*. U.S. Environmental Protection Agency	18-P-0059
December 22, 2017
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< ¦¦ \ Office of Inspector General
At a Glance
Why We Did This Review
Financial assurance is meant to
provide documentation or proof
that those responsible for the
closure, post-closure care or
cleanup of contaminated sites or
facilities that handle hazardous
waste have adequate financial
resources to do so. We did this
evaluation to determine whether
the U.S. Environmental Protection
Agency (EPA) includes all
environmental liabilities in its
reviews of financial assurance and
whether it reviews the validity of
Resource Conservation and
Recovery Act (RCRA) and
Superfund financial assurance
liabilities for companies with
multiple facilities/sites nationwide.
This report focuses on companies
with multiple environmental
liabilities covered by self-
insurance instruments (e.g.,
financial tests demonstrating or
corporate guarantees stating the
companies have enough assets to
cover their liabilities). In a March
2016 report, we identified data
quality and control deficiencies
that prevented the EPA's proper
management of RCRA and
Superfund financial assurance.
This report addresses the
•	Cleaning up and revitalizing
•	Operating efficiently and
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.gov/oiq.
Listing of OIG reports.
Self-Insurance for Companies With Multiple
Cleanup Liabilities Presents Financial and
Environmental Risks for EPA and the Public
What We Found
The EPA does not include and verify all self-
insured environmental cleanup liabilities
when evaluating requests for and reviewing
corporate self-insurance. The EPA faces
significant challenges to validating forms of
self-insurance, including:
•	Regulatory constraints: Most RCRA
regulations and Superfund guidance we
reviewed do not require full disclosure of
all environmental liabilities, and the EPA
lacks the information needed to independently validate all forms of self-
insured liabilities. EPA guidance also does not require regional staff to
check whether a company has multiple liabilities in other regions when
validating a self-insurance instrument.
•	Data and technical gaps: The EPA lacks a data system with the
capability to track multiple environmental liabilities and the resources and
technical ability to validate self-insurance for companies with multiple
environmental liabilities. Survey responses from all 10 EPA regions
showed that 70 percent of respondents believe insufficient staff training
and expertise are moderate or extreme barriers to the efficient
management and review of financial assurance instruments.
The inability to validate a company's self-insurance is a high-risk issue for the
EPA. If self-insurance is not valid, a company may default on its obligation to
pay for cleanup or closure activities, in some cases necessitating a
government response. This threatens the effectiveness of cleanup programs,
as the EPA—and, ultimately, the taxpayers—could be left with billions of
dollars in cleanup costs. If a cleanup is not performed by the facility as
required, it can result in longer human and environmental exposures to unsafe
substances. The EPA could mitigate the risks by requiring full disclosure of all
self-insured environmental liabilities, or the agency could seek regulatory or
statutory changes. During our review, we also found a lack of compliance with
physical safeguards for hard-copy financial assurance instruments.
Recommendations and Planned Agency Corrective Actions
We recommend that the EPA study the costs associated with requiring full
disclosure of all self-insured environmental liabilities and with eliminating the
use of corporate self-insurance instruments. We also recommend that the
EPA add controls to improve its oversight of financial assurance. The agency
agreed with nine of our 14 recommendations. Work is underway to reach
agreement on the five unresolved recommendations.
The EPA's ability to oversee
self-insurance instruments
is impaired, leaving the
agency and taxpayers
vulnerable to billions of
dollars in financial risk and
the public vulnerable to
environmental risk. Unlike
the EPA, some federal
agencies do not accept
corporate self-insurance.