United States
Environmental Protection
- Agency
f/EPA Report of Audit
Report of Audit of
EPA, Region 8's Administration
of Superfund Cooperative Agreements
Audit Report No. E5eH7-08-0005-71992
September 30, 1987
-------
TABLE OF CONTENTS
SCOPE AND OBJECTIVES 1
SUMMARY OF FINDINGS 2
ACTION REQUIRED 4
BACKGROUND 4
FINDINGS AND RECOMMENDATIONS
1 - MONITORING OF PRE-REMEDIAL AND REMEDIAL
FUNCTIONS REQUIRES REGIONAL ATTENTION 7
2 - REGIONAL ADMINISTRATION OF COOPERATIVE
AGREEMENTS SHOULD BE STRENGTHENED 26
3 - REGIONAL OVERSIGHT OF RECIPIENT FINANCIAL
MANAGEMENT SYSTEMS NEED IMPROVEMENT 36
ATTACHMENT 1 - REGION 8 RESPONSE TO DRAFT AUDIT REPORT 42
REPORT DISTRIBUTION ». 63
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE INSPECTOR GENERAL FOR AUDITS
WESTERN DIVISION
2^^ Main Street, Suite 22Q
San Francisco, CA 94105
415 974-7084
September 30, 1987
SUBJECT:
FROM:
TO:
Report on Audit of EPA, Region 8's
Administration of Superfund
Cooperative Agreements
Audit Report No. E5eH7-08-0005-71992
lgr-jftcucww ^^J^^t^
Truman R. Bee
Divisional Inspector General for Audit
Western Divisioa
John Shearer
Regional Administrator
EPA, Region 8
SCOPE AND OBJECTIVES
We have performed an audit of the EPA, Region 8's administration of the Super-
fund cooperative agreements awarded to states under the Comprehensive Environ-
mental Response, Compensation, and Liability Act of 1980. The primary objec-
tives of our audit were to:
- Determine the adequacy of Regional policies, procedures, and practices
for administration and management of cooperative agreements under CERCLA.
- Review for compliance of Regional policies, procedures, and practices
with National Superfund guidance,
- Ascertain that the objectives of the cooperative agreements were being
achieved.
Our review of the management and supervision of the cooperative agreements
covered the period August 24, 1982 through February 28, 1987.
Our examination was made in accordance with Standards for Audit of Governmental
Organizations, Programs, Activities, and Functions issued by the Comptroller
General of the United States, and accordingly, included such tests of the
records and other auditing procedures as were considered necessary in the
circumstances. We reviewed the Region's system of internal controls relating
to the management and supervision of the cooperative agreements to the extent
necessary to accomplish the stated objectives of the audit. Internal control
deficiencies noted in the above areas have been included in the "Summary of
Findings" and "Findings and Recommendations" sections of this report.
-------
SUMMARY OF FINDINGS
We concluded that the Region needed to more effectively manage the $6.4 million
of cooperative agreements awarded to date. Since the activities addressed in
the agreements covered serious hazardous waste conditions, it is important that
increased regional attention be directed to the agreements. We found that pre-
remedial and remedial work were not performed timely and effectively, and the
completion of remedial work at four environmentally sensitive National Priori-
ties List (NPL) sites was significantly behind schedule. We also noted a lack
of aggressiveness in the Region's monitoring of other cooperative agreement
requirements, and an absence of regional guidance to its Regional Project Man-
agers. Further, the audit disclosed a need for improved regional procedures
for monitoring the financial.management systems utilized by the cooperative
agreement recipients. In general, we attribute these conditions to a need for
more regional involvement in the states' cooperative agreements.
The results of our review are summarized in the following subparagraphs, and
detailed, along with related recommendations, in the "Findings and Recommen-
dations" section of this report.
1 - MONITORING OF PRE-REMEDIAL AND REMEDIAL FUNCTIONS REQUIRE REGIONAL ATTEN-
TION
The Region has not developed adequate procedures for monitoring the pre-reme-
dial and remedial functions included in the cooperative agreements to assure
that they were performed in a timely and effective manner. As a result, we
noted that the pre-remedial functions, which included preliminary assessments
(PAs), site inspections (Sis), and Hazard Ranking System (HRS) scoring have
required an average of more than two years to complete, and in some cases, have
remained incomplete. In addition, the reliability of some of the pre-remedial
work has been questionable. These conditions have precluded timely determina-
tions as to whether additional hazardous waste sites should be included on the
Superfund National Priority List (NPL), and also delayed the initiation of sub-
sequent clean-up actions. In the remedial area, delays of up to 5 years were
experienced in completing the Remedial Investigations/ Feasibility Study (RI/FS)
at four sites. Two of the delayed projects were the Milltown Reservoir site in
Montana, and the Arsenic Trioxide site in North Dakota, which were experiencing
problems with arsenic in the drinking water supplies. In addition, a decision
was delayed on the proposed actions necessary to clean-up the arsenic, copper,
barium, lead, and zinc which were found at the Silver Bow Creek NPL site in
Montana. Further, little progress had been made on the RI/FS for clean-up of
the wind blown tailings and contaminated groundwater identified at the Sharon
Steel site in Utah. All of the above NPL sites represent significant environ-
mental hazards, which require priority attention to assure that further reme-
dial action is initiated in a timely manner. We believe that the above defi-
ciencies have been allowed to continue because the Region had not established
an aggressive policy of monitoring the performance aspects of the cooperative
agreements (see page 7).
-------
2 - REGIONAL ADMINISTRATION OF COOPERATIVE AGREEMENTS SHOULD BE STRENGTHENED
The Region needed to improve its procedures for managing the administrative
aspects of its Superfund cooperative agreements. Without adequate procedures
there was no assurance that maximum environmental benefits will be derived from
the $6.4 million of Superfund cooperative agreement funds. The inadequate re-
gional actions along with recipient deficiencies have resulted in a relatively
poor performance under the cooperative agreements. This condition was pri-
marily attributable to the fact that the Region had not: (i) taken an aggres-
sive role in assuring the completion of the required cooperative agreement
work; (ii) provided the Regional Project Managers with adequate guidance to
perform their responsibilities; (iii) prematurely awarded a cooperative agree-
ment to a recipient that did not meet the financial, technical, and experience
requirements described in 40 CFR 30.301; (iv) required recipients to establish
the site specific schedules required by EPA guidance; (v) maintained the Com-
prehensive Environmental Response, Compensation, and Liability Information Sys-
tem (CERCLIS) in an" adequate manner; and (vi) established an adequate working
relationship with the State of Utah for performance of the cooperative agree-
ment goals and objectives. We believe that improvements in the above areas
will require that the Region more aggressively monitor the recipients' coopera-
tive agreement activities (see page 26).
3 - REGIONAL OVERSIGHT OF RECIPIENT FINANCIAL MANAGEMENT SYSTEMS NEED IMPROVE-
MENT
Regional oversight of recipient financial management systems required improve-
ment to assure that the systems were adequately maintained. The Region was
unaware that the recipients were not in compliance with the Letter of Credit
(LOG) User's Manual, and therefore did not have the information needed to pro-
perly manage and disburse Federal funds. In addition, our audit disclosed that
additional review of the recipients' accounting systems was necessary to assure
the proper accountability of the $6.4 million of cooperative agreement funds
which have been awarded to date. Specificially, we found that the Cash Trans-
action Reports (SF-272) had not been submitted within the required time frames,
and that the Financial Status Reports (FSR) were either not submitted or sub-
mitted late. The FSR problems were previously reported in an EPA, Office of
the Inspector General (OIG) report' issued January 27, 1986. Although the Re-
gion provided assurances that corrective action would be taken, the deficien-
cies have continued to exist. Additionally, we found that the regional staff
were making changes to recipients' SF-272 Reports without properly notifying
the certifying official of the alterations. We consider this to be a poor
internal control procedure. The audit also disclosed that the Region needed
to strengthen its review of recipients' accounting and reporting systems to
assure that all deficiencies were appropriately detected and corrected. In
this respect, it was noted that major deficiencies in the State of Utah's ac-
counting system and LOG procedures were not identified during a recent regional
review. We attributed the above conditions to a general lack of regional at-
tention to the financial aspects of the cooperative agreements, and inadequate
monitoring of the recipients' financial management systems (see page 36).
-------
A draft audit report was provided to the Region on August 12, 1987, and the Re-
gion responded to the draft report on September 21, 1987. An exit conference
was held with regional representatives on September 22, 1987. The Region gen-
erally concurred with the findings and recommendations contained in the draft
report. However, in several instances, the Region provided additional comments
to clarify the information provided in the audit report. In this respect, the
Region commented that a number of factors contributed to its management defi-
ciencies during the period of the audit. These factors included: (i) general
start-up problems with the relatively new Superfund program; (ii) organization
changes within EPA and the Region; (iii) inadequate staffing at all levels,
(iv) a turnover of the technical staff; (v) an uncertainty of funding during
the 18 month Superfund re-authorization slow-down? (vi) a continual shifting
of national priorities; and (vii) a program speed-up after re-authorization.
We acknowledge the Region's comments, but believe that more effective regional
management procedures could have reduced the impact of the above factors.
The Region's comments have been summarized and incorporated into each finding
in the "Findings and Recommendations11 section of this report, along with ap-
propriate auditor comments, as necessary. In addition, the Region's complete
response has been includes as • Attachment 1 to this report. Certain of the
comments included in the Region's response to the draft report resulted in our
making revisions to the final audit report.
ACTION REQUIRED
In accordance with EPA Directive 2750, the Action Official is required to pro-
vide this office a written response of the actions taken or proposed to be
taken on the audit recommendations within 90 days of the audit report date.
BACKGROUND
The "Superfund" program was established by the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (CERCLA), Public Law 96-510,
enacted on December 11, 1980. The Superfund program was created to protect
public health and the environment from release, or threat of release, of hazard-
ous substances from abandoned hazardous waste sites and other sources where
response was not required by other Federal laws. A Trust Fund was established
by CERCLA to provide funding for responses ranging from control of emergency
situations to provision of permanent remedies at uncontrolled sites. CERCLA
authorized a $1.6 billion program financed by a five-year environmental tax
on industry and some general revenues. CERCLA requires that response, or pay-
ment for response, be sought from those responsible for the problem, including
property owners, generators, and transporters.
CERCLA was revised and expanded by the Superfund Amendments and Re-authoriza-
tion Act of 1986 (SARA), Public Law 99-499, enacted October 17, 1986. SARA
reinstituted the environmental tax and expanded the taxing mechanism available
for a five-year period.. It authorized an $8.5 billion program for the 1987-
1991 period. The Trust 'Fund was renamed the Hazardous Substance Superfund.
-------
The basic regulatory blueprint for the Superfund Program is the National Oil
and Hazardous Substances Contingency Plan (NCP), 40 CFR Part 300. The NCP was
first published in 1968 as part of the Federal Water Pollution Control Plan,
and has been substantially revised to meet CERCIA requirements. The NCP lays
out two broad categories of response: removals and remedial response. Re-
movals are relatively short-term responses, and modify an earlier program un-
der the Clean Water Act. Remedial response is long-term planning and action
to provide permanent remedies for serious abandoned or uncontrolled hazardous
waste sites.
CERCLA recognizes that the Federal Government can only assure responsibility
for remedial response at a limited number of sites representing the greatest
public threat. It therefore requires the maintaining of an NPL, which must be
updated at least annually. The NPL is composed primarily of sites which have
been ranked on the basis of a standard scoring system, which evaluates their
potential threat to public health. In addition, each State was allowed to
designate its highest priority site, without regard to the ranking system.
CERCLA section 104(c)(3) provides that no remedial actions shall be taken un-
less the state in which the release occurs enters into a contract or coopera-
tive agreement with EPA to provide certain assurances, including cost sharing.
At most sites, the state must pay 10 percent of the costs of remedial action.
Pre-remedial activities (preliminary assessments, site inspections) remedial
planning (remedial investigations, feasibility studies, remedial designs), and
removals may be funded at 100 percent by EPA. For facilities operated by a
state or political subdivision at the time of disposal of hazardous substances,
the state must pay at least 50 percent of all response costs, including re-
movals and remedial planning previously conducted.
Region 8 had awarded 10 cooperative agreements with a total value of about $6.4
million to 5 of the 6 states within the Region as of the date of our audit
field work. A $32,988 cooperative agreement was subsequently awarded to the
remaining state (South Dakota) in March 1987. The cooperative agreements were
awarded by the Region for a variety of purposes including: (i) the performance
of pre-remedial tasks, (ii) state lead for specific sites in the remedial
stages, and (iii) management assistance during pre-remedial and remedial phases
of the process. The cooperative agreements awarded by the Region are identi-
fied below:
-------
No. Recipient
V008427 Utah Dept. of Health
V008433 Wyoming Dept. of Environ-
mental Quality
V008457 North Dakota Dept. of Health
V008414 North Dakota Dept. of Health
V008415 Montana Dept. of Environ-
mental Sciences
V008430 Montana Dept. of Environ-
mental Sciences
V008416 Montana Dept. of Environ-
mental Sciences
V008435 Colorado Dept. of Health
V008459 Colorado Dept. of Health
V008462 Colorado Dept. of Health
Amount Purpose
$1,282,046 Multi-Site Coop. Agree.
63,295 Multi-Site Coop. Agree.
10,000 Multi-Site Coop. Agree.
319,033 Arsenic/Trioxide RI/FS
2,294,996 Silver Bow Creek RI/FS
101,897 PA/SI Program
1,091,085 Mi11town RI/FS
231,845 Multi-Site Mgmt. Asst.
45,000 PA/SI Program
1,000,000 South Adams County
Total Program Funding
$6,439,197
-------
FINDINGS AND RECOMMENDATIONS
1 - MONITORING OF PRE-REMEDIAL AND REMEDIAL FUNCTIONS REQUIRES REGIONAL ATTENTION
Regional procedures for monitoring the pre-remedial and remedial functions
specified in the cooperative agreements needed to be strengthened to assure
that the functions were performed in a timely and effective manner. The pre-
remedial functions, which included preliminary assessments (PAs), site inspec-
tions (Sis), and hazard ranking systems (HRS) scoring packages have required
an average of more than two years to complete, and in some cases, have remained
incomplete. In addition, the reliability of some of the pre-reitedial work has
been questionable. These conditions have precluded timely determinations as to
whether the applicable hazardous waste sites should be included on the Super-
fund National Priority List (NPL), and also delayed the initiation of subse-
quent clean-up actions. In the remedial area, delays of up to 5 years were
experienced in completing the Remedial Investigation/Feasibility Studies (RI/FS)
at four environmentally sensitive sites. Two of the delayed projects included
the Milltown Reservoir site in. Montana, and the Arsenic Trioxide site in North
Dakota, which were experiencing environmental problems with arsenic in the
drinking water supplies. In addition, a decision was delayed on the proposed
actions necessary to clean-up the arsenic, copper, barium, lead, and zinc which
were found at the Silver Bow Creek NPL site in Montana. Further, little pro-
gress had been made on the RI/FS for the wind blown tailings and contaminated
groundwater problems identified at the Sharon Steel site in Utah. All of the
above NPL sites represent significant environmental hazards, which require
priority attention to assure that further remedial action is initiated in a
timely manner. Vfe believe that the above conditions occurred, in part, because
the Region was not aggressive in requiring performance under the cooperative
agreements.
Background
The Superfund process is described in detail in Subpart F of 40 CFR 300. This
CFR establishes the methods and criteria to be used in determining the ap-
propriate response to be followed when hazardous substances are released, or
there are substantial threats of release to the environment. The ultimate goal
of a Superfund action is to initiate a permanent remedy for the affected hazard-
ous waste site. The Superfund process can generally be divided into the fol-
lowing three phases and their related subphases:
1. Discovery and Ranking (Pre-remedial)
- Site Discovery
- Preliminary Assessment
- Site Inspection '
- Immediate Removal (if necessary)
- Hazard Ranking System Scoring
- Nomination for National Priority List (if appropriate)
-------
2. Remedial Planning
- Remedial Investigation
- Feasibility Study
- Record of Decision
- Remedial Design
3. Remedial Implementation
- Remedial Action
- Initial Remedial Measures
- Operation and Maintenance
The Region has awarded 10 cooperative agreements with a total value of about
$6.4 million. The cooperative agreements cover a variety of areas, including
the pre-remedial program, remedial action at a particular site, or pre-remedial
and remedial action at multiple sites within a state. With South Dakota's
receipt of a cooperative agreement in March 1987, each state in Region 8 now
has a cooperative agreement for performance of at least part of the pre-reme-
dial program. According to the Region's latest CERCLIS report, dated February
11, 1987, there were 804 hazardous waste sites in the Region, 38 of which are
listed on the NPL. The above report included about 170 sites on which a PA
had not been performed, and 538 which could potentially require an SI. The
enactment of the Superfund Amendments and Reauthorization Act of 1986 (SARA)
established new priorities for the Superfund program. As a result of the gen-
eral dissatisfaction with the slow progress of the program, SARA included a
requirement that all sites listed on CERCLIS at the time of its enactment on
October 17, 1986, had to have a PA completed by January 1988, an SI completed
by January 1989, and an HRS scoring package within four years of enactment.
Completion of Preliminary Assessments Are Behind Schedule
Our review disclosed that the completion of PAs required under the cooperative
agreements awarded to the States of Utah, Wyoming, and South Dakota were behind
schedule. In addition, we found that, on a region-wide basis, an average of
449 days elapsed between the dates that the PA report was issued and the date
that the next pre-remedial step, an SI field visit, was performed. These de-
lays have precluded the Region from making timely assessments of the degree of
severity of the hazardous waste problems at the affected sites.
The PA is the first step in the actual site evaluation process. The PA at-
tempts to evaluate the magnitude of the potential hazard, identify the source
and the nature of the release, and identify potentially responsible parties.
A site must be listed on the CERCLIS before the PA can be performed. In con-
ducting the PA, some or alj of the following data gathering techniques may be
performed: (i) interviews with government personnel, (ii) review of govern-
ment files, (iii) review of geological, hydrological, and topographical data
available from government and other sources, (iv) review of well logs, meteo-
rological, land use and planning data, and (v) a perimeter (off-site) inspec-
tion. After the PA is completed, the Region must determine whether or not the
-------
site merits further action, or if it should be placed in a pending category.
If further action is to be initiated, the next step in the pre-remedial pro-
cess would be the completion of an SI.
Utah Cooperative Agreement. The cooperative agreement provided for the com-
pletion of 21 PAs by September 1985. However, none of the PAs were completed
as of that date, and the performance period was extended to September 1986.
While the state had prepared draft copies of all of the PAs by the end of the
revised performance period, only three PAs had been approved by EPA. One
factor contributing to the state's delays was a lack of adequate control of
the specific action dates that the individual PAs were to be performed and
submitted for review. As a result, we noted that 13, or more than half, of
the PAs were submitted to the Region simultaneously on March 28, 1986. Un-
fortunately, the Region reciprocated by returning the results of its reviews
on 17 PAs to the state on June 10, 1986. Neither the state nor the Region had
the resources to deal with a periodic heavy workload caused by the simultaneous
submission of large groups of PAs. We believe that this workload problem could
have been avoided if the Region and the state had prepared a mutually accept-
able delivery schedule for the PA reports at the beginning of the year. Such
a schedule would have helped spread submission of these reports on an orderly
basis over the year. Even when the PAs were submitted there were problems with
the timeliness of the Region's completion of its reviews. In this respect, an
average of 150 days were required for the Region to review the PAs submitted by
the state. To illustrate, the draft PA for the Lark Tailings site was initial-
ly submitted on December 5, 1985. However, the Region did not comment on the
draft report until June 10, 1986. A revised PA was resubmitted by the state
on September 2, 1986, or about 271 days after its original submission. As of
September 16, 1986, the PA had not yet been approved by the Region. Another
illustration of the Region's review delays occurred at the American Barrel Yard
site. Two draft PAs were submitted by the state for this site, including an
initial submission in April 1986. Neither of the draft PAs had been approved
by the Region as of September 1986. The draft PAs indicated a major health
concern because transient people had access to the thousands of barrels at this
site, which have shown a strong presence of gases.
Wyoming and South Dakota Cooperative Agreements. The Wyoming cooperative agree-
ment required that a total of 39 PAs be performed. However, the state was un-
able to meet this commitment. While the state had a fairly active PA program
during the early stages of the cooperative agreement, the Superfund activities
in the state came to a virtual halt after the state's only cooperative agree-
ment employee resigned in June 1986. This inactivity continued for about 9
months until the Region authorized the Field Investigation Team (FIT) contrac-
tor to begin performing PAs in the state in an effort to meet the SARA re-
quirements.
With respect to the South -Dakota cooperative agreement, we noted that work on
20 PAs was not performed, because of an 11-month delay in awarding the coopera-
tive agreement. The state requested the agreement in May 1986, but it was not
awarded until April 1987. While the Region ultimately used the FIT contractor
to perform four of the PAs, the majority of the PA work was not performed.
-------
Untimely Actions on Completed PAs. In addition to the delays in completing the
PAs, there were also delays in acting on the PAs once they were completed. In
this regard, we reviewed the time taken to initiate action on the PAs com-
pleted for 31 regional sites. The review, which included several sites from
each state, disclosed that an average of 449 days elapsed between the date of
the final PA report and the date that an SI field visit was initiated. To il-
lustrate, the Yankton Landfill in South Dakota, had a PA completed on September
1, 1981. The PA report recommended that further remedial action in the form of
an SI be performed. However, an SI site visit was not initiated until November
7, 1985, or over 4 years later. The resultant SI report was not completed un-
til November 5, 1986, or more than 5 years after the PA report. Some other ex-
amples of significant delays experienced in following up on completed PAs were
as follows:
No. of Days
Between Completed
Site PA and SI Field Visit
Salt Lake City Landfill No. 1 & 2, Utah 2,202
Whitewood Custom Treaters, South Dakota . 1,295
Syro Steel, Utah 435
Standard Oil-Greybull, Wyoming 364
Many of the problems concerning the lack of timely performance of the PAs were
attributable to the fact that neither the state nor regional personnel con-
sidered the PA process to be of a high priority. This has resulted in the
performance of PAs only when spare time was available. This attitude was a
contradiction of the objectives of the cooperative agreements which established
performance of PAs and Sis as important action items. The PAs represent an
important part of the Superfund process, and are the first step in identifying
and prioritizing sites, which may require some form of remedial action. Ac-
cordingly, we believe they should be accorded sufficient priority to assure
that they are completed and acted upon in a timely manner.
Regional Comments and Cur Evaluation
Regional Comments. The Region stated that during the period covered by the
audit, there was no Headquarters or regional requirements to complete pre-
remedial tasks within a specific time period. The Region therefore indicated
that its performance was not inconsistent with any established agency policy
or procedure. The Region also commented that its Strategic Planning and Man-
agement System (SPMS) targets were generally met for pre-remedial work. In
addition, the Region provided the following specific comments on the various
topics discussed in the finding.
1. Completion of Preliminary Assessments Are Behind Schedule. The Re-
gion stated that PA and SI work, and listing new sites on the NPL were very low
priority during the time covered by the audit. It stated that the emphasis was
directed towards completing RI/FS and remedial efforts at sites already on the
NPL. In addition, until SARA was enacted, there were no specific time frames
for completion of the PA or SI at a particular site. The Region therefore did
not agree with our conclusion that the average days cited in the report repre-
sented an untimely situation.
10
-------
2. Utah Cooperative Agreement. The Region stated that the Utah-EPA
Memorandum of Understanding included a mutually agreed upon delivery and review
schedule. It believed that this should help to alleviate many of the problems
experienced in the past. The Region also anticipated the Memorandum of Under-
standing would be the model for agreements with other states in the Region.
3. Wyoming Cooperative Agreement. The Region commented that the status
of pre-remedial work in Wyoming was at a virtual standstill at the time of the
audit. It noted that pre-remedial work had a very low priority. The Region
also stated that the state was within its rights not to hire an employee to con-
tinue the Superfund work.
4. Untimely Actions on Completed PAs. The Region explained that there
was no statutory time requirement for initiating an SI upon completion of the
PA. It also stated that the level of staffing at the Region precluded timely
action on all PAs and Sis. The Region further contended that it had met its
SPMS targets, and that all priority sites had been completed during the period
of the audit. The Region did not agree with the audit report statement that
"neither the state nor regional personnel considered the PA process to be of a
high priority." The Region commented that its SPMS targets had been met in
this case.
PIG Evaluation. The Region's comments are acknowledged. However, it remains
our position that the average number of days required to move from PA to a SI
stage is excessive. We do not believe that the comment concerning the lack
of Headquarters guidance is responsive to our concern. Effective management
practices dictate that improvements be made whether or not Headquarters had
provided guidance. With the inclusion of time frames in SARA, we agree that
this problem should diminish.
The Region also asserted that the State of Wyoming was clearly within its
rights to refuse to hire a Superfund person to complete the work under the co-
operative agreement. While this may be the case, we do not believe that such
an action was within the spirit of the cooperative agreement process. In our
opinion, a state should not be allowed to delay the Superfund cooperative agree-
ment process indefinitely because it had not acted in a responsible manner.
We believe that this is an area where the Region must become more aggressive
with the states to assure that the Superfund program continues to move forward.
>
In responding to our finding relating to untimely action on completed PAs, the
Region indicated disagreement with our general conclusion that PAs were a low
priority. However, the Region contradicts itself in responding to our finding
related to delays in completion of preliminary assessments under the Utah co-
operative agreement. In that portion of its response, the Region advised that
PA activity was a low priority. In addition, the Region's comments on the ac-
complishment of its SPMS targets were not relevant to this audit. The audit
covered the shortfalls in accomplishing the goals and objectives of the co-
operative agreement. As such, we did not review either the validity or the
accomplishment of the SPMS objectives. It is obvious, however, that the SPMS
target goals were more easily attainable than those provided for in the cooper-
ative agreement.
11
-------
Inadequate Site Inspections
We found that the Sis being performed in Region 8 were not always accomplished
in accordance with EPA requirements or in a timely manner. In this respect, we
found problems with the quality of the work performed for 7 of 9 Sis reviewed
in Utah and South Dakota. Further, we noted that an average of more than 10
months was required to complete the SI process. With the exception of the
State of Utah, which performed its own Sis, the Sis were, for the most part,
being accomplished by the FIT contractor. It was the intention of the Region
to expand the states' participation in the SI process. If this is the case,
additional training on the SI process will be required. In addition, regional
oversight of the states' performance will have to be increased to assure ade-
quate performance. Also, written guidance, concerning the performance of the
SI, had not been prepared by the Region.
The purpose of an SI is to characterize the problems at a site. It should also
ascertain what, if any, further action is necessary, and determine if the site
should be considered for .inclusion on the NPL. The major objectives are to
(i) determine if there ig, any immediate danger to persons living or working
near the site and if an immediate removal action is necessary, (ii) provide
sufficient information to develop the most accurate HRS score, and (iii) iden-
tify the major sources of contamination.
The steps taken to acquire the information necessary for an SI may include the
following: (i) measurement of ambient conditions, (ii) documentation of the
conditions of waste materials containment, topography, geology, and hydrology,
(iii) identification of local populations and natural resource areas, (iv) re-
view of operators records, (v) collection of on and off-site stream, ground-
water, air, soil, and leachate samples, (vi) analysis of samples including
quality assurance and quality control review of the analysis, and (vii) pre-
liminary HPS scoring to determine that adequate data are available to score
the site.
Problems With Quality of Sis. We reviewed 9 SI reports and concluded that 7
failed to meet the requirements of EPA, Office of Solid Waste and Emergency
Response (OSWER) Directive 9345.1-1, dated December 1985. This directive
stated that the two most important purposes of the SI were to:
"...!) understand the potential threat posed by a site—to the extent pos-
sible within the limited scope of the SI, and
"2) to determine the need for further Superfund activity at a hazardous
substance site."
The 9 Sis reviewed included Sis performed by Utah, as well as some previously
performed by South Dakota.- As indicated, we found that 7 Sis failed to meet
at least one of the two criteria established by the OSWER directive. The most
common deficiency was the failure to perform the necessary sampling during the
SI process. In addition, most of the Sis concluded that additional site test-
ing should be performed. In our opinion, this was not an acceptable conclusion.
The primary purpose of an SI is to assess the eminent danger of the site, and
to assure continuation of the remedial process. The resources available to EPA
12
-------
under its hazardous waste program are not adequate to perform additional Sis on
the same site. This is particularly true when only one SI should have been
necessary. The results of our review of the Sis are summarized in the subpara-
graphs below.
Old Sioux Falls Landfill, South Dakota. A site visit was made in June
1979, and the SI report was completed in March 1985. Our review of the report
disclosed that it was of relatively poor quality, and was prepared by someone
other than the inspector that performed the field visit. We also noted that
no sampling had been performed in conjunction with the SI. Additionally, the
files did not document or otherwise indicate why it took almost 6 years to com-
plete the SI process. Although the SI report commented that the site had been
abandoned and built over, there was no indication that this had been the cause
for any delay. In summary, it was our opinion that very little effort had gone
into the preparation of the SI report. It therefore did not appear that any-
thing was accomplished by performance of the SI.
St. Regis Paper Co.-Wheeler Division, South Dakota. The field visit was
conducted in January 1983._ The resultant SI report, which was not dated, indi-
cated that no sampling had been performed. The report noted that samples of
groundwater, waste, runoff, and soils were needed. The report also indicated
the possibility of contamination of drinking water due to the presence of
pentachlorophenol and creosote sludges. In view of the potential environmental
problems and the lack of sampling, it appeared that the results of the SI are
of little value in ascertaining whether future remedial work is necessary.
Since the reports reviewed did not fulfill the primary objectives of an SI, it
appears that additional regional training on the techniques of performing an
SI is required. Also, the Region's procedures need to be improved to document
whether or not the Region considered the Sis performed by the states to be
acceptable or unacceptable. The project files for the 9 Sis reviewed did not
indicate whether the Region considered the work unacceptable, or if additional
work at the sites was required. The Region has the responsibility for assuring
that the states possessed the necessary technical staff and facilities to per-
form the Superfund work before the cooperative agreement was awarded. In addi-
tion, the Region was responsible for monitoring the progress of the states SI
activity under the cooperative agreements. Our review disclosed that the Re-
gion has not fulfilled these responsibilities. The Region has not provided the
states with any written instructions, training, or other guidance detailing the
minimum requirements for performance of an SI. Unlike the FIT contractor, the
state agencies are not required to submit a sampling plan prior to making a
site visit for SI sampling and site characterization. As such, it is important
that the states be provided detailed instructions on the procedures to be fol-
lowed in performing an SI.
Delays in Completing SI Reports. In addition to the quality problems, we found
that significant delays were experienced in the issuance of the final SI re-
ports. In this regard, an average of 313 days elapsed between the date that
the SI site visit was made and the date that the SI report was issued. When
this time is combined with the 449-day average delay in following up on the
PAs, a total of 762 days, or more than 2 years, are required to determine
whether the site represented a significant environmental hazard. We noted
13
-------
that several of the sites which have been delayed in the SI process represented
significant hazardous waste problem areas which should have proceeded to reme-
dial action as soon as possible. One of these sites, the Wasatch Chemical site
in Utah, represented one of the most serious hazardous waste sites in the
state.
The Wasatch Chemical site is located in an industrial area of Salt Lake City.
The site was found to present a serious potential health hazard as a result of
ground and surface water contamination. However, our review disclosed that
clean-up action on this site had not progressed to the remedial stage, although
more than 2 1/2 years had passed since an initial SI was performed in tMay 1984.
The SI report, stated "As the Huntsman-Christensen pond may be representing a
serious potential hazard to an important municipal well and is releasing toxic
and carcionogenic compounds to the local ground and surface waters, it is felt
that further CERCIA action there should be given a high priority." An HRS
score of 51.02 was established as a result of the SI. However, it was not
until June 1985, about one-year later, that the state performed a CERCIA site
inspection. Various, parts of this site have been leased and subleased to a
number of chemical companies which used the facilities to mix, blend, and
package pesticides and herbicides. The site actually consists of two separate
parts. One part (Lot 6) covers 3.68 acres of partially fenced, but otherwise
undeveloped land, except for a cement encased pond which has been used for bulk
hazardous and toxic waste storage. The balance of the site consists of 10.89
acres of property containing a number of structures used in the past for a
variety of purposes. The 1984 SI covered only Lot 6. A subsequent 1985 SI was
conducted and included sampling of the whole site. The SI resulted in an HRS
score of 87.5 on September 13, 1985. Both of the HRS scores were far in excess
of the 28.5 minimum required for consideration for inclusion on the NPL. Al-
though the significant hazardous waste problems at this site have been known
since 1984, long-term remedial action has not been initiated.
During the SI performed in 1985, a group of forty-eight 55-gallon drums, numer-
ous smaller containers, and 13 compressed gas cylinders were discovered at the
site. The containers were in a severely deteriorated condition. Samples
showed the hazardous wastes contained elevated levels of 2-4-D, Xylene,
Anthracene, Nepthalenes, and Phenonthrenes. Soil samples also showed elevated
levels of 2, 4, 5-T, other organics, and heavy metals. The cylinders were not
sampled because of doubts regarding their structural integrity. On the basis
of the sample results, the state requested the Region to conduct an immediate
removal of the drums, containers, cylinders, and contaminated soil from the
site. The immediate removal was conducted during the months of March and April
1986. Approximately 19 of the 48 drums were found to contain Dioxin contami-
nated wastes.
The Dioxin level of some of the containers reached as high as 9,000 to 12,000
parts per billion (ppb), which was far in excess of the 5 to 10 ppb standard
allowed for industrial areas. The drums currently remain stored at the site
and locked in a metal shed.
There has apparently been some reluctance on EPA's part to list the entire site
on the NPL because a portion of the site is subject to the requirements of the
Resource Conservation and Recovery Act (RCRA) program. As a result, it is our
14
-------
understanding that only Lot 6 is being considered for the NPL. However, the
state contended that the whole site should be listed on the NPL because the
release of contaminants "...on the site are unrelated to current RCRA practices
and all parties have demonstrated a staunch unwillingness to conduct necessary
remedial investigations or undertake remedial activities at the site." In this
respect, the Potentially Responsible Parties (PRPs) on this site represent a
major obstacle to the commencement of any remedial action. The state has at-
tempted to negotiate an agreement with the PRPs since mid-1984 without success.
As a result, the state has subsequently filed a civil action in Federal court
to force the PRPs to participate in the site clean-up and to reimburse the
state for its oversight costs. The suit is pending with no date for final
resolution. There were 11 PRPs named in the suit. This could prove to be a
very lengthy process which may result in further lengthy delays in the actual
remedial action at the site. A memorandum issued by EPA on March 20, 1984,
entitled Participation of Potentially Responsible Parties in Development of Re-
medial Investigations and Feasibility Studies under CERCLA clearly stated that
"The Agency will not engage in lengthy negotiations with PRPs over whether PRPs
will conduct the RI/FS." This policy was established to preclude an obstinate
or uncooperative PRP from .unduly delaying remediation of a hazardous site con-
dition. It appears that the intent of this policy was not followed at the
Wasatch Chemical site.
Regional Comments and Our Evaluation
Regional Comments. The Region agreed that procedures for conducting an SI are
necessary. However, it stated that the resources necessary to prepare the pro-
cedures were not available. The Region also coitroented that the procedure
should be prepared by Headquarters to assure consistency between the Regions.
The Region also provided the following additional comments on the other matters
discussed in the finding.
1. Quality of Sis. The Region contended that an SI will often result in
the conclusion that additional sampling was required at a particular site. The
Region maintained there are simply too many variables at a site to expect that
a small number of samples will be adequate.
2. Old Sioux Falls Landfill, South Dakota. The Region commented that, at
the time that this SI was conducted, there was no requirement that sampling be
perfornBd.
3. St. Regis Paper Co.-Wheeler Division, South Dakota. The Region com-
mented that sampling at this site was not conducted because it was not required
at the time the SI was performed.
4. The Region agreed that additional training in the SI area was neces-
sary for the state staffs. •' However, the Region was not willing to unilateral-
ly develop procedures for performing the Sis. The Region also indicated that
it monitored the states' Superfund performance via the quarterly reports.
5. Wasatch Chemical Site, Utah. The Region explained the circumstances
under which Utah filed the legal action against the Wasatch PRPs. It noted
that it was the most appropriate action at that time.
15
-------
PIG Evaluation. As explained previously, we believe that, in the absence of
Headquarters guidance, the Region should establish the procedures necessary to
maintain an effective Superfund program. Such procedures would assist states
in meeting the requirements for performing Sis. Our additional comments, keyed
to the balance of the Region's response, are as follows:
1. We recognize that there may be a problem with the performance of ade-
quate sampling during the normal site visit. However, the need to constantly
revisit sites to perform additional sampling is, in our opinion, an ineffec-
tive practice in view of the additional time and cost required. It is our
understanding that similar problems regarding the adequacy of sampling prac-
tices have occured on a nationwide basis. To help correct this problem, EPA
Headquarters has developed a guidance document, OSWER Directive 9345.1-11, to
assist in planning a site sampling strategy. Our audit disclosed that such a
sampling strategy had not been developed for most of the Sis reviewed in Re-
gion 8. Without an adequate sampling plan, the necessity for follow-up visits
is increased.
2. The Region responded .that there was no requirement for sampling at
the Old Sioux Falls Landfill. Without a sampling requirement, practically
nothing was accomplished by performing the SI, since it revealed nothing more
about the site than was previously known.
3. The Region indicated that sampling was not required. However, it
should be noted the form used to conduct the SI at this site specifically
identified the sampling that should have been performed.
4. It remains our position that if a void in guidance exists, the Region
should initiate the procedures necessary to correct the problem. With respect
to the comment that the Region monitors the PA and SI program by review of the
quarterly reports, we consider this comment to be non-responsive to our con-
cern. Our review disclosed that very little actual information was transmitted
via the quarterly reports. Certainly the quality of the work performed could
not be reviewed via a quarterly report.
5. We did not question whether or not the litigation taken at the Wasatch
Chemical Site by the state was appropriate. Our point was that the litigation
should not be allowed to indefinitely stall the RI/FS process at the site.
>
Hazard Ranking System Scoring Problems
Our review disclosed that the procedures used by the Region to review and ap-
prove HRS scoring packages were not adequate. As a result, the HRS scoring
packages submitted in support of the Olsen-Neihart Reservoir, and the Silver
Creek Tailing sites were npt adequate to withstand the challenges made by out-
side sources. In addition, the Region's handling of the HRS scoring package
for the potentially significant Kennecott Copper site was inadequate. Since
most of the HRS scoring packages prepared in Region 8 were applicable to sites
in the State of Utah, we limited our review to that state. The actual HRS
scoring was performed by both state and the FIT contractor. Progression of
a site through the pre-remedial process to eventual remediation of a serious
16
-------
health threat is dependent, in part, on how well the HRS scoring package was
prepared and supported. An HRS score that is not based upon adequate support-
ing information will not withstand the challenges of a potentially responsible
party or of local government entities.
The purpose for the HRS scoring system is to provide a method of establishing
the relative risk or danger of a site in relation to all other sites by con-
sidering the (i) population at risk, (ii) the hazard potential of the substance
at the site, and (iii) the potential for contamination of drinking water sup-
plies, direct human contact, and the destruction of sensitive ecosystems. Com-
putation of the HRS score is based on data developed during the SI. The HRS
score ranges between 0 and 100. A score of 28.5 or more is required for nom-
ination to the NPL. The major factors to be considered during the HRS process
are (i) the observed release, (ii) the route of exposure characteristics,
(iii) the containment measures taken to minimize or prevent migration of a
contaminant, (iv) the waste characteristics, and (v) the targets, such as
populated areas, which may be affected by a migrating contaminant.
Olsen-Neihart Reservoir, Utah. . This site was included on the October 15, 1984,
NPL update. The SI was performed by state staff. The HRS scoring was per-
formed by the FIT, and the site was given a score of 33.75. During prepara-
tion for negotiations with the PRP for the site, the regional staff became
concerned about the inadequacy of the data supporting the HRS score. Some of
the deficiencies noted were; (i) the upgradient and downgradient groundwater
samples were taken 4 years apart; (ii) no data on the depth of the aquifer and
whether the wells were completed to the aquifer of concern; and (iii) based
on the data available, there had not been an observed release to the surface
waters. These data were critical to achieving the HRS score of 33.75. The
significance of the deficiencies noted made it difficult to understand how the
HRS score had been initially accepted without questions being raised as to the
adequacy of the HRS scoring package. These questions should have been asked
during the quality assurance review performed on the HRS scoring package.
Based on subsequent sampling work performed by the state, we understand that
the site is to be recommended for elimination from the NPL.
Silver Creek Tailings Site, Park City, Utah. The state performed an SI on this
site and issued a report on August 10, 1985. The report recommended the site
be considered for the NPL. The site was located within a resort community, and
consisted of about 80 acres of mine' tailings that vary in depth from one to ten
feet. A tract of expensive custom homes and commercial buildings were con-
structed on the site during the past several years. The soil samples showed
high concentrations of lead, cadmium, arsenic, and silver. The FIT contractor
assigned an HRS score of 38.4 to the site on January 15, 1985. The City subse-
quently engaged a consultant to review the accuracy of the HRS scoring package.
The consultant raised several issues concerning the reliability of sampling
data, the validity of the' conclusions reached, and the resultant HRS score.
Specifically, the consultant challenged the state's conclusion concerning the
interconnection of aquifers underlying the site and the validity of the surface
water sampling technique employed by the DEH staff. Upon receipt and review of
the consultant's report, EPA Headquarters urged that the Region conduct more
sampling to confirm the validity of the HRS score. However, the Region initial-
ly refused to conduct additional testing to support the HRS score. It has sub-
sequently initiated an extensive reevaluation of the site.
17
-------
Kennecott Copper Sites. The Kennecott Copper sites potentially represented
the most significant hazardous waste sites in the State of Utah. However,
little action has been taken to ascertain the full extent of the hazardous
waste problems at these sites, or to initiate a schedule of corrective action.
In this regard, there were nine individual Kennecott Copper sites listed on
the CERCLIS. Only three of these had either a PA or SI performed under the
cooperative agreement.
An SI of the Kennecott Tailings Pond located in Magna, Utah was conducted by
the state in July 1985. The pond, which covered approximately 5,000 acres, has
been built up to a height of 80 to 90 feet. It is bordered on the south by
the Oquirrh Mountains, on the north by the Great Salt Lake, and on its other
sides by marshy alkali flats and fresh water creeks and canals. A draft report
summarizing the results of the SI was issued by the state in December 1985.
The draft report indicated that the pond had high levels of arsenic, lead, and
chromium. A preliminary HRS score of 79.15 was calculated based on a scoring
of air, groundwater, and surface water releases. It should be noted that the
tailings pond was in close proximity to local population and industry. This
was reflected in the draft SI report which stated "Should the tailings ponds be
found to present environmental hazards, the potential for impacts upon local
population and industries is high."
Although the actual SI was conducted in July 1985, no action had been taken by
the Region as of the end of 1986 to recommend that this site be included on the
NPL. The files are vague as to the cause for the excessive delay. However,
the results of a FIT review issued in September 1986 disclosed problems with
the sampling rationale used in the SI. The review concluded that the data
were not adequate to support an HRS score, although it indicated that there
was a definite problem with the Kennecott Tailings site. The files did not
explain why it took 9 months for the Region to conclude that the sampling was
inadequate. Since the actual sampling was performed in July 1985, there was,
in reality, a 14-month delay in determining that the sampling was inadequate.
As of June 1987, little progress had been made towards correcting the HRS
scoring deficiencies and rescoring the site so that it could be nominated for
inclusion on the NPL. We were advised that the PRP was voluntarily conducting
groundwater studies of the general area of this site. It should be noted that
the PRP's study may take several years to complete, and even then there is no
assurance that the PRP will move forward after the study to clean-up this
site. We therefore believe that EPA should immediately take the lead on this
site, and have the FIT perform the work required and prepare an adequate HRS
scoring package.
Regional Comments and Cur Evaluation
Regional Comments. The Region provided the following specific comments.
1. Silver Creek Tailings Site, Park City, Utah. The Region provided
additonal comments to clarify its position regarding the additional sampling
required for this site. The Region indicated that it did not oppose additional
sampling at the site, but did not believe that the site represented an iirmedi-
ate threat to the connunity. The Region indicated it preferred to conduct
the additional sampling subsequent to NPL listing.
18
-------
2. Kennecott Copper Site. The Region enphasized that the HRS package
submitted by the state was tentative until the Region had completed its quality
assurance review. The Region further contended that the package submitted by
the state for Kennecott could not be adequately documented, and was therefore
not adequate to support the HRS score. The Region indicated that it is in the
process of having the state resample the site under an expanded SI. The Region
also commented that it had repeatedly told the state of its intentions to list
the site on the NPL should the SI substantiate such a listing. The Region also
agreed that it should take the lead for this site, if the state hesitated to
take appropriate action on a timely basis.
PIG Evaluation. The Region's comments provide additional clarification for the
basis of its actions on the above two sites. However, in both instances, the
Region's lack of aggressive action has contributed to the delays at the sites.
The Region commented that it repeatedly told the state that the Kennecott Cop-
per site would be nominated for the NPL, if the SI supported such an action.
However, we found no documentation in the official project files to support
this assertion. ...
-T-
Lack of Progress at NPL Sites
We observed that progress towards remediation at several of the NPL sites speci-
fied in the cooperative agreements was slew and sporadic. It was our opinion
that Superfund activities at these sites were not well managed by the Region.
In this respect, the Region did not assure that the states expedited action on
these sites, but instead allowed the state agencies to move at their own pace.
In most cases, this pace was quite slow. While some delays were attributable
to local opposition against moving forward in the Superfund process, we did not
find that the Region actively assisted the states when these situations occur-
red. In the subparagraphs below, we discuss the lack of progress at the fol-
lowing four NPL sites: the Milltown Reservoir Sediments Site, Montana; the
Arsenic Trioxide Site, North Dakota; the Silver Bow Creek Site, Montana; and
the Sharon Steel Site, Utah.
Milltown Reservoir Sediments Site, Montana. Samples taken from drinking wells
in thecommunity ofMilltown,Montana,in 1981, showed elevated levels of
arsenic in the drinking water supply. Milltown is adjacent to the Milltown Dam
where the Big Blackfoot River joins the Clark Fork River. The Milltown Dam was
built in 1906 to provide hydroelectric power to the area. Although the facil-
ity remains in operation, the reservoir has been filled over the years with
mine tailings. The Clark Fork River basin is the location of several NPL
sites, including the Anaconda Smelter Site, the Montana Pole Site, and the
Silver Bow Creek Site. The total distance from the Silver Bow Site to the
Milltown Reservoir Site is about 120 miles.
The Region awarded a cooperative agreement to the Montana Department of Health
and Environmental Services on June 27, 1983, for preparation of an RI/FS at
the site. The site was nominated for and included on the NPL in the fall of
1983. As an intermediate remedial measure, the water supply system for the
households with contaminated water was replaced in 1985. The firm of Harding
Lawson Associates (HLA) was hired to perform the RI/FS. However, HIA had dif-
19
-------
ficulty with the performance of the required tasks, and fell about 6 months be-
hind schedule. This condition, in addition to the poor quality of work, ulti-
mately led to a termination of HLA's contract by the state in February 1987.
In this regard, the state reported in one of its quarterly reports that "The
draft FS report was poorly done and it was becoming evident that the contrac-
tor, Harding Lawson Associates, was not performing as expected." The report
also commented on problems with the RI/FS report and stated that "The main
area of discrepancy was with the Arsenic speciation...HLA has had some trouble
in validating their data in regard to arsenic speciation." The report further
stated that "The draft FS report was received on 11/13/86. It was evident
that little work had been done since the 1985 version. Comments from the 1985
version were not incorporated into the draft...It was felt it was poorly done."
As a result of the termination and the problems with the quality of the work,
some of the testing performed by HLA may have to be redone. This could delay
the initiation of further remedial action although more than 3 1/2 years have
passed since the cooperative agreement was awarded.
Arsenic Trioxide Site, North Dakota. Normal drinking water sampling disclosed
the existence of arsenic in the drinking water supplies of Lidgerwood, Rutland,
and Wyndmere, North Dakotaf. The sampling levels were either at the maximum or
exceeded the maximum levels allowed under EPA's mandated Safe Drinking Water
Act (SDWA). In addition, wells in the surrounding rural farming communities
were also found to contain high levels of arsenic. A specific source of the
arsenic contamination was not readily identifiable. This situation resulted in
the award of a cooperative agreement to the North Dakota Department of Health
on August 24, 1982, for the purpose of identifying the extent and potential
sources of contamination. The cooperative agreement specified that work would
be completed by December 3, 1984.
Our audit disclosed that the required work had not been completed, although
about five years had passed since the initial cooperative agreement award.
Because of the poor quality of the documentation in the project files, we were
not able to ascertain the cause of the delays. Additionally, there was no
indication as to what actions were taken by the Region to encourage the state
to speed up their progress. However, a memorandum in the file stated that one
year of the delay was attributable to the fact that the state was unable to
hire personnel. Obviously the State of North Dakota did not attach a very high
priority to the site since they did not assign other state personnel to work
on the project. As a result of the delays, EPA Headquarters urged that the
Region take back the site lead, and complete the RI/FS as a Federal lead site.
The Region opposed this suggestion contending that the delays had been beyond
the state's control, and that a change in lead responsibilities may damage its
working relationship with the state. The Region therefore granted the state
an additional time extension, and agreed to have an EPA FIT contractor assist
in the completion of the various tasks remaining under the RI/FS. These ef-
forts did result in a Record of Decision (ROD) being reached in September
1986, for all areas of the site, except for the Town of Lidgerwood. A ROD for
Lidgerwood was not expected to be completed before September 1987, because of
a controversy over the funding of its water supply system. The RI/FS con-
cluded that the contamination was affecting an area of 171 square miles con-
taining a population of about 4,500. Contamination of the groundwater ap-
20
-------
peared to have two sources. The first source was from naturally occuring
arsenic contained in shales native to the area. The second source of contamin-
ation was from arsenic-laced bait used to control grasshopper infestations from
about 1936 until the mid-1940's. The program to fight the grasshopper infesta-
tion was funded by a combination of Federal, state, and local governmental pro-
grams. The project file indicated that the state liability and cost sharing
at this site were considered because of this role in the grasshopper control
program. However, there was no documentation indicating whether the state
liability issue had been resolved. In addition, the files did not discuss the
Federal government's liabilities, although it also participated in the control
program.
Silver Bow Creek Site, Montana. The original site was added to the NPL in
September 1983. It extended approximately 15 miles upstream from the con-
fluence of the Clark Fork River and Silver Bow Creek. EPA awarded a coopera-
tive agreement to the Montana Department of Health and Environmental Services
in September 1983, for performance of an RI/FS at the site. It was subsequent-
ly determined that an additional 9-mile area may also qualify as an NPL site.
As a result, in April 1984, the FIT completed an SI and HRS scoring package
for this additional area. The site was scored at 49.9 and was added to the
original Silver Bow Creek NPL site, extending that site 9 miles further up the
Silver Bow Creek. The site contained arsenic, cadmium, copper, barium, lead,
and zinc. There have also been releases of PCPs via groundwater discharges
from the Montana Pole NPL site. A removal team has been assessing the poten-
tial for acute health impacts from the presence of elemental mercury at a
public ball field within the boundaries of the Silver Bow Creek site. Al-
though the site has been on the NPL since September 1983, the RPM estimated it
would be at least two years before adequate information would be available to
make a well informed decision on the future remedial actions required at the
site. This situation would result in a study period of 5 to 6 years, at a
minimum, before completion of the RI/FS.
Sharon Steel Site, Utah. This site is located in a heavily populated suburb
of Salt Lake City, Utah. The site consisted of approximately 260 acres of
tailings from a mine milling facility which operated from about 1880 to 1959.
The tailings are 40 to 50 feet deep in some locations. Releases from the site
in the form of wind blown tailings and contamination of groundwater have been
documented. The site received an flRS score of 72.03 and was included on the
NPL in October 1984. In addition, the site was incorporated into the multi-
site cooperative agreement awarded to the Utah Department of Health in Septem-
ber 1984. Progress at this site has been very slow, and development of an
acceptable workplan has been unsatisfactory. Problems with the notifications
and negotiations with the PRPs also had a negative effect on progress at this
site. Although this site has been on the NPL for over 2 1/2 years, little
actual RI/FS work has been accomplished. As a result of Federal litigation
against the PRPs, EPA assumed the lead for the site in early 1987. The Fed-
eral lead RI/FS was anticipated to begin with groundwater sampling in June
1987. It therefore appears that substantial additional effort will be required
before the RI/FS at this site is completed.
21
-------
Regional Comments and Our Evaluation
Regional Comments. The Region did not agree that the states were allowed to
move at their own pace. It expressed a dissatisfaction with the pace of state
activities under CERCIA. The Region also commented that it was encouraging
the states to be more efficient and timely. With respect to the specific
issues discussed in this finding, the Region provided the following additional
comments.
1. Milltown Reservoir Sediments Site, Montana. The Region commented that
progress on the Milltown Reservoir and Silver Bow Creek sites in Montana were
impacted by (i) the delay in re-authorization of CERCIA, and (ii) the complexity
of the sites which are part of a chain of four NPL sites encompassing 77 oper-
able units. With respect to the Milltown site, the Region disagreed that the
RI/FS for the site was significantly behind schedule. It contended that the 3
1/2 years cited in our report was not an accurate portrayal of the actual delay.
The Region also stated that we should only consider the delay period from the
time the ROD for the water supply system was proposed in 1985, rather than
from inception of the cooperative agreement in 1983. The Region agreed that
site specific schedules would be useful tools for monitoring state performance.
The Region also stated that it was planning to implement specific schedules
for each site.
2. Arsenic Trioxide Site, North Dakota. The Region commented that it did
not assume the lead on this site, as urged by Headquarters, because it wanted
to put the project back on schedule, and desired to build the state's capabili-
ties. The Region did not agree that it delayed action in order to maintain
good relations with the state. It also considered our statement concerning
the state's attachment of a low priority for the site to be speculative, and
suggested that we delete the statement from the report. The Region further
commented that the decision to fund the Lidgerwood water treatment facility
resulted from a change in EPA national policy at EPA Headquarters. As a re-
sult, the decision to perform a ROD for the Lidgerwood facility was not made
until mid-1987.
3. Silver Bow Creek Site, Montana. The Region stated the audit report
misstated the area of the specific site being addressed in the report. The
response indicated that the whole Silver Bow Creek site consisted of a 120-
mile area. Due to the size and complexity of this site, including the Butte
addition, the Region contended that it may take longer than the normal time
period to complete the RI/FS. The Region's comments also discussed the causes
for delay including a lack of funding, inadequate resources, and a low seasonal
rainfall.
4. Sharon Steel Site, Utah. The Region claimed that the lead for this
site was not taken back ad a result of unsatisfactory progress by the state.
According to the Region, the site became a Federal lead site because of the
initiation of Federal litigation against the PRPs. The Region commented that
"...EPA as a matter of policy assumes the lead for RI/FSs in every instance in
which EPA initiates litigation."
22
-------
PIG Evaluation. The Region disagreed that it allowed the states to perform at
their own pace. However, the Region provided no new information that would
allow us to modify our conclusion. On the basis of our review of the sites
discussed in this audit report, we consider our conclusion to represent a rea-
sonable assessment of the Region's actions. Our evaluation of the balance of
the Region's response is keyed to the regional comments summarized above.
1. The Region disagreed that the site was significantly behind schedule.
However, according to an office memorandum prepared by the State Project Of-
ficer for the Milltown site, dated December 29, 1986, one of the reasons for
terminating Harding Lawson Associates was because they were 4 to 6 months be-
hind schedule. Also, we were not aware that work on the replacement of the
water supply system and the characterization of Milltown site were mutually
exclusive of each other. It therefore remains our position that the period
of delay should be measured from the date of the cooperative agreement. We
recognize that many Superfund sites are unique and complex, however, the more
than 3 1/2-year delay experienced under this project appears excessive.
2. Our statement regarding the Region's desire to maintain good relations
with the state was based on a July 26, 1985, memorandum from the regional Super-
fund Remedial Branch Chief to the Director of the Waste Management Division.
In the discussion of whether the EPA should assume the lead for the site, the
memorandum stated "This would enable EPA to meet the deadlines committed to,
with the downside risk of damaging EPA-State relations across more than just
the Superfund Program." With respect to our statement that the state placed a
low priority on this site, we believe that the almost 4 year delay in comple-
tion of work and the state's inaction for a one-year period support our con-
clusion.
3. Our information concerning the area covered by the Silver Bow Creek
Site was taken directly from regional documentation contained in the coopera-
tive agreement. Contrary to the Region's comment, the site did not include
the whole 120-mile area. In addition, the February 1987 EPA Region 8 Fact
Sheet described the site as extending 15 miles upstream from the Clark Fork
River and Silver Bow Creek. While we recognize that this is a very complex
site, we do not believe that a 5 to 6-year study period to complete the RI/FS
represented a reasonable time frame.
4. The comments on the Sharon Steel site clarify the basis for EPA as-
sumption of the Federal lead. However, the fact remains that more than 2 1/2
years have passed with little RI/FS work completed. During the exit confer-
ence, the Region also modified its comment concerning EPA's assumption of a
lead when EPA has initiated litigation. It indicated that EPA generally
assumed the lead when it initiated litigation, but that there was no written
policy in this regard. ..-;
RECOMMENDATIONS
We recommend that the Regional Administrator:
1. Improve the timeliness and effectiveness in which the cooperative
agreement pre-remedial functions are performed by:
23
-------
a. Placing a higher priority on the conpletion of the PA, SI, and
the HRS scoring packages.
b. Reducing the elapsed time required to complete the PAs, and to
initiate and complete the Sis and HRS scoring packages.
c. Improving the monitoring of the performance of the PAs, Sis, and
HRS scoring package by the cooperative agreement recipients.
d. Assuring that the Sis are performed in accordance with the EPA
guidance contained in OSWER Directive 9345.1-1. In this regard, the Region's
acceptance or rejection of the completed Sis should be documented in the pro-
ject files.
e. Requiring states to submit a site sampling plan for their Sis to
the Region for review and approval prior to commencing field work.
f. Providing adequate training to applicable state personnel in the
PA, SI, and HRS areas to, assure that they have the necessary background and
capabilities to perform in these areas.
g. Taking immediate action to assure that the complete Wasatch Chem-
ical site is recommended for inclusion on the NPL.
h. Improving regional reviews of the HRS scoring packages to assure
that they are effectively prepared and reported.
i. Taking the lead responsibility for the Kennecott Copper sites, and
expediting the completion of an adequate HRS scoring package for the Kennecott
Tailings Pond site.
2. Improve the management of the NPL sites included in the cooperative
agreements to assure that timely actions are being performed. In this respect,
special attention should be given to expediting action on the four following
NPL sites: the Milltown Reservoir Sediments site; the Arsenic Trioxide site;
the Silver Bow Creek site; and the Sharon Steel site.
Regional Comments and Our Evaluation
>
Regional Comments. The Region generally agreed with the recommendations in-
cluded in the audit report. However, the Region's proposed actions on Recom-
mendation numbers I.e., l.d., and I.e. are not as encompassing as we recom-
mended. Our recommendations provided for approvals of certain actions. How-
ever, the Region responded that, in fact, they plan to cease certain approval
functions now performed. In this regard, the Utah Memorandum of Understanding
will not require that the Region approve PAs, SI sampling plans, or Sis. The
only approval will be at the HRS stage of the preremedial process.
PIG Evaluation. In view of the deficiencies we found in the pre-remedial pro-
gram, the move towards less regional oversight (i.e. approvals) is, in our
24
-------
opinion, inappropriate. Vfe believe such a practice will have a detrimental
effect upon the program. We therefore urge the Region to reconsider this
course of action until the states have demonstrated the capability to adequately
perform the required pre-remedial tasks.
25
-------
2 - REGIONAL ADMINISTRATION OF COOPERATIVE AGREEMENTS SHOULD BE STRENGTHENED
The Region has not developed the procedures necessary to adequately manage its
Superfund cooperative agreements. As a result, there was no assurance that
maximum environmental benefits will be derived from the $6.4 million of Super-
fund cooperative agreement funds awarded to date. The inadequate regional ac-
tions, along with recipient deficiencies have adversely effected performance
under the cooperative agreements. Vfe attributed this condition to numerous
factors including the following: (i) the Region had not adequately monitored
the completion of the required cooperative agreement work; (ii) the Regional
Project Managers (RPMs) were not provided adequate guidance to perform their
responsibilities; (iii) some cooperative agreements were prematurely awarded
to recipients that did not meet the financial, technical, and experience re-
quirements described in 40 CFR 30.301; (iv) the Region had not required recip-
ients to establish the site specific schedules required by EPA guidance; (v)
the Comprehensive Environmental Response, Compensation, and Liability Informa-
tion System (CERCLIS) was not adequately maintained; and (vi) the Region and
the State of Utah had not .established an adequate working relationship for the
performance of the cooperative agreement goals and objectives. Improvements
in the above areas will require more aggressive regional monitoring of the
recipients' cooperative agreement activities.
Background
The cooperative agreement program in Region 8 is managed by the State Program
Section of the Hazardous Waste Management Division. The use of cooperative
agreements is authorized by Sections 104(c) and 104(d) of the CERCIA. The
cooperative agreements allow a state or a political subdivision thereof to
take or to participate in any necessary actions provided under CERCIA given
that the state or political subdivision possess the necessary skills and capa-
bilities to do so. The agreement is also used to delineate EPA and state
responsibilities for the actions to be taken at the site, to obtain required
assurances, and as a commitment of Federal funding. EPA uses the cooperative
agreement as a means of encouraging state participation in Superfund activi-
ties such as the pre-remedial programs, state management assistance on EPA
lead activities, and state lead sites. EPA Headquarters has published various
policy and guidance documents for use in implementing the Superfund program.
Procedures for managing the cooperative agreements are discussed in the publi-
cations entitled "State Participation in the Superfund Remedial Program" (the
"purple book"), and the "Superfund State-Lead Remedial Project Management Hand-
book". These publications provide guidance to both the EPA and state staffs
for the systematic application of clean-up activities under Superfund remedial
response projects at NPL sites. The publications also provide detailed infor-
mation on each step of the'remedial process and explain why the step is neces-
sary.
More Aggressive Regional Role is Necessary
The Region has not taken an aggressive role in assuring the completion of the
required cooperative agreement work. This has contributed significantly to a
26
-------
lack of effective Superfund programs in many of the states, including one state
which only recently received a cooperative agreement after a long delay. Once
a cooperative agreement was awarded to a state, the Region was not aggressive
in initiating effective oversight of the state's activities. The states were
therefore given a large degree of latitude in establishing their cooperative
agreement Superfund programs. Such an approach would only be effective if the
recipient states have the desire and capability to meet the goals and objec-
tives of the program. We did not find that the states in Region 8 possessed
these attributes and therefore the Region's approach was not fully successful.
To the contrary, the combination of inadequate regional and state action re-
sulted in ineffective performances under the cooperative agreements. There
was no indication that the Region initiated any penalties or other sanctions
against the cooperative agreement recipients for instances of non-performance.
Instead, the Region merely reestablished the goals and objectives into the sub-
sequent year's cooperative agreement. While we recognize the Region's desire
is to have the states fully participate in the program, it is our opinion that
the Region should more aggressively pursue instances on non-performance. Some
examples of areas which require more active regional involvement are summarized
below.
Wyoming Cooperative Agreement. A multi-site cooperative agreement was awarded
to Wyoming to perform 39 PAs, to assist in the performance of 19 Sis, and to
complete 11 hazard ranking system (HRS) packages. It also provided for the
state to review EPA's SI reports and HRS scoring packages, and to assist in the
management at CERCLIS sites. We found the state's performance of the above re-
quirements to be unsatisfactory. There had been no work performed under the
cooperative agreement during a 9 month period. This condition occurred when
the state's sole cooperative agreement employee resigned in June 1986. After
this date there was a virtual stop in all Superfund activity within the state.
The Region apparently did not take timely action to remedy the condition, since
we found no documentation in the project files indicating that it emphasized to
the state the importance of filling the position. This cooperative agreement
inactivity continued until the Region authorized the FIT contractor to begin
performing PAs in an effort to meet the SARA deadlines established for the
pre-remedial program.
Utah Cooperative Agreement. Qjr recent audit of the state's cooperative agree-
ment disclosed that, as of September 1986, the state had not fulfilled the per-
formance goals and objectives established in the cooperative agreement. Spe-
cifically, required work had not been completed in the areas of hazardous waste
site forward planning, remedial investigations, and site feasibility studies,
including studies at two sites included on the NPL. In addition, 21 PAs and 14
Sis specified in the cooperative agreement have not been effectively performed,
and the completion of the required reports were behind schedule. These condi-
tions could have a detrimental affect on the public health and safety of area
residents, since appropriate action was not taken to alleviate known hazardous
conditions. This included sites with high concentrations of lead, arsenic, and
other heavy metals. -
During the first year of the cooperative agreement the Region became aware that
the state was a difficult recipient to work with. The state made it clear that
it was either incapable or unwilling to perform in accordance with the terms
27
-------
and conditions of the cooperative agreement. However, the Region did not take
effective action to bring the state into compliance or to terminate the agree-
ment.
North Dakota Cooperative Agreement. The state was awarded a cooperative agree-
ment on August 24, 1982, for a total project cost of $242,716. The award was
made to enable the state "to investigate the elevated arsenic concentrations in
southeastern North Dakota, and determine if the area is meritorious for further
consideration and mitigation under the superfund program of CERCLA." The area
was titled the "Arsenic Trioxide Site". The state's progress in completing the
required scope of work has been unsatisfactory. In this respect, more than 4
years have passed and required work remained incomplete. Part of the problem
was attributable to the stoppage of work by the state for about one year be-
cause it was unable to hire personnel. As a result of the long delay, EPA
Headquarters urged the Region to take back the lead on the site. However, the
Region refused, because it believed that this would have a damaging effect on
EPA-state relations. Again, we believe that the Region's passive attitude with
respect to the accomplishment of the program objectives has been a contributing
factor to the state's ineffective performance under the cooperative agreement.
Delay in Awarding Cooperative Agreement to South Dakota. Although the state
did not have a cooperative agreement at the time of our audit, it was attempt-
ing to obtain an agreement. In this regard, the state submitted an application
for a $32,988 agreement in May 1986. In the application, the state indicated
that a multi-site cooperative agreement was required to fund 20 state-lead PAs,
and to provide management assistance on 5 EPA-lead inspections. Although the
Region considered the application acceptable, it indicated it was unable to
make an award because of a lack of funding. It is our opinion that, due to
the small amount requested by the applicant, funding could have been arranged
from alternate sources. Due to the delay, a cooperative agreement was not
awarded until March 1987. In the interim, EPA had to utilize its FIT contrac-
tor to perform four PAs. While this arrangement accomplished some of the back-
log of work, it did not give the state the opportunity to develop its own capa-
bilities or experience.
Regional Comments and (Xir Evaluation
Regional Comments. The Region disagreed that it was not aggressive in ful-
filling its oversight responsibility. The Region cited Utah as an example
of its aggressive oversight, stating that it had jeopardized the EPA-state
relationship in order to fulfill its responsibility. The Region also commented
that the staffing allowed by EPA Headquarters for oversight was very limited.
With respect to the individual states cited in the finding, the Region provided
the following additional comments:
1. State of Wyoming.' The Region responded that the Division Director and
staff had contacted the state on several occasions in an attempt to convince
them to fill the vacant Superfund position. This incident occurred during the
period of limited Superfund funding, and at a time when a program slowdown was
in effect.
28
-------
2. State of Utah. The Region took exception to our comment regarding the
potential detrimental effect on the public health and safety of area residents.
The Region considered the comment to be speculative and possibly incorrect be-
cause no detrimental effect had been documented during the audit.
3. State of North Dakota. The Region stated that it was not passive
in dealing with the state, and has taken aggressive action to correct the
problems with the project.
4. State of South Dakota. The Region commented that the application for
the South Dakota cooperative agreement was received during the period of re-
duced Superfund funding. It also stated that EPA Headquarters was not ap-
proving agreements for pre-remedial work at that time.
PIG Evaluation. The Region objected to our conclusion that it had not ful-
filled its oversight responsibility in an aggressive manner. However, the
material reviewed during the course of our audit, and the lack of any documen-
tation to support the Region's response, do not provide sufficient evidence to
support its objection. .
The Region also stated that we were speculative in our comments concerning the
potentially detrimental public health effects at the Utah sites. It is noted
that our comments on the potential health effects were taken from the appli-
cable PAs and Sis. The specific instances of actual environmental harm would
be documented during the RI/FS process.
Regional Project Officers Require Additional Guidance
The Region had not developed guidance to assist the RPMs in the performance of
their cooperative agreement administrative responsibilities. In this respect,
the Region had not established uniform RPM procedures concerning: the official
content and organizational structure of the site project records; controls over
the receipt and disposition of work products submitted to the Region for review
or approval; the procedures for reviewing the cooperative agreement work pro-
ducts, and for notifying recipients of the status of the reviews. It is our
opinion that the establishment of formal written regional procedures would help
assure a more consistent treatment of cooperative agreement issues by the re-
sponsible RPMs. It appears that the Region was hesitant to invest the time and
effort required to develop the written procedures due to the ever changing na-
ture of the Superfund program. However/ the basic steps of the pre-remedial
and remedial phases of the process are well established and unlikely to change
significantly, and therefore would only have to be reinforced in a guidance
package. Except for some basic information, there is a general absence of
national guidance in the pre-remedial area. The regional guidance document
could help to fill this gap.
Organization and Content of Project Files. Our review disclosed that the
organization and content of the Superfund project files varied widely between
RPMs. Such variations were not unexpected, since the Region had not estab-
lished a standard for organizing the files or minimum file content require-
ments. We believe that the standardization of the project files would assist
29
-------
management on all projects, but would be particularly important for the large,
complex, and controversial hazardous waste sites. In this regard, our audit
disclosed that essential information on the status of PAs and Sis was not
always readily available in the project files. In some instances, the RPM
found that the information had been filed elsewhere. However, there were other
cases where the information could not be located by the RPM. Similarly, the
project files generally did not contain documentation summarizing the results
of telephone calls or discussions which the RPMs may have had. Since the
RPMs deal with many issues on a verbal basis, it is important that this in-
formation be documented and incorporated into the project files. In addition,
such documentation would be valuable if a new RFM was assigned.
Control of Work Products. The Region has not established procedures to control
the receipt and transmittal of work products submitted for regional review and
approval. The work products involved ranged from general correspondence in-
quiries concerning the cooperative agreement, to specific technical documents
such as PAs and Sis. The importance of maintaining such a control was evi-
denced under the Utah . cooperative agreement. In this instance, the state
claimed that it had submitted documents to the Region. However, the Region
indicated they were never received. Under the current system, there was no
means of adequately resolving this discrepancy, since records controlling the
receipt of documents were not maintained. Because of the importance of ade-
quately protecting the documentation relating to Superfund hazardous waste
sites in the event of future negotiation or litigation actions, we believe that
the Region should establish some minimum document control procedures.
Procedures for Reviewing frfork Products and Notifying the Recipients of
tus of the Reviews. The Region has not established standard procedures or time
frames for the RPMs to follow in their review and approval of recipient work
products. Instead, each RPM performed the review function in their own way.
Under these conditions, there was no assurance that the reviews were consistent
from state to state. The importance of establishing time frames for completion
of regional reviews was illustrated under the Utah cooperative agreement. We
noted that, as of September 1986, the Region was taking an average of 78 days
to review the PAs and Sis submitted by the state. An update of this condition
in February 1987, indicated that this time period had been extended to 150 days
for PAs and reduced to 60 days for Sis. In either case, these time periods
appear excessive, and indicate a need for some realistic time frames for com-
pletion of regional reviews. In those cases where a difficult site may require
more time, the time frames could be adjusted.
In addition, the Region had not established procedures for notifying recipients
as to the status of the PA or SI reviews. Some RPMs discounted the need for
this procedure and stated that the recipients were informed of the status on a
verbal basis. However, we were unable to substantiate this statement, because
such information was not documented in the project files. In this respect,
State of Utah personnel indicated that they had not been informed of the reason
for delays in the review of its PAs and Sis. Since the Utah PAs and Sis were
requiring several months to review, some form of official notification is con-
sidered essential. Another RPM ccnrnented that when a recipient waited a rea-
sonable time and no written comments were received from the RPM, the recipient
30
-------
should assume that the work product was approved. Again, this is a poor prac-
tice, which could result in incorrect assumptions and potential embarrassment to
the Region. In our opinion, the use of a simple form letter would provide the
recipients with the status information necessary, and also serve as an effec-
tive form of documentation for the project files.
Regional Comments and Our Evaluation
Regional Comments. The Region indicated that development of program guidance
was the responsibility of EPA Headquarters. It further commented that guid-
ance developed at the regional level could result in inconsistencies between
regions. The Region agreed that standardization of the project files would
be beneficial, and stated that such an effort is underway. In addition, the
Region generally concurred with our observation concerning the review of work
products, and indicated that it is in the process of implementing change by
development and use of a model Superfund Memorandum of Agreement. The agree-
ment will include a schedule of target review periods, as well as other re-
quirements. The Region did not respond to our comments concerning the control
of work products. " ^
PIG Evaluation. We considered the Region's comments to be responsive to our
recommendations. In regards to the Region's comments concerning the responsi-
bility for developing program guidance, it should be noted that the Region
modified its position during the audit exit conference. At that time, the
Region agreed that regionally developed guidance may be useful in areas where
the national office was not active.
Premature Cooperative Agreement Award
Our review disclosed that the State of Utah cooperative agreement was awarded,
although the state had not fulfilled the requirements of 40 CFR 30.301. At the
time of the cooperative agreement award in December 1984, the Utah Department
of Health did not possess the required financial, management, nor technical
capabilities necessary to perform the objectives of the cooperative agree-
ment. 40 CFR 30.301 provides that assistance will be awarded only if the ap-
plicant can meet certain criteria, including:
"(1) Financial resources, technical qualifications, experience, organiza-
tion, and facilities adequate to'carry out the project, or a demonstrated
ability to obtain these;
"(2) Resources to meet the project completion schedule contained in the
assistance agreement;
"(4) Accounting and auditing procedures adequate to control property,
funds, and assets, as required in Subpart E of this part".
During the initial period of performance under .the agreement, the state had
neither the technical or managerial staff, nor the necessary accounting proce-
dures to perform the required tasks. In addition, the state did not move
rapidly to acquire the required staff or skills to adequately perform the co-
operative agreement requirements. Four months expired before the first pro-
31
-------
gram staff member was hired. By the end of June 1985, the staff had increased
to four. This staffing level was totally inadequate to meet the objectives of
the agreement.
Regional Comments and Our Evaluation
Regional Comments. The Region did not comment on the above condition. How-
ever, in its response to our draft audit report, the State of Utah commented
that neither the Region nor the state expected the objectives established in
the cooperative agreement to be accomplished within the original period of
performance.
PIG Evaluation. In our opinion, the state's response acknowledged that the
cooperative agreement was awarded prematurely.
Failure to Establish Specific Site Schedules
We found that the Region had not required the cooperative agreement recipients
to develop the site specific schedules required to properly manage the status
of the sites. In this regard, the "purple book" states that "Prior to the
initiation of remedial activities at a site on the NPL, EPA will, in close
coordination with the state, develop a site specific schedule for the site in
question. OSWER requires the development of a schedule for every NPL site."
The failure to develop site specific schedules appears to stem from a reluc-
tance, on the part of both EPA and the state, to accept responsibility for
meeting any scheduled action dates. In our opinion, the site specific sched-
ules are necessary and would help alleviate delays and misunderstandings be-
tween the Region and the states by establishing responsibilities. This was
particularly true with respect to the Olsen-Neihart site in Utah. The ini-
tiation of a site specific schedule for this site probably would have avoided
the conflict between the Region and the state with respect to the notification
of the PRPs. In this instance, the site schedule would have established the
mutual responsibilities between the Region and the state, early in the planning
process, and therefore avoided the lengthy delay which occurred.
Regional Comments. The Region agreed that site specific schedules would be a
useful tool, and indicated that such schedules would be initiated for each
site.
t
CERCLIS Information Not Fully Accurate
Our review disclosed that the Region's CERCLIS management information system
did not contain current or accurate information on many Superfund sites. In
this regard, the CERCLIS did not always indicate whether PAs, Sis, or HRS
packages had been completed for the NPL sites. For example, the Smuggler Moun-
tain, Rocky Mountain Arsenal, and Martin Marietta Aerospace sites in Colorado
did not show that HRS packages had been completed for these sites, although
all of the sites were included on the NPL. Since the HRS packages were nor-
mally completed before a site was included on the NPL, it appeared that this
information may have been overlooked. A similar situation existed with respect
to Sis performed at the Mackay Landfill site, and the Highland Boy Smelter site
32
-------
in Utah. In these instances, the SI completion dates were not included in the
CERCLIS, although the Sis were performed. We believe that additional regional
efforts are required to assure that the site status information included on the
CERCLIS is as up-to-date as possible. A current and accurate CERCLIS would
serve as a valuable tool in the overall management of the Superfund sites.
Regional Comments. In response to our draft report, the Region indicated that
the CERCLIS served no real purpose in a regulatory or program management sense.
It also commented that CERCLIS was not used to set regional priorities in the
preremedial program. Further, in the exit conference, the Region noted that
CERCLIS was revised and would become the cornerstone of a comprehensive Super-
fund information system.
Need for Improved Working Relationships in the State of Utah
The lack of satisfactory progress towards the remedial phase of hazardous waste
clean-ups in Utah has been significantly hindered by a strained working rela-
tionship between the. state.and the Region.
r-
An example of this problem occurred in the Fall of 1985 as a result of the
state's procurement of a well drilling contractor at the Olsen-Neihart Reser-
voir site. The Region did not approve the award, and stated in a November 8,
1985, letter that the procurement was not consistent with 40 CFR Part 33. The
Region therefore recommended that the state reprocure the services in compli-
ance with Federal procurement requirements. During the next several months,
the difference in state and EPA attitudes and perceptions of how the Superfund
program should operate became clearer. There were several instances during
this period in which the state staff seemed adamant and almost defiant in their
positions. In a letter to the Region, dated December 2, 1985, the Utah Super-
fund Program Manager stated that the state intended to award the contract to
the successful bidder over the Region's objections. In addition, the letter
also addressed the Region's oversight and coordination under Superfund by
stating "...it is clear that EPA perceives its oversight role as supervising
item-by-item all state activities under the MSCA." The letter continued by
offering this suggestion, "As an alternative to item-by-item supervision, the
state recommends that EPA oversee state activities on a periodic review/audit
basis, as it does with most delegated programs." The letter also cited several
examples of the Region's inability to provide the necessary time and resources
to perform their review of state activities on a timely basis. Upon receipt
of this letter, the Region informed the state that if they were to award the
contract without reprocurement, any costs associated with the procurement and
the resulting work would not be allowed for Federal funding due to the noncom-
pliance with Federal procurement requirements. In a subsequent response, the
state wrote to the Region on January 2, 1986, stating that "...our experience
with EPA's Superfund process has fallen short of a partnership. We seem to be
more often antagonists than partners. After reading your letter of December
19, 1985, I am again frustrated by the whole Superfund process and sometimes
wonder if it is really .in the state's interest to participate." The letter
continued, "If this is the manner in which EPA chooses to resolve issues, then
our efforts in Superfund are doomed to failure."
33
-------
It is apparent that the state would prefer to implement the Superfund program
in Utah with a minimum of intrusion and oversight by EPA. However, because of
problems with the state's performance under the cooperative agreement, it ap-
pears that continued regional monitoring will be necessary. The Region has
attempted to improve the working relationship and to ease the state's appre-
hensions by means of initiating monthly visits by the RPMs. During the visits,
discussions were held on matters of material concern and interest. While this
is a step in the right direction, the state indicated they would like to have
the visits expanded to include contact, between the state and EPA technical
staff as well.
We did not find that similar relationship problems existed with the other
states in Region 8. The Utah condition was apparently unique because of the
attitude of the state, and the volume of work which the state was required to
pass through EPA for review and approval. In this regard, Utah was the only
state that had assumed full responsibilities for performing PAs and Sis, and
for preparing the required reports. While the state and regional staffs were
aware of their problem/ it will be necessary for the staffs to make addition-
al efforts to improve their mutual cooperation and willingness to work togeth-
er. Only in this manner can the mutual benefits of a successful cooperative
agreement be reached.
Regional Comments. The Region did not object to our finding, but clarified
that the Superfund Remedial Branch Chief and the Superfund Program Section
Chief accompanied the RPM during the monthly visits whenever possible. Other
regional staff members also attended whenever possible. Thus, the Region be-
lieved it was taking necessary steps to improve relationships with the State
of Utah.
RECOMMENEftTIONS
We recommend that the Regional Administrator:
1. Establish a more active regional role in the monitoring of the recip-
ients' cooperative agreement activities. This role should include procedures
for initiating actions, including appropriate penalties and sanctions, against
the recipients that do not perform in accordance with the requirements of the
cooperative agreements. In this, regard, the performance of the States of
Wyoming, Utah, and North Dakota (Arsenic Trioxide Site) should be closely
monitored.
2. Develop written procedures to assist the RPMs in the performance of
their cooperative agreement administrative responsibilities. The procedures
should, as a minimum, cover:
a. The official content and organizational structure of the site pro-
ject records.
b. The controls over the receipt and disposition of work products sub-
mitted to the Region for review or approval.
c. The maximum time frames for the review of work products.
34
-------
d. The notification of recipients on the status of regional reviews if
work is not complete.
3. Assure that the recipients have the necessary qualifications to meet
the requirements of 40 CFR 30.301 prior to award of a cooperative agreement.
4. Require the recipients to prepare site specific schedules for all NPL
sites as required by the "purple book".
5. Place additional emphasis on updating and maintaining the CERCLIS in a
current and accurate condition.
6. Continue to coordinate with the State of Utah in an effort to develop
an effective working relationship. As a minimum, these efforts should include
more frequent coordination and interchange between the state and regional
staffs.
Regional Comments. The Region generally concurred in the audit report recom-
mendations. The Region anticipated that its Memorandum of Understanding with
Utah will serve as a model for similar agreements with other states within the
Region. It also commented that it will continue to cooperate with EPA Head-
quarters to develop additional staff guidance.
35
-------
3 - REGIONAL OVERSIGHT OF RECIPIENT FINANCIAL MANAGEMENT SYSTEMS NEED IMPROVE-
MENT
The Region had not developed the monitoring procedures necessary to assure that
adequate financial management systems were maintained by the cooperative agree-
ment recipients. As a result, the Region was not aware that the recipients
were not in compliance with the Letter of Credit (LOG) User's Manual/ and did
not have the information needed to properly manage and disburse Federal funds.
In addition, there was no assurance that the recipients maintained accounting
systems necessary to account for the $6.4 million of cooperative agreement
funds which have been awarded to date. Specifically, we noted that the Cash
Transaction Reports (SF-272) had not been submitted within the required time
frames, and that the Financial Status Reports (FSR) were either not submitted
or submitted late. The SF-272 problem was previously reported in an EPA,
Office of the Inspector General (OIG) report, issued January 27, 1986. Al-
though the Region provided assurances that corrective action would be taken,
our review disclosed that the condition continued to exist. Additionally, we
found that the regional - staff were changing certified SF-272 Reports without
written notification to the recipient. We consider this to be an ineffective
internal control procedure. The audit also disclosed that the Region needed
to strengthen its review of recipients' accounting and reporting systems to
assure that all deficiencies were detected and corrected. In this respect,
it was noted that major deficiencies in the State of Utah's accounting system
and LOG procedures were not identified during a recent regional review. We
attributed the above conditions to a lack of regional attention to the finan-
cial aspects of the cooperative agreements, including the recipients' financial
management systems.
Background
Each of the cooperative agreements awarded by the Region contained a special
condition providing that reimbursement under the agreement would be by the Let-
ter of Credit method, and that the recipient would comply with the requirements
of the Letter of Credit User's Manual. The LOG User's Manual requires the reci-
pient to submit a SF-272 Report within 15 working days following the end of
each calendar quarter. In addition, Comptroller Policy Announcement No. 85-5,
Financial Reporting Requirements for Superfund Recipients, effective September
30, 1985, specified that .Superfund recipients must submit an FSR within 90 days
after the close of the budget period. Prior to September 30, 1985, recipients
were required to submit an FSR within 30 days after each calendar quarter. If
the budget period was longer than one year, the report was to be submitted an-
nually based on the anniversary of the budget period. The purposes of these
reporting requirements were to (i) allow EPA the opportunity to monitor the ex-
penditure and status of Federal funds under the agreements, and (ii) assure
that cash draw downs are directly related and closely timed to the actual dis-
bursement needs of the project. The cooperative agreement special conditions,
as well as paragraph 25.50 of the EPA Accounting Manual state that failure of
the recipient to comply with the LOG requirements could result in the revoca-
tion of the LOG and change to the reimbursable method of financing.
36
-------
Financial Reporting Procedures Not Adequately Monitored
Our review disclosed that the Region's Financial Management Division had not
established adequate procedures for assuring that required LOG requirements
were followed. We found that 4 of the 5 cooperative agreement recipients had
not met the requirement for timely submission of the SF-272 Report, and that
none of the recipients had fully complied with the FSR submission requirements.
As previously stated, the LOG User's Manual provides that the SF-272 Report
should be submitted within 15 working days following the end of a calendar
quarter, and the FSR should be submitted annually within 90 days of the end of
the budget period. Without accurate and timely financial reports, the Region
did not have the information necessary to approve the recipients' payment re-
quests. The extent of the reporting delays are shown in the following subpara-
graphs.
late SF-272 Reports. We found that, of the 5 cooperative agreement recipients,
only North Dakota had submitted its SF-272 Reports within the 15-day submission
requirement. The following schedule shows that the reports submitted by the
other four states were from 5 to 75 days late.
SF-272 Reports Working
Due Date*Date Submitted Days Late
01-21-86 03-18-86 40
04-22-86 05-07-86 11
07-21-86 09-15-86 40
10-21-86 11-19-86 21
01-21-87 02-04-87 10
Colorado 07-21-86 08-07-86 13
10-21-86 10-28-86 5
Wyoming 01-21-87 02-05-87 11
Montana 01-21-86 05-06-86 75
04-22-86 05-06-86 10
* Includes a factor for the 15 days allowed by the LOG User's Manual for sub-
mission of the reports.
As shown above, Utah did not submit the SF-272 Report required for the quarter
ended June 30, 1986 until September 15, 1986. For the quarter ended December
31, 1986, the required report was not submitted until February 4, 1987. The
delayed submissions did not preclude the Region from approving the State of
Utah's $259,454 payment request for the quarter ended December 31, 1986. The
Region's payment approval' on January 28, 1987, was made one week before the
SF-272 Report was submitted. Similarly, by the time Colorado submitted a SF-
272 Report for the quarter ended June 30, 1986, the Region had already approved
a $261,800 payment for this period.
We also noted that the Region's Financial Management Division has followed a
practice of changing the recipients' certified SF-272 Reports. While the reci-
pients were notified of the changes by telephone, an amended SF-272 Report was
37
-------
not submitted to EPA with the necessary certifications. In addition, we found
no documentation in the files indicating that the recipients concurred with the
changes made by the Region. Also, the project records did not indicate that
the original state certifying official was made aware of the changes. For ex-
ample, the SF-272 Report submitted by the Montana Department of Agriculture, for
the quarter ended December 31, 1986, was originally certified by the Administra-
tor of the Centralized Services Division. The report was subsequently changed
by the Region without advising the certifying official. According to a hand-
written notation on the SF-272 Report, a person other than the Administrator
was verbally notified of the change. In addition, there was no documentation
indicating that the recipient organization concurred with the adjustment. We
believe that the the Region's practice of changing the SF-272 Reports repre-
sents a poor internal control procedure. A more effective procedure would re-
quire that the SF-272 Report be returned to the certifying official for correc-
tion and recertification.
Failure to Comply With FSR Submission Requirements. Although the FSRs were to
be submitted annually, within 90 days of the close of the budget period, we
found that the FSRs had --never been submitted under cooperative agreements
awarded to Utah, Colorado, and Montana (Agreement No. V008416). While the FSRs
were submitted for recent periods under four other cooperative agreements, the
submissions were late for two of the agreements. One of the FSRs which was
submitted late was applicable to the North Dakota cooperative agreement. Al-
though North Dakota had an EPA cooperative agreement since 1983, it did not
submit its initial FSR until November 22, 1985. This FSR covered all prior
periods through August 30, 1985. Its subsequent submission, covering the per-
iod ended October 30, 1985, was not submitted until December 8, 1986. A sum-
mary of the FSR submission problems, through December 30, 1986, is included
below.
No. of FSRs
State
Utah
Colorado
Montana
Montana
Montana
Wyoming
North Dakota
Total
Cooperative
Agreement No.
V008427
V008435
V008416
V008415
V008430
V008433
V008414
Required to be
Submitted
3
2
9
8
2
2
13
39
Not
Submitted
3
2
9
7
1
1
11
34
Submitted Late
none submitted
none submitted
none submitted
1
0
0
2
3
In view of recipients' failure to comply with the FSR submission requirements,
the Region did not have sufficient information to effectively monitor the fi-
nancial aspects of the cooperative agreements. The regional FSR deficiencies
were previously reported in DIG Audit Report No. P5EH5-11-0028-60470, issued
January 27, 1986. In its response to the report, the Region stated that "Re-
gion VT11 converted its letters of credit to the Letter of Credit Treasury
Financial Communications System (LOC-TFCS) during the first, quarter of FY 1985.
The LOC-TFCS allows the agency 24 hours to either allow or reject draw downs on
38
-------
the letters of credit. This allows us to reject draw downs if the required re-
ports are not received." Our current audit showed that the above procedure was
not followed. To the contrary, the Region has continued to allow draw downs,
although the recipients were not in compliance with the LOG User's Manual re-
porting requirements.
Region 8 Needs to Strengthen Its Reviews of Recipient Accounting Systems
The Region has established procedures for conducting limited reviews of reci-
pient accounting and financial reporting systems. However, we believe that
these procedures need to be strengthened to assure that all accounting system
deficiencies are detected and corrected. While the limited scope review per-
formed by the Region on the Utah Division of Environmental Health (DEH) ac-
counting system was a positive management action, we found that the reported
results were not entirely accurate. In this respect, the resultant report
prepared by the Region, on July 11, 1986, contained the following two conclu-
sions, which our subsequent audit found to be incorrect.
1. The report concluded that "The recipient's grant accounting records,
procedures, and internal controls provided acceptable records of accountability
for program funds."
2. The report also concluded that "The recipient's letter of credit draw
down procedures for Federal funds were adequately controlled and excess amount
of funds were not being requested."
Acceptability of the Utah DEH Accounting System. Although the Region's review
indicated that the Utah DEH accounting and internal control systems were ade-
quate, our audit, which was current through June 30, 1986, found that this was
not the case. The DEH had not implemented the accounting procedures necessary
to accurately account for its Superfund expenditures or to comply with the ac-
counting system requirements prescribed in 40 CFR 30.510 or 40 CFR 30.301 (a) (4).
We also noted that there were major inadequacies in the accounting system used
to record and accumulate costs incurred under the $1.2 million multi-site co-
operative agreement. These inadequacies included (i) the use of unacceptable
labor charging and recording practices, which have allowed DEH to allocate
employee indirect time charges as direct labor, and to transfer labor costs to
the cooperative agreement from other projects without adequate documentation,
and (ii) a lack of segregation of allowable and unallowable costs in the ac-
counting records. These accounting deficiencies represent significant internal
control weaknesses which adversely affected the integrity of the accounting sys-
tem, and jeopardized the Federal government's ability to recover Superfund
costs from responsible parties.
Adequacy of Utah DEH Letter of Credit Draw Down Procedures. The regional re-
view concluded that the IjOC draw down procedures were adequate. However, our
audit concluded that DEH had not complied with the DOC requirements provided
for in the special conditions of its cooperative agreement or in the IOC User's
Manual. As a result, the ICC has not been effectively utilized as a means of
obtaining reimbursements under the $1.2 million multi-site cooperative agree-
39
-------
ment. Specifically, our review disclosed that (i) required LOG financial re-
ports were not submitted or were submitted late, (ii) LOG draw down amounts
were not properly calculated, and (iii) LOG draw downs were not made on a
timely basis.
We believe that more thorough regional reviews would highlight the presence of
any such shortcomings. It is noted that since the issuance of our Utah DEH
draft audit report, the Region has been working closely with the DEH to assure
that corrective actions are taken. However, the above examples illustrate that
the recipients' financial management systems must be more thoroughly reviewed
by the Region to assure that they are properly able to account for Federal
funds and that LOG requirements are fully met.
RECOMMENDATIONS
We recommend that the Regional Administrator:
1. Initiate written procedures for use in administering the LOG method of
reimbursement. These procedures should, as a minimum, require that:
a. Recipients comply with the reporting requirements contained in the
LOG User's Manual which require that the SF-272 Report be submitted within 15
working days following each calendar quarter, and the FSR within 90 days fol-
lowing the end of the budget period or on each anniversary of the budget period.
b. LOG draw down requests be rejected in those instances where the
above reporting requirements have not been met.
c. All SF-272 Reports requiring changes be returned to the certifying
official for correction and recertification. Under no circumstances should the
changes be made by regional personnel.
d. Consider the revocation of LOG privileges for those recipients,
which continue to not fulfill the requirements of the LOG User's Manual.
2. Improve the Region's reviews of recipient accounting systems to assure
that accounting system deficiencies are detected and corrected.
REGION 8 COMMENTS AND OUR EVALUATION
Region 8 Comments. The Region generally concurred with the audit recommenda-
tions and provided the following specific comments:
Recommendation No. l.a. The Region concurred with the recommendation on
the SF-272 Reports, and stated that written procedures were included in the LOG
User's Manual, which was provided to each recipient. It also indicated that the
regional grants management reviews reiterated the importance of the require-
ments. The Region further commented that it maintains a tickler file, and
now calls recipients to remind them of the report due dates. Letters are
also sent by the Grants Management Branch to recipients whose reports are
overdue.
40
-------
With respect to the FSPs, the Region commented that it has implemented a
tracking procedure to monitor the submission of the timeliness of the FSRs. It
also indicated that additional staff has been assigned to the Grants Management
Branch to assist in this area.
While the Region agreed that some FSRs were not submitted or submitted
late, they did not agree with the number of such reports discussed in the au-
dit report. The Region indicated that the requirement for the submission of
quarterly FSR reports was not required before February 1984. The Region also
stated that all overdue FSRs had been submitted except for one in Colorado.
It further commented that Colorado's Letter of Credit privileges would be
revoked, if the overdue FSR was not submitted promptly.
Recommendation No. 1.b. The Region indicated that it was reasonable to
disapprove draw downs, if a state was consistently late and the number of days
exceeded 10 or more working days late. It did not agree that such action was
necessary when the state had a legitimate reason.
Recommendation No. .I.e. . The Region agreed that stronger internal controls
were needed. It also commented that SF-272 Report changes made by the Region
were very minor. However, its policy has been revised and all corrections are
returned to the certifying official for approval.
Recommendation No. l.d. The Region indicated that it will consider the
revocation of LOG privileges in cases where there is a blatant or consistent
disregard for the requirements. It further commented that the states were
making progress in submitting their reports more timely.
Recommendation No. 2. The Region agreed that its accounting system review
procedures needed to be strengthened. It also commented that the Headquarters
Grants Administration Division was in the process of developing a model check-
list for training regional staff.
PIG Evaluation. We found that the Region's comments were generally responsive
to the intended purpose of our recommendations. However, the Region disagreed
with our conclusions concerning the requirement to submit quarterly FSRs. We
believe that it has been EPA policy/ since inception of the program, to require
the submission of FSRs on a quarterly basis. This policy was reiterated in
EPA Comptroller Policy Announcement No. 85-5, dated September 9, 1985, which
stated that "Recipients of assistance under the Superfund program were required
to submit the SF 269, 'Financial Status Report', quarterly instead of annually
as required for non-Superfund recipients. This information was required to
ensure proper monitoring and accountability of recipients activities during
the early implementation stages of the program. Now that EPA's experience with
the Superfund program has grown, the need for this additional reporting has
diminished. Considering the administrative burden of this additional reporting
by Superfund recipients, we have reevaluated the need for this financial data
on a quarterly basis."
41
-------
ATTACHMENT
»SB,
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
y^*"^,* REGION VIII
^PR°lfc° 999 18th STREET-SUITE 500
QUtlu -D DENVER, COLORADO 80202-2405
tiHWn-oK
SEP 2 1
Mr. Truman R. Beeler
Division Inspector General for
Audit
Office of the Inspector General for
Audits
Western Division
U.S. EPA
211 Main Street, Suite 220
San Francisco, CA 94105
Dear Mr. Beeler:
We have completed our review of your office's "Draft Audit Report
No. E5eH7-08-0005 Report oi EPA, Region VIII's Administration of Superfund
Cooperative Agreements". Our specific comments on the audit report are found
in Attachment One to this letter.
We have made a careful review of your findings and while not agreeing
with many of them can certainly agree with you that we need to do a better job
of managing this complex Superfund Cooperative Agreement program. In fact,
many of our comments will indicate the positive management improvements we
have made since the audit was conducted.
We appreciate the effort your office expended in conducting this audit
and your recommendations for improving our management. Likewise, we hope you
appreciate our objections to many of your findings and will carefully consider
what we believe are needed corrections of fact.
We shared the draft audit report within the States in our Region. The
comments we received from the States are incorporated in our review.
One of our major concerns with the draft audit report, and one which we
believe should be included in a modification to the final report concerns the
draft's inclusion of very broad conclusions drawn about Region VIII's
management effectiveness (or alleged lack of effectiveness). An example is
the very first statement in the "Summary" section that reads "The Region has
not effectively managed the programmatic and administrative aspects of its
cooperative agreements." This major finding, along with others such as we did
not perform "timely and effectively", and that there was a "lack of active
regional involvement", are:somewhat conjectural and not fully supported by the
findings of fact which make up the major portion of the audit.
We believe a more appropriate beginning sentence in the "Summary" section
would read: "The Region needs to more effectively manage the programmatic and
administrative aspects of its cooperative agreements." This sentence would
better reflect the actual findings of the audit and our extensive comments on
your findings. In addition, all the other very broad conclusions about our
management of the Cooperative Agreement program should be modified accordingly
and put more in conformance with the actual facts.
42
-------
Obviously our management was not perfect, but we believe the record shows
we were very much involved in working with our states to administer this
program during a difficult period. We do not believe your audit accurately
reflects these efforts.
Again, thank you for your efforts in helping us improve our program
management. We would like to have an exit audit before issuance of the Final
Report. Martha Nicodemus, the Regional Audit Coordinator, will contact your
office to make acceptable arrangements.
Sincerely,
James J. Scherer
Regional Administrator
Enclosures
43
-------
Attachment 1
EPA Comments on "Draft Audit Report No. E5e H7-08-0005-Report of EPA Region
8's Administration of Superfund Cooperative Agreements"
COMMENTS ON "SUMMARY OF FINDINGS"
1) Page 2, first paragraph - In reference to the IG's finding that "The
Region has not effectively managed..." its cooperative agreements we
strongly believe the IG must place this major conclusion in a realistic
historical context.
Specifically, Region VIII has experienced a number of factors which
contributed to Regional management difficulties during the period of the
audit. These factors included:
general start-up problems with the relatively new Superfund program;
organization and reorganization;
inadequate staff
technical staff turnover
management staff turnover
uncertain funding during the 18 month Superfund re-authorization
si ow-down
shifting national priorities
program speed-up after reauthorization
Certainly the management of any program must expect to deal as a normal
course with some of these factors. However, the combination of these
factors during the period covered by the audit had an impact on program
management effectiveness. We believe, however, that the facts support a
record of active involvement in the administration of our State
cooperative agreements as we, along with the States, have worked to
overcome the major problems presented by the factors listed above.
2) Page 2, first paragraph - A second finding in this first paragraph that
"it is important that increased regional attention be directed to the
agreements" is one with which we can only agree. Again, we believe our
record - as brought out by these comments and Attachments - points out
our efforts to increase the effectiveness of management of the
cooperative agreement program.
44
-------
The comments below are addressed to specific "findings and
recommendations", pp. 6-26. To the extent that they address draft audit
"summary" statements, pp. 1-5, it should be so noted.
COMMENTS ON "FINDINGS AND RECOMMENDATIONS"
1) Page 6, first paragraph - All of the references throughout the report to
the time taken to complete preremedial functions should be prefaced with
a statement that for the time period covered by the audit, there were no
EPA Headquarters or Regional requirements to complete any of the
activities (PA, SI, HRS) within any specified time period. Indeed, the
very nature of the preremedial program is one in which State and Regional
priorities change and certain activities are started or stopped with no
expected or required regularity. We certainly agree that establishment
of delivery schedules for preremedial activities is necessary. Only
since the enactment of SARA in October of 1986 has there been established
the requirement for EPA to complete PA, SI, and HRS activities according
to any schedule. The Region's performance prior to this time, therefore,
was not inconsistent with any established Agency procedures, regulations,
or statutory requirements. Moreover, the report should make mention of
the fact that the Region met its preremedial SPMS requirements for all
but one of the years in question (1985) with that year's effort falling
but a few short due to confusion about the CERCLIS data base and its
requirements.
2} Page 6, first paragraph - The audit makes reference to a decision that
was delayed on proposed actions necessary to clean up arsenic, copper,
barium, lead, and zinc which were found at the Silver Bow Creek NPL site
in Montana. The audit report does not state which part of the site is
referred to, or which actions were delayed. We believe the auditor is
referring to the Colorado Tailings operable unit.
We would point out that in August, 1986, a cleanup decision was delayed
at this operable unit for several reasons: 1) The FS concluded no public
health problem existed; 2) lack of assured funding due to the delay in
reauthorizing CERCLA; and 3) insufficient data to support a unilateral
order for cleanup. A draft,FS was completed, however, and will prove
useful later. The Colorado Tailings operable unit has been included as
part of a larger operable unit for which a feasibility study is scheduled
in March 1989.
3) Page 6, first paragraph - In reference to the statement concerning delays
in the RI/FS process at the Sharon Steel site, we would point out that
EPA Region VIII has/assumed control over this process and has made it a
Federal lead. Federal lead was necessitated by DOJ filing a court action
on EPA's behalf. A complete RI/FS is presently underway - groundwater,
soil, and air sampling and analysis of environmental and human health
impacts - with the RI report scheduled for completion Spring 1988.
45
-------
4) Page 7, last two paragraphs - The report is very critical of delays in
completion of Preliminary Assessments (PAs) and Site Inspections (Sis)
and implies that higher priorities should have been given to these
efforts. Hie report ignores the fact that PA/SI work and listing new
sites on the NPL was a very low priority activity during the Superfund
slowdown program that was in effect for a period of over a year and
one-half. The National program directed the Regions to put most of their
efforts into continuing RI/FS work, and remedial actions and remedial
designs for sites already on the NPL. The pace of adding new sites OP
the list was indeed not a high priority in Region VIII, nor was it a high
priority in any other Region in EPA. Nonetheless, we have considerably
tightened up on the time frames for the conduct of such actions since the
enactment of SARA.
In addition, we would point out that during the time period covered by
the audit, there were no requirements for the EPA Regional offices to
proceed to the SI. stage for any site within any prescribed time period,
thus making any "average number" of days between such activities an
invalid measure of Regional performance. To then make the leap that such
an average number of days somehow precluded "timely assessments of the
degree of severity of the hazardous waste problems at the affected sites"
is unsupportable by any evidence that an imrnminent or substantial threat
was posed by any of the sites which were examined during the draft audit.
5) Page 8, first full paragraph - EPA Region VIII agrees that a mutually
acceptable delivery and review schedule for EPA review of State
deliverables is needed and such has been arranged in at least one State
via conclusion of the EPA-Utah Superfund Memorandum of Agreement (SMOA).
A copy of the SMOA is Attachment 2. Time frames and review procedures
will be instituted for other Region VIII States patterned after the Utah
SMOA.
6) Page 8, second and third full paragraphs - The audit report is critical
of the Wyoming cooperative agreement since the State lost an employee and
was unable to fill the position immediately. The report fails to
recognize again the slowdown phase that we were in, even though it does
recognize that we utilized the FIT contractor to perform PAs in that
state in order to continue progress. Wyoming's decision not to hire a
Superfund person is clearly within the State's rights. You should refer
to attachment 3 for Wyoming's explanation of their situation. EPA
resumed preremedial work in the State when it was clear that EPA
contractor resources would again be available and that the State would
not in the meantime hire and resume work itself.
Also on page 8, (last full paragraph), it is stated that the South Dakota
cooperative agreement was not awarded until April 1987 even though it was
requested in May of 1986. Again, it was not stated that there was no
national money available for this activity until March of 1987. The
Region should be commended for its quick obligation of funds when they
became available.
46
-------
7) Page 8, last two sentences and p. 9, remainder of paragraph - The
reference to how long it took for certain sites to move from the PA to
the SI stage can be attributed to two major factors: 1) the lack of any
requirement that sites "move" from PA to SI within any specific time
period, and 2) the limit on resources given Region VIII EPA to do Sis (a
function of the workload model which assigns resources based on annual
SPMS targets established by Headquarters). The draft audit fails to
acknowledge that EPA met or came close to meeting its SPMS targets for
Sis in each of the years examined. The Region was clearly addressing
those sites which had the highest collective priority of EPA and the
States. That other Sis still need to be done is not the issue. EPA will
be doing Sis for the next several years. Instead, the report should
acknowledge that the Region accomplished the SI review of its priority
preremedial sites in the years examined.
8) Page 9, second paragraph - There is a comment that "neither the state nor
regional personnel considered the PA process to be of a high priority".
We disagree. Region VIII has considered the PA process to be a priority
in as much as our annual SPMS targets (which measure the priority that HQ
places on this activity) have been met given the limited resources
provided.
9) Page 9, second paragraph - In regard to the time factor, refer to our
comment number 1.
10) Page 9, last full paragraph - In regard to the time factor, refer to our
comment number 1. We agree that written guidance concerning the
performance of an SI is necessary. This guidance should be prepared by
EPA Headquarters to insure consistency from one EPA Region to another.
The Region has been and will continue to be hardpressed for resources to
prepare such guidances.
11) Page 10, second to last paragraph - The draft audit comment that SI
conclusions which note "that additional site sampling should be
performed" are "not an acceptable conclusion" is contrary to National
Superfund program experience in dealing with potentially hazardous waste
sites. EPA site inspections, frequently reach such a conclusion even
after six years experience with the program. There are simply too many
unknowns at the time of site inspections to believe that a small number
of original samples can effectively capture the nature of the threat
posed by any site. EPA and the States continually revisit sites for SI
followup work. Indeed such a category of activity (SIF - or Site
Inspection Followup) was created by EPA HQ to track time spent on such
needed activities. •.
12) Page 10, last full paragraph - The audit information on the Old Sioux
Falls Landfill did not reference that at the time this SI was conducted
there were no requirements that sampling be done at site inspections.
There was simply no guidance from HQ.
47
-------
13) Pages 10-11, last paragraph of page 10, first paragraph of page 11, -
Sampling was not done at the St. Regis Paper Co., So. Dakota site because
it was not required by any guidance at the time.
14) Page 11, first full paragraph - Region VIII agrees that additional
regional training on the techniques of performing an SI is required.
Such training was provided to the State of Utah earlier in FY 87 and will
be provided to any other States who desire to take on the lead for SI
work in future years. As noted earlier, the Region has not been and is
not now in the position of being able to unilaterally devise written SI
instructions or guidance as the draft audit report suggests should be
done. Regarding the monitoring of State progress under cooperative
agreements, the draft audit report should note that Region VIII did
monitor via quarterly reports those activities conducted by States with
Superfund monies and requested such reports be submitted whenever there
was a delay. In Utah's case, the issues surrounding the submission of
quarterly and financial reports have already been discussed in the audit
of that State's cooperative agreement. North Dakota, Colorado, and
Wyoming preremedial deliverables have been routinely tracked by Region
VIII staff, in a close, cooperative working relationship with those
States. The draft audit report should also note that the preremedial
work done by South Dakota during the period of this audit review was not
done under a CERCLA cooperative agreement but rather under a RCRA 301?
grant, with its much less specific reporting requirements. Now that the
State of South Dakota is fully funded under a CERCLA cooperative
agreement, Region VIII and the State are working closely to accomplish
the mutually agreed upon preremedial workload remaining in the State.
15) Page 12, last paragraph - The State should be commended for Us
initiative in pursuing legal action and negotiations with the Wasatch
PRPs. At the time the State took this action, EPA had not yet proposed
the site for listing on the NPL. Therefore, the site was not eligible
for fund money for the conduct of the RI/FS. The State action was the
only option available. The State has continued these negotiations since
listing on the NPL in accordance with a recently signed Site Enforcement
Agreement with EPA.
>
Based on EPA's RCRA/CERCLA NPL listing policy, EPA Headquarters has
determined that only the Lot 6 portion of'the Wasatch Chemical Site can
be listed. This limited Wastch Lot 6 site has been proposed in the
Federal Register for public comment.
16) Page 14, first paragraph - The report notes that EPA Headquarters urged
the Region to conduct more sampling at the Silver Creek Tailings site and
that the Region initially refused. EPA Region VIII has always supported
the collection of additional data at the Silver Creek Tailings site. The
Region and Headquarters disagreed over the timing of additional data
collection. It was the Regional position at the time that the original
flawed HRS package should be identified as such by timely action on the
NPL listing; then additional data collection to resco're the site could
48
-------
proceed. As the data from the site indicated the potential for long term
problems rather than an imminent and substantial endangerment to those
living around it, this seemed an appropriate course of action. EPA
Region VIII did decide in the fall of 1986 to move forward with
additional data collection because it had become clear that final action
on the MPL listing was not occurring and only a well-designed,
well-executed technical study would answer the concerns that had been
raised. The site was dropped from the NPL by the SARA amendments in
October 1986.
Also, the conclusion regarding aquifer interconnection in the HRS package
was supported both by the State (at the time the SI was completed) and by
EPA (at the timeThe HRS was completed).
17) Page 14, second full paragraph - The reference to a "preliminary HRS
score of 79.15" should note that until a site is formally nominated by a
Region, a score remains tentative subject to quality control and quality
assurance review. In the case of the Kennecott Tailings draft HRS
packages prepared by the State of Utah, the score of 79.15 could not be
documented or otherwise supported and the draft package was returned to
the State for reconsideration. The Kennecott tailings will be resampled
by the State under an expanded site investigation and HRS to be funded by
the Region in FY 88. There is no evidence to support the statement that
"we sense a reluctance by the Region to list the site on the NPL because
the PRP was voluntarily conducting some groundwater studies of the
general area of this site." We have repeatedly told the State that it is
our intent to proceed with listing of the site should site data be
obtained to support such a listing.
We have only been concerned with the quality of the data to document
listing on the NPL in order that we may ultimately prevail in our
action. We certainly agree with the report's recommendation that the
Region directly take the lead on the listing of the Kennecott facility if
this becomes necessary.
18) Pages 15-17, paragraphs referring to the Mi 11 town and Silver Bow Creek
(SBC) sites. In general, the audit report fails to account in its
evaluation for two important factors:
a. The one year delay in reauthorization of CERCLA resulted in carrying out
only the most critical Super-fund activities during FY-86 and half of
FY-87. The Montana CAs reviewed by the auditor covered only remedial
investigations feasibility studies (RI/FS), and pre-remedial
activities. Funding of these CAs (as well as other RI/FS activities)
received low priority during the slowdown, and progress was significantly
slowed.
49
-------
b. The Silver Bow Creek (SBC) and Milltown sites are part of a complex chain
of four sites on the Clark Fork River, each one in itself complex. EPA
has currently identified 77 separate operable units among these sites.
It was not until well after these sites were listed on the NPL that EPA
realized how complex the interaction among these sites really was. For
example, the SBC site was envisioned as only 25 miles long when listed.
Now, it appears to be more properly 120 miles long, and includes the
entire city of Butte. This realization has meant realignment and addition
of priorites at all four sites along the Clark Fork River.
19) Page 15, first full paragraph - The report states the conclusion that the
Region does not manage Superfund activities but instead allows the State
agencies to move at their own pace. We disagree. The Region is not
content with the pace of the State activities in CERCLA. We are on
record in several States, by evidence of the IG's own data in this
report, to push states to be more efficient and more timely in the
conduct of their Superfund activities. This is clearly illustrated by
the Region solving the problem of the North Dakota cooperative agreement,
as well as our insistence in the State of Utah that project schedules be
expedited even to the detriment of our relationships with that State.
20) Page 15, and also pages 18 and 19, paragraphs concerning the Milltown
site - We question the contention that "completion of the remedial
investigation/feasibility study for the Milltown site is significantly
behind schedule". This observation is presumably based on guidance
timelines for RI/FS activities. However, as noted in the IG findings,
more than one phase of RI/FS activities has been conducted at the
Milltown site. The first phase identified the need for an alternative
water supply for persons whose private wells were contaminated by the
Milltown materials. A Record of Decision was signed for this action in
April 1984 and expanded in August 1985. Subsequent to this initial ROD
another phase of investigative activities was initiated, to coincide with
preparation of a feasibility study for the final remedy. Therefore, the
appropriate start date for the current RI/FS activities should not be
from the date of site listing on the NPL, nor the initial cooperative
agreement with the State of Montana. The start date should be the
initiation of the current phase of activities, approximately April 1985.
Concerning the IG's statement that "This condition, in addition to poor
quality of work, ultimately led to a termination of HLA's contract by the
state in February 1986," and the IG report quoting a State quarterly
report as saying "The draft FS report was received on 11/13/87", we would
reply that the dates presented in the IG report are incorrect and
misleading as to the; progress of the Milltown site activities.
Termination proceedings were initiated against HLA in February 1987, and
the draft FS report was received on 11/13/86.
50
-------
The significance of these errors lies in the realization that the
termination proceedings only began this year and were initiated by the
State within three months of the true date of receipt of the faulty FS
report. Re consider this reasonable given the legal and technical
determinations which must be made prior to initiating those proceedings.
We anticipate the ensuing termination activities will take a substantial
amount of time to finalize. In the meantime, the EPA Montana Office is
exploring with the State a means of continuing the RI/FS without waiting
for termination proceedings to be completed.
Concerning the IG's contention that the Region was not aggressively
monitoring performance aspects of the cooperative agreement and was
"content to allow the state agencies to move at their own pace." We
would point out that documentation is available in the project files
which clearly indicates that the Agency was monitoring the State and
contractor activities on a timely basis. Some evidence of this is the
presence of quarterly status reports submitted by the State; minutes of
meetings held between Jthe Agency and the State to discuss site progress,
including termination proceedings; and memos from the EPA Remedial
Project Manager to the State addressing poor contractor performance.
(Examples are found in Attachment No. 4).
More significantly, it was noted in the IG findings that the EPA
attempted in early 1985 to change the Mi 11 town site from a State-lead to
a Federal-lead project in an effort to expedite RI/FS and, ultimately,
remedial action activities. This effort, initiated by EPA as a result of
schedule slippage, was unsuccessful because of the strong political
opposition.
On page 19 of the audit report it is stated that the Region did not
require CA recipients to establish site specific schedules. This
observation applies to Mi 11 town CA, and we believe it to be an accurate
critique. Strict schedules included in the cooperative agreement would
allow both CA signatories to monitor project status independently and
objectively. A schedule for future activities will be included in the
next CA for the Milltown site, which is anticipated to be finalized the
1st quarter of FY 1988.
Concerning the IG's recommendation that "...special attention should be
given to expediting action on the (among others) Milltown Reservoir
Sediments site", (page 19), we would reply that, as discussed above, EPA
and the State are currently exploring ways to continue the RI/FS without
waiting for contractor termination proceedings to be complete. However,
termination proceedings will need to be completed before the RI/FS can be
considered final. The'principal reason is that a large amount of data
has already been collected, and the quality of this data will in part
determine how much additional data must be collected. The State is
attempting to obtain all of the data acquired by the contractor and this
has proved to be a difficult task. Once obtained, all data will require
51
-------
validation to determine what contractor costs and fees are justified.
The REM II oversight contractor for the project has been tasked with
validation duties, but has fallen seriously behind schedule in these
efforts, due to prioritization of REM II site assignments and a shortfall
in level of effort hours available.
21) Page 16, paragraphs on the Arsenic Trioxide site - In reference to the
second paragraph, the Region's main objective in not taking back the
Arsenic Trioxide project from the State of North Dakota was to attempt to
put the project back on schedule and to build State capabilities for
future work, not to maintain good State/EPA working relationships as
stated. The success of the Region in achieving this objective is
testimony to the appropriateness of our action.
In another sentence in the second paragraph it is stated that "Obviously
the State of North Dakota did not attach a very high priority to the site
since they did not assign other State personnel to work on the project."
We find this statement speculative on the State's motives and believe it
should be deleted. Direct contact by the IG with North Dakota Superfund
administrators on this issue may well be appropriate.
The sentence in this same paragraph that states "A ROD for Lidgerwood was
not expected to be completed before September, 1987, because of a
controversy over the funding of its water supply" should be clarified.
The controversy and delay resulted from a change in EPA HQ policy.
Originally, HQ said there would be no funding for water treatment works
built to comply with requirements of the Safe Drinking Water Act. Later
this policy was changed.
Also, the comments on the Lidgerwood ROD should note that the decision
even to do a ROD for the already completed Lidgerwood action was not made
until halfway through the FY 87. The actual completion of the ROD at
this location has absolutely no bearing on any real or potential health
risk, as the population of Lidgerwood is already being served by an
alternative water system. In addition, the Region has decided to
continue treating this site as a Fund lead site and has not named the
State or Federal government as responsible parties.
22) Pages 16-17, paragraph on the Silver Bow Creek site - The audit report
states that the Silver Bow Creek (SBC) site has been on the NPL since
September 1983, and that the RPM estimated that an RI/FS study period of
5 to 6 years, at a minimum, would be necessary. The audit states that
this constituted insufficient progress.
The audit report appears to confuse the effort and dates associated with
the Butte addition with those of the remainder of the SBC site. It
apppears that the auditor spoke only to the RPM assigned to the Butte
portion of the SBC site. Additionally, the report does not recognize
several other important factors.
52
-------
As the/audit has acknowledged, the Butte portion (the 9 additional miles)
was not added (actually, proposed to be added to the NPL) until March
1986. EPA began forward planning activities (scoping of the RI) in
Septmeber 1986, or soon therafter as resources became available. The
Butte portion of the SBC site, an extremely complex mix of public health,
ground water and political issues, consists of a town of 35,000
residents, a 4,000-mile maze of underground mine workings, and an
abandoned open pit copper mine. It may indeed take much more that the
"normal" RI to arrive at a workable, cost effective, and protective
remedy for such a site.
The remainder of the SBC site is equally complex. Its boundaries extend
from the town of Butte to Milltown Dam, approximately 120 river miles;
substantially more than envisioned when the site was listed on the NPL in
September 1983. (The audit report describes the original site as being
15 miles long and downstream from the confluence of the Clark Fork River
and Silver Bow Creek. The original site was 25 miles long, and was
upstream of the confluence.)
Initially, the State prepared an RI/FS work plan totaling $1.4 million.
EPA had only $850,000 available at the time. Slightly more than a year
passed while the RI/FS work plan was modified to address priorities and
funding limitations, and while the EPA Region VIII struggled to obtain
the full $1.4 million. Portions of the RI/FS were initiated in the
spring of 1984.
However, during the delay in reauthorization of Superfund, few
substantial tasks were undertaken during FY-86 and half of FY-87, with
the exception of those at the Colorado Tailings operable unit. Lack of
assured funding and the constant need to stretch thin resources even
thinner during this period, resulted in little ability on the State's and
EPA's part to commit to funding a long-term effort. Additionally, two
consecutive drought years have prevented the collection of hydrologic
data necessary to complete the RI. Completion of the RI/FS has also been
delayed because of the need to modify the original RI/FS work plan to
meet the evolving requirements of guidance, SARA, and the NCP.
23) Page 17, paragraph on the Sharon Steel site - As previously stated in
these comments, EPA Region VIII has assumed the lead on the Sharon Steel
site and a compete RI/FS is well underway. Also, our major reason for
taking back the lead on this site was because of our involvement in
Federal litigation, not lack of progress. The statement that "lack of
action (by State) resulted in EPA taking back the lead ..." is
inconsistent with EPA's representations to the State.
EPA placed the Sharon Steel RI/FS on hold in the spring of 1986 pending
conclusion of EPA's negotiations with the PRPs. (At the time the State
assumed the lead, EPA advised the State that EPA would later be
53
-------
negotiating with PRPs, but would not allow that to delay the RI/FS).
Prior to concluding those negotiations, in October, 1986, EPA initiated
litigation against the PRPs, including a claim to enjoin the PRPs to
conduct the RI/FS. In February 1987, EPA advised the State that because
EPA had initiated litigation against the PRPs and needed to control the
RI/FS in order to meet court imposed information requirements, EPA would
assume the lead for the RI/FS. At that time and since, EPA has advised
the State that EPA as a matter of policy assumes the lead for RI/FSs in
every instance in which EPA initiates litigation.
24) Pages 17-18, "Recommendations" -
la and Ib - The Region has adopted the national program emphasis on
meeting the PA and SI goals of SARA, schedules and goals which did not
exist for the preremedial program during the time covered by the audit.
Ic - The Region will be improving the monitoring of work performed under
State cooperative agreements although a formal 'approval role for PAs and
Sis will not exist. The Region and HQ will maintain, as always, an
approval role over all HRS packages prepared by States under cooperative
agreements.
Id - The Region will not have an'approval role over State-prepared Sis
per the example established in the EPA-Utah Superfund Memorandum of
Agreement recently negotiated. All applicable guidance on the conduct of
Sis will be provided to the States once Region VIII has received such
from HQ.
le - Region VIII will review and comment on sampling plans prepared by
the States, but there is no 'approval role for EPA per the terms of the
recently developed SMOA with Utah, We expect that the Utah SMOA will be
used as the model for other such agreements in Region VIII.
If - Region VIII will continue to provide training to State personnel in
all aspects of the preremedial program for which guidance and criteria
have been established.
Ig - Recommendation is made that the Region take immediate action to
assure that the complete Wasatch Chemical site is recommended for
inclusion on the NPL. The Region has, in fact, on more than one occasion
recommended in writing that the entire Wasatch chemical site be placed on
the NPL. The Region has discussed this issue with EPA Headquarters in
the context of the RCRA/CERCLA NPL listing policy.
Ih - The Region agrees with this recommendation and has had a full time
staff person dedicated to the quality control review of HRS packages
since January 1986.
54
-------
li - The Region intends to award the State of Utah a cooperative
agreement in FY 88 which provides funding for a State-lead expanded site
inspection at the Kennecott Tailings site per the State's request.
25) Page 19, the middle of the paragraph - It is stated that the cooperative
agreement program is managed by the State programs section of the Air and
Waste Management Division. This is the incorrect name of this Division,
which was originally restructured in February of 1985. This Division's
correct name is the "Hazardous Waste Management Divison".
26) Page 20, top of the page - It is stated that the Region is reluctant to
initiate effective oversight of the State's activities. We disagree.
The Region wants effective oversight of State activities in the conduct
of its responsibilities under Superfund and we intend to improve our
performance. The Region's insistence in the State of Utah that it
perform in accordance with its agreement in spite of the damage it did to
the State - EPA relationship illustrates the Region's intent in carrying
out its responsibilities. Also, the auditor's opinion concerning giving
the States "wide latitude" neglects to mention that the Region is only
provided .004 FTE in the workload model for each PA and .015 FTE for each
SI conducted per year in the region, whether by FIT or the six Region
VIII States. We have given the States and the preremedial program
consistently more staff effort than the limited FTE allowed by the HQ
model for this activity.
With respect to page 20, in the second paragraph, the Region did not sit
idly by during the time that the State lost an employee in Wyoming for a
period of 9 months. We were, after all, in a slowdown period and we were
limited in our ability to respond effectively using the FIT contractor.
In addition, the report seems to reflect that unless we have a written
record in the file, that we never discuss our concerns with the State.
The fact of the matter is that the Division Director of this program
personally discussed this with the Head of the Department of
Environmental Quality of the State of Wyoming on at least two occasions
and was able to get a commitment to have this position filled in spite of
a State freeze on hiring. In addition, Regional staff also had several
conversations with the State expressing concern over the inability of the
State to promptly fill this vacancy.
27) Page 20, last full paragraph - The comment that "these conditions could
have a detrimental affect (sic) on the public health and safety of area
residents" is speculative if not incorrect in its absence of any
supporting documentation of such a "detrimental affect."
28) Page 21, first paragraph, North Dakota - It is again stated that the
Region had a passive attitude with respect to the accomplishment of the
program objectives. We disagree. The Region, in fact, took aggressive
action to correct the problems in North Dakota and ultimately was
successful in its efforts. In the middle paragraph, we do not accept the
55
-------
criticism implied that although the Region considered the application for
a cooperative agreement in South Dakota to be acceptable, it was unable
to make an award because of a lack of funding. Clearly, this was not a
priority activity of Regions during the slowdown phase of Superfund. Use
of the FIT contractor seemed the reasonable approach and certainly was in
agreement with the national guidance to not award any cooperative
agreements during the slowdown phase.
29) Page 21, last full paragraph, South Dakota - The comment that the Region
should have made "alternative funding arrangements" fails to capture the
realities of the time period. First, EPA cannot unilaterally terminate
cooperative agreements without strong evidence of State malfeasance.
Regional and State concurrence on any deobligations were therefore
required and unlikely at the time. The Region, moreover, had little to
no guarantee that any funds deobligated (even assuming mutual agreement)
would have been returned to the Region for allocation to some other
State. HQ, in fact, was at the time looking to deobligate monies from
CAs to use elsewhere in the program (contractors, CLP, etc.) and there
was almost a certainty that deobligated State CA funds would not have
come back to the Region.
30) Page 21, last paragraph - The Region did not develop RPM guidance related
to CA oversight because that was a national responsibility represented in
the State Participation in the Superfund Remedial Program Manual (Purple
Book). The quarterly report and review procedures were those established
at the national level and adopted by the Region in its management of the
CA process. It would have been counterproductive to the national
Superfund program to establish regional-specific requirements that could
have allowed the Agency to be easily challenged on a national consistency
basis. A regional guidance document would have been a reckless effort in
the light of this risk.
31) Page 22, first full paragraph - The Region agrees that the
standardization of project files would assist the management of all
projects and such an effort is underway, funded as it has been in FY 87
by the availability of funds under the reauthorized statute. Such
support funding was not available prior to this time.
32) Page 22, bottom paragraph - In regard to the time factor, refer to our
comment number 1. The emerging SMOA provisons will establish target
review periods, noting that there will always be occasions when even
these targets will have to be missed.
33) Page 24, last paragraph - The criticisms of the CERCLIS data base should
note that until late FY 87 the CERCLIS system was used only to report PA
and SI SPMS accomplishments. The dates of HRS packages might have helped
fill data gaps created by CERCLIS originators, but served no real purpose
in a regulatory or program management sense and as such received little
56
-------
attention by the Region. We have determined that several PA and SI
reports have been completed but not entered on CERCLIS, but again the
program did not suffer as a result. Current site status information on a
HQ data base was not the basis for setting Region preremedial priorities
in the early years of the program . The Region met its national targets
and in the process addressed those sites of most concern to EPA and the
States at the time.
34) Page 24, first paragraph, - It is stated that the Region did not meet
cooperative agreement requirements in awarding the Wyoming cooperative
agreement since the State employee who worked on the agreement ultimately
resigned. We fail to understand this criticism. Certainly, the State
had the capability when the award was made. If we followed the reasoning
in the I.G.'s report, we would not make any cooperative agreement awards
to any of our small States, including South Dakota, since there is a
possibility that there may be turnover and need for extension of project
periods to accomplish' the work.
35) Page 25, last full paragraph - The IG mentions monthly visits with Utah,
but states that only RPM's attend. This is not accurate. The Superfund
Remedial Branch Chief and the Superfund Program Section Chief always
attend these monthly meetings. Also, as needed, other Superfund section
chiefs and Regional Counsel staff will attend.
36) Page 26, Recommendations - The Region acknowledges many of the goals
contained in these recommendations. The Utah SMOA in attachment 2 is the
model which we will use to improve and strengthen our administration of
Superfund cooperative agreements. We will continue to work with EPA
Headquarters to develop appropriate guidance for the State and EPA staffs.
37) The remaining comments are made on the audit's findings concerning Region
VIII's financial management systems:
57
-------
FINDING NO. 3 - Regional Oversight of Recipient Financial Management Systems
Need Improvement
Auditor's Recommendation 1
1. Initiate written procedures for use in administering the LOG method of
reimbursement. These procedures should, as a minimum, require that:
a. Recipients comply with the reporting requirements contained in the
LOG User's Manual which require that the SF-272 Report be submitted
within 15 working days following each calendar quarter, and the FSR
within 90 days following the end of the budget period or on each
anniversary of the budget period.
Region's Response
Late SF-272 Reports:
We concur with the auditor that states were late in submitting their SF
272 reports. However, ourranalysis shows that the number of days reported in
the audit finding is overstated since it is based on calendar days instead of
working days. This resulted in a variance of 4 to 68 days instead of the 7 to
105 days as indicated in the finding.
Written procedures are included in the LOG users manual which is provided
to each assistance recipient. The recipient is also made aware of the
requirements when a review is made by the Grants Management Branch personnel.
Internal control procedures include maintaining a tickler file, calling
recipients prior to the due date to remind them of reporting requirements,
notifying the Financial Management Officer of late respondents who in turn
informs Chief of Grants Management Branch. Reminder letter(s) will be sent by
the Grants Management Branch to recipients whose reports are overdue.
Failure to Comply with FSR Submission Requirements
We concur with the auditor that annual FSR's for Superfund Cooperative
Agreements (CA) were not submitted within the required 90-days of the close of
the budget period. We have implemented a tracking procedure to monitor
submission of all program grant FSR's which includes a series of three
progressively emphatic reminder letters to each of the recipients (see
attachment). Since instituting this procedure, timely submittal of FSR's in
program grants has increased significantly. Superfund recipients' reports
will be more aggressively monitored to ensure that they meet the regulatory
due dates. An additional FTE has been assigned to the Grants Branch Superfund
program to assist in this area. The person is on board and is developing a
tracking system for administrative requirements of Superfund cooperative
agreements.
The auditor makes reference to a previous DIG report dated January 27,
1986, regarding timely submission of FSR's and states that the Region had
assured the DIG that corrective action would be taken. Although the Region
certainly agrees that timely FSR's are important to financial management of
the cooperative agreements, we believe the statement that this issue was
included
58
-------
in the referenced DIG report is inaccurate. The issue of late SF 272 reports
was raised in that DIG report, and the Region instituted the LOC-TFCS system
to reject drawdowns on the letter of credit if the SF-272's were not received.
We have taken action and will continue to take action against those
states that are late in submitting their FSR's. For example, the Assistant
Regional Administrator for Policy and Management made a trip to Utah last year
to talk directly with the Director of the Division of Environmental Health
regarding late submission of their FSR's. He told the Director at that time
that we would be forced to institute sanctions against the state if they did
not improve their timeliness in this area. Since that time, the reports from
Utah have been submitted much more promptly for their program grants, More
attention will be devoted to Superfund FSR's in the future since we have an
additional person in the Grants Branch to monitor this activity.
We.do not agree with the auditor that 39 FSR's were required to be
submitted through December 30, 1986. The auditor's report states that FSR's
were to be submitted annually, within 90 days of the close of the budget
period. This is consistent with the General Grant Regulations applying to all
assistance agreements which require that FSR's be submitted within 90 days
after the end of the budget period. In reviewing the Superfund Cooperative
Agreements, we noted a special condition which required the States to submit
quarterly progress reports, but this should not be confused with the SF-269
Financial Status Report. If the auditors believe that quarterly FSR's were
required from Superfund recipients on a quarterly basis from inception of the
program through September 1985, please indicate where you found such a
requirement. Otherwise, the number of FSR's listed in the draft audit report
could not be correct, e.g. 13 reports due from North Dakota.
Our records indicate the following annual FSR's were required during the
period covered by this audit:
Cooperative FSR's FSR's FSR's Submitted
State Agreement No. Required Submitted Late
Utah V008427 2 1 1
Colorado V008435 2 00
Montana V008416 3 3 1
Montana V008415 3 3 1
Montana V008430 - 1 1 0
N. Dakota V008414 4 20
Wyoming V008433 1 1 0
TOTAL 16 11 3
Since the time the audit was performed, all overdue FSR's have been
submitted with the exception of one in Colorado. We are making efforts to
obtain this outstanding FSR and are considering cutting off the Letter of
Credit privileges for this State under the Superfund program if it is not
submitted promptly.
59
-------
Auditor's Recommendation l.b. LOG draw down requests be rejected in
those instances where the reporting requirements have not been met.
Region's Response
The Region does concur with the auditor's finding that no LOG drawdown
requests were rejected when reporting requirements were not met. The decision
for not rejecting drawdowns was based on the fact that the states had a low or
negative cash balance and had significant sums of money due them. Since the
states were being reimbursed for their expenses and not receiving advances as
many states do, the Region did not believe it was appropriate to withhold
funds. During the audit period, the Financial Management Section personnel
checked the drawdown request to determine if the recipient had a low cash
balance on hand and/or if a large sum was due. If this was the case, the
drawdown request was approved. The present procedures include the above steps
with modifications to the approval step. If no response is received from the
recipient to the reminder letters on timely submission of the required reports
(see paragraph l.a.) the Grants Management Branch Chief will notify the
Financial Management Officer to reject drawdowns on letter of credit until the
reports have been received. The reminder letter for SF 272 reports will give
the recipient ten (10) working days from receipt of the letter to respond.
It appears reasonable to the Region to disapprove drawdowns if the state
is consistently late and the number of days Is significant (10 working days).
It does not seem reasonable to take this action with a state who has a
legitimate reason, such as Wyoming. Wyoming consistently submits its reports
before the due date. The exception noted in the audit report was due to the
shortage of staff when the person assigned to submitting the reports was on
maternity leave. When she returned, the reports were again submitted timely.
Reasonableness should be a factor in rejecting drawdowns.
Auditor's Recommendation I.e. All SF-272 Reports requiring changes be
returned to the certifying official for correction and recertification. Under
no circumstances should the changes be made by Regional personnel.
Region's Response
The Region does agree that stronger internal controls are needed. The
regional personnel did in fact make, changes, however, in most cases they
believed the changes were very minor. The Region's current policy is to send
back all corrections to the certifying officer. In Montana, there are 3
certifying officers who are contacted when a change needs to be made. In the
case referenced 1n the audit report, the document was sent to the certifying
official contacted by phone who may not have been the certifying official
signing the original document. The Region is now sending changes to the
certifying official signing the document.
Auditor's Recommendation l.d. Consider the revocation of LX privileges
for those recipients which continue to fail to fulfill the requirements of the
LOC User's Manual.
Region's Response;
The Region will always consider this action in cases where there appears
to be blatant or consistent disregard for the requirements. We have
60
-------
considered this action already e.g., Utah, and will take it again when the
situation calls for it. However, with one exception, this action does not
appear to be justified at this time. The States are making an effort to
submit their reports in a timely manner and are calling or writing to inform
the Regional Office of the reason for being late.
Auditor's Recommendation 2
Improve the Region's reviews of recipient accounting systems to assure
that accounting system deficiencies are detected and corrected.
Region's Response:
The auditor believes that the Region's accounting system review
procedures need to be strengthened to assure that all accounting deficiencies
are detected and corrected. The Region and the Agency as a whole agree with
this assessment. At the Superfund Administrative Management Conference in
Seattle in July 1987, Headquarters Grants Administration Division indicated
they are in the process of developing model cooperative agreement checklists
and training of regional staff on oversight review protocals.
The Region's review procedures consist primarily of survey and oversight
of the recipient's accounting system relative to the EPA awarded assistance
agreements. The reviews are not a substitute for audits. The region is not
authorized to conduct audits, and we make it clear to the recipient that our
reviews are to identify problem areas to management so that potential problems
can be averted early in the process. The Regional reviews generally follow
the "Survey of Grantee's Management Systems" program contained in the
Assistance Administration Manual, Appendix 19-3. The review performed
consists of a limited judgmental sample selection of the grant expenditure
documents, together with interviews of the responsible recipient accountant.
A general verbal walk-through of the accounting practices and maintenance of
records is described. Subsequent verifications are made of selected revenue
and/or expenditure documents.
In regard to the Utah Department of Health, Administrative Services
Bureau of Finance Section review performed by the Region, the auditor
indicated that the statement concerning the adequacy of the accounting records
procedures and internal control procedures was inaccurate. We only reviewed
the EPA grant accounting procedures implemented for use by the Finance
Section. We did discuss in detail with the Financial Manager and staff
accountant the reconciliation of the Finance Section financial data to the
State Financial Information and Resource Management System (FIRMS). We were
advised that the original FIRMS revenue and expenditure data entries were
rearranged into cost categories for management and reporting purposes by the
Finance Section. We concluded, based on our limited scope of review (and it
was made perfectly clear both orally and in writing to the state that our
review function should not be construed as an audit) that the recipient's
accounting practices and procedures were adequate. Since the issue of the
Utah accounting system and how it relates to the State FIRMS system was
61
-------
dropped from the Utah Superfund audit report as a result of the exit
conference with the State and the OIG, we believe strongly that it should be
dropped from this report. If the 016 could not determine conclusively that it
was not adequate without further study, then the Region should not be
criticized for failure to identify it as a major problem based on a limited
review.
Acceptability of the Utah Accounting System
The auditor stated that although the Regional review indicated that the
Utah DEH accounting and internal control systems were adequate, they found
that this was not the case. The auditors found inadequacies in the following
areas:
(i) Use of unacceptable labor charging and recording practices, which
allowed DEH to allocate employer indirect time charges as direct labor,
and to transfer labor costs to the cooperative agreement from other
projects without adequate documentation. During prior years the recipient
and EPA Regional Grants Management staff have had discussions on the
labor cost allocation procedures. It was concluded that the Department
of Health sufficiently demonstrated that their cost allocation
methodologies were being consistently recorded and reported. However,
the auditor's recommendations regarding the allocation of indirect costs
and the possible accounting advantages to the state will be discussed
with the recipient for possible inclusion in the indirect cost pool and
resolution of the pending audit finding.
(ii) The auditor stated that transferred labor costs of the cooperative
agreement from other projects were made without adequate documentation.
At the time of our review, we were advised that the majority of these
transfers of labor costs were required because of the revision of certain
cost center code numbers. Selected vouchers were reviewed at the time
which appeared to indicate the code numbers were changed. In future
reviews, our personnel will perform more indepth reviews to ensure the
propriety of cost transfers.
(iii) The auditor stated that the DEH accounting system lacked
segregation of allowable and unallowable costs. At the recent exit
conference regarding the DEH Superfund audit, discussions on this audit
finding were held. The recipient appeared to have sufficiently explained
the Finance Section's method of recording grant allowable costs. Any
costs determined not to be grant eligible costs were recorded and paid
with the funds in the State general fund account. We will not make any
further comment on this deficiency since Utah's response to the audit
finding appears to be acceptable to the auditors.
62
-------
DISTRIBUTION
Copies
Office of the Inspector General
Headquarters Office 5
Inspector General (1)
Deputy Inspector General (1)
Director, Audit Operations Staff (3)
Chief, Programs Assistance Unit (Hqs) 1
Divisional Office 3
Other DIGA's (1 each) 5
Regional Office •=••
Regional Administrator, Region 8 2
Director, Waste Management Division 3
Director, Office of Policy and Management 1
Audit Follow-Up Coordinator 1
Headquarters Office
Director, Grants Administration Div.
(Hqs) (PM-216) 1
Director, Office of Emergency and Remedial
Response (Superfund) (WH-548) 1
Comptroller (PM-225) 1
63
------- |