gj \ Office of Inspector General
y
Special Report
Assistance Agreements
EPA's Lack of Oversight Contributed to
Coordinating Committee for Automotive
Repair's Grant Management Problems
Report No. 10960-2002-M-000031
August 22, 2002
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Inspector General Resource Centers
Conducting the Report:
Central Audit and Evaluation Resource Center
Kansas City
Central Investigations Resource Center
Chicago
EPA Program Offices Involved:
Office of Enforcement and Compliance Assurance,
Office of Compliance
Office of Grants and Debarment,
Grants Administration Division
Report Contributors:
Stephanie Oglesby
Clay Brown
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August 22, 2002
MEMORANDUM
SUBJECT: EPA's Lack of Oversight Contributed to Coordinating Committee
for Automotive Repair's Grant Management Problems
Report No. 10960-2002-M-000031
FROM: Bennie Salem
Divisional Inspector General
TO: Martha Monell, Director
Grants Administration Division
Michael M. Stahl, Director
Office of Compliance
This is our final report on the Environmental Protection Agency's (EPA) lack of oversight of the
Coordinating Committee for Automotive Repair's (CCAR) cooperative agreements. The report
includes recommendations to improve oversight of cooperative agreements issued to CCAR.
You will need to provide additional information, including milestone dates, concerning on-site
reviews and establishing indirect cost rates. This report is a supplementary report to a prior final
financial report entitled, EPA Cooperative Agreements Awarded to the Coordinating Committee
for Automotive Repair, which was issued May 29, 2002. This report includes an assessment of
your comments and we have incorporated the written comments in Appendix I.
We identified the oversight issues during our review of CCAR's cooperative agreements. Wide-
ranging problems with grant oversight had been identified in a series of other Office of Inspector
General audit reports, which all showed the need for improved EPA management of assistance
agreements. Those reports included the following:
Report
Procurements Made by Assistance Agreement Recipients
Should be Competitive
Surveys, Studies, Investigations and Special Purpose Grants
EPA's Competitive Practices for Assistance Awards
Report No.
2002-P-00009
2002-P-00005
2001-P-00008
Date
March 28, 2002
March 21 , 2002
May 21, 2001
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CCAR, also referred to as CCAR-Greenlink, is one of 10 compliance assistance centers funded by
EPA's Office of Enforcement and Compliance Assurance (OECA). CCAR provides compliance
assistance information to the automotive industry via the Internet. CCAR first received funds
from EPA in October 1995 and, as of June 30, 2001, had claimed $2,026,837 in EPA funds. It
was EPA's goal for the compliance assistance centers, including CCAR, to become self sufficient
after a few years of operation, but CCAR had not done so by September 2001.
Our work at CCAR was not an examination in accordance with Government Auditing Standards;
instead, we followed the Grants Proactive Vulnerability Assessment guide. We reviewed EPA
project officer and grants specialist roles and responsibilities in providing oversight to CCAR. We
followed the criteria in the Assistance Administration Manual, Project Officer Manual, and EPA
Orders 5700.3 and 5700.4. Had we performed our work in accordance with Government
Auditing Standards, other matters might have come to our attention and would have been
reported to you.
EPA's Oversight of CCAR Was Limited
EPA's lack of oversight contributed to CCAR's grant management problems. The project officer
and grants specialist did not provide the necessary oversight to ensure CCAR managed its
cooperative agreements in accordance with federal regulations. In a separate report, we
questioned all costs claimed under the cooperative agreements because CCAR did not account for
funds in accordance with federal rules, regulations, and terms of the cooperative agreements.
Adequate EPA oversight could have prevented reimbursing CCAR for ineligible and unsupported
costs.
The project officer and grants specialist did not coordinate a monitoring plan to oversee CCAR's
cooperative agreements, nor provide adequate oversight to ensure CCAR's cooperative
agreements were managed in accordance with federal regulations. Neither followed
recommended procedures in grant guidance. Additionally, the grants specialist was not
responsive to repeated requests from the grantee for assistance in developing an indirect cost rate.
EPA should ensure grant recipients comply with all applicable statutes, regulations, policies, and
requirements in agreements. According to an EPA document, Managing Your Financial
Assistance Agreement (Project Officer Manual), dated February 2001, the project officer serves
as EPA's technical manager and liaison with the grant recipient's project manager on all matters
relating to project performance. The project officer provides programmatic oversight and
technical assistance by conducting onsite reviews, as well as reviewing and approving progress
reports, Financial Status Reports, and payment requests. The grants specialist, on the other hand,
is a source of administrative oversight for all EPA assistance agreements, and serves as the liaison
between the project officer, the grantee's project manager, and grantee administrative staff for
administrative matters. The Project Officer Manual identifies some specific responsibilities of the
project officer and grants specialist, as follows:
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Project Officer
1. Review proposed budget against workplan to determine whether the budget is reasonable.
2. Ensure project staff support is adequate.
3. Review costs to determine whether they are eligible and reasonable.
4. Conduct site visits as necessary to evaluate programmatic capability.
5. Ensure the recipient complies with all programmatic terms and conditions in the award.
Grants Specialist
6. Ensure budget information is complete and costs consistent with federal principles and policies.
7. Review indirect cost rate and verify the grantee has a current, approved rate.
8. Review proposed salary ranges for reasonableness.
9. Review costs to determine whether they are allowable and allocable.
The project officer did not provide sufficient monitoring of CCAR's management of the
cooperative agreements. The project officer received progress reports and conducted regular
teleconferences with the grant recipient, but primarily focused on the grantee's performance
progress; business and administrative aspects of CCAR were not addressed. As noted above, the
project officer should review CCAR's proposed budgets and costs to determine whether they are
eligible and reasonable, but there was no evidence in the project officer's files to indicate a cost
reasonable analysis of proposed costs for the cooperative agreements and each amendment was
conducted. According to the project officer, CCAR's quarterly reports identified budgeted
dollars versus actual dollars spent, and the project officer compared these numbers with the
activities CCAR performed to ensure the costs appeared reasonable. However, there was no
documentation in the project officer's file supporting a cost reasonable analysis of costs incurred.
Also, the budgeted dollars and actual expenditures identified on the quarterly reports were never
verified for accuracy and eligibility.
The grants specialist also did not fulfill required duties as defined in the Project Officer Manual
and Assistance Administration Manual. The grants specialist did not respond to repeated requests
from CCAR or the project officer for assistance in developing an indirect cost rate, and we found
no evidence that CCAR prepared or negotiated an indirect cost rate as required by the
cooperative agreements. In addition, discussions with the grants specialist disclosed that the
person was generally unaware of CCAR's budget submissions and cost structure. The project
officer was aware that CCAR never developed the indirect cost rate but still let the cooperative
agreements continue. After repeated delays in assistance from the grants specialist, the project
officer should have elevated CCAR's request for technical assistance to upper management.
The project officer and grants specialist also did not coordinate a monitoring plan to oversee
CCAR's cooperative agreements. According to EPA Order 5700.3, "EPA Policy For Post-
Award Management of Grants and Cooperative Agreements by Headquarters and Regional
Offices," effective June 1999, the project officer should communicate with the grants management
office at least once a year during the life of a cooperative agreement to ensure proper monitoring.
The record of communication should be documented in the project officer files. However, there
was no such documentation in the project officer's files.
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Further, the project officer had not conducted an onsite review until August 2001, almost 6 years
after the first award. It is important for onsite reviews of new recipients of EPA funding to be
conducted early in the process, to detect problems as early as possible. In addition, when the
review was conducted, it only looked at the programmatic areas of CCAR; the financial and
administrative systems were not reviewed to ensure they were in compliance with federal
regulations. Also, the grants specialist did not conduct an onsite evaluation, recommended in
Interim EPA Order 5700.4 "Interim Guidance Compliance Assistance Initiative Policy," effective
October 2000. The on-site evaluation would include a review of CCAR's entire operation, taking
into account property management, procurement, financial systems, and general administration.
This would have enabled testing for unallowable costs and the adequacy of the grantee's financial
and administrative systems.
EPA's lack of oversight allowed CCAR to receive reimbursement for non-federal as well as
federal activities that occurred at CCAR. As of June 30, 2001, CCAR's claims under the
cooperative agreements totaled $2,026,837. In another report, we questioned the entire amount
because CCAR's financial management and time distribution systems did not meet the
requirements of 40 Code of Federal Regulations 30.21. We questioned most costs because
CCAR did not have written accounting procedures regarding the allocation of joint or common
costs. The grants specialist has the responsibility to review costs to determine whether they are
allowable and allocable. CCAR did not have adequate controls to prevent the submission and
reimbursement of ineligible expenses. For example, CCAR claimed alcoholic beverages and trips
for non-federal activities. In addition, available documentation was not always sufficient to
determine whether costs were reasonable, allowable, and allocable in accordance with federal
regulations.
Also, CCAR did not maintain adequate time records as required by Office of Management and
Budget (OMB) Circular A-122. CCAR employees maintained weekly records of work activity,
but did not usually identify the actual hours spent on the activities. These activity reports were
not used to distribute labor costs claimed to the cooperative agreement. In addition, CCAR
shifted a non-EPA obligation to the cooperative agreement, which is prohibited by OMB Circular
A-122. Specifically, the Board of Directors reduced the number of required work hours for the
Executive Director to liquidate non-EPA funds owed to the Director for a period when funds
were not available, and since the costs for the Executive Director were more than approved by
EPA this should have been noticed by the project officer. The project officer had salary
information but never identified what portion of the Executive Director's salary EPA was paying.
Also, in-house reviews of one cooperative agreement identified the disparity in the Executive
Director's salary to other salaries, but nothing was changed.
According to EPA Order 5700.3, it is EPA's policy that project officers and grants specialists
monitor cooperative agreements subsequent to the signature of the award. EPA particularly
needs to provide such oversight to CCAR because CCAR continued to ineffectively manage its
cooperative agreements and claimed excessive and ineligible costs. Adequate oversight could
prevent EPA from reimbursing CCAR for future ineligible and unsupported costs.
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Recommendations
We recommend that the Directors of the Grants Administration Division and Office of
Compliance:
1. Ensure EPA staff comply with established procedures and controls for the oversight
and management of grants and cooperative agreements.
2. Promote onsite reviews of assistance agreement recipients, especially early in the
project period.
Agency Response and OIG Comments
The Grants Administration Division (GAD) and OECA concurred with the recommendations. In
order to provide adequate oversight and management of CCAR's cooperative agreement, GAD
placed CCAR on a reimbursement payment method, and CCAR must submit all payment requests
to the project officer for approval prior to receiving payment. The project officer will work with
the grants specialist to ensure that the information is complete and determine whether proposed
costs are reasonable, allowable, and allocable to the cooperative agreement. GAD provided the
Office of Inspector General a copy of its memorandum to CCAR dated July 30, 2002.
GAD and OECA agreed to promote on-site reviews of assistance agreement recipients. OECA
plans to follow up with its project officers to make sure they make an on-site visit to their
grantees as necessary. GAD will also participate in these visits as often as possible.
GAD also acknowledged their lack of administrative oversight in assisting CCAR in developing
an indirect cost rate proposal. Recognizing the need to improve oversight in the area of indirect
cost rate negotiations, GAD is exploring establishing a partnership with the Office of Acquisition
Management and contracting out the responsibility for indirect cost rate negotiation.
Even though GAD established and implemented policies that promote on-site reviews, it needs to
ensure these policies are followed by the grants specialists and project officers. Our review
identified non-compliance with these policies. The policies should help ensure coordination and
identification of significant issues for the grants specialists and project officers. OECA's followup
with its project officers should encourage onsite visits early in the oversight process to ensure
grantees understand and are properly implementing grant requirements. OECA needs to clarify
how it plans to follow up with all its project officers to ensure on-site visits are conducted and
provide milestone dates for its accomplishments.
Although GAD mentioned partnering with the Office of Acquisition Management to contract out
indirect cost rate negotiations, GAD needs to provide additional information on what it plans to
do and include milestone dates.
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Action Required
In accordance with EPA Order 2750, you, as the action official, should provide this office a
written response within 90 days of the final report date. We have designated the Director of
Grants Administration Division as the action official responsible for consolidating your response.
For corrective actions planned but not completed by the response date, reference to specific
milestone dates will assist us in deciding whether to close this report.
If you have any questions, please contact Stephanie Oglesby at (913) 551-7008 or Michael Rickey
at (312) 886-3037.
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Appendix I
Agency Response
D.C.
SUBJECT- BP.-Vs Lack of Oversight Contributed to Coordinating Committee for
Antoinette Repair's Grunt Management Problems
Assignment No. 2001-00260 . . •. • : |
FROM: Marty rvlonell. Director '. • '. • '• -\
Grams Administration Division •.*'' - ; " . • '
TO: Beanie Saiem
Divisional Inspector denerai
This memorandum is in response to ihe Off ice of Inspector General's (OKI) draft audit
report (Draft Report). EPA '.« Lack ufOn-rxiglu ('onirihincd ti> Cunniimiiing i i»nmi!U'<;j<»-
•\\ncmnn\-s Kt'innr '.v Gram Mima%i>i»('.»t /'cu/),'V«w " m coordination with the (Mfice ot
Lnforcemem and Compliance Assurance (OEC.-U the Grams Administration Division (GAUi H
providing the following comments to the recommendations outlined in the Draft, Rcpoil.
Ensure EPA stall'comply with established procedures ana
controls for the oversight and manageme.nl of grants and cooperative agreements.
f»AJI We concur with this recommendation. Both the project othcer ana the
S^mTspecialisl have designated roles and responsibilities in the posi-auard oversight of grains
ajKl cooperative agreements. Key to this oversight is timely and effective communication
between the recipient, project officer and grants specialist. In response to another OK i report on
CCAR. the foilovungcorreciive actions will he implemented under Cl. AR s next increment »>i
assistance fusidmg;
1) CCAR's current cooperative agreement will be placed on a reimbursement
paunent method, and CCAR must submit all future payment requests 10 i he-
project officer for approval prior to receiving payment. Each pa> mem request ^
must include a list of expenditures incurred along uhh a detailed jusiifieation loi
cosss. The project officer, in carrying out this responsibility will \\-ork with the
arants specialist 10 ensure that the information is complete and de-term me \\hethet
proposed costs are reasonable, allowable, and alloeable to the cooperative
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2) The officer will be to submit a monitoring to ihc
on an basis (or more issues be encountered), to ensure
CCAR's cooperative is in accordance with Federal
regulations.
GAD acknowledges our lack of administrative oversight in assisting CCAR in developing
an indirect cost rate Recognizing the to improve our oversight in the of
cost rate negotiations, GAD is exploring establishing a with the Office of
Acquisition Managemenl (OAM) and contracting out the responsibility for indirect cost rate
negotiation.
Promote on-site revie\\ 5 of assi stance I rocipients,
especially early in the period.
We concur with this recommendation. OECA plans to follow-up with all
its project officers to they an on-sile visit 10 their as necessary.
Notwithstanding any budgetary/resource constraints. GAD will gladly participate in these visits
as often as Upon each sue visit, the OECA project officer will consult u ith their Grams
Specialsst to coordination and the identification of issues,
On-site reviews, which is an of the post-award oversight process, must be a
collaborative effort the officer and the grants specialist. Since 1998. GAD has
a more proactive to post-award oversight of grants and cooperative agreements
by and implementing policies which we believe already promote on-site reviews.
On May 4. 1998, as a of 1996 Congressional hearings and OIG OGD
the. "Policy. Procedures and Guidelines for {he Post-Award Management
of Grants and Cooperative Agreements By Grants; Management Oj/icc\-", (GPI 98-6),
This OGD policy guidance requirements for post-award monitoring
of assistance agreements by Grants Management Offices (GMOs). including monitoring
*~ f fe' • v %7
activities required for all assistance and providing on monitoring
techniques criteria for identifying recipients needing monitoring.
On April 5. 1999. EPA 5700.3. "EPA Policy for Post Award Management of
Grants and Cooperative Agreements by Headquarters ami Regional Office a". was
established. This EPA policy was the companion to the OGD internal guidance policy
mentioned above, and went a further by ensuring EPA Headquarters and Regional
program offices. GMOs. Financial Offices worked together to manage
EP/Vs by requirements for post-award monitoring of
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Lastly, on June 7, Interim EPA Order 5700.4. " Interim Grantee Compliance
.'Instance Initiative Policy" was established. This EPA Order will modify EPA O=\Vr
S7UO. 3, "EPA Policy for Post- Award Management Mid Grams and Cooper-olive
Agreements by Headquarters ami Regional Offices ", and the Office of Grant- and
Debannent IOGD > policv GPJ 98-6, "Post-A ward Management of Assistance
Agree me fit.s, to:
1) place Headquarters and Regional Program Offices, and Grants Manauernenr
Offices on Hie same two-year cycle to develop and submit Post-Award Monitorin*
Plans to GAD for review, and
•^ r€(-luirc Headquarters, Regional Program Offices, and Grants Management(' • '•'•.;•
to include evaluative on-sile visits and/or off-she evaluations within their l-Vv-:!-
Award Monitoring Plans,
We lhank you for the opportunity to comment on the Draft Report. Please co«uv"
Valorie Swan-Townsend. of my staff; at (202.) 564-5373 if you have any questions.
AUachment:
OBOA's Comments on the IG's Draft Audit Report (Response 7/16/02)
cc: John Nolan, Audit Liaison, Grants Administration Division
Everetf Bishop, Project Officer, Compliance Assessment and Media Proeranis Division
Greg Marion. Audit Liaison, Office of Enforcement and Compliance Assurance
Joyce Blake, Grants Specialist
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Appendix II
Distribution
EPA
Comptroller (2731 A)
Director, Office of Grants and Debarment (3901R)
Agency Audit Followup Coordinator (2724A)
Associate Administrator for Congressional and Intergovernmental Relations (1301 A)
Associate Administrator for Communications, Education, and Media Relations (1101 A)
Applicable Audit Followup Coordinator (program liaison)
Inspector General (2410)
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