L-
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE Or INSPECTOR GENERAL
NORTMERN DIVISION
TO W. JACKSON BLVD.. 4TH FLOOR
CHICAGO. ILLINOIS 6O«O4
OFFICE OF AUDIT
312/353-2486
OFFICE OF INVESTIGATION
312/3S3-2SO7
May 26, 1987
SUBJECT:
rv
FROM:
TO:
Audit Report No. P5BG7-05-0536-71225
Interim Audit of Illinois Environmental Protection Agency's
Administration of Its Superfund Cooperative Agreements
with EPA Under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980
For The Period April 28, 1983 through March 31, 1986
Anthony C. Carrol lo
Divisional Inspect
Northern Division
for Audits
u
Ivars Antens, Chief
Grants and Financial Management Branch
Region 5
SCOPE AND OBJECTIVES
An interim audit of the Illinois Environmental Protection Agency's (IEPA)
administration of its cooperative agreements with the U.S. Environmental
Protection Agency under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 has been completed. The audit included an examina-
tion of costs claimed or reported under the referenced cooperative agreement
from the inception dates through March 31, 1986. The audit field work and
draft report were completed on July 17, 1986 by Tichenor & Eiche, Certified
Public Accountants. The purpose of the audit was to determine:
0 the .adequacy, effectiveness,'and reliability of procurement, accounting,
and management controls exercised by the IEPA in administering its
cooperative agreements with EPA.
0 the lEPA's compliance with provisions of the cooperative agreements and
applicable EPA regulations.
0 the lEPA's compliance with provisions of the Letter of Credit - Treasury
Financial Communications System Recipients' Manual.
0 the reasonableness, allocability, and allowability of costs claimed under
the cooperative agreements with EPA.
-------
IEPA received provisional indirect cost rates from the EPA Planning and Cost
Advisory Branch, to be applied to its cooperative agreements. IEPA revised
the provisional Indirect cost rates and used the revised indirect cost rates
in reporting Us indirect costs of $315,588. The rates were not audited.
The audit was performed in accordance with generally accepted auditing
standards and the Standards for Audit of Governmental Organizations, Programs,
Activities, and Functions (1981 revision) promulgated by the Comptroller
General of the United States. Accordingly, the examination included such tests
of the accounting records and such other auditing procedures as we considered
necessary in the circumstances.
SUMMARY OF FINDINGS
EPA waived the cost-sharing requirements for remedial planning activities to
be conducted under its cooperative agreements with IEPA. However, IEPA has
chosen to contribute ten percent of the costs of the approved remedial planning
activities. EPA has agreed to apply lEPA's allowable expenditures toward any
future state cost-sharing responsibilities for remedial actions.
In our opinion, subject to the resolution of the questioned and set-aside costs
summarized below and presented in Exhibits A-l and A-2 of the attached report
the accepted amounts fairly present the reasonable, allocable, and allowable
costs in accordance with the provisions of the cooperative agreement.
Claimed
Total
Federal Share
Amount Available
For Future Cost-
Sharing
Accepted
$218,756
$290.511
$263.180 $198.600
$ 27,331 $ 20,156 $ 102
Set-Aside
$70.731
$63,658
$ 7,073
In addition to lEPA's claimed costs, IEPA reported expenditures that were not
yet claimed on its Financial Status Reports, for the period April 29, 1983
through March 31, 1986.
Total
Federal Share
Amount Available
For Future Cost-
Sharing
Reported' Accepted Questioned Set-Aside
11.422.852 $913.393 $1.024 $508.435
$1.329.662 $862.581 $ 922 $466.159
$ 93,190 $50,812 $ 102 $ 42,276
This report questions claimed and reported Federal costs of $922 and $922,
respectively. The questioned costs represent equipment purchased by IEPA
that did not have prior approval.
-2-
-------
This report sets aside claimed and reported Federal costs of $63,658 and
$466,159, respectively. The set aside costs represent contract costs where
procurement procedures used by the IEPA did not provide assurance that the
best offerers were awarded contracts or that awarded contracts were fair and
reasonable. The procedures used in awarding 12 of the 13 contracts under the
cooperative agreements were not in compliance with all requirements of Federal
regulations contained in 40 CFR Part 33.
Audited costs are defined as the total project costs claimed by the state.
Questioned costs are costs claimed or incurred that we have concluded should
not be reimbursed by EPA or incurred as part of project eligible costs because
they are not allowable under the provisions of applicable laws, regulations,
policies, cost principles, or terms of the cooperative agreement or contract.
Set-aside costs are costs which cannot be accepted without additional informa-
tion or evaluations and approvals by responsible Agency program officials.
Recommendation
We recommend that Region 5:
1. Reduce the amount available to IEPA for future remedial actions by $922
for claimed costs and by $922 if reported costs are claimed.
2. Determine the allowability of the Federal share set aside of $63,658 in
claimed costs and $466,159 in reported costs if those costs are claimed.
3. Review and approve Federal procurement actions initiated by IEPA until
the IEPA procurement system is fully in compliance with 40 CFR Part 33.
4. Require the IEPA to submit a copy of its new Division of Land Pollution
Control procedures manual to ensure that the manual incorporates all
Federal requirements.
IEPA provided formal written comments on the draft report in a letter dated
March 19, 1987. In Its response, IEPA disagreed with the equipment costs
questioned because the items purchased, four filter stands, were essential for
remedial investigations. IEPA also disagreed with the set-aside amounts of
$63,658 and $466,159 for poor procurement practices because it claims in all
instances that IEPA procured professional services with adequate competition
and evaluation from the lowest qualified proposer.
To provide a balanced understanding of the issues, we have presented MDNR's
position and our comments at the appropriate sections in the report.
Additionally, a copy of the entire response has been previously provided.
ACTION REQUIRED
In accordance with EPA Order 2750, the action official is required to issue
recommendations in this report within 150 days of the audit report date. Where
the action official considers a position on the audit findings that differs
from our recommendations, we would appreciate the opportunity to discuss manage-
ment's position before the determination is issued to IEPA. A copy of the
-3-
-------
final determination should be provided to our office when issued. We have no
objection to the release of this report at your discretion. Should you have
any questions, please contact Kay Hudson.
Enclosures
Distribution:
Chief, Grants and Financial Management Branch (5)
(Responsible for distribution to auditee)
Director, Grants Administration Division (PM-216)
Chief, Superfund Accounting Branch,
Financial Management Division (PM-226)
Chief, State and Regional Coordination Branch,
Headquarters Hazardous Site Control Division (WH-548E)
Chief, Grants Policy and Procedures Branch,
Grants Administration Division (PM-216)
-------
r
1
m)
\ma
-------
0100
REPORT OF INTERIM AUDIT OF
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY'S
ADMINISTRATION OF ITS SUPERFUND COOPERATIVE
AGREEMENTS WITH EPA UNDER THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION,
AND LIABILITY ACT OF 1980
FOR THE PERIOD APRIL 28, 1983 THROUGH MARCH 31, 1986
HEADQUARTERS UBRART
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
ac.
-------
TABLE OF CONTENTS
SCOPE AND OBJECTIVES
SUMMARY OF FINDINGS
BACKGROUND
AUDITORS' REPORT ON COOPERATIVE AGREEMENTS
V-005781-01, V-005780-01, V-005782-01, V-005779-01,
V-005783-01 and V-005792-01 AWARDED TO THE ILLINOIS
ENVIRONMENTAL PROTECTION AGENCY
AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL
AND COMPLIANCE
FINDINGS AND RECOMMENDATIONS
1 - STATE'S SUPERFUND PROCUREMENT SYSTEM NEEDS
IMPROVEMENT
2 - CONTROLS OVER NONEXPENDABLE PERSONAL PROPERTY
NEED STRENGTHENING
3 - MINOR FINDINGS - CORRECTIVE ACTION REQUIRED
EXHIBIT A-l -
EXHIBIT A-2 -
EXHIBIT B-l -
COOPERATIVE AGREEMENTS AWARDED TO THE
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SUMMARY OF COSTS CLAIMED, ACCEPTED, QUEST-
IONED AND SET-ASIDE FOR THE PERIODS
INDICATED IN NOTE 1
COOPERATIVE AGREEMENTS AWARDED TO THE
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SUMMARY OF COSTS REPORTED, ACCEPTED,
QUESTIONED AND SET-ASIDE FOR THE PERIODS
INDICATED IN NOTE 1
BYRON SALVAGE YARD, ILLINOIS COOPERATIVE
AGREEMENT AWARDED TO THE ILLINOIS ENVIRON-
MENTAL PROTECTION AGENCY SCHEDULE OF COSTS
CLAIMED, ACCEPTED, QUESTIONED AND SET-ASIDE
FOR THE PERIODS INDICATED IN NOTE 1
Page
1
5
6
13
15
17
26
29
32
33
34
-------
TABLE OF CONTENTS (Continued)
EXHIBIT G-2 -
EXHIBIT H -
MULTI-SITE COOPERATIVE AGREEMENT AWARDED TO
THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SCHEDULE OF COSTS REPORTED, ACCEPTED AND
SET-ASIDE FOR THE PERIOD SEPTEMBER 29, 1984
THROUGH MARCH 31, 1986 44
SCHEDULE OF COMPLIANCE WITH FEDERAL PRO-
CUREMENT REGULATIONS BY COOPERATIVE
AGREEMENT AND CONTRACT FOR THE PERIOD
APRIL 28, 1983 THROUGH MARCH 31, 1986 45
APPENDIX I -
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
RESPONSE TO DRAFT AUDIT REPORT
46
-------
REPORT OF INTERIM AUDIT OF
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY'S
ADMINISTRATION OF ITS SUPERFUND COOPERATIVE
AGREEMENTS WITH EPA UNDER THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION,
AND LIABILITY ACT OF 1980
FOR THE PERIOD APRIL 28, 1983 THROUGH MARCH 31, 1986
SCOPE AND OBJECTIVES
We performed an interim audit of the Illinois Environmental
Protection Agency's (IEPA) administration of its cooperative
agreements with the United States Environmental Protection
Agency (EPA) under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980. The primary
objectives of our review were to:
1. Determine the adequacy, effectiveness, and reliability of
procurement/ accounting, and management controls exercised
by the State in administering its cooperative agreements
with EPA.
2. Ascertain the State's compliance with provisions of the
cooperative agreements and applicable EPA regulations and
instructions.
3. Ascertain the State's compliance with provisions of the
Letter of Credit.__- Treasury Financial Communications System
Recipients' Manual.
4. Determine the reasonableness, allocability, and allowabil-
ity of the costs claimed or reported under the cooperative
agreements with EPA.
Specifically, our audit covered the following cooperative
agreements: Byron Salvage Yard, Illinois; Cross Brothers; ACME
Solvent Reclaiming; A & F Materials, Greenup, Illinois; La
Salle Electrical Utilities; and Multi-site (Belvidere
Municipal Landfill, Peterson Sand & Gravel, Pagel's Pit,
Sheffield/U.S. Ecology, Wauconda Sand & Gravel, Waukegan/OMC,
Velsicol Chemical Corporation and Preliminary Assessments/Site
Inspections). The audit included an examination of costs
claimed or reported under the. referenced cooperative agreements
from inception through March 31, 1986.
Our audit was performed in accordance with generally accepted
auditing standards and the financial and compliance provisions
of the Standards for Audit of Governmental Organizations,
Programs, Activities, and Functions (1981 revision) promulgated
by the Comptroller General of the United States. Accordingly,
the examination included such tests of the accounting records
and such other auditing procedures as we considered necessary
in the circumstances.
-1-
-------
FINANCIAL RESULTS OF AUDIT (Continued)
AMOUNT
COOPERATIVE AGREEMENT CLAIMED ACCEPTED QUESTIONED SET-ASIDE
Byron Salvage Yard,
Illinois $159,512 $ 88,269 $ 512 $ 70,731
Cross Brothers 27,619 27,619
ACME Solvent Reclaiming -
A & F Materials,
Greenup, Illinois 86,184 85,672 512
La Salle Electrical
Utilities -
Multi-site (Belvidere
Municipal Landfill,
Peterson Sand & Gravel,
Pagel's Pit, Sheffield/
U.S. Ecology, Wauconda
Sand & Gravel, waukegan/
OMC, and Velsicol
Chemical Corporation) 17,196 17,196 - -
Totals $290,511 $218,756 $1,024 $70,731
Less:
Federal Share $263,180 $198,600 $ 922 $ 63,658
Amount Available For
Future State Cost-
Sharing Responsibili-
ties For Remedial
Actions $ 27,331 $ 20,156' $ 102 $ 7,073
Summarized below are the costs accepted, questioned and
set-aside for the amounts reported by IEPA on its monthly
expenditure worksheets that were not yet claimed on the
Financial Status Reports (SF-269) for the period from April 28,
1983 through March 31, 1986:
-------
SUMMARY OF FINDINGS
1. STATE'S SUPERFUND PROCUREMENT SYSTEM NEEDS IMPROVEMENT
The procedures used by the Illinois Environmental Protection
Agency (IEPA) in awarding twelve of the thirteen contracts
under the Superfund cooperative agreements were not in com-
pliance with all applicable requirements of the Federal reg-
ulations contained in 40 CFR Part 33. In addition, IEPA
maintained contract files that did not contain all the docu-
mentation required by 40 CFR 33.250. IEPA certified that
its procurement system was in compliance with 40 CFR Part
33, but State regulations cited in the certification did not
meet the intent of the applicable requirements of the
Federal regulations; and IEPA did not establish written pro-
cedures which would incorporate the requirements of 40 CFR
Part 33 into its procurement system. Thus, the procurement
procedures used by IEPA did not provide assurance to EPA
that the best offerors were awarded contracts or that con-
tracts awarded were fair and reasonable. We have, there-
fore, set-aside contractual costs claimed of $70,731 and
contractual costs reported of $508,435.
2. CONTROLS OVER NONEXPENDABLE PERSONAL PROPERTY NEED
STRENGTHENING
IEPA management did not enforce property control procedures
issued by the State's Central Management Services and by
lEPA's internal property management personnel. Federal reg-
ulation 40 CFR 30.531 requires recipients to maintain accur-
ate property records, which include the location, use and
condition of the property. The regulation also requires a
control system to be maintained to prevent loss, damage or
theft. Property records maintained by IEPA were not period-
ically updated to reflect transfers of property. The
records also did not give the specific location of the prop-
erty. Unused property was kept in a storeroom to which sev-
eral people had keys. Personnel did not always follow sign-
out procedures when withdrawing property from the storeroom
for use. Due to the weaknesses noted in the property con-
trol system, we were unable to locate $1,311 of Superfund
property. The total cost of property acquired under the
Superfund cooperative agreements was $61,985. Failure to
correct, these weaknesses exposes all property acquired to
the risk of loss, misuse or misappropriation.
IEPA'5 COMMENTS ON FINDINGS AND EVALUATION
An exit conference was held with IEPA officials on July 17, 1986
and with Region 5 officials on July 18, 1986. The purpose of
the exit conferences was to present our findings and recommen-
dations and to ensure a clear understanding of our report by
IEPA and Region 5 management. At the conferences and during the
course of the audit, IEPA and Region 5 officials discussed their
-5-
-------
BACKGROUND (Continued)
surance of payment of 10 or 50 percent of remedial costs. The
State must agree to a cost-share of 10 percent if the site was
privately owned. At publicly owned sites (one owned by the
State or a political subdivision thereof), the State is required
to pay 50 percent of all remedial action costs. Cooperative
agreements for remedial investigations/ feasibility studies, and
remedial designs can be funded up to 100 percent by EPA.
IEPA is the designated State Agency for identifying and ranking
sites which pose a risk to the public or the environment, and
performance of remedial investigation, design, and cleanup at
hazardous waste sites. During our audit, IEPA was actively in-
volved in six cooperative agreements with EPA.
Byron Salvage Yard, Illinois
•
The Byron Salvage Company hazardous waste site covers about 20
acres and is located four miles southwest of the Town of Byron
in Ogle County, Illinois. Pollution resulted from waste dis-
posal activities at the salvage yard. It was found that cyanide-
contaminated waste was sprayed on the salvage yard roads and
that waste materials were buried throughout the site. Because
of the threat to public water- supplies and the environment, EPA
awarded a cooperative agreement to complete a Remedial Investi-
gation and Feasibility Study (RI/FS) at the site. Cooperative
Agreement No, V005781-01 was awarded on April 28, 198r3 to the
Illinois Environmental Protection Agency under CERCLA providing
for 90 percent Federal and 10 percent State cost sharing for a
RI/FS with a maximum Federal share of $271,275. As of March 31,
1986, the project was approximately 79 percent complete.
CrossBrothers
The Cross Brothers hazardous waste site is located 10 miles
southeast of Kankakee County, Illinois. The 10 acre site was
used for an operation in which barrels and pails containing
residual paints, ink solvents and adhesives were collected from
the Chicago area and brought in for reclamation. The method of
operation was to invert the containers, allow them to drain,
pour waste solvents into and over them and then ignite them in
order to burn out any residues. Because there was a threat to
public water supplies developed from the nearby private wells
and the underlying aquifer, EPA awarded a cooperative agreement
for a RI/FS. Cooperative Agreement No. V005780-01 was awarded
on May 4, 1983 to the Illinois Environmental Protection Agency
under CERCLA providing for 90 percent Federal and 10 percent
State cost sharing for a RI/FS with a maximum Federal share of
$765,784. As of March 31, 1986, the project was approximately
22 percent complete.
-7-
-------
BACKGROUND (Continued)
Multi-site Cooperative Agreement
1- Belvidere Municipal Landfill
The Belvidere Municipal Landfill hazardous waste site is lo-
cated near Belvidere in Boone County, Illinois. Operation
began in 1939 and reportedly received only municipal waste
until 1965. After 1965, a variety of industrial wastes were
accepted for disposal until the site was closed in 1973.
Because of the threat of possible contamination to ground
water and a nearby river, EPA awarded a cooperative agree-
ment to perform a Ri/FS at the site. The Belvidere site is
part of Multi-site Cooperative Agreement No. V005792-01
awarded on September 29, 1984 to the Illinois Environmental
Protection Agency under CERCLA which provided for 100 per-
cent Federal participation for a Ri/FS with a maximum
Federal share of $630,889 at this site. As of March 31,
1986, the project was approximately 22 percent complete.
2. Peterson Sand & Gravel
The Peterson Sand & Gravel site is located near Liberty-
ville, Illinois in Lake County. The site is a former sand
and gravel pit that was used as a disposal area for refuse
and hazardous waste including paint, waste paint and sol-
vents. Several removals have occurred at the site. In
1977, 400 drums of hazardous waste were removed. A sub-
sequent removal in 1983 removed several hundred more drums
from the site. Because the possibility exists that more
drums and contaminated soil remain at the site, EPA awarded
a cooperative agreement to the Illinois Environmental
Protection Agency under CERCLA, to provide for remedial
investigation at this site. Peterson Sand & Gravel is part
of Multi-site Cooperative Agreement No.V005792-01.awarded on
September' 29, 1984 which provided for 100 percent Federal
participation for remedial investigation with a maximum
Federal share of $432,771 at this site. As of March 31,
1986, the project was approximately nine percent complete.
3. Pagel's Pit
The Pagel's Pit facility is located near Morristown in
winnebago County, Illinois approximately five miles south of
Rockford. The site is an operating disposal facility which
has had applicable permits issued for operation. Evaluation
of the ground water samples indicates contamination of the
aquifer. Because of the threat to public water supplies and
the environment, EPA awarded a cooperative agreement to the
Illinois Environmental Protection Agency under CERCLA, to
provide for remedial investigation at this site. Pagel's
Pit is part of Multi-site Cooperative Agreement No.
V005792-01 awarded on September 29, 1984 which provided for
100 percent Federal participation for remedial investigation
-------
.
BACKGROUND (Continued)
board Marine Corporation discharged a substantial amount of
PCB's into Waukegan Harbor and the north ditch of Lake
Michigan, EPA has taken the lead on this National Priority
List (NPL) site and had a RI/FS completed in the fall of
1983. EPA awarded a cooperative agreement to the Illinois
Environmental Protection Agency under CERCLA, to provide for
management assistance at this federal-lead site.
waukegan/OMC is part of Multi-site Cooperative Agreement No.
V005792-01 awarded on September 29, 1984 which provided for
100 percent Federal participation with a maximum Federal
share of $30,020 for management assistance at this federal-
lead site. As of March 31, 1986, the project was approxi-
mately 19 percent complete.
7. Velsicol Chemical Corporation
Velsicol Chemical Corporation has operated a plant at
Marshall, Illinois since 1983 that has manufactured agricul-
tural chemicals and resins. Chlordane is a major product at
this facility and currently is the only product. Over the
years/ organic wastes have been placed in various lagoons on
site. These lagoons have overflowed into a nearby stream
during periods of high rainfall. The largest lagoon (the
5/6 pond) has solidified. Areas of concern include ground-
water, soil, sediment, surface water, and air contamination.
Velsicol owns approximately 420 acres at this site with the
plant portion of this property occupying approximately 86
acres. Because of the threat to public water supplies and
the environment, EPA awarded a cooperative agreement to the
Illinois Environmental Protection Agency under CERCLA, to
provide for remedial investigation at this site. Velsicol
Chemical Corporation is part of the Multi-site Cooperative
Agreement No. V005792-01 awarded on September 29, 1984 which
provided' for 100 percent Federal participation for remedial
investigation with a maximum Federal share of $729,887 at
this site. As of March 31, 1986, the project was approxi-
mately 11 percent complete.
8. Preliminary Assessment/Site Inspection
An amendment to the Multi-site cooperative agreement was
awarded by EPA to the Illinois Environmental Protection
Agency under CERCLA to perform Preliminary Assessments and
Site Inspections on approximately 400 sites remaining on the
inventory of reported sites. The purpose of preliminary
assessments is to gather site information concerning the
nature and quantity of hazardous materials, determine the
possibility of exposure and determine the affected target
population and environment. Site inspections are performed
on all hazardous waste sites that are determined through
preliminary assessments to require an inspection. The site
inspection phase entails interviewing employees and owners;
-11-
-------
_t TICHENOR & EICHE
, CERTIFIED PUBLIC ACCOUNTANTS ~~~ —
J THE SUMMIT, SUITE 200
4350 BROWNSBORO ROAD
LOUISVILLE. KENTUCKY 40207
(502) 89J-0700
Mr. Kenneth D. Hockman
U.S. Environmental Protection Agency
Divisional Inspector General for Audit
Internal Audit Division
Office of the Inspector General
Washington, D.C.
AUDITORS' REPORT ON COOPERATIVE AGREEMENTS V005781-Q1.
V005780-01, VOOS782-01, V005779-01, V005783-01 AND
V005792-01 AWARDED TO THE ILLINOIS
ENVIRONMENTAL PROTECTION AGENCY
We have examined the expenditures claimed or reported by the
Illinois- Environmental Protection Agency (IEPA) related to the
Byron Salvage Yard, Cross Brothers, ACME Solvent Reclaiming, A
& P Materials, La Salle Electrical Utilities and Multi-site
cpoperative agreements for April 28, 1983 through March 31,
1986, as detailed in Exhibit A-l and Exhibit A-2. Our
examination was performed in accordance with generally accepted
auditing standards and the Standards for Audit of Governmental
Qrganizajbijging^ Programs, Activities and Functions' (1981
Revision).Accordingly, our examination included such tests of
the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
The Summaries of Costs Claimed/Reported (Exhibits A-l and A-2)
were prepared on the basis of regulations and criteria
established by the U.S. Environmental Protection Agency
relating to hazardous waste disposal cooperative agreement
projects pursuant to Public Law 96-510. Accordingly, Exhibits
A-l and A-2 are not intended to present financial position and
results of operations in conformity with generally accepted
accounting principles.
IEPA received provisional indirect cost rates from the EPA
Planning and Cost Advisory Branch, the cognizant agency, to be
applied to its EPA cooperative agreements. The provisional
rates, which were not audited by us, were established to allow
the obligation and payment of funds to IEPA until actual
indirect costs are determined and a final rate is negotiated.
As of the date of our audit, the EPA Planning and Cost Advisory
Branch had not approved the revised indirect cost rates
submitted by IEPA. IEPA used the revised indirect cost rates,
which were not audited by us, in reporting its indirect costs.
Total indirect costs claimed or reported by IEPA was $315,588.
-13-
-------
TICHENOR & EICHE
THE SUMMIT, SUITE 200
4350 BROWNSBORO ROAD
LOUISVILLE. KENTUCKY 40207
(502) 89J-0700
Mr. Kenneth D. Hockman
U.S. Environmental Protection Agency
Divisional Inspector General for Audit
Internal Audit Division
Office of the Inspector General
Washington/ D.C.
AUDITORS' REPORT ON INTERNAL ACCOUNTING CONTROL AND COMPLIANCE
We have examined the expenditures claimed or reported by
Illinois Environmental Protection Agency (IEPA), for pre-
remedial and remedial .work under the Byron Salvage Yard, Cross
Brothers, ACME Solvent Reclaiming, A & F Materials, La Salle
Electrical Utilities, and Multi-site cooperative agreements for
April 28, 1983 through March 31, 1986, as detailed in Exhibit
A-l and Exhibit A-2. Our examination was performed in
accordance with generally accepted auditing standards and the
financial and compliance provisions of the Standards for Audit
of Governmental Organizations, Programs, Activities, and
Functions (1981 revision). Solely to assist us in planning and
performing our examination, we made a study and evaluation of
the significant internal accounting controls of IEPA. For the
purpose of this report, we have classified the significant
internal accounting controls into the following categories:
o Disbursements
o Payroll
o Contractor procurement
o Contractor performance and billings
o Cash management (letter of credit system)
o Property and equipment
Our study included all of the control systems listed above.
That study and evaluation was limited to a preliminary review
of the system to obtain an understanding of the control envi-
ronment and the flow of transactions through the accounting
system. Because the audit could be performed more efficiently
through additional analysis and substantive audit tests, thus
placing very little reliance on the internal accounting control
system, our study and evaluation of the internal accounting
controls did not extend beyond this preliminary review phase.
Accordingly, we do not express an opinion .on the system of
internal accounting controls taken as a whole.
Also, our examination, made in accordance with the standards
mentioned above, would not necessarily disclose all material
-15-
-------
FINDINGS AND RECOMMENDATIONS
1. STATE'S SUPERFUND PROCUREMENT SYSTEM NEEDS IMPROVEMENT
The procedures used by the Illinois Environmental Protec-
tion Agency (IEPA) in awarding twelve of the thirteen con-
tracts under the Superfund cooperative agreements were not
in compliance with all applicable requirements of the Fed-
eral regulations contained in 40 CFR Part 33. In addition,
IEPA maintained contract files that did not contain all the
documentation required by 40 CFR 33.250. IEPA certified
that its procurement system was in compliance with 40 CFR
Part 33, but State regulations cited in the certification
did not meet the applicable requirements of the Federal
regulations; and IEPA did not establish written procedures
which would incorporate the requirements of 40 CFR Part 33
into its procurement system. Thus, the procurement proce-
dures used by IEPA did not provide assurance to EPA that
the best offerers were awarded contracts or that contracts
awarded were fair and reasonable. We have, therefore, set-
aside contractual costs claimed of $70,731 and contractual
costs reported of $508,435.
We reviewed all thirteen contracts procured under the
Superfund cooperative agreements. As of March 31, 1986,
contract obligations totaled $2,849,551 and payments made
on the contracts totaled $609,113. The deficiencies in the
procurement system are detailed below.
A. Cost Analysis
A cost analysis was required for eleven contracts repre-
senting obligations totaling $2,633,351. IEPA did not
perform a cost analysis for any of the eleven contracts
or for any negotiated change orders. Federal regulation
40 CFR 33.290 requires recipients to conduct a cost an-
alysis on all negotiated change orders and all negoti-
ated subagreements in excess of $10,000. Cost analysis
is defined in 40 CFR 33.005(b) as "the review and evalu-
ation of each element of subagreement cost to determine
reasonableness, allocability, and allowability". IEPA
management stated that it evaluated proposals on the
basis of technical criteria alone because so few firms
were willing to agree to the indemnity clause of its
contracts. However, the importance of a properly con-
ducted cost analysis is heightened, not diminished,
under the conditions of decreased competition resulting
from fewer interested contractors. Since a cost anal-
ysis was not performed on the contracts awarded, we were
unable to determine whether negotiated contract costs
were reasonable, allowable, or allocable.
-17-
-------
_
FINDINGS AND RECOMMENDATIONS (Continued)
ron Salvage and Western, Inc. for Belvidere) were
awarded based upon both technical and pricing criteria.
Proposals received were ranked based upon technical
evaluation scores. Then the total award proposed by the
offerers were compared. If two proposals received sim-
ilar technical scores and one proposal had a lower
price, the proposal with the lower price would be sel-
ected, even if the proposal had a lower technical
score. Meaningful negotiations were not held with the
best qualified offerers, best and final offers were not
obtained, and no further pricing negotiations were per-
formed. Additionally, the request for proposals did not
state that the award may be based on initial offers
alone, as required by 40 CFR 33.520 (a). Without mean-
ingful negotiation with the best qualified offerers or
performance of further pricing negotiations, IEPA cannot
assure EPA that the best offer or was awarded the con-
tracts.
C. Requests for Proposals
Requests for proposal documents did not contain all the
required information as specified in the Federal regula-
tions. We noted the following deficiencies in the docu-
ments:
1. None of the public notices of requests for proposals
stated how to obtain associated documents, including
a copy of 40 CFR 33.295, Subparts F and G and the
basis for subagreement award as required by 40 CFR
33.510{b).
2. None of the requests for proposals identified the
relative importance attached to each evaluation cri-
teria [40 CFR 33.510(c) ].
The State's procurement regulations detailed require-
ments for requests for bids. These requirements were:
an advertisement for bid must be published at least
three times in the official newspaper of the state, so-
licitation for bids must be in conformance with accepted
business practices and the method of that solicitation
must be set out in detail. No further requirements were
included for requests for proposals which met the intent
of the Federal regulations.
Without the required information detailed above, IEPA
cannot assure EPA that all offerers were fairly and uni-
formly evaluated with established criteria or assure
that the most qualified and best offerer was selected.
-19-
-------
FINDINGS AND RECOMMENDATIONS (Continued)
fair share of contracts were awarded to small, minority
and women's businesses. IEPA personnel stated that
requests for proposals were sent to the State's Office
of Minority Businesses, and provided us with copies of
letters to support their action on one procurement. No
documentation was provided for any other procurements.
E. Contract File Documentation
Contract files maintained by IEPA did not contain all
the documentation required by 40 CFR 33.250. In addi-
tion/ the files did not include documentation of the
contract procurement procedures. Due to the lack of
documentation, we are unable to determine whether the
contract procurement process was properly conducted or
.that contracts were awarded fairly.
Our review indicated that none of the contract files in-
cluded:
1. Written justification for the procurement method
used.
2. Written justification for the type of contract exe-
cuted.
3. Details of contract negotiations, including cost ne-
gotiations with architectural firms.
4. Basis for award cost or price.
Without the documentation listed above, IEPA cannot
assure EPA that the most effective procurement method
was used, that the type of contract executed was proper
in the circumstances, or that the contract awarded was
fair and reasonable.
We also determined that certain contract files did not
contain:
1. Evaluations of proposals r^^eived, which would in-
clude the evaluator's scc.e sheets. - (Donohue &
Associates for Byron Salvage and D'Appolonia for
both Byron Salvage and Cross Brothers.)
2. Copies of public notices for request for proposals
or request for statements of qualifications.
(D'Appolonia for Cross Brothers; and Black & Veatch
for La Salle Electric.)
These two items are not specified in 40 CFR 33.250 as
required documentation for contract files. Yet without
-21-
-------
FINDINGS AND RECOMMENDATIONS (Continued)
Superfund cooperative agreements. After the clause
was adapted, however, it was not equivalent to the
specified clause. The adapted clause limits the
right of access to financial records for change
orders or contract amendments in excess of $10,000,
instead of the right of access to financial records
for all change orders or contract amendments; and
4. All of the subcontracts executed by Superfund coop-
erative agreement contractors were lacking in one or
more of the required subagreement clauses required bv
40 CFR Part 33. *
Without the inclusion of all the required subagreement
clauses in both contracts and subcontracts, IEPA cannot
assure EPA that the best interests of the Government were
protected.
Since lEPA's contract procurement system did not meet all
the requirements of 40 CFR Part 33, and contract files did
not contain all the required documentation, we are unable to
determine whether contracts procured under Superfund co-
operative agreements were fair and reasonable, we have set-
aside $70,731 of contractual costs claimed and $508,435 of
contractual costs reported relating to the contracts which
were not procured in accordance with 40 CFR Part 33. (See
Exhibit H for a- summary of the contracts, deficiencies and
costs set-aside.)
IEPA'5 COMMENTS ON FINDINGS
We recommended in our draft report that the Regional Admini-
strator, Region 5:
1. Require that IEPA provide data demonstrating that the
costs set-aside were reasonable in relation to the
services rendered;
2. Require that all procurement actions initiated by
reviewed and approved by EPA officials until t
IEPA be
the IEPA
procurement system is fully in compliance with 40 CFR
Part 33; and
3. Direct IEPA to initiate improvements to its procurement
system to meet the requirements of 40 CFR Part 33. These
improvements should include, as a minimum, that IEPA:
-23-
-------
FINDINGS AND RECOMMENDATIONS (Continued)
All the Multi-Site Contracts have been amended
to include the model sub-agreement language or
equivalent language as required by 40 CPR 33.
DLPC is in the process of amending all other
federal contracts to include these clauses.
These remaining contracts will be completed by
April 1, 1987.
Since July 1986, the DLPC has performed cost
and/or price analyses on all cost proposals and
change orders of $10,000 or more. In addition,
the person who performs these cost and price
analyses attended a "Cost and Price Analysis"
course in Denver, Colorado taught by Management
Concepts, Incorporated. The IEPA has also
requested Region 5, USEPA to develop a cost and
price analysis course addressing hazardous
waste • site- contract pricing. USEPA has agreed
to sponsor such a course for all Region 5
States in the near future. Appropriate DLPC
personnel concerned with cost and price
analysis will attend the course once it is
offered.
In addition to the cost and price analysis, the
Agency has amended all its Multi-Site Contracts
to include clauses which require that
Multi-Site Contractors have their indirect
expense multiplier audited and verified
annually. These audits will be performed in
accordance with the Federal Acquisition
Regulations, Part 31, and will also ensure the
expenses are allowable and they are allocated
c6rrectly.
OUR EVALUATION OF IEPA COMMENTS
lEPA's response regarding the reasonableness of set-aside
costs and the review of IEPA procurement actions by EPA was
not adequate to resolve these issues and are further dis-
cussed under items 1. and 2. below:
1. IEPA stated in its response that IEPA will cooperate
with EPA, Region 5 to provide whatever additional
information is necessary to assure that the set-aside
contractual costs are allowed. However, we are not
aware of any data that has been provided by IEPA to EPA
to demonstrate that the costs set-aside were reasonable
in relation to the services rendered.
2. IEPA indicated in its response that EPA review of IEPA
procurement actions is not necessary because of the
-25-
-------
FINDINGS AND RECOMMENDATIONS (Continued)
regulation 40 CFR 30.531 requires recipients to maintain
accurate property records, which include the location, use
and condition of the property. The regulation also
requires a control system to be maintained to prevent loss,
damage or theft. Property records maintained by IEPA were
not periodically updated to reflect transfers of property.
The records also did not give the specific location of the
property. The total cost of property acquired under the
Superfund cooperative agreements was $61/985. Failure to
correct these weaknesses exposes all property acquired to
the risk of loss, misuse or misappropriation.
During our review of Superfund property,
items could not be located.
the following
Description
Air Mask
Air Cylinder
Air Cylinder
Total
IEPA Tag
Number
16848
16849
16850
Cooperative
Agreement
A & F Materials
'A & F Materials
A & F Materials
Cost
$ 725
293
293
$1,311
This was due to the following weaknesses noted in the sys-
tem:
1. IEPA personnel did not follow procedures which require
property transfers to be reported to property management
personnel at the time of transfer.
2. Several persons had access to the equipment storeroom
and did not always follow sign-out procedures when with-
drawing property from the storeroom for use.
3. Property listings did not give specific details as to
the location of property. The listings only indicated
the division to which the cost of the equipment was
charged.
Both the State of Illinois and IEPA developed written pro-
perty management procedures which detail controls to be im-
plemented by the Agency. IEPA management did not emphasize
the importance of these procedures to personnel nor did
they instruct new employees on the procedures. without
proper enforcement of property management controls, EPA
cannot be assured that Superfund property is adequately
safeguarded and is used for Superfund cooperative agreement
projects.
-27-
-------
FINDINGS AND RECOMMENDATIONS (Continued)
3. MINOR FINDINGS - CORRECTIVE ACTION REQUIRED
A- FINANCIAL STATUS REPORTS (SF-269'S) WERE NOT SUBMITTED
TIMELY
IEPA did not submit Financial Status Reports (SF-269's)
on an annual basis. Reports were only submitted at the
completion of a cooperative agreement activity. EPA
Comptroller Policy Announcement No. 85-5 requires
SF-269's to be submitted on an annual basis. However/
IEPA submitted "CERCLA Quarterly Reports" to Region 5
which detailed the progress of the Superfund cooperative
agreements. Information provided included expenditures
to date by site compared to budgeted amounts/ as well as
the percentage of work completed for each site and tech-
nical data. Region 5 project management personnel stat-
ed that these reports were more useful than the SF-269's
in monitoring cooperative agreement activity. However,
the SF-269's were certified, whereas the "CERCLA
Quarterly Reports" were not. Furthermore, the SF-269's
were intended for the financial/grants personnel of EPA/
Region 5, whereas the "CERCLA Quarterly Reports" were
intended for the program management personnel of EPA,
Region 5.
B. COSTS WERE MISCLASSIFIED AS CONTRACTUAL SERVICES
Costs charged to the object class "Contractual Services"
included costs normally charged to the "Travel/
Supplies, or Other Direct Costs" object class. The
cost? were classified as such because the chart of
accounts for the State's financial system included costs
such as: petty cash expenditures, equipment repairs and
maintenance/ equipment rentals, and printing costs as
part of the State's "Contractual Services" (Object 1200)
account group. When IEPA prepared cooperative agreement
budgets and Financial Status Reports/ the entire amount
charged to the "Contractual Services" account group was
included in the "Contractual Services" object class.
Region 5 project management personnel were unaware that
costs other than amounts paid to. contractors were
included in the "Contractual Services" object class. At
the exit conference held on July 17, 1986 at the offices
of IEPA, the EPA Project Officer and the IEPA Program
Development Manager/ Land reached an understanding as to
the type of costs that will be classified in each object
class for reporting purposes.
lEPA'S COMMENTS ON FINDINGS
We recommended in our draft audit report that the Regional
Administrator/ Region 5:
-29-
-------
FINDINGS AND RECOMMENDATIONS (Continued)
that EPA, Region 5 personnel are now aware of the costs
included by IEPA in the "Contractual Services" object
class. However, failure of EPA, Region 5 to ensure
consistent reporting of financial data by recipients of
federal funds will diminish the meaningfulness of the
financial data reported.
RECOMMENDATIONS
We recommend that the Regional Administrator, Region 5
require that IEPA exclude other direct costs from the
"Contractual Services" cost category when reporting to the
federal government. If this data cannot be segregated
through the use of appropriate sub-accounts in the IEPA
classification system, then proper workpaper support should
be maintained by IEPA for any account analyses or report
reclassifications required to ensure consistent and
accurate reporting for federal financial reports.
.
•31-
-------
EXHIBIT A-l
COOPERATIVE AGREEMENTS AWARDED TO THE
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SUMMARY OF COSTS CLAIMED, ACCEPTED, QUESTIONED AND SET-ASIDE
FOR THE PERIODS INDICATED IN NOTE 1
AMOUNT
COST CATEGORY CLAIMED ACCEPTED QUESTIONED SET-ASIDE NOTES
(NOTE 1)fNOTE 2)
Personnel $ 74,047 $ 74,047 $ - $ -
Fringe Benefits 12,337 12,337
Travel 7,046 7,046
Equipment 8,913 7,889 1,024
Materials And Supplies 2,813 2,813
Contractual Services 121,698 50,967 - 70,731
Other Direct Costs -
Indirect Costs 63,657 63,657 - -
Totals $290,511 $218,756 $1,024 $ 70,731
Less:
Federal Share $263,180 $198,600 $ 922 $ 63,658
Amount Available For
Future State Cost-
Sharing Responsibili-
ties For Remedial
Actions $ 27,331 $ 20,156 $ 102 $ 7,073
Note 1 - The amounts claimed represent expenditures reported on
the Financial Status Reports (SF-269) for the periods
indicated on Exhibits B-l, C-l,- E and G-l.
*
Note 2 - See Exhibits B-l, C-l, E and G-l for schedules of
costs claimed, accepted, questioned and set-aside by
cooperative agreement.
Note 3 - See Exhibits B-l and E for details of the $1,024
questioned costs.
Note 4 - See Exhibit B-l for details of the $70,731 set-aside
costs.
-32-
-------
EXHIBIT B-l
BYRON SALVAGE YARD, ILLINOIS COOPERATIVE AGREEMENT
AWARDED TO THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SCHEDULE OF COSTS CLAIMED, ACCEPTED, QUESTIONED AND SET-ASIDE
FOR THE PERIODS INDICATED IN NOTE 1
AMOUNT
COST CATEGORY
Personnel
Fringe Benefits
Travel
Equipment
Materials And
Supplies
Contractual Services
Other Direct Costs
Indirect Costs
Totals
Less:
Federal Share (90%
Of Accepted
Eligible Costs)
Amount Available For
Future State Cost-
Sharing Responsi-
bilities For
Remedial Actions
CLAIMED ACCEPTED QUESTIONED SET-ASIDE NOTES
(NOTE 1)
24,442 $24,442
4,089 4,089
3,249 3,249
5,013 4,501
512
677
100,511
677
29,780
70,731
21,531 21,531
$159,512 $88,269 $512 $70,731
$143,561 $79,442 $461
$63,658
$ 15,951 $ 8,827
$ 7,073
Note 1 - The amounts claimed represent expenditures reported on
the Financial Status Reports (SF-269) for Remedial
Investigation activities from May 1, 1983 through
October 31, 1984 and Feasibility Study activities from
May 1, 1983 through August 31, 1985.
Note 2 - Equipment purchased under ^Voucher No. FLC0225, dated
August 20, 1984, did not have prior EPA approval. The
total cost of the equipment was $2,048. We have
questioned $512 that was allocated to this cooperative
agreement. No finding or recommendation will be
written on lEPA's internal controls over equipment
since this was an isolated incident and lEPA's system
for obtaining EPA approval of equipment purchases was
not deficient.
-34-
-------
ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
NOTES TO EXHIBIT B-l (CONTINUED)
See Exhibit H, which details by contract the specific
regulations of 40 CFR Part 33 which were not
Also see Finding No. 1, state's
Procurement System Needs Improvement,
the Findings and Recommendations section
followed.
Super-fund
located in
for further development of this finding.
-36-
-------
EXHIBIT C-l
CROSS BROTHERS COOPERATIVE AGREEMENT AWARDED
TO THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SCHEDULE OF COSTS CLAIMED AND ACCEPTED
FOR THE PERIOD MAY 4, 1983 THROUGH JANUARY 31, 1986
AMOUNT
COST CATEGORY
Personnel
Fringe Benefits
Travel
Equipment
Materials And Supplies
Contractual Services
Other Direct Costs
Indirect Costs
Totals
CLAIMED
(NOTE 1)
$12,647
2,212
669
599
1,262
10,230
$27,619
ACCEPTED
$12,647
2,212
669
599
1,262
10,230
1.2.7,619
Less:
Federal Share (90% Of Accepted
Eligible Costs)
Amount Available For Future Cost-
Sharing Responsibilities For
Remedial Actions
$24,857
$24,857
$ 2,762
Note 1 - The amounts claimed represent expenditures reported
on the Financial Status Reports (SF-269) for Initial
.Remedial Measures through January 31, 1986.
-38-
-------
EXHIBIT D
ACME SOLVENT RECLAIMING COOPERATIVE AGREEMENT
AWARDED TO THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SCHEDULE OF COSTS REPORTED, ACCEPTED, QUESTIONED AND SET-ASIDE
FOR THE PERIOD JUNE 15, 1983 THROUGH MARCH 31, 1986
AMOUNT
COST CATEGORY
Personnel
Fringe Benefits
Travel
Equipment
Materials And Supplies
Contractual Services
Other Direct Costs
Indirect Costs
Totals
Less:
Federal Share (90%
Of Accepted Eligible
Costs)
Amount Available For
Future State Cost-
Sharing Responsibili-
ties For Remedial
Actions
REPORTED ACCEPTED QUESTIONED SET-ASIDE NOTES
(NOTE 1) (NOTE 2)
$ 38,211 $ 38,211
6,750
7,523
10,133
1,625
263,856
9,795
32,763
6,750
7,523
9,621
1,625
3,928
9,795
32,763
512 - 3
259,928 4
$370,656 $110,216
$333,590 $ 99,194
!512 $259,928
$233,935
$ 37,066
$ 25,993
Note 1 -
Note 2 -
Note 3 -
Note 4 -
The amounts shown represent itemized expenditures as
reported by IEPA on its monthly expenditure work-
sheets and not yet claimed on a Financial Status
Report (SF-269) through March 31, 1986.
The amounts accepted, questioned and set-aside repre-
sent our classification of the reported expenditures
should the items be claimed by the recipient on a
Financial Status Report (SF-269).
We have questioned $512 of equipment costs
reasons disclosed in Note 2 of Exhibit B-i.
for the
We have set-aside $259,928 of contractual service
costs for the reasons disclosed in Note 3 of Exhibit
B-l.
-40-
-------
EXHIBIT P
LA SALLE ELECTRICAL UTILITIES COOPERATIVE AGREEMENT
AWARDED TO THE ILLINOIS ENVIRONMENTAL PROTECTION ACENrv
SCHEDULE OF COSTS REPORTED, ACCEPTED AND SET-ASIDE
FOR THE__PERIOD JANUARY 13, 1984 THROUGH MARCH r^ 1 Qflfi
AMOUNT
COST CATEGORY
Personnel
Fringe Benefits
Travel
Equipment
Materials And Supplies
Contractual Services
Other Direct Costs
Indirect Costs
Totals
REPORTED ACCEPTED SET-ASIDE NOTE
(NOTE 1) {NOTE 2)
$ 82,985 $ 82,985 $
14,051
14,093
2,985
8,945
64,395
68,864
68,583
14,051
14,093
2,985
8,945
1,691
68,864
68,583
62,704
$324,901 $262,197 $ 62,704
Less:
Federal Share (90% of
Accepted Eligible Costs)
Amount Available For Future
state Cost-Sharing Respon-
sibilities For Remedial
Actions
$292,411 $235,977 $ 56,434
, 220= $ j/270
Note 1 - The amounts shown represent itemized expenditures as
reported by IEPA on its monthly expenditure worksheets
and not yet claimed on a Financial status Report
(SF-269) through March 31, 1986.
Note 2 - The amounts accepted and set-aside represent our
classification of the reported expenditures should the
items be claimed by the recipient on a Financial
Status Report (SF-269).
Note 3 - We have set-aside $62,704 of contractual service costs
for the reasons disclosed in Note 3 of Exhibit B-l.
-42-
-------
EXHIBIT G-2
MOLTI-SITE COOPERATIVE AGREEMENT AWARDED TO
THE ILLINOIS ENVIRONMENTAL PROTECTION AGENCY
SCHEDULE OF COSTS REPORTED, ACCEPTED AND SET-ASIDE
FOR THE__PgRIQp SEPTEMBER 29, 1984 THROUGH MARCH 31. 1986
AMOUNT
COST CATEGORY
Personnel
Fringe Benefits
Travel
Equipment
Materials And Supplies
Contractual Services
Other Direct Costs
Indirect Costs
Totals
REPORTED ACCEPTED SET-ASIDE NOTE
(NOTE 1) (NOTE 2)
$144,753 $144,753 $
25,752 25,752
14,897 14,897
34,778 34,778
41,015 41,015
107,777 22,114 85,663 3
4,582 4,582
117,391 117,391 -
$490,945 $405,282 $ 85,663
Less:
Federal Share (100% of
Accepted Eligible Costs)
Amount Available For Future
State Cost-Sharing Respon-
sibilities For Remedial
Actions
$490,945 $405,282 $ 85,663
Note 1 -
Note 2 -
The amounts shown represent itemized expenditures as
reported by IEPA on its monthly expenditure
.worksheets and not yet claimed on a Financial Status
Report (SF-269) through March 31, 1986.
The amounts accepted and set-aside represent our
classification of the reported expenditures should
the items be claimed by the recipient on a Financial
Status Report (SF-269).
Note 3 -
We have
costs for
B-l.
set^aside $85,663 of contractual service
the reasons disclosed in Note 3 of Exhibit
-44-
-------
APPENDIX
-------
Page -2-
March 19, 1987 (COOTIHUCD)-
The establishment of new property control procedures that will
assure compliance with 40 CFR 30.
The filing of Financial Status Reoorts (SF-269) on an annual basis.
A complete description of these and other actions which have been taken
is found in Attachment A: "lEPA's Response to Auditor's Recommendations.11
Costs totalling $579,166.00 were "set-aside" because the Auditors could
not reasonably assure themselves that the lowest possible, best and
final offer(s) had been negotiated with the successful contractor(s).
The IEPA strongly believes the "set-aside" costs should be allowed by
USEPA because the contracts were awarded in an open and competitive
manner to the lowest responsible, responsive bidder in every case.
Although a few provisions of 40 CFR 33 were not expressly followed,
the intent of these regulations was certainly met. This point is further
discussed in Attachment A.
We believe that the information which we have provided demonstrates
the lEPA's committment to pursue federally funded procurement pursuant
to 40 CFR Part 33, and we hope that this information will also help
to resolve any outstanding audit issues. If you have any questions,
or need further information, please contact Bill Radlinski of the Division
of Land Pollution Control at 217/782-6760.
Sincerely,
^"~"") ''' . .•'" ;
<*f J / S-
Richard J. Carlson
Di rector
RJC:JAS:mg/02
Enclosure
cc: Tichenor, Resler and Eiche"
Anthony C. Carrollo, Div. Inspector General
for Audit, Northern Division
Ivars P. Antens, Reg. V. Chief, Financial Mgt. Branch
Tom Mateer, Reg. V. Chief, State Programs and
Information Unit
-47-
-------
-2-
APPENDIX 1
(CONTINUED)
Bills for services performed are closely reviewed to ensure that
the correct work was performed in the prescribed manner.
Billings are closely monitored and audited to ensure that prices
charged do not exceed those listed on the awarded price schedules.
Given all the above, we believe that USEPA should approve the $579,166.00
"set-aside" by the Auditors.
2. It is not clear whether this recommendation is intended for all
IEPA procurement practices regarding federal funds or for only those
associated with the CERCLA program. We are assuming the latter. However,
we do not believe that even the review of the Division of Land's CERCLA
procurement actions is necessary, because positive measures have been
taken to bring its procurement system fully into line with 40 CFR 33.
These steps are described in detail in lEPA's responses to recommendation
3 (see below).
3.A. A new Division of Land Pollution Control (DLPC) procedures manual,
complete with checklists, has been written which addresses all procurement
requirements of 40 CFR 33. This manual has been reviewed and commented
on by both staff of IEPA (Divisions of Land Pollution and Administration)
and Region V, USEPA program personnel. Responses to the comments have
been incorporated into the manual. These procedures are now ready to
be implemented at the next federal procurement.
In addition, the DLPC has formed a committee which will expand this
basic manual to include in-depth procedures for all phases of work performed
by the DLPC and to develop standarized language for such documents as
public notices and requests-for-proposals. The committee will also
develop standardized forms and letters to be used in the procurement
process. This expanded procurement manual and associated documents
will be completed by June 30, 1987.
Since July 1986, the DLPC has performed cost and/or price analyses on
all cost proposals and change orders of $10,000.00 or more. In addition,
the person who performs these cost and price analyses attended a "Cost
and Price Analysis" course in Denver, Colorado taught by Management
Concepts, Incorporated. The IEPA has also requested Region V, USEPA
to develop a cost and price analysis course addressing hazardous waste
site contract pricing. USEPA has agreed to sponsor such a course for
all Region V States in the near future. Appropriate DLPC personnel
concerned with cost and price analysis will attend the course once it
is offered.
In addition to the cost and price analysis, the Agency has amended all
its Multi-Site Contracts to include clauses which require that Multi-Site
Contractors have their indirect expense multiplier audited and verified
annually. These audits will be performed in accordance with the Federal
Acquisition Regulations, Part 31, and will also ensure the expenses
are allowable and they are allocated correctly.
-49-
-------
-4-
~ ' APPENDIX 1
(CONTINUED)
AUDIT PROPERTY CONTROL RECOMMENDATIONS (Page 25)
We recommend that Regional Administrator, Region V:
1. Direct IEPA management to emphasize the importance of property control
procedures; and
2, Instruct IEPA employees in the procedural improvements required
in the property management system. The improvements should include:
A. Updating property records on a timely basis;
B. Limiting access to the equipment storeroom; and
C. Amending property records to indicate the specific location
of property.
lEPA's RESPONSES
1. lEPA's management does recognize the importance of property management,
and has taken appropriate action to Improve its property control measures.
On September 16, 1986 a person was hired to be solely responsible for
property control. This person is responsible for inventorying all equipment,
safeguarding all equipment in the storeroom, and for maintaining property
records. A re-inventory of all equipment and a new Divisional equipment
inventory system has been developed and implemented by this person.
2. As mentioned above, a new inventory system has been implemented
within the DLPC. Property control records have been amended to indicate
the piece of equipment, the serial number, IEPA tag number, manufacturer,
and the specific location of the property. The DLPC has also revamped
its warehouse storage area, at considerable expense, to provide for
better security and more space. There are now only two keys to this
storage area.
In addition,' the two air cylinders which could not be located during
the audit, have been found.
-51-
-------
-6-
APPENDIX 1
(CONTINUED)
AUDIT UNAPPROVEO EQUIPMENT PURCHASE RECOMMENDATION (Page 30)
We recommend that the Regional Administrator, Region V disallow the
equipment purchase that did not have USEPA's prior approval.
lEPA's RESPONSE
The IEPA believes that the "questioned" $2,048.00 in equipment costs
should be allowed by Region V. The items in question are four filter
stands. One filter stand was used at each of the four sites noted in
the Audit Report. We do not contest that USEPA's permission was not
obtained before the filter stands were purchased. However, these pieces
of equipment are essential in the collection of groundwater samples,
and therefore, remedial investigations at these sites could not have
been performed without the filter stands.
We are unable to determine why USEPA's permission was not obtained prior
to the purchase. We can only assume that the equipment was purchased
in haste and getting USEPA's permission was inadvertently overlooked.
However, since this was a purchase of essential and necessary equipment
at these sites, we believe the costs should be allowed.
JAS:mg/003
-53-
------- |