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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
EPA OIG Compliance With
Retention Incentive
Regulations and Policies
Report No. 14-B-0246
May 2, 2014
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Report Contributors:
Leah Nikaidoh
Darren Schorer
Catherine B. Allen
Abbreviations
CFR	Code of Federal Regulations
EPA	U.S. Environmental Protection Agency
OIG	Office of Inspector General
Hotline

To report fraud, waste or abuse, contact us
through one of the following methods:
email:
OIG Hotline@epa.aov
phone:
1-888-546-8740
fax:
1-202-566-2599
online:
http://www.epa.aov/oia/hotline.htm
write:
EPA Inspector General Hotline

1200 Pennsylvania Avenue, NW

Mailcode 2431T

Washington, DC 20460
Suggestions for Audits or Evaluations
To make suggestions for audits or evaluations,
contact us through one of the following methods:
email:	OIG WEBCOMMENTS@epa.gov
phone:	1-202-566-2391
fax:	1-202-566-2599
online:	http://www.epa.g0v/0ig/c0ntact.html#Full Info
write: EPA Inspector General
1200 Pennsylvania Avenue, NW
Mailcode 241OT
Washington, DC 20460

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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
14-B-0246
May 2, 2014
Why We Did This Review
On August 27, 2013, a member
of the U.S. Senate Committee
on Environment and Public
Works requested that the
U.S. Environmental Protection
Agency (EPA), Office of
Inspector General (OIG),
initiate work in connection with
a fraud committed by John C.
Beale, a former Senior Policy
Advisor with the EPA's Office of
Air and Radiation. In particular,
the committee member asked
the OIG to determine EPA
policies and processes that
"facilitated" Beale's fraud.
Although the EPA authorized
retention incentive pay to Beale
until 2003, the agency
continued to make retention
incentive payments to him until
2013.
This report addresses the
following EPA theme:
• Embracing EPA as a high
performing organization.
EPA OIG Compliance With Retention Incentive
Regulations and Policies
What We Found
The EPA OIG did not comply with Office of
Personnel Management regulations or agency
policies on retention incentive pay. From 2006
through 2009, retention incentives were paid to
two EPA OIG employees. The two EPA OIG
employees received $64,204 in retention
incentives with no documentation of annual
recertification from 2008 through 2009.
The EPA OIG employees received unauthorized retention pay due to:
•	Management confusion over the requirement for annual recertification of
retention incentive pay.
•	Evidence of the annual recertification not being retained.
•	The agency's human resource system lacking internal controls to track,
notify and automatically discontinue retention incentive pay if not properly
authorized.
Unauthorized retention
incentive payments
totaling $64,204 were
made to EPA OIG
employees due to a lack
of adequate internal
controls and agency
follow-up.
Recommendation and Planned Corrective Actions
We recommend that the Deputy Inspector General determine whether any
additional evidence exists to justify a retention incentive. If unjustified, he
Deputy Inspector General should refer the matter to the agency to initiate action
to recover the unauthorized retention incentive amounts paid to EPA OIG
employees.
The Deputy Inspector General agreed with our recommendation.
For further information,
contact our public affairs office
at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2014/
20140502-14-B-0246.pdf

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
May 2, 2014
MEMORANDUM
SUBJECT: EPA OIG Compliance with Retention Incentive Regulations and Policies
Report No. 14-B-0246
FROM: Kevin Christensen, Acting Assistant Inspector General
Office of Audit

TO:
Charles Sheehan, Deputy Inspector General
As part of our continuing work on internal controls as a result of the John C. Beale investigation,
we initiated an audit of the U.S. Environmental Protection Agency's (EPA's) internal controls over
retention incentives. During this review, we identified issues that impact the Office of the Inspector
General (OIG) and require your immediate attention, and we are reporting this to you separately.
Action Required
Please provide a written response to this report within 60 calendar days. You should include planned
corrective actions and completion dates for the recommendation. Your response will be posted on the
OIG's public website, along with our memorandum commenting on your response. Your response
should be provided as an Adobe PDF file that complies with the accessibility requirements of
Section 508 of the Rehabilitation Act of 1973, as amended. The final response should not contain data
that you do not want released to the public. If your response contains such data, you should identify the
data for redaction or removal, along with corresponding justification. We will post this report to our
website at http://www.epa.gov/oi g.
If you or your staff have any questions regarding this report, please contact me at (202) 566-1007 or
christensen.kevin@epa.gov; or Robert Adachi, Director, Forensic Audits, at (415) 947-4537 or
adachi.robert@epa.gov.

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U.S. Environmental Protection Agency
Office of Inspector General
EPA OIG Compliance With
Retention Incentive Regulations
and Policies

Report No. 14-B-0246
May 2, 2014

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Reasons for Review
Part of continuing work on internal controls of payroll and
benefits.
Review initiated on the U.S. Environmental Protection
Agency's (EPA's) policies and procedures for paying retention
incentives.
14-B-
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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Scope and Methodology
~	Performed fieldwork from October 31, 2013, to March 20, 2014.
~	Conducted assignment in accordance with generally accepted
government auditing standards issued by the Comptroller General
of the United States.
~	EPA personnel were covered in a separate report.
~	Determined whether the EPA Office of Inspector General (OIG) paid
employees retention incentives in accordance with federal
regulations and EPA policy.
14-B-0246
V
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency	@EPAoig
www.epa.gov/oig

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Scope and Methodology (cont'd.)
~	Obtained a listing of OIG employees who received retention
incentives for calendar years 2006 through August 7, 2013.
~	Reviewed retention incentive request forms,
correspondence and SF-50s for each employee.
~	Interviewed staff from the agency's Shared Service Center.
~	Contacted the two EPA OIG supervisors and their
employees who received retention incentives.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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Office of Personnel Management
Regulations
~ The Code of Federal Regulations (CFR), in 5 CFR 575:
o Authorizes payment of incentive for employees:
With unusually high or unique qualifications.
Likely to leave in the absence of an incentive.
o Requires annual review of the determination to pay the incentive.
o Requires an authorized agency official to annually document in
writing the determination to pay the incentive.
o Requires reduction/termination of the retention incentive
authorization whenever conditions change.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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EPA/OIG Policies
~ EPA's Pay Administration Manual:
o Authorizes a 1-, 2- or 3-year retention incentive.
o Requires annual recertification using the EPA authorization form.
o Requires the human resources officer to provide notification in
advance of the annual reauthorization date.
o Requires termination if the employee is reassigned or promoted
to a different position.
o Per EPA's order on waivers, the employee is required to
notify the supervisor and the human resources officer about
overpayments.
o EPA OIG has no additional retention incentive policies.
14-B-0246
V
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency	@EPAoig
www.epa.gov/oig

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Results
~	We found that the EPA OIG did not fully comply with Office
of Personnel Management regulations or EPA policy on
retention incentive pay.
o No documentation of annual recertification identified for the
last 2 years each employee received the retention incentive.
o One employee received retention incentive pay for 4 months
beyond the promotion date.
~	There are no EPA OIG employees currently receiving
retention incentives.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency	@EPAoig
www.epa.gov/oig

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Uncertified Incentives
~ We identified two EPA OIG employees who received retention incentives
with no documentation of annual recertification from 2008 through 2009:

Uncertified
Incentive
Employee #1 (Retired)
$16,098
Employee #2
48,106
EPA OIG Total*
$64,204
~ No EPA OIG employee has received a retention incentive
since 2009.
*Amounts were calculated using data provided by EPA and are subject to reconciliation with payroll records.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency	@EPAoig
www.epa.gov/oig

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Uncertified Incentives (cont'd.)
~	For both EPA OIG employees, retention incentives were
properly reviewed and authorized for 2006 and 2007.
~	No documentation is available to support either employee
being authorized to receive retention incentives in 2008 and
2009, as required by federal regulations and EPA policies.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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Pay Beyond Promotion
o EPA OIG Employee #1 received incentive pay although
his incentive should have been terminated because he
was promoted.
o The EPA issued a debt notice to the employee and advised
him about the agency's waiver process.
o The employee filed a waiver with the EPA's Office of General
Counsel Claims Officer. The Office of General Counsel
reviewed the waiver and made a determination to partially
reinstate incentive pay.
o No further action is warranted for incentive pay received
after promotion.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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How Did This Happen?
~	Confusion over the requirement for an annual
recertification.
~	Evidence of the annual recertification was not retained,
even though one supervisor stated that the annual
recertifications were completed.
~	The EPA's human resources system lacks internal controls to
track, notify and automatically discontinue the retention
incentive if not authorized by an annual recertification.
14-B-0246
V
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency	@EPAoig
www.epa.gov/oig

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Why Is This Important?
Unauthorized retention payments were made to two EPA
OIG employees:
o Employees #1 and #2 were paid a total of $64,204 without
documentation supporting annual recertification.
o Employee #2 was overpaid by an additional $13,563 due to lack
of timely termination.
Review of the EPA's internal controls related to retention
incentives for agency employees identified similar issues.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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Recommendation
~ We recommend that the EPA OIG Deputy Inspector General
determine whether any additional evidence exists to justify
retention incentive pay. If unjustified, the EPA OIG Deputy
Inspector General should refer the matter to the agency to
initiate action to recover the unauthorized retention incentive
amounts paid to the EPA OIG employees.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency
@EPAoig
www.epa.gov/oig

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Management Briefing
We held an exit conference with the Deputy Inspector General
on April 10, 2014, on the results of the review.
The Deputy Inspector General agreed to take action to address
the recommendation.
14-B-0246
OFFICE OF INSPECTOR GENERAL
U.S. Environmental Protection Agency	@EPAoig
www.epa.gov/oig

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Status of Recommendation and
Potential Monetary Benefits
POTENTIAL MONETARY
RECOMMENDATIONS	BENEFITS (In $000s)





Planned


Rec.
Page



Completion
Claimed
Ag reed-To
No.
No.
Subject
Status1
Action Official
Date
Amount
Amount
1 13 Determine whether any additional evidence 0 Deputy Inspector General	$64
exists to justify retention incentive pay.
If unjustified, refer the matter to the agency to
initiate action to recover the unauthorized
retention incentive amounts paid to EPA OIG
employees.
1 0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
14-B-0246
15

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EPA OIG Distribution
Inspector General
Deputy Inspector General
Counsel to the Inspector General
Chief of Staff, Office of Inspector General
Deputy Assistant Inspector General for Congressional and Public Affairs
14-B-0246

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