«
y
Office of Inspector General
Report of Audit
EPA
350/
1995.1
Final Report of Audit on EPA's
Controls Over Assistance Agreements
E1FMF4-03-0141-5100513
September 28, 1995
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Inspector General Division
Conducting the Audit:
Program Offices Involved:
Mid-Atlantic Audit Division
Philadelphia, PA
Office of International Activities
Washington, DC
Office of Water
Washington, DC
Office of Research and Development
Washington, DC
Office of Prevention, Pesticides, and
Toxic Substances
Washington, DC
Office of Administration and
Resources Management
Washington, DC
Grants Administration Division
Washington, DC
Region 3, Grants Management Section
Philadelphia, PA
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b"0
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
SEP 28 1995
OFFICE OF
THE INSPECTOR GENERAL
MEMORANDUM
SUBJECT:
FROM:
TO:
Report of Audit on EPA's Controls
Over Assistance Agreements
Report No. E1FMF4-03-0141-5100513
Elissa R. Karpf
Deputy Assistant Inspector Genei
for Acquisition and Assistance Audits
(2421)
Sallyanne Harper
Acting Assistant Administrator
for Administration and Resources Management (3101)
W. Michael McCabe
Regional Administrator, Region 3 (3RAOO)
Attached is our audit report on EPA' s Controls Over
Assistance Agreements. The purpose of the audit was to determine
whether grants management offices in Headquarters and Region 3
properly awarded assistance agreements, whether grants
specialists and project officers effectively reviewed
applications, administered awards and amendments, and closed
projects in accordance with established guidelines.
This report contains findings that describe deficiencies the
Office of Inspector General (OIG) 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 audit report do not necessarily represent the final EPA
position.
ACTION
This report makes eight recommendations to the Acting
Assistant Administrator for Administration and Resources
Management (OARM) , and one recommendation to the Region 3
Administrator. As a result, we designated the Acting Assistant
Administrator of OARM as the primary action official to
coordinate the Agency's official response. In accordance with
EPA Directive 2750, the Acting Assistant Administrator for OARM
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Audit of EPA's Controls Over Assistance Agreements
is required to provide this office with a written response to the
audit report within 90 days of the final audit report date. The
response should include milestone dates for corrective actions
planned but not completed.
We have no objections to further release of this report to
the public. Should you have any questions about this report,
please contact P. Ronald Gandolfo, the Divisional Inspector
General for Audit in the Mid-Atlantic Division, or his Deputy,
Carl Jannetti on 215-597-0497.
Attachment
11
Report No. E1PMF4-03-0141-XXXXXXX
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Auditof EPA's Controls Over Assistance Agreements
EXECUTIVE SUMMARY
PURPOSE
The purpose of the audit was to determine whether EPA
properly awarded assistance agreements, whether grants
specialists and project officers effectively reviewed
applications, administered awards and amendments, and closed
projects in accordance with all established guidelines.
BACKGROUND
In addition to its work force of almost 18,000 people, EPA
uses contracts and assistance agreements to accomplish its
mission. Assistance agreements are awarded to states, non-profit
organizations, universities and other entities. These agreements
are awarded through Grants Management Offices (GMOs} whose
fundamental role is to complement the technical knowledge of
project officers.
The GMOs are responsible for all business management aspects
associated with the review, negotiation, award and administration
of assistance agreements including audit resolution and final
close out. The GMOs are located in the EPA regions and
Headquarters. Within each GMO, there are grants specialists that
are primarily responsible for the administration of the
assistance agreements from the application phase to close out.
In EPA Headquarters, the Grants Administration Division
(GAD) performed the GMO functions. In GAD, 11 grants specialists
were responsible for processing over 2,900 awards and amendments
each year. The total value of these actions was over $380
million each year. The GMO in Region 3 had four grants
specialists, five grants assistants, and three Senior'
Environmental Employment Program grants specialists. The Region
3 GMO was responsible for over 640 awards and amendments in each
of the last two fiscal years. Associated funds in Region 3 were
also more than $300 million each year.
The grants specialists were responsible for developing and
maintaining the official file, which has three parts;
administrative, financial and technical. This file is to serve
as a composite collection of documents that provide programmatic
and fiscal information on the purpose, performance and history of
an agreement. The grants specialists should work closely with
the project officers to ensure successful completion of the
projects.
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Audit of EPA's Controls Over Assistance Agreements
The EPA project officers are also critical to the successful
completion of work done under assistance agreements. They have
the basic charge to manage and monitor the recipient's
performance under the terms of the assistance agreement.. There
is basically no difference between the responsibilities of
regional and Headquarters project officers.
On-going communication between the project officers, grants
specialists and the recipients regarding all aspects of the
agreement is essential. The Agency established the Assistance
Administration Manual to provide consistent administrative
policies and procedures for grants specialists and project
officers to use for monitoring recipient performance. This
manual provides highly detailed policies and procedures for
managing administrative aspects of assistance programs. These
policies and procedures encompass every stage of the grant
process from solicitation, pre-application, review and award
through performance monitoring, project administration, close out
and records retention.
PREAMBLE
The Office of the Inspector General (OIG) has performed
literally hundreds of audits on EPA assistance agreements. These
audits have shown that the recipients of assistance agreements
have at times misspent and wasted millions of dollars.
Occasionally, these recipients even defrauded EPA. A number of
these OIG audit reports revealed serious conditions that
occurred, in part, because the project officer and grants
specialists usually did not perform site visits, review payment
requests, obtain audit reports, or ensure compliance with the
terms of the assistance agreements. These conditions still
adversely affect assistance agreements.
PRINCIPAL FINDINGS
GAD ADMINISTERED ASSISTANCE AGREEMENTS
INCONSISTENTLY
Administration procedures for EPA's assistance agreements
were not performed consistently. Extensive differences existed .
between the functions performed by the GAD and Region 3 personnel
who managed assistance agreements. GAD personnel did not comply
with EPA policies and procedures when administering assistance
agreements. While both organizations administered the same types
of assistance agreements, GAD did not perform various functions
ii
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Audit of EPA*a Controls Over Assistance Agreements
performed by the Region 3 GMO. Personnel in GAD stated this
situation occurred because there was a shortage of grants
specialists in Headquarters.
PROJECT
INADEQUATELY
:ERS MANAGED ASSISTANCE AGREEMENTS
The Agency's project officers need to improve their
management of assistance agreements. The projects we examined in
EPA Headquarters showed that project officers did not follow
EPA's requirements. Similar to GAD, the project officers' files
contained limited documentation to show they performed required
reviews and evaluations of planned events and costs. As a
result, it was not apparent if the Agency's assistance agreements
were being managed.
Most project officers did not visit or correspond with
recipients, review financial matters and audit reports, as well
as notify GAD when the projects were completed. In some cases,
the project officers destroyed or lost the Agency's records,
instead of safeguarding and preserving the sparse Agency records
that they did have. Without these documents, we could neither
determine whether project officers monitored recipient activities
and progress, nor substantiate that EPA received what it paid for
under these agreements.
COMPLETED ASSISTANCE AGREEMENTS NOT CLOSED
GAD and Region 3 need to close 5,000 assistance agreements
that were shown on EPA's Grants Information and Control System as
inactive. By closing these assistance agreements that provided
almost $700 million to recipients, we estimated that $33 million
of unused funds may have been utilized to pay for current
Superfund projects, as well as other Government programs or EPA
initiatives. Moreover, by not closing these agreements, the
Agency bypassed the control process, by which EPA should have '
ensured that all required technical work and administrative
requirements were completed.
GAD DID NOT COMPLY WITH THE INTEGRITY ACT
GAD did not comply with the Federal Managers' Financial
Integrity Act (Integrity Act) by not identifying and reporting
its weaknesses. During the past seven years, GAD failed to.
report that it did not comply with Agency administration policies
and procedures for assistance agreements. Accurate reporting
iii
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Audit of EPA'a Controls Over Assistance Agreementa
would have been the early warning mechanism for the conditions
discussed in this report. It is also essential to properly
safeguard Agency resources, such as assistance monies, against
fraud, waste and abuse.
RECOMMENDATIONS
GAD should comply with established procedures and controls
for the oversight and management of assistance agreements. The
Agency also needs to emphasize to project officers the necessity
to comply with policies and directives concerning the management
of assistance agreements. Moreover, GAD and Region 3 EPA should
develop a systematic plan to close out assistance agreements.
The Agency also needs to ensure that the Office of Grants and
Debarment uses the Integrity Act process to identify and report
all weaknesses.
QARM RESPONSE AND OIG EVALUATION
The Agency agreed with one of the nine recommendations in
this report and partially agreed with a second. The response
indicated a disagreement with two other recommendations, and did
not address the remaining five. Moreover, OARM's response
recommended several changes to our report. These are:
o The findings are consistent with the findings in
previous reports. Basically, no new issues are
identified.
o We recommend that the report more clearly recognize the
resource constraints that have made it difficult for us
to resolve the issues that are cited in the report and
have been cited in previous reports. Currently the
report just cites GAD's own contention that resources
are scarce.
o it would be helpful to us if the recommendation on
tiered management were more specific.
o There are some places where we recommend changes in the
tone of the report.
o The report would be more helpful to us if it included
examples of how GAD can make better use of limited
resources.
IV
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' Audit of EPA'a Controls Over Assistance Agreement a
o we believe placing additional attention on the MOU with
FMC would make the tone of the report more positive
than it currently is. The MOU shows that the Agency
recognized a weakness in its assistance program and
took steps to resolve it.
More detailed Agency comments are provided in Appendix B of this
report.
We agree that this report presents findings previously
discussed in other reports. However, we performed this review
because conditions had not improved. Moreover, this review went
to greater depth, and contrary to the Agency's response, does
provide recommendations so that GAD could better provide post
award managment for assistance agreements.
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VI
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TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
CHAPTER 1 1
INTRODUCTION 1
PURPOSE ; 1
BACKGROUND 1
SCOPE AND METHODOLOGY 3
PRIOR AUDIT COVERAGE 5
CHAPTER 2 7
PREAMBLE ' 7
CHAPTER 3 11
GAD ADMINISTERED ASSISTANCE AGREEMENTS INCONSISTENTLY . 11
INAPPROPRIATE REVIEWS OF PROPOSALS/APPLICATIONS . . 12
INADEQUATE MANAGEMENT AND OVERSIGHT BY GAD .... 14
PERFORMING SITE VISITS 15
PROCESSING FINANCIAL REPORTS 16
COMPLYING WITH FEDERAL AUDIT REQUIREMENTS 17
OBTAINING FINAL REPORTS 18
MANAGEMENT AND OVERSIGHT IMPROVEMENTS NEEDED ... 19
RECOMMENDATIONS 20
CHAPTER 4 25
PROJECT OFFICERS MANAGED ASSISTANCE AGREEMENTS
INADEQUATELY 25
INCOMPLETE PROJECT OFFICER FILES 26
MISSING PROJECT OFFICER FILES 29
SUMMARY 31
RECOMMENDATIONS 31
CHAPTER 5 35
COMPLETED ASSISTANCE AGREEMENTS NOT CLOSED 35
MANAGEMENT OVERSIGHT REVIEWS 38
RECOMMENDATIONS 39
CHAPTER 6 . . 41
GAD DID NOT COMPLY WITH THE INTEGRITY ACT 41
RECOMMENDATION 42
APPENDIX A 43
PRIOR OIG AUDITS CONCERNING
THE MANAGEMENT OF ASSISTANCE AGREEMENTS 43
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APPENDIX B 45
AGENCY RESPONSE 45
APPENDIX C 47
DISTRIBUTION 47
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Audit of EPA*a ControlsOver Assistance Agreements
CHAPTER 1
INTRODUCTION
PURPOSE
The purpose of the audit was to determine whether EPA
properly awarded assistance agreements, whether grants
specialists and project officers effectively reviewed
applications, administered awards and amendments, and closed
projects in accordance with all established guidelines.
BACKGROUND
The mission of EPA is to protect the health and welfare of
the American people by preventing and abating pollution hazards.
In addition to its work force of almost 18,000 people, EPA uses
contracts and assistance agreements to accomplish its mission.
The Grants Administration Division (GAD) and Region 3 awarded
assistance agreements to states, non-profit organizations,
universities and other entities for projects such as:
o continuing environmental programs;
o construction of wastewater treatment plants;
o hazardous waste site cleanups;
o environmental education projects;
o research; and
o training for non-Federal personnel.
GAD predominantly awarded assistance agreements to non-profit
organizations and universities, while Region 3 primarily awarded
agreements to states, local governments and universities. These
agreements were awarded through Grants Management Offices (GMOs) :
whose fundamental role is to complement the technical knowledge
of project officers. The GMOs are responsible for all business
management aspects associated with the review, negotiation, award
and administration of assistance agreements including audit
resolution and final close out.
The GMOs are located in the EPA regions and Headquarters.
GMOs are required to document administrative and legal reviews of
an assistance application to assure it is complete. These
reviews are also intended to determine that the project is
acceptable. Within each GMO, there are grants specialists that
are primarily responsible for the administration of the
assistance agreements from the application phase to close out.
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Audit of EPA's Controla Over Assistance Agreements
In a June I, 1990 memorandum the Deputy Administrator explained
that:
The GMOs will provide full "cradle to grave" assistance
management, from receipt of application through award
and monitoring of projects, to audit resolution, and
close out.
In EPA Headquarters, the Grants Administration Division
performed the GMO functions. In GAD, 11 grants specialists were
responsible for processing more than 2,900 awards and amendments
each year. The total value of these actions was over $380
million each year. The GMO in Region 3 had four grants
specialists, five grants assistants, and three Senior
Environmental Employment Program grants specialists. The Region
3 GMO was responsible for over 640 awards and amendments in each
of the last two fiscal years. Associated funds in Region 3 were
also more than $300 million each year.
The grants specialists were responsible for developing and -
maintaining the official file. This file is in three parts: GAD
maintains the administrative file; the Financial Management
Center has the financial; and the project officer has the
technical file. These three files serve as a composite
collection of documents that provide programmatic and fiscal
information on the purpose, performance and history of an
agreement. The grants specialists should work closely with the
project officers to ensure successful completion of the projects.
The EPA project officers are also critical to the successful
completion of work done under assistance agreements. They have
the basic charge to manage and monitor the recipient's
performance under the terms of the assistance agreement. There
is basically no difference between the responsibilities of
regional and Headquarters project officers.
On-going communication between the project officers, grants
specialists and the recipients regarding all aspects of the
agreement is essential. The Agency established the Assistance
Administration Manual to provide consistent administrative
policies and procedures for grants specialists and project
officers to use for monitoring recipient performance. This
manual provides highly detailed policies and procedures for
managing administrative aspects of assistance programs. These
policies and procedures encompass every stage of the grant .
process from solicitation, pre-application, review and award
2
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Audit of EPA'a Controls Over Assistance Agreements
through performance monitoring, project administration, close out
and records retention.
In 1991, GAD completed the Grants Management Basic Program
Manual, which consolidated assistance agreement policies and
procedures. According to this Manual, GMOs were responsible for
evaluating applications, ensuring recipients submit reports
indicating the use of funding, monitoring the status of
accomplishments, and ensuring compliance with administrative and
program requirements. It was the responsibility of GMOs to
ensure that the project officers received the necessary reports
from the recipient and that follow-up actions were taken if
reports were overdue, incorrect, or deficient. This Manual also
explained that GMOs should help project officers with the review
and analysis of recipient reports and maintain the official
administrative file.
SCOPE AND METHODOLOGY
This audit was performed in accordance with the Government
Auditing Standards {1994 Revision) issued by the Comptroller
General of the United States as they apply to economy and
efficiency and program results audits. Our review included tests
of EPA program records and other auditing procedures we
considered necessary.
To accomplish our objectives, we performed reviews at the
EPA Grants Administration Division (GAD) in Washington, D.C. and
at the Region 3 Grants Management Section (QMS) in Philadelphia,
PA. Both these GMOs were responsible for all management aspects
associated with the review and negotiation of applications, as
well as the award and administration of assistance agreements
through audit resolution and close out. We interviewed Section
Chiefs, senior grants specialists and grants specialists. In
GAD, we also interviewed the Division Director and Branch Chiefs.
Additionally, in the Headquarters program offices we interviewed
project officers and other program personnel.
During our survey and audit, we. reviewed statutory
authorities for awarding assistance agreements, the Assistance
Administration Manual, Code of Federal Regulations (CFR), and
various other EPA policies, procedures and guidance applicable to
assistance agreements. To evaluate EPA's controls over
assistance agreements, we examined various records, reports,
correspondence and files, which included administrative and
project officer files. We reviewed project officer files for
assistance agreements awarded by the Office of International
3
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Audit of EPA's Controls Over Assistance Agreements
Activities, Office of Water, Office of Research and Development,
Office of Prevention, Pesticides, and Toxic Substances, and the
Office of Administration and Resources Management.
During our review, we judgmentally selected 54 assistance
agreements from EPA's Grants Information Control System. This
sample included both active and inactive agreements with a total
value of more than $95 million. The inactive projects were
completed but not closed. The breakdown of our sample by
location is shown below.
Grants
Management
Office
Assistance Agreements Sampled
Active Inactive . Total
Total Funds
Awarded
GAD
Region 3
Totals
16
7
23
15
16
31
31
23.
5!
$59,100,000
36.400.000
595.500.000
During our review of GMO and project officer files, we
compared what was required by the Assistance Administration
Manual and the EPA Grants Management Basic Program Manual to the
documents in the file. We also reviewed the assistance
agreements to determine their purpose, requirements, and
compliance with applicable laws and regulations. We also
evaluated GAD's internal control environment as it related to
assistance agreements.
Our review evaluated the economy, efficiency and program
results expected only in relation to the procedures used by EPA
to award, monitor and close assistance agreements. Our audit
also included an evaluation of management controls and procedures
specifically related to the audit objectives. The internal
control weaknesses that we noted and related recommendations to
strengthen controls within the scope of this audit are included
in Chapters 2 through 6. Except as noted in these Chapters,
nothing came to our attention that caused us to believe GAD's and
Region 3's remaining procedures were not adequate for our
purposes.
As part of this audit, we reviewed the Office of Grants and
Debarment's'Quality Assurance Letters on Internal Controls for
the eight fiscal years ended September 1994, prepared to comply
with the Federal Managers' Financial Integrity Act. We found
that none of the weaknesses cited in this audit report were
disclosed in these annual assurance letters.
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Audit of EPA'a Controls Over Assistance Agreements
During this audit, we obtained various printouts from the
Grants Information Control System. Although we used information
maintained by EPA on computers, we did not audit the general and
application controls of the data processing system. The main
purpose of our audit was not to express an opinion on the
accuracy of the data processing system, but to evaluate the
Agency's implementation of policies and regulations as they deal
with the administration and close out of assistance agreements.
As a result of our survey, we initiated an in-depth review
on June 24, 1994. The fieldwork for this audit was completed on
March 31, 1995. We submitted "Position Papers" to the Office of
Grants and Debarment and Region 3 on June 19, 1995. On June 29,
1995, Region 3 provided written comments to these position
papers. During July 1995, we met with personnel from OARM and
Region 3 to discuss the issues contained in the position papers.
The draft report was issued on August 11, 1995. EPA submitted
their response to us on September 19, 1995. We did not conduct
an exit conference because GAD personnel indicated it was
unnecessary. EPA's comments are summarized at the conclusion of
each finding, and the complete response is included as Appendix B
to this report.
PRIOR AUDIT COVERAGE
EPA's Office of Inspector General (OIG) has issued numerous
audits and special reviews regarding the inadequate
administration of assistance agreements by grants specialists and
project officers1. Our recent reviews disclosed that grants
specialists and project officers did not comply with the Agency's
Assistance Administration Manual and other policies, procedures
and regulations.
During 1994, EPA's OIG issued final audit reports on
Cooperative Agreement (CX-818257-01) awarded to Temple University
(S3CML3-03-0201-4100523), and on Cooperative Agreement
(T007356-01) awarded to the University of Kansas (E1FMF4-19-0618-
4100407). Both reports addressed improper administration and
oversight of the cooperative agreements by the project officers
and grants specialists. The OIG recommended that senior
management be held accountable for ensuring documented management
controls are in place and that project officers and grants
specialists comply with the Assistance Administration Manual.
1 See Appendix A for a partial list of the more recent
reports concerning assistance agreements.
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Audit of EPA's Controls Over Assistance Agreements
CHAPTER 2
PREAMBLE
The OIG has performed literally hundreds of audits and
special reviews on EPA assistance agreements. A number of these
have disclosed that the recipients of assistance agreements have
at times misspent and wasted millions of dollars. Occasionally,
these recipients even defrauded EPA. For example, our 1988
Capping Report on Superfund Cooperative Agreements, which
summarized the results of 33 OIG audit reports, disclosed:
4 Recipients often did not attain performance goals and
objectives under the Superfund-Cooperative Agreements.
* Widespread noncompliance with procurement regulations,
and the disregard for the special conditions in
cooperative agreements.
* The extent of the financial management deficiencies
encountered casts doubt on the recipients' ability to
account for the $136 million EPA spent.
There were numerous reasons why these situations occurred, not
the least of which was inadequate oversight by grants specialists
and project officers.
Other more recent audits have amplified the need for the
grants specialists in GAD, and the project officers to improve
their oversight of assistance agreements. For example:
* The March 1993, audit on the Environmental Research
Laboratory in Athens, Georgia reported that inadequate
oversight by Headquarters components, such as GAD,
precluded .the early detection and correction of the
misuse and abuse of cooperative agreements.
• Our September 1994 reports on the assistance agreements
awarded to the Center for Earth Resource Management
Applications (CERMA), revealed details about:
CERMA's violation of conflict of interest
regulations;
financial management and internal control
deficiencies;
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Audit of 3PA'a Controls Over Assistance Agreements
the recipient's failure to obtain annual audits as
required by OMB Circular A-133;
EPA suspending CERMA from all Federal and non-
Federal procurement; and,
more than $200,000 that CERMA needed to repay EPA
because the amounts claimed were ineligible,
unsupported, and unreasonable.
* Audit reports on the cooperative agreements awarded to
Kansas University and Temple University highlighted
serious problems concerning EPA's national conferences.
For example, one of these audits noted that, despite
the expenditure of thousands of dollars, there were
virtually no records to indicate the Agency reviewed
the University's proposal to host the conference, as
well as contracts and invoices. Moreover, numerous
unreasonable and unnecessary costs in the proposal
should have been disallowed. This responsibility was -
shared by the project officer and GAD's grants
specialists. Unfortunately, none successfully carried
out their responsibility.
Our review concluded that neither EPA nor the
University complied with applicable Federal cost
principles. Moreover, the University did not follow
its own procedures for safeguarding public funds.
Overall, we identified almost $541,000, which were
considered ineligible, unsupported, or unnecessary and
unreasonable. These costs included string bands,
cowboy hats, and limousines.
Two of the 31 assistance agreements we reviewed during this
current audit were awarded to the West Virginia University
Research Corporation. Concurrently, we also performed an audit
of the costs claimed under two other assistance agreements that
provided $6.5 million to this same recipient. This second audit
of costs disclosed that the project officer and the grants
specialist neither reviewed nor approved the training manuals
that cost EPA an estimated $900,000. After paying almost $61,000
for one course, the University informed its subcontractor that
the final training package remained inadequate and unacceptable.
All of these OIG audit reports disclosed serious conditions
that occurred, in part, because the project officers arid grants
specialists usually did not perform site visi *, review payment
8
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Audit ofEPA*a Controls Over AssistanceAgreements
requests, obtain audit reports, or ensure compliance with the
terras of the assistance agreements. These conditions still
adversely affect the assistance agreements we reviewed during
this audit. Chapter 3 of this report discusses why we believe
GAD's administration of assistance agreements needs improvement.
Chapter 4 discusses the need for project officers to improve
their administration procedures.
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CHAPTER 3
GAD ADMINISTERED ASSISTANCE AGREEMENTS
INCONSISTENTLY
Administration procedures for EPA's assistance agreements
were not performed consistently. Extensive differences existed
between the functions performed by the GAD and Region 3 personnel
who managed assistance agreements. We found that GAD personnel
did not comply with Agency requirements. For example, GAD did
not perform post award management of assistance agreements.
While both organizations administered the same types of
assistance agreements, various functions performed by the Region
3 GMO were not performed by GAD. Personnel in GAD stated this
situation occurred because there was a shortage of grants
specialists in Headquarters.
The 23 Region 3 assistance agreement files we reviewed
generally contained sufficient information to evidence that EPA's
administration requirements were satisfied. However, for the 31
assistance agreements awarded by GAD there was insufficient
evidence to document that grants specialists: (a) reviewed the
recipients' proposals; (b) monitored progress on the projects; or
(c) required recipients to complete projects and submit the
required close out documentation. GAD performed annual
evaluations to ensure that the regions completed this type of
post award management, but did not follow similar standards
themselves. Chapter 5 provides more details about these annual
evaluations.
On August 20, 1990, the Assistant Administrator for the
Office of Administration and Resources Management issued guidance
that described the roles and responsibilities of personnel who
administer assistance agreements. This guidance also delineated
five major areas of responsibility. The duties associated with
each of these areas are described below:
PREAWARD/AWARD
Encompasses providing guidance to
applicants and project officers,
reviewing assistance applications,
ensuring the allowability of costs, as
well as assuring a recipient's
financial, procurement, and property
management systems are adequate.
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O OVERSIGHT
O CLOSE OUT
Audit of EPA'a Controls Over AssistanceAgreements
0 ACTIVE GRANTS Entails reviewing payment
MANAGEMENT requests, obtaining reports, assessing
project status, ensuring compliance with
terms and conditions, including the
receipt of all deliverables. It also
requires maintaining the official grant
management award file, providing
guidance to the recipient, and ensuring
compliance with Agency regulations such
as EPA procurement regulations.
Requires on-site reviews of the
recipient's financial, procurement, and
property management systems, as well as
meetings with recipients and project
officers.
Consists of ensuring accountability of
property, obtaining, reviewing and
distributing final reports and Financial
Status Reports (FSRs), processing close
out documents, as well as reviewing and
approving final payments.
Involves attending entrance and exit
conferences, receiving, reviewing, and
resolving audit reports, providing
assistance to auditors, and ensuring
corrective action was initiated.
It is important to note that many of the grants specialists'
duties described above could not be completed without documentary
evidence. For example, to properly reconcile FSRs with other
financial reports, the grants specialist would need either copies
of the FSRs and reports, a work sheet comparing figures from
these documents, or documentation showing the date and' the
results of the review. Similar documentation should be available
to evidence: conducting on-site reviews and preparing reports;
reviewing procurements and expenditures; verifying the receipt of
deliverables; and, ensuring compliance with the terms and
conditions of the assistance agreements. GAD files contained
little or none of this type of information.
INAPPROPRIATE REVIEWS OP PROPOSALS/APPLICATIONS
The content of every proposal must be reviewed in the
program office and by the grants specialists. '->r all awards,
o AUDIT
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Audit of SPA'a Controls Over Assistance Agreements
the official assistance agreement file must contain written
documentation to show that reviews have been favorable and any
deficiencies have been addressed. EPA's Assistance
Administration Manual states in part that:
When an application is received by EPA, it will receive
an administrative review by the Assistance
Administration Unit [in this case Headquarters GAD] and
immediately be forwarded to the designated program
official for technical/programmatic review....The
reviewer must determine whether all proposed project
tasks are included in the budget and must review each
budget item for reasonableness.
...[GAD] must...maintain a complete'and accurate record in
the official file of all actions on each application....
The Assistance Administration Manual requires GAD to complete
among other things, legal and administrative reviews for all new
assistance agreements, as well as amendments. A sample checklist
for these reviews is provided in Chapter 15 of this Manual.
Despite the requirements in the Assistance Administration
Manual, GAD's files did not contain documentation to evidence
their review of the assistance agreement applications.
Specifically, 10 of the 31 files we evaluated did not contain the
checklists discussed in the Assistance Administration Manual or
other evidence that the applications were reviewed. Ironically,
several of the checklists completed were for smaller dollar value
assistance agreements, while checklists were not completed for
those involving more substantial amounts of money. For example,
checklists were completed for four agreements valued at less than
$100,000 each, while four agreements without checklists were for
amounts ranging from $3 million to $10 million.
GAD personnel acknowledged that frequently they neither
completed administrative review checklists nor performed the
required reviews for all proposals. One grants specialist did
not recall completing the checklist, but indicated the checklist
was in his head. When asked if he ever completed checklists, he
stated that he tried to do them. A second grants specialist
explained that she also should have completed a checklist, but
sometimes there was not enough time, especially at the end of the
fiscal year. Two other specialists confirmed that checklists
were not always completed during the "crunch period" at the end
of the fiscal year. Interestingly enough, seven assistance
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Audit of EPA'a Controls Over Assistance Agreements
agreements without checklists were awarded during the last month
of the fiscal year.
BY GAD
EPA's management and oversight responsibilities continue
after the application is processed and the assistance agreement
is awarded. According to the August 20, 1990, guidance issued by
the Assistant Administrator for the Office of Administration and
Resources Management, and the Assistance Administration Manual,
GAD and the GMOs--GAD's regional counterparts--were responsible
for grants management and oversight of EPA assistance agreements.
Their duties included the numerous functions described .
previously. However, the assistance files we reviewed in GAD
frequently did not contain documentation to indicate that grants
specialists fulfilled these duties.
For the most part, GAD files contained only the documents
needed to award or amend assistance agreements. These included
documents such as: applications, assistance agreements,
amendments, funding orders, commitment notices, decision
memorandum and approvals for amendments to the assistance
agreements. There was neither evidence of correspondence with
recipients nor indications that GAD provided management and
oversight of the assistance agreements. Moreover, there was
generally no correspondence between GAD personnel and project
officers regarding project performance, site visits, progress
reports, and interim financial reports. In effect, GAD's files
did not contain documentation evidencing that GAD fulfilled their
responsibilities for:
o The review and analysis of recipient reports
to ensure reports were received and the
recipient's efforts were on schedule and
complied with Agency objectives.
o Comparing payment requests with progress
reports to ensure payments were justifiable.
o Monitoring recipient activities, both on-site
and "in-house." These activities included
reviewing recipient's financial, procurement,
and property management systems, as well as
meetings with the recipient and the project
officer.
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Audit of EPA's Controls Over Assistance Agreements
o Ensuring the recipient complied with special
conditions in the assistance agreement.
o Assuring the recipient followed Single Audit
Act requirements and completed recommended
corrective actions.
o Maintaining the official grants management
file and providing guidance to the recipient.
PERFORMING SITS VISITS
Site visits and the associated reviews performed during
these visits should be GAD's greatest resource to monitor
recipient performance. OMB Circular A-110 provides that Federal
agencies shall make site visits to review program accomplishments
and management control systems, and to provide technical
assistance.
EPA's Assistance Administration Manual, Chapter 44, Section
5.b., also emphasizes the use of site visits as a tool to monitor
assistance agreements. This reference explains that on-site
reviews should be performed to evaluate financial, procurement
and property management systems. GMOs need to prepare review
protocols, coordinate reviews, test transactions, and follow-up
on findings and corrective actions. Also, they need to assure
that EPA project officers are performing technical site visits.
Despite these requirements, GAD's grants specialists
performed no site visits for the 31 projects we reviewed. Our
discussions with four grants specialists corroborated that the
management and oversight required by Agency guidance was not
performed. They did not perform on-site reviews or site visits,
but believed these reviews would be beneficial for GAD and the
recipients. The specialists indicated a desire to ensure
recipients fulfilled requirements, but stated they could not
perform site visits because travel funds were not available. -We
do not agree that, in all cases, the lack of travel funds
prevented sites visits. Moreover, performing site visits should
have precluded some of the conditions we discussed in the
Preamble.
The specialists we interviewed also did not know if project
officers performed site visits, because GAD did not normally
receive documentation evidencing site visits or progress
evaluations from the project officers. Only one of the 31 GAD
files we reviewed contained a project officer site visit report,
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Audi*-, of EPA7 s Controls Over Aasistance Agreements
even though project officers were also required to perform site
visits and send GAD a site visit report. Unfortunately, it
appears that most project officers also did not visit recipients.
The lack of project officer site visits is discussed in
Chapter 4.
PROCESSING FINANCIAL REPORTS
According to 40 CFR 30.505, recipients must submit FSRs
within 90 days after each budget period and within 90 days after
the end of the project. The EPA Assistance Administration
Manual, Chapter 44, Section 5.c., provides that FSRs must be
reviewed by the GAD to assure•that the recipient uses EPA funds
properly. Our review included 15 completed projects, but GAD
received FSRs for only seven. However, GAD did not process these
FSRs timely. Processing included verifying mathematical
accuracy, determining the amount paid to the recipient, and
initiating the deobligation of unused funds.
GAD grants specialists explained that FSRs were put in piles
when received. When the piles became too large, the specialists
stopped all other work, and processed FSRs during what they
termed were "FSR Parties." One such party started in early
February 1994. Three of the seven FSRs we found in GAD's files
were processed then. Even after processing the FSR, GAD usually
did nothing further to close the assistance agreements. Only one
of the seven projects for which FSRs were received was closed,
even though these projects were completed as long ago as 1989.
The chart below shows that these FSRs were not processed in a
timely manner.
AGREEMENT
NUMBER
CX819154
CX816377
CR813043
DATE PROJECT
COMPLETED
09/30/92
02/15/91
12/30/90
DATE OF
FSR
12/21/92
05/30/91
09/07/92
DATE PROCESSING
COMPLETED
02/02/94
02/01/94
02/02/94
We asked the grants specialist responsible for project
CX819154 why GAD received an FSR in 1992, but did not deobligate
the funds until 1994. The specialist agreed this was a problem,
and explained that GAD had an "FSR Party" in February 1994,
during which many FSRs were processed. During October 1994, we
asked another specialist if she received an FSR for a project
that ended over a year ago. After searching through three large
stacks of FSRs, she was unable to locate one for this agreement.
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Audit of EPA's Controls Over Assistance Agreements
A third grants specialist told us he had not processed FSRs since
February 1994, which was more than eight months ago.
GAD had not received FSRs for the remaining eight projects.
Moreover, their files did not indicate any attempts to obtain the
missing FSRs, even though these projects were completed as many
as three years ago. For example, one recipient should have
submitted an FSR by December 1992, The grants specialist told us
that she could not find the FSR, and explained that she received
FSRs, but did not have time to file them.
Because GAD personnel did not obtain FSRs for eight projects
and none of the progress reports for all 15 completed projects,
they could not compare FSRs to progress reports to ensure
payments were justified. Unfortunately, GAD did not send the
FSRs they received to the project officers. In effect, the
recipients expended over $6 million under these 15 completed
assistance agreements, and the Agency did not know if the
recipients used EPA funds properly. This same omission occurred
'for all assistance agreements that we reviewed.
One of the assistance agreements discussed in the Preamble
is an example of-what happens when EPA does not review the status
of a recipient's work before making payments. The West Virginia
University Research Corporation paid a contractor almost $61,000
even though the contractor's work was "completely inadequate or
unacceptable."
COMPLYING WITH FEDERAL AUDIT REQUIREMENTS
GAD was responsible for assuring recipients complied with
Single Audit Act requirements and that recommended corrective
actions were completed. According to the Grants Management Basic
Program Manual (Module VII, page.7.19), EPA is authorized to
audit the financially assisted activities of any recipient
organization. However, it is Federal policy to rely on a
recipient's own audits if performed in accordance with applicable
Federal audit standards.
GAD personnel stated that they did not assure recipients
complied with Single Audit Act requirements, but relied on the
recipients to have the required audits completed--usually annual
audits. GAD personnel further explained that they did not
request copies of audit reports from recipients, and if received,
the reports were not reviewed. Our review> of GAD's files
confirmed that GAD did not fulfill their responsibility. Only
one of the 31 GAD files we reviewed contained an audit report.
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Audit of EPA's Controls Over Assistance Agreements
The project officers did not fare much better in this regard.
There were only two audit reports in the 13 project officer files
we reviewed.
According to the Chief, Grants Operation Branch almost all
assistance agreements were closed without GAD seeing an audit
report. One grants specialist explained that she had never seen
or requested an audit report. A second grants specialist told us
that few recipients submit audit reports, and explained that
specialists were not instructed to obtain audit reports, and
therefore did not request them.
Again one of the examples in the Preamble points out the
essentiality of reviewing and following up on audit reports. The
recipient's single audit report for fiscal year 1992 disclosed
the need for the University to conduct a "wall to wall" inventory
of its property. The 1993 single audit disclosed the results of
this inventory, and reported that over 7,000 items were missing.
These two audit, reports disclosed findings that were important to
EPA because the recipient charged EPA's two cooperative
agreements almost $190,000 for equipment, including a number of.
computers. EPA did not obtain these audit reports and did not
know about these significant findings. As a result, EPA did not
ensure corrective action was taken to safeguard its equipment.
OBTAINING FINAL REPORTS
The project officer is expected to certify to GAD that the
project is completed. According to the Assistance Administration
Manual, Chapter 44, paragraph 5.J., if the agreement requires a
final report, the project officer must review the draft of the
final project report 'and notify GAD when the final report for the
completed project is approved.
As discussed previously, 15 of the GAD files we reviewed
were for completed projects; however, none contained project
officer certifications regarding receipt and approval of the
final product. Moreover, there was no evidence in GAD's files to
indicate any communication with the project officers to obtain
the needed certifications. It is noteworthy that several of
these projects were completed as many as five years ago, and
neither GAD's grants specialists nor the project, officers
communicated with one another regarding the final products.
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Audit of EPA'a Controls Over Assistance Agreements
MANAGEMENT AND OVERSIGHT IMPROVEMENTS NEEDED
Our review of GAD's procedures showed a very low priority
was assigned to the management and oversight of assistance
agreements. GAD personnel explained that their omissions
regarding management and oversight were caused by a shortage of
resources. In May 1993, GAD performed a workload study, and
concluded that because of substantial workload increases, they
needed about 15 more grants specialists. Specifically, the
report stated:
Unfortunately, because of the work overload, the quality of
our grants operation has suffered. We simply are not doing
everything we should--
Our pre-award management is less than perfect.
We do very little post award management.
Our backlog of unclosed out projects is growing
daily.
As a consequence--
We suffer from low morale.
Our ability to respond to IG's recommendations is
limited.
Client services suffer.
Without additional FTE resources, GAD's work quality
will suff-er and frustration, low morale, and large
backlogs will continue.
It appears that the study was correct in several respects--
the quality of GAD's work did continue to suffer, the large
backlogs continued, as well as the frustration levels. It is
noteworthy•that many of the issues we reported concerning GAD
were not new. Their own workload study and several other audits
we previously issued referred to GAD's inadequate management. It
is also noteworthy that GAD developed the 3-Year Action Plan for
Improving Grants Practices during early 1993. Despite the
workload study, the past audit reports, and improvement plans,
GAD has not been able to adequately perform post award management
of assistance agreements.
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Audit of EPA'a Controls Over Assistance Agreements
While we did not validate GAD's workload study, we did
confirm the need for improvement. As a result, the Agency needs
to determine if added resources should be furnished to alleviate
the conditions reported. However, with or without added
resources, GAD needs to initiate actions that go, beyond those
already proposed in their workload study, 3-Year Plan, and in
their responses to previous audit reports. For example, GAD
should consider developing different levels of management for
assistance agreements. In this way, grants specialists could
concentrate their efforts on the higher dollar value agreements,
and provide not as much effort to less significant agreements.
We acknowledge, that EPA has a number of initiatives in
development, such as issuing the Implementation Order to
Streamline Small Grants, revising the Integrity Act requirements,
updating the Assistance Administration Manual, and establishing
Performance Partnerships with states. Since many of the
initiatives are in development, Headquarters and the regions are
in'the process of developing guidelines for implementation by
fiscal year 1996.
In addition to these initiatives, the Agency should take
aggressive action to ensure project officers perform their
existing responsibilities, and to transfer more of GAD's
oversight responsibilities to the project officers. This could
include requiring project officers to provide GAD all needed
documents, as well as comparing payment information to the
recipient's progress. GAD should also consider developing
different levels of management for assistance agreements. For
example, the current oversight required for the smaller dollar
value assistance agreements could be reduced in order to
concentrate GAD's efforts on the higher dollar value.assistance
agreements.
RECOMMENDATIONS
The Assistant Administrator for Administration and Resources
Management should require GAD to comply with established
procedures and controls for the oversight and management of
assistance agreements. To accomplish this, the Agency needs to
determine if additional resources should be devoted to the
oversight and management of assistance agreements to correct the
conditions reported. However, with or without the addition of
increased resources, the Agency should initiate action to improve
GAD's management and oversight of assistance agreements. In this
regard, the Agency should consider:
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Audit of EPA'a Controls Over Assistance Agreements
o Transferring selected GAD responsibilities to project
officers.
o Using additional Senior Environmental Employees to
assist GAD.
o Transferring the responsibility for selected assistance
agreements to regional GMOs, if they are providing the
same level of oversight as Region 3. GAD should be
able to provide information about regional capabilities
from their past reviews.
o Developing different levels of management for
assistance agreements with a view toward concentrating
GAD's efforts to the higher dollar value assistance
agreements.
QARM RESPONSE
We have updated our application checklist arid advised our
specialists to use it on all projects. Although experienced
specialists can remember the items on the checklist, we agree the
checklist should provide an official record of our review.
The report says there was a lack of correspondence in GAD's
files, but project officers receive most the correspondence from
recipients during the performance of the projects, and they do a
great deal of the monitoring. All progress reports are sent to
them. This is consistent with your recommendation that GAD
consider transferring responsibilities to project officers.
The report says a review of GAD's files failed to show that
we met our responsibilities for the following: review and
analysis of recipient reports; comparing payment requests with
progress; and monitoring recipient activities. We believe these
activities are primarily project officer responsibilities, and it
is consistent with your recommendation to let project officers do
them.
Concerning the recommendations:
o We agree that GAD should transfer more responsibility
to project officers, and we believe project officers
keeping their files is one aspect of this. We also
acknowledge that this responsibility must be stressed
to project officers. However, the report does not
indicate which responsibilities could be transferred to
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Audit of EPA*a Controls Over Assistance Agreements
project officers. It would be helpful if the report
were more specific. Also, the report says "This could
included requiring project officers to provide GAD all
needed documents...." We recommend against requiring
that documents be sent to GAD.
o GAD has seven Senior Environmental Employees, and they
have been invaluable. However, they require funds, and
it is doubtful that we will be able to get any more of
them.
o Transferring the responsibility for selected assistance
agreements to regional GMOs has already taken place to
the fullest extent practicable. The regional
delegations have been broadened in recent years to
permit regions to fund projects that formerly were
awarded out of Headquarters. I believe this provides
the appropriate incentive. I believe this
recommendation should be deleted.
o Developing different levels of management for
'assistance agreements--It would help us if the report
were more specific. We cannot tell from this statement
what level of management is recommended for varying
dollar levels.
PIG EVALUATION
We do not agree with OARM's comments concerning the lack of
correspondence in GAD's files. Our report explains that GAD does
not usually perform post award management and that the project
officers do not generally inform GAD of their oversight
activities. Our review also showed that in many cases, the
oversight by the project officers was lacking. The Assistance
Administration Manual requires the project officer to send GAD
11.. .documentation.. .that have a significant bearing on. . .the .
project." This Manual also requires the project officer to send
GAD a report for site visits. These documents are essential if
GAD is going to oversee post award activities of assistance
agreements as required by Agency policies.
We do not agree'that the review and analysis of recipient
reports; comparing payment requests with progress; and monitoring
recipient activities are solely project officer responsibilities.
The Grants Management Basic Program Manual clearly indicates that
these activities are also the responsibility of GAD.
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Audit of EPA1s Controls Over Assistance Agreements
Our report did not specify which responsibilities could be
transferred to project officers because there are numerous
possibilities. The Agency should decide what will work best to
ensure that someone performs at least some of the post award
management GAD should have accomplished. During our review we
found little or no evidence that GAD performed oversight
activities such as: site visits, close out, ensuring the receipt
of reports, project status assessments, procurement action
reviews, information management, and file management. We believe
this list offers several possibilities for transferring
responsibilities to the project officers.
We do not agree that the recommendation concerning
transferring the responsibility for selected assistance
agreements to regional GMOs should be deleted. Although our
review did not evaluate whether or not regional delegations have
been expanded to the fullest extent possible, we believe other
possibilities exist. Our review included 16 active grants. In
some cases, these assistance agreements were awarded to state
agencies that received other assistance agreements from the
regions. As a result, EPA has two GMOs responsible for post
award management of one recipient. It would be more efficient to
have oversight provided by one GMO.
We intentionally did not include the specific levels of
management that GAD should afford to assistance agreements of
varying dollar levels. Our concern was that there was little or
no evidence that GAD performed oversight activities for
assistance agreements. Moreover, GAD personnel indicated
oversight was limited because they lacked the necessary staff.
That being the case, we believe one option is to provide whatever
oversight was possible--using the existing GAD staff, an
augmented GAD staff, or other Agency personnel such as the
project officers--to a smaller number of assistance agreements.
The specific levels we believed were best determined by GAD.
However, we are willing to work with Agency personnel on this
issue.
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Audit of EPA*e Controls OverAssistance Agreements
CHAPTER 4
PROJECT OFFICERS MANAGED ASSISTANCE AGREEMENTS
INADEQUATELY
The Agency's project officers need to improve their
oversight of assistance agreements. The projects we examined in
EPA Headquarters showed that project officers did not follow
EPA's requirements. Similar to GAD, the project officers' files
contained limited documentation to show they performed required
reviews and evaluations of planned events and costs. As a
result, it was not apparent if the Agency's assistance agreements
were being managed.
Most project officers did not visit or correspond with
recipients, review financial matters and audit reports, as well
as notify GAD when the projects were completed. In some cases,
the project officers destroyed or lost the Agency's records,
instead of safeguarding and preserving the sparse Agency records.
that they did have. Without these documents, we could neither
determine whether project officers monitored recipient activities
and progress, nor substantiate that EPA received what it paid for
under these agreements.
According to the EPA Assistance Administration Manual
Chapter 44, the project officer is the recipient's main point of
contact with EPA for technical guidance and is responsible to:
Manage and monitor the performance of work under the
terms of the assistance agreement. Establish a
"working file" for the project and maintain the
official technical record of activities.
Provide documentation to the GAD of correspondence,
meetings, and phone calls, which have a significant
bearing on the performance of either the project, the
recipient or its contractors.
Perform site visits to monitor actual versus scheduled
performance, and determine the condition of equipment and
property. These visits should also ensure personnel,
equipment, and facilities charged to the agreement are used
on the project, and identify any conditions adversely
affecting EPA's interest.
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Audit of EPA* a Controls Over Assistance Agreements
Prepare a trip report that evaluates the quality of work
performed. Copies of the trip reports must be provided to
GAD for inclusion in the official file.
INCOMPLETE PROJECT OFFICER PILES
We requested that the project officers provide us their
files for 17 of the 31 assistance agreements included in our
review of GAD. Because the project officers could not locate
four files, we limited our review to 13 project officer files.
Nine of these were ongoing projects and four were completed. We
compared the contents of the project officers' files to the
documents required by the EPA. Grants Management Basic Program
Manual, and interviewed each project officer.
Our review indicated that project officers' files did not
contain 47 percent of the required documents. Moreover, many
documents the project officers did have, did not end up in GAD's
files. The Assistance Administration Manual, Chapter 44,
requires that the project officers provide these documents to
GAD. The table below presents the details concerning the
documents missing from the project officers' files.
DOCUMENTS REQUIRED BY THE GRANTS
MANAGEMENT BASIC PROGRAM MANUAL
Application
Program Review
Decision Memorandum
Assistance Agreement
Amendment*
Site Visit Report
Progress Report*
Audit Report
Financial Statu* Report* ,'
Final Report*
Certification to «AP«
TOTALS
PERCENTAGE OF DOCUMENTS MISSING
* Not required for all files.
FILES THAT
REQUIRED SPECIFIED
DOCUMENTS
13
13
13
9
13
13
4
jr
m
FILES WITHOUT
SPECIFIED
DOCUMENTS
2
8
3
3
9
0
11
TO
4
Jl
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Audit of EPA'a ControlsOver AssistanceAgreements
The extent of the missing documents shows the disregard of
basic management techniques needed to properly manage assistance
agreements. For example, the assistance agreement and amendments
are in actuality the contract between EPA and the recipient.
Without these documents the project officer--EPA's project
"manager--did not have the "contract" terms that enumerated the
recipient's responsibilities. This was especially troubling
because often the assistance agreements contained not only the
recipient's general responsibilities, but many "special
conditions" requiring compliance with government regulations.
The extremely limited interaction between the project
officers and the. recipients indicated that the Agency's
management of its assistance agreements .needed significant
improvement. For nine projects, totaling almost $12 million,
there were no indications the project officers performed site
visits. The project officers told us they did not perform site
visits because either they just do not perform visits, or travel
funds were not available. For example, one project officer said
she does not normally perform site visits. -A second project
officer told us she has performed visits, but not for the two
projects we asked about. Another explained that occasionally she
attended recipients' workshops, but did not perform site visits.
She believed that site visits should be conducted for larger
assistance agreements, and she added that travel funds were
usually limited.
The fourth project officer we interviewed indicated she did
not do site visits, and she believed site visits were only
necessary for certain recipients. However, she did say that she
may have gone out and reviewed a training course conducted by a
recipient.
Another project officer told us he did not visit the
recipient for two projects because travel funds were frequently
not available for site visits. However, he believed that site
visits were important and he did visit recipients whenever travel
funds were available. He told us he has been a project officer
for 24 years, and the product received is of much higher quality
when project officers visited the site. During site visits, he
reviewed financial information, project status, and on-site work.
He believed that project officers should do at least one site
visit on projects over $100,000.
It was noteworthy that three of the nine recipients not
visited were located in Washington, D.C., literally.blocks from
the-project officers' desks. Another recipient received three of
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Audit of EPA'a Controls Over Assistance Agreements
the assistance agreements included in our review. EPA provided
this recipient more than $1 million, but the project officer did
not perform a site visit, even though the recipient was located
only about 30 miles from EPA Headquarters.
It was also troubling that other project officers said they
just did not do site visits, while EPA's guidance establishes
that site visits are needed to monitor performance and
expenditures under assistance agreements. Not performing site
visits weakens EPA's ability to monitor progress, to ensure that
recipients comply with their agreements, and to safeguard Federal
assets.
The lack of interaction between project officers and
recipients was not limited to site visits and correspondence.
Eleven of the 13 project officer files reviewed did not contain
required audit reports. According to the EPA Grants Management
Basic Program Manual, Agency personnel managing assistance
agreements should perform audit follow-up. Also, this manual
lists audit reports as a document to be incorporated in the GAD -
and the project officer's files. As discussed in Chapter 3, GAD
also did not obtain audit reports or even verify that recipients
complied with Single Audit Act requirements. If unsolicited
audit reports were provided by the recipient, GAD did not include
them in their files or forward the report to the project officer.
Audits are essential oversight devices that test the
financial transactions of the recipient, as well as compliance
with applicable laws and regulations. Unfortunately, neither GAD
nor the project officers obtained copies of the recipients' audit
reports. As a result, the Agency spent millions of dollars
without availing itself of an essential resource--the examination
of recipients' financial and.compliance reports that affected the
expenditure of EPA's funds.
Audit reports were not the only resource the project
officers did not use to monitor recipients. They also did not
use FSRs although Chapter 44 of the Assistance Administration
Manual discusses the need to compare FSRs with progress reports.
Ten of the 13 project officer files did not contain FSRs (FSRs
were not yet required for the remaining three files). Without
FSRs, project officers had little or no knowledge of a
recipient's expenditures, because the progress reports they
received usually did not contain financial information.
Moreover, GAD did not receive the progress reports; therefore,
they also did not compare payments to the work accomplished.
28
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Audit of EPA'a Controls Over Assistance Agreements
The omissions discussed were unfortunate because for
assistance agreements awarded by GAD, recipients sent payment
requests directly to EPA's Financial Management Center (FMC), in
Las Vegas. FMC verified the math, and paid the recipient.
However, FMC was not responsible for verifying that the payment
was justified by the work accomplished. Consequently, EPA paid
recipients millions of dollars, without comparing accomplishments
to payments. *
Our discussions with several project officers confirmed the
need to improve the Agency's monitoring of payments and work
accomplishments. One project officer told us she received
quarterly progress reports, but did not retain copies. She
rarely received FSRs, and assumed GAD monitored the financial
aspect of the project. She did not receive payment vouchers or
expenditure reports, and did not know whether the money was spent
appropriately. A second project officer explained that a few
years ago, project officers stopped approving payment requests
because it took too much time. However, he believed the project
officers should receive financial reports.
In addition to not monitoring expenditures while the work
was being performed, the project officers did not obtain final
reports from recipients for the four completed projects, and
therefore, could not provide certifications to GAD. As discussed
previously in Chapter 3, GAD did not obtain certifications from
project officers attesting to the receipt and approval of the
final product as required by EPA's Assistance Administration
Manual, Chapter 44, paragraph 5.
MISSING PROJECT OFFICER FILES
Not only were the project officers' files incomplete, but
some project officers did not preserve the records they did have.
Two project officers told us they destroyed three files, because
they were unaware of the requirement to keep files after the
project was completed. A fourth missing file was for an
assistance agreement awarded by the Office of Pollution
Prevention and Toxics. Personnel from this office said they did
not destroy the file, but misplaced it.
One project officer explained that when his two projects
were completed, he forwarded important information to GAD and
then destroyed two of the files. The information in GAD's files
for these projects was just as sparse as the rest of GAD's files.
We asked the second project officer how she determined that the
assistance agreement was completed prior to destroying the file.
29
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Audit of EPA*a Controls OverAssistance Agreements
She told us she received a copy of the brochure the recipient
developed, and was given feedback regarding the workshop to be
conducted. However, she did not have firsthand knowledge that
the workshop was conducted, or if the brochures were distributed
to the appropriate persons.
Contrary to what the project officers believed, there were
numerous directives prohibiting the destruction of records. For
example, EPA Directive 2100, Information Resources Management
Policy Manual, Chapter 10, establishes that records, created or
acquired by EPA officials when conducting Agency business, are
the property of the United States Government. Title 18 U.S.C.
2071 prescribes penalties for willful and unlawful destruction of
official government records.
EPA's Final Closeout Policy for Assistance Agreements,
issued August 27, 1992, provides that the retention, period for
EPA records is at least seven years after closing assistance
agreements. For Superfund assistance agreements, the retention
period is thirty years after close out. According to EPA
Directive 2160, the Records Management Manual, all EPA employees
are responsible for complying with the Agency's records control
schedules.
EPA Ethics Advisory 92-24, dated December 10, 1992, issued
by the Deputy General Counsel, included National Archives and
Records Administration Bulletin No. 93-2, entitled "Proper
disposition of Federal records and personal papers." Section 8
of this Bulletin stated:
As specified under 36 CFR 1222.42, nonrecord materials,
including extra copies of agency records kept only for
convenience of reference, may be removed {permanent
removal or destruction) from Government agencies only
with the approval of the agency head or other agency
officials, such as the records officer or legal
counsel.
Any destruction, removal or concealment of records in a way
that is inconsistent with established Agency schedules violates
Agency policy and Federal law. The project officers' improper
disposal of Agency files adversely impacted EPA's management
accountability of the funds provided to the recipients of these
assistance agreements.
30
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Audit of EPA's Controls Over Assistance Agreements
SUMMARY
All of the records to be maintained by the project officers
are in effect components of the Agency's control system for
assistance agreements. This control system is needed to ensure
that recipients of assistance agreements spend EPA's money
properly. For example, site visits are necessary to learn if
work is on schedule and is of adequate quality. Moreover, good
business practice would dictate performing site visits. They
provide the EPA presence. It is not reasonable to give
recipients hundreds of thousands of dollars, sometimes even
millions, to complete projects.and not visit them to review
progress.
EPA's control was further decreased because the project
officers and GAD personnel generally did not compare payments to
physical progress. They also did not usually: determine if
audit reports contained issues affecting EPA; obtain final
reports required by assistance agreements; verify that all the
administrative and technical requirements were completed; close
the assistance agreement and send the project files to storage.
Agency procedures required EPA personnel managing assistance
agreements to complete these functions. Nonperformance of these
duties negated EPA's control system for the assistance agreements
we reviewed. In effect, EPA merely awarded the assistance
agreements and paid the recipients.
RECOMMENDATIONS
The Assistant Administrator for Administration and Resources
Management should:
1. Emphasize to project officers the necessity to comply with ;
Agency policy and directives concerning the management of
assistance agreements. This emphasis needs to address:
a. Performing site visits, as well as completing site
visit reports and forwarding them and other required
documents to GAD.
b. Monitoring expenditures adequately by performing
documented comparative evaluations of progress reports,
payments, FSRs and recipient audit reports.
c. Safeguarding assistance records through compliance with
EPA's Records Management Manual and other Agency
directives concerning records retention.
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Audit of EPA'a Controls Over Assistance Agreements
2. Perform periodic evaluations to ensure project officers
adequately manage assistance agreements and perform the
functions required by references such as the OMB Circular A-
110, the EPA Grants Management Basic Program Manual, and the
EPA Assistance Administration Manual.
OARM RESPONSE
OARM's response did not address the recommendations.
However, certain points were raised as to the content of this
Chapter. The response indicated:
o We do not have a lack of the basic Management
techniques. This refers to the report statement "The
extent of the missing documents shows a disregard of
the basic management techniques needed to...
o We believe site visits are over emphasized. Site
visits are a tool and it is up to the Agency to
exercise judgement in deciding which tools to use.
o The percentage (47%) of required documents were missing
cannot be substantiated because;
- Site visits--maybe there were none.
- Audit reports--are not developed for every project.
o We believe the value of the A-133 audits is overstated.
The audits are usually not available until the work is
completed. It is usually difficult or impossible to
identify the parts of the audits that relate to
individual projects.
o We believe that FSR's should be sent to the project
officers. However, the report leaves the false
impression that sending the FSRs to the project
officers would have been helpful to them in comparing
progress to expenditures. Since the FSRs are not
submitted until after each budget period, they are not
helpful in comparing expenditures to progress. We
believe the report should stress that progress reports
should be used for this purpose.
OIG EVALUATION
We stand by our statement that the project officers
disregarded basic management techniques for two reasons.
32
First,
Report No. E1FMF4-03-0141-5100513
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• Audit of EPA'sControls Over Assistance Agreements
as we explained in our audit report the assistance agreement is
the contract between EPA and the recipient. We believe that the
most basic management technique requires EPA's project monitor to
have a copy of this contract which specifies the recipient's
responsibilities. Second, we also believe basic management
techniques require EPA's project monitors to visit recipients
periodically to insure they are accomplishing the objectives for
which the Agency provides, in some cases, millions 'of dollars.
We agree that the Agency does not have a requirement to
visit every project, however, we disagree that site visits are
over emphasized in our report. We interviewed project officers
that monitored assistance agreements for which the Agency
provided significant amounts of money to recipients. These
project officers told us they do not perform site visits. We
believe that this is not a beneficial management approach. Site
visits should be performed periodically for at least the Agency's
more significant projects.
We disagree that the 47 percent in our report overstates the
amount of documents missing from the project officer's files for
two reasons. First, based on the dollar value of the assistance
agreements EPA awarded to the 54 recipients in our review, 49
recipients were required to have single audits performed.
Moreover, the remaining 5 recipients also had single audits
performed. As a result, contrary to OARM's contention, audit
reports were required or prepared by all of the recipients we
reviewed. Second, whether or not site visits were performed for
all the projects would not appreciably affect the 47 percent we
reported. For example, our chart was based on the premise that
at least one site visit should have been performed for each
project.. Using the premise that no site visits were required,
the percentage of missing documents in the project officers'
files would have declined a negligible amount to 45 percent.
However, we do not believe that is a valid premise. The
significant dollar value of the assistance agreements awarded to
the recipients mandates at least some site visits.
We do not agree that the value of A-133 audits are
overstated and usually not available until the work is completed.
To the contrary A-133 audits often are issued before the projects
were completed. This occurred because many assistance agreements
are awarded with project periods that can span several years, and
the audits are performed either annually or biennially.
Regarding OARM's contention that it is difficult or
impossible to identify the parts of the audit reports that relate
33
Report No. E1FMF4-03-0141-5100513
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Audit of EPA's Controls Over Assistance Agreements
to individual projects, we believe that this identification is
often unnecessary. A-133 audits many times contain systemic or
cross-cutting issues that affect all of the recipient's
assistance agreements. For example, GAD and the project officers
did not have the A-133 audit report for one of the recipients in
this review. We obtained a copy of this report and found that it
contained a significant finding relating to the recipient's
property management system. This audit disclosed that over 7,000
equipment items were missing, and indicated the recipient would
investigate the missing equipment. At the time of our review,
the recipient had not completed its investigation. This finding
is important to EPA because the recipient charged EPA's
cooperative agreements approximately $190,000 for equipment,
including computers. This is just one example that demonstrates
the value of A-133 audits.
We do not dispute OARM's contention that progress reports
would be more helpful than FSR's for comparing recipient's
expenditures to progress. Our only concern was that this
comparison was not being made.
34
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Audit of EPA* B Controls Over Assistance Agreements
CHAPTERS
COMPLETED ASSISTANCE AGREEMENTS NOT CLOSED
GAD and Region 3 need to close 5,000 assistance agreements
that were shown on EPA's Grants Information and Control System as
inactive. By closing these assistance agreements that provided
almost $700 million to recipients, we estimated that $33 million
of unused funds may have been utilized to pay for current
Superfund projects, as well as other Government programs or EPA
initiatives. Moreover, by not closing these agreements, the
Agency bypassed the control process, by which EPA should have
ensured that all required technical work and administrative
requirements were completed.
The EPA Final Closeout Policy for Assistance Agreements,
dated August 27, 1992, requires the Agency to close assistance
agreements within 180 days after receiving required reports and
deliverables. This policy also provides that delaying close outs
unnecessarily encumbers obligated but unexpended funds. Also,
close out becomes more difficult with the passage of time because
persons responsible for managing various aspects of a project may
resign, retire, or transfer; memories of events are less clear;
the interests of the project officer and recipient shift to other
priorities; and award documents may become lost or destroyed.
The EPA Grants Management Basic Program Manual also
emphasizes the need for expeditiously closing assistance
agreements. This manual explains that close out ensures a final
accounting of expenditures, and a determination from the project
officer that all technical work was satisfactorily completed.
Close out also ensures that any remaining unliquidated obligation
balances are promptly deobligated for possible use on other
projects.
We reviewed 15 completed assistance agreements awarded by
GAD and 16 from Region 3. These 31 agreements provided over $29
million to recipients. Twenty-five of the 31 agreements were not
closed as of June 1, 1994, even though the projects were
completed for several years. Had these projects been closed, EPA
could have deobligated over $700,000 as long as five years ago.
Moreover, almost $550,000 of this amount was Superfund monies
that EPA may have used for other projects. We calculated the $33
million that may have been deobligated, based on the average
amounts unused for the 31 agreements and the total number of
agreements to be closed at each location.
35
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Audit of EPA'B Controls Over Assistance Agreements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
AGREEMENT
NUMBER
819144-01
003545-01
902508-01
819154-01
819282-01
003435-01
818557-01
819346-01
901920-01
901925-01
003302-01
003585-01
819584-01
003460-01
003503-01
901864-01
816377-01
813043-03
003471-01
003429-01
815431-01
815356-01
003377-01
003316-01
814031-01
CLOSE OUT
REQUIRED
03/30/94
06/30/93
04/12/93
04/30/93
04/24/93
03/31/93
03/30/93
•
03/30/93
03/30/93
03/30/93
12/31/92
12/30/92
10/28/92
06/30/92
06/30/92
03/30/92
09/15/91
06/30/91
03/30/91
08/28/90
04/15/90
03/30/90
03/30/90
09/30/89
06/30/89
MONTHS
OVERDUE
2
11
13
13
13
14
.14
14
14
14
17
17
19
23
23
26
32
35
38
45
49
50
50
56
59
UNUSED $ NOT
OECBU GATED
$ 47.500
0
0
0
0
0
0
114,900
0
0
207.000
14,600
0
0
23.900
0
0
0
0
61,500
0
0
141,000
110.700
0
Total Available for Oeobligation $721,100
Of the thirty-one projects, five were closed, but four of
these were closed late. The following table provides details
concerning the untimely closing and amounts not -leobligated.
36
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Audit of EPA's Controls Over Assistance Agreements
Closing these projects sooner would have allowed EPA to
deobligate over $161,800 in a more timely manner. It is
noteworthy that $152,800 of this amount could have been available
sooner for other Superfund projects.
AGREEMENT
NUMBER
003517-90
003456-89
003464-01
003578-01
003412-02
DATE
COMPLETED
12/31/91
12/31/91
09/30/90
12/31/91
05/31/90
CLOSE an
REQUIRED
06/30/92
06/30/92
03/31/91
06/30/92
11/30/90
CLOSE OUT
COHPLfclfcD
07/07/92
10/26/93
10/21/93
01/11/93
04/08/93
MONTHS
LATE
0
16
31
6
28
EXCESS
FUNDS
$ 0
9,000
24.800
0
128,000
Amount OeobL (gated Late $161,800
GAD managers contended that because grants specialists have
an overwhelming workload they do not have time for close outs.
These managers also indicated there was more pressure to award
assistance agreements and that close outs were a low priority.
The May 1993, workload study by GAD showed that each grants
specialists managed 180 assistance agreements. This study also
noted:
Our backlog of unclosed...projects is growing
daily....The overload restricts grants specialists'
ability to adequately perform all required duties and
the effect of the resulting inadequate grants
management is multiplied by the high dollar value of
grants managed.
According to other GAD employees close out was a "sore
subject" throughout GAD because there were not enough specialists
to handle the awards and do close outs. One employee explained
that usually after the Office of Inspector General or someone
brings up this issue, GAD would assemble a team to reduce the
backlog; then in another 10 years .the same thing happens again.
This employee hoped the process could be changed to avoid this
situation in the future.
A Region 3 senior grants specialist echoed many of the same
opinions expressed by GAD personnel. This specialist explained
they are busy awarding assistance agreements. Close outs are not
the highest priority because unused money that is left on the
37
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Audit of EPA^s Controls Over Assistance Agreements
grant has probably expired and cannot be used by EPA. Region 3
personnel also contended that close outs were delayed because
project officers and recipients did not always submit
documentation in a timely manner. During our review, we did note
instances that confirmed their contention.
MANAGEMENT OVERSIGHT REVIEWS
GAD was responsible for ensuring that EPA's regional GMOs
performed close out. This oversight was performed during the
Management Oversight Reviews (MORs) that GAD performed in all EPA
regions. The MORs are intended to evaluate not only the
effectiveness of close out, but the regions' overall management
of their assistance programs and implementation of GAD's
policies. MORs evaluate activities such as, post award
management, whether site visits and expenditure reviews were
performed, as well as audit report resolution. Examples of GAD's
recommendations to the regions concerning close out are shown
below:
...GMS should...close out its non-construction grants in a
timely fashion. (June 1992, Region 3 MOR Report)
...develop and implement an aggressive plan-of-action,
including milestones, for the close out of
administratively/physically completed grants, including all
grant projects. (March 1994, Region 2 MOR Report)
...ensure close out of administratively completed grants.
(August 1994, Region 9 MOR Report)
The recommendations that resulted from GAD's MORs of the
regions were sound guidance that GAD should apply to its own
operations. Close out becomes increasing more difficult with the
passage of time. Some recipients are required to keep their
records for only three years after the project is completed.
Project officers' files are at times destroyed or misplaced.
Personnel administering assistance agreements are reassigned or
leave the Agency. Without a systematic approach the number of
projects that need to be closed will continue to grow until the
workload becomes unmanageable. GAD is already in an untenable
position because it has over 4,500 assistance agreements awaiting
close out. Region 3's predicament was not as overwhelming
because the number of projects awaiting close out was about 500.
38
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It is noteworthy that GAD has recently initiated action to
streamline the processing of FSRs and to deobligate unused funds
more timely. During April 1995, GAD entered into a Memorandum
of Understanding (MOU) to shift some of the responsibilities for
obtaining and reviewing FSRs to the Las Vegas Financial
Management Center, This MOU was intended to help alleviate any
additipnal growth to the existing backlog. However, additional
action is needed by GAD to reduce the existing backlog.
RECOMMENDATIONS
We recommend that the:
1. Assistant Administrator for Administration and
Resources Management develop a systematic plan to close
out the assistance agreements. If it is determined
that GAD resources are inadequate to both manage and
close assistance agreements, this plan should consider
shifting selected responsibilities for close out to
project officers or other Agency personnel.
2. Region 3 Administrator should initiate action to close
its completed projects. This action is needed to
comply with Agency policies, and to ensure unused funds
are deobligated in a timely manner.
OARM's response did not discuss developing a plan to close
out assistance agreements, but noted they would appreciate
clarification on which responsibilities for close out should be
shifted from GAD to project officers.
PIG EVALUATION
Part II of GAD's "Final Closeout Policy For Assistance
Agreements," outlines seven basic roles and responsibilities of
the Grants Management Office. For example, these include:
o Ensuring receipt of the final certification of project
completion, financial reports, invention disclosure
reports and property management reports.
o Providing property disposition instructions and
ensuring compliance with all conditions of the
assistance agreement.
39
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Audit of EPA' a Controls Over Assistance Agreements
o Receiving, approving and distributing the final FSR.
This encompasses reviewing and analyzing the contents,
including the recipient's cost share, reconciliation
with information on EPA's systems, determining the
allowability of indirect costs, and disposing of
unliquidated obligations.
o Requesting the final audit.
o Preparing the close out amendment. This includes .the
review and approval of the final payment and notifying
the Financial Management Office to process or deny
payment.
o Preparing and issuing the close out letter.
o Retiring Agency files in accordance with record
retention requirements.
We did not specify which of these responsibilities could be
transferred because OARM's personnel are most aware of the
nuances of their operations, and should decide what will work
best.
40
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Audit of EPA's Controla Over Assistance Agreementa
CHAPTER 6
GAD DID NOT COMPLY WITH THE INTEGRITY ACT
GAD did not comply with the Federal Managers' Financial
Integrity Act {Integrity Act) by not identifying and reporting
its weaknesses. During the past seven years, GAD failed to
report that it did not comply with Agency administration policies
and procedures for assistance agreements. Accurate reporting
would have been the early warning mechanism for the conditions
discussed in this report. It is also essential to properly
safeguard Agency resources, such as assistance monies, against
fraud, waste and abuse.
A generally recognized management principle is that good
internal controls improve operations and provide reasonable
assurance that Government resources are protected against fraud,
waste, mismanagement, and misappropriation. The Integrity Act
requires agencies to establish and maintain control systems in
accordance with Comptroller General standards. These standards
require control systems and other significant events to be
clearly documented in management directives, administrative
policy, and accounting manuals. The Integrity Act also requires
agencies to perform ongoing control system evaluations and to
report the results annually.
GAD managers understood the need to implement an effective
internal control system. They established the administration and
closing of assistance agreements as internal control objectives
under the Integrity Act. However, GAD grants specialists were
not performing many of these internal controls, which included
among other items, assuring: projects progressed properly;
recipients complied with assistance agreements; on-site visits
were conducted; financial reports were reviewed; and, projects
were closed timely.. As a result, significant internal control
weaknesses were not reported in GAD's annual Integrity Act
assurance letters even though management was aware of these
weaknesses. .
During the past eight fiscal years, GAD management did not
report their inability to administer and close assistance
agreements as a weakness. However, GAD had declared not closing
assistance agreements as a weakness in fiscal year 1986, when
only 79 projects needed to be closed. Since then the number of
agreements not closed has increased substantially. In 1994,
there were over 4,500 Headquarters projects awaiting close out.
41
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Audit of EPA'e Controls Over Assistance Agreements
GAD personnel told us they did not report their inability to
administer arid close assistance agreements in their annual
assurance letter. These conditions were not considered a
material weakness because GAD's omissions were not a process
problem, but were a resource problem that needed additional staff
to correct. To compensate for their lack of control, GAD relied
on the project officers and the recipients to manage assistance
agreements.
We do not agree that GAD's omissions were a resource problem
that alleviated the need to inform Agency management of the
conditions occurring in GAD. Instead, we believe that the
inability to administer and close assistance agreements was a
significant weakness. GAD has not complied with numerous Agency
policies and procedures established to manage assistance
agreements. These Agency requirements were the control systems
designed to ensure recipients spent EPA funds wisely. It is
essential that this occurs. For that reason, GAD should have
used the Integrity Act process as an early warning system to
inform Agency management that the administration of assistance
agreements needed improvement.
RECOMMENDATION
We recommend that the Assistant Administrator for
Administration and Resources Management instruct the Director of
Office of Grants and Debarment to use the Integrity Act process
to identify and report all weaknesses, not only those contained
in this report.
OARM RESPONSE
OARM did not respond to this recommendation.
42
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Audit of EPA'a Controls Over Assistance Agreements
APPENDIX A
PRIOR PIG AUDITS CONCERNING
THE MANAGEMENT OF ASSISTANCE AGREEMENTS
Special Review on Assistance Agreements Administered by the
Office of Small and Disadvantaged Business Utilization (Report
No. E3FMP2-03-0364-3400017), January 25, 1993.
Management of Extramural Resources at the Environmental Research
Laboratory, Athens, Georgia {Audit Report No. E1JBF2-04-0300-
3100156), March 31, 1993.
Management of Cooperative Agreements: Office of Research and
Development, Environmental Research Laboratory, Gulf Breeze,
Florida (Audit Report No. E1JBF2-04-0386-4100237),
March 31, 1994.
Audit of Cooperative Agreement T007356-01 Awarded to the
University of Kansas (Audit Report No. E1FMF4-19-0618-4100407)
June 17, 1994.
Special Review of Cooperative Agreement Number CR-817670-01
Awarded to the Center for Hazardous Materials Research (CHMR),
Pittsburgh, PA (Report No. E3FBG4-03-0132-4400102),
August 29, 1994.
Special Review of Center for Earth Resource Management
Applications, Inc. (Report No. E3FEP3-03-0057-4400106),
September 12, 1994.
Audit Report on Cooperative Agreement CX-818257-01 Awarded to
Temple University (Audit Report No. E3CML3-03-0201-4100523),
September 15, 1994.
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APPENDIX B
AGENCY RESPONSE
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APPENDIX B
Page 1 of 7
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
ADMINISTRATION
AND RE SOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Response to Draft Report of Audit on EPA's
controls Over Assistance Agreements
Report No. E1FMF4-03,-P141
FROM: ^allyarme Carper
Acting Assistant Administrator for
Administration and Resources Management (3101)
TO: Elissa Karpf
Deputy Assistant Inspector General
for Acquisition and Assistance Audit staff (2421)
Attached is OARM's response to the draft report of audit on
EPA's controls over assistance agreements.
Thank you for allowing GAD the opportunity to review the draft
report and provide comments on it before it was issued. We look
forward to working with you to resolve the issues identified in the
report.
If you or your staff have any questions or need additional
information, please contact Mildred Lee on (202) 260-5252.
Attachment : .
cc: Lora Culver (3102)
Robert Reed, Jr. (3PM70)
Recycled/Recyclable
Primed with Soy/CwtoUi In* on paper Hat
contain* *t fecal»% ncycMd fiber
-------
APPENDIX B
Page 2 of 7
Draft Report of Audit on EPA's Controls
Over Assistance Agreements
Summary
o OIG made several changes to the pre-draft report. We
recommend additional changes noted below.
o The findings are consistent with the findings in previous
reports. Basically, no new issues are identified.
o We recommend that the report more clearly recognize the
resource constraints that have made it difficult for us to
resolve the issues that are cited in the report and have been
cited in previous reports. Currently the report just cites
GAD's own contention that resources are scarce.
V
o It would be helpful to us if the recommendation on tiered
management were more specific.
o There are some places noted below where we recommend changes
in the tone of the report.
o The report would be more helpful to us if it included examples
of how GAD can make better use of limited resources.
o The report says in several places that the Agency didn't make
site visits. We believe the point is overemphasized. The
Agency does not have a requirement that site visits be
conducted on each project. Site visits are a 'tool for the
Agency, but it is up to the Agency to exercise judgement in
deciding which monitoring tools to use.
o We believe placing additional attention on the MOU with FMC
would make the tone of the report more positive than it
currently is. The MOO shows that the Agency recognized a
weakness in its assistance program and took steps to resolve
it. • • . . . .
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APPENDIX B
Page 3 of 7
Specific Items
o Page i, Par. 4: Some of the data should be updated. GAD was
responsible for processing over 2,900 awards and amendments,
with a total value of these actions over $380 million each
year.
o Page i, Par. 5: We believe the report should say the official
. file is in three parts: GAD has the administrative; FMC has
the financial; and the PO has the technical. We believe this
would help get the message out that project officers are
responsible for keeping files; too.
•
o Page iii, Par. 3: We believe site visits are overemphasized.
The Agency does not have a requirement that site visits be
conducted on each project. site visits are a tool for the
Agency, but it is up to the Agency to exercise judgement in
.deciding which monitoring tools to use.
o Page 2, Par. 4: We believe the report should say the official
file is in three parts: GAD has the administrative; FMC has
the financial; and the PO has the technical. We believe this
would help get the message out that project officers are
responsible for keeping files, too.
o Page 13, Par. 4, 5 and 6: We have updated our application
check list and advised our specialists to use it on all
projects. I am attaching a copy .for your information.
Although experienced specialists can remember the items on the
check list, we agree that the check list should provide an
official record of our review.
o Page 14, Par. 3: The report says there was a lack of
correspondence in GAD's files, but project officers receive
most of the correspondence from recipients during the
performance of the projects, and they do a great deal of the
monitoring. All progress reports are sent to them. This is
consistent with your recommendation that GAD consider
transferring' responsibilities to project officers. We
acknowledge that the role of project officers in maintaining
files needs to be stressed.
o Page 14, Par. 4 and 5: The report says a ""review of GAD's
files failed to show that we met our responsibilities for the
following: review and analysis of recipient reports;
comparing payment requests with- progress; and monitoring
recipient activities. We believe these activities are
primarily project officer responsibilities, and it is
consistent with your recommendations to let project officers
do them.
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APPENDIX B
Page 4 of 7
o Page 15, Par. 3: We believe the report should say the
official file is in three parts: GAD has the administrative;
FMC has the financial; and the PO has the technical. We
believe this would help get the message out that project
officers are responsible for Keeping files, too.
o Page 15, Par. 4: The report says site visits and associated
reviews performed during these visits should be GAD's greatest
resource to monitor recipient performance. As we have stated
in other places, we believe lack of site visits is
overemphasized in the report. Site visits are just one tool
the Agency can use. Also, project officers are responsible
for monitoring technical conditions; GAD monitors
administrative ones. This is consistent with your
recommendation that some of GAD's responsibilities be
transferred to project officers.
o Page 15, Par. 4, 5, and 6: We believe site visits are
overemphasized. The Agency does not have a requirement that
site visits be conducted on each project. Site visits are a
tool for the Agency, but it is up to the Agency to exercise
judgement in deciding which monitoring tools to use.
o Page 16, Par, 2: The report says a copy of the FSR should be
sent to the project officer for comparison to the recipient's
progress reports to ensure payment was justified. Since FSRs
are submitted after each budget period, they aren't effective
in comparing progress to expenditures. We agree not
processing the FSRs is a weakness that should be cited in the
report, but we believe you should delete the statement that
they can be used to compare progress to payments. We believe
it is much more accurate to stress comparing progress to
payments when reviewing progress reports.
o Page 16, Par. 3 and 4: When we read the report, we felt that
the description of the "FSR parties" and the piles of FSRs
left the impression that we did not take the FSRs seriously.
It would be- preferable to us to say that GAD didn't process
all of the FSRs' and held them too long. Th.e "FSR parties"
were planned after a branch meeting in which we -all expressed
our concern that the FSRs weren't being processed. The
description in the report doesn't capture our concern for the
problem associated with FSRs not being processed.
o Page 17, Par. 3: Re the statement, "Unfortunately GAD did not
send the FSRs they received to the project officers. As a
result, project officers also could not compare the"
recipients' progress to expenditures." We agree that the FSRs
should be sent to the project officers. However, the report
leaves the false impression that sending the FSRs to the
project officers would have been helpful to them in comparing
progress to expenditures. Since the FSRs are not submitted
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APPENDIX B
Page 5 of 7
until after each budget period, they aren't helpful in
comparing expenditures to progress. We believe the report
should stress that progress reports should be used for this
purpose.
o Page 20, Par. 1: The report says "For example, GAD should
consider developing different levels of management for
assistance agreements.11 It would help us if the report were
more specific. We are not sure from this statement what level
of management is recommended for varying dollar levels.
o Page 20, Par 3: The report says "This could include requiring
project officers to provide GAD all needed documents. . .".
We recommend against requiring that documents be sent to GAD.
We agree with the recommendation in the report that GAD
transfer more responsibility to project officers, and- we
believe project officers keeping their files is one aspect of
this. We also acknowledge that this responsibility must be
stressed to project officers.
o Page 20, Recommendations:
o The report doesn't indicate which responsibilities could
be transferred to project officers. It would be helpful
if the report were more specific.
o GAD has seven Senior Environmental Employees, and they
have been invaluable. However, they require funds, and
it is doubtful that we will be able to get any more of
them.
o Transferring the responsibility for selected assistance
agreements to regional GMOs has already taken place to
the fullest extent practicable. The regional delegations
have been broadened in recent years to permit regions to
fund projects that formerly were awarded out of
Headquarters. I believe, this provides the appropriate
incentive. I believe this recommendation should be
deleted. ' ' ' •
o Developing different levels of. management for assistance
agreements - It would help us if the report were more
specific. We cannot tell from this statement what level
of management is recommended for varying dollar levels.
o Page 23, Par. 6: We believe site visits are overemphasized.
The Agency does not have a requirement that site visits be
conducted on each project. Site visits are a tool for the
Agency, but it is up to the Agency to exercise judgement in
deciding which monitoring tools to use.
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APPENDIX B
Page 6 of 7
o Page 24, Table: the percentage of 47% of required documents
not- in the files cannot be substantiated.
o Site visits - maybe there were none.
o Audit reports - are not developed for every project.
o Page 24, Par. 4: The sentence, "The extent of the missing
documents shows the disregard of the basic management
techniques needed to properly manage assistance agreements**,
sounds negative. We do not have a disregard of the basic
management techniques.
o Page 25, Par. 2,, 3, 4 and 5: We believe site visits are
overemphasized. The Agency does not have a requirement that
site visits be conducted on each project. Site visits are a
tool for the Agency, but it is up to the Agency to exercise
judgement in deciding which monitoring tools to use.
o Page 25, Par. 5: We recommend a modification of the tone of
the following sentences to let the facts of the audit speak
for themselves: "It was noteworthy that three of the nine
recipients not visited were located in Washington, D.C.,
literally blocks from the project officers' desks. The only
travel funds needed to visit these recipients was a Metro fare
of less than $3." Also, as stated above, the Agency does not
have a requirement that site visits be conducted on each
project. Site visits are a tool for the Agency, but it is up
to the Agency to exercise judgement in deciding which
monitoring tools to use.
o Page 26, Par. 2: We believe site visits are overemphasized.
The Agency does not have a requirement that site visits be
conducted on each project. Site visits are a tool for the
Agency, but it is up to the Agency to exercise judgement in
deciding which monitoring tools to use.
o Page 26, Par. 3 and 4: We believe the value of the A-133
audits is overstated. The audits aren't performed on aj.1
projects, and are usually not available until the work has
been completed. It is usually difficult or impossible to
identify the parts of the audits that relate to individual
proj ects.
o Page 26, Par. 5: We agree that the FSRs should be sent to the
project officers. However, the report leaves the false
impression that sending the FSRs to the project officers would
have been helpful to them in comparing progress to
expenditures. Since the FSRs are not submitted until after
each budget period, they aren't helpful in comparing
expenditures to progress. We believe the report should stress
that progress reports should be used for this purpose."*"
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APPENDIX B
Rage 7 of 7
o Page 26, Par.. 6 and Page 27, Par. 1, 2, and 3: We agree that
the FSRs should be sent to the project officers. However, the
report leaves the false impression that sending the FSRs to
the project officers would have been helpful to them in
comparing progress to expenditures. Since the FSRs are not
submitted until after each budget period, they aren't helpful
in comparing expenditures to progress. We believe the report
should stress that progress reports should- be used for this
purpose.
o Page 27, Par. 4. We believe the sentence, "Not only were the
project officers' file incomplete, but some project officers
did not preserve the records they did have", sounds somewhat
negative.
o Page 28, Par. 2: We believe the sentence, "Contrary to what
the project officers believed, there were numerous directives
prohibiting the destruction of records", sounds somewhat
negative.
o Page 29, Par. l: We believe site visits are overemphasized.
The Agency does not have a requirement that site visits be
conducted on each project. Site visits are a tool for the
Agency, but it is up to the Agency to exercise judgement in
deciding which monitoring tools to use.
o Page 29, Par 2: The first and second sentence make it sound
as though GAD and project officers never compare payments to
physical progress, review audit reports, obtain final reports,
verify that administrative and technical requirements are
completed; or close assistance agreements. Although we agree
there are areas for improvement, we believe these sentences
overstate the weaknesses.
o Pages 32 and 33: We did not understand the statement on Page
32, "Of the thirty-one projects, five others were closed, but
four of these were closed as many as 31 months late". We
believe the report meant to say, "Of the thirty-one projects,
five -were closed. . .". In addition, the table on Page 33
indicates only one project as many as 31 months late - not
four.
o Page 33,, Par. 2: The report says, "These managers also
believed . there was more pressure to award assistance
agreements and that close outs were a low priority." We
believe this sentence should say, "These managers said there
was more pressure. . .".
o Page 35, Recommendation 1 suggests shifting selected
responsibilities for closeout to project officers? We would
appreciate clarification, i.e., which ones should be shifted?
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Audit of EPA*a ControlsOver Asaistance Agreements
APPENDIX C
DISTRIBUTION
Recipient
Office of Inspector General
Inspector General (2410)
EPA Headquarters Office
Assistant Administrator for Administration and Resources
Management (3101)
Agency Followup Official (3101), Attn: Assistant
Administrator for Administration and Resources Management
Agency Followup Coordinator (3304), Attention: Director,
Resource Management Division
Director, Office of Grants and Debarment (3901F)
Director, Grants Administration Division (3903F)
Director, Facilities Management and Services Division (3204)
Director, Program and Policy Coordination Office (3102)
Audit Followup Coordinator (3102)
Headquarters Library (3404)
Assistant Administrator for International Activities (2610)
Assistant Administrator for Water (4101)
Assistant Administrator for Research and Development (8101)
Director, Office of Research Program Management (8102)
Assistant Administrator for Prevention, Pesticides, and Toxic
Substances (7101)
Associate Administrator for Regional Operations and
State/Local Relations (1501)
47
Report No. E1FMF4-03-0141-5100513
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Audit of EPA'a Controls Over Assistance Agreements
Associate Administrator for Congressional and
Legislative Affairs (1301)
Associate Administrator for Communications, Education, and
Public Affairs (1701)
EPA Recrion 3 Office
Regional Administrator, Region 3 (3RAOO)
Chief, Grants Management Branch (3PM70)
Audit Followup Coordinator (3PM70)
Regional Library (3PM52)
48
Report No. E1FMF4-03-0141-5100513
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