U.S. Coast Guard National Pollution Funds Center:

Improved Controls Needed for Oil Removal Disbursements and Action Needed for Sustainable Funding

GAO-15-682: Published: Sep 15, 2015. Publicly Released: Sep 15, 2015.

Additional Materials:

Contact:

Beryl H. Davis
(202) 512-2623
davisbh@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The U.S. Coast Guard's National Pollution Funds Center (NPFC) has responsibility for disbursements from the Oil Spill Liability Trust Fund (Fund).The Fund enables the Coast Guard and the Environmental Protection Agency (EPA) to respond to oil spills. The Oil Pollution Act of 1990 (OPA) authorizes the Fund to pay for certain damage claims and oil removal costs. The federal government may subsequently seek reimbursement of these costs from responsible parties.

Damage claims. GAO found that for fiscal years 2011 through 2013, internal controls were designed and implemented to reasonably assure that damage claim expenses were appropriately disbursed from the Fund.

Oil removal. GAO identified several internal control deficiencies, which demonstrated that NPFC was unable to reasonably assure that oil removal disbursements were appropriately disbursed from the Fund. GAO's statistical tests of oil removal disbursements less than or equal to $500,000 identified design and implementation control deficiencies involving invoices that lacked required certifications, high visibility spills that were not identified, and missing supporting documentation for some costs. Also, GAO identified other issues, including that NPFC lacked policies and procedures for tracking and reconciling cash advances to EPA.

NPFC has established a system of internal controls for the designation and billing, as appropriate, of responsible parties. For fiscal years 2011 through 2013, GAO determined for the amounts over $500,000 that NPFC designed and implemented internal controls to provide reasonable assurance that responsible parties were designated and billed, as appropriate, for damage claim and oil removal disbursements.

For fiscal years 2011 through 2013, the Fund disbursed over $360 million, not including disbursements related to the Deepwater Horizon oil spill. During the period, not including the Deepwater Horizon oil spill, NPFC billed $272 million to responsible parties and collected $39 million. GAO found that NPFC was unable to bill for a large percentage of the damage claim and oil removal disbursements over $500,000 because the responsible party had reached its limit of liability, not all elements of liability were established, or the source of the spill could not be identified.

OPA authorizes using the Fund for immediate response costs and when responsible parties cannot be identified or pay. GAO analyzed the Fund's sources of income and found the 8-cent per-barrel tax on petroleum products is relied on as the primary, consistent source of funding because the Fund has disbursed more funding than it has been able to recover. This is because the Fund is not reimbursed for certain damage claim and oil removal costs, as noted above. The average amount of the Fund's revenue from the per-barrel tax was 60 percent of the total revenue for fiscal years 2011 through 2013. The per-barrel tax is set to expire at the end of 2017, creating uncertainty with regard to future revenue sources for the Fund. As of September 30, 2014, the Fund's balance was about $4.6 billion, which reflects approximately $1.3 billion in fines from the Deepwater Horizon oil spill. However, these fines are not a consistent funding source.

Why GAO Did This Study

The Coast Guard Authorization Act of 2010 included a provision for GAO to examine NPFC. This report addresses the extent to which (1) NPFC has designed and implemented internal controls over damage claim and oil removal disbursements to reasonably assure that amounts are appropriately disbursed from the Fund; (2) NPFC has designed and implemented internal controls to reasonably assure that responsible parties are designated and billed, as appropriate, for disbursements from the Fund that are over $500,000; and (3) the Fund was reimbursed for damage claim and oil removal costs in fiscal years 2011 through 2013. GAO also reviewed the Fund's primary source of revenues.

GAO obtained and analyzed data on damage claim and oil removal disbursements from fiscal years 2011 through 2013. GAO also obtained and analyzed data on billings and collections for fiscal years 2011 through August 2014 in order to determine which disbursements had been billed and paid. GAO reviewed relevant policies and procedures and interviewed officials and staff at the Coast Guard and EPA.

What GAO Recommends

Congress should consider options for sustaining the Fund, as well as the optimal level of funding, to address uncertainty regarding future funding. In addition, GAO is making several recommendations to improve the U.S. Coast Guard's internal controls for oil removal disbursements from the Fund. The Department of Homeland Security concurred with the recommendations and described actions taken or planned for each recommendation.

For more information, contact Beryl H. Davis at (202) 512-2623 or davisbh@gao.gov.

Matter for Congressional Consideration

  1. Status: Open

    Comments: We will continue to monitor the funding status.

    Matter: Congress should consider the options for sustaining the Oil Spill Liability Trust Fund as well as the optimal level of funding to be maintained in the Fund, in light of the expiration of the Fund's per-barrel tax funding source in 2017.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard National Pollution Fund Center (NPFC), we reported that some invoices for oil removal disbursements were not properly certified. Certification of invoices is an important internal control as it reduces the risk of processing ineligible invoices. We recommended that the Commandant of the Coast Guard develop and implement a plan to reasonably assure that NPFC staff comply with invoice certification policies and procedures. In October 2015, the U.S. Coast Guard issued new policies and guidance, stating that the Federal On Scene Coordinator (FOSC) must certify the invoice and associated cost documentation before reimbursement is made. Further, the Case Officer must review the documentation provided by the FOSC, thus establishing a process where two persons in two different positions must review the transaction before payment is authorized. The new policies and guidance should reduce the risk of payments being made on ineligible invoices.

    Recommendation: To improve the design and implementation of NPFC's internal controls over Fund disbursements, the Secretary of Homeland Security should direct the Commandant of the Coast Guard to develop and implement a plan to reasonably assure that NPFC staff comply with invoice certification policies and procedures.

    Agency Affected: Department of Homeland Security

  2. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard (USCG) National Pollution Funds Center (NPFC), we found that NPFC did not have policies and procedures for supervisory review of the filing process to ensure that documentation is properly maintained. We recommended that the Coast Guard develop and implement policies and procedures for the consistent supervisory oversight of the filing process related to transaction documentation. In response, the NPFC updated the "Closed Case Checklist" to document the supervisory review of the case closure process for every case, and the date of that review. If effectively implemented, the new checklist should improve the NPFC's internal controls over fund disbursement and documentation.

    Recommendation: To improve the design and implementation of NPFC's internal controls over Fund disbursements, the Secretary of Homeland Security should develop and implement policies and procedures for reasonably assuring consistent supervisory oversight of the filing process related to transaction documentation.

    Agency Affected: Department of Homeland Security

  3. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard (USCG) National Pollution Fund Center (NPFC), we recommended that NPFC's high visibility oil spill policy be updated to reflect management's current practice of weekly meetings to identify and discuss such spills. In October 2015, the NPFC Director approved an updated policy for briefing on high visibility incidents (such as those that are reported in the media, require substantial support, or involve disputes with other agencies) and recording the briefings in Senior Staff minutes. This policy should reasonably assure that the high visibility spills are identified and discussed and does respond to the recommendation.

    Recommendation: To improve the design and implementation of NPFC's internal controls over Fund disbursements, the Secretary of Homeland Security should update NPFC's high visibility oil spill policy to reasonably assure that it reflects management's current practice of weekly meetings to identify and discuss high visibility oil spills.

    Agency Affected: Department of Homeland Security

  4. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard National Pollution Funds Center (NPFC), we reported that the NPFC lacked policies and procedures for tracking and reconciling cash advances to the Environmental Protection Agency (EPA). Specifically, NPFC did not verify amounts supporting the EPA cash advances or maintain documentation supporting those advances. We recommended that the Coast Guard develop policies and procedures for processing NPFC cash advances, including processes for (1) tracking advances, (2) reconciling advances to expenditures, (3) approving the liquidation of an advance, and (4) maintaining supporting documentation. In response, in February 2016 the NPFC approved and issued a new standard operating procedures titled "Providing and Managing United States Environmental Protection Agency Advance." The guidance lists the steps to be followed in processing and tracking advances, reviewing cost documentation, liquidating advances, and documenting the entire process. If effectively implemented, the new guidance and procedures should improve NPFC's internal controls over fund disbursements.

    Recommendation: To improve the design and implementation of NPFC's internal controls over Fund disbursements, the Secretary of Homeland Security should develop policies and procedures for processing of cash advances from the Fund, covering processes for (1) tracking the amounts advanced, (2) reconciling amounts advanced to amounts spent, (3) providing approval to the Finance Center to liquidate an advance, and (4) maintaining supporting documentation.

    Agency Affected: Department of Homeland Security

  5. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard National Pollution Fund Center (NPFC), we found that the Shore Infrastructure Logistics Center (SILC) did not have documented policies and procedures to reasonably assure that available vendor discounts are identified and used, thus increasing the risk of missing opportunities to save the government money. We recommended that the Commandant of the Coast Guard develop and implement policies and procedures related to identifying available vendor discounts. In August 2015, the U. S. Coast Guard issued new guidance that updated its checklists for invoice payment and closeout, task orders, and purchase orders by adding a line to identify prompt payment discounts. The guidance further stated that the new checklists were effective immediately and should be included in all case folders. The new guidance should ensure that the government pays the lowest price possible for goods and work received and adequately addresses our recommendation.

    Recommendation: To improve the design and implementation of SILC's internal controls over Fund disbursements, the Secretary of Homeland Security should direct the Commandant of the Coast Guard to develop and implement policies and procedures related to identifying available vendor discounts.

    Agency Affected: Department of Homeland Security

  6. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard National Pollution Fund Center (NPFC), we reported that the Shore Infrastructure Logistics Center (SILC) did not have documented policies and procedures to reasonably assure that invoice amounts are correctly calculated, increasing the risk of overpayments. We recommended that the Commandant of the Coast Guard develop and implement policies and procedures to reasonably assure that all amounts presented on the invoice are calculated correctly. In August 2015 - prior to our report's issuance - the U.S. Coast Guard issued new guidance stating that the Contract Specialist is responsible for ensuring that calculations on invoices are correct and that errors found should be documented in a memo or email to the contractor. If no reply is received from the contractor, the invoice will be rejected. The new guidance should ensure that amounts on all invoices are properly calculated and documented.

    Recommendation: To improve the design and implementation of SILC's internal controls over Fund disbursements, the Secretary of Homeland Security should direct the Commandant of the Coast Guard to develop and implement policies and procedures to reasonably assure that all amounts presented on an invoice are calculated correctly.

    Agency Affected: Department of Homeland Security

  7. Status: Closed - Implemented

    Comments: In GAO's September 2015 report on the U.S. Coast Guard (USCG) National Pollution Fund Center (NPFC), we found a lack of policies and procedures for taking advantage of discounts offered by various vendors. To encourage faster payments, some vendors will offer cash discounts on amounts owed when a customer pays within specified time frames. However, we found that available vendor discounts were not being consistently identified and that the USCG's Finance Center was not taking advantage of the existing discounts. As a result, the USCG may have overpaid for goods and services. We recommended that the USCG develop and implement a mechanism to reasonably assure that procedures for processing available discounts related to fund disbursements are followed. In response, in December 2015 the USCG's Finance Center updated its Contracts Desk Guide's standard operating procedures, including the process map, discount tracking, and the checklist for processing discounts. The updated guidance included information on the use of discounts and required that discounts be verified prior to the approval of invoices. If effectively implemented, the new guidance should ensure that the NPFC does not overpay for goods and services purchased.

    Recommendation: The Secretary of Homeland Security should direct the Commandant of the Coast Guard to develop and implement a mechanism for the Finance Center to reasonably assure that its procedures for processing available discounts related to Fund disbursements are followed.

    Agency Affected: Department of Homeland Security

 

Explore the full database of GAO's Open Recommendations »

Nov 16, 2017

Nov 15, 2017

Nov 9, 2017

Oct 20, 2017

Sep 26, 2017

Looking for more? Browse all our products here