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                   U.S. Environmental Protection Agency
                   Office of Inspector General

                   At   a   Glance
                                                            10-4-0013
                                                       October 27, 2009
                                                                Catalyst for Improving the Environment
Why We Did This Review

The U.S. Environmental
Protection Agency (EPA)
Office of Inspector General
(OIG) conducts reviews of
earmarked grants known as
Special Appropriation Act
Projects issued to local  and
tribal governments. The City
of Flowood, Mississippi, was
selected for review.

Background

Region 4 awarded Grant No.
XP9468195totheCityof
Flowood, Mississippi
(grantee), on February 10,
1995.  The purpose of the
grant was to provide federal
assistance of $7,679,032 to
fund the construction of the
Hogg Creek Interceptor
pipeline segment.  EPA
funded 69.86 percent of the
eligible project costs and the
grantee funded 30.14 percent.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.

To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2010/
20091027-10-4-0013.pdf
 Coste Claimed Under EPA GrantXP9468195
 Awarded to the City of Flowood, Mississippi
 What We Found
The grantee did not perform a cost analysis or negotiate a fair and reasonable
profit as a separate element of the contract price as required under Title 40 Code
of Federal Regulations (CFR) 31.36(f). As a result, we questioned $1,755,157 in
unsupported architectural and engineering (A&E) costs claimed. The grantee will
need to repay $896,224 of grant funds.  The grantee also did not have its own
written procurement procedures and did not maintain records sufficient to detail
the procurement of the A&E contract.
 What We Recommend
We recommend that the EPA Region 4 Regional Administrator:

  1.  Require the grantee to provide the documentation demonstrating that it
     performed a cost analysis for the A&E contract at the time of negotiation.
     If the grantee is unable to do so, EPA should recover the federal share of
     questioned A&E costs of $896,224.

  2.  Require the grantee to develop written procurement procedures in
     accordance with 40 CFR 31.36(b)(l).

  3.  Require the grantee to incorporate the procurement record keeping
     requirements in 40 CFR 31.36 (b)(9) into its written procurement
     procedures, and comply with those requirements.

The grantee agreed with the recommendations to develop written procurement and
record keeping procedures. However, the grantee did not agree with the
questioned A&E costs and stated that it had performed the equivalent of the
required cost analysis for its A&E contract.

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