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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
16-P-0313
September 12, 2016
Why We Did This Audit
The U.S. Environmental
Protection Agency (EPA),
Office of Inspector General
(OIG), conducted this audit to
determine whether labor-
charging practices at the
Oregon Health Authority's
Public Health Division (PHD)
comply with federal
requirements. The OIG also
sought to determine the effect
of any noncompliance on
amounts PHD claimed under
EPA grant awards.
The Oregon Health Authority
has received EPA funding in
such areas as the Drinking
Water State Revolving Fund,
Public Water System
Supervision and Lead-Based
Paint.
This report addresses the
following EPA goals or
cross-agency strategies:
•	Protecting America's
waters.
•	Ensuring the safety of
chemicals and preventing
pollution.
•	Working toward a
sustainable future.
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.gov/oia.
Listing of OIG reports.
Oregon Health Authority's Prior Labor-Charging Practices
Under EPA Grants Did Not Meet Requirements
What We Found
The Oregon Heath Authority's PHD did not always
comply with federal labor-charging requirements.
Prior to May 2014, PHD charged labor, fringe
benefits and indirect costs to its Drinking Water
State Revolving Fund, Public Water System
Supervision and Lead-Based Paint grants based
on budget allocations rather than actual activities
performed. Also, employee certifications for those
charging solely to one grant were not sufficient.
The Code of Federal Regulations (CFR), in 2 CFR Part 225, requires that where
employees work on multiple activities or cost objectives, labor charges must be
based on the after-the-fact distribution of an employee's actual activity. Labor
charges should also be supported by employee-signed personnel activity reports
or the equivalent. A periodic certification of time charges is also required for
those employees working solely on one grant. Oregon's statewide online system
allows employees to override the assigned codes and enter hours based on
actual activity. However, despite state guidance, prior to May 2014, PHD
employees did not use the override function. PHD staff and employees said they
were unaware of the override function.
PHD's practice prior to
May 2014 of charging
labor hours based on
budget allocations rather
than actual activities, as
well as insufficient
employee certifications,
resulted in more than
$12 million in
unsupported costs.
In response to an EPA administrative review, PHD updated its employee time
reporting guidance, and starting in May 2014, PHD employees began properly
reporting costs. However, we still question as unsupported the $12,136,214 in
labor, fringe benefits and related indirect costs claimed by PHD on EPA grants
prior to May 2014.
Recommendations and Recipient's Response to Draft Report
We recommend that the Regional Administrator, Region 10, disallow and recover
$12,136,214 of unsupported labor and related fringe benefits and indirect costs
claimed prior to May 2014, unless Oregon PHD can provide support for the labor
charges. The region should also identify and recover any unsupported costs prior
to May 2014 from any other PHD-administered EPA grants not covered by this
audit. PHD concurred with the findings, but did not agree with the
recommendation to disallow the labor costs, noting it provided a comparative
analysis of payroll charges to support its position, plus it is now in full compliance
with grant requirements. We acknowledge that PHD's labor-charging practices
are currently in compliance with requirements, but the analysis provided does not
support that labor costs prior to May 2014 meet federal requirements. Region 10
did not respond to the draft report and understands it has the opportunity to
respond to the final report. The recommendations remain unresolved.

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