oversight

Financial Management: Superfund Cost Analysis

Published by the Government Accountability Office on 1997-07-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States
General Accounting Office
Washington, D.C. 20548

Accounting and Information
Management Division


B-276645

July 30, 1997

The Honorable Jerry Lewis
Chairman
The Honorable Louis Stokes
Ranking Minority Member
Subcommittee on Veterans Affairs,
 Housing and Urban Development, and
 Independent Agencies
Committee on Appropriations
House of Representatives

Subject: Financial Management: Sunerfund Cost Analvsis

On June 12, 1997, we briefed your staff on our study of the Environmental
Protection Agency’s (EPA) Superfund accounting system. This review was
called for in House Report 104-628, which accompanied the Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill for fiscal year 1997. We had previously agreed
with your staff that the objectives of our work were to determine the answers
to three questions: (1) What types and amounts of overhead and direct
expenses do EPA and the Department of Justice allocate’ or charge to
Super-fund? (2) Do those expenses support the program’s objectives? (3) Are
the expenses charged typical of the types of cleanup costs normally incurred by
large petroleum or chemical companies?

To satisfy these objectives, we. analyzed information on Super-fund
disbursements for fiscal year 1996, reviewed the EPA Inspector General (IG)
and Department of Justice IG audits of those disbursements, and held
discussions with petroleum and chemical industry representatives. We
conducted our work from March 1997 to June 1997, primarily at EPA
headquarters and Department of Justice headquarters in Washington, D.C., in
accordance with generally accepted government auditing standards.

At our request, EPA aggregated fiscal year 1996 Superfund disbursements
totaling about $1.4 billion into five expense categories. As shown in slides 7
and 10 of our enclosure, nearly half of the total was for contractor cleanup and
the balance for categories directly related to, or supporting, the cleanup. We
did not independently verify the accuracy of the disbursements, but we noted

                                   GAO/AIMD-97-131R Superfund Cost Analysis
B-276645

that EPA IG and Justice IG audits of those disbursements did not disclose any
discrepancies related to the charges to Super-fund.

For example, the EPA IG reviewed the appropriateness of the charges to
Superfund as part of its annual financial audit (see slide 14). The EPA IG’s
work included statistical random samples of Superfund items separately
selected at both the interim and final phases of testing. This testing did not
disclose any discrepancies or questioned costs. Similarly, the Department of
Justice IG’s latest annual audit of Justice’s Super-fund billings did not identify
any discrepancies or questioned costs. Based on the results of the IGs’work,
the expenses allocated or charged appear to support the program’s objectives.

The petroleum and chemical companies we contacted advised us that a pro rata
share of administration and management costs are allocated to their cleanup
activities, but they were reluctant to provide us access to their accounting
records. Therefore, we were unable to assess whether EPA’s expenses are
typical of cleanup costs normally incurred by these companies. The companies
did not identify any specific concerns with EPA’s accounting practices (see
slide 17). The only concerns mentioned related to other issues, such as the
relative efficiency of federal versus private cleanup efforts (see slide 18).

As agreed with your staff, no further work relative to this request is warranted
at this time.

We requested oral comments on a draft of this letter from officials at the
Department of Justice and EPA. On July 17, 1997, the GAO Liaison at EPA
advised us that EPA generally concurred with the draft. However, the EPA IG’s
office provided some technical comments, including clarifications on the scope
of the EPA IG financial audit. We considered the comments and made changes
as appropriate. On July 18, 1997, the GAO Liaison in Justice’s Environment and
Natural Resources Division told us that the Department of Justice concurred
with the facts presented.



We are sending copies of this letter to the Chairmen and Ranking Minority
Members of the House and Senate Committees on Appropriations; the
Administrator and the Inspector General of the Environmental Protection
Agency; the Attorney General and the Inspector General of the Department of
Justice; the Director of the Office of Management and Budget; and other
interested parties. Copies will also be made available to others upon request.




                                      GAO/AIMD-97-131R Superfund Cost Analysis
B-276645

Enclosed is a copy of the briefing slides we presented at the June 12, 1997,
meeting, amended to provide additional information requested by your staff. If
you have any questions, please contact me on (202) 512-8341.




Linda M. Calbom
Director, Civil Audits

Enclosure




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