Office of Inspector General
\ —
Special Report
Assistance Agreements
EPA Cooperative Agreements
Awarded to the Coordinating Committee
for Automotive Repair
Report No. 10960-2002-M-000017
May 29, 2002
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Inspector General Resource Centers
Conducting the Review: 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 Grants and Debarment,
Grants Administration Division
Report Contributors: Stephanie Oglesby
Clay Brown
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May 29, 2002
MEMORANDUM
SUBJECT: EPA Cooperative Agreements Awarded to the Coordinating Committee for
Automotive Repair
Report No. 10960-2002-M-000017
FROM: Bennie Salem
Divisional Inspector General
TO: Martha Monell, Director
Grants Administration Division
We performed a limited financial and compliance review of the Coordinating Committee for
Automotive Repair's (CCAR) Cooperative Agreements CX82437601 (1995-2000), CX82573201
(1997-1999), and CX82836601 (2000-2001). The purpose of our work was to determine
whether CCAR effectively managed its Environmental Protection Agency (EPA) cooperative
agreements. Specifically, we determined whether costs claimed for the cooperative agreements
were allowable, reasonable, and allocable in accordance with federal law, regulations, and terms
of the cooperative agreements.
This review was completed as part of a nationwide Office of Inspector General initiative
performed jointly between the Offices of Audit and Investigations. This report addresses financial
and compliance observations. The Office of Investigations is addressing other matters related to
the cooperative agreements separately.
Our work was not an examination in accordance with Government Auditing Standards, the
purpose of which is to express an opinion. Therefore, we do not express an opinion. Our work
followed the Grants Proactive Vulnerability Assessment guide. Our review involved a judgmental
sample of costs claimed for payroll, travel, rent, supplies, and administration expenses. We
reviewed these costs to determine whether CCAR accounted for the costs in accordance with
Federal rules, regulations, and terms of the cooperative agreements. Specifically, we followed the
criteria in Office of Management and Budget Circular A-122 and 40 Code of Federal Regulations
Part 30 when conducting our compliance review. 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.
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Action Required
In accordance with EPA Order 2750, you, as the action official, are required to provide our office
with a proposed draft management decision specifying the Agency's position on our
recommendation on costs questioned and other recommendations in this report. The draft
management decision is due within 120 calendar days of the date of this transmittal memorandum.
Our report includes an assessment of the recipient's draft report comments. We also included its
written comments as Appendix I.
If you have any questions, please feel free to call Stephanie Oglesby at (913) 551-7008 or Michael
Rickey at (312) 886-3037.
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Table of Contents
Summary of Results 1
Recommendations 1
Recipient Response 2
Office of Inspector General Evaluation 2
Background 3
Exhibits 5
A: CCAR's Noncompliance With the Terms
of the Cooperative Agreements 5
B: Summary Results for Cooperative Agreement CX82437601 7
C: Summary Results for Cooperative Agreement CX82573201 11
D: Summary Results for Cooperative Agreement CX82836601 13
Appendices 17
I: Recipient Comments 17
II: Distribution 25
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Summary of Results
We questioned all costs claimed under the Cooperative Agreements CX82437601 (1995-2000),
CX82573201 (1997-1999), and CX82836601 (2000-2001), because the Coordinating Committee
for Automotive Repair (CCAR) did not account for funds in accordance with Federal rules,
regulations, and terms of the cooperative agreements. CCAR's claims under the cooperative
agreements totaled $2,026,837 as of June 30, 2001. The questioned costs consisted of
unsupported and ineligible payroll costs and unsupported travel, equipment, printing/postage,
rent, telephone, outreach, CCAR administration, web/computer, and supply costs. The
questioned costs and specific issues identified are explained in detail in Exhibits A through D.
Recommendations
We recommend the Director, Grants Administration Division:
2. Require CCAR to modify its financial management system to meet the requirements of
40 Code of Federal Regulations (CFR) 30.21. At a minimum, CCAR's system must:
• Ensure that financial results are current, accurate, and complete.
• Include written procedures to determine reasonableness, allocability, and allowability of
costs in accordance with Office of Management and Budget (OMB) Circular A-122.
• Include accounting records that are supported by adequate source documentation.
2. Require CCAR to develop a time distribution system that meets the requirements of OMB
Circular A-122.
3. Not provide any new funds until the Agency confirms that CCAR has financial
management capabilities to manage funds in accordance with 40 CFR 30.21 and OMB
Circular A-122.
4. Require CCAR to reconstruct the accounting records necessary to support the
expenditure of funds in accordance with OMB Circular A-122. At a minimum, CCAR will
need to review time sheets, logs or other records to identify the time actually spent on
EPA authorized activities.
5. Require CCAR to submit indirect cost proposals for the fiscal periods 1995 to present in
accordance with OMB Circular A-122.
6. Recover all ineligible costs that do not meet the requirements of OMB Circular A-122.
7. Recover all funds that cannot be supported by CCAR in accordance with OMB Circular
A-122.
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Recipient Response
CCAR generally concurred with recommendations 1, 2, and 5. CCAR has begun to develop a
financial management system that addresses the specific matters noted by the OIG. CCAR has
instituted a new timekeeping (time distribution) system effective March 2, 2002, which identifies
work activities by specific task in quarter-hour increments. Finally, CCAR is currently working
with its accounting firm to prepare and submit an indirect cost proposal.
CCAR generally disagreed with recommendations 4 and 6. The organization does not have the
resources to reconstruct past accounting records. Instead, CCAR wants to move forward with
assistance from EPA to assure that present and future systems of accounting records meet the
OMB Circular A-122 requirements.
CCAR believes that the draft report overstates the amount of ineligible and unsubstantiated costs.
First, CCAR believes the salary paid to the former Executive Director was reasonable. Second,
CCAR believes that since EPA provided 80 to 90 percent of its funding, a corresponding
percentage of expenses were directly related to EPA agreements. Since most expenses were EPA
related, CCAR believes the amount of salaries charged to the agreements reasonably reflected the
actual time spent by the employees. CCAR also believes the vast majority of travel costs related
to federal activities and were allowable.
Office of Inspector General (OIG) Evaluation
Even though CCAR is working toward improved financial management and time management
systems, and the development of an indirect cost rate proposal, its response did not provide
sufficient information to satisfy our recommendations. While CCAR said it is making the
recommended changes, EPA should satisfy itself that CCAR has an appropriate financial
management system in place before providing additional funds.
As previously mentioned, CCAR believes the Executive Director's actual salary compensation
was lower than the agreed-upon base. We do not concur. The agreed-upon base included
compensation to be paid with non-federal funds. As noted in the report, the Board of Directors
reduced the required work hours to liquidate non-EPA funds owed to the Director for a period
when funds were not available. The shifting of a non-EPA obligation to the cooperative
agreements is prohibited by OMB Circular A-122 and these costs should be recovered.
Although CCAR stated that it has accomplished the technical requirements of the cooperative
agreements, it could not demonstrate that all costs claimed against these agreements related
directly to federal activities. Thus, CCAR should provide adequate documentation to support
costs claimed to date. If this cannot be done, we believe EPA must recover all costs that cannot
be supported as directly related to federal activities.
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Background
CCAR, also referred to as CCAR-Greenlink, is one of 10 compliance assistance centers funded by
EPA's Office of Enforcement and Compliance Assurance. CCAR provides compliance assistance
information to the automotive industry via the Internet. EPA's main goal was for the compliance
assistance centers to become self-sufficient within a few years of operation. CCAR first received
funds from EPA in October 1995 and, as of September 2001, had not met the EPA goal of
becoming financially privatized.
To assist the reader in obtaining an understanding of the report, key terms are defined below:
Claimed Costs: Program outlays identified by the grantee on either the Financial Status
Report (Standard Form 269) or Federal Cash Transaction Report
(Standard Form 272).
Questioned Costs: Adjustments made by the OIG because the claimed costs are unsupported
(not supported by adequate documentation) or ineligible (incurred and
claimed contrary to a provision of a law, regulation, or term in the
cooperative agreement governing the expenditure of funds).
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Exhibit A
CCAR's Noncompliance With the Terms
of the Cooperative Agreements
CCAR did not follow the terms identified in the cooperative agreements and prepare an indirect
cost rate proposal. The terms identified in CCAR's cooperative agreements follow OMB Circular
A-122, Attachment A, paragraph E.2, and require that recipients prepare an indirect cost rate
proposal within 90 days from the cooperative agreements' award dates and retain it in their files,
subject to audit. The indirect cost proposal should be updated each fiscal year. Also, the indirect
cost rate proposal should be based on guidance in the EPA Booklet "Preparing Indirect Cost Rate
Proposals for Grants and Contracts" (August 1990). Typical indirect costs for non-profit
organizations include depreciation or use allowances on buildings and equipment; costs of
operating and maintaining facilities; and general administration and expenses, such as the salaries
and expenses of executive officers, personnel administration, and accounting.
Our review identified that CCAR had never developed an indirect cost rate proposal. CCAR had
numerous budget amendments that increased funds awarded in the cooperative agreements. The
budget narratives supporting the amendments identified indirect costs for CCAR. The terms of
the cooperative agreements required CCAR to develop an indirect cost rate proposal supporting
the indirect costs within 90 days from the issuance of the award. However, CCAR did not
comply with the terms of the cooperative agreements and develop an indirect cost rate.
Even though CCAR identified indirect costs in budget narratives, CCAR treated all costs as direct
in its accounting system. Various elements of costs were charged based on the availability of
funds budgeted in the cooperative agreements. CCAR rarely charged costs so that the federal and
non-federal activities bore a share of common costs. In addition, no overall allocation approach
or plan existed that assured equitable and consistent treatment of costs, especially common costs
incurred to provide necessary support to all federal and non-federal activities.
We found that CCAR's non-federal revenue increased from approximately 8 percent in fiscal
1996 to 48 percent in fiscal 2001. Even though CCAR increased non-federal revenue each year,
costs were not properly allocated to federal and non-federal activities.
CCAR should develop an indirect cost rate proposal that would provide a cost allocation
structure to be used for all costs that benefit more than one final cost objective. In addition, the
cost allocation structure would provide CCAR with an improved ability to monitor the various
components of allocated costs and would minimize the risk of claiming reimbursement for
for unsupported costs.
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Exhibit B
Summary Results for Cooperative Agreement CX82437601
Categories
Personnel/Fringe Benefits
Travel
Equipment
Printing/Postage
Web/Computer
Office Rent
Telephone
Outreach
Research
Education Consultant
Supplies
CCAR Administration
Excess Claimed Costs
Total
Costs
Claimed
$1,062,267
85,126
42,393
43,167
60,119
85,818
60,768
86,483
65,966
26,657
27,060
114,391
4,785
$1,765,000
Costs Questioned as:
Ineligible
$108,510
$108,510
Unsupporte
d
$953,757
85,126
42,393
43,167
60,119
85,818
60,768
86,483
65,966
26,657
27,060
114,391
4,785
$1,656,490
Total Questioned
Total
$1,062,267
85,126
42,393
43,167
60,119
85,818
60,768
86,483
65,966
26,657
27,060
114,391
4,785
$1,765,000
^^6^00^
Notes
1
2
3
3
3
3
3
3
3
3
3
3
4
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Notes
1. We questioned $1,062,267 of personnel costs for the following reasons:
l.A
l.B
Description
Unauthorized Salary
System Deficiency
Total
Ineligible
$108,510
Unsupported
$953,757
Total
$108,510
$953,757
$1,062,267
1 .H We questioned $108,510 of unauthorized salaries for the following reasons:
l.A-1
l.A-1
l.A-2
l.A-3
Description
Work Hour Adjustment
Excess Over Ceiling
Unauthorized Holiday Pay
Total
Amount
$70,643
$35,045
$2,822
$108,510
We questioned $70,643 because the Board of Directors reduced the number of hours for
the Executive Director without reducing the salary claimed under the cooperative
agreement. Effective July 1, 1999, the Board of Directors increased the Executive
Director's annual salary to $136,000 and reduced the number of required work hours to
1,560. This reduction resulted in a 30-hour work week. The Board reduced the hours to
liquidate non-EPA funds owed to the Director for a period when funds were not available.
Shifting a non-EPA obligation to a cooperative agreement is prohibited by OMB Circular
A-122, Attachment A, paragraph 4.b. In addition, the reduction in hours increased the
equivalent hourly rate from about $65 to $87. It is not reasonable to pay $87 per hour for
the same work previously paid at $65 per hour, without an authorized increase in salary.
According to the EPA project officer, the Executive Director's salary was limited to
75 percent of hours worked. Therefore, the maximum number of hours that EPA agreed
to reimburse CCAR would be 22.5 hours (30 hours X 75 percent), which is 56 percent of
a standard 40-hour work week. It is necessary to compute the adjustment by a factor of
56 percent to ensure that the allowable amount is based on 75 percent of the total hours
worked at an annualized hourly rate of about $65. Adjustment was computed as follows:
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Description Amount
Approved Salary - July
1999 through Oct. 2000 $183,147
Adjustment Factor 56%
Maximum Allowable
Charged to EPA $173,205
accounts
Maximum Allowable ($102,562
)
Questioned Costs $70.643
l.A-2 As discussed in the previous note, EPA limited the reimbursement of the Executive
Director's salary to 75 percent of the hours worked. For 6 months, the limit was
50 percent. From 1995 through 2001 (except for the cost questioned in note l.A-1
above) CCAR claimed $35,045 for the Executive Director in excess of the EPA imposed
ceiling.
l.A-3 We questioned $2,822 of unauthorized holiday pay. CCAR employees claimed holiday
pay for days which were not authorized in their written personnel policy. For example,
staff charged the entire week of Christmas as holiday time, when only Christmas day was
authorized holiday time. OMB Circular A-122, Attachment B, subparagraph 7.b(l) states
that allowable compensation must conform to the established policy of the organization.
l.B We questioned $953,757 as unsupported costs because CCAR did not maintain adequate
time records as required by OMB Circular A-122, Attachment B, subparagraph 7.m(2).
CCAR employees maintained weekly records of work activity, but did not usually identify
the actual hours spent on the activities. Additionally, these activity reports were not used
to distribute labor costs claimed to the cooperative agreement. The claims were based on
estimates. For example, some employees identified non-federal activities but all salary
costs were charged to the cooperative agreement. We also identified specific time periods
when federal and non-federal activities paid for labor costs, but the employee taxes were
paid solely with EPA funds in the cooperative agreement.
2. We questioned $85,126 of travel costs because CCAR's accounting system was deficient.
CCAR did not have adequate controls to prevent the submission and reimbursement of
ineligible expenses for travel. According to 40 CFR Part 30.21, a grantee's financial
management system shall provide effective controls over and accountability for all funds
9 Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
received. Our limited review identified claims to EPA for alcoholic beverages and trips for
non-federal activities. In addition, available documentation was not sufficient to determine
whether the costs were reasonable, allowable and allocable in accordance with federal
regulations and terms of the cooperative agreement. Often, the only support for a charge
was a credit card receipt that did not identify the item purchased.
3. We questioned the remaining costs of $612,822 because CCAR did not: (1) have written
accounting procedures regarding the allocation of joint or common costs, and (2) submit
indirect cost proposals that would distinguish indirect costs from direct costs.
Title 40 CFR 30.21(b)(6) requires the grantee's financial management system to include
written procedures for determining allocability of costs. OMB Circular A-122,
Attachment A, subparagraph A.4 discusses the principles of allocability that would need to
be addressed in the written procedures. In addition, OMB Circular A-122, Attachment A,
paragraph C defines indirect costs; paragraph D discusses the three allocation methods
authorized for indirect costs; and paragraph E discusses the negotiation and approval of
indirect cost rates.
We found no evidence that CCAR had prepared or negotiated an indirect cost rate as
required by OMB Circular A-122. Costs benefitting more than one activity were generally
charged directly to the EPA cooperative agreement.
4. We questioned $4,785, which was the difference between the $1,765,000 claimed on the
Financial Status Report and the $1,760,215 supported in the accounting records. We
were not able to reconcile the total program outlays claimed with CCAR's accounting
system.
10 Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Exhibit C
Summary Results for Cooperative Agreement CX82573201
Categories
Personnel/Fringe Benefits
Travel
Equipment
Printing/Postage
Web/Computer
Office Rent
Telephone
Outreach
Supplies
CCAR Administration
Excess Claimed Costs
Total
Costs
Claimed
$66,455
3,623
1,077
1,144
760
3,223
2,243
4,023
1,155
5,368
929
$90,000
Costs Questioned as:
Ineligible
$22,441
$22,441
Unsupported
$44,014
3,623
1,077
1,144
760
3,223
2,243
4,023
1,155
5,368
929
$67,559
Total Questioned
Total
$66,455
3,623
1,077
1,144
760
3,223
2,243
4,023
1,155
5,368
929
$90,000
^90^00^
Notes
1
2
O
O
O
O
O
O
O
O
4
11
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Notes
1. We questioned $66,455 of personnel costs for the following reasons:
l.A
l.B
Description
Unauthorized Salary
System Deficiency
Total
Ineligible
$22,441
Unsupporte
d
$44,014
Total
$22,441
$44,014
$66,455
1 .A We questioned $22,441, which was the difference between the amount authorized by EPA
and the amount claimed by CCAR. EPA agreed to reimburse the Executive Director 10
percent of his salary, which was $13,596. CCAR claimed $36,037 for the Executive
Director's salary and this resulted in ineligible costs reimbursed by EPA.
1 .B We questioned $44,014 as unsupported costs because CCAR did not maintain adequate
time records. Details are discussed in Exhibit B, Note l.B.
2. We questioned $3,623 of travel costs as unsupported because CCAR's accounting system
was deficient. CCAR did not have adequate controls to prevent the submission and
reimbursement of ineligible expenses for travel. Details are discussed in Exhibit B,
Note 2.
3. We questioned the remaining costs of $18,993 because CCAR did not: (1) have written
accounting procedures regarding the allocation of joint or common costs, and (2) submit
indirect cost proposals that would distinguish indirect costs from direct costs. Details are
discussed in Exhibit B, Note 3.
4. We questioned $929, which was the difference between the $90,000 claimed on the
Financial Status Report and the $89,071 supported in the accounting records. We were
not able to reconcile the total program outlays claimed with CCAR's accounting system.
12
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Exhibit D
Summary Results for Cooperative Agreement CX82836601
Categories
Personnel/Fringe Benefits
Travel
Printing/Postage
Web/Computer
Office Rent
Telephone
Outreach
Supplies
CCAR Administration
Excess Claimed Costs
Total
Costs
Claimed
$105,423
5,835
2,339
8,632
19,549
6,675
5,231
2,653
12,634
2,866
$171,837
Costs Questioned as:
Ineligible
$18,558
$18,558
Unsupported
$86,865
5,835
2,339
8,632
19,549
6,675
5,231
2,653
12,634
2,866
$153,279
Total Questioned
Total
$105,423
5,835
2,339
8,632
19,549
6,675
5,231
2,653
12,634
2,866
$171,837
^H^T^
Notes
1
2
3
3
3
3
3
3
3
4
13
Report No. 10960-2002-M-000017
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EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Notes
1. We questioned $105,423 of personnel costs for the following reasons:
l.A
l.B
Description
Unauthorized Salary
System Deficiency
Total
Ineligible
$18,558
Unsupporte
d
$86,865
Total
$18,558
$86,865
$105,423
l.C We questioned $18,558 of ineligible costs for the following reasons:
l.A-1
l.A-2
l.A-3
Description
Work Hour Adjustment
Excess Over Ceiling
Unauthorized Holiday Pay
Total
Amount
$10,372
$7,232
$954
$18,558
l.A-1 We questioned $10,372 because the Board of Directors reduced the number of hours for
the Executive Director without reducing the salary claimed under the cooperative
agreement. Effective July 1, 2000, the Board of Directors increased the Executive
Director's salary to $141,440 and reduced the number of required work hours to 1,560.
See Exhibit B, Note l.A-1 for more details. The adjustment was computed as follows:
14
Report No. 10960-2002-M-000017
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Description
Approved Salary - Nov.
2000 through Dec. 2000
Adjustment Factor
Maximum Allowable
EPA Cooperative Agreements Awarded
to the Committee for Automotive Repair
Amount
$23,573
56%
Charged to EPA accounts
Maximum Allowable
Questioned Costs
1 .A-2 We questioned $7,232 because CCAR claimed costs for the Executive Director's salary in
excess of the EPA imposed ceiling. Details are discussed in Exhibit B, Note l.A-2.
l.A-3 We questioned $954 of unauthorized holiday pay. Details are discussed in Exhibit B,
Note l.A-3.
1 .B We questioned $86,865 as unsupported costs because CCAR did not maintain adequate
time records. Details are discussed in Exhibit B, Note l.B.
2. We questioned $5,835 of travel costs as unsupported because CCAR's accounting system
was deficient. CCAR did not have adequate controls to prevent the submission and
reimbursement of ineligible expenses for travel. Details are discussed in Exhibit B,
Note 2.
3. We questioned the remaining costs of $57,713 because CCAR did not: (1) have written
accounting procedures regarding the allocation of joint or common costs, and (2) submit
an indirect cost proposal that would distinguish indirect costs from direct costs. Details
are discussed in Exhibit B, Note l.A-3.
4. We questioned $2,866, which was the difference between the $171,837 claimed on the
Federal Cash Transaction Report and the $168,971 supported in the accounting records.
We were not able to reconcile total program outlays claimed with CCAR's accounting
system.
1 5
Report No. 1 0960-2002-M-00001 7
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16
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Appendix I
Recipient Comments
March 27, 2002
To: Ms. Valorie Swan-Townsend, U.S. EPA, Grants Administration Division
Cc: Mr. Michael Stahl, U.S. EPA, OECA
Mr. Michael Alushin, U.S. EPA, OECA
Mr. Everett Bishop, U.S. EPA, OECA
CCAR Executive Committee
I am writing in response to the draft report, EPA Cooperative Agreements Awarded to
the Coordinating Committee For Automotive Repair, that was received in our office with
a cover memorandum from Bennie Salem, Divisional Inspector General, dated
February 22, 2002.
My response is being sent to you in coordination with an accompanying letter from Mr.
Lirel Holt, who serves as chairman and chief executive officer of CCAR, and a joint
response from Mr. Holt and I that addresses specific accounting issues in the draft
report.
Background
I joined the CCAR organization in August 2000, when I was hired as marketing/project
manager to work on the "Automotive Career Education Day" project. I came from a
background of working for 17 years with not-for-profit trade and professional
organizations in the automotive and diesel fuel injection industries. My education and
professional experience have been in the areas of public relations and management;
I have no accounting background.
Transition
Upon the resignation of Mr. Sherman Titens as CCAR president on February 1, 2001,
my duties were shifted to include more of the day-to-day responsibility for activities of
the "CCAR-GreenLink" Compliance Assistance Center. Since June 2001 when the OIG
review began, my responsibilities have been almost directed to CCAR-GreenLink
activities.
17 Report No. 10960-2002-M-000017
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Further Transition
Effective July 23, 2001, following the resignation of Mrs. Robyn Kendrick, I served as
acting director of CCAR, and in November 2001 my title was changed to acting
president. Since that time, I have attempted to clarify and coordinate the financial
management activities of CCAR around three guiding tenets:
1) what has been asked of CCAR by OECA;
2) what areas of concern have been communicated to me by those involved in the
OIG review; and
3) what seems a reasonable and prudent system of management based on my
business experience.
Response to Recommendations
Mr. Holt has asked me to respond specifically to the recommendations listed on pages
2-3 of the draft report.
1. The first recommendation is to suspend CCAR's current cooperative agreement "all
corrective action" has been taken to support future federal claims. What CCAR
needs to know is: What constitutes "all corrective action" and who will make this
determination?
2. We want to comply with this recommendation regarding CCAR's financial
management system, and I have reviewed the language of 40 CFR 30.21. We have
begun the process of developing a financial management system that addresses
the specific matters noted by the OIG. There are certain matters for which we will
need assistance or classification from OECA. We work with OECA (or designated
parties) to address these matters.
3. CCAR has instituted a new timekeeping (time distribution) system effective March 2,
2002, which identifies work activities by specific task in quarter-hour increments. I
am attaching a sample report based on this new structure. We will solicit your
guidance to determine if this new system meets the requirements of OMB Circular
A-122.
4. CCAR has neither the financial nor human resources required to reconstruct the
past accounting records in regard to expenditure of grant funds.
We can move forward with assistance from EPA to assure that our present and
future system of accounting records meet the OMB Circular A-122 requirements.
5. We are working presently with our accounting firm to prepare and submit an indirect
cost proposal shortly.
18 Report No. 10960-2002-M-000017
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6. Upon review of the draft report with our accounting firm, it is my opinion that the
draft report almost entirely overstates the amount of ineligible and unsubstantiated
costs.
A separate response prepared after consultation with our accounting firm addresses
the Exhibits attached to the draft report.
Personal Observations
A comment made to me by personnel involved in the OIG review has stuck with me
through the last several months since I became CCAR's acting president. The gist of
the comment was this: "We know we can't change the past, but we can impact the
future."
I have no knowledge of what CCAR did or didn't do in efforts to follow the terms
identified in the cooperative agreements of previous years and to prepare an indirect
cost proposal for those periods. I have no knowledge of what assistance or guidance
was provided in previous years to CCAR by OECA or the Grants Administration
Division related to indirect costs.
What I do know is that a series of cooperative agreements were approved for CCAR,
and my assumption is that EPA reviewed them at every step along the way. I also know
that annual audits of CCAR have been conducted in accordance with Government
Auditing Standards, as well as OMB Circular A-133, using the same accounting firm
each time. Former staff members repeatedly told me that CCAR was "clean" in each of
these audits, and I assume that copies of these documents have regularly been
provided to OECA.
Moving Forward
With ongoing guidance and assistance from OECA and the Grants Administration
Division, CCAR can continue to serve the automotive industry through the "CCAR-
GreenLink" Compliance Assistance Center, and can do so in compliance with all
applicable guidelines for our financial management and reporting.
If the OIG draft report requires, however, that CCAR "change the past" by
reconstructing accounting records and again providing documentation and justification
for all previous expenditure of grant funds, there is no future for CCAR. The
organization simply cannot sustain itself financially to conduct such a massive
accounting procedure.
The total automotive industry looks to CCAR-GreenLink for answers and solutions in
environmental compliance and pollution prevention. Each week brings new
opportunities to reach our audience by way of our website, telephone assistance, and
through our marketing of private-label services and S/P2 online training.
My optimism that CCAR can flourish is high. Its performance of its compliance
assistance duties has never been greater. We have the staff in place, as well as the
products that can permit us to be far less dependent on EPA grant funding in future
years.
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The content of the final OIG report will determine whether my optimism can become a
shared reality for CCAR and EPA.
Sincerely,
ROBERT G. STEWART
Acting President
rgs:
Attachment
20 Report No. 10960-2002-M-000017
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March 27, 2001
To: Ms. Valorie Swan-Townsend
CC: Mr. Michael Stahl, Mr. Michael Alushin, Mr. Everett Bishop
CCAR Executive Committee
From: Lirel Holt and Robert G. Stewart, CCAR
The following response has been developed after consultation with our accounting firm, BKD LLP, and a
review of the OIG draft report, audit records and notes accumulated during the period in question.
Exhibit A: CCAR's Non-Compliance with the Terms of the Cooperative Agreements
While Exhibit A refers to non-compliance with respect to terms of the Cooperative Agreement, it seems to
refer solely to indirect costs and the need for CCAR to develop an indirect cost rate proposal.
It should be noted that from CCAR's inception in 1994 and through 1998 (with the exception of 1996)
approximately 80 to 90% of its funding was provided by the EPA's Office of Enforcement and Compliance
Assurance (OECA).
Based on level of funding being received from the EPA over this time period and the corresponding level of
effort and operations directed towards the purpose of carrying out the terms outlined in Cooperative
Agreement (EPA grants), our assumption is that CCAR management felt it was not necessary to develop an
indirect cost rate proposal. This is due to the fact that during this time period CCAR's entire operational
efforts and related expenditures were almost entirely geared towards carrying out the directives outlined in
the EPA grants.
During this time period, 80 to 90% of expenses incurred were directly related to the EPA grants. This is
consistent with the budgets that were submitted to and approved by the OECA.
Accordingly, management in place at the time felt it was somewhat unreasonable to require an indirect cost
rate be in place, when in fact, indirect costs only comprised a minute portion of our total expenses incurred
during this time period.
With respect the fiscal years ended 1999 through 2001, we do agree that CCAR's non-federal revenue and
expenses increased during this time period, per recommendations by OECA that CCAR become self-
funding. As a result of this mandate to become self-sufficient and emerging new revenue streams, we are in
the process of developing an indirect cost rate proposal and/or negotiating an indirect cost rate, which upon
completion, and approval by the EPA, will be implemented immediately.
When evaluating and reviewing our revenue and expense distribution (both direct program expenses and
indirect management and general expenses), it is still our position that the amounts claimed under the EPA
grants would be comparable had an indirect cost rate been in place. We have compiled the information on
21 Report No. 10960-2002-M-000017
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the attached spreadsheet from our audited financial statements to highlight this point. (The attached Exhibit
#1 summarizes not only fiscal years ended 1999 to 2001 but also fiscal years 1996 to 1998.)
Exhibit B: Summary Results for Cooperative Agreement CX82437601
In Exhibit B, the OIG is questioning the entire $1,765,000 claimed under the cooperative agreement. Of
this amount, $108,510 is referred to as ineligible and $1,656,490 is referred to as unsupported. As a
practical matter, how can this be? The CCAR-Gree«Link website was built and operated for all these
years, and A-133 audits were completed as required. The enormous percentage of funds being challenged
calls the method of analysis into question.
The purported lack of and deficiencies in documentation described in the draft report are inconsistent with
the evidence provided to and inspected by our auditors during the annual audits. It is possible that some
documentation available at the time of the earlier audits is no longer in existence due the passage of time
and normal destruction of records, although we have no knowledge of any such destruction of records. It is
also probable that documentation on hand was not fully provided to or understood by the OIG or CCAR
personnel during the period of the work of the OIG. CCAR personnel from the periods involved are no
longer employed by CCAR and the knowledge of current CCAR personnel regarding such matters is
limited.
Notes l.A-1, A-2. Ineligible Executive Director's salary amounts consisting of $70,643 related to work
hour adjustment and $35,045 related to excess over ceiling.
It should first be noted that a good portion of the history and related circumstances involving the former
Executive Director's salary were discussed and negotiated by former Board members with the former
Executive Director. Furthermore, as requested by the OIG, we have not consulted with the former
Executive Director with respect to this matter. Taking that into consideration, the following is, to the best
of our knowledge, our position on the matter.
l.A-1 and A-2. The draft report states it is not reasonable to pay $87 per hour for work previously
performed at a rate of $65 per hour. As noted in correspondence available between the former Executive
Director and the Board, it appears that the actual compensation (1996-$99,600; 1997-$! 10,051; 1998-
$132,930) was lower than the agreed-upon base compensation of $132,000 for 1996. The agreed-upon
compensation of $132,000 was determined to be reasonable based on the Executive Director's education
and experience. Therefore, our position is that the individuals involved in the decision deemed the increase
from $65 to $87 per hour reasonable.
The EPA was provided records for compensation and accounting at all junctures. No recommendations
were received to reduce compensation, nor were comments received that compensation was inappropriate.
l.A-3. The report questions $2,822 of unauthorized holiday pay. We are not currently challenging this
matter.
l.B. We are not in agreement with the OIG position that $1,656,490 of expenses is unsupported. Since
most of the expenses were for salaries, compensation and website development, such records do exist to
support the expenses, and contacts by the EPA would confirm the existence of the services and employment
of staff.
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l.B-1. OIG questioned $953,757 as unsupported costs because CCAR did not maintain adequate time
records. It has always been our policy that CCAR employees maintain weekly records of work activity.
While the detail of hours spent on each activity may not have always been clear, we do feel that the amount
of such salaries charged to the grant reasonably reflected the actual time spent by the employees.
Furthermore, while you may argue that claims were based on estimates, we feel we can adequately support
that such estimates reasonably reflect the actual time and effort. For example, as previously noted for our
fiscal years ended February 28, 1998 and prior, the vast majority of our activities and related expenses
were directly related to the funding provided by the EPA grants. The EPA funding and related program
activities (with the exception of 1996) comprised over 80% of our actual program activities in some years
and over 90% in others. (See attached Exhibit #1 that illustrates this).
l.B-2. OIG questioned $85,126 of travel costs because CCAR's accounting system was deficient. While
there might be some unallowable travel costs, our position is that the vast majority was allowable and did
relate to federal activities. As indicated in the OIG report, only a limited review was performed with respect
to such claims and expenditures. Our position is that CCAR maintained adequate documentation for the
vast majority of such expenditures.
l.B-3. OIG questioned $612,822 of the remaining costs because CCAR did not have written accounting
procedures regarding allocation of joint or common costs and did not submit an indirect cost rate proposal.
We feel such costs are allowable and can be supported. To our knowledge, the underlying documentation
(invoices, receipts, cancelled checks, etc.) still exists for such costs. Additionally, the majority of such costs
were direct costs related to the EPA grants.
l.B-4. OIG questioned $4,785, which was the difference between the $1,765,000 claimed on the Financial
Status Report and the $1,760,215 supported in the accounting records. At this time, we have not had the
resources to investigate this in detail. It would be helpful if you could please provide us with a recap or
detail of how the $1,760,215 was determined.
Exhibit C: Summary Results for Cooperative Agreement CX82573201
In Exhibit C, the OIG is questioning the entire $90,000 claimed under the cooperative agreement. Of this
amount, $22,441 is referred to as ineligible and $67,559 is referred to as unsupported. (See general
response at Exhibit B)
l.A. OIG questioned $22,441 of the Executive Director's salary, which OIG stated was the difference
between the amount authorized by the EPA and the amount claimed by CCAR. We feel the amount claimed
by CCAR of $36,037 is reasonable based on the Executive Director's time, effort and previously approved
compensation prior to and related to this grant. We feel the agreed upon reimbursement rate of 10% was an
estimate of the Executive Director time, and that actual time expended on this grant exceeded the initial
estimate.
l.B. We are not in agreement with the OIG position that $44,014 of expenses is unsupported. Since most
of the expenses were for salaries, compensation and web site development, such records do exist to support
the expenses, and contacts by the EPA would confirm the existence of the services and employment of
staff.
l.B-1. OIG questioned $44,014 as unsupported costs because CCAR did not maintain adequate time
records. It has always been our policy that CCAR employees maintain weekly records of work activity.
While the detail of hours spent on each activity may not have always been clear, we do feel that the amount
23 Report No. 10960-2002-M-000017
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of such salaries charged to the grant reasonably reflected the actual time spent by the employees.
Furthermore, while you may argue that claims were based on estimates, we feel we can adequately support
that such estimates reasonably reflect the actual time and effort. For example, as previously noted for our
fiscal years ended February 28, 1998 and prior, the vast majority of our activities and related expenses
were directly related to the funding provided by the EPA grants. The EPA funding and related program
activities (with the exception of 1996) comprised over 80% of our actual program activities in some years
and over 90% in others. (See attached Exhibit #1 that illustrates this).
l.B-2. OIG questioned $3,623 of travel costs because CCAR's accounting system was deficient. While
there might be some unallowable travel costs, our position is that the vast majority was allowable and did
relate to federal activities. As indicated in the OIG report, only a limited review was performed with respect
to such claims and expenditures. Our position is that CCAR maintained adequate documentation for the
vast majority of such expenditures.
l.B-3. OIG questioned $18,993 of the remaining costs because CCAR did not have written accounting
procedures regarding allocation of joint or common costs and did not submit an indirect cost rate proposal.
We feel such costs are allowable and can be supported. To our knowledge, the underlying documentation
(invoices, receipts, cancelled checks, etc.) still exists for such costs. Additionally, the majority of such costs
were direct costs related to the EPA grants.
l.B-4. OIG questioned $989, which was the difference between the $90,000 claimed on the Financial
Status Report and the $89,071 supported in the accounting records. At this time, we have not had the
resources to investigate this in detail. It would be helpful if you could please provide us with a recap or
detail of how the $89,071 was determined.
Exhibit D: Summary Results for Cooperative Agreement CX82836601
In Exhibit C, the OIG is questioning the entire $171,837 claimed under the cooperative agreement. Of this
amount, $18,558 is referred to as ineligible and $153,279 is referred to as unsupported. (See general
response at Exhibit B.)
Notes l.A-1, A-2. Ineligible Executive Director's salary amounts consisting of $10,372 related to work
hour adjustment and $7,232 related to excess over ceiling. (See response at Exhibit B.)
l.A-3. The report questions $954 of unauthorized holiday pay. We are not currently challenging this
matter.
l.B, B-l, B-2, B-3, B-4. We are not in agreement with your position that $86,865 of expenses is
unsupported. (See responses at Exhibits B and C.)
Sincerely,
LIREL HOLT ROBERT G. STEWART
Chairman, CCAR Acting President, CCAR
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25 Report No. 10960-2002-M-000017
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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)
Auditee
Acting President, Coordinating Committee for Automotive Repair
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