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I 0 I OIG
% PR0^S OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Special Report
Congressionally Requested
Review of EPA Actions Taken
in Response to Financial
Assistance Agreement Reports
Report No. 2003-S-000006
July 23, 2003

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Report Contributors:	Lora Schaefer
Wendy Swan

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JUL 23, 2003
THE INSPECTOR GENERAL
The Honorable Don Young
Chairman
Committee on Transportation and Infrastructure
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
On February 21, 2003, the House Committee on Transportation and Infrastructure sent a letter
requesting the Office of Inspector General (OIG) report on the Environmental Protection
Agency's (EPA) resolution of issues identified in reports on assistance agreements issued by OIG
in Fiscal Years 2001 and 2002. You asked that we also answer eight specific questions related to
this subject. After reviewing the questions, and meeting with Committee staff, the original
questions were modified and confirmed in a letter to the Committee on March 21, 2003.
When the EPA transfers funds for a public purpose, it uses a legal instrument called an assistance
agreement, which may be in the form of a grant or cooperative agreement. Assistance
agreements are the primary vehicle through which EPA delivers environmental and human health
protection. In recent years, more than half of EPA's budgeted funds have been awarded to
organizations outside the Agency through such agreements. EPA primarily awards assistance
agreements to State, local, and tribal governments; universities; and nonprofit organizations.
The following paragraphs provide brief answers to your specific questions. Our answers are
supplemented by additional information in Enclosures A through C. Enclosure D provides
details on our scope and methodology.
1. What is the inventory of grants that were identified as having significant
non-compliance issues concerning grant rules and/or questioned costs?
There were 369 audits of assistance agreements issued in fiscal 2001 and 2002. Of these
audits, 27 included material non-compliance issues, and questioned costs. (Enclosure A
identifies the 27 reports.) The 27 include both those reports prepared by our office and
those prepared by independent accountants under the Single Audit Act. A material non-
compliance is a financial management deficiency that is contrary to Federal regulation
and could result in a material misstatement of costs, inhibit accounting for project funds,
or impede the ability to conduct an audit.
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2.	For each relevant case, what action did EPA take to ensure the recipient corrected
the deficiencies?
EPA issued final decisions for 19 of the 27 audit reports with material non-compliance
issues. EPA has not made decisions on eight reports. For one report, the audit resolution
has been suspended at our request. For the other seven reports, EPA has not met the
6-month resolution period required by Office of Management and Budget (OMB)
Circular A-50 and EPA Manual 2750, Change 2. Resolution has been in process for
these seven reports for periods ranging from 9 months to over 2 years.
Of the 19 reports where EPA issued final decisions, the recipients are appealing 9 of the
decisions. For 9 of the 10 remaining reports, the recipients have either resolved the non-
compliance issues or are implementing a corrective action plan. EPA did not require
corrective action for lof the remaining 10 reports.
See Enclosure B for a summary table on actions taken and Enclosure C for details on
actions taken as a result of each audit report.
3.	For each case, did EPA recover the questioned costs? If not, why not?
We questioned a total of $29,646,516 in the 27 audit reports. EPA issued decisions on 19
of the reports covering $19,980,625 of questioned costs. As noted in question 2, EPA has
not made decisions on eight reports. Resolution on one report is suspended, and EPA has
exceeded the required 6-month resolution period on the other seven reports. The
following table shows the status of the 27 reports and the results of EPA's decisions.
Description
Number of
Reports
Amount
Percent of
Total Questioned
Sustained
19
$5,381,033
18%
Not Sustained
$14,599,592
49%
Suspended
1
$1,301,365
5%
No Decision
7
$8,364,526
28%
Total Questioned
27
$29,646,516
100%
EPA did not sustain $14,599,592, of which $13,026,526 (89 percent of unsustained costs)
was questioned in the report on Chicago Public Schools. The assistance to Chicago
Public Schools was a loan, and after consulting with the U.S. Department of Justice, EPA
concluded that there was no language in the loan document to permit recovery for
unallowable costs.1 Also, EPA did not sustain $907,000 (6 percent of unsustained costs)
in the Lake Wallenpaupack report when it determined that two engineering contracts were
reasonable in spite of conflicts of interest and competition issues.
1 Since the assistance to Chicago Public Schools is a loan, all questioned costs will eventually be repaid to
the Government. Chicago Public Schools is current in the repayment of this loan.
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Of the 19 reports with final decisions, the recipients are appealing 9 of those decisions
covering $2,199,695 related to sustained costs (about 41 percent of sustained costs). To
date, EPA has recovered through repayment or offsets2 $2,180,030 in sustained costs, and
is due another $1,001,308.
4.	Did EPA provide new funds to any recipients that had a history of non-compliance
concerning the other Federal grants? If so, what actions did EPA take to safeguard
the new funds from future loss?
EPA provided new funds to 11 of the recipients since the issuance of audit reports
included in this review. EPA designated four as high risk recipients. For another
recipient, EPA required special conditions on the new funding; subsequently, EPA
suspended all work under the agreement and withheld reimbursement of costs pending
resolution of report findings.
5.	Did EPA take any action to suspend or debar any recipients of the identified grants,
or any employee of the recipient?
According to EPA officials, one employee of a recipient was debarred for embezzling
grant funds from the recipient. The embezzlement was identified in the Advisory Report
on Assistance Agreement Defalcation, National Asian Pacific Center on Aging. For the
remaining grants, no recipients or employees of recipients were suspended or debarred as
a result of issues identified in these reports.
6.	What changes, if any, did EPA make in its own procedures as a result of the reports
and what impact would the changes have on the control environment for grants
management?
In response to this question, EPA officials provided no evidence of changes to written
procedures resulting from the selected audit reports. However, on December 31, 2002,
EPA issued Order 5700.6, Policy on Compliance, Review, and Monitoring, as part of its
commitment to strengthen post-award management efforts. This revised policy resulted
from a culmination of audit reports over the years.
According to Regions 8 and 10, some practices have been modified as a result of the
assistance agreement audits issued in their regions. Region 8 has emphasized monitoring
tribes and evaluating financial and programmatic reporting. Region 10 has incorporated
"lessons learned" into yearly training, and has emphasized post award monitoring.
Region 10 is also updating guidance for taking enforcement actions to provide a more
pro-active approach to dealing with non-compliance issues.
2 An offset is where EPA allows the recipient to apply the questioned costs against other allowable costs that
have not been claimed.
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7.	Are EPA's current procedures adequate for EPA staff to identify the types of
deficiencies found in these reports?
Current EPA procedures (issued December 31, 2002, after the issuance dates of the
reports reviewed) appear to be adequate to identify deficiencies regarding financial status
reports, progress reports, and cash draws. Other deficiencies, such as unsupported or
ineligible costs, may not be detected by EPA unless the recipient is selected for advanced
monitoring. However, careful adherence to pre-award procedures, which include
reviewing proposed costs and assessing the recipients' ability to perform, should reduce
the risk of misusing EPA assistance funds.3 Additionally, some recipients are required to
have annual audits in accordance with OMB Circular A-133. These audits may identify
control and compliance issues and questioned costs.
EPA's monitoring procedures identify two types of monitoring that should take place for
assistance awards: baseline monitoring and advanced monitoring. Baseline monitoring is
the minimum monitoring that should take place on every award issued by the grant
management and program offices on an ongoing basis throughout the life of the award. It
includes: (a) ensuring financial status reports, progress reports, and any quality assurance
materials are received and accepted; (b) reviewing financial status by comparing available
funds to project progress and the time remaining on the project; and (c) monitoring
payments to identify concerns with cash draws.
Advanced monitoring is required for a minimum of 10 percent of the active grants.
Advanced monitoring includes desk reviews and on-site evaluations, which involve
reviewing the recipient's accounting system, personnel, payroll, travel, matching or cost
sharing, indirect costs, procurement, property management, and internal controls.
8.	What, if any, personnel actions did EPA take concerning EPA employees who had
failed to carry out Agency procedures involved with the identified grants?
According to EPA officials, they did not take any adverse personnel actions related to
assistance agreement responsibilities against any EPA employees associated with the
assistance agreements included in Enclosure A.
3In a recent report (Report No. 2003-P-00007, EPA Must Emphasize Importance of Pre-AwardReviews
for Assistance Agreements, dated March 31, 2003), we concluded that EPA was not always following required
pre-award procedures.
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If you or your staff have additional questions, please contact me at (202) 566-0847, or Eileen
McMahon, Assistant Inspector General for Congressional and Public Liaison, at (202) 566-2546.
Sincerely,
Nikki L. Tinsley
Enclosures
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Enclosure A
Selected Assistance Agreement Reports

Descriptive
Report
Questioned
Action

Title
No.
Costs
Official
1.
3 Rivers Wet Weather, Inc.
2002-3-00016
$150,201
Region 3
2.
Alaska Energy Authority
2002-3-00075
$171,600
Region 10
3.
Center for Chesapeake Communities
2001-1-00101
$120,093
Region 3
4.
Chicago Public Schools
2001-1-00120
$14,390,438
Headquarters
5.
Confederated Tribes of
2001-3-00094
$152,209
Region 10

Chehalis Reservation -1998



6.
Confederated Tribes of
2001-3-00181
$24,895
Region 10

Chehalis Reservation -1999



7.
Coordinating Committee for
2003-S-00001
$2,026,837
Headquarters

Automotive Repair



8.
Crow Tribe
2002-1-00098
$237,683
Region 8
9.
Department of Public
2001-1-00128
$1,268,874
Region 2

Works, Virgin Islands



10.
lliamna Village Council -1999
2002-3-00009
$71,055
Region 10
11.
lliamna Village Council - 2000
2002-3-00042
$111,813
Region 10
12.
Lake Wallenpaupack
2002-M-00007
$978,000
Region 3
13.
Lower Brule Sioux Tribe
2002-1-00099
$632,615
Region 8
14.
MBI International
2002-2-00008
$1,301,365
Headquarters
15.
Michigan Department of
2001-3-00076
$353,308
Region 5

Environmental Quality -1997



16.
Michigan Department of
2001-3-00209
$431,090
Region 5

Environmental Quality -1999



17.
Missouri Clean Water
2001-1-00143
$36,305
Region 7

State Revolving Fund



18.
Napoleon City Schools
2001-1-00073
$4,017,412
Headquarters
19.
National Asian Pacific Center on
2001-S-00006
**$1,000,653
Headquarters

Aging - Defalcation



20.
National Asian Pacific Center on
2001-S-00012
$160,360
Headquarters

Aging - Cash Management



21.
National Association of
2001-1-00203
$636,069
Headquarters

Minority Contractors



22.
North Ohio Valley Air Authority
2001-3-00138
$57,653
Region 5
23.
Northern Cheyenne Tribe
2002-1-00089
$25,789
Region 8
24.
Red Lake Chippewa
2002-1-00119
$264,640
Region 5
25.
Rosebud Sioux Tribe
2002-1-00096
$387,621
Region 8
26.
Sault Ste. Marie Chippewa
2002-1-00056
$34,043
Region 5
27.
SF Cooperative Agreement -
2002-1-00184
$603,895
Region 3

Washington, D.C.




Total Questioned Costs

$29,646,516

** The report disclosed an embezzlement of $1,802,546 of Federal grant funds from Department of Labor
and EPA programs. The embezzled funds could not be readily reconstructed to identify the specific amount
of embezzled funds pertaining to each agency. However, based on information received from an
independent accountant, EPA's share was estimated to be $937,072.40 with applicable indirect costs of
$63,580.35 for a total of $1,000,653.
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Enclosure B
Summary of Results
Descriptive
Title
Did Agency
ensure
correction of
deficiencies?
Did Agency
recover
questioned
costs?
Did Agency
provide new
funds since
issuance of
audit report?
Did Agency
suspend or
debar any
recipient or
their
employee(s)?
Did Agency
modify
internal
procedures?
Did Agency
take any
formal action
against any
EPA
employee?
3 Rivers Wet Weather, Inc.
Yes
Yes
No
No
No
No
Alaska Energy Authority
Yes
Yes
No
No
Yes
No
Center for Chesapeake
Communities
In Appeal
In Appeal
No
No
No
No
Chicago Public Schools
No
Yes
No
No
No
No
Confederated Tribes of
Chehalis Reservation - '98
In Appeal
In Appeal
Yes
No
Yes
No
Confederated Tribes of
Chehalis Reservation - '99
In Appeal
In Appeal
No
Yes
No
Coordinating Committee
for Automotive Repair
No Decision
No Decision
Yes
No
No
No
Crow Tribe
In Appeal
In Appeal
Yes
No
Yes
No
Department of Public
Works, Virgin Islands
No Decision
No Decision
No
No
No
No
lliamna Village Council - '99
No Decision
No Decision
No
No
No
No
lliamna Village Council - '00
No Decision
No Decision
No
No
No
Lake Wallenpaupack
In Appeal
In Appeal
No
No
No
No
Lower Brule Sioux Tribe
In Appeal
In Appeal
Yes
No
Yes
No
MBI International
Suspended
Suspended
No
No
No
No
Michigan Department of
Environmental Quality - '97
Yes
Yes
Yes
No
No
No
Michigan Department of
Environmental Quality - '99
Yes
Yes
No
No
No
Missouri Clean Water
State Revolving Fund
Yes
In Process
Yes
Yes
No
No
No
Napoleon City Schools
No Decision
No Decision
No
No
No
No
National Asian Pacific
Center on Aging -
Defalcation
Yes
Pending
Yes
Yes
No
No
National Asian Pacific
Center on Aging - Cash
Management
Yes
Pending
No
No
National Association of
Minority Contractors
In Appeal
In Appeal
No
No
No
No
North Ohio Valley Air
Authority
In Appeal
In Appeal
No
No
No
No
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Descriptive
Title
Did Agency
ensure
correction of
deficiencies?
Did Agency
recover
questioned
costs?
Did Agency
provide new
funds since
issuance of
audit report?
Did Agency
suspend or
debar any
recipient or
their
employee(s)?
Did Agency
modify
internal
procedures?
Did Agency
take any
formal action
against any
EPA
employee?
Northern Cheyenne Tribe
Yes
No
Yes
No
Yes
No
Red Lake Chippewa
No Decision
No Decision
Yes
No
No
No
Rosebud Sioux Tribe
In Appeal
In Appeal
Yes
No
Yes
No
Sault Ste. Marie Chippewa
Yes
Yes
Yes
No
No
No
SF Cooperative Agreement -
Washington, D.C.
No Decision
No Decision
No
No
No
No
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Enclosure C
Analysis of Audit Reports
Single Audit Report on 3 Rivers Wet Weather, Inc. Pittsburgh Pennsylvania;
Report No. 2002-3-00016, issued October 23, 2001;
Audit Period: July 1,1999 to June 30, 2000
This report disclosed two reportable conditions that affected EPA assistance agreements. The
audit questioned funds drawn down under the wrong grants. EPA concurred with the finding.
The recipient repaid $110,092 in overdrawn funds, which was confirmed in the next year's single
audit report.
Single Audit Report for Alaska Energy Authority Anchorage, Alaska;
Report No. 2002-3-00075, issued March 27, 2002;
Audit period: July 1,1999 to June 30, 2000
This report contained two findings related to EPA funds: (1) $171,600 of questioned payroll and
related administrative costs, and (2) lack of procedures to ensure performance of single audits.
The recipient provided evidence and EPA allowed some additional questioned costs. On
November 4, 2002, EPA issued its final decision and required the recipient to repay $131,724.
The amount has been repaid.
Region 10 is preparing enforcement action guidance to provide a more pro-active approach for
non-compliance issues. The Region is also incorporating "lessons learned" from audit reports
into yearly grants management training.
Final Financial Audit Report of Assistance Agreements Awarded to the
Center for Chesapeake Communities;
Report No. 2001-1-00101, issued February 13, 2001
The audit questioned $120,093 of the $920,338 incurred for three assistance agreements. Some
of the costs were unsupported, such as personnel and related fringe benefit costs, because the
recipient did not maintain payrolls supported by time sheets. Other costs were ineligible, such as
equipment, computer software costs, and other/in-kind expenditures.
On August 22, 2001, EPA issued the final decision requiring the recipient repay EPA $120,093.
The recipient appealed the final decision to the Regional Administrator on September 28, 2001.
The recipient believed that the final decision was incorrect because it did not consider previously
submitted documentation and failed to take into consideration prior comments. On
November 19, 2002, the Regional Administrator reversed, in part, the original decision, and
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reduced the repayment to $67,732. The recipient subsequently appealed the Regional
Administrator's decision to Headquarters. No decision has been made on the latest appeal.
Audit of Assistance Agreement J858353-010 Awarded April 16,1993
for Asbestos Abatement Chicago Public Schools, Chicago, IL;
Report No. 2001-1-00120, issued March 26, 2001
The audit report questioned $14,390,438 of $14,618,298 claimed because Chicago Public
Schools either did not spend the money as authorized or did not maintain sufficient
documentation to determine authorized use of the money. Specifically, the report questioned:
~	$1,781,687 for unauthorized activities outside the statutory limits of the Asbestos School
Hazard Abatement Re-authorization Act of 1990, the approved scope of work, or the
approved project period.
~	$1,363,912 because the recipient received funds in excess of the final claimed costs.
~	$11,244,839 because the lump-sum contracts included both authorized abatement work and
unauthorized work.
The recipient returned the $1,363,912 in excess funds to EPA. The award to Chicago Public
Schools was a loan rather than a grant. According to the Department of Justice, EPA could not
recover the other questioned costs because the loan instrument did not allow for recovery unless
the recipient defaults on repayment. No other recovery provisions were incorporated into the
loan agreement. Per EPA's Financial Management Division, Chicago Public Schools was
current on its loan repayment schedule.
On March 20, 2003, EPA notified the recipient that EPA was closing the audit without requiring
further action other than to require the school district to continue making loan payments in
accordance with the repayment schedule.
Single Audit Report on the Confederated Tribes of Chehalis Reservation,
Oakville, Washington;
Report No. 2001-3-00094, issued February 20, 2001;
Audit Period: January 1,1998 to December 30,1998
This report contained 10 findings that pertain to all Federal programs. The following findings
directly affected EPA assistance agreements:
~	The audit questioned $152,209 of EPA funds the recipient received in excess of assistance
agreement expenditures. Significant amounts of Federal funds were spent for non-Federal
purposes.
~	Fixed asset records did not support amounts reported on the financial statements.
~	Reports prepared from the financial information system were likely to be inaccurate and
misleading.
~	Costs were allocated to programs based on budgeted amounts.
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~	The recipient needs to monitor grants and contracts, and file required financial reports timely.
EPA issued its final decision on October 12, 2001. Based on EPA's independent analysis of
supporting documentation, EPA required the recipient to repay $294,835, which was more than
the disallowed cost identified in the single audit. EPA designated the recipient as "high risk."
Under the designation, EPA will monitor results of single audits, closely track submission of
financial reports, include additional conditions in all assistance agreements, and place the
recipient on a reimbursable payment method. If the recipient fails to implement corrective
actions, EPA will terminate the assistance agreements and take enforcement actions.
Upon appeal, the Regional Administrator required repayment of $281,375. On January 14, 2003,
the recipient appealed the Regional Administrator's decision to Headquarters.
Currently, EPA Region 10 has taken enforcement action against the recipient by not awarding
any additional grants. EPA did not award a General Assistance Program grant for 2003, and is
taking individual enforcement actions to close expired grants. The Region is unable to close
other grants because the recipient has not provided required reports and documentation. The
recipient requested EPA remove the "high risk" designation. EPA has refused because the
recipient has never complied with the original decision.
Region 10 is preparing enforcement action guidance to provide a more pro-active approach for
non-compliance issues. The Region is also incorporating "lessons learned" from audit reports
into yearly grants management training.
Single Audit Report on the Confederated Tribes of Chehalis Reservation,
Oakville, Washington;
Report No. 2001-3-00181, issued July 11, 2001;
Audit Period: January 1,1999 to December 31,1999
This report contained 10 findings that pertained to all Federal programs. The following findings
directly affected EPA assistance agreements:
~	Fixed asset records did not support the amounts reported on the financial statements (repeat
finding).
~	The general fund spent significant Federal funds for general fund purposes. Specific Federal
funds expended or the dollar amount for unallowable costs could not be identified (repeat
finding).
~	Reports prepared from the financial information system during the year were likely inaccurate
and may be misleading (repeat finding).
~	Tests of internal controls identified many instances where original source documentation did
not support expenditures.
~	The auditors questioned $24,895 of EPA funds based on limited transaction testing.
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EPA issued its final decision on July 2, 2002. Based on EPA's independent analysis of the
supporting documentation, EPA required the recipient to repay $225,325, which was more than
the disallowed cost identified in the single audit. The recipient remains designated as "high risk."
The Regional Administrator upheld the decision upon appeal. The recipient has appealed the
Regional Administrator's decision to Headquarters.
Currently, Region 10 has taken enforcement action against the recipient by not awarding any
additional grants. The Region did not award a General Assistance Program grant for 2003, and is
taking individual enforcement actions to close expired grants. The Region is unable to close
other grants because the recipient has not provided required reports and documentation. The
recipient requested EPA remove the "high risk" designation. EPA has refused because the
recipient has never complied with the original decision.
Region 10 is preparing enforcement action guidance to provide a more pro-active approach for
non-compliance issues. The Region is also incorporating "lessons learned" from audit reports
into yearly grants management training.
EPA Cooperative Agreements Awarded to the Coordinating Committee for
Automotive Repair;
Report No. 2003-S-00001, issued May 29, 2002
The audit questioned all costs claimed under the three cooperative agreements because the
recipient did not account for funds in accordance with Federal rules, regulations, and terms of the
cooperative agreements. The $2,026,837 of questioned costs consisted of unsupported and
ineligible payroll costs and unsupported travel, equipment, printing/postage, rent, telephone,
outreach, recipient administration, web/computer, and supply costs.
The audit recommended that EPA:
~	Require the recipient to modify its financial management system to meet the requirements of
40 Code of Federal Regulations (CFR) 30.21.
~	Require the recipient to develop a time distribution system meeting the requirements of OMB
Circular A-122.
~	Not provide any new funds until EPA confirms the recipient has financial management
capabilities to manage funds in accordance with regulations.
~	Require the recipient to reconstruct accounting records necessary to support the expenditure
of funds in accordance with OMB Circular A-122.
~	Require the recipient to submit indirect cost proposals for the fiscal periods 1995 to present,
in accordance with OMB Circular A-122.
~	Recover all ineligible costs that do not meet the requirements of OMB Circular A-122.
~	Recover all funds that cannot be supported by the recipient in accordance with OMB Circular
A-122.
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The audit report is still in the resolution process and EPA has not issued a final decision. On
October 24, 2002, the Grants Administration Division issued a memo to the OIG concurring with
all recommendations except the recommendation not to provide new funds until the recipient can
manage the Federal funds in accordance with regulations. EPA had provided additional funds of
$93,945 to the recipient on July 23, 2002. Subsequently, on July 30, 2002, EPA imposed special
conditions and restrictions, including (1) placing the recipient on a reimbursement payment
method, and (2) requiring the recipient's employees take a grant management course. On
December 13, 2002, EPA suspended work and temporarily withheld funds until the recipient
resolved the findings outlined in the OIG report (45-day stop-work order/suspension). The
recipient has appealed the stop-work order.
EPA Grants Awarded to the Crow Tribe;
Report No. 2002-1-00098, issued March 27, 2002
The audit questioned $237,683, or 72 percent of the costs claimed under three grants. All
payroll, payroll-related, and indirect costs were questioned because the recipient's payroll system
did not meet OMB Circular A-87 requirements. The auditors also reported two material
weaknesses in the recipient's internal controls that raised serious concerns about the Tribes'
ability 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.
The audit recommended that EPA:
~	Recover $237,683 of questioned costs.
~	Designate the recipient as high risk until it can assure that its financial management system
meets all regulatory requirements, and project tasks can be completed.
~	Suspend all current and new grants if, after 6 months, the recipient has not met requirements.
~	Discuss the importance of strong internal controls, including meaningful, timely program
performance reporting with the recipient.
~	Work with the recipient to help it develop and implement policies and procedures to protect
EPA grant funds and strengthen environmental program performance.
On September 25, 2002, EPA issued a final decision sustaining the OIG findings and designating
the Tribe as a "high risk" recipient. The decision required the Tribe to repay $237,683. On
October 23, 2002, the Tribe requested that the Regional Administrator review the final decision,
which is still pending. EPA has required weekly progress reports from the Tribe and makes
monthly on-site visits.
EPA Region 8 awarded additional funds to the Tribe. Awards were made with special conditions
related to the "high risk" designation. Under the designation, grant reimbursements are not made
until supporting financial and programmatic documentation is submitted and reviewed.
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As a result of several tribal audits, Region 8 has become more proactive with the tribes and
works with the Tribal Office. Grants are given additional scrutiny and Region 8 is responding
earlier to non-compliance with grant requirements. For example, Region 8 determined
insufficient progress was being made under an air grant and is terminating the grant. The Tribe
repaid funds that were misspent.
Environmental Protection Agency Grants Virgin Islands, Department of Public Works;
Report No. 2001-1-00128, issued April 11, 2001
The Department of Public Works did not effectively manage the grants awarded by EPA. For
example, Public Works did not:
~	Use grant funds effectively.
~	Maintain required documentation.
~	Validate cash draws for grants administered by the U.S. Army Corps of Engineers.
~	File financial reports in a timely manner.
~	Establish procedures to use electronic funds transfers.
~	Maintain property control records.
~	Provide sufficient oversight of costs incurred by the Corps.
The report questioned $1,268,874 for projects administered by the Corps. The report also
concluded that the Corps may have incurred excess costs of $715,914 under two of the grant
projects. Public Works requested additional funds of $130,000 to correct deficiencies in Corps-
administered work. The report included 12 recommendations to the Governor of the Virgin
Islands to improve grant administration.
EPA has not issued a final decision. EPA sent a letter to the recipient requesting the status of
corrective actions. To date, 4 of the 12 findings have been closed. EPA expects to close an
additional four findings by September 30, 2003, and is currently researching the remaining four
findings.
Single Audit Reports on the Iliamna Village Council (Village) Iliamna, Alaska;
issued September 30, 2002
Report No. 2002-3-00009 - Audit Period: October 1,1998 to September 30,1999
Report No. 2002-3-00042 - Audit Period: October 1,1999 to September 30, 2000
The reports questioned $182,868 ($71,055 in fiscal year 1999 and $111,813 in fiscal year 2000)
charged to EPA assistance awards due to a lack of supporting documentation (repeat finding).
Additional findings included:
~	Deficient cash management and budgetary controls (repeat finding).
~	Duplicate payments for travel.
~	Late submission of required Federal financial reports and quarterly reports (repeat finding).
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~ Inconsistent preparation of time sheets and personnel activity reports.
The OIG recommended that EPA: (1) obtain supporting documentation or recover the questioned
costs, and (2) determine the adequacy of the recipient's response to the independent audit reports.
EPA has not issued its final decision. EPA is currently reviewing the recipient's accounting
records and working to match documents provided to expenditures identified in accounting
records.
Assistance Agreement X993 795-01 Awarded by EPA to the
Lake Wallenpaupack Watershed Management District;
Report No. 2002-M-00007, issued January 18, 2002
The report concluded that the Lake Wallenpaupack Watershed Management District did not
follow Federal procurement procedures regarding conflicts of interest and competition when
awarding $907,000 for two engineering contracts. The issues included:
~	There was a conflict of interest associated with the award of the engineering contracts, as the
chosen contractor played a significant role in the District's affairs leading up to the contract
awards. For example, the successful contractor proposed the projects to the Board of
Directors, solicited grant funds on behalf of the District, recommended the procurement
method to be used, wrote the request for qualifications, and drafted both contracts. The
above activities represent a conflict of interest according to 40 CFR 31.36 (b)(3).
~	The District awarded engineering contracts without engaging in adequate competition, in
violation of the regulations.
~	There was no documentation to indicate that the District performed cost analysis as required
by Federal regulations.
In addition, the contracts included $140,000 for non-engineering services, including preparing
mailing lists, developing brochures, and hosting golf and other activities. The District paid the
contractor $71,000 for services outside the scope of the contract.
EPA determined that the contracts were reasonably priced. On May 6, 2002, EPA issued its final
decision and required the recipient to repay the $71,000 for engineering services that were
outside the scope of the contract. EPA also recommended that the District follow procurement
regulations for future acquisitions and place the District's procurement procedures in a stand-
alone document. EPA did not specifically address the conflict of interest issue in the final
decision letter. EPA explained that it used the price reasonableness determination as its method
to address all of the shortcomings with the contracting process.
The recipient appealed the decision to repay the $71,000 on September 30, 2002. The appeal is
on hold pending a decision on the grantee's ability to pay the $71,000.
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EPA Grants Awarded to the Lower Brule Sioux Tribe;
Report No. 2002-1-00099, issued March 29, 2002
The audit questioned $632,615, or 97 percent of the costs claimed under three grants. All costs
for two grants were questioned because the recipient could not provide a reasonably complete
and accurate list of expenses. The Tribe's financial management system was inadequate and
internal controls did not support good grant management. Specifically, the Tribe: (1) could not
adequately identify the source and application of funds for two of the three grants audited,
(2) could not provide supporting documentation for some costs claimed, (3) did not compare
actual expenditures to budgeted amounts in its progress reports, (4) did not comply with
applicable OMB cost principles, and (5) did not provide accurate, current, and complete
disclosure of financial results. Additionally, internal control weaknesses raised serious concerns
about the Tribes's ability 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.
The audit recommended that EPA:
~	Recover $632,615 of questioned costs
~	Maintain the recipient's "high risk" designation until it can assure that its financial
management system meets regulatory requirements, and the payroll system meets
OMB Circular A-87 requirements.
~	Suspend all current and new grants if, after 6 months, the recipient has not met the above
requirements.
~	Discuss the importance of strong internal controls with the recipient.
On September 25, 2002, EPA issued the final decision and required the Tribe to repay $632,615.
On October 25, 2002, the Tribe requested that the Regional Administrator review the original
decision, which is still pending.
EPA Region 8 has awarded additional funds to the Tribe since the audit report, but not after
making the decision. Prior to the OIG report, EPA had already designated the Tribe as a "high
risk" recipient. Under the designation, EPA stated that it reviewed financial and program
information for each payment request. From the reviews, the Region believes the Tribe has
demonstrated sufficient progress, and may soon start reviewing payments on a "spot check"
basis.
Procurement Practices Under Grant No. X825532-01 Awarded to MBI International;
Report No. 2002-2-00008, issued January 29, 2002
The audit found that MBI, a non-profit organization, did not have adequate justification to
support awards of sole source contracts to related for-profit companies. Justifications submitted
were not dated and did not justify any sole source procurement. Also, MBI's procurement
practices did not meet Federal requirements. For example, six contracts were signed after work
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began. Further, there were conflicts of interest between MBI and related companies. Board
members were involved in awarding sole source contracts to each other's companies. As a
result, $1,301,365 of the $1,320,940 incurred was not eligible for Federal reimbursement. The
OIG recommended that EPA disallow the ineligible costs incurred. At this time, audit resolution
has been suspended at OIG's request.
Single Audit Report for the State of Michigan Department of Environmental Quality;
Report No. 2001-3-00076, issued January 22, 2001;
Audit Period: October 1,1995 to September 30,1997
This report contained 15 findings related to EPA funds involving a variety of assistance
agreements. Findings included:
~	Various internal control weaknesses.
~	Improper allocation of payroll costs to Federal grants.
~	Ineligible costs of $76,980 for terminal leave payments.
~	Ineligible costs of $163,000 because the recipient erroneously applied a higher indirect cost
rate to its Federal programs.
~	Ineligible costs of $58,943 because the recipient incorrectly charged the Clean Water State
Revolving Fund for activities to establish the Drinking Water State Revolving Fund.
~	Ineligible costs of $54,385 because supporting documentation did not agree with the amounts
claimed.
~	Financial status reports to EPA were not timely.
The OIG report recommended that EPA review the adequacy of documentation, the recipient's
response, and the corrective action plan. The recipient provided documentation of corrective
action and proposed to offset the questioned costs of $353,308. EPA determined the grantee's
response was adequate and informed the recipient that no further action was necessary.
Single Audit Report for the State of Michigan Department of Environmental Quality,
Lansing, Michigan;
Report No. 2001-3-00209, issued August 22, 2001;
Audit Period: October 1,1997 to September 30,1999
This report contained four findings pertaining to EPA funds, including:
~	All State Revolving Fund loan recipients did not provide required single audit reports. Some
loan recipients did not identify State Revolving Fund loans as Federal funds in their single
audits. (Similar finding in prior year report.)
~	The State agency had not established a system to properly allocate $538,863 ($431,090
Federal share) in payroll expenditures to all Federal grant programs. (Similar finding in prior
report.)
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EPA issued its final decision on March 21, 2002, which determined the recipient provided an
acceptable response to the first finding above, but did not provide sufficient documentation to
support the allocation of administrative costs to Federal programs. The decision required the
recipient to repay $431,090, the Federal share of the amount disallowed.
On April 3, 2002, the recipient appealed the final decision to the Regional Administrator. After
review of additional documentation, the Region reduced the disallowed Federal share to
$181,774. The disallowed costs have been repaid.
Auditor's Report for the State of Missouri Department of Natural Resources
Clean Water State Revolving Fund for the Year Ended June 30, 2000;
Report No. 2001-1-00143, issued May 29, 2001
The report identified material weaknesses within the internal control system and operations, and
concluded that Missouri did not maintain an adequate accounting system for State Revolving
Fund activities in accordance with the Clean Water Act. Specifically:
~	The control environment established by management needed to be corrected to provide the
accountability and safeguards inherent in proper accounting systems.
~	The accounting system only accounted for the cash balance of the State Revolving Fund, and
did not account for loans receivable, construction loan funds, revenue bonds, bond reserves,
EPA capitalization grants, or many other accounts.
~	The subsidiary systems Missouri used were not reconciled to the trustee records, and were
not self-balancing groups of accounts.
~	The State Revolving Fund financial statements did not include all program expenses.
~	The State of Missouri, since 1999, transferred $722,328 of State Revolving Funds and
$36,305 of administrative funds to the State's general fund in violation of the Clean Water
Act because of Article X of the Missouri State Constitution.
EPA issued the final decision on September 24, 2001, requiring Missouri to prepare a Corrective
Action Plan to address each recommendation in the audit report. Missouri repaid the $36,605
transferred to the general fund on May 29, 2001.4 According to Region 7, all recommendations
have been satisfactorily addressed, except for developing a formal accounting system. Missouri
has issued a contract to develop that system with a target completion date of August 2003. EPA
notified Missouri that unless the Accounting System is complete and functioning as intended in
accordance with the Corrective Action Plan, EPA in all likelihood would not award the next
capitalization grants for both the Clean Water and the Drinking Water Revolving Funds.
4The State repaid the $722,328 to the fund before the final report was issued.
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Audit of Costs Claimed by Napoleon City Schools, OH
Under EPA Assistance Agreement No. J858565-010;
Report No. 2001-1-00073, issued January 11, 2001
The agreement covered three projects. Two projects were funded with a combination of a loan
and a grant for $1,905,519 and $1,905,515, respectively. The third project was funded by a loan
for $467,622. The OIG questioned $4,017,412 of the $4,278,656 claimed because the recipient
did not spend funds in accordance with the Asbestos School Hazard Abatement Re-authorization
Act of 1990, regulations, and the terms of the agreement. Specifically, the recipient claimed:
~	Costs for damages and delays caused by a contractor's deficient work and default.
~	Costs for renovations and other items not necessary to complete the authorized abatement
project.
~	Costs for unauthorized asbestos abatement.
~	Costs for lump-sum contracts that included both authorized asbestos abatement and general
renovation work.
~	Costs for contracts and other agreements that were not procured in accordance with Federal
regulations and terms of the assistance agreement.
~	Duplicate, unallowable, and unsupported costs.
EPA has not issued a final decision for this report. EPA's Office of Grants and Debarment has
worked closely with the school district, the Office of General Counsel, and the OIG on this
complex audit resolution. The resolution is complicated by the combination loan/grant funding.
The method for resolving the questioned costs related to the loan has been determined by the
precedent set by the resolution of the Chicago Public Schools audit (see prior discussion).
Advisory Report on Assistance Agreement Defalcation, National Asian Pacific Center on
Aging, Seattle, Washington;
Report No. 2001-S-00006, issued March 29, 2001
The report disclosed the embezzlement of $1,802,546 of Federal grant funds from Department of
Labor and EPA programs.5 The embezzled funds could not be readily reconstructed to identify
the specific amount of embezzled funds that pertained to each grantor agency or agreement.
Therefore, the report requested EPA officials to coordinate with Department of Labor
representatives and jointly demand repayment by the recipient of the embezzled funds.
EPA issued a final decision for this report. On September 25, 2001, EPA entered into a
memorandum of understanding with the Department of Labor to coordinate on the embezzlement
recovery. The Department of Labor has the lead on resolution of this report. On October 15,
2001, EPA issued a preliminary decision disallowing the total amount of the embezzlement. The
5As noted in attachment A, an independent accountant estimated EPA's share was $937,072.40 with
applicable indirect costs of $63,580.35 for a total of $1,000,653. However, EPA and Department of Labor both
requested the recipient repay $1,802,546 of disallowed costs and did not assign a specific share to each Agency.
EPA instructed the recipient to remit the disallowed costs to the United States Treasury.
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Department of Labor issued a similar decision on October 16, 2001. In November 2001, the
recipient disputed both decisions. The Department of Labor and EPA held a dispute resolution
meeting with the recipient in December 2002. On June 25, and July 8, 2003, EPA and the
Department of Labor each issued final decisions disallowing all $1.8 million of embezzled funds
and the related indirect costs. Prior to this decision, EPA and the Department of Labor had
discussions with the recipient about recovery of the funds. The recipient raised financial
hardship regarding the repayment. We have been informed that the Department of Labor and
EPA, in consultation with the Department of Justice, have determined the recipient is able to
repay only $300,000 of the disallowed costs and will request the recipient remit that amount.
However, no formal decision has been made regarding the collection.
EPA has awarded additional funds to the recipient since the audit report. Also, EPA debarred the
recipient's former employee convicted of the embezzlement.
Advisory Report on Continued Cash Management Issues - National Asian Pacific Center on
Aging, Seattle, Washington;
Report No. 2001-S-00012, issued September 26, 2001
The audit questioned $160,360 because the recipient drew down more cash than expended. The
audit also found that the recipient was in non-compliance with the Single Audit Act, had not
submitted all financial reports timely, and did not provide adequate documentation for
reconciliation of the Senior Environmental Employment program timesheets.
The EPA Office of Grants and Debarment has worked closely with the OIG and the Office of
General Counsel on resolution of this audit. EPA performed a site review in November 2002 and
notified the recipient of the current issues still needing to be addressed. The recipient responded
in April 2003. On July 9, 2003, EPA sent a memorandum to the OIG detailing its final decisions
on the questioned costs and the recipient's corrective actions. EPA concluded that all system
weaknesses and non-compliances have been adequately addressed. EPA plans to conduct a
followup review of the recipient's system changes next fiscal year.
Regarding the questioned costs, EPA analyzed a subsequent period and also found that the cash
draws exceeded the supported expenditures. The recipient asserted that the unsupported
difference was, in fact, part of the embezzlement which was discussed in the preceding report
summary. EPA has accepted the recipient's assertion and considers the questioned costs to be
included in the amount disallowed for the embezzlement.
EPA has awarded additional funds to the recipient since the audit report.
Grant No. X-824519-01 Awarded to the National Association of Minority Contractors;
Report No. 2001-1-00203, issued September 27, 2001
The audit questioned $636,069 of either ineligible or unsupported costs. Ineligible costs
included:
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~	Personnel costs that were not reasonable or allocable in accordance with regulations.
~	Contractual costs where studies were not completed, conferences were not conducted, and
consultant costs were ineligible.
~	Telephone costs that were not reasonable and allocable in accordance with regulations.
~	Travel costs where there was no indication how the travel benefitted the grant.
~	Other costs where procurement practices were inappropriate and advertisement did not
benefit the grant.
On March 13, 2002, EPA issued the final decision and required the recipient to repay $515,926.
Most of the questioned costs EPA reinstated were personnel costs of $116,305. EPA concluded
that the documentation supporting these costs was sufficient. The recipient did not agree with
the final decision and filed an appeal with the EPA Administrator on April 12, 2002.
North Ohio Valley Air Authority (NOVAA), Ohio;
Report No. 2001-3-00138, issued May 16, 2001;
Audit Period: October 1,1995 to September 30,1996
This single audit report noted the North Ohio Valley Air Authority received Federal funds
(a sub-agreement) under a cooperative agreement awarded to the Ohio Environmental Protection
Agency. The audit report on the sub-agreement questioned Federal costs of $57,653 because of a
lack of supporting documentation. The report also concluded that the financial reports were
inaccurate and unreliable and requests for budget transfers and/or program revisions were made
later than 30 days after the beginning of the quarter.
The recipient ceased operations on September 30, 1999. On July 19, 2001, EPA issued its final
decision to the Ohio EPA. The decision requested repayment of $57,653. The Ohio EPA
requested that the Regional Administrator review the decision. The Regional Administrator has
not issued a decision on the appeal.
EPA Grants Awarded to the Northern Cheyenne Tribe;
Report No. 2002-1-00089, issued March 5, 2002
The audit questioned $25,789 for a contract because the Tribe did not follow competitive
contracting requirements when awarding the contract. Region 8 had directed the recipient to
award this contract to a specific organization without competition.
On September 25, 2002, EPA issued the final decision. EPA did not require the recipient to
repay $25,789 in questioned contract costs because the Region directed the Tribe to award the
sole source contract without justification. The decision instructed the Tribe to follow applicable
EPA procurement regulations or, in certain instances, follow its own procurement regulations, for
future procurement.
EPA Region 8 has awarded additional funds to the Tribe since the audit report.
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As a result of several Region 8 tribal audits, Region 8 officials have become more proactive with
the tribes and work with the tribal Office. Grants are given additional scrutiny, and Region 8 is
responding earlier to non-compliance with grant requirements.
Costs Claimed by the Red Lake Band of Chippewa Indians Under
EPA Assistance Agreement Nos. GA995767-03, CD985239-01, and 1985959-01;
Report No. 2002-1-00119, issued May 24, 2002
The audit questioned costs of $264,640 because the recipient did not account for funds in
accordance with Federal rules, regulations, and the terms of the agreements. The report included
the following findings:
~	The recipient did not have a time distribution system that met the requirements of
OMB Circular A-87.
~	The recipient did not properly account for fringe benefit costs.
~	The recipient did not maintain records to support its cost sharing for two of the grants.
~	The recipient did not properly allocate indirect costs to all benefitting activities.
~	The recipient did not submit financial reports timely, as required by the grant and Federal
regulations.
~	The recipient's performance reports for two of the three grants did not meet minimum
Federal requirements because the reports were incomplete.
EPA had not yet issued the final decision at the time of our review. Region 5 submitted its
proposed final decision for OIG review on September 25, 2002, and OIG did not agree with some
proposed actions. Region 5 submitted a revised proposed final determination on March 28,
2003, which was incomplete.
EPA Region 5 has awarded additional funds to the Tribe since the audit report.
EPA Grants Awarded to the Rosebud Sioux Tribe;
Report No. 2002-1-00096, issued March 19, 2002
The audit questioned $387,621, or 86 percent of the costs claimed under four grants. The
questioned costs consisted primarily of unsupported payroll costs and related indirect costs.
Auditors also observed two material weaknesses in the recipient's internal controls that raised
serious concerns about the recipient's ability 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.
The audit report recommended that EPA:
~	Recover $387,621 of questioned costs.
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~	Designate the recipient as "high risk" until it can assure that its financial management system
meets all regulatory requirements.
~	Suspend all current and new grants if, after 6 months, the recipient has not made substantial
progress toward meeting the requirements above.
~	Discuss the importance of strong internal controls, including meaningful, timely program
performance reporting with recipient.
On September 25, 2002, EPA issued a final decision sustaining the OIG findings and designating
the Tribe as a "high risk" recipient. The decision required the Tribe to repay $387,621.
On October 1, 2002, the Tribe requested that the Regional Administrator review the original
decision, which is still pending.
EPA Region 8 has awarded additional funds to the Tribe since the audit report, but not after
making the final decision. New awards will be made with special conditions related to the "high
risk" designation. Under the designation, grant reimbursements are not made until supporting
financial and programmatic documentation is submitted and reviewed.
As a result of several Tribal audits, Region 8 has become more proactive with the Tribes and
works with the Tribal Office. Grants are given additional scrutiny, and Region 8 is responding
earlier to non-compliance with grant requirements.
Audit of Final Costs Claimed by Sault St. Marie Tribe of Chippewa Indians Under
Assistance Agreement Nos. CP985954-01,1985367-01, and GA995191-04;
Report No. 2002-1-00056, issued December 18, 2001
The audit questioned $34,034 and identified four internal control weaknesses:
~	The recipient's time distribution system did not meet Federal requirements.
~	The recipient's accounting practices needed improvement to ensure the proper segregation
and accounting of costs as required by Federal regulations.
~	The recipient did not timely submit financial reports as required by the grant and Federal
regulations.
~	The recipient did not have an adequate process to request payment of grant funds in
accordance with the grant agreement and Federal regulations.
On April 8, 2003, the Regional Administrator ruled on an appeal and sustained $3,570 of
questioned direct labor and related costs. Some of the questioned costs were allowed because the
recipient provided additional supporting documentation. EPA had already determined that the
recipient had corrected the internal control weaknesses. After applying an offset of $2,915, the
recipient was required to repay $655 plus interest.
EPA Region 5 has awarded additional funds to the recipient. Officials did not believe any
additional special grant conditions were necessary in the new award. The recipient's response to
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Region 5's preliminary determination included documentation or assurance the recipient took the
corrective action recommended in the audit report.
Costs Claimed by the Washington, D.C., Department of Health
Under EPA Superfund Cooperative Agreement No. VC983169;
Report No. 2002-1-00184, issued September 26, 2002
The audit examined costs claimed under the assistance agreement and found the recipient did
not:
~	Maintain a financial management system adequate to account for source and application of
Federally-sponsored activity funds as required by 40 CFR 31.20.
~	Maintain a time distribution system to meet requirements as required by OMB Circular A-87.
~	Meet matching or cost sharing requirements specified in the Agreement.
~	Submit timely indirect cost proposals to its cognizant Federal agency.
~	Meet financial reporting requirements in 40 CFR 31.41; financial reports either were not
submitted or were not timely or accurate.
~	Request and allocate Federal funds appropriately.
~	Submit complete and timely quarterly performance reports.
~	Obtain timely single audits, as required by 40 CFR 31.26 and OMB A-133.
~	Provide supporting documentation for selected transactions.
~	Record equipment consistently in its official property management records.
The OIG recommended that EPA: (1) suspend all activity under the assistance agreement, and
designate the recipient as "high risk" until its financial management system meets Federal
requirements; (2) recover all costs that cannot be supported in accordance with Federal rules and
regulations; (3) require the recipient to prepare indirect cost proposals; (4) require the recipient to
obtain timely single audits; (5) require the recipient to prepare accurate and timely financial and
performance reports; and (6) terminate the agreement in accordance with 40 CFR 31.44 if the
recipient does not complete all corrective actions within 180 days of the report.
As of April 1, 2003, EPA had not issued its final decision. Due to the complexity of the
crosscutting issues, the resolution has taken longer than anticipated. EPA officials believe it will
be some time before issuance of the decision, due to difficulties in getting an adequate corrective
action plan from the recipient.
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Enclosure D
Scope and Methodology
The purpose of our work was to obtain, review, and summarize the information necessary to
answer the questions contained in the Chairman's February 21, 2003, letter, as modified by
discussion with the Committee and confirmed by our letter dated March 21, 2003. This work
was not an audit in accordance with generally accepted government auditing standards. We did
not complete this work with the intent of providing an independent assessment of the
performance of a government organization or activity, as required by generally accepted
government auditing standards. We performed our fieldwork from February 12, 2003, through
July 9, 2003.
To complete our work, we obtained assistance agreement information from EPA's Grants
Administration Division, Office of Human Resources and Organizational Services, and audit
followup coordinators in some regional offices. We relied on data provided by EPA officials and
data from the Integrated Financial Management System and the Grants Information Control
System. We obtained information from EPA officials, but did not independently verify the
accuracy of the data.
We used the Inspector General's Operations Reporting (IGOR) system and pertinent Semiannual
Reports to the Congress to identify the universe of 369 assistance agreement reports issued in
fiscal years 2001 and 2002. From the universe of 369 reports, we selected 27 reports that met our
self-defined criteria of a material non-compliance. For purposes of the review, a material non-
compliance is defined as a financial management deficiency that is contrary to Federal
regulations and may result in a material misstatement of costs, inhibit accounting for project
funds, or impede the ability to conduct an audit.
We also reviewed EPA Order 5700.6, Policy on Compliance, Review and Monitoring, issued
December 31, 2002. Although this policy was not in effect at the time the selected reports were
issued, we wanted to review the latest policy to determine whether the new procedures could
prevent or identify the types of problems noted in our fiscal 2001 and 2002 reports.
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