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Report Contributors: Angela Bennett
Darren Schorer
Abbreviations
CFR Code of Federal Regulations
EPA U.S. Environmental Protection Agency
FLSA Fair Labor Standards Act of 1938
FY Fiscal Year
GS General Schedule
OARM Office of Administration and Resources Management
OCFO Office of the Chief Financial Officer
OIG Office of Inspector General
U.S.C. United States Code
Cover image: The OIG analyzed 79 instances of EPA Region 10's reported biweekly pay cap
exceedances during FYs 2015, 2016 and 2017 (through January 7, 2017).
We identified 61 valid exceedances, 13 non-exceedances, two exceedances for
non-Region 10 employees, and three unsupported exceedances. (EPA OIG image)
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
January 12, 2018
MEMORANDUM
SUBJECT: Inconsistencies With EPA Policy Identified in Region 10's
Biweekly Pay Cap Waiver Process
Report No. 18-P-0068
FROM: Arthur A. Elkins Jr.
TO:
Chris Hladick, Regional Administrator
Region 10
This is our audit report in response to a hotline complaint received by the Office of Inspector
General (OIG) of the U.S. Environmental Protection Agency. The project number for this audit
was OA-FY17-0135. This audit did not identify any problems requiring corrective actions.
This report contains no recommendations and you are not required to provide a written response.
Should you choose to provide a final response, we will post the 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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Inconsistencies With EPA Policy Identified in
Region 10's Biweekly Pay Cap Waiver Process
18-P-0068
Table of C
Purpose 1
Background 1
Responsible Offices 2
Prior Audit Report 2
Scope and Methodology 3
Results of Audit 4
Conclusion 6
Agency Response and OIG Comment 7
Appendix
A Distribution 8
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Purpose
As a result of a hotline complaint, the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA) conducted an audit of EPA
Region 10's biweekly pay cap waiver process. The audit objective was to
determine whether Region 10's process met federal requirements and complied
with established agency policies and procedures.
Background
The OIG received a hotline complaint alleging that EPA Region 10 mismanaged
its biweekly pay cap waiver process. The complaint alleged that there appeared to
be an absence of management controls for approving biweekly pay cap waivers,
which is contrary to agency policy. Examples cited included approvals for non-
emergencies, a lack of review by the human resources office, missing supporting
documentation, and inadequate justifications.
Federal Requirements
Title 5 U.S.C. § 5547, Limitation on Premium Pay, establishes a biweekly pay
cap for General Schedule (GS) employees. The biweekly basic pay cap may be
waived for GS employees who are paid premium pay while conducting work in
connection with an emergency (including a wildfire emergency) that involves a
direct threat to life or property.
The Fair Labor Standards Act of 1938 (FLSA) provides minimum standards for
wages and overtime entitlements. The FLSA also ".. .exempts specified
employees or groups of employees from the application of certain of its
provisions. ..." Title 5 CFR Part 551, Pay Administration Under the Fair Labor
Standards Act, contains the regulations, criteria and conditions set forth by the
Office of Personnel Management as prescribed by the act.
Title 5 CFR § 551.104 defines FLSA-exempt employees as those not covered by
the minimum wage and overtime provisions of the act, and FLSA-nonexempt as
those covered by the provisions. Per 5 CFR § 551.201, the employing agency
makes the determination on an employee's exemption status.
Title 5 CFR § 551.501(a) states that employees who are not exempt from
provisions of the FLSA shall be paid for all hours of work in excess of 8 hours
a day or 40 hours in a workweek, at a rate of one-and-one-half times the
employee's hourly regular rate of pay.
EPA Policy and Procedures
The EP A's Pay Administration Manual provides policy and procedures on pay
administration for employees in GS positions. Chapter 15, Section 6, states that
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. EPA may lift the biweekly pay cap for those emergencies deemed to be a
natural disaster. ..." The manual defines natural disasters as emergencies which
threaten human life or property.
The EPA has delegated the authority to declare disaster emergencies to various
management officials in the regions and at headquarters. For an emergency
confined to one region, the Regional Administrator will decide whether the
emergency is a disaster meriting the lifting of the biweekly cap. The Regional
Administrator may redelegate the authority to the Assistant Regional Administrator
or Deputy Regional Administrator. The deciding official will notify the local
Human Resources Officer of the determination that a disaster exists on a Natural
Disaster Emergency Designation form. The form requires information, such as the
following:
Type of natural disaster, locations and beginning date.
Signature of the approving official.
Employees for whom an exception to biweekly pay is requested.
Human Resources Officer approval for lifting the biweekly pay cap.
Notification of the conclusion of the natural disaster emergency by the
approval official.
Effective date of termination and the signature of the Human Resources
Officer.
Responsible Offices
In accordance with EPA policy, Regional Administrators request biweekly
pay cap waivers for emergencies confined to one region. Region 10's Office of
Management Programs, Human Resources and Facilities Unit, is the local human
resources office responsible for reviewing and approving waivers. At EPA
headquarters, the Office of Administration and Resources Management's
(OARM's) Office of Human Resources is responsible for providing overall
technical guidance and direction for EPA policy on overtime in emergencies,
including policies and procedures. The Office of the Chief Financial Officer
(OCFO) is responsible for the payroll processing of waivers.
Prior Audit Report
During our audit, we identified concerns over compliance, accountability and
consistency with EPA Region 10's and headquarters' biweekly pay cap waiver
process. As a result, we issued a management alert report on August 9, 2017,
Management Alert: Concerns Over Compliance, Accountability and Consistency
Identified With EPA's Biweekly Pay Cap Waiver Process (Report No. 17-P-0355).
Our purpose was to alert the EPA to these matters because the agency was
updating its related policies and procedures. At the time, the OIG made no
recomm endati ons.
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Scope and Methodology
We conducted this audit 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 objective. We believe that the evidence obtained
provides a reasonable basis for the findings and conclusions presented in this
report.
To determine whether Region 10's process met federal requirements and complied
with established agency policies and procedures, we performed the following:
Interviewed officials and personnel in OARM's Office of Human
Resources (including its Shared Service Center in Las Vegas, Nevada),
and officials and personnel in OCFO about the pay cap waiver policy and
procedures.
Obtained biweekly pay cap waiver requests for fiscal years (FYs) 2015,
2016 and 2017 through (January 7, 2017).
Analyzed waiver requests to determine whether each request:
o Was approved by the Region 10 Regional Administrator or
designee.
o Was reviewed/approved by Region 10's Human Resources Officer.
o Met the requirement for approval (we looked for written
justification that an emergency existed and the nature and extent of
the threat to life and property, or why the response was considered
mission-critical).
Obtained Region 10's internal review report on biweekly exceedances.
Obtained payroll data that identified Region 10 employees exceeding the
biweekly pay cap for FYs 2015, 2016 and 2017 (through January 7, 2017).
Reconciled the pay cap waiver requests with the payroll data to determine
whether all instances of exceedance were documented.
Analyzed Region 10's biweekly pay cap standard operating procedure.
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Results of Audit
Our audit found that Region 10's process for approving biweekly pay cap waivers
was not consistent with agency policy in the EPA's Pay Administration Manual.
Region 10 did not always retain documentation supporting waiver requests,
include sufficient information to justify the need, and include review by the
region's Human Resources Officer. This occurred because Region 10 did not have
an internal policy or process to address these items. As a result, Region 10
employees may have been overpaid or been paid for work that did not meet the
definition of an emergency under 5 U.S.C. § 5547.
On September 7, 2017, Region 10 issued a new biweekly pay cap waiver standard
operating procedure that resolved the inconsistencies and the OIG's concerns.
During our audit, Region 10 provided additional documentation for all but three
of the instances where employees exceeded the biweekly pay cap. The three
instances resulted in payments of $2,355.39, which exceeded the biweekly pay
cap.
Retention of Supporting Documentation
Region 10 provided the OIG with payroll data that identified 79 instances where
employees exceeded the biweekly pay cap during FYs 2015, 2016 and 2017
(through January 7, 2017). Further analysis of the 79 instances showed that only
77 instances pertained to Region 10 employees. The non-Region 10 employees
were excluded from further analysis. Table 1 shows that of the 77 instances
identified in our analysis, 61 had a valid exceedance, 13 had a non-exceedance,
and three had exceedances with no waiver. Detailed summaries of the various
instances follow Table 1.
Table 1: Region 10 biweekly pay cap exceedances
Reason
Valid
exceedance
Non-
exceedance
No
waiver
Exceedance - FLSA nonexempt
36
Exceedance with waiver - FLSA exempt
25
Incorrect pay cap
3
Compensatory and credit hour pay out
5
Combination of employees with same
name
3
Employee did not incur overtime but
exceeded pay cap (immaterial amount)
2
Employee incurred overtime but no waiver
found
3
Totals (77)
61
13
3
Source: OIG summary of data from Region 10 payroll records.
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Valid Exceedances
Our analysis of the 61 instances of valid exceedances showed that 36 instances
were for employees whom the agency determined were FLSA nonexempt.
Per 5 CFR § 551.501(a), these employees shall be paid for all hours of work.
Region 10 provided eight waiver requests that supported the remaining
25 exceedances for the FLSA-exempt employees.
Non-Exceedances
EPA Region 10's documentation of the 13 instances of non-exceedances
showed that three instances used the biweekly pay cap amount from the
wrong year, five related to payments for compensatory and/or credits hours
(not subject to the biweekly pay cap), two pertained to payroll issues not
related to overtime, and three resulted from the base pay for two employees
with the same name being incorrectly combined.
No Waiver
In three instances, employees incurred overtime but Region 10 was not
able to locate waivers to support the exceedances. Without a waiver, we were
unable to determine whether the overtime incurred pertained to an emergency.
As a result, the employees may have been overpaid or been paid for work
that did not meet the definition of an emergency under 5 U.S.C. § 5547.
The costs related to the three instances totaled $2,355.39. The EPA's Pay
Administration Manual, Appendix l.f., requires the Human Resources Officer
to maintain files of waiver requests.
Sufficient Information to Justify Need
Our analysis of the eight waivers provided by Region 10 for the 25 instances
with valid exceedances showed that some waivers did not include sufficient
information to justify the need (whether there was an emergency with a threat to
life and property). As a result, employees may have been overpaid or been paid
for work that did not meet the definition of an emergency under 5 U.S.C. § 5547.
The EP A's Pay Administration Manual, Appendices 3 and 4, requires information
on the type of disaster and the nature and extent of the threat to life or property.
We determined that five of the eight waivers included sufficient information
to support the need for 15 instances. Region 10 provided supplemental
documentation for the remaining three waivers, covering 10 instances (such as
an action memorandum, Administrator order or pollution/situation reports) to
support the determination that an emergency existed. Based on our analysis of
supplemental documentation, the OIG agrees that the needs were justified, and we
take no exception to the remaining 10 instances. However, future waiver requests
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must contain sufficient information to justify the need as required by agency
policy.
No Approval by Human Resources Officer
The eight waivers that Region 10 provided covering the 25 instances with valid
exceedances showed the requests were approved by the Regional Administrator as
required, but none of the requests showed approval by the Region 10 Human
Resources Officer. The EPA's Pay Administration Manual, Chapter 15, requires
local Human Resources Officers to authorize lifting the biweekly pay cap after a
determination by the Regional Administrator that an emergency exists.
Region 10 Issues Standard Operating Procedure
On September 7, 2017, Region 10 issued a new standard operating procedure for
biweekly pay cap waivers. The new procedure addressed the OIG's concerns
related to the EPA's biweekly pay cap waiver process, as noted in the prior
management alert report. The procedure requires the following:
The Regional Human Capital Officer (formerly Human Resources Officer)
must keep all documentation related to Region 10 waiver requests,
including copies of waivers for Region 10 employees responding to
emergencies in other regions.
Documentation must include the reason for the waiver and the anticipated
response period.
Waivers must go through a review by the Human Capital Officer before
and after being sent to the Regional Administrator for signature.
Signature approval by the Director of the Las Vegas Shared Service
Center must be included.
The OIG analyzed the standard operating procedure and concluded that the
procedure addresses and resolves the OIG's concerns about the inconsistencies
with agency policy presented in this report.
Conclusion
Region 10 has taken action to address the OIG's concerns about the biweekly
pay cap waiver process. The OIG believes that the standard operating procedure
implemented by Region 10 will address the OIG's concerns presented in this
report. Further, the agency is in the process of updating its biweekly pay cap
waiver policies and procedures at a national level. Region 10 informed us that the
national policy will mirror the regional policy. As such, agency policy should
resolve the OIG's concerns about the waiver process.
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No recommendations are being made because pertinent policies and procedures
were implemented by Region 10.
Agency Response and OIG Comment
EPA Region 10's email response expressed concerns with the OIG's
statement that employees may have been overpaid or paid for work that
was not an emergency. Region 10 believed that it would be more accurate
to say the OIG was unable to determine whether the pay related to those
three waivers was justified, and cite the total dollar amount in question.
The OIG revised the report to state that we were unable to determine whether
the overtime incurred pertained to an emergency, and to include the amount of
payments in excess of the biweekly pay cap resulting from the undocumented
waivers.
Region 10 agreed with our proposed changes and stated it had no other concerns.
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Appendix A
Distribution
The Administrator
Chief of Staff
Chief of Operations
Deputy Chief of Operations
Assistant Administrator for Administration and Resources Management
Chief Financial Officer
Regional Administrator, Region 10
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Deputy Assistant Administrator for Administration and Resources Management
Associate Chief Financial Officer
Director, Office of the Controller, Office of the Chief Financial Officer
Director, Office of Human Resources, Office of Administration and Resources Management
Director, Office of Resources, Operations and Management, Office of Administration and
Resources Management
Deputy Director, Office of Resources, Operations and Management, Office of Administration
and Resources Management
Deputy Regional Administrator, Region 10
Assistant Regional Administrator, Region 10
Director, Public Affairs and Community Engagement, Region 10
Audit Follow-Up Coordinator, Office of the Administrator
Audit Follow-Up Coordinator, Office of Administration and Resources Management
Audit Follow-Up Coordinator, Office of the Chief Financial Officer
Audit Follow-Up Coordinator, Region 10
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