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*. U.S. Environmental Protection Agency	12-4-0499

i	\ Office of Inspector General	May 23 2012
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At a Glance
Why We Did This Review
The U.S. Environmental
Protection Agency (EPA)
Office of Inspector General is
examining assistance
agreements to nonprofit
organizations. We selected the
North Carolina Rural Economic
Development Center, Inc.,
(NCREDC) for review. The
purpose of the review was to
determine whether the
NCREDC complied with grant
requirements and applicable
regulations.
Background
EPA Region 4 issued to the
NCREDC Grant No.
X96418405, in the amount of
$994,100, to help fund a
$1,046,421 project under
Section 104(b)(3) of the Clean
Water Act. The grant was
amended to increase funding,
bringing the total award to
$1,192,500. The grantee, which
also received funding from
state sources, incurred costs of
$2,204,031 between October 1,
2003, and May 31,2007.
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/2012/
20120523-12-4-0499.pdf
Costs Claimed by the North Carolina Rural
Economic Development Center, Inc., Under
EPA Grant No. X96418405
What We Found
The NCREDC did not comply with the Code of Federal Regulations (CFR),
specifically 2 CFR Part 230, regarding financial management. The NCREDC did
not properly allocate direct costs between state and federal funding sources.
Therefore, EPA should recover $1,192,500 in costs questioned under the grant.
The NCREDC failed to properly allocate the questioned costs primarily because
EPA provided incorrect guidance and inadequately monitored the grant. Region 4
must recognize that the $178,556 budget revision it directed is not allocable to
the EPA grant because it shifted subcontract costs allocable to state funding
sources to the EPA grant. Additionally, the NCREDC was unfamiliar with
federal grant regulations.
What We Recommend
We recommend that the Regional Administrator, Region 4, disallow all costs
paid under Grant No. X96418405 and recover $1,192,500.
Planned Agency Corrective Actions
Region 4 and the NCREDC disagreed with our draft findings and
recommendation. We evaluated the information in their responses to our draft
report but did not modify our findings or recommendation. The recommendation
is thus unresolved with resolution efforts in progress.
Region 4 provided a corrective action plan indicating that the NCREDC will
submit a plan outlining full accounting of the allocation of costs between state
and federal funding sources for the project. With the NCREDC's plan, the region
can determine the reasonableness, allocability, and allowability of costs in
accordance with the provisions of the applicable federal cost principles.

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