UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460 JL t ^ ,
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OFFICE OF
THE INSPECTOR GENERAL
9 1989
MEMORANDUM
SUBJECT:
Audit Report No. M5BFL9-11-0048-9100415
Audit of Superfund Interagency Agreements with
the Department of Health and Human Services
(Missouri Department of Health)
FROM:
TO:
Kenneth D.
Divisional Inspector General for Audit
Internal Audit Division (A-109)
Harvey G. Pippen, Director
Grants Administration -Division (PM-216)
I am transmitting a copy of the subject report prepared by a
contractor for the Office of Inspector General, Department of
Health and Human Services. We are closing this report in our Prime
Audit Tracking System upon issuance. Should your staff have any
questions concerning this report, please have them call John Walsh
on 475-6753.
Attachment
CD
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HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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APPENDIX
DISTRIBUTION OF REPORT
Director, Office of Emergency and Remedial Response (OS-200)
Director, Office of Program Management, Office of Emergency
and Remedial Response (OS-240)
Chief, Financial and Administrative Management Section, Office
of Emergency and Remedial Response (OS-240)
Comptroller (PM-225)
Director, Financial Management Division (PM-226)
Chief, Grants Information and Analysis Branch (PM-216F)
Agency Followup Official (PM-208)
Agency Followup Official (PM-225)
Attn: Resource Management Division
Audit Followup Coordinator (PM-208)
Attn: Program Operations Support Staff
Regional Administrator, Region 7
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Missouri Department of
in
John Ashcroft
Governor
Robert Harmon, M.D.
Director
P.O. Box 570, Jefferson City, MO 65102 • 314 / 751-6400
May 24, 1989
Mr. Elvin R. Hilyer
Associate Director for Policy Coordination
Room 2419 - Mail Stop D-1 4
Centers for Disease Control
1600 Clifton Road, N.E.
Atlanta, Georgia 30333
Dear Mr. Hilyer:
RE: A-04-88-04068
I have reviewed the audit report pertaining to the above
audit of cooperative agreements U61-CCU700563 and U61-CCU700735
for the period July 12, 1983 through March 31, 1987 and May 13,
1985 through September 29, 1987. My responses to the
recommendations are as follows:
1 . Equipment control system deficiencies
We concur and have implemented stricter controls.
2. No reconciliation of annual physical inventory
The recommendation is not feasible and reflects a lack of
understanding of the SAM System by the auditors. The SAM
System (Statewide Accounting for Missouri) is an
accounting system that accumulates expenditures for each
fiscal year by fund. Fixed asset purchases are recorded
as expenditures of their respective fund. Any fixed
asset acquired is set up on the property control record
with all the appropriate identification noted in the
auditor's recommendation. The annual physical inventory
is reconciled to the property control records and any
discrepancies investigated.
3. No close-out submission of equipment listing
We concur; and February 7, 1987, issued a letter listing
equipment costing over $1,000 for cooperative agreement
No. U61-CCU700563.
Sincerely,
Robert G. Harmon, M.D., M.P.H,
Director
RGH:AT:jar
AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER
MIVIOM poviitad on a nondBcnrrinnoiy tt&m
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DEPARTMENT OF HEALTH & HUMAN SERVICES
/<
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Office of Inspector General
, Office of Audit
REGION IV
P. O. BOX 1704
ATLANTA, GEORGIA 30301
MAY 2 138T
Common Identification No. A-04-88-04068
Dr. Robert G. Harmon, Director
Missouri Department of Health
P.O. Box 570
Jefferson City, Missouri 65102
Dear Dr. Harmon:
Enclosed for your information and use is a report on the Results
of the Audit of Environmental Protection Agency Superfund Awards
to the Missouri Department of Health (MDH).
The audit was conducted of Cooperative Agreements U61/CCU700563
and U61/CCU700735, which were awarded by the Centers for Disease
Control (CDC) on behalf of the Agency for Toxic Substances and
Disease Registry (ATSDR). The periods reviewed were July 12,
1983 through March 31, 1987 and May 13, 1985 through September
29, 1987, respectively. The audit was performed by the CPA firm
of Carmichael, Ingle, White, & Company, P.C., which is under
contract with the Department of Health and Human Services, Office
of Inspector General, Office of Audit.
The audit disclosed untimely reporting of equipment dispositions
to property control personnel. Recommendations are that the MDH
implement stricter accounting procedures within the existing
equipment control system to ensure current information regarding
equipment transfers and dispositions.
Another finding disclosed that the MDH was not submitting a
listing of equipment costing over $1,000 to the ATSDR as required
by the Assistance Award Close-out Requirements. Recommendations
are that the MDH compile and submit the necessary list.
The auditor also found that there was no reconciliation of annual
physical inventory to the State-wide Accounting for Missouri
(SAM) reports. Recommendations are that the MDH not only
reconcile the annual inventory counts to the SAM reports and
accounting records, but also account for any discrepancies to
ensure adequate safeguarding of Federal assets.
MDH concurred with the auditor concerning the first two
recommendations and plans to implement appropriate changes. MDH
did not, however, agree with the auditor's findings on inventory
reconciliation. The MDH believes that it already has adequate
procedures in place.
P O. 00X 1T747
Box 20
51 SWFi>MAv*nu«
Miami Fiona* 33131
Room 2091
227 N. Bwwuon suwt
w*. Floridi 323O1
P O. 8o> 27443
RUwgfl. Men*Carolina 27«n
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Page 2 - Dr. Robert G. Harmon
The complete text of MDH's written response is included as
Appendix A in the auditor's report.
Final determinations as to actions to be taken on all matters
reported will be made by the HHS official named below. We
request that you respond to each of the recommendations in this
report within 30 days from the date of this letter to the HHS
official named, presenting any comments or additional information
that you believe may have a bearing on his final determination.
In accordance with the principles of the Freedom of Information
Act (Public Law 90-23), HHS/OIG Office of Audit reports issued to
the Department's grantees and contractors are made available, if
requested, to members of the press and general public to the
extent information contained therein is not subject to exemptions
in the Act, which the Department chooses to exercise. (See
Section 5.71 of the Department's Public Information Regulation,
dated August 1974, as revised.)
To facilitate identification, please refer to Common
Identification Number A-04-88-04068 in all correspondence
relating to this report.
Si'ncerely yours
Emil A. Trefzge^
Regional Inspectof General
for Audit, Region IV
Enclosure
Direct Reolv to;
Associate Director for Policy Coordination
Room 2419 - Mail Stop D-14
Centers for Disease Control
1600 Clifton Road, N.E.
Atlanta, Georgia 30333
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Distribution Schedule
Auditee No. of Copies
Dr. Robert G. Harmon, Director 2
Missouri Department of Health
P.O. Box 570
Jefferson City, Missouri 65102
Environmental Protection Aaencv
Assistant Inspector General for Audit 1
Office of Inspector General
Environmental Protection Agency
4th and M Streets, SW
Washington, D.C. 20460
Action Official - ATSDR
Associate Director for Policy Coordination 2
Room 2419 - Mail stop D-14
Centers of Disease Control
1600 Clifton Road, N.E.
Atlanta, Georgia 30333
Audit Liaison
Chief, Cost and Audit Management Branch, PHS 1
Room 17A-50, Parklawn Building
5600 Fisher's Lane
Rockville, Maryland 20857
Office of Audit
Deputy Assistant Inspector General for Audit 1
Public Health Service Audit Division
Management, Operations and Evaluation Division 1
Regional Inspector General for Audit, Region VII l
Regional Office 2
Other Parties
Associate Administrator, ATSDR - CDC 1
Mail Stop F-38
1600 Clifton Road, N.E.
Atlanta, Georgia 30333
Total
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DEPARTMENT OF HEALTH AND HUMAN SERVICES/
ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND AUDIT
MISSOURI DEPARTMENT OF HEALTH
{FORMERLY PART OF MISSOURI DEPARTMENT OF SOCIAL SERVICES)
JEFFERSON CITY, MISSOURI
COOPERATIVE AGREEMENTS
U61/CCU700563
U61/CCU700735
FOR THE PERIODS
JULY 12, V983 THROUGH MARCH 31, 1987
MAY 13, 1985 THROUGH SEPTEMBER 29, 1987
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TABLE OF CONTENTS
ACRONYMS
EXECUTIVE SUMMARY
BACKGROUND
SCOPE OF AUDIT
AUDITORS' REPORT
SCHEDULES:
A - SUMMARY OF COSTS - COOPERATIVE AGREEMENT U61/CCU700563
A-t - SCHEDULE OF COSTS - 7/12/83 - 9/30/84
A-1a - FINANCIAL STATUS REPORT - 7/12/83 - 9/30/84
A-2 - SCHEDULE OF COSTS - 10/1/84 - 3/31/86
A-2a - FINANCIAL STATUS REPORT 10/1/84 - 3/31/86
A-3 - SCHEDULE OF COSTS - 4/1/86 - 3/31/87
A-3a - FINANCIAL STATUS REPORT 4/1/86 - 3/31/87
B - SCHEDULE OF COSTS - COOPERATIVE AGREEMENT U61/CCU700735
B-1 - FINANCIAL STATUS REPORT - 5/13/85 - 9/29/87
AUDITORS' REPORT ON COMPLIANCE
AUDITORS' REPORT ON INTERNAL CONTROL
FINDINGS AND RECOMMENDATIONS
1. Equipment Control System Deficiencies
2. No Reconciliation of Annual Physical Inventory
3. No Close-out Submission of Equipment Listing
APPENDIX A: GRANTEE'S RESPONSE
Page
1
2
4
6
7
9
10
11
13
14
16
17
18
19
20
22
25
27
29
30
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ACRONYMS
DHHS or HHS - Department of Health and Human Services
ATSDR - Agency for Toxic Substances and Disease Registry
CDC - Center for Disease Control
EPA - Environmental Protection Agency
NIEHS - National Institute of Environmental Health Sciences
DIG - Office of Inspector General
U.S. - United States
PHS - Public Health Service
OMB * Office of Management and Budget
FSR - Financial Status Report
CFR - Code of Federal Regulations
CERCLA - Comprehensive Environment Response Compensation
and Liability Act of 1980
SARA - Superfund Amendments and Reauthorization Act of
1986
SUPERFUND - Hazardous Substance Response Trust Fund
P.L. - Public Law
FSR - Financial Status Report
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EXECUTIVE SUMMARY
This audit of costs claimed under Superfund awards was performed under contract with
the U. S. Department of Health and Human Services, Office of Inspector General.
The specific objectives of the audit were:
- To determine if costs claimed by each grantee were reconciled to the
accounting records for expenditures.
- To evaluate the methodology and adequacy of monitoring activities.
- To determine, for grantee transactions tested, the degree of
compliance with applicable Environmental Protection Agency (EPA)
laws and regulations, cost principles, and generally accepted
accounting principles.
- To determine if operations adhered to the principles of economy
and efficiency in the administration of the grants.
- TO evaluate internal controls for each of the grantee operations,
as appropriate.
Our audit disclosed the following findings:
- Missouri Department of Health does not insure timely reporting
of equipment dispositions to property control personnel.
We recommend the Agency implement accounting procedures to assure
that dispositions of equipment are reported on a timely basis to property
control personnel. MDH concurs with our finding, and has implemented
controls to ensure dispositions are reported timely.
-------
The Agency does not reconcile the annual physical inventory to the
Stats-wide Accounting for Missouri (SAM) reports. We recommend the Agency
implement accounting procedures to insure that equipment per the SAM
reports is reconciled to the detail physical inventory equipment list.
MDH believes they have adequate controls to reconcile the physical inven-
tory with the property control records. We believe the recommendation
should be implemented unless the cost would be prohibitive.
The Agency did not submit to ATSDR an equipment listing detailing
items that cost over $1,000 for the Cooperative Agreement U61/CCU700563
as required per the Assistance Award Close-out Requirements. How-
ever, the Agency did submit a letter to ATSDR stating that no equip-
ment costing over $1,000 was purchased during the period 4/1/86 -
3/31/87. We recommend the Agency submit to ATSDR an equipment listing
detailing items that cost over $1,000 for all periods of Cooperative
Agreement U61/CCU700563. Also, we recommend that the same is done
when Cooperative Agreement U61/CCU700735 is closed-out. The Agency concurs
with our finding, and intends to submit detail equipment listings for the
close-out of each cooperative agreement.
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BACKGROUND
The Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA) established the Hazardous Substance Response Trust Fund (Superfund) to
provide monies for the identification, prioritization, and remediation of the
nation's uncontrolled hazardous waste sites. The Superfund is administered by the
Environmental Protection Agency (EPA). The Department of Health and Human Services
(HHS) receives an annual allocation from this Superfund trust fund. HHS uses the
funds to perform studies of health related issues attributable to hazardous waste.
Within HHS, the Superfund program is administered by the Agency for Toxic Substances
and Disease Registry (ATSDR) and the National Institute of Environmental Health
Sciences (NIEHS).
ATSDR and NIEHS are authorized to award grants, cooperative agreements or contracts
to states or private contractors to perform health related studies. The Department's
Office of Inspector (OIG) is required to attest to the reasonableness of costs
claimed by the grantees and contractors. These requirements are stated in section
111 (JO of the Comprehensive Environmental Response Compensation and Liability Act
(P.L. 96-510 CERCLA}. CERCLA, as amended by the Superfund Amendments and
Reauthorization Act of 1986 {P.L. 99-499 SARA), provides for the recovery from
responsible parties of response costs incurred by the Federal Government. Response
costs generally include expenses for health studies, investigatory clean-up,
enforcement and administrative activities.
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ATSDR awarded two cooperative agreements listed below, which were in effect for
the period July 12, 1983 through September 29, 1987 to the Missouri Department
of Social Services, Jefferson City, Missouri:
Cooperative Agreement Cooperative Agreement Federal Funds
Number Period Authorized
061/CCU700563
U61/CCU700735
7/12/83 to 3/31/87
5/13/85 to 9/29/87
$943,091
$568,880
Chemical wastes containing 2,3,7,8-tetrachlorodibenzo-p'-dioxin (dioxin)
originating from the NEPACCQ/SYNTEX plant at Verona, Missouri in 1971 were
widely distributed over a several month period throughout southwestern and
eastern Missouri. During 1971, numerous domestic and wild animals died in the
vicinity of these areas sprayed with the contaminated waste oil. The Missouri
Department of Health and the Center for Disease Control (CDC) investigated the
toxic illness in 1971, but it was not until 1974 that CDC identified the toxic
agent as dioxin. The presence of dioxin in the soil had been confirmed in 36
sites in Missouri, and there are approximately 100 additional sites that were
under investigation by the U. S. Environmental Protection Agency and the
Missouri Department of Natural Resources. The major objective of this project
was to determine whether, and to what extent, health effects have occurred among
persons exposed to these dioxin contaminated areas.
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ARMICHAEL.
INGLE. WHITE Sc
HOMPANY ":
2970 CUirmont Rd., N.E.
Suite 780
Atlanta. Georgia 30329
AUDITORS' REPORT
Mr. Emil A. Trefzger, Jr., C.P.A.
Regional Inspector General for Audit
U. S. Department of Health and Human Services
Office of Inspector General - Region IV
101 Marietta Tower Suite 1401
Atlanta, Georgia 30323
We have performed a financial and compliance audit of the accompanying
Schedules A and B, Summary of Costs - Cooperative Agreements U61/CCU700563 and
U61/CCU700735, presenting the Federal share of outlays submitted by Missouri
Department of Health for the periods July 12, 1983 through March 31, 1987
and May 13, 1985 through September 29, 1987, respectively. Our examination was
made in accordance with generally accepted auditing standards and the standards
for financial and compliance audits contained in the Standards for Audit of
Governmental Organizations, Programs, Activities, and Functions 1981 Revision,
issued by the U. S. General Accounting Office and accordingly, included such
tests of accounting records and such other auditing procedures as we considered
necessary in the circumstances. We did not examine the Federal share of outlays
for the period July 12, 1983 through September 30, 1984 which constitutes 37% of
the total Federal share of outlays-Schedule A Cooperative Agreement
U61/CCU700563. These Federal share of outlays were examined by other auditors
whose report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for the Federal share of outlays
for the period July 12, 1983 through September 30, 1984, is based solely upon
the report of the other auditors.
-------
In our opinion, based upon our examination and the report of other auditors,
Schedules A & B present fairly the Federal share of outlays for the periods
July 12, 1983 through March 31, 1987 and May 13, 1985 through September 29,
1987, respectively.
This report is intended solely for the use of management, the U. 5. Department
of Health & Human Services, and the U.S. Environmental Protection Agency. This
restriction is not intended to limit the distribution of this report which, upon
acceptance by the U. S. Department of Health & Human Services, is a matter of
public record.
September 15, 1988
Atlanta, Georgia
-------
Schedule A
DEPARTMENT OF HEALTH AND HUMAN SERVICES/
ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND AUDIT
MISSOURI DEPARTMENT OF HEALTH
SUMMARY OF COSTS - COOPERATIVE AGREEMENT
U61/CCU700563
AUDIT PERIOD: JULY 12, 1983 THROUGH MARCH 31, 1987
Personal Service
Fringe Benefits
Contractual
Travel
Equipment
Supplies
Other -
Total Direct Costs
Indirect Cost
Total
Budget
$116,006
29,228
613,131
33,698
38,456
4,204
51,497
$886,220
56,871
$943,091
Actual
$ 97,148
21,921
465,576
22,287
38,454
1,667
60,905
$707,958
46,557
$754,515
Variance
$ 18,853
7,307
147,555
11,411
2
2,537
(9,4C8)
$178,262
10,314
$188,576
Note: The Cooperative Agreement approved by ATSDR allowed for line item differences
in the budget.
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Schedule A-1
DEPARTMENT OF HEALTH AND HUMAN SERVICES/
ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND AUDIT
MISSOURI DEPARTMENT OF HEALTH
SCHEDULE OF COSTS - COOPERATIVE AGREEMENT
U61/CCU700563-01
AUDIT PERIOD: JULY 12, 1983 THROUGH SEPTEMBER 30, 1984
Personal Service
Fringe Benefits
Contractual
Travel
Equipment
Supplies
Other
Total Direct Costs
Indirect Cost
Total
Budget
S 75,372
19,597
208,562
7,960
38,456
1,990
8,555
$360,492
38,213
$398,705
Actual
$ 51,247
12,024
142,248
11,342
38,454
490
675
$256,480
25,610
$282,090
Variance
$ 24,125
7,573
66,314
(3,382)
2
1,500
7,880
$104,012
12,603
$116,615
Note: The Cooperative Agreement approved by ATSDR allowed for line item differences
in the budget.
10
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MISSOURI DEPARTMENT OF HEALTH
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SCOPE OF AUDIT
The audit procedures referred to herein were performed under contract with the U. S.
Department of Health and Human Services, Office of Inspector General, to determine if
the Missouri Department of Health properly:
- disbursed Federal funds awarded in accordance with EPA laws and
regulations;
- reported costs claimed on the Financial Status Report;
- administered the cooperative agreement in accordance with the
principles of economy and efficiency; and
- adequately monitored program activities.
To accomplish the audit objectives:
- reviewed Single Audit Act audit reports and the applicable workpapers,
and held discussions with the auditor-in-charge;
- examined the Financial Status Reports;
- reviewed Federal legislation pertaining to the Superfund (Hazardous
Substance Response Trust Fund); and
- applied detailed audit procedures at the Missouri Department of Health.
Two subrecipients, St. Louis University Medical School and Allied Health Consultants,
were judgementally chosen to be audited. These subrecipients represent approximately
43% and 42% of all cooperative agreement costs incurred by the Missouri Department of
Health during the audit periods July 12, 1983 through March 31, 1987 and May 13, 1985
through September 29, 1987, respectively. We performed the audit procedures in
accordance with generally accepted auditing standards, and in accordance with audit
standards and requirements for financial and compliance audits set forth in the
Standards for Audit of Governmental Organizations, Programs, Activities and Functions
1981 Revision, issued by the U. S. General Accounting Office. In selecting sample
items for testing, we used non-statistical sampling techniques.
-------
Schedule A-2
DEPARTMENT OF HEALTH AND HUMAN SERVICES/
ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND AUDIT
MISSOURI DEPARTMENT OF HEALTH
SCHEDULE OF COSTS - COOPERATIVE AGREEMENT
U61/CCU700563-02
AUDIT PERIOD: OCTOBER 1, 1984 THROUGH MARCH 31, 1986
Personal Service
Fringe Benefits
Contractual
Travel
Equipment
Supplies
Other
Total Direct Costs
Indirect Cost
Total
Budget
$ 37,134
8,854
347,433
22,138
2,214
39,942
$457,715
17,083
$474,798
Actual
$ 42,477
9,154
267,773
8,375
1,177
56,847
$385,803
19,406
$405,209
Variance
$ (5,343)
(300)
79,660
13,763
1,037
(16,905)
$ 71,912
(2,323)
$ 69,589
Note: The Cooperative Agreement approved by ATSDR allowed for line item differences
in the budget.
13
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Schedule A-3
DEPARTMENT OF HEALTH AND HUMAN SERVICES/
ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND AUDIT
MISSOURI DEPARTMENT OF HEALTH
SCHEDULE OF COSTS - COOPERATIVE AGREEMENT
U61/CCU700563-03
AUDIT PERIOD: APRIL 1, 1986 THROUGH MARCH 31, 1987
Personal Service
Fringe Benefits
Contractual
Travel
Equipment
Supplies
Other
Total Direct Costs
Indirect Cost
Total
Budget
$ 3,500
777
57,136
3,600
Actual
$ 3,424
743
55,555
2,570
Variance
$ 76
34
1,581
1,030
3,000
$68,013
1,575
3,383
$65,675
1,541
(383)
$2,338
34
$69,588
$67,216
$2,372
Note: The Cooperative Agreement approved by ATSDR allowed for line item differences
in the budget.
16
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MISSOURI DEPARTMENT OF HEALTH
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Schedule B
DEPARTMENT OF HEALTH AND HUMAN SERVICES/
ENVIRONMENTAL PROTECTION AGENCY
SUPERFUND AUDIT
MISSOURI DEPARTMENT OF HEALTH
SUMMARY OF COSTS - COOPERATIVE AGREEMENT
U61/CCU700735
AUDIT PERIOD: MAY 13, 1985 THROUGH SEPTEMBER 29, 1987
Personal Service
Fringe Benefits
Contractual
Travel
Equipment
Supplies
Other
Total Direct Costs
Indirect Cost
Total
Budget
$ 80,736
18,654
360,704
29,900
12,404
6,500
23,650
$532,548
36,332
$568,880
Actual
$ 91,704
19,903
260,130
15,517
9,013
1,050
97,309
$494,626
38,758
$533,384
Variance
$(10,968)
(1,249)
100,574
14,383
3,391
5,450
(73,659)
$ 37,922
(2,426)
$ 35,496
=5====S5
Note: The Cooperative Agreement approved by ATSDR allowed for line item differences
in the budget.
18
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-------
lARMICHAEL.
INGLE. WHITE &.
iOMP.ANY lv
2970 Clairmont Rd., N.E.
Suite 780
Atlanta. Georgia 30329
AUDITORS' REPORT ON COMPLIANCE
We have examined Schedules A & B, Summary of Costs - Cooperative Agreements
U61/CCU700563 and U61/CCU700735 presenting the Federal share of outlays submitted by
Missouri Department of Health for the period July 12, 1983 through March 31, 1987,
and May 13, 1985 through September 29, 1987, respectively, and have issued our report
thereon, dated September 15, 1988. Our examination was made in accordance with
generally accepted auditing standards and the standards for financial and compliance
audits contained in the Standards for Audit of Governmental Organizations, Programs,
Activities,and Functions 1981 Revision, issued by the U. S. General Accounting
Office and, accordingly, included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
The management of the Missouri Department of Health is responsible for their
compliance with laws and regulations. In connection with the examination referred to
above, we selected and tested transactions and records pertinent to Schedules A & B,
Summary of Costs - Cooperative Agreement U61/CCU700563 and U61/CCU700735, presenting
the Federal share of outlays submitted by Missouri Department of Health for the
period July 12, 1983 through March 31, 1987 and May 13, 1985 through September 29,
1987, respectively. The purpose of our testing of transactions and records from the
program detailed above was to obtain reasonable assurance that the Missouri
Department of Health had, in all material respects, administered the programs and
executed the tested program transactions, in compliance with laws and regulations,
including those pertaining to financial reports and claims for advances and
reimbursements, noncompliance with which we believe could have a material effect on
the allowability of program expenditures.
20
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Our testing of transactions and records selected from the program detailed above
disclosed instances of noncompliance with those laws and regulations. All instances
of noncompliance that we found are identified in the Findings and Recommendations
section of this report, (page 25).
In our opinion, subject to the effect of the ultimate resolution of those instances
'of noncompliance referred to in the preceding paragraph, for the period of July 12,
1983 through September 29, 1987 for the items tested, the Missouri Department of
Health administered the above programs in compliance, in all material respects, with
laws and regulations, including those pertaining to financial reports and claims for
advances and reimbursements, noncompliance with which we believe could have a
material effect on the allowability of program expenditures. With respect to the
transactions and records that were not tested by us, nothing came to our attention to
indicate that the Missouri Department of Health had not complied with laws and
regulations other than those laws and regulations for which we noted violations in
our testing referred to above.
This report is intended solely for the use of management, the U. S. Department of
Health & Human Services, and the U.S. Environmental Protection Agency. This
restriction is not intended to limit the distribution of this report which, upon
acceptance by the U. S. Department of Health & Human Services, is a matter of public
record.
September 15, 1988
Atlanta, Georgia
21
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297°
ARMiCHAEL.
INGLE. WHITE &. ivute
-------
Our study included all of the applicable control categories listed above. The
management of the Missouri Department of Health is responsible for establishing and
maintaining internal control systems used in administering federal financial
assistance programs. In fulfilling that responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of control
procedures. The objectives of internal control systems used in administering federal
financial assistance programs are to provide management with reasonable, but not
absolute, assurance that, with respect to federal financial assistance programs,
resource use is consistent with laws, regulations, and policies; resources are
safeguarded against waste, loss, and misuse; and reliable data is obtained,
maintained, and fairly disclosed in reports.
Because of inherent limitations in any system of internal accounting and
administrative controls used in administering federal financial assistance programs,
errors or irregularities may nevertheless occur and not be detected. Also,
projection of any evaluation of the systems to future periods is subject to the risk
that procedures may become inadequate because of changes in conditions or that the
degree of compliance with the procedures may deteriorate.
Our study and evaluation of the internal control systems was limited to a review of
the audit work performed by other auditors whose report thereon has been furnished to
us, and a review of the systems to obtain an understanding of the control environment
and the flow of transactions through the accounting system. Internal control
weaknesses identified in the review of audit work performed by other auditors were
considered in determining the nature, timing, and extent of the audit tests
23
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to be applied in our examination of Schedules A & B, Summary of Costs - Cooperative
Agreements U61/CCU700563 and U61/CCU700735 presenting the Federal share of outlays
submitted by the Missouri Department of Health for the period July 12, 1983 through
March 31, 1987 and May 13, 1985 through September 29, 1987, respectively. In
addition, these above mentioned weaknesses were considered during our examination and
review of the Missouri Department of Health's compliance with laws and regulations,
noncompliance with which we believe could have a material effect on the allowability
of program expenditures. This report on internal control does not affect our reports
on Schedules A & B, Summary of Costs - Cooperative Agreements U61/CCU700563 and
U61/CCU700735 and on the Missouri Department of Health's compliance with laws and
regulations dated September 15, 1988. Accordingly, we do not express an opinion on
the system of internal accounting control. However, our study and evaluation and our
examination disclosed no condition that we believe to be a material weakness in
relation to the above programs of the Missouri Department of Health.
*
This report is intended solely for the use of management, the U. S. Department of
Health & Human Services, and the U.S. Environmental Protection Agency. This
restriction is not intended to limit the distribution of this report which, upon
acceptance by the U. 5. Department of Health & Human Services, is a matter of public
record.
September 15, 1988
Atlanta, Georgia
~
24
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FINDINGS AND RECOMMENDATIONS
1. EQUIPMENT CONTROL SYSTEM DEFICIENCIES
The Agency is required by both federal and state regulations to maintain a system for
managing equipment until transfer, replacement, or disposition takes place. During
the audit of property/equipment, inadequacies were discovered with regard to the
timely reporting of dispositions to property control personnel. Controls have not
been implemented within the equipment control system to insure that dispositions are
properly recorded and that existing equipment is safeguarded against theft, loss, or
unauthorized transfer.
45 CFR Part 74.140(c), states: "A control system shall be in effect to insure
adequate safeguards to prevent loss, damage, or theft of the equipment."
It is possible that equipment can be disposed of or transferred without proper
accounting in the existing equipment control system.
Recommendation
The Agency should incorporate stricter controls within the existing equipment control
system to insure that the property control personnel receive timely information
regarding equipment transfers and dispositions.
Auditee's Comments
On March 1, 1989, the Missouri Department of Health provided written comments to our
preliminary findings and recommendations. (See Appendix A for the complete text of
MDH's comments.) MDH agreed with the recommendation to incorporate stricter controls
to ensure dispositions of property are reported timely and physical, inventory and
reconciliation are performed annually. MDH stated it would require completion of
Form DH-60, Non-Expendable Property Transfer, to be forwarded to the property control
officer.
25
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Auditors' Response
These actions by the Missouri Department of Health, in our opinion, are positive
measures which will enhance the financial management of the Department's resources,
and will contribute to better ensure the integrity of assets.
26
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2. NO RECONCILIATION OF ANNUAL PHYSICAL INVENTORY
During the course of the audit of property/equipment, inadequacies were noted with
regard to the implementation of the Agency's equipment management system. The
Agency does not reconcile the annual physical inventory to the State-Wide
Accounting for Missouri (SAM) reports. The SAM reports do not have accounts
set up that distinguish equipment purchases over $1,000. Therefore, other means
were used to account for all equipment.
Per "Accounting for Nonexpendable Property in Missouri State Agencies", issued by the
Office of the State Auditor of Missouri, each state agency shall perform an annual
physical inventory, accounting for all acquisitions and dispositions in the interim.
Recommendat i on
We recommend that the Agency reconcile annual inventory counts to the SAM reports
and accounting records and account for any discrepancies to insure adequate safe-
guarding of Federal assets. These accounting records should, at a minimum,
include a description of the equipment, an identification number, identification
of the grant under which the recipient acquired the equipment, the information
needed to calculate the Federal share of the equipment, acquisition date and
unit acquisition cost, location,, use and condition of the equipment, and all
pertinent information on the ultimate transfer, replacement, or disposition of
the equipment.
Auditee's Comments
In commenting on our draft report, the Missouri Department of Health believes they
are performing adequate procedures to reconcile the physical inventory with the
property control records. (See Appendix A for the complete text of MDH's comments}.
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Auditors' Response
In our opinion, our recommendation should be enacted unless the cost of implementing
our recommendation would exceed its benefits.
28
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3. NO CLOSE-OUT SUBMISSION OF EQUIPMENT LISTING
As required per the Assistance Award Close-out Requirements an equipment listing
detailing items that cost over $1,000 must be submitted to ATSDR for Cooperative
Agreement U61/CCU70Q563 . The Agency misinterpreted the requirement and submitted a
letter to ATSDR stating that no equipment costing over $1,000 was purchased during
one of the three FSR periods, April 1, 1986 through March 31, 1987. Since ATSDR
accepted this letter and did not request any further information, the Agency thought
it had fulfilled its close-out responsibilities for equipment.
Recommendation
We recommend the Agency submit to ATSDR an equipment listing detailing items that
cost over $1,000 for all periods of Cooperative Agreement U61/CCU700562. Also, we
recommend that the same is done when Cooperative Agreement U61/CCU700735 is
closed-out.
Auditee's Comments
In commenting on our draft report, the Missouri Department of Health agreed with our
recommendation. (See Appendix A for complete text of MDH's comments). The
Department had, originally, misinterpreted the requirement.
Auditors' Iteponse
In our opinion, Missouri Department of Health's intention to prepare a detail
equipment listing for each cooperative agreement will meet the Assistance Award
Close-Out Requirements.
29
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!;•*• Missouri Department of
n_
APPENDIX A
John Ashcroft
Governor
Robert Harmon, M.D.
Director
P.O. Bon 570, Jefferson City, MO 65102 • 314/751-6400
March 1, 1989
Mr. Emil A. Trefzger, Jr.
Regional Inspector General
For Audit Region IV
Department of Health and Human Services
Region IV
P.O. Box 1704
Atlanta, Georgia 30301
Dear Mr. Trefzger:
RE: A-04-88-04068
I have received and reviewed your draft audit report
regarding the above audit of the cooperative agreements U61-
CCU700563 and U61-CCU700735 for the period July 12, 1983 through
March 31, 1987 and May 13, 1985 through September 29, 1987. The
following are my responses to the findings and recommendations
contained in the report:
1. EQUIPMENT CONTROL SYSTEM DEFICIENCIES
We concur. We have since improved the controls to ensure
dispositions are reported timely and physical inventory
and reconciliation are performed annually.
Department policy requires the transferring unit to
complete a Nonexpendable Property Transfer form, DH-60,
and forward it to the property control officer for
equipment they plan to transfer or dispose of. The
reconciliation of the physical inventory to the property
control records would highlight this item and resolve the
matter. The division director and bureau chief are held
accountable and have to explain what happened to the
items not located.
2. NO RECONCILIATION OF ANNUAL PHYSICAL INVENTORY
On September 28, 1985, the Division of Health became the
Department of Health. The Department of Health (DOH)
began retagging all items in October, 1985 and into 1986.
We feel this actually constituted an inventory. All
items that were listed on the Department of Social
Services inventory were given DOH numbers and loaded onto
our system. Another physical inventory was conducted in
early 1988 and reconciled to the property control
records. ; •.•
MAR -• 1989
i I
AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER
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2 -
APPENDIX A
Per 15CSR 40-2.031 Control of Nonexpendable Property, we
are required to reconcile the physical inventory with the
property control records. We are not required to
reconcile to the SAM reports. Equipment purchases are
expensed in the SAM reports when purchased. SAM reports
accumulate expenses incurred during the fiscal year. It
would be impossible to reconcile the physical inventory
to the SAM reports for the number of years involved.
The inventory control records indicate the identification
number, description of the item, acquisition date, unit
requisition cost, location and federal program code.
We recently implemented the federal program code
identification to know from what federal program the
property was purchased. Prior to this time, the property
was identified as being purchased with state or federal
funds .
3. NO CLOSE-OUT SUBMISSION OF EQUIPMENT LISTING
We concur. This was due to a misinterpretation of the
requirement.
Sincerely
J
£cn~-
/
Robert G.
Director
, M.D., M.P.H.
RGH:AWT:jar
P.S. Since these findings are not material, we do not feel the
need for an exit conference.
31
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