United States Office of the Inspector General September 1990
Environmental Protection 401 M Street, S.W
Agency Washington, D.C. 20460
&EPA ERA'S Office of the
Inspector General
Annual
Superfund Report
to the Congress
for Fiscal 1989
Printed on Recycled Paper
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FOREWORD
This is our third Annual Superfund Report to the Congress,
covering fiscal 1989 activities. The Superfund Amendments and
Reauthorization Act of 1986 (SARA) requires the Office of
Inspector General (DIG) to annually audit the Superfund program
and to provide an annual report to Congress on these required
audits.
The advent of the Superfund program created new and unique
cost accounting requirements. Over a period of several years,
EPA responded to these new requirements by significantly
improving its ability to accurately account for and document
Superfund costs on a site-specific basis. However, in our fiscal
1989 Trust Fund audit, we found continuing problems with the
reporting of Superfund accounting information. During fiscal
1989, EPA implemented the Integrated Financial Management System
(IFMS) as the Agency's official accounting system, replacing the
Financial Management System (FMS). We found that IFMS did not
provide complete and accurate reports consistent with the needs
and objectives of EPA's management. Also, data was not
reconciled in the transfer of accounting information from FMS to
IFMS; audit trails were sometimes not sufficient to trace
transactions; security over access to the operating system and
application software (IFMS) was inadequate; and the property
subsystem was not integrated with IFMS.
Our review of the Agency's fiscal 1988 Annual Report to
Congress on Superfund progress, which SARA requires to be
submitted, found that information in some areas of the report was
not reasonable and accurate. Some reported accomplishments were
not supported by valid source documents, did not meet Agency
definitions of the accomplishment types, or did not occur in
fiscal 1988. We also found that some information was not as
complete as it could have been.
Our audits of the Agency's performance in managing the
Superfund program also found significant deficiencies. We
reviewed the Agency's management of two significant Superfund
removal actions in Region 5, and another two in Region 6. In
both regions, we found that the removal action contractor was
also doing some of the sampling and analysis to determine the
extent of contamination. Because the cost of the removal action
is directly dependent upon the extent of contamination, this
represents the appearance of a conflict of interest. At one
site, we found that the removal did not comply with asbestos
worker protection rules, thus potentially impairing the health of
removal workers. In both regions, we found problems with
enforcement efforts which delayed recovery of costs of removals
from those responsible for the contamination. At one site,
Region 5 awarded a site-specific contract without first
determining the full extent of contamination. As a result, the
removal could not be completed under the contract.
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In addition to reviewing Agency performance, we also take a
proactive role in assisting EPA management in preventing future
problems. This includes review of draft documents and
participation in EPA work group meetings. Superfund program
areas with a particularly high level of OIG proactive work during
fiscal 1989 included technical assistance grants to citizens'
groups and cooperative agreements with States.
The EPA Administrator is required by SARA to submit to
Congress an annual Superfund progress report on January 1 of each
year covering activities during the prior fiscal year. EPA's
second such report, due January 1, 1989, was submitted April 5,
1990. We are required by SARA to review that report for
reasonableness and accuracy; and our report is to be included in
the Agency report. We have summarized the results of our second
such review in this report.
We will continue to assist Agency management to deliver the
most effective and efficient Superfund program through a
comprehensive program of audits, investigations and fraud
prevention.
I John C. Martin
Inspector General
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TABLE OF CONTENTS
Page
Purpose 1
Background 3
Hazardous Substance Superfund 5
Cooperative Agreements and State Credits 11
Performance Audits and Special Reviews 27
Interagency Agreements 43
Contracts 50
Assistance to EPA Management 53
Review of Agency's Superfund Progress Report 57
Investigative Activity . 60
Exhibit I - Hazardous Substance Superfund
Schedule of Obligations 61
Exhibit II - Hazardous Substance Superfund
Schedule of Disbursements 66
Exhibit III - Superfund Audit Reports Issued
During Fiscal 1989 70
Appendix - Acronyms and Abbreviations 74
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PURPOSE
This report is provided pursuant to section lll(k) of the
Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA) of 1980, as amended. The Superfund Amendments and
Reauthorization Act (SARA) of 1986 amended that section of CERCLA
to add several annual requirements for the Inspector General of
each Federal agency carrying out CERCLA authorities. These
requirements include four audit areas and an annual report to
Congress regarding the required audit work. This report covers
fiscal 1989 audits of Superfund activities. The required four
audit areas are discussed below.
This report contains chapters on the two mandated areas in
which we performed reviews. We are also summarizing other
Superfund audit work, assistance to EPA management and Superfund
investigative work which we performed during fiscal 1989. In
addition to fulfilling the statutory requirements, the objectives
of this report include providing the Congress with significant
results of all of our Superfund work and a better understanding
of how the Office of Inspector General is carrying out its
purposes with respect to the Superfund program.
Trust Fund
CERCLA requires ". . .an annual audit of all payments,
obligations, reimbursements, or other uses of the Fund in the
prior fiscal year . . . ." We call this our Trust Fund audit and
it constitutes a financial and compliance audit of EPA
obligations and disbursements from the Hazardous Substance
Superfund during the fiscal year.
Claims
CERCLA requires an annual audit to assure "... that claims
are being appropriately and expeditiously considered . . . ."
Since SARA did not include natural resource damage claims as
allowable Fund expenditures, the only claims provided in CERCLA,
as amended, are response claims. No claims were submitted during
fiscal 1989. In future years, we will audit claims which are of
sufficient size to be considered material.
Cooperative Agreements
CERCLA requires audits ". . . of a sample of agreements with
States (in accordance with the provisions of the Single Audit
Act) carrying out response actions under this title . . . ." We
perform financial and compliance audits of cooperative agreements
with States. In some instances, our audits also review program
performance. In addition, we sometimes review EPA regional
management of the cooperative agreement program. Closely related
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to this work is the audits we perform, as needed, of credits
claimed by States pursuant to section 104(c)(3) of CERCLA.
Remedial Investigations!Feasibility Studies (RI/FS)
CERCLA requires our "... examination of remedial
investigations and feasibility studies prepared for remedial
actions . . . ." Our RI/FS examinations provide a technical
review of the adequacy of the studies to provide a sound
technical basis for remedial action decisions. These
examinations may be done as part of audits of EPA management or
as special reviews by our technical staff. Although several
RI/FS examinations were in progress during fiscal 1989, and some
draft RI/FS examination reports were submitted to Agency
officials for comment, no final reports were issued during fiscal
1989. In our budget request for fiscal 1991, we have requested
additional staff for our Engineering and Science Unit to improve
our capability to perform RI/FS examinations.
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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 hazardous
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 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 payment
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 Reauthorization 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 three times to meet CERCLA requirements.
The NCP lays out two broad categories of response: removals and
remedial response. Removals are relatively short-term responses
and modify an earlier program under 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 recognized that the Federal Government can only
assume responsibility for remedial response at a limited number
of sites representing the greatest public threat. Therefore, EPA
must maintain a National Priorities List (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 unless the State in which the release occurs
enters into a contract or cooperative agreement with EPA to
provide certain assurances, including cost sharing. At most
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sites, the State must pay 10 percent of the costs of remedial
action. Preremedial 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 50 percent of all response costs,
including removals and remedial planning previously conducted.
CERCLA 104(d)(l) provides that if a State or political
subdivision is determined to have the capability to respond to
the issues addressed in the Act, they may be authorized to
respond by use of a contract or cooperative agreement. As a
result, most States have participated in some part of the
Superfund program. CERCLA 104(d)(2) provides a remedy to the
Federal Government for failure of a State or political
subdivision to perform satisfactorily.
The use of cooperative agreements is authorized by sections
104(c)(3) and 104(d) of CERCLA. Cooperative agreements allow a
State or political subdivision to take, or to participate in, any
necessary actions provided under CERCLA, given that the State or
political subdivision possess the necessary skills and
capabilities to do so. These actions are normally addressed in
the cooperative agreement as performance goals and objectives.
The agreement is also used to delineate EPA and State
responsibilities for 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 the full range of Superfund activities -
preremedial, remedial, removal and enforcement.
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HAZARDOUS SUBSTANCE SUPERFUND
SCOPE AND OBJECTIVES
We contracted with an independent public accounting (IPA)
firm to perform an audit of EPA's portion of the Hazardous
Substance Superfund (Trust Fund) for the fiscal year ended
September 30, 1989. This audit included examining, on a test
basis, financial management records at EPA's Servicing Finance
Offices and accounting points located at 10 regional offices, 3
major laboratory facilities, Headquarters, and the National
Enforcement Investigations Center (NEIC); and personal property
management records for the accountable areas at these locations.
As part of the audit, the IPA selectively tested (using
statistical samples) transactions which obligated and disbursed
funds for Superfund activities. The objectives of this audit
were to determine if:
(1) The Schedules of Obligations and Disbursements
were presented fairly in accordance with
applicable laws, regulations and guidelines;
(2) EPA management complied with laws and regulations
which, if not followed, might have a material
effect upon the Schedules of Obligations and
Disbursements; and
(3) EPA established an adequate system of internal
accounting control to ensure the reliability of
applicable financial management records.
It was not within the scope of this audit to determine the
allowability and allocability of the general support services
cost pools that were accumulated and allocated to Superfund or to
verify the bases for these allocations. Audit procedures for
cost allocations were limited to reviewing methodologies, testing
the mathematical accuracy, and verifying that the allocations
were made in a timely manner.
FINDINGS
1. Financial Results of Audit
During fiscal 1989, EPA obligated almost $1.5 billion and
disbursed over $938 million. The IPA questioned obligations and
disbursements as shown below for reasons that are summarized in
the remaining findings below. The financial results of this
audit are summarized below and detailed in Exhibits I and II.
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Total Accepted Ineligible1 Unsupported2
Fiscal 1989 $1,492,440,010 $1,490,253,955 $ 106,475 $2,079,580
Obligations
Fiscal 1989 $ 938,183,328 $ 935,285,018 $1,663,156 $1,235,154
Disbursements
The IPA recommended that EPA review and resolve the
questioned transactions.
2. Internal Control Weaknesses In IFMS
During fiscal 1989, EPA implemented the Integrated Financial
Management System (IFMS) as the Agency's official financial
management system, replacing the Financial Management System
(FMS). For fiscal 1989, the FMS was in operation as the Agency's
system for the first five months and the IFMS for the remaining
seven months.
A material internal control weakness existed in the
reporting capabilities of the IFMS. The reporting subsystem did
not provide complete and accurate reports consistent with the
needs and objectives of EPA's management. Also, data was not
reconciled in the transfer of accounting information from FMS to
IFMS; audit trails were sometimes not sufficient to trace
transactions; security over access to the operating system and
application software (IFMS) was inadequate; and the property
subsystem was not integrated with IFMS.
The IFMS was acquired to provide a comprehensive financial
management system to support EPA's financial management
functions. The system was expected to perform the standard
accounting functions of commitment and obligation processing,
document tracking, accounts payable, accounts receivable and
general ledger. The system was also expected to support an end-
user-oriented report writer, an ad hoc query capability, and an
automated interface between the mainframe and user workstations.
However, in fiscal 1989, IFMS did not meet EPA's expectations for
accounts receivable, general ledger and reporting functions. As
a result, EPA could not produce necessary reports from IFMS
during the fiscal year or at year-end. Consequently, Agency
1 Costs questioned because of an alleged violation of a
provision of a law, regulation, contract, grant, cooperative
agreement, or other agreement or document governing the
expenditure of funds.
2 Costs questioned because, at the time of the audit, they
were not supported by adequate documentation and/or had not been
approved by responsible program officials.
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personnel could not properly monitor many financial activities
during the fiscal year.
Because of Agency proposed corrective actions cited in the
Agency response to the draft report, the IPA did not make any
recommendations on this finding in the final report.
3. Accounts Receivable
EPA needed to improve the recording and managing of accounts
receivable and collections. Our audit disclosed that 110
receivables, totalling $43,094,911, due for cost recovery
actions, fines and penalties, and State cost shares, were not
recorded in a timely manner. Also, 22 receivables, totalling
$39,739,334, were not recorded in the correct fiscal year. We
noted that 33 receivables were not assessed interest totalling
$434,219. In addition, 6 collections, totalling $511,965, were
not recorded against their corresponding receivables.
Additionally, 12 receivables, valued at $2,068,514, and 31
collections, valued at $2,606,359, were not properly transferred
from the FMS to the IFMS during the conversion of data from FMS
to IFMS.
Accounts receivable were not being recorded timely or in the
correct fiscal year because: internal controls were not
established for forwarding settlement documents to the Financial
Management Officers (FMOs); judicial orders were not promptly
obtained from the Department of Justice; and FMOs were not
recording accounts receivable promptly in the IFMS when
settlement documents were received prior to payment. In
addition, the regions did not establish routine procedures to
regularly reconcile Superfund program office and Office of
Regional Counsel records with the IFMS records.
EPA OIG issued an audit report, Superfund Cost Recovery
Accounts Receivable Establishment and Collections (E1SJF9-05-
0274-0100207, March 28, 1990). The report contained
recommendations to EPA to ensure that the FMOs, Superfund program
offices, and Offices of Regional Counsel have established: (1)
procedures and internal controls over the flow of documents to
ensure the receivables are recorded timely; and (2) procedures to
regularly reconcile their records with IFMS. In addition, the
report contained recommendations to: (1) promptly complete and
issue a directive on receivables and billings; and (2) include
the forwarding of completed judicial orders to EPA as part of the
interagency agreement with the Department of Justice. EPA
outlined planned corrective actions which, when implemented,
should help resolve the deficiencies noted in this finding.
Due to Agency corrective actions in response to the Accounts
Receivable audit and proposed corrective actions in response to
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the draft Trust Fund audit report, the IFA made no
recommendations on this finding in the final report.
4. Accounting lor and Controlling Personal Property
EPA's accounting for and controlling personal property
needed to be improved. The audit disclosed that 494 property and
equipment items costing $1,529,895 were not recorded in the
Personal Property Accounting System (PPAS). These 494 items were
from our audit samples of 1,123 items costing $5,053,350
purchased during fiscal 1989. Also, 439 of the 1,123 items,
costing $515,520, could not be physically located. At Regions 2,
4, 5, 6, 7 and 9, annual inventories had not been performed.
Also, at Regions 2, 5, 6, 7 and 9, custodial officers for
property had not been properly designated or had not accepted
custodial responsibilities. Further, the national PPAS listing
did not agree with PPAS listings at Regions 3 and 10 and
Cincinnati. The local listings recorded 52 items, valued at
$167,039, that were not recorded in the national PPAS listing.
The primary cause of property items not being recorded in
PPAS and items not being located was due to contracting officers,
custodial officers, or receiving personnel not sending
documentation of property purchased and received to the
appropriate Property Accountable Officers. The failure to
conduct annual physical inventories and obtain acceptances of
custodial duties was due to non-compliance with Agency policies
and procedures, primarily because of inadequate staffing and
training of property personnel.
If annual inventories had been performed, omissions from the
PPAS and unlocated property items might have been identified. As
a result of the above deficiencies, EPA property was not properly
controlled, thus increasing the possibility of waste, loss,
unauthorized use and misappropriation.
In addition to the Agency's proposed corrective actions in
response to the draft audit report, the IPA recommended that the
appropriate EPA Division Directors work together to ensure that
all accountable property and equipment items are properly and
timely recorded in the PPAS at actual cost.
5. Schedule of Disbursements Did Not Agree with Outlays Reported to
OMB
The audit disclosed a $26,767,694 difference between the
total disbursements reported in the Schedule of Disbursements and
the total outlays reported to the Office of Management and Budget
for fiscal 1989. The review of this difference disclosed that
Financial Management Division officials could not reconcile the
differences between U.S. Treasury disbursements and EPA's records
for fiscal 1989, due to reporting deficiencies of the IFMS and
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the failure to reconcile conversion data from FMS. Therefore,
Agency officials adjusted EPA's disbursements at year-end to
agree with Treasury's records without details of the transactions
supporting the adjustment. The inability to reconcile conversion
data or perform monthly reconciliations resulted in this
significant difference between the Agency's records and
Treasury's records at year-end.
In addition to the Agency's proposed corrective actions in
response to the draft audit report, the IPA recommended that EPA
management:
• record at the object class level (where appropriate)
adjustments made to clear the Year-End Prepaid
Adjustments Account so that specific differences
between disbursements previously reported in the
Schedule of Disbursements and the outlays reported to
OMB can be identified; and
• prepare a report from the general ledger, after all
adjustments are recorded, which agrees with or is
reconciled to the outlays reported to OMB, and retain
for the auditors.
6. Nonpayroll Documentation and Recording Errors
Based upon the results from statistical sampling, the IPA
questioned $2,186,055 of nonpayroll obligations and $2,875,846 of
nonpayroll disbursements. The reasons for questioned costs
included: obligating documents could not be located, no
Superfund justification was on or attached to obligating
documents, amounts were incorrectly charged to Superfund, errors
were made in correcting entries, transactions were obligated
twice, documentation could not be located because the
transactions were recorded at another accounting point, amounts
obligated in FMS did not agree with the obligating documents, a
transaction was charged to an incorrect account number, an
obligation was not properly authorized, complete accounting
information was not recorded in IFMS, and input errors were made.
In addition to the Agency's proposed corrective actions in
response to the draft audit report, the IPA recommended that
Agency management:
• obtain documentation to support the standard vouchers
recorded for the Las Vegas accounting point; and
• determine if certain FMS/IFMS conversion transactions
included twice in the Schedule of Disbursements were
part of the discrepancy between the Schedule of
Disbursements and the total outlays reported to OMB.
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7. Personnel Costs Questioned
The IPA questioned $22,464 of the $103,536,979 of recorded
personnel compensation disbursements. The questioned costs
resulted from ineligible lump sum leave, unrecorded
redistributions, lack of documentation to support transactions,
accounting system data not in agreement with source information,
incorrect pay rates, and input, adjustment and rounding errors.
Because of Agency corrective actions cited in the Agency
response to the draft report, the IPA did not make any
recommendations on this finding in the final report.
AGENCY RESPONSE
The final audit report was issued on September 24, 1990,
Audit Report Number P1SFF9-11-0032-0100492. The Assistant
Administrator for Administration and Resources Management has 90
days to act on the recommendations made in the report and to
report to us on the status of these actions. In response to the
draft audit report, the Agency provided a plan for corrective
action which was responsive to the recommendations in the draft
report.
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COOPERATIVE AGREEMENTS AND STATE CREDITS
In fiscal 1989, we issued six audit reports covering costs
incurred under Superfund response cooperative agreements and one
audit report on an application for a Superfund response
cooperative agreement. We also issued one report on claimed
State credits based on CERCLA section 104(c)(3), which allows
States credit for response costs incurred between January 1, 1978
and December 11, 1980. The combined financial results of these
eight audits were as follows:
Federal Share Total Costs
Amount audited $26,893,835 $27,919,752
Amount accepted $18,635,393 $19,363,801
Ineligible costs3 $ 4,333,117 $ 4,518,002
Unsupported costs* $ 3,925,345 $ 4,037,949
Unnecessary/unreasonable costs5 $ 0 $ 0
The eight audits are summarized below.
A. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION
Scope ana Objectives
An independent public accounting firm (IPA) conducted an
interim audit of the New Jersey Department of Environmental
Protection's (NJDEP) administration of its cooperative agreement
for remedial design and initial remedial action for the removal
of hazardous waste from the Burnt Fly Bog site, Marlboro
Township, New Jersey. The primary objectives of our audit were
to:
a. Determine the adequacy, effectiveness and reliability of
procurement, accounting and management controls exercised by
the NJDEP in administering the cooperative agreement;
Costs questioned because of an alleged violation of a
provision of a law, regulation, contract, grant, cooperative
agreement, or other agreement or document governing the
expenditure of funds.
* Costs questioned because, at the time of the audit, they
were not supported by adequate documentation and/or had not been
approved by responsible program officials.
5 Costs questioned because they were not necessary or not
reasonable.
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b. Ascertain NJDEP's compliance with provisions of the
cooperative agreement and applicable Federal regulations and
instructions; and
c. Determine the reasonableness, allocability and allowability
of costs claimed under the cooperative agreement from
December 7, 1983 through June 30, 1986.
Findings
1. NJDEP Did Not Properly Accumulate Direct Costs
NJDEP did not charge certain costs, such as travel and
equipment, to the applicable site. Instead, NJDEP considered
these costs as part of the indirect cost rate.
2. NJDEP Did Not Fully Comply With EPA Assistance Deviation
NJDEP did not fully adhere to qualifications imposed by EPA
when it approved a deviation from EPA's assistance regulations to
allow use of an innovative procurement method. NJDEP used the
contract for purposes not originally intended and did not obtain
required EPA advance approval for costs exceeding $250,000.
3. NJDEP Needs To Improve Progress Reporting Procedures
Monthly progress reports from NJDEP's contractor were
submitted directly to the EPA project officer without prior
review and approval by the NJDEP Site Manager. This shifted
responsibility for monitoring the contractor's work from NJDEP to
EPA.
4. NJDEP Did Not File A Financial Status Report Timely
The fiscal 1987 Financial Status Report was filed late. The
report due on September 30, 1987 had not been filed as of the
date of the IPA's audit report (March 9, 1989).
5. Allowabilitv Of NJDEP Costs Must Be Determined
We referred for regional review (1) $1,126,044 claimed for
transportation services not procured in accordance with Federal
Regulations and (2) claimed contractual services of $13,632 for
Remedial Design which were not supported by an appropriate change
order and costs analysis.
Recommendations
We recommended that EPA Region 2:
• In accordance with the EPA Assistance Administration
Manual, require NJDEP to account for cleanup costs by
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site and activity to support Federal enforcement cases
against responsible parties and to determine State cost
shares for those activities that require cost sharing.
• Require that NJDEF indicate which costs are included in
the indirect cost rate and to demonstrate to EPA how it
was determined that it is not cost effective to account
for these costs.
• Instruct NJDEP to refrain from using contracts such as
the contract cited in the audit report, with a small
cost ceiling, for jobs originally estimated to cost
more than $1,000,000.
• Instruct NJDEP to comply with conditions required in
EPA approval of deviations from procurement
requirements.
• Instruct NJDEP to comply with regulations regarding
significant changes in scope or price of the original
contract.
• Require that monthly progress reports of contracts be
reviewed and approved by the NJDEP Site Manager before
transmittal to the EPA Project Officer.
• Instruct NJDEP to submit Financial Status Reports on a
timely basis.
• Evaluate the appropriateness of funding the total set
aside costs of $1,139,676, based upon the above
recommendations.
Agency Response
In response to the audit report, EPA Region 2 indicated:
• NJDEP has assured EPA Region 2 that all costs that can
be adequately documented as being attributable to a
specific site are charged on a site and phase of
activity basis.
• Region 2 agrees with NJDEP's method of charging
indirect costs and have determined that no further
action is required.
• Region 2 agrees that the primary purpose of the
contract type cited in the audit report was to expedite
small work assignments. Therefore, Region 2 will
consider requests from NJDEP for waivers to the
contract without establishing maximum amounts of $1
million as recommended in the audit report.
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• Region 2 has approved and will continue to approve
NJDEP requests for use of this contract type when the
contracts exceed the dollar thresholds of $100,000 or
$250,000.
• Region 2 determined that NJDEP was in compliance with
EPA's regulations regarding changes in scope or price
of the original contract.
• Monthly progress reports are being submitted by NJDEP
to EPA.
• NJDEP's staff maintains close communications with
Region 2 concerning the status of filing FSRs and any
delays encountered. No further action is required on
this finding.
• All set-aside costs have been accepted in full, based
upon the Region's evaluation of justifications for
them.
B. TENNESSEE DEPARTMENT OF HEALTH AND ENVIRONMENTAL
SERVICES
Scope and Objectives
We conducted an interim audit of the costs incurred for the
period March 29, 1985 through June 30, 1987, by the Tennessee
Department of Health and Environmental Services (TDHES) Division
of Solid Waste Management under a cooperative agreement to
perform preliminary assessments and site inspections. Our
objective was to determine the allowability of costs claimed
under the project in accordance with the provisions of the
cooperative agreement and applicable Federal regulations.
Findings
1. TDHES Did Not Comply With Federal Regulations On Letter Of
Credit
Drawdowns on the letter of credit were based on estimated
expenditures in lieu of actual costs incurred.
2. TDHES Did Not Properly Accumulate Direct Costs
Weaknesses in internal controls resulted in TDHES requesting
reimbursement of overhead type payroll costs as direct expenses
instead of including those costs in the overhead cost pool. In
addition, TDHES claimed $114,026 of personnel and fringe benefit
costs, including the director's salary, that should have been
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charged indirect; were unapproved; or not associated with the
Superfund program.
3. Allowabilitv Of TDHES Costs Must Be Determined
We referred for EPA review $125,625 of laboratory services
costs allocated under a time and motion study method.
4. TDHES Claimed Undocumented Costs And Costs Not Based On An
Approved Indirect Rate
TDHES claimed $27,980 of travel costs, indirect charges and
other costs that were undocumented, incurred prior to the
effective date of the cooperative agreement or were not based on
a final approved rate.
Recommendations
We recommended that EPA Region 4:
• Ensure that all drawdowns are based on actual
expenditures.
• Ensure that costs claimed for the director are
classified and included in the overhead cost pool.
• Ensure that all personnel positions are approved by EPA
before these expenditures are claimed.
• Have TDHES provide assurance that all personnel costs
be directly grant related.
• Not participate in the $142,006 of questioned costs;
review the alienability of the $125,625 of laboratory
costs; and recover the applicable amount from TDHES.
Agency Response
In response to the audit report, EPA Region 4 indicated:
• The State of Tennessee has implemented a new statewide
accounting system. The system is now generating
reports in a timely manner that will allow TDHES to
make drawdowns based on actual expenditures.
• TDHES is reviewing positions to assure that Federal
funds are not used for unauthorized positions. TDHES
assured Region 4 that only those expenses that are
authorized and approved shall be charged to the
cooperative agreement.
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• The $125,625 of costs claimed for contractual services
are provisionally accepted pending a formal time study
to determine current work time unit values for all
tests performed by the laboratory/ subject to final
audit.
• The $114,026 of personnel costs and associated fringe
benefits are unallowable for EPA participation.
• Indirect costs claimed were based upon an arrangement
by which costs can be recovered as incurred using a
preliminary rate and are allowable subject to
adjustment based upon the final negotiated rate.
• Other costs questioned by the auditors were disallowed.
However, TDHES indicated it had discovered $51,322 of
motor pool costs not previously claimed. EPA will
amend the cooperative agreement to cover these costs,
which will offset disallowed costs that TDHES would
otherwise have had to refund to EPA. The motor pool
costs will be subject to final audit.
C. COLORADO DEPARTMENT OF HEALTH
Scope and Objectives
We performed a final audit of a cooperative agreement
awarded to the Colorado Department of Health (CDH) for response
activity at the California Gulch site. The audit, covering the
period February 1, 1985 through March 31, 1988, was performed to:
a. Determine the reasonableness, allocability, and allowability
of the costs claimed;
b. Determine the adequacy, effectiveness and reliability of
procurement, accounting and management controls exercised by
the State in administering the cooperative agreement and;
c. Ascertain the State's compliance with the provisions of the
cooperative agreement and applicable EPA regulations and
instructions.
Findings
1. Agencies Had Not Complied With Superfund Procurement
Requirements
The procedures utilized by the Colorado State Purchasing
Department and the Colorado Attorney General's Office to procure
and administer contract services under the cooperative agreement
did not assure complete compliance with the Federal requirements
for procurement systems. The cost of the only contract awarded
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accounted for $1.1 million of the total $1.3 million claimed
under the cooperative agreement. This contract was awarded
without the required cost or price analysis and invoices were not
prepared in accordance with contract terms. We questioned
$967,468 of subagreement costs as unsupported until CDH audits
the costs for allowability.
2. Agencies Had Hot Complied With Federal Regulations Governing
Financial Systems
The five Colorado Agencies claiming costs under the
cooperative agreement did not fully comply with Federal
regulations governing financial systems. The accounting systems
used by the various agencies did not adequately account for labor
or other direct costs (travel or supplies) on a site-specific
basis. The agencies had to reconstruct the records for audit
purposes.
3. CDH Did Not Comply With All Special Conditions
CDH management procedures need improvement to assure
compliance with the special conditions included in the subject
cooperative agreement. While CDH met the majority of the special
conditions, it had not complied with those applicable to (i)
adherence to the Federal Procurement Regulations and (ii)
eliminating amounts spent solely to assess the extent of injury
to the State's natural resources, or for litigation and/or
enforcement purposes.
5. CDH Claimed Unallowable Costs
We questioned $221,969 for ineligible labor, fringe
benefits, overhead, travel, and supplies claimed by various
Colorado State Departments which were not supported by adequate
documentation and subagreement costs for unallowable services,
unallowable surcharges, and amounts not actually paid to the
subcontractor.
Recommendations
We recommended that EPA Region 8:
• Revoke CDH's self-certification of their procurement
system until it corrects the deficiencies found in the
audit report. Also, CDH should be notified that no
additional cooperative agreements will be made to them
without EPA first determining that their procurement
system meets cooperative agreements requirements.
• Notify CDH that no additional cooperative agreements
will be made to them without verification that actions
have been taken to correct their accounting systems
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deficiencies. In addition, the other Colorado State
departments identified in the report as having
accounting system deficiencies should also be required
to correct the deficiencies before any additional
cooperative agreement work is authorized to them.
• Alert Region 8 staff responsible for awarding other
grants and contracts to CDH and the other Colorado
State departments identified in the report of the
accounting and procurement system deficiencies noted in
the audit report.
• Advise Region 8 staff responsible for administering
cooperative agreements of the importance of monitoring
compliance with special terms and conditions in such
agreements.
• Advise CDH that $967,468 of subagreement cost are
unallowable until an audit of the subagreement costs
claimed under the cooperative agreement is made by CDH.
Upon completion of the audit, the Region should assess
the allowability of the subagreement costs.
• Advise CDH that the $221,969 of ineligible cost claimed
is disallowed for reimbursement under the cooperative
agreement.
• Obtain recovery of the cooperative agreement funds paid
to CDH in excess of the amounts found allowable.
Agency Response
In its proposed response to the audit report, Region 8
stated:
• "Our review of the State's procurement procedures did
not find or identify deficiencies that would warrant
revocation of its self-certification for procurement.
Current State procurement policies and procedures are
considered adequate."
• "Based on our review during the resolution process, we
found no reason to alert Regional staff of problems
with the State's accounting and procurement systems.
Our review indicated those systems are adequate."
• "We would agree with the auditors recommendation if the
State and its agencies continued to document costs as
they had before the cooperative agreement's award.
However, during the audit resolution process we were
able to verify current accounting practices and
procedures used by the State in recording its costs.
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The system in place adequately accounts for costs
incurred."
• "In general we agree that all EPA staff should be alert
to ensure compliance of cooperative agreement special
terms and conditions. . . . the State, in its review,
identified resource damage claims in excess of those
identified by the auditors and appropriately withdrew
their claim."
• The Region's review determined that the State met its
responsibility and carefully reviewed and analyzed a
bid proposal in an instance in which there was only one
bidder.
• Costs of $97,386 were considered unallowable.
The OIG disagreed with the Agency's response. It is
understood that EPA will issue a deviation to EPA's assistance
regulations in order to resolve the audit report.
D. SOUTH CAROLINA DEPARTMENT OF HEALTH AND ENVIRONMENTAL
CONTROL
Scope and Objectives
We conducted an audit of costs incurred by the South
Carolina Department of Health and Environmental Control (SCDHEC)
under a cooperative agreement for response at the Bluff Road
site.
Our objective was to determine if costs claimed for the
period June 28, 1982 through December 31, 1987, were reasonable,
allowable, and allocable under the terms of the agreement and
applicable EPA regulations.
Findings
1. SCDHEC Claimed Costs Previously Determined Unallowable
SCDHEC claimed $249,367 of contractor change order costs
that were in excess of the amount accepted by EPA in response to
an interim audit.
2. SCDHEC Claimed Unsupported Costs
SCDHEC claimed $121,267 of salary, fringe benefit, and
indirect costs that were not properly supported by the State's
method of labor cost accounting.
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Recommendations
We recommended that EPA Region 4 not participate in the
$370,634 of questioned costs and recover funds due EPA in
accordance with established guidelines.
Agency Response
EPA Region 4 determined that the questioned costs were
unallowable.
E. MISSOURI DEPARTMENT OF NATURAL RESOURCES
Scope and Objectives
We performed an interim audit of costs incurred by the
Missouri Department of Natural Resources (MDNR) under a
cooperative agreement for response at the Ellisville site. The
primary objectives of our review were to:
a. Determine the adequacy, effectiveness, and reliability of
procurement, accounting and management controls exercised by
the MDNR in administering its cooperative agreement with
EPA.
b. Ascertain MDNR's compliance with provisions of the
cooperative agreement and applicable EPA regulations and
instructions.
c. Ascertain MDNR's compliance with provisions of the "Letter
of Credit-Treasury Financial Communications System
Recipients' Manual."
d. Determine the reasonableness, allocability, and allowability
of the costs claimed by MDNR under the cooperative agreement
with EPA.
Findings
1. MDNR Needs Improved Time Distribution Procedures
MDNR's time distribution procedures were not adequate to
accurately record actual time worked by the site's three
properties and by precise activity.
2. MDNR Needs To Improve Financial and Progress Reporting
MDNR did not submit quarterly Financial Status Reports (FSR)
on a timely basis as required by Federal regulations. No FSR was
submitted between January 1983 and March 1985.
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3. Quarterly Progress Reports
MDNR did not submit quarterly progress reports on a timely
basis. Also the reports, when submitted, were incomplete. They
did not contain information regarding 1) estimates of work
completed by activity, 2) expenditures by cost category, and 3)
the estimated variance expected at project completion date.
4. MDNR Accounting System Deficiencies
MDNR's accounting system did not accumulate data by object
class categories in the budget, for each activity. Further, the
costs were not accumulated by individual properties.
5. MDNR Calculated Costs Incorrectly
We questioned $8,435 of the claimed costs for Initial
Remedial Measures and Predesign Activities which were incorrectly
calculated.
Recommendations
We recommended that EPA Region 7:
• Require MDNR to account for cleanup costs by site
property and activity.
• Require MDNR to establish procedures to assure that
Financial Status Reports are prepared and submitted
timely.
• Require MDNR to submit quarterly progress reports on a
timely basis, and include all necessary information to
support the report.
• Not participate in the $8,435 questioned and recover
the applicable amount.
Agency Response
In response to the audit report, EPA Region 7 indicated:
• They have instructed the MDNR to verify labor costs
charged to each activity funded under the cooperative
agreement and assure EPA that procedures are in place
which monitor actual costs versus the approved budget
amounts. There is no requirement in the cooperative
agreement that MDNR account for costs by property.
• The quarterly progress reports and the Financial Status
Reports are now being received on time.
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• The Region instructed MDNR to refund the Federal share
of questioned costs.
F. ARKANSAS DEPARTMENT OF POLLUTION CONTROL AND ECOLOGY
Scope and Objectives
We performed an interim audit of the Arkansas Department of
Pollution Control and Ecology's (ADPCE) administration of its
multi-site cooperative agreement. The primary objectives of the
audit were to determine whether:
a. Costs claimed under the cooperative agreement for the period
April 1, 1985 through March 31, 1988 were reasonable,
allowable and allocable to the sponsored projects, and
b. Controls exercised by the State through its financial
management, accounting, procurement, contract administration
and property management systems were adequate to provide
assurance that costs claimed were reasonable, allowable and
allocable to the sponsored projects.
Findings
1. ADPCE Costs Claimed Varied With Reports Filed
We questioned $ 6,601 of direct salaries, fringe benefit,
and indirect costs claimed based on inconsistencies between
personnel hours reported and the narrative descriptions of work
performed in progress reports.
2. ADPCE Did Not File All Required Reports
ADPCE did not consistently submit, on a quarterly basis, the
required quarterly Minority and Women's Business Enterprise
Utilization reports. Earlier in the project period, Federal Cash
Transactions Reports were submitted late.
3. ADPCE Did Not Comply With Special Conditions
The project narrative statement included in the grant
application was incorporated into the cooperative agreement by
reference as a special condition. ADPCE did not comply with the
cooperative agreement provision requiring EPA project officers'
approval of the quality assurance/quality control plan prior to
beginning certain site work. Costs for work prior to plan
approval were included in ADPCE progress reports.
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Recommendations
We recommended that EPA Region 6 instruct the ADPCE to:
• Develop and implement policies and procedures which
will ensure the accuracy of quarterly reports and
eliminate inconsistencies which may impact the
integrity of financial and project records.
• Develop and implement policies and procedures to ensure
that appropriate personnel are fully cognizant of
special conditions of the agreement and that they are
complied with.
Agency Response
In response to the audit report, EPA Region 6 obtained a
refund of the $6,601 in questioned costs.
G. LIDGERWOOD, NORTH DAKOTA DRINKING WATER TREATMENT PLANT
Scope and Objectives
Vie reviewed the City of Lidgerwood, North Dakota's (the
City) application for funding of costs associated with
constructing and repairing its drinking water treatment plant.
The City requested that these costs be reimbursed under CERCLA
through the award of a cooperative agreement.
The objectives of the review were to determine the
alienability, under the provisions of CERCLA, of costs incurred
for plant construction and the reasonableness of proposed
additional costs for repairs needed to make the plant fully
operational. The financial records reviewed were limited to
those costs relating to the water treatment plant's construction
and first year of operation between July 1984 and April 1987.
Findings
1. Proposed Plant Not Eligible For CERCLA Funding
We questioned all of the City's proposed cost of $433,034
(EPA share $248,962) as unallowable under CERCLA because the
plant was built solely to comply with an order issued pursuant to
the Safe Drinking Water Act. The plant's design emphasized iron
and manganese removal, while the contaminant of concern to
Superfund was arsenic. We also noted that the plant had not
operated properly since its completion, and sometimes had been
inoperable. Records maintained at the plant did not demonstrate
it was removing arsenic.
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2. Proposed Cost Unsupported Or Unallowable
In addition to the reasons cited in finding number one, we
questioned (i) $56,859 of the proposed costs for personnel,
related benefits and repairs which were unsupported and (ii)
$59,138 of the above cost for engineering equipment and other
expenses that were unallowable.
Recommendations
We recommended that EPA Region 8:
• Advise the City that a cooperative agreement using
CERCLA funds cannot be awarded for their water
treatment plant because certain of the costs they
propose are unallowable, the plant was not built solely
to treat a CERCLA related contaminant and the plant is
not working properly.
• In the event that the Region decides to pursue CERCLA
funding of the plant:
1. A legal opinion should be obtained on the use of
CERCLA funds to remediate Safe Drinking Water Act
violations;
2. The City should be required to determine the
repairs needed to make the plant fully operational
in removing arsenic and to provide a detailed cost
estimate for evaluation;
3. The Region should make a technical evaluation
whether: (i) the City's arsenic removal process is
the cost-effective alternative, (ii) the proposed
repairs will result in a fully operational plant
that removes arsenic; and (iii) the repair costs
duplicate any costs already incurred by the City;
and
4. Performance criteria relating to the removal of
arsenic should be a special condition in the
cooperative agreement award.
Agency Response
In its response to the audit report, Region 8 stated:
• Lidgerwood is a part of the Arsenic Trioxide NPL site.
Even though the water treatment facility was
constructed in response to an Administrative Order
issued in 1979 for a violation of the Maximum
Contaminant Level for arsenic under the Safe Drinking
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Water Act, this facility adequately addresses an
arsenic contamination problem in the water supply.
Therefore the Region intends to reimburse the City of
Lidgerwood for allowable costs incurred for
construction of the water treatment plant.
• The Office of Solid Waste and Emergency Response
(OSWER), after consulting with the Office of General
Counsel, concluded that the issue raised by the audit
was basically a policy call and not a legal matter.
OSWER determined, with no objections being raised by
the Office of General Counsel, that it is appropriate
to use CERCLA funds for the Lidgerwood treatment plant.
• The plant is capable, as originally designed, of
removing arsenic contamination in the City's water
supply.
• EPA is working with the Bureau of Reclamation to design
and construct modifications for the enhancement to this
plant so that it operates efficiently and effectively
with minimal manual control.
• The Region determined through reports submitted to the
Drinking Water Branch by the State of North Dakota,
that the plant did remove arsenic contamination when
operated in accordance with the original design. In
addition, since the Bureau of Reclamation has been
overseeing operation of the plant with no design
changes, arsenic has been effectively removed.
• $364,340 of the proposed costs are allowable. $156,410
of the costs are covered by a block grant from the
Federal Department of Housing and Urban Development.
EPA will reimburse the City for $187,137, 90 percent of
the remaining allowable costs.
H. NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL
CONSERVATION CREDIT PERIOD COSTS FOR LOVE CANAL
Scope and Objectives
We conducted a final audit of credit period costs claimed by
the New York State Department of Environmental Conservation
(NYSDEC) for Love Canal under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA) which
included costs incurred by the Urban Development Corporation
(UDC), New York State Department of Transportation (NYSDOT) and
New York State Department of Health (NYSDOH) for activities at
Love Canal, City of Niagara Falls, New York, between January 1,
1978 and December 11, 1980.
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The purpose of our audit was to determine the acceptability
of $17,619,773 in costs claimed by NYSDEC for credit under
Section 104(c)(3) of CERCLA for direct out-of-pocket non-Federal
funds expended or obligated at Love Canal between January 1, 1978
and December 11, 1980.
Findings
1. Urban Development Corporation
UDC could not substantiate $519,423 of claimed expenditures
through December 11, 1980. The expenditures were for property
acquisitions, relocation, closing, insurance, administrative and
personal service costs.
2. New York State Department of Transportation
NYSDOT claimed $405,526 of costs for personal services,
related expenses and fencing costs without supporting
documentation. In addition, we also referred for regional review
$1,805,180 pending the receipt of adequate documentation.
3. New York State Department of Health
NYSDOH could not provide documentation supporting $2,410,374
of claimed costs for personal services, fringe benefits, indirect
costs, contracts, equipment, supplies and travel costs.
Recommendations
We recommended that EPA Region 2:
• Not allow credit under Section 104(c) (3) of CERCLA for
the unallowable costs claimed:
UDC $ 519,423
NYSDOT $ 405,526
NYSDOH $2,410,374
Total $3,335,323
• Evaluate the appropriateness of allowing such credits
for the $1,805,180 of costs set aside in the audit
report.
Agency Response
Based upon review of the audit and documentation provided by
NYSDEC during audit resolution, Region 2 disallowed $4,132,421.
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PERFORMANCE AUDITS AND SPECIAL REVIEWS
In addition to reviews required by CERCLA, as amended, we
reviewed other aspects of EPA's management of the Superfund
program, as our resources permitted. Such reviews completed in
fiscal 1989 are summarized below.
A. REGION 5'S MANAGEMENT OF TWO SIGNIFICANT REMOVAL ACTIONS
Scope and Objectives
Our objective was to evaluate Region 5's effectiveness and
efficiency in managing significant removal actions at two
Superfund sites. Specifically, we determined whether:
a. Sites were properly evaluated and classified as removals in
accordance with the guidelines set forth in the National
Contingency Plan.
b. Immediate removal was the most effective and efficient
option at the time and mitigated site hazards.
c. Actions were taken in accordance with Agency policy and
procedures.
d. Responsible parties were identified and appropriately
pursued to share in the cost of the cleanup.
e. Environmental and worker protection laws were adhered to
during removal actions.
We selected significant removal actions at Dayton Tire and
Rubber near Dayton, Ohio and Cam-Or near Westlake, Indiana,
because they represent significant removals initiated after the
Superfund Amendments and Reauthorization Act of 1986 (SARA).
Each site had cleanup costs of more than $2 million with cleanup
activities lasting more than 12 months. The issues summarized
below are based upon our review of these two removal actions and
do not necessarily reflect upon the overall adequacy of Region
5's removal program.
Findings
1. Awarding the Proper Type of Site Specific Contract Will Help
the Region Achieve Efficient Removals
Agency contracting officials awarded a $2 million site-
specific contract with provisions which were inadequate to
complete cleanup of hazardous wastes at the Dayton Tire and
Rubber site. Consequently, cleanup of hazardous wastes was not
completed under the site-specific contract because contract
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provisions limited the amount of hazardous wastes that could be
removed. For example, one Agency review reported that the low
quantity of asbestos to be removed, according to contract
provisions, forced the On Scene Coordinator (OSC) to make
impractical decisions in order to stay within contract
limitations. The actual amount of asbestos far exceeded the
amount specified in the contract. In addition, as a result of
contract limitations, Regional Superfund officials could not
determine if the site-specific contract achieved its goal of
being cost effective.
This condition occurred primarily because the Region's
initial contamination studies did not support the type of
contract awarded by Headquarters contracting officials. These
studies did not show the full extent of contamination because the
site was unusual in size and complexity. Despite the studies'
limitations, Headquarters contracting officials awarded a firm
fixed price contract with provisions limiting the wastes that
could be removed. As a result, cleanup of hazardous wastes was
not completed under this contract when Regional personnel found
additional wastes needing removal.
Our review also showed that, after awarding the site-
specific contract, Regional employees permitted the cleanup
contractor to perform a more detailed extent of contamination
study to accurately assess the amount of cleanup required. Using
the cleanup contractor for this purpose is contrary to Agency
directives issued to prevent potential conflicts of interest.
2. Adequate Search for Potentially Responsible Parties Will
Benefit Cost Recovery Efforts
A Region 5 contractor did not perform an efficient and
timely search for potentially responsible parties (PRPs)
responsible for PCB6-contaminated oil at Cam-Or. This condition
occurred primarily because the contractor copied Cam-Or records
that were not necessary for identifying PRPs. In May 1987, the
contractor began a project, lasting about a year, to photocopy
200 boxes of Cam-Or's records. In May 1988, after the contractor
had received almost $100,000 of Agency funds for this project,
Regional employees determined that the photocopies would not
identify PRPs. Consequently, the contractor did not use Agency
funds efficiently and its inadequate PRP search delayed the
Region's efforts to obtain reimbursement of over $2 million in
cleanup costs.
In December 1988, Regional attorneys finally acquired the
necessary data from the contractor and promptly sent information
request letters to 172 companies to determine responsibility for
PCB refers to polychlorinated biphenyls
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hazardous wastes at Cam-Or. At the time we completed our field
work in May 1989, Regional Counsel and Regional Superfund
personnel had not followed up with 77 companies who had not
responded to the Region's letters.
We also found that the Region's ability to determine the
adequacy of contractor PRP searches, like the PRP search at Cam-
Or, was hindered because the Agency's National Enforcement
Investigations Center (NEIC) suspended a program to audit
Regional contractors performing PRP searches. Although regions
could still request NEIC's contractor to perform audits, Regional
attorneys were not aware of this service. In addition, our
review showed that Regional Counsel should have provided NEIC
officials information that the NEIC contractor had performed
poorly a PRP search for another Superfund site in Region 5.
3. Asbestos Training for Superfund Employees Will Help Ensure
Worker Safety
A Region 5 subcontractor did not conduct a major asbestos
removal project at Dayton Tire and Rubber in accordance with
regulations promulgated by the Occupational Safety and Health
Administration (OSHA) for asbestos removal. This condition
occurred because the contractor did not comply with OSHA
regulations. In addition,.the Regional OSC did not have
sufficient knowledge of asbestos worker protection rules to allow
him to determine the need for the contractor to follow OSHA
worker protection rules. Consequently, the workers' risk of
inhaling asbestos fibers increased when the contractor violated
OSHA worker protection rules by not properly enclosing the work
area and not ensuring employees followed proper decontamination
procedures. Medical studies of asbestos-related diseases, such
as asbestosis, lung cancer, mesothelioma and other cancers, have
revealed that the primary exposure route is inhalation of
asbestos fibers.
A 1987 survey of regional offices by Headquarters Superfund
officials showed the need for Superfund employees to be aware of
asbestos regulations. This survey report stated there were over
50 asbestos Superfund sites of concern nationwide. The hazards
at these sites included friable asbestos insulation materials,
industrial processing wastes, asbestos-laden fill material, mine
tailings and unpaved roadways to asbestos bearing serpentine. As
a result, Headquarters Superfund officials have established an
asbestos workgroup to assist regions when confronted with
asbestos hazards at Superfund sites.
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Recommendations
Vie recommended that EPA Region 5:
• Ensure that Regional officials follow the Agency's
April 1989 directive regarding the use of site-specific
contracts.
• Ensure that EPA employees or a contractor, other than
the cleanup contractor, prepare a detailed extent of
contamination study prior to preparing a statement of
work and awarding a cleanup contract.
• Ensure that Superfund employees maintain early and
continuous contact with Regional contractors so
contractors fully understand the type and detail of
information required of their PRP searches.
• Complete follow up with PRPs not responding to the
Region's initial information request letter for Cam-Or.
• Forward to NEIC information required to audit the work
of contractors who perform unsatisfactory PRP searches.
• Ensure that all OSCs receive the full 40-hour asbestos
training course.
Agency Response
In reply to our draft report, EPA Region 5 agreed with most
of our findings and indicated they:
• Would follow Agency guidance on site-specific
contracting.
• Would ensure that EPA employees or a contractor, other
than the cleanup contractor, prepare a detailed extent
of contamination study prior to preparing a statement
of work and awarding a cleanup contract or delivery
order.
• Would maintain early and continuous contact with
Regional contractors so that contractors will fully
understand the type and detail of information required
in their PRP searches, and maintain closer oversight of
inexperienced contractors.
• Sent CERCLA section 106 unilateral administrative
orders to 17 PRPs.
• Would send follow-up letters to other PRPs not
responding to prior requests for information.
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• Would forward to NEIC, where appropriate, the
information required to audit the work of contractors
who perform unsatisfactory PRP searches.
• Have initiated a program to provide asbestos training
for all OSCs.
In response to the final audit report, EPA Region 5 further
indicated they had issued notice letters to PRPs requesting
reimbursement for all costs incurred by the U.S. in connection
with the site.
B. REGION 6 MANAGEMENT OF SIGNIFICANT SUPERFUND REMOVALS
Scope and Objectives
We reviewed the Region's management of significant Superfund
removals. Our objective was to evaluate the Region's
effectiveness and efficiency in managing significant Superfund
removals performed at Superfund sites. Specifically, we
determined whether:
a. Sites were properly classified as removals under Agency
guidance;
b. Exemptions to exceed the statutory limits for removals were
properly obtained;
c. Actions taken properly addressed site hazards;
d. Pertinent environmental standards were adhered to during the
removal;
e. Responsible parties were appropriately pursued to share in
the cost of the removal; and
f. Site records adequately documented the removal.
We reviewed the significant removals ongoing as of October
1988 with cost ceilings exceeding $2 million, the statutory
ceiling on removals. The removals were at the Vertac site in
Jacksonville, Arkansas and the Gramlich site in Fort Smith,
Arkansas. These were the only significant removals the Region
had ever conducted at the time our review began. The review was
limited to significant removals and was not intended to evaluate
the Region's entire removal program.
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Findings
1. Improved Coordination and Oversight Needed
The Region needed to improve the coordination and oversight
of joint cleanup efforts with the State of Arkansas. We found
that a series of misunderstandings and the State's limitations
delayed cleanup of both the Vertac and Gramlich sites. At
Vertac, the Region and the State did not coordinate timely
incineration of drums containing dioxin. At Gramlich, the Region
presumed the State had cleaned up the site, only to find six
years later that the site was still contaminated. Delayed
cleanup of the two sites left people living on or near the sites
in danger for an additional two to six years while removal costs
increased a total of $6 million.
2. Contractor Assignments Should Be Segregated
The Region needed to improve the segregation of contractor
assignments. We found that the Region did not adequately
segregate contractor assignments at the Gramlich site. The OSC
assigned three contractors to perform more than one of the
fundamental removal activities of sampling, analysis and
excavation. The performance of these activities without adequate
segregation presented the appearance of a conflict of interest
and possibly allowed the contractors to perform unnecessary work.
3. Complete Enforcement Should Be Taken
The Region needed to improve enforcement against PRPs. We
found that the Region did not take complete enforcement actions
against a PRP for the Gramlich site. The Region did not ask the
PRP to perform the cleanup prior to beginning the removal; did
not notify the PRP in writing of their potential liability for
the cost of the removal; did not issue an administrative order
once the PRP refused to perform the removal; and had not pursued
cost recovery against the PRP. Regional personnel said the
urgency to address site threats preempted taking complete
enforcement. They added that the deadline for cost recovery did
not expire until 1991. If the PRP had cleaned up the site, the
Region could have saved the $1.6 million spent to clean up the
site. The Region also lost the opportunity to recover treble
damages from the PRP because an administrative order was not
issued.
4. Better Documentation Needed
The Region needed to improve the documentation maintained
for significant removals. We found that the Region did not
maintain adequate documentation for removal costs and site
access. Cost documentation did not adequately support contractor
charges for disposal, labor, equipment and security. Also, some
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contractor costs were not documented as removal costs. Site
access documentation was incomplete because oral access
agreements were not confirmed with letters to the site residents.
We recognized that the urgency of the removals might have reduced
the OSCs' abilities to prepare documentation. However, adequate
documentation was necessary to show that removal decisions were
in accordance with Agency guidelines and to provide evidence for
cost recovery actions. By not keeping adequate documentation,
the Region's ability to recover removal costs from PRPs could
have been harmed. Also, adequate cost documentation was
necessary to support the OSCs' approvals of payments to removal
contractors.
5. Better Exemption Requests Needed
The Region needed to submit earlier requests for exemption
from the statutory limits on removals so Headquarters could
control the course of significant removals. We found that the
Region did not submit timely requests for the removals at the
Vertac and Gramlich sites. Agency procedures required the Region
to submit the requests to Headquarters at the start of the
removals. However, the Region delayed the requests from two to
five months. By the time the requests were made, the Region had
already selected and implemented a response. Consequently, the
Region bypassed Headquarters' controls over high cost removal
decisions.
Recommendations
We recommended that EPA Region 6:
• Adopt procedures for coordination and oversight of
joint cleanup efforts with States, including
documentation of coordinated efforts in memorandums of
understanding and action memorandums.
• Sign a memorandum of understanding with the State of
Arkansas concerning coordination and joint oversight of
the joint cleanup effort for the Vertac site.
• Require the assignment of contractors in such a manner
that there are no potential or perceived conflicts of
interest. Where situations preclude segregation, the
OSC should ensure the integrity of work by performing
additional oversight and monitoring.
• Adopt written procedures for determining what
additional oversight and monitoring is necessary to
ensure the integrity of the work when normal
segregation is precluded.
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• Adopt procedures for use of all of the Agency's
enforcement tools, including notice letters and
administrative orders.
• Pursue cost recovery for the Gramlich removal, using a
plan of action with milestone dates.
• Adopt specific documentation requirements for each
category of removal costs (e.g., labor, equipment,
security, disposal, etc.), based on the options
suggested in Agency guidance.
• Adopt specific documentation requirements for site
access, based on Agency guidance.
• Provide documentation training for OSCs.
• Document contractor costs which are directly related to
a removal as removal costs. The costs should be
approved in action memorandums and charged against the
removal cost ceiling.
• Submit exemption memorandums for significant removals
to Headquarters prior to selecting and implementing a
response.
• Document in the action memorandums all significant
information given to or relied on by the approval
official.
Agency Response
In response to our draft report, EPA Region 6 indicated it
would:
• Review procedures which could be utilized for more
effective coordination of removal actions with the
State of Arkansas.
• Review each State Memorandum of Agreement to ensure
that adequate procedures are included for State/EPA
coordination for all removal actions.
• Organize future removal work so that work assignments
are segregated to preclude potential conflicts of
interest. If conditions on future removals, such as
personnel shortages, preclude proper segregation,
written procedures will be developed for monitoring and
oversight of contractor work.
• Promptly submit future action memorandums for statutory
exemptions to Headquarters.
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In response to the final report, EPA Region 6 further
indicated they:
• Had implemented procedures, effective December 12,
1989, to ensure that complete enforcement action is
taken at each non-NPL removal action or that proper
documentation exists in the file to justify not
following the normal enforcement scheme. Regional
procedures are being reviewed in the light of new
national guidance.
• Are planning cost recovery activities at the Gramlich
site for fiscal 1990. The details of these plans are
enforcement confidential.
• Initiated a review of the cost documentation
requirements in the Removal Cost Management Manual to
make sure that removal action cost monitoring
procedures are in compliance with the manual, and to
evaluate the feasibility of instituting formalized
regional cost monitoring procedures. The Region also
scheduled training in the Removal Cost Management
System and in contract management.
• Would ensure that all action memorandums are in
compliance with the Superfund Removal Procedures
Manual. Exemption requests will be submitted to
Headquarters as soon as it is anticipated that
expenditures could exceed the $2 million statutory
limit.
C. REGION 2'S OCCUPATIONAL SAFETY AND HEALTH PROGRAMS FOR
SUPERFUND AND RCRA ACTIVITIES
Scope and Objectives
The purpose of our review was to determine whether
Region 2's safety policies, programs and procedures for field
activities are adequate to assure that EPA employees are
protected against known and unknown hazards for Superfund and
Resource Conservation and Recovery Act (RCRA) programs. Our
objectives were to determine the adequacy of Region 2's:
a. Administration and management controls over occupational
health and safety programs for employees involved in
Superfund and RCRA field activities;
b. Health and Safety Committee's composition, training and
activities; and
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c. Occupational safety and health programs for employees
engaged in Superfund and RCRA field activities, particularly
the areas of guidance, training, respiratory equipment,
medical surveillance, accident and illness investigations,
reporting and recordkeeping, and hazardous substances
response.
Our review generally covered Region 2's occupational health
and safety operations from December 18, 1986 through
September 30, 1987. However, we did extend beyond that date when
conditions required more current information be obtained.
Findings
1. Regional Safety Staff Lacks Expertise in Moderate and High
Risk Work Areas
Region 2's Occupational Health and Safety staff did not
include a member with managerial expertise or the expertise to
provide the technical guidance that Superfund and RCRA field
personnel require. The Region's assigned safety staff was
comprised of one individual. The Region filled its Occupational
Health and Safety Manager position with a temporary employee at
the trainee level. The trainee lacked management experience as
well as adequate training and field experience in hazardous waste
operations and emergency response activities. The Region
believed the individual had the potential to develop the
managerial skills needed while at the same time administering the
program. The Region depended on the assistance of other
employees and outside contractors to provide field expertise. As
a result of the lack of available safety expertise, the Region
cannot be assured that its employees are or will be adequately
protected against moderate and high risk safety hazards.
2. Improvement Needed in Medical Monitoring Program
Region 2 was permitting field personnel to work at Superfund
and RCRA sites without receiving required initial medical
monitoring examinations prior to their assignment or termination
examinations when leaving the Agency. This occurred because
Regional management had inadequate controls to ensure that
medical monitoring requirements were met, to ensure that medical
monitoring requirements were met, and there was no Regional
policy to conduct termination examinations. As a result,
employees were being potentially exposed to hazardous substances
without adequate baseline information or assurance to the Agency
that they were fit for duty. Furthermore, the Agency was not
assured of employees' medical conditions prior to working for or
leaving the Agency and the Agency could not take action, if
necessary, to see that undisclosed health problems were treated.
in addition, the Agency could face the increased risks of
unwarranted litigation.
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3. Region Needs to Establish Respiratory Protection Program
Region 2 needed to establish a respiratory protection
program for its employees. There was no formal written program,
personnel were not always following proper safety precautions,
there was a lack of equipment, fit tests were not conducted,
equipment was not routinely maintained, and recordkeeping was
inadequate. This occurred because the Region's respiratory
protection program was still somewhat in the formative stages.
The program was only in the draft stage and there was no
respiratory protection program designee. As a result, management
could not be assured that personnel had been properly trained in
safety procedures and had adequate, well-maintained equipment.
Recommendations
We recommended that EPA, Region 2:
• Consider supplementing the health and safety staff with
a full-time permanent health and safety specialist who
has sufficient expertise concerning moderate and high
risk work areas.
• Implement a policy to perform termination examinations
in accordance with Occupational Safety and Health
Administration (OSHA) regulations.
• Establish a formal Regional respiratory protection
program.
Agency Response
In its response to the final report, EPA, Region 2 agreed to
take the following corrective actions:
• Evaluate the feasibility of adding technical resources
to its health and safety program staff. For fiscal
1990, Region 2 will explore the availability of
contract funding for health and safety services under
the Agency's technical resources contract.
• At the termination of employment, Region 2 is now
offering employees the opportunity to undergo a
termination examination. In addition, the sign-out
procedure for existing employees contains a statement
regarding the medical monitoring program. The
Occupational Health and Safety Officer or his/her
designee must confirm that the sign-out procedure had
been followed by initialing the sign-out sheet for all
employees.
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• Region 2 has established a formal Regional respiratory
protection program. A Regional policy implementing the
program was signed by the Acting Regional Administrator
on May 20, 1989.
D. UNANNOUNCED ON-SITE REVIEWS OF REMOVAL ACTIONS
Background
CERCLA authorizes removal actions at hazardous waste spills
and sites, whether or not they are on the National Priorities
List (NPL). In contrast to long-term remedial response, removals
are generally short-term time-critical actions needed to abate a
threat. They are not subject to the detailed planning process
used for remedial actions, and the work is generally directed on
a day-to-day basis by a Federal official.
The on-scene coordinator (OSC) is the Federal official
designated to coordinate and direct Federal response at a site.
Implementation of removal actions is usually done under one of a
number of Emergency Response Cleanup Services (ERCS) contracts.
The OSC is normally assisted by a Technical Assistance Team (TAT)
contractor to monitor the response, develop the workplan and
document the cleanup costs.
The OIG has been performing unannounced on-site audits of
removal actions for several years. During fiscal 1989, we issued
five reports of such audits. The removals audited were at the
Kelly Koet site in Cincinnati, Ohio; the Brooks Foundry site in
Albion, Michigan; the Waterboro Patent Leather site in Waterboro,
Maine; the Enginuity, Inc. site in Albany, Indiana; and the
Middlefield-Ellis-Whisman Study Area in Mountain View,
California.
Scope and Objectives
These reviews normally include a site visit of 1-3 days
while a removal is in progress. While at the site, auditors
observe conditions, review documentation and interview personnel.
There is usually follow-up work at the EPA regional office to
review documentation that is not at the site and to interview
appropriate personnel.
The objectives of each review were to determine:
• Adequacy of the OSC compliance with prescribed
directives and guidance governing removal actions;
• Adequacy of the OSC's controls in monitoring the
cleanup work and on-site spending; and
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• Adequacy of the technical assistance provided by the
TAT contractor.
Kelly Koet, Brooks Foundry and Waterboro Patent Leather Sites
We observed no material weaknesses in removal controls at
these three sites. Therefore, we had no findings and no
recommendations to management.
Enginuity, Inc. Site
At the Enginuity, Inc. site in Albany, Indiana, we found
that OSC guidance, project monitoring and technical assistance
were generally adequate to control and monitor the removal
action. However, the contractor's labor charges to EPA
improperly included employee time spent commuting between the
Enginuity, Inc. site and home each weekend. This was due to the
OSC improperly suspending site work (demobilizing the site).
This condition occurred because contract language addressing
demobilization and weekend travel was not sufficiently clear.
The OSC concurred with the labor charges claimed by the
contractor. Consequently, EPA paid the contractor for employee
time that was not related to site cleanup activities. For
example, on one weekend, the cleanup contractor's labor charges
included $2,372 that consisted of 12 employees commuting 4 hours
from the site on Friday night to their homes and 4 hours for
travel back to the site on Monday morning.
After we discussed this issue with Region 5 officials and
before we issued a report, two corrective actions were taken.
The Region 5 contracting officer issued a clarification to the
contractor. The clarification indicated that an OSC's decision
not to have work performed on a weekend does not constitute
demobilization. In such a case, employee travel expenses home
are reimbursable to the extent they do not exceed the per diem
costs they would have incurred had they stayed at the site.
Every three weeks, the OSC may authorize contractor employees to
travel home with actual travel expenses reimbursable under the
contract. However, labor charges would remain unallowable.
The Region 5 contract project officer issued a memorandum to
OSCs which also outlined these provisions. The memorandum also
indicated that site demobilization will only occur for a
technical reason, e.g., no field work can be carried out until
the disposal arrangements are finalized, etc. Interruptions for
weekends and holidays are not demobilizations.
In the final report, we recommended that EPA Region 5:
• Monitor whether OSCs are adhering to the instructions
indicated above.
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• Review and, if appropriate, clarify all other ERCS
contracts administered by Region 5 to ensure that (1)
suspending site cleanup work for a weekend is not
considered demobilization, and (2) weekend travel time
by contract employees is not chargeable to the
contract.
• Advise Headquarters officials that similar
circumstances may exist under other ERCS contracts
nationwide.
In its response to the final report, EPA Region 5 indicated
they had:
• Reviewed the other ERCS contract administered by Region
5, and sent a copy of the letter defining the
Government position to that contractor.
• Discussed the issue with a Headquarters contracts
official, and sent a copy of the contracting officer's
letter to Headquarters.
Middlefield-Ellis-Whisman Study Area
At the Middlefield-Ellis-Whisman Study Area in Mountain
View, California, we found that the OSC conducted the on-site
activities in a reasonable manner and generally in compliance
with applicable EPA guidance. However, the OSC failed to review
the subcontractor invoices when approving the ERCS invoices.
This was significant because of the high percentage of
subcontract costs associated with this particular removal action.
Well drilling subcontract charges totalled $90,627, or
approximately 70 percent of the total ERCS vouchered costs of
$129,170.
We recommended that EPA Region 9 OSCs review major
subcontract costs for consistency with the OSC's site
documentation when certifying ERCS payment vouchers. For this
purpose, the OSCs should obtain a copy of major ERCS subcontracts
so as to facilitate the review and control of subcontractor tasks
invoiced to EPA. In response to the report, EPA Region 9:
• Required all Region 9 OSCs to obtain copies of major
ERCS subcontracts and use this information in the
invoice certification process.
• Reviewed Removal Cost Management Manual procedures for
certifying subcontractor costs with all OSCs.
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E. SPECIAL REVIEW OF OAK GROVE SANITARY LANDFILL SITE
Scope and Objectives
This review was conducted in response to a White House
referral of correspondence from a citizen raising questions about
Federal, State and County actions with regard to the Oak Grove
Sanitary Landfill (OGSL) Superfund site in Oak Grove Township,
Minnesota. As such, the scope of the review was limited to the
questions raised and matters arising in the course of the review.
The matters were discussed with EPA Region 5, State and County
officials; officials of a State contractor; and members of the
family owning the site.
Findings
1. Region 5 Needs to Correct Demand for Payment Letter to
Potentially Responsible Parties
EPA Region 5 sent a "Demand of Payment of Site Costs"
(demand letter) on February 7, 1989, to 13 potentially
responsible parties (PRPs) that contained errors due to the
improper preparation and review of the Region's Cumulative Cost
Summary. As a result, Region 5 demanded the 13 PRPs pay
$1,287,614.91 for response costs incurred at the OGSL site
through September 10, 1988, when actual total costs incurred were
$765,406.91. There were two causes of errors in the amount. The
first was a clerical error in entering $165,200 as $1,165,200 on
the Cumulative Cost Summary. Secondly, $477,792 in costs were
not included because a Superfund accounting employee could not
obtain detail costs needed to prepare the Cumulative Cost
Summary.
2. Quality Assurance Issues Need Resolution
A contractor hired by the Minnesota Pollution Control Agency
(MPCA) to perform a remedial investigation at the OGSL site did
not comply with quality assurance requirements to ensure
integrity of sampling data. As a result, the MPCA quality
assurance officer expressed reservations concerning some of the
data. If data remains flawed, faulty decisions addressing ground
water problems at the OGSL site could result.
Recommendations
Because corrective actions were taken during the course of
the review, the only recommendation made in the final report was
that EPA Region 5 ensure that the actions are accomplished.
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Agency Response
During the course of the review, EPA Region 5:
• Sent a corrected demand letter to the PRPs.
• Reviewed 12 other demand letters issued since January
1989 for clerical errors. None were found.
• Arranged with MPCA to have a different contractor
perform necessary sampling and analysis to refine the
data.
• Agreed to ensure that MPCA prepares a quality assurance
report resolving the quality assurance issues.
In its response to the final report, EPA Region 5 stated it
would review and approve the Quality Assurance Project Plan
(QAPP) for the State's second operable unit activity; work with
the State to develop an approvable QAPP, if requested; and audit
the project once the QAPP is approved, if requested.
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INTERAGENCY AGREEMENTS
EPA enters into interagency agreements with a number of
other Federal agencies to perform Superfund tasks. Costs
incurred under these agreements are audited by the Offices of
Inspector General or other audit organizations of the receiving
agencies. The other Offices of Inspector General, like that of
EPA, are required by statute to annually audit their own agency's
use of the Superfund and to report on that audit to the Congress.
The audit reports are also issued by the EPA DIG to EPA with a
cover letter for any action which may be needed by EPA officials.
In fiscal 1989, we issued nine of these reports to EPA
management. The combined financial results of these nine audits
were as follows:
Total Costs Audited $68,368,167
Total Costs Accepted $67,981,702
Total Costs Ineligible7 $ 241,872
Total Costs Unsupported8 $ 144,593
Total Costs Unnecessary/Unreasonable9 $ 0
The nine audits are summarized below by agency audited.
U.S. ARMY CORPS OF ENGINEERS
The U.S. Army Audit Agency (Army Audit) performed audits and
issued three reports on Superfund activities of the U.S. Army
Corps of Engineers (COE). These reports included results of
audits for fiscal 1987 financial transactions, follow-up of
implementation of recommendations in a prior report, and the
Jibboom Junkyard site.
Fiscal 1987 Transactions
In the audit of fiscal 1987 financial transactions, Army
Audit determined that most of the obligations and disbursements
were accurately recorded and reported, but were not always
recorded in the month they occurred. Army Audit concluded that
7 Costs questioned because of an alleged violation of a
provision of a law, regulation, contract, grant, cooperative
agreement, or other agreement or document governing the
expenditure of funds.
8 Costs questioned because, at the time of the audit, they
were not supported by adequate documentation and/or had not been
approved by responsible program officials.
9 Costs questioned because they were not necessary or not
reasonable.
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this did not result in any significant problems. Corrective
action by the COE is ongoing. The EPA OIG made no
recommendations to EPA management as a result of this audit.
Follow-Up
In a prior audit, Army Audit recommended that the COE work
out alternative funding arrangements with EPA other than
reimbursement. Recommendations were also made to improve cost
documentation. Army Audit found that the two agencies were
working together to reach mutually agreeable solutions for both
issues. The EPA OIG made no recommendations to EPA management as
a result of this audit.
Jibboom Junkyard Site
The audit of COE construction activities at the Jibboom
Junkyard site in Sacramento, California, indicated potential
contractor liability for construction cost increases because of
design deficiencies. In addition, the audit found contract
increases that were not ratified, and improper charging of labor
and overhead costs. Regarding cost increases related to design
deficiencies, the COE stated that their contract relied on data
provided by EPA. Therefore, their contractor was not responsible
for the design omissions and problems. The COE has agreed to
ratify the contract increase if requested by EPA. In addition,
it has made adjustments for the improper labor and overhead
charges, and have strengthened controls to ensure this problem
does not recur.
The EPA OIG Engineering and Science Unit reviewed the COE's
claim that EPA was responsible for providing inaccurate data used
by their design contractor. On the basis of that review, we
concluded that no errors were made by the architect/engineering
firm that developed the feasibility study for EPA.
We recommended to EPA that it request the COE to ratify the
Corps construction contract to cover all variations in estimated
quantities, if EPA plans to recover costs from a potentially
responsible party (PRP). In response, EPA indicated that the COE
has issued guidance to its field operating agencies requiring
final contract modifications to cover all variations in estimated
quantities for Superfund contracts. However, since the Jibboom
Junkyard contract had been completed over two years ago, the
Agency felt a modification for that contract was not justified.
The EPA OIG contacted a Superfund enforcement official and found
that a PRP would be sought. Therefore, the EPA OIG sent a
followup memorandum to the EPA Action Official reiterating the
audit report recommendation. No response to this memorandum has
been received.
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NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION
The Department of Commerce DIG audited four Superfund
interagency agreements between EPA and the National Oceanic and
Atmospheric Administration (NOAA). The audit report addressed
obligations and disbursements for fiscal years 1984 through 1986.
For two of the agreements, NOAA's charges were properly
controlled and adequately supported. However, for the other two
agreements, problems were identified with the approaches used to
assign and control project costs. These problems included
charging on the basis of estimated rather than actual direct
labor hours, and unallowable equipment purchases under one
agreement. NOAA has taken corrective action on the deficiencies.
Recommendations to EPA
We recommended that EPA:
• Ensure that cost reporting and Superfund documentation
retention requirements are in all future interagency
agreements with NOAA.
• Not reimburse NOAA for the costs not sufficiently
supported with documentation.
• Request reimbursement from NOAA for the unauthorized
equipment purchased.
Agency Response
In response to the audit report, EPA:
• Issued the Interagency Agreements Policy and Procedures
Compendium which makes clear other agencies'
responsibilities to account for Superfund costs. Cost
reporting language is now included in the special
conditions of all Superfund interagency agreements.
• Obtained a General Counsel ruling that the amount paid
to NOAA could not be recovered. Paid NOAA the full
amount obligated, but not for the amount billed in
excess of the obligation.
• Obtained reimbursement for the unauthorized equipment
purchased.
DEPARTMENT OF JUSTICE
The Audit Staff, Department of Justice (DOJ), audited
obligations and expenditures during fiscal 1987 under two
Superfund interagency agreements between EPA and DOJ, Land and
Natural Resources Division (LNRD). The audit disclosed a need
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for improvement in the preparation of expense reports, internal
controls, and the methodology used to compute employee costs.
Findings were:
• Cost information was not reported to EPA in a manner
consistent with the budgetary classifications provided
in the agreements, or the object classes used by the
DOJ to account for LNRD costs. Furthermore, amounts
reported on expense reports could not be readily traced
to accounting records. As a result, the financial
reports did not provide sufficient cost data to assure
that the costs incurred were within cost category
limitations of the agreements.
• The LNRD system of internal accounting controls needs
strengthening to improve the quality and accuracy of
financial representations in reports and records. As a
result of weaknesses in these controls, management was
not provided with reasonable assurance that
transactions were executed in accordance with
management's authorization and recorded properly.
• Hourly employee rates used to allocate employee costs
among the various direct and indirect cost centers were
not in compliance with the terms and conditions of the
agreements. As a result, direct employee costs
distributed to individual cost centers may not have
represented actual LNRD costs.
DOJ, LNRD has taken corrective action on the findings.
Recommendations to EPA
We recommended that EPA:
• Request a status report on the corrective measures
instituted by the DOJ, LNRD, to ensure that costs
reported to EPA are (1) readily reconcilable with
amounts recorded in LNRD's accounting records, and (2)
consistent with the budgetary limitations of the
agreements.
• Obtain assurances from DOJ, LNRD, that hourly employee
rates used to allocate employee costs among the various
direct and indirect cost centers are in compliance with
the terms and conditions of the agreements.
• Obtain, for accounting control and accuracy purposes,
corrected expense reports and cost data for the two
audited agreements.
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Agency Response
In response to the audit report, EPA:
• Received a Billing Summary from DOJ, LNRD, which
demonstrated that the costs reported are reconcilable
with LNRD's accounting records consistent with the
budgetary limitation of the agreements.
• Received assurance from DOJ, LNRD, and the EPA program
office that hourly employee rates used to allocate
employee costs between the various direct and indirect
costs centers are in compliance with the terms and
conditions of the agreements.
• Received from DOJ, LNRD, corrected expense reports and
cost data for the two audited agreements.
DEPARTMENT OF ENERGY
The Department of Energy (DOE) OIG audited fiscal 1987
Superfund costs incurred under twelve interagency agreements
between EPA and DOE. The audits disclosed problems with (1)
costs incurred after the period of performance for an agreement
had expired, (2) not accounting for Superfund costs separately,
and (3) costs incorrectly charged to one agreement. The DOE OIG
also noted differences between EPA and DOE records on
expenditures under six agreements.
Recommendations to EPA
We recommended that EPA:
• Amend the period of performance for the appropriate
agreement to cover costs incurred in fiscal 1987.
• Include, in future agreements, requirements for DOE to
account for Superfund costs separately and to maintain
documentation necessary for cost recovery actions.
• Not reimburse DOE for $2,035 of costs incorrectly
charged.
• Verify fiscal 1987 expenditures for six agreements and
work with DOE to resolve any discrepancies.
Agency Response
In response to the audit report, EPA:
• Amended the period of performance for the appropriate
agreement.
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• Issued the Interagency Agreement Policy and Procedures
Compendium which makes clear other agencies'
responsibilities to account for Superfund costs
separately and to maintain documentation for cost
recovery actions.
• Made the adjustment for the costs incorrectly charged.
• Will correct EPA financial records to include all valid
obligations and expenditures.
FEDERAL EMERGENCY MANAGEMENT AGENCY
The Federal Emergency Management Agency (FEMA) OIG audited
fiscal 1987 FEMA expenditures for the temporary and permanent
relocation program under Superfund. The audit found that FEMA
had effectively administered the temporary relocation component
of the program and generally spent funds for eligible purposes.
However, it did identify several recording and documentation
problems. FEMA took corrective action on those problems. The
EPA OIG made no recommendations to EPA management as a result of
this audit.
U.S. COAST GUARD
The Department of Transportation OIG audited fiscal 1987
Superfund costs of the U.S. Coast Guard. The audit found
inaccurate billings, unbilled and unsupported costs, and
potential duplicate billings. Prior audit reports discussed the
lack of readily available documentation to support costs incurred
by the Coast Guard.
Recommendations to EPA
We recommended that EPA:
• Not reimburse the Coast Guard for overbilled personnel
costs.
• Not reimburse the Coast Guard, or adjust future
billings, for unsupported costs.
Agency Response
In response to the audit report, EPA indicated that accounts
had been adjusted to reimburse EPA for a portion of the
overbilled and unsupported costs, and reimbursement would be
obtained for the remainder.
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
An independent public accounting firm under contract to the
Department of Health and Human Services OIG conducted an audit of
two cooperative agreements with the Missouri Department of
Health. The agreements were awarded by the Centers for Disease
Control on behalf of the Agency for Toxic Substances and Disease
Registry. No costs were questioned. The audit did identify
weaknesses in the recipient's controls over equipment and
physical inventories. The EPA OIG made no recommendations to EPA
management as a result of this audit.
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CONTRACTS
The OIG is responsible for conducting and supervising
independent and objective audits relating to the programs and
operations of Superfund. In order to carry out this
responsibility the 016 performs financial and compliance audits
of EPA contractors. Each of the Public Laws authorizing EPA to
award contracts provides that the Agency shall have the authority
to audit and examine the books and records of the contractor and
subcontractors receiving Federal funds. The provisions regarding
audits are also clearly spelled out in the general provisions of
each EPA contract. Our primary audit objectives are to determine
(1) whether the controls exercised by the contractors and
subcontractors through their accounting, procurement, contract
administration, and property management systems are adequate to
account for costs claimed; and (2) costs claimed are reasonable,
allowable, and allocable, in accordance with applicable laws and
regulations, to the sponsored project.
Audits of contracts have played a major role not only in
yielding financial benefits to the Agency, but also in improving
Agency management. With the increased size of the program and as
more sites are actually cleaned up, we expect to devote
significant resources to auditing EPA contractors and
subcontractors. These audits also play an integral part in
supporting EPA's cost recovery actions.
During fiscal 1989, we issued 33 Superfund contract audit
reports. The combined financial results of these audits were as
follows:
Total Costs Audited $739,014,750
Total Costs Accepted $738,103,938
Total Costs Ineligible10 $ 345,750
Total Costs Unsupported11 $ 562,973
Total Costs Unnecessary/Unreasonable12 $ 2,089
10 Costs questioned because of an alleged violation of a
provision of a law, regulation, contract, grant, cooperative
agreement, or other agreement or document governing the
expenditure of funds.
11 Costs questioned because, at the time of the audit, they
were not supported by adequate documentation and/or had not been
approved by responsible program officials.
12 Costs questioned because they were not necessary or not
reasonable.
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While the OIG is responsible for all audits of EPA
contracts, we can elect to have the audits performed by in-house
staff, independent public accounting firms, or another Federal,
State or local audit agency. During fiscal 1989, our Superfund
financial and compliance audits of contracts were performed as
follows:
Audits Performed by OIG Staff 2
Audits Performed by Independent Public Accountants 11
Audits Performed by Another Federal Agency 19
Audits Performed by a State Agency 1
A listing of all Superfund audit reports issued by the OIG
during fiscal 1989 is contained in Exhibit III.
One particularly significant contract audit is summarized
below.
PEI ASSOCIATES, INC. LEE'S FARM REMOVAL DELIVERY ORDER
Scope and Objectives
We reviewed costs billed by PEI Associates, Inc. under a
delivery order to conduct a removal at the Lee's Farm site in
Dunne County, Wisconsin. The audit covered the period
January 11, 1985 through December 31, 1986. Our objective was to
ensure that all costs billed were allowable, allocable and
reasonable.
Findings
1. PEI Claimed Unsupported Costs
The contractor claimed $228,951 involving (1) labor for an
employee whose qualifications could not be demonstrated, (2)
unsupported labor costs, (3) costs for a soil washing system that
never operated, (4) equipment charges billed twice, and (5) costs
for equipment standby time in excess of allowable days.
2. PEI Claimed Ineligible Costs
The contractor claimed $118,969 for costs that were
ineligible under contract terms. The claims were for labor while
traveling to and from the work site, an item which the contract
specifically disallowed for reimbursement; and equipment costs
which were applicable to another delivery order, billed in excess
of costs incurred, or billed for a time period excluded by
contract terms.
51
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Recommendation
We recommended that the Contracting Officer make a final
determination on the questioned costs.
Agency Response
In response to the audit report, the EPA Contracting Officer
negotiated a definitization of the delivery order which
disallowed $139,518 of the contractor's claimed costs.
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ASSISTANCE TO EPA MANAGEMENT
In addition to performing audits and investigations, the
Office of Inspector General (DIG) responds to EPA management
requests for 016 input in the development of regulations,
manuals, directives, guidance and procurements. These are
proactive efforts to prevent problems that would be reflected in
later negative audit findings or investigative results. The OIG
reviews and comments on draft documents prepared by Agency
offices. In some instances, we designate an OIG staff person to
attend meetings of an EPA work group to provide input. Fiscal
1989 was an active year for OIG preventive assistance to EPA
management in the Superfund area.
Administrators Superfund Management Review
OIG staff participated in two task groups working on the
Administrator's Superfund Management Review (90-day study). We
provided one staff person for a three-month period to work on the
task group addressing the effectiveness and efficiency of
remedial program implementation and oversight. Specific
accomplishments included research and analysis of Superfund
management systems, site data collection and quality assurance
efforts.
We also provided support for a task group studying the
Agency's dependence on contractors. The task group examined the
major components of the current Superfund procurement strategy to
identify and address the inherent weaknesses of the strategy
observed by such organizations as the General Accounting Office,
the Office of Technology Assessment and Congressional committees.
Major areas of concern included controlling contractor costs,
assuring quality performance and obtaining adequate competition.
Discussions with staff of the General Accounting Office, Army
Corps of Engineers and EPA OIG were able to provide the task
group with a better understanding of these issues and possible
corrective actions.
Acquisition Regulations on Conflict of Interest
We commented on a proposed amendment to the EPA Acquisition
Regulation to provide additional coverage to avoid actual,
apparent or potential conflicts of interest in work performed
under EPA contracts. The need for additional regulation of
conflicts of interest in Superfund contracting was identified
during the Superfund Management Review. In our comments to the
Agency, we suggested that the rule include specific statements of
possible punitive action which could be taken if a contractor or
contract employee violates the conflict of interest rule. We
also called to their attention apparent contradictory language in
the draft rule.
53
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Superfund Document Management Study Work Group
The Superfund Document Management Study Work Group sought to
clearly describe and assess the current document management
system for Superfund site records. It sought a consensus on
modifications and improvements to be implemented through the
standardization and systematization of document management. Our
participation in this work group had two purposes. We provided
an understanding of the 016's role in the Superfund program and
the need to be aware of OIG reports which may affect Superfund
litigation. We also provided our perspective on problems
identified and proposals for improvements.
Technical Assistance Grants
The EPA Administrator requested in fiscal 1987 that the OIG
work closely with the Superfund office in its efforts to develop
and administer the technical assistance grants program to groups
of persons affected by Superfund sites. Because these grants are
awarded to small groups without grants experience or much
administrative structure, the Administrator recognized that this
program presented special management challenges. In response to
this request, in fiscal 1989 the OIG continued to participate in
work group meetings and review draft program documents, including
proposed amendments to the interim final rule.
Cooperative Agreements
We have been conducting Superfund cooperative agreement
audits for several years and have frequently found significant
deficiencies. These audits are now statutorily required. A
regulation on cooperative agreements and Superfund State
Contracts for Superfund Response Actions was published as an
interim final rule in fiscal 1989. The development of this
regulation was cited by the Agency as a response to our "capping"
report on cooperative agreement audits issued in fiscal 1987.
The OIG assisted in developing this regulation through active
participation in workgroup meetings and review of drafts. In
fiscal 1989, the OIG also participated in review of comments on
the interim final rule and development of the final rule, an
effort which continued in fiscal 1990.
Coordination with Other Agencies
Since EPA was given the responsibility of managing the
Hazardous Substance Superfund (Trust Fund), EPA's OIG took on the
task of informing the Federal OIG community (as well as
appropriate audit organizations) of the mandated audit
requirements. The Superfund Amendments and Reauthorization Act
of 1986 requires "... the Inspector General of each department,
agency or instrumentality of the United States which is carrying
54
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out any authority. . ." under SARA to conduct an annual audit of
uses of the Superfund. In July 1987, we formed a work group
comprised of representatives from a number of OIGs or audit
officials of those Federal departments or agencies which have
been given significant Fund-financed responsibilities by statute
or Executive Order 12580. The objectives of our work group are
to:
• Clarify the statutory requirement;
• Coordinate schedules and reports under the mandatory
annual audit requirement;
• Discuss funding mechanisms for the mandatory audit
work; and
• Discuss program areas of concerns or audit findings.
The objectives are carried out through meetings held three
or four times a year with the full work group as well as
individual contacts as needed.
We continue to work with other OIG's and audit officials to
resolve Superfund accounting and control problems. We
coordinated these activities with administrative and program
offices at EPA to ensure that an effective audit product would
result. Through our work group contacts, we played a key role in
getting recordkeeping and accounting guidance out to other
Federal agencies who receive Trust Fund monies. Through these
activities we hoped to ensure consistent audit coverage as well
as better accountability and control over Trust Fund spending.
Superfund Orientation Course
As Superfund spending has increased and the program has
expanded and developed, the OIG has recognized a need to ensure
that its auditors and investigators who review Superfund have a
good understanding of the program. Therefore, we have developed
a special orientation course explaining the key aspects of the
Superfund program, including:
• Superfund and related legislation and regulations;
• The removal, remedial and enforcement components of the
Superfund program;
• Organizational structure and functions of EPA offices
delegated specific Superfund responsibilities; and
• The OIG's role and responsibilities concerning
Superfund and the type of Superfund audits the OIG
performs.
55
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The orientation course will be given to all OIG employees
and OIG audit services contractor employees who are or will be
involved in Superfund audits. The course will also be offered to
other Federal OIGs and audit organizations who are performing
audits in their respective agencies. The course was developed in
fiscal 1988 and 1989, and began to be offered in fiscal 1990.
56
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REVIEW OF AGENCY'S SUPERFUND PROGRESS REPORT
Section 301(h) of CERCLA, as amended by SARA, requires that,
"On January 1 of each year the Administrator of the Environmental
Protection Agency shall submit an annual report to Congress of
such Agency on the progress achieved in implementing.this Act
during the preceding fiscal year." The provision also requires
seven specific areas to be included in the report. The Inspector
General is required to review this report "... for
reasonableness and accuracy and submit to Congress, as a part of
such report a report on the results of such review."
The second Annual Report was due to Congress on January 1,
1989, covering fiscal 1988 activities. The report was not
submitted to Congress until April 5, 1990. Our review of the
report was submitted on March 28, 1990, to the Administrator
(Audit Report No. E1SFF9-11-0015-0100227). Most of our audit
work for this review was conducted during fiscal 1989.
Some of the areas presented in the Annual Report were
reasonable and accurate. However, the information in other areas
of the report was not reasonable and accurate, and some
information was not as complete as it could have been.
Significant portions of the accomplishments claimed by the
regions were not supported by valid source documents. In some
cases the source documentation indicated the action either did
not meet Agency definitions or did not occur in fiscal 1988. In
at least one case the same action was counted in both fiscal
years 1987 and 1988. Also, program accomplishment figures in the
Annual Report were not always complete because the Comprehensive
Environmental Response, Compensation, and Liability Information
System (CERCLIS) is routinely updated months after the fiscal
year end. As a result, some accomplishments were entered into
CERCLIS after the preparation of the Annual Report.
CERCLA section 301(h)(l)(c) requires the Agency to include
in the Annual Report "notice of each [feasibility] study which
will not meet a previously published schedule for completion and
the new estimated date for completion." The Annual Report shows
"previously published" completion dates which were estimated no
earlier than the beginning of fiscal 1988. For projects in
process at that time, these dates were taken from the column
9/30/87 Est. Completion included in the Annual Report for fiscal
1987. So for these projects, lengthy delays which may have
occurred prior to the beginning of fiscal 1988 are not shown.
In some instances, activities conducted at a site are
claimed in multiple categories, i.e., both as removals and
remedial actions. These same activities are apparently
considered to meet more than one Agency definition. For example,
57
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at the Region 4 Newport Dump site, the documentation in the files
stated that "the remedial action was initiated on July 2, 1987
and completed on October 31, 1987." Yet the CERCLIS printouts we
received indicated that not one, but three actions occurred on
October 30,1987: a removal completion, a first remedial action
completion and a final remedial action completion. Some Agency
officials have devised the term "removials" to apply to these
cases. We have initiated an audit of this practice.
In addition to the findings summarized above, our audit
report included the following comments on the Annual Report
preparation process:
As with last year's Annual Report, the process used to
prepare this year's was not fully effective. Although
this Annual Report was due to Congress January 1, 1989,
it was not submitted to OMB for review until September
1989, one month later than last year's report. While
the Agency improved the overall timeliness of issuing
the report, it was still not completed until December
1989. Many of the reasons for the Annual Report's
lateness are the same as last year. These issues need
to be addressed if future Annual Reports are to be
submitted timely to Congress.
Part of the reason that the Annual Report encountered
such difficulties is that the coordinator's resources
were limited, thus inhibiting the completion of the
prior year's Annual Report. In fact while we were
performing our review of the fiscal 1988 Annual Report
the coordinator was still devoting much of his time to
the fisca 1987 Annual Report. We finished almost all
of our field work for the fiscal 1988 review prior to
the Agency's transmittal of the fiscal 1987 Annual
Report to Congress.
Another factor contributing to the Annual Report's
delay was the fact that the coordinator was unable to
secure selected accomplishment figures in a timely
manner from Agency offices responsible for compiling
them. For example, as previously discussed, we were
initially unable to secure CERCLIS printouts from OSWER
two months after the end of the fiscal year, due to
"date discrepancies."
Accurate and complete monitoring information is not
available to the signatory officials. The Director,
Office of Emergency and Remedial Response, has a
tracking system to monitor the status and progress of
the Annual Report. However, the tracking system
available for the Administrator and the Assistant
Administrator for OSWER is incomplete and inaccurate.
58
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In June 1989, we secured a printout from the "Statutory
Deadlines Tracking System," which contained no record
of the fiscal 1988 Annual Report. Furthermore, the
printout showed that the fiscal 1987 Annual Report was
completed on February 26, 1988, when, in fact, it was
not signed by the Administrator until over a year
later. Without accurate and complete monitoring
information, officials responsible for signing the
Annual Report cannot ensure it is completed on time.
Finally, we are concerned that delays in the fiscal
1988 Annual Report will delay future Annual Reports
past the January due date to Congress. Preparation of
the fisca 1989 Annual Report did not begin until past
the point in time necessary to meet the CERCLA
deadline.
CERCLA states that the authorizing committees in
Congress will hold oversight hearings after receiving
the Annual Report, to ensure that the statute is being
implemented according to the purposes of the law and
congressional intent. The delay in issuing the fiscal
1988 Annual Report will not only delay that oversight
process, but also did not afford Congress the
opportunity to consider any needed action during the
fisca 1990 appropriations cycle.
59
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INVESTIGATIVE ACTIVITY
During fiscal 1989/ the number of Superfund investigations
conducted by the 016 increased by 13.5 percent over fiscal 1988.
At the end of fiscal 1989, there were 42 active Superfund
investigations, comprising more than 18.5 percent of all active
OIG investigations at EPA.
During fiscal 1989, there was one prosecutive action
resulting from an EPA OIG Superfund investigation. Chem-tle
Environmental Sciences, Inc., of San Antonio, Texas, was indicted
on July 31, 1989, by a grand jury in the Middle District of North
Carolina. Chem-tle, an EPA Emergency Response Cleanup Services
contractor, was charged in a two-count indictment with submitting
false claims to EPA totalling $177,629.26. The OIG investigation
revealed that Chem-tle billed EPA for three months' operation of
a quality assurance program and pollution liability insurance
coverage, which the firm did not provide under the EPA contract.
This indictment led to the termination of the contract, which had
a potential value of $14 million over a three-year period.
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EXHIBIT I
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
SCHEDULE OF OBLIGATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1989
Description
Personnel Compensation &
Benefits
Travel and Transportation
of Persons
Transportation of Things
Rent, Cormmi cat ions and
Utilities
Printing and Reproduction
Other Contractual Services
Supplies and Materials
Equipment
Land and Structures
Total
$ 123,578,385
9,954,457
619,400
20,294,995
1,001,710
1,050,344,375
3,675,414
18,811,488
5,052
Accepted
$ 123,578,385
9,988,395
619,400
20,359,322
901,410
1,048,608,842
3,628,472
18,579,547
5,052
Ineligible
$
6,762
-
53,715
-
1 45,895
(10)
113
-
Unsupported
$
(40,700)
-
(118,042)
100,300
1,689,638
46,952
231,828
-
Grants, Subsidies and
Contributions
Insurance Claims and
Indemnities
Interest
Unidentified
GRAND TOTALS
264,187,952 264,018,348
1,539
2,207
(36.964)
1,539
2,207
(36.964)
169,604
Jl.492.440.010 $1.490.253.955
The accompanying note is an integral part of this schedule.
61
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EXHIBIT I
(continued)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
NOTE TO SCHEDULE OF OBLIGATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1989
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Schedule of Obligations was prepared from information
provided by the EPA Financial Management Division based on
financial information contained in the Financial Management
System (FMS) from October 1, 1988 through February 28, 1989, and
the Integrated Financial Management System (IFMS) from March 1,
1989 through September 30, 1989. EPA's policy is to prepare this
schedule in conformity with accounting policies and procedures
that are legislatively established and promulgated through
various Federal and EPA policies and procedural standards, which
is a comprehensive basis of accounting other than generally
accepted accounting principles. This schedule is not intended to
present either the financial position or the financial results of
operations in conformity with generally accepted accounting
principles.
Obligations, as presented in this Exhibit, were reported by
the Financial Management Division from a combination of
obligation data taken from the two financial systems (FMS and
IFMS) operating during the fiscal year. The Superfund Activity
For The Fiscal Year 89 Through February, 1989 Report was prepared
from information contained in the FMS Allotment File for the
current fiscal year appropriation. The total obligations from
this report amounted to $305,144,988 for the five month period
ending February 28. The Year To Date Obligation and Expended
Totals Report, prepared from information contained in the IFMS
General Journal File for the current fiscal year appropriation,
was provided to us on February 7, 1990. Total obligations from
this report amounted to $1,192,732,516 for the seven month
period, from March 1 through September 30. Combining the two
reports, the total obligations reported to us for the fiscal year
amount to $1,497,877,504, as shown below:
62
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EXHIBIT I
(continued)
System File Dates Amount
FMS Allotment 10/1/88-2/28/89 $ 305,144,988
IFMS General Journal 3/1/89-9/30/89 $1.192.732.516
Total SI.497.877.504
The total reported obligations above were compared to total
obligations of $1,510,214,270, as shown on the Report on Budget
Execution (SF-133), submitted to the Office of Management and
Budget (OMB) on November 30, 1989. The difference between the
obligations .reported to us and.the obligations reported to OMB
amounted to $12,336,766. The difference in the combined FMS and
IFMS obligations and the obligations reported to OMB was
reconciled by adding to, or subtracting from the Money Available
by Appropriation (a monthly report), certain general ledger
account balances as of September 30 to determine the obligations
incurred and reported to OMB.
The combined FMS and IFMS obligations reported to us
included a payroll accrual of $5,437,494, which was subsequently
reversed in the accounting-records by EPA. The accrual
represented personnel compensation and personnel benefits at
February 28, 1989, in the FMS before conversion to the IFMS. The
accrual should have been reversed in March 1989. The payroll
accrual was not included in the total obligations reported to
OMB. We have adjusted the Schedule of Obligations to exclude the
payroll accrual. The accrual was adjusted from the major object
class for personnel compensation because we were unable to
determine the specific amounts for compensation and benefits
accrued at February 28, 1989.
Included in the Schedule of Obligations is ($36,964), for
which there was no object class assigned to the transactions. We
were informed by Agency officials that no object class was
required for certain transactions such as year-end accruals, cash
receipts and certain conversion data. The schedule also includes
$2,207 of interest which was erroneously charged to a separate
object class and was not reclassified. Interest charges should
have been charged to a separate object class within each major
object class. The unidentified object class and interest amounts
were immaterial in relation to total obligations.
Processing Of Financial Data
In March 1989, EPA implemented a new automated IFMS to
replace the FMS. The IFMS was adapted to EPA's requirements
using a previously developed software program. The IFMS is a
63
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EXHIBIT I
(continued)
comprehensive financial management system acquired to support the
financial management functions of EPA. The system was expected
to perform the standard accounting functions of commitment and
obligation processing, document tracking, accounts payable,
accounts receivable and general ledger. The system was also
expected to support an end-user-oriented report writer, an ad hoc
query capability and an automated interface between the mainframe
and user workstations. Additional IFMS subsystems address
specific financial functions such as travel, collections and
reporting. However, during fiscal 1989, the general ledger,
accounts receivable and collections, and ad hoc reporting
subsystems did not function properly.
Recording Transactions • Obligations • Nonpayroll
Obligations are amounts of orders placed, contracts awarded,
services received, travel performed and similar transactions
during a given period that will require payments during the same
or future periods. Such amounts reflect adjustments for
differences between obligations previously recorded and actual
disbursements to liquidate those obligations. The term
"obligation" includes both.obligations that have matured (legal
liabilities) and those that are contingent upon some future
performance, such as providing services or furnishing materials.
Obligations represent funds obligated against the current fiscal
year's appropriation, including carry-over authority for
appropriations from prior years. Obligations are recorded for
budgetary purposes by appropriation at the time they are
incurred.
Recording Transactions • Obligations - Payroll
Payroll obligations are based upon actual personnel
compensation and benefits (PC&B) recorded biweekly in the payroll
subsystem (EPAYS) plus accruals at month-end and year-end. PC&B
obligations amounted to $123,578,385, which, based on EPA policy,
were recorded as obligations for budgetary accounting purposes.
Legal Limitations • Administrative Expense Ceiling
Funding for the Superfund program is achieved through a
separate annual, no-year appropriation. The legal limitation set
by Congress on the Superfund appropriation requires the Agency to
stay within an administrative expense ceiling. Congressional
intent was to limit intramural expenses to ensure that the
primary function of the Superfund of cleaning up hazardous waste
sites was protected. Agency policy is that the legally binding
administrative expense ceiling placed on the Superfund
64
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EXHIBIT I
(continued)
appropriation be managed by the Office of the Comptroller through
a distribution of specific ceilings to the individual Responsible
Planning and Implementation Officers.
Public Law 100-202 provided funding to carry out the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, with $1,425,000,000 for fiscal 1989, to be derived
from the Hazardous Substance Superfund, consisting of
$1,275,000,000 as authorized by the Superfund Amendments and
Reauthorization Act of 1986, and $150,000,000 as a payment from
general revenues to the Hazardous Substance Superfund, with all
of such funds to remain .available.until expended. The law also
provides no more than $190,000,000 to be available for
administrative expenses.
Our analysis of the administrative expenses for the year
indicated that the Superfund program obligated $177,902,631, or
11.9% of total obligations, for these administrative expenses, as
defined by Agency policy. The Agency defined administrative
expenses to include all object classes in the Schedule of
Obligations except Other Contractual Services, Land and
Structures, and Grants, Subsidies and Contributions. These
amounts are within the dollar limitation set by Congress, and are
93.6% of the administrative expense ceiling of $190,000,000.
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EXHIBIT II
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
SCHEDULE OF DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1989
Description
Personnel Compensation &
Benefits
Travel and Transportation
of Persons
Transportation of Things
Rent, Communications and
Utilities
Printing and Reproduction
Other Contractual Services
Supplies and Materials
Equipment
Land and Structures
Grants, Subsidies and
Contributions
Insurance Claims and
Indemnities
Interest
Unidentified
GRAND TOTALS
266.136
$1.235.154
The accompanying note is an integral part of this schedule.
Total
$122,203,847
4,018,563
490,419
20,475,357
741,973
658,032,402
3,200,624
15,174,499
36,231
Accepted
$122,181,383
4,017,060
490,489
20,402,247
741,973
655,960,674
3,170,544
15,149,506
36,231
Ineligible
$ 1,682
89
-
-
-
1,660,955
-
426
-
Unsupported
$ 20,782
1,414
(70)
73,110
-
410,773
30,080
24,567
-
126,650,824 126,242,462
1,883
3,145
(12.846.439)
$938.183.328
1,883
3,141
(13.112.575)
$935.285.018 ^
4
663.156
408,362
66
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EXHIBIT II
(continued)
UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
HAZARDOUS SUBSTANCE SUPERFUND
NOTE TO SCHEDULE OF DISBURSEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 1989
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Schedule of Disbursements was prepared from information
provided by the EPA Financial Management Division based on
financial information contained in the Financial Management
System (FMS) from October 1, 1988 through February 28, 1989, and
the Integrated Financial Management System (IFMS) from March 1,
1989 through September 30, 1989. EPA's policy is to prepare this
schedule in conformity with accounting policies and procedures
that are legislatively established and promulgated through
various Federal and EPA policies and procedural standards, which
is a comprehensive basis of accounting other than generally
accepted accounting principles. This schedule is not intended to
present either the financial position or the financial results of
operations in conformity with generally accepted accounting
principles.
Disbursements, as presented in this Exhibit, were reported
by the Financial Management Division from a combination of
disbursement data for appropriations 68-20X8145 and 68-20M8145
taken from the two financial systems (FMS and IFMS) operating
during the fiscal year. The Superfund Activity For The Fiscal
Year 89 Through February, 1989 Report was prepared from
information contained in the FMS Detail History File. The total
year to date disbursements from this report amounted to
$370,669,594 for the five month period ending February 28. The
Year To Date Disbursement Totals Report, prepared from
information contained in the IFMS General Journal File, was
provided to us on February 7, 1990. Total disbursements from
this report amounted to $567,513,734 for the seven month period,
from March 1 through September 30. Combining the two reports,
the total disbursements reported to us for the fiscal year amount
to $938,183,328, as shown below:
67
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EXHIBIT II
(continued)
System File Dates Amount
FMS Detail History 10/1/88-2/28/89 $370,669,594
IFMS General Journal 3/1/89-9/30/89 $567.513.734
Total $938.183.328
The total reported disbursements above were compared to
total outlays of $911,415,634, as shown on the Report on Budget
Execution (SF-133), submitted to the Office of Management and
Budget (OMB) on November 30, 1989. The difference between the
disbursements reported to us and the outlays reported to OMB
amounted to $26,767,694. The difference in disbursements is a
result, in part, of conversion activity from FMS to IFMS files
and year-end closing entries.
The Schedule of Disbursements includes ($12,846,439) for
which no object class was assigned to the transactions. We were
informed by Agency officials that no object class was required
for certain transactions such as accruals, cash receipts and
certain conversion data. The schedule also includes $3,145 of
interest which was erroneously charged to a separate object class
and was not reclassified. Interest charges should have been
charged to a separate object class within each major object
class.
Processing Of Financial Data
In March 1989, EPA implemented a new automated IFMS to
replace the FMS. The IFMS was adapted to EPA's requirements
using a previously developed software program. The IFMS is a
comprehensive financial management system acquired to support the
financial management functions of EPA. The system was expected
to perform the standard accounting functions of commitment and
obligation processing, documents tracking, accounts payable,
accounts receivable and general ledger. The system was also
expected to support an end-user-oriented report writer, an ad hoc
query capability and an automated interface between the mainframe
and user workstations. Additional IFMS subsystems address
specific financial functions such as travel, collections and
reporting. However, during fiscal 1989, the general ledger,
accounts receivable and collections, and ad hoc reporting
subsystems did not function properly.
68
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EXHIBIT II
(continued)
Recording Transactions - Disbursements - Nonpayroll
Disbursements represent the amount of cash outlays made to
liquidate obligations. They represent funds disbursed during the
current fiscal year against either prior years' or current year's
appropriations. Nonpayroll disbursements are recorded on the
cash basis of accounting.
Recording Transactions • Disbursements - Payroll
Personnel compensation and benefits (PC&B) disbursements are
based upon actual PC&B costs recorded as incurred biweekly in the
payroll subsystem (EPAYS), with adjustments for accruals at
month-end and year-end. PC&B disbursements amounted to
$122,203,847, which represented PC&B costs incurred during fiscal
1989 on an accrual basis.
Recording Transactions - Property and Equipment and Depreciation
EPA's policy is to capitalize property and equipment with a
cost greater than $5,000 and a useful life of two years or
greater. However, disbursements for equipment recorded in this
Exhibit are presented on a cash basis, without adjustment for
capitalized items. No depreciation was calculated or recorded
for purposes of this schedule.
69
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EXHIBIT III
1 OF 4
SUPERFUND AUDIT REPORTS
ISSUED DURING FISCAL 1989
INTERNAL AND MANAGEMENT AUDITS AND SPECIAL REVIEWS
Final
Report
Number Description
Reviews Required By CERCLA
9100488 TRUST FUND AUDIT, FISCAL 1988
9100236 EPA PROGRESS REPORT REVIEW, FISCAL
1987
Audit
Control Number
P1SFF8-11-0048
E1SF*7-11-0037
Performance Audits
9100493 REG. 5 MANAGEMENT OF SIGNIFICANT REMOVALS
9100513 REG. 6 MANAGEMENT OF SIGNIFICANT REMOVALS
REG. 2 SUPERFUND/RCRA HEALTH AND SAFETY
REMOVAL SITE REVIEW, KELLY KOET, OH
REMOVAL SITE REVIEW,
REMOVAL SITE REVIEW,
REMOVAL SITE REVIEW,
9100213
9400034
9400035
9100338
9400046
9400042
BROOKS FOUNDRY, MI
WATERBORO, ME
ENGINUITY, IN
REMOVAL SITE REVIEW, M-E-W STUDY AREA, CA
E1SHD9-
E1SHD9-
E1SK*7-
E1SHG9-
E1SHG9-
E1SHF9-
E1SHG9-
E1SHG9-
05-0019
06-0017
02-0216
05-0374
05-0373
01-0144
05-0403
09-0111
Special Review
9400033 OAK GROVE SANITARY LANDFILL, MN
Date
Report
Issued
9/22/89
4/ 6/89
9/29/89
9/29/89
3/15/89
6/21/89
6/22/89
6/29/89
9/29/89
9/22/89
E6FGG9-05-0272 6/21/89
70
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EXHIBIT III
2 OF 4
SUPERFUND AUDIT REPORTS
ISSUED DURING FISCAL 1989
COOPERATIVE AGREEMENTS AND STATE CREDITS
Final
Report
Number Auditee
Audit
Control Number
Cooperative Agreements
9100226 NEW JERSEY DEPT. OF ENV. PROTECTION P5BG*7-02-0084
9100014 TENNESSEE DEPT. OF HEALTH & ENV. SERVICES P5CG*8-04-0092
9100484 COLORADO DEPARTMENT OF HEALTH P5CG*8-08-0117
9300028 SOUTH CAROLINA DEPT. HEALTH & ENV. CONTROL E5CGN8-04-0329
9100021 MISSOURI DEPARTMENT OF NATURAL RESOURCES P5BGN7-07-0089
9300022 ARKANSAS DEPT. OF POLLUTION CONT. & ECOLOGY P5CGN8-06-0122
9100034 CITY OF LIDGERWOOD, NORTH DAKOTA E5CG*8-08-0019
Date
Report
Issued
3/29/89
10/18/88
9/21/89
3/13/89
10/19/88
2/22/89
10/26/88
State Credits
9100221 NEW YORK DEPT. OF ENV. CONSERV.-LOVE CANAL
P5CG*7-02-0083 3/23/89
71
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EXHIBIT III
3 OF 4
SUPERFUND AUDIT REPORTS
ISSUED DURING FISCAL 1989
INTERAGENCY AGREEMENTS
Final Date
Report Audit Report
Number Auditee Control Number Issued
9100050 ARMY CORPS OF ENGINEERS-FISCAL 1987 M5BFL9-11-0011 ll/ 9/88
9100276 ARMY CORPS OF ENGINEERS-JIBBOOM SITE M5BFL9-11-0037 5/10/89
9400039 ARMY CORPS OF ENGINEERS-FOLLOW-UP M5BFP9-11-0044 9/19/89
9100275 COAST GUARD (DOT)-FISCAL 1987 M5BFL9-11-0038 5/10/89
9100168 ENERGY DEPARTMENT-FISCAL 1987 M5BFL9-11-0022 1/24/89
9100259 FED. EMERG. MGMT. AGENCY-FISCAL 1987 M5BFL9-11-0029 5/ 1/89
9100415 HEALTH & HUMAN SERVICES DEPT.-MISSOURI M5BFL9-11-0048 8/ 9/89
9100096 JUSTICE DEPARTMENT-FISCAL 1987 M5BFL9-11-0020 12/12/88
9100051 NAT'L OCEANIC & ATMOS. ADM.-FY 1984-6 M5BFL9-11-0010 11/10/88
72
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EXHIBIT III
4 OF 4
SUPERFUND AUDIT REPORTS
ISSUED DURING FISCAL 1989
CONTRACT AUDITS
Final
Report
Number Auditee
Preaward Proposals
9100099 ALLIANCE TECHNOLOGIES CORPORATION, MA
9100128 AMERICAN CROSS-ARM COMPANY, INC., FL
9100027 BECHTEL ENVIRONMENTAL, INC., TN
9100047 BLACK & VEATCH, TN
9100181 BLACK & VEATCH, MO
9100053 COM FEDERAL PROGRAMS CORPORATION, FL
9400006 DOBBS CORPORATION, GA
9100049 ECOLOGY & ENVIRONMENT, INC., NY
9100101 ENGINEERING DESIGN & GEOSCIENCE, TN
9100065 GIBBS & HILL, NY
9100093 HOLT AND ROSS, NY
9100059 IT CORPORATION, TN
9100052 JAMMAL & ASSOCIATES, FL
9100066 KAISER ENGINEERS, INC., CA
9400003 LIFE SYSTEMS, INC., OH-FISCAL 1989
9100010 LSA ASSOCIATES, INC., CA
9100094 MALCOLM PIRNIE, INC., NY
9100180 RADIAN CORPORATION, TX
9100296 SCIENCE APPLICATIONS INT'L CORP., CA
9400004 SIRRINE ENVIRONMENTAL, SC
9400014 SOIL & MATERIALS ENGINEERS, INC., GA
9100046 TERRACON CONSULTANTS, IA
Interim Audits
9100448 AMERICAN ENVIRONMENTAL MANAGEMENT, CA
9100229 MAECORP, INC., IL-FISCAL 1987
9100443 ROY F. WESTON, PA
Final Audits
9300082 ENSITE, INC., GA-PALMETTO WOODS SITE, SC
9100268 KAAREN JOHNSON ASSOCIATES, MD
9300098 PEI ASSOCIATES, INC., OH-LEE'S FARM, WI
9100326 TICHENOR & EICHE, CPAs, KY
Indirect Costs
9300083 HAZTECH, INC., GA
9300071 J.M. MONTGOMERY CONSULTING, CA
9100261 MAECORP, INC., IL-FISCAL 1987
9300097 O.H. MATERIALS COMPANY, OH-FISCAL 1987
Audit
Control Number
D9AFL9-01-0039
P9AGL8-04-0359
D9AGL9-09-0020
D9AGL9-04-0029
D9AHL9-07-0021
D9AGL9-04-0057
P9AFP9-04-0025
D9AFL9-01-0030
D9AGL9-04-0092
D9AGL9-02-0065
D9AGL9-02-0070
D9AGL9-09-0027
D9AGL9-04-0028
D9AKL9-09-0035
D9AGP9-05-0112
D9AGL9-09-0016
D9AGL9-02-0066
D9AKL9-06-0014
D9AKL9-09-0175
P9AGP9-04-0018
P9AGP9-04-0024
P9AJP8-07-0206
D9BGL9-01-0214
P9BHL8-05-0418
D9BGL9-01-0215
E9CHN9-04-0234
P9CF*B-1 1-0055
P9CHN7-05-0558
E9CFL9-03-0132
P9DKN8-04-0316
S9DK*8-09-0161
P9DHL8-05-0309
P9DKN8-05-0635
Date
Report
Issued
12/15/88
12/27/88
10/24/88
ll/ 2/88
10/28/88
11/10/88
1/17/89
ll/ 7/88
12/20/88
11/16/88
12/13/88
11/14/88
11/10/88
11/16/88
11/18/88
10/14/88
12/13/88
10/ 4/88
5/30/89
1/12/89
3/ 2/89
ll/ 2/88
8/30/89
3/31/89
8/28/89
8/18/89
5/ 5/89
9/27/89
6/14/89
8/21/89
7/18/89
5/ 2/89
9/19/89
73
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APPENDIX: ACRONYMS AND ABBREVIATIONS
ADPCE
CDH
CERCLA
CERCLIS
CFR
COE
DOE
DOJ
DOT
EPA
ERCS
FEMA
FMO
FMS
FSR
IFMS
I PA
LNRD
MDNR
MPCA
NCP or National
Contingency Plan
Arkansas Department of Pollution Control and
Ecology
Colorado Department of Health
Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as
amended
Comprehensive Environmental Response,
Compensation, and Liability Information
System, the Superfund management information
system
Code of Federal Regulations
Corps of Engineers
Department of Energy
Department of Justice
Department of Transportation
Environmental Protection Agency
Emergency Response Cleanup Services
Federal Emergency Management Agency
Financial Management Officer
Financial Management System (EPA)
Financial Status Report
Integrated Financial Management System (EPA)
Independent public accounting firm
Land and Natural Resources Division
(Department of Justice)
Missouri Department of Natural Resources
Minnesota Pollution Control Agency
National Oil and Hazardous Substances
Contingency Plan, 40 CFR Part 300
74
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NEIC
NJDEP
NOAA
NPL
NYSDEC
NYSDOH
NYSDOT
OGSL
OIG
OSC
OSHA
OSWER
PAO
PC&B
PPAS
PRP
QAPP
RCRA
RI/FS
SARA
SCDHEC
TAT
National Enforcement Investigations Center
(EPA)
New Jersey Department of Environmental
Protection
National Oceanic and Atmospheric
Administration
National Priorities List
New York State Department of Environmental
Conservation
New York State Department of Health
New York State Department of Transportation
Oak Grove Sanitary Landfill
Office of Inspector General
On-Scene Coordinator
Occupational Safety and Health Administration
Office of Solid Waste and Emergency Response
(EPA)
Property Accountable Officer
Personnel Compensation and Benefits
Personal Property Accounting System (EPA)
Potentially Responsible Party
Quality Assurance Project Plan
Resource Conservation and Recovery Act
Remedial Investigation/Feasibility Study
Superfund Amendments and Reauthorization Act
of 1986
South Carolina Department of Health and
Environmental Control
Technical Assistance Team
75
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TDHES Tennessee Department of Health and
Environmental Services
Trust Fund Hazardous Substance Superfund
UDC Urban Development Corporation
76
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