Environmental Protection: Funds Obligated for Completed Superfund
Projects (Letter Report, 07/21/98, GAO/RCED-98-232).

Pursuant to a congressional request, GAO reviewed the Environmental
Protection Agency's (EPA) efforts to deobligate and recover funds for
completed Superfund projects, focusing on: (1) the progress that EPA has
made to recover the unspent funds on the inactive Superfund contracts
and assistance agreements that GAO identified; and (2) whether any
additional funds that expired during 1997 for Superfund contracts and
assistance agreements are available for deobligation.

GAO noted that: (1) EPA has made a concentrated effort to recover the
unspent funds that GAO identified for work orders and assistance
agreements for Superfund contracts that were completed prior to 1997;
(2) of the $249 million that GAO identified, EPA has recovered $210
million; (3) of the approximately $39 million remaining, EPA has
detailed plans to recover about $26 million during fiscal year (FY)
1998; (4) EPA plans to recover the remaining $13 million in FY 1999; (5)
EPA has an additional $125 million available for deobligation from
contracts and assistance agreements that expired in 1997; (6) although
EPA had identified and plans to recover $10 million, GAO identified an
additional $115 million, which also expired in 1997, that can be
recovered; (7) EPA did not identify the additional $115 million because
its analysis, which was based on data for June 1997, covered contracts
that expired prior to July 1, 1997; (8) typically, in the second half of
a calendar year, significant amounts become available for deobligation;
and (9) of the additional amount available for deobligation and
recovery, $109 million derives mainly from contract work orders that
expired during the last 6 months of 1997 and over $6 million from
assistance agreements.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-98-232
     TITLE:  Environmental Protection: Funds Obligated for Completed 
             Superfund Projects
      DATE:  07/21/98
   SUBJECT:  Contract administration
             Cooperative agreements
             Deobligations
             Unexpended budget balances
             Pollution control
             Budget obligations
             Hazardous substances
             Waste disposal
IDENTIFIER:  Superfund Program
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on VA, HUD, and Independent
Agencies, Committee on Appropriations, House of Representatives

July 1998

ENVIRONMENTAL PROTECTION - FUNDS
OBLIGATED FOR COMPLETED SUPERFUND
PROJECTS

GAO/RCED-98-232

Obligated Funds for Superfund Projects

(160431)


Abbreviations
=============================================================== ABBREV

  EPA - Environmental Protection Agency

Letter
=============================================================== LETTER


B-279695

July 21, 1998

The Honorable Jerry Lewis
Chairman, Subcommittee on VA, HUD,
and Independent Agencies
Committee on Appropriations
House of Representatives

Dear Mr.  Chairman: 

The Environmental Protection Agency (EPA) relies heavily on contracts
and assistance agreements to accomplish the work of the Superfund
program, which was created to clean up the nation's most hazardous
waste sites.  Superfund contracts are awarded to private businesses
to (1) clean up hazardous waste sites, (2) supervise the cleanups
performed by others, and (3) provide technical and scientific
support.  Assistance agreements are generally used to fund states',
nonprofit organizations', and universities' activities that support
the Superfund program. 

When EPA awards a contract or enters into an assistance agreement, it
obligates federal funds to cover the cost of the planned work.  As
work progresses according to work orders for individual contracts or
work plans for assistance agreements, EPA makes payments and
liquidates its obligations.  In April 1997, we reported that EPA had
$249 million in unspent obligated funds available for deobligation on
over 6,000 Superfund contract work orders and assistance agreements
that were completed prior to calendar year 1997.\1 Our report
recommended that the Administrator of EPA develop a strategy for
identifying, deobligating, and recovering unspent funds.  Unspent
Superfund moneys may be deobligated and recovered when all work has
been completed or when the time period for completing the work has
expired. 

This report responds to your request that we (1) determine the
progress that EPA has made to recover the unspent funds on the
inactive Superfund contracts and assistance agreements that we
identified and (2) determine whether any additional funds that
expired during 1997 for Superfund contracts and assistance agreements
are available for deobligation. 


--------------------
\1 Environmental Protection:  Opportunities to Recover Funds
Obligated for Completed Superfund Projects (GAO/T-RCED-97-134, Apr. 
15, 1997). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

EPA has made a concentrated effort to recover the unspent funds that
we identified for work orders and assistance agreements for Superfund
contracts that were completed prior to 1997.  Of the $249 million
that we identified, EPA has recovered $210 million.  Of the
approximately $39 million remaining, EPA has detailed plans to
recover about $26 million during fiscal year 1998.  EPA plans to
recover the remaining $13 million in fiscal year 1999. 

EPA has an additional $125 million available for deobligation from
contracts and assistance agreements that expired in 1997.  Although
EPA has identified and plans to recover $10 million, we identified an
additional $115 million, which also expired in 1997, that can be
recovered.  EPA did not identify the additional $115 million because
its analysis, which was based on data for June 1997, covered
contracts that expired prior to July 1, 1997.  Typically, in the
second half of a calendar year, significant amounts become available
for deobligation.  Of the additional amount available for
deobligation and recovery, $109 million derives mainly from contract
work orders that expired during the last 6 months of 1997 and over $6
million from assistance agreements. 


   BACKGROUND
------------------------------------------------------------ Letter :2

EPA relies extensively on contractors to carry out the Superfund
program.  Contracts are generally used to obtain the services of
private businesses when EPA manages or oversees the cleanup work. 
Assistance agreements are generally used to fund states', nonprofit
organizations', and universities' activities that support Superfund
program activities.\2 From fiscal year 1990 though fiscal 1997,
Superfund contracts accounted for $5.4 billion, or 49 percent, of the
$11.1 billion that EPA obligated for all contracts awarded during
that period.  Over the same time period, EPA entered into Superfund
assistance agreements valued at about $554 million. 

When EPA awards a contract or enters into an assistance agreement,
the agency obligates federal funds equal to the estimated cost of the
work and issues individual work orders to describe the specific tasks
and requirements to be completed.  As work progresses, contractors or
assistance agreement recipients are provided with funds, thus
liquidating obligations.  In many instances, the amount of funds
obligated exceeds the amount eventually needed to pay the contractors
or other entities for the completed tasks and other requirements.  In
such cases, the unspent funds may be deobligated and recovered when
all the work has been completed or when the period for performing the
work has expired.  Before recovering unspent funds, EPA reviews the
completed contracts or assistance agreements to ensure that all
appropriate payments have been made.  EPA leaves no more than 10
percent of the total expenditures made under the contracts as a
reserve to cover any additional costs, as determined by a final
audit.  Recovered funds are to be used for other Superfund activities
because congressional appropriations for the Superfund program remain
available for use until expended. 

Until 1997, EPA had experienced continuing problems in recovering
unspent funds on inactive work orders and assistance agreements for
Superfund contracts.  As we reported in 1990, EPA's failure to
recover unspent funds increased the government's need to borrow;
increased the agency's vulnerability to fraud, waste, and abuse; and
resulted in missed opportunities to obtain interest payments that
were due to the government from overpayments to contractors.\3 To
handle the backlog of unspent funds remaining on inactive contract
work orders, EPA established a Superfund Deobligation Task Force in
1994.  The task force is composed of about 30 part-time members,
representing several headquarters offices and each of EPA's 10
regional offices.  Members of the task force review work orders for
individual contracts to identify completed projects, determine the
amount of unspent funds available for deobligation, and prepare
requests to deobligate and recover the unused funds.  The task force
gives priority to work orders with the largest potential recovery of
funds.  Although EPA has not established a task force to identify
completed projects funded through assistance agreements, it has
placed increased emphasis on identifying completed projects,
determining the amount of unspent funds available for deobligation,
and recovering the unused funds. 

In April 1997, we reported that recovering unspent obligated funds
continued to be a problem at EPA.  While the Superfund Deobligation
Task Force had recovered nearly $400 million in unspent funds from
fiscal years 1994 through 1996, its activities did not receive high
enough priority to obtain the staff resources needed to eliminate
EPA's substantial backlog of contract work orders and assistance
agreements.  The reason for this, according to agency officials, was
that the task force relied primarily on the efforts of individual
contracting officers and grant specialists in headquarters and the
regions to identify and recover Superfund money. 


--------------------
\2 Assistance agreements include grants and cooperative agreements. 
Grants provide organizations with financial assistance to carry out a
program without substantial federal involvement.  Cooperative
agreements provide financial assistance with substantial federal
involvement. 

\3 EPA's Contract Management:  Audit Backlogs and Audit Follow-Up
Problems Undermine EPA's Contract Management (GAO/T-RCED-91-5, Dec. 
11, 1990). 


   EPA'S EFFORTS TO RECOVER
   UNSPENT SUPERFUND MONEYS
------------------------------------------------------------ Letter :3

In June 1997, in response to our April 1997 report's recommendations,
EPA began a systematic process to identify funds available for
deobligation by using automated data files.  Using this new process,
EPA made a concentrated effort to identify and recover additional
funds.  Of the $249 million available for recovery that we identified
in our 1997 report, EPA has recovered $210 million.  Of the
approximately $39 million remaining, EPA has detailed plans to
recover about $26 million by the end of fiscal year 1998, as shown in
table 1.  According to EPA officials, the remaining $13 million
should be recovered in fiscal year 1999, after all final payments are
made to contractors. 



                                Table 1
                
                Balances of Unspent Funds Available for
                 Recovery From Contracts and Assistance
                 Agreements Completed Prior to Calendar
                               Year 1997

                                                      Planned recovery
                                  Amount available      in fiscal year
Category                              for recovery                1998
------------------------------  ------------------  ------------------
Contracts                              $17,068,541         $16,264,299
Assistance agreements                   21,833,269           9,301,202
======================================================================
Total                                  $38,901,810         $25,565,501
----------------------------------------------------------------------
The actions taken by EPA in fiscal year 1997 and planned actions in
fiscal 1998 should substantially reduce outstanding recoveries on
Superfund contracts and assistance agreements completed prior to
1997. 


   ADDITIONAL FUNDS AVAILABLE FOR
   DEOBLIGATION
------------------------------------------------------------ Letter :4

EPA has additional funds available for deobligation on contracts and
assistance agreements that expired in 1997.  As shown in table 2,
unspent obligated funds total about $125 million that derived from
about 3,900 inactive contracts and assistance agreements. 



                                Table 2
                
                Unspent Funds Available for Recovery on
                  Contracts and Assistance Agreements
                    Completed in Calendar Year 1997

                                 Number of orders/
                                        assistance
                                  agreements to be    Amount available
Category                               deobligated        for recovery
------------------------------  ------------------  ------------------
Contracts                                    3,819        $116,948,267
Assistance agreements                           65           7,851,500
======================================================================
Total                                        3,884        $124,799,767
----------------------------------------------------------------------
In its detailed deobligation plan for fiscal year 1998, EPA
identified about $8 million of the $117 million available to be
deobligated from contracts.  The $109 million that EPA did not
identify came mainly from contract work orders that expired during
the last 6 months of 1997.  EPA did not identify these amounts
because its analysis, which was based on data from June 1997,
identified contract work orders that expired during the last 6 months
of 1996 and the first 6 months of 1997.  The contracts that expired
during the last 6 months of 1997 will be addressed in EPA's fiscal
year 1999 deobligation plan, according to EPA officials.  Each
October, EPA plans to analyze contract work orders that have expired
by June of that year and deobligate the identified funds during that
fiscal year. 

Our analysis, which included all of 1997, shows a significantly
higher potential recovery in the last 6 months of the year.  A
significant number of work orders expired during the last 6 months of
1997, and our analysis of work orders for 1996 disclosed a similar
pattern.  According to EPA officials, this pattern is typical for
expiring contract work orders.  The officials also stated that each
year, the amount of funds available for recovery varies with the
expiration of contracts for different Superfund activities. 
Therefore, they could not predict the potential recovery amounts for
future years. 

In its detailed deobligation plan for fiscal year 1998, EPA
identified about $2 million of the $8 million available to be
deobligated from assistance agreements.  We identified over $6
million more than EPA did for deobligation and recovery.  According
to EPA officials, the amount that we identified will be included in
their fiscal year 1999 deobligation plan.  EPA updated the progress
that it had made in closing out Superfund assistance agreements on
November 1, 1997, and again on May 1, 1998.  These progress reports
identify the specific assistance agreements that EPA plans to close
out during the next 6 months. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

EPA has made a concentrated effort to recover unspent obligated funds
that we identified on inactive work orders and assistance agreements
that were completed for Superfund contracts prior to 1997.  EPA's
recovery of funds during fiscal year 1997 and the planned recoveries
in fiscal 1998 should reduce significantly the amount of recoverable
funds on expired contracts and assistance agreements. 

However, EPA's planned deobligations of contract work orders in
fiscal year 1998 will not include all orders that expired in 1997
because EPA's analysis only included contracts that expired during
the first half of 1997.  If EPA's analysis included contracts that
expired during the last half of the year, the agency would have
identified an additional $115 million that could potentially be
recovered in fiscal year 1998.  Typically, in the second half of a
calendar year, significant amounts become available for deobligation. 
The deobligation of these moneys would, in turn, make funds available
for other Superfund projects earlier. 


   RECOMMENDATION
------------------------------------------------------------ Letter :6

To expedite the recovery of unspent funds on inactive Superfund
contract work orders, we recommend that the Administrator of EPA
modify the agency's analysis of completed contracts to include a
separate analysis of contracts that have expired at the end of
December in addition to June of each calendar year. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We provided EPA with copies of this report for review and comment. 
The agency generally agreed that the report provided a good
characterization of the agency's Superfund recovery efforts and
suggested editorial changes to the report to ensure accurate factual
information regarding the agency's process.  EPA did not agree with
our recommendation that the agency incorporate a second analysis of
completed contracts each year.  EPA officials stated that very little
would be gained with an additional review in December.  We found,
however, that a significant number of contracts expire during
September of each year and that the identification of these contracts
in December would allow for recovery before the end of the fiscal
year (Sept.  30).  For example, had an additional review been made in
December 1997, an additional $115 million would have been identified
for recovery in fiscal year 1998.  As a result, we have retained our
recommendation because it would provide for a quicker recovery of
funds. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

Using EPA's data systems,\4 we identified contract work orders and
assistance agreements having unspent obligations for work that had
been completed or for which the specified performance period had
expired.  We also met with officials from EPA to review the progress
that the agency made in recovering unspent obligated funds.  We
performed our work from March through June 1998 in accordance with
generally accepted government auditing standards. 


--------------------
\4 The EPA data systems that we used include (1) the Contracts
Information System, (2) the Financial Information System, (3) the
Grants Information System, and (4) the Management and Accounting
System.  We did not verify the accuracy or reliability of the data
systems. 


---------------------------------------------------------- Letter :8.1

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 10 days from the date of this letter.  At that time, we will
send copies to the EPA Administrator and other interested parties. 
We will also make copies available to others upon request.  Major
contributors to this report included John Wanska, John Yakaitis, and
Everett O.  Pace.  If you or your staff have any questions, please
contact me at (202) 512-4907. 

Sincerely yours,

Peter F.  Guerrero
Director, Environmental
 Protection Issues


*** End of document. ***