent knowledge of site rankings.

      HRS  scores for listing sites on the NPL, developed from the SI, have been
inconsistent from region to region because regions used different scoring
procedures.  The Agency intends to address this problem through guidance on SI
and listing  procedures, and Headquarters quality assurance  reviews. We present
the three areas  described below in the  order in which they occur in the site
assessment process.

      Quality of  Site Inspections

      The quality of Sis is very important because they determine an HRS score
that may place the site on the NPL. A control used by Region 5 was an "audit
program" to evaluate the quality of the SI reports submitted by States and
contractors.  Site assessment managers' performance appraisals contain the  goals
for the number of assessments to  be performed each year.  This may lead them
to rush through the site assessments so they can reach their goals qualifying
them to receive  awards.  As a result, the audit program that the site assessment
managers use may be  an ineffective control.

      Another weakness is that the Sis are susceptible to sampling season
limitations  and weather delays.  One regional official told us that the contractors
do field work in  the summer and perform most of the writing and administrative
duties in the winter. While this may be good contract management, it rushes site
assessment managers to examine and approve the SI reports near the end of the
fiscal year.  During the fiscal  1990 Superfund Annual Report to Congress audit,
we found the EPA received many PA and SI reports late in the fiscal year.

      The rush to perform the Sis can cause rushes at laboratories that analyze
samples from the Sis.  We have found problems,  such as backlogs in sampling
and fraudulent submission of data  to EPA, in the Contract Laboratory Program.
The laboratories have backlogs that can pressure  laboratory employees to alter
tests  results when the  tests are delayed.

      The weaknesses  described above could result in poorly prepared SI reports.
Poor SI  reports can result in an incorrect HRS score, and therefore, improper

 EPA Office of the Inspector Ganerai Suoerfund Strategic Planning Document. January 1992
Pane 14
decisions for placement on the NPL, and cleanup.  Additionally, these weaknesses
create a fertile setting for illegal acts.


      Once an SI is performed, a site is scored using the MRS.  Because of the
decentralization of EPA, the regions may not score sites consistently.  In the past,
some regions have not scored a site based on all possible contamination
pathways if scoring based on one pathway was  sufficient to place the site on the
NPL.  As a result, the NPL rankings did not necessarily reflect the relative  risk of
sites.  A site scoring just above the NPL cutoff based on only one  pathway might
be a higher risk than a much higher scored site for which the region considered all


      Sites receiving an MRS score of 28.5 or above qualify for the NPL. The
current procedures for listing a site on the NPL start with a listing package
prepared by appropriate regional officials. The region submits the package to
Headquarters officials who send it to a contractor for a quality control review.
After this review, a site may be proposed for the NPL. EPA publishes the
proposal in the Federal Register for comment.  EPA may  list the site on the NPL
after considering comments on the proposal.

      The weaknesses described above may result  in inconsistent and wrong MRS
scores, endangering human  health and the environment, and violating Federal
statutes and regulations.


      We have audited the management of the Field Investigation Team contracts
for performing site assessment work. We have also audited many  cooperative
agreements with States to perform site assessment work.



      How effective is the site assessment process?  Do  Sis include adequate and
appropriate information to determine a score?  Does the revised HRS result in
consistent scores? Were any sites with a score  of 28.5 or above not proposed
for the NPL?  Does the program contain sufficient controls to minimize the
possibilities for improper influence and corruption?


      Due to the relatively small expenditures involved, the site assessment
program is a low priority for financial audits.  It is a medium priority for both
performance audits and proactive investigative efforts. Although spending is
relatively low, this area is  critical to the entire Superfund program and has a
relatively high fraud potential.

EPA Office of the inspector General Suoarfund Strategic Planning Document. January 1992      Page 15


     We  need to conduct performance audits of the effectiveness of the site
assessment program. Our mandatory audits of cooperative agreements with
States will continue to address the management of site assessment work by
States.  We will be conducting incurred cost audits of ARCS contractors, who do
site assessment as well as  remedial work.  Investigative efforts will focus on the
possibility of improper influence on the process and contractor fraud.

EPA Office of the Inspector Ganaral Suoerfund Strategic Planning Document. January 1992
Pace 16
                         REMEDIAL  PLANNING
      Sites EPA places on the National Priorities List (NPL) for clean-up undergo a
remedial investigation (Rl) and a feasibility study (FS) to assess site conditions
and evaluate remedial alternatives. Developing and conducting an RI/FS may
include project scoping, data collection, risk assessment, treatability studies, and
analysis of alternatives. The purpose of the Rl is to collect the data needed to (1)
adequately characterize the threat posed by the hazardous substances and
contaminants and (2) perform the FS.  The primary objective of the FS is to
identify and evaluate appropriate remedial alternatives so EPA can select an
appropriate remedy.  EPA presents the recommended remedy in a proposed plan
which accompanies the RI/FS.  The proposed plan briefly describes the remedial
alternatives analyzed, proposes  a preferred remedial action alternative, and
summarizes the information used to select the preferred alternative. After an
opportunity for State and public comment on the proposed plan, EPA selects the
final remedy  in the record of decision (ROD). The remedial design (RD) phase is
the last step  in remedial planning.  The RD is the engineering design of the
chosen remedy.  The RD includes site specific construction plans for use in
procuring a remedial action contractor. Because of potentially significant time
lapses between collection of Rl  data and the beginning of the  RD, the RD may
include field work and treatability studies.  Such additional studies may result in
reopening of  a ROD.

      EPA has delegated responsibility for remedial planning to EPA regional
offices. EPA Headquarters issues regulations and  guidance documents on this
process, and  annual program guidance to the regions setting out goals and
milestones. EPA contractors, States or PRPs usually  conduct the work under the
oversight of regional remedial project managers  (RPMs).  States managing
remedial planning usually procure contractors to dp the work.  State and local
governments may review documents and provide input. The public is informed
about site activities and given an opportunity to comment on the proposed plan.


      Poor  Performance

      Waste of public funds can result from poorly conducted  remedial planning.
Contractors may perform poorly and the EPA RPM or State project officer may
not provide adequate oversight. One possible result of poor performance is the
need to go back and repeat deficient studies and analyses.  This is costly and
reduces public confidence in the process.  Another possible  result of an
unsatisfactory RI/FS is selection of a remedy that is not the most cost-effective.
Later  discovery of such an error could result in PRP resistance to reimbursement
of the Fund for needlessly expensive site remediation.

      Unnecessary Activities

      Contractors may undertake time  consuming and expensive activities not
needed to adequately understand the threat the site poses nor to select a cost-

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
Page 17
effective remedy.  Inadequate oversight by the RPM or State project officer can
result in a contractor developing new site information when available information
is adequate for planning purposes. Similarly, a contractor may undertake
sampling and analyses or treatability studies not warranted for site conditions or
the type and  extent of site contamination.

      Personnel Assignments

      The education and experience of the individuals responsible for remedial
planning is another source of  vulnerability. Inexperienced RPMs or State project
officers may  be ineffective in  managing contractors who have much  greater
experience.  They may be easily intimidated by senior contractor representatives
and may have difficulty recognizing poor quality products, insufficiently justified
overrun requests, or fraudulent billings. Contractors may assign staff lacking
adequate experience to perform work for  EPA or the State to train the staff at
c jvernment expense.  Once the staff gains needed experience, the contractor
may reassign them to non-government contracts.  This is likely to produce a less
than adequate product at an excessive  cost.

      Fraudulent Charges

      Since much of the remedial planning effort consists of evaluating
information and producing documents, most charges for  contractor services are
for labor.  This results in vulnerability to billings for labor hours not used for the
EPA project.  RPMs or State project officers may approve fraudulent charges due
to inadequate oversight or improper influence by the contractor.


       We have conducted many audits of State cooperative agreements for the
performance  of remedial planning activities. We have  reviewed EPA management
of remedial planning efforts at specific sites, including  the RI/FS reviews required
by statute. We have conducted some audits of remedial planning contractors.
We have reviewed the procurement of the Alternative  Remedial Contracting
Strategy  (ARCS) contracts, and are now reviewing whether EPA has achieved the
objectives of  the ARCS contracts. We  also have proactive investigative initiatives
underway to  identify contractor fraud.



       Is EPA oversight of ARCS contractors adequate?  Are project managers
competent to provide oversight?  Are EPA staff trained to provide quality and
timely reviews of contractor work products?  Does EPA  adequately oversee work
done under the direction of States?

       Does remedial planning meet regulatory requirements and follow Agency
guidance?  Does EPA adequately monitor and  enforce compliance with required
remedial planning procedures? Are Agency requirements adequate and

EPA Office of the Inspector General Simarfund Strategic Planning Document. January 1992
Paoe 18
       Are Agency measures of progress in remedial planning meaningful and
appropriate? Do they result in  effective performance and discourage "bean


       The remedial planning phase is key to the success of the entire remedial
program.  It is also the program area that has received the largest share of
Agency Superfund resources.  In addition, it is highly vulnerable to fraud.
Therefore, we consider it a high priority for financial audits,  performance audits
and proactive investigative efforts.  However, as sites move through the
Superfund pipeline, the Agency's resources are increasingly shifting from remedial
planning to remedial implementation.  The priority we give to remedial planning
will therefore decrease over the next few years.


       The OIG will continue the mandatory audits of cooperative agreements
with States, many of which are for remedial planning.  We also will continue site
specific audits and investigations at Superfund sites in  the RI/FS or RD stage,
including the mandatory RI/FS reviews.  In addition, we will  continue to review
the Agency's management of remedial planning (ARCS) contracts.  We will
conduct many more audits of remedial planning contractors.  We will review the
Agency's  management of the remedial planning process. We will investigate
fraud by remedial planning contractors and EPA personnel responsible for
managing them.

EPA Office of the Inspector General Suoarftind Strategic Planning Document. January 1992	Page 19



      Remedial action 
EPA Office of the Inspector General Suoarfund Strategic Planning Document. January 1992
Paae 20
       One vulnerability with the Corps is the possible use of traditional
engineering and management procedures that are not appropriate for hazardous
waste remediation. EPA has relied on the Corps' construction experience, and
provided little oversight.  There are also questions about the adequacy of Corps
records for cost recovery and the timeliness with which they conduct the RAs.

       States conduct some RAs under cooperative agreements.  The capabilities
of States to conduct this work vary widely.  Past audits have shown such
problems as poor procurement procedures, inadequate contract management, long
delays, inadequate financial management and lack of experienced staff.

       RA contracting is subject to all the potential problems of large construction
contracts. These include bid rigging, product substitution, noncompliance with
specifications and defective pricing. The ARCS contracts are subject to the
problems associated with cost-type contracts, where the risk is largely with the
contracting party.


       The OIG has done little work related to RAs because EPA has completed
few RA projects.  We have audited some cooperative agreements with States for
RA work. We audited EPA's efforts to meet the statutory goal of starting 175
substantial and continuous, physical on-site RAs within three years after
enactment of SARA. We audited the use of removal contracts and authorities to
conduct RAs. The OIG is now reviewing selected areas of the  ARCS contracting
process. Included within this review are contract work assignments involving
RAs.  Our proactive investigative efforts on contractor fraud include ARCS RA
work.  We have had several investigative cases in this program area, one of
which  resulted in an indictment.



       Are RAs completed in accordance with specifications adequate for
remediation of the site?  Are RA costs eligible, reasonable, and allowable?  Do
EPA, the Corps of Engineers, States and ARCS contractors adequately review
RAs and oversee construction activities?  Are RAs completed in a timely manner?
Are adequate controls operating to minimize contractor fraud?


       RAs are relatively high cost projects of critical environmental importance.
However, relatively few  have  been completed and EPA has put more resources
into remedial planning.  Therefore, remedial implementation is currently a medium
priority for financial and  performance audits.  However, as more RAs are
completed and EPA shifts resources into remedial implementation, it will become
a higher audit priority in the next few years.  Construction projects  historically
have a high fraud potential, and Superfund RAs have additional vulnerabilities.
Remedial implementation is a high priority for proactive investigative efforts.

EPA Office of the Inspector General Simerfund Strategic Planning Document. January 1992
Pace 21

       We will continue to audit cooperative agreements with States for remedial
implementation.  Our planned increased coverage of ARCS contractors will include
ARCS  remedial implementation activities. We will coordinate with the Army Audit
Agency on increased audits of Fund-lead remedial implementation managed  by the
U.S. Army Corps of  Engineers.  We will conduct performance audits on the
management of RAs. Proactive investigative efforts will focus on uncovering
contractor fraud.

 EPA Office of the Inspector general Suoerfund Strategic Planning Document. January 1JI92	Page 22

                        REMOVAL PROGRAM


       The removal program is an  integral part of the Superfund program and
 contributes greatly to its cleanup achievements. The Emergency Response
 Division manages the program with a staff of about 50 in Headquarters. The
 regional offices manage the individual removals with a staff of about 200 in the
 field. At both listed and non-listed sites, removals  can stabilize, prevent, or
 mitigate a release or threat of a release of hazardous substances. Removals
 significantly reduce the threats a site poses to human health and the environment.

       EPA completes about 200 removals a year, spending over $100 million on
 site cleanup. EPA's On-Scene Coordinators (OSCs) organize and direct the
 removals using Emergency Response Cleanup Services (ERCS) contractors  to
 perform site cleanups. EPA uses site-specific contracts for some removals.

       Action memorandums document removal decisions. The  memorandums
 state the authority for the removal, outline the proposed  actions and costs, and
 document approval of the proposed actions.  They  also describe the site's  history
 and current situation along with the health and environmental threats present.

       Congress intended removals to be short-term, relatively inexpensive
 responses. CERCLA, as  amended, limits the cost and duration of removals to $2
 million  and one year,  but also provides  for exemptions to the  limits under special
circumstances. About 30 removals a year exceed the dollar limits.

       To reduce the  short-term risks at NPL sites,  EPA uses removals to evaluate
and respond to immediate threats.  EPA reviews each NPL site every two years
and conducts a removal if needed  to address immediate threats. About 50
 removals a year are at NPL sites.  Congress required the  removals to contribute to
the efficient performance of the remedial cleanup of the sites.


       Because the removal program  must be able to respond on an emergency
basis, it does not have many of the controls used by the remedial program.
Based on past OIG work, the removal program has  the following vulnerabilities:

       •     EPA may use removal authorities to conduct activities outside the
            limited statutory scope of  removals.

       •     The broad authority of OSCs results in high  vulnerability to
            corruption and  mismanagement.

       •     Removals may  not always effectively reduce the imminent threats
            posed by the sites.

       •     Improper management of removals may result in the release of
            hazardous substances during removals, posing a threat to on-site
            personnel and the  nearby area.

iPA Office of the Inspector General Stmarfund Strategic Planning Doctmmnt. January 1992	Page 23

       •     The ERCS contracts may allow payments greatly exceeding the
             contractor's costs.

       Past OIG work has resulted in many Agency efforts to address these


       OIG audit efforts in this area have been extensive.  In the financial audit
area, we have conducted many audits of removal contractors.  In the performance
audit area, we have conducted several major audits of EPA's management of the
removal program. For the last few years, we have also conducted several
unannounced site visits at removals each year.  In addition, there have been
several investigations of alleged corruption and fraud  by EPA removal staff and
contractors.  We have a proactive investigation underway to detect fraud in the
transportation and disposal of hazardous waste.



       Are contract costs eligible, supported, necessary, and reasonable?  Are
removals effective,  efficient, timely and in accordance with statutory restrictions?
Are adequate controls operating to minimize corruption and contractor fraud?


       Removal actions have high vulnerabilities, but our extensive audit coverage
has resulted in considerable EPA action to address these vulnerabilities. Removal
costs are a small proportion of total Superfund costs.  Therefore, removals are a
low priority for both financial and performance audits. However, as  our past
extensive audit coverage becomes dated, we will need to increase the audit
priority for removals somewhat.  Removals are highly vulnerable to fraud and
corruption, and thus are a high priority for proactive investigative efforts.


       We will continue to conduct annual audits of ERCS contractors' incurred
costs and overhead rates.  As contracts expire, we will conduct initial pricing
reviews of offerers  for replacement contracts.  We  will continue to conduct some
unannounced on-site reviews of removal actions. We will complete current audit
work on  EPA's management of ERCS contracts. We  may conduct more audits of
EPA's management of removals in a few years. Proactive  investigative efforts
will focus on uncovering corruption and contractor fraud.

 EPA Office of the Inspector General Superfund Strategic Planning Document. January 1992	Page 24



       CERCLA gives EPA a broad set of tools to require potentially responsible
 parties (PRPs) to perform or pay for the cleanup of hazardous waste sites.  These
 include authorities to: (1) order PRPs to investigate and clean up sites, {2}
 negotiate settlements with  PRPs to fund or perform site response, and (3) take
 legal action if the PRPs do  not perform or pay for response. The PRP search is
 the foundation for EPA's enforcement process.  EPA begins a PRP search for
 proposed NPL sites to identify companies or individuals potentially liable for site
 response costs.  PRPs may be present or past owners or operators of the site,
 generators, or transporters.  The PRP search includes record collection and file
 review of State, EPA, and site records, title search, site history, and analysis of
 financial  status.  EPA uses  section 4(e) letters (information requests) to get
 information on waste operations and waste management from those who may
 have been involved with the site.

       Once EPA identifies  the PRPs, EPA notifies them of their potential liability
 and the opportunity to negotiate with  EPA to conduct site response. During the
 negotiations,  EPA and the PRPs try to reach an agreement to have the PRPs
 finance and conduct  the work.  Major issues affecting negotiations include
 stipulated penalties, past costs, oversight costs and additional work needed. If
 negotiations are unsuccessful, EPA may (1) issue an order to compel the PRPs to
do the work,  {2} sue the PRPs to require them to perform the work, or (3) use
 Federal funds to perform the work and seek to recover its costs later.  If
negotiations are successful, EPA and the PRPs must sign a legal document that
sets forth the requirements for cleanup.  During fiscal 1991, the Superfund
 program  negotiated settlements with responsible parties to perform or pay for an
estimated $1.4 billion of Superfund work.

       Mobilizing PRP resources up front to conduct  response is usually more
effective than using the Fund and  recovering the cost later.  Negotiations are
critical since PRP responsibility for funding and performing response is decided
during this stage of the process. For those cases in which EPA paid for the
cleanup work, EPA seeks to recover its costs.  EPA first issues a demand letter
that informs the PRPs of the costs EPA incurred. EPA then negotiates with the
PRPs for reimbursement. If negotiations are unsuccessful, the Department of
Justice may sue the  PRPs for cost recovery.  EPA returned $352.8 million to the
Fund through cost recovery collections in the fiscal 1987-1991  period.

      In the  past, the Superfund program has been criticized because EPA has
recovered only a small percentage of its costs. Cost recovery actions provide
revenues to the Fund and encourage voluntary PRP response by eliminating
incentives for PRPs to let the government conduct the response, in order for EPA
to recover costs, EPA needs good cost documentation beginning when costs are
incurred.  PRPs increasingly challenge EPA's cost recovery claims.  For cases in
which PRPs perform the response  under an administrative or court order, EPA
RPMs and OSCs oversee PRP response work.  EPA's monitoring may include on-
site examination of the response, review of all reports, and parallel sampling and
analysis.   During fiscal 1991, PRPs performed about 63 percent of the RAs, 70

 EPA Office of thp Inspector General Suoerfund Strategic Planning Documant. January 1992	Pane 25

 percent of the RDs, 70 percent of the RI/FSs and 30 percent of the removals.
 These figures exclude Federal facilities.  Through oversight, EPA determines PRPs'
 compliance with orders. EPA may collect penalties and damages for
 noncompliance with orders.

       As in  other parts of the Superfund program, EPA relies heavily on contract
 support in enforcement. Among the tasks contractors perform are PRP searches,
 technical oversight of PRP responses and assembling of documents for use in


       EPA may not be vigorously enforcing its information requests. PRP
 searches and responses to  information requests are vulnerable to such fraud as:
 (1) fraudulent bankruptcy petitions,  (2) understatement of income  or assets, (3)
 overstatement of liabilities and (4) concealment of the sale or transfer of assets.

       EPA has several  settlement tools,  but has not always used  them effectively
 or consistently.  Because the regions negotiate settlements, they may not be
 consistent nationwide.

       It is in the interest of PRPs to keep their Superfund costs to a minimum.
 Thus they may try to conceal the extent  of their liability and improperly limit the
 scope of response at a site.  They may try to bribe or otherwise improperly
 influence EPA staff and contractors to further these  efforts.

       Enforcement contracts are subject to  the same possibilities  for excessive
 costs,  inadequate performance and fraud  as  other EPA contracts.  In addition,
 they are  especially vulnerable to  conflicts of interest, bribery and other corruption
 due to the great financial impact of their work on PRPs.


       Superfund enforcement has received considerable performance audit
 attention in recent years. One theme area for the Office of Audit  is the use of
 PRPs to perform Superfund site cleanups. We have  recently reviewed the areas
 of PRP searches, PRP oversight,  and cost recovery.  We also have reactive and
 proactive investigations underway to find if PRPs who claim inability to pay for
 Superfund response have filed fraudulent  bankruptcy petitions or concealed their
 true financial positions.



       Are PRP searches adequate?  Does EPA fully  enforce information requests
to PRPs?  Are negotiations with PRPs conducted effectively and timely?  Are
settlements with PRPs comprehensive, fully protective of the public interest and
fair? Are orders issued  for  PRP response adequate and enforceable? Does EPA
adequately oversee and enforce orders for PRP response? Does EPA effectively
recover its Superfund costs from PRPs?  Does EPA adequately oversee its

EPA Office of the Inspector General Superfund Strategic Wanning Document. January 1992	Page 26

enforcement contractors? Are adequate controls operating to minimize corruption
and fraud?


       EPA spending on enforcement is small compared to the total Superfund
budget.  Enforcement is a low priority for financial audits.  The effectiveness of
enforcement efforts has an enormous impact on the Federal funding needed for
the Superfund program, and enforcement has significant vulnerabilities. However,
our recent audit efforts have covered most significant performance audit needs.
Therefore, enforcement is a low priority for performance audits once we complete
work now in progress. However, its priority will increase in a few years as the
recent audit work becomes dated.  While the potential for fraud is high, the EPA
funding for enforcement is relatively low.  Therefore, its priority for proactive
investigative efforts is medium.


       We will complete our theme area audit work on the use of PRPs to
perform Superfund site cleanups during fiscal 1994.  In later years, we will
conduct audit follow-up work to determine whether EPA implemented past
recommendations and its corrective actions were effective.  We will conduct
incurred cost audits of ARCS contractors, whose work includes oversight of
responses managed by responsible parties.  We may conduct some other financial
audits of enforcement contractors. Investigative efforts will focus on uncovering
corruption and fraud perpetrated to reduce PRP liability and costs.

EPA Office of the Inspector General Superfund Strategic Planning Document. January 1992      Pace 27



       The research and development program is integral to Superfund and plays
an important technical support role. With an annual Superfund budget of about
$70 million and 130  staff, the Office of Research and Development (ORD)
manages several programs involving basic research, applied research and technical
support. EPA awards contracts, grants and cooperative agreements to carry out
much of the research.

       The largest research effort is in the development and evaluation of new
cleanup technologies. The Risk Reduction Engineering Laboratory manages that
program, called the Superfund Innovative Technology Evaluation (SITE) program.
The program uses cooperative agreements with technology developers to conduct
pilot testing and demonstration of new technologies at  Superfund sites across the
country. The program evaluates performance data and recommends technology
applications.  The Alternative Treatment Technology Information Clearinghouse
(ATTIC) system is the primary source of technology transfer on the new

       The Exploratory Research Program manages other significant research
efforts conducted under grants. Grants fund five university-based Hazardous
Substances Research Centers serving the ten EPA regions.  EPA may fund each
Center for eight years for as  much  as $9 million each.  Smaller grants in the
Research Grants Program fund basic research at universities and medical
institutions.  The Small Business Innovation Research Program also uses grants to
fund research.


       ORD recently reported that the management of its extramural resources
was a significant weakness in its internal controls.  Areas of weakness include
too few staff to adequately manage contracts and grants, inadequate training in
contract and grant management, lack of on-site inspections of contractor and
recipient work, poor contract administration files, inadequate monitoring of
government furnished property, unreasonable costs for work performed, and costs
exceeding contractual ceilings.


       We conducted an audit of the SITE Program. We have done a few
financial audits of research contractors and assistance recipients.  We have
proactive investigations underway to determine the potential for fraud by
universities, research centers and laboratories doing Superfund research and

 EPA Office of tha Inspector General Suoerfund Strateotc Planning Document. January 1992	Ppge 28



       Are claimed costs eligible, supported, necessary and reasonable? Is EPA
 conducting efficient and effective  research oriented toward the field application of
 improved risk assessment and cleanup technology?  Are adequate controls
 operating to  minimize conflicts of interest and fraud  in the selection of contractors
 and assistance recipients, the management of contracts and assistance
 agreements,  and the reporting of research results?


       The funding devoted to research and development is a small proportion of
 the Superfund budget.  However, our audit coverage has been minimal and there
 are significant vulnerabilities.  This program area is especially dependent on
 contractors and assistance recipients.  We consider it a medium priority for
 financial audits and a low priority for performance audits and proactive
 investigations. However, if research and development funding continues to
 increase, the priority for audits and proactive investigations in this area also will


       We will conduct audits of research contracts,  grants and cooperative
 agreements when there are indications that there may be significant unallowable
 charges.  We will follow up on the SITE  Program audit, and may conduct further
 performance  audits in this program area as resources and other priorities allow.
 Proactive investigations will focus  on conflicts of interest and the potential for
 fraud  by contractors and assistance  recipients.

EPA Officg Of the frigp»ctor General Superfund Strategic Planning Document. January 1992      Page 29

                       ANALYTICAL SERVICES


       The Superfund program depends heavily on site sampling and the analysis
of these samples.  Soil, water and air samples may be collected at the SI,  Rl, RD
and RA phases of the remedial program, as well as during removals.  Reliable
sampling and analysis of samples is critical to understanding the nature and
extent of contamination.  The Contract Laboratory Program (CLP), established in
fiscal 1980, analyzes most Superfund samples.  The purpose of the program is to
provide analytical services that are  of acceptable quality and cost-effective for a
high volume of samples.

       The CLP provides two types of analytic services, routine analytic services
(RAS) and special analytic services  (SAS).  About 50 commercial laboratories
operating under firm fixed-price contracts with EPA perform RAS.  RAS services
include analyses of organics, inorganics and high concentration samples. These
contracts include quality assurance/quality control protocols, specific reporting
requirements and liquidated damages for each late  or incomplete sample.

       The SAS program meets specific requirements not met through RAS
procedures. For example,  the SAS  program can obtain analytical results more
quickly than the 35 days provided by RAS contracts.  The SAS program meets
requirements for stringent  detection limits. A separate contract is awarded to a
commercial laboratory for each SAS request. In fiscal year 1990, the CLP
analyzed 57,000 RAS and 42,000 SAS samples.

       The primary users of the CLP services are the ten EPA regions. Regional
Sample Control Coordinators in each region provide a single contact point for the
samplers, the laboratories and the users of the data. These regional officials and
Superfund contractors review analytical results and use the data to make
decisions regarding Superfund sites. The Sample Management Office, an EPA
contractor, largely manages the CLP program.

       EPA also analyzes samples through non-CLP laboratories.  Mobile
laboratories, regional  laboratories, PRPs or other EPA contractors may analyze
samples. A 1990 survey found that non-CLP laboratories analyze 14 percent of
site assessment samples, 35 percent of remedial samples and 84 percent of
removal samples.


       There are several factors critical to the reliability of sample analysis.  These
include maintenance of a chain of custody, limits on sample holding times,
calibration and recalibration of analysis instruments, and documentation of
analyses.  Analysis is vulnerable to  such fraud as fabricated analysis results,
backdating of analyses to hide  excessive holding times and faked records of
instrument calibration.  Layering of  contractors, with the Sample Management
Office dealing directly with contract laboratories, increases program vulnerability.

 EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
Pane 30
       In addition, the samples being analyzed may not have been collected using
 proper sampling techniques.  Improper sampling techniques can result in samples
 not reflecting the actual contamination at the site.  Problems in sampling or
 analysis can cause EPA to misunderstand the threat posed by a site, and
 therefore make a poor choice of remedy.


       We have issued one performance audit report on the  CLP and have several
 other audits in this area in progress. We have devoted considerable investigative
 effort to CLP labs, resulting in several fraud convictions and several exclusions of
 laboratories from the CLP program.



       Are samples and analyses of them reliable and adequately documented?
 Are analysis results provided promptly to avoid delaying site response? Are
 adequate controls operating to minimize contractor fraud?


       The laboratory contracts are small and generally awarded on  a fixed price
 basis.  The  priority for financial audits is low.  The program area has very high
 vulnerability and is critical to the success of the Superfund program. The priority
 for performance audits is high.  However, the need for performance audits will
 decline once we complete current work in this area, since this work provides
 good audit coverage. While the fraud potential is very high, reactive investigative
 work is uncovering much of the fraud.   Therefore, the proactive investigative
 priority is medium.


      We will complete the current series of performance audits in  this area.
 Later, we will do follow-up work on these audits. We will conduct financial
 audits only of the Sample Management Office contract and perhaps other major
 cost-type analytical contracts. We will limit investigative efforts to reactive
 investigations of contractor fraud.

EPA Office of the Inspector General Supprfund Strategic Planning Document. January 1992	Pagq 31

                         FEDERAL FACILITIES


       As the owner of one-third of the nation's land, the Federal government is
responsible for cleaning up thousands of sites where uncontained hazardous
wastes are contaminating  soil and ground water.  Since 1980, CERCLA has
required Federal agencies to  determine whether their facilities and lands contain
abandoned or uncontrolled hazardous wastes and to take needed corrective

       Dissatisfied with the rate of progress in achieving these goals, Congress
added  a new section 120  to CERCLA when it enacted  SARA, requiring:

       •     Each department, agency and instrumentality of the U.S. to add to
            the inventory of Federal  agency hazardous waste facilities.

       •     EPA to establish a Federal Agency Hazardous Waste Compliance
            Docket (Docket) containing all information (site location, amount and
            toxicity of waste, extent of contamination, etc.) required under the
            Resource Conservation and Recovery Act  (RCRA) and CERCLA.

       •     EPA to assure conduct of a preliminary assessment (PA) for each
            facility on the Docket within 18 months after enactment of SARA
            (each agency to perform its own PAs).  Following the PA, the EPA
            is to  determine  whether  to include the site on the NPL if the facility
            meets the NCP  criteria.

       •     Each agency  to begin an Rl/FS within six months after inclusion of
            the facility on the NPL.  EPA is to review the results of the Rl/FS and
            within 180 days enter into an interagency agreement (IAG) with the
            Federal agency  for the expeditious completion of all necessary
            remedial action  at the  facility.  Substantial continuous physical on-
            site remedial  action is  to begin at each facility within 15 months
            after completion of the Rl/FS.

       The law also requires annual reporting by Federal agencies to Congress on
progress  in implementing the requirements of section 120.  In addition, it includes
provisions for settlements  with other  parties, State and local participation, and the
transfer of authorities and  property.

       Federal agencies identify facilities requiring investigation and possible
remediation under CERCLA.  These facilities range in size from hundreds of acres
to tens of thousands of acres and many contain multiple contaminated  areas.
The Departments of Defense (DOD), Energy (DOE) and Interior account for about
84 percent of the Federal  sites that require investigation.  Once the Federal site is
identified, EPA lists it on the Docket.  The Docket is available for public
inspection at EPA regional offices.  EPA first published  the Docket on February
12, 1988, with 1,170 facilities. As of August 23,  1991,  the Docket includes
1,652  facilities.

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
                                                        Paoe 32
       Once EPA lists a Federal facility on the Docket, the responsible agency
must conduct a PA and, if necessary, an SI, within 18 months.  Following the
PA/SI, EPA applies the Hazard Ranking System (HRS) and includes sites that
score 28.50 or above on the NPL.  Inclusion on the NPL does not mean
Superfund monies are available for cleanup as with non-Federal sites. Section
111(e){3) specifies that the Fund is not available  for remedial actions at Federal
facilities.  As of July 1991,  116 Federal facilities were on the NPL and three  more
sites proposed.  All but five  of these  sites are DOD or DOE facilities.

       Within six months of  NPL listing of a Federal facility, the Federal agency
must begin an Rl/FS, in consultation  with EPA and the State.  EPA and the State
must publish an enforceable  timetable for the Rl/FS completion, and  EPA must
review the Rl/FS when completed.

       CERCLA section 120  also requires the Federal facility to enter into an  IAG
with EPA for the remedial action within 180  days of EPA's review of the Rl/FS.
The IAG is the vehicle  for remedy selection.  At a minimum, the IAG must include
a review of cleanup alternatives considered and the remedy selected, a cleanup
schedule, and arrangements  for operation and maintenance.

       EPA policy is to enter into an  IAG at the Rl/FS stage.  This meets the
requirements for starting an  Rl/FS and publishing  a timetable.  It also provides for
early input by EPA and the State into the Rl/FS and remedy selection process.
EPA policy is to have three-party lAGs, with  the State joining EPA and the Federal
facility as an active partner and signatory. lAGs  are enforceable by the parties to
the agreement and by citizens and  States.

       Cleanup {RD/RA phase) is to begin at  the Federal facility within 15 months
of Rl/FS completion. The  signing of the ROD marks the completion of the Rl/FS.
In their annual budget submissions, Federal agencies must review alternative
funding for cleanup costs. The annual budget submission also must include a
statement on the hazards  to public health, welfare, and the environment, and the
consequences of failure to begin and  complete  remedial action. In addition, each
Federal agency participating  in the  CERCLA program must submit an annual report
to Congress. This report must describe the Federal agency's progress in such
areas as reaching lAGs and conducting RI/FSs and cleanups.  EPA has reported
the following Federal facility  response activities in progress at NPL sites:
Fiscal Year
8.7 fig S2  9_Q  21

22 28 72 215 330
fiZ  fifi  S3  20 SI

 1   2   6  18 22

   S3.  30.  El

7   7   8  20
      To simplify the negotiation of site-specific lAGs, EPA developed model
lAGs with DOD and DOE in 1988. The models cover areas such as the scope,
statutory compliance - RCRA-CERCLA integration, consultation with EPA, dispute
resolution, enforceability, stipulated  penalties, funding, etc.

      EPA consolidated the Federal facilities program in April 1990 as the  Office
of Federal Facility Enforcement (OFFE) within the Office of Enforcement.  The
mandate of OFFE is to develop an innovative, multimedia enforcement program to
improve compliance rates and promote cleanup activities at Federal facilities.

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
Paae 33
OFFE develops national programs and internal policies, strategies and procedures
for assuring compliance by Federal entities with all environmental statutes and
implementing regulations.  The Office is also responsible for coordinating with
program offices on policy development  and receives technical support from those
media program offices.

      EPA's regional offices carry out the program.  RPMs provide technical
assistance and oversight of Federal facility responses.  Each region has a Federal
Facility Coordinator who handles non-Superfund issues.  Regional Counsel
provides support for negotiations and dispute resolution related to the lAGs.
Although OFFE provides the regions with resources, it  has no oversight authority
over their implementation of Federal facility activities.

      Section 120{e}(5) requires each Agency to report to Congress on its
progress toward  implementing the various CERCLA section 120 provisions.  The
report must include progress in entering lAGs, cost estimates and budgetary
proposals for each IAG, public comments on each IAG, instances in which no IAG
was reached,  progress in  conducting RI/FSs, and progress in conducting RAs.  In
addition, this section requires the Federal agency to submit the report to the
States affected by a facility covered by CERCLA.

      Executive Order 12088 requires  each  Federal agency to  submit an annual
plan for the control of environmental pollution to the Director, Office of
management and Budget (OMB), through EPA. OMB Circular A-106 mandates
the process of implementing this Order. In the A-106  process, each Federal
agency describes what actions they will take to control environmental pollution
and how much they expect it to cost.  EPA establishes the guidelines for
developing  the plans and reviews the plans before they are sent to OMB.


      Compliance Monitoring

      Audits of  EPA monitoring of non-Federal PRPs showed inadequate
compliance monitoring by  RPMs. Frequently RPMs do  not perform on-site visits,
but instead monitor by telephone from the regional office.  In 1990, the DOE
identified environmental compliance as a material weakness in their FMFIA
process. DOE identified successful completion of EPA environmental audits and
other compliance monitoring as  an  indicator of DOE's success in implementing
corrective action.

      Limited Ability to Assess Penalties

      EPA assesses stipulated penalties against other Federal agencies only in
very extreme cases. It also provides for much lower stipulated penalties than it
would include in  agreements or  decrees for non-Federal sites.  The only instance
of EPA assessing stipulated penalties was $100,000 against DOE for the Fernald,
Ohio facility. (DOE also agreed  to  spend an additional $150,000 on supplemental
environmental projects in the Fernald vicinity.)  Penalties are particularly critical in
Federal facility cases because EPA may not take over the cleanup and sue the
other Federal agency for recovery of cleanup costs.

 EPA Office of the Inspector General Superfund Strategic Planning Document. January 1992
Paae 34
       Newlv Established Office

       The current OFFE organization has existed less than a year, having been
 reorganized in June of 1991.  The Office  is expanding and growing.  Much of the
 staff has tittle experience in the Superfund Federal facility program area.

       No Oversight Over Regions

       OFFE has no line authority over regional operations. Although OFFE
 provides funding to the regions to carry out the Federal facilities enforcement
 program, it has  no assurance that the regions are carrying out the program

       Oversight Capabilities

       Both Congress and the public expect EPA to make sure Federal agencies
 clean up their facilities promptly and effectively. However, EPA has limited ability
 to live up to  these expectations.  Although EPA may assess stipulated penalties,
 it only does this in extreme cases  and assesses smaller amounts than it would
 against non-Federal PRPs.  In addition, the Department of Justice has determined
 that one Federal agency cannot sue another,  so EPA has little  enforcement clout.


       We have conducted no audits or investigations.



       is EPA effectively carrying out its responsibilities under  section 120?  Are
 other Federal agencies cleaning up their facilities in accordance with statutory


       EPA does not finance the cleanup of other agencies' Federal facilities, and
 devotes little of its Superfund resources to Federal facilities enforcement.
 Priorities for  financial audits and proactive investigations are low. However,
 Federal facilities pose grave environmental threats. The  priority for performance
 audits is medium.  Furthermore, this  priority will increase as the Federal  facilities
 program grows and matures.


       We will audit EPA's management of the  Federal facilities program.  We
 also will  cooperate with OIGs or other audit agencies to  review selected agencies'
 Federal facility programs and EPA's oversight of them. We have requested the
 President's Council on  Integrity and Efficiency to coordinate a government-wide
 audit of DOD and DOE facilities.

EPA Offica of the Inspector General Simerfund Strategic Planning Document. January 1992	Page 35



      EPA plans to spend $95 million from fiscal 1992 through 1996 on system
development and enhancement, and an additional $431 million on automated data
processing operations and support.  A significant percentage of these costs either
directly or indirectly supports the Superfund program. The development and
maintenance (operations and support) of major information systems are critical to
EPA offices performing their missions.  Congress, States, environmental groups,
the public, and Agency officials depend on the accuracy and timeliness of data
provided by EPA's MISs.

      Agency MISs support all aspects of the Superfund program mission.  Some
information systems provide support to the Superfund program and other Agency
programs. For example, financial and contract systems support all Agency
programs. They are critical to the ability of EPA to perform its Superfund
mission.  Systems dedicated to Superfund support a varied user community
(Headquarters offices, regional offices, laboratories, other Federal agencies, State
offices, etc.) on many computer hardware platforms (including mainframe
systems, minicomputers, Local Area Networks and personal computers).  Major
Superfund systems in operation or development include:

      Comprehensive Environmental Response. Compensation and Liability
      Information System (CERCLIS1 - Supports EPA Headquarters and regions
      for the management and oversight of the Superfund program. It maintains
      an automated inventory of abandoned, inactive or uncontrolled hazardous
      waste sites. It is also a vehicle for regions to report site cleanup status to
      Headquarters.  It is a decentralized national system on which each region
      controls and enters its data on regional systems.  CERCLIS uses System
      2000 Database Management System software and operates on the IBM
      ES9000 mainframe at Research Triangle Park, North Carolina (RTP).  EPA
      plans to develop  a new version of CERCLIS using a relational database.

      Superfund Document Management System (SDMS) - Being designed to
      improve the effectiveness and efficiency of Superfund records management
      and document handling operations  by using digital imaging technology.
      The Office of Solid Waste and Emergency Response (OSWER) has
      projected a savings of 40% from the current annual cost of $28 million for
      Superfund document management.  EPA does not expect this system to be
      operational for several years.

      Suoerfund Cost Recovery Image Processing System (SCRIPS) - First
      installed in early  1991. SCRIPS uses image processing technology to store
      and retrieve all site specific Superfund cost documentation and integrate
      this information with EPA's Integrated Financial Management System
      (IFMS).  EPA is now conducting pilot testing that integrates, on a  limited
      basis, IFMS and SCRIPS. This integration capability will take financial
      transaction output data from  IFMS and trigger SCRIPS to collect and
      produce images of those documents supporting the transaction.  SCRIPS
      collects document images at  regional and field sites throughout the country

 EPA Office of foe Inspector General Suoerfund Strategic Planning Document. January 1992	Page 36

       for central storage at EPA's National Computer Center. The system
       operates on IBM personal computer (PC) workstations equipped with
       scanning capability, IBM AS 400 minicomputers (at the regional level), and
       the IBM ES9000 mainframe at RTP.

       CLP Analytical Results  Database (CARD) - Serves as a comprehensive
       database of the results of inspections of deliverables from laboratory
       contractors (contract compliance screening), and supports methods and
       quality assurance requirements development. CARD uses ADABAS on the
       IBM ES9000 mainframe at RTP.  EPA plans to provide regional access to
       CARD.  Laboratories must deliver summary data on IBM PC compatible
       diskettes to buitd the CARD database.

       Site Enforcement Tracking System (SETS) - Tracks name and address
       information about PRPs at CERCLA sites. EPA uses the information to
       identify conflicts of interests,  and to respond to public inquiries about
       PRPs. SETS uses Focus and Clist software, and operates on the  IBM
       ES9000 mainframe at RTP.

       Emergency Response Notification System (ERNS) - A national database and
       retrieval system used to store information on releases of oil and hazardous
       substances.  The data is based on release notifications submitted to the
       National Response Center, EPA regions and the U.S. Coast Guard since
       1987. The system contains preliminary information on specific releases,
       including the reported discharger, date of release, material released, cause
       of release, damage or injuries  involved, quantity released, source of
       release, incident location, response actions taken, authorities notified, and
       affected environmental media. ERNS data is available on magnetic tapes,
       diskettes, or printouts.  ERNS uses UNIX, Clipper, and dBase software and
       operates on an IBM PC.

       CLP Statistical Database (STAT1  - Contains random samples of the
       laboratory  results produced by the Contract Laboratory Program (CLP).  It
       supports the statistical  analysis of occurrence and concentration of priority
       pollutants and hazardous substances at  Superfund sites.  The STAT
       system uses SAS statistical software operating on the IBM ES9000
       mainframe at RTP.

       The Office of Administration and Resource Management (OARM) has
overall responsibility for EPA's information resources management (IBM)  program.
OARM operates several Agency-wide systems, including  financial and  contract
systems.  OARM's Office of Information Resources Management (OIRM) provides
centralized Agency-wide systems development of major systems. The OARM's
offices at RTP and Cincinnati,  Ohio provide general telecommunications and
computer support to EPA program offices.

       OSWER has an Information Management group with general responsibility
for the planning and management of  OSWER's IRM program.  The  Office of
Emergency and Remedial Response and the Office of Waste Programs
Enforcement, under OSWER, jointly plan and manage the Superfund IRM program.
These offices develop IRM  plans and budgets, and provide day-to-day

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992	Page 37

management of the information systems.  Regional IBM Planning Coordinators in
each region coordinate IBM planning with the OSWER Headquarters organizations.


       We reviewed all major EPA automated systems as of September 30, 1991,
and risk ranked them based upon established risk criteria.  Superfund systems
ranked as high risk included CERCLIS, SDMS and SCRIPS.  Several major Agency-
wide systems used by Superfund also showed high risk.


       Over the past few years, we have conducted several reviews of CERCLIS
and several reviews of major Agency-wide management information systems and
IRM activities supporting the  Superfund  program.



       Are management information systems vital to Superfund management
accurate  and current?  Do they provide the information EPA needs to manage the
Superfund program effectively?  Does EPA develop new and modified systems in
keeping with good MIS development practices?  Are adequate controls operating
to minimize contractor waste and fraud?


       MISs  are critical to the functioning of the Superfund program. Past audit
work showed EPA spent large amounts to develop systems that were not reliable
and did not provide the information  needed by management.  We  have identified
several critical systems as high risk.  The audit priority, both performance and
financial, is high.  The funding devoted to  MISs is low compared to other program
areas.  We consider the fraud potential to  be only medium.  Therefore, the priority
for proactive investigations is low.


       We will conduct system development, application control and data integrity
audits of selected high risk MISs. We will conduct financial audits of major MIS

EPA Office of the Inspector General Suparfund Strategic Planning Document. January 1992	
           Alternative Remedial Contracting Strategy
           Alternative Treatment Technology Information Clearinghouse
           Bureau of Reclamation, U.S. Department of the Interior
           Cooperative agreement
           CLP Analytical Results Database
                                                                 Pane 38
           Comprehensive Environmental Response, Compensation, and Liability
CERCLIS   Comprehensive Environmental Response, Compensation, and Liability
           Information System
CLP        Contract Laboratory Program
DCAA      Defense Contract Audit Agency
DOD       Department of Defense
DOE       Department of Energy
EPA        Environmental Protection Agency
ERCS      Emergency Response Cleanup Services
ERNS      Emergency Response Notification System
FS         Feasibility study
HRS        Hazard Ranking System
IAG        Interagency agreement
IBM        International Business Machines
IFMS       Integrated Financial Management System
IRM        Initial remedial measure or information resources management
LSI         Listing site inspection
MIS        Management  information system
NCP        National Oil and Hazardous Substances Contingency Plan, 40 CFR
           Part 300

iPA Office of the Inspector General Suoerfun^ Strategic Planning Dpffumqnt. January 1992
NPL        National Priorities List
O&M      Operation and maintenance
OARM     Office of Administration and Resources Management
OFFE      Office of Federal Facilities Enforcement
OIG        Office of the Inspector General
OIRM      Office of Information Resources Management
OMB      Office of Management and Budget
ORD       Office of Research and Development
OSC       On-Scene Coordinator
OSWER    Office of Solid Waste and Emergency Response
PA        Preliminary assessment
PC        Personal computer
PRP        Potentially responsible party
RA        Remedial action
RAS        Routine analytic services
RCRA      Resource Conservation and Recovery Act
RD        Remedial design
Rl         Remedial investigation
RI/FS      Remedial investigation/feasibility study
ROD       Record of Decision
RPM       Remedial project manager
RTP        Research Triangle Park, North  Carolina
SARA      Superfund Amendments and Reauthorization Act of 1986
SAS        Special analytic services
SCRIPS    Superfund Cost Recovery Image Processing System
SDMS      Superfund Document Management System
Paae 39

EPA Office of the Inspector General Suoerfund Strategic Planning Document. January 1992
SETS       Site Enforcement Tracking System
SI          Site inspection
SITE        Superfund Innovative Technology  Evaluation
SSI         Screening site inspection
STAT       CLP Statistical Database
Paae 40