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Hw
OD1A
TABLE OF CONTENTS
PAGE
SCOPE AND OBJECTIVES ....... . ......................... 1
SUMMARY OF FINDINGS .................... ............. . 3
AGENCY COMMENTS AND OUR RESPONSE ---- ................. 4
ACTION REQUIRED ....................................... 5
•
BACKGROUND .................... ....................... 5
H
^ FINDINGS AND RECOMMENDATIONS ............ ............. 8
^ 1. Invalid Grant Obligations Need To Be
^ Deobligated ............................... 8
*Y
/V} 2. Grant Closeouts Were Not Timely . ............ 10
CT3
00
HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
MAR 3 0 1990
OFFICE OF
THE INSPECTOR GENERAL
MEMORANDUM
SUBJECT: Audit Report E1AME9-11-0041- 0100239
Review of Unliquidated Obligations in "M" Accounts
' "
FROM:
TO:
AV^^HH.^? ^Xl f\ • A»^«-«a mm j \^f if ff -- jf-^ ^ ww-
Acting Assistant Inspector General
for Audit (A-109) L
F. Henry Habicht II
Deputy Administrator (A-101)
SCOPE AND OBJECTIVES
We have completed an audit of the Environmental Protection
Agency's (EPA) policies and procedures for managing and report-
ing unliquidated grant obligations in "M" accounts. An "M"
account contains unliquidated obligations from appropriations
that expired at least two years earlier. The objectives of our
audit were to determine:
— the validity of unliquidated "M" account grant balances?
— the effectiveness of EPA's reviews of "M" account grant
balances to identify invalid obligations that should be
deobligated; and
— the accuracy, of EPA's reporting of
on year-end reports.
"M" account balances
We performed our .audit fieldwork at EPA Headquarters and EPA
Regions 2 and 5. We selected Regions 2 and 5 for detailed audit
work because these regions had the largest "M" account balances.
We also contacted officials in the other eight EPA regions by
telephone and mail to determine the validity of the unliqui-
dated obligations in our sample. Our fieldwork was conducted
during calendar year 1989.
In performing our work we interviewed, among others, officials
in the Headquarters Financial Management Division's (FMD)
Financial Reports and Analysis Branch and Fiscal Policies and
Procedures Branch. In Regions 2 and 5 we interviewed officials
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in the Grants Administration and Financial Management branches.
At these locations we reviewed policies, procedures, guidance
documents, project files, and financial report documents. In
addition, we reviewed applicable public laws and Office of
Management and Budget (OMB) and General Accounting Office (GAO)
guidance.
With regard to our first objective—to determine the validity
of unliquidated "M" account balances—we established the universe
of all unliquidated obligations as of September 30, 1987. We
selected this cutoff date to fulfill the requirements of a
Government-wide project sponsored by the President's Council on
Integrity and Efficiency (PCIE) Audit Committee. The overall
objective of the PCIE multi-agency project, which has not yet
been issued, was to assess the propriety of Federal agencies
oversight procedures and controls for unliquidated balances in
"M" accounts in accordance with applicable laws and regulations.
We used a Special Purpose Users Report (SPUR) from FMD's
Financial Management System to identify the universe of
unliquidated obligations we reviewed. We did not perform a
reliability assessment of the controls over the data in the
system. However, we did verify the data we eventually used from
the system through updating the data through fiscal 1989,
discussions with EPA officials, comparisons with other listings,
and reviews of financial and project files.
A SPUR report showed "M" account balances totalling $52.1
million. Of this amount, about half, $24.2 million, was in the
object class code representing grants, subsidies, and contribu-
tions . We concentrated our audit effort on grants because we
found there was a large number of long-standing inactive "M"
account balances in grants. We selected a judgmental sample of -
109 grant obligations totalling $14.9 million in unliquidated
obligations, or over half this object class code, for detailed
review. To compute the dollar amounts of invalid obligations, we
used the outstanding unliquidated "M" account balances at the
time we completed our field work in November 1989. These
balances were included in the Comptroller's fiscal 1989 year-end
certification of unliquidated obligations which is sent to
Treasury.
Our second audit objective was to determine the effectiveness of
EPA's reviews of "M" account grant balances to identify invalid
obligations that should be deobligated. We identified both EPA
Headquarters and regional procedures for conducting semiannual
reviews to identify invalid obligations. To test these proce-
dures, we reviewed financial documents and interviewed finance
and grant officials to determine how these reviews were
performed.
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To address our third objective—to determine the accuracy of
EPA's reporting of "M" account balances on year-end reports—we
reconciled the "M" account balances reported by EPA on Treasury
Fiscal Service Form 2108 (TFS 2108) with our SPUR report to
verify the accuracy of our universe of "M" account obligations.
Treasury uses the TFS 2108 to compile an annual report to
Congress. The GAO has completed extensive audit work
on EPA's financial reports, including the TFS 2108. We reviewed
GAO's workpapers and determined that we could rely on their work
to meet our objective of verifying the accuracy of the TFS 2108.
We reviewed the internal administrative controls relating to our
specific audit objectives. Internal controls and their effect on
program operations are described in the FINDINGS AND RECOMMENDA-
TIONS section of this report. Except where noted, we performed
our review in accordance with Government Auditing Standards (1988
revision) issued by the Comptroller General of the United States.
No other issues within the original scope of this review came to
our attention which we believe warranted expanding the scope of
the audit.
SUMMARY OF FINDINGS
EPA needs to improve the timeliness of its grant closeouts and
strengthen its semiannual reviews of unliquidated obligations to
improve the accuracy of its year-end reporting to Treasury. Our
review disclosed that $7.9 million of the $14.9 million sample of
unliquidated grant obligations in "M" accounts was invalid and .
should be deobligated. (See the schedule on page 9.) Generally,
these unliquidated obligations were found to be invalid because
regional grants and financial personnel had not taken action to
close out the grant and deobligate the remaining funds even
though the work on the grant had been completed. While regional
grants and financial officials performed semiannual reviews of
unliquidated obligations, these reviews were not always effective
in removing invalid obligations from EPA's Financial Management
System which is used to prepare the TFS Form 2108. Because of
the Agency's ineffectiveness in deobligating the invalid obliga-
tions, the EPA Comptroller's year-end certification of valid and
viable obligations for the fiscal year ending September 30, 1989,
was overstated by at least $7.6 million. ($260,299 of the $7.9
million was deobligated before we completed our review.) Since "
our review disclosed that many of the grants we identified should
have been closed out and deobligated before September 30, 1987,
the year-end certifications were also overstated for fiscals 1987
and 1988. However, we did not determine the exact amount that
could have been deobligated and how much the certifications were
overstated for fiscal 1987 and 1988.
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The Agency's treatment of these inactive, invalid grant obliga-
tions did not comply with EPA's policies and procedures govern-
ing unliquidated obligations and Section 1311 of Public Law 83-
663 which requires EPA's Comptroller to certify the amount of
obligated but unexpended balances for each "M" account. Addi-
tionally, EPA was not in conformance with OMB Circular A-127,
"Financial Management Systems," December 19, 1984, which requires
the heads of agencies, in compliance with the Federal Managers
Financial Integrity Act (FMFIA) and related statutes, to estab-
lish and maintain systems of accounting and internal control that
provide complete disclosure of the financial status of the
Agency. Specifically, full financial disclosure requirements
were not being met because EPA's year-end reporting to Treasury
on the TFS Form 2108, which is used to compile the Treasury
Combined Statement, was overstated. For fiscal 1989, the year-
end report to Treasury was overstated by at least $7.6 million.
We are recommending that current policy be supplemented and
procedures be improved to close out State program and project
grants timely and to require that the validity of each "M"
account grant obligation, without recent payment activity, be
documented during future semiannual reviews so invalid
obligations will not be reported.
A more stringent procedure should be established to prevent
invalid obligations from being certified as valid obligations on
successive semiannual reviews so that the year-end reports will
not be overstated. Although the invalid obligations did not
cause an actual dollar loss to EPA or the Federal Treasury, these
improvements will result in better grant management and a more
accurate picture of EPA's financial status. We are also recom-
mending that the regions implement the procedures established for
certifying valid obligations and closing out grants timely and:
(1) deobligate and close out the $7.6 million in grants that we
identified and (2) review the remaining $9.3 million in grants to
determine whether these grants should be closed out and the funds
deobligated. We are recommending that follow-up procedures be
used to determine whether the recommendations are being
effectively implemented.
AGENCY COMMENTS AND OUR RESPONSE
On November 9, 1989, we notified the Agency of our findings and
recommendations by issuing position papers to Agency personnel
with whom we worked during the audit. We received written
comments on the position papers which we took into consideration
when drafting the report. On January 26, 1990, we issued the
draft audit report to the Deputy Administrator and the Assistant
Administrator for Administration and Resources Management. On
March 22, 1990, we held an exit conference with Agency Head-
quarters Grants Administration Division and Financial Management
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TRANSMZTTAL SLIP
From Reference or
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REFERENCE COLLECTION I .1
GENERAL COLLECTION I 1
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INTERNATIONAL COLLECTION
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INITIALS
DATE- '
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Division personnel who presented their comments on the draft
report. As a result of the exit conference, we made some
clarifications in the report regarding grant close-out criteria.
We asked the Assistant Administrator, the designated primary
action official for the draft report; to respond to the draft
within 30 days. When Agency officials '.were not able to provide
written comments within this time, we agreed to consider their
response up until the report was signed, about 60 days after
Agency officials received the draft. We did not receive a
response to the draft audit report prior to the issuance of this
report. If we had received a response, we would have addressed
the Agency's comments here and where appropriate in the body of
the report.
ACTION REQUIRED
In accordance with EPA Directive 2750, the primary action
official is required to provide this office with a written
response to the audit report within 90 days of the audit report
date. The Deputy Administrator is the designated primary action
official for this report. For corrective actions planned but not
completed, the response should include specific milestone dates.
This will assist us in closing the report in the Prime Audit
Tracking System.
BACKGROUND
An "M" account is an account into which unliquidated obligations
from an appropriation are transferred at the end of the second
full fiscal year following the appropriation's expiration.
Chapter 4 of GAO's Federal Appropriations Law Manual states that
an obligated balance retains its fiscal year identity for two
fiscal years following the expiration date of the appropriation.
On September 30 of the second full fiscal year, any remaining
obligated but unexpended balance is transferred to a consolidated
successor account, where it is merged with the obligated balances
of all other appropriation accounts of that department or agency
for the same general purpose. The successor account is known as
the "M" account. "M" accounts are generated from one and two
year appropriations. Funds in the "M" account are available for
payment indefinitely against any of the appropriations from which
the account is derived.
The PCIE committee requested a review of "M" accounts because
it believed that many of the obligations will never require the
expenditure of funds. The PCIE believed many of the obligations
could be deobligated because they (1) may have been incorrectly
entered into the accounting system, (2) are not valid obliga-
tions, (3) have already been paid, (4) are reported incorrectly,
or (5) are longstanding obligations that will most likely never
be paid.
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Public Law 83-663, Supplemental Appropriation Act, 1955, provides
the legal requirements for recording obligations. Provisions of
this law (31 U.S.C. 15Ola) provide that no amount shall be
recorded as an obligation of the U.S. Government unless it is
supported by documentary evidence of:
(1) A binding agreement in writing between the parties
thereto, including Government agencies;
(2) A loan agreement showing the amount of the loan and
terms of the repayment;
(3) An order required by law to be placed with an agency;
(4) An order issued under a law authorizing purchases
without advertising;
(5) A grant or subsidiary payable;
(6) A liability that may result from pending litigation;
(7) Employment or services of persons or expenses of
travel under law;
(8) Services provided by public utilities; or
(9) Other legal liability of the Government against an
available appropriation or fund.
EPA is required to fulfill its responsibilities to establish and
maintain a system of internal controls in accordance with the
Federal Managers Financial Integrity Act of 1982 (FMFIA). Two
Office of Management and Budget (OMB) circulars are also of
importance. OMB Circular A-127, "Financial Management Systems,"
December 19, 1984, sets forth policies and procedures for
developing, operating, evaluating/ and reporting on financial
management systems. OMB Circular. A-123, "Internal Control
Systems/" August 4, 1986, is the implementing circular for FMFIA.
It requires agency heads to review for/ report on, and correct
agency internal control weaknesses, specifically targeting areas
where there is potential for fraud, waste and mismanagement.
Recently, the GAO issued an opinion on EPA financial statements
for fiscals 1987 and 1988. In a related management letter
(GAO/AFMD-90-21ML), dated February 26, 1990, accompanying its
opinion, GAO addressed several internal control and accounting
weaknesses at EPA. The letter states that EPA'a review
procedures, designed to assess the validity of unliquidated
obligations, continue to classify invalid obligations as valid.
The GAO letter suggested that EPA management evaluate the
Agency's policies and procedures and their implementation to
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identify and correct weaknesses which continue to allow invalid
obligations to remain in the accounting records.
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FINDINGS AND RECOMMENDATIONS
1. Invalid Grant Obligations Need to be Deobligated
Over half, $7.9 million, of the $14.9 million in unliquidated
obligations in our sample were invalid and needed to be
deobligated. Additionally, our review disclosed that delays in
grant closeouts and ineffective closeouts resulted in the
Comptroller's year-end certification of valid obligations being
overstated for at least three fiscal years, For the year ending
September 30, 1989, the certification was overstated by $7.6
million. This is the $7.9 million identified by our review less
$260,299 deobligated before we completed our fieldwork. Since
our review disclosed that many of the grants we identified should
have been closed out and deobligated before September 30, 1987,
the year-end certifications were also overstated for fiscals 1987
and 1988. However, we did not determine the exact amount the
could have been deobligated and how much the certifications were
overstated for fiscals 1987 and 1988.
A review of a SPUR report from EPA's Financial Management
System which listed all the obligations in "M" accounts as of
September 30, 1987, showed a large number of old and inactive
obligations under the object classification codes for grants,
subsidies, and contributions in the regional Servicing Finance
Offices. As a result of this observation, we reviewed unliqui-
dated obligations involving grants at the 10 Regional offices to
determine if they were still valid and viable. These grants
were funded from one and two year appropriations that expired
before fiscal year 1985. As of September 30, 1987, EPA's
financial records had a balance of $52.1 million in "M" accounts.
Of this amount, $24.2 million were grants, subsidies, and contri-
butions . We judgmentally selected 109 grant obligations total-
ling $14.9 million. Our sample focused on the larger, older
obligations, generally greater than $100/000. (See the schedule
on the next page.) To compute the dollar amounts of invalid
obligations, we used the outstanding unliquidated "M" account
balances at the time we completed our fieldwork in November 1989.
These invalid obligation balances were included in the
Comptroller's year-end certifications for fiscal 1989.
To determine whether the unliquidated obligations were valid, we
visited Regions 2 and 5 and contacted the other eight regions by
telephone and mail. We contacted officials from the Financial
Management branches, Grants Administration branches and, if
necessary, the project officers to determine whether these
obligations were still valid and viable. The Agency did not have
any detailed criteria on timeframes for the close-out process.
For the purposes of our audit, we accepted a grant obligation as
being valid if the period of performance was still in effect or
it had expired so recently that there had not been sufficient
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time to close out the,grant. The following schedule provides the
results of our determinations of the validity and viability of
the obligations.
Schedule of Obligations Reviewed
Region
1
2
3
4
5
6
7
8
9
10
Number of
Obligations
Reviewed
Amount of
Obligations
Reviewed
(9/30/87)
Balance
Number of
Obligations
Recommended
For Deobligation
and
Closeout
Amount of
Obligations
Recommended
for Deobli-
gation and
Closeout
6
23
19
1
47
3
3
1
3
3
$1,463,504
1,809,604
1,807,891
331,069
6,263,149
378,320
580,173
280,000
1,544,115
486,775
1
20
7
0
41
0
0
0
2
0
$ 27,184
1,159,820
517,014
0
5,528,568
0
0
0
636,469
0
Totals
109
$14,944,600
71
$7,869,055*
*$260,299 of this amount was deobligated after we began our
audit and before the end of fiscal 1989.
These obligations consisted primarily of older grants whose bud-
get and project periods had expired several years ago. Based on
our review of the grant files and discussions with program
officials, we determined that about 65 percent (71) of the grants
we examined, or $7.9 million, should have been closed out and
deobligated prior to our audit. Exhibit 1 provides a list of the
obligations we believe should be deobligated and the basis for
our opinion. (Note that figures from the center column of the
above schedule may come from the third or fourth columns in
Exhibit 1.)
Based on our audit, we determined that the obligations were
invalid for many reasons, including:
(1) Grants were awaiting final Financial Status Reports (FSR)
though the budget period had expired several years ago;
(2) Grants with final FSRs were awaiting closeouts for at
least three years;
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(3) Grants were awaiting closeout after the resolution of a
Single Audit in May 1988;
(4) Grants were transferred to EPA before 1980 from the
National Institutes of Health, and regional managers could
not locate files or records for these grants and could not
justify why those obligations should remain on EPA's
financial records; and
(5) Grants were forgotten by regional officials when personnel
changed.
The majority of the grants we examined were in various stages of
closeout prior to the point the funds could have been deobli-
gated. The period of performance for these grants had expired
and no future payments were due to the grantee. These obliga-
tions, listed in EPA's financial records, would not have existed
at the time of our audit if the close-out process had been com-
pleted more timely and effectively.
2. Grant Closeouts Were Not Timely
The majority of the invalid obligations consists of grants where
the physical work had been completed but the administrative work
to close out the grant had not been completed. The deobligation
of unliquidated balances is one of the final steps in the grant
close-out process. According to EPA procedures, funds should be
deobligated upon project completion, acceptance of the final FSR,
and the resolution of any audit-questioned costs. It states that
closeout of project-type grants should be completed within six
months after the end of the agreement. However, no strict
criteria exist for specifying the timeframe for closing out the
State continuing environmental grants. Chapter 40 9f the Grants
Administration Manual provides guidance on the closeout of
assistance agreements. Chapter 40 further states:
EPA should close out projects promptly.
Delay unnecessarily ties up obligated but
unexpended funds. Also, closeout becomes
more difficult as time passes because
persons responsible for various aspects of
a project resign, retire, or transfer;
memories of events are less clear; the
Interests of the Project Officer and
Project Manager shift to other matters;
and documents are lost or destroyed.
40 CFR 30.505(b) requires that an interim FSR be submitted within
90 days of the end of the budget period. For the grants we
reviewed, which fell under the provisions of 40\ CFR 30.505 (b),
there was no regulatory timeframe for submittal of final FSRs
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other than the requirement that they be submitted within a
reasonable time after completion of the grants. A regulatory
timeframe for final FSRs was established with the promulgation of
40 CFR 31.50 on March 11, 1988. This regulation requires the
grantees to submit final FSRs within 90 days of completion or
expiration of the grant unless EPA approves a time extension.
Although there is no specific time period for the receipt and
processing of the final FSR, our review in Region 2 disclosed
that extensive delays occurred between the end of the budget
period and the receipt and processing of the FSRs and subsequent
deobligations. For example, in our Region 2 sample, we identi-
fied four grants where the region had not received a final FSR.
In all cases, the budget period had expired on or before
December 31, 1986. For another five grants, the FSRs were
received, but had not been processed. In all these cases, the
final FSRs were received before December 29, 1987. Though there
were criteria for receiving and processing final FSRs, we believe
ample time has passed for closing out these grants and
deobligating the remaining funds.
Region 2 has made efforts to improve the administration of the
closeout of grants by developing policies and procedures for
ensuring that interim and final FSRs are received. However, at
the time we conducted our field work, the policies and procedures
were not fully implemented.
Our fieldwork in Region 5 indicated that a backlog of grant
closeouts also existed in this region. For example, in Region 5
our sample of grants needing deobligation and final closeout
included 13 unliquidated obligations totalling $2.4 million from
grants involved in a lengthy resolution of a single audit. The
audit was resolved when a check refunding the overpayment was
sent to Region 5 in May 1988. However, as of October 1989, the
13 unliquidated grant obligations were not deobligated.
The Servicing Finance offices had not deobligated State program
and project grants in "M" accounts because: (1) it is EPA proce-
dure not to deobligate the balances before most of the grant
closeout process is completed; (2) other responsibilities are
considered to have a higher priority for EPA's limited resources
than closing out old inactive grants and performing a thorough
analysis of unliquidated obligations in "M" accounts; and (3} the
current procedure of certifying the validity of obligations if no
information is received to the contrary makes it easier for an
invalid obligation balance to remain in an "M" account.
According to Region 5 program officials, the backlog of grant
closeouts exists primarily due to organizational priorities and
available resources. The Region 2 Grants Administration Branch
Chief stated that its backlog of grant closeouts was caused by
the region placing a higher priority on Superfund, construction,
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and recurring program grants. The Region 2 official said the
placement of organizational priorities in areas other than State
program and project grants resulted from a lack of resources.
With the advent and growth of new programs such as Superfund and
new types of water programs, and the lack of resources, the older
State program and project grants did not receive adequate
attention, according to the same official.
3. Semiannual ReviewNeeds Strengthening
One consequence of certifying invalid obligations and reporting
them to Treasury as valid was that the Agency, was not complying
with Public Law 83-663, Section 1311. We believe a more
intensive semiannual review process would identify these invalid
obligations and result in timely deobligations and improved
reporting to Treasury.
Section 1311 of Public Law 83-663 requires the certification
of unliquidated obligations of each appropriation as of
September 30, for each fiscal year. To meet the provisions of
Section 1311, EPA developed a process to review current and prior
year obligations on a semiannual basis. EPA conducted semiannual
reviews on a regular basis except for the most recent review.
The last review, which should have been completed in the fall of
1989, was cancelled due to problems with the implementation of
the Agency's new Integrated Financial Management System.
EPA Transmittal Notice 82-25, dated July 7, 1982, is EPA's
policy for the review of unliquidated obligations. The policy
requires semiannual reviews of inactive obligations. The
Transmittal Notice states:
o Contracts, Grants and Interagencv Agreements.
Unliquidated obligations of these documents
which are recorded, having no fiscal or physi-
cal activity for 12 months, will be reviewed
for validity and viability. The review of
contracts[,] grants and interagency agreements
will be certified every six months in conjunc-
tion with the fiscal year-end certification.
According to the Transmittal Notice, EPA's Financial Management
Officers are generally responsible for initiating the semiannual
review. To complete the semiannual review process, the Financial
Management Officer generates a list of inactive unliquidated
obligations. The Project Officer in the program office and
Grants Administration Division officials are the reviewers
responsible for performing a comprehensive review of the items on
the list. Under the current practice, the reviewing officials
must note those items that are invalid or not viable so that they
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can be removed from the Financial Management System. When the
reviewing officials complete the review, the listing is returned
to the Financial Management Officer. The Financial Management
Officer is responsible for deobligating those items which were
found to be invalid or not viable. In the case of grants, this
occurs when appropriate closing documents are provided. The
Financial Management Officer will certify by memorandum to
Headquarters Financial Reports and Analysis Branch the number of
obligations removed and representative dollar amount.
Regional Financial Management Officers will not deobligate grant
funds unless they are notified by regional Grants officials that
the inactive obligation is no longer valid. Grants officials
will only tell Financial Management Officers what obligations are
invalid; Grants officials will not certify the validity of all
other obligations on the list provided them. Financial Manage-
ment officials are not assured that each inactive grant obliga-
tion on the list they provided to Grants is examined and
determined to be valid. Therefore, Financial Management
officials routinely certify as valid grant obligations which
should be deobligated.
For example, in our Region 5 sample of obligations, we identified
four grants with unliquidated balances of $481,224 that should
have been deobligated years ago. These grants were transferred
to EPA from the National Institutes of Health some time before
1980. The regional officials cannot locate any of the files or
records and are unsure if they ever had any. Regional officials
agreed that these obligations could be deobligated immediately.
However, these grants were continually certified as valid obliga-
tions.
RECOMMENDATIONS
We recommend that the Deputy Administrator instructs the
Assistant Administrator for Administration and Resources
Management to develop procedures to close out State program and
project grants timely, including obtaining and processing FSRs
timely. In addition, we recommend that the Deputy Administrator
ensure that the Assistant Administrator for Administration and
Resources Management supplements current policy and improves
procedures so that future semiannual reviews document the
validity of each "M" account grant obligation without recent
payment activity. The policy should require a procedure be
established at each region to prevent grants requiring closeout
from being certified as valid obligations on successive reviews.
Certification should include a signature by a responsible
official and be accompanied by brief notes explaining the
validity of the obligation. The notes should refer to
documentation on file which supports the validity of the
obligation. The policy's effectiveness should be examined during
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the annual review of Agency financial systems conducted by system
managers and users in accordance with OMB Circular No. A-127,
December 19, 1984, and be confirmed periodically during internal
reviews performed in connection with OMB Circular No. A-123,
August 4, 1986, and the Federal Managers Financial Integrity Act.
Also, we recommend that the Deputy Administrator instructs the
Regional Administrators to:
Implement the procedures regarding certifications of valid
obligations established by the Assistant Administrator for
Administration and Resources Management and ensure that the
established procedures are followed and eliminate the
problem of certifying invalid obligations as valid.
Implement the procedures developed by the Assistant
Administrator for Administration and Resources Management
to close out State program and project grants timely,
including obtaining and processing FSRs timely.
— Deobligate and close out the $7.6 million in program and
project grants which we identified.
— Review the remaining $9.3 million in State program and
project grants to determine whether these grants should be
closed out and the funds deobligated. Although our audit
did not identify "M" account grant balances in some regions
that needed to be deobligated, all regions have a sizable
portion of the $9.3 million and should review their "M"
account grant balances. These balances are old and, as
demonstrated by the overall results of our review, these
balances frequently remain on the books when they should be
deobligated.
OTHER MATTERS
As noted above, our sample included four National Institutes of
Health grants which could be deobligated immediately. During our
review of these four grants, we noticed there were 32 similar
grants, with similar accounting information, which totalled
$365,589. These obligations involving NIH grants were not
included in our sample. However, we believe the region should
take action to review these unliquidated obligations. The obli-
gations and remaining balances are listed in Exhibit 2.
14
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EXHIBIT 1
Page 1 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 1
Obligation
Number
OP00111001
Type of
Obligation
Unknown
Unliquidated
Amount
(Balance As
of 9/30/871
$125,000.00
Reason for Action
The remaining balance
was $27,183.69. The
balance was deobligated
in November 1989. There
were two obligations in
our sample under this
grant.
15
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EXHIBIT 1
Page 2 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 2
Obligation
Number
Type of
Obligation
Unliquidated
Amount
(Balance As
of 9/30/871
Reason for Action
0000227401 NYSDEC Manpower
Development and
Training Prog.
0000278080 Virgin Islands
Water Pollution
Control Grant
0000218401 Utica, NY
Resource
Recovery Prog,
Grant
0000226201 NYSDEC Coopera-
tive Agreement
for Diagnostical
Feasibility
Study, Phase I,
for Van
Cortlandt Lake
0000213601 New Jersey DEP
Areawide waste
Treatment Man-
agement Plan-
ning Grant
0000220501 NYSDEC Lake
Classification
and Management
$7,965.00 The budget period expired
on 9/30/86. A final FSR
was submitted on
11/26/85.
$6,176.00 A final payment or deob-
ligation is needed. The
budget period expired on
4/30/80. The final FSR
was dated 12/31/82.
$69,584.00 The budget period
expired in 6/81. The FSR
dated 6/81 was received
by the region and an
audit determination was
made on 2/11/82.
$66,228.00 The budget period expired
on 12/31/84. No final
FSR has been received.
$13,996.24 A final payment or
deobligation is needed.
The budget period expired
in 12/81. The FSR was
dated 6/11/82.
$6,928.00 A final payment or
deobligation is needed.
The budget period expired
in 6/81. The final FSR
was dated 11/06/81.
16
-------
EXHIBIT 1
Page 3 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 2
Obligation
Number
Type of
Obligation
Unliquidated
Amount
(Balance As
_of_9/30/_871
Reason for Action
0000223401 Clean Lakes
Restoration
Program New
Jersey DEP
Lake Hadden
0000209780 Air Pollution
Control Program
Grant, City of
Newark,.New
Jersey
0000217802 Port Authority
of New York and
New Jersey
Cooperative
Agreement for
Resource
Recovery
0000227301 New Jersey DSP
0000209782 Newark, New
Jersey Air
Grant
0000215681 New York State
Dept. of Envir.
Conservation
. Solid Waste
Management
Program Grant
$51,756.00 Project was terminated in
2/82. A deobligation
memo was prepared, but
never signed.
$9,162.00 An amendment to the grant
recommended deobligation.
The budget period expired
in 9/80.
$6,996.00 This represents balances
due grantee. The budget
period expired in 9/80.
The final FSR was
received in 2/81.
$5,122.00 The budget period
expired on 9/15/86. A
final FSR dated 5/12/87
was received by the
region.
$5,500.00 The budget period expired
on 9/30/82. A final FSR
dated 5/19/83 was
received by the region.
$72,308.00 The balance represents an
overpayment due EPA. The
overpayment was repaid.
However, the.balance
remains on the books.
The budget period expired
in 12/81. A final FSR
was received on 11/14/86.
17
-------
EXHIBIT 1
Page 4 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 2
Obligation
Number
Type of
Obligation
Unliquidated
Amount
(Balance As
of 9/30/87^
Reason for Action
$172,723.00 The budget period expired
on 6/30/85. No final FSR
has been received. Two
obligations in our sample
were under this grant.
$105,437.00 The budget period expired
on 12/31/84. No final
FSR has been received.
0000219701 Virgin Islands
Cooperative
Agreement for
Resource
Recovery
0000219402 Mercer County
Improvement
Authority
Cooperative
Agreement for
for a Resource
Recovery Project
Development
0000225601 New Jersey DEP $319,676.00 The budget period expired
Cooperative
Agreement for
a Phase II
Implementation
Program for
North Hudson
County
0000217702 New York City
Department of
Sanitation
Cooperative
Agreement
Resource Recovery
Development
Program
(Current
balance is
$206,937.00)
on 7/01/86. The final
FSR is dated 12/29/87.
0000214001
Puerto Rico
Environmental
Quality Board
$330,838.00 The budget period expired
on 12/31/86. No final
FSR has been received.
Three obligations in our
sample were under this
grant.
$22,164.00 The budget period expired
in 12/83. Final audit
determination was made on
8/14/87.
18
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EXHIBIT 1
Page 5 of 14
"M" ACCOUNTS. NEEDING CLOSEOUT AND DEOBLIGATION
REGION 3
Obligation
Number
0000305182
Type of
Obligation
Roanoke Co,
Air Grant
Unliquidated
Amount
(Balance As
of 9/30/871
$ 162.00
0000304883
Maryland Air
Management
Division
887.40
0000310602
Delaware
Water Valley
Grant
$ 1,273.00
Reason for Action
These grants ended in
FY 85. Due to an
oversight, deobliga-
tion did not occur.
At this time, the
balance can be deobli-
gated per memo dated
9/18/89 from the Pro-
ject Officer. (Memo
went through the
Acting Chief, Air
Program Branch.)
The unliquidated
amount is the Govern-
ment's share of a sale
of federally funded
autos. Maryland has
fulfilled its obliga-
tions by reimbursing
the Federal Govern-
ment. Per memo dated
9/18/89, from the
Project Officer, the
balance can be deobli-
gated. (Memo went
through the Acting
Chief, Air Programs
Branch.)
Grant ended 12/31/83
and the water manage-
ment division closed
out this grant. The
file was disposed of
per memo dated 7/10/89
from, the Chief, Water
19
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EXHIBIT 1
Page 6 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 3
Obligation
Number
0000310602
{cont.)
Type of
Obligation
Unliquidated
Amount
(Balance As
of 9/30/871
0000305183
Roanoke Co.
Air Grant
$ 3,253.00
0000322501
Alliance for
Chesapeake
Bay Grants
$ 6,136.00
Reason for Action
Support Branch. The
balance of $1,273.00
represents monies owed
EPA, but, due to the
oldness of this grant,
it will not be pur-
sued. Per the Project
Officer, deobligation
is requested.
These grants ended in
FY 85. Due to an
overs ight, deobliga-
tion did not occur.
At this time, the
balance can be deobli-
gated per memo dated
9/18/89 from the Pro-
ject Officer. (Memo
went through the
Acting Chief, Air
Programs Branch.)
The Project Officer
told us that this
grant should have been
deobligated long ago.
In 11/84 audits were
done on these grants
and they were all
supposedly closed.
Because of this, no
file exists except
maybe in the archives.
20
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EXHIBIT 1
Page 7 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 3
Obligation
Number
0000327901
Unliquidated
Amount
(Balance As
of 9/30/87)
$235,136.00
Type of
Obligation
Columbia
Lakes In
Maryland
(Urban Storm
Control)
0000312304 Maryland'DNR $270,166.49
Reason for Action
Grant is in the
closeout process. No
work has been done
since 1987. According
to a letter to the
State of Maryland,
none of the funds can
be used.
Deobligation was
requested as a direct
result of our review.
Per 7/10/89 memo from
the Chief of the Water
Support Branch,
deobligation of this
balance was requested.
21
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EXHIBIT 1
Page 8 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 5
Obligation
Number
Type of
Obligation
0000525883 Muskegon County
Health Dept. Air
Pollution Grant
0000526580 Canton City
Health Dept.
0000526283 Cook County
Dept. of Envir.
Control Air
Pollution
Control Grant
0000526583 Canton City
Health Dept.
Air Pollution
Control Program
Grant
0000521480 Indiana State
Board of Health
Air Pollution
Control Prog.
Unliquidated
Amount
(Balance As
of 9/30/871
$159.00
0000526179 Chicago Air
Pollution
Control
Program Grant
0000521483 Indiana State
Board of Health
Air Pollution
Program Grant
$162.52
$3,723.00
$11,617.63
$108,520.00
$229,266.00
$233,888.76
0000526178 City of Chicago $324,489.00
Air Pollution
Control Prog.
Grant
22
Reason for Action
Last payment was made in
4/84.
Last payment was made in
5/83.
Last payment was made in
2/85.
Last payment was made in
12/84.
Final FSR was received
and a reconciliation to
the Financial Management
System was completed in
1984.
A refund for an overpay-
ment based on an audit
was received in 3/83.
Last payment was made in
5/84.
A refund for an over-
payment based on an
audit was received in
3/83.
-------
EXHIBIT 1
Page 9 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 5
Obligation
Number
Unliquidated
Amount
Type of (Balance As
Obligation of 9/30/87T
0000521077 Illinois EPA $396,609.24
Air Pollution
Control Program
Grant
0002091973 NIH Grant
0001088995 NIH Grant
0001089031 NIH Grant
0002089031 NIH Grant
0000535480
$ 333.00
$138,089.94
$146,933.25
$195,867.91
Ohio EPA Solid $105,256.00
and Hazardous
Waste Program
Support
0000535482 Ohio EPA $127,880.00
Hazardous Waste
Management
Program Grant
0000537980 Ohio EPA State $128,758.00
Public Water
Supervision
Program Grant
0000549801 Ohio EPA
$136,263.00
0000535480 Ohio EPA Solid $140,201.00
and Hazardous
Waste Management
Program Support
23
Reason for Action
Last payment was
6/30/87.
Region does not have any
files for the grant.
Region does not have any
files for the grant.
Region does not have any
files for the grant.
Region does not have any
files for the grant.
An audit involving the
grant was resolved in
5/88.
An audit involving the
grant was resolved in
5/88.
An audit involving the
grant was resolved in
5/88.
An audit involving the
grant was resolved in
5/88.
An audit involving the
grant was resolved in
5/88. .
-------
EXHIBIT 1
Page 10 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 5
Obligation
Number
0000531701
0000535481
0000535479
Type of
Obligation
Ohio EPA State-
wide Water
Quality Manage-
ment Planning
Ohio EPA Solid
& Hazardous
Waste Management
Program Support
Ohio EPA Solid
& Hazardous
Waste Management
Program Support
Unliquidated
Amount
(Balance As
of 9/30/87)
$143,751.69
0000539082 Ohio EPA
0000534880 Ohio EPA Air
Pollution
Control Grant
$166,108.00
$184,851.00
$200,685.00
$209,897.00
0000535478 Ohio EPA Solid $274,183.00
and Hazardous
Waste Management
Program Support
0000537981 Ohio EPA State
Public Water
System Super-
vision Grant
0000534879 Ohio EPA Air
Pollution
Control Grant
$301,626.00
$316,949.00
Reason for Action
Payment reconciliation
was completed in 11/82.
An audit was involved
with this grant.
An audit involving the
grant was resolved in
5/88.
An audit involving this
grant was resolved.
An audit involving the
grant was resolved in
5/85.
An audit involving this
grant was resolved.
An audit involving this
grant was resolved.
An audit involving the
grant was resolved in
5/88.
An audit involving this
grant was resolved.
24
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EXHIBIT 1
Page 11 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 5
Obligation
Number
Type of
Obligation
Unliquidated
Amount
(Balance As
of 9/3Q/87>
Reason for Action
0000570501 University of
Michigan Lake
Huron
Phytoplankton
Samples
0000570101 Michigan Dept.
of Natural Re-
sources Process
Characterization
Phase III
0000577001 Unknown
87.15 Final payment request
made on 9/16/82. Final
payment was never made.
443.00 Last payment was made on
7/06/83.
0000549101
Indiana State
Board of Health
State Water
Quality
Management Grant
0000543881 Wisconsin Dept.
of Agriculture
Pesticide
Enforcement and
Applicator
Certification
Programs
0000534982 Office of
Indiana State
Chemist, Purdue
University
Pesticide Use
and Marketing
Enforcement Prog,
$119,300.00
$128,738.00
The last action date was
1/30/84. The grant is in
the close-out process.
Grant closeout had
started in 8/82. Last
payment was made in
7/82.
1.00 The balance, except for
$1.00, was transferred
to another grant in
1982.
55.27 Last payment was made on
9/01/83.
25
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EXHIBIT 1
Page 12 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 5
Obligation
Number
0000529883
0000548984
0000571301
0000573383
0000516780
0000534382
0000516778
Type of
Obligation
Illinois EPA
Public Water
Supply Super-
vision Program
Illinois Dept.
of Agriculture
Certification
of Pesticide
Applicators
Program
Ohio Oept. of
Natural
Resources Under-
ground Injection
Control Program
Ohio Dept. of
Natural Re-
sources Under-
ground Injection
Control Program
Michigan Dept.
of Natural
Resources Mr
Pollution
Control Grant
Illinois EPA
Hazardous Waste
Management
Program Grant
Michigan Dept.
Of Natural
Resources Air
Pollution
Control Grant
Unliquidated
Amount
(Balance As
of 9/30/871
$ 262.00
Reason for Action
Last payment was made on
12/20/84.
$ 2,000.00
Last payment was made in
10/84.
$ 6,436.00
Last payment was made in
3/83.
$100,270.00
$115,749.00
$217,492.00
$272,275.00
26
Last payment was made in
10/83.
Final Status Report was
received in 10/82. Last
payment was made in
9/82.
Last payment was made in
2/83.
Last payment was made on
8/10/78.
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EXHIBIT 1
Page 13 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 5
Obligation
Number
Type of
Obligation
0000533401 Rochester Pure
Waters District
0000535901 Saqinaw Mich.
Demonstration
Grant
Unliquidated
Amount
(Balance As
of 9/30/871
$100,095.00
$239,297.00
Reason for Action
Memo, dated 8/03/84, to
Grants Administration
Branch requested close
out of the project.
Memo, dated 10/17/85,
showed all work had been
completed. Final pay-
ment was made on
10/08/86. Closeout was
requested on 12/22/88.
27
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EXHIBIT 1
Page 14 of 14
"M" ACCOUNTS NEEDING CLOSEOUT AND DEOBLIGATION
REGION 9
Obligation
Number
Type of
Obligation
Unliquidated
Amount
(Balance As
of 9/30/871
Reason for Action
0000932702 State Water
Resources
Control Board
California
0000921101
State Water
Resources
Control Board
California
$234,110,77 Final PSR was dated
4/86. The FSR was
received by the region in
6/89. The balance was
deobligated in 1989 after
our mail survey.
$402,358.55 Final FSR was dated
4/86. $26,188.00 was
deobligated on 9/29/89.
The remaining balance of
$376,170.55 represents a
potential payment. How-
ever, the State has not
submitted an invoice.
28
-------
EXHIBIT 2
ADDITIONAL NIH GRANTS NOT IDENTIFIED IN OUR
SAMPLE NEEDING DEOBLIGATION
REIGON 5
Obligation
Number
0001026674
0001026677
0001026683
0001088932
0001088978
0001088979
0001088980
0001089329
0001089340
0001089353
0001091973
0001092392
0001092396
0001292394
0002088932
0002088978
0002088979
0002088995
0002089313
0002089329
0002089340
0002091855
0002091857
0002091894
0002189328
0002189329
0002189349
0003088978
0003088979
0003088995
0003091857
0003191855
Unliquidated
Amount
1 Current Balanced
$1,659.00
$12,857.00
$11,255.00
$2,092.00
$6,333.00
$13,909.93
$4,180.00
$2,515.00
$6,548.00
$7,656.00
$1,799.00
$25,325.00
$10,031.00
$2,078.00
$29.00
$6,666.00
$14,091.68
$2,590.47
$8,215.76
$4,204.00
$4,272.00
$9,776.00
$13,382.00
$6,729.00
$2,638.00
$9,000.00
$18,548.00
$51,640.00
$37,832.41
$42,442.40
$21,132.00
$4,162.00
29
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APPENDIX
Inspector General (A-109)
Assistant Administrator for Administration
and Resources Management (PM-208)
Director, Office of Administration (PM-217)
Comptroller, Office of the Comptroller (PM-225)
Director, Financial Management Division (PM-226F)
Associate Administrator for Regional
Operations and State/Local Relations (A-101)
Regional Administrators
Assistant Regional Administrator for
Policy and Management, Regions 2 thorough 9
Director, Planning and Management Division,
Region 1
Director, Management Division, Region 10
Director, Grants Administration Division (PM-216F)
Agency OIG Liaison, Office of Administration
and Resources Management (H-3304)
Audit Followup Coordinator, Office of Administration
and Resources Management (PM-225)
30
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