Office of Inspector General
Audit Report
SUPERFUND
Region 2's Billing of Superfund Oversight Costs
E1SFF8-02-0007-8100206
August 13,1998
-------
Inspector General Division Eastern Division
Conducting the Audit: Boston, MA
Region Covered: Region 2
Program Offices Involved: Emergency and Remedial Response Division
Financial Management Branch
Office of Regional Counsel
-------
MEMORANDUM
SUBJECT: Report of Audit of Region 2's Billing of Superfund Oversight Costs
Audit Report E1SFF8-02-0007-8100206
FROM: Paul D. McKechnie
Divisional Inspector General for Audit
Eastern Division
TO: Jeanne M. Fox
Regional Administrator
Region 2
Attached is our final audit report on EPA Region 2's Billing of Superfund Oversight Costs. The
objectives of this audit were to determine whether the Region was (a) timely billing the
responsible party for Superfund oversight costs, (b) successfully collecting untimely billed
oversight costs, and (c) implementing the Agency's Superfund reforms regarding oversight.
This audit report contains findings that describe problems the Office of Inspector General (OIG)
has identified and corrective actions the OIG recommends. This audit report represents the
opinion of the OIG. Final determination on matters in the audit report will be made by EPA
managers in accordance with established EPA audit resolution procedures. Accordingly, the
findings contained in this audit report do not necessarily represent the final EPA position, and are
not binding upon EPA in any enforcement proceeding brought by EPA or the Department of
Justice.
ACTION REQUIRED
In accordance with EPA Order 2750, you as the action official are required to provide this office
a written response to the audit report within 90 days. Your response should address all
recommendations, and include milestones dates for corrective actions planned, but not completed.
We have no objection to the release of this report to the public. Should you have any questions
about this report, please contact Herb Maletz, Audit Manager at (212) 637-3058 or Steven J.
Weber, Team Leader at (617) 565-3160.
-------
Superfund Oversight Billings
EXECUTIVE SUMMARY
PURPOSE
We performed an audit of Region 2's billing of Superfund oversight
costs because of problems noted during our audit of the Agency's
Financial Statements. The objectives of this audit were to
determine whether the Region was (a) timely billing the responsible
party for Superfund oversight costs, and (b) successfully collecting
untimely billed oversight costs, and (c) implementing the Agency's
Superfund reform regarding oversight.
BACKGROUND
The Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) authorizes EPA to recover its costs from
responsible parties to help replenish the Superfund Trust Fund. The
law, as amended by the Superfund Amendments and
Reauthorization Act of 1986, stipulates that EPA may help fund
state government efforts to remediate hazardous waste sites. Both
EPA and the states are to comply with the cost documentation
requirements found in the Code of Federal Regulations to ensure
that the maximum amount of cost is recovered.
Oversight costs are incurred by EPA or a state while monitoring
cleanup work being performed by responsible parties (RPs) at
"Enforcement-lead" Superfund sites. Such costs can include
charges for personnel (salary, indirect costs, and travel) as well as
charges by contractors. EPA recovers these costs through the use
of enforcement documents, i.e., either a Consent Decree (CD) or an
Administrative Order on Consent (AOC). An AOC is a legally-
binding agreement between EPA and the RPs; a CD is a similar
document, except that it is filed in court for a judge's approval.
RESULTS-IN-BRIEF
In many cases Region 2 did not (a) bill, (b) bill timely, (c) issue
accurate bills or (d) successfully collect accumulated Superfund
oversight costs from RPs. These conditions were generally caused
by the Region's inadequate management controls for timely billing
of oversight costs. Specific contributing factors were (i) other
competing priorities, (ii) inadequate tracking systems, (iii) vague or
nonexistent billing requirements in AOCs or CDs, (iv) inadequate
coordination between program offices and Office of Regional
-i-
-------
Superfund Oversight Billings
Counsel (ORC), (v) difficulty in segregating oversight from other
response costs, and (vi) lack of resources.
Untimely billings and collections resulted in unnecessary delays in
replenishing the Superfund Trust Fund and limited EPA's ability to
timely clean up other priority sites and further protect human health
and the environment. Specifically, oversight costs of more that $31
million at 89 sites had not been billed as of September 30, 1997. In
addition, there were $4 million in disputed oversight costs. Costs
not billed for many years represent unrecorded receivables and
affect EPA financial statements causing understated account
receivable and revenue account balances. Significant amounts of
interest that would have accrued to the Trust Fund were also lost or
postponed.
Region 2 also did not fully implement the reduced oversight reform
as described in EPA's OSWER Directive No. 9200.4-15. Methods
for measuring reduced oversight had not been developed. As a
result, Region 2 did not document or report any reductions as
required at the six sites it selected. Additionally, the Region did not
provide RPs with estimated oversight costs for the next year
because it had not developed a process to do so. The Region and
Headquarters were working to develop the necessary tools to carry
out this reform.
RECOMMENDATIONS We recommend that the Region 2 Administrator improve the
oversight billing management controls by (1) prioritizing oversight
billings to assure that all pending bills are issued by the end of FY
98, (2) ensuring that future oversight costs are billed in accordance
with enforcement agreements or within 120 days of the anniversary
date, (3) modifying existing oversight billing procedures to include
time frames for initiating, assembling, reviewing, and issuing
oversight bills by participating offices, (4) expediting
implementation of the Superfund Oversight Billing Tracking System
making it fully functional and accessible to personnel, and (5)
initiating and documenting periodic meetings between ERRD,
Finance and ORC officials to improve coordination and timeliness.
-n-
-------
Superfund Oversight Billings
REGION 2 RESPONSE On June 23, 1998 the Region responded that it agreed it should
and OIG EVALUATION endeavor to issue oversight bills on a timely, regular basis, and
noted recent efforts to improve its record in this regard. The
Region plans to clear the backlog of old enforcement oversight
billings by the end of FY 98, except where case management
strategies would be compromised. The response also provided
updated information at some sites and other comments. The
Region agreed with three of the five oversight billing
recommendations, but had concerns about including timeframes in
Regional procedures, and documenting meetings.
We still believe those two recommendations are necessary and
request that the Region reconsider them and provide specific
corrective actions and milestone dates for implementing all
recommendations. The response has been summarized at the end of
Chapter 2 and other comments were inserted in the body of the
report. See Appendix A for the complete Regional response. An
exit conference was held with Region 2 representatives on July 21,
1998.
-in-
-------
Superfund Oversight Billings
This Page Was Intentionally Left Blank.
-------
Superfund Oversight Billings
TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
CHAPTER 1 - INTRODUCTION 1
PURPOSE 1
BACKGROUND 1
SCOPE AND METHODOLOGY 3
PRIOR AUDIT COVERAGE 4
CHAPTER 2 - IMPROVEMENT NEEDED IN TIMELY BILLING AND
COLLECTIONS OF OVERSIGHT COSTS 5
BACKGROUND 6
OVERSIGHT BILLINGS NOT ISSUED 7
UNTIMELY ISSUED BILLINGS AFFECT COLLECTIONS 10
ERRONEOUS BILLINGS 14
REASONS FOR BILLING DELAYS 16
ENVIRONMENTAL AND FINANCIAL EFFECTS 19
PRIOR OIG REPORTS NOTED SIMILAR CONDITIONS 20
CONCLUSION 21
RECOMMENDATIONS 21
REGIONAL RESPONSE 22
OIG EVALUATION 23
CHAPTER 3 - OTHER MATTERS - INITIATIVE TO REDUCE
OVERSIGHT ACTIVITIES 29
EXHIBITS
EXHIBIT 1 SAMPLED SITES - NO BILLINGS 31
EXHIBIT 2 SAMPLED SITES - PARTIAL BILLINGS 32
EXHIBIT 3 PREVIOUS OIG and GAO AUDIT REPORTS 33
APPENDICES
APPENDIX A - REGION 2'S RESPONSE TO DRAFT REPORT 35
APPENDIX B - DISTRIBUTION 48
-------
Superfund Oversight Billings
This Page was Intentionally Left Blank.
-------
Superfund Oversight Billings
CHAPTER 1
INTRODUCTION
PURPOSE
We performed an audit of Region 2's billing of Superfund oversight
costs because of problems noted during our audit of the Agency's
Financial Statements. The objectives of this audit were to
determine whether the Region was (a) timely billing the responsible
party for Superfund oversight costs, (b) successfully collecting
untimely billed oversight costs, and (c) implementing the Agency's
Superfund reforms regarding oversight.
BACKGROUND
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (CERCLA) authorized EPA to recover costs
from responsible parties (RPs) to help replenish the Superfund
Trust Fund. The law, as amended by the Superfund Amendments
and Reauthorization Act of 1986, stipulated that EPA may help
fund state government efforts to remediate hazardous waste sites.
Both EPA and states must comply with cost documentation
requirements found in the Code of Federal Regulations to ensure
the maximum amount of cost is recovered.
CERCLA, which created the Superfund program, was designed
primarily to clean up abandoned hazardous waste sites. Under the
law, a trust fund was established to pay to clean these sites.
Additionally, EPA can compel RPs for abandoned or inactive
hazardous waste sites to clean them up, or the Agency can conduct
the cleanup and demand payment from RPs.
The Superfund Trust Fund is used when the Agency performs such
cleanups. The Fund has been authorized at an aggregate of $15.2
billion and is primarily supported by crude and petroleum oil taxes,
the sale or use of certain chemicals, an environmental tax on
corporations, amounts recovered from RPs, and interest earned. As
of December 1995, the authority to collect taxes expired, and taxes
are no longer being collected. At the end of fiscal year (FY) 97, the
Trust Fund reflected an unappropriated balance of $2.6 billion. In
FY 97, Congress appropriated $1.4 billion for the Superfund
program to continue. For FY 98, $2.15 billion was appropriated
-1-
-------
Superfund Oversight Billings
($1.9 billion from the Fund and $250 million from general
revenues). However $650 million of the $1.9 billion was not made
available contingent on Superfund reauthorization enactment.
Currently, the Fund receives income primarily from RP recoveries
and interest.
EPA incurs oversight costs while monitoring cleanup work
performed by RPs at "Enforcement-lead" Superfund sites. Such
costs can include EPA personnel charges (salary, indirect costs, and
travel), as well as charges by EPA contractors or state employees.
Such recoveries are to be accomplished by use of enforcement
documents, either a Consent Decree (CD) or an Administrative
Order on Consent (AOC). An AOC is a legally-binding agreement
between EPA and the RPs; a CD is a similar document, except that
it is filed in court for a judge's approval. Although EPA is
responsible for pursuing reimbursement, it has only recovered from
RPs a fraction of the monies it has spent.
The Chief Financial Officers Act of 1990 requires that an Agency
develop and maintain an integrated accounting and financial
management system that provides (1) complete, reliable, consistent,
and timely information responsive to the financial information needs
of Agency management and (2) development and reporting of cost
information. OMB Circular A-127 also requires an Agency's
financial management system to provide reliable and timely
information on amounts owed the government.
EPA Headquarters July 10, 1997, FY 98 Superfund Work Planning
memorandum discusses various Superfund activities including a
new reporting measure which should capture the status of Regional
progress towards sending timely and complete oversight bills. This
measure will incorporate the number of sites with up-to-date and
complete oversight billings and the number of sites where such
billings are not as yet required.
An April 7, 1998 joint Plan for Achieving Timely Oversight Billing
Under CERCLA issued by the Comptroller and the Office of Site
Remediation Enforcement enlisted Regional support in
implementing the Agency's plan to achieve timely Superfund
oversight billings. EPA's goal is to become current in oversight
billing by September 30, 1998, thereby, preventing a potential
FMFIA material weakness and maintaining the fiscal health and
-2-
-------
Superfund Oversight Billings
integrity of the Superfund program. The memorandum states that
in order to be current in our oversight billings by September 30,
1998, regions must have billed the parties for all known billable
costs on their oversight cases within 120 days of the anniversary
date specified in the CD or AOC. Also, following this billing
process and establishing an account receivable will ensure timely
recovery of oversight costs. Accordingly, each Region was
required to submit an action plan by April 30, 1998.
SCOPE AND We performed this audit according to the Government Auditing
METHODOLOGY Standards (1994 Revision) issued by the Comptroller General of
the United States as they apply to economy and efficiency program
audits. Our review included tests of documents and other auditing
procedures we considered necessary. No other issues came to our
attention which we believe warranted expanding the scope of the
audit.
To accomplish our objectives we interviewed Region 2 Emergency
and Remedial Response Division (ERRD), Finance and Office of
Regional Counsel (ORC) personnel. These individuals included
branch chiefs, Finance and Program office cost recovery specialists,
remedial project managers, and attorneys. We reviewed individual
enforcement documents (AOCs and CDs), Superfund oversight
inventory reports, CERCLA enforcement document distribution
procedures, Superfund cost recovery procedures, oversight billing
reports, billing status reports, Memoranda of Understanding
documents, cost summary packages, and individual site files.
To determine reasons why the Region was not billing in a timely
manner in accordance with terms and conditions of the consent
documents, we reviewed 10 judgmentally selected cases. Five of
these cases were selected due to the lack of billing during the life of
the consent document. The other five cases were reviewed based
upon evidence of limited or sporadic billing patterns.
To determine the accuracy of the issued bills, we also reviewed the
management controls regarding the elimination or reduction of
oversight costs from bills. In addition, we examined the controls
involving how bills were authorized and assembled. We then
judgmentally selected three revised bills for additional review. We
-3-
-------
Superfund Oversight Billings
did not review the internal controls associated with the input of
information into the Region's Integrated Financial Management
System or any other automated recorded system.
To evaluate the extent to which the Region had implemented the
Superfund reforms outlined in the Agency's July 31, 1996 OSWER
Directive No. 9200.4-15, we interviewed appropriate Regional
officials, reviewed and analyzed correspondence submitted to
EPA's Headquarters Superfund Office, and interviewed
Headquarters Superfund officials.
We also reviewed Region 2's Fiscal Year 1994-1997 Annual
Assurance Letters to determine whether the oversight billing area
was identified as a potential weakness during their annual Federal
Managers' Financial Integrity Act (FMFIA) self-evaluation. The
Region did not identify any material weaknesses or vulnerabilities
pertaining to Superfund oversight billings or collections.
Our review was conducted from January 7, to March 31, 1998.
PRIOR AUDIT Previous EPA Office of the Inspector General (OIG) and General
COVERAGE Accounting Office (GAO) audit reports have identified concerns
with Agency delays in billing and recovering costs from responsible
parties. These reports have been included as Exhibit 3.
-4-
-------
Superfund Oversight Billings
CHAPTER 2
IMPROVEMENT NEEDED IN TIMELY BILLING AND COLLECTION OF
OVERSIGHT COSTS
What Was Found
Why It Occurred
What Was the Effect
Region 2 did not timely bill and collect accumulated Superfund
oversight costs. Further, the Region did not recover cleanup
oversight costs from responsible parties (RPs) for as long as 11
years. Also, when delayed bills for collection (BFC) were sent, RPs
disputed the amounts and collections were affected. In addition, at
least 17 of the 68 oversight BFCs issued since 1989 (25 percent)
contained errors and amounts were reduced by approximately $5.4
million.
These conditions were generally caused by the Region's inadequate
management control system for timely billing of oversight costs at
remedial and removal sites. Specific contributing factors were (i)
other competing priorities, (ii) inadequate tracking systems, (iii)
vague or nonexistent billing requirements in AOCs or CDs, (iv)
inadequate coordination between program offices and Office of
Regional Counsel (ORC), (v) difficulty in segregating oversight
from other response costs, and (vi) lack of resources.
Untimely oversight billings and collections resulted in unnecessary
delays in replenishing the Superfund Trust Fund. It also limited
EPA's ability to timely clean up other priority sites and further
protecting human health and the environment. More specifically,
oversight costs of more than $31 million at 89 sites had not been
billed to RPs as of September 30, 1997. In addition, there were $4
million in disputed oversight costs. Unbilled oversight costs also
affected EPA's financial statements and caused understatements in
the account receivable and revenue account balances. Significant
amounts of interest that would have accrued to the Trust Fund
were also lost or postponed.
-5-
-------
Superfund Oversight Billings
Background
Region 2
Oversight Billings
An important Superfund program objective is to recover EPA funds
used to clean up a site. This includes costs EPA incurs to oversee
clean up activities. Recovery is initiated through negotiation with
or legal action against a RP. Judicial and non-judicial actions
(orders) establish EPA's legal right to be reimbursed by the RP for
oversight costs. Based on these orders, Finance prepared oversight
bills and established an accounts receivable.
EPA Headquarter's January 24, 1996 Revisions to Core Financial
Management Measures revised the Superfund Cost Recovery
oversight billing measure. It required preparation of oversight bills
within 120 days of the anniversary date of the CD or AOC, or
within the time frame specified in the document, or as directed by
the program office. The revision was necessary because many CDs
or AOCs were silent on when oversight costs should be billed.
Also, several Financial Management Offices expressed concern over
the oversight billing measures.
In some cases, the CD or AOC specifically stated that EPA will bill
annually whereas recent documents mostly use the term
"periodic" billing. However, we believe and ORC officials agreed
that annual billing is the prudent practice to enable entities to
undertake a meaningful review of costs incurred.
The Superfund Cost Organization and Recovery Enhancement
System (SCORES) is a database management system used to
organize and track Superfund costs for a specific site. The
SCORES report is combined with the supporting cost and technical
documentation to yield a cost recovery package.
The Region issued enforcement documents with oversight
reimbursement provisions to 115 Superfund sites. However, from
April 1989 to September 30, 1997, the Region issued BFCs to only
68 sites (60 percent). As of September 30, 1997, Region 2's FY
1997 Unbilled Oversight Closing Balance Calculation listed $31.5
million pertaining to 89 Superfund sites as unbilled (increase of $2.1
million since September 30, 1996) as shown below:
-6-
-------
Superfund Oversight Billings
Region 2 FY 98
Initiatives
Total Oversight Costs Incurred $62.1 million
Total Oversight Costs Billed 30.6 million
Outstanding Unbilled Oversight Costs $31.5 million
These 89 sites have not received BFCs for as long as 11 years. In
fact, 56 of these sites (63 percent) have not had bills issued for
more than five years since the effective date of the document.
The original billed amounts were $36 million, but 17 of the 68
BFCs (25 percent) issued were reduced.
Prior to FY 98, Region 2 oversight billings were a low priority.
However, since the first quarter of 1998 the Region has been trying
to focus on the backlog of oversight bills. ERRD officials indicated
they were committed to consistently issue 10 to 12 oversight bills
per month. To meet this commitment the Region had been
preparing priority lists, and workgroups and periodic meetings have
taken place between various offices. There were no schedules for
the meetings and minutes were not taken.
To effectively manage and track oversight billings the Region
recently developed a Superfund Oversight Billing Tracking System
(SOBTS) based on a Region 3 system. This system is currently
being used by the ERRD Resource Management/Cost Recovery
Section Chief. Although historical oversight billing data has
generally been entered into the system, it has not yet been fully
functional. Our review of sample reports concluded that once the
system becomes fully operational it could be a useful tool in
managing oversight billings.
The ERRD Oversight Billing Coordinator stated that the Region
plans to issue all pending oversight bills involving old enforcement
documents by the end of FY 98. Also, a November 24, 1997
response, pertaining to the FY 97 Financial Statement Audit OIG
position paper, stated that ERRD was directed to clear the backlog
of overdue oversight bills within FY 98. However, our review of
the Region's February 25, 1998 "Oversight Billing Status Report"
disclosed that only five BFCs had been issued in FY 98.
Oversight Billings
Not Issued
The Agency estimated that as of September 30, 1997, it had $162
million of unbilled oversight costs, making it the third largest
-7-
-------
Superfund Oversight Billings
Superfund asset after Trust Fund Balances at Treasury and Non-
Federal Accounts Receivable. We realize that the $162 million
represents costs that should have been billed, as well as those not
yet due to be billed. Unbilled Superfund oversight costs have been
a continuing problem affecting EPA's financial statements.
The Region had not sought to recover oversight costs from RPs as
stipulated in settlement documents. The Region's estimated
oversight costs of $31.5 million represent approximately 20 percent
of the Agency total. We reviewed five sites with AOCs issued
between October 8, 1987 and June 28, 1993, and unbilled oversight
costs of more than $4.4 million as of September 30, 1997.
Site Date of AOC Unbilled Amount
1 5/27/88 $ 839,891
2 9/27/89 909,332
3 10/8/87 950,170
4 6/7/88 702,422
5 6/28/93 1.043.676
$4.445.491
A brief description of the five sites follow (See Exhibit 1 for a
summary of details):
Site 1 The May 27, 1988 AOC stated that the RP will reimburse EPA for
oversight costs. Also, at the end of each fiscal year, EPA will
transmit an accounting of all costs incurred during the previous
year. However, as of March 1, 1998 (almost 10 years) the Region
had not billed any oversight costs. As of September 30, 1997,
unbilled costs were $839,891. During this period various SCORES
reports were generated for different amounts, but a BFC was never
issued.
The response to the draft report indicated that on April 7, 1998 the
RPs were billed $894,800.87 and made a partial payment of
$776,558.74. The RPs challenged the remaining costs because they
were not attributable to EPA's oversight. Region 2 agreed that it
erroneously billed certain unrelated costs and revised the original
bill to $776,593.64. The remaining balance was paid on June 10,
1998.
-------
Superfund Oversight Billings
Site 2 On September 27, 1989 EPA issued an AOC, followed by a CD
which was signed on April 2, 1990. Both the AOC and CD indicate
that EPA will "periodically" transmit accounts of the costs incurred
by EPA. As of March 1, 1998 (almost nine years) the Region had
not sent a BFC to the RP. As of September 30, 1997, the Region
has estimated unbilled oversight costs of $909,332.
Site 3 The October 8, 1987 AOC required EPA to transmit an annual
accounting of all costs incurred. As of March 1, 1998 (lO1/^ years)
the Region had not sent a BFC (unbilled oversight amount as of
September 30, 1997 was $950,170). Various SCORES reports for
different amounts were prepared in 1994 but no action was taken.
EPA is trying to negotiate a total settlement. The July 9, 1997
SCORES showed $1,244,845 for all costs (October 9, 1987
through April 30, 1997). EPA's August 8, 1997 settlement offer
was to accept $646,935, a reduction of over one million dollars.
Response costs were $1.2 million mentioned above plus $422,642
interest (total of $1,667,487). The response to the draft report
indicated that a CD settlement was expected to be signed by late
June 1998 and the compromised amount was consistent with
Agency policy.
Site 4 The June 7, 1988 AOC stated that, EPA would transmit an annual
accounting of all costs incurred during the previous year. On May
7, 1993 another AOC was issued (removal action) and the
Respondent agreed to reimburse EPA for response costs (including
oversight costs) incurred. There was no billing timeframe
information mentioned in this AOC. Various SCORES reports
were prepared during 1995 and 1996, but no actions were taken. A
BFC had not been issued as of March 1, 1998 for estimated
oversight costs of $702,422 (as of September 30, 1997).
Negotiations are ongoing with the RP.
Site 5 The June 28, 1993 AOC required EPA to "periodically" transmit
oversight billings. As of March 1, 1998 (five years) no BFC was
issued and the Region estimated $1,043,676 of unbilled oversight
costs. EPA and the RP are currently attempting to negotiate a
global settlement of all past response and oversight costs.
-9-
-------
Superfund Oversight Billings
In July 1997, Finance prepared a cost history ($1,806,966) which
included a sub-schedule showing costs of $468,057. ORC
indicated $1.8 million was past costs, while $468,000 was primarily
oversight. There were other costs of $100,000 and other
adjustments, and estimated the total package to be $3.1 million
($1.8 million past costs, $500,000 oversight and $770,000
interest). EPA has begun to negotiate the whole universe of costs
and is not thinking of separate oversight billings. Although total
costs were $3.1 million, EPA proposed a settlement of $1.8 million
for past response and oversight costs. We were advised that a CD
was signed on May 12, 1998, and the basis of compromise was
appropriate and documented.
In conclusion, the Region had not sought to recover $31.5 million
oversight costs from RPs as stipulated in settlement documents.
Untimely Issued
Billings Affect
Collections
Untimely billings had a direct effect on the rate of collection.
Because the billing period encompassed as long as seven years,
RPs generally delayed payment, challenged the "stale" costs, and
requested extensive supporting documentation to support billed
amounts. Collections were further delayed while the Region
responded to the RP's claims, participated in conversations to
resolve differences, and gathered necessary documentation.
Region 2 issued BFCs many years after the effective date of the
document. As of September 30, 1997 there were eight sites with
disputed billings totaling approximately $4 million which will result
in reduced or delayed collections. We selected for review five of
these sites with documents issued between!986 and 1990.
Region 2's untimely billings (between 1991 and 1996) for the five
sites selected amounted to $2.2 million. However, as of March 1,
1998 it had only collected $203,020 ($145,000 + $58,020), which
was less than 10 percent of the billed amount. While some
additional amounts might be collected in the future we believe that
a substantial amount will be forgiven or reduced through negotiated
settlements (See Exhibit 2 for further details).
-10-
-------
Superfund Oversight Billings
Site
A
DATE
BFC
Document
6/02/89 5/13/96 (1)
Amount
Billed
$
622,370
B
C
11/28/89
4/30/86
4/04/95 (1)
2/05/91 (1)
488,86
9
468,74
3
D
6/30/89
3/13/96
137,572
E
467.481
9/28/90
2/26/96 (2)
$2.185.035
Site A
(1) Revised BFCs were sent from two to four months later.
(2) BFC resent.
The June 2, 1989 AOC required EPA to provide the RP with a
"periodic" accounting of costs. However, it took EPA five years
(July 18, 1994) to furnish the RP with an estimate of oversight
costs ($438,992). The actual BFC ($622,370) was not sent until
May 13, 1996 for the period June 3, 1989 to March 7, 1996.
Because the bill was addressed to the RP's attorney, the bill was
reissued on July 10, 1996 (seven years from the AOC date).
The RP disputed the bill because it took EPA seven years to
provide an accounting of oversight costs. The RPs attorney's
October 17, 1997 letter stated:
The project was nearing completion, five years into the
study, when EPA for the first time revealed that its expenses
were approximating the study costs. As you know, the
AOC requires that EPA produce a periodic accounting of
its costs, which my clients understood to mean a quarterly
-11-
-------
Superfund Oversight Billings
accounting. Had such an accounting been made by EPA,
my clients would have had numerous opportunities to work
out with EPA a less costly approach to the project. These
opportunities were denied by EPA's failure to meet this
AOC obligation.
The RP's attorney used the billing delay and other considerations to
reduce the amount. As of January 30, 1998, the Accounts
Receivable outstanding balance was $679,036 (includes interest).
However, a draft settlement for $575,000 has been orally accepted.
As a result, EPA has negotiated away $104,036 ($679,036 -
$575,000). The RPM also stated that an additional $120,566 in
unbilled administrative costs were negotiated as part of this
settlement. In effect, EPA forfeited a total of $224,602.
Site B Although the CD pertaining to oversight costs was effective
November 28, 1989, it took the Region almost five and a half years
to issue the BFC (April 19, 1995) in the amount of $443,939. It
took another year before a revised bill ($488,869) was issued (July
11, 1996) for oversight costs incurred between November 28, 1989
and March 14, 1996. Also, additional oversight costs of $42,548
incurred as of September 30, 1997 have not been billed.
On August 21, 1996, the RP invoked dispute resolution procedures
since most costs were inconsistent with the CD terms which
required annual billings. The RP has alleged that it was also
confused by certain past response costs outlined in a 1994 CD. On
September 30, 1996, EPA received $58,020 from a different RP
which was applied to this bill. The RP's January 22, 1997
Statement of Position mentioned that the United States should
dismiss its claim for oversight costs because it did not provide an
annual billing of those costs as required by the 1989 CD.
Site C The April 30, 1986 AOC mandated annual oversight billings. On
February 5, 1991 (almost five years later) a BFC for $468,743 was
issued for the period April 1986 to December 1990. The RP
refused to pay because EPA had not billed annually, included five
years of costs incurred, and the untimely accounting did not
demonstrate that costs were recoverable.
The RP Counsel's March 14, 1991, letter to Region 2 indicated
-12-
-------
Superfund Oversight Billings
particular concern with EPA's untimely accounting (costs incurred
over a five to six year period). The Counsel stated:
The Order makes it clear that an accounting must be
submitted at the end of each year. One purpose of this
annual deadline is to enable the firm to undertake a
meaningful review of the costs allegedly incurred. It is very
difficult to audit costs that are as stale as those set forth in
this accounting. Compounding the problem of stale costs,
the accounting does not adequately identify which costs
were incurred in which years.
The RP's May 3, 1991 correspondence emphasized EPA's
mandatory duty to serve annual demands for cost
reimbursement and believed they were seriously prejudiced by the
delayed billings. On June 3, 1991 EPA issued a revised bill
($445,806 plus $11,672 interest) and the RP made a partial
payment of $145,000.
EPA has been trying to negotiate a global settlement and expected
these negotiations to be completed by December 31, 1997 (revised
to May 7, 1998). As of February 12, 1998 outstanding oversight
costs were $437,209. Also, additional oversight costs of $297,133
have not been billed as of September 30, 1997. On June 23, 1998
Regional officials stated that remaining oversight payments were
resolved in the global settlement and a BFC will be issued for
oversight costs that have not been billed.
Site D The AOC was signed on June 30, 1989 and almost seven years
passed before a March 13, 1996 BFC was issued ($137,572) for
oversight costs incurred between July 1, 1989 and January 28,
1993. The BFC included $15,000 of past response costs. The
Region believes, but could not document that one reason for the
delayed BFC was an investigation to determine whether another
party could be pursued as an RP. The RP refused to pay due to its
financial condition and the large amount of oversight compared to
other clean-up costs. Two years have passed since the BFC, and
ORC could not provide the expected resolution date. Although the
corporation was dissolved and the owner relocated to Florida, ORC
expects to collect a portion of the billed costs.
-13-
-------
Superfund Oversight Billings
The ORC attorney acknowledged that annual billings would have
been a better practice, and the $15,000 past response costs should
have been billed separately in 1989. On June 14, 1996, the RP's
attorney stated that he had the authority to pay the $15,000.
Site E Although the AOC was entered on September 28, 1990, the Region
took more than five years to issue the BFC (February 26, 1996)
covering costs of $467,481 incurred between February 12, 1990
and April 2, 1994. The BFC was resent to the RP on April 22,
1996. The RP refused to pay claiming removal costs were too
high, and subsequent settlement discussions were not successful.
On June 23, 1998 we were advised that DOJ settled the matter for
$350.000 based primarily on litigation risks. The Region believed
only $45,000 of the original amount pertained to oversight costs.
However, review of Finance records and ORC and ERRD
correspondence indicated the entire amount represented oversight
costs, and were recorded as such in IFMS.
In conclusion, Region 2's untimely oversight billings resulted in
collection delays and RP disputes which adversely impacted the
timely replenishment of the Superfund Trust Fund and EPA's ability
to clean up other priority sites.
Erroneous Billings Between 1989 and September 30, 1997 Region 2 revised 17 BFCs
and a total of $5.6 million of erroneous costs were eliminated. Our
review of three of these revised BFCs disclosed various erroneous
costs were included in the original bill. Such costs included
previously paid or non-oversight amounts, and amounts without
adequate supporting documentation. As a result, the Region had to
retract or revise the billings, remove costs inadvertently included,
and provide additional documentation to substantiate the validity of
other costs. Although the revised amounts were eventually paid,
the time needed to correct the original billings caused delayed
reimbursement to the Trust Fund.
RPs challenged the credibility of the billing process based on these
errors. A Regional attorney assigned to negotiate settlements of
these costs advised that in some cases the Region was willing to
compromise certain costs because of concerns over the impact that
inaccurate billings would have on the creditability of other costs.
-14-
-------
Superfund Oversight Billings
The following summarizes our review of the three sampled sites.
Site S On July 25, 1996 the Region billed the RP more than $211,000
which had been previously paid. This was caused by the Region's
inadequate review of the content of the bill. As a result, the Region
had to retract the original bill, and provide a revised bill eliminating
previously paid costs. In addition, the Region also compromised
certain costs over concerns that the RP was willing to litigate the
validity of the oversight costs.
The original oversight BFC included contractor costs for
performing the initial Remedial Investigation and Feasibility Study
and oversight of the RP-performed Initial Remedial Measures.
These costs had been settled during the negotiation of the May 19,
1993 Consent Decree and payment of $1.3 million of pre-December
30, 1991 response costs.
The RP's response to the bill stated "EPA's present demand for
response costs seems to contain claims for reimbursement of
charges that must date back to the mid-1980's. . . Obviously, if
EPA's present demand for response costs includes costs previously
paid by the Respondents, then the EPA Demand is flawed by
material accounting errors." The Region responded that certain
charges were erroneous and the revised bill omitted those costs.
Site M On March 31, 1995 the Region billed more than $83,000 which had
been previously paid, reduced the "annual allocation expense" by
$12,304, and compromised interest charges of over $47,000. This
was caused by the Region's inadequate review of the content of the
bill and the failure to provide timely supporting documentation. As
a result, the Region retracted the original bill, and provided a
revised bill eliminating costs already paid and accumulated interest.
Although the RP requested an accounting of costs, EPA's final
submission was not received until almost one year after the initial
bill. The revised bill removed prior costs of $83,000 and reduced
the annual allocation by $12,303. The Region reduced the "annual
allocation expense" for a five-year period after the RP disputed the
validity of the billed amount, and provided Congressional testimony
to support the reduction to 80 percent of the last final rate. The RP
also believed that accrued interest was unreasonable and unjust
when EPA admittedly did not produce proper documentation and
-15-
-------
Superfund Oversight Billings
made a material error in its original invoice. The Regional
attorney responsible for Sites S and M advised that inaccurate billed
costs put the whole credibility of the billing
SiteF
process in question, and delayed responses to requests for
documentation resulted in accrued interest that might be
compromised.
The Region revised the original BFC by $110,757 because it had
previously included certain ineligible or previously recovered costs.
Specifically, the revised bill eliminated (i) technical assistance grant
of $36,707, (ii) payroll costs of $11,981, (iii) indirect costs of
$30,368, (iv) additional payroll costs of $29,760, and (v) a $1,941
accounting error. These reductions were caused by inadequate
accounting of site costs. Therefore, the Region was required to
retract the original bill, and provide the RP with a revised bill.
Our review of these revised BFCs disclosed erroneous costs
included in the original bill. These costs included previously paid or
non-oversight amounts, and amount without adequate supporting
documentation. As a result, the Region had to retract or revise the
billings, remove costs inadvertently included, and provide additional
documentation to substantiate the validity of other costs. The
Region needs to improve their review process to ensure that bills
sent to RPs are accurate.
Reasons for
Billing Delays
General Discussions
withRPM's
and Attorneys
Billing delays were generally caused by the Region's inadequate
management controls for timely billing of oversight costs at
remedial and removal sites. Factors such as other competing
priorities, inadequate tracking systems, vague or non-existent billing
requirements in AOCs or CDs, inadequate coordination between
program offices and ORC, difficulty in segregating oversight from
other response costs, and lack of resources contributed to the delay.
We had various conversations with RPMs and attorneys involved
in thelO sites reviewed. Virtually all interviewed personnel
mentioned various Regional billing process weaknesses especially
the low priority and lack of urgency to issue annual or periodic
BFCs. Most personnel stated that it would have been better to bill
-16-
-------
Superfund Oversight Billings
annually or at least years earlier. Some RPMs believed that Finance
personnel should be responsible for preparing billings, and
separately code oversight costs in some manner.
Many RPMs mentioned weaknesses in EPA's tracking system for
oversight costs. Specifically, RPMs and supervisors were not
always aware of specific billing requirements. Some RPMs stated
that bills were not issued because supervisors never asked them to
do so. Also RPMs having a vital role in determining oversight
costs stated that EPA's systems could not always generate specific
reports to track or separate unbilled oversight from other costs.
Therefore, RPMs had to spend a great amount of time to manually
ascertain oversight costs. We understand that since FY 96, the
Integrated Financial Management System (TFMS) has the capability
to track and report billed oversight costs through activity/action
codes. However, tracking systems are of limited benefit if bills are
not sent out in a timely manner.
Specific Discussions The Site 1 RPM stated that she had been working on other priority
with Five RPMs sites, and there was no rush to issue annual oversight bills. She had
received various SCORES reports and stated that it would have
been better if the Region had billed annually if there was available
time. She believed that Finance should prepare oversight billings,
since RPMs were not familiar with such areas as indirect cost rates.
She only confirms appropriate costs, and it would be useful if
Finance coded oversight costs separately to make billing easier. In
addition, other site work has a priority over oversight billing.
The Site 2 RPM agreed that it made sense to bill oversight costs
earlier, but due to the different levels of work at this complex site,
the first priority was cleanup activities. He has been overwhelmed
with work, has not had time to carefully review the initial SCORES
report, and did not know when he could initiate the BFC. He also
stated that scientists and engineers are not the best people to be
involved in cost recovery activities.
The Site A RPM stated there were no annual billings as resources
to prepare billings were labor intensive and other priorities existed.
He thought that a cost estimate provided to the RP's attorney in
June 1994 was sufficient until an actual May 13, 1996 bill was
issued. He agreed that annual billings would have been better.
-17-
-------
Superfund Oversight Billings
The Site B RPM believed that RPMs were engineers and not
geared towards accounting and billing functions. On-going clean
up, litigation, and community relations were priorities and oversight
billings were not. The RPM stated that oversight costs were not
significant in 1991 and documentation was not readily available.
Also, the Region did not have the capability to generate specific
reports to prepare the BFC and segregate oversight costs.
The Site C RPM believed it was common not to provide annual
billings even though the Order may have mandated such billings.
Also, EPA did not have an adequate tracking system to alert the
RPM to initiate a bill. He did not believe EPA should commit an
exorbitant amount of resources to annual billings which may result
in the recovery of little money, when resources committed every
few years would likely result in greater cost recovery.
These discussions clearly show that Region 2 should reevaluate the
priority given to oversight billings. We believe that immediate
actions must be implemented to remedy this problem.
Inadequate Regional The Region's December 1992 Oversight Billing Superfund Cost
Procedures Recovery procedures require Finance to generate a draft SCORES
report for ERRD within five working days. ERRD officials
including Remedial Project Managers (RPM) and On-Scene
Coordinators (OSC) consult with ORC, identify all charges, and
forward "marked up" reports to Finance for review and
reconciliation. When ERRD and ORC determine proper charges an
account receivable for the billed oversight costs is established.
Although the Procedures outline oversight billing responsibilities,
time frames are not specified for many activities. For example,
there are no time frames for assembling and analyzing billing data
and for issuing an oversight bill. We acknowledge that each site is
different and many have complex issues. However, we strongly
believe that general time frames with some flexibility should be
incorporated depending on the different unique areas.
The Procedures discuss the RPMs initiation of the billing process by
requesting SCORES reports, but do not address the significant
period of time that passes before the process is initiated. We
believe the procedures should be modified to include RPM and
-18-
-------
Superfund Oversight Billings
OSC oversight monitoring, reviewing and billing responsibilities
upon receipt of the enforcement document. General time frames
should be incorporated for managers to measure the effectiveness
of its oversight billing program as required by the Government
Performance and Results Act (GPRA) of 1993.
Environmental and
Financial Effects
Effect on EPA's
Financial Statements
Lost or Postponed
There are both environmental and financial effects that result from
the conditions we describe. Untimely oversight bills adversely
affect the use of the Superfund Trust Fund to effectively cleanup
the Region's Superfund sites. This lack of Regional priority to
collect expended funds postpones the replenishment of monies
drawn from the Fund. As a result, the environmental threat to
human health is increased because the Agency's ability to address
identified hazardous waste sites is limited.
For Superfund sites involving oversight reimbursement
provisions, periodic bills are to be issued to RPs and an accounts
receivable recorded in the Agency's financial system. Similarly,
collections are to be recorded to increase the corresponding
revenue account balance. However, when EPA incurs oversight
costs, but does not issue bills, receivables are not recorded and
funds are not collected. Thus, unbilled oversight costs cause an
understatement in the account receivable and revenue account
balances. If costs remain unbilled for years, financial statement
balances for corresponding fiscal years continue to be misstated.
Due to the Region's lack of action, oversight bills pertaining to
many Superfund sites were not issued for many years. In FY 97
Headquarters required the Regions to accurately estimate their
unbilled oversight amount. Region 2 had estimated more that $31
million unbilled oversight costs, which in essence was its estimated
understated accounts receivable amount. Also, since no receivables
were recorded, funds remained uncollected for years and revenues
were understated. ERRD and ORC officials stated that certain
Regional unbilled oversight amounts were not accurate because
some estimated amounts included past response costs. This
inaccuracy could be significant and could cause significant
adjustments in EPA's financial statement balances.
When the oversight bill is sent to an RP who does not make a
-19-
-------
Interest
Superfund Oversight Billings
timely payment, interest will accrue from the payment demand date
to the due date. Therefore, delays in issuing BFCs, followed by
delayed or non-payment increase the amount of lost interest. Also,
if a bill is not sent or untimely sent, EPA will lose a substantial
portion of interest because RPs rarely pay upon demand.
In essence, the billing delay provides RPs an interest free loan from
the date the annual billing could have been issued. EPA usually
waits until most site work is completed before it negotiates with
RPs for repayment because it combines these efforts to reduce legal
and other enforcement costs. As a result, this practice can
postpone interest charges for several years which affects Superfund
Trust Fund balances. Also, in many cases, the accumulated interest
is either entirely or partially waived to reach a negotiated
settlement. Although the Region believes such compromise is in
the Agency's best interest, we believe that more timely billings
would reduce the waived interest.
Prior OIG Reports
Noted Similar
Conditions
Our March 29, 1990 audit report, Review of Region 2's Oversight
of Superfund Post-Settlement Activities, noted that oversight costs
were not billed or collected timely. Specifically, the Region had not
billed eight often sites for oversight costs incurred prior to FY 87.
Two of these sites were reviewed in our current audit and remain
unbilled even though oversight costs have significantly increased.
The Region responded that EPA oversight cost recovery was a low
priority due to resource constraints and high turnover, but would
devote additional attention to recovering such costs. Specifically, a
cost recovery coordinator was hired to coordinate issuance of
demand letters for oversight costs. Also, the Region was
completing oversight cost recovery documentation packages so
BFCs could be issued for the amounts identified in the report.
The Region's response to the OIG's Follow-up Review of Region
2's Corrective Actions - Oversight of Superfund Post Settlement
Activities (November 24, 1992) indicated they were continuing to
work to achieve the goal of annual issuance of oversight billings.
-20-
-------
Superfund Oversight Billings
CONCLUSION
GAO and OIG audit reports continuously cited late oversight
billings as an issue that must be addressed. Although the Region
recently developed initiatives to accelerate the timeliness of its
oversight billings, it must fully implement the steps and milestones
to achieve its goals. The Region must improve its overall
management control and tracking systems, devote the necessary
resources, and give a much higher priority to issuing timely and
accurate oversight bills in accordance with enforcement
agreements. Such actions will increase recovery of additional funds
to replenish the Superfund Trust Fund to clean-up other priority
sites.
RECOMMENDATIONS
We recommend that the Region 2 Administrator improve the
oversight billing management control system by:
2-1 Emphasizing oversight billings as a priority activity and
ensuring that all pending bills are issued by the end of FY
98. A quarterly reconciliation should be prepared,
backlogged BFCs addressed, and necessary actions taken.
2-2 Ensuring that future oversight costs are billed in accordance
with the enforcement agreements signed by the Region or
within 120 days of the anniversary date if the agreement is
silent as to billing requirements.
2-3 Modifying existing written oversight billing procedures to
include time frames for initiating, assembling, reviewing,
and issuing oversight bills by the participating offices
(ERRD, Finance and ORC).
2-4 Expediting implementation of the Superfund Oversight
Billing Tracking System (SOBTS) making it fully functional
and accessible to RPMs and other personnel involved in the
billing process.
2-5 Initiating and documenting periodic meetings between
ERRD, Finance and ORC officials involved in the oversight
process to improve coordination and timeliness between the
-21-
-------
Superfund Oversight Billings
offices.
REGION 2 RESPONSE On June 23, 1998 Region 2 responded to the May 11, 1998 draft
report and agreed that it should endeavor to issue oversight bills on
a timely, regular basis. The Region has recently taken significant
steps to improve its record in this regard and plans on clearing the
backlog of old oversight billings by the conclusion of FY 98,
"except where case management enforcement strategies would be
compromised." The Region began its oversight billing initiative on
November 1997. As of May 1998, 14 bills had been issued, 14
were subsumed in larger negotiations, three had no further costs to
be billed, and eight others will be addressed in FY 99 because of
enforcement strategy considerations.
The Region believes RPs have requested extensive documentation
"regardless of the length of the billing period" and it is incorrect
that documentation requests are a result of long billing periods.
Also, it is very common that RPs who are presented with very large
cost recovery claims seek EPA discussions and backup
documentation. However, the Region agrees its goal should be to
make timely cost reimbursement requests, provide accurate cost
recovery claims, and timely compile necessary supporting
documentation.
The Region disagreed that unbilled oversight amounts used for the
financial statement were inaccurate. SCORES reports were
provided to ERRD and ORC staff and were reviewed to determine
site-by-site unbilled oversight costs. These individuals then
certified the annual unbilled oversight costs.
The Region does not believe that untimely billings limited EPA's
ability to timely cleanup priority sites, because "the Trust Fund has
had sufficient funds." Also, there is no evidence that cleanups have
been limited as a result of delayed oversight billing.
The Region disagreed with recommendation 2-3 and believed
current oversight procedures were effective and did not require
timeframes for initiating, assembling, reviewing, and issuing bills.
The Region believed tracking of oversight bills should continue to
be handled on a site-by-site basis and monitored with the current
-22-
-------
Superfund Oversight Billings
tracking report. At the exit conference, ERRD officials stated that
once the backlog is gone, the Region expects to bill on an annual
basis. Regarding recommendation 2-5, the response stated that
meetings between ERRD, Finance and ORC are held, but minutes
are not recorded. However, action or follow-up items are
documented and tracked by ERRD.
OIG EVALUATION We recognize that during FY 98 the Region made oversight billings
a higher priority and had made progress in reducing its substantial
backlog of unbilled costs. Also, recent improvements to the
tracking systems have assisted the Region's efforts. However,
further improvements are needed.
The response outlined the Region's billing efforts for FY 98, but
only addressed 39 of the approximate 80 backlogged sites (less than
50 percent). The remaining 41 sites will have to be addressed by
September 30, 1998. We recognize that other bills are in process,
but only 14 have been actually issued. Therefore, we believe the
Region will have difficulty in meeting its goal of clearing the
backlog of old enforcement oversight billings during FY 98. Also,
deferred billings for the 14 sites subsumed in larger negotiations are
contingent on reaching a settlement. Some previous settlement
negotiations have taken years and have not been resolved.
In many cases, the Region sends out bills without gathering
necessary supporting documentation that RPs might request. In
fact, the ERRD Director's, May 12, 1998 Oversight Billing Plan
submitted to Headquarters states that, "We expect that a number of
bills will be challenged by the RPs, or that additional information
may be requested" (emphasis added).
For example, the Region sent a March 24, 1998 BFC in the amount
of $985,558 for the period May 29, 1985 to February 28,1998
(about 13 years). However, the RP's attorney immediately
requested cost documentation and an extension for repayment until
receipt of such documentation. EPA granted the RP an "indefinite"
extension pending the providing of such documentation. ORC
informed Finance that interest would be waived until after the
"indefinite" deadline. This example shows that the Region has not
met its goal of timely reimbursement requests with timely
-23-
-------
Superfund Oversight Billings
submission of supporting documentation. It also show significant
amounts of lost interest that would have accrued to the Agency.
Although we agree that certain RPs may request extensive
documentation regardless of the length of the billing period, we
found it was much more common where billed amounts were larger
due to the extended periods. We concur that the Region's goals
should include timely and accurate cost reimbursement requests
with timely compilation of supporting documentation.
While we agree the Region's methodology for certifying annual
unbilled oversight costs should provide accurate amounts, in reality,
this was not always the case. As some ERRD and ORC individuals
indicated, there were some estimated amounts which included past
costs. One example is Site 1 where the Region determined the FY
97 year-end unbilled oversight amount to be $839,891. However,
as the Region acknowledged in its response, only $776,594 of
$894,801 billed in May 1998 was attributable to oversight.
Regional staff stated that similar situations existed with other sites.
The OIG, GAO and the EPA Administrator believe untimely
billings and delayed collections limited EPA's ability to timely clean
up other sites. For example, GAO's February 1997 Superfund
Program Management report (GAO/FtR 97-14) determined this
program to be "high risk" because of waste, fraud, abuse and
mismanagement vulnerabilities. The report discussed EPA's limited
recovery of cleanup costs from RPs, and the need of available funds
to address the magnitude of the nation's hazardous waste problem.
Although cleaning up waste sites to protect the environment and
the public will cost the Federal government "hundreds of billions of
dollars", EPA has only recovered from RPs a fraction of the monies
it has spent. Therefore, "it is essential that the government
replenish the Trust Fund by increasing to the
maximum extent its recovery of costs from the parties responsible
for cleaning up these sites." (emphasis added)
Also, the Administrator's September 4, 1997 Statement to the U.S.
Senate's Committee on Environment and Public Works discussed
health effects associated with Superfund sites (i.e. birth defects,
cardiac disorders, changes in pulmonary function, impacts on the
immune system, infertility). To protect human health and the
environment the Administrator believed that action is needed that
-24-
-------
Superfund Oversight Billings
increases the pace of cleanups and improves program efficiency.
The Administration also remains concerned over expiration of
authority to replenish the diminishing Superfund Trust Fund. In
addition, the Congressional Budget Office projected that the Trust
Fund, at the end of the next fiscal year, will have less remaining
than needed to keep the program operating and to keep site
cleanups underway, in the following fiscal year.
EPA's April 7, 1998 Plan for Achieving Timely Oversight Billing
Under CERCLA sent to all regions outlined its goal to be current in
oversight billing by September 30, 1998. The Plan stated that all
offices should work towards this goal and "maintain the fiscal
health and integrity of the Superfund program. Failing to bill on a
current basis jeopardizes the potential collection from RPs, thus
impairing future appropriations" (emphasis added).
There is always uncertainty about the amount of income that the
Trust Fund will earn, particularly from recoveries which flow into
the Fund on an uneven basis. The greater the amounts billed and
received from RPs, the greater the amounts that would be available
to fund the Superfund program for subsequent years. For example,
the availability of Fund resources from appropriations beyond FY
99 depends on the amounts made available to EPA for FY 99 and
recoveries and interest realized in FYs 98 and 99. The only thing
preventing EPA from addressing cleanups was the lack of funds.
Regarding recommendation 2-3, based on the Region's prior
inability to issue BFCs timely, we strongly believe the institution of
certain timeframes is an important management control to assure
accountability for timely oversight billing. We also recognize there
is a need for some flexibility because site situations vary. Also,
such timeframes will provide accountability and feedback on the
success of such commitments.
ERRD officials provided the OIG with general timeframes for
certain actions. For example, Finance generally took 1 to 21/2
weeks to get the first SCORES report. Finance later generated a
second SCORES report. Both reports are reviewed by the RPM.
Although the time to review the SCORES varied based on the
RPM's familiarity with the site, the average time was 2 weeks.
However, it could take more than a month for a very complex site.
We believe these timeframes could be incorporated in the
-25-
-------
Superfund Oversight Billings
procedures and used as a basis to measure performance.
Two recent OIG audits of Regions 3 and 5 billings of oversight
costs (See Exhibit 3) recommended and the Regions concurred with
the need for specific timeframes for preparing, forwarding and
reviewing annual oversight bills to ORC, the program office and
RPs for payment. The Region 5 Administrator stated that specific
timeframes for preparing and reviewing oversight billings will be
included in a Superfund Cost Recovery Memorandum of
Understanding. Also, the Superfund Cost Recovery Taskforce
workgroup will "add new timeframes to effect more timely
billings." Additionally, specific timeframes "will enhance our
ability to timely execute the complex billing process and meet the
performance guidelines."
The Region 3 Administrator's response concurred with the OIG
recommendation. He stated procedures had been prepared to bill
future oversight costs, specifying specific timeframes for Finance,
the Superfund program office and ORC to initiate, assemble, and
issue an oversight bill. Also, a joint memorandum from the three
Regional offices outlined the procedures to document the oversight
billing process and specified how long it should take all three
offices to perform all tasks to issue an oversight bill. The
memorandum also stated that the three office's personnel meet
regularly to discuss the status of all sites and costs to be billed.
Regarding recommendation 2-5, we also believe that periodic
meetings between the three offices should be held and items
discussed, conclusions or decisions made, and follow-up action
fully documented
Finance officials indicated that informal oversight billings meetings
were held with ERRD (about five times per year). However, there
was no set schedule, minutes were not taken, and actions were
based on verbal agreements. Conducting regular meetings between
ERRD, Finance and ORC could be an effective management tool to
assure a coordinated, informed effort. Minutes
should be taken to provide evidence of the topics discussed, problems
noted, actions in process, additional actions needed and timeframes, person
responsible for actions and necessary follow up. Copies of the minutes
-26-
-------
Superfund Oversight Billings
should be distributed to all participants.
-27-
-------
Superfund Oversight Billings
This Page Was Intentionally Left Blank.
-28-
-------
Superfund Oversight Billings
CHAPTER 3
OTHER MATTERS
Initiative to
Reduce Oversight
Activities
On October 2, 1995, the Administrator announced several new
Superfund reforms including an initiative to encourage and reward
cooperative parties by reducing EPA oversight activities. In a July
31, 1996 memorandum (OSWER Directive No. 9200.4-15), EPA
Headquarters provided examples of oversight monitoring activities
that should be considered for reduction depending upon site
circumstances. These examples included items such as reducing the
number of field visits to observe routine activities or taking fewer
split samples at the site. The memorandum also:
• Referred to a list of 100 sites with cooperative and capable
parties, where the Regions had already reduced or had plans
to reduce oversight.
• Explained EPA's overall goal for a nationwide 25%
reduction in oversight costs over the next year at these 100
sites.
• Stipulated that the Regions should immediately evaluate all
sites to identify where oversight could be reduced without
reducing protection.
• Detailed that RPs receive a summary of oversight
reductions with their annual bill. Regions also should report
estimates of how much oversight has been reduced at sites
(i.e. number of sites, activities reduced, and estimates of
costs saved).
• Required that RPs receive an estimate of oversight costs for
the next year, at the time of annual billing.
The memorandum also stated that reductions in oversight activities
should be implemented as soon as possible. Also, for FY 96, the
site manager for each identified site under this reform should report
oversight activities that have been eliminated or reduced.
-29-
-------
Superfund Oversight Billings
Region 2 Activities Region 2 previously identified six candidates for reduction of
oversight monitoring and informed the RPs of this action. Also,
four additional candidates were identified in FY 98. However,
Regional officials could not provide evidence that any specific cost
reduction amounts had occurred at these sites. While other
Regions have already reduced oversight activities in compliance
with the Directive, Region 2 has not reported required oversight
reductions (estimates of costs saved). Additionally, Region 2 needs
to improve its process to ensure that all RPs are provided with an
estimate of oversight costs for the next year.
The impact of reduced oversight administration reform is difficult
to assess for several reasons including lack of accurate information
regarding specific site reductions. Also, there is no defined level of
the amount of oversight EPA is to perform, which makes it difficult
to identify what qualifies as a reduction in oversight. In addition, it
is often difficult to quantify the value of oversight activities EPA
does not perform. During FY 98, the Region and Headquarters are
working to develop methods for measuring specific oversight
reductions for different sites.
-30-
-------
Superfund Oversight Billings
REGION 2 SUPERFUND OVERSIGHT BILLINGS
SAMPLED SITES - NO BILLINGS
Document
Exhibit 1
Payment Unbilled
site
arm
1.
2.
3.
4.
5.
Billing
2 Terms
AOC, (A)
AOC, (P)
CD, (P)
AOC, (A)
AOC, (A)
AOC, (S)
AOC, (P)
A= Annual
P= Periodic
S= Silent
Effective
Date
05/27/88
09/27/89
07/23/90
10/08/87
06/07/88
05/07/93
06/28/93
Amount
Billed
NA
NA
NA
NA
NA
NA
NA
Bill
Date
NA
NA
NA
NA
NA
NA
NA
Period
Covered
NA
NA
NA
NA
NA
NA
NA
Amt. &
Date
NA
NA
NA
NA
NA
NA
NA
Amount
9/30/97
$839,891
$909,332
$950,170
$702,422
$1.043.676
$4.445.491
-31-
-------
Superfund Oversight Billings
REGION 2 SUPERFUND OVERSIGHT BILLINGS
SAMPLED SITES - PARTIAL BILLINGS
Exhibit 2
Document
Site Billing Effective Amount Bill Period
Name Terms Date Billed Date Covered
Payment Unbilled
Amt. & Amount
Date 9/30/97
A. AOC, (P) 06/02/89 $622,370 05/13/96 1989 to 1996 N/A
(R) 07/10/96
B. CD, (A) 11/28/89 $443,939 04/04/95 1989 to 1996 $58,020 $42,548
(R) $488,869 (R) 07/11/96 09/30/96
C. AOC, (A) 04/30/86 $468,743 02/5/91 1986 to 1990 $145,000 $297,133
(R) $445,806 06/28/91
D. AOC, (S) 06/30/89 $137,572 03/13/96 1989 to 1993 N/A
E. AOC, (S) 09/28/90 $467,481 02/26/96 1990 to 1994 N/A
(R) $437,481 (R) 04/22/96
A= Annual
P= Periodic
S= Silent
R= Revised/
Resent
-32-
-------
Superfund Oversight Billings
Exhibit 3
Previous OIG and GAP Audit Reports
OIG Audit Report E5FFL7-03-0008-7100292, Region 3's Billing of Superfund Oversight
Costs. (September 22, 1997) found that Region 3 took, in some cases, years to bill RPs
for oversight costs.
OIG Audit Report El AMF6-05-0079-7100139, Region 5's Billing and Collection of
Account Receivables. (March 27, 1997) discussed billing and collecting of oversight costs
problems in Region 5.
OIG Audit Report El SFB5-11-0008-6400016, Major Delays in Superfund Cleanups
Increased Costs and Potential Health Risks. (November 29, 1995) discussed: (a) a Region
8 site where the RP used a three-year delay in billing to negotiate a reduction in the bill;
and (b) a Region 3 site where there was a two-year billing delay.
OIG Special Review E1SJG2-02-5000-3400005, Follow-up Review of Region 2's
Corrective Actions Regarding Oversight of Superfund Post Settlement Activities.
(November 24, 1992) noted continuing weaknesses in billing and collecting oversight
costs.
OIG Audit Report E1SJC9-02-0055-0100230, Review of Region 2's Oversight of
Superfund Post-Settlement Activities. (March 29, 1990) noted oversight costs that were
not billed and collected in a timely manner.
GAO Audit Report, System Enhancements Could Improve the Efficiency of Cost
Recovery (GAO/AIMD-95-177, August 1995) outlined concerns over EPA's poor
recovery rate due to poor information systems.
OIG Audit Report E1AML7-20-7008-8100058, EPA's Fiscal 1996 and 1997 Financial
Statements. (March 2, 1998) indicated that the Agency's accounting for unbilled
Superfund oversight costs needed improvement. Until billings are prepared, reimbursable
costs incurred since the last billing were not recorded as assets in accounting records.
Also, certain Regional estimates of unbilled costs were unreliable. EPA's Acting Chief
Financial Officer agreed that the timeliness of the Agency oversight billing as well as the
methodology for estimating oversight amounts needed improvement.
-33-
-------
Superfund Oversight Billings
This Page Was Intentionally Left Blank.
-34-
-------
Superfund Oversight Billings
Appendix B
DISTRIBUTION
Office of Inspector General
Acting Inspector General (2410)
Deputy Assistant Inspector General for Internal Audits (2421)
Divisional Inspectors General
EPA Headquarters Office
Assistant Administrator for Solid Waste and Emergency Response (5101)
Agency Audit Follow-up Official (2710)
Agency Follow-up Coordinator (2724)
Director, Policy and Program Evaluation Division, Office of Site Remediation Enforcement (2273A)
Associate General Counsel, Solid Waste and Emergency Response Law Office (2366)
Associate Administrator for Congressional and Legislative Affairs (1301)
Associate Administrator for Communications, Education and Public Affairs (1701)
Region 2
Regional Administrator
Assistant Regional Administrator for Policy and Management
Director, Emergency and Remedial Response Division
Director, Financial Management Branch
Regional Counsel
------- |