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* UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
\ OFFICE OF THE INSPECTOR GENERAL
r J NORTHERN DIVISION
•& 77 WEST JACKSON BOULEVARD 905R95Q21
CHICAGO, IL 60604-3590
January 31, 1995
MEMORANDUM
SUBJECT: Audit Report No. E5FGF4-05-02«l-5jf00144
Illinois Super fund Cooperative Agreement
FROM: Anthony C. Carrollo
Divisional Inspector^jgerieral for Audits
Northern Division
TO: Valdas V. Adamkus
Regional Administrator
Region 5
This report contains findings and recommendations from our
interim audit of Illinois Environmental Protection Agency's
internal controls over costs for their Superfund cooperative
agreements.
This audit report contains findings that describe problems
the Office of Inspector General (OIG) has identified and
recommendations for corrective action. This audit report
represents the opinion of the OIG. Final determination on
matters in the audit report will be made by EPA managers in
accordance with established EPA audit resolution procedures.
Accordingly, the findings described in the audit report do not
necessarily represent the final EPA position.
Action Required
In accordance with EPA Order 2750, you, as the action
official, are required to provide this office a written response
to the audit report within 90 days of the final report date. For
corrective actions planned, but not completed by your response
date, please include specific milestones for when corrective
action will be completed.
We have no objections to further release of this report to
the public.
Should you or your staff have any questions or need
additional information, please contact Audit Manager Charles
Allberry at 353-4222.
cc: Howard Levin (MF-10J)
Larry Eastep, Section Manager
IEPA Remedial Project Management Section
Printed on Recycled Paper
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Illinois Superfund Cooperative Agreements
EXECUTIVE SUMMARY
PURPOSE
The Office of Inspector General (OIG) has performed an audit
of the Illinois Environmental Protection Agency (IEPA)
management of cooperative agreements (CA). The audit was
performed as part of the OIG's statutory requirement to audit
a sample of CAs, as well as part of our ongoing oversight of
Agency operations and programs. The objectives of our review
were to determine whether IEPA:
• exercised adequate controls over costs through its
financial management, accounting, procurement, contract
administration, and property management systems;
• complied with Federal regulations and CA requirements;
and
• achieved the objectives of the CAs.
BACKGROUND
The Superfund program was established by the Comprehensive
Environmental Response, Compensation, and Liability Act
(CERCLA) of 1980. The program was revised and expanded in
1986 by the Superfund Amendments and Reauthorization Act.
Under Superfund, EPA is responsible for managing the cleanup
of hazardous waste sites that threaten human health and the
environment.
CERCLA authorizes EPA to delegate remedial response
activities at hazardous waste sites to individual states.
IEPA is responsible for administering the environmental
protection programs for the State of Illinois. When a state
elects to manage the remedial response at a site, it enters
into a CA with EPA. The CA (1) documents the division of
responsibilities between the state and EPA, and (2) defines
the Federal funding available to the state and its cost-
share, if any.
We reviewed three sites under two multi-site CAs and the Core
Program CA.
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Site/CA Name1
Parson's Casket Hardware
Southeast Rockford
Paxton Avenue Lagoon
Core Program
CA Number
V005989-01
V005989-01
V005044-01
V005946-01
Funds
Awarded
$1,641,964
$4,418,411
$ 900,000
$5,240,915
Costs
Incurred2
$1,361,934
$2,865,070
$ 510,863
$5,147,171
RESULTS OF AUDIT
We found weaknesses in IEPA's quarterly reporting and
internal controls over Superfund CAs. While none of these
weaknesses caused us to question costs claimed on the CAs
reviewed, corrective actions will lessen the risk that future
costs claimed would be unallowable.
Monitoring Core Program Costs and Accomplishments
More detailed financial reports would improve Region 5's
ability to monitor Core Program CA expenditures and tasks.
Financial reports, submitted by IEPA, did not permit Region 5
to know when IEPA had exceeded planned amounts within
budgeted cost categories. Also, Region 5 was not holding
IEPA accountable for completing tasks. As a result, Region 5
did not know whether IEPA was satisfying the Core Program CA
requirements. In fiscal 1995, IEPA will receive $976,325 in
additional Federal funding for its Core Program. Region 5
needs to improve its oversight of these funds and increase
lEPA's accountability for planned tasks.
Internal Control Weaknesses
In general, IEPA has adequate internal controls over the
funds it receives through Superfund CAs. However, we did
find weaknesses in internal controls in the following areas:
• reconciliation of personnel charges,
• property management,
1 Exhibit 1 provides a brief description of the three CAs
reviewed during the audit.
2 As of July 31, 1994.
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• review of contractor invoices, and
• tracking Core Program expenditures.
REGION 5 COMMENTS AND ACTIONS
Region 5 was generally in agreement with our report, and have
already acted, or have agreed to act, to resolve the issues
raised in this report.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 5:
1. Request that IEPA include in its Core Program CA
quarterly progress reports total costs and a comparison
of estimated to planned expenditures for each cost
category.
2. Require the Superfund office to discuss with IEPA the
status of Core Program CA tasks during semi-annual
reviews.
3. Require the Superfund office, for fiscal 1996, to
negotiate completion dates, when possible, for Core
Program CA tasks.
We also recommend that the Regional Administrator, Region 5,
require IEPA to:
1. Conduct periodic reconciliations of personnel charges
claimed to supporting source documents.
2. Reassign property purchased with Core Program funds,
that is currently being used by persons not supporting
Superfund activities, to persons supporting Superfund
activities.
3. Review and document its review of contractor invoices.
4. Track Core Program CA expenditures to the budget, by
cost category.
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TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
CHAPTERS
1 INTRODUCTION 1
PURPOSE 1
BACKGROUND 1
SCOPE AND METHODOLOGY 3
2 ACCOUNTABILITY FOR CORE PROGRAM EXPENDITURES
AND ACCOMPLISHMENTS 7
MONITORING CORE PROGRAM EXPENDITURES 7
COMPLETION DATES FOR CORE PROGRAM TASKS 9
CONCLUSION 11
RECOMMENDATIONS 11
AGENCY COMMENTS AND OIG EVALUATION 11
3 IEPA INTERNAL CONTROLS OVER COOPERATIVE AGREEMENTS . 13
RECONCILIATION OF PERSONNEL CHARGES 13
PROPERTY MANAGEMENT 14
REVIEW CONTRACTOR INVOICES 15
TRACKING CORE PROGRAM EXPENDITURES 16
CONCLUSION 16
RECOMMENDATIONS 17
AGENCY COMMENTS AND OIG EVALUATION 17
EXHIBITS
1 IEPA COOPERATIVE AGREEMENTS REVIEWED 19
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TABLE OF CONTENTS
(continued)
Page
APPENDICES
1 REGION 5 RESPONSE TO DRAFT REPORT 21
2 ABBREVIATIONS 25
3 DISTRIBUTION 27
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CHAPTER 1
INTRODUCTION
PURPOSE
The Office of Inspector General (OIG) has performed an audit
of the Illinois Environmental Protection Agency (IEPA)
management of cooperative agreements (CA). The audit was
performed as part of the OIG's statutory requirement to audit
a sample of CAs, as well as part of our ongoing oversight of
Agency operations and programs. The objectives of our review
were to determine whether IEPA:
• exercised adequate controls over costs through its
financial management, accounting, procurement, contract
administration, and property management systems;
• complied with Federal regulations and CA requirements;
and
• achieved the objectives of the CAs.
BACKGROUND
The Superfund program was established by CERCLA in 1980. The
program was revised and expanded in 1986 by the Superfund
Amendments and Reauthorization Act. Under Superfund, EPA is
responsible for managing the cleanup of hazardous waste sites
that threaten human health and the environment.
CERCLA authorizes EPA to delegate remedial response
activities at hazardous waste sites to individual states.
IEPA is responsible for administering the environmental
protection programs for the State of Illinois. When a state
elects to manage the remedial response at a site, it enters
into a CA with EPA. The CA (1) documents the division of
responsibilities between the state and EPA, and (2) defines
the Federal funding available to the state and its cost-
share, if any. There are several different types of CAs.
• Multi-site CAs fund site specific remedial and removal
activities.
• Core Program CAs fund state activities needed to support
the Superfund program.
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• Pre-remedial CAs fund state activities such as
preliminary assessments, site inspections, and hazardous
ranking scoring.
• Enforcement CAs fund state oversight of responsible
party activities at Superfund sites.
States must submit an "Application for Federal Assistance" to
req- st CERCLA funds to support Superfund activities in their
sta-ce. The application must include an estimated budget by
cost category (i.e., personnel, travel, equip >t,
contractual, etc.). The application must also include a
Statement of Work describing the activities and tasks to be
conducted, the projected costs associated with each task, the
number of products to be completed, and a schedule for
implementation. The str'-e is required to submit progress
reports quarterly on th .ctivities delineated 'n the
Statement of Work. Thet_ reports must contain vl) an
explanation of work accomplished during the reporting period,
(2) a comparison of the percer nge of the project completed
to the project schedule, (3) c omparison of the estimated
funds spent to date to planned expenditures, (-') an
explanation of significant discrepancies, and 5) an estimate
of the time and funds needed to complete the v\,_>rk required in
the CA.
As of January 1, 1994, IEPA had 14 active CAs with EPA
totalling $37,829,245. The CAs involved removal or
remediation work at 29 Superfund sites.
During January 1994, an EPA contractor performed a management
assistance program (MAP) review of IEPA's Superfund program
to (I) assess compliance with program requirements, (2)
provide technical consultation in order to promote sound
management practices, and (3) avoid future audit findings.
The review focused on the Agency's financial, procurement,
and property management practices as they pertain to the
lEPA's Superfund program. The MAP review found areas for
improvement and made recommendations to:
• develop written policies and procedures for key
financial management functions,
• reconcile internal grant expenditure reports to expense
documentation,
• improve time reporting practices,
• doc ant Superfund recordkeeping practices,
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• account for usage of vehicles purchased with Core
Program CA funds,
• re-certify the state's procurement system for purposes
of Superfund and updating model contract references to
program regulations,
• improve practices related to the use of Superfund
property, and
• develop written policies and procedures for Superfund
property management.
SCOPE AND METHODOLOGY
During our audit, we reviewed three sites under two multi-
site CAs: Parson's Casket Hardware, Southeast Rockford (S.E,
Rockford), and Paxton Avenue Lagoons. We also reviewed the
Core Program CA. Table 1 provides a summary of the funds
awarded and costs incurred for the four sites/CAs reviewed.
Table 1
IEPA Superfund Cooperative Agreements
Site/CA Name1
Parson's Casket Hardware
Southeast Rockford
Paxton Avenue Lagoon
Core Program
CA Number
V005989-01
V005989-01
V005044-01
V005946-01
Funds
Awarded
$1,641,964
$4,418,411
$ 900,000
$5,240,915
Costs
Incurred2
$1,361,934
$2,865,070
$ 510,863
$5,147,171
These sites were selected because of their large dollar
obligations and other factors. Parson's Casket site was
selected for review during the survey based on the amount of
obligations and discussions with Region 5 personnel. A
second site, Paxton Avenue Lagoons, was selected after the
survey because it had significant obligations with charges
more current than other sites. We also chose to audit the
1 Exhibit 1 provides a brief description of the three CAs
reviewed during the audit.
2 As of July 31, 1994.
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Core Program CA to examine overall CA management. We did not
select pre-remedial or enforcement CAs because of changing
priorities or the awards' low dollar value. Because no pre-
remedial or enforcement CAs were selected for review, we
selected one other site under a multi-site CA, besides
Parson's and Paxton. There were two other on-going sites
with Federal funds expended: (1) LaSalle Electric; and (2)
S.E. Rockford. We selected the latter because it was a more
current site.
To gain an initial understanding of lEPA's controls in the
areas of financial management, accounting, procurement, and
contract administration, we selected the Parson's Casket
site. We obtained background information from the Region 5
Project Officer, evaluated the costs IEPA incurred on this
project, and assessed the controls over contractor
performance and billings.
For the Parson's Casket site, we analyzed costs as of the
latest available Financial Status Report, dated September 30,
1993. We reviewed the personnel costs claimed by selecting a
random sample of 53 employee time sheets out of a universe of
537. The sample represented 10 percent of the time sheet
universe. In reviewing contractual costs for the site, we
selected a judgmental sample of the five largest contractor
invoices, which represented 37 percent of the total dollar
amount of contractual costs. In addition, we sampled
equipment and commodity expenditures. We did not test costs
in other categories as amounts claimed for those categories
were not material to the total amount claimed.
After completing our review of Parson's Casket, we expanded
our scope to include two additional sites (Paxton Lagoons and
S.E. Rockford), and the Core Program CA. We selected the
additional sites to determine whether contract administration
issues identified during our review of the Parson's Casket CA
were unique to that site or systemic occurrences throughout
all CAs. We reviewed contractual costs by selecting a
judgmental sample of the four largest contractor invoices.
The sample amount represented 30 percent of the total dollar
amount of contractual costs. We did not sample the other
cost categories as none had significant costs beyond those
tested during the survey of Parson's Casket. Since it was
not practical to select statistical samples, our results were
not pr."ectable to the universe.
For the Core Program CA, we reviewed whether the objectives
of the CA were achieved. We also evaluated lEPA's controls
over letter-of-credit drawdowns and property management.
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For all items tested, we examined the source documents and
performed other audit procedures that we considered necessary
to gain an understanding of IEPA's financial management and
accounting controls. As criteria, we used the Code of
Federal Regulations (CFR) Title 40, Parts 30, 31, 33, and 35;
Office of Management and Budget (OMB) Circular A-87 and A-
102; and the general and special conditions contained in each
CA. Except as noted in chapter 3, our review of Parson's
Casket did not disclose any material weaknesses in IEPA's
financial management, accounting, and procurement systems.
In planning and performing our audit, we considered relevant
aspects of the internal control structure in order to
determine our auditing procedures. The significant controls
we reviewed included financial management, accounting,
contract procurement, contract management, and property
management. For these internal controls, we obtained an
understanding of the relevant policies and procedures and
whether they had been placed into operation. We also relied
upon the single audit report, prepared by the Illinois Office
of the Auditor General, for the IEPA, for the two years
ending June 30, 1991 and 1992, to the extent that it was
applicable to lEPA's Superfund program. Weaknesses in
internal controls are discussed in chapter 3. Nothing else
came to our attention in connection with our review which
caused us to believe that IEPA was not in compliance with any
of the terms and conditions of the CA, laws, and regulations
for those transactions not tested.
We performed our audit in accordance with the Government
Auditing Standards. 1988 Revision promulgated by the
Comptroller General of the United States and included tests
of the accounting records and other auditing procedures as
deemed necessary. Audit fieldwork was performed from June
13, 1994, to November 11, 1994.
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CHAPTER 2
ACCOUNTABILITY FOR CORE PROGRAM EXPENDITURES
AND ACCOMPLISHMENTS
More detailed financial reports would improve Region 5's
ability to monitor Core Program CA expenditures and tasks.
Financial reports, submitted by IEPA, did not permit Region 5
to know when IEPA had exceeded planned amounts within
budgeted cost categories. Also, Region 5 was not holding
IEPA accountable for completing tasks. As a result, Region 5
did not know whether IEPA was satisfying the Core Program CA
requirements. In fiscal 1995, IEPA will receive $976,325 in
additional Federal funding for its Core Program. Region 5
needs to improve its oversight of these funds and increase
lEPA's accountability for planned tasks.
MONITORING CORE PROGRAM EXPENDITURES
By obtaining more detailed financial reports from IEPA,
Region 5 would improve its ability to monitor activity within
the Core agreement. lEPA's quarterly progress reports for
the Core agreement included only overall cost information, as
required by EPA regulations. This aggregate reporting did
not provide Region 5 with a comparison, by cost category, of
expenditures incurred to planned expenditures. As a result,
Region 5 was not aware that IEPA had significantly exceeded
its planned expenditures for several cost categories.
As shown by the bracketed numbers in table 2, IEPA Core
Program expenditures exceeded the budget for contractual,
equipment, other, and indirect cost categories.
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Table 2
Superfund Core Program Cooperative Agreement
Actual and Budgeted Expenditures From
July 1, 1987, Through July 31, 19943
Cost Category
Personnel
Fringe Benefits
Contractual
Travel
Supplies
Equipment
Other
Total Direct
Indirect Costs
Total Costs
EPA Share4
Actual
Expenditures
$ 1,980,226
392,644
505,099
110,658
55,198
428,386
512,970
$ 3,985,181
1,161,990
$ 5,147,171
$ 4,694,220
Budgeted
Expenditures
$ 2,096,373
455,503
448,499
137,354
426,758
376,240
174,466
$ 4,115,193
1,125,722
$ 5,240,915
$ 4,780,233
Difference
$ 116,147
62,859
(56,600)
26,696
371,560
(52,146)
(338,504)
$ 130,012
(36,268)
$ 93,744
$ 85,834
During fiscal 1991, IEPA personnel noticed expenditures were
exceeding the budget for some cost categories. At that time,
IEPA attempted to rebudget funds from other cost categories
to cover the shortages. However, rebudget efforts were not
successful in correcting the problem. IEPA personnel stated
that, because of other priorities, they were unable to devote
adequate time needed to realign the Core Program budget to
the expenditures.
Current regulations require states to obtain EPA's approval
to reallocate funds among cost categories only when the
cumulative amount exceeds 10 percent of the total approved
budget. lEPA's variances did not exceed this threshold.
Therefore, no approval was required or requested. However,
3 The Core Program CA is amended yearly to provide
additional funds.
4 For the Core Program CA, the cumulative EPA share is 91
percent.
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receiving financial information detailed by budget cost
category would allow Region 5 to be aware of changes to the
original plan which were not highlighted in the progress
report narrative. This knowledge would, in turn, allow the
Region to ask appropriate questions and update its
understanding of a project's direction.
Providing financial information by budget cost category
should not result in any additional recordkeeping for IEPA.
Its accounting system already accumulates and tracks
expenditures in this manner. In fact, IEPA already reports
financial data by cost category for all EPA Cooperative
Agreements except for the Core Program.
COMPLETION DATES FOR CORE PROGRAM TASKS
Region 5 needs to hold IEPA more accountable for timely
completion of Core Program CA tasks. IEPA did not complete
some tasks identified in the fiscal 1994 Core Program CA.
Region 5 monitoring of IEPA progress in completing tasks was
hindered because the tasks were not given specific due dates
for completion. As a result, Region 5 has no means of
determining whether reasonable progress is being made toward
completion of tasks needed to support the Superfund program
in Illinois.
EPA developed the Core Program CA concept to provide each
state the necessary funds to carry out Superfund activities.
The Core Program CA provided states with additional funds to
conduct Superfund implementation activities that were not
directly identifiable to specific sites, but were intended to
support a state's overall ability to participate in the
Superfund response program. Each year IEPA and Region 5
negotiate specific tasks that will be accomplished using Core
Program CA funds. The fiscal 1994 Core Program CA lists ten
major activities, including program management, staff
development, legal and statutory activities, and a community
relations and public education program. Within each of these
activities, the CA lists various tasks that IEPA will
perform, including a schedule and objective for each task.
IEPA did not complete some of the tasks in the Core Program
CA for fiscal 1994, as shown in table 3. These tasks are
important in supporting lEPA's involvement in the Superfund
program. Not completing tasks, such as training and project
management systems, could effect IEPA's ability to manage
Superfund activities.
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Table 3
Superfund Core Progra Cooperative Agreement
Status of Fiscal 1994 Cor.. Program CA Workplan Tasks
Core Program CA Task
Develop project
management data base
tracking system.
Provide p ]ect
manager t. .ining in
12 specific areas.
Develop and implement
IEPA' s cost
documentation
procedures to support
EPA cost recovery
efforts.
Update and revise the
protocols for project
• - anagemen t . De ve 1 op
an appropriate
contractor evaluation
systems.
Completion
Date
02/01/94
On-Going
On -Go ing
On -Going
Task Status
As of
11/11, t5
Not
completed.
Training
complete
in 4 of 12
areas .
Not
completed.
No written
procedures
in place .
As of
01/12/956
Planned
completion
09/30/95.
Training
provided
in 10 of
12 areas
to some
project
managers .
Draft
procedures
completed.
Draft
evaluation
form
issued
11/08/94.
Region 5 needs to hold IEPA accountable for completing
scheduled tasks. Region 5 was not monitoring lEPA's
completion of Core Program CA tasks. Region 5 and IEPA
conduct semi-annual reviews to discuss progress on the CAs.
The reviews focus on site specific, remedial action
accomplishments. Region 5 personnel stated that Core Program
CA task accomplishments are not extensively discussed during
the reviews. Also, as shown in table 3, many of the tasks do
not have assigned completion dates. Some tasks, such as
5 Conclusion of audit fieldwork
6 Region 5 response to draft audit report
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training, cannot be assigned a specific completion date.
Other tasks, such as updating and revising the protocols for
project management and developing a contractor evaluation
system, can have completion dates assigned. Not having due
dates makes it difficult to evaluate progress in completing
tasks.
CONCLUSION
Region 5 would improve its ability to monitor Core Program
expenditures and task accomplishments by requesting that IEPA
include more financial detail in quarterly progress reports.
These reports should include a comparison of cumulative costs
to planned expenditures for each cost category. Also,
estimated completion dates would assist Region 5 in
monitoring the progress of tasks to be accomplished under the
Core agreement.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 5:
1. Request that IEPA include in its Core Program CA
quarterly progress reports total costs and a comparison
of estimated to planned expenditures for each cost
category.
2. Require the Superfund office to discuss with IEPA the
status of Core Program CA tasks during semi-annual
reviews.
3. Require the Superfund office, for FY 1996, to negotiate
completion dates, when possible, for Core Program CA
tasks.
AGENCY COMMENTS AND PIG EVALUATION
Region 5 generally agreed with the findings and
recommendations presented in this chapter. Its response
provided updated information on the status of Core CA tasks.
We added this information to Table 3 on page 10.
In response to our specific recommendations, Region 5 stated
that it will place discussion of Core CA deliverables on the
agendas for future Superfund Program Review meetings
(recommendation #2). Region 5 also agreed to specifically
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negotiate completion dates for Core CA tasks in the fiscal
1996 amendment (recommendation #3).
We revised recommendation #1 to address a concern expressed
by Region 5 in its response to the draft report. We
originally recommended that Region 5 require IEPA to submit
more detailed quarterly progress reports. Region 5, however,
does not believe it could require more detailed reporting.
Current regulations direct a State to report financial
information in aggregate terms. Region 5 asked that we
remove this finding from the report.
We continue to believe that more detailed reporting would
allow Region 5 to better monitor cooperative agreement
expenditures. Therefore, we did not remove the finding from
this report. In consideration of Region 5's concern, we
reworded the related recommendation to request more detailed
reporting from IEPA. IEPA has agreed to include "a
comparison of estimated to budgeted expenditures for the Core
Program cooperative agreement quarterly progress reports."
This will adequately address our recommendation.
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CHAPTER 3
IEPA INTERNAL CONTROLS OVER COOPERATIVE AGREEMENTS
In general, IEPA has adequate internal controls over the
funds it receives through Superfund CAs. However, we did
find weaknesses in internal controls in the following areas:
• reconciliation of personnel charges,
• property management,
• review of contractor invoices, and
• tracking Core Program expenditures.
Reconciliation of personnel charges and the management of
property issues were previously identified in Region 5's MAP
review of lEPA's Superfund program. IEPA agreed to take
action to address the findings in the MAP, but had not
implemented the corrective actions at the time of our audit.
IEPA management is responsible for establishing and
maintaining an internal control structure. The objective of
an internal control structure is to provide management with
reasonable, but not absolute, assurance that Federal
financial assistance programs are managed in compliance with
applicable laws and regulations.
RECONCILIATION OF PERSONNEL CHARGES
IEPA personnel charges billed could not be reconciled to the
personnel reporting system (PRS), which tracks employee time
by project. This occurred because personnel costs for
overtime are reported differently in the time tracking system
than how they are billed to EPA. As a result, we were unable
to verify the total personnel costs IEPA claimed. In
response to a recent IEPA MAP review, IEPA agreed to conduct
quarterly reconciliations of CA expenditures, including
personnel costs, to supporting documentation.
Regulatory guidance in 40 CFR Part 35.6270 requires a
recipient's accounting system to use actual costs as the
basis for all reports of direct site charges. This includes
a record keeping system that enables site-specific costs to
be tracked by site, activity, and operable unit, and provides
sufficient documentation for cost recovery purposes. IEPA's
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accounting system tracks personnel costs by appropriation.
IEPA uses the PRS to track personnel costs for each CA and
grant.
Personnel charges billed to EPA could not be reconciled to
the time tracking system. Printouts from the time tracking
system list individuals who charged time to a site, and
includes overtime premium costs as part of the direct
personnel charges. However, when billing Federal projects,
IEPA policy is to allocate overtime premium costs to all
projects a person works on during a pay period. As a result,
personnel charges in the tracking system were greater than
what was billed to EPA. For example, for the Parson's Casket
site, there was a difference of $12,427 between the time
tracking system and what was billed to EPA.
Personnel costs per tracking system $ 271,401
Personnel cost billed to EPA 258.974
Difference $ 12.427
Since the treatment of overtime premium was different in the
tracking system than how it was billed to EPA, we could not
verify the total personnel charges to lEPA's time tracking
system. IEPA does perform a manual reconciliation of
personnel charges during cost recovery, but this is only done
when EPA requests the information. As a result of the MAP
review, IEPA will be reconciling expenditure reports to
expense documentation on a quarterly basis. The quarterly
reconciliation should include reconciling personnel costs
billed to EPA to what is contained in the time tracking
system.
PROPERTY MANAGEMENT
IEPA did not have sufficient control ov? Core Program
property. This occurred because IEPA d- .. not ensure that
property purchased with Core Program CA funds was issued to
personnel supporting the Superfund program. As a result,
IEPA property purchased with Core Program CA funds was not
being used to support Superfund activities.
Guidance in 40 CFR Part 35.6270 requires that a state's
accounting system provide control, accountability, and an
assurance that funds, property, and other assets are used
only for authorized purposes.
IEPA inventory records showed that staff assigned to the
Bureau of Water, Leaking Underground Storage Tank Program,
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and the Management of Used Tires Program were using property
purchased with Core Program funds. We confirmed these
inventory records by physically locating these property
items. IEPA personnel stated that all property purchases are
added to the inventory without regard to the source of
funding used to purchase the property. Property was then
removed from inventory on a first come, first serve basis.
As a result, property may not be assigned to personnel
performing activities related to the source of funding for
the property.
The MAP review, which was performed of lEPA's Superfund
program during January 1994, also found that property was not
being used to support Superfund activities. In response to
the finding, IEPA agreed to prepare a property management
policy for all equipment purchases with CERCLA funds. IEPA
also agreed to evaluate the assignments of all equipment
purchased with Core Program funds. As of September 1994,
IEPA had not implemented these recommendations.
REVIEW OF CONTRACTOR INVOICES
IEPA personnel responsible for reviewing contractor invoices
did not always complete invoice review sheets before
submitting the invoices for payment. This occurred because
IEPA was not consistently complying with its procedures to
document contractor invoice reviews before invoices were
submitted to the fiscal office for payment. Documented
invoice reviews, prior to payment, ensure that tasks listed
in the contract are completed and contractors are paid only
for services provided.
In March 1990, IEPA initiated procedures to document
contractor invoice reviews before invoices were submitted for
payment. IEPA developed a standard contractor invoice review
checklist sheet. The review checklist calls for IEPA to
verify such items as (1) total hours charged against
individual time sheets, (2) hourly labor rates charged
against the contract, and (3) whether work was performed
prior to the contract expiration date. Tick marks on some
invoices led us to conclude that the invoices had been
reviewed to some extent, however we did not find invoice
review sheets in the files. Six of nine invoices we reviewed
did not have invoice review sheets. We informed IEPA
officials of the inconsistent invoice review practices. IEPA
officials stated that, in the future, documented evidence
prescribed by the Agency will be attached to contractor
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Illinois Superfund Cooperative Agreements
invoices before they are submitted to the fiscal office for
payment.
TRACKING CORE PROGRAM EXPENDITURES
As discussed in chapter 2, IEPA exceeded its budget for some
cost categories in the Core Program CA. This occurred
because IEPA was not comparing Core Program CA actual
expenditures to the budget. As a result, Core Program CA
expenditures, for some cost categories, consistently exceeded
the budget.
We found that neither lEPA's Budget and Grants Unit nor the
Finance Office were reviewing Core Program expenditures for
each cost category to ensure they did not exceed budgeted
amounts. The Budget and Grants Unit monitors financial
expenditures against projec- budgets. The Finance Office
maintains fiscal information on Federal grant programs,
including CAs. Personnel in budget and finance offices
reviewed Core Program CA expenditures only to ensure they did
not exceed total budgeted amounts, and not individual cost
categories.
Some cost categories have been over budget for several years
(see table 2 in chapter 2, page 6). This has made -t
difficult for IEPA to ensure that expenditures are within
budget for individual cost categories. We issued a flash
report (report no. 4400111) on September 29, 1994, informing
Region 5 that IEPA was exceeding budgeted amounts in several
cost categories for the Core Program CA. We recommended that
Region 5 require IEPA to amend its fiscal 1995 Superfund Core
Program CA to assure that actual and fiscal 1995 planned
expenditures did not exceed the budgeted amounts in each cost
category. Correcting the cost categories which are over
budget will allow IEPA to better track actual and budgeted
expenditures.
CONCLUSION
IEPA could improve internal controls over the funds it
receives through Superfund CAs by (1) periodically
reconciling personnel charges to supporting source documents
to verif "he accuracy of reported costs, (2) reassigning
property r rchased with Core Program funds, currently being
used by persons not supporting Superfund activities, to
persons supporting Superfund activities, (3) reviewing and
documenting its review of contractor invoices, and (4)
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Illinois Superfund Cooperative Agreements
tracking Core Program CA expenditures to the budget, by cost
category.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 5,
require IEPA to:
1. Conduct periodic reconciliations of personnel charges
claimed to supporting source documents.
2. Reassign property purchased with Core Program funds,
that is currently being used by persons not supporting
Superfund activities, to persons supporting Superfund
activities.
3. Review and document its review of contractor invoices.
4. Track Core Program CA expenditures to the budget, by
cost category.
AGENCY COMMENTS AND PIG EVALUATION
Region 5 agreed with the findings and recommendations
presented in this chapter. It will advise IEPA that (1)
periodic reconciliations of personnel charges should be
performed (recommendation #1) and (2) property should be
reassigned to ensure that all Superfund property is used by
lEPA's Superfund staff (recommendation #2).
IEPA stated that its present policy requires reviewers to
complete the standard checklist for every contractor's
billing (recommendation #3). IEPA also submitted an
amendment application to the Core CA to adjust budgeted
amounts to actual expenditures (recommendation #4).
The actions taken or proposed by Region 5 and IEPA adequately
address our recommendations.
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EXHIBIT 1
Page 1 of 2
IEPA COOPERATIVE AGREEMENTS REVIEWED
As part of our audit we reviewed the Parson's Casket
Hardware, S.E. Rockford, Paxton Avenue Lagoons, and Core
Program CAs.
Parson's Casket Hardware
The 2-acre Parson's Casket Hardware Company site, located in
Belvidere was an electroplating facility from the 1920s until
1982, when the owner filed for bankruptcy. In 1982, IEPA
found hazardous wastes in drums of various sizes stored
around the facility, in storage tanks, and in an unlined
lagoon. Following the cleanup of these wastes, sampling data
IEPA collected in 1987 indicated that the groundwater was
contaminated with numerous volatile organic compounds (VOC).
The municipal water system in the area draws groundwater from
this aquifer and is the sole source of drinking water for
Belvidere's 15,200 residents. IEPA studied the nature and
extent of contamination at the site with EPA oversight. IEPA
completed the remedial investigation/feasibility study in
1992. EPA is using the results of this study to determine
and select alternative actions for the clean up of the site.
S.E. Rockford
The S.E. Rockford site covers about 2-square miles, and
affects about 155,000 people. The groundwater in the area is
contaminated with VOCs. The site is being addressed in three
stages: (1) initial actions, (2) alternate water supply, and
(3) long term groundwater remedy. The initial action stage,
which was completed in 1990, involved EPA sampling the wells
of 78 homes and testing for specific VOCs. EPA provided
bottled water to 283 homes until carbon filtration systems
could be installed. All 283 homes subsequently were
connected to the city water supply in 1990. The alternate
water supply stage, which was completed in 1991, identified
additional residences with contaminated water supplies above
the Federal standards. This action resulted in additional
hookups to the city water supply. The long term groundwater
remedy stage, under EPA monitoring, is still on-going and
involves an IEPA investigation into the source, nature, and
extent of the contamination. The investigation will define
the contaminants and will result in recommended alternatives
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EXHIBIT 1
Page 2 of 2
for the final groundwater remedy. IEPA plans to complete the
investigation during 1994.
Paxton Avenue Lagoon
The Paxton Avenue Lagoons site is located on the south side
of Chicago. The site consists of three lagoons, a mound of
soil and crushed drums, and a seepage area of oily soil. In
1985, IEPA performed a remedial investigation at the site to
determine the characteristics and extent of the
contamination. Based on the remedial investigation, IEPA
erected an incinerator and excavated and incinerated
contaminated soil. The remaining contamination at the site
was covered with a cap during December 1993. IEPA completed
work at the site during March 1994.
Core Program CA
The Core Program CA provides IEPA with funds to conduct non-
site specific Superfund activities. IEPA received its first
Core Program CA in July 1987. The CA is amended yearly to
provide additional funds. IEPA used the Cere Program to fund
non-site specific activities, including (1) purchasing
property, providing technical training, and (2) providing
health assessment screening for IEPA personnel supporting the
Superfund program.
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APPENDIX 1
Page 1 of 4
REGION 5 RESPONSE TO DRAFT REPORT
UMfTED STATES ENVIRONMENTAL PROTECTION AGENCY
REGIONS
77 WEST JACKSON BOULEVARD
CHICAGO. IL 60604-3590
m
KPLf TO THE 4TTEWTIO* O'
R-19J
MEMORANDUM
•OBJECT: Region 5 Response to the Office of Inspector General
Draft Report on Illinois Environnental Protection Agency
Management of Cooperative Agreements
ntOX: Valdas V. AdamXus
Regional Administrator
TO: Anthony C. Carrollo. Divisional Inspector General
for Audits, Northern Division
Thank you for the opportunity to respond to the draft report on
Illinois Environnental Protection Agency (IEPA) management of
cooperative agreements. The Region's comments are attached, along
with our formal response to each of the recommendations that appear in
the draft report.
If you have any questions concerning these comments, please call
Howard Levin, Chief, Financial Analysis Section, at (312) 886-7522.
Attachment
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APPENDIX 1
Page 2 of 4
ftegie s Response to the Offie* of Inspector Oencral
Draf teport on Illinois environmental Protection Agency
Mana; «ant of cooperative Agreements
Listed below are the Regie-'s concerns with the draft report, as
well as the Region's response to each recommendation.
COMMENTS OH THE REPORT
1. ZEPA has informed us that they expect to complete the design
of a project management data base tracking system by
September 30, 1995.
2. Regarding the twelve specific areas of project manager
training, these twelve areas of training were not meant
to be mandatory training and they do not represent
specific training courses. IEPA has notified us that
they have provided training to some project managers in
ten of the twelve areas identified in Activity 4 of the
Core Grant during the last year.
3. IEPA has informed us that they have developed cost recovery
procedures (written procedures in draft form) for EPA
cost recovery. IEPA has thus far completed cost recovery
documentation requests by U.S. EPA in a timely manner,
and all documentation packages have been complete.
4. USEPA issued a draft evaluation form for State use on
November 8, 1994, and will be holding a meeting with state
officials on February 2, 1995, to discuss the Contracts
Management Guidance, including the evaluation guide.
5. Region 5 recommends deleting the finding on page 7, that we
did not require IEPA to report actual expenditures by cost
category on a quarterly basis, due to the fact that it is not
required in our regulations. The Grant regulations at 40 CFR
Part 35.6650(b)(3) and (4) require the quarterly reports to
include an estimate of funds spent to date as compared to
planned exper .-itures, and estimated funds needed to complete
the CA worX as compared to funds remaining. A Financial
Status Report (FSR) is required to be submitted annually, 90
days after the end of the grant year, and does not require
reporting of expenditures by cost category. Under 40 CFR Part
31.30 (c) and (e),U.S. EPA cannot require, and the State does
not need to obtain prior approval, to make cumulative
transfers anong direct cost categories that do not exceed 10%
of the current total approved budget, if such transfers do not
result in the need for additiona funds. Region 5 plans to
continue to provide States witn this flexibility to make
transfers.
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APPENDIX 1
Page 3 of 4
DRAW REPORT RECOMMENDATIONS
Require IEPA to include in its core program CA quarterly progress
reports, total costs tad * comparison of actual to budgeted
expenditures for each cost category.
Region 5 Response: IEPA has agreed to include total estimated
costs and a comparison of estimated to budgeted expenditures for
the CORE program cooperative agreement quarterly progress report.
Discuss with IEPA the status of core program CA tasks during semi-
annual reviews.
Region 5 Response: Discussion of the CORE CA deliverables will be
placed on the agendas for the Superfund Program Review meetings.
Require the Superfund program, for fiscal 1996, to negotiate
completion dates, when possible, for core program CA tasks.
Region 5 Response: Region 5 will specifically negotiate task
completion dates in the Fiscal Year 1996 amendment.
Require IEPA to conduct periodic reconciliations of personnel
charges claimed to supporting source documents.
Region 5 Response: Region 5 will advise IEPA that periodic
reconciliations of personnel charges to supporting source documents
should be performed.
Require IEPA to reassign property purchased with core program
funds, that is currently being used by persons not supporting
Superfund activities, to persons supporting Superfund activities.
Region 5 Response: Region 5 will advise IEPA that the recommended
reassignment of property should be accomplished as soon as possible
to insure that all property with Superfund serial numbers is used
by lEPA's Superfund Staff.
Require IEPA to review and document its review of contractor
invoices.
Region 5 Response: The IEPA indicated to us that they originally
developed the billing review checklist as a training tool. Present
IEPA policy requires that the Billing Reviewer uses and completes
the checklist for every consultant's and contractor's billing.
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APPENDIX 1
Page 4 of 4
Require ItPA to track core program CA expenditures to the budget,
by cost category.
Regies S Response: IEPA has informed us that this recommendation
is based on one incident where amounts were accidently switched
between object class categories, and thus not a systemic problem.
IEPA has agreed to continue to track CORE program CA expenditures
to the budget by cost category. IEPA submitted an amendment
application which was received on December 21, 1994, for the
purpose of correcting this error. This problem was also mentioned
in a Flash Report dated September 23, 1994.
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APPENDIX 2
Page 1 of 1
ABBREVIATIONS
CA Cooperative Agreement
CERCLA Comprehensive Environmental Response, Compensation,
and Liability Act
CFR Code of Federal Regulations
IEPA Illinois Environmental Protection Agency
MAP Management Assistance Program
OIG Office of Inspector General
OMB Office of Management and Budget
PRS Personnel Reporting System
VOC Volatile Organic Compounds
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APPENDIX 3
Page 1 of 1
DISTRIBUTION
Inspector General (A-109)
Regional Administrator, Region 5
Region 5, Office of Superfund
Region 5 Follow-up Coordinator (Chief, FAS) (MFA-10J)
Region 5 Public Affairs (P-19J)
Region 5 Library
Agency Followup Coordinator (PM-208);
Attention: Assistant Administrator for the Office of
Administration and resources Management
Agency Followup Coordinator (H-3304);
Attention: Director, Resources Management
Associate Administrator for Regional Operations
and State/Local Relations (H-1501)
Headquarters Library (PM-211A)
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