OPA authorizes use of the Fund, subject to limitations on the amount and  types of costs, to pay specified damage claims above a responsible  party’s liability limit, to pay damage claims or removal costs when a  responsible party does not pay or cannot be identified, and to pursue  reimbursement from the responsible party for oil removal and damage  claims paid by the Fund. The Fund’s primary revenue source is an 8-cent per-barrel tax on both  domestically produced and imported petroleum products. These included missing invoice certifications,  missing supporting cost documentation, and high visibility spills not  identified. NPFC’s Design and Implementation of Internal Controls for Its Damage Claim Disbursements Provide Reasonable Assurance That Expenses Are Appropriately Disbursed from the Fund

Our testing of the 27 selected high dollar damage claim disbursements,  which accounted for 93 percent of the total damage claim disbursements  for fiscal years 2011 through 2013, found that the design and  implementation of relevant key controls provide reasonable assurance  that damage claim expenses are appropriately disbursed. NPFC Controls Provide Reasonable Assurance That Responsible Parties Were Designated and Billed for Damage Claim and Oil Removal Disbursements over $500,000

NPFC has established a system of internal controls over designation and  billing of responsible parties for damage claim and oil removal  disbursements that are over $500,000. We determined that the  internal controls provided reasonable assurance that the responsible  parties were designated and billed, as appropriate, for the oil removal  disbursements that are over $500,000. The Fund Has Received Limited Reimbursement for Damage Claim and Oil Removal Disbursements, and Certain Revenue Sources for the Fund Are Set to Expire

NPFC disbursed in total over $360 million from the Fund for damage  claim and oil removal costs in fiscal years 2011 through 2013. We found  that NPFC was unable to bill for a large percentage of high dollar claim  disbursements because either the responsible parties had reached their  limit of liability or the spills were classified as mystery spills. Amounts Billed to and Collected from Responsible Parties in Fiscal Years 2011 through 2013

As shown in table 3, NPFC sent bills to responsible parties totaling   $272 million and collected $39 million in total for fiscal years 2011 through  2013 for both damage claim and oil removal disbursements. During fiscal year 2014, NPFC reported 408 oil spills;  the Coast Guard and EPA responded to 324 of these. 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. Although the Fund’s balance was about $4.6 billion as of September 30,  2014, the potential for large spills exists, and if a responsible party is  unwilling, unable, or not required to pay, the Fund will be needed to pay  for the cleanup, including removal costs and damage claims. Because the Fund has  disbursed more funding than it has been able to recover, its primary  source of funding has been the per-barrel oil tax. However, the per-barrel  oil tax is set to expire in 2017, creating uncertainty with regard to future  funding. Matter for Congressional Consideration

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. Develop and implement policies and procedures related to identifying  available vendor discounts. In written comments, reprinted in  appendix IV, the Department of Homeland Security concurred with our  recommendations and described actions taken or planned to address  each recommendation. GAO staff who made key contributions to this report  are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

The Coast Guard Authorization Act of 2010 included a provision for GAO  to conduct an audit of Oil Spill Liability Trust Fund (Fund) disbursements. This report examines the extent to which (1) the National Pollution Funds  Center (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. To determine whether the design of existing internal controls over the  damage claim and oil removal processes assure that amounts are  appropriately disbursed from the Fund, we (1) reviewed OPA and other  federal laws and regulations to obtain an understanding of allowed costs,  (2) reviewed Standards for Internal Control in the Federal Government  and evaluated the policies and procedures NPFC has in place for  damage claim and oil removal disbursements, (3) evaluated potential  risks and the effectiveness of NPFC’s controls to mitigate those risks   (4) interviewed NPFC officials and staff, and (5) performed walk-throughs  of the damage claim and oil removal processes.
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 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.

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.