U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
National Association of State
Departments of Agriculture
Research Foundation Needs to
Comply With Certain
Federal Requirements and
EPA Award Conditions to
Ensure the Success of Pesticide
Safety Education Programs
Report No. 14-P-0131
March 10, 2014

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Report Contributors:
Angela Bennett
Philip Cleveland
Bill Spinazzola
Abbreviations
ACH
Automated Clearing House
CFR
Code of Federal Regulations
EPA
U.S. Environmental Protection Agency
FFR
Federal Financial Report
FY
Fiscal Year
MTDC
Modified Total Direct Costs
NASDA
National Association of State Departments of Agriculture
NASDARF
National Association of State Departments of Agriculture Research Foundation
NBC
National Business Center
OGD
Office of Grants and Debarment
OIG
Office of Inspector General
OMB
Office of Management and Budget
SF
Standard Form
Cover photo: Pesticide being applied to a field. (EPA photo)
Hotline
To report fraud, waste or abuse, contact
us through one of the following methods:
email:	OIG Hotline@epa.gov
phone:	1-888-546-8740
fax:	1-202-566-2599
online:	http://www.epa.gov/oiq/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@eoa.oov
phone:
1-202-566-2391
fax:
1-202-566-2599
online:
http://www.epa.qov/oiq/contact.html#Full Info
write:
EPA Inspector General

1200 Pennsylvania Avenue, NW

Mailcode 241OT

Washington, DC 20460

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^tDS7X" U.S. Environmental Protection Agency	14 P 0131
% \ Office of Inspector General	March 10,2014
W I
At a Glance
Why We Did This Review
The U.S. Environmental
Protection Agency (EPA)
Office of Inspector General
(OIG) reviewed the funds
drawn by the National
Association of State
Departments of Agriculture
Research Foundation
(NASDARF)
under EPA Cooperative
Agreement No. 83456201.
The award provided
$3.6 million to:
•	Evaluate and improve
existing pesticide safety
training programs and
materials.
•	Identify areas in the program
where additional pesticide
safety education is needed.
The purpose of our
examination was to determine
whether costs incurred were
allowable in accordance with
federal requirements and the
agreement and whether
NASDARF conducted
procurements in accordance
with federal regulations and
the agreement.
This report addresses the
following EPA themes:
•	Embracing EPA as a high
performing organization.
•	Taking action on toxics
and chemical safety.
For further information,
contact our public affairs office
at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2014/
20140310-14-P-0131.pdf
National Association of State Departments of Agriculture
Research Foundation Needs to Comply With Certain
Federal Requirements and EPA Award Conditions to Ensure
the Success of Pesticide Safety Education Programs
We questioned
$571,626 of potentially
unallowable costs.
What We Found
NASDARF's financial management system did not
meet certain federal requirements and conditions of
the EPA award. Specifically, NASDARF incorrectly
calculated and applied indirect cost rates, reported
outlays for indirect costs in excess of recorded expenses, and drew funds that
exceeded its cash needs. As a result, we questioned $275,650.
NASDARF did not document its procurement selection process or provide
documentation to support any cost or price analysis performed on its project
management subcontract as required by the Code of Federal Regulations
(CFR) in 40 CFR Part 30. NASDARF did not determine the reasonableness of
costs for two subgrants as required by conditions of the award. In addition,
NASDARF's written procurement policy lacked procedures to ensure
compliance with 40 CFR Part 30. As a result, we questioned $295,976.
The OIG also identified an unresolved issue pertaining to potentially
unallowable costs of $118,324 drawn under a prior EPA award. The costs,
recorded as a refundable advance, represent funds received as of year-end but
not yet earned.
Recommendations and Responses
We recommend that the EPA disallow and recover $571,626 pertaining to the
financial management and procurement issues. We also recommend that the
EPA require NASDARF to recalculate its indirect cost rates to be consistent
with 2 CFR Part 230 and establish controls to ensure that its financial
management and procurement systems comply with federal requirements and
conditions of the award. Further, we recommend that certain special conditions
be included for all active and future EPA awards until NASDARF meets all
applicable federal financial and procurement requirements. For the $118,324 of
potentially unallowable costs, the EPA should review and recover costs
determined to be unallowable. NASDARF generally did not agree with the OIG
findings and recommendations. The EPA agreed with the OIG
recommendations and stated it would work with NASDARF to resolve the
issues.
Noteworthy Achievements
In response to OIG finding outlines, NASDARF modified its subcontract for
project management services and its written procurement procedures to include
OIG-recommended requirements pertaining to 40 CFR Part 30.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
March 10, 2014
MEMORANDUM
SUBJECT: National Association of State Departments of Agriculture Research Foundation
Needs to Comply With Certain Federal Requirements and EPA Award Conditions to
Ensure the Success of Pesticide Safety Education Programs
Report No. 14-P-0131
FROM: Arthur A. Elkins Jr.
TO:	Howard Corcoran, Director
Office of Grants and Debarment
Office of Administration and Resources Management
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the problems
the OIG has identified and corrective actions the OIG recommends. This report represents the opinion of
the OIG and does not necessarily represent the final EPA position. Final determinations on matters in
this report will be made by EPA managers in accordance with established audit resolution procedures.
Action Required
In accordance with EPA Manual 2750, you are required to provide us your proposed management
decision on the findings and recommendations contained in this report before you formally complete
resolution with the recipient. Your proposed management decision is due in 120 days, or on July 8, 2014.
To expedite the resolution process, please also email an electronic version of your management decision
to adachi.robert@epa.gov.
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 to be released to the public; if your response
contains such data, you should identify the data for redaction or removal. This report will be available
on our website at http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Richard Eyermann,
acting Assistant Inspector General for Audit, at (202) 566-0565 or evermann.richard@epa.gov; or
Robert Adachi, Product Line Director, at (415) 947-4537 or adachi.robert@epa.gov.
^EDSrX
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National Association of State Departments of Agriculture	14-P-0131
Research Foundation Needs to Comply With Certain
Federal Requirements and EPA Award Conditions to Ensure
the Success of Pesticide Safety Education Programs
Table of Contents
Chapters
1	Independent Accountant's Report		1
2	Introduction		4
Purpose 		4
Background 		4
Noteworthy Achievements		5
NASDARF and EPA Responses		5
3	Results of Examination		6
Recommendation 		7
NASDARF and EPA Responses 		7
OIG Comments		7
4	Financial Management System Did Not Meet Certain
Federal Requirements		8
Indirect Cost Rates Were Calculated and Applied Incorrectly		8
Reported Costs Exceeded Amounts Recorded in General Ledger		10
Accepted Cash Management Practices Not Followed		11
Conclusion		14
Recommendations 		15
NASDARF Response 		15
EPA Response 		17
OIG Comments 		17
5	Procurements Did Not Meet Federal Requirements or
Agreement Conditions		19
Sole-Source Procurement Not Justified; Cost or Price Analysis
Not Conducted		19
Subgrant Procurements Did Not Comply With Administrative Condition ....	20
Written Procurement Policy Does Not Include Required Procedures		21
Conclusion		22
Recommendation 		23
NASDARF Response 		23
EPA Response 		24
OIG Comments 		24
6	Other Unresolved Issue		25
Recommendation 		26
NASDARF Response 		26
EPA Response 		26
OIG Comments 		26
-continued-

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National Association of State Departments of Agriculture	14-P-0131
Research Foundation Needs to Comply With Certain
Federal Requirements and EPA Award Conditions to Ensure
the Success of Pesticide Safety Education Programs
Status of Recommendations and Potential Monetary Benefits	 27
Appendices
A NASDARF's Comments on Draft Report and OIG Responses		28
B EPA's Comments on Draft Report		39
C Distribution		43

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Chapter 1
Independent Accountant's Report
As part of our oversight of assistance agreement awards made by the
U.S. Environmental Protection Agency (EPA), the Office of Inspector General (OIG)
examined the costs claimed under Cooperative Agreement No. 83456201 awarded to
the National Association of State Departments of Agriculture Research Foundation
(NASDARF). The OIG conducted the examination to determine whether the costs
incurred were allowable under federal regulations and conditions of the award, and
whether procurements were conducted in accordance with federal regulations. The
applicable federal requirements found in the Code of Federal Regulations (CFR)
include:
•	Title 2 CFR Part 230, Cost Principles for Non-Profit Organizations.
•	Title 40 CFR Part 30, Uniform Administrative Requirements for Grants
and Agreements with Institutions of Higher Education, Hospitals, and
Other Non-Profit Organizations.
By accepting funding provided through the agreement, NASDARF has responsibility
for complying with these requirements. Our responsibility is to express an opinion on
NASDARF's compliance based on our examination.
We conducted our examination in accordance with generally accepted government
auditing standards issued by the Comptroller General of the United States. We also
utilized the attestation standards established by the American Institute of Certified
Public Accountants. We examined, on a test basis, evidence supporting NASDARF's
assertion contained in its interim Federal Financial Report (FFR) for the period ending
January 24, 2013, and performed other procedures as we considered necessary.
We believe that our examination provides a reasonable basis for our opinion.
We interviewed EPA personnel from the Office of Grants and Debarment and the
Office of Pesticide Programs in headquarters, Washington, D.C. We obtained an
understanding of the agreement and gathered information concerning NASDARF's
performance. Specifically, we reviewed NASDARF's request for proposal to determine
the objectives of the agreement and project deliverables. We also gathered information
on criteria relevant to the agreement and reviewed applicable federal requirements,
including 2 CFR Part 230 and 40 CFR Part 30.
On January 10, 2013, we conducted an entrance conference with NASDARF.
We returned to NASDARF's office in Washington, D.C., the week of January 22,
2013, to conduct interviews and obtain documentation to address our objectives.
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To determine whether the costs incurred by NASDARF were allowable under
40 CFR Part 30 and conditions of the agreement, we:
•	Conducted interviews to obtain an understanding of the accounting
system, applicable internal controls, and practices followed to administer
the agreement.
•	Reviewed single audit reports for fiscal years (FYs) 2010 through 2012 to
identify issues that may have an impact on our examination.
•	Reviewed internal controls related to the assignment objectives and
performed tests to determine whether the controls are in place and
operating effectively.
•	Reviewed compliance with laws, regulations and the terms and conditions
of the agreement.
•	Examined reported outlays on a test basis to determine whether the outlays
were adequately supported and eligible for reimbursement under the
conditions of the agreement and federal requirements.
•	Identified required deliverables and determined whether they were
submitted to and accepted by the EPA.
To determine whether NASDARF conducted its procurements in accordance with
40 CFR Part 30, we:
•	Conducted interviews to obtain an understanding of how NASDARF
procured subcontracts and subgrants.
•	Obtained and reviewed written procurement and contract administration
policies and procedures to determine whether they included federal
requirements.
•	Obtained and reviewed supporting documentation for the award of the
sole-source subcontract for project management services to ensure
compliance with relevant criteria.
•	Obtained and reviewed supporting documentation for a judgmental sample
of three of eight subgrant and subcontract awards to ensure compliance
with relevant criteria. The sample represented 81% ($289,943 of
$357,995) of the total subgrant and subcontract costs.
We also reviewed project costs and NASDARF's drawdown of EPA funds.
Specifically, we performed the following steps:
•	Obtained, reviewed and reconciled NASDARF's interim FFR for the
period ending January 24, 2013.
•	Discussed the FFR preparation with NASDARF to ensure the FFR was
prepared in accordance with applicable laws, regulations, and terms and
conditions of the cooperative agreement.
•	Reviewed NASDARF's drawdown procedures, obtained a draw history,
and selected a judgmental sample of three of the 15 draws to determine
whether the draws were reasonable and properly supported. The sample
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represented 24% ($350,000 of $1,460,000) of total draws as of December
6, 2012. We reviewed supporting invoices, payment documents and
associated accounting system entries to determine whether the
expenditures were allocable and allowable under 40 CFR Part 30 and the
agreement.
•	Obtained and analyzed monthly bank statements to determine compliance
with cash management requirements as described in the administrative
conditions of the agreement and under federal regulation.
We conducted our examination from January 10, 2013 through November 4,
2013. Our examination disclosed material noncompliance and internal control
weaknesses with financial management and procurement. In particular,
NASDARFs:
•	Financial management system pertaining to cash draws and project costs
does not meet the requirements of the agreement or 2 CFR Part 230 and
40 CFR Part 30. Chapter 4 of this report includes a discussion of the
noncompliance.
•	Subcontract procurement of its project manager was not documented and
did not include cost and price analysis as required by the agreement or
40 CFR Part 30. In addition, the subgrant procurements examined did not
comply with the agreement's administrative condition no. 4(a). Chapter 5
of this report presents more details on these conditions.
Unless NASDARF can demonstrate compliance with all applicable requirements,
we recommend that the EPA disallow and recover $492,817 of reported costs and
$78,809 in excess cash draws.
In our opinion, because of the effect of the issues described above, the costs
claimed do not meet, in all material respects, the requirements of 2 CFR Part 230
and 40 CFR Part 30, or the conditions of the agreement for the period ended
December 31, 2012.
Robert K. Adachi
Director for Forensic Audits
March 10, 2014
14-P-0131
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Chapter 2
Introduction
Purpose
The OIG conducted this examination to determine whether NASDARF complied
with federal requirements and the conditions of EPA Agreement No. 83456201.
Our objectives were to determine whether:
•	Costs incurred by NASD ARF were allowable in accordance with federal
requirements and conditions of the agreement.
•	NASD ARF followed applicable regulations and conditions of the agreement in
its procurement of subcontracts and subgrants.
Background
The National Association of State Departments of Agriculture (NASDA) is a nonprofit,
nonpartisan association of public officials comprised of executive heads from 50 state
departments of agriculture, as well as executives from the U.S. territories of Puerto
Rico, Guam, American Samoa and the U.S. Virgin Islands. NASDA's mission is to
support and promote the American agricultural industry through the development,
implementation and communication of sound public policy programs. NASDA
organized NASD ARF to design and implement educational programs relating to
farming and other agricultural activities, and to help state and local government develop
government programs relating to agricultural activities.
The EPA awarded Agreement No. 83456201 to NASD ARF on March 24, 2010. The
award provided $3.6 million to support national and international pesticide safety
education programs designed to reduce the pesticide exposure of agricultural workers
and pesticide applicators. Pesticide safety education projects not only target workers
and applicators, but also growers, healthcare providers, and pesticide producers and
retailers. The purpose of the award was to evaluate and improve existing pesticide
safety training programs and materials, and identify areas within the programs where
additional pesticide safety education is needed.
The EPA awarded the funds based on the authorities provided by:
•	The Federal Insecticide, Fungicide, and Rodenticide Act, Section 20,
which authorizes the agency to issue assistance agreements for research,
development, monitoring, public education, training, demonstrations and
studies concerning pesticide-related matters.
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• The National Environmental Policy Act, Section 102(2)(F), which
recognizes the worldwide and long-range character of environmental
problems; and, where consistent with U.S. foreign policy, lends
appropriate support to programs designed to maximize international
cooperation in anticipating and preventing a decline in the world
environment.
The budget and project period for Agreement No. 83456201 is April 5, 2010,
through April 6, 2015. This agreement is a continuation of work started under
NASD ART" s previous EPA Agreement No. 83235401.
Although NASDARF is not required to submit a standard form (SF) 425 FFR
until the agreement is completed, NASDARF prepared an interim FFR at the
OIG's request. The interim FFR, dated January 24, 2013, covered the period
April 5, 2010 through December 31, 2012. The FFR included a federal share of
outlays totaling $1,398,210, cash receipts of $1,460,000 and cash on hand of
$78,809.
Noteworthy Achievements
On June 19, 2013, the OIG issued finding outlines to NASDARF. The outlines
expressed concern that NASDARF's project management subcontract did not
include 40 CFR ง30.48(c)(1) and (d) requirements pertaining to breach of contract
remedies and access to records. The finding outlines included a recommendation
that NASDARF revise the subcontract to include these requirements. In response,
NASDARF stated that it had modified the subcontract to reflect the requested
adjustments. The OIG reviewed the revised subcontract and confirmed the
provisions were included. NASDARDF also revised its written procurement
procedures to include OIG-recommended requirements pertaining to
40 CFR Part 30.
NASDARF and EPA Responses
OIG received comments from NASDARF and the EPA concerning the OIG's
draft report issued on November 5, 2013. NASDARF also provided supplemental
documentation to support some comments. Due to the various types and volume
of documents provided, the OIG did not include NASDARF's additional
documentation in this report, but the information is available upon request.
We held an exit conference with NASDARF on February 12, 2014 to discuss their
response to the draft report and the impact on our final report. NASDARF
continued to disagree with our findings.
The OIG did not hold an exit conference with EPA. Rather EPA requested that
the OIG proceed with issuing the audit report so they can begin working with
NASDARF to resolve the findings.
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Chapter 3
Results of Examination
NASDARF's procurement practices, methods for determining and claiming
indirect costs, and drawdown practices for EPA Agreement No. 83456201 did not
comply with certain federal requirements or agreement conditions. As shown in
table 1, we questioned $571,626 of reported costs.
Table 1: Costs reported and questioned for EPA Agreement No. 83456201
Cost element
Reported
Questioned
Note
Travel
$ 382,417


Supplies
24,618


Contractual
611,287
295,976
(2)
Other
183,047


Indirect costs
196.841
196,841
(3)
Subtotal (1)
$1,398,210
$492,817





Drawdown amounts
$1,460,000
78.809
(4)
Total

$571,626

Source: OIG-generated table.
Note 1: Represents the amount reported (including expenditures and unliquidated
obligations) on the interim SF 425 FFR prepared by NASDARF and provided to
the OIG on January 24, 2013.
Note 2: Contractual costs totaling $295,976 were questioned, including:
•	Costs of $151,484 for Ramsey Consulting because NASDARF did not
perform a cost or price analysis, justify the use of a sole source, or
document the basis for the award cost or price of the sole-source award.
Chapter 5 of this report discusses this issue in detail.
•	Costs of $144,492 ($44,492 for University of Florida and $100,000 for
CropLife Latin America), because NASDARF did not comply with
agreement condition 5a(4) pertaining to the procurement of sub grants.
The agreement condition requires that the recipient determine the
reasonableness of proposed subgrant costs. NASDARF was unable to
provide documentation that the costs were reasonable. Chapter 5 of this
report discusses this issue in detail.
Note 3: We questioned $196,841 of indirect costs because NASDARF did not
comply with the requirements of its indirect cost rate agreements when
calculating an indirect cost rate and applying the rate to the allocation base for the
agreement. The amount questioned also includes a negative amount of $12,896
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for costs related to two unsupported adjustments to indirect costs. Chapter 4 of
this report discusses these issues in detail.
Note 4: We questioned the cash-on-hand balance of $78,809, which NASDARF
reported on its interim SF 425, because NASDARF maintained excessive cash
balances under the agreement and did not use the funds in a timely manner. This
amount represents the difference in expenditures and receipts. Chapter 4 of this
report discusses the issue in detail.
Recommendation
We recommend that the Director of the Office of Grants and Debarment:
1. Disallow and recover $571,626 of questioned costs. If NASDARF
provides documentation that meets appropriate federal requirements or
demonstrates the fairness and reasonableness of the subcontract and
subgrant costs, the amount to be recovered may be adjusted accordingly.
NASDARF and EPA Responses
NASDARF generally disagreed with our findings and provided a detailed
response to the issues presented in Notes 2, 3, and 4 above. However, NASDARF
did not provide a response to recommendation 1 or the recommendations
contained in chapters 4 and 5. The OIG included a discussion of NASDARF's
responses to Notes 2, 3, and 4 and OIG comments in the applicable chapters of
this report. NASDARF's complete written response and additional OIG
comments are included in appendix A.
The EPA agreed with recommendation 1 and stated it will:
1.	Provide NASDARF the opportunity to submit documentation to substantiate the
questioned costs.
2.	Review the documentation and take necessary corrective action, including recovery
of all or part of the questioned subcontract and indirect costs as well as funds drawn.
3.	Work with NASDARF to implement corrective actions to comply with federal
requirements on assuring the reasonableness of sub-grant, sub-contracts, indirect
costs and drawdown amounts.
The EPA's complete written response is included in appendix B.
OIG Comments
The OIG agrees with EPA's intended corrective actions for recommendation 1. However,
because the EPA did not provide specific planned completion dates for the corrective
actions, the OIG considers the status of the recommendation unresolved.
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Chapter 4
Financial Management System Did Not Meet
Certain Federal Requirements
NASDARFs financial management system did not meet certain federal
regulations and agreement conditions. Specifically, NASDARF:
•	Did not calculate and apply indirect cost rates correctly.
•	Reported outlays for indirect costs in excess of recorded expenses in the
general ledger.
•	Drew down funds that exceeded cash needs.
These conditions occurred because NASDARF did not have controls in place
to ensure compliance with federal regulations and agreement conditions.
In calculating indirect cost rates, NASDARF was not aware initially of
2 CFR Part 230 requirements to exclude subgrants and subcontracts in excess of
$25,000. NASDARF later interpreted the requirements erroneously and only
excluded amounts for subgrants but not subcontracts. For the reported outlays,
NASDARF lacked controls to ensure the recording of adjustments in the general
ledger. Lastly, NASDARF's written procedures for drawdowns did not
incorporate cash-management requirements as described in the administrative
conditions of the agreement or under federal regulations.
As described in chapter 3, we questioned $196,841 of indirect costs and $78,809
related to the excessive cash draws.
Indirect Cost Rates Were Calculated and Applied Incorrectly
NASDARF did not calculate indirect cost rates in accordance with the
requirements of its approved indirect cost rate agreements. Additionally,
NASDARF did not apply the rates to the appropriate allocation base when
reporting costs under the agreement.
The U.S. Department of the Interior's National Business Center (NBC) negotiates
indirect cost rates for the EPA. The indirect rate agreement between NASDARF
and the NBC for the fiscal year ending June 30, 2011, states that the allocation
base for the indirect rate should be total direct costs less capital expenditures
(i.e., the portion of subgrants or subcontracts in excess of the first $25,000 and
pass-through funds). This is consistent with 2 CFR Part 230, Appendix A,
paragraph D.3.f., which references modified total direct costs (MTDC) and states,
in part:
Indirect costs shall be distributed to applicable sponsored awards
and other benefiting activities within each major function on the
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basis of MTDC. MTDC consists of all salaries and wages, fringe
benefits, materials and supplies, services, travel, and subgrants and
subcontracts up to the first $25,000 of each subgrant or subcontract
(regardless of the period covered by the subgrant or subcontract).
Calculation of Indirect Cost Rate
When calculating the allocation base for FY 2011, NASDARF did not exclude
any subgrant or subcontract amounts. Subcontracts and subgrants in the allocation
base for the EPA agreement amounted to $306,563. The OIG's analysis revealed
that four subcontractors or subgrantors received payments that exceeded the
$25,000 limit. NASDARF should have excluded the excess payments totaling
$86,399 from the allocation base.
We do not know the effect that this condition has on the indirect cost rate. The
allocation base consisted of costs from five programs. Our review included only
the costs in the base for the EPA agreement. We did not determine whether
NASDARF should have deleted any costs from the other four programs. We
reviewed the indirect rate calculation for FY 2011 because, at the time of our
audit, this was the latest year for which NASDARF had an approved final indirect
cost rate.
Application of Indirect Cost Rate
When applying the indirect cost rate to total costs incurred for the EPA
agreement, NASDARF excluded $66,758 for subgrant and subcontract payments
that exceeded $25,000. We reviewed subgrant and subcontract payments and
determined that $286,453 should have been excluded—an increase of $219,695
over the excluded amount.
Initially, NASDARF was not aware of the requirement to exclude amounts in
excess of $25,000. Later, NASDARF misinterpreted the requirements and did not
exclude amounts for the subcontract that it awarded for project management.
NASDARF stated it did not consider the project manager to be the same as other
awards. NASDARF also stated that in order for the award to be financially viable,
it would need to apply indirect cost rates to the full amount of fees paid.
NASDARF reported $196,841 of indirect costs under the agreement. We
questioned the full amount because NASDARF did not calculate and apply the
rates in accordance with the provisions of its negotiated indirect cost rate
agreements. To ensure that its indirect cost rates result in an equitable allocation
of costs, NASDARF should:
• Recalculate indirect cost rates after excluding subgrant and subcontract
amounts in excess of $25,000, or request the NBC to amend its indirect
cost rate agreements to include an equitable allocation base.
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•	Submit revised indirect cost rates to the NBC for approval.
•	Claim indirect costs using the revised approved rates.
Reported Costs Exceeded Amounts Recorded in General Ledger
NASDARF was unable to support adjustments made to recorded expenses when
preparing its FFR. Total outlays reported on the interim FFR were $1,398,210.
The reported costs exceeded amounts recorded in the general ledger by $4,123.
NASDARF stated the difference was attributable to three adjustments related to
indirect costs. NASDARF provided adequate support for unrecorded indirect
costs of $17,019. However, we did not receive sufficient support for the two
remaining adjustments. NASDARF stated it had not recorded the amounts in the
general ledger as expenditures.
One negative adjustment of $5,183 was to reduce indirect expenses for the
amount of the CropLife Latin America contract, which exceeded $25,000. The
remaining negative adjustment of $7,713 was a decrease to FY 2011 indirect costs
for the difference between the billing and final indirect cost rates. Documents that
NASDARF provided to support these two adjustments consisted of two summary
accounting reports with handwritten notes in the margin. Supporting documents
that show how the amounts were determined were not included.
The requirements of 40 CFR ง30.21(b)(7) state that recipients' financial
management systems shall provide accounting records, including cost accounting
records that are supported by source documentation. In addition, 2 CFR Part 230,
Appendix A, paragraph A.2g, states that to be allowable under an award, costs
must be "adequately" documented. As a result, we questioned the two negative
adjustments totaling $12,896. Table 2 shows NASDARF's reconciliation of the
FFR to the general ledger.
Table 2: Reconciliation of FFR to the general ledger

Amounts
Comparison


FFR line 10g (total federal share)

$ 1,398,210
General ledger report

1,394,087
Difference

$4,123
Explanation


Unrecorded indirect costs for December 2012

$ 17,019
Adjustment to indirect cost for CropLife contract
exceeding $25,000
($5,183)

Unrecorded adjustment to FY 2011 indirect costs
(7,713)

Subtotal adjustments

(12,896)
Difference

$4 123
Source: Based on information provided by NASDARF.
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Accepted Cash Management Practices Not Followed
NASDARF did not follow accepted cash management practices when drawing
down EPA funds. This resulted in funds being held for excessive periods,
unnecessary funds drawn, and funds drawn and used for expenses incurred under
non-EPA programs. As of December 6, 2012, NASDARF made 15 draws totaling
$1,460,000. Our review of three of the 15 draws showed that NASDARF:
•	Expended funds from 21 to 125 days after drawing the funds.
•	Maintained an average cash balance of $147,029 during the period of
July 2010 through February 2013.
•	Used EPA funds to pay expenditures for five other non-EPA programs.
This occurred because NASDARF" s written drawdown policy does not include
requirements to minimize the time elapsing between drawing funds and making
expenditures, as required by the agreement and 40 CFR ง30.22(a) and (b).
In chapter 3 of this report, we questioned $78,809 of excess funds drawn as of the
interim FFR for the period ending January 24, 2013. This amount is reported as
cash on hand (line 10c) and represents the excess of cash receipts over cash
disbursements. NASDARF did not earn interest on the excess cash funds drawn.
Agreement administrative condition 4(a) states:
By accepting this agreement for the electronic method of payment
through the Automated Clearing House (ACH) network using the
EPA-ACH payment system, the recipient agrees to request funds
based on the recipient's immediate disbursement requirements by
presenting an EPA-ACH Payment Request to your EPA Servicing
Finance Office. Further, failure on the part of the recipient to
comply with the above conditions may cause the recipient to be
placed on the reimbursement payment method.
Title 40 CFR ง30.22(a) states, in part:
Payment methods shall minimize the time elapsing between the
transfer of funds from the United States Treasury and the issuance
or redemption of checks, warrants, or payment by other means by
the recipients.
Title 40 CFR ง30.22(b) states, in part:
Cash advances to a recipient organization shall be limited to the
minimum amounts needed and be timed to be in accordance with
the actual, immediate cash requirements of the recipient
organization in carrying out the purpose of the approved program
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or project. The timing and amount of cash advances shall be as
close as is administratively feasible to the actual disbursements by
the recipient organization for direct program or project costs and
the proportionate share of any allowable indirect costs.
Funds Held for Excessive Periods
NASDARF drew funds in advance of expenditures and held the funds for
excessive periods. We selected and reviewed supporting documentation for three
of the 15 draws. As shown in table 3, NASDARF did not begin to expend funds
for 21 to 125 days after the funds were drawn. In addition, the number of days
between the draw and the last payment ranged from 110 to 230 days.
Table 3: Number of days to expend drawdowns

First
Days to first
Last
Days to last
Draw date
payment
payment
payment
payment
7/21/2010
8/11/2010
21
3/8/2011
230
7/21/2011
8/22/2011
32
11/08/2011
110
7/12/2012
11/14/2012
125
1/22/2013
194
Source: NASDARF drawdown requests and supporting documents.
We noted a fourth draw made on April 22, 2013, for $249,000. In response to our
request for supporting documentation for the funds drawn, NASDARF replied
that the $249,000 represents expenditures that it expects to incur in April, May
and June 2013. NASDARF provided the OIG with a listing of the expected
expenditures for that 3-month period, which totaled $248,585. Since the
information provided represents expected expenditures, we were unable to
determine if the information refers to the number of days to expend the draw or if
the draw was appropriate.
Excessive Cash Balances Maintained
NASDARF maintained excessive cash balances in its EPA bank account. We
reviewed bank statements for the period beginning with the first EPA draw of
funds in July 2010 through February 2013. We summarized deposits, checks and
other debits, transfers in, and transfers out. We utilized the summary to compute
an average cash balance for each month and fiscal year, and for the agreement
period July 2010 through February 2013 (32 months). We found that NASDARF
maintained large cash balances during the entire period. As shown in table 4, the
average cash balance by year ranged from a low of $43,472 in FY 2011 to a high
of $263,164 in FY 2012.
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Table 4: Average cash balance
Fiscal year
Average cash
balance
Lowest
balance
Highest
balance
2011
$119,900
$43,472
$233,651
2012
$185,748
$108,060
$263,164
2013
$129,642
$66,380
$175,409
Source: OIG calculations using NASDARF bank statements.
Funds Used for Other Purposes
NASDARF used EPA funds to cover expenditures under other non-EPA
programs. Our review of NASDARF's bank statements showed numerous
transfers of funds from the EPA bank account to five other NASDARF bank
accounts, including accounts for:
•	NASDA.
•	Agricultural Quality Inspection Services.
•	Midwestern Association of State Departments of Agriculture.
•	Northeastern Association of State Departments of Agriculture.
•	Western Association of State Departments of Agriculture.
NASDARF stated it used the EPA funds to pay expenses incurred on other
non-EPA programs. This occurred because of delays in receiving funds from
other entities, delays due to the availability of funds by the bank, and problems
with NASDARF's bill-paying service. Table 5 summarizes transfers to and from
the EPA bank account.
Table 5: Transfers to and from the EPA account

Transfers out
Transfers in
FY 2010 (April-June 2010)
0
0
FY 2011 (July 2010-June 2011)
$ 35,371
$126,753
FY 2012 (July 2011-June 2012)
244,951
11,698
FY 2013 (July 2012-June 2013)
53,855
0
Source: NASDARF monthly bank statements.
Accounting Policy Manual Does Not Include Required Procedures
NASDARF's draft accounting policy manual dated June 30, 2011, Internal
Control Memo, includes procedures for drawing federal funds. However, the
procedures only indicate who requests the draws and states that the automated
accounting software be used to summarize and analyze documentation. There
were no written procedures to minimize the time between transfer of funds from
the U.S. Treasury and payment by the recipient for program purposes, as required
by the agreement and federal regulations.
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Title 40 CFR ง30.21(b)(5) states, in part:
(b) Recipients' financial management systems shall provide for the
following.
(5) Written procedures to minimize the time elapsing between
the transfer of funds to the recipient from the U.S. Treasury
and the issuance or redemption of checks, warrants or
payments by other means for program purposes by the
recipient.
Conclusion
Based on the findings above, NASDARF's financial management system did not
meet certain federal requirements contained in the agreement. The recipient's
written policies and procedures do not include the necessary guidance to ensure
compliance with 40 CFR Part 30. We have no assurance that costs are fair and
reasonable when NASDARF calculates indirect costs and rates incorrectly, does
not reconcile reported costs to its general ledger, withdraws excessive cash, and
holds funds for a long period of time.
To address the financial management issues identified, NASDARF should
establish controls to ensure indirect costs are calculated and applied consistent
with the requirements found in 2 CFR Part 230. NASDARF should also ensure
that costs are recorded and supported by adequate source documentation as
required by 40 CFR ง30.21(b)(7), and ensure that drawdowns are consistent with
the requirements contained in 40 CFR ง30.21(b)(5) and ง30.22(a) and (b).
The EPA should also impose special conditions on all current and future awards
of EPA funds as outlined in 40 CFR Part 30 and 40 CFR ง30.14, Special Award
Conditions, which states:
If an applicant or recipient: has a history of poor performance, is
not financially stable, has a management system that does not meet
the standards prescribed in Circular A-l 10; has not conformed to
the terms and conditions of a previous award; or is not otherwise
responsible, EPA may impose additional requirements as needed,
provided that such applicant or recipient is notified in writing as to:
the nature of the additional requirements, the reason why the
additional requirements are being imposed, the nature of the
corrective action needed, the time allowed for completing the
corrective actions, and the method for requesting reconsideration
of the additional requirements imposed. Any special conditions
shall be promptly removed once the conditions that prompted them
have been corrected.
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The special conditions should include: (a) payment on a reimbursement basis; and
(b) EPA review and approval of reimbursement requests prior to payment.
Recommendations
We recommend that the Director of the Office of Grants and Debarment:
2.	Require NASDARF to:
a.	Recalculate its indirect cost rate for FY 2011, excluding subgrant
and subcontract amounts in excess of $25,000; and submit to the
NBC for approval, or ask the NBC to amend, the indirect cost rate
agreements to include an equitable allocation base.
b.	Claim indirect costs using the recalculated approved rates.
3.	Require NASDARF to calculate its indirect cost rates for years beyond
FY 2011 by excluding subgrant and subcontract amounts in excess of
$25,000; or to be in accordance with any revised indirect cost rate
agreement.
4.	Require the following special conditions be included for all current and
future awards until the EPA determines that NASDARF has met all
applicable federal financial requirements:
a.	Payment on a reimbursement basis.
b.	Review and approval of reimbursement requests, including all
supporting documentation, prior to payment.
NASDARF Response
NASDARF generally did not agree with the OIG findings and recommendations
and provided the following comments.
Did not calculate and apply indirect cost rates correctly: NASDARF responded
that it is fully informed of 2 CFR Part 230 requirements and at no time was under
the impression, nor did they execute any activities under the illusion, that indirect
costs could be charged on subgrants and subcontracts in excess of $25,000.
Further, NASDARF stated that the OIG's charge relates specifically to Ms. Carol
(Ramsay) Black's misclassification as a "subcontractor," when in fact, Ms. Black
is a contracted employee/consultant under Ramsay Consulting, LLC. As a
contracted employee, Ms. Black is not subject to the rule of a subcontract under 2
CFR Part 230.
NASDARF also responded that the OIG listed Ramsay Consulting LLC,
Richard Herrett, Maria Stein Associates, and CropLife Latin America as
subcontractors/subgrantors receiving payments in excess of $25,000. Ramsay
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Consulting, LLC and Mr. Herrett served as project managers for the grant and are
therefore considered direct salary. Irrespective of the classification, Mr. Herrett
was not paid under this current agreement. Maria Stein Associates received
$21,143 under Cooperative Agreement 83456201 and the remaining invoices
were charged under a prior agreement.
NASDARF stated it is awaiting the EPA grants office's opinion before making
any decisions in regard to reapplying for indirect rates.
NASDARF lacked controls to ensure the recoding of adjustment in the general
ledger: NASDARF disagreed with the OIG's finding that it lacked controls to
ensure the recording of adjustments in the general ledger. NASDARF stated that
the nature of any indirect rate application results in regular adjustments when
rates change and new payments are made for subgrants. NASDARF's goal is to
obtain a correct cumulative total in the indirect allocation, not an unrealistic
expectation of an unchanging allocation each month. Assessing these values at
interim periods over the life of the grant only offers a snapshot at that specific
time. NASDARF also provided a revised SF 425 as of October 31, 2013, and
supporting general ledger through October 2013.
NASDARF" s written procedures for drawdown did not incorporate cash-
management requirements described in the administrative conditions of the
agreement or under federal regulations: NASDARF responded it had changed
both personnel and policy within the last year to ensure cash management
practices are line with grant requirements. NASDARF's updated policy now
reads:
Drawdowns related to the EPA agreement are initiated by the
Director of Finance based on anticipated short-term expenses as
reported and documented by the Project Director. Drawdowns are
typically made after expenses are paid but may be made a week in
advance in anticipation of large vendor/sub grant disbursements.
NASDARF also stated that it is aware of OIG's position claiming funds are
available within 3 business days; however, recent technical difficulties with the
ASAP website make it extremely challenging for NASDARF management to
operate with a 3-day window for distributing funds.
NASDARF used EPA funds to cover expenditures under other non-EPA
programs: NASDARF stated that the OIG's assertion that it used EPA funds for
expenditures for other non-EPA programs is incorrect. NASDASRF stated that it
transfers funds from the NASDARF checking account to other NASDA-affiliated
accounts only after NASDARF earned the funds through indirect allocations or
reimbursement for direct expenses.
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EPA Response
The EPA agreed with the OIG's recommendations and provided the following
comments.
Recommendation 2: The Office of Grants and Debarment (OGD) will provide
NASDARF the opportunity to clarify its position and properly support its indirect
rate and require NASDARF to amend the rate where appropriate. OGD will
review NASDARF's support and coordinate with the U.S. Department of the
Interior's NBC to review and amend the indirect cost rate agreement as needed,
then require NASDARF to adjust claimed costs according to the revised
agreement.
Recommendation 3: Where necessary, OGD will require NASDARF to
recalculate its indirect costs rates to be in compliance with 2 CFR Part 230 and
coordinate with NBC to revise NASDARF's rates. OGD will then require
NASDARF to adjust claimed costs according to any revised indirect cost rate
agreements.
Recommendation 4: OGD will place NASDARF on reimbursement for its active
assistance agreements. The agency will require NASDARF to provide supporting
documents for costs incurred for the agency's review prior to releasing funds for
payment. NASDARF will remain on reimbursement status until it has demonstrated
to the agency that its financial management of EPA agreements meets applicable
federal requirements for drawing grant funds.
OIG Comments
The OIG did not agree with NASDARF's comments. The OIG's responds to them
as follows.
Did Not Calculate and Apply Indirect Cost Rates Correctly: In its response,
NASDARF states that Ms. Black's position should be treated as direct salary. The
OIG disagrees with this position. Under 2 CFR Part 230, Appendix B.8,
compensation for personal services includes services provided by the
organization's employees. Since Ms. Black is not an employee, her position cannot
be treated as a direct salary. There is no disagreement that Ms. Black is a
contractor. However, based on further review of 2 CFR Part 230, the OIG believes
that clarification is needed about the relationships discussed (i.e., grants-subgrants,
contracts-subcontracts, and whether the requirement applies to the Ramsey
contract). NASDARF's relationship with Ramsey is not the typical grant-subgrant
relationship; rather, it is a grant-contract relationship. We recommend that the EPA
seek clarification on whether this type of relationship is subject to the $25,000
requirement. This would also apply to the services provided by Mr. Herrett.
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NASDARFs comment that the costs for Mr. Herrett and Ms. Stein were not
claimed under this agreement is correct. However, the costs were included in the
allocation base when computing the FY 2011 indirect cost rate. NASDARF used
the FY 2011 rate to claim indirect costs under this agreement. Therefore, these
costs should be limited to the $25,000.
NASDARF Lacked Controls to Ensure the Recoding of Adjustment in the
General Ledger: The OIG based its finding on the fact that the general ledger did
not support the outlays reported on the interim FFR. The OIG acknowledges the
adjustments of indirect costs as NASDARF discussed. However, outlays reported
on the FFR should be adequately supported as required by 40 CFR ง30.21(b)(7).
Although NASDARF provided a revised SF 425 and general ledger, it did not
provide any additional documentation to support the two adjustments reported
under the interim FFR. As a result, the OIG continues to question the costs as
unsupported.
NASDARF's Written Procedures for Drawdown Did Not Incorporate Cash-
Management Requirements Described in the Administrative Conditions of the
Agreement or Under Federal Regulations: The OIG acknowledges that NASDARF
revised its procedures. However, the procedures do not indicate that drawdowns
should be made as close as administratively feasible to the actual disbursements
and be timed in accordance with the actual, immediate cash requirements. The OIG
does not consider this acceptable, and continues to maintain that NASDARF can
get funds from the EPA within 3 days or less.
NASDARF Used EPA Funds to Cover Expenditures Under Other Non-EPA
Programs: The OIG disagrees with NASDARF that it did not use EPA funds for
expenditures for non-EPA programs. The OIG's cash flow analysis, conducted
using NASDARF's bank statements, showed that NASDARF moved funds
between EPA's programs and others. Most of the transfers out were to the NASD A
account, which, as discussed in NASDARF's response above, could be for
reimbursement for indirect expenses. However, there were significant deposits to
and from the EPA account from other agencies. There were also smaller transfers
out from the EPA account to other associations within the state departments of
agriculture. Federal Regulations at Title 40 CFR 30.21(b)(3) require that recipients'
financial management systems shall assure that funds are used solely for authorized
purposes.
The OIG agrees with EPA's intended corrective actions for recommendations 2, 3,
and 4. However, because the EPA did not provide specific planned completion
dates for the corrective actions, the OIG considers the status of the
recommendations unresolved.
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Chapter 5
Procurements Did Not Meet Federal Requirements
or Agreement Conditions
NASDARFs procurement practices for subcontracts and subgrants did not
comply with federal requirements or agreement conditions. In particular,
NASDARF did not:
•	Provide documentation to support the sole-source procurement process
used for its project management subcontract, or conduct a cost or price
analysis as required by 40 CFR Part 30 and NASDARF's own
procurement policy.
•	Comply with agreement administrative condition 15.a.(4) for subgrants
awarded to the University of Florida and CropLife Latin America.
•	Include provisions required by 40 CFR Part 30 in its written procurement
policy.
These conditions occurred because of NASDARF's lack of knowledge or a lack
of understanding about agreement conditions and federal requirements.
Additionally, NASDARF's written policies and procedures provided inadequate
guidance for subcontract and subgrant awards. As shown in chapter 3, we
questioned $295,976 that NASDARF incurred and reported for three awards.
Table 6 details the subcontract and subgrant awards questioned.
Table 6: Subcontract and subgrant costs questioned
Cost element
Reported and
questioned
Project management subcontract
$151,484
University of Florida subgrant
44,492
CropLife Latin America subgrant
100.000
Total
$295,976
Source: NASDARF's reported costs.
Sole-Source Procurement Not Justified; Cost or Price Analysis
Not Conducted
When awarding a subcontract for project management, NASDARF did not
promote open and free competition, perform a cost or price analysis, document
the basis for the award cost or price, or properly document its procurement
practices. NASDARF signed the subcontract on February 26, 2009. The
subcontract provided project management services at an hourly rate of $90.
The hourly rate included salary of $74.50 and indirect costs of $15.50.
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As of January 2013, NASDARF had incurred and reported $151,484 for this
subcontract.
Requirements listed under 40 CFR ง30.43 state that all procurement transactions
be conducted in a manner to provide, to the maximum extent practical, open and
free competition. In addition, 40 CFR ง30.45 requires that some form of cost or
price analysis be made and documented in the procurement files in connection
with every procurement action. According to 40 CFR ง30.46, procurement
records and files for purchases in excess of the small purchase threshold must
include at least the basis for contractor selection, justification for lack of
competition when competitive bids or offers are not obtained, and the basis for
award cost or price.
NASDARF" s own written procurement policy for purchases exceeding $25,000
requires that a cost analysis be conducted and documented in conjunction with
every purchase. Justification for the lack of competition should also be
documented if competitive bids or offers are not obtained.
NASDARF initially informed us that it did not solicit proposals for project
managers from other subcontractors. A subcontractor was selected based on
NASDARF" s experiences and NASDARF" s discussion with other knowledgeable
personnel, including EPA staff. We asked NASDARF to provide justification for
the lack of competition, the use of a sole source, the basis for contractor selection,
the basis for the award price, and its cost or price analysis for the subcontract.
NASDARF was unable to provide any of the required documents or provide
evidence that it had performed any of the required steps. NASDARF stated that
most of their procurement actions for this subcontract were verbal and were not
documented.
Subgrant Procurements Did Not Comply With Administrative
Condition
NASDARF did not comply with administrative condition 15.a.(4) in the award of
subgrants to the University of Florida and to CropLife Latin America.
Administrative condition 15.a.(4) required NASDARF to determine whether
proposed subgrant costs are reasonable. NASDARF's analysis of proposed costs
for these two awards was insufficient and lacked numerous support items that
should be included when determining the reasonableness of costs.
University of Florida Agreement
NASDARF made an $88,984 award to the University of Florida on May 25, 2010.
The purpose of the award was to identify the potential risks of pesticide drift from
agricultural operations, develop good-neighbor practices for minimizing risks, and
disseminate educational material on drift and good-neighbor practices.
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NASDARF agreed to pay $44,492 upon the execution of the award, with the
remaining 50 percent due upon receipt of a first-year interim report. As of
January 2013, NASDARF had incurred and reported $44,492 for the subgrant
under the previous EPA Agreement No. 83235401, and the remaining amount of
$44,492 is reported under EPA Agreement No. 83456201.
We asked NASDARF to provide documentation of its review of the
reasonableness of proposed costs for the award. In response, NASDARF stated
that the costs were reasonable. NASDARF did not submit any comparisons of
price quotes, market prices or other benchmarks to support its determination of
reasonableness. In addition, NASDARF did not submit any documentation
indicating that it had evaluated each element of cost.
CropLife Latin America Agreement
NASDARF made an award to CropLife Latin America for a project in Costa Rica.
Dated January 31, 2011, the agreement included total project costs of $204,307
over a 3-year period. NASDARF's share of the total was $100,000. As of
January 2013, NASDARF had incurred and reported the full $100,000.
We asked NASDARF for documentation of its review of the reasonableness of
costs for the award. In response, NASDARF provided a document that described
its review of the proposed amount. The analysis did not demonstrate that the
proposed costs were reasonable. NASDARF stated that the cost of the project
compared favorably to the cost of other EPA projects. NASDARF stated that the
cost of the other EPA projects was $30,000. However, NASDARF did not name
the other EPA projects, provide any supporting documents or other market prices,
or provide benchmarks to support the reasonableness of the costs. NASDARF
also stated that the project would be substantially more expensive if another entity
conducted the project, but NASDARF did not provide any supporting
documentation for this statement.
Written Procurement Policy Does Not Include Required Procedures
We reviewed NASDARF's written procurement policy to determine whether the
policy included provisions required by 40 CFR Part 30. The policy contained
several required procurement practices but lacked other requirements.
NASDARF's policy was implemented in FY 2010 and applies to purchases
exceeding $25,000. The policy:
•	Prohibits conflicts of interest.
•	Includes provisions for conducting and documenting a cost analysis in
conjunction with every procurement.
•	Requires justification for lack of competition if competitive bids or offers
are not obtained.
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•	Requires procurements to be conducted to maximize opportunities,
increase quality and reduce the cost of the purchase.
•	Requires justification for the award of a contract to an entity other than the
low bidder.
However, the NASDARF policy did not include the following requirements from
40 CFR Part 30, which requires solicitations to include:
•	A clear statement on all requirements that the bidder or offeror should
fulfill for the bid or offer to be evaluated (ง30.43).
•	A clear and accurate description of the technical requirements
(ง30.44(a)(3)(i)).
•	Requirements that the bidder/offeror must fulfill all other factors to be
used in evaluating bids or proposals (ง30.44(a)(3)(ii)).
•	Contracts be awarded only to responsible contractors who possess the
potential ability to perform successfully under the terms and conditions of
the proposed procurement (ง30.44(d)).
•	Procurement records and files for purchases in excess of the small
purchase threshold also include the basis for contractor selection (ง30.46).
Conclusion
NASDARF's procurements did not follow its own procurement policy, comply
with federal requirements or meet all conditions of the agreement. When
recipients do not justify sole-source procurements or complete the required cost or
price analysis, the OIG has no assurance that costs are fair and reasonable. Since
NASDARF did not document its decisions at the time of the procurement, it did
not comply with federal requirements. Consideration of NASDARF's after-the-
fact explanations and documentation is at the discretion of EPA management and
would require a formal deviation from agency policy in accordance with
40 CFR ง30.4, Deviations. This regulation states:
The Office of Management and Budget (OMB) may grant
exceptions for classes of grants or recipients subject to the
requirements of Circular A-l 10 when exceptions are not
prohibited by statute. However, in the interest of maximum
uniformity, exceptions from the requirements of Circular A-l 10
shall be permitted only in unusual circumstances. EPA may apply
more restrictive requirements to a class of recipients when
approved by OMB. EPA may apply less restrictive requirements
when awarding small awards, except for those requirements which
are statutory. Exceptions on a case-by-case basis may also be made
by EPA.
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Recommendation
We recommend that the Director of the Office of Grants and Debarment:
5. Require NASDARF to establish controls for future awards in order
to ensure:
a.	Documentation is maintained in procurement files to justify
sole-source procurements and to ensure compliance with
40 CFRง30.46.
b.	Compliance with 40 CFR ง30.45 by conducting a cost or price
analysis to determine reasonableness of costs.
c.	Compliance with administrative conditions of the award by
determining and documenting the reasonableness of subgrant costs.
NASDARF Response
NASDARF generally did not agree with the OIG findings and recommendations
and provided the following comments.
Sole-Source Procurement Not Justified. Cost or Price Analysis Not Conducted:
NASDARF responded that, as provided in previous communications with the
OIG, both NASDARF and the EPA engaged several individuals for consideration
to replace Mr. Richard Herrett as the NASDARF Project Manager. However, due
to the unique skill-set and expertise required to adequately fill the NASDARF
Project Manager position, only a finite number of individuals met the
qualifications needed for consideration. One of the candidates, Mr. Roger
Flashinski, under consideration for the Project Manager position, provided a
statement confirming that he was not able to accept the position due to timing
considerations and his position with another university did not allow for the same
accommodations as Ms. Black. Additionally, NASDARF addressed the
reasonableness of pay and provided comparison data to current positions similar
in scope and demands.
Cost or Price Analysis Not Conducted: NASDARF did not agree with the OIG
findings and recommendations and restated its assessment of "reasonableness of
costs" for the University of Florida project. NASDARF stated that the rates in the
proposal are reasonable and fall within typical rates for editing. Further, the
pesticide-related subject matter is technical and requires a skilled editor.
NADARF also included analysis of the various cost elements.
Similar to the University of Florida subgrant, NASDARF stated that it provided
sufficient documentation to demonstrate "reasonableness of costs" for the
CropLife Latin America project. NASDARF also included further discussion of
the various cost elements and comparisons to other state pesticide safety
education programs.
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EPA Response
The EPA agreed with the OIG's recommendations and stated that OGD will
require NASDARF to comply with the requirements of 40 CFR Part 30 and
administrative conditions with respect to documenting the justification of sole-
source procurements and performing an adequate cost or price analyses for
procurements and subawards to determine the reasonableness of cost.
OIG Comments
The OIG acknowledges NASDARF's discussion regarding the cost-price analysis
and reasonableness of costs associated with the Ramsey contract and the subgrants.
However, since NASDARF did not document the analysis at the time of the
procurement, it did not comply with federal requirements. Consideration of
NASDARF" s after-the-fact explanations and documentation is at the discretion of
EPA management and would require a formal deviation from agency policy in
accordance with 40 CFR ง30.4, Deviations.
The OIG agrees with EPA's intended corrective actions for recommendation 5.
However, because the EPA did not provide specific planned completion dates for
the corrective actions, the OIG considers the status of the recommendation
unresolved.
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Chapter 6
Other Unresolved Issue
During our review of NASD A's single audit report for FY 2012, the OIG learned
of an unresolved issue pertaining to a prior EPA agreement. Specifically,
NASDARF reported and drew funds of $118,324 for potentially unallowable
costs under EPA Agreement No. 83235401. Per the single audit report, the costs
were recorded as a refundable advance and represent funds received as of
year-end but not yet earned. NASDARF initially considered the costs (incurred in
2006 and 2007) as unallowable and did not report them. NASDARF later reported
the costs to the EPA as part of the closeout of the agreement in 2011. Although
the EPA closed the agreement, NASDARF stated that the agency never made a
determination on the allowability of the costs. NASDARF will recognize these
funds as revenue once accepted by the EPA.
We followed up with EPA personnel in the Office of Pesticide Programs and
OGD, and found that staff were unaware of the issue. Personnel in both offices
stated they had no knowledge of the potentially unallowable costs. However, staff
said they would discuss the issue with personnel associated with the previous
agreement and obtain more information. As a result, we questioned the $118,324
pending review and approval by EPA.
Although the agreement is closed, the EPA can recover funds if the funds are
determined to be unallowable. Title 40 CFR ง30.72(a) states the closeout of an
award does not affect, in part, the following:
•	The right of EPA to disallow costs and recover funds on the basis of a
later audit or other review.
•	The obligation of the recipient to return any funds due as a result of later
refunds, corrections or other transactions.
•	Audit requirements (ง30.26).
In addition, 40 CFR ง30.73(a) states:
Any funds paid to a recipient in excess of the amount to which the
recipient is finally determined to be entitled under the terms and
conditions of the award constitute a debt to the Federal
Government. If not paid within a reasonable period after the
demand for payment, EPA may reduce the debt by paragraph (a)
(1), (2) or (3) of this section.
(1) Making an administrative offset against other requests
for reimbursements.
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(2)	Withholding advance payments otherwise due to the
recipient.
(3)	Taking other action permitted by statute.
Recommendation
We recommend that the Director of the Office of Grants and Debarment:
6. Determine the allowability of the $118,324 in costs incurred under prior
EPA Agreement No. 83235401 and recover any costs determined to be
unallowable.
NASDARF Response
NASDARF responded that the EPA had officially closed the grant and released
the funds. NASDARF also provided a copy of the close-out letter.
EPA Response
The EPA responded to the recommendation stating that OGD and the Office of
Chemical Safety and Pollution Prevention will require NASDARF to submit
documentation for the costs in question incurred in 2007 under Agreement No.
83235401 to determine whether they are allowable under the agreement. EPA also
responded it will review the documentation and take necessary corrective action,
including the recovery of costs as appropriate if they are determined to be
unallowable.
OIG Comments
The OIG acknowledges that the EPA closed the grant and released the funds.
However, based on NASDARF's comments to the OIG and the single audit report
for FY 2012, allowability of the costs remains at issue.
The OIG agrees with EPA's intended corrective actions for recommendation 6.
However, because the EPA did not provide specific planned completion dates for
the corrective actions, the OIG considers the status of the recommendation
unresolved.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Planned
Completion
Action Official	Date
Claimed
Amount
Ag reed-To
Amount
7 Disallow and recover $571,626 of questioned
costs. If NASDARF provides documentation that
meets appropriate federal requirements or
demonstrates the fairness and reasonableness of
the subcontract and subgrant costs, the amount to
be recovered may be adjusted accordingly.
15 Require NASDARF to:
a.	Recalculate its indirect cost rate for FY 2011,
excluding subgrant and subcontract amounts
in excess of $25,000; and submit to the NBC
for approval, or ask the NBC to amend, the
indirect cost rate agreements to include an
equitable allocation base.
b.	Claim indirect costs using the recalculated
approved rates
15 Require NASDARF to calculate its indirect cost
rates for years beyond FY 2011 by excluding
subgrant and subcontract amounts in excess of
$25,000; or to be in accordance with any revised
indirect cost rate agreement.
15 Require the following special conditions be
included for all current and future awards until the
EPA determines that NASDARF has met all
applicable federal financial requirements:
a.	Payment on a reimbursement basis.
b.	Review and approval of reimbursement
requests, including all supporting
documentation, prior to payment.
23 Require NASDARF to establish controls for future
awards in order to ensure:
a.	Documentation is maintained in procurement
files to justify sole-source procurements and
to ensure compliance with 40 CFRง30.46.
b.	Compliance with 40 CFR ง30.45 by
conducting a cost or price analysis to
determine reasonableness of costs.
c.	Compliance with administrative conditions of
the award by determining and documenting
the reasonableness of subgrant costs.
26 Determine the allowability of the $118,324 in costs
incurred under prior EPA Agreement No. 83235401
and recover any costs determined to be
unallowable.
Director, Office of
Grants and Debarment
Director, Office of
Grants and Debarment
$572
Director, Office of
Grants and Debarment
Director, Office of
Grants and Debarment
Director, Office of
Grants and Debarment
Director, Office of
Grants and Debarment
$118
1 O = 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
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Appendix A
NASDARF's Comments on Draft Report
and OIG Responses
NASDA
National Association of State Departments of Agriculture
4350 North Fairfax Drive
Suite 910
Arlington, VA 22203
Tel: 202-296-9680 | Fax: 703-880-0509
www.nasda.org
December 19, 2013
Ms. Angela Bennett
US EPA Region 4
Office of Inspector General
61 Forsyth Street, S.W.
Mailcode: 12T26
Atlanta, GA 30303-8960
RE: Office of Inspector General's Draft Report on Examination of NASDARF's
Cooperative Agreement No. 83456201
Dear Ms. Bennett:
Thank you for the opportunity to provide comments and additional information on the Office of
Inspector General's (OIG) draft examination on the National Association of State Departments of
Agriculture Research Foundation's (NASDARF) cooperative agreement with the Environmental
Protection Agency (No. 83456201).
In an effort to provide a complete and accurate response to OIG's inquires under Project No. OA-
FY13-0140, NASDARF has personally met with OIG management on several occasions, fully
complied with all of OIG's requests for information and supporting documentation over several
months, and met with EPA's Office of Pesticide Programs (OPP) representatives to discuss and
provide informed responses to OIG's draft examination. In addition to the specific responses below,
we are providing the attached documentation for your review (Attachments A-U).
We value OIG's role and mission, and we appreciate any opportunity to increase NASDARF
efficiencies in our cooperative agreement with EPA. Please see our responses to OIG findings
below.
OIG Charge: Financial Management Systems did not Meet Certain Federal Requirements
In Chapter 4 of the OIG draft examination, OIG made the following charges:
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NASDARF's financial management system did not meet certain federal regulations
and agreement conditions. Specifically, NASDARF:
•	Did not calculate and apply indirect cost rates correctly.
•	Reported outlays for indirect costs in excess of recorded expenses in the
general ledger.
•	Drew down funds that exceeded cash needs.
These conditions occurred because NASDARF did not have controls in place to
ensure compliance with federal regulations and agreement conditions. In calculating
indirect cost rates, NASDARF was not aware initially of 2 CFR Part 230
requirements to exclude subgrants and subcontracts in excess of $25,000. NASDARF
later interpreted the requirements erroneously and only excluded amounts for
subgrants, but not subcontracts. For the reported outlays, NASDARF lacked controls
to ensure the recording of adjustments in the general ledger. Lastly, NASDARF's
written procedures for drawdowns did not incorporate cash-management
requirements as described in the administrative conditions of the agreement or under
federal regulations.
NASDARF Response to Chapter 4 Charge: Did not calculate and apply indirect cost
rates correctly:
NASDARF is fully informed of 2 CFR Part 230 requirements to exclude subgrants and subcontracts
in excess of $25,000, and at no time was NASDARF under the impression, nor did NASDARF
execute any activities under the illusion, that indirect costs could be charged on subgrants and
subcontracts in excess of $25,000.
OIG's charge relates specifically to Ms. Carol (Ramsay) Black's misclassification as a
"subcontractor," when in fact, Ms. Black is a contracted employee/consultant under Ramsay
Consulting, LLC. NASDARF maintains a long standing relationship with Ms. Black in her capacity
as a contract employee, and Ms. Black's correct classification as a contracted employee is not
subject to the rule of a subcontract under 2 CFR Part 230.
As provided in previous communications with OIG, both NASDARF and EPA engaged several
individuals for consideration to replace Mr. Richard Herrett as the NASDARF Project Manager.
However, due to the unique skill-set and expertise required to adequately fill the NASDARF Project
Manager position, only a finite number of individuals met the qualifications needed for
consideration. Subsequently, both EPA and NASDARF identified Ms. Black as the most qualified
employee candidate during the recruitment process to replace Mr. Herrett, who had indicated his
desire to retire. However, in order to hire Ms. Black and allow her to retain her faculty position at
Washington State University, it was necessary for Ms. Black to serve in a "consultant/employment"
capacity. To this end, NASDARF made a budgetary request in March 2011 to move $520,000 from
the Salary budget category into the Contractual category.
Since Ms. Black serves as an agent for NASDARF and the project manager for cooperative
agreement No. 83456201, her position should be treated as direct salary. NASDARF recognizes
Ms. Black's hourly expenses should be budgeted as salary per the original budget. NASDARF will
request that the budget is returned to its original classifications.
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Ms. Black is perceived by all project partners, stakeholders, and EPA as being an agent of
NASDARF. Her expertise is largely responsible for the high level of quality work and numerous
deliverables this Cooperative Agreement has produced, and EPA, NASDA, and the stakeholder
community hold her in high regard. OIG and NASDARF may disagree on Ms. Black's position and
the Ramsay Consulting, LLC contract. Given this potential disagreement, NASDARF maintains the
indirect cost rule was applied consistently across each and every other subgrant and subcontract,
including those in question with University of Florida, CropLife Latin America, and Texas A&M
University.
In addition, OIG listed Ramsay Consulting LLC, Richard Herrett, Maria Stein Associates, and
CropLife Latin America as subcontractors/subgrantors receiving payments in excess of $25,000.
Ramsay Consulting, LLC and Mr. Herrett served as project managers for the grant and are therefore
considered direct salary. Irrespective of the classification, Mr. Herrett was not paid under this
current agreement. Maria Stein Associates received $21,143 under Cooperative Agreement X8-
83456201; these expenses are as follows: printing Handler Verification cards (second payment of
$11,950 from June 2010), a thumb drive ($163 in Sept 2012) and publication design for a PPE
document ($9,030 in May 2013). The remaining invoices were charged under a prior agreement
(Attachments A-H).
As OIG noted in its discussion of adjustments to the indirect allocation, indirect costs were not
ultimately charged on the $10,093 over $25,000 paid to CropLife Latin America.
NASDARF applies for their indirect rate annually. The rate is approved by the National Business
Center (NBC). This results in a revised Final indirect rate and a new Provisional indirect rate. The
Final indirect rate is received long after the close of the NASDARF fiscal year and almost always
requires adjustment to prior years (Attachment I).
NASDARF is awaiting the EPA grants office's opinion before making any decisions in regards to
reapplying for indirect rates. Indirect rates were calculated with guidance from EPA and the NBC,
which considered all programs currently undertaken by NASDA and NASDARF. This arduous
process takes resources away from program goals and would more than likely result in no material
adjustments.
OIG Response 1: In its response, NASDARF states that Ms. Black's position should be
treated as direct salary. The OIG disagrees with this position. Under 2 CFR 230,
Appendix B.8, compensation for personal services includes services provided by the
organization's employees. Since Ms. Black is not an employee, her position cannot be
treated as a direct salary. There is no disagreement that Ms. Black is a contractor. However,
based on further review of 2 CFR Part 230, the OIG believes that clarification is needed
about the relationships discussed (i.e., grants-subgrants, contracts-subcontracts, and whether
the requirement applies to the Ramsey contract). NASDARF's relationship with Ramsey is
not the typical grant-subgrant relationship; rather, it is a grant-contract relationship. We
recommend that the EPA seek clarification on whether this type of relationship is subject to
the $25,000 requirement. This would also apply to Mr. Herrett.
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NASDARF Response to Chapter 4 Charge: NASDARF lacked controls to ensure the
recording of adjustments in the general ledger:
NASDARF disagrees with OIG's statement that NASDARF lacked "controls to ensure the
recording of adjustments in the general ledger." The nature of any indirect rate application results
in regular adjustments when rates change and new payments are made for subgrants. NASDARF's
goal is to obtain a correct cumulative total in the indirect allocation, not an unrealistic expectation of
an unchanging allocation each month. Assessing these values at interim periods over the life of the
grant only offers a snapshot at that specific time. Attachment J includes the general ledger through
October 2013 and Attachment K is a revised SF425 as of October 31, 2013, which provide greater
context of the grant during a dynamic, interim period. Attachment L reflects the indirect rates over
the life of the grant.
OIG Response 2: The OIG based its finding on the fact that the general ledger did not
support the outlays reported on the interim FFR. The OIG acknowledges the adjustments of
indirect costs as NASDARF discussed; however, outlays reported on the FFR should be
adequately supported as required by 40 CFR ง30.21(b)(7). NASDARF did not provide any
additional documentation to support the two adjustments reported under the interim FFR.
As a result, the OIG continues to question the costs as unsupported.
NASDARF Response to Chapter 4 Charge: NASDARF's written procedures for
drawdowns did not incorporate cash-management requirements described in the
administrative conditions of the agreement or under federal regulations:
NASDARF has changed both personnel and policy within the last year to insure cash management
practices are in line with grant requirements. According to the revised SF425, as of October 31,
2013, EPA owed NASDARF $125,319.20 in direct expenses and indirect allocations (Attachment
M). This money was drawn down in November per NASDARF's updated policy, which now reads:
"Drawdowns related to the EPA agreement are initiated by the Director of Finance based on
anticipated short-term expenses as reported and documented by the Project Director.
Drawdowns are typically made after expenses are paid but may be made a week in advance
in anticipation of large vendor/sub grant disbursements."
NASDARF is aware of OIG's position claiming funds are available within 3 business days;
however, recent technical difficulties with the ASAP website make it extremely challenging for
NASDARF management to operate with a 3-day window for distributing funds.
OIG Response 3: The OIG acknowledges that NASDARF revised its procedures; however,
the procedures do not indicate that drawdowns should be made as close as administratively
feasible to the actual disbursements and be timed in accordance with the actual, immediate
cash requirements. The OIG does not consider this acceptable, and continues to maintain that
NASDARF can get funds from the EPA within 3 days or less.
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NASDARF Response to Chapter 4 Charge: NASDARF used EPA funds to cover
expenditures under other non-EPA programs:
OIG's assertion that NASDARF used EPA funds for expenditures for other non-EPA programs is
incorrect. Funds were transferred from the NASDARF checking account to other NASDA
affiliated accounts only after NASDARF earned the funds through indirect allocations or
reimbursement for direct expenses. NASDARF is unclear how OIG's assumption was generated,
and NASDARF is highly concerned OIG did not adequately develop an understanding of
NASDARF's revenue recognition and cash management procedures when reaching this conclusion.
NASDARF welcomes additional information and explanation on how OIG developed this finding.
OIG Response 4: The OIG disagrees with NASDARF that it did not use EPA funds for
expenditures for non-EPA programs. The OIG's cash flow analysis, conducted using
NASDARF's bank statements, showed that NASDARF moved funds between the EPA's
programs and others. Most of the transfers out were to the NASDA account, which, as
discussed in the response above, could be for reimbursement for indirect expenses.
However, there were significant deposits to and from the EPA account from other agencies.
There were also smaller transfers out from the EPA account to other associations within the
state departments of agriculture. Title 40 CFR 30.21(b)(3) requires that recipients' financial
management systems shall assure that funds are used solely for authorized purposes.
OIG Charge: Procurements did not meet Federal Requirements or Agreement Conditions
In Chapter 5 of the OIG draft examination, OIG made the following charges:
NASDARF's procurement practices for subcontracts and subgrants did not comply
with federal requirements or agreement conditions. In particular, NASDARF did
not:
•	Provide documentation to support the sole-source procurement process used
for its project management subcontract, or conduct a cost or price analysis
as required by 40 CFR Part 30 and NASDARF's own procurement policy.
•	Comply with agreement administrative condition no. 15.a.(4) for subgrants
awarded to the University of Florida and Croplife Latin America.
•	Include provisions required by 40 CFR Part 30 in its written procurement
policy.
These conditions occurred because of NASDARF's lack of knowledge or a lack of
understanding about agreement conditions and federal requirements. Additionally,
NASDARF's written policies and procedures provided inadequate guidance for
subcontract and subgrant awards. As shown in chapter 3, we questioned $295,976
that NASDARF incurred and reportedfor three awards. - not explicitly addressed.
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NASDARF Response to Chapter 5 Charge: Sole-Source Procurement Not Justified;
Cost or Price Analysis Not Conducted:
As stated above, Ms. Black is a contracted employee/consultant under Ramsay Consulting, LLC.
NASDARF maintains a long standing relationship with Ms. Black in her capacity as a contract
employee, and Ms. Black's correct classification as a contracted employee is not subject to the rule
of a subcontract. This was an employee hiring decision for which both NASDARF and EPA Office
of Pesticide Programs ("OPP") participated.
As provided in previous communications with OIG, both NASDARF and EPA engaged several
individuals for consideration to replace Mr. Richard Herrett as the NASDARF Project Manager.
However, due to the unique skill-set and expertise required to adequately fill the NASDARF Project
Manager position, only a finite number of individuals met the qualifications needed for
consideration. One of the candidates, Mr. Roger Flashinski, under consideration for the Project
Manager position provided a statement confirming he was not able to accept the position due to
timing considerations and his position with another university did not allow for the same
accommodations as Ms. Black (Attachment N).
In response to the issue of reasonableness of pay, the project manager position requires a skill set
similar to those of a government employee program manager or branch chief. NASDARF's project
manager is responsible for overseeing multiple programs areas, including: applicator certification,
worker protection handler education and support for health care providers. A qualified project
manager must have demonstrated extensive national leadership and be highly respected in pesticide
applicator education and regulation arena. The manager must be well-established within the wide
network of national stakeholders and be well-respected within the EPA Office of Pesticide
Programs. They must have demonstrated success in coalition leadership, conference management,
project development & coordination, and manage a highly respected pesticide safety
education/regulatory program.
NASDARF based Ms. Black's hourly compensation on similar positions located in the Washington,
DC and Seattle, WA areas. Furthermore, NASDARF discussed Ms. Black's pay level with EPA
OPP, which subsequently agreed on appropriateness of Ms. Black's pay level. Current positions
similar in scope and demands include:
•	National Program Leader for IR-4 and PMP at USD A National Institute for Food and
Agriculture (NIFA) (Monte P. Johnson). Mr. Johnson provides national leadership for state
and federal activities aimed at developing a greater understanding of the toxicological
consequences of human exposure to pesticides and the effects of pesticide residues in foods
and the environment. Prior to assuming this position with USDA, Mr. Johnson was the
University of Kentucky pesticide education specialist. Current rank: GS-15 and salary:
$148,510 (or $71.40/hour), not including benefits.
•	USDA Plant Systems Protection Program Leader (Mary Purcell-Miramontes). Ms. Purcell-
Miramontes leads and directs Agriculture & Food Research Initiative (AFRI) competitive
grant programs on Insects and Nematodes in Plant Systems and co-chairs the Colony
Collapse Disorder Steering Committee and Program Leader for the Pesticide Safety
Education Program. Current rank: GS-15 and salary: $140,259 (or $67.43/hour), not
including benefits.
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•	Branch Chief Worker Safety Division for US Environmental Protection Agency (Kevin
Keaney). Mr. Keaney works for OPP's Field and External Affairs Division and manages
regional and state coordination and assistance for applicator certification, worker protection,
health incidents, and health care providers, including communication and outreach activities.
Current rank: GS-15 and salary: $155,500 (or $74.52/hour), not including benefits.
•	USDA NIFA Office of the Director, Program and Analysis Officer (William J. Hoffman).
Mr. Hoffman participates in programming, policy development and interpretation,
development and updating of NIFA's guidelines, COOP plans, and resources. Current rank:
GS-14 and salary: $126,251 (or $60.70/hour), not including benefits.
Cost basis for GS Pay Scale for positions in Seattle, WA and Washington, DC:
•	GS 14 — $65.53 per hour + 37% benefit rate = $89.78
•	GS 15 - 74.51 per hour + 22.78% benefit rate = $91.48 (actual benefit rate for EPA GS15 is
22.78%)
Ms. Black's contract with NASDA states the $90.00/hour includes a base pay rate of $74.50 per
hour and $15.50 per hour overhead expenses for the contractor. The base rate would actually be
higher had Ms. Black been a salaried employee for NASDARF. The employee benefits rate at
NASDA for retirement, health, and dental is 24.5%. The benefit rate for federal employees ranges
from 23-37%. Ms. Black's rate for benefits is currently 20%.
OIG Response 5: The OIG acknowledges the NASDARF's discussion regarding the selection
of Ms. Ramsey. However, since NASDARF did not document its decisions at the time of the
procurement, it did not comply with federal requirements. Consideration of NASDARF's after-
the-fact explanations and documentation is at the discretion of EPA management and would
require a formal deviation from agency policy in accordance with 40 CFR ง30.4, Deviations.
NASDARF Response to Chapter 5 Charge: Cost or Price Analysis Not Conducted:
NASDARF restates its assessment of "reasonableness of costs" for the UFL project. We disagree
with OIG finding our assessment did not measure a prudent person's assessment. The rates in the
proposal are reasonable and fall within typical rates for editing as referenced by the Editorial
Freelancers' Association (http://www.the-efa.org/res/rates.php). ProComm (Attachment O) and
HOW Design (http://www.howdesign.com/design-business/pricing/hourly-rates). The pesticide-
related subject matter (air sampling, data analysis) is technical and requires a skilled editor.
Presentation development includes content development, graphic design and multimedia animation
and is priced similarly. Narration includes the voice over narration, plus insertion and
synchronization with the base media (PowerPoint or video). Using our collective experience on the
amount of time to produce publications and current market prices, the below description is accurate:
Cost Analysis:
• OTHER $13,000 - publication and postage way under budget:
o When looking at expenses for curriculum development, web design, print design,
presentation design, which includes technical experts, editors, designers, professional
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narration, total costs are reasonable and anticipate an outlay for publication and
presentation design to be over $2,500.
ฆ	Editors $1,000 - range in per/hour fees: 800-1600 words per hour. $50-125/hour
depending on level of content expertise required.
ฆ	Publication Designers $1,000 - $45-125 per page - anticipate 10 pages
ฆ	Presentation development - 40 hours at $45-100/hour
ฆ	Professional narration $500 - $500 per completed hour (prep, narrate, edit)
o Printing/mailing costs for follow-up survey and color-brochures are reasonable
ฆ	Follow-up survey mailed to each school district (3,928 copies) - print $4,000
($l/copy), send and return envelopes $800 = $4,800
ฆ	Tri-fold color brochure - estimate 4,000 copies at $1 each - $4,000
o Postage ($1.20/envelope) = $4,714 per mailing
•	SALARIES and WAGES $13,547:
o Personnel: this project is receiving more commitment of time than what was sought in
the budget
ฆ	0.04 FTE equates to 83 hours or just over two-weeks time for a lead coordinator
and assistant coordinator. This project will incur many more hours than
estimated. It is anticipated that a time commitment of 0.25 FTE would be more
appropriate. The base salary is $145,000 for the Extension Specialist (GS15
equivalent) and $116,250 (GS13 equivalent) for the Assistant position. These are
equitable salary ranges for senior university extension personnel when compared
to federal employee pay scales.
ฆ	Benefits are listed at 27.8% which covers health insurance premiums, dental, life
insurance premiums and Florida Retirement System Pension Plan and Investment
Plan.
•	TRAVEL $9,360: Travel: meets state requirements for per diem and least expensive travel
options; believe this is under-budgeted for anticipated expenses
o Estimate 2 interstate trips for 2 people (airfare, per diem) = $1,200 per trip x 4 = $4,800
o Estimate 6 interstate trips for 2 people (mileage, per diem) = $440 per trip x 12 = $5,280
Similar to the University of Florida subgrant, NASDARF provided sufficient documentation to
demonstrate "reasonableness of costs" for the CropLife Latin America, Costa Rica project. We
refer OIG and EPA to our original response. CropLife Latin American project effort continues
EPA's presence in supporting Central American pesticide safety education programs (El Salvador,
Honduras, Costa Rica, Nicaragua) (Attachment P and Q).
There is significant financial benefit with partners providing matching expenses: FLNC & their
partners will provide financial and substantial in-kind support, CLLA will provide $50,000 and will
provide oversight and accountability reporting for the program.
Personnel: CLLA and FLNC will provide personnel with expertise in implementing pesticide safety
train-the trainer programs and coordinating diverse stakeholder coalitions; expect to have additional
expert support from: Costa Rica Ministries of Agriculture, Labor, Environment, and Health;
pesticide manufacturers industry; University of Costa Rica; International Labor Organization;
Instituto Nacional de Aprendizaje (national training organization); Cooperativa de Productores de
Leche Dos Pinos (milk producers association); and other agricultural producer cooperatives.
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The reach of the outreach program includes farmers, managing applicators, pesticide handlers,
dealers, and field workers.
The project would be substantially more expensive if another entity conducted it because another
entity would need to expend time and resources to develop the strong connections with a broad
group of stakeholders and an understanding of the needs of pesticide applicators and other people
involved in pesticide sales, use, and disposal. Having the experience from other Latin American
countries is invaluable.
To augment the response, we provide the following information:
The one-year report (June 2004-2005) and budget from the 2003 CropLife Honduras project shows
a very similar scope of work, budgetary items and budgeting levels. The one-year budget which
trained over 8,000 people was nearly $48,000 (Salaries: $14,000, Supplies/Training Aids: $2,100,
Equipment: $4,800, Printed Materials: $4,600, Marketing/Communication: $ 2,000, and Travel
$18,800) (Attachment R).
NASDARF also compared what EPA/USDA typically provides to each well-established U.S. state
certified applicator education program ($30,000 base funds + additional funds based on the number
of certified applicators, requires 100% matching funds from the state); the proposed annual cost of
the Costa Rica effort (approx. $33,333 per year from NASDARF with matching funds from CLLA
and FLNC, as well as substantial in-kind support) and the proposed implementation costs appear
reasonable. Below are samples of four states from each region of the United States for the USD A
Budget year FY2008. The on the next page table indicates the total annual support level provided
by the EPA/USDA Funding and State Match. This total excludes agent and specialist salaries,
benefits and operations. The last column indicates the percentage of the total operating budget
supported by EPA/USDA, The Costa Rica project fits well within this range (Attachments S and
T).
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State Pesticide Safety Education Programs (PSEP) Note: these are
established programs. Source: Data from USDA base-support in FY2008
approx. %
of total
PSEP
allocation; funding originated from EPA



operations
State
USDA
Funding
University
Match
Total

Southern Region




University of Georgia
$42,668
$42,668
$85,336
100%
University of Arkansas
$34,107
$34,107
$68,214
50%
Oklahoma State University
$38,164
$38,164
$76,328
25%
North Carolina State University
$48,766
$48,766
$97,532
40%
North Central Region




Iowa State University
$47,142
$47,142
$94,284
20%
Kansas State University
$32,696
$32,696
$65,392
100%
Michigan State University
$39,701
$39,701
$79,402
100%
North Dakota State University
$29,841
$29,841
$59,682
25%
Northeast Region




Virginia Polytechnic Institute & State
University
$28,925
$28,925
$57,850
15%
University of Massachusetts
$19,166
$19,166
$38,332
35%
University of Maine
$18,003
$18,003
$36,006
33%
Pennsylvania State University
$47,169
$47,169
$94,338
15%
Western Region




Colorado State University
$26,798
$26,798
$53,596
45%
University of Alaska
$16,898
$16,898
$33,796
75%
University of Wyoming
$33,474
$33,474
$66,948
100%
Washington State University
$43,083
$43,083
$86,166
15%
NASDARF also directs OIG to the Office of Grants and Debarment opinion related to the
procurement procedures for the University of Florida and CropLife Latin America awards, given
the controls already in place for awards of this type.
OIG Response 6: The OIG acknowledges NASDARF's discussion regarding the cost-price
analysis and reasonableness of costs associated with the subgrants. However, since
NASDARF did not document the analysis at the time of the procurement, it did not comply
with federal requirements. Consideration of NASDARF's after-the-fact explanations and
documentation is at the discretion of EPA management and would require a formal deviation
from agency policy in accordance with 40 CFR ง30.4, Deviations.
OIG Charge: Other Unresolved Issue
In Chapter 6 of the OIG draft examination, OIG made the following charges:
During our review of NASDA's single-audit report for FY 2012, the OIG learned of an
unresolved issue pertaining to a prior EPA agreement. Specifically, NASDARF reported and
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drew funds of $118,324 for potentially unallowable costs under EPA Agreement No.
83235401. Per the single-audit report, the costs were recorded as a refundable advance and
represent funds received as of year-end but not yet earned. NASDARF initially considered
the costs (incurred in 2006 and 2007) as unallowable and did not report them. NASDARF
later reported the costs to the EPA as part of the closeout of the agreement in 2011.
Although the EPA closed the agreement, NASDARF stated that the agency never made a
determination on the allowability of the costs. NASDARF will recognize these funds as
revenue once accepted by the EPA.
NASDARF Response to Chapter 6:
NASDARF has attached the letter officially closing this grant and funds have been released
(Attachment U).
OIG Response 7: The OIG acknowledges that EPA closed the grant and released the funds.
However, based on NASDARF's comments to the OIG and the single audit report for
FY 2012, allowability of the costs remains at issue. On this basis, the OIG continues to
question the cost. The EPA should review and determine the allowability of the costs and
recover any determined to be unallowable.
NASDARF appreciates OIG's efforts and in response to these OIG findings, NASDARF modified
our subcontract for project management services and updated our written procurement procedures
to include OIG-recommended requirements pertaining to 40 CFR Part 30.
NASDARF is pleased to partner with EPA in providing these timely, lifesaving programs to
pesticide applicators around the U.S. and Central America. NASDARF will continue to work with
the Office of Pesticide Programs and the Office of Grants and Debarment to achieve the goals of the
program while maintaining a commitment to excellence.
We appreciate any opportunity to increase NASDARF efficiencies in our cooperative agreement
with EPA. We stand ready to work with our federal partners and OIG to continue to improve these
processes. Please let us know if you have any questions or would like to discuss further.
Conclusion
Sincerely,
Stephen Haterius
Chief Executive Officer, NASDA
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Appendix B
EPA's Comments on Draft Report
| \
% ^
MEMORANDUM
SUBJECT: Response to Office of Inspector General Draft Report, Project No. OA-FY13-0140
titled, " National Association of State Departments of Agriculture Research
Foundation (NASDARF) did not comply with certain Federal requirements and EPA
award conditions", dated November 5, 2013
FROM: Kysha Holliday
Deputy Director, NPTCD
TO:	Robert K. Adachi.
Director of Forensic Audits
Office of the Inspector General
Thank you for the opportunity to respond to the issues and recommendations in the subject draft
audit report. Attached is a summary of the Office of Grants and Debarment's (OGD) and the Office
of Chemical Safety and Pollution Prevention's (OCSPP) overall position regarding each report
recommendation.
AGENCY'S OVERALL POSITION
OGD and OCSPP generally agree with the Inspector General's findings that NASDARF did not
comply with certain requirements of 40 CFR Part 30, 2 CFR Part 230, or its award conditions.
As described below, OGD and OCSPP agree with Recommendations 1 through 6.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D C. 20460
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
December 20, 2013
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AGENCY'S RESPONSE TO REPORT RECOMMENDATIONS
Agreements
No.
Recommendation
Intended Corrective Action(s)
Estimated
Completion by FY
1
Disallow and recover $571,626 of
questioned costs. If NASDARF
provides documentation that
meets appropriate federal
requirements or demonstrates the
fairness and reasonableness of
the subcontract and subgrant costs,
the amount to be recovered may be
adjusted accordingly.
1. OGD will provide NASDARF the
opportunity to submit documentation to
substantiate the questioned costs. OGD
will review the documentation and take
necessary corrective action, including
the recovery of all or part of the
questioned subcontract and indirect
costs as well as funds drawn. OGD will
work with NASDARF to implement
corrective actions to comply with
federal requirements on assuring the
reasonableness of sub-grants, sub-
contracts, indirect costs and drawdown
amounts.
Within 180 days of
OIG issuing their
final report or as
soon as practicable
2
Require NASDARF to:
a.	Recalculate its indirect cost rate
for FY 2011, excluding sub-grant
and subcontract amounts in
excess of $25,000; and submit to
the NBC for approval, or ask the
NBC to amend, the indirect
cost rate agreements to include an
equitable allocation base.
b.	Claim indirect costs using the
recalculated approved rates.
2. OGD will provide NASDARF the
opportunity to clarify its position and
properly support its indirect rate and
require NASDARF to amend the rate
where appropriate. OGD will review
NASDARF" s support and coordinate
with DOI-NBC to review and amend the
ICR agreement as needed, then require
NASDARF to adjust claimed costs
according to the revised agreement.
Within 180 days of
OIG issuing their
final report or as
soon as practicable
3
Require NASDARF to calculate its
indirect cost rates for years beyond
FY 2011 by excluding subgrant
and subcontract amounts in excess
of $25,000; or to be in accordance
with any revised indirect cost rate
agreement.
3. Where necessary, OGD will require
NASDARF to recalculate their indirect
costs rates to be in compliance with 2
CFR 230 and coordinate with DOI-NBC
to revise NASDARF's rates. OGD will
then require NASDARF to adjust
claimed costs according to any revised
ICR agreements.
tbd
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No.
Recommendation
Intended Corrective Action(s)
Estimated
Completion by FY
4
Require the following special
conditions be included for all
current and future EPA
awards until the EPA
determines that NASDARF
has met all applicable federal
financial requirements:
a.	Payment on a
reimbursement basis.
b.	Review and approval of
reimbursement requests,
including all supporting
documentation, prior to
payment.
4. OGD will place NASDARF on
reimbursement for their active assistance
agreements. The Agency will require
NASDARF to provide supporting documents
for costs incurred for the Agency's review
prior to releasing funds for payment.
NASDARF will remain on reimbursement
status until they have demonstrated to the
Agency that their financial management of
EPA agreements meets applicable federal
requirements for drawing grant funds.
Within 180 days of
OIG issuing their
final report or as
soon as practicable
(ongoing)
5
Require NASDARF to
establish controls for future
awards in order to ensure:
a.	Documentation is
maintained in procurement
files to justify sole-source
procurements and to
ensure compliance with 40
CFR ง30.46.
b.	Compliance with 40 CFR
ง30.45 by conducting
a cost or price analysis to
determine reasonableness of
costs.
c.	Compliance with
administrative conditions of
the award by determining and
documenting the
reasonableness of subgrant
costs.
5. OGD will require NASDARF to comply
with the requirements of 40 CFR 30 and
administrative conditions with respect to
documenting the justification of sole source
procurements and performing an adequate
cost or price analyses for procurements and
sub awards to determine the reasonableness
of cost.
Within 180 days of
OIG issuing their
final report or as
soon as practicable
6
Determine the allowability of
$118,324 of costs
incurred under prior EPA
Agreement No. 83235401 and
recover any costs determined
to be unallowable.
6. OGD and OCSPP will require NASDARF
to submit documentation for the costs in
question incurred in 2007 under grant No.
83235401 to determine if they are allowable
under the agreement. OGD and OCSPP will
review the documentation and take necessary
corrective action, including the recovery of
costs as appropriate if they are determined to
be unallowed.

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OGD and OCSPP have a valued relationship with NASDARF and an obligation to manage
grants in accordance with federal fiduciary and stewardship standards. The Agency fully intends
to take the necessary corrective actions and work with NASDARF to resolve the findings of the
OIG audit once formally issued.
CONTACT INFORMATION
If you have any questions regarding this response, please contact Kysha Holliday, Deputy
Director of NPTCD at (202)564-1639 or Joe Lucia (202) 564-5378.
cc:
Arthur A. Elkins Jr., Inspector General
Angela Bennett, Project Manager, Office of the Inspector General
Howard Corcoran, Office of Grants and Debarment
Carolyn Schroeder, OCSPP, OPP-FEAD
Deborah Hartman, OCSPP, OPP-FEAD
Kevin Keaney, OCSPP, OPP-FEAD
Jill Young, GIAMD
Denise Polk, Director NPTCD
Barbara Proctor, GIAMD-AAO
Kristen Arel, GIAMD
Bernadette Dunn, OCFO
bcc: none
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Appendix C
Distribution
Director, Office of Grants and Debarment, Office of Administration and Resources Management
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Director, Grants and Interagency Agreements Management Division, Office of Administration
and Resources Management
Audit Follow-Up Coordinator, Office of Administration and Resources Management
Audit Follow-Up Coordinator, Office of Grants and Debarment, Office of Administration
and Resources Management
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