EPA Cost Estimates Are Not Reliable or Timely

AFMD-92-40: Published: Jul 1, 1992. Publicly Released: Jul 1, 1992.

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GAO provided information on the Environmental Protection Agency's (EPA) Superfund Program, focusing on whether EPA reporting of Superfund's estimated funding is reasonable.

GAO found that: (1) EPA Superfund cost estimates are not reliable or useful for overseeing costs or making funding decisions; (2) EPA substantially understates Superfund cost estimates and is often over a year late in issuing required cost estimates; (3) Superfund cost estimates often exclude future National Priorities List (NPL) sites and do not reflect realistic costs to complete site cleanup efforts; (4) EPA does not use available forecast management techniques to estimate future costs; (5) Congress has authorized $15.2 billion for Superfund, but EPA has advised Congress that it would need $26.4 billion for hazardous waste cleanup; (6) EPA estimates that an additional 1,000 Superfund clean-up sites by 2000 would require about $11 billion and total Superfund costs are likely greater than EPA reports; and (7) the EPA Chief Financial Officer (CFO) and Inspector General do not monitor the reliability of Superfund cost estimates prepared by program managers.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: EPA disagreed with this recommendation. However, EPA has indicated that it will: (1) review the idea of expanding the cost analysis to include future costs; and (2) begin summarizing cost growth analysis using a larger universe and continually update its cost growth assumption.

    Recommendation: To improve the usefulness of estimates to complete hazardous waste site cleanup, the Administrator, EPA, should require the Assistant Administrator for Solid Waste and Emergency Response to: (1) report the estimates in categories showing those currently on NPL, those to be added over a certain period, such as the next 10 years, and those to be added in the more distant future; (2) substantiate and document as reasonable, the factor used in preparing the estimates to reflect the growth in the cost of clean-up projects underway; and (3) use forecast management practices, such as identifying forecast errors, in developing the estimates.

    Agency Affected: Environmental Protection Agency

  2. Status: Closed - Implemented

    Comments: EPA agrees with the thrust of this recommendation and, in its CFO organization plan (revised June 1993), the Administrator provided the CFO authority to direct, manage and provide policy guidance and oversight of agency financial management activities and operations. Developing cost estimates is a financial management activity. EPA believes that to fully implement this recommendation would require a sophisticated cost accounting system. During fiscal year 1995, EPA completed the design, test, and implementation of a new cost accounting system. However, EPA does not expect agencywide use of the system to occur until later in fiscal year 1996.

    Recommendation: To help ensure the reliability and timeliness of Superfund cost estimates, the Administrator, EPA, should provide CFO authority and responsibility, as envisioned in the CFO Act, for providing guidance on preparing the estimates and monitoring the results.

    Agency Affected: Environmental Protection Agency

  3. Status: Closed - Not Implemented

    Comments: EPA agrees that reporting information on the estimated cost of hazardous waste site cleanup is an appropriate role for the CFO. However, EPA believes that it is first necessary for the agency to be able to develop reliable cost estimates which depends on having a cost accounting system that is in place and operating. Such a system became operational on October 1, 1995. Also, a new module is being developed to bring cost and program data together and is expected to be implemented in fiscal year 1996, if funds are available. EPA expects agencywide use of the new system to occur in fiscal year 1996 and reliable cost estimates to be available shortly thereafter.

    Recommendation: To help ensure the reliability and timeliness of Superfund cost estimates, the Administrator, EPA, should direct CFO to disclose in the Superfund financial statement overview, information on the estimated cost of hazardous waste site cleanup.

    Agency Affected: Environmental Protection Agency


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