Leaking Underground Storage Tank Program: Idaho Department of Health and Welfare, Division of Environmental Quality

Office of Inspector General

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INSPECTOR GENERAL DIVISION WESTERN AUDIT DIVISION
CONDUCTING THE AUDIT: SEATTLE BRANCH OFFICE
REGION COVERED: REGION 10
PROGRAM OFFICE INVOLVED: WATER DIVISION
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1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
t0 OFFICE OF THE INSPECTOR GENERAL FOR AUDITS
"'PBOlfc WESTERN DIVISION
75 HAWTHORNE STREET
19TH FLOOR, MAIL CODE M
SAN FRANCISCO, CA 94105-3901

September 28, 1994

MEMORANDUM

SUBJECT: Report on Leaking Underground Storage Tank Program,
Idaho Department of Health and Welfare, Division of
Environmental Quality
Audit Report No. E3NLB3-10-0151-4100563

FROM: Truman R.
Divisional Inspector General for Audit
Western Division

TO: Chuck Clarke
Regional Administrator
EPA, Region 10

Attached are seven copies of the subject audit report. The
overall objectives of our audit were to determine whether:

Costs claimed under cooperative agreement no. L000536-01
were allowable, allocable, and reasonable; and

Idaho was in compliance with the requirements of
cooperative agreement no. L000716-01.

The report contains important findings and recommendations
regarding the subject area.

Since the report and recommendations are directed to your office,
we have not distributed copies of the report to the Administrator
of the Idaho Division of Environmental Quality or other State
officials responsible for administration of the LUST program in
Idaho. However, we have provided sufficient copies to your
office for such a distribution, if you wish to do so.

Action Required

In accordance with EPA Order 2750, you, as the action official
are required to provide this office a written response to the
audit report within 90 days of the final audit report date. For
corrective actions planned, but not completed by your response
date, reference to specific milestone date will assist this
office in deciding whether to close this report. We have no
objections to the further release of this report to the public.
Printed on Recycled Paper
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This audit report contains findings that describe problems the
Office of the Inspector General has identified and corrective
actions the OIG recommends. This audit report represents the
opinion of the OIG. Final determinations on matters in this
audit report will be made by EPA managers in accordance with
established EPA audit resolution procedures. Accordingly, the
findings described in this audit report do not necessarily
represent the final EPA position, and are not binding upon EPA in
any enforcement proceeding brought by EPA or the Department of
Justice.

Should you have any questions about this report, please contact
me or Charles Reisig of our Seattle Office at (206) 553-4032.

Attachments
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Idaho's Leaking Underground Storage Tank Program
TABLE OF CONTENTS

EXECUTIVE SUMMARY i
PURPOSE i
BACKGROUND i
PRINCIPAL FINDINGS ii
Financial iii
Performance iii
RECOMMENDATIONS ' v
IDHW COMMENTS vi
OIG EVALUATION vi

CHAPTER 1 1
INTRODUCTION 1
PURPOSE 1
BACKGROUND 1
SCOPE AND METHODOLOGY 2
Financial 2
Performance 3
PRIOR AUDIT COVERAGE 4

CHAPTER 2 5
RESULTS OF FINANCIAL AUDIT 5
AUDITOR'S OPINION 5
RECOMMENDATION 6
IDHW COMMENTS AND OIG EVALUATION 6

CHAPTER 3 9
REPORT ON INTERNAL CONTROLS AND COMPLIANCE 9
INTERNAL CONTROLS 9
IDHW Personnel Costs Were Not Sufficiently Supported 9
Non-Personnel Expenditures Were Unsupported 12
COMPLIANCE 14
IDHW's Procurement Process Needs Improvement 14
RECOMMENDATIONS 15
IDHW COMMENTS AND OIG EVALUATION 16

CHAPTER 4 17
GREATER EMPHASIS IS NEEDED FOR HIGHER PRIORITY LUST SITES 17
BACKGROUND 17
OVERSIGHT NEEDED IMPROVEMENT 18
South Western Idaho Region 19
Northern Idaho Region 21
MANAGEMENT REPORTS WERE INACCURATE 23
NOT ALL SITES WERE PRIORITIZED 25
RECOMMENDATIONS 25
IDHW COMMENTS AND OIG EVALUATION 26
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Idaho's Leaking Underground Storage Tank Program
CHAPTER 5 28
COST RECOVERY PROCEDURES NEED IMPROVEMENT 28
BACKGROUND 28
ALL FUND COSTS WERE NOT IDENTIFIED FOR RECOVERY 29
DOCUMENTATION OF COST RECOVERY SETTLEMENTS WAS
INADEQUATE 30
INTEREST ASSESSMENTS WERE NOT MADE 31
WEAK PROCEDURES AFFECT COST RECOVERY 31
RECOMMENDATIONS 32
IDHW COMMENTS AND OIG EVALUATION - 33

CHAPTER 6 34
QUARTERLY STARS REPORTS WERE INACCURATE 34
BACKGROUND 34
INFORMATION NEEDS TO BE PROPERLY RECONCILED AND COMPILED . . . . 35
INFORMATION WAS UNTIMELY 36
RECOMMENDATIONS 36
IDHW COMMENTS AND OIG EVALUATION 36

APPENDICES 38
I IDHW RESPONSE TO AUDIT REPORT 38
H - ABBREVIATIONS 53

DISTRIBUTION 54
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Idaho's Leaking Underground Storage Tank Program
EXECUTIVE SUMMARY
PURPOSE
The Office of Inspector General, Western Audit Division, has
completed an audit of EPA's Leaking Underground Storage Tank
(LUST) Cooperative Agreements with the State.of Idaho. The
purpose of the review was to determine whether the State of Idaho
had adequate accountability over the LUST Trust Funds and was in
compliance with the requirements of the cooperative agreements.
Our specific objectives were to determine whether:

• Costs claimed were allowable, allocable, and reasonable
under the LUST cooperative agreements;

• The state was in compliance with cooperative agreement
requirements;

• The state's site cleanup priorities were appropriate;
and

• The state's data input into the Strategic Targeted
Activities for Results System (STARS) was accurate.

BACKGROUND

In 1984 and 1986 Congress passed Underground Storage Tank (UST)
legislation which is under Subtitle I of the Resource
Conservation and Recovery Act (RCRA). The Superfund Amendments
and Reauthorization Act of 1986 (SARA), which amended RCRA,
established the LUST Trust Fund to finance the cleanup of
petroleum releases from USTs.

Subtitle II of RCRA authorizes EPA to provide LUST Trust Funds to
states for the cleanup of LUSTs through cooperative agreements.
LUST cooperative agreements are agreements between EPA and states
that provide the basis which EPA oversees and manages the use of
LUST Trust Funds. The agreements identify the amount of funds
that have been allocated to each state and establish LUST Program
performance requirements. The states may use the Trust Fund to
pay for costs of site corrective actions, enforcement actions
undertaken to get owners and operators (responsible parties) to
take corrective actions, cost recovery of Trust Fund
expenditures, and reasonable and necessary administrative
expenses directly related to these activities.

The audit evaluated the two most recently completed LUST
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Idaho's Leaking Underground Storage Tank Program
cooperative agreements between EPA and the State of Idaho. We
conducted a financial and compliance audit of LUST Cooperative
Agreement No. L000536-01. This agreement was selected because it
was the most current agreement where the state had submitted a
final financial status report (FSR). We conducted a performance
audit of LUST Cooperative Agreement No. L000716-01 because the
agreement was the most recently completed agreement, and as a
result, represented the state's most current activities.

EPA Region 10 awarded LUST Cooperative Agreement No. L000536-01
to the Idaho Department of Health and Welfare (IDHW) on
April 12, 1991. The purpose of the agreement was to fund Idaho's
LUST Program for the period April 12, 1991 to December 31, 1992.
The agreement established a total project cost of $1,095,739 with
EPA funding 90 percent.

EPA Region 10 awarded LUST Cooperative Agreement No. LO00716-01
to IDHW on July 28, 1992. The agreement's purpose was to provide
funding for Idaho's LUST Program for the period July 28, 1992 to
December 31, 1993. The total project cost of the agreement was
$1,185,101. EPA provided funding for 90 percent.

Idaho's Lust Program is administered by the Idaho Department of
Health and Welfare, Division of Environmental Quality,
Remediation Bureau. IDHW operates five regional offices that
cover different geographical areas of the state. These regional
offices are allocated LUST Trust Funds and assist the Remediation
Bureau with administration of the program. As of the end of
fiscal 1993, IDHW reported that out of 689 LUST sites within the
state, cleanups had been initiated on 614 sites and 350 had been
completed.

PRINCIPAL FINDINGS

We conducted a financial and compliance audit of EPA's LUST
cooperative agreement with the State of Idaho covering the period
April 12, 1991 through December 31, 1992. We also conducted a
performance audit of the state's LUST cooperative agreement with
EPA covering the period July 28, 1992 through December 31, 1993.
Overall, we found that IDHW had made progress in the remediation
of many LUST sites. However, we found that IDHW needed to
improve its documentation of costs claimed and make improvements
in other areas of its LUST Program. The audit results for these
areas are summarized in the following paragraphs.
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Idaho's Leaking Underground Storage Tank Program
Financial

Unsupported Costs

The State of Idaho claimed costs totaling $927,787 under LUST
Cooperative Agreement No. L000536-01 covering the period from
April 12, 1991 through December 31, 1992. We were unable to
express an opinion on the allowability of the costs claimed
because IDHW's accounting procedures were not sufficient to
determine whether LUST Trust Funds had been used in accordance
with applicable Federal statutes. As a result, we concluded that
$711,906 of the $927,787 total costs claimed under the
cooperative agreement were unsupported.

Internal Controls Weaknesses and Non-Compliance With Federal
Regulations

We found weaknesses in the State of Idaho's system of internal
controls for LUST Trust Fund expenditures claimed under LUST
Cooperative Agreement No. L000536-01. Furthermore, we found that
the state did not comply with contract administration
requirements specified by 40 Code of Federal Regulations (CFR),
Part 31.

A sample of 25 payroll transactions showed that 17 were either
based on budget allocations rather than actual hours worked on
the LUST Program or the distributions were different than the
time recorded on the employees' timesheets. A sample of 50 non-
personnel expenditures showed: (i) 26 of the expenditures were
not supported by documentation that the costs were allocable to
the LUST Program and (ii) several instances where IDHW did not
require contractors to comply with specific terms of the
contracts. As a result, a significant portion of the costs
claimed are questioned as unsupported.

These conditions occurred because IDHW did not have procedures to
ensure that payroll costs were distributed according to actual
time worked, documentation for non-personnel costs to support the
allocability of direct charges to the LUST Program, and
contractors are required to adhere to terms of contracts.

Performance

The cooperative agreements with IDHW included requirements for
the state to maintain a LUST site cleanup priority list, pursue
cost recovery of LUST Trust Fund expenditures from responsible
parties, and to submit quarterly STARS reports. We found that
the state had performed these activities. However, we concluded
that IDHW needed to place more emphasis on the remediation of
higher priority sites, improve procedures for cost recovery, and

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Idaho's Leaking Underground Storage Tank Program
improve the accuracy of STARS reporting.

Greater Emphasis Is Needed For Higher Priority LUST Sites

Although IDHW had made substantial progress in addressing the
remediation of LUST sites, sufficient attention had not been
given to some LUST sites that posed the greatest threat to human
health and the environment. A judgement sample of 23 sites
designated either as high priority or as contaminating
groundwater disclosed that oversight of responsible party
remediation for 9 of the sites needed improvement, management
reports identifying remediation status of the sites were not
accurate, and cleanup priority rankings had not been assigned to
all sites. In our opinion, these conditions occurred because
IDHW had not placed adequate emphasis on ensuring that LUST sites
posing the most significant threat to human health and the
environment were remediated as soon as possible.

Cost Recovery Procedures Need Improvement

IDHW's procedures used for the recovery of LUST Trust Fund
expenditures need improvement. During the period fiscal 1993
through the first quarter fiscal 1994, cost recovery settlements
involving four LUST sites were completed. Although IDHW had
incurred Trust Fund expenditures totaling $198,000 for the sites,
only $189,000 was identified for cost recovery purposes. IDHW
did not document why it accepted reduced cost recovery
settlements totaling $144,000. Also, IDHW did not attempt to
charge interest on LUST Trust Fund recovery amounts and did not
adequately administer a contract which was funded with LUST Trust
Funds.

These conditions occurred because Remediation Bureau personnel:
(i) did not accurately identify all LUST Trust Fund expenditures;
(ii) did not follow EPA documentation requirements; (iii) were of
the opinion that interest assessments would adversely affect the
cost recovery process and corrective actions; and (iv) made
contract revisions without the use of a written contract
amendment. As a result, IDHW might not have maximized its cost
recoveries from responsible parties.

Quarterly STARS Reports Were Inaccurate

Quarterly STARS reports submitted to EPA Region 10 did not
accurately report LUST Program activity during fiscal 1993. The
number of confirmed releases were understated by 23 (16 percent),
cleanups initiated were overstated by 20 (18 percent), and
cleanups completed were understated by 42 (57 percent). In
addition, the quarterly reports included LUST Program activity
that had occurred prior to the reporting periods. The

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Idaho's Leaking Underground Storage Tank Program
inaccuracies occurred because not all performance data had been
correctly compiled by the computer system used to maintain LUST
site information, information in the quarterly reports was not
reconciled to the supporting records, and some regions reported
LUST site activity late. The erroneous reporting resulted in EPA
managers receiving inaccurate performance information on the
IDHW's LUST Program during fiscal 1993.

RECOMMENDATIONS
»
Our detailed recommendations follow the findings discussed in
Chapters 2 through 6. In summary, we recommend that the Regional
Administrator require IDHW to:

• Either provide support for costs claimed under
cooperative agreement no. LO00536-01 and make a
financial adjustment for costs not supported, or obtain
a waiver for deviation from Federal requirements for
such supporting documentation.

• Charge costs to cooperative agreements based on actual
costs and establish procedures which ensure that
claimed expenditures are allowable and allocable.

• Ensure that LUST site oversight activities are based on
assigned priorities and that priorities are assigned to
all sites.

• Ensure that Consent Agreements or Schedules and
Criteria are established for significantly contaminated
LUST sites as required by Idaho's Water Quality
Standards and Wastewater Treatment Requirements.

• Ensure that each cost recovery claim include all Trust
Fund expenditures associated with the LUST site and
that cost recovery settlements are documented.

• Implement procedures which ensure that LUST site
activity information maintained in the LUST site data
base is reconciled to source documents at least
quarterly.
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Idaho's Leaking Underground Storage Tank Program
IDHW COMMENTS

We provided IDHW with a copy of our draft report on July 29, 1994
and we received a revised response dated September, 22, 1994. An
exit conference was held with IDHW on September 8, 1994.

IDHW did not agree with the costs questioned as unsupported and
our conclusions on internal controls. IDHW disagreed because it
believed that its accounting procedures for both personnel and
non-personnel costs were in compliance with Federal requirements.

IDHW also disagreed with our conclusion that more emphasis should
be placed on higher priority LUST sites. IDHW disputed our
conclusion mainly because it believed that: (i) prioritizing LUST
sites with responsible parties was not a Federal requirement, and
(ii) its priority system was a numerical guide, not a work
allocation system.

IDHW agreed with our conclusions and recommendations pertaining
to its cost recovery and STARS reporting procedures.

A summary of IDHW's comments follow the recommendations in
Chapters 2 through 6. Appendix I contains IDHW's detailed
comments.

DIG EVALUATION

Our position regarding costs questioned remains unchanged.
IDHW's expenditure documentation was insufficient to support that
personnel and non-personnel costs were actually incurred for the
LUST Program. We believe that the evidence obtained during the
audit supports our conclusions on the costs questioned as
unsupported.

We believe IDHW could enhance the effectiveness of its LUST
Program by placing more emphasis on the oversight of the
remediation of higher priority sites. IDHW had a policy of
prioritizing LUST sites based on risk to human health and the
environment, but we found that IDHW had not pursued sufficient
remediation actions for some high priority sites.

Additional DIG comments relating to IDHW's response are included
in Chapters 2 through 6.
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Idaho's Leaking Underground Storage Tank Program
CHAPTER 1

INTRODUCTION

PURPOSE

The Office of Inspector General, Western Audit Division, has
completed an audit of EPA's Leaking Underground Storage Tank
(LUST) Cooperative Agreements with the State'of Idaho's
Department of Health and Welfare (IDHW). The purpose of the
review was to determine whether the IDHW had adequate
accountability over the LUST Trust Funds and was in compliance
with the requirements of the cooperative agreements. Our
specific objectives were to determine whether:

• Costs claimed were allowable, allocable, and reasonable
under the LUST cooperative agreements;

• The state was in compliance with cooperative agreement
requirements;

• The state's site cleanup priorities were appropriate;
and

• The state's data input into the Strategic Targeted
Activities for Results System (STARS) was accurate.

BACKGROUND

Subtitle II of SARA authorizes EPA to provide LUST Trust Funds to
states for the cleanup of LUSTs through cooperative agreements.
LUST cooperative agreements are agreements between EPA and states
that provide the basis which EPA oversees and manages the use of
LUST Trust Funds. The agreements identify the amount of funds
that have been allocated to each state and establish LUST Program
performance requirements. The states may use the Trust Fund to
pay for costs of site corrective actions, enforcement actions
undertaken to get owners and operators (responsible parties) to
take corrective actions, cost recovery of Trust Fund
expenditures, and reasonable and necessary administrative
expenses directly related to these activities.
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Idaho's Leaking Underground Storage Tank Program
The audit evaluated the two most recently completed LUST
cooperative agreements between EPA and the State of Idaho. We
conducted a financial and compliance audit of LUST Cooperative
Agreement No. L000536-01. This agreement was selected because it
was the most current agreement where the state had submitted a
final financial status report (FSR). We conducted a performance
audit of LUST Cooperative Agreement No. L000716-01 because the
agreement was the most recently completed agreement, and as a
result, represented the state's most current activities.

EPA Region 10 awarded LUST Cooperative Agreement No. L000536-01
to the IDHW on April 12, 1991. The purpose of the agreement was
to fund Idaho's LUST Program for the period April 12, 1991 to
December 31, 1992. The agreement established a total project
cost of $1,095,739 with EPA funding 90 percent.

EPA Region 10 awarded LUST Cooperative Agreement No. L000716-01
to IDHW on July 28, 1992. The agreement's purpose was to provide
funding for Idaho's LUST Program for the period July 28, 1992 to
December 31, 1993. The total project cost of the agreement was
$1,185,101. EPA provided funding for 90 percent.

SCOPE AND METHODOLOGY

Financial

We conducted a financial and compliance audit of the LUST
Cooperative Agreement No. L000536-01. We conducted the field
work from January through May 1994 at the offices of IDHW located
in Boise and Twin Falls, Idaho.
\

We conducted the audit in accordance with the Government Auditing
Standards for financial related audits issued by the Comptroller
General of the United States. Accordingly, the examination
included such tests of the accounting records and other auditing
procedures as we considered necessary in the circumstances.

Independent auditors were in the process of conducting the Single
Audit of IDHW for fiscals 1991, 1992 and 1993 during the time of
our audit. At the time of our audit, the auditors had completed
field work and were in the process of issuing a draft report. We
reviewed their working papers on internal controls and Federal
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Idaho's Leaking Underground Storage Tank Program
compliance. We relied on the auditor's conclusion that IDHW's
accounting system taken as a whole was adequate with respect to
the processing of transactions.

As part of our review, we obtained an understanding of IDHW's
internal control structure used in administering Federal
financial assistance programs and assessed the control risk in
order to plan our review and to determine the nature, timing, and
extent of our testing. The intent of this assessment was to
evaluate the existing internal controls to determine whether they
were adequate to prevent or minimize the risk of errors occurring
and not being detected by management in a timely manner.

To determine the reasonableness, allowability, and allocability
of the costs claimed under the cooperative agreement, we
judgmentally selected transactions for testing; for personnel
transactions we selected 25 and for non-personnel transactions we
selected 50. We reviewed the source documentation for all
sampled transactions and for some transactions, we interviewed
program personnel.

The results of our financial and compliance review of the
cooperative agreement are presented in Chapters 2 and 3 of this
report.

Performance

We conducted a performance audit of selected elements of LUST
Cooperative Agreement No. L000716-01. We performed this audit
according to Government Auditing Standards for performance audits
issued by the Comptroller General. Our field work was conducted
from January through May 1994 at IDHW's offices located in Boise
and Coeur d'Alene, Idaho. The scope of our work was limited to
activities under the LUST cooperative agreement and covered
management procedures in effect through May 1994.

We reviewed records maintained by IDHW's Remediation Bureau and
two of the state's five regional offices. The scope of our
review generally covered reports and records prepared from
October 1, 1992 through September 30, 1993. The records reviewed
included: (i) LUST Cooperative Agreement No. L000716-01,
(ii) LUST Program quarterly STARS reports, (iii) LUST site status
reports, (iv) LUST site files, and (v) LUST Trust Fund cost
recovery records.

The site files that we reviewed were judgmentally selected. We
selected sites which IDHW had reported as higher priority sites
and sites which were reported to be contaminated groundwater
sites.
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Idaho's Leaking Underground Storage Tank Program
The results of our performance review of this cooperative
agreement are presented in Chapters 4 through 6 of this report.

PRIOR AUDIT COVERAGE

A prior audit of IDHW's Cooperative Agreements for the Superfund
Program was conducted by Conrad & Associates CPA's and results
were included in Office of Inspector General Report
No. P5BGL1-10-0046-2100612. The report identified five internal
control and compliance issues that needed corrective action. The
issues concerned: (i) inequitable allocation of employee paid
absences; (ii) insufficient justifications for awarding
contracts; (iii) deficient procurement procedures relating to
cost and price analysis; (iv) deficient letter-of-credit
procedures; and (v) deficient property management procedures.

During our audit, we performed follow up work and determined that
corrective action had been implemented for the five issues.
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Idaho's Leaking Underground Storage Tank Program
CHAPTER 2

RESULTS OF FINANCIAL AUDIT
AUDITOR'S OPINION
We were unable to opine on the allowability of the costs claimed
under Cooperative Agreement No. L000536-01 because the IDHW
accounting procedures were not sufficient to determine that funds
had been used in accordance with applicable Federal statutes.
The results of our testing on the allowability of the costs
claimed are summarized in the following schedule and footnotes.

LUST COOPERATIVE AGREEMENT
No. L000536-01

Schedule of Costs Claimed, Questioned,
and Unsupported
Cost
Category
Personnel
Travel
Capital Outlay
Contractual
Other Operating
Indirect
TOTAL
EPA Share
Costs
Claimed
(Note 1)
$513,259
20,315
17,252
215,881
33,270
127.810
$927.787
$835.008
Costs Questioned ( Note 2)
Ineligible
$ -0-
-0-
-0-
-0-
-0-
-0-
$ -0-
$ -0-
Unsupported
$513,259
20,315
17,252
-0-
33,270
127,810
$711.906
$711.906
Notes
3
4
4

4
5
Footnotes to the schedule

Note 1. Costs claimed were determined from the FSRs submitted
by IDHW for the period April 12, 1991 to
December 31, 1992. The state's 10 percent match was
applied to the Contractual Cost Category.
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Idaho's Leaking Underground Storage Tank Program
Note 2. Costs questioned by the Office of Inspector General are
questioned because they are:

a. Ineligible. Incurred and claimed contrary to a
provision of law, regulation, cooperative
agreement, or other document governing the
expenditure of funds.

b. Unsupported. Not supported by adequate
documentation and/or have not been approved by
responsible program officials'.

Note 3. Total claimed personnel costs are shown as unsupported
because IDHW charged a significant amount of personnel
costs (direct time and paid absences) to the LUST
Program based on budget allocations and not actual time
worked. (See Chapter 3 for details of finding.)

Note 4. IDHW charged a significant amount of non-personnel
costs for travel, capital outlay, and other operating
expenditures without documenting the allocability to
the LUST Program. (See Chapter 3 for details of
finding.)

Note 5. Indirect costs are shown as unsupported because while
IDHW used an acceptable indirect cost rate, the rate
was applied to personnel costs which we are
questioning.

RECOMMENDATION

We recommend that the Regional Administrator require IDHW to
provide support for costs claimed or recover the Federal share of
the cooperative agreement funds questioned. In the event IDHW is
unable to provide adequate support for all costs claimed, IDHW
may want to seek a deviation from the Federal requirements for
such supporting documentation (40 CFR, Part 31.22(b)).

IDHW COMMENTS AND OIG EVALUATION

IDHW Comments

IDHW disputed our conclusions regarding its accounting procedures
and their sufficiency to identify and support specific direct
costs charged to the LUST Program. IDHW believes its procedures,
as detailed in its response, do provide compliance with 40 CFR,
Part 31.20. Specifically, its position is that multiple levels
of review are adequate to support the costs claimed. Therefore,
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Idaho's Leaking Underground Storage Tank Program
it believes all non-personnel costs claimed are supported and
should be allowed.

IDHW also provided comments on three examples that are discussed
in Chapter 3 under the heading Not Related to LUST Program.

Training costs of $258.89 where the supporting documentation
indicated direct benefit to other than LUST Programs, should
be allowable because the individual receiving the training
is responsible for auditing both Superfund and LUST
documentation.

Air fare costs of $289.00 where the purpose of travel was
not documented and the employee charged time during the
period of travel to another program (UST) should be allowed
because States are often forced to fund travel costs to
these activities through variable means. Travel could
easily be funded out of either program. The UST Program had
available personnel dollars and the LUST Program had
operating dollars, therefore, participation costs were
allocated in this manner and should be allowed.

A set of law codes where 20 percent of the costs ($10.47)
were charged to the LUST Program is maintained in the
Attorney General's office, is available for UST/LUST Program
staff utilization, and is available by check-out to any IDHW
employee.

OIG Evaluation

The OIG position remains unchanged. While we believe IDHW's
accounting system has the capability to provide adequate support
for costs claimed, we found that transaction documentation was
insufficient to support that the costs were actually incurred for
the LUST Program. As described in Chapter 3, the supporting
documentation (invoices and travel vouchers) did not identify the
costs specifically with the LUST Program, as required by OMB
Circular A-87.

IDHW's response does not describe how allocability of costs to
the LUST Program will be established in the transaction
documentation. IDHW's response describes a process for the
review, approval, and payment for non-personnel transactions.
This process appears adequate to ensure that goods and services
were received by IDHW and that payment should be made. However,
the response does not adequately describe how the costs are
identified with and charged to a particular cost objective. A
particular concern is that IDHW's response states that a clerical
staff person is the one who determines necessary accounting
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Idaho's Leaking Underground Storage Tank Program
information which is done after all of the management and
supervisory approvals have been obtained.

As we describe in Chapter 3, the documentation for claimed
training costs of $258.89 stated that the purpose of the training
was for programs other than the LUST Program. Therefore, based
upon that documentation, the costs should not have been charged
to the Lust Program. If the training is of benefit to more than
one cost objective as stated in IDHW's response, then the cost
should have been recorded as an indirect cost in accordance with
the provisions of OMB Circular A-87.

With reference to air fare costs of $289.00, OMB Circular A-87
defines direct costs as those that can be identified specifically
with a particular cost objective. Where no travel purpose is
documented and the employee charged time to another Federal
program, the travel costs should not have been charged to the
LUST Program. Additionally, IDHW's arguments for charging costs
to the program - because funds were available - conflicts with
OMB Circular A-87, Attachment A, paragraph C,2,b which states
that any cost allocable to a particular grant or cost objective
may not be shifted to other Federal grant programs to overcome
fund deficiencies.

The description in IDHW's response for the purchase of a set of
law codes meets the definition of an indirect cost. OMB Circular
A-87 defines indirect costs as those (a) incurred for a common or
joint purpose benefiting more than one cost objective, and (b)
not readily assignable to the cost objectives specifically
benefitted. By stating that these codes are maintained by the
Attorney General's office for all IDHW employees identifies this
is an indirect cost and not for the direct benefit of the LUST
Program.

We believe that IDHW's arguments relating to the three items
above provide additional support that those costs should not have
been charged as direct costs to the LUST Program and that they
correctly should be reclassified in our report from the category
of costs questioned - unsupported to costs questioned -
ineligible. We have not reclassified them in our final report
because of the relatively small amounts involved.
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Idaho's Leaking Underground Storage Tank Program
CHAPTER 3

REPORT ON INTERNAL CONTROLS AND COMPLIANCE

INTERNAL CONTROLS

The management of the IDHW is responsible for establishing and
maintaining an internal control structure used in administering
Federal financial assistance programs. In fulfilling this
responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of the
control procedures. The objectives of an internal control
structure are to provide management with reasonable, but not
absolute assurance that the expenditures claimed under Federal
financial assistance programs are in accordance with Federal cost
principles.

We noted matters involving the internal control structure and its
operation that we consider to be a reportable condition.
Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation
of the internal control structure that, in our judgement, could
adversely affect the entity's ability to record, process,
summarize, and report financial data consistent with the
assertions of management in the program statements.

IDHW Personnel Costs Were Not Sufficiently Supported

We cannot opine on claimed personnel costs because the accounting
practices of charging direct time and paid absences were not
based upon actual costs to the LUST Program. Therefore, claimed
costs for personnel expenditures under Cooperative Agreement
No. L000536-01 are questioned as unsupported in the amount of
$513,259-

Most of the employees in our payroll sample were in split-funded
positions, i.e., pay and benefits were funded from two or more
budgetary allocations. IDHW policy required each employee to
complete a timesheet to record actual time worked to the
appropriate program. We found that some IDHW employees
distributed direct time and paid absences based on budget
allocations. In addition we found that some employees'
timesheets did not support the payroll distributions.

IDHW is responsible to account and report charges to the LUST
Program in accordance with laws and regulations. IDHW's failure
to ensure that personnel costs were charged based on actual
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Idaho's Leaking Underground Storage Tank Program
effort to the LUST Program and were adequately supported resulted
in questioned costs and jeopardizes future funding.

Direct Time

IDHW often charged payroll costs based on budget allocations
rather than actual time worked on the LUST Program and did not
ensure that timesheets supported payroll distributions. We
judgmentally selected a random sample of 25 payroll transactions
out of 802 to test IDHW's procedures for charging personnel costs
to the LUST Program. We reviewed daily timesheets and payroll
distributions to determine if payroll costs were reasonable,
allowable, and allocable.

For the 25 payroll transactions that we reviewed, we found that:
(i) payroll distributions for 8 transactions were supported by
timesheets; (ii) 4 transactions related to the same employee
whose payroll distributions were supported by timesheets, but
appeared to be prepared based upon budget, not actual time worked
(i.e. because the same hours were distributed to the same
programs every day over a 6-month period that we reviewed);
(iii) payroll distributions for 8 transactions were different
from the time recorded on the employees' timesheets; and
(iv) payroll distributions for 5 transactions could not be
reconciled to timesheets because the calculations and methodology
for distribution of paid absences was not documented in the
payroll records and IDHW staff could not explain how the
distributions were made. Additional comments relating to the
transactions described in (iii) and (iv) above are discussed
below.

Payroll Distributions Not Supported. Daily timesheets did not
support the payroll cost distribution for eight of the sample
transactions:

• For two different pay periods for one employee, no
hours were recorded to the LUST Program on the daily
timesheet but 5.6 hours were distributed to the program
for each pay period.

• For three different pay periods for another employee,
varying hours were recorded to the LUST Program on the
daily timesheet but time was distributed in the same
percentage to two different programs.

• The daily timesheet showed the time was for a generic
activity called "clerical" for two transactions where
payroll costs were charged to three programs.
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• No direct time was recorded to LUST on the daily
timesheet for one transaction but 6 hours were
distributed to the program.

Payroll Distribution Could Not be Reconciled to Timesheets. For
five transactions sampled, payroll distributions could not be
reconciled to the employees' timesheets because the payroll
records did not show how paid absences were allocated. For
example, a timesheet indicated 3 direct hours to the LUST
Program, however, 8 hours were distributed to LUST. This
employee had recorded 40 hours of annual leave on the daily
timesheet, but the payroll records did not document whether the
additional 5 hours was a share of the annual leave, and, if so,
the calculations and methodology for the 5 hours charged to the
LUST Program.

40 CFR, Part 31.22(b), cites the criteria for determining
allowable cost under the LUST cooperative agreement. This
regulation provides that OMB Circular A-87 is applicable. OMB
Circular A-87, Attachment B, states that the cost of compensation
is allowable only to the extent that payrolls are supported by
time and attendance records for individuals. Salaries and wages
of employees chargeable to more than one grant program or other
cost objective will be supported by appropriate time distribution
records. The method used should produce an equitable
distribution of time and effort.

During the audit, we asked several staff members from three of
IDHW's regional offices to explain inconsistencies in recording
daily timesheets and the basis for distribution of time among
different programs. They all indicated that they distributed
their time on the basis of budget allocations. Some IDHW staff
stated their timesheets reflect how their position was budgeted
and not necessarily on activities where time was spent. They
felt it was proper to charge by budget allocations because they
believed it closely reflects the actual activity. Additionally,
IDHW officials stated that they believed it was proper for
employees who are split-funded between the UST/LUST Programs to
charge their time to either program because the two programs are
similar.
Paid Absences

IDHW was charging paid absences of employees to the LUST Program
based on budget allocations rather than pursuant to an equitable
approved leave plan. For the 12 employees in our payroll sample
who had charged paid absences to more than one program, we
reviewed daily timesheets and time distributions to determine if
IDHW allocated leave according its policy.

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IDHW's "Charging of Paid Absences" policy states that the
employee is to distribute the costs of leave on the same ratio as
the work performed in the biweekly pay period or in certain
cases, charge the leave on the basis of work performed over the
last month, whichever is reasonable.

For 10 of the 12 employees reviewed, we found that paid absences
were distributed based on budget allocations. As discussed
earlier under the Direct Time Section of this Chapter, IDHW staff
felt that it was proper to charge by budget because they believed
that it closely reflects actual activity.

OMB Circular A-87, Attachment B, Section B-13 states that,
"employee benefits in the form of regular compensation paid to
employees during periods of authorized absences from the job,
such as for annual leave, sick leave, court leave, military
leave, and the like, if they are (1) provided pursuant to an
approved leave system; and (2) the cost thereof is equitably
allocated to all related activities, including grant programs"
are allowable to the extent that total compensation for employees
is reasonable.

Non-Personnel Expenditures Were Unsupported

We cannot opine on claimed non-personnel costs because the
accounting procedures were not adequate to establish that the
funds were used in support of the LUST Program. Therefore,
claimed costs under Cooperative Agreement No. L000536-01 for
travel, capital outlay, and other operating expenditures are
questioned as unsupported in the amounts of $20,315, $17,252, and
$33,270, respectively.

IDHW is responsible to account and report charges to the LUST
Program in accordance with laws and regulations. IDHW's failure
to adequately document the allocability of charges to the LUST
Program resulted in questioned costs and jeopardizes future
funding.

IDHW's accounting documentation does not adequately support
allocability of non-personnel expenditures, excluding contract
costs, to the LUST Program. We judgmentally selected a random
sample of 50 non-personnel transactions out of 365 to test IDHW's
procedures for charging expenditures to the LUST cooperative
agreement. We reviewed expense vouchers and supporting
documentation to determine if the costs claimed were reasonable,
allowable, and allocable.

During our testing, we determined that 26 out of 50 transactions
did not adequately support the allocability of expenditures to
the LUST Program. We found that 3 of the transactions were not

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related to the LUST Program and 23 other transactions were
supported by documents that did not provide sufficient evidence
that the expenditures were related to the program. These
deficiencies are discussed below.

Not Related to LUST Program

Three transactions were charged to the LUST Program; however,
supporting documents indicated the expenditures were not related
to the program:

• Training costs of $258.89 were claimed. The supporting
documentation described the training purpose "to gain
knowledge and increase skills/abilities to audit
Superfund and Wastewater Facilities Construction
Projects."

• Airfare costs of $289.00 were claimed. The purpose of
the travel was not documented. However, the employee's
timesheet showed that while in travel status, the
employee's time was charged to the Underground Storage
Tank program.

• A set of law codes was purchased by the Attorney
General's Office. The costs were charged to four
different funding sources, including 20 percent
($10.47) to LUST. This purchase should have been
recorded as an indirect cost because it does not meet
the criterion as a direct cost specifically
identifiable with a particular cost objective.

Inconclusive Evidence

Twenty-three transactions were charged to the LUST Program;
however we found inconclusive evidence that the expenditures were
related to the program:

• The documentation for 20 transactions amounting to
$1,058.13 (film processing, water samples, employment
services, computer table, slide holders, training,
Lotus 1-2-3, etc.) included no reference to the LUST
Program.

• Three travel related transactions amounting to $159.75
either did not include the purpose for the travel or
the purpose was too general to determine if the charge
was specifically for the LUST Program.

OMB Circular A-87, Attachment A, Section E defines allowable
direct costs as those that can be identified specifically with a

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particular cost objective and not be allocable to any other
federally financed program. 40 CFR, Part 31.20 requires fiscal
control and accounting procedures of the state to permit the
tracing of funds to a level of expenditures adequate to establish
that such funds have not been used in violation of the
restrictions and prohibitions of applicable statutes.

During the audit, we asked IDHW officials to explain causes for
the problems we found with some of the sample transactions. The
IDHW officials stated that the costs were incurred for the LUST
Program and that they believed that their accounting
documentation and procedures were in compliance with
OMB Circular A-87.

COMPLIANCE

The management of IDHW is responsible for its compliance with
laws and regulations applicable to the LUST cooperative
agreements. In addition to the audit of accounting transactions,
during our audit, we also selected and tested transactions to
determine IDHW's compliance with certain other provisions of
laws, regulations, and special conditions to the LUST cooperative
agreement, noncompliance with which could have a material effect
on the costs claimed.

Material instances of noncompliance are failures to follow
requirements, or violations of prohibitions, contained in laws,
regulations and cooperative agreement special conditions, that
cause us to conclude that the aggregation of misstatement
resulting from those failures or violations could be material to
the costs claimed. The results of our tests disclosed the
following material instances of noncompliance.

IDHW's Procurement Process Needs Improvement

During our review, we noted the following contracting practices
that need improvement to preclude prohibited practices and
excessive costs. For 13 of the sampled non-personnel
transactions that were contract billings, we reviewed contract
procedures and documents to ensure IDHW compliance with laws and
regulations.

For all 13 transactions, we found that the contract charges were
adequately supported and allocable to the, LUST Program. However,
we identified several instances where IDHW did not require
contractors to comply with the specific terms of the contract and
paid costs accordingly. We found that:
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• A contractor performed work on a task order that was
issued 3 months after the base contract expired.

• Two contractors performed work and billed IDHW for cost
overruns and IDHW issued amendments retroactively to
cover the costs.

• IDHW awarded Cost Plus Fixed Fee contracts. However,
in practice IDHW paid profit based on percentage of
cost for some task orders.

40 CFR, Part 31.36 requires IDHW to maintain a contract
administration system which ensures that contractors perform in
accordance with the terms, conditions, and specifications of
their contracts.

An IDHW official said that the project officers out in the field
focus on getting work completed by the contractor and give oral
agreements to continue and then complete the paper work later.

IDHW has recently made several improvements in its contracting
practices. One major change was to shift the contracting
responsibilities from the Department's Central Office
to the Division's Support Services. This change allows for
better communications between the contract specialist and the
project officers because the contract function is now located in
the same building. Also, Support Services has been in the
process of implementing new contracting procedures and have
already made improvements in the areas of cost and price analysis
on amendments and the selection process when awarding contracts.

We did not question any contract costs because work was performed
and charges were adequately supported. In the instances of
profit paid on a percentage of cost, we did not question any
costs because the amount was immaterial.

RECOMMENDATIONS

We recommend that the Regional Administrator require IDHW to:

1. Charge costs to LUST cooperative agreements based on
actual time worked.

2. Implement its "Charging of Paid Absences" policy.

3. Establish procedures to ensure documentation adequately
supports the allocability of expenditures to the LUST
Program.
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4. Provide satisfactory evidence that recommendation
numbers 1 through 3 above have been implemented prior
to making additional LUST cooperative agreement awards.

5. Continue to improve its contract procedures to ensure
that contractors perform within the terms, conditions
and specifications of the contracts.

IDHW COMMENTS AND OIG EVALUATION

IDHW Comments

IDHW disputes that personnel costs charged to the LUST Program
were not based upon actual costs. IDHW believes that individuals
manage their time to fit the budget allocation, are recording
actual hours, and these actual hours also accurately reflect
their budget allocations. This is substantiated by each employee
signing a biweekly declaration that certifies the hours reported
were necessary in the public service, are correct and were
actually rendered. The response stated that there appears to be
confusion among staff as to the proper methods of transferring
the monthly timesheet to the bi-weekly record and IDHW is
evaluating several modifications to further enhance employee time
records.

IDHW believes that all personnel costs, as well as associated
indirect costs should be allowed.

OIQ Evaluation

Our position is unchanged. IDHW's statement that individuals
were recording actual hours and these actual hours also
accurately reflect their budget allocations is not supported by
the evidence obtained during our audit. Our review of
documentation and discussions with employees as described in this
chapter give evidence that some employees were charging based on
budget and not actual hours. For example, in eight cases
timesheets did not support the distribution to the LUST Program.
The employees distributed 80 hours (whether leave, holiday,
direct time or indirect time) by the budget percentages of
funding without consideration for the actual time worked on the
program.
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CHAPTER 4

GREATER EMPHASIS IS NEEDED FOR HIGHER PRIORITY LUST SITES

BACKGROUND

Subtitle I of the Resource Conservation and Recovery Act (RCRA)
established the LUST Trust Fund to assure rapid and effective
responses to releases from leaking underground storage tanks.
Rapid corrective actions minimize corrective action costs, injury
to persons, and damage to property.

IDHW's site cleanup priority policy required all LUST sites to be
assigned a priority based on risk to human health and the
environment. IDHW's Remediation Bureau maintained a LUST site
status report which identified the cleanup priority for each of
the state's LUST sites. Those sites that posed the most
significant threat to human health and the environment were
required to be assigned the highest priority. The state's
priority system assigned priority rankings from one to ten.
Priority seven through ten sites were defined as high priority
sites, with priority ten sites considered extreme emergency
sites. The policy required contaminated groundwater sites to be
assigned priority rankings of at least a four.

Idaho Department of Health and Welfare Rules and Regulations,
Title 1, Chapter 2, Water Quality Standards and Wastewater
Treatment Requirements, requires IDHW to send Consent Agreements
to responsible parties for LUST sites that pose a significant
threat to human health and the environment. The Consent
Agreement establishes a schedule for the responsible party's
submission of a site investigation and corrective action plan to
the Department. In addition, the agreement establishes a
compliance schedule for implementing, monitoring, evaluating, and

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reporting site corrective actions. Therefore, the Consent
Agreement establishes a formal agreement where the responsible
party agrees to remediate the LUST site.

The Water Quality Standards and Wastewater Treatment Requirements
also specify that responsible parties shall be given 30 days from
receipt of the Consent Agreement to reach an agreement with IDHW
regarding the terms of the Consent Agreement. If agreement is
not reached within the 30 days, the Department is required to
establish a Schedule and Criteria which directs responsible
parties to comply with the regulations' remediation requirements.
IDHW may assess civil penalties not to exceed $10,000 per
violation or $1,000 per day for a continuing violation, whichever
is greater, for failure to comply with the Schedule and Criteria.
IDHW's authority to establish the Schedule and Criteria was
established through an amendment to the Water Quality Standards
and Wastewater Treatment Requirements, which became effective
during December 1992.

The use of Consent Agreements or Schedules and Criteria are
established through IDHW's Remediation Bureau. Consent
Agreements are initiated by requests from the state's regions to
the Remediation Bureau. Preparation of a Consent Agreement
requires negotiations with the responsible party in order to
establish agreement of remediation requirements and completion
schedules. These negotiations involve both Remediation Bureau
and responsible regional personnel. Once the agreement is
reached on remediation requirements and compliance schedules, the
Remediation Bureau prepares the Consent Agreement. If the
responsible party is unwilling to enter into a Consent Agreement,
the Remediation Bureau prepares a Schedule and Criteria directing
remediation of the site.

OVERSIGHT NEEDED IMPROVEMENT

We found that IDHW had made substantial progress in the
remediation of LUST sites. As of the end of fiscal 1993, IDHW
reported that cleanups had been initiated on a total of 614 of
689 LUST sites within the state. In addition, IDHW reported that
350 of the initiated cleanups had been completed as of the end of
the fiscal.

However, IDHW's oversight of corrective actions for sites having
significant contamination needed improvement. We selected a
judgement sample of 23 sites that had been designated either as
having high cleanup priorities or as having contaminated
groundwater. We selected our sample from sites located in two of
the state's five regions. These sites were located in the South
Western Idaho Region (SWIR) and the Northern Idaho Region (NIR),

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these were the regions with the largest number of identified LUST
sites. Our review of site files and interviews of responsible
IDHW personnel disclosed that oversight of responsible party
remediation efforts for 9 of the 23 sites was either not
performed or needed improvement during fiscal 1993.

South Western Idaho Region

Oversight of responsible party remediation efforts had not been
conducted on some significantly contaminated-LUST sites. As a
result, there was no assurance that LUST cooperative agreement
funds were effectively directed towards the most significantly
contaminated sites.

The SWIR had a total of 292 reported LUST sites as of the end of
fiscal 1993. We took a judgement sample of 15 sites which had
been identified by IDHW as having significant petroleum
contamination. The sample consisted of 11 sites with priority
rankings of at least seven (High), 1 site with a priority ranking
of one (Lowest) with reported contaminated groundwater, and 3
sites assigned no priority ranking with reported contaminated
groundwater. We included in our sample some sites with reported
groundwater contamination and that had low or no priorities
assigned. These sites appeared to represent an inconsistency
with IDHW's priority policy which provides that contaminated
groundwater sites should be assigned priorities of at least a
four (Moderate-Low).

The SWIR provided adequate oversight of responsible party
remediation efforts for 8 of the 15 sites during fiscal 1993.
However, we found that 2 of the 15 sites were not confirmed LUST
sites (See the MANAGEMENT REPORTS WERE INACCURATE Section of this
Chapter). We also found that the region provided no oversight of
responsible party remediation efforts for 5 of the 15 sites.
Although significant contamination had been verified or was
suspected at the five sites, neither the Consent Agreement or
Schedule and Criteria was used to pursue remediation.

• Steve's Auto Repair Site. No priority ranking had been
assigned to the site. File documentation disclosed
that SWIR personnel became aware of the LUST site
during October 1991. Significant petroleum
contamination of the soil and groundwater had been
identified at the site. A laboratory report showed
that the contaminate benzene was identified at a
concentration of 23,000 parts per billion. IDHW's
cleanup standards require remediation action when
benzene levels exceed 5 parts per billion. As of the
end of fiscal 1993, the responsible party had not
initiated remediation action at the site and SWIR

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personnel had not conducted any followup, to include
establishment of a Consent Agreement or Schedule and
Criteria.

R&N Stinker Station Site. No priority ranking had been
assigned to the site. SWIR personnel were informed of
the LUST site during January 1992, and they last
followed up on the site during January 1993. No
Consent Agreement or Schedule and Criteria had been
established for the site's remediation. The site file
indicated petroleum contaminated groundwater was
suspected at the site. However, the extent of
contamination had not been determined and the
responsible party had not initiated any remediation
action as of the end of fiscal 1993.

Pre-Coat Industries Site. A cleanup priority ranking
of seven (High) had been assigned to the site. SWIR
personnel became aware of the LUST site during March
1992. File documents showed that petroleum
contamination of the groundwater and soil exceeded
acceptable cleanup levels. Although significant
contamination had been identified at the site, SWIR
personnel had not taken any followup action, to include
establishment of a,Consent Agreement or Schedule and
Criteria, during fiscal 1993.

Tates Rents Site. A cleanup priority of seven (High)
had been assigned to the site. SWIR personnel became
aware of the LUST site during February 1992. File
documents showed that petroleum contamination of the
soil and groundwater exceeded acceptable cleanup
standards. File documents also indicated that the
responsible party had initiated remediation actions at
the site during March 1992. However, we found that no
followup action was conducted by SWIR personnel, to
include establishment of a Consent Agreement or
Schedule and Criteria, during fiscal 1993.

Washington County Site. A cleanup priority of eight
(Very High) had been assigned to the site. SWIR
personnel became aware of the LUST site during December
1989 and petroleum contamination of the soil and
groundwater had been identified. On June 10, 1991 the
SWIR received correspondence from the responsible party
stating that it considered the site to be remediated
and planned no further cleanup activities. The
responsible party stated that site monitoring would
continue. There was no evidence that SWIR had
concurred with the responsible party's remediation

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claim or had followed up on the status of the site
during fiscal 1993. Furthermore, neither a Consent
Agreement nor a Schedule and Criteria had been
established to ensure adequate remediation of the site.

Our review showed that SWIR had not pursued and monitored the
remediation of five sites where significant petroleum
contamination to the groundwater had been verified or was
suspected. SWIR personnel indicated that oversight of LUST sites
had been conducted based on first hand knowledge of the sites
rather than priority rankings. They said that the assignment of
cleanup priorities had been looked upon as an administrative
requirement rather than a management tool. As a result, assigned
priorities were not used to determine the region's oversight
activities and other sites were given more attention by SWIR
personnel.

To ensure that LUST sites posing the most significant threat to
human health and the environment receive appropriate attention,
IDHW needs to ensure that oversight activities are based on
assigned cleanup priorities. Oversight activities should include
the establishment of the Consent Agreement or Schedule and
Criteria in order to ensure timely remediation of priority LUST
sites.

Northern Idaho Region

We also found that oversight of some significantly contaminated
sites within the NIR needed improvement.

The NIR had a total of 128 reported LUST sites as of the end of
fiscal 1993. We took a judgement sample of eight sites which had
been identified as having significant petroleum contamination.
The sample consisted of sites with priority rankings of at least
a seven (High).

The NIR was adequately monitoring and following up on remediation
of four of the eight high priority sites. However, at the other
four high priority sites, we found that either a Consent
Agreement or a Schedule and Criteria was not used or used timely
to effectively pursue remediation during fiscal 1993.

• Pioneer Square Site. The site was identified as a LUST
site during July 1992 and was assigned a priority
ranking of eight (Very High). Significant petroleum
contamination of the soil and groundwater had been
identified at the site. We found that NIR personnel
had made attempts to get the responsible party to
initiate the remediation process but were unable to get
the responsible party to complete a site contamination

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assessment as of the end of fiscal 1993. Although the
NIR was unable to make significant progress toward site
remediation for about a year, neither a Consent
Agreement or Schedule and Criteria was used to pursue
remediation of the site as of the end of fiscal 1993.

Muzzy Oil Site. A LUST was identified at the site
during July 1992 and was assigned a priority ranking of
seven (High). Significant petroleum contamination had
been identified at the site. We found that attempts
had been made to get the responsible party to initiate
the remediation process; however, IDHW was unable to
get the responsible party to complete a site assessment
or enter into a Consent Agreement as of the end of
fiscal 1993. We found that a Schedule and Criteria was
eventually established during October 1993. If IDHW's
Schedule and Criteria policy outlined in the Water
Quality Standards and Wastewater Treatment Requirements
had been followed, the Schedule and Criteria should
have been issued at least 6 months earlier which could
have lead to earlier site remediation.

Robert Hays Site. The site was identified as a LUST
site during July 1990 and was assigned a priority
ranking of seven (High). Significant soil
contamination had been found at the site and it was
believed that the groundwater may have been
contaminated. NIR personnel instructed the responsible
party to determine the extent of groundwater
contamination on September 11, 1990 but they did not
follow up on the responsible party's remediation
actions until January 1993. We found that the
responsible party had not complied with the region's
remediation request as of the end of fiscal 1993.
Although significant contamination existed at the site,
neither a Consent Agreement or Schedule and Criteria
was used to pursue remediation of the site as of the
end of fiscal 1993.
Rocky Point Marina Site. The site was identified as a
LUST site during August 1990 and was assigned a
priority ranking of ten (Extreme Emergency).
Significant petroleum contamination of the soil and
groundwater had been identified at the site which was a
marina located about 100 feet from a lake. The
responsible party for the site was the Idaho Division
of Public Works, a state agency.
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We found that the responsible state agency had
initially excavated 325 cubic yards of contaminated
soil at the site during 1990 but additional excavation
of approximately 2,000 cubic yards of contaminated soil
was required at the site. It took the NIR about
3 years, until November 1993, to get the responsible
state agency to formally agree to pursue remediation of
the site. This agreement was achieved through the
establishment of a Schedule and Criteria during
November 1993. As a result of the.Schedule and
Criteria, the responsible state agency initiated
remediation action during December 1993.

Responsible NIR and Remediation Bureau personnel indicated that
more emphasis had not been placed on these sites during fiscal
1993 because: (i) the NIR had a large workload and other high
priority sites were given more attention; (ii) the threat to
human health and the environment for the Rocky Point Marina site
was reduced during 1990 when initial remediation activities were
conducted, and as a result, the cleanup priority should have been
changed to a seven; (iii) there was a backlog of requests for
Consent Agreements which affected the timeliness of the process;
(iv) the authority for establishment of the Schedule and Criteria
did not become effective until December 1992, and it took IDHW
several months to develop and implement the Schedule and Criteria
Program; and (v) negotiations with the responsible parties were
necessary in order to establish realistic remediation schedules
which affected the timeliness of the Schedule and Criteria
process.

In our opinion, more emphasis should have been placed on the
establishment of Consent Agreements and Schedules and Criteria
for the four sites. All four sites were assigned priorities of
at least a seven (High), which indicated that they posed a
significant threat to human health and the environment. Priority
use of LUST Trust funds should be used to ensure that the most
threatening sites to human health and the environment are
remediated. Therefore, oversight activities should include the
establishment of the Consent Agreement or Schedule and Criteria
in order to ensure timely remediation of priority LUST sites.
Furthermore, the Schedule and Criteria should be initiated 30
days after the responsible party has been offered an opportunity
to enter into a Consent Agreement as specified by Idaho's Water
Quality Standards and Wastewater Treatment Requirements.

MANAGEMENT REPORTS WERE INACCURATE

We evaluated the accuracy of IDHW's LUST site status reports by
comparing information in the fourth quarter fiscal 1993 report

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with LUST site files. The comparison identified that the LUST
site status report for fourth quarter fiscal 1993 was not
accurate. As a result, IDHW was unable to effectively monitor
LUST site remediation progress.

IDHW's Remediation Bureau maintains a LUST site data base using
EPA's Underground Storage Tanks Data Base Management System
(UST-DMS). LUST site status reports are generated by the UST-DMS
at least quarterly. These reports identify the cleanup priority
assigned to each identified LUST site and each site's remediation
status. The reports assist IDHW LUST Program personnel with
monitoring program progress. The report covering fourth quarter
fiscal 1993 showed the remediation status of 675 LUST sites.

Our review of the site status report covering the fourth quarter
fiscal 1993 and site files for 23 judgmentally sampled sites
disclosed that the status report included incorrect information
on 14 (61 percent) of the sites. Specifically we found that the
report included: (i) two sites that were not confirmed LUST
sites; (ii) seven sites with incorrect confirmed release dates;
(iii) two sites with incorrect cleanup initiated dates; and
(iv) three sites with incorrect confirmed release and cleanup
initiated dates.

Either the confirmed release dates, cleanup initiated dates or
both identified in the report for the 12 LUST sites were
significantly in error. For example:

• The file for one site contained no evidence that a
cleanup had been initiated; however, the status report
showed that a cleanup had been initiated on
March 1, 1992.

• The file for another site disclosed that the LUST was
identified during December 1989; however, the status
report showed a confirmed release date of
June 30, 1992.

The reporting inaccuracies occurred because IDHW's Remediation
Bureau did not periodically reconcile the information in UST-DMS
with source documents. Instead, the Remediation Bureau relied on
IDHW regional personnel to review UST-DMS output reports to
identify information errors and report needed corrections. The
need for reconciliations is discussed in more detail in
Chapter 6, QUARTERLY STARS REPORTS WERE INACCURATE, of this
report.

Without accurate information on site remediation activities, IDHW
can not effectively monitor program progress. Therefore, IDHW
needs to ensure that site activity information maintained in the

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Idaho's Leaking Underground Storage Tank Program
UST-DMS is reconciled to source documents as recommended in
Chapter 6 of this report.

NOT ALL SITES WERE PRIORITIZED

IDHW had not assigned cleanup priority rankings to all LUST sites
where petroleum contamination of the groundwater had been
identified or was suspected. As a result, there was no assurance
that IDHW took timely action to remediate all sites posing the
greatest threat to human health and the environment.

Idaho obtains the majority of its drinking water from
groundwater. IDHW's LUST site cleanup priority policy requires
sites with contaminated groundwater to be assigned a priority
ranking of at least a four (Moderate-Low). LUST sites with
contaminated groundwater which is a source of drinking water for
more than 100 people, is to be assigned a cleanup priority
ranking of ten (Extreme Emergency).

IDHW's LUST site status reports covering the fourth quarter
fiscal 1993 listed 24 sites that were reported as having
petroleum contaminated groundwater but which were not assigned a
cleanup priority. We found that 20 of these sites were located
within the South Western Idaho Region. As discussed earlier, the
SWIR had not followed up on two sites, which had not been
assigned a cleanup priority, but where contaminated groundwater
had been identified or was suspected. SWIR staff said that a
priority had not been assigned to some contaminated groundwater
sites because of an oversight error.

To ensure timely remediation of sites posing the most significant
threat to human health and the environment, all LUST sites should
be assigned an appropriate cleanup priority.

RECOMMENDATIONS

We recommend that the Regional Administrator require IDHW to:

1. Ensure that LUST site oversight activities are based on
assigned cleanup priorities.

2. Ensure that Consent Agreements or Schedules and
Criteria are established for significantly contaminated
LUST sites as required by Idaho's Water Quality
Standards and Wastewater Treatment Requirements. Also,
ensure that Schedules and Criteria are established
timely when responsible parties fail to enter into
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Idaho's Leaking Underground Storage Tank Program
Consent Agreements within 30 days of receipt of the
agreements.

3. Correct the inaccuracies in the UST-DMS by conducting a
one-time 100 percent reconciliation of the UST-DMS with
site records.

4. Ensure all LUST sites are assigned a cleanup priority
consistent with IDHW1s priority policy.

IDHW COMMENTS AND OIG EVALUATION

IDHW Comments

IDHW disagreed with our conclusions, but generally concurred with
the recommendations because they provide an enhancement to its
current program. In its response IDHW stated that: (i) priority
system requirements do not apply to oversight of responsible
party lead corrective action sites; (ii) its priority ranking
system is a general guide to assess the potential of a site to
threaten or contaminate the environment, a useful tool in
determining relative potential to affect human health and the
environment, and is a numerical guide, not a work allocation
system; (iii) a remediation team approach is used to determine
staff work allocations; and (iv) three of the four NIR sites
cited by the draft audit report as examples have been remediated
since the auditor's visit.

OIG Evaluation

We agree with IDHW that its priority ranking system is a useful
tool in determining relative potential to affect human health and
the environment. During the audit IDHW staff said that the
priority ranking system is used for all sites and we noted that
IDHW had used this system to focus resources on several sites
which posed the greatest threat to human health and the
environment. Our recommendations are intended to help IDHW use
its priority ranking system even more effectively.

The memorandum cited by IDHW as a basis for not applying priority
system requirements to oversight activities also states that:

... even in streamlined programs, all sites cannot and
should not receive the same degree of oversight. States
will likely need to focus their limited technical resources
on more complex or hazardous sites. Therefore, we encourage
the use of risk based priority systems (emphasis added) as a
way to determine the appropriate degree of oversight that
should be given to specific sites.

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Idaho's Leaking Underground Storage Tank Program
IDHW's policy entitled "Cleanup Prioritization System for
Petroleum Underground Storage Tank Releases" states that this
system will ensure that high priority is given to (1) releases
which pose the greatest threat to human health and the
environment, and (2) sites where the State cannot identify a
solvent owner or operator of the tank who will undertake action
properly. It also states that every effort has been made to
focus IDHW's cleanup priorities on releases posing the greatest
threat to human health and the environment. The policy also
appears to be flexible enough to be adapted to different site
conditions and it allows priorities to be changed when conditions
change or where more information becomes available.

We are pleased that three of the four NIR sites cited in the
draft report have been remediated since our visit. We believe
that high priority sites, particularly those ranging from 10
(Extreme Emergency) to 7 (High), should receive priority
remediation actions. Where circumstances preclude expedited
cleanup, the files should describe what actions, including
enforcement, are being taken to expedite cleanup under those
circumstances.
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Idaho's Leaking Underground Storage Tank Program
CHAPTER 5

COST RECOVERY PROCEDURES NEED IMPROVEMENT

These conditions occurred because Remediation Bureau personnel:
(i) did not accurately identify all LUST Trust Fund expenditures;
(ii) did not follow EPA documentation requirements; (iii) were of
the opinion that interest assessments would adversely affect the
cost recovery process and corrective actions; and (iv) made
contract revisions without the use of a written contract
amendment. As a result, it does not appear that IDHW had
maximized its cost recoveries from responsible parties.

BACKGROUND

Subsection 9003(h)(6), Subtitle I of RCRA requires states to
recover Trust Fund expenditures for corrective action and
enforcement with respect to releases of petroleum when liable
owners or operators (responsible parties) have been identified.
States may forgo full cost recovery in instances where the
responsible party has maintained financial responsibility
coverage which complies with Federal Financial Responsibility
Regulations and the coverage is not adequate to pay the costs of
a response without significantly impairing the ability of the
owner or operator to continue in business. In these instances,
cost recovery may be limited to the required financial
responsibility coverage.

Office of Solid Waste and Emergency Response (OSWER) Directive
9610.10 outlines EPA's LUST Trust Fund cost recovery policy- The
policy requires each state to make reasonable efforts to contact
owners and operators who are liable for LUST sites, notify them
of their liability for enforcement and corrective action costs,
and demand payment. In addition, states are required to assess
and encouraged to pursue interest charges on Trust Fund
expenditures.

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Idaho's Leaking Underground Storage Tank Program
OSWER Directive 9610.10 also specifies that "in those rare
instances where equitable factors support compromise or
termination of the Trust Fund claim, states should ensure that
the bases for any compromise or termination are adequately
supported in the records of the state and reflect the efficient
use of Trust Fund resources." The policy allows states to reach
compromised settlements when it is more cost effective to
negotiate a settlement over pursuing litigation.

IDHW's Remediation Bureau is responsible for-recovering LUST
Trust Fund expenditures from responsible parties. During the
period covering fiscal 1993 through first quarter fiscal 1994,
the Remediation Bureau completed cost recovery settlements on
four LUST sites totaling $143,600.

ALL FUND COSTS WERE NOT IDENTIFIED FOR RECOVERY

IDHW's Remediation Bureau did not identify all costs for cost
recovery purposes. Site specific accounting and cost recovery
records for the four sites showed that the Remediation Bureau did
not identify all LUST Trust Fund expenditures for use in
recovering costs from responsible parties. Our review disclosed
that costs had been understated for all four sites. The
following table illustrates the differences between costs
identified by the Remediation Bureau and the actual costs per
IDHW's accounting system:

Site Costs (thousands)
Site

A
B
C
D
Identified
By IDHW
For Recoveries

$33.8
30.0
39.1
86.5

$189.4
Recorded In
IDHW's
Accounting System

$35.0
35.5
40.9
87.0
Difference

$1.2
5.5
1.8
0.5
Remediation Bureau personnel indicated that the major cause of
the discrepancies was that, in the past, cost recovery emphasis
had been on recovering contracting costs rather than all costs
incurred for specific LUST sites. IDHW staff said the
Remediation Bureau had to conduct a labor intensive review of the
accounting records in order to identify all Trust Fund
expenditures incurred at a LUST site. We were told that cost
recovery focused on contracting costs because the costs made up
the highest percentage of costs incurred at the LUST sites and
the costs were easily identifiable. We found that site specific
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Idaho's Leaking Underground Storage Tank Program
expenditure information had been readily available from the
IDHW's accounting system.

Without accurate identification of all costs incurred for LUST
sites, the state can not request full reimbursement from
responsible parties. During the audit, responsible Remediation
Bureau personnel indicated that future cost recovery claims would
be based on all LUST Trust Fund expenditures incurred at specific
LUST sites.

DOCUMENTATION OF COST RECOVERY SETTLEMENTS WAS INADEQUATE

The Remediation Bureau did not adequately document why less than
full cost recovery settlement amounts were accepted. Site files
and accounting records contained information that the Remediation
Bureau did not recover all identified costs on the four LUST
sites. The following table shows the total Trust Fund
expenditures identified for cost recovery and settlement amounts
for the four sites:

Site Costs (thousands)
Not Recovered
Site Identified Recovered Amount Percent

A $33.8 $21.8 $12.0 36
B 30.0 15.0 15.0 50
C 39.1 21.1 18.0 46
D 86.5 85.7 ..8 1

$189.4 $143.6

IDHW had an excellent recovery rate of 99 percent for site D.
However, the cost recovery settlements averaged only 56 percent
of the costs identified by the Remediation Bureau for sites A, B,
and C. The recovery percentages do not include additional costs
which were not identified and recovered as discussed in the
previous section. For example, site B, for which only 50 percent
of identified costs were recovered, had an additional $5,500 of
costs which were not identified and recovered.

The Remediation Bureau's rationale for accepting the partial
recoveries for the three sites was not documented as required by
OSWER policy. Remediation Bureau personnel said that the
documentation explaining the basis for partial recovery
settlements was not prepared and maintained because some of the
settlement information was privileged under the "attorney-client
relationship." In our opinion, the basis for cost recovery
settlements can be documented without compromising privileged
information. Because the required documentation was not prepared

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Idaho's Leaking Underground Storage Tank Program
and maintained, it was not possible to determine whether IDHW
effectively used Trust Fund resources.

INTEREST ASSESSMENTS WERE NOT MADE

The Remediation Bureau had not assessed interest on any cost
recovery settlements made during fiscal 1993 and the first
quarter fiscal 1994. Consistent with OSWER policy, the
Remediation Bureau's LUST Trust Fund cost recovery policy allowed
for the assessment of interest on Trust Fund'expenditures.
Remediation Bureau personnel said that interest had not been
assessed on LUST Trust Fund expenditures because they thought
that the assessments might adversely affect the cost recovery
process and the IDHW's ability to obtain responsible party
agreements to assume necessary site corrective actions.

In our opinion, interest assessments can provide the state with
more leverage during cost recovery because the longer a
responsible party waits to settle the claim, the higher the
interest cost. In addition, the assessment of interest is
required by OSWER policy and provides an opportunity for
additional resources to support the state's LUST Program.

WEAK PROCEDURES AFFECT COST RECOVERY

Because of some weaknesses in IDHW's contract administration and
cost recovery procedures, an attorney for Fearless Farris Service
Stations, Inc. (Fearless Farris), owner and operator of the
Fruitland Stinker Station, was able to negotiate a significantly
reduced settlement for his client. IDHW's Remediation Bureau
initially sent a cost recovery notice to Fearless Farris for an
amount of $24,659. A final consent agreement was made for
$12,660, or about 51 percent of the original claim.

The initial claim of $24,659 included contract costs of $24,100.
IDHW issued a task order to one of its contractors to conduct
Phase I studies of hydrocarbon contaminated ground water. Based
upon a comparison of estimated to actual task order costs,
reviews of IDHW's file documents, discussions with IDHW's staff,
and comments in letters from Fearless Farris' attorney, the scope
of work of this task order had been changed orally by IDHW, but
had not been formally incorporated into the task order. While
the estimated total costs and actual costs were the same, there
were significant differences in the categories of costs which
indicate that work was done differently than originally
estimated.

Fearless Farris' attorney used the scope of work changes to
justify a counter-proposal to repay only $8,760 in his reply to

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Idaho's Leaking Underground Storage Tank Program
the cost recovery notice. In a letter to IDHW he stated that it
was: (i) apparent that the $24,100 spent for this investigation
was not only excessive but also unnecessary; (ii) obvious that
the contractor contracted for much more work than was actually
accomplished; (iii) apparent no adjustment was made to the
contract despite the fact that less than half of the work
described in the budget estimate was performed; and (iv) not for
his client to lay blame for this outrageous expenditure.

In response to Fearless Farris' counter-proposal, IDHW reduced
its claim by $8,094 to $16,565. An IDHW internal memorandum
stated that there was some basis to significantly reduce the
amount required in the cost recovery, but the basis was very
different than that presented by Fearless Farris. The memorandum
identified reductions for labor costs in excess of the estimate
($4,931), professional land surveyor costs not included in the
estimate ($2,604), and state personnel costs ($559). The
memorandum further stated that there was no way to further
justify a reduction in the cost recovery amount.

Fearless Farris1 attorney responded by stating that his client
continued to believe that the proposed sum of $16,565 was
excessive and as a counter-offer was willing to "split the
difference" from its last offer of $8,760 which would mean a
payment of approximately $12,660. A consent agreement was signed
by both parties which stipulated that Fearless Farris would pay
IDHW an amount of $12,660.

The history of this claim indicates that IDHW's negotiating
position was weakened because it apparently could not demonstrate
that all the contract costs were allocable to the Stinker site
and that the costs were reasonable. The files also do not
contain justification for the further reduction of $3,905 to
reach the settlement amount of $12,660.

RECOMMENDATIONS

We recommend that the Regional Administrator require the IDHW to:

1. Ensure that cost recovery claims include all costs
associated with the LUST sites.

2. Document the basis for settlement amounts and the
justification for any settlements significantly less
than full cost recovery.

3. Assess and attempt to recover interest charges on LUST
Trust Fund cost recovery amounts.
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Idaho's Leaking Underground Storage Tank Program
4. Ensure that all contract modifications are done through
the use of written amendments.

IDHW COMMENTS AND DIG EVALUATION

IDHW Comments

IDHW concurred with our conclusions and recommendations. In its
response IDHW stated that it already has prepared a draft cost
recovery policy to ensure the recommendations are implemented.

OIG Evaluation

We are pleased that corrective actions based upon our
recommendations have already begun.
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Idaho's Leaking Underground Storage Tank Program
CHAPTER 6

QUARTERLY STARS REPORTS WERE INACCURATE
Quarterly STARS reports submitted to EPA Region 10 did not
accurately report LUST Program activity during fiscal 1993. The
number of confirmed releases were understated by 16 percent,
cleanups initiated were overstated by 18 percent, and cleanups
completed were understated by 57 percent. In addition, the
quarterly reports included LUST Program activity that had
occurred prior to the reporting periods. The inaccuracies
occurred because not all performance data had been correctly
compiled by the computer system used to maintain LUST site
information, information in the quarterly reports was not
reconciled to the supporting records, and some regions reported
LUST site activity late. The erroneous reporting resulted in EPA
managers receiving inaccurate performance information on the
IDHW's LUST Program during fiscal 1993.

BACKGROUND

OSWER Directive 9650.10 requires states with LUST cooperative
agreements to submit quarterly progress reports (STARS reports)
disclosing data on LUST Program activities. The reports are used
by EPA Region 10 and EPA Headquarters to monitor program
progress. In addition, EPA Headquarters uses the information to
make nationwide funding decisions and to report program progress
to Congress.

The LUST cooperative agreement with the State of Idaho required
the IDHW to submit quarterly STARS reports to EPA Region 10.
IDHW was required to include the following performance data in
its reports: (i) number of reported confirmed releases,
(ii) number of emergency responses taken, (iii) number of LUST
cleanups initiated, (iv) number of cleanups under control,
(v) number of cleanups completed, and (vi) number of sites with
enforcement actions.

During fiscal 1993, IDHW used EPA's UST-DMS to maintain the LUST
site data base. The system was maintained by IDHW's Remediation
Bureau. Information in the UST-DMS was input from source
documents submitted by the IDHW's five regions. The UST-DMS has
a STARS reporting feature that can be used to compile LUST
Program activity data maintained in the database. During fiscal
1993, the Remediation Bureau used the reporting feature to
compile performance measure data. The system generated
statistics were reported in IDHW's quarterly STARS reports.

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Idaho's Leaking Underground Storage Tank Program
INFORMATION NEEDS TO BE PROPERLY RECONCILED AND COMPILED

We found that IDHW's fiscal 1993 quarterly STARS reports were
inaccurate. We evaluated the accuracy of confirmed releases,
cleanups initiated, and cleanups completed that the state
reported for fiscal 1993. The quarterly reports showed that a
total of 121 confirmed releases had been identified, 134 cleanups
had been initiated, and 32 cleanups had been completed. Source
documents used for UST-DMS input for fiscal 1993 showed that
confirmed releases had been understated by 23 (16 percent),
cleanups initiated had been overstated by 20 (18 percent), and
cleanups completed had been understated by 42 (57 percent).

Remediation Bureau personnel stated that the inaccurate reporting
occurred because the UST-DMS had not counted performance data
input into the system with dates that were outside the quarter.
This reporting problem was identified and corrected by
Remediation Bureau personnel during the first quarter
fiscal 1994, just prior to our site audit work. The counting
deficiency was corrected through the use of a series of system
commands to obtain cumulative totals of LUST Program activity
data and the discontinuance of the STARS reporting feature.

Although the Remediation Bureau had corrected the counting
problem, we found that adequate controls had not been established
to ensure that performance data maintained and compiled by the
UST-DMS and subsequently reported in the quarterly STARS reports
was accurate. The information input into the database and
reported in the quarterly reports was not reconciled to the
source documents. Instead, the Remediation Bureau relied on IDHW
regional personnel to review UST-DMS output reports to identify
information errors and report any needed corrections. However,
the regional reviews did not assure accurate reporting because
they were conducted after the quarterly STARS reports were
submitted to EPA and were conducted by personnel not responsible
for maintaining the LUST site database.

In order to ensure that the program activity information
maintained in the database is correct, the Remediation Bureau
needs to reconcile the source documents with the UST-DMS prior to
submission of the quarterly STARS reports to EPA. It is
essential that the reconciliations be conducted by Remediation
Bureau personnel since they maintain the UST-DMS and prepare the
quarterly reports. If reconciliations had been conducted during
fiscal 1993, inaccurate LUST performance statistics would not
have been reported to EPA. As discussed in Chapter 4, MANAGEMENT
REPORTS WERE INACCURATE Section, of this report, we also found
inaccuracies in UST-DMS output reports.
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Idaho's Leaking Underground Storage Tank Program
INFORMATION WAS UNTIMELY

The quarterly STARS reports included LUST Program performance
data that occurred prior to the reporting periods. Supporting
documentation for the reports showed that some of the IDHW1s
regions were not reporting LUST site information on a timely
basis. For example, 28 out of 29 confirmed releases reported by
the Northern Idaho Regional Office during the first quarter
fiscal 1993 occurred prior to the beginning of the quarter. The
dates of these 28 confirmed releases ranged from October 8, 1989
to September 17, 1992.

Also, LUST performance information was not reported timely to EPA
managers. Supporting documentation for the quarterly STARS
reports showed that the Remediation Bureau had not emphasized to
the regions the need for timely reporting of LUST Program
activity information. As a result, LUST Program performance data
in the quarterly STARS reports for fiscal 1993 did not reflect
actual performance for the reporting period. To provide EPA
managers with reliable information, the Remediation Bureau needs
to ensure that the regions report LUST Program activity
information timely and for the correct reporting period.

RECOMMENDATIONS

We recommend that the Regional Administrator require IDHW to:

1. Implement procedures which ensure that LUST site
activity information maintained in the UST-DMS is
reconciled to source documents at least quarterly.

2. Ensure that IDHW's regions report LUST site activity
information to the Remediation Bureau on a timely basis
and that the information is reported timely to EPA.

IDHW COMMENTS AND OIG EVALUATION

IDHW Comments

IDHW concurred with our conclusions and recommendations. In its
response, IDHW stated that it was evaluating the incorporation of
existing IDHW data entry and data quality analysis/quality
control policies and procedures into the LUST site data base
program. Incorporation of data entry protocols will assure data
is accurate, timely, and reconciled to source documentation.
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Idaho's Leaking Underground Storage Tank Program
OIG Evaluation

We are pleased that IDHW is initiating corrective action to
ensure the accuracy of its reports.
37
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APPENDIX I
IDAHO DEPARTMENT
OF HEALTH AND WELFARE

DIVISION OF
ENVIRONMENTAL QUALITY
1410 North Hilton, Statehouse Mail, Boise, ID 83720-9000, (208) 334-0502 Cecil D Andrus, Governor
September 22, 1994
Mr. Charles H. Reisig
Branch Manager
US E.P.A. - Office of the Inspector General for Audits
Western Division
1111 3rd Avenue, Suite 1460
Seattle, WA 98101
Dear Mr. Reisig:

This letter is in response to the draft audit report on EPA's Leaking Underground Storage Tank
(LUST) Cooperative Agreements with the State of Idaho, Department of Health and Welfare
(IDHW), Division of Environmental Quality (DEQ), the September 8, 1994 audit exit
conference, and telephone discussions between Andrew Pentony of DEQ and Mike Owen of your
staff.

Based on the above referenced telephone discussions, the OIG concluded the following two
specific clarifications would be made to the draft audit report:

• PRIOR AUDIT COVERAGE (pg. 4): Comments concerning the five internal control
and compliance issues addressed in the Bunker Hill Superfund site Cooperative
Agreement audit will be documented as resolved.

• CHAPTER 3, COMPLIANCE, Cost Transfers Between Budget Categories not
Approved (pgs. 13-14): All comments concerning non-approval of cummulative
transfers without prior EPA approval will be removed from the draft report.

Based on staff negotiations and the above referenced clarifications, IDHW-DEQ has prepared
a revised response (attached) to the draft audit report for your review and consideration.

In addition, IDHW-DEQ maintains that significant benefits were derived from the work
performed under these cooperative agreements. As such, IDHW-DEQ requests that further
negotiations concerning this review focus on work accomplished, benefits derived, and areas
were enhancements can be established and utilized in the future.
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Mr. Charles H. Reisig
Revised Response to Draft Audit Report
September 22, 1994
Page 2
If you have any questions/comments or require additional information, please contact Andrew
Pentony at (208) 334-0502.
Sincerely,
/ Jon Sandoval, Assistant Administrator
Support Services

Attachments

cc: Bettina Stokes, EPA
Lance Nielsen, DEQ
Richard Humiston, DMS
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REVISED RESPONSE TO DRAFT AUDIT REPORT
NO. E3NLB3-10-0151
September 22, 1994
CHAPTER 1. Introduction

Comment 1.

This section provided an overview of the Purpose, Background, Scope and Methodology,
and a discussion of Prior Audit Coverage.

Response 1.

IDHW-DEQ has no comments concerning this section except those statements which
directly relate to the following Chapters.

CHAPTER 2. Results of Financial Audit

Comment 2.

Auditors Opinion: "We were unable to opine on the allowability of the costs claimed
under Cooperative Agreement No. L000536-01 because the IDHW accounting procedures
were not sufficient to determine that funds had not been used in violation of the
restrictions of the applicable Federal statutes. The results of our testing on the
allowability of the costs claimed are summarized in the following schedule and footnotes.

Recommendation: "We recommend that the Regional Administrator require IDHW to
provide support for costs claimed or recover the Federal share of the cooperative
agreement funds questioned. In the event IDHW is unable to provide adequate support
for all costs claimed, IDHW may want to seek a deviation from the federal requirements
for such supporting documentation (40 CFR, Part 31.22(b)).

Response 2.

IDHW-DEQ disputes the conclusions referenced in Comment 2 regarding IDHW's
accounting procedures and their sufficiency to reasonably control the allowability of
specific direct costs. Specifically, IDHW accounting procedures include the following
steps:

1) A thorough review by the receiving individual ensuring proper shipment/receipt
of the invoice materials. After a thorough review of the material stated on the
invoice, the receiving individual signs the invoice, concurring with the
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Revised Response to Draft Audit Report
No. E3NLB3-10-0151
September 22, 1994

deliverables documented on the invoice. Additionally, if the material invoiced is
a capital outlay or attractive item as identified by IDHW policy, an inventory
number is assigned and the material is entered into IDHW's and DEQ's inventory
data bases.

2) The Project Officer or staff member responsible for the transaction reviews the
associated invoice and if he/she is in-concurrence; initials (approves) the invoice.
If the project officer disputes the charges reflected in the invoice, the invoice is
returned to the IDHW-DEQ accounting staff who negotiate/dispute the invoice.

3) The Program Manager/Supervisor (who provides direct supervision to the staff
member referenced in (2) above), reviews the transaction and discusses any
inconsistencies with the staff member. Upon concurrence with the staff members
recommendation for payment, the Program Manager/Supervisor approves the
transaction by initialling the invoice.

4) The Program Bureau Chief (who provides direct supervision to the staff
referenced in (2) and (3) above), reviews the transaction and discusses any
inconsistencies with the affected staff. Upon review and concurrence with the
reasonableness and allowability of the costs associated with the invoice, the
Bureau Chief also approves the invoice.

5) The Division Assistant Administrator (who provides direct supervision to the staff
referenced in (2), (3), and (4) above), reviews the transaction and discusses any
inconsistencies. After completing a thorough review of the invoice, the Assistant
Administrator, upon concurrence, also initials the invoice.

6) Based upon determinations made by the individuals referenced in (2) through (5)
above, either the staff member, Supervisor/Manager, and/or Bureau Chief provide
the invoice to their respective clerical staff person. The clerical staff completes
an Expenditure Voucher form, which is a typed document: clearly defining
necessary accounting documentation. The clerical staff person routes the
Expenditure Voucher to the IDHW-DEQ accounting staff for further internal audit
and document preparation.

7) The complete invoice package is reviewed by accounting staff for necessary
approvals, as indicated above, as well as for proper identification of program
codes, and allowability based on IDHW policy.
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Revised Response to Draft Audit Report
No. E3NLB3-10-0151
September 22, 1994

8) The documentation is then further reviewed by the Accounting Supervisor; to
assess the allowability, proper distribution of costs, and reasonableness of
charges claimed in the invoice.

9) Upon completion of the actions listed in (1) through (8) above, the invoices are
batched and transmitted to the Assistant Administrator for Support Services for
additional review. Upon review of all relevant documentation and concurrence
with the materials contained in the invoice package the Assistant Administrator
recommends payment of the invoice to the Division Administrator.

10) The Division Administrator completes a review of the information listed above,
and upon concurrence, authorizes the payment of the invoice.

The following procedures are implemented after payment has been made to the vendor
to ensure the proper allocability of both state and federal funds:

a) Project Manager/Supervisor's, Bureau Chiefs, and Assistant Administrator's are
provided with monthly reports which detail, by funding source/grant, each of the
obligations paid during the last month. If either of the management officials
identifies incorrect charges, they are to immediately report their observations to
the Accounting Supervisor for correction.

b) Program Manager/Supervisor's, Bureau Chiefs, and Assistant Administrator's
participate in quarterly budget reviews. During the course of these multi-day
evaluations managers again review the transactions, as listed in (a) above.

As such, the procedures listed in (1) through (10) and (a) and (b) were consistently
utilized on the transactions in question. To retroactively research and further document
the costs associated with the (26) questioned invoices, would not be cost effective (as it
would cost more to research and re-prepare the documents then the cost of the items in
question). However, if EPA deems the additional documentation necessary and required,
IDHW-DEQ may further review this matter. Specifically, capital outlay items purchased
and questioned in this review could be demonstrated to be in possession of LUST staff
and utilized as part of their daily work activity. Also, in response to the (3) specific
examples provided in your report IDHW-DEQ provides the following:

• "Training costs of $258.89 were claimed. The supporting documentation
described the training purpose "to gain knowledge and increase skills/abilities to
audit Superfund and Wastewater Facilities Construction Projects."
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Revised Response to Draft Audit Report
No. E3NLB3-10-0151
September 22, 1994

As previously indicated to Audit personnel, the individual who attended this
training is responsible for auditing both Superfund and LUST documentation.
The name of the course reflects the description provided above, however, the
information obtained from the course was equally applicable to the duties of a
LUST and Superfund auditor. As such, rather than sending the auditor to
additional training which referenced LUST in the title but covered the same
information, IDHW-DEQ split the costs between the two benefiting programs.

• "Airfare costs of $289.00 were claimed. The purpose of the travel was not
documented. However, the employee's time sheet showed that while in travel
status, the employee's time was charged to the Underground Storage Tank
program."

Without completely researching through past documentation, conversations with
staff conducting activities during this period indicated that when State attendance
is required/expected at meetings/conferences, states are often forced to fund travel
costs to these activities through variable means. In practice these
meetings/discussions surround both LUST and UST issues, and could easily be
funded out of either program. In this case, staff re-call the UST program had
available personnel dollars (not operating) and the LUST program had available
operating dollars (not personnel), therefore participation costs were allocated in
this manner. As such, costs allowable were in excess of actual charges to this
cooperative agreement, however, this appeared to be reasonable.

• "A set of law codes was purchased by the Attorney General's Office. The costs
were charged to four different funding sources, including 20 percent ($10.47) to
LUST. This purchase should have been recorded as an indirect cost because it
does not meet the criterion as a direct cost specifically identifiable with a
particular cost objective."

The documents in question were purchased by the Attorney General's Office,
however, these documents are maintained by clerical staff in the AG's office and
are available for UST/LUST program staff utilization, i.e., the AG's office
(within the DEQ building) is the central location for DEQ's legal reference
materials, they were not purchased exclusively for the use of the AG's. In an
attempt to maximize available resources IDHW-DEQ has attempted to limit the
number of CFR documents. The purpose of limiting CFR documents was based
on cost and the on-going nature of regulatory change. Therefore, IDHW-DEQ's
AG's office maintains current editions of each CFR, and the documents are
available by check-out to any IDHW-DEQ employee.
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In addition, the procedures listed above have undergone audit review by both state and
federal officials. Specifically, Idaho State government statute requires a comprehensive
Legislative Audit to review IDHW-DEQ procedures every two (2) years. Also, these
same procedures were evaluated by EPA-OIG Superfund auditor's in the recently
completed Bunker Hill Cooperative Agreement audit. IDHW-DEQ is surprised by this
finding, as it is the first documented incident of standard accounting procedures ever
raised as an issue in a draft report.

Based upon the above information, IDHW-DEQ concludes the accounting procedures
utilized are reasonable, and provide compliance with 40 CFR, Part 31.20. Therefore,
all non-personnel costs claimed should be supported and allowed.

CHAPTERS. Report on Internal Controls and Compliance

Comment 3.

Internal Controls: IDHW was charging Personnel Costs Based on Budget Allocations.
"We cannot opine on claimed personnel costs because the accounting practices of
charging direct time and paid absences were not based upon actual costs to the LUST
program. Therefore, claimed costs for personnel expenditures under Cooperative
Agreement No. L000536-01 are questioned as unsupported in the amount of $513,259.

Recommendations: "We recommend that the Regional Administrator require IDHW to:

1. Charge costs to LUST cooperative agreements based on actual time worked.

2. Implement its "Charging of Paid Absences" policy.

3. Establish procedures to ensure documentation adequately supports the allocability
of expenditures to the LUST Program.

4. Provide satisfactory evidence that recommendation numbers 1 through 3 above
have been implemented prior to making additional LUST cooperative agreement
awards.

5. Continue to improve its contract procedures to ensure that contractors perform
within the terms, conditions and specifications of the contracts.

6. Obtain prior approval for direct cost transfers that exceed 10 percent of the
approved budget.
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Response 3.

IDHW disputes the audit reports claim that personnel costs are unsupported because the
costs to the LUST program were not based upon actual costs.

Upon further review of the questioned personnel costs, it appears all IDHW-DEQ staff
are working within budgeted amounts. However, there" appears to be several methods
for maintaining their compliance with budget allocations. Some staff manage their
tasks/activities on a daily basis to fit the budget allocation, while others utilize a weekly,
bi-weekly, monthly, or quarterly date. Individuals that manage their tasks in a daily,
weekly, bi-weekly or even monthly manner provide the appearance they are not
recording actual hours. However, IDHW-DEQ believes, upon review of the monthly
timesheets, individuals are recording actual hours, and these actual hours also accurately
reflect their budget allocations. This is substantiated by each employee signing (bi-
weekly) a declaration which states: "I certify that the hours reported on this time sheet
were necessary in the public service, are correct and were actually rendered."

In addition, there appears to be confusion among IDHW-DEQ staff as to the proper
methods of transferring the monthly timesheet records to the bi-weekly record. To
alleviate this problem, IDHW-DEQ is evaluating several potential modifications to
further enhance employee time records. The potential modifications include:

Providing additional time sheet recording training to staff.

Amending the monthly timesheet to cover a bi-weekly period, so as to directly
correspond with the current bi-weekly timesheets.

Require staff to utilize the current PCA codes which are identified on the bi-
weekly timesheet as identifiers of allocated time.

Remove the administration and clerical categories and require staff to code time
directly to the PCA code for which they are working.

Include PCA delineations under each of the leave categories.

Providing periodic evaluations of timesheet performance, ensuring compliance
with IDHW-DEQ policy.
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By enhancing the current timesheet system and providing additional training, IDHW-
DEQ intends to further clarify the records of actual costs allocated to each program.

Additionally, IDHW-DEQ concurs with the draft audit report finding that recent
improvements have been made to contracting procedures and that central contracting
functions have been shifted to IDHW-DEQ.

Based on the above referenced information, IDHW-DEQ substantiates its position that
all personnel costs, as well as associated indirect costs should be allowed.

CHAPTER 4. Greater Emphasis is Needed for Higher Priority LUST Sites

Comment 4.

The IDHW did not give sufficient attention to some LUST sites that posed the greatest
threat to human health and the environment. A judgement sample of 23 sites designated
either as high priority or as contaminating groundwater disclosed that oversight of
responsible party remediation for 9 of the sites needed improvement, management reports
identifying remediation status of the sites were not accurate, and cleanup priority
rankings had not been assigned to all sites. In our opinion, these conditions occurred
because DDHW had not placed adequate emphasis on ensuring that LUST sites posing the
most significant threat to human health and the environment were remediated as soon as
possible.

Recommendations: "We recommend that the Regional Administrator require IDHW to:

1. Ensure LUST site oversight activities are based on assigned cleanup priorities.

2. Ensure that Consent Agreements or Schedules and Criteria are established for
significantly contaminated LUST sites as required by Idaho's Water Quality
Standards and Wastewater Treatment Requirements. Also, ensure that Schedules
and Criteria are established timely when responsible parties fail to enter into
Consent Agreements within 30 days of receipt of the agreements.

3. Correct the inaccuracies in the UST-DMS by conducting a one-time 100 percent
reconciliation of the UST-DMS with site records.

4. Ensure all LUST sites are assigned a cleanup priority consistent with IDHW's
priority policy.
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Response 4.

IDHW-DEQ disputes the audit reports claim that IDHW-DEQ "did not give sufficient attention
to some LUST sites that posed the greatest threat to human health and the environment." Upon
further review by IDHW-DEQ staff, the following points are presented to support IDHW-DEQ's
position:

1. By Memorandum, dated March 11, 1993 (attached), David W. Ziegele, Director
of the Office of Underground Storage Tanks, provides clarification on the
applicability of RCRA Subtitle I requirements to priorities for funding of
corrective action oversight activities. Mr. Ziegele states: "Contrary to the
position taken by the OIG in the California audit report, LUST Trust Fund
monies used for oversight of RP-lead corrective action are not subject to the
priority system requirements of Subtitle I nor to the corresponding section of
OSWER Directive 9650.10..." As such, IDHW-DEQ contends the findings
found in Comment 4 do not apply.

2. To demonstrate the applicability of the points raised in Mr. Ziegele's
memorandum, IDHW-DEQ evaluated the findings relative to the observations of
the IDHW-DEQ, North Idaho Regional Office (NIRO). The following
clarifications are made:

a) IDHW-DEQ reviewed specific information surrounding the four sites
listed and has determined none of the owners questioned by the audit
report were considered recalcitrant. Each of the sites has a progression
of site work commensurate with the potential of the site to affect human
health or the environment.

b) The site ranking, developed and used by IDHW-DEQ, is a general guide
to assess the potential of a site to threaten or contaminate the environment.
Each site has a unique set of geologic, hydrogeologic and anthropogenic
circumstances that determine how limited staff time should be applied to
the site. IDHW-DEQ utilizes a remediation team approach to evaluate the
potential and actual environmental threats posed by a site to determine
staff work allocations. Sites with significant actual or potential threats are
held in compliance with Water Quality Standards and Wastewater
Treatment Requirements. The priority ranking system is a numerical
guide, not a work allocation system as identified in the audit report.
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c) Three of the four sites cited by the draft audit report as examples have
been remediated since the auditors visit. The site assessment is complete
on the fourth site and a consent agreement has been developed with the
responsible party. Voluntary compliance with the petroleum sections of
the Water Quality Standards and Wastewater Treatment Standards has
historically been very high throughout Idaho. In IDHW-DEQ's
experience, voluntary compliance is far superior to forced compliance to
achieve expedited remediation goals.

d) The following are detailed responses to each of the four sites listed in the
draft audit report for NIRO:

PIONEER SQUARE SITE. The audit report suggests a schedule and
criteria should have been used at an earlier stage on this site. The site
owners have not been recalcitrant. This site is an example of a very
complex site where multiple sources are in the area, cross gradient and up
gradient of the site. The site and other close sources required evaluation
prior to assessment of responsibility for contamination found in the area.
Voluntary compliance site assessments were relied upon to help sort out
these sources. In addition, the ground water contamination on this site
was in a slow moving ground water area with no identified users (City of
Sandpoint). Although DEQ can enforce regulations on known responsible
parties, where responsibility is unknown IDHW-DEQ must use caution
and often rely on voluntary investigations.

Currently, Pioneer Square and the neighboring bulk facility have
completed site assessments. There appears to be contamination on both
sites. The Pioneer Square PRP has negotiated a consent agreement with
LDHW-DEQ and a corrective action plan will be submitted for this site in
accordance with the established schedule.

MUZZY OIL SITE. This site was discovered prior to the availability of
the schedule and criteria in December 1992. Voluntary compliance was
progressive throughout the project. The owner/operator was not
recalcitrant and requested extensions to regulation deadlines. The site
never posed an off-site ground water threat because of unique geologic
characteristics not accounted for in the IDHW-DEQ prioritization scoring.
The site was successfully remediated in June 1994 voluntarily by the
owner/operator.
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ROBERT HAYS SITE. This site was also discovered prior to the
availability of the schedule and criteria in December 1992. In addition,
there were no UST/LUST staff in the NIRO region at the time of this site
discovery in 1990. No ground water contamination was ever documented
at the site. Moderate levels of soil contamination remained after removal
of a 550 gallon gasoline tank, where soil could not be removed from
under a building.

The audit report suggests no follow-up was conducted on the site from
notification in September 1990 until January 1993. The fact there was no
documentation in the file does not mean follow up was not done. At this
particular point in time (i.e., at the start of the LUST program in NIRO),
returned certified mail was not put into the file, the returns were
discarded. This oversight was corrected but, not before the two returned
letters during this period were discarded. The fact there was no
documented ground water contamination, and no schedule and criteria was
available during this period, did not allow further action on this site. The
site has been closed after a voluntary compliance site investigation had
shown no contamination of the ground water.

ROCKY POINT MARINA SITE. This site was initiated in 1990, again,
before the availability of the schedule and criteria and the inception of the
NIRO LUST program. Negotiation of the consent agreement between
IDHW-DEQ and the Idaho Division of Public works was time consuming.
Initial source removal of leaking tanks and contaminated soil had mitigated
most of the continuing threat to ground water at the site. No ground
water use was threatened. The site was remediated in December 1993
under a schedule and criteria.

e) The prioritization of sites by IDHW-DEQ is guided by the scoring sheet
filled out on each site. The priority value from the scoring presents the
potential for a site to affect public health and the environment. Site
specific geologic, hydrogeologic, and anthropogenic conditions give each
site a unique potential to contaminate. As such, IDHW-DEQ uses a team
approach to determine staff priority in working on sites. The priority
ranking is not a work allocation system, but a useful tool in determining
relative potential to affect human health and the environment.
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f) Time delays in the negotiation of consent agreements and scheduling of
site work are virtually unavoidable. A vast array of technical, legal, and
financial issues accompany each site. IDHW-DEQ's experience indicates
forced compliance does not speed resolution of any issues in many cases.
True recalcitrant owners/operators are held strictly to regulation time
tables. Regulation of LUST sites by IDHW-DEQ is consistent and very
effective in achieving remediation.

To demonstrate IDHW-DEQ's commitment to enhancing the LUST program, evaluation
of the current prioritization system has begun to ensure the system utilized accurately
reflects the scientific conditions of the respective site. However, IDHW-DEQ still
concludes the prioritization system is just one tool in determining relative priorities.
Other components that apply include, but are not limited to:

• aggressiveness/eagerness of the RP to pursue the required work.
• seasonal timing of work to be performed.
• available funding by RP's (this is an extremely important issue in
Idaho, as the state does not possess a state sponsored cleanup
law/fund).

While IDHW-DEQ maintains the position that this section does not apply to the audit in
question, IDHW-DEQ does concur with the recommendations made in this section for
providing enhancement to the current program with the following exceptions:

1) IDHW-DEQ is not required to maintain a site prioritization system, as
documented above, and

2) the system utilized by IDHW-DEQ is utilized as a management tool to
assist DEQ program managers in assigning relative priority, not absolute
priority.

As documented above, IDHW-DEQ concludes the findings referenced in Comment 4 do
not apply. However, appropriate justification has been presented to demonstrate IDHW-
DEQ's commitment to providing an effective and efficient approach to LUST site
management.
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CHAPTER 5. Cost Recovery Procedures Need Improvement

Comment 5.

"IDHW's procedures used for the recovery of LUST Trust Fund expenditures need
improvement. During the period fiscal 1993 through the first quarter fiscal 1994, cost
recovery settlements involving four LUST sites were completed. Our review of the cost
recovery actions at all four sites disclosed that the recoveries did not cover all of the
Trust Fund expenditures related to the site. Also, the cost recoveries were not
adequately documented. In addition, IDHW did not attempt to charge interest on LUST
Trust Fund recovery amounts and did not adequately administer a contract which was
funded with LUST Trust Fund monies.

These conditions occurred because Remediation Bureau personnel: (i) did not accurately
identify all LUST Trust Fund expenditures; (ii) did not follow EPA documentation
requirements; (iii) were of the opinion that interest assessments would adversely affect
the cost recovery process and corrective actions; and (iv) made contract revisions without
the use of a written contract amendment. As a result, it does not appear that IDHW had
maximized its cost recoveries from responsible parties.

Recommendations: "We recommend that the Regional Administrator require IDHW to:

1. Ensure that cost recovery claims include all costs associated with the LUST sites.

2. Document the basis for settlement amounts and the justification for any
settlements significantly less than full cost recovery.

3. Assess and attempt to recover interest charges on LUST Trust Fund cost recovery
amounts.

4. Ensure that all contract modifications are done through the use of written
amendments.

Response 5.

IDHW-DEQ concurs with the audit report findings, and already has prepared a draft cost
recovery policy to ensure the recommendations stated above are implemented.
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CHAPTER 6. Quarterly Stars Reports Were Inaccurate
Comment 6.

Quarterly STARS reports submitted to EPA Region 10 did not accurately report LUST
Program activity during fiscal 1993. The number of confirmed releases were understated
by 16 percent, cleanups initiated were overstated by 18 percent, and cleanups completed
were understated by 57 percent. In addition, the quarterly reports included LUST
Program activity that had occurred prior to the reporting periods. The inaccuracies
occurred because not all performance data had been correctly compiled by the computer
system used to maintain LUST site information, information in the quarterly reports was
not reconciled to the supporting records, and some regions reported LUST site activity
late. The erroneous reporting resulted in EPA managers receiving inaccurate
performance information on the IDHW's LUST Program during fiscal 1993.
Recommendation: "We recommend that the Regional Administrator require IDHW to:

1. Implement procedures which ensure that LUST site activity information
maintained in the UST-DMS is reconciled to source documents at least quarterly.

2. Ensure that IDHW's regions report LUST site activity information to the
Remediation Bureau on a timely basis and that the information is reported timely
to EPA.

Response 6.

IDHW concurs with the audit reports statements indicating IDHW-DEQ Remediation Bureau
staff should be required to reconcile source documents with information maintained in the UST-
DMS.

As previously indicated to OIG staff, IDHW-DEQ is currently evaluating protocols for the entry
of LUST site data and associated QA/QC to ensure the accurate and timely incorporation of site
data. As such, IDHW-DEQ is evaluating the incorporation of existing IDHW-DEQ data entry
and data QA/QC policies and procedures into the LUST site data base program. Incorporation
of the data entry protocols will assure data entered are accurate and reconciled to source
documentation.
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Idaho's Leaking Underground Storage Tank Program
APPENDIX II

ABBREVIATIONS

CFR Code of Federal Regulations

EPA Environmental Protection Agency

FSR Financial Status Report

IDHW Idaho Department of Health and Welfare

LUST Leaking Underground Storage Tank

NIR Northern Idaho Region

OIG Office of Inspector General

OMB Office of Management and Budget

OSWER Office of Solid Waste and Emergency Response

RCRA Resource Conservation and Recovery Act

SARA Superfund Amendments and Reauthorization Act

STARS Strategic Targeted Activities for Results System

SWIR South Western Idaho Region

UST Underground Storage Tank

UST-DMS Underground Storage Tank - Data Base Management System
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Idaho's Leaking Underground Storage Tank Program
DISTRIBUTION

Office of Inspector General

Inspector General (2410)

EPA Headquarters Office

Agency Followup Official (3101)
Agency Followup Coordinator (3304)
Director, Grants Administration Division (3903F)
Assistant Administrator for Enforcement (2211)
Associate Administrator for Regional Operations and
State/Local Relations (1501)
Associate Administrator for Congressional and
Legislative Affairs (1301)
Associate Administrator for Communications, Education
& Public Affairs (1701)
Headquarters Library (3401)

EPA Region 10

Regional Administrator
Director, Water Division
Audit Followup Coordinator
Public Affairs Office
Region 10 Library
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