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Inspector General Resource Center
Conducting the Audit: Central Audit and Evaluation Resource Center
Denver, Colorado Office
EPA Region Covered: Region 8
Program Offices Involved: Tribal Assistance Program
Grants, Audit, and Procurement Program
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 AND EVALUATION RESOURCE CENTER 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
March 27, 2002 999 18th Street Suite 300
Denver, Colorado 80202-2405
303-312-6872
FAX: 303-312-6063
MEMORANDUM
SUBJECT: EPA Grants Awarded to the Crow Tribe
Report No. 1003 70-2002-1 -000098
FROM: Jeff Hart
Branch Manager
Denver Office
TO: J ack McGraw
Acting Regional Administrator
Region 8
Attached is our report, EPA Grants Awarded to the Crow Tribe. This report includes our
independent assessment of three Crow environmental grants and the Crow Tribe's general
management of its environmental program.
ACTION REQUIRED
In accordance with Environmental Protection Agency (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 our recommendation on costs questioned and other
recommendations 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 100370-2002-1-000098 on any related
correspondence.
Attachment
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Table of Contents
Independent Auditor's Report 1
Audit Results 2
Objective 2
Scope and Methodology 2
Findings 3
Recommendations 5
Agency Comments and OIG Evaluation 5
Exhibits
A: Summary of Balance Due EPA 7
B: Summary of Audit Results for Water Section 106 Grant 1998173-99 8
C: Summary of Audit Results for General Assistance Program
Grant NI998122-02 10
D: Summary of Audit Results for Water
Special Project Grant X988061-01 12
Appendices
I: Region 8 Response 15
II: Distribution 16
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EPA Grants
Awarded to the Crow 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) for each of the grants listed in the Scope and
Methodology section submitted by the Crow Tribe, Crow Agency, Montana (grantee). 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 costs claimed by the grantee are free of
material misstatement and are 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, the claimed costs referred to above and presented in Exhibits A through D do not
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 and Evaluation Resource Center
Office of Inspector General
Fieldwork End: March 7, 2002
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Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Audit Results
In response to a December 7, 1999 allegation letter, we reviewed (1) the legality of
Environmental Protection Agency (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 judgmentally 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 Crow Tribe, Crow Agency, Montana.
Objective
Our overall objective was to determine whether the grantee effectively managed its environmental
grants. To accomplish this objective, we asked the following question: Were 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
The grantee claimed costs totaling $429,982 under the following three assistance agreements:
Program
Grant No.
Financial Status
Report Form 269A
Amount
Water Section 106
1998173-99
September 30, 2000
$114,497
General Assistance Program
NI998122-02
March 31, 2000
$258,824
Water Special Project
X988061-01
December 15, 2000
$ 56,661
Total
$429,982
We selected these three grants to obtain a cross-section of the grantee's environmental
program. Grant 1998173-99 involved water quality projects from April 1999 through
September 2000. Grant NI998122-02 involved activities from April 1996 through March
2000 for increasing tribal capacity and management capabilities to implement environmental
programs. Grant X988061-01 was a special project grant from July 1999 through December
2000 to conduct workshops to educate reservation residents on water quality monitoring and
2
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
cleanup activities. EPA paid 100 percent of the costs claimed for grant NI998122-02 and 95
percent of eligible costs for the other two grants. The costs claimed for the three grants
totaled $429,982 and included EPA payments totaling $356,520.
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 Crow Tribe Reservation during the week of March 19, 2001. We reviewed
the three grants and related documents, detailed expense ledgers, accompanying receipts, and
other supporting documentation, and met with Crow officials responsible for executing grant
requirements.
Findings
We Questioned 72 Percent of Costs Claimed
We questioned 72 percent, or $308,237, of all costs claimed under the three grants we
audited. Of EPA payments made, the EPA share of questioned costs is $237,683. The
questioned costs primarily consist of unsupported payroll costs (salaries and fringe benefits)
and related indirect costs. Specifically:
We questioned all payroll and payroll-related costs because the grantee's
payroll system did not meet Office of Management and Budget Circular A-87
requirements.
We questioned all indirect costs because the grantee used payroll costs as the
basis to determine indirect costs and, as noted above, the grantee's method of
charging payroll costs did not meet Office of Management and Budget
requirements.
Exhibit A shows overall costs claimed and questioned while Exhibits B through D provide
detailed summaries for each of the four grants.
Internal Controls Did Not Support Good Grant Management
The General Accounting Office's Standards for Internal Control in the Federal Government
(Standards) establish standards that should be part of any organization's management.
According to the Standards, sufficient internal control helps provide reasonable assurance
that an organization's operations are effective and efficient, financial reporting is reliable, and
applicable laws and regulations are followed. A strong internal control structure includes five
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Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
components: (1) control environment, (2) risk assessments, (3) control activities, (4)
information and communications, and (5) monitoring.
Even though our audit did not include a comprehensive review of the grantee's internal
controls for managing its Federal grants, we observed two material weaknesses during our
audit that raised serious concerns about the ability of the Crow Tribe to adequately manage
environmental grants. Tribal leadership, management, and staff did not emphasize the
importance of good internal controls and did not adequately communicate program or
financial information.
Control Environment: Crow Tribe's leadership did not emphasize and, as a result,
management and staff did not establish a positive control environment, the foundation
for all other internal control standards. The Standards require that a positive control
environment includes competent staff with high integrity and ethical values, strong
management oversight of staff, clearly defined staff authority and responsibility, and
strong human capital policies and practices. Management provided neither the
discipline and structure nor the climate to positively influence the quality of internal
controls. For example, management did not require staff to charge time to individual
projects, nor did management ensure environmental staff complied with grant
provisions. In addition, management did not establish an effective organizational
structure and management did not implement effective oversight practices.
Information and Communications: Crow Tribe management did not adequately
communicate program or financial information to either EPA or Tribal management.
The Standards require pertinent information to be, "identified, captured, and
distributed to the right people in sufficient detail and at the appropriate time to enable
them to carry out their duties and responsibilities efficiently and effectively." Timely
information should be available and in a form that allows Crow management and staff
as well as EPA staff to ensure programs operate effectively and efficiently. Timely
Financial Status Reports help Tribal and EPA managers determine whether funds are
sufficient to complete required tasks and program performance progress reports
highlight accomplishments and areas that need extra attention. However, Crow Tribe
staff, in some cases, could not locate accounting records necessary to support claimed
costs and did not ensure Tribal management and EPA staff were provided adequate
information to monitor program progress. Crow staff did not regularly communicate
their difficulty completing tasks on one grant and did not seek advice about how the
grant could have been successfully completed.
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Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Recommendations
We recommend that the Acting Regional Administrator, Region 8:
1. Recover $237,683 in payments made to the grantee for which we questioned costs.
2. Designate the grantee as high risk until the grantee develops and implements written
procedures and controls to ensure that its:
(a) financial management system can adequately account for and support all claimed
costs;
(b) payroll system meets Office of Management and Budget Circular A-87
requirements; and
(c) oversight procedures are sufficient to help ensure project tasks are completed
and products delivered.
3. Suspend all current and new grants if, after 6 months, the grantee has not met the
requirements of recommendation 2.
4. Discuss the importance of strong internal controls, including meaningful, timely
program performance reporting, with Crow Tribe managers.
5. Work with the Tribe to help it develop and implement policies and procedures to
protect EPA grant funds and strengthen environmental program performance.
Agency Comments and OIG Evaluation
Region 8 officials generally agreed with the findings and recommendations. Regional staff
provided comments to clarify portions of the report and we have incorporated those
comments and modified the report as appropriate. We have included the Region's complete
response in Appendix I.
We reviewed the documentation the grantee sent to the Region regarding questioned costs
and agree with the Region that the materials the grantee provided support $26,263 of the
costs questioned in our February 1, 2002 draft report. We reviewed the additional
information provided by the grantee, analyzed the sufficiency of that information, accepted
certain items of cost, and modified our report as appropriate. As a result we have changed
recommendation 1 to read: "Recover $237,683 in payments made to the grantee for which
we questioned costs."
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Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
The Region agreed to designate the grantee as high risk. In order to fully comply with EPA
Order 2750, the Region must request from the grantee a corrective action plan describing
how it will comply with recommendation 2. The grantee's corrective action plan should
include milestone dates and specific actions it will take in order to correct the issues noted in
recommendation 2.
The Region substantially agreed with recommendation 3. We agree that the Region should
reevaluate the grantee's financial management system after 6 months to determine whether
the grantee has made substantial progress correcting deficiencies. We also agree that if the
grantee has fully complied the Region should remove the grantee's high risk designation. We
believe, however, that the Region should recognize that if the grantee has made little or no
progress, the Region should withhold future grants until the grantee complies with Office of
Management and Budget Circular A-87.
The Region agreed that it would emphasize the importance of strong internal controls during
its next visit to the Tribe.
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Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Exhibit A
Summary of Balance Due EPA
Water Section 106 Grant 1998173-99
(See Exhibit B)
$114,497 Claimed
$70,889 Questioned
$43,608 Total Allowable
EPA Payments as of 7/6/2001
$62,140
EPA Share (95% of allowable)1
$41,428
Balance Due EPA
$20,712
General Assistance Program Grant
NI998122-02 (See Exhibit C)
$258,824 Claimed
$195,245 Questioned
$63,579 Total Allowable
EPA Payments as of 9/6/2000
$258,824
EPA Share (100% of allowable)
$63,579
Balance Due EPA
$195,245
Water Special Project Grant
X988061-01
(See Exhibit D)
$56,661 Claimed
$42,103 Questioned
$14,558 Total Allowable
EPA Payments as of 11/1/2001
$35,556
EPA Share (95% of allowable)
$13,830
Balance Due EPA
$21,726
Total Costs Claimed:
$429,982
Total Costs Questioned:
$308,237
Total Allowable:
$121,745
Total EPA Payments Made:
$356,520
Total EPA Share Allowable:
$118,837
Balance Due EPA:
$237,683
Note
1. EPA share represents EPA's portion of allowable project costs.
7 Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Exhibit B
Summary of Audit Results for
Water Section 106 Grant 1998173-99
Costs Questioned as:
Categories
Costs
Claimed
Ineligible
Unreasonable
Unsupported
Total
Payroll
$55,091
$55,091
$55,0911
Travel
5,809
Lease Vehicle
6,668
Supplies
831
$188
1882
Contracted
Svcs
18,149
495
4953
Mileage
28
Rental/Office
2,400
Equipment
7,400
Utilities
247
Indirect Cost
15,115
15,115
15,1154
Telephone
2,758
Total
$114,4975
$188
$70,701
$70,889
Total Allowable (Claimed less Questioned)
$43,608
Summary of Balance Due EPA
EPA Payments as of 7/6/2001
$62,140
EPA Share (95% of allowable)
$41,428
Balance Due EPA
$20,712
Notes
1. We questioned $55,091 of salaries and related fringe benefit costs as unsupported
because the grantee did not use an acceptable basis for charging salaries. The
grantee neither maintained an after-the-fact accounting of time charges nor
certified that any employees worked solely on the water grant. Office of
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Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Management and Budget Circular A-87 requires that when employees work on
more than one activity or cost objective, their salary or wage distribution must be
supported by documentation that reflects an after-the-fact distribution of the actual
activity of each employee. Specifically, the Circular provides that, "Budget
estimates or other distribution percentages determined before the services are
performed do not qualify as support for charges to Federal awards . . . The
Circular further requires that when employees are expected to work solely on a
single Federal award, "charges for their salaries and wages will be supported by
periodic certifications that the employees worked solely on that program for the
period covered by the certification ..." Certifications must be prepared at least
semi-annually and signed by the employee or a supervisor having first-hand
knowledge of the work performed. The Circular provides that "substitute
systems," such as quantifiable measures of employee effort, may be used instead of
an after-the-fact distribution of an employee's actual activity.
2. We questioned $188 of supply costs as ineligible. The $188 was for an "EPA
luncheon." Although we were unable to find the support for the expense, we
considered the cost ineligible because Office of Management and Budget Circular
A-87 provides that, "Costs of entertainment. . such as . . . meals. . . are
unallowable" and therefore ineligible.
3. We questioned $495 of contractual costs as unsupported because the grantee was
unable to locate the supporting documentation for the costs.
4. We questioned all indirect costs as unsupported because we questioned all of the
payroll costs (salary and fringe benefits), as discussed in Note 1, and the grantee
used salaries as the basis for indirect costs.
5. Does not add due to rounding.
9
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Exhibit C
Summary of Audit Results for
General Assistance Program Grant N1998122-02
Costs Questioned as:
Categories
Costs
Claimed
Ineligible
Unreasonable
Unsupported
Total
Payroll
$168,163
$168,163
$168,1631
Contracted Svcs
5,170
Equipment
6,360
Vehicle Rent
19,011
Office Supplies
4,307
$195
1952
Other Supplies
54
Miscellaneous
14,620
Travel Off Res.
13,252
Utilities
1,000
Indirect Cost
26,887
26,887
26,8873
Total
$258,8244
$195
$195,050
$195,245
Total Allowable (Claimed less Questioned)
$63,579
Summary of Balance Due EPA
EPA Payments as of 9/6/2000
$258,824
EPA Share (100% of allowable)
$63,579
Balance Due EPA
$195,245
Notes
1. We questioned $168,163 of salaries and related fringe benefit costs as unsupported because the
grantee did not use an acceptable basis (as outlined in Office of Management and Budget
Circular A-87) for charging salaries. See Exhibit B, Note 1.
10
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
2. We questioned $195 of office supply costs as ineligible because the costs were incurred outside
of the grant period. Regulations at 40 CFR Section 31.23 do not permit the grantee to charge
costs to the grant resulting from expenses incurred outside the grant period.
3. We questioned all indirect costs as unsupported because we questioned all of the payroll costs
(salary and fringe benefits), as discussed in Note I, and the grantee used salaries as the basis for
indirect costs.
4. Does not add due to rounding.
11 Report No. 100370-2002-1 -000098
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EPA Grants
Awarded to the Crow Tribe
Exhibit D
Summary of Audit Results for
Water Special Project Grant X988061-01
Costs Questioned as:
Categories
Costs
Claimed
Ineligible
Unreasonable
Unsupported
Total
Payroll
$33,774
$33,774
$33,7741
Travel
6,766
$938
9382
Telephone
550
Supplies
125
Rent/Office
2,400
Equipment
1,945
Contractual
3,710
Indirect Cost
5,048
5,048
5,0483
In Kind Match
2,343
2,343
2,3434
Total
$56,661
$938
$41,165
$42,103
Total Allowable (Claimed less Questioned)
$14,558
Summarv of Balance Due EPA
EPA Payments as of 11/1/2001
$35,556
EPA Share C95% of allowable1)
.1513 830
Balance Due EPA
$21,726
Notes
1. We questioned $33,774 of salaries and related fringe benefit costs as unsupported because the
grantee did not use an acceptable basis (as outlined in Office of Management and Budget
Circular A-87) for charging salaries. See Exhibit B, Note 1.
12
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
2. We questioned $938 in travel costs as ineligible because the project coordinator claimed higher
than allowable and/or actual lodging costs for four trips and did not return the money to the
Tribe.
3. We questioned all indirect costs as unsupported because we questioned all of the payroll costs
(salary and fringe benefits), as discussed in Note I, and the grantee used salaries as the basis
for indirect costs and those costs were unsupported.
4. We questioned all match as unsupported because the grantee did not provide documentation
for the amount of match claimed.
13
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Region 8 Response
Appendix I
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
•GION 8
! IEET - SUITE 300
CO 80202-2466
800-227-8917
mt epa.gov/regionG8
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15
Report No. 100370-2002-1-000098
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EPA Grants
Awarded to the Crow Tribe
Appendix II
Distribution
Office of Inspector General
Inspector General
EPA Headquarters Office
Comptroller (2731 A)
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
(1101 A)
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
Crow Tribal Program Manager, Tribal Assistance Program
Crow Tribe
Chairman
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Report No. 100370-2002-1-000098
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