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Region 5's Billing and Collection of Accounts Receivable

Appendix 1

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

REGION 5

77 WEST JACKSON BOULEVARD

CHICAGO, IL 60604-3590

MAR 25 1997

REPLY TO THE ATTENTION OF:

MEMORANDUM

SUBJECT:

FROM:

TO: Anthony C. Carrollo

Thank you for the opportunity to comment on the subject revised draft audit report.

Attached is the Region's response to the report. If you have any questions, please contact Karen Vasquez, Acting Regional Comptroller at 6-7560.

Attachment

Valdas V. Adamkus

Attachment

Region 5 Response to the Office of Inspector General Audit Report on Accounts Receivable Billing and Collection

We agree with the findings in the February 26, 1997 revised draft audit report. Listed below are Region 5's specific responses to the report's findings and recommendations, including our planned and completed corrective actions.

Chapter 2 - Superfund Oversight Costs Are Not Timely Collected

Recommendation 2-1: Develop and implement specific time frames for preparing and forwarding annual oversight bills to ORC, the program office, and RPs for payment.

Region 5 Response:

The Region agrees with the recommendation. We will include specific time frames for preparing and reviewing oversight bills in a new Superfund Cost Recovery Memorandum of Understanding (MOU). The Superfund Cost Recovery Taskforce has a workgroup with representatives from the program office, the RCO and ORC. We also will invite the Office of Inspector General, Northern Division, to nominate a member of their staff to participate in this workgroup. The workgroup will revise the MOU that has been in effect since 1990 to reflect organizational and process changes and to add new time frames to effect more timely billings. The workgroup began working on January 28, 1997. It will provide a new MOU to the program office, the RCO, and ORC by September 30, 1997.

The billing of Superfund oversight costs is a complex process involving analysis by the RCO, ORC, the program office, and the RPs. The RCO accesses multiple data information systems to assemble, reconcile, and document oversight costs. Each billing may have unique requirements requiring special consideration.

Current CFO performance guidelines established by Headquarters indicate when annual oversight billings are to be prepared. The guidelines call for the RCO to prepare oversight bills within 120 days of the anniversary date of the consent decree or administrative order on consent, or within the time frame specified in the document, or as directed by the program office, whichever is applicable. Implementing specific time frames set by the Taskforce workgroup will enhance our ability to timely execute the complex billing process and meet the performance guidelines.

Recommendation 2-2: Work with ORC and the program office to establish standard time frames for reviewing proposed annual oversight billing before the RCO sends the RP the bill.

Region 5 Response:

The Region concurs with the recommendation that it develop standard time frames for reviewing proposed annual oversight billings prepared by the RCO. This recommendation can also be implemented as part of the effort to update and revise the Superfund Cost Recovery MOU. However, the Region believes that most Superfund oversight bills are reviewed promptly. The process of defining which costs can be billed requires considerable research and refinement. Occasionally, there are valid reasons for delaying an oversight bill. Although ORC staff attorneys handle many additional responsibilities, they give appropriate priority to oversight bills.

Recommendation 2-3: Emphasize timely issuance of dunning letters 30, 60, and 90 days following the issuance of the annual oversight billings.

Region 5 Response:

We agree with this recommendation and we will implement this function in the new accounts receivable Collection Tracking System (CTS) effective April 1, 1997.

Recommendation 2-4: Record contacts with other Region 5 offices and RPs regarding collection efforts.

Region 5 Response:

We agree with this recommendation. We understand the importance for staff to document efforts to collect past due accounts, including dunning letters and referrals to ORC. We have already orally informed our staff that they are to document in detail all contacts with regional attorneys, program staff, and responsible parties in order to provide a complete audit trail for all files. Written instructions to the staff to officially notify them of this requirement will be distributed by the end of this month.

Chapter 3 - Region 5 Did Not Bill Superfund Accounts Receivable on A Cumulative Basis

Recommendation 3-1: Modify CTS to prepare the site's annual billing and dunning letters to include outstanding unpaid balances.

Region 5 Response:

We agree with the recommendation regarding cumulative billings and have initiated discussions with the designers of CTS to incorporate this concept into the system so that as each new bill is generated, a statement of past due amounts will be provided. This new modification will be implemented in approximately six months.

We believe it is important that a cumulative billing process include some flexibility to adjust for unique, case-specific factors. Settling parties may not have paid their bills for a valid reason. Superfund is a dynamic process where: (1) some oversight bills are disputed in whole or in part (which is permitted as a matter of fairness because future oversight costs are not known at the time of settlement); and (2) some bills may be superseded by, or merged into, subsequent settlement agreements for later phases of the cleanup at the same site.

Chapter 4 - Payments Obtained for Unrecorded Receivables

Recommendation 4-1: Implement an internal operating procedure for (RCO) staff to routinely notify management when repeated requests to ORC for the orders are not resolved.

Region 5 Response:

We agree with this recommendation. Written procedures will be prepared by March 31, 1997.

Recommendation 4-2: (ORC should) Provide the RCO with the orders listed in Exhibit 1, so that the RCO can record the amounts in the Agency's financial accounting system.

Region 5 Response:

The Region concurs with this recommendation, and will continue working to locate and provide the outstanding items listed in Exhibit 1.

As a threshold matter, the Region must rely on the DOJ, which must in turn rely on the local U.S. Attorney's Offices to obtain and provide copies of the final orders and decrees. While EPA's MOU provides that DOJ will promptly provide copies of these documents to the Region, this does not always happen in practice. For example, in two of the cases in Exhibit 1--Siddiqui Parvez and Grosse Isle Township--totaling $7526, it appears that ORC has never received the relevant final decrees from the DOJ.

Four matters totaling $35,332 (Garwood, Lenoir, Reger and Slagle) appear to be restitution matters which are handled autonomously by U.S. Attorney's offices or by the OIG's office. It appears that DOJ does not have knowledge or information about these cases either. ORC plans to raise this matter with DOJ management so they can work on ways of making sure these documents are provided to the Region. The basis for one payment of $12,500 (Graff Enterprises) is still under investigation.

Recommendation 4-3: (ORC should) Establish and implement internal control procedures for the liaison to routinely follow-up with staff about the RCO's requests for documentation. Also, continue to emphasize to staff attorneys the importance of providing orders timely to the RCO.

Region 5 Response:

The Region concurs with this recommendation. The workgroup, referred to in our response to Recommendation 2-1, will make recommendations on improving this process.

To reinforce the Region's commitment to making this process work, the Deputy Regional Counsel has been instructed to personally follow-up on any matter where a staff attorney has been asked to provide documents to the RCO contact but has not done so for more than two reporting periods. In addition, the Deputy Regional Counsel has formally assigned the liaison responsibility to a person who has more day-to-day involvement with ORC's compliance tracking efforts than the attorney who had been informally serving in this role for the past several years.

The ORC, the RCO, and other program offices have been working together to reinforce the importance of providing copies of decrees and orders to the RCO. On April 17, 1996, ORC issued "Revised ORC Case Reporting and Tracking Procedures." That memorandum provides a comprehensive reference for staff attorneys on their document submission responsibilities at all stages of the enforcement process. The memorandum reinforces the need to provide copies of entered decrees and orders to the RCO. On August 6, 1996, the Office of Enforcement and Compliance Assurance issued "Procedures for Enforcement Tracking" to all enforcement personnel in the Region, including the ORC attorneys. Those procedures further reinforce the importance of providing copies of entered decrees and orders to the RCO. In addition, ORC has recently revised its Case Conclusion Data sheet (a form that must be completed at the time any Consent Decree is entered, per the April 17, 1996, memo) to include a specific reminder that a copy of all final decrees and orders must be provided to the RCO and another copy to ORC's Docket Analyst. ORC believes these measures will increase awareness of, and compliance with, the requirement to promptly provide documents to the RCO.

ORC has also been working with the RCO to identify missing documents either before payments are received, or as soon as possible afterward. ORC's Management Analyst now provides to the RCO contact a monthly report of final judicial decrees and orders entered in ORC's tracking system. This report will permit the RCO to assure that it has copies of the relevant documents and has established receivables. In the event the RCO is missing documents, it can request documents from the ORC Docket Analyst's master file (or if the document is not there either, the Management Analyst can identify the assigned attorney and have them forward the relevant documents).

Appendix 2
ABBREVIATIONS

BD Billing Document

CERCLA Comprehensive Environmental Response, Compensation, and Liability Act

CTS Cost Recovery Collection Tracking System

DOJ Department of Justice

EPA Environmental Protection Agency

MOU Memorandum of Understanding

OIG Office of Inspector General

ORC Office of Regional Counsel

Orders Judicial and Non-Judicial Orders

Program Office Superfund Program Office

RCO Regional Comptroller's Office

RMDs Resource Management Directives

RP Superfund Responsible Party

RPM Superfund Remedial Project Manager

Appendix 3
DISTRIBUTION

Region 5

Headquarters

Office of Inspector General Regional Offices

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Created April 25, 1997

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