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Semiannual Report to Congress April 1-September 30, 1996
EPA Office of Inspector General
Semiannual Report to Congress
April 1-September 30, 1996
Executive Summary
The report listed below is an electronic rendering of the official printed document. It has been formatted for electronic presentation and may not contain all the charts, figures, or other graphical information in the official report.
Foreword
The combination of effective audit and investigative work during the past six months, along with a strong Agency management partnership for improvement has enhanced the environment for change and resulted in significant progress. By communicating with our audit customers frequently and assisting Agency management to recognize opportunities for cost saving and solving problems, the OIG is helping EPA achieve greater accountability and productivity from its resources. The OIG has also developed a more streamlined organization and strategic plan for applying a greater proportion of its resources directly to audits and investigations in environmental programs.
This report highlights some of our most significant audits, investigations and concerns along with Agency action to implement our recommendations. Subjects discussed in this report include the threat of contaminated drinking water in schools, the need for better air quality emission standards, the need for more reliable budget and accounting practices, wasteful and improper contracting practices by the Agency and its grantees, distortions in the value of real property in the financial statements, and Agency success in reducing administrative time cleaning up Superfund sites. Also, our investigations have resulted in a significant number of civil settlements that have returned funds to the government.
Agency management is actively pursuing improved accountability throughout its programs and operations as one of its major strategic objectives and for compliance with the Government Performance And Results Act. Although we are encouraged by EPA’s commitment to this initiative, much still needs to be done. We will continue working to strengthen our partnership with Agency management to promote the changes and actions necessary to improve the accountability for its resources and environmental results.
John C. Martin
Inspector General
EPA's Progress in Improving Areas of Significant OIG Concern
This section of our report presents the Office of Inspector General’s (OIG) perspective on significant problems requiring additional Agency attention to ensure its programs are conducted effectively, efficiently, and economically. OIG and EPA personnel have cooperated extensively to address these problems. The Agency has also taken a number of actions either independently or in prompt response to our reports to improve its operations. However, EPA’s most significant problems were created over a long period of time, and resolution will require long term commitments and constant attention. Therefore, it is too soon to determine whether EPA management’s corrective actions will fully solve these problems.
The following presents the areas of significant current concern to the OIG, and some of EPA’s actions taken during the last year to address them.
Air Programs
OIG Concerns
Emission factors are used to estimate emissions from a source when more reliable emissions data are not available. Without reliable emissions factors, EPA, states and industry who rely upon them cannot be sure that their air pollution control strategies target the right industries or products and permitting programs include all required sources and establish proper emission limits. Our 1996 audit found that the large majority of published emission factors were rated low for reliability, and many emission factors were not updated since 1988. EPA’s use of industry partnerships to assist in the development of emission factors increased the risk that
non-representative or inaccurate factors will be developed. Industries have an inherent incentive to use emission factors that indicate lower than actual pollutant emissions. Accordingly, we nominated emissions factor development as a material weakness candidate for fiscal 1996.
In reviews of enforcement and compliance assistance activities, we found that state enforcement programs have a limited deterrent effect because of little publicity and not always assessing the economic benefit of violations.
Our audit of EPA’s regional processing of State Implementation Plans (SIP) found that parts of the SIP program needed to be improved nationally through better guidance and communication with states, and by resolving processing delays.
Agency Actions
The Agency will re-examine the program for any management or financial integrity weaknesses and review the appropriateness of funding the Adopt-A-Factor program. In addition, the Agency will use a peer review with industry, state and local personnel to ensure that a balanced perspective is presented in industry partnership. EPA agreed to improve communications with states and work with air quality program partners to streamline and simplify the SIP process.
Financial Management
OIG Concerns
The Agency team that conducted a National Performance Review of EPA’s financial management reported three weaknesses: insufficient time and funds; the
complex financial management systems and processes; and a wide disparity in expertise and attention paid to financial management among EPA managers. In addition, the OIG has repeatedly reported that EPA’s accounting systems had not provided complete, consistent, reliable and timely data. Although the Agency has made a number of significant improvements in financial management, additional actions are needed to ensure that EPA has trained staff, policies, procedures and systems to carry out these responsibilities effectively.
An audit showed that a pattern of errors in EPA’s budgeting and accounting practices for personnel resources made financial management information unreliable for ensuring that EPA complied with congressional intent, and in developing budget requests.
Another audit identified that although the Agency has initiated results oriented management direction to implement the Government Performance and Results Act (GPRA), reliable financial and performance information was not always available to effectively manage EPA’s programs.
A review of EPA’s property disclosed that the Agency overstated deprecation, may not have correctly accounted for leased real property, and did not perform lease-versus-buy comparisons for all leases. As a result, Agency financial statements are inaccurate and opportunities to achieve millions in savings were missed.
An audit of EPA’s fiscal 1995 financial statements identified problems in recording
reimbursable Superfund oversight costs as assets, accounting for grants from more than one appropriation, allocating expenses to show the cost of the fund in the financial statements and accounting for property and contractor-held equipment.
Agency Actions
The Agency recently took actions to correct some of the reporting budgeting and accounting problems, and plans to redesign the program element structure as part of its Planning, Budgeting and Accountability system. EPA has agreed to correct the issues identified in our fiscal 1995 financial statements audit report. The Agency, for various reasons such as staffing and budget constraints, has not taken action on all of our concerns and much more work is necessary to address the problem areas we have identified.
Leaking Underground Storage Tanks
OIG Concerns
Leaking underground storage tanks (LUST) pose significant environmental risks throughout the country. Although States have made progress cleaning up LUST sites, we found that oversight and enforcement were inadequate on some of the most hazardous sites. Cost recoveries were often not pursued and state activity reports were misleading.
Agency Actions
The Agency generally disagreed with our observations and conclusions, but either agreed with the audit’s recommendations or presented acceptable alternative actions to ensure States provide adequate oversight and enforcement on high risk sites, and states develop and implement cost recovery
programs.
Superfund
OIG Concerns
An audit found that despite identification between 12 and 15 years ago, three Superfund sites we reviewed were still not cleaned up. The prolonged time spent studying sites and designing remedies resulted in higher cleanup costs and continued risks to public health and the environment. The requirements of the Comprehensive Environmental Response, Compensation, and Liability Act and its 1986 amendments resulted in more focus and achieving process steps rather than cleanups of sites. In 1988, an on-site vault containing about 4 million pounds of hazardous waste was targeted for a time-critical removal action, since extremely high concentrations of arsenic were in the soil, ground water and surface water surrounding the vault. However, the vault and its contents were still on-site as of June 1995.
Another 1996 audit showed that EPA Region 8 responded to the Summitville, CO, Superfund site emergency in a wide-spread but remote area, by reducing hazardous waste risks. However, the Region did not adequately oversee Interagency Agreements with the Department of Interior’s Bureau of Reclamation resulting in seven costs overruns totaling nearly $7.3 million and inefficient cleanup implementation.
An audit of Superfund site laboratory data found that EPA spent nearly $2 million overseeing the Aerojet General Corporation Superfund site, but had not evaluated the quality of laboratory data used for making public health risk assessments, developing cleanup public health risk assessments, developing cleanup
alternatives, and designing the remedy.
Agency Actions
The Agency is acting to improve its oversight and enforcement of interagency agreements. Also, EPA will require Aerojet to submit a revised quality assurance project plan and will enhance its oversight of Aerojet.
Information Resources Management (IRM)
OIG Concerns
EPA’s IRM program is critical to the success of all program activities. This year we reported that the year 2000 problem could cause failure of major EPA systems because computers store years in two digit numeric fields and the "00" could cause inverse dates resulting in incorrect assumptions and computations. The upcoming century change is one of the most critical problems in data processing and industry. Although the Office of IRM (OIRM) had raised Agency awareness of data processing problems associated with the year 2000, OIRM needed to accelerate its actions to reduce the imminent threat of major systems failure.
Agency Actions
The Agency recognized that the Year 2000 issue is a material problem with potentially serious consequences, and developed a comprehensive plan to identify and implement needed modifications throughout Agency systems.
During the past year, EPA made major structural changes to address long standing IRM issues. For example, EPA reorganized the Office of Information Resources and appointed a separate Chief Information Officer (CIO).
Management of Extramural Resources
OIG Concerns
EPA relies extensively on contractors and other outside entities to assist in: cleaning up pollution, setting the environmental agenda for the future, and providing goods and services. EPA funds public organizations, such as universities or state and local organizations, and other Federal agencies, to pursue areas of mutual environmental concern through assistance agreements and interagency agreements. EPA needs to continue improving its extramural resources management and to emphasize that Agency officials are accountable for their actions. While we commend and support the Agency’s initiatives, management problems continue in this area as identified by our recent work. We proposed grants administration as a material weakness candidate for fiscal 1996. The deficiencies remain a serious concern because EPA is initiating a major Performance Partnership Grants program under which recipients will have even more latitude.
•Assistance Agreements
In July 1996, we testified before the House Subcommittee on National Economic Growth, National Resources and Regulatory Affairs, that some recipients of assistance agreements have wasted taxpayers’ dollars, and at times, EPA did not get what it paid for. These conditions occurred not only because recipients did not fulfill their responsibilities, but also because EPA did not fulfill its obligation to adequately monitor assistance agreement activities and apply available sanctions when recipients did not perform. Project officers and grants specialists did not throughly review grant applications, perform site visits, review payment requests, obtain single audit reports, provide final certifications or complete timely closeouts Basically, EPA has been awarding assistance agreements and paying the recipients’ claims without knowing whether the costs were allowable and reasonable, or the work was being performed.
An audit of congressionally earmarked assistance to selected universities showed that EPA accepted earmarked funding and implemented nonstatutory earmarks with unclear scopes and no specific authorizing statutes. As a result, millions of dollars in EPA assistance funds were expended by this recipient for unauthorized purposes.
During fiscal 1996, an audit found that EPA had not adequately defined the Superfund Technical Assistance Grant program needs, goals or performance measures. The program was inconsistently implemented and publicized, resulting in only a small number of grants being awarded since the program’s inception.
Another audit revealed that EPA improperly awarded a grant to pay ineligible expenses including ineligible travel, catering services, and entertainment previously incurred by an EPA contractor for a 1995 symposium.
•Contracting
During fiscal 1996, an audit of EPA’s third largest contractor showed that EPA’s ineffective, inefficient planning and inadequate oversight of a major contractor’s performance resulted in some of the products and services procured being inadequate, untimely, or of questionable value.
Another audit found that EPA acquired hundreds of passenger vehicles without statutory authority. EPA reported $138 million in government property, including passenger and vehicles, held by contractors despite regulatory requirements that contractors furnish all necessary property.
We also identified that EPA circumvented GSA, violated several laws, and acted without legislative authority by using a contractor to acquire a building independently. If EPA had used GSA’s services and purchased the building, EPA may have saved $3.8 million over the five-year lease.
• Agency Actions
Since 1992, improving the administration of contracts has been a major area of focus for EPA. And, in fact, EPA has made positive changes in its contract management practices. Now, the Agency needs to devote the same attention to grants and other types of assistance agreements. EPA has initiated and is continuing to initiate a number of efforts to improve grants management including an expanded project officer training curriculum, updating obsolete policies and improving post award grant management. EPA has established an Agency-wide task force to develop guidance and training materials to clarify the complexities of using contracts and assistance
agreements to support conferences.
Executive Summary
Section 1--
Audits -- Significant Findings and Recommendations
Section 2--Audit Report Resolution
This section, required by the IG Act, reports on the status and results of Agency management actions to resolve audit reports. At the beginning of the semiannual period, there were 217 reports for which no management decision had been made. During the second half of fiscal 1996, the Office of Inspector General issued 248 new reports and closed 247. At the end of the reporting period, 218 reports remained in the Agency followup system for which no management decision had been made. Of the 218 reports, 110 reports remained in the Agency followup system for which no management decision was made within 6 months of issuance.
For the 121 reports closed that required agency action, EPA management disallowed $17.7 million of questioned costs and agreed with our recommendations that $12.3 million be put to better use. In addition, cost recoveries in current and prior periods included $2.0 million in cash collections, and at least $46.9 million in offsets against billings.
Section 3--Prosecutive Actions
During this semiannual reporting period, our investigative efforts resulted in 6 convictions and 10 indictments. Also, our investigative work led to $1.6 million in fines and recoveries.
Section 4--Fraud Prevention and Management Improvements
During this semiannual period, we reviewed seven legislative and 37 regulatory items. Our most significant comments concerned the Regulatory Warning Act, the General Accounting Office Management Reform Act, the proposed EPA order on the Safety, Health, and Environmental Employment Program, and the response to a GAO report on EPA water pollution.
The EPA Office of Grants and Debarment completed action on OIG-generated suspension and debarment cases during this reporting period, resulting in two debarments, one compliance agreements and one notice of proposed debarment.
The EPA Committee on Integrity and Management Improvement (CIMI), chaired by the Inspector General developed an awareness document to highlight the importance of effective contract administration. CIMI also coordinated EPA’s Public Service Recognition Week program and activities.
An OIG Office of Audit survey of many of its Agency and Congressional customers provided positive results about the value and effectiveness of OIG work.
Profile of Activities and Results
The first number in each category represents the results during the period from April 1, through September 30, 1996. The second number is the total for Fiscal Year 1996. Dollars are in millions.
Audit Operations
OIG Managed Reviews:
-a. Reviews Performed by EPA, Independent Public Accountants and State Auditors
- Questioned Costs ((Ineligible, Unsupported, and Unnecessary/Unreasonable) and Recommended Efficiencies (Funds be Put to Better Use) are subject to change pending further review in the audit resolution process) - Total $251.6; $287.5 [Federal Share $179.6; $205.2]
- Recommended Efficiencies (Funds be Put to Better Use) - Total $5.5; $18.2 [Federal Share $5.5; $18.2]
- Costs Disallowed to be Recovered (Federal Share) (costs which EPA management agrees are unallowable and is committed to recover or offset against future payments) $17.2; $57.6
- Costs Disallowed as Cost Efficiency (Federal Share) (funds made available by EPA management's commitment to implement recommendations in OIG performance and preaward audits) $0.0; $0.4
b. Other Reviews:
- Reviews Performed by Another Federal Agency or Single Audit Act Auditors
- Questioned Costs - Total $1.0; $3.9 [ Federal Share $1.0; $3.9]
- Recommended Efficiencies - Total $11.7; $44.0 [ Federal Share $11.7; $44.0]
- Costs Disallowed to be Recovered [Federal Share $0.5; $1.5]
- Costs Disallowed as Cost Efficiency [Federal Share $12.3; $19.6]
Agency Recoveries:
Recoveries from Audit Resolutions of
Current and Prior Periods (cash collections or offsets to future payments. Information on recoveries from audit resolution is provided from the EPA Financial Management Division and is unaudited)$16.2; $48.9
Reports Issued:
- OIG Managed Reviews:
- EPA Reviews Performed by the OIG 69; 119
- EPA Reviews Performed by Independent Public Accountants 9; 13
- EPA Reviews Performed by State Auditors 3; 6
- Other Reviews:
- EPA Reviews Performed by another Federal Agency 128; 262
- Single Audit Act Reviews 39; 98
Total Reports Issued 248; 498
Reports Resolved (agreement by Agency officials to take satisfactory corrective action. Reports resolved are subject to change pending further review) 121; 321
Investigative Operations
- Fines and Recoveries (including civil) $1.6; $5.0
- Investigations Opened 45; 116
- Investigations Closed 71; 142
- Indictments of Persons or Firms 10; 11
- Convictions of Persons or Firms 6; 11
- Admin. Actions Against EPA Employees 12; 23
- Civil Judgments 3; 6
Fraud Detection and Prevention Operations
- Debarments, Suspensions, and Compliance Agreements 4; 9
- Hotline Cases Opened 11; 21
- Hotline Cases Processed and Closed 15; 30
- Personnel Security Investigations Adjudicated 218; 602
- Semiannual Report, September 1996 Table of Contents
- EPA OIG Home Page
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