\ Office of Inspector General
Report of Review
ASSESSMENT OF FINANCIAL
MANAGEMENT IN THE
ENVIRONMENTAL PROTECTION AGENCY
VOLUME I OF II
E1SFG3-11-0026-4400042
March 31, 1994
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Inspector General Division
Conducting the Review: Headquarters Audit Division
Arlington, Virginia
Regions Covered: Agency wide
Program Offices Involved: Agency wide
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ASSESSMENT OF FINANCIAL MANAGEMENT IN
THE ENVIRONMENTAL PROTECTION AGENCY
EXECUTIVE SUMMARY
PURPOSE
On September 27, 1993, the United States Senate Committee on
Environment and Public Works, Subcommittee on Superfund,
Recycling, and Solid Waste Management requested that the Office
of Inspector General (OIG) conduct a comprehensive review of
EPA's financial management program. The Subcommittee also sent a
letter to the Environmental Protection Agency (EPA) Administrator
requesting the Agency's cooperation and participation in this
review. This report summarizes the results of our assessment of
financial management in the EPA. This review was a model effort
in that it was performed as a cooperative endeavor between the
Office of Inspector General and EPA's Financial Management
Division (FMD).
This review was performed to provide a current assessment of
the Agency's financial management program to:
identify the most important financial management issues
that challenge EPA,
determine the root causes for the financial management
issues, and
recommend initiatives to address these issues and
causes to improve financial management within the
Agency.
The team conducted the review in three interrelated parts.
First, the OIG auditors conducted a literature search of OIG,
General Accounting Office (GAO) and other reports. They reviewed
the findings and recommendations in the reports to determine the
Agency's position on the reported issues. The review team then
developed a list of financial management issues that currently
challenge the Agency.
Second, focus groups were held to obtain Agency views on
root causes and solutions to financial management issues that
challenge EPA. As a starting point, the review team provided the
focus groups with the list of financial management issues they
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developed. Then focus groups discussed issues, both on and off
this list, that they considered important. They selected the
issues that they viewed as the most important, and addressed root
causes and solutions.
Third, OI6 auditors developed a standard set of questions
based on financial management issues identified during the
literature search and focus group discussions. They used these
questions to interview key financial managers in the Agency to
obtain their views on root causes and solutions to financial
management issues.
The review team used the results of these three interrelated
efforts to develop this report to provide a current assessment of
financial management in EPA. In addition, copies of the draft
report were provided to personnel in the Office of Administration
and Resources Management (OARM), and the Office of Solid Waste
and Emergency Response (OSWER). Review comments received were
considered in finalizing the report.
BACKGROUND
EPA management has recognized the need for improvements in
financial management and is currently taking steps to strengthen
its overall financial management program and to make it more
responsive to Agency personnel. The Agency has conducted an EPA
National Performance Review for financial management and has
produced a Financial Management Status Report and Five-Year Plan.
Both of these documents propose actions that should help the
future direction of EPA's financial management program. In
addition, in fiscal 1993 the Office of Administration and
Resource Management reorganized to help improve the management
and accountability of the Agency's complex contracts, grants, and
financial management activities. This review builds on the
efforts that the Agency is taking, and should help the Agency
better focus and direct financial management.
RESDLTS-IN-BRIEF
Our review identified the following issues that
significantly challenge financial management in EPA at the
present time. The issues are: (1) different perceptions and
awareness of financial management, (2) financial aspects of
Superfund cost recovery, (3) finance and reporting systems, (4)
financial and accounting policies and procedures, (5) program
financial management, and (6) financial management training and
qualifications.
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PRINCIPAL ISSUES
Different Perceptions and Awareness
of Financial Management
The perceived importance of financial management varies
throughout the Agency. Our review disclosed that many employees
did not consider financial management to be as important as
program management. Others believed financial management and
other program management to be mutually supporting, equivalent
status functions. As long as financial management is not
consistently viewed as a priority equal to program management, it
will not get the attention it needs. This perception is further
impacted by the amount of responsibilities assigned to the Chief
Financial Officer (CFO). The CFO responsibilities were
designated to the Assistant Administrator for Administration and
Resources Management who already had numerous other duties. As a
result, it may be very difficult for the CFO to establish a
strong relationship with Agency managers and staff needed to
ensure effective Agencywide financial management practices.
Financial Aspects of Super-fund
Cost Recovery
EPA has not always effectively presented its case to
Congress and the public regarding the Superfund clean-up program
and the progress being made. The Agency needs to better convey
that Superfund clean-up is a lengthy, involved process and the
cost recovery process for these sites is equally complicated and
lengthy. EPA needs to convey how it is doing against realistic
targets, i.e., what should be occurring. Officials in the focus
groups and interviews believe that cost recovery is not given a
high enough priority. Because cost recovery is a process that
occurs after cleanup, some Agency personnel view the clean up as
the "real" work, with cost recovery as secondary. Some wanted to
see better site specific charging for Superfund sites and
accounting for Superfund receivables.
Finance and Reporting Systems
During our focus groups and interviews, we found that users
were concerned with limited systems capabilities, and lack of
integration of finance and reporting systems. This includes
problems with the use of the Integrated Financial Management
System (IFMS) and the Agency's Comprehensive Environmental
Response, Compensation and Liability Information System
(CERCLIS). IFMS is the Agency's official accounting system while
CERCLIS is used to manage the Agency's Superfund Program.
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Duplicate data input between systems that are generally not
reconciled has led to problems that could be overcome with more
effective use of the two systems.
Concerns were also expressed with the subsequent use of
alternate PC based systems that users developed locally to meet
Agency needs. To compensate for the deficiencies with the
Agency's systems and to accomplish their missions, many EPA
offices have developed their own alternate systems. This has
resulted in a proliferation of generally unreconcilable user data
systems that make managing EPA programs extremely challenging.
Financial and Accounting
Policies and Procedures
EPA personnel expressed concern that the financial policies
and procedures are difficult to locate, incomplete, and confusing
for many users. They reported that policies are not consolidated
in an easy to use fashion, are out of date in many instances, and
are bureaucratically written without the benefit of user friendly
interpretations. They further believe that Agency policies and
procedures are not consistently administered. While Headquarters
FMD issues the official financial management policy, the
decentralized structure of the Agency results in many different
interpretations of policies which tend to confuse staff. Because
many policies had not been updated, we found that many regions
developed their own way of doing business causing a lack of
standardization among the regions. Finally, the users found many
of the policies and procedures difficult to understand. As a
result, EPA personnel did not believe that the Agency's policies
and procedures were effective.
Program Financial Management
Agency personnel identified several concerns that hinder the
achievement of good financial management in EPA program offices.
First, they believe there is an overall lack of understanding of
the importance of financial management by program managers. Many
program managers do not believe that they are involved in
financial management.
Second, management does not have the data and reporting
tools needed to effectively manage their programs. For example,
to track spending against operating plans or budgets, program
managers need reports that break down commitments and obligations
to the branch or office level.
Third, Agency personnel do not believe that there is a
strong link between budgeting and planning in the Agency. They
reported that the budget is not directly tied to the planning
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function, and that budgeting and planning do not work coherently
together. When the Agency's budget is reduced during a given
year, there frequently is no correlating change to the plan,
making many goals difficult to achieve.
Fourth, they believe that the Agency has many different fund
object class codes to charge programmatic or administrative
expenditures, and not enough instructions to use the codes
consistently. Consequently, users often do not know the proper
code to use.
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Financial Management Training
and Qualifications
The Agency is making progress in assuring that its financial
management staff is well trained and qualified. However, some
impediments have affected this goal. For example, the Agency
does not offer courses on all specific EPA financial management
areas. Yet, this very specific training is needed for Agency
employees toeffectively accomplish their financial
responsibilities. This lack of specific training has resulted in
inexperienced and untrained personnel performing financial
management functions, particularly in program offices.
In addition, when courses are developed for specific
government financial management training, they are not taught in
all regional offices. Limited travel and training funds often
prohibit regional offices from sending their employees to
Headquarters for the needed financial management training. In
addition, many Agency personnel believe a core curriculum of
courses would help standardize financial management duties and
functions within EPA, and would facilitate better communication
among financial managers and staff.
RECOMMENDATIONS
The Office of Inspector General has developed
recommendations addressing each of the above principal issues.
The recommendations were formulated from our ideas, suggestions
received from the focus groups and interviews, and past
recommendations reported in OIG or GAO audits. The detailed
recommendations are provided in Chapter Three (page 37) of this
report.
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TABLE OF CONTENTS
(VOLUME I)
Page
EXECUTIVE SUMMARY i
PURPOSE i
BACKGROUND ii
RESULTS-IN-BRIEF ii
PRINCIPAL ISSUES iii
RECOMMENDATIONS V
CHAPTERS
CHAPTER 1 INTRODUCTION 1
PURPOSE AND SCOPE OF REVIEW 1
METHODOLOGY 3
BACKGROUND 4
FINANCIAL MANAGEMENT ACCOMPLISHMENTS
AND INITIATIVES 5
OIG VIEW OF FINANCIAL MANAGEMENT 8
CHAPTER 2 FINANCIAL MANAGEMENT ISSUES 11
DIFFERENT PERCEPTIONS AND AWARENESS
OF FINANCIAL MANAGEMENT 12
FINANCIAL ASPECTS OF SUPERFUND
COST RECOVERY 17
FINANCE AND REPORTING SYSTEMS 23
FINANCIAL AND ACCOUNTING POLICIES
AND PROCEDURES 27
PROGRAM FINANCIAL MANAGEMENT 32
FINANCIAL MANAGEMENT TRAINING
AND QUALIFICATIONS 34
(OVER)
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CHAPTER 3 RECOMMENDATIONS 37
DIFFERENT PERCEPTIONS AND AWARENESS
OF FINANCIAL MANAGEMENT 37
FINANCIAL ASPECTS OF SUPERFUND
COST RECOVERY 38
FINANCE AND REPORTING SYSTEMS . . . . . 39
FINANCIAL AND ACCOUNTING POLICIES
AND PROCEDURES 39
PROGRAM FINANCIAL MANAGEMENT 40
FINANCIAL MANAGEMENT TRAINING
AND QUALIFICATIONS 41
APPENDICES
APPENDIX 1 GLOSSARY OF ACRONYMS 43
APPENDIX 2 REPORT DISTRIBUTION 45
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TABLE OF CONTENTS
(VOLUME 2)
EXHIBITS
EXHIBIT A JOINT OIG/FMD REVIEW TEAM MEMBERS
AND INDEPENDENT FOCUS GROUP
FACILITATORS A-l
EXHIBIT B SENATE REQUEST LETTERS . B-l
EXHIBIT C EPA OFFICES REPRESENTED BY THE
FIVE FOCUS GROUPS C-l
EXHIBIT D EPA LOCATIONS AND OFFICES REPRESENTED
BY THE KEY INTERVIEWS D-l
EXHIBIT E LISTING OF EPA OIG FINANCIAL MANAGEMENT
AND SUPERFUND RELATED REPORTS E-l
EXHIBIT F LISTING OF GAO AUDIT REPORTS AND OTHER
FINANCIAL MANAGEMENT DOCUMENTS F-l
EXHIBIT G STATUS OF PRIOR OIG RECOMMENDATIONS
IN MATS G-l
EXHIBIT H OIG REPORTS AND FINDINGS BY ISSUE AREA . . H-l
EXHIBIT I GAO REPORT HIGHLIGHTS 1-1
EXHIBIT J OIG/FMD TEAM INITIAL ISSUES PRESENTED
TO THE FOCUS GROUPS J-l
EXHIBIT K PROCEDURES USED FOR THE OIG/FMD FOCUS
GROUP MEETINGS K-l
EXHIBIT L FOCUS GROUP SUMMARY OF MAJOR ISSUES .... L-l
EXHIBIT M INTERVIEW QUESTIONS USED FOR KEY
INTERVIEWS M-l
EXHIBIT N SUMMARY OF EPA KEY INTERVIEWS N-l
EXHIBIT O ORGANIZATION CHARTS (EPA & OARM) .... O-l
EXHIBIT P ANALYSIS OF MILESTONE DATES P-l
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CHAPTER 1
INTRODUCTION
This report summarizes the results of our assessment of
financial management in the Environmental Protection Agency
(EPA) . All exhibits referred to in this report are included in a
separate report (Volume II) which is available upon request.
This review was a pioneering, model effort in that it was a
joint, cooperative endeavor between the Office of Inspector
General (OIG) and EPA's Financial Management Division (FMD).
This was a valuable experience to both the EPA and OIG because we
canvassed the Agency, working together with FMD as a team, to
highlight the issues and develop the solutions. The OIG and FMD
team members are identified in Exhibit A (page A-l). We believe
this review places a spotlight on the importance of financial
management to EPA, and on the many issues challenging financial
management. Lastly, the results of this review will benefit EPA
financial management far into the future by highlighting the
issues raised by representative EPA managers and staff.
PURPOSE AND SCOPE OF REVIEW
The purpose of this review was to provide an overview of EPA
financial management. Specifically, we wanted to (1) identify
the most important financial management issues that challenge
EPA; (2) determine the root causes for the financial management
issues; and (3) recommend initiatives to address these issues and
causes to improve financial management within EPA. The review
was requested by the United States Senate Committee on
Environment and Public Works, Subcommittee on Superfund,
Recycling, and Solid Waste Management. Copies of the request
letters to the EPA Administrator and Inspector General are
presented in Exhibit B (page B-l). To be responsive to the
Senate request with the limited timeframe we were given, we did
not perform this review as an audit that necessarily meets
generally accepted auditing standards. We believe that the
review as conducted presents a realistic, current assessment of
financial management in EPA.
We examined the financial management condition of EPA
through three distinct phases in our work. First, in order to
obtain the broadest picture of EPA financial management
practices, we conducted a literature search and analysis of
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current and past OIG and General Accounting Office (GAO) reports
citing EPA financial management issues as findings, as well as
other reports on government-wide financial management. The
search included reports issued from 1986 through 1993.
During our research, we reviewed the OIG semi-annual reports
and our OIG automated report data base. We then reviewed reports
obtained from Office of Audit files. To ensure the widest
possible coverage of financial management issues, other agencies
thought to have certain sound financial management practices were
contacted for information. For example, we reviewed the
Department of Energy's Chief Financial Officer (CFO) Financial
Management Development Program (FMDP) Manual which addressed
financial management staff curriculum courses and Individual
Development Plans (IDPs).
The identification phase of our work also included an
analysis of EPA's Management Audit Tracking System (MATS) by
cross checking open findings in MATS to the Agency's Financial
Management Status Report and Five-Year Plan. MATS is the
Agency's system to track OIG audit report recommendations and
their implementation. Further, we reviewed EPA's National
Performance Review report on financial management.
As a distinct second phase of our effort, we followed a
Total Quality Management (TQM) approach by convening focus group
meetings with EPA users of financial management. We asked them
for their views on the most challenging financial management
issues, causes for the issues, and recommended solutions to
address the issues and causes. To obtain EPA user comments, we
held five separate focus group meetings. These focus groups were
held in Region 2 at New York, Region 8 at Denver, and the EPA
Finance and Accounting Center at Cincinnati. The two others were
held at Headquarters. One included EPA Senior Budget Officers
and the other focused entirely on Superfund-related financial
management issues. The organizational components represented in
the focus groups are identified in Exhibit C (page C-l).
For the third phase of our work, we conducted key interviews
with agency Headquarters and regional officials to obtain their
views of the financial management issues, causes and recommended
solutions. These interviews included senior level EPA employees
working in financial management areas that included the Financial
Management Officers (FMO), Regional Comptrollers, Assistant
Regional Administrators (ARA), and Superfund Program Managers in
Boston, Philadelphia, Chicago, and San Francisco. We also
interviewed other senior officials such as, the EPA Comptroller
in Headquarters to get their perspectives. The locations and
offices of those interviewed is presented in Exhibit D (page
D-l) .
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We used the results of these three interrelated efforts to
develop this report to provide a current assessment of financial
management in EPA. In addition, copies of the draft report were
provided to personnel in the Office of Administration and
Resources Management (OARM), and the Office of Solid Waste and
Emergency Response (OSWER). Review comments received were
considered in finalizing the report.
METHODOLOGY
This report represents an assessment of financial management
in EPA. To obtain the overview of significant current and past
financial management issues, we reviewed approximately 140 OIG
audit reports that included financial management issues. The OIG
reports are presented in Exhibit E (page E-l). We wanted to
determine if major past concerns were still an issue and if
recommendations made by the OIG had been acted on. In addition,
we reviewed GAO reports and .other Federal Government reports on
financial management issues that might present challenges or
offer solutions to EPA. The GAO and other reports are listed in
Exhibit F (page F-l).
We analyzed EPA's Financial Management Status Report and
Five-Year Plan to ascertain if FMD addressed the open issues from
our current and prior reports. We compared the Plan with open
OIG report recommendations to determine if EPA had taken or
planned corrective actions for the open areas. We reviewed the
Management Audit Tracking System to determine if the issues in
historical reports had been addressed by EPA. The results of our
analysis of OIG reports in MATS is presented in Exhibit G (page
G-l). Also, we reviewed the Plan to ascertain if further
recommendations were needed to improve the Plan.
In order to achieve a balanced perspective of financial
management issues as they affect Agencywide users, we decided on
a focus group approach. The financial management issues
developed from the reports in our literature search were the
basis for developing and presenting the basic financial
management issues to the focus groups. The results of our
literature search are presented in Exhibit H (page H-l) and
Exhibit I (page 1-1). OIG staff developed a set of issues from
the literature search, and then solicited FMD comments on the
validity and completeness of the issues on the list. A listing
of the financial management issues is presented in Exhibit J
(page J-l).
The focus groups consisted of six to twelve individuals.
While the individuals came from a variety of program areas, we
tried to ensure that only one individual came from any given
program area or regional branch. While the individual could be
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any grade level, they had to be involved with, or have knowledge
of financial management matters.
We asked the focus groups to select the major financial
management issues confronting the Agency, from their viewpoint.
The members used the jointly developed OIG/FMD issue list as a
starting point and then added or deleted to the list of issues as
they desired. After identifying their most significant issues,
the groups discussed why the issues were concerns, and what
caused the issues to be concerns. Then the groups recommended
solutions that would improve EPA overall.
The focus groups utilized TQM trained facilitators who
conducted the focus groups to promote an open, impartial
atmosphere. Representatives from the OI6 and FMD attended the
focus groups but acted only as neutral monitors. The monitors
did not actively participate in the group discussions, unless
specifically invited or encouraged to participate on given
issues. Procedures for the focus group meetings are presented in
Exhibit K (page K-l). We believe the information obtained from
the focus groups is representative of Agency user viewpoints. An
overall summary of focus group results is presented in Exhibit L
(page L-l).
We also conducted interviews with key EPA Headquarters and
regional personnel on financial management issues. In order to
obtain consistent financial management information from all the
interviews, we designed a standard set of questions to use for
all the interviews. The questions were designed to inquire about
the office's financial management accomplishments, current
initiatives, staff qualifications, organizational structure,
agency accounting systems and discussions on each of the major
financial management issues that the individual considered
important. The questions used for the interviews are presented
in Exhibit M (page M-l), and an overall summary of the interviews
is presented in Exhibit N (page N-l).
BACKGROUND
EPA is organized into Headquarters and Regional Offices
under the direction of the Administrator overall. The
Headquarters offices are headed by Assistant Administrators, and
the Regional offices are headed by Regional Administrators. The
Headquarters and Regional Offices all report directly to the
Deputy Administrator. In addition, there are numerous EPA
laboratories and field offices located throughout the United
States and its territories.
The Agency's financial management activities fall directly
under the responsibility of the CFO. The CFO is the Assistant
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Administrator for the Office of Administration and Resource
Management (OARM). The Office of the Comptroller is one of the
major offices reporting to the CFO. The Comptroller's Office has
direct authority over three divisions; budget, resource
management, and financial management. The Budget Division
carries out program analysis and planning; budget formulation,
preparation, and execution; and distribution of funding
allotments and allocations. The Resource Management Division
administers the CFO's responsibilities for resource systems.
The Financial Management Division is the Agency's central
finance office. The division develops and maintains accounting
systems, fiscal controls, and systems for payroll and
disbursements, and develops and implements EPA's financial
management policies and procedures. In the regions, the
Assistant Regional Administrators (ARA) have been delegated
authority from the CFO for responsibility of financial management
within their organizations. This responsibility is added to the
ARAs responsibilities of personnel management, regional program
planning, budget implementation, and grants administration. EPA
and OARM organization charts are presented in Exhibit O (page
O-l) .
FINANCIAL MANAGEMENT ACCOMPLISHMENTS
AND INITIATIVES
EPA management has recognized the need for improvements in
financial management and is currently taking steps to strengthen
its overall financial management program and to make it more
responsive to all Agency personnel. The Agency has conducted an
Agencywide National Performance Review for financial management,
and has produced a Financial Management Status Report and Five-
Year Plan. Both of these documents propose actions that should
help the future direction of EPA's financial management program.
In fiscal year 1993, the Office of Administration and
Resource Management reorganized to improve the management and
accountability of the Agency's complex contracts, grants, and
financial management activities. In addition to the
reorganization, the Agency has demonstrated improvement through
several financial management accomplishments and initiatives.
We believe the above are good initial steps to move towards
sound financial management at EPA. We in the OIG are optimistic
that the Agency is moving in the right direction. However, at
present most progress is in the form of plans rather than
concrete accomplishments. For this reason, the OIG continues to
be concerned about the Agency's ability to implement the plans
timely and effectively.
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EPA's Senior Resource Officials and Resource
Management Committee
The Agency has designated Senior Resource Officials (SRO)
and a Resource Management Committee. According to Agency plans,
the SROs are to be the Agency's primary points of .accountability
charged with strengthening Agencywide fiscal resource management
practices. The Resource Management Committee replaced the
Standing Committee on Contracts Management .and will assure
effective implementation of Standing Committee recommendations.
The Resource Management Committee's mission is to provide an
Agencywide forum for SROs to strengthen resource management by:
1) developing strategies for reforming the Agency's fiscal
resource management practices; 2) overseeing, assessing, and
advocating accountable resource management; and 3) making
decisions necessary to implement the Standing Committee on
Contracts Management recommendations.
The Resource Management Committee is chaired by the CFO and
vice-chaired by the Deputy CFO. The Deputy Assistant
Administrators and Assistant Regional Administrators are
typically designated as the SROs after approval from the CFO.
The SRO is accountable for that office's ethical, effective
resource management, including acquisition, assistance and
programmatic financial management. Extramural resources within
this scope include contracts, procurement, grants, loans, state
revolving funds, and cooperative and interagency agreements.
While we believe the SRO concept and the Resource Management
Committee can substantially strengthen financial management at
EPA, we note that both efforts are in their early stages.
Ensuring that designated officials have the appropriate
backgrounds, training, staffing, and authority, etc. will be
critical to the success or failure of these initiatives.
The Agency has systems to track corrective action on OIG
recommendations and internal control weaknesses. The Agency
utilizes the Management Audit Tracking System (MATS) for audit
follow-up. The system records OIG report findings and
recommendations along with the Agency's response to the reports
and corrective actions. MATS provides the status of OIG reports
as needed and assists in the audit resolution process. While the
OIG recognizes that the system is in place and functioning,
various reports over time have shown that further improvements to
MATS can be made. Recognizing the difficulties in establishing
MATS and improving it over time, the challenge today is to ensure
that corrective actions have actually occurred when reported.
EPA uses the Internal Control Corrective Action Tracking
System (CATS) to monitor corrective action on material weaknesses
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identified in the Federal Managers' Financial Integrity Act
(FMFIA) process. CATS records and tracks recommendations and
projected action dates and provides a system to monitor whether
management implements the changes as scheduled. While the Agency
currently does not have an automated tracking system to monitor
the implementation of GAO report recommendations, OARM is slated
to develop a system to clearly identify GAO issues requiring
program attention, milestones, and completion dates.
Financial Management Status Report
and Five-Year Plan
The Chief Financial Officers Act of 1990 required that the
Director of the Office of Management and Budget (OMB) annually
submit to Congress a Federal Agency financial management status
report and a government-wide five-year financial management plan.
To achieve this requirement, OMB instructed agency CFOs to
prepare a status report and five-year plan.
EPA complied with OMB instructions and completed its
Financial Management Status Report and Five-Year Plan initially
in 1992. In August 1993, the Agency issued its second Plan after
resolving to make a more concerted effort to make the Plan more
meaningful and comprehensive for EPA financial management.
The Agency considered the Plan as an opportunity to (1)
articulate a bold, long-range vision for financial management,
and (2) begin developing a strategy that will serve as a roadmap
for achieving that vision. The Plan focuses on the opportunity
to integrate key pieces of Congressional legislation so that EPA
is able to provide complete financial, budget, and program
management information to decision makers in support of policy in
the environmental arena.
OMB provided the Agency with the key areas to address in its
Plan. The key areas were broken down into sections each
beginning with a statement of long-term objectives, continuing
with the status of progress made in the present year, and
concluding with an outline of plans for further improvements over
the next five years. The Agency also included milestones and
expected completion dates for the planned improvements. The
sections addressed in the Agency's Plan are: 1) CFO's Conceptual
Framework; 2) Financial Management Organization; 3) Accounta-
bility Standards; 4) Financial Management Personnel; 5) Financial
Systems; 6) Management Integrity; 7) Asset Management; 8) Audited
Financial Reporting; and 9) Administration of Government
Assistance Programs.
Recognizing that this Financial Management Status Report and
Five-Year Plan is the second ever produced, it is a substantial
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improvement over the first, and is a fairly comprehensive
document.
Agency NPR Review of Financial
Management
In addition to completing the Financial Management Status
Report and Five-Year Plan, EPA established a Financial Management
Team to identify barriers to effective financial management. The
team adopted the statement below as their vision for the future
of EPA financial management.
"The Agency has a sound, flexible, user friendly, and
readily accessible financial management process which
ensures that EPA directs resources in ways that maximize
achievement of the Agency's mission."
The team followed a focus group approach to determine the
most important target areas and initiatives for corrective
action. The team selected three targets, and drafted a report
listing each action. The three targets reported were; 1)
increase flexibility with accountability, 2) increase the
importance of financial management and, 3) improve financial
management information systems. The NPR recommended initiatives
for correction.
OIG VIEW OF FINANCIAL MANAGEMENT
The OIG recognizes that financial management in the Agency
has improved over the past few years. With the implementation of
the CFO Act and goals listed in the Financial Management Status
Report and Five-Year Plan, steps have been taken to strengthen
financial management, as well as, increase management's
commitment to improving accountability throughout EPA. Yet,
significant areas of concern still exist concerning financial
management issues within the Agency, and throughout the federal
government. For example, 6AO stated in their December 1992
Financial Management Issues report that:
Widespread financial management weaknesses are
crippling the ability of our leaders to effectively run
the federal government. Reducing the federal deficit
requires monumentally difficult decisions. If our
government is to make these decisions in an informed
manner, it must have better financial information.
...public confidence in the federal government as a
financial steward has been severely undermined.
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In addition, we found that current and past OIG, GAO, and FMFIA
reports indicate that certain issues continue to effect EPA in
the financial management arena.
Our review and analyses of past reports identified financial
management issues that have historically challenged the Agency.
These issues include: accounts receivable and collections;
internal controls and record keeping; EPA's financial statements;
financial systems; obligations and disbursements; property and
equipment; and low Superfund cost recovery. Although reported on
several times over a period of more than a decade, many of these
issues still challenge the Agency. For example, recently
completed audits of the Agency's financial statements showed
that: improvements were needed in financial and budgetary
accounting and reporting; recording accounts receivable; property
and equipment records need to be integrated with the general
ledger; and accounts payable and collections.
The' Agency acknowledges the significant areas still in need
of improvement, has corrective action plans in place addressing
key issues, and is serious about efforts to proceed. We, in the
OIG, are optimistic but would be remiss in not raising concerns
over whether the corrective action plans will be completed within
the timeframes given. We have had promises of corrective actions
in the past which many times have not materialized, and we note
that the seriousness of approach, priorities, resources, key
personnel, etc. can change over time.
To further illustrate this point, we analyzed the Financial
Management Status Report and Five-Year Plan to determine the
status of 22 corrective action milestones with expected
completions dates prior to December 1993. Agency personnel
advised us that 14 of these milestones were completed as
scheduled. However they also advised that corrective actions for
one milestone was completed four months late, and that corrective
actions for seven milestones will be delayed from three to nine
months. Three of the delayed milestones are for significant
actions that affect the Agency's finance and reporting systems.
Our analysis of these corrective action milestones is presented
in Exhibit P (page P-l).
We recognize the Agency is making good initial steps at
improving financial management. We do want to emphasize that
continuing issues exist that must be addressed. The challenge to
the Agency is to now follow through on its good start.
We want to acknowledge and commend the Agency's efforts in
preparing the Financial Management Status Report and Five-Year
Plan and their other financial management improvement initiatives
underway. Further, we believe this joint OIG/EPA financial
management review on the current state of EPA's financial
management program is a very appropriate and timely effort. Our
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purpose was not to criticize EPA financial management but to
propose additional measures the Agency could take to further
improve and refine this area. This report should help to
highlight the issues and recommend solutions to the Agency.
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CHAPTER 2
FINANCIAL MANAGEMENT ISSUES
The purpose of this chapter is to identify the primary
financial management issues that currently pose a challenge to
the Agency. It discusses the root causes and possible solutions
to the issues. The chapter also describes the Agency's efforts
to continuously improve and strengthen financial management.
Through our three phase approach previously described, our
review identified the following issues and causes that currently
present a significant challenge for financial management in EPA.
Different perceptions and awareness of financial
management,
Financial aspects of Superfund cost recovery,
Finance and reporting systems,
Financial and accounting policies and procedures,
Program financial management, and
Financial management training and qualifications.
These issues were recognized as the primary financial
management challenges by Agency personnel. The issues grew, in
part, out of various OIG or GAO reports and Agency self-analysis
exercises.
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DIFFERENT PERCEPTIONS AND AWARENESS OF
FINANCIAL MANAGEMENT
The perceived importance of financial management as a
function varies within the Agency. Many employees believe that
financial management is a function subservient to the Agency's
other programs. Some believe financial management and other
Agency programs are meant to be equivalent, mutually supporting
functions. The differing viewpoints and perceptions that other
programs are more important than financial management, have made
it difficult for financial management to function effectively.
Atrareness and Importance of
Financial Management
As indicated by 6AO, the current state of financial
management in government is dismal and needs much improvement to
manage the federal government's resources effectively. Although
EPA has been moving in the right direction in recent years, the
current state of financial management at EPA also leaves room for
improvement. One of the most pressing crises facing the federal
government today is the overall importance of federal agency
financial management. Financial management can no longer be
thought of as an isolated accounting and payment function in this
day of large budgets and government deficits.
The 1991 Joint Financial Management Improvement Program
(JFMIP) financial handbook states the following about financial
management:
Financial management is concerned primarily
with the fiscal affairs of an organization and
the translation of actions, both past and proposed,
into meaningful and relevant information for use in
the management process. Financial management covers
a broad spectrum of activities including planning,
programming, budgeting, accounting, cash and credit
management, reporting, and audit review. It also
directly supports management controls, total quality
management, training, personnel management, grant
management, procurement and property management.
EPA managers are responsible for efficiently using agency
resources to accomplish the agency's missions. They must ensure
that financial management is recognized as an important area
having a broad perspective. EPA managers must obtain, manage,
and account for Agency fiscal resources in order to achieve EPA's
overall environmental mission.
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Yet, in our review, we found that EPA managers and staff had
widely different perceptions about the importance of financial
management as it currently exists in the Agency. As a senior
Agency official stated this wn°le area of financial management
is taken for granted when it is doing good, but when financial
management fails, then it gets attention.
A big question among focus group participants was whether
financial management was as important as the work performed in
the program offices. Many viewed it as subservient to program
management, while others viewed it as being on an equal footing
with program management, working with and mutually supporting
each other. As a result of these widely varying views, financial
management is not as effective as it should be within EPA.
Many program office employees indicated that they are not
aware of many financial management policies and procedures
because the importance of these issues is not stressed. Much of
the financial management information that is presented to the
program offices comes as second hand knowledge and many of these
employees are not provided training in financial management
concepts.
We also found that many employees were not aware of EPA's
Financial Management Status Report and Five-Year Plan. Some did
not see the impact from the CFO Act and did not understand its
importance and requirements for Agency financial management. For
example, at our focus groups, we had to explain in some cases
what the CFO Act and EPA Financial Management Status Report and
Five-Year Plan were all about. In one instance, FMD had provided
copies of the Financial Management Status Report and Five-Year
Plan to the region, but management there did not further
distribute copies of the Plan to appropriate regional personnel.
An additional concern is that many Agency finance office
employees believe that program office employees give the
appearance that they have little interest in financial management
and that financial management is not a program concern. For
example, in a focus group we found that the participants had not
been trained in appropriation law, although they all need the
training for financial management functions that they perform.
To improve financial management, the Agency must ensure
that financial management is recognized in its broader
perspective as an interconnected set of management operations,
services and tools through which EPA obtains, manages, and
accounts for its fiscal resources in order to achieve its
environmental mission.
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Impact of CFO Position on
EPA Financial Management
The CFO needs to ensure that Agency financial management
objectives are accomplished. EPA has designated and assigned the
Chief Financial Officer duties to the Assistant Administrator for
Administration and Resources Management. The CFO position, a
presidential appointee, reports directly to the Administrator.
EPA's CFO is responsible for managing the Agency's financial
management activities including budget formulation and execution,
management of contracts and grants administration, and Agencywide
management controls and audit follow-up. The Deputy Assistant
Administrator for Finance and Acquisition, who serves as the
Deputy CFO, is dedicated to managing resource management
functions and advising the CFO.
The CFO responsibilities are further delegated throughout
the Agency. The Assistant Regional Administrators are designated
regional CFOs. In the Headquarters program offices, the Senior
Budget officers (SBOs) are designated the primary financial
managers. Although the CFO responsibilities are delegated to
Agency officials, the CFO does not have explicit line authority
over the financial management personnel in the Regions and
Program Offices.
In the GAO Transition Series on financial management issues
(December 1992 GAO/OCG-93-4TR), the Comptroller General stated
that:
We are concerned, however, that a number of the
agencies' CFO appointments are not following the
example set in selecting the Controller in OMB. For
nine major agencies, whose combined budgets this past
year exceeded $700 billion, the CFO designation was
added to the position of the assistant secretary for
management or administration positions that have
very broad responsibilities. This is basically the way
financial management responsibilities were structured
before passage of the CFO Act, and that approach did
not work. Its continued use, in cases in which the CFO
has a large number of responsibilities beyond areas
such as budgeting and financial management, could
dilute the CFO's role and thereby not foster the needed
urgency and undivided attention.
Organizationally, because EPA designated and assigned the
Chief Financial Officer duties to the Assistant Administrator for
Administration and Resources Management, we believe this is a
concern at EPA as well. In our review we found that the EPA CFO
also has many other responsibilities in addition to financial
management. For example, the current CFO is also responsible for
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acquisition management; human resources management; and
information resources management. In addition, the CFO is
responsible for the Agency's grants and debarment program, and
other administrative areas that include safety, health and
facilities management. See Exhibit O (page O-l) for all the
offices and functions under EPA's current CFO.
The purpose of the CFO position was to raise the visibility
of financial management, recognize the importance of financial
management functions with the successful operation of the Agency,
and provide strong oversight to the Agency's fiscal
responsibilities. Yet, during our focus group meetings,
participants mentioned that they believe there is a lack of
overall impact of the CFO on EPA financial management. This
indicates that the presence of this type of CFO (a CFO
responsible for Administration and other duties rather than just
financial management) .is not having as much impact as desired on
day to day operations.
We also recognize the concerns raised by GAO and Agency
personnel, and have our own reservations about this
organizational structure. With the many responsibilities placed
on the CFO, it may be very difficult for the CFO to establish a
strong relationship with Agency managers and staff needed to
ensure effective Agencywide financial management practices.
However, we further recognize that the present organizational
structure has only been in place a short time and that additional
time is necessary .to determine the effectiveness of this
structure. Therefore, we are not proposing further
organizational changes at this time.
EPA Actions
EPA's Office of Administration and Resources Management was
reorganized in FY 1993 to improve financial management. This
organizational change was designed to raise management attention
to financial management, recognize the importance of financial
integrity, and provide strong oversight of the Agency's fiscal
responsibilities. These were steps in the right direction, but
as evidenced by the feedback at our focus groups more needs to be
done.
Also, the Agency is planning to implement performance
measures to establish standards and goals to measure how well the
Agency's various Headquarters and regional offices are performing
key financial management function. Regions and Headquarters
program financial operations are not under the direct supervision
of the CFO; however, the CFO has the authority to measure how
well financial management activities are being conducted in these
offices. In addition, FMD plans to coordinate the development of
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financial management performance measures with the Agency's
efforts to implement the Government Performance and Results Act.
Finally, the DIG and the Agency jointly believe that this
review itself will emphasize the importance of financial
management within EPA. Increased awareness, knowledge and
importance of financial management will greatly benefit the
Agency overall and will ensure that EPA resources are used wisely
to protect the environment.
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FINANCIAL ASPECTS OF SUPERFUND
COST RECOVERY
Superfund is a large part of the Agency's work. The issue
of recovering costs spent for this area is critical to the
successful accomplishment of EPA's mission. Recovering costs
from those responsible for hazardous waste sites is thus an
extremely important function and helps ensure that Superfund
sites can be cleaned up in a cost effective and timely manner.
During our review, we held a focus group in EPA Headquarters
to discuss Superfund-related financial management issues. In
addition, in our other focus groups, Superfund issues were
discussed as well as in our interviews conducted with EPA
officials. Cost recovery issues were an important topic and were
discussed as needing additional attention and changes to improve
the Agency's Superfund mission.
The following were major issues discussed that reflect
Superfund financial management related areas:
better communication and presentation needed for
Superfund data,
higher priority needed for cost recovery,
better site specific charging needed,
improvement of Superfund accounts receivable, and
better communication with DOJ.
Better Communication & Presentation
of Superfund Data is Needed
Superfund focus group members stated that many Superfund
site clean-ups are long, complex, 8 to 10 year projects. Thus,
because of the duration for the projects, they said that cost
recovery can be a long, time consuming process. Focus groups
also raised concerns that EPA has not always successfully
explained to the Congress and the public the length and
complexity that limit recovery. Because of this, EPA has been
perceived as not aggressively pursuing cost recovery and as
proceeding very slowly in the recovery process. Further, the
focus group said that EPA has not effectively explained that 100%
cost recovery may be unrealistic because of no potential
responsible parties (PRPs) or limited numbers of financially weak
PRPs at sites, and other reasons that limit cost recovery
prospects.
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Focus group participants gave various causes for this
communication problem. They believe that it is a major exercise
to provide data to Congress or anyone else who requests
information. For example, the Agency has an Integrated Financial
Management System (IFMS) to meet its financial and reporting
requirements. For the Agency's Superfund program activities, it
established the Comprehensive Environmental Response,
Compensation and Liability Information System (CERCLIS).
They said that management information systems are not
providing the information management needs and data in the
CERCLIS can not always be reconciled or integrated with the data
in the IFMS. Headquarters is concerned about the information for
sites contained in the Agency's systems. Instead of relying on
the site data contained in the Agency's systems, Headquarters
often requires the regions to manually recollect the data and
report it to Headquarters. This process uses up many resources
that would be available to do other functions. It is
disconcerting that the Agency does not rely on and trust the data
contained in its own information systems.
The Agency also does not have information readily available
to explain what is a feasible target or amount for cost recovery.
Further, the Agency does not routinely perform analyses required
to better present EPA's case to the Congress and the public on
how EPA is progressing on meeting the Superfund targets it had
established.
An example of the need for more effective communication is
illustrated by the OIG Capping report on "Whether EPA Has
Maximized the Use Of PRPs to Effect Superfund Site Cleanups,
E1SJE2-02-0063-3100152, March 31, 1993." EPA did not have
sufficient information to allow for timely and effective
management oversight. Management did not always have complete
and accurate information available to effectively monitor
Superfund site status. Further, the report found that an absence
of pertinent data, hindered management's ability to make informed
decisions.
Priority of Cost Recovery vs
Other Program Areas
Cost recovery is not always given the support or resources
needed. Perceptions of some EPA officials in focus groups and in
our interviews is that cost recovery is not always viewed by
upper management as critical to cleaning up the environment as
are other areas of the Superfund program. Thus other program
areas are better supported than cost recovery.
Cost recovery is often viewed as a process that occurs
after the fact and is seen as secondary to the "real" mission of
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EPA that of cleaning up hazardous waste sites. Site
completions are viewed as being more important than how many
dollars are recovered. Further, EPA may settle for lower dollar
settlements which can give the PRPs the wrong message about EPA's
ability or motivation to aggressively pursue site cost recovery.
The following OIG and GAO reports illustrate the need for
the Agency to place a higher priority on cost recovery:
"Superfund: A More Vigorous and Better Managed Enforcement
Program Is Needed, GAO/RCED-90-22, December, 1989." Report
states "because cost recovery has been considered a low
priority within EPA and received limited staff resources, it
has faltered." GAO also stated that timely and effective
enforcement is needed to obtain cleanups from responsible
parties, and that cost recovery efforts are inadequate.
"Followup Review of EPA's Cost Recovery Actions Against
PRPs, ElSJGO-11-0022-0400036, September 24, 1990."
Indicates that the Agency needs to be more aggressive toward
cost recovery and give it more priority and resources in the
regions.
OIG Capping report on "Whether EPA Has Maximized the Use Of
PRPs to Effect Superfund Site Cleanups, E1SJE2-02-0063-
3100152, March 31, 1993" reports a lack of aggressiveness
in EPA's Superfund enforcement program. Cost recoveries
were not vigorously pursued or maximized.
In addition, Superfund Cost Recovery was included as one of
the four areas the IG recommended that the Agency report as a
material weakness in 1993. Finally, EPA's own FMFIA "1993
Integrity Act Report to the President and Congress" also includes
Superfund cost recovery as one of EPA's material weaknesses.
Better Site Specific Charging
Heeded for Costs
A recent OIG report and feedback from Agency employees
identified the need for better site specific charges. When work
is performed on Superfund sites, if the site does not have a site
identifier number, costs associated with working on the site may
be charged to what is called a "ZZ" account. The "ZZ" account is
a general account that does not allocate the costs to the
specific site where the costs can later be recovered. So in
effect, these costs are not being recovered by EPA and are being
paid for by the government when potential responsible parties
(PRPs) could be held responsible for reimbursing the government.
Reimbursement of costs was one intention of the original
Superfund legislation passed by the Congress. The OIG Report
"Superfund "ZZ" Accounts, E1SFF2-11-0051-3100266, dated July 2,
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1993" stated that various site costs, charged to "ZZ" accounts,
were not later identified for cost recovery from PRPs.
Also, focus group participants and interviewees pointed out
that the IFMS and CERCLIS are not compatible and do not share the
same data bases. The employees explained that because the two
systems are not compatible, it is an enormous effort to gather
all applicable costs for each individual site. Further they are
concerned about the overall accuracy of charging costs to
specific sites because site costs in the two systems often are
different. This adds to the overall effort to accurately gather
all site specific charges.
For example, the EPA Deputy Administrator's, "Report on
Superfund Administrative Improvements, dated June 23, 1993,"
states that the IFMS and CERCLIS systems record different
information on Superfund sites. There has not been a
reconciliation between the two systems, and as a result, it is
very difficult to combine data from the two systems to obtain a
full report for cost recovery.
Accounting for Superfund Receivables
Needs Improvement
Focus group participants and others interviewed told us that
the IFMS does not provide aging reports, compute compound
interest, calculate indirect cost rates, or set up installment
payments. As a result, additional manual work must be done to
accurately track Superfund accounts receivable.
An OIG report dated December 29, 1992, "A Decade of Auditing
Superfund Obligations and Disbursements: Fiscal years 1981
Through 1990, P1SFF1-11-0027-3100058" highlighted problems with
Superfund Accounts Receivable. The report states that
improvements are needed in recording and managing Superfund
accounts receivable and collections.
Some regional offices have resorted to setting up
independent spreadsheets or data bases in order to facilitate
accounts receivable billing and tracking. These additional
efforts to manage account receivable functions can be time
consuming and resource intensive. Consequently, many offices put
accounts receivable tasks off until the last minute.
During our focus groups and interviews, most regions
admitted that due to the lack of resources, accounts receivable
is not a high priority and is usually not done timely. Also,
regional employees told us that accounts receivable is a low
priority because after it was decentralized throughout the
regions, no additional resources were provided to assist in the
increased workload.
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A new accounts receivable module was implemented in the IFMS
to alleviate some of the problems that exist. However, the focus
groups and interview members complained that the new module is
not very functional for Superfund receivables and needs
improvement.
Better Cooperation Needed From
the Department of Justice
The Agency has a memorandum of understanding (MOU) with the
Department of Justice for collecting costs from PRPs in Superfund
cost recovery cases. However, focus group members and other
Agency employees interviewed told us that DOJ is not timely in
providing the Agency with records to establish accounts
receivable and to initiate collections. As a result, the Agency
has not always been able to establish and bill accounts
receivable in a timely manner. An OIG Report on "Superfund Cost
Recovery Accounts Receivable Establishment and Collection,
E1SJF9-05-0274-0100207, dated March 28, 1990" states that
cooperation is needed from DOJ to help improve and speed up the
process for cost recovery and Superfund accounts receivable.
In addition, we learned that DOJ recently began charging the
Agency three percent of Superfund accounts receivable that they
collect for the Agency. Focus group participants and Agency
officials believe that the cost of assisting EPA in recovering
costs is already covered in the interagency agreement (IAG) with
DOJ. An FMD official advised that EPA funds DOJ $32 million per
year under this IAG. Thus the additional three percent charge
appears to be a double billing, and will reduce the amount of
Superfund cost recovery. The Agency has been working with DOJ to
resolve this issue.
EPA Actions
The Agency's Financial Management Status Report and Five-
Year Plan states that because many Superfund issues have been
evolving, various new issues for Superfund financial management
have not been explicitly addressed and other areas need more
detailed explanations. The Plan further states, "In order to
meet its goal of sound financial management, the Agency plans to
identify and address these emerging issues in a timely fashion by
issuing the appropriate policy and guidance." According to the
Plan, the Agency will issue this additional Superfund guidance by
December 1994.
The Plan also indicates that the Agency is placing increased
emphasis on cost recovery by reviewing the methodology used to
change the indirect cost rate to a full cost recovery rate.
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According to the Plan, the Agency will issue guidance on this
issue soon.
Lastly, the Plan addressed the Superfund Cost Recovery Image
Processing System (SCRIPS) and the Superfund Cost Organization
and Recovery Enhancement System (SCORE$) which are used in cost
recovery. The Plan states, "The current process of SCRIPS and
SCORE$ is presently cumbersome, but is working well. The
ultimate goal is the integration of SCRIPS and SCORE $ into one
cost recovery system." The planned completion for this
initiative is October 1995.
We-believe these actions will help improve EPA's Superfund
financial management and specifically, the aspects of cost
recovery. EPA should carefully monitor these initiatives to
ensure that they are completed as planned.
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FINANCE AND REPORTING SYSTEMS
EPA tracks and controls approximately $7 billion annually to
support its mission. To account for this large sum of money, EPA
requires effective finance and reporting systems to monitor
outlays and ensure that its resources are effectively managed.
In 1989, the Agency implemented its Integrated Financial
Management System. Other administrative and programmatic systems
also include financial data but are not all interfaced with IFMS.
Part of EPA's financial management responsibilities include
managing and monitoring Superfund site cleanup efforts and cost
recovery. To manage Superfund program activities, the Agency
uses the Comprehensive Environmental Response, Compensation and
Liability Information System in conjunction with the IFMS and
other systems. CERCLIS, which is a programmatic system, is the
Agency's principal management information system for the
Superfund program.
During our focus groups and interviews, Agency personnel
told us their concerns. Agency personnel can not always rely on
the IFMS to effectively meet all their financial management
requirements. There is a lack of integration and incompatibility
of finance and reporting systems. Many concerns centered on the
use of duplicate or alternate PC based systems that were
developed locally to meet regional financial management needs not
provided by the Agency's finance and reporting systems. Previous
and current OIG reviews have also identified these concerns.
The Agency has taken some steps to strengthen its finance
and reporting systems. For example, since introducing IFMS, the
Agency has implemented a single general ledger, replacing
separate general ledgers kept at 14 finance offices throughout
EPA. In addition the Agency has formed a team to manage the
implementation of software to update IFMS, and has implemented
various technical changes to improve its finance and reporting
systems.
Incompatibility of EPA Systems
The Agency's finance and reporting systems do not always
provide the information needed by Agency managers to make sound
financial and program management decisions. The CFO Act requires
EPA and other agencies to: eliminate old or inefficient financial
management systems; provide timely and useful financial
information to decision-makers; and integrate financial and other
systems. Although EPA implemented the IFMS, it still operates
the predecessor accounting system, the FMS, for access to
historical data, ad hoc reports, and some payroll information. A
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properly functioning IPMS should provide these capabilities, but
the FMS has been primarily kept alive to support Superfund cost
recovery actions involving pre 1989 costs. The Agency is taking
steps to upgrade its finance and reporting systems by eliminating
the FMS as well as several other systems. An ongoing OIG audit
will report on the Agency's efforts to upgrade and simplify the
finance systems.
Incompatibility of the Agency's finance and reporting
systems has led to a proliferation of many systems, duplicate
data and data entry, inability to reconcile data, increased
costs, and data integrity problems. In addition, there is a
concern with integrating IFMS with CERCLIS. Different data bases
and data definitions are used in both IFMS and CERCLIS and both
systems contain different dollar costs for Superfund sites.
Because CERCLIS was intended to be a management tool, rather than
the official Agency accounting system, the definition of planned,
obligated and expended amounts are not necessarily consistent
with normal accounting practices. Throughout the Agency, it
needs to be recognized that the IFMS is the Agency's official
accounting system.
The IFMS/CERCLIS issue was pointed out in the June 23, 1993,
Deputy Administrator's Superfund Administrative Improvements
Report. The Report stated the following concerns with the lack
of compatibility between EPA's IFMS and CERCLIS.
The information systems used by the Financial Management
Division and by Superfund record different information on
Superfund sites. The Superfund information system does not
receive current Agency obligation and disbursement
information from the FMD financial system. Because of this,
the cost data maintained by FMD and the obligations and
planning data maintained by Superfund are sometimes
difficult to match. There has not been a system-wide
reconciliation between the two systems, and as a result, it
is very difficult to combine data from the two systems to
obtain a full report for cost recovery activities.
Focus group participants and interviewees agreed with the
above information and pointed out that the Agency has not fully
integrated its financial and reporting systems. They believe
that there are too many incompatible systems, and that the
IFMS/CERCLIS incompatibility is an example of this problem.
Specifically, EPA has not yet eliminated the use of FMS and other
systems, fully interfaced IFMS with other systems such as
CERCLIS, nor met all the IFMS finance and reporting needs of EPA
users. They see a need for a joint effort by FMD and the Office
and Solid Waste and Emergency Response (OSWER) to solve these
problems.
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Further, they believe that there is a lack of: data
standardization and reluctance to eliminate the older systems;
little accountability of top management including no one official
responsible for following through on IFMS implementation; and
little user involvement in the implementation of IFMS. Also,
they believe that IFMS was not set up to satisfy user needs for
Superfund functions. For example, IFMS does not calculate
interest charges for overdue Superfund accounts receivable.
The following 6AO and OIG reports further illustrate these
problems with the Agency's computer systems and integration
efforts:
6AO Report on "EPA's Actions to Improve Longstanding
Information Management Weaknesses, T-IMTEC-93-4, March 29,
1993."
OIG Report on "Follow-Up of CERCLIS Reporting And Post-
Implementation, E1SFG1-15-5001-2400027, dated March 27,
1992."
OIG Report on "Integrated Financial Management System:
Managing Implementation Of The New Accounting System,
E1AMFO-11-0029-1100153, dated March 29, 1991."
Agency personnel believe that the incompatibility of the
Agency's systems makes it extremely difficult to manage the
Agency's financial activities, and complex programs such as
Superfund. He also believe this is a serious problem.
Use of Locally Developed
Systems
One common theme found throughout the focus group and
interview comments was that user needs are not sufficiently met
by the Agency's finance and reporting system. To compensate for
system deficiencies, users have developed their own separate
systems. IFMS functions critical to EPA's mission have not been
implemented such as the project cost accounting module and the
account code structure which would support Superfund cost
recovery. Because IFMS and CERCLIS did not always do what
regional users needed or wanted, users in regional offices
developed alternate systems. For example, Agency users said
these systems were developed and are used on individual PCs to
allow regional users to accomplish their missions and to make up
for the deficiencies in IFMS and CERCLIS.
These individual alternate systems have become key systems
used to manage many EPA programs. While it is unreasonable to
expect the Agency's finance and reporting systems to meet every
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need of each EPA organization, the frequency of concerns over
this issue suggests that the Agency needs to do much better.
The Agency's NPR report on financial management also pointed
out problems with the use of these systems. It stated that
development of these systems has created a proliferation of
information systems within the Agency including planning, budget,
finance, property, and program accomplishments. In addition,
these systems are not linked in a way to easily permit Agency
managers to make sound, consistent program and financial
management decisions. Also, data input is often duplicated, and
information in the multiple systems cannot be reconciled. As a
result, many Agency employees use these numerous and separate
regional systems to actually manage many EPA programs rather than
relying on the official Agency systems like IFMS and CERCLIS.
The financial management environment is very complex and
unwieldy because so many systems are being used and maintained.
We believe that controls over the use of these locally developed
systems are needed to ensure that data is accurate, consistent,
and essential. Use of these systems should be coordinated to
permit sharing of those that could be used Agencywide. The
Superfund area presents a unique opportunity for the Agency to
coordinate the finance and reporting systems with the individual
systems in the regions to simplify Superfund operations by better
meeting user needs, and more effectively ensuring data
reliability and consistency.
EPA Actions
In July 1993, EPA issued a comprehensive plan to complete
IFMS implementation. Over the next five years, EPA plans to:
eliminate reliance on the FMS and other systems;
expand the capacity of the financial information system by
implementing a new account code structure and installing
project cost accounting;
electronically bridge IFMS with other financial and
administrative systems;
conduct a reassessment of IFMS including examining
requirements and cost benefits; and
complete the revisions of the system development life cycle
policies, standards, and procedures.
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FINANCIAL AND ACCOUNTING POLICIES
AND PROCEDURES
Our review found that (1) a large number of policies and
procedures exist that need to be consolidated, (2) policies need
to be revised, and (3) policies need to be made more user
friendly. Agency employees should be familiar with and
knowledgeable of financial management policies and procedures
because they are responsible for managing EPA's financial
resources. In addition to being familiar with the financial
policies and procedures, Agency finance employees will soon be
subject to mandatory financial management performance measures.
The performance measures and standards will provide the CFO and
Agency managers with a basis for1 assessing the strengths and
weaknesses of EPA's financial management.
The Fiscal Policies and Procedures Branch within FMD is
responsible for developing and implementing financial management
policies and procedures, with the assistance of the Superfund
Accounting Branch for Superfund policies and procedures. The
Agency's financial management policies and procedures can be
found in the Resources Management Directives System (RMDS) which
is part of the Agency's overall directives system.
FMD issues new or revised guidance through Comptroller
Policy Announcements or Comptroller Transmittal Notices. These
documents are later incorporated into the RMDS. In order to
improve the availability of the RMDS guidance, some issued
chapters in the RMDS and issued and revised policies and
procedures since 1987 have been made available on an electronic
bulletin board. Policies and procedures were electronically
scanned and entered into this menu-driven bulletin board which is
referred to as SAGE. This system is broken down into areas which
include 1) Resources Manual Directives, 2) Comptroller Policy
Announcements, and 3) Comptroller Transmittals.
Large Number of Policies
and Procedures
In the focus groups and interviews conducted, the issue of
policies and procedures was considered important in each
location. One widely discussed problem pertained to the large
number of existing policies and procedures. Despite the
existence of RMDS guidance and the SAGE system, many concerns
were heard that the policies and procedures available are
difficult to locate and are confusing for many users. Users
believe that the policies are not stored in a consolidated
fashion and there is no central reference point where a search
for material can be performed. Therefore, in many instances it
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is unknown whether a policy exists on a. certain issue. Users
find themselves relying on the advice of others, unsure if the
advice is accurate.
Although the SAGE system is in fact available, knowledge of
the system is not fully dispersed throughout the Agency. Also
SAGE is limited in its capabilities because it only provides a
key word search for policy references by chapter rather than for
the entire policy system. SAGE also requires the users to know
in advance the year of issuance of a policy announcement or
transmittal number of the policy they want to research. This
means that an individual has to know which chapter and year to
search rather than being led to the several chapters that discuss
the given subject areas. In addition, access to SAGE is
dependent upon the availability of a Local Area Network (LAN).
Currently, all EPA users do not have access to LANs, and thus can
not use the SAGE system.
Focus group members and interviewees believe that Agency
policies and procedures are issued from many different EPA
offices and then are left up to individual offices to implement
them consistently within EPA. While Headquarters FMD issues the
official financial management policy, the decentralized structure
of the Agency results in many different interpretations of
policies which tend to confuse staff. Further, it is often
difficult to determine which of the many memorandums received
constitute enforceable approaches. For example, we were advised
that offices put out draft instructions which remain drafts for
lengthy periods of time, which raises questions as to whether
draft instructions should be followed. It was also reported that
there are many policies in existence on areas of little interest
to the EPA staff, while other areas of great interest to the
staff were not adequately addressed.
Focus groups reported that Headquarters spends an excessive
amount of time creating policies in areas that they believe are
irrelevant. Also, users stated that too much of the Agency's
policy is driven by legislation instead of what may be truly
necessary to run the Agency. An example of this is contained in
the EPA Financial Management Status Report and Five-Year Plan.
In the Plan, the Agency acknowledges that "Although most of the
Agency's Superfund financial policies were developed after the
1987 reauthorization, the Superfund program has continued to
evolve significantly. As a result of this evolution, many new
issues have not been explicitly addressed and other areas need
more detailed explanations."
Finally, focus groups and interviews pointed out that no
policy exists for supplying documentation for work accomplished
at Superfund sites to the different regions when it is needed for
cost recovery purposes. For example, when a region has a
Superfund cost recovery case involving work and costs at sites in
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other regions, the region must obtain copies of cost supporting
documents from many sources which is a very time consuming
process.
Policies Need Revision
Focus groups and key interviews pointed out that many
procedures were outdated and could no longer be used for the
processes they covered. In addition, a user guide for the IFMS
was never compiled. Therefore many of the policies and
procedures requiring use of a financial system were never revised
or updated to reflect the new financial system. They believe
that this has led to a lack of standardization for many of the
policies.
The Agency's financial management policies and procedures
are contained in the Resource Management and Directives System
(RMDS). The RMDS constitutes the "2500" series within the EPA
Directives System. The responsibility of the RMDS rests with the
Fiscal Polices and Procedures Branch within the Office of the
Comptroller. This Branch is responsible for updating the RMDS
and answering questions regarding additional material, changes,
or clarifications needed for the RMDS.
Although FMD has implemented the SAGE system, most of the
policies and procedures were scanned directly from the outdated
RMDS manuals. We found many examples of outdated policies and
procedures included in the SAGE system, as well as policies that
remained unissued. For example, the chapter pertaining to
accounting processes, Chapter 2530, listed eight separate
sections in the menu, yet none of these eight have been issued.
As another example, several policies and procedures in FMD SAGE
still refer to the predecessor accounting system the Financial
Management System. For instance, Chapter 2580, Financial
Management Systems, issued in June 1987, refers to many financial
systems that are no longer used.
We were told that other policies requiring attention include
Automated Teller Machine (ATM) use, travel authorization,
timecards, and object class codes. Most locations agreed that
these areas were in need of change. For example, they stated
that travel and timecards are time intensive and object class
codes are confusing.
Updates to the RMDS frequently arise due to central
agencies, such as Office of Management and Budget, Treasury, and
General Accounting Office, making mandatory changes or providing
new guidance on policy and procedures. In addition, updates may
be necessary due to new procedures determined by the Agency to be
beneficial or new systems implemented which require explanation.
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Additionally, because many policies are not revised or
updated, we found that many regions have developed their own
standard way of doing business. This lack of standardization
causes many of the regions to perform the same function
differently. Each region uniquely interprets the available
policies, adds to them, and applies them differently. This
causes inconsistencies between regions and makes it difficult for
Headquarters to provide direction to an individual region if
questions arise. It also confuses and limits communication among
the regions and reduces the effectiveness of policies and
procedures within the Agency.
Policies Weed to be
User Friendly
The users found many of the policies and procedures
difficult to understand because by their nature they are complex,
not easy to follow, and bureaucratic in nature. They also
stressed the lack of specific examples or cases to follow that
would cover and address the most frequently used policies and
provide easy answers to users questions on policy issues.
Further, the policies are not user friendly and are not tied
together by an index. In addition, because many of the policies
are so old, users were unclear on whether the policies were still
current. Policies and procedures were difficult to locate
because they were contained in too many manuals and were not
consolidated. Finally, the policies and procedures were not
automated for easy access and a key word search system was not
available to provide users a ready reference for specific policy
questions. As a result, Agency policies and procedures were not
always effective.
Although FMD implemented the SAGE system to simplify the
search for financial policies, the system is not user-friendly.
Similar policies existed in both the policy announcements and the
transmittals. For example, Policy Announcement 92-10 concerns
the implementation of the ATM policy for Diners Club. However,
information pertaining to the implementation of the American
Express Card was covered in Transmittal Number 94-01. Similar
policies being covered in both policy announcements and
transmittals creates confusion on where to search for a policy.
In addition, as previously discussed, both the policy
announcement and the transmittal sections of the FMD SAGE were
set up in the menu by year. Therefore, if users did not know the
year the policy was updated, they would need to search each year
to locate the policy. This may thwart the users' search for a
policy if it was unknown that a policy was ever issued in certain
areas. Further, when searching for a policy it is difficult to
determine if a policy had replaced another policy.
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Some users viewed the ineffectiveness of the policies and
procedures as resulting from a lack of involvement when they were
written. Therefore, many users believed the policies to be
inadequate or not pertaining to the work they performed. The
lack of user input also led to inconsistencies in interpreting
the policies. Because the regions were not involved in drafting
the policies, they were not always sure of what Headquarters
expected from them. As a result, some regions interpreted
policies as they thought appropriate.
A last concern mentioned by the focus groups was that with
the current emphasis on streamlining government, better policies
and procedures will be needed to help guide Agency employees in
doing their expanded tasks and functions. They believed with
streamlining in place, inadequate policies and procedures would
hinder Agency operations.
EPA Actions
After reviewing the Financial Management Status Report and
Five-Year Plan, we found that a number of these areas were
addressed by Agency management. The Agency implemented
recommendations of an EPA task force on accounts receivable which
included the policies of the Office of the Comptroller to improve
communication between Headquarters and Regional employees. The
Agency also revised and updated several aspects of its accounting
policies and procedures including requirements to document
financial transactions and reconcile accounts receivable.
FMD is aware that additional work is needed to improve their
financial management policies and procedures. They plan to
develop and implement a strategy to consolidate and revise
existing accounting polices and procedures and issue them in the
Resources Management Directives System (RMDS) according to the
Financial Management Status Report and Five-Year Plan.
DOJ recently issued a letter on documentation needs for cost
recovery cases which EPA distributed nationally. EPA is also
completing a microfilming project related to cost recovery
documents.
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PROGRAM FINANCIAL MANAGEMENT
During focus groups and interviews, Agency personnel
discussed several issues they believe hinder the achievement of
good financial management in the program offices. They cited
four primary concerns. First, there is an overall lack of
understanding of the importance of financial management by
program management personnel. Second, management does not have
the data and reporting tools needed to effectively manage their
programs. Third, the link between budgeting and planning in the
Agency is weak. Fourth, there are too many financial codes and
their interpretations are confusing to program staff.
Agency personnel believe there is an overall lack of
understanding of the importance of financial management by
program management personnel. There is no program of financial
management in the program offices, and many program management
personnel do not believe that they are involved in financial
management. They believe that FMD and regional comptrollers
conduct financial management. As a result, program management
personnel make decisions without the knowledge that financial
management is involved, and they often lack critical knowledge
needed for making such decisions. For example, program managers
can relate budgetary matters to financial management, but they do
not view activities such as signing time cards, travel
authorizations or contract work orders as part of financial
management. Many do not realize that funds can not be shifted
among appropriations.
We reported earlier that program offices often view
financial management as less important than program management,
and that the Agency is seeking to address this concern by
creation of the Senior Resource Official (SRO) concept. We in
the OIG believe the Agency deserves credit for the SRO concept.
Importantly, the SRO concept is a viable mechanism for addressing
many financial management concerns, including making staff in
program offices view financial management responsibilities as an
important, inherent part of their job. We want to see the
concept properly implemented. SRO responsibilities need to be
specifically defined; appropriately qualified people need to be
named to positions and training provided, as needed; staff needs,
if any, need to be defined, etc. While we support the concept,
implementation needs to be closely monitored to ensure it
properly takes place.
Another area they addressed was the Management and Reporting
System (MARS)/IFMS issue. While some users believe that
MARS/IFMS is useful, others experienced problems producing usable
reports needed to make budget decisions. For example, Agency
personnel described a situation in which a report was generated
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for specific information. The report contained many columns that
included the specific information needed as well as additional
information that was not needed. As a result, the report had to
be reformulated to sort out the needed data. Reformulating these
reports can be a very tedious and time consuming process.
Also, IFMS/MARS only tracks overall Agency funds not on a
divisional or branch office level. MARS does not break out
individual branch and sub-office levels to provide the level of
detail needed so that managers can use it to effectively track
and manage the funds for their division or office. Further,
management cannot use many of the MARS reports to effectively
control budgets or track resources. Thus, usable management
reports are not always available for Agency decision makers. The
lack of usable and creditable management reports can adversely
impact critical environmental decisions and reduce the
effectiveness of limited Agency resources. Finally, the Agency's
financial and reporting system increases the difficulty for
program offices to actively participate in financial management
functions.
Agency personnel do not believe that there is a good link
between budgeting and planning in the Agency. The employees in
the focus groups and interviews told us that the Agency does not
always follow through on its plans and lacks effective planning.
They believe this occurs because the budget is not directly tied
to the planning function. Thus, when the budget suddenly
changes, it impacts planned activities making some planned goals
impossible to achieve. Further, the regions believe that they
lack flexibility in their budgets and cannot make their own
budgetary decisions.
Finally, the focus groups believe that the Agency has many
fund object class codes, and that very little interpretation on
how to use these codes is available to employees. These codes
are used to classify various types of programmatic and
administrative expenditures. Because suitable explanations are
not available, users often do not know whether to use
programmatic or administrative fund object class codes. Further,
they do not always know which accounts to charge expenditures,
and do not consistently use the accounts among the offices.
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FINANCIAL MANAGEMENT TRAINING
AND QUALIFICATIONS
During the focus groups and interviews, issue areas arose
regarding staff training and qualifications. Although a
sensitive area, the participants disclosed some concerns and
suggested solutions to improve financial training to Agency
employees.
Financial Management Training
From our focus groups and interviews, we learned that the
Agency does not always offer courses on specific EPA financial
management areas. Yet, this very specific training is needed for
Agency employees, including those in program offices, to
effectively accomplish their financial responsibilities. The
lack of this specific training has resulted in inexperienced and
untrained personnel performing some financial management duties
and functions.
In addition, when courses are developed on specific
government financial management training, they are not always
taught in regional offices. Regional offices must then send
employees to Headquarters for financial management training.
However, even though many offices would like to send all of their
financial employees to training, funds are not always available
in their budgets. Because of this funding limitation, only one
employee, usually a manager, is chosen and sent for the training.
Since only one person is sent, other regional employees often do
not receive the specialized, individualized training required for
their job situations.
As stated above, many EPA employees are not receiving the
necessary training to perform their financial management duties.
In the OIG Report on "Reconciling Cash, E1AMF2-11-0040-3100391,
dated September 29, 1993," we reported an instance in which
training provided by Headquarters was only attended by two
employees from a total of nine regional offices that we reviewed.
This situation points out the need for specific training given at
field locations.
Because EPA specific financial management training is often
unavailable, government-wide training classes are sometimes
substituted. However, it may be impossible to utilize and adapt
government-wide training to achieve specific Agency financial
management goals. In addition, government-wide training is not
always available on certain functions, such as grants management
and budget forecasting.
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Through our focus groups and interviews, we also learned
that the lack of having more than one trained person often leaves
offices without a back-up person to perform key financial
functions. Due to resource constraints, program finance offices
usually have only one employee knowledgeable on a particular key
financial function, such as cash reconciliation and ensuring that
deobligations occur timely. Problems may occur when the "expert11
is not at work or leaves the Agency. Many offices find it hard
to make time for their employees to learn new financial functions
due to an already heavy workload.
During focus groups and interviews, some Agency personnel
told us that they believe the Agency does not require its finance
employees to be formally trained on all important financial
functions. In addition, they believe that newly hired employees
do not have to meet specific requirements to obtain jobs with
financial management responsibilities. Further, they believe
that the Agency lacks a financial management curriculum.
Financial Management
Qualifications
From our interviews and focus groups, Agency employees said
that factors such as experience and on-the-job training are
important to financial management positions. They further
believe that the regional comptrollers and the financial
management officers should all have accounting or finance
degrees. Also, they indicated that budget experience was
important for financial managers to have in the program and
finance offices.
The majority of the employees interviewed believe that
financial management staff should have backgrounds in the 510,
511 or 501 position classification series that Office of
Personnel Management (OPM) established. The 510/511 series are
for accountants/auditors. We agree with the interview results
that staff with backgrounds in series 510 and 511 are appropriate
for financial management type jobs. Since series 501 is a
"General Series," it is easy to enter and use of it should
therefore be closely controlled. We believe that the knowledge,
skills and abilities required for each position should be closely
scrutinized.
Many Agency personnel said that a core curriculum would help
standardize financial management duties and functions within EPA,
and would facilitate communication among financial managers and
staff in the regions. They said the curriculum would provide a
foundation for consistent financial management training among
Agency managers and staff. Further, it would allow each regional
office to identify specific training needs and courses that would
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enable regional managers and staff to meet specific regional
operations and achieve their financial management goals.
Finally, during the focus groups and interviews, the issue
of certification requirements for financial management was
discussed. Some Agency employees said it would benefit financial
management within EPA, while others did not. We believe the
issue of certification requirements for personnel in financial
management positions should be explored further. Currently, FMD
is looking into the use of a certification program for EPA
financial management positions.
EPA Actions
The Financial Management Status Report and Five-Year Plan
addresses the training of financial management personnel. For
example, FMD has reviewed performance agreements of financial
management personnel, integrated language to strengthen
accountability for financial management functions and developed
training and awareness programs. FMD also developed a core
curriculum for FMD finance personnel. However, this curriculum
has not been put in place for Agencywide financial managers and
staff. FMD is also exploring the establishment of long-term
training and certification strategies for financial management,
similar to what the Department of Energy is doing.
EPA is also preparing performance measures to assess how
well SROs meet their goals. Finally, qualification efforts are
underway as described in the Agency's Financial Management Status
Report and Five-Year Plan under the Quality Assurance Program.
The CFO is in the process of updating and upgrading the Financial
Manager's Quality Assurance Program to strengthen financial
management within EPA. As part of this effort, FMD is focusing
on the qualifications and skills assessment for financial
managers.
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CHAPTERS
RECOMMENDATIONS
This chapter presents recommendations to facilitate the
Agency's continuing efforts to improve its financial management
program. These recommendations are based on information obtained
through focus group discussions, interviews, and other reviews
and analyses. The Financial Management Division has already
initiated actions to implement some of the recommended actions,
and will include others in the next update of the Financial
Management Status Report and Five-Year Plan. We have included
separate recommendations for each of the major issues discussed
in the report.
To ensure that the proper importance is attached to
financial management Agencywide, the.following recommendations
under each section are made to the EPA Administrator.
Different Perceptions and Awareness
of Financial Management
1. Identify best practices or bench mark practices for
financial management operations Agencywide to help set
standards of service and performance, and then implement the
practices at each location throughout EPA. We believe that
these actions will increase networking of financial managers
and staff throughout Headquarters and the regions, and
further strengthen financial management in the Agency.
2. Distribute directly to Agency managers, at the GS-13 level
and above, a copy of the Financial Management Status Report
and Five-Year Plan. We believe that this practice will
ensure proper distribution of the Plan and change the
financial management culture by increasing the level of
awareness of financial management in EPA.
3. Continue with the initiative to develop and implement
performance measures for determining how well the Agency
managers are achieving financial management goals and
functions.
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4. Periodically follow up on the progress of efforts to
complete corrective action milestones and take necessary
actions to eliminate or minimize delays.
5. In the Financial Management Status Report and Five-Year
Plan, include a section to report the Agency's success and
any lack of success in completing corrective action
milestones for the previous year.
Financial Aspects of Superfund
Cost Recovery
1. Ensure that clear and consistent EPA cost recovery goals and
targets are established and coordinated with all Superfund
managers throughout the Agency. By doing this, EPA will
better ensure that its position on Superfund cost recovery
is properly stated. To better present and strengthen its
position on cost recovery to the public and to Congress, EPA
must coordinate and obtain site information from the regions
and then ensure that this data is kept timely, updated and
accurate. We believe EPA would then be in a better position
to measure and explain how it is currently doing against the
targets it had established for Superfund cost recovery.
2. Assign a higher priority to Superfund financial management,
and specifically cost recovery, within the Agency at all
levels. Agency top management should ensure that cost
recovery and other aspects of Superfund financial management
are given the same priority as are the other program areas
in both Headquarters and in the regions.
3. Explore different alternatives with Agency Superfund
Headquarters and regional staff to establish specific
incentives for Agency managers in order to help ensure cost
recovery is pursued as an important function in its own
right. Further, EPA should work more closely with DOJ to
speed up the process for establishing accounts receivable.
4. Continue efforts to resolve the potential double billing
issue which arose over the three percent service charge.
5. Establish controls to ensure that EPA costs for work on
sites is charged to the specific sites where the work
occurred. Better tracking of costs and assigning site
identifiers for all Superfund sites should be given a high
priority to improve EPA's Superfund financial management
program.
6. Set up a work group between FMD and OSWER. The group should
include both Headquarters and regional staff. They should
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review and improve the overall management of financial data
for Superfund sites in charging site costs.
Finance and Reporting Systems
1. Continue to improve the financial management system by
eliminating older systems, adding system interfaces, and
developing needed system functions by 1995 as is currently
planned. We believe that an important key to the success of
this recommendation is that senior management takes an
active role to devote resources necessary for this effort.
2. Establish a joint effort between FMD and the program offices
with client/customer teams to work out the interface
problems associated with IFMS and other Agency systems.
Ensure standard data elements among the different systems.
Including the field users in the overall process will help
standardize EPA/IFMS system use and results.
3. Make a commitment to better correlate IFMS and CERCLIS in
such a fashion that user needs are satisfied, and redundant
efforts are eliminated. User groups from OSWER and FMD
should work out any problems (i.e., ensuring that dollar
amounts for Superfund sites are correct) to allow better
management and oversight of the Superfund program. This
would help standardize the data that the Agency uses both in
and outside EPA for Superfund operations.
Financial and Accounting Policies
and Procedures
1. Review, update and consolidate the large number of EPA
financial management policies and procedures electronically
by using such a method as FMD's SAGE system. During this
effort, FMD should examine the overall process used to issue
financial management policies and procedures to ensure that
the RMDS directive system reflects and includes all such
policies and procedures. During this procedure, FMD should
ensure that Agency users are invited to participate in this
process.
2. Provide on line, key word searches for policies, procedures,
and manuals to use as a reference tool to easily facilitate
the search for pertinent guidance used as a reference for
all financial management issues to assist all Agency users.
To accomplish this effort, senior management needs to ensure
that sufficient resources are provided.
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3. Simplify EPA financial management policies and procedures so
that they are more user friendly to all Agency users.
Ensure that policies and procedures that are consistently
used by many Agency users such as those for travel, payroll,
and timecards are explained in plain English versions. A
good example of this is the current EPA travel booklet "On
the Go With EPA" which presents travel related information
in a clear and concise manner.
4. Educate users on financial policies and procedures. FMD
should provide an orientation briefing on EPA financial
management policies and procedures to inform EPA employees
with financial management responsibilities of the importance
of such policies and procedures, how to locate them, and how
to apply them.
5. Explore the use of automation for payroll, travel,
timecards, etc., to help standardize and streamline current
financial management functions Agencywide.
Program Financial Management
1. Provide guidance and consistency of interpretation for
different fund object classes. Establish an ongoing
interaction between the Budget Division and regional field
locations to explain the differences and purposes of
different object classes. Provide visits and needed
assistance to field sites to ensure consistent use of
program and administration object class codes.
2. Provide assistance to the regions and Headquarters offices
on how to set up and use MARS reports by demonstrating the
specifics of the system and reports to individual office
users. FMD personnel should personally meet with users to
solve their questions and concerns.
3. Redesign the input and reporting features of MARS so that
Agency managers can create and generate better financial
management reports.
4. Ensure that EPA's strategic plan is developed before the
budget, so that the budget matches the plan. This will
allow the strategic plan to serve as the basis for the
overall EPA budget, rather than the other way around. If
the budget is adjusted, realistic adjustments to the plan
need to be made.
5. Continue with the initiative in the Financial Management
Status Report and Five-Year Plan to establish performance
measures to measure how well the Agency is performing key
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financial management functions for Headquarters and regional
offices.
6. Establish a model office for implementing the SRO concept
Agencyvide. in establishing a model office, consideration
should be given to clearly describing the capabilities,
procedures and controls each program office must have.
Financial Management Training
and Qualifications
1. FMD should provide very specific user-oriented financial
management training on location at both regional and
Headquarters locations. This would allow Agency users to
ask questions that are pertinent to their individual work
situations.
2. Establish an Agencywide financial management core of
training courses that every Agency employee involved in
financial management is required to take. Other optional
courses at each regional level could vary depending on
specific needs and priorities established for the different
EPA regions. This would promote consistency among Agency
locations in the way financial management data is accounted
for and recorded.
3. Strengthen the training curriculum by including the Five-
Year Plan, our report, NPR, CFO Act requirements, etc., as
required reading. Provide training on emerging financial
management issues to EPA as a whole. The financial
management environment in the federal government is changing
rapidly but many employees, especially those in the regions,
do not receive training on the new laws or procedures.
4. Provide cross training among Agency personnel in key
financial management operations and positions to establish
backup expertise for crucial office financial management
functions and duties.
5. Continue to explore the establishment of financial
management certification requirements similar to what the
Department of Energy is doing. If the requirements are
appropriate, implement the certification procedure for
financial management managers and staff Agencywide.
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Appendix 1
Page 1 of 2
GLOSSARY OF ACRONYMS
ADCR Automated Document Control Register
AMS American Management Systems
A/R Accounts Receivable
ARA Assistant Regional Administrators
ATM Automated Teller Machine
CATS Corrective Action Tracking System
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980
CERCLI8 Comprehensive Environmental Response, Compensation and
Liability Information System
CFO Chief Financial Officer
CPE Continuing Professional Education
OA Deputy Administrator
DOJ Department of Justice
EPA Environmental Protection Agency
FCQAS Financial Compliance and Quality Assurance Staff
FMD Financial Management Division
FMDP Financial Management Development Program
FMSD Facilities Management Services Division
FMFIA Federal Managers' Financial Integrity Act
FMO Financial Management Officer
FOZA Freedom of Information Act
GAO General Accounting Office
HAD Headquarters Audit Division
ZA6 Interagency Agreement
IDPs Individual Development Plans
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Appendix l
Page 2 of 2
IFMS Integrated Financial Management System
IRM Information Resource Management
JFMIP Joint Financial Management Improvement Program
LAN Local Area Network
MARS Management and Reporting System
MATS Management Audit Tracking System
OARM Office of Administration and Resources Management
O6C Office of General Counsel
OI6 Office of Inspector General
OMB Office of Management and Budget
ORC Office of Regional Counsel
OSWER Office of Solid Waste and Emergency Response
PPAS Personal Property Accountability System
PRP Potential Responsible Party
QA Quality Assurance
QAR Quality Assurance Review
RA Regional Administrator
RMDS Resources Management Directives System
RPZO Responsible Planning Implementation Officer
SAGE Electronic bulletin board listing EPA financial
management policies and procedures
8BO Senior Budget Officer
SCORE$ Superfund Cost Organization and Recovery Enhancement
System
SCRIPS Superfund Cost Recovery Image Processing System
SRO Senior Resource Official
TQM Total Quality Management
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APPENDIX 2
Page 1 of 2
REPORT DISTRIBUTION
Deputy Administrator (1102)
Deputy Inspector General (2410)
Assistant Inspector General for Audit (2421)
Office of General Counsel (2310)
Comptroller (3301)
Director, Financial Management Division (3303)
Regional Administrators - (Regions 1-10)
Financial Management Officers - (Regions 1-10)
Assistant Regional Administrators - -.Regions 1-10)
Assistant Administrator for Policy, Planning
and Evaluation (2111)
Assistant Administrator for Enforcement (2211)
Assistant Administrator for Administration and
Resources Management (3101)
Assistant Administrator for Water (4101)
Assistant Administrator for Solid Waste and
Emergency Response (5101)
Assistant Administrator for Air and Radiation (66101)
Regional Comptrollers (Regions 1-10)
Audit Followup Coordinator (3102), Attn: Director,
Resource Management Division
Senior Resource Officials
Agency Followup Official (3301)
Audit Liaisons
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APPENDIX 2
Page 2 of 2
Associate Administrator for Regional Operations
and State/Local Relations (1501)
Associate Administrator for Congressional and
Legislative Affairs (1301)
Associate Administrator for Communications and
Public Affairs (1701)
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