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Highlights

The Oil Spill Liability Trust Fund (Fund) is a $1 billion fund authorized by the Oil Pollution Act of 1990 (OPA) to pay for (1) federal removal actions, (2) certain claims for uncompensated removal costs and damages,and (3) natural resource damage and restoration activities resulting from oil spills or the substantial threat of oil spills to the waters or shorelines of the United States. The Fund is administered by the National Pollution Funds Center (NPFC) of the U.S. Coast Guard. In May 2002, our Office of General Counsel reported on legal issues and limitations of the Fund and concluded that certain administrative costs were inappropriately being paid out of the Fund. In light of this conclusion, we reviewed the internal controls over disbursements from the Fund. Specifically, we reviewed the Fund to determine whether (1) the design of internal controls over the claims process provides reasonable assurance that improper payments will not occur or will be detected in the normal course of business and (2) internal controls over the claims process are operating as designed to help ensure proper payment of claims.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
United States Coast Guard 1. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to require automatic control numbers for each ATP form.
Closed - Implemented
NPFC now has a mechanism that establishes control numbers in a systematic fashion. Control Numbers are established manually by one of two people and are added to the authorization to pay claim forms (ATPs). These control numbers and other information are reviewed by NPFC Financial Management Division personnel using the control log, to which they have read only access.
United States Coast Guard 2. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to limit access to the ATP form control numbers to one individual and an alternate in each claims division.
Closed - Implemented
NPFC established one lead person in each of the two claim divisions to establish ATP control numbers. The person that establishes control numbers in one claim division is the backup for establishing control numbers for the other claim division.
United States Coast Guard 3. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to require two signatures on each ATP form, one for the preparer and one for the approver.
Closed - Implemented
NPFC policies now require both the preparer and approver signatures on each ATP, and this policy has been implemented.
United States Coast Guard 4. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to establish procedures requiring the National Pollution Funds Center to authenticate ATP forms prior to submitting them to the U.S. Coast Guard Finance Center for payment.
Closed - Implemented
NPFC's Financial Management Division now authenticates the information on every ATP and faxes the ATPs to the U.S. Coast Guard Finance Center.
United States Coast Guard 5. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to establish and implement controls so that any required legal reviews of claims are completed before they are approved for payment.
Closed - Implemented
NPFC now requires a checklist to be filled out that states whether a legal review is required and if so, that the legal review has been completed before a claim payment can be made.
United States Coast Guard 6. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to establish and implement controls to ensure that a release form is received from a claimant before a claim can be approved for payment.
Closed - Implemented
NPFC implemented procedures requiring receipt of the release form before a control number can be established and a claim form can be prepared and processed.
United States Coast Guard 7. To improve the design of internal controls over the claims process, the Commandant of the U.S. Coast Guard should direct the Director of the National Pollution Funds Center to modify the claims processing system to consistently identify the originator of all actions on user screens.
Closed - Implemented
NPFC has modified the claims processing system to identify the originator of all actions on user screens.
United States Coast Guard 8. The Commandant of the U.S. Coast Guard should direct the Chief Financial Officer of the U.S. Coast Guard to require that the Finance Center verify the validity of ATP forms prior to processing claim payments.
Closed - Implemented
The U.S. Coast Guard Finance Center now verifies that the signatures on the ATPs are authorized and that the ATPs have been received from the National Pollution Fund Center's Financial Management Division.

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