Office of Inspector General
Report of Audit
EPA Assistance Agreements Awarded to
The National University Continuing
Education Association, Inc. (NUCEA)
E3CEL6-03-0139-7100297
September 24, 1997
EPA
350
R
97
006x
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Inspector General Division
Conducting the Audit:
Mid-Atlantic Division
Philadelphia, PA
Program Offices Involved:
Office of Pollution Prevention and
Toxics, National Program Chemical
Division
Grants Administration Division
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE INSPECTOR GENERAL
MID-ATLANTIC DIVISION
841 Chestnut Building
Philadelphia, Pennsylvania 19107-4431
(215) 566-5800
September 24, 1997
MEMORANDUM
SUBJECT:
Report on Audit of Assistance Agreements
Awarded to National University Continuing Education
Association, Inc. (NUCEA)
Report Number: E3CEL6-03-01 39-71 00297
FROM:
TO:
Carl A. Jannetti
Divisional Inspector General for Audit
Gary M. Katz, Director
Grants Administration Division
Attached is our report on Audit of Assistance Agreements Awarded to NUCEA. The
purpose of the audit was to determine whether: 1) cooperative agreements number CX-
819144 and CX-821851, awarded to NUCEA, achieved their objectives, 2) incurred costs
wore allowable and allocable, and 3) EPA adequately monitored the cooperative
agreements awarded to NUCEA. This report contains important findings and
recommendations.
This report contains findings that describe problems the Office of the Inspector General
(CIG) has identified and corrective actions the OIG recommends. This report represents
the opinion of the OIG. Final determinations on matters in this report will be made by EPA
managers in accordance with established EPA audit resolution procedures. Accordingly,
the findings contained in this report do not represent the final EPA position, and are not
binding upon EPA in any enforcement proceedings brought by EPA or the U.S. Department
of Justice.
This report makes several recommendations to the Director of the Grants Administration
Division, and also includes two recommendations to the Director of the National Program
Chemical Division. Because the majority of the recommendations in this report are
addressed to you, we have designated you as the primary action official. As such, you
should take the lead in coordinating the Agency's response.
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ACTION REQUIRED
In accordance with EPA Order 2750, you as the action official are required to provide this
office a written response to this report within 90 days. Your response should address all
recommendations, and include milestone dates for corrective actions planned, but not
completed.
We have no objection to the release of this report to the public. Should you have any
questions about this report, please contact me or Magdalene M. Cunningham at
215-566-5800
215-566-5800.
Attachment
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EXECUTIVE SUMMARY
Purpose
Results-in-Brief
The purpose of our audit was to determine whether:
* Cooperative agreements awarded to the National University
Continuing Education Association, Inc. (NUCEA) achieved
their objectives.
• Incurred costs were allowable and allocable according to
Federal regulations.
• EPA adequately monitored the cooperative agreements
awarded to NUCEA.
1. Individuals Trained Unnecessarily
The overall purpose of the cooperative agreements awarded to
NUCEA was to provide training for individuals engaged in lead
detection and abatement activities. Of the 6,134 people EPA paid
to train, 1,248 or 20 percent were not in occupational fields
related to lead detection and abatement.
2. EPA Provided Needless Fee Waivers
EPA paid the Centers, fee waivers totaling $237,000, without
receiving a benefit in return. Fee waivers of $250 were paid for
each state and local government attendee. The purpose of the fee
waivers was to encourage state and local government employees
participation in the training. However, EPA had already paid the
Centers the full cost of training each attendee, including state and
local government personnel. As a result, paying fee waivers to the
Centers was unnecessary and unwarranted.
3. Sustainability of Centers Delayed
The six Centers established and funded under the NUCEA
cooperative agreements were to be self-sustaining by May 1993,
but did not achieve "sustainability" until 1997. EPA continued to
award funds to NUCEA and the Centers during fiscal years 1993,
1994, 1995, and 1996 without determining if the Centers had
achieved "sustainability" or required the additional Federal
in
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Recommendations
Agency Response
funding. As a result, EPA awarded Federal funds totaling $5.1
million to achieve a goal it may have already reached.
i
4. Oversight Needs Improvement
The project officers in the National Program Chemical Division of
the Office of Pollution Prevention and Toxics did not adequately
monitor the two agreements awarded to NUCEA.
5. Questioned Costs
We reviewed $1,684,698 of the $3,393,264 Federal share
claimed by NUCEA. We questioned $733,878 as ineligible and
$218,382 as unsupported. Costs were questioned because
NUCEA did not prepare an indirect cost rate proposal as required
by OMB Circular A-122 and because NUCEA provided needless
fee waivers as discussed above. In addition, we questioned costs
invoiced by a subrecipient, the University of Maryland. The
University's invoices did not agree with its general ledger, the
University did not subtract program income from costs incurred,
and the University could not adequately support their in-kind
contributions.
We recommend the Director of the National Program Chemical
Division ensure that costs are only incurred as needed to achieve
the objectives of assistance agreements. This would prevent funds
from being expended to 1) train individuals unnecessarily,
2) provide needless fee waivers, and 3) support centers that are
already self-sustaining.
We also recommend that the Director of the Grants
Administration Division recover the amounts due EPA identified
on the exhibits.
The Director of the National Program Chemical Division agrees to
ensure that costs are only incurred as needed to achieve the
objectives of assistance agreements. However, the Director does
not agree that individuals were trained unnecessarily, that the fee
waivers were needless, or that the funding to the centers should
have been discontinued sooner.
The Grants Administration Division and the National Program
Chemical Division (formally the Chemical Management Division)
IV
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OIG Evaluation
are working with representatives of NUCEA to obtain any
available documentation which will enable them to determine the
final allowability of costs. During resolution of the final audit,
they will reduce the allowable cost of the projects if costs are
determined unallowable and recover any related overpayments.
Our position on the findings remains unchanged. However, we
concur with the joint effort of the Grants Administration Division
and the National Program Chemical Division to resolve the
questioned costs identified in the report.
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VI
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TABLE OF CONTENTS
EXECUTIVE SUMMARY jjj
CHAPTER 1 1
INTRODUCTION 1
Purpose 1
Background 1
Prior Audit Coverage 3
Scope and Methodology 3
CHAPTER 2 7
IMPROVEMENTS NEEDED IN TRAINING PROCEDURES 7
1. Individuals Trained Unnecessarily 7
2. EPA Provided Needless Fee Waivers :... 9
3. Sustainability of Centers Delayed 12
4. Oversight Needs Improvement 14
RECOMMENDATIONS 17
CHAPTER 3 19
COSTS CLAIMED BY NUCEA 19
RECOMMENDATIONS 25
CHAPTER 4 26
UNIVERSITY OF MARYLAND COSTS 26
RECOMMENDATIONS 36
CHAPTER 5 38
UNIVERSITY OF MASSACHUSETTS COSTS 38
RECOMMENDATIONS 40
APPENDIX A — AGENCY'S RESPONSE 41
APPENDIX B — NUCEA'S RESPONSE 52
APPENDIX C — UNIVERSITY OF MARYLAND'S RESPONSE 56
VII
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APPENDIX D — UNIVERSITY OF MASSACHUSETTS' RESPONSE 66
APPENDIX E - REPORT DISTRIBUTION 68
Vltl
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CHAPTER 1
INTRODUCTION
Put-pose
Background
The purpose of our audit was to determine whether:
• Cooperative agreements awarded to the National University
Continuing Education Association, Inc. (NUCEA) achieved
their objectives.
• Incurred costs were allowable and allocable according to
Federal regulations.
• EPA adequately monitored the cooperative agreements
awarded to NUCEA.
EPA wanted to offer two training courses throughout the country.
One of the courses was for lead inspectors and the other for
supervisors and contractors performing lead abatement. Through
these training courses, EPA wanted to maximize accessibility and
public awareness of lead-based paint abatement.
In July 1991, NUCEA submitted a proposal to EPA to manage and
coordinate the establishment and operation of a Regional Lead
Training Center program. The Centers served as the primary
mechanism for delivering EPA's training courses across the
country. EPA selected NUCEA based on their capacity to
efficiently develop and manage complex national continuing
education and training programs.
NUCEA is a 75 year-old nonprofit organization with a
membership of over 100 universities having vast experience in
establishing national training programs. In 1989, NUCEA merged
with the Association of Colleges and Universities in Environmental
Training and Education in order to add an environmental health
and safety component to the organization. NUCEA's members
with lead related expertise prior to the award of the cooperative
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agreements included the University of Cincinnati, Georgia
Technical Institute, and Tufts University. EPA worked with these
three educational institutions on previous lead related projects.
On September 12, 1991, EPA awarded $1,334,255 to NUCEA
under cooperative agreement number CX-819144. Amendments
to this cooperative agreement brought the total award amount to
$2,348,611. The objective of this agreement was to provide the
primary mechanism for delivering the EPA model training courses
to lead abatement professionals across the country. According to
EPA's decision memorandum dated August 2, 1991, funding for
this project was appropriated by Congress for grants to be awarded
to universities for education and training programs for workers
involved in lead-based paint abatement.
On September 29, 1993, EPA awarded cooperative agreement
number CX-821851 to NUCEA for $1,194,342. Amendments to
this cooperative agreement increased the total award amount to
$1,970,862. This agreement provided for the coordination and
evaluation of Centers to facilitate lead abatement training
opportunities across the country. According to the EPA project
officer (PO), this second cooperative agreement was intended to
be an extension of the first agreement. The objective was to
extend the project period and provide additional funds for the
operation of the Centers.
In coordination with EPA, NUCEA established an advisory panel
to select the educational institutions that would comprise the
Regional Lead Training Center program. They chose the following
six educational institutions: University of Maryland, University of
Massachusetts, University of Cincinnati, University of California,
University of Kansas, and the Georgia Technical Institute. NUCEA
was responsible for working closely with these institutions to
establish Centers at each institution, coordinate their training
activities, and ensure the continued existence of the Centers
beyond the period of EPA funding. Shown below are the Federal
share of costs claimed by NUCEA and the six Centers from
September 1991 through December 1994.
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NUCEA $484,736
University of Maryland 464,732
University of Massachusetts 564,730
University of Cincinnati 440,125
University of California 491,398
University of Kansas 426,543
Georgia Technical Institute 521.000
Total Federal Share Claimed $3.393.264
Prior Audit
Coverage
Scope and
Methodology
In September 1995, the EPA Office of Inspector General (OIG)
issued the Final Report of Audit on EPA's Controls Over Assistance
Agreements, report number E1FMF4-03-0141-5100513. The audit
found weaknesses in EPA's controls for awarding, monitoring, and
closing out agreements. One of the cooperative agreements
reviewed during that audit was CX-819144, which is discussed in
this report.
We performed this audit according to Government Auditing
Standards (1994 Revision) issued by the Comptroller General of
the United States as they apply to financial and performance
audits. Our review included tests of records and other auditing
procedures we considered necessary.
Our audit survey began on March 18, 1996, and ended on June
28, 1996. As a result of the survey, we initiated an in-depth audit
that was performed from July 1, 1996 through September 25,
1996 and from January 27, 1997 through March 25, 1997.
Our audit encompassed the project period of both cooperative
agreements. Cooperative agreement number CX-819144 covered
the period September 12, 1991 to September 30, 1993. The
original project period for cooperative agreement number CX-
821851 was from October 1, 1993 to December 31, 1996.
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However, EPA discontinued providing funds to NUCEA two years
earlier and a final project report was submitted on December 31,
1994. As of our review, neither cooperative agreement had been
closed by EPA.
Our audit was conducted at EPA, NUCEA, the University of
Maryland and the University of Massachusetts. Our audit at EPA
included reviewing the grant specialists' and POs' files and
evaluating the Agency's monitoring of the two cooperative
agreements. Also, we conducted several interviews with the POs
and grants specialists to discuss issues regarding program
development, administration, and close-out procedures. Our
audit included determining the allowability and allocability of
NUCEA's incurred costs by examining and testing numerous
accounting documents. We also evaluated NUCEA's management
of grant funds and its monitoring of the six Centers. Finally, we
audited the costs incurred by the University of Maryland and the
University of Massachusetts.
As part of our audit, we examined and tested various accounting
records, reports, correspondence, and original supporting
documents. We evaluated EPA's, NUCEA's, and the Universities'
compliance with the: Code of Federal Regulations, OMB
Circulars, EPA policies, and the EPA Assistance Administration
Manual, as they related to our audit objectives.
We sampled costs incurred by NUCEA and the two Universities
under each of the following cost categories: personnel, fringe
benefits, travel, equipment, supplies, contractual, and other direct
costs. In addition, we evaluated the appropriateness of the
indirect costs, in-kind contributions, and program income. We
determined if the costs were adequately supported and
represented eligible and reasonable expenses.
We reviewed NUCEA's and the Universities' Single Audit Reports
for the fiscal years ending June 30, 1993, 1994, and 1995. These
reports included assessments of the internal control systems and
were prepared to fulfill the requirements of the Single Audit Act
and OMB Circulars A-110 and A-133. For the most part, we relied
on the internal control assessments in these Single Audit Reports.
However, we did perform limited testing of NUCEA's and the
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Universities' internal controls as they related to the costs incurred
under the cooperative agreements. We did not evaluate the
internal controls associated with the input and processing of
accounting information into automated records, although we used
information contained in these automated accounting systems.
We discussed the results of our audit with representatives from the
following entities that were responsible for managing the
cooperative agreements and the Centers:
• EPA Grants Administration Division,
• EPA National Program Chemical Division,
• NUCEA,
• University of Maryland Financial Services Department,
• University of Maryland Environmental Health Education
Center,
• University of Massachusetts Controller's Office, and
* University of Massachusetts Division of Continuing Education.
We issued a draft report on May 15, 1997. NUCEA submitted
their response to us and EPA on July 17, 1997. EPA provided us
their response on August 5, 1997. After evaluating the responses
and reviewing additional documentation provided by NUCEA, we
have modified our report as appropriate. We conducted an exit
conference with NUCEA's accountant on September 9, 1997 and
EPA personnel on September 11, 1997.
EPA's response is summarized after each issue in Chapter 2 and
after the recommendations in Chapters 2, 3, 4 and 5. The
responses from NUCEA, the University of Maryland and the
University of Massachusetts are summarized at the end of
Chapters 3, 4 and 5, respectively. Following each summary, we
provided our evaluation of the response. In addition, we included
complete copies of the responses as appendixes to the report.
However, due to the volume, we have not included the additional
documentation attached to the responses.
To assist in obtaining a proper understanding of the report, we
have defined the following key terms:
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COSTS CLAIMED: Costs identified by NUCEA as eligible for
Federal participation.
ACCEPTED COSTS: Costs accepted by the QIC as eligible for
Federal participation.
COSTS QUESTIONED: Costs that are questioned by the OIG
because they are:
a) INELIGIBLE — Incurred and claimed contrary to a
provision of a law, regulation, contract, grant, cooperative
agreement, or other agreement or document governing the
expenditure of funds.
b) UNSUPPORTED — Not supported by adequate
documentation and/or has not been approved by
responsible program officials.
EPA PAYMENTS TO DATE: This amount includes funds disbursed
by EPA to NUCEA. These funds encompassed both
reimbursements for costs incurred and advance payments.
BALANCE DUE EPA: This amount should not be construed as
being the final determination of questioned costs. The amount
may vary depending upon EPA resolution.
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CHAPTER 2
IMPROVEMENTS NEEDED IN TRAINING PROCEDURES
1. Individuals
Trained
Unnecessarily
More than 1,200 of the 6,100 people EPA paid to train were not in
occupational fields related to lead detection and abatement.
Moreover, neither EPA nor NUCEA had information about the
occupation of an additional 800 attendees. This occurred because
neither EPA, NUCEA nor the Centers ensured attendees were in
occupational fields relevant to the training. As a result, EPA funds
were unnecessarily expended on individuals that did not need or
use the training.
According to EPA's decision memorandum dated August 2, 1991,
the cooperative agreement awarded to NUCEA was for education
and training programs for workers involved in lead-based paint
abatement. The overall purpose of the cooperative agreements
awarded to NUCEA was to provide this training.
NUCEA's final project report to EPA, dated December 31, 1994,
included statistics on the occupations of individuals that attended
the Lead Inspector, and Lead Abatement for Supervisors and
Contractors courses. These statistics show that NUCEA and the
Centers provided training to a substantial number of people that
were not involved with lead abatement. In its final report,
NUCEA grouped lead-related occupations into the following nine
categories: Public Housing Authority, Carpenter/Remodeler,
Government Official, Industrial Hygienist, Building Contractor,
Environmental Consultant, Facilities Manager, Building Inspector
and Public Health Official. According to NUCEA's statistics on
the Lead Inspector course, 543 or 17 percent of the 3,196
participants responded that their occupation was something other
than one of the nine lead-related fields. An additional 320 or 10
percent did not respond. The statistics on the Lead Abatement for
Supervisors and Contractors course showed that 705 or 24 percent
of the 2,938 participants had occupations in other than lead-
related fields. An additional 499 or 17 percent did not respond.
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Agency Response
OIG Evaluation
We also conducted a survey of training participants to determine if
they thought the course was beneficial and applicable to their
occupations. We contacted 53 of approximately 6,100
individuals who received training between 1992 and 1994.
Twelve or 23 percent of the participants contacted did not find the
training beneficial. One participant stated that she volunteered for
the training, however, the information was not needed for her job.
A second participant stated that the information may be helpful in
the future, however, he did not currently deal with lead. A third
participant stated he took the training for personal interest.
As prescribed by the cooperative agreements, EPA awarded funds
totaling $6.1 million to NUCEA and the Centers to train
individuals engaged in lead detection and abatement. However,
we believe these funds were not utilized as originally intended by
the Agency to accomplish the objective stated in their decision
memorandum.
We disagree with the report's conclusion that individuals were
trained unnecessarily. EPA's policy in awarding these cooperative
agreements was to encourage entry into the lead-based paint
profession. We did not require students taking training to be in
similar occupational fields. To have done this would have
defeated one of the primary purposes of the Training Centers — to
encourage entry of individuals into the new field.
The statements from the three individuals interviewed of the 6,100
trained, do not lead to the report's conclusion that individuals
were trained unnecessarily.
There is no relation between the 1992 Appropriation Act and the
NUCEA cooperative agreements. The cooperative agreements
were awarded under the statutory authority of the Toxic
Substances Control Act, Section 10.
Our position on this issue remains unchanged, in our opinion, to
effectively achieve the objective of increasing the number of
professionals in the field of lead-based paint abatement, the
training applicants should have been pre-screened to ensure the
individuals EPA was paying to train would potentially use the
training in a future job related to lead paint abatement.
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2. EPA Provided
Needless Fee
Waivers
The three statements from individuals that attended the training
were included as examples. We spoke to a total of 53 individuals
that attended the training and 12 did not find the training useful.
In our opinion, the results of the 53 interviews and NUCEA's final
report support our position that individuals were trained
unnecessarily.
We concur with the Agency's statement regarding the Toxic
Substances Control Act and have removed all references to the
1992 Appropriations Act from our report for clarity.
EPA paid the Centers fee waivers, totaling $237,000 under CX-
821851, without receiving a benefit in return. Fee waivers of
$250 were paid for each state and local government attendee.
The purpose of the fee waivers was to encourage state and local
government employees participation in the training. However,
EPA had already paid the Centers the full cost of training each
attendee, including state and local government personnel. As a
result, paying fee waivers to the Centers was unnecessary and
unwarranted.
The fee waivers were inappropriate because they were paid in
addition to the reimbursement of costs. For example, the Georgia
Technical Research Institute received $241,000 under cooperative
agreement CX-821851 as reimbursement for costs incurred. This
amount included all costs for providing the training and
maintaining the Center, such as salaries, fringe benefits, travel,
equipment, consultants, materials, supplies, contractual and
indirect costs. In addition to the reimbursement for costs, the
Center received $250 for each state and local government
employee that attended their training, totaling $51,500. This
$51,500 was paid, although the Center did not incur additional
training costs for state and local government attendees.
Under cooperative agreement CX-821851, EPA budgeted
$375,000 for fee waivers. Of this budgeted amount, EPA paid
each Center the following:
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University of Maryland $32,750
University of Massachusetts 33,750
University of Cincinnati 75,500
University of California 31,250
University of Kansas 12,250
Georgia Tech Research 51.500
Total $237.000
NUCEA Response
EPA's guidelines for the cooperative agreement required NUCEA
to develop criteria and a plan for allocating the $375,000 among
the six Centers. The Centers were required to develop and
implement a plan for determining which state and local
governments would receive the fee waivers. However, the plans
were not developed and implemented by NUCEA or the Centers.
Instead, NUCEA paid the Centers $250 for each state or local
government employee trained.
According to EPA, the fee waivers were provided because they
believed the courses would expedite state and local government
employees awareness of Federal requirements for lead paint
abatement, and encourage states to develop their own statutes and
programs. In our opinion, if EPA wanted state and local
government personnel trained, they should have required, as a
condition of the cooperative agreement, a goal that a certain
number or percentage of the individuals trained be state or local
government personnel. Since EPA was already reimbursing the
Centers for their costs, EPA should not have provided these
additional funds, totaling $237,000.
The fee waivers were a tuition assistance program that was
implemented in response to the Agency's guidelines for
cooperative agreement CX-821851. The Agency's letter of June
15, 1993 specifically stated that $375,000 must be set aside for
this program. The Agency's guidelines call for the development of
criteria and a plan for the program. The plan that was developed
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Universities
Response
Agency Response
for the allocation of funds provided that they would be allocated
to each of the centers on a need basis.
The report states that EPA should not have provided the funding of
the fee waiver program because the centers were already being
reimbursed for their costs. The costs for which the centers were
being reimbursed, were those associated with the establishment
and maintenance of the centers. The costs for the courses should
have been entirely supported by the tuition charges for them. The
fee waivers were to serve as a method of tuition reduction to
allow local and state government officials to attend a course that
they may not otherwise be able to attend.
The University of Maryland and the University of Massachusetts
believe the fee waivers were received in accordance with their
agreement with NUCEA and therefore the costs should not be
questioned.
We disagree with the report's conclusion that EPA provided
needless fee waivers to the institutions providing the training
under the NUCEA cooperative agreement. In addition, there is a
conflict between the first and last paragraphs under this section in
the draft report regarding EPA's policy for providing fee waivers.
The purpose of the fee waivers was to encourage state and local
government employees participation in the training, to expedite
their awareness of Federal requirements for lead paint abatement,
and, most important, to encourage states to develop their own
statutes and programs (not procedures).
We believe it would be inappropriate for EPA, as a condition of
the cooperative agreement, to require that a certain number or
percentage of the individuals trained be state and local
government personnel. We are not in a position to force state or
local government employees to attend training.
The fee waivers were built into the budget of the cooperative
agreement. Subsequently, the recipients should have used all
funding provided to support the training centers. The fact that the
Centers did not collect tuition from state and local government
officials which were granted fee waivers does not necessarily
mean that the waivers were funds in excess of the costs of
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program operations. The number of state and governmental
employees trained makes clear that our approach was a success.
OIG Evaluation
3. Sustainability of
Centers Delayed
We disagree that it would be inappropriate to require a certain
number or percentage of the individuals trained to be state and
local government personnel because it would force state or local
government employees to attend training. The Agency could have
included in the cooperative agreement a special condition that
specified as a goal, a number or percentage of government
personnel to be trained. This would not have forced any state or
local government personnel to attend, but would have encouraged
the Centers to recruit the government personnel. We also do not
believe this method would have denied training to others because,
as your response substantiates, the Centers were under-utilized
and could have conducted additional courses to fulfill the
demand.
We have noted the comments that the recipients should have used
all funding to support the training centers. However, we wish to
reemphasize what was included in our finding, "EPA had already
paid the Centers the full cost of training each attendee, including
state and local government personnel." The cost to train these
people was already claimed by the Centers and paid for by EPA
under the cooperative agreement. The Centers invoiced NUCEA
for the costs incurred, usually on a monthly or quarterly basis.
These invoices identified the amounts incurred, during the month
or quarter, for each cost category, such as salaries, fringe benefits,
travel, supplies, etc. The Centers sent separate invoices for the fee
waivers which were, in effect, duplicative claims.
We concur with the Agency's statement that the purpose of the fee
waivers was to encourage the development of state programs, not
procedures. Also we concur with the Agency's statement
regarding the confusion between the two different references to
the Agency's purpose for providing fee waivers. We have revised
our report accordingly.
EPA initially planned to provide NUCEA and the six Centers a
total of approximately $1 million during fiscal years 1991 and
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Agency Response
1992, and for the Centers to be self-sustaining by May 1993;
However, EPA continued providing funds to the Centers during
fiscal year 1993, and the three succeeding fiscal years, without
determining if the Centers required the additional funding. As a
result, EPA spent an additional $5.1 million to achieve a goal it
may have already reached.
Although the Centers received $250 fee waivers from EPA for each
state and local government attendee, as well as tuition revenue of
as much as $625 per person from all other trainees, the Centers
were not considered by EPA to have achieved "sustainability" until
1997. This was the first year that EPA did not provide funding to
the Centers. In the interim, between fiscal years 1993 and 1997,
EPA did not determine whether the fee waiver and tuition revenue
was sufficient to cover the costs of the courses, thereby making
the Centers self-sustaining.
The comparison of the courses scheduled in 1997, to those
completed in prior years, indicated that the Centers could have
functioned sooner without EPA funding. For example, the
University of Maryland received tuition revenue of $147,261 from
21 courses in 1993. This represents an average of $7,000 per
course. In the first three months of 1997, the University of
Maryland gave five courses with an additional 12 planned, for a
total of 17 courses in 1997. Since the Centers are providing fewer
courses in 1997 without EPA funding, than in 1993 when they
received EPA funding, we believe the Centers could have been
considered self-sustaining before fiscal year 1997.
We disagree with the reports conclusion that EPA should have
terminated funding sooner. The report is correct in indicating that
in 1991 when EPA initially awarded the cooperative agreement
our intent was that EPA would provide funding for only a few
years. However, with the October 1992 enactment of Title X-The
Residential Lead-Based Paint Hazard Reduction Act, the time
frame under which the Centers could become self-sustaining was
extended. This extension was given because Title X placed new
mandates on EPA which included promulgating.regulations to
establish a Federal Lead Program to accredit training providers,
certify lead-based paint professionals, and establish work
standards. The regulations establishing the accreditation and
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OIG Evaluation
4. Oversight Needs
Improvement
certification requirements were not promulgated until August
1996. Without these regulations in place, the demand for lead-
based paint professionals was inadequate to assure the Centers
could be self-sufficient. As a result, EPA's policy decision was to
continue to fund the Centers to ensure that a work force of trained
individuals would be available to meet consumer demand when it
developed after the regulations were in place.
As stated in the report, the centers are now self-sustaining.
Therefore the title of the this section should be changed from
"Centers Not Self Sustaining" to "Centers Became Self Sustaining
After Originally Planned."
Our position on this issue remains unchanged, however, we have
revised the title for this section of the report.
Although we agree that Title X placed more mandates on EPA and
that the new regulations could increase demand for trained lead-
based paint abatement professionals, we do not agree that the
delayed regulations alone were sufficient reason to continue to
provide funding to the Centers that were supposed to be self
sustaining by May 1993. In our report, we provided the example
that the University of Maryland provided more courses in 1993
than in 1997 which was after the regulations were promulgated.
In our opinion, this supports our position that if the lower demand
in 1997 is enough to support the Centers, then the Centers may
have been self-sustaining prior to 1997. We maintain our position
that EPA should have determined if the Centers required
continued funding before awarding an additional $5.1 million.
Oversight of assistance agreements needs improvement. The
Project Officers (PO) from the National Program Chemical
Division of the Office of Pollution Prevention and Toxics did not
adequately monitor the two agreements awarded to NUCEA. This
condition is a systemic problem with the Agency that was the
subject of OIG audit reports issued over the past several years. It
is imperative that EPA provide adequate monitoring over
assistance agreements to ensure Federal funds are managed
properly.
14
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According to Chapter 44 of the EPA Assistance Administration
Manual, project officer's responsibilities include:
• Having a thorough knowledge of the terms and
conditions of the project,
• Insisting on high quality and timely progress
reports,
• Obtaining and reviewing financial status reports
(FSR) to ensure the proper use of the funds,
• Notifying the grant specialist that the final
project report was completed, and
• Certifying completion of the project and assisting
in the close-out process.
We found several weaknesses in the PO's oversight of the NUCEA
cooperative agreements as identified below.
• Our initial discussions with the PO in April 1996 revealed that
she did not know some of the basic facts concerning the
assistance agreements. For example, she believed only one
cooperative agreement was awarded to N UCEA and that the
agreement was closed.
This same PO attended the Agency's revised PO training
course in January 1997. However, an interview in March
1997 revealed that the PO was still unaware that her
responsibilities included preparing close-out memorandums,
obtaining and reviewing final FSRs, and obtaining a final
project report for each cooperative agreement.
• Discussions with NUCEA revealed that a total of eight different
POs were assigned to the two assistance agreements. We
believe this is an excessive number of individuals because the
two agreements lasted only about three years, October 1991
through December 1994.
• The PO did not require NUCEA to prepare a final project
report for CX-819144 that was due on December 31, 1993.
The PO required only one report encompassing both
agreements. This report was submitted on December 31,
1994, the end of the project period for CX-821851.
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Agency Response
• Cooperative agreement CX-819144 was sti 11 open three years
after the project period and CX-821851 remained open two
. years after the project period. This occurred because the PO
did not request the final FSR from NUCEA or prepare a close-
out memorandum for the grant specialist. In accordance with
40 CFR 30.505, a final FSR was due by December 31, 1993 for
the first agreement and by March 31, 1995 for the second
cooperative agreement. As of March 1997, the PO had not
received the final FSRs or initiated close-out of the cooperative
agreements.
On a positive note, we found that the PO took appropriate action
after determining that NUCEA's progress reports were inadequate.
NUCEA did not prepare quarterly progress reports as required by
the cooperative agreement special conditions. Instead, NUCEA
forwarded progress reports it received from the six Centers. The
PO contacted NUCEA regarding the inadequate reports, sent a
letter identifying the need to correct the reports, and performed a
site visit to discuss the inadequate reports.
Previous OIG reports provided recommendations to improve the
Agency's oversight of assistance agreements. In addition, the
Agency included this issue as a material weakness in its 1996
Integrity Act Report To The President And Congress. The
projected completion date of planned corrective actions for this
weakness is 1998. Therefore, no recommendations related to
"Oversight Needs Improvement" are being made at this time.
The portions of Chapter 44, EPA Assistance Administration
Manual, related to project officer responsibilities were superseded
in 1995 with a manual entitled Managing Your Financial
Assistance Agreement: Project Officer Responsibilities.
The number of project officers assigned to the NUCEA cooperative
agreement was a result of several factors. The Office of Pollution
Prevention and Toxics underwent a reorganization in 1992
resulting in significant staffing shifts. As a result, the individuals
previously dealing with the cooperative agreements were not
placed in the organization that became responsible for the Lead
Program. Further there was high staff turnover during this period.
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DIG Evaluation
RECOMMENDATIONS
Agency Response
The assignment of new project officers was largely because
project officers had transferred to different jobs or left the Agency.
There is no solution to that problem.
Our position on this issue remains unchanged. Although the
criteria related to project officers' responsibilities was superseded,
the Assistance Administration Manual was the applicable criteria
during the period of the NUCEA cooperative agreements. In
addition, the new criteria includes similar wording regarding the
project officers' responsibilities.
Although there is no solution to the need of assigning numerous
project officers to an agreement, it is important to ensure an
orderly transition is made when POs change so that requirements
are monitored and missing items are obtained.
We recommend the Director of the National Program Chemical
Division ensure that costs are only incurred as needed to achieve
the objectives of assistance agreements. This would prevent funds
from being expended to 1) train individuals unnecessarily, 2)
provide needless fee waivers, and 3) support centers that are
already self-sustaining.
The Director of the National Program Chemical Division agrees to
ensure that costs are only incurred as needed to achieve the
objectives of assistance agreements. However, the Director does
not agree that individuals were trained unnecessarily, that the fee
waivers were needless, or that the funding to the centers should
have been discontinued sooner.
Grants Administration Division and National Program Chemical
Division are working with representatives of NUCEA to obtain any
available documentation for costs which will enable them to
determine the final allowability of costs. During resolution of the
final audit, they will reduce the allowable cost of the projects if
costs are determined unallowable and recover any related
overpayments.
Ensuring that claimed costs were actually incurred is something
that can only be verified by an audit of the recipient's accounting
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OIG Evaluation
records for a particular grant. The role of the program office for
this grant is to ensure the reasonableness of costs claimed for
reimbursement by a grantee. An underlying assumption is that
grantees are operating in good faith and that they are truthfully
and accurately reporting claimed costs. We are not in a position
to question this good faith reporting, nor should we. Ascertaining
the veracity of claimed costs is thus beyond the scope of
responsibility for a program office and is a function of government
auditors.
We concur with the planned efforts of the Grants Administration
Division and the National Program Chemical Division to resolve
the questioned costs identified in Chapters 3, 4 and 5 of this
report. However, we do not concur with the Agency's statement
that determining the veracity of claimed costs is beyond the scope
of responsibility for a program office. According to the Ass/stance
Administration Manual, project officers' responsibilities include:
1) reviewing financial status reports to ensure the proper use of
funds and 2) having a thorough knowledge of the terms and
conditions of the project. The terms of an assistance agreement
include the budget and the applicable federal regulations and cost
principles. Since the Office of Inspector General can only audit a
small number of assistance agreements, it is essential that project
officers and grant specialists also ensure that costs claimed on
their assistance agreements are allowable.
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CHAPTER 3
COSTS CLAIMED BY NUCEA
ALLOWABILITY ANALYSIS OF COSTS CLAIMED BY
THE NATIONAL UNIVERSITY CONTINUING EDUCATION ASSOCIATION, INC.
FOR THE PERIOD SEPTEMBER 12, 1991 THROUGH DECEMBER 31, 1994
UNDER EPA COOPERATIVE AGREEMENTS CX-819144 AND CX-821851
AUDITORS' OPINION
COSTS
CLAIMED ACCEPTED UNAUDITED INELIGIBLE UNSUPPORTED
$1,996,179 $589,218 $987,104 $183,357 $236,500 Exhibit 3-1
AGREEMENT
CX 819144-01
CX 821851-01
T*al $3 705.176 $1.054.164 $1.708.566 $539.193
Federal Share Claimed: $3,393,264
1 708.997
464.946
721.462
LIJSS Federal Share Questioned:
Ineligible Costs $733,878
Unsupported Costs 218.382
Total Allowable Federal Share
Total EPA Payments To Date
Total Balance Due EPA
952.260
$2,441,004
3.393.264
355.836
166.753 Exhibit 3-2
S4Q3.253
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EXHIBIT 3-1
ALLOWABILITY ANALYSIS OF COSTS CLAIMED BY
THE NATIONAL UNIVERSITY CONTINUING EDUCATION ASSOCIATION, INC.
FOR THE PERIOD SEPTEMBER 12, 1991 THROUGH SEPTEMBER 30,1993
UNDER EPA COOPERATIVE AGREEMENT CX-819144
AUDITORS' OPINION
COSTS
CATEGORY
Direct Labor
Fringe Benefits
Travel
Equipment
Supplies
Contractual
Other Direct Costs
Indirect Costs
In-Kind Contr. Direct
In-Kind Contr. Indirect
Univ. of Maryland
Univ. of Massachusetts
Other Centers (unaudited)
Total
Federal Share Claimed:
Less Federal Share Questioned:
Ineligible Costs *
Unsupported Costs**
Allowable Federal Share
EPA Payments To Date
CLAIMED
$104,222
27,963
3,831
8,333
18,004
12,767
19,275
36,697
27,520
5,229
389,660
355,574
987.104
SI. 996.1 79
ACCEPTED
$104,222
27,963
3,831
8,333
18,004
12,767
19,275
27,520
5,229
6,500
355,574
$589218
$1,798,178
INELIGIBLE UNSUPPORTED NOTES
1
1
$36,697 2
3
' 4
146,660 $236,500 Exhibit 4-1
Exhibit 5-1
5
$183.357 $236.500
$287,304
116.428
403.732
$1,394,446
1.798.178
Balance Due EPA
$403.732
•Includes NUCEA's indirect and the University of Maryland's ineligible costs and program income as shown in Exhibit 4-1.
"includes the University of Maryland's unsupported costs as shown in Exhibit 4-1.
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Salaries and
Fringe Benefits
Note 1 All salaries and fringe benefits were previously
questioned as unsupported because NUCEA employees did not
prepare time distribution sheets as required by OMB Circular A-
122. However, based upon the alternative records which NUCEA
attached to their response, we have accepted these costs.
Indirect Costs
In-Kind Contribution
Note 2 NUCEA claimed indirect costs at the rate of 19
percent, but did not prepare an indirect cost rate proposal. In
accordance with the requirements of the cooperative agreements,
OMB Circular A-122, EPA's Indirect Cost and Special Rate Policy,
and EPA's Guide for Preparing Indirect Cost Rate Proposals, a
grantee may only claim indirect costs if they have prepared an
indirect cost rate proposal. Therefore, we questioned as ineligible
all indirect costs claimed, totaling $36,697.
All indirect costs were also previously questioned as unsupported
because NUCEA could not provide supporting documentation for
actual indirect costs incurred. In response to our draft report,
NUCEA submitted documentation to support the incurred costs.
This documentation shows rates of 42.84 percent and 51.14
percent for their fiscal years ending June 30, 1992 and 1993,
respectively. Those rates are significantly higher than the 19
percent allowed in the cooperative agreement. We have accepted
the documentation as supporting the claimed costs but only to the
extent of the approved rate of 19 percent. However, the indirect
costs remain ineligible for the reason stated in the previous
paragraph.
Ineligible Amount $36.697
Note 3 We previously questioned $15,781, of the $27,520
claimed, as ineligible because NUCEA claimed total costs instead
of only the Federal share as required by 40 CFR Part 30.307.
However, NUCEA submitted additional documentation in support
of their in-kind contributions. We have reviewed this
documentation and accepted the costs.
Note 4 We previously questioned the additional $5,229 of
indirect in-kind contributions claimed for the reasons identified
under Notes 2 and 3 above. Based on the additional
21
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Other Centers
documentation provided by N UCEA, we have accepted these
costs.
Note 5 Our audit included costs claimed by NUCEA, the
University of Maryland, and the University of Massachusetts. We
did not review the $987,104 of costs claimed by the remaining
four Centers: University of Cincinnati, University of California,
University of Kansas and the Georgia Technical Institute.
Therefore, we have not provided an opinion on these costs.
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EXHIBIT 3-2
ALLOWABILITY ANALYSIS OF COSTS CLAIMED BY
THE NATIONAL UNIVERSITY CONTINUING EDUCATION ASSOCIATION, INC.
FOR THE PERIOD OCTOBER 1, 1993 THROUGH DECEMBER 31, 1994
UNDER EPA COOPERATIVE AGREEMENT CX-821851
AUDITORS' OPINION
COSTS
CATEGORY
Direct Labor
Fringe Benefits
Travel
Equipment
Supplies
Contractual
Other Direct Costs
Indirect Costs
In-Kind Contr.
Univ. of Maryland
Uriiv. of Massachusetts
Fe<3 Waivers.- Other Centers
Other Centers (unaudited)
Total
Federal Share Claimed:
Le:;s Federal Share Questioned:
Ineligible Costs *
Unsupported Costs**
Allowable Federal Share
EPA Payments To Date
CLAIMED
$36,921
10,542
2,070
16
30,196
114,194
10,909
48,796
22,828
274,733
265,830
1 70,500
721.462
$1.708.997
ACCEPTED
$36,921
10,542
2,070
16
30,196.
114,194
10,909
22,828
5,190
232,080
$464.946
INELIGIBLE UNSUPPORTED NOTES
$48,796
102,790
33,750
1 70,500
$355.836
1
1
2
3
$166,753 Exhibit 4-2
Exhibit 5-2
4
5
$166.753
$446,574
101.954
$1,595,086
548.528
$1,046,558
1.595.086
Balance Due EPA
$548.528
*lncl jdes NUCEA's indirect and the University of Maryland's ineligible costs and program income as shown in Exhibit 4*2. This amount
also includes ineligible fee waivers paid to the University of Massachusetts and all other centers.
"Includes the University of Maryland's unsupported costs as shown in Exhibit 4-2.
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Salaries and
Fringe Benefits
Indirect Costs
in-Kind Contribution
Fee Waivers
Note 1 All salaries and fringe benefits were previously
questioned as unsupported because NUCEA employees did not
prepare time distribution sheets as required by OMB Circular A-
122. However, based upon the alternative records which NUCEA
attached to their response, we have accepted these costs.
Note 2 NUCEA claimed indirect costs at the rate of 24
percent, but did not prepare an indirect cost rate proposal. In
accordance with the requirements of the cooperative agreements,
OMB Circular A-122, EPA's Indirect Cost and Special Rate Policy,
and EPA's Guide for Preparing Indirect Cost Rate Proposals, a
grantee may only claim indirect costs if they have prepared an
indirect cost rate proposal. Therefore, we questioned as ineligible
all indirect costs claimed totaling $48,796.
All indirect costs were also previously questioned as unsupported
because NUCEA could not provide supporting documentation for
actual indirect costs incurred. In response to our draft report,
NUCEA submitted documentation to support the incurred costs.
This documentation shows rates of 55.50 percent and 42.07
percent for their fiscal years ending March 31, 1994 and 1995,
respectively. Those rates are significantly higher thasn the 24
percent allowed in the cooperative agreement. We have accepted
the documentation as supporting the claimed costs but only to the
extent of the approved rate of 24 percent. However, the indirect
costs remain ineligible for the reason stated in the previous
paragraph.
Ineligible Amount $48.796
Note 3 We previously questioned $22,828 as ineligible
because NUCEA claimed total costs instead of only the Federal
share as required by 40 CFR Part 30.307. However, NUCEA
submitted additional documentation in support of their in-kind
contributions. We have reviewed this documentation and
accepted the costs.
Note 4 We questioned as ineligible, all fee waivers paid to
the Centers, totaling $237,000. Of this amount, $32,750 was paid
to the University of Maryland, $33,750 was paid to the University
of Massachusetts, and the balance of $170,500 was paid to the
24
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Other Centers
RECOMMENDATIONS
NUCEA Response
Agency Response
(DIG Evaluation
remaining four Centers. Chapter 2 of this report provides the
details concerning the ineligibility of these payments.
Ineligible Amount $170.500
•
Note 5 Our audit included costs claimed by NUCEA, the
University of Maryland, and the University of Massachusetts. We
did not review the $721,462 of costs claimed by the remaining
four Centers: University of Cincinnati, University of California,
University of Kansas, and the Georgia Technical Institute.
Therefore, we have not provided an opinion on these costs.
We recommend that the Director of the Grants Administration
Division:
1) Recover the amounts due EPA identified on Exhibit 3-1 and
Exhibit 3-2, and
2) Review the costs invoiced to NUCEA by the remaining four
centers for issues similar to those found at the University of
Maryland and recover the questioned costs identified.
We have submitted 1) an indirect rate summary for the periods
covered by the assistance agreements, 2) signed affidavits from
each of the individuals involved with the cooperative agreements
attesting to their level of participation, and 3) a schedule of
directors' time supporting the in-kind contributions.
Grants Administration Division and National Program Chemical
Division are working with representatives of NUCEA to obtain any
available documentation which will enable us to determine the
final allowability of costs. During resolution of the final audit, we
will reduce the allowable cost of the projects if costs are
determined unallowable and recover any related overpayments.
We concur with the Agency's response and planned corrective
action for resolving the remaining ineligible and unsupported
costs.
25
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CHAPTER 4
UNIVERSITY OF MARYLAND COSTS
EXHIBIT 4-1
ALLOW/ABILITY ANALYSIS OF COSTS INVOICED BY
THE UNIVERSITY OF MARYLAND
FOR THE PERIOD SEPTEMBER 12, 1991 THROUGH SEPTEMBER 30, 1993
UNDER EPA COOPERATIVE AGREEMENT CX-819144
AUDITORS' OPINION
COSTS
CATEGORY
Federal Share-Direct
Federal Share-Indirect
In-Kind Contribution-Direct
In-Kind Contribution-Indirect
Total
Program Income
Federal Share Invoiced:
Less Federal Share Questioned:
Ineligible Costs
Unsupported Costs
Program income *
Allowable Federal Share
EPA Payments To Date
Balance Due EPA
•Federal share of program income is 79% of $143,738.
CLAIMED
(Note!)
$240,724
19,258
120,072
9.606
$389.660
&
$137,054
116,428
113.553
ACCEPTED INELIGIBLE UNSUPPORTED
$6,500 $117,796 $116,428
19,258
120,072
9.606
$6.500 $146.660 $236.500
|Q $143.738 |g
$259,982
367.035
($107,053)
259.982
$367.035
NOTE!
. 2,3,4
5
6
7
8
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Cost Categories
Salaries and Fringe
Benefits
Note 1 The Center submitted invoices to NUCEA who then
claimed the amount of these invoices and received reimbursement
from EPA. However, the Center's invoices did not agree with their
general ledger. Moreover, to remain within the grant budget, the
Center made adjustments on invoices that resulted in negative
amounts claimed for some cost categories. As a result, we could
not consider the amounts that the Center invoiced under each cost
category. Instead, we attempted to trace the four total amounts on
the Center's invoices to supporting documentation. The invoices
showed total amounts for Federal Share - Direct and Indirect, as
well as In-kind Contributions Direct and Indirect. The cost
categories on the Center's invoices included: Personnel, Fringe
Benefits, Travel, Equipment, Supplies, Contractual, and Other
Direct Costs. Based on our limited review of the four amounts,
we identified the following issues.
Note 2 The Federal Share - Direct of $240,724 shown on the
Center's invoices included $136,011 of salaries and related fringe
benefits. Of this amount, we identified that at least $88,948 was
for the salary of the Center's Director. We determined this
amount was inappropriately charged to the EPA cooperative
agreements as a direct cost. In accordance with the cost principles
in OMB Circular A-21, costs incurred for common or joint
objectives, and which cannot be readily identified with a
particular project or activity, should be allocated indirectly. The
University could not provide documentation to show the amount
of the Director's time spent on various projects. However,
University personnel acknowledged that the Director may not
have devoted 100 percent of her time to the cooperative
agreements. As a result, we questioned her salary and fringe
benefits as ineligible.
Ineligible Amount $88.948
The remaining $47,063 of direct salaries and associated fringe
benefits ($136,011-$88,948) could not be audited because the
University's invoices did not agree with the general ledger.
Therefore, we questioned these remaining amounts as
unsupported until the University provides a reconciliation of the
general ledger to the salary and fringe amounts identified on each
invoice.
Unsupported Amount $47.063
27
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Contractual
Note 3 The Federal Share - Direct also included $83,042 of
contractual charges for entertainment, consultant services,
housekeeping, staff development, and office equipment. We
questioned the $83,042 as both ineligible and unsupported as
shown below.
As part of our review of contractual expenses, we reviewed
invoices from caterers. Discussions with University personnel
revealed that breakfasts and lunches were provided to individuals
attending the courses. OMB Circular A-21 identifies meals as
ineligible entertainment costs. Therefore, we questioned as
ineligible, all invoices for food that were charged as Federal Share
- Direct, totaling $8,509.
Ineligible Amount $8.509
We could not identify the total amount expended for consultants,
however, we reviewed the charges by two consultants. In
accordance with 40 CFR Part 33.280, EPA participation in
consultant charges is limited to the maximum daily rate for a GS-
18. One consultant did not exceed the $434 daily allowable
limit. However, the University paid the second consultant $1,000
per day which exceeded the daily allowable limit by $566. The
amount claimed for the consultant was $8,801 and we questioned
the $4,986 excess that resulted because the consultant billed
above the allowable daily rate. According to University
personnel, this consultant's fee included the rental of a large piece
of equipment. We requested the University to provide
documentation to support this claim since the consultant's
invoices only mentioned the instructor's daily rate. However, the
University has not provided this documentation. As a result, we
questioned a total of $4,986 as ineligible.
Ineligible Amount $4.986
The University charged $9,960 as direct expenses for items such
as housekeeping/cleaning services, locks, and office equipment.
All these items were for common use and should have been
charged indirectly to the cooperative agreements in accordance
28
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Equipment and
Other Direct Costs
Indirect Costs
with OMB Circular A-21. Therefore, we questioned $9,960 as
ineligible.
Ineligible Amount $9.960
The remaining $59,587 of contractual costs were not audited
because the University's invoices did not trace to the general
ledger. Therefore, we questioned the remaining amount as
unsupported until the University provides a reconciliation of the
general ledger to the contractual amount identified on each
invoice.
Unsupported Amount $59.587
Note 4 The Federal Share - Direct also included $8,853 for
equipment and $6,318 for other direct costs. The University
charged $5,393 of this $15,171 as direct expenses for items such
as rent, staff development, and office equipment. All these items
were for common use and should have been included in the
indirect cost pool, and charged indirectly to the cooperative
agreements in accordance with OMB Circular A-21. Therefore,
we questioned $5,393 as ineligible.
Ineligible Amount $5.393
The remaining equipment and other direct costs totaling $9,778
($15,171 - $5,393) were not audited because the University's
invoices did not trace to the general ledger. Therefore, we
questioned this amount as unsupported until the University
provides a reconciliation of the general ledger to the contractual
amount identified on each invoice.
Unsupported Amount $9.778
Note 5 We questioned indirect costs, totaling $19,258 as both
ineligible and unsupported.
This.amount was considered ineligible because the Center did not
prepare an indirect cost rate proposal for the eight percent rate it
applied to all invoices submitted for payment. In accordance with
the requirements of OMB Circular A-21, EPA's Indirect Cost and
Special Rate Policy, and EPA's Guide for Preparing Indirect Cost
Rate Proposals, the Center may only claim indirect costs if they
have prepared an indirect cost rate proposal. During our audit,
we noted that the University had an indirect rate agreement with
29
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In-Kind
Contribution
Indirect In-Kind
Program Income
the U.S. Department of Health and Human Services {HHS) which
was applicable to Federal assistance agreements during the period
we reviewed. The predetermined rate was 33.1 percent for Off-
Campus Instruction. Although the Center's applied rate was
lower than the rate agreement with HHS, an indirect cost rate
proposal should have been prepared for the eight percent rate.
Without a proposal, we were unable to determine if costs were
appropriately allocated.
These costs were also considered unsupported because the Center
could not provide documentation to support the actual indirect
costs incurred. Without supporting documentation, such as time
sheets, invoices for supplies and equipment, and travel vouchers,
we were unable to determine if the Center incurred these indirect
expenses.
Ineligible Amount $19.258
Note 6 The Center claimed in-kin'd contributions totaling
$120,072. We questioned as unsupported all of the in-kind
contributions claimed for the reasons discussed below.
• The in-kind expenses were not included in the University's
general ledger accounting system. 40 CFR 30.510 requires a
recipient to maintain a financial management system that
consistently applies accepted accounting principles and
practices including an accurate, current, and complete
accounting of all financial transactions for the project.
• The Center could not provide documentation such as, time
sheets, invoices for equipment and supplies, as well as travel
vouchers and consulting agreements to support these
expenses.
Unsupported Amount $120.072
Note 7 We questioned all indirect in-kind contributions
claimed for the reasons identified under Notes 5 and 6 above.
Ineligible Amount $9.606
Note 8 We determined the University received approximately
$143,738 of program income from individuals that attended the
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University Response
EPA sponsored training courses. However, the University did not
deduct this income from total project costs. In accordance with
40 CFR 30.525; program income must be used to fund additional
eligible project activities by subtracting income from total project
costs before determining the Federal share claimed for
reimbursement.
Ineligible Amount $143.738
The University's response to these notes is shown after the next
exhibit.
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EXHIBIT 4-2
ALLOWABILITY ANALYSIS OF COSTS INVOICED BY
THE UNIVERSITY OF MARYLAND
FOR THE PERIOD OCTOBER 1, 1993 THROUGH DECEMBER 31, 1994
UNDER EPA COOPERATIVE AGREEMENT CX-821851
AUDITORS' OPINION
COSTS
CATEGORY
Federal Share-Direct
Federal Share-Indirect
In-Kind Contribution-Direct
In-Kind Contribution-Indirect
Total
Program Income
Federal Share Invoiced:
Less Federal Share Questioned:
Ineligible Costs
Unsupported Costs
Program income *
Allowable Federal Share
EPA Payments To Date
Balance Due EPA
•Federal share of program income is 91 % of $ 105,409,
CLAIMED
(Note 1)
$192,009
12,741
64,799
5.184
$274.733
m
$97,606
101,954
95.922
ACCEPTED INELIGIBLE UNSUPPORTED NOTES
$5,190 $84,865 $101,954 2,3,4,5
12,741 6
64,799 7
5184 8
$5.190 $102.790 $166.753
1Q $105.409 |Q 9
$204,750
295.482
($90,732)
204.750
$295.482
32
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Cost Categories
Salaries and Fringe
Benefits
Note 1 The Center submitted invoices to NUCEA who then
claimed the amount of these invoices and received reimbursement
from EPA. However, the Center's invoices did not agree with their
general ledger. Moreover, to remain within the grant budget, the
Center made adjustments on invoices that resulted in negative
amounts claimed for some cost categories. As a result, we could
not consider the amounts that the Center invoiced under each cost
category. Instead, we attempted to trace the four totaf amounts on
Ihe Center's invoices to supporting documentation. The invoices
showed total amounts for Federal Share - Direct and Indirect, as
well as In-kind Contributions Direct and Indirect. The cost
categories on the Center's invoices included: Personnel, Fringe
Benefits, Travel, Equipment, Supplies, Contractual, and Other
Direct Costs. Based on our limited review of the four amounts,
we identified the following issues.
Note 2 The Federal Share - Direct of $192,009 shown on the
Center's invoices included $129,089 of salaries and related fringe
benefits.
From the Federal Share - Direct amount, we identified that at least
541,625 was for the salary of the Center's Director. We
determined this amount was inappropriately charged to the EPA
cooperative agreements as a direct cost. In accordance with the
cost principles in OMB Circular A-21, costs incurred for common
or joint objectives, and which cannot be readily identified with a
particular project or activity, should be allocated indirectly. The
University could not provide documentation to show the amount
of the Director's time spent on various projects. However,
University personnel acknowledged that the Director may not
have devoted TOO percent of her time to the cooperative
agreements. As a result, we questioned her salary and fringe
benefits as ineligible,
Ineligible Amount $41.625
The last two invoices submitted by the University to NUCEA
under CX-821851 included the month of June 1994. Specifically,
one invoice covered the period April 1, 1994 through June 30,
1994. The next invoice covered the period June 1, 1994 through
September 30, 1994. Because the general ledger and invoices did
not agree, we couid not determine how much of the second
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Contractual
invoice was applicable to June. Therefore, we questioned as
unsupported the salary and fringe amounts included on the second
invoice, totaling $25,402. The invoice also identified indirect
costs totaling $1,606 which we questioned as ineligible under
Note 6 below.
Unsupported Amount $25.402
The remaining $62,062 of direct salaries and associated fringe
benefits ($129,089-$41,625-$25,402) could not be audited
because the University's invoices did not agree with the general
ledger. Therefore, we questioned these remaining amounts as
unsupported until the University provides a reconciliation of the
general ledger to the salary and fringe amounts identified on each
invoice.
Unsupported Amount $62.062
Note 3 The Federal Share - Direct also included $24,41 6 of
contractual charges for entertainment, telephone expenses, and
office equipment. We questioned the $24,416 as both ineligible
and unsupported as shown below.
As part of our review of contractual expenses, we reviewed
invoices from caterers. Discussions with University personnel
revealed that breakfasts and lunches were provided to individuals
attending the courses. OMB Circular A-21 identifies meals as
ineligible entertainment costs. Therefore, we questioned as
ineligible, invoices for food that were charged as Federal Share -
Direct, totaling $822.
Ineligible Amount $822
The University charged $9,104 as direct expenses for items such
as telephone expenses and office equipment. All these items were
for common use and should have been included in the indirect
cost pool, and charged indirectly to the cooperative agreements.
Therefore, we questioned $9,104 as ineligible.
Ineligible Amount
The remaining $14,490 of contractual costs could not be audited
because the University's invoices did not agree with the general
ledger. Therefore, we questioned the remaining amount as
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Equipment
Fee Waivers
Indirect Costs
In-Kind
Contribution
unsupported until the University provides a reconciliation of the
general ledger to the contractual amount identified on each
invoice.
Unsupported Amount ft14T49p
Note 4 We reviewed five invoices for equipment purchases
totaling $3,756. Most of the electronic items appeared
appropriate. However, a stereo, totaling $564, was purchased and
charged to the EPA cooperative agreement. University personnel
stated that the stereo was not being used by the Center.
Therefore, we questioned $564 as ineligible.
Ineligible Amount $564
Note 5 We questioned $32,750 as ineligible fee waivers
received by the University. This issue was discussed in Chapter 2.
Ineligible Amount $32.750
Note 6 We questioned indirect costs totaling $12,741 as both
ineligible and unsupported. This amount was considered
ineligible because the Center did not prepare an indirect cost rate
proposal for the eight percent rate it applied to all invoices
submitted for payment. These costs were also considered
unsupported because the Center could not provide documentation
to support the actual indirect costs incurred. See Exhibit 4-1,
Note 5 for additional information.
Ineligible Amount $12.741
Note 7 The Center claimed in-kind contributions totaling
$64,799. We questioned as unsupported all of the in-kind
contributions claimed for the reasons discussed below.
• The in-kind expenses were not included in the University's
general ledger accounting system. 40 CFR 30.510 requires a
recipient to maintain a financial management system that
consistently applies accepted accounting principles and
practices, including an accurate, current, and complete
accounting of all financial transactions for the project.
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Indirect In-Kind
Program Income
• The Center could not provide documentation such as, time
sheets, invoices for equipment, and supplies, as well as travel
vouchers and consulting agreements to support these
expenses.
Unsupported Amount $64.799
Note 8 We questioned all indirect in-kind contributions
claimed for the reasons identified under Notes 6 and 7 above.
Ineligible Amount $5.184
Note 9 We determined the University received approximately
$105,409 of program income from individuals that attended the
EPA sponsored training courses. However, the University did not
deduct this income from total project costs. In accordance with
40 CFR 30.525, program income must be used to fund additional
eligible project activities by subtracting this program income from
total project costs before determining the Federal share claimed
for reimbursement.
Ineligible Amount $105.409
RECOMMENDATIONS We recommend the Director of Grants Administration Division:
1) Require the University to reconcile invoiced amounts to its
general ledger. This reconciliation then must be used to
complete the verification of costs by comparing the general
ledger amounts to canceled checks.
2) Recover from NUCEA the amounts due EPA as identified on
Exhibits 4-1 and 4-2.
University Response
to Exhibit 4-1 and
Exhibit 4-2
Agency Response
The University disagreed with each note identified in Chapter 4 of
the report. They claimed to have adequate support for some costs
and to be in the process of reconciling their records in order to
provide additional documentation.
Grants Administration Division and National Program Chemical
Division are working with representatives of NUCEA to obtain any
available documentation which will enable them to determine the
final allowability of costs. During resolution of the final audit,
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OIG Evaluation
they will reduce the allowable cost of the projects if costs are
determined unallowable and recover any related overpayments.
We concur with the Agency's response and planned corrective
action. When the Grants Administration Division receives
supporting documentation from the University, we are willing to
assist them in their review of this information.
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CHAPTER 5
UNIVERSITY OF MASSACHUSETTS COSTS
EXHIBIT 5-1
ALLOWABILITY ANALYSIS OF COSTS INVOICED BY
THE UNIVERSITY OF MASSACHUSETTS
FOR THE PERIOD SEPTEMBER 12, 1991 THROUGH SEPTEMBER 30,1993
UNDER EPA COOPERATIVE AGREEMENT CX-819144
AUDITORS' OPINION
CATEGORY
Direct Labor
Fringe Benefits
Travel
Equipment
Supplies
Contractual
Other Direct Costs
Indirect Costs
In-Kind Contribution
Total
Program Income
Federal Share Invoiced:
Less Federal Share Questioned:
Ineligible Costs
Unsupported Costs
Allowable Federal Share.
EPA Payments To Date
Balance Due EPA .
$0
COSTS
CLAIMED
$103,498
22,510
3,621
5,524
11,673
69,723
52,208
51,243
35.574
S355.574
m
ACCEPTED INELIGIBLE
$103,498 $ 0
22,510
3,621
5,524
11,673
69,723
52,208
51,243
35.574
$355.574 £Q
$115r220 $Q
$320,000
UNSUPPORTED
$ 0
tt
m
Q.
$320,000
320.000
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EXHIBIT 5-2
M.IOWABILITY ANALYSIS OF COSTS INVOICED BY
THE UNIVERSITY OF MASSACHUSETTS
FOR THE PERIOD OCTOBER 1, 1993 THROUGH DECEMBER 31, 1994
UNDER EPA COOPERATIVE AGREEMENT CX-821851
AUDITORS' OPINION
COSTS
CATEGORY
Direct Labor
Fringe Benefits
Travel
Equipment
Supplies
Contractual
Other Direct Costs
Indirect Costs
Fee Waivers
In-Kind Contribution
Total
Program Income
Federal Share Invoiced:
less; Federal Share Questioned:
Ineligible Costs
Unsupported Costs
Allowable Federal Share
EPA Payments To Date
Balance Due EPA
CLAIMED
$89,524
36,315
3,019
0
7,559
21,091
18,309
35,163
33,750
21.100
$265.830
tt
$33,750
0
ACCEPTED INELIGIBLE UNSUPPORTED
$89,524 $ 0 $ 0
36,315
3,019
0
7,559
21,091
18,309
35,163
0 33,750
21.100
$232.080 S33.750 $Q
$134.120 ifi $£
$244,730
33.750
$210,980
244.730
NOTE
$33.750
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RECOMMENDATIONS
University Response
Agency Response
and OIG Evaluation
Note 1 The University of Massachusetts was one of the six
Centers receiving awards from NUCEA under cooperative
agreements CX-819144 and CX-821851. NUCEA paid the
University $564,730. Of this amount, $320,000 was
reimbursement for costs incurred under cooperative agreement
CX-819144, $210,980 was reimbursement for costs incurred
under CX-821851 and $33,750 represented tuition fee waivers.
We questioned the $33,750 paid to the University for fee waivers.
This issue was discussed in Chapter 2.
Ineligible Amount $33.750
We recommend the Director of Grants Administration Division
recover from NUCEA the fee waivers due EPA as identified on
Exhibit 5-2.
At the completion of the Inspector General's audit on January 31,
1997, the auditor informed the University at the exit conference
that there were no findings. The University was very surprised to
receive the $33,750 finding. We made a further review of our
contractual agreement and determined that we have complied
with all the billing instructions. The University feels the $33,750
was received in accordance with the contractual agreement with
NUCEA.
The Agency's response and our evaluation concerning the fee
waivers is shown in Chapter 2. However, it should be noted that
at the conclusion of our field work, we informed the University of
our concerns regarding the fee waivers.
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APPENDIX A — AGENCY'S RESPONSE
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
ALJ6 -5B0T
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT:
FROM:
TO:
Comments on the Draft Report of Special Review on Assistance Agreements
Awarded to the National University Continuing Education Association, Inc.
(NUCEA), Report Number E3CEP6-03-0139
Gary M. Katz, Director ' / *• '•.
Grants Administration Division
-y
Carl A. Jannetti
Divisional Inspector General for Audit (3 A100)
I am commenting on the draft special review report on the National University Continuing
Education Association, Inc. (NUCEA), Audit Report Number E3CEP6-03-0139. This special
review evaluated two cooperative agreements awarded to NUCEA to assist them in developing
and implementing a program to train people in dealing with lead-based paint.
We generally agree with the report's recommendations on Page 12. Grants
Administration Division and National Program Chemical Division (formerly the Chemical
Management Division) staff are working with representatives of the recipient to obtain any
available documentation for costs which will enable us to determine the final allowability of costs.
During resolution of the final audit, we will reduce the allowable cost of the projects if costs are
determined unallowable and recover any related overpayments.
We are, however, concerned with several sections of the report which we believe to be
inaccurate. Jn particular:
o As explained in the attached memorandum from the National Program Chemical
Division, we disagree with the Draft Report conclusion that individuals were
trained unnecessarily. When the initial cooperative agreement was awarded, the
field of lead-based paint activities was an emerging field. Before enactment of
Title X-The Residential Lead-Based Paint Hazard Reduction Act of l992--in
October of 1992, only a handful of states had lead programs requiring individuals
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performing lead-based paint activities to be trained by accredited training providers
to obtain state certification and there was no national market for lead-based paint
professionals. Because EPA policy in awarding these cooperative agreements was
to encourage entry into the lead-based paint profession, we did not require
students taking training to be in similar occupational fields. To have done this
would have defeated one of the primary purposes of the Lead Training Centers
(RLTCs) developed under these cooperative agreements~to encourage entry of
new individuals into the new field. The fact that some individuals do not ultimately
enter a field in which they have training is expected in any educational field and
does not translate to the draft report's conclusion that these individuals were
trained unnecessarily. We recommend this conclusion of the draft report be
deleted.
We also disagree with the Draft Report conclusion that EPA provided needless fee
waivers to the institutions providing the training through the NUCEA cooperative
agreements. The purpose of the fee waivers was to encourage state and local
government employees' participation in the training, to expedite their awareness of
Federal requirements for lead paint abatement, and, most important, to encourage
states to develop their own statutes and programs (not procedures). We believe it
would have been inappropriate for EPA, as a condition of the cooperative
agreement, to require that a certain number or percentage of the individuals trained
be state or local government personnel as suggested in the report. We are not in a
position to force state or local governmental employees to attend training.
Further, establishing a "percentage" as the report suggests could have had the
adverse effect of "locking out" private industry from training based on an
arbitrarily developed "quota system" for governmental employees. The number of
state and government employees trained makes clear that our approach was a
success. On the other hand, the waivers were built into the budgets of the
cooperative agreements and all funding under the cooperative agreements was to
be used to support the Lead-based paint training program. If the recipient's total
costs, including the costs of the subrecipients, considering any program income,
was less than the amount awarded by EPA plus the recipients cost share, we will
take action to recover the overpayment.
We disagree with the Draft Report conclusion that EPA should have terminated
funding for the RLTCs sooner. The Report is correct in indicating that in 1991
when EPA initially awarded the cooperative agreement our intent was that EPA
would provide funding for only a few years. However, with the October 1992
enactment of Title X, the time frame under which the Centers could become self-
sustaining was extended. The new law placed new mandates on EPA including
several new regulatory activities. Under Sections 402 and 404 of Title X, EPA
was directed to promulgate regulations to establish a Federal Lead Program to
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-3-
accredit training providers, certify lead-based paint professionals, and establish
work standards. It was Congress' vision that this program would be implemented
through delegated state programs. The Toxic Substance Control Act rule making
which had been underway, became a Title X rule-making. This delayed the
establishment of accreditation and certification requirements. The rule was not
promulgated until August 28, 1996, and does not require the certification of
workers until August of 1999. This regulation was a major factor driving the
demand for trained lead-based professionals (and therefore, the demand for
training of lead-based paint professionals). In addition, Title X required the
disclosure of lead hazards in real estate transactions. That rule was not
promulgated until 1996 and did not become fully effective until December 1996.
Without these regulations in place, the demand for lead-based paint professionals
was inadequate to assure the RLTCs could be self sufficient. As a result, EPA's
policy decision was to continue to fund the RLTCs to ensure that a workforce of
trained individuals would be available to meet consumer demand when it
developed. This was also Congress' intent since Congressional add-on funds were
appropriated specifically for the RLTCs in FY92, and FY93 and FY94. Again, we
do not agree the facts support the report's conclusion and recommend this
discussion be deleted.
We have provided other specific comments on the report in the attached comments from
the National Program Chemical Division. We have also attached comments and information
prepared by representatives of NUCEA. If you have questions, please call Scott McMoran on
(202) 564-5374.
ATTACHMENTS
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ATTACHMENT
NATIONAL PROGRAM CHEMICAL DIVISION COMMENTS
General Background on Federal Lead Program
The IG Report focuses on EPA's Cooperative Agreement with the National University
Continuing Education Association (NUCEA) which established the Regional Lead Training
Centers (RLTCs). However, it must be recognized that the RLTCs are only one element of the
broader national program for prevention of childhood lead poisoning. If the NUCEA cooperative
agreement is viewed in that broader context—OPPTpolicy decisions which the Report disagrees
wi th, will be put into a different perspective.
The National Lead Program to prevent childhood lead poisoning involves several federal
agencies (EPA, HUD, CDC), as well as our state and local governmental partners and private
industry. EPA/OPPT efforts to address childhood lead poisoning began in 1989 when initial
technical efforts were undertaken jointly with HUD. Regulatory and non-regulatory activities to
address childhood lead poisoning from lead-based paint were being addressed under the Toxic
Substances Control Act statutory authority. In October of 1992, Title X-The Residential Lead-
Based Paint Hazard Reduction Act of 1992— was enacted which altered the course of, and
significantly expanded, our lead-based paint activities.
Two of the initial goals in the program (both pre- and post-Title X) were 1) to establish a
broader awareness of childhood lead poisoning, and 2) to develop a state/local governmental and
private infrastructure, including a professional work force of lead risk assessors, inspectors, and
abatement contractors, to respond to parents needs for information regarding their housing and
action (abatement) to reduce risks. It was recognized that a number of implementation activities
would need to be underway concurrently to attain these basic goals.
In order to develop, within the national infrastructure, private lead-based paint
professionals—EPA recognized there needed to be both a demand for lead abatement
professionals (abatement, risk assessment, and inspection) and a supply of trained individuals. A
number of long-term activities were creating the demand for professionals—outreach/public
education on the issue childhood lead poisoning; establishment of Federal/State Lead Programs
mandating the certification of lead professionals performing lead-based paint activities; mandated
information disclosure of known lead-based paint hazards at the time of real estate transactions
(both rental and lease); and notification of potential lead-based paint hazards during renovation
and remodeling activities. Some of these "demand-oriented" activities started in the late 80s/early
90's and most are still underway. As EPA pushed these "demand-oriented" activities, it was
incumbent on us to ensure that there was a supply of lead-based professionals to assist the
consumers to address their children's health concerns. It was for that reason that the RLTCs
were initially established and continue to be a significant element of our overall national
infrastructure.
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Specific Comments on the May 15,1997 Draft Report
BACKGROUND
Page 1. There is no relation between the Appropriations Act (Public Law 102-139) which
was signed into law on October 28, 1991 and the NUCEA Cooperative Agreement which was
awarded on September 12, 1991 (prior to enactment of the Appropriations Act); the cooperative
agreement was awarded under the statutory authority of the Toxic Substances Control Act
(TSCA), Section 10, as was the subsequent award.
INDIVIDUALS TRAINED UNNECESSARILY
OPPT disagrees with the Draft Report conclusion that "individuals were trained
unnecessarily" for the following reasons.
Page 7. The Draft Report states that individuals were trained unnecessarily because
"neither EPA, NUCEA nor the Centers ensured attendees were in occupational fields relevant to
the training." The Draft Report cites NUCEA's final project report to EPA which (the Draft
Report states) showed that the RLTCs "provided training to a substantial number of people that
were not involved in lead abatement."
As indicated in the "General Background" section of this response, the field of lead-based
paint activities is an emerging field (that was the case in 1991 with the initial awards and
continues to be the case in 1997). Before enactment of Title X in October of 1992, there was
only a handful of states which had State Lead Programs requiring that individuals performing
lead-based paint activities be trained by accredited training providers and obtain state certification.
There was not a national market for lead-based paint professionals.
Our policy was to encourage entry into the lead-based paint profession. There was no
criteria that students for training at the RLTCs were already in similar occupational fields as a
prerequisite for the courses. This would have defeated one of the primary purposes of the
RLTCs—to encourage entry of new individuals into the new field. Our long term goal has been
to ensure that highly trained professionals are available to perform lead-based paint services and
become certified by the State and Federal Lead Programs when the certification requirements
become effective.
Page 8. The auditor also interviewed students and summarized statements (of three
students out of,a total of 6100) in the Draft Report which states: "One participant stated that she
volunteered for the training, however, the information was not needed for her job. A second
participant stated that the information may be helpful in the future, however, he did not currently
deal with lead. A third participant stated he took the training for personal interest."
The National Program Chemical Division believes that the fact that some individuals
46 Report No. 7100297
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trained do not ultimately enter a field in which they have training is to be expected in any
educational field. Statements from these three individuals do not lead to the Draft Report
conclusion that "individuals were trained unnecessarily."
We believe you should delete this section of the report.
Further, as noted earlier, these fiinds were not awarded under Public Law 102-139, but
rather under TSCA Section 10.
EFA PROVIDED NEEDLESS FEE WAIVERS
The National Program Chemical Division disagrees with the Draft Report conclusion that
"E3JA provided needless fee waivers" for the following reasons.
Page 8. The Draft Report states that: "EPA believed the waivers would provide the
Centers an added incentive to attract these types of people (stale and local government people,
parenthesis added) to the training. However, EPA had already paid the Centers the full cost of
training each attendee, including state and local government personnel."
The waivers were built into the budget of the cooperative agreement; subsequently, the
recipients should have used all funding provided under the cooperative agreement to support the
RLTC program. The fact that the RLTCs did not collect tuition from state and local
governmental officials which were granted the fee waivers does not necessarily mean that the
waivers were funds in excess of the costs of program operations. It was always the expectation of
EPA that the RLTCs would charge tuition to their students and that those funds would be used to
supplement the Federal funds provided under the grant to support the program (i.e., the funds
provided by EPA plus the tuition generated should not exceed the program operation costs minus
the RLTC cost share—[EPA funds+tuition] <, [costs-cost share]).
As stated in our response to the Report's recommendation, if, after reviewing the
recipient's actual costs and related income from fees, we determine that NUCEA's actual costs
are less than the grant plus required cost share and income from fees, we will make appropriate
recoveries.
Page 9. The draft Report statements in the 2nd paragraph of page 9 and the first Fee
Waiver paragraph of page 8, regarding EPA's policy for providing fee waivers are in conflict.
The fee waivers were not put into place for the benefit of the RLTCs in gaining more students, the
waivers were put into place, as generally stated on page 9, to expedite state and local
government's employees' awareness of Federal requirements for lead paint abatement and, most
important, encourage states to develop their own statutes and programs (not procedures).
Page 9. Last Paragraph. We disagree with the IG's opinion that: "if EPA wanted state
and local government personnel trained, they should have required, as a condition of the
cooperative agreement, that a certain number or percentage of the individuals trained be state or
local government personnel." EPA is not in a position to force any state or local governmental
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employees to attend training at the RLTCs and would not want to establish a minimum number or
percentage of state and local students. To establish a "percentage" could have the adverse effect
of "locking out" private industry from training based on an arbitrarily developed "quota system"
for governmental employees. We hoped instead that the opportunity to participate in the training
at no cost would be an adequate incentive to bring state and local participants.
Based on the amount of fee waivers NUCEA paid to the various participating institutions
(see page 9 of the draft report), it appears the EPA strategy of providing fee waivers for state and
local governmental personnel was successful in encouraging their participation in the training. We
recommend you change the thrust of this section to discuss only the cost issue as related to the fee
waivers.
CENTERS NOT SELF-SUSTAINING
The National Program Chemical Division disagrees with the Draft Report conclusion that
EPA should have terminated funding for the RLTCs much sooner for the following reasons.
Page 10. The Draft Report is correct in indicating that in 1991 when EPA initially
awarded the cooperative agreement the intent was to only provide a few years of seed money to
the RLTCs. This intent is stated in the recipient's July, 1991 grant application-"A primary goal
of NUCEA's proposal is to ensure the continuation of these university-based Lead Training
Centers beyond the grant period. Therefore a major consideration in selecting university centers
will be their projected ability to continue delivering lead training instruction on a self-sustaining
basis once the grant funding ceases." The application also implied that NUCEA's need for
funding might end as soon as 1992 or 1993. However, with the October 1992 enactment of Title
X and other events, the time frame under which The National Program Chemical Division
believed that the RLTCs could become self-sustaining expanded.
The enactment of Title X placed a number of new mandates on EPA and the program
took on a bigger role. Several new regulatory activities were required under Title X. Under
Sections 402/404 of Title X, EPA was directed to promulgate regulations to establish a Federal
Lead Program to accredit training providers, certify lead-based paint professionals, and establish
work standards. It was Congress' vision that this program would be implemented through
delegated state programs. Title X directed a program somewhat different from the earlier
program envisioned under our TSCA authorities. The TSCA rulemaking which had been
underway, became a Title X rulemaking. The changes in the rulemaking which were necessary
when switching to a new statutory authority and a much broader lead-based paint program,
delayed the time frame for establishing accreditation and certification requirements. The rule was
not promulgated until August 28,1996, and does not require the certification of workers until
August of 1999. This regulation is one of the major factors driving the demand for trained lead-
based professionals (and therefore, the demand for training of lead-based paint professionals
seeking state or federal certification).
In addition, Title X mandated the promulgation of a rule requiring the disclosure of lead
hazards in real estate transactions. That rule was not promulgated until 1996 and did not become
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fully effective until December 1996. The Disclosure Rule was seen as yet another activity which
would increase the demand for lead-based paint professionals (and thereby the demand for
training), since new home buyers with information about lead-based paint hazards would be more
likely to require the services of lead-based paint professionals (e.g., lead-based paint inspections
prior to purchase of a home) than individuals who were unaware of potential lead hazards.
Because of the timing of these regulatory programs which were seen as two of the
principal factors driving the demand for lead-based paint professionals and thereby, lead-based
paint training, the OPPT policy decision was to continue to fund the RLTCs to ensure that
training continued to be available across the nation and that a workforce of trained individuals
wculd be available to meet consumer demand as it developed.
This was also Congress' intent since Congressional Add-on funds were allocated
specifically for the RLTCs in FY92, and FY93 and FY94.
Page 10. The Draft Report states that "EPA did not determine whether the fee waiver
and tuition revenue was sufficient to cover the cost of the course, thereby making the Centers
self-sustaining." EPA grant programs rely on grantees to maintain accounting systems and
records to support their costs. The program POs do not received detailed financial statements
from grant recipients—under normal operating circumstances they only receive quarterly progress
reports. A separate financial analysis was not performed by the program office for each RLTC to
del ermine if they could become self sustaining. However, if the institutions were fully reporting
all program income (tuition), program costs, grantee cost share, and federal award—if the federal
contribution combined with program income exceeded the program costs less the grantee cost
share—the grantee is obligated to note that fact and return funds to the EPA. The financial
reporting system would automatically determine the point at which the grantees became
self-sustaining.
Page 10. The final sentence in the "Centers Not Self-Sustaining" section of the Draft
Report is illogical. The Report states: "Since the Centers are providing fewer courses in 1997
without EPA funding, than in 1993 when they received EPA funding, we believe the Centers
could have been considered self-sustaining before fiscal year 1997."
Following this Construct one could come to the conclusion that if zero courses were
offered in 1997 that would demonstrate that the Centers could have become self sustaining
sooner. Instead, the audit should have evaluated whether adequate training is being provided
based on the decreased number of courses offered after EPA assistance ended.
As stated in the report, the centers are now self sufficient as planned by EPA. At the very
least, the title of the section should be changed to "Centers Became Self Sustaining After
Or ginally Planned". At best, the section should be deleted because it is not supported by the
facts.
O^RSIGHT NEEDS IMPROVEMENT
49
Report No. 7100297
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Page 11. The Draft Report references Chapter 44 of the EPA Assistance Administration
Manual. The portions of that manual related to project officer responsibilities was superseded in
1995 with a manual entitled "Managing Your Financial Assistance Agreement: Project Officer
Responsibilities," This manual was developed for GAD's Agency-wide training program, and is
the handbook used to teach the classes that POs must take to meet new training and certification
requirements established by OARM. Lin—We could probably provide a copy of the Assistance
Administration Handbook, if requested, but for POs, the training manual is better.
Chapter 5 of this Manual outlines the roles and responsibilities of GAt) and program staff
in post-award grant management activities. This Chapter, at page S.20, states that it is the role of
the grants management office to "review financial status reports and resolve any discrepancies."
The Project Officer, on the other hand, is the "focal point for resolution of programmatic issues
identified in progress reports and other work products." The program office's principal role is as
the technical overseers of the projects while OARM houses the Agency's business experts for
management of extramural funding instruments.
Lin—I question the need to comment on this section. It is unlikely the auditors will make a
significant change and it just sounds like we are saying its not our fault, its theirs.
Page 11. The Draft Report states that: "Discussions with NUCEA revealed that a total of
eight different POs were assigned to the two assistance agreements. We believe this is an
excessive number of individuals because the two agreements lasted only about three years,
October 1991 through December 1994." The National Program Chemical Division agrees that
there was a number of different POs over the course of the agreements. OPPT underwent a
reorganization in September 1992 which resulted in significant staffing shifts, individuals
previously dealing with the RLTC cooperative agreement were not placed in the organization
which became responsible for the Lead Program. Further there was high staff turnover during this
period. The assignment of new project officers was largely because previous POs had transferred
to different jobs or left the agency. There is no solution to that problem.
RECOMMENDATIONS
Page 12. The Draft Report recommends that the Director of the Chemical Management
Division ensure that costs claimed for reimbursements are only for incurred costs, that are needed
to achieve the objectives of assistance agreements. The National Program Chemical Division
disagrees with that recommendation.
Ensuring that claimed costs were actually incurred is something that can only be verified
by an audit of the recipient's accounting records for a particular grant. The role of the program
office for this grant (or any other grant) is to ensure the "reasonableness" of costs claimed for
reimbursement by a grantee. An underlying assumption is that grantees are operating in "good
faith" and that they are truthfully and accurately reporting claimed costs. We are not in a position
to question this "good faith" reporting, nor should we. Ascertaining the veracity of claimed costs
is, thus, beyond the scope of responsibility for a program office and is a function of government
auditors.
50 Report No. 7100297
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REQUEST FOR AUDIT
Regarding the University of Maryland, it should be noted that in July 1995 the program
office met with representatives from the IG's office and requested that an audit be performed on
the University of Maryland RLTC grant (communication between Linda Vlier Moos and Susan
Thornberg, either the week of July 10 or July 17, 1995). The IG's Office declined to perform an
audit.
RESPONSE TO RECOMMENDATIONS
Determining the necessity, aHowability, and reasonabieness of costs is a responsibility
shared between The National Program Chemica! Division and GAD staff. In resolving the final
audit, we will work together with the recipient to assure all questioned costs are evaluated with
the recipient and that only appropriate costs are allowed. If it is determined overpayments were
made, we will take action to recover them.
H:\JSER\SHAIiE\OGD\GAD\GOB-B\AUDlTS\NUCEA\NUCEAKV I .WPD
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[This page was intentionally left blank]
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APPENDIX B — NUCEA'S RESPONSE
52
Report No. 7100297
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JOHN C. WALSH & Co., P. C.
CERTIFIED PUBLIC ACCOUNTANT
1101 FIFTEENTH STREET, N. W.
SUITE JOT
WASHINGTON, D. C. 2000J
(201) 1)3-9000
July 17, 1997
Carl Jannetti
Divisional Inspector General for Audit
Office of Inspector General
841 Chestnut Building
Philadelphia, Pa. 19107-4431
Re:
CX-819144
CX-821851
Dear Mr. Jannetti:
This letter is in response to the draft report of the Special review on the EPA Assistance Agreements
referenced above by the Inspector General.
Indirect Costs
We have submitted to the Inspector General's Office an indirect rate summary for the periods
covered by the agreements and have enclosed a copy of the same for your records.
Salaries and Fringe Benefits
In connection with the disallowance of salaries and fringe benefits for NUCEA, we are submitting
herewith signed affidavits from each of the individuals involved attesting to their level of
participation. For the two employees who were charged 100 percent to the cooperative agreement,
we are also submitting copies of their original letters of employment, advertisements for their
positions and other employment information. The affidavit for John Hager stipulates how the
chargeable protion of his time was spent in connection with the agreement
In-Kind Contribution
The Inspector General report found the In-Kind contribution totaling $43,858 as ineligible because
NUCEA did not calculate this amount when requests for payment were submitted to the Las Vegas
electronic payment center. The report states that NUCEA's accountant and Executive Director stated
that they thought EPA would apply the appropriate percentage prior to reimbursing them for the
Federal share. This statement was never made to the auditors and should not be contained in any
subsequent reports.
53
Report No. 7100291
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Carl Jannetti, Divisional Inspector
Off.ce of Inspector General
July 17, 1997
At the time of their original participation in the cooperative agreement, the submission for
reimbursements contained their appropriate accounting for the in-kind cost contributions. A copy
of the submission for the period October 15, 1991 to March 14, 1992 is included in this submission
to further evidence this. NUCEA was informed at this time that they must begin participating in the
electronic voucher payment system and that the only amount to be submitted through this system
was the Federal share. We have included a copy of the ACH Payment Request form. There is no
provision made for separating the Federal share and the in-kind contribution amount. NUCEA was
at this same time submitting to the Washington office financial summary reports that contained an
accounting of the in-kind costs on an on-going basis. Again, the submission of only the Federal
share was based on information from the EPA electronic payment staff in Las Vegas.
NUCEA is submitting herewith a schedule of the in-kind contribution of time by the staff throughout
the cooperative agreements. We have included a signed statement from the Executive Director of
the Association attesting to the level of effort by each of the individuals involved in the in-kind
contribution by the Association along with detailed time distribution worksheets.
Fee Waivers
The draft report refers to the fee waiver program that was conducted in connection with the
subsequent cooperative agreement. This tuition assistance program was implemented in response
to the Agency's guidelines for agreement CX-821851. The guidelines (copy attached) referred to the
program and the Agency's letter of June 15, 1993 (copy attached) which specifically stated that
$375,000 must be set aside for the tuition assistance program.
The copy of the guidelines call for the development of criteria and plan for the tuition assistance
program. The plan that was developed for the allocation of funds provided that they would be
allocated to each of the centers on a need basis In the RF P for the RLTCs, item 9 of the description
of activities for the RLTC contained the criteria for the course waiver fund and item 8 of the
guidelines for proposal development contained a description of the method of allocation of the
funds The centers submitted estimated numbers of participants in the fee waiver to insure that
sufficient funding would be available to complete the tuition assistance programs.
The centers were required to submit separate applications for each state and local official who
wsinted to attend a course for prior approval by NUCEA/EPA This was done so that the eligibility
of each participant was cleared and that the intent of the fee waiver program would be accomplished.
The report further states that EPA should not have provided the funding of the fee waiver program
because the centers were already being reimbursed for their costs. The costs that the centers were
being reimbursed for were those associated with the establishment and maintaining of the Regional
Lead Training Centers. The costs for the courses should have been entirely supported by the tuition
charges for them. The Fee Waiver program was to serve as a method of tuition reduction to allow
54
Report No. 7100297
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Carl Jannetti, Divisional Inspector
Office of Inspector General
July 17, 1997
local and state government officials to attend a course that they may not otherwise be able to attend.
University of Massachusetts
We have attached the University's response concerning the Inspector General's findings. In
summary, the University feels that the payment of the fee waivers was made in accordance with their
subagreement with NUCEA which was also in accordance with NUCEAs agreement with EPA.
Each of the subagreement participants in the program incurred costs in the performance of their
contractual obligations regarding the fee waiver program and to ask them to now return the money
would be in direct contradiction to the contract.
University of Maryland
We have attached the University's response concerning the Inspector General's findings. Again the
University and NUCEA have the same feelings regarding the fee waiver program. In addition, the
University has provided its response to the other questions regarding the Inspector General's finding.
We hope that this information will assist you in closing this review in a favorable manner.
If you have any questions or need any additional information, please feel free to contact us.
Very truly yours,
Jtruly yours,
f.tUL
cc: W Scott McMoran, EPA
Kay Kohl, UCEA
55
Report No. 7100297
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APPENDIX C — UNIVERSITY OF MARYLAND'S RESPONSE
56
Report No. 7100297
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fertfer*
jrm
UNIVERSITY OF MARYLAND
AT BALTIMORE
FINANCIAL SEIH
June 23,1997
Mr.; JackWalsh
UCEA Auditor
11 (il 15th Street NW
Suite 207
Washington, DC 20005
DeAr Mr. Walsh:
! Enclosed are the University of Maryland at Baltimore's responses to your audit
of the KPA's Cooperative Agreements CX 819144 and CX 821851.
| If you have any questions, please feel free to contact me at (410) 706-7776.
MEW:ad
Enclosure
CC: Ms. Marjorie Forster
Ms. Janet Simons
Mr. Larry Miller
.Ms. Brenda Blake
Sincerelv,
Marc £. Wassemian
Director of Financial Services
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University of Maryland at Baltimore
Responses to the Inspector General*^ Audit
Cooperative Agreements CX 819144 and CX 821851
CX 819144
The University would like to clarify that our records indicate the contract expenditures
began in May.. 1992.
Note two - Audit Comment: The University could not provide documentation to show
the amount of the Director's lime spent on various projects. However, University
personnel acknowledged that the Director may not have devoted 100 percent of her time
to the cooperative agreements. As a result, we questioned her salary and fringe benefits
as ineligible.
University Response: The University has a statement from the Department and effort
reports that substantiate the Director devoted 100% of her time to the cooperative
agreement
Note two - Audit Comment: The remaining $47,063 of direct salaries and associated
fringe benefits ($136.011-S88.948) could not be reviewed because the University's
invoices did not agree with the general ledger. Therefore, we questioned these remaining
amounts as unsupported until the University provides a reconciliation of the general
ledger to the salary and fringe amounts identified on each invoice.
.University Response: The University is in the process of reconciling the invoices to our
general ledger. We have identified all but $10,461 of the $47,063 cited by the auditor.
Note three - Audit Comment: As part of our review of contractual expenses, we
reviewed invoices from caterers. Discussions with University personnel revealed that
breakfasts and lunches were provided to individuals attending the courses. OMB Circular
A-21 identifies meals as ineligible entertainment costs. Therefore, we questioned as
ineligible, all invoices for food that were charged as Federal Share - Direct, totaling
$8,509.
University Response: The total contractual services recorded on the ledger was
$132,372. The total amount billed to the Federal Share was $83,042. The University did
not bill for food. It was part of our in-kind contribution.
58
Report No. 7100297
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Note three - Audit Comment: We could not identify the total amount expended for
consultants, however, we reviewed the charges by two consultants. In accordance with
40 CFR Pan 33.280 FRA participation in consultant charges is limited to the maximum
daily rate for a GS-18. One consultant did not exceed the $434 daily allowable limit.
However, the University paid the second consultant $1,000 per day which exceeded the
daily allowable limit by $566. The amount claimed for the consultants was $8,801 and
we questioned the S4.986 excess that resulted because the consultant billed above the
allowable daily rate. According to University personnel, this consultant's fee included
the'rental of a large piece of equipment. \Ve requested the University to provide
documentation to support this claim since the consultant's invoices only mentioned the
instructor's daily rate. However, the University has not provided this documentation. As
a result, we questioned a total of $4.986 as ineligible.
University Response: The company in question was Leadtec Services. They were not
consultants, but subcontractors. Therefore, the rules concerning consultants do not apply
in this case.
Note three - Audit Comment: The University charged $9,960 as direct expenses for
items such as housekeeping/cleaning services, locks, and office equipment. All these
items were for common use and should have been charged indirectly to the cooperative
agreements in accordance with OMB Circular A-21. Therefore, we questioned $9,960 as
ineligible.
University Response: The cooperative agreement is conducted off-campus. The
indirect cost rate applied to off-campus agreements does not include indirect costs for
plant operations expenses; it provides only for the recovery of administrative costs.
•
Accordingly, costs for housekeeping/cleaning services and locks cited in the audit report
as ineligible arc allowahle for an agreement conducted off-campus; such costs are not
recovered through the indirect cost rale applied to the agreement.
Note three - Audit Comment: The remaining $59,587 of contractual costs were not
reviewed because the University's invoices did not trace to the genera! ledger. Therefore,
we questioned the remaining amount as unsupported until the University provides a
reconciliation of the general ledger to the contractual amount identified on each invoice.
University Response: The Department has indicated that they have supporting
documentation for the remaining $59.587. We are in the process of verifying this
amount.
59
Report No. 71002S
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Note four. - Audit Comment: The Federal Share - Direct also included $8,853 for
equipment and $6,318 for other direct costs. The University charged $5,393 of this
SI 5,171 as direct expenses for items such as rent, staff development, and office
equipment. All these items were for common use and should have been included in the
indirect cost pool, and charged indirectly to the cooperative agreements in accordance
vrith OMB Circular A-21. Therefore, we questioned $5,393 as ineligible.
University Response: The cooperative agreement is conducted off-campus. All items
cited in this comment are not recovered in the indirect cost rate applied to the agreement.
Note four - Audit Comment: The remaining equipment and other direct costs totaling
J9,778 (SI 5,171 - S5,?98) were not reviewed because the University's invoices did not
trace to the general ledger. Therefore, we questioned this amount as unsupported until
t lie University provides a reconciliation of the general ledger to the contractual amount
identified on each invoice.
University Response: The department has indicated thai they have supporting
c.ocumentation for the remaining $9.778. We are in the process of verifying this amount.
Note five - Audit Comment: Although the Center's applied rate was lower than the rate
agreement with HHS, an indirect cost rate proposal should have been prepared for the
eight percent rate. Without a proposal, we were unable to determine if costs were
appropriately allocated.
University Response: IJMAB prepares an indirect cost proposal and submits it to our
cognizant federal agency (Department of Health and Human Services). Negotiations are
conducted with DHHS, resulting in a negotiated rate agreement, which provides the
indirect cost rates that are to be applied for the period covered by the negotiated
agreement.
The indirect cost rate agreement, based on the UMAB indirect cost proposal, is
negotiated with our cognizant federal agency. As our cognizant federal agency, DHHS
negotiates indirect cost rates for UMAB that apply to all agencies of the federal
government.
Section III. D (Use by Other Federal Agencies) of the negotiated agreement dated January
18, 1997 (as well as ail preceding agreements) stales: "The rates in this Agreement were
approved in accordance with the authority in Office of Management and Budget Circular
A-21, and should be applied to grants, contracts and other agreements covered by this
Circular."
60
Report No. 7100297
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Although the negotiated indirect cost rate for off-campus instruction for the audited fiscal
period is 33.1 %, the eight percent rate applied to the agreement is the maximum indirect
cost rate allowed. No separate indirect cost proposal is required for the eight percent rate
under the requirements of OMB A-21 and the negotiated agreement with our cognizant
federal agency, which established the 33.1% rate.
No additional documentation is required for indirect costs charged to the agreement,
beyond the documentation submitted with the indirect cost proposal, which provided the
basis for the negotiation with our cognizant federal agency.
Note six - Audit Comment: The in-kind expenses were not included in the University's
general ledger accounting system. 40CFR 30.510 requires a recipient to maintain a
financial management system that consistently applies accepted
accounting principles and practices including an accurate, current, and complete
accounting of all financial transactions for the project.
University Response: The department has indicated tnat they have supporting
documentation for the in-kind contribution. We are in process of verifying this amount.
Note seven - Audit Comment: \Ve questioned all indirect in-kind contributions
unclaimed for the reasons identified under Notes 5 and 6 above.
University Response: See response in Note 5.
Note eight - Audit Comment: We determined the University received approximately
$143,738 of program income from individuals that attended the EPA sponsored training
courses. However, the University did not deduct this income from total project costs. In
accordance with 40 CFR 30.525. program income must be used to fund additional
eligible project activities by subtracting income from total project costs before
determining the Federal share claimed for reimbursement.
University Response: The University is not clear how the auditor arrived at the amount
of $143.738. The University did spend all program income it received on project
expenses.
Report No. 71002
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CX 8218S1
Note two - Audit Comment: The University could not provide documentation to show
the amount of the Director's time spent on various projects. However, University
personnel acknowledged that the Director may not have devoted 100 percent of her time
to the cooperative agreements. As a result, we questioned her salary and fringe benefits
as ineligible. .
University Response: The University has a statement from the Department and effort
reports that substantiate the Director devoted 100% of her time to the cooperative
agreement.
Note two - Audit Comment: The last two invoices submitted by the University to
NUCEA under CX-821851 included the month of June 1994. Specifically, one invoice
covered the period April 1, 1994 through June 30,1994. The next invoice covered the
period June I. 1094 through September 30, 1994. Because the general ledger and
invoices did not agree, we could not determine how much of the second invoice was
applicable to June. Therefore, we questioned as unsupported the salary and fringe
amounts included on the second invoice, totaling $25,402. The invoice also identified
indirect costs totaling $1,606 which we questioned as ineligible under Note 6 below.
The remaining 562,062 of direct salaries and associated fringe benefits ($129,089-
$41.625-$25,402) could not be reviewed because the University's invoices did not agree
with the general ledger. Therefore, we questioned these remaining amounts as
unsupported until the University provides a reconciliation of the general ledger to the
salary and fringe amounts identified on each invoice.
University Response: The department has indicated that they have supporting
documentation. We arc in the process of verifying this.
Note three - Audit Comment: As part of our review of contractual expenses, we
reviewed invoices from caterers. Discussions with University personnel revealed that
breakfasts and lunches \vere provided 10 individuals attending the courses. OMB Circular
A-21 identifies meals as ineligible entertainment costs. Therefore, we questioned as
ineligible, invoices for food that were charged as Federal Share - Direct totaling $822.
University Response: The University did not bill for food. It was part of our in-kind
contribution.
Note three - Audit Comment: The University charged $9.104 as direct expenses for
items such as telephone expenses and office equipment. All these items were for
common use and should have been included in the indirect cost pool, and charged
indirectly to the cooperative agreements. Therefore, we questioned $9,104 as ineligible.
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Report No- 7100297
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University Response: These costs were not recovered through the indirect cost rate
applied to the agreement.
Note three - Audit Comment: The remaining $14.490 of contractual costs could not be
reviewed because the University's invoices did not agree with the general ledger.
Therefore, we questioned the remaining amount as unsupported until the University
provides a reconciliation of the general ledger to the contractual amount identified on
each invoice.
University Response: The department has indicated that they have supporting
documentation. We are in the process or" verifying this.
Note four - Audit Comment: We reviewed five invoices for equipment purchases
totaling $3,756. Most of the electronic items appeared appropriate. However, a stereo,
totaling $564, was purchased and charged to the EPA cooperative agreement. University
personnel stated that the stereo was not being used by the Center. Therefore, we
questioned $564 as ineligible.
University Response: The stereo in question was part of the audio visual equpment
purchased for the contract.
Note live - Audit Comment: We questioned $32,750 as ineligible fee waivers received
by the University. This issue was discussed in Chapter 2.
University Response: The University needs clarification on what is in Chapter 2 before
we can respond.
Note six - Audit Comment: We questioned indirect costs totaling $12,741 as both
ineligible and unsupported. This amount was considered ineligible because the Center
did not prepare an indirect cost rate proposal for the eight percent rate it applied to all
invoices submitted for payment. These costs were also considered unsupported because
the Center could not provide documentation to support the actual indirect costs incurred.
See Exhibit 4-1, Note for additional information.
University Response: UMAB prepares an indirect cost proposal and submits it to our
cognizant federal agency (Department of Health and Human Services). Negotiations are
conducted with DHHS, resulting in a negotiated rate agreement, which provides the
indirect cost rates that are to be applied for the period covered by the negotiated
agreement.
The indirect cost rate agreement, based on the UMAB indirect cost proposal, is
negotiated with our cognizant federal agency. As our cognizant federal agency, DHHS
negotiates indirect cost rates for UMAB that apply to all agencies of the federal
government.
63
Report No. 7100297
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Section III.D (Use by Other Federal Agencies) of the negotiated agreement dated January
28,!l997 (as well as all preceding agreements) states: "The rates in this Agreement were
approved in accordance with the authority in Office of Management and Budget Circular
A-21, and should be applied to grants, contracts and other agreements covered by this
Circular."
i
Although the negotiated indirect cost rate for off-campus instruction for the audited fiscal
period is 33.1%, the eight percent rate applied to the agreement is the maximum indirect
cost rale allowed. No separate indirect cost proposal is required for the eight percent rate
under the requirements of OMB A-21 and the negotiated agreement with our cognizant
federal agency, which established the 33.1% rate.
Nojadditional documentation is required for indirect costs charged to the agreement,
beyond the documentation submitted with the indirect cost proposal, which provided the
basis for the negotiation with our cognizant federal agency.
i
Note seven - Audit Comment: The Center claimed in-kind contributions totaling
$64,799, We questioned as unsupported all of the in-kind contributions claimed for the
reasons discussed below.
i
• iThe in-kind expenses were not included in the University's general ledger accounting
system. 40 CFR 30.510 requires a recipient to maintain a financial management
system that consistently applies accepted accounting principles and practices,
including an accurate, current, and complete accounting of all financial transactions
for the project.
• iThe Center could riot provide documentation such as time sheets, invoices for
equipment, and supplies, as well as travel vouchers and consulting agreements to
support these expenses.
University Response: The department has indicated that they have supporting
documentation. We are in the process of verifying this.
Note eight - Audit Comment: We questioned all indirect in-kind contributions claimed
tor the reasons identified under Notes 6 and 7 above.
University Response: See response in Note 6.
i
Note nine - Audit Comment: We determined the University received approximately
$105,409 of program income from individuals that attended the EPA sponsored training
courses. However, the University did not deduct this income from total project costs. In
accordance with 40 CFR 30.525. program income must be used to fund additional £
eligible project activities by subtracting this program income from total project costs
before determining the federal share claimed for reimbursement.
64
Report No. 7100297
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University Response: The University is not clear how the auditor arrived at the amount
of $ 105.409. The University did spend all program income it received on project
expanses.
65
Report No. 710029'
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APPENDIX D — UNIVERSITY OF MASSACHUSETTS'RESPONSE
66
Report No. 7100297
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UNIVERSITY OF MASSACHUSETTS
AMHERST
Goodell Building
Box 33210
Amherst. MA 01003-3210
(413) 545-0806
FAX: (413) 545-6088
Kay J. Kohl, Executive Director
University Continuing Education Association
Suite 615
One Dupont Circle .
Washington, DC 20036
Office of the Contr
Director of Finance
July 15,1997
Ref.: NUCEA Fee Waiver Program
Finding - EPA Inspector General Report
Dear Ms. Kohl:
At the completion of Inspector General's audit, on January 31,1997, the auditor
informed the University at the exit conference that there were no findings.
The University was very surprised to receive the $33,750 finding. We made a
further review of our contractual agreement and determined that we have complied with
all the billing instructions. On August 4,1994, the University received billing
instructions from Mr. David Johnson, Program Manager, we complied with these
instructions. We have enclosed appropriate documentation to support our position in this
matter.
The University feels the $ 33,750 was received in accordance with contractual
agreement with NUCEA. If you require any additional information, please call me after
you have reviewed this material ( 413 ) 545 - 0806. The University would like to bring
closure to this issue.
Sincerely
Sam Killings
Assistant Controller
cc:
Kevin Aiken
Edward Calabrese
Lloyd Thomas
Charles Gilbert
Robert Harrison
John C. Walsh
Thomas Mathers
Mike Sullivan
67 Report No. 7100297
The university ol Massachusetts is an Affirmative Action/Equal Opportunity institution
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APPENDIX E - REPORT DISTRIBUTION
EPA Headquarters
Office of Inspector General - Headquarters
Agency Audit Follow up Coordinator
Agency Audit Follow-up Official
Director, Grants Administration Division
Drector, National Program Chemical Division
EPA Library
External
National University Continuing Education Association, Inc.
University of Maryland
University of Massachusetts
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Report No. 7100297
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