U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Evaluation Report
Improved Management of
Superfund Special Accounts
Will Make More Funds
Available for Clean-ups
Report No. 09-P-01 19
March 18,2009
-------
Report Contributors:
Carolyn Copper
Tina Lovingood
Angela Bennett
Jee Kim
Barry Parker
Katherine Beam
Abbreviations
CERCLA
CERCLIS
EPA
GAO
OCFO
OECA
OIG
OMB
OSRTI
OSWER
PRP
SAM Report
Trust Fund
Comprehensive Environmental Response, Compensation, and Liability Act
Comprehensive Environmental Response, Compensation, and Liability
Information System
U.S. Environmental Protection Agency
U.S. Government Accountability Office
Office of the Chief Financial Officer
Office of Enforcement and Compliance Assurance
Office of Inspector General
Office of Management and Budget
Office of Superfund Remediation and Technology Innovation
Office of Solid Waste and Emergency Response
Potentially Responsible Party
Special Accounts Management Report
Hazardous Substance Superfund Trust Fund
-------
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-P-0119
March 18,2009
Why We Did This Review
In February 2006, the Office of
Inspector General
recommended that the U.S.
Environmental Protection
Agency (EPA) timely review
Superfund special accounts to
ensure funds are used
consistent with guidance. We
followed up on EPA's progress
in implementing this and other
recommendations by evaluating
EPA's use of special accounts
that had high available balances
or were at least 10 years old.
Background
The Comprehensive
Environmental Response,
Compensation, and Liability
Act (CERCLA) authorizes EPA
to retain and use funds received
in settlements to address
CERCLA response actions
contemplated in settlement
agreements. EPA retains these
funds in site-specific accounts,
called "special accounts." As
of May 2008, EPA had over
$1.1 billion in 819 Superfund
special accounts.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2009/
20090318-09-P-0119.pdf
Improved Management of Superfund
Special Accounts Will Make More Funds
Available for Clean-ups
What We Found
EPA had not used about $65 million in Superfund special accounts that were
available because it lacked some management controls. Additionally, EPA was
holding more than $88 million in special account funds in reserve that could be
used to support priority Superfund sites, including sites where human exposure
was not under control. EPA's fragmented and uncoordinated approaches to
account for these funds led to missed opportunities to fund needed Superfund
clean-ups. EPA lacked visibility over the amount and use of special account
funds. In previous reports, we had recommended that about $59 million of the
$65 million of idle special account funds be reclassified or transferred to the
Hazardous Substance Superfund Trust Fund (Trust Fund). In this report, we
recommend that the remaining approximately $6.6 million be reclassified or
transferred to the Trust Fund.
EPA has addressed various aspects of managing special accounts. However,
improvements in EPA oversight and management of some accounts are needed to
ensure Agency guidance is followed and the significant amount of money in
Superfund special accounts is properly managed to support Superfund clean-up
needs. EPA has not established the management controls needed to address the
challenge of managing the $1.1 billion it currently has in 819 Superfund special
accounts.
What We Recommend
We recommend that EPA implement management controls to improve its use,
management, and transparency of special accounts. A central management
official is needed, available account data needs to be used, and new policies and
public reporting requirements need to be implemented. EPA agreed with and has
implemented, or committed to implement, recommendations in earlier reports to
reclassify or transfer to the Trust Fund $59 million in idle special accounts, and it
should now act on the remaining $6.6 million. EPA generally concurred with the
Office of Inspector General's recommendations for improving the management
of special accounts. However, some of the actions the Agency proposed to take
did not meet the intent of OIG Recommendation 1. Therefore portions of
Recommendation 1 are undecided with resolution in progress. Regions 1, 2, 4, 6,
7, and 10 generally concurred with the recommendations, and in some cases, had
already implemented them or provided updated figures. Several regional
recommendations remain open.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
PRO!
OFFICE OF
INSPECTOR GENERAL
March 18, 2009
MEMORANDUM
SUBJECT: Improved Management of Superfund Special Accounts
Will Make More Funds Available for Clean-ups
Report No. 09-P-0119
FROM:
TO:
Wade T. Najjum
Assistant Inspector General
Office of Program Evaluation
Scott Fulton, Acting Deputy Administrator
Barry Breen, Acting Assistant Administrator for Solid Waste and
Emergency Response
Catherine McCabe, Acting Assistant Administrator for Enforcement
and Compliance Assurance
Maryann Froehlich, Acting Chief Financial Officer
Ira Leighton, Acting Regional Administrator, Region 1
George Pavlou, Acting Regional Administrator, Region 2
Stan Meiburg, Acting Regional Administrator, Region 4
Lawrence Starfield, Acting Regional Administrator, Region 6
William Rice, Acting Regional Administrator, Region 7
Michelle Pirzadeh, Acting Regional Administrator, Region 10
This is our report on the subject evaluation conducted by the Office of Inspector General (OIG)
of the U.S. Environmental Protection Agency (EPA). This report contains findings that describe
the problems the OIG has identified and corrective actions the OIG recommends. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determinations on matters in this report will be made by EPA managers in accordance with
established resolution procedures.
The estimated cost of this and the three early warning reports issued to Regions 5, 8, and 9 -
calculated by multiplying the project's staff days by the applicable daily full cost billing rates in
effect at the time - is $947,442.
-------
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days. You should include a corrective actions plan for agreed upon
actions, including milestone dates. Your responses for Recommendations l(a), l(e), and l(f) did
not meet the intent of the OIG recommendations. Therefore, these responses need to be
reevaluated and revised before submitting the 90-day response to this report. The Acting
Regional Administrators for Regions 2 and 7 have already taken appropriate corrective actions
and thus are not required to respond. We have no objections to the further release of this report
to the public. This report will be available at www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact me at 202-566-0837
or najjum.wade@epa.gov, or Carolyn Copper at 202-566-0829 or copper.carolyn@epa.gov.
-------
Improved Management of Superfund Special Accounts 09-P-0119
Will Make More Funds Available for Clean-ups
Table of Contents
Purpose 1
Background 1
Noteworthy Achievements 2
Scope and Methodology 3
Results of Review 4
EPA Program Managers Did Not Know Whether Special Accounts
Were Used Consistent With Guidance 4
EPA Has About $65 Million in Idle Superfund Money That Could Be Better Used 5
EPA's Lack of Central Management Contributes to Under Utilization of Funds 6
EPA Did Not Use Special Accounts Data It Collected to Manage the Accounts 7
EPA Lacks a Policy to Address Use of Funds Held in Reserve 8
EPA's Lack of Public Reporting on Special Accounts Inhibits
Transparency and Oversight 9
Conclusions 9
Recommendations 10
Agency Comments and OIG Evaluation 11
Status of Recommendations and Potential Monetary Benefits 13
Appendices
A Prior Reports 15
B Details on Scope and Methodology 17
C Table of Opportunities for Better Utilization through
Reclassification or Transfer to the Fund 19
D Details on Special Accounts with Opportunities for
Better Utilization through Reclassification or Transfer 20
E Details on Reserve Accounts 24
- continued -
-------
Improved Management of Superfund Special Accounts 09-P-0119
Will Make More Funds Available for Clean-ups
F Sample Aggregate Financial Information EPA Could Report 26
G Agency Response to OIG Draft Report 27
H Region 1 Response to OIG Draft Report 42
I Region 2 Response to OIG Draft Report 45
J Region 4 Response to OIG Draft Report 46
K Region 6 Response to OIG Draft Report 47
L Region 7 Response to OIG Draft Report 50
M Region 10 Response to OIG Draft Report 52
N Distribution 54
-------
09-P-0119
Purpose
The purpose of this evaluation was to assess the U.S. Environmental Protection Agency's
(EPA's) utilization of Superfund special account funds. We used EPA's 2001 guidance1 on the
"General Hierarchy of Special Account Funds Use" to evaluate EPA's utilization of special
account funds. We conducted our evaluation in response to an Office of Management and
Budget (OMB) request and to follow up on the Agency's implementation of prior EPA Office of
Inspector General (OIG) recommendations in this area. Our objective was to evaluate EPA's use
of special accounts that had high available balances or were at least 10 years old.
The OIG has issued three early warning reports to Regions 5, 8, and 9 as part of this evaluation.
These reports are discussed in Appendix A.
Background
EPA is authorized by section 122(b)(3) of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) to retain and use funds received in a settlement to
address CERCLA response actions contemplated in a settlement agreement. EPA retains these
funds in interest-earning site-specific accounts, called "special accounts." Special accounts are
subaccounts within the EPA Hazardous Substance Superfund Trust Fund (Trust Fund).
Superfund special account funds remain available for use in site-specific special accounts and
should be used according to EPA's "General Hierarchy of Special Account Funds Use" (see
Table 1).
Table 1: General Hierarchy of Special Account Funds Use
1. Use as settlement incentive for future work agreements.
2. Fund EPA-lead response actions.
3. Estimate future site costs and risks, reserve estimated amount; if there is a remainder, apply to
previous EPA site expenditures.
4. If there are funds remaining after all site work is completed and funds have been applied to
previous EPA site expenditures, transfer remaining balance to the Trust Fund.
Source: Special Accounts: Guidance on Key Decision Points in Using Special Account Funds, September 28, 2001.
Nearly 20 years ago, few Superfund special accounts existed, but their numbers and dollar values
have grown considerably since that time (see Charts 1 and 2). Since 1990, the number of special
accounts has grown from 5, with available balances totaling about $1.9 million, to 819, with
available balances totaling more than $1.1 billion as of May 31, 2008. This amount is nearly as
much as EPA's Superfund enacted budget of about $1.2 billion for Fiscal Year 2008.
1 September 28, 2001, Special Accounts: Guidance on Key Decision Points in Using Special Account Funds, Office of Solid
Waste and Emergency Response # 9275.1-03.
-------
09-P-0119
Chart 1: Total Number of Superfund
Special Accounts
Chart 2: Total Available Dollars
in Superfund Special Accounts
819
767,
520
160
36
1990 1995 2000 2005 2007 2008*
, j, „ * Fiscal Year
Show n by # Accounts
$1,130.12
$1 ,091 .63 » *
$886.71 «
$390.62 _
•
$21 8.02 ^
$1.87
A
1990 1995 2000 2005 2007 2008*
Fiscal Year
Show n in Millions
* 2008 amounts as of May 31, 2008
Source: OIG analysis of EPA data.
On April 22, 2004, EPA issued a report on an internal study, SUPERFUND: Building on the
Past, Looking to the Superfund Future., to identify opportunities for program efficiencies that
would enable the Agency to begin and ultimately complete more long-term clean-ups with
current resources. In response to this study, known as the 120-Day Study, EPA acknowledged in
a directive that it had no systematic approach for capturing and reporting decisions concerning
the use of special accounts, or for determining when special account resources may be returned
to the Trust Fund.2 To address this concern, EPA instructed its regions via the directive to
provide interim information to Headquarters on the management of special accounts. By the end
of 2005, the regions provided Headquarters this interim information, referred to as the 2005
Special Accounts Management (SAM) report. The SAM report included management data such
as available balance; planned uses; remaining balances; and planned reclassifications, transfers,
and/or closures. Also in response to the 120-Day Study, EPA created the Superfund Board of
Directors. The Board's role is to prepare, coordinate, and execute action plans to address the
report's recommendations. The Assistant Administrators for the Office of Solid Waste and
Emergency Response (OSWER) and the Office of Enforcement and Compliance Assurance
(OECA) co-chair the Board.
Noteworthy Achievements
EPA has recognized the need to improve its monitoring and management of special accounts.
Over the last several years, EPA has issued multiple special account guidance documents. These
August 4,2005, Management of Special Accounts (OSWER Directive 9275.1-16).
-------
09-P-0119
documents included guidance on reclassification and account close-out procedures. EPA
Headquarters and regions have also increased their tracking of special accounts data and
provided training. Through proper management of site-specific special accounts, the Agency has
made available previously appropriated Superfund resources to support other Superfund sites.
Specific actions include:
• Using the SAM reports to improve the Comprehensive Environmental Response,
Compensation, and Liability Information System (CERCLIS) database to track the
planned and actual uses of special account resources, and using this data for Fiscal Year
2009 work planning discussions. These CERCLIS improvements allow the regions to
plan their response budgets with consideration of special account resources available.
CERCLIS improvements also provide Headquarters the ability to routinely monitor and
review regional decisions concerning the use of these accounts.
• Holding National Meetings in 2006, 2007, and 2008, and providing all-day training to
most regions.
• Improving the Special Accounts Intranet site to provide easy access to EPA policy and
guidance on special accounts and training materials. New tools on the site include the
Special Account Annotated Bibliography and the Special Accounts Reference Outline for
Regional Attorneys.
• Developing a Special Account Management Strategy that outlines activities and areas
where EPA will continue to work to improve the management of special account funds
and the transparency of special account information.
• Identifying points of contact for special account issues in each of its Headquarters offices
and the regions to facilitate coordination on special account issues.
• As of August 27, 2008, reclassifying at least $91.3 million,3 including about
$29.8 million in response to three prior OIG reports, and transferring more than
$1.3 million to the Trust Fund.
Scope and Methodology
We conducted our review in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the evaluation to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our evaluation
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our evaluation objectives. We performed our review from April 2007
through November 2008. Appendix B contains additional details on our scope and methodology.
Several prior reports by the Agency, the EPA OIG, and the U.S. Government Accountability
Office (GAO) have identified weaknesses in EPA's management of special accounts. These
reports, including three early warning reports issued as part of this evaluation, are summarized in
Appendix A.
3 The amount reclassified includes $12,736,126 in reclassifications Region 9 completed using the deobligation and
reobligation process (as provided by Region 9), and the remainder includes amounts EPA reclassified using
transactions using a specific reclassification code ("KV").
-------
09-P-0119
Results of Review
Based on our review of a sample,4 we found that although EPA is generally using special account
funds consistent with its hierarchy, EPA lost opportunities to use about $65 million in Superfund
special accounts. As a result of our early warning reports, EPA implemented or agreed to
implement actions to reclassify or transfer to the Trust Fund about $59 million, and it now needs
to do the same for about $6.6 million more. Additionally, we identified more than $88 million in
special account funds being held as reserves (or holdbacks). If the reserves were reclassified,
appropriated dollars made available from the reclassification could be used to support other
priority Superfund sites, including sites where human exposure is not under control. The
opportunities were lost because EPA lacked some fundamental management controls, including:
• central management (including appropriate "tone at the top") and oversight to ensure
special accounts were used consistent with Agency special accounts guidance and OMB
guidance on internal control,5
• use of special accounts data that EPA collects,
• a policy to address the use of funds held in reserve, and
• public reporting on special accounts.
EPA lacked these controls primarily because EPA management had not recognized a need for
them. EPA managers have the responsibility for establishing and maintaining internal controls to
achieve effective and efficient operations and reliable financial reporting. Without these
controls, EPA was not aware of and could not demonstrate whether Superfund special account
funds were being used consistent with the hierarchy, or the Agency's actions to improve use of
special accounts have produced results.
In addition, senior managers cannot make informed decisions about the significant available
balance of approximately $1.1 billion in special accounts, nor ensure stewardship of these
resources. EPA's oversight organizations are also prevented from clearly understanding how
special accounts are being used. Implementing needed controls could help EPA improve
management and transparency of special accounts and better use special account funds to ensure
idle funds are used to fund other projects that could help protect public health and the
environment.
EPA Program Managers Did Not Know Whether Special Accounts Were Used
Consistent With Guidance
EPA did not know, and could not demonstrate, that special account funds had been used
consistent with a hierarchy of priorities for spending these funds and as detailed in its guidance.
As a result, oversight bodies, including Congress and OMB, were not able to clearly know how
special accounts funds were being used or the results the special accounts program was getting.
Also, EPA itself did not know whether these large sums of money were being properly managed.
4 As of May 2007, the accounts reviewed in our sample represented 11 percent of the total number of all Superfund
special accounts and 47 percent of the total value of all accounts. We do not project our results beyond this sample.
5December21, 2004, OMB Circular A-123, revisions to Management's Responsibility for Internal Control.
-------
09-P-0119
In September 2001, EPA OSWER and OECA jointly issued Directive #9275.1-03 to provide
general guidelines for regions regarding when and how special account funds should be used
throughout the remedial process. It detailed a "General Hierarchy of Special Account Funds
Use" that established priorities for different uses of the funds (see Table 1).
As Table 2 shows, we found that EPA was using or planned to use (at the time we collected the
data) about $51.7 million of the sampled available balances as an incentive to Potentially
Responsible Parties (PRPs) to settle with EPA for clean-up. EPA was using or planned to use
$265.6 million of the sampled available balances for EPA activities (lead-response), involving
oversight of PRPs' clean-up work or cleaning up a site itself. EPA also reserved (held back)
approximately $114.7 million of the sampled special accounts available balances to address
future site costs and risks. This included approximately $88.4 million EPA was not required to
hold and about $26.3 million it was required to hold due to settlement agreements. The subject
of reserves is discussed later in this report.
Table 2: Planned Uses per General Hierarchy of Special Account Funds
Region
1
2
3
4
5
6
1
8
9
10
Total
Available
Balances
$65,589,228
64,154,161
3,248,811
1,507,946
19,304,991
8,329,059
1,788,465
63,713,312
261,662,276
7,829,661
$497,127,910
Settlement
Incentive
(Priority 1)
$12,251,554
0
0
0
0
0
184,709
0
39,299,625
0
$51,735,888
EPA Lead-
Response
(Priority 2)
$35,601,938
63,565,175
3,248,811
25,000
6,346,183
6,913,850
123,266
55,805,468
91,814,533
2,439,629
$265,642,853
Future Site
Costs
(Priority 3)
$1,100,000
0
0
840,663
7,834,778
0
0
801,007
12,748,118
3,000,000
$26,324,566
Risk
Reserves
(Priority 3)
$16,776,000
0
0
0
1,675,029
0
0
0
70,000,000
0
$88,451,029
Reclassify
(Priority 3)
$0
573,000
0
0
3,324,000
1,250,377
1,480,490
7,106,837
20,000,000
2,390,032
$36,124,736
Transfer to
Trust Fund
(Priority 4)
$99,614
0
0
642,283
0
164,832
0
0
0
0
$906,729
Unplanned
Amounts
$1,122
15,986
0
0
125,001
0
0
0
27,800,000
0
$27,942,109
Source: EPA OIG analysis of a sample of Superfund special accounts. Figures are approximate due to rounding,
and are updated since our May 2007 sample selection.
EPA Has About $65 Million in Idle Superfund Money That Could Be Better Used
While EPA had generally followed its special accounts guidance for the sample of accounts
reviewed, about $65 million in 20 accounts had not yet been reclassified or transferred and could
be put to better use. Of the 20 accounts, 16 of the accounts were from the portion of our sample
of accounts that were at least 10 years old. As shown in Table 2, the amount of funds that could
be better used includes more than $36 million identified for reclassification, more than $900,000
identified for transfer to the Trust Fund, and nearly $28 million that had no planned uses. Some
of these funds could have been used earlier. About 3 years ago, EPA identified approximately
$6.9 million of these funds as available for reclassification or transfer, but these actions did not
occur. Breakdowns of these funds by region are in Appendices C and D. EPA could have
potentially used some of these funds for sites that did not receive funding for new construction in
2005 and 2006, or to address other clean-up priorities, such as uncontrolled human health
exposures.
-------
09-P-0119
In previous reports, we recommended about $59 million of the $65 million of idle special
account funds in Regions 5, 8, and 9 be reclassified or transferred to the Trust Fund. EPA
agreed with and has implemented, or committed to implement, those previous recommendations.
We also found that other regions can reclassify or transfer to the Trust Fund, as appropriate,
approximately $6.6 million more, as detailed in Table 3 and Appendix D.
EPA's Lack of Central Management Contributes to Under Utilization of Funds
EPA lacks an effective control structure6 to address accountability and related issues pertaining
to the management of special accounts. EPA has a decentralized management control structure
that impedes management's visibility and oversight of special accounts. This has resulted in
approximately $65 million of planned reclassifications, transfers, and account closures not
occurring or being delayed, and funds remaining idle. By not completing these planned actions,
EPA's ability to make the best use of appropriated Superfund dollars is impeded. More
specifically, because EPA did not apply special account funds to previous site expenditures
(reclassify the funds), EPA did not use those funds to address other needed Superfund clean-ups.
EPA's special accounts management is fragmented among 4 Headquarters offices and 10
regional offices. Each of these offices has separate roles and responsibilities, and no one office
or managing body is centrally responsible for managing, overseeing, and coordinating special
accounts work for these various offices.
According to the Agency, management of special accounts is a team effort. Enforcement staff
(in OECA and the regions) secure settlements and collections, use funds to encourage PRPs to
negotiate, and ensure EPA uses the funds consistent with settlements. Finance staff (in the
Office of the Chief Financial Officer [OCFO] and the regions) track and account for the funds.
Program staff (in OSWER and the regions) use funds to achieve the clean-ups. Office of
General Counsel provides legal advice on EPA's authorities under CERCLA to establish,
manage, and use special accounts. Regional offices manage the day-to-day special accounts
work.
Headquarters managers believe the regional management of the accounts, in addition to the
multiple management guidance documents issued by Headquarters offices, is sufficient for
managing EPA special accounts. In the past, they questioned the need for a central management
structure. Though Headquarters offices have jointly issued special accounts guidance, none of
the offices has taken the lead or been designated as the central management official to ensure
proper management, oversight, and coordination of special accounts work by Headquarters and
regional offices. Consequently, no single Headquarters entity is responsible for the management
or oversight of special accounts.
For example, the lack of central management of special accounts resulted in Region 5's missed
opportunity to use special account funds to address an unfunded Region 5 clean-up in 2005. In
August 2007, we reported that Region 5 staff had recommended reclassifying approximately
$2.8 million from the Thermo Chem Superfund site special account in April 2004. These funds
were not reclassified then because Region 5 finance staff did not confirm receipt of the
6 OMB requires an effective control environment. The control environment is the organizational structure and
culture created by management and employees to sustain organizational support for effective internal control.
-------
09-P-0119
reclassification memo to complete the reclassification because the site managers were unaware
that action was needed or required. Controls such as the verification of finance's receipt of the
memo, a milestone in the reclassification memo for completing reclassification, and certification
that the reclassification occurred would have helped Region 5 accomplish the $2.8-million
reclassification. As we reported in August 2007, had Region 5 reclassified the $2.8 million in
2004 as planned, it could have supported other clean-up needs. This included Region 5's Ottawa
Radiation site (Areas 1, 4, 9, and 11, and Illinois Power), which at the time had uncontrolled
human health exposures.
EPA Did Not Use Special Accounts Data It Collected to Manage the Accounts
EPA Headquarters did not use interim special accounts data it collected in 2005 (SAM report) to
address an internal Agency recommendation (Recommendation 97 from EPA's 120-Day Study)
to review the oldest special accounts. Further, EPA Headquarters did not provide any analysis or
follow-up with the regions on their proposed actions at the time to better use special accounts
funds. In addition, although EPA is developing a Special Account Management Strategy, EPA
has no comprehensive plan to use the current data being entered into CERCLIS to manage
special accounts, nor has it identified a management official to be responsible for managing the
data at the national level. As a result, EPA lost and may continue to lose opportunities to use
some of these funds to address priority Superfund sites earlier, including those with uncontrolled
human health exposures.
Recommendation 97 in the Agency's 120-Day Study directed OECA to identify the oldest
special accounts and then meet with the regions to discuss uses of those dollars and progress
toward using them. In July 2008, EPA reported in a status update that its work on this
recommendation was complete, with action ongoing. However, our interviews with the Agency
disclosed that EPA has not performed an analysis of the older accounts as stated. Rather EPA
planned to look at all accounts once CERCLIS updates are complete, in early November 2008.
The Agency's 2005 special account data (SAM report) identified about $6.9 million from nine
accounts (eight were 10 years old or older) that could have been better and earlier utilized (see
Appendix C). Although the SAM report was submitted by the regions to EPA Headquarters,
Headquarters did not follow up to ensure regions used the funds. As a result, regions' plans to
reclassify or transfer special accounts funds to the Trust Fund in 2005 remained unexecuted for
several years. Details on the special accounts with opportunities for better utilization are in
Appendices C and D. EPA continues to collect special account data and create special account
CERCLIS reports, but does not have a comprehensive plan to use the data to manage or oversee
the special accounts.
Had EPA addressed the internal Agency recommendation and followed up with the regions on
the actions it proposed in the 2005 SAM report, funds identified as available could have been put
to better use before 2008. Specifically, in 2005 and 2006, EPA could have potentially used some
of these funds for sites that did not receive new construction funding and/or where the human
health exposures were uncontrolled. Further, EPA's lack of a comprehensive plan for using
special accounts data, as well as a lack of a central management official to manage and oversee
the special accounts data it collects, are impediments to using special account funds. A
-------
09-P-0119
comprehensive plan, along with the designation of central management to monitor the data, will
help prevent the loss of future opportunities to better use special account funds.
EPA Lacks a Policy to Address Use of Funds Held in Reserve
In three of the accounts we sampled, we identified more than $88 million in special account
funds being held as reserves (or holdbacks) for potential future EPA-lead clean-up work. The
three sites with reserve amounts are shown in Table 4.
Table 4: Sites with Reserve Accounts
Site
Stringfellow
Beede Waste Oil
Thermo Chem
Total
Region
Region 9
Region 1
Region 5
Amount
$70.0 million
$16.8 million
$1.6 million
$88.4 million
Source: EPA OIG analysis.
Reserves, in this context, are defined as special account funds that the regions maintain in
accounts after EPA settles with the PRP (lodges and/or enters a consent decree in court), or EPA
holds as "insurance" in the event that a PRP defaults. EPA has not established a policy or
developed guidance for use in establishing, maintaining, and releasing these reserves. If the
reserves were reclassified, appropriated dollars made available from the reclassification could be
used to support other priority Superfund sites in the region or across the nation, including sites
where human exposure is not under control.
For the three sampled accounts, there were no legal requirements for EPA to hold funds in
reserve; rather EPA regions used "best professional judgment" in determining the amount of
reserves to hold. As a result of holding these reserves, EPA was potentially withholding funds
that could be reclassified and/or returned to the Trust Fund. In addition, as the amount of reserve
funds increases, it can create obstacles in the region's ability to actually use the funds. For
example, there may be instances where a region may not be able to absorb all appropriated funds
made available as a result of the reclassification of large amounts of special accounts funds in a
given fiscal year. We found this to be the case for the Stringfellow account, where Region 9 told
us it would have a difficult time using the $20 million during Fiscal Year 2008 because
Headquarters was already allocating money to the Region from the national pool.
According to the Agency, where an agreement is not specific about funds to withhold, it applies
"best professional judgment" to determine the proper amount to retain for potential future work
by EPA. For example, in two of the three reserve cases where an agreement did not specify
holding of reserves, the OIG concluded that EPA regions held either 100 percent of the estimated
amount of remaining clean-up or as much as they had in the account to cover it. The amount
reserved for the third site was based on "30 percent of the account balance." See Appendix E for
details on the reserve amounts. A reserve policy, which details the factors that should be
considered and documented when establishing, maintaining, or releasing any reserves, as well as
central management to oversee the reserves, will improve controls to better utilize special
accounts.
-------
09-P-0119
EPA's Lack of Public Reporting on Special Accounts Inhibits Transparency and
Oversight
EPA lacks transparency in its public reporting of special accounts. Such transparency is needed
to understand how special account funds are being utilized. EPA did not detail special accounts
receipts, interest earned, obligations, disbursements, or available balances in its Superfund
Annual Report for Fiscal Year 2007. Special account dollars were also not clearly and separately
reported in EPA's Fiscal Years 2006 and 2007 financial statements. Rather, for reporting
purposes, they were combined with EPA's annually appropriated dollars. For example, past
costs (earned revenue) were reported in the Statement of Net Cost, and interest and cash-outs
(unearned revenue) were reported in the Balance Sheet as assets and liabilities, respectively.
The OIG has rendered an unqualified opinion on EPA's financial statements for 8 consecutive
years, and under current reporting requirements combining funds for reporting purposes is
allowed. However, these requirements make it unclear and more difficult for oversight bodies
(Congress and OMB) to understand the significant cumulative amounts of Superfund special
accounts and how these accounts' funds are being used. As previously shown in Charts 1 and 2,
as of the end of May 2008, there were 819 special accounts with available balances totaling
about $1.1 billion.
Without specific requirements to provide transparency in the reporting of the use of special
accounts, it is unclear to EPA and oversight bodies how funds are being utilized, as well as the
results the special accounts program is getting for its investment. The amount and use of these
funds has grown significantly in recent years, thereby increasing the need for more
accountability and transparency. Appendix F contains a suggestion for financial information that
could be publicly reported on Superfund special accounts.
Conclusions
EPA has taken important steps toward managing Superfund special accounts and putting some
controls in place, including CERCLIS improvements, policy development, and inter-office
coordination. However, more needs to be done to ensure idle Superfund resources are put to
better use. The lack of management controls, such as accountability and transparency in the use
and reporting of special accounts, impedes use and proper management of special accounts.
Given the significant growth in the number and value of Superfund special accounts, EPA must
recognize the need for central management, accountability, and transparency, and make
managing special accounts an Agency priority. The designation of a central management and
action official will facilitate communication, coordination, and informed decision-making on
Superfund special accounts given the various EPA Headquarters and regional offices involved.
-------
09-P-0119
Recommendations
1. We recommend that the EPA Deputy Administrator designate a central management and
action official for Superfund special accounts (and document this delegation) with
responsibility for developing an action plan to ensure that management accountability
and related issues regarding special accounts are addressed. This should include:
(a) Requirements for clear and separate financial reporting of special account funds
in a publicly available report.
(b) An annual planning process that includes a determination that special account
funds will be used consistent with the hierarchy, to aid in the monitoring of
special account funds.
(c) Development of regional and Headquarters controls that include follow-up to
make sure planned and/or requested uses (e.g., reclassifications, transfers) of
special accounts funds occur, and document these controls in appropriate
guidance.
(d) Development of a plan that includes completed CERCLIS reports with accurate
special accounts data, and that identifies how EPA will use the special accounts
data it collects to manage the program and improve performance.
(e) Establishment of guidance and/or policy that addresses the proper application and
amount of the holdback or reserve of special account funds for future use. The
guidance and/or policy should include a listing of factors to assess in establishing,
maintaining, and releasing reserves, both before and after an agreement for
clean-up is achieved with PRPs.
(f) Reevaluation of whether the current amount of about $88.4 million being held in
reserve is still appropriate under the new policy (developed in response to
Recommendation l(e)), and, if not, reclassify or transfer it to the Trust Fund, as
appropriate.
(g) Regularly aging and analyzing the "oldest accounts" for opportunities to better
use special accounts funds.
2. We recommend that the Region 1 Administrator reclassify or transfer to the Trust Fund,
as appropriate, $100,736 in idle special account funds.
3. We recommend that the Region 2 Administrator reclassify or transfer to the Trust Fund,
as appropriate, $588,986 in idle special account funds.
4. We recommend that the Region 4 Administrator reclassify or transfer to the Trust Fund,
as appropriate, $642,283 in idle special account funds.
10
-------
09-P-0119
5. We recommend that the Region 6 Administrator reclassify or transfer to the Trust Fund,
as appropriate, $1,415,209 in idle special account funds.
6. We recommend that the Region 7 Administrator reclassify or transfer to the Trust Fund,
as appropriate, $1,480,490 in idle special account funds.
7. We recommend that the Region 10 Administrator reclassify or transfer to the Trust Fund,
as appropriate, $2,390,032 in idle special account funds. We also recommend that the
Region 10 Administrator reclassify interest from the Tulalip account on a regular basis
(see Appendix D).
8. We recommend that the Assistant Administrator for the Office of Solid Waste and
Emergency Response and the Assistant Administrator for the Office of Enforcement and
Compliance Assurance, as co-chairs of the Superfund Board of Directors, correct the
Action Status for reviewing the oldest special accounts (under Recommendation 97 of
EPA's 120-Day Study) to state that EPA has not yet completed analysis work on all of its
special accounts, including the "oldest special accounts," and provide an updated
milestone for completion.
Agency Comments and OIG Evaluation
We received separate comments from Agency Headquarters offices and regions. In its
December 2008 comments, the Agency (Headquarters) generally concurred with the OIG's
recommendations for improving the management of special accounts. However, in most areas,
the corrective actions the Agency proposed did not meet the intent of the OIG's
recommendations. For example, although we recommended that the Agency designate a central
management official for special accounts, the Agency proposed to establish a senior management
committee which would operate under a charter. We had a subsequent meeting and
communications with the Agency to resolve differences and reach agreements. Some issues
were resolved and proposed corrective actions have been accepted. However, several
recommendations remain unresolved and resolution will be required. Appendix G provides the
full text of the Agency's comments and the OIG's response. Recommendations 1, Ib, Ic, Id, Ig,
and 8 are open with agreed-to corrective actions pending. In the Agency's 90-day response to
this report, it should provide estimated milestone completion dates or actual completion dates for
these open recommendations. The Agency's response to Recommendations la, le, and If still
do not meet the intent of the OIG's recommendations. These recommendations are unresolved.
As appropriate, the OIG will continue to work with the Agency to satisfactorily resolve
differences.
The regions generally concurred with their respective recommendations for reclassification, had
already implemented them, and/or provided updated figures or made additional technical
clarifications in their official comments. The full text of the regions' comments and OIG's
response are in Appendices H through M. Regions 2 and 7 have completed corrective actions for
their respective recommendations (Recommendations 3 and 6). Therefore, the OIG has closed
these recommendations and the regions should close them in Agency's tracking systems.
Regions 1, 4, 6, and 10 provided acceptable corrective actions for the recommendations they are
11
-------
09-P-0119
responsible for (respectively, OIG Recommendations 2, 4, 5, and 7). These recommendations
are open with agreed-to actions pending. The regions' 90-day response to this report should
provide estimated or actual milestone completion dates for these recommendations.
12
-------
09-P-0119
Status of Recommendations and
Potential Monetary Benefits
Rec. Page
No. No.
Subject
RECOMMENDATIONS
Status1
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Action Official
Planned
Completion Date
Claimed
Amount
Agreed To
Amount
10 Designate a central management and
action official forSuperfund special
accounts (and document this
delegation) with responsibility for
developing an action plan to ensure
that management accountability and
related issues regarding special
accounts are addressed. This should
include:
(a) Requirements for clear and
separate financial reporting of
special account funds in a publicly
available report.
(b) An annual planning process that
includes a determination that
special account funds will be used
consistent with the hierarchy, to
aid in the monitoring of special
account funds.
(c) Development of regional and
Headquarters controls that
include follow-up to make sure
planned and/or requested uses
(e.g., reclassifications, transfers)
of special accounts funds occur,
and document these controls in
appropriate guidance.
(d) Development of a plan that
includes completed CERCLIS
reports with accurate special
accounts data, and that identifies
how EPA will use the special
accounts data it collects to
manage the program and improve
performance.
(e) Establishment of guidance and/or
policy that addresses the proper
application and amount of the
holdback or reserve of special
account funds for future use. The
guidance and/or policy should
include a listing of factors to
assess in establishing,
maintaining, and releasing
reserves, both before and after an
agreement for clean-up is
achieved with PRPs.
(f) Reevaluation of whether the
current amount of about $88.4
million being held in reserve is still
appropriate under the new policy
(developed in response to
Recommendation 1(e)), and, if
not, reclassify or transfer it to the
Trust Fund, as appropriate.
EPA Deputy
Administrator
13
-------
09-P-0119
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion Date
Claimed Agreed To
Amount Amount
(g) Regularly aging and analyzing
the "oldest accounts" for
opportunities to better use special
accounts funds.
10 Reclassify or transfer to the Trust Fund,
as appropriate, $100,736 in idle special
account funds.
10 Reclassify or transfer to the Trust Fund,
as appropriate, $588,986 in idle special
account funds.
10 Reclassify or transfer to the Trust Fund,
as appropriate, $642,283 in idle special
account funds.
March 2009
Region 1 Administrator March 2009
Region 2 Administrator 02/10/2009
Region 4 Administrator 09/30/2009
$100.7
$589.0
$642.3
$100.7
$600.0
$642.3
Reclassify or transfer to the Trust Fund,
as appropriate, $1,415,209 in idle
special account funds.
0 Region 6 Administrator 09/30/2009
$1,415.2
$1,415.6
11 Reclassify or transfer to the Trust Fund,
as appropriate, $1,480,490 in idle
special account funds.
11 Reclassify or transfer to the Trust Fund,
as appropriate, $2,390,032 in idle
special account funds. Also, reclassify
interest from the Tulalip account on a
regular basis (see Appendix D).
11 As co-chairs of the Superfund Board of
Directors, correct the Action Status for
reviewing the oldest special accounts
(under Recommendation 97 of EPA's
120-Day Study) to state that EPA has
not yet completed analysis work on all
of its special accounts, including the
"oldest special accounts," and provide
an updated milestone for completion.
C Region 7 Administrator 09/30/2008
0 Region 10 Administrator 09/30/2009
Assistant Administrator March 2009
for the Office of Solid
Waste and Emergency
Response
and
Assistant Administrator
for the Office of
Enforcement and
Compliance Assurance
$1,480.5
$2,390.0
$1,544.4
$2,390.0
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
14
-------
09-P-0119
Appendix A
Prior Reports
In completing our work, we issued three early warning reports to Regions 5, 8, and 9. These
reports recommended that a total of approximately $59 million in special account funds be
reclassified or transferred to the Trust Fund and made available to fund other regional or national
Superfund priorities. The three reports were as follows:
• EPA OIG Report No. 08-P-0196, Making Better Use of Stringfettow Superfund
Special Accounts, July 9, 2008: We found that by Fiscal Year 2011, EPA Region 9
could reclassify, or transfer to the Trust Fund, up to $47.8 million in special account
funds for the Stringfellow Superfund site, located near Glen Avon, California. In
response to our draft report, Region 9 agreed to and completed reclassifying $20 million
of the $47.8 million by the end of Fiscal Year 2008. It also stated it would review the
remaining amount ($27.8 million) in annual reviews and when it achieves a record of
decision in Fiscal Year 2011, as well as in Fiscal Year 2012 when it plans to reach a
settlement for the remaining site work. [In response to this draft report, the Agency
updated the record of decision date to Fiscal Year 2011.]
• EPA OIG Report No. 08-P-0102, Making Better Use of Superfund Special Account
Funds in Region 8, March 17, 2008: We found that Region 8 could reclassify, or
transfer to the Trust Fund, nearly $8 million from the special accounts for the Portland
Cement site in Salt Lake City, Utah. Construction had been completed at the site in
September 2006 and minimal future costs were anticipated. In response to our report,
Region 8 reclassified $3,027,087 in February 2008 and another $4,091,034 in July 2008.
• EPA OIG Report No. 2007-S-00002, Making Better Use of Superfund Special
Account Funds for Thermo Chem, August 20, 2007: EPA Region 5 missed an
opportunity in 2005 to make timely and better use of $2.8 million in the special account
for the Thermo Chem Superfund site. The Region could have funded other priority
response activities by reclassifying funds no longer needed at the Thermo Chem site.
Region 5 could also make use of an additional $524,000 that had no current planned use.
In March 2008, as a result of our report, Region 5 reclassified $2,741,743, and it plans to
reclassify additional funds in Fiscal Year 2009. On January 30, 2009, Region 5
reclassified $529,328.
Other prior reports related to issues covered in this review include:
• EPA OIG Report No. 2006-P-00013, EPA Can Better Manage Superfund Resources,
February 28, 2006: Recommendation 2-7 stated "EPA should timely review special
account dollars and set up a formal process and schedule to ensure special account funds
are used consistently according to the hierarchy specified in its guidance."
Recommendation 2-2, which pertained to Superfund in general, stated: "EPA offices
should more closely align themselves in support of an accountable entity (e.g., a Board, a
National Program Manager) to effectively allocate and manage Superfund resources
15
-------
09-P-0119
across the Agency according to the program's demonstrated needs and goals." Further
EPA actions are still needed in response to these recommendations.
• SUPERFUND: Building on the Past, Looking to the Superfund Future, April 22,
2004 (known as the 120-Day Study): This report, prepared by EPA, included several
recommendations regarding special accounts that we considered relevant to our current
review, including:
-S Recommendation 95: "OCFO should develop fact sheets on setting up special
accounts, utilizing special account dollars, and closing out the accounts. (Near
term)"
•S Recommendation 96: "OECA and OCFO should design reports that clearly
describe the use and status of special accounts, and should provide them to
managers in the Regions and Headquarters on a regular basis. (Long term)"
•S Recommendation 97: "OECA should identify the oldest special accounts and
then meet with the Regions to discuss uses of those dollars and progress toward
using them. (Near term)"
S Recommendation 102: "EPA's management and support offices should meet
with their Superfund response and enforcement clients to review current measures
and possibly establish new performance measures specific to the Superfund
program, such as on special accounts and cost recovery in order to increase the
Superfund program's integration and efficiency."
• GAO Report No. GAO/RCED-00-118, SUPERFUND: Extent to Which Most
Reforms Have Improved the Program Is Unknown, May 12, 2000: This report
included one reform pertaining to special accounts - promote the greater use of site-
specific accounts that hold funds obtained through settlements with parties at a site for
clean-up actions at that site. EPA's performance measures included measuring outputs -
number of accounts and amounts of funds available (133 accounts contained $570 million
available for site-specific clean-up); and the number of settlements disbursing funds from
accounts and amounts disbursed (beginning in Fiscal Year 2000). The measures did not
include any outcomes.
• EPA OIG Report No. 99P0214, Administration of Superfund Special Accounts Needs
Improvement, September 28,1999: This report disclosed that reconciliations of special
account transactions and balances were not sufficient to ensure identification and
correction of errors in these accounts; that regional personnel were not always
sufficiently aware of the existence and intended use of these accounts; and that reviews
were not made to determine if accounts should be closed.
16
-------
09-P-0119
Appendix B
Details on Scope and Methodology
To address our objectives, we selected and analyzed an initial judgmental sample of 79 special
accounts with available balances that totaled at least $10 million in value or were at least
10 years old. These accounts totaled $485,174,8967 as of May 31, 2007. This represented about
47 percent of the available balances of all special accounts nationally ($485,174,896 out of
$1,032,652,234), and about 11 percent of the total number of accounts nationally (79 out of 697).
In addition, our sample included six other accounts totaling $10,828,354 that were identified by
the regions as of the dates we interviewed the relevant regional officials.
We identified whether EPA Headquarters had developed and provided guidance to the regions
on managing the "General Hierarchy of Special Account Funds Use." We obtained and
reviewed other guidance applicable to special accounts. We determined the extent to which
special account funds are used as a settlement incentive and used for EPA-lead clean-ups. We
evaluated the extent to which EPA planned funds for reclassification, and identified how much
money has been transferred to the Trust Fund. The opportunities we identified for better
utilization in Appendix C were generally identified at about the time of our interviews with
regional officials.
In conjunction with our analysis, we visited Regions 1, 2, and 9 to conduct interviews with
regional project staff and program managers regarding the sample accounts. For Regions 3, 4, 5,
6, 7, 8, and 10, we conducted phone interviews with project staff and program managers. OIG
staff co-located in Regions 4 and 5 attended the phone calls in person with regional staff. In
April 2008, we interviewed the State of California's Department of Toxic Substances Control
staff responsible for developing the clean-up estimates for the Stringfellow site.
We reviewed many documents, including:
• Agreements or other documentation establishing the special accounts and/or limiting the
use of the special accounts funds.
• Agency financial statements, and the Fiscal Year 2007 Superfund Annual Report, to
determine how special accounts information was publicly reported.
• Regional documentation supporting their management of special accounts, and regional
reclassification memos.
• Corroborating documentation for regions' planned future uses of special accounts funds.
• The Agency's annual performance plan for Fiscal Year 2007; Fiscal Year 2007 assurance
letters for OSWER, OECA, and OCFO; and Goal 3 in EPA's 2006-2011 strategic plan, to
gain an understanding of reported internal controls and EPA's reporting of its
accomplishments achieved with special accounts funding.
7The total for the 79 accounts as of May 31, 2007, excludes 3 accounts from the initial sample. If these accounts
were included, the total would decrease by $9,745 as two of the accounts totaled $0 and one had a balance of
negative $9,745.
17
-------
09-P-0119
To gain a current understanding of how special account funds might be used at the sampled
accounts' sites, we researched the site clean-up status for the sites in the Agency's Superfund
Information System. We reviewed corroborating documents such as records of decision and
5-year review reports when available. To gain an understanding of the Agency's progress in
planning and using special accounts funds, we obtained and analyzed special accounts
management reports submitted by the regions to Headquarters. These 2005 reports described
details on the past and planned future use of special accounts.
To gain an understanding of information systems controls and weaknesses, we reviewed prior
audit reports on the relevant information systems. However, because we had not evaluated the
controls over the details of specific site accounts before, and because of the concerns found in
prior reports, we attempted to verify information in these systems. We obtained available
documentation that supported the establishment of sampled accounts. We also obtained
available documentation supporting clean-up estimates and planned uses of funds. We obtained
documentation supporting reclassification requests. We reviewed ORBIT (OCFO Reporting and
Business Intelligence Tool) information for obvious errors. We relied on work performed by
OIG financial statement auditors regarding financial statement transactions, which included tests
involving special accounts.
We reviewed draft CERCLIS reports that the Agency planned to use to track and manage special
accounts. We asked about plans EPA had to assure data accuracy once the reports are completed.
We interviewed staff in three Headquarters offices (OSWER, OECA, and OCFO) that have a
role in managing special accounts, to gain an understanding of the roles and responsibilities for
each. We also asked them about the actions they took in managing and reporting on special
account funds. We asked about oversight conducted by Headquarters of regional use of special
account funds consistent with the guidance, and Headquarters use and follow-up of the 2005
special accounts data they collected.
We interviewed Headquarters and Region 9 officials regarding policies on holding reserves in
special accounts, particularly when EPA has an agreement with PRPs for clean-up. We
interviewed EPA Headquarters and regional staff and managers regarding the management and
utilization of special account funds.
We interviewed regional officials - generally the remedial project manager, the site attorney, and
financial management staff for each account - to determine how regions were using the special
accounts funds consistent with the hierarchy of special accounts use. Regional officials
discussed the current clean-up status of the sampled accounts' sites, and the planned use of funds
to address any remaining site work. We interviewed regional staff regarding regional
reclassifications, and, in the case of Region 9, the accounting of its reclassified funds.
We followed up with Headquarters officials about whether they had analyzed the "older" special
accounts pursuant to a recommendation from an internal Agency report.
Details on prior reports reviewed are in Appendix A.
18
-------
09-P-0119
Appendix C
Table of Opportunities for Better Utilization
through Reclassification or Transfer to the Fund
Region
1
2
4
5
6
7
8
9
10
Special Account
Keefe Environmental
Land & Resource
Recovery
Subtotal
Love Canal
Subtotal
City Industries, Inc.
Subtotal
Thermo Chem
Subtotal
Gulf Coast Vacuum
Odessa Drum
Company
Subtotal
Ralston
Fenton Creek Dump
Three D Investments
Subtotal
Portland Cement
California Gulch
Petrochem Recycling
Central City/
Clear Creek
Subtotal
Stringfellow
Subtotal
Pacific Wood
Treating
Arctic Surplus
Bunker Hill-NIPC
Tulalip
Subtotal
Action
Identified in
2005 SAM
-
Remove"
-
-
-
-
No Future Use
of Account
Reclassify/
Transfer
Reclassify/
Transfer
-
Close -
Fiscal Year 2007
Close -
Fiscal Year 2006
Close -
Fiscal Year 2006
Close -
Fiscal Year 2008
-
Work Complete
Close
-
-
TOTAL All Regions
Amount of
Action
Identified in
2005 SAM
$60,000
$60,000
$1,069,379
$1,069,379
$251,015
$1,155,759
$1,406,774
$3,623,798
$11
$1,672
$3,625,481
$15,981
$703,951
$7019,932
$6,881,566
Action
Completed
Before OIG
Review Initiated
April 2007
-
No
-
-
-
-
No
No
No
-
No
No
No
No
-
No
No
-
-
OIG
Recommended
Action-Reclassify
or Transfer to
Trust Fund
$1,122
$99,614
$100,736
$588,986
$588,986
$642,283
$642,283
$3,449,001
$3,449,001
$218,388
$1,196,821
$1,415,209
$274,535
$1,164,054
$41,901
$1,480,490
$7,101,411
$102
$2,025
$3,299
$7,106,837
$47,800,000
$47,800,000
$17,479
$769,912
$28,097
$1,574,544
$ 2,390,032
$64,973,574
Source: EPA OIG analysis of EPA data and OIG reports.
1 Remove $60,000 + Accumulated Interest to Trust Fund.
19
-------
09-P-0119
Appendix D
Details on Special Accounts with Opportunities for
Better Utilization through Reclassification or Transfer
Region 1
We identified two special accounts with a total of $100,736 that could be better utilized. This
included $1,122 for Keefe Environmental Services and $99,614 for Land and Resource
Recovery.
Keefe Environmental Services: Region 1 initially identified the opportunity to reclassify an
estimated $100,135 of unplanned costs from this special account in Fiscal Year 2008. More
recently, the Region updated its future cost estimate, reducing unplanned costs from $100,135 to
$1,122. The Region stated that if the unplanned amount is not needed for continuation of the
long-term response action (scheduled to begin in the second quarter of Fiscal Year 2009), it
would again consider reclassification.
Land and Resource Recovery: The $99,614 identified for this special account represents $60,000
plus $39,614 of accumulated interest that can be transferred to the Trust Fund. The Region, in its
2005 SAM report, noted that $60,000 from the initial consent decree, used to set up the special
account, was incorrectly put into the special account. The $60,000 should have been put into the
Trust Fund. The funds were subsequently removed from the special account in May 2007. In
addition, the removal of accumulated interest should have followed the removal of $60,000 that
occurred in May 2007. We suggested to the Region that all accumulated interest associated with
the $60,000 should be removed. The Region agreed. In December 2007, the Region corrected
the account to remove the interest. No further action is needed from Region 1 on this issue.
Region 2
We identified $588,986 in the Love Canal special account that could be better utilized.
Subsequent information provided by the Region showed $573,000 planned for reclassification.
The remaining balance of 15,986 is unplanned. Per the Region, it will most likely recommend a
partial reclassification of $500,000, pending completion of an on-going health study. The
Region believes that the study could require more money based on upcoming findings and
associated public hearings. The Region also believes it may not be appropriate to reclassify any
of the funds until the study is completed and communicated to the public. On February 10, 2009,
Region 2 reclassified $600,000.
Region 3
We found no opportunities for reclassification or transfer to the Trust Fund in Region 3.
20
-------
09-P-0119
Region 4
We identified $642,283 in the City Industries, Inc., special account that could be better utilized.
Region 4 intends to close out the special account and transfer the remaining funds to the Trust
Fund. During our interview in July 2007, Region 4 had stated that, in 2004, the PRPs took over
operation and maintenance at the site and have been operating the plant for 3 years. The Region
has no concern at this point that the PRPs cannot adequately do the work at the site. The Region
agreed to reclassify the $642,283 and close the account during Fiscal Year 2009.
Region 5
The utilization of special account funds in Region 5 has been addressed in an early warning
report already issued by the OIG (see Appendix A). We identified $3,449,001 in the Thermo
Chem special account that could be better utilized. This amount includes $3,324,000
($2.8 million plus $524,000) of costs planned for reclassification and an additional unplanned
amount of $125,001. The utilization of these funds has been addressed in an early warning
report already issued by the OIG (see Appendix A). This report recommended reclassification of
approximately $2.8 million (plus additional accrued costs) to fund other priority response
activities. It also recommended reclassification, or transfer to the Trust Fund (as appropriate), of
approximately $524,000 in unplanned costs. In March 2008, Region 5 reclassified $2,741,743,
and on January 30, 2009, reclassified another $529,328.
Region 6
We identified two special accounts with a total of $1,415,209 that could be better utilized. This
amount included $218,388 for Gulf Coast Vacuum and $1,196,821 for Odessa Drum Company.
The Region also planned to reclassify $660,000 from the Pab Oil account, but the OIG is not
making a recommendation on this amount until further OIG work is completed.
Gulf Coast Vacuum: The $218,388 for this account includes $53,556 identified by the Region
for reclassification and $164,832 identified for transfer to the Trust Fund in Fiscal Year 2009.
The PRP is currently the lead for performing and funding site operation and maintenance. EPA
provides oversight, conducts some monitoring, and performs the required 5-year reviews.
Special account funds have been planned to support these activities.
Odessa Drum Company: We identified $1,196,821 that could be better utilized. Based on
discussion and correspondence from the Region, it planned to reclassify $1,121,075 and close
out the special account. Per the Region, this account was identified for closure in 2005, but due
to workload issues had not been addressed. In January 2008, the Region reclassified $1,121,075.
As of September 2, 2008, the available balance was about $75,445. The Region plans to transfer
these funds to the Trust Fund and close the account in Fiscal Year 2009.
Pab Oil: The Region plans to reclassify $660,000. Per the Region, the site was deleted from the
National Priorities List in 2000 and is currently in operation and maintenance with on-going
monitoring being conducted by the PRP. The remaining special account funds will be used to
fund EPA oversight and required 5-year reviews. However, the OIG does not plan to
21
-------
09-P-0119
recommend reclassification of these funds until the OIG concludes its work associated with its
evaluation of site sampling. When that work is completed, the OIG will revisit the need for
recommending reclassification of these funds.
Region 7
We identified three special accounts with a total of $1,480,490 that could be better utilized. This
amount includes $274,535 for Ralston, $1,164,054 for Fenton Creek Dump, and $41,901 for
Three D Investments.
Ralston: EPA has a formal deferral agreement with the State of Iowa and there is no future
work at the site. Under the deferral agreement, the State assumed responsibility for overseeing
the response action at the Ralston site in accordance with the September 1999 record of decision.
Region 7 planned to reclassify the balance of $274,535 from the Ralston special account by
September 30, 2008, and in fact reclassified $286,284 in September 2008. The Region also
closed the account.
Fenton Creek Dump: The Region agreed it can reclassify $1,164,054 for this site by
September 30, 2008, and did reclassify $369,942 in September 2008. The Region also plans to
close the account by September 30, 2009.
Three D Investments: The Region agreed it can reclassify $41,901 for this site by September 30,
2008, and did reclassify $16,761 in September 2008. The Region also closed the account.
Region 8
The utilization of special account funds in Region 8 has been addressed in an early warning
report already issued by the OIG (see Appendix A). This report recommended reclassification of
$7,974,141 from five special accounts to fund other priority response activities or transfer these
funds to the Trust Fund, as appropriate. The five accounts included Portland Cement, California
Gulch, Petrochem Recycling, Lowry, and Central City/Clear Creek. In response to the
recommendations, Region 8 has agreed with the reclassification of approximately $7,106,837,
and has taken or planned the following actions:
• reclassified approximately $3 million in February 2008, and $4,091,034 in July 2008,
from the Portland Cement special account; and
• planned reclassification or transfer of funds from three accounts to the Trust Fund and
close the accounts as follows: California Gulch $102, Petrochem $2,025, and Central
City/Clear Creek $3,299. Region 8 will leave the Lowry account open as the Region now
expects another deposit to the account.
Region 9
The utilization of special account funds in Region 9 has been addressed in an early warning
report already issued by the OIG (see Appendix A). This report recommended the
22
-------
09-P-0119
reclassification or transfer to the Trust Fund, as appropriate, $47.8 million of the Stringfellow
special accounts. In response to our report, EPA agreed and completed reclassification of
$20 million of the $47.8 million in July 2008. The remaining $27.8 million reclassification was
identified by EPA as a "buffer for unknowns." Per the Region, as much as the remaining amount
of the $27.8 million could be reclassified or transferred to the Superfund Trust Fund (plus any
earned interest, less oversight costs) by the end of Fiscal Year 2011. [In response to this draft
report, the Agency updated the date for the record of decision to Fiscal Year 2011.]
Region 10
We identified five special accounts with a total of $2,390,032 that could be better utilized. This
amount includes $1,574,544 for Tulalip, $769,912 for Arctic Surplus, $28,097 for Bunker Hill-
NIPC, and $17,479 for Pacific Wood Treating.
Tulalip: The purpose of the special account is to maintain $3 million for remedy failure
contingencies and for 27 years of operation and maintenance. In 2006 and 2007, the Region
reclassified $1.5 million in interest earned from the account. The staff stated that this amount
could be reclassified because interest was not covered by the Consent Decree and that only the
principal needs to be maintained in the account. Accordingly, the OIG recommended and
Region 10 agreed to continue to reclassify interest amounts from the account on a regular basis.
The Region plans to maintain $300,000 in the account for 5-year reviews. We have identified
$1,574,544 of interest for reclassification. The Region agreed to the regular reclassification of
interest, but provided no milestone for either.
Arctic Surplus: Reclassification of $769,912 can occur at the Arctic Surplus site because the Site
has been deleted from the National Priorities List and there is no future work remaining. The
Region plans to keep the account open because it may receive another payment from another
agency. The Region agreed to the reclassification in Fiscal Year 2009.
Bunker Hill-NlPC: The Region plans to close out the $28,097 interest-only special account
because there is no more planned work under the special account. However, the Region has not
yet provided a milestone date.
Pacific Wood Treating: The remaining $17,479 of funds in this special account were reclassified
in December 2007 following our interview with the Region. No further action is needed from
Region 10 on this issue.
23
-------
09-P-0119
Appendix E
Details on Reserve Accounts
Stringfellow (General)
Region 9 maintains approximately $70 million of funds in the Stringfellow special accounts as a
reserve to fund potential future response work. The Region plans to maintain the reserve for
potential future work in the event the State of California is not required or is financially unable to
complete the work. The reserve funds may never be used if the State continues its historical
practice of funding its agreed-to clean-up costs.
In 2001, EPA and the State negotiated a consent decree wherein the State assumed the
responsibility for future response activities and payment of federal costs at the site. The State
reimbursed EPA approximately $99 million for response costs expended at the site through
December 2000. The State also agreed to perform all future response actions that have or will be
selected for the site and to pay for EPA's future response costs. Per the agreement, the funds
were to be deposited into the Stringfellow special account and used to conduct or finance
response actions at or in connection with the site or transferred to the Trust Fund.
The State has been performing and funding the work since the agreement, in 2001. In 2005, the
State settled with its insurers and collected approximately $121 million for site clean-up. The
funds were put into the State's general fund to reimburse it for the work it funded at the
Stringfellow site. Despite the agreement and the insurance proceeds collected by the State, EPA
continues to maintain the funds as reserve with concern that at some point the State may not
implement the final response.
The Region's primary rationale for retaining funds in the Stringfellow Special Account is to fund
potential future work, which EPA perceives as a risk due to unique uncertainties at the site.
These uncertainties stem from the fact that a final remedy has not been chosen and a consent
decree for performance of work is not in place. The Region maintains that until agreement is
reached on the final remedy and a consent decree is negotiated, it cannot be fully assured of the
future costs to EPA.
The final operable unit is in the remedial investigation/feasibility study phase with planned
completion in 2008. EPA expects to issue a final record of decision for the site in Fiscal Year
2011. The State, in July 2007, estimated the final remedy at approximately $70 million
(including addressing perchlorate). Discussions with the State in April 2008 confirmed the
$70 million as a valid estimate, pending an update based on a final remedy, which is over a year
away.
Beede Waste Oil
As of about the date of our regional interview (June 14, 2007), Region 1 was holding
approximately $16.8 million in the special account as reserve for use as leverage in settlement
24
-------
09-P-0119
with the PRP. In addition, despite the entrance of an agreement with the PRP, the Region plans
to continue to maintain the reserve until the site is at least construction complete. The Region
expressed concerns about a remedy failure or changes and proposed to keep the funds available
as backup. The remedy, selected in 2004, includes a groundwater pump-and-treat system with
an estimated 15 years of treatment to achieve the stated groundwater clean-up levels. Design
was initiated by the PRP in December 2006 and is still on-going. Although the consent decree is
entered, the Region continues to maintain the funds in the Special Account in the event that a
remedy change or failure necessitates work beyond that required by the Consent Decree; that
EPA takes over the work because the PRPs are deficient in their clean-up; or that oversight costs
exceed the amount the PRPs are required to pay. The Region notes that the financial assurance
provided under the settlement, although meeting the settlement requirements, does not provide
liquid funds to EPA. Currently, the special account funds are being used to support enforcement
and records center activities.
Thermo Chem
As of about the time of our regional interview (June 26, 2007), Region 5 was holding
approximately $1.6 million in special account funds as financial insurance in the event the PRP
defaults and cannot successfully achieve the remedy clean-up goals. The PRPs, under a 1992
Unilateral Administrative Order, conducted remedial design/remedial action for a groundwater
extraction treatment system. The system was placed into operation in 1999. Treatment will
continue until groundwater clean-up standards are met (estimated completion in 2015). The
PRPs are meeting the obligations and are conducting operation and maintenance activities.
25
-------
09-P-0119
Appendix F
Sample Aggregate Financial Information
EPA Could Report
Previous Year's End Special Accounts' Aggregate Available Balance:
+ Deposits
+ Interest Earned
+ Deobligations
- Obligations
- Expenditures
For EPA Lead Work
For Reimbursement/Payment to PRPs
For Reclassifications
- Transfers to the Trust Fund
Aggregate Available Balance at Year End
Amount of Year End Aggregate Available Balance:
• Planned for Settlement Incentives
• Planned for EPA-Lead Work
• Planned for Reserves Based on Agreement Requirements
• Planned for Reserves Based on EPA Decision
• Planned for Reclassification
• Planned for Transfer
• As Yet Unplanned
Total Cumulative Reclassifications at Year End
Total Transfers as of Year End
26
-------
09-P-0119
Appendix G
Agency Response to OIG Draft Report
December 22, 2008
MEMORANDUM
SUBJECT: Response to the Draft Report, "Improved Management of Superfund Special
Accounts Will Make More Funds Available for Clean-ups" (Project No. 2007-
000727)
FROM: Susan Parker Bodine /s/
Assistant Administrator
TO: Bill A. Roderick
Deputy Inspector General
Office of Inspector General
On behalf of Lyons Gray, the Chief Financial Officer for the Office of the Chief
Financial Officer (OCFO), Granta Nakayama, Assistant Administrator for the Office of
Enforcement and Compliance Assurance (OECA), and the Office of Solid Waste and Emergency
Response (OSWER), I am providing this response to the draft report entitled, Improved
Management of Superfund Special Accounts Will Make More Funds Available for Clean-ups.
Following the Office of Inspector General (OIG) transmittal dated November 19, 2008, both
Headquarters and the regions have reviewed the draft report. Regional offices will provide you
with their individual responses under separate cover. Thank you for the opportunity to review
the draft report. We appreciate your consideration of the comments made in the September 22,
2008 memorandum to your staff from our offices and the revisions you made based on those
comments.
The Agency has undertaken considerable efforts to improve the management of special
accounts, many of which implement recommendations received during the process of this OIG
investigation and report. At the same time, we embrace the commitment to pursue further
improvements to the management of this important Superfund resource.
EPA generally concurs with the OIG's recommendations for improving the management
of special accounts. Attachment 1 describes the Agency's approach to implementing each
recommendation. However, we do have concerns with how the draft report characterizes some
aspects of special accounts, which are described below. We believe the accuracy of the report
could be further improved by consideration and incorporation of these comments.
27
-------
09-P-0119
OIG Response 1
The OIG reviewed the Agency's response and made changes to the report as appropriate, and as
discussed specifically below.
Sample of Special Accounts Reviewed in the Report are not Representative of the Universe of
Special Accounts
We appreciate the draft report statements in footnote 4 that "we do not project our results
beyond this sample [of special accounts]" and that "EPA is generally using special account funds
consistent with its hierarchy" (page 4). EPA nevertheless feels that the report as a whole leaves
the impression that EPA is not managing special account resources well overall.
We generally support the draft report's recommendations based on our collective
experience regarding special accounts, but have concerns with some of the specific findings
based on the special accounts that were the subject of this study.
Therefore, we recommend the OIG expand its discussion regarding some of the ways the
accounts that were the subject of this study are not typical of the overall special account
universe. EPA maintains over 800 special accounts, 79 of which were reviewed by the OIG.
The evaluated accounts had available balances greater than $10 million and were more than 10
years old. While we agree that such accounts merit additional oversight, it is noteworthy that
only 3 percent of special accounts have available balances greater than $10 million and only 12
percent are more than 10 years old. A majority of accounts, more than 500, have less than
$500,000 available.
More specifically, the accounts for one National Priorities List (NPL) site, the
Stringfellow site, comprise 24% of the total available balance analyzed by the OIG in this study.
The special accounts associated with Stringfellow are used to support 77% of the dollar amount
the OIG has cited in its report as being both held in "reserve" ($70 million of the $88.4 million)
and as "idle" and available for reclassification or transfer to the general portion of the Superfund
Trust Fund ($47.8 million of the $65 million).
Stringfellow is an extremely complicated site from both an enforcement and cleanup
perspective. Future work and costs at the site are uncertain due to the State of California's status
as the main potentially responsible party (PRP) and because a final remedy has not been selected.
Furthermore, the special accounts associated with Stringfellow are not representative of the
majority of special accounts, as the account had the highest available balance amount of all
special accounts at the time of the OIG's study. Given these circumstances, it is unreasonable to
make general findings on the Agency's overall management of special accounts based on this
site.
28
-------
09-P-0119
OIG Response 2
As of May 2007, the accounts in our sample represent 47 percent of the total value of all
Superfund special accounts. Identifying and correcting management weakness over this portion
of special account funds should not be minimized or dismissed because this represents only a
small portion of the number of special accounts.
According to EPA Guidance, Appropriate Special Account Funds May Be Retained until Future
Site Work and Risks are Addressed
The draft report defines "reserves" as "special account funds that the regions maintain in
accounts after EPA settles with the PRP (lodges and/or enters a consent decree in court), or EPA
holds as "insurance" in the event that a PRP defaults." The first half of this definition ("funds
that the regions maintain in accounts after EPA settles with the PRP (lodges and/or enters a
consent decree in court)") does not fit a number of situations where there is both a settlement
special account and a work settlement with PRPs.9 The fact that there is a PRP settlement for
work does not mean that there is not other, sometimes very significant and costly work required
at the site. Therefore, EPA believes this first phrase should be deleted.
OIG Response 3
The OIG disagrees that it should change any part of its definition, as the lodging and entering of
a consent decree indicates that the PRP has committed to paying for or conducting clean-up.
The second portion of the definition ("EPA holds as "insurance" in the event that a PRP
defaults") appears to reflect an OIG perspective that it is not appropriate to retain special account
funds for settlements with PRPs where there may be a risk that the settlement will not
accomplish the desired cleanup. While we generally agree that funds should not routinely be
retained in accounts purely as a "safety net" for future uncertainties, there are site-specific
situations where such retention is appropriate. These may include situations where the PRPs'
viability and financial assurance mechanisms are not sufficient. Similarly, unusually uncertain
remedy technologies or approaches could warrant such retention.
CERCLA authorizes EPA to retain funds in special accounts for all future response
actions contemplated by the agreement under which the funds were received. According to the
guidance document, Special Accounts: Guidance on Key Decision Points in Using Special
Account Funds (September 28, 2001) (Timing and Use Guidance), funds are retained in a special
account for "future site costs and risks;" and any excess funds are reclassified or transferred to
the Superfund Trust Fund. This guidance document addresses the appropriate timing of fund use
and identifies general principles for the regions to follow in making a determination as to
9 The definition used in this first phrase apparently does not distinguish "settlements for work" from "settlements for
cash", which are also negotiated through consent decrees and provides funds for EPA itself to perform response
work or provide as an incentive to other PRPs to perform response work.
29
-------
09-P-0119
whether there will be future expenditures at a site. Those principles include: evaluate
independently the use of funds throughout the remedial process; consider changes in site
conditions (e.g., the need for an emergency removal, remedy not performing as expected); and
determine whether the circumstances of the PRP have changed (e.g., recalcitrance, insolvency).
Consistent with EPA guidance and the agreement under which EPA received the funds,
regions may retain funds in special accounts to address site-specific risks that otherwise might
require EPA to expend appropriated funds in the future. When there are no longer unaddressed
site risks, EPA will then reclassify or transfer funds as appropriate.10
The OIG's recommendation for the development of guidance regarding reserves is based
on only 3 sites. EPA now has an annual process for reviewing planned uses for special accounts
to determine the nature of funds retained for future site costs and risks. A preliminary review of
November 2008 data suggests that less than 6% of accounts retain some funds that would qualify
as "reserves." A majority of these funds are in special accounts associated with just 2 sites
(Stringfellow and Beede Waste Oil), for reasons discussed in the OIG draft report. The
Headquarters program and enforcement offices have reviewed with the regions the
circumstances at these sites, and our conclusion is that the regions are appropriately holding the
funds in the special account in accordance with current guidance.
In particular, the Region's primary rationale for retaining funds in the Stringfellow
special accounts is to fund potential future work, which EPA perceives as addressing a legitimate
risk due to unique uncertainties at the site and in the State. These uncertainties stem from the fact
that a final remedy has not been chosen and a final consent decree for performance of remaining
work is not in place. The Region maintains that until agreement is reached on the final remedy
and a consent decree is negotiated, it cannot be fully assured of the future costs to EPA.
Furthermore, budget concerns in the State of California in 2008 caused the State to stay several
of its contracts, which included the contracts to continue work related to the development of the
remedy decisions (i.e., the remedial investigation/feasibility study) at the Stringfellow site. As a
result, a final remedy is now anticipated in early 2011, rather than in 2010 as stated in Appendix
A (page 14, first bullet) of the draft report. As recently as December 1, 2008, the State of
California declared a fiscal emergency due to an anticipated revenue gap that is expected to be as
much as $28 billion over the next 19 months. As a result of the continued fiscal uncertainties in
the State, EPA continues to maintain the funds in the accounts for Stringfellow due to concerns
that at some point the State may not implement the final response required.
EPA believes that proper application of the Timing and Use Guidance., along with
assistance from Headquarters to ensure consistent application, is appropriate for the overall
management of special accounts, including whether and when to retain funds for future work and
risks. In order to address the OIG's concern, the Office of Superfund Remediation and
Technology Innovation (OSRTI) and Office of Site Remediation Enforcement (OSRE) will
implement a policy to review accounts on a semi-annual basis as part of the FY 2009 and FY
2010 regional work planning and mid-year review process, or when a response milestone is
reached, to ensure that funds are used in accordance with current guidance. Where unusual site-
10 See also, Consolidated Guidance on the Establishment, Management and Use of CERCLA Special Accounts,
October 4, 2002 (p. 4).
30
-------
09-P-0119
specific situations occur, such as Stringfellow, EPA agrees that additional Headquarters program
and enforcement office involvement is appropriate, and these offices will work with the EPA
Region responsible for the special account, as appropriate, throughout the life cycle of the special
account. The Special Accounts Senior Management Committee will evaluate the effectiveness
of this approach at the conclusion of FY 2010 mid-year regional reviews.
OIG Response 4
The OIG agrees with the Agency that it may be appropriate for the Agency to retain funds where
there may be risk that the settlement will not accomplish the desired clean-up. However, the
OIG believes that doing so on the basis of "best professional judgment" is not appropriate. The
Agency should document in a policy or guidance the circumstances under which retaining the
reserves is appropriate to make it more transparent, and the current guidance does not do so.
Further, the Agency uses the example that financial assurance mechanisms may not be sufficient
as a reason to retain special account funds as reserves; doing so demonstrates the weaknesses in
some forms of financial assurance EPA requires.
EPA is Currently Using the Data Captured in CERCLIS
As noted in the draft report, OSRTI and OSRE used the initial data collected in the 2005
Special Accounts Management (SAM) Report to inform development of the Comprehensive
Environmental Response, Compensation, and Liability Information System (CERCLIS) data
entry screens. To manage and monitor special accounts effectively, EPA has spent a
considerable amount of time and resources to ensure the proper data are captured in CERCLIS.
The new CERCLIS data entry screens will not only improve Headquarters ability to oversee and
manage special accounts, but now that the data fields have been finalized, the regions are able to
plan their use of special account resources in a systematic way.
Since the OIG investigation, EPA used the regional CERCLIS planning data for available
special account funds in its FY 2009 work planning discussions with the regions. Work planning
discussions are used to review planning data with the regions and ensure that plans are consistent
with EPA guidance. Headquarters reviews the special account planning data entered into
CERCLIS by the regions prior to work planning discussions to ensure the available special
account funds have an appropriate planned use, identifies accounts where additional information
is needed, and follows-up with the regions on the accounts in question.
EPA will continue to use the data in CERCLIS as part of the mid-year and annual
regional work planning review processes for the Superfund program, as well as on an ad-hoc
basis to monitor special account use and ensure the appropriate use of special account funds.
The Agency has outlined these activities in the Special Account Management Strategy (Strategy)
under development, which will be issued in January 2009.
EPA is also using these data to identify priority areas for additional oversight and
management. Using the data entered in Fall 2008, OSRE and OSRTI identified data concerns
for accounts in each region and requested the regions review these accounts to ensure all funds
31
-------
09-P-0119
are planned appropriately. EPA has been using, and will continue to use, these data to report to
both internal and external stakeholders. EPA will also use these data to ensure planned actions
are carried out, that funds are further planned as risks are addressed, and to identify issues for
annual meetings, conferences, or additional guidance. As identified in the Strategy, we continue
to refine our data analysis to further improve the management of special accounts.
OIG Response 5
The OIG acknowledges EPA's progress in improving CERCLIS to enable better management of
special account funds.
Improvement in Over seeing and Managing Special Accounts will Continue
EPA agrees with the OIG that Headquarters management and oversight of special
accounts is increasingly important given the growth in special account resources in recent years.
EPA appreciates that the draft report acknowledges the efforts taken recently to improve the
management of special accounts. EPA has taken additional measures in consideration of the
OIG's recommendation for a central management approach of one designated office for special
accounts to provide clarity, accountability, and clear channels of communication.
The complexity of Superfund sites along with the complexity of special accounts requires
unique legal, programmatic, and financial expertise across three Headquarters offices as well as
regional offices to ensure effective management. No one office in the Agency has all the
expertise necessary to oversee special accounts in its entirety.
Furthermore, regions have the delegated authority to request and use special account
resources, and are in the best position to make decisions regarding the use of funds. The
responsibility for day-to-day planning and management of special accounts will remain in the
regions, with close coordination and management oversight from Headquarters. At the same
time, we acknowledge that improved inter-office coordination and greater Headquarters attention
could have prevented several of the issues stemming from 2005 that are described by the OIG,
and since 2005, such inter-office coordination efforts have taken and continue to take place.
Since management of special accounts is a joint responsibility for which no one office
can be solely responsible, OCFO, OSWER, and OECA have agreed to establish a Superfund
Special Accounts Senior Management Committee (Committee) that will be comprised of the
directors for the offices responsible for special account management and oversight, as well as the
lead regions for Superfund and Management.11 The objective of the Committee is to further
strengthen leadership and improve coordination and transparency among the offices in
11 The Committee will be comprised of the Directors for the Office of Superfund Remediation and Technology
Innovation (OSRTI), Office of Site Remediation Enforcement (OSRE), Office of Budget (OB), Office of Financial
Management (OFM), and the Office of Financial Services (OFS), as well as the Division Director for Superfund in
EPA Region 7, Lead Region for Superfund, and the Associate Regional Administrator for Management in EPA
Region 8, Lead Region for Management. Lead Regions rotate every two years.
32
-------
09-P-0119
Headquarters and the regions involved in the management and oversight of special accounts.
OSRTI will serve as the Lead Coordinator for the Committee, and, as a whole, the Committee
will monitor the status of special accounts, ensure that each member office is fulfilling its
responsibilities under the Special Accounts Management Strategy, and be responsible for overall
oversight and management of special accounts. The Committee will elevate issues, as needed, to
the Superfund Board of Directors for resolution.
OIG Response 6
Since the Agency's response to the OIG draft report, the Agency provided drafts of its
Committee Charter. Because the most current version of the Charter states that the Deputy
Administrator is the only one who can terminate the Charter, and the Charter includes the
requirement for the Chairman of the Committee to raise unresolved issues to senior management
or above, the proposed alternative is accepted. However, until the most current version of the
Charter is signed, the related recommendation is open with agreed to actions pending.
Settlement Agreements Do Not Allow for Special Account Funds to Be Used at Other Sites
While we appreciate the OIG's efforts to clarify how reclassification of special account
resources can make available previously appropriated resources for use at other Superfund sites,
there continue to be areas of the report (e.g., page 4, page 8) where the phrasing suggests that
special account funds may be better used at "other" sites. In accordance with CERCLA
Section 122(b)(3), special account funds must only be used for the purposes of carrying out
the agreement through which EPA received the funds, which means they must be used only
at the site(s) for which the funds were received. Special account funds themselves are never
used at "other" sites. This is a sensitive and important point during negotiations with PRPs and it
is vital to clarify the language throughout the report.
Through reclassification, special account resources are used to reimburse EPA for
response work at the site which was previously paid for with appropriated dollars. The
appropriated resources freed up from the reclassification are then made available for EPA to use
at other sites. In an effort to ensure the concept of reclassification is clear and reduce the
potential for misunderstanding by the public when this report is published, we request that
footnote 5 on page 4 be placed in the body of the document rather than as a footnote. It is also
important the draft report clarify in every instance that appropriated funds are to be used to
fund work at "other" sites, not special account funds.
OIG Response 7
The OIG made appropriate changes to the text.
33
-------
09-P-0119
EPA Agrees Public Reporting is Advantageous but Wishes to Clarify that Resources Are Not
Improperly Commingled
Given the growth in special account resources in recent years, EPA generally agrees with
the OIG that public reporting would provide transparency and increase the Agency's
accountability to our oversight agencies to manage these resources effectively. The Superfund
Special Accounts Senior Management Committee will consider venue options for annual
reporting as well as the level of detail appropriate in providing public access to special account
data. In FY 2009, the Agency will begin to report the appropriate detail in the selected venue(s)
annually.
However, the OIG's statements on page 9 that reporting for special account funds were
".. .commingled with EPA's appropriated dollars" incorrectly implies that both these resources
are not accounted for properly. The information recommended by the OIG to be reported
publicly is at a more detailed level than appropriate for the Agency's Financial Statements and
supporting footnotes. The Statements are prepared in accordance with OMB Circular A-136 and
provide Agency-level information, including a Cashout footnote. The Superfund supplemental
statements also follow the requirements of A-136. The OIG recognizes in the draft report that it
has rendered an unqualified opinion on EPA's financial statements for 8 consecutive years.
To avoid the misperception that EPA improperly accounts for both appropriated and
special account Superfund resources, EPA recommends that the term "commingled" be deleted
from this section, and specifically recommends the following on page 9:
• Revise fifth sentence in the first full paragraph from, "Rather, they were commingled with EPA's
annually appropriated dollars, and reported in many places" to "Rather, for reporting purposes,
they were combined with EPA's annually appropriated dollars."
• Revise first sentence in the second full paragraph from, "The OIG has rendered an unqualified
opinion on EPA's financial statements for 8 consecutive years, and under current reporting
requirements the commingling of funds is allowed" to "The OIG has rendered an unqualified
opinion on EPA's financial statements for 8 consecutive years, and under current requirements
combining funds for reporting purposes is allowed."
OIG Response 8
The OIG made appropriate changes to the text.
High Special Account Available Balances Do Not Impede Spending
On Page 8, 3rd full paragraph, 4th sentence, the report states, "For example, once a
significant amount of funds are available for release, high fund balances may prevent the region
from spending large amounts of money at a given time." In the case of Region 9 cited in the
report, current year funding for projects at other sites in Region 9 had already been issued by
Headquarters, according to the program's standard work planning and funds allocation process,
prior to the Stringfellow reclassification. As a result, a portion of the funds that were reclassified
34
-------
09-P-0119
at the Stringfellow site were used by Region 9 and the remaining amount was used to fund work
at other sites across the nation.
This approach is entirely consistent with the message throughout the draft report where
the OIG states that previously appropriated funds resulting from special account reclassification
"could be used to support other priority Superfund sites". The funds freed up due to
reclassification are incorporated into well-established Agency work planning and fund allocation
processes, and the Agency ensures funds are used for the highest national and regional priorities.
Therefore, while there may be instances where a region may not be able to absorb all
appropriated funds made available as a result of the reclassification of large amounts of special
account funds in a given fiscal year, the overall program can do so, and in a way that focuses on
priority sites. For these reasons, the balance available in a special account, whether high or low,
does not impede spending.
OIG Response 9
The OIG did not state that high available balances impede spending. However, we made
appropriate changes to the text.
Characterization of Certain Aspects of the Stringfellow Special Accounts are Incorrect
Of the $65 million cited in the report as "idle" and available for reclassification or
transfer to the general portion of the Superfund Trust Fund, $47.8 million is associated with the
Stringfellow site that has previously been addressed by an Early Warning Report. Of the $47.8
million, the OIG recommended in the Early Warning Report $20 million be reclassified, which
has occurred. Appendix D of the draft report implies that the Region will reclassify the
additional $27.8 million in 2010 when in fact the Region committed to reviewing the potential
for reclassification of the additional $27.8 million identified by the OIG, as well as any
additional amounts, on completion of certain milestones, including the final remedy decision and
final consent decree. Completion of the final remedy is now expected in early 2011, rather than
2010 as stated in the draft report. The Region has always planned a phased approach that is
consistent with the level of uncertainty regarding site cleanup requirements.
OIG Response 10
The OIG made appropriate changes to the text.
In addition, Appendix E (page 23, third paragraph) states, "The funds were put into the
State's general fund to reimburse it for work it funded at the Stringfellow site". Please clarify in
the draft report that the insurance settlement of $121 million was placed in the State's general
fund where it is being used to fund general State operations; the funds are not being held by the
State to fund Stringfellow site work.
35
-------
09-P-0119
Concerns have also been expressed previously over the enforceability of the consent
decree commitment for the State to "clean up the site" and "pay future costs." The OIG's
paraphrase in Appendix E (page 23, third paragraph) of Region 9's justification of the "reserve"
that the State "may not have the funds needed for the clean up" fails to recognize that other
concerns exist. As a result, we suggest that the last sentence in the third paragraph on page 23
read, "EPA continues to maintain the funds as reserve with concern that at some point the State
may not implement the final response."
OIG Response 11
The OIG made appropriate changes to the text.
As noted previously, the draft report should reflect the revised anticipated dates for the
final remedy and implementing consent decree. Please include a footnote or other reference to
the State budget effects on the schedule, or the present anticipated date of early 2011 for the final
remedy decision.
OIG Response 12
The OIG made appropriate changes to the text.
Attachment 1 provides a list of the recommendations that apply to Headquarters, and our
response. We look forward to working with you on this and other matters in the future. If you
have any questions regarding the Agency's response to the draft report, please contact Jim
Woolford at (703) 603-8960 orwoolford.james@epa.gov.
Attachment
cc: Marcus Peacock, OA
Lyons Gray, OCFO
Granta Nakayama, OECA
James Woolford, OSWER/OSRTI
Marcia E. Mulkey, OECA/OSRE
Lorna McAllister, OCFO/OFM
Carol Terris, OCFO/OB
Raffael Stein, OCFO/OFS
36
-------
09-P-0119
Attachment 1
Agency Response to OIG Recommendations for Project No. 2007-000727
OIG Recommendation
Agency Comments
1. Designate a central management and
action official for Superfund special accounts
(and document this delegation) with
responsibility for developing an action plan to
ensure that management accountability and
related issues regarding special accounts are
addressed.
Concur (in Principle): The Agency concurs in
principle with this recommendation. EPA
proposes to address this recommendation in an
alternative fashion given varied areas of
expertise across the Agency that no one office or
program can be responsible for.
Rather than designating a single central
management and action official, the Agency is
establishing a Superfund Special Accounts
Senior Management Committee comprised of
the directors of the offices and regions that have
responsibility for managing special accounts.
OSRTI will act as Lead Coordinator for the
Committee, including managing the operational
aspects of the Committee and organizing
Committee meetings. The Committee will
elevate issues for resolution to the Superfund
Board of Directors as needed. A "charter" for
this Committee will be completed in January
2009.
We believe this approach addresses the OIG's
concerns of clarity and accountability, along
with creating clear channels of communication,
while reflecting the reality that critical special
account functions occur across offices.
OIG Analysis:
1. Since the Agency' s response to the OIG draft report, the Agency provided drafts of its
Committee Charter. Because the most current version of the Charter states that the Deputy
Administrator is the only one who can terminate the Charter, and the Charter includes the
requirement for the Chairman of the Committee to raise unresolved issues to senior management
or above, the proposed alternative is accepted. However, until the most current version of the
Charter is signed, the recommendation is open with agreed to actions pending.
l(a). Requirements for clear and separate
financial reporting of special account funds in
a publicly available report.
Concur: The Superfund Special Accounts
Senior Management Committee will address this
recommendation.
Clear and separate financial reporting of special
account funds will be publicly available annually
beginning in FY 2009.
37
-------
09-P-0119
OIG Analysis:
l(a). The Agency's most current draft of its Committee Charter stated that the Office of Budget
will be the official responsible for publicly reporting the end of year summary special account
resource collection and expenditure data. It appears that the special account information OSRTI
suggested it would report is similar to the information already reported and which we believe
prevents sufficient oversight. The Director, OSRTI, and the proposed Chairman for the Special
Accounts Management Committee stated that OSRTI will be the office responsible for national
public reporting of special account planning information. However, the Agency is not specific
about which information it will report, and does not specify the venue for reporting. The Agency
does say that by August 2009 it will meet and resolve internally which information will be
reported and which venues, and that it will notify the OIG of this resolution. Until then, this
recommendation is undecided with resolution in progress.
l(b). An annual planning process that
includes a determination that special account
funds will be used consistent with the
hierarchy, to aid in the monitoring of special
account funds.
Concur: Regional plans for using special
account funds are incorporated as part of the
Superfund program's annual work planning
process for the Superfund Remedial and
Superfund Enforcement programs. Regional
plans are also discussed as part of mid-year
reviews conducted by the programs. The
Agency does not focus only on the hierarchy,
but on the overall management of special
accounts and the appropriate timing and use of
funds.
The Agency addressed this recommendation as
part of its FY 2009 regional work planning
activities. A review of the use and plans for
special account funds will continue as part of the
mid-year and annual regional work planning
process conducted by the Superfund program.
The Agency believes this recommendation will
also be addressed in the Special Accounts
Management Strategy under development,
which will be issued in January 2009.
OIG Analysis:
l(b). According to the Agency, it has implemented some actions through use of CERCLIS
screens and review during the annual planning and mid-year review process. However, the most
current version of the Charter, which includes the details on how management will ensure special
account funds are used consistent with the guidance, is not signed. The OIG believes a signed
Charter with the agreed-to elements is key to assuming oversight of the consistent use of the
funds with the hierarchy. Until the Charter is signed, the recommendation is open with agreed to
actions pending.
l(c). Development of regional and
Headquarters controls that include follow-up
to make sure planned and/or requested uses
(e.g., reclassifications, transfers) of special
Concur: Special account uses will be monitored
through the annual regional work planning and
mid-year review process, and on an ad hoc basis if
warranted by unusual site circumstances.
38
-------
09-P-0119
accounts funds occur, and document these
controls in appropriate guidance.
The Superfund Special Accounts Senior
Management Committee will determine if
additional documentation of appropriate controls
is needed by November 2009.
OIG Analysis:
l(c). The Agency's most current draft of its Committee Charter stated that the Committee would
ensure that regions' planned actions occur. However, until the Charter is signed, the
recommendation is open with agreed to actions pending.
l(d). Development of a plan that includes
completed CERCLIS reports with accurate
special accounts data, and that identifies how
EPA will use the special accounts data it
collects to manage [special accounts] the
program and improve performance.
Concur: The CERCLIS data entry screens were
finalized and released to the regions for data
entry on July 21, 2008. CERCLIS reports have
been created and were used in each of the 10
regional FY 2009 work planning sessions, as
well as for follow-up conducted with the
regions.
The Agency believes this recommendation will
be addressed through the Special Accounts
Management Strategy, which will be issued in
January 2009.
OIG Analysis:
l(d). The Agency has committed in its most current version of the Committee Charter to oversee
special account planning data in CERCLIS. This and other information provided in the Charter
meets the intent of the recommendation. However, until the Charter is signed, the
recommendation is open with agreed to actions pending.
l(e). Establishment of guidance and/or
policy that addresses the proper application
and amount of the holdback or reserve of
special account funds for future use. The
guidance and/or policy should include a
listing of factors to assess in establishing,
maintaining, and releasing reserves, both
before and after an agreement for clean-up is
achieved with PRPs.
Concur (in Principle): EPA agrees that only
those funds that are needed to address future
work and risks should be placed into a special
account. EPA believes that the guidance
contained in Special Accounts: Guidance on Key
Decision Points in Using Special Account Funds
(September 28, 2001) (Timing and Use
Guidance), is sufficient for the regions, with
Headquarters oversight, to manage the use of
special account funds overall.
EPA agrees that additional Headquarters
program and enforcement office oversight is
also appropriate. OSRTI and OSRE will
implement a policy to review and oversee that
the use of special account funds is in accordance
with current EPA guidance through the FY 2009
and FY 2010 regional work planning and mid-
year review of special accounts, or when a
response milestone is reached. For sites with
39
-------
09-P-0119
unusual circumstances, Headquarters program
and enforcement offices will work more closely
with the region responsible for the special
account, as appropriate, throughout the life cycle
of the special account. The Special Accounts
Senior Management Committee will evaluate
the effectiveness of this approach at the
conclusion of FY 2010 mid-year regional
reviews.
OIG Analysis:
l(e). The Agency has not agreed to develop a reserve policy and believes that its current
guidance is sufficient. The OIG continues to believe that documenting the specific criteria that
EPA uses to hold funds in accounts when agreements have been reached with PRPs is necessary.
In these instances, the special accounts are essentially being held as financial assurance. This
documentation is necessary to justify not (1) reclassifying these funds and using them to
reimburse the Trust Fund, thereby making available appropriated funds to clean up other sites;
or, (2) transferring these funds, thereby reducing the taxpayer burden since the Trust Fund is
funded by the General Fund.
Based on the OIG comments, the Agency has added language to the Charter specifying that the
Committee will ensure special account funds are used consistent with EPA special account
guidance, and OSRTI and the Office of Site Remediation Enforcement will have the primary
responsibility for this action. It will use the work planning and mid-year review process to
ensure that regions' planned uses for these funds are appropriate, and when site uncertainties are
resolved the funds are planned for more specific response action use or reclassified/transferred to
the Trust Fund. In light of OIG concerns, however, OSRTI will work with the Office of Site
Remediation Enforcement and the other offices and regions to evaluate existing guidance and
identify where our concerns could be more fully addressed. The Committee will evaluate this
analysis in October 2009 and decide how best to address gaps in current guidance related to the
issues we have identified.
This recommendation is undecided with resolution in progress.
l(f). Reevaluation of whether the current
amount of about $88.4 million being held in
reserve is still appropriate under the new
policy (developed in response to Recommen-
dation l(e)), and, if not, reclassify or transfer
it to the Trust Fund, as appropriate.
Concur: EPA will review these accounts as part
of the annual regional work planning and mid-year
review process to ensure account funds are used in
accordance with EPA guidance.
OIG Analysis:
l(f). The Agency has agreed to review these accounts as part of the annual regional work
planning and mid-year review process to ensure account funds are used in accordance with EPA
guidance. However, until such time the Agency develops a policy on special account funds held
in reserve, the Agency should document in writing the decisions and outcomes reached at the
twice yearly regional work planning meetings regarding maintaining or reclassifying reserve
balances, to include the criterion used in making final decisions. Based on the explanation above
related to le, this recommendation is undecided with resolution in progress.
40
-------
09-P-0119
l(g). Regularly aging and analyzing the
"oldest accounts" for opportunities to better
use special account funds.
Concur: The Agency will use CERCLIS data
to analyze the "oldest accounts" as part of the
mid-year regional reviews in March 2009.
This analysis will be incorporated as part of the
annual regional work planning and mid-year
review process with the regions.
OIG Analysis:
l(g). The Agency agreed to use CERCLIS data to analyze the "oldest accounts" as part of the
mid-year regional reviews in March 2009. This analysis will be incorporated as part of the
annual regional work planning and mid-year review process with the regions. Until the action is
completed, the recommendation is open with agreed to actions pending.
8. We recommend that the Assistant
Administrator for the Office of Solid Waste
and Emergency Response and the Assistant
Administrator for the Office of Enforcement
and Compliance Assurance, as co-chairs of
the Superfund Board of Directors, correct the
Action Status for reviewing the oldest special
accounts (under Recommendation 97 of
EPA's 120-Day Study) to state that EPA has
not yet completed analysis work on all of its
special accounts, including the "oldest special
accounts," and provide an updated milestone
for completion.
Concur: The Agency will use CERCLIS data to
review the "oldest special accounts" as part of the
mid-year regional reviews in March 2009. The
Agency will update the Action Status of the 120-
Day Study to reflect this plan.
OIG Analysis:
8. The Agency concurred with this recommendation. As previously stated in response to
Recommendation l(g), the Agency will use CERCLIS data to analyze the "oldest accounts" as
part of the mid-year regional reviews in March 2009. The Agency will update the Action Status
of the 120-Day Study to reflect this plan. The OIG would also expect that any subsequent
updates to the 120-Day Action Status will include current status of its work on the "oldest
accounts." This recommendation is open with agreed-to actions pending.
41
-------
09-P-0119
Appendix H
Region 1 Response to OIG Draft Report
MEMORANDUM
DATE: December 18, 2008
SUBJECT: Region I Comments on OIG Draft Report: Improved Management of Superfund
Special Accounts Will Make More Funds Available for Clean-ups
FROM: James T. Owens, III, Director /s/ for
Office of Site Remediation and Restoration
TO: Tina Lovingood
Office of the Inspector General
Carolyn Copper
Office of the Inspector General
As requested, Region I is providing the following comments on the above draft report. We do
not concur with the draft report's recommendations specifically for Region I.
The OIG draft report recommends that the Region I administrator reclassify or transfer $100,736
to the Trust Fund, as appropriate. For accuracy, Region I believes the recommendation should
be updated to reflect the most current data and Regional actions by reducing the actual amount
available for reclassification or transfer by $99,614. Our position is supported by Appendix D
(page 19) of the draft report.
Appendix D, Details on Special Accounts with Opportunities for Better Utilization through
Reclassification or Transfer
This appendix shows that the amount OIG has identified as available for reclassification or
transfer relates to two sites: Landfill and Resource Recovery, Inc. (L&RR, $99,614) and Keefe
Environmental Services ($1,122). Note that the report refers to L&RR as Land and Resource
Recovery.
L&RR - As the OIG suggested and the draft report states, Region I moved the principal
($60,000) to the Trust Fund in May 2007 and subsequently moved the associated interest
($39,614) to the Trust Fund in December 2007. The draft report further states that: No further
action is needed from Region I on this issue. Therefore, Region I believes the region specific
recommendations should clearly state that no amount remains available for reclassification or
transfer with respect to the L&RR special account.
42
-------
09-P-0119
Keefe - As the OIG draft report states, Region I will begin a long-term response action in the
second quarter of FY '09. At the time that Region I determines no further funding is needed for
this activity, Region I concurs that it will again consider reclassifying or transferring to the Trust
Fund any remaining funds, as appropriate.
We also disagree with the language in Appendix E concerning the Beede Waste Oil site in
Region I.
OIG Response
Although Region 1 stated it did not concur with the recommendation, it did take action that was
responsive to it. Region 1 believes that the recommendation should be updated to reflect the
most current data and regional actions by reducing the actual amount available for
reclassification. The Region's comment pertains to the removal of $99,614 from the Land and
Resource Recovery special account in 2007. OIG recognizes the most current data, and
acknowledges the Region's removal of funds, as stated in Appendix D, no further action is
needed from Region 1 on this issue. Because the Regions' actions were initiated subsequent to
the start of our field work in April 2007, the recommendation will remain as stated. Region 1
also agreed to review the remaining $1,122 in the second quarter of Fiscal Year 2009. See
Appendix G for OIG Response to the Region's comments on Appendices D and E. This
recommendation is open with agreed-to actions pending.
Appendix E, Details on Reserve Accounts
With regard to the Beede Waste Oil site, the draft report states:
Since the consent decree is entered, there should be no basis for the Region to continue to
maintain the funds, especially if adequate financial assurance is provided. However, the Agency
is concerned about the potential of a remedy change or failure, PRPs potentially being deficient
in their clean-up, exceedence of recovery of oversight costs over a negotiated limit, and the fact
that the Region did not negotiate liquid financial assurance in its settlement with the PRPs.
Currently, the special account funds are being used to support enforcement and records center
activities.
The Region disagrees that there is "no basis" to maintain the funds in the special account. The
OIG's statement fails to recognize the future work and risks that may continue to exist at a site
even after a consent decree is entered. Therefore, Region I respectfully requests that this
statement be clarified to state, more accurately, the following:
Although the consent decree is entered, the Region continues to maintain the funds in the Special
Account in the event that a remedy change or failure necessitates work beyond that required by
the Consent Decree; that EPA takes over the work because the PRPs are deficient in their
clean-up; or that oversight costs exceed the amount the PRPs are required to pay. The Region
notes that the financial assurance provided under the settlement, although meeting the settlement
requirements, does not provide liquid funds to EPA.
43
-------
09-P-0119
If you have any questions, please contact Stanley Chin of my staff at (617) 918-1401.
cc: J. Owens
R. Cavagnero
OSRR Branch Chiefs
M. Bosworth
J. Buonopane
M. Cassidy
S. Walter
B. Haslett
J. Jerison
L. Murphy
J. Doucette
P. O'Leary
44
-------
09-P-0119
Appendix I
Region 2 Response to OIG Draft Report
From 12/4/08 Email From Leslie Petersen, Chief, Resource Management Cost Recovery Section,
Program Support Branch, to Carolyn Copper, Product Line Director, OIG, Office of Program
Evaluation, and Tina Lovingood, Project Manager, OIG, Office of Program Evaluation
"This is in response to the draft report below. The regions were instructed to respond directly to your
office regarding the region specific recommendations. For Region 2 the recommendation (#3) was to
reclassify or return to the trust, $588,986 in Love Canal special account funds. The Region concurs with
the recommendation and intends to process a reclassification of approximately $600,000 in special
account funds by January 31, 2009. Please call me at 212-637-4298 if you need any additional
information."
OIG Response
Region 2 concurs with the recommendation and completed reclassification of $600,000 on
February 10, 2009. The recommendation is closed
45
-------
09-P-0119
Appendix J
Region 4 Response to OIG Draft Report
12/5/08
MEMORANDUM
SUBJECT: Response to OIG Draft Report issued by the Office of Inspector General (OIG)
regarding Management of Superfund Special Accounts Will Make More Funds
Available for Clean-ups
TO: Wendy Hopkins Lubbe
Region 7
Tracey Stewart
Office of Superfund Remediation & Technology Innovation
FROM: Franklin E. Hill, Director /s/
Superfund Division
This memorandum is in response to the pre-dated January 2009 release of the Draft Report
issued by the Office of Inspector General (OIG) regarding Management of Superfund Special
Accounts Will Make More Funds Available for Clean-ups. This response is specific to Region 4
only.
The OIG recommends in this report that the Region 4 Administrator reclassify or transfer to the
Trust Fund as appropriate $642,283 in idle special account funds. Region 4 concurs with the
recommendation of the OIG and will take the appropriate steps to reclassify or transfer these
funds during FY09. Region 4 does not have any comments on the programmatic/policy issues
and non-region specific recommendations.
OIG Response
Region 4 concurs with the recommendation and will take the appropriate steps to reclassify or
transfer these funds during Fiscal Year 2009. The recommendation is open with agreed-to
actions pending.
If you have any additional questions or concerns please contact Carolyn McCall at 404/562-
8874.
cc: Terry Dempsey, Regional Grants Disputes Officer/Audit Liaison
46
-------
09-P-0119
Appendix K
Region 6 Response to OIG Draft Report
12/4/08
MEMORANDUM
SUBJECT: Comments on the Draft Evaluation Report:
Improved Management of Superfund Special Accounts
Will Make More Funds Available for Clean-ups
Project No. 2007-000727
FROM: Lydia Johnson, Chief /s/ Cynthia K. Brown for
Enforcement Assessment Section (6SF-TE)
TO: Tina Lovingood, Project Manager
Office of Inspector General
Thank you for the opportunity to provide comments to the Office of Inspector General
(OIG) Draft Evaluation Report: Improved Management of Superfund Special Accounts Will
Make More Funds Available for Clean-ups. The following is a summary of comments from the
Superfund Division, which manages and oversees the Region 6 special accounts. An additional
response will be submitted by HQ.
General Comments
Since the OIG draft report reflects findings based on planning information reviewed and
collected over the past year and a half, we recognize the region's special accounts have changed;
therefore, this report is not totally reflective of current plans for the identified sites. Our
comments are based on more recent management of special account plans and data pulled as of
November 3, 2008. The following recommendations reflect special account information as of
November 3, 2008.
Recommendations
No. 1 Please replace the draft language on page 11 to read:
5. We recommend that the Region 6 Administrator
reclassify or transfer to the Trust Fund, as appropriate,
$954,511 in idle special account funds.
47
-------
09-P-0119
No. 2 Please replace the narrative draft language on page 20 for Odessa Drum Company
and Pab Oil with the following language. The narrative for Gulf Coast Vacuum is
correct as drafted and requires no corrections.
Region 6
We identified two special accounts with a total of $294,476 that
could be better utilized. This amount includes $218,388 for Gulf
Coast Vacuum and $76,088 for Odessa Drum Company. The
Region also planned to reclassify $660,035 from the Pab Oil
account in Fiscal Year 2009, but the OIG is not making a
recommendation on this amount until further work is completed.
Odessa Drum Company: We identified $76,088 remaining in the
account that could be better utilized. Based on discussion and
correspondence from the Region, it planned to reclassify
$1,121,076 and close out the special account. Per the Region, this
account was identified for closure in 2005, but due to workload
issues had not been addressed. In January 2008, the Region
reclassified $1,121,076. As of November 3, 2008, the available
balance was about $76,088. The Region plans to transfer these
funds to the Trust Fund and close the account in Fiscal Year 2009.
Pab Oil: The Region plans to reclassify $660,035. Per the Region,
the site was deleted from the National Priorities List in 2000 and is
currently in operation and maintenance with on-going monitoring
being conducted by the PRP. The remaining special account funds
will be used to fund EPA oversight and required 5-year reviews.
However, the OIG does not plan to recommend reclassification of
these funds until the OIG concludes its work associated with its
evaluation of site sampling. When that work is completed, the
OIG will revisit the need for recommending reclassification of
these funds.
OIG Response
Region 6 generally concurred with the recommendation for reclassification of funds and
requested that the recommended amounts be updated to reflect special account balances as of
November 3, 2008. The Region's comments are based on more recent management of special
account plans, including a reclassification of $1,121,076 from the Odessa Drum Company
special account in January 2008. OIG recognizes the most current data and, as stated in
Appendix D, The Region plans to transfer remaining funds to the Trust Fund and close the
account in Fiscal Year 2009. Because the Regions' actions were initiated subsequent to the start
of our field work in April 2007, the recommendation will remain as stated. See Appendix G for
OIG Response to the Region's comments on Appendix D. This recommendation is open with
agreed-to actions pending.
48
-------
09-P-0119
Thank you for the opportunity to review the draft report. If you have any questions
regarding this memo, please direct them to Doretha Christian at
(214) 665-6734.
49
-------
09-P-0119
Appendix L
Region 7 Response to OIG Draft Report
12/8/08
MEMORANDUM
SUBJECT: Improved Management of Superfund Special Accounts
Will Make More Funds Available for Clean-ups
Project No. 2007-000727
FROM: John B. Askew /s/ for
Regional Administrator, Region 7
TO: Wade Najjum
Assistant Inspector General
Office of Program Evaluation
On November 19, 2008, the Office of Inspector General (OIG) issued the draft evaluation
report "Improved Management of Superfund Special Accounts Will Make More Funds Available
for Clean-ups." OIG directed Recommendation 6 to Region 7 in the draft report. We are
providing our response to Recommendation 6.
Recommendation 6: We recommend that the Region 7 Administrator reclassify or
transfer to the Trust Fund as appropriate, $1,603,756 in our Special Accounts (SAs.)
Region 7 Response: There were four SAs mentioned in the OIG's report. Following is
the current status of these four SAs:
Superior Solvents: It was determined additional work at this site is necessary, and the SA
should not be closed at this time. Therefore, the SA funds are currently planned to cover EPA's
intramural costs for the oversight of a removal action.
Ralston: In September 2008, the region reclassified the remaining balance of $286,284 in
this SA, thus closing the SA. No further actions are needed.
Fenton Creek Dump: Region 7 reduced this SA in September 2008 by a transfer of
$1,150,718.90 to the Superfund TrustFund and a reclassification of $66,896. The region
retained $100,000 in this SA for the sampling and closure of site wells. This SA is currently
planned in CERCLIS to be closed March 30, 2010.
Three D Investment: Region 7 reclassified $17,761 and transferred the remaining
balance of $22,749.14 to the Superfund Trust Fund. This SA was closed in September 2008. No
further actions are needed.
50
-------
09-P-0119
In summary, the region transferred and/or reclassified a total of $1,544,409.04 from three
of the SAs cited in the OIG report. The difference between the $1,603,756 in the OIG's
recommendation and the $1,544,409, which the region has transferred and reclassified, is due to
the amount remaining in the Superior Solvents SA, a portion of the $100,000 retained in the
Fenton Creek SA, and obviously accrued interest.
OIG Response
The OIG's draft report recommendation to Region 7 was to reclassify $1,480,490. The Region's
comments say that our recommendation directed them to reclassify $1,603,756. Region 7
transferred and/or reclassified a total of $1,544,409 in September 2008 from the special accounts
cited in the OIG report. This recommendation is closed.
If you have any questions concerning this response, please contact me or Kathy Finazzo,
Regional Audit Follow-up Coordinator, at 913.551.7833.
cc: Cecilia Tapia, SUPR
Robert Jackson, SUPR
Ann Keener, SUPR
Wendy Lubbe, SUPR
Teri Hankins, SUPR
Martha Cuppy, PLMG
Carla Kohler, RFMB
Kathy Finazzo, RFMB
51
-------
09-P-0119
Appendix M
Region 10 Response to OIG Draft Report
December 17, 2008
Reply To: ECL-110
MEMORANDUM
SUBJECT: Region 10 Response to Office of Inspector General (OIG) Draft Evaluation
Report, Project No. 2007-000727: Improved Management of Superfund Special
Accounts
FROM: Daniel D. Opalski, Director /s/ for
Office of Environmental Cleanup
THRU: Bob Phillips, OIG Audit Liaison /s/
Office of Management Programs
TO: Wade Najjum, Assistant Inspector General
Office of Program Evaluation
Region 10 concurs on the recommendations made in the subject report regarding
reclassification of funds in five different Region 10 special accounts. The total amount to be
reclassified, however, may differ due to interest that has accrued since OIG first looked at these
accounts. Barring any unforeseen circumstances, these actions will be completed by
September 30, 2009.
The specific status of the accounts named in the report is as follows:
Tulalip (10B3): Region 10 will pursue reclassification of the interest, currently at $2,156,195.74,
in this account. Since the account continues to accrue interest (nearly $9,000 in October 2008
alone), we will continue to reclassify funds in excess of the $3 million required by the Consent
Decree approximately every two years.
Arctic Surplus (10E8): The account balance is currently $807,432, and Region 10 will reclassify
these funds in FY09. As is recognized in the subject report, we cannot close out this special
account due to potential future payments from another federal agency.
Bunker Hill-UPRR Trails (103D): Contrary to our previous plan, Region 10 will not be closing
this special account. We are currently in negotiations for additional work with the Potentially
Responsible Parties (PRPs) involved in the initial settlement that created this account. This
account will remain open and available balances (along with potential additional payments) will
be used for future work at this site.
52
-------
09-P-0119
Bunker Hill-NIPC (10Y5): Region 10 is working with the Cincinnati Finance Center to resolve
some accounting issues related to this special account and once those are resolved, Region 10
will realign the funds in this account to account 1020 for other Bunker Hill work and then close
this account.
Pacific Wood Treating (101 A): As noted in the report, Region 10 has already reclassified these
funds and closed this account.
OIG Response
Region 10 concurs with the recommendation regarding reclassification of funds in five different
special accounts and noted that, barring any unforeseen circumstances, the actions will be
completed by September 30, 2009. However, the Region also indicated that one of the accounts
will remain open to receive other expected settlement funds, and the funds that are currently in
the account will be used to pay for future clean-up. We have adjusted the tables in the report and
the recommendation accordingly. The recommendation is open with agreed-to actions pending.
As stated above, Region 10 will make every effort to complete these actions by
September 30, 2009. If you have further questions, please call Beth Sheldrake, of my staff, at
(206) 553-0220.
cc: Carolyn Copper, EPA OIG
Tina Lovingood, EPA OIG
Beth Sheldrake, EPA ECL
Lynne Kershner, EPA ECL
Russell Harmon, EPA OMP
Cyndy Mackey, EPA ORC
Bob Phillips, EPA OMP
Tracey Stewart, EPA OSRTI
Hollis Luzecky, EPA OSRE
53
-------
09-P-0119
Appendix N
Distribution
Office of the Administrator
Acting Deputy Administrator
Acting Assistant Administrator, Office of Solid Waste and Emergency Response
Acting Assistant Administrator, Office of Enforcement and Compliance Assurance
Acting Chief Financial Officer
Acting Regional Administrators, Regions 1-10
Acting Agency Follow-up Official (the CFO)
Agency Follow-up Coordinator
Principal Deputy Assistant Administrator, Office of Solid Waste and Emergency Response
Principal Deputy Assistant Administrator, Office of Enforcement and Compliance Assurance
Acting General Counsel
Acting Associate Administrator for Congressional and Intergovernmental Relations
Acting Associate Administrator for Public Affairs
Director, Office of Superfund Remediation and Technology Innovation
Acting Director, Office of Site Remediation Enforcement
Director, Office of Administration and Policy
Audit Follow-up Coordinators, Regions 1-10
Audit Follow-up Coordinator, Office of Enforcement and Compliance Assurance
Audit Follow-up Coordinator, Office of Solid Waste and Emergency Response
Audit Follow-up Coordinator, Office of the Chief Financial Officer
Acting Inspector General
54
------- |