U.S. Environmental Protection Agency	13-4-0296
^	Office of Inspector General	June 17,2013

At a Glance
Why We Did This Review
The U.S. Environmental
Protection Agency, Office of
Inspector General, conducted
this audit to determine whether
labor-charging practices at the
New Mexico Environment
Department comply with federal
requirements. The OIG also
sought to determine the effect
of any noncompliance on
amounts NMED claimed under
EPA awards.
This report addresses the
following EPA Goals and
Cross-Cutting Strategies:
	Taking action on climate
change and improving air
quality.
	Protecting America's
waters.
	Cleaning up communities
and advancing sustainable
development.
Labor-Charging Practices at the
New Mexico Environment Department
For further information, contact
our Office of Congressional and
Public Affairs at (202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2013/
20130617-13-4-0296.pdf
What We Found
We found that three of the four NMED bureaus audited did not always comply with
requirements found in the Code of Federal Regulations under 2 CFR Part 225.
The Air Quality Bureau and Drinking Water Bureau charged labor, fringe benefits,
and indirect costs to federal grants based upon budget allocations instead of actual
activities performed. Personnel activity reports we received from the Surface Water
Quality Bureau to support charges for labor costs incurred prior to July 2006 did not
meet 2 CFR Part 225 requirements.
Title 2 CFR Part 225 requires that where employees work on multiple activities or
cost objectives, labor charges be based upon the after-the-fact distribution of an
employee's actual activity and supported by employee-signed personnel activity
reports or the equivalent. NMED personnel stated that they charged labor based upon
budget allocations because they thought the practice was acceptable. NMED
personnel also stated that the accounting system used for SWQB timekeeping before
July 2006 is no longer accessible and that employee-signed personnel activity reports
from this period are no longer available.
We questioned $298,159 in labor, fringe benefits, and related indirect costs claimed by
AQB; $2,974,318 claimed by DWB; and $2,733,798 claimed by SWQB. We also
identified an additional $486,305 charged to a DWB-administered grant, which has not
yet been reported to the EPA.
Recommendations and Planned Corrective Actions
We recommend that the Region 6 Regional Administrator disallow and recover
unsupported costs of $298,159 from AQB; $2,974,318 from DWB; and $2,733,798
from SWQB, unless NMED provides support that complies with 2 CFR Part 225
requirements. We also recommend that the regional administrator ensures NMED
does not claim unallowable costs of $486,305 under the DWB grant, unless it can
provide support that complies with 2 CFR Part 225 requirements. In addition, we
recommend that the regional administrator recover any unsupported costs claimed
under AQB and DWB grants not covered in our cost-impact determination and ensure
that labor-charging practices at remaining NMED bureaus with EPA grants comply
with federal requirements. Region 6 agreed with our findings and four of the five
recommendations. NMED agreed with recommendation 4 and disagreed with the
remaining recommendations. NMED reiterated some of the comments provided during
our fieldwork, but no additional information or supporting documentation was provided.
Noteworthy Achievements
AQB and DWB took corrective actions promptly when the issue was brought to their
attention. Both bureaus issued written procedures that require employees to charge
labor hours based upon actual activities performed. We found that employees
complied with these procedures. As of April 14, 2012, labor-charging practices at all
four audited bureaus comply with federal requirements.

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