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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
September 8, 2005
Catalyst for Improving the Environment
Why We Did This
We conducted this examination
to determine whether:
•	The reported outlays fairly
present, in all material
respects, the allowable costs
incurred under EPA
cooperative agreement
V99925204 (agreement); and
•	California Department of
Toxic Substances Control
(State) complied with
applicable laws, regulations,
and terms of the agreement.
EPA Region 9 awarded the
agreement to the State on June
24, 2002, for Superfund site
assessments and Brownfields
activities. The initial award was
$640,000. The agreement was
amended to reflect total project
costs of $1,340,000. The
agreement had a budget period
from July 1, 2002, to June 30,
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:
California Department of Toxic Substances Control
Reported Outlays under Cooperative Agreement V99925204
What We Found
In our opinion, with the exception of contract outlays, the outlays reported by
the State present fairly, in all material respects, allowable costs incurred under
the agreement. EPA has determined that the State performed the activities in
the agreement's work plan and has complied with the agreement's deliverable
The State's procurement process needs improvement to ensure that contractual
outlays reported were allowable and that contracts were negotiated and
administered in accordance with Federal regulations. Specifically, the State did
not: (1) perform cost or price analysis, (2) negotiate profit as a separate line
item in the contract, (3) ensure that the contractors monitor their subcontracts,
and (4) include all the required clauses in the contracts. The State also did not
inform or require its contractors to comply with the Federal Cost Principles.
As a result, the State was unable to demonstrate that the reported outlays for
contractual services were "fair and reasonable" and we questioned reported
contract outlays of $215,946.
What We Recommend
We recommend that the Regional Administrator, EPA Region 9:
1.	Disallow contract outlays of $215,946 reported under the agreement.
2.	Revoke the State's procurement system self-certification until adequate
policies and procedures are in place to ensure compliance with Federal
regulations and cost principles.
3.	Review and approve all State solicitations and contracts under EPA grants
and cooperative agreements, other than small purchases.
4.	Determine the adequacy of actions taken by the State to update its
procurement handbook, develop additional procurement policies, develop
procedures for negotiating prices, and provide adequate training on
procurement and contract management.
The State disagreed with recommendation 1 and concurred with
recommendations 2 through 4.