,,r led Siaia*
Office of Inspector General
Semiannual Report
to the Congress
October 1, 1996 through
March 31, 1997
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UtOfl
are agente of posftiv* chang* ftriving for continuous improvement In our
Agency's management and program operations, artd In our own offices."
The /nspector Genera/ Act of 1978t as amended, fequires the Inspector Genera/ to:
{1) cortctod and supervise audits and investigations stating to programs and
operations m foe Agency; f2) provide leadership end make recommendations designed
toft) promote economy, efficiency, and effectiveness and $) prevent and detect fraud
and abuse in Agency programs a^rf operations; and (3) fuiSy inform the Agency Head
and the Congress about proWems and deficiencies identified by fte Office of Inspector
Genera/ reteft'ug to r/ie administration off Agency prug&ms and operations
O Help EPA achieve its environmental goals by improving the performance and
integrity of EPA programs and operations, by safeguarding and protecting the
Agency's resources, and by cl&arly reporting the results of our work.
@ Foster strong working relationships.
© Operate at the highsst performance level.
Provide aurfft and Investigative products and services, alt of which can
help EPA accomplish its mission.
Cover Photo: Shiprock, New Mexico
By Terrence Moore
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Foreword
I am pleased to present this Semiannual Report
to Congress for the period ended March 31, 1997. Thi$
has been a time erf change and of defining or setting new
directions, both within the Agency and the Office of
Inspector General. During this six month period, we
issued our strategic plan which defines our approach,
links QIG goals and objectives Lo the Agency's
environ menial mission, and allocates DIG resources to
high risk audit and investigate areas. This Semiannual
Report to Congress has been reformatted to create a
etearer relationship between the reporting requirements
of the Inspector General Act and the QIC's strategic plan,
mission, objeclives and goals for assisting EPA attain its
goals and objectives.
This report highlights some or our most significant
audits, investigations and consultative activities in which we are working with Agency
management to bring about meaningful improvements, changes and results With the
implementation of the Government Performance and Results Act, the atmosphere for
change in the Agency has never been so encouraging. Attention to the need for strong
management practices in the form of realistic planning, accountability, performance
measurement and reporting of results is giving new meaning to role of the OIG and the vaiue
of its assistance and recommendations. Nowhere is this more obvious than in the Agency's
reorganization to create an Office of the Chief Financial Officer along with a new Planning,
Budgeting, Analysis and Accountability system. TTiis is further supported, as discussed in
this report, by the Agency's progress in improving the quality and reliability of its financial
systems and information necessary to make better use of scientific and cost data in setting
priorities,, assessing accomplishments, and providing feedback for crucial decisions.
This fundamental commitment by the Administrator along with decisive action by
Agency management is a potent formula to solve problems and leverage significant results,
No one doubts that this is just a beginning, and much still needs to be done. I look forward to
continuing to work with the Administrator, forging a partnership, to meet our greatest mutual
challenges for a better environment.
Nikki L. Tinstey
Acting Inspector General
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Contents
Executive Summary 1
Profile of Activities and Results 3
Major Laws Administered by EPA 4
Establishment of the OIG in EPA-lts Role and Authority 5
Purpose and Reporting Requirements of the Office of Inspector General
Semiannual Report 5
Who's Who in the Office of Inspector General 6
Section 1-Significant Findings and Recommendations
Programs 10
Financial Statements 25
Assistance Agreements 29
Contracts 35
Section 2—Report Resolution
Status Report on Perpetual Inventory of Reports in Resolution Process
for the Semiannual Period Ending March 31, 1997 37
Status of Management Decisions on IG Reports 38
Inspector General Issued Reports With Questioned Costs 38
Inspector General Issued Reports With Recommendations that Funds Be
Put to Better Use 39
Section 3—Investigative Results
Summary of Investigative Results 42
Description of Selected Prosecutive Actions 43
Civil and Administrative Actions to Recover EPA Funds 45
Selected Suspension and Debarment Actions 47
Section 4-Fraud Prevention and Management Improvements
Review of Legislation and Regulations 51
OIG Management Initiatives 52
Committee on Integrity and Management Improvement 53
Hotline Activities 54
Appendix Summaries
Appendix 1— Reports Issued 55
Appendix 2—Reports Issued Without Management Decision 56
The complete text of selected audits is available through the EPA OIG internet home
page. http://www.EPA.Gov/OIGearth/list397.htm
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Executive Summary
Section 1--
Significant Findings and
Recommendations
1. Serious Environmental Data Quality Problems
Impair Federal Facility Superfund Cleanups
EPA and Federal facilities lacked sufficient procedures to
ensure that environmental laboratory data was of
acceptable quality. Sharing information on poor
performers and effective quality assurance systems could
have helped avoid millions in expenditures and years of
cleanup delays at the nine sites audited
(page 10).
2. Pennsylvania Did Not Report Significant Clean
Air Act Violators
Pennsylvania did not report numerous significant violators
of the Clean Air Act to EPA and did not take aggressive
enforcement action to bring all violating facilities into
compliance. As a result, EPA's oversight of the State's
enforcement program was hindered (page 12).
3. Radon and ENERGY STAR® Voluntary Programs
Were Generally Effective
The Radon and ENERGY STAR® voluntary programs used
good management practices and developed ways to
estimate their environmental results. However,
improvements in documenting the planning process,
phasing out Agency involvement, ensuring logo integrity,
and reporting accuracy will further enhance program
effectiveness (page 14).
4. Federal Regulations Inadequately Protect Water
Quality from Animal Waste
Federal regulations written in the 1970s have restricted
EPA's ability to deal with concentrated animal feeding
operations that produce millions of tons of animal waste
per year and threaten water quality. North Carolina had
to strengthen its regulatory program to handle animal
waste disposal situations not adequately covered under
Federal regulations
(page 15).
5. RCRA Civil Penalties by States Were Inconsistent
There were inconsistent penalty policies and practices
between states resulting in a wide variation in the
methods of calculating and average size of penalties.
Also, states did not always adequately calculate or
recover the economic benefit when assessing penalties
to deter noncompliance with RCRA (page 17).
6. Streamlining Hazardous Waste Reporting Will
Improve Clarity and Ease of Reporting
The Biennial Report process for collecting hazardous
waste data is complex and lengthy, thus increasing the
potential for errors. The 1997 report does not include
waste minimization or capacity planning data which limits
its value (page 19).
7. Extramural Management Specialist Positions
Were Beneficial But Not Well-Defined
The Extramural Management Specialist (EMS) position
established by the Office of Research and Development
(ORD) helped remove extramural management as a
Federal Managers' Financial Integrity Act (FMFIA)
material weakness. However, the EMS role was not well-
defined and some Agency officials were unclear about its
role, responsibilities, and benefits (page 20).
8. Superfund Oversight Costs Were Not Billed or
Collected Timely
Region 5 did not promptly establish receivables, send
initial billings, or follow-up on unpaid accounts to
responsible parties for Superfund site oversight costs
(page 21).
9. EPA Hindered U.S. Coast Guard's Ability to
Recover Costs from Polluters
The Agency did not provide timely cost packages to the
U.S. Coast Guard (USCG), thus delaying
reimbursements and impeding USCG's ability to pursue
cost recovery from oil spill polluters (page 23).
10. Substantial Progress Made in Financial
Statement Reporting
During fiscal 1996, EPA continued to make substantial
progress in improving its financial reporting systems and
practices, resolving many issues that caused us to qualify
or disclaim an opinion on prior years' financial
statements. The issues preventing the Agency from
receiving unqualified opinions on its fiscal 1996 financial
statements should be resolved during fiscal 1997 (page
25).
11. Pesticides Reregistration Accomplishments
Can Be More Reliably Reported
The fiscal 1996 financial statements for the Pesticides
Reregistration and Expedited Processing Fund (FIFRA
Fund) were fairly presented. However, the draft Overview
needed to provide additional information and more
OCTOBER 1, 1996 THROUGH MARCH 31,1997
1
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accurately report on the Agency's progress in
reregistering pesticides (page 27).
12. Idaho State Revolving Funds Not Used Timely
Local demand for loans was not sufficient to use more
than $25 million available in Idaho's State Revolving
Fund (SRF), and the State's SRF-related reporting
systems were inadequate and contained a serious
internal control weakness (page 29).
13. Nearly $37 Million Questioned on Monterey,
California, Project
The Monterey Regional Water Pollution Control Agency,
California, claimed $35,360,324 of ineligible
construction, engineering, administrative, and other costs
for the design and construction of a regional wastewater
treatment plant. An additional $1,593,473 of
unsupported costs were questioned (page 31).
14. Over $35 Million Questioned on New York City
Projects
The City of New York claimed $19,115,757 of ineligible
construction, engineering, force account, and
administrative expenses for construction of upgrades on
two sewage treatment facilities. An additional
$16,320,786 of unsupported costs were questioned
(page 32).
15. Almost $9 Million Questioned on Baltimore,
Maryland Project
The City of Baltimore, Maryland, claimed $1,333,847 of
ineligible construction, engineering, administrative, and
force account costs for modifications to a wastewater
treatment plant. An additional $7,665,732 of
unsupported costs, including $5,770,727 above the grant
ceiling, were questioned (page 33).
16. $7 Million Questioned on Los Angeles County
Project
The Los Angeles County Sanitation District claimed
$6,692,844 of ineligible construction, engineering,
and equipment costs for portions of
a wastewater treatment facility that was never
placed into operation. An additional $307,889 of
unsupported costs were questioned (page 34).
1997, the Office of Inspector General issued 228 new
reports and closed 252. At the end of the reporting
period, 197 reports remained in the Agency followup
system for which no management decision had been
made. Of the 197 reports, 111 reports remained in the
Agency followup system for which no management
decision was made within 6 months of issuance (page 36
For the 126 reports closed that required agency action,
EPA management disallowed $ 8.2 million of questioned
costs and agreed with our recommendations that $ 5.6
million be put to better use (page 36). In addition, cost
recoveries in current and prior periods included $2.6
million in cash collections, and at least $2.3 million in
offsets against billings
(page 3).
Section 3-lnvestigative Results
During this semiannual reporting period, our investigative
efforts resulted in two convictions and three indictments.
Also, our investigative work led to $2.9 million in fines and
recoveries (page 42).
The Office of Grants and Debarment completed action
on seven OIG-generated suspension and debarment
cases during this reporting period, resulting in four
suspensions and two debarments, one compliance
agreements (page 47).
Section 4--Fraud Prevention and
Management Improvements
During this semiannual period, we reviewed three
legislative and 38 regulatory items. Our most significant
comments concerned contracts administration, including
a Federal Acquisition Regulation case, and draft internal
guidance (page 51).
The EPA Committee on Integrity and Management
Improvement (CIMI), chaired by the Inspector General,
published bulletins on Prospective, Outside, and Post-
Employment, and Travel Bonuses (page 53).
Five new hotline cases were opened and five were
closed during the reporting period. Of the closed cases,
two resulted in environmental, prosecutive, or
administrative corrective action (page 54).
Section 2--Report Resolution
This section, required by the IG Act, reports on the status
and results of Agency management actions to resolve
audit reports. At the beginning of the semiannual period,
there were 221 reports for which no management
decision had been made. During the first half of fiscal
OFFICE OF INSPECTOR GENERAL
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Profile of Activities and Results
October 1,1996 to March 31,1997
Audit Operations ($ in millions)
OIG Managed Reviews:
Reviews Performed by EPA, Independent Public
Accountants and State Auditors
Questioned Costs *
- Total $159.3
-Federal 118.8
Recommended Efficiencies*
- Federal $ 0
Costs Disallowed to be Recovered
-Federal $ 7.5
Costs Disallowed as Cost Efficiency
-Federal $ 4.1
Reports Issued - OIG Managed Reviews:
- EPA Reviews Performed By OIG: 54
- EPA Reviews Performed by
Independent Public Accountants: 8
- EPA Reviews Performed by
State Auditors: 0
Total 62
Reports Resolved (Agreement by Agency officials to
take satisfactory corrective action.) *** 126
Audit Operations ($ in millions)
Other Reviews:
Reviews Performed by Another Federal
Agency or Single Audit Act Auditors
Questioned Costs *
-Total $ 1.9
- Federal 1.9
Recommended Efficiencies*
-Federal $ 1.4
Costs Disallowed to be Recovered
- Federal 0.7
Costs Disallowed as Cost Efficiency
- Federal $ 1.5
Reports Issued - Other Reviews:
- EPA Reviews Performed by
Another Federal Agency: 132
- Single Audit Act Reviews: 34
Total 166
Agency Recoveries - Recoveries from Audit $ 4.9
Resolutions of Current and Prior Periods
(cash collections or offsets to future payments.)**
Investigative Operations
Fines and Recoveries
(including civil)
Investigations Opened
Investigations Closed
Indictments of Persons or Firms
Convictions of Persons or Firms
Administrative Actions Against
EPA Employees/ Firms
Civil Judgments
S2.9M
84
70
3
2
24
6
Fraud Detection and Prevention
Operations
Hotline Cases Opened
Hotline Cases Processed and Closed
Personnel Security Investigations
Adjudicated
Legislative and Regulatory Items Reviewed
5
5
397
41
* 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.
OCTOBER 1, 1996 THROUGH MARCH 31,1997
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Major Laws Administered by EPA
Statute
Pollution Prevention Act
Toxic Substances Control Act
Federal Insecticide, Fungicide,
and Rodenticide Act
Federal Food, Drug and Cosmetic Act
Resource Conservation and Recovery Act
and Solid Waste Disposal Act
Comprehensive Environmental Response,
Compensation, and Liability Act
Clean Air Act
Clean Water Act
Safe Drinking Water Act
Marine Protection, Research and
Sanctuaries Act
Asbestos School Hazard Abatement Act/
and Asbestos Hazard Emergency Response
Emergency Planning and Community Right-
to-Know Act
Oil Pollution Act of 1990
Environmental Research, Development, and
Demonstration Authorization Act
National Environmental Education Act
National Environmental Policy Act of 1969
Provisions
Provides that pollution should be prevented or reduced at the source,
recycled safely when not preventable, treated safely when not preventable
or recyclable, or disposed of in a safe manner.
Requires EPA notification of any new chemical prior to its manufacture
and authorizes EPA to regulate its production, use, or disposal.
Authorizes EPA to register all pesticides, specify the terms and conditions
of their use, and remove unreasonable hazardous pesticides from the
marketplace.
Authorizes EPA in cooperation with FDA to establish tolerance levels for
pesticide residues on food.
Authorizes EPA to identify hazardous wastes and regulate their
generation, transportation, treatment, storage, and disposal.
Requires EPA to designate hazardous substances that can present
substantial danger and authorizes the cleanup of contaminated sites.
Authorizes EPA to set emission standards to limit the release of criteria
pollutants and hazardous air pollutants.
Requires EPA to establish a list of water pollutants and set standards.
Requires EPA to set drinking water standards to protect public health
from hazardous substances.
Regulates ocean dumping of toxic contaminants.
Authorizes EPA to establish a comprehensive regulatory framework for
controlling asbestos hazards in schools.
Requires States to develop programs for responding to hazardous
chemical releases and requires industries to report on the presence and
release of certain hazardous substances.
Makes EPA responsible for oil spill prevention, preparedness, response,
and enforcement activities associated with non-transportation-related
onshore oil facilities.
Authorizes all EPA research and development programs.
Provides for a program of education on the environment through activities
in schools and related educational activities, and encourages students to
pursue careers related to the environment.
Provides a national policy requiring environmental impact statements
describing potentially adverse effects of, and alternatives to, any major
Federal action. Established the Council on Environmental Quality.
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Establishment of the OIG in EPA-lts Role And Authority
The Inspector General Act of 1978 (Public Law 95-452), as
amended, created Offices of Inspector General to consolidate
existing investigative and audit resources in independent
organizations headed by Inspectors General.
EPA established its Office of Inspector General (OIG) in January
1980. As an agency with a massive public works budget, EPA is
vulnerable to various kinds of financial abuses. The OIG's role is to
review EPA's financial transactions, program operations, contracts,
and administrative activities; investigate allegations or evidence of
possible criminal and civil violations; and promote economic, efficient,
and effective Agency operations. The OIG is also responsible for
reviewing EPA regulations and legislation.
The EPA Inspector General reports directly to the Administrator and
the Congress and has the authority to:
• Initiate and carry out independent and objective audits and
investigations,
Issue subpoenas for evidence and information,
Obtain access to any materials in the Agency,
Report serious or flagrant problems to Congress,
Select and appoint OIG employees,
Fill Senior Executive Service positions,
Administer oaths, and
Enter into contracts.
The Inspector General is appointed by, and can be removed only by,
the President. This independence protects the OIG from
interference by Agency management and allows it to function as the
Agency's fiscal and operational watchdog.
Organization and Resources
The Office of Inspector General functions through three major
offices, each headed by an Assistant Inspector General: Office of
Audit, Office of Investigations, and Office of Management.
Nationally, there are nine Divisional Inspectors General for Audit and
four Divisional Inspectors General for Investigations who direct staffs
of auditors and investigators and who report to the appropriate
Assistant Inspector General in Headquarters.
For fiscal 1997, the Agency was appropriated $6.8 billion and
authorized 17, 951 full time equivalent (FTE) positions to conduct the
environmental programs authorized by Congress to restore and
protect the environment. As a separate appropriation account, the
Office of Inspector General (OIG) received $40.1 million (.6%) to
carry out the provisions of the Inspector General Act of 1978, as
amended. Eleven million of the OIG's appropriation was derived from
the Hazardous Substance Superfund trust fund and $577,000 was
derived from the Leaking Underground Storage Tank trust fund.
The OIG had a funded staffing level of 385 FTE positions.
Purpose and Reporting Requirements of the Office of
Inspector General Semiannual Report
The Inspector General Act of 1978, as amended, requires the
Inspector General to keep the Administrator and Congress fully and
currently informed of problems and deficiencies in the Agency's
operations and to recommend corrective action.
The IG Act further specifies that semiannual reports will be
provided to the Administrator by each April 30 and October 31,
and to Congress 30 days later. The Administrator may transmit
comments to Congress along with the report, but may not change
any part of it.
The specific reporting requirements prescribed in the Inspector
General Act of 1978, as amended, are listed below.
Source Section/Page
Inspector General Act, as amended.
Section 4(a)(2)
Section 5(a)(1)
Section 5(a)(2)
Section 5(a)(3)
Section 5(a)(4)
Section 5(a)(5)
Section 5(a)(6)
Section 5(a)(7)
Section 5(a)(8)
Section 5(a)(9)
Section 5(a)(10)
Section 5(a)(11)
Section 5(a)(12)
Review of Legislation and Regulations 4 51
Significant Problems, Abuses, and 1 9
Deficiencies
Recommendations with Respect to 19
Significant Problems, Abuses, and
Deficiencies
Prior Significant Recommendations on
Which Corrective Action Has Not
Been Completed
Matters Referred to Prosecutive
Authorities
Summary of Instances
Where Information Was Refused
List of Audit Reports
Summary of Significant Reports
Statistical Table 1-Reports With
Questioned Costs
Appendix 2 56
3 42
Appendix 1 55
1 9
2 9
Statistical Table 2-Reports With
Recommendations That Funds Be Put
To Better Use
2 39
Summary of Previous Audit
Reports Without Management
Decisions
Appendix 2 56
Description and Explanation of Revised
Management Decisions Appendix 2 56
Management Decisions with Which the
Inspector General Is in Disagreement **
* There were no instances where information or
assistance requested by the Inspector General was refused
during this reporting period.
** There were no instances of management decisions with
which the Inspector General was in disagreement.
OCTOBER 1, 1996 THROUGH MARCH 31,1997
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Office of Inspector General-Who's Who
JHHM CK. Raudi
Deputy
Audte
Dvpuly for Nimiri Aute
Kannrth, Q. Hgakmnn
Planning and RntGurcn
Robflrt F_
A. Scientific
H, Hill
lADP AuMtB fin
JWn-C. Jenu
T,
i Mnnngrmnnl DivitiOh
l J. Binder
Budget fr
MBnBgBiwnt Division
Divisionat trtspt&tors General for Audit
DtYbfortii lrt*p*etetft GttwtS
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Section 1-- Office of Audit
OFFICE OF AUDIT OBJECTIVE, ACTIVITIES, AND MEASURES
OFFICE OF AUDIT OBJECTIVE: By 2005, achieve 15% improvement in providing objective, timely,
independent auditing and consulting services which benefit EPA in meeting its 2005 environmental
goals and improve the performance and integrity of its operations, and contribute to the OIG-wide
goal of redirecting 10% of indirect resources to direct mission objectives
ACTIVITIES TO MEET OUR FUTURE OBJECTIVE
Program Audits - Determine the extent to which the desired results or benefits envisioned by the
Administration and Congress are being achieved, reviews the economy, efficiency and effectiveness
of operations, and determines the extent of compliance with applicable laws and regulations.
Financial Statement Audits - Reviews of the Agency's financial systems and statements to ensure
that the Agency's accounting information is accurate, reliable and useful, and complies with
applicable laws and regulations. Our objective is assist EPA in making improvements in the financial
management processes and controls which will provide better information for decisions promoting
the greatest possible environmental results.
Assistance Agreement Audits - Audits of EPA's Construction Grant Program, State Revolving
Fund, Performance Partnership Grants, Interagency Agreements and Cooperative Agreements,
which provide assistance to state, local and tribal governments, universities and nonprofit recipients
accounting for about half of EPA's budget. We will audit both the financial and performance
aspects, building on the Single Audit Act and focusing on resource intensive, higher risk programs.
Contract Audits - Audits of Agency indirect cost proposals, preaward, interim and final contracts.
These audits determine the eligibility, allocability, and reasonableness of costs claimed by
contractors and assure that EPA pays only for what it requests and receives. EPA has assumed
audit cognizance of 15 major contractors and will continue to monitor the contract universe to identify
high risk contractors. In addition, the Defense Contract Audit Agency provides contract audit
services, on a reimbursable basis, at the majoriy of EPA's contractors.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
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NEW INITIATIVES
Water Quality- The OIG plans to begin reviews of the clean water program because of the
significant pollution problems, high risk to public health, and the significant level of resources.
Performance Measures- The OIG plans to work closely with the Agency during the development of
performance measures, as part of the GPRA process, to see that appropriate controls are in place to
provide accountability.
Toxic Substances - The OIG will review EPA's Toxic Substances Program which is responsible for
protecting the public and environment from the risks associated with the manufacturing, use and
disposal of all commercial toxic chemicals.
PERFORMANCE MEASURES/INDICATORS
-Amount of recommended efficiencies (funds put to better use)
-Examples of program or operational opportunities for changes made from recommendations
-Amount of costs questioned on Agency contracts and projects
-Amount of costs disallowed to be recovered or as cost efficiency
-Amount of recoveries from audit resolutions
-Number and quality of consultation, advisory and assistance recommendations
-Timeliness of financial audit opinions
The audit summaries that follow demonstrate how the OIG is implementing its strategic plan to
achieve its mission and ultimately helping the Agency achieve its goal of effective management.
OFFICE OF INSPECTOR GENERAL
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Significant Findings and Recommendations
As required by sections 5(a)(1) and j2f of
the Inspector Genera! Act of 1976, as
amended, this section, identifies
significant problems, abuses, and
deficiencies relating to the Agency's
programs and operations along with
recommendations for the current pcnod.
The findings described resulted from
audits performed by or for the Office of
Audit. Findings arc open bo further re-view
but are the final position of the Office of
Inspector General. This section is divided
into four areas; PntHjrams, Financial
Statements, Assistance Agreements, and
Contracts,
1395 THROUGH MARCH 31.1 SB?
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Programs
Findings in Brief
EPA and Federal facilities need
sufficient procedures to ensure
that environmental laboratory data
is of acceptable quality. Sharing
information on poor performers
and effective quality assurance
systems could have helped avoid
millions in expenditures and years
of cleanup delays at the nine sites
audited.
The Inspector General Act requires the OIG to initiate reviews and other
activities to promote economy and efficiency and to detect and prevent
fraud, waste, and mismanagement in EPA programs and operations.
Internal and performance audits and reviews are conducted to accomplish
these objectives largely by evaluating the economy, efficiency, and
effectiveness of operations. The OIG conducted a number of major reviews
of EPA programs. The following are the most significant internal audit,
performance audit, and special review findings and recommendations
resulting from our efforts.
Serious Environmental Data Quality Problems Impair
Federal Facility Superfund Cleanups
Federal facilities comprise nearly 60 percent of EPA's Superfund workload under
remedial investigation or feasibility study phases. In 1995, DOD and DOE had
over 90 percent of the Federal facility sites on or pending inclusion on EPA's
Superfund National Priorities List (NPL). Executive Order 12580 gave DOD and
DOE cleanup responsibilities at their NPL sites, and the National Contingency
Plan further defined their responsibilities but did not describe EPA's oversight role
for these cleanups. Since 1992, environmental data quality has been a material
weakness in the Agency's management control system.
We Found That
Federal facilities have experienced serious problems with the quality of laboratory
analyses used to make cleanup decisions, and there is evidence these problems
are widespread. For example, extensive laboratory fraud was found at one
laboratory, which was used by 28 DOD sites in three EPA regions, resulting in
about $5 million of lost data and associated expenses. In another case, EPA
suspended a laboratory which did work at five DOD sites in two EPA regions. At
one site, this laboratory and another produced $2.5 million of data deemed
unusable, delaying cleanup two years. We believe that one of the primary
reasons these problems existed was because EPA's oversight role at Federal
facility Superfund cleanups was unclear due to ambiguous legal authorities. Also,
remedial project managers generally relied on Federal facilities to ensure that
quality assurance project plan (QAPPs) requirements were met.
10
OFFICE OF INSPECTOR GENERAL
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fountain Arsenal Labar.il-riry (EPA OIG
Of Ihe IS OAF^y audited s\ -une sites in Regions 8, 9. and 10, da-a qualify
opjodivHs f:he drwhu firsinponent cf QAPPa] were; not established or proper V
defined for x o£ fhe-n. 13 QAPPs were not approved by the regional qua ify '
e-ssLiranr;e s:affs. ami H QAPP was not used to co'lect dira for ons site Eleven
QAPPs d d lot include dala validation. tebora:or)> audiis or msgnetic tape
a^i'sb lity £-cti'.',l-ss whic.i 'we Found particularly effect Ve in defecting
qjali-.y data Further, EPA's guidance for nrsoarin^ QAPPg did not
raquire tht^t- daf.= quality activities Wflen warranled. D00r qualify data can lead to
inco[:&=t decisions resu-hmg in inadequate heal(t» B-gtectc-n or exderoiu.res for
unneeded cleanup re
EPA hx no- worked with DOD ct DOE in assessing 'heir environmental date
qualty systems tepanne-nl-wide. whicli w-njld have dentified sigriflca.it
deficis.-ic'es. Because cf problems wiln their cfuality assurance systems
.aboracoiy analyses concucted at DOD and DOE Stpsfund sites rannot be
presumed to be of appropriate quahly for decision making. DOD c id not have a
system for tracking laboratory performance and sharing iaboratgrv audit results
wfcn other military services or Federal agencies. The DOE Oifice'of Inspector
General found problems with DOE's commerce I laboratory qualify assurance
program allowing labcistaries thai Bailed to qualify- or we-e suspended from one
site to conlmue testing samptes for o:hei sites
There was no sys:eir within tne Federal govern men I to Ehare laboratory
evaluations eveji Itough it could nelpavo.
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The Acting Assistant Administrator for Solid Waste and Emergency Response:
Findings in Brief
Pennsylvania did not report
numerous significant violators of
the Clean Air Act (CAA) to EPA
and did not take aggressive
enforcement action to bring all
violating facilities into compliance.
As a result, EPA's oversight of the
State's enforcement program was
hindered.
• Work with the regions to ensure that Federal facility Superfund QAPPs include
requirements that are based on well-defined data quality objectives.
• Develop a national quality management plan and performance measures for
the environmental data quality system.
• Issue guidance specifying regional oversight responsibilities for Federal facility
Superfund cleanups and establish procedures for ensuring fraudulent or poor
quality data is not used.
• Assess the adequacy of DOD's and DOE's environmental data management
systems and create a forum for sharing environmental laboratory evaluations
among Federal agencies.
The Assistant Administrator for Research and Development:
• Refine the data quality objectives process and work with the Federal Facilities
Restoration and Reuse Office and regions to develop acceptable quality
management plans.
The Assistant AdministratorforEnforcement and Compliance Assurance:
• Request that Executive Order 12580 be modified to expressly identify EPA's
oversight role for environmental data quality.
What Action Was Taken
The final audit report (7100132) was issued to the respective Assistant
Administrators on March 20, 1997. In responding to the draft report, Agency
officials generally agreed with the findings and recommendations, and stated that
a framework will be developed for a minimum quality assurance program that
Federal facilities should have in place. Also, the Agency agreed to assess the
adequacy of DOD's and DOE's environmental data quality systems by November
30, 1997, and to amend its data quality objectives guidance. A response to the
final report is due by June 18, 1997.
Pennsylvania Did Not Report Significant Clean Air Act
Violators
Section 105 of the CAA provided the initial authority for Federal grants to help
state and local agencies prevent and control air pollution. These grants required
each state to perform inspections at specified major facilities and report
significant violators to EPA in accordance with EPA's Timely and Appropriate
Enforcement Policy. EPA uses this information to take action if a state does not
enforce Federal law and to ensure that a violator achieves compliance timely.
We Found That
EPA set priorities for its air program and awarded more than $5 million a year in
grants to the Pennsylvania Department of Environmental Protection (PADEP) to
carry them out. However, PADEP kept Region 3 uninformed by not reporting
significant violators to EPA, thus avoiding what it perceived as Federal meddling.
We Recommended That
12
OFFICE OF INSPECTOR GENERAL
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PADEP believed that it could work with facilities to achreve compliance without
Igbeling the facilities as significant violators.
PADEP performed 2,000 inspections during Siscal 1995, only six significant
violators wgre ir&parted to Region 3. We identified 64 other facilities that should
have been on EPA's list of significant violators during Fiscal Year 1995, some of
which had vtolaleci the CAA far years without PADEP reporting them lo EPA, The
violations included: 34 facilities that emitted excessive pollution; 22 facilities fist
violated their construction permit; and 8 Facilities mat installed machinery (wJiich
produced pollution) without receiving a construction permit from PADEP Since
we reviewed documentation for only 270 at the more than 2,000 major facilities m
Pennsylvania, it appears thai a more thorough review would have identified many
more significant violators that should have been reported,
PADEP 's Failure to notify EPA lhat violations occurred hindered the Agency's
ability to oversee the Stele's anfonc-ertienl program, and Region 3 from ensuring
that violators achieved compliance t mely. This practice allowed PADEP to deal
wilh violators without EPA involvement This also cantntjted to allowing fac lities
that were senous contributors of a>;r pollution 10 continue harming the environment,
sometimes for mony years. PADEP's reasons for not reporting significant
violators to EPA indicate a difference of approach en how to enforce the CAA.
Numeroys violations. persisted for long periods and were not reponed by PADEP
as significant violators For example, a PADEP inspection at a facility thai
man-j'aetures concrete structures identified seven violations during sixteen
months staring in May 1 S93 to September 1 i94. It was nc! until October 1 935
th-gt a PADEP inspnection verified 'hat Ihe last violation was re&oJved. Another
facility that manufactured auDomoiive carpel and intenor trim was allowed by
PADEP to operate with a faulty boter emitting excess pollution and psy ?. penalty
of $50C per muntri. fhis arrangement cc-nlinue-d from June 1995 un'il August
' Q-D6 when a new Loile-r was installed.
W= also f^uncf I hat some of 1=ie inspections that. PADEP pgi-formed were neS
thorough enough to determine whether 3 facility wa& complying with State and
Fecersl regulations Moreover, whan the Srjate identiied violations ii did not
always ensure the facility took corrective action In total, 17 percent of ihe
inspections we reviewed neece-d improvement.
OCTOCES 1, '995 THROUGH MARCH 3~,
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• Take action to ensure PADEP reports significant violators as required by its
Section 105 grant and by EPA's Timely and Appropriate Enforcement Policy.
• Require PADEP to conduct inspections that are thorough enough to determine
a facility's compliance and perform follow-up in order to resolve violations timely.
What Action Was Taken
Findings in Brief
The Radon and ENERGY STAR®
voluntary programs used good
management practices and
developed ways to estimate their
environmental results. However,
improvements in documenting
the planning process, phasing out
Agency involvement, ensuring
logo integrity, and reporting
accuracy will enhance program
effectiveness.
The final report (710015) was issued on February 14, 1997. In response to the
draft report, Agency officials agreed with our findings and recommendations.
Agency officials also stated that they will withhold a portion of Fiscal Year 1997
Section 105 grant funds until EPA is convinced that PADEP is reporting all known
significant violators. A response to the final report is due by May 15, 1997.
Radon and ENERGY
Generally Effective
Voluntary Programs Were
EPA's voluntary programs seek to prevent pollution in partnership with its
stakeholders. Both global warming and radon were ranked as high risks in EPA's
report Unfinished Business and Reducing Risk. To address global warming, EPA
developed the ENERGY STAR programs which encourage the use of more energy
efficient technologies through partnerships with business, government, and
nonprofit groups. The Radon program uses a combination of research,
information dissemination, and partnerships with industry groups to decrease
exposure to radon.
We Found That
The Radon and ENERGY STAR® voluntary programs provided the impetus for
overcoming barriers to energy-efficiency and changing consumer behavior, and
were effective at achieving environmental benefits and reducing health risks.
These programs demonstrated several good management practices, including
planning, educating people about incentives, providing quality support, working
with outside organizations, obtaining commitments, and evaluating progress and
making adjustments. In addition, they effectively estimated the impact their
activities had on reducing risks to health and the environment using information
from both EPA and outside sources. As a result, the programs were able to (1)
evaluate their progress, (2) measure their performance against goals, and (3)
make adjustments to better achieve their goals.
Improvements in some areas will strengthen the overall benefits of these
voluntary programs. The ENERGY STAR programs need to better document the
planning process, including assumptions made, alternatives considered, and
courses of action selected. The programs also need to define overall market
transformation goals (the process whereby innovations are introduced into the
marketplace and are increasingly accepted), and establish plans for phasing out
the Agency's involvement when these goals are met.
Further, the ENERGY STAR programs practice of allowing manufacturers to self-
certify their products for ENERGY STAR compliance may not preserve the integrity
of the logo. As EPA expands the number of products that will use the ENERGY
STAR logo to identify energy efficiency, the potential for misuse increases which
We Recommended That
The Regional Administrator,
Region 3:
14
OFFICE OF INSPECTOR GENERAL
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Findings In Brief
Federal regulations written in the
1970s have restricted EPA's ability
to deal with concentrated animal
feeding operations (CAFOs) that
produce millions of tons of animal
waste per year and threaten water
quality. North Carolina had to
strengthen its regulatory program
to handle animal waste disposal
situations not adequately covered
under Federal regulations.
might mislead readers who do not understand that it includes other than high
radon areas.
We Recommended That
The Director, Atmospheric Pollution Prevention Division, require the ENERGY
STAR programs to:
• Document the planning process when developing future programs and prepare
written year-end evaluations.
• Develop written plans to define a target level for market transformation and
establish plans to phase out EPA's program support after the target is reached.
• Consider the need for additional efforts to maintain ENERGY STAR logo integrity,
as the program applies the logo to new products.
What Action Was Taken
We issued the final report (7100130) to the Assistant Administrator for Air and
Radiation on March 19, 1997. In responding to the draft report, Agency officials
agreed with our findings and proposed corrective actions to address the
recommendations, including action to require market transformation objectives
and exit strategies in annual business plans for each program area.
Federal Regulations Inadequately Protect Water Quality
from Animal Waste
CAFOs are concentrated animal or poultry growing operations for the production
of meat, milk, and eggs, which produce large amounts of animal waste requiring
disposal. The Clean Water Act includes CAFOs in the definition of a point
source which subjects them to the requirements of the National Pollutant
Discharge Elimination System (NPDES), and EPA promulgated final regulations
for CAFOs in 1976. In 1995, North Carolina experienced animal waste spills
totaling almost 30 million gallons.
We Found That
At the time of the spills, North Carolina had a "no discharge" program in place for
its animal feeding operations which was, in many ways, stricter than Federal
CAFO regulations. However, the 1995 spills reached surface waters in the State,
resulting in varying amounts of damage. After the spills, the State passed
could degrade the value of the
logo and adversely affect the
Energy Star programs.
The Radon program reports the
statistic for high radon areas to
demonstrate that the program is
targeting high-risk areas first.
However, the reported statistic
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
15
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l raqmrenems foraiwrs wsslfi operations 10 include permitting,
of faci ities. cenilicatcn sf operates of animal waste msnageirent
systems. aiKl st'ider lace/::'! cc-nslrjct en and siting req.jiranieits Nonh
Carolina's sifLricei reoulatcns better p-nted :he water cualily frcm accidental
spills and improper land KPP i-=lion of ammal waste s^luEiit.
•- ja •••'
r..i;. ;-
R-^p
Cftiirlcny of U.S.
t C1 Agriculture
faci ities helps ensure aJnererce to the cr.tica; elements of s good
aimral waste management system Hcwaver, curre-il Federal regulatem or.ly
rsqiJrs -hal amrra feed ng operstiina dofinec as CAFO&be permitted. Further,
cri:i(al elem&nts of Nonh Carol ma s aii-nsl wssta recu atory progrsm such as land
application, rurtrienl manageinent. a-iimai waste nansgemenl plans, specific
construct un rcqLirem&T.s. and ope." alar fa.rvng and cer-Mcation are not
acdresserf in Federal regulations, EPA nee unions, allow land application
procedures ID be addressed in NP DEC- permits when applicable, and encourages
1h=l crher elements he inc'uded.
Under ex stirtg Fe
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Findings In Brief
Inconsistent penalty policies and
practices between states resulted
in a wide variation in the methods
of calculating and average size of
penalties. Also, states did not
always adequately calculate or
recover the economic benefit
when assessing penalties to deter
noncompliance with RCRA.
The Assistant Administrator for Water and the Assistant Administrator for
Enforcement and Compliance Assurance:
• Revise and reissue the CAFO regulations by streamlining and strengthening
the definition of a CAFO.
• Take regulatory actions to include minimum adequate requirements for land
application, nutrient management, waste system operation management, and
facility and expansion construction requirements.
• Maximize use of existing regulations by encouraging or requiring intensive use
of the case-by-case CAFO designation process and developing a methodology to
identify at-risk animal feeding operations for permitting consideration under this
process.
• Establish a plan to inspect permitted and unpermitted CAFOs on a regular
basis.
What Action Was Taken
The final report (7100142) was issued to the Assistant Administrator for Water
and the Assistant Administrator for Enforcement and Compliance Assurance on
March 31, 1997. In response to our draft report, the Agency indicated it shares
the concerns expressed in the report about the environmental threat posed by
animal waste, and agreed to take corrective actions to assure proper regulation of
CAFOs.
RCRA Civil Penalties by States Were Inconsistent
The Resource Conservation and Recovery Act (RCRA) enforcement program
was established to deter noncompliance with RCRA regulations. EPA regions
use the1990 RCRA Civil Penalty Policy (RCPP) to ensure that penalties eliminate
the economic incentives to violate regulations, reflect the gravity and duration of
RCRA violations, and deter noncompliance. Authorized states, the primary
implementers of the RCRA enforcement program, are not required to use the
RCPP to calculate penalties, and state penalties vary from state to state.
We Found That
Application of penalty policies was inconsistent between states, which can result
in inconsistent enforcement of RCRA-related facilities. In addition, the states we
reviewed had smaller average penalties than EPA regions, and states varied in
documenting penalty calculations and adjustments. It is critical that penalties be
effective and more consistent among states to deter noncompliance and ensure
equitable treatment of regulated facilities.
We Recommended That
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
17
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received from being in noncompliance. Our review of penalties in Maryland and
West Virginia found that the economic benefit of noncompliance was not
documented in penalty calulations, and therefore it was not known if it was
recovered in the penalty amounts. In Nebraska and Louisiana, the economic
benefit portion was calculated only occasionally for proposed penalties.
Even when the economic benefit was calculated in state cases for an initial
proposed penalty amount, it was not always in the final penalty. In both regions
and states, the initial proposed penalty amounts were often reduced through
negotiation, and (in some state cases) the final amounts were reduced below the
calculated economic benefit of noncompliance. When a facility is given relief
from paying back the economic benefit it gained from noncompliance, an
incentive for noncompliance is provided. Further, we reviewed cases in both
regional and state files where the economic benefits that facilities may have
derived from noncompliance were not calculated.
Staff responsible for determining penalties were not required to take training on
how to calculate economic benefits using EPA's computer model. The Agency
issued a manual which provides cost estimates for many RCRA violations.
However, more information was needed on how to calculate economic benefit for
violations not listed in the guidance. For the violations we found with no
economic benefit calculation and no explanation, better training and guidance
might have resulted in more effective penalty assessments.
We Recommended That
The Assistant Administrator for Enforcement and Compliance Assurance:
• Encourage the EPA regions to work with the states to ensure that the economic
benefit of noncompliance is calculated and recovered in penalty assessments.
• Provide additional training and guidance to regional and state personnel to help
establish expertise in calculating economic benefits of noncompliance.
• Encourage the regions to work with the states during grant negotiations to
achieve state implementation of the RCRA Civil Penalty Policy, and to improve
documentation of civil penalties and subsequent penalty adjustments.
What Action Was Taken
The draft report was issued to the Assistant Administrator for Enforcement and
Compliance Assurance on December 23, 1996. A response to the draft report
was due by February 14, 1997, but had not been received at the time of final
report (7100146) issuance on March 31,1997.
For penalty assessments, states
were not as rigorous as EPA in
calculating and recovering
economic benefits that facilities
Findings in Brief
The Biennial Report process for collecting hazardous
waste data is complex and lengthy, thus increasing
the potential for errors. The 1997 report does not
include waste minimization or capacity planning data
which limits its value.
18
OFFICE OF INSPECTOR GENERAL
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Streamlining Hazardous
Waste Reporting Will
Improve Clarity and Ease
of Reporting
instructions to states which forward them to (and collect them from) generators,
and treatment,
storage, and disposal facilities (TSDs), check data quality, and return the
information to EPA.
The Biennial Reporting System (BRS) was designed by EPA to meet the
statutory requirement of reporting on the amount and types of hazardous waste
generated. It is an important source of information for the regulated community.
EPA provides the user community with the ability to request enhancements to
make BRS data
more "obtainable" for reporting purposes.
We Found That
The overall Biennial Report process reflects the complexity of RCRA and is
difficult for generators and TSDs that have to report hazardous waste
information. EPA's instructions and forms are lengthy and complex, and several
states have replaced them with their own shorter versions. Some Biennial Report
codes differ
from codes used daily by generators to manage hazardous waste and can result
in confusion, potential for data errors, or limited usefulness.
Many users of the BRS have problems obtaining useable data because the
programming language is difficult to learn and use, and few people have the
expertise to program necessary reports. Users of the Biennial Report believe that
expanded use of electronic technology and better reporting is needed, and
various states and regions are already using innovations that improve the
effectiveness of data collection and management.
RCRA requires regulated entities to report efforts reducing the volume and
toxicity of hazardous wastes generated which EPA and state agencies use to
measure progress. Since the Information Collection Request for the 1997
Biennial Report does not include the requirement for reporting on waste
minimization activities, the Agency must determine how it will report this
progress.
We Recommended That
The Acting Assistant Administrator for Solid Waste and Emergency Response:
• Streamline and redesign the Biennial Report forms and instructions to make
them clearer and easier for generators and TSDs to complete.
The Resource Conservation and
Recovery Act (RCRA) requires
EPA to collect information on the
generation and disposal of
hazardous waste every two years.
Consequently, EPA established
the National Biennial RCRA
Hazardous Waste Report
(Biennial Report) and provides
biennial reporting forms and
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
19
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Findings In Brief
The Extramural Management
Specialist (EMS) position
established by the Office of
Research and Development
(ORD) helped remove extramural
management as a Federal
Managers' Financial Integrity Act
(FMFIA) material weakness.
However, the EMS role was not
well-defined and some Agency
officials were unclear about its
role, responsibilities, and benefits.
• Revise the Biennial Report
codes (system type, form and
source) to avoid the confusion
experienced by generators and
TSDs.
• Educate the states regarding the use of existing electronic enhancements to
improve their data collection and reporting activities.
• Assess the type of data required and specify how the RCRA reporting
requirement will be met.
What Action Was Taken
The final report (7100114) was issued to the Acting Assistant Administrator for
Solid Waste and Emergency Response on February 18, 1997. In the March 27,
1997, response to the final report, the Assistant Administrator agreed with our
recommendations. Several corrective actions were planned to include
streamlining changes for the 1999 reporting forms, providing additional training
and electronic enhancements for data reporting and use, and evaluating the best
methods for satisfying the statutory requirements related to waste minimization.
Based on this response, we closed the report in our tracking system.
Extramural Management Specialist Positions Were
Beneficial But Not Well-Defined
In 1990, the Agency declared ORD's management of extramural resources as an
FMFIA Presidential-level material weakness. To correct this, ORD, among other
things, created a network of acquisition specialists (EMSs) in 1993 to advise top
management on proper procurement practices and to coordinate all extramural
management activities for their respective offices, laboratories, or divisions.
Fourteen EMSs are located across the country, with at least one at each ORD
research laboratory.
We Found That
EMSs helped ORD remove its six-year FMFIA material weakness pertaining to
extramural resource management by advising top-level managers and technical
staff at their locations on extramural matters. They improved extramural
package quality by working with project officers (PO) on a wide array of issues,
and by providing valuable oversight to ensure ORD used the correct instruments.
EMSs also worked on ORD Management Review teams which were effective in
identifying weaknesses and areas of concern, and they improved ORD's staff
understanding of extramural management by teaching various training courses.
The EMS position, while beneficial, was not well-defined and led to the
performance of unallowable or unintended duties. Fifty percent of EMS position
descriptions needed updating, and 43 percent contained duties typically
performed by POs which are specifically prohibited by ORD policy. In some
cases, EMSs had either assumed roles not addressed in the position description
or did not perform certain functions which had not been deleted. ORD
management
indicated that all EMS position descriptions should contain a consistent core of
duties.
20
OFFICE OF INSPECTOR GENERAL
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Findings in Brief
Region 5 did not promptly
establish receivables, send initial
billings, or follow-up on unpaid
accounts to responsible parties
for Superfund site oversight costs
role of the EMS. Often times, GAD staff dealt with someone other than the
EMSs to resolve assistance package issues, and some were not even aware of
who the EMSs were. As a result, GAD staff were not always working with the
ORD official most knowledgeable about the assistance issues. OAM officials
expressed concern that some EMSs performed both acquisition and project
officer functions, often without authority or a warrant.
We Recommended That
The Assistant Administrator for Research and Development require his staff to:
• Develop a standardized EMS position description, with assistance from OAM
and GAD, which includes a "core" set of duties and responsibilities to ensure
consistent implementation nationwide.
• Revise the ORD Policies and Procedures Manual to clarify that EMSs are not
permitted to perform project officer duties either officially or informally.
• Communicate the EMS role to OAM and GAD management and staff, and take
steps to improve communication with the two offices.
What Action Was Taken
The final report (7100141) was issued to the Assistant Administrator for Research
and Development on March 27, 1997. In responding to the draft report, the
Assistant Administrator agreed with our recommendations and will provide an
action plan, with timeframes, by June 27, 1997.
Superfund Oversight Costs Were Not Billed or Collected
Timely
An important objective of the Superfund program is recovering funds that EPA
spends cleaning up a Superfund site, including the cost of overseeing cleanup
work that the responsible party performs, to replenish the Superfund Trust Fund.
Region 5 is responsible for billing and collecting accounts receivable for these
costs at sites it monitors.
We Found That
Region 5 often took months, and sometimes years, to establish accounts
receivable and bill responsible parties for Superfund oversight costs. Of the 24
Superfund site files we reviewed, 17 were billed late and 4 were not billed at all.
In addition, 36 percent of letters in the files demanding payment were sent late
and
Staff from both the Grants
Administration Division (GAD) and
the Office of Acquisition
Management (OAM) stated that
they did not fully understand the
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
21
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The Region's billing practice hindered collection and accounting efforts since
annual billings included only the current year's oversight charges and excluded
unpaid balances and accumulated interest from prior years. This practice does
not provide the Region or the responsible party with the magnitude of the entire
unpaid balance or enough detail to permit reconciliation to accounting records.
Cumulative balance billings would allow EPA staff to identify and pursue parties
with the highest debt and allow prioritization of resources in the collection of
unpaid balances.
The Regional Comptroller's Office (RCO) received payments for accounts
receivable which did not exist in its accounting records because the Office of
Regional Counsel (ORC) did not forward a number of court orders needed to
establish accounts receivable. Agency directives require ORC to send court
orders to the RCO, but some attorneys were unaware of this requirement. In
addition, there was no follow-up system to ensure that the RCO's requests for
supporting documents were answered. As a result, Region 5's accounts
receivable were incomplete and the RCO was not able to match collections to the
related receivable.
We Recommended That
The Regional Administrator, Region 5, direct the Regional Comptroller to:
• Develop and implement specific time frames for preparing and forwarding
annual oversight bills to responsible parties.
• Emphasize timely issuance of dunning letters following annual oversight
billings.
• Modify the new billing and collection system so that annual billing and dunning
letters include outstanding unpaid balances.
The Regional Administrator, Region 5, direct the Regional Counsel to:
• Establish and implement internal control procedures to routinely follow-up on
the RCO's requests for documentation.
What Action Was Taken
The final report (7100139) was issued to the Regional Administrator, Region 5, on
March 26, 1997. In responding to the draft report, the Agency agreed with our
findings and has implemented or planned actions to address the report's
recommendations.
62 percent were not sent at all.
Reliance on manual procedures
contributed to both of these
problems.
Findings in Brief
The Agency did not provide timely cost packages to
the U.S. Coast Guard (USCG), thus delaying
reimbursements and impeding USCG's ability to
pursue cost recovery from oil spill polluters.
22
OFFICE OF INSPECTOR GENERAL
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EPA Hindered U.S. Coast
Guard's Ability to
Recover Costs from
Polluters
The Oil Pollution Act of 1990 (Act)
created the Oil Spill Liability Trust
Fund, which is managed by the
USCG. EPA's oil spill program is
funded through national and site-
specific Interagency Agreements
(IAG) with the USCG, and the
multi-incident IAG required EPA to
submit cost documentation within
90 days of site response completion.
We Found That
EPA had difficulty preparing and submitting cost determination packages timely
to the USCG to support its billings. The Agency's Office of Emergency and
Remedial Response (OERR) and regional personnel were not aware of the Act's
three year statute of limitations for the USCG to pursue cost recovery from oil
spill polluters, starting on the site completion date. We reviewed 44 oil spill sites
and determined that regional officials had completed cleanup at 15 (34 percent)
of them more than two years prior, but the cost packages had not been
completed. USCG needs at least one year prior to the statutory deadline to
prepare a case against a polluter.
In addition, cost packages prepared in the regions were not reconciled to EPA's
Integrated Financial Management System (IFMS) before being forwarded to the
Cincinnati Financial Management Center (CFMC), and in most cases, the regions
were requested to submit corrections. There were long delays between
requesting corrections and receiving responses, and, in some cases, no response
was provided. Untimely submittal of cost packages and corrections caused EPA
lengthy delays in receiving reimbursement for expended costs and hindered
USCG's ability to recover the government's costs from responsible parties.
EPA recognized the need to dedicate resources to process cost packages timely,
and OERR indicated to the USCG that it would provide additional resources to
the regions to alleviate the backlog. Regions 3, 5, and 6 dedicated employees to
their oil spill programs, and OERR dedicated an individual at CFMC to review
and reconcile cost packages, resulting in a reduction of the backlog of
outstanding
sites awaiting reimbursement by the USCG.
We Recommended That
The Acting Assistant Administrator for Solid Waste and Emergency Response
direct the Director of the Office of Emergency and Remedial Response to:
• Emphasize to OERR and regional oil spill personnel the importance of
providing cost documentation through CFMC to USCG within 90 days of site
completion.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
23
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IFMS before forwarding the cost package to CFMC.
What Action Was Taken
The final report (7400017) was issued to the Acting Assistant Administrator for
Solid Waste and Emergency Response on January 14, 1997. In responding to the
draft report, the Assistant Administrator agreed with our recommendations and
provided milestone dates to initiate actions which, when implemented, will resolve
our findings.
• Work with the regions to provide
CFMC with the status of all oil spill
cases opened prior to 1997. Also,
direct the regions to immediately
prepare and submit
cost documentation packages for
all sites that have been
completed.
• Provide instructions to the
regions' oil spill personnel on how
to reconcile cost documentation to
24 OFFICE OF INSPECTOR GENERAL
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Findings in Brief
During fiscal 1996, EPA
continued tomake substantial
progress in improving its financial
reporting systems and practices,
resolving many issues that
caused us to qualify or disclaim
an opinion on prior years'
financial statements. The issues
preventing the Agency from
receiving unqualified opinions on
its fiscal 1996 financial
statements should be resolved
during fiscal 1997.
Over the years, the OIG has expressed serious concerns about financial
management in EPA. Historically, EPA did not give financial management
the attention it needed. In response to these concerns, EPA has taken a
number of corrective actions. During 1996, EPA continued to make
substantial progress in improving its financial reporting systems and
practices. The OIG has focused on identifying problems related to those
issues needing attention to improve financial, budget, and performance
management in the Agency. The following section summarizes the most
significant findings and recommendations during this semiannual
reporting period.
Substantial Progress Made in Financial Statement
Reporting
Fiscal 1996 was the first year the Government Management Reform Act required
Agency-wide audited financial statements for EPA. Previously, EPA was only
required to prepare audited financial statements for its trust funds, revolving
funds and commercial activities. EPA's financial statements consist of the
Superfund Trust Fund, State and Tribal Assistance Grants Appropriation (STAG),
and All of EPA's Other Appropriated Funds.
We Found That
Opinion on EPA's Fiscal 1996 Financial Statements. In our opinion, the
Consolidating Statement of Financial Position fairly presented the financial
position of EPA, as well as STAG and All Other Funds as of September 30, 1996,
except for any adjustments that might have been necessary for unbilled
Superfund oversight costs and accrued grantee liability. We disclaimed an
opinion on the Superfund Statement of Financial Position as of September 30,
1996 because we were unable to audit the unbilled oversight costs, the amounts
accrued for unbilled grantee expenses, and the components of Superfund net
position.
Except for the Superfund Trust Fund (for which we disclaimed an opinion on the
fiscal 1995 financial statements), we had not previously audited the financial
statements of the other reporting entities included in the financial statements.
Therefore, we could not determine whether the balances reported for assets,
liabilities and net position as of October 1, 1995 were fairly presented. Since
these balances impact the Consolidating Statement of Operations and Changes
in Net Position for the year ended September 30, 1996, we could not express an
opinion on the Statement of Operations and Changes in Net Position for
Superfund, STAG, All Other Funds, and the Agency as a whole. The issues that
caused us to qualify or disclaim an opinion on the reporting entities included in
the
Financial Statements
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
25
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Statement of Financial Position
also affected the Statement of
Operations and Changes in Net
Position.
Material Internal Control
Weaknesses
Superfund Oversight Costs. EPA incurs oversight costs to monitor cleanups of
hazardous waste sites which are recoverable by EPA from responsible parties
according to the terms of Consent Decrees or Consent Orders. Until these costs
are billed, they are not recorded as an asset in EPA's accounting system.
Therefore, regional finance personnel had to estimate the amount of unbilled
oversight costs as of September 30, so the costs could be shown as an asset in
the financial statements. Financial Management Division personnel provided
regional finance offices with procedures for developing and recording the amount
of unbilled oversight costs. However, the Agency's methodology resulted in the
omission of some costs that should have been included while including other
costs that should have been excluded.
Superfund Net Position. The budget execution process within the Agency's
accounting system was initially set up to expend funds as though the source of all
funds was appropriated authority; however, Superfund has both appropriated and
non-appropriated authority. When finance officials recorded various transactions
for non-appropriated authority, the equity, budget and revenue accounts were
improperly affected. As a result, we were unable to determine if the components
of net position were fairly stated. This problem was first reported during the audit
of the fiscal 1993 financial statements.
Grant Payments. EPA's grantees are not required to provide the Agency with
information on the amount of expenses they have incurred, but have not billed
EPA, as of September 30.
To estimate the fiscal 1996 accrued liability for grant expenses, Agency financial
management staff contacted a sample of grant recipients to obtain billing cycle
information and/or the actual amounts owed the grantees as of September 30.
We found that most grantee responses did not correspond with the original
information they had provided, so we were unable to determine whether the
accrued grant liability included in the financial statements was fairly presented.
We Recommended That
The Acting Chief Financial Officer:
• Establish a working group to determine the best methodology for estimating the
amount of unbilled Superfund oversight costs to accrue at year-end; and
• Work with the Acting Assistant Administrator for Administration and Resources
Management to obtain information needed to fairly present the accrued liability
for grant expenses in the financial statements.
26
OFFICE OF INSPECTOR GENERAL
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Findings in Brief
The fiscal 1996 financial
statements for the Pesticides
Reregistration and Expedited
Processing Fund (FIFRA Fund)
were fairly presented. However,
the draft Overview needed to
provide additional information
and more accurately report on the
Agency's progress in
reregistering pesticides.
What Action Was Taken
The final report (7100120) was
issued on March 24, 1997. In
responding to the draft report, the
Acting Chief Financial Officer
concurred with most of our draft
report recommendations or identified alternative corrective actions to resolve the
issues discussed in the report. The Agency plans to implement corrective actions
on all reported material internal control weaknesses by August 15, 1997. Since
we believe that the corrective actions planned and the milestones established are
responsive to our recommendations, we did not request a response to the final
audit report.
Pesticides Reregistration Accomplishments Can Be More
Reliably Reported
The 1988 amendments to the Federal Insecticide, Fungicide, and Rodenticide
Act (FIFRA) mandated the accelerated re registration of all pesticide products
registered prior to November 1, 1984. When EPA determines that a pesticide
active ingredient is eligible for re registration, it issues a Registration Eligibility
Decision (RED) and the product is reregistered about 14 to 24 months later. The
Chairman of the House Agriculture Committee requested that we audit the fiscal
1996 financial statements for the Fund.
We Found That
In our opinion, the financial statements fairly presented the FIFRA Fund's
financial position and the results of its operations and changes in net position for
the year ended September 30, 1996. In reviewing the draft Overview
accompanying the financial statements, we determined that:
Fourteen (9 percent) of the 148 REDs EPA reported it had completed through the
end of fiscal 1996, represented canceled, suspended or exempt active
ingredients for which a RED document was not prepared. Although these
activities show progress toward meeting the Agency's goal of reassessing and
reregistering products, disclosing the final disposition of chemicals would provide
program officials and others with more accurate data for assessing program
accountability. In addition, EPA prematurely counted REDs as being completed
when an undated letter to the registrant was signed indicating that the pesticide
active ingredient is eligible for reregistration, even though it can take up to 20
additional months to issue REDs to the registrants.
Problems with EPA's Pesticide Regulatory Action Tracking System resulted in
EPA overstating its fiscal 1996 program accomplishments for the FIFRA Fund.
The 159 products reported as reregistered during fiscal 1996 were overstated by
11, and 153 prior year product cancellations were reported as accomplishments.
Further, the number of products amended was understated by four. If the Agency
verified and validated program accomplishment data, accuracy and
completeness of the data available to manage pesticide reregistration activities
could be improved.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
27
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• Disclose the final disposition of completed REDs and explain that REDs are
counted as complete before they are issued to the registrant, and
• Develop and implement a policy that requires verification and validation of
program accomplishments.
What Action Was Taken
The final report (7100125) was issued to the Assistant Administrator for
Prevention, Pesticides, and Toxic Substances on March 13, 1997. In responding
to the draft report, the Assistant Administrator agreed with all of our findings and
recommendations. A response to the final report is due by June 11, 1997.
We Recommended That
The Assistant Administrator for
Prevention, Pesticides, and Toxic
Substances:
28
OFFICE OF INSPECTOR GENERAL
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Findings in Brief
Local demand for loans was not
sufficient to use more than $25
million available in Idaho's State
Revolving Fund (SRF), and the
State's SRF-related reporting
systems were inadequate and
contained a serious internal
control weakness.
Over the past several years, the OIG has frequently identified problems in
the Agency's award and administration of interagency agreements, and
assistance agreements at various offices and facilities. These audits
determine whether costs claimed by assistance recipients are eligible,
supported by documentation, necessary, and reasonable. The following
section summarizes the most significant findings and recommendations
reported during this semiannual reporting period.
Idaho State Revolving Funds Not Used Timely
The Clean Water Act established the SRF program in 1987 to create self-
sustaining revolving funds in each state. The SRFs provide loans for
construction of wastewater treatment facilities and other authorized activities.
Federal capitalization grants provide the initial funds for SRFs, and Idaho
received seven totaling $50.4 million from August 1989 through April 1995.
When combined with the State's matching funds, $60.5 million was available for
loans to local communities and for administrative expenses.
We found That
During the first six years of the Idaho SRF program, local demand for loans was
not sufficient to use all available SRF funds. A gap between demand and
available funds reached a high point of more than $25 million as of October 1,
1994, representing more than double the largest annual grant ever awarded to
Idaho. While the gap was reduced to $17 million as of June 30, 1995, with two
large loans totaling $14 million, it still exceeded more than double the fiscal 1995
grant of about $7 million.
The gap between loans awarded and funds available was the result of several
local communities failing to follow through with their original plans to obtain SRF
loans for reasons such as obtaining other sources of funding, changing priorities,
and inability to obtain permits. We identified 43 potential projects for which loans
were planned and determined that 16 (37 percent) totaling $15 million did not
result in loans.
Idaho's SRF reporting systems were inadequate in two respects. First, annual
Intended Use Plans (IUP) did not include enough projects to account for all
available SRF funds. In fiscal 1995, the State's IUP listed projects accounting for
only $6 million of the $20 million available in SRF funds. Second, the accounting
system did not have sufficient controls to ensure that SRF funds were recorded
Assistance
Agreements
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
29
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and reported accurately. Cash
balances reported in the SRF
financial statements did not agree
with the SRF general ledger cash
balance, a serious internal control
weakness. The cash balance reported in the fiscal 1995 financial statements was
under-reported by $91,295.
We Recommended That
The Regional Administrator, Region 10:
• Focus on demand during the Region's annual reviews of Idaho's SRF program
and request the State to identify steps it is taking to improve demand and
accelerate timely use of funds for high priority projects.
• Inform Idaho of the requirement that ILJPs should account for all available SRF
funds.
• Request the State to obtain annual audited financial statements of the SRF.
What Action Was Taken
We issued the final report (7100147) to the Regional Administrator, Region 10, on
March 31, 1997. The Agency concurred with all of the recommendations and
stated that Idaho has taken actions to increase the use of funds and ensure that
its ILJPs are complete. We consider the corrective actions to be satisfactory and
closed the report in our tracking system.
30
OFFICE OF INSPECTOR GENERAL
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Findings in Brief
The Monterey Regional Water
Pollution Control Agency,
California, claimed $35,360,324 of
ineligible construction,
engineering, administrative, and
other costs for the design and
construction of a regional
wastewater treatment plant. An
additional $1,593,473 of
unsupported costs were
questioned.
Construction Grants
In December 1996, the Agency declared the Construction Grants Close Out
a new material management control weakness under the 1996 Integrity Act
Report to the President and Congress. To assist the Agency in its effort to
close out the construction grants program, the OIG, in consultation with
the Agency, implemented a revised audit strategy in October 1994 that
focuses effort on the most vulnerable grants, based on a risk analysis of
each remaining grant subject to audit. When the OIG implemented its
revised audit strategy, there were 1,453 grants totalling $12.4 billion subject
to audit. As of March 1997, there were only 116 grants totalling $2.5 billion
which are expected to receive OIG review during the next two and a half
years. Summaries of some audits of construction grants with significant
issues follow.
Nearly $37 Million Questioned on Monterey, California, Project
We Found That
EPA awarded three grants totaling $44,456,541 for the design and construction of
a regional wastewater treatment plant with secondary treatment. The grantee
claimed $35,360,324 of ineligible costs under the grants, including:
• $26,247,435 of construction, engineering and other costs that were outside the
scope of the approved project;
• $6,637,602 of engineering, force account, administrative, and miscellaneous
costs that were previously disapproved by the delegated state agency, incurred
after the approved construction completion date, or associated with ineligible
environmental impact studies or planning activities;
• $2,475,287 of defense costs that were associated with a contractor's
construction claim that was disapproved by the U.S. Army Corps of Engineers,
and credits for project-related revenues that should have been offset against the
project costs.
We also questioned, as unsupported, $1,593,473 of construction and engineering
costs incurred without the necessary prior approvals from the delegated state
agency.
We Recommended That
The Regional Administrator, Region 9, not participate in the Federal share of the
ineligible costs ($26,902,135), obtain and evaluate any additional justification and
documentation from the grantee for the Federal share of unsupported costs
($1,212,314), and recover the applicable amount from the grantee.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
31
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Findings In Brief
The City of New York claimed
$19,115,757 of ineligible
construction, engineering, force
account, and administrative
expenses for construction of
upgrades on two sewage
treatment facilities. An additional
$16,320,786 of unsupported cost
were questioned.
We issued the final report (7300015) to the Regional Administrator, Region 9, on
December 31, 1996. A response to the audit report, due by April 1, 1997, has not
been received.
Over $35 Million Questioned on New York City Projects
We Found That
EPA awarded five construction grants totaling $565,505,660 to upgrade sewage
treatment facilities at the Coney Island and Owl's Head water pollution control
plants. The grantee claimed $19,115,757 of ineligible costs under the grants,
including:
• $11,187,933 of construction and project improvement costs that were primarily
for ineligible construction change orders, in excess of the actual costs incurred, or
associated with normal operation and maintenance functions;
• $11,426,728 of project engineering costs which exceeded the limits imposed by
the New York State Department of Environmental Conservation, and were
greater than the amounts actually paid;
• $481,108 for innovative/alternative treatment, for grantee force account costs
incurred before the grants were awarded or allocable to ineligible portions of the
projects, and for administrative and inspection costs using the incorrect
construction eligibility factor;
• $3,980,012 for credit adjustments to eliminate a duplicate downward
adjustment already applied under another project and the grantee's deduction for
unpaid construction retainages.
We also questioned $16,320,786 of unsupported indirect costs,
innovative/alternative costs, and costs for which no information was provided.
Similar findings of questioned costs pertaining to New York City totaling over $10
million were reported in our semiannual report to Congress for the period ended
March 31, 1996.
We Recommended That
The Regional Administrator, Region 2, not participate in the Federal share of the
ineligible costs ($14,395,792), obtain and evaluate any additional justification and
documentation from the grantee for the Federal share of unsupported costs
($14,739,351), and recover the applicable amount from the grantee.
What Action Was Taken
32
OFFICE OF INSPECTOR GENERAL
-------
Findings in Brief
The City of Baltimore, Maryland,
claimed $1,333,847 of ineligible
construction, engineering,
administrative, and force account
costs for modifications to a
wastewater treatment plant. An
additional $7,665,732 of
unsupported costs, including
$5,770,727 above the grant ceiling,
were questioned.
on February 10, 1997 and March 31, 1997, respectively. Responses to the audit
reports are due by May 9, 1997, and June 30, 1997.
Almost $9 Million Questioned on Baltimore, Maryland, Project |
We Found That
EPA awarded a grant totaling $10,785,000 for basic and $495,165 for innovative
funding for the construction of anaerobic digesters to treat primary and secondary
thickened sludge at the Back River wastewater treatment plant. The grantee
claimed $1,333,847 of ineligible costs under the grant, including:
• $1,049,373 for force account, engineering, and construction costs which were
outside the scope of the approved project, or were in excess of the eligible bid
and change orders;
• $284,474 for payroll additive costs which were not supported by an approved
rate.
We also questioned $7,665,732 of unsupported engineering and construction
costs for which eligibility determinations had not been made by EPA or the
Maryland Department of the Environment. The grantee claimed $5,770,727 in
excess of the grant ceiling and stated that the grant ceiling was established
substantially below the amount of funding required for the project. These costs
are unsupported pending a decision by EPA.
Similar findings of questioned costs pertaining to Baltimore totaling nearly $9
million were reported in our semiannual report to Congress for the period ended
September 30, 1996.
We Recommend That
The Regional Administrator, Region 3, not participate in the Federal share of the
ineligible costs ($1,000,385), and obtain and evaluate any additional justification
and documentation from the grantee for the Federal share of unsupported costs
($5,749,299).
What Action Was Taken
We issued the final report (7300025) to the Regional Administrator, Region 3, on
March 31, 1997. A response to the report is due by June 30, 1997.
What Action Was Taken
The final reports (7100111 and
7100150) were issued to the
Regional Administrator, Region 2,
Findings in Brief
The Los Angeles County Sanitation District claimed
$6,692,844 of ineligible construction, engineering,
and equipment costs for portions of a wastewater
treatment facility that was never placed into
operation. An additional $307,889 of unsupported
costs were questioned.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
33
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$7 Million Questioned on
Los Angeles County
Project
We Found That
EPA awarded five grants totaling
$171,617,994 for the design and
construction of the Carver-
Greenfield sludge dehydration and
energy recovery system at the Los
Angeles County Joint Water
Pollution Control Plant. The
Carver-Greenfield facility was
constructed but never placed into
operation because it was
determined to be a failure by EPA,
the state, and the grantee. The
grantee claimed $6,692,844 of ineligible costs under the grants, including:
• $6,301,523 of construction, engineering, and other costs that were outside the
scope of the approved project;
• $228,000 for a steam turbine building which should have been credited to the
project in accordance with a grant termination agreement; and
• $163,321 offeree account costs incurred after the approved construction
completion date.
We also questioned $307,889 of unsupported engineering, settlement, and legal
costs which had not been approved by the State Water Resources Control Board
because the grantee had not provided adequate documentation to support the
costs.
Similar findings of questioned costs pertaining to Los Angeles totaling more than
$73 million were reported in our semiannual reports to Congress for the periods
ended March 31 and September 30, 1995, and March 31, 1996.
We Recommended That
The Regional Administrator, Region 9, not participate in the Federal share of the
ineligible costs ($5,674,739), obtain and evaluate any additional justification and
documentation from the grantee for the Federal share of the unsupported costs
($261,213), and recover the applicable amount from the grantee.
What Action Was Taken
We issued the final report (7200004) to the Regional Administrator, Region 9, on
January 2, 1997. A response to the audit report, due April 2, 1997, has not been
received.
34
OFFICE OF INSPECTOR GENERAL
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Financial Contract Audits
The EPA OIG provides independent contract audits and financial advisory
services to EPA's Office of Acquisition Management (OAM) and to other
government agencies at certain government contractors. During this reporting
period, the OIG maintained contract audit cognizance for 15 contractors where
EPA contracts represent the majority of the contractor's total auditable dollars.
We are responsible for performing all contract audits at these contractors
including incurred cost audits, proposal reviews, and operations audits. In
addition, we provide assistance to OAM in developing negotiation objectives,
input for OAM's development of contract related policy, and analyzing of
contractor responses to report issues. Presented below are the results of two
financial contract audits.
Inconsistent Charges to Operational Overhead Pool
An audit of an incurred cost proposal disclosed inconsistencies in a contractor's
charging of costs to the overhead pool. The contractor created a separate
overhead pool solely to address the requirements of this particular contract, and
treated it as a company-wide pool that included costs for other contracts when the
contractor could not directly charge the items. The auditor found that some
expenses included in the overhead pool were of the same nature as those
allocable as a direct cost on other contracts. Under the Federal Acquisition
Regulation (FAR), an indirect cost cannot be allocated to a final cost objective if
other costs incurred for the same purpose in like circumstances have been
included as a direct cost of that or any other final cost objective. We questioned
$204,079 of the overhead pool pending a determination regarding the allocability
of these costs as direct or indirect.
Inadequate Supporting Documentation
An audit of an incurred cost proposal resulted in questioned costs of $378,000.
The auditors found the contractor did not have adequate supporting
documentation for $314,000 of the claimed costs, and the remaining questioned
costs were unallowable under the FAR. We also questioned $133,000 of direct
costs including $62,000 that should have been included as indirect costs. The
remaining costs were either unallowable or were not adequately supported.
Contracts
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
35
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Section 2 -- Report Resolution
As required by the Inspector
General Act, as amended, this
section contains information on
reports in the resolution
process for the semiannual
period. This section also
summarizes OIG reviews of the
Agency's follow-up actions on
selected reports completed in
prior periods. In addition,
information is presented on the
resolution of significant reports
issued by the OIG involving
monetary recommendations.
Current Period
• As of March 31, 1997, EPA had
197 OIG reports requiring
resolution which was 21 less than
the ending balance September 30,
1996.
• The number of past due audit
reports, (reports with no
management decision within six
months of issuance), increased
from 110 to 111. This
represented 56 percent of the
reports in the follow-up system as
of March 31, 1997, compared to
50 percent as of September 30,
1996.
• The costs questioned on the
OIG
reports for which management
decisions were past due as of
March 31, 1997, represented 69
percent of total questioned costs to
be resolved. This is a 28 percent
increase from September 30,
1996.
• As of March 31, 1997, Agency
management had not responded to
85 percent (94 of 111) of the past
due audit reports. The Office of
Acquisition Management, the
Grants Administration Division,
and Grants Financial Management
-Region 3, accounted for over 69
percent (65 of 94) of these.
• About 8 percent (9 of 111) of the
past due reports were preaward
audits. This is 13 percent
improvement over the previous 6-
month period. EPA is one of the
few agencies that reports on
resolution of audits conducted on
preaward contract proposals.
Trends
Office of Management Circular A-
50, Audit Followup, specifies that
audit resolution shall be made
within a maximum of six months
after issuance of a final audit
report.
Our analysis of unresolved reports
from October 1 , 1995, through
March 31, 1997, continued to show
a disturbing trend.
The number of non-preaward
reports without management
decision (180 days past the report
issue date) averaged 96 at the end
of each reporting period.
However, the number of reports
for which the Agency had not sent
a response to the OIG increased
from 73 to 83 percent (72 to 85
reports) as of March 31, 1997.
Audit followup is an integral part of
good management. Corrective
action taken by management on
resolved findings and
recommendations is essential to
improving the effectiveness and
efficiency of Agency operations. In
an era of tight budgets, limited
resources , and rising demand for
quality public services, it is crucial
that EPA follows up promptly in
collecting debts arising from
audits. Recognizing that audit
followup is a shared responsibility
of Agency managers and auditors,
we are willing to assist the Agency
to quickly resolve open audit
reports.
36
OFFICE OF INSPECTOR GENERAL
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Status Report On Perpetual Inventory of Reports in Resolution Process For The Semiannual
Period Ending March 31,1997(Dollar Values in Thousands)
Report Category
A. For which no
management decision was
made by October 1, 1996
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
decision was made by the
end of the reporting period
Reports for which no
management decision was
made within six months of
issuance
No.
of
Rpts
221
228
126
323
126
197
111
Report Issuance
Questioned
Costs
$309,214
120,740
0
429,954
39,989
389,965
269,528
Recommended
Efficiencies
$56,696
1,443
0
58,139
38,120
20,019
18,576
Report Resolution
Costs Sustained
To Be Recovered
8,232
As Efficiencies
5,603
( 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.)
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
37
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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. 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, 1997 (Dollar Value in thousands)
Report Category
A. For which no management decision was made
by October 1,1996**
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
87
46
133
25
20
18***
108
64
Questioned Costs*
$309,214
120,740
429,954
39,989
8,232
31,757
389,965
269,528
Unsupported Costs
$71,267
49,209
120,476
13,788
1,140
12,649
106,688
58,253
* 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.
*** Five audit reports totaling $ 11,507 were not agreed to by management.
38
OFFICE OF INSPECTOR GENERAL
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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, 1997 (Dollar Values in Thousands)
Report Category
A. For which no management decision was made by October 1, 1996*
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 the
end of the reporting period
Reports for which no management decision was made within six
months of issuance
Number of
Reports
26
2
28
18
7
5**
9
10
8
Dollar Value
$56,696
1,443
58,139
38,120
5,603
21,052
11,465 ***
20,019
18,576
* Any difference in number of reports and amounts of recommended efficiencies between this report and our previous semiannual report results from
corrections made to data in our audit tracking system.
** Three reports were included in C(i) and C(ii). Only the related dollars disallowed were included in C(i), whereas the dollars which were not disallowed
were included in C(ii).
*** This amount represents the dollar value of recommendations that funds be put to better use, no dollars shown for management decision on
these audits.
Audits With No Final Action As Of 3/31/97 Which Are Over One Year Past OIG Report Date
Audits
Programs
Allegations
Construction Grants
Assistance Agreements
Contracts
TOTAL
Non Superfund
46
5
139
13
18
221
Superfund
14
41
55
Total
46
5
139
27
59
276
Percent
17%
2%
50%
10%
21%
100%
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
39
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Section 3 - Office of Investigations
OFFICE OF INVESTIGATION OBJECTIVE, ACTIVITIES, AND MEASURES
OFFICE OF INVESTIGATIONS OBJECTIVE: By 2005, increase by 10 % the effectiveness
of the Office of Investigations in detecting and deterring fraud and other improprieties, and
contributing to the OIG-wide goal of redirecting 10% on indirect resources to direct mission
objectives.
STRATEGIC ACTIVITIES TO MEET OUR OBJECTIVE
-Program Integrity Investigations - Investigations of activities that could undermine the
integrity of Agency programs concerning safety and public health, and erode public
confidence in the Agency. These cases are initiated in response to allegations or may be
self initiated in high-risk areas where there is reasonable suspicion of fraud.
-Assistance Agreement Investigations - Investigations of criminal activities related to
Agency grants, State Revolving Fund, Interagency Agreements and Cooperative
Agreements, which provide assistance to state, local and tribal governments, universities
and nonprofit recipients. Collectively these programs account for about half of EPA's
budget.
-Contract and Procurement Investigations - Investigations involving acquisition
management, contracts and procurement practices. We specifically focus on cost
mischarging, defective pricing, and collusion on EPA contracts. The decentralized nature of
EPA contracting, the complexity of Agency contracting and the lack of a central vendor and
subcontractor data base increases the Agency's vulnerability to fraud.
-Employee Integrity Investigations - Investigations involving allegations against EPA
employees that could threaten the credibility of the Agency.
40
OFFICE OF INSPECTOR GENERAL
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NEW INITIATIVES
Investigations of Assistance Agreements - The OIG plans to increase its emphasis on
investigations of fraud involving EPA grants and cooperative agreements to colleges and
universities, community Technical Assistance Grants, and State Revolving Funds.
Liaison Activities - The OIG will increase its efforts to establish strong working relationships
with state and local law enforcement officials and environmental program officials. We will
also provide fraud awareness briefings with Agency, state, local and other federal officials to
foster a strong working relationships and a customer-oriented organization.
PERFORMANCE MEASURES/INDICATORS
-Number of assistance agreement and contract cases opened
-Number of indictments and convictions
-Amount of fines, restitutions, civil penalties and recoveries
-Number of suspensions, debarments and other administrative actions
-Improvements made or corrective actions taken because of investigative referrals
-Deterrent effect of investigations.
The investigative summaries that follow demonstrate how the OIG is implementing its
strategic plan to achieve its mission and ultimately helping the Agency achieve its goal of
effective management.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997 41
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Investigative Results
The following is a summary of
investigative results during this
semiannual reporting period.
Investigative activities include
investigations of alleged criminal
violations which may result in
prosecution and conviction,
investigations of alleged
violations of Agency regulations
and policies, and OIG personnel
security investigations.
Summary Of Investigative
Activities
Pending Investigations as
of September 30, 1996 155
New Investigations
Opened This Period 84
Investigations Closed
This Period 70
Pending Investigations as
of March 31, 1997 169
Prosecutive and
Administrative Actions
In this period, investigative efforts
resulted in two convictions and thre
indictments*. Fines and recoveries
including those associated with civi
actions, amounted to $ 2.9 million.
Twenty-four administrative actions
were taken as a result of
investigations.
Reprimands 6
Resignations/Removals
Restitutions 4
Suspensions &
Debarment Actions 7
Other 2
Reduced Leave 1
TOTAL
24
Profiles of Pending Investigations by Type
* Does not include indictments obtained in cas
in which we provided investigative assistance.
General EPA Programs
Total Cases =118
Superfund/Lust
Total Cases = 51
42
OFFICE OF INSPECTOR GENERAL
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Description of Selected Prosecutive Actions
Laboratory Executive
Sentenced in Waste-dump
Scheme
On December 23, 1996, Alan P. Stevens, former chief executive of
Stevens Analytical Laboratory in Stoneham, Massachusetts, was
sentenced to serve one year and one day in federal prison, ordered
to pay $7,467 in restitution to the victims of his fraud, and assessed
a fee of $50 after pleading guilty to wire fraud. Between May 1993
and 1996, Stevens posed as a representative of an environmental
laboratory that collected, tested, and disposed of waste, knowing that
such services would not be provided and that reports of such
activities would be false and fraudulent. Stevens collected waste
materials, some containing Polychlorinated Biphenyls (PCBs), for
analysis and prepared a false test report with a fraudulent signature,
knowing that the waste materials had not been tested. Stevens,
claiming to be working for Alliance Testing and Consulting,
contracted to dispose of six 55-gallon drums of waste oil containing
PCBs when, in fact, Stevens rented a truck and used it to transport
the drums to a highway median area where he abandoned them. At
the time, Stevens was under supervised probation for a conviction
of falsifying water quality test results for the towns of Lynnfield and
Bedford, Massachusetts. This case was investigated by the EPA
OIG, the EPA Criminal Investigative Division, and the
Massachusetts Environmental Strike Force.
Corporate President
Sentenced for Conspiracy
On October 24, 1996, Robert Feller, President of Non Hazardous
Incineration (NHI), a non-hazardous waste broker in the State of New
Jersey, was sentenced to 5 years probation, fined $3,000, and
assessed a special $50 fee. In April 1996, Feller pleaded guilty to
conspiracy to create and distribute a false approval letter of the EPA.
One of NHI's major clients produced transdermal nicotine patches
which, under EPA regulations, are required to be classified as
hazardous wastes after the expiration date. Feller contacted a
number of people at EPA in order to request that the patches be
reclassified as non-hazardous wastes. When EPA refused Feller's
request, Feller then conspired to produce a forged letter stating that
transdermal nicotine patches are not classified as hazardous wastes.
This investigation was conducted by EPA OIG.
EPA Employee Pleads
Guilty to Filing False Travel
Claim
On January 7, 1997, James Melvin McDuffie, an EPA personnel
management specialist, pleaded guilty to submitting a false claim to
the government for mileage expenses while on an Intergovernmental
Personnel Act assignment. An investigation revealed that McDuffie
submitted travel vouchers claiming mileage expenses for travel
between his residence and his post of duty at North Carolina A&T
University in Greensboro, North Carolina, when he did not report to
his post of duty. This investigation was conducted by EPA OIG.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
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Illinois Businessman
Pleads Guilty
On November 14, 1996, David
Shewmake, president of Shewmake Insurance Company, Skokie,
Illinois, pleaded guilty to making a false statement to influence the
award of an EPA-funded asbestos abatement contract.
As previously reported, in 1991, under the Asbestos School Hazard
Abatement Act (ASHAA), EPA approved the funding by the Chicago
Board of Education for asbestos abatement at Kennedy High School.
The Chicago Board of Education solicited bids from contractors to
perform the abatement, including required bid bonds frequently
accompanied by a power of attorney certifying authorization of an
agent to commit the surety to the promises made in the bid bond.
The indictment charged that Loyalty Environmental, Inc., a private
company engaged in asbestos removal, submitted a bid package of
$1,444,015 containing a fraudulent bid bond and power of attorney
that Shewmake prepared on behalf of Indiana "Lumberman's" Mutual
Insurance Company using an embossing device bearing the name of
the insurance company from a local printer. This investigation was
conducted by the EPA OIG.
Company and Officers
Indicted for Conspiracy to
Defraud EPA and Other
Federal Agencies
On December 18, 1996, Ricards International, Inc. (Rll), of Silver
Spring, Maryland, and Richard D. Salvatierra, officer and
shareholder, were indicted on charges of conspiracy to defraud the
United States, false claims, aiding and abetting, and filing a false tax
return. Salvatierra was also an officer and shareholder in Potomac
Leasing, Inc. (PLI), and controlled the day-to-day operations of that
entity. Through PLI, Salvatierra allegedly leased warehouse and
office space and then subleased the space to Rll at a higher rate.
These higher costs were billed to EPA and the Department of Health
and Human Service (HHS). Further, as part of the conspiracy,
Salvatierra and Edsel Billingy, former officer at Rll and shareholder
in PLI, divided the extra funds generated by the inflated costs
between themselves by having PLI pay certain personal expenses
for Salvatierra and Billingy and listing those payments as business
expenses on Salvatierra's and Billingy's income tax returns in an
effort to conceal their receipt of income from PLI proceeds. On
February 7, 1997, Billingy was indicted on a charge of conspiracy to
defraud the United States, for agreeing, obtaining, and aiding in
obtaining, payment for false and fictitious claims submitted to the
United States, to pay for excess and inflated costs. On March 17,
1997, he pleaded guilty. On January 27, 1997, PLI and Salvatierra
were debarred from further participation in Federal assistance, loan,
and benefit programs and activities and from government
contracting under the Federal Acquisition Regulation for three years
measured from March 29, 1994, the date of the initial suspension.
This case was investigated jointly by the EPA OIG, HHS OIG, and
the Internal Revenue Service.
44
OFFICE OF INSPECTOR GENERAL
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Civil and Administrative Actions to Recover
EPA Funds
Investigations and audits conducted by the Office of Inspector
General provide the basis for civil and administrative actions to
recover funds fraudulently obtained from EPA. Through the
Inspector General Division of the Office of General Counsel, the OIG
uses a variety of tools to obtain restitution. These include
cooperative efforts with the Department of Justice in filing civil suits
under the False Claims Act, the Program Fraud Civil Remedies Act,
and other authorities; working with grantees using their own civil
litigation authorities; invoking the restitution provisions of the Victim
and Witness Protection Act during criminal sentencing; using the
Agency's authority to administratively offset future payments and to
collect debts; and negotiating voluntary settlements providing for
restitution in the context of suspension and debarment actions. Civil
and administrative actions to recover funds usually extend over
several semiannual reporting periods.
Company Agrees to
$368,500 Settlement on
False Claim Changes
On January 3, 1997, Sobotka and Company, Inc. (SCI), and three of
its officers, agreed to pay the EPA $368,500 as a civil settlement on
charges of making false claims to EPA. In August 1989, EPA
contracted with SCI to perform financial, technical, and procedural
analyses of energy and environmental programs and policy issues.
On October 31, 1995, a complaint was filed in U.S. District Court for
the District of Columbia alleging that between November 1989 and
November 1991, the defendants had submitted approximately 62
false claims totaling $246,695. Under the agreement, the
defendants satisfied the $368,500 settlement by forgoing $310,549
previously billed to EPA under the contract, and paying the
government $57,951 on the date of the agreement. This case was
investigated by EPA OIG.
EPA Employee Repays
$24,000 in Settlement on
Improper Education
Expenses
On December 23, 1996, Jesse MacArthur Long, an EPA employee,
entered into a settlement agreement with EPA and the United States
Attorney's Office, District of Montana, to resolve a civil complaint
charging that Long had used an Intergovernmental Personnel Act
(IPA) assignment at Montana State University (MSU) to earn a Ph.D.
degree at taxpayer expense without proper authorization. Under the
settlement agreement, Long agreed to reimburse the United States
$24,000 for education-related expenses. This case originated when
an OIG audit and investigation revealed that Long attended MSU on
a full-time basis for the two years of the IPA assignment, charging
all
education expenses to EPA under a cooperative agreement for
scientific research. This investigation was conducted by EPA OIG.
Bankrupt Contractor Pays $100,000
Settlement on Mistaken Receipts
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
45
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Clean-up Company Settles
for $38,000
Department of State (DOS) also mistakenly paid $204,644 to
Stephens Engineering. Stephens Engineering deposited the funds
into its operating account which were disbursed against company
obligations. Stephens Engineering subsequently filed for
bankruptcy.
This case was investigated jointly by EPA OIG and DOS OIG.
Contractor Agrees to Fund
Up to $2.4 Million Additional
Clean up Costs
On January 14, 1997, in the United
States Bankruptcy Court for the
District of Maryland, Merrill Cohen,
trustee for the estate of Stephens
Engineering Co., Inc., settled
outstanding debts with the United
States by agreeing to pay $100,000.
An investigation revealed that an
invoice payment in the amount of
$468,910 was mistakenly paid to
Stephens Engineering, instead of to
its financial assignee. Further, the
On January 31, 1997, OHM Remediation Services Corporation, for
itself and its predecessor companies agreed to pay the government
$38,000 to resolve disputed claims arising from invoices that OHM
Remediation submitted to EPA from January 1, 1990 through
December 21,1995, for cleanup or remediation services on seven
contracts. The contracts and the Federal Acquisition Regulation
required that OHM Remediation include in each invoice only those
subcontractor and vendor charges that it had actually paid at the
time the invoices were submitted to the government. After an
inquiry, OHM Remediation disclosed that it had submitted invoices
to EPA under the contracts that included subcontractor and/or
vendor charges which had not been paid at the time of submission.
This investigation was conducted by EPA OIG.
COM Federal Programs Corporation agreed to a $2.4 million
administrative settlement with the EPA in response to allegations
associated with the clean up of the Asbestos Dump Site in
Meyersville, New Jersey. COM was contracted by EPA to perform
the $8 million clean up of the site which is a residential area adjacent
to the Great Swamp National Wildlife Refuge. The contract required
COM to remove soil contaminated with asbestos and replace it with
clean fill.
After completion of the clean up, the EPA OIG investigated
allegations that the soil installed to replace the asbestos
contaminated soil was obtained from a hazardous waste site being
cleaned up under the New Jersey State Environmental Cleanup
Responsibility Act. EPA concluded after examining the soil that it
did not meet the contract specifications because it contained debris
and chemical contaminates at levels not acceptable for use at the
site.
The agreement requires the EPA contractor to pay up to $2.4 million
in clean up costs for the removal and disposal of the defective
backfill, the installment of clean fill, and the performance of any
additional asbestos work at the site. This case was investigated by
EPA OIG.
46
OFFICE OF INSPECTOR GENERAL
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EPA's policy is to do business only with contractors and assistance
recipients who are honest and responsible. EPA enforces this policy
by suspending or debarring contractors, assistance recipients, or
individuals within those organizations, from further EPA contracts or
assistance if there has been a conviction of, or civil judgment for,
specific offenses, including the commission of any offense indicating
a lack of business integrity or business honesty that seriously and
directly affects the present responsibility of an entity or individual.
An entity or individual may also be debarred for any other cause of
so serious or compelling a nature that it affects its present
responsibility. Debarments are to be for a period commensurate
with the cause, but generally do not exceed 3 years.
The EPA Suspension and Debarment (S&D) Division in the Office of
Grants and Debarment operates the S&D program at EPA. The OIG
assists the EPA S&D program by providing information from audits,
investigations, and engineering studies; and obtaining documents
and evidence used in determining whether there is a cause for
suspension or debarment.
The actions summarized below resulted from OIG investigations:
• On October 1, 1996, EPA suspended Loyalty Environmental, Inc.
(Loyalty), of Skokie, Illinois, a private company engaged primarily in
asbestos abatement; William Foss, the firm's president; Eau Claire
Mechanical Insulation, Inc. (ECMI), of Orland Park, Illinois, a
building insulation subcontractor for Loyalty; Michael Cahill, an ECMI
estimator and salesman; and David J. Shewmake, president of
Shewmake Insurance Company. The suspension actions were
based on the May 2, 1996, indictments of Foss, Cahill, and
Shewmake which each was charged with making false statements
and conspiracy.
• On January 27, 1997, EPA issued notices of proposed debarment
to LNS Environmental Services, Inc. (LNS), of Richardson, Texas,
and its president, Niranjan G. Shah. An OIG investigation revealed
that LNS used improper testing methods, falsified data, and illegally
disposed of hazardous waste samples under the direction of Shah.
LNS, formerly Gymnurs Laboratories, Inc., had been awarded a
special analytical services subcontract under EPA's Contract
Laboratory Program.
Selected Suspension and
Debarment Actions
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
47
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Remediation Services, Inc. (OHM), EPA's prime contractor hired
EWT to transport hazardous waste to two approved landfills in
Detroit, Ml, and Wyandotte, Ml. Waste sent to Detroit was rejected
by the landfill since it was not approved for that particular site. An
EWT employee, acting independently, created and signed the OSC's
name to the new manifest so that the rejected material could go to
another landfill. EWT reprimanded the EWT employee, OHM
suspended business with EWT, and EWT employees were retrained
in subcontract compliance. As part of the compliance agreement,
EWT will make changes in company policies and procedures to
prevent reoccurrences of the events. In consideration of EWT's
compliance with the terms and conditions of the agreement, EPA will
not initiate any suspension ordebarment action in conjunction with
the forgory. Both EPA and EWT agree that the improper
manifesting as a possible cause fordebarment and EPA may initiate
suspension and/or debarment proceedings against EWT if there is a
material breach of this agreement.
• On Decembers, 1996, EPA
signed a compliance agreement with
Environmental Waste Technology,
Inc. (EWT), following an OIG
investigation of an allegation that
anOn Scene Coordinator's (OSC)
signature was forged on two
manifests used to transport
hazardous waste from a cleanup site
to an unintended landfill. OHM
48 OFFICE OF INSPECTOR GENERAL
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Section 4 - Office of Management
OFFICE OF MANAGEMENT OBJECTIVE, ACTIVITIES, AND MEASURES
OFFICE OF MANAGEMENT OBJECTIVE: Support OIG performance by effectively
planning, applying, and reporting to Congress fiscal, human and technical resources use,
and by redirecting 10% of OIG-wide indirect resources to direct mission objectives.
STRATEGIC ACTIVITIES TO MEET OUR OBJECTIVE
-Strategic and Financial Planning, Execution and Reporting - Activities to develop strategic and
performance plans, budgets and reports in compliance with the GPRA that clearly link all resources
to organizational objectives and results. Providing sound fiscal controllership to ensure
accountability for effective decision making and the best application of resources to meet mission
objectives.
- Human Resource Management - Activities to provide a fully staffed, highly qualified, and culturally
diverse work force supported by appropriate and efficient administrative services to maximize
application of OIG staff time on direct mission work.
-Information Resources Management - Development, acquisition, implementation, application and
management of comprehensive technical information resources providing better cheaper and faster
communications and product quality, improving OIG efficiency and its value to the Agency.
-Hotline and Fraud Prevention Activities - Activities to promote employee and contractor
awareness to improprieties and deter possible fraud and wrongdoing, and encourage employees
and the public to report possible instances of fraud, waste and mismanagement.
-Personnel Security Activities - Initiating and arranging for background investigations and National
Agency Checks and Inquiries of current and prospective EPA employees and contractors, and
evaluating the results to determine if suitability and security requirements are met to reduce risk and
protect the integrity of the EPA programs and operations.
-Legislative/Regulation Review & Congressional Reporting - Reviews and evaluations of
Agency and related legislation and regulations to identify possible weakness, duplications,
risks and opportunities for improvements and savings. Also, activities relating to IG Act reporting
requirements to, and communication with Congress and the Administrator.
OCTOBER 1,1996 THROUGH MARCH 31,1997
49
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NEW INITIATIVES
-Integrated Management Information System- The OIG will complete initial work and implement a
comprehensive management information system that will streamline many mission and
administrative functions, helping the OIG to meet its objectives of increasing its performance by
2005.
-Redirecting resources to direct mission objectives. - The OIG, organization wide, will redirect at
least 10 % of it resources now invested in management and administrative functions for application
to direct auditing, review, consulting and investigations work.
-Implementing GPRA Requirements - The OIG will continue its initial work to closely align its
strategic plans and organizational objectives with those of the Agency and to develop budgets,
manage resources and report on results, providing a clear picture of the OIG's return on the
investment.
PERFORMANCE MEASURES/INDICATORS
-Clear, well supported plans, budgets and reports providing 100 percent accountability of resources.
-Fully staffed, well qualified, culturally diverse workforce.
-Comprehensive plans and actions to use information technology to improve efficiency.
-Quality of recommendations for changes to legislation and regulations.
-Clear, accurate, timely, complete and informative reports to Congress.
-Administrative actions resulting from Personnel Security activities.
-Impact of Hotline complaints resolved.
The Management summaries that follow demonstrate how the OIG is implementing its strategic plan
to achieve its mission and ultimately helping the Agency achieve its goal of effective management.
50 OFFICE OF INSPECTOR GENERAL
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Fraud Prevention And Management Improvements
This section describes activities of the Office of
Inspector General to promote economy and
efficiency and to prevent and detect fraud, waste,
and abuse in the administration of EPA programs
and operations. This section includes information
required by statute, recommended by Senate
report, or deemed appropriate by the Inspector
General.
Review of Legislation and
Regulations
Section 4(a)(2) of the Inspector General Act of
1978, as amended, directs the Office of Inspector
General to review existing and proposed legislation
and regulations relating to Agency programs and
operations to determine their effect on economy
and efficiency and the prevention and detection of
fraud and abuse. During this semiannual period,
we reviewed three legislative and 38 regulatory
items. The most significant items reviewed are
summarized below.
Proposed Rule Under Federal
Acquisition Regulation (FAR) Case
95-022
We were concerned that the proposed rule did not
completely reflect the recommendation by the
Office of Management and Budget (OMB) report,
Interagencv Task force Report on the Federal
Contract Audit Process, to expand the FAR in
recognizing that other agencies may have audit
cognizance in addition to Defense Contract Audit
Agency.
We also commented that the proposed rule did not
clearly describe the relationships among the
Cognizant Federal Agency, the Contract
Administrative Office, and the Contracting Officer;
nor clearly define the parties' individual duties and
responsibilities.
Finally, we noted that none of our previously
recommended revisions to the proposed rule under
FAR Case 95-017 affecting FAR Case 95-022
were incorporated, and we strongly recommended
that they should be.
At the end of the semiannual period, a decision on
this FAR case had not been issued.
Contracts Management Manual
Chapter 17
This chapter is designed to strengthen EPA's
monitoring of contractor performance. We
recommended that the chapter:
• require completion of the Agency's annual and
final performance reports within a certain time from
the contract's anniversary or closing date,
• instruct the Contracting Officer to contact the
cognizant auditor before providing a recommended
rating for the business-relations category,
• refer to "incurred cost submission," rather than
"indirect cost rate proposal," since both direct and
indirect costs need to be audited.
• include the contractor's responsiveness to audit
report recommendations and auditors' requests for
information as additional rating elements, and
• delete language erroneously implying that the
Contracting Officer has direct authority over the
Project Officer.
At the end of the semiannual period, the Agency
had not issued a revised document.
EPA's Working Capital Fund (WCF)
Policies and Procedures
J
We noted that the document did not expressly
address the issue of accountability and
recommended that it be revised to indicate that all
WCF financial management activities will be
conducted at the highest level of integrity through
full disclosure of current and accurate financial
information, along with complete records of
correspondence and decisions. Also, all WCF
actions and financial activities should be subject to
independent review and audit either directly by, or
under the supervision of, the Office of Inspector
General.
We also expressed concern that the document did
not discuss the role of the Comptroller, specify who
approves rates, or describe how the Chair of the
WCF Customer Advisory Group is selected.
OCTOBER 1,1996 THROUGH MARCH 31,1997
51
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The Office of the Comptroller revised EPA Order
2570.1 to our satisfaction by expanding the
discussion of accountability and clarifying roles. A
related document discusses the role of the
Comptroller..
Draft EPA Guidelines for Use of
Government Purchase Cards
While we agreed that the document was
comprehensive and well-organized, we stated that
additional precautions should be taken to help
provide program integrity. Specifically, since credit
card purchases are designed to be made over the
telephone for as much as $2,500 for a single
purchase, we recommended that the Agency
screen all potential Government Purchase Card
Holders to certify their integrity and suitability. In
our opinion, preappointment checks (i.e., review of
security forms and Office of Personnel
Management, Federal Bureau of Investigation, and
credit checks) prior to placement and a Minimum
Background Check after placement should be
mandatory.
At the end of the semiannual period, the Agency
had not issued a revised document.
EPA Training and Learning
Delegation
We did not concur with the proposed delegation of
authority because the Director of the EPA Learning
Institute appeared to have the authority to select,
appoint and terminate all Training Officers,
including those in the Office of Inspector General
(OIG). In our view, this would infringe upon the
OIG's independent status. Accordingly, we
recommended that the delegation be revised to
specify that the Inspector General (IG), or his/her
designee, has sole authority for these duties,
except to the extent the IG delegates his/her
authority to the Agency.
We also recommended that Training Officers be
given instruction in pertinent areas of financial
responsibility since they will be authorized to
obligate Government funds.
The Agency revised the delegation to clarify the
IG's authority and indicated that the Training
Officers would receive finanical-related training.
OIG Management Initiatives
StreamliningOIGPolicyDirect^
The EPA OIG has been aggressively working to
streamline its internal policy guidance by more than
50 percent as part of its administrative reforms
initiative, and is achieving a high level of success.
While this process is ongoing, the following are
several examples of the successes we have
achieved so far. The Office of Audit has reduced its
number of Manual Chapters from 21 to 9,
eliminating over 80 percent of the initial number of
pages. The Office of Management will reduce the
number of Manual Chapters from 20 to 13,
eliminating unecessary policy guidance and
allowing staff to use innovative methods to achieve
results. This work is continuing along with other
administrative reforms to improve the efficiency of
the OIG.
Strategic Planning Leads The Way |
As part of the EPA OIG preparations for planning,
budgeting, and reporting under the requirements of
the Government Performance and Results Act
(GPRA), the EPA OIG published its first
comprehensive Strategic Plan in December 1996,
to set the direction of the OIG activities for the next
five years. This plan describes the vision, mission
and goals of the OIG and articulates how we will
measure our performance. The plan establishes
the perspective by discussing the OIG organization
as it is, where it has come from, and where it is
going with prospective new initiatives. It also
describes the accomplishments, changes and
future risks associated with specific Agency
programs, and creates a framework for consistent
planning, budgeting and reporting to be used in
reinventing the organization and integrating our
work with the Agency's objectives.
We have also worked closely with EPA in
formulating an Agency-wide process and
architecture for integrating planning, budgeting,
accounting, measurement, and reporting
compliance with the GPRA. The OIG is
concurrently reformulating its processes and
structure as well, to fit within the Agency structure.
We have restructured this OIG Semiannual Report
to Congress to align with the activities described in
the OIG Strategic Plan, and the OIG goals and
objectives . This approach demonstrates how the
results of our work are linked to our mission, goals
52
OFFICE OF INSPECTOR GENERAL
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and objectives, and contribute to the attainment of
the Agency's goals and objectives.
Assistance to the Office of
Acquisition Management
One EPA-OIG audit office provided extensive
support to OAM in the development of the
Government's negotiating position. At OAM's
request the OIG reviewed and analyzed the
contractor's response to an incurred cost audit
report and provided input for the Government to
consider in developing the negotiation objectives.
This will improve the negotiation process by
resolving discrepancies between the report and the
contractor's response prior to the negotiation with
the contractor.
Expense Allocation and Property
Assistance Projects
During audits of EPA's financial statements for
fiscal 1995, the OIG identified weaknesses in the
areas of allocating expenses and accounting for
and controlling property. The OIG worked jointly
with EPA to identify ways to correct these
problems. We recommended revisions to the
Agency's allocation procedures to ensure that
Superfund support costs were not double-counted
and that adequate supporting documentation was
maintained for allocated expenses. Also, we
evaluated EPA's inventory process to verify the
existence of property items, and sampled property
items to determine if their costs were properly
reflected in the Agency's accounting records.
Based on this assistance, the Agency made
changes in its procedures for the fiscal 1996
financial statements.
Increasing Competition in EPA
Contracting
In a novel approach to evaluate options to increase
competition in EPA contracting and to identify
industry practices which might negatively affect
competition, the Office of Acquisition Management
and the U.S. Department of Justice, Antitrust
Division and Economic Analysis Group, are
working together to review EPA procurement
procedures. The review is an outgrowth of an
investigation by the OIG that identified a practice in
which bidders on EPA contracts established
'exclusive agreements' with their proposed
subcontractors. As a condition of the 'exclusive
agreements', the subcontractors agreed not to
submit proposals in support of other competitors for
the same contract. The use of such agreements,
previously unknown by the EPA, appeared to
potentially impact competition on EPA contracts by
limiting the availability of qualified subcontractors.
Committee on Integrity and
Management Improvement
The Committee on Integrity and Management
Improvement (CIMI) was established in 1984 by
EPA Order 1130.1 to coordinate the Agency's effort
to minimize the opportunities for fraud, waste, and
mismanagement in EPA programs and activities.
CIMI strives to continually increase employee
awareness and understanding of various Agency
policies and procedures. The Committee is
composed of senior EPA program and regional
officials and is chaired by the Inspector General.
Prospective, Outside, and Post-
Employment
CIMI developed an informational leaflet to provide
EPA personnel with a summary of the restrictions
on outside employment and post-employment and
to heighten employee awareness of potential
improprieties.
In view of current efforts to reduce the size of the
Federal work force, many employees are
reassessing their career goals and need guidance
to avoid potential conflicts of interest. The rules
regarding prohibited activities after leaving Federal
service and those governing outside employment
and teaching, speaking, and writing while a Federal
employee are designed to guard against conflicts of
interest which may bring into question the propriety
of Federal actions. The rules are complex and
violators are subject to a wide range of penalties,
including criminal sanctions. Therefore, Federal
employees who plan to seek employment in the
private sector or engage in outside employment
should become familiar with the restrictions.
OCTOBER 1,1996 THROUGH MARCH 31,1997
53
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Travel Bonuses
CIMI developed an awareness leaflet to provide
answers to commonly asked questions regarding
the "ownership" of frequent flyer awards,
promotional material, and other compensation
earned by employees while traveling on official
Government business. The leaflet emphasizes that
misuse of frequent traveler benefits and other
travel bonuses is misuse of Government property,
and makes it clear that any benefits a Federal
employee receives from travel services paid for by
the Government are government property and may
only be used on future official travel.
EPA encourages employees who travel on official
business to participate in frequent traveler
programs. As membership in frequent traveler
programs has increased, so has the potential for
abuse, particularly among employees who are not
aware of Agency policy regarding official travel.
The document stresses that the policies described
therein are applicable at the time of issuance. It
warns that policies in this area frequently change,
and advises readers to seek advice from their
ethics officials or the Agency's finance office if they
have any questions regarding travel benefits.
Hotline Activities
The OIG Hotline opened five cases and completed
and closed five cases during the reporting period.
Of the cases closed, two resulted in environmental,
prosecutive, or administrative corrective action.
Cases that did not have immediate validity due to
insufficient information may be used to identify
trends or patterns of potentially vulnerable areas for
future review. At the end of this semiannual
reporting period, 32 Hotline cases were open.
The following is an example of corrective action
taken as a result of information provided by the
OIG Hotline.
A complainant alleged certain environmental
violations by Spectra, Inc. of Clarksburg, Maryland,
particularly involving the company's wastewater
treatment operations. As a result of an
investigation by EPA's Criminal Investigations
Division, Region 3 issued a $30,250 administrative
penalty against Spectra for Clean Water Act
violations.
54 OFFICE OF INSPECTOR GENERAL
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Appendix 1 - Reports Issued
Audit Reports Issued October 1,1996 to March 31,1997
(Dollars in Thousands)
Type of Review
Program Audits
Financial Statement
Assistance Agreement Audits:
Construction Grants
Single Audit Act Audits
Other
Contract Audits:
Preaward
Incurred Costs/ Other
TOTALS
Number of
Reports
24
2
19
34
4
22
123
228
Costs
Ineligible
$ 57,922
1,507
23
$ 1,080
$ 60,532
Costs
Unsupported
$ 48,988
6
113
$ 101
$ 49,208
Costs
Unnecessary/
Unreasonable
$ 10,998
$ 10,998
Funds to be
Put
to Better Use
$ 1,443
$ 1,443
A complete listing of each report issued during the reporting period and dollar value of questioned costs and the dollar
value of recommendations that funds be put to better use is available upon request from the OIG at (202) 260-4912.
OCTOBER 1, 1997 THROUGH MARCH 31, 1997
55
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Appendix 2 - Reports Issued Without Management Decision
Reports Issued Without Management Decision - 180 Days Past Report Issue Date
Action Official
Grants Administration Division
Office of Acquisition Management (OAM)
OAM Contract Mgmt Division RTF
OAM Cost Advisory - WCAB
OAM Cost Advisory - FAB
OAM Cost Advisory - CPRN
Chief Financial Officer
Asst Administrator for Air & Radiation
Asst Administrator for Adm & Resources
Mgmt
Regional Administrator Region 1
Regional Administrator Region 2
Grants Financial Mgmt Region 3
Regional Administrator Region 4
Grants Financial Mgmt Region 5
Regional Administrator Region 6
Regional Administrator Region 8
Regional Administrator Region 9
Regional Administrator Region 10
TOTALS
Over 6 Months
Less Than 1 Year
2
1
10
5
8
3
1
2
2
1
1
8
1
1
3
2
51
Over 1 Year Less
than 3 Years
7
5
2
17
7
4
3
2
4
2
2
1
56
Over 3 Years
2
1
1
4
Total
9
1
15
7
25
12
1
2
6
1
4
10
5
1
2
3
4
3
111
56
OFFICE OF INSPECTOR GENERAL
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Reports Issued Without Management Decision -180 Days Past Report Issue Date
Action Official
Grants Administration Division
Office of Acquisition Management (OAM)
OAM Contract Mgmt Division RTF
OAM Cost Advisory - WCAB
OAM Cost Advisory - FAB
OAM Cost Advisory - CPRN
Chief Financial Officer
Asst Administrator for Air & Radiation
Asst Administrator for Adm & Resources
Mgmt
Regional Administrator Region 1
Regional Administrator Region 2
Grants Financial Mgmt Region 3
Regional Administrator Region 4
Grants Financial Mgmt Region 5
Regional Administrator Region 6
Regional Administrator Region 8
Regional Administrator Region 9
Regional Administrator Region 10
TOTALS
No Response
Received
8
1
10
5
23
9
1
2
3
10
4
2
3
4
2
94
Response In
Review Process
5
2
1
2
5
1
1
1
11
Inadequate
Response
1
1
1
1
1
5
Appeal to ARE
1
1
A summary of each report issued before October 1, 1996, for which no management decision has been made by March
31, 1997, an explanation of the reasons, and a statement concerning the desired timetable for achieving management
decision is available upon request from the OIG at (202) 260-4912.
OCTOBER 1, 1996 THROUGH MARCH 31, 1997
57
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OIG MAILING ADDRESSES and TELEPHONE NUMBERS
OIG HOTLINE (202) 260-4977
CnvircnnenU! I Pr cteclion Agency
Of,ce d Inspecior General
401 VI Street, 3.W. (2441)
W.-jsh'ngbn. OC 2C450
(202)260-3137
Atlanta
-c'or General
' olh F leer-' 00 Ala'Darr u $1 . S'vV
Allanla. (jA 3G3C-3
Audit: (^04) 5*52 -SB M
Protection Agercy
Oficu of l'"-sp=x.:c • Oe nero!
JFK Federal Ou IfJing (CIG)
(Office at 1 Congress Slj
I Session. f-,'AOi203
Autil.<6lV) GG5-31W)
Chicago
FnvlronrWiSal Prc-lu^'i^n Age":,^
ORicO of InspculO' C;snc-L'l
77 MVssl JacMsnn Bey o'/'ii fl
i:i1h F:oor(IA-13J)
Chicago. IU eC60-S
Ajilit: (312)353 2 ISO
InvestiaEilbiifi: (3 ^2) 353 2507
Ciiicinnali
Cnviro- n-o^UI ^rDtodifMi Agency
Cffls e-' Inspector Gener
MS : Nn
Audit: (5' S) 300-4351 1
'nvou'igaticn-s (312) 353- ?SW/ •;Ch;«j'::,fl
Dallas
FnvranmentalPfCtedion A y (i n cy
OHica of htysclcir Ge--OfCil (f:OIG)
144ft Ross Avenge. SM 1ft 1200
I Dallas, 'IX 752D3 2 '33
feJil. ! 21 A) 665 6621
invfisligirtions,: (^04^56^-9857 {Al snta)
Denver
Environ Ticnlcil l"'nc-1edjun Agency
U'fica of Inspectoi General
Denver, CC 3tS fj2-24D5
Audi1:: C3CJ} »'i2-C&7:>
'^j 353-2507 (O
Kan sas City
LfwronmunlCil Prc-le^ico Agency
Cffioeol inspecl-ai -General
720 Minneso;;j Avenue
(nff-ce atG3C MinnesoU) Ave-j
Ka^sus Cily KS66101
ns (3 12) 353 'Jr.ftf [
New
vircTirtnlSl Protection Arjency
-11 ilmadv^ay. Woor 1520
rk, NY "D007-18B':>
Audi*: ft'. 2) 037-3060
: f?|/) f:37-3C41
Philadelphia
E'^i'^nmen'til P
Office of IntpRClOT General
Philadelphia, PA 1S10?
.Audi {21
ch Triang le Park, NC
Eiw -icmmental Protectior Ayoncy
Office of Inspector Sencral
C si aw ba 3 M 1 1 d i ng
HighwrtVM, Mail Drop G3
Rc&ftarch Trkmoie Park. NC Jffi
Atdil: (91&; S41
Sacramento
Envii c -'iinsntal Fiuied on AgeiK:.v
Ofli!,* ill lnsp«s«ir:i' Genera.
firiUCauiljo- Ujl-., Suilc B-KW
Sa^isn'tnto, CA 359' 1
Investigator: s ^15} 744 246!j (
San Fra
Uil Protect" Dn /«|^-ncy
Office of I -ispscic " Ge nnra
75 Huwlhome Si i'l-' J
' ?fn Flcor
San Francises. CA1W105
Audi {41 S) 7^ -2-145
&: (415;, /41-24S5
Seattle
Env-ionmerlai P-ufe.Ho". Aqeri'jy
OMice of Inspector General
1 VI * :M Avenue, Sui'o 1460
feijit (2C6) 553-4033
nvesliga'ions (>'!'JI=) Q
INSPECTOH O
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