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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2005-4-00054
March 31, 2005
Catalyst for Improving the Environment
Why We Did This Review
We conducted this
examination to express an
opinion on the reported
outlays on the Federal Cash
Transactions Reports, and
determine whether the
recipient was managing its
EPA grant in accordance with
applicable requirements.
Background
EPA awarded grant
R828112-01 to the recipient
on November 14, 2000. The
agreement was authorized
under section 103 of the Clean
Air Act, as amended. This
agreement provided
$18,750,000 to the recipient to
identify and help the broader
science community plan for
new research in air toxics,
accountability, and the health
effects of emerging fuels and
technologies.
Reported Outlays Under EPA Grant R828112-01
Health Effects Institute
What We Found
We questioned $2,009,473 of reported outlays because the Health Effects Institute
did not maintain the necessary documentation to fully support the reported costs, as
required by Federal regulations. Employee time sheets did not specifically identify
the EPA grant as a chargeable activity and were not used as the basis for charging
labor and related costs to the grant. The recipient charged time for specific
employees even though the employees might have worked on other non-grant
activities. In addition, the recipient charged travel and other costs to the grant
without determining the allocable benefit of such costs.
The Health Effects Institute did not agree with our conclusions. The Institute stated
that it had only one final cost objective and all of its cost were allocable to the EPA
grant. This position is inconsistent with the Institute's accounting records which
identified two cost objectives, one for the EPA grant and one for industry. Besides
the automotive industry, the Institute received funds from several other sources.
What We Recommend
For further information,
contact our Office of
Congressional and Public
Liaison at (202) 566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2005/
20050331 -2005-4-00054.pdf
We recommend that EPA (1) obtain sufficient documentation to support the outlays
of $2,009,473 in accordance with EPA regulations or disallow the costs from
Federal grant participation; (2) place the recipient on a cost reimbursement payment
basis and review the supporting documentation for all claims prior to payment until
such time as the recipient can demonstrate that it has addressed its financial
management weaknesses; and (3) ensure the recipient's indirect cost rate proposal
includes information for identifying direct and indirect costs, and an explanation of
how these costs are accounted for in the accounting system.

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