TABLE OF CONTENTS
SCOPE AND OBJECTIVES 1
SUMMARY OF FINDINGS 2
ACTION REQUIRED .... 4
BACKGROUND 5
FINDINGS AND RECOMMENDATIONS
1. Accounts Receivable Need To Be Consistently
Recorded 6
2. Prompt Action Needed To Collect Amounts Owed 13
EXHIBITS
1. Schedule Of Superfund Cost Recovery Collections
Reviewed And Reasons For Lost Interest To The
Super fund Trust Fund 17
APPENDICES
1. Regional Administrator Reply To OIG Draft Report ... 20
2. Distribution 22
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
\ NORTHERN DIVISION
•*
r 1O W. JACKSON BLVD.. 4TH FLOOR
CHICAGO. ILLINOIS 6O6O4
OFFICE OF AUDIT OFFICE OF INVESTIGATION
312/333-2486 March 6, 1990 312/333-2307
SUBJECT: Audit Report No. E1SJF9-05-027.4-0100172
Review of Superfund Cost Recovery Accounts
Receivable Establishment and Collection
..
FROM: Anthony C. Carrollo
Divisional Inspector General for Audits
Northern Division
TO: Edwin B. Erickson
Regional Administrator
Region 3
SCOPE AND OBJECTIVES
We performed an audit of Region 3's collection of Superfund cost
recovery amounts. The purpose of the audit was to determine if:
1 . Cost recovery amounts are recorded as accounts receivable
in EPA's financial records.
2. Cost recovery amounts are collected in a timely manner.
3. Interest is assessed upon late payment.
We reviewed Superfund cost recovery amounts which resulted from
cost recovery enforcement actions for Region 3 Superfund sites.
The review focused on amounts due from cost recovery actions
completed from October 1, 1986 to September 1, 1989. We
judgmentally selected to review the cost due from 11 of 44 (25
percent) cost recovery enforcement actions completed during
fiscal years (FY) 1987 through 1989. We also reviewed the
collection of oversight costs for three enforcement actions.
Therefore, we reviewed 14 (11 + 3) cost recovery amounts due.
We recognize that, because our sample of enforcement actions was
a judgmental sample and not a statistical random sample,
statistical projections cannot be made on the remaining
enforcement actions in the universe. However, while our findings
cannot be statistically inferred to the larger universe of
enforcement actions, our sample was sufficient to satisfy our
audit objectives.
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EPA delegated the responsibility for tracking and collecting cost
recovery amounts owed to the regions at the beginning of FY 1989.
Therefore, for FY 1989, Region 3 was responsible for all
Superfund cost recovery activities including (1) recording of
accounts receivable and (2) ensuring the payments were collected.
For the prior fiscal years, Region 3 was responsible for all
other activities related to the collection of cost recovery
amounts owed except recording and collecting.
We performed the audit in accordance with the Government Auditing
Standards issued by the Comptroller General of the United States
(1988 revision). Fieldwork was conducted from July 17, 1989 to
January 3, 1990. We reviewed reports, policies and procedures,
and cost recovery and accounts receivable files. Also, we held
discussions with regional Superfund, counsel, and financial
management officials.
Significant instances of noncompliance with internal
administrative controls are detailed in this report. No other
issues came to our attention which were significant enough to
warrant expanding our review.
We discussed our findings and recommendations with Region 3
officials. Their comments and actions taken in response to our
findings are discussed in the body of this report. A copy of
Region 3's February 20, 1990 reply to our draft report is
attached as Appendix 1.
SUMMARY OF FINDINGS
Region 3 needs to (1) consistently record Superfund cost recovery
amounts due on its financial records, (2) make timely
collections, and (3) collect interest for late payments. Debts
arising from consent agreements in enforcement actions and
Superfund cost recoveries are valuable government assets, and EPA
procedures are intended to protect these assets. Failure to
report actions that create these debts, or failure to report them
timely, results in substantial losses to the Hazardous Substance
Superfund (Superfund Trust Fund).
1. Accounts Receivable Need To Be Consistently Recorded
For 9 of 14 settlement documents we reviewed, neither
Headquarters nor Region 3 were consistently and promptly
recording accounts receivable (about $3.1 million) on the
Agency's financial records. Thus, the Agency's control over
monies owed to the Superfund Trust Fund was ineffective. Because
receivables were not recorded, the Agency was not aware of all
payments which were due the Superfund Trust Fund. As a result, a
payment might be diverted, lost, or not paid without anyone being
aware of it.
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The Agency was also not meeting internal control standards which
require that significant events be promptly recorded and properly
classified. The failure to record a receivable for amounts due
to the Superfund Trust Fund is a material weakness in internal
controls.
The FY 1989 Agency Operating Guidance stated that the success of
collecting cost recovery payments depends on being sure that case
closing information is immediately sent to the regional financial
offices. This ensures that the collections can be recorded
properly and receivable amounts can be accurately reported to
management. Accounts receivable were not consistently recorded
in Region 3 because: (a) the Office of Regional Counsel did not
timely forward settlement documents to the Financial Management
Office in all cases, and (b) there was no assurance that
Financial Management Office received settlement documents timely.
In response to our draft report, the Regional Administrator
stated that he believed the finding was overstated because it
includes those actions that Headquarters was responsible for
prior to FY 1989. If the actions prior to FY 1989 are eliminated
from the review, no material weakness in Region 3's internal
controls would be found. The Region believed that an internal
control review is not justified because existing procedures
adequately insure the recording and recovery of all Trust Fund
receivables.
Notwithstanding the comments made by the Region, we are still of
the opinion that the existing procedures were not adequately
implemented to ensure that all amounts due for Superfund cost
recovery are recorded as accounts receivable. We recognize that
the Headquarters Financial Management Division, and not Region 3,
was responsible for recording accounts receivable and ensuring
payments were collected prior to FY 1989. However, for each year
we reviewed, Region 3 was responsible for all other activities,
including forwarding settlement documents to financial
management. As stated in our report, we found that (a)
settlement documents were not consistently forwarded to the
Financial Management Office and (b) only one settlement document
was date stamped by the Financial Management Office as
verification of when it was received.
We agree that Region 3's procedures, when consistently followed,
are adequate to ensure the recording and recovery of all
Superfund Trust Fund receivables. In our opinion, the Region's
inconsistent implementation of its procedures is a material
weakness in internal controls because it significantly weakens
safeguards against waste, loss, unauthorized use or
misappropriation of funds.
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We recommend the Regional Administrator, Region 3, take
appropriate action to direct the Office of Regional Counsel, the
Hazardous Waste Management Division, and the Financial Management
Office to ensure that (a) settlement documents are timely
forwarded to the Financial Management Office and (b) Office of
Regional Counsel's tracking system is regularly reconciled with
the financial management system. Also, an alternative internal
control review should be conducted during FY 1990 to ensure
receivables are promptly recorded on the financial records.
2. Prompt Action Needed To Collect Amounts Owed
Region 3 was not promptly collecting cost recovery amounts owed
to the Superfund Trust Fund because of (a) delays in sending
accounting data to responsible parties, (b) late payment of
amounts due, and (c) delays in notifying responsible parties.
These conditions existed primarily because the enforcement
personnel in the Superfund Remedial and Removal Branches had not
reported all oversight cases for billing to the CERCLA Cost
Recovery Section. Delays in collecting amounts owed resulted in
lost interest to the Superfund Trust Fund of $11,553.
Of the 14 settlement documents reviewed, we found 6 cases (43
percent) where collection of amounts owed was delayed. The U.S.
Treasury Department currently invests Superfund monies in 52-week
U.S. Treasury MK Bills. When cost recovery amounts are not
promptly collected, the Superfund Trust Fund loses the interest
which would have accrued.
In response to our draft report, the Regional Administrator
stated that the Office of Regional Counsel, the Hazardous Waste
Management Division and the Office of the Comptroller developed
written procedures for billing oversight costs. The procedures
will be reviewed and finalized during FY 1990. Also, the
Comprehensive Environmental Response and Liability Information
System (CERCLIS) will track oversight billings and ensure that
the bills are issued timely.
The actions planned by the Region, when properly implemented,
will substantially correct the deficiencies cited in this
finding. We recommend that the Regional Administrator ensure
regional officials complete their planned actions.
ACTION REQUIRED
In accordance with EPA Order 2750, the action official is
required to provide this office a written response to the audit
report within 90 days of the audit report date.
We have no objections to the further release of this report at
your discretion. Should you have any questions, please call me
or Lee Stevens.
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BACKGROUND
In 1980, Congress passed the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA), commonly
known as Superfund. This law provides EPA with the authority and
necessary, tools to respond directly or to compel potentially
responsible parties to respond to releases of hazardous
substances, pollutants or contaminants. CERCLA was reauthorized
and amended on October 17, 1986, by the Superfund Amendments and
Reauthorization Act (SARA).
CERCLA Section 107 states that generators and transporters of
hazardous substances, as well as past and present owners and
operators of hazardous waste sites, are strictly, jointly, and
severally liable for the costs of cleanup. Once EPA undertakes a
response using Superfund Trust Fund monies, it can recover costs
from the responsible parties. EPA may recover Federal response
costs from any or all responsible parties involved in a remedial
action. The monies recovered go back into the Superfund Trust
Fund for use in the future.
A major goal of the Superfund program is to have potentially
responsible parties (PRPs) cleanup sites that are releasing or
threatening to release hazardous substances. The enforcement
process normally used by EPA to achieve this goal may involve
five major efforts. First, EPA attempts to identify PRPs as
early as possible. Second, EPA.will encourage the PRPs to
cleanup the site. Third, if EPA believes the PRP is willing and
capable of cleaning up the site, an enforcement agreement is
negotiated. The agreement may be entered in court, or it may be
an administrative order. Under both agreements EPA oversees the
PRP. Fourth, if a settlement is not reached, a unilateral
administrative order may be issued to compel the PRP to perform
the cleanup. Fifth, if the PRPs will not perform the cleanup,
EPA will perform the cleanup and file a suit against the PRP to
recover the money spent.
The Superfund Trust Fund is administered by the Treasury
Department. It is funded primarily by environmental taxes on
petroleum and on the sale or use of certain chemicals. Other
sources of funding for the Superfund Trust Fund are fines and
penalties paid by individuals and entities, cost recoveries, and
interest. EPA collects these funds and deposits them into the
Superfund Trust Fund. When amounts from any of these sources are
credited to Superfund Trust Fund, they are invested in U.S.
Treasury MK Bills. Monies in the Superfund Trust Fund not needed
for current expenditures remain invested, and only those amounts
required for current expenditures are redeemed. All earnings are
credited to and become part of the Superfund Trust Fund.
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FINDINGS AND RECOMMENDATIONS
Finding No. 1 - ACCOUNTS RECEIVABLE NEED TO BE CONSISTENTLY
RECORDED
For 9 of 14 settlement documents we reviewed, neither
Headquarters nor Region 3 were consistently and promptly
recording accounts receivable (about $3.1 million) on the
Agency's financial records. Thus, the Agency's control over
monies owed to the Superfund Trust Fund was ineffective. Because
receivables were not recorded, the Agency was not aware of all
payments which were due the Superfund Trust Fund. As a result, a
payment might be diverted, lost, or not paid without anyone being
aware of it.
The ultimate responsibility for good internal controls rests with
management. Internal controls should be recognized as an
integral part of the collection of Superfund cost recovery
amounts. Also, debts arising from consent agreements in
enforcement actions and Superfund cost recoveries are valuable
government assets, and EPA procedures are intended to protect
these assets. Failure to report actions that create these debts,
or failure to report them timely, results in substantial losses
to the Superfund Trust Fund. The failure to record receivables
for amounts due to the Superfund Trust Fund is a material
weakness in internal controls.
The FY 1989 Agency Operating Guidance stated that the success of
collecting cost recovery payments depends on being sure that case
closing information is immediately sent to the regional financial
offices. This ensures that the collections can be recorded
properly and receivable amounts can be accurately reported to
management. Accounts receivable were not consistently recorded
in Region 3 because: (1) the Office of Regional Counsel (ORC)
did not timely forward settlement documents to the Financial
Management Office (FMO) in all cases, and (2) there was no
assurance that the FMO received settlement documents timely.
EPA's Financial Management Manual, Chapter 7, states that an
account receivable is to be promptly established for all amounts
owed. In order for receivables to be recorded, settlement
documents need to be sent to the FMO. EPA's Comptroller issued a
December 9, 1986 memorandum to all regions stating that Agency
officials responsible for actions creating debts must ensure that
copies of the settlement documents are forwarded to the FMO. The
Comptroller also stated the responsibility for debts arising from
settlements is not solely a financial management function, but
that all Agency staff are accountable for these assets.
EPA's Resource Management Directive System (RMDS) Chapter 2550D
"Financial Management of the Superfund Program" (2550D), issued
on August 25, 1988, contains guidance on establishing receivables
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for cost recovery. The guidance states that Superfund Branch
Chiefs should ensure that settlement documents are forwarded to
the FMO within one work day of final signature. As to
establishing accounts receivable, 2550D refers to RMDS 2540,
Chapter 9, "Receivables and Billings" for more information.
However, this guidance has not been issued to date.
The amount and timing of cost recovery amounts may be found in
documents such as responsible party agreements, consent decrees,
administrative orders, settlements, court orders, judgments, etc.
The documents may (1) require payment of a fixed amount, or (2)
state that EPA will send the responsible party accounting data
which specifies the amount owed. Any document, including
accounting data, which establishes an amount owed is referred to
as a settlement document throughout the report.
We judgmentally selected to review the costs due from 11 of 44
(25 percent) cost recovery enforcement actions completed during
FYs 1987 through 1989. For each of the enforcement actions
selected, we reviewed the collection of monies due the Superfund
Trust Fund for costs incurred by EPA before the effective date of
the enforcement action. We also performed a limited review of
the collection of monies due the Superfund Trust Fund for cost
incurred after the effective date of the enforcement action
(oversight costs). We reviewed the collection of oversight costs
for three enforcement actions. Therefore, we reviewed 14 (11 +
3) settlement documents which established amounts owed for past
costs and/or oversight costs.
Settlement Documents Not Consistently Forwarded To FMO
Settlement documents were not consistently forwarded to the
Headquarters or Region 3 FMOs. The settlement documents
reviewed represented $3.7 million due to the Superfund Trust
Fund. For the 14 settlement documents reviewed, 36 percent (5 of
14), amounting to $1.3 million, were not forwarded to the FMOs.
Number Of Settlement Settlement
Settlement Documents Not Documents Costs '
Documents Forwarded Forwarded To Be
FY Reviewed* To FMO To FMO Recovered
1988 73 4 $2,557,390
1989 _7 2. 5. 1.166.175
Total T£ J5 9, S3.723.565
* Each responsible party agreement, consent decree,
administrative order, settlement, court order, or
judgment is counted as a settlement document. In
addition, for the three settlement documents where we
reviewed the payment of oversight costs, each billing
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is counted as a settlement document. For one of the
settlements (Maryland Sand and Gravel), the billing for
oversight costs had not been prepared as of January 3/
1990, the end of our fieldwork.
Even though 64 percent (9 of 14) of the settlement documents were
forwarded to the FMOs, we could not determine when 6 of 9
settlement documents were forwarded. The six settlement
documents were Maryland Sand and Gravel, Harvey and Knott, Holder
Chemical, Chisman Creek, Palmerton Zinc, and Henderson Road.
The five cases where settlement documents were not forwarded to
the Headquarters FMO or Region 3 FMO promptly were United Rigging
($2,844), Saltville Waste Disposal ($456,000), Middletown Road
($300,000) Raymark Industries ($539,205), and Maryland Sand and
Gravel (Oversight) ($35,000).
Regional officials stated that the ORC, specifically the Regional
Hearing Clerk, was responsible for forwarding all settlement
documents to the FMO. FMO in turn was to date stamp the
settlement document when it was received. We found that the
settlement documents were generally not date stamped by FMO.
Also, ORC did not keep a log of when settlement documents were
sent to FMO. Without a log or date stamp, we could not determine
when the document was sent by ORC or received by FMO. Also,
Region 3 had no assurance that settlement documents were received
in FMO, when forwarded by ORC.
In the three cases where we could determine when FMO received the
settlement documents, only one was date stamped by the FMO. The
other two settlement documents were oversight billings which were
prepared by FMO.
Region 3 officials stated that they use the Superfund Desk
Operating Procedures, issued by Headquarters Financial Management
Division, as guidance on forwarding settlement documents to the
FMO. However, our review found that Region 3 did not have
assurance that the FMO was timely receiving settlement documents.
Region 3 needs to ensure that (1) guidance for forwarding
settlement documents is consistently followed and (2) the FMO
date stamps settlement documents as verification of when they are
received.
Accounts Receivable Need To Be Consistently Recorded
As shown in the schedule on page 7, settlement documents were not
forwarded to Headquarters or Region 3 FMOs in 5 of 14 cases. In
the remaining 9 (14 - 5) cases where settlement documents were
provided, Headquarters FMO did not consistently follow procedures
in the Financial Management Manual to promptly record a
receivable for the amounts due.
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Receivable Receivable
Timely Not Timely Could Not
FY Recorded Recorded Determine *
1988 0 4 0
1989 _2 _0 _3
Total 243
* We could not determine when the receivable was recorded
in three cases because the information that we obtained
from FMO did not indicate the date the receivable was
established. The information we obtained indicated the
document date, which is the effective date of the
order, and not the date the receivable was established.
The four cases where Headquarters FMO did not timely record the
accounts receivable, even though they had the settlement
document, were Maryland Sand and Gravel ($6,432), Harvey and
Knott ($350,000), Holder Chemical ($711,000), and Chisman Creek
($723,958). The four cases total $1,791,390.
Improved Reconciliation Procedures Would Help Ensure
Receivables Are Recorded
Regular reconciliation of Hazardous Waste Management Division
(HWMD) and ORC records with the financial records would serve as
an internal control to assure that all settlement documents were
forwarded to the FMO and the receivables were recorded. RMDS
Chapter 2550D states that the FMO should establish routine
procedures with the Superfund Branch Chief and Regional Counsel
to regularly reconcile program and Counsel records with the
financial records. In addition, the offices are to exchange
information on the status of debts, including cases concluded by
Department of Justice. Region 3 had the information needed to
reconcile program and Counsel records with the financial records,
but the reconciliation process had not been formalized.
ORC has its own tracking system for penalty payments, which the
region refers to as the "Administrative and Judicial Penalties"
tracking system. The Regional Hearing Clerk uses the system to
track administrative and judicial enforcement cases. Cases are
tracked by defendant name. The system tracks the status of
settlement documents, when payments are due, and whether the debt
had been paid. However, the Regional Hearing Clerk did not
consider it an official tracking system.
The Regional Hearing Clerk was to send a copy of the tracking
system report each month to the FMO. However, FMO officials
stated on January 3, 1990, that they do not receive the tracking
system report on a regular basis. The report can be used to
determine whether all settlement documents had been received from
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ORC. Formal procedures are needed to ensure that the tracking
system is regularly reconciled to the financial records.
The Federal Managers Financial Integrity Act (FMFIA) requires
that U.S, General Accounting Office internal control standards be
followed when establishing and maintaining systems of internal
control. The objectives of an internal control system include
that (1) all assets are safeguarded against waste, loss,
unauthorized use, and misappropriation, and (2) all revenues and
expenditures are recorded and accounted for properly so that
accounts and reliable financial reports may be prepared and
accountability of assets may be maintained. Specifically, the
internal control standards state that transactions and other
significant events are to be promptly recorded and properly
classified.
Region 3's inconsistent recording of accounts receivable for
amounts due to the Superfund Trust Fund was a material weakness
in internal controls. OMB Circular A-123 defines a material
weakness as a specific instance of noncompliance with FMFIA which
would (1) impair the fulfillment of an agency component's
mission; (2) deprive the public of needed services; (3) violate
statutory or regulatory requirements; or (4) significantly weaken
safeguards against waste, loss, unauthorized use or
misappropriation of funds. Region 3 meets all these conditions
by not recording receivables.
When receivables were not properly recorded, the financial
management system does not provide EPA management with timely and
accurate financial information. OMB Circular A-127 (A-127)
states that a financial management system is to provide useful,
timely, reliable, and complete information. A-127 and FMFIA
require that an Agency's financial management system provide for:
• Complete disclosure of the financial activities of the
agency,
• Adequate financial information for agency management and
for formulation and execution of the budget, and
• Effective control over revenue, expenditure, funds,
property, and other assets.
Draft Report Recommendations
We recommended that the Regional Administrator, Region 3, take
appropriate action to:
1. Direct the Office of Regional Counsel, the Hazardous Waste
Management Division, and the Financial Management Office to
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ensure that (a) settlement documents are timely forwarded to
the Financial Management Office and (b) Office of Regional
Counsel's tracking system is regularly reconciled with the
financial records.
2. Direct the Financial Management Office to ensure that
settlement documents are date stamped as verification of
receipt.
3. Perform an internal control review during FY 1990 to
determine whether the procedures are being followed and
whether they are adequate to ensure that receivables are
promptly recorded on the financial records.
Regional Reply to Draft PIG Report
The Region disagreed with our finding. The Region believed that
the finding was overstated because it includes those actions that
Headquarters was responsible for prior to FY 1989. The Region
believed that if the actions prior to FY 1989 are eliminated from
the review, no material weakness in Region 3's internal controls
would be found. The Region believed that an internal control
review is not justified because existing procedures adequately
insure the recording and recovery of all Trust Fund receivables.
Auditor's Comments
Notwithstanding the comments made by the Region, we are still of
the opinion that the existing procedures were not adequately
implemented to ensure that all amounts due for Superfund cost
recovery are recorded as accounts receivable. We recognize that
the Headquarters Financial Management Division, and not Region 3,
was responsible for recording accounts receivable and ensuring
payments were collected prior to FY 1989. However, for each year
we reviewed, Region 3 was responsible for all other activities,
including forwarding settlement documents to financial
management. As stated in our report, we found that settlement
documents were not consistently forwarded to the FMO. For FY
1989, 2 of 7 (29 percent) settlement documents reviewed were not
forwarded to the FMO.
According to Region 3 procedures, settlement documents are to be
date stamped by the FMO. As stated in our finding, we found only
one settlement document was date stamped by the FMO. Settlement
documents need to be date stamped by the FMO as verification of
when they are received. U. S. General Accounting Office internal
control standards state that documentation of transactions should
be complete and accurate and should facilitate tracing the
transaction and related information from before it occurs, while
it is in process, to after it is completed. Without settlement
documents being date stamped by the FMO, we were unable to
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determine during our review when they were forwarded to, or
received by, the FMO.
We agree that Region 3's procedures, when consistently followed,
are adequate to ensure the recording and recovery of all
Superfund Trust Fund receivables. In our opinion, the Region's
inconsistent implementation of its procedures is a material
weakness - in internal controls because it significantly weakens
safeguards against waste, loss, unauthorized use or
misappropriation of funds. We recommended in the draft report
that the Regional Administrator ensure that the existing
procedures are consistently followed.
To ensure that existing procedures are consistently followed, at
a minimum, an alternative internal control review should be
performed. An alternative internal control review is defined as
a process to determine that the control techniques in an agency
component are operating in compliance with OMB Circular A-123.
Alternative internal control reviews determine overall compliance
and include testing of controls.
Recommendations
We recommend that the Regional Administrator, Region 3, take
appropriate action to:
1. Direct the Office of Regional Counsel, the Hazardous Waste
Management Division, and the Financial Management Office to
ensure that (a) settlement documents are timely forwarded to
the Financial Management Office and (b) Office of Regional
Counsel's tracking system is regularly reconciled with the
financial records.
2. Direct the Financial Management Office to ensure that
settlement documents are date stamped as verification of
receipt.
3. Perform an alternative internal control review during FY
1990 to determine whether the procedures are being followed
to ensure that receivables are promptly recorded on the
financial records.
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Finding No. 2 - PROMPT ACTION NEEDED TO COLLECT AMOUNTS OWED
Region 3 was not promptly collecting cost recovery amounts owed
to the Superfund Trust Fund because of (1) delays in sending
accounting data to responsible parties, (2) late payment of
amounts due, and (3) delays in notifying responsible parties.
These conditions existed primarily because the enforcement
personnel in the Superfund Remedial and Removal Branches had not
reported all oversight cases for billing to the CERCLA Cost
Recovery Section (Cost Recovery Section). Delays in collecting
amounts owed resulted in lost interest to the Superfund Trust
Fund of $11,553.
Of the 14. settlement documents reviewed, we found 6 cases (43
percent) where collection of amounts owed was delayed (see
Exhibit 1).
Number Lost
Reason For Delay Of Cases Interest
Delay in sending accounting data 3 $ 6,134
Late payment 2 3,385 *
Delay in notifying responsible party 1 2,034
Total $11
* The two late payments were collected in FY 1988.
Therefore, Headquarters, not Region 3, was responsible
for the collection.
One of most important objectives of the Superfund program is to
recover the funds that EPA spends in cleaning up a Superfund
site. Recovery may be effected either through negotiation or as
a result of legal action against responsible parties. The costs
EPA tries to recover may be for (1) past expenditures, (2) future
work that EPA will do at the site, or (3) the costs of EPA
overseeing cleanup work that the responsible party may perform
under contract at the site.
Section 107(a) of the Superfund Amendments and Reauthorization
Act (SARA) requires that cost recovery amounts accrue interest at
the same rate as investments of the Superfund Trust Fund. The
U.S. Treasury Department currently invests Superfund monies in
52-week U.S. Treasury MK Bills that mature in early September of
each year. When funds are needed for Superfund activities,
MK-Bills are sold and the proceeds are used to pay EPA costs.
When funds are received, additional MK-Bills of the same maturity
are purchased. The MK-Bill rates for FYs 1987 to 1989 are:
FY Interest Rate
1987 5.63%
1988 6.99%
1989 8.39%
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Delays In Sending Accounting Data
Accounting data was not promptly sent to the responsible parties
in 3 of 6 cases where payments were delayed. See Exhibit 1 for
details on each case. Each of the settlement documents were
billings for oversight costs.
Site Name
Billing
Date In
Order
Actual
Billing
Date
Elapsed
Days
Shriver's Corner 01/01/88 09/11/89 619
Maryland Sand and Gravel 04/21/89 * 257
Saltville Waste Disposal 01/01/89 03/20/89 78
* Cost not billed as of January 3, 1990.
The lost interest to the Superfund Trust Fund due to delays in
collection for these three cases was $6/134.
Within the Hazardous Waste Management Division, the Cost Recovery
Section is responsible for preparing the cost summaries for the
billing of oversight costs. The Remedial and Removal Branches
are responsible for ensuring that the Cost Recovery Section is
notified when oversight billings are needed. At the beginning of
each year, Cost Recovery Section requests a list from the
Remedial and Removal Branch section chiefs of all orders and
decrees which require the payment of oversight costs.
The billing for Shriver's Corner was late because the site was
not reported by the Remedial and Removal Branches when the Cost
Recovery Section requested a list of all sites which needed
oversight billings. The Cost Recovery Section requests during FY
1987 and 1988 were worded in rather general terms. Because the
request for orders and decrees with oversight billing provisions
was not specific, not all orders and decrees were identified by
the Remedial and Removal Branches. Having recognized the
problem, the FY 1989 request was more specific and the response
improved. Cost Recovery Section became aware of older orders and
decrees, like Shriver's Corner, that require billing of oversight
costs. Even though the response improved, the Cost Recovery
Section still had no assurance that all orders and decrees, which
require oversight billings, were being reported by the Remedial
and Removal Branches.
In the case of Maryland Sand and Gravel, the settlement document
required EPA to send regular billings to the responsible party
for oversight costs. Region 3 defines regular billing as the
anniversary date of the settlement document. Therefore, a
billing should have been sent by April 21, 1989. Maryland Sand
and Gravel was not billed as of January 3, 1990, the end of our
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fieldwork in Region 3. Cost Recovery Section personnel stated
that the billing had been overlooked.
Region 3 recognized the importance of ensuring that oversight
costs are promptly billed. Draft procedures outlining the roles
and responsibilities of Hazardous Waste Management Division,
Financial Management Section, and Office of Regional Counsel had
been prepared. However, a tracking system is needed to ensure
(1) all orders and decrees, which require oversight billings, are
identified and (2) oversight billings are sent out promptly. The
draft oversight procedures need to be finalized and signed by the
Director, Hazardous Waste Management Division, the Regional
Counsel, and the Comptroller to establish accountability for
following the procedures.
Late Payment Of Costs Due
Costs due to the Superfund Trust Fund were not collected prior to
the due date in 2 of 6 cases where payments were delayed. Since
the effective date of the settlement documents was in FY 1988,
Headquarters FMO, and not Region 3 FMO, was responsible for the
collection. See Exhibit 1 for details of each case.
Due Collection
Site Name Date Date
Saltville Waste Disposal 09/15/89 not collected
Harvey & Knott Drum Site 05/05/88 09/29/88
The lost interest to the Superfund Trust Fund due to delays in
collection for these two cases was $3,385.
Written Notification Of Effective Date Not Sent
The remaining case, where costs were not timely recovered, was
the result of miscommunication between Department of Justice
(Justice) and ORC. In the case of Palmerton Zinc Pile, the
settlement document was effective October 14, 1988. The first
installment of $50,000 was paid June 8, 1989, six months later.
However, the responsible party was not notified for 5 months that
the decree had been entered and payment was due. Justice thought
ORC notified the responsible party the case had been entered and
ORC thought Justice did. Therefore, the responsible party did
not know the settlement document had been entered and did not
know that costs were due. The lost interest to the Superfund
Trust Fund due to the delay in collection for this one case was
$2,034.
Delays in (1) sending accounting data to responsible parties, and
(2) collecting amounts due, slows the investment of cost recovery
15
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amounts due to the Superfund Trust Fund. We reviewed $3,466,103
of costs due. If prompt action was taken to collect the amounts
owed, the funds could have been invested by the Superfund Trust
Fund at an earlier date and additional interest of at least
$11,553 would have been earned.
Draft Report Recommendations
We recommended that the Regional Administrator, Region 3, require
the:
1. Hazardous Waste Management Division, the Office of Regional
Counsel, and the Financial Management Section to complete
and implement procedures for billing oversight costs.
2. Hazardous Waste Management Division to establish a tracking
system to (1) identify all orders and decrees which require
oversight billings and (2) promptly issue oversight
billings.
Regional Reply to Draft PIG Report
Region 3's response to our draft recommendations was as follows:
1. In FY 1989, representatives from the Office of Regional
Counsel, the Hazardous Waste Management Division and the
Office of the Comptroller developed written procedures for
billing oversight costs. However, the Region is aware that
these procedures are in draft form and will be reviewed and
finalized during FY 1990.
2. The Region believes that the establishment of another
tracking system within the Hazardous Waste Management
Division would be duplication of the system currently being
developed. The Comprehensive Environmental Response and
Liability Information System (CERCLIS) will track oversight
billings and ensure that the bill is issued in a timely
manner.
Auditor's Comments
The actions outlined by Region 3 in reply to our draft
recommendations, when implemented, will substantially correct the
deficiencies cited in our draft report. We did not review the
tracking system for oversight payments in CERCLIS because it had
not been implemented at the time of our review.
Recommendations
We recommend that the Regional Administrator ensure that the
planned corrective actions are completed.
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Exhibit 1
Page 1 of 3
(See page 13)
SCHEDULE OF SUPERFUND COST RECOVERY COLLECTIONS REVIEWED
AND REASONS FOR LOST INTEREST TO THE SUPERFUND TRUST FUND
Total
Value of
ID
70
32
42
42
36
F3
37
24
24
26
78
A3
F9
D9
Settlement Cost Due
Site Name Document EPA (1)
Middletown Road $
Harvey & Knott Drum
Maryland Sand & Gravel
Maryland Sand & Gravel
(Oversight)
Holder Chemical Corp
United Rigging & Hauling
Chisman Creek
Saltville Waste Disposal
Saltville Waste Disposal
(Oversight)
Palmerton Zinc Pile
Raymark Industries
Henderson Road
Clark L A & Son
Shriver's Corner
(Oversight)
Total §3
300,000
350,000
6,432
35,000
711,000
10,000
723,958
456,000
17,604
100,000
512,500
188,055
280,000
33,016
,723,565
$ 300,000
70,000
6,432
(est) 35,000
711,000
5,833
723,958
456,000
17,604
100,000
539,205
188,055
280,000
33.016
S3, 466, 103
Effective
Date of Date Lost
Settlement Costs Interest
Document 12) Paid (3)
03/01/88
04/20/88
04/20/88
04/21/89
04/29/88
07/25/88
08/24/88
09/15/88
10/14/88
02/21/89
05/10/89
07/17/89
09/11/89
03/30/88
$ 1,183
05/26/88
(not billed) 2,011
09/21/88
2,202
05/09/89 320
2,034
04/27/89
05/23/89
09/15/89
11/24/89 3,803
$11,553
Note
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
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Exhibit 1
Page 2 of 3
Notes;
1. This column represents costs owed to EPA as of January 3,
1990.
2. Headquarters was responsible for recording accounts
receivable and collecting the payments for settlement
documents effective prior to October 1, 1988. Region 3
Financial Management Office was responsible for all
settlement documents effective after the date.
3. Lost interest was calculated on uncollected monies from the
date costs were due until costs were paid.
4. Payment of $350,000 for the Harvey & Knott Drum Site was to
be paid in installments over 10 years. The first $35,000
payment was collected September 29, 1988. The second was
received on May 8, 1989.
5. The consent decree required regular billing of oversight
costs. The billing was to be sent on the anniversary date
of the decree, or April 21, 1989. As of January 3, 1990, .
the end of OIG fieldwork in Region 3, the billing had not
been sent. We calculated lost interest due to the delay in
oversight billing was $2,011, based on Region 3's estimated
oversight costs of $35,000.
6. According to the financial management system printout, the
account receivable of $711,000 for past costs for the Holder
Chemical Corporation was accurately recorded but not timely
established. The account receivable, established on June
15, 1988, was 47 days after the effective date of the
settlement document April 29, 1988. No payment had been
made for Holder because the responsible party has been in a
nursing home and was deemed incompetent. The property is
now the only asset of the corporation, which the state has a
lien against.
7. The consent agreement for United Rigging & Hauling requires
$10,000 to be paid in 24 monthly installments of $416.66
each plus interest. As of October 27, 1989, 14 payments
totalling $5,833.24 have been collected. The last
collection date was September 18, 1989.
8. The consent decree for Saltville Waste Disposal requires
costs of $456,000 be paid in two installments. The first
installment of $228,000 was collected timely. The second
installment was due September 15, 1989. Headquarters was
responsible for collecting the payment. The second
installment was not collected as of November 15, 1989, the
end of OIG fieldwork in Headquarters.
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Exhibit 1
Page 3 of 3
9. The consent decree for Saltville Waste Disposal stated that
oversight billings were to be sent on January 1 of each
year. The billing for FY 1989 was not sent until March 20,
1989, resulting in lost interest of $320.
10. The consent decree for Palmerton Zinc, effective October 14,
1988, stated that $100,000 was to be paid in two
installments of $50,000 each. The payment was due within 60
days, or by December 13, 1988. The payment was not made
until June 8, 1989, six months later. The payment was not
received promptly because the responsible party was not
timely notified of the effective date of the consent decree.
The second installment of $50,000 was due on October 14,
1989. The payment was received on October 13, 1989.
11. The consent decree for Raymark Industries required $512,500
costs, plus accrued interest, be paid. The decree stated
that the responsible parties had transferred $1,125,000
between April 1, 1988 and July 1, 1988 to the United States.
The money was deposited in an interest bearing escrow
account established by the Clerk of the District Court for
the Eastern District of Pennsylvania.
Within 10 days of entry of the decree, $512,500 plus accrued
interest was to be paid to the EPA for response costs. The
total amount collected was $539,205, which included $26,705
interest. The settlement document was effective February
21, 1989. The payment was made on April 27, 1989, about two
months later. The collection was not timely because the
Court collected the payment and delayed transferring the
collection amount to EPA. Lost interest was not computed in
this instance because the problem was with Justice and
beyond EPA's control.
12. The consent order for the Shriver's Corner Site required
oversight billing to be submitted at year end. The billing
for calendar year 1987 oversight costs was not timely
submitted. Lost interest is calculated from the date the
billing should have been made, January 1, 1988, until the
date the billing was made, September 11, 1989. The payment
was collected November 24, 1989.
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SUBJECT:
FROM:
TO:
Appendix 1
Page 1 of 2
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION III
841 Chestnut Building
Philadelphia, Pennsylvania 19107
Draft Report Audit on Superfund Cost
Recove ry-Accounts Pe ce ivable
Establishment and Collection
Audit Report No. ElSJF9-05-027j
DATE: FEB 2 0 1900
Edwin B. Erickson
Regional Administrator
(3RAOO)
Anthony C. Carrollo
Divisional Inspector General for Audits
Northern Division
I am transmitting to you the Region's response to the above
referenced report on Superfund Cost Recovery receivables. Based on
the Audit Management Section's (AMS) review of the attached comments
from the Hazardous Waste Management Division and the Office of the
Regional Comptroller, the Region's response to the audit report recom-
mendations is as follows:
Conduct an Internal Control Peview on the Recording of Receivables
The Region believes that the finding on the Regional recording of
accounts receivables is overstated because it includes those actions
that Headquarters was responsible for prior to fiscal year 1989.
If those actions are eliminated from the review, no material weakness
in Region Ill's internal controls would be found. The Region believes
that an internal control review is not justified because existing
procedures adequately insure the recording and recovery of all Trust
Fund receivables.
Complete and Implement Procedures for Billing Oversight Costs
In Fiscal Year 1989, representatives from the Office of Regional
Counsel (ORC), the Hazardous Waste Management Division and the Office
of the Comptroller developed written procedures for billing oversight
costs. However, the Region is aware that these procedures are in
draft form and will be reviewed and finalized during fiscal year 1990.
Establish a Tracking System Within Hazardous Waste Management Division
The Region believes that the establishment of another tracking system
within the Hazardous Waste Management Division would be a duplication of
the system currently being developed. The Comprehensive Environmental
Response and Liability Information (CERCLIS) will track oversight
billings and ensure that the bill is issued in a timely manner.
20
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Appendix 1
Page 2 of 2
I hone that these comments have been responsive and will be useful
in providing a more accurate description of the report issues, findings
and recommendations. If your staf^ needs further information or clari-
fication, please have them contact Bob Picollo at FTS 597-3900.
Attachments (2)
cc: P. Ronald Gandolfo (3AIOO)
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Appendix 2
DISTRIBUTION
Region 3
Regional Administrator
Regional Audit Resolution Officer
Office of Regional Counsel
Headquarters
Inspector General (A-109)
Assistant Administrator for Administration and
Resources Management (PM-208)
Office of General Counsel (LE-130)
Assistant Administrator for Solid Waste and
Emergency Response (OS-100)
Assistant Administrator for Enforcement and
Compliance Monitoring (LE-133)
Comptroller (PM-225)
Agency Followup Official (PM-225)
ATTN: Director, Resource Management Division,
Agency Followup Official (PM-208)
Director, Financial Management Division (PM-226)
Associate Administrator for Regional Operations (A-101)
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