EPA-350-R 10-004
May 2010
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Semiannual Report to Congress
October 1, 2009 - March 31, 2010
m.
I
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Abbreviations
ASSERT Automated System Security Evaluation and Remediation Tracking
DCAA Defense Contract Audit Agency
EPA U.S. Environmental Protection Agency
FY Fiscal Year
GIAMD Grants and Interagency Agreements Management Division
MACT Maximum Achievable Control Technology
OGD Office of Grants and Debarment
OIG Office of Inspector General
OMB Office of Management and Budget
Cover photos: Clockwise, from top left: A surface mining operation from which fill may be discharged
into surface waters (EPA photo); vegetated curb extensions used to decrease stormwater
runoff (EPA photo); and pipes for a water main extension project (EPA OIG photo).
To find out more about the U.S. Environmental Protection Agency
Office of Inspector General and its activities, visit our Website at:
http://www.epa.gov/oig
Printed on 100% recycled paper (minimum 50% postconsumer)
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Message to Congress
The Office of Inspector General (OIG) of the U.S. Environmental Protection Agency
(EPA) made several organizational changes during the past semiannual reporting period
to better protect Agency resources and increase EPA efficiency. We established the
Office of Cyber Investigations and Homeland Security to help the Agency identify
attacks against its computer and network systems and thus protect its resources,
infrastructure, and intellectual property. Also, within our Office of Audit, we established
the Efficiency Audits Division to focus on identifying potential monetary benefits within
EPA operations.
However, the President's budget request for Fiscal Year 2011 for the EPA OIG will
substantially inhibit our ability to perform our duties as required by the Inspector General
Act and as sought by Congress. The President's budget request for the OIG of
$55.8 million is $8.9 million less than we requested. We seek the additional funding so
that we can increase OIG staffing as directed by Congress and give proper audit coverage
to the areas in which the Agency's budget has increased. Grant funds not related to the
American Recovery and Reinvestment Act of 2009 have increased significantly - by
nearly $2 billion for the State Revolving Funds alone and another $475 million for the
Great Lakes Restoration Initiative.
The OIG has established its own independent human resources office, as allowed by the
Inspector General Act of 1978. The OIG has also established its own contracting
function. The OIG and EPA's Office of Administration and Resources Management
have entered into a memorandum of understanding establishing operational
responsibilities for the human resources and contracting functions. These actions will
help us to meet our objectives with more control over the activities related to hiring and
retaining the most qualified workforce, and engage in procurement activities in support of
our mission. It is our intention to work closely with, but completely independent of,
EPA's contracting and human resources offices.
During the semiannual reporting period, we issued six reports on EPA's efforts related to
the American Recovery and Reinvestment Act of 2009. Two site inspections of
Recovery Act grants did not disclose any issues that would require action from fund
recipients or EPA. We also determined that EPA promoted competition for National
Clean Diesel Funding Assistance Program grants to the maximum extent possible. We
did note that EPA has not provided States with clear and comprehensive guidance on how
to determine the eligibility of green reserve projects.
We also found that EPA's ENERGY STAR label does not guarantee superior energy
efficiency. Without an enhanced testing program, including the testing of non-ENERGY
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
STAR products, EPA cannot be certain that ENERGY STAR products are the most
energy-efficient and cost-effective choice for consumers. Almost all of the ENERGY
STAR products in our test sample met and in most cases exceeded the program's
performance standards, but many non-ENERGY STAR products selected performed
comparably to and in some cases better than ENERGY STAR products.
The EPA travel program lacks necessary control procedures to assure all travel
authorizations were necessary and in the best interest of the government. Our
preliminary review of 949 travel documents disclosed 199 incidents in which travel
appeared to be self-approved by persons not authorized to do so. We intend to review
this matter further.
EPA can better prepare and use independent government cost estimates for Superfund
contracts to improve its ability to negotiate fair and reasonable prices. Also, EPA should
record fines and penalty billings in a more timely and consistent manner, and report
penalty information more efficiently. For EPA's Consolidated Financial Statements for
Fiscal Years 2009 and 2008, we rendered an unqualified opinion.
As a result of an investigation conducted with the Internal Revenue Service, the president
of a New Jersey landscaping company was sentenced to 5 months in prison for his part in
defrauding EPA at the Federal Creosote Superfund Site in Manville, New Jersey. Several
civil settlements were reached related to other EPA cases, one related to allegations of
falsified invoices and another related to allegations of false claims. Further, the
production manager for a Tennessee company was given 1 year of probation and fined
$5,000 for making a material false statement in a Discharge Monitoring Report required
under the Clean Water Act.
EPA continues to face challenges in using its funds and accomplishing its mission in an
efficient and effective manner, particularly concerning Recovery Act projects. We will
continue to review the Agency's efforts to ensure funding is expended properly and
human health and the environment are safeguarded.
Bill A. Roderick
Acting Inspector General
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Table of Contents
About EPA and Its Office of Inspector General 1
U.S. Environmental Protection Agency 1
EPA Office of Inspector General 1
Management Challenges for the Agency 9
OIG Recovery Act Efforts 11
OIG Conducts Outreach to Deter Fraud, Improve Efficiency 11
Site Inspections of Recovery Act Projects Did Not Note Problems 12
EPA Maximized Competition for Clean Diesel Program Grants 13
EPA Should Provide Definitive Guidance for Green Reserve Projects 14
EPA Faced Challenge in Meeting Drinking Water Fund Deadline 15
Agency Internal Control Design Found to Be Sufficient 16
Additional OIG Audits and Evaluations Underway 16
Other Significant OIG Activity 17
Water 17
Superfund/Land 18
Enforcement 20
Cross-Media 21
Special Reviews 25
Grants 28
Contracts 30
Forensic Audits 33
Financial Management 36
Information Resources Management 39
Investigations 43
Other Activities 47
Statistical Data 50
Profile of Activities and Results 50
Audit, Inspection, and Evaluation Report Resolution 51
Hotline Activity 53
Summary of Investigative Results 54
Scoreboard of Results 55
continued
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Appendices 56
Appendix 1 - Reports Issued 56
Appendix 2 - Reports Issued Without Management Decisions 58
Appendix 3 - Reports with Corrective Action Not Completed 72
Appendix 4 - OIG Mailing Addresses and Telephone Numbers 73
Index of Reporting Requirements
Inspector General Act of 1978, as Amended
Requirement •Subject
Section 4(a)(2) Review of legislation and regulations 47
Section 5(a)(1) Significant problems, abuses, and deficiencies 14-46
Section 5(a)(2) Significant recommendations for corrective action 14-42
Section 5(a)(3) Reports with corrective action not completed 72
Section 5(a)(4) Matters referred to prosecutive authorities 43-46, 50, 54-55
Section 5(a)(5) Information or assistance refused None
Section 5(a)(6) List of reports issued 56-57
Section 5(a)(7) Summaries of significant reports 12-42
Section 5(a)(8) Audit, inspection, and evaluation reports - questioned costs 50-52, 55-57
Section 5(a)(9) Audit, inspection, and evaluation reports - funds to be put to better use 50-52, 55-57
Section 5(a)(10) Prior audit, inspection, and evaluation reports unresolved 51-52, 58-71
Section 5(a)(11) Significant revised management decisions None
Section 5(a)(12) Significant management decisions with which OIG disagreed None
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
About EPA and Its
Office of Inspector General
U.S. Environmental Protection Agency
The mission of the U.S. Environmental Protection Agency (EPA) is to protect human
health and the environment. As America's steward for the environment since 1970, EPA
has endeavored to ensure that the public has air that is safe to breathe, water that is clean
and safe to drink, food that is free from dangerous pesticide residues, and communities
that are protected from toxic chemicals. EPA develops and enforces regulations that
implement national environmental laws, and works with its partners and stakeholders to
identify, research, and solve/mitigate current and future environmental problems. EPA
provides grants to States, tribes, nonprofit organizations, and educational institutions;
supports pollution prevention and energy conservation; and promotes environmental
education for all Americans. EPA has Headquarters offices in Washington, DC;
10 regional offices; and more than 100 other offices, laboratories, and field sites.
EPA's Fiscal Year (FY) 2010 budget of $10.5 billion in discretionary budget authority,
which includes 17,384 full-time equivalent employees, is the highest level of funding in
EPA's history. The FY 2010 budget provides a substantial increase from FY 2009. In
addition to its annual budget, EPA received $7.2 billion under the American Recovery
and Reinvestment Act of 2009.
EPA Office of Inspector General
The Office of Inspector General (OIG) is an independent office of EPA that detects and
prevents fraud, waste, and abuse to help the Agency protect human health and the
environment more efficiently and cost effectively. Although we are part of EPA,
Congress provides us with a budget line item separate from the Agency's to ensure our
independence. The EPA OIG was created and is governed by the Inspector General Act
of 1978 (P.L. 95-452). The legislative history of the 1978 law, found in Senate Report
95-1071 and House Report 95-584, sheds light on Congress's intent in enacting this
legislation. The original act has been amended a number of times. Important changes
were made in 1988 (P.L. 100-504) and again in 2002 (P.L. 107-296). Most recently, to
enhance the independence of Inspectors General, the Inspector General Reform Act of
2008 (P.L. 110-409 [H.R. 928]) was enacted.
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Vision of the EPA OIG
We are catalysts for improving the quality of the environment and government through
problem prevention and identification, and cooperative solutions.
Mission of the EPA OIG
Add value by promoting economy, efficiency, and effectiveness within EPA and the
delivery of environmental programs. Inspire public confidence by preventing and
detecting fraud, waste, and abuse in Agency operations and protecting the integrity of
EPA programs.
OIG Organization
To fulfill our vision and accomplish our mission, we perform audits, evaluations, and
investigations of EPA, as well as its grantees and contractors. We also provide testimony
and briefings to Congress. We recommend solutions to the problems we identify that
ultimately result in providing Americans a cleaner and healthier environment. We are
organized as follows.
ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
INSPECTOR GENERAL
Deputy Inspector General
Special Projects/QAR
Office of
Program Evaluation
Counsel to the Inspector General and
Associate Deputy Inspector General
Office of Congressional,
Public Affairs and
Management
'Reports to the Deputy Inspector General for oversight of OSR investigations
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
OIG staff are physically located at Headquarters in Washington, DC; at the regional
headquarters offices for all 10 EPA regions; and other EPA locations including Research
Triangle Park, North Carolina, and Cincinnati, Ohio. During the semiannual reporting
period, two key organizational changes occurred:
• In November 2009, we established the Officer of Cyber Investigations and
Homeland Security. This office is responsible for identifying and investigating
attacks against EPA's computer and network systems, operating the OIG's
Hotline program, and managing the OIG's continuity of operations plan.
• In December 2009, we established the Efficiency Audits Division within the
Office of Audit. This division's mission is to identify monetary benefits
within EPA operations, thus freeing resources for higher-priority efforts.
Efficiency audits assess ways to improve results with the same or fewer resources.
Details on the specific role each OIG office plays in helping the OIG accomplish its
mission follow.
Immediate Office: This office includes the position of the Inspector General, which is
vacant, and the Deputy Inspector General, who is serving as the Acting Inspector
General. In addition to providing overall leadership and direction, this office includes a
Quality Assurance Program team that reviews all draft and final reports to ensure
conformance with standards.
Office of Audit: This office performs audits to improve the economy, efficiency, and
effectiveness of Agency programs and to prevent fraud, waste, and abuse. The office
performs financial audits of assistance agreements and contracts, as well as Agency-wide
reviews of programs. Product divisions and their missions include:
• Contracts and Assistance Agreements: Improving EPA's management of
contracts and grants.
• Forensic Audits: Identifying fraud, waste, and abuse in contracts and grants.
• Financial Audits: Improving the Agency's financial management.
• Risk Assessment and Program Performance: Improving EPA's internal
controls, processes, and workforce/manpower.
• Efficiency Audits: Identifying monetary benefits and improving efficiency.
Office of Congressional, Public Affairs and Management: This office performs
communication and resource management functions. Communication functions include
providing communication and liaison services to Congress, the public, and the media;
editing, issuing, and distributing OIG reports; and managing information posted on the
OIG Website. The office also manages the OIG's budget process and coordinates OIG
planning, policies and procedures, audit follow-up, performance measurement and
reporting, contracting, and OIG internal control assessment. Further, the office is
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
responsible for all aspects of OIG human capital programs, human resource operations,
and recruitment.
Office of Counsel: This office provides independent legal and policy advice to all
components of the OIG and represents the OIG in administrative litigation. The office
manages the OIG ethics program, providing ethics training, advice, and financial
disclosure reviews, and coordinates OIG responses to Freedom of Information Act and
other document requests. The office, which employs Special Agents in addition to
attorneys, also performs oversight and special reviews. These reviews include criminal
and other investigations of misconduct by EPA employees. Further, the office performs
legal reviews in response to requests by members of Congress and the Agency.
Office of Cyber Investigations and Homeland Security: This new office, established
in November 2009, is responsible for identifying and investigating attacks against EPA's
computer and network systems to protect EPA resources, infrastructure, and intellectual
property. The office also operates the EPA OIG Hotline program and continuity of
operations program. By utilizing open source and law enforcement databases, the office
provides OIG employees with information to enhance their ability to meet their mission
requirements. The office, through its coordination and liaison contacts with emergency
response agencies from within the federal, State, and local governments, enhances EPA's
operational readiness capabilities.
Office of Investigations: This office employs Special Agents to perform criminal
investigations. The majority of the investigative work is reactive in nature, responding to
specific allegations of criminal activity and serious misconduct. The office focuses its
investigative efforts on financial fraud (contracts and assistance agreements), computer
crimes, infrastructure/terrorist threat, program integrity, and theft of intellectual or
sensitive data. Specifically, investigations focus on:
• Criminal activities in the awarding, performing, and paying of funds under EPA
contracts, grants, and other assistance agreements to individuals, companies, and
organizations.
• Criminal activity or serious misconduct affecting EPA programs that could
undermine or erode the public trust.
• Contract laboratory fraud relating to water quality and Superfund data, and
payments made by EPA for erroneous environmental testing data and results that
could undermine the bases for EPA decision-making, regulatory compliance, and
enforcement actions.
• Incidents of computer misuse.
• Theft of intellectual property or other sensitive data and release of or
unauthorized access to sensitive or proprietary information by EPA contractors,
grantees, and other nonemployees by other than computer intrusion methods.
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Office of Mission Systems: This office performs audits of and issues reports on EPA's
information resources management to ensure the Agency is adequately maintaining its
systems and data. These audits consider how well EPA collects data, manages its
investment in information technology, and manages information security and privacy.
The office also provides information technology support to the rest of the OIG, manages
the technical aspects of the OIG Website, and provides data mining and analysis to
support OIG staff.
Office of Program Evaluation: This office performs program evaluations that assess
and answer specific questions about how well EPA programs are working. The office
assesses strategic planning and process implementation to determine whether a program
is designed and operating as intended, as well as the extent to which a program is
achieving its objectives and having an impact. Evaluations examine root causes, effects,
and opportunities leading to conclusions and recommendations that influence systemic
changes and promote improved delivery of the Agency's mission. Evaluations may also
be designed to increase the understanding of a program. Product areas include:
• Air: Helping to make air safe and healthy to breathe.
• Water: Helping to ensure that drinking water is safe and waterbodies are protected.
• Superfund/Land: Improving waste management and clean-up.
• Enforcement: Helping to improve compliance with environmental requirements.
• Research and Development: Helping EPA improve its research and
development efforts and ensure sound science.
• Cross-Media: Evaluating nontraditional approaches to protecting the
environment and challenges that cut across programs.
• Special Reviews: Reviewing issues of fraud, waste, and misuse in EPA programs.
Proposed OIG Funding Substantially Inhibits Performance of Duties
The Acting Inspector General submitted comments to Congress and the Office of
Management and Budget asserting that the FY 2011 President's budget request for the
EPA OIG "would substantially inhibit the Inspector General from performing the duties
of the office" under Section 6(f)(3)(E) of the Inspector General Act of 1978, as amended.
The OIG's requested budget for FY 2011 ($64,766,000) is $8,964,000 more than the
OIG's portion of the President's budget request ($55,802,000). The additional funding is
necessary as a result of congressional direction to increase OIG staffing to previous
levels, and EPA's $2.7 billion (non-Recovery Act) enacted increase for FY 2010. The
increase included $1,410,920,000 for the Clean Water State Revolving Fund,
$557,971,000 for the Drinking Water State Revolving Fund, and $475,000,000 for the
Great Lakes Restoration Initiative. The State revolving funds and the Great Lakes
Restoration Initiative provide grants to States.
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Grants have long been identified as high-risk activities that pose management challenges
in their potential for misapplication from the intended environmental purpose, lack of
accountability, and fraud. To help ensure essential transparency and the greatest public
environmental benefit, the OIG should receive sufficient funds to provide oversight
through audits and investigations to determine whether desired results are achieved.
Without a specific corresponding increase in OIG funds to conduct audits and
investigations and to fulfill the OIG's directed staffing level to provide needed oversight
and accountability, new EPA funds for grants are more vulnerable to fraud, waste, and
abuse.
Below is a summary of the OIG resource levels/expenditures for FYs 2000 through 2010.
Historical Budget and Manpower Statistics
Fiscal Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Enacted Budget
(after rescissions
where applicable)
$43,379,700
$45,493,700
$45,886,000
$48,425,200
$50,422,800
$50,542,400
$50,241,000
$50,459,000
$52,585,000
$54,766,000
$54,766,000
Onboard Staff
(as of October 1 )
340
351
354
348
363
365
350
326
290
304
316
Expenditures
(includes
carryover)
$39,384,100
$41,050,807
$45,238,608
$46,023,048
$52,212,862
$61,733,781
$49,583,584
$48,658,217
$51,628,082
$52,272,811
TBD
Sources: OIG archives and analysis and EPA Integrated Financial Management System.
The Recovery Act provided the EPA OIG $20 million through September 30, 2012, for
oversight and review. As of March 31, 2010, the OIG expended $4,827,838 in Recovery
Act funds and had 31.3 full-time equivalent positions in place. Details on our Recovery
Act efforts begin on page 11.
OIG Establishes Own Human Resources Office, Contracting Function
The OIG has established its own independent human resources office, as allowed by the
Inspector General Act of 1978. The OIG has also established its own contracting
function. The OIG and EPA's Office of Administration and Resources Management
have entered into a memorandum of understanding establishing operational
responsibilities for the human resources and contracting functions.
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Among the authorities established by Congress for Inspectors General is the authority to
operate independently in providing operational human resource services to OIG
employees and to enter into contracts without interference or review by their parent
agency. This authority is but one of several safeguards established by Congress to
protect OIG independence and objectivity. Specifically, the Inspector General Act of
1978 provides that each Inspector General, in carrying out the provisions of the Act, is
authorized to "to select, appoint, and employ such officers and employees as may be
necessary for carrying out the functions, powers, and duties of the Office subject to the
provisions of title 5, United States Code, governing appointments in the competitive
service...," and "to enter into contracts and other arrangements for audits, studies,
analyses, and other services with public agencies and with private persons, and to make
such payments as may be necessary to carry out the provisions of this Act." In
accordance with this authority, the EPA OIG has hired staff and made other arrangements
to provide for the full range of operational human resources and acquisition services to
support accomplishing its mission.
OIG Annual Performance Report Issued
The OIG issued its Annual Performance Report for FY 2009, its eighth such annual report.
This report contains historical statistical information, along with narrative summaries, to
demonstrate the use of OIG resources and the value derived in terms of return on
investment. This approach provides trends and correlations between OIG products and
their subsequent outputs and outcomes in relation to our strategic goals and the fulfillment
of our statutory mission.
This report fulfills the reporting requirements of the Government Performance and Results
Act in demonstrating how well the EPA OIG achieved results compared to its 2009 Annual
Performance Targets. It also presents OIG cumulative results for FYs 2003 through 2009.
This Annual Performance Report, designed to provide full accountability for the operations
of the OIG, supplements the OIG summary statistics in EPA's FY 2009 Performance
Accountability Report. The performance report includes a bulleted account of OIG
performance highlights and operational improvement, financial summaries, management
challenges, summaries of OIG operations and productivity, narrative highlights of how
OIG work is improving EPA operations, and the costs and timeliness of all issued
products. The report is available at
http://www.epa.gov/oig/reports/2010/AnnualPerformanceReportFY2009.pdf
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
OIG Quality Assurance Program Being Applied
The OIG operates a rigorous Quality Assurance Program to provide objective, timely,
and comprehensive reviews to ensure that OIG work complies with pertinent laws,
professional standards, regulations, and policies and procedures, and is carried out
efficiently and effectively. OIG offices, activities, processes, and products are subject to
review. Our OIG Quality Assurance Program team conducts independent referencing
reviews of draft and final audit and evaluation reports and ensures conformance with the
standards of the Comptroller General and Council of Inspectors General on Integrity and
Efficiency. Our Quality Assurance Program involves:
• Report quality assurance.
• Quality assurance reviews of audit and evaluation activities.
• Annual self-assessments of each OIG office.
• Administrative program reviews.
• External peer reviews conducted by other OIGs.
• Use of a quality assurance checklist.
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Management Challenges for the Agency
Following is a summary of the proposed key management challenges that we provided to
the Agency for FY 2010. The OIG defines management challenges as a lack of
capability derived from internal self-imposed constraints or, more likely, externally
imposed constraints that prevent EPA from reacting effectively to a changing
environment. The FY 2010 challenges listed below are based primarily on our audit,
evaluation, and investigative work. The last three challenges listed are new.
• The Need for a National Environmental Policy: EPA is challenged in being
able to confront emerging, cross-media, and cross-boundary challenges due to
rigid environmental laws and a lack of complete authority or control over many
activities that impact our nation's environment. Problems such as global climate
change, stratospheric ozone depletion, the loss of biological diversity, and other
broad and complex environmental issues require more concerted, coordinated
efforts. EPA's organizational structure, along with a shared responsibility with
States and 25 other federal agencies, results in a fragmented approach to
environmental protection. A national environmental policy implemented by
Congress and the Administration would help EPA and other federal agencies
develop a unified approach to environmental protection.
• Water and Wastewater Infrastructure: Many drinking water and wastewater
treatment systems are reaching the end of their life cycles, and huge capital
investments are needed to replace, repair, and construct facilities so that
municipalities can meet human health and environmental standards. EPA, States,
and municipalities have struggled to update these systems over the years because
they have not supplied sufficient funds to do so. A comprehensive approach to
bridging the water and wastewater infrastructure gap would systematically assess
the investment requirements; alert the public and Congress of unfunded liabilities
and risks; and better enable EPA, States, and local governments to work together
to organize resources to meet needs.
• Oversight of Delegations to States: EPA's oversight of State programs requires
improvement. EPA has made progress in this area, but there are a number of
factors and practices that reduce the effectiveness of Agency oversight. Key
among these are limitations on the availability, quality, and robustness of
program implementation and effectiveness data, and limited Agency resources to
independently obtain such data. Differences between State and federal policies,
interpretations, and priorities make effective oversight a challenge.
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
• Safe Reuse of Contaminated Sites: In the last decade, EPA has placed
increasing emphasis on the reuse of contaminated or once-contaminated
properties. However, EPA faces a number of challenges to ensure that reused
contaminated sites are safe for humans and the environment, including the
common practice of not removing all sources of contamination from hazardous
sites; a regulatory structure that places key responsibilities for monitoring and
enforcing the long-term safety of contaminated sites on non-EPA parties;
changes in site risks as site conditions change over time; and weaknesses in
EPA's oversight of the long-term safety of sites. EPA has made improvements
and efforts at addressing these challenges and must continue to do so.
• Capability to Secure Agency Network Resources and Respond to Cyber
Attacks: The unknown origins of many cyber attacks and the complex ways they
compromise data networks make EPA's collaboration with the U.S. Computer
Emergency Readiness Team crucial to the security of EPA's network. EPA relies
heavily on the team to identify external threats, develop technical solutions, and
coordinate government-wide responses to cyber attacks because the Agency lacks
the funds, forensic tools, and technical expertise needed to do so internally. EPA
must ensure it has a comprehensive information security management structure in
place to defend against cyber attacks from entities intent on obtaining sensitive
data that could be used against the U.S. government or economy.
• Reducing Domestic Greenhouse Gas Emissions: EPA has faced a number of
challenges since the Supreme Court ruled that greenhouse gases are air pollutants
under the Clean Air Act and required that EPA determine whether it should
regulate such emissions for new motor vehicles. EPA is addressing domestic
greenhouse gas emissions through three avenues: (1) regulations, (2) voluntary
programs, and (3) research and development. Each presents the Agency with
challenges that are, to some extent, beyond its direct control. EPA faces political
and private opposition to its regulatory actions, and the Agency is relying on
voluntary programs to reduce greenhouse emissions, some of which are based on
limited, unverified, and anonymous data. Also, EPA is relying on two multi-
Agency research and development programs to accelerate development of new
and advanced technologies but has limited control over this research.
• EPA's Framework for Assessing and Managing Chemical Risks: EPA's
framework for assessing and managing chemical risks has not yet achieved the
goal of protecting human health and the environment, and is hampered by
limitations on the Agency's authority to regulate chemicals under the Toxic
Substances Control Act. The Act lacks enforcement provisions and the
administrative authority to seek injunctive relief, issue administrative orders,
collect samples, and quarantine and release chemical stocks. EPA must better
manage existing authorities until the Act's reform occurs.
10
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
OIG Recovery Act Efforts
The American Recovery and Reinvestment Act of 2009, signed by President Obama on
February 17, 2009, provides the EPA OIG $20 million for oversight activities through
September 30, 2012. The OIG is conducting audits, investigations, and other reviews to
ensure economy and efficiency and to prevent and detect
fraud, waste, and abuse in EPA's disbursement of the
$7.2 billion it received under the Act. Reports on our
findings are posted on our Website and at
http://www.recovery.gov as published. An assessment
of EPA progress after one year based on our work is at
http://www.epa.gov/oig/reports/2010/ARRA One-
Year Overview Report-March 20 10 .pdf. The OIG
reviews, as appropriate, concerns raised by the public
about specific investments using funds made available by
the Recovery Act. Individuals may report any suspicion of fraud, waste, or abuse of EPA
stimulus funds via the OIG Hotline. Any findings of such reviews not related to ongoing
criminal proceedings will also be posted on our Website. Details on our efforts to date
follow.
OIG Conducts Outreach to Deter Fraud, Improve Efficiency
Deterring Fraud, Waste
& Abuse of EPA Funds
EPA Office of Inspector General
Off ice ot Audit
Forensic Audit Division
Brochure prepared by
OIG Forensic Audits
Division. (EPA OIG)
The OIG has undertaken extensive outreach efforts to better enable
EPA and Recovery Act grant and contract recipients to manage
funding and avoid fraud, waste, and abuse.
During the semiannual report period, the OIG's Forensic Audits Division
published a brochure, Deterring Fraud, Waste & Abuse of EPA Funds. The
brochure, which describes what we look for concerning fraud, waste, and
abuse, can be viewed and downloaded at
http://www.epa.gov/oig/reports/2010/OIG_forensics_brochure .pdf
As EPA prepared to award Recovery Act funds, the OIG took a number of
actions to alert Agency managers of risks and to recommend cost-effective
controls. The OIG participated in Agency workgroups and committees and
commented on the Agency's Recovery Act Risk Mitigation Strategy
(Stewardship Plan) to assist it in developing strategies and establishing
controls to implement the Recovery Act. Also, the OIG is using EPA
financial systems to monitor EPA awards and recipient draws. OIG staff met
with senior EPA grant and contract officials to discuss the OIG's ongoing
work and risks observed related to Recovery Act programs.
11
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
The OIG's Office of Investigations has implemented a three-pronged approach -
education, outreach, and investigations - to spread the word about the requirements of the
Recovery Act and to deter and detect fraud schemes. A key goal is to educate
stakeholders and provide resources to help them use funds appropriately. The office has
provided Recovery Act-specific fraud training and presentations to Agency personnel;
State, tribal, and local officials; contractors; and grant recipients. As of March 31, 2010,
the office had provided 100 briefings across the country to over 3,390 personnel who are
administering or receiving Recovery Act funding. The office has developed new and
extensive liaison relationships with State Revolving Fund coordinators; tribal water
coordinators; State inspector general offices; and contractor, grant recipient, and
engineering personnel.
In addition, the Office of Investigations developed fraud awareness and education
materials, including pamphlets, postings, briefings, and Webinar broadcasts. We have
provided these materials to Agency personnel, State and tribal administrators,
contractors, and grant recipients. We have distributed over 6,000 pamphlets, posters, and
Hotline cards to stakeholders throughout the country. Brochures and information on
training opportunities are available at http://www.epa.gov/oig/recovery_trng.htm.
Several western States have expressed concern that smaller Recovery Act fund recipients
that had never received federal funds before could be taken advantage of by unscrupulous
contractors and engineers. Further, these recipients may not know all the federal
requirements. Many States have either made it a requirement or strongly encouraged any
recipient of Recovery Act funds to attend our fraud presentation, and the OIG has already
made approximately 22 such presentations. The handout for our "American Recovery and
Reinvestment Act Fraud Prevention" presentation can be accessed at
http://www.epa.gov/oig/ARRA/IG Community ARRA Handout.pdf
When criminal acts related to Recovery Act funds are reported, the EPA OIG will
investigate. To date, we have opened 14 criminal investigations involving Recovery Act-
related issues. We will also proactively initiate investigations.
Site Inspections of Recovery Act Projects Did Not Note Problems
As part of the OIG's efforts to ensure that EPA is spending its Recovery Act
funds in accordance with requirements, we are conducting a number of site
inspections. For two site inspections completed, nothing came to our attention
that would require action from the fund recipients or EPA.
The Village of Buckeye Lake, Ohio, received a $6,615,297 Drinking Water State
Revolving Fund loan to upgrade its water distribution system, including $5,000,000 in
12
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Recovery Act funds for principal forgiveness. As part of our inspection, we toured the
project, interviewed village representatives and contractor personnel, and reviewed
documentation related to Recovery Act requirements. No problems came to our
attention. (Report No. 10-R-0079, American Recovery and Reinvestment Act Site
Inspection of the Water Distribution System, Village of Buckeye Lake, Ohio,
March 10, 2010-ReportCost: $44,572)
The City of Manchester, New Hampshire, acting by and through Manchester Water
Works, received a $2,536,087 loan from the New Hampshire Department of
Environmental Services under the Drinking Water State Revolving Fund program. The
loan included up to $1,268,043 in Recovery Act funds for principal forgiveness. The
purpose of the loan is to extend and install water main pipes in the Lynchville Park and
Danis Park areas of Goffstown, New Hampshire. As
part of our inspection, we toured the Lynchville Park and
Danis Park water main extension project; conducted
interviews of city, contractor, and subcontractor
personnel; and reviewed documentation related to
Recovery Act requirements. No problems came to our
attention. (Report No. 10-R-0080, American Recovery
and Reinvestment Act Site Inspection of Water Main
Extension Project, Manchester Water Works,
Manchester, New Hampshire, March 17, 2010 -
Report Cost: $61,185)
Pipes for water main extension project, Goffstown,
New Hampshire. (EPA OIG photo)
EPA Maximized Competition for Clean Diesel Program Grants
EPA promoted competition for Recovery Act grants to the maximum extent
possible for the National Clean Diesel Funding Assistance Program.
EPA achieved three important goals in promoting competition for Recovery Act grants
under the National Clean Diesel Funding Assistance Program: (1) competition was fair
and impartial, (2) all applicants were evaluated only on criteria established in the
announcement, and (3) EPA made an effort to mitigate the risk of any applicant receiving
an unfair competitive advantage. In 2009, EPA received significantly more applicants
and proposals for grant awards than in 2008. We noted a potential best practice when
EPA issued a national Request for Applications and universal guidance for reviewers and
selection officials; this practice should be considered for other grant programs.
(Report No. 10-R-0082, EPA Maximized Competition for Recovery Act Grants under the
National Clean Diesel Funding Assistance Program, March 23, 2010 - Report Cost:
$204,872)
13
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
EPA Should Provide Definitive Guidance for Green Reserve Projects
EPA has not provided States with clear and comprehensive guidance on how to
determine the eligibility of green reserve projects. EPA cannot provide a
reasonable assurance that such projects will meet the objectives of Congress.
Clean Water and Drinking Water State Revolving Funds provide low-interest loans to
protect water quality and public health. The Recovery Act provided $6 billion in these
funds to States and required that at least 20 percent of this funding support green projects
(water or energy efficiency, green infrastructure, or environmentally innovative
activities).
Although EPA had been promoting a green approach for at least a year prior to the
enactment of the Recovery Act, it did not develop and issue timely, clear, and
comprehensive guidance for green reserve projects to meet many of
the States' needs. For example, EPA did not provide guidance on
how to solicit and select green projects until after many States had
finished doing so; some States then felt they should resolicit for
green projects while others did not.
EPA's guidance and subsequent updates have not addressed
important aspects of project selection. At the time of this review,
EPA had not established water- and energy-efficiency threshold
ranges for many types of green projects, or provided sufficient
information to States on developing business case justifications.
Moreover, changes in EPA's guidance resulted in EPA regions
applying different standards when approving States' proposals.
Vegetated curb extensions used in
Portland, Oregon, to decrease
sto rmwate r ru n off. (E PA p h oto)
We recommended that EPA develop and revise green reserve guidance for States and
review States' submitted green reserve projects and accompanying business cases. The
Agency did not formally agree or disagree with our recommendations.
(Report No. 10-R-0057, EPA Needs Definitive Guidance for Recovery Act and Future
Green Reserve Projects, February 1, 2010 - Report Cost: $329,423)
14
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
EPA Faced Challenge in Meeting Drinking Water Fund Deadline
Facing a myriad of challenges, EPA and the States used various approaches to
mitigate the risk of Drinking Water State Revolving Fund projects not meeting the
Recovery Act deadline of February 17, 2010, for having projects under contract
or construction.
The Recovery Act provided $2 billion for the Drinking Water State Revolving Fund and
required projects to be under contract or construction as of February 17, 2010, to avoid
reallocation of funds. As of November 1, 2009, 257 projects, totaling $323.9 million,
were under contract. We had made three observations about improvements to EPA
processes for ensuring that States met the deadline:
• EPA was unaware of projects not under construction nationwide.
• EPA did not establish procedures to assist States with projects not under contract.
• EPA's Recovery Act Risk Mitigation Plan (Stewardship Plan) did not contain
specific actions to identify States at risk of not meeting the deadline.
EPA would have had to reallocate funding for projects not under contract by February 17,
2010; such a reallocation would cause a delay that could negatively affect job creation
and economic recovery.
We recommended in a briefing report that EPA identify and monitor projects not under
contract, establish a contingency action plan, and complete its written procedures for
reallocating funds not under contract. EPA implemented actions that met the intent of
those recommendations by increasing its participation in State efforts to establish
contracts for Recovery Act-funded projects by February 17, 2010, and finalizing
procedures for reallocation. We also recommended that EPA specify the actions it will
take in its Stewardship Plan. EPA did not implement this recommendation because it
believed the States would make sufficient progress.
In testimony before the House Committee on Transportation and Infrastructure on
February 23, 2010, EPA's Senior Accountable Official for the Recovery Act stated that
all State Revolving Funds awarded to States were under contract or construction by the
deadline, and no funds would need to be reallocated.
(Report No. 10-R-0049, EPA Action Needed to Ensure Drinking Water State Revolving
Fund Projects Meet the American Recovery and Reinvestment Act Deadline of
February 17, 2010, December 17, 2009 - Report Cost: $424,756)
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Agency Internal Control Design Found to Be Sufficient
Although we did not test implementation of EPA's procedures for reviewing
quarterly Recovery Act data, we believe the Agency sufficiently designed its
internal controls to detect material omissions and significant reporting errors.
We conducted this review as part of a government-wide effort to review federal agencies'
processes for reviewing Recovery Act data submitted by recipients of federal funds. We
reviewed EPA's policies and procedures for reviewing quarterly Recovery Act data and
met with the Agency's Recovery Act officials responsible for implementing these
policies and procedures throughout the Agency. We forwarded our results to the
Recovery Accountability and Transparency Board for consolidation in the overall
government report sent to Congress.
(Report No. 10-R-0020, EPA Recovery Act Recipient Reporting and Data Review
Process, October 29, 2009)
Additional OIG Audits and Evaluations Underway
The OIG has initiated the following audits and evaluations to determine whether
EPA and funding recipients manage projects effectively and meet Recovery Act
objectives.
• EPA's Assessment of Past Performance and Determination of Responsibility for
Contractors Awarded Recovery Act Funds
• EPA's Recovery Act Targeting Criteria
• Recovery Act Diesel Emission Retrofit Program
• EPA's Use of Interagency Agreements for Recovery Act Activities
• EPA's Resource Allocation for Recovery Act Contract and Assistance
Agreement Oversight
• EPA and State Oversight of Recovery Act Clean Water State Revolving Fund
Projects
• Implementation of Recovery Act Stewardship Plan for Superfund Remedial
Program Contracts
• Financial Reporting for the Recovery Act
• Oversight of Leaking Underground Storage Tank Program
• EPA Data Quality Review Processes
16
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Other Significant OIG Activity
Water
Helping to ensure that drinking water is safe and waterbodies are protectei
Fill from surface mining operations
may be discharged into surface waters
or wetlands. (EPA photo)
EPA Needs a Framework to Identify Clean Water Act Violations
Without an effective strategy, EPA cannot be assured that it is sufficiently
protecting wetlands and other surface waters from improper dredged or fill
activity.
Section 404 of the Clean Water Act regulates the discharge of dredged or fill material
into wetlands and surface waters. Based on a 1989 memorandum of agreement, EPA has
the lead enforcement role for flagrant or repeat violations involving cases where the
violator has not applied for a valid Clean Water Act Section 404
permit from the U.S. Army Corps of Engineers.
EPA lacks a systematic framework to identify Section 404
violations. EPA has a limited field presence and relies on
complaints and referrals from external sources. The national data
system is incomplete and coordination with federal and State
partners is sporadic. As a result, EPA cannot be sure it is
adequately protecting wetlands and does not have the necessary
inputs to make informed decisions about the allocation of
resources to Section 404 enforcement.
Based on our recommendations, EPA agreed to develop and implement a comprehensive
Section 404 enforcement strategy to address issues such as communication with
enforcement partners and a system to track violations. EPA did not agree that the 1989
memorandum of agreement should be revised, stating that its planned enforcement
strategy would address how it collaborates with the U.S. Army Corps of Engineers and
processes referrals. Both recommendations are undecided.
(Report No. 10-P-0009, EPA Needs a Better Strategy to Identify Violations of Section 404
of the Clean Water Act, October 26, 2009 - Report Cost: $998,055)
For details on additional water issues, refer to:
• Page 14, "EPA Should Provide Definitive Guidance for Green Reserve Projects."
• Page 15, "EPA Faced Challenge in Meeting Drinking Water Fund Deadline."
• Page 33, "Reviews of Special Appropriation Act Project Grants Note Potential Savings."
• Page 34, "EPA Should Recover Questioned Costs Claimed by Walker Lake Working Group."
• Page 44, "Civil Settlement Reached Related to Invoice Submissions."
• Page 44, "Production Manager Sentenced for Filing False Report."
• Page 45, "Company Ordered to Pay $200,000 Fine for Water Discharge Violations."
17
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Superfund/Land
Improving waste management and clean-u.
Indoor Air
SoilOas
Soil
Contamination
Lack of Final EPA Guidance on Vapor Intrusion Impedes Efforts to
Address Indoor Air Risks
EPA's efforts to protect human health at sites where vapor intrusion risks may
occur have been impeded by the lack of final Agency guidance.
Vapor intrusion is the migration of volatile chemicals from the subsurface into overlying
buildings. EPA has acknowledged that current and former contaminated sites could have
extensive vapor intrusion issues and pose a significant risk to the public. EPA issued
draft guidance in 2002. EPA's draft guidance has limited purpose and scope, contains
outdated toxicity values, does not address mitigating vapor intrusion risks or monitoring
the effectiveness of mitigation efforts, does not clearly recommend a multiple-lines-of-
evidence approach in
evaluating and making
decisions about vapor
intrusion risks, and is not
recommended for assessing
vapor intrusion risks
associated with
underground storage tanks.
Chemical Vapor Migration
EPA has not finalized its
2002 draft guidance
because 2007 guidance
from the Interstate
Technology Regulatory
Council addressed many of the issues that EPA's finalized guidance would have
addressed. In addition, the Agency said that issuing final guidance is problematic
because the associated science and technology is evolving and lengthy administrative
review requirements were a barrier to timely guidance. Some of these administrative
requirements have been rescinded. The Agency is developing a roadmap of technical
documents to update its draft guidance.
We recommended that EPA issue final guidance to establish current Agency policy on
the evaluation and mitigation of vapor intrusion risks, and finalize toxicity values for
trichloroethylene and perchloroethylene. The Agency agreed and provided milestones.
(Report No. 10-P-0042, Lack of Final Guidance on Vapor Intrusion Impedes Efforts to
Address Indoor Air Risks, December 14, 2009 - Report Cost: $454,233)
I I I I I M If
Gnoundwater
Contaminatron
Vapor intrusion migration. (EPA illustration)
18
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Increased Oversight Needed at Wildcat Superfund Site in Delaware
Our inspection of the Wildcat Landfill Superfund Site near Dover, Delaware,
found that more sampling and EPA oversight are needed to ensure the site
remains safe for humans and the environment.
Wildcat Landfill was added to the Superfund National Priorities List in 1983 and deleted
from the list in 2003. The site was contaminated by disposal of paint sludge and
municipal, industrial, and latex waste. In 2005, the site was sold to Kent County,
Delaware, which plans to reuse the site for public recreation purposes.
Our independent sampling results were generally consistent with Region 3's historical
results. However, surface waters at the site have a sheen that resembles petroleum.
The clean-up remedy does not address petroleum
contamination. Region 3 had not tested for petroleum but
agreed to do so in September 2009. In December 2009,
the Region reported that it had detected petroleum at
levels below public health standards and it will continue to
monitor the site's petroleum levels.
The remediated Wildcat Superfund Landfill Site.
(EPA OIG photo)
The site has not been cleaned up to standards that allow
for unrestricted public access. However, Kent County
plans to create a greenway and construct a bike path on
the landfill. Also, a local small business owner who
purchased an acre of the site has inquired about building a
storage facility. The Region is aware of the County's plans and agreed to formally
document discussions with the site owner and review reuse plans.
We recommended that Region 3 modify its sampling and analysis approach to ensure
proper testing, address contamination that exceeds standards, and improve oversight of
site reuse plans. Region 3 agreed with our recommendations and has initiated or
completed some actions.
(Report No. 10-P-0055, Changes in Conditions at Wildcat Landfill Superfund Site in
Delaware Call for Increased EPA Oversight, January 26, 2010 - Report cost, including
contractor costs: $285,382)
For details on additional Superfund/land issues, refer to:
• Page 25, "EPA Not Sufficiently Notified by Response Center about Leaking Well."
• Page 30, "EPA Can Better Prepare and Use Independent Government Cost Estimates
for Superfund Contracts."
• Page 36, "EPA Should Continue Reducing Federal Advances and Special Accounts."
• Page 43, "Sentencings Continue in Bid Rigging Case at New Jersey Superfund Site."
• Page 45, "No Evidence of Criminal Activity Found in EPA Coal Ash Rulemaking."
19
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Enforcement
Helping to improve compliance with environmental requirements
High Priority Violations of Clean Air Act Not Addressed in a Timely
Manner
High priority violations of the Clean Air Act were not addressed in a timely
manner. About 30 percent of State-led high priority violations and 46 percent of
EPA-led high priority violations were unaddressed after 270 days, which can
result in significant environmental and public health impacts.
In 1998, EPA revised a 1992 policy to prioritize violations of the Clean Air Act by
stationary sources. Despite this policy revision, we found that high priority violations are
not being addressed in a timely manner. Although EPA had noted some of these
deficiencies, it has not developed a plan to correct them. Regions did not:
• Ensure that sources receive notices of violation within 60 days.
• Hold meetings with States to discuss a strategy for high priority violations
unaddressed for 150 days.
• Take over delinquent State high priority violation cases when appropriate.
• Ensure that States entered accurate data into the Air Facility System database.
Also, EPA Headquarters did not use the watch list and trend reports to assess
performance of regions and States in addressing high priority violations, and several
States addressed high priority violations with informal rather than formal enforcement
actions.
We recommended that EPA direct regions to comply with the 1998 high priority
violation policy, revise this policy as needed, and implement proper controls over high
priority violations. EPA did not agree to revise the 1998 policy because it intends to
review it before committing to a revision. EPA concurred with our other
recommendations but did not provide sufficient detail on planned actions.
(Report No. 10-P-0007, EPA Oversight and Policy for High Priority Violations of
Clean Air Act Need Improvement, October 14, 2009 - Report Cost: $673,050)
20
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Cross-Media
Evaluating nontraditional approaches to protecting the
environment and challenges that cut across programs
ENERGY STAR Label Does Not Guarantee Superior Energy
Efficiency
Without an enhanced testing program, including the testing of non-ENERGY
STAR products, EPA cannot be certain that ENERGY STAR products are the
most energy-efficient and cost-effective choice for consumers.
EPA established the ENERGY STAR Labeling Program as an innovative approach to
environmental protection. More than 40,000 individual product models are ENERGY
STAR qualified. In 2007, EPA reported that ENERGY STAR
helped Americans save 180 billion kilowatt hours and
prevented the emission of 40 million metric tons of carbon
equivalents of greenhouse gases.
Almost all of the ENERGY STAR products in our test sample
met and in most cases exceeded the program's performance
standards. However, selected non-ENERGY STAR products
performed comparably to and in some cases better than
ENERGY STAR products. This level of performance affects
the ENERGY STAR label's image as a trusted national symbol
for determining superior energy efficiency. Our testing results
called into question the assumptions used to calculate energy
savings and greenhouse gas reductions attributed to the
ENERGY STAR program.
A monitor - an ENERGY STAR product
category. (EPA photo)
We recommended that EPA verify estimated energy savings and greenhouse gas
reduction calculations using a market-based performance testing program that includes
testing non-ENERGY STAR products, and that EPA revise the ENERGY STAR Website
to include the established standard alongside qualifying product performance data and to
provide a summary listing of the highest performers. Although the Agency disagreed
with our conclusions, it concurred with our recommendations.
(Report No. 10-P-0040, ENERGY STAR Program Integrity Can Be Enhanced Through
Expanded Product Testing, November 30, 2009 - Report Cost: $489,338)
21
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
EPA's Approach to Toxic Substances Control Act Uncoordinated
EPA does not have integrated procedures and measures in place to ensure that
new chemicals entering commerce do not pose an unreasonable risk to human
health and the environment.
EPA is responsible for ensuring that new chemicals entering commerce do not pose
unreasonable risk to human health and the environment. EPA's New Chemicals Program
had limitations in three processes intended to identify and mitigate new risks -
assessment, oversight, and transparency. Factors contributing to EPA's uncoordinated
approach include:
• An absence of test data and a reliance on modeling.
• Emphasis and resources that are not commensurate with the scope of monitoring
and oversight work.
• Procedures for handling confidential business information requests that are
predisposed to protect industry information rather than to provide public access
to health and safety studies.
• Performance measures for managing risks from new chemicals that do not
accurately reflect program performance in preventing risk and do not ensure
compliance.
We recommended that EPA establish a management plan with new goals and measures to
demonstrate the results of EPA actions. We also recommended that EPA establish
criteria for selecting chemicals or classes of chemicals for low-level exposure and
cumulative risk assessments, and develop confidential business information classification
criteria to improve EPA's transparency and information sharing. Further, we
recommended that EPA develop a management plan that includes training, consistent
enforcement strategies across regions for monitoring and inspection protocols, and a list
of manufacturers and importers of chemicals for strategic targeting. The Agency agreed
with our recommendations.
(Report No. 10-P-0066, EPA Needs a Coordinated Plan to Oversee Its Toxic Substances
Control Act Responsibilities, February 17, 2010 - Report Cost: $786,181)
22
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
EPA Must Ensure Pesticide Manufacturers Comply with Export
Notification Requirements
Because EPA does not evaluate the safety of unregistered pesticides intended
solely for export, the extent of dietary risk from these never-registered pesticides
on imported foods is unknown.
Pesticides not registered for use in the United States may be manufactured domestically
and exported. EPA is responsible for implementing Section 17(a) of the Federal
Insecticide, Fungicide, and Rodenticide Act, which requires that the foreign purchaser of
an unregistered pesticide sign a foreign
purchaser acknowledgement statement
acknowledging that the pesticide is not
registered and cannot be sold for use in
the United States.
Section 17(a) also requires EPA to
forward copies of all foreign purchaser
acknowledgement statements received
to the appropriate government officials
of the importing countries. However,
EPA is not complying with the
requirements of Section 17(a).
Importing country governments are not
consistently notified by EPA that they
are importing a potentially hazardous
pesticide. Further, export data on
unregistered pesticides are insufficient
for tracking and analysis. Also, because
EPA does not evaluate the safety of unregistered pesticides intended for export, it cannot
provide the Food and Drug Administration and the U.S. Department of Agriculture with
information to monitor and detect residues of these pesticides on imported foods.
The Agency responded that it did not find any basis for changing its procedures after
reviewing the foreign purchaser acknowledgement statements highlighted in our report.
However, subsequently, the Agency provided a corrective action plan that meets the
intent of the OIG's recommendations to comply with its statutory mandates and
implement management controls. We concurred with the proposed corrective action plan
and appreciated the constructive approach to the issues raised in the report.
(Report No. 10-P-0026, EPA Needs to Comply with the Federal Insecticide, Fungicide,
and Rodenticide Act and Improve Its Oversight of Exported Never-Registered Pesticides,
November 10, 2009 - Report Cost: $736,223)
Foreign purchaser acknowledgement statements received by EPA
from importing countries in 2007. (EPA OIG graphic)
23
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
EPA Has Limited Assurance It Can Maintain Continuity of Operations
EPA has limited assurance that it can successfully maintain continuity of
operations and execute mission-essential functions during a significant national
event such as a pandemic influenza outbreak.
Federal Continuity Directive 1 requires EPA to develop a
continuity plan that ensures its ability to accomplish its
mission-essential functions from an alternative site with
limited staffing and without access to resources available
during normal activities.
EPA's continuity of operations policy does not clearly define
authorities and responsibilities for continuity planning at all
levels of the Agency and has not been updated to reflect
current national directives and guidance. EPA lacks internal
management controls, including guidance and systematic
oversight, to ensure that regional offices have developed
required continuity plans. Regions' plans are generally
inconsistent, and there was no evidence that EPA
Headquarters reviewed, approved, or commented on the
regions' plans.
A diagnostic test to detect novel influenza
virus. (Centers for Disease Control and
Prevention photo)
EPA's continuity training and exercises have not prepared the Agency to provide
essential services during a significant national event. Also, the exercises do not test
EPA's ability to execute mission-essential functions following continuity of operations
activation. Four of the six regions contacted and all but one program office have not
conducted internal exercises to test capabilities.
We recommended that EPA establish a schedule to complete requirements, designate a
lead office for continuity of operations planning, and identify Headquarters and regional
responsibilities and authorities. EPA should also develop consistent mission-essential
functions, and review and approve all regional and program office continuity of
operations plans. The Agency concurred with our recommendations.
(Report No. 10-P-0017, EPA Needs to Improve Continuity of Operations Planning,
October 27, 2009 - Report Cost: $519,022)
24
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Special Reviews!
Reviewing issues of fraud, waste, and misuse in EPA programs
EPA Travel Program Needs Improved Controls
The EPA travel program lacks necessary control procedures to assure all travel
authorizations were necessary and in the best interest of the government.
GovTrip is the single EPA travel management system for scheduling, approving, and
auditing travel authorizations and payments. The General Services Administration is the
federal manager for GovTrip and EPA's Office of the Chief Financial Officer manages
GovTrip for the Agency.
Our preliminary review of 949 travel documents extracted from the Financial Data
Warehouse covering the period September 2008 to April 2009 disclosed 199 incidents
where travel appeared to be self-approved by persons not authorized to do so. EPA's
travel policy states that self-approved travel is not permitted below the level of Office
Directors, Laboratory Directors, and their equivalents (presumably Senior Executive
Service and Excepted Service personnel). Poor internal controls also allow personnel to
change the routing chain for travel approval without notifying their supervisor of record.
Personnel can request the Agency's GovTrip helpdesk to change the routing or can make
the change electronically through the GovTrip system.
This interim report was for information purposes only and did not provide any final
conclusions or recommendations by the OIG. We plan to review the 199 travel records
further for potential violations of the Agency's travel policy, and we also intend to assess
the reliability of the GovTrip data in the Financial Data Warehouse.
(Report No. 10-P-0078, EPA Travel Program Lacks Necessary Controls, March 9,
2010 - Report Cost: $548,603)
EPA Not Sufficiently Notified by Response Center about Leaking Well
We found that the National Response Center did not provide EPA with calls or
voicemail messages from a North Carolina constituent regarding a leaking well.
When the Agency was informed of the leak, EPA's On-Scene Coordinator
contacted the constituent and arranged for permanent repairs to the well, which
were completed April 28, 2009.
A U.S. Representative requested that we investigate the events surrounding a response to
an April 25, 2009, telephone report of a leaking well in Skyland, North Carolina. The
National Response Center, operated by the U.S. Coast Guard, U.S. Department of
25
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Homeland Security, is the sole national point of contact for reporting such discharges.
During nonbusiness hours, the EPA emergency hotline is programmed to forward all
incoming calls to the National Response Center.
We found that the National Response Center received voicemails about the leaking well
from two other callers on April 25, 2009, but did not provide any response to the
voicemails. The center's Operations Officer told us the center did not listen to the
voicemails until September 2009. When the voicemails were discovered, center staff
took no actions to inform EPA of the calls.
Prior to April 25, 2009, we determined that 12 voicemails were left with the National
Response Center dating back to 2006. We found inconsistencies in the statements of the
National Response Center and its telephone contractors regarding who was aware of
voicemail problems and when.
We presented our findings to the U.S. Department of Homeland Security Office of
Inspector General so it may determine corrective actions taken and still needed.
(Report No. 10-P-0027, Congressionally Requested Inquiry into EPA 's Response to a
Report of a Leaking Well in North Carolina and the National Response Center Hotline,
November 10, 2009 - Report Cost: $120,684)
Unauthorized Work-at-Home Arrangement Noted Based on Hotline
Review
In response to a Hotline complaint, we found an unauthorized full-time work-at-
home arrangement that has existed for 9 years and allows an EPA National
Enforcement Training Institute employee to work from home in Ohio instead of at
an office in Washington, DC.
The employee and position were originally located in the Washington, DC, area but the
employee moved as a result of a spouse transfer. In our opinion, the institute's actions
were for the benefit of a single employee rather than the interests of the government, and
were not equitably provided to others within the institute. EPA has no established or
consistent policy, procedure, or criteria for granting full-time work-at-home privilege.
Neither the institute nor EPA's Office of Administration and Resources Management has
any written documentation showing the government interest in or appropriateness of
making this arrangement, or that senior Office of Administration and Resources
Management officials approved this action. EPA Headquarters officials said they were
aware of similar arrangements in research performed for an unrelated court case and they
believe these arrangements must be brought under control.
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
We recommended that responsibility for authorizing duty station changes be assigned to
the Assistant Administrator for Administration and Resources Management. We further
recommended that EPA establish and implement Agency policy that clearly articulates
the process and procedures for changing an employee's duty station, and bring into
compliance with the new policy all existing full-time employees at a duty station separate
from the position of record. The Agency generally agreed with these recommendations.
(Report No. 10-P-0002, Review of Hotline Complaint on Employee Granted Full-Time
Work-at-Home Privilege, October 7, 2009 - Report Cost: $161,118)
27
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Grants
Improving EPA's use of assistance agreements
Costs Questioned for National Tribal Environmental Council Grants
We found unsupported costs of $2,768,490 and ineligible costs of $33,732 for
grants awarded to the National Tribal Environmental Council, Inc., leading us to
question a total of $2,802,222 of the recipient's reported costs of $3,586,445.
EPA awarded three grants to the council - one to facilitate the participation of Western
Indian Tribes in the Western Regional Air Partnership and two for the continued support
of the National Tribal Air Association. The council is headquartered in Albuquerque,
New Mexico.
The council's work plans do not describe the council's goals or objectives for its
participation in the Western Regional Air Partnership and National Tribal Air
Association. Thus, annual reports did not include a comparison of accomplishments with
the objectives for the period as required. As a result, EPA cannot determine whether the
funds EPA provided to the council achieved their intended purpose.
We recommended that EPA require the council to adequately support the $2,768,490
questioned as unsupported, disallow and recover any costs the recipient cannot support,
and recover the $33,732 of ineligible costs. We also recommended that EPA work with
the council to develop work plans and performance reports. The Agency agreed with our
recommendations.
Total Reported Outlays and Questioned Costs
Assistance
Agreement
XA 9791 3701
XA 832001 01
XA 83376601
~H Total ^|
Total Reported
Outlays
$2,416,877
1,058,370
111,198
$3,586,445
Outlays
Questioned as
Ineligible
$0
33,732
0
~H $33,732 H~
Outlays
Questioned as
Unsupported
$2,012,300
664,956
91,234
$2,768,490
Sources: Reported outlays from the recipient's Financial Status Reports and report of
expenditures. Amounts questioned based on OIG analysis.
(Report No. 10-4-0067, Incurred Cost Audit of Three EPA Cooperative Agreements
Awarded to National Tribal Environmental Council, Inc., February 17, 2010 - Report
Cost: $353,113)
28
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Procedures Needed to Address Delayed Earmark Projects
Some Special Appropriation Act Project earmarked grant funds were still
unobligated 5 years after Congress appropriated them, and EPA has no
procedures for addressing such occurrences.
A congressional earmark is part of an appropriation designated by Congress to be spent
on a particular project. Congress appropriates Special Appropriation Act Project grant
funds in the form of earmarks for water infrastructure projects. EPA established the goal
of completing such projects within 5 years of grant award.
Delays frequently occurred because earmark recipients either could not obtain the
matching funds required to obtain the grants or the projects were complex and required
extensive planning. As of April 2009, there were 84 earmarks that Congress appropriated
before FY 2004 totaling over $28 million that still had unobligated funds. Additionally,
as of April 2009, there were 119 grants that EPA awarded prior to FY 2004 that had total
funds remaining of over $122 million. In many cases, funds were not completely spent
because the recipient had to make changes to the work plan, or because State and local
regulations caused delays.
We recommended that EPA establish a national policy that creates a response framework
for dealing with unobligated earmarks. The framework should include criteria for when
to escalate the handling of unobligated earmarks. We also recommended that the policy
address actions to be taken when projects are delayed and include an exception reporting
procedure. EPA agreed with our recommendations.
(Report No. 10-P-0081, EPA Needs Procedures to Address Delayed Earmark Projects,
March 22, 2010 - Report Cost: $403,981)
=or details on additional grant issues, refer to:
• Page 13, "EPA Maximized Competition for Clean Diesel Program Grants."
• Page 14, "EPA Should Provide Definitive Guidance for Green Reserve Projects."
29
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Contracts • Improving EPA's use of contracts
EPA Can Better Prepare and Use Independent Government Cost
Estimates for Superfund Contracts
EPA limits its ability to negotiate a fair and reasonable price for Superfund
contracts when it does not have a well-supported independent government cost
estimate.
An independent government cost estimate is a detailed estimate of what a reasonable
person should pay to obtain the best value for a product or service. Such estimates are
compared to the contractor's proposal to help determine price reasonableness.
EPA did not sufficiently document information in its Superfund independent government
cost estimates for 30 of the 42 cases reviewed. Additionally, in 9 of the 42 cases, EPA
did not update the estimates when significant changes occurred. In 8 of the 42 cases,
EPA program staff accepted the contractor's estimate without evaluating why it differed
from the independent government cost estimate. In some cases, EPA did not prepare the
required estimate for actions with a potential value in excess of the Federal Acquisition
Regulation threshold for simplified acquisitions of $100,000.
We recommended that EPA place greater emphasis on independent government cost
estimates through training and tools. EPA should prepare independent government cost
estimates for all contract actions expected to exceed the simplified acquisition threshold
and discontinue the practice of relying only on the contractors' estimates. EPA agreed
with all our recommendations and provided a corrective action plan.
(Report No. 10-P-0065, EPA Can Improve Its Preparation and Use of Independent
Government Cost Estimates for Superfund Contracts, February 16, 2010 - Report Cost:
$449,120)
EPA Lacks Effective System to Ensure Receipt of Adjustment
Vouchers
Because EPA does not have an effective system to ensure that required
adjustment vouchers are received, the Agency allowed contractors to keep
government funds and provided them with interest-free loans in those cases
where the contractor owed EPA money.
The Defense Contract Audit Agency performs audits of final indirect cost rate proposals
that impact EPA contracts. After negotiations with a contractor, EPA establishes a final
30
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
indirect cost rate agreement. After this agreement is established, the contractor is
required to submit adjustment vouchers to EPA within 60 days of the agreement date to
adjust for the difference between billed indirect costs and the indirect costs resulting from
the application of the negotiated indirect costs rates for the period specified.
EPA did not always receive adjustment vouchers from contractors for final negotiated
indirect cost rates. For 17 of the 20 Defense Contract Audit Agency audit reports in our
sample, EPA did not receive an
adjustment voucher within 60 days of
the agreement on at least 1 EPA
contract. The 20 audit reports affected
52 EPA contracts, of which EPA did not
receive adjustment vouchers for 33. The
only 9 vouchers received on time all
involved EPA owing the contractor
money. In some cases, contractors kept
money owed the government for years.
As a result of our review, EPA received
a credit of $4,713 from one contractor
and $263,193 from another.
|25
c
0 2(J
o 15
0)
J2
3
z
Receipt of Adjustment Vouchers
Rece
| |
ived On-Time Received Late Not Received Not Required
Source: OIG analysis of EPA data.
We recommended that EPA track receipt of adjustment vouchers and monies owed EPA
for final negotiated indirect cost rates. We also made recommendations to identify and
address agreements where adjustments have not been made, and to make various process
improvements. EPA agreed with our recommendations or took satisfactory alternate
corrective actions.
(Report No. 10-P-0075, EPA Does Not Always Receive Adjustment Vouchers from
Contractors, March 8, 2010 - Report Cost: $398,166)
Costs Paid for Equipment during Hurricane Responses Not Monitored
EPA did not monitor costs paid against average purchase prices for equipment
used during its responses to Hurricanes Gustav and Ike, which made landfall in
Louisiana and Texas in September 2008 and caused significant damage.
In our sample of 97 equipment items, with usage charges of $4,399, EPA may have paid
$2,048 more than the average purchase price for 22 items. EPA did not require the
contractor to submit average purchase price information as required in the contract. EPA
could have mitigated the risk of excessive charges for equipment rentals by using the
Removal Cost Management System for all emergency response contracts and tracking
equipment rental costs by contract.
31
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
We found that EPA had implemented the corrective actions it agreed to in response to our
2006 report on Hurricane Katrina contracting issues. However, EPA never established a
review board for Hurricanes Gustav and Ike; review boards can help improve future
emergency contracting procedures. Also, EPA did not notify the OIG that several
corrective actions related to our 2006 report were going to be delayed by more than
6 months, which can impact reporting to Congress.
We recommended that EPA review equipment charges for Hurricanes Gustav and Ike for
usage fees that exceeded the average purchase price, negotiate new rates, and amend
contract language. We also recommended that EPA develop a system to identify and
prevent overcharges for emergency response contracts and notify the OIG when
corrective actions are delayed more than 6 months. EPA agreed with our
recommendations or proposed acceptable alternative corrective actions.
(Report No. 10-P-0047, EPA Needs to Improve Cost Controls for Equipment Used during
Emergencies, December 16, 2009 - Report Cost: $395,481)
32
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Forensic Audits
Identifying fraud, waste, and abuse in grants and contracts
Reviews of Special Appropriation Act Project Grants Note
Potential Savings
We reviewed costs claimed under Special Appropriation Act Project grants and
noted instances of ineligible costs claimed.
Since 1992, EPA has awarded over 5,000 Special Appropriation Act Project grants,
totaling over $5 billion, based on congressional earmarks. EPA awarded these grants to
State and local governments and quasi-governmental agencies (such as water improvement
districts) to assist in planning, designing, and constructing wastewater and drinking water
facilities. In FY 2007, we began reviewing selected Special Appropriation Act Project
grants, and completed three reviews during the latest semiannual reporting period; these
reviews noted $2,605,331 that should be repaid to EPA.
• The West Rankin Utility Authority, Flowood, Mississippi, did not meet
procurement and financial management requirements, and we questioned
$1,745,457 in unsupported architectural and engineering costs claimed, of which
the grantee should repay $663,321. The grantee also did not comply with
monitoring requirements. Due to these noncompliances and internal control
weaknesses, the grantee may not have the capability to manage future grant
awards. We recommended that EPA Region 4 require the grantee to provide
needed documentation and return the $663,321 if the documentation cannot be
provided, and designate the grantee as a high-risk grantee if it does not improve
its policies and procedures. (Report No. 10-4-0003, Costs Claimed Under EPA
Grant XP97424901 Awarded to West Rankin Utility Authority, Flowood,
Mississippi, October 13, 2009 - Report Cost: $76,786)
• The City of Flowood, Mississippi, did not perform a cost analysis or negotiate a
fair and reasonable profit as a separate element of the contract price as required, so
we questioned $1,755,157 in unsupported architectural and engineering costs
claimed. The grantee needs
to repay $896,224 of the grant
funds. The grantee also
did not have its own written
procurement procedures and
did not maintain records
sufficient to detail the
procurement of the
architectural and engineering city of Flowood pump station. (EPA OIG photo)
33
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
contract. We recommended that EPA Region 4 require that the grantee provide
needed documentation and return the $896,224 if the documentation cannot be
provided. (Report No. 10-4-0013, Costs Claimed Under EPA Grant XP9468195
Awarded to the City ofFlowood, Mississippi, October 27, 2009 - Report Cost:
$81,847)
• The City of Blackfoot, Idaho, did not meet financial management requirements.
The grantee claimed contract costs of $1,713,009 also claimed under two other
federal grants, supply and labor costs of $24,836 not supported by source
documents, and supply and administration costs of $6,684 not eligible because
they did not comply with cost principles. Based on payments made and the
federal share, EPA should recover $1,045,926 in questioned costs. The grantee
also should be designated as high risk. We recommended that EPA Region 10
collect the $1,045,926 and establish special conditions for all future awards to the
grantee. (Report No. 10-4-0086, Examination of Costs Claimed under EPA
Grant XP 98069201 Awarded to the City of Blackfoot, Idaho, March 29, 2010 -
Report Cost: $108,097)
EPA Should Recover Questioned Costs Claimed by Walker Lake
Working Group
The Walker Lake Working Group did not meet financial management
requirements with respect to contract, travel, and other direct costs, and did not
support its Financial Status Report with accounting system data. We noted
$384,678 in questioned costs.
On September 30, 2004, EPA awarded a grant for the development of a conservation plan
for Walker Lake in Hawthorne, Nevada. The grant specified that EPA will contribute
100 percent of the approved allowable project costs up to the awarded amount of $842,100.
EPA should recover $384,678 in questioned costs under the grant if the grantee is unable
to provide adequate documentation to meet the appropriate federal financial management
and procurement requirements. The grantee claimed contract costs that were not
allowable because analysis and administration requirements were not met, and travel and
other direct costs that were not
Summary of Questioned Costs allowable because
documentation requirements or
Amount Amount
Cost Category Claimed Questioned
cost principles were not met.
Contract Costs $367,415 $364,750
Travel and Other Direct Costs 21,434 19,928
Totals $388,849 $384,678
We also recommended that EPA
require the grantee to improve
Sources: Amounts claimed were from accounting system data the . ,
grantee provided in supporting the Financial Status Report amount. lts procurement process and
Costs questioned were based on OIG's analysis of the data. internal controls, and establish
34
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
procedures to ensure that future financial status reports are properly supported. Further,
we recommended that future payments to the grantee be made on a reimbursement basis,
and that reimbursement requests be reviewed and approved by EPA.
(Report No. 10-2-0054, Examination of Costs Claimed under EPA Grant X96906001
Awarded to Walker Lake Working Group, Hawthorne, Nevada, January 6, 2010-
ReportCost: $82,312)
Equipment Purchase, Segregation of Duties Issues Noted with
Grants
The OIG received a Hotline complaint regarding two assistance agreements
awarded to the Eastern Band of Cherokee Indians, Cherokee, North Carolina.
The total federal share of the two agreements, including amendments, was
$630,851.
We determined that the Eastern Band of Cherokee Indians did not have a conflict of
interest and its Federal Cash Transaction Reports were correct and prepared in
compliance with federal requirements, EPA policies, and grant terms and conditions.
However, we identified significant deficiencies in internal controls concerning equipment
purchases and segregation of duties that required immediate attention.
We noted that some equipment purchase authorizations were dated the same day the
equipment was delivered, the grantee did not always obtain three quotes, and the Asset
Compliance Officer did not always authorize purchases. Regarding segregation of duties,
one employee is authorized to write grant proposals; solicit funding to carry out the
program goals; prepare budgets; oversee the expenditure of funds; and purchase,
maintain, repair, and inventory all equipment.
We recommended that Region 4 require that (1) the grantee comply with its internal
control policies and procedures with respect to equipment purchases, (2) all future
purchases under these grants be properly approved, and (3) the grantee establish internal
controls to ensure the proper segregation of duties for grant award and administration.
(Report No. 10-4-0001, Internal Control Weaknesses under EPA Grant Nos. 1004802070
and BG96483308, Awarded to the Eastern Band of Cherokee Indians, Cherokee, North
Carolina, October 5, 2009 - Report Cost: $38,221)
For details on an additional forensic audit issue, refer to:
• Page 12, "Site Inspections of Recovery Act Projects Do Not Note Problems."
35
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Financial Management
Improving the Agency's financial managemen
Improvement Needed in Recording and Reporting Fines, Penalties
EPA did not consistently record fines and penalty billings in a timely manner and
did not report penalty information with complete accuracy and transparency.
Assessing penalties as part of an enforcement action deters noncompliance. EPA's
Cincinnati Finance Center records and tracks the billing and collection of fines and penalties.
Regional and program office personnel did not forward copies of source documents to the
Cincinnati Finance Center in a timely manner, thus delaying the recording of accounts
receivable. EPA did not record a receivable as required for two disputed stipulated penalties
totaling $2,839,500. EPA generally took appropriate action to collect fines and penalties.
However, EPA did not monitor the collections on a $300,000 receivable as required.
Although EPA tracked the assessment, billing, and collection of fines and penalties, it used
the assessments, and not the collections, as a measure of the enforcement program's impact.
The Agency's data system contained 7 errors totaling $139,242 in the penalty assessment
amounts out of 156 billings reviewed related to 117 assessments.
We recommended that EPA ensure the timely recording of fines and penalty billings,
monitor delinquent debt, ensure greater data system accuracy, develop a policy for recording
stipulated penalties, and disclose fines and penalties collected as well as assessments when
reporting enforcement action results. EPA agreed with all our recommendations.
(Report No. 10-P-0077, EPA Needs to Improve Its Recording and Reporting of Fines and
Penalties, March 9, 2010 - Report Cost: $340,813)
EPA Should Continue Reducing Federal Advances and Special
Accounts
We found that a $1.1 million federal advance to EPA from the U.S. Capitol Police
had remained open because an accounting adjustment had not been completed.
In addition, we found three federal special accounts that included incorrectly
recorded receipts and/or expenditures totaling about $2.5 million.
Federal advance interagency agreements and Superfund federal special accounts occur
between EPA and its federal trading partners. EPA issued Superfund Special Account
Guidance on July 16, 2002. However, that guidance does not address spending federal
versus nonfederal special account funds. Without clear guidance, programs expended
nonfederal funds before federal funds, resulting in amounts advanced by other federal
36
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
agencies remaining outstanding after the project was completed and some special account
receipts and/or expenditures remaining misclassified.
As a result of our audit, in December 2009, EPA recorded a $1.1 million adjustment
related to the U.S. Capitol Police advance. In addition, during our audit, EPA corrected
$2.0 million of the $2.5 million in incorrectly recorded federal special accounts. We
recommended that EPA record the remaining $579,126 in special account funds in the
correct fund, and verify that special account receipts and expenditures are recorded in the
proper fund code. The Agency concurred with our findings and recommendations.
(Report No. 10-P-0093, EPA Should Continue Efforts to Reduce Federal Advances and
Federal Special Accounts, March 31, 2010 - Report Cost: $320,000)
EPA Earns Unqualified Opinion on Financial Statements
We rendered an unqualified opinion on EPA's Consolidated Financial Statements
for FYs 2009 and 2008 (restated), meaning that they were fairly presented and
free of material misstatement. However, we noted three material weaknesses
and eight significant deficiencies in internal controls.
A material weakness is a significant deficiency, or combination of significant deficiencies,
that results in more than a remote likelihood that a material misstatement of the financial
statements will not be prevented or detected. The three material weaknesses noted were:
• EPA understated accounts receivable for FY 2008.
• EPA understated unearned revenue.
• EPA should improve billing costs and reconciling unearned revenue for
Superfund State Contract costs.
Significant deficiencies are deficiencies in internal controls that adversely affect the
entity's ability to report financial data reliably in accordance with generally accepted
accounting principles such that there is more than a remote likelihood that a misstatement
of the entity's financial statements will not be prevented or detected. The eight
significant deficiencies noted were:
• EPA misstated uncollectible debt and other related accounts.
• EPA needs to improve billing and accounting for accounts receivable.
• EPA did not inventory Headquarters property items.
• EPA should improve its financial statement preparation process.
• EPA did not deobligate unneeded funds in a timely manner.
• EPA should improve the management of data system user accounts.
• EPA should improve physical access controls for the Las Vegas Finance Center.
• EPA needs improved planning for Customer Technology Solutions equipment.
37
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
We noted one noncompliance issue involving EPA's need to continue efforts to reconcile
intragovernmental transactions. Our work identified monetary benefits of $3.7 million
related to issues involving State Superfund Contracts, unbilled accounts receivable,
unbilled Superfund oversight costs, and unneeded funds that could be deobligated and put
to better use.
In a memorandum from the Chief Financial Officer dated March 10, 2010, the Agency
recognized the issues raised and indicated it will take corrective actions.
(Report No. 10-1-0029, Audit of EPA 's Fiscal 2009 and 2008 (Restated) Consolidated
Financial Statements, November 16, 2009 - Report Cost: $2,240,000)
Pesticide Funds Earn Unqualified Opinions
We rendered unqualified, or clean, opinions on the FYs 2009 and 2008 financial
statements for two funds EPA uses to collect fees related to pesticides.
The Pesticide Registration Improvement Act authorized EPA to assess and collect pesticide
registration fees to expedite registering certain pesticides; the fees are deposited into the
Pesticide Registration Fund. In our opinion, the financial statements for the fund were
fairly presented and free of material misstatement. We found no instances of
noncompliance. (Report No. 10-1-0088, Fiscal Year 2009 and 2008 Financial Statements
for the Pesticide Registration Fund, March 30, 2010 - Report Cost: $155,160)
To expedite reregistering older pesticides against modern health and environmental testing
standards, Congress authorized EPA to collect fees from pesticide manufacturers; the fees
are deposited into the Pesticides Reregistration and Expedited Processing Fund. In our
opinion, the financial statements for the fund were fairly presented and free of material
misstatement. We found no instances of noncompliance. (Report No. 10-1-0087, Fiscal
Year 2009 and 2008 Financial Statements for the Pesticides Reregistration and Expedited
Processing Fund, March 30, 2010 - Report Cost: $159,732)
Chemical Safety and Hazard Investigation Board Financial
Statements Earn Unqualified Opinion
An independent public accounting firm that audited the Chemical Safety and Hazard
Investigation Board's FYs 2009 and 2008 financial statements on behalf of the OIG
rendered an unqualified opinion on the statements, meaning that they were fairly
presented and free of material misstatement. The auditors noted no matters involving
internal control and its operation that the auditors considered to be significant
deficiencies or material weaknesses. No instances of noncompliance that could have a
direct and material effect on the financial statement amounts were noted. The
independent public accounting firm issued its report on December 15, 2009.
38
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Information Resources
Management
Helping the Agency maintain its systems and data
EPA's Information Security Weakness Tracking System Needs
Improvements
EPA's oversight and monitoring procedures for the Automated System Security
Evaluation and Remediation Tracking (ASSERT) system provide limited
assurance the data are reliable for assessing EPA's computer security program.
EPA uses ASSERT to gather information on testing and evaluating Agency information
systems, and tracking progress made in fixing identified security weaknesses. EPA also
uses ASSERT to generate reports provided to the Office of Management and Budget
(OMB) pursuant to the Federal Information Security Management Act. We found that:
• Unsubstantiated responses for self-reported information contribute to data quality
problems.
• Limited independent reviews and lack of follow-up inhibit EPA's ability to
identify and correct data inaccuracies.
• Independent reviews lack coordination with certification and accreditation.
• Information security personnel believe they need more training.
• Limited internal reporting on required security controls and missing information
in security plans inhibit external reporting.
Further, incomplete security documentation raises concerns as to whether the ASSERT
application contractor is meeting federal requirements.
We recommended that EPA emphasize the importance of ensuring that personnel
accurately assess and report information in ASSERT, and take other steps to improve
system management. The Agency agreed with all our findings and recommendations.
(Report No. 10-P-0058, Self-reported Data Unreliable for Assessing EPA's Computer
Security Program, February 2, 2010 - Report Cost: $511,930)
EPA Deployed Unauthorized Information Technology Equipment
EPA deployed over 11,500 Customer Technology Solutions computers without
assessing the risks posed to its network and without formal management
acceptance of risks.
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
The Customer Technology Solutions contractor provides information technology end-
user support and services for EPA Headquarters program offices, associated laboratories,
and finance centers. Equipment has been deployed to 18 locations nationwide. OMB
requires creating a security plan that complies with National Institute of Standards and
Technology guidance. Vulnerability management and critical security documents are
paramount to fulfilling this requirement.
EPA lacks a process to routinely test Customer Technology Solutions equipment for
known vulnerabilities and to correct identified threats. Further, EPA placed this
equipment into production without fully assessing the risk the equipment poses to the
Agency's network and without authorizing the equipment for operations. EPA has
installed over 11,500 computers nationwide and, as problems occurred, management
focused its attention on addressing those issues to meet the deployment schedule
milestone.
We recommended that EPA direct the Customer Technology Solutions contractor to
develop and implement a vulnerability testing and remediation process for its equipment
consistent with existing EPA security policies and procedures, and issue a memorandum
to Agency Senior Information Officials requiring their program offices to conduct
vulnerability testing. We recommended that until this process is in place, EPA require
the contractor to remediate identified vulnerabilities in a timely manner. On
November 9, 2009, EPA signed an authorization to operate the Customer Technology
Solutions equipment, and we recommended EPA ensure that all key actions are
completed by the milestone dates.
(Report No. 10-P-0028, Improved Security Planning Needed for the Customer
Technology Solutions Project, November 16, 2009 - Report Cost: $271,418)
EPA Needs Improved Data Migration Plans
EPA's plans for migrating data from the Integrated Contracts Management
System to the EPA Acquisition System lack sufficient data integrity and quality
checks to ensure the complete and accurate transfer of procurement data.
EPA's Office of Acquisition Management is replacing the Integrated Contracts
Management System with the EPA Acquisition System. EPA's plans do not include
proper data migration controls to ensure that the acquisition data transfer accurately and
completely. In particular, contracting officers are responsible for reviewing their own
contract data after data migration. Additionally, contracting officers are not required to
attend data migration training. Plans to migrate closed contracts do not require
verification of the accuracy and completeness of the data, which will be used for historic
reporting purposes.
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
The contractor that completed this review recommended a third-party review of migrated
data for active and inactive contracts prior to release in the EPA Acquisition System,
enhancing the data migration training requirements, and developing a plan to ensure
closed contract data are reviewed for accuracy. EPA generally agreed with the findings
and recommendations.
(Report No. 10-P-0071, Plans to Migrate Data to the New EPA Acquisition System Need
Improvement, February 24, 2010 - Report Cost: $130,684)
Physical Security at Las Vegas Facilities Needs Improvement
EPA needs to improve physical security at its facilities in Las Vegas, Nevada.
EPA occupies space in six buildings on or near the University of Nevada-Las Vegas
campus, and different EPA organizations occupy those spaces. The buildings use a card
access system, administered by the Office of Research and Development.
The Las Vegas Finance Center's server room and other key areas are susceptible to
unauthorized access by personnel not a part of the Finance Center. The center's areas are
protected by an access control system, but the system is not administered in a manner that
allows the center to monitor access to its area and thus detect and prevent unauthorized
access. These physical access control problems are not limited to the Finance Center; the
Office of Research and Development does not administer the system in a manner that
permits the other EPA organizations in Las Vegas to monitor access to their space.
The Office of Research and Development agreed with our findings and indicated it
planned to negotiate the transfer of the responsibility for maintaining and overseeing the
portion of the card access system relied upon by the other offices within Las Vegas to one
of the other offices. We made various recommendations to improve physical security at
the Las Vegas facilities, including developing formal procedures and assessing physical
security practices at EPA's Las Vegas offices. EPA agreed with our recommendations.
(Report No. 10-P-0059, EPA Needs to Improve Physical Security at Its Offices in
Las Vegas, Nevada, February 3, 2010 - Report Cost: $49,122)
Information Security Progress Made, But Further Action Needed
Our annual review of EPA's implementation of the Federal Information Security
Management Act, submitted to OMB, disclosed that the Agency continues to
make progress in improving its information technology security.
While EPA has developed an automated system to track program offices' responses to
self-assessments of their information security program questions, greater effort is needed
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
to ensure the reliability of this information. Further, EPA could strengthen its
information security program by:
• Developing procedures and providing training related to the certification and
accreditation of EPA systems.
• Providing training so EPA personnel better understand their responsibilities for
overseeing contractor compliance with federal security requirements.
• Improving practices to ensure EPA offices provide sufficient documentation to
officials so they can make informed decisions about authorizing a system for
operations.
(Report No. 10-P-0030, Fiscal Year 2009 Federal Information Security Management Act
Report: Status of EPA 's Computer Security Program, November 18, 2009)
Improvements Needed in Notifying Officials on Outstanding
Financial Transactions
EPA should make changes to the programming code used to notify EPA officials
of financial transactions that have not processed after 60 days.
The Office of the Chief Financial Officer developed a delinquency report for all suspense
table transactions greater than 60 days old and distributed the report monthly to EPA
Assistant and Regional Administrators. This process involves using a program that
automatically notifies management when the transaction originator has not taken required
resolution action. We found that the Office of the Chief Financial Officer relies heavily
on the manual update of the programming code and had not implemented a process to
routinely check the listing of officials to ensure accuracy.
We recommended that the Office of the Chief Financial Officer document a process to
review the recipient list for the delinquency report. We also recommended that the office
use a more advanced programming logic technique. The Office of the Chief Financial
Officer agreed with the recommendations and indicated it would complete corrective
actions by April 30, 2010.
(Memorandum on OIG Observations Made During the Audit of the U.S. Environmental
Protection Agency's Fiscal Year 2009 Consolidated Financial Statement, issued
February 18, 2010)
42
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Investigations
Investigating laboratory fraud, financial fraud,
and computer crimes
Investigative
Sentencings Continue In Bid Rigging Case at New Jersey
Superfund Site
On October 28, 2009, Frederick Landgraber, of Bridgewater, New Jersey, was sentenced
in U.S. District Court of New Jersey to 5 months in prison to be followed by 5 months of
home detention. In addition, he was ordered to pay a $5,000 fine and $35,000 in
restitution to EPA. Landgraber is the president and co-owner of a Martinsville, New
Jersey, landscaping company.
Landgraber previously pled guilty to conspiring to defraud EPA at the Federal Creosote
Superfund Site, located in Manville, New Jersey. As part of the conspiracy, Landgraber
provided more than $30,000 in kickbacks to an employee of a prime contractor in
exchange for the employee steering landscaping subcontracts to Landgraber's company.
Landgraber and his co-conspirator subverted the competitive bidding process by
submitting intentionally high cover bids on behalf of fictitious companies. Landgraber's
company received approximately $1.5 million in subcontracts at Federal Creosote.
On February 23, 2010, James E. Haas, Jr., a former representative of a New Jersey
subcontractor, was sentenced to serve 33 months in jail to be followed by 3 years of
probation. He was also ordered to pay a $30,000 fine and $53,050 in restitution to EPA.
Haas previously pled guilty to charges of fraud and conspiracy to provide kickbacks.
Haas admitted to paying kickbacks to former employees of a prime contractor in
exchange for the award of a subcontract to the company he represented. He also admitted
to inflating bid prices for the subcontracts to include the amount of kickbacks paid to his
co-conspirators.
To date, eight individuals and three companies have pled guilty as part of this
investigation. Fines and restitution totaling more than $2.7 million have been ordered.
This case is being conducted with the Internal Revenue Service Criminal Investigation
Division. (Case Cost: $199,793)
43
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Civil Settlement Reached Related to Invoice Submissions
On October 23, 2009, D.T. Construction, Inc., Dunbar, Pennsylvania, entered into a civil
settlement agreement with the U.S. Attorney's Office for the Western District of
Pennsylvania to resolve allegations that the company submitted falsified invoices.
DT Construction won bids on an EPA-funded project to install waterlines and a pump
station in Westmoreland County, Pennsylvania. DT Construction submitted invoices to
the contract administrator that contained inflated numbers of supplies. A portion of the
overpayment was able to be offset, leaving a net loss of $251,037. To resolve the
allegations, the company agreed to pay $125,000. (Case Cost: $255,202)
Civil Settlement Reached to Resolve False Claims Allegations
While admitting no liability, on December 30, 2009, Automotive Testing Laboratories,
Inc., Mesa, Arizona, entered into a civil settlement agreement with the U.S. Attorney's
Office for the Southern District of Ohio to resolve allegations of false claims. This
agreement stipulates that the contractor will pay $85,000 to the government. In 1998, a
qui tarn suit was filed by James Moran, a former vice president and lab manager. In the
suit, Moran alleged that Automotive Testing Laboratories mischarged labor and other
costs, including unallowable costs, on two EPA contracts for emissions testing. In 2006,
the United States intervened and joined the suit. As a result of his initial suit, Moran will
receive $48,000 from Automotive Testing Laboratories. (Case Cost: $276,817)
Production Manager Sentenced for Filing False Report
On October 19, 2009, Denver Killion, former Production Manager for J.M. Huber
Corporation, Etowah, Tennessee, was sentenced in U.S. District Court for the Eastern
District of Tennessee to 1 year of probation and 100 hours of community services. He
was also ordered to pay a $5,000 fine and a $25 special assessment. Further, on
November 23, 2009, Killion's name was placed on the Excluded Parties List System until
he petitions the EPA Suspension and Debarment Division for the withdrawal of his name
from the list.
In January 2009, Killion was charged with making a material false statement in a
Discharge Monitoring Report required under the Clean Water Act. Killion falsely
represented that the wastewater effluent from Huber had been analyzed for aluminum
concentration during January 2004 when he knew the effluent had not been tested.
This case was conducted with the EPA Criminal Investigation Division and the Tennessee
Valley Authority Office of Inspector General. (Case Cost: $48,482)
44
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Company Ordered to Pay $200,000 Fine for Water Discharge
Violations
On November 13, 2009, Cargill Meat Solutions Corporation pled guilty in U.S. District
Court for the District of Colorado to two counts of violating the Clean Water Act
regarding discharges. Cargill was fined $200,000 and ordered to pay a $25 special
assessment.
Cargill engaged in meat processing at its facility in Fort Morgan, Colorado. The facility
included a wastewater treatment operation that discharged wastewater into the South
Platte River under a Clean Water Act permit. However, in August 2003, Cargill violated
a permit condition and discharged water containing more than 400 coliform colonies per
100 milliliters. In July 2004, Cargill again violated a permit condition and discharged
water containing more than 2,875 pounds of suspended solids.
This case was conducted with the EPA Criminal Investigation Division. (Case Cost:
$97,256)
Special Report
No Evidence of Criminal Activity Found in EPA Coal Ash Rulemaking
We found no evidence of any effort to suppress the release of scientific
information during the rulemaking process for coal combustion waste disposal in
landfills or surface impoundments.
Coal combustion waste, largely generated by coal combustion at coal-fired utilities, is
one of the largest waste streams in the United States. It typically contains a broad range
of metals and is disposed of in landfills, surface impoundments, or mines. At the request
of the EPA Administrator, we investigated allegations of a cover-up or other misconduct
related to the risk assessment for coal ash. This issue was raised during a 60 Minutes
interview that was conducted after a Tennessee Valley Authority surface impoundment
coal ash spill in late December 2008.
In May 2000, EPA found that coal combustion waste disposal in landfills and surface
impoundments warranted national regulation under Resource Conservation and Recovery
Act Subtitle D (nonhazardous solid wastes) but not Subtitle C (hazardous wastes). In its
determination, EPA stated that it would revise its determination if it found a need to do so
as a result of public comment, further analysis, or information. EPA had not issued a
coal combustion waste rule for disposal in landfills and surface impoundments since May
2000.
45
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Between 2000 and 2006, EPA addressed public comments and updated the damage cases
and the draft quantitative risk assessment that had been prepared for the May 2000
regulatory determination. In 2007, EPA published a notice of data availability and the
associated draft risk assessment in the Federal Register and the public docket was
established. After the notice of data availability period closed, EPA commissioned a peer
review, completed in September 2008. The peer review noted that the 2002 constituent
screening analysis and 2005 sensitivity analysis were not available. EPA posted the
screening analysis to the public docket in March 2009, and informed investigators that it
would post the sensitivity analysis, revised to address errors, to the docket that will be
created for the coal combustion waste proposed rule.
We determined that although the rulemaking process moved slowly in the 9 years since
EPA's May 2000 regulatory determination, we did not find evidence of criminal or
improper activities causing delays during the rulemaking process.
(Report No. 10-N-0019, Response to EPA Administrator's Request for Investigation into
Allegations of a Cover-up in the Risk Assessment for the Coal Ash Rulemaking,
November 2, 2009 - Report Cost: $214,534)
46
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Other Activities
Legislation and Regulations Reviewed
Section 4(a) of the Inspector General Act requires the Inspector General to review
existing and proposed legislation and regulations relating to the program and operation of
EPA and to make recommendations concerning their impact. We primarily base our
comments on the audit, evaluation, investigation, and legislative experiences, as well as
our participation on the Council of the Inspectors General on Integrity and Efficiency.
During the reporting period, we reviewed 85 proposed changes to legislation, regulations,
policy, and procedures that could affect EPA, and provided comments on 17. We also
reviewed drafts of OMB circulars, memoranda, executive orders, program operations
manuals, directives, and reorganizations. Details on two items follow.
Proposed Presidential Memorandum,^ Comprehensive Federal Strategy on Carbon
Capture and Storage. We reviewed the proposed presidential memorandum that
establishes an Interagency Task Force on Carbon Capture and Storage, comprised of
senior officials from pertinent agencies and co-chaired by designees from EPA and the
U.S. Department of Energy. We commented that perhaps some acknowledgment that
business, industry, and academia have been and continue to grapple with carbon capture
and storage would be appropriate. If business, industry, and academia are not part of the
interagency task force, their past and ongoing efforts should be acknowledged, and a
future role for such entities should perhaps be noted in the presidential memorandum.
Proposed Executive Order, Reducing Improper Payments. OMB proposed an
executive order to reduce improper payments by intensifying efforts to eliminate waste,
fraud, and abuse in the major programs administered by the Federal Government. The
proposed executive order would direct executive departments and agencies to take certain
actions to help reduce improper payments made by the Federal Government to
beneficiaries, grantees, and contractors. We identified two major concerns with the
proposed executive order. The first concern is with the requirement that the Secretary of
the Treasury would be directed to set up a hotline to collect reports of fraud, waste, and
abuse that led or may lead to improper payments by the Federal Government. The
second concern is with the requirement that the Council of the Inspectors General on
Integrity and Efficiency would make recommendations to agency heads. We
commented that both of these requirements are something the department/agency
inspector general is best positioned to do.
47
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
OIG Reviews Agency's FY 2009 Draft Performance and
Accountability Report
Our review of EPA's FY 2009 draft Performance and Accountability Report found that,
overall, the report fulfills Government Performance and Results Act requirements.
Congress requested OIGs to annually review and report on their agencies' general
compliance with the Government Performance and Results Act. We fulfilled this
direction by reviewing the draft annual Performance and Accountability Report and
reporting to the Agency on omissions and areas for improvement. We generally did not
verify the accuracy of the data. EPA continues to incorporate improvements in the report
based on our suggestions in prior years. However, the report had areas that still needed to
be structurally strengthened. For example:
• Better balance and perspective is needed. While challenges were presented,
they tended to be general. Measures and accomplishments should be put into
perspective in terms of time, the universe, baselines, and overall goal.
• Greater emphasis on collaboration and relative contribution is needed.
Many of the results and challenges depend on interaction with federal and
State/tribal partners. The report should better describe the contribution to results
or barriers attributable to those partners.
• EPA results are narrow. The presentation of results by goals and objectives is
narrow and does not recognize confluence across goals and objectives. EPA
should attempt to reference those interactions to present a better view of EPA's
overall performance.
In response to our review comments, EPA made a number of improvements in the final
version of its FY 2009 Performance and Accountability Report.
EPA OIG Conducts External Peer Review of
Treasury Inspector General for Tax Administration
The EPA OIG conducted an external peer review of the Treasury Inspector General for
Tax Administration for the year ended March 31, 2009. We issued our report on
February 3, 2010. The organization received a rating of pass.
Our responsibility was to express an opinion on the design of the system of quality
control and the organization's compliance with its own policies and applicable standards.
We conducted our review in accordance with Government Auditing Standards and
guidelines established by the Council of the Inspectors General on Integrity and
Efficiency. The findings included in the accompanying Letter of Comment were not
48
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
considered to be of sufficient significance to affect the opinion expressed in the report.
We identified the following recommendations to enhance the Treasury Inspector General
for Tax Administration's quality control system:
• Implement a process to ensure auditors consistently follow established
procedures to finalize completed audits within 30 days after the report issuance.
• Properly document in the working papers any designation of individuals below
audit manager that are authorized to approve working papers.
• Configure its automated working paper system to prevent one individual from
being able to prepare and approve the same working paper.
49
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Statistical Data
Profile of Activities and Results
Audit Operations
Office of Inspector General Reviews
October 1, 2009 to
March 31, 2010
($ in millions)
Questioned Costs *
Recommended Efficiencies *
Costs Disallowed to be Recovered
Costs Disallowed as Cost Efficiency
Reports Issued -
Office of Inspector General Reviews
Reports Resolved
(Agreement by Agency officials
to take satisfactory corrective actions) **
$5.9
$6.9
$0.8
$6.9
41
112
Audit Operations
Reviews Performed by Single Audit Act Auditors
October 1, 2009 to
March 31, 2010
($ in millions)
Questioned Costs * $0.3
Recommended Efficiencies * $0
Costs Disallowed to be Recovered $10.4
Costs Disallowed as Cost Efficiency $0
Reports Issued -
Single Audit Act Reviews 51
Agency Recoveries
Recoveries from Audit Resolutions of Current
and Prior Periods (cash collections or offsets
to future payments) *** $9.5
Investigative Operations
Total Fines and Recoveries ****
Cost Savings
Cases Opened During Period
Cases Closed During Period
Indictments/Informations of
Persons or Firms
Convictions of Persons or Firms
Civil Judgments/Settlements/Filings
October 1, 2009 to
March 31, 2010
($ in millions)
$1.2
$0.3
52
32
6
5
2
Questioned Costs and Recommended Efficiencies
are subject to change pending further review in the
audit resolution process.
Reports Resolved are subject to change pending
further review.
Information on Recoveries from Audit Resolutions is
provided by EPA's Office of Financial Management
and is unaudited.
Fines and recoveries resulting from joint
investigations.
50
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Audit, Inspection, and Evaluation Report Resolution
Status Report on Perpetual Inventory of Reports in Resolution Process
for Semiannual Period Ending March 31, 2010
Report Category
A. For which no management
decision was made by
October 1 , 2009*
B. Which were issued during the
reporting period
C. Which were issued during the
reporting period that required
no resolution
Subtotals (A + B - C)
D. For which a management
decision was made during the
reporting period
E. For which no management
decision was made by
March 31, 2010
F. Reports for which no
management decision was
made within 6 months of
issuance
No. of
Reports
138
92
25
205
112
93
53
Report Issuance
($ in thousands)
Questioned
Costs
$29,501
$6,062
$0
$35,563
$11,531
$24,032
$18,168
Recommended
Efficiencies
$0
$6,881
$0
$6,881
$6,881
$0
$0
Report Resolution Costs
Sustained
($ in thousands)
To Be
Recovered
$10,399
$80
$0
$10,479
$10,479
$0
$0
As
Efficiencies
$0
$6,881
$0
$6,881
$6,881
$0
$0
Any difference in number of reports and amounts of questioned costs or recommended efficiencies between this
report and our previous semiannual report results from corrections made to data in our audit tracking system.
Status of Management Decisions on Inspector General Reports
This section presents additional statistical information that is required by the Inspector General Act of
1978, as amended, on the status of EPA management decisions on reports issued by the OIG involving
monetary recommendations. Tables 1 and 2 cannot be used to assess results of reviews performed or
controlled by this office. Many of the reports were prepared by other federal auditors or independent
public accountants. EPA OIG staff do not manage or control such assignments. Auditees frequently
provide additional documentation to support the allowability of such costs subsequent to report issuance.
51
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Table 1: Inspector General-issued Reports with Questioned Costs for Semiannual Period Ending
March 31, 2010 (dollars in thousands)
Report Category
A. For which no management decision was made by
October 1 , 2009 **
B. New reports issued during period
Subtotals (A + B)
C. For which a management decision was made during the
reporting period:
(i) Dollar value of disallowed costs
(ii) Dollar value of costs not disallowed
D. For which no management decision was made by
March 3 1,20 10
Reports for which no management decision was made
within 6 months of issuance
No. of
Reports
40
12
52
15
10
5
37
29
Questioned
Costs *
$29,501
$6,062
$35,563
$11,531
$10,479
$1,052
$24,032
$18,168
Unsupported
Costs
$14,163
$4,948
$19,111
$737
$235
$502
$18,374
$13,616
Questioned costs include unsupported costs.
Any difference in number of reports and amounts of questioned costs between this report and our previous
semiannual report results from corrections made to data in our audit, inspection, and evaluation tracking system.
Table 2: Inspector General-issued Reports with Recommendations that Funds Be Put to Better Use
for Semiannual Period Ending March 31, 2010 (dollars in thousands)
Report Category
A. For which no management decision was made by October 1 , 2009 *
B. Which were issued during the reporting period
Subtotals (A + B)
C. For which a management decision was made during the reporting period:
(i) Dollar value of recommendations from reports that were
agreed to by management
(ii) Dollar value of recommendations from reports that were
not agreed to by management
(iii) Dollar value of nonawards or unsuccessful bidders
D. For which no management decision was made by March 31, 2010
Reports for which no management decision was made
within 6 months of issuance
No. of
Reports
0
2
2
2
2
0
0
0
0
Dollar
Value
$0
$6,881
$6,881
$6,881
$6,881
$0
$0
$0
$0
Any difference in number of reports and amounts of funds put to better use between this report and our previous
semiannual report results from corrections made to data in our audit, inspection, and evaluation tracking system.
Audits, Inspections, and Evaluations with No Final Action as of March 31, 2010, that Are Over 365 Days Past
the Date of the Accepted Management Decision (including Audits, Inspections, and Evaluations in Appeal)
Audits, Inspections, and Evaluations
Program
Assistance Agreements
Contract Audits
Single Audits
Financial Statement Audits
Total
Total
41
27
0
19
1
88
Percentage
47%
31%
0%
21%
1%
100.0%
52
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Hotline Activity
The following table shows EPA OIG Hotline activity regarding complaints of fraud, waste, and abuse in
EPA programs and operations that occurred during the past semiannual period.
Semiannual Period
(October 1,2009 to
March 31, 2010)
Issues Open at the Beginning of the Period
Inquiries Received During the Period
Inquiries Closed During the Period
Inquiries Pending or Open at the End of the Period
7
345
334
18
Issues Referred to Others:
OIG Offices
EPA Program Offices
Other Federal Agencies
State/Local Agencies
84
13
80
53
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Summary of Investigative Results
Summary of Investigative Activity During Reporting Period
Cases Open as of October 1 , 2009 *
Cases Opened During Period
Cases Closed During Period
Cases Pending as of March 31 , 201 0
96
52
32
116
* Adjustment made to opening balance.
Investigations Pending by Type as of March 31, 2010
Contract Fraud
Assistance
Agreement Fraud
Employee Integrity
Program Integrity
Computer Crimes
Other
Total
Superfund
8
1
3
1
0
0
13
Management
6
35
19
8
3
6
77
Split
Funded
1
1
0
1
2
1
6
Recovery
Act
7
8
0
1
0
3
19
Chemical
Safety Board
0
0
0
1
0
0
1
Total
22
45
22
12
5
10
116
Results of Prosecutive Actions
Criminal Indictments / Informations / Complaints
Convictions
Civil Judgments / Settlements / Filings
Fines and Recoveries (including Civil)
Prison Time
Home Detention
Probation
Community Service
EPA OIG Only
3
1
2
$261,100
0 months
6 months
36 months
0 hours
Joint*
3
4
0
$328,625
38 months
5 months
72 months
100 hours
Total
6
5
2
$589,725
38 months
11 months
108 months
100 hours
' With another federal agency.
Administrative Actions
Suspensions
Debarments
Employee Resignations
Compliance Agreements
Other Administrative Actions
Total ^^^^^^^^^^^^^^^^^H~
Administrative Recoveries
Cost Savings
EPA OIG Only
2
0
2
0
6
10
$0
$25,660
Joint*
0
9
0
1
1
11
$600,000
0
Total
2
9
2
1
7
21
$600,000
$25,660
* With another federal agency.
54
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Scoreboard of Results
Scoreboard of OIG Second Quarter FY 2010 (March 31, 2010) Performance Results
Compared to Annual Performance Goal Targets
All results reported in FY 2010, from current and prior years' work, are as reported in OIG Performance Measurement
and Results System, Inspector General Operations Reporting System, and Inspector General Enterprise
Management System. Unaudited.
OIG FY 2010 Government Performance and
Results Act Annual Performance Targets
Compared to FY 2010 Results Reported
Supporting Measures
Goal: Contribute to Human Health and Environmental Quality Through Improved Business Practices,
Accountability, and Integrity of Program Operations
Environmental Improvements/Actions/
Changes/Improvements in Business/Systems/
Efficiency Risks Reduced or Eliminated
Target: 334; Reported: 115 (34.4%)
0 Legislative/Regulatory Changes/Decisions
0 Examples of Environmental Improvement
0 Environmental or Management Best Practices
Implemented
12 Environmental or Management Policy, Process,
Practice, Control Change Actions Taken
56 Certifications/Validations/Verifications/Corrections
0 Environmental or Management Operational/
Control Risks Reduced or Eliminated
4 Actions Taken or Resolved Prior to Report Issuance
(Not Otherwise Reported)
43 Recommendations Reported as Implemented,
Previously Identified as Unimplemented by OIG
Follow-up *
Environmental & Business Recommendations,
Challenges, Best Practices, and Risks Identified
Target: 903; Reported: 327 (36.2%)
236 Recommendations (for Agency/Stakeholder Action)
2 Critical Congressional or Public Management
Concerns Addressed
4 Best Environmental or Management Practices
Identified
10 Referrals for Agency Action
2 New Environmental or Management Operational
Risks or Challenges Identified
44 Unimplemented Recommendations Identified
33 Recovery Act Awareness Briefings/Outreach Sessions
Return on Investment: Potential dollar return as
percentage (120%) of OIG budget $54.7 million
Target: $65.6M; Reported: $14 M (21%)
(Dollars in Millions)
$6.1 Questioned Costs (Net EPA)
6.9 Recommended Efficiencies, Costs Saved (EPA)
$1.0 Fines, Recoveries, Settlements
Criminal, Civil, and Administrative Actions
Reducing Risk of Loss/Operational Integrity
Target: 75; Reported: 21 (28%)
5 Criminal Convictions
6 Indictments/lnformations/Complaints
21 Administrative Actions
2 Civil Settlements
12 Allegations Disproved
Other (no targets established)
Sustained Monetary Recommendations and
Savings Achieved from Current and Prior
Periods: $21M
Sustained Environmental and Management
Recommendations for Resolution Action
Recovery Act Activity Results*
(also counted above)
Total Reports Issued: 92
(Dollars in Millions)
$10.5 Questioned Costs Sustained
$10.5 Cost Efficiencies Sustained or Realized
148 Sustained Recommendations
33 Awareness Briefings/Outreach Sessions
21 Complaints Received
41 OIG-produced Reports
51 Reports by Other Audit Entities with OIG Oversight
Reported by Agency as implemented of those previously reported by the OIG as Unimplemented.
55
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Appendices
Appendix 1 - Reports Issued
The Inspector General Act requires a listing, subdivided according to subject matter, of each report issued by the OIG during the
reporting period. For each report, where applicable, the Inspector General Act also requires a listing of the dollar value of
questioned costs and the dollar value of recommendations that funds be put to better use. This listing includes a section for
reports involving the American Recovery and Reinvestment Act of 2009.
Questioned Costs
Report No.
Report Title
Date
Ineligible
Costs
Unsupported Unreasonable
Costs Costs
Federal
Recommended
Efficiencies
PERFORMANCE REPORTS
10-P-0002 Hotline Complaint on Employee Granted Full-Time Work-at-Home Privilege
10-P-0007 EPA Oversight and Policy for High Priority Violations of Clean Air Act
10-P-0009 Violations of Section 404 of the Clean Water Act
10-P-0017 EPA Needs to Improve Continuity of Operations Planning
10-P-0026 Oversight of Exported Never-Registered Pesticides
10-P-0027 Congressionally Requested Inquiry into National Response Center Hotline
10-P-0028 Improved Security Planning for Customer Technology Solutions Project
10-P-0030 2009 Annual Federal Information Security Management Act Report
10-P-0040 ENERGY STAR Program Integrity Can Be Enhanced
10-P-0041 EPA Needs Procedures to Address Delayed Earmark Projects
10-P-0042 Final Guidance on Vapor Intrusion
10-P-0047 Cost Controls for Equipment Used during Emergencies
10-P-0055 Changes in Conditions at Wildcat Landfill Superfund Site in Delaware
10-P-0058 Self-reported Data for Assessing EPA's Computer Security Program
10-P-0059 EPA Needs to Improve Physical Security at Its Offices in Las Vegas, Nevada
10-P-0065 Use of Independent Government Cost Estimates for Superfund Contracts
10-P-0066 Coordinated Plan to Oversees Toxic Substances Control Act Responsibilities
10-P-0071 Plans to Migrate Data to the New EPA Acquisition System
10-P-0075 EPA Does Not Always Receive Adjustment Vouchers from Contractors
10-P-0077 EPA Needs to Improve Its Recording and Reporting of Fines and Penalties
10-P-0078 EPA Travel Program Lacks Necessary Controls
10-P-0081 EPA Needs Procedures to Address Delayed Earmark Projects
10-P-0093 Unliquidated Obligations Under Federal Advances
TOTAL PERFORMANCE REPORTS = 23
ASSISTANCE AGREEMENT REPORTS
10-4-0001 Grants Awarded to the Eastern Band of Cherokee Indians, North Carolina
10-4-0003 Grant Awarded to West Rankin Utility Authority, Flowood, Mississippi
10-4-0013 Grant Awarded to the City of Flowood, Mississippi
10-2-0054 Grant Awarded to Walker Lake Working Group, Hawthorne, Nevada
10-4-0067 Grants Awarded to National Tribal Environmental Council, Inc.
10-4-0086 Grant Awarded to the City of Blackfoot, Idaho
TOTAL ASSISTANCE AGREEMENT REPORTS = 6
Oct. 07, 2009
Oct. 14, 2009
Oct. 26, 2009
Oct. 27, 2009
Nov. 10, 2009
Nov. 10, 2009
Nov. 16, 2009
Nov. 18, 2009
Nov. 30, 2009
Dec. 08, 2009
Dec. 14, 2009
Dec. 16, 2009
Jan. 26, 2010
Feb. 02, 2010
Feb. 03, 2010
Feb. 16, 2010
Feb.17,2010
Feb. 24, 2010
Mar. 08, 2010
Mar. 09, 2010
Mar. 09, 2010
Mar. 22, 2010
Mar. 31,2010
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
Oct. 05, 2009
Oct. 13, 2009
Oct. 27, 2009
Jan. 06, 2010
Feb. 17, 2010
Mar. 29, 2010
0
0
0
$1,663
33,732
1,031,036
$1,066,431
0
$663,321
896,224
383,015
2,768,490
14,890
$4,725,940
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
0
0
0
0
0
0
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$3,139,000
0
0
0
$3,139,000
0
0
0
0
0
0
$0
SINGLE AUDIT REPORTS
10-3-0004 Chippewa Cree Tribe, FY 2007
10-3-0005 Chippewa Cree Tribe, FY 2008
10-3-0006 West Lafayette, City of, FY 2007
10-3-0008 Palm Beach County Solid Waste Authority, FY 2008
10-3-0010 Sac and Fox Nation of Missouri, FY 2008
10-3-0011 Polk, City of, FY 2007
10-3-0012 Michigan Department of Agriculture, FY 2008
10-3-0014 Norton Sound Health Corporation, FY 2008
10-3-0015 Orlando, City of, FY 2008
10-3-0016 Hutchinson, Cityof, FY2008
10-3-0021 York, Cityof, FY2003
10-3-0022 Alliance for the Chesapeake Bay, FY 2008
10-3-0023 DeKalb-Jackson Water Supply District, Inc., FY2008
10-3-0024 Gwinett, County Government, FY 2008
10-3-0025 Belle Glade, City of, FY 2005
10-3-0031 American Samoa Power Authority, FY 2008
10-3-0032 Seminole Nation of Oklahoma, FY 2008
10-3-0033 Brewer, City of, 6/30/08
10-3-0035 Marlborough, City of, FY 2008
10-3-0036 Monticello, City of, FY 2008
10-3-0037 Eklutna Native Village, FY 2008
Oct. 13, 2009
Oct. 13,2009
Oct. 13,2009
Oct. 23, 2009
Oct. 26, 2009
Oct. 26, 2009
Oct. 26, 2009
Oct. 27, 2009
Oct. 27, 2009
Oct. 27, 2009
Oct. 29, 2009
Oct. 30, 2009
Oct. 30, 2009
Oct. 30, 2009
Oct. 30, 2009
Nov. 24, 2009
Nov. 24, 2009
Nov. 24, 2009
Nov. 24, 2009
Nov. 24, 2009
Nov. 24, 2009
0
0
0
0
$1,735
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
56
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Questioned Costs
Report No.
10-3-0038
10-3-0039
10-3-0043
10-3-0044
10-3-0045
10-3-0046
10-3-0048
10-3-0050
10-3-0051
10-3-0052
10-3-0053
10-3-0056
10-3-0060
10-3-0061
10-3-0062
10-3-0063
10-3-0064
10-3-0068
10-3-0069
10-3-0072
10-3-0073
10-3-0074
10-3-0076
10-3-0083
10-3-0084
10-3-0085
10-3-0089
10-3-0090
10-3-0091
10-3-0092
Report Title
Pulaski County, FY 2008
Dassel, City of, FY 2008
Elko Band Council, FY2007
Chugach Regional Resource Commission, FY2004
Yurok Tribe, FY 2007
National Safety Council, FY2008
Alturas, City of, FY 2008
Torres Martinez Desert Cahuilla Indians, FY 2007
Cahuilla Band of Indians, FY 2005
Cahuilla Band of Indians, FY 2006
Nooksack Indian Tribe, FY 2007
Vallejo, City of, FY 2004
Lennox, City of, South Dakota, FY2005
La Jolla Band of Luiseno Indians, FY 2007
Pit River Tri be, FY 2007
Solana Beach, City of, FY 2007
Lone Pine Paiute-Shosone Reservation, FY 2007
Pit River Tri be, FY 2008
Woods Hole Oceanographic Institution, FY 2008
Georgia Tech Research Corporation, FY2008
Torres Martinez Desert Cahuilla Indians, FY 2008
Yurok Tribe, FY 2008
Puerto Rico Commonwealth of Environmental Quality Board, FY 2008
Colorado, State of, FY 2009
Utah, State of, FY 2009
Te-Moak Tribe Western Shoshone/Battle Mountain Band Council, FY 2008
Gas Technology Institute, FY2006
Batelle Memorial Institute, FY2008
Blackfeet Tribe of the Blackfeet Indian Reservation, FY 2006
Montana, State of, FYs 2008 and 2009
TOTAL SINGLE AUDIT REPORTS = 51
Date
Nov. 25, 2009
Nov. 25, 2009
Dec. 15, 2009
Dec. 15, 2009
Dec. 15, 2009
Dec. 15,2009
Dec. 17, 2009
Dec. 17, 2009
Dec. 18, 2009
Dec. 18, 2009
Dec. 31,2009
Jan. 28, 2010
Feb. 04, 2010
Feb. 05, 2010
Feb. 12, 2010
Feb. 12, 2010
Feb. 12,2010
Feb. 19, 2010
Feb. 19, 2010
Feb. 26, 2010
Feb. 26, 2010
Feb. 26, 2010
Mar. 08, 2010
Mar. 24, 2010
Mar. 24, 2010
Mar. 24, 2010
Mar. 31,2010
Mar. 31,2010
Mar. 31,2010
Mar. 31,2010
Ineligible
Costs
$39,998
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6,080
0
0
0
0
0
0
0
$47,813
Unsupported Unreasonable
Costs Costs
0
0
$88,084
0
0
0
0
7,029
0
0
0
0
0
0
0
0
100,543
0
0
0
26,442
0
0
0
0
0
0
0
0
0
$222,098
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
Federal
Recommended
Efficiencies
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
CONTRACT REPORTS
10-4-0070
Army Creek Landfill CERCLA Claim No. 3, New Castle, Delaware
TOTAL CONTRACT REPORTS = 1
Feb. 24, 2010
0
$0
0
$0
0
$0
0
$0
FINANCIAL STATEMENT REPORTS
10-1-0029
10-1-0087
10-1-0088
Audit of 2009 and 2008 (Restated) Consolidated Financial Statements
FY2009 FIFRA Financial Statements
FY2009 PRIA Financial Statements
TOTAL FINANCIAL STATEMENT REPORTS = 3
Nov. 16, 2009
Mar. 30, 2010
Mar. 30, 2010
0
0
0
$0
0
0
0
$0
0
0
0
$0
$3,742,059
0
0
$3,742,059
AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 REPORTS
10-R-0020
10-R-0049
10-R-0057
10-R-0079
10-R-0080
10-R-0082
Recipient Reporting Under the Recovery Act
Drinking Water State Revolving Fund Deadline of February 17, 2010
Guidance for Recovery Act and Future Green Reserve Projects
Site Inspection of Water Distribution System, Village of Buckeye Lake, Ohio
Site Inspection of Water Main Project, Manchester, New Hampshire
Competition for National Clean Diesel Funding Assistance Program Grants
TOTAL AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 REPORTS
Oct. 29, 2009
Dec. 17, 2009
Feb. 01,2010
Mar. 10, 2010
Mar. 17, 2010
Mar. 23, 2010
= 6
0
0
0
0
0
0
$0
0
0
0
0
0
0
$0
0
0
0
0
0
0
$0
0
0
0
0
0
0
$0
OTHER REPORTS
10-N-0018
10-N-0019
Compendium of Unimplemented Recommendations as of 9/30/2009
Coal Ash Rulemaking
TOTAL OTHER REPORTS = 2
Oct. 28, 2009
Nov. 02, 2009
0
0
$0
0
0
$0
0
0
$0
0
0
$0
TOTAL REPORTS ISSUED = 92
$1,114,244
$4,948,038
$0
$6,881,059
57
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Appendix 2 - Reports Issued Without Management Decisions
For Reporting Period Ended March 31, 2010
The Inspector General Act requires a summary of each audit report issued before the commencement of the
reporting period for which no management decision has been made by the end of the reporting period, an explanation
of the reasons such management decision has not been made, and a statement concerning the desired timetable for
achieving a management decision on each such report. OMB Circular A-50 requires resolution within 6 months of a
final report being issued. In this section, we report on audits with no management decision or resolution within
6 months of final report issuance. In the summaries below, we note the Agency's explanation of the reasons a
management decision has not been made, the Agency's desired timetable for achieving a management decision, and
the OIG follow-up status as of March 31, 2010.
Office of Air and Radiation
Report No. 2004-P-00033, Effectiveness of Strategies to Reduce Ozone Precursors, September 29, 2004
Summary: Our analysis of EPA emissions data for "serious," "severe," and "extreme" ozone nonattainment areas
indicated that some major metropolitan areas may not have achieved the required 3 percent annual emission
reductions in ozone precursor emissions. While EPA air trends reports have emphasized that ozone levels are
declining nationally and regionally, only 5 of 25 nonattainment areas designated serious to extreme had substantial
downward trends. EPA provided an action plan to the OIG that provided a partial list of actions planned, and we
closed 8 of the 25 recommendations. We believed we may be able to close six recommendations once the final
Milestone Compliance Demonstration rule was promulgated. However, in May 2006, EPA told us the Agency had
decided not to issue the rule; it instead planned to issue guidance that EPA regions could share with States. We did
not agree that guidance is an acceptable alternative. As of September 12, 2008, the Agency had not agreed with the
other recommendations and had not submitted a complete response that addresses all the recommendations in the
report. We will continue to follow up on the Agency's actions.
Agency Explanation: EPA recently issued a lower ozone standard and is completing reconsideration of that standard.
Based on the resulting classifications of ozone attainment and nonattainment areas, EPA will revisit the effectiveness
of the OIG's recommendations for Milestone Compliance Demonstration guidance. Resolution expected by
December 2010.
OIG Follow-up Status: Incomplete response received
Report No. 2005-P-00003, Development of the Proposed MACT for Utility Units, February 3, 2005
Summary: Evidence indicated that EPA senior management instructed EPA staff to develop a Maximum Achievable
Control Technology (MACT) standard for mercury that would result in national emissions of 34 tons annually, instead
of basing the standard on an unbiased determination of what the top performing coal-fired units were achieving in
practice. The Clean Air Act requires that a MACT standard should, at a minimum, be based on the emissions levels
achieved by the top performing 12 percent of units - not a targeted national emissions result. We believed it was
likely that the standard understated the average amount of mercury emissions reductions achieved by the top
performing 12 percent of power units. Thus, the MACT standard, if adopted, would not achieve the maximum
emission reductions achievable. Shortly after we issued our report, EPA de-listed mercury as an air toxic subject to
MACT standards and issued the Clean Air Mercury Rule that established a trading program for mercury emissions.
However, 16 States filed lawsuits challenging the rule. A U.S. District Court vacated the rule in February 2008. EPA
appealed the court's decision in March 2008 but subsequently decided to develop a MACT standard for air toxics
emissions from power plants under the Clean Air Act Section 112. In December 2009, EPA approved an Information
Collection Request requiring all U.S. power plants with coal-or oil-fired electric generating units to submit air toxics
emissions data. EPA will use this data to develop a MACT standard for mercury emissions from power plants. Since
EPA is now developing a mercury MACT rule, the Agency needs to provide the OIG with an action plan.
Agency Explanation: EPA is currently considering the next steps after court rulings on the Clean Air Interstate Rule.
The Agency intends to use a Utility MACT Rule and also revise its corrective action plan. Estimated completion date
for the revisions is July 2010.
OIG Follow-up Status: Incomplete response received
58
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Report No. 08-P-0020, MACT Implementation Progress and Challenges, October 31, 2007
Summary: EPA's National Emissions Inventory data indicate an overall decline in air toxic emissions concurrent with
implementation of the MACT standards. EPA plans to use National Emissions Inventory data to assess the public
health risk remaining from MACT sources of air toxics emissions, but the reliability of the data for site-specific
emissions varies considerably. EPA has not established objectives that define an acceptable level of quality for
National Emissions Inventory data used in the residual risk process. EPA guidance recommends that program
offices develop data quality objectives for using data in such decisionmaking processes. Given the uncertainties
associated with National Emissions Inventory data, EPA could over- or underestimate the public health risk from
MACT sources of emissions. Overstating risk could result in EPA placing regulations on industries that are not cost
beneficial. Conversely, understating risk could result in EPA not requiring regulations where needed to protect public
health. The Agency has not agreed with our recommendation to establish the recommended State reporting
requirements, and we consider the issue unresolved.
Agency Explanation: The Agency concurs with the objective to ensure the quality of the emission database and is
presenting the OIG the alternative approach - continuing with the current program using voluntarily submitted data
and analyzing those results to determine whether further improvements are needed. The Agency is providing the
OIG a revised action plan. Estimate completion by May 2010.
OIG Follow-up Status: Resolution under negotiation in Headquarters
Report No. 09-P-0125, Effect of Efforts to Address Air Emissions at Selected Ports, March 23, 2009
Summary: While EPA has issued air emissions regulations for most port sources, EPA's actions to address air
emissions from large oceangoing vessels in U.S. ports have not yet achieved the goals for protecting human health.
The Clean Air Act provides EPA with the authority to regulate emissions from oceangoing vessel engines. EPA has
deferred taking a position on whether it has authority to regulate emissions from foreign-flagged vessels, which
account for about 90 percent of U.S. port calls. We recommended that EPA assess its authorities and responsibilities
under the Clean Air Act to regulate air emissions from foreign-flagged vessels in U.S. ports, and report any shortfalls
to Congress. In its 90 day response, EPA said it would describe the legal analyses of stakeholders regarding this
issue and make it available to Congress through the preamble to a proposed rule for new Category 3 marine diesel
engines. However, describing the legal analyses of others does not meet the intent of our recommendation. The
intent of our recommendation was that EPA would assess whether there are any shortfalls in its statutory authority
under the Clean Air Act to regulate air emissions from foreign-flagged vessels in U.S. ports and, if so, report these to
Congress. This assessment should provide a clear statement as to whether EPA has authority to regulate air
emissions from engines on foreign-flagged vessels in U.S. ports. We consider this recommendation open and
unresolved.
Agency Explanation: The Office of Air and Radiation has sent a memorandum (dated March 19, 2010) to the OIG
outlining actions that will address all open corrective actions. EPA is leaving the first recommendation open for now
pending further discussion with the OIG.
OIG Follow-up Status: Proposed response received awaiting final determination
Report No. 09-P-0151, EPA Does Not Provide Oversight of Radon Testing Accuracy and Reliability, May 12, 2009
EPA does not perform oversight of radon testing device accuracy or reliability. The 1988 Indoor Radon Abatement
Act required that EPA establish proficiency programs for firms offering radon-related services, including testing and
mitigation. EPA established and operated proficiency programs until 1998, when it disinvested in these programs.
EPA asserts that it shares oversight responsibility with States and industry, including the two national proficiency
programs operating under private auspices. However, without oversight, EPA cannot assure that radon testing
devices provide accurate data on indoor radon risks or that radon testing laboratories accurately analyze and report
radon results. We recommended that EPA disclose that while radon testing is recommended, EPA cannot provide
assurance that commercially available radon testing devices or testing laboratories are accurate and reliable. EPA
generally agreed with this recommendation and stated that it will review and revise both its Web-based and printed
public materials, as appropriate. However, the Agency did not provide information on how it intends to characterize
the accuracy and reliability of radon testing in its public documents, and more information is needed.
Agency Explanation: The Office of Air and Radiation continues to negotiate with the OIG on the recommendation and
is preparing a memorandum to outline actions and proposed dates for addressing the recommendation.
OIG Follow-up Status: Incomplete response received
59
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EPA OIG Semiannual Report to Congress
October 1, 2009 - March 31, 2010
Office of Administration and Resources Management
Report No. 09-P-0206, EPA's Human Resources System Shared Service Centers, August 11, 2009
We reported that EPA's shared service center initiative lacked the necessary management controls to achieve
efficiency and effectiveness. Our draft report noted EPA lacked necessary cost analysis and OMB approval to
upgrade PeoplePlus with an automated workflow feature in support of the establishment of the EPA shared service
centers. Subsequent to the release of our draft report in April 2009, EPA changed its approach to achieving
anticipated efficiencies at its shared service centers and has determined that it is not cost effective to update
PeoplePlus. EPA now looks to find a certified line-of-business provider that can provide the required human
resources information technology support. Our final report included recommendations that EPA have the appropriate
analysis, actions, and approvals in place to ensure the effective management of the Agency's human resources
function.
Agency Explanation: EPA's Office of the Chief Financial Officer and Office of Administration and Resources
Management have agreed to and begun system fit/gap sessions with the U.S. Department of the Interior's National
Business Center to arrive at the baseline cost estimate, and time requirements for a potential human resources line-
of-business migration. It is anticipated that these sessions will run to June 2010.
OIG Follow-up Status: No response
Office of Acquisition Management
Report No. 08-4-0146, Cambridge Labor Charging Verification Review, May 1, 2008
Summary: Based on our review, nothing came to our attention that caused us to believe that the labor charges
(including subcontract labor) billed under Contract EP-W-05-044 are not in compliance with federal laws, regulations,
or terms and conditions of the contract. However, during our review, we noted a potential violation of Title 13, Code
of Federal Regulations, Part 121, Small Business Size Regulations, which we believe required immediate attention.
Agency Explanation: The Small Business Administration did not receive the contracting officer's request for size
determination and documentation which was mailed to them in April 2009. The Office of Acquisition Management will
schedule a meeting with the OIG for the week of March 29, 2010, to discuss disposition of this audit. After discussion
with OIG, if required to do so, the Office of Acquisition Management will resubmitthe size determination request to
the Small Business Administration and will follow the Small Business Administration's recommendation. Expected
resolution date will be determined after the Office of Acquisition Management meets with the OIG.
OIG Follow-up Status: Incomplete response received
Financial Analysis and Rate Negotiation Service Center
Report No. 2004-1-00099, Lockheed Martin Services Group - FYE 12/31/2002 Incurred Cost, August 23, 2004
Summary: The Defense Contract Audit Agency (DCAA) questioned indirect costs of $3,595,399, of which $2,128 is
applicable to EPA contracts. DCAA qualified the audit results pending receipt of assist audit reports.
Agency Explanation: Resolution on hold due to other cognizant federal agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2006-4-00120, National Academy of Sciences - FY 2006 Info Tech System, July 20, 2006
Summary: DCAA determined that the contractor's information technology system general internal controls were
inadequate in part.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
60
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Report No. 2006-4-00165, National Academy of Sciences - FY 2006 Indirect/ODC System, September 27, 2006
Summary: In DCAA's opinion, the contractor's service centers cost system and related internal control policies and
procedures were inadequate in part. DCAA's examination noted certain significant deficiencies in the design or
operation of the Indirect/Other Direct Costs system process.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2006-4-00169, National Academy of Sciences - FY 2006 Labor System, September 29, 2006
Summary: In DCAA's opinion, the contractor's labor system and related internal control policies and procedures were
inadequate in part. DCAA's examination noted certain significant deficiencies in the design or operation of the
internal control structure.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00016, URS Corporation (c/o URS Greiner, Inc.) - FY 2001 Incurred Cost, November 13, 2006
Summary: DCAA questioned a total of $188,772,784 in direct and indirect costs. Of these, $5,585,929 are claimed
direct costs, of which $1,328,189 are from EPA Contract No. 68-W9-8225. The questioned indirect expenses
impacted all fringe, overhead, and general and administrative rates. Of the questioned indirect costs, EPA's share is
$401,412, for a total of $1,729,601 in questioned direct and indirect costs.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00061, Lockheed Martin Services Group- FY 12/31/2004 I/C, April 10, 2007
Summary: DCAA questioned $34,708,911 in claimed direct costs and proposed indirect costs. Further, DCAA did
not audit $338,864,655 in claimed direct and indirect costs for assist audits not yet received or for received assist
audit reports whose impact on the contractor's cost objectives has not yet been calculated. Additionally, DCAA
upwardly adjusted ($48,224,805) in claimed base costs. EPA's share of the questioned costs totals $694,178.
DCAA did not provide any Cumulative Allowable Cost Work Sheet or Schedule of Allowable Costs by Cost Element
by Contract because the most current year with negotiated indirect rates is calendar year 1998. DCAA will issue a
supplemental audit report upon completion of its analysis of the assist audit results, and as the outstanding fiscal
years' indirect rates are negotiated, the requested Cumulative Allowable Cost Work Sheet and Schedule of Allowable
Costs by Cost Element by Contract will be provided.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-4-00058, SAIC - Companies 1, 6, and 9 - FY 2006 Floorchecks, April 30, 2007
Summary: DCAA determined that certain labor practices require corrective action to improve the reliability of the
contractor's labor accounting system. DCAA did not express an opinion on the adequacy of the contractor's labor
accounting system taken as a whole.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00079, Science Applications Intl. Corporation - FYE 1/31/2005 I/C, July 18, 2007
Summary: DCAA submitted three audit reports under this assignment. DCAA accepted the claimed direct costs at
Companies 1 and 6 (there are no claimed direct costs at Company 9), and questioned proposed indirect costs and
61
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
rates at Companies 1, 6, and 9. DCAA questioned a total of $17,224,585 of Company 9 claimed indirect expenses
($9,938,874) and fringe benefit costs and rates ($7,285,711), of which $7,762,651 was allocated to other companies
that do not perform government work. Questioned indirect costs of $3,525,230 and $4,552,250 were allocated to and
questioned in the claimed general and administrative costs and rates of Companies 1 and 6, respectively. The
questioned fringe benefit rates in Company 9 resulted in questioned fringe benefit costs of $865,365 and $519,089
for Companies 1 and 6, respectively. DCAA questioned an additional $1,995,869 of Company 1 claimed indirect
expenses, and an additional $511,822 of Company 6 claimed indirect expenses. Total questioned costs in
Companies 1 and 6 are $11,969,625, of which $119,696 are applicable to EPA contracts.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00080, Lockheed Martin Services, Inc. - FY 2005 Incurred Cost, August 6, 2007
Summary: DCAA questioned $595,792,539 in claimed direct costs and $10,982,460 in proposed indirect costs and
rates. None of the questioned direct costs are chargeable to EPA contracts. A number of the EPA contracts have
indirect ceiling rates that are lower than the contractor's proposed indirect rates, and are not impacted by the
questioned indirect expenses and rates. However, there are EPA contracts/subcontracts that do not have indirect
ceiling rates and are impacted by the questioned indirect rates. EPA's share of questioned indirect costs totals
$133,069.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00090, ABT Associates Inc. - FY 2002 Incurred Cost, August 29, 2007
Summary: DCAA questioned a total of $2,206,870, involving $5,363 of proposed direct costs and $2,201,507 of
proposed indirect costs and rates. EPA's share of the questioned indirect costs is $123,686. None of the questioned
direct costs impact EPA contracts.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (U.S. Agency for International
Development).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-4-00079, Weston Solutions, Inc. - FY 2006 Billing System, September 25, 2007
Summary: In DCAA's opinion, the contractor's billing system and related internal control policies and procedures
were inadequate in part.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-4-00080, National Academy of Sciences - FY 2006 Budget System, September 26, 2007
Summary: In DCAA's opinion, the budget and planning system and related internal control policies and procedures
were inadequate in part.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0002, SAIC - Company 1 Compensation Follow-Up, October 2, 2007
Summary: In DCAA's opinion, the contractor's compensation system and related internal control policies and
procedures are inadequate in part. DCAA's examination noted certain significant deficiencies in the design or
operation of the internal control structure that could adversely affect the contractor's ability to record, process,
62
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
summarize, and report compensation in a manner that is consistent with applicable government contract laws and
regulations.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-1-0114, Weston Solutions Inc. - FY 12/31/2004 Incurred Cost, March 24, 2008
Summary: DCAA determined that the contractor's claimed direct costs are acceptable; however, DCAA questioned
$2,082,837 in proposed indirect costs and rates. Further, DCAA applied penalties in accordance with Federal
Acquisition Regulation 42.709, and identified expressly unallowable costs subject to penalty that had been allocated
to various contracts specified in Federal Acquisition Regulation 42.709(b), including 11 EPA contracts. Of the
questioned costs, EPA's total share of questioned costs is $197,869, of which $164,163 is questioned overhead costs
and $33,706 is questioned general and administrative costs.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-1-0131, Washington Group International, Inc. - FY 2001 Incurred Costs, April 15, 2008
Summary: DCAA questioned $2,208,686 of claimed direct costs and $13,757,945 of proposed indirect costs and
rates, a total of $15,966,631. EPA's share of questioned costs totals $44,648.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-1-0130, Morrison Knudsen Corporation - FY 1999 Incurred Costs, April 15, 2008
Summary: DCAA questioned $3,705,233 in claimed direct costs and $3,472,023 in proposed indirect costs and
rates, a total of $7,177,256. EPA's share of questioned costs totals $57,369.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0208, MACTEC Engineering & Consulting, Inc. - CAS 409, July 24, 2008
Summary: In DCAA's opinion, the contractor was in noncompliance with Cost Accounting Standard 409 during the
period of January 1, 2006, through December 31, 2006.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0308, Tetra Tech EC, Inc. - EDP General Controls, September 30, 2008
Summary: In DCAA's opinion, the contractor's information technology system of general internal controls was
inadequate in part. DCAA's examination noted significant deficiencies in the design or operation of the internal
control structure that could adversely affect the contractor's ability to record, process, summarize, and report direct
and indirect costs in a manner consistent with applicable government contract laws and regulations.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Report No. 09-1-0034, Lockheed Martin Services Group - FY 2006 Incurred Cost, November 24, 2008
Summary: DCAA questioned $23,672,344 in claimed direct and proposed indirect costs and rates. Of this, $381,582
is claimed direct costs and $23,290,762 is proposed indirect costs and rates. DCAA also did not audit $159,778,286
in claimed subsidiary and subcontracts costs. EPA's share of the questioned costs is 3 percent, or $11,448 in
claimed direct costs and $698,722 in proposed indirect costs, a total of $710,170.
Agency Explanation: This audit is awaiting additional information on the resolution of the questioned costs and rates
by the cognizant federal agency (Defense Contract Management Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Grants and Interagency Agreements Management Division
Report No. 2003-S-00001, Region 7 Grants Proactive, May 29, 2002
Summary: We questioned over $2 million because the Coordinating Committee on Automotive Repair did not
account for the funds in accordance with federal rules, regulations, and terms of the agreement.
Agency Explanation: The Grants and Interagency Agreement Management Division (GIAMD) has been working
extensively to review the reconstructed records submitted by the Coordinating Committee for Automotive Repair to
determine if there is significant documentation to support the costs charged to the EPA assistance agreements. The
records are lacking a significant amount of timecards to support the personnel costs that are charged to the grant.
However, GIAMD is working to determine if the other documentation provided, such as quarterly reports and notes
from office meetings that outline staff duties, will offer sufficient support for some of the personnel costs. Expect
resolution by May 31, 2010.
OIG Follow-up Status: Incomplete response received
Report No. 2003-4-00120, Geothermal Heat Pump Consortium, Inc. - Costs Claimed, September 30, 2003
Summary: Questioned $1,153,472 due to material financial management deficiencies. The Consortium's financial
management system was inadequate for various reasons, including that the Consortium did not separately identify
and accumulate costs for all direct activities, such as membership support and lobbying; account for program income
generated by the activities funded by the EPA agreements; and prepare or negotiate indirect cost rates.
Agency Explanation: The Branch Chief and Associate Award Official met with Office of General Counsel on
January 22 to discuss our review of the audit and options for resolution. Although we have made some progress, we
are continuing to work toward an agreement on which costs are unallowable. We are reviewing submitted procurement
actions and costs documentation. Our next meeting will be in late April to discuss the resolutions agreed upon in our
Office of General Counsel meeting and next steps. Further meetings with the Office of General Counsel and the
GIAMD director are required to evaluate the recommendation to count membership fees as program income before a
final determination can be issued. Expect resolution by October 31, 2010.
OIG Follow-up Status: No response
Report No. 2005-3-00036, National Indian Health Board, FY 2002, December 30, 2004
Summary: The board was allocating salary costs to grants based on predetermined formulas. No support, in the
form of time sheets, was located for those allocations. Also, amounts charged to various grants were not always
supported by original documentation. Therefore, we questioned $31,960 as unsupported.
Agency Explanation: GIAMD sent the National Indian Health Board a letter on December 22, 2009, requesting
supporting documentation that accounts for the $31,960 of expended funds and a Statement of Functional Expenses.
We received a response from the board on February 2, 2010, stating that they are unable to provide us with the
requested supporting documentation at this time due to changes in the board's accounting software and electronic
files that occurred in 2003 and when their office moved from Denver, Colorado, to Washington, DC, and they no
longer employ staff who worked for the organization in 2002. The board indicated in its response that it would like to
assist us, but documentation is quite limited. The board may have to remit a partial or full payment back to EPA in
the amount of $31,960 reportedly charged to the EPA Grant Number 827909. Expect resolution by June 30, 2010.
OIG Follow-up Status: No response
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Report No. 2006-3-00006, Alfred University, FY 2004, October 13, 2005
Summary: The University's accounting system provides certified payroll information on an individual grant basis.
However, the payroll distribution system does not provide a proportionate breakdown of each employee's total time
by each sponsored program he/she may be working on and other nonsponsored activities. The auditor questioned
costs of $649,506, but could not determine the direct impact upon EPA's program.
Agency Explanation: The University sent the Office of Grants and Debarment (OGD) an e-mail on February 11,
2010, that includes notification that it is still compiling the additional documentation and a copy of its amended
policies on Time & Effort and compensation that were developed as part of their responses to the adverse OMB
Circular A-133 audit findings. OGD followed up with the University by e-mail on March 7, 2010, requesting the status
of the additional documentation to substantiate the questioned cost. OGD received e-mail notification from the
University on March 18, 2010, stating that it has compiled the additional documentation that will substantiate the
questioned cost and will submit them by March 26, 2010. GIAMD may disallow the costs attributable to the EPA
assistance agreements ($148,968 + $230,517) if the additional documentation does not substantiate these
questioned costs. Expect resolution by April 30, 2010.
OIG Follow-up Status: No response
Report No. 2006-4-00122, Association of State & Interstate Water Pollution Control Administrators, July 31, 2006
Summary: The association did not comply with the financial and program management standards and the
procurement standards promulgated in Title 40, Code of Federal Regulations, Subchapter B, Part 30. For example,
the association could not provide support for any of its general journal entries, included duplicate recorded costs in its
accounting system, could not always trace grant draws to the accounting records, and could not always support labor
charged to the EPA grants. As a result, we questioned as unsupported a total of $1,883,590 in EPA grant payments
for seven grants.
Agency Explanation: In recent months we held several meetings with the OIG, the Office General Counsel, the
association, and EPA's Assistant Administrator for Administration and Resources Management. Based on these
meetings, GIAMD reached decisions on the remaining issues that needed to be addressed, i.e., issues related to the
association's fringe and indirect cost rates during the audit period, allowability of contract costs incurred by the
association, and single audits that were not submitted by the association. We received revised Financial Status
Reports from the Association reflecting disallowances of costs; prepared the draft final determination letter; obtained
approval of two deviations from Title 40, Code of Federal Regulations, Parts 30.5 and 30.26(a) to authorize GIAMD's
final determinations on the contract costs and single audits; received the Office of General Counsel's concurrence on
the final determination letter; and provided the draft final determination letter to OIG for concurrence on January 26,
2009. However, on February 10, 2010, OIG notified us it does not agree with GIAMD's proposed final determination
to allow the costs ($653,038) incurred under a subagreement by the American Clean Water Foundation for circuit
rider activities. OIG agreed that the transaction was a subaward rather than a contract, but disagreed with allowing
the costs because the American Clean Water Foundation did not conduct a required single audit and the
Foundation's financial and program management systems did not comply with standards. On February 5, 2010,
GIAMD and the Office of General Counsel held a conference call with the Association in which we outlined the
concerns about the subaward costs of $653,038. The Association said it has records of its own to substantiate the
costs charged by the Foundation, and GIAMD said it would make arrangements to visit the Association's offices and
review those records. Representatives from EPA's compliance team and Grants Management Branch A visited the
Association on February 25, 2010, and obtained some but not all of the required documentation to support the costs
charged by foundation. A follow-up visit to association for additional documentation was scheduled but has been
rescheduled several times. We have another onsite visit to the foundation scheduled for March 24, 2010. When we
get the information we will need to evaluate it, share it with the OIG, and prepare a revised final determination letter.
In addition, we will need to obtain approval of another deviation waiving the single audit requirements for the
Foundation. Expect resolution by May 31, 2010.
OIG Follow-up Status: No response
Report No. 2007-4-00027, National Rural Water Association - Congressional, November 30, 2006
Summary: The Association's method of allocating indirect costs over total direct costs is contrary to the requirements
of OMB Circular A-122. Currently, the Association does not exclude subcontracts or subawards from its indirect cost
allocation base. As a result, the EPA grants are bearing a disproportionate amount of indirect costs. For the period
from March 1, 1999, to February 29, 2004, EPA grants may have been overallocated by $2,021,821 in indirect costs.
The exact amount of the indirect overallocation will be determined when negotiating the indirect cost rate.
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Agency Explanation: OGD completed the final determination letter and sent it to the OIG for concurrence, and it was
sent back with a few comments. OGD is working with the OIG to resolve the audit. Expect resolution by May 1, 2010.
OIG Follow-up Status: No response
Report No. 2007-3-00037, Alfred University - FY 2005, December 11, 2006
Summary: The University's accounting system provided certified payroll information on an individual grant basis.
However, the payroll distribution system did not provide a proportionate breakdown of each employee's total time by
each sponsored program he/she may be working on and other nonsponsored activities. The auditor questioned costs
of $649,506, but could not determine the direct impact on EPA's program
Agency Explanation: The University sent OGD an e-mail on February 11, 2010, that includes notification that it is still
compiling the additional documentation and a copy of its amended policies on Time & Effort and compensation that
were developed as part of its responses to the adverse OMB Circular A-133 audit findings. OGD followed up with the
University by e-mail on March 7, 2010, requesting the status of the additional documentation to substantiate the
questioned cost. OGD received e-mail notification from the University on March 18, 2010, stating that it has compiled
the additional documentation that will substantiate the questioned costs and will submit them by March 26, 2010.
GIAMD may disallow the costs attributable to the EPA assistance agreements ($148,968 + $230,517) if the additional
documentation does not substantiate these questioned costs. Expect resolution by April 30, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0062, Missouri, University of - FY 2006, December 18, 2008
Summary: The University did not have an effective system of internal controls to ensure compliance with the
activities allowed or unallowed costs/cost principles compliance requirements. The auditors identified two systemic
issues related to the University's Time & Effort reporting. These issues involved the procurement and suspension
and debarment, and subrecipient monitoring. The auditors questioned $37,453 related to EPA grants.
Agency Explanation: OGD is reviewing the report. The report includes findings of inadequate internal controls and
questioned cost totaling $90,973. OGD will contact recipient for additional information to support the questioned
costs of $90,973. The estimated time for audit resolution is June 30, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0213, National Congress of American Indians - FY 2007, August 17, 2009
Summary: Employees and supervisors did not always sign timesheets. As a result, the single auditor questioned
labor charged of $10,965 as unsupported, of which $5,467 was for EPA grants. The recipient also did not submit its
indirect cost rate proposal within the required timeframe. Additionally, EPA's special grant conditions state that the
recipient is not allowed to claim indirect costs unless its indirect cost rate agreement has been sent to the cognizant
agency for approval. As a result, we questioned indirect costs of $25,155 as unsupported.
Agency Explanation: OGD has requested some additional information from the recipient. The final determination
letter is expected on May 15, 2010.
OIG Follow-up Status: No response
Office of Enforcement and Compliance Assurance
Report No. 08-P-0278, Strategic Planning in Priority Enforcement Areas, September 25, 2008
Summary: The Office of Enforcement and Compliance Assurance has instituted a process for strategic planning in
its national enforcement priority areas. The FYs 2008-2010 strategic plans we reviewed - for air toxics, combined
sewer overflows, and mineral processing - contain an overall goal, a problem statement, and other key elements.
However, each of the plans is missing key elements to monitor progress and accomplishments and efficiently utilize
Agency resources. All three strategies lack a full range of measures to monitor progress and achievements. Two
strategies lack detailed exit plans. Additionally, the combined sewer overflow strategy does not address the States'
key roles in attaining the strategy's overall goal. The absence of these elements hinders the Office of Enforcement
and Compliance Assurance from monitoring progress and achieving desired results in a timely and efficient manner.
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Agency Explanation: The OIG issued a memo to the Office of Enforcement and Compliance Assurance on
January 20, 2010, which requested this office to change the designation of recommendation 2-2 in the Management
Audit Tracking System to "unresolved" and include it in the list of recommendations unresolved after a year. The OIG
indicated it would pursue this matter through the formal EPA audit resolution process. Audit resolution is pending.
OIG Follow-up Status: Referred to Audit Resolution Board
Office of Environmental Information
Report No. 09-P-0240, Information Security Vulnerability Management Program, September 21, 2009
Summary: EPA implemented 56 percent (15 of 27) of the information security audit recommendations we reviewed.
EPA's lack of progress on four key audit recommendations we made in 2004 and 2005 inhibits EPA from providing an
Agency-wide process for security monitoring of its computer network. EPA has not established an Agency-wide
network security monitoring program because EPA did not take alternative action when this project ran into significant
delays. We recommended that EPA create Plans of Action and Milestones for each unimplemented audit
recommendation, update EPA's Management Audit Tracking System, provide EPA program and regional offices with
an alternative solution for vulnerability management, establish a workgroup of program and regional EPA information
technology staff to solicit input on training needs, and issue an updated memorandum discussing guidance and
requirements. The Agency agreed with all of our findings and recommendations.
Agency Explanation: The Office of Environmental Information provided a new corrective action plan to the OIG on
March 15, 2010. OIG has not yet approved the plan.
OIG Follow-up Status: Incomplete response received
Region 1- Regional Administrator
Report No. 08-3-0250, Indian Township Tribal Government, FY 2006, September 5, 2008
Summary: The Tribe did not submit Financial Status Reports within required timeframes. For the EPA Partnership
Performance grants, the single auditor reported that the Tribe did not have records or formal calculations to
demonstrate that it met the matching requirements under these grants. Payroll issues were noted, as well as
$26,134 in unsupported costs. There also were 17 cross-cutting findings. The U.S. Department of Health and
Human Services is the oversight agency responsible for audit resolution, but we reported these findings to EPA as
they may impact EPA grant funds.
Agency Explanation: The resolution of this audit is rolled into discussion of resolution of the FY 2008 audit, since
issues carry over. Expect resolution by September 2010.
OIG Follow-up Status: No response
Report No. 09-3-0024, Indian Township Tribal Government, FY 2007, November 12, 2008
Summary: There are several EPA grants for which the official time period has expired; however, the Tribe still has
funds available under these grants and potential related expenditures. To have access to these funds, the Tribe
needs to request time extensions from EPA. The Tribe has drawn funds from various federal programs to pay
general fund expenditures, which is not allowable. The single auditors noted a net deficit to federal programs of
$189,961. The Tribe recognized that this condition existed due to misappropriation activities by the former tribal
governor.
Agency Explanation: The resolution of this audit is rolled into discussion of resolution of the FY 2008 audit, since
issues carry over. Expect resolution by September 2010.
OIG Follow-up Status: No response
Report No. 09-3-0250, Cumberland, Town of- FY 2004, September 29, 2009
Summary: The assistant finance director has certain job responsibilities that resulted in the lack of segregation of
duties. The Town and school department did not have an accounting system in place to properly maintain and
account for their governmental fund fixed assets. Further, the Town did not have an accounting system to account
for the water fund's fixed assets and related depreciation, did not obtain copies of certified payrolls from the company
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
that constructed the water tanks funded by this federal program, and did not submit the required reports and forms
identified above by the required due dates.
Agency Explanation: The grantee provided an acceptable response on March 30, 2010. The final determination
letter will be completed by April 12, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0191, New Hampshire, State of- FY 2008, August 12, 2009
Summary: Administrative and direct program cost drawdowns were not in accordance with the agreement entered
between the Secretary of the Treasury, U.S. Department of the Treasury, and the State. Also, costs that met the
definition of indirect costs were charged directly to the grant and were not included in the indirect cost rate.
Agency Explanation: The State continues to work with Treasury to resolve. Expect resolution by May 2010.
OIG Follow-up Status: No response
Region 2 - Regional Administrator
Report No. 09-3-0239, Puerto Rico, University of- FY 2008, September 17, 2009
Summary: Time & Effort reports were never submitted and several Time & Effort reports were submitted late.
University officials and private investigators are not being held accountable for the missing reports. There is a known
amount of $15,317 in questioned costs, of which $10,439 are direct funds from EPA.
Agency Explanation: Region 2 currently awaits detailed documentation from the grantee to support the $10,439 in
questioned unsupported costs. Expected resolution date is June 30, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0255, Puerto Rico, Department of Agriculture - FY 2004, September 30, 2009
Summary: For the EPA pesticide grants, the Department did not have supporting documentation to justify services
and purchases, contracts, invoices, payment vouchers, a proposal evaluated, and a payroll register. The auditors
questioned $5,376 as unsupported costs.
Agency Explanation: Region 2 currently awaits specific documentation from the grantee to support the $5,376 in
questioned unsupported costs. Expect resolution by June 30, 2010.
OIG Follow-up Status: No response
Report No. 08-4-0156, Canaan Valley Institute, May 19, 2008
Summary: We questioned $3,235,927 of the $6,686,424 in reported net outlays because the recipient reported
unallowable outlays for indirect, contractual, and in-kind costs. Specifically, the recipient (1) claimed indirect costs
without approved indirect rates, (2) did not credit back to the agreements all program income, (3) did not demonstrate
that it performed cost analysis of contracts, (4) reported costs for services outside the scope of one agreement,
(5) did not comply with terms and conditions of contracts, and (6) used EPA funds to match another federally funded
cooperative agreement. Also, the recipient needs to improve its subrecipient monitoring program.
Agency Explanation: In December 2009, the OIG determined that Region 3's proposed final determination letter was
incomplete for several recommendations. In January 2010, Region 3 submitted a request for deviation from
Headquarters and is waiting to hear back. Region 3 expects to have a revised final determination letter to the OIG by
April 30, 2010.
OIG Follow-up Status: No response
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EPA OIG Semiannual Report to Congress October 1, 2009 - March 31, 2010
Report No. 09-4-0135, Tetra Tech EM Inc. Base Year Labor Verification Review, April 3, 2009
Summary: Based on our review, matters came to our attention that caused us to believe that Tetra Tech overtoiled
EPA $253,089 for labor charges (including subcontract labor).
Agency Explanation: Region 3 submitted a proposed final determination memo to the OIG on July 6, 2009, and the
OIG requested more information on September 24, 2009. Region 3 submitted a revised response to the OIG with
attachments on March 22, 2010, and is awaiting a response.
OIG Follow-up Status: Resolution pending receipt of additional information
Region 8 - Regional Administrator
Report No. 2007-4-00078, Cheyenne River Sioux Tribe, September 24, 2007
Summary: The Tribe did not comply with the financial and program management standards under Title 40, Code of
Federal Regulations, Parts 31 and 35, and OMB Circular A-87. We questioned $3,101,827 of the $3,736,560 in
outlays reported. The Tribe's internal controls were not sufficient to ensure that outlays reported complied with
federal cost principles, regulations, and grant conditions. In some instances, the Tribe also was not able to
demonstrate that it had completed all work under the agreements and had achieved the intended results of the
agreements.
Agency Explanation: We were able to utilize a federal contract and provide Tribe staff (programmatic and financial)
with comprehensive grants management training that will hopefully provide the general understanding to everybody
involved with EPA funds management. The next step is to build off of this and work with the Tribe to implement
procedures/controls to assure that the compliance requirements are consistently met. We expect resolution shortly
after our work the week of April 19, 2010.
OIG Follow-up Status: No response
Report No. 08-3-0307, Oglala Sioux Tribe - FY 2004, September 30, 2008
Summary: The single auditor findings indicate the Tribe may not be able to support costs claimed under EPA grants.
As a result, we are questioning the costs claimed of $1,158,903.
Agency Explanation: We continue to work with the Tribe to address the deficiencies in its management and
accounting systems. We have a series of meetings set up with the Tribe's Environmental and Finance Departments
over the next 5 months to work with the Tribe to identify and overcome its performance limiting factors through
adherence to existing policies and procedures and/or development of new policies and procedures that better serve
its (and our) needs. Once these new practices are fully implemented and tested, we will recommend that the audit be
closed. Expect resolution by October 31, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0252, Oglala Sioux Tribe - FY 2005, September 29, 2009
Summary: The single auditor's findings indicate that the Tribe may not be able to support the costs claimed under
EPA grants. As a result, we are questioning the costs claimed during 2005 of $307,323 as being unsupported.
Agency Explanation: We continue to work with the Tribe to address the deficiencies in its management and
accounting systems. We have a series of meetings set up with the Tribe's Environmental and Finance Departments
over the next 5 months to work with the Tribe to identify and overcome its performance limiting factors through
adherence to existing policies and procedures and/or development of new policies and procedures that better serve
its (and our) needs. Once these new practices are fully implemented and tested, we will recommend that the audit be
closed. Expect resolution by October 31, 2010.
OIG Follow-up Status: No response
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Report No. 09-3-0253, Oglala Sioux Tribe - FY 2006, September 30, 2009
Summary: The single auditor's findings indicate that the Tribe may not be able to support the costs claimed under
EPA grants. As a result, we are questioning the costs claimed during 2006 of $530,042 as being unsupported.
Agency Explanation: We continue to work with the Tribe to address the deficiencies in its management and
accounting systems. We have a series of meetings set up with the Tribe's Environmental and Finance Departments
over the next 5 months to work with the Tribe to identify and overcome its performance limiting factors through
adherence to existing policies and procedures and/or development of new policies and procedures that better serve
its (and our) needs. Once these new practices are fully implemented and tested, we will recommend that the audit be
closed. Expect resolution by October 31, 2010.
OIG Follow-up Status: No response
Region 9 - Regional Administrator
Report No. 09-3-0159, Cahto Tribe of the Laytonville Rancheria - FY 2006, June 8, 2009
Summary: The Tribe did not perform the single audit within the required timeframe. Further, the Tribe did not secure
an approved indirect cost proposal for FY 2006. Also, documentation was not available, and the Tribe's policies and
procedures need to be updated. We questioned funds of $142,465.
Agency Explanation: As of March 26, 2010, a final determination letter has been routed for signature that addresses
all of the complex issues raised by the single audit. Extra time was required to review documentation provided by the
recipient that adequately addressed EPA's concerns and the "high risk" rating recommended by the OIG. The final
determination letter should be issued no later than May 1, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0218, Northern Mariana Islands, Commonwealth of- FY 2007, August 24, 2009
Summary: Of 35 nonpayroll expenditures of the Environmental Protection Consolidated Grants program tested
involving $320,208, there was no indication that price or rate quotations were obtained from an adequate number of
qualified sources for six items that qualified under small purchase procedures. The single auditors questioned
$17,027. Also, property records had incomplete information, reporting of accumulated expenditures was inconsistent,
the policy for competitive procurement for items less than $2,500 did not conform to federal requirements, and
procurement procedures did not include procedures related to airfare.
Agency Explanation: The project officer and accounting staff have been diligently reviewing documentation provided
by the recipient to adequately address all of the single audit's complex issues. It has taken extra time given
competing priorities, geographic distance, volume of support documentation, and the need to perform a thorough
review. A final determination letter should be routed for signature no later than May 1, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0238, Guam, Government of- FY 2008, September 17, 2009
Summary: The government had inadequate internal controls over procurement. Records in the procurement file
were not sufficient, and the single auditor questioned $109,487 of unsupported procurement transactions. Also, the
government did not submit the required reports for FY 2008, which precluded testing reported amounts against
underlying accounting records.
Agency Explanation: The project officer and accounting staff have been diligently securing and reviewing
documentation provided by the recipient to adequately address all of the single audit's complex issues. It has taken
extra time given competing priorities, geographic distance, volume of support documentation, and the need to
perform a thorough review. A final determination letter should be routed for signature no later than May 1, 2010.
OIG Follow-up Status: No response
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Report No. 09-3-0248, Northern Mariana Islands, Commonwealth of - FY 2008, September 24, 2009
Summary: We questioned $19,501 of direct costs as unsupported. Another $78,763 in unsupported costs was noted
in relation to indirect cost rates. The auditee's noncompliance with procurement regulations resulted in $56,969 in
ineligible costs. Because of a lack of compliance in relation to accounting for program income, $11,685 in ineligible
costs was noted. Property records were not reconciled and accumulated expenditures were not properly recorded.
Agency Explanation: The project officer and accounting staff have been diligently securing and reviewing
documentation provided by the recipient to adequately address all of the single audit's complex issues. It has taken
extra time given competing priorities, geographic distance, volume of support documentation, and the need to
perform a thorough review. A final determination letter should be routed for signature no later than May 1, 2010.
OIG Follow-up Status: No response
Total reports issued before reporting period for which
no management decision has been made as of March 31, 2010 = 53
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October 1, 2009 - March 31, 2010
Appendix 3 - Reports with Corrective Action Not Completed
In compliance with reporting requirements in the Inspector General Act, Section 5(a)(3), "Identification of
Reports Containing Significant Recommendations Described in Previous Semiannual Reports on Which
Corrective Action Has Not Been Completed," and to help EPA managers gain greater awareness of
outstanding commitments for action, we have developed a Compendium of Unimplemented
Recommendations. This separate document provides the information required in Appendix 3 to this
Semiannual Report to Congress. This compendium (available upon request or at
http://www.epa.qov/oiq/reports/2010/20100428-10-N-0114.pdf) is produced semiannually for Agency
leadership and Congress based on Agency reports on the status of action taken on OIG
recommendations and OIG selective verification of that reported status.
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October 1, 2009 - March 31, 2010
Appendix 4 - OIG Mailing Addresses and Telephone Numbers
Headquarters
U.S. Environmental Protection Agency
Office of Inspector General
1200 Pennsylvania Ave., NW (2410T)
Washington, DC 20460
(202) 566-0847
Atlanta
U.S. Environmental Protection Agency
Office of Inspector General
61 Forsyth Street, SW
Atlanta, GA 30303
Audit/Evaluation: (404) 562-9830
Investigations: (404) 562-9857
Boston
U.S. Environmental Protection Agency
Office of Inspector General
5 Post Office Square, Suite 100 (OIG15-1)
Boston, MA 02109-3912
Audit/Evaluation: (617) 918-1470
Investigations: (617) 918-1466
Chicago
U.S. Environmental Protection Agency
Office of Inspector General
77 West Jackson Boulevard
13th Floor (IA-13 J)
Chicago, IL 60604
Audit/Evaluation: (312) 353-2486
Investigations: (312) 353-2507
Cincinnati
U.S. Environmental Protection Agency
Office of Inspector General
26 West Martin Luther King Drive
Cincinnati, OH 45268-7001
Audit/Evaluation: (513)487-2360
Investigations: (513)487-2364
Dallas
U.S. Environmental Protection Agency
Office of Inspector General (6OIG)
1445 Ross Avenue, Suite 1200
Dallas, TX 75202-2733
Audit/Evaluation: (214)665-6621
Investigations: (214)665-2790
Offices
Denver
U.S. Environmental Protection Agency
Office of Inspector General
1595 Wynkoop Street, 4th Floor
Denver, CO 80202
Audit/Evaluation: (303) 312-6969
Investigations: (303) 312-6868
Kansas City
U.S. Environmental Protection Agency
Office of Inspector General
901 N. 5th Street
Kansas City, KS 66101
Audit/Evaluation: (913) 551-7878
Investigations: (913) 551-7875
New York
U.S. Environmental Protection Agency
Office of Inspector General
290 Broadway, Room 1520
New York, NY 10007
Audit/Evaluation: (212)637-3080
Investigations: (212)637-3041
Philadelphia
U.S. Environmental Protection Agency
Office of Inspector General
1650 Arch Street, 3rd Floor
Philadelphia, PA 19103-2029
Audit/Evaluation: (215) 814-5800
Investigations: (215) 814-5820
Research Triangle Park
U.S. Environmental Protection Agency
Office of Inspector General
Mail Drop N283-01
Research Triangle Park, NC 27711
Audit/Evaluation: (919) 541-2204
Investigations: (919) 541-1027
San Francisco
U.S. Environmental Protection Agency
Office of Inspector General
75 Hawthorne Street (IGA-1)
7th Floor
San Francisco, CA 94105
Audit/Evaluation: (415) 947-4521
Investigations: (415) 947-4500
Seattle
U.S. Environmental Protection Agency
Office of Inspector General
1200 6th Avenue, 19th Floor
Suite 1920, M/SOIG-195
Seattle, WA 98101
Audit/Evaluation: (206) 553-4033
Investigations: (206) 553-1273
Winchester
U.S. Environmental Protection Agency
Office of Inspector General
200 S. Jefferson Street, Room 314
P.O. Box 497
Winchester, TN 37398
Investigations: (423) 240-7735
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It's your money
It's your environment
Report fraud, waste or abuse
e-mail: OIG_Hotline@epa.gov
write: EPA Inspector General Hotline 2431M
1200 Pennsylvania Avenue NW
Washington DC 20460
fax: 202-566-1810
phone: 1-888-546-8740
www.epa.gov/oig/hotline/how2file.htm
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