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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
EPA Should Bill Superfund
Oversight Costs More Timely
Report No. 11-P-0697
September 22, 2011

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Report Contributors:	Paul Curtis
Meg Hiatt
Alfred Falciani
Bob Evans
Carol Kwok
Edgar Dumeng
Kevin Ross
Phil Weihrouch
Robert Hairston
Abbreviations
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act
CFC
Cincinnati Finance Center
EPA
U.S. Environmental Protection Agency
IFMS
Integrated Financial Management System
MOU
Memorandum of understanding
OIG
Office of Inspector General
ORC
Office of Regional Counsel
OSWER
Office of Solid Waste and Emergency Response
PRP
Potentially responsible party
SCORPIOS
Superfund Cost Recovery Package Imaging and On-Line System
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail:	OIG Hotiirie@epa.aov	write: EPA Inspector General Hotline
phone:	1-888-546-8740	1200 Pennsylvania Avenue NW
fax:	703-347-8330	Mailcode 8431P (Room N-4330)
online:	http://www.epa.aov/oia/hotline.htm	Washington, DC 20460

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*. U.S. Environmental Protection Agency	11-P-O607
*	\ Office of Inspector General	September 22,2011
I SB/
.... At a Glance
Catalyst for Improving the Environment
Why We Did This Review
The purpose of this audit was to
determine whether the U.S.
Environmental Protection
Agency's (EPA's) Superfund
oversight bills reflect the correct
nature and dollar amount, and
whether EPA timely bills and
collects Superfund oversight
expenditures.
Background
Although potentially responsible
parties (PRPs) pay for cleanup at
Enforcement Lead Superfund
sites, EPA incurs oversight costs
from monitoring the PRPs'
cleanup work. The
Comprehensive Environmental
Response, Compensation, and
Liability Act authorizes EPA to
recover from PRPs Superfund
cleanup costs that are not
inconsistent with the National
Contingency Plan.
For further information,
contact our Office of
Congressional, Public Affairs and
Management at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2011/
20110922-11 -P-0697.pdf
EPA Should Bill Superfund Oversight Costs
More Timely
What We Found
Based on our audit of oversight billings for nine sites in Regions 1, 5, and 9,
we found that Region 5 did not timely bill or did not bill approximately
$8.6 million in oversight costs for two sites. The $8.6 million consists of $2.5
million for costs incurred between 2000 and 2008 that were not timely billed,
and $6.1 million that was not billed prior to the start of our audit. During our
audit, Region 5 billed about $1 million of the $6.1 million. We did not
identify problems with oversight cost billings in Regions 1 or 9.
Region 5 did not timely bill oversight costs and has not billed certain costs
because the accounting staff has difficulty in allocating costs at sites with
multiple agreements and operable units, and the case management team has
difficulty coordinating review of oversight costs. Further, EPA's policies do
not require oversight bills to be issued within a specific timeframe. Untimely
billing of oversight costs results in delays in replenishing the Superfund Trust
Fund, and limits EPA's ability to timely clean up other priority sites to
further protect human health and the environment.
What We Recommend
We recommend that the Region 5 Regional Administrator direct the
Superfund Division Director to develop a policy to require that oversight
billings be issued no less than annually, and procedures to help staff prepare
oversight billings and resolve billing problems. We also recommend that the
Region 5 Regional Administrator direct the Superfund Division Director to
bill PRPs up to $4,319,545 incurred for the Allied Paper site and
approximately $783,845 for the Sauget site.
While Region 5 did not agree with the recommendation to issue a policy
requiring annual billings, Region 5 stated that it plans to bill any future
oversight costs on an annual basis. If the Agency bills annually as indicated,
that would address the intent of our recommendation. Region 5 agreed that
additional protocols are needed to ensure that management is made aware of
any projected delay in oversight billing and will develop standard operating
procedures. Region 5 partially satisfied our last recommendation by billing
$2,389,367 and $757,312 in costs for the Allied and Sauget sites,
respectively, through August 2, 2011. Because of the timing of the billings,
we were unable to verify how much remains to be billed.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
September 22, 2011
MEMORANDUM
SUBJECT: EPA Should Bill Superfund Oversight Costs More Timely
Report No. ll-P-069"7
FROM: Arthur A. Elkins, Jr.
Inspector General
TO:
Susan Hedman
Regional Administrator, EPA Region 5
This is our report on the subject audit 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 on
the subjects reported. Final determination on matters in this report will be made by EPA
managers in accordance with established audit resolution procedures.
The estimated direct labor and travel costs for this report are $233,961.
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 response will be posted on the OIG's public website, along with
our memorandum commenting on your response. Your response should be provided as an Adobe
PDF file that complies with the accessibility requirements of Section 508 of the Rehabilitation Act
of 1973, as amended. The final response should not contain data that you do not want to be
released to the public; if your response contains such data, you should identify the data for
redaction or removal. We have no objections to the further release of this report to the public. We
will post this report to our website at http://www.epa.gov/oig.
If you or your staff, have any questions regarding this report, please contact Paul Curtis at
(202) 566-2523 or curtis.paul@,epa.gov, or Meg Hiatt at (513) 487-2366 or
hiatt. margaret@,epa. gov.

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EPA Should Bill Superfund Oversight Costs	11-P-0697
More Timely
	Table of Contents	
Purpose		1
Background		1
Noteworthy Achievements 		2
Scope and Methodology		2
Results of Review		3
Conclusions		4
Recommendations		5
Agency Comments and OIG Evaluation		5
Status of Recommendations and Potential Monetary Benefits		7
Appendices
A Details on Scope and Methodology		8
B Region 5 Response to Draft Report		11
C Distribution		14

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Purpose
The purpose of this audit was to determine whether the U. S. Environmental
Protection Agency's (EPA's) Superfund oversight bills reflect the correct nature
and amount, and whether EPA timely bills and collects Superfund oversight
expenditures.
Background
Although potentially responsible parties (PRPs) pay for cleanup at Enforcement
Lead Superfund sites, EPA incurs oversight costs from monitoring the PRPs'
cleanup work. The Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) authorizes EPA to recover from PRPs Superfund
cleanup costs that are not inconsistent with the National Contingency Plan.
Recoverable costs include EPA's planning and implementing cleanup actions,
investigation and monitoring, actions to limit access to the site, indirect costs
needed to support the cleanup work, EPA's contractor costs, and annual allocation
costs. EPA recovers these costs through cost recovery actions. Cost recovery
settlements are either embodied in a consent decree or administrative orders.
	A consent decree is a legal agreement entered into by the United States
(through EPA and the U.S. Department of Justice) and PRPs and lodged
with a court.
	An administrative order on consent is a similar document, except that it is
not approved by the court.
EPA may also recover oversight costs through unilateral administrative orders,
which require PRPs to undertake response actions when a settlement is not
reached. The settlement agreements establish the billing frequency, and often the
agreements state that EPA will bill periodically.
EPA tracks the oversight costs in the Integrated Financial Management System
(IFMS). The Office of Regional Counsel (ORC), Superfund Division, or finance
office in the regions prepares the cost recovery packages using the Superfund
Cost Recovery Package Imaging and On-Line System (SCORPIOS), which
extracts costs from IFMS. The cost recovery packages are a compilation of costs
incurred for a site and can include such costs as payroll, travel, contractor costs,
and indirect costs. The review process of the cost recovery packages varies
slightly by region. The ORC, Superfund Division, and finance office review the
cost recovery packages to verify financial accuracy of the costs. After all three
offices agree on the content, either the Superfund Division or finance office
(depending on the region) prepares the final bills, sends the bills to the PRPs, and
provides a copy to the Cincinnati Finance Center (CFC). Further, the CFC has the
lead role in collecting the oversight costs and assessing interest on delinquent
bills. The CFC involves the regions as necessary.
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Noteworthy Achievements
As we conducted our audit, we identified the following noteworthy achievements
related to the billing of the oversight costs in Region 9:
	The ORC, Superfund Division, and Cost Accounting Team conduct
monthly meetings to discuss the billings as well as any site issues.
	The Cost Accounting Team uses a cost recovery documentation checklist
included in a Lotus Notes database to compile the financial cost
documentation summary/package. The checklist consists of a list of
potential EPA intramural and extramural service providers. It allows the
cost documentation requester to specify the type of cost summary/package
needed for a particular cost recovery activity and prepare additional
instructions for the Cost Accounting Team. The checklist facilitates the
process of preparing the cost documentation summary/package by
identifying the types of costs that need to be included in the cost package
(e.g., headquarters or regional payroll, interagency agreements, contracts).
	The Superfund Division and Cost Accounting Team provide periodic
training on site-specific charging as well as cost documentation procedure
orientation to new attorneys, remedial project managers, and program
project officers to inform them how to track their time accurately by site
and what needs to be included in the costs documentation
summary/package.
Scope and Methodology
We conducted our audit from January 13 to July 8, 2011, in accordance with
generally accepted government auditing standards. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for
our conclusions based on our audit objectives.
We selected Regions 1, 5, and 9 for review because they had the largest amounts
of unbilled oversight costs in the Agency's fiscal year 2010 unbilled oversight
accrual spreadsheet. We reviewed laws and regulations related to the billing of
Superfund oversight costs. We also reviewed EPA policies and guidance. We
reviewed documents for selected sites, including settlement agreements, itemized
costs summaries from SCORPIOS, and billing queries from EPA's Financial Data
Warehouse to determine the accuracy and timeliness of billings.
Appendix A contains further details on our scope and methodology.
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Results of Review
Based on our audit of oversight billings for nine sites in Regions 1, 5, and 9, we
found that Region 5 did not timely bill or did not bill approximately $8.6 million
in oversight costs for two sites. The $8.6 million consists of $2.5 million for costs
incurred between 2000 and 2008, which were not timely billed, and $6.1 million
that was not billed prior to the start of our audit. During our audit, Region 5 billed
about $1 million of the $6.1 million, leaving $5.1 million to be billed. We did not
identify problems with oversight cost billings in Regions 1 or 9. CERCLA
authorizes EPA to recover its costs from PRPs to help replenish the Superfund
Trust Fund, and Office of Solid Waste and Emergency Response (OSWER)
guidance states that EPA will strive to issue timely (e.g., annual) oversight bills,
and that regions are required to issue a timely bill for future response costs to the
extent called for by the underlying settlement agreement. Region 5 did not timely
bill oversight costs and has not billed certain costs because the accounting staff
has difficulty (1) allocating costs at sites with multiple agreements and operable
units, and (2) coordinating review of oversight costs. Further, EPA's policies do
not require oversight bills to be issued within a specific timeframe. Untimely
billing of oversight costs results in delays in replenishing the Superfund Trust
Fund and limits EPA's ability to timely clean up other priority sites to further
protect human health and the environment. EPA also lost or postponed the
opportunity to collect interest on oversight costs not billed and collected that
would have accrued to the Trust Fund.
Office of Solid Waste and Emergency Response interim Guidance
OSWER Directive No. 9200.0-32P, Interim Guidance on Implementing the
Superfund Administrative Reform onPRP Oversight, was issued to provide
guidance to regions on implementation of the Superfund reform on the
administration of PRP oversight. The guidance states, "Where PRPs have entered
into agreements with EPA to pay oversight costs, EPA will strive to issue timely
(e.g., annual) oversight bills based on known or available costs at the time of
billing." The guidance also states that under the Superfund reform on PRP
oversight, regions are required to issue a timely bill for future response costs
(including oversight costs) that is, to the extent called for by the underlying
agreement, accompanied by appropriate cost documentation.
Region 5 Billing Practices
Region 5 did not timely bill oversight costs of $2.5 million for the Sauget site
under a November 2000 administrative order on consent and a September 2002
unilateral administrative order. The first billings under these orders were not
issued until September 2008 and covered billing periods of approximately 6 and 7
years. Table 1 provides a summary of the costs not billed timely.
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Table 1: Oversight costs not billed timely
Site
Order date
Billing date
Billing period
Amount
Sauget
11/24/2000
09/25/2008
11/25/2000-12/31/2007
$1,463,351
Sauget
09/30/2002
09/25/2008
09/30/2002-08/31/2008
1,007,146
Total
$2,470,497
Source: Office of Inspector General (OIG) analysis.
Further, Region 5 did not bill oversight costs of up to $6.1 million. Table 2
provides a summary of the costs not billed for the two sites.
Table 2: Oversight costs not billed
Site
Billing period
Amount
Allied Paper
02/15/2005-12/31/2010
$5,319,545a
Sauget
01/01/2008-10/31/2010
783,845b
Total
$6,103,390
Source: OIG analysis.
a Under five settlement agreements.
b Under the administrative order on consent.
As of May 2011, Region 5 issued oversight bills totaling approximately
$1 million for the Allied site for costs incurred from 2005 through 2010.
Subsequent to issuing out draft report, Region 5 billed $2,389,367 and $757,312
in costs for the Allied and Sauget sites through August 2, 2011. Because of the
timing of the billings, we were unable to verify how much remains to be billed.
Region 5 stated that the oversight billings took longer because it is difficult for the
accounting staff to allocate costs at sites with multiple agreements, operable units,
and complications due to a complex bankruptcy. The region also said that for
these sites, it is difficult for the case management team for each settlement
agreement (consisting of the lead attorney, remedial project manager, and
on-scene coordinator) to coordinate the review of costs. Also, we believe the
billings were not timely because EPA's policies do not require oversight billings
to be issued within a specified timeframe. Region 5 has a Superfund cost recovery
procedures memorandum of understanding (MOU) with ORC, the Superfund
Division, and the finance office. This MOU defines roles and responsibilities of
ORC, Superfund Division, and the Resources Management Division, and includes
the Superfund cost recovery procedures and timeframes for reviewing and issuing
draft and final oversight billings. However, we found that for the Sauget and
Allied Paper sites, the timeframes in the MOU were not met.
Conclusions
Region 5 did not timely bill oversight costs, which delayed replenishing the trust
fund and having the funds available to clean up other sites. Specifically, Region 5
did not bill oversight costs of up to $6.1 million accumulated at two sites between
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2000 and 2010. EPA also lost or postponed the opportunity to collect interest on
oversight costs not billed and collected that would have accrued to the Superfund
Trust Fund.
Recommendations
We recommend that the Regional Administrator, Region 5, direct the Superfund
Division Director to:
1.	Develop a policy to require Region 5 to bill Superfund oversight cost
billings no less frequently than annually.
2.	Develop procedures for staff involved in oversight billings to meet on
a regular basis to discuss the status of billings due under agreements or
orders, to coordinate staff in preparing and reviewing bills, and to
resolve problems that are delaying the issuance of bills.
3.	Bill PRPs up to $4,319,545 incurred for the Allied Paper site, and
approximately $783,845 for the Sauget site.
Agency Comments and OIG Evaluation
Region 5 did not agree with our recommendation to develop a policy to require
them to bill Superfund oversight costs billings no less frequently than annually.
Region 5 recognized the existence of the current guidance in OSWER Directive
No. 9200.0-32P, Interim Guidance on Implementing the Superfund Administrative
Reform on PRP Oversight. The guidance states that, "Where PRPs have entered
into agreements with EPA to pay oversight costs, EPA will strive to issue timely
(e.g., annual) oversight bills." Region 5 noted that the guidance is not mandatory
and believes it is important to leave some control over the timing of oversight
billing to the discretion of the enforcement team. We agree that there should be
some control over the timing of oversight billings left to the discretion of the
enforcement team, but in no case should billings be less frequent than annually.
While Region 5 did not agree with the recommendation to issue oversight bills
annually, Region 5 stated that they plan to bill any future oversight costs on an
annual basis. If Region 5 bills annually as indicated, that would address the intent
of our recommendation. Therefore, we continue with our recommendation that
Region 5 timely bill oversight costs to PRPs no less frequently than annually, as
less frequent billings delay replenishing the Superfund Trust Fund, and consider
the recommendation unresolved in lieu of a planned completion date.
Region 5 referred to the MOU for Superfund cost recovery procedures that
formalizes cost recovery procedures among the Superfund Division, the ORC, and
the Resources Management Division. However, Region 5 agreed that additional
protocols are needed to ensure that management is made aware promptly of any
projected delay in oversight billing so issues can be resolved expeditiously.
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Region 5 will develop standard operating procedures to provide staff with clear
direction on the process of informing management of any issues that could delay a
bill. Management review and approval will be required for any bills to be issued
less frequently than on an annual basis. We still recommend that Region 5
develop procedures for staff involved in oversight billings to meet on a regular
basis to discuss the status of billings.
Region 5 partially satisfied our recommendation 3 by billing $2,389,367 and
$757,312 of the amounts questioned in this report for the Allied Paper and Sauget
sites through August 2, 2011. Because of the timing of the billings, we were
unable to verify how much of the remaining funds were available for additional
billings. We acknowledge that the complexities of agreements and difficulties in
allocating costs to different PRPs can cause delays in billing, and commend
Region 5 for its efforts in billing oversight costs as recommended.
Appendix B provides Region 5's response to the draft report. Region 5 included
three attachments in its response. Attachment 1 refers to OSWER Directive No.
9200.0-32P, Interim Guidance on Implementing the Superfund Administrative
Reform onPRP Oversight. Attachment 2 refers to Region 5's MOU for Superfund
cost recovery procedures. Attachment 3 provides details for the amounts billed for
the Allied Paper and Sauget sites. Due to the length of the directives and the
MOU, we did not include the full text of the attachments.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in $000s)





Planned


Rec.
Page



Completion
Claimed
Agreed To
No.
No.
Subject
Status1
Action Official
Date
Amount
Amount
Direct the Superfund Division Director to develop a
policy to require Region 5 to bill Superfund
oversight cost billings no less frequently than
annually.
Direct the Superfund Division Director to develop
procedures for staff involved in oversight billings to
meet on a regular basis to discuss the status of
billings due under agreements or orders, to
coordinate staff in preparing and reviewing bills,
and to resolve problems that are delaying the
issuance of bills.
Direct the Superfund Division Director to bill PRPs
up to $4,319,545 incurred for the Allied Paper site,
and approximately $783,845 for the Sauget site.1
Regional Administrator,
Region 5
Regional Administrator,
Region 5
3/30/2012
Regional Administrator,
Region 5
8/2/2011
$6,100
$3,147
O = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
1 We found $6.1 million that was not billed prior to the start of our audit. As of May 2011, Region 5 billed about $1 million. Subsequent to our audit, Region 5
billed an additional $3,147 million. Because of the timing of the billings, we were unable to verify how much of the remaining funds were available for additional
billings.
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Appendix A
Details on Scope and Methodology
We reviewed laws and regulations pertaining to the billing of Superfund oversight costs,
including CERCLA. We also reviewed EPA policies and guidance, such as Resources
Management Directive System 2550D-12, Superfund Cost Documentation and Cost
Recovery,; Resources Management Directive System 2550D-14, Superfund Accounts
Receivable and Billings', and OSWER Directive No. 9200.0-32P, Interim Guidance on
Implementing the Superfund Administrative Reform on PRP Oversight.
We obtained a universe of sites from CFC's fiscal year 2010 fourth quarter unbilled
oversight accrual spreadsheet. The accrual spreadsheet contained 832 site IDs with total
unbilled oversight costs of $86 million as of September 30, 2010. Using the CFC's
spreadsheet, we selected the regions with the largest amount of accrued unbilled
oversight costs for review. The regions selected for review were Regions 1, 5, and 9, with
accrued unbilled oversight costs of approximately $43 million. We then selected three
sites with the largest accrued amount for review from the three selected regions, for a
total of nine sites. The accrued unbilled oversight costs for the nine sites selected were
approximately $23 million. We believed that by selecting sites with largest amount of
unbilled oversight costs, we were more likely to identify instances in which controls over
oversight billings were not adequate. Table A-l provides details on the sites selected for
review.
Table A-1: Sites reviewed
Region
Site ID
Site name
Unbilled oversight costs
at 09/30/10
1
0146
Wells G & H
$6,738,204.87
1
0109
W.R. Grace
2,202,599.85
1
011T
Beede Waste Oil
966,128.86
5
059B
Allied Paper
6,763,004.17
5
05XX, 0558
Sauget Area Two
2,043,891.02
5
0582
Rose Township
633,212.04
9
09R8
Unidynamics - UPI
1,531,252.31
9
09JS
Asarco
1,246,177.60
9
09MX
Iron King Mine
1,096,364.32
Total
$23,220,835.04
Source: OIG analysis.
We developed a questionnaire to obtain information from EPA staff involved with
oversight billings. The objective of the questionnaire was to determine the process for
billing oversight costs, the status of oversight billings, and whether oversight billings are
accurate and timely sent to PRPs. We contacted select accounting staff, cost recovery
specialists, regional counsel, and remedial program managers in Regions 1, 5, and 9. We
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also interviewed CFC staff about their procedures for billing and collecting oversight
costs. We reviewed billing files and records for selected sites, including settlement
agreements and itemized cost summaries from SCORPIOS. We reviewed EPA's
methodology for allocating the indirect costs. However, we did not audit the indirect cost
rate methodology. Headquarters calculates and publishes the annual indirect cost rates
and inputs the rates into SCORPIOS. The regions use the indirect cost rates in
SCORPIOS to compute the indirect costs that are included in the billings for the
oversight costs.
Prior Reviews
We researched prior EPA OIG and U.S. Government Accountability Office reports
related to the Superfund billings. We noted four pertinent EPA OIG reports, as listed
below:
	Region 3's Billing of Superfund Oversight Costs, Report No. E5FFL7-03-0008-
7100292, September 22,1997. We found that Region 3 sometimes took a long
time to bill responsible parties for oversight costs. In one instance, the bill
presented to the responsible party represented charges generated over an 8-year
period.
	Region 2's Billing of Superfund Oversight Costs, Report No. E1SFF8-02-0007-
8100206, August 13,1998. We found that Region 2 did not timely bill and collect
accumulated Superfund oversight costs. Further, the region did not recover
cleanup oversight costs from responsible parties for as long as 11 years. Specific
contributing factors were (1) other competing priorities, (2) inadequate tracking
systems, (3) vague or nonexistent billing requirements in administrative orders on
consent or consent decrees, (4) inadequate coordination between program offices
and ORC, (5) difficulty in segregating oversight from other response costs, and
(6) lack of resources.
	Region 9's Controls Over Superfund Oversight Cost Billings, Report No.
E1SFF8-09-0022-8100259, September 30,1998. We found that Region 9 had
made significant progress in reducing its several-year backlog of unbilled
oversight costs by July 1998. However, continued attention is necessary to assure
that the region is able to meet EPA's standard for preparing current oversight
billings within 120 days of the consent decree or administrative order on consent
anniversary date.
	EPA Can Recover More Federal Superfund Money, Report No. 08-P-0116,
March 26, 2008. We found that exceptions to the typical billing approach can
impede some cost recovery. These exceptions include the following: (1) regions
may not bill some sites annually, (2) sites' established billing cycle may be every
2 years or periodic, (3) EPA has no agreement with the PRP to recover oversight
costs, and (4) the region may not find it cost effective to bill for a small amount.
Under the above conditions, regions told us they sometimes postpone an annual
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detailed review of site costs. When the regional staff finally review the site costs
to prepare a bill, they may find that all costs are not fully documented and staff
with historic knowledge may not be available.
Internal Control Review
In planning and performing our audit, we reviewed management controls related to our
audit objectives. We examined EPA's fiscal year 2010 Federal Managers' Financial
Integrity Act Annual Assurance Letters issued by the Regional Administrators and
Assistant Administrators for the various EPA programs to identify any weaknesses
pertaining to accounts receivables, collections, and oversight costs. In addition, we
examined EPA's Office of Management and Budget Circular A-123 Appendix A reviews
of internal controls to identify any weaknesses related to accounts receivables,
collections, and oversight costs. EPA identified no material weaknesses in its Circular
A-123 reviews related to oversight cost billings and collections. We obtained an
understanding of control activities through reviews of EPA's various policies, guidance,
and procedures related to unbilled oversight costs. We obtained an understanding of the
oversight billing process through review of background information, indirect cost rates,
and preliminary research walk-throughs. We did not review the internal controls over
EPA's IFMS or SCORPIOS from which we obtained information, but relied on reviews
of systems conducted during the audit of EPA's fiscal year 2010 financial statements.
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Appendix B
Region 5 Response to Draft Report
August 10, 2011
MEMORANDUM
SUBJECT: Region 5 Response to the Office of Inspector General's Draft Report:
"EPA Should Bill Superfund Oversight Costs More Timely"
Project No. OA-FY11-0045
FROM: Susan Hedman
Regional Administrator
TO:	Melissa Heist
Assistant Inspector General for Audit
On July 11, 2011 Region 5 received the above-referenced draft report, which accurately
identified two Superfund sites where Region 5's oversight bills were not sent out on an
annual basis. We welcome this opportunity to comment on the draft report and respond
to its recommendations.
Region 5 has a sound cost recovery program; oversight bills are issued on an annual basis
in the vast majority of cases. In fiscal year 2010, 98 percent of the regularly scheduled
oversight bills were issued timely (i.e. within 120 days of the annual anniversary date of
the order). We agree, however, that our process can be improved to ensure that existing
policies and procedures are followed consistently and that issues causing potential delays
in billing are elevated to management promptly. With regard to the two specific
instances identified in the draft report, we must point out that in one instance (the Allied
Paper/Portage Creek/Kalamazoo River Superfund Site), billing was complicated by the
bankruptcy liquidation of one of the major potentially responsible parties (PRPs) at the
site. This PRP was also a signatory to the agreements giving rise to the oversight costs.
In the other matter (the Sauget Area 2 Superfund Site), billing has been extraordinarily
complicated due to the fact that different PRPs are responsible for cleanup at various
areas of the site. Although the complex bankruptcy and complicated allocation of costs
do not necessarily excuse the billing delays, we believe they are explanations that should
be taken into account in your final report.
With regard to the recommendation that we develop a policy to require billing no less
frequently than annually, I direct you to EPA's Interim Guidance on Implementing the
Superfund Administrative Reform on PRP Oversight, OSWER Directive No. 9200.0-32P
(Attachment 1). This guidance states that "where PRPs have entered into agreements
with EPA to pay oversight costs, EPA will strive to issue timely (e.g., annual) oversight
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bills." It is a general goal of the Agency and Region 5 to issue oversight bills annually.
This goal, however, is not a mandatory requirement, nor does Region 5 believe it should
be. The discretion inherent in the goal is reflected in EPA's model settlement
agreements, which typically provide that EPA will bill the respondents or defendants "on
a periodic basis" (see, e.g., paragraph 55.a. of the Model Remedial Design and Remedial
Action Consent Decree). This discretion may be appropriate in individual cases, such as
at the Allied Paper/Portage Creek/Kalamazoo River Superfund Site. In this case, EPA
has been negotiating a series of settlement agreements to perform very costly cleanup
work at the site. Region 5 believes that it is important to leave some control over the
timing of oversight billing to the discretion of the enforcement team.
With regard to your recommendation concerning the development of procedures for staff
coordination on oversight billing, I want to call your attention to Region 5's
Memorandum of Understanding (MOU) for Superfund cost recovery procedures
(Attachment 2). The MOU was last amended on September 27, 2001 and formalizes cost
recovery procedures among the Superfund Division, the Office of Regional Counsel, and
the Resource Management Division. This MOU recognizes the roles and responsibilities
of all personnel involved in Superfund cost recovery and establishes the Cost Recovery
Task Force. This task force includes representatives from each division and meets on a
quarterly basis for the purpose of assessing whether oversight bills are sent in the
appropriate time frame. Region 5 also has a bill tracking system which records billing
dates and establishes dates for future billings.
Region 5 agrees, however, that additional protocols are needed to ensure that
management is made aware promptly of any projected delay in oversight billing so that
issues can be resolved expeditiously. To that end, we will develop a standard operating
procedure (SOP) to provide staff with clear direction on the process of informing
management of any issues that could delay a bill. Management review and approval will
be required for any bills to be issued less frequently than on an annual basis. The SOP
will be finalized within the next three months. In addition to the existing tracking tool,
we will use the unbilled accrual report on a quarterly basis to monitor for any outlier
situations that may be developing. Finally, we will revisit and update the MOU to reflect
recent organizational changes and any other appropriate updates.
We have already addressed your final recommendation. The billing for the total amount
of recoverable oversight costs for the Allied Paper/Portage Creek/Kalamazoo River and
Sauget Area 2 Superfund Sites has been brought up-to-date. See Attachment 3 for details
on the billing dates and amounts. We plan to bill any future oversight costs on an annual
basis.
Thank you for providing us with an opportunity to respond to your draft report. I believe
that the procedures we will implement as a result of your investigation will make an
already strong program even stronger. If you have any questions, please contact me or
your staff may contact Dale Meyer, Resource Management Division at 312-886-7561 or
meyer.dale@epa.gov; Larry Kyte, Office of Regional Counsel at 312-886-4245 or
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kyte.larry@epa.gov; or Sharon Jaffess, Superfund Division at 312-353-0536
jaffess.sharon@epa.gov.
Attachments (3)
cc: Eric Levy
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Appendix C
Distribution
Office of the Administrator
Regional Administrator, Region 5
Assistant Administrator for Administration and Resources Management
Agency Followup Official (the CFO)
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Chief, Enforcement and Compliance Assurance Branch, Region 5
Associate Branch Chief, Office of Regional Counsel, Region 5
Comptroller, Resources Management Division, Region 5
Audit Followup Coordinator, Region 5
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