278 



• Existing response action contracts will be renegotiated within 180 days to in- 

 corporate limitations and deductibles as specified in the Guidelines (e.g., maxi- 

 mum indemniflcation is $75 million for large, 5-year contracts, with a $3.2 mil- 

 lion deductible). 



To reduce Sup)erfund's exposure to unlimited liabilities, I intend to implement 

 these guidelines. 



Q. 14: In 1991, EPA's Inspector General found that an integrated flnancial man- 

 agement system had still not been implemented at the Agency because of inad- 

 equate resources and management attention. What is the priority you attach to 

 this effort and what role will the Senior Council on Management Controls play? 



A. 14: The full implementation of the Agency's Integrated Financial Management 

 System (IFMS) received high priority in the fiscal year 1993 operating plan. Despite 

 the significant reduction taken in EPA's Management and Support budget this year, 

 we were able to hold the $5.4 million in contract funding set aside for IFMS harm- 

 less. 



We recognize there have been continual problems, and for the first time reported 

 certain aspects of IFMS as material weaknesses in the Agency's December, 1992, 

 FMFIA Assurance letter sent to the President and Congress. The Senior Council on 

 Management Controls and the IG were actively involved in the process which iden- 

 tified both accounts receivable and accounting system, and related financial man- 

 agement problems as reportable material weaknesses. 



We have developed corrective action plans with timetables to rectify these prob- 

 lems. The Senior Council on Management Controls will be briefed during their quar- 

 terly meetings, and will be actively involved in monitoring the plans and helping to 

 resolve any roadblocks we may encounter. 



Q. 15: This lack of follow -through also characterizes EPA's enforcement pro- 

 gram. After numerous government reviews pointing out that EPA's regional of- 

 fices were not assessing penalties against violators at least as great as the amount 

 by which the companies benefit by not being in compliance, the agency sent 

 around a memo urging them to adhere to agency policies and to document reasons 

 for any penalty reductions. However, as GAO reported to us last month, little has 

 changed; two-thirds of closed cases did not document penalty calculations. What 

 will the new Department do about this very important problem? 



A. 15: Of^ce of Enforcement believes that the cases identified by GAO as lacking 

 documentation of economic benefit were largely matters in which the economic ben- 

 efit component was nominal and thus not required. Unfortunately, there was no ref- 

 erence in the case file to the determination regarding whether to seek to recover 

 the economic benefit. To address this concern, we will issue guidance that clarifies 

 the need to document the economic benefit determination whether or not its recov- 

 ery is required based on the facts of the particular matter. This documentation will 

 be included in the case file along with the other penalty documentation. EPA con- 

 tinues to pay close attention to the issue of penalty documentation. On August 9, 

 1990, for example, the Office of Enforcement issued a policy entitled "Documenting 

 Penalty Calculations and Justifications in EPA Enforcement Actions." This docu- 

 ment established a uniform system for documenting penalty calculations by requir- 

 ing the submission of a written "penalty justification" in every settlement package 

 submitted to Headquarters. OE requires that each case file, whether administrative 

 or civil judicial, contain documentation of the current bottom line settlement 

 amount agreed to by the members of the litigation team. With respect to civil judi- 

 cial cases, OE has been particularly successful in ensuring that the case files con- 

 tain penalty documentation. 



GAO's continuing concerns relate principally to administrative cases and revolve 

 around the failure to regularly document the economic benefit component of the 

 penalty calculation. Significantly, under its policies, EPA does not require recovery 

 of economic benefit in all cases. Where, for example, the economic benefit of non- 

 compliance is calculated to be under $5,000, economic benefit is deemed to be "nomi- 

 nal' and thus not a critical component of the penalty. 



Moreover, the Office of Enforcement is exploring vehicles for improving the moni- 

 toring of administrative penalty matters generally. One possibility may be to re- 

 quire that, upon settlement of administrative cases, OE, in coordination with the 

 appropriate Program office, will ask that the Regions send copies of the settlement 

 agreements to Headquarters. OE will monitor and review these case settlements to 

 ensure that national policy concerns, including penalty documentation, have been 

 met. In this way, OE will afford "real time" audit and monitoring of settlements. 



Q. 16: S. 171 includes a provision respecting EPA international activities and re- 

 sponsibilities. Specifically, the bill calls for the Secretary of Environment to assist 

 the Secretary of State in carrying out international negotiations and discussions 



