-------
Inspector General Division
 Conducting the Audit:                   Northern Audit Division
                                        Chicago, Illinois
Region Covered:                         Region 5
Regional Offices Involved:                 Planning and Management
                                        Division

                                        Office of Superfund

-------
             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                     OFFICE OF THE INSPECTOR GENERAL
                           NORTHERN DIVISION
                       77 WEST JACKSON BOULEVARD
                          CHICAGO, IL 60604-3590
                           July 31,  1995
MEMORANDUM
SUBJECT:   Final  Report No.  E5FGF5-05-0047-5100429
           Indiana Cooperative Agreements


FROM:      Anthony C.  Carrollo
           Divisional  Inspector/General for Audits
           Northern Division

TO:        Valdas V. Adamkus
           Regional Administrator
           Region 5

     We have  completed our interim audit of Indiana Department of
Environmental Management's internal controls over costs for their
Superfund cooperative agreements.  This audit report contains
findings  that describe problems the Office of Inspector General
 (OIG) has identified  and recommendations for corrective action.

Action Required

     In response to the draft report,  your office provided us an
action plan with milestone dates for the correcting the noted
weaknesses.   We  find  your response adequate and, as of the date
of this report,  we are closing out this audit in our audit
tracking  system.   Please track all corrective actions and
milestone dates  in the Agency's Management Audit Tracking System.
Also, we  have no objections to further release of this report to
the public.

     Should you  or your staff have any questions or need
additional information,  please contact Charles Allberry, Audit
Manager,  at 353-4222.


Attachment
                                                          Printed on Recycled Paper

-------
[This  page  was intentionally left blank.]

-------
                     Indiana Superfund Cooperative Agreements
                      EXECUTIVE SUMMARY
PURPOSE

The Office of the Inspector General  (OIG) performed an audit
of the Indiana Department of Environmental Management's
(IDEM) administration of Superfund cooperative agreements
(CA).  The audit was performed as part of the OIG's statutory
requirement to audit a sample of CAs, as well as part of our
ongoing oversight of Agency operations and programs.  The
objectives of our review were to determine whether IDEM:

  •  exercised adequate controls over costs through its
     financial management, accounting, procurement, contract
     administration, and property management systems;

  •  complied with Federal regulations and CA requirements;
     and

  •  achieved the objectives of the CAs.
BACKGROUND

The Superfund program was established by the Comprehensive
Environmental Response, Compensation, and Liability Act
(CERCLA) of 1980.  The program was revised and expanded in
1986 by the Superfund Amendments and Reauthorization Act.
Under Superfund, the U.S. Environmental Protection Agency
(EPA) is responsible for managing the cleanup of hazardous
waste sites that threaten human health and the environment.

CERCLA authorizes EPA to delegate remedial response
activities at hazardous waste sites to individual states.
IDEM is responsible for administering the environmental
protection programs for the State of Indiana.  When a state
elects to manage the remedial response at a site, it enters
into a CA with EPA.  The CA (1) documents the division of
responsibilities between the state and EPA, and  (2) defines
the Federal funding available to the state and its cost
share, if any.

We reviewed two sites under a multi-site CA and the Core
Program CA.
                              i

                          Report No. E5F6F5-05-0047-5100429

-------
                     Indiana  Superfund Cooperative Agreements
Site/CA Name
Continental Steel
Galen Myers Dump
Core Program
CA Number
V-005072-01
V-005072-01
V-005990-01
Funds
Awarded1
$4,898,902
$1,039,217
$3,554,474
Costs
Incurred2
$286,029
$80,529
$1,218,3823
RESULTS OF AUDIT

We found weaknesses  in  IDEM's  financial  reporting and
internal controls over  Superfund  CAs.  While none of these
weaknesses caused us to question  costs claimed on the CAs
reviewed, corrective actions will lessen the risk that future
costs claimed would  be  unallowable.

Untimely Submission  of  Financial  Reports

IDEM did not submit  its last three semiannual Cash
Transactions Reports (CTR)  or  its FY 1994 Financial Status
Report  (FSR) to EPA  within  Agency prescribed time limits.
This untimeliness occurred  because IDEM  experienced:

  •  problems implementing  a new  automated accounting system,
     and

  •  an influx of new,  inexperienced grant accounting
     personnel.

As a result, EPA was unable to timely monitor IDEM's
Automated Clearing House (ACH)  drawdown  requests for FY 1994
and actual expenditures for open  CAs.  EPA needs to ensure
that IDEM submits future CTRs  and FSRs within prescribed time
limits.
     *As of 9/30/93.

     2Per 9/30/93 Financial Status Report.

     3Federal share ($1,353,758 X 90% - $1,218,382).

                              ii

                           Report No.  E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
Internal Control Weaknesses

In general, IDEM has adequate internal controls over the
funds it receives through Superfund CAs.  However, we did
find weaknesses in internal controls in the following areas:

  •  contract management,

  •  property management,  and

  •  Core Program activity accomplishments.


REGION 5 COMMENTS AND ACTIONS

Region 5 was generally in agreement with our report, and has
already acted, or has agreed to act, to resolve the issues
raised in this report.


RECOMMENDATIONS

We recommend that Region 5 work with IDEM to:

 1.  Identify and implement ways to improve the timeliness of
     IDEM's accounting data and financial reports.

 2.  Train agency personnel supporting the Superfund program
     through use of Core Program funds.

We also recommend that Region 5 request that IDEM:

 1.  Ensure that its contracts manager is adequately trained
     and qualified to effectively administer Federally funded
     contracts.

 2.  Develop a Procurement and Contract Management Manual.

 3.  Develop a method to easily identify Superfund Core
     Program funded property.

 4.  Ensure that all fixed assets purchased with Federal
     funds are timely reported to the State Auditor and
     included in the State's inventory system.

 5.  Conduct annual physical inventories and reconcile the
     results to the state master inventory list.
                             111

                          Report No. E5FGF5-05-0047-5100429

-------
           Indiana  Superfund  Cooperative Agreements
[This  page was  intentionally  left blank.]
                   iv



               Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
                      TABLE OF CONTENTS

                                                         Page

EXECUTIVE SUMMARY 	   i

CHAPTERS

  1  INTRODUCTION 	   1

       PURPOSE  	   1

       BACKGROUND	   1

       SCOPE AND METHODOLOGY	   2

  2  IDEM DID NOT SUBMIT TIMELY FINANCIAL REPORTS TO EPA    5

       FINANCIAL REPORTING REQUIREMENTS AND PROCEDURES  .   5

       ACCOUNTING SYSTEM DELAYS 	   6

       PERSONNEL EXPERIENCE AND TRAINING  	   7

       CONCLUSION 	   8

       RECOMMENDATIONS  	   9

       AGENCY COMMENTS AND OIG EVALUATION 	   9

  3  IDEM NEEDS TO IMPROVE CONTRACT MANAGEMENT
     UNDER SUPERFUND COOPERATIVE AGREEMENTS 	  11

       CONTRACTOR PERFORMANCE BEYOND CONTRACT EXPIRATION   11

       INADEQUATE TRAINING  	  12

       LACK OF POLICIES AND PROCEDURES	13

       ABSENCE OF WRITTEN POSITION DESCRIPTION  	  14

       CONCLUSION	15

       RECOMMENDATIONS  	  15

       AGENCY COMMENTS AND OIG EVALUATION 	  15
                              v

                          Report No. E5F6F5-05-0047-5100429

-------
                     Indiana Super-fund Cooperative Agreement^
                      TABLE OF CONTENTS
                          (continued)
                                                         Page

  4  IDEM DID NOT ADEQUATELY SAFEGUARD SUPERFUND ASSETS  .  17

       PROPERTY CONTROL REQUIREMENTS  	  17

       PROPERTY MANAGEMENT CONTROLS AND PROCEDURES   ...  18

       TIMELY REPORTING FIXED ASSET PURCHASES  	  19

       ANNUAL PHYSICAL INVENTORIES  	  20

       PROPERTY RECORD MAINTENANCE PROCEDURES  	  20

       CONCLUSION	21

       RECOMMENDATIONS  	  22

       AGENCY COMMENTS AND OIG EVALUATION 	  22

  5  IDEM DID NOT COMPLETE CORE PROGRAM ACTIVITIES   ,  .  .  23

       CORE PROGRAM OBJECTIVES  	  23

       COMPLETION OF CORE PROGRAM ACTIVITIES	24

       CONCLUSION	26

APPENDICES

  1  REGION 5 RESPONSE TO DRAFT REPORT  	  27

  2  ABBREVIATIONS	31

  3  DISTRIBUTION	33
                             VI

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
                          CHAPTER 1

                         INTRODUCTION
PURPOSE

The Office of the Inspector General  (OIG) performed an audit
of the Indiana Department of Environmental Management's
(IDEM) administration of Superfund cooperative agreements
(CA).  The audit was performed as part of the OIG's statutory
requirement to audit a sample of CAs, as well as part of our
ongoing oversight of Agency operations and programs.  The
objectives of our review were to determine whether IDEM:

  •  exercised adequate controls over costs through its
     financial management, accounting, procurement, contract
     administration, and property management systems;

  •  complied with Federal regulations and CA requirements;
     and

  •  achieved the objectives of the CAs.
BACKGROUND

The Superfund program was established by the Comprehensive
Environmental Response, Compensation, and Liability Act
(CERCLA) of 1980.  The program was revised and expanded in
1986 by the Superfund Amendments and Reauthorization Act.
Under Superfund, the U.S. Environmental Protection Agency
(EPA) is responsible for managing the cleanup of hazardous
waste sites that threaten human health and the environment.

CERCLA authorizes EPA to delegate remedial response
activities at hazardous waste sites to individual states.
IDEM is responsible for administering the environmental
protection programs for the State of Indiana.  When a state
elects to manage the remedial response at a site, it enters
into a CA with EPA.  The CA (1) documents the division of
responsibilities between the state and EPA, and  (2) defines
the Federal funding available to the state and its cost
share, if any.  There are several different types of CAs.

  •  Multi-site CAs fund site specific remedial and removal
     activities.
                              1

                          Report No. E5F6F5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
  •  Core Program CAs fund state activities needed to support
     the Superfund program.

  •  Pre-remedial CAs fund state activities such as
     preliminary assessments, site inspections, and hazardous
     ranking scoring.

  •  Enforcement CAs fund state oversight of responsible
     party activities at Superfund sites.

States must submit an "Application for Federal Assistance" to
request CERCLA funds to support Superfund activities in their
state.  The application must include an estimated budget by
cost category (i.e., personnel, travel, equipment,
contractual, etc.).  The application must also include a
Statement of Work describing the activities and tasks to be
conducted, the projected costs associated with each task, the
number of products to be completed, and a schedule for
implementation.   The state is required to submit progress
reports quarterly on the activities delineated in the
Statement of Work.  These reports must contain (1) an
explanation of work accomplished during the reporting period,
(2) a comparison of the percentage of the project completed
to the project schedule, (3) a comparison of the estimated
funds spent to date to planned expenditures, (4)  an
explanation of significant discrepancies, and  (5)  an estimate
of the time and funds needed to complete the work required in
the CA.
SCOPE AND METHODOLOGY

During our audit, we reviewed two sites (Continental Steel
and Galen Myers) under a multi-site CA to gain an
understanding of IDEM's controls in the areas of financial
management, accounting, procurement, and contract
administration.  We selected these two projects because they
were the only ones with significant obligations.  We also
reviewed the Core Program CA to examine overall CA
management.  Table 1 provides a summary of the funds awarded
and costs incurred for the three sites/CAs reviewed.
                              2

                          Report No. E5PGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
                           Table  1
            IDEM Superfund Cooperative  Agreements
Site/CA Name
Continental Steel
Galen Myers Dump
Core Program
CA Number
V-005072-01
V-005072-01
V-005990-01
Funds
Awarded1
$4,898,902
$1,039,217
$3,554,474
Costs
Incurred2
$286,029
$80,529
$1,218,3823
For the two site specific projects, we  obtained background
information from the Region  5  Project Officer,  evaluated the
costs IDEM incurred, and assessed  the controls  over
contractor performance and billings.  We  analyzed costs  as of
the latest available Financial Status Report  (FSR),  dated
September 30, 1993.  Since personnel costs  were relatively
low for both sites we performed a  100 percent review of  those
costs.  In reviewing contractual costs  for  the  sites,  we
selected a judgmental sample of five of the largest purchase
orders.  Three of these purchase orders {involving 11
invoices) were for the Continental Steel  site and represented
49 percent of the total contractual costs on the project.
The remaining two purchase orders  (involving 11 invoices)
were for the Galen Myers site  and  represented 75 percent of
the total contractual costs  on the project.  We did not  test
costs in other categories as amounts claimed for those
categories were not material to the total amount claimed.
Since it was not practical to  select statistical samples,  our
results were not projectable to the universe.

For the Core Program CA, we  reviewed whether the objectives
of the CA were achieved.  We also  evaluated IDEM's controls
over letter-of-credit drawdowns and property management.

For all items tested, we examined  the source documents and
performed other audit procedures that we  considered necessary
to gain an understanding of  IDEM's financial management  and
     XAS Of 9/30/93.

     2Per 9/30/93 Financial Status Report.

     3Federal share ($1,353,758 X 90% = $1,218,382).

                               3

                           Report No.  E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
accounting controls.  As criteria, we used the Code of
Federal Regulations  (CFR) Title 40, Parts 30, 31, 33, and 35;
Office of Management and Budget (OMB) Circular A-87 and A-
102; and the general and special conditions contained in each
CA.  Except as noted in chapters 2 through 4, our review of
the Continental Steel and Galen Myers sites did not disclose
any material weaknesses in IDEM's financial management,
contract administration, and property management systems.

In planning and performing our audit, we considered relevant
aspects of the internal control structure in order to
determine our auditing procedures.  The significant controls
we reviewed included financial management, accounting,
contract procurement, contract management, and property
management.  For these internal controls, we obtained an
understanding of the relevant policies and procedures and
whether they had been placed into operation.  We also relied
upon the single audit report, prepared by the Indiana State
Board of Accounts, for the IDEM, for the year ending June 30,
1993, to the extent that it was applicable to IDEM's
Superfund program.  Weaknesses in internal controls are
discussed in chapters 2, 3, and 4.  Nothing else came to our
attention in connection with our review which caused us to
believe that IDEM was not in compliance with any of the terms
and conditions of the CA, laws, and regulations for those
transactions not tested.

We performed our audit in accordance with the Government
Auditing Standards. 1988 Revision promulgated by the
Comptroller General of the United States and included tests
of the accounting records and other auditing procedures as
deemed necessary.  Audit fieldwork was performed from
November 29, 1994, to June 2, 1995.
                              4

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
                          CHAPTER 2

     IDEM DID NOT SUBMIT TIMELY FINANCIAL REPORTS TO EPA
IDEM did not submit its last three semiannual Cash
Transactions Reports  (CTR) or the FY 1994 FSR to EPA within
Agency prescribed time limits.  This untimeliness occurred
because IDEM experienced:

  •  problems implementing a new automated accounting system,
     and

  •  an influx of new, inexperienced grant accounting
     personnel.

As a result, EPA was unable to timely monitor IDEM's
Automated Clearing House  (ACH) drawdown requests for FY 1994
and actual expenditures for open CAs.  EPA needs to ensure
that IDEM submits future CTRs and FSRs within prescribed time
limits.
FINANCIAL REPORTING REQUIREMENTS AND PROCEDURES

As a recipient of EPA assistance agreement funds, IDEM is
responsible for providing EPA with CTRs and FSRs within
specified timeframes.  EPA uses the CTR to monitor cash
advanced to recipients and ensure that recipients are not
maintaining excessive cash balances.  EPA uses the FSR to
obtain actual cost expenditure data by site, activity, and
operable unit for each CA.  The ACH Recipient's Manual
requires recipients to submit:

  •  CTRs within 15 working days following the end of the
     semiannual period.

  •  FSRs by December 30 of each year.

Timely financial reports allow EPA to closely monitor
recipients' ACH drawdowns and expenditures for open CAs.

IDEM uses document control registers to record and track
transactions affecting cash receipts and disbursements.  IDEM
grant accountants are responsible for posting adjusting
entries to document control registers maintained for each CA.
The cash accountant uses document control register data to
support financial data reported to EPA.  According to IDEM
officials, it generally takes about two days to prepare,


                              5

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
review, and submit financial reports to EPA if data in the
document control registers are complete and correct.  Posting
delays and errors in the document control register, however,
would cause delays in submitting reports to EPA.
ACCOUNTING SYSTEM DELAYS

IDEM's conversion from a manual to an automated accounting
system contributed to delays in the timely submittal of CTRs
and FSRs to EPA.  According to IDEM officials, a manual
accounting system with document control registers was used
before July 1993 and EPA received the required financial
reports timely.  IDEM's accounting system was partially
automated in July 1993.  The Superfund Core Program CA was
automated in October 1993 and the site specific CAs were
automated in September 1994.  The conversion automated the
grant accountants' document control registers.  Since
automation began, IDEM has not timely submitted the required
financial reports to EPA.  For example, CTRs for the periods
ending December 31, 1993 and June 30, 1994 were submitted on
January 18, 1995; 12 and 6 months late respectively.  IDEM
submitted the FSR for the period ending September 30, 1994 on
April 24, 1995; almost 4 months late.  As of July 28, 1995,
IDEM had not submitted the CTR for the period ending December
31, 1994.

The State of Indiana Auditor's Office  (State Auditor) is
responsible for maintaining fiscal control over state and
Federal funds awarded to state agencies.  The State Auditor
maintains the state accounting system.  IDEM, in turn,
maintains its own separate accounting system.  The flow of
financial transactions through the state and IDEM accounting
systems is as follows:

  •  Financial transaction initiated by IDEM.

  •  Claim vouchers, purchase orders, interdepartment bills,
     or payroll documents are submitted to State Auditor and
     posted to the state accounting system.

  •  IDEM receives confirmation of the transaction having
     been posted and processed in the state accounting system
     from the State Auditor.
                              6

                          Report No. E5FGF5-05-0047-5100429

-------
                      Indiana Superfund Cooperative Agreements
  •  Confirmation data  are  reviewed,  by IDEM grant
     accountants, for accuracy and submitted for posting to
     IDEM's accounting  system.

  •  Transaction complete.

Financial transactions  are  posted manually and separately to
the state and IDEM  accounting systems because the systems are
not electronically  linked.   This results in posting delays
between the time the data is first posted to the state
system4 and subsequently posted  to  IDEM's  system.   Further
delays occur because additional data,  including the grant/CA
number, are posted  to and tracked in IDEM's accounting
system.  According  to IDEM  officials,  the IDEM accounting
system is not user  friendly which makes it very time
consuming to manually enter data.   Thus,  IDEM's system did
not have current accounting data readily available.  As a
result of these posting delays,  IDEM uses the State Auditor
accounting transaction  microfiche to obtain the up-to-date
data needed to support  the  financial reports sent to EPA.

IDEM officials stated that,  since January 1995, they have
made some incremental improvements to the data input process,
making it somewhat  less cumbersome.  IDEM has also moved the
time and effort portion of  its accounting system to a new
computer platform.  As  a result, the delay in identifying
labor charges associated with Superfund cooperative
agreements has been reduced from more than 9 months to about
3 months.  The goal is  to further reduce this time lag to one
month.  IDEM officials  expect to replace their current
accounting system in about  two years.
PERSONNEL EXPERIENCE AND TRAINING

An influx of inexperienced grant accounting staff members
also contributed  to IDEM's reporting delays.   IDEM has five
grant accountants assigned to monitor the budget and track
expenditures on Federal  grants/CAs.5  At  the time  of  our
review, four of the five grant accountants had less than one
year of Federal grant/CA accounting experience.   IDEM's
previous grant accounting staff had an average of 4 years
experience.  The  significant loss of experienced personnel
     4The transactions are first posted to the state accounting system because
the State Auditor has disbursement control over IDEM funds.

     5A sixth grant accountant in IDEM is responsible for monitoring state
grants.

                               7

                           Report  No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
impacted IDEM's ability to submit timely financial reports to
EPA.  Inexperienced personnel caused the duties and
responsibilities of senior accounting staff members to
increase.  For example, besides performing their regular
duties, IDEM's senior accounting personnel had to provide
continual guidance to inexperienced personnel and correct
errors they created.  Inexperienced personnel hindered IDEM's
ability to monitor CA budgets, track expenditures, and submit
timely financial reports to EPA.

IDEM did not use Core Program funds to provide Federal grant
training to inexperienced grant accountants.  EPA established
the Core Program CA to provide states with additional funds
needed to support non-site specific Superfund activities.
Under the terms of the Core Program CA, funds may be used to
provide training to personnel supporting Superfund
activities.  According to IDEM's grant accountants, they did
not receive formal training designed to help them effectively
monitor CA budgets or track expenditures.  The grant
accountants stated that their limited grant experience came
through on-the-job training.  IDEM officials stated that
assignment workloads and course availability made it
difficult to provide grant accountants with formal grant
training.  The lack of training hindered IDEM's ability to
effectively manage Superfund activities and contributed to
financial reporting delays.  IDEM should consider using Core
Program funds to ensure that inexperienced personnel receive
the training needed to effectively manage the Superfund
program.

In response to our findings, IDEM officials added two mid-
level supervisors to the grant accounting section - one in
February 1995 and another in May 1995.  These positions are
responsible for directly supervising and providing continual
on-the-job training to the grant accountants.  Also, IDEM is
considering providing continual cross-training to
inexperienced grant accounting staff members.  The goal of
the training is to establish and maintain a group of
experienced grant accountants.
CONCLUSION

A combination of problems contributed to IDEM's inability to
submit timely financial reports to EPA.  IDEM experienced
reporting delays because of: (1) problems encountered while
implementing a new automated accounting system, (2) the loss
of experienced grant accounting staff personnel, and (3) the
lack of training provided to inexperienced grant accounting


                              8

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
personnel.  As a result, IDEM's last three semiannual CTRs
were submitted 3-12 months late.  Therefore, EPA was unable
to timely monitor ACH drawdown requests to ensure that IDEM
was not maintaining excessive balances of Federal funds
during the second semiannual reporting period of FY 1993 and
all of FY 1994.  EPA was also unable to monitor IDEM's FY
1994 expenditures for open CAs.
RECOMMENDATIONS

We recommend that Region 5 work with IDEM to:

 1.  Identify and implement ways to improve the timeliness of
     IDEM's accounting data and financial reports.

 2.  Train agency personnel supporting the Superfund program
     through use of Core Program funds.


AGENCY COMMENTS AND PIG EVALUATION

Region 5 agreed with the findings and recommendations
presented in this chapter.  In response to our specific
recommendations, Region 5 stated that it will continue to
work with IDEM as the Region has for the past several years
to help IDEM improve its accounting system  (recommendation
#1).  Region 5 also plans to offer comprehensive training to
all its states during Fiscal Year 1996.  Additionally, Region
5 will ensure that IDEM is apprised of appropriate financial
and grant administration courses offered through the Federal
government.  Region 5 will also ensure that IDEM identifies a
training plan to cover the identified weaknesses in the FY 96
IDEM Core Program workplan  (recommendation #2).

The actions taken or proposed by Region 5 and IDEM adequately
address our recommendations.
                               9

                           Report No.  E5FGF5-05-0047-5100429

-------
           Indiana  Superfund Cooperative Agreements
[This page was  intentionally left blank.]
                   10



               Report No.  E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
                          CHAPTER  3

          IDEM NEEDS TO  IMPROVE  CONTRACT MANAGEMENT
            UNDER SUPERFUND COOPERATIVE AGREEMENTS
IDEM had not developed sufficient contract management
practices.  This occurred because IDEM's contracts manager
did not receive:

  •  contract management training,

  •  policies and procedures to execute contract management
     duties, or

  •  a written position description.

As a result, two Superfund contractors were allowed  to
continue work at the Galen Myers and .Continental Steel  sites
for about a year after their contracts expired.  When the
error was discovered, work had to be stopped while new
agreements were negotiated.
CONTRACTOR PERFORMANCE BEYOND CONTRACT EXPIRATION

Due to reliance on  incorrect advice  from  IDEM's procurement
staff, the contracts manager did not realize that the
contracts at these  sites expired in  May 1993.  During May
1994, when the contracts manager discovered the error, stop
work orders were immediately issued  which halted remediation
activities at the sites and caused completion schedules to
slip.  IDEM had to  negotiate separate settlements with the
two contractors to  cover services provided during the expired
contract period.  A prompt settlement was reached with the
Galen Myers site contractor and remediation work continued.
However, a final settlement was not  reached with the
contractor at the Continental Steel  site  until late January
1995.  Work has since resumed at this site under a new
contractor.

The Federal Grants  Management Handbook6,  states that:

     After a grant  is awarded, grantees must perform
     administrative tasks to ensure  contractor
     performance.   As with so many of the procurement
     6Grants Management Advisory Service, June 1988.

                              11

                           Report  No.  E5F6F5-05-0047-5100429

-------
                      Indiana  Superfund Cooperative Agreements
     standards, the extent  of  effort in administering
     contracts depends on factors involved in each
     contract.  The degree  of  contact and the need for
     oversight depends on the  degree of harm that the
     grantee will suffer if the  contract's terms are not
     met.  As the potential harm increases,
     administrative supervision  should also increase.

Since a majority of IDEM's  Superfund CA costs are spent
through two state-lead Superfund contracts,  currently
totaling about $5,938,000,  IDEM  should have implemented
stringent contract administration and supervision over the
Superfund contracts.
INADEQUATE TRAINING

IDEM's contracts manager had  not  received sufficient training
needed to effectively  administer  Superfund contracts.  The
IDEM contracts manager's educational  background is in public
and environmental health.7  During the summer of 1991,  IDEM
created the contracts  manager position.   The current
contracts manager was  temporarily detailed to the  position,
and was eventually made permanent.

Upon assuming the current position, the  contracts  manager
received some Superfund CA  training.   None of this training
directly related to  contract  management  duties and
responsibilities.  For example, the contracts manager
attended the Superfund Response Agreements Seminar; however
it did not include contract administration duties  and
responsibilities.  The contracts  manager expressed an urgent
need to obtain training needed to effectively administer
agency contracts.  The contracts  manager stated she had
problems obtaining some training  courses because they were
not available, or not  held  at a convenient location.

The contracts manager  should  have received contract
administration training comparable to a  contracting officer,
as the functions of  both positions are similar.   EPA's
Contract Administration manual8 (the manual) states that:
     7The position's official title is "Environmental Manager II". "Contracts
Manager" is the unofficial title.

     80ffice of Administration and Resources Management, November 1991.

                              12

                           Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
     contract administration encompasses all functions
     relating to a contract from the moment it is
     awarded until final payment has been made, and the
     contract is closed out.

It also states that:

     In the contracts administration phase, the role of
     the Contracting Officer is to monitor the
     contractor's progress, ensure that the contract
     terms and conditions are being adhered to, and make
     necessary contract modifications...

The contracts manager's duties are similar to those of a'
contracting officer as described in the manual.  The lack of
sufficient and pertinent training prevented the contracts
manager from performing contract administration duties as
effectively and efficiently as needed.  For example, the lack
of contract administration training led the contracts manager
to rely on incorrect advise provided to her by IDEM's
procurement staff.  Specifically, she was advised that when a
contract is amended, the contract term starts over from the
amendment date.  Because of this incorrect information, the
contracts expired without the contracts manager knowing.
LACK OF POLICIES AND PROCEDURES

IDEM had not developed and implemented written contract
management procedures.  According to 40 CFR Part 31. "Uniform
Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments":

     when procuring property and services under a grant,
     a State will follow the same policies and
     procedures it uses for procurements from its non-
     Federal funds.  The State will ensure that every
     purchase order or other contract includes any
     clauses required by Federal statutes and executive
     orders and their implementing regulations.

The State Board of Accounts recommended, in their June 30,
1993 audit report, that IDEM develop contract monitoring
procedures.  IDEM responded on September 9, 1994, that:

     IDEM Office of Management, Budget, and
     Administration is in the process of implementing...
     a contract monitoring system that emphasizes areas
     of compliance to responsible staff and communicates


                              13

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
     notice of contract expiration within a reasonable
     period of time...

IDEM also stated that it will document "procedures for
approving and paying claims and purchase orders...and
otherwise work to keep errors as infrequent as is cost-
effective ."

However, as of July 1995, about 24 months after  the State
Board of Accounts' audit report was issued, IDEM had not
developed written contract administration and invoice review
procedures in compliance with the report's recommendations.9
IDEM's response to the audit report did not specify target
implementation dates.   Because IDEM had not developed
contract management procedures, the contracts were not
efficiently and effectively administered.

During January 1995, IDEM prepared a solicitation requesting
proposals for preparation of a procurement and contracts
management manual.  As of July 28, 1995,  IDEM had not yet
hired a contractor, but expected to finalize a contract soon.
A completed procurement and contracts management manual is
expected by December 1995.
ABSENCE OF WRITTEN POSITION DESCRIPTION

IDEM had not provided the contracts manager with a written
position description, although she has held the position for
over three years.  Position descriptions provide individuals
with a general overview of the position duties and
responsibilities.  The contracts manager needed a written
position description to ensure the fulfillment of the full
scope of contract administration duties.

The manual states that some contract administration duties
are delegated to technical contract managers designated as
project officers, work assignment managers, delivery order
officers, administrative delivery order officers, and
delivery order project officers.  Because contract managers
are entrusted with much of the contractor oversight required,
an understanding of the principles and duties involved in
contract administration is essential.  The contract manager's
role is one of monitoring contract performance from both a
technical and financial standpoint.  The contract manager
also verifies monthly vouchers for payment.
     9IDEM had created a contractor invoice review sheet.

                              14

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
If IDEM had provided the contracts manager with a written
position description from the beginning, the contracts
manager might have been more familiar with contract
management duties and responsibilities.  Because IDEM did not
provide the contracts manager with a written position
description, the contracts manager was not familiar with the
full scope of contract management duties.  As a result, the
contracts manager was not executing contract management
duties needed to efficiently and effectively administer the
expired Superfund CA contracts.

In June 1995, after completion of our audit fieldwork, IDEM
provided a written position description for the contracts
manager.
CONCLUSION

IDEM had not developed sufficient contract administration
practices over contracts awarded using Superfund CA funds.
This occurred because IDEM did not provide the contracts
manager with  (1) adequate contracting training,  (2) policies
and procedures to execute contract administration duties, and
 (3) a written position description.  As a result, two
contractors were allowed to continue work at the Continental
Steel and Galen Myers sites for about a year after the
contracts expired.
RECOMMENDATIONS

We recommend that Region  5 request IDEM to:

 1.  Ensure that its contracts manager is adequately trained
     and qualified to effectively administer Federally funded
     contracts.

 2.  Develop a Procurement and Contract Management Manual.


AGENCY COMMENTS AND PIG EVALUATION

Region 5 agreed with the  findings and recommendations
presented in this chapter.  Region 5 will be offering
comprehensive training to all its states during early FY  96
and will ensure that contracts management is part of this
training and that appropriate IDEM personnel attend
(recommendation #1).  Also, Region 5 will make the
development of a Procurement and Contract Management Manual a


                              15

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
deliverable under IDEM's FY 96 Core Program workplan
(recommendation #2).

The actions taken or proposed by Region 5 and IDEM adequately
address our recommendations.
                             16

                          Report No. E5FGF5-05-0047-5100429

-------
                      Indiana Superfund Cooperative Agreements
                           CHAPTER 4

      IDEM DID NOT ADEQUATELY SAFEGUARD SUPERFUND ASSETS
IDEM did not have  sufficient  property management controls to
safeguard Superfund  Core  Program assets.   Core Program assets
were not adequately  safeguarded because IDEM did not:

  •  have sufficient property management  controls and
     procedures to identify equipment purchased with Core
     Program funds,

  •  timely report fixed  asset purchases,

  •  conduct physical  inventories,  and

  •  comply with Federal  and  state  accounting procedures for
     maintaining property records.

As a result, IDEM  did  not adequately safeguard assets against
loss, theft, or improper  use.   EPA  needs  to ensure that IDEM:
(1) complies with  regulatory  guidance,  and (2)  develops
property management  controls  to adequately safeguard
Superfund assets.


PROPERTY CONTROL REQUIREMENTS

Recipients of  Federal  assistance agreement funds must follow
Federal and state  property management procedures for
identifying assets.  The  State Auditor is responsible for
maintaining the official  State of Indiana property records.
These records  must be  maintained in accordance with 40 CFR
35.6700  (c)  (1) and  (3).   Under this regulation, the records
must include the property description and its source,
including the  assistance  agreement  number.

The State Auditor  maintains and updates the state master
inventory list; a  record  of fixed assets.10  Fixed assets
valued over $5,000 are posted to the inventory list at their
original cost.  For  assets valued from $500 to $5,000,
agencies have  the  option  of maintaining a separate asset
control system, or including  the assets on the state master
inventory list with  a  $0  value.  IDEM's fixed assets valued
     10IDEM identifies fixed assets as any land, buildings, improvements other
than buildings, construction in progress,  and equipment purchases.

                               17

                           Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
less than $5,000 are included on the state master inventory
list.

IDEM is required to follow the fixed asset property
management procedures for reporting equipment purchases and
dispositions as contained in the State of Indiana accounting
manual.  The manual requires agencies to:

  •  track fixed assets from initial purchase to final
     disposition.

  •  submit weekly fixed asset inventory reports, summarizing
     purchases and dispositions, to the State Auditor.

The manual allows state agencies to submit the reports less
often based on their purchasing pattern.  These reports are
used to update the state master inventory list.  The reports
include the asset description, cost, and state tag number.
IDEM assigns a unique state tag number to all fixed assets
upon receipt.  The tag number includes a three digit prefix
(495 for IDEM) which identifies the state agency owning the
fixed asset.  The tag number is used to identify the owning
agency and is attached to all fixed assets.

The state accounting manual also requires agencies to perform
a 100 percent fixed asset physical inventory annually.  The
manual states that agencies should compare the results of the
physical inventory to the master inventory list for accuracy.
The Indiana State Board of Accounts performs annual audits of
IDEM, including a limited fixed asset physical inventory.
This limited inventory does not, however,  relieve state
agencies from performing the required annual fixed asset
inventory.

Federal requirements in 40 CFR 35.6700  (c) (8) call for
recipients to maintain information on the disposition of
property.  Indiana requires state agencies to report, on the
weekly inventory reports, asset disposition information to
the State Auditor.  Based on information contained in the
inventory reports, the State Auditor semi-annually issues a
new master inventory list to state agencies.   State agencies
are required to review the new inventory list for accuracy
and report any discrepancies.
PROPERTY MANAGEMENT CONTROLS AND PROCEDURES

IDEM's property records were not adequate to identify
property purchased with Core Program funds.  According to 40


                              18

                          Report No. E5F6F5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
CFR 35.6700  (c) (3), recipients of assistance agreement funds
are required to identify, in the inventory records, the
funding source of property, including the assistance
agreement number.  IDEM's  master inventory list, however,
did not include the assets funding source.  Without adequate
property records, we were unable to differentiate between
assets funded through the Core Program CA and other sources.
Also, without adequate property records, we could not verify
whether Core Program funded assets were safeguarded against
loss, theft, or improper use.

According to IDEM officials, they often used memory to
differentiate between assets funded by the Core Program and
those funded by other sources on the master inventory list.
When memory fails, the funding source can be found in the
requisition files.  These files contain a copy of the
purchase request, purchase order, and the receiving report
all of which identify the asset funding source.  However, it
is often difficult and time consuming to identify the correct
requisition file because they are stored by the initiating
office.  IDEM needs to develop better property control
procedures designed to easily identify fixed asset funding
sources.

IDEM officials agreed that a better system is needed to
identify fixed assets funding source.  As of January 1995,
IDEM was investigating the possibility of using the first two
characters of the  state asset number to identify the assets
funding source.  The state's accounting system allows
agencies to use these characters any way they choose.
However, IDEM was not using them for any specific purpose.
Using these characters to identify the funding source would
enable IDEM to quickly and easily identify Core Program
funded assets.
TIMELY REPORTING FIXED ASSET PURCHASES

Between FY 1990 and FY 1993 IDEM purchased over $124,000 in
equipment with Core Program funds.  IDEM was not timely
reporting fixed asset purchases to the State Auditor.  This
occurred because IDEM was not following the state accounting
manual property management and accounting procedures for
reporting fixed asset purchases.  As a result, we were unable
to identify IDEM's fixed assets purchased with Core Program
funds.

The manual requires state agencies to submit weekly fixed
asset inventory reports to the Auditor's Office to update the


                              19

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
master inventory list.  IDEM's purchasing administrator is
responsible for submitting the weekly reports to the
Auditor's Office.  These reports are used to update the
master inventory list.  Because of the low volume of
purchases, IDEM was submitting its reports quarterly.
However, the agency move in April 1994 put the purchasing
administrator behind schedule in submitting the inventory
reports to the State Auditor.  According to the purchase
administrator, IDEM is about a year behind schedule in
submitting inventory reports to the State Auditor.

IDEM's purchasing administrator has maintained a database
file of all agency purchases made during the last year.  He
said once the agency performs a physical inventory in July
1995, they will resume submitting quarterly reports to the
State Auditor.  IDEM needs to promptly report fixed asset
purchases to ensure the master inventory list remains current
and minimize the possibility of loss, theft, or improper use.
ANNUAL PHYSICAL INVENTORIES

IDEM was not conducting annual physical inventories of fixed
assets.  According to IDEM officials, it has been over 18
months since an inventory was performed.  Also, IDEM
officials were unable to furnish the results of the last
inventory.  As a result, assets purchased since the last
inventory were subject to loss, theft, or improper use.  The
state accounting manual requires agencies to perform an
annual 100 percent fixed asset physical inventory.  The
manual also requires state agencies to reconcile the
inventory results to the master inventory list and report any
discrepancies to the State Auditor.

IDEM officials attributed the inventory delay to the 1994
agency move.  However, according to the State Board of
Accounts audit report, for the period July 1, 1992 to June
30, 1993, IDEM was not performing annual inventories prior to
the move.  The State Board of Accounts recommended that IDEM
complete a physical inventory to ensure that the fixed asset
inventory was up to date and accurate.  In response to our
findings, IDEM officials have scheduled a complete physical
inventory of fixed assets for July 1995.
PROPERTY RECORD MAINTENANCE PROCEDURES

IDEM's property control records were not adequate to identify
the fixed assets funding source or to account for the


                              20

                          Report No. E5F6F5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
disposal of property.  This occurred because IDEM did not
follow Federal and state property management procedures.  As
a result, the state master inventory list was not updated to
reveal actual fixed assets on hand.

IDEM needs to coordinate the disposal of assets with the
State Auditor to ensure that the state inventory list is
updated to delete items no longer in the agency possession.
If IDEM does not follow state disposal procedures, assets are
subject to loss, theft, or improper use.  The August 19, 1994
state master inventory list did not comply with Federal and
state requirements because it did not identify the funding
source, percentage of EPA interest, or disposition
information.  For example, IDEM's Office of Superfund
conducted a physical count of all fixed assets in their
section, prior to the agency move during April 1994.  During
the count, two cameras were found to be damaged beyond repair
and were described as "trashed" on the count sheet.  The
cameras were subsequently thrown out without reporting the
disposal to the State Auditor.  The state accounting manual
requires state agencies to report fixed asset dispositions to
the State Auditor so the items can be deleted from the master
inventory list.  IDEM's Office of Superfund section chief
said they were not aware of any official agency procedures to
report the disposition of property.  As a result, the assets
remained on the state master inventory list although they
were no longer in IDEM's possession.

As a result of our raising this issue, IDEM officials
requested and received copies of Indiana procedures related
to disposition of property.  They have made employees aware
of the proper means of disposing of property and the related
reporting requirements.
CONCLUSION

IDEM did not adequately safeguard fixed assets purchased with
Core Program funds.  This occurred because IDEM did not:   (1)
have sufficient property management controls and procedures
to identify equipment purchased with Core Program funds,  (2)
timely report fixed asset purchases,  (3) conduct physical
inventories, and  (4) comply with Federal and state accounting
procedures for maintaining property records.  As a result,
IDEM did not ensure that fixed assets purchased with Core
Program funds were adequately safeguarded against loss,
theft, or improper use.
                              21

                          Report No. E5F6F5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
RECOMMENDATIONS

We recommend that Region 5 request IDEM to:

 1.  Develop a method to easily identify Superfund Core
     Program funded property.

 2.  Ensure that all fixed assets purchased with Federal
     funds are timely reported to the State Auditor and
     included in the State's inventory system.

 3.  Conduct annual physical inventories and reconcile the
     results to the state master inventory list.


AGENCY COMMENTS AND PIG EVALUATION

Region 5 agreed with the findings and recommendations
presented in this chapter.  Region 5 and IDEM will prepare an
activity for the PY 96 Core Program workplan to develop a
property management procedures manual that includes the
appropriate controls in place for Superfund property
(recommendation #1).  Region 5 will work with IDEM to develop
an activity under the FY 96 Core Program cooperative
agreement to ensure that IDEM begins maintaining a property
inventory system that meets the requirements of the state
accounting manual  (recommendation #2).   Also,  Region 5 will
develop an activity under the FY 96 Core Program workplan to
ensure that IDEM begins conducting physical inventories that
meet the requirements of 40 CFR Part 35.

The actions taken or proposed by Region 5 and IDEM adequately
address our recommendations.
                             22

                          Report No. E5FGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
                          CHAPTER 5

        IDEM DID NOT COMPLETE CORE PROGRAM ACTIVITIES
Region 5 was not holding IDEM accountable for completing Core
Program tasks.  IDEM did not complete some activities
identified in the FY 1994 Core Program workplan.  Region 5's
monitoring of IDEM's progress in completing Core Program
activities was hindered because activities were not assigned
specific completion dates.  As a result, Region 5 did not
know whether IDEM was satisfying the Core Program CA
requirements.  Between 1988 and 1993, EPA awarded IDEM more
than $3.5 million in Core Program funds.  Region 5 needs to
improve its oversight of these funds and increase IDEM's
accountability for planned tasks.
CORE PROGRAM OBJECTIVES

EPA developed the Core Program CA concept to provide each
state with funds needed to conduct Superfund implementation
activities that were not directly identifiable to specific
sites.  Core Program funds are generally used to fund
training, non-site  specific property purchases, and payroll
expenses of state personnel who support Superfund activities.
IDEM and Region 5 negotiate specific activities that will be
accomplished using  Core Program funds.

IDEM's Core Program listed eight major program elements:

  •  Program management and supervision,

  •  Interagency coordination,

  •  Contract administration,

  *  Legal assistance,

  •  Staff development and training,

  •  Program administration and financial management,

  •  Automation and data management, and

  •  Clerical support.
                              23

                           Report No.  E5FGP5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
Within each program element, the CA lists various activities
which IDEM will perform, including a schedule and objective
for each activity.
COMPLETION OF CORE PROGRAM ACTIVITIES

IDEM did not complete some activities listed in the Core
Program workplan, as shown in table 2.  These included
creating contract management procedures, developing a project
management tracking system, and training staff.  The effect
of not completing these activities was seen in earlier
chapters of this report.  For example, as shown in chapter 3,
the lack of contract management procedures, combined with the
lack of training for the contracts manager, resulted in two
contractors being allowed to work after their contracts had
expired.  The overall result of not completing these tasks
has been to impair IDEM's ability to effectively manage the
Superfund program.

Region 5 needs to hold IDEM accountable for completing
scheduled activities and monitor the completion of the
activities.  IDEM and Region 5 conduct semi-annual Superfund
reviews to discuss CA's progress and accomplishments.  These
reviews focus mainly on the remedial activities and
accomplishments of site specific CAs.  Region 5 and IDEM
personnel stated that during the reviews Core Program
activities and accomplishments are only briefly discussed.
During the reviews IDEM and Region 5 need to conduct more
extensive discussions of Core Program activities and
accomplishments.  These discussions will allow both agencies
the opportunity to evaluate whether Core Program funds are
being used effectively and efficiently to support the
Superfund program.

Also, as shown in table 2, many of the activities do not have
assigned completion dates.  Not assigning completion dates
makes it difficult for Region 5 to evaluate IDEM's progress
in completing activities.
                              24

                          Report No. E5FGF5-05-0047-5100429

-------
                   Indiana Superfund Cooperative Agreements
                         Table 2
       Superfund Core Program Cooperative Agreement
Status of Fiscal 1994 Core Program CA Workplan Activities
       Core  Program
      CA Activities
 Completion
    Date
     Status
  Direct the activities
  necessary for
  contractor selection
  and contract
  management.
On-Going.
Not complete.
IDEM had not
developed
contract
management
procedures.
  Develop and implement
  an integrated site
  information tracking
  system.
On-Going.
Not complete,
  Identify training
  needs,  deve1op
  appropriate training
  plans,  and assign
  training for
  subordinate staff.
On-Going.
Not complete.
IDEM did not
schedule
needed
contract
administration
and grant
accounting
training to
staff members.
  Complete and submit a
  Financial Status
  Report (FSR).
Post marked
within 90
days after
the end of
the annual
budget
period.	
FY 1994, FSR
not submitted
to EPA on
time.
  Develop,  implement,
  and maintain adequate
  reports and financial
  records in
  conformance with
  fiscal audit
  procedures.
Summarize
information
on
Quarterly
Reports.
Not complete.
IDEM's
property
inventory
records did
not identify
Core funded
property.
                            25
                        Report No. E5PGF5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
In May 1995, Region 5 and IDEM conducted the mid-year review
of IDEM's Superfund CAs.  At that time,  IDEM and Region 5
reviewed the status of current Core Program tasks and
established specific completion dates where possible.  IDEM
officials told us that they will also include proposed
completion dates for Core Program tasks included in IDEM's FY
96 application.
CONCLUSION

Region 5 would improve its ability to monitor Core Program
activity accomplishments by requesting that IDEM review
scheduled activities and assign target completion dates
whenever possible.
                             26

                          Report No.  E5FGF5-05-0047-5100429

-------
                            Indiana  Superfund  Cooperative Agreements
                                                               APPENDIX 1
                                                               Page 1  of 3
                   REGION  5  RESPONSE TO  DRAFT
                 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                 REGION 5
                          77 WEST JACKSON BOULEVARD
                            CHICAGO, IL 60604-3590
                                                       REPLY TO THE ATTENTION OF
                                    I 1996

                                                          R-19J
MEMORANDUM

SUBJECT:  Region 5 Response to the Office  of Inspector General
          Draft Report on Indiana Superfund Cooperative Agreements
          Report No. E5FGF5-05-0047

ntOM:     Valdas V. Adamkus
          Regional Administrator

TO:       Anthony C. Carrollo, Divisional  Inspector General
             for Audits, Northern Division
Thank you for the opportunity to respond to the draft report on the
Indiana Department of Environmental Management's (IDEM) administration
of cooperative agreements.  Our response to each of the
recommendations that appear in the report  is attached.

If you have any questions concerning these comments, please call
Howard Levin, Chief, Financial Analysis Section, at (312) 886-7522.
                                     Valdas V
.  Adamkus     ^J
Attachment
                                     27

                                 Report No. E5FGF5-05-0047-5100429

-------
                       Indiana Superfund Cooperative Agreements
                                                           APPENDIX 1
                                                           Page 2  of 3
REGION S RESPONSE - DRAFT AUDIT REPORT MO.  E5FG5-05-0047
    In general, we  agree with the substance of the
    recommendations.  However, since the issues reported on
    pertain to accounting and administrative functions, we
    believe the report was incorrect in recommending the Office
    of Superfund  to take the corrective actions.


    RECOMMENDATION  - Region 5, Office of Superfund [OSF] should
    work with IDEM  to identify and implement ways to improve the
    timeliness of IDEM's accounting data and financial reports.

    RESPONSE - Region 5 will continue to work with IDEM to
    develop an action plan to correct the deficiencies cited in
    the audit report.  The Region has been working with IDEM for
    several years in order to help them improve their accounting
    system.  During that time, IDEM was in the process of
    automating its  accounting system but ran into several
    problems and  delays which they claim to have been beyond
    their control.  IDEM has informed us that once the conversion
    from a manual to an automated system took place,  there was  a
    learning curve  delay.  However,  IDEM has informed us that
    they recognize  that they need to improve their accounting and
    financial data  systems.


    RECOMMENDATION  -  Region 5,  OSF should work with  IDEM to
    train agency  personnel supporting the Superfund program
    through use of  Core Program funds.

    RESPONSE - Region 5 agrees that IDEM needs to have the
    appropriate administrative training for its grants and
    administrative  staff.  IDEM has had a tremendous  personnel
    turnover in this area over the last year.   The Region plans
    to offer comprehensive training to all its states during
    Fiscal Year 1996.  Additionally,  Region 5 will ensure that
    IDEM is apprised of appropriate financial and grant
    administration  courses offered through the Federal
    government.   Region 5 provides training funds through the
    Core Program  Cooperative Agreement and will ensure that IDEM
    identifies a  training plan to cover the identified weaknesses
    in the FY 96  IDEM Core Program workplan.


   RECOMMENDATION  - Region 5, OSF should direct IDEM to ensure
   that its contracts manager is adequately trained  and
   qualified to  effectively administer Federally funded
   contracts.

   RESPONSE - Region 5 is  committed to building state
                                 28


                            Report No.  E5FGP5-05-0047-5100429

-------
                                                           APPENDIX 1
                                                           Page  3 of 3
capability and now recognizes that IDEM took on its two first
State-lead Fund financed Suparfund projects without having
all the contracts management personnel/expertise in place.
As mentioned above, Region 5 will be offering comprehensive
training to all its states during early FY 96 and will ensure
that contracts management is part of this training and that
the appropriate IDEM personnel attend.


RECOMMENDATION - Region 5, OSF should direct IDEM to develop
a Procurement and Contract Management Manual.

RESPONSE - Region 5 will make this initiative a deliverable
under IDEM's FY 96 Core Program workplan.


RECOMMENDATION - Region 5, OSF should direct IDEM to develop
a method to easily identify Superfund Core Program funded
property.

RESPONSE - Region 5 and IDEM will prepare an activity for the
FY 96 Core Program workplan to develop a property management
procedures manual that includes the appropriate controls  in
place for Superfund property.


RECOMMENDATION - Region 5, OSF should direct IDEM to ensure
that all fixed assets purchased with Federal funds are timely
reported to the State Auditor and included in the State's
inventory system.

RESPONSE - Region 5 will work with IDEM to ensure that it
begins maintaining a property inventory system that meets  the
requirements of the state accounting manual.   This will be a
documented activity under the FY 96 Core Program Cooperative
Agreement.


RECOMMENDATION - Region 5, OSF should direct IDEM to conduct
annual physical inventories and reconcile the results to the
state master inventory list.

RESPONSE - Region 5 will work with IDEM to ensure that they
begin conducting property inventories that meet the
requirements of 40 CFR Part 35.   This will be a documented
activity under the FY 96 Core Program workplan.
                                29


                           Report  No.  E5FGF5-05-0047-5100429

-------
           Indiana  Superfund Cooperative Agreements
[This page was  intentionally left blank.]
                   30




               Report No. E5F6F5-05-0047-5100429

-------
                     Indiana Superfund Cooperative Agreements
ACH

CA

CERCLA


CFR

CTR

EPA

FSR

IDEM


DIG

OMB

State Auditor
                                                  APPENDIX 2
                                                  Page 1 of 1
       ABBREVIATIONS

Automated Clearing House

Cooperative Agreement

Comprehensive Environmental Response,
Compensation, and Liability Act

Code of Federal Regulations

Cash Transactions Report

U.S. Environmental Protection Agency

Financial Status Report

Indiana Department of Environmental
Management

Office of Inspector General

Office of Management and Budget

State of Indiana Auditor's Office
                              31
                           Report No.  E5FGF5-05-0047-5100429

-------
           Indiana Superfund Cooperative Agreements
[This page was  intentionally  left blank.]
                   32




               Report No. E5FGF5-05-0047-5100429

-------
                      Indiana Superfund Cooperative Agreements
                                                   APPENDIX 3
                                                   Page 1 of 1

                         DISTRIBUTION

 Inspector General (A-109)

 Regional  Administrator,  Region 5

 Region 5  Follow-up Coordinator (Chief,  FAS)   (MFA-10J)

 Region 5  Public Affairs (P-19J)

 Region 5  Library

 Agency Follow-up Coordinator (PM-208);
      Attention:  Assistant Administrator for the Office of
                  Administration and Resources Management

 Agency Follow-up Coordinator (H-3304);
      Attention:  Director, Resources Management

 Associate Administrator for Regional Operations
      and  State/Local Relations (H-1501)

 Headquarters Library (PM-211A)

•U.S.  General Accounting Office
      Attention: Greg Kosarin
                               33

                           Report No. E5FGF5-05-0047-5100429

-------
           Indiana Superfund Cooperative Agreements
[This page was  intentionally left blank.]
               Report No. E5FGF5-05-0047-5100429

-------