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Audit Report
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EPA Grants Awarded to the
Northern Cheyenne Tribe
Report No. 1000370-2002-1 -00089 March 5, 2002

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Inspector General Division
Conducting the Audit:	Central Audit Division
Denver, Colorado Office
EPA Region Covered:
Region 8
Program Offices Involved:
Tribal Assistance Program
Grants, Audits, and Procurement Program
Montana Operations Office
Grantee:
Northern Cheyenne Tribe
Audit Conducted by:
Larry Dare
Thomas Herrod
Cover: The illustration is part of an EPA poster that depicts Tribes' sovereign right to
protect the water, land, and air. The cover illustration represents air.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
CENTRAL AUDIT DIVISION	branch offices:
901 NORTH 5TH STREET	1445 Ross Avenue, Suite 1200
KANSAS CITY, KANSAS 66101	Dallas, Texas 75202-2733
913-551-7878	214-665-6621
FAX: 913-551-7837	FAX: 214-665-6589
April 11, 2002	999 18th Street Suite 300
Denver, Colorado 80202-2405
303-312-6872
FAX: 303-312-6063
MEMORANDUM
SUBJECT: EPA Grants Awarded to the Northern Cheyenne Tribe
Report No. 1000370-2002-1-00089
FROM: Jeff Hart
Branch Manager
Denver Office
TO:	Jack McGraw
Acting Regional Administrator
Region 8
Attached is our report, EPA Grants Awarded to the Northern Cheyenne Tribe.
This report includes our independent assessment of three Northern Cheyenne
environmental grants and Northern Cheyenne's general management of its
environmental program.
ACTION REQUIRED
In accordance with EPA Order 2750, you, as the action official, are required to
provide our office with a proposed draft management decision specifying the Agency's
position on costs questioned in this report. The draft management decision is due
within 120 calendar days of the date of this transmittal memorandum.
Our report includes an assessment of your draft report comments. We also
included your written comments as Appendix I.
If you have any questions, please call me at (303) 312-6169 or Larry Dare at
(303) 312-6969. Please refer to report number 1000370-2002-1-00089 on any related
correspondence.
Attachment

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Table of Contents
Independent Auditor's Report		1
Audit Results		3
Objective 		3
Scope and Methodology 		3
Findings 		4
Recommendation		5
Agency Comments and Office of Inspector General Evaluation 		5
Exhibits
A Summary of Balance Due EPA 	 6
B Summary of Audit Results for Water Grant 1998634-99 	 7
C Summary of Audit Results for General Assistance Program
Grant GA998636-01 	 8
D Summary of Audit Results for Air Grant A008455-00 		10
Appendices
I	Agency Response		11
II	Distribution 		12
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Report No. 1000370-2002-1-00089

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EPA Grants Awarded to
the Northern Cheyenne Tribe
Independent Auditor's Report
We have examined the costs claimed on the final Financial Status Report (Form 269A)
and Request for Advance or Reimbursement (Form 270) submitted by the Northern
Cheyenne Tribe, Lame Deer, Montana (grantee) for each of the grants listed in the
Scope and Methodology section. The preparation and certification of the claims are
the responsibility of the grantee. Our responsibility was to express an opinion on the
claims.
We conducted our examination in accordance with Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
claims submitted by the grantee are free of material misstatement and eligible under
grant agreements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the final claims. An audit also includes assessing the
accounting principles used and significant estimates made by management in
preparing the claims. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, except for the questioned cost in Exhibit C, the claimed costs referred to
above and presented in Exhibits A through D present fairly the reasonable, allowable,
and allocable costs claimed according to the law, regulations, assistance agreements,
and other applicable federal guidance.
Jeff Hart
Branch Manager
Denver Office
Central Audit Division
Office of Inspector General
Fieldwork End: March 16, 2001
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EPA Grants Awarded to
the Northern Cheyenne Tribe
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EPA Grants Awarded to
the Northern Cheyenne Tribe
Audit Results
In response to a December 7, 1999 allegation letter, we reviewed (1) the legality of
EPA Region 8's Tribal Assistance Program grant awards, (2) the Tribal Assistance
Program's internal management, and (3) grantee management of environmental
programs and expenditure of grant funds. We reported on the first two issues in our
September 29, 2000 report, Increased Focus on Grant Management and Internal
Relationships Would Improve Region 8's Tribal Assistance Program. To address the
third issue, we conducted financial audits of four grantees. We judgementally selected
the four tribes based on their significant involvement with EPA programs, past
performance, and the fact that each had several recently closed grants for which we
expected to find complete financial records. This report provides our findings at one of
those grantees - the Northern Cheyenne Tribe, Lame Deer, Montana.
Objective
Our overall objective was to determine whether the grantee effectively managed its
environmental grants. To accomplish this objective, we asked the question: Are costs
claimed for grants eligible, reasonable, and supported, and were the costs in
compliance with grant terms and conditions as well as applicable Federal statutes and
regulations?
Scope and Methodology
EPA paid the grantee $403,231 under the following assistance agreements:
Program
Grant No.
For Expenses
Through
Amount
Water Section 106 Special
Project
1998634-99
7/14/2000
$64,444
General Assistance Program
GA998636-01
6/28/2000
$256,993
Air Section 105
A008455-00
11/27/2000
$81,794

Total
$403,231
We selected these three grants to obtain a cross section of the grantee's
environmental program and because the grantee had received final payment from
EPA for each grant. Grant 1998634-99 involved water quality projects from April
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EPA Grants Awarded to
the Northern Cheyenne Tribe
1999 through March 2000. Grant GA998636-01 involved activities from May 1997
through March 2000 and was intended to increase tribal management capability
and capacity to implement environmental programs. Grant A008455-00 was for
developing and enhancing a comprehensive air monitoring program; the project
period was from October 1999 through September 2000. EPA funded 100 percent
of grant GA998636-01. EPA paid 95 percent of the costs associated with the other
two grants and the grantee paid the remaining 5 percent. The total claimed cost for
the three projects was $411,662, which included total EPA payments of $403,231.
For each grant, the grantee certified on Standard Form 270, Request for Advance
or Reimbursement, that the costs were in accordance with the grant terms.
Subsequently, the grantee certified on Standard Form 269A, Financial Status
Report, that all outlays and unliquidated obligations were for the purposes set forth
in the award documents.
We visited the Northern Cheyenne Reservation during the week of March 12, 2001.
We reviewed the three grants, the accompanying detailed expense ledgers, and
receipts and other supporting documentation.
Findings
We Questioned Contractual Funds
We questioned a $25,789 contract payment made because the Northern Cheyenne
Tribe did not follow competitive contracting requirements when it awarded this
contract. Region 8 had directed the grantee to award this contract to a specific
organization without competition. Regardless, the grantee was not following Tribal
and Federal procurement policies when awarding this contract.
Internal Controls Support Good Grant Management
Our objectives did not include a comprehensive review of the grantee's internal
controls for managing its Federal grants. However, during our on-site fieldwork we
generally found Northern Cheyenne's internal controls to be sufficient.
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EPA Grants Awarded to
the Northern Cheyenne Tribe
Recommendation
We recommend that the Acting Regional Administrator, EPA Region 8, recover
$25,789 in ineligible costs.
Agency Comments and
Office of Inspector General Evaluation
The Region did not agree with our recommendation and did not believe it is
appropriate that Northern Cheyenne be held responsible for repaying the amount
of costs questioned. The Region noted that Northern Cheyenne acted on the
Region's advice and believed the Region had already executed a contract with Mni
Sose Intertribal Water Rights Coalition, Incorporated in full compliance with
Federal procurement regulations. In addition the Northern Cheyenne Tribe
believed it was actually precluded in using its procurement procedures.
We disagree. While we acknowledge that the grantee was directed by Region 8 to
award the contract to the particular organization without competition, this did not
relieve the grantee of responsibility for following applicable regulations. While the
Tribal representatives knew at the time that the contract should have been
competed and raised their concerns with Region 8 staff, they nonetheless issued a
sole source contract without justification. As a result, we believe Northern
Cheyenne should be held responsible for its actions and required to repay
$25,789, the amount of the contract.
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EPA Grants Awarded to
the Northern Cheyenne Tribe
Exhibit A
Summary of Balance Due EPA
Water Grant 1998634-99
(See Exhibit B)
$68,570 Claimed
$0 Questioned
$68,570 Total Allowable
EPA Payments as of 7/14/00
$64,444
EPA Share (95% of allowable)1
$64,444
Balance Due EPA
$0
General Assistance Program Grant
GA998636-01 (See Exhibit C)
$256,993 Claimed
$25,789 Questioned
$231,204 Total Allowable
EPA Payments as of 6/28/00
$256,993
EPA Share (100% of allowable)
$231,204
Balance Due EPA
$25,789
Air Grant A00845-00
(See Exhibit D)
$86,099 Claimed
$0 Questioned
$86,099 Total Allowable
EPA Payments as of 11/27/00
$81,794
EPA Share (95% of allowable)
$81,794
Balance Due EPA
$0
Total Costs Claimed:	$411,662
Total Costs Questioned:	$25,789
Total Allowable:	$385,873
Total EPA Payments Made:	$403,231
Total EPA Share Allowable:2	$377,442
Balance Due EPA:	$25,789
Notes
1.	Ninety-five percent of total program outlays is $65,142. However, the EPA share
is limited to $64,444 because recipient match ($4,126) consists entirely of in-
kind contributions which are not eligible for reimbursement. Total program
outlays, $68,570, less the grantee's in-kind contribution of $4,126, equals
$64,444.
2.	EPA share represents that portion of allowable project cost for which EPA is
responsible.
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EPA Grants Awarded to
the Northern Cheyenne Tribe
Exhibit B
Summary of Audit Results for Water Grant 1998634-99

Costs Questioned as:
Categories
Costs
Claimed
Ineligible
Unreasonable
Unsupported
Total
Payroll
$40,488




Travel
5,323




Supplies
133




Equipment
3,395




Utilities
1,185




Indirect Cost
13,920




Recipient Match
4,126




Total
$68,570



$0
Total Allowable (Claimed less Questioned)
$68,570
Summary of Balance Due EPA

EPA Payments as of 03/31/00
$64,444
EPA Share (95% of allowable)1
$64,444
Balance Due EPA
$0
Notes
10.	Ninety-five percent of total program outlays is $65,142. However, the
EPA share is limited to $64,444 because recipient match ($4,126)
consists entirely of in-kind contributions which are not eligible for
reimbursement. Total program outlays, $68,570, less the grantee's in-
kind contribution of $4,126, equals $64,444.
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EPA Grants Awarded to
the Northern Cheyenne Tribe
Exhibit C
Summary of Audit Results for
General Assistance Program Grant GA998636-01

Costs Questioned as:
Categories
Costs
Claimed
Ineligible
Unreasonable
Unsupported
Total
Payroll
$141,216




Travel
$25,957




Supplies
$5,443




Equipment
$12,071




Contractual1
(Professional Services)
$25,789
$25,789


$25,7891
Utilities
$2,593




Indirect Cost
$43,924




Total
$256,993
$25,789


$25,789
Total Allowable (Claimed less Questioned)
$231,204
Summary of Balance Due EPA

EPA Payments as of 06/28/2000
$256,993
EPA Share (100% of allowable)
$231,204
Balance Due EPA
$25,789
Notes
1. We questioned this $25,789 contract payment made to Mni Sose Intertribal
Water Rights Coalition, Incorporated, because the contract award did not follow
Tribal or Federal procurement policies. Northern Cheyenne's policy states that,
"In purchases exceeding $10,000, the grantee shall utilize formal advertising
(also known as sealed bids), with adequate purchase description, competitive
sealed bids, and public openings unless negotiated procurement is utilized."
Although the grantee's policy allowed negotiated procurement in certain
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EPA Grants Awarded to
the Northern Cheyenne Tribe
circumstances, that policy did not appear to apply in this case, and the required
procedures for negotiated procurements were not followed. In addition, the
Federal Acquisition Regulations, Part 6, requires a contract of this size to be
open for competitive bids. However, this contract was awarded sole source,
without competitive contracting requirements being followed. We found that the
grantee awarded the contract because Region 8 directed the grantee to
specifically contract with Mni Sose Intertribal Water Rights Coalition,
Incorporated, for conference services.
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EPA Grants Awarded to
the Northern Cheyenne Tribe
Exhibit D
Summary of Audit Results for Air Grant A008455-00

Costs Questioned as:
Categories
Costs
Claimed
Ineligible
Unreasonable
Unsupporte
d
Total
Payroll
$53,196




Travel
9,052




Telephone
1,954




Supplies-Office
1,714




Utilities
675




Property/
Equipment
2,549




Equipment
Repair
142




Indirect Cost
16,735




Public Relations
81




Total
$86,098



$0
Total Allowable (Claimed less Questioned)
$86,098
Summary of Balance Due EPA

EPA Payments as of 11/27/00
$81,794
EPA Share (95% of allowable)
$81,794
Balance Due EPA
$0
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EPA Grants Awarded to
the Northern Cheyenne Tribe
APPENDIX I
AGENCY RESPONSE
%
I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
""-y	REGION 8
"**	999 18 STREET - SUITE 300
DENVER, CO 80202-246$
Phone 800-227-8917
Ref: 8TMS-G	http://www.epa.gov/region08
MEMORANDUM	FEB ~ 1
ait iXW. iwi-uo
SUB JECT: Audit of EPA Grants Awarded to the
, - -Northern Cheyenne Tribe
[ Draft BSport2001 -08-000370-NC
V '\s
FROM: ^ck'MUjraw
feting Regional Administrator
TO:	' Jeff Hart
Branch Manager
Denver Office
A draft audit report, prepared by your office, was provided to us regarding several grants
awarded to the Northern Cheyenne Tribe. Costs in the amount of $25,789 were questioned under
the General Assistance Program (GAP) grant for a sole source contract with Mm Sose. We have
reviewed our records and the response that we received from the Tribe.
A GAP grant was awarded to the Northern Cheyenne for $168,132. In this grant a work
plan and a budget, in the amount of $29,135, were negotiated with the Tribe to oversee a contract
with Mni Sose to organize the Tribal Leader's Summit. The money was awarded to the Tribe on
February 23,1999 and the summit was to be held March 17, 1999. The Tribe's response
indicates that they felt they did not have the time to contract out. The Tribe also felt EPA was
directing them to go with Mni Sose and presumed the procurement with Mni Sose had already
been executed by the Region 8 office in full compliance with federal procurement regulations.
They felt that in complying with our funding directive, the Tribe was actually precluded in using
its procurement procedures.
The audit questioned the contract costs because it was a sole source contract. EPA should
have let the Tribe follow their own procurement regulations, which specifies that any purchase
exceeding $10,000 should be formally advertised. EPA's actions resulted in this
miscommunication, and it is not appropriate for the Tribe to be held responsible for repaying
funds due to this situation. We ask that you consider revising your audit report on this matter.
If you have any further questions on our response, please contact Beverly Good sell.
Regional Audit Coordinator.
Thank you.
Printed on Recycled Paper
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EPA Grants Awarded to
the Northern Cheyenne Tribe
APPENDIX II
DISTRIBUTION
Office of Inspector General
Inspector General
EPA Headquarters Office
Director, Financial Management Division (2733R)
Comptroller (2731A)
Director, Grants Administration Division (3903R)
Agency Audit Followup Coordinator (2724A)
Associate Administrator for Congressional and Intergovernmental Relations
(1301A)
Associate Administrator for Communications, Education, and Media Relations
(1101A)
Region 8 Office
Regional Counsel
Assistant Regional Administrator, Office of Partnerships and Regulatory
Assistance
Associate Assistant Regional Administrator, Office of Partnerships and
Regulatory Assistance
Director, Tribal Assistance Program
Assistant Regional Administrator, Office of Technical and Management Services
Director, Grants, Audits, and Procurement Program
Director, Financial Management Program
Audit Followup Coordinator
Director, Office of Communication and Public Involvement
Director, Montana Office
Northern Cheyenne Tribal Project Officer, Montana Operations Office
Northern Cheyenne Tribe
President
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