United States
Environmental Protection
Agency
Office of
Inspector General (2441)
Washington DC 20460
EPA--350-K-99-001
May 1999
&EPA Office of Inspector General
Semiannual Report
the Congress
er 1,1998 through
,1999
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INSPECTOR GENERAL VISION
STATEMENT
"We are agents of positive change striving for continuous improvement in our
Agency's management and program operations, and in our own offices."
The Inspector General Act of 1978, as amended, requires the Inspector General
to: (1) conduct and supervise audits and investigations relating to programs and
operations of the Agency; (2) provide leadership and coordination, and make
recommendations designed to (A) promote economy, efficiency, and
effectiveness and (B) prevent and detect fraud and abuse in Agency programs
and operations; and (3) fully and currently inform the Administrator and the
Congress about problems and deficiencies identified by the Office of Inspector
General relating to the administration of Agency programs and operations.
STRATEGIC PLAN GOALS
O Help EPA achieve Hs environmental goals by improving the performance and integrity of EPA
programs and operations, by safeguarding and protecting the Agency's resources, and by dearly
reporting the results of our work.
© Foster strong working relationships.
© Operate at the highest performance level.
Cover photo courtesy of National Archives
U S Environmental Protection Agency
Region 5,Library (Pt-12J)
77 West Jackson Boulevard, utn
Chicago, II 60604-3590
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Foreword
D
(uring this semiannual period, we continued to work with EPA managers to
resolve issues and develop solutions to problems identified through our audit
and investigative work. This semiannual report identifies issues that could
impact not only the environment but also human health. The three goals from our strategic
plan and examples of relevant work during this six-month period are highlighted below and
discussed in more detail in this report.
Helping EPA achieve its environmental goals by improving the performance and integrity of
EPA programs
We reported that because an EPA region allowed its states to use a less protective
water quality criteria, water bodies with bacterial contamination may remain undetected and
unreported. As a result, the public may be unknowingly exposed to harmful bacteria. EPA
recently completed an action plan that includes a renewed commitment to encouraging state
adoption of updated criteria. Further, EPA committed to promulgating the updated criteria with
a goal of assuring criteria application to all states not later than 2003.
Our grant audits show that grant recipients have wasted federal funds, and did not
provide the agreed upon product or service. This occurred in part because EPA did not
adequately oversee the grants or the grant work plan did not identify expected outcomes. One
audit found that EPA awarded the same grantee two grants with identical requirements and
work plans, despite expecting two different work products. Our audits assisted the Agency in
identifying internal control weaknesses where improvements were necessary. In response to
our work, the Agency revised guidance and is continuing to train project officers.
Our criminal investigations have resulted in the prosecution of companies and
individuals engaged in defrauding the government and the public by submitting false reports
and payment claims for environmental tests that were never done or that contained fabricated
or altered data. EPA, local governments, and individual customers rely on the accuracy of
these tests to assess threats to the environment and to determine where and when remedies
are needed to control hazardous wastes, toxins, and other contaminated substances that
pollute our ground water, rivers, and streams. In one case, a former California laboratory
supervisor pleaded guilty to falsifying data related to the cleanup of a Superfund site. In
another case, a Colorado company and its owner were indicted on charges of falsifying reports
regarding oil contamination cleanups.
Fostering strong working relationships
To strengthen our relationships with Agency employees and managers, the OIG
implemented an aggressive fraud awareness briefing program. Briefings have been
conducted for staff working in EPA grant programs, in Superfund and contracting activities,
and for re-certification classes for project officers, work assignment managers, and on-scene
coordinators. We believe that this program has contributed significantly to the Agency's ability
to prevent and detect fraud.
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The Region 8 Administrator established a joint OIG-Region 8 agricultural team to share
information and participate in various activities with the agricultural community. Although EPA
and the agricultural community shared a common goal of being good stewards of the
environment, the commonality of this goal was often not recognized. The OIG worked with
regional staff to assess how the Region could best work with the agricultural community. The
Team determined that the agricultural community needed a focal point within the Region who
could provide coordination between environmental programs and present EPA goals in a
manner sensitive to the agricultural community's point of view.
Operating at the highest performance level
To further our efficiency and effectiveness, our new management information system,
Inspector General Operations and Reports (IGOR), became operational in March 1999. IGOR
will provide the Office of Inspector General with statistical information on resource allocations,
audit findings and recommendations, and investigation case results. This application will also
be used to interface with Agency systems to allow for sharing of data and information.
Agents of positive change
The OIG continued its reinvention initiatives by focusing on becoming a high
performance organization. The OIG Steering Committee, which plays a key role in our
reinvention initiative, developed statements of leadership philosophy, and organizational and
operating system values in support of the OIG vision statement. In addition, work groups
chaired by Steering Committee members developed a new OIG rewards program and made
substantial progress on projects related to strategic planning, organizational communications,
and process standardization.
We submitted our first Diversity Report to congressional appropriation committees on
Office of Inspector General workforce diversity improvements for the first half of this fiscal year.
We are committed to recruiting and maintaining a highly competent and diverse workforce.
Since 1997, we have taken steps to improve the Office's diversity and address workers'
concerns, and we have communicated these steps internally through the Office of Inspector
General Intranet. We are especially proud that our Special Emphasis Program Manager Team
was awarded the EPA Silver Medal for exceptional team efforts in developing a model
management approach to improve diversity.
The Office of Inspector General remains committed to working collaboratively with all
EPA employees and our external stakeholders to view environmental and management
challenges as opportunities for win-win solutions.
Nikki L. Tinsley
Inspector General
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Profile of Activities and Results
October 1,1998 to March 31, 1999
Audit Operations ($ in millions)
OIG Managed Reviews:
Reviews Performed by EPA, Independent Public
Accountants and State Auditors
Audit Operations ($ in millions)
Other Reviews:
Reviews Performed by Another Federal
Agency or Single Audit Act Auditors
October 1,1998 to
March 31,1999
Questioned Costs *
- Total
- Federal
Recommended Efficiencies*
- Federal
Costs Disallowed to be Recovered
- Federal
Costs Disallowed as Cost Efficiency
- Federal
Reports Issued - OIG Managed Reviews:
- EPA Reviews Performed By OIG:
- EPA Reviews Performed by
Independent Public Accountants:
- EPA Reviews Performed by
State Auditors:
Total
$ 112.0
66.7
$ 0
$11.4
S 0
35
8
0
October 1,1998 to
March 31, 1999
$1.4
1.4
$1.7
$0.5
$0
43
Reports Resolved (Agreement by Agency officials to take
satisfactory corrective action.) ***
86
Questioned Costs *
- Total
- Federal
Recommended Efficiencies*
- Federal
Costs Disallowed to be Recovered
- Federal
Costs Disallowed as Cost Efficiency
- Federal
Reports Issued - Other Reviews:
- EPA Reviews Performed by
Another Federal Agency:
- Single Audit Act Reviews:
Total
Agency Recoveries - Recoveries from Audit
Resolutions of Current and Prior Periods
(cash collections or offsets to future payments.)**
101
64
165
$17.9
Investigative Operations
Fraud Detection and Prevention Operations
Fines and Recoveries (including civil)
Savings/Repudiated Claims
Investigations Opened
Investigations Closed
Indictments of Persons or Firms
Convictions of Persons or Firms
Administrative Actions Against
EPA Employees/ Firms
Civil Judgments
$0.6M
41
36
Hotline Cases Opened
Hotline Cases Processed and Closed
Personnel Security Investigations
Adjudicated
Legislative and Regulatory
Items Reviewed
71
74
213
18
19
2
* 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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Contents
Section 1-Helping EPA Achieve Its Environmental Goals
Program Audits and Investigations 1
Financial Management 9
Assistance Agreement Audits and Investigations 10
Contract Investigations 16
Employee Integrity Investigations 19
Hotline Activities 20
Section 2-Fostering Strong Working Relationships
Advisory and Assistance Services 21
Fraud Awareness Briefings 25
Committee on Integrity and Management Improvement 26
Section 3-Operating at the Highest Performance Level
Office of Inspector General Initiatives 27
Government Performance and Result Act Review Plan 30
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 31,1999 32
Status of Management Decisions on IG Reports 33
Inspector General Issued Reports With Questioned Costs 33
Inspector General Issued Reports With Recommendations that Funds Be
Put to Better Use 34
Summary of Investigative Results 35
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
Programs Audits and Investigations
Region III Water
Standards and
Monitoring Need
The Clean Water Act requires each state to adopt water quality standards
to help control and remedy water pollution. Bacteria in water, which can
cause sore throats, ear infections, meningitis, or encephalitis, were not
properly assessed or reported. The Clean Water Act requires EPA to
develop and publish criteria for assessing water quality based on the
latest scientific knowledge. States are then to adopt these criteria, or
criteria that are at least as protective as EPA's. In 1986, EPA
recommended Enterococcus and E. coli as bacteriological indicators of
harmful pathogens. However, as of 1998, most of the states within the
Region used fecal coliform, a criteria developed in the 1960's. Because
the Agency implicitly allowed the states to use this less protective criteria,
water bodies with bacterial contamination may remain undetected and
unreported, and the public may be unknowingly exposed to harmful
bacteria.
Water quality standards in all Region III states were inadequate in 1998,
even though EPA identified some deficiencies as far back as 1990.
Consequently, state standards do not protect the waters as intended by
the Clean Water Act. This occurred because Region III did not fully use its
authority to issue written notices to the states, or elevate these issues to
the EPA Administrator.
Region III also missed opportunities to review water quality standards.
The Clean Water Act requires each state to hold public hearings at least
every three years to review its water quality standards and submit the
results to the EPA Administrator. At the time of our audit, only one
Region III state had completed its review.
We recommended that the Assistant Administrator for Water work to
ensure that, if states do not amend their water quality standards to include
the Agency's criteria, appropriate action is taken to resolve the deficiency.
We also recommended the Regional Administrator, Region III, send
written notices to each state in the Region clearly identifying the
inadequate standards and withhold a portion of Clean Water Act section
106 funding from any state whose Triennial Review is overdue.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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Agency Action
The final report (9100118) was issued to the Assistant Administrator for
Water and the Regional Administrator, Region III, on March 31, 1999. In
response to the draft report, the Office of Water and Region III generally
agreed with the recommendations. The Assistant Administrator
responded that EPA recently completed an Action Plan for Beaches and
Recreational Waters that includes a commitment to encouraging state
adoption of updated criteria, or promulgate the updated criteria where a
state does not amend its standards, with a goal of assuring that the
updated criteria apply in all states not later than 2003. A response to the
final report is due by June 29, 1999.
Congress intended that states assume responsibility for implementing the
Resource Conservation and Recovery Act (RCRA) regulations with
oversight from EPA. As a result, states are primarily responsible for
identifying and taking formal enforcement actions against RCRA
Significant Non-Compliers (SNCs).
We found that serious violations, such as leaking battery acid and drums
of hazardous waste, did not receive formal enforcement actions. Thus, the
health and protection of the state's population and environment was put at
risk. The Rhode Island Department of Environment Management
(RIDEM) did not: (1) identify any SNCs for several years; (2) issue
appropriate and timely enforcement actions; (3) ensure that violators
complied with enforcement compliance schedules; (4) dedicate available
resources to RCRA; and (5) develop a detailed enforcement policy and
tracking system. Also, RIDEM's over-reliance on informal enforcement
actions could provide non-complying facilities an economic advantage
over complying facilities.
Agency Action
The final report (9100078) was issued to the Regional Administrator,
Region 1, on January 21, 1999. In response to the draft report, the
Regional Administrator agreed with our recommendations aimed at
helping RIDEM improve its RCRA program. Also, the Region agreed to
consider withdrawal of RIDEM's RCRA enforcement authority, if
necessary. According to the Regional Administrator, during the past
several months, RIDEM has significantly improved its RCRA enforcement
program and satisfied all nine of the region's criteria established for
evaluating RIDEM's performance. RIDEM increased its staffing,
conducted a number of inspections, issued several new penalty actions,
developed an enforcement response policy, started implementing a plan
to address its backlog, and improved its management of data. A response
to the final report is due by May 15,1999.
OFFICE OF INSPECTOR GENERAL
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Does Not
to
Manage RCRA
EPA is responsible for overseeing and issuing annual grants to states that
implement the Resource Conservation and Recovery Act (RCRA)
hazardous waste regulations. States and EPA regions negotiate the work
to be accomplished with grant funds, such as issuing and renewing
permits for facilities that treat, store, or dispose of hazardous wastes.
Permits are the essential instruments for assuring compliance with
environmental laws.
When permits are not renewed in a timely manner, facilities may not be
operating in accordance with the most recent environmental requirements
and standards. Regulatory changes that occurred during the permit term
would not have been incorporated into the existing permit. This allows
facilities to postpone compliance with newer and often stricter standards
during the renewal process, which may take years.
Without clear oversight responsibilities, or complete and accurate
information, EPA cannot effectively monitor performance, identify
problems or make improvements. EPA has not issued guidance
describing how regions will monitor state permitting operations, or how
EPA Headquarters will oversee regional performance. At the time of our
fieldwork, neither Headquarters nor Region 3 had complete, accurate
information on the status of the national or regional permitting universe,
such as the number of facilities, the number of facilities with original
permits and the number needing renewal.
While EPA intends to focus on ensuring that its goal for issuing original
permits is met, it needs to prepare for its future workload of permit
renewals, and develop the necessary controls to oversee this activity.
Office of Solid Waste officials agreed that these issues need to be
addressed, and we worked jointly to develop recommendations. We
recommended that the Office of Solid Waste and Emergency Response
(OSWER) issue guidance for managing RCRA permit renewals to EPA
regions and the states, and ensure key renewal data is collected and used
to better manage the process.
Agency Action
We issued the final report (9100115) to the Acting Assistant Administrator
for Solid Waste and Emergency Response on March 30,1999. OSWER
officials provided oral comments on the draft report, during which they
agreed with the recommendations. A response to the final report is due
by June 28, 1999.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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EPA'S RCRA
Deferral
Program Has
Not Maximized
Cleanups
Since 1983 Superfund officials have transferred cleanup responsibility to
RCRA for approximately 3,000 sites. The intent of the policy was to
maximize the overall number of cleanups by deferring sites to RCRA ,
thus preserving the CERCLA Trust Fund for sites for which no other
cleanup authorities were available.
Since only 29 percent of the deferred sites are in the RCRA corrective
action workload, the remaining 71 percent are not likely to be cleaned up
in the near future. The Resource Conservation and Recovery Act
Information System (RCRIS) indicates that less than 2 percent of deferred
sites have been cleaned up. About one-third of the deferred sites in our
sample would be potentially eligible for placement on the National
Priorities List.
Our review of sites not in the corrective action workload found that in the
four regions sampled almost 67 percent (210 of 313) of the sites should
not have been deferred from Superfund to RCRA. Deferral decisions
were made without sufficient communication between RCRA and
Superfund program officials to determine which authority would best
address the site. In addition, deferral guidance was not issued until the
program was well underway, and there was either misinterpretation or
inconsistent application of the deferral policy. The sampled sites have
been in EPA's inventory for 17 years on average, and less than one
percent of them have been cleaned up.
Almost 10 percent of the total number of sites coded as deferred to the
RCRA program were not found in RCRIS because of coding errors,
system incompatibilities with CERCLIS, insufficient communication
between the two programs, and weak deferral procedures. EPA is
generally unaware of the status of cleanups. For some sites, the states
informed us that actions had been taken or were underway which were
not reflected in RCRIS.
We recommended that the Acting Assistant Administrator for Solid Waste
and Emergency Response work with states to update site
characterizations; determine which program has available resources and
legal authority to address sites starting with those that pose highest risk;
improve communication and collaboration between Superfund and RCRA
officials; and strengthen procedures for deferring sites.
Agency Action
We issued the final report (9100116) to the Acting Assistant Administrator
for Solid Waste and Emergency Response on March 31,1999. In
response to the draft report, the Acting Assistant Administrator indicated
that the recommendations would improve the efficiency of the deferral
process, and OSWER is prepared to reassess many of the site
management decisions to ensure that EPA and state responses protect
human health and the environment. A response to the final report is due
June 30, 1999.
OFFICE OF INSPECTOR GENERAL
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Improved
Controls Over
System
EPA operates a mainframe computer at the National Computer Center
which supports large-scale data processing and provides a national data
repository for Agency environmental, administrative, and scientific
systems. EPA's major financial systems are also stored and maintained
on the mainframe. Loss of mainframe processing capability would have a
material impact on the Agency's ability to carry out its environmental
mission.
EPA is not maintaining and reviewing critical operating libraries such as
the Authorized Program Facility (APF) in a timely manner. The APF is a
mechanism for controlling programs which are specifically designated as
"authorized". APF authorized programs can bypass all security and
password checks. We identified libraries that no longer require APF
authorization. Without effectively managing the contents of the APF, EPA
management cannot be assured programs running in an authorized state
will adhere to system integrity requirements or Agency integrity guidelines.
These weaknesses resulted from the lack of a process to review APF
libraries periodically.
In addition, EPA is not adequately controlling the number of users who
can alter and update APF libraries. We identified users who no longer
needed this type of access to perform their current jobs. Also, we
identified user IDs assigned to positions and not individuals. Without
effective access controls to the APF, a knowledgeable user could
circumvent or disable security mechanisms to modify programs or data
files without leaving an audit trail. These weaknesses were caused by the
lack of a review process to revoke user access.
We recommended that the Director, Enterprise Technology Services
Division develop and implement a process for (1) periodically reviewing
APF libraries and removing libraries that no longer require APF
authorization, and (2) reviewing users' access capabilities to APF libraries,
and assigning all user IDs to individuals.
Agency Action
The final report (9300001) was issued to the Director, Enterprise
Technology Services Division on January 28, 1999. In response to the
draft report, the Director agreed with our recommendations and provided
planned corrective actions and milestone dates for completion.
Specifically, the libraries that no longer required APF authorization were
removed, and the software installation procedures will be modified to
include an APF review. The contractor will be instructed to revoke all user
IDs when employees leave the company, and all user IDs will be assigned
to individuals. During the audit the contractor was very responsive in
initiating and implementing system changes including removing
inappropriate libraries and user IDs. A response to the final report was
due April 28,1999.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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Colorado Needs
to Improve Its
Water Quality
Standards,
Monitoring and
Reporting
The Clean Water Act requires each state to adopt EPA-approved water
quality standards to help control and remedy water pollution. Overall,
Colorado developed a water quality program that protects state waters.
Colorado was very proactive in developing water quality criteria where EPA
had not. In other areas, however, Colorado needed to increase its efforts.
Colorado did not adopt the national swimmable goal for all state waters, or
conduct required studies showing the swimmable goal was not attainable.
Colorado adopted water quality criteria for some pollutants in certain
waters that were less restrictive than the criteria applied to most other
waters in the state. For these pollutants, Colorado did not demonstrate that
the criteria were still protective of the uses of the waters.
Colorado's current monitoring program employed appropriate monitoring
methods and procedures to test and assess the waters of the state,
although, like other states, Colorado has faced difficult challenges in
maintaining its monitoring program. Colorado relied on other agencies to
monitor its waters for organic pollutants but did not have a procedure to
obtain and use this data. Colorado's water quality reports varied in
completeness and accuracy. EPA uses the assessments to measure
performance in achieving its goals of clean and safe water, and to report to
Congress.
Region 8 implemented effective procedures to approve and evaluate
Colorado's water quality standards, although it did not have procedures to
oversee and evaluate water quality testing, assessing, and inventory
reporting. Region 8's priorities in the oversight of the Colorado water
quality program reflected the Office of Water's priorities. Colorado, in turn,
historically has placed more attention on the development of standards
than on monitoring, assessing, and reporting activities.
We recommended that the Regional Administrator, Region 8, work with
Colorado to improve its support for water quality standards decisions;
assist Colorado in increasing the comprehensiveness of its state water
quality monitoring program; persuade Colorado to include complete,
accurate information in its water quality reports; and develop procedures to
oversee and evaluate Colorado's water quality testing, assessing, and
reporting.
Agency Action
The final report (9100093) was issued to the Regional Administrator,
Region 8 on March 10, 1999. In response to the draft report, the Region
and Colorado generally agreed with the recommendations. Region 8
documented several planned technical and program support activities and
commitments to work with and support Colorado programs. Colorado
welcomed assistance in its ongoing efforts to enhance its water quality
program.
OFFICE OF INSPECTOR GENERAL
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Colorado agreed more documentation was desirable to support decisions,
including preparing analyses at triennial reviews for maintaining ambient
standards in light of changed conditions since the adoption of initial
standards. Also, Colorado committed to improving the quality of its
reporting. A response to the final report is due by June 10,1999.
Benefits
Recipient
Pleaded Guilty
and Was
Ordered to Pay
$500 Restitution
On December 16, 1998, Betty Morgan, a Louisiana recipient under the
methyl parathion relocation program, pleaded guilty in Criminal District
Court, Parish of Orleans, Louisiana, to an amended bill of information
charging her with theft of less than $100. She requested immediate
sentencing and was sentenced to 1 day in the parish prison with credit for
time served from the date of her arrest and ordered to pay $500 restitution.
Morgan had been arrested and was indicted in July 1998 on charges that
she was overpaid more than $3,000 in benefits based on her false
certification that eight occupants resided in her residence. Under the
relocation program (funded by EPA's Superfund and administered locally
by the U.S. Army Corps of Engineers), EPA pays relocation costs and
related subsistence for residents whose homes have been contaminated
with methyl parathion, a toxic pesticide licensed for agricultural use and
banned for indoor use. Benefit levels are based on the number of
occupants residing in the contaminated homes. EPA is also paying for the
contamination cleanup costs. Cleanup costs for Morgan's residence were
$26,946.
Two Convicted
of Attempt to
Commit Theft
by Deception,
(Making False
Statements,
and Forgery
On March 10, 1999, a jury in Fannin County, Georgia, found Gary L. Jones
and Nadine E. Starks each guilty of one count of criminal attempt to commit
theft by deception, one count of making false statements, and one count of
first degree forgery. Jones and Starks were indicted on May 11, 1998, on
those charges stemming from allegations that Jones represented himself to
an Ellijay, Georgia, homeowner as an employee of Atlanta Testing, Inc.
(ATI); told the resident that ATI had contracted with EPA to locate and
remove canisters containing toxic waste; and stated that he had been
directed by EPA to perform soil tests under the concrete slab in their
garage. The charges also alleged that Jones presented to the homeowner
a business card and letter purportedly from an EPA employee but which
had been forged by Starks, stating that Jones had been directed to
perform the remedial work. Sentencing is scheduled for April 22, 1999.
This investigation was conducted jointly by the EPA OIG and the Fannin
County (Georgia) Sheriff's Office.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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Audit Update
On February 18, 1999, the Austin American-Statesman reported that the
Texas Water Development Board (the Board) had adopted a new policy
allowing federal funds to help Colonia residents with water and sewer
connections. Colonias are small communities located along the United
States-Mexican border which are often impoverished and characterized by
substandard housing and poor living conditions. The new policy was
initiated by EPA following the completion of an OIG survey of Colonia
wastewater treatment projects. The report, Survey of Completed Texas
Colonia Wastewater Treatment Assistance Program Projects, issued
September 21,1998, said that many residents of Colonias could not
connect their homes to wastewater treatment facilities because of the cost.
The report stated that there were no provisions under the assistance
program to fund connection-related costs. As a result, most residents must
rely on resources from other state and federal programs. However,
conflicting state or federal requirements under these other programs may
prevent some Colonia residents from being eligible for funds. In this
situation, residents are unable to connect to the system because they
cannot afford the fees on their own.
The report contained a recommendation to EPA for the development of
affordable financial strategies for delivery of services to the residents. In
response, the Region stated that it would work with the Board to allow EPA
grant funds to be used to pay for the cost of connections. The Region's
efforts were realized on February 17,1999, with the Board's adoption of the
new state policy. The new policy is intended to allow $10 million to $12
million in federal money to be spent on household connections to drinking
water and sewer lines. Officials estimate that about 10,000 households,
with approximately 40,000 to 50,000 people, could benefit from the new
policy.
OFFICE OF INSPECTOR GENERAL
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Financial Management
Update On
Agency
Actions To
Financial
Management
Improvement
Act
In our report on EPA's Fiscal 1997 And 1996 Financial Statements
(8100058, dated March 2, 1998), we reported that, as of September 30,
1997: (1) EPA's Core Financial Systems did not have application security
plans required by OMB Circular A-130, Management of Federal Information
Resources; and (2) systemic problems caused delays in billing responsible
parties for Superfund oversight costs. The Federal Financial Management
Improvement Act (FFMIA) requires us to report, in our Semiannual Report
to the Congress, on the remediation plan to bring the financial
management systems into compliance.
The Comptroller sent the remediation plan to OMB on March 31,1999. In
this plan, the Comptroller indicated that all corrective actions but one were
completed.
Aaencv Efforts to Prepare Application Security Plans
Our fiscal 1998 financial statement audit work through March 31,1999,
indicated corrective actions had been completed such as preparing
application security plans for all systems for which the CFO is responsible,
and issuing internal operating procedures for three core financial systems.
As of March 31,1999, we had not completed our fiscal 1998 financial
statement audit work, and, accordingly, had not determined the adequacy
of these actions. We will provide an update of the status of corrective
actions taken in our next Semiannual Report to the Congress.
Aaencv Efforts to Bill Superfund Oversight Costs
At the end of fiscal 1997, EPA had $162 million of unbilled Superfund
oversight costs. During fiscal 1998, EPA committed to addressing the core
problems causing billing delays and made billing of oversight costs a
priority. The Comptroller and Director, Office of Site Remediation
Enforcement, in conjunction with regional offices, increased the Agency's
cost recovery accounts receivable 42% from $485 million in 1997 to $691
million at the end of 1998. Further, the Agency's estimate of unbilled
oversight costs decreased 56% to $71 million in 1998.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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Assistance Agreement Audits and Investigations
Chesapeake
n
Procedures for
Awarding
Cooperative
The Local Government Advisory Committee (LGAC) formed a workgroup to
examine the feasibility of establishing a non-profit entity to further assist
local governments in implementing Chesapeake Bay protection and
restoration activities. Before completion of this study, the Center for
Chesapeake Communities (CCC), a nonprofit organization, was
incorporated and the LGAC Vice Chair became the Executive Director of
CCC. The timing of the incorporation prompted some LGAC members to
request an OIG audit to determine if a conflict of interest existed.
Soon after the CCC was incorporated, EPA awarded it a noncompetitive
cooperative agreement to fund organizational start-up costs, prepare a
local government training module, and plan a local government summit.
Additional funding was provided to conduct activities that would enhance
CCC's ability to provide technical assistance, and complete various
projects. Almost one-half of the cooperative agreement funds provided to
the CCC were used for a contract award to obtain LGAC support.
EPA awarded the noncompetitive cooperative agreement to the CCC
without adequate justification which created an appearance of preferential
treatment. The CCC Executive Director acted favorably toward a
contractor by awarding it two contracts after this same contractor absorbed
costs totaling approximately $2,300 for incorporating the CCC. This action
compromised the integrity of the CCC's contract award process and
violated EPA's regulations. We also found that neither the CCC nor its
contractor had adequate financial management systems in place to
properly account for Federal funds.
In addition, EPA awarded cooperative agreements to intermediaries, which
in turn awarded contracts to provide LGAC support services. EPA officials
explained that by awarding cooperative agreements to obtain the services
of an LGAC support contractor, it was able to avoid Federal procurement
regulations, making the procurement for support services easier. However,
while easing the process for awarding the support contracts, EPA actions
were not consistent with the intent of the Federal Grant and Cooperative
Agreement Act.
We recommended that the Regional Administrator, Region III, terminate the
existing cooperative agreement awarded to the CCC and, if services are
needed, attempt to award a new cooperative agreement competitively;
obtain LGAC support services directly, without using an intermediary;
discontinue all payments to the CCC and review all costs already incurred
under the cooperative agreements; and before awarding assistance
agreements and allowing advance payments, ensure that recipients have
adequate internal controls and financial management systems.
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Agency Action
The final report (9100117) was issued to the Regional Administrator,
Region III, on March 31, 1999. In response to the draft report, the Region
concurred with virtually all the recommendations. Region III has already
taken corrective actions including: a site review and evaluation of the
CCC's financial management and records systems; development of a
management plan for competing nonprofit grants in the CPBO; issuance of
the first Request for Proposals under the new competitive procedures
outlined in the management plan; and initiation of a vulnerability
assessment for all Chesapeake Bay Program grants. A response to the
final report is due by June 30, 1999.
In June 1994, the Center for Environment, Commerce & Energy (Center)
issued a report which quantified discharges of pollution into the air, water,
and land of the District of Columbia. EPA Headquarters Grants
Administration Division (GAD) awarded an Office of Environmental Justice
(OEJ) grant for $30,000 to the Center in April 1995 to expand on the earlier
report by including statistics on race and income. In August 1995, Region
3's Chesapeake Bay Program Office (CBPO) awarded the Center a
$140,000 grant to focus its efforts on informing the District's communities
about the types and amounts of pollution in their neighborhoods.
EPA awarded the same grantee two grants with identical requirements and
work plans, despite expecting two different work products. This occurred,
in part, because the work plan was too general and included tasks related
to both work products. There are no controls between EPA regions and
Headquarters to ensure that one grantee does not receive money twice for
the same work. About one month after the award of the second grant, the
Center notified the CBPO and OEJ of the duplicate work plans and
suggested two separate reports be produced. Neither CBPO nor OEJ staff
responded to the Center's proposed solution or took action to differentiate
between the work plans. This lack of clear direction, coupled with
ineffective monitoring by EPA project officers, resulted in neither program
office receiving the work product it expected.
The Center's accounting system did not adequately support its grant
expenditures in accordance with federal regulations. We questioned
$169,219 of the $179,000 in project expenditures under the two grants.
We recommended that the Regional Administrator, Region III, and the
Assistant Administrator for Enforcement and Compliance Assurance hold
the project officers and approval officials accountable for grant work plans
specifically, administering the grant effectively, and monitoring the
grantee's performance. Also, we recommended that language be included
in grant applications and agreements to have the grantee certify that it has
no other EPA-funded awards that include the same scope of work, and that
the Center be required to repay EPA $169,219.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
11
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Agency Action
The final report (9300006) was issued to the Regional Administrator,
Region 3; the Assistant Administrator for Enforcement and Compliance
Assurance; and the Director, Grants Administration Division on February
17, 1999. In response to the draft report, there was general agreement
with the findings. However, there was not consensus with respect to the
recommendations. A response to the final report is due May 18, 1999.
EPA Recovers
$176,666,
Interest on
Overpaid Grant
Funds
On February 4, 1999, EPA received a payment of $176,666 from the City of
Detroit which represents the accrued interest resulting from an
overpayment of EPA grant monies to the Detroit Water and Sewer District
(DWSD). This recovery was the result of the joint efforts of OIG
investigators and auditors, which disclosed a duplicate payment of
$999,999 issued by EPA and held improperly by DWSD for over 2% years.
This action had permitted the interest to be earned without benefit to the
Government. Based on the results of this investigation, EPA previously
offset $999,999 against a subsequent claim under the grant, realizing a
cost savings.
EPA Recovers
$4,214 in
University of
Minnesota
Settlement
With False
Claims Act
On November 19, 1998, the United States Attorney's Office for the District
of Minnesota entered into a civil settlement agreement with the Board of
Regents of the University of Minnesota (UM) to resolve all claims stated in
an amended complaint filed in December 1996. In June 1998, a summary
judgment was issued concerning the EPA portion of the complaint. In the
judgment, the Regents were found liable for misusing $4,345 in EPA grant
funds. These funds were placed in a general account at UM and utilized
for other than the EPA grant project. EPA recovered this amount less an
administrative fee. The investigation was initiated as a result of a False
Claim Act qui tarn lawsuit filed by James F. Zissler, a former employee of
UM, alleging that UM officials had misapplied funds from numerous federal
grants, including those from the Food and Drug Administration and the
National Institutes of Health. The total settlement amount paid by UM was
$32,000,000.
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OFFICE OF INSPECTOR GENERAL
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Construction Grants
Over $86
Million
Questioned
on Hudson
County, New
Projects
EPA reported Construction Grants Closeout as a material management
control weakness in its Fiscal 1998 Integrity Act Report to the President and
Congress. The OIG, in consultation with EPA, implemented a revised audit
strategy several years ago to assure that the most vulnerable grants were
subjected to audit and to assure that the audit process did not delay the
construction grants' program closeout. As of March 1999, there were 28
grants totaling $989 million which are expected to receive OIG review. The
majority of these grants are in Regions 1, 2, and 3. Summaries of some
audits with significant issues follow.
EPA awarded two grants totaling $60,379,612 for the construction and
expansion of wastewater treatment facilities. The grantee claimed
$22,091,905 of ineligible costs under the grants, including:
• $18,268,010 of construction and other project costs that were in excess of
the costs approved for inclusion under the grants by the New Jersey
Department of Environmental Protection (NJDEP);
• $2,200,925 of project inspection fees that were incurred for ineligible
activities such as permits and redesign or were in excess of maximum
allowable costs approved by the NJDEP;
• $1,785,680 of engineering fees that were not approved by NJDEP, or were
not procured in accordance with EPA requirements;
• $996,550 of administrative costs consisting of ineligible legal fees and
indirect costs, and other costs that were not allocable to the project; and
• $1,159,260 of additional eligible design allowance costs that were not
claimed by the grantee. These additional costs were offset against
questioned ineligible costs.
We also questioned $64,507,499 of unsupported costs which included
$33,800,342 of unsettled litigation-related costs and $27,252,679 of
construction and project improvement costs that did not meet effluent
discharge standards, as required by special grant conditions.
We recommended that the Regional Administrator, Region 2, not participate
in the federal share of the ineligible costs ($12,150,548), and obtain and
evaluate any additional documentation to determine the eligibility of the
federal share of the unsupported costs ($35,479,124).
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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Agency Action
The final report (9100066) was issued to the Regional Administrator, Region
2, on December 28, 1998. A response to the report was due by March 28,
1999.
$1.8 Million
Qui
on
EPA awarded a construction grant totaling $12,448,500 for the construction
of sewers, pump stations and force mains to serve nine communities in Anne
Arundel County. The grantee claimed $1,824,458 of ineligible costs under the
grant, including:
• $1,151,690 of construction costs that were either determined to be
ineligible by the Maryland Department of the Environment (MDE) or were
claimed due to a clerical error;
• $667,943 of inspection, engineering and indirect costs claimed in excess
of the amounts approved by MDE; and
• $4,825 of project income that was not credited by the grantee to the
project.
We also questioned $1,720 of unsupported administrative costs.
We recommended that the Regional Administrator, Region 3, not participate
in the federal share of the ineligible costs ($1,368,344), and obtain and
evaluate any additional documentation for the federal share of the
unsupported costs ($1,290).
Agency Action
The final report (9300005) was issued to the Regional Administrator, Region
3, on February 4,1999. A response to the report is due by May 5, 1999.
EPA awarded four construction grants totaling $41,860,428 for the
construction of wastewater treatment facilities, including primary and
secondary treatment plants, sewer lines, force mains, and pump stations.
The grantee claimed $1,274,888 of ineligible costs under the grants,
including:
• $546,373 of start-up services which were in excess of the costs allowed
under EPA policy;
• $373,469 of bid bond forfeitures that were received by the grantee but
were not credited to the project in the final claim;
• $317,441 of project inspection fees outside the scope of the project; and
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OFFICE OF INSPECTOR GENERAL
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• $37,605 construction, engineering and administrative costs that were not
eligible under the project.
We also questioned $5,506,071 of unsupported construction, engineering
and administrative costs.
We recommended that the Regional Administrator, Region 2, not participate
in the federal share of the ineligible costs ($956,166), and obtain and
evaluate any additional documentation from the grantee for the federal share
of the unsupported costs ($4,129,554).
Agency Action
The final reports (9100073 and 9100076) were issued to the Regional
Administrator, Region 2, on January 5, 1999 and January 13, 1999,
respectively. Responses to the reports were due by April 5, 1999 and April
13, 1999.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
15
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Contract Investigations
Former
Laboratory
President to
Serve f5
Months In
Prison and to
Pay $331,471
in Fines and
Restitution
On October 21,1998, William L. Hopkins, Jr., former president of Hess
Environmental Laboratories, Inc. (Hess), was sentenced in U.S. District
Court, Eastern District of Pennsylvania, to 15 months imprisonment, three
years supervised release, and ordered to pay a $40,000 criminal fine,
$291,071 in restitution, and a $400 special assessment. The sentencing
follows a July 1998 guilty plea by Hopkins to charges of conspiracy to
defraud the United States, making false statements to EPA, violating the
Clean Water Act, and mail fraud. Hopkins knew that Hess did not have the
proper equipment to perform certain environmental tests, yet directed Hess
personnel to continue the fraudulent scheme to prepare, bill for, and mail
false reports to customers for tests that were never performed and that
contained fabricated results. The conspiracy affected schools, hospitals,
local governments, and businesses, including the Tobyhanna Army Depot in
Tobyhanna, Pennsylvania, which paid Hess to test samples for hazardous
wastes, contamination of ground water, and for pollutants discharged into
rivers and streams. These customers, as well as EPA and the Pennsylvania
Department of Environmental Protection, relied on the tests to assess threats
to the environment and to determine where and when remedies were needed
to control hazardous, toxic, or contaminated substances. Previously, as a
result of this investigation, Hess was closed, was sentenced to pay over $5.5
million in restitution, and was placed on 5 years probation. This investigation
was conducted jointly by the EPA OIG, the EPA Criminal Investigation
Division, and the U. S. Army Criminal Investigation Command.
Corporation
Agrees to Pay
$50,000
Settlement
On November 11, 1998, the United States Attorney's Office for the Middle
District of North Carolina entered into a civil settlement with Unisys
Government Systems, Inc. (Unisys), to settle false claims charges involving
premature billing to the government under four contracts with EPA and the
National Aeronautics and Space Administration (NASA). The investigation
was initiated to determine if Unisys had submitted claims to EPA and NASA
for payment to its subcontractors when, in fact, Unisys had not yet paid those
subcontractors. Such premature billing is in violation of Section 52.216-7 of
the Federal Acquisition Regulation (FAR). Unisys agreed to pay the
government $50,000 and has implemented specific billing policies and
procedures to ensure compliance with the FAR. This investigation was
conducted jointly by the EPA OIG and the NASA OIG.
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OFFICE OF INSPECTOR GENERAL
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Former
California Lab
Supervisor
Pleads Guilty
to Falsifying
Laboratory
Testing Data
On November 19, 1998, Gene Kong Lee, a former supervisor at Anlab
Analytical Laboratories (Anlab), a Sacramento company that specialized in
water and wastewater testing, pleaded guilty to one count of falsifying
laboratory test data. In July 1998, Lee was indicted in U.S. District Court,
Eastern District of California, on charges that he falsified test results and
filed a false claim of $10,500 to EPA for payment for the work. The testing
was performed during the cleanup of a Superfund site in Davis, California.
Lee, a gas chromatography/mass spectrometry supervisor at Anlab,
manipulated the computer-generated test data in order to make the results
appear to meet quality assurance criteria and to avoid performing quality
control measures. Also, Lee falsely reported the sampling analyses as
having been done within specified holding times when in fact he knew that
this was untrue. Previously, two operators Lee supervised at Anlab,
Xiaomang Pan and Brett Huffman Williams, pleaded guilty to misdemeanor
charges of fraudulent demand and aiding and abetting for their action in
falsifying the laboratory results by manipulating the data. This investigation
was conducted jointly by the EPA OIG and the EPA Criminal Investigation
Division.
Company and
Owner
Indicted on
Charges of
Falsifying
Reports
On December 17, 1998, Enviro25 Environmental Services, Inc. (Enviro25),
and its owner, Susan A. Summers, were indicted in District Court, City and
County of Denver, Colorado, on 16 counts of forgery and 17 counts of
attempting to influence a public servant. Summers alone was also charged
with one count of violating the Colorado Organized Crime Control Act.
Enviro25 was started by Summers 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. Summers and her company are 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.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
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California
Laboratory
Owner/Officer
Charged with
Submitting
Analytical
On February 3, 1999, Blayne Hartman, owner and officer of Transglobal
Exploration Geochemistry, was indicted in U.S. District Court, Central District
of California. The indictment charges that Hartman submitted analytical data
relating to soil gas samples collected at the Mayco Pump property, located in
the San Fernando Valley Superfund site, to the Los Angeles Regional Water
Quality Control Board. Hartman claimed that the laboratory equipment had
been properly calibrated to analyze for various contaminants when, in fact, he
knew that the equipment had not been properly calibrated and had falsified a
portion of the calibration data. On February 11, 1999, EPA suspended
Hartman from participation in federal assistance, loan, and benefit programs
and from all federal procurement. Between February 16 and March 1, 1999,
EPA also suspended Transglobal Exploration Geochemistry and suspended
Transglobal Exploration & Geoscience, Inc.; Transglobal Environmental
Geochemistry, Inc.; and HP Labs as affiliates of Hartman. Subsequently, the
suspension of HP Labs was lifted as the result of an interim compliance
agreement.
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OFFICE OF INSPECTOR GENERAL
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Employee Integrity Investigations
EPA Employee
Terminated;
Pleads Guilty to
Theft of More
Than $40,000 of
Equipment;
$10,500 in
Equipment
Recovered to
Date
On March 17, 1999, a criminal information was filed in U.S. District Court,
District of Maryland, charging a former EPA employee with stealing and
converting to personal use a Government VISA credit card and office
equipment belonging to EPA. The Government's loss attributable to the theft
exceeds $40,000. While an EPA employee, the defendant, a GS-14
Information Management Specialist, made unauthorized purchases of
computers and computer-related equipment using a Government-sponsored
business account VISA card. The employee also stole EPA computers that
were legitimately purchased for EPA. The employee then sold the purchased
and stolen computers and equipment for cash for personal use. The sales
were made to local pawn shops and individuals. In two instances, it appears
that co-workers were victimized by the defendant selling them converted
equipment that the employee represented as personal property. To date,
investigative efforts have led to the recovery of over $10,000 worth of the
equipment from local pawn shops and individuals. Based upon the facts
disclosed by the OIG investigation, the employee was terminated and on
March 31, 1999, the defendant pleaded guilty to one count of theft of
government property. Sentencing on the criminal conviction is scheduled for
June 16, 1999.
Former
Employee
Pleads Guilty to
Making False
Statements to
Obtain Benefits
under the
Federal
Employees*
Compensation
Act
On January 5, 1999, Rochel Haigh Blehr, a former EPA employee, pleaded
guilty in U.S. District Court, Northern District of Georgia, to a one-count
criminal information charging her with making a false statement and
representation to obtain benefits under the Federal Employees'
Compensation Act (FECA). Blehr had filed a benefits claim for loss of work
due to exposure to formaldehyde in the office environment. Blehr, a former
EPA computer data technican, is the sole owner and publisher of a local
newspaper, The Environmental Times, incorporated in the State of Georgia
as a domestic for profit corporation. The information charged that Blehr
falsely represented that she had turned over all responsibilities for
overseeing the newspaper to a vice president of the company when, in fact,
she knew she had not done so. This investigation was conducted jointly by
the EPA OIG and the Department of Labor OIG.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
19
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Hotline Activities
The OIG Hotline has made significant progress in establishing an effective
program. We now have in place a standard procedure for processing Hotline
complaints. An Office of Inspector General Manual chapter was approved
and a flow chart developed. Each complaint is reviewed by a team of
auditors, evaluators, and criminal investigators as conditions warrant. All
matters significant enough to require a response are monitored by the team
until resolved. In addition, we have established liaison with several key
groups who receive the most complaints, such as the Criminal Investigation
Division and the Office of Human Resources. We have also had success in
expanding the market for the Hotline. We established a toll-free number to
improve access to the Hotline, and we created and distributed a new poster.
The poster and matching business cards are printed in EPA's colors and are
more attractive to draw attention. The Office of Acquisition Management
agreed to require that all contractors display the poster on their premises.
During the next semiannual period, we plan to revamp and expand the OIG
Hotline web page with the assistance of the OIG Information Technology
Facilities Management team. Plans for our new web page format include
links to EPA program office Hotlines, the EPA locator, other OIG hotlines, and
State environmental offices. We also plan to clarify the types of problems
that should be reported in order to promote the identification of significant
matters warranting investigative, audit, or management attention.
During the reporting period, the OIG Hotline opened 71 new cases and
closed 74 cases including 17 from the previous period. The pie chart shows
the distribution of hotline case referrals.
Hotline Case Referral Distribution
OIG Audit Divisions
36
RG Program Offices
13
CID
8
20
HQ Program Offices
4
OIG Investigation
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OFFICE OF INSPECTOR GENERAL
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Section 2-- Fostering Strong Working Relationships
Advisory and Assistance Services
EPA established nine Compliance Assistance Centers to help small and
medium-sized businesses and local governments better understand and
comply with federal environmental requirements. Each Center is targeted
to a specific sector.
Federal funds were used for start up, development, and initial operation.
EPA intended that the Centers would move towards self-sufficiency through
financial support of the industries they serve. However, the ability of
Centers to generate income (e.g. through advertising, product and service
sales, industry contributions, etc.) has been difficult. Further, the ability of
Centers to raise funds varies greatly depending on their target audience.
EPA asked the OIG to identify the conditions under which users of
GreenLink, the center for automotive service and repair industry, would
financially support the Center. We interviewed GreenLink users and found
a wide variety of opinions on ways to generate income. We provided the
information to OECA officials on January 14,1999.
Joint Review
. Suggestions to
Improve
' Environmental
Results in the
At the request of EPA Region 8, the OIG worked with regional staff to
complete an assessment of how the Region could best work with the
agricultural community. The agricultural community includes a unique
group of individuals and entities with changing demands due to new
initiatives such as the Clean Water Action Plan. EPA and the agricultural
community share the common, broad goal of being good stewards of the
environment. However, the commonality of this goal was often not
recognized by EPA or the agricultural community. For example, while a
farmer may be concerned that the stream running through his property is
eroding valuable farm land, EPA may be concerned that stream bank
erosion damages the health of the stream.
The Region 8 Regional Administrator established an agricultural team to
share information and participate in various activities with the agricultural
community. The joint OIG-Region 8 team believed the agricultural
community needed a focal point within the Region who could present EPA
goals in a manner sensitive to the agricultural community's point of view.
This focal point would also provide coordination between environmental
programs and provide Region 8 staff with information about how EPA and
the agricultural community could work together to meet their common
goals. The team also discussed the benefits of involving the U.S.
OCTOBER 1, 1998 THROUGH MARCH 31,1999
21
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Department of Agriculture's National Conservation Service in meeting the
Region's goal of building relationships with the agricultural community.
Joint
Performance
Partnership
Grant
Management
Assistance
Reviews
Identified
Lessons Learned
Over the last two fiscal years, the OIG divisional audit offices and EPA
regional staff have conducted joint reviews to evaluate state and regional
performance partnership grants (PPG) implementation. The goal was to
assess the progress and identify lessons learned so EPA can take
corrective action to minimize any negative effect on overall performances.
A PPG is a multi-program grant made to a state or tribal agency from funds
allocated and otherwise available for a specific environmental program. A
primary purpose of PPGs is to give recipients increased flexibility to
address their highest environmental priorities, while continuing to address
core program commitments. EPA designed PPGs to encourage improved
environmental performance by linking program goals with program
outcomes and by increasing the use of environmental indicators and
program performance measures.
As of March 31,1999, three joint reviews were completed and five others
were in progress. The review completed in the last six months included
similar issues found in the two previously completed reviews. These issues
included the need for EPA and the states to develop more outcome-based
performance measures, to gather sufficient and appropriate data on
performance measures and indicators, and to tie what the states will
measure to environmental goals.
The PPG has provided the state with flexibility for such things as (1)
organizing the agreement on the basis of its own priorities, (2) obtaining
funds for multimedia areas, and (3) establishing a two-year agreement
based on the state's fiscal year. Switching to a two-year agreement
allowed the state to focus on implementation rather than document
development. However, the state's financial management system has
hindered its ability to fully realize the flexibility the process provides.
The review team also found similar difficulties in the state and regional
efforts to achieve PPG goals and demonstrate improved environmental
performance. Changes in a state's administration or staff can result in
changes in philosophy or a loss of knowledge, which may result in less
support from management and new priorities that are not reflected in the
agreement. In addition, the transition from activity-based measures to
environmental indicators is an issue that is being struggled with on a
national basis. The movement to indicators has been difficult due to the
lack of base measurement data; the need for a broader, multimedia
perspective; and the increased burden created for staff in collecting
different information and developing new databases. The state financial
management system is also a barrier to flexibility because it does not have
the capability to track funds the way the PPG was structured.
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OFFICE OF INSPECTOR GENERAL
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We suggested EPA and the states continue working together to identify
performance measures with better indicators of environmental outcomes
and short-term goals. The states should identify their desired
environmental conditions and correlate these to the performance measures
in the Performance Partnership Agreement. Additionally, the Agency
should work with the states to clarify procedures for carryover funds and
the need to meet reporting commitments. When additional reviews are
complete, we plan to issue a memorandum to the Office of Congressional
and Intergovernmental Relations summarizing the results and offering
suggestions for improving overall program performance.
Financial
Contract Audits
The OIG provides independent contract audits and financial advisory
services to EPA's Office of Acquisition Management (OAM) and to other
government agencies. During this reporting period, the OIG maintained
contract audit cognizance for 10 contractors where EPA contracts
represent the majority of the contractors' total auditable dollars. We
performed all contract audits at these contractors including incurred cost
audits, proposal reviews, and operation audits. In addition, we assisted
OAM in developing negotiation objectives, developing its contract-related
policy, and analyzing contractor responses to reports.
In one instance, we performed procedures, agreed to by OAM, to assist in
negotiating final indirect cost rates and direct costs. We questioned 64
percent of the indirect cost rate proposed by the company. This resulted in
a potential savings of $463,489. The contractor correctly excluded the labor
related to an unallowable divestiture activity in its final incurred cost
proposal, but did not exclude the directly associated indirect costs as
required by the Federal Acquisition Regulation. We increased the labor
base used to compute the indirect rate to ensure that all costs associated
with an unallowable divestiture activity were properly excluded from the
indirect cost pool.
Clean Water
State Revolving
Fund (CWSRF)
Title VI of the Clean Water Act established the CWSRF program to replace
the wastewater treatment facilities construction grants program. One
expectation of the CWSRF is to create permanent revolving funds in each
state to make loans to local governments to construct needed wastewater
treatment facilities. Assets in state-administered CWSRFs exceeded $28
billion as of December 1998.
The OIG developed an audit strategy in consultation with EPA to help
assure that EPA's need for reliable CWSRF financial statements is met.
The strategy also includes objectives to help assure that states operate the
CWSRFs with adequate internal controls and in compliance with
capitalization grant requirements. In addition to monitoring state auditor
and independent public accountant audits of CWSRFs, the OIG conducts
audits in selected states. In fiscal 1999, the OIG issued audit reports on
the CWSRF programs in Nebraska and Texas. Audits are in progress in
Nevada, Oregon, and Utah. Texas received an unqualified opinion on its
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
23
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CWSRF financial statements. The Nebraska subsidiary accounting
systems do not have adequate controls in place to ensure that all CWSRF
activity is properly accounted for and to ensure that accurate financial
information is maintained and reported in the financial statements.
Therefore, we disclaimed an opinion because we were unable to obtain the
level of assurance needed. We recommended that the CWSRF
management maintain an accounting system to adequately account for its
activity and place a higher priority on its financial reporting and accounting.
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OFFICE OF INSPECTOR GENERAL
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Fraud Awareness Briefings
The OIG is committed to building strong relationships with other
investigative agencies, prosecutors, Agency employees and managers and
to strengthening awareness by state and local law enforcement officials
and environmental program officials of possible fraud, waste, and abuse
within EPA programs. To achieve this goal, the OIG has supported an
aggressive fraud awareness briefing program spear headed by the
investigative field offices within EPA's regions. The briefings are an
important part of the Office of Investigations' fraud detection and prevention
efforts within EPA and, as such, have been formally integrated into the
Office of Investigations' performance plans.
To effectively implement the fraud awareness briefing program, field offices
have identified specific EPA programs and interested state and local law
enforcement organizations within their jurisdictions for participation.
Briefings are usually tailored to address the vulnerabilities within these
areas or specific interests from a law enforcement perspective. Briefings
have been conducted for staff working in EPA grant programs; in
Superfund and contracting activities; and for re-certification classes for
Project Officers, Work Assignment Managers, and On-Scene Coordinators.
Most recently, we have conducted briefings for local United States
Attorney's Offices on law enforcement issues regarding the filing of
financial information by potentially responsible parties under CERCLA.
Based on the OIG's activity over the past six months, in this area, we
believe that the fraud awareness briefings have contributed to the goal of
fraud detection and prevention and have facilitated the development of
stronger working relationships both within and outside EPA.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
25
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Committee on Integrity and Management
Improvement
Employment,
Outside
Employment
Employment
The Committee on Integrity and Management Improvement (CIMI) was
established in 1984 by EPA Order 1130.1. The purpose of CIMI is to
coordinate the Agency's effort to minimize the opportunities for fraud, waste
and mismanagement in EPA programs and to advise the Administrator on
policies to improve the efficiency and effectiveness of EPA programs and
activities. The Committee is composed of senior EPA program and
regional officials and is chaired by the Inspector General.
CIMI developed an informational leaflet to provide EPA personnel with a
detailed synopsis of current restrictions on outside employment and post-
employment and to heighten employee awareness of potential
improprieties.
In view of reduction in the size of within the Federal work force, many
employees are reevaluating their career goals and need guidance to avoid
potential conflicts of interest. The rules pertaining to prohibited activities
after leaving Federal service and those governing outside employment and
teaching, speaking, and writing while a Federal employee were established
to guard against actual or potential conflicts of interest which may bring into
question the propriety of Federal actions. These rules are complex, and
violators are subject to a wide range of penalties, including criminal
sanctions. Federal employees who plan to seek employment in the private
sector or engage in outside employment need to know about applicable
rules.
Program Fraud
Civil Remedies
Act
The Program Fraud Civil Remedies Act (PFCRA) was enacted to provide
Federal agencies with an additional legal remedy to combat fraud by false
claims and false statements. Before enactment of PFCRA, the only
remedies available were civil action under the False Claims Act, and
criminal prosecution under the Federal criminal code. Sometimes known
as the "Mini-False Claims Act," PFCRA established an alternative
administrative procedure that can be used against anyone who makes a
claim to an agency that he/she knows, or has reason to know, is false,
fictitious, or fraudulent. Any individual (or organization) found liable under
PFCRA may be penalized up to $5,500 per false claim or false statement,
and may be assessed up to double the amount falsely claimed. CIMI
developed an awareness bulletin to provide EPA employees with a brief
synopsis of PFCRA and inform them how PFCRA can be used to bring
administrative actions to recover damages and civil penalties for small
dollar frauds. The document also emphasized the need for continual
efforts to detect and report fraud.
26
OFFICE OF INSPECTOR GENERAL
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Section 3-- Operating at the Highest Performance Level
Office of Inspector General Initiatives
The OIG continued its reinvention initiative during this reporting period by
focusing on becoming a high performance organization which contributes to
environmental quality, public health and good government through problem
prevention and cooperative solutions.
In January 1999, thirty OIG leaders and managers attended a Federal
Executive Institute sponsored course on building high performance
organizations. To provide a solid foundation for our high performance
organization, all OIG employees will receive specialized training in the
concepts of personal leadership and performance excellence by the end of
the calendar year. Our performance excellence training will familiarize OIG
employees with the Malcolm Baldrige National Quality Award criteria and
provide a framework for assessing organizational performance, and
ultimately facilitate systemic improvements within the OIG.
The OIG Steering Committee plays a key role in our reinvention initiatives.
The Steering Committee developed statements of leadership philosophy,
and organizational and operating systems values in support of our OIG
vision statement. They then worked with other members of our leadership
team to refine the statements and share them with our entire workforce.
Work Groups under the auspices of the Steering Committee developed a
new rewards program for the OIG and made significant progress on projects
in the areas of strategic planning, organizational communications and
process standardization.
Operations And
Reports
On February 22, 1999, OIG launched the debut of its new management
information system, the Inspector General Operations and Reports system
(IGOR). IGOR was designed to automate and consolidate the management
of OIG activities. It replaces functions previously accomplished by three
individual OIG systems, integrates the information, and provides the
flexibility to satisfy multiple user requirements. IGOR has the capability to
perform assignment tracking, audit tracking and investigative tracking. It
will produce the type of statistical information used in the Semiannual
Report to Congress as well as recurrent internal OIG management reports.
It will also calculate and maintain cost data associated with OIG activities.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
27
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The Inspector General and the IGOR Development Team
The completion of IGOR represents a milestone that has taken almost three
years to achieve. IGOR is a major tool in assisting the DIG to accomplish
its' goal of improved performance.
Office of
Investigations'
Customer
Survey
This past fiscal year, the Office of Investigations conducted its third
customer survey. The survey consisted of a two-page questionnaire which
we sent to officials in the Agency, the Department of Justice, and state and
local governments, who recently worked with our special agents or received
our investigative products. The questionnaire inquired about various
subjects including the professionalism and timeliness of the investigation
and any deficiencies; whether the special agent kept the prosecutor
informed about the progress of the investigation; whether the agent provided
timely and effective prosecutive support; whether the investigative report
was clear, focused and complete; and whether there were areas for
improvement. Prosecutors were asked to rate their overall experience in
working with the special agent.
The Office of Investigations distributed questionnaires to 114 customers,
most of whom were Assistant U.S. Attorneys (AUSAs) and Headquarters
and regional Agency officials, and received 57 responses (50%). The
results were favorable. For example, 96.5% of the respondents indicated
that our investigations were professional and timely; all of the thirty AUSAs
who responded stated that they were kept apprised of progress in the
investigation and that our special agents provided timely and effective
support; and the average overall rating that our agents received from
AUSAs was 4.73 (on a 5.0 scale). The results of the survey, including the
comments from every respondent, were provided to all EPA OIG special
agents for their edification and instruction in how to enhance customer
satisfaction.
28
OFFICE OF INSPECTOR GENERAL
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First 010
Diversity
Report
Progress
In response to House Report 105-610, dated July 8,1998, which
accompanied the fiscal 1999 appropriations for the Departments of Veterans
Affairs and Housing and Urban Development and Independent Agencies,
we provided a semiannual report on workforce diversity covering the first
half of this fiscal year. In addition to submitting the report on workforce
diversity twice a year to the House and Senate Committees on
Appropriations, the House directed each Inspector General covered by that
appropriation to convene a working group to study the issues of workforce
diversity and to identify the problems in improving workforce diversity.
The DIG is committed to recruiting and maintaining a highly competent and
diverse workforce. Since 1997, we have actively taken the following steps,
and have communicated them internally through the OIG Intranet, to
address the concerns and perceptions of our employees and to increase
workforce diversity in the OIG:
• We created the Special Emphasis Program Manager (SEPM)
Team. The SEPM Team is a working group which helps OIG
management identify, analyze, and address the employment-related
concerns and perceptions of minorities, women, and persons with
disabilities and helps senior management develop ideas to increase
workforce diversity in the OIG. During April 1999, the Agency
awarded the SEPM Team the Silver Medal for exceptional team
efforts in developing a model management approach that other EPA
offices can emulate to effectively assist the Agency in achieving its
Affirmative Employment Program and Diversity Action Plan goals
and objectives.
• We established a Diversity Action Plan (DAP). The DAP identifies
the employment-related concerns and perceptions of our minority
employees and provides approaches for increasing workforce
diversity in the OIG.
• We annually prepared and submitted the update of the Affirmative
Employment Program (AEP) Plan to EPA's Office of Civil Rights.
The AEP Plan describes our workforce diversity goals for selected
target groups and describes our accomplishments in meeting the
goals. The OIG keeps track of its progress by preparing in-house
quarterly updates of the AEP.
• Fiscal 1999 Goals: Our fiscal 1999 AEP goals focused on
increasing the number of under-represented Hispanics, Asian-
Pacific Islanders, and women. We worked to ensure that we have
an active program for reaching candidates from the under-
represented groups. A key component of our efforts is the
continued involvement of the SEPM Team and OIG hiring officials.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
29
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Government Performance and Results Act Review
Plan
OIG Continues
The Government Performance and Results Act (GPRA)
promotes a new focus on results, accountability, service quality
and customer satisfaction In Federal agencies. GPRA links
with results. Strategic and annual
which
are used to evaluate results. Members of Congress have asked
OIGs to develop a Results Act review plan to examine agency
and verify selected data and accounting
ort an agency's performance reports.
Consistent with the IG Act, the OIG has been actively promoting
improvement of EPA operations by overseeing effective implementation of
the Results Act's provisions and assisting Agency managers to
institutionalize the principles of GPRA into day-to-day operations. The OIG
first reported on EPA's implementation of GPRA in 1996, but has been
reporting on EPA data quality issues for several years.
Currently, the OIG is assisting EPA evaluate the accomplishment of its
goals, and ensure the adequacy of accountability systems and development
of meaningful performance measures. OIG audits are evaluating the
accuracy, adequacy and reliability of data needed to measure performance
and environmental results from Agency operations, its grantees and
contractors in managing the nation's water quality and cleaning up the
nation's hazardous waste sites. The OIG is also reviewing EPA's cost
accounting procedures, processes and systems to accumulate the costs
of carrying out each of its goals.
The OIG is developing and planning the following new tools and approaches
for integrating reviews of, and assistance for Agency GPRA implementation
into its products and services:
• GPRA Review Guide with procedures for assessing GPRA
implementation.
• Audit planning process linking audit products and services to Agency
strategic and annual performance goals, measures, data and management
challenges.
• Survey of agency data systems and sources for selected goals and
measures.
• Partnerships with state auditors/OIGs for review of selected performance
data.
• Creation of a program evaluation unit to assist Agency management
assess results.
30
OFFICE OF INSPECTOR GENERAL
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• Development of Agency data quality standards.
The OIG is planning reviews of Agency GPRA implementation as part of its
performance audit process by assessing data quality and systems for
selected performance measures and goals, focusing on areas of high risk
that support the attainment of the following Agency Strategic Goals:
• Better waste management, restoration of contaminated waste sites and
emergency response.
• Clean and safe water.
• Sound science, improved understanding of environmental risk and
greater innovation to address environmental problems.
• Credible deterrent to pollution and greater compliance with the law.
• Expansion of Americans' right to know about their environment.
• Effective Agency management.
The OIG will also review selected performance measures identified in the
Overview of EPA's Financial Statements, beginning with the one prepared
for Fiscal 1999.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
31
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Section 4 -Audit Report Resolution
Status Report on Perpetual Inventory of Reports in Resolution Process for Semiannual Period Ending
March 31,1999 (Dollar Values in Thousands)
Report Category
A. For which no
management decision was
made by October 1, 1998
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 (he reporting
period
E. For which no
management decision was
made by March 31,1998
Reports for which no
management decision was
made within six months of
issuance
No.
of
Rpts
130
208
133
205
86
119
55
Report Issuance
Questioned
Costs
$112,447
68,083
0
180,530
26,659
153,871
86,011
Recommended
Efficiencies
0
$1,658
0
1,658
0
1,658
0
Report Resolution
Costs Sustained
To Be Recovered
16,977
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.)
32
OFFICE OF INSPECTOR GENERAL
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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 DIG 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.
Auditees frequently 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 31,1999 (Dollar Value in Thousands)
Report Category
A. For which no management decision was
made by October 1, 1998 **
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 the end of the reporting period
Reports for which no management decision was
made within six months of issuance
Number of
Reports
64
32
96
34
22
29***
62
34
Questioned Costs*
$112,447
68,083
180,530
26,659
16,977
9,975
153,871
86,011
Unsupported Costs
$30,545
44,586
75,131
10,682
5,134
5,509
64,449
19,864
* Questioned costs include the unsupported costs.
** Any difference in number of reports and amounts of questioned costs between this report and previous semiannual report results from corrections made to data in
our audit tracking system.
*** Twelve audit reports totaling $858 were not agreed to by management.
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
33
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Table 2 — Inspector General Issued Reports With Recommendations That Funds Be Put To Better Use
for Semiannual Period Ending March 31,1999 (Dollar Values in Thousands)
Report Category
A. For which no management decision was made by October 1, 1998*
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
(iii) Dollar value of non-awards or unsuccessful bidders
D. For which no management decision was made by March 31, 1999
Reports for which no management decision was made within six
months of issuance
Number of
Reports
0
1
1
0
0
0
0
1
0
Dollar Value
0
$1,658
1,658
0
0
0
0
1,658
0
* Any difference in number of reports and amounts of recommended efficiencies between this report and our previous semiannual repor t results from corrections
made to data in our audit tracking system.
Audits With No Final Action As Of 3/31/99-Which are over 365 Days Past OIG Report Issuance
Date
Audits
Programs
Allegations
Assistance Agreements
Construction Grants
Contract Audits
TOTAL
Non-Superfund
40
4
10
109
9
172
Superfund
6
-
13
-
29
48
Total
46
4
23
109
38
220
Percentage
20.9
1.8
10.5
49.5
17.3
100
34
OFFICE OF INSPECTOR GENERAL
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Summary of Investigative Results
Summary Of Investigative
Activities
Pending Investigations as
of September 30, 1998
New Investigations
Opened This Period
Investigations Closed
This Period
Pending Investigations as
of March 31, 1999
199
41
36
204
Prosecutive and
Administrative Actions
In this period, investigative efforts
resulted in four convictions and five
indictments.* Fines and recoveries,
including those associated with civil
actions, amounted to $575,099.
Nineteen administrative actions were
taken as a result of investigations.
Reprimands 3
Restitutions 2
Suspensions &
Debarments 6
Other 8
TOTAL 19
* Does not include indictments
obtained in cases in which
we provided investigative
assistance.
Profiles of Pending Investigations by Type
General EPA Programs
Total Cases =135
30
27
Superfund
Total Cases = 69
30
DContract ^Assistance Agreement ^Employee Integrity
&8Program Integrity mother
OCTOBER 1, 1998 THROUGH MARCH 31, 1999
35
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OIG MAILING ADDRESSES and TELEPHONE NUMBERS
OIG HOTLINE 1-888-546-8740 or (202) 260-4977
Headquarters
Environmental Protection Agency
Office of Inspector General
401 M Street, SW (2441)
Washington, DC 20460
(202)260-3137
Atlanta
Environmental Protection Agency
Office of Inspector General
61 Forsyth Street, SW
Atlanta, GA 30303
Audit: (404) 562-9830
Investigations: (404) 562-9857
Boston
Environmental Protection Agency
Office of Inspector General
JFK Federal Building (OIG)
(office at 1 Congress St)
Boston, MA 02203
Audit: (617) 565-3160
lnvestigations:(617) 565-3928
Chicago
Environmental Protection Agency
Office of Inspector General
77 West Jackson Boulevard
13th Floor (IA-13J)
Chicago, IL 60604
Audit: (312) 353-2486
Investigations: (312) 353-2507
Cincinnati
Environmental Protection Agency
Office of Inspector General
MS : Norwood
Cincinnati, OH 45268-7001
Audit: (513) 366-4360
Investigations: (312) 353-2507 (Chicago)
Dallas
Environmental Protection Agency
Office of Inspector General (6OIG)
1445 Ross Avenue, Suite 1200
Dallas, TXs 75202-2733
Audit: (214) 655-6621
Investigations: (404) 562-9857 (Atlanta)
Denver
Environmental Protection Agency
Office of Inspector General
999 18th Street, Suite 500
Denver, CO 80202-2405
Audit: (303) 312-6872
Investigations: (312) 353-2507 (Chicago)
Kansas City
Environmental Protection Agency
Office of Inspector General
726 Minnesota Avenue
(office at 630 Minnesota Ave)
Kansas City, KS 66101
Audit: (913) 551-7878
Investigations: (312) 353-2507 (Chicago)
New York
Office of Inspector General
290 Boardway, Room 1520
New York, NY 10007
Audit: (212)637-3080
Investigations: (212) 637-3041
Philadelphia
Environmental Protection Agency
Office of Inspector General
841 Chestnut Street, 13th Floor
Philadelphia, PA 19107
Audit: (215) 566-5800
Investigations: (215) 566-2361
Research Triangle Park, NC
Environmental Protection Agency
Office of Inspector General
Catawba Building
Highway 54, Mail Drop 53
Research Triangle Park, NC 27711
Audit: (919) 541-2204
Investigations: (919) 541-1027
Sacramento
Environmental Protection Agency
Office of Inspector General
650 Capitol Mall, Suite 6309
Sacramento, CA 95814
Audit: (916) 498-6530
Investigations: (415) 744-2465 (SF)
San Francisco
Environmental Protection Agency
Office of Inspector General
75 Hawthorne St (1-1)
19th Floor
San Francisco, CA 94105
Audit: (415) 744-2445
Investigations: (415) 744-2465
Seattle
Environmental Protection Agency
Office of Inspector General
12006th Avenue, 19th Floor
Suite 1920, M/SOIG-195
Seattle, WA 98101
36
OFFICE OF INSPECTOR GENERAL
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Region 5, Library (PL-12J)
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