*. U.S. Environmental Protection Agency	08-4-0156
% Office of Inspector General	May 19 2008
% w At a Glance
Catalyst for Improving the Environment
Why We Did This Review
We conducted this
examination to determine
whether (a) the reported
incurred costs for five U.S.
Environmental Protection
Agency (EPA) cooperative
agreements were reasonable,
allocable, and allowable in
accordance with the terms and
conditions of the agreements
and applicable regulations;
and (b) Canaan Valley
Institute (recipient) achieved
the intended results of the
EPA awarded five cooperative
agreements to the recipient to
provide further enhancements
to the Mid-Atlantic
Highland's environment and
economic sustainability, and
continued support for the
Highland action plan.
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:
Canaan Valley Institute, Inc., Incurred Cost
Audit of Five EPA Cooperative Agreements
What We Found
In our opinion, with the exception of the questioned costs discussed below, the
outlays reported in the recipient's Federal Cash Transaction Reports and Financial
Status Reports present fairly, in all material respects, the allowable outlays
incurred in accordance with the terms and conditions of the agreements and
applicable laws and regulations. We questioned $3,235,927 of the $6,686,424 in
reported net outlays because the recipient reported unallowable outlays for
indirect, contractual, and in-kind costs. Specifically, the recipient:
	Claimed indirect costs without approved indirect rates;
	Did not credit back to the agreements all program income;
	Did not demonstrate that it performed cost analysis of contracts;
	Reported costs for services outside of the scope of one agreement;
	Did not comply with terms and conditions of contracts; and
	Used EPA funds to match another federally-funded cooperative agreement.
The recipient met the requirements of its assistance agreements. However, the
recipient could improve its subrecipient monitoring program.
What We Recommend
We recommend that EPA recover questioned outlays of $3,218,661 unless the
recipient provides sufficient documentation to support the related reported costs in
accordance with Federal regulations. EPA should require the recipient to prepare
and submit its indirect cost rate proposals for negotiation using the accrual
method, and disclosing the direct allocation methodology. The recipient should
credit $17,266 in program income to the agreements. The recipient needs to
ensure that cost and pricing analyses are performed and documented as part of its
contract procurement process.
We recommend EPA direct the recipient to revise its subrecipient monitoring
program to require technical reports from its subrecipients, in addition to financial
reports that are already required. The recipient should also time its subrecipient
payments to ensure the funds are expended timely by its subrecipients.