U.S. Environmental Protection Agency
                  Office of Inspector General

                  At  a   Glance
                                                             09-2-0011
                                                        October 20, 2008
                                                                 Catalyst for Improving the Environment
Why We Did This Review

The U.S. Environmental
Protection Agency (EPA)
Office of Inspector General is
reviewing Special
Appropriation Act Project
(SAAP) grants to identify
issues warranting further
analysis. We selected Washoe
County Department of Water
Resources (grantee) for one of
these reviews.

Background

The grantee received two
SAAP grants from EPA
Region 9. Grant XP96909501
was to replace private water
supply wells with community
public water supply services.
Grant XP97963701 was for a
nitrate remediation pilot
project.  These grants provided
the grantee with $2,067,700 in
Federal assistance.
For further information,
contact our Office of
Congressional and Public
Liaison at (202) 566-2391.

To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2009/
20081020-09-2-0011.pdf
Costs Claimed under EPA Grants XP96909501
and XP97963701 Awarded to the Washoe County
Department of Water Resources, Nevada

 What We Found
The grantee did not meet financial management requirements specified by Federal
policy and regulations. In particular, the grantee:

  •  Claimed indirect costs without approved rates or cost allocation plans;
  •  Charged estimated labor costs to the grants without adjusting to actual costs;
  •  Claimed fringe benefit costs that were not based on approved rates or a cost
     allocation plan;
  •  Procured sole source contracts without cost analysis;
  •  Claimed contract costs under one grant that were not allocable; and
  •  Claimed unallowable interest expenses.

Because of these issues, EPA will need to recover $291,494 in questioned costs
under the two grants. As of September 2008, Region 9 had recovered $26,774 of the
questioned costs from the grantee. The grantee also needs to strengthen its internal
controls.
 What We Recommend
We recommend that EPA Region 9's Regional Administrator:

  1. Disallow and recover the remaining uncollected balance of the $291,494
    questioned if the grantee is unable to provide documentation that meets
    appropriate Federal financial management requirements.

  2. Require the grantee to establish procedures to ensure that it: (a) charges labor
    and benefit costs to the Federal grants in accordance with Federal policy;
    (b) conducts procurement in accordance with Federal regulations; (c) properly
    identifies unallowable costs and excludes them from billings to the Federal
    Government; (d) limits cash draws for Federal grants to actual disbursements;
    and (e) pays contract costs charged to Federal grants in accordance with contract
    terms and conditions.

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