OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Followup Review
A/
Office of Underground Storage Tanks
Has Improved Contract Administration,
But Further Action Needed
Report No. 2006-P-00012
February 28, 2006
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Report Contributors:
Doug LaTessa
John Trefry
Abbreviations
EPA
EPM
LUST
OIG
OUST
Environmental Protection Agency
Environmental Program Management
Leaking Underground Storage Tank
Office of Inspector General
Office of Underground Storage Tanks
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2006-P-00012
February 28, 2006
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
February 28, 2006
MEMORANDUM
SUBJECT: Office of Underground Storage Tanks Has Improved
Contract Administration, But Further Action Needed
Report No. 2006-P-OOO12
FROM: Carl A. Jannetti /? >/
Director, Contract Audits t*^ *
TO: Cliff Rothenstein
Director, Office of Underground Storage Tanks
This report is a followup review of the contract administration issues discussed in Environmental
Protection Agency (EPA) Office of Inspector General (OIG) Report No. 2004-P-00014, The
Office of Underground Storage Tanks: Contract Administration and Performance Measurement
Concerns., issued March 31,2004.
This followup report contains findings that describe the problems the OIG has identified and
corrective actions the OIG recommends. This report represents the opinion of the OIG and the
findings contained in the report do not necessarily represent the final EPA position. Final
determinations on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures.
Action Required
Since you concurred with our recommendations and agreed to implement corrective actions, a
report of action is not required. Therefore, we have closed this report in our tracking system as
of the date of issuance. We held an exit conference on February 21,2006 with the Office of
Underground Storage Tanks (OUST). As a result of that conference, OUST agreed to send
select staff to an Appropriations Law course.
We have no objections to the further release of this report to the public. For your convenience,
this report will be available at http://www.epa.gov/oig/.
Should you have any questions regarding this report, please contact me at (215) 814-5800 or
Jannetti.carl@epa.gov. or John Trefry, Assignment Manager, at (202) 566-2474 or
trefrv.iohn@eDa.gov.
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Purpose
We conducted this followup review on the contract administration issues discussed in a prior
Environmental Protection Agency (EPA) Office of Inspector General (OIG) report, The Office of
Underground Storage Tanks: Contract Administration and Performance Measurement Concerns
(2004-P-00014), issued March 31,2004. In response to the report, EPA's Office of
Underground Storage Tanks (OUST) proposed nine corrective actions to better use and manage
contract funds. Our foilowup objectives were to determine whether OUST, with respect to the
two contracts previously reviewed, successfully implemented policies and procedures to:
Ensure the appropriateness of charges to the Leaking Underground Storage Tank (LUST)
and Environmental Program Management (EPM) appropriations;
Avoid loss of funding due to expiration of funds; and
Avoid obligating funds to contracts without identification of corresponding work
assignments.
Scope and Methodology
We performed this followup review from September to November 2005, in accordance with
Government Auditing Standards issued by the Comptroller General of the United States. Our
followup review included a site visit to OUST headquarters offices, where we met with OUST
management and staff.
To determine the extent to which corrective actions had been implemented, we interviewed the
OUST Project Officer, staff from the Office of Acquisition Management, and staff from the
Office of General Counsel, and reviewed supporting documentation. To determine the amount
of expired EPM appropriations and unliquidated LUST funds, we queried EPA's Financial Data
Warehouse and confirmed the results with the Project Officer. We also queried the Financial
Data Warehouse to determine the appropriations used to pay invoices.
To determine whether OUST had continued the practice of obligating funds to contracts without
identifying corresponding work (parking funds), as well as implementing OUST's "pay as you
go" process (fund work assignments and task orders as they are issued), we queried the Financial
Data Warehouse to identify the obligations made to the contracts since the last review. We then
reviewed corresponding contract modifications, work assignments, statements of work, and
independent government cost estimates for each of those work assignments.
Our followup review, including our review of management controls, was limited to evaluating
the proposed corrective actions for OUST's two contracts identified in the prior review. As
such, a complete review of the applicable management controls related to OUST's contract
administration was not relevant to our evaluation.
Results of Review.
Of the nine corrective actions OUST proposed as a result of the previous review, OUST
implemented eight actions. In particular, regarding the third objective of this followup review,
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OUST stopped obligating funds to contracts without identifying corresponding work (parking
funds), and implemented its "pay as you go" process. Also, OUST successfully implemented
new invoicing requirements for contractors and new funding processes for contracts, and
improved its invoice payment process. We commend OUST for successfully implementing
these actions. However, while OUST provided contract administration training for its staff, as
agreed, it did not have all required people attend the training. Contract Management Manual
training was provided to work assignment managers but not Project Officers and senior level
managers within OUST, even though OUST noted in its corrective action plan that all would be
required to take the training.
Regarding our followup objectives on the appropriateness of charges to appropriations and
avoiding the loss of funding due to expiration of funds, we noted that while OUST had taken
corrective actions, some problems remained. The prior OIG report concluded that $134,000 of
LUST money obligated to a contract had not been expended and would be unavailable without
deobligation and recertification. These obligations increased to over $395,000 by March 2005,
because funds remaining on completed work assignments were not used or deobligated. This
amount represents potential missed opportunities for achieving environmental improvements.
As a result of our followup review, OUST initiated a contract modification in November 2005 to
deobfigate and recertify these funds. Details on the accumulation of the obligations subsequent
to our prior review are shown in the following table.
Unexpended LUST Funds Obligated to Contract
"i- -* «r««?*s KK^
June 2000
August 2000
September 2000
August 2003
December 2003
March 2004
November 2004
March 2005
$103,043
36,288
140,004
3,127
89,369
1,804
. 410
21,045
$103,043
139,331
279,335
282.462
371,831
373,635
374,045
395,090
59
57
56
21
17
14
6
2
Months Idle: The number of months from the month after the obligation was made
through the end of the contract, May 2005.
Additionally, the prior OIG report had identified $140,004 of LUST funds that were
inappropriately used to pay invoices that should have been paid with EPM funds. OUST
initiated a contract modification in February 2004 to reverse these payments. However, OUST
did not have sufficient EPM funds for the fiscal years in which the original invoiced costs were
rendered. Therefore, when OUST attempted to correct the problem previously reported, it
erroneously paid for Fiscal Year 2002 services with Fiscal Year 2003/2004 EPM funds, and
Fiscal Year 2003 services with Fiscal Year 2004/2005 EPM funds. OUST officials did not
realize that, consistent with Title 31, U.S. Code, Section 1552, EPM funds available elsewhere in
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the Agency should have been identified before using future year appropriations to pay for
services rendered in prior years. OUST initiated a modification in October 2005 to correct this
issue by identifying available EPM funds and then transferring expenses between fiscal years to
enable it to properly pay the invoices.
OUST staff indicated they do not regularly monitor the Agency's financial systems to.determine
the status of obligated funds on its contracts. However, OUST queries the Agency's financial
systems for the grants that it manages. OUST staff claimed that no one from EPA's Financial
Management Center told them they could use the Financial Data Warehouse to run such queries
for contracts.
Recommendations
We recommend that the Director, Office of Underground Storage Tanks:
1. Have staff regularly query EPA's financial systems to monitor the status of funds
obligated to OUST contracts so that they can deobligate and recertify funds when
appropriate.
2. Direct staff to not use future year appropriations to pay for services rendered in prior
years.
3. Require the Project Officer to attend training in the proper use of appropriations.
Agency Comments and OIG Evaluation
OUST concurred with our recommendations and agreed to monitor the status of its funds
obligated to contracts on a monthly basis and to provide direction and training to its staff. We
consider the Agency's planned actions to be sufficient. The full text of EPA's response is in
Appendix A.
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Appendix A
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
Mail Code 5401G
OFFICE OF
SOLID WASTE AND EMERGENCY
RESPONSE
February 14, 2006
MEMORANDUM
SUBJECT: Office of Underground Storage Tanks Follow-up Review of
Contract Administration
FROM: Susan Parker Bodine/s/
Assistant Administrator
TO: Carl A. Jannetti
Director, Contracts Audits
This is in response to the Draft Followup Report: Office of Underground Storage Tanks
(OUST) Has Improved Contract Administration, But Further Action Needed, Assignment No.
2005-001469, dated January 18,2006. We appreciate the opportunity to review the Report, and
we concur with the three recommendations contained in the report. Our specific comments can
be found in the attachment.
If you have any questions regarding this response, please contact CliffRothenstein at
703-603-7163.
Attachments
cc: Barry Breen, OSWER
Renee Wynn, OSWER
Johnsie Webster, OSWER
CliffRothenstein, OUST
Sammy Ng, OUST
Judy Barrows, OUST
Mark Barolo, OUST
Lynn DePont, OUST
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Attachment
Office of Underground Storage Tanks (OUST)'s Response to the Recommendations:
1. Have staff regularly query EPA's financial systems to monitor the status of
funds obligated to OUST contracts so that they can deobligate and recertify funds
when appropriate.
OUST concurs.' OUST will monitor its obligated contracts' status of funds using the
Agency's Financial Data Warehouse on a monthly basis so that it can be determined
if funds need to be deobligated and recertified as appropriate.
2. Direct staff to not use future appropriations to pay for services rendered in prior years.
OUST concurs. OUST will direct staff to not use future appropriations to pay for
services rendered in prior years.
3. Require senior level managers and Project Officers to attend Contracts
Management Manual training, as well as training in the proper use of
appropriations.
OUST concurs. OUST is already following this recommendation. OUST's Deputy
Office Director has oversight responsibility for contracts management. He is a
certified Project Officer and has completed both the three-day Contracts Management
Manual training and the one-day refresher Contracts Management Manual
Recertification training course which is required every three years in order to maintain
his contract management certification. Additionally, OUST's two Division Directors
and OUST's Project Officer have completed similar training. (Please see the attached
spreadsheet.)
It should also be noted that all of OUST's active contracts managers maintain their
contracts certification with the three-year one-day recertification training.
All OUST employees, including its Senior-level managers and Project Officer,
received informal training from EPA's Appropriations expert (from the Office of
General Counsel) in May 2004 on the proper use of appropriations.
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Appendix B
Distribution
Office of the Administrator
Agency Followup Official
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations "
Associate Administrator for Public Affairs
Assistant Administrator, Office of Solid Waste and Emergency Response
Director, Office of Underground Storage Tanks
Director, Financial Management Division
Director, Office of Acquisition Management
Audit Followup Coordinator, Office of Solid Waste and Emergency Response
Inspector General
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