EPA-350-R 09-036
November 2009
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Semiannual Report to Congress
April 1, 2009 - September 30, 2009
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Abbreviations
BEI Bennett Environmental, Inc.
CTS Customer Technology Solutions
DCAA Defense Contract Audit Agency
ECHO Enforcement and Compliance History Online
EPA U.S. Environmental Protection Agency
FIFRA Federal Insecticide, Fungicide, and Rodenticide Act
FMFIA Federal Managers' Financial Integrity Act
FY Fiscal Year
GAO Government Accountability Office
GIAMD Grants and Interagency Agreements Management Division
MACT Maximum Achievable Control Technology
OGD Office of Grants and Debarment
OIG Office of Inspector General
OMB Office of Management and Budget
Cover photos: Left: Construction of a water facility in Enaville, Idaho, for which the Central Shoshone
County Water District received a $12.2-million loan through the American Recovery and
Reinvestment Act. Construction began in May 2009. Details are on page 11. (EPA photo)
Right: A brochure distributed by the Office of Inspector General as part of its outreach
efforts to deter fraud related to Recovery Act funding. (EPA OIG brochure)
To find out more about the U.S. Environmental Protection Agency
Office of Inspector General and its activities, visit our Website at:
http://www.epa.gov/oig
Printed on 100% recycled paper (minimum 50% postconsumer)
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Message to Congress
The Office of Inspector General took numerous steps during the past semiannual
reporting period to help the U.S. Environmental Protection Agency (EPA) properly and
efficiently spend the $7.2 billion it has received under the American Recovery and
Reinvestment Act of 2009.
We have taken many steps to educate the public about the requirements of the Recovery
Act to help deter fraud, waste, and abuse as funds are distributed. We have provided
specific training on the Recovery Act to Agency personnel; State, tribal, and local
officials; contractors; and grant recipients. This has included over 60 briefings, as well as
a Webinar. In addition, we have developed and distributed fraud awareness and
education materials. Further, we have participated in Agency workgroups and
committees, are using EPA financial systems to monitor EPA awards and recipient draws
of Recovery Act funding, and have initiated unannounced site visits to assess the use of
Recovery Act funds.
To date, we have opened three criminal investigations involving Recovery Act-related
issues, including one of the first Recovery Act-specific investigations. Also, during the
past semiannual reporting period, we initiated a half-dozen audit and evaluation
assignments to determine whether EPA and funding recipients manage projects
effectively and meet Recovery Act objectives. These assignments included looking at
whether EPA sufficiently evaluated the past performance of contractors before awarding
Recovery Act funds, whether EPA is promoting competition to the maximum extent
possible in awarding Recovery Act funds for the National Clean Diesel Funding
Assistance Program, and whether the required percentage of State Revolving Fund
dollars were awarded to "green" projects.
We continue to look at important issues that are not related to the Recovery Act. We
found that EPA has neither the authority nor the resources to ensure radon testing devices
and testing laboratories are accurate or reliable. EPA is only recovering a fraction of the
Superfund removal costs it incurs related to rapid response removal actions at
non-National Priorities List sites. EPA's process for establishing peer review panels used
to enhance EPA's scientific and technical work products can be improved. The Office of
Solid Waste and Emergency Response's Regional Public Liaison program does not
sufficiently focus on or measure specific outputs and outcomes, and does not ensure
offices consistently take steps to make stakeholders aware of the program.
We found that while EPA generally recorded Homeland Security Presidential
Directive-12 property accurately, we noted several discrepancies. This directive
established a mandatory standard for security and reliable forms of identification issued
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
by the Federal Government to its employees and contractors, and we found $29,538 in
property missing and not recorded in the system. We recommended that EPA should
stop providing its labor hour estimates to contractors prior to receiving contractor
proposals, and found EPA needs to improve its invoice review procedures. Further,
EPA's Office of Acquisition Management did not comply with EPA's System Life Cycle
Management policy and procedure while developing the new EPA Acquisition System,
and based on our findings agreed to delay implementing the system.
An Agency-wide policy for monitoring obligations under Superfund Cooperative
Agreements and identifying amounts available for deobligation is needed. During our
audit, the Agency deobligated $330,370 in open obligations.
As a result of our investigations, several guilty pleas were entered in connection with a
bid rigging case at a Superfund site in New Jersey. Further, tribal officials in Maine were
sentenced to prison terms for misusing $1.7 million in federal funds. In addition, an
operations manager for a Tennessee company was convicted and sentenced for making a
false statement related to Clean Air Act documents.
As EPA continues to face the challenges of using its funds and accomplishing its mission
in an efficient and effective manner, particularly concerning Recovery Act projects, we
will continue to both work with the Agency and oversee its efforts to ensure funding is
expended properly and human health and the environment are safeguarded to the
maximum extent possible.
Bill A. Roderick
Acting Inspector General
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Table of Contents
About EPA and Its Office of Inspector General 1
U.S. Environmental Protection Agency 1
EPA Office of Inspector General 1
Management Challenges for the Agency 8
OIG Recovery Act Efforts 10
OIG Taking Proactive Approach to Deterring Fraud and Waste 10
Reviews Underway on EPA's Spending of Recovery Act Funds 12
Assistant Inspector General Testifies on OIG Recovery Act Plans 14
Open Recommendations May Affect Funding 15
EPA Should Revise Its Grant Accrual Methodology 16
EPA Should Update Management Integrity Guidance 17
Other Significant OIG Activity 18
Air 18
Water 20
Superfund/Land 22
Research and Development 24
Cross-Media 25
Special Reviews 27
Grants 31
Contracts 32
Forensic Audits 35
Financial Management 37
Risk Assessment and Program Performance 39
Information Resources Management 41
Investigations 45
Other Activities 49
Statistical Data 52
Profile of Activities and Results 52
Audit, Inspection, and Evaluation Report Resolution 53
Hotline Activity 55
Summary of Investigative Results 56
Scoreboard of Results 57
continued
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Appendices 58
Appendix 1 - Reports Issued 58
Appendix 2 - Reports Issued Without Management Decisions 61
Appendix 3 - Reports with Corrective Action Not Completed 74
Appendix 4 - OIG Mailing Addresses and Telephone Numbers 75
Index of Reporting Requirements
Inspector General Act of 1978, as Amended
Requirement •Subject
Section 4(a)(2) Review of legislation and regulations 49
Section 5(a)(1) Significant problems, abuses, and deficiencies 15-48
Section 5(a)(2) Significant recommendations for corrective action 15-44
Section 5(a)(3) Reports with corrective actions not completed 74
Section 5(a)(4) Matters referred to prosecutive authorities 45-48, 52, 56-57
Section 5(a)(5) Information or assistance refused None
Section 5(a)(6) List of reports issued 58-60
Section 5(a)(7) Summaries of significant reports 15-44
Section 5(a)(8) Audit, inspection, and evaluation reports - questioned costs 52-54, 57-60
Section 5(a)(9) Audit, inspection, and evaluation reports - funds to be put to better use 52-54, 57-60
Section 5(a)(10) Prior audit, inspection, and evaluation reports unresolved 53-54, 61-73
Section 5(a)(11) Significant revised management decisions None
Section 5(a)(12) Significant management decisions with which OIG disagreed None
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
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The mission of the U.S. Environmental Protection Agency (EPA) is to protect human
health and the environment. As America's steward for the environment since 1970, EPA
has endeavored to ensure that the public has air that is safe to breathe, water that is clean
and safe to drink, food that is free from dangerous pesticide residues, and communities
that are protected from toxic chemicals. EPA develops and enforces regulations that
implement national environmental laws, and works with its partners and stakeholders to
identify, research, and solve/mitigate current and future environmental problems. EPA
provides grants to States, tribes, nonprofit organizations, and educational institutions;
supports pollution prevention and energy conservation; and promotes environmental
education for all Americans. EPA has Headquarters offices in Washington, DC;
10 regional offices; and more than 100 laboratories and field sites.
For Fiscal Year (FY) 2009, EPA had a budget of $7.6 billion. EPA's FY 2010 proposed
budget requests $10.5 billion in discretionary budget authority and 17,384.3 full-time
equivalent positions to accomplish EPA's efforts to build a greener economy, move into a
clean energy future, and protect human health and the environment in communities
across the nation. The FY 2010 budget request is substantially higher than the FY 2009
budget, reflecting an enhanced focus on addressing public health and environmental
challenges. Increased funding will be targeted at such vital areas as improving water
infrastructure, protecting freshwater resources, creating a foundation to address climate
change, identifying research gaps, and managing chemicals. In addition to its annual
budget, EPA received $7.2 billion under the American Recovery and Reinvestment Act
of 2009 through FY 2011.
The Office of Inspector General (OIG) is an independent office of EPA that detects and
prevents fraud, waste, and abuse to help the Agency protect human health and the
environment more efficiently and cost effectively. Although we are part of EPA,
Congress provides us with a budget line item separate from the Agency's to ensure our
independence. The EPA OIG was created and is governed by the Inspector General Act
of 1978 (P.L. 95-452). The legislative history of the 1978 law, found in Senate Report
95-1071 and House Report 95-584, sheds light on Congress' intent in enacting this
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
legislation. The original act has been amended a number of times. Important
changes were made in 1988 (P.L. 100-504) and again in 2002 (P.L. 107-296).
Most recently, to enhance the independence of the Inspectors General, the
Inspector General Reform Act of 2008 (P.L. 110-409 [H.R. 928]), was enacted.
Vision of the EPA OIG
We are catalysts for improving the quality of the environment and government through
problem prevention and identification, and cooperative solutions.
Mission of the EPA OIG
Add value by promoting economy, efficiency, and effectiveness within EPA and the
delivery of environmental programs. Inspire public confidence by preventing and
detecting fraud, waste, and abuse in Agency operations and protecting the integrity of
EPA programs.
OIG Organization
To fulfill our vision and accomplish our mission, we perform audits, evaluations, and
investigations of EPA, as well as its grantees and contractors. We also provide testimony
and briefings to Congress. We recommend solutions to the problems we identify that
ultimately result in providing Americans a cleaner and healthier environment. We are
organized as follows.
EPA Office of Inspector General
INSPECTOR GENERAL
Vacant
I Special Assistant U
I Kim Rawls I
Special Projects/
Quality Assurance
Office of Audit
Melissa Heist
Assistant Inspector General
Deputy Inspector General
Bill Roderick
Associate Deputy Inspector General
and Counsel
Mark Bialek
Office of Congressional,
Public Affairs and Management
Eileen McMahon
Assistant Inspector General
Office of Mission Systems
Patricia Hill
Assistant Inspector General
Office of Investigations
Wayne McElrath
Acting Assistant Inspector General I
Office of Program Evaluation
Wade Najjum
Assistant Inspector General
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
OIG staff are physically located at Headquarters in Washington, DC; at the regional
headquarters offices for all 10 EPA regions; and other EPA locations including Research
Triangle Park, North Carolina, and Cincinnati, Ohio. Details on the specific role each
OIG office plays in helping the OIG accomplish its mission follow.
Immediate Office: This office includes the position of the Inspector General, which is
currently vacant, and the Deputy Inspector General, who is serving as the Acting
Inspector General. In addition to providing overall leadership and direction, this office
includes a Quality Assurance Program team that conducts reviews of all draft and final
reports to ensure conformance with standards. The office also manages the OIG's
Continuity of Operations Plan.
Office of Audit: This office performs audits to improve the economy, efficiency, and
effectiveness of Agency programs and prevent fraud, waste, and mismanagement. The
office performs financial audits of assistance agreements and contracts, as well as
Agency-wide reviews of programs. Product divisions and their missions include:
• Contracts and Assistance Agreements: Improving EPA's management of
contracts and grants.
• Forensic Audits: Identifying fraud, waste, and abuse in contracts and grants.
• Financial Audits: Improving the Agency's financial management.
• Risk Assessment and Program Performance: Improving EPA's internal
controls, processes, and workforce/manpower.
In FY 2010, the Office of Audit plans to establish a new division to focus exclusively on
identifying cost savings within EPA's operations.
Office of Congressional, Public Affairs and Management: This office performs
communication and resource management functions. This includes providing
communication and liaison services to Congress, the public, and the media; operating the
OIG Hotline; editing, issuing, and distributing OIG reports; and managing information
posted on the OIG Website. The office also manages the OIG's budget process and
coordinates OIG planning, policies and procedures, audit follow-up, performance
measurement and reporting, contracting, and OIG internal control assessment. Further,
the office is responsible for all aspects of OIG human capital programs and functions and
human resources operations and recruitment.
Office of Counsel: This office provides independent legal and policy advice to all
components of the OIG and represents the OIG in administrative litigation. The office
manages the OIG ethics program, providing ethics training, advice, and financial
disclosure reviews, and coordinates OIG responses to Freedom of Information Act and
other document requests. The office, which employs Special Agents in addition to
attorneys, also performs Oversight and Special Reviews. These reviews include criminal
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
and other investigations of misconduct by EPA employees. Further, the office performs
legal reviews in response to requests by members of Congress and the Agency.
Office of Investigations: This office employs Special Agents, as well as computer
specialists, to perform criminal investigations. The majority of the investigative work is
reactive in nature, responding to specific allegations of criminal activity and serious
misconduct. The office focuses its investigative efforts on financial fraud (contracts and
assistance agreements), computer crimes, infrastructure/terrorist threat, program integrity,
and theft of intellectual or sensitive data. Specifically, investigations focus on:
• Criminal activities in the awarding, performing, and paying of funds under EPA
contracts, grants, and other assistance agreements to individuals, companies, and
organizations.
• Criminal activity or serious misconduct affecting EPA programs that could
undermine or erode the public trust.
• Contract laboratory fraud relating to water quality and Superfund data, and
payments made by EPA for erroneous environmental testing data and results that
could undermine the bases for EPA decision-making, regulatory compliance, and
enforcement actions.
• Intrusions into and attacks against EPA's network, as well as incidents of computer
misuse and theft of intellectual property or other sensitive data and release of or
unauthorized access to sensitive or proprietary information.
Office of Mission Systems: This office performs audits of and issues reports on EPA's
information resources management to ensure the Agency is adequately maintaining its
systems and data. Audits consider how well EPA collects data, manages its investment in
information technology, and manages information security and privacy. The office also
provides information technology support to the rest of the OIG, manages the technical
aspects of the OIG Website, and provides data mining and analysis to support OIG staff.
Office of Program Evaluation: This office performs program evaluations that assess
and answer specific questions about how well a program is working. The office can
assess strategic planning and process implementation to determine whether a program is
designed and operating as intended, as well as the extent to which a program is achieving
its objectives and having an impact. Evaluations examine root causes, effects, and
opportunities leading to conclusions and recommendations that influence systemic
changes and promote improved delivery of the Agency's mission. Evaluations may also
be designed to increase the understanding of a program. Product areas include:
• Air: Helping to make air safe and healthy to breathe.
• Water: Helping to ensure that drinking water is safe and waterbodies are protected.
• Superfund/Land: Improving waste management and clean-up.
• Enforcement: Helping to improve compliance with environmental requirements.
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
• Research and Development: Helping EPA improve its research and
development efforts and ensure sound science.
• Cross-Media: Evaluating nontraditional approaches to protecting the
environment and challenges that cut across programs.
• Special Reviews: Reviewing issues of fraud, waste, and misuse in EPA programs.
This office also looks at issues involving homeland security.
OIG Budget and Operations
Proposed Funding for OIG Remains Level for FY 2010,
OIG Obtains New Independent Resource Authority
The FY 2010 President's Budget provides the EPA OIG with an amount identical to the
FY 2009 budget funding level of $54,766,000. In accordance with a congressional
directive to increase its staffing level to that of prior years, and at the same time recruit
staff to fulfill the oversight requirements of the American Recovery and Reinvestment Act
of 2009, the OIG is continuing a hiring initiative consistent with available funds. During
this semiannual reporting period, the OIG obtained delegated examining authority to make
direct hiring decisions and is seeking the services of a private contractor as its primary
source for human resources functions. In the interim, to address the staffing gap and
accelerate the recruitment and selection of highly qualified staff members, the OIG will
continue to use the services of the Office of Personnel Management to further expedite
staff recruitment and processing actions. Additionally, to ensure OIG independence and
expedite the availability of contractual services consistent with the Inspector General Act,
as amended, the OIG has established an independent contracting operation.
Below is a summary of the OIG resource levels/expenditures for FYs 2000 through 2010.
Historical Budget and Manpower Summary
Fiscal Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Enacted Budget
(after rescissions
where applicable)
$43,379,700
$45,493,700
$45,886,000
$48,425,200
$50,422,800
$50,542,400
$50,241,000
$50,459,000
$52,585,000
$54,766,000
Pending
Onboard Staff
(as of October 1 )
340
351
354
348
363
365
350
326
290
304
316
Expenditures
(includes
carryover)
$39,384,100
$41,050,807
$45,238,608
$46,023,048
$52,212,862
$61,733,781
$49,583,584
$48,658,217
$51,628,082
$52,272,811
TBD
Sources: OIG archives and analysis and EPA Integrated Financial Management System.
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
The Recovery Act provided the EPA OIG $20 million through September 30, 2012, for
oversight and review. As of September 30, 2009, the OIG expended approximately
$2 million of Recovery Act funds. Details on our Recovery Act efforts begin on page 10.
OIG Annual Plan
The OIG has issued its Annual Plan for FY 2010 based on an assessment of risks and
challenges identified by the OIG and some of its key stakeholders. The strategy and
work plan for the first 6 months of FY 2010 addresses EPA's most significant
environmental and management areas of concern, its new priorities, and areas of
investment through specific assignments. The plan considers the role of the OIG in
providing oversight of the Agency's implementation of the Recovery Act. The Plan is
available at http://www.epa.gov/oig/reports/2010/EPA OIG FY2010 Annual Plan.pdf
The planning process included developing and updating a comprehensive compendium of
risks, challenges, and opportunities for Agency-wide management and media-specific areas,
as well as regional cross-goal and management issues. Data were collected, categorized, and
summarized to reflect a broad perspective from multiple points of view, including EPA
managers, Agency planning efforts and performance reporting results, previous OIG work,
and a risk assessment by the Government Accountability Office (GAO). The assignments in
the plan focus on opportunities for improving the Agency's control environment for greater
transparency, including managing grants and contracts as well as operational efficiencies.
We used the compendium of risks and challenges, largely reported by the Agency itself,
to formulate customer-driven strategic themes and develop and select assignments. The
plan includes assignments in progress from FY 2009 as well as those to be initiated in
FY 2010. The plan, which also provides a summary update on the OIG Strategic Plan,
is designed to adjust for new priorities and conditions while pursuing a program of work
that leverages the greatest return on investment in terms of Agency improvements,
performance, and risk reduction.
OIG Follow-up
The OIG has been implementing a strong follow-up strategy for improving the process
for resolving (reaching agreement on actions to be taken) and completing agreed-to
actions on OIG recommendations. Follow-up, which is a shared responsibility between
the Agency and the OIG, is a process by which the Office of the Chief Financial Officer
monitors and reports on Agency implementation of recommendations, and OIG auditors
and evaluators determine the adequacy, effectiveness, and timeliness of actions taken by
management on reported findings.
To comply with Inspector General Act reporting requirements and to help EPA managers
gain greater awareness of outstanding commitments for action, we are now issuing
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
semiannually a "Compendium of Unimplemented Recommendations." The
Compendium is produced as an appendix to each Semiannual Report to Congress and as
a stand-alone report issued to Agency management. The identification of unimplemented
recommendations in the Compendium has significantly increased the number of
corrective actions taken by the Agency.
Additionally, at the OIG's behest, the Agency Annual Integrity Review Policy and
Process now requires an examination of all outstanding audit recommendations. The
OIG is also examining its own process for closing out recommendations that lead to
successful resolution. The OIG enhanced its management information system to provide
accountability for each recommendation within the OIG and through its connection to the
Agency's follow-up tracking system.
OIG Quality Assurance Program
The OIG operates a rigorous Quality Assurance Program to provide objective, timely,
and comprehensive reviews to ensure that OIG work complies with pertinent laws,
professional standards, regulations, and policies and procedures, and is carried out
efficiently and effectively. OIG offices, activities, processes, and products are subject to
review. Our OIG Quality Assurance Program team conducts independent referencing
reviews of all draft and final audit and evaluation reports and ensures conformance with
the standards of the Comptroller General and Council of Inspectors General on Integrity
and Efficiency. Our Quality Assurance Program involves:
• Report quality assurance.
• Quality assurance reviews of audit, evaluation, and investigative activities.
• Annual self-assessments of each OIG office.
• Administrative program reviews.
• Independent internal quality review of OIG performance by an outside firm.
• External peer reviews conducted by other OIGs.
• Use of a quality assurance checklist.
During the semiannual period, the Department of Homeland Security's OIG issued its
peer review report of the EPA OIG. The Department of Homeland Security OIG found
that our system of quality control has been suitably designed and complied with to
provide us with reasonable assurance of performing and reporting in accordance with
professional standards.
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
On April 28, 2009, we provided EPA with a list of key management challenges for FY 2009.
The OIG defines management challenges as a lack of capability derived from internal self-
imposed constraints or, more likely, externally imposed constraints that prevent EPA from
reacting effectively to a changing environment. The FY 2009 challenges listed below are
based primarily on our macro-risk assessment, audit, evaluation, and investigative work.
The list includes two new challenges ("Management of Stimulus Funds" and "Safe Reuse of
Contaminated Sites") along with eight challenges that were included for FY 2008.
• Management of Stimulus Funds: The American Recovery and Reinvestment
Act of 2009 is providing EPA with $7.2 billion. The Agency faces significant
challenges in meeting Recovery Act requirements while carrying out its ongoing
programs. The grants EPA awards with Recovery Act funds will contain new
conditions that require additional monitoring and oversight. EPA needs to rely
heavily on State agencies, as the primary funding recipients, to properly monitor
subrecipients' use of funds. Superfund work will generally be awarded with
contracts, and with the emphasis on awarding funds and starting work quickly,
EPA needs to make sure contractors are ready and able to accept the additional
work.
EPA's Organization and Infrastructure: EPA has about 140 offices and
laboratories. Given budget restraints, the autonomous nature of regional and
local offices, and the growing pressure to expand its role globally, EPA will be
challenged to assess the efficiency and effectiveness of its current structure.
Performance Measurement: EPA must focus on the logic and design of its
measures for success and efficiency, along with data standards and consistent
definitions, to ensure that adequate information is obtained and used to evaluate
and manage EPA programs, operations, processes, and results.
Threat and Risk Assessments: EPA does not comprehensively assess threats to
human health and the environment across the environmental media for which it is
responsible (air, water, etc.) to ensure actions are planned, coordinated, and
budgeted most efficiently and effectively. This fragmentary approach continues
because environmental laws often focus on single media or threats.
Water and Wastewater Infrastructure: Drinking water and wastewater
treatment systems are reaching the end of their life cycle, and huge investments
will be needed to replace, repair, and construct facilities.
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
• Meeting Homeland Security Requirements: EPA needs to implement a
strategy to effectively coordinate and address threats, including developing a
scenario to identify resource needs, internal and external coordination points, and
responsible and accountable entities.
• Oversight of Delegations to States: Many States and tribes are responsible for
implementing EPA's programs, enforcing laws and regulations, and reporting on
program performance, with EPA retaining oversight responsibility. Inconsistent
capacity and interpretation among State and tribal entities limit accountability
and compliance.
• Chesapeake Bay Program: After more than 20 years of effort by federal, State,
and local governments, Chesapeake Bay waters remain degraded and required
nutrient and sediment reductions will not be met by the 2010 target. EPA needs to
institute management controls ensuring that actions to manage land development,
agricultural runoff, nutrient reduction technology, and air emissions are
implemented, and that consistent sources of funding are identified by EPA partners.
• Voluntary Programs: EPA must ensure that voluntary approaches and innovative
or alternative practices are managed using standards, consistent processes, and
verifiable data. This is needed to ensure that programs are efficiently and effectively
providing intended and claimed environmental benefits.
• Safe Reuse of Contaminated Sites: In the last decade, EPA has placed increasing
emphasis on reusing contaminated or once-contaminated properties. However,
EPA's management of long-term oversight and monitoring for the safe use of these
sites has lagged, and this gap promises to increase substantially as EPA continues to
heavily promote reusing these sites without the investment needed to ensure safety.
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
OIG Recovery Act Efforts
The American Recovery and Reinvestment Act of 2009, signed by President Obama on
February 17, 2009, provides the EPA OIG $20 million for oversight activities through
September 30, 2012. The OIG is conducting audits, investigations, and other reviews to
ensure economy and efficiency and to prevent and detect fraud, waste, and abuse in
EPA's disbursement of the $7.2 billion it is receiving under the Act. Reports on our
findings will be posted on our Website and at http://www.recovery.gov as published. The
OIG is also working with the Agency to ensure that there are appropriate controls in
place and that decisions, actions, and accountable results are transparent. The OIG will
review, as appropriate, concerns raised by the public about specific investments using
funds made available by the Act. Individuals may report any suspicion of fraud, waste,
or abuse of EPA stimulus funds via the OIG Hotline. Any findings of such reviews not
related to ongoing criminal proceedings will also be posted on our Website. Details on
our efforts to date follow.
OIG Taking Proactive Approach to Deterring Fraud and Waste
The EPA OIG's Office of Investigations has implemented a three-pronged approach -
education, outreach, and investigations - to spread the word about the requirements of the
Recovery Act and to deter and detect fraud schemes targeting EPA Recovery Act funds.
A key goal is to educate stakeholders and provide resources to help them use funds
appropriately.
Office of Inspector General
FRAUD, WASTE, AND ABUSI
Prevention, Detection, and Reporting
for Federal, State, Local, anil Tribal Administratoi
Two brochures distributed
by the OIG. (EPA OIG
brochures)
We have provided Recovery Act-specific fraud training and
presentations to Agency personnel; State, tribal, and local officials;
contractors; and grant recipients. To date, we have provided over
60 briefings across the country to over 2,500 personnel who will
administer or receive Recovery Act funding. We have developed new
and extensive liaison relationships with State Revolving Fund
coordinators; tribal water coordinators; State inspector general offices;
and contractor, grant recipient, and
engineering personnel.
Office of inspector Gener
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WHEN GOOD '• '
MONEY GOES BAD
True Stories $f GrantFfftidatEPA
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In addition, we have developed
professional fraud awareness and
education materials, including
pamphlets, postings, briefings, and
Webinar broadcasts. We have
provided these materials to Agency
personnel, State and tribal
10
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
administrators, contractors, and grant recipients. Where possible, we have leveraged
technology to assist us. We have distributed over 5,000 pamphlets, posters, and Hotline
cards to stakeholders throughout the country. Brochures and information on training
opportunities are available at http://www.epa.gov/oig/recovery trng.htm.
In April 2009, in conjunction with EPA's Office of Water, the EPA OIG presented its
first fraud and awareness Webinar. This Webinar reached 385 key decision makers,
including State and local Clean Water and Drinking Water State Revolving Fund
coordinators. In early September 2009, the EPA OIG, in conjunction with the Western
Regional Inspector General Council and the State of California OIG, conducted three
on-site Recovery Act fraud awareness and education briefings for State, county, and
municipal employees, as well as grant recipients, in San Diego, Los Angeles, and San
Francisco, California. Representatives from the Federal Bureau of Investigation, the
OIG Tours Recovery Act Recipient's Facility
Above: Construction activity on the water
pump station and neutralization and
backwash equalization pump stations for
the Central Shoshone County Water
District project. (EPA photo)
Right: A view of the community's well in
its flooded state. (Photo courtesy Idaho
Department of Environmental Quality)
As part of the OIG's education and outreach efforts, on
September 10, 2009, staff from the EPA OIG toured the
first Recovery Act project in EPA Region 10 to begin
construction. The Central Shoshone County Water
District received a $12.2-million loan through the Idaho
Department of Environmental Quality State Revolving
Fund to construct a 5-million-gallon-per-day drinking
water facility in Enaville, Idaho, to replace the existing
community well that is often flooded. The project,
which began construction in May 2009 and will cost an
estimated $20.4 million, also includes installing water
meters to all 2,300 connections to allow for a
conservation-based rate structure. This allows the
project to meet Recovery Act requirements as a "green
project." The project created about 30 new construction
jobs. During our tour, we looked at what Idaho is doing
with its Recovery Act funds, and we gave a presentation
on fraud prevention to the facility's owner and resident
engineer as well as State officials.
11
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
U.S. Attorney's Office, and the Department of Justice Antitrust Division were also
involved. The briefings, attended by over 550 participants, covered general and
Recovery Act fraud indicators and information on whistleblower protections for State,
county, and municipal employees involved in Recovery Act projects. Similar Webinars
and briefings are scheduled for the future.
Several western States - Alaska, Arizona, California, Idaho, Nevada, Oregon, and
Washington - have expressed concern that smaller Recovery Act fund recipients that had
never received federal funds before could be taken advantage of by unscrupulous
contractors and engineers. Further, these recipients may not know all the federal
requirements for managing and reporting on the use of federal funds. Seven States have
made it a requirement for any recipient receiving Recovery Act funds to attend our fraud
presentation, and we have already made approximately 25 such presentations. The handout
for our "American Recovery and Reinvestment Act Fraud Prevention" presentation can be
accessed at http://www.epa.gov/oig/ARRA/IG Community ARRA Handout.pdf
When criminal acts in relation to Recovery Act funds are reported, the EPA OIG will
conduct investigations. To date, we have opened three criminal investigations involving
Recovery Act-related issues, including one of the first Recovery Act-specific
investigations. We will also proactively initiate investigations to determine whether EPA
is spending its Recovery Act funds properly and to ensure there are no instances of fraud,
waste, and abuse.
Reviews Underway on EPA's Spending of Recovery Act Funds
A sign noting a Recovery Act
project. (EPA OIG photo)
As EPA prepared to award Recovery Act funds, the OIG took a number of actions to alert
Agency managers of risks and to recommend cost-effective controls. These actions were
taken to help prevent fraud, waste, and abuse, and to ensure program goals are achieved
and Recovery Act funds are accurately tracked and reported. The OIG participated in
Agency workgroups and committees and commented on the
Agency's Stewardship Plan to assist it in developing strategies and
establishing controls to implement the Recovery Act.
The OIG is using EPA financial systems to monitor EPA awards and
recipient draws of Recovery Act funding. In some cases, the OIG
contacted EPA and/or the recipient to assess the support for the funds
requested, and the OIG will continue its vigilance in monitoring
reimbursement requests. Further, the OIG conducted unannounced
site visits of Recovery Act funding subrecipients under the Clean
Water and Drinking Water State Revolving Fund programs, to
determine whether subrecipients are complying with requirements. Visits will be made
to other recipients.
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
The OIG also initiated audit and evaluation assignments to determine whether EPA and
funding recipients manage projects effectively and meet Recovery Act objectives.
During the 6-month period ended September 30, 2009, the OIG started the following
Recovery Act assignments:
• Audit of EPA's Assessment of Past Performance and Determination of
Responsibility for Contractors Awarded Recovery Act Funds: To
successfully achieve mission goals and objectives, EPA needs to ensure that
contractors have the necessary qualifications and personnel. If EPA is not
prudent in reviewing contractor past performance evaluations and financial and
technical capabilities, there is a risk that contractors and/or their subcontractors
may not have the capability to perform work adequately. Our audit objectives
ask (a) are contractor performance evaluations completed timely, and (b) do
EPA's contractor performance evaluation and responsibility determination
processes consider all available sources of information?
• Evaluation of Active Solicitation for the Green Reserve for Recovery Act
State Revolving Funds. The Recovery Act provides $6 billion in capitalization
grants to the States through the Clean Water and Drinking Water State Revolving
Fund programs. These programs provide low-interest loans for projects that
protect water quality and public health. The Recovery Act requires at least
20 percent of this funding to support green projects, which involve water or
energy efficiency, green infrastructure, or environmentally innovative activities.
States that had not met the green reserve requirements as of August 17, 2009, can
request a waiver transferring funds to support traditional projects, but all funds
must be under signed contracts by February 17, 2010. We are evaluating EPA's
controls to determine whether EPA has ensured that States adequately solicited
and identified green projects.
• Audit of Drinking Water State Revolving Fund Recovery Act Intended Use
Plan Projects: Recovery Act requirements for State Revolving Fund activities
include a requirement instructing States to propose projects that are ready to
proceed to construction within 12 months. The OIG will review States' intended
use plans, the processes States used to develop them, and EPA's review process.
The objectives are to determine (a) what impediments exist to having projects
under contract or construction by February 17, 2010; and (b) what steps EPA has
taken to ensure projects are meeting this deadline.
• Audit of EPA's Competition for Recovery Act Grants under the National
Clean Diesel Funding Assistance Program: The Recovery Act provides
$300 million to support Clean Diesel program activities; this amount is about six
times the program's annual appropriation. The Recovery Act requires that EPA
award Recovery Act funds through a process that addresses the established
13
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
competition requirements and the new Recovery Act requirements. Our
objectives are to determine whether (a) EPA promoted competition to the
maximum extent possible for the National Clean Diesel Funding Assistance
Program, and (b) the competitions met the goals and requirements of the
Recovery Act.
Audit of EPA's Resource Allocation for Recovery Act Contract and
Assistance Agreement Oversight: EPA needs to ensure that it has sufficient
grants management and contract personnel to properly manage Recovery Act
projects. Our assignment objectives are to determine (a) how the Agency
decided the resources needed to manage Recovery Act contracts and assistance
agreements, and (b) EPA's method for distributing those resources.
Additionally, the Recovery Act requires the Recovery Accountability and
Transparency Board to review whether agencies have sufficient qualified
acquisition personnel overseeing Recovery funds. Our assignment included the
collection and submission of the Board's workforce sufficiency and
qualifications survey for EPA.
Audit of EPA's Use of Inter agency Agreements for Recovery Act Activities:
The Office of Management and Budget's (OMB's) Office of Federal
Procurement Policy interagency agreement guidance emphasizes the importance
of the agreement identifying clear lines of responsibility. It states that effective
management and use of interagency acquisitions is a shared responsibility,
especially for assisted acquisitions. Lack of clear lines of responsibility between
agencies has contributed to inadequate planning, inconsistent use of competition,
weak contract management, and concerns regarding financial controls. We plan
to determine whether (a) Recovery Act interagency agreements identify clear
lines of responsibility, and (b) EPA awarded Recovery Act interagency
agreements based on sound business decisions.
On April 29, 2009, Melissa Heist, Assistant Inspector General for Audit, testified before
the House Transportation and Infrastructure Committee during a hearing on progress
made to date on implementing the Recovery Act.
"EPA will face significant new financial and programmatic challenges as it awards and
oversees Recovery Act funding," Ms. Heist testified. The State Revolving Fund
programs are the largest share of EPA Recovery Act funding, totaling $6 billion of the
$7.2 billion appropriated. EPA and its grantees will be challenged to spend the State
Revolving Fund Recovery Act funding in a timely manner as required by the Act, she
said.
14
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Most Recovery Act funds will be awarded through assistance agreements or contracts.
EPA assistance agreements and contracts personnel will have to manage the stimulus-
funded projects in addition to their normal workloads. "If EPA does not assign sufficient
staff to oversight, the Agency increases the risk of fraud, waste, and abuse of federal
funds," Ms. Heist said.
EPA will rely heavily on State agencies as the primary fund recipients to properly
manage their subrecipients for most of the Recovery Act funding. "EPA may not have
the information needed to identify fraud, waste, and abuse at the level where a majority
of funds are expended," said Ms. Heist.
In March 2009, the OIG released its initial oversight plan of Recovery Act funds. Under
the plan, the OIG will assess whether EPA is using its funds in accordance with
applicable requirements and is meeting the accountability objectives defined by OMB.
"As our auditors and evaluators identify risks, they will provide flash reports to Agency
managers with recommendations for ways to mitigate these risks," Ms. Heist said.
From an investigative perspective, Ms. Heist said that in addition to conducting
investigations, the OIG will undertake a proactive approach - through outreach and
education - to prevent fraud, waste, and abuse.
"We will revise and update oversight plans as necessary to ensure that fraud, waste,
abuse, and mismanagement is identified and addressed," concluded Ms. Heist.
Providing funding to recipients with known weaknesses and open recommendations
increases the risks of fraud, waste, abuse, and mismanagement of Recovery Act funds.
As of June 30, 2009, we found that 67 OIG reports involving assistance agreement and
contract recipients had open recommendations that could affect EPA's Recovery Act
activities. As of that date, EPA had used Recovery Act funds to award one assistance
agreement and one contract to recipients with open recommendations. For the two
recipients, EPA ensured that they took corrective actions to address the findings prior to
awarding Recovery Act funds.
Open recommendations are those for which EPA or the recipient of an EPA assistance
agreement or contract has not completed corrective actions. OMB guidance requires the
expediting of actions on open recommendations to preclude continuing weaknesses or
deficiencies that can affect Recovery Act funding.
In addition to the two recipients already receiving Recovery Act funds, others with open
recommendations may also receive such funds. EPA should consider known concerns,
15
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
including open recommendations, when making future awards. We recommended that
EPA verify whether assistance agreement and contract recipients have corrected
weaknesses identified in OIG reports prior to awarding new funds. We noted these
matters in Report No. 09-X-0196, Assistance Agreement and Contract Recipients with
Open Audit Recommendations May Affect Recovery Act Activities, issued July 14, 2009.
Previously, in Report No. 09-X-0136, Open Audit Recommendations Affecting Recovery
Act Activities, issued April 9, 2009, we identified open recommendations from three EPA
OIG reports that could have an effect on Recovery Act funding. These reports were
focused on opportunities to improve EPA management. For a 2008 report on the need for
providing revised terms and conditions to regions for spending brownfields grant funds in
a more timely manner, EPA indicated these terms and conditions would be in place
before EPA awarded any Recovery Act grants. Another 2008 report found that EPA had
no assurance that use of Cost-Plus-Award-Fee contracts facilitates a higher level of
performance than other types of contracts, and EPA is revising its guidance regarding the
use of such contracts. For these two reports, EPA implemented corrective actions before
awarding Recovery Act funds. A 2007 report found that EPA often entered into
interagency contracts without conducting cost-reasonableness assessments or identifying
alternatives, and we reemphasized the need for EPA to address this issue.
The OIG was concerned with the impact the Recovery Act will have on EPA's grant
accrual calculation for the FY 2009 financial statements.
Grant accruals in the financial statements represent grantee costs incurred but not billed.
EPA's grant accruals for the FY 2009 financial statements may not include adjustments
for additional funds received under the Recovery Act. EPA has historically computed
grant accruals based on the results of a grantee billing practice survey. EPA planned to
combine Recovery Act grants with traditional grants and use the combined universe as
the basis for its grant accrual calculation. However, Recovery Act funds are intended to
be used faster than traditional grants. Consequently, the results of the sample will be
skewed because the billing practices for Recovery Act grants will be different than those
for EPA's traditional grants and will not be representative of all grants, including
Recovery Act grants. This difference in billing practices could result in a misstatement
of accrued liabilities in the financial statements.
We recommended that the Chief Financial Officer modify the current grant accrual
methodology to account for the increase in and nature of grant expenditures due to the
Recovery Act. The Agency agreed to make needed modifications.
This issue was addressed in Report No. 09-X-0217, EPA Should Revise Its Grant Accrual
Methodology to Address Impact of Recovery Act Funds, issued August 19, 2009.
16
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
EPA should update its management integrity guidance to address Recovery Act activities.
In December 2008, the Agency issued guidance that outlined requirements for conducting
internal control reviews and preparing annual assurance statements. We believe the
guidance should be updated to ensure that EPA offices:
• Emphasize effective design and operation of key business processes that support
Recovery Act activities and generate data for reporting purposes.
• Integrate Recovery Act internal control reviews into their multiyear strategies.
• Certify how well internal controls are working in FY 2009 assurance statements
to the EPA Administrator.
Updated guidance should ensure that programmatic operations of offices that receive
Recovery Act funds have properly designed internal controls that are operating as
intended. We recommended that the Agency expedite updating its management integrity
guidance.
We discussed this issue in Report No. 09-X-0145, Recommendation to Strengthen
Management Integrity Processes Affecting Recovery Act Activities, issued April 27, 2009.
17
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Helping to make air safe and healthy to breathe
Some Protocol Gases Did Not Meet Acid Rain Program's Accuracy
Criterion
EPA has conducted only two tests of the accuracy of EPA Protocol Gases since
1997, when EPA's Office of Research and Development discontinued its annual
testing program.
The accuracy of continuous emissions monitors is critical to EPA's Acid Rain Program
because data from these monitors determine the number of allowances a utility can bank,
sell, or trade. EPA Protocol Gases are used to calibrate and assure the quality of these
monitors. EPA regulations require the use of these gases or National Institute of
Standards and Technology-certified reference materials when conducting quality
assurance for continuous emissions and ambient air monitoring systems.
In our sample testing, we found that 89 percent of the cylinders met the Acid Rain
Program's accuracy criterion and 11 percent did not. Our sample was not designed to
estimate the impact of the test results on the Acid Rain Program.
However, inaccurately certified concentrations could cause system
operators to unknowingly calibrate their monitoring systems to
record inaccurate measurements. If a utility overstates its
emissions, it could lose the opportunity to sell allowances to other
utilities. Conversely, if a utility understates its emissions, the
utility and regulators may incorrectly conclude that the source is
complying with emissions standards. With respect to ambient air
monitoring, the accuracy of these monitors is important because
the data are used to determine whether areas are in compliance
with the Nation's ambient air quality standards.
Gas cylinders stored at National
Institute of Standards and Technology
laboratory in Gaithersburg, Maryland.
(Photo courtesy National Institute
of Standards and Technology)
We recommended that oversight programs be implemented to assure the quality of EPA
Protocol Gases for both the Acid Rain Program's continuous emissions monitoring
systems and the National Ambient Air Quality Standard's ambient air monitors. We also
recommended that Protocol Gas procedures be updated and maintained to ensure that the
protocol meets the objectives of the Acid Rain, ambient air, and stationary source air
programs. The Agency concurred with our recommendations.
(Report No. 09-P-0235, EPA Needs an Oversight Program for Protocol Gases,
September 16, 2009 - Report Cost: $665,846)
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
EPA Does Not Provide Oversight of Radon Testing Accuracy and
Reliability
'. ' .-., the nor the to
• -• are or
Radon is a naturally occurring gas that seeps out of rocks and soil into the air in homes.
Radon builds up when it is unable to disperse, attaching to tiny dust particles indoors that
are easily inhaled and can adhere to the lining of lungs. EPA estimates that about 20,000
lung cancer deaths each year in the United States are related to indoor exposure to radon.
The only way to know whether indoor radon levels are elevated is to test the indoor air.
We found that EPA does not perform oversight of radon testing device accuracy or
reliability. The 1988 Indoor Radon Abatement Act required that EPA establish
proficiency programs for firms offering radon-related services, including testing and
mitigation. EPA established and operated proficiency programs until 1998, when it
disinvested in these programs. EPA asserts that it shares oversight responsibility with
States and industry, including the two national proficiency programs operating under
private auspices. However, without oversight, EPA cannot assure that radon testing
devices provide accurate data on indoor radon risks or that radon testing laboratories
accurately analyze and report radon results.
We recommended that the Agency disclose that while radon testing is recommended,
EPA cannot provide assurance that commercially available radon testing devices or
testing laboratories are accurate and reliable. We also recommended that EPA inform
Congress that the limitations of reliable testing for radon may have a negative effect on
the achievement of Indoor Radon Abatement Act goals. EPA generally agreed with the
recommendations.
(Report No. 09-P-0151, EPA Does Not Provide Oversight of Radon Testing Accuracy
and Reliability, May 12, 2009 - Report Cost: $384,100)
For details on an additional air issue, please refer to page 47, "Operations Manager
Sentenced for Making a False Statement."
19
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Accelerated Adoption of Numeric Nutrient Water Quality Standards
Needed
EPA's to of
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Water from approximately 41 percent of the contiguous
United States drains into the Mississippi River Watershed,
as shown. The hypoxic zone in the Gulf of Mexico is
thought to be caused by excess nutrients from the
Mississippi River and seasonal stratification (layering) of
waters in the Gulf. (EPA map)
waters. Until recently, EPA has not
water quality standards for States.
The 1972 Clean Water Act established a goal of
maintaining the integrity of the Nation's waters.
Decades later, States reported more than 14,000
nutrient-related impairments. In 1998, EPA
issued its National Strategy and Plan
recommending that States adopt numeric
nutrient water quality standards. In the 11 years
since, half the States still have no numeric
nutrient standards. In 2007, EPA recognized
that State progress should be accelerated.
States are reluctant to create standards because
their implementation is costly and often
unpopular with various constituencies. EPA has
not held the States accountable to committed
milestones. The current approach does not
assure that States will develop standards that
provide adequate protection for downstream
used its Clean Water Act authority to promulgate
We recommended that the Assistant Administrator for Water prioritize States/waters
significantly affected by excess nutrients and set standards as needed. We also
recommended that the Agency establish EPA and State accountability for adopting
standards for the rest of the Nation's waters, and establish metrics. The Agency
disagreed with our recommendations related to setting standards for significant waters,
but agreed with our other recommendations.
(Report No. 09-P-0223, EPA Needs to Accelerate Adoption of Numeric Nutrient Water
Quality Standards, August 26, 2009 - Report Cost: $505,399)
20
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Data Provided on Clean Water Act Jurisdictional Uncertainty
In to a the on the
of the on Act
In its 2006 Rapanos decision (Rapanos v. United States, 547 U.S. 715 (2006)), the
Supreme Court addressed where the Federal Government can apply the Clean Water Act.
The justices issued five separate opinions (one plurality, two concurring, and two
dissenting) with no opinion commanding a majority. This wide-ranging set of opinions
has affected EPA's enforcement of wetlands regulations, and the Agency does not have a
specific picture of its Clean Water Act jurisdiction. We provided to the House
Committee on Transportation and Infrastructure a compilation of comments from EPA,
the U.S. Army Corps of Engineers, and State wetlands staff about the variety of effects
the Rapanos decision has had on their programs.
(Report No. 09-N-0149, Congressionally Requested Report on Comments Related to
Effects of Jurisdictional Uncertainty on Clean Water Act Implementation, April 30, 2009
- additional report pending)
For details on additional water issues, please refer to:
• Page 11, "OIG Tours Recovery Act Recipient's Facility."
• Page 25, "Great Lakes Clean-up May Take More than 77 Years to Complete."
• Page 29, "Hotline Allegation on East Mission Flats Repository Unsubstantiated."
• Page 31, "Single Audit Report for Worthington, West Virginia, Found to Be Substandard."
21
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Superfund/Land
Improving waste management and clean-up
EPA Could Increase Superfund Cost Recovery at Non-National
Priorities List Sites
EPA is only recovering a fraction of the Superfund removal costs it incurs related
to rapid response removal actions at non-National Priorities List sites because it
says there is a lack of viable potentially responsible parties. Improvements in
EPA's controls over identifying responsible parties may improve recovery of the
government's clean-up costs.
The Comprehensive Environmental Response, Compensation, and Liability Act (also
known as Superfund) authorizes EPA to address releases of hazardous substances that
require a rapid response and to pay for clean-up costs before identifying a responsible
party. The Act authorizes EPA to recover these costs.
A review of a sample of removal actions showed that EPA collected from responsible
parties approximately 11 percent ($31.4 million of $294.5 million) of the Federal
Government's costs for conducting removal actions.
According to EPA, about another 30 percent ($86.0 million)
of the costs are pending further government action. EPA
indicated most of the remaining $177.1 million is
unrecovered because of a lack of viable potentially
responsible parties.
Hazardous containers at National Lacquer and
Paint Company in Illinois. (EPA photo)
Although EPA has a high rate of success in addressing cost
recovery requirements prior to the expiration of the statute of
limitations, it has limited control in other key areas that affect
its ability to recover the government's costs from responsible
parties. EPA also does not review and monitor charges made to all Superfund accounts
so all appropriate site costs can be recovered.
We recommended that EPA implement improved controls to monitor potentially
responsible party search completions and consistently document these searches, ensure
EPA database quality, and ensure the government's costs related to Superfund accounts
are identified for possible recovery. EPA concurred with our recommendations.
(Report No. 09-P-0144, EPA Needs to Improve Internal Controls to Increase Cost
Recovery, April 27, 2009 - Report Cost: $621,682)
22
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Sampling Results at Jones Superfund Site in New York
Generally Consistent with EPA Data
Our independent sampling results at the Jones Sanitation Superfund Site in Hyde
Park, New York, were generally consistent with EPA Region 2 historical data.
However, better documentation is needed to explain Region 2's conclusion that
sodium and nickel exceedances do not threaten human health and the environment.
Jones Sanitation had received and treated septic and industrial wastes containing hazardous
substances. The Site, which operated from approximately 1956 to 1990, was deleted from
the National Priorities List in 2005. The OIG is testing long-term monitoring results at
Superfund sites EPA has deleted from the List.
In April 2008, the OIG obtained groundwater and surface water
samples from Jones Sanitation and nearby areas and conducted a
site inspection. Our independent sampling results were
generally consistent with the sampling data that Region 2 has
historically obtained. In addition, our site inspection showed the
Site was properly maintained and secured and is consistent with
information Region 2 has obtained on the Site conditions.
A stream runs through the Jones Sanitation
Superfund Site. (EPA OIG photo)
Of the 113 chemical compounds that could be compared, only
sodium and nickel were found to exceed standards in the
residential wells or to have the ability to potentially migrate off-site at levels above
standards. Region 2 did not document a concern with these and concluded that the Site
remedy remains protective to human health and the environment.
We recommended that Region 2 demonstrate and document that off-site migration of
sodium, nickel, and any other compounds exceeding applicable standards are controlled at
the Site. We also recommended that the Region modify and/or re-initiate some off-site
monitoring if the Region determines such monitoring is needed. EPA agreed with our
recommendations.
(Report No. 09-P-0243, Independent Sampling Generally Confirms EPA 's Data at the
Jones Sanitation Superfund Site in New York, September 23, 2009 - Report Cost,
including contractor cost: $568,898)
For details on additional Superfund/land issues, please refer to:
• Page 27, "Regional Public Liaison Program Needs to Focus on Results and Customers."
• Page 33, "EPA Should Stop Providing Labor Hour Estimates to Contractors."
• Page 36, "Comprehensive Environmental Response, Compensation, and Liability Act
Response Claim."
• Page 37, "Agency-wide Policy Would Improve Monitoring of Obligations under
Superfund Cooperative Agreements."
"Criminal Charges Continue in Bid Rigging Case at New Jersey Superfund Site.'
"Details on Investigation of Libby Superfund Site Released to Public."
• Page 45,
• Page 48,
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Process for Establishing Peer Review Panels Can Be Improved
Peer review is a process for enhancing a scientific or technical work product so that the
decision or position taken by the Agency has a sound, credible basis. Because EPA's
National Center for Environmental Assessment produces highly influential scientific
assessments, such as human health risk assessments, it is one of EPA's primary users of
peer review services.
We found that the EPA National Center for Environmental Assessment's peer review
panel selection process does not differ in many aspects from processes used by other
major science-based organizations. However, the Center's current system for populating
and managing expert panels can be improved by:
• Defining "impartial" panelists in the Center's operating guidance.
• Establishing procedures for providers of peer review services to follow when
conducting independent background searches on prospective panelists.
• Establishing procedures for addressing conflicts of interest or potential biases
that become known after a panel has begun or completed deliberations.
• Ensuring that the Center clearly documents who has the authority and
responsibility for making final determinations regarding panel selection or how
potential conflicts of interest are resolved.
We also found that the Center can improve its oversight of peer reviews conducted by
third parties to better ensure that these peer reviews follow contractual guidelines.
We recommended that EPA improve management controls by better defining the concept
of "impartiality"; establishing criteria under which contractors and other external peer
review service providers should operate; and maintaining records of all management
decisions pertaining to the selection of peer reviewers, particularly resolution of potential
conflicts of interest. We also recommended that EPA develop guidance to address
conflict of interest issues that arise after panel formulation, and an oversight tool to
ensure that external peer review service providers follow all significant steps in the peer
review process. EPA agreed with our recommendations.
(ReportNo. 09-P-0147, EPA Can Improve Its Process for Establishing Peer Review
Panels, April 29, 2009 - Report Cost: $272,110)
24
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Cross-Media
Evaluating nontraditional approaches to protecting the
environment and challenges that cut across programs
Great Lakes Clean-up May Take More than 77 Years to Complete
EPA is challenged by the overall extent of the contaminated sediment problem in
the Great Lakes Areas of Concern and has not developed or implemented a
coordinated approach to manage clean-ups. At the current rate of progress, it
may take more than 77 years to complete all the clean-ups
Thirty-one Areas of Concern have been identified around the U.S. border of the Great
Lakes. All but one are polluted with contaminated sediments. EPA is responsible for
working with States, localities, and other stakeholders to remove this contaminated
sediment. Since 2004, EPA has completed five
Great Lakes Legacy Act-funded contaminated
sediment clean-ups and remediated approximately
800,000 cubic yards of contaminated sediment.
Without improved management, coordination, and
accountability, EPA will not succeed in achieving
the results intended for the Areas of Concern
program. Although EPA is the designated lead for
the clean-ups, it does not have a system for
coordinating remediation activities across its
program offices, or with States, localities, and other
stakeholders. Potential clean-up sites have an
estimated federal cost of $2.25 billion. Local
partners will have to come up with $1.21 billion in
nonfederal matching funds before assistance is provided. Moreover, remediation will be
conducted in the order that local governments and stakeholders can afford rather than
with regard to the risks posed to human health or the environment.
We recommended that the Great Lakes National Program Manager establish a
management plan with written designations of authority and responsibility for each EPA
program office, as well as other actions. EPA concurred with developing a limited
management plan, but not designating site-specific leadership authorities. We do not
consider the actions sufficient to meet the intent of the recommendations.
(Report No. 09-P-0231, EPA Needs a Cohesive Plan to Clean Up the Great Lakes Areas
of Concern, September 14, 2009 - Report Cost: $381,379)
Great Lakes National Program Office's R/V Mudpuppy
sampling in the Buffalo River near the Smith Street
habitat restoration site, Buffalo, New York, August
2005. (EPA photo)
25
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Hotline Allegation on Antimicrobial Testing Program
Unsubstantiated
We EPA's of the of
is on
in the
The Antimicrobial Testing Program is designed to evaluate the effectiveness of EPA-
registered disinfectants. The focus of the program is on disinfectants most crucial to
infection control: sterilants, tuberculocides, and hospital-level disinfectants. The
program policies and procedures require the Office of Pesticide Programs to notify the
Office of Enforcement and Compliance Assurance and manufacturers when a product
fails testing and specify what type of action is to be taken based on testing results.
The Office of Pesticide Programs - Antimicrobials Division is not withholding
information on product failures from intended users, as alleged in a Hotline complaint.
As of February 2009, 325 of the 671 EPA-registered disinfectant products had been
tested under the program, and EPA expects all testing to be completed by 2011.
The report does not contain any recommendations. However, we made several
observations regarding Office of Pesticide Programs' policies and practices that could be
improved. These included providing publicly accessible information on effective
hospital disinfectants and tuberculocidal products, amending standard operating
procedures to include products without a hospital disinfectant label claim, and developing
a plan to sustain the program after testing is completed in 2011.
(Report No. 09-P-0152, Results of Hotline Complaint Review of EPA ' s Antimicrobial
Testing Program, May 27, 2009 - Report Cost: $89,833)
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Regional Public Liaison Program Needs to Focus on Results and
Customers
of ' . I
not on or and
and not to
of the
The Regional Public Liaison program is an important link between concerned
stakeholders and EPA. Liaisons help the public and regulated community by providing
information, facilitating informal contact with EPA staff, and assisting in resolving
problems and concerns related to programs administered by the Office of Solid Waste
and Emergency Response. Despite limited resources, Regional Public Liaisons have
assisted many stakeholders.
Duties of Regional Public Liaisons
• Provide information and facilitate informal
contact with EPA staff.
• Help resolve problems.
• Make recommendations to Agency senior
management to improve Office of Solid Waste
and Emergency Response programs.
Source: Office of Solid Waste and Emergency Response
Guidance for Regional Public Liaisons, issued March 2004.
The program could be a key internal control
for reducing the risk that significant
stakeholder concerns might go unaddressed.
However, the program lacks clearly stated
program logic, which would include outputs
and outcomes and provide a results-oriented
approach to implementation. As a result,
regional offices implement the program
differently and report results in varied
formats. There is no consolidated report to
show what the program achieves. Inconsistent implementation has led some liaisons to
take specific steps to ensure stakeholders are aware of the program and others to adopt a
more passive, reactive approach.
We recommended that the Office of Solid Waste and Emergency Response use a logic
model approach to revise the Regional Public Liaison program, focusing on outputs and
outcomes. We also recommended consolidated reporting, consistent implementation,
minimum requirements for stakeholder awareness activities, and a national Website. The
Agency concurred with our recommendations.
(Report No. 09-P-0176, Regional Public Liaison Program Needs Greater Focus on
Results and Customer Awareness, June 24, 2009 - Report Cost: $355,483)
27
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
EPA Needs Consistent Overall Guidance on Interaction with the OIG
EPA's Office of Enforcement and Compliance Assurance reportedly had instructed its
managers not to provide information directly to the OIG, contrary to the Inspector
General Act of 1978 and EPA's own guidance.
Our review found that some EPA program and regional offices promulgated internal
guidance that impeded OIG access to Agency information and personnel. These internal
guidances included procedures with burdensome administrative requirements and
requirements that personnel seek supervisory guidance before responding to OIG
inquiries. Our survey found that 83 percent of respondents either were not aware or did
not know of any guidance or procedures governing interaction with the OIG, and
14 percent believed they may face retribution if they provided information or documents
to the OIG without permission from a supervisor.
In response to our report, the EPA Administrator issued prescriptive guidance on
August 7, 2009, to address these issues. The guidance instructed EPA personnel to
provide OIG auditors, evaluators, and investigators with full and unrestricted access to
personnel, facilities, records, and other information or material needed by the OIG to
accomplish its mission. The OIG believes the actions taken by the Administrator to be
sufficient.
(Report No. 09-P-0222, Office of Inspector General Access to Agency Information and
Personnel, August 25, 2009 - Report Cost: $199,469)
EPA's Shared Service Center Initiative Lacked Necessary Controls
In June 2008, EPA began consolidating human resources transactional services under
three EPA shared service centers. EPA expected the consolidated centers to provide
better results at lower cost. EPA documented the necessity of upgrades to its human
resources management system to achieve these efficiencies.
We found that EPA launched the shared service centers in June 2008 before the necessary
upgrade of PeoplePlus to an automated workflow feature. Further, EPA lacked the
28
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
necessary cost analysis and OMB approval to support establishing the centers. EPA
subsequently determined that it is not cost effective to update PeoplePlus, and the
Agency's testing of an automated workflow feature proved unsuccessful, causing the
Agency, in part, to abandon the project.
EPA is now looking to find a human resources line-of-business provider to provide the
required information technology support. We concur with the Agency's decision to do
so, but we recommended that EPA seek approval from OMB regarding its current hybrid
approach. We also recommended that EPA develop a baseline cost estimate, establish
realistic milestones, and document the risk of using PeoplePlus until EPA migrates to
certified shared service centers.
(Report No. 09-P-0206, EPA 's Human Resource Management System Did Not Deliver
Anticipated Efficiencies to the Shared Service Centers, August 11, 2009 - Report Cost:
$152,524)
Hotline Allegation on East Mission Flats Repository Unsubstantiated
EPA Region 10 and the Idaho Department of Environmental Quality allowed
appropriate community involvement and provided adequate notice when selecting
the East Mission Flats, Idaho, repository location and soliciting comments on the
proposed plan, location, and designs. However, the amount of water that will be
introduced into the repository with flooding and rising groundwater levels remains
unresolved.
An environmental organization in Kellogg, Idaho, alleged in a Hotline complaint that the
public was not appropriately notified of repository plans and did not have an opportunity
to provide comments. We found that appropriate
notice and community involvement were provided,
and that many physical aspects of flooding have been
investigated and considered in the design process.
However, we found that the geochemical aspects and
potential for releasing dissolved contaminants had yet
to be investigated. The proposed repository site is
located in an area that floods annually. Region 10 and
Idaho have not sufficiently analyzed geochemical
Planned East Mission Flats contaminated soil waste conditions expected to form near the repository base,
repository location in May 2008. (EPA OIG photo) ^ potential for ^^ floodmg to introduce water
into the repository, and the possibility that dissolved
contaminants will migrate away from the repository. In response to our concerns,
Region 10 and the Idaho Department of Environmental Quality prepared a draft scope of
work for the needed analysis; much of that work was completed.
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
We recommended that Region 10 finish analyzing the geochemical and physical
conditions and confirm the adequacy of the repository design. Region 10 concurred with
the recommendation and prepared a technical analysis.
(Report No. 09-P-0162, Contaminated Soil Waste Repository at East Mission Flats,
Idaho, June 8, 2009 - Report Cost: $418,288)
30
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Single Audit Report for Worthington, West Virginia, Found to Be
Substandard
One of the responsibilities of federal agencies is to conduct quality control reviews of
selected audits made by nonfederal auditors. On June 8, 2000, EPA awarded
Worthington a grant for $1.2 million for designing and constructing a drinking water
system. We reviewed the single audit for Worthington conducted by Leland O'Neal,
CPA, for the fiscal year ended June 30, 2004.
The single audit report was substandard because it did not meet general, field work, and
reporting standards required by the Government Auditing Standards. As a result, the
audit report could not be used for its intended purpose, which was to provide a federal
agency with assurance that the grant funds were spent in compliance with federal
requirements.
We recommended that EPA meet with Worthington officials to ensure that they
understand pertinent requirements and their obligations to meet them, and designate the
Town as a high-risk grant recipient should the recipient receive any new EPA awards.
(Report No. 09-2-0195, Quality Control Review of Leland O'Neal, CPA, Single Audit for
Town of Worthington, West Virginia, for Fiscal Year Ended June 30, 2004, July 14, 2009
-ReportCost: $152,290)
31
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Contracts
Improving EPA's use of contracts
EPA Did Not Properly Account for All Homeland Security Property
While EPA generally recorded Homeland Security Presidential Directive-12
property accurately, we noted several discrepancies.
Homeland Security Presidential Directive-12 establishes a mandatory, government-wide
standard for secure and reliable forms of identification issued by the Federal Government
to its employees and contractors. Requirements include identity proofing, registration,
card issuance, and card management. Equipment used to generate
this identification is referred to as Homeland Security Presidential
Directive-12 property.
EPA generally recorded Homeland Security Presidential Directive-
12 property accurately in EPA's Fixed Assets Subsystem.
However, four pieces of property valued at $29,538 were missing
and not recorded in the system. Further, acquisition costs in the
system were not correct for some equipment, and nonfinancial
information for several pieces of property was not accurately
recorded. To meet an OMB deadline, EPA shipped property to
other EPA locations before the property was recorded in the Fixed
Asset Subsystem.
We recommended that EPA use established procedures to resolve
accountability for missing property, and review accuracy of
Homeland Security Presidential Directive-12 property information
in the Fixed Assets Subsystem and update any discrepancies. We
also recommended that EPA modify the Homeland Security
Presidential Directive-12 contract to reflect contractor
requirements and accountability. The Agency concurred with the
recommendations and provided corrective action plans.
(Report No. 09-P-0233, EPA Did Not Properly Account for All
Property for Implementing Homeland Security Presidential
Directive-12, September 15, 2009 - Report Cost: $123,103)
From top: EPA's ID Proofing
Station, Enrollment Station, and
Issuance Station used to issue
Smartcards. (EPA photos)
32
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
EPA Should Stop Providing Labor Hour Estimates to Contractors
An independent government cost estimate is a detailed estimate of what a reasonable
person should pay to obtain the best value for a product or service. EPA contract
management and program staff indicated that providing the contractor with total labor
hours is common practice under level-of-effort contracts. Some staff informed us they
provide contractors with estimated labor prior to receiving the proposal to indicate to the
contractor the level of effort EPA anticipates will be needed.
We found that for most of the Superfund contracts reviewed, EPA did not routinely
provide total labor hours to the contractor before receiving the proposal. Some EPA staff
informed us they did not provide the total labor hours because doing so would undermine
the negotiation process. When EPA provides its estimate of total labor hours before
receiving the proposal, the contractor does not have an incentive to seek a more efficient
or innovative approach to meet the government's requirement.
EPA agreed with our recommendations to modify EPA Acquisition Regulations and will
communicate new guidance to contracting staff and those who prepare independent
government cost estimates.
(Report No. 09-P-0229, EPA Should Stop Providing Estimates of Total Labor Hours to
Contractors, September 9, 2009 - Report Cost: $141,313)
EPA Should Improve Invoice Review Procedures
In 2008, EPA paid contractors $1.3 billion. To safeguard EPA funds, invoices must be
reviewed to determine whether the submitted costs are allowable, allocable, and
reasonable.
During our review, we found (1) invoice reviews were not always documented as
required, (2) project officer reviews were based on incomplete information, (3) monthly
progress reports did not always contain the information needed to evaluate invoices, and
(4) Agency staff did not perform required rate verifications and math checks.
33
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Financial Monitoring Reviews have identified repetitive findings on contractor invoices
regarding errors that EPA employees should have identified. Findings are resolved on a
case-by-base basis rather than through a corrective action plan to address internal control
weaknesses. This lack of a comprehensive approach leaves Agency funds vulnerable to
fraud, waste, abuse, and mismanagement.
We recommended that EPA modify the Contracts Management Manual to require use of
a checklist for invoice reviews, and have Contracting Officers verify compliance with the
policy during invoice reviews. We also recommended that EPA take corrective actions in
response to the trends identified in financial monitoring reviews. EPA agreed with the
findings and provided corrective action plans to address all but one of the
recommendations.
(Report No. 09-P-0242, Contractor Invoice Internal Controls Need Improvement,
September 23, 2009 - Report Cost: $363,581)
34
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Labor and Subcontract Cost Verification Reviews Conducted
EPA accomplishes a large part of its mission through contracts. Past audits have
shown that oversight of EPA billings varies from region to region, office to office, and
even contract to contract. Lack of consistent oversight presents potential risks
regarding the costs being billed by contractors.
Details on several of our reviews conducted this semiannual reporting period follow.
• Superfund Technical Assessment and Response Team Contractor: Based on
Agency concerns related to questionable labor staffing and charging practices of
one of its Superfund Technical Assessment and Response Team contractors, we
conducted a labor and subcontract cost verification review. We found that:
S The contractor improperly billed for labor costs of employees who did
not meet the minimum contract requirements.
^ No subcontractor met the minimum contract requirements for education
and training.
S The contractor billed for employees who were not approved at the time
the labor costs were incurred.
^ The contractor improperly billed for employees who did not complete
required Basic Incident Command System Level 200 training.
Although this review only covered 1 year of the 5-year contract, we found the
Agency was billed $253,089 in ineligible labor and subcontract costs.
• Superfund Technical Assessment and Response Team Joint Venture: We
initiated an examination of costs billed under a joint venture for Superfund
Technical Assessment and Response Team services in a region. Our examination
focused on the joint venture's compliance with federal laws, rules, and
regulations under the specific contract. During our examination, we identified
information of a time-critical nature that the Agency needed to consider in future
contracting decisions concerning the joint venture. We informed the contracting
officer, project officer, and other regional contracting personnel of the following
35
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
information for consideration in deciding whether to exercise the award term
options on this contract.
^ The joint venture did not maintain any books or records.
S Labor hours billed under the contract did not reconcile with the
accounting records of the managing venturer.
•S The managing venturer used an employment agency to staff the contract.
•S Known billing errors were not corrected and thus represented over-
billings to the Agency.
S The nonmanaging venturer appeared to be doing the majority of the
work, thus calling into question the joint venture's classification as a
Service Disabled Veteran Owned Small Business.
S The nonmanaging venturer appeared to be acting as the project manager,
contrary to Small Business Administration regulations.
•S The managing venturer has a history of partnering in joint venture
agreements and being a member of mentor-protege programs.
S The managing venturer's ability to contribute staff to all of its joint
venture arrangements was questionable.
The Agency concurred with our recommendation, and decided not to award the
award term option to the joint venture. The contract expired on June 18, 2009,
and the Agency indicated no future work will be awarded to the joint venture.
• Facilities Maintenance and Support Contract: For a 2005 EPA small-
business set-aside contract, we found that labor charges billed under the contract
were in accordance with federal laws, regulations, and contract terms and
conditions. We noted an improvement that should be made to the contractor's
labor charging system to increase the accuracy of allocating labor costs charged
to government contracts. Overtime hours were not separately recorded. Instead,
they were combined with regular hours on the employee timesheet.
Implementing additional controls would improve identification of overtime and
reduce the risk of mischarging overtime labor. Based on our report, the Agency
agreed to work with the contractor to resolve the issue.
• Comprehensive Environmental Response, Compensation, and Liability Act
Response Claim: We reviewed a reimbursement mixed funding claim for
$1,133,543 submitted by the responsible parties for a Superfund site in North
Carolina. We performed this review solely to assist the EPA Office of Solid
Waste and Emergency Response in evaluating the claimant's mixed funding
claim. Our review noted no exceptions to the claimed amount. We
recommended that EPA accept the claim and reimburse the claimant $1,133,543
of the total eligible costs of $3,675,562.
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Agency-wide Policy Would Improve Monitoring of Obligations under
Superfund Cooperative Agreements
A Cooperative Agreement is a legally binding obligating document that provides funding
to a State to carry out or assist with Superfund removal and/or remedial activities.
Timely review and deobligation of unneeded funds allow these funds to be used on other
Superfund priorities.
We identified several best practices used by Regions 3, 5 and 8, such as (1) requiring that
States submit detailed reports on the status of each Superfund site twice a year,
(2) requiring that budget officers solicit information from project officers and other staff
twice a year to identify potential funds for deobligation, and (3) performing a
deobligation exercise twice a year for Superfund Cooperative Agreements.
We identified $331,802 of open obligations in Region 3 that needed to be deobligated.
During our audit, the Agency deobligated $330,370 of that amount. The Agency
deobligated $1,432 less than the amount originally identified for one agreement because
of a final drawdown.
We recommended that EPA incorporate the best practices noted into a uniform policy for
reviewing unliquidated obligations under Superfund Cooperative Agreements in all
regions. The Agency agreed with our recommendation.
(Report No. 09-P-0241, EPA Has Improved Efforts to Reduce Unliquidated Obligations
in Superfund Cooperative Agreements, But a Uniform Policy Is Needed, September 22,
2009 - Report Cost: $260,513)
Pesticide Fund Earns Unqualified Opinion
EPA is responsible for reassessing the safety of older pesticide registrations against
modern health and environmental testing standards. To expedite this reregistration
37
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
process, Congress authorized EPA to collect fees from pesticide manufacturers. The fees
are deposited into the FIFRA Fund.
Along with our clean opinion for the financial statements, we noted one significant
deficiency in internal controls. The Office of Pesticide Programs was unable to provide
reliable information on reporting accomplishments for reregistration and amendment
actions under the FIFRA Program Performance Measure Two. The Agency agreed to
take appropriate corrective actions.
(Report No. 09-1-0172, Fiscal Year 2008 and 2007 Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund, June 23, 2009 - Report Cost:
$171,671)
For details on additional financial management issues, please refer to:
• Page 16, "EPA Should Revise Its Grant Accrual Methodology."
• Page 50, "Costs of Financial Statement Audits Reduced 39 Percent."
38
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
III!! ,iii:
JiJLi
EPA Can Improve Management Integrity Program Efforts
EPA not the
Act (FMFIA) to as by
guidance,
FMFIA requires federal agency managers to annually evaluate and indicate whether their
agencies' internal controls comply with standards prescribed by GAO. Internal control
systems prevent fraud, waste, abuse, and mismanagement.
Although EPA offices rely on annual Office of the Chief Financial Officer guidance:
• EPA offices have not developed internal control review strategies that include
elements such as the Government Performance and Results Act.
• Guidance and training have not provided staff and managers with adequate
awareness of GAO's internal control standards.
• Until recently, guidance has not required offices to report on compliance with all
GAO standards.
• Insufficient resources are devoted to validating assurance letters.
Five Key GAO Standards for Internal Control
in the Federal Government
1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communications
5. Monitoring
Source: GAO's Standards for Internal Control
in the Federal Government, GAO/AIMD-00-21.3.1
(November 1999).
The Office of the Chief Financial Officer relies on
Assistant and Regional Administrators to verify
reporting letters' program elements before certifying
them. EPA offices view FMFIA reporting as an
administrative task rather than an opportunity to assess
program results and identify risks toward achieving
goals.
We made various recommendations to improve FMFIA
use, and the Agency agreed with our recommendations.
(Report No. 09-P-0203, EPA Should Use FMFIA to Improve Programmatic Operations,
August 6, 2009 - Report Cost: $212,476)
39
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Office of Research and Development Can Improve FMFIA Efforts
of of and
is
The Office of Research and Development approaches FMFIA as an administrative
reporting activity rather than an opportunity to evaluate and report on research program
performance. As a result, the Office has not:
• Conducted a comprehensive risk assessment.
• Included National Program Directors in the FMFIA process.
• Developed and implemented a strategy to establish and evaluate the effectiveness
of internal controls over research programs.
• Provided FMFIA training to managers and staff.
• Included relevant risk and program performance information in assurance letters.
Although the Office of Research and Development's largest lab, the National Health and
Environmental Effects Research Laboratory, informally identifies program risks, neither
the Office of Research and Development nor that lab conducts internal control risk
assessments on which to base a program review strategy. Applying FMFIA as intended
would help EPA achieve its mission and desired program results through improved
accountability.
We made various recommendations to the Office of Research and Development to
improve FMFIA efforts, and the Office agreed with those recommendations. Also, the
Office of Research and Development's Administrative Efficiencies Project management
integrity workgroup has initiated actions that we believe will address our findings, such
as developing a draft multiyear review strategy.
(Report No. 09-P-0232, EPA 's Office of Research and Development Could Better Use the
Federal Managers' Financial Integrity Act to Improve Operations, September 15, 2009 -
Report Cost: $515,790)
40
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Ills
111 III !
III!1
Delay in Deploying EPA Acquisition System Needed
EPA's did not EPA's I ife
Cycle the EPA
EPA acquires approximately $1.3 billion in goods and services annually. To better
manage these transactions, EPA is developing the new EPA Acquisition System.
The Office of Acquisition Management did not fully develop system requirements
documents during the requirements phase. Test scripts were not developed to prove that
the system fulfilled all requirements and to
ensure the system would function as required.
Also, the Draft Master Test Plan was never
approved, implemented, and enforced.
Financial Replacement System
(EPA's new core financial management system)
Contract Payment System
Payroll System
Financial Data Warehouse
Agency Plans to Share EPA Acquisition System Data
vith the Following Four Systems
Source: OIG analysis.
We concluded that EPA did not have a sound
basis for deploying the EPA Acquisition
System by June 29, 2009, as scheduled. More
management emphasis is needed to ensure the
system development control environment
achieves the desired results and the end product meets EPA's needs. Based on our
findings and recommendations, EPA is working on correcting the issues identified and
has delayed implementing the EPA Acquisition System until at least FY 2010.
(Report No. 09-P-0197, EPA Should Delay Deploying Its New Acquisition System until
Testing Is Completed, July 20, 2009 - Report Cost: $249,019)
EPA Needs to Further Improve Network Security Monitoring Program
EPA's of on key in
EPA an for
of its
EPA managers are required to take timely and effective action to correct deficiencies
identified by OIG audits and show that corrective actions taken achieve the desired results.
41
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
EPA implemented 56 percent (15 of 27) of the information security audit recommendations
we reviewed. Since EPA had not established an Agency-wide network security monitoring
program, the Agency lacks information necessary to respond to known threats against
EPA's network and to mitigate vulnerabilities before they can be exploited.
Recommendations included that EPA create Plans of Action and Milestones for
unimplemented audit recommendations, provide EPA program and regional offices with
an alternative solution for vulnerability management, establish a workgroup to solicit
input on training needs, and issue an updated memorandum on guidance and
requirements. The Agency agreed with our recommendations.
(Report No. 09-P-0240, Project Delays Prevent EPA from Implementing an Agency-wide
Information Security Vulnerability Management Program, September 21, 2009 - Report
Cost: $475,431)
Technical Network Vulnerability Assessed
OIG a to at to
If not EPA's
to the
The testing, done per the Federal Information Security Management Act, disclosed
several high-risk vulnerabilities at the following EPA locations. In some cases, the
locations were able to take immediate action to correct the identified vulnerabilities.
• Great Lakes National Program Office, Chicago, Illinois: Internet Protocol
addresses with high-risk vulnerabilities associated with one device were
identified, and EPA took immediate corrective actions. (Report No. 09-P-0185,
June 30, 2009)
• National Computer Center, Research Triangle Park, North Carolina:
Several Internet Protocol addresses with high-risk vulnerabilities were identified.
(Report No. 09-P-0186, June 30, 2009)
• Region 8, Denver, Colorado: Numerous Internet Protocol addresses with high-
risk vulnerabilities were identified. (ReportNo. 09-P-0187, June 30, 2009)
• Potomac Yard Buildings, Arlington, Virginia: Several Internet Protocol
addresses with high-risk vulnerabilities were identified. (Report No. 09-P-0188,
June 30, 2009)
• 1310 L Street Building, Washington, DC: Several Internet Protocol addresses
with high-risk vulnerabilities were identified. (Report No. 09-P-0189, June 30,
2009)
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
• Research Triangle Park Finance Center, Research Triangle Park, North
Carolina: Several Internet Protocol addresses with high-risk vulnerabilities
were identified, and EPA took immediate corrective actions. (Report No.
09-P-0227, August 31, 2009)
(The cost for all reports, including contractor and OIG oversight cost, was $189,759.)
Exchange Network Improvements Needed
EPA to
The Exchange Network is EPA's approach to and expected preferred method for the
exchange of environmental data among Network partners. As of January 2007, 48 States
and 2 tribes used the Network.
This follow-up review disclosed that although improvements were made since our 2007
report, EPA should take more steps to complete key recommendations to increase the
utilization of the network. Further, EPA needs to improve security planning for its point
of presence on the Exchange Network, the Central Data Exchange. Specifically, EPA
should ensure that security activities associated with system accreditation and
contingency planning comply with federal and Agency requirements. We made various
recommendations for improvement to EPA. Without action, management hinders its
ability to achieve the desired utilization of the Exchange Network and ensure the
Network is operating without vulnerabilities that could put needed data at risk.
(Report No. 09-P-0184, Steps Taken But More Work Needed to Strengthen Governance,
Increase Utilization, and Improve Security Planning for the Exchange Network, June 30,
2009 - Report Cost: $253,562)
Compliance Information System Needs Better Security Controls
EPA's to
EPA's Enforcement and Compliance History Online (ECHO) system provides integrated
compliance and enforcement information for approximately 800,000 regulated facilities
nationwide. ECHO allows users to find inspection, violation, enforcement action,
informal enforcement action, and penalty information about facilities for the past 3 years.
End users of the Permit Compliance System and Integrated Compliance Information
System - National Pollutant Discharge Elimination System can override the Significant
Non-Compliance data field without additional access controls, because EPA has not
43
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
implemented database security features to restrict access to this field. As a result, users
can change data without authorization, which could affect data made available to the
public via ECHO.
We provided this information to EPA in a briefing report. Based on our report, EPA will
explore additional database security features.
(Report No. 09-P-0226, ECHO Data Quality Audit - Phase I Results: The Integrated
Compliance Information System Needs Security Controls to Protect Significant
Non-Compliance Data, August 31, 2009 - additional report pending)
Deployment of Customer Technology Solutions Computers
Needs Improvement
(CIS)
to CIS
in DC,
We visited the following three sites to observe EPA's process for deploying CTS equipment:
• National Exposure Research Laboratory, Athens, Georgia
• National Air and Radiation Laboratory, Montgomery, Alabama
• National Vehicle and Fuel Emissions Laboratory, Ann Arbor, Michigan.
CTS is EPA's new, comprehensive information technology solution for all Headquarters
program offices for personal computing and information technology support services.
Employees are often resistant to new systems during deployment. OIG site visits
disclosed that although improvements were made in the CTS deployment process, EPA
should take more steps to ensure (1) temporary technicians receive more training to
become familiar with new equipment, (2) EPA employees receive consistent results when
contacting the CTS helpdesk to resolve service request issues, and (3) program office
points of contact have a clearer understanding of their role during the CTS deployment.
(Memorandum on OIG's Observations Regarding Customer Technology Solutions
Equipment Deployments, issued September 11, 2009 - report pending)
For details on additional information resources management issues, please refer to:
• Page 17, "EPA Should Update Management Integrity Guidance."
• Page 28, "EPA's Shared Service Center Initiative Lacked Necessary Controls."
44
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Criminal Charges Continue In Bid Rigging Case at New Jersey
Superfund Site
Several guilty pleas were entered in connection with a bid rigging case at the Federal
Creosote Superfund site located in Manville, New Jersey. Further, an indictment was
unsealed.
On June 25, 2009, Frederick Landgraber, co-owner of a Martinsville, New Jersey,
landscaping company, pled guilty in the U.S. District Court of New Jersey to conspiracy
to defraud EPA. As part of the conspiracy, Landgraber provided more than $30,000 in
kickbacks to an employee of the prime contractor at Federal Creosote in exchange for
landscaping subcontracts. Landgraber and his co-conspirator subverted the competitive
bidding process by submitting intentionally high bids on behalf of fictitious companies.
In total, Landgraber's company received approximately $1.5 million in subcontracts at
Federal Creosote.
On July 6, 2009, Robert P. Griffiths, a former executive of Bennett Environmental, Inc.
(BEI), a Canadian-based company, pled guilty to charges that he conspired to defraud
EPA by inflating the prices he charged to a prime contractor and providing kickbacks to
employees of that contractor. Griffiths and his co-conspirators were given the bid prices
of BEI's competitors, which allowed BEI to submit the highest possible bid prices and
still be awarded the subcontracts. On one occasion, Griffiths and his co-conspirators
inflated the bid prices to cover approximately $1.3 million in kickbacks and amounts BEI
kept for itself. The kickbacks were in the form of money transferred by wire to a
co-conspirator's shell company, lavish cruises for senior officials of the prime contractor,
various entertainment tickets, pharmaceuticals, and home entertainment electronics. The
co-conspirators were able to allocate at least $43 million in fraudulently awarded
subcontracts to BEI for the removal, treatment, and disposal of contaminated soil at the
Federal Creosote site and fraudulently concealed that BEI had submitted false invoices
for the disposal of approximately 20,000 tons of soil.
Griffiths also pled guilty to conspiracy to commit international money laundering.
Griffiths, along with a co-conspirator who received more that $ 1 million in kickbacks,
laundered approximately $207,000 of the kickback proceeds from the co-conspirator's
bank account to Griffiths' bank account in Canada. Griffiths also pled guilty to
obstructing an official proceeding before the Securities and Exchange Commission,
which was investigating whether Griffiths and others had obtained information not
available to the public and relied upon that information to conduct certain improper
securities transactions.
45
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Further, on September 11, 2009, a 12-count indictment was unsealed in the U.S. District
Court of New Jersey. The indictment charged Gordon D. McDonald, a former project
manager for a prime contractor, with engaging in separate kickback and fraud
conspiracies with subcontractors John A. Bennett and James E. Haas, Jr. Bennett is the
former chief executive officer of subcontractor BEI. Haas is a former representative of a
subcontractor that provides common backfill, a type of soil material used to refill an
excavation. McDonald, Bennett, and Haas were charged with committing fraud against
the United States. McDonald is also charged with engaging in a bid-rigging conspiracy
and separate kickback and fraud conspiracy with two other subcontractors at the Federal
Creosote and Diamond Alkali Superfund sites. He is also charged with international
money laundering, tax violations, and obstruction of justice.
In February 2009, Christopher Tranchina, an employee of a Sewell, New Jersey,
company that provided temporary electrical utilities, pled guilty to participating in a
separate kickback and fraud conspiracy at Federal Creosote. Tranchina was sentenced on
July 13, 2009, to 20 months in prison, to be followed by 3 years' probation. He was
ordered to pay $154,594 in restitution.
To date, seven individuals and three companies have pled guilty as part of this
investigation.
This case is being conducted with the Internal Revenue Service Criminal Investigation
Division. (Case Cost: $334,739)
Tribal Officials Sentenced for Misusing $1.7 Million in Federal Funds
On April 24, 2009, Robert Newell, Princeton, Maine, was sentenced in the U.S. District
Court for the District of Maine for conspiracy to defraud the United States,
misapplication of tribal government funds, making false statements, and submitting false
claims. Newell, the former tribal governor of the Passamaquoddy Tribe, Indian
Township Reservation, was sentenced to 5 years in prison to be followed by 3 years of
supervised release. He was also ordered to pay $1,741,876 in restitution and a $2,900
special assessment.
On April 27, 2009, James J. Parisi, Jr., Portland, Maine, former Director of Finance of the
Passamaquoddy Tribe, was sentenced to 1 year and 1 day in prison, to be followed by
3 years of supervised release. He was held jointly responsible for the restitution ordered
for Newell and was ordered to pay a $ 1,100 special assessment.
Newell and Parisi misapplied approximately $1.7 million in restricted federal funds
awarded to Indian Township for its tribal programs. They used the restricted funds for
the benefit of themselves and some family members. However, most of the diverted
federal funds went to pay general assistance to tribal members. The victims in this case
46
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
included the EPA, the Indian Township Tribal Government, the Indian Township
Retirement Fund, the U.S. Department of Interior's Bureau of Indian Affairs, the U.S.
Department of Health and Human Services, the U.S. Department of Housing and Urban
Development, the U.S. Department of Justice, and the State of Maine.
This investigation was conducted with the Offices of Inspector General of the
U.S. Department of the Interior, U.S. Department of Justice, U.S. Department of Health
and Human Services, and U.S. Department of Housing and Urban Development; the
U.S. Department of Labor's Employee Benefits Security Administration; and the
U.S. Attorney's Office. (Case Cost: $221,953)
Operations Manager Sentenced for Making a False Statement
On April 15, 2009, Brent Anderson, Oak Ridge, Tennessee, was convicted and sentenced
in the U.S. District Court for the Eastern District of Tennessee for filing a false material
statement in documents required to be maintained by the Clean Air Act. Anderson was
sentenced to 12 months' probation, and ordered to perform 50 hours of community
service and pay a $100 assessment.
Anderson, the Operations Manager for Heraeus Metal Processing, Inc., falsified baghouse
pressure logs and scrubber logs that were required to be maintained at the Heraeus
facility in Wartburg, Tennessee, pursuant to permits issued by the Tennessee Department
of Environment and Conservation under delegations from EPA. The Clean Air Act
requires that logs be maintained to record the various operating parameters of the
scrubber and baghouse air pollution control devices. Heraeus was required to submit an
annual report in March 2005, to include the logs, to the Tennessee Department of
Environment and Conservation. The investigation determined that between October
2004 and at least February 2005, no contemporaneous logs were maintained by the
Wartburg facility as required by the permits. Subsequently, Anderson created, or caused
to be created, false logs for the facility. After the falsification became known, Heraeus
fully cooperated with the federal investigation. In January 2009, Heraeus was convicted
and sentenced to 18 months' probation and ordered to pay a $350,000 fine.
Based upon the conviction, a Clean Air Act Listing was published whereby Anderson is
prohibited from receiving any government contract, loan, or benefit at the violating
facility until the conditions that gave rise to the Clean Air Act violation have been
corrected.
This case is being conducted with the East Tennessee Environmental Crimes Task Force,
which includes the EPA Criminal Investigation Division and OIG, the Tennessee
Department of Environment and Conservation, and the Tennessee Valley Authority OIG.
(Case Cost: $150,234)
47
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Details on Investigation of Libby Superfund Site Released to Public
In March 2006, the OIG opened a preliminary investigation of EPA asbestos clean-up
efforts at the Superfund site in Libby, Montana, based on allegations that EPA failed to
fully address scientific standards for clean-up and of possible contractor misconduct. The
investigation determined that no criminal activity occurred but that further evaluation of
potential risks to the public should be conducted.
An investigation summary was prepared in April 2006, detailing the investigative
findings and noting a need for further evaluation of EPA's clean-up actions in Libby.
This summary noted that difficult deadlines had been placed on EPA to complete a Risk
Assessment and a Record of Decision regarding the clean-up, and the uncertainty that
surrounds amphibole asbestos at Libby and its harmful potential effects needs further
scientific research. Over the past several years, hundreds of cases of asbestos-related
disease have been documented in the Libby area stemming from asbestos-contaminated
vermiculite mined in the area.
On April 21, 2009, Public Employees for Environmental Responsibility (PEER) filed a
lawsuit against the OIG seeking the release of the April 2006 memorandum. The OIG
released this memorandum based on new Freedom of Information Act guidelines issued
by the President and the Attorney General. This information was released in Report No.
09-P-0146, Public Release of "Rumple Report" on Preliminary Investigation of EPA
Clean-up of Amphibole Asbestos in Libby, Montana, issued April 28, 2009.
48
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Legislation and Regulations Reviewed
Section 4(a) of the Inspector General Act requires the Inspector General to review
existing and proposed legislation and regulations relating to the program and operation of
EPA and to make recommendations concerning their impact. The primary basis for our
comments are the audit, evaluation, investigation, and legislative experiences of the OIG,
as well as our participation on the Council of the Inspectors General on Integrity and
Efficiency. During the reporting period, we reviewed 46 proposed changes to legislation,
regulations, policy, and procedures that could affect EPA and provided comments on 8.
We also reviewed drafts of OMB circulars, program operations manual, directives, and
reorganizations. Details on two items follow.
Interim Agency Guidance Regarding Communications with Federally Registered
Lobbyists about Recovery Act Funds. On March 20, 2009, the President issued a
memorandum titled, "Ensuring Responsible Spending of Recovery Act Funds."
Section 3 of the memorandum outlined specific requirements that Executive Branch
employees must follow regarding communications with federally registered lobbyists
about Recovery Act funds. On April 14, 2009, the Agency requested comments on draft
guidance it prepared for its employees implementing these requirements. The OIG
provided comments to strengthen and clarify the draft guidance to include a section
called Recovery Act Oversight with a reference to the OIG Hotline to report any possible
improprieties. Also, we recommended that if a person says he or she is not a federally
registered lobbyist there needs to be a way to confirm this and the procedure needs to be
outlined in the guidance.
Proposed Revision to EPA Order 3110.5A, Clearance Procedures for Employees
Separating or Transferring from EPA. EPA's Office of Human Resources proposed a
revision to EPA Order 3110.5A, Clearance Procedures for Employees Separating or
Transferring from EPA, addressing procedures for employees separating or transferring
from EPA. We commented that when an employee transfers to another federal agency,
the EPA supervisor may have some options available depending upon the conditions, and
these options need to be outlined in the document. We also commented that departing
employees have been the source of important information pertaining to possible waste
and abuse. In fact, employees often feel compelled to leave due to their knowledge of
possible waste and abuse that they may be reluctant to disclose while still in a particular
job or under the supervision of a particular supervisor. We suggested that, in addition to
the standard exit interview, each departing employee be offered the opportunity to meet
with a member of the OIG or provide information anonymously through the OIG Hotline.
49
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Costs of Financial Statement Audits Reduced 39 Percent
A "Most Efficient Organization" independent validation report issued by a contractor on
September 11, 2009, found that the EPA OIG's cost to conduct the FY 2008 financial
statement audits from March 2008 to July 2009 was 39 percent lower than the baseline
figure used under the OMB Circular A-76 process. The study was conducted by a
contractor selected by EPA.
The OIG had won a sourcing competition under OMB Circular A-76, Performance of
Commercial Activities, to conduct annual audits of EPA's Consolidated Financial
Statements, the Pesticide Registration Fund, and the Pesticides Reregistration and
Expedited Processing Fund for the 5-year period beginning March 1, 2008. The actual
cost of the three audits was approximately $1.2 million less than the amount the OIG
incurred conducting these audits for FY 2006 - the baseline year.
In addition to the cost findings, the independent review found that technical and cost
performance was being adequately monitored, and that technical performance was of
above-average acceptable quality. The review was not an audit, and there is no formal
corrective action process connected to the review.
OIG Internal Control Assessment Identifies Challenges, Areas for
Improvement
In accordance with FMFIA, Agency guidance, and the five GAO internal control
standards, OIG has assessed the effectiveness of its internal controls and operations
during this reporting period. In addition, the OIG assessed the progress to improve
weaknesses identified in last year's review. This included a survey of all OIG
employees. Also, we determined that the OIG managed all Recovery Act responsibilities
and activities in the OIG effectively and efficiently, used reliable and accurate data to
report on Recovery Act activities, used all Recovery Act funds designated for the OIG
solely for Recovery Act efforts, and monitored the applicable risks and internal controls
identified in EPA's Recovery Act Stewardship Plan. As a result, internal controls within
the OIG are adequate to reasonably ensure the protection of programs, operations,
functions, and resources against fraud, waste, abuse, and mismanagement, and the OIG is
in compliance with all applicable laws and regulation.
OIG actions to improve internal controls included the following.
• Continued to develop and transfer OIG applications into a common information
technology infrastructure and implemented numerous security protections.
• Received high security scores for implementing Federal Information Security
Management Act requirements.
50
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
• Produced the OIG FY 2008 Annual Performance Report for full transparency of
its financial management and operations.
• Entered into an Interagency Agreement with the Office of Personnel
Management to improve the OIG hiring process.
• Developed a revised cost accounting process for individual office direct product
rates and overhead allocation rates.
• Performed an organization-wide assessment of results and accomplishments.
• Participated in various performance and activity measurement processes for
public reporting.
• Established an Efficiency Audits Product Line.
• Received a "clean opinion" from a rigorous external peer review on the quality
and compliance of OIG audit and evaluation products with Government Auditing
Standards.
We identified an internal management weakness related to staffing. The OIG has been
directed by Congress to increase staffing. However, for the past 2 years the OIG has
been frustrated at the lengthy process associated with depending upon EPA's Human
Capital services. Also, the OIG legacy investigative case management system has been
identified as a weakness, and the OIG is exploring several case management systems
used by agencies within the Inspector General community that perform a similar
investigative function or mission.
51
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Audit, Inspection, and Evaluation
Operations
Office of Inspector General Reviews
April 1 , 2009, to
September 30, 2009
($ in millions)
Questioned Costs *
• Total $0.3
• Federal $0.3
Recommended Efficiencies *
• Federal $25.3
Costs Disallowed to be Recovered
• Federal $0.2
Costs Disallowed as Cost Efficiency
• Federal $8.7
Reports Issued - OIG-Managed
Reviews
• EPA Reviews Performed by OIG 38
• EPA Reviews Performed by
Independent Public Accountants 6
Total 44
Reports Resolved
(Agreement by Agency officials
to take satisfactory corrective
actions) ** 90
FY
2009
$8.7
$1.5
$62.3
$1.0
$48.2
66
12
78
178
Audit, Inspection, and Evaluation
Operations
Other Reviews
(Reviews Performed by Another Federal
or a Single Audit Act Auditor)
April 1 , 2009, to
September 30, 2009
($ in millions)
Questioned Costs *
• Total $11.4
• Federal $11.4
Recommended Efficiencies *
• Federal $0.0
Costs Disallowed to be Recovered
• Federal $1.1
Costs Disallowed as Cost Efficiency
• Federal $1 .3
Reports Issued - Other Reviews
• EPA Reviews Performed by
Another Federal Agency 0
• Single Audit Act Reviews 77
Total 77
Agency Recoveries
Recoveries from Audit, Inspection,
and Evaluation Resolutions
of Current and Prior Periods
(cash collections or offsets to $8.4
future payments) ***
Agency
FY
2009
$36.6
$13.3
$0.0
$2.9
$1.3
37
138
175
$17.4
Investigative Operations
April 1 , 2009, to
September 30, 2009
($ in millions)
Fines and Recoveries $2.468
(including civil) ****
Cost Savings $0.280
Cases Open During Period 28
Cases Closed During Period 18
Indictments/Informations of Persons 8
or Firms
Convictions of Persons or Firms 4
Civil Judgments/Settlements/Filings 0
FY
2009
$6.149
$0.280
61
47
14
12
0
Questioned Costs and Recommended Efficiencies
are subject to change pending further review in the
audit, inspection, and evaluation resolution process.
Total Questioned Costs include contracts of other
federal agencies.
Reports Resolved are subject to change pending
further review.
Information on Recoveries from Audit, Inspection,
and Evaluation Resolutions is provided by EPA's
Office of Financial Management and is unaudited.
Total includes actions resulting from joint
investigations.
52
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Status Report on Perpetual Inventory of Reports in Resolution Process
for Semiannual Period Ending September 30, 2009
Report Category
A. For which no management
decision was made by
April 1,2009*
B. Which were issued during the
reporting period
C. Which were issued during the
reporting period that required
no resolution
Subtotals (A + B - C)
D. For which a management
decision was made during the
reporting period
E. For which no management
decision was made by
September 30, 2009
F. Reports for which no
management decision was
made within 6 months of
issuance
No. of
Reports
138
121
30
229
90
139
55
Report Issuance
($ in thousands)
Questioned
Costs
$20,505
$11,735
$0
$32,240
$2,617
$29,623
$18,075
Recommended
Efficiencies
$8,409
$25,330
$0
$33,739
$8,739
$25,000
$0
Report Resolution Costs
Sustained
($ in thousands)
To Be
Recovered
$1,334
$0
$0
$1,334
$1,334
$0
$0
As
Efficiencies
$8,409
$25,330
$0
$33,739
$8,739
$25,000
$0
Any difference in number of reports and amounts of questioned costs or recommended efficiencies between this
report and our previous semiannual report results from corrections made to data in our audit tracking system.
Status of Management Decisions on Inspector General Reports
This section presents statistical information as required by the Inspector General Act of 1978, as
amended, on the status of EPA management decisions on reports issued by the OIG involving monetary
recommendations. As presented, information in Tables 1 and 2 cannot be used to assess results of
reviews performed or controlled by this office. Many of the reports were prepared by other federal
auditors or independent public accountants. EPA OIG staff do not manage or control such assignments.
Auditees frequently provide additional documentation to support the allowability of such costs
subsequent to report issuance.
53
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Table 1 - Inspector General-issued Reports with Questioned Costs for Semiannual Period Ending
September 30, 2009 (dollars in thousands)
Report Category
A. For which no management decision was made by
April 1,2009**
B. New reports issued during period
Subtotals (A + B)
C. For which a management decision was made during the
reporting period
(i) Dollar value of disallowed costs
(ii) Dollar value of costs not disallowed
D. For which no management decision was made by
September 30, 2009
Reports for which no management decision was made
within 6 months of issuance
No. of
Reports
41
18
59
19
14
9
40
28
Questioned
Costs *
$20,505
$11,735
$32,240
$2,617
$1,334
$1,283
$29,623
$18,075
Unsupported
Costs
$13,610
$1,870
$15,480
$1,296
$219
$1,077
$14,184
$12,501
Questioned costs include the unsupported costs.
Any difference in number of reports and amounts of questioned costs between this report and our previous
semiannual report results from corrections made to data in our audit, inspection, and evaluation tracking system.
Table 2 - Inspector General-issued Reports with Recommendations that Funds Be Put to Better Use
for Semiannual Period Ending September 30, 2009 (dollars in thousands)
Report Category
A. For which no management decision was made by April 1 , 2009 *
B. Which were issued during the reporting period
Subtotals (A + B)
C. For which a management decision was made during the reporting period
(i) Dollar value of recommendations from reports that were
agreed to by management
(ii) Dollar value of recommendations from reports that were
not agreed to by management
(ii) Dollar value of nonawards or unsuccessful bidders
D. For which no management decision was made by September 30, 2009
Reports for which no management decision was made
within 6 months of issuance
No. of
Reports
5
2
7
6
6
1
0
1
0
Dollar
Value
$8,409
$25,330
$33,739
$8,739
$8,739
$0
$0
$25,000
$0
Any difference in number of reports and amounts of funds put to better use between this report and our previous
semiannual report results from corrections made to data in our audit, inspection, and evaluation tracking system.
Audits, Inspections, and Evaluations with No Final Action as of September 30, 2009, that Are Over 365 Days
Past the Date of the Accepted Management Decision (including Audits, Inspections, and Evaluations in Appeal)
Audits, Inspections, and Evaluations
Program
Assistance Agreements
Contract Audits
Single Audits
Financial Statement Audits
Total
Total
35
25
0
19
0
79
Percentage
44%
32%
0%
24%
0%
100.0%
54
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
The following table shows EPA OIG Hotline activity regarding complaints of fraud, waste, and abuse in
EPA programs and operations that occurred during the past semiannual and annual periods.
Issues Open at the Beginning of the Period
Inquiries Received During the Period
Inquiries Closed During the Period
Inquiries Pending at the End of the Period
Issues Referred to Others
OIG Offices
EPA Program Offices
Other Federal Agencies
State/Local Agencies
Semiannual Period
(April 1,2009 -
September 30, 2009)
37
435
222
7
189
41
12
128
Annual Period
(October 1 , 2008 -
September 30, 2009
12
568
561
7
22
77
21
209
55
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Summary of Investigative Activity During Reporting Period
Cases Open as of April 1, 2009
Cases Opened During Period
Cases Closed During Period
Cases Pending as of September 30, 2009
94
28
18
104
Investigations Pending by Type as of September 30, 2009
Contract
Assistance Agreement
Employee Integrity
Program Integrity
Computer Crime
Laboratory Fraud
Other
Total
Superfund
10
0
0
1
0
1
1
13
Management
3
37
16
7
5
11
6
85
Split Funded
2
0
0
1
0
0
0
3
Recovery Act
1
1
0
1
0
0
0
3
Total
16
38
16
10
5
12
7
104
Results of Prosecutive Actions
Criminal Indictments / Informations / Complaints
Convictions
Civil Judgments / Settlements / Filings
Fines and Recoveries (including Civil)
Prison Time
Prison Time Suspended
Probation
Community Service
EPA OIG Only
2
1
0
$0
0 months
0 months
60 months
0 hours
Joint*
6
3
0
$2,468,140
128 months
0 months
180 months
50 hours
Total
8
4
0
$2,468,140
128 months
0 months
240 months
50 months
Administrative Actions
Suspensions
Debarments
Compliance Agreements
Other Administrative Actions
Total
Administrative Recoveries
EPA OIG Only
0
0
0
16
16
$0
Joint*
12
8
0
1
21
$0
Total
12
8
0
17
37
$0
With another federal agency.
56
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Scoreboard of OIG FY 2009 Performance Results
Compared to FY 2009 Annual Performance Goal Targets
All results reported in FY 2009, from current and prior years' work, are as reported in OIG
Performance Measurement and Results System, Inspector General Operations Reporting System,
and Inspector General Enterprise Management System.
OIG FY 2009 Government Performance and Results Act
Annual Performance Targets Compared to FY 2009
Results Reported
Supporting Measures
Goal: Contribute to Human Health and Environmental Quality Through Improved Business Practices,
Accountability and Integrity of Program Operations
Environmental Improvements/Actions/Changes
Improvements in Business/Systems/Efficiency
Risks Reduced or Eliminated
Target: 318; Reported: 272 (86%)
6 Legislative/regulatory changes/decisions
2 Environ me ntal/mgmt best practices implemented
38 Environmental/mgmt. policy, process, practice,
control change actions
43 Certifications/validations/verifications/corrections
15 Environment/mgmt. operational/control risks
reduced or eliminated
103 Actions taken or resolved prior to report issuance
(not otherwise reported)
65 Recommendations reported as implemented,
previously identified unimplemented by follow-up*
Environmental & Business Recommendations,
Challenges, Best Practices, and Risks Identified
Target: 903; Reported: 983 (109%)
785 Recommendations (for Agency/stakeholder action)
26 Critical congressional or public management
concerns addressed
13 Best environmental/mgmt. practices identified
81 Referrals for agency action
7 New environmental/mgmt. operational risks or
challenges identified
71 Unimplemented recommendations identified
Return on Investment: Potential Dollar Return as
Percentage (120%) of OIG Budget $55.7 Million
Target: $66.8 M; Reported: $83.3 M (150%)
(Dollars in millions)
$ 14.8 Questioned costs net EPA
$ 62.3 Recommended efficiencies, costs saved (EPA)
$ 6.2 Fines, recoveries, settlements
Criminal, Civil, and Administrative Actions
Reducing Risk of Loss/Operational Integrity
^Target: 80; Reported: 95 (119%)
12 Criminal convictions
14 Indictments/informations/complaints
55 Administrative actions
14 Allegations disproved
Other (no targets established)
Sustained Monetary Recommendations and Savings
Achieved from Current and Prior Periods: $53.5 M
Sustained Environmental and Management
Recommendations for Resolution Action: 365
American Recovery and Reinvestment Act Activity Results
Reports Issued: 253
(Dollars in Millions)
$ 4.0 Questioned costs sustained
$ 49.5 Cost efficiencies sustained or realized
365 Sustained recommendations
63 Awareness briefings
66 OIG-produced reports
187 Reports by other audit entities w/ OIG oversight
Reported by the Agency as implemented of those reported by the OIG as unimplemented.
57
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
The Inspector General Act requires a listing, subdivided according to subject matter, of each report issued by
the OIG during the reporting period. For each report, where applicable, the Inspector General Act also requires
a listing of the dollar value of questioned costs and the dollar value of recommendations that funds be put to
better use. This listing includes a section for reports involving the American Recovery and Reinvestment Act.
Questioned Costs
Report No.
Project Title
Date
Ineligible
Costs
Unsupported Unreasonable
Costs Costs
Federal
Recommended
Efficiencies
PERFORMANCE REPORTS
09-P-0144 EPA Needs to Improve Internal Controls to Increase Cost Recovery 27-Apr-09 0 0
09-P-0147 EPA Can Improve Its Process for Establishing Peer Review Panels 29-Apr-09 0 0
09-P-0148 Compendium of Unimplemented Recommendations as of March 31, 2009 30-Apr-09 0 0
09-P-0151 EPA Does Not Provide Oversight of Radon Testing Accuracy and Reliability 12-May-09 0 0
09-P-0152 Results of Hotline Complaint Review of EPA's Antimicrobial Testing Program 27-May-09 0 0
09-P-0162 Contaminated Soil Waste Repository at East Mission Flats, Idaho 8-Jun-09 0 0
09-P-0176 Regional Public Liaison Program Needs Greater Focus on Results 24-Jun-09 0 0
09-P-0184 Security Planning for Exchange Network Needs Improvement 30-Jun-09 0 0
09-P-0185 Network Vulnerability Assessment: EPA's Great Lakes National Program Office 30-Jun-09 0 0
09-P-0186 Network Vulnerability Assessment: EPA's National Computer Center 30-Jun-09 0 0
09-P-0187 Network Vulnerability Assessment: Region 8 30-Jun-09 0 0
09-P-0188 Network Vulnerability Assessment: EPA's Potomac Yard Buildings 30-Jun-09 0 0
09-P-0189 Network Vulnerability Assessment: EPA's 1310 L Street Building 30-Jun-09 0 0
09-P-0197 EPA Should Delay Deploying New Acquisition System until Testing Is Completed 20-Jul-09 0 0
09-P-0203 EPA Should Use FMFIA to Improve Programmatic Operations 6-Aug-09 0 0
09-P-0206 Efficiencies to the Shared Service Centers Not Delivered 11-Aug-09 0 0
09-P-0222 Office of Inspector General Access to Agency Information and Personnel 25-Aug-09 0 0
09-P-0223 EPA Needs to Accelerate Adoption of Numeric Nutrient Water Quality Standards 26-Aug-09 0 0
09-P-0226 ECHO Data Quality Audit Phase I Results: Security Controls Needed 31-Aug-09 0 0
09-P-0227 Network Vulnerability Assessment: EPA's Research Triangle Park Finance Center 31-Aug-09 0 0
09-P-0229 EPA Should Stop Providing Estimates of Total Labor Hours to Contractors 9-Sep-09 0 0
09-P-0231 EPA Needs a Cohesive Plan to Clean Up Great Lakes Areas of Concern 14-Sep-09 0 0
09-P-0232 EPA's Office of Research and Development Could Better Use FMFIA 15-Sep-09 0 0
09-P-0233 EPA Can Better Accountfor Homeland Security Presidential Directive-12 Property 15-Sep-09 0 0
09-P-0235 EPA Needs an Oversight Program for Protocol Gases 16-Sep-09 0 0
09-P-0240 Delays Prevent EPA from Implementing Information Security Vulnerability Program 21-Sep-09 0 0
09-P-0241 Uniform Policy Needed for Superfund Unliquidated Obligations 22-Sep-09 0 0
09-P-0242 Contractor Invoice Internal Controls Need Improvement 23-Sep-09 0 0
09-P-0243 Sampling Generally Confirms EPA's Data at Jones Superfund Site in New York 23-Sep-09 0 0
TOTAL PERFORMANCE REPORTS = 29 $0 $0
ASSISTANCE AGREEMENT REPORTS
09-N-0150 EPA's Unliquidated Obligations for Grants 1-May-09 0 0
TOTAL ASSISTANCE AGREEMENT REPORTS = 1 $0 $0
SINGLE AUDIT REPORTS
09-3-0137 Elkland Borough of - FY 2007 13-Apr-09 0 0
09-3-0138 Fort Worth City of-FY 2006 14-Apr-09 0 0
09-3-0139 Albuquerque, City of - FY 2006 15-Apr-09 0 0
09-3-0140 Anaconda-Deer Lodge County - FY 2007 20-Apr-09 $16,576 0
09-3-0141 Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation - FY 2007 20-Apr-09 0 0
09-3-0142 North Carolina State of-FY 2007 23-Apr-09 0 0
09-3-0143 Hawaii Department of Health-FY 2007 23-Apr-09 0 0
09-3-0153 Sandia Pueblo of - FY 2005 4-Jun-09 0 $87,234
09-3-0154 Sandia Pueblo of-FY 2006 4-Jun-09 0 $99,443
09-3-0155 Association of Bay Area Governments - FY 2007 4-Jun-09 0 0
09-3-0156 Ak-Chin Indian Community - FY 2007 4-Jun-09 0 0
09-3-0157 Barona Group of the Capitan Grande Band of Mission Indians-FY 2007 4-Jun-09 0 0
09-3-0158 Bishop Paiute Tribe - FY 2007 8-Jun-09 0 0
09-3-0159 Cahto Tribe of the Laytonville Rancheria - FY 2006 8-Jun-09 0 $142,465
09-3-0160 California State of-FY 2007 8-Jun-09 0 0
09-3-0165 Colorado State of-FY 2007 17-Jun-09 0 0
09-3-0166 Connecticut State of - FY 2007 17-Jun-09 0 0
09-3-0167 Northway Village Council - FY 2004 17-Jun-09 0 $21,544
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
0
$0
$25,000,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$330,370
0
0
$25,330,370
0
$0
58
-------
EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Report No.
09-3-0168
09-3-0169
09-3-0170
09-3-0171
09-3-0173
09-3-0174
09-3-0175
09-3-0177
09-3-0178
09-3-0179
09-3-0180
09-3-0181
09-3-0182
09-3-0183
09-3-0190
09-3-0191
09-3-0192
09-3-0193
09-3-0194
09-2-0195
09-3-0198
09-3-0199
09-3-0201
09-3-0202
09-3-0204
09-3-0205
09-3-0207
09-3-0208
09-3-0209
09-3-0210
09-3-0211
09-3-0212
09-3-0213
09-3-0214
09-3-0215
09-3-0216
09-3-0218
09-3-0219
09-3-0220
09-3-0221
09-3-0224
09-3-0228
09-3-0230
09-3-0234
09-3-0236
09-3-0237
09-3-0238
09-3-0239
09-3-0244
09-3-0245
09-3-0246
09-3-0248
09-3-0249
09-3-0250
09-3-0251
09-3-0252
09-3-0253
09-3-0254
09-3-0255
Project Title
Pala Band of Mission Indians - FY 2007
Carson Water Subconservancy District - FY 2007
Maine State of - FY 2007
Saltillo City of - FY 2006
Lake Michigan Air Directors Consortium - FY2008
Puerto Rico Water Pollution Control Revolving Fund - FY 2007
Oregon State of - FY 2007
Puerto Rico Department of Health - FY 2006
Puerto Rico Environmental Quality Board - FY2007
Pennsylvania Commonwealth of - FY 2007
Virgin Islands, U.S. Government of - FY 2006
Kentucky Commonwealth of - FY 2007
Texas State of -FY 2007
Connecticut, State of - FY 2008
New Hampshire State of - FY 2007
New Hampshire State of - FY 2008
Delaware State of - FY 2008
Colorado State of - FY 2008
American Samoa Territory of - FY 2007
Quality Control Review of Single Audit for Town of Worthington, WV - FY 2004
Iowa State of - FY 2008
Puerto Rico Water Pollution Control Revolving Fund
Palatka City of - FY 2008
Fort Worth City of - FY 2007
Montana State of - FY 2007
Florida State of -FY 2008
Kwethluk Ira Council - FY 2007
Chevak Traditional Council - FY 2004
Chevak Traditional Council - FY 2005
Guam Govern ment of - FY 2007
Georgia State of -2008
Montgomery Town of - FY 2007
National Congress of American Indians Fund - FY 2007
Puerto Rico Aqueduct and Sewer Authority - FY 2006
Norfolk, County of- FY 2007
Arkansas, State of- FY 2008
Northern Mariana Islands, Commonwealth of - FY 2007
Texas, State of- FY 2008
Pennsylvania, Commonwealth of - FY 2008
Arizona, State of - FY 2008
Howard University - FY 2008
New Mexico Environment Department - FY 2006
Guam Waterworks Authority - FY 2007
Guam Waterworks Authority - FY 2008
New Mexico Environment Department - FY 2007
New Mexico Environment Department - FY 2008
Guam Govern ment of - FY 2008
Puerto Rico University of - FY2008
Tonkawa Tribe of Indians of Oklahoma - FY 2007
Detroit, City of - FY 2006
Maine State of -FY 2008
Northern Mariana Islands, Commonwealth of - FY 2008
Detroit, City of- FY 2007
Cumberland, Town of - FY 2004
National Fish and Wildlife Foundation - FY 2008
Oglala Sioux Tribe -FY 2005
Oglala Sioux Tribe -FY 2006
Rutland, City of - FY 2008
Puerto Rico Department of Agriculture - FY 2004
TOTAL SINGLE AUDIT REPORTS = 77
Date
22-Jun-09
22-Jun-09
22-Jun-09
23-Jun-09
23-Jun-09
23-Jun-09
24-Jun-09
24-Jun-09
25-Jun-09
26-Jun-09
26-Jun-09
29-Jun-09
29-Jun-09
30-Jun-09
1-Jul-09
1-Jul-09
10-Jul-09
10-Jul-09
10-Jul-09
14-Jul-09
30-Jul-09
30-Jul-09
5-Aug-09
6-Aug-09
6-Aug-09
7-Aug-09
12-Aug-09
12-Aug-09
12-Aug-09
12-Aug-09
12-Aug-09
14-Aug-09
17-Aug-09
17-Aug-09
18-Aug-09
18-Aug-09
24-Aug-09
25-Aug-09
25-Aug-09
25-Aug-09
28-Aug-09
8-Sep-09
10-Sep-09
15-Sep-09
17-Sep-09
17-Sep-09
17-Sep-09
17-Sep-09
23-Sep-09
23-Sep-09
24-Sep-09
24-Sep-09
24-Sep-09
29-Sep-09
29-Sep-09
29-Sep-09
30-Sep-09
30-Sep-09
30-Sep-09
Ineligible
Costs
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$9,417,244
0
$14,160
0
0
0
0
0
0
$42,377
0
0
0
0
$68,654
0
0
0
0
0
0
$29,330
$9,588,341
Questioned Costs
Federal
Unsupported Unreasonable Recommended
Costs Costs Efficiencies
0
0
0
0
0
0
0
0
0
0
$44,003
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$17,503
0
0
$36,120
0
0
0
$17,027
$343,386
0
0
0
0
0
0
0
0
$109,487
$10,439
0
0
0
$98,264
0
0
0
$307,323
$530,042
0
$5,376
$1,869,656
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
CONTRACT REPORTS
09-4-0133
09-4-0134
09-4-0135
09-4-0225
STN Environmental Contract Review
Call Henry Labor Verification Review
Tetra Tech EM Inc Base Year Labor Verification Review
CERCLA Credit Claim - Concord NC
TOTAL CONTRACT REPORTS = 4
3-Apr-09
3-Apr-09
3-Apr-09
31-Aug-09
0
0
$276,875
0
$276,875
0
0
0
0
$0
0
0
0
0
$0
0
0
0
0
$0
FINANCIAL STATEMENT REPORTS
09-1-0172
09-2-0161
09-2-0200
09-2-0247
FYs 2008 and 2007 Statements for Pesticides Reregistration/Processing Fund
Agreed Upon Procedures on EPA's FY 2009 First Quarter Financial Statements
Agreed Upon Procedures on EPA's FY Second Quarter Financial Statements
Agreed Upon Procedures on EPA's FY 2009 Third Quarter Financial Statements
TOTAL FINANCIAL STATEMENT REPORTS = 4
23-Jun-09
8-Jun-09
30-Jul-09
24-Sep-09
0
0
0
0
$0
0
0
0
0
$0
0
0
0
0
$0
0
0
0
0
$0
59
-------
EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
Questioned Costs
Federal
Report No.
Project Title
Date
Ineligible
Costs
Unsupported
Costs
Unreasonable
Costs
Recommended
Efficiencies
AMERICAN RECOVERY AND REINVESTMENT ACT REPORTS
09-X-0136 Open Audit Recommendations Affecting Recovery Act Activities 9-Apr-09 0 0
09-X-0145 Management Integrity Processes for Recovery Act Activities Needs Strengthening 27-Apr-09 0 0
09-X-0196 Open Audit Recommendations for Assistance Agreement and Contract Recipients 14-Jul-09 0 0
09-X-0217 Grant Accrual Methodology May Impact of Recovery Act Funds 19-Aug-09 0 0
TOTAL AMERICAN RECOVERY AND REINVESTMENT ACT REPORTS = 4 $0 $0
OTHER REPORTS
09-N-0146 Public Release of "Rumple Report" on Investigation in Libby, Montana 28-Apr-09 0 0
09-N-0149 Congressionally Requested Report on Jurisdictional Uncertainty on Clean Water Act 30-Apr-09 0 0
TOTAL OTHER REPORTS = 2 $0 $0
TOTAL REPORTS ISSUED = 121 $9,865,216 $1,869,656
0
0
0
0
$0
0
0
$0
$0
0
0
0
0
$0
0
0
$0
$25,330,370
60
-------
EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
For Reporting Period Ended September 30, 2009
The Inspector General Act requires a summary of each audit report issued before the commencement of the
reporting period for which no management decision has been made by the end of the reporting period, an explanation
of the reasons such management decision has not been made, and a statement concerning the desired timetable for
achieving a management decision on each such report. OMB Circular A-50 requires resolution within 6 months of a
final report being issued. In this section, we report on audits with no management decision or resolution within
6 months of final report issuance. In the summaries below, we note the Agency's explanation of the reasons
management decision has not been made, the Agency's desired timetable for achieving a management decision, and
the OIG follow-up status as of September 30, 2009.
Office of Air and Radiation
Report No. 2005-P-00003, Development of the Proposed MACT for Utility Units, February 3, 2005
Summary: Evidence indicated that EPA senior management instructed EPA staff to develop a Maximum Achievable
Control Technology (MACT) standard for mercury that would result in national emissions of 34 tons annually, instead
of basing the standard on an unbiased determination of what the top performing coal-fired units were achieving in
practice. The Clean Air Act requires that a MACT standard should, at a minimum, be based on the emissions levels
achieved by the top performing 12 percent of units - not a targeted national emissions result. We believed it was
likely that the standard understated the average amount of mercury emissions reductions achieved by the top
performing 12 percent of power units. Thus, the MACT standard, if adopted, would not achieve the maximum
emission reductions achievable. Shortly after we issued our report, EPA de-listed mercury as an air toxic subject to
MACT standards and issued the Clean Air Mercury Rule that established a trading program for mercury emissions.
However, 16 States filed lawsuits challenging the rule, and we agreed to hold the recommendations in abeyance until
the court case is settled. As of October 17, 2008, the Agency had asked the Supreme Court to review the federal
appeals court ruling that struck down the cap-and-trade program. We continue to hold the recommendations in
abeyance until EPA decides to proceed.
Agency Explanation: Per the OIG, resolution is on hold, beyond Agency control. EPA received a ruling on the Clean
Air Mercury Rule and is determining the next action.
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-P-0020, MACT Implementation Progress and Challenges, October 31, 2007
Summary: EPA's National Emissions Inventory data indicate an overall decline in air toxic emissions concurrent with
implementation of the MACT standards. EPA plans to use National Emissions Inventory data to assess the public
health risk remaining from MACT sources of air toxics emissions, but the reliability of the data for site-specific
emissions varies considerably. EPA has not established objectives that define an acceptable level of quality for
National Emissions Inventory data used in the residual risk process. EPA guidance recommends that program
offices develop data quality objectives for using data in such decision-making processes. Given the uncertainties
associated with National Emissions Inventory data, EPA could over- or underestimate public health risk from MACT
sources of emissions. Overstating risk could result in EPA placing on industries regulations that are not cost
beneficial. Conversely, understating risk could result in EPA not requiring regulations where needed to protect public
health. The Agency has not agreed with our recommendation to establish the recommended State reporting
requirements, and we consider the issue unresolved.
Agency Explanation: The Agency concurs with the objective of Recommendation 3-2 but does not have the authority
to take the corrective action suggested by the OIG. Agency requesting the OIG to reconsider the feasibility of the
recommendation.
OIG Follow-up Status: Resolution under negotiation in Headquarters
61
-------
EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 08-P-0174, Efforts to Address Indoor Risks from Radon, June 30, 2008
Summary: Nearly two decades after passage of the 1988 Indoor Radon Abatement Act, exposure to indoor radon
continues to grow. Efforts to reduce exposure through mitigation or building with radon-resistant new construction
have not kept pace. EPA agreed to develop a strategy for achieving the long-term goal of the Act, as well as other
recommendations. For our recommendation that EPA identify limitations to meeting the goal to Congress, EPA
responded that it does not believe the Act's goal is achievable, but did not agree to notify Congress that the goal is
unachievable. We consider this issue open and unresolved.
Agency Explanation: On March 20, 2009, the OIG sent a memo to the Office of Air and Radiation's Acting Assistant
Administrator closing recommendations 2-1 and 2-3. The OIG requested additional information/clarification or
commitments from the Office of Air and Radiation for recommendations 2-2 and 2-4. The Office of Air and Radiation
is currently preparing a response addressing the OIG's concerns and will need to reach agreement on a planned
completion date of December 31, 2011.
OIG Follow-up Status: Incomplete response received
Report No. 09-P-0125, Effect of Efforts to Address Air Emissions at Selected Ports, March 23, 2009
Summary: While EPA has issued air emissions regulations for most port sources, EPA's actions to address air
emissions from large oceangoing vessels in U.S. ports have not yet achieved the goals for protecting human health.
The Clean Air Act provides EPA with the authority to regulate emissions from oceangoing vessel engines. EPA has
deferred taking a position on whether it has authority to regulate emissions from foreign-flagged vessels, which
account for about 90 percent of U.S. port calls. We recommended that EPA assess its authorities and responsibilities
under the Clean Air Act to regulate air emissions from foreign-flagged vessels in U.S. ports, and report any shortfalls
to Congress, but EPA's comments were not responsive. We also recommended that EPA revise its ports strategy to
include a transformation plan, but EPA did not agree. In its 90-day response to the OIG in June 2009, EPA agreed
with the report recommendations and proposed corrective actions. The OIG agreed with the Agency's action plan for
recommendations 2-2 and 3-1, and closed these recommendations in July 2009. The OIG requested additional
information/clarification from EPA's Office of Air and Radiation for recommendation 2-1 that EPA assess whether
there are any shortfalls in its statutory authority under the Clean Air Act to regulate air emissions from foreign-flagged
vessels in U.S. ports and, if so, report these to Congress.
Agency Explanation: The Office of Air and Radiation is leaving recommendation 2-1 open for now pending further
discussion with the OIG.
OIG Follow-up Status: Incomplete response received
Financial Analysis and Rate Negotiation Service Center
Report No. 2004-1-00099, Lockheed Martin Services Group - FYE 12/31/2002 Incurred Cost, August 23, 2004
Summary: The Defense Contract Audit Agency (DCAA) questioned indirect costs of $3,595,399, of which $2,128 is
applicable to EPA contracts. DCAA qualified the audit results pending receipt of assist audit reports.
Agency Explanation: Resolution on hold due to other cognizant federal agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2006-4-00120, National Academy of Sciences - FY 2006 Info Tech System, July 20, 2006
Summary: DCAA determined that the contractor's information technology system general internal controls were
inadequate in part.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
62
-------
EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 2006-4-00165, National Academy of Sciences - FY 2006 Indirect/ODC System, September 27, 2006
Summary: In DCAA's opinion, the contractor's service centers cost system and related internal control policies and
procedures were inadequate in part. DCAA's examination noted certain significant deficiencies in the design or
operation of the Indirect/Other Direct Costs system process.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2006-4-00169, National Academy of Sciences - FY 2006 Labor System, September 29, 2006
Summary: In DCAA's opinion, the contractor's labor system and related internal control policies and procedures were
inadequate in part. DCAA's examination noted certain significant deficiencies in the design or operation of the
internal control structure.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00016, URS Corporation (c/o URS Greiner, Inc.) - FY 2001 Incurred Cost, November 13, 2006
Summary: DCAA questioned a total of $188,772,784 in direct and indirect costs. Of these, $5,585,929 are claimed
direct costs, of which $1,328,189 are from EPA Contract No. 68-W9-8225. The questioned indirect expenses
impacted all fringe, overhead, and general and administrative rates. Of the questioned indirect costs, EPA's share is
$401,412, for a total of $1,729,601 in questioned direct and indirect costs.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00059, National Academy of Sciences - FY 12/31/2004 Incurred, April 5, 2007
Summary: In DCAA's opinion the claimed direct costs are acceptable; however, there are $787,774 in questioned
indirect costs, of which $70,900 are applicable to EPA contracts.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00061, Lockheed Martin Services Group - FY 12/31/2004 I/C, April 10, 2007
Summary: DCAA questioned $34,708,911 in claimed direct costs and proposed indirect costs. Further, DCAA did
not audit $338,864,655 in claimed direct and indirect costs for assist audits not yet received or for received assist
audit reports whose impact on the contractor's cost objectives has not yet been calculated. Additionally, DCAA
upwardly adjusted ($48,224,805) in claimed base costs. EPA's share of the questioned costs total $694,178. DCAA
did not provide any Cumulative Allowable Cost Work Sheet or Schedule of Allowable Costs by Cost Element by
Contract because the most current year with negotiated indirect rates is calendar year 1998. DCAA will issue a
supplemental audit report upon completion of its analysis of the assist audit results, and as the outstanding fiscal
years' indirect rates are negotiated, the requested Cumulative Allowable Cost Work Sheet and Schedule of Allowable
Costs by Cost Element by Contract will be provided.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
63
-------
EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 2007-4-00058, SAIC - Companies 1, 6, and 9 - FY 2006 Floorchecks, April 30, 2007
Summary: DCAA determined that certain labor practices require corrective action to improve the reliability of the
contractor's labor accounting system. DCAA did not express an opinion on the adequacy of the contractor's labor
accounting system taken as a whole.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00079, Science Applications Intl. Corporation - FYE 1/31/2005 I/C, July 18, 2007
Summary: DCAA submitted three audit reports under this assignment. DCAA accepted the claimed direct costs at
Companies 1 and 6 (there are no claimed direct costs at Company 9), and questioned proposed indirect costs and
rates at Companies 1, 6, and 9. DCAA questioned a total of $17,224,585 of Company 9 claimed indirect expenses
($9,938,874) and fringe benefit costs and rates ($7,285,711), of which $7,762,651 was allocated to other companies
that do not perform government work. Questioned indirect costs of $3,525,230 and $4,552,250 were allocated to and
questioned in the claimed general and administrative costs and rates of Companies 1 and 6, respectively. The
questioned fringe benefit rates in Company 9 resulted in questioned fringe benefit costs of $865,365 and $519,089
for Companies 1 and 6, respectively. DCAA questioned an additional $1,995,869 of Company 1 claimed indirect
expenses, and an additional $511,822 of Company 6 claimed indirect expenses. Total questioned costs in
Companies 1 and 6 are $11,969,625, of which $119,696 are applicable to EPA contracts.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00080, Lockheed Martin Services, Inc. - FY 2005 Incurred Cost, August 6, 2007
Summary: DCAA questioned $595,792,539 in claimed direct costs and $10,982,460 in proposed indirect costs and
rates. None of the questioned direct costs are chargeable to EPA contracts. A number of the EPA contracts have
indirect ceiling rates that are lower than the contractor's proposed indirect rates, and are not impacted by the
questioned indirect expenses and rates. However, there are EPA contract/subcontracts that do not have indirect
ceiling rates and are impacted by the questioned indirect rates. EPA's share of questioned indirect costs total
$133,069.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00090, ABT Associates Inc. - FY 2002 Incurred Cost, August 29, 2007
Summary: DCAA questioned a total of $2,206,870, involving $5,363 of proposed direct costs and $2,201,507 of
proposed indirect costs and rates. EPA's share of the questioned indirect costs is $123,686. None of the questioned
direct costs impact contracts.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (U.S. Agency for International
Development).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-1-00097, National Academy of Sciences FYE 12/31/2003 Incurred Cost, September 20, 2007
Summary: In DCAA's opinion, the contractor's questioned costs increased to $300,645, of which EPA's portion is
$27,058 (9 percent). This supplemental report supersedes the prior report in its entirety.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
IG Follow-up Status: Resolution pending receipt of additional information
64
-------
EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 2007-4-00079, Weston Solutions, Inc. - FY 2006 Billing System, September 25, 2007
Summary: In DCAA's opinion, the contractor's billing system and related internal control policies and procedures
were inadequate in part.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2007-4-00080, National Academy of Sciences - FY 2006 Budget System, September 26, 2007
Summary: In DCAA's opinion, the budget and planning system and related internal control policies and procedures
were inadequate in part.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0002, SAIC - Company 1 Compensation Follow-Up, October 2, 2007
Summary: In DCAA's opinion, the contractor's compensation system and related internal control policies and
procedures are inadequate in part. DCAA's examination noted certain significant deficiencies in the design or
operation of the internal control structure, which could adversely affect the contractor's ability to record, process,
summarize, and report compensation in a manner that is consistent with applicable government contract laws and
regulations.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-1-0114, Weston Solutions Inc. - FY 12/31/2004 Incurred Cost, March 24, 2008
Summary: DCAA determined that the contractor's claimed direct costs are acceptable; however, DCAA questioned
$2,082,837 in proposed indirect costs and rates. Further, DCAA applied penalties in accordance with Federal
Acquisition Regulation 42.709, and identified expressly unallowable costs subject to penalty that had been allocated
to various contracts specified in Federal Acquisition Regulation 42.709(b), including 11 EPA contracts. Of the
questioned costs, EPA's total share of questioned costs is $197,869, of which $164,163 is questioned overhead costs
and $33,706 is questioned general and administrative costs.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-1-0129, National Academy of Science - FY2005 Incurred Costs, April 10, 2008
Summary: In DCAA's opinion, the contractor's direct costs are acceptable; however, DCAA questioned the proposed
carry-forward amounts of $377,330, of which EPA's share is 12 percent, or $45,280.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Office of Naval Research).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-1-0131, Washington Group International, Inc. - FY 2001 Incurred Costs, April 15, 2008
Summary: DCAA questioned $2,208,686 of claimed direct costs and $13,757,945 of proposed indirect costs and
rates, a total of $15,966,631. EPA's share of questioned costs total $44,648.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 08-1-0130, Morrison Knudsen Corporation - FY 1999 Incurred Costs, April 15, 2008
Summary: DCAA questioned $3,705,233 in claimed direct costs and $3,472,023 in proposed indirect costs and
rates, atotal of $7,177,256. EPA's share of questioned costs total $57,369.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0157, EG&G - FY 2006 Accounting System Audit, May 20, 2008
Summary: In DCAA's opinion, the contractor's control environment and the overall accounting system and related
internal control policies and procedures were inadequate in part. DCAA noted one significant deficiency in the design
or operation of the internal control structure. The deficiency could adversely affect the organization's ability to record,
process, summarize, and report costs in a manner that is consistent with applicable government contract laws and
regulations.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0207, Metcalf & Eddy Inc. - Floorcheck, July 24, 2008
Summary: DCAA believes certain contractor labor practices require corrective action to improve the reliability of the
contractor's labor accounting system.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0208, MACTEC Engineering & Consulting, Inc. - CAS 409, July 24, 2008
Summary: In DCAA's opinion, the contractor was in noncompliance with Cost Accounting Standard 409 during the
period of January 1, 2006, through December 31, 2006.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-4-0308, Tetra Tech EC, Inc. - EDP General Controls, September 30, 2008
Summary: In DCAA's opinion, the contractor's information technology system of general internal controls was
inadequate in part. DCAA's examination noted significant deficiencies in the design or operation of the internal
control structure, which could adversely affect the contractor's ability to record, process, summarize, and report direct
and indirect costs in a manner consistent with applicable government contract laws and regulations.
Agency Explanation: Audit resolution on hold due to other cognizant federal agency (Defense Contract Management
Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 09-4-0018, Booz Allen Hamilton - Cost Accounting Standard 409, November 5, 2008
Summary: In DCAA's opinion, the contractor is in noncompliance with Cost Accounting Standards 409-50(e)(1), 409-
50(e)(2), and 409-50(e)(4).
Agency Explanation: Audit resolution on hold due to other cognizant federal Agency (Department of Defense).
OIG Follow-up Status: Resolution pending receipt of additional information
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 09-1-0034, Lockheed Martin Services Group - FY 2006 Incurred Cost, November 24, 2008
Summary: DCAA questioned $23,672,344 in claimed direct and proposed indirect costs and rates. Of this, $381,582
is claimed direct costs and $23,290,762 is proposed indirect costs and rates. DCAA also did not audit $159,778,286
in claimed subsidiary and subcontracts costs that have not yet been audited. EPA's share of the questioned costs is
3 percent, or $11,448 in claimed direct costs and $698,722 in proposed indirect costs, a total of $710,170.
Agency Explanation: This audit is awaiting additional information on the resolution of the questioned costs and rates
by the cognizant federal agency (Defense Contract Management Agency).
OIG Follow-up Status: Resolution pending receipt of additional information
Grants and Interagency Agreements Management Division
Report No. 2002-2-00008, MBI International Assistance Agreement, January 29, 2002
Summary: MBI did not have adequate justification to support the award of sole source contracts. Also, MBI's
procurement practices did not meet federal requirements. As a result, $1,301,365, consisting of $1,201,857 in
contract costs and $99,508 in consultant costs, is not eligible for federal reimbursement. Further, there were
apparent conflicts of interest between MBI, its subsidiary (CRT), and companies created by CRT.
Agency Explanation: Office of Grants and Debarment (OGD) forwarded the final decision letter to the OIG for review
in September 2009, supported by a proposed deviation from two regulatory requirements. The OIG will respond by
October 21, 2009. OGD will address any comments and finalize the final decision letter by November 30, 2009.
OIG Follow-up Status: Incomplete response. OIG will evaluate the proposed final determination once the deviation
is approved.
Report No. 2003-S-00001, Region 7 Grants Proactive, May 29, 2002
Summary: We questioned over $2 million because the Coordinating Committee on Automotive Repair did not
account for the funds in accordance with federal rules, regulations, and terms of the agreement.
Agency Explanation: EPA anticipates issuing the final determination letter by December 31, 2009. Recommendations
4, 6, and 7 can be addressed once the review of financial documentation submitted by the recipient is completed. It is
anticipated that many of the costs may be disallowed because the financial documentation provided by the recipient is
incomplete. The financial documentation provided by the recipient in support of questioned costs includes progress
reports, miscellaneous receipts, and some time sheets, but many of the costs cannot be substantiated. Expect
resolution by December 31, 2009.
OIG Follow-up Status: Incomplete response received
Report No. 2003-4-00120, Geothermal Heat Pump Consortium, Inc. - Costs Claimed, September 30, 2003
Summary: Questioned $1,153,472 due to material financial management deficiencies. The Consortium's financial
management system was inadequate for various reasons, including that the Consortium did not separately identify
and accumulate costs for all direct activities, such as membership support and lobbying; account for program income
generated by the activities funded by the EPA agreements; and prepare or negotiate indirect cost rates.
Agency Explanation: The Branch Chief and Associate Award Official have been meeting weekly to review the audit
findings and have prepared a draft final determination addressing most of the issues identified in the audit report. We
have sought consultation with Office of General Counsel to discuss the interpretation of program income as it relates to
membership fees in accordance with 2 Code of Federal Regulations 215.24. Further meetings with the Office of
General Counsel and the Grants and Interagency Agreements Management Division (GIAMD) Director are required to
evaluate the recommendation to count membership fees as program income before a final determination can be
issued. We expect a possible resolution and a final determination letter to be issued by December 31, 2009. It is
anticipated that a portion of the questioned cost allocated to indirect costs may be disallowed because the recipient has
not provided a copy of its negotiated rate for the audit period. Expect resolution by December 31, 2009.
OIG Follow-up Status: No response
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 2005-3-00036, National Indian Health Board, FY 2002, December 30, 2004
Summary: The Board was allocating salary costs to grants based on predetermined formulas. No support, in the
form of time sheets, was located for those allocations. Also, amounts charged to various grants were not always
supported by original documentation. Therefore, we questioned $31,960 as unsupported.
Agency Explanation: The recipient claims to have revised its policies to address the time sheet and original
document issues, but the policy remains very broad and general. OGD has received responses from the recipient
and is reviewing the documentation information. OGD expects the final determination letter on November 30, 2009.
OIG Follow-up Status: No response
Report No. 2006-3-00006, Alfred University, FY 2004, October 13, 2005
Summary: The University's accounting system provides certified payroll information on an individual grant basis.
However, the payroll distribution system does not provide a proportionate breakdown of each employee's total time
between each sponsored program he/she may be working on and other nonsponsored activities. The auditor
questioned costs of $649,506, but could not determine the direct impact upon EPA's program.
Agency Explanation: GIAMD reviewed the affidavits, payroll authorization, and supporting documentation that the
recipient submitted and determined that the information does not demonstrate the proportionate breakdown of time
and effort. GIAMD is still unable to determine how much of the personnel costs should be allowed since the audit
reports do not identify how much of labor related to EPA grants. Upon consultation with the GIAMD Director on the
next steps, the decisions were made to notify the recipient of our proposed determination, provide it with the
opportunity to submit additional contemporaneous documentation on the total amount charged for personnel and
fringe benefits, and request further guidance from OIG on how to quantify the amount of labor related to EPA grants.
GIAMD contacted OIG for further guidance and is now awaiting a response. The final determination letter is expected
by January 31, 2010.
OIG Follow-up Status: No response
Report No. 2006-4-00122, Association of State & Interstate Water Pollution Control Administrators, July 31, 2006
Summary: The Association did not comply with the financial and program management standards and the
procurement standards promulgated in Title 40, Code of Federal Regulations, Subchapter B, Part 30. For example,
the Association could not provide support for any of its general journal entries, included duplicate recorded costs in its
accounting system, could not always trace grant draws to the accounting records, and could not always support labor
charged to the EPA grants. As a result, we questioned as unsupported a total of $1,883,590 in EPA grant payments
for seven grants.
Agency Explanation: OGD met with the OIG on July 29, 2009, to discuss our progress on this audit. After several
additional internal meetings, OGD and an attorney advisor from the Office of General Counsel met with the recipient
on August 18, 2009, to outline the final items that need to be addressed before the resolution process can be
completed. Five final items or issues were discussed and mutually agreed upon. Each party left this meeting with
specific assignments concerning these issues. At this point, time is needed to resolve these items. Due to the
complexity of these issues, OGD anticipates a final decision letter by December 31, 2009.
OIG Follow-up Status: No response
Report No. 2007-4-00027, National Rural Water Association - Congressional, November 30, 2006
Summary: The Association's method of allocating indirect costs over total direct costs is contrary to the requirements
of OMB Circular A-122. Currently, the Association does not exclude subcontracts or subawards from its indirect cost
allocation base. As a result, the EPA grants are bearing a disproportionate amount of indirect costs. For the period
from March 1, 1999, to February 29, 2004, EPA grants may have been overallocated by $2,021,821 in indirect costs.
The exact amount of the indirect overa I location will be determined during negotiating the indirect cost rate.
Agency Explanation: OGD has received the Indirect Cost Proposal and revised Policy and Procedures for cash
draws that was requested and now OGD staff is working with the Compliance Team in resolving the unsupported cost
cited in the report. OGD expects the final determination letter in November 2009.
OIG Follow-up Status: No response
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 2007-3-00037, Alfred University - FY 2005, December 11, 2006
Summary: The University's accounting system provided certified payroll information on an individual grant basis.
However, the payroll distribution system did not provide a proportionate breakdown of each employee's total time
between each sponsored program he/she may be working on and other nonsponsored activities. The auditor
questioned costs of $649,506, but could not determine the direct impact on EPA's program
Agency Explanation: GIAMD reviewed the affidavits, payroll authorization, and supporting documentation that the
recipient submitted and determined that the information does not demonstrate the proportionate breakdown of time
and effort. GIAMD is still unable to determine how much of the personnel costs should be allowed since the audit
reports do not identify how much of the labor is related to EPA grants. Upon consultation with the GIAMD Director on
the next steps, the decisions were made to notify the recipient of our proposed determination, to provide the recipient
with the opportunity to submit additional contemporaneous documentation on the total amount charged for personnel
and fringe benefits, and to request further guidance from OIG on how to quantify the amount of labor related to EPA
grants. GIAMD contacted OIG for further guidance and is now awaiting a response. The final determination letter is
expected January 31, 2010.
OIG Follow-up Status: No response
Report No. 09-3-0038, Water Environmental Federation - FY 2006, November 21, 2009
Summary: In the prior year audit, the single auditor found that some expenses had been charged twice to this grant.
To correct this error, the recipient was required to post an adjusting entry; however, the entry was not posted until
almost a year after the errors were identified.
Agency Explanation: OGD has received and reviewed the response from the recipient and expects the final
determination letter November 15, 2009.
OIG Follow-up Status: No response
Report No. 09-3-0062, Missouri, University of - FY 2006, December 18, 2008
Summary: The University did not have an effective system of internal control in place to ensure compliance with the
activities allowed or unallowed costs/cost principles compliance requirements. The auditors identified two systemic
issues related to the University's time and effort reporting. These issues involved the procurement and suspension
and debarment, and subrecipient monitoring. The auditors questioned $37,453 related to EPA grants.
Agency Explanation: OGD is reviewing the report. The report includes findings of inadequate internal controls and
questioned cost totaling $90,973. The estimated time for audit resolution is December 30, 2009.
OIG Follow-up Status: No response
Report No. 09-3-0073, Environmental Council of the States and Affiliates - FY 2006, January 6, 2009
Summary: The Council did not properly segregate duties. Journal entries prepared by the accountant were not
subject to a formal review and approval process. Major accounts were not reconciled to supporting schedules in a
timely manner, while others remained unreconciled and contained material misstatements. The Council's accounting
system did not consistently reflect an accurate recording of federal grant revenue and receivables. The Council's
reporting package for the fiscal year ended September 30, 2006, was still not submitted 9 months after the audit
period. Compensation time was not properly charged.
Agency Explanation: The final determination letter is being reviewed by the Approving Official and is expected to be
signed by October 30, 2009.
OIG Follow-up Status: No response
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Office of Acquisition Management
Report No. 08-4-0146, Cambridge Labor Charging Verification Review, May 1, 2008
Summary: Based on our review, nothing came to our attention that caused us to believe that the labor charges
(including subcontract labor) billed under Contract EP-W-05-044 are not in compliance with federal laws, regulations,
or terms and conditions of the contract. However, during our review, we noted a potential violation of Title 13, Code
of Federal Regulations, Part 121, Small Business Size Regulations, which we believe requires immediate attention.
Agency Explanation: On April 1, 2009, the Contracting Officer forwarded the required documentation to the Small
Business Administration. Receipt of the Small Business Administration's determination was anticipated in June or
July 2009, but as of September 25, 2009, it had not been received. Numerous attempts by the Contracting Officer to
obtain status on the determination have gone unanswered. However, since the results of the Small Business
Administration's review will have no impact on contract EP-W-05-044 or any other contracts with Cambridge
Environmental, the Office of Acquisition Management recommended that the audit be closed. However, the OIG
does not agree with the Office of Acquisition Management that the audit should be closed. The Office of Acquisition
Management is in the process of scheduling a meeting with the OIG to seek agreeable resolution of this audit.
A time frame for resolution will also be discussed during the meeting.
OIG Follow-up Status: Incomplete response received
Office of Enforcement and Compliance Assurance
Report No. 08-P-0278, Strategic Planning in Priority Enforcement Areas, September 25, 2008
Summary: The Office of Enforcement and Compliance Assurance has instituted a process for strategic planning in
its national enforcement priority areas. The FYs 2008-2010 strategic plans we reviewed - for air toxics, combined
sewer overflows, and mineral processing - contain an overall goal, a problem statement, and other key elements.
However, each of the plans is missing key elements to monitor progress and accomplishments and efficiently utilize
Agency resources. All three strategies lack a full range of measures to monitor progress and achievements. Two
strategies lack detailed exit plans. Additionally, the combined sewer overflow strategy does not address the States'
key roles in attaining the strategy's overall goal. The absence of these elements hinders the Office of Enforcement
and Compliance Assurance from monitoring progress and achieving desired results in a timely and efficient manner.
Agency Explanation: The Office of Enforcement and Compliance Assurance and the OIG met to discuss this report
and the Agency's progress. The Office of Enforcement and Compliance Assurance provided the information
requested by the OIG and believes the current request to the regions satisfies the commitment made to the OIG. The
Office of Enforcement and Compliance Assurance will proceed with the first round of information collection and then
assess next steps. Resolution expected by December 15, 2009.
OIG Follow-up Status: Incomplete response received
Office of Environmental Information
Report No. 09-P-0127, Freedom of Information Act, March 25, 2009
Summary: EPA procedures did not always ensure that Freedom of Information Act responses were timely or that
appeals were processed timely. Some of the annual personnel and cost statistics gathered and provided to the
National Freedom of Information Act Officer for inclusion in the annual report to the Department of Justice were not
accurate. The lack of complete and correct cost information means that EPA may not know how much of its budget it
is spending on Freedom of Information Act-related costs, and also that it is not meeting the specific statutory
reporting requirements.
Agency Explanation: The Office of Environmental Information provided a Corrective Action Plan to the OIG on
June 15, 2009, and reminded the OIG on September 9, 2009, that no response was received regarding close-out.
On October 1, 2009, the OIG responded via e-mail that the response was not acceptable, and now the Office of
Environmental Information is in discussions with the OIG to resolve concerns. The Office of Environmental
Information anticipates reaching agreement with the OIG by October 30, 2009.
OIG Follow-up Status: No response
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Office of General Counsel
Report No. 09-P-0127, Freedom of Information Act, March 25, 2009
Summary: EPA procedures did not always ensure that Freedom of Information Act responses were timely or that
appeals were processed timely. Some of the annual personnel and cost statistics gathered and provided to the
National Freedom of Information Act Officer for inclusion in the annual report to the Department of Justice were not
accurate. The lack of complete and correct cost information means that EPA may not know how much of its budget it
is spending on Freedom of Information Act-related costs, and also that it is not meeting the specific statutory
reporting requirements.
Agency Explanation: The Office of General Counsel has one corrective action on this audit, while the Office of
Environmental Information is the lead (see above). The Office of Environmental Information provided a Corrective
Action Plan to the OIG on June 15, 2009, that included the Office of General Counsel corrective action. The Office of
Environmental Information is in discussions with the OIG to resolve concerns, and agreement with the OIG is
anticipated by October 30, 2009.
OIG Follow-up Status: No response
Region 1- Regional Administrator
Report No. 2006-3-00203, Indian Township Tribal Government, FY 2002, September 18, 2006
Summary: The Tribe invested in nongovernmental investments; had virtually no written investment policies and
procedures; did not have an adequate accounting system to record, process, and summarize accounting
transactions; did not maintain numerous bank accounts; has a chronic problem of late financial statement audits;
maintains manual general ledger and bookkeeping systems decentralized from the tribal books; and did not always
have support receipts.
Agency Explanation: Resolution on hold by OIG.
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2006-3-00204, Indian Township Tribal Government, FY 2003, September 18, 2006
Summary: We noted the same issues disclosed in Report No. 2006-3-00203 for FY 2002. We also found that the
Tribe had numerous bank accounts with financial institutions, and approximately $557,000 was uninsured or
uncollateralized cash as of September 30, 2003.
Agency Explanation: Resolution on hold by OIG.
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 2006-3-00205, Indian Township Tribal Government, FY 2004, September 19, 2006
Summary: We noted the same issues disclosed in Report Nos. 2006-3-00203 and 2006-3-00204 for FYs 2002 and
2003, respectively. Also, approximately $592,634 in the Tribe's numerous bank accounts with financial institutions
was uninsured or uncollateralized cash as of September 30, 2004. Further, the Tribe did not timely submit quarterly
federal reports SF-269 and SF-272 for September 30, 2004.
Agency Explanation: Resolution on hold by OIG.
OIG Follow-up Status: Resolution pending receipt of additional information
Report No. 08-3-0250, Indian Township Tribal Government, FY 2006, September 5, 2008
Summary: The Tribe did not submit financial status reports within required timeframes. For the EPA Partnership
Performance grants, the single auditor reported that the Tribe did not have records or formal calculations to
demonstrate that it met the matching requirements under these grants. Payroll issues were noted, as well as
$26,134 in unsupported costs. There also were 17 cross-cutting findings. The U.S. Department of Health and Human
Services is the oversight agency responsible for audit resolution, but we reported these findings to EPA as they may
impact EPA grant funds.
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Agency Explanation: A conference call was conducted on September 2, 2009, with the recipient, grants specialist,
project officer, regional audit follow-up coordinator, and the certified public accounting firm that conducted the single
audit. The agenda for the call was to discuss the EPA-specific audit issues as well as the 11 cross cutting issues
noted in the 2007 and 2008 reports. Progress was made to address a few issues during this call. The next call was
scheduled for October 7, 2009. The OIG lead for single audits planned to participate in the October call and perhaps
can offer the region some assistance on how to facilitate the audit resolution process. Expect resolution by
July 2010.
OIG Follow-up Status: No response
Report No. 09-3-0024, Indian Township Tribal Government, FY 2007, November 12, 2008
Summary: There are several EPA grants for which the official time period has expired; however, the Tribe still has
funds available under these grants and potential related expenditures. To have access to these funds, the Tribe
needs to request time extensions from EPA. The Tribe has drawn funds from various federal programs to pay
general fund expenditures, which is not allowable. The single auditors noted a net deficit to federal programs of
$189,961. The Tribe recognized that this condition existed due to misappropriation activities by the former tribal
governor.
Agency Explanation: A conference call was conducted on September 2, 2009, with the recipient, grants specialist,
project officer, regional audit follow-up coordinator and the certified public accounting firm that conducted the single
audit. The agenda for the call was to discuss the EPA-specific audit issues as well as the 11 cross cutting issues
noted in the 2007 and 2008 reports. Progress was made to address a few issues during this call. The next call was
scheduled for October 7, 2009. The OIG lead for single audits plans to participate in the October call and perhaps
can offer the region some assistance on how to facilitate the audit resolution process. Expect resolution by
July 2010.
OIG Follow-up Status: No response
Region 3 - Regional Administrator
Report No. 08-4-0156, Canaan Valley Institute, May 19, 2008
Summary: We questioned $3,235,927 of the $6,686,424 in reported net outlays because the recipient reported
unallowable outlays for indirect, contractual, and in-kind costs. Specifically, the recipient (1) claimed indirect costs
without approved indirect rates, (2) did not credit back to the agreements all program income, (3) did not demonstrate
that it performed cost analysis of contracts, (4) reported costs for services outside of the scope of one agreement,
(5) did not comply with terms and conditions of contracts, and (6) used EPA funds to match another federally funded
cooperative agreement. Also, the recipient could improve its subrecipient monitoring program.
Agency Explanation: Due to the large amount of questioned costs and findings, the proposed final determination
letter has been delayed. Region 3 has an extension from the OIG until October 30, 2009, to submit the proposed
final determination letter.
OIG Follow-up Status: No response
Region 8 - Regional Administrator
Report No. 2007-4-00078, Cheyenne River Sioux Tribe, September 24, 2007
Summary: The Tribe did not comply with the financial and program management standards under Title 40, Code of
Federal Regulations, Parts 31 and 35, and OMB Circular A-87. We questioned $3,101,827 of the $3,736,560 in
outlays reported. The Tribe's internal controls were not sufficient to ensure that outlays reported complied with
federal cost principles, regulations, and grant conditions. In some instances, the Tribe also was not able to
demonstrate that it has completed all work under the agreements and has achieved the intended results of the
agreements.
Agency Explanation: Due to work on current grants and demands of other projects, the Region was not able to
complete this as planned. The Region expects this issued to be resolved by October 31, 2009.
OIG Follow-up Status: No response
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EPA OIG Semiannual Report to Congress April 1, 2009 - September 30, 2009
Report No. 08-3-0307, Oglala Sioux Tribe - FY 2004, September 30, 2008
Summary: In reviewing the report findings, we have determined that they significantly impact the costs the Tribe
claimed during 2004. The single auditor findings indicate the Tribe may not be able to support costs claimed under
EPA grants. As a result, we are questioning the costs claimed of $1,158,903.
Agency Explanation: An onsite review was conducted on April 14, 2009. Review of support documents indicated
administrative problems consistent with prior work (timekeeping, cost allocation, travel costs, etc.); additional
questions on indirect cost recoveries; and problems with information provided by the Tribe's auditors. The Region
continues to work with the Tribe and its auditors to determine ultimate cost recovery. Expect resolution by December
31,2009.
OIG Follow-up Status: No response
Report No. 09-3-0103, Hill City, City of - FY 2006, February 25, 2009
Summary: The City contracted for audit services for the year ended December 31, 2006, on June 19, 2007, but was
not prepared to begin the audit until after the 9-month period had passed. The City had a lack of segregation of
duties over revenue, expenditure, and payroll functions. The City has not prepared, published, or filed its annual
report for the year ended December 31, 2006. The City did not report capital assets on its financial statements as
required. Management did not properly present capital assets. The City Finance Office has been unable to complete
the year-end recordkeeping and reporting functions. Deficiencies were noted in internal accounting control and
recordkeeping, resulting in a diminished assurance that transactions are properly executed and recorded and that
assets are properly safeguarded. Many of these conditions had been noted in the past four audits.
Agency Explanation: The Hill City Finance Officer has indicated that she will be able to provide us a response to the
findings and the corrective actions taken by October 31, 2009.
OIG Follow-up Status: No response
Region 9 - Regional Administrator
Report No. 09-3-0075, Lone Pine Shoshone Reservation - FY 2006, January 8, 2009
Summary: The Reservation's cash on hand ($136,000) exceeded current expenditures. This finding was originally
reported in FY 2005 and was not corrected in FY 2006.
Agency Explanation: A conference call with the Reservation was held on August 19, 2009, to resolve the finding on
the FY 2006 single audit report. As of September 30, 2009, the Tribe has not provided any documentation to
substantiate the $136,000 in excess cash. The Agency sent an initial warning letter to the Tribe on August 26, 2009,
setting September 15, 2009, as the due date to respond and avoid sanctions. Because of the lack of an adequate
response, an enforcement letter will be prepared and sent in the next 2 weeks imposing sanctions.
OIG Follow-up Status: No response
Total reports issued before reporting period for which
no management decision has been made as of September 30, 2009 = 55
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
In compliance with reporting requirements in the Inspector General Act, Section 5(a)(3), "Identification
of Reports Containing Significant Recommendations Described in Previous Semiannual Reports on
Which Corrective Action Has Not Been Completed," and to help EPA managers gain greater awareness
of outstanding commitments for action, we have developed a "Compendium of Unimplemented
Recommendations." This separate document provides the information required in Appendix 3 to this
Semiannual Report to Congress. This Compendium (available upon request or at
http://www.epa.gov/oig/reports/2010/20091028-10-N-0018.pdf) is produced semiannually for Agency
leadership and Congress based on Agency reports on the status of action taken on OIG recommendations
and OIG selective verification of that reported status.
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EPA OIG Semiannual Report to Congress
April 1, 2009 - September 30, 2009
•*.T'-:-.'I.
Headquarters
U.S. Environmental Protection Agency
Office of Inspector General
1200 Pennsylvania Ave., NW (2410T)
Washington, DC 20460
(202) 566-0847
Atlanta
U.S. Environmental Protection Agency
Office of Inspector General
61 Forsyth Street, SW
Atlanta, GA 30303
Audit/Evaluation: (404) 562-9830
Investigations: (404) 562-9857
Boston
U.S. Environmental Protection Agency
Office of Inspector General
One Congress Street, Suite 1100
Boston, MA 02114-2023
Audit/Evaluation: (617) 918-1470
Investigations: (617) 918-1468
Chicago
U.S. Environmental Protection Agency
Office of Inspector General
77 West Jackson Boulevard
13th Floor (IA-13 J)
Chicago, IL 60604
Audit/Evaluation: (312) 353-2486
Investigations: (312) 353-2507
Cincinnati
U.S. Environmental Protection Agency
Office of Inspector General
26 West Martin Luther King Drive
Cincinnati, OH 45268-7001
Audit/Evaluation: (513)487-2360
Investigations: (513)487-2364
Dallas
U.S. Environmental Protection Agency
Office of Inspector General (6OIG)
1445 Ross Avenue, Suite 1200
Dallas, TX 75202-2733
Audit/Evaluation: (214)665-6621
Investigations: (214)665-2790
Offices
Denver
U.S. Environmental Protection Agency
Office of Inspector General
1595 Wynkoop Street, 4th Floor
Denver, CO 80202
Audit/Evaluation: (303) 312-6969
Investigations: (303) 312-6868
Kansas City
U.S. Environmental Protection Agency
Office of Inspector General
901 N. 5th Street
Kansas City, KS 66101
Audit/Evaluation: (913) 551-7878
Investigations: (913) 551-7875
New York
U.S. Environmental Protection Agency
Office of Inspector General
290 Broadway, Room 1520
New York, NY 10007
Audit/Evaluation: (212)637-3080
Investigations: (212)637-3041
Philadelphia
U.S. Environmental Protection Agency
Office of Inspector General
1650 Arch Street, 3rd Floor
Philadelphia, PA 19103-2029
Audit/Evaluation: (215) 814-5800
Investigations: (215) 814-5820
Research Triangle Park
U.S. Environmental Protection Agency
Office of Inspector General
Mail Drop N283-01
Research Triangle Park, NC 27711
Audit/Evaluation: (919) 541-2204
Investigations: (919) 541-1027
San Francisco
U.S. Environmental Protection Agency
Office of Inspector General
75 Hawthorne Street (IGA-1)
7th Floor
San Francisco, CA 94105
Audit/Evaluation: (415) 947-4521
Investigations: (415) 947-4500
Seattle
U.S. Environmental Protection Agency
Office of Inspector General
1200 6th Avenue, 19th Floor
Suite 1920, M/SOIG-195
Seattle, WA 98101
Audit/Evaluation: (206) 553-4033
Investigations: (206) 553-1273
Winchester
U.S. Environmental Protection Agency
Office of Inspector General
200 S. Jefferson Street, Room 314
P.O. Box 497
Winchester, TN 37398
Investigations: (423) 240-7735
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It's your money
It's your environment
I
Report fraud, waste or abuse
e-mail: OIG_Hotline@epa.gov
write: EPA Inspector General Hotline 2491T
1200 Pennsylvania Avenue NW
Washington DC 20460
fax: 202-566-2549
phone: 1-888-546-8740
www.epa.gov/oig/hotline/how2file.htm
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