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Office of Inspector General
AUDIT REPORT
LEAKING UNDERGROUND STORAGE
TANK COOPERATIVE AGREEMENT
L008655-01 AWARDED TO COLORADO
DEPARTMENT OF PUBLIC HEALTH
AND ENVIRONMENT
E3LLL6-08-0031-7100144
March 31, 1997
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Inspector General Division
Conducting the Audit: Central Audit Division
Kansas City, Kansas
Region Covered: Region 8
Program Office
Involved: Office of Pollution Prevention. State
and Tribal Assistance
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350R97026
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
CENTRAL AUDIT DIVISION
726 MINNESOTA AVENUE
KANSASCITY, KANSAS66101
913-551-7878
FAX. Q13 551 7037
FAX. 91J-5bT-/rB.i/r
March 31, 1997
BRANCH OFFICES:
1445 ROSS AVENUE. SUITE 1200
DALLAS, TEXAS 75202-2733
214-665-6621
FAX: 214-665-6589
999 18TH STREET, SUITE 500
DENVER, COLORADO 80202-2405
303-312-6872
FAX: 303-312-6063
MEMORANDUM
SUBJECT:
FROM:
TO:
Audit of Colorado Leaking Underground
Storage Tank Cooperative Agreement L008655-01
Report Number E3LLL6-08-003 1-7100144
Bennie S. Salem
Divisional Inspector General
Jack W. McGraw
Acting Regional Administrator
Region 8
We performed an audit of the Environmental Protection Agency (EPA) Leaking
Underground Storage Tank (LUST) Cooperative Agreement (CA) L008655-01 awarded to the
Colorado Department of Public Health and Environment (CDPHE). The purpose of our review
was to determine whether CDPHE had adequately accounted for the LUST Trust Fund monies
and complied with the LUST CA special conditions. We found that CDPHE claimed $16,277
($14,649 EPA share) of ineligible costs. In general, CDPHE complied with the CA terms and
conditions. However, CDPHE did not comply with two significant special conditions. In
addition, Region 8 project officers needed to review the LUST CA special conditions and delete
or modify unnecessary or excessive requirements.
ACTION REQUIRED
In accordance with EPA Order 2750, you, as the action official, are required to issue a
final determination on the costs questioned to the auditee within 150 days of the final audit report
date. A copy of the final determination should be provided to our office when issued. In
addition, you are required to provide us with a written response to the other recommendations in
this report within 150 days of the final audit report. For corrective actions planned but not
completed by the response date, reference to specific milestone dates will assist us in deciding
whether to close this report.
RECYCLED
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This audit report contains findings that describe problems the Office of Inspector General
(OIG) has identified and corrective actions OIG recommends. The report represents the opinion
of OIG, and the findings contained in this 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.
We have no objection to the release of this report to any member of the public upon
request. This report contains no confidential business or proprietary information that cannot be
released to the public.
If you have any questions, please call me at (913) 551-7831 or Jeff Hart, Audit Manager
in our Denver office, at 312-6872. Please refer to audit control number E3LLL6-08-0031 on any
correspondence.
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EXECUTIVE SUMMARY
BACKGROUND
The Superfund Amendments and Reauthorization Act (SARA) of 1986, Section 205, amended
the Solid Waste Disposal Act and established the Leaking Underground Storage Tank (LUST)
Trust Fund to finance the cleanup of petroleum releases from underground storage tanks (UST).
SARA authorized the Environmental Protection Agency (EPA) to provide LUST Trust Fund
monies to states for the cleanup of leaking underground storage tanks through cooperative
agreements (CA). Region 8 awarded the Colorado Department of Public Health and
Environment (CDPHE) LUST CA L008655-01 on May 10, 1990. On July 1, 1995, the Colorado
State Legislature transferred its UST and LUST programs from CDPHE to the Colorado
Department of Labor and Employment (CDOLE). EPA's Region 8 UST program office
requested that the Office of Inspector General perform a financial audit of the CDPHE CA in
order to close out the agreement. Also, Region 8 staff wanted to confirm that CDPHE had
properly transferred LUST program equipment to CDOLE.
WE FOUND THAT
CDPHE claimed $16,277 ($14,649 EPA share) of ineligible costs. Other than the costs
questioned, we found that the costs claimed under the CA were fairly presented in accordance
with applicable EPA regulations, other federal and state requirements, and the CA terms. In
general, we found that the CDPHE LUST program complied with the CA terms and special
conditions. However, we found that CDPHE's Hazardous Materials and Waste Management
Division staff did not document its practice of periodically reviewing and adjusting budget
estimates for distribution of paid leave as part of its policies and procedures. Also, CDPHE did
not comply with two significant special conditions. The Region 8 project officer needed to
review and change the LUST CA special conditions to better reflect actual LUST program
activities. CDPHE and CDOLE staff needed to coordinate and document each department's
responsibility related to future cost recovery efforts for sites that were previously under CDPHE
cognizance. Also, we determined that CDPHE appropriately transferred the LUST program
equipment to CDOLE.
WE RECOMMENDED THAT
The Acting Regional Administrator recover the $14,649 federal share of ineligible costs claimed
by CDPHE under LUST CA L008655-01. He should require CDPHE and CDOLE to fully
comply with federal laws, regulations, and CA special conditions. He should instruct Region 8
UST/LUST project officers to review and modify the LUST CA special conditions and establish
a date for a Management Assistance Program review of CDOLE's compliance with its LUST
i E3LLL6-08-0031-7100144
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CA. The Acting Regional Administrator should also require CDPHE and CDOLE to coordinate
and document each department's responsibility related to future cost recovery efforts.
AUDITEE COMMENTS AND PIG EVALUATION
Region 8, CDPHE, and CDOLE agreed with our findings and recommendations.
ii E3LLL6-08-0031-7100144
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TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
PURPOSE 1
BACKGROUND 1
SCOPE AND METHODOLOGY 2
PRIOR AUDIT COVERAGE .3
RESULTS OF AUDIT 3
OPINION 3
REPORT ON COMPLIANCE AND INTERNAL CONTROLS 4
CONCLUSION 7
RECOMMENDATIONS . 8
AUDITEE COMMENTS AND OIG EVALUATION 8
EXHIBIT A - SCHEDULE OF COSTS CLAIMED AND QUESTIONED 9
APPENDICES
APPENDIX I AUDITEE RESPONSES 11
APPENDIX II ABBREVIATIONS 16
APPENDIX III DISTRIBUTION 17
E3LLL6-08-0031-7100144
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PURPOSE
On July 1, 1995, the Colorado State Legislature (hereinafter known as the Legislature) transferred
the Underground Storage Tank (UST) and the Leaking Underground Storage Tank (LUST)
programs from the Colorado Department of Public Health and Environment (CDPHE) to the
Colorado Department of Labor and Employment (CDOLE). The Environmental Protection
Agency's (EPA) Region 8 UST program office requested that the Office of Inspector General (OIG)
perform a financial audit of the Colorado LUST Cooperative Agreement (CA) L008655-01 awarded
to CDPHE in order to close out the agreement. Also, Region 8 staff wanted to confirm that CDPHE
had properly transferred LUST program equipment to CDOLE.
The purpose of our review was to determine whether CDPHE had adequately accounted for the
LUST Trust Fund monies and complied with CA special conditions. Our specific objectives were
to determine whether:
o Costs claimed were eligible, allocable, and reasonable under the LUST CA;
o CDPHE complied with federal laws, regulations, and the CA special conditions; and
o CDPHE appropriately transferred all LUST equipment to CDOLE.
BACKGROUND
Congress passed UST legislation in 1984 and 1986. In 1984, the Hazardous and Solid Waste
Amendments established the UST program under Subtitle I of the Resource Conservation and
Recovery Act (RCRA). The Superfund Amendments and Reauthorization Act (SARA) of 1986,
Section 205, amended the Solid Waste Disposal Act and established the LUST Trust Fund to
finance the cleanup of petroleum releases from USTs.
SARA authorizes EPA to provide LUST Trust Fund monies to states for the cleanup of leaking
underground storage tanks through CAs. These agreements between EPA and states provide the
basis for EPA's oversight and management of LUST Trust Fund monies. The agreements identify
the amount of funds that have been allocated to each state and establish LUST program performance
requirements. States may use LUST funds to pay for costs of site corrective actions, enforcement
actions against owners and operators (i.e., responsible parties), cost recovery of LUST expenditures,
and reasonable and necessary administrative expenses directly related to these activities.
EPA Region 8 awarded LUST CA L008655-01 to CDPHE on May 10, 1990. The CA purpose was
to provide funding for CDPHE to conduct timely and appropriate corrective action at LUST sites
and implement cost recovery procedures at sites where LUST Trust Fund monies had been
expended for cleanup. CDPHE submitted its final financial status report (FSR) on September 25,
1 E3LLL6-08-0031-7100144
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1995. Total project costs under the agreement were $2,712,519. EPA provided $2,440,267 of the
total project costs.
During the time period of LUST CA L008655-01, CDPHE's Hazardous Materials and Waste
Management Division (HMWMD) administered the state LUST program. HMWMD also
administered the Storage Tank Remediation and Solid Waste Program. This program was
responsible for responding to UST incidents where a leak or release occurred which had or could
have impacted human health or the environment.
SCOPE AND METHODOLOGY
We conducted a financial and compliance audit of LUST CA L008655-01 to determine if the costs
incurred and claimed were eligible, reasonable, and allocable under the CA terms and conditions
and in accordance with laws and regulations. The audit represented a final audit of costs claimed
under the agreement. Our financial and compliance audit covered the period May 10, 1990, through
September 30, 1995. We performed our fieldwork from August to December 1996 at EPA Region
8, CDPHE, and CDOLE offices in Denver, Colorado.
We conducted the audit in accordance with the Government Auditing Standards (1994 Revision)
issued by the Comptroller General of the United States. Accordingly, the review included tests of
the accounting records and other auditing procedures as we considered necessary. Other than the
issues discussed in this report, no other significant issues came to our attention that warranted
expanding the scope of our audit.
As part of our review, we obtained an understanding of CDPHE's internal control structure in order
to determine the nature, timing, and extent of our testing. We relied on the Statewide Single Audit
Report of the State of Colorado for the fiscal year ended June 30, 1995, to the extent possible. We
analyzed a sample of incurred costs and related internal controls to assure compliance with federal
statutory and regulatory criteria and with CDPHE's policies and procedures. Because of the
inherent limitations in any system of internal accounting control, errors or irregularities may occur
and not be detected. Except for the questioned costs and issues discussed in this report, nothing
came to our attention which would cause us to believe that CDPHE's procedures were not adequate
for our purposes.
To determine the eligibility, allocability, and reasonableness of the costs claimed under the CA, we
judgmentally selected a sample of costs claimed for testing. We selected 92 personnel transactions
and 106 non-personnel transactions. We reviewed the source documentation for all sampled
transactions including purchase orders, payment invoices, travel authorizations, travel vouchers, and
timesheets.
In addition to the audit of accounting transactions, we selected and tested transactions to determine
CDPHE's compliance with federal laws, regulations, and the LUST CA special conditions. We
2 E3LLL6-08-0031-7100144
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reviewed CDPHE's compliance with the CA's program and financial reporting requirements and
interviewed CDPHE administrative and program staff to determine whether policies and procedures
were appropriately implemented. In addition, we interviewed the Region 8 project officer to
determine whether the project officer provided sufficient oversight of the program's compliance
with the CA terms and special conditions.
Also, we reviewed the LUST CA L998395-01 awarded to CDOLE on July 12, 1995, and
interviewed CDOLE LUST program and finance staff. We reviewed the CDOLE LUST CA special
conditions to determine whether the terms and special conditions changed when CDOLE assumed
responsibility for the LUST program. We interviewed CDOLE LUST program staff to determine
whether LUST program equipment was properly transferred, and we inspected the transferred LUST
program equipment. We reviewed and reconciled CDPEE's equipment property records to the
equipment transferred to CDOLE. In addition, we interviewed CDOLE LUST program and finance
staff to determine how coordination with CDPHE would occur for future cost recovery actions on
sites for which CDPHE still retained cost documentation.
We performed followup work on prior audit findings at CDPHE and determined that CDPHE had
implemented corrective action. However, we identified additional improvements needed in
CDPHE's controls.
PRIOR AUDIT COVERAGE
We reported several internal control and compliance issues in a January 1994 audit report of
CDPHE's Superfund CAs. We found that: (1) reported expenditures in FSRs were not supported by
accounting records; (2) document processing errors were overstating expenditures; and (3) methods
used to allocate expenditures, including paid leave were not documented, not properly supported,
and not in accordance with the Office of Management and Budget (OMB) Circular A-87
methodology.
RESULTS OF AUDIT
OPINION
We found that CDPHE claimed $16,277 ($14,649 EPA share) of ineligible costs. We questioned
$7,965 indirect costs, $7,886 personnel costs, and $426 contractual costs, as ineligible under LUST
CA L008655-01. Other than the costs questioned, we found that the costs claimed under the CA
were fairly presented in accordance with applicable EPA regulations, other federal and state
requirements, and the CA terms and special conditions. OMB Circular A-87 establishes principles
and standards for determining costs applicable to grants, contracts, and other agreements with state
and local governments. The results of our analysis are summarized in Exhibit A. CDPHE staff
agreed with all of our questioned costs.
3 E3LLL6-08-0031-7100144
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REPORT ON COMPLIANCE AND
INTERNAL CONTROLS
In general, we found that the CDPHE LUST program complied with the CA terms and special
conditions. However, we found that HMWMD staff did not document its practice of periodically
reviewing and adjusting budget estimates for distribution of paid leave as part of its policies and
procedures. Also, CDPHE did not comply with two significant special conditions. The Region 8
project officer needed to review and change the LUST CA special conditions to better reflect actual
program activities. CDPHE maintained the cost documentation required for future LUST cost
recovery actions, but CDPHE staff stated that they did not have the resources to prepare the cost
recovery documentation packages after the the Legislature transferred the LUST program to
CDOLE. Also, we determined that CDPHE appropriately transferred LUST program equipment to
CDOLE.
HMWMD Needed to Document Its
Procedures for Distributing
Paid Absences
Although we found that HMWMD's practice of periodically reviewing and adjusting budget
estimates provided an equitable distribution of paid leave costs, it had not documented this practice
as part of its policies and procedures. The HMWMD LUST program and administrative staff
charged paid absences to the LUST CA based on budget estimates. HMWMD periodically
evaluated these budget estimates and revised them for future pay periods when significant variances
existed between budgeted and actual activities. Although CDPHE's policy was for employees to
charge paid leave as budgeted, HMWMD staff stated that not all CDPHE divisions reviewed and
adjusted budget estimates during the year. Neither HMWMD or CDPHE had included this policy in
written policies and procedures.
OMB Circular A-87, Attachment B, dated January 15, 1981, states that paid absences from the job,
such as for annual leave, sick leave, court leave, military leave, and the like, are allowable if they
are:
(1) provided pursuant to an approved leave system; and (2) the cost thereof is
equitably allocated to all related activities, including grant programs.
HMWMD documented its time and effort reporting procedures, but had not documented its practice
of reviewing and adjusting budget estimates as part of its policy and procedures. HMWMD needed
to document this review and modification process as part of its time and effort allocation
methodology to ensure that it was instituted and paid absences continued to be equitably distributed
in accordance with federal cost principles.
E3LLL6-08-0031-7100144
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The Region Needed to
Enforce and Improve
Special CA Conditions
In general, the CDPHE LUST program complied with the LUST CA terms and special conditions.
However, CDPHE did not provide required certifications for two special conditions. In addition,
the Region 8 project officer identified several of the other LUST CA special conditions as too
prescriptive. However, these same conditions were included in the new LUST CA awarded to
CDOLE. The project officer planned to review the special conditions in the CDOLE LUST CA and
eliminate those that were too prescriptive and no longer appropriate or necessary. The project
officer had also requested that Region 8's grants staff perform a Management Assistance Program
(MAP) review of CDOLE's compliance with EPA requirements under its LUST CA.
CDPHE had not provided Region 8 with the required certification for its utilization of minority-
owned businesses (MBE) and women-owned businesses (WBE) when awarding contracts. The CA
required CDPHE to submit its certification within 30 days of each federal fiscal yearend. The
purpose of the required certification was to ensure that CDPHE made federal funds available to
organizations owned or controlled by socially and economically disadvantaged individuals, women,
and historically black colleges and universities. Although CDPHE staff stated that several of the
contractors working at LUST sites were either MBE or WBE firms, the Region 8 Small Business
Officer could not locate any certifications for the LUST CA.
Neither the current Region 8 project officer nor CDPHE staff could provide supporting
documentation that CDPHE provided Region 8 with the required certification for its cost recovery
authority. The LUST CA required that CDPHE delay taking cost recovery action until it provided
EPA with certification of its legislative authority for cost recovery or certification that Colorado law
permitted it to exercise the RCRA Section 9003(h)(6) authorities. The only evidence that the
current Region 8 project officer could provide relating to the cost recovery certification was a copy
of an internal document dated December 28, 1988, in which a prior Region 8 project officer had
documented the State's cost recovery status. The prior project officer had written that the State
could seek cost recovery for actions taken in response to certain emergency situations under the
State's Hazardous Substance Incidents statute. In addition, potential legislation for introduction into
the 1989 legislative session would expand the State's cost recovery authorities to include any LUST
Trust Fund activities. However, the current project officer could not find any evidence that the State
passed such a law. The LUST program staff was currently working with the Colorado Attorney
General's Office to determine if a prior Attorney General had provided EPA with certification.
Although CDPHE did not take any cost recovery actions, CDOLE had taken a cost recovery action
under the new CA.
Also, the current Region 8 project officer did not know that one of the special conditions required
CDPHE to submit specific information to the project officer for review and comment prior to any
site-specific corrective action. The condition required that prior to any site-specific corrective
action utilizing LUST Trust Fund monies, CDPHE was to provide justification for using the monies
5 E3LLL6-08-0031-7100144
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(i.e., potentially responsible party inability to pay or recalcitrance, emergency conditions, etc.), the
proposed level of cleanup, and the estimated cost of cleanup.
Once the project officer became aware of the condition, she stated that it was too prescriptive. A
prior Region 8 project officer had included this condition and some of the other more prescriptive
special conditions in the CA when the LUST program was relatively new, according to the current
project officer. This condition was included in the new CA awarded to CDOLE on July 12, 1995,
as well as the audited CA and other Region 8 states' CAs. She planned to work with the other
Region 8 project officers to review all LUST CAs for appropriateness of special conditions. She
stated that any unnecessary conditions should be taken out of the LUST CAs.
The project officer stated that a MAP review would be especially useful now to ensure that CDOLE
proceeded appropriately with the new CA. A MAP review would provide Region 8 with a means of
assessing the recipient's grants management capabilities by evaluating: (1) compliance with
regulations and CA terms and conditions; (2) adequacy of internal controls; and (3) appropriateness
of accounting, reporting, and cost documentation standards and practices. CDOLE staff stated that
they were interested in any feedback or input into how they could improve their processes and
procedures. The current Region 8 project officer had requested in fiscal 1996 that Region 8's grants
management staff perform a MAP review of CDOLE's compliance with the LUST CA.
State Agencies Needed to
Coordinate Future Cost
Recovery Actions
CDPHE and CDOLE needed an action plan for future cost recovery actions at sites for which
CDPHE had prepared the cost documentation. After transfer of the LUST program to CDOLE,
CDPHE continued to maintain the cost documentation required for future LUST cost recovery
actions, but CDPHE staff stated that they did not have the resources to prepare future cost recovery
documentation packages for these past sites. During the time period that CDPHE administered the
LUST program, it complied with the LUST cost recovery documentation requirements. However,
when the Legislature transferred the LUST program to CDOLE, the two agencies did not formalize
plans to address future cost recovery issues involving cost documentation maintained by CDPHE.
CDPHE staff were considering transferring all cost documentation to CDOLE, if CDPHE would be
relieved of any responsibility related to future cost recovery at these past sites.
Each state entering into a LUST CA must comply with certain financial management and cost
documentation requirements specific to the LUST Trust Fund. Office of Solid Waste and
Emergency Response Directive 9610.10A, Cost Recovery Policy for the Leaking Underground
Storage Tank Trust Fund, states that:
States must maintain accounting and recordkeeping systems that will document all
Trust Fund expenditures, support cost recovery with site-specific records, and
E3LLL6-08-0031-7100144
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demonstrate that recovered funds are retained and used for additional eligible activities
under their cooperative agreements.
CDPHE and CDOLE staff were currently working on a Memorandum of Agreement (MO A) that
could be used to coordinate future cost recovery efforts. Staff were using the MOA to document
each department's role on various joint activities but had not included the future cost recoveries
issue. The MOA would be an appropriate mechanism for CDPHE and CDOLE to document the
responsibilities of each department related to future cost recovery actions on sites for which CDPHE
still retained cost documentation. In addition, if the two departments agree to transfer all of the cost
documentation related to prior years' efforts to CDOLE, then the MOA would also provide the
mechanism to document the transfer of responsibility for the documentation maintenance for future
cost recovery actions from CDPHE to CDOLE.
CDPHE Properly Transferred
Equipment to CDOLE
CDPHE properly transferred equipment acquired through the LUST program to CDOLE. In some
instances, CDPHE provided equivalent equipment instead of the actual item the LUST program
purchased. When the Legislature transferred the LUST program from CDPHE to CDOLE, Region
8 and CDOLE program staff were concerned that CDPHE may not have transferred all of the
program's equipment with the program. The majority of the equipment costs claimed under the
LUST CA were for computer hardware and software. We reviewed the equipment purchased under
LUST CA L008655-01 and reconciled it to the equipment CDPHE transferred to CDOLE. The
results of our review satisfied Region 8 and CDOLE LUST program staff that the LUST program
had obtained all appropriate equipment from CDPHE.
CONCLUSION
CDPHE claimed $16,277 ($14,649 EPA share) of ineligible costs under LUST CA L008655-01. In
general, CDPHE complied with the CA terms and special conditions. However, HMWMD did not
document its paid absences distribution procedures. Although the majority of CDPHE's claimed
costs were contractor costs, CDPHE had not provided Region 8 with required certifications for its
MBE and WBE utilization. It also had not provided certification for its cost recovery authority.
Also, Region 8 continued to require special conditions in its LUST CAs which were too prescriptive
or no longer appropriate or necessary. The Region 8 project officer planned to review all LUST
CAs to update the special conditions. The Region 8 project officer also planned to request a MAP
review of CDOLE's compliance with its LUST CA. In addition, CDPHE and CDOLE needed to
coordinate responsibilities for future cost recovery actions.
E3LLL6-08-0031-7100144
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RECOMMENDATIONS
We recommend that the Acting Regional Administrator:
1. Recover the $14,649 federal share of ineligible costs claimed by CDPHE under
LUSTCAL008655-01.
2. Instruct Region 8 UST/LUST project officers to enforce appropriate controls to
ensure LUST Trust Fund recipients comply with grant terms and conditions,
including documented cost allocation procedures and submission of any required
certifications.
3. Require CDOLE to provide certification as to the State's cost recovery authority.
4. Instruct Region 8 UST/LUST project officers to review and evaluate the special
conditions in the LUST CAs, and where appropriate, modify or delete excessive
conditions.
5. Establish a date for the MAP review of CDOLE's compliance with its LUST CA.
6. Require CDPHE and CDOLE to coordinate and document each department's
responsibility related to future cost recovery efforts for sites that were previously
under CDPHE cognizance.
AUDITEE COMMENTS AND PIG EVALUATION
Region 8, CDPHE, and CDOLE agreed with our findings and recommendations. The Region and
CDPHE agreed that the ineligible costs claimed by CDPHE should be repaid to EPA. The regional
project officers reevaluted the grant terms and conditions and plan to take appropriate action to
ensure compliance. Regional project officers will modify those conditions deemed unnecessary or
too prescriptive and not driven by guidance or regulatory requirements. The regional program staff
will ensure that CDOLE provides a cost recovery certification and will withhold a portion of the
LUST grant award if necessary until this special condition has been met. Also, the regional
program staff will ensure that responsibility for future cost recovery actions at sites previously
under CDPHE control are properly handled and substantiated with appropriate documentation. The
Region scheduled a MAP review of CDOLE for the fourth quarter of fiscal 1997.
The planned actions, if initiated timely, should satisfy the intent of OIG's recommendations.
E3LLL6-08-0031-7100144
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EXHIBIT A
SCHEDULE OF COSTS CLAIMED AND QUESTIONED
Cost
Category
Personnel
Travel
Capital Outlay
Contractual
Operating
Indirect
TOTAL
LUST COOPERATIVE
Mav 10. 1990. to
AGREEMENT L008655-01
SeotemberSO. 1995
Total Costs Amount Questioned
Claimed As Ineligible
$ 792,656 $7,886
6,350 -0-
10,388 -0-
1,701,403 426
32,866 -0-
167.745 7.965
$2.7LL4Q8
SHOWN ON FSR $2.712.519
EPA SHARE(90%) $2,440,267
EPA Share Claimed (90%)
Less: EPA Share Questioned
Allowable Federal Share
Payments As of September 26, 1995
Balance Due EPA
$16.277
$ 14,649
Notes
1
2
3
$2,440,267
14.649
2,425,618
2.440.267
$ 14.649
Notes
1. We questioned $7,886 for personnel time charges as ineligible. The staff timesheets did not
support the time distribution charged to the LUST CA. EPA Audit Resolution Board
Decision Number ARB-8, dated November 3, 1981, held that:
E3LLL6-08-0031-7100144
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Costs which a grantee cannot properly support pursuant to 40 CFR
[Code of Federal Regulation] 30.800 and 30.805 shall not be
allowable for reimbursement with EPA funds.
2. We questioned $426 resulting from a contractor inappropriately claiming a 10 percent
markup on all of its nonscheduled costs on an invoice. The contract required that equipment
and supplies, disposal costs, all subcontracted work and related costs be reimbursed to the
contractor at invoice cost.
3. We questioned a total of $7,965 in indirect costs: (1) $1,522 of indirect costs as being
allocable to direct costs we have questioned, and (2) $6,443 for indirect costs that CDPFfE
claimed for ineligible contractual costs.
We questioned $1,522 of indirect costs as ineligible because CDPHE claimed indirect costs
related to the personnel costs we questioned.
We questioned $6,443 of indirect costs as ineligible because CDPFfE applied and claimed a
1.7 percent indirect flow-thru rate on contractual costs classified as capital construction
costs. Although CDPFffi was allowed to claim an indirect flow-thru rate on costs classified
as contractual costs, costs classified as capital construction costs were exempt from
application of any indirect rate. The Legislature classified the contractual costs under the
LUST CA as capital construction costs. CDPHE claimed the indirect flow-thru rate on its
capital construction costs for fiscal 1991 and 1992.
10 E3LLL6-08-0031-7100144
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APPENDIX I
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY Page 1 of 5
REGION VIII
9" 18th STREET - SUITE 50°
DENVER, COLORADO 80202-2466
MR2019S?
8TMS-G
MEMORANDUM
SUBJECT: Response to Draft Audit Report of Colorado
Leaking Underground Storage Tank Program
Cooperative Agreement No. L008655-01
,ReportNumb<3r E3LLL6-08-0031-XXXXXXX
FROM: J^WrMcdfaw
cting Regional Administrator
TO: ennie S. Salem
Divisional Inspector General
. As you may know, the Region 8 UST/LUST Program requested this audit because
the administration responsibility of this program was transferred from the Colorado
Department of Public Health and Environment (CDPHE) to the Colorado Department of
Labor and Employment (CDOLE), Oil Inspection Section (OIS). This transfer occurred on
July 1, 1995 and the UST/LUST Program wanted to ensure that Cooperative Agreement
(CA) No. L008655-01 was properly closed out and the OIS had the grants management
capabilities to manage the new CA. As required by EPA Order 2750, the Region's
response to the draft audit report of the Colorado Leaking Underground Storage Tank
Program (LUST) is outlined below.
Recommendation #1: Recover the $16.154 of ineligible costs claimed by CDPHE under
LUST Cooperative Agreement No. L008655-01.
The Region agrees with this recommendation.
Recommendation #2: Instruct Region 8 UST/LUST Project Officers to enforce
appropriate controls to ensure LUST Trust Fund recipients comply with grant terms and
conditions.
The Region agrees with this recommendation. The regional Project Officers have
reevaluated the grant terms and conditions and will pursue appropriate actions when
necessary.
Printed on Recycled Paper
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Page 2 of 5
Recommendation #3; Require CDOLE to provide certification as to the State's cost
recovery authority.
The Region agrees with this recommendation. The regional program staff is aware
of the cost recovery certification issue and has been working and will continue to work with
OIS and the Colorado Attorney General to ensure that the State can meet the required
certification requirements. This certification is a special condition of the LUST
CA and, therefore, must be met in order for the State to receive LUST award monies. The
regional program staff will work with the State to ensure that this condition is met in a
timely manner. If the State cannot meet this condition in a timely manner, the Region 8
UST/LUST Program will consider taking action against the State by withholding a portion
of the LUST award until the special condition has been met.
Recommendation #4: Instruct Region 8 UST/LUST Project Officers to review and evaluate
the special conditions in the LUST Cooperative Agreements, and where appropriate.
modify and delete excessive conditions.
The Region agrees with this recommendation. The regional program staff
discussed the specific modifications to the special conditions with other Region 8 states
during an "All States Meeting" held in Denver in February 1997. Those special conditions
deemed unnecessary or too prescriptive and not driven by guidance or regulatory
requirements will be modified.
Recommendation #5: Establish a date for the MAP review of CDOLE's compliance with its
LUST Cooperative Agreement.
The Region agrees with this recommendation. The Region 8 UST/LUST program
staff requested a Management Assistance Program (MAP) review of OIS in January 1996
to ensure and document that the State grants management capabilities required to
manage the LUST CA. A MAP review has been scheduled for the fourth quarter in FY 97
Recommendation #6: Require CDPHE and CDOLE to coordinate and document each
department's responsibility related to future cost recovery efforts for sites that were
previously under CDPHE cognizance.
The Region agrees with this recommendation. The Region 8 UST/LUST program
staff will work with CDPHE and CDOLE to ensure that responsibility for future cost
recovery actions at sites previously under CDPHE control are properly handled and
substantiated with appropriate documentation.
Thank you for the opportunity to comment on the draft report. If you have any
questions, please call Barbara Rodriguez, Regional Audit Coordinator, at (303) 312-6360.
cc: Jeff Hart, 80IG Dave Schachterle, SRC
Steve Tuber, 8P2-W Sandy Stavnes, 8P2-W-GW
Barbara Rodriguez, 8TMS-G
12
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APPENDIX I
Page 3 of 5
STATE OF COLORADO
Roy Romer, Governor
Patti Shwayder, Executive Director
Dedicated to protecting and improving the health and environment of the people of Colorado
4300 Cherry Creek Dr. S. Laboratory Building
Denver, Colorado 80222-1530 4210 E. 11 th Avenue
Phone (303) 692-2000 Denver, Colorado 80220-3716
(303) 691 -4700 Colorado Department
of Public Health
March 12, 1997 and Environment
Bennie S. Salem
Divisional Inspector General
United States Environmental Protection Agency
Office of Inspector General
Central Audit Division
726 Minnesota Avenue
Kansas City, Kansas 66101
Re: Audit of Colorado Leaking Underground Storage Tank Program
Cooperative Agreement No. L008655-01
Report Number E31116-08-0031-XXXXXXX
Dear Ms. Salem:
Thank you for the opportunity to provide comments on the above
referenced draft audit report. We have appreciated the cooperative
spirit in which your staff have worked with us on this audit.
With a few exceptions we agree with the findings in the draft
report. Our relatively minor disagreements are as follows;
1. HMWMD Needed to Document Its Procedures for Distributing Paid
Absences (page 5):
The text of this comment states that prior audits of the
Colorado Department of Public Health and Environment's (CDPHE)
divisions identified that CDPHE did not have a consistent
method or policy with regard to allocating paid leave costs to
various funding sources. CDPHE has had a policy in effect for
several years in regard to allocating paid leave costs between
funding sources. CDPHE policy is to charge paid leave as
budgeted for employees in the Department.
2. Additional Resolution of Questioned Costs Subsequent to the
Issuance of this Draft Audit Report. I understand that,
subsequent to the release of this draft report, additional
discussions between CDPHE staff and Environmental Protection
Agency,. Office of Inspector General (EPA-OIG) staff have
reduced the questioned cost amounts (pp 12-13 as follows:
A. Personal Services Questioned Costs of $8,027. This amount
would be reduced to $7,886, along with a corresponding
reduction in questioned indirect costs from $7,992 to $7,965.
13
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APPENDIX I
Page 4 of 5
March 12, 1997
Page 2
B. Contractual Questioned costs of $1,930. We have provided
your audit staff with additional documentation which should
allow you to reduce this amount by $1,504 to $426.
The adjusted questioned cost total would be $16,277, with the EPA
share being $14,469. Again, it is our understanding that your
staff concur with these changes.
We look forward to receiving your final report and resolving the
outstanding issues with Region 8 personnel. Thank you again for
the professional and cooperative manner in which your staff have
conducted this audit.
Sincerely,
-^
Lee Thielen
Associate Director
cc: Howard Roitman, HMWMD
Richard Piper, DOLE
Barbara Rodriguez, EPA Region 8
Sandy Stavnes, EPA Region 8
14
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ROY ROMER
Governor
JOHN J. DONLON
Executive Director
RICHARD O. PIPER
State Inspector of Oils
March 10, 1997
APPENDIX 1
Page 5 of 5
DEPARTMENT OF LABOR AND EMPLOYMENT
Oil Inspection Section
Tower 3, Suite 525
1515 Arapahoe Street
Denver CO 80202-2117
(303) 620-4300; Fax (303) 620-4303
Mr. Bennie S. Salem, Divisional Inspector General
United States Environmental Protection Agency
Office of Inspector General
726 Minnesota Avenue
Kansas City, KS66101
Re: Audit of Colorado Leaking Underground Storage Tank Program Cooperative Agreement No.
L008655-01 Report Number E31116-08-0031-XXXXXXX
Dear Mr. Salem:
This is to reply to subject draft audit report dated February 6, 1997. From a program perspective, our
comments will deal with the recommendations listed on page 11.
Recommendation number 3: Require CDOLE to provide certification as to the State's cost recovery
authority.
Response: Agree.
Colorado Department of Labor and Employment does certify that it does have the State's costs recovery
authority. Colorado Revised Statutes sections 8-20.5-209(1) and (3) give the State Inspector of Oils the
authority to recovery costs when the Oil Inspection Section incurs costs in performing investigations and
environmental corrective actions related to underground storage tanks.
Recommendation number 6: Require CDPHE and CDLE to coordinate and document each department's
responsibility related to future cost recovery efforts for sites that were previously under CDPHE cognizance.
Response: Agree.
The Department of Labor and Employment assumes cost recovery responsibility, where appropriate, for all
LUST site expenditures since the program was transferred here on July 1,1995. Additionally, the Department
of Labor and Employment will request accounting records from the Department of Public Health and
Environment for previous LUST site expenditures made while the program was at the Health Department in
order to attempt cost recovery for those appropriate sites also.
Sincerely
'John J. &6nlon, Executive Director
Colorado Department of Labor and Employment
cc: Jeff Hart US EPA Region VIII
15
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APPENDIX II
CA
CDOLE
CDPHE
EPA
FSR
HMWMD
LUST
MAP
MBE
MOA
OIG
OMB
RCRA
SARA
the Legislature
UST
WBE
ABBREVIATIONS
Cooperative Agreement
Colorado Department of Labor and Employment
Colorado Department of Public Health and Environment
Environmental Protection Agency
Financial Status Report
Hazardous Materials and Waste Management Division
Leaking Underground Storage Tank
Management Assistance Program
Minority-owned Business Enterprise
Memorandum of Agreement
Office of Inspector General
Office of Management and Budget
Resource Conservation and Recovery Act
Superfund Amendments and Reauthorization Act
Colorado State Legislature
Underground Storage Tank
Women-owned Business Enterprise
16
E3LLL6-08-0031-7100144
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APPENDIX III
DISTRIBUTION
Office of Inspector General
Inspector General (2410)
Deputy Assistant Inspector General for
External Audits (2421)
EPA Headquarters Office
Assistant Administrator for Administration
and Resources Management (3101)
Comptroller (3301)
Associate Administrator for Regional Operations and
State/Local Relations (1501)
Agency Audit Followup Coordinator (3304)
Agency Audit Followup Official (3101)
Director for Program and Policy Coordination Office (3102)
Director for Grants Administration (3903F)
Office of Congressional Liaison (1302)
Office of Public Affairs (1707)
Headquarters Library (3304)
EPA Region 8
Assistant Regional Administrator, Office of Pollution
Prevention, State and Tribal Assistance
Director, Water Program
Director, Groundwater Program
Project Officer, Underground Storage Tank Program
Audit Coordinator
Colorado Department of Public Health and Environment
Executive Director
Controller
Director, Hazardous Materials and Waste Management Division
Administrative Manager, Hazardous Materials and Waste
Management Division
Colorado Department of Labor and Employment
Executive Director
Associate Director for Finance
State Inspector of Oils, Oil Inspection Section
17 E3LLL6-08-0031-7100144
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