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Assistance Agreements Awarded to the
Center for Chesapeake Communities
Report Number 2001-1-00101
February 13, 2001

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Regional Center for Environmental Information
US EPA Region 111
1650 Arch St
Philadelphia, PA 19103
Region Covered:
Region III
Program Office Involved:
Office of the
Assistant Regional Administrator
for Policy and Management
Contributors:
Patrick J. Milligan
Mark S. Phillips
Rosa Rivera-Rodgers
Stephen J. Nelson

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE INSPECTOR GENERAL
MID-ATLANTIC DIVISION
1650 Arch Street
Philadelphia, Pennsylvania 19103-2029
(215) 814-5800
February 13, 2001
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Philadelphia, PA 19103
MEMORANDUM
SUBJECT: Final Financial Audit Report of Assistance Agreements
Awarded to the Center for Chesapeake Communities
Report Number 2001-1-00101
FROM: Patrick J. Milligan
Team Leader
Mid-Atlantic Division (3AI00)


TO:
Thomas C. Voltaggio, Acting
Region III Administrator (3RA00)
Between September 1997 and May 1998, EPA Region III awarded the Center
for Chesapeake Communities (CCC) three assistance agreements totaling $920,338.
In 1998, we evaluated Region Ill's management of CCC's first assistance agreement
as well as CCC's performance under the agreement. On March 31, 1999, we issued
an audit report entitled Center for Chesapeake Commutiities which disclosed that,
among other issues, CCC did not have an adequate financial accounting system.
In that prior report, we recommended that a financial audit be conducted at the
conclusion of the project period for the grant. Attached is our financial audit report.
This report contains findings that describe problems the Office of Inspector
General (OIG) has identified and corrective actions the OIG recommends. This
report represents the opinion of the OIG. Final determinations on matters in this
report will be made by EPA managers in accordance with established EPA audit
resolution procedures. Accordingly, the findings contained in this report do not
represent the final EPA position.
ACTION REQUIRED
In accordance with EPA Manual 2750, you are required to provide a final
determination on the costs questioned within 180 days of the audit report date.
Also, please submit an electronic copy of your response to phillips.mark@epa.gov.
This will assist us in deciding whether to close this report. Should your position on

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the questioned costs differ from our recommendation, we would appreciate the
opportunity to discuss Region Ill's position before the determination is issued to the
CCC. Please provide us with a copy of the final determination when it is issued.
We have no objection to the further release of this report to the public. If you
or your staff have any questions regarding this report, please contact me or Mark S.
Phillips at (215) 814-5800.

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TABLE OF CONTENTS
PURPOSE 	 1
BACKGROUND 	 1
SCOPE AND METHODOLOGY	 2
RESULTS OF REVIEW 	 4
RECOMMENDATION 	 5
CCC RESPONSE AND OIG EVALUATION	 5
EXHIBIT A 			 7
Analysis of Expenditures to Verify Allowability
Under the Base Agreement
EXHIBIT B 	 19
Analysis of Expenditures to Verify Allowability
Under the Small Watershed Agreement
EXHIBIT C 	 22
Analysis of Expenditures to Verify Allowability
Under the Sustainable Development Agreement
APPENDIX 1 - CCC RESPONSE	 27
APPENDIX 2 - DISTRIBUTION	 41

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PURPOSE
This financial audit was performed because our earlier performance audit,
Center for Chesapeake Communities (E6DEP8-03-0014-9100117), dated March 31,
1999, cited deficiencies with CCC's financial accounting system. One of our
recommendations in that report was that a financial audit be conducted of CCC
when it concluded the grant work. In particular, the purpose of this financial audit
was to determine whether the costs claimed by CCC under three EPA assistance
agreements were allowable, allocable, and reasonable.
BACKGROUND
CCC is a nonprofit organization formed to provide technical assistance for local
governments interested in Chesapeake Bay restoration and protection activities.
The EPA Region III Chesapeake Bay Program awarded the CCC three assistance
agreements intended to improve the Chesapeake Bay:
Agreement
Description
Amount
Project Period
CB993675-01
Base
$461,233
09/08/97 - 06/30/99
X-993743-01
Small Watershed
$391,105
04/01/98-01/15/00
SD-993796-01
Sustainable Development
$ 68,000
05/15/98-05/15/99
Although the three assistance agreements were for projects relating to the
Chesapeake Bay, each award was for a distinct project and, as a result, CCC was
required to account for its costs separately for each award. Below is a brief
description of what EPA required CCC to do under each assistance agreement.
Base
The Base agreement was to support the start-up of the CCC, and complete
various projects, such as enhancing implementation efforts for reducing
nutrients in the Chesapeake Bay, and supporting toxic reduction pollution
prevention goals. Part of CCC's work also included providing staff support
for the Local Government Advisory Committee (LGAC). LGAC's primary
mission was to develop and implement a strategy for local government
participation in the Chesapeake Bay Program.
Small Watershed
EPA's Small Watershed Grants Program provided funding in amounts up to
$40,000 to 16 local governments to implement watershed protection and
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restoration activities that were supportive of Region Ill's Chesapeake Bay
Program goals.
CCC received $60,000 to manage the 16 grants awarded to local
governments. CCC was required to track applications, assure that the
recipients properly allocated and accounted for the grant money, and ensure
that the recipients successfully completed their project. When a recipient
completed the work, it was required to submit a report to CCC that
summarized the project, included lessons learned, and a feasibility report for
conducting a similar project elsewhere.
Sustainable Development
The grant required CCC to prepare innovative, sustainable, site development
plans to be designed for a specific parcel of land in the Chesapeake Bay
Watershed. As part of this project, the CCC was required to:
•	Demonstrate that a carefully designed alternative development plan
would be profitable and marketable to the public while protecting the local
environment and the Chesapeake Bay.
•	Ensure the plan offered fiscal and social benefits to the local community.
•	Organize a local government sustainable development summit to
disseminate the positive results from the plans to private interests, such
as bankers, developers, and local government decision-makers.
•	Ensure that the summit focused on the benefits as well as the barriers of
sustainable development for local communities.
SCOPE AND METHODOLOGY
We conducted a financial audit of CCC's final costs incurred for all three assistance
agreements. The scope of our work was limited to financial activities conducted by
CCC under the grants. We performed our audit in accordance with the Government
Auditing Standards (1994 Revision) for financial audits issued by the Comptroller
General. The audit included tests of the accounting records and other auditing
procedures we considered necessary. Other than the issues discussed in this report,
no other significant issues came to our attention that warranted expanding the
scope of our audit.
Our review of CCC's internal controls was related to costs incurred under the
grants. It was limited to assuring compliance with federal criteria and with CCC's
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policies and procedures. Because of the inherent limitations in any system of
internal controls, errors or irregularities may occur and not be detected. Except for
the issues discussed in this report, nothing came to our attention that would cause
us to believe that CCC's procedures were not adequate for our purposes.
We reviewed EPA's policies and procedures for administering grants and the
requirements specified in the assistance agreements. We used the Code of Federal
Regulations (CFR) Part 30 and the Office of Management and Budget (OMB)
Circular A-122 as criteria for conducting this audit. We also interviewed officials
from Region III, CCC's Executive Director, and CCC's bookkeeper.
Our audit began on March 13, 2000 and ended on August 4, 2000. We conducted
our audit at Region III and at CCC's office in Annapolis, MD. Early in the audit, we
found that CCC's accounting and record keeping system was not in compliance with
federal regulations. Specifically, CCC did not account for the three awards
separately and the supporting documentation for costs incurred was filed in a
manner not conducive to an audit. Because of these deficiencies, we were unable to
complete our audit at that time. On May 31, 2000, we sent CCC a letter describing
the deficiencies and what corrective action was necessary. We allowed CCC one
month to make the required changes. We returned to CCC's office at the end of
July and found that the grantee had reorganized its accounting records and
accounted for costs by grant agreement. CCC provided revised financial statements
reflecting the adjustments they made to their accounting records. We then
conducted an audit of these revised records.
We reviewed records maintained by Region III and CCC. These records included
the assistance agreements, work plans, contracts, correspondence, and related files.
We reviewed the costs claimed under the agreements to determine the
reasonableness, allowability, and allocability of CCC's expenditures. For each cost
claimed, we reviewed source documentation such as invoices, receipts, canceled
checks, travel reports, bank statements, and time sheets. We also reviewed CCC's
compliance with the program and financial reporting requirements of the grant.
We issued the draft report on October 26, 2000. Region III did not respond to the
draft report but indicated it would make a determination on questioned costs based
on the final report. The CCC responded to the draft report on December 11, 2000.
We included all of CCC's response as Appendix 1 to this report. On February 12,
2001 we conducted an exit conference with CCC.
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RESULTS OF REVIEW
Costs Questioned
We determined that of the $996,146 in costs incurred by CCC under three separate
agreements, $50,817 of those costs were ineligible and $130,434 were unsupported.
Thus, $814,895 of the costs incurred were considered acceptable. For each of the
three grants, we analyzed the money EPA provided to CCC against the costs
incurred that we accepted. In total, we concluded that a balance of $120,093
($88,120 plus $31,973) was due EPA from CCC. The results of our financial audit
are summarized below and presented in detail in Exhibits A, B, and C.
Base Agreement
(Grant CB993675-01)
Questioned
Incurred Ineligible Unsupported	Accepted
Total Costs $508,687 $10,433 $125,141	$373,113
Total Payments	461,233
Balance Due EPA	$88,120
Small Watershed Agreement
(Grant X-993743-01)
Questioned
Incurred Ineligible Unsupported	Accepted
Total Costs $361,651 $701 $1,818	$359,132
Total Payments	391,105
Balance Due EPA	$31,973
Sustainable Development Agreement
(Grant SD-993796-01)
Questioned
Incurred Ineligible Unsupported	Accepted
Total Costs $125,808 $39,683 $3,475	$82,650
Total Payments	68,000
Amount CCC Overspent	$14,650
Balance Due EPA	$0
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Other Matters
CCC Owes Vendors
As of January 2000, CCC received a total of $920,338 from EPA for the three
awards. However, the CCC still owed $53,485 to various organizations and
contractors even though it had expended all of the EPA funds it had received.
Single Audit Not Completed
OMB Circular A-133 requires grantees to have an independent Single Audit
completed for each year that they expend $300,000 or more of federal monies.
CCC was required to have an audit completed for 1998 because in that year it
expended approximately $700,000 of the $920,338 awarded by Region III.
The fieldwork for the 1998 Single Audit was conducted, but a report was not
issued, even though it was due September 30, 1999. The Executive Director
for CCC said that the audit firm hired by the CCC had not issued a report
because it is waiting for the results of this review. We request the Region
forward a copy of CCC's Single Audit to us when it is completed.
RECOMMENDATION
We recommend that the Region III Administrator adjust the allowable costs in
accordance with our determination. In particular, CCC should repay EPA $88,120
of the Base grant and $31,973 of the Small Watershed grant, for a total of $120,093.
CCC RESPONSE AND OIG EVALUATION
CCC generally disagreed with the draft report and maintained that all costs
incurred should be accepted. We disagree with CCC's response and still question
nearly all of the costs we questioned in the draft report. CCC also provided some
documentation subsequent to the draft report and based on that documentation we
made minor alternations to our report.
We summarized CCC's overall comments below, followed by our evaluation of the
response. CCC's specific comments to individual notes are included after each note,
along with our evaluation.
CCC Response
CCC noted that the present draft does not reference the process that ensued after
the first OIG Report. In the first report, many issues were raised and after
following the prescribed agency procedures they were resolved. CCC raised this
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issue because a number of significant issues contained in this report are identical to
the issues raised in the previous performance audit. Since these issues have
already been addressed, CCC believes it both inappropriate and unreasonable to
reopen them, and make adverse findings and recommendations which have the
effect of requiring additional time and expense to address again and recreate the
same controversies.
CCC replied that it was unable to determine what combination of numerous
expenditures cited in the report were questioned and would be pleased to address
each expenditure as appropriate. CCC also stated that during the OIG's on-site
visits, a question was raised concerning specific checks and that the grantee has
answered nearly everyone of these questions by the records provided to the OIG.
OIG Evaluation
Issues addressed in the earlier audit were within the scope of a performance audit.
During that audit, we evaluated the adequacy of Region Ill's and CCC's
performance under the grant. Specifically, whether CCC complied with federal
regulations related to areas such as: justifying noncompetitive cooperative
agreements, proper use of cooperative agreements, and conflict of interest.
This report is a financial audit and did not again address the performance issues
identified in the first OIG audit. However, there is a direct correlation between the
performance issues and many of the costs we questioned. As a result, many of the
performance issues that affected agency dollars were not resolved during the
performance audit. These issues can only be resolved after the monetary aspects of
the issues are corrected. As a result, if poor grantee performance resulted in a
misuse of grant funds, the corresponding costs were questioned as part of this
financial audit.
We disagree with CCC when it responds that it does not know which specific costs
we are questioning or does not understand why the costs are questioned. During
our records review at CCC's office, we explained to the Executive Director of CCC
why the costs were ineligible or unsupported. For each of the costs we questioned,
we explained either why the cost could not be charged to the EPA grants or, when
appropriate, the type of supporting documentation that was needed in order for the
costs to be accepted. CCC was afforded more than sufficient opportunity to provide
supporting documentation for costs that were questioned. Moreover, our draft
report provided much detail about the costs.
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EXHIBIT A
Analysis of Expenditures to Verify Allowability
Under the Base Agreement
(Grant CB993675-01, Awarded to CCC for the Period
September 8, 1997 to June 30, 1999)
AUDITOR'S OPINION
Costs Questioned
Costs
Category
Costs
Incurred
Ineligible
UnsucDorted
Costs
Accented
Note
Personnel
$176,018
$ 0
$40,600
$135,418
1
Contractual
34,441
0
0
34,441

LGAC
185,509
0
25,268
160,241
2
Travel
8,108
277
4,051
3,780
3
Equipment
11,072
0
11,072
0
4
Supplies
9,424
63
1,925
7,436
5
Other
64,454
5,842
9,877
48,735
6
In-kind
46.435
4.800
38.935
2.700
7
Total
$535,461
$10,982
$131,728
$392,751

Federal
Share 95%
$508,687
$10,433
$125,141
$373,113

Total
Payments



$461,233

Balance
Due EPA



$88,120

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Note 1: Personnel
We determined $40,600 of $176,018 in personnel and related fringe expenditures
were unsupported.
a.	Personnel and related fringe costs amounting to $39,908 were
unsupported because CCC did not maintain payrolls supported by
personnel activity reports (i.e., time sheets) as required by OMB
Circular A-122. Time sheets must be based on an after-the-fact
determination of the actual activity of each employee. Because CCC
employees did not complete time sheets from September 1997 through
May 1998, we could not determine the time expended on grant-related
activities. We did review the Executive Director's personal calendar,
but it also did not provide adequate support.
Amount Unsupported $39,908
CCC Response
During the period questioned, CCC had only one grant and one
employee. The single employee did keep a calendar and no one
disputes that the required work was carried out. CCC believes the
insistence on records labeled time sheets is a very narrow definition of
adequacy.
OIG Evaluation
Our position remains unchanged. We attempted to use the calendar as
an alternative to formal time sheets, however, the information on the
calendar was cryptic and incomplete. During the time period in
question, the Executive Director was charging the EPA grant full time.
However, because of insufficient documentation, there was no way to
verify that the Executive Director worked full time on the EPA project.
b.	We found the $692 paid to a life insurance provider as unsupported
because CCC did not provide the supporting records required by
40 CFR 30.21, such as an invoice or receipt and a description of
services provided.
Amount Unsupported	$692
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CCC Response
The bill is the receipt. CCC believes that the payment and check is
sufficient to support the expense. The same quarterly bill has been
identified and paid continuously over the life of the CCC grants. CCC
notes the amount identified is not identical to any particular payment
in their records; thus they are unable to determine which particular
check was being questioned. IG staff has copies of the CCC records.
The insurance provider is unable to provide copies of bills more than
two years old.
OIG Evaluation
Our position remains unchanged. Because CCC did not provide a
receipt or invoice, there is no record of the grantee incurring this cost
for life insurance.
Total Amount Unsupported $40.600
Note 2: LGAC
CCC's subcontractor, Redman/Johnson Associates (Redman), received $184,557 for
LGAC project expenditures. Because Redman was awarded time-and-materials
contracts, labor charges needed to be substantiated by individual daily job time
cards. Between September 1997 and April 1998, Redman did not maintain daily
time sheets and could not support the actual costs for hours charged. Moreover,
after April 1998, when timesheets were prepared, there were some discrepancies
between the total hours reported on the invoices and the related time sheets. In
total, we found 716 hours on the Redman invoices, valued at $25,268, that were not
supported by time sheets.
Total Amount Unsupported $25.268
CCC Response
CCC stated that it followed the same policies required of the previous contractor for
which no time sheets were required. CCC believed that its arrangement with
Redman was in the form of a fee-for-services contract, not a time-and-materials
contract. Redman provided CCC time estimates in its billing to show progress and
level of effort. The critical test in every case was the services or product provided.
After EPA articulated their expectations that time sheets were required, time
sheets were kept and provided for all billings after April 1998. CCC strongly
believes that the amount indicated as unsupported is an unreasonable insistence on
detail when EPA had not required this of prior grantees.
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OIG Evaluation
We did not audit the grantees mentioned by CCC, and therefore do not have an
opinion on whether they complied with federal regulations. We did find, however,
that CCC's subcontractor did not adequately document time charged to the EPA
grant as required by federal regulations.
We disagree that the contract was a fee-for-service contract because the Redman
contract states it was a Time and Materials contract. Moreover, all of the Redman
invoices were prepared as time and materials invoices. Monthly invoices included
the hourly labor rates multiplied by the number of hours each employee charged.
These invoices indicate that the contract was administered as a time-and-materials
contract.
As part of its response to the draft report, CCC provided additional Redman time
sheets and we adjusted the amount of unsupported costs accordingly.
Note 3: Travel
CCC incurred a total of $8,108 in travel expenses under the Base agreement. Of
these expenditures, we determined $277 as ineligible and $4,051 as unsupported.
a. Early in the project, EPA provided CCC free office space at an EPA
facility. However, the CCC Director had to pay for parking while
working at this facility. We considered the $277 in parking expenses
charged to this grant as ineligible because the cost was unreasonable
in accordance with OMB Circular A-122. The Circular defines a cost
as reasonable if it does not exceed that which would be incurred by a
prudent person under the circumstances prevailing at the time the
decision was made to incur the costs. We considered this expenditure
unreasonable because daily commuting and parking expenses are
usual and customary expenses of each employee.
Total Amount Ineligible	$277
CCC Response
As part of the Director's employment contract, CCC authorized the
payment of parking since this was provided free to other staff in the
same office complex.
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OIG Evaluation
Our position remains unchanged. The other staff referred to by CCC
was EPA staff. Free parking provided to EPA staff does not entitle
grantees to the same benefit. This was an inappropriate and
unreasonable charge.
b. We found $4,051 in travel expenditures as unsupported because CCC
did not provide the records required by 40 CFR 30.21, such as purpose
for the travel, travel vouchers, and receipts.
Total Amount Unsupported $4.051
CCC Response
CCC replied that it was unable to determine what combination of
expenditures lead to claim that $4,051 is unsupported. CCC also
responded that its records are reasonably complete and would be
pleased to address each expenditure as appropriate.
OIG Evaluation
Our position remains unchanged. During the audit, we explained each
expenditure with CCC, but the grantee was unable to furnish the
required support.
Note 4: Equipment
We determined the $11,072 incurred for equipment expenditures was unsupported
because CCC did not indicate which equipment costs were grant related.
Total Amount Unsupported $11.072
CCC Response
All CCC equipment is grant related. CCC does not understand the observation that
records were not clear about which equipment was grant related.
OIG Evaluation
Our position remains unchanged. We found that the $11,072 was listed in the
summary financial records as the amount of equipment charges. However, the
more detailed support listed an amount greater than $11,072. As a result, we
cannot determine which records comprise the $11,072. We asked CCC for an
explanation on this issue, but none was provided.
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Note 5: Supplies
CCC incurred a total of $9,424 for supplies under the Base assistance agreement.
Of these expenditures, we considered $63 as ineligible and $1,925 as unsupported.
a.	We considered the $50 incurred for Christmas cards and the $13
incurred for a Physician Home Assistant computer software package
as ineligible because the costs were unreasonable in accordance with
OMB Circular A-122. Also, these costs were ineligible because they
were not allocable to the grant. The Circular states a cost is allocable
to a grant if it benefits the award and is necessary to the overall
operation of the organization. Christmas cards and the software
package did not benefit the EPA grant and were not necessary for the
overall operation of CCC.
Total Amount Ineligible	$63
CCC Response
CCC agrees that these items were incorrectly allocated to a Grant
category and will make the correction.
OIG Evaluation
We concur with CCC's response.
b.	We determined $825 for consultant services, $500 for start-up costs,
$431 for reference materials, and $169 for note cards as unsupported
because CCC did not provide the supporting records required by
40 CFR 30.21. There were no invoices or receipts for these
expenditures.
Total Amount Unsupported $1.925
CCC Response
CCC included some additional documentation on these issues. The
$169 business cards were so that staff could respond to information
requests without the need for more costly stationary.
OIG Evaluation
We received no additional documentation for the $825, $500 and $431
items; therefore, our position remains unchanged. We did not question
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the reasonableness of the business cards. We questioned their cost
because there was no receipt or invoice to support the expenditure.
Note 6: Other
CCC incurred a total of $64,454 in the "Other" category of expenses. Of these
expenditures, we considered $5,842 as ineligible and $9,877 as unsupported.
a.	As of July 1999, CCC's staff was downsized to one person, the
Executive Director. We found it unnecessary and unreasonable to
continue renting office space at a cost of approximately $1,300 per
month for one person. CCC should have found more modest
accommodations in an effort to conserve money. Allowing a one-month
transition period for the reduction in staff, we questioned rent
expenses beginning August 1999. Because this expense was allocated
to all three grants, the questionable portion allocated to the Base grant
was $3,890.
Amount Ineligible	$3,890
CCC Response
The draft report fails to recognize that the CCC signed a three-year
lease in May 1998. It is not reasonable to move to "more modest
accommodations" if CCC was still obligated to pay for the present one.
The CCC allocation of these costs during the closeout period is
reasonable and should be expected when such contracts are present.
When CCC received the base grant there was a reasonable expectation
CCC would hold it for this entire three-year period. Only the
subsequent involvement of IG staff put this expectation in doubt and
ultimately caused CCC to relinquish the grant.
OIG Evaluation
Our position remains unchanged. The prudent business decision
would have been to terminate the lease before the three years
transpired and pay a penalty for breaking the lease.
b.	For travel with his personal vehicle, the CCC Director received a
mileage reimbursement of 30 cents per mile. However, the CCC
Director also charged an auto allowance of $350 per month to the grant
to help finance his vehicle. OMB Circular A-122 allows for travel costs
to be charged on either an actual basis or a mileage basis. We
considered the Director receiving both a standard mileage
reimbursement and the auto allowance as unnecessary and
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unreasonable. Because this expense was allocated to the three grants,
the questionable portion allocated to the Base grant was $1,295.
Amount Ineligible
$1,295
CCC Response
CCC provided support describing that the expenditure for auto
allowance was contained in the Executive Director's employment
contract and that the mileage is considered a standard reimbursement.
CCC also provided information that non-profits in the Washington
Metro area frequently provide auto allowance to directors particularly
when extensive use of an automobile is required. CCC believes the
expenditure is reasonable and eligible.
OIG Evaluation
Our position remains unchanged. We considered the CCC Director
receiving both a standard mileage reimbursement and the auto
allowance as unnecessary and unreasonable.
c. CCC incurred $307 for fund-raising activities, $252 for gifts to
recognize Board of Directors' services, and $98 for a Board luncheon.
We considered these expenditures ineligible because they were not in
accordance with OMB Circular A-122. In particular, they were
unnecessary, unreasonable, and not allocable to the grant.
CCC Response
CCC did not conduct fund-raising activities but rather purchased
reference materials on how to conduct fund-raising activities. CCC
may have incorrectly allocated the expenditures for gifts and a lunch
given to the board members.
OIG Evaluation
Our position regarding the $307 expense remains unchanged.
Regarding the board gifts and lunch, CCC now considers those costs
ineligible and has agreed to pay those monies back to EPA, we agree
with the comment.
Amount Ineligible
$657
Total Amount Ineligible
$5.842
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d.	We found $6,995 paid to an Internet Service Provider unsupported
because CCC did not provide the supporting records required by
40 CFR 30.21, such as an invoice or receipt and a description of
services provided.
Amount Unsupported $6,995
CCC Response
The file that would support the cost was lost in the move. CCC was
making every effort to find a copy of the contract.
OIG Evaluation
Our position remains unchanged.
e.	We determined "Other" expenditures totaling $1,872 claimed in the
grant administrative category as unsupported because CCC did not
provide the supporting records required by 40 CFR 30.21. The $1,872
consisted of:
•	$845 Travel Voucher - No receipts.
•	$740 Journal Entry - No explanation of
accounting adjustment.
•	$222 Phone Charges - No invoice.
•	$ 65 Training Related - No explanation of what
the training related to.
Because these expenses were allocated to all three grants, the
questionable portion allocated to the Base grant was $1,872.
Amount Unsupported $1,872
CCC Response
Additional information has been submitted for consideration regarding
the eligibility of these costs.
OIG Evaluation
Our position remains unchanged because we have not received this
additional information that CCC referred to in its response.
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f. We found a $1,010 check written to cash as unsupported because
CCC did not provide the supporting records required by 40 CFR 30.21.
There were cryptic88 handwritten notations referencing four staff
members attending a conference in Ocean City, MD. However, there
was no invoice or explanation of how this expense was grant-related.
Amount Unsupported $1,010
CCC Response
CCC has not been able to locate the receipt; however, CCC has asked
the vendor for a copy of the charges. CCC also submitted additional
support.
OIG Evaluation
Our position remains unchanged. The additional support provided by
CCC is a blank registration form with a hand written note on it. This
support is not adequate.
Total Amount Unsupported $9.877
Note 7: In-kind
Although CCC reported $44,937 of In-kind expenditures on the Financial Status
Report, the accounting records showed a total of $46,435. We reviewed the higher
amount as the In-kind expenses claimed by CCC. We considered $4,800 ineligible
and $38,935 as unsupported.
a. We considered $4,800 of In-kind expenditures for EPA's donated office
space as ineligible. In-kind expenditures are required so that the
grantee can provide some of the cost of the project from its own
resources to show a commitment toward the project. Because the office
space was donated by EPA, there was no expenditure by CCC. As a
result, the $4,800 was not an eligible in-kind expenditure. The 40 CFR
30.2 defines cost sharing or matching (In-kind) as that portion of the
project or program cost not borne by the Federal Government.
Total Amount Ineligible	$4.800
CCC Response
The space was provided at the behest of the Agency to facilitate the
corporation's startup for a program desired by the Agency. CCC
believed this was an appropriate In-kind contribution as expected by
the grant.
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OIG Evaluation
Our position remains unchanged because there was no expenditure by
CCC. These costs were borne by the EPA.
b.	We found $31,660 of In-kind expenditures as unsupported because
CCC did not provide the supporting records required by 40 CFR 30.23.
This regulation requires, among other things, that the records be
verifiable and that the activities are necessary and reasonable for
proper and efficient accomplishment of project objectives. CCC had
documentation indicating that individuals volunteered their time at
various meetings and workshops, such as: Community Environmental
Reviews, Pollution Prevention Workshops, and LGAC meetings.
However, we could not determine which individuals provided the
services and how their services supported the grant.
Amount Unsupported $31,660
CCC Response
It is incredulous to CCC that the IG could not assess the supporting
records required by the Agency. CCC has provided a list of the
meetings, attendees and modest estimates of the value of their time.
The records show the meetings took place and the services were
provided.
OIG Evaluation
Our position remains unchanged. The documentation provided was
inadequate. We could not determine the number of individuals that
provided the services and how their services supported the grant.
c.	We determined $7,275 of In-kind expenditures for CCC board
members' time spent at CCC's Corporate Board Meetings as
unsupported because CCC did not provide the supporting records
required by 40 CFR 30.23. The regulation required, among other
things, that the records be verifiable and that the activities be
necessary and reasonable for proper and efficient accomplishment of
the grant.
Amount Unsupported $7.275
CCC Response
The CCC grants described in this report constituted all the work
undertaken by CCC from September 1997 to January 2000. Thus,
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CCC counted the board members attendance at board meetings as
appropriate In-kind contributions.
OIG Evaluation
CCC needed board minutes and an agenda that cleanly showed how
the board members' efforts directly supported the EPA grants.
Total Amount Unsupported $38,935
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EXHIBIT B
Analysis of Expenditures to Verify Allowability
Under the Small Watershed Agreement
(Grant X-993743-01, Awarded to CCC for the Period
April 11, 1998 to January 15, 2000)
AUDITOR'S OPINION
Costs Questioned
Costs
Category
Costs
Incurred
Ineligible
UnsuDDorted
Costs
Acceoted
Note
Personnel
$ 19,633
$ 0
$ 0
$ 19,633

Communities
331,494
0
0
331,494

Travel
2,222
0
1,167
1,055
1
Supplies
2,183
0
398
1,785
2
Other
6.119
701
253
5.165
3
Total
$361,651
$701
$1,818
$359,132

Total
Payments



$391,105

Balance
Due EPA



$31,973

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Note 1: Travel
We determined $1,167 in travel expenditures were unsupported because CCC did
not provide the supporting records (e.g., purpose for the travel, travel vouchers,
receipts) as required by 40 CFR 30.21.
Total Amount Unsupported $1.167
CCC Response
CCC was unable to determine which of the expenditures IG's staff identified as
unsupported. CCC has provided copies of all their records and would be pleased to
respond on an item by item basis.
OIG Evaluation
Our position remains unchanged. During the audit, we explained the specific
documentation CCC needed, and the grantee was unable to furnish the required
support.
Note 2: Supplies
We found $398 in expenditures for supplies to be unsupported because CCC did not
provide the supporting records (e.g., invoices or receipts) as required by 40 CFR
30.21.
Total Amount Unsupported	$398
CCC Response and OIG Evaluation
See Note 1 above.
Note 3: Other
CCC incurred a total of $6,119 in the "Other" category of expenses. Of these
expenditures, we considered $701 as ineligible and $253 as unsupported.
a. We considered $526 in rent expenditures as ineligible for reasons
explained in Exhibit A, Note 6a.
Amount Ineligible	$526
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b. We considered $175 in auto allowance expenditures as ineligible for
reasons explained in Exhibit A, Note 6b.
Amount Ineligible	$175
Total Amount Ineligible	$701
c. We determined $253 in the "Other" expenditures as unsupported for
reasons explained in Exhibit A, Note 6e.
Total Amount Unsupported	$253
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EXHIBIT C
Analysis of Expenditures to Verify Allowability
Under the Sustainable Development Agreement
(Grant SD-993796-01, Awarded to CCC for the Period
May 15, 1998 to May 15, 1999)
AUDITOR'S OPINION
Costs Questioned
Costs
Category
Costs
Incurred
Ineligible
Unsupported
Costs
Accepted
Note
Personnel
$ 45,077
$ 0
$ 0
$45,077

Contractual
21,756
0
0
21,756

Travel
8,065
0
166
7,899
1
Supplies
6,545
1,148
0
5,397
2
Other
11,042
981
354
9,707
3
In-kind
59,350
47,475
2,225
9,650
4
Summit Expense
58.200
0
1,599
56.601
5
Subtotal
$210,035
$49,604
$4,344
$156,087

Less:
Summit Income
52.775
0
0
52.775

Total
$157,260
$49,604
$4,344
$103,312

Federal
Share 80%
$125,808
$39,683
$3.475
$ 82.650

Total
Payments



$ 68.000

CCC
Overspent



$ 14.650

Balance Due EPA


$ 0

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Note 1: Travel
We determined $166 in travel expenditures as unsupported because CCC did not
provide the supporting records (e.g., travel receipts) as required by 40 CFR 30.21.
Total Amount Unsupported	$166
CCC Response
CCC was unable to determine which of the expenditures IG's staff identified as
unsupported. CCC has provided copies of all their records and would be pleased to
respond on an item by item basis.
OIG Evaluation
Our position remains unchanged. During the audit, we explained the specific
documentation CCC needed, and the grantee was unable to furnish the required
support.
Note 2: Supplies
CCC incurred a total of $1,148 for 300 copies of James Michener's fictional novel,
Chesapeake. These books were given to CCC workshop participants to promote
interest in the Chesapeake Bay. Because this book was fictional, we considered this
expenditure ineligible because it was unnecessary and unreasonable in accordance
with OMB Circular A-122.
Total Amount Ineligible	$1,148
CCC Response
CCC believed the use of the book generated substantial interest in the Bay and the
CCC work. CCC contends the book was more likely to be read than another factual
report of Bay statistics. CCC's experience shows this assumption to be true.
O/G Evaluation
Our position remains unchanged.
Note 3: Other
CCC incurred a total of $11,042 in the "Other" category of expenses. Of these
expenditures, we considered $981 as ineligible and $354 as unsupported.
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a.	We considered $736 in rent expenditures as ineligible for reasons
explained in Exhibit A, Note 6a.
Amount Ineligible	$736
b.	We considered $245 in auto allowance expenditures as ineligible for
reasons explained in Exhibit A, Note 6b.
Amount Ineligible	$245
Total Amount Ineligible	$981
c. We determined $354 in "Other" expenditures as unsupported for
reasons explained in Exhibit A, Note 6e.
Total Amount Unsupported	$354
Note 4: In-kind
CCC reported a total of $59,350 of In-kind expenditures, of which we considered
$47,475 as ineligible and $2,225 as unsupported.
a. CCC inflated its expenditures by erroneously claiming $47,475 as an
In-kind expense when this amount was income. We considered this
erroneously claimed amount ineligible.
Total Amount Ineligible	$47.475
CCC Response
CCC reported the amount received from contributors and attendees as
In-kind contributions because these funds were used to offset hotel and
other costs associated with grant activities.
OIG Evaluation
We agree that CCC was entitled to use Summit Income to offset
Summit Expenses. This is illustrated in Exhibit C where we accept
$52,775 of Summit Income and subtract this amount from Grant
Expenses.
However, the $47,475 discussed in this note was a portion of the
$52,775 of Summit Income; and was erroneously claimed as an In-
kind expense. Therefore, our position remains unchanged.
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b. We determined $2,225 of In-kind expenditures as unsupported because
CCC did not provide the supporting records required by 40 CFR 30.23.
The regulation requires, among other things, that the records be
verifiable, and that the activities are necessary and reasonable for
proper and efficient accomplishment of project objectives. The support
indicated individuals volunteering their time at various Site Planning
meetings and workshops, but we could not determine which
individuals provided the services and how their services supported the
grant.
Total Amount Unsupported $2.225
CCC Response
It is incredulous to CCC that the IG could not assess the supporting
records required by the Agency. CCC has provided a list of the
meetings, attendees and modest estimates of the value of their time.
The records show the meetings took place and the services were
provided.
OIG Evaluation
Our position remains unchanged. The documentation provided was
inadequate. We could not determine the number of individuals that
provided the services and how their services supported the grant.
Note 5: Summit Expense
We considered several Summit expenditures totaling $1,599 as unsupported
because CCC did not provide the supporting records required by 40 CFR 30.21.
The particular expenditures were for:
a.	Kinkos	$948	- No Receipt
b.	Cash Advances $635	- No Explanation
c.	Restaurant	$ 16	- No Receipt
Total Amount Unsupported	$1.599
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CCC Response
This item labeled "Kinkos" was for the Conference program delivered
on site. The receipt was misplaced. Kinkos could not provide us copy
since they retain records of this type for only one year.
The cash advances were funds to pay hotel personnel for setting up
exhibits. No receipts were provided by these persons. CCC notes
indicate the exhibits cost about $30 each to set up; CCC thought these
costs reasonable. They were not paid out of federal funds.
The item labeled "Restaurant" was a staff person's lunch. The receipt
was not found.
OIG Evaluation
Our position remains unchanged for items a, b, and c.
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APPENDIX 1 - CCC RESPONSE
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Center for Chesapeake Communities, Ltd.
209 West Street, Suite 201
Annapolis, MD 21401
Email: gallenbay@aol.com
Tel. (410) 267-8595
Fax. (410) 267-8597
December 11, 2000
Via E-mail
Mr. Patrick J. Milligan
Team Leader
United States Environmental Protection Agency
Office of the Inspector General
Mid-Atlantic Division
3AI00
1650 Arch Street
Philadelphia, Pennsylvania 19103-2029
RE: Draft Report #2000-000803
Dear Mr. Milligan:
Thank you for the opportunity to comment and provide additional information on the
Draft Financial Audit Report of Financial Assistance Agreements Awarded to the Center for
Chesapeake Communities.
GENERAL COMMENT ON SCOPE
We have reviewed the Draft Report in detail and will comment on each of its sections as
appropriate. We note that the report references an earlier Performance Audit dated March 31,
1999, as a reference for this Report and states the purpose of this financial audit "was to
determine whether the costs claimed by CCC under these Assistance Agreements were
allowable, allocable, and reasonable."
We note that the present Draft does not reference the process that ensued after the first
Report. In that Report many issues were raised and following the prescribed agency procedures
resolved. We raised this issue because a number of significant issues contained in this report are
identical to ones raised in the previous Performance Audit. Since these issues (which we will
identify in our comments below) have already been raised and resolved, it seems to us both
inappropriate and unreasonable to reopen them, and make adverse findings and
recommendations which have the effect of requiring additional time and expense to address and
recreating the same controversies.

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BACKGROUND
The narrative contained in the report on our organization's purpose, and the description
of the three Agreements contained on page 1 and 2 of the Draft Report are accurate.
SCOPE AND METHODOLOGY
We note the comments in the Draft that reflect "Except for the issues discussed in this
report, nothing came to our attention that would cause us to believe CCC procedures were not
adequate for our purposes."
IG Audit staff can attest that we have made every effort to be fully cooperative and have
provided copies of all records and materials relating to our work. The observation made
concerning record keeping reflects only how they were filed in our office by cost category
instead of by grant. This "deficiency" was corrected and the records reorganized. Our financial
statement was adjusted as requested.
RESULTS
We disagree with the results of the review of both the Base Agreement (Grant CB-
993675-01) and the Small Watershed Agreement (Grant X-99374301). We also differ on the
Sustainable Development Agreement and will comment below; however we note the Audit finds
No Balance Due EPA on Grant SD-993796-01). We agree with this finding.
CCC VENDORS
We do have outstanding obligations which we have made substantial progress in meeting
since January 2000. It can not help but be noted that our ability to pay these organizations may
be heavily dependent on how this Draft Report is revised, distributed and its Recommendations
resolved. The earlier report dated March 31,1999 did substantial and sustained harm to our
organization, its staff and Directors. This happened despite the fact that every issue save one
was resolved satisfactorily. We strongly hope these facts will encourage reflection on the
substantive comments below.
SINGLE AUDIT
IG staff can confirm a single audit was paid for and the on site review carried out in early
1999 as required. EPA's extensive review of our work and records has caused the Audit firm to
withhold its report. Auditors raise the significant issue of our remaining a "going concern" in
light of the response following the EPA review and our reluctant withdrawal from competition
for future funding while this review continues. At present we do not have the funds to complete
further audits. The one already paid for will be completed when this cycle of reviews is
complete. We will provide a copy of this document when it is available to us.
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ANALYSIS OF EXPENDITURES UNDER BASE AGREEMENT
ALLOWABLE COSTS
Our detailed comments on the Draft begin with item identified on page 8. We shall
return to the Summary on page 7 later.
Note 1 Personnel
Note 1-a. This issue has been previously addressed in the earlier Performance Audit.
Our response is on record. EPA Management and Audit Staff have reviewed these records and
found them acceptable. Here are the facts.
•	During the period September, 1997 through May 1998 we had only one grant and one
employee. No records labeled time sheets were kept until additional employees and grants were
made which required the segregation of effort by activity. The single employee did keep a
calendar and no one disputes that the required work was carried out during this period.
•	We strongly believe the history of previous reviews of this information, common sense and
the reports provided by our payroll records showing bi-monthly calls for payments, taxes, etc.
should be sufficient to document these costs. We believe the insistence on records labeled time
sheets is a very narrow definition of adequacy. This $39,908 is supported by these facts and
records.
Note 1-b. Life insurance has been a paid benefit since hiring the first employee. The bill
is the receipt. We believe the payment and check is sufficient to support the expense. The same
quarterly bill has been identified and paid continuously over the life of our grant. We note the
amount identified is not identical to any particular payment in our records; thus we were unable
to determine which particular check was being questioned. IG staff have copies of our records.
The insurance provider is unable to provide copies of bills more than two years old.
Note 2-LGAC
This issue has been previously addressed in the earlier Performance Audit. The response
of the Contractor is on record. Copies of these materials were again provided in September,
2000. EPA Management and Audit Staff have reviewed these records and found them
acceptable. Here are the facts:
During the period identified, the Center followed the same policies required of the
contractor for the previous four years by the previous holder of the grant. During that period no
time sheets were required. The contract was not in their view a time and materials contract but a
fee for services contract. They provided time estimates in their billing to show progress and
level of effort. The critical test in every case was the services or product.
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The IG and Management and Audit Staff are familiar with these facts. In our first year-
long contract with this vendor after EPA articulated their expectations concerning such records
time sheets were required, kept and provided for all billing after April, 1998.
We strongly believe the assertion that the amount of $26,693 is unsupported and is an
unreasonable insistence on detail when such informational requirement had not been previously
required by the Agency of its prior grantees and the issue has already been resolved. It should
not be included in this report except perhaps as a reference that it has already been addressed.
Note 3-Travel
Note 3-a. We note that the CCC had no costs for office space during this period
(September 1997 to April 1998). The CCC thus authorized the payment of parking since this
was provided free to other staff in the same office complex. The actual cost of $35 per month
does not seem unreasonable and it should be noted that the employee was experiencing severe
health problems during this period (which lead to heart surgery) which significantly affected his
ability to walk great distances. His employment contract thus provided payment for parking.
The payments reflect these facts. We believe the payments are appropriate.
Note 3-b. Our records are reasonably complete. We are unable to determine what
combination of expenditures lead to the claim that $4,051 is unsupported. We would be pleased
to address each expenditure as appropriate. We note that a question was raised concerning
specific checks during the on-site audit. We believe nearly every one of these questions has
been answered by the records we have provided and which remain available.
Note 4
All of our equipment is grant related. The computers, printers, copy machine, fax, and
office furniture are the normal part of setting up an office to carry out any task. Copies of
invoices were reviewed. We do not understand the observation that records were not clear about
which equipment was grant related.
We had no equipment prior to this grant. All equipment was acquired for grant related
work. Each grant provides for equipment costs. These funds were indicated in our records and
the specific checks noted for each item. We believe this connection is clear; thus the costs
themselves are supported.
Note 5-Supplies
Note 5-a. Christmas Cards were purchased cards and a sale item added to a software
purchase for $13.00. If these items were incorrectly allocated to a Grant category. We will make
the correction. This may be a bookkeeping error in coding costs.
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Note 5-b. We have included some additional documentation on these issues. The $ 169
item was for business cards for staff (sample enclosed) for response to information requests
without the necessity for use of more costly stationary. (Exhibit 1)
Note 6-Other
Note 6-a. It is accurate that the CCC immediately downsized its staff in July, 1999. The
Draft Report fails to recognize that the CCC signed a three year lease in May, 1998. It is not
reasonable to move to "more modest accommodation" if we are still obligated to pay for the
present one.
Our allocation of these costs during our closeout period are reasonable and should not be
unexpected when such contracts are present. The original lease was a money saving arrangement
in light of rapidly changing rents in the Annapolis area. When we received the Base grant we had
reasonable expectation we would hold it for this entire three year period. Only the subsequent
involvement of IG Staff put this expectation in doubt and ultimately caused us to relinquish the
grant.
Note 6-b. We provided documentation on this item in September, 2000 to IG staff. We
point out that the expenditure for an auto allowance was contained in the Executive Director's
employment contract and the mileage is considered a standard reimbursement. CCC's rate is .30
per mile. We also provided information that non-profits in the Washington Metro area frequently
provide Auto Allowance to Directors particularly when extensive use of an automobile is
required. We believe the expenditure is reasonable and eligible and was previously reviewed by
Audit management staff.
Note 6-c. The CCC purchased reference materials from several organizations on
environmental fundraising. We were expected to provide such information to local governments
for their use in response to requests. In addition the EPA expected the CCC to leverage its
grants to provide additional services to local governments.
We acquired these materials and posted reference to them on our Web site. We did not
conduct fundraising activities; thus be believe the $307 item appropriate to our work.
The gifts to our Board may be incorrectly allocated. Our Board served without
compensation. We provided shirts and other items for identification of their affiliation when
attending CCC sponsored events.
The CCC paid for a lunch provided at our Board Meeting. Directors came from
throughout the Bay Watershed. We thought this was a reasonable expenditure in light of the
expectation we would appreciate a viable non-profit organization. This expenditure may be
incorrectly allocated.
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Note 6-d. Funds were provided to a Web Designer that has gone out of business and
been replaced by a Web hosting organization supported by an Internet service provider. This
contract was developed very early in our existence prior to our move in May, 98. The file was
lost in the move. We are making every effort to find a copy of the contract.
Note 6-e. We have reviewed these items. Such additional information as we have been
able to identify is enclosed. (Exhibit 2, sent separately)
Note 6-f. This item refers to a check written for staff to participate in the Maryland
Municipal League Summer Conference in Ocean City. The CCC was expected to participate in
municipal meetings in Pennsylvania, Virginia and Maryland. In the case of Maryland, Staff had
just come on Board; thus only on site registration was possible. We have not been able to locate
the receipt; however the Municipal League has verified the cost been asked for a copy of the
charges. This information is enclosed. (Exhibit 3)
Note 6-g. We are confused by the comment that membership in the Washington Council
of Agencies is unsupported. Both the invoice, check and description of the organization are part
of our records. In addition our health insurance was provided through this organization. As a
small non-profit we joined this organization to be considered part of a pool for health coverage.
Membership is a prerequisite to getting these benefits. The cost savings to the grant are obvious
since our health costs were reduced by an estimated S500 per month. We believe this cost is
clearly supported.
Note 7-In-kind.
¦ We respectfully disagree with all the findings in this Note. Our accountant used usual and
standard practice to provide us with the number contained in our reports.
We understand the intent of In-kind support to be that the grantee acquire support in the
form of funds or effort from any appropriate source to compliment the funds in the grants. This
we have done and done consistently.
a.	The estimated value of the donated office space is a modest evaluation of the cost to
have acquired alternative space in the Annapolis area. Since we were provided space for a start
up organization for eight months we estimate the saving to the grant to be $4,800. We believe
this is an appropriate in-kind contributions as expected by our grant. Local EPA staff frequently
described the donated use of space as a contribution to our work. The records reflect this
encouragement and our belief it was appropriate. The space was provided at the behest of the
Agency to facilitate the corporation's startup for a program desired by the Agency.
b.	It is incredulous to us that the IG could not asses the supporting records required by
the Agency. We provided a list of the meetings, attendees and modest estimates of the value of
their time. The records shows the meetings took place and the services were provided. The Draft
Report notes we had documents concerning these
6

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meetings. The finding appears to request identifications of each individual by name. We believe
such request is unreasonable. However, in nearly every case even this expectation was met. The
assertion that IG staff were unable to see how attendance at the various workshop and meetings
we sponsored was connected to the grant is incredulous since these were all required by the
grant.
A list of these activities is contained in the grant award, reflected in our work reports and in our
financial expenditures. IG staff have all these documents. We strongly believe these in-kind
contributions are supported and consistent with the services required by the grant.
We note that this is a contribution, not an expenditure of grant funds. Hundreds of people
participated in our work. Many of these activities were attended by EPA staff. All of the required
activities were completed satisfactorily aided by the participation of those who attendance is
asserted as part of our reports.
c. The EPA grants described in this report constituted all the work undertaken by the
CCC during the period September, 1997 to January, 2000. Our Board provided oversite for this
work and frequently participated as representatives of their communities, organizations or
profession. They were never compensated for this work. We counted their attendance at Board
and other meetings as appropriate in-kind contributions. We were told by our accountant that
this is a usual and customary practice in accounting for federal grants. Their involvement is
reasonable for the proper operation of a non-profit which is a requirement for the grantee by the
EPA's Rules. Note, these are contributions of time not expenditure of grant funds. The actual
costs associated with these meetings is only a very small percentage of the value of the time
contributed by these individuals.
The records provided to the IG's reviewers, contrary to their findings, demonstrate that
the Corporation more than met its obligation to provide in-kind services to support the required
in-kind match for the grant funds. The records provided to the IG clearly and reasonably
demonstrate the value of the services, and IG's determination that the recognition of that value is
unsupported by the records is erroneous.
Response to Analysis of Expenditures under the Small Water Shed Agreement
Note 1 Travel
We were unable to determine which of the travel expenditures IG's staff identified as
unsupported. We have provided copies of all our records and would be pleased to respond on an
item by item basis.
Note 2 Supplies
See above comment under response to Note 1. We believe all our costs in this area are
adequately supported.
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Note 3
Note 3-a. See our earlier comments concerning rent. This was a reasonable and
unavoidable expense in light of our rental contract. It seems to us entirely appropriate that a
portion of these costs be charged to this grant as part of the expenses CCC is entitled to under the
grant.
Note 3-b. See our earlier comment on auto expenses in the base grant and note that again
it seems appropriate to allocate these costs to this grant in light of the enormous cost to CCC to
visit many of the grantees in the Bay Watershed program.
Note 3-c. We are unable to determine what this item refers to and thus cannot offer a
constructive response.
Analysis of Expenditures Under the Sustainable Development Agreement
The Summary document is incomprehensible to us. It would seem to suggest we had
costs totaling nearly a quarter of a million dollars ($210,035) for a project for which we
received $68,000 from EPA. The analysis suggests we overspent by $14,650 and no balance is
due EPA. We concur we do not owe EPA any funds on this or any other of these Agreements.
The report seems to us to consistently understate the funds acquired from other than EPA
sources as eligible in-kind match. Clearly we have received different advice from our
accountant than that used by the IG Staff.
In addition we note for the record that this grant required activities linked to those
required by the Base grant. It seems unreasonable to say we overspent this grant and under spent
the other when our records show these costs were shared by both projects.
Comments on Notes on Page 17 of Draft
Note 1 Travel
We cannot respond since we are unsure what expenditure is not supported.
Note 2
We believe the use of the Book identified in the Draft Report generated substantial
interest in the Bay and our work. In fact we submit it was more likely to be read and kept than
another factual report of the latest statistics on the Bay. These materials were also available.
Our experience shows our assumption to be true. The Auditor's judgement should not trump our
actual program experience.
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Note 3-Other
a.	Rent, see our earlier comment
b.	Auto, see our earlier comment and submissions
c.	We are unable to respond since no particular item is identified.
Note on In-kind
Item A. We reported the amount received from contributors, and attendees as in-kind
contributions because these funds were used to offset hotel and other costs associated with grant
activities. The advice we received indicated this was an appropriate match to our federal funds
since the expenses for the project could not have been met without these funds.
Item B. See our earlier comment concerning our reporting of the contribution of
volunteers to this project. Since the meetings took place, as the records show, clearly the criteria
for adequacy is different that we expected. It is also important to note no federal funds were
involved in these "expenditures."
Note 5-Summit Expense
Item a-Kinko's. This item is for the Conference program delivered on site. The receipt
was misplaced. Kinko's could not provide us a copy since they retain records of this type for
only one year.
Item b. This item provided funds to pay hotel personnel for setting up exhibits and the
display area. No receipts were provided by these persons. Our notes indicate the exhibits cost
about $30 each to set up. We thought these costs reasonable. They we not paid out of federal
funds.
Item c. This was a staff person's lunch. The receipt was not found.
Closing Comments
The process that has lead to this report has been lengthy, demanding and devastating to
our organization and it is still not complete. Faced with a similar situation a new organization
may well have closed. Ours nearly has. However because I believe that all our transactions
were handled with integrity, and were consistent with the purposes for which the EPA provided
the funds, we have sought to honor our obligations to our contractors and reestablish a revenue
stream.
We cannot agree that we owe the Agency any refunds. Nearly 80% of the requested
refund amount on the Base grant is attributed to costs already addressed and resolved in an
earlier review process. The assertions concerning equipment seems to us totally out of context
since the grant clearly allows equipment to be purchased, and all of it is accounted for in our
receipts and was present in our office when visited by IG staff
9

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twice and Management and Audit Staff. Rather than under spent our record show we over spent
this grant in an effort to carry out the work successfully. How else could you explain the fact
that we are still paying off our vendors as noted on page 5 of the draft?
Accountants and others knowledgeable about government programs whom we have
consulted note the Center has achieved remarkable success in a very short period of time, putting
into place systems, projects and policies while under close scrutiny. It seems to us unreasonable
that the report fails to note we have had many successes, no complaints from our grantees and
low overhead.
Perhaps the most fundamental observation missing from the report is the close
relationship of activities to be carried out under each grant. In one case, the "Summit Toward a
Sustainable Chesapeake," the activity was to be carried out with funds from two grants. It seems
to us unreasonable to assert we overspent one while under spent the other. Any organization
especially a new one might encounter difficulty successfully separating costs for such
overlapping grants. We think these differences balance out and would have been handled it in
this way had we the benefit of hindsight present in the Draft Report. Over a period of three
years, these issues would have been thoroughly discussed and resolved by EPA Grants
Management Staff. The intervention of the IG froze in place a dynamic process and this process
had not yet had time to take place.
We will be fully cooperative with the continuing resolution of the issues identified in this
report. Our most significant concern is that its findings will become a burden we cannot
shoulder and remain viable as an organization. We trust the Agency will continue to work with
us to assure our assertions are heard and a full and fair resolution is made in the weeks ahead.
Respectfully submitted,
Executive Director
10

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Exhibit 1
*1
Gajry G. Allen
Cbntek for Chesapeake Communities
SOB West Street, Suite 201
Annapolis, MD 8140L 4lO-ae7-8S90

11

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Exhibit 1 (Per Response)
THE NEW GRAY-BLUE CARD, PLUS YOUR NAME IN COLOR
The custom cards for our Pocket Briefcases art more useful and nicer than
standard J by 5 cards, which are either blank or have lines running the
wrong way, and are made of ordinary paper We print ours in three efficient
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Choose bright white or our brand-new. gray-blue stock. Both he
absolutely flat (unlike inexpensive cards, which often curl slightly) and are a
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We offer these Pocket briefcase Cards plain or personalized, and in a
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jotting a note when you send people articles or reports They are also
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hand someone your card when you've written something on it. In one card
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as well as a power business card
A- &&***

O MICHAEL N HIR5CHFELD
Elizabeth James
ANTIQUPS QtALtt

inc.
Robert Hale
ccT>OaT
_	,c*lFf ASSOr.ro--"1

Wendy Harrington
Q
F- G.i
William R. Jacobs, M.D
Umuay MHul r—ii
CmraOt
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1,000 Personalized Cards, White (rl, wc, or gd) K-ADS1090 $69.95
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Set of 50 Envelopes for 3 by 5 Cards (while only) K-ADS190 $6.95
How to order First select your paper stock and style. Choose gray-blue or
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12

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Exhibit 3
Individual Registration Form
MML Annual Convention — June 29, 30 & July 1, 1998
Please print or type; use a separate form tor each person.
Name.
Nick Name.
Spouse/Companion Name
Title	
Nick Name
Municipality. Agency or Company .
Address	
City
StBtO .
Zip
Phone(_
~ First time MML convention attends# ~ Number for children's parly Tuesday?
Information
~ Golf
Pre-Registration Fees
3 Day Registration Fee
Municipal Official
Other
1 Day Registration Fee — Circle One: Mon. Tues. Wed
Municipal Official
Other
Social Functions
Aw aids Dinner—Tuesday, June 24
Before
April 11
i 22$
S 295
J IIS
t 2)0
eicn »t t 31
Seafood Bulfet—Wednesday, June 25
Adult 	 each »t
CMtlmn (age 6-10 ) 	
each it
27
12
Jolly Roect Pais—Wad . June 25
each at
April 12-
June 4
t 270 /•j
V 3JJ
J 210
t 275
t it
t 32
15
12
Amount
t
-S-/0
i 12
total
Payment must accompany registration form!
Method ol Payment: C3 Check enclosed payable to Maryland Municipal League O MasterCard/VlSA
Expiration Date			Card Number		:	
Print Name as it Appears on Card
Card Holder's Signature
6
if you nave special needs,
including dietary, please attach
a separate sheet describing your
requirements
On-Site Registration
AH registrants after June 4
must register on site at
higher fees. No meat
Itckets will be sold on site.
3-Day Member.. ..$310
3 Day Non Member. . 405
1 Day Member.... 240
1-Day Non-Member ..315
Return to the Maryland Municipal League, 1212 West Street. Annapolis. MD 21401. (Credit card


fa 3,	t- w Su< 1 l+Ly\
13

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APPENDIX 2 - DISTRIBUTION
41
Report No. 2001-1-00101

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HEADQUARTERS
Office of Inspector General (2410)
Associate Administrator for Congressional and Intergovernmental
Relations (1301A)
Associate Administrator for Communications, Education, and Media
Relations (1101A)
Director, Grants Administration Division (3903R)
Comptroller (2731A)
Agency Audit Follow up Coordinator (2724A)
REGIONAL OFFICE
Assistant Regional Administrator, Office of Policy and Management (3PM00)
Director, Chesapeake Bay Program Office (3CB00)
Director, Office of Communications and Government Relations (3CG00)
Chief, Grants & Audit Management Branch (3PM70)
Region III Library (3PM50)
OTHER
Center for Chesapeake Communities
42
Report No. 2001-1-00101

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