United States Office of EPA-350-K-00-001
Environmental Protection Inspector General (2441) May 2000
Agency Washington DC 20460
Office of Inspector General
Semiannual Report
to the Congress
October 1, 1999 through
March 31,2000
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During this semiannual period the Office of Inspector General (OIG)
continued to work with the Agency to address the key management
challenges we have identified through our audit efforts. This year we
added four new areas to the Agency's Top Ten Management Challenges list:
(1) improving the quality of laboratory data; (2) improving the Agency's
process for preparing the financial statements; (3) addressing the growing
backlog of five-year reviews; and (4) the slow progress made in restoring and
maintaining the integrity of the Great Lakes basin. We believe these and
previously identified areas need to be addressed in a timely manner so EPA
can continue to accomplish its environmental mission and achieve effective
management. OIG staff are committed to working collaboratively with EPA
and our external stakeholders to view environmental and management
challenges as opportunities for win-win solutions.
We have made progress in establishing an Office of Program Evaluation
within the OIG. The office will lead the design and implementation of program
evaluations, report to the Agency and Congress on the findings of those
evaluations, conduct research on methodology that can be used for evaluating
EPA's programs, and coordinate program evaluation activities within the OIG.
As part of our continuing efforts to improve our own performance, we
conducted an office-wide, intensive "Theory of Business" training program.
This training provided our staff information on business processes and
emphasized leadership, partnering, strategic planning, customer and
marketing approaches, best practices case studies, important internal process
improvements, and business results.
This report summarizes some of our most significant audits and investigations
during the six-month period:
• EPA does not have an effective biosolids program for ensuring safe
land application. While EPA promotes land application, EPA cannot assure
the public that current land application practices are protective of human
health and the environment.
• EPA did not submit timely and complete financial statements
resulting in a qualified opinion. Although EPA improved its financial statement
preparation process for FY 1999, EPA financial statements contained
significant errors and lacked accounting support.
• EPA improved its implementation of the Whistleblower Protection
Act. We found no indications that EPA failed to protect whistleblowers rights.
• The City of Cleveland settled a civil lawsuit charging that the City's
Air Pollution Control Program improperly spent more than $429,000 in grant
funds awarded by EPA. An amended complaint was filed by the United States
alleging that several of the City's Bureau of Pollution Control employees spent
only part or none of their time on air pollution prevention activities.
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• A former executive director of the North Ohio Valley Air Authority
(NOVAA) pleaded guilty to charges of accepting an unlawful gratuity as a
public official and conspiracy to defraud the government. NOVAA received
Federal funds from EPA through the Ohio Environmental Protection Agency.
As we begin the new millennium, the OIG remains dedicated to :
1) improving environmental quality and public health; 2) improving EPA's
management and program operations; and 3) producing timely, quality, and
cost effective products and services which meet our customers needs. I am
confident that the partnership we have created with EPA will continue to result
in mutual improvement and better environmental outcomes.
Nikki L. Tinsley
Inspector General
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Profile of Activities and Results
October 1, 1999 to March 31, 2000
Audit Operations ($ in millions)
OIG Managed Reviews:
Reviews Performed by EPA, Independent Public
Accountants and State Auditors
October 1, 1999
March 31,
2000
Questioned Costs *
- Total $49.4
- Federal 37.6
Recommended Efficiencies*
- Federal 0
Costs Disallowed to be Recovered
- Federal $14.9
Costs Disallowed as Cost Efficiency
- Federal 0
Reports Issued - OIG Managed Reviews:
- EPA Reviews Performed By OIG: 27
- EPA Reviews Performed by
- Independent Public Accountants: 0
- EPA Reviews Performed by
State Auditors: 0
Total 27
Reports Resolved (Agreement by Agency officials to take
satisfactory corrective action.) *** 100
Audit Operations ($ in millions)
Other Reviews:
Reviews Performed by Another Federal
Agency or Single Audit Act Auditors
October 1, 1999
March 31, 2000
Questioned Costs *
- Total $ 3.4
- Federal 3.4
Recommended Efficiencies*
- Federal $0
Costs Disallowed to be Recovered
- Federal $0.5
Costs Disallowed as Cost Efficiency
- Federal $0
Reports Issued - Other Reviews:
- EPA Reviews Performed by
Another Federal Agency: 269
- Single Audit Act Reviews: 57
Total 326
Agency Recoveries - Recoveries from Audit $4.1M
Resolutions of Current and Prior Periods
(cash collections or offsets to future payments.)**
Investigative Operations
Fines and Recoveries
(including civil) $7.5M
Investigations Opened 31
Investigations Closed 42
Indictments of Persons or Firms 17
Convictions of Persons or Firms 21
Administrative Actions Against 7
EPA Employees/ Firms
Civil Judgments 4
Fraud Detection and Prevention Operations
Hotline Cases Opened 50
Hotline Cases Processed and Closed 23
Legislative and Regulatory
Items Reviewed 32
* Questioned Costs and Recommended Efficiencies subject to change pending further review in the audit resolution process.
* * Information on recoveries from audit resolution is provided from EPA Financial Management Division and is unaudited
** * Reports resolved are subject to change pending further review.
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Table of Contents
Section 1-Helping EPA Achieve Its Environmental Goals and Improve Its
Programs
Program Audits and Investigations 1
Financial Management 11
Assistance Agreement Investigations 16
Contract Investigations 18
Hotline Activities 21
Section 2-Fostering Strong Working Relationships
Advisory and Assistance Service 22
Section 3- Operating at The Highest Performance Level
OIG Awards 24
Section 4-Audit Report Resolution and Summary of Investigative Results
Status Report on Perpetual Inventory of Reports in Resolution Process
for the Semiannual Period Ending March 31, 2000 25
Status of Management Decisions on IG Reports 26
Inspector General Issued Reports With Questioned Costs 26
Inspector General Issued Reports With Recommendations that Funds Be
Put to Better Use 27
Summary of Investigative Results 28
The complete text of selected audits is available through the EPA OIG
internet home page, http: // www.epa.gov/oigearth
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Section 1- Helping EPA Achieve Its Environmental Goals and Improve Its
Programs
Prosram Audits and Investigations
Although EPA promotes land application of biosolids (treated sewage sludge) rather
than landfilling or incineration, the Agency cannot assure the public that current land
application practices are protective of human health and the environment. EPA
performs few biosolids related inspections of publicly owned treatment work (POTW)
operations, virtually no inspections of land application sites, and few records
inspections at POTWs or land appliers. EPA regions do not maintain data on the
cumulative amounts of pollutants at land application sites despite its own requirement
to do so. The biosolids program has been delegated to only three states, and there is
virtually no federal oversight of state biosolids programs in nondelegated states.
Therefore, EPA does not have sufficient information to determine compliance levels
with its own regulatory requirements. This almost complete absence of a federal
presence results from the low priority given by EPA and the decision not to commit
enforcement resources to biosolids. EPA has stated that it has committed its
enforcement resources to priorities that have greater risks than biosolids.
Domestic sewage sludge is the solid, semi-solid, or liquid by-product generated
during the treatment of wastewater at municipal wastewater treatment plants. These
sewage treatment plants are referred to as POTWs. Biosolids refer to sewage sludge
that has been treated and can be beneficially recycled. Sludge also includes domestic
septage. If applied properly, biosolids help condition soil and provide a beneficial use
of waste.
EPA is required by the Government Performance and Results Act to measure the
results of its programs. EPA established a FY 1999 annual performance goal that
50% of biosolids be beneficially reused. However, EPA established this goal without
defining beneficial reuse. Also, the goal was established without identifying the
resources needed to achieve the goal, without clear guidance to the regions on what
data to gather, and without describing verification and validation procedures.
Consequently, EPA regions are measuring progress in different ways. Totaling these
inconsistent measurements does not provide a meaningful picture of the national state
of biosolids use and is not a useful decision making tool.
We recommended that the Assistant Administrators for OW and OECA provide, by
the end of fiscal 2001, an analysis of whether the Agency's proposed actions provide
a sufficient basis for assessing compliance with its requirements and assuring the
public of the protectiveness of land application practices. We also recommended that
the Assistant Administrator for Water define beneficial reuse, allocate the resources
necessary to determine progress toward the established goal, provide guidance to the
regions concerning what data should be collected and where collected data should
reside, and establish procedures to verify collected data.
PAGE 1 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Agency Action
We issued the final report (2000-P-10) to the Assistant Administrators for Water and
OECA on March 20, 2000. In response to the draft report, both Assistant
Administrators, citing budget constraints and relatively low environmental risk,
declined to invest additional resources in the biosolids program. EPA plans to
promote use of its new Biosolids Data Management System to store and monitor
biosolids data, to improve communications between the regions and states, to
maintain documentation of state activities for regulating and overseeing biosolids use,
and to develop audit protocols for assessing compliance with biosolids regulations. A
response to the final report is due June 19, 2000.
Progress with Hanford's Tank Waste Remediation System (TWRS) Program is not
sufficient to ensure compliance with the Resource Conservation and Recovery Act
(RCRA) and to protect human health and the environment. At least one million
gallons of highly toxic and radioactive waste from 67 of Hanford's 149 single shell
tanks (SSTs) has already leaked, and some of the waste has reached the groundwater.
There are about 54 million gallons of high level radioactive waste stored in Hanford
tanks. Continued delays in interim stabilization and in treatment and retrieval of the
tank wastes could result in the use of both the SSTs and double shell tanks (DSTs)
well beyond the established schedule. These delays could significantly increase the
risks of releases into the environment and threaten human health.
In 1989, the State of Washington's Department of Ecology (Ecology), EPA Region
10, and the Department of Energy (DOE) signed an agreement and consent order
requiring that DOE return its Hanford Federal Facility to compliance with RCRA and
the State's Hazardous Waste Management Act. The agreement also designated
Ecology as the lead regulatory agency for all Hanford SSTs and DSTs containing
hazardous and highly radioactive waste. DOE established the TWRS program for
Hanford to ensure that the tank waste is stored, treated, and immobilized in a safe,
environmentally sound, and cost-effective manner.
Region 10 and Ecology have not developed an effective oversight and enforcement
strategy. Ecology historically focused on negotiation to address agreement
compliance issues rather than formal enforcement. With support of the Region,
Ecology successfully resolved many issues through negotiation; however, additional
enforcement actions are needed. Ecology did not perform a sufficient number of
inspections even though seven of the eight inspections conducted during the prior
seven year period identified serious compliance issues.
Although the 1989 agreement established major milestones for stabilizing SSTs,
treating waste from SSTs and DSTs, and closing the SSTs, DOE has not complied
with these milestones. Interim stabilization of the SSTs consistently have been
missed and completion of interim stabilization will be delayed by nine years. The
start of treatment of tank wastes will be delayed at least four years and the completion
of treatment may be delayed up to 19 years. Retrieval of waste from, and the closure
of, all SSTs may be delayed at least 15 years and nine years, respectively.
OFFICE OF INSPECTOR GENERAL - PAGE 2
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We recommended that the Region 10 Administrator negotiate with Ecology to address
oversight and enforcement responsibilities regarding DOE compliance with the
agreement and RCRA requirements as part of the fiscal 2000/2001 performance
partnership process; consult with EPA National Program Managers to determine what
action can be taken at the EPA Headquarters to encourage DOE to assign a higher
priority to cleanup the Hanford tanks; and report the weaknesses in the Hanford
TWRS Program as a management control deficiency in the annual FMFIA assurance
letter.
Agency Action
We issued the final report (2000-P-00012) to the Region 10 Regional Administrator
on March 30, 2000. In a joint response to the draft report, the Region and Ecology
concurred with both the report facts and recommendations. A response to the final
report is due June 29, 2000.
EPA's Region 8 needs more security for its dial-up access and telecommunications
infrastructure. Without proper controls over dial-up access, confidential and sensitive
data is vulnerable to unauthorized disclosure during transmission over
telecommunication lines.
EPA's National Technology Services Division (NTSD) provides the centrally
managed automated data processing and telecommunications infrastructures required
to support the Agency's mission. NTSD did not plan to force dial-up access through
EPA's Internet Firewall, scheduled for implementation in April 2000. Although
Region 8 and NTSD management were tightening security controls, the current dial-
up access controls did not adequately secure access to the network. Region 8 did not
use advanced authentication techniques to protect the dial-up access to the Network.
Weak logical and physical access controls contributed to poor security over dial-up
access. Furthermore, the Region did not log and audit all dial-up attempts to their
system, nor did NTSD have any plans to help regional offices interpret logged data
captured at EPA's National Computer Center. Also, we discovered that some of the
Region's terminated employees still had access to the regional servers. These
weaknesses enable potential intruders to exploit external dial-up access points and
increase the vulnerability of regional data and EPA's network and national systems.
We recommended that EPA establish policies and procedures that access rights to
computer facilities are limited to proper personnel, that all dial-up connections pass
through the firewall, and periodic dial-up training be provided for all remote users.
PAGE 3 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Agency Action
We issued the final report (2000-P-16) to Region 8's Assistant Regional
Administrator (ARA) and the Director, NTSD on March 31, 2000. Both officials
responded favorably to the draft report recommendations. The ARA agreed to
implement all recommendations under the Regions' control and provided suitable
milestone dates for completion. The Director, NTSD stated that NTSD must review
various ways of implementing corrective actions before committing to a specific plan
of action. The response to the final report is due June 30, 2000.
EPA's policies adequately protect its whistleblower employees. The Agency satisfies
statutory requirements to inform employees of their rights and remedies.
The Whistleblower Protection Act (WPA) was established to strengthen and improve
protection rights of Federal employees, prevent reprisals, and help eliminate
wrongdoing within the Government. WPA mandates that employees should not suffer
adverse consequences as a result of prohibited personnel practices, such as retaliation
against whistleblowers. Employee protection provisions are also part of the six
environmental statutes.
Employees who believe they have been retaliated against for whistleblower activities
may file a complaint. The WPA does not require that agencies prepare a
whistleblower policy or establish training, but does require that employees are
informed of their rights and remedies.
During our review, EPA agreed to update its 1995 memorandum informing employees
of their rights and remedies under the WPA, and post it on EPA's Intranet. The
memorandum also reaffirms EPA's commitment to the protection of employee rights
under the whistleblower protection laws. We believe that the finalized memorandum
and proposed whistleblower training to be incorporated into the Agency's annual
ethics training will satisfy the Agency's requirement for informing employees of their
rights and remedies under whistleblower protection laws and provisions. We found
no indications that EPA failed to protect Whistleblowers rights.
For Headquarters and three regional offices, there were 23 whistleblower complaints
filed by 17 EPA employees during the past five years. Three of the 23 cases were
decided in favor of the employee with no disciplinary actions ordered against an EPA
supervisor or manager. In ten cases settled, EPA did not admit fault or recommend
disciplinary action.
OFFICE OF INSPECTOR GENERAL - PAGE 4
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Agency Action
We issued the final report (2000-S-2) to the Assistant Administrator for
Administration and Resources Management on October 20, 1999. We did not make
any formal recommendations, and therefore, no response was necessary. The report
was closed upon issuance. On April 3, 2000, the Agency issued a memorandum to all
employees reaffirming support for proper implementation of the WPA and providing
guidance on employee responsibilities and protections.
The National Environmental Performance Partnership System (NEPPS), including the
Performance Partnership Grant (PPG) program, has not been well-integrated into the
Environmental Protection Agency (EPA) and not all EPA managers and staff buy-into
or accept NEPPS. As a result, environmental improvements may not be happening as
rapidly or to as great an extent as they might be if there was better integration and
acceptance of NEPPS and meaningful performance measurement.
NEPPS requires a change in EPA organizational culture that has not yet occurred.
Regional NEPPS coordinators and headquarters staff have adopted NEPPS
components into their daily activities. However, many other EPA program managers
and staff have not integrated NEPPS into their day-to-day operations or into helping
them accomplish EPA's mission.
NEPPS was not we 11-integrated into EPA because of four factors: lack of (1)
leadership that provided a clear direction and set expectations, (2) training and
guidance, (3) trust in NEPPS due to fear of change and losing control, and (4) goals
and related performance measures to monitor and measure progress on achieving
better environmental results. EPA headquarters launched NEPPS without any
guidance for the Regions and the states, hoping to encourage innovation and
maximize flexibility. While some regional and state staff were able to use some new
innovative and flexible approaches to address environmental problems, the lack of
guidance, training, and clear direction resulted in many EPA and state staff having
widely different impressions and understanding of NEPPS and what it was designed
to accomplish.
EPA and states have not been able to redirect scarce resources to improving
environmental results. For many EPA regional managers and staff, NEPPS has not
focused on environmental results or deferred work that was not a priority. Instead,
NEPPs has been added to a long list of traditional work responsibilities. Further,
some regional program managers and staff viewed NEPPS as only a paperwork
exercise to get a performance partnership agreement in place.
We recommended that EPA work with EPA and state staff to establish clear direction,
expectations, goals, performance measures, and milestones for NEPPS and PPGs;
ensure the new NEPPS national program manager has full authority and responsibility
for implementing NEPPS and PPGs; train EPA and state staff; and develop a NEPPS
guidance document that considers the lessons learned to date.
PAGE 5 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Agency Action
We issued the final report (2000-M-000828-000011) to the Acting Deputy
Administrator on March 31, 2000. EPA has initiated some steps to better clarify its
directions for NEPPS. A response to the final report is due June 29, 2000.
In March 1994, we issued EPA's Pesticide Program (Report No. 4100205). We
recommended that the Office of Pesticide Programs (OPP) improve management
processes and information management; update regulations, policies, and procedures;
and continue efforts to ensure the integrity of scientific data. Our follow-up audit
found that OPP improved program management processes. The Office of
Enforcement and Compliance Assurance (OECA) and OPP officials continued to
improve data integrity. Improvements were made in the Good Laboratory Practices
program, the quality of disinfectant effectiveness studies, and the review of
information concerning adverse effects of pesticides.
OPP is responsible for protecting human health and the environment from
unreasonable adverse effects from the use of pesticides. Pesticides are chemicals or
biological substances used to control unwanted plants, insects, fungi, rodents, or
bacteria. OPP's major activities include registration, reregistration, and tolerance
reassessment. OECA is responsible for enforcing pesticide laws and ensuring data
integrity.
We found that, while OPP's information management has improved since March
1994, some of the original concerns still exist. For example, OPP still had not
developed quality assurance procedures to support its systems. OPP officials took
some steps to improve efforts to develop and update regulations, policies, and
procedures, but they still need to place more attention on regulation development.
While OPP officials still face fluctuating resources and growing responsibilities, they
have taken some steps to better manage these issues than they did at the time of our
prior report. Some OPP activities may still not be completed, or not completed
timely, but program officials are striving to make conscious choices on how to make
the best use of their resources.
We recommended that the OPP Director establish quality assurance procedures for
the individual systems the program plans to continue using and for the program's new
information network with firm milestones for bringing it on line. We also
recommended that the OPP Director develop plans for: periodically reviewing
existing regulations to determine if they need to be updated or eliminated, and
reviewing regulations that have been pending for several years to determine if they are
still needed.
OFFICE OF INSPECTOR GENERAL - PAGE 6
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Agency Action
We issued the final report (OOP00011) to the OPP Director on March 27, 2000. The
Director's response to our draft report included corrective actions that, when
completed, will adequately address the findings and recommendations in our report.
As a result, a response to the final report is not required.
Region 8 is confident that the risk from radionuclides at the Lowry Landfill site is
low, and that early warning systems and effective monitoring to detect radionuclides
throughout the treatment process should ensure protection. Region 8 has taken steps,
including hiring an independent party to conduct additional groundwater tests, that
should assure the Lowry cleanup plan adequately protects human health and the
environment and help allay public concerns.
From the mid-1960s until 1980, the City and County of Denver operated an industrial
liquid waste and municipal solid waste landfill at the Lowry Landfill site. More than
130 million gallons of liquid waste were disposed of at the site. Overtime the liquid
seeped through the soil and mixed with groundwater. Some members of the public
criticized the way Region 8 addressed the question of whether radionuclides
(materials that exhibit radioactive decay) were in the groundwater at the Lowry site
and challenged whether the Lowry cleanup plan adequately protected human health
and the environment. Radionuclides can cause potential health effects in humans by
directly damaging sensitive biological tissue.
Region 8 did not effectively manage four public presentations we evaluated in which
members of the public, concerned about radionuclides, challenged the Region's
decision to send Lowry groundwater offsite to public wastewater treatment facilities.
Region 8's mistakes in the handling of the presentations increased public criticism
and negative publicity about its offsite treatment decision. We found Region 8 has
taken meaningful steps to more effectively communicate with the public and better
manage situations when the public challenges its cleanup decisions.
We recommended that the Regional Administrator: implement the independent
party's recommedations, as appropriate, to ensure monitoring and early warning
systems are adequate to detect unacceptable levels of radionuclides in groundwater
before it leaves the site; clearly explain to the public the factors involved in making
site decisions; and carefully plan for all public meetings.
Agency Action
We issued the final report (1998-R8-0000206-00007) to the Region 8 Administrator
on February 29, 2000. In response to the draft report, the Region concurred with the
recommendations in the report and indicated that it is taking steps to address them. A
response to the final report is due May 29, 2000.
PAGE 7 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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On January 7, 2000, Enviro25 Environmental Services, Inc. (Enviro25), and its
owner, Susan Summers, were sentenced in District Court, City and County of Denver,
Colorado, for violating Colorado's racketeering statutes. Enviro25 was ordered to pay
a $1 million fine. Summers received a sentence of 12 years incarceration and 5 years
mandatory parole, which was suspended upon completion of 90 days incarceration in
the Denver County jail, serving 2 years in a community corrections facility, and 10
years of active probation. Summers was also ordered to pay $347,000 in restitution
and $5,395 in court costs. The sentencing follows guilty pleas by Summers and
Enviro25 to one count of criminal attempt to violate the
Colorado Organized Crime Control Act (Act) and one count of violating the Act,
respectively. In December 1998, Enviro25 and Summers were indicted on 16 counts
of forgery and 17 counts of attempting to influence a public servant. Summers was
also been charged with one count of violating the Act. Summers started Environ25
three months after she left a job with the Colorado Department of Health (CDH)
where she worked on developing guidance documents for underground petroleum
storage tank owners and operators and on enforcement protocols. Enviro25 provided
environmental consulting services, including the cleanup of contaminated or
suspected contaminated sites. The company also assisted clients with regulatory
matters before the CDH and the Colorado Department of Labor and Employment
(CDLE), including applications for reimbursement from the Petroleum Storage Tank
Fund, development of corrective action plans, and applications for site closure. She
and her company were accused of withholding truthful information and falsifying
documents submitted to the CDLE and the CDH (now known as the Colorado
Department of Public Health and Environment) regarding oil-contamination cleanups
at eight Colorado sites from March 1992 to July 1996. This investigation was
conducted jointly by the EPA OIG, the EPA Criminal Investigation Division, and the
Colorado Secretary of State's Office of Investigations.
On March 23, 2000, Omar Gonzalez of Richmond, Virginia, and his company,
Industrial Training and Support Services (ITSS), were sentenced in U.S. District
Court, Eastern District of Virginia, for selling fake asbestos training certificates.
Gonzales was sentenced to 27 months imprisonment, 2 years supervised release, and
ordered to pay $68,089 in restitution to the Internal Revenue Service. ITSS was
sentenced to one year probation. Additionally, Gonzales and ITSS were jointly
ordered to pay a $90,995 fine. The sentencing follows November 1999 guilty pleas
by Gonzales and ITSS to charges of making false statements to the government and
income tax evasion resulting from selling fraudulent asbestos training certificates.
Gonzalez admitted selling certificates to people who had not completed the required
courses, including undocumented aliens who were issued certificates under false
names. From January 1994 and December 1995, the defendants generated $90,995 in
illegal income from the training classes allegedly given. Gonzalez also admitted
owing $68,089 in back taxes for the years these years. The fraudulent scheme
undercut federal and state laws designed to protect workers and the public from health
risks by requiring workers to be properly trained and certified to remove, handle, and
dispose of asbestos-containing material.. This investigation was conducted jointly by
the EPA OIG, the EPA Criminal Investigations Division, the Federal Bureau of
Investigation, the Naval Criminal Investigative Service, the General Services
Administration OIG, and the IRS Criminal Investigation Division.
OFFICE OF INSPECTOR GENERAL - PAGE 8
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Q EPA's First Annual Performance Report Focuses on Process
Instead of Outcomes
The Office of Inspector General reviewed EPA's first Annual Performance Report
and provided both written and oral comments to Agency managers. The Agency did
resolve many of our initial concerns about consistency and clarity in presentation,
and compliance with reporting requirements in Section 1116 of the Government
Performance and Results Act (GPRA). However, we commented that the
Performance Report focuses largely on process accomplishments and outputs instead
of outcomes and impacts. While there are some excellent measures and stories of
achievement, they do not demonstrate a dimension of progress or linkage as the
means and strategies between the goals, objectives, activities and eventual outcomes
and impacts. Additionally, this report does not identify any resource or cost
considerations to show a return on investment for future investment and prioritizing
decisions to tell Congress whether EPA is doing the right things (effectiveness), and
doing the those things right (efficiency) to achieve its important environmental
mission, and if not, why. Although not required by GPRA, but clearly a concern of
Congress, this report does not discuss, beyond a few oblique references, the Agency's
action to address and resolve the Top Management Challenges identified by the OIG,
and the Program Risks identified by the GAO. Also, we suggested that the Agency
provide some attestation about the quality of the data. We will continue to work with
the Agency to advise and recommend improvements in its management processes
through better implementation of the GPRA
Work Done This Period Reviewing the Agency's Implementation of
GPRA
1-1 Reviews of data quality, systems capacity, controls and security
The EPA OIG has been reviewing and reporting on the quality of EPA program,
scientific and financial data for many years and has identified such as material
weakness or Management Challenges. Most recently the OIG has reported that
Agency systems security is at significant risk and Agency plans to improve its systems
were incomplete and ineffective.
1-1 Reviews related to Agency Goals
Goal 2.3.1: Clean and Safe Water, Reduce Loadings and Air Depositions . The goal
was not clearly defined, resources were not identified, data was not identified or
defined to the Regions, without verification and validation process. The specific
actions taken were not linked to achievement of the goal and data collected was
inconsistent so the it could not be used for effective decision making or
accountability. Additionally, the actions supporting this goal may contribute to non-
point source pollution in the form of chemical run-off
Goal 2. We reviewed how the Office of Water communicated the GPRA architecture,
and strategy to assure that its regional staff understood and were prepared to
implement the GPRA process and requirements in daily management of its programs.
We found that the regional staff and management were generally excluded from
PAGE 9 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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development of setting objectives, subobjectives, targets, actions and measures.
Therefore, they also lacked knowledge of the linkages and relationship between
national program goals and performance measures, and their specific actions and
results. While the Office of Water appears to be producing results supporting its
national goals, Regional staff does not have the information it needs for local decision
making.
Goal 6.1.4 Cleaning up the Great Lakes. All the actions and costs supporting
attainment of this goal are not charged to this goal, but rather are fragmented and
charged to several different goals. For example National office actions are not
charged to this goal alone, but charged to the waste goals. A Senate Appropriations
Report was concerned that activities could be identified under more than one goal,
dispersing accountability. Our report findings exemplify such fragmentation and lack
of a clear linkage between the goal, actions, resources and results.
Goal 7.3.4 Local and Small Government Outreach. There is a gap in the linkage of
Goal 7, specific actions, resources and reportable results. While the Region 5 is
responsible for action, no regional resources allocated to this goal. Region 5 actions,
resources and results are presented as if they are part of Goal 7, but instead are
fragmented among other goals preventing accountability for this goal. Also, funds
originating from different goals are co-mingled by design in the states, but
accountability for attainment of those specific goals is not in place.
OFFICE OF INSPECTOR GENERAL - PAGE 10
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Financial Manasement
We issued a qualified opinion on EPA's fiscal year 1999 financial statements. Our
qualified opinion resulted from multiple and untimely submissions, significant
errors, and lack of accounting support. EPA's financial systems and methodologies
to account for costs by strategic goals cannot be relied on. Additionally, EPA's
security plans for its core financial systems continued to contain significant
deficiencies.
For fiscal year 1999 the Agency was unable to provide support in a timely manner for
the composition of Other Financing Sources for the Superfund Trust Fund and EPA
as a whole. Further, the financial statements disclose these differences as Custodial
Liability Reclassifications and Other which does not adequately address the source
or composition of the amounts. EPA was also unable to provide support for the
composition of "Other" in the Statement of Financing for the All Other Appropriated
Funds and the Agency as a whole. Additionally, we were unable to apply alternate
audit procedures to satisfy ourselves as to the fair presentation of these items. Except
for the effects, if any, of adjustments that may have been necessary to correct the
items identified above, the fiscal 1999 financial statements fairly present assets,
liabilities, and net position. The recommendations we made as a part of the fiscal
1998 financial statement audit, when fully implemented, should correct weaknesses
in the Agency's financial statement preparation process.
The Government Performance and Results Act requires EPA to develop plans on
intended accomplishments, measure how well it is doing, make appropriate decisions
based on the information gathered, and communicate information about performance
to Congress and the public. To do this, EPA developed a strategic plan with ten
goals and during fiscal 1999 began tracking the cost to achieve each of its goals. We
found that the Agency's methodology for accumulating costs by goal could not be
relied upon.
We previously reported concerns that security plans for EPA's core financial systems
were not compliant with Federal financial management system requirements. Our
work continues to show significant deficiencies for fiscal 1999. As a result, we
continue to report the issue as a noncompliance with the Federal Financial
Management Improvement Act (FFMIA). Additional developments for fiscal 1999
support the listing of computer security controls as a material weakness. EPA's
Acting CFO stated that potential vulnerabilities in the Agency's mainframe computer
and network servers are an exception to Agency FFMIA compliance.
During tests of compliance with laws and regulations, we did not identify any
instances of noncompliance that would result in material misstatements. However,
we did note the following two significant noncompliance issues.
EPA disburses grants that are funded from more than one appropriation, using the
oldest available appropriation first, which may or may not be the appropriation that
benefitted from the work performed. Thus, EPA is not complying with Title 31
U.S.C. 1301 which requires EPA to match disbursements to the benefitting
appropriation.
PAGE 11 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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In response to our prior audit report findings, EPA's OCFO conducted biennial
reviews of user fees required by OMB Circular A-25, "User Charges" and the CFO
Act. The November 1997 review showed five current fees, four proposed fees, and
eight exceptions. To be in complete compliance with OMB Circular A-25
requirements, the Acting CFO needs to either update user fees, or obtain exceptions
from OMB, for the user fees in the 1997 review.
FFMIA requires that we determine whether EPA's financial management systems
substantially comply with Federal financial management system requirements,
applicable accounting standards, and the Standard General Ledger at the transaction
level. We identified that EPA was unable, in most cases, to report its intra-
governmental assets and liabilities by trading partner because finance offices were
not coding transactions to show this information. Reporting trading partner
information enables the Treasury to eliminate intra-governmental transactions from
its Financial Report of the United States Government. Agencies also need this
information so they can manage their assets and liabilities.
To correct the other FFMIA noncompliances we recommended the Acting Chief
Financial Officer (CFO) incorporate planned fiscal 2000 security plan actions for
financial systems into a formal remediation plan; establish procedures to identify
actual costs by goal, objective and subobjective at the time the costs are recorded;
develop timely, reliable, accurate cost reports; develop a Statement of Net Cost with
accurate and reliable cost information by goal; and issue policies to require all
finance offices to expedite the review and input of trading partner information. We
also recommended actions for other internal control and compliance issues.
Agency Action
We issued the final report (00100231) to the Acting CFO on February 29, 2000. In
response to the draft report, the Acting CFO agreed that further improvements need
to be made to the process for preparing financial statements. The Acting CFO also
agreed with many of the recommendations and indicated corrective actions are
planned or ongoing. However, he believes the weaknesses we identified in the
financial statement preparation process do not warrant categorization as a material
weakness, nor are they indicative of the Agency's inability to provide managers with
information that is accurate and reliable for use on a day-to-day basis to manage
Agency programs. A response to the final report is due by May 30, 2000.
EPA's Region 4 needs to collect $14.3 million in cost recoveries from the City of Ft.
Lauderdale, Florida. This action will compensate EPA for a construction grant paid
to build a compost facility that was prematurely abandoned.
In August 1983, EPA awarded the City of Ft. Lauderdale, Florida a $15.8 million
construction grant to build a dewatering facility and an off-site compost facility. The
City closed the compost facility after approximately two years of operation because
of mechanical and odor control problems. In September 1990, EPA offered the City
a $1.3 million grant amendment that funded 100 percent of the costs to correct the
problems.
OFFICE OF INSPECTOR GENERAL - PAGE 12
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However, the City declined use of the supplemental grant funds because it believed
the technology failed and the facility was incapable of operating satisfactorily. The
City never re-opened the compost facility and in June 1998, requested EPA's
approval to demolish the facility and sell the land.
EPA's policy on Abandonment of Wastewater Treatment Works generally requires
that grant recipients operate and maintain treatment facilities over their useful life
consistent with the Clean Water Act. The policy also obligated EPA to pursue cost
recovery if grant recipients terminated use of the facilities without adequate
justification. Region 4 program officials reviewed the circumstances related to the
City's decision to abandon the facilities after only two years and concluded that cost
recovery was required. We calculated the EPA share of the costs ($14.3 million) for
the abandoned facilities.
We recommended that the Regional Administrator, Region 4, recover $14.3 million
as EPA's share of the costs to construct the compost facility.
Agency Action
We issued the final report (2000-7-00007) to the Regional Administrator, Region 4,
on February 24, 2000. A response is due by May 24, 2000.
Actions by EPA's National Remedy Review Board (NRRB) will save an estimated
$68 million at Superfund cleanup sites. These savings are attributable to effective
operations and decisions by the NRRB.
In 1995, EPA created the National Remedy Review Board (NRRB) as part of a
comprehensive package of reforms to make the Superfund program faster, fairer and
more efficient. The NRRB is a peer group composed of 20 EPA managers and
senior technical experts. NRRB's goal is to annually review about 10 percent of all
proposed cleanup remedies for Superfund sites. The reviews are generally limited to
proposed high-cost cleanup decisions that meet specific dollar thresholds to assure
that the proposed remedies are cost efficient and consistent with current law,
regulations, and guidance. As of December 1998, the NRRB had reviewed proposed
cleanup decisions for 34 sites with estimated costs of almost $2.9 billion. As of
January 1999, EPA regions had documented estimated future savings of $68 million
based on NRRB recommendations for seven of the 34 sites.
We found the NRRB was generally effective in performing comprehensive reviews
of high-cost remedies and providing advice that fostered consistency in regional
remedial decisions. The estimated savings resulting from the NRRB's decisions
appeared to be realistic and sometimes conservative. NRRB's requirements for
regional proposal packages and subsequent reviews have also promoted improved
decision-making and documentation of proposed remedies by regional staffs. We
identified several opportunities for EPA to improve the NRRB's operations and
offered suggestions for implementing these improvements.
PAGE 13 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Agency Action
We issued the final report (2000-P-00005) to the Assistant Administrator for Solid
Waste and Emergency Response on December 21, 1999. Since there were no formal
recommendations, the report was issued in final after receiving comments from
NRRB staff on the proposed final report. The final report was closed upon issuance.
Atlantic Ecology Division (AED) located in Narragansett, Rhode Island has not
corrected contract and property management weaknesses previously identified.
These weaknesses were repeatedly reported but were not addressed. As a result,
accountable property is not properly safeguard.
In 1993, the OIG initially reported contract management weaknesses. AED's
extramural management specialist also reported contract and property management
weaknesses in 1996. However, AED still has not corrected these problem. AED's
management is not adequately overseeing administrative practices in contract and
property management. As a result, one contract was not effectively managed and
$6.2 million of accountable property was not safeguarded. Valuable property is
vulnerable to misuse or theft; custodial officer designations are outdated; annual
inventories are not performed; and status of loaned equipment is unknown.
AED studies the effects of contaminants and other stressors on the coastal waters and
watersheds of the Atlantic seaboard. AED administered about $10 million in
extramural resources at its Narragansett site in fiscal year 1999.
While management of the Automated Data Processing contract was adequate,
management of the Operations and Maintenance (O&M) contract continued to be
deficient. The project officer did not ensure that the contractor provided all the
preventive maintenance required in the contract. Also, the project officer procured
services which the O&M contractor could have provided under the existing contract.
Until recently, the O&M project officers lacked either the skills or experience to
manage the contract effectively. Senior management did not ensure that these
project officers had access to the appropriate technical expertise needed to evaluate a
contractor's performance properly. As a result, the O&M contractor, not AED,
controlled the work.
Although AED improved in its oversight of cooperative agreements, documentation
for interagency agreements (lAGs) costs remained insufficient as previously reported
by the OIG in 1993. The cooperative agreement project officers diligently monitored
grant activities and maintained adequate documentation to assure that they met the
terms of the agreements. As a result, these cooperative agreements helped fulfill
AED's research mission to support science. However, reasonableness of IAG costs
could not be determined and the IAG project officer did not ensure receipt and
review of the required supporting cost documentation.
OFFICE OF INSPECTOR GENERAL - PAGE 14
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We recommended that the Director, AED establish contract and property
management procedures to ensure resources are used effectively and safeguarded;
develop a formal system to resolve weaknesses identified; and develop a tracking
system to monitor contractor performance and commitments.
Agency Action
We issued the final report (2000-P-00015) to the Assistant Administrator for
Research and Development on March 29, 2000. In response to the draft report, the
Assistant Administrator generally concurred with the report's findings and
recommendations. AED had already taken corrective action on many of the
recommendations. A response to the final report is due June 28, 2000.
PAGE 15 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Assistance Agreement Investigations
On October 8, Patsy J. DeLuca, former Executive Director of the North Ohio Valley
Air Authority (NOVAA), pleaded guilty in U.S. District Court, Southern District of
Ohio, to a 2 count information charging him with accepting an unlawful gratuity as a
public official and conspiracy to defraud the government. Also on that date, Ronald
DeLuca, his son, and Vincent R. Zumpano, a former employee of NOVAA, each
pleaded guilty to a 2 count indictment charging each with aiding and abetting the
acceptance of an unlawful gratuity by a public official and conspiracy to defraud the
government. On March 24, 2000, Richard W. Canestraro, former NOVAA Board
member, also pleaded guilty to aiding and abetting Patsy DeLuca. NOVAA, prior to
its disbanding in 1997, was a multi-county air quality regulatory agency
headquartered in Steubenville, Ohio. NOVAA received federal funds from the EPA
through the Ohio Environmental Protection Agency (Ohio EPA) to enforce federal
and state air quality laws. While Patsy DeLuca was Executive Director, he agreed to
accept $169,750 for advising Pine Hollow C&D Landfill near Steubenville on
pending applications before the Ohio EPA for new or expanded sites. Patsy DeLuca
was aided in this agreement by Ronald DeLuca, Zumpano, and Canestraro. Patsy
and Ronald DeLuca and Zumpano also admitted causing Ronald to file false
individual and corporate income tax returns in 1995 and 1996 in order to conceal the
nature of the illegal gratuity. Each man has agreed to cooperate with the Internal
Revenue Service in determining taxable income, tax, penalties, and interest due. As
a further result of the our investigation, on February 8, 2000, the EPA recovered
$28,328 from Ohio EPA as a result of Ohio EPA's efforts to recover excess funds
from Ohio EPA's contractural termination with NOVAA. This investigation was
conducted jointly by the EPA OIG, the Federal Bureau of Investigation, and the
Internal Revenue Service Criminal Investigation Division.
On February 24 and 25, 2000, guilty pleas were entered in U.S. District Court,
Western District of Washington, by Wallace G. Jorgensen and his daughter, Gina R.
Jorgensen, respectively. Wallace G. Jorgensen, former lead accountant of the
National Asian Pacific Center on Aging (NAPCA), pleaded guilty to charges of
embezzling property from a program receiving federal funds and falsifying an
income tax return. Gina R. Jorgensen pleaded guilty to a charge of wire fraud. The
NAPCA, one of six grantee organizations funded by EPA through the Senior
Environmental Employment Program, is a non-profit organization whose mission is
to serve the needs of older Asian and Pacific Americans throughout the United States
through employment and training programs. Wallace Jorgensen devised various
schemes in which he issued thousands of NAPCA payroll and travel advance checks
to himself and immediate family members. The defendant and his family members
used the embezzled funds to purchase various goods and services, including
clothing, and to make down payments on several cars and at least one house. From
1993 to 1999, Jorgensen embezzled in excess of $1.8 million. He failed to report the
income from the embezzled funds on his federal income tax returns, resulting in a tax
loss of $609,083. Gina Jorgensen devised and executed a scheme to obtain a home
mortgage loan. In application papers, she claimed to be employed by Jorgensen
Construction, a fictitious company, variously claiming earnings of $4,800 and
$5,700 per month. As part of the scheme, she sent, via wire facsimile, a copy of her
checking account monthly statement showing deposits of more than $10,000,
serving to support her fictitious employment income. She knew, however, that all of
the deposits reflected on the statement actually derived from funds provided by her
OFFICE OF INSPECTOR GENERAL - PAGE 16
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father. This investigation was conducted jointly by the EPA OIG, the Department of
Labor OIG, the Federal Bureau of Investigation, and the Internal Revenue Service
Criminal Investigation Division.
On January 7, 2000, the United States entered into an agreement with the City of
Cleveland in U.S. District Court, Northern District of Ohio, to settle a civil lawsuit
charging that the city's Air Pollution Control Program improperly spent a total of
$429,158 in grant funds awarded by EPA for the fiscal years 1995 to 1998 for air
pollution and prevention. The original complaint was filed as a False Claims Act qui
tarn suit by a former employee of the city's Department of Public Health, Bureau of
Air Pollution Control (BAPC), alleging various abuses of federal grant monies.
Based upon the work of EPA OIG investigators and auditors, the timekeeping and
financial records of the BAPC were found to be in such a state of disarray that EPA
could seek the return of all federal monies awarded for fiscal years 1995 to 1998,
which totaled $2,382,286. The United States intervened in the lawsuit in June 1999
and filed an amended complaint alleging that a number of BAPC employees spent
only a part or none of their time on air pollution prevention activities.
PAGE 17 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Contract Investigations
On October 20, 1999, ABT Associates, Inc. (ABT), of Cambridge, Massachusetts,
entered into an agreement with the United States, through the District of
Massachusetts and the Middle District of North Carolina, and paid $1.9 million to
settle civil claims arising under the federal False Claims Act. The Federal
Acquisition Regulations (FAR) prohibit government contractors from billing the
government for its subcontractor costs prior to actually paying those costs (Paid Cost
Rule). From 1988 until early 1998, ABT allegedly billed as many as fifteen different
government agencies for subcontractor costs which it had not yet incurred. An audit
by the Defense Contract Audit Agency reflected that during this period, ABT may
have billed the government prematurely nearly 74% of the time. The United States
alleged that ABT knowingly engaged in this conduct and deprived it of the use of the
funds paid to ABT prematurely. Thus, the United States suffered losses in the form
of imputed interest. ABT's government clients included the EPA, the Department of
Health and Human Services, the Department of Justice, the Executive Office of the
President, and the National Science Foundation. In 1998, ABT hired a new
accounting staff, and when they learned of the problem, they made significant
changes in accounting procedures to ensure that the conduct did not recur. As part of
its settlement, ABT entered into a Compliance Agreement which requires the
company to retain an independent entity to review ABT's compliance with the FAR
on an annual basis, to train its employees on government contract compliance, and to
maintain a help line/hotline for ABT employees who seek guidance on government
contracting issues or who wish to report improper government contracting practices.
This investigation was led by the EPA OIG with the assistance of the Defense
Contract Audit Agency.
On March 8, 2000, the United States entered into an agreement with Jacobs
Engineering Group, Inc. (Jacobs), in U.S. District Court, Central District of
California, to settle a civil lawsuit charging that Jacobs submitted false claims for
fifteen years by charging excess lease costs to its government contracts. The original
complaint was filed as a False Claims Act qui tarn suit alleging that Jacobs
knowingly violated a provision of the Federal Acquisition Regulation governing
sales and lease-back arrangements. The suit alleged that Jacobs overcharged the
EPA; the Departments of the Air Force, Army, and Navy; the Department of Energy,
and the National Aeronautics and Space Administration. According to the
complaint, Jacobs sold its corporate headquarters in 1982 and then entered into a 15
year lease-back agreement that included rates in excess of its prior ownership costs,
passing the higher rental costs to the government in the form of unallowable charges
on its contracts. Jacobs, headquartered in California and one of the largest global
engineering, architecture, technology, and construction firms, had performed work
for EPA under the construction grant program. EPA was awarded $669,674 in
damages by the settlement. This investigation was conducted jointly by the EPA
OIG, the Air Force Office of Special Investigations, the Naval Criminal Investigative
Service, the Army Criminal Investigation Division Command, the Department of
Energy OIG, with the Defense Contract Audit Agency providing audit support.
OFFICE OF INSPECTOR GENERAL - PAGE 18
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On March 30, 2000, ManTech International Corporation, Inc. (ManTech), of Fairfax,
Virginia, entered into an agreement with the United States, through the Eastern
District of Virginia and the Middle District of North Carolina, to pay $415,000 to
settle civil claims arising under the federal False Claims Act. The Federal
Acquisition Regulations (FAR) prohibit government contractors from billing the
government for its subcontractor costs prior to actually paying those costs (Paid Cost
Rule). From October 1991 to January 1996, ManTech allegedly prematurely billed
the EPA, the Department of Defense (DOD), and the National Aeronautics and
Space Administration (NASA) for subcontractor costs and other direct costs.
ManTech denied any criminal acts, but acknowledged that certain of its billings did
not fully comply with the Paid Cost Rule. The company, therefore, agreed to
compensate the government for the interest it lost as a result of the pre-mature
billings and for a portion of the cost of the investigation, atotal of $415,000. The
settlement agreement incorporates separate administrative proceedings being
conducted by the EPA, Office of Suspension and Debarment, as lead agency. This
investigation was conducted jointly by the EPA OIG; the NASA OIG; the DOD
Defense Criminal Investigative Service, and the Naval Criminal Investigative
Service.
On February 10, 2000, Environmental Systems & Technologies, Inc. (EST), of
Blacksburg, Virginia, having pleaded guilty in U.S. District Court, Western District
of Virginia, to a misdemeanor charge of intentionally directing a laborer to apply
hours on a federal contract, was ordered to pay $74,000 in restitution to EPA and a
$950 fine. As a result of the guilty plea, the government dismissed with prejudice
the April 1999 indictment which charged the company and its president and owner,
Jack C. Parker, with conspiracy, making false statements, submitting false claims,
and mail fraud. EST, an environmental company specializing in the development
and application of computer-aided technology for assessment and remediation of soil
and groundwater contamination, and Parker allegedly engaged in a scheme to
defraud their customers by mischarging and over billing. Parker was charged with
directing and encouraging his employees to falsify their time sheets by mischarging
hours spent on a particular project in order to maximize the hours spent on each
customer's contract to receive full payment under the contract regardless of the actual
work accomplished. EST, as a subcontractor to IT Corporation (IT) on a contract
with EPA, allegedly mischarged 123 hours on timesheets it submitted to IT; IT in
turn submitted the alleged false claim to EPA for payment.
Three employees of CompuChem Environmental Corporation of Gary, North
Carolina, were sentenced in U. S. District Court, Eastern District of North Carolina,
on charges of making a false statement and aiding and abetting others in the
commission of making a false statement. On October 29, 2000, Mark Bevan, a
laboratory supervisor, was sentenced to 3 years probation, 100 hours of community
service, and ordered to pay a $1000 fine. On December 16, 1999, Richard P. Lends,
a second shift supervisor at the laboratory, was sentenced to 3 years probation, 75
hours of community service, and ordered to pay $2,100 in restitution. On December
17, 1999, Valerie Smith, a chemist, was sentenced to 5 years probation, a period of
home confinement not to exceed 180 consecutive days, 100 hours of community
service, and ordered to pay $1,800 in restitution. Bevan, Lends, and Smith were
PAGE 19 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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charged with conducting improper gas chromatograph/mass spectrometer analyses
on samples taken from hazardous waste sites nationwide and falsely certifying that
the analyses complied with all EPA contract requirements. The EPA relies on the
testing data provided by laboratories participating in the Contract Laboratory
Program to assess threats to public health and the environment and to determine
where and when remedial action is needed.
At the request of Congress, the Federal Offices of Inspector General are asked to
annually identify the Top Ten Management Challenges facing their respective
departments and agencies. The Top Ten Management Challenges in EPA represent
areas of systemic weakness or specific vulnerability seriously threatening the
success or integrity of Agency operations. For Fiscal 1999, the Office of Inspector
General reported the following Management Challenges that need to be addressed
timely for EPA to effectively accomplish its environmental mission.
1. Accountability (updated)
2. Environmental Data Information Systems (updated)
3. Backlog of National Pollutant Discharge Eliminati
on System Permits (updated)
4. Oversight of Assistance Agreements (updated)
5. Employee Competencies (updated)
6. EPA's Automated Information Systems Security (updated)
7. Quality of Laboratory Data (new)
8. Agency Process for Preparing Financial Statements (new)
9. Superfund Five-Year Reviews (new)
10. The Great Lakes Program (new)
The items identified as updated were also listed in the Top Ten Management
Challenges for Fiscal 1998. The ones identifies as new, are listed for the first time as
Management Challenges, although our work has previously brought them to the
Agency's attention.
The Office of Inspector General is committed to working collaboratively with EPA
and our external stakeholders to view environmental and management challenges as
opportunities for win-win solutions. We believe the Agency has made significant
progress towards resolving three previously reported Top Management Challenges:
(1) Agency's Relationship With Contractors; (2) Use of Inefficient Contract Types;
and (3) Quality Assurance Plans. While the Agency is responsible for ensuring that
its continuing actions correct the problems in those areas, we plan to closely monitor
EPA's plans and progress in resolving each area.
OFFICE OF INSPECTOR GENERAL - PAGE 20
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During this reporting period, the OIG Hotline opened 50 new cases and closed 23.
The pie chart shows the distribution of the 50 opened cases.
Other Federal Agency
1
Hqrs. Offices
6
OIG Investigative Offices
9
Criminal Investigations Division
10
OIG Audit Divisions
8
Regional Program Offices
16
Hotline Case Referral Distribtuion
Complaints continue to be reviewed by a team of auditors, evaluators, and criminal
investigators as conditions warrant. All matters significant enough to require a
response are monitored until the necessary resolution action is planned or taken.
Complaints are analyzed to identify trends which should be considered in the audit
and investigative planning processes.
PAGE 21 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Section 2-Fostering Strong Working Relationships
Advisory and Assistance Services
To demonstrate our commitment to helping EPA achieve its environmental mission
and focus on our customers, the OIG continued to work with several Agency
program offices. The OIG participates in various workgroups in the Office of Chief
Financial Officer (OCFO), Office of Environmental Information (OEI), and Office
International Activities (OIA) to address information resources management issues.
These workgroup activities are advisory services which allow the OIG to address
customer needs on mission critical issues.
We participate in three OCFO Agency-level workgroups. The workgroups, formed
in Fiscal 1999, are addressing replacing the travel module in the Integrated Financial
Management System (IFMS), Budget Allocation System (BAS) and the EPA Payroll
system. The travel module workgroup is evaluating pilots of off-the-shelf software.
The BAS workgroup is evaluating needed changes and development of system
upgrades. In January 2000, the BAS workgroup completed preliminary assessments,
recommended replacing the payroll system with off-the-shelf software, and the CFO
agreed to replace the system.
We are also involved in four Agency-level workgroups with the OEI and a fifth joint
workgroup with OIA and OEI. The Data Quality Indicators workgroup started, in
Fiscal 1999, competed prototype metadata for data quality indicators that will be
presented to management. We are participating in two Information Integration
Initiative workgroups that are addressing (1) Agency and regional office needs for
correcting and ensuring accurate data, and (2) establishing an Agency Facility
Registry System (FRS). In addition, we helped the Agency determine security and
off-site storage needs for its headquarters critical servers. Finally, we are
participating in a joint OEI and OIA workgroup to identify international
environmental information activities and develop a strategic plan for the Agency's
international work.
EPA spends millions of dollars each year to obtain goods or services from other
Federal agencies through Interagency Agreements (lAGs). In December 1998, EPA
had $1.29 billion in open obligations for lAGs. We found unliquidated obligations
for lAGs were not deobligated in a timely manner because the responsible agency
officials had not placed sufficient emphasis on oversight of these funds. The
deobligation process is critical to EPA's efforts to maximize the use of funds.
Although the Agency has policies and procedures governing the responsibilities for
oversight of lAGs, and for deobligating funds, Agency officials did not consistently
follow the procedures. This resulted in IAG funds remaining obligated to projects
which were either completed or canceled. Of the $4.7 million of unliquidated
obligations reviewed, we identified $2.3 million (49 percent) which should have
been deobligated and used for other purposes, or which may have expired.
OFFICE OF INSPECTOR GENERAL - PAGE 22
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We determined that: (1) lAGs had not been timely deobligated; (2) interaction among
Agency offices, to deobligate IAG funds, needed improvement; (3) the unliquidated
review process could be strengthened; (4) Region 7 and Region 2 were pro-active in
deobligating IAG funds; and, (5) the new IAG Close-Out Policy was a key factor in
more IAG funds being deobligated. We concluded that Agency officials responsible
for IAG funds control must exert better oversight of unliquidated obligations, and
consistently implement their IAG policies and procedures.
We recommended that EPA deobligate the $2.3 million in unliquidated obligations
as no longer valid, and review all lAGs inactive for 18 months or more to determine
if funds should be deobligated. We also recommended the reinforcement of
responsibilities for the ongoing review of IAG funds. To enhance EPA's review
process, we recommended that the annual unliquidated obligation report be prepared
in a format to show the age of the outstanding unliquidated balances.
Agency Action
We issued the final report (2000-P-000004-R5-000329) to the Assistant
Administrator for Administration and Resources Management and the Chief
Financial Officer, on December 10, 1999. In responding to the draft report, the
Agency agreed in principle with most of our recommendations, but disagreed with
our approach to solving some of the issues. The response to the final report was due
on March 10, 2000. A response had not been received to the final report.
The OIG has taken significant steps to investigate and counter illegal intrusions of
EPA's computer systems. We are planning a specialized computer intrusion
investigative unit. We appointed a Special Agent representative to coordinate
investigations with the National Infrastructure Protection Center (NIPC), which is
headed by the FBI. Our representative is also the established point of contact for
GAO's FED-CIRC (Computer Intrusion Response Center). Our teaming with both
organizations will substantially increase EPA's knowledge of intrusion efforts by
outside parties and allow for enhanced coordination of investigative efforts by the
OIG and other law enforcement agencies. Additionally, we provided advanced
training to some of our field agents in the means and methods of today's computer
"hackers" and the applicable federal statutes violated by their intrusions. This
advanced training will be given to other OIG and EPA staff members. We are
working with EPA staff, including the Information Security Officers, to inform them
of our efforts and of the available training and to provide them with designated
points of contact for investigative referrals.
PAGE 23 - OCTOBER 1, 1999 THROUGH MARCH 31, 2000
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Section 3- Operating at The Highest Performance Level
Bronze Medal awards were presented by Inspector General Nikki L. Tinsley to
members of a team consisting of OIG auditors and investigators and supported by
EPA contracting officers and a Suspension Debarment attorney. The OIG team,
directed jointly by an OIG investigator and auditor, was recognized for their efforts
in coordinating mass information and attempting to pursue civil, criminal and
administrative investigative action involving a complex contracting fraud matter.
The various EPA Contracting Officers, in several regions, were recognized for their
expertise and support in the contracting arena for the OIG action. The teaming of the
above individuals, consisting of OIG and agency personnel, is a showcase for
fostering strong working relationships.
During this reporting period, the United States Attorney's Office honored special
agents from our Office of Investigations at separate awards ceremonies. Michael R.
Stiles, United States Attorney, Eastern District of Pennsylvania presented a special
agent from our Philadelphia Office, Mid-Atlantic Investigations Division, with a
certificate "in recognition of his dedicated commitment in a series of prosecutions of
environmental testing laboratories which falsified test results for soils and water on a
systematic basis, jeopardizing the safety of the environment and the health of the
people." The recognition was given in response to work on the Hess Environmental
Laboratory investigation which resulted in five criminal convictions and $5.5 million
in recoveries. Alejandro Mayorkas, United States Attorney, Central District of
California, presented a special agent from our San Francisco Office, Western
Investigation Division, and a special agent from the Air Force Office of Special
Investigations with awards for their outstanding contributions to the Jacobs
Engineering Group, Inc., investigation. Our special agent was further commended for
critical work he and divisional staff provided during negotiations which resulted in a
$35million settlement.
OFFICE OF INSPECTOR GENERAL - PAGE 24
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Section 4-Audit Keport Resolution
Status Report on Perpetual Inventory of Reports in Resolution Process for Semiannual Period Ending
March 31, 2000
Report Category
A. For which no
management decision was
made by October 1, 1999
B. Which were issued
during the reporting period
C. Which were issued
during the reporting period
that required no resolution
Subtotals (A + B - C)
D. For which a
management decision was
made during the reporting
period
E. For which no
management decision was
made by March 31,2000
Reports for which no
management decision was
made within six months of
issuance
No.
of
Rpts
131
353
231
253
100
153
55
Report Issuance (Dollar Value in
Thousands)
Questioned
Costs
$100,932
41,054
0
141,986
26,734
115,252
77,244
Recommended
Efficiencies
$95
0
0
95
95
0
0
Report Resolution
Costs Sustained (Dollar Value in Thousands)
To Be Recovered
$15,361
As Efficiencies
0
(Any difference in number of reports and amounts of questioned costs or recommended efficiencies between this report and our
previous semiannual report results from corrections made to data in our audit tracking system.)
PAGE 25 - OCTOBER 1,1999 THROUGH MARCH 31,2000
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Status of Management
Decisions on IG Reports
This section presents statistical
information as required by the
Inspector General Act Amendments
of 1988 on the status of EPA
management decisions on reports
issued by the OIG involving monetary
recommendations.
As presented, information contained
in Tables 1 and 2 cannot be used to
assess results of reviews performed
or controlled by this office. Many of
the reports were prepared by other
Federal auditors or independent
public accountants. EPA OIG staff
do not manage or control such
assignments. Auditeesfrequently
provide additional documentation to
support the allowability of such costs
subsequent to report issuance. We
expect that a high proportion of
unsupported costs may not be
sustained.
Table 1 — Inspector General Issued Reports With Questioned Costs for Semiannual Period Ending
March 31,2000
Report Category
A. For which no management decision was made
by September 30, 1999**
B. New reports issued during period
Subtotals (A + B)
C. For which a management decision was made
during the reporting period
(i)Dollar value of disallowed costs
(ii)Dollar value of costs not disallowed
D. For which no management decision was
made by March 31, 2000
Reports for which no management decision was
made within six months of issuance
Number of
Reports
59
39
98
48
30
18
50
33
Questioned Costs* (Dollar
Value in Thousands)
$100,932
41,054
141,986
26,734
15,361
11,373
115,252
77,244
Unsupported Costs
(Dollar Value in
Thousands)
$27,666
17,083
44,749
8,315
5,288
3,027
36,434
13,572
* Questioned costs include the unsupported costs.
"Any difference in number of reports and amounts of questioned costs or recommended efficiencies between this report and our
previous semiannual report results from corrections made to data in our audit tracking system.
OFFICE OF INSPECTOR GENERAL - PAGE 26
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Table 2 ~ Inspector General Issued Reports With Recommendations That Funds Be Put To Better
Use for Semiannual Period Ending March 31, 2000
Report Category
A.For which no management decision was made by October 1, 1999
B. Which were issued during the reporting period
Subtotals (A + B)
C. For which a management decision was made during the
reporting period
(i) Dollar value of recommendations from reports that were
agreed to by management
(ii) Dollar value of recommendations from reports that were
not agreed to by management
(ill) Dollar value of non-awards or unsuccessful bidders
D.For which no management decision was made by March 31, 2000
Reports for which no management decision was made within six
months of issuance
Number of
Reports
1
0
1
1
0
1
0
0
0
Dollar Value (In
Thousands)
$95
0
95
95
0
95
0
0
0
* As part of the OIG reinvention initiative, the OIG was in the process of switching to a new Performance and Accountability
System during this reporting period. Until the system is thoroughly tested, some of the statistics reported may not represent the
final results of our operations as of the time the report was printed.
Audits With No Final Action As Of 3/31/00- Which are over
365 Days Past OIG Report Issuance Date
Audits
Programs
Assistance Agreements
Contract Audits
Single Audits
Financial Statement Audits
TOTAL
Total
41
123
48
7
5
224
Percentage
18.3
54.9
21.5
3.1
2.2
100.0
PAGE 27 - OCTOBER 1,1999 THROUGH MARCH 31,2000
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Summary of Investigative Results
Summary Of Investigative
Activities
Pending Investigations as
of September 30, 1999
New Investigations
Opened This Period
Investigations Closed
This Period
Pending Investigations as
of March 31, 2000
192
31
42
181
Prosecutive and
Administrative Actions
In this period, investigative efforts
resulted in twenty-one convictions
and seventeen indictments.* Fines
and recoveries, including those
associated with civil actions,
amounted to $7.5 million. Seven
administrative actions were taken as a
result of investigations.
Resignations
Terminations
Suspensions &
Debarments
Restitutions
Other
TOTAL
1
1
2
2
1
* Does not include indictments
obtained in cases in which
we provided investigative
assistance.
Profiles of Pending Investigations by Type
General EPA Programs
Superfund
Total Cases = 122
Cases = 59
Total
OFFICE OF INSPECTOR GENERAL - PAGE 28
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