oversight

Superfund: Status of EPA's Efforts to Improve Its Management and Oversight of Special Accounts

Published by the Government Accountability Office on 2012-01-18.

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

               United States Government Accountability Office

GAO            Report to the Ranking Member,
               Committee on Environment and Public
               Works, U.S. Senate


January 2012
               SUPERFUND

               Status of EPA’s
               Efforts to Improve Its
               Management and
               Oversight of Special
               Accounts




GAO-12-109
                                             January 2012

                                             SUPERFUND
                                             Status of EPA’s Efforts to Improve Its Management
                                             and Oversight of Special Accounts
Highlights of GAO-12-109, a report to the
Ranking Member, Committee on Environment
and Public Works, U.S. Senate




Why GAO Did This Study                       What GAO Found
Under the Superfund program, EPA             From fiscal year 1990 through October 2010, the Environmental Protection
has the authority to enter into              Agency’s (EPA) 10 regions collected from potentially responsible parties almost
agreements with potentially                  $4 billion in funds that were placed in special accounts. Nearly half of these funds
responsible parties for them to conduct      are still available to be obligated for future Superfund cleanup; the remaining
a cleanup at hazardous waste sites or        funds have already been obligated, but not all of these obligated funds have
compel potentially responsible parties       been disbursed. According to GAO’s analysis of EPA data, EPA has plans to
to do so. EPA can also conduct               obligate almost all of the available funds in special accounts over the next 10
cleanups itself and then seek                years. However, EPA regional officials told GAO that special account funds that
reimbursement. EPA is authorized to
                                             are planned to be obligated are estimates rather than commitments, and the
retain and use funds received from
                                             planned use of funds often changes as site circumstances warrant. As of October
settlements with these parties in
interest-earning, site-specific special
                                             2010, of the $1.9 billion funds that EPA had obligated for Superfund cleanup
accounts within the Trust Fund. These        expenses, $1.6 billion had been disbursed.
accounts provide resources in addition       According to GAO’s review of EPA documents and interviews with agency
to annual appropriations to clean up         officials, EPA has taken steps, including implementing strategies and guidance,
sites. The number of accounts grew           in the last few years to better monitor and manage special accounts. EPA took
slowly until 1995 when EPA                   these steps in response to the EPA Inspector General’s (IG) findings and
encouraged their greater use. After          recommendations, as well as EPA officials’ own recognition that the agency
1995, their number and dollar value
                                             needed to provide better oversight of the special accounts process. These steps
increased. EPA headquarters is
                                             include the following:
responsible for overseeing its regions’
management of special accounts. In           •   processes to better plan for the use of special account funds by adding a
two reports issued in 2006 and 2009,             screen in the agency’s Superfund database that enables EPA regions to
the EPA IG made recommendations to               enter special account planning data into specific data fields and create
EPA to better manage these accounts.             reports, so that officials can monitor the special account balances against
As requested, this report examines the           planned obligations for ongoing and future site-specific response activities;
(1) status—that is, balances, locations,
                                             •   increased oversight of special accounts, including designating a national
and recent and planned uses—of
Superfund special accounts, and (2)
                                                 special accounts coordinator who, among other things, conducts annual and
extent to which EPA’s headquarters               midyear reviews and holds discussions with regional staff to evaluate their
and regions have implemented                     plans to allocate special account funds, and establishing a Special Accounts
processes and policies to improve the            Senior Management Committee that meets semiannually to provide overall
monitoring and management of these               management oversight and monitor the status of special accounts; and
accounts. GAO analyzed EPA
                                             •   strategies and guidance on how to plan for using special accounts, including
Superfund program data, guidance,
                                                 an agencywide strategic plan, overall guidance for the regions on the proper
and strategies, and interviewed EPA
officials.
                                                 use and planning of special accounts funds throughout the cleanup process,
                                                 detailed guidance on the reclassification process, and a model memorandum
GAO is not making recommendations                for transferring funds from a special account to the Hazardous Substance
in this report. GAO provided a draft of          Superfund Trust Fund (Trust Fund) and closing out a special account.
this report to EPA for review and
comment. EPA provided technical
comments that were incorporated into
the report, as appropriate.



View GAO-12-109. For more information,
contact Carolyn L. Yocom at (202) 512-7114
or yocomc@gao.gov.



                                                                                      United States Government Accountability Office
Contents


Letter                                                                                   1
              Background                                                                 4
              About Half of the $3.7 Billion that EPA Has Collected in Special
                Accounts Is Available for Future Superfund Cleanup                      14
              EPA Has Implemented Processes and Policies in Recent Years to
                Better Monitor and Manage Superfund Special Accounts                    23
              Agency Comments and Our Evaluation                                        32

Appendix I    Objectives, Scope, and Methodology                                        33



Appendix II   GAO Contact and Staff Acknowledgments                                     35



Tables
              Table 1: Open Superfund Special Accounts and Sites, Including
                       NPL Sites, by EPA Region, as of October 2010                    15
              Table 2: Open Superfund Special Accounts Grouped in Categories
                       by Unobligated Balance, as of October 2010                      15
              Table 3: Special Accounts Obligations Planned for Fiscal Years
                       2011-2070, by Type of Cleanup Activity, Enforcement, and
                       Federal Facilities                                              18
              Table 4: Special Account Funds Planned for Reclassification, Fiscal
                       Years 2011-2013, as of October 2010                             21
              Table 5: Special Account Funds Planned for Transfer to the Trust
                       Fund, Fiscal Years 2011-2013, as of October 2010                21
              Table 6: Number of Sites with Special Accounts in Each Phase or
                       Milestone of the Superfund Cleanup Process, as of
                       October 2010                                                     22


Figures
              Figure 1: EPA’s 10 Regions                                                 5
              Figure 2: Phases of the Typical Superfund Site Cleanup Process             8
              Figure 3: EPA’s National Planned Uses for $1.8 billion in Special
                       Account Funds, Beginning Fiscal Year 2011                       17




              Page i                                                   GAO-12-109 Superfund
Abbreviations

CERCLA            Comprehensive Environmental Response, Compensation,
                  and Liability Act
CERCLIS           Comprehensive Environmental Response, Compensation,
                  and Liability Information System
EPA               Environmental Protection Agency
IG                Inspector General
NPL               National Priorities List
PRP               potentially responsible party
TCE               Trichloroethylene
Trust Fund        Hazardous Substance Superfund Trust Fund


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Page ii                                                             GAO-12-109 Superfund
United States Government Accountability Office
Washington, DC 20548




                                   January 18, 2012

                                   The Honorable James M. Inhofe
                                   Ranking Member
                                   Committee on Environment and Public Works
                                   United States Senate

                                   Dear Senator Inhofe:

                                   The Comprehensive Environmental Response, Compensation, and
                                   Liability Act (CERCLA) of 1980, commonly referred to as “Superfund,”
                                   was enacted to protect human health and the environment from the
                                   effects of hazardous substances. Under CERCLA, the Environmental
                                   Protection Agency (EPA) has the authority to enter into agreements with
                                   potentially responsible parties (PRP) for them to conduct the cleanup at
                                   hazardous waste sites, 1 or compel PRPs to clean up sites. In addition,
                                   EPA can clean up the sites itself and then seek reimbursement from the
                                   PRPs. EPA’s primary source of funds for EPA-led cleanups of Superfund
                                   sites is its annual appropriations by Congress from the Hazardous
                                   Substance Superfund Trust Fund (Trust Fund), which receives a transfer
                                   from the general fund of the Treasury.

                                   EPA is also authorized by CERCLA to retain and use funds received from
                                   settlements with a PRP, and EPA may hold these funds in interest-
                                   earning, site-specific accounts called “special accounts.” 2 These special
                                   accounts are interest-bearing subaccounts within the Trust Fund that are
                                   generally used for future cleanup actions at the sites associated with a
                                   specific settlement or to reimburse appropriated funds that EPA had
                                   previously used for response activities at these sites. These accounts
                                   help EPA respond to and clean up sites by providing resources in addition
                                   to EPA’s annual appropriations. In 1990, EPA had five special accounts
                                   totaling about $1.9 million. Over the next few years, the number of special
                                   accounts increased slowly. However, beginning in 1995, EPA issued



                                   1
                                    Under CERCLA, PRPs generally include current or former owners and operators of a site
                                   or the generators or transporters of the hazardous substances.
                                   2
                                    CERCLA section 122(b)(3) was added in 1986, establishing EPA’s authority to retain and
                                   use funds from an agreement with PRPs, which EPA has implemented through the use of
                                   special accounts.




                                   Page 1                                                           GAO-12-109 Superfund
memorandums and guidance encouraging greater use of special
accounts. Since that time the number and dollar value of these accounts
has steadily increased. EPA’s regional offices are primarily responsible
for establishing and managing special accounts for the Superfund sites
located in their region, and EPA headquarters offices are responsible for
overseeing the regional offices’ management of these accounts.

In two reports, issued in 2006 and 2009, the EPA Inspector General (IG)
made recommendations to improve the management of Superfund
special accounts. 3 In 2009, for example, the IG stated that EPA needed to
assign a central management official to be responsible for developing an
action plan to ensure that the management accountability and related
issues regarding special accounts that the IG had identified were
addressed. The IG recommended that this action plan include, among
other things, (1) an annual planning process to aid in monitoring special
accounts, (2) more guidance or a policy that addresses how special
accounts should be implemented and used, and (3) plans for developing
complete reports with accurate special accounts data from EPA’s
Comprehensive Environmental Response, Compensation, and Liability
Information System (CERCLIS) database to manage the program and
improve its performance. 4

In this context, you asked us to examine EPA’s Superfund special
accounts. Specifically, our objectives were to (1) describe the status—
including balances, locations, and recent and planned uses—of
Superfund special accounts and (2) examine the extent to which EPA’s
headquarters and regions have implemented processes and policies to
improve the monitoring and management of Superfund special accounts.

To conduct this work, we reviewed relevant law and EPA guidance and
interviewed senior officials at EPA’s headquarters and regional offices.
Specifically, to describe the status of special accounts, we obtained and
analyzed data regarding all special accounts from EPA’s CERCLIS


3
 EPA Office of Inspector General, Evaluation Report: EPA Can Better Manage Superfund
Resources, Report No. 2006-P-00013, Feb. 28, 2006. EPA Office of Inspector General,
Evaluation Report: Improved Management of Superfund Special Accounts Will Make More
Funds Available for Clean-ups, Report No. 09-P-0119, Mar. 18, 2009.
4
 CERCLIS is EPA’s automated inventory of site information for all potential or confirmed
Superfund sites. It contains information on hazardous waste site assessment and
remediation from 1983 to the present.




Page 2                                                             GAO-12-109 Superfund
database, as of October 2010. 5 To assess the reliability of the CERCLIS
data, we reviewed relevant documentation, examined the data to identify
obvious errors and inconsistencies, and interviewed knowledgeable
agency officials to see if there were any known problems with the data
and to learn more about their procedures for maintaining the data. We
determined that the data were sufficiently reliable for the purposes of this
report. To examine the extent to which EPA’s headquarters and regions
are implementing processes and policies to improve the monitoring and
management of Superfund special accounts, we analyzed documents
and interviewed officials from EPA headquarters offices, including the
Office of Superfund Remediation and Technology Innovation, the Office
of Site Remediation Enforcement, and the Office of the Chief Financial
Officer. We also interviewed EPA’s IG officials regarding their 2006 and
2009 reports on EPA’s management of special accounts. According to
these officials, all recommendations from these two reports were closed
out based on EPA’s response. In addition, we conducted interviews with
officials in EPA’s 10 regional offices to determine how each region
managed and monitored its special accounts and coordinated with EPA
headquarters. We also obtained from the regional offices relevant
supporting documentation, including detailed information on 20 of 285
special accounts. We selected 20 accounts on the basis that EPA
headquarters had either raised questions about them with the regions or
recommended that the regions take further actions on issues relating to
them that arose during EPA’s fiscal year 2010 annual review of the
regions’ planning data for special accounts. We reviewed data on these
20 accounts to determine how and to what extent regional offices had
addressed these issues. These 20 special accounts were chosen from a
random nonprobability sample of the 285 accounts and therefore cannot
be generalized to all special accounts. A more detailed discussion of our
scope and methodology is presented in appendix I.

We conducted this performance audit from October 2010 to January 2012
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




5
 Unless otherwise stated, all EPA data collected are as of October 2010—the most
current available data at the time of our review.




Page 3                                                           GAO-12-109 Superfund
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             CERCLA, often referred to as the “Superfund” law, gave the federal
Background   government the authority to respond to actual and threatened releases of
             hazardous substances, pollutants, and contaminants that may endanger
             public health and the environment. EPA established the Superfund
             program to carry out these responsibilities. Data as of September 2011—
             the most current data available—show that there were 13,856 sites in
             EPA’s CERCLIS active site inventory, which may require attention under
             EPA’s Superfund program. Management of these sites, including the
             special accounts associated with them, has historically been the
             responsibility of the EPA region in which a site is located. EPA has 10
             regional offices, each one responsible for the execution of EPA programs
             within several states and, in some regions, territories. Figure 1 shows the
             states included in each of the 10 regions.




             Page 4                                                  GAO-12-109 Superfund
Figure 1: EPA’s 10 Regions




                             Page 5   GAO-12-109 Superfund
                             This section discusses (1) EPA’s process for cleaning up Superfund sites,
                             (2) EPA’s enforcement process for site cleanup, (3) the Trust Fund
                             established under CERCLA, (4) EPA’s use of special accounts for
                             Superfund cleanup, and (5) the EPA IG’s recommendations for better
                             management of these special accounts.


EPA’s Process for Cleaning   EPA’s Superfund cleanup process can be lengthy, sometimes taking
Up Superfund Sites           decades to clean up contamination to the standards selected for a site.
                             The cleanup process involves a series of steps during which specific
                             activities take place or decisions are made. The first step occurs when the
                             Superfund program is notified of a potential site through various
                             mechanisms, including receipt of citizens’ petitions, and referrals or
                             notifications from states, tribes, and other federal agencies. Following
                             notification, a site undergoes a minimal screening process, called a pre-
                             CERCLIS screening, to determine whether a site assessment process is
                             appropriate. Sites deemed appropriate are added to the CERCLIS active
                             site inventory. During the site assessment process, EPA and states
                             collect data to identify, evaluate, and rank hazardous waste sites based
                             on Hazard Ranking System criteria. 6 Using these criteria, EPA and/or its
                             state and tribal partners conduct a preliminary assessment and, if
                             warranted, a site inspection or other more in-depth assessment to
                             determine whether the site warrants short- or long-term cleanup attention.
                             Sites that EPA determines are among the nation’s most seriously
                             contaminated hazardous waste sites are placed on the National Priorities
                             List (NPL) for attention under the federal Superfund program. Cleanup
                             work under CERCLA generally involves two categories of actions: short-
                             term removal actions that address immediate threats to human health and
                             the environment, and long-term remedial actions that aim to permanently
                             or significantly reduce contamination. Only sites on the NPL are eligible
                             for Trust Fund-financed remedial actions, but sites not listed on the NPL
                             may be remediated with private funds, in some instances with EPA
                             oversight. EPA conducts removal actions at both NPL and non-NPL sites.

                             EPA or a PRP will begin the remedial process by conducting a two-part
                             study of the site: (1) a remedial investigation to characterize site


                             6
                              The Hazard Ranking System is a numerically based screening system that uses
                             available information—such as from initial, limited investigations—to assess the relative
                             potential for releases of hazardous substances at sites to pose a threat to human health or
                             the environment.




                             Page 6                                                              GAO-12-109 Superfund
conditions and assess the risks to human health and the environment,
among other actions and (2) a feasibility study to evaluate various options
to address the problems identified through the remedial investigation. The
culmination of these studies is a record of decision, which identifies the
selected remedy for addressing the site’s contamination and a cost
estimate for implementing the remedy. EPA or the PRP may develop
preliminary estimates of construction costs and, as the site moves from
the study phase into the remedial action phase, a more accurate cost
estimate may be developed. The method of implementation for the
selected remedy is then developed during remedial design and
implemented during the remedial action phase, when actual cleanup of
the site occurs.

When all construction of the cleanup remedy at a site is finished, all
immediate threats have been addressed, and all long-term threats are
under control, EPA generally considers the site to be “construction
complete.” Sites where additional work is required after construction is
completed then enter into the postconstruction phase, which includes
actions such as operation and maintenance and conducting 5-year
reviews. 7 When EPA in consultation with the state determines that no
further site response is appropriate, then EPA may delete the site from
the NPL. Figure 2 illustrates the typical Superfund process for cleaning up
a site.




7
 CERCLA regulations require reviews every 5 years of the integrity of the remedy at a site
where hazardous substances remain on-site above levels that permit unrestricted use and
unlimited exposure, even after deletion from the NPL.




Page 7                                                             GAO-12-109 Superfund
Figure 2: Phases of the Typical Superfund Site Cleanup Process




                                        Thus, EPA may incur a variety of costs in implementing the Superfund
                                        program at particular sites. EPA may spend funds to investigate and
                                        clean up sites, including short-term removals at any site, and long-term
                                        remedial actions at NPL sites. EPA may also incur costs for oversight
                                        associated with a site cleanup where a private party is conducting and
                                        funding the cleanup.


EPA’s Enforcement                       EPA may enter into agreements with PRPs for those parties to conduct
Process for Superfund                   cleanups, compel site cleanups by PRPs, or conduct cleanups itself and
Site Cleanup                            seek reimbursement for its costs from those parties. EPA’s enforcement
                                        of environmental cleanup at Superfund sites begins with the identification
                                        of the PRPs, usually early in the cleanup process; continues throughout
                                        site cleanup; and often does not conclude until after the site is declared
                                        construction complete. EPA identifies PRPs by, among other actions,
                                        reviewing documentation related to the site; conducting interviews with
                                        government officials or other knowledgeable parties; performing historical
                                        research on the site; sampling soil or groundwater at the site; and
                                        requesting additional information from relevant parties. In addition to
                                        identifying PRPs, EPA attempts to obtain information on the type and
                                        amount of hazardous substances shipped to a site by each party and any
                                        financial constraints faced by the identified parties.

                                        EPA may begin a cleanup process before it has identified PRPs.
                                        However, once it identifies PRPs, it typically seeks to reach a settlement


                                        Page 8                                                  GAO-12-109 Superfund
                    with them on their cleanup responsibilities and/or their payment for
                    cleanup costs that EPA incurs. These negotiations generally may take
                    place at any time throughout the site cleanup process. We have
                    previously found that in reaching these settlements, EPA’s and the PRPs’
                    decisions are influenced by site-specific characteristics and other key
                    considerations, such as the expected cost of site cleanup, the strength of
                    EPA’s evidence of PRP liability, and the number and type of other PRPs. 8


The Trust Fund      CERCLA established the Trust Fund to support Superfund program
Established Under   activities. EPA generally can use appropriated monies from the Trust
CERCLA              Fund for short-term cleanups and for long-term cleanups of NPL sites.
                    For example, EPA may elect to use such funds at sites for which the
                    parties responsible for site contamination cannot be found or are unwilling
                    or unable to clean up a site, to initiate work pending settlement, or in an
                    emergency. 9 Historically, the Trust Fund received revenue from four
                    major sources: taxes on crude oil and certain chemicals, as well as an
                    environmental tax assessed on corporations based on their taxable
                    income; 10 transfers via appropriations from the general fund of the
                    Treasury; fines, penalties, and recoveries from PRPs; and interest earned
                    on the balance of the Trust Fund. In 1995, the authority for the taxes
                    expired and, as of November 2011, had not been reinstated. As of 2011,
                    the Trust Fund’s primary source of revenue is the transfer from the
                    general fund of the Treasury. At the end of fiscal year 2010, the Trust
                    Fund had total assets and liabilities of $3.74 billion, with nearly 55 percent
                    of that total in special accounts.




                    8
                     GAO, Superfund: Litigation Has Decreased and EPA Needs Better Information on Site
                    Cleanup and Cost Issues to Estimate Future Program Funding Requirements,
                    GAO-09-656 (Washington, D.C.: July 15, 2009).
                    9
                     EPA may use Trust Fund monies on remedial actions at a site only if that site is listed on
                    the NPL, but EPA can use Trust Fund monies for removal actions at any nonfederal site.
                    This funding restriction does not apply to cleanup actions funded with special account
                    funds.
                    10
                      The Trust Fund may receive an occasional corporate tax payment from an amended tax
                    return. However, the petroleum and chemical taxes expired on December 31, 1995, and
                    the corporate environmental income tax expired for taxable years commencing after
                    December 31, 1995.




                    Page 9                                                               GAO-12-109 Superfund
EPA’s Use of Special     Section 122(b)(3) of CERCLA allows EPA to retain and use funds
Accounts for Superfund   received pursuant to an agreement with a PRP for purposes of carrying
Cleanup                  out an agreement. EPA retains those funds in subaccounts of the Trust
                         Fund called “special accounts.” As part of the settlement, those funds
                         placed in a special account may be used for that specific site or may be
                         transferred by EPA to the general portion of the Trust Fund. EPA’s goal in
                         establishing special accounts is to preserve the use of annual
                         congressionally appropriated funds for cleanup at sites without a viable
                         PRP. EPA regions are encouraged to create and use special accounts as
                         an incentive to secure PRP cleanups and to fund EPA’s cleanup when it
                         has lead responsibility. EPA officials said that they believe that PRPs are
                         more willing to settle when assured that their settlement money will
                         generally be used at the site where they hold liability, rather than at
                         another site.

                         According to EPA guidance, regions should strive to use model
                         (standardized) settlement language to establish special accounts. The
                         model language is intended to allow EPA flexibility in deciding for what
                         specific response actions special account funds can be used and
                         therefore when to use these funds. It allows EPA to use the funds for a
                         response action at the site associated with the account, and EPA
                         guidance states that special account funds are site-specific and are
                         generally not available for EPA to use at other sites. The model language
                         also retains EPA’s authority to transfer funds from a special account to
                         the general portion of the Trust Fund for future appropriation by
                         Congress. EPA guidance notes that the language of the actual agreement
                         governs EPA use of a particular special account’s funds.

                         Generally, funds may be deposited in a special account regardless of
                         whether the settling party is performing the work. According to EPA, the
                         agency typically receives funds as a result of agreements entered when
                         the PRPs are unable or unwilling to perform the response action, as is the
                         case in a bankruptcy or an “ability to pay” settlement for parties facing
                         financial difficulties. EPA may also determine that the hazardous
                         substance contributed by a particular PRP was minimal in amount and
                         toxicity compared with other substances at a site and therefore allow that
                         party a de minimis settlement. 11 In addition, PRPs who are conducting


                         11
                           To qualify parties as de minimis, CERCLA authorizes EPA to use its judgment as to
                         whether the hazardous substances contributed by parties are minimal in amount and
                         toxicity in comparison with other substances at the site. CERCLA requires EPA to offer
                         settlements to such parties.




                         Page 10                                                            GAO-12-109 Superfund
some response actions may make payments to EPA to address past or
future response actions. EPA’s costs of overseeing the PRPs’
implementation of the work are usually included in future response costs.
These payments may be made for the estimated amount of oversight or
on a periodic basis. However, under its guidance, EPA is only to establish
a special account for a site where future cleanup work remains at a site.
According to EPA officials, they prefer to establish one centralized special
account per site because this generally allows them to more easily
manage funds for a site, but certain situations may require more than one
account for a site. For example, multiple special accounts for one site
may be established for amounts that EPA will provide or disburse to
PRPs who agree to perform the response work (serving as a settlement
incentive for the PRPs to perform the work), or for each separate
operable unit or different response action at a site. 12

Once settlement proceeds are deposited in a special account, EPA
regional staff enter plans for the use of those funds into CERCLIS.
According to EPA guidance, regional staff, such as the sites’ regional
remedial project managers, are to evaluate the planned uses of special
account funds on an ongoing basis, as warranted by site activity, to
ensure that these resources are used efficiently and effectively and make
corresponding changes to their planned use as appropriate. The regional
staff are to consider both the short- and long-term plans for the site; thus
they often plan several fiscal years in advance. According to the
guidance, estimates of EPA’s future response costs at a site should be
based on the best information available at a given point in time and the
best professional judgment of regional staff. Various EPA groups,
including regional counsel, regional program management, regional
finance, and headquarters staff are all involved in this planning process.

In general, according to EPA guidance, special account funds should be
used prior to annual congressional appropriations. This guidance
establishes priorities for the use of special account funds, referred to as
the General Hierarchy of Special Account Use. According to this
hierarchy, funds in special accounts should be



12
  An operable unit commonly refers to a geographical area, contaminated medium, or
chronological phase of a cleanup. The division of a site into multiple operable units serves
to better inform stakeholders of the manner in which EPA expects to manage the cleanup
of a site.




Page 11                                                              GAO-12-109 Superfund
                       •    used to facilitate settlement with PRPs for response actions;

                       •    used to fund EPA’s costs for response actions;

                       •    reclassified to reimburse previous EPA site expenditures made from
                            annual congressional appropriations; reclassification is available when
                            an EPA region reasonably estimates that the special account contains
                            more funds than are needed to address all known and potential future
                            work at the site. 13 Funds made available from reclassification may be
                            used by EPA at another Superfund site for the same category of
                            expenditure as the costs being reimbursed; and

                       •    transferred to the general portion of the Trust Fund, when
                            reclassification has already been considered and is not appropriate,
                            and the special account balance exceeds the estimated known and
                            potential future cleanup costs at that site. 14 In contrast to reclassified
                            funds, transferred funds require a future congressional appropriation
                            to make the funds available for use by EPA.

                       Typically, EPA closes special accounts when (1) all site work has been
                       completed; (2) no funds are left in the account, and no future deposits are
                       anticipated; or (3) EPA does not anticipate incurring any additional costs
                       at those sites. To close an account, the remaining funds in the special
                       account, if any, are then transferred to the general portion of the Trust
                       Fund to increase the balance available for future appropriation for
                       cleanups.


EPA IG’s               In March 2009, EPA’s IG reported on EPA’s management of special
Recommendations for    accounts, finding that, if EPA had had better management controls in
Better Management of   place at that time, more funds would have been available for Superfund
                       cleanup. According to the 2009 IG report, EPA had a decentralized
Special Accounts       management control structure for overseeing the use of special accounts.
                       Management oversight was fragmented—no single office at headquarters



                       13
                          The reclassification of special account funds is intended to put EPA in the same position
                       it would have been in if the PRP settlement proceeds had been received prior to the
                       expenditure of Superfund appropriation resources at that site.
                       14
                          Generally funds that are not used for future response work at a site are reclassified or
                       transferred to the general portion of the Trust Fund, rather than returned to PRPs, unless
                       it is specifically written into the settlement that they should be returned to PRPs.




                       Page 12                                                              GAO-12-109 Superfund
or the regions was responsible for managing, overseeing, and
coordinating special accounts work. In addition, the IG found that EPA
headquarters did not have a structured approach for following up on
regional plans to use special account funds to ensure that they were
being managed correctly and that EPA lacked detailed guidance and
policy on the proper use, management, and monitoring of special
accounts funds. As a result, among other things, the IG recommended
that EPA designate a central management official for special accounts
with responsibility for developing an action plan to ensure that
management accountability and related issues regarding special
accounts were addressed. The IG stated that this action plan should
include, among other things, (1) a process for ensuring completed
CERCLIS reports with accurate special accounts data to manage the
program and improve performance; (2) an annual planning process—
including a determination that regional special account funds will be used
consistent with the General Hierarchy—to aid in monitoring special
accounts; (3) development of headquarters and regional controls that
include follow-up to make sure planned or requested uses (e.g.,
reclassifications and transfers to the Trust Fund of special account funds)
were conducted; and (4) establishment of guidance and policy that
addresses the proper application and amount of special account funds
that should be reserved for future use. In addition, the IG recommended
that EPA regularly analyze the “oldest accounts” for opportunities to
better use special account funds.




Page 13                                                 GAO-12-109 Superfund
                         From fiscal year 1990 through October 2010, EPA collected from PRPs
About Half of the $3.7   over $3.7 billion that it placed in 1,023 special accounts. 15 Nearly half of
Billion that EPA Has     these funds—$1.8 billion—are still available to be obligated for future
Collected in Special     Superfund cleanup; and the remaining funds—$1.9 billion—have already
                         been obligated, but not all of these obligated funds have been
Accounts Is Available    disbursed. 16 In addition, for fiscal years 1990 through 2010, all EPA
for Future Superfund     regions reclassified about $131 million from 96 special accounts to pay
                         for previous EPA site expenditures, transferred about $14 million from 39
Cleanup                  accounts to the general portion of the Trust Fund, and closed 76
                         accounts.


Status of Unobligated    As of October 2010, of the $3.7 billion that it placed in 1,023 special
Funds in EPA Special     accounts, EPA held nearly $1.8 billion in unobligated funds in 947 open
Accounts                 accounts—accounts that have funds available for use in future cleanup
                         responses at specific sites—at 769 Superfund sites; 17 503 of these sites
                         are currently on the NPL. The number of special accounts increased
                         significantly from 2001 through 2010: 854 of the 1,023 accounts, or 83
                         percent, were established during this period. Table 1 shows these
                         accounts by region, with the number of open accounts, sites, NPL
                         designation, and unobligated funds.




                         15
                           The $3.7 billion includes approximately $378 million in accrued interest that has been
                         earned on all special accounts since the inception of the program. Interest begins to
                         accrue from the date that the special account is established and is calculated each month
                         based on the average daily balance within each special account. Interest rate for special
                         accounts is approximately the same as the Trust Fund interest rate, which was 2.24
                         percent in fiscal year 2010.
                         16
                           EPA considers special account funds that have been reclassified to be disbursed.
                         Transfers to the general portion of the Trust Fund represent a reduction in the amount of
                         receipts and interest earned that are available for obligation.
                         17
                          Ninety-nine Superfund sites have multiple special accounts.




                         Page 14                                                             GAO-12-109 Superfund
Table 1: Open Superfund Special Accounts and Sites, Including NPL Sites, by EPA Region, as of October 2010

Dollars in millions
            Number of         Percentage of Number of sites Number of sites with  Percentage of sites           Total unobligated
EPA       open special      special accounts   with special special accounts on with special accounts            funds in special
                                                          a
region       accounts               by region   accounts                the NPL           on the NPL                    accounts
1                      66              7.0%                       62                         55         88.7%                $121
2                      94              9.9%                       93                         80         86.0%                 192
3                     116            12.2%                       103                         86         83.5%                  75
4                      68              7.2%                       68                         35         51.5%                  61
5                     212            22.4%                       180                         93         51.7%                 195
6                      63              6.7%                       45                         22         48.9%                 100
7                      68              7.2%                       63                         28         44.4%                 319
8                      72              7.6%                       55                         30         54.5%                 262
9                      93              9.8%                       62                         51         82.3%                 330
10                     95            10.0%                        38                         23         60.5%                 140
Total                 947             100%                       769                        503         65.4%               $1,795
                                           Source: GAO analysis of EPA data.

                                           a
                                              Sites may have more than one special account.


                                           The majority of available special account funds are concentrated in a
                                           small number of special accounts. As of October 2010, 33 open accounts,
                                           or 3 percent, had a total of $1 billion available, or 61 percent of the total
                                           amount available in special accounts. Table 2 below shows the number of
                                           open accounts that have an available balance of less than $500,000, from
                                           $500,000 to $10 million, and greater than $10 million.

Table 2: Open Superfund Special Accounts Grouped in Categories by Unobligated Balance, as of October 2010

Dollars in millions
                                                   Open accounts                                  Unobligated balance
Unobligated balance                            Number                          Percentage             Sum               Percentage
Greater than $10 million                             33                               3%            $1,102                     61
From $500K to $10 million                          292                               31%             $605                      34
Less than $500K                                    622                               66%               $88                      5
Total                                              947                              100%            $1,795                    100
                                           Source: EPA.


                                           As of October 2010, EPA had plans to obligate 99.8 percent of the $1.8
                                           billion available in special accounts, according to our analysis of EPA
                                           CERCLIS data. EPA tracks plans for unobligated special account funds in


                                           Page 15                                                           GAO-12-109 Superfund
CERCLIS by three categories: (1) planned obligations; (2) additional
reserved uses (estimated costs) not captured as planned obligations; and
(3) amounts for work parties (e.g., generally PRPs who have agreed to
conduct response work under a settlement agreement) that are included
in settlements but have not yet been distributed to them. Specifically:

•    Planned obligations are costs anticipated by EPA to be incurred in
     association with specific site response actions. Planned obligations
     are grouped into five categories: removal and removal support,
     pipeline operations, 18 remedial action, enforcement, and federal
     facilities. 19

•    Additional reserved uses are regional staff’s estimated costs for
     possible or long-term future actions. This category includes 14
     different types of potential uses, such as 5-year reviews. 20
     Reclassifications and transfers to the Trust Fund are also included in
     this category, but EPA prefers to break out this information separately
     for the purpose of evaluating the data in management reviews.

•    Amounts for work parties refers to funds promised in settlements to
     parties performing the cleanup work at the site; these are amounts
     that were used as a settlement incentive in negotiations with potential
     work parties.

Figure 3 shows, as of October 2010, how EPA planned to use
unobligated funds in special accounts.




18
  According to EPA documentation, the category “pipeline operations” contains all other
planned special account obligations that fall under Superfund’s remedial program,
including investigations, oversight, etc., and the category “remedial action” includes all
planned special account obligations for removal, remedial action, long-term response
action, and one 5-year review under Superfund’s remedial program.
19
  These five categories in CERCLIS are used by EPA to categorize funding for the
purpose of the program’s budget structure process.
20
  Only one 5-year review can be entered as a planned obligation in CERCLIS. This
category may be used to enter estimates for subsequent 5-year reviews, also referred to
as outyear 5-year reviews.




Page 16                                                              GAO-12-109 Superfund
Figure 3: EPA’s National Planned Uses for $1.8 billion in Special Account Funds,
Beginning Fiscal Year 2011




Note: The total percentage exceeds 100 percent due to the rounding of the values.


Planned obligations were made for 64.9 percent—$1.16 billion—of the
$1.8 billion in unobligated funds at the beginning of fiscal year 2011,
according to our analysis of EPA data. Funds designated for remedial
action and pipeline operations made up the largest portions of the $1.16
billion. Approximately $671 million, or 58 percent of these funds, were
planned for remedial action, and $418 million, or 36 percent of these
funds, were planned for pipeline operations.

According to EPA headquarters officials, in some instances, funds for
anticipated long-duration Superfund cleanup actions may be planned as
much as 40 or 50 years in advance, when there are enough funds in an
account to plan that far in advance. Regional data indicate that, of the
available special account resources that have planned obligations, more
than half are planned to be obligated from fiscal years 2011 through 2013
and, according to EPA officials, 95 percent will be obligated by fiscal year
2022. However, EPA regional officials told us that the special account
planned obligations are estimates rather than commitments. According to
headquarters and regional officials, planned funds may not be used for
their original planned use or may not be used in the originally designated
fiscal year for a number of reasons, such as unforeseen issues that arise


Page 17                                                                   GAO-12-109 Superfund
                                                with Superfund cleanups, especially during the remedial investigation and
                                                remedial actions; EPA regional staff responding to national and regional
                                                emergencies; or site schedule changes. EPA regional staff must either
                                                delete or move forward plans to use special account funds into a
                                                subsequent fiscal year when special account obligations for a prior fiscal
                                                year are not obligated as previously planned. Table 3 shows CERCLIS
                                                information on the number of special accounts and associated obligations
                                                planned by type of EPA cleanup activity, enforcement, and federal
                                                facilities for fiscal years 2011 through 2070.

Table 3: Special Accounts Obligations Planned for Fiscal Years 2011-2070, by Type of Cleanup Activity, Enforcement, and
Federal Facilities

Dollars in millions
              Removal and
            removal support         Pipeline operations               Remedial action          Enforcement           Federal facilities
             Number                  Number                          Number                    Number                Number
Fiscal            of                      of                              of                        of                    of
year        accounts       Value    accounts          Value         accounts         Value    accounts   Value      accounts       Value      Total
2011-
2013                  44   $62.80        398        $208.37                 173     $437.34        12    $5.47                14   $2.65   $716.63
2014-
2016                   6     3.22        151           82.95                  78     205.29          2    0.15                 1    0.13   $291.74
2017-
2019                   1     0.23          69          38.94                  13      26.93          1    0.05                 0      0     $66.15
2020-
2022                   1     0.15          42          34.14                   6       1.76          0       0                 0      0     $36.04
2023-
2025                   0       0           29          15.66                   0         0           0       0                 0      0     $15.66
2026-
2070                   0       0           25          38.14                   0         0           0       0                 0      0     $38.14
Total                 52   $66.40        714        $418.19a                270     $671.32        15    $5.67                15   $2.78   $1,164.36
                                                Source: GAO analysis of EPA data.

                                                a
                                                The total in this column does not add up due to the rounding of the values.


                                                Additional reserved uses made up 32.6 percent—or $585 million—the
                                                second largest portion of the national planned uses for all special account
                                                funds in fiscal year 2011. According to EPA officials, they have not yet
                                                entered these estimates as specific planned obligations in CERCLIS
                                                because the planning of these funds is more challenging to predict or in
                                                some cases, there are limitations for how obligations can be entered into
                                                CERCLIS. For example, only one 5-year review can be entered as a
                                                planned obligation in CERCLIS as a site financial transaction. The



                                                Page 18                                                                       GAO-12-109 Superfund
                              “outyear five year review” field may be used to enter estimates for
                              subsequent 5-year reviews. Other funds under this category represent
                              such items as potential EPA work takeover from a PRP where the PRP
                              does not have adequate or liquid financial assurance and anticipated
                              costs prior to determination of the final remedy for cleanup. This category
                              also includes special account funds that are planned for reclassification or
                              transfer to the Trust Fund, which we discuss in greater detail later.

                              Amounts for work parties were approximately $42.2 million—or about 2.4
                              percent of the $1.8 billion in unobligated special account funds—as
                              promised in settlements, as of the beginning of fiscal year 2011,
                              according to EPA regions’ planning documents. These funds will be
                              disbursed to work parties as they submit claims for reimbursement to
                              EPA, in accordance with milestones established in the settlement
                              documents.

                              The unassigned remaining balance was approximately 0.2 percent of
                              special account funds, or approximately $3 million, as of October 2010.
                              According to the national special accounts coordinator, EPA headquarters
                              generally permits a small amount of the total balance of unobligated
                              special account funds to remain unplanned. However, according to an
                              EPA official, headquarters staff question regions when the unassigned
                              remaining balance of a special account is generally more than 10 percent
                              of its available balance, more than 10 percent of the total available funds
                              for the region, or more than $100,000 per account.


Status of Obligated Special   As of October 2010, of the total accumulated receipts of $3.7 billion in
Account Funds                 1,023 special accounts, about $1.9 billion had been obligated for site
                              specific response work, according to our analysis of EPA data. 21 Of this
                              total, EPA had disbursed approximately $1.6 billion for Superfund cleanup
                              expenses; the remaining $247 million in obligations had not yet been
                              disbursed (i.e., unliquidated obligations).

                              Furthermore, EPA regions have not disbursed any funds from 240 of the
                              947 open special accounts with a total of $228 million available in these
                              accounts. Twenty-five of these 240 accounts include unliquidated



                              21
                                Obligations in this report refer to funds that have been disbursed, as well as unliquidated
                              obligations, which are obligations incurred but not yet paid for.




                              Page 19                                                              GAO-12-109 Superfund
                              obligations. According to officials from regions that had large numbers of
                              special accounts with no disbursements, there are numerous reasons for
                              not having disbursed any funds from these accounts for site cleanup. For
                              example, one regional official stated that funds are often deposited in
                              special accounts early in the Superfund site cleanup process, sometimes
                              years before cleanup at the site actually begins. Also, regions often retain
                              funds in special accounts for contingency purposes if cleanup plans
                              change (e.g., potential EPA work takeover at a later date). Another
                              regional official stated that numerous special accounts in the region had
                              recently received sizeable deposits from a large bankruptcy settlement,
                              and the funds have been planned for but not obligated as of the time of
                              our review.


Status of Reclassification,   Historically, EPA has conducted few reclassifications or transfers of funds
Transfer of Funds, and        to the general portion of the Trust Fund. Recently, however, EPA regions
Closure of Special            have begun to reclassify more funds from open special accounts. While
                              all EPA regions reclassified about $131 million from 96 special accounts
Accounts                      during the 20-year period from fiscal years 1990 through 2010, about
                              $111 million, or about 85 percent, of this amount was reclassified during
                              the last 3 years of this period. In addition, since fiscal year 1990, EPA has
                              transferred about $14 million from 39 special accounts to the Trust Fund.

                              According to EPA guidance, for reclassification and transfer, regions
                              should provide planning estimates for the current fiscal year, as well as
                              the two subsequent fiscal years. According to EPA data, for fiscal years
                              2011 through 2013, about 4.1 percent—$74 million—of the total $1.8
                              billion in unobligated special account funds were designated for
                              reclassification or transfer to the Trust Fund. Of the $74 million, EPA
                              regions plan to reclassify about $61 million, or about 82 percent, from
                              special accounts and to transfer the remaining $13 million. EPA’s plans to
                              reclassify or transfer funds may change as a result of changing site
                              conditions throughout the Superfund cleanup process. For example, in
                              fiscal year 2010, EPA planned to reclassify $43 million and transfer about
                              $4 million; however, at the end of the fiscal year, EPA actually had
                              reclassified only $26 million and transferred about $3 million. Tables 4
                              and 5 show, by region, the number and value of special accounts planned
                              for reclassification and transfer for fiscal years 2011 to 2013, as of
                              October 2010.




                              Page 20                                                  GAO-12-109 Superfund
Table 4: Special Account Funds Planned for Reclassification, Fiscal Years 2011-2013, as of October 2010

Dollars in millions
                         Fiscal year 2011                                   Fiscal year 2012                         Fiscal year 2013
                      Number of Reclassification                         Number of Reclassification              Number of    Reclassification
Region                 accounts         amount                            accounts         amount                 accounts            amount
1                             3                      $2.5                          0                 $0                   0                $0
2                             5                       3.8                          4                 1.9                  0                 0
3                             1                       0.5                          0                  0                   0                 0
4                            14                       8.1                          4                 2.3                  1                1.1
5                             7                       7.8                          1                 1.9                  0                 0
6                             5                       6.4                          0                  0                   0                 0
7                             7                       1.1                          4                 1.0                  1                0.2
8                             0                        0                           0                  0                   0                 0
9                             3                      12.8                          0                  0                   0                 0
10                            4                       1.6                          4                 7.8                  0                 0
Total                        49                  $44.6                           17            $14.9                      2               $1.3
                                            Source: GAO analysis of EPA data.



Table 5: Special Account Funds Planned for Transfer to the Trust Fund, Fiscal Years 2011-2013, as of October 2010

Dollars in millions
                                     Fiscal year 2011                             Fiscal year 2012                     Fiscal year 2013
                                  Number of                 Transfer             Number of      Transfer                Number of Transfer
Region                             accounts                  amount               accounts       amount                  accounts amount
1                                               0                  $0                     0                $0                      0        $0
2                                               4                 0.6                     2                2.3                     0         0
3                                               6                 0.9                     0                 0                      0         0
4                                               2                 0.9                     0                 0                      0         0
5                                               18                6.0                     1            0.05                        0         0
6                                               4                 0.8                     0                 0                      0         0
7                                               2                 0.5                     0                 0                      0         0
8                                               1                 0.2                     2           0.001                        0         0
9                                               1                 0.5                     0                 0                      0         0
10                                              1              0.005                      1            0.01                        0         0
                                                                     a
Total                                           39            $10.2                       6            $2.4                        0         0
                                            Source: GAO analysis of EPA data.
                                            a
                                            The total in this column does not add up due to the rounding of the values.




                                            Page 21                                                                       GAO-12-109 Superfund
EPA guidance states that reclassifications and transfers to the Trust Fund
should not take place until it can be reasonably estimated that the special
account contains more funds than are needed for remaining response
actions at the site. Therefore, according to EPA officials, it is generally
easier for the regions to determine if special account funds can be
reclassified or transferred once response actions at a site are
substantially complete. EPA officials said that they consider “Construction
Complete,” “NPL Delete,” and “Post Construction” to be the three phases
in the Superfund cleanup process when a site most likely can be
considered substantially complete and, therefore, the funds in a special
account may be considered for reclassification or transferred to the Trust
Fund. As of October 2010, the cleanup activities at 297 of the 769
Superfund sites with open accounts were considered substantially
complete, according to our analysis of EPA data, and therefore more
likely to have funds eligible to be reclassified or transferred than sites in
the earlier stages of the cleanup process. Table 6 presents the number of
Superfund sites with special accounts in each phase or milestone of the
cleanup process, from the remedial investigation/feasibility study to
deletion from the NPL, as of October 2010.

Table 6: Number of Sites with Special Accounts in Each Phase or Milestone of the
Superfund Cleanup Process, as of October 2010

                                                                          Number of
                                                                           sites with
                                                                              special
                                                                                    b
 Cleanup phase or milestone                                               accounts
 Remedial investigation/Feasibility   Remedial assessment not begun               40
 study                                Study under way                            169
                                      Study complete                              11
                           a
 Record of decision                   Remedy selected                             22
 Remedial design                      Design under way                            52
                                      Design complete                              2
 Remedial action                      Construction under way                      45
                                      Remedial action complete                     9
 Miscellaneous (other responses, such as the removal process)                    122
                                a
 Construction complete                                                             2
 Postconstruction                                                                263
                          a
 Deletion from NPL                                                                32
 Total sites                                                                     769
Source: GAO analysis of EPA data.




Page 22                                                          GAO-12-109 Superfund
                           a
                           These steps are considered “milestones” in the Superfund cleanup process.
                           b
                            The site designations that are noted here are based on the action at a site associated with a special
                           account that is least advanced in the Superfund cleanup process. Other actions may be taking place
                           at these sites that are more advanced in the Superfund cleanup process.

                           EPA requires special accounts to be closed when (1) all site work has
                           been completed, (2) no funds are left in the account and no future
                           deposits are anticipated, or (3) EPA does not anticipate incurring any
                           additional costs at those sites. As of October 2010, EPA had closed 76
                           special accounts since the beginning of the program; these accounts
                           were open an average of 7 years. According to our analysis of EPA data,
                           EPA closed 9 special accounts from fiscal years 2000 through 2005 and
                           67 accounts from fiscal years 2006 through 2010, including 33 in fiscal
                           year 2010. According to EPA officials, the steady increase in closures has
                           occurred because the regions are improving their management of special
                           accounts and closing accounts where no funds remain or funds are no
                           longer needed for future work.


                           In response to the IG’s findings and recommendations, 22 as well as EPA
EPA Has                    officials’ own recognition that the agency needed to provide better
Implemented                oversight of the special accounts process, EPA has implemented the
Processes and              following processes and policies in the last few years to better monitor
                           and manage special accounts: (1) processes to better plan the use of
Policies in Recent         special account funds, (2) increased oversight of special accounts by
Years to Better            designating a national special accounts coordinator, and a Special
                           Accounts Senior Management Committee, and (3) strategies and
Monitor and Manage         guidance on how to plan for using and monitoring special accounts.
Superfund
Special Accounts
EPA Has Implemented        To facilitate regional management and headquarters planning and review
Processes to Better Plan   of special accounts, in 2008, EPA established a process to better track
for Use of Funds in        planned uses for special account funds. That is, it established a section in
                           CERCLIS—referred to as the Special Account Management Screen (or
Special Accounts           planning screen)—that enables EPA regions to see and enter special
                           account planning data into specific data fields and create reports so that


                           22
                             According to EPA, it has closed out all recommendations from the two IG reports. The
                           IG has not conducted a follow-on review to the 2009 report to determine the sufficiency of
                           all of EPA’s responses.




                           Page 23                                                                      GAO-12-109 Superfund
                    both EPA headquarters and regional officials can monitor the special
                    account balances against planned obligations for ongoing and future site-
                    specific response activities. According to EPA officials, reports based on
                    data entered into fields on this screen have allowed both EPA
                    headquarters and regional staff to review the data to assure that, among
                    other things, the agency maximizes opportunities to use, reclassify, or
                    transfer these resources to the general portion of the Trust Fund over
                    time.

                    In the first few years of using this new planning screen, regional staff
                    noticed that some funds did not easily fit into the specified categories in
                    the screen, and they had to place the funds under other catchall fields,
                    according to EPA headquarters officials. As a result, in December 2010,
                    EPA added four new fields under the reserved use section and combined
                    two categories into one. These changes are intended to allow EPA
                    headquarters staff to better track the regions’ funding plans and to comply
                    with guidance issued in September 2010 clarifying how special account
                    funds are to be planned and used. For example, EPA headquarters
                    created a new field for funds reserved for a potential EPA takeover of the
                    work if one or more PRPs who are performing the site cleanup work
                    become insolvent; in such cases, EPA might have to fund necessary work
                    with special account funds. According to officials we spoke with in one
                    EPA region, these changes have helped reduce the number of questions
                    and concerns from headquarters during its reviews of regions’ plans to
                    allocate funds.


EPA Has Increased   Before the IG’s 2009 report, EPA had recognized that it needed to better
Oversight for       oversee the regions’ management of special accounts, according to an
Special Accounts    EPA headquarters official. In 2008, an EPA staff person in the Office of
                    Superfund Remediation and Technology Innovation—with assistance
                    from staff from other offices such as the Office of Site Remediation
                    Enforcement and Office of the Chief Financial Officer—was permanently
                    assigned to coordinate the management of special accounts with the
                    regions. This headquarters staff person—the national special accounts
                    coordinator—conducts annual and midyear reviews and holds
                    discussions with regional staff to evaluate regions’ plans to allocate
                    special account funds, among other things. Specifically, every August, in
                    preparation for the annual review of these funds, the coordinator analyzes
                    planning data on all open special accounts using monitoring reports
                    developed from CERCLIS data to ensure that regions are entering quality
                    data into CERCLIS, complying with special account guidance, and
                    effectively managing special accounts.


                    Page 24                                                 GAO-12-109 Superfund
The coordinator told us that she focuses on particular details of a special
account in the annual review that may indicate a potential for special
account management problems. In particular, the coordinator examines
accounts that (1) disbursed no funds, and (2) have a large amount of
funds remaining although construction is complete or the site has been
deleted from the NPL, and (3) those accounts that are 10 years old or
more. In addition, the coordinator stated that she looks closely at certain
types of special accounts on a regular basis, such as the following:

•    Accounts with balances over $10 million. The coordinator examines
     these accounts—which make up 61 percent of available special
     account balances—to see the types of actions that have occurred. For
     example, the coordinator told us that she checks whether planned
     funding for prior fiscal years was actually obligated and disbursed as
     planned. 23 Specifically, she looks for any indications that a region
     might be continually shifting the same planned obligated funds from
     one fiscal year to the next and, if so, investigates the reasons for this
     shift.

•    Accounts that had planned reclassifications, transfers to the Trust
     Fund, or planned closures. The EPA coordinator told us that she
     regularly examines whether these actions have occurred. For
     example, according to EPA data, in fiscal year 2010, regions planned
     to reclassify $43.1 million from 75 accounts at the beginning of the
     year; however, the coordinator found that regions had actually
     reclassified $26.2 million from 41 accounts by the end of that fiscal
     year. For those 34 accounts where reclassification was not
     completed, 20 accounts had their planned reclassifications moved to
     future fiscal years, 10 accounts were identified as needing funds for
     further work at the site, and 4 had their planned reclassified funds
     transferred instead to the Trust Fund.
In addition, according to the coordinator, beginning in fiscal year 2011,
EPA focused on reviewing those special accounts with available balances
less than $10,000 to help ensure that funds are used as quickly as


23
  According to EPA officials, neither headquarters nor the regions systematically tracks all
special accounts to see whether planned funds in a prior fiscal year were actually
obligated and disbursed as planned. Headquarters and the regions see these planning
estimates as targets rather than commitments. Therefore, to make the most efficient use
of EPA resources in overseeing special accounts, the coordinator focuses more often on
how accounts with larger planned amounts are being managed by the regions, as well as
accounts that have available funds to reclassify or transfer to the Trust Fund.




Page 25                                                              GAO-12-109 Superfund
possible so that the accounts can be closed. According to the coordinator,
this review allows the regions to focus their workload efforts on managing
the larger special accounts rather than the many accounts with relatively
few funds.

According to the coordinator, during this annual review, she may pose
questions regarding the regions’ planning estimates and suggest certain
actions to ensure better management of specific special accounts. For
example, the coordinator might suggest that the regions (1) use the funds
in a special account as an incentive for future settlements with PRPs, (2)
reclassify or transfer to the Trust Fund unneeded funds and close the
account when a site cleanup is completed or near completion, (3) correct
and update the account (such as entering funds in the proper planning
category), (4) use special account funds before using appropriated funds,
or (5) move previously planned obligated funds that have not yet been
obligated in a previous fiscal year to a future fiscal year. For example,
during the special account fiscal year 2011 annual review conducted in
2010, the coordinator asked questions regarding the regions’ planning
estimates on 285 special accounts. Based on our analysis of these
planning data, we identified 65 questions or suggestions related to
whether there was potential to reclassify or transfer to the Trust Fund
some or all account funds or close an existing account. The remaining
questions or suggestions identified a variety of subjects, including
whether the planned funding was put in the wrong category on the special
accounts planning screen in CERCLIS, and whether special account
funds could be used as an incentive for the PRP to do the work.

During the annual review, regional staff agree to make changes or
adequately explain the reasons why the coordinator’s suggestion should
not be taken at that time. According to EPA regional officials we spoke
with, all of the coordinator’s questions during the fiscal year 2011 annual
review were addressed before the next midyear planning sessions
conducted in the spring of 2011. However, according to a regional official
and the coordinator, a question from a previous planning session may be
asked again in subsequent planning sessions if it was not entirely or
sufficiently addressed. In some cases, the coordinator stated she wanted
to obtain more detailed information from the region to ensure that funds
were planned for use in the most effective and efficient way possible. In
other cases, while funds were planned in accordance with guidance, the
regional officials and the coordinator had a difference of opinion on the
best planned use of funds.




Page 26                                                  GAO-12-109 Superfund
To examine this process in more detail, we sampled 20 accounts from
EPA headquarters’ 2010 annual planning review of 285 accounts about
which the coordinator had questions. For all of these accounts, the
regions addressed all the coordinator’s questions or took the
recommended action requested or suggested by the coordinator. For
example, the coordinator questioned $989,000 in special account funds
that were placed in the “Other” field without a detailed explanation on
when the determination for use of these funds would be made. As a result
of discussions with EPA headquarters and a change to the planning
screen, these funds were moved to a new field created in December
2010—”Protectiveness Contingencies.” According to EPA documentation,
this field should be used when current site information indicates there is
reasonable potential that a remedy will not be protective in the future. For
the account in question, EPA regional officials determined that available
special account funds for the site would still be needed to protect nearby
residences from the effects of a hazardous chemical contamination—
Trichloroethylene (TCE). 24 The remedy chosen for this TCE
contamination in the groundwater—an underground drainage system—
had not resulted in lower contamination levels, and EPA had found vapor
intrusion in the crawl spaces of houses located at the site. EPA
determined that it would need the special account funds to assess
whether new migration systems need to be installed to prevent inhalation
of TCE from the crawl spaces.

According to the coordinator, once the planning discussions take place,
the regions are expected to make any corrections to planned special
account funds in CERCLIS. The coordinator then reviews the data again
and uses this information to establish a baseline for fiscal year planning.
In addition, the coordinator provides an annual work planning review
report to EPA management in December. In March of the following year,
the coordinator conducts midyear reviews to follow up on regional issues
and to monitor planned actions previously identified.

EPA headquarters holds bimonthly national conference calls with regional
officials to discuss any special accounts issues that have arisen and to
discuss possible changes to the special accounts process to make it


24
  TCE, a degreasing agent in metal cleaning that has been used widely in Department of
Defense industrial and maintenance processes, has been documented at low exposure
levels to cause headaches and difficulty concentrating. High-level exposure may cause
dizziness, headaches, nausea, unconsciousness, cancer, and possibly death.




Page 27                                                          GAO-12-109 Superfund
more efficient. Several regional officials we spoke with stated that,
between the conference calls, and other events, such as the annual
Superfund Special Accounts National Meeting and Cost Recovery
Training Conference, 25 staff are provided with the information they need
to effectively manage special accounts.

In 2009, in response to the IG’s recommendation that a central
management official in headquarters for special accounts be established
to ensure management accountability, EPA established a Special
Accounts Senior Management Committee. Unlike the coordinator, who
has daily responsibility for special accounts, the committee has broader
responsibilities. It meets semiannually to provide overall management
oversight and monitor the status of special accounts. The IG had
recommended that a single office in headquarters be responsible for the
management of special accounts, but EPA officials told us that the
agency did not think this was a workable arrangement because the
management of special accounts requires the involvement of, and
coordination among, several EPA offices, including the regional offices.
The committee consists of directors from EPA headquarters offices
involved in the special accounts process, including the Office of
Superfund Remediation and Technology Innovation, the Office of Site
Remediation Enforcement, and the Office of the Chief Financial Officer,
as well as directors of relevant Superfund divisions from the regions.
Regional representation is rotated among regions every 2 years. A
committee charter lists the responsibilities of each office in managing
special accounts.

According to several EPA regional officials we spoke with who have
responsibilities for special accounts, the level of coordination and
transparency in managing special accounts between headquarters and
the regions has improved over the last few years. For example, one
regional official stated that the high level of coordination is evident from
headquarters’ review of regional planning data and related meetings to
discuss potential issues with specific special accounts. Another regional
official stated that headquarters has been very responsive, sharing
information and obtaining policy viewpoints from the region, and
implementing ways to streamline and improve the process.


25
 At the time of our discussions with the regions, EPA held the Superfund Special
Accounts National Meeting and Cost Recovery Training Conference annually. Recently,
EPA has made the decision to hold this meeting bi-annually instead of annually.




Page 28                                                         GAO-12-109 Superfund
EPA Has Issued Strategies   EPA has issued new strategy and guidance documents to help manage
and Guidance on Managing    special accounts in response to the IG’s recommendations and EPA
Special Accounts            headquarters’ own recognition that the agency needed to provide a more
                            nationally consistent approach to managing and monitoring special
                            accounts. Specifically, EPA established the Superfund Special Accounts
                            Management Strategy in 2009. This strategy sets forth the agency’s plan
                            to improve the use, management, and monitoring of special accounts to
                            help support Superfund site cleanups. According to EPA documentation,
                            this strategy serves as a road map for EPA regional and headquarters
                            personnel who are responsible for overseeing and managing special
                            accounts. The Special Accounts Senior Management Committee is
                            responsible for implementing this strategy. The strategy focuses on four
                            main areas: (1) coordination and transparency, such as intraagency
                            coordination between the EPA offices that are responsible for managing
                            special accounts; (2) special account use and planning efforts, such as
                            effective regional planning and use of the CERCLIS special account
                            planning screen; (3) monitoring special accounts, such as annual regional
                            work planning and midyear reviews; and (4) regional support, guidance,
                            and training.

                            EPA has also issued guidance on the (1) planning, use, and monitoring of
                            special account funds and (2) reclassifying special account funds,
                            transferring funds to the Trust Fund, and closing special accounts.

                            Planning, use, and monitoring of special account funds. EPA’s special
                            account guidance, issued in 2010, updated and expanded previous EPA
                            guidance that was originally published in 2001 and 2002. This newer
                            guidance provides specific information on the proper use and planning of
                            special account funds throughout the cleanup process. For example, EPA
                            generally expects that planning for the use of special account funds
                            occurs within 3 months after establishing a special account, and planning
                            should be updated on a regular basis during the year. According to EPA
                            regional officials we spoke with, they try to plan for the use of special
                            account funds as soon as possible. However, according to some regional
                            officials, various circumstances can affect whether planning can occur
                            within 3 months. For example, they noted, large special accounts usually
                            are associated with large, complex cleanup sites and therefore it is likely
                            to take longer to plan how funds will be used. At the same time, officials
                            said, these accounts are often a priority because of the hazards involved.
                            The workload required to plan and manage accounts with large balances
                            may result in less time available to plan for accounts with smaller
                            balances.



                            Page 29                                                 GAO-12-109 Superfund
EPA also issued a detailed Monitoring Plan for Special Account Planning
Data in 2009, which EPA updated in November 2010. This plan describes
the process that EPA headquarters and the regions should follow to
monitor special account planning data, including the scheduled times
when middle of fiscal year and end of fiscal year final planning data
should be reviewed and discussed with the regions, made final, and
reported to the Special Accounts Senior Management Committee.

Reclassifying special account funds, transferring funds to the Trust Fund,
and closing special accounts. EPA headquarters issued detailed
guidance on the reclassification of special account funds in 2009,
including when EPA regions should consider doing a reclassification and
a step-by-step description of the reclassification process the regions
should follow. At the same time, it also issued a model memorandum for
transferring funds from a special account to the Trust Fund and closing
out a special account. In this guidance and memorandum, EPA states
that regions must notify headquarters when they plan to reclassify funds,
transfer funds to the Trust Fund, or close out an account. The regions
must submit a draft memorandum to headquarters staff in the Office of
Site Remediation Enforcement and the Office of Superfund Remediation
and Technology Innovation to discuss any potential issues with the action
prior to proceeding with the action. However, regional officials we spoke
with stated that the process for reclassifying funds has been complex and
that the requirements for conducting a reclassification were resource
intensive and time consuming. For example, regions had to submit a
memorandum with detailed information on the special account—no matter
how small the amount of funds to be reclassified. As a result, in April
2011, EPA headquarters issued revised model notifications to streamline
the process and accelerate the review process for reclassifications of
funds, transfer of funds to the Trust Fund, and closing of a special
account. According to EPA officials, the most significant change
eliminates the requirement for a formal memorandum for those
transactions that involve $200,000 or less. For those transactions, EPA
regions now only need to send an e-mail to headquarters staff informing
them of the intended action and provide the appropriate assurances in
accordance with guidance (e.g., if an account is to be closed, the region
does not anticipate any future deposits). For transactions involving
$200,000 or more, regions still need to send formal notification
memoranda to headquarters. However, these actions can now be
included in the same memorandum, rather than separate memorandums
if (1) a transfer of funds to the Trust Fund or closeout occurs at the same
time or immediately following a reclassification or (2) a closeout occurs at



Page 30                                                 GAO-12-109 Superfund
the same time or immediately following a transfer of funds to the Trust
Fund

Several regional officials we spoke with stated that, overall the increased
guidance has been helpful, and that EPA headquarters has done a
thorough job of establishing any needed special accounts policy and
guidance documents, addressing all major aspects and issues relating to
the management of special accounts. In addition, officials from EPA
regions 3, 5, and 9 stated that their regions have added management
tools specific to their regions to enhance those available from
headquarters, including a special accounts regional database, intranet
site page, and guidance specific to their regions, respectively. An EPA
headquarters official stated that an increased emphasis has been made
in the last few years in headquarters to better manage the regions’
special account process, particularly the “back end” of the process
involving special account reclassifications, transfers to the Trust Fund,
and account closures. However, EPA headquarters officials told us that
the agency has recognized it may need to be more involved in the “front
end” of the special accounts process, when regions are deciding whether
to establish a special account. EPA headquarters is evaluating whether it
is efficient for the regions to open special accounts for small amounts, or
for those sites that may be further along in the cleanup process, because
regions need to spend time and staff resources monitoring these new
accounts. An EPA official stated that EPA’s Superfund Special Accounts
Senior Management Committee has approved a review of the policy for
establishing special accounts. The committee plans to begin this study in
fiscal year 2012 and, if needed, develop further guidance on the opening
of special accounts.

Furthermore, according to several of these regional officials, the changes
to notifications and revised model memorandum have made the
reclassification and transfer processes easier by minimizing the number
of staff who need to prepare and approve reclassifications and transfers
while saving time by eliminating extensive preparation and headquarters
review of notifications. The revised processes allow special account funds
to be reclassified and transferred faster. In addition, in June 2011, EPA
issued two fact sheets to regional special accounts staff that provide
supplemental information on special account reclassifications, as well as
specific steps required to close out a special account.




Page 31                                                 GAO-12-109 Superfund
                     We provided a draft of this report to EPA for review and comment. EPA
Agency Comments      provided technical comments that we incorporated into the report, as
and Our Evaluation   appropriate.


                     As agreed with your office, unless you publicly announce the contents of
                     this report earlier, we plan no further distribution until 30 days from the
                     report date. At that time, we will send copies to the appropriate
                     congressional committees, Administrator of EPA, and other interested
                     parties. The report also will be available at no charge on the GAO website
                     at http://www.gao.gov.

                     If you or your staff members have any questions about this report, please
                     contact me at (202) 512-7114 or yocomc@gao.gov. Contact points for our
                     offices of Congressional Relations and Public Affairs may be found on the
                     last page of this report. GAO staff who made major contributions to this
                     report are listed in appendix II.

                     Sincerely yours,




                     Carolyn L. Yocom
                     Director




                     Page 32                                                 GAO-12-109 Superfund
Appendix I: Objectives, Scope, and
              Appendix I: Objectives, Scope, and
              Methodology



Methodology

              This appendix provides information on the scope of the work and the
              methodology used to (1) describe the status of special accounts—
              including balances, locations, and recent and planned uses—of
              Superfund special accounts and (2) examine the extent to which the
              Environmental Protection Agency’s (EPA) headquarters and regions are
              implementing processes and policies to improve the monitoring and
              management of Superfund special accounts.

              To describe the status of the 1,023 special accounts, we obtained and
              analyzed data from EPA’s Comprehensive Environmental Response,
              Compensation, and Liability Information System (CERCLlS) database.
              Specifically, for information on special accounts balances; locations; and
              recent and planned uses, including funds that had been obligated and
              disbursed, as well as funds reclassified, transferred to the Superfund
              Trust Fund, or closed, we analyzed spreadsheets obtained from officials
              with EPA’s Office of Superfund Remediation and Technology Innovation.
              For those funds that were planned to be obligated and reserved for future
              use, as well as reclassified and transferred, we analyzed spreadsheets of
              planned funds derived from EPA’s CERCLIS special accounts planning
              screen, as of October 2010. We also obtained data and interviewed
              officials at EPA’s headquarters and the Office of the Chief Financial
              Officer regarding the makeup and current status of funds in the Trust
              Fund.

              To assess the reliability of the data from EPA’s CERCLIS database used
              in this report, we analyzed related documentation, examined the data to
              identify if there were any obvious errors or inconsistencies, and
              interviewed knowledgeable agency officials about the data to see if there
              were any known problems with the data and to learn more about their
              procedures for maintaining the data. We determined the data to be
              sufficiently reliable for the purposes of this report.

              To examine the extent to which EPA’s headquarters and regions are
              implementing policies and procedures to improve the monitoring and
              management of Superfund special accounts, we analyzed documents
              and interviewed officials from EPA headquarters offices, including the
              Office of Superfund Remediation and Technology Innovation, the Office
              of Site Remediation Enforcement, and the Office of the Chief Financial
              Officer. Specifically, we obtained and reviewed strategies and guidance
              issued by EPA headquarters to the regions on the special accounts
              process, as well as available EPA regional documentation on the use of
              management tools unique to EPA’s regions. We also analyzed
              documents and interviewed officials from EPA’s Office of Inspector


              Page 33                                                GAO-12-109 Superfund
Appendix I: Objectives, Scope, and
Methodology




General (IG) regarding their 2006 and 2009 reports on EPA’s
management of special accounts. We also conducted interviews with
officials in each of EPA’s 10 regional offices and collected supporting
documentation to determine how the regions managed and monitored
their special accounts and coordinated with EPA headquarters and, if
needed, conducted follow-up interviews to obtain additional data as a
result of our analysis. During these interviews, we also obtained
information on how EPA regions addressed EPA headquarters questions
or recommendations for actions on their special accounts that arose
during EPA’s fiscal year 2011 annual review of the regions’ planning data.
Specifically, we discussed and obtained data on 20 special accounts (2
special accounts from each region) taken from a sample of 285 accounts
about which EPA had questions or recommendations for actions. These
accounts were chosen from a random nonprobability sample and
therefore cannot be generalized to all special accounts.

We conducted this performance audit from October 2010 to January 2012
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 findings and
conclusions based on our audit objectives.




Page 34                                                GAO-12-109 Superfund
Appendix II: GAO Contact and Staff
                  Appendix II: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Carolyn L. Yocom, (202) 512-7114, yocomc@gao.gov
GAO Contact
                  In addition to the individual named above, Vincent P. Price, Assistant
Staff             Director; Greg Carroll; Laina Poon; and Amy Ward-Meier made key
Acknowledgments   contributions to this report. Elizabeth Beardsley, Cindy Gilbert, Julia
                  Kennon, Ruben Montes de Oca, and Carol Herrnstadt Shulman also
                  made important contributions.




(361239)
                  Page 35                                                  GAO-12-109 Superfund
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