Environment!! ProtKtxm
Agency
tnipecror General
40? M Street. SW
Washington. OC 20460
Report of Audit
REPORT ON AUDIT OF REGION HI'S
PROCEDURES FOR MONITORING
COOPERATIVE AGREEMENTS AWARDED
TO THE STATE OF MARYLAND
FISCAL YEARS 1983 THROUGH 1986
AUDIT REPORT NUMBER E5eH6-03-0219-70947
i
MARCH 25, 1987
U S Environmental Protection Ag»»I
Library. Room 2404 PM-2U-1
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TABLE OF CONTENTS
Page
SCOPE AND OBJECTIVES 1
SUMMARY OF FINDINGS 2
ACTION REQUIRED 4
BACKGROUND 4
FINDINGS AND RECOMMENDATIONS
I
1 - FINANCIAL MANAGEMENT AND REPORTING INADEQUACIES 6
2 - GRANT OBJECTIVES WERE NOT ACCOMPLISHED, 15
3 - ENFORCEMENT OF THE HAZARDOUS WASTE MANAGEMENT PROGRAM NEEDS
STRENGTHENING 23
4 - LACK OF COMPLIANCE WITH SPECIAL CONDITIONS 27
EXHIBIT I - ERRONEOUS SALARY ALLOCATIONS TO EPA GRANTS 31
EXHIBIT II - EMPLOYEE'S QUARTERLY SALARY VERSUS QUARTERLY SALARY
ALLOCATED TO EPA GRANTS 32
i
APPENDIX A - REGION III RESPONSE TO DRAFT AUDIT REPORT 33
i
APPENDIX B - DISTRIBUTION i 37
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE INSPECTOR GENERAL
MID-ATLANTIC DIVISION
841 CHESTNUT BUILDING
PHILADELPHIA, PENNSYLVANIA 19107
March 25, 1987
MEMORANDUM
SUBJECT:
FROM:
TO:
Audit Report Number E5eh6-03-0219-70947
Report of Audit on Region Ill's;
Procedures for Monitoring Cooperative
Sreements Awarded/to the State) of Maryland
for Audit
P. Ronald Gandolfo
Divisional Inspector Genei
James M. Seif
Regional Administrator
SCOPE AND OBJECTIVES
We have performed an audit of Region Ill's procedures for monitoring
cooperative agreements awarded to the Maryland Department of Health and
Mental Hygiene (Maryland). The primary objectives of our audit were to
determine whether Region III had controls and procedures in effect to assure
that:
1. Costs claimed by Maryland under cooperative agreements
were reasonable, allocable and allowable.
2. Mary ,;i was in compliance with cooperative agreements
and applicable EPA regulations and instructions.
i
3. The required tasks and work products were being completed
in accordance with delivery schedules established in the
cooperative agreements. j
Our-tjiudit was performed in accordance with the Standards for Audit of
GovernmeatlOrganizations, Programs, Activities, and Functions issued by the
Comptroller'General of the United States,1 and included tests of the accounting
records and other auditing procedures as were considered necessary at Region
III and the State of Maryland.
On May 29, 1986, Region Ill's Hazardous Waste Management Division re-
quested that the Office of the Inspector General conduct a limited scope
financial audit of selected cooperative agreements covering the period
October 1, 1983 to June 30, 1985. Because of deficiencies noted during the
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early stages of the engagement, we expanded our audit to other cooperative
agreements and extended our scope to address compliance and program results.
Our review disclosed deficiencies in the Region's monitoring of cooperative
agreements in the financial, compliance and program results areas which are
discussed id this report. Because of the limited financial scope of the
audit which only addressed the alienability of costs claimed, we did not
perform a detailed study of internal accounting controls to enable us to
issue a report thereon. Our review encompassed cooperative agreement numbers
3283, 3339 and 3139 covering the period ; October 1, 1983 to December 31,
1986. Our fieldwork began on May 29, 1986 and was completed on December
8, 1986.
SUMMARY OF FINDINGS
Our review disclosed that because of inadequate internal controls,
Maryland improperly charged costs to EPA| programs and did not adhere to
financial reporting requirements. In addition, Region III did not ensure
grantee compliance with EPA regulations in the reporting and claiming of
costs. Specifically, we found that:
o Over 1002 of certain employees' salaries were charged to
EPA grants, and hours charged to cooperative agreements
differed from the hours shown on employee timesheets.
o Predetermined percentages lacking support were used in
charging administrative salaries to EPA programs.
o Financial Status Reports prepared by Maryland and
accepted by EPA were incomplete.
o Costs incurred and reported did not bear any relationship
to the approved budget categories.
o Costs were claimed which were not supported by adequate
documentation.
o A grant amendment was not executed timely.
o Equipment purchases were not recorded in the property
management system.
We also found that the performance goals and objectives of the coopera-
tive agreements with Maryland were not met as required. We found that (1)
none of the 12 Site Investigations (Sis) under Grant No. 3339 could be
completed because the required Quality Assurance Project Plan (QAPP) was
not prepared by Maryland and approved by
EPA; (2) Region III allowed two
Site Investigations (Sis) to be completed under Grant No. 3283 in violation
of EPA regulations because sample collection and analysis were performed by
Maryland without an approved QAPP; and (3) required Preliminary Assessments
(PAs) under Grant No. 3283 were not accomplished within the original grant
period because Region III held draft reports submitted by Maryland for
periods ranging up to 11 months. A factor contributing to the above situation
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was that Region III did not adequately monitor Maryland's performance and
progress toward completing the work products under the agreements. Therefore,
the overall goal of having the states perform PAs and Sis under cooperative
agreements"1 was not attained. Also, if the required Sis had been completed,
additional hazardous sites would have been considered for a Hazardous Ranking
Score (HRS) and possible inclusion on the National Priorities List (NPL) so
that clean up action could be initiated.
In addition, Region III needs to ensure that Maryland effectively admin-
isters the enforcement aspects of its Hazardous Waste Management Program in
accordance with the conditions of the cooperative agreement and EPA regula-
tions. We found that Maryland submitted its Compliance/Enforcement Strategy
late and EPA and Maryland still have not 'agreed upon an acceptable enforce-
ment strategy. Since this strategy has not yet been approved, EPA and
Maryland have no uniform criteria for administering the Hazardous Waste
Enforcement Program. As stated in EPA's FY 85 year end evaluation, lack of
a written enforcement program makes tracking and evaluating the State's
enforcement program extremely difficult. Region III needs to immediately
approve this strategy after assuring that it is in compliance with EPA
regulations. Sanctions against Maryland should be applied in cases of
noncompliance with grant conditions and EPA regulations.
Finally, we noted that Maryland did j not comply with several important
special conditions required by the cooperative agreements, and EPA did not
assure such compliance. Because of this (1) the health and safety of the
public and personnel involved with the onfsite collection of samples may not
be adequately safeguarded; (2) documentation did not exist in the form of a
public involvement plan to assure that the public had the opportunity to
understand proposed actions and had input in the decision making process
involving controversial facilities; and (3) various reporting requirements,
including submittal of progress reports, were not satisfied. This situation
could have been alleviated had EPA properly monitored and enforced the
requirements of the agreements, including imposing appropriate sanctions
for noncompliance.
We provided preliminary copies of our findings to Region III officials
on December 19, 1986 who in turn transmitted the preliminary findings to
the State of Maryland. We received responses to our preliminary findings
from Region III and Maryland on February 4 and January 15, 1987 respectively.
Their responses have been incorporated into the body of the findings, where
applicable.
On February 6, 1987. a draft report was transmitted to the Regional
Administrator for comment. He provided written comments to our draft report
on March 25, 1987. The response, included as Appendix A, indicates concurr-
ence with all thirteen recommendations included in the draft report, except
for Recommendation Number 3 under the finding Financial Management and
Reporting Inadequacies. The Region did
not concur with the recommendation
to require the grantee to submit documentation to substantiate costs reported
on Financial Status Reports.
Subsequently an exit conference was; held with Region III on March 18,
1987. At this conference, we discussed the Region's comments to our findings
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and recommendations. We concurred with Region Ill's position regarding
Recommendation Number 3 and have accordingly amended the recommendation.
Although .submission of documentation is not required, the grantee must main-
tain this"documentation which is subject to review by EPA.
ACTION REQUIRED
In accordance with EPA Directive 2750, the Region III Administrator is
required to provide this office with a written response to the audit report
within 90 days of the audit report. If you have any questions, please contact
me or Martin Pinto at 597-0497.
The courtesies and cooperation extended by your staff during this audit
are appreciated.
BACKGROUND
On December 11, 1980, Public Law 96-510, the Comprehensive Environmental
Response, Compensation, and Liability Actj (CERCLA) was enacted by Congress.
CERCLA, commonly known as the "Superfund" law, was passed to provide the
needed general authority and to establish a Trust Fund for Federal and state
governments to respond directly to any problems at uncontrolled hazardous
waste disposal sites, not only in emergency situations, but also at sites
where longer term permanent remedies arej required. CSRCLA was established
to fill the gap in the nation's system' to protect public health and the
environment from hazardous substances by authorizing Federal action to
respond to the release, or threatened release, from any source, including
abandoned hazardous waste sites, into any part of the environment.
The blueprint for the superfund program under CERCLA is the National
Contingency Plan (NCP), first published in 1968 as part of the Federal Water
Pollution Control Plan. The NCP lays out three types of responses for inci-
dents involving hazardous wastes. Theae are immediate removal, planned
removal, and remedial response. The first two types of responses were
modifications of the earlier program under the Clean Water Act. However,
remedial response is intended to deal with the longer term problems . of
abandoned or uncontrolled sites.
In October 1982, Congress appropriated $10 million dollars from the
Trust FundVeatablished under CERCLA to implement Section 3012 of the Resource
Conservation and Recovery Act (RCRA). this provides for state programs to
develop inventories of hazardous waste storage and disposal sites. This $10
million was a one-time, nonrecurring appropriation to assist states in comple-
ting the site survey and inspection portion of the remedial response program.
EPA decided to continue the Preliminary Assessment/Site Investigation program
and has now set aside additional funds under Section 104(b) and (d) of CERCLA
for the pre-remedial program. Section 3011 of RCRA was established to
develop and implement a state hazardous waste program. This program will
determine the extent to which hazardous waste is generated, transported,
treated, stored and disposed of, along with the extent of exposure to human
beings and the environment. The Federal funding and performance periods of
the cooperative agreements reviewed are summarized below, with a discussion
of each agreement included in the subparagraphs which follow.
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Cooperative
Agreement Mo.
3283
3339
3139
I
Federal Funding1
$ 192,000 ;
345,200 I
808,650
$1,345,850
Project Period
10/01/83 - 06/30/85
07/01/85 - 12/31/86
10/01/84 - 09/30/85
ROSA Section 3012Cooperative Agreements
Cooperative agreement No. 3283 which was awarded on October 31, 1983
for $93,000 requires Maryland to complete 32 preliminary assessments (PAs)
of hazardous waste sites. The purpose of a PA is to examine the potential
hazardous waste sites contained in the inventory to determine if a site
merits further action. A PA should characterize in a preliminary fashion
the hazardous substance present, potential pollutant dispersal pathways, the
population and resources which might be affected, facility management prac-
tices, and the potential responsible parties. The grant was amended on
November 14, 1984 increasing the Federal award by $99,000. The amendment
provided for 16 additional PAs and two site investigations (Sis). Grant No.
3339 which was awarded on August 9, 1985 for $345,200 is a continuation of
Grant No. 3283 and requires 45 PAs and i2 Sis. The purpose of a SI is to
better define the extent of the problem; at a site and provide a data base
sufficient to determine the next action (i.e., additional investigation,
emergency response, enforcement, and/or remedial response). The results of a
SI are presented in a report which is used to initiate the Hazardous Ranking
Score (HRS) process. Based on the HRSj the site may be included on the
National Priorities List (NPL).
RCRA Section 3011 Cooperative Agreement
Cooperative Agreement No. 3139 which was awarded on December 17, 1984
for $717,450 provides for the implementation, administration and enforcement
of Maryland's Hazardous Waste Program. The grant was amended on July 18,
1985 increasing Federal participation by $91,200. The program, when fully
implemented, will do the following:
o Communicate program progress effectively to the public,
and take steps to ensure that all hazardous waste
handlers covered by the regulations are identified and
brought into the RCRA system;
o laitue or deny permits, and approve closures for all
existing treatment, storage, and 'disposal facilities
and'have procedures to promptly address new facilities
and permit revisions; and
o Demonstrate improving compliance rates for all handlers,
with all violators returned to compliance as quickly and
effectively as possible through a vigorous enforcement
program.
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FINDINGS AND RECOMMENDATIONS
1. FINANCIAL MANAGEMENT AND REPORTING INADEQUACIES
Because of inadequate internal controls, Maryland improperly charged
costs to EPA programs and did not adhere, to financial reporting require-
ments. Region III also did not ensure grantee compliance with EPA regula-
regulations in the reporting and claiming of costs. Specifically, we found
that: '
o Over 100% of certain employees' salaries were charged to
EPA grants, and hours charged to cooperative agreements
differed from the hours shown on employee timesheets.
o Predetermined percentages lacking support were used in
charging administrative salaries to EPA programs.
o Financial Status Reports prepared by Maryland and
accepted by EPA were incomplete.
o Costs incurred and reported did not bear any relation-
ship to the approved budget categories.
o Costs were claimed which were not supported by adequate
documentation.
o A grant amendment was not executed timely.
o Equipment purchases were not recorded in the property
management system. I
Our review disclosed that Maryland [has overcharged EPA by $18,664
under its cooperative agreements. Also, improper reporting of costs and lack
of adherence t t -2 approved budget inhibit EPA's monitoring of the program
and could nega. ily impact upon EPA's planning process for future awards
and funding levels. i
It is essential for control purposes that Region III monitor cooperative
agreements to assure compliance with EPA regulations and grant conditions.
Special conditions and requirements should be incorporated in cooperative
agreements, ^facilitating the Region's monitoring efforts. The following
paragraphsjdiacuss the deficiencies noted in the financial management area.
ir
Over 100% of Employees' Salaries Charged to EPA Grants
i
We found that Maryland charged more than 100% of certain employees'
salaries to EPA grants. Exhibit I illustrates six employees whose quarterly
salaries were allocated to various EPA grants in excess of 100%. The monetary
effect of these overcharges is illustrated in Exhibit II. These six employees
were paid $35,180 in quarterly salaries, of which Maryland allocated $53,844
to EPA programs resulting in an $18,664 overcharge.
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Our review encompassed the period October I, 1984 to June 30, 1985 and
in our opinion represents all instances where more than 100% of an employee's
salary was charged to EPA programs during this period.
This overcharge occurred because of a procedural weakness in Maryland's
method of accumulating employee hours and allocating payroll costs to EPA
programs. Specifically, on a bi-weekly basis a technical field employee
verbally obtained the hours chargeable to Grant No. 3283 from the respective
employees. These hours were the basis for the billing to EPA. Timesheets
were later prepared by the employees. However, the hours recorded on the
timesheets were never reconciled to the hours obtained verbally and used as
the basis for billing EPA.
Internal correspondence between Maryland financial personnel discussed
possible overcharges to EPA grants. One particular memorandum dated April
15, 1985 states "the most important problems are the identification of
costs and potential duplications. Costs may have been duplicated not only
within this grant but also to other grants." Despite knowledge of possible
grant overcharges in early 1985, no action was taken by Maryland officials
to review and correct the situation.
OMB Circular A-87 B.lOb requires that "Salaries and wages of employees
chargeable to more than one grant program or other cost objective will be
supported by appropriate time distribution records."
In addition to the $18,664 in overcharges previously discussed and
reflected in Exhibit II, we reviewed employee timesheets for the purpose
of comparing these hours to those hours charged to EPA programs. We found
that the hours reported on some employee timesheets differed from the
hours charged to EPA programs. Examples are as follows:
Hours
Employee Quarter Ending Grant Number[
7 9/30/85 3139
8
3/31/85
3283
Charged
to EPA
238
95
Per Employee
Timesheets
93
28
It should be noted that the differences resulted in both over-
charges and undercharges and that there was no established pattern so as
to overcharge EPA. In addition, for pctober 1984, Maryland officials
could not locate timesheets for Grant No. 3283.
Finally, for payroll charged to the SI "Relay Mud Slide" under Grant
No. 3283, we were unable to reconcile hours reported on employee timesheets
to hours billed to EPA. Detailed documentation showing employee, hours
worked, time period etc. were not available for our review as required by 40
CFR 30.500(5) which states that "time records and other supporting documenta-
tion must be maintained."
Again, Maryland officials were made aware of duplicate and undocumented
costs in the following memorandums between financial personnel.
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February 14, 1985 - "I still do not j know where Che $86,109 of "Relay
Mud Slide" direct costs are recorded. Because I do not have sufficient
detail on Jthe Relay Hud Slide costs." i
April 12, 1985 - "It must be verified that (employee name deleted) did
not duplicate any salaries or other costsj i.e. if these costs were recorded
in 607 or 617, I may have reported them also. (Name deleted) took my figures
and added them to his - but he may have been wrong."
Maryland officials now concur that payroll charged to EPA programs should
not exceed 100% of an employees' salary and that hours charged should readily
agree and be reconcilable to employee timesheets. In this regard, they
indicated that corrective actions have been implemented which will assure
that the situations do not occur in the future.
Maryland, in its response to the preliminary findings, stated that it
consistently reported expenditures which substantially exceeded the financial
obligations included in several EPA grant ,assistance awards. State expendi-
tures have exceeded the required level of effort. The overreporting of hours
to State employees who were not
program grants,
Fiscal controls
was because the CERCLA program was new
familiar with the various EFA assistance
were established to correct the problem b'efore the audit by the Inspector
General. '
We agree that Maryland reported expenditures higher than the required
level of effort but this does not justify ch'arging more than 1002 of employee's
salaries to EPA programs. EPA, in its response to the preliminary findings,
concurs that the correction of those procedural weaknesses in Maryland's
method of accumulating employee hours and allocating payroll costs will
preclude possible duplication of payroll charges on EPA grant programs.
Administrative Salaries were Predesignated and Charged Directly to Various
SPA Programs '
We found that Maryland predesignated several employees to various pro-
grams and claimed their labor, fringe and associated administrative indirect
costs on the basis of this predesignated determination. We reviewed quarterly
memorandums from the Chief Administrator of the Enforcement Program to the
Fiscal Administrator which showed that [several employees' predesignated
percentages were charged to these cooperative agreements. In addition,
employees'^timesheets did not reconcile to the quarterly percentages that
were used .When charging EPA programs. Th'is practice does not provide for
an accurat^accounting and reporting of labor costs as specified in 40 CFR
30.510(a) irtfich provides that recipients of EPA funds are to maintain a
.financial management system that includes an accurate, current, and complete
accounting of ail financial transactions for the project.
Maryland's Chief Administrator of the Enforcement Program, who is shown
as Employee 6 in Exhibit I, is a case in point. His time was predesignated
to various EPA programs (99Z to Grant No. 3139, etc.) resulting in 113%
of his 3rd quarter salary being charged to EPA programs. We found that he
was also responsible for the State Superfund and Municipal Waste Enforcement
Programs and were informed that approximately 651 of the funds under his
jurisdiction are State monies.
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Obviously, we question how 1132 of the Chief Administrator's salary can
be allocated to EPA programs with no allocation being made to State funded
programs for which he is responsible. In addition, several other section
chiefs and secretaries were charged directly to EPA programs based on a
predetermined quarterly percentage.
Maryland, in its response to the preliminary findings, again stated
that it incurred and reported expenditures which significantly exceeded its
State matching requirements. We again feel this does not justify its prac-
tices as discussed in this finding. EPA officials concur that the practice
of predesignated time charging does not result in the accurate reporting of
labor costs to specific EPA grant programs.
Financial Status Reports Are Incomplete
The Financial Status Reports (FSRs) submitted by Maryland do not show
costs by program elements. The instructions for completing OMB Form 269,
"Financial Status Reports" state that "The purpose of vertical columns (a)
through (f) is to provide financial data! for each program, function, and
activity in the budget as approved by the Federal sponsoring agency...".
Maryland listed only total Federal and State outlays for each cooperative
agreement instead of the required cost Breakdown for each activity. For
example, the FSR for Grant No. 3139 which is a RCRA program, should show
costs by the following program elements: (1) Program Development; (2)
Permitting; (3) Enforcement; and (4) Program Administration.
The instructions further indicate that the grantor agency has flexibility
on how recipients should report costs. By accepting the reporting of costs
on a total basis, management is denying itself a valuable tool for examining
how costs are actually expended in comparison with the approved budget.
EPA has continually accepted Maryland's FSRs as submitted. Preparation
and acceptance of incomplete FSRs inhibit the State's and Region's ability
to monitor grant expenditures.
Maryland, in its response to the preliminary findings, stated that it
never has been an accepted practice to submit FSRs to EPA by program element.
We disagree with Maryland baaed on the FSR instructions as previously dis-
cussed. EPA, in its response to the preliminary findings, concurs that FSRs
submitted by Maryland should properly identify costs by individual program
element.
Costs Incurred and Reported Bear No Relationship to the Approved Budget
i
Costar,incurred and reported to EPA by Maryland on its FSR and attachment
&tgr, • f I
bear no relationship to the budget as approved in the grant agreement. A
comparison of budget categories and coats as approved in Grant No. 3139 to
amounts appearing in an attachment to the FSR is as follows:
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Attachment to the FSR
Personnel *'
Fringe Benefits
Travel
Training
Supplies
Contractual
Other
Total Direct
Indirect Costs
Total
Approved
Grant Budget
$ 592,191
206,476
25,000
58,347
44,710
30,000
27,342
984,066
89,051
$1,073,117
Award |
Budget1
I
$ 592, 19H
206,476
-0-
-0-
-0-
_0-
185,399
984,066
89,051
Expenditure
$ 982,946
230,880
-0-
-0-
-0-
-0-
39,337
1,253,163
147,442
Budget
Remainder
$(390,755)
( 24,404)
-0-
-0-
-0-
-0-
146,062
(269,097)
( 58,391)
$1,073,117* $1,400,605
$(327,488)
^includes Federal funds of $808,650 and State funds of $264,467.
As shown above, Maryland's accounting records for Grant No. 3139 and
accordingly the attachment to its FSR, , did not reflect costs incurred
under travel, training, supplies and contractual. Instead budgeted and
actual costs were combined under the line item "other" and shown as $185,399
and $39,337 respectively. A further analysis of the above chart reveals
that significant differences existed between budgeted and actual expenditures.
For example, the "other" cost category was underexpended $146,062 while
"personnel" was overexpended $390,755. In effect, expenditures were trans-
ferred or shifted from one cost category to another without EPA approval.
40 CFR 30.510 requires a financial management system that includes a
comparison of actual costs versus budgeted object class amounts. Also, OMB
Circular A-102, Attachment K establishes criteria and procedures that should
be followed by Federal grantor agencies in requiring grantees to report
deviations from grant budgets and to request approvals for budget revisions.
The circular states that "A Federal agency may also, at its option, restrict
transfers of funds amongst direct cost categories for awards in which the
Federal share exceeds $100,000 when the cumulative amount of such transfers
exceeds or is expected to exceed five percent of the total budget". EPA
never imposed any such restriction on the grantee. OMB Circular A-102,
Attachment K also provides that "the state must request prior approval if
the state plans to transfer funds allotted for training to other categories
of expense". Again, in our chart, the approved grant agreement had $58,347
budgeted for^:training which was in essence 'absorbed in another cost category.
No such request for prior approval, as required by the regulations, was
received from Maryland.
The disregard by Maryland of the approved budget inhibits EPA's moni-
toring of program expenditures and could negatively impact upon EPA's planning
process for future awards and funding level's.
By reporting FSR expenditures by budgeted categories, Regional management
would be made aware of any changes and shifting of funds from one cost category
10
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to another. Also, in order for management to determine and evaluate the
reasons for costs being over or under budgeted amounts, recipients should be
required to have the data available for EPA review.
Maryland, in its response to the preliminary findings, stated that
certain categories of costs were combined into the category of "other"
merely for.*''convenience. Regarding the transfer of expenditures from one
cost category to another, Maryland cites the criteria for training allowances
and states this requirement provides no basis for questioning the shift or
transfer of costs from "other" to personnel!.
During the audit, Maryland could not provide us with a breakdown by
budget category of the line item "other" so we disagree that it was merely
for "convenience." Our comments remain applicable. EPA, in its response to
the preliminary findings, stated that it will monitor program expenditures
with the budget cost categories approved in the grant agreement to ensure
compliance with Federal grant regulations.
Costs Claimed Were Not Supported by Adequate Documentation
We found that sample analysis and equipment costs of $61,620 and $2,426
respectively claimed on FSRs were not supported by adequate documentation.
We also noted that other costs totaling $48,104 were allocated based on a
percentage of salaries in lieu of actual documentation. The sample analysis
costs pertained to the "Relay Mud Slide" under Grant No. 3283. The samples
were processed by the Hazardous Waste Laboratory operated by the State of
Maryland. We were informed that the number of samples were multiplied by
prices appearing on a sample analysis price list. Amounts appearing on the
price list were handwritten and no supporting documentation for these prices
was available. A Maryland financial employee in a February 14, 1985 memoran-
dum stated, "Because I do not have sufficient detail on the Relay Mud Slide
costs which include $61,620 for sample analysis, a meaningful comparison
with the award by object is precluded."
I
In addition, we asked various Region III personnel for justification as
to why EPA is paying for sample analysis costs under Grant No. 3283 and not
Grant No.
question.
Grant No.
3139.
-•'.3''
3283,
Mo one could provide us with a satisfactory answer to our
:he undocumented equipment costs of $2,426 claimed under
Annapolis Road Field Office personnel informed us that
equipment usage was reported verbally over the telephone and no written
records exist. 40 CFR 30.510 requires the State to maintain a "financial
management system that includes records together with supporting documents
showing the source and application of all project funds ... and income."
Finally,; we noted that the following costs totaling $48,104 were charged
to EPA without any source documentation. '•
Line Item
Other Direct Costs
Travel
Supplies
Contractual
Communicat ions
Miscellaneous
Grant No.i
3139
$39,337
$39,337
Grant No.
3283
11
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We found chat these costs were allocated to each grant based on the per-
centage of grant related salaries to total salaries in a particular cost
center. Maryland officials,stated it was too difficult to separately account
for the costs. For example, they claim that
tion for travel costs would by far exceed
the cost of keeping the documenta-
the benefit received. We agree
that the amounts claimed thus far are relatively small, but costs under the
tj'T^ V~" ,1
Superfund program will significently increase as evidenced by the passage on
October 17, 1986 of the Superfund Amendments and Reauthorization Act of
1986.
Also, the scope of work section of the RCRA 3012 workplan and the grant
request for amendment stated that ... "all allowable costs and activities
will be tracked and maintained on a site-by-site basis". However, Maryland
did not maintain an accounting system that accounts for all costs by site
and activity to support Federal enforcement cases against responsible parties.
Financial management and reporting under Superfund requires more detailed ac-
counting policies and procedures than other
policy is contrary to 40 CFR 30.510 and
EPA programs. Finally, Maryland's
OMB Circular A-102, Attachment G
which require a grants financial management system which provides source
documentation for grant expenditures.
In its response to the preliminary findings, Maryland stated it has been
an acceptable fiscal procedure approved by
costs among many categories. Regarding
previous EPA auditors to allocate
sample analysis costs, Maryland
acknowledges that this is a dilemma which has been confronting the State for
reimbursement of laboratory analysis coats. Our comments remain applicable
in that Maryland's policy is contrary to EPA and OMB regulations. EPA, in
its response to the preliminary findings, concurs that the grantee must
maintain a financial management system that includes records and supporting
documentation for grant expenditures as required by 40 CFR 30.510.
i
Grant Amendment Not Executed in a Timely Manner
i
Although the original project period for Grant No. 3283 ended on September
30, 1984, we noted that Amendment No. 1, |which extended the project period
to December 31, 1984, was not signed until November 14, 1984. Thus the
program operated from October 1 to November 13, 1984 without a formalized
agreement. Regulation 40 CFR 35.140 states that an applicant should submit
a complete application at least 60 days before the beginning of the budget
period. In addition, the Regional Administrator should review and approve,
conditionally approve or disapprove it within 60 days of receipt. EPA's
Grant Management Section did not receive Maryland's application to amend
the grant agreement until October 25, 1984 which is almost one month into
the extended grant period.
J&:.
The Region, in its response to the preliminary findings, stated that a
mutual agreement was reached between EPA and the State to increase the grant
amount and extend the project and budget period. Amendment No. 1 was exe-
cuted by both parties to formally consummate this mutual understanding.
Our finding remains applicable. Grant agreements and amendments should
be submitted and processed prior to the beginning of the project period to
allow time for sufficient review and approval before the expenditure of
Federal funds. Adherence to such policy will allow the Region sufficient
time to review applications thus assuring grants are properly awarded.
12
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Equipment Purchases Not Recorded in theProperty Management System
Equipment purchases of $7,021 under iGrant No. 3283 were not recorded in
the property management system. According to 40 CFR 30.531, a recipient's
property management system must maintain accurate records reflecting: "a
description of the property; manufacturer's serial number, model number, or
other identification number; source of the property, including assistance
identification number ...". The fiscal accountant at the State office indi-
cated equipment purchased and delivered to offices other than the Depart-
ment of Health and Mental Hygiene Office are not recorded in Maryland's
property management system. Since the equipment items were delivered to
Maryland's Annapolis Road Field Office and EPA's Annapolis Laboratory, they
were not included in the inventory records. Because of this procedure,
Maryland's property management records are incomplete and not in accordance
with 40 CFR 30.531. Equipment purchased for which there is no permanent
record are more susceptible to loss, misuse or theft.
Maryland, in its response to the preliminary findings, stated that
one purchase under question was in the property inventory record maintained
by the Laboratories Administration and was not immediately available for the
auditor's review. Maryland concurs that the other equipment purchase was
not recorded in the property inventory. Regarding Recommendation No. 2,
Maryland in its response stated "if accepted by EPA it would be more far-
reaching and stringent than those requirements heretofore incorporated into
EPA regulations related to grants management. As to Recommendation No. 2,
we feel such a requirement is necessary ibased on the financial management
and reporting inadequacies noted during our audit.
Region III Comments
The Region's response to our recommendations are summarized below and
included vertabim as Appendix A.
1. Region III will continue to monitor the grantee's
performance and take appropriate measures to ensure
that the grantee complies with EPA regulations and
grant conditions.
2. Region III will monitor program expenditures with
the budget cost categories approved in the grant
agreement to ensure compliance with Federal grant
regulations. Within the purview o'f OMB Circular
Arl02 EPA may, as warranted on a c'ase by case basis,
exercise its option to add special conditions to grant
agreements restricting tne transfer of funds amongst
direct cost categories approved in
the grant agreement.
The Region did .not agree with our recommendation in the
draft report requiring the grantee to provide supporting
detail as to the costs claimed on Financial Status Reports.
The level of detailed documentation would be overwhelming
and the recommendation goes beyond,the OMB requirement for
reporting financial data on the FSR.
13
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4. The grantee will be requested to substantiate those
costs specifically identified by the OIG as dis-
aliowable for Federal participation.
Our Evaluation of Region's Comments
?*'
We concur with the corrective and proposed actions by Region III as
a result of our audit. We also agree with the Region's comments relative
to Recommendation No. 3 and have accordingly amended .our recommendation.
A special condition should be incorporated in grant agreements requiring
that the grantee maintain supporting detail as to the costs claimed on
FSRs.
Recommendations
We recommend that the Regional Administrator of EPA Region III:
1. Monitor cooperative agreements to assure that the grantee
complies with EPA regulations and grant conditions.
2. Add special conditions to the grant agreement restricting
the transfer of funds between costj categories and assuring
the grantee's strict adherence to budgeted cost categories.
3. Emphasize through incorporation of a special condition in
grant agreements that the grantee maintain supporting
detail as to the costs claimed on FSRs to help assure that
costs claimed are reasonable, allocable and allowable.
Such detail would include names of the employees charged,
and applicable percentage of their salary charged to the
particular grant. The grantee should be periodically
reviewed to assure that the required supporting detail is
being maintained. >
4. Recover costs improperly charged to EPA programs.
jr. • '
14
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2- GRANT OBJECTIVES WERE NOT ACCOMPLISHED
The performance goals and objectives of the cooperative agreements with
Maryland were not met as required. We found that (1) none of the 12 Site
Investigations (Sis) under Grant No. 3339 could be completed because the
required Quality Assurance Project Plan (QAPP) was not prepared by Maryland
and approved by EPA; (2) Region III allowed two Sis to be completed under
Grant No. 3283 in violation of EPA regulations because sample collection and
analysis were performed by Maryland without an.approved QAPP; and (3) requir-
ed Preliminary Assessments (PAs) under Grant No. 3283 were not accomplished
within the original grant period because Region III held draft reports submi-
tted by Maryland for periods ranging up to 11 months. A factor contributing
to the above situation was that Region III did not adequately monitor Mary-
land's performance and progress toward completing the work products under
the agreements. Therefore, the overall Igoal of having the states perform
PAs and Sis under cooperative agreements was not attained. Also, if the
required Sis had been completed, additional hazardous sites would have been
considered for a Hazardous Ranking Score (HRS) and possible inclusion on
the National Priorities List (NPL) so that! clean up action could be initiated.
To correct these situations, we believe that the Regional Administrator
must implement effective monitoring procedures and have adequate staff avail-
able to ensure that grant and overall EPA objectives are attained. Lines of
communication must be established between EPA and the grantee so that required
data and information necessary to accomplish the tasks are completed and
approved and work is undertaken in accordance with EPA regulations.
Required Site Investigations Not Completed!
Maryland could not complete the 12 required Sis under Grant No. 3339
because its QAPP has not yet been approved by EPA. This occurred primarily
because communication was lacking between Region III personnel and Maryland
regarding the requirement for developing and approving the QAPP.
The grant period which originally was from July i, 1985 to June 30,
1986 has already been extended twice through December 31, 1986. The second
extension states that "this extension of time will allow the State to complete
its commitments under the existing grant." Region III in this second extension
still insists that Maryland can accomplish its grant objectives. We believe
this is impossible because the QAPP has still not been approved. In our
opinion, the grant objectives after considering the time extensions are
unattainable since Sis, which involve sample collection and analysis, cannot
be performed^without an approved QAPP.
• $-«*••••
The overall purpose of a QAPP is to assure the accuracy of samples taken
during Sis so that sites are properly classified as to their threat to the
environment. The QAPP presents, in specific terms, the policies, organiza-
tion, objectives, functional activities, and specific quality assurance and
quality control activities designed to achieve the data quality goals of the
SI.
15
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The QAPP is essential to the SI whose purpose is to provide a data base
sufficient for scoring the site using the HRS, to determine the need for
emergency response, or for documenting a decision for or against a CERCLA
action. .. I
A plan is required by the 3012 Guidance. In addition, 40 CFR 30.302
(d)(2) states "that the recipient of an assiistance award must submit a sched-
ule for developing a QAPP within 30 days of receiving an assistance award.
Recipients may not begin field or laboratory work until the award official
approves the recipients' QAPP." With an approved QAPP, decisions relative to
a site as to its threat to the environment and inclusion on the NPL are
based on accurate sampling procedures with the results being defensible in
court should they be challenged.
The EPA project officer did not request assistance from the EPA Annapolis
Laboratory in approving the QAPP until January 10, 1986, more than six months
into the initial grant period. The project officer, who should monitor grant
performance, indicated he had been unaware that a plan was required from
the grantee. At a January 24, 1986 meeting in Annapolis, the State finally
submitted its QAPP.
During our field work in June 1986, Maryland officials confirmed that
the plan was submitted in January and contended that EPA's Annapolis Labora-
tory was remiss in not approving it. In the opinion of Maryland officials,
EPA in effect has prohibited the State from accomplishing the grant objectives.
The Chief of EPA's Quality Assurance Section at the Laboratory provided us
with her memorandum to the file regarding the January 24, 1986 meeting which
read in part as follows:
1. At the present time the Maryland lab lacks the equipment
necessary to perform the analysis.
2. The sampling portion of the Lab Manual will be reviewed
first.
SPA13 ."'U,: < Assurance Section Chief informed us that at the meeting it
was determined «,:.ac the grantee lacked the equipment to perform sample analysis
which is required for Sis. Specifically, | Maryland did not have a graphite
furnace necessary to meet certain metal detection limits. Subsequent to the
meeting, the Section Chief determined that the manual submitted by Maryland
did not constitute a QAPP. She informed us that the document submitted by
Maryland satisfied only one-half of one (element No. 9-Analytical Procedures)
of the 16 {required elements of a plan. ; The manual contained laboratory
informatioa£but no information on field related parameters and it was not
Superfund site-specific.
We inquired of the Annapolis Section Chief if she informed Maryland
officials that their plan was unacceptable and if there was any documentation
to this effect. She indicated that the Annapolis Laboratory Quality Assurance
Section functions on an "assistance upon request basis" and that it is the EPA
project officer's responsibility to monitor and follow-up on the QAPP.
16
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On March 6 and July 9, 1986 the EPA project officer did call the Annapolis
Section Chief to determine the status of Maryland's QAPP. On both occasions
the Section Chief informed the project jofficer that Maryland had not yet
submitted a satisfactory QAFP. The project officer has since transferred to
another Region and the vacancy has not been filled to date.
• & |
Maryland officials indicated that EPA|did not inform them of the unaccept-
ability of their QAPP until September 5, 1986 at the Central Atlantic State's
Solid Waste Director's Caucus Meeting in Ocean City, Maryland. Maryland
officials were told by EPA that the plan was incomplete but they did not
receive any other details. They stated that no direction was ever provided
on how to complete and prepare a QAPP.
We cannot determine which agency is primarily responsible for the grant
objectives not being accomplished because of the conflicting information
provided. Examples are as follows:
EPA: Maryland officials were immediately notified
that their QAPP was unacceptable.
i
Maryland: EPA did not notify us that;the QAPP was
unacceptable until September 5, 1986.
EPA: Maryland was given guidance for preparing a
QAPP at the January 24, 1986 meeting in Annapolis.
Maryland: EPA never offered Maryland[any information on how
to complete and prepare a QAPP.
The information contained in this finding was primarily based on discus-
sions with both EPA and Maryland personnel. The project file was poorly
maintained and there was very little documentation available showing the
course of events. Chapter 5 of the EPA, Assistance Administration Manual
indicates that an official EPA file must 'be established and maintained for
each grant. Additionally, it should be complete and orderly so as to allow
immediate access to records of all significant grant actions. We have con-
cluded that lines of communication were not properly established between
Region III and the grantee to assure that [the required data and information
necessary to complete the tasks were completed in accordance with EPA
guidelines and regulations.
Region III personnel stated that the Region's overall objectives were
met because, even though Maryland did not complete the 12 Sis in the grant,
Region HI:£». goals for Sis have been attained through its own efforts. Des-
pite this,;,we believe that more Sis could have been completed, and considered
for a HRS and possible inclusion on the NPLL We also believe EPA has impeded
Maryland's ability to perform Sis by not 'approving the QAPP or contacting
Maryland officials about their QAPP deficiencies.
EPA'a Guidance for State Cooperative Agreements, Appendix A issued
September 17, 1985, indicates that "The amount of SI work performed by States
will be determined on an individual basis depending on a number of factors
EPA may step in to assist States that begin to fall behind in their
scheduled performance of PAs and Sis."
17
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Maryland officials stated that they 'wanted to undertake as many Sis
as possible and that EPA has prohibited them from meeting this objective.
We have concluded that Region III has been remiss in its monitoring and
administration of this grant which has contributed to the State not meeting
its grant objectives. !
The Region, in its response to the preliminary findings, concurred that
it is essential to improve lines of communication, recruit adequate staff
and implement effective monitoring procedures to ensure that the work products
are completed in conformance with EPA regulations. In this regard, a formal
QAPP workshop was conducted in the Regional Office on December 9, 1986.
Representatives from the State of Maryland were in attendance.
The Region also stated that recruitment actions have been accelerated
and all existing vacancies for professional, staff in the Site Investigation
and Support Section have been filled including the hiring of a new Section
Chief and Site Investigation Officer. The response indicates that the re-
cruitment of this additional professional staff will enable Region III to
effectively monitor the State's performance to ensure compliance with EPA
regulations and grant conditions.
The Region anticipates that the grantee's QAPP will be approved March 31,
1987 predicated upon receipt of Maryland's submittal by March 1 and EPA's
review and approval within the next 30 days.
It should be pointed out that if the QAPP is indeed approved by EPA on
March 31, 1987, 21 months would have elapsed since the beginning of the grant
period, July 1, 1985. This is most untimely considering that EPA regulations
state that "the recipient of an assistance! award must submit a schedule for
developing a QAPP within 30 days of receiving an assistance award."
Maryland, in its response to the preliminary findings, acknowledged
difficulties with its QAPP stating it has ,never been formally notified that
it has been disapproved. They further contend that the grant amendments
eliminated the State's requirement to complete the Sis. We disagree in
that the grant amendments did not delete the SI work product requirements.
Site Investigations Approved, Completed and1 Paid for Without a QAPP
Maryland completed tvo Sis under Grant No. 3283 without an approved
QAPP. A plan is required by the 3012 Guidance. In addition, 40 CFR 30.302
(d)(2) state* "that the recipient of an assistance award must submit a sched-
ule for developing a QAPP within 30 days of receiving an assistance award.
Recipients-may not begin field or laboratory work until the award official
approves tti* recipient's QAPP." Also, 40 CFR 30.503(f) lists 16 elements
that the project plan must address.
The EPA project officer stated that a project plan was not requested and
approved because EPA personnel were unaware of this requirement. As discussed
previously in this finding, a QAPP still has not been approved for Grant No.
3339. The project officer indicated that EPA approved sampling for the two
Sis; however, he was unable to provide us with any documentation to this
effect. Maryland officials are of the opinion that their quality assurance
18
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in the collection and analysis of samples I during Sis is more than adequate.
They stated that their sampling data and results have stood up in the courts
as well as put "violators in jail." I
i
In addition to violating EPA regulations, discussions with the Quality
AssurancefjSection Chief at the Annapolis Laboratory indicated that the absence
of an approved QAFP has the following effects:
-. |
1. Samples taken are not defensible in court. The
defense in a court case will always revert to EPA's
weakest link which may only be a procedural item
such as the "chain of custody" relative to sample
collection. Such a procedural item would be ad-
dressed in the QAPP.
2. EPA's credibility is in question. The public is now
more sophisticated and frequentlyjraises questions
relative to sampling and quality assurance at public
hearings. By allowing Sis without quality assurance
plans, EPA gives the public the impression that the
Agency is not doing its job. j
i
3. The decision making process relative to each site is
impaired which could result in improper decisions
being made. Hazardous sites may be classified as
being of little or no threat to the environment and
not includable on the NPL.
In addition, we noted that sample analysis costs amounted to $61,620
for the two Sis. Adequate documentation did not exist for these costs as
discussed in our financial management finding. We also found that sample
analysis was performed under other EPA grants, specifically Grant No, 3139,
but EPA does not participate in such costs. We inquired, but received no
satisfactory explanation from EPA officials as to why EPA pays for sample
analysis under one grant and not another.
Finally, EPA officials could not inform us as to the disposition of
these two Sis. There was no documentation available as to why a HRS was not
assigned to these two sites, nor were they ever added to the NPL list.
Maryland, in its response to our preliminary findings, stated that the
two Sis were conducted under a RCRA grant and that it has an approved
Quality Asaurance/Quality Control plan under the basic RCRA grant. We
disagree. .^Grant No. 3283 although originally funded under RCRA is for the
Superfund^&cutedial Program. The grant amendment, which provided for the two
Sis in quettTon, was funded under CERCLA and stated specifically that the
funds were^rto be used for Super fund PAs
and Sis. RCRA and Super fund are
different programs and have different program objectives and requirements.
It is obvious from the difficulties encountered in obtaining EPA approval
that the QAPP for RCRA does not suffice for the Superfund Program.
19
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Final Preliminary Assessments Late
i
Because of delays by EPA, only 20 of the required 32 final PAs under
Grant No. 3283 were submitted by Maryland to EPA within the original grant
period of October I, 1983 to September 30, 1984. The project period was
extended to March 30, 1985 and again to June 30, 1985 so that Maryland could
deliver all required final products. We noted that Maryland submitted the
required 32 PAs in draft form to EPA within the original grant period, but
Region III did not review and return the reports to Maryland in a timely
manner for preparation of the final reports. Examples are as follows:
Preliminary Assessment
A
B
C
As shown above, in some cases as much as eleven months elapsed between
EPA's receipt of PAs and the date it was returned to Maryland. Maryland
officials stated that the delay was attributable to EPA who was delinquent
in reviewing and returning the draft PAs.' Furthermore, EPA never made any
changes to the draft PAs.
The project officer confirmed that the late deliverables were attri-
butable to EPA in that adequate staff was >not available to review and return
the draft reports to Maryland in a reasonable time. We were also informed
that now only final PAs are required which should alleviate the problem.
We extended our review regarding the: timely submission of PAs to Grant
No. 3339 which is a continuation of Grand No, 3283. Maryland was required
to suDBiit li final PAs each quarter for the project period July 1, 1985 to
June 30, 1986. No draft PAs were required. A comparison of PAs required
and completed for the year ended June 30, 1986 is as follows:
Date
Draft Sent
to EPA
06/14/84
06/14/84
06/19/84 ;
Returned
by EPA
05/13/85
04/01/85
05/13/85
Final Submitted
to EPA
06/27/85
04/15/85
06/27/35
Quarter Ended
September 30, 1985
December 31, 1985
March 31, 1986
June 30, 1986
: Totals
Required
11
11
11
ii
4!5
Completed
11
4
10
8_
33
In order for Maryland to meet its grant commitment, a no-cost time
extension was granted to September 30, 1986. Maryland completed its PAs
within the extended grant period.
As shown above, grant objectives relating to PAs have not been attained
from the project's inception, October 1, 1983 to June 30, 1986. EPA officials
stated that the Region's overall PA goal' has been attained through its own
efforts.
20
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Although Che Region may have met its overall goal, we believe that through
more effective monitoring and utilization! of EPA resources, the grantee could
have attained its grant objectives. EPA's first priority under its pre-
remedial program, which is to complete PAs on all sites listed on the CERCLA
Information System, would have been further accomplished. On a more timely
basis, sites would have been recommended for CERCLA action, for no additional
CERCLA action, for pending CERCLA action or for an emergency response.
Finally, Maryland did not adhere to its grant agreement relative to PAs,
which is in violation of 40 GFR 30.309 which states in part that "you must
efficiently and effectively manage your 'project, successfully complete the
project according to schedule, and meet all monitoring and reporting require-
ments." ,
The Region, in its response to the preliminary findings, indicated that
it filled all existing vacancies and recruited additional professional staff
which will assure compliance with grant objectives.
Region III Comments
The Region's response to our findings and recommendations are summarized
below and included vertatim as Appendix A.|
I.
2.
3.
4.
The Region is committed to putting forth a concerted
effort to approve Maryland's Quality Assurane Project
Plan. A formal QAPP workshop was conducted and it is
expected that the grantee's QAPP! should be approved by
March 31, 1987.
Procedures for monitoring grants,will be implemented
as a result of the successful recruitment of additional
professional staff in the Site Investigation and Support
Section.
The increase in professional staff will enable Region
r.7* Affectively monitor the States performance to
aa«. :hat grantee tasks and work products are completed
in accordance with grant requirements and EPA regulations.
The Region did not agree with our conclusion that addi-
tional hazardous sites would have been considered for a
Hazardous Ranking Score and possible inclusion on the
National Priorities List. Since
''available upon the completion of
the information made
the PAs is rather
.limited and cursory in nature, it cannot be used to
'immediately calculate Hazardous Ranking Scores for
these sites.
Our Evaluation of Region's Comments
We concur with the corrective actions initiated by Region III as a result
of our audit. Sis which were the basis for our conclusion contain sufficient
data to initiate the Hazardous Ranking Score process. The Region incorrectly
based its response on PAs which we agree are1 rather cursory in nature. Accor-
dingly, our conclusion remains applicable in that additional sites could have
been considered for a Hazardous Ranking Score had the Sis been completed.
21
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Re comme ndations
We recommend that the Regional Administrator of EPA Region III:
i
1. Take immediate action and assure that Maryland's
QAPP is completed and approved in accordance with
EPA regulations so that grant goals and objectives
can be accomplished. Controls should be in effect
to assure that grants are not awarded unless
objectives are realistic and attainable.
2. Assure that procedures for monitoring grants are
fully implemented and that staff resources are
available to carry out these responsibilities.
3. Assure that grantee tasks and work products are
undertaken and completed in accordance with grant
requirements and EPA laws and regulations.
22
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3. ENFORCEMENT OF THE HAZARDOUS WASTE MANAGEMENT PROGRAM NEEDS STRENGTHENING
Region^III needs to ensure that Maryland effectively administers the
enforcement aspects of its Hazardous Waste Management Program in accord-
ance with the conditions of the cooperative agreement and EPA regulations.
We found that Maryland submitted its Compliance/Enforcement Strategy late
and EPA and Maryland still have not agreed upon an acceptable enforcement
strategy. Since this strategy has not yet been approved, EPA and Maryland
have no uniform criteria for administering the Hazardous Waste Enforcement
Program. As stated in EPA's FY 85 draft year end evaluation, lack of a
written enforcement program makes tracking and evaluating the State's enforce-
ment program extremely difficult. Region III needs to immediately approve
this strategy after assuring that it is in compliance with EPA regulations.
Sanctions against Maryland should be applied in cases of non-compliance with
grant conditions and EPA regulations. >
I
Special Condition Number 8 to Grant No. 3139 awarded December 17, 1984
stipulates that a State Compliance/Enforcement Strategy must be developed
and submitted to the Region by December 31, 1984. The grantee submitted
a draft enforcement strategy on May 26, 1986, almost one and one-half years
late which has not yet been approved by Region III. The former EPA project
officer indicated that Maryland did not place a high priority in this area,
while EPA's delay was attributed to the lack of staff. We were also informed
that Maryland officials believe the strategy is "worthless" since the
State can administer its enforcement program without it. We are of the
opinion the, enforcement strategy is important because it establishes and
defines the State's policies for administering the enforcement aspects of
its Hazardous Waste Management Program. Futhermore, Maryland has not complied
with Special Condition Number 8 of its grant agreement and a requirement in
its FY 85 workplan.
The principle objective of the State/EPA enforcement effort is to achieve
an improved environment through increased compliance with environmental lavs.
Maryland has primary responsibility for taking timely and appropriate actions
to ensure that compliance is achieved. EPA provides assistance to Maryland
in meeting its goals. I
The Interim National Criteria for a Quality Hazardous Waste Management
Program which is referenced in the EPA/State Enforcement Agreement and also
Special Condition Number 3 states:
That
-------
o Of the six facilities that should have been assessed
penalties, only one paid a penalty for a groundwater
monitoring violation.
o Although enforcement action was taken in all six
"Vj-i ^^ '
cases, only two of the six facilities had formal
actions taken against them within the 90 day timely
and appropriate criteria, which was effective October
1, 1984. The other four facilities had violations
that existed up to 30 months before enforcement action
was taken by Maryland.
As of August 1986, five of the six facilities were still in violation,
and four of these facilities were not assessed any penalties.
Region III personnel stated that Maryland believes that it should act
autonomously when dealing with enforcement policy and strategy. In the
draft End-of-Year evaluation, a Maryland official stated that "enforcement
within 90 days is completely irrelevant".
Region III and Maryland personnel have two different views on the
administration and enforcement policies of the Hazardous Waste Management
Enforcement Program in Maryland. For example, an enforcement action such as
a written notification of violations with penalty assessment would be a
notice of violation from the State; however, from EPA it would be an adminis-
trative order. EPA enforcement personnel indicated that Maryland consistently
attempts to prevent them from properly overseeing the State to assure an
effective hazardous waste enforcement program.
We found that Region III did not implement its own enforcement actions
as permitted in Special Condition Number 3 nor did it invoke any of the
following sanctions as provided in 40 CFR 30.900 for Maryland's non-compliance
with grant conditions:
o The grant may be terminated or annulled.
o Payment may be withheld.
o Such other legally available or appropriate
administrative or judicial action may be
instituted.
la summary, Maryland has not administered the. enforcement aspects of
its Uazardott* Waste Management Program in accordance with EPA requirements.
In additiotif^EPA has not been effective in ensuring that Maryland complies
with thesefrequirements. ;
Maryland, in its response to the preliminary findings, concurs that
differences exist between the State and EPA' concerning the enforcement stra-
tegy. The State disagrees with our comments pertaining to lack of enforce-
ment actions. The response states that it is not possible for six facilities
to be out of compliance for 30 months according to the National Guidance.
Since the National Guidance was effective on October 1, 1984 it was inappro-
priately applied retroactively. Maryland also indicated that it only has
one facility on the Significant Non-Compliance List.
24
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We disagree. Our audit: report states that "the other four facilities
had violations that existed up to 30 months before enforcement action was
taken by Maryland". We did not refer to the National Guidance nor use it
as criteria. In addition there are six facilities on the schedule of signi-
ficant non-compliera included as an attachment in the FY85 draft End-of-Year
evaluation and not one as indicated in the State's response.
The Region indicated, in its response to the preliminary findings, that
the State/Compliance Enforcement Strategy was approved on October 29, 1986.
The Region also indicated that "although: a specific strategy had not been
approved for Maryland within prescribed time limits, it should be noted that
during this interim period the State's enforcement program was vigorously
maintained in accordance with national program guidelines." Correspondence
examined by us does not support this conclusion. For example, one such
document noted in the Region's file reads in part as follows:
All in all, the State of Maryland is the only State in
Region III which consistently attempts to foil EPA inter-
ventions and oversight to assure an effective hazardous
waste enforcement program. The State's Waste Management
Administration has vehemently opposed EPA action in
Maryland, yet has failed to follow its grant and the
State/EPA Enforcement Agreement to which it has agreed.
Finally, it should be pointed out that the State/Compliance Enforcement
Strategy was almost two years late in being approved.
Region III Comments
The Region's response to our findings! and recommendations are summarized
below and included verbatim as Appendix A.,
I
1. The State/Compliance Enforcement Strategy was
approved by EPA on October 29, 1986.
2. Region III will monitor the grantee's performance
to ensure compliance with grant conditions and
EPA regulations.
3. In accordance with it's Policy and Performance-
Based Assistance, EPA reserves the right to
impose sanctions as a final measure to compel
grantee compliance with Federal regulations
and grant conditions, in order to achieve
national objectives.
i
4. The Region disagrees with the source of the state-
ment pertaining to Maryland's opinion that enforce-
ment within 90 days is completely irrelevant.
The Region stated that this is not an observation
by EPA but a statement made repeatedly by Maryland
Waste Management Administration personnel in
review meetings and in the grant application.
More importantly, this statement was included in
the draft End-of-Year Review.
25
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5. The Region questioned Che source of a quote included
in the finding regarding Maryland'si attempt to foil
EPA interventions and oversight to assure an effective
hazardous waste enforcement program. The Region feels
ttiat'this inflammatory statement should be stricken
- w i
from the report.
Our Evaluation of Region's Comments
We concur with the proposed actions to be initiated by Region III as
a result of our audit. The finding does recognize that the State/Compliance
Enforcement Strategy was approved by EPA on October 29, 1986. However,
we are recommending that Region III assure that the strategy, as approved,
conforms with EPA policies and regulations. We have revised our finding
and cited as criteria the draft End-of-Year evaluation regarding Maryland's
statement that enforcement within 90 days is completely irrelevant. Finally,
a copy of the memorandum containing the quote which the Region felt should
be stricken was presented to Region III officials at the exit conference.
The memorandum was obtained from Region III files and the quote remains in
the finding.
Recommendations:
We recommend that the Regional Administrator of EPA Region III:
I. Assure that the State/Compliance Enforcement Strategy,
as approved, conforms with EPA policies and regulations.
2. Assure grantee compliance with grant conditions and EPA
regulations.
3. Apply sanctions in instances of continued noncompliance
with grant conditions and EPA regulations.
26
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4. LACK OF COMPLIANCE WITH SPECIAL CONDITIONS
Maryland did not comply with several important special conditions re-
quired by the cooperative agreements, and 'EPA did not assure such compliance.
Because of this (1) the health and safety of the public and personnel involved
with the cm-site collection of samples may not be adequately safeguarded;
(2) documentation did not exist in the form of a public involvement plan to
assure that the public had the opportunity to understand proposed actions
and had input in the decision making process involving controversial facili-
ties; and (3) various reporting requirements, including submittal of progress
reports, were not satisfied. This situation could have been alleviated had
EPA properly monitored and enforced the requirements of the agreements,
including imposing appropriate sanctions for non-compliance.
We found the following special conditions were not satisfied:
Grant Number 3283
i
o Site safety plans were not prepared by Maryland
(SC No. 10).
o Quarterly progress reports were incomplete and
were not submitted on a timely basis (SC No. 11).
Grant Number 3139
o Public involvement plans for each environ-
mentally significant facility were not
prepared and submitted to EPA (SC Mo. 13).
o One reporting requirement was not satisfied
(SC No. 2).
Grant No. 3283 required the grantee Co perform two Sis, in addition
to numerous PAs. Sis require on-site collection of organic and inorganic
samples. We found that the Sis were conducted without a site safety plan.
We also were informed that Maryland collects samples when conducting some
PAs and that samples were taken from at least four PA sites.
safety plans were in effect for these sites;
Again no site
The grantee has not complied with both Special Condition Number 10 to
Grant No. 3283 and to EPA 3012 Guidance which states:
"Site.safety plans will be prepared prior to undertaking
on-site inspections. These safety plans will be con-
sistent with the requirements of CERCLA 104(f), U.S.
EPA's Occupational Health and Safety Manual and other
applicable U.S. EPA safety guidance." '
t
Also, Appendix M of the State Participation in the Superfund Remedial
Program, states, "all CERCLA projects must have in place a site safety
plan which establishes the requirements and procedures for protecting the
health and safety of all on-site personnel.";
27
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By Maryland not preparing site safety plans and EPA not assuring compli-
ance with the grant agreement and its 3012, Guidance, the health and safety
of the public and personnel involved with the sampling may not be adequately
safeguarded.
-------
Maryland, in its response to the preliminary findings, concurred that a
public involvement plan for each environmentally significant facility has
not been prepared. The response stated that a Community Relations Officer
has been hired and the formalized plan is expected by early 1987. The Region
in its response to the preliminary findings, stated that public participation
did take place and at no time was the public prohibited from participating
in the State's decision-making process. Our comments remain applicable in
that the required public involvement plan was not prepared and submitted
for each environmentally significant facility.
i
On Grant No, 3139, we also found that one reporting requirement was not
satisfied as required by Special Condition Number 2. The requirement per-
tained to the official annual update of the Major Facilities List, which was
due May 30, 1985. We obtained the list that was submitted with the work
plan on September 10, 1984; however, there is no evidence of an annual update.
EPA officials claim that the update was not required since the list remained
unchanged. However, if this is the casej we believe there should be some
documentation to this effect.
Although the special conditions specified in this finding were apparently
not satisfied, payments were nevertheless made to Maryland. 40 CFR 30.309(b)
requires that Maryland comply with all terms and conditions of the grant
agreement. This regulation applies to all special conditions and reporting
requirements included in the grant agreement. It is obvious that EPA must
improve its oversight efforts to ensure that the requirements of special
conditions are stringently monitored. Assuring grantee compliance with
these requirements is an essential element of this monitoring process.
Region III Comments
The Region's response to our findings ,and recommendations are summarized
below and included verbatim as Appendix A.
1. Through an increase in professional staff, the
Region will effectively monitor compliance with
grant conditions and EPA regulation's.
2. In accordance with it's Policy and Performance-
Based Assistance, EPA reserves the right to
impose sanctions as a final measure to compel
grantee compliance with Federal regulations
and grant conditions in order to achieve
national objectives. ,
•JV
3. Region III shall review cooperative agreements
prior to award to ensure that they contain
special conditions which are consistent with
current EPA laws and regulations.
4. The Region disagreed with our conclusion that
the public did not have the opportunity to
understand proposed actions and have input
in the decision making process involving
controversial facilities. Public participa-
tion did occur despite the lack of a written
29
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public involvement plan. In addition, the
statement that no plan was submitted because
it was unimportant should be deleted from
the finding.
t
5. For Grant No. 3139, only one reporting require-
ment was not satisfied and the finding should
be changed accordingly. '
Our Evaluation of Region's Comments
We concur with the corrective actions initiated by Region III as a
result of our audit. We agree with the Region and accordingly amended our
conclusion regarding the lack of a public (involvement plan. In addition, we
deleted the statement that the plan was unimportant. Finally, the finding,
as revised, states that only one reporting requirement for Grant No. 3139
was not satisfied.
Recommendations
We recommend that the Regional Administrator of EPA Region III:
1. Monitor cooperative agreements to ensure compliance
with grant conditions and EPA regulations.
2. Take appropriate actions including the withholding of
funds in instances of noncompliance.
t
t
3. Assure that all cooperative agreements are complete
and contain special conditons which reflect current
EPA laws and regulations. '
30
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APPENDIX A
Page I of 4
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION IN
841 Chestnut Building
Philadelphia, Pennsylvania 19107
Response to Draft Audit Report - Region
Ill's
SUBJECT: Procedures for Monitoring Cooperative Agreements Awarded OATC. """~ ""ZJ
to the State oj( Mary^Landf - Report No. E5eH6-03-0219 '"'"'" " '
/^
FROM: James M. Self) '
Regional Administrator 4-3RAOO)
TO: p. Ronald Gandolfo
Office of the Inspector General
The review of the above-referenced audit report has been completed
and we offer the following comments for!your consideration;
I. AUDIT FINDINGS
A. SUMMARY OF FINDINGS
1. On Page 2. We do not agree with the concluding statement made
by audit in this opening paragraph. The OIG's assertion of considering
additional hazardous sites for a Hazard Ranking Score (MRS) is a
misinterpretation of the National Priorities List (NPL) process. Since
the information made available upon the completion of the Preliminary
Assessments (PAs) is rather limited and cursory in nature, it cannot be
used to immediately calculate Hazard j Ranking Scores for these sites,
let alone consider them for "possible inclusion on the NPL so that
clean-up action could be initiated" as recommended by audit.
2. On Page 3. We take exception to the conclusion (2) reached by
the OIG which states that "the public did not have the opportunity to
understand proposed actions and have input in the decislonmaklng process
involving controversial facilities". This notation is incorrect and
should be deleted from the report. During FY-1985, the year that was
subject to this audit, permit actions were completed for the Allied
Corporation and the Hawkins Point Land Disposal Facility. In both of
these Ceases, the public was given 45 days to review and comment on the
drafts-permits. Public hearings were held to discuss both draft reports.
A Cittiien'a Advisory Committee was also formed to provide input to the
State1'throughout the permit application review and approval process for
the Hawkins Point Facility.
B. BACKGROUND
On Page 4. The summarization should be revised to correct the
Project Period for Cooperative Agreement No. 3139 to read "10/01/84 -
09/30/85" in lieu of "10/01/84 - 09/30/86".
33
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APPENDIX A
Page 2 of 4
C. RCRA SECTION 3012 COOPERATIVE AGREEMENTS
On Page 5. The last sentence Is Ambiguous and should be rewritten
to clarify the intent of "the final report".
D. ENFORCEMENT OF HAZARDOUS WASTE MANAGEMENT PROGRAM NEEDS STRENGTHENING
1. On Page 22. The second paragraph erroneously indicates that
"Region III personnel stated that Maryland believes that it should act
autonomously when dealing with enforcement policy and strategy and that
enforcement within 90 days is completjely irrelevant."
For your information, this is hot an observation by EPA but a
statement made repeatedly by Maryland'Waste Management Administration
(WMA) personnel in review meetings and in their grant application.
More importantly, this statement was included in the draft End-of-Year
Review but not in the Final Review. It is, therefore, recommended that
this statement should either be corrected or deleted in its entirety.
2. On Page 23. We question the example cited by the OIG under
the second paragraph as documentation extracted from our Regional
files:
"All in all, the State of Maryland Is the only State in Region
III which consistently attempts to foil EPA interventions and
oversight to assure an effective hazardous waste enforcement
program. The State's Waste Management Administration has
vehemently opposed EPA action in Maryland, yet has failed to
follow its grant and the State/EPA Enforcement Agreement to
which it has agreed."
A review of Regional RCRA staff files could not produce a memo-
randum or letter with this language. [In order to comment on the
meaning and significance of this paragraph, its source needs to be
considered. It is recommended that this inflammatory statement be
stricken from the report*
E. LACK OF COMPLIANCE WITH SPECIAL CONDITIONS
J&£ |
On Page 23. The conclusion (2) reached by the OIG is not
•*ti
correct and should be deleted for the
No. A*2. above.
reason mentioned in Comment
2. On Page 24. The second bullet under Grant Number 3139 should
be changed to read "One reporting requirement was not satisfied". The
last paragraph on Page 25 should also!be revised to reflect this
correction.
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APPENDIX A
3 Page 3 of 4
3. On Page 25. In the third paragraph, the statement indicating the
reason that no plan was submitted "because it was unimportant" should be
deleted. EPA officials did not mean to imply that the plans were unimportant,
but that public participation occurs regardless of the existence of a written
plan. The citation for RCRA public participation should be corrected to read
40 CFR 124.
II. AUDIT RECOMMENDATIONS
A. RECOMMENDATIONS on Page 12.
1. As indicated in our response to the Preliminary Findings on this
audit, EPA Regional Staff, together with the Annapolis Central Regional
Laboratory, is committed to putting forth a concerted effort to approve
Maryland's Quality Assurance Project Plan (QAPP), Toward this end, we
conducted a formal QAPP Workshop in our Regional Office on December 9, 1986.
Representatives from the State of Maryland participated in this formal
training session which covered the specific requirements for developing a
QAPP in accordance with 40 CFR 30.503. The grantee's QAPP should be
approved by March 31, 1987. This schedule is predicated upon receipt of
Maryland's submlttal by March 1st and EPA's review and approval within the
next 30 days.
2. Procedures for monitoring grants will be implemented as a result
of the successful recruitment of additional professional staff in the Site
Investigation and Support Section. A new Section Chief was brought on
board on October 28, 1986 and a Site Investigation Officer (SIO) has been
recently hired to manage our Cooperative Agreement with Maryland.
3. The above increase In professional staff will enable Region III
to effectively monitor the State's performance to assure that grantee
tasks and work products are completed in accordance with grant requirements
and EPA regulations.
B. RECOMMENDATIONS on Page 20.
1. Region III will continue to monitor the grantee's performance and
take appropriate measures to ensure that the grantee complies with EPA
regulations-and grant conditions.
2. Region III will monitor program expenditures with the budget cost
categories approved in the grant agreement to ensure compliance with federal
grant regulations. Within the purview of 10MB Circular A-102 EPA may, as
warranted on a case by case basis, exercise Its option to add special
conditions to grant agreements restricting the transfer of funds amongst
direct cost categories approved in the grant agreement.
35
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4 APPENDIX A
Page 4 of 4
3. We do not concur with audit's|recommendation which requires the
grantee, to submit an overwhelming level of detailed documentation to
support coats claimed on Financial Status Reports (FSRs). OIG's
recommendation goes beyond the OMB requirement for reporting financial
data on the FSR (OMB Form 269). In accordance with 40 CFR 30.510, this
type of supporting documentation must'be properly maintained in the
grantee's financial management system.
4. The grantee is required to maintain a financial management
system in conformance with 40 CFR 30.510. The grantee will be requested
to substantiate those costs specifically identified by the OIG as
disallowable for federal participation.
C. RECOMMENDATIONS on Page 23.
1. As indicated in our response to the Preliminary Findings of this
audit and documented in the end of the year report, the State/Compliance
Enforcement Strategy was approved by EPA on October 29, 1986.
2. Region III will monitor the grantee's performance to ensure
compliance with grant conditions and EPA regulations.
3. In accordance with its Policy land Performance-Based Assistance,
EPA reserves the right to impose sanctions as a final measure to compel
grantee compliance with federal regulations and grant conditions, in
order to achieve national objectives. !
D. RECOMMENDATIONS on Page 26.
1. Refer to Comments A.3., B.I., and C.2. above.
2. --'to Comment C.3. above.
3. Region III shall review cooperative agreements prior to award
to ensure that they contain special conditions which are consistent
with current EPA laws and regulations.1
•.
•*»-
36
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APPENDIX B
REPORT DISTRIBUTION
Recipient
Office of the Inspector General
Inspector General (A-109)
Copies
Region III
Regional Administrator (3RAOO)
Hazardous Waste Management Division Director (3HWOO)
Audit Follow-up Coordinator (3PM60)
2
2
1
Headquarters Offices
Director, Financial Management Division (PM-226)
Comptroller (PM-225)
Agency Follow-up Official (PM-208)
Attention: Resource Systems Staff
Associate Administrator for Regional Operations (A-101)
37
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