Environmental Protection: Opportunities to Recover Funds Obligated for
Completed Superfund Projects (Stmnt. for the Rec., 04/15/97,
GAO/T-RCED-97-134).

GAO discussed the Environmental Protection Agency's (EPA) efforts to
recover funds obligated for completed Superfund projects, focusing on
the: (1) total amount of unspent obligated funds remaining on completed
contract work orders and assistance agreements and the EPA offices and
regions primarily responsible for administering these funds; and (2)
timeliness of EPA's recovery of such funds.

GAO noted: (1) as of December 1996, about $249 million in unspent
obligated funds was potentially available to be recovered on over 6,000
completed work orders and assistance agreements; (2) EPA's Office of
Solid Waste and Emergency Response and its regional offices located in
Atlanta, New York, and Philadelphia administer most of the funds; (3) in
the early 1990s, EPA recognized the need to take more timely action to
recover unspent funds; (4) however, according to the agency's Inspector
General, EPA's offices responsible for managing contracts and assistance
agreements were not provided sufficient resources to do so, while
carrying out their other responsibilities; (5) consequently, in 1994,
EPA created the Superfund Deobligation Task Force to respond to a
growing backlog of completed work orders and assistance agreements, and
the associated unspent funds; (6) since fiscal year 1994, the task force
has recovered over $400 million; and (7) however, the task force is not
keeping up with a growing backlog of completed work orders and
assistance agreements because it is composed of part-time members who
perform these activities only when their primary job responsibilities
enable them to do so.

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

 REPORTNUM:  T-RCED-97-134
     TITLE:  Environmental Protection: Opportunities to Recover Funds 
             Obligated for Completed Superfund Projects
      DATE:  04/15/97
   SUBJECT:  Contract administration
             Hazardous substances
             Cooperative agreements
             Government collections
             Budget obligations
             Deobligations
             Unexpended budget balances
             Waste disposal
IDENTIFIER:  Superfund Program
             
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Cover
================================================================ COVER


Before the Subcommittee on VA, HUD, and Independent Agencies,
Committee on Appropriations, House of Representatives

For Release
on Delivery
Expected at
10 a.m.  EDT
Tuesday
April 15, 1997

ENVIRONMENTAL PROTECTION -
OPPORTUNITIES TO RECOVER FUNDS
OBLIGATED FOR COMPLETED SUPERFUND
PROJECTS

Statement for the Record by
Stanley J.  Czerwinski, Associate Director,
Environmental Protection Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-97-134

GAO/RCED-97-134T


(160371)


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

  EPA -
  GAO -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We appreciate this opportunity to provide a statement for the record
for use in the Subcommittee's hearing on the Environmental Protection
Agency's (EPA) fiscal year 1998 appropriation.  As you requested, we
have reviewed certain aspects of EPA's contracts and assistance
agreements\1 that are used to accomplish the work of the Superfund
program.  Specifically, we are providing information on (1) the total
amount of unspent obligated funds remaining on completed contract
work orders and assistance agreements and the EPA offices and regions
primarily responsible for administering these funds and (2) the
timeliness of EPA's recovery of such funds. 

In summary, we found the following: 

  -- As of December 1996, about $249 million in unspent obligated
     funds was potentially available to be recovered on over 6,000
     completed work orders and assistance agreements.  EPA's Office
     of Solid Waste and Emergency Response and its regional offices
     located in Atlanta, New York, and Philadelphia administer most
     of the funds. 

  -- In the early 1990s, EPA recognized the need to take more timely
     action to recover unspent funds.  However, according to the
     agency's Inspector General, EPA's offices responsible for
     managing contracts and assistance agreements were not provided
     sufficient resources to do so, while carrying out their other
     responsibilities.  Consequently, in 1994, EPA created the
     Superfund Deobligation Task Force to respond to a growing
     backlog of completed work orders and assistance agreements, and
     the associated unspent funds.  Since fiscal year 1994, the task
     force has recovered over $400 million.  However, the task force
     is not keeping up with a growing backlog of completed work
     orders and assistance agreements because it is composed of
     part-time members who perform these activities only when their
     primary job responsibilities enable them to do so. 


--------------------
\1 Assistance agreements include grants, cooperative agreements, and
interagency agreements.  Grants provide financial assistance to
organizations to carry out a program without substantial federal
involvement.  Cooperative agreements provide financial assistance and
require substantial federal involvement to carry out a program. 
Interagency agreements transfer funds between federal agencies. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

EPA relies heavily on contracts and assistance agreements for the
Superfund program, which was created to clean up the nation's most
hazardous waste sites.  EPA relies on contractors to accomplish the
work of the program, including (1) cleaning up hazardous waste sites,
(2) supervising cleanups performed by others, and (3) providing
technical and scientific support to the program.  Contracts are
generally used to obtain the services of private businesses when EPA
manages the work.  Assistance agreements are generally used to
support the activities of states, nonprofit organizations, and
universities in the Superfund program.  From fiscal years 1990
through 1996, Superfund contracts accounted for $5 billion, or 57
percent, of the $8.8 billion that EPA obligated for all contracts
awarded during that period.  From fiscal years 1990 through 1995, the
most recent period for which information is available, EPA entered
into 620 Superfund assistance agreements valued at about $387
million. 

EPA issues individual work orders to describe the specific tasks and
requirements to be completed on contracts.  When a new work order is
awarded or a new assistance agreement is entered into, EPA obligates
an amount equal to the estimated cost of the work.  As work
progresses, EPA releases funds to contractors or the recipients of
assistance agreements and liquidates its obligations.  In many
instances, the amount of funds obligated exceeds the amount
eventually needed to pay the contractor or other entities for the
completed tasks and other requirements.  In such cases, the unspent
funds may be deobligated and recovered when all work has been
completed or when the specified period of performance has expired. 
Before recovering unspent funds, EPA reviews the completed contract
or assistance agreement to ensure that all appropriate payments have
been made.  EPA leaves between 10 to 15 percent of the total
expenditures made under the contract or assistance agreement as a
reserve to cover any additional costs, as determined by a final
audit.  Recovered funds are to be used for other Superfund
activities, since congressional appropriations for the Superfund
program remain available for use until expended. 

EPA contracting officers or grant specialists are responsible for
reviewing the costs of the work and performing other closeout
activities.  The maximum amount of time allowed for closing out
contracts according to the Federal Acquisition Regulation is 36
months from the date the contracting officer receives evidence of the
project's completion.  Similarly, EPA's Final Closeout Policy for
Assistance Agreements specifies that assistance agreements be closed
within 180 days after completion. 


   UNSPENT FUNDS COULD BE
   RECOVERED FROM INACTIVE
   SUPERFUND CONTRACTS AND
   ASSISTANCE AGREEMENTS
---------------------------------------------------------- Chapter 0:2

Using EPA's data systems,\2 we identified contract work orders and
assistance agreements having unspent obligations for work that has
been completed or for which the specified performance period has
expired.  Our analysis of the data shows that about $249 million in
unspent funds are potentially available for recovery, mostly on
contracts and agreements administered by the Office of Solid Waste
and Emergency Response and three EPA regional offices.  As shown in
table 1, hundreds of work orders or agreements were completed prior
to 1991. 



                                Table 1
                
                   Balances of Unspent Obligations by
                  Contract and Assistance Agreements'
                            Completion Year

                                 Number of orders/
                                        assistance             Unspent
Fiscal year                             agreements         obligations
------------------------------  ------------------  ------------------
1981-84                                          7            $100,945
1985-87                                         30           1,542,836
1988-90                                        886          16,871,139
1991-93                                      2,477          68,923,588
1994-96                                      2,682         161,484,102
======================================================================
Total                                        6,082        $248,922,610
----------------------------------------------------------------------
We found that each of EPA's 10 regional offices and various
headquarters offices currently have unspent balances obligated for
work that has been completed.  (See app.  I.) Completed work orders
and agreements administered by the Office of Solid Waste and
Emergency Response total over $54 million in unspent funds.  In
addition, such funds total over $43 million in region 2 (New York),
over $18 million in region 3 (Philadelphia), and over $30 million in
region 4 (Atlanta).  These four agency units account for
approximately $145 million, or about 58 percent, of the $249 million
potentially available for recovery. 

EPA officials told us that the Office of Solid Waste and Emergency
Response has a large amount of unspent funds because the Superfund
Deobligation Task Force, thus far, has given higher priority to
recovering funds in EPA's regions.  However, the director of the task
force told us that more emphasis will be placed on headquarters'
units during fiscal year 1997.  He also told us that EPA regions
located in the eastern part of the United States, such as regions 2,
3, and 4, typically award a greater number of Superfund contracts and
assistance agreements than other regions and therefore have more
unspent funds on work orders and agreements. 


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


   TIMELY ACTIONS HAVE NOT BEEN
   TAKEN TO RECOVER FUNDS
---------------------------------------------------------- Chapter 0:3

EPA has experienced a continuing problem in recovering unspent funds
on completed Superfund work orders and assistance agreements.  To
address this problem, EPA created a Superfund Deobligation Task
Force, which has succeeded in recovering nearly $400 million in
unspent funds since fiscal year 1994.  Nevertheless, the backlog of
completed work orders and assistance agreements with unspent funds
continues to grow, as additional work orders and assistance
agreements are completed.  Consequently, on October 1, 1996, the
agency implemented a policy that allows EPA offices to use the funds
they recover for their own Superfund activities, rather than
returning them to the agency for redistribution.  However, thus far,
this incentive has not resulted in increased recoveries of funds. 


      RECOVERING UNSPENT FUNDS IS
      A LONG-TERM PROBLEM
-------------------------------------------------------- Chapter 0:3.1

In December 1990 hearings before the Subcommittee on Oversight and
Investigations, House Committee on Energy and Commerce, we said that
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 due the government from overpayments to contractors.\3 A few
years later, EPA's Inspector General reported that, as of March 1993,
contracts awarded under the Superfund program still had balances of
over $100 million in unspent obligated funds that were no longer
needed for their original purposes. 

According to the Inspector General's report, EPA had experienced
delay in recovering unspent funds because it had given a low priority
and few resources to closing contracts, which involves ensuring that
all goods and services have been received, evaluating performance,
and resolving all outstanding issues or problems.  The report stated
that EPA's Contract Management Division had requested, but not
received, additional resources to carry out these responsibilities in
a more timely manner. 

In addition, according to the Inspector General's report on
assistance agreements,\4

EPA officials stated that competing priorities for staff resources
also has resulted in untimely closings of Superfund assistance
agreements.  Officials of EPA's Grants Administration Division, which
administers the agreements, stated that, while closeout functions are
important, the division places more emphasis on entering into new
assistance agreements than on closing old ones. 


--------------------
\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). 

\4 Final Report of Audit on EPA's Controls Over Assistance
Agreements, EPA's Office of Inspector General (Sept.  28, 1995). 


      EPA'S TASK FORCE HAS
      RECOVERED SUBSTANTIAL FUNDS
-------------------------------------------------------- Chapter 0:3.2

To handle a backlog of completed work orders and assistance
agreements, in 1994 EPA established a Superfund Deobligation Task
Force.  The task force is composed of about 30 part-time members,
representing several headquarters offices and each of EPA's 10
regional offices.  Members review individual contract work orders 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 and assistance agreements with the largest potential recovery
of funds. 

After the task force identifies unspent funds, EPA takes action to
deobligate and recover them, except for an amount held in reserve
pending a final audit of the actual costs of the work.  If the
reserve funds are not sufficient to cover the final costs, as
determined by the audit, EPA uses current-year appropriated funds to
pay the difference. 

Since fiscal year 1994, the task force has recovered over $400
million.  However, we found that substantial funds remain on work
orders and assistance agreements that were completed years earlier. 
For example, our analysis shows that 3,400 work orders and assistance
agreements were completed more than 3 years earlier, the maximum
amount of time that the Federal Acquisition Regulation and EPA's
regulations allow for closing out contracts and assistance
agreements.  Funds totaling approximately $87 million, or about 35
percent, of the $249 million that we identified were associated with
these orders and assistance agreements.  If the work orders or
assistance agreements are not closed within the time specified, EPA
is required to do so as soon as possible. 

Furthermore, while the task force has recovered substantial funds, it
apparently is not keeping up with a growing backlog of completed work
orders and assistance agreements.  For example, in a May 1, 1996,
statement for the record to the Subcommittee on VA, HUD, and
Independent Agencies, House Committee on Appropriations, we said that
unspent funds on completed work orders totaled $164 million as of
March 1, 1996.\5 Our analysis shows that as of January 1, 1997, such
unspent funds had grown by $13 million, an increase of about 8
percent. 

Task force officials told us that during fiscal year 1996, they spent
less time on recoveries than they had during the previous 2 fiscal
years.  The task force recovered $160 million in fiscal year 1994,
$170 million in fiscal year 1995, but only $67 million in fiscal year
1996.  According to task force officials, fewer staff resources were
provided and fewer funds were recovered during fiscal year 1996
because higher priority was given to other work requirements of the
EPA units providing the part-time task force members. 

These officials also told us that EPA does not have records showing
the amount of time that members spend on their task force activities
but noted that it is not unusual for competing priorities to severely
limit the staff resources that are available.  The officials also
told us that EPA has never performed an analysis to determine the
resources needed to eliminate the agency's backlog and to keep pace
with new completed work orders and assistance agreements. 

The director of the task force told us that EPA intends to continue
with its task force approach.  He acknowledged, however, that other
options may be considered if sufficient progress is not made in
achieving timely recoveries of unspent funds.  Among such options are
adding resources to the EPA organizations responsible for managing
and auditing contracts and grants so that they may be closed in a
more timely manner. 


--------------------
\5 Environmental Protection:  Selected Issues Related to EPA's Fiscal
Year 1997 Appropriation (GAO/T-RCED-96-164, May 1, 1996). 


      NEW INCENTIVE POLICY
-------------------------------------------------------- Chapter 0:3.3

EPA believes that a new policy, initiated on October 1, 1996, may
result in additional recoveries by providing more incentive to
headquarters and regional task force members to identify, deobligate,
and recover funds on completed work orders and assistance agreements. 
Until fiscal year 1997, recovered funds were placed in a central pool
and then distributed on the basis of national Superfund priorities. 
As of October 1, 1996, the funds remain with the offices recovering
them to meet the offices' Superfund cleanup needs.  EPA officials
told us that this new policy might achieve better results by
providing greater incentive to EPA offices to deobligate and recover
unspent funds.  The officials acknowledged, however, that under the
new policy, task force members must still find time to perform the
recovery activities while meeting other work requirements having
higher priority within their organizational units. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 0:4

The recovery of substantial unspent funds on completed Superfund
contract work orders and assistance agreements could help EPA in
meeting its responsibilities for cleaning up Superfund hazardous
waste sites.  Although the agency has taken actions to recover such
funds, it has not succeeded in eliminating a substantial backlog of
completed work orders and assistance agreements while keeping pace
with annual additions to the backlog.  Consequently, EPA is not
achieving timely recoveries of these funds, as required by agency
policy and the applicable federal contracting regulation. 


   RECOMMENDATION
---------------------------------------------------------- Chapter 0:5

To recover unspent funds on inactive Superfund contract work orders
and assistance agreements, we recommend that the Administrator of EPA
develop a strategy for identifying, deobligating, and recovering
unspent funds within the period specified for contracts by the
Federal Acquisition Regulation, and for assistance agreements by
EPA's Final Closeout Policy for Assistance Agreements. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

EPA officials, including the Director of the Budget Division, Office
of the Comptroller, generally agreed with the information contained
in this statement for the record.  They also agreed that a strategy
was needed for recovering unspent funds within the period specified
by Federal Acquisition Regulations and EPA's regulations.  We have
incorporated clarifying comments provided by EPA where appropriate. 


FUNDS AVAILABLE FOR DEOBLIGATION
FROM SUPERFUND WORK ORDERS AND
ASSISTANCE AGREEMENTS BY EPA
ORGANIZATION AS OF DECEMBER 2,
1996
=========================================================== Appendix I

                                 Number of orders/
                                        assistance
                                  agreements to be
EPA organization                       deobligated  Estimated recovery
------------------------------  ------------------  ------------------
Region 1                                       229          $7,668,938
Region 2                                       589          43,569,654
Region 3                                       423          18,983,622
Region 4                                       590          30,651,835
Region 5                                       452          18,905,755
Region 6                                       247          11,504,173
Region 7                                       243           8,764,694
Region 8                                       190          12,931,893
Region 9                                       275          14,986,054
Region 10                                      175          11,218,870
Office of Research and                         704           5,061,885
 Development
Office of Solid Waste and                    1,088          54,905,483
 Emergency Response
Office of Policy, Planning,                    113           1,802,992
 and Evaluation
Office of Administration and                   497           4,751,486
 Resources Management
Office of Enforcement and                      132           2,086,980
 Compliance Assurance
Miscellaneous                                  135           1,128,296
======================================================================
Total                                        6,082        $248,922,610
----------------------------------------------------------------------

*** End of document. ***