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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Operating efficiently and effectively
Region 2 Needs to Improve
Its Internal Processes Over
Puerto Rico's Assistance
Agreements
Report No. 17-P-0402
September 25, 2017

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Report Contributors:	Michael D. Davis
Madhu Dev
Kevin Haas
Cara Lindsey
Gloria Taylor-Upshaw
Abbreviations
CCSJBE
Corporation for the Conservation of the San Juan Bay Estuary
CFR
Code of Federal Regulations
EPA
U.S. Environmental Protection Agency
EQB
Puerto Rico Environmental Quality Board
FY
Fiscal Year
GPI
Grants Policy Issuance
GS
Grant Management Specialist
IGMS
Integrated Grants Management System
OGD
Office of Grants and Debarments
OIG
Office of Inspector General
PO
Project Officer
SRF
State Revolving Fund
Cover photo: The Region 2 Caribbean Environmental Protection Division office building in
Guaynabo, Puerto Rico. (EPA OIG photo)
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
17-P-0402
September 25, 2017
Why We Did This Review
We conducted this audit to
determine whether the
U.S. Environmental Protection
Agency (EPA) established
controls and processes for
overseeing and managing
Puerto Rico's assistance
agreements to protect human
health and the environment.
Assistance agreements—which
include grants and cooperative
agreements—are mechanisms
used to transfer funds from the
EPA to another entity to serve
a public purpose. The EPA
provides recipients in the
Commonwealth of Puerto Rico
with assistance agreements for
environmental programs, such
as air pollution control and
hazardous waste management.
Region 2 oversees the EPA's
assistance agreements with
Puerto Rico.
This report addresses the
following:
• Operating efficiently and
effectively.
Region 2 Needs to Improve Its Internal Processes
Over Puerto Rico's Assistance Agreements
What We Found
Region 2 needs to improve its internal
processes over Puerto Rico's assistance
agreements in the following areas:
• Confirmations that the Puerto Rico
Environmental Quality Board's
equipment was used as intended.
We found that Region 2 Project Officers
equipment was used in accordance with
Region 2 may have inefficiently
used over $217,000 in taxpayer
funds by not confirming
equipment was used as intended
or obtaining support for
requested fringe benefit costs.
did not confirm the board's grant
approved work plans.
•	Documents and information in grant files that support assistance agreement
award decisions. Region 2 did not always include complete, accurate or
hard copy documents in the grant files.
•	Support for car allowance fringe benefit costs. Region 2 did not know
whether the grant recipient of two cooperative agreements maintained
supporting documentation for its car allowance fringe benefit costs.
As a result of these issues, the EPA may have inefficiently used taxpayer funds
for Environmental Quality Board equipment purchases, may need additional
support for grant award decisions in the official hard copy grant files, and may not
have evidence that taxpayer funds have been properly used under two
cooperative agreements.
Recommendations and Planned Corrective Actions
We made four recommendations to the Regional Administrator, Region 2,
regarding the EPA's internal processes over Puerto Rico's assistance
agreements:
Send all inquiries to our public
affairs office at (202) 566-2391
or visit www.epa.aov/oia.
Listing of OIG reports.
•	Train Project Officers to follow grant guidance and to confirm equipment
purchases and use during the post-award phase.
•	Require Project Officers and Grant Management Specialists to take
specific, annual training on grant file management.
•	Require Project Officers to take specific, annual training on conducting
baseline monitoring reviews.
•	Determine support for car allowance fringe benefit costs.
Region 2 agreed with the four recommendations and provided appropriate
corrective actions.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
September 25, 2017
MEMORANDUM
SUBJECT: Region 2 Needs to Improve Its Internal Processes Over Puerto Rico's
Assistance Agreements
Report No. 17-P-04CK
FROM: Arthur A. Elkins Jr.
TO:
Catherine McCabe, Acting Regional Administrator
Region 2
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). The project number for this audit was OA-FY17-0001.
This report contains findings that describe the problems the OIG has identified and corrective actions the
OIG recommends.
Action Required
The agency provided corrective actions for addressing the recommendations with milestone dates.
Therefore, a response to the final report is not required. Should you choose to provide a final response,
we will post your response 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 along with corresponding
justification.
We will post this report to our website at www.epa.gov/oig.

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Region 2 Needs to Improve Its Internal Processes
Over Puerto Rico's Assistance Agreements
17-P-0402
Table of Contents
Chapters
1	Introduction		1
Purpose		1
Background		1
Responsible Offices		2
Scope and Methodology		3
2	Region 2 Did Not Confirm EQB Used Equipment
as Outlined in Work Plans		5
Agency Policy Outlines Equipment Requirements		5
POs Did Not Confirm EQB's Equipment Was Used as Intended		6
PO Reviews Were Limited to Specific Data		7
POs Are Unfamiliar With EQB's Equipment		8
Recommendation		8
Agency Response and OIG Evaluation		8
3	Region 2 Needs to Improve Internal Documentation for Puerto Rico
Assistance Agreements 		10
EPA Has Established Grant Oversight Requirements		10
POs and GSs Need to Improve Grant Award Documentation		11
Documentation Not in Grant Files Due to Electronic Processes		13
Official Files Should Be Maintained to Support Grant Award Decisions		13
Recommendations		14
Agency Response and OIG Evaluation		14
4	EPA Needs to Assess Fringe Benefit Costs for Car Allowances		15
Federal Procedures Specify Requirements for Fringe Benefits		15
Region 2 Paid CCSJBE for Car Allowances as Fringe Benefits 		16
CCS J BE Should Have Support for Car Allowance Fringe Benefit Costs....	17
Region 2 Should Confirm Costs		18
Recommendation		18
Agency Response and OIG Evaluation		18
Status of Recommendations and Potential Monetary Benefits		19
- continued -

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Region 2 Needs to Improve Its Internal Processes
Over Puerto Rico's Assistance Agreements
17-P-0402
Appendices
A Assistance Agreements Selected for Review		20
B Agency Response and OIG Evaluation		21
C Distribution		30

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Chapter 1
Introduction
Purpose
The Office of Inspector General (OIG) conducted an audit of U.S. Environmental
Protection Agency (EPA) Region 2's oversight of Puerto Rico's assistance
agreements. Our objective was to determine whether the EPA established controls
and processes for overseeing and managing Puerto Rico's assistance agreements
to protect human health and the environment.
Background
According to EPA Order 5700.1, Policy for Distinguishing Between Assistance
and Acquisition, issued on March 22, 1994, the EPA is authorized through various
statutes to carry out specific environmental activities. These statutes also specify
whether the EPA can provide outside parties with financial assistance—for
example, with assistance agreements—to accomplish these activities. The purpose
of awarding assistance agreements is expressly for public benefit.
The EPA funds assistance agreements as either grants or cooperative agreements.
The only distinction between a grant and a cooperative agreement is that a
cooperative agreement involves a greater degree of federal involvement. Region 2
stated that "EPA assistance agreement programs are characterized as competitive
or non-competitive, discretionary or non-discretionary and/or considered a
Continuing Environmental Program or non-Continuing Environmental Program
(i.e. project grants, fellowships)."
Funding sources for EPA assistance agreements can be divided into two
categories: state revolving funds (SRFs) or non-SRFs. An SRF is a specific grant
program authorized by statute and is a partnership between a federal agency and a
state. It provides a permanent, independent source of low-cost financing for
infrastructure projects. A non-SRF assistance agreement is any assistance
agreement that is not funded by an SRF. Non-SRF agreements have been awarded
to recipients in the Commonwealth of Puerto Rico for environmental programs,
such as air pollution control, pesticides enforcement and hazardous waste
management programs. The EPA has awarded non-SRF assistance agreements to
a variety of entities in Puerto Rico, including the Puerto Rico Department of
Agriculture; the Metropolitan Bus Authority; local entities and municipalities; and
the Puerto Rico Environmental Quality Board (EQB), which has the primary
function of protecting and preserving the environment in Puerto Rico.
In 2001, however, the EPA classified EQB as a high-risk grant recipient.
According to 40 CFR Part 31 (1999), Uniform Administrative Requirements for
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Grants and Cooperative Agreements to State and Local Governments,1 a grant
recipient may be considered high risk for various reasons, including a history of
unsatisfactory performance or nonconformance to the terms and conditions of
previous awards. Special conditions or restrictions placed upon a high-risk
recipient may include payment on a reimbursement basis, additional project
monitoring or the establishment of additional prior approvals.
The high-risk designation letter that the EPA sent
to EQB stated that, although the agency had
provided assistance and resources to help EQB
address deficiencies in its grants management and
financial management systems, EQB was without
an accounting system. The EPA also identified the
following additional concerns:
•	Lack of a timely procurement program.
•	Inappropriate charging of time due to the
lack of a time allocation plan.
•	Ineffective property management system.
As a result of this high-risk designation, EQB
implemented a multiyear corrective action plan,
which it completed in 2014. From May 5 to
May 9, 2014, Region 2 conducted an on-site review of EQB systems, files and
operations. On May 12, 2014, Region 2 removed EQB's high-risk status, citing no
instances of significant noncompliance. Region 2 stated that its staff have
continued to monitor EQB since lifting the high-risk designation.
Responsible Offices
The Region 2 Caribbean Environmental Protection Division oversees the Puerto
Rico assistance agreements with the EPA. This division serves as the primary
liaison for environmental issues and problems with the governments and regulated
industries and authorities of Puerto Rico and the territory of the U.S. Virgin
Islands. The Caribbean Environmental Protection Division conducts inspections,
identifies violations, recommends enforcement actions, and plans and coordinates
activities necessary to implement regional programs in Puerto Rico and the U.S.
Virgin Islands.
The Region 2 Office of Policy and Management, Grants and Audit Management
Branch, also has responsibilities regarding assistance agreements with Puerto
1 The grant regulations at 40 CFR Part 31 were superseded by two other regulations: (1) the Office of Management
and Budget's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,
codified at 2 CFR Part 200, which the EPA adopted in December 2014, and (2) supplemental grant regulations
codified at 2 CFR Part 1500. Federal regulations at 2 CFR §§ 200.205 and 200.207 contain the relevant provisions
pertaining to high-risk grant recipients.
EQB's office in San Juan, Puerto Rico.
(EPAOIG photo)
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Rico. The branch is responsible for the administrative review of awards,
preparation of awards, administrative post-award management, development of
grant-specific administrative terms and conditions, approval of grant payment
requests for recipients on reimbursement, closeout of awards, and administrative
oversight of all grants and cooperative agreements in Region 2. The branch also
provides support, as needed, to the regional program offices, which perform
similar functions from the program perspective.
Scope and Methodology
We conducted this audit from October 19, 2016, to July 18, 2017, in accordance
with generally accepted government auditing standards issued by the Comptroller
General of the United States. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis
for our findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
We focused our audit on non-SRF assistance agreements with Puerto Rico. To
answer our objective, we reviewed the following relevant laws, procedures and
policies related to assistance agreements:
1)	Federal Regulation, 2 CFR Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal
Awards, 2016.
2)	Office of Management and Budget Circular No. A-123,Management's
Responsibility for Enterprise Risk Management and Internal Control,
July 15, 2016.
3)	EPA Grants Policy Issuance (GPI), GPI-02-02, Guidance: Equipment
Acquired Under Assistance Agreements, March 2, 2002.
4)	EPA, Assistance Agreement Almanac, February 26, 2016.
5)	EPA Order 5700.6 A2 CHG 2, Policy on Compliance, Review and
Monitoring, September 24, 2007.
We interviewed the Region 2 Project Officers (POs), Grant Management
Specialists (GSs) and regional managers located in the New York and Puerto Rico
offices to learn about their roles in regard to the assistance agreements. We also
interviewed Puerto Rico Commonwealth personnel in the EQB, Department of
Health, Puerto Rico Infrastructure Finance Authority, and Puerto Rico Aqueduct
and Sewer Authority.
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We obtained a universe of 133 Puerto Rico non-SRF assistance agreements that
were active in fiscal year (FY) 2016 or closed in FY 2015. From this universe, we
selected a sample of 23 assistance agreements and reviewed their supporting hard
copy documentation. Appendix A of this report contains a summary of the
23 grants in our sample, which we selected based on the highest dollar amounts
awarded and expended.
We also reviewed Region 2's electronic actions for some of the assistance
agreements in our sample to verify actions taken but not documented in the hard
copy files. We reviewed data in the EPA's Integrated Grants Management System
(IGMS) and the EPA's financial system, Compass Data Warehouse. We also
performed three site visits in Puerto Rico associated with three assistance
agreements in our sample.
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Chapter 2
Region 2 Did Not Confirm EQB Used Equipment
as Outlined in Work Plans
Region 2 POs did not confirm that EQB used grant equipment, totaling over
$207,000, in accordance with approved work plans. The EPA's GPI-02-02 states
that POs have a responsibility during the post-award phase to confirm that a grant
recipient purchases and uses equipment according to the approved work plan.
However, Region 2 POs conducted programmatic baseline reviews that were
limited to specific data areas, which did not include confirming equipment was
used as intended. POs need to be familiar with the use of equipment purchased
under a grant to make a reasonable determination for future equipment requests
and to confirm that taxpayer funds are being used in accordance with grant
requirements.
Agency Policy Outlines Equipment Requirements
EPA Order 5700.6 A2 CHG 2, Policy on Compliance, Review, and Monitoring,
Section 5.1, "Programmatic Baseline," states that the PO is responsible for
conducting programmatic baseline monitoring of each active award. Per this
order, the following areas may be reviewed as part of programmatic baseline
monitoring:
... receipt of progress reports, identifying areas of concern cited in
the progress reports, whether expended and remaining funds are
reasonable, whether previous concerns are (or are to be) remedied,
whether proper Quality Assurance (QA) materials are approved,
and whether all programmatic terms and conditions are met.
Furthermore, the EPA's GPI-02-02, Guidance: Equipment Acquired Under
Assistance Agreements, Section 6, "Responsibilities," outlines that POs are
responsible for confirming equipment was used as intended during the post-award
phase:
The PO is responsible for confirming that recipient purchases the
equipment within the time frame outlined in their milestones and
uses the equipment for the purposes outlined in the work plan.
In addition, Section 5, "Disposition Options," of the EPA's GPI-02-02 states that
the use of equipment purchased with federal funds is not limited to the time
period or scope of that particular grant:
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The recipient may keep the equipment and continue to use it on the
project originally funded through the assistance agreement or on
other federally funded projects whether or not the project or
program continues to be supported by Federal funds.
POs Did Not Confirm EQB's Equipment Was Used as Intended
Region 2 POs did not confirm that EQB used equipment in accordance with the
approved work plans. We found that the narratives in the approved work plans did
not include justifications explaining the need for or use of the equipment
requested under the grants. However, the budget packages submitted by EQB in
the pre-award phase and approved by the EPA did contain a justification and
intended use for the requested equipment.
EQB provided us with a list of equipment purchased with federal funds under the
FY 2013 (Grant Number 00224313) and FY 2015 (Grant Number 00224315)
Hazardous Waste Programs. The equipment list fiom EQB contained 15 items—
13 computers, a printer and a vehicle—with a total federal cost of $28,360. The
equipment list specified the name, identification number and location of each
item.
We performed a physical inventory of the items on EQB's equipment list. We
noticed that EQB was not using five of the 13 computers purchased under Grant
Number 00224313 (Figure 1); according to the purchase orders, these five
computers cost a total of $3,606. The EQB Program Manager explained that these
computers were not being used because staff had left their positions. The manager
was not sure how long the computers had been out of use.
Figure 1: Unused EQB computers purchased with EPA grant funds
Let: A computer not in use in the EQB office. Right: An unused computer placed on a
filing cabinet in a locked office. These computers were purchased with funds from
Grant Number 00224313. (EPA OIG photos)
Also, we observed that additional computer purchases were made under the
subsequent FY 2016 grant for the same Hazardous Waste Program. The PO was
not aware of the disposition of the existing equipment prior to approving the
purchase of new computers on the subsequent grant. In addition, the grant files
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did not document any PO reviews confirming the use of equipment in accordance
with grant policy. The new computers may not have been needed. Since many
grants are renewed annually, OIG believes POs should be aware whether
equipment purchased under grants is being used as outlined by the grant work
plans.
Additional Equipment Purchased Without Confirmation of Use as
intended
We identified a total of five EQB grants from our selected samples that included
equipment purchases in the approved grant budgets. Table 1 lists the EQB grants
that included equipment purchases, which totaled over $207,000. However, the
POs did not confirm, in the post-award phase, whether the equipment was being
used for the purposes outlined in the approved work plans.
Table 1: Approved budgeted equipment costs
Grant
number
Project title
Grant
status
Federal portion of
grant-budgeted
equipment costs
00207815
FY 2015 Air Pollution Control Program
Closed
$4,063
00224313a
FY 2013 Hazardous Waste Program
Closed
10,677
00224315
FY 2015 Hazardous Waste Program
Closed
20,250
99293412
FY 2012 Performance Partnership Grant
Open
116,208
99293413
FY 2013 Performance Partnership Grant
Open
56,000

Total budgeted equipment costs
$207,198
Source: OIG analysis of EPA grant data.
aThe five computers identified as not in use during a site visit were purchased under this grant.
PO Reviews Were Limited to Specific Data
Region 2 stated that an equipment review is not required for EQB since it is no
longer considered a high-risk recipient. Region 2 also provided this statement:
POs are not responsible for reviewing existing inventories before
approving equipment purchases. Rather, POs are required to use
their best professional judgment and considerations such as
knowledge of the type of equipment, consistency with the
recipient's procurement system, market research/market value, or a
prudent person test to assess the reasonableness and necessity of
proposed equipment purchases. Particularly for state governments
in continuing environmental grant programs, it is expected that
there will be turnover in equipment, especially computers, and that
every year a fraction of the existing inventory will be replaced.
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Although there is no requirement to review a grant recipient's equipment
inventory before approving equipment purchases, the EPA's GPI-02-02 does
require POs to confirm the use of equipment during the post-award phase.
However, we observed that the POs limited their reviews during the post-award
phase to specific data areas, which did not include equipment purchases or
whether equipment was used as outlined in work plans.
POs Are Unfamiliar With EQB's Equipment
Region 2 POs did not properly oversee more than $207,000 in taxpayer funds
because they did not adhere to established agency policies to confirm that EQB
was using equipment purchased with grant funds as outlined in approved work
plans. Additionally, because POs limited their reviews to specific data areas in the
pre-award phase, Region 2 could not determine whether equipment was actually
purchased per the approved budget and used per the grant guidelines.
POs are not familiar with post-award equipment purchases made with grant funds.
Since many grants are renewed annually, POs need to be able to make a
reasonable determination as to (1) whether the equipment requests made by grant
recipients during the pre-award phase and approved by the EPA were actually
purchased and (2) whether the equipment purchased was being used in
accordance with the grant policy. The POs could then confirm the efficient use of
taxpayer funds. Additionally, POs should be able to determine whether the
equipment already possessed by the recipients can continue to be used on other
federally funded projects.
Recommendation
We recommend that the Regional Administrator, Region 2:
1. Train Project Officers to follow the EPA's Grants Policy Issuance-02-02
guidance, and require that programmatic baseline reviews include
confirmation of equipment purchases and use during the post-award phase.
Agency Response and OIG Evaluation
The agency agreed with our recommendation and provided corrective actions with
completion dates. Region 2 provided the OIG with technical comments along with
its response to this report, including comments relevant to this chapter. We
evaluated the region's comments and made changes to the chapter as appropriate.
The complete agency response to the draft report is in Appendix B.
In response to Recommendation 1, the region stated that all POs "are required to
take training as part of their certification, which includes refresher training
triennially for equipment purchases and use during the post award phase."
Region 2 therefore stated that this corrective action is complete. Also, the region
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said that the Office of Grants and Debarments (OGD) will review and update the
existing PO training module for guidance regarding equipment purchases by
September 30, 2018. We consider the agency's planned corrective actions to
satisfy the intent of the recommendation. This recommendation is resolved
pending completion of the updated training.
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Chapter 3
Region 2 Needs to Improve Internal Documentation
for Puerto Rico Assistance Agreements
Region 2 needs to improve its internal documentation in support of Puerto Rico
assistance agreements that protect human health and the environment.
Specifically, Region 2 POs and GSs need to improve documentation in the
following areas:
•	PO and GS hard copy file documentation.
•	PO programmatic baseline report information.
•	GS comprehensive administrative review checklist responses.
The region stated that paper files are rarely used and that some documents may be
completed electronically. According to the EPA's Assistance Agreement Almanac,
however, official grant files include paper documents managed by GSs and POs.
In addition, EPA Order 5700.6 A2 CHG 2, Policy on Compliance, Review and
Monitoring, states that POs and GSs are responsible for conducting programmatic
and administrative baseline monitoring as part of the grants process.
Region 2 should improve its documentation to allow for an official audit trail of
grant award decisions in one location. Also, an official hard copy file is needed to
support the decisions made to protect human health and the environment should
electronic systems not be available.
EPA Has Established Grant Oversight Requirements
The EPA's Assistance Agreement Almanac includes these applicable
requirements:
•	Section 1.3, "EPA File Documentation and Record Retention
Requirements, Requirements for Grant Files," states that the official EPA
files for executed grants should include paper copies of all grant-related
documents kept by the grant management offices and the program offices.
GSs and POs manage the documents. The EPA's IGMS, email and other
similar electronic systems "do not currently meet the requirements for an
electronic recordkeeping system." Therefore, electronic records from these
systems "must be printed out and captured in a paper recordkeeping
system." Grant files should include both official records and nonofficial
copies of specified administrative records.
•	Section 4.1, "GMO [Grant Management Officer] Review of the Funding
Package," requires GSs to review and approve funding packages and to
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use the comprehensive administrative review checklist to evaluate the
funding packages. This section also requires GSs to complete separate cost
review analyses to accompany the checklist.
EPA Order 5700.6 A2 CHG 2, Policy on Compliance, Review, and Monitoring,
Section 5.1, "Programmatic Baseline," states that POs are responsible for
conducting programmatic baseline monitoring of each active award. Section 5.2,
"Administrative Baseline," states that GSs are responsible for conducting
administrative baseline monitoring of each active award.
POs and GSs Need to Improve Grant Award Documentation
Region 2 needs to improve its hard copy file documentation, the information it
includes in programmatic baseline reports, and its responses in the comprehensive
administrative review checklists.
Hard Copy Documents Were Not Included In Grant Files
Region 2 POs and GSs did not include all required documentation in the official
hard copy grant files, which should contain grant-related documents kept by the
grant management offices and the program offices. Region 2 PO and GS grant
files were missing the programmatic and administrative baseline reports,
comprehensive administrative review checklists, and other grant-related
documents. We identified 14 grant files out of the 23 grant files sampled that had
missing hard copy documents, as exemplified in Table 2. Although these
documents were missing from the physical grant files, Region 2 staff were able to
provide us with most of the documents from other sources, including electronic
and personal files. (Documents that could not be provided even from other
sources are bolded in Table 2.)
Table 2: Hard copy documents missing from PO and GS files
Grant
number
PO or GS
file
Grant
status
Hard copy documents missing
from official files a
00207811
PO
Closed
Programmatic baseline report.
00207812
PO
Closed
1)	Final technical completion report.
2)	Programmatic baseline report.
00213114
PO
Open
1)	Approved work plan.
2)	Communications with the grant recipient.a
00224311
PO
Closed
Final technical completion report.
00224313
GS
Closed
Closeout letter.
00224314
1)	GS
2)	PO
Closed
1)	Administrative baseline report.
2)	Final technical completion report.
00266308
PO
Closed
Final technical completion report.
96297112
PO
Open
Communications with the grant recipient.a
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Grant
number
PO or GS
file
Grant
status
Hard copy documents missing
from official files a
97200701
1)	GS
2)	PO
Closed
1)	Administrative baseline report.
2)	Programmatic baseline report.
97210701
1,2) GS
3) PO
Closed
1)	Administrative baseline report.
2)	Final technical completion report.
3)	Programmatic baseline report.
97235209
GS
Closed
White House notification letter.a
99206921
PO
Open
1)	Approved work plan.
2)	Programmatic baseline report.
99206922
PO
Open
Approved work plan.
99293412
GS
Open
Comprehensive administrative review checklist.
Source: OIG analysis of EPA grant data.
a The agency was unable to provide the documents in bold to the OIG.
PO Programmatic Baseline Reports and Cioseout Certifications Were
inaccurate
Region 2 POs did not always maintain accurate reports for the Puerto Rico
assistance agreements.
We identified inaccuracies in the programmatic baseline reports for three grants
out of the 23 grants sampled: Grant Numbers 00207816, 00224314 and
00224315. In the baseline report for Grant Number 00207816, the PO noted that
the recipient was submitting quarterly payment requests and making reasonable
drawdowns. However, when we asked the PO to explain how this information
was verified, we were told that the PO does not have access to the financial
database system and has not been trained to check the drawdowns. Similarly, in
the baseline reports for Grant Numbers 00224314 and 00224315, it was indicated
that the PO verified that the recipient was submitting quarterly payment requests;
however, when we asked how the PO verified this, the PO stated that those
notations were typographical errors and that the recipient submissions were not
verified.
In addition, the PO cioseout certifications were inaccurate for Grant
Numbers 00207815 and 00224315. For both grants, we observed that the PO
noted "not applicable" in response to a question regarding equipment purchases.
However, we noted that equipment was included in the approved revised budgets.
GS Administrative Review Checkiist Responses Were inaccurate and
incomplete
Region 2 GSs maintained inaccurate and incomplete responses to questions in the
comprehensive administrative review checklists for Puerto Rico assistance
agreements. Region 2 explained that the comprehensive administrative review
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checklist is a tool to properly review applications and funding packages and to
assist GSs in identifying errors.
We found that the comprehensive administrative review checklists had inaccurate
and incomplete responses in seven of the 23 grant files sampled; however, these
issues did not have an impact on the related assistance agreements. For example:
•	For Grant Number 00207817, the answers to questions 4 and 4a in the
"Eligibility and Pre-Award Capabilities Review" section (Section 2) noted
inaccurately that there were exclusions in the System for Award
Management.
•	For Grant Numbers 99293413 and 00213114, the GS did not complete the
"Funding Recommendation" section (Section 6).
Documentation Not in Grant Files Due to Electronic Processes
Region 2 POs and GSs did not always maintain hard copy files for assistance
agreements. The region stated that the vast majority of documents may be
completed electronically, including grant applications and post-award documents.
However, IGMS currently does not meet the EPA's requirements to qualify as an
electronic record-keeping system. In addition, a document was missing from the
physical grant file because the GS kept it on a computer hard drive. Some GSs
stated that not including these documents in the hard copy grant files may have
been an oversight, while one PO stated that, because a document was readily
accessible electronically via IGMS, a hard copy was not printed.
Region 2 stated that the majority, if not all, of its grant work is handled
electronically. The region also stated that its staff print and file documents in the
official hard copy files but that paper files are rarely used, except to retrieve
information on historical grants that may not be readily available electronically.
Region 2 stated that, in May 2017, its grants office conducted training sessions on
file management with the region's GSs and POs. The grants office has also stated
that it updated regional guidance on its intranet site.
Official Files Should Be Maintained to Support Grant Award Decisions
Region 2 should improve its documentation for Puerto Rico assistance agreements
to establish a complete, accurate and centrally located audit trail of grant award
decisions in support of the EPA's mission to protect human health and the
environment. Specifically, improvement is needed in the retention of hard copy
file documentation and in the accuracy and completeness of programmatic
baseline reports and comprehensive administrative review checklist responses.
Also, official hard copy files are needed to make sure that documentation is
readily available should electronic systems fail.
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Region 2 stated that the agency is currently developing an agencywide web-based
grants system. We believe an automated grants system that qualifies as an
electronic record-keeping system would benefit the region by eliminating the need
to print out documents for the physical grant files.
Recommendations
We recommend that the Regional Administrator, Region 2:
2.	Require Project Officers and Grant Management Specialists to take
specific, annual training on grant file management.
3.	Require Project Officers to take specific, annual training on conducting
baseline monitoring reviews, to include reviews of the EPA's financial
system for drawdown information.
Agency Response and OIG Evaluation
Region 2 agreed with our recommendations and provided corrective actions with
completion dates. The region provided the OIG with technical comments along
with its response to the draft report. The complete agency response to the draft
report is in Appendix B.
For Recommendation 2, the Region 2 stated that it maintains an online "File
Content Management Training," which is available to POs, GSs and managers.
Region 2 stated that it completed this training in May 2017. Additionally, the
region said that an announcement of this training will be transmitted annually to
staff by March 31, 2018. We consider the agency's corrective actions satisfied the
intent of the recommendation. This recommendation is resolved pending
completion of the announcement of the FY 2018 training.
For Recommendation 3, the agency noted that OGD will review the available
programmatic baseline monitoring training and will update the content as
appropriate by September 30, 2018. We consider the agency's planned corrective
action to satisfy the intent of the recommendation. This recommendation is
resolved pending completion of the corrective action.
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Chapter 4
EPA Needs to Assess Fringe Benefit Costs
for Car Allowances
The EPA needs to determine whether a Puerto Rico nonprofit has support for the
requested fringe benefit costs related to car allowances under two cooperative
agreements. Federal regulations state that costs related to personal use of vehicles
(including transportation to and from work) are unallowable as fringe benefits,
while vehicle costs related to work conducted under federal grants are allowable.
The PO for these cooperative agreements stated that the grant recipient's car use
was not monitored and that the grant recipient did not maintain supporting
documentation differentiating the personal and work use of vehicles. As a result
of not having the required supporting documentation, the EPA should confirm
that the estimated $10,000 in taxpayer funds used for this fringe benefit was
proper and allowable.
Federal Procedures Specify Requirements for Fringe Benefits
Federal regulations at 2 CFR § 200.431(a), Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards, define fringe
benefits:
Fringe benefits are allowances and services provided by employers
to their employees as compensation in addition to regular salaries
and wages. Fringe benefits include, but are not limited to, the costs
of leave (vacation, family-related, sick or military), employee
insurance, pensions, and unemployment benefit plans. Except as
provided elsewhere in these principles, the costs of fringe benefits
are allowable provided that the benefits are reasonable and are
required by law, non-Federal entity-employee agreement, or an
established policy of the non-Federal entity.
However, 2 CFR § 200.431(f) clarifies that personal use of vehicles is
unallowable as a fringe benefit:
[The] portion of automobile costs furnished by the entity that
relates to personal use by employees (including transportation to
and from work) is unallowable as fringe benefit or indirect
[Facilities and Administration] costs regardless of whether the cost
is reported as taxable income to the employees.
In compliance with federal standards, the Corporation for the Conservation of the
San Juan Bay Estuary (CCSJBE)—a nonprofit located in Puerto Rico that has
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been awarded cooperative agreements by the EPA—created a cost allocation
methodology, which was approved by the EPA in April 2016. The methodology
has the following objectives:
•	Meet regulatory and [Office of Management and Budget]
requirements.
•	Accurately capture personnel time, related costs and other
expenses to maximize reimbursement.
•	Provide a mechanism to allow employees to charge time and
other expenses to multiple programs or grants as necessary
that is workable in the CCSJBE environment.
In addition, Section 5.13 of CCSJBE's cost allocation methodology states, "Cell
Phone and Car Allowance expenses are budgeted in the proposals and only
authorized for approved allowable and allocable expenditures."
Region 2 Paid CCSJBE for Car Allowances as Fringe Benefits
Under two cooperative agreements with
CCSJBE, the EPA awarded car
allowances as fringe benefits for the
Executive Director and
Volunteer/Outreach Coordinator in
FY 2016 and FY 2017.
The EPA awarded CCSJBE two
cooperative agreements—Grant
Numbers 99206921 and 99206922—to
implement projects and programs
included in the San Juan Bay Estuary
Comprehensive Conservation and
Management Plan. According to the
award documents, these projects and programs were intended to "improve the
water and sediment quality of the [San Juan Bay Estuary] to ensure its suitability
for fishing and swimming and to promote other compatible recreational and
commercial activities."
The PO informed us that, in FY 2016 under Grant Number 99206921, CCSJBE
claimed $7,005 for car allowance fringe benefits for the Executive Director and
Volunteer/Outreach Coordinator. In addition, as of March 29, 2017, CCSJBE
claimed $3,974 in FY 2017 for the car allowance fringe benefits under Grant
Number 99206922. The PO stated that the costs, estimated at over $10,000, were
not monitored by the EPA to determine if they related to personal or work use.
A project to restore this lagoon is included in
the San Juan Bay Estuary Comprehensive
Conservation and ManagementPlan.
(EPA OIG photo)
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CCSJBE Should Have Support for Car Allowance Fringe Benefit Costs
Region 2 stated that it is up to the
recipient to maintain proper
documentation to support charges
under the cooperative agreement. In
addition, Region 2 stated that it does
not review supporting documentation
for costs drawn down by grant
recipients unless their assistance
agreements are in reimbursement
payment status. However, 2 CFR
§ 200.300 states the federal awarding
agency must manage the federal award to confirm that federal funding is
expended in full accordance with statutory and public policy requirements.
The PO stated that the region did not monitor or review the car use (personal
versus work) for the car allowances allocated under the cooperative agreements.
The PO also stated that the car allowances were approved by the CCSJBE
program as flat monthly allowances, since both the Volunteer/Outreach
Coordinator and the Executive Director were expected to use their personal cars
extensively to attend meetings and outreach activities outside the office.
During our fieldwork, the PO stated that the two CCSJBE employees receiving
the car allowances did not maintain documentation regarding mileage and use
because CCSJBE policies did not require this information. In June 2017, however,
Region 2 provided the OIG with Revision 3 of the CCSJBE's Personnel Policies
Handbook, issued in October 2015, which shows that CCSJBE's internal control
procedures do require the official use of vehicles to be documented. Section 8.5 of
this handbook specifically states that "employees who use their own automobiles
for travel on authorized business will be reimbursed for mileage" but that "[t]ravel
between home and office is not reimbursable." As a result, the handbook requires
that employees submit "a detailed log of all approved mileage to your manager
for reimbursement at least each quarter."
As an additional oversight control, Region 2 stated it conducted advanced
monitoring and transaction testing for CCSJBE and found support for the charges
requested in its drawdowns. However, costs associated with fringe benefits were
not included in the monitoring. Region 2 said it has followed up with CCSJBE
regarding the fringe benefit costs:
[T]o determine the correct amount associated with the vehicle use,
if documentation can be produced to support the costs, and has
already recommended some form of use log be developed and
implemented immediately for the Executive Director and Public
Another entrance to the Lagoon in Condado,
San Juan. (EPA OIG photo)
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Affairs Director prior to requesting any additional funds for such
costs from EPA if one is not currently used.
Region 2 Should Confirm Costs
Region 2 should confirm that the use of taxpayer funds—estimated at over
$10,000—for fringe benefits for car allowances was proper. Region 2 should
determine whether CCSJBE has documentation to support its requests for these
costs under the FY 2016 and FY 2017 cooperative agreements.
The PO stated that Region 2 did not monitor the grant recipient's car use, and
Region 2 stated that it is up to the recipient to maintain proper documentation to
support charges under the cooperative agreement. Region 2 has requested
documentation from CCSJBE and stated that it will "pursue the appropriate
remedy based on the supporting documentation received from the recipient."
Recommendation
We recommend that the Regional Administrator, Region 2:
4. Determine whether the cooperative agreements under Grant Numbers
99206921 and 99206922 have the proper support for the fringe benefit
costs requested for car allowances.
Agency Response and OIG Evaluation
Region 2 concurred with our recommendation and provided a corrective action
with a completion date. The region also provided the OIG with technical
comments along with its response to the draft report. The complete agency
response to the draft report is in Appendix B.
In response to Recommendation 4, Region 2 stated that it "will make the
appropriate determination of support" for the requested car allowance fringe
benefit costs and will take necessary actions by March 31, 2018. We consider the
agency's planned corrective action to satisfy the intent of the recommendation.
This recommendation is resolved pending completion of the proposed corrective
action.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS






Potential





Planned
Monetary
Rec.
Page



Completion
Benefits
No.
No.
Subject
Status1
Action Official
Date
(in $000s)
8 Train Project Officers to follow the EPA's Grants Policy
lssuance-02-02 guidance, and require that programmatic
baseline reviews include confirmation of equipment purchases
and use during the post-award phase.
14 Require Project Officers and Grant Management Specialists to
take specific, annual training on grant file management.
14 Require Project Officers to take specific, annual training on
conducting baseline monitoring reviews, to include reviews of the
EPA's financial system for drawdown infoimation.
18 Determine whether the cooperative agreements under Grant
Numbers 99206921 and 99206922 have the proper support for
the fringe benefit costs requested for car allowances.
Regional Administrator, 9/30/18
Region 2
Regional Administrator, 3/31/18
Region 2
Regional Administrator, 9/30/18
Region 2
Regional Administrator, 3/31/18
Region 2
$207
$10
1 C = Corrective action completed.
R = Recommendation resolved with corrective action pending.
U = Recommendation unresolved with resolution efforts in progress.
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Appendix A
Assistance Agreements Selected for Review
Grant
number
Project title
EPA award
amount
Open Grants
99293412-2
PREQB Performance Partnership Grant (PPG) '12
$4,159,660
99293413-5
PREQB PPG '13
4,007,952
97235209-1
Puerto Rico Aqueduct and Sewer Authority FY 05
Special Appropriation
3,849,000
97285910-2
FY '10 PREQB Water Quality Management Planning
Grant
1,342,616
00207817-0
Air Pollution Control Program
977,496
00207816-1
Air Pollution Control Program
977,494
00224314-0
FY 14 Hazardous Waste Program
889,862
99206922-0
FY 2016 San Juan Bay Estuary Program
770,000
00224315-1
Hazardous Waste Management Program '15
706,446
99206921-0
FY 2016 San Juan Bay Estuary Program
684,608
00207815-0
Air Pollution Control Program
675,000
96297112-4
FY 14 EQB State Response 128(a) Program
409,079
96274100-0
Multi-Purpose Grant Program
269,175
00213114-3
FY 14 Public Water System Supervision Program
164,837
Closed Grants
99293411-0
2011 PPG
2,473,883
00224311-2
Hazardous Waste Program FY11
1,110,095
00224313-1
FY13 Hazardous Waste Management Program
830,140
00266308-1
PREQB- Voluntary Cleanup Program
826,507
00224312-1
Hazardous Waste Program
675,000
00207812-0
Air Pollution Control Program FFY2012
612,093
00207811-0
FFY 2011 Air Pollution Control Program
604,394
97200701-0
PREQB PM 2.5 FY-2011/2012
371,056
97210701-0
PREQB FY-2009-2010 PM 2.5
344,048
Source: OIG-generated table from EPA grant data.
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Appendix B
Agency Response and OIG Evaluation
UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY - REGION II
290 BROADWAY
NEWYORK, NEW YORK 10007-1866
AUG 1 7 2017
MEMORANDUM
SUBJECT: Response to Office of Inspector General Draft Report, Project No.
FY-17-0001, "Region 2 Needs to Improve its Internal Processes Over
Puerto Rico's Assistance Agreements," dated July 18, 2017
FROM: Catherine R. McCabe
Acting Regional Administrator
TO:	Kevin Christensen
Assistant Inspector General for Audit
Office of Inspector General
Thank you for the opportunity to respond to the issues and recommendations in the
subject audit report. Following is a summary of the Agency's overall position, along with
its position on each of the report recommendations. EPA's Office of Grants and
Debarment (OGD) also provided input for this response. For those report
recommendations with which the Agency agrees, we have provided corrective actions
and estimated completion dates. For your consideration, we have included a Technical
Comments Attachment to supplement this response.
AGENCY'S OVERALL POSITION
Region 2 generally agrees with the four recommendations provided in the report and
has begun to implement appropriate corrective actions. However, while we agree to
determine support for the fringe costs as stated in Recommendation Number 4, we
request that the finding leading to that recommendation be removed. Please refer to
the "Technical Comments Attachment" for a detailed description of our position on the
OIG's analysis of the Grant Policy (GPI) 02-02 cited throughout the report and the
resulting conclusions in addition to other technical comments.
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AGENCY'S RESPONSE TO REPORT RECOMMENDATIONS
Agreements
No.
Recommendation
High-Level Intended
Corrective Action(s)
Estimated Completion by
Quarter and FY
1
Train Project Officers to
follow the EPA's Grants
Policy Issuance GPI-02-02
guidance, and require that
programmatic baseline
reviews include confirmation
of equipment purchases and
use during the post-award
phase.
1.1	All Agency Project
Officers are required to take
training as part of their
certification, which includes
refresher training triennially
and for equipment purchases
and use during the post award
phase.
1.2	OGD will review the
existing Project Officer
Training module regarding
guidance for equipment
purchases and will update as
appropriate.
Complete
4th Quarter FY 2018
2
Require Project Officers
and Grant Management
Specialists to take specific,
annual training on grant
file management
2.1	Region 2 maintains its File
Content Management
Training online and available
to Project Officers, Grants
Specialists and Managers.
Additionally, the training
provides resources, such as
the grant file organization
structure. Region 2 updated
and delivered this training to
staff in May 2017.
2.2	An annual announcement
of the above training will be
transmitted to staff.
Completed 3rd Quarter
FY2017
2nd Quarter FY 2018
3
Require Project Officers to
take specific, annual
training on conducting
baseline monitoring
reviews, to include reviews
of the EPA's financial
system for drawdown
information.
3.1 OGD will review available
training for Programmatic
Baseline Monitoring and will
update the content as
appropriate.
4th Quarter 2018
4
Determine whether the
cooperative agreements
under Grant Numbers
99206921 and 99206922
have the proper support
for the fringe benefit costs
requested for car
allowances.
4.1 Region 2 will make the
appropriate determination of
support for the costs and take
necessary action.
2nd Quarter FY2018
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CONTACT INFORMATION
If you have any questions regarding this response, please contact John Svec, Audit
Coordinator of the Grants and Audit Management Branch on (212) 637-3699 or Rudnell
O'Neal, Acting Branch Chief of the Grants and Audit Management Branch on (212) 637-
3427.
Attachments
cc: Michael D. Davis
Gloria Taylor-Upshaw
Rudnell O'Neal
Stephanie Montrallo
Carmen Guerrero
Jose Font
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ATTACHMENT
TECHNICAL COMMENTS
Comments to specific sections to the Draft Response
At a Glance Section - Page 3
"What We Found" - The Report claims that R2 "needs to improve its internal processes over
Puerto Rico's assistance agreements" yet it does not cite any instances in which the Region
made an improper award or took an improper action. No significant issues were identified.
We were unable to ascertain how the OIG came to this
conclusion. The report cites $3,606 of computer
equipment the OIG believed was not reviewed properly
and approximately $10,000 of fringe benefit costs
associated with vehicle usage believed to be
unsupported. The $207,000 cited here is the federal
share of equipment costs in the grant approved budgets
reviewed by the OIG, which may include other types of
equipment in addition to the five computer equipment
items identified in the report. This statement also implies
that Region 2 was lax in its oversight role or did not follow
EPA procedures. The report does not support that
conclusion or implication and we respectfully request it
be reconsidered.
This section also states the following as an area needing improvement:
"Supports car allowance fringe benefit costs. Region 2 did not know whether the grant recipient
of two cooperative agreements maintained supporting documentation for the car allowance
fringe benefit costs."
While we will follow up to determine support for the costs as recommended by the OIG, we
request that the above finding be removed. This statement implies that the Region should have
known whether the recipient had supporting documentation for its fringe benefit costs. We
disagree that there is a finding as to the Region's oversight or internal processes over Puerto
Rico's assistance agreements as it pertains to this issue. As a general matter, and as previously
explained in our response the discussion draft, supporting documentation is reviewed only at
the time of a post-award transaction testing, or when questioned costs are identified through a
single audit or other review. No Regional processes will be modified as a result of the OIG's
identification of this issue. We will continue the established practices and procedures for
following up on any questioned costs identified as a result of external or EPA reviews.
OIG Response: We believe our report addresses internal processes over Puerto Rico's assistance
agreements that need improvement, such as the need to confirm equipment was used as intended
in the post-award phase, to have better internal documents, and to know if the agency is paying
unallowable car allowance fringe benefit costs.
Region 2 may have
inefficiently used over
$207,000 in taxpayer
funds by not
confirming equipment
use or obtaining
support for requested
fringe benefit costs.
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We did not make any changes to the "At a Glance" section of the report. We believe that the
finding should remain in the report. We believe that when the agency approved the nonprofit
grantee cost methodology, the EPA should have confirmed the nonprofit to be in compliance
with 2 CFR § 200.431(f), which clarifies that personal use of vehicles is unallowable as a fringe
benefit. Also, the agency agreed to the recommendation and provided a corrective action with
completion date. The finding chapter is needed to support the facts.
We believe that, while it is the grant recipient's responsibility to maintain documentation, the
agency should not wait for and rely only on external reviews for oversight.
Chapter 1
Background - Page 1
Region 2 requests paragraphs one and two be revised. EPA funds assistance agreements as a
grant or a cooperative agreement. The purpose of awarding assistance agreements is expressly
for public benefit. EPA Assistance Agreement programs are characterized as competitive or
non-competitive, discretionary or non-discretionary, and/or are considered a Continuing
Environmental Program or non-Continuing Environmental Program (i.e. project grants,
fellowships). An SRF is a specific grant program authorized by statute; it is not an optional
mechanism for awarding grant funds.
OIG Response: We updated the "Background" section in accordance with the suggested
wording.
Responsible Offices - Page 2
We request the last paragraph to be clarified using the following language:
The Region 2 Office of Policy and Management, Grants and Audit Management Branch, aiso
has responsibilities regarding assistance agreements with Puerto Rico. The branch is
responsible for the administrative review, preparation of awards, administrative post-award
management, development of grant-specific administrative terms and conditions, approval of
grant payment requests for recipients on reimbursement in conjunction with the program office,
closeout, and administrative oversight for all grants and cooperative agreements in Region 2.
The branch also provides support, as needed, to the regional program offices, which perform
similar functions from the program perspective.
OIG Response: We updated the "Responsible Offices" section in accordance with the suggested
wording.
Chapter 2-
Region 2 Did Not Confirm EQB's Equipment Use - page 5
Region 2 POs did not confirm EQB's grant equipment use. The EPA's Grants Policy Issuance
(GPl) GPI-02-02 states that POs have a responsibility during the post-award phase to confirm
that a grant recipient purchases and uses equipment according to the approved budget and
work plan. However, Region 2 POs conducted programmatic baseline reviews that were limited
to specific data areas, which did not include confirming equipment use. POs need to be familiar
with the use of equipment purchased under a grant to make a reasonable determination for
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future equipment requests and to confirm that taxpayer funds are being used in accordance with
grant requirements.
This chapter cites the requirements of GP1-02-02, but fails to note the following provisions of this
GPI, which mirror the regulations (see 2 CFR 200.313, Equipment):
Section 4, Definitions, states the following:
"States are not subject to these requirements. States will use, manage and dispose of
equipment acquired under a grant by the state in accordance with state laws and
procedures."
Section 5, Disposition Options, states the following:
"Special Cases
States: State agencies may manage and dispose of equipment acquired under
assistance agreements in accordance with state laws and procedures."
"State agencies can manage equipment according to their state regulations."
Region 2 worked closely with EQB to develop its procedures and specific systems to be in
compliance with federal regulations and Generally Accepted Accounting Principles. EPA has
maintained an oversight role with EQB as it has worked to further develop internal control
processes and implemented its own procedures. EQB's procedures for equipment are compliant
and it is incumbent upon EQB to follow its procedures. The report does not cite any instances in
which EQB inappropriately procured or managed equipment, or where its property management
procedures were not followed.
OIG Response: We agree with the EPA's statement that GP1-02-02 requires states to manage
equipment. However, the policy also includes a statement in Section 2 about scope: "This
guidance applies to all EPA POs and GMOs awarding or administering assistance agreements."
Therefore, POs are "responsible for confirming that the recipient purchases that equipment
within the time frame outlined in their milestones and uses the equipment for the purposes
outlined in the work plan." The regional POs did not follow this requirement for the equipment
outlined in this chapter.
POs Did Not Confirm EQB's Equipment Use - page 6
The statement that POs "Did Not Confirm EQB's Equipment Use" is not correct. Project Officers
review both the budget package and the workplan; they confirm the equipment and its intended
use in the cost review checklist, completed as part of the Funding Recommendation process.
Additionally, GPI-02-02 does not require a Project Officer to assess the equipment needs under
one agreement by reviewing a recipient's complete equipment inventory and procurement
history. The OIG's statement that "POs should be aware of how equipment purchased under
previous grants is being used to make a reasonable determination whether additional purchases
are necessary" is outside the scope of a POs responsibility, potentially beyond their expertise,
and would create undue administrative burden on the recipients and EPA staff. We note that the
OIG's review did not identify any unnecessary equipment, and that EQB's procedures prohibit
the purchase of unneeded items.
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OIG Response: We updated the title and body of Chapter 2 to address that POs did not confirm
equipment was used as outlined in the approved work plans.
Additional Equipment Purchases Without Confirmation - Page 7
We suggest revising this section to clarify the OIG's purpose for conveying the information. POs
are required to complete baseline monitoring at least annually, the Project Officer Off-Site/On-
Site Review Guidance and Protocol cited is used for programmatic advanced monitoring
reviews for selected grant and cooperative agreements. Unless a specific grant is selected as
part of a small sample of agreements for this type of additional review, a PO would not utilize
this checklist to document equipment purchases and therefore, it would not be in the grant file.
A review of the Grantee Compliance Database confirmed that the agreements identified in
Table 1 were not selected for programmatic advanced monitoring review. Table 1 lists
equipment budgeted under the agreement, all of those equipment dollars were reviewed by the
PO and determined to be reasonable, allowable and necessary to complete the milestones of
the workplan covered by the agreement at the time of the award. Please note that the PPGs for
EQB, grant numbers 99293412 and 99293413, listed in Table 1 have not been closed or are
currently active. The Project Officer has provided documentation to support her review and
approval of equipment EQB purchased under each agreement.
OIG Response: We agree and deleted the subsection in the "Additional Equipment Purchased
Without Confirmation" related to the above-mentioned protocol, as it would be part of the
advanced monitoring reviews only. In addition, we added a column to Table 1 to show the status
(open or closed) of each grant listed.
PO Reviews Were Limited to Specific Data - Page 7
The report indicates that "Region 2 stated that an equipment review is not required for EQB
since they are no longer considered high-risk recipient." While it is not clear what context this
statement was made, as a result of EPA lifting the High Risk designation, EQB is no longer
required to submit supporting expenditure documentation that was required with its requests for
payment when under the High Risk designation. As discussed previously, EQB is considered a
state agency and is required to follow its own procurement policies and procedures. EPA
reviewed and approved the proposed equipment purchases in the grant budgets and has
extensively reviewed EQB's procurement policies and standard operating procedures.
Region 2 has consulted with the Headquarters Office of Grants and Debarment, National Policy,
Training & Compliance Division and that office is in agreement with the statement previously
provided to the OIG by Region 2:
POs are not responsible for reviewing existing inventories before approving equipment
purchases. Rather, POs are required to use their best professional judgment and
considerations such as knowledge of the type of equipment, consistency with the
recipient's procurement system, market research/market value, or a prudent person test
to assess the reasonableness and necessity of proposed equipment purchases.
Particularly for state governments in continuing environmental grant programs, it is
expected that there will be turnover in equipment, especially computers, and that every
year a fraction of the existing inventory will be replaced.
Region 2 maintains that POs were reviewing and approving equipment in accordance with the
Agency's policies and regulations.
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OIG Response: We agree that EQB is a state agency and is required to follow its own
procurement policies and procedures. However, GP1-02-02 includes a statement in Section 2
about scope: "This guidance applies to all EPA POs and GMOs awarding or administering
assistance agreements." Therefore, POs in the post-award phase are "responsible for confirming
that the recipient purchases the equipment within the time frame outlined in their milestones and
uses the equipment for the purposes outlines in the work plan." We updated the report to note
that POs did not confirm EQB equipment was used as outlined in the work plans.
POs Are Unfamiliar with EQB's Equipment - Page 8
We respectfully disagree with this section and request it be revised. Region 2 was extensively
involved in the development of EQB's procurement policies and standard operating procedures.
We have thoroughly reviewed the implementation of those procedures and have maintained a
close oversight role with EQB as they have continued to develop additional internal controls
since the High Risk Designation was lifted. POs properly reviewed the equipment lists included
with the proposed budgets in accordance with grant regulations and EPA policy. Each piece of
equipment proposed is assessed and determined to be allowable, reasonable, and necessary
for the completion of the workplan milestones. EQB's procedures require EPA approval prior to
making changes in proposed equipment purchases and GPI-02-02 (as well as the EPA grant
regulations) requires a state agency to follow its policies and procedures regarding equipment.
Therefore, it is the Agency's position that there is no benefit for a PO to assess a state agency's
complete equipment inventory prior to approving equipment for every grant nor is it within the
scope of EPA's oversight responsibilities.
OIG Response: We agree that there is no benefit for a PO to assess a state agency's complete
equipment inventory prior to approving equipment for every grant. We believe that, once EQB
purchases equipment in accordance with the grant, it is the PO's responsibility in the post-award
phase to make sure EQB uses the equipment in accordance with the approved work plan, as
required by GPI-02-02.
We updated the title and body of Chapter 2 to indicate that POs did not confirm EQB equipment
was used as outlined in work plans.
Chapter 3 - Page 9-13
Region 2 Needs to Improve Internal Documentation for Puerto Rico Assistance
Agreements
We respectfully request the title for this chapter be reconsidered, it does not accurately reflect
the contents of the chapter. The issues cited in this section are immaterial to grants
management and EPA's oversight. The Comprehensive Administrative Review Checklist is a
tool to assist GSs in reviewing the application packages and funding recommendations and
identifying potential issues; the checklist does not constitute a final Agency determination or an
official report. Additionally, due to multiple levels of internal controls and management reviews,
there were no instances of improper awards being made. We contend that Region 2 has proper
internal controls and procedures in place to properly oversee Puerto Rico grants. Additionally,
Region 2 has already provided file content training to POs and Managers, updated its File
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Content Training available online, has provided written reminders to staff to print grant related
documents and will continue to do so.
OIG Response: We agree that Region 2 has internal controls and procedures in place to oversee
Puerto Rico grants. However, we believe that improvements are needed and that the title
accurately reflects the need for improving controls over internal documentation.
We stated in our report that the comprehensive administrative review checklist is a tool to
facilitate the proper review of applications and funding packages and to assist GSs in identifying
errors; therefore, we did not make any additional changes to the body of the report.
Chapter 4 -
Region 2 Paid CCSJBE for Car Allowances as Fringe Benefits - Page 16
CCSJBE did not request "the same fringe benefits" in 2017 as it did in 2016. The periods
covered were different. We request the following paragraph be clarified as follows:
The PO informed us that, in FY 2016 under Grant Number 99206921, CCSJBE claimed $7,005
for car allowance fringe benefits for the Executive Director and Volunteer/Outreach Coordinator.
In addition, as of March 29, 2017, CCSJBE claimed $3,974 in FY 2017 for car allowance fringe
benefits for the Executive Director and Volunteer/Outreach Coordinator under Grant Number
99206922. The PO stated that the costs, estimated at over $10,000, were not monitored by EPA
to determine if they related to personal or work use.
OIG Response: We agree that the same costs were not claimed in FYs 2016 and 2017. We were
referring to the car allowance fringe benefit in our report. We updated "the same fringe benefits"
to "car allowance fringe benefits."
Region 2 Should Confirm Costs -
Region 2 has already begun the process of verifying that for the costs of the vehicle allowance
fringe benefits for the Executive Director and Volunteer/Outreach Coordinator are properly
supported. CCSJBE has met with Region 2 staff and has submitted draft revised procedures for
review and comment. We maintain that we will pursue the appropriate remedy based on the
supporting documentation received from the recipient.
OIG Response: We consider the agency's planned corrective action to satisfy the intent of the
recommendation.
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Appendix C
Distribution
The Administrator
Chief of Staff
Chief of Staff for Operations
Deputy Chief of Staff for Operations
Regional Administrator, Region 2
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Deputy Regional Administrator, Region 2
Director, Office of Grants and Debarment, Office of Administration and Resources Management
Director, Grants and Interagency Agreements Management Division,
Office of Administration and Resources Management
Director, Office of Regional Operations
Regional Public Affairs Officer, Region 2
Director, Caribbean Environmental Protection Division, Region 2
Director, Office of Policy and Management, Region 2
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Region 2
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