[Final Audit Report on Department of the Interior, Hazardous Materials Site Management]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. C-IN-MOA-0040-2004

Title: Final Audit Report on Department of the Interior, Hazardous
       Materials Site Management



  August 22, 2005

****************************************DISCLAIMER***************************** 
This file contains an ASCII representation of an OIG report. No attempt has been made to display graphic images or illustrations. Some tables may be included, but may not resemble those in the printed version. A printed copy of this report may be obtained by referring to the PDF file or by calling the Office of Inspector General, Division of Acquisition and Management Operations at (202) 219-3841. 
*******************************************************************************

Memorandum

To:	P. Lynn Scarlett
	Assistant Secretary for Policy, Management and Budget

From:	Earl E. Devaney
	Inspector General

Subject:	Final Audit Report on Department of the Interior, Hazardous Materials Site Management (No. C-IN-MOA-0040-2004).

	This report presents the results of our audit of the Department of the Interiorï¿½s program for the management of hazardous materials.  We concluded that the Department and its bureauï¿½s did not effectively manage known and suspected contaminated hazardous materials sites and as a result has no assurance that it is effectively protecting the public and the environment.  Our report presents recommendations that are designed to assist the Department in furthering its efforts to maximize program effectiveness.
									
	We conducted this audit with staff from the Environmental Protection Agencyï¿½s Office of Inspector General.  We have included their final report on promising practices for hazardous materials site management as Appendix 4 of this report.

		In the May 4, 2005 response to the draft report, the Assistant Secretary concurred with all seven of our recommendations.  Based on this response we consider recommendations 3, 4, 5, 6, and 7 resolved.  However, additional information is needed for us to consider recommendations 1 and 2 resolved.  Accordingly, we request that the additional information indicated in Appendix 7 to the report be provided to us.  

		The legislation, as amended, creating the Office of Inspector General requires that we report to Congress semiannually on all audit reports issued, actions taken to implement our recommendations, and recommendations that have not been implemented.  Therefore, this report will be included in our semiannual report. 

	We appreciate the cooperation provided by the Department and agency staff during our audit.  If you have any questions regarding this report, please call me at (202) 208-5745.
	



EXECUTIVE SUMMARY

WHY WE DID THIS AUDIT

The Department of the Interior (DOI or Department) manages one-fifth of the land mass in the United States.  DOIï¿½s stewardship responsibilities as a land manager include mitigating sites contaminated by hazardous materials to protect the public and preserve the environment.  Our audit objective was to determine whether the Department has effective processes to identify, track, and prioritize hazardous materials sites.  We also worked with the Environmental Protection Agencyï¿½s (EPA) Office of Inspector General (OIG) to identify relevant promising practices that DOI might use to enhance its processes.  

WHAT WE FOUND

DOI is not adequately addressing the dangers posed by known and suspected contaminated sites on its land, and as a result DOI has no assurance that it is effectively protecting the public and the environment.  DOI does not:

> Know how many contaminated sites are on its land.

> Have an active plan to discover sites.

> Know if the most critical sites are being mitigated first.

DOI has not taken a proactive approach in managing hazardous materials sites.  Instead, the office charged with program oversight focused primarily on the Central Hazardous Materials Fund, which is a Congressional mandate, and other external pressures, such as the need to estimate liabilities for environmental cleanup for financial statement reporting purposes.  We believe these efforts are not sufficient to effectively manage hazardous materials sites on DOI land. 

The Department has not provided practical guidance to the bureaus for identifying, tracking, and prioritizing contaminated sites, and does not oversee these activities.  Lacking Departmental leadership, the bureaus did not assign sufficient priority to identifying hazardous materials sites.  In fact, three of the four bureaus we audited did not have a proactive site identification process.  The fourth bureau had a process to identify contaminated sites, but bureau officials estimated it will take 250 years to complete this process. 

In 1993 the Office of Inspector General reported that the Department of the Interior had not identified and evaluated the majority of hazardous materials sites on its land.  Further, the Department did not always prioritize contaminated sites to ensure that the most serious sites were cleaned up first.  Our current audit found that little progress has been made in addressing these issues and the Department still has serious deficiencies in its efforts to identify and prioritize hazardous materials sites.

In addition to not adequately addressing the dangers of hazardous materials sites, the Departmentï¿½s inaction may result in escalated cleanup costs.  Delays in identifying hazardous sites could hinder identification of the parties responsible for the contamination, preventing the Department from collecting the cleanup costs from these parties.  Delays in mitigating hazardous sites may allow the contamination to spread and complicate cleanup efforts.


Our report recommends that the Department develop and implement the necessary tools for a successful program, such as a management information system, uniform policies and procedures, and strong Departmental leadership.



























TABLE OF CONTENTS

                                                                                                                                                                 PAGE
INTRODUCTION	1
	BACKGROUND	 1
	EPA PROMISING PRACTICES	  3

RESULTS OF AUDIT	4
	LEADERSHIP AND GUIDANCE	5
	COMPREHENSIVE INVENTORY	6
	DISCOVERY OF SUSPECTED SITES	9
	PRIORITIZATION PROCESS	10
	DOCUMENTATION	12

RECOMMENDATIONS	15		
APPENDICES
	1.	OBJECTIVE, SCOPE, AND METHODOLOGY	18		
	2.	PRIOR AUDITS	20   	3.	LOCATIONS VISITED/CONTACTED	23
	4.	EPA-OIGï¿½S EVALUATION REPORT OF PROMISING PRACTICES	26
	5.	ASSISTANT SECRETARY FOR POLICY, MANAGEMENT AND BUDGET 
		RESPONSE APRIL 25, 2005ï¿½ï¿½ï¿½	27
	6.	ASSISTANT SECRETARY FOR POLICY, MANAGEMENT AND BUDGET
		RESPONSE MAY 4, 2005	43
	7.	STATUS OF AUDIT RECOMMENDATIONSï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½...47

ACRONYMS
BIA  	Bureau of Indian Affairs
BLM	Bureau of Land Management
CERCLA	Comprehensive Environmental Response, Compensation,
	 and Liability Act
CERCLIS	Comprehensive Environmental Response, Compensation,
	and Liability Information System
CHF	Central Hazardous Materials Fund
DAS Group	DOI Deputy Assistant Secretariesï¿½ Advisory Group
	on Environmental Policy and Compliance
DOI or Department	Department of the Interior
ECL	Environmental Cleanup Liabilities Database
EPA	Environmental Protection Agency
FWS	Fish and Wildlife Service
GAO	Government Accountability Office
NPS	National Park Service
OEPC	Office of Environmental Policy and Compliance
OIG	Office of Inspector General



INTRODUCTION



This report presents the results of our audit of the Department of the Interiorï¿½s (DOI or Department) efforts to manage hazardous materials sites.  The objective of our audit was to determine whether the Department has effective processes to identify, track, and prioritize hazardous materials sites.  

BACKGROUND

As the nationï¿½s principal conservation and largest land-controlling agency, the Department manages the natural resources on 507 million acres of public lands dispersed throughout the United States.  Hazardous materials sites on DOI land may endanger human health, natural resources, and the environment.  DOI allows numerous activities on its land that generate or use hazardous substances that could result in a hazardous materials site.  For example, oil and gas drilling, mining, landfill operations, industrial uses, and pesticide applications may contaminate water supplies or otherwise damage the environment and put the public at risk.  DOIï¿½s own operationsï¿½such as underground fuel storage tanksï¿½may be another source of contamination.  DOI lands are also susceptible to illegal activities such as open dumping of potentially contaminated materials.  

In reports to the Office of Management and Budget, DOI has estimated that it might cost as much as $1.3 billion1 to assess, cleanup, and monitor these sites.


Two principal environmental laws govern the management of hazardous materials and cleanup of contaminated sites.  The Resource Conservation and Recovery Act (RCRA) of 1976, as amended, applies to active operations and imposes strict controls over hazardous materials from their creation to final disposal.  The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980, as amended, commonly known as the Superfund Law, governs the cleanup of abandoned and uncontrolled sites for potential or actual releases of hazardous substances.  Other laws, such as the Clean Water Act, Toxic Substances Control Act, and the Clean Air Act, also impact the Departmentï¿½s management of hazardous materials sites.  


In the Department of the Interior, the Office of Environmental Policy and Compliance (OEPC) has the responsibility to oversee, coordinate, and review all aspects of DOIï¿½s environmental policy.  OEPC is responsible for the Departmentï¿½s proactive environmental activities, such as assisting bureaus in implementing strategies and management controls to meet the requirements of Executive Order 13101 ï¿½Greening the Government Through Waste Prevention, Recycling and Federal Acquisition.ï¿½  OEPC assists bureaus in developing programs to procure environmentally friendly products and to prevent pollution by properly disposing of or recycling DOI property.  It is also responsible for overseeing, coordinating, and reviewing all aspects of DOIï¿½s involvement with hazardous materials sites.  This responsibility includes tracking bureau and office site activities, providing a centralized methodology for the prioritization of sites, and coordinating and developing DOI environmental policy. 

OEPC currently has approximately 39 employees, 1 of them is responsible for managing the Departmentï¿½s hazardous materials site management activities.

OEPC also oversees the Central Hazardous Materials Fund (CHF), which annually receives appropriations to allow the Department to mitigate contaminated sites under Superfund 


Law.  OEPC is working with the Office of Financial Management to implement a Department-wide Environmental Cleanup Liabilities database.  This database is being used to calculate the Departmentï¿½s liability associated with contaminated sites for financial statement reporting purposes. 


Our audit covered activities performed by OEPC and four bureausï¿½Bureau of Indian Affairs (BIA), Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), and National Park Service (NPS).  The scope and methodology of our audit is detailed in Appendix 1.

EPA PROMISING PRACTICES
We requested EPA-OIGï¿½s assistance in identifying promising practices employed by EPA.  EPA has over 20 years experience with information systems and processes to identify, assess, prioritize, and estimate costs of hazardous materials sites through EPAï¿½s implementation of the Superfund program.  We believe the Department could benefit from EPAï¿½s extensive knowledge in addressing hazardous materials sites.  


EPA-OIG identified promising practices in the areas of site discovery, site assessment, prioritization, and cost estimating.  We have included summaries about EPA promising practices within our report.  EPA-OIGï¿½s Evaluation Report with the full description of the promising practices is included as Appendix 4.

RESULTS OF AUDIT

More than a decade after significant problems were identified in the program, DOI has not made discernable progress in strengthening the program.  
The Department has yet to implement an active process to identify potentially hazardous sites, does not have a complete inventory of known or suspected contaminated sites, and does not have a system to prioritize hazardous materials sites.  


This occurred primarily because the Department did not provide sufficient leadership, guidance, or oversight to the bureaus.  None of the bureaus we audited had a complete listing of all known hazardous materials sites, and only one of the bureaus had an ongoing process to assess the condition of its lands.  Further, bureaus gathered and recorded hazardous materials site data in an inconsistent and uncoordinated manner.  The resulting patchwork of information is not adequate for the Department to manage contaminated sites or ensure accurate financial reporting.  













Auditors observed individuals collecting rock samples and taking them from the contaminated area. 
Without effective processes to manage hazardous materials sites, DOI is prolonging potential public and environmental exposure to hazardous contamination and toxic substances.  For example, the Bureau of Land Management (BLM) was aware of contamination at a site in 1988 but did not include the site in its inventory, nor was it added to the Departmentï¿½s inventory until 2005.  Additional testing in 2002 showed both lead and arsenic levels at the site exceeded BLM established critical levels by 17 and 20 times, respectively.  BLM took no action to warn the public of the contamination between 1988 and 2005; meanwhile:   

> An elementary school was constructed about 1/3 mile from the contaminated area.

> Existing houses continued to be dependent on water wells about 800 feet away from the site.  Initial testing has found one well to be contaminated with high levels of lead and arsenic.

> New houses are being constructed about 1 mile from the site.  



> The site, including the contaminated areas, has become a popular spot for recreation activities such as driving All-Terrain-Vehicles and camping2.

Lacking an adequate process for administering hazardous materials sites, DOI is also risking increased liability for escalating cleanup costs and decreased probability of identifying the parties responsible for the contamination and associated cleanup.  

LEADERSHIP AND GUIDANCE

OEPC has not actively overseen the bureausï¿½ activities and has not issued Department-wide policies and procedures.

The Department has not taken an active leadership or oversight role in the management of hazardous materials sites.  Initially, OEPC officials told us that they did not have the authority to oversee the bureausï¿½ actions in regard to inventorying, prioritizing, and assessing hazardous materials sites.  However, the Departmental manual makes it clear that, since 1989, OEPC  has had the authority to:

> Issue policy and procedures.

> Review and comment on bureau hazardous materials budgets.

> Track bureau site activities.

> Provide a centralized methodology for site prioritization.

> Oversee all categories of contaminated sites.

> Advise the Assistant Secretary for Policy, Management and Budget on cleanup alternatives. 

We found however, that OEPC has not issued appropriate policy and procedures.  Also, OEPC officials stated that historically the bureaus have operated independently in regard to managing hazardous materials sites and that OEPC did not have the tools available to ensure the bureaus adhere to uniform procedures.


While OEPC has not exercised all its authorities, it has coordinated and administered the Central Hazardous Materials Fund (CHF).  The CHF is funded to mitigate some of the Departmentï¿½s highest known priority sites.  According to DOI, since 1995 it has expended nearly $100 million and negotiated with responsible parties to contribute funds and services for site cleanup with an estimated value of $150 million.  The CHF, however, addresses only about 5 percent of the Departmentï¿½s current inventory of hazardous materials sites3.




The bureausï¿½ current fragmented policies and procedures prevent effective Department-wide management and do not ensure that the most critical sites are being addressed first.  

COMPREHENSIVE INVENTORY

The Department of the Interiorï¿½s inventory of known and suspected hazardous sites lacks the information to make responsible management decisions.  
The Department does not have a comprehensive inventory of its known and suspected hazardous materials sites.  Since 1993, OIG and Government Accountability Office (GAO) reports (see Appendix 2) have emphasized the need for a comprehensive inventory of hazardous materials sites on DOI lands.  A comprehensive inventory is needed to expedite risk assessments and make reliable cleanup and prioritization decisions necessary to protect the public and the environment.  

In 2003, the Department started developing the Environmental Cleanup Liabilities Database (ECL) for financial reporting purposes to replace the annual process of assembling a list of environmental liabilities from the individual bureaus.  Department officials told us that they planned to use the ECL as a management tool for hazardous materials sites and as an inventory of hazardous materials sites.  The ECL is compiled by bureau officials from hazardous materials site data maintained at the bureau or field office level.  The types and quality of the data included in the ECL varies.  For example, some bureaus added additional information about the types of contamination at a specific hazardous materials site in the comments section of the database, while other bureaus did not.  Our audit determined that the ECL does not include all known and suspected hazardous materials sites and does not include the kinds of information needed for the ECL to be used as a management tool.

Incomplete Database 

The ECL is incomplete as an inventory of hazardous materials sites on DOI land because the bureaus did not record all known or suspected4 contaminated sites.  For example:

> The Fish and Wildlife Service (FWS) had a common practice of not recording contaminated sites in the inventory unless the estimated cleanup costs exceeded $250,000 per site.  As a result, FWS did not record at least 25 known contaminated sites in the inventory with a total estimated cleanup cost of $1.6 million.

> The National Park Service (NPS) has not yet recorded nine suspected sites on the ECL that were discovered in 1976 at a park which is located in a highly populated area.  As of FY 2004, none of these sites have been recorded in the ECL.


Department officials were aware the ECL represented an incomplete inventory of hazardous materials sites but took little or no action to ensure that all known sites were recorded.  For example, OEPC officials noted that five contaminated sites receiving cleanup funds from the CHF in FY 2003 were not recorded in the Departmentï¿½s inventory, but the OEPC officials did not require the bureaus to enter these sites into the database.  


Management Information

The Departmentï¿½s current inventory of hazardous materials sitesï¿½the ECLï¿½lacks the information needed to make responsible management decisions.  Also, the inventory does not have needed reporting capabilities, such as the ability to generate a list of prioritized sites.  A management information system should contain information such as:


> Type and extent of contamination.

> Risks to human health or the environment.

> Identification of parties responsible for cleanup costs.

> Specific site location.


The Departmentï¿½s current ECL is not designed to capture this data.  Some bureaus enter a portion of the data in a comments section of the database, but others do not.

Further, while the bureaus maintain information such as type of contamination or geographic location about known and suspected hazardous materials sites, the information is collected and maintained in an inconsistent manner.  For example, one bureau may record a site by the type of contamination, and another bureau may use geographical reference names.  Also, some bureaus list the types of contaminants while others do not. 

In addition to inconsistencies among bureaus, there are often inconsistencies within bureaus regarding how a site is recorded.  For example, one BLM field office records several mine features, such as individual shafts, buildings, and tailings, as one hazardous site.  Another field office lists each feature as a separate site.  This has occurred because the Department has not provided guidance or oversight on the types of information to be collected, maintained, or submitted.

As a result, the Departmentï¿½s database is incomplete, inconsistent, and not suitable for making sound management decisions or providing accurate financial data.  Nor can the Department obtain complete and consistent data from the bureaus.  Complete and accurate inventory data are necessary for the Department to evaluate, prioritize, and monitor hazardous sites. 

EPAï¿½s report provides background information on EPAï¿½s management information system.  A review of this system may be helpful to DOI to develop a comprehensive management information system.  EPA identified consistent terminology in the management information system as critical to its success because of the reliance on data from multiple bureaus.  For EPAï¿½s Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS), EPA requires state and tribal data to comply with standards established by the Environmental Data Standards Council.  EPA noted these standards could serve as a useful tool for DOI to review and use when building its management information system.  

DISCOVERY OF SUSPECTED SITES

The bureaus employ a reactive approach to site discovery often only recording sites after they have been identified by the public.
DOI does not have a proactive process to identify hazardous materials sites and evaluate the risks posed to human health, wildlife, and the environment.  Our audit also found three of four bureaus did not have a proactive site identification program.  One bureau has initiated a site discovery process.  However, based on its current plan the bureau will need approximately 250 years to complete its review.  

The bureaus employ a reactive approach to site discovery, often only recording sites after the sites have been identified by the public.  GAO reported in 1999 that sometimes BLM only identified hazardous sites following injuries to citizens or livestock.


The bureaus have told us that it is not practical to visually inspect every acre for potential contamination.  
While we agree that it may not be practical to inspect every acre, the Department and its bureaus are not effectively using the tools and information that are available to identify hazardous materials sites.  For example, existing databases and management information systems, such as the systems designed for oil and gas lease management or its facilities information systems, contain useful information.  However, the Department did not provide guidelines or instructions to the bureaus on how to use these databases.  





















EPA identified several promising practices to aid DOI in creating a useful site discovery process.  EPA suggests that DOI should examine existing site inventories and work with states, tribes, and communities to obtain information to identify potential sites.  EPA also suggests DOI develop user-friendly checklists that employees could use to create initial reports of potential hazardous materials sites.  Like EPA, DOI could provide a web-based petition for citizens to formally refer a potential site.

PRIORITIZATION PROCESS

The Department cannot determine which sites need to be addressed first.

The Department does not prioritize and rank all of its hazardous materials sites.  In multiple reports, our office and GAO have identified the need for the Department to prioritize sites on a national basis.  The Department has agreed with these recommendations, but it still has not implemented a Department-wide prioritization process.  In 1993, OEPC developed a pilot program to rank sites on a nationwide basis; however, this ranking system was never finalized or published as Departmental guidance.


The Department has a process to prioritize sites nominated for funding by the CHF, the Departmentï¿½s central cleanup fund.  A 2003 review of the Departmentï¿½s CHF conducted by the Bureau of Reclamation (BOR)5 found that the resulting prioritizations were adequate.  However, these sites account for only 5 percent of the Departmentï¿½s recorded inventory and may not represent the only critical sites.  The Department does not prioritize the remaining 95 percent of the inventory.


The bureaus have some information regarding prioritization of hazardous materials sites on bureau land, but the information is not complete or comparable.  We found that bureaus developed varying methods for establishing priorities and making funding decisions for contaminated site mitigation.  


BLM prioritizes sites only within program areas, rather than across the Bureau as a whole.  For example, contaminated sites resulting from abandoned mines are not ranked against open dumps.  Historically, BIA split funding roughly equally across regions, without even considering the relative risks of sites in the individual regions.  Because BLM and BIA are not prioritizing all possible sites, they do not have assurance that they are addressing the most serious sites first.  Consequently, the Department cannot use the bureausï¿½ prioritization results to identify its highest priority sites.  Therefore, the Department also lacks assurance that the most serious hazardous sites are being cleaned up first.


In contrast, both NPS and FWS conduct site prioritization based on information submitted by the parks or refuges.  Because NPS and FWS rank sites on a national basis, these Bureaus have some assurance that the most critical sites are being addressed first.  However, DOI does not request this data. 


To establish a prioritization process, EPA offered the following promising practices:

> Develop a risk-based method to prioritize hazardous materials sites and apply an approach that ranks sites based on current and future land uses, ecological risks, and tribal factors/cultural considerations.

> Develop a tracking mechanism for sites DOI sets aside as not requiring cleanup actions.  DOI should work with states, tribes, and communities to stay aware of changing site conditions that may warrant reprioritization of already evaluated sites.

DOCUMENTATION

The Department and its bureaus may not have reliable data for management purposes or financial reporting.
Cost estimates and financial liability codes6 for hazardous materials sites were not always adequately supported.  The bureaus and the Department rely on this information to prepare annual financial statements.  Bureau officials assign liability codes to hazardous materials sites based on the likelihood that the bureau or Department will be financially responsible for the cleanup costs.  For financial reporting purposes this code dictates whether the estimated cleanup costs will be accrued, disclosed, or undisclosed in the bureau and Department financial statements. 

We reviewed 125 site files (14 percent) of the 911 sites listed on the FY 2003 ECL.  Cost estimates for 108 (86 percent) of the 125 sites were not adequately supported.  Additionally, for the 125 site files we evaluated, 103 (82 percent) did not have supporting documentation to justify the liability code selected.  As a result, the Department and the bureaus may not have reliable data for management purposes or financial reporting.  


Cost Estimates

Bureau support for the cost estimates reported on the ECL was inconsistent.  Some bureaus reported estimates that officials could not explain.  For example, NPS identified a suspected hazardous materials site at a former landfill and has been reporting an estimated cost for site assessment work of between $50,000 and $1,000,000.  NPS, however, had no supporting documentation for this estimate and current park employees did not know how it was developed.  In other instances, bureaus had well documented cost estimates but reported other amounts in the inventory without explanations.  For example, BIA, BLM, FWS, and NPS had professional contractors prepare cost analyses for site cleanup.  The estimates in the inventory did not match the cost analyses prepared by the contractors.  Bureau officials could not explain the differences.


At many site locations, cost estimates were derived based on the historical knowledge of bureau employees.  The site files did not contain adequate documentation explaining the methodologies and assumptions used to develop the estimates.  For example, supporting documentation for the estimate did not identify the type and extent of contamination or describe cleanup options.  Without this type of information, cost estimates may not be reliable and cannot be easily updated.  

EPA staff use a web-based tool to prepare cost estimates for each work assignment at a site.  Such a tool would walk the bureau employees through a series of questions about the site and then provide standard or historical reference information to build the cost estimate.  This tool would automatically create documentation on the methodology and assumptions used to develop a cost estimate.  Cost estimates will be easier to update with this information readily available.  Also, the basis for the cost estimates would be more consistent between bureaus and among bureau field offices.   



Financial Liability Codes
	
The bureaus and the Department do not have documentation available to support the liability code assigned to specific hazardous materials sites.  Without supporting documentation neither the bureaus nor the Department can verify the chosen liability codes. 


In most instances, we did not have enough information to assess the liability codes for the hazardous materials site files reviewed.  However, in two cases we identified incorrect codes.  Specifically, for two NPS sites where NPS had caused the contamination, the assigned liability codes did not reflect NPSï¿½s culpability and responsibility to pay for the cleanup actions.  Based on our audit work, NPS corrected these errors prior to financial reporting for FY 2004.  This situation raises concerns as to the accuracy of the information reported in the financial statements for Environmental Contingent Liabilities.  Financial statement auditors have identified similar problems in the FY 2002 and FY 2003 financial statement audits.  The Department needs to take steps to validate the liability codes on its inventory.  


EPA did not identify any specific promising practices to improve DOIï¿½s documentation for liability codes.  BIA, however, has a manual, which includes standardized forms to document this process.  The Department should consider using BIAï¿½s form, or something similar, across all bureaus to support the decisions on liability codes.

RECOMMENDATIONS

To address the deficiencies identified in this report, we made seven recommendations to the Assistant Secretary for Policy, Management and Budget (PMB).  PMB provided the OIG with its initial response to the draft report on April 25, 2005 (Appendix 5).  Subsequent discussions with OEPC resulted in a supplemental response which was received on May 4, 2005 (Appendix 6).  Both responses were considered in our comments and in preparation of the final report.

Our recommendations and assessment of PMBï¿½s responses follow:


1. Require OEPC to develop and implement uniform policies and procedures for bureaus to identify and prioritize hazardous sites.

PMB RESPONSE


In its May 4, 2005 response to the draft report, PMB concurred with the recommendation.  However, PMB did not specifically address the need to develop and implement uniform policies and procedures for bureaus to prioritize hazardous sites.  Specifically, PMB stated:


The Director, OEPC will request that the DOI Deputy Assistant Secretariesï¿½ Advisory Group on Environmental Policy and Compliance (DAS Group) convene for discussion and for decision on whether a uniform policy for identification and discovery is needed.  The DAS group will meet not later than the fourth quarter FY 2005 to make this decision.  The Director, OEPC will inform the OIG of the outcome of the DAS Group meeting within one week of the date of such meeting and provide the OIG with any guidance developed.

OIG CONCLUSION

OIG will consider this recommendation resolved if the DAS group recommends that OEPC take action to develop and implement uniform policies and procedures for bureaus to both identify and prioritize hazardous sites.  



2. Require OEPC to oversee the Bureausï¿½ actions to ensure compliance with policy and procedures.

PMB RESPONSE

In its May 4, 2005 response to the draft report, PMB concurred with this recommendation.  According to PMB, if the DAS group directs OEPC to provide guidance and oversight on uniform policies and procedures as discussed in Recommendation 1, it will do so.

OIG CONCLUSION

OIG will consider this recommendation resolved if the DAS group recommends that OEPC take action to oversee the Bureausï¿½ actions to ensure compliance with policy and procedures


3. Require OEPC to develop a Management Information System that captures consistent and accurate data for all hazardous materials sites.

PMB RESPONSE

In its May 4, 2005 response to the draft report, PMB concurred with this recommendation.  According to PMB, OEPC is developing the ECL database to be both a management information system (MIS) and to support the accounting system.  The ECL will be designed to capture accurate and consistent site information based on available data. 

OIG CONCLUSION

OIG considers this recommendation resolved but not implemented.  


4. Require the bureaus to revaluate current cost estimates and liability codes for accuracy and report accurate information to OEPC.

PMB RESPONSE

In its May 4, 2005 response to the draft report, PMB concurred with this recommendation.  According to PMB, OEPC is working with the Office of Financial Management and the bureaus to address these issues and will establish requirements to reevaluate, review, and document costs on an annual basis.  The first set of the reviews will be done by the end of the fourth quarter FY 2005.

OIG CONCLUSION

OIG considers this recommendation resolved but not implemented.


5. Provide the necessary resources to OEPC to implement an effective hazardous site management program.

PMB RESPONSE

In its May 4, 2005 response to the draft report, PMB concurred with this recommendation pending the DAS groupsï¿½ decision.  Budget guidance for FY 2007 will include a review of OEPC to determine whether additional resources are needed.  If so, the request for additional resources will be reviewed by the DAS group.  The analysis of OEPCï¿½s resource requirements will be done by the end of the third quarter FY 2006.

OIG CONCLUSION

OIG considers this recommendation resolved but not implemented.


6. Evaluate current resource levels against cleanup needs.  Request additional resources if necessary to address critical sites promptly.  

PMB RESPONSE

In its May 4, 2005 response to the draft report (Appendix 6), PMB concurred with this recommendation.  According to PMB, the implementation of the ECL database will provide a more complete assessment of cleanup and environmental management needs, which in turn will be worked into the budget process. 

OIG CONCLUSION

OIG considers this recommendation resolved but not implemented.  


7. Consider EPAï¿½s promising practices when developing new procedures and tools for identifying, tracking, and prioritizing hazardous materials sites.

PMB RESPONSE

In its May 4, 2005 response to the draft report, PMB concurred with this recommendation.  According to PMB, the DAS group will review the contents of the report and provide any recommendations to OEPC. 


OIG CONCLUSION

OIG considers this recommendation resolved but not implemented.  



OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine whether the Department and its bureaus have effective processes to identify, track, and prioritize hazardous materials sites.  This audit was completed in partnership with the Environmental Protection Agency (EPA) Office of Inspector General (OIG).  EPAï¿½s OIG summarized EPAï¿½s process of discovering, assessing, prioritizing, and cost estimating hazardous materials sites for cleanup and identified promising practices for consideration by the Department of the Interior (DOI or Department).

The scope of our audit covered federal lands under the management of the Department.  We conducted audit verification work at the Department and four bureaus: Bureau of Indian Affairs (BIA), Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), and National Park Service (NPS).  We used the Environmental Cleanup Liabilities Database (ECL) as of September 30, 2003, as the baseline for our audit.  The following areas were excluded from the scope of this audit:  currently operating sanitary landfills; transportation, storage, and handling of hazardous materials; current operations at DOI facilities; physical hazards; and identification of actual or potential contamination on lands newly acquired or to be acquired.  

As part of our audit, we sent a questionnaire to 101 bureau officials and conducted audit fieldwork to obtain information on hazardous materials site management.  However, we based our audit conclusions only on the information we validated during our fieldwork.  We did not use the questionnaire because our fieldwork indicated that the responses were not reliable.  For example, 30 out of 53 respondents stated that they discover hazardous sites by performing periodic inventories or by conducting surveys of public land.  Conversely, audit work at regional, state, and field locations of the four bureaus we reviewed showed that three bureaus did not conduct periodic inventories or surveys of public land to identify hazardous sites and the fourth bureau had an ineffective program.  

To accomplish our objective, we gained an understanding of both Department and bureau roles in the site discovery, assessment, and prioritization process.  To assess the effectiveness of the program, we conducted the following audit steps:				
> Gathered general, administrative, and background information to provide us with a working knowledge of the hazardous materials site program at the Department and bureau organizational levels.

> Identified the policies and procedures used by DOI and its bureaus to inventory and prioritize hazardous sites.  

> Identified the policies and procedures that DOI and its bureaus use to estimate the costs of site assessment and cleanup.

> Identified the procedures that DOI uses to provide oversight for hazardous sites.

> Examined supporting documentation, existing bureau and EPA databases, and Department data to identify sites that were not recorded on the Departmentï¿½s inventory.  

> Examined supporting documentation for cost estimates to determine if reported amounts were accurate.

> Examined documentation to determine if assignment of liability codes was supported.

We performed our audit from February 2004 to March 2005 in accordance with the Government Auditing Standards issued by the Comptroller General of the United States.  Accordingly, we included such tests of records and other auditing procedures that we considered necessary under the circumstances.  We included tests of internal controls and compliance with laws and regulations to the extent necessary to satisfy the audit objective.  Internal control and compliance weaknesses identified during our audit are discussed in the Results of Audit section of this report.  The recommendations, if implemented, should improve the internal controls in these areas.  Because our review was limited, it would not necessarily have disclosed all internal control deficiencies or noncompliance with laws and regulations that may have existed at the time of our audit.  To satisfy the Government Accountability Office (GAO) Government Auditing Standards on relying on the work of others, we reviewed the EPA audit teamï¿½s qualifications, roles, and responsibilities for the audit; statements of independence; and the audit plan.  We concluded that EPA is qualified to perform its portion of the audit and that the audit plan was designed to gather relevant and competent audit evidence.  EPAï¿½s audit work is significant to our audit and we relied on and referred to it in this audit report.	




	Appendix 2

PRIOR AUDITS

We reviewed audit reports issued as far back as 1993 by our office; the Government Accountability Office (GAO); and KPMG LLP, a certified public accounting firm, that made recommendations similar to those in this audit report.  

> In March 1993, we issued a report titled Management of Hazardous Materials by the Department of the Interior.  The key issues in the report were:

* The Department had not identified the majority of suspected hazardous materials sites.

* Individual bureaus within the Department conducted the site identification and inventory process in an inconsistent, uncoordinated manner, with minimal Departmental guidance.

* Contaminated sites were not always prioritized to ensure that the most serious situations would be corrected first.

	The audit report recommended that the Department:

* Direct the bureaus to develop actions plans to ensure that hazardous materials site inventories are completed.

* Require the Office of Environmental Affairs (currently the Office of Environmental Policy and Compliance) to develop and implement Department-wide inventory guidelines and procedures to ensure that the bureaus conduct comprehensive inventories.

* Require the Office of Environmental Affairs to develop and implement a Department-wide prioritization system.

* Authorize and require the Office of Environmental Affairs to perform independent oversight of bureausï¿½ hazardous materials site inventory, evaluation, prioritization, and cleanup activities.

* Provide the Office of Environmental Affairs with necessary resources, both funding and staffing, to accomplish its additional Hazardous Materials Program oversight and reporting responsibilities.



> In July 1994, GAO issued a report titled Federal Facilities: Agencies Slow to Define the Scope and Cost of Hazardous Waste Cleanups.  The key issues in this report that related to DOI contaminated site management were:

* Inventories of hazardous materials sites were still incomplete for some of the Departmentï¿½s agencies. 

* BLM and FWS lack a comprehensive program for identifying hazardous sites.

* Studies by Congressional committees and the Department concluded that, despite the possible enormity of cleanup problems, the Departmentï¿½s agencies have failed to adequately identify and address problems of hazardous materials contamination on their lands.

GAO recommended that Congress amend CERCLA to require agencies to submit to EPA plans for completing their hazardous materials site inventories, reporting annually on the progress of implementation of their plans, and to develop and report estimates of total costs to cleanup their potential hazardous materials sites.

> In June 1996, GAO issued a report titled Federal Facilities:  Consistent, Relative Risk Evaluations Needed for Prioritizing Cleanups.  The key issues in the report that related to DOI contaminated site management were:

* The Department had developed a centralized process for setting priorities for Central Hazardous Material Fund (CHF) sites, but bureaus set priorities for all other sites.  

* The Department cannot fully set priorities without a complete inventory of contaminated sites and adequate data on the risks at these sites.

* The Department does not adequately evaluate the relative risks of its sites Department-wide.

GAO suggested that Congress consider amending CERCLA to require federal agencies to develop a consistent process for assessing and ranking the relative risks of hazardous materials sites and to employ this process as a factor in setting priorities for federal hazardous materials cleanups nationwide.

> In April 1999, GAO issued a report titled Superfund:  Progress Made by EPA and other Federal Agencies to Resolve Program Management Issues.  The key issues in the report that related to DOI contaminated site management were:

* BLM has not set nationwide cleanup priorities because it has not yet developed an overall cleanup strategy or a comprehensive inventory of its hazardous materials sites, estimated to cost billions of dollars to address.  GAO first identified this problem in a report issued in 1987.

> In the FY 2002 annual financial statement audit, KPMG reported that there were weaknesses in the Departmentï¿½s controls over environmental liabilities.  KPMG reported that the Department of the Interior:

* Had not fully developed policies and procedures for estimating environmental liabilities.

* Did not have a prioritized list of cleanup activities, planned cost studies, and projects by risk score factor.

* Did not provide sufficient direction to regional locations to prepare and submit funding requests and to communicate funding results back to the regions.

* Did not have policies to ensure identification of the responsible party for environmental liabilities.

* Did not consistently apply the same methodology to estimate liabilities.

* Did not have a sufficient number of specialists to assist with the cost estimation process and monitor cleanup efforts.

* Had not developed a Departmental prioritized cleanup plan or developed and communicated policies on preparing and submitting funding requests.

* Did not require its components to apply the same methodology to estimate liabilities.

> In the FY 2003 annual financial statement audit, KPMG reported that there were weaknesses in the Departmentï¿½s controls over environmental liabilities.  KPMG reported that the Department of the Interior did not:

* Consistently research and document the basis for changes to environmental liabilities.

* Consistently apply policies for estimating environmental liabilities.

* Provide periodic training to scientists, financial management staff, and others to ensure that they understand the Departmentï¿½s and federal accounting standards on environmental liabilities.

* Establish controls to ensure that changes in environmental liabilities are properly researched, supported, and recorded.

Appendix 3

LOCATIONS VISITED/CONTACTED


Department of Health and Human Services

Office of Tribal Programs	Rockville, Maryland*

Department of the Interior

Office of the Secretary

Office of Environmental Policy and Compliance	Washington, DC
Office of the Solicitor	Washington, DC*

Bureau of Indian Affairs

Division of Accounting Management	Washington, DC*
Division of Energy and Minerals Resources	Lakewood, CO
Division of Environmental and Cultural 
   Resources Management	Washington, DC*
Eastern Oklahoma Region Office	Muskogee, OK*
Jicarilla Agency Office	Dulce, NM*
Navajo Region Office	Gallup, NM
Northern Pueblos Agency	Espanola, NM*
Northwest Region Office	Portland, OR
Office of Facilities Management and Construction	Albuquerque, NM*
Rocky Mountain Region Office	Billings, MT*
Southern Pueblos Agency	Albuquerque, NM
Southwest Region Office	Albuquerque, NM
Western Region Office	Phoenix, AZ

Bureau of Land Management

Alaska State Office 	Anchorage, AK
Arizona State Office	Phoenix, AZ*
Bakersfield Field Office	Bakersfield, CA*
California Desert District	Moreno Valley, CA*
California State Office	Sacramento, CA
Carson City Field Office	Carson City, NV


* Offices contacted only.

Colorado State Office	Lakewood, CO
Folsom Field Office	Folsom, CA
Grand Junction Field Office	Grand Junction, CO
Lands & Realty Group	Washington, DC*
Miles City Field Office	Miles City, MT*
Nevada State Office	Reno, NV
Rio Puerco Field Office	Albuquerque, NM*
Tucson Field Office	Tucson, AZ
Uncompahgre Field Office	Montrose, CO
Wyoming State Office	Cheyenne, WY

Fish and Wildlife Service

Atchafalaya, National Wildlife Refuge	Lacombe, LA
Delta National Wildlife Refuge	Venice, LA
Division of Engineering	Lakewood, CO
Division of Environmental Quality	Arlington, VA
J. Clark Salyer, National Wildlife Refuge	Upham, ND
North Louisiana Refuge Complex	Farmerville, LA*
Southeast Regional Office	Atlanta, GA*
Southwest Regional Office	Albuquerque, NM*
St. Catherine Creek Refuge	Sibley, MS*
Upper Souris, National Wildlife Refuge	Berthold, ND

National Park Service

Alaska Region	Anchorage, AK
Attorney Advisor's Office	Boulder, CO
Environmental Management Program Staff	Boulder, CO
Gateway National Recreation Area	Staten Island, NY
Grand Teton National Park	Jackson's Hole, WY
Intermountain Region	Lakewood, CO
Lassen Volcanic National Park	Mineral, CA
Mojave National Preserve	Barstow, CA
Mt. Rainier National Park	Ashford, WA
Olympic National Park	Port Angeles, WA
Pacific West Region Office	Oakland, CA*
Valley Forge National Historic Park	Valley Forge, PA
Whiskeytown National Recreation Area	Whiskeytown, CA
Washington Office	Washington, DC*
Yellowstone National Park	Yellowstone National Park,
	   WY

* Offices contacted only.


Office of Surface Mining

Division of Technical Support	Washington, DC*

Indian Tribal Governments

Navajo Environmental Protection Agency	Window Rock, AZ
Pueblo of Acoma	Acoma, NM

Local Governments

Pima County Parks and Recreation			Tucson, AZ	
Tucson Unified School District			Tucson, AZ
	
Private Organizations

National Tribal Environmental Council	Albuquerque, NM 



























* Offices contacted only.

Appendix 4




EPA OIGï¿½s Evaluation Report 















































Appendix 7

STATUS OF AUDIT RECOMMENDATIONS




Recommendations

Status
Action Required
1
Management concurs; additional information needed.
Provide the DOI Deputy Assistant Secretariesï¿½ Advisory Group on Environmental Policy and Compliance (DAS group) decision that OEPC implement the recommendation to develop and implement uniform policies and procedures for bureaus to both identify and prioritize hazardous sites and an estimated target date and titles of officials responsible for implementation.

2
Management concurs; additional information needed. 
Provide the DAS group decision that OEPC oversee the bureausï¿½ actions to ensure compliance with policy and procedures and an estimated target date and titles of officials responsible for implementation.   

3, 4, 5, 6, 7
Resolved; not implemented
No further response to the Office of Inspector General is required.  The recommendations will be referred to the Departmentï¿½s Focus Leader for Management Accountability and Audit Follow-up for tracking of implementation.
		
		
       
       	
       
       	

		




1 The DOI may not be solely responsible for these estimated costs.  Other parties may have been responsible for the contamination at these sites and may be responsible for all or part of site remediation.
2 On March 15, 2005, the OIG issued a flash report (C-IN-BLM-0013-2005) identifying public safety issues at this site.  The report made four recommendations to correct the safety issues and protect the public.  In its response to our report, BLM agreed to take appropriate action to address the recommendations.

3 Our audit showed that the Environmental Cleanup Liabilities Database (ECL) is incorrect and does not include all known hazardous materials sites (see p. 7).
4 For purposes of our audit we defined a suspected hazardous materials site as a site identified by the public or Departmental employees where there has been a suspected release of hazardous materials or other contamination.  These sites need to be included in the Departmentï¿½s inventory so that the sites can be prioritized and funded for testing and assessment.
5 The BOR completed the Department of the Interiorï¿½s Central Hazardous Materials Fund Program Review in December 2003.  The objectives of the review were to review and document the DOIï¿½s CHF objectives and programmatic procedures and to evaluate the effectiveness of the program.  
6 Hazardous materials sites may be assigned a financial liability code of probable, reasonably probable, or remote.  Probable means that the future outflow or other sacrifice of resources is more likely to occur than not, and cost estimates for these hazardous materials sites are accrued in the financial statements.  Reasonably probable means that the chance of future outflow or other sacrifice of resources is more than remote but less than probable.  Cost estimates for reasonably probable hazardous materials sites are disclosed in the financial statements.  Remote means that the chance of future outflows occurring is slight and cost estimates for these hazardous materials sites are neither accrued nor disclosed in the financial statements.  
??

??

??

??

i







48


47