U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
EPA Should Strengthen
Internal Controls over
Interagency Agreement
Unliquidated Obligations
Report No. 09-P-0086
January 26, 2009
-------
Report Contributors: Paul Curtis
Meg Hiatt
Bob Evans
Kevin Ross
Alfred Falciani
Carol Kwok
Demetrios Papakonstantinou
Sheree James
Javier Negron
Abbreviations
CFC Cincinnati Finance Center
EMS Extramural Management Specialist
EPA U.S. Environmental Protection Agency
FY Fiscal Year
IA Interagency Agreement
IFMS Integrated Financial Management System
IGMS Integrated Grants Management System
GIAMD Grants and Interagency Agreements Management Division
GICS Grants Information and Control System
GMO Grants Management Office
HHS U.S. Department of Health and Human Services
OCFO Office of the Chief Financial Officer
OGD Office of Grants and Debarment
OIG Office of Inspector General
PO Project Officer
RMDS Resource Management Directive System
-------
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-P-0086
January 26, 2009
Why We Did This Review
The purpose of this audit was
to evaluate the U.S.
Environmental Protection
Agency's (EPA's) process for
reviewing unliquidated
interagency agreement (IA)
obligations, deobligating funds,
and closing lAs. The
objectives of our review were
to determine: (1) whether EPA
has adequate controls in place
to identify and deobligate
unneeded IA funds, and (2) the
amount of obligations under
lAs that could potentially be
deobligated.
Background
An IA is a written agreement
between federal agencies in
which one agency provides
goods or services to another
agency on a reimbursable basis.
It is EPA's policy to close all
lAs within 270 days after the
project period expires. As part
of close-out, unliquidated
obligations should be
deobligated so that the funds
can be used for other purposes.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2009/
20090126-09-P-0086.pdf
EPA Should Strengthen Internal Controls over
Interagency Agreement Unliquidated Obligations
What We Found
EPA has not closed out lAs that have at least $4.2 million of unneeded funds that
should be deobligated. Further, EPA had deobligated an additional $2.3 million
between January 7, 2008, and April 25, 2008, as a result of our audit. These funds
could be used for other environmental projects.
Controls for identifying funds for deobligations were not always effective. We
found that EPA Project Officers, the Grants and Interagency Agreements
Management Division, and Grants Management Offices did not effectively monitor
lAs to ensure they were closed out timely and unneeded funds were deobligated.
The annual unliquidated obligation review was not effective and did not identify
funds that should have been deobligated and used for other environmental purposes.
Project Officers cited various reasons for untimely close-out of lAs, including
unfamiliarity with close-out procedures and difficulties working with other agencies.
What We Recommend
We are making various recommendations to the Office of Administration and
Resources Management. They include:
• Deobligating the remaining $4.2 million in IA unliquidated obligations, and
ensuring these lAs and those with $2.3 million already deobligated are closed
out.
• Ensuring EPA Order 1610 is consistently followed.
• Ensuring program offices develop performance measures involving IA
management for Project Officer performance standards.
• Ensure the IA data in the Grants Information and Control System and
Integrated Grants Management System are reconciled.
We also recommend that the Chief Financial Officer reformat the unliquidated
obligation report and require forwarding of the report to Project Officers.
In general, the Agency agreed with the report's findings and recommendations and is
in the process of establishing procedures that, when implemented, should adequately
address the findings.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
January 26, 2009
MEMORANDUM
SUBJECT: EPA Should Strengthen Internal Controls over Interagency Agreement
Unliquidated Obligations
Report No. 09-P-0086
FROM: Melissa M. Heist
Assistant Inspector General for Audit
TO: Susan B.Hazen
Acting Assistant Administrator for Administration and Resources Management
Maryann Froehlich
Acting Chief Financial Officer
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the
problems the OIG has identified and corrective actions the OIG recommends. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determinations on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures.
The estimated cost of this report - calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time - is $374,414.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days. You should include a corrective actions plan for agreed upon
actions, including milestone dates. We have no objections to the further release of this report to
the public. This report will be available at http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Paul Curtis at (202)
566-2523 or curtis.paul@epa.gov, or Meg Hiatt at (513) 487-2366 or hiatt.margaret@epa.gov.
-------
EPA Should Strengthen Internal Controls over 09-P-0086
Interagency Agreement Unliquidated Obligations
Table of Contents
Chapters
1 Introduction 1
Purpose 1
Background 1
Noteworthy Achievements 2
Scope and Methodology 4
2 Funds No Longer Needed Remain Obligated 5
Monitoring of lAs Needs Improvement 5
Untimely Close-out 6
Difficulties with Other Agencies 7
Lack of Performance Standards 8
Inconsistent Data 8
Conflicting Guidance 9
Review Process for Unliquidated Obligations Needs Improvement 10
Recommendations 11
Agency Response and OIG Evaluation 12
Status of Recommendations and Potential Monetary Benefits 14
Appendices
A Details on Scope and Methodology 16
B EPA Order 1610 Timeline of Close-out Activities for lAs 18
C Obligations on Sampled lAs 19
D Agency Response to Draft Report 21
E Distribution 26
-------
-------
09-P-0086
Chapter 1
Introduction
Purpose
The purpose of this audit was to evaluate the U.S. Environmental Protection
Agency's (EPA's) process for reviewing unliquidated interagency agreement (IA)
obligations, deobligating funds, and closing lAs. The objectives of our review
were to determine:
1. Whether EPA has adequate controls in place to identify and deobligate
unneeded IA funds.
2. The amount of obligations under lAs that could potentially be deobligated.
Background
An IA is a written agreement between federal agencies in which one agency
provides goods or services to another agency on a reimbursable basis. EPA has
entered into many such agreements that obligate EPA to pay other agencies.
Several EPA offices are involved in the administration and financial management
oflAs:
• The National Policy Training and Compliance Division, under the Office
of Grants and Debarment (OGD) within the Office of Administration and
Resources Management, is responsible for developing and implementing
Agency-wide administrative policy and procedures for lAs. This includes
training for IA Project Officers (POs). In coordination with the Office of
the Chief Financial Officer (OCFO), this division is responsible for
establishing and maintaining systems for financial management, internal
control, and reporting for all lAs. Interagency Agreement Specialists
within Regional Grants Management Offices (GMOs) and the
Headquarters Grants and Interagency Agreements Management Division
(GIAMD) serve as EPA's administrative contacts with other federal
agencies. They review and approve the administrative portion of the IA
funding and prepare the EPA IA agreement on Form 1610 and any formal
amendments. Regional GMOs and GIAMD also monitor the IA for
compliance with administrative conditions, help the PO resolve
performance problems, and close out the agreement after all the terms and
conditions are fulfilled.
• Cincinnati Finance Center (CFC), a component of OCFO, is the central
servicing finance office for all EPA lAs. CFC disburses funds to other
agencies and records the disbursements in accounting records. CFC is
also responsible for recording amendments to deobligate funds and
-------
09-P-0086
verifying that the IA balance is correct. Further, CFC assists POs in
reconciling billing differences with other agencies.
• EPA POs, within EPA's programs, provide technical and managerial
oversight of lAs. They are responsible for assuring that EPA quality
assurance requirements are met by other agencies for the goods and
services provided to EPA. For disbursement agreements, the PO ensures
that EPA receives goods and services from the other agency in accordance
with the agreements. The PO approves invoices received from the other
agency. POs are responsible for notifying OCFO/CFC at least quarterly in
writing or electronically on the project status. The PO is also responsible
for notifying OCFO/CFC of the final project cost in writing when the
project expires. POs should also maintain all supporting documentation
for costs claimed, and ensure compliance with the lA's terms and
conditions.
It is EPA's policy to close out lAs within 270 days after the project period ends.
EPA considers an IA administratively closed when, after the period of
performance expires, the PO verifies the completion of all work and payment of
all invoices. After all work is completed and all the bills are paid, CFC
deobligates the remaining funds.
Noteworthy Achievements
During the audit period, we identified the following noteworthy achievements
related to the management of IA extramural agreements1:
• GIAMD has made a concerted effort to close out the backlog of expired
lAs so that unneeded funds can be deobligated. GIAMD stated that it
closed 596 lAs during Fiscal Year (FY) 2007, and 590 in FY 2008, and
69 in FY 2009, as of January 13, 2009.
• OGD issued IA Policy Issuance 08-02 on February 29, 2008, which limits
the project period duration for new IA awards. This guidance establishes:
(1) a limit on the total length of all of the project periods of an IA; and
(2) criteria for determining when new awards, rather than amendments,
must be used to fund additional work. The policy limits the total length of
the project period of lAs to 7 years unless there is a specific regulatory or
statutory authorization for a longer project period or a signed waiver from
the Director, OGD, or a designee. The policy further states that no-cost
amendments, incremental funding amendments, and supplemental funding
amendments may not be used to add additional activities to an IA if the
additional activities are unrelated to the original scope of work. In such
cases, EPA must fund the additional activities through a new IA.
Extramural agreements include contracts, grants and cooperative agreements, and lAs.
-------
09-P-0086
• EPA has increased its effort to deobligate unused Superfund funds. The
Office of Solid Waste and Emergency Response's Office of Superfund
Remediation and Technology Innovation has scrutinized open Superfund
obligations on lAs over 2 years old as part of its annual work planning.
During the planning meeting, Headquarters and regional Office of
Superfund Remediation and Technology Innovation officials review the
Superfund unliquidated obligations to determine the amount that should be
deobligated during the year.
• The Office of Research and Development employs Extramural
Management Specialists (EMSs). These specialists are an integral part of
the post-award monitoring process for lAs (as well as for contracts, grants,
and cooperative agreements). The EMS coordinates efforts among POs,
GMOs, and CFC, and facilitates the IA administrative process, including
deobligating funds and closing out lAs. An EMS in the Office of
Research and Development stated that employing the specialists ensures
that lAs are closed out and funds are deobligated timely because the EMS
continually monitors lAs. The Office of Air and Radiation employs Grant
Coordinators who serve similar functions as the EMSs. The Grant
Coordinators are responsible for monitoring the close-out of lAs and
following their standard operating procedures that are derived from EPA
Order 1610. Other offices should consider employing specialists to
improve their post-award management duties, including timely IA close-
out and deobligating unneeded funds.
• In FY 2006, OGD separated the IA class from its 4-day basic grants class.
OGD now provides a full day of IA training that addresses specific topics
such as cost review, determining a bona fide need, severability of funds,
and assisted acquisition. This class is now being further enhanced to
cover Office of Federal Procurement Policy guidance requirements for
grants and lAs issued by the Office of Management and Budget on June 6,
2008.
• In the third quarter of FY 2008, EPA added measures on unliquidated
obligations and close-out for lAs to the "Grants Management Performance
Measures Reports." These quarterly reports are provided to the Junior
Resource Official, Senior Resource Official, and GMO community for
management review.
• The Las Vegas Finance Center, which is responsible for processing all
EPA grants, sends a reminder notice (notification letter) requesting a final
financial status report from the grant recipient after the project period of a
grant expires. We believe sending out such a reminder notice to the EPA
POs prior to the period of performance expiring would be useful in closing
out lAs timely.
-------
09-P-0086
• OGD issued EPA Order 1610 in October 2006, which established the
Agency's first comprehensive policy for closing out lAs.
Scope and Methodology
We conducted this audit in accordance with generally accepted government
auditing standards, issued by the Comptroller General of the United States. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained
provided a reasonable basis for our findings and conclusions based on our audit
objectives.
After excluding certain items from the universe as discussed in Appendix A, we
selected a statistical sample of 62 lAs using monetary unit sampling from the
population. The sample included lAs with $23 million in unliquidated
obligations, which represented 69 percent of our target universe. We also
interviewed POs, grants specialists, Budget and Finance Officers, and other EPA
officials to determine their roles in closing out lAs, deobligating funds, and
reviewing unliquidated obligations; and to identify funds that should be
deobligated. We conducted the audit from January 4 through April 25, 2008.
Appendix A contains a more extensive discussion on our scope and methodology.
-------
09-P-0086
Chapter 2
Funds No Longer Needed Remain Obligated
EPA has not closed out lAs that have at least $4.2 million of unneeded funds that
should have been deobligated. Further, EPA had deobligated an additional
$2.3 million between January 7 and April 25, 2008, as a result of our audit. These
funds could be used for other environmental projects. EPA Order 1610 requires
that lAs be closed within 270 days after the project period ends and any remaining
funds be deobligated. We found that POs, GIAMD, and GMOs did not
effectively monitor lAs to ensure they were timely closed out and unneeded funds
were deobligated. Also, the annual unliquidated obligation review was not
effective and did not identify funds that should have been deobligated and used
for other environmental purposes. POs cited various reasons for untimely close-
out of lAs, including unfamiliarity with close-out procedures and difficulties
working with other agencies.
Monitoring of lAs Needs Improvement
POs, GIAMD, and GMOs did not effectively monitor lAs to ensure timely close-
out so that unneeded funds were deobligated and used for other environmental
projects. EPA Order 1610 requires that lAs be closed within 270 days after the
project period ends and any remaining funds be deobligated. See Appendix B for
further details on the close-out process as defined by EPA Order 1610.
As of January 7, 2008, EPA had 318 agreements, with obligations totaling
$33,276,951, where there was no reported activity in the last year, or the period of
performance end date was greater than 270 days old. We selected a statistical
sample of 62 lAs totaling $23 million, using monetary unit sampling from the
population. As of April 25, 2008, we identified $4.2 million of unneeded funds
that should have been deobligated. An additional $2.3 million was deobligated by
EPA between January 7 and April 25, 2008, as a result of our audit.
For 18 of the 62 lAs reviewed, the POs did not initiate close-out and the GMOs
did not notify the POs that the project period ending dates had elapsed.
Consequently, the lAs remained open beyond the project period ending dates.
Several POs said they did not effectively monitor lAs because they were
unfamiliar with the IA close-out procedures, and often waited for GIAMD to
initiate close-out. Other factors included difficulties with other agencies, lack of
performance standards, inconsistent data, and conflicting guidance. Details
follow.
-------
09-P-0086
Untimely Close-out
POs did not effectively monitor funds obligated under lAs. We found that funds
remained obligated on 26 lAs after the period of performance had expired. For
example, we found one Superfund IA, with the U.S. Coast Guard under the
Department of Homeland Security, where the project period ended on
September 30, 2001, with a remaining unliquidated obligation amount of
$1.6 million. On October 26, 2005, more than 4 years after the project period
ended, the Coast Guard told CFC that $1.5 million could be deobligated and the
remaining $100,000 would be billed. On October 27, 2005, CFC sent an e-mail to
the PO and GIAMD to initiate deobligating the $1.5 million. However, as of
April 25, 2008, the entire $1.6 million unliquidated obligation balance remained
recorded, and no amounts had been deobligated. As a result, the Superfund funds
remained obligated more than 6 years after the project period ended and were
unavailable for other uses.
GMOs do not always send a reminder letter to the recipient and PO on the close-
out requirement and to begin close-out procedures. EPA Order 1610 states:
If the EPA Project Officer has not initiated close out procedures,
within 60 calendar days after the project period has expired, the
GMO [GIAMD] will begin close out procedures. The GMO
[GIAMD] will contact the OCFO/CFC to determine the balance of
funds on an I A and to find out if there are any outstanding bills
waiting to be processed. Within 90 calendar days after the project
period has expired, the GMO [GIAMD] will send an electronic
close out notification to the EPA Project Officer requesting the final
report or product(s), whether the OCFO/CFC balance is correct,
and whether the EPA Project Officer concurs in the close out of the
IA. The EPA Project Officer must respond to the GMO [GIAMD]
within 120 calendar days after the project period has expired.
We found that POs often wait to hear from GMOs to initiate close-out, and that
GMOs do not always contact the PO.
GMOs do not always notify the other agency that it is going to initiate close-out
of the IA and deobligate the remaining funds. According to EPA Order 1610,
when the performance end date is greater than 180 days and the obligated amount
is greater than $500, the IA specialist should send a decrease amendment to the
other agency. The decrease amendment notifies the other Agency that EPA
considers the project complete and intends to close out the IA. By serving notice
to other agencies, EPA can stimulate them to take action to complete the IA
projects and submit final bills. For example, funds are obligated annually under
one IA for access to a U.S. Department of Health and Human Services (HHS)
Information Collection Request Review and Approval System. As of April 25,
2008, a total of $250,000 was obligated on the IA for 2 years' access to the
-------
09-P-0086
system. We found that even though HHS had not billed for this access, EPA
continued to obligate additional funds. The PO was not aware HHS had not billed
EPA. As a result of our audit, the PO contacted HHS and the $250,000 will be
billed by and paid to HHS.
Difficulties with Other Agencies
EPA has not been able to reduce IA unliquidated obligations because of
difficulties with billings from other agencies. We found that other agencies were
inconsistent and untimely in billing EPA, or experienced significant delays in
receiving invoices from grantees and contractors. These delays kept EPA from
timely closing out some lAs. We found that other agencies use IA funds to award
sub-agreements (e.g., grants, contracts, lAs, cooperative agreements, etc.). In
some of these cases, the EPA IA project period did not coincide with the other
agency's sub-agreement. For example, for an IA with HHS, the project period
expired October 1, 2006, with an unliquidated obligation amount of $224,689. As
of April 25, 2008, the unliquidated obligation amount had not changed.
According to the PO, HHS used the IA funds to award contracts to States with
project periods that exceeded the IA, allowing States up to 4 years after the award
to bill HHS. The PO said this caused billing and close-out delays.
EPA does not enforce the specific billing instructions indicated on lAs. On the IA
form, requests for payments must be submitted monthly, quarterly, or upon
completion of work if they are not marked as advances. We found an instance
where another agency did not bill in accordance with the IA terms. An IA with
the Department of Homeland Security stipulated that the Department should bill
EPA quarterly. Also, the Funding Authorization document stated: "Upon
completion of scope of work, the recipient other Federal agency will submit a bill
with detailed records of expenditures. The Agency must submit a bill within
60 days following the disaster response completion date." The period of
performance was from August 30, 2005, to September 30, 2006. The Department
of Homeland Security billed EPA just three times over the period of performance
(August 2006, March 2007, and May 2007). The remaining unliquidated
obligation of $793,792 was not closed out until April 2008.
Other Agencies do not bill timely. According to a PO for a Department of Energy
IA, that Department does not bill timely. The Department of Energy sporadically
submitted four bills during the 2/^-year project period. It took more than 2 years
after the IA expired to close out the IA. The PO said he tried to get the
Department of Energy to submit the final bill after the project period expired
without any success. It was not until the PO asked the grant specialist to close out
the IA that the Department of Energy submitted its final bill, in December 2007.
The IA and related unliquidated obligation of $125,597 were closed out on
February 27, 2008.
-------
09-P-0086
Lack of Performance Standards
Program managers are not consistent in establishing and measuring PO
performance standards in accordance with OGD instructions. The OGD has
instructed program management to add performance measures concerning lAs to
the PCs' performance evaluations. In a January 17, 2008, memo regarding the
management of lAs under the Performance Appraisal and Recognition System,
the OGD stated: "... Senior Resource Officials should ensure that IA
responsibilities are referenced, as appropriate, in 2008 PO Performance
Agreements."
Also, the Superfund 120-Day Study report recommended: "For lAs, grants, and
contracts, OARM (Office of Administration and Resources Management) should
establish appropriate close-out performance measures and send quarterly reports
to Senior Resource Officials with outstanding closeouts, including the amount of
outstanding dollars."
For 13 of our 62 sampled agreements, the POs stated they did not have any
performance standards concerning lAs. Other POs provided specific standards
relating to lAs, such as:
• Initiate, negotiate, and manage grants and/or lAs to achieve Agency
strategic goals and to ensure compliance with Agency grant management
requirements, policies, federal rules, and all applicable regulations.
• Ensure that the other agency receives the goods or services specified in the
agreement, prepare and forward a copy of the final property/equipment
inventory and disposition recommendation to the property management
office; and initiate appropriate close-out by preparing a written IA close-
out request for submission to the Grants Information and Analysis Branch.
While the January 17, 2008, memo provided guidance to Senior Resource
Officials, IA responsibilities have yet to be incorporated into all POs'
performance standards. GIAMD has incorporated the following performance
standards for grant personnel:
By 9/30/08, reduces GIAMD grants and/or inter agency agreements
close-out backlog as follows:
o 90% of grants ending in FY 07 are closed; and
o 99% of grants ending prior to FY 07 are closed
Inconsistent Data
There is inaccurate information in the Integrated Grants Management System
(IGMS) that is a result of problems in migrating data from the older Grants
Information and Control System (GICS). This causes problems with the
-------
09-P-0086
Integrated Financial Management System (IFMS) as well because data in IFMS
does not coincide with data in IGMS. After the migration to IGMS, some lAs
retained an open status in IGMS even though they had been closed in GICS.
Therefore, POs were unaware that some lAs remained open. Other POs do not
use IGMS at all.
A Senior Management Analyst in GIAMD stated:
IGMS data for lAs is not so accurate. IGMS data for lAs is
preceded by GICS I A data. Some of the I As closed out in GICS were
not properly transferred to IGMS. There were dual GICS andIA
systems operating in FY 200 7. During the period when the dual
systems were operating any lAs closed should have been done in
IGMS and GICS to properly close the IA. IGMS was to be the new
grants system and GICS would be discontinued. Therefore, if an IA
was closed in GICS when the dual systems were operating it should
have been closed-out to both systems, which was not done.
Data in IGMS does not always coincide with data in IFMS. The Grants
Management Council agreed that the Agency should explore integrating IA data
between the IFMS and IGMS, which will help expedite making decisions on
"who owns" an IA.
Conflicting Guidance
EPA has conflicting policies/guidance for closing out lAs. As a result, POs are
unclear of their responsibilities. For example, EPA Order 1610 states that lAs
must be closed out within 270 days, while the IA Reference Library states lAs
should be closed out within 180 days. The Resource Management Directive
System (RMDS) states the GMO will contact the PO before the project expires or
when the IA has had no activity for 6 months or more, while the IA Reference
Library states the PO will contact the GMO if all bills are paid and the project is
complete. Ten PO interviewees said they either were unclear as to who was to
initiate close-out or were unfamiliar with the close-out procedures. Table 2-1
shows examples of discrepancies:
-------
09-P-0086
Table 2-1: Discrepancies in IA Close-out Guidance
Event
Notification to
begin close-out
Prior to Project
Period
Expiration, or
when there
has been no
activity for
6 months
EPA Order 1610
lAs should be
closed out within
270 calendar days
I A Library
lAs should be
closed out within
180 calendar days
PO should contact
the GMO to close
out if all bills are
paid and project is
complete
RMDS 2550C
GMO sends
memoranda of
notification that
close-out
procedures will
begin to POs
Project Officer
Manual V6
90 days prior to the
project expiration date,
the GMO will send a
"Reminder Letter" to
the recipient and the
Project Officer
reminding them of the
closeout requirements
Sources: EPA Order 1610, IA Reference Library, RMDS 2550c, Project Officer Manual
Review Process for Unliquidated Obligations Needs Improvement
EPA has not effectively reviewed unliquidated obligations on inactive lAs to
identify unneeded funds. Those funds could be deobligated and used for other
environmental projects. OCFO Policy Announcement 96-04 requires GIAMD
and Senior Resource Officials to review the inactive IA unliquidated obligation
report, and certify the review was completed and appropriate deobligations were
made. We found that many of the POs were not involved in the review process,
and that only lAs with expired periods of performance were reviewed, regardless
of inactivity. As a result, the IA unliquidated obligation review process was not
effective because it did not result in identifying unneeded funds.
OCFO Policy Announcement 96-04, Review of Unliquidated Obligations,
instructs OCFO's Financial Management Division to distribute Headquarters IA
reports to the Grants Administration Division (now GIAMD) and regional IA
reports to Senior Resource Officials. The reports identify inactive lAs (no
payment or obligation activity in 6 months or more) with remaining unliquidated
obligation amounts.
EPA did not identify and deobligate all unneeded IA funds because EPA did not
effectively use the unliquidated obligation review. We found a number of reasons
why the IA unliquidated obligation review process was not completely effective:
• Not all POs receive the annual OCFO IA unliquidated obligation report
and subsequently participate in the unliquidated obligation review for
inactive lAs. Thirty-nine POs said they do not receive the IA unliquidated
obligation reports and are not involved in the unliquidated obligation
review for inactive lAs. For example, an Office of Water IA with HHS
had a project period of October 1, 2005, through September 30, 2007, and
an unliquidated obligation balance of $208,167. We found that no work
was ever performed or bills submitted during the project period.
10
-------
09-P-0086
Subsequently, on March 3, 2008, the entire amount of $208,167 was
deobligated and the IA was closed out. The PO was not contacted during
the unliquidated obligation review to determine the validity and necessity
of the unliquidated obligation amount. The PO said if he were contacted
during the project period as part of the review, he would have said the
funds could have been deobligated sooner and used for other
environmental projects.
lAs with current periods of performance that have had no activity in
180 days or more are not being reviewed. GMO staff in Regions 5 and 9
said lAs listed on the unliquidated obligation report with a current period
of performance are coded as active and are not reviewed to determine the
validity and necessity of the unliquidated obligation amount.
The unliquidated obligation report is not formatted properly because it
lists obligations by line of accounting, not by IA number. This method
may require multiple programs to review different unliquidated obligation
amounts for the same multi-funded IA. Therefore, results of each review
may not be coordinated and provided to the reviewing official to arrive at
one consolidated deobligation amount for the IA.
Recommendations
We recommend that the Assistant Administrator for the Office of Administration
and Resources Management:
2-1 Direct GIAMD and GMOs to:
(a) Work with the POs to prepare decrease amendments to deobligate
the remaining $4.2 million in IA unliquidated obligations
identified during our audit and initiate close-out action.
(b) Ensure the lAs with $2.3 million deobligated during the audit are
closed out.
2-2 Direct OGD to ensure EPA Order 1610 is consistently followed, which
includes:
(a) GMOs notifying the PO that the IA is expiring before the project
period ends.
(b) POs initiating close-out of the project once a project is complete
and all applicable costs have been billed or paid.
(c) GMOs initiating close-out of the IA if the PO has not done so after
the end of the IA project period.
(d) GMOs sending close-out notices to the other agencies, the PO, and
CFC for lAs where the project period end date is greater than
270 days old.
11
-------
09-P-0086
2-3 Direct OGD to work with other agencies on developing standard billing
practices.
2-4 Direct OGD to work with the GMOs and POs to ensure compliance with
the existing deobligation and close-out procedures under EPA Order 1610.
When other agencies do not respond within 90 days to the decrease
amendments, have GIAMD/GMOs send the decrease amendment to CFC
and instruct it to deobligate the remaining funds and administratively and
financially close out the lAs.
2-5 Follow through with program offices to ensure they develop performance
measures that are incorporated into PO performance standards which hold
the PO accountable for their performance in monitoring and timely closing
out I As.
2-6 Ensure the IA data in GICS and IGMS are reconciled.
We recommend that the Chief Financial Officer:
2-7 Develop procedures that ensure compliance with OCFO Policy
Announcement 96-04 and require all POs responsible for managing and
closing out lAs to participate in the unliquidated obligation review and
determine the validity and necessity of all inactive lAs for current and
expired project periods.
2-8 Reformat the unliquidated obligation report in order of IA number and
require that GIAMD and GMOs forward the report to the PO of record
and his/her supervisor, so a single review of the entire unliquidated
obligation amount can be performed.
Agency Response and OIG Evaluation
EPA agreed with the majority of our recommendations and its proposed
corrective actions should address our recommendations. The Agency
reported that, as of November 24, 2008, the Agency had deobligated more
than $320,000 of the $4.2 million and closed out 6 of 14 combined
agreements. The Agency is in the process of issuing interim procedures to
implement the Office of Federal Procurement Policy guidance on
interagency acquisitions. These procedures will help ensure that lAs
involving the use of other agencies contracts are in the best interest of the
government. The Agency also decided to move to IA Shared Service
Centers to enhance the efficiency and effectiveness of the IA process.
In its response to the draft report, EPA provided further clarification on the
following issues noted:
12
-------
09-P-0086
• EPA stated that EPA Order 1610 provides a cradle-to-grave
framework for IA close-out. The OIG concurs that EPA Order
1610 does provide an adequate framework if followed, and if there
is no other conflicting guidance.
• The Office of Administration and Resources Management requested
that the OIG revise this recommendation to require OGD to work
with GMOs and POs to ensure compliance with the existing
deobligation and close-out procedures under EPA Order 1610. We
concur and revised the language in the final report.
• OGD is currently developing the Grants Data Mart and will ensure that
IGMS is updated with information that is currently in GICS but not in
IGMS. We concur with this action plan.
• OCFO developed a standard IA report that enables offices to pull real-time
inactive unliquidated obligation information. The document transaction
number in these reports provides the IA number. We concur with this
action.
The full text of the Agency response is in Appendix D.
13
-------
09-P-0086
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
2-1 11 Direct GIAMD and GMOs to:
(a) Work with the POs to prepare decrease
amendments to deobligate the remaining
$4.2 million in IA unliquidated obligations
identified during our audit and initiate
close-out action.
(b) Ensure the lAs with $2.3 million deobligated
during the audit are closed out.
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Claimed Agreed To
Amount Amount
Assistant Administrator,
Office of Administration and
0 Resources Management On9oln9
11/24/08
$4,200
$2,300
$4,200
$2,300
2-2 11 Direct OGD to ensure EPA Order 1610 is
consistently followed, which includes:
(a) GMOs notify the PO that the IA is expiring
before the project period ends.
(b) POs initiating close-out of the project once a
project is complete and all applicable costs
have been billed or paid.
(c) GMOs initiating close-out of the IA if the PO
has not done so after the end of the IA project
period.
(d) GMOs sending close-out notices to the other
agencies, the PO, and CFC for lAs where the
project period end date is greater than
270 days old.
2-3 12 Direct OGD to consult with other agencies on
developing standard billing practices.
2-4 12 Direct OGD to work with the GMOs and POs to
ensure compliance with the existing deobligation
and close-out procedures under EPA Order 1610.
When other agencies do not respond within
90 days to the decrease amendments, have
GIAMD/GMOs send the decrease amendment to
CFC and instruct it to deobligate the remaining
funds and administratively and financially close out
the lAs.
2-5 12 Follow through with program offices to ensure they
develop performance measures that are
incorporated into PO performance standards which
hold the PO accountable for their performance in
monitoring and timely closing out lAs.
2-6 12 Ensure the IA data in GIGS and IGMS are
reconciled.
Assistant Administrator,
Office of Administration and
Resources Management
Assistant Administrator,
Office of Administration and
Resources Management
Assistant Administrator,
Office of Administration and
Resources Management
Assistant Administrator,
Office of Administration and
Resources Management
Assistant Administrator,
Office of Administration and
Resources Management
Ongoing
Ongoing
Ongoing
3/31/09
6/30/09
Ongoing
9/09
6/30/09
14
-------
09-P-0086
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Rec.
No.
2-7
Page
No.
12 Develc
Subject
ip procedures that ensure complian
Status1
ice with 0
Action Official
Chief Financial Officer
Planned
Completion
Date
6/30/09
Claimed Agreed To
Amount Amount
2-8
12
OCFO Policy Announcement 96-04 and require all
POs responsible for managing and closing out lAs
to participate in the unliquidated obligation review
and determine the validity and necessity of all
inactive lAs for current and expired project periods.
Reformat the unliquidated obligation report in order
of IA number and require that GIAMD and GMOs
forward the report to the PO of record and his/her
supervisor, so a single review of the entire
unliquidated obligation amount can be performed.
Chief Financial Officer
4/4/09
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
15
-------
09-P-0086
Appendix A
Details on Scope and Methodology
We reviewed laws and regulations pertaining to lAs, such as the Economy Act. We reviewed
EPA policies and guidance, such as EPA Order 1610, No Cost Amendments, Processing Invoices
and Close out of Interagency Agreements. We reviewed Policy Announcement 96-04, Review of
Unliquidated Obligations, issued by OCFO. We also reviewed IA guidance posted on the
"Grants" intranet Website and the IA Reference Library Website.
We conducted interviews with officials from GIAMD and OCFO. We also interviewed program
officials from the Office of Research and Development in Las Vegas, and the Region 8
Superfund office, to obtain an understanding of their policies and practices for monitoring and
deobligating unneeded IA funds. We did not review the internal controls over EPA's IFMS or
the Interagency Document On-Line Tracking System from which we obtained information, but
relied on the internal control evaluation conducted during the audit of EPA's FY 2007 financial
statements.
We obtained the universe of open obligations for lAs, which CFC extracted from the Interagency
Document On-Line Tracking System, as of January 7, 2008. The report obtained from CFC
identified 1,388 open obligations totaling $496,998,575. We determined the population by
removing: (1) lAs with current periods of performance and activity within the past 180 days;
(2) lAs with periods of performance ending less than 270 days prior to January 7, 2008; and
(3) lAs with the periods of performance start date less than a year. This population resulted in
318 lAs totaling $33.3 million in open obligations.
We pulled a statistical sample of 62 lAs, totaling $23 million, using monetary unit sampling
from the $33.3 million of open obligations. The list of sampled lAs is in Appendix C. We
obtained the financial copies of the lAs from CFC to determine periods of performance, amounts
obligated, names of project officers, names of grants specialists, and names of the other agencies.
In addition, we reviewed the descriptions of the goods and services provided to EPA. We also
reviewed any available correspondence and work plans provided in the IA files. We developed a
questionnaire to use in contacting project officers, and other grants, finance, and program
officials. The objectives of our questionnaire were to determine whether EPA has adequate
controls in place to identify and deobligate unneeded IA funds and the amount of obligations
under lAs that could potentially be deobligated. We interviewed POs, grant specialists, budget
and finance officers, and other EPA officials to determine their roles in closing out lAs,
deobligating funds, and reviewing unliquidated obligations; and to identify funds that should be
deobligated.
Internal Control Structure
In planning and performing our audit, we reviewed management controls related to our audit
objectives. This included EPA's polices and procedures for administering and managing the
deobligation and close-out of lAs, and for reviewing IA unliquidated obligations. We examined
EPA's FY 2007 Federal Managers' Financial Integrity Act Annual Assurance Letters issued by
16
-------
09-P-0086
the Regional Administrators and the Assistant Administrators for the various EPA program
offices. For 2007, the Agency did not report any material weaknesses related to lAs. In
addition, we examined EPA's A-123 Review to identify any weaknesses related to unliquidated
obligations under lAs. EPA identified no material weaknesses in its A-123 review of internal
controls. The Agency identified six significant deficiencies, but none related to unliquidated
obligations for lAs.
Prior Audit Coverage
We researched prior EPA OIG, Government Accountability Office, and other reports related to
lAs. We reviewed an EPA report, Superfund: Building on the Past, Looking to the Future
(commonly known as the 120-Day Study), issued April 22, 2004. We noted five pertinent EPA
OIG reports, as listed in Table A-l:
Table A-1: Prior EPA OIG Reports Related to lAs
Report No.
2000-P-000004-R5-000329
2000-P-0029
2001-P-00011
2007-P-00011
2007-P-00021
Title
Timely Deobligation of Interagency Agreement Funds
Follow-up on Headquarters Interagency Agreements
Superfund Interagency Agreements
Interagency Agreements to Use Other Agencies'
Contracts Need Additional Oversight
EPA Can Improve Its Managing of Superfund Interagency
Agreements with U.S. Army Corps of Engineers
Date
December 10, 1999
September 29, 2000
June 22, 2001
March 27, 2007
April 30, 2007
Source: OIG analysis
17
-------
09-P-0086
Appendix B
EPA Order 1610 Timeline of
Close-out Activities for I As
Event
IA Project Period
Expires
60 Days After Project
Period Expires
90 Days After Project
Period Expires
Within 120 Days After
the Project Period
Expires
Within 180 Days After
the Project Period
Expires
90 Days After
Notifying the Other
Agency
Within 270 Days After
the Project Period
Expires
Procedure
EPA POs must contact the GMO to initiate close-out of an IA if they know that a
project is complete and that all costs have been billed and paid.
The GMO begins close-out procedures if the EPA PO has not initiated. The
GMO contacts OCFO/CFC to determine the balance of funds on an IA and to
find out if there are any outstanding bills waiting to be processed.
The GMO sends an electronic close-out notification to the PO requesting the
final report or product(s), whether the CFC balance is correct, and whether the
PO concurs in the close-out of the IA.
PO responds to the GMO's request.
Remaining balance of $500 or less: GMO issues a close-out letter to the other
Agency and a copy to the CFC and the PO. The CFC automatically deobligates
any remaining funds.
Remaining balance over $500: GMO prepares a decrease amendment to close
out the IA, obtains Award Official's signature, and sends the decrease
amendment to the other Agency for acceptance.
Upon receipt of the signed decrease amendment, the GMO sends a copy to the
CFC and EPA PO. The CFC deobligates remaining funds.
If the GMO does not receive a response to the decrease amendment, it
contacts the CFC electronically to obtain the current balance of the IA. If the
balance has not changed and there are not any outstanding financial issues, it
sends the CFC the decrease amendment, with a memorandum explaining that
the other agency failed to sign the decrease amendment. The CFC deobligates
the remaining funds. The GMO considers IA administratively and financially
closed out.
If the other agency notifies the GMO in writing of any discrepancies in the
balance of the decrease amendment, the GMO notifies the CFC and PO for
resolution. The CFC and PO must work with the other agency to reconcile the
differences. The reconciliation might require the GMO to reissue the decrease
amendment with the reconciled balance. The GMO sends the revised decrease
amendment and a copy to the CFC and PO. The CFC deobligates the
reconciled balance.
The IA is administratively and financially closed out.
Source: EPA Order 1610
18
-------
09-P-0086
Appendix C
Obligations on Sampled I As
lANo.
DW69922101
DW1 9955248
DW96933601
DW70946000
DW96942093
DW1 3849601
DW69922041
DW75957552
DW70945996
DW75955615
DW75832901
DW49995201
DW89983801
DW1 3789901
DW14897801
DW70946056
DW70945995
DW89946010
DW03954801
DW1 2922405
DW1 3921 975
DW1 3948 136
DW1 4922068
DW1 4953939
DW1 4921 598
DW1 4950447
DW1 4944226
DW1 4922304
DW1 5945958
DW1 6922030
DW21912901
DW47948022
DW47945853
DW47948051
DW64922217
DW69989901
DW69922463
Location
HQ OSWER
R9OW
HQ OARM
R4OW
R2 OSWER
HQ OSWER
HQ OSWER
R10OW
R4OW
R9OW
HQOIG
HQOA
HQOAR
HQ OSWER
HQ OSWER
R4OW
R4OW
R4OW
R8 OECA
HQ OPPTS
HQ OSWER
R5 GLNPO
HQ OSWER
R8 OSWER
HQORD
R6 OSWER
R3 OSWER
HQOW
R4OEA
HQ OSWER
HQOAR
R5 GLNPO
R4OPM
R5 OSWER
RTP OPPTS
HQ OSWER
HQOAR
Period of
Performance
End Date
09/30/01
02/28/02
08/30/06
09/30/06
01/15/09
09/30/03
09/30/06
09/30/07
06/30/06
12/31/08
09/30/04
05/31/05
09/30/06
09/30/07
09/30/05
09/30/05
03/31/06
10/31/10
09/30/08
09/30/08
09/30/10
09/30/10
06/30/09
09/30/08
03/31/09
12/31/10
01/01/11
12/20/09
09/30/08
09/30/07
12/31/06
12/31/06
12/31/06
03/29/08
01/31/08
09/30/06
09/30/07
Obligation
Amount
$2,000,000
21,219,244
2,200,000
1,000,000
6,207,156
754,000
115,000
208,167
16,000,000
635,600
129,000
68,973
270,000
1,010,000
5,174,999
3,000
700,000
51,061
684,718
100,000
1,050,003
642,937
400,000
400,000
360,000
53,864
100,000
50,000
100,000
140,000
2,433,979
1,250,000
3,073,338
707,000
200,000
1,900,000
29,000
Unliquidated
Obligation
Amount as of
01/07/08
$1,594,850
953,676
846,547
793,793
6,207,156
26,507
115,000
208,167
327,900
444,000
93,405s
66,066
45,798
100,946
158,279
821
253,681
17,864
98,001
100,000
1,050,003
642,937
400,000
400,000
311,067
53,864
100,000
50,000
26,460
67,500
46,290
247,955
49,212
43,118
200,000
395,936
29,000
Deobligated
from 01/07/08
to 04/25/08
$0
0
0
793,793
0
0
0
208,167
0
0
69,731
66,066
0
0
0
821
253,681
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Amount That
Should Be
Deobligated
(as of
04/25/08)
$1,481,9252
953,676
0
0
0
26,507
0
0
0
0
0
0
45,798
100,946
158,279
0
0
17,864
0
0
0
0
0
0
0
0
0
0
0
67,500
46,290
247,955
0
43,118
0
395,936
0
Cause(s)
1
5
5
2,4
5
1 ,4, 5
2,4
5
4
5
1
1, 5
1,2,4,5
1, 5
1,4,5
1,4
1,4
3, 5
1,2, 3,4,
5
5
2, 5
3, 5
5
5
3, 5
5
1,4,5
5
1,2, 5
1, 3, 5
5
2, 5
2, 3
2 This amount was recommended as a partial deobligation in 2005, pending final close-out.
3 This IA unliquidated obligation amount as of 01/07/08 includes the amount of $23,675 deobligated on 10/03/07.
19
-------
09-P-0086
lANo.
DW70921868
DW75955725
DW75955726
DW75921732
DW75922294
DW75961101
DW75905601
DW75948098
DW75955684
DW75955703
DW75955626
DW75922398
DW89964801
DW89921578
DW89922320
DW96954001
DW96950473
DW96940290
DW96945989
DW96945877
DW96947580
DW96941780
DW96941991
DW96946034
DW96942095
Location
HQ OSWER
R9OW
R9OW
HQ OSWER
HQ OSWER
HQ OARM
HQ OPPTS
R5OW
R9OW
R9OW
R9OW
HQOEI
HQ OSWER
HQORD
HQOW
HQOW
R6 OSWER
R1 OSWER
R4WMD
R4WMD
R5 OSWER
R2 OSWER
R2 OSWER
R4WMD
R2 OSWER
Total
Period of
Performance
End Date
09/30/05
12/31/09
12/31/09
09/30/05
09/30/06
09/30/06
10/01/06
12/31/07
12/31/08
12/31/09
12/31/08
09/30/08
07/31/06
09/30/06
06/30/1 1
03/31/07
09/30/07
12/31/08
07/31/10
12/31/05
12/31/07
12/31/08
12/31/08
09/30/10
06/30/10
Obligation
Amount
$396,000
1,154,600
344,500
2,200,000
2,000,000
2,272,476
1,150,000
1,121,300
1,525,000
120,000
266,500
185,000
600,000
383,536
260,000
3,889,000
3,290,000
900,000
563,000
3,430,000
37,097,000
350,000
1,300,000
250,000
50,000
$137,192,186
Unliquidated
Obligation
Amount as of
01/07/08
$68,991
1,154,600
344,500
23,571
323,569
218,202
224,689
100,000
262,000
120,000
266,500
185,000
122,805
125,597
260,000
398,269
415,077
500,656
539,811
223,753
282,444
34,832
121,266
250,000
50,000
$23,181,934
Deobligated
from 01/07/08
to 04/25/08
$0
0
0
0
0
218,202
0
0
0
0
0
0
122,805
125,597
0
398,269
0
0
0
0
0
0
0
0
0
$2,257,132
Amount That
Should Be
Deobligated
(as of
04/25/08)
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
415,077
0
0
223,753
0
TBD4
TBD
0
0
$4,224,624
Cause(s)
2
2, 5
2, 5
2
2
1, 3, 5
2, 3, 5
5
1,2, 5
5
2, 5
1,2, 3, 5
1, 5
2
5
3, 5
5
1, 5
3
3
3
Source: OIG analysis
Cause Legend:
Reference
1
2
3
4
5
Description of Cause
Ineffective monitoring of lAs
Difficulties with other agencies
Lack of performance standards
Conflicting guidance
Ineffective unliquidated obligation review process
Some portion of the amount should be deobligated in FY 2008. EPA cannot determine how much will be
deobligated since it will have to discuss it with the other agency to make a final decision.
20
-------
09-P-0086
Appendix D
Agency Response to Draft Report
November 24, 2009
MEMORANDUM
SUBJECT: Response to Draft Audit Report
EPA Should Strengthen Internal Controls over
Interagency Agreement Unliquidated Obligations
Project No. 2008-18
FROM: Luis A. Luna
Assistant Administrator
Office of Administration and Resources Management
Lyons Gray
Chief Financial Officer
TO: Paul C. Curtis
Director, Financial Statement Audits
Thank you for the opportunity to respond to the subject Office of Inspector General (OIG) Draft
Audit Report (Report). The Report evaluates EPA's internal controls for reviewing unliquidated
interagency agreement (IA) obligations, deobligating funds and closing lAs.
We recognize the importance of having an effective process for managing lAs so that unneeded
IA funds are deobligated promptly and allocated to other high priority environmental projects.
We appreciate the Report's description of noteworthy Agency achievements in this area. We
suggest adding to the final Report three other significant accomplishments:
• The issuance of EPA Order 1610 in October 2006, which established the Agency's first
comprehensive policy for closing out lAs.
• The recent issuance of interim procedures to implement the Office of Federal Procurement
Policy guidance on interagency acquisitions. These procedures will help ensure that lAs
involving the use of other agencies' contracts are in the best interest of the government.
• The Agency's recent decision to move to IA Shared Service Centers. Centralizing the
management of lAs will enhance the efficiency and effectiveness of the IA process.
We generally agree with the Report findings concerning the need to strengthen internal controls
over IA unliquidated obligations. The Report contains seven recommendations for improving
21
-------
09-P-0086
EPA's management of IA unliquidated obligations, five of which are directed to the Office of
Administration and Resources Management (OARM) and two of which are directed to the Office
of the Chief Financial Officer (OCFO). The Agency's response to those recommendations is
provided below.
Recommendation 2-1: Direct the Grants and Interagency Agreement Management
Division (GIAMD) and Grants Management Offices (GMOs) to:
(a) Work with the Project Officers (POs) to prepare decrease amendments to deobligate
the remaining $ 4.2 million in IA unliquidated obligations identified during the audit
and initiate close-out action.
(b) Ensure that lAs with $2.3 million deobligated during the audit are closed out.
Response: OARM agrees with this recommendation. The Office of Grants and Debarment (OGD), in
coordination with the responsible Grants Management Offices (GMOs), has deobligated to date more
than $320,000 of the $4.2 million of IA unliquidated obligations, and has closed out 6 of the combined
14 agreements. OGD has also ensured that all of the lAs, totaling $2.3 million and deobligated during
the audit, were closed out. OGD will continue to work with the responsible Project Officers (POs) and
the other agencies to deobligate the remainder of the $4.2 million and to closeout the agreements as
soon as possible.
Recommendation 2-2: Direct the Office of Grants and Debarment (OGD) to develop a
comprehensive policy for closing out lAs that includes:
(a) GMOs notifying the PO that the IA is expiring before the project period ends.
(b) POs initiating close-out of the project once a project is complete and all applicable costs
have been billed or paid.
(c) GMOs initiating close-out of the IA if the PO has not done so, so many days after the
end of the IA project period.
(d) GMOs sending close-out notices to other agencies, the PO, and the Cincinnati Finance
Center (CFC) where the project period end date is greater than 270 days old.
(e) Receiving billings of IA expenses from other agencies on a quarterly basis.
Response: OARM disagrees with the suggestion that EPA does not have in place a
comprehensive policy for closing out lAs. EPA Order 1610 provides a cradle-to-grave
framework for IA closeout, including the elements contained in recommendations 2-2 (b)-(d).
OARM, however, agrees with the OIG that providing POs advance notice of the approaching
expiration of an IA project will expedite the close out process. Accordingly, OGD will
implement recommendation 2-2(a) by developing an electronic advance notification requirement.
The notification will alert POs that their lAs will expire within one month and describe the
required steps for closing out the agreement. OGD anticipates having the advance notification
process in place by no later than March 31, 2009.
OARM agrees with the underlying intent of recommendation 2-2(e) to further timely billing by
other federal agencies, but believes that the suggestion to receive billings on a quarterly basis
needs further exploration. There are a number of factors that must be carefully considered. They
22
-------
09-P-0086
include EPA's lack of control over the billing practices of other agencies, potential adverse
effects on the performance of critical programmatic work, and the fact that the other agency
billing practices are influenced by disparate billing procedures of contractors and grantees
working under lAs.
OARM and OCFO will consult with other federal agencies and EPA Headquarters and Regional
Offices on this issue. Based on the results of that consultation, OGD will develop, by June 30,
2009, guidance on improving the timeliness of IA billings and include the guidance in the
Agency's IA Manual.
Recommendation 2-3: Direct OGD to perform a review to determine the status [of] all
existing lAs with unliquidated balances where the project period end date is greater than
180 days old. When other agencies do not respond within 90 days to the decrease
amendments, have GIAMD/GMOs send the decrease amendment to CFC and instruct it to
deobligate the remaining funds and administratively and financially close out the lAs.
Response: The procedures described in this recommendation basically track the
deobligation/closeout process of EPA Order 1610. Accordingly, OARM requests that the OIG
revise this recommendation to require OGD to work with GMOs and POs to ensure compliance
with the existing deobligation and closeout procedures under EPA Order 1610. The Order
explicitly requires EPA to review existing funds-out lAs with project periods that have been
expired for more than 180 days for deobligation and closeout and send decrease amendments to
the other agency. If the other agency does not respond within 90 days to a decrease amendment,
the Order calls for EPA to pursue deobligation and closeout automatically, except where there
are outstanding financial issues or changes in the agreement balance. OARM believes these
limited exceptions are appropriate to reduce the risk of premature liquidation of valid
obligations.
Recommendation 2-4: Follow through with program offices to ensure they develop
performance measures that are incorporated into PO performance standards and hold the
PO accountable for their performance monitoring and timely closing out lAs.
OARM agrees with this recommendation. By memo dated September 5, 2008, OGD requested
Senior Resource Officials to ensure that IA responsibilities are referenced, as appropriate, in
Fiscal Year (FY) 2009 PO performance agreements. OGD will build on that memo by
convening a cross-Agency workgroup to develop by September 2009, specific IA performance
measures for FY 2010 agreements.
23
-------
09-P-0086
Recommendation 2-5: Reconcile the IA data in the Grants Information Control System
and the Integrated Grants Management System.
OARM believes that this recommendation is unnecessary. OGD is currently in the process of
decommissioning the Grants Information and Control System (GICS). One step in that process
is to ensure that Integrated Grants Management System (IGMS) is updated with information that
is currently in GICS but not in IGMS. This will ensure that IGMS reflects comprehensive IA
information. By June 30, 2009, the Grants Data Mart, which draws information directly from
IGMS, will replace GICS as the reporting tool for lAs.
Recommendation 2-6: Develop procedures that ensure compliance with OCFO Policy
Announcement 96-04 and require all Project Officers responsible for managing and closing
out lAs to participate in the unliquidated obligation review and determine the validity and
necessity of all inactive lAs for current and expired project periods.
Response: OCFO and OARM agree with this recommendation. OGD will implement it by
revising the Agency's IA manual by June 30, 2009 to: 1) highlight the importance of achieving
the objectives of Policy Announcement 96-04; 2) make clear that GMOs and POs have the
primary responsibility for completing IA unliquidated obligation reviews and closing out lAs;
and 3) include procedures for PO involvement in the unliquidated obligation review process.
Through the FY 2008 Management Integrity (FMFIA) process, OCFO raised the level of
accountability for the unliquidated obligations to the Assistant Administrators and Regional
Administrators. OCFO will continue this emphasis in the FY 2009 FMFIA process. Also, in
keeping with the plan to eliminate free-standing policies, OCFO will incorporate the Policy
Announcement 96-04 review requirements into the RMDS Administrative Control of
Appropriated Funds (Funds Control Manual) chapter when it is updated.
Recommendation 2-7: Reformat the unliquidated obligation report in order of IA number
and require that GIAMD and GMOs forward the report to the PO of record and his/her
supervisor, so a single review of the entire unliquidated obligation amount can be
performed.
Response: As noted in the FY 2008 Review of Unliquidated Obligations guidance memo (April
4, 2008), OCFO developed a standard IA ORBIT report that enables offices to pull real-time
inactive unliquidated obligation information. The document transaction number in these reports
provides the IA number. The report can be sorted by Responsible Program Implementation
Office or transaction number. OCFO will assist OGD as needed to ensure they have the most
useful sort. OGD will be responsible for distributing the report to POs.
Thank you again for the opportunity to comment on the draft Report. We look forward to
receiving your final Report. If you have any questions concerning our comments, please contact
Howard Corcoran or Lorna McAllister.
cc: Senior Resource Officials
24
-------
09-P-0086
Melissa Heist
Junior Resource Officials
Grants Management Officers
Howard Corcoran
Denise Benjamin Sirmons
Sandra Waugh-Williams
Jeanne Conklin
Francis Roth
Kathie Herrin
Lorna McAllister
Susan Dax
Raffael Stein
Melvin Visnick
Jim Wood
Jeff Marsala
25
-------
09-P-0086
Appendix E
Distribution
Office of the Administrator
Acting Assistant Administrator, Office of Administration and Resources Management
Acting Chief Financial Officer
Director, Office of Grants and Debarment
Director, Office of Policy and Resources Management, Office of Grants and Debarment
Deputy Director, Office of Grants and Debarment
Acting Deputy Chief Financial Officer
Acting Division Director, National Policy, Training and Compliance Division, Office of Grants
and Debarment
Acting Director, Office of Financial Services, Office of the Chief Financial Officer
Acting Director, Office of Financial Management, Office of the Chief Financial Officer
Agency Follow-up Official (the Chief Financial Officer)
Agency Follow-up Coordinator
Acting General Counsel
Acting Associate Administrator, Office of Congressional and Intergovernmental Relations
Acting Associate Administrator, Office of Public Affairs
Audit Follow-up Coordinator, Office of the Chief Financial Officer
Audit Follow-up Coordinator, Office of Administration and Resources Management
Deputy Inspector General
26
------- |