U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Special Report
Assistance Agreement and
Contract Recipients with
Open Audit Recommendations
May Affect Recovery Act Activities
Report No. 09-X-0196
July 14, 2009
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Report Contributors: Janet Kasper
Matthew Simber
Leah Nikaidoh
Michael Petscavage
Nancy Dao
Lisa McCowan
Wendy Swan
Abbreviations
CFR Code of Federal Regulations
DCAA Defense Contract Audit Agency
EPA U.S. Environmental Protection Agency
FAOSC Financial Analysis and Oversight Service Center
FY Fiscal Year
GIAMD Grants and Interagency Agreements Management Division
OAM Office of Acquisition Management
OIG Office of Inspector General
OMB Office of Management and Budget
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-X-0196
July 14, 2009
Catalyst for Improving the Environment
Why We Did This Review
We reviewed open
recommendations from prior
Office of Inspector General
(OIG) audit reports that
focused on assistance
agreement and contract
recipients that could impact
the U.S. Environmental
Protection Agency's (EPA's)
American Recovery and
Reinvestment Act (Recovery
Act) activities. Recent Office
of Management and Budget
guidance requires the
expediting of actions on open
recommendations to preclude
continuing weaknesses or
deficiencies that can impact
Recovery Act funding.
Background
Open recommendations are
those for which EPA or the
recipient of an EPA assistance
agreement or contract has not
completed corrective actions.
As of June 3 0,2009,
67 reports had open
recommendations that could
impact EPA's Recovery Act
activities.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
Assistance Agreement and Contract
Recipients with Open Audit Recommendations
May Affect Recovery Act Activities
What We Found
As of June 30, 2009, EPA used Recovery Act funding to award one assistance
agreement and one contract to recipients with open recommendations.
Providing funding to recipients with known weaknesses and open
recommendations increases the risks of fraud, waste, abuse, and mismanagement
of Recovery Act funds.
We reviewed open audit reports for four audit areas for which the findings and
recommendations primarily addressed questioned costs and internal control
weaknesses:
• Financial audits of assistance agreement recipients (9 reports)
• Forensic audits of assistance agreement and contract recipients (4 reports)
• Single audits (27 reports)
• Defense Contract Audit Agency audits (27 reports)
In addition to the two recipients already receiving Recovery Act funding, at least
a portion of the remainder may also receive such funds through assistance
agreements and contracts. EPA should consider known concerns, including open
recommendations, when making future awards.
What We Recommend
We recommend that EPA verify whether assistance agreement and contract
recipients have corrected weaknesses identified in OIG reports prior to awarding
new funds, and expedite corrective action for open recommendations pertaining
to Recovery Act funding recipients.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2009/
20090714-09-X-0196.pdf
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% UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
S WASHINGTON, D.C. 20460
: ' '/
fyi -tfc°N OFFICE OF
PRO INSPECTOR GENERAL
July 14, 2009
MEMORANDUM
SUBJECT: Assistance Agreement and Contract Recipients with Open Audit
Recommendations May Affect Recovery Act Activities
Report No. 09-X-0 196
FROM: Melissa M. Heist
Assistant Inspector General for Audit
TO: Craig Hooks, Acting Assistant Administrator
Office of Administration and Resources Management
The Office of Inspector General (OIG) of the U.S. Environmental Protection Agency (EPA) has
completed a review of open recommendations from prior financial audit reports that could
impact EPA's American Recovery and Reinvestment Act (Recovery Act) activities. l This
review was not an audit conducted in accordance with Government Auditing Standards.
We reviewed and included in this special report all EPA OIG reports with open
recommendations as of June 30, 2009. Open recommendations are those for which EPA or the
recipient of an EPA assistance agreement or contract has not completed corrective action. In
accordance with Executive Office of the President, Office of Management and Budget (OMB)
Recovery Act Implementation Guidance, dated April 3, 2009, if final action on report
recommendations has not been taken, EPA should (1) expedite such action to preclude the
continuance of weaknesses or deficiencies in the administration of Recovery Act-funded
programs, or (2) provide an explanation of why such corrective actions cannot or should not be
taken in the administration of Recovery Act-funded programs. The OMB guidance instructs
OIGs to determine whether safeguards exist to ensure recipients and sub-recipients use funds for
their intended purposes.2
1 A report on open recommendations from performance audit reports, Open Audit Recommendations Affecting
Recovery Act Activities (Report No. 09-X-0136), was issued on April 9, 2009.
2 OMB Memorandum M-09-15, Updated Implementing Guidance for the American Recovery and Reinvestment Act
0/2009.
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09-X-0196
This special report identifies open recommendations from 67 OIG audit reports in four different
audit areas that could impact EPA's Recovery Act activities because the findings and
recommendations addressed questioned costs and internal control weaknesses:
• Financial audits of assistance agreement recipients (9 reports)
• Forensic audits of assistance agreement and contract recipients (4 reports)
» Single audits (27 reports)
• Defense Contract Audit Agency reviews (27 reports)
A quick reference table listing all 67 reports is included as Attachment 1. Attachment 2 contains
details on each of the reports based on audit area.
While not all the organizations in the 67 reports with open recommendations will receive
Recovery Act funds, EPA continues to make assistance agreement and contract award decisions.
These open recommendations demonstrate instances where recipient internal controls did not
safeguard federal funds or follow federal regulations. EPA must ensure that recipients are able
to effectively administer and manage Recovery Act-funded projects. Assistance agreement and
contract recipients with internal control weaknesses may unknowingly or knowingly violate
federal regulations. One of the crucial accountability objectives listed in the OMB guidance is to
ensure "funds are used for authorized purposes and potential for fraud, waste, error, and abuse
are mitigated." If EPA provides funding to recipients that have not implemented the identified
corrective actions, the Agency increases the risks of fraud, waste, abuse, and mismanagement of
Recovery Act funds.
On March 9, 2009, EPA issued its Initial Recovery Act Grant Award Guidance. This Guidance
directed EPA Program and Grants Management Offices to resolve OIG audit, single audit, or
EPA review open findings for Recovery Act funding applicants prior to award. When the open
recommendations cannot be resolved prior to award and the finding does not call into question
the recipient's ability to manage Recovery Act funds, the Office may proceed with the award.
The award must contain a special term and condition requiring the recipient to take necessary
corrective actions within a specified period. EPA made a Recovery Act Clean Water State
Revolving Fund award to the State of New York and did not include the required special term
and condition. The OIG recognizes that EPA included resolving open recommendations from
prior reviews in its Recovery Act assistance award process. However, for Recovery Act grant
recipients, we are recommending the Regional Senior Resource Official to verify that assistance
agreement recipients have corrected weaknesses or have a plan to timely correct weaknesses
identified in OIG, single audit, or EPA reviews prior to awarding funds and document the
verification in the assistance agreement file. EPA's Office of Acquisition Management (OAM)
also issued guidance; however, it did not address reviewing audit reports with open findings
pertaining to contractors that may receive Recovery Act funds.
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09-X-0196
As of June 30, 2009, EPA had awarded Recovery Act funding to 2 of the 67 recipients with open
recommendations (see Table 1).
Table 1: Recipients of Recovery Act Funds with Open Recommendations
Action Official
Region 2
OAM
Recipient
New York, State of
Contractor
Report No.
2007-3-00139
08-4-0207
Recovery Act Program
Clean Water State Revolving Fund
Superfund
Source: OIG analysis
We are making several recommendations to the Office of Administration and Resources
Management, which oversees the administration of assistance agreements and contracts, to
ensure that open recommendations are appropriately addressed in relation to Recovery Act funds.
We will monitor EPA's implementing of this report's recommendations as part of our ongoing
Recovery Act work.
Recommendations
We recommend that the Assistant Administrator for Administration and Resources Management:
1. Require Regional Senior Resource Officials; Director, Grants and Interagency
Agreements Management Division; and/or OAM Procurement Operation Division
Directors to verify that assistance agreement and contract recipients have corrected
weaknesses or have a plan to timely correct weaknesses identified in OIG reports prior to
awarding funds, and document these actions in the assistance agreement or contract file.
2. For Defense Contract Audit Agency audit reports received by OAM since January 1,
2009, verify that contract recipients have corrected weaknesses or plan to timely correct
weaknesses identified in these reports prior to awarding funds.3 Document this review in
the contract file. Implement the actions identified in Recommendation 3 for the
contractor that received Recovery Act funding.
We recommend that the Assistant Administrator for Administration and Resources Management
and the Regional Administrator, Region 2:
3. Expedite corrective actions to address open recommendations for recipients that have received
Recovery Act funding. Review assistance agreement and contract terms and conditions
and amend them, as necessary, to adequately protect the government's interests.
Document these actions in the assistance agreement or contract file, along with the
approval of the actions by the Regional Senior Resource Official and the OAM
Procurement Operation Division Director.
3 As of January 1, 2009, EPA began administering the interagency agreement with the Defense Contract Audit
Agency.
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09-X-0196
Action Required
Please provide a response within 30 days describing the actions EPA is taking, or has taken, to
address these recommendations. Specifically, we ask you to describe what EPA is doing to
address the open recommendations pertaining to the two Recovery Act fund recipients.
If you or your staff has any questions regarding this report, please contact me at
(202) 566-0899 or heist.melissa@epa.gov: or Janet Kasper, Director for Contracts and
Assistance Agreement Audits, at (312) 886-3059 or kasper.janet@epa.gov.
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09-X-0196
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Claimed Agreed To
Amount Amount
Require Regional Senior Resource Officials;
Director, Grants and Interagency Agreements
Management Division; and/or 0AM Procurement
Operation Division Directors to verify that
assistance agreement and contract recipients have
corrected weaknesses or have a plan to timely
correct weaknesses identified in DIG reports prior
to awarding funds, and document these actions in
the assistance agreement or contract file.
For Defense Contract Audit Agency audit reports
received by 0AM since January 1, 2009, verify that
contract recipients have corrected weaknesses or
plan to timely correct weaknesses identified in
these reports prior to awarding funds. Document
this review in the contract file. Implement the
actions identified in Recommendation 3 for the
contractor that received Recovery Act funding.
Expedite corrective actions to address open
recommendations for recipients that have received
Recovery Act funding. Review assistance
agreement and contract terms and conditions and
amend them, as necessary, to adequately protect
the government's interests. Document these
actions in the assistance agreement or contract file,
along with the approval of the actions by the
Regional Senior Resource Official and the 0AM
Procurement Operation Division Director.
Assistant Administrator
for Administration and
Resources Management
Assistant Administrator
for Administration and
Resources Management
Assistant Administrator
for Administration and
Resources Management
and
Regional Administrator,
Region 2
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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09-X-0196
Attachment 1
Quick Reference Table for OIG Reports
with Open Findings and Recommendations
We have developed the following reference table of reports with open recommendations, listing
the EPA action official and the page number on which the report description is located. The
table lists reports open as of June 30, 2009. The Grants and Interagency Agreements
Management Division (GIAMD) and the Office of Acquisition Management/Financial Analysis
and Oversight Service Center (OAM/FAOSC) both are within EPA's Office of Administration
and Resources Management. The recipients with open recommendations that have already
received Recovery Act funds are highlighted in yellow.
Table 1-1: OIG Report Quick Reference Table
Action
Official
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
GIAMD
Region 1
Region 1
Region 1
Region 1
Region 1
Region 2
OIG Report
Number
2002-2-00008
2003-S-00001
2003-4-00120
2005-3-00036
2006-3-00006
2007-3-00037
2006-4-00122
2006-3-00199
2007-4-00026
2007-4-00027
08-1-0277
09-3-0038
09-3-0073
09-3-0062
2006-3-00203
2006-3-00204
2006-3-00205
08-3-0250
09-3-0024
2007-3-00139
Report
Date
01/29/2002
05/29/2002
09/30/2003
12/30/2004
10/13/2005
12/11/2006
07/31/2006
09/07/2006
11/28/2006
11/30/2006
09/25/2008
11/21/2008
01/06/2009
01/07/2009
09/18/2006
09/18/2006
09/19/2006
09/05/2008
11/12/2008
07/26/2007
Report Title
Procurement Practices Under Grant No.
X825532-01 Awarded to MBI International
EPA Cooperative Agreements Awarded to the
Coordinating Committee for Automotive Repair
(Region 7 Proactive)
Geothermal Heat Pump Consortium, Inc., Costs
Claimed Under EPA Assistance Agreement
Nos. X828299-01 and X828802-01
National Indian Health Board, Fiscal Year (FY)
2002
Alfred University, FY 2004
Alfred University, FY 2005
Association of State and Interstate Water
Pollution Control Administrators Incurred Costs
for Seven EPA Assistance Agreements
Howard University, FY2005
International City/County Management
Association Reported Outlays Under Seven
Selected Cooperative Agreements
Examination of Financial Management Practices
of National Rural Water Association, Duncan,
Oklahoma
National Caucus and Center on Black Aged,
Inc., Incurred Cost Audit of Eight EPA
Cooperative Agreements
Water Environment Federation, FY2006
Environmental Council of the States and
Affiliates, FY 2006
Missouri, University of, FY2006
Indian Township Tribal Government, FY2002
Indian Township Tribal Government, FY2003
Indian Township Tribal Government, FY2004
Indian Township Tribal Government, FY 2006
Indian Township Tribal Government, FY2007
New York, State of, FY 2006
Page
14
13
12
17
17
19
11
18
11
10
9
22
23
23
18
18
19
20
22
20
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09-X-0196
Action
Official
Region 2
Region 2
Region 3
Region 3
Region 3
Region 5
Region 5
Region 6
Region 6
Region 8
Region 8
Region 8
Region 8
Region 8
Region 8
Region 9
Region 9
RegionIO
RegionIO
RegionIO
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OIG Report
Number
09-3-0050
09-3-0063
08-4-0156
09-3-0126
09-4-0135
09-4-0112
09-4-0133
09-3-0093
09-3-0108
2007-4-00078
08-3-0247
08-3-0307
09-3-0102
09-3-0103
09-3-0140
09-3-0075
09-3-0077
09-3-0104
09-3-0109
09-2-0078
08-1-0130
2007-1-00090
08-1-0131
2004-1-00099
2007-1-00016
2007-1-00097
08-1-0114
2007-4-00038
2007-4-00079
2007-1-00061
2007-1-00079
08-4-0157
08-4-0002
2006-4-00120
2007-4-00080
2006-4-00165
2006-4-00169
2007-1-00059
2007-4-00058
08-1-0129
2007-1-00080
08-4-0259
08-4-0207
09-1-0034
Report
Date
12/08/2008
12/18/2008
05/19/2008
03/23/2009
04/03/2009
03/09/2009
04/03/2009
02/11/2009
03/03/2009
09/24/2007
09/04/2008
09/30/2008
02/24/2009
02/25/2009
04/20/2009
01/08/2009
01/08/2009
02/25/2009
03/03/2009
01/12/2009
04/15/2008
08/29/2007
04/15/2008
09/14/2005
11/13/2006
09/20/2007
03/24/2008
01/08/2007
09/25/2007
04/09/2007
07/1 8/2007
05/20/2008
1 0/02/2007
07/20/2006
09/26/2007
09/27/2006
09/29/2006
04/05/2007
04/30/2007
04/1 0/2008
08/30/2007
09/12/2008
07/24/2008
11/24/2008
Report Title
St. Regis Mohawk Tribe, FY 2007
Cayuga County Soil and Conservation District,
FY 2006
Canaan Valley Institute, Inc., Incurred Cost
Audit of Five EPA Cooperative Agreements
Alliance for the Chesapeake Bay, FY 2007
Contractor
ML Wastewater Management, Inc. -
Procurement, Financial Management, and
Lobbying Issues Under EPA Grant Number
XP97572201
Contractor
Seminole Nation of Oklahoma, FY2006
Seminole Nation of Oklahoma, FY2007
Cheyenne River Sioux Tribe Outlays Reported
Under Five EPA Assistance Agreements
North Dakota, State of, FY 2006
Oglala Sioux Tribe, FY2004
Northern Cheyenne Tribe, FY2006
The City of Hill City, FY 2006
Anaconda-Deer Lodge County, FY 2007
Lone Pine Paiute-Shoshone Reservation,
FY 2006
La Jolla Band of Luiseno Indians, FY 2006
Snoqualmie Tribe, FY 2006
Nooksack Indian Tribe, FY 2006
Costs Claimed under EPA Grant XP9801 1401
Awarded to the City of Rupert, Idaho
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Contractor
Page
22
23
9
26
15
15
16
24
26
10
20
21
25
25
26
24
24
25
26
15
31
30
30
28
29
30
31
29
30
29
29
31
30
28
30
28
28
29
29
30
29
32
31
32
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09-X-0196
Action
Official
OAM/FAOSC
OAM/FAOSC
OAM/FAOSC
OIG Report
Number
08-4-0308
09-4-0018
08-4-0208
Report
Date
09/30/2008
11/05/2008
07/24/2008
Report Title
Contractor
Contractor
Contractor
Page
31
32
31
Source: OIG analysis
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09-X-0196
Attachment 2
Details on OIG Reports with
Open Findings and Recommendations
Financial Audits of Assistance Agreement Recipients
The OIG performs financial audits of EPA assistance agreements to determine whether recipients
claimed amounts that were reasonable, allocable, and allowable according to federal cost
principles. These audits evaluate whether recipients maintained adequate financial management
systems, complied with applicable laws and federal regulations, and achieved the intended
purposes of the grants. We identified nine reports with open recommendations related to EPA
assistance agreement recipients as of June 30, 2009. Details of the findings and
recommendations for each report follow.
Report: National Caucus and Center on Black Aged, Inc., Incurred Cost Audit of Eight EPA
Cooperative Agreements (08-1-0277), September 25, 2008
The recipient-reported outlays in its quarterly Financial Status Reports as of September 30, 2007,
presented fairly, in all material respects, the allowable outlays incurred in accordance with the
terms and conditions of the agreements and applicable laws and regulations. However, the
recipient did not clearly disclose its allocation methods in its indirect cost proposals. The
recipient also charged employee leave costs to grants disproportionately to the amount of time
employees spent on each assistance agreement.
Recommendations: We recommended that EPA's GIAMD require the recipient to: (1) revise its
indirect cost proposals to clearly explain the process used to allocate costs to its agreements;
(2) have the revised proposals approved by its cognizant federal agency; (3) use a more equitable
method for allocating employee paid absences to agreements; and (4) revise its accounting
manual to include procedures to ensure that final accounting of administrative costs occur timely.
Report: Canaan Valley Institute, Inc., Incurred Cost Audit of Five EPA Cooperative
Agreements (08-4-0156), May 19, 2008
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 sub-recipient
monitoring program.
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09-X-0196
Recommendations: We recommended that EPA Region 3 recover questioned outlays of
$3,218,661 unless the recipient provides sufficient documentation to support the related reported
costs in accordance with federal regulations. EPA Region 3 should require the recipient to
prepare and submit its indirect cost rate proposals for negotiation using the accrual method, and
disclose the direct allocation methodology. The recipient should credit $17,266 in program
income to the agreements and ensure that cost and pricing are performed and documented as part
of its contract procurement process. We also recommended EPA Region 3 direct the recipient to
revise its sub-recipient monitoring program to require technical reports from its sub-recipients
and time its sub-recipient payments to ensure the funds are expended timely by its sub-recipients.
Report: Cheyenne River Sioux Tribe Outlays Reported Under Five EPA Assistance
Agreements (2007-4-00078), September 24, 2007
The Tribe did not comply with the financial and program management standards under Title 40,
Code of Federal Regulations (CFR), Parts 31 and 35; and OMB Circular A-87. We questioned
$3,101,827 of the $3,736,560 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.
Recommendations: We recommended that the EPA Region 8 Regional Administrator disallow
and recover the federal share of ineligible costs of $64,765. The Region should require the Tribe
to provide sufficient documentation for the remaining $3,037,062 questioned, and disallow and
recover the federal share of any outlays the Tribe cannot support. The Region should also
require the Tribe to adjust its indirect costs claimed. The Region should provide training to the
Tribe on federal regulations and grant requirements, and review the Tribe's solicitations and
contracts under EPA agreements until the Tribe has adequate procedures in place. The Region
should confirm that all work under the agreements was satisfactorily completed prior to
agreement closeout. The Region should maintain the Tribe's "high risk" designation until all
audit issues have been resolved.
Report: Examination of Financial Management Practices of National Rural Water
Association, Duncan, Oklahoma (2007-4-00027), November 30, 2006
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 sub-awards from its indirect cost allocation base. As a result, EPA grants are bearing a
disproportionate amount of indirect costs. For the period March 1, 1999, to February 29, 2004,
EPA grants may have been over-allocated by $2,021,821 in indirect costs. The exact amount of
the indirect over-allocation will be determined during negotiation of the indirect cost rate.
Association practices did not comply with OMB Circular A-122 in the following instances:
• Procedures did not identify all unallowable costs and the Association did not have written
procedures for reviewing costs.
• Costs were charged based on budgets and the Association did not consistently record
costs based on actual activity.
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09-X-0196
• Direct and indirect costs may have included unallowable costs.
• Drawdowns were based on budget amounts and not actual expenditures.
Recommendations: We recommended that the Director of the Grants Administration Division
(1) obtain final negotiated indirect cost rates for the Association; and (2) require the Association
to develop written procedures to (a) identify unallowable costs in accordance with OMB Circular
A-122, and (b) develop written procedures for the preparation of cash draws.
Report: International City/County Management Association Reported Outlays Under Seven
Selected Cooperative Agreements (2007-4-00026), November 28, 2006
We questioned $1,007,858 of the $9,871,025 in reported outlays because the recipient claimed
unallowable outlays for contractual services, sub-grant costs, indirect labor costs, and in-kind
costs. Specifically, the recipient did not:
• compete contracts, justify a sole-source procurement, or perform contract cost analysis;
• oversee or maintain documentation for sub-grants; and
• maintain adequate documentation for in-kind costs used as recipient match.
We also questioned indirect costs the recipient claimed that were prohibited by law. For
Brownfields grants, recipients are prohibited by law from claiming administrative costs, which
EPA has determined to include indirect costs. However, EPA included in the grant a special
condition to allow the recipient to claim some indirect costs as direct costs under the grant. The
special condition conflicts with OMB regulations regarding direct and indirect costs. Therefore,
we questioned indirect costs claimed under the award.
Recommendations: We recommended that EPA's GIAMD: (1) disallow the questioned outlays
of $78,298 prohibited by law; (2) obtain sufficient documentation to support the remaining
questioned outlays of $929,560 in accordance with EPA regulations or disallow the costs from
federal grant participation; and (3) direct the recipient to establish procedures to address issues
related to procuring contracts, managing sub-recipients, and documenting in-kind costs.
Report: Association of State and Interstate Water Pollution Control Administrators Incurred
Costs for Seven EPA Assistance Agreements (2006-4-00122), July 31, 2006
The Association did not comply with financial and program management standards and
procurement standards promulgated in Title 40 CFR, Subchapter B, Part 30. The Association:
(1) could not provide support for any of its general journal entries; (2) included duplicate
recorded costs in its accounting system; (3) could not always trace grant draws to the accounting
records; (4) could not always support labor charged to the EPA grants; (5) could not support the
recorded indirect costs; (6) did not record all of its program income; (7) did not have adequate
written procedures for determining reasonable, allocable, and allowable costs; (8) drew EPA
grant funds in excess of the funds needed; and (9) did not complete the required single audits for
fiscal years ended June 30, 2004, and June 30, 2005. Also, the Association's procurement
system did not comply with procurement standards. The Association awarded contracts to the
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09-X-0196
America's Clean Water Foundation, a related organization, without competition or a cost
analysis, contrary to the requirements of Title 40 CFR 30.42 and 30.45.
Recommendations: We recommended that EPA's GIAMD: (1) recover $1,883,590 unless the
Association is able to reconstruct its accounting records to meet the minimum financial
management standards required in Title 40 CFR 30.21; (2) disallow contract costs procured in
violation of Title 40 CFR 30.42 and 30.45; (3) rescind provisional indirect cost rates for the fiscal
years ended June 30, 2005, and June 30, 2006; (4) stop work on all active grants and refrain from
awarding any new grants until EPA has assurances that the Association meets minimum financial
management requirements; (5) keep the Association on the reimbursement payment method until
the Association meets minimum financial management requirements, settles current federal
liabilities, and repays all disallowed costs; and (6) require the Association to comply with single
audit requirements for fiscal years ended June 30, 2004, and June 30, 2005.
Report: Geothermal Heat Pump Consortium, Inc., Costs Claimed Under EPA Assistance
Agreement Nos. X828299-01 andX828802-01 (2003-4-00120), September 30, 2003
We questioned $1,153,472 due to material financial management deficiencies. The
Consortium's financial management system was inadequate in that the Consortium did not:
(1) separately identify and accumulate the costs for all direct activities, such as membership
support and lobbying; (2) account for program income generated by the activities funded by the
EPA agreements; (3) prepare or negotiate indirect cost rates; (4) prepare written procedures for
allocating costs to final cost objectives; (5) maintain an adequate labor distribution system; and
(6) provide adequate support for direct cost allocations. In addition to the financial management
system deficiencies, the Consortium did not: (1) competitively procure contractual services or
perform any of the required cost or pricing analyses; and (2) comply with all reporting
requirements.
Recommendations: We recommended that EPA's GIAMD:
1) Evaluate the need and scope of the assistance agreements considering that there were other
sources of income to support the activities; i.e., membership dues and agreements with other
federal agencies. If EPA determines that there was not a need for the assistance, take action
to annul the assistance agreement(s).
If EPA decides to allow agreements, we recommended that EPA:
2) Recover the $1,153,472 of unsupported costs.
3) Suspend work under the current agreements and refrain from awarding new funds until the
Consortium can demonstrate that its accounting practices are consistent with 40 CFR 30.21.
At a minimum, the Consortium's system must: (a) ensure that financial results are current,
accurate, and complete; (b) include written procedures to determine reasonableness,
allocability, and allowability of costs in accordance with OMB Circular A-122; (c) include
accounting records that are supported by adequate source documentation; (d) require the
Consortium to establish an adequate time distribution system that meets the requirements of
OMB Circular A-122, Attachment B, paragraph (7) - the system should account for total
hours worked and leave taken, and identify all the specific activities and final cost objectives
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that the employees work on during the pay period, including membership and lobbying
activities; and (e) require the Consortium to follow all procurement standards under 40 CFR
30.40 through 30.48.
4) Require the Consortium to submit an indirect cost rate proposal prepared in accordance with
OMB Circular A-122.
5) Require the Consortium to provide detailed documentation supporting its use of program
income to fund additional activities furthering eligible project or program objectives under
assistance agreement X828802-01. If the Consortium cannot provide documentation,
program income should be deducted from any costs EPA determines to be allowable under
the assistance agreement.
If EPA determined some costs were allowable, we recommended that EPA's GIAMD:
6) Deduct from allowable costs any program income earned by the membership activities
funded under assistance agreement X828299-01.
7) Consider using program income from agreement number X828802-01 to fund the study not
completed under agreement number X828299-01 per administrative condition number 15.
Report: EPA Cooperative Agreements Awarded to the Coordinating Committee for
Automotive Repair (Region 7 Proactive) (2003-S-00001), May 29, 2002
We questioned over $2 million because the Coordinating Committee for Automotive Repair did
not account for the funds in accordance with federal rules, regulations, and agreement terms.
Recommendations: We recommended that the Director, Grants Administration Division:
1) Require the Committee to modify its financial management system to meet the requirements
of 40 CFR 30.21. At a minimum, the system must:
• Ensure that financial results are current, accurate, and complete.
• Include written procedures to determine reasonableness, allocability, and allowability
of costs in accordance with OMB Circular A-122.
• Include accounting records that are supported by adequate source documentation.
2) Require the Committee to develop a time distribution system that meets the requirements of
OMB Circular A-122.
3) Refrain from providing any new funds until the Agency confirms that the Committee has the
financial management capabilities to manage funds in accordance with 40 CFR 30.21 and
OMB Circular A-122.
4) Require the Committee to reconstruct the accounting records necessary to support the
expenditure of funds in accordance with OMB Circular A-122. At a minimum, the
Committee will need to review timesheets, logs, or other records to identify the time actually
spent on EPA authorized activities.
5) Require the Committee to submit indirect cost proposals for the fiscal periods 1995 to the
present in accordance with OMB Circular A-122.
6) Recover all ineligible costs that do not meet the requirements of OMB Circular A-122.
7) Recover all funds that cannot be supported in accordance with OMB Circular A-122.
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Report: Procurement Practices Under Grant No. X825532-01 Awarded to MBI International
(2002-2-00008), January 29, 2002
MBI did not have adequate justifications to support the award of sole source contracts. Also,
MBFs procurement practices did not meet federal requirements. As a result, $1,301,365 in
contract costs and $99,508 in consultant costs are not eligible for federal reimbursement.
Further, there were apparent conflicts of interest between MBI, a subsidiary, and companies that
the subsidiary created.
Recommendation: We recommended that the Director, Grants Administration Division,
disallow the $1,301,365 of ineligible costs incurred under EPA grant X825532-01.
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Forensic Audits of Assistance Agreement and Contract Recipients
The OIG conducts forensic audits of EPA assistance agreement and contract recipients to
determine the acceptability and allowability of costs claimed and whether recipients complied
with federal regulations. The OIG determines whether safeguards exist to ensure recipients and
sub-recipients use funds for their intended purposes. We identified four forensic audit reports
with open findings and recommendations as of June 30, 2009.
Report: Costs Claimed under EPA Grant XP98011401 Awarded to the City of Rupert, Idaho
(09-2-0078), January 12, 2009
The grantee did not meet Title 40 CFR Part 31 requirements for financial management. The
grantee claimed: unsupported costs, unallowable pre-award costs, unallowable interest costs, and
unallowable equipment costs. The grantee also reported cumulative total project costs that were
not supported by accounting records. Therefore, EPA needs to recover $63,256 of the $423,106
in costs questioned under the grant.
Recommendation: We recommended that EPA Region 10's Regional Administrator disallow
$423,106 and recover $63,256 in costs questioned under grant XP98011401.
Report: ML Wastewater Management, Inc. -Procurement, Financial Management, and
Lobbying Issues Under EPA Grant Number XP9 75 72201 (09-4-0112), March 9, 2009
The grantee's financial management system was not sufficient to ensure that reported costs
complied with federal regulations. The grantee's claim included unallowable costs involving
procurement, interest, organizational costs, lobbying, indirect costs, and labor and fringe benefit
costs. Further, total project costs may be unreasonable. The grantee also may not have provided
at least 0.4 new acres of wetlands to replace wetlands filled during construction.
Recommendations: We recommended that the Regional Administrator, EPA Region 5, recover
$801,118 of the questioned costs, recover any unreasonable project costs, and designate the
grantee as a high-risk grantee.
Report: 09-4-0135, April 3, 2009
Based on our review, we found the contactor over-billed EPA for labor charges.
Recommendations: We recommended that the Regional Administrator, EPA Region 3, request
the Office of Policy and Management's Contracting Officer to seek reimbursement of the over-
billed labor charges.
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Report: 09-4-0133, April 3, 2009
We found, the contractor had not maintained books and records (i.e., general ledger, monthly
financial statements, etc.) and was not able to reconcile labor hours to its accounting system.
Recommendations: We recommended that the EPA Regional Administrator, Region 5, utilize
the information provided in deciding whether to exercise the award term options and in any
future contracting decisions concerning the contractor.
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Single Audits
The Single Audit Act, as amended, requires non-federal entities (States, local governments,
universities, tribal governments, and non-profit organizations) that expend $500,000 or more of
federal financial assistance during a fiscal year to have an annual, comprehensive "single audit"4
that covers all federal expenditures (including grants, contracts and loans). The single audit is
performed on the recipient's financial statements and compliance with major federal program
requirements. The single audit report contains the applicable opinions given by the single
auditor as well as the following major sections: (1) the recipient's financial statements; (2) the
schedule of expenditures of federal awards; (3) a report on compliance with laws, regulations,
and grant/contract requirements; (4) a schedule of findings and questioned costs (if applicable);
and (5) the recipient's corrective action plan(s). Federal agencies use single audits as a means to
ensure that recipients are expending federal resources properly, and to assess the overall financial
management capability of these recipients.
Table 2-1 lists prior Single Audit reports with open findings and recommendations as of June 30,
2009.
Table 2-1: Single Audit Reports with Open Recommendations
Action Official
Single Audit Report
Summary of Findings and Recommendations
GIAMD
Report No. 2005-3-00036
National Indian Health
Board
FY 2002
Issued: 12/30/2004
The Board allocated salary costs to grants based on
pre-determined formulas not supported by timesheets
and charged amounts to various grants not always
supported by original documentation. As a result, the
single auditor questioned $31,960 in unsupported costs.
Recommendations: We recommended that the Action
Official recover the questioned costs of $31,960, unless
the recipient can provide adequate documentation to
support these costs. We also recommended that EPA
confirm the corrective action identified in the single audit
report was implemented; if not, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
GIAMD
Report No. 2006-3-00006
Alfred University
FY 2004
Issued: 10/13/2005
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 non-sponsored activities. The
auditor questioned costs of $649,506, but could not
determine the direct impact upon EPA's program.
Recommendations: We recommended that EPA
require the University to provide adequate documentation
to demonstrate that payroll costs claimed are allowable
and allocable to EPA's grant. If the University is unable
4 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the Compliance
Supplement, provide guidance in implementing single audit requirements. The auditor must conduct the single audit
in accordance with Government Auditing Standards.
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Action Official
Single Audit Report
Summary of Findings and Recommendations
to provide sufficient and adequate documentation to
support the payroll costs; EPA should recover these
costs. We recommended the Action Official confirm the
recipient implemented the corrective action identified in
the single audit report.
GIAMD
Report No. 2006-3-00199
Howard University
FY 2005
Issued: 09/07/2006
The University had numerous payroll charging errors.
The University did not: (1) have a formal procedure for
documenting the journal entries made relating to cost
transfers; (2) consistently perform sub-recipient
monitoring procedures in accordance with its published
policy; (3) allow for specific identification in the general
ledger of the items used to meet the matches on
federally-sponsored grants with cost-share requirements;
(4) communicate with the applicable federal awarding
agency regarding $435,654 in assets that were disposed
of, as required by federal regulation; (5) follow its
established internal controls over the financial reporting
process for quarterly and final financial status reports;
and (6) have adequate procurement procedures.
Recommendations: We recommended the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If corrective
action has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
Region 1
Report No. 2006-3-00203
Indian Township Tribal
Government
FY 2002
Issued: 09/18/2006
The Tribe did not invest in governmental securities as
required by OMB Circular A-133, Compliance
Supplement, or have written investment policies and
procedures. The Tribe did not: have an adequate
accounting system to record, process, and summarize
accounting transactions; timely reconcile its bank
accounts within its internal accounting system; and
submit its financial statement audits, which had been as
late as 2 years, in a timely manner. The Tribe maintains
manual general ledger and bookkeeping systems
decentralized from the Tribal books. The Tribe did not
attach or could not find supporting receipts for various
transactions.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If corrective
action has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
Region 1
Report No. 2006-3-00204
Indian Township Tribal
Government
FY 2003
Issued: 09/18/2006
The Tribe did not invest in governmental securities as
required by OMB Circular A-133, Compliance
Supplement. The Tribe did not have written investment
policies and procedures; or an adequate accounting
system to record, process, and summarize accounting
transactions. The Tribe maintains bank accounts within
its internal accounting system that have not been timely
reconciled. The Tribe has a chronic problem of late
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Action Official
Single Audit Report
Summary of Findings and Recommendations
financial statement audits and has been recently as far as
2 years behind in submission of audit reports. The Tribe
maintains manual general ledger and bookkeeping
systems decentralized from the tribal books. While
testing transactions for federal programs, specifically
environmental, supporting receipts were not attached and
could not be found for payments of various transactions
by the Tribe. Tribal and federal program requirements
over fiscal spending require approved budgets. For the
year audited, the Tribe exceeded various budget line
items for tribal government. The Tribe has numerous
bank accounts with financial institutions; approximately
$557,000 was uninsured or uncollateralized cash as of
September 30, 2003.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If corrective
action has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
Region 1
Report No. 2006-3-00205
Indian Township Tribal
Government
FY 2004
Issued: 09/19/2006
The Tribe did not invest in governmental securities as
required by OMB Circular A-133, Compliance
Supplement. The Tribe did not have written investment
policies and procedures. The Tribe did not have an
adequate accounting system to record, process, and
summarize accounting transactions. The Tribe maintains
bank accounts within its internal accounting system that
have not been timely reconciled. The Tribe has a chronic
problem of late financial statement audits and has been
recently as far as 2 years behind in submission of audit
reports. The Tribe maintains manual general ledger and
bookkeeping systems decentralized from the tribal books.
While testing transactions for federal programs,
specifically environmental, supporting receipts were not
attached and could not be found for payments of various
transactions by the Tribe. Tribal and federal program
requirements over fiscal spending require approved
budgets. For the year audited, the Tribe exceeded
various budget line items for tribal government. The
Tribe has numerous bank accounts with financial
institutions; approximately $592,634 was uninsured or
uncollateralized cash as of September 30, 2004. The
Tribe did not submit timely quarterly reports.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If corrective
action has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
GIAMD
Report No. 2007-3-00037
Alfred University
FY 2005
The University's current system provided certified payroll
information on an individual grant basis. However, the
payroll distribution system did not provide a proportionate
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Action Official
Single Audit Report
Summary of Findings and Recommendations
Issued: 12/11/2006
breakdown of each employee's total time between each
sponsored program he or she may be working on and
other non-sponsored activities. The auditor questioned
costs of $856,419, but could not determine the direct
impact upon EPA's program.
Recommendations: We recommended that EPA
require the University to provide adequate documentation
to demonstrate that payroll costs claimed are allowable
and allocable to EPA's grant. If the University is unable
to provide sufficient and adequate documentation to
support the payroll costs; EPA should recover these
costs. We recommended the Action Official confirm the
recipient implemented the corrective action identified in
the single audit report.
Region 2
Report No. 2007-3-00139
New York, State of
FY 2006
Issued: 07/26/2007
The State had 191 audit reports with findings that were
required to have management decisions rendered within
6 months. Of these, only 72 had been completed in a
timely manner, 73 required more than 6 months to
complete, and 46 had no decision rendered. The
recipient did not have adequate program asset controls,
inventory procedures, and proper tagging of items. The
State did not maintain a complete list of its assets.
Additionally, the State could not always locate items that
appeared on the asset lists. The recipient did not have
any evidence of a policy or procedure in place to ensure
proceeds from the sale or disposal of the assets could be
identified and returned to the federal program. The single
audit report for the year ended March 31, 2005, was
received by the New York Department of Environment
Conservation (the prime recipient) in July 2005.
However, the management decision was dated May
2006, five months late. The recipient has had the same
finding in prior years and the Department has not
ensured that its recipient has taken timely and
appropriate corrective action.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If corrective
action has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
Region 8
Report No. 08-3-0247
North Dakota, State of
FY 2006
Issued: 09/04/2008
Program income was not properly recognized and
reported by North Dakota State University.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the findings in the report.
Region 1
Report No. 08-3-0250
Indian Township Tribal
The Tribe did not submit Standard Forms 269 and 272
within required timeframes (see Finding 2005-9 on page
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Action Official
Single Audit Report
Summary of Findings and Recommendations
Government
FY 2006
Issued: 09/05/2008
77 of the audit report). We reported this finding to EPA
for resolution since the Tribe did not fully address this
issue in FY 2006, and in FY 2006, the Tribe continued to
struggle with processing financial information timely. 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. During the
review of the EPA Lead Educational Outreach grant
PH-97122801, the single auditor identified payroll
charges for an employee who traditionally had been paid
using general fund resources. A review of the
employee's timesheets and data sheet did not indicate
that this individual's job responsibilities had changed.
Therefore, there is no reason for this employee to charge
the EPA grant. The single auditor questioned $26,134 in
unsupported costs.
Recommendations: We recommended that EPA:
(1) Recover the $26,134 in questioned unsupported
costs, unless the Tribe can provide adequate
documentation to support these costs. (2) Ensure that
the Tribe has taken appropriate corrective action to
address the findings in the single audit report. If the Tribe
has not completed corrective action, it needs to provide a
corrective action plan and milestone dates to address the
findings. (3) For the EPA Performance Partnership
grants, ensure that the Tribe has adequate
documentation to support its matching requirements. If
the Tribe cannot provide adequate support, EPA should
recover any unmatched costs accordingly.
Region 8
Report No. 08-3-0307
Oglala Sioux Tribe
FY 2004
Issued: 9/30/2008
The Tribe did not: (1) have an adequate system of
accounting duties and internal controls to assure
adequate internal controls over the safeguarding of
assets and reliability of financial records and reporting;
(2) perform reconciliations on a timely basis; (3) post
cash receipts and other activity regularly into the general
ledger; and (4) record several bank accounts in the
general ledger. Additionally, there were many significant
adjusting journal entries posted after the close of the
books at year end. The single auditor identified several
findings that affect indirect costs. First, the Tribe was not
allocating the indirect cost rate properly to various
programs. Second, during testing of indirect cost
expenditures, the auditor found expenditures that should
have been charged directly to programs. Also, some
expenditures charged to the indirect cost fund were not
necessary and reasonable. In testing transactions, the
single auditor found that the Tribe did not have
documentation to support accounts payable, travel costs,
and fringe benefits. As a result, we questioned all
reported expenditures of $1,158,903.
Recommendations: We recommended that EPA
Region 8: (1) Require the Tribe to prepare a
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Action Official
Single Audit Report
Summary of Findings and Recommendations
reconciliation of its reported expenditures to its official
general ledger. (2) Once the reconciliation is completed,
select a sample of transactions to review, in detail, to
ensure the costs are allowable, allocable, and reasonable
under federal regulations and EPA grant requirements.
Prior to sample selection, the Region should meet with
the OIG to discuss its proposed sampling approach.
(3) For any costs that are not adequately supported,
recover these costs, accordingly.
Region 1
Report No. 09-3-0024
Indian Township Tribal
Government
FY 2007
Issued: 11/12/2008
There are several EPA grants where the official time
period has expired, but 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 this condition existed due to
misappropriation activities by the former Tribal governor.
Recommendations: We recommended that EPA ensure
the Tribe took corrective action to address the findings in
the single audit report. If the Tribe has not completed
corrective action, it needs to provide a corrective action
plan with milestone dates to address the findings.
GIAMD
Report No. 09-3-0038
Water Environment
Federation
FY 2006
Issued:11/21/2008
In the prior year audit, the single auditor found that some
expenses had been charged twice to this grant. To
correct this error, the Federation was required to post an
adjusting entry; however, the entry was not posted until
almost a year after the errors were identified.
Recommendations: We recommended that EPA
ensure that the recipient has taken appropriate action to
address the finding in the single audit report. If the
recipient has not completed corrective action, it needs to
provide a corrective action plan and milestone dates to
address the finding.
Region 2
Report No. 09-3-0050
St. Regis Mohawk Tribe
FY 2007
Issued: 12/08/2008
The Tribe requested grant drawdowns in excess of
current cash needs. The Performance Partnership
program had a material positive cash balance for
6 months. The Tribe was unable to provide
documentation that a fixed asset physical inventory was
completed for the audit year for the Performance
Partnership Grant program. The Tribe had one credit
card charge that was not properly authorized for the
Performance Partnership Grant program, BG99267201.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If corrective
action has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the findings in the audit report.
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Action Official
Single Audit Report
Summary of Findings and Recommendations
Region 2
Report No. 09-3-0063
Cayuga County Soil and
Conservation District
FY 2006
Issued: 12/18/2008
The District did not have proper segregation of duties
over assets. The District did not have one individual
charged with overseeing the entire Anaerobic Digester
Project. Instead, funds were requested by different
individuals. Therefore, a single disbursement could be
claimed under more than one grant as either a direct
expense or as a cost share of the District. The District did
not request drawdowns on a reimbursement basis as
preferred by the grantor agency. Additionally, no
supporting documentation was maintained to justify the
amounts requested, whether for an advance or a
reimbursement of expenses. The single auditors noted
that 16 of 46 transactions selected for examination were
not approved by the Executive Director as required by the
District's purchasing policy.
Recommendations: We recommended that the Action
Official confirm the corrective action the recipient
identified in the single audit report was implemented.
If the corrective action has not been implemented, EPA
needs to obtain a corrective action plan, with milestone
dates, for addressing the finding in the audit report.
GIAMD
Report No. 09-3-0073
Environmental Council of
the States and Affiliates
FY 2006
Issued: 01/06/2009
The Council did not: (1) properly segregate duties;
(2) formally review and approve journal entries prepared
by the accountant; (3) reconcile major accounts such as
cash, accounts receivable, grants receivable, deferred
revenue, and grant revenue, to supporting schedules in a
timely manner; (4) reconcile various accounts such as
cash, accounts receivable, grants receivable, and
deferred revenue that contained material misstatements;
(5) consistently reflect an accurate recording of federal
grant revenue and receivables in its accounting system;
and (6) submit its FY 2006 reporting package within a
timely manner. Compensation time earned by working
hours in excess of standard weekly hours in 1 week and
used in a subsequent week is charged to the federal
program for the week the time is used rather than for the
week the time was worked and earned.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the findings in the report.
GIAMD
Report No. 09-3-0062
Missouri, University of
FY 2006
Issued (Revised):
01/07/2009
The University did not have an effective system of
internal control in place to ensure compliance with (1) the
activities allowed or unallowed costs/cost principles
compliance requirements; (2) the procurement and
suspension and debarment compliance requirements;
and (3) the sub-recipient monitoring compliance
requirement. The University also did not perform an
effective or timely review of the sub-recipients' OMB
Circular A-133 Single Audit Reports; issue management
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Action Official
Single Audit Report
Summary of Findings and Recommendations
decisions on audit findings within 6 months after receipt
of the sub-recipients' OMB Circular A-133 Single Audit
Reports; and ensure that the sub-recipients took
appropriate and timely corrective action as required by
OMB Circular A-133. The auditor questioned $90,973.
Recommendations: We recommended that the Action
Official: (1) Confirm the recipient implemented the
corrective action identified in the single audit report. If
the corrective action has not been implemented, EPA
needs to obtain a corrective action plan, with milestone
dates, for addressing the findings in the audit report.
(2) Recover $90,973 in questioned costs unless the
University can provide adequate documentation that the
costs claimed are allowable and allocable to the
assistance agreement(s).
Region 9
Report No. 09-3-0075
Lone Pine Paiute-
Shoshone Reservation
FY 2006
Issued: 01/08/2009
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.
Recommendations: We recommended that the Action
Official: (1) Require the Reservation to provide
expenditure documentation to support the $136,000 in
excessive cash draws. If the Reservation is unable to
provide adequate documentation, the Reservation should
reimburse EPA, including applicable interest. (2) Confirm
the corrective action the recipient identified in the single
audit report was implemented. If the corrective action
has not been implemented, EPA needs to obtain a
corrective action plan, with milestone dates, for
addressing the finding in the report.
Region 9
Report No. 09-3-0077
La Jolla Band of Luiseno
Indians
FY 2006
Issued: 01/08/2009
Due to improperly prepared bank account reconciliations
in prior years up to FY 2005, as well as changes made to
transactions subsequent to reconciliation, many bank
account reconciliations do not agree with the financial
statements.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the finding in the report.
Region 6
Report No. 09-3-0093
Seminole Nation of
Oklahoma
FY 2006
Issued: 02/11/2009
The cash balance on hand, $2,677, for the EPA grant
under the Tribal Air Quality Program, was less than the
amount required, $3,410.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the finding in the report.
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Action Official
Single Audit Report
Summary of Findings and Recommendations
Region 8
Report No. 09-3-0102
Northern Cheyenne Tribe
FY 2006
Issued: 02/24/2009
The Tribe was unable to produce property listings for
FY 2006. The property listings provided were dated July
2007. Also, the Tribe has not performed a physical
inventory of property and equipment within the past
2 years for EPA Grant Number BG98852306. Of 27
disbursements selected for testing, 4 I-9 forms were not
properly completed for EPA Grant Number BG98852306.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the findings in the report.
Region 8
Report No. 09-3-0103
The City of Hill City
FY 2006
Issued: 02/25/2009
The City did not: (1) begin the A-133 audit until after the
9-month period had passed; (2) have segregation of
duties over revenue, expenditure, and payroll functions;
(3) prepare, publish, or file its annual report for the year
ended December 31, 2006; (4) report capital assets on its
financial statements in accordance with Governmental
Accounting Standards Board 34 and accounting
principles; (5) present capital asset purchases as a
separate line item in the Statement of Revenues,
Expenditures, and Changes in Fund Balances for the
Governmental Funds; (6) complete the year-end
recordkeeping; and (7) post year-end entries to the
general ledger. 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.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the findings in the report.
Region 10
Report No. 09-3-0104
Snoqualmie Tribe
FY 2006
Issued: 02/25/2009
The Tribe's policies and procedures were not designed to
ensure time elapsing between the transfer of funds from
the U.S. Treasury and disbursement was minimized. The
approximate duration for cash carried is 5 working days
cash needs; however, the Tribe carried cash for 9 months
for an EPA grant. Travel advance payments to
employees were not consistently reconciled with receipts.
Evidence of event attendance was not consistently
provided. Overpayments to employees and vendors
were apparently disbursed. Federal funds were loaned to
treasury cash from an EPA program; as a result, the
auditors questioned $20,963.
Recommendations: We recommended that the Action
Official: (1) Confirm the recipient implemented the
corrective action identified in the single audit report. If
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09-X-0196
Action Official
Single Audit Report
Summary of Findings and Recommendations
the corrective action has not been implemented, EPA
needs to obtain a corrective action plan, with milestone
dates, for addressing the findings in the report.
(2) Recover the $20,963 in unallowable costs that were
loaned to the recipient's treasury cash account.
Region 6
Report No. 09-3-0108
Seminole Nation of
Oklahoma
FY 2007
Issued: 03/03/2009
The negative cash balance on hand, -$591, for the EPA
grant, Tribal Air Quality Program, was less than the
amount required, $2,341. This was due to the Nation
lending funds to other programs. The auditors
questioned $2,932.
Recommendations: We recommended that the Action
Official: (1) Confirm the recipient implemented the
corrective action identified in the single audit report. If
the corrective action has not been implemented, EPA
needs to obtain a corrective action plan, with milestone
dates, for addressing the finding in the audit report.
(2) Recover the $2,932 in questioned unsupported costs
unless the Nation can provide adequate documentation
that the costs claimed are allowable and allocable to the
assistance agreement.
Region 10
Report No. 09-3-0109
Nooksack Indian Tribe
FY 2006
Issued: 03/03/2009
The Tribe submitted late its indirect cost proposal, which
was due June 30, 2005, for the year ended December
31, 2006; the negotiated rate was not obtained until April
23, 2007. For the Environmental Services Program
(Annual Performance Grant), the single auditor could not
determine the dates the annual performance report or
Standard Forms 272 were filed. The Tribe did not have
adequate internal controls to certify payroll allocation
between federal programs.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the findings in the audit report.
Region 3
Report No. 09-3-0126
Alliance for the
Chesapeake Bay
FY 2007
Issued: 03/23/2009
Cumulative temporarily restricted net assets were not
reconciled to the job cost system. The Alliance accrued
non-vesting accumulating sick leave.
Recommendations: We recommended that the Action
Official confirm the recipient implemented the corrective
action identified in the single audit report. If the
corrective action has not been implemented, EPA needs
to obtain a corrective action plan, with milestone dates,
for addressing the findings in the report.
Region 8
Report No. 09-3-0140
Anaconda-Deer Lodge
County
FY 2007
Issued: 04/20/2009
While the auditor maintained independence under the
American Institute of Certified Public Accountants Ethics
Interpretation of 101-3, Performance of Non-Attest
Services, the auditor assisted in posting client-approved
adjusting entries to the trial balance and in the
preparation of draft financial statements, notes, and
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09-X-0196
Action Official
Single Audit Report
Summary of Findings and Recommendations
supplementary schedules. The Treasurer of the County
was unable to reconcile the County's cash. At June 30,
2007, the unreconciled amount was $39,568. The
County has consulted with outside sources to help with
the reconciliation process with considerable progress;
however, the cash is still out of balance. Further, cash
has not been reconciled since June 30, 2007. The
County has not performed a physical inventory of fixed
assets and compared the physical inventory to existing
detailed records of fixed assets. Equipment was
purchased without being approved in the Superfund
Cooperative Agreement between EPA and the County.
The auditors questioned $16,576. The County does not
have an investment policy currently in force and has not
been active in collecting personal property taxes. The
Public Administrator has not posted an annual report in
the office of the Clerk of the District Court. The County
has not included a Management's Discussion and
Analysis as part of its supplementary information
accompanying the basic financial statements, as required
by Governmental Accounting Standards Board
Number 43.
Recommendations: We recommended that the Action
Official: (1) Confirm the recipient implemented the
corrective action identified in the single audit report. If
the corrective action has not been implemented, EPA
needs to obtain a corrective action plan, with milestone
dates, for addressing the findings in the report.
(2) Recover the $16,576 in questioned ineligible costs.
Also, given the nature and extent of findings presented,
we recommended that the Region closely consider the
recipient's financial capability prior to awarding any
additional funds, including monies the Recovery Act may
provide.
Source: OIG analysis
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Defense Contract Audit Agency Audits
The Defense Contract Audit Agency (DCAA) audits contracts for the Department of Defense
and provides contract audit services to other government agencies. DCAA audits include
evaluations of contractor policies, procedures, and controls. These audits identify and evaluate
activities that contribute to or impact proposed or incurred government contract costs.
A contractor may have contracts with multiple Federal agencies and the reports cover all
government funding, not just EPA. The Federal agency that provides the most funding is
generally identified as cognizant and has the lead for resolving the report findings. For many
DCAA reports, EPA is not cognizant. Even though OAM is identified as the action official,
EPA may not be the lead agency responsible for resolving the report issues. Table 2-2-below
lists the 34 DCAA reports with open findings and recommendations related to EPA contract
recipients as of June 30, 2009.
Table 2-2: DCAA Reports with Open Recommendations
Action
Official
DCAA Audit Report
Summary of Findings and Recommendations
OAM/FAOSC
OIG Report No. 2004-1-00099
Issued: 09/14/2005
DCAA questioned $3,595,399 in proposed general
and administrative costs for FY 2002, of which EPA's
share equals $2,128. DCAA qualified the audit results
pending receipt of assist audit reports.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2006-4-00120
Issued: 07/20/2006
DCAA determined that the Information Technology
system general internal controls were inadequate in
part in 2006. DCAA's examination disclosed certain
significant deficiencies in the design or operation of
the general internal controls that could adversely
affect the organization's ability to record, process,
summarize, and report direct and indirect costs in a
manner that is consistent with applicable government
contract laws and regulations.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 2006-4-00165
Issued: 09/27/2006
DCAA reported that the service centers cost system
and related internal control policies and procedures
were inadequate in part in 2006. DCAA's examination
disclosed certain significant deficiencies in the design
or operation of the Indirect/Other Direct Costs system
process that could adversely affect the organization's
ability to record, process, summarize, and report
Indirect/Other Direct Costs in a manner consistent
with applicable government contract laws and
regulations.
Recommendation: We recommended that the Action
Official resolve the issue.
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Action
Official
DCAA Audit Report
Summary of Findings and Recommendations
OAM/FAOSC
OIG Report No. 2006-4-00169
Issued: 09/29/2006
DCAA reported that the labor accounting system was
inadequate in part in 2006. DCAA's examination
disclosed significant deficiencies in the design or
operation of the internal control structure that could
result in increased control risk for the reliability of
labor charges.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 2007-1-00016
Issued: 11/13/2006
DCAA questioned $188,772,784 in claimed direct
costs and proposed indirect costs for FY 2001, of
which EPA's share is $1,729,601.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2007-4-00038
Issued: 01/08/2007
DCAA determined that certain labor practices require
corrective action to improve the reliability of the
contractor's labor accounting system in 2006.
DCAA expressed no opinion on the adequacy of the
system taken as a whole.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 2007-1-00059
Issued: 04/05/2007
DCAA questioned $787,774 in proposed indirect costs
in FY 2004, of which EPA's share is $70,900.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2007-1-00061
Issued: 04/09/2007
DCAA questioned $34,708,911 in claimed direct costs
and proposed indirect costs for FY 2004, of which
EPA's share is $694,178.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2007-4-00058
Issued: 04/30/2007
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.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 2007-1-00079
Issued: 07/18/2007
DCAA questioned $11,969,625 in proposed indirect
costs for FY 2005, of which EPA's share is $119,696.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
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Action
Official
DCAA Audit Report
Summary of Findings and Recommendations
OAM/FAOSC
OIG Report No. 2007-1-00090
Issued: 08/29/2007
DCAA questioned $2,201,507 in claimed direct costs
and proposed indirect costs for FY 2002, of which
EPA's share of questioned indirect costs is $123,686.
None of the questioned direct costs impact EPA
contracts.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2007-1-00080
Issued: 08/30/2007
DCAA questioned $10,982,460 in proposed indirect
costs for FY 2005, of which EPA's share equals
$133,069.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2007-1-00097
Issued: 09/20/2007
DCAA questioned $300,645 in proposed indirect costs
for FY 2003, of which EPA's share is $27,058.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 2007-4-00079
Issued: 09/25/2007
DCAA reported that the billing system and related
internal control policies and procedures were
inadequate. The DCAA examination noted certain
significant deficiencies in the design or operation of
the internal control structure, which in its judgment
could adversely affect the contractor's ability to record,
process, summarize, and report billings in a manner
that is consistent with applicable government contract
laws and regulations.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 2007-4-00080
Issued: 09/26/2007
DCAA reported that the budget and planning system
and related internal control policies and procedures
were inadequate in part in 2006.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 08-4-0002
Issued: 10/02/2007
DCAA reported that the compensation system and
related internal control policies and procedures are
inadequate in part in 2007. 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.
Recommendation: We recommended that the Action
Official resolve the issue.
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Action
Official
DCAA Audit Report
Summary of Findings and Recommendations
OAM/FAOSC
OIG Report No. 08-1-0114
Issued: 03/24/2008
DCAA questioned $2,082,837 in proposed indirect
costs for FY 2004, of which EPA's share is $197,869.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 08-1-0129
Issued: 04/10/2008
DCAA questioned the proposed carry forward
FY2005 amounts of $377,330, of which EPA's share
is $45,280.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 08-1-0131
Issued: 04/15/2008
DCAA questioned $15,966,631 in claimed direct costs
and proposed indirect costs for FY 2001, of which
EPA's share equals $44,648.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 08-1-0130
Issued: 04/15/2008
DCAA questioned $7,177,256 in claimed direct costs
and proposed indirect costs for FY 1999, of which
EPA's share equals $57,369.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
OAM/FAOSC
OIG Report No. 08-4-0157
Issued: 05/20/2008
DCAA reported that the control environment and the
overall accounting system and related internal control
policies and procedures were inadequate in part in
2006. DCAA noted one significant deficiency in the
design or operation of the internal control structure
that could adversely affect the organization's ability to
record, process, summarize, and report costs in a
manner consistent with applicable government
contract laws and regulations.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 08-4-0207
Issued: 07/24/2008
DCAA reported that certain contractor labor practices
require corrective action to improve the reliability of
the contractor's labor accounting system.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 08-4-0208
Issued: 07/24/2008
DCAA reported that during the period of January 1,
2006, through December 31, 2006, the contractor was
in noncompliance with Cost Accounting Standard 409
Depreciation of Tangible Capital Assets and Federal
Acquisition Regulation Part 31.
Recommendation: We recommended that the Action
Official resolve the issue.
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Action
Official
DCAA Audit Report
Summary of Findings and Recommendations
OAM/FAOSC
OIG Report No. 08-4-0259
Issued: 09/12/2008
DCAA reported that certain contractor labor practices
require corrective action to improve the reliability of
the contractor's labor accounting system.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 08-4-0308
Issued: 09/30/2008
DCAA reported that the information technology
system general internal controls of the contractor were
inadequate in part. The DCAA examination noted
certain significant deficiencies in the design or
operation of the internal control structure. In their
judgment, these deficiencies could adversely affect
the organization's ability to record, process,
summarize, and report direct and indirect costs in a
manner that is consistent with applicable government
contract laws and regulations.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 09-4-0018
Issued: 11/05/2008
DCAA reported that the contractor was in
noncompliance with Cost Accounting Standard 409,
Depreciation of Tangible Capital Assets. DCAA was
not able to obtain the date of the initial failure to
comply with the standard. As of the date of the
report, the condition causing the noncompliance had
not been corrected.
Recommendation: We recommended that the Action
Official resolve the issue.
OAM/FAOSC
OIG Report No. 09-1-0034
Issued: 11/24/2008
DCAA questioned proposed indirect costs and rates
for FY 2006. EPA's share of the questioned costs is
$710,170.
Recommendation: We recommended that the Action
Official resolve the questioned costs.
Source: OIG analysis
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09-X-0196
Appendix A
Distribution
Acting Assistant Administrator for Administration and Resources Management
Assistant Administrator for Air and Radiation
Assistant Administrator for Solid Waste and Emergency Response
Acting Assistant Administrator for Water
Acting Regional Administrators, Regions 1-10
Agency Follow-up Official (the CFO)
Agency Follow-up Coordinator
Acting General Counsel
Director, Office of Brownfields and Land Revitalization
Acting Director, Office of Acquisition Management
Acting Director, Office of Underground Storage Tanks
Director, Office of Grants and Debarment
Director, Grants and Interagency Agreements Management Division
Audit Follow-up Coordinator, Office of Administration and Resources Management
Audit Follow-up Coordinator, Office of Air and Radiation
Audit Follow-up Coordinator, Office of Solid Waste and Emergency Response
Audit Follow-up Coordinator, Office of Water
Audit Follow-up Coordinators, Regions 1-10
Acting Inspector General
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