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•J % U.S. ENVIRONMENTAL PROTECTION AGENCY
\ / OFFICE OF INSPECTOR GENERAL
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Catalyst for Improving the Environment
Attestation Report
Incurred Cost Audit of Three
EPA Cooperative Agreements
Awarded to National Tribal
Environmental Council, Inc.
Report No. 10-4-0067
February 17, 2010
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Report Contributors:
Leah Nikaidoh
Bill Spinazzola
Richard Valliere
Abbreviations
CFR
Code of Federal Regulations
EPA
U.S. Environmental Protection Agency
FCTR
Federal Cash Transaction Report
FSR
Financial Status Report
FY
Fiscal Year
NT A A
National Tribal Air Association
OIG
Office of Inspector General
OMB
Office of Management and Budget
WRAP
Western Regional Air Partnership
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U.S. Environmental Protection Agency 10-4-0067
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Office of Inspector General
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At a Glance
Catalyst for Improving the Environmen
Why We Did This Review
We conducted this
examination to determine
whether reported incurred
costs for three U.S.
Environmental Protection
Agency (EPA) cooperative
agreements awarded to the
National Tribal Environmental
Council (recipient) were
reasonable, allocable, and
allowable in accordance with
the terms and conditions of the
agreements and applicable
regulations.
Background
EPA awarded one agreement
to the recipient to facilitate the
participation of Western
Indian Tribes in the Western
Regional Air Partnership.
EPA also awarded two
agreements for the continued
support of the National Tribal
Air Association program.
For further information,
contact our Office of
Congressional, Public Affairs
and Management
(202) 566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2010/
20100217-10-4-0067.pdf
Incurred Cost Audit of Three EPA
Cooperative Agreements Awarded to
National Tribal Environmental Council, Inc.
What We Found
We questioned $2,802,222 of the $3,586,445 reported because the recipient
claimed unsupported costs of $2,768,490 and ineligible costs of $33,732
that did not comply with the financial and program management standards
of Title 40, Code of Federal Regulations, Subpart B, Part 30.
While the recipient's work plans describe activities and planned deliverables,
they do not include a description of the recipient's goals or objectives for its
participation in the Western Regional Air Partnership and National Tribal Air
Association. Without the goals and objectives, the annual reports could not
include a comparison of accomplishments with the objectives for the period,
as required by Title 40, Code of Federal Regulations, Subpart B, Part 30.51.
As a result, EPA cannot determine whether the funds EPA provided the
recipient achieved their intended purpose.
What We Recommend
We recommend that EPA's Director for Grants and Interagency Agreements
Management Division and the Region 9 Regional Administrator require the
recipient to provide adequate support for the $2,768,490 questioned as
unsupported, and disallow and recover any costs that the recipient cannot
support; and recover the $33,732 in ineligible costs.
In its response, the recipient provided explanations for the costs we
questioned as unsupported and ineligible, but did not provide information
sufficient to revise our conclusion. The recipient did describe the actions it
was taking to address the questioned costs.
We also recommend that EPA work with the recipient to develop (a) work
plans that identify goals and objectives for the recipient's activities to
support the Western Regional Air Partnership and National Tribal Air
Association, and (b) performance reports that include a comparison of
accomplishments with goals and objectives in the work plan. EPA
concurred with the recommendation.
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$ A \
I® I
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
February 17, 2010
MEMORANDUM
SUBJECT: Incurred Cost Audit of Three EPA Cooperative Agreements
Awarded to National Tribal Environmental Council, Inc.
Report No. 10-4-0067
vyp,-^. \v\
FROM: Melissa M. Heist
Assistant Inspector General for Audit
TO: Howard Corcoran
Director
Office of Grants and Debarment
Jared Blumenfeld
Regional Administrator
Region 9
This is our report on the subject audit conducted by the Office of Inspector General
(OIG) of the U.S. Environmental Protection Agency (EPA). This report contains
findings that describe the problems the OIG has identified and corrective actions the OIG
recommends. This report represents the opinion of the OIG and does not necessarily
represent the final EPA position. EPA managers in accordance with established audit
resolution procedures will make final determination on matters in this report.
The estimated cost of this report - calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time - is $353,113.
Action Required
In accordance with EPA Manual 2750, Chapter 3, Section 6(f), you are required to provide us
your proposed management decision for resolution of the findings contained in this report before
you formally complete resolution with the recipient. Your proposed decision is due in 120 days,
or on June 17, 2010. To expedite the resolution process, please e-mail an electronic version of
your proposed management decision to kasper.ianet@epa.gov.
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We have no objections to the further release of this report to the public. This report will be
available at http://www.epa.gov/oig. If you or your staff have any questions regarding this
report, please contact Janet Kasper at (312) 886-3059 or the above e-mail address, or Leah
Nikaidoh at (513) 487-2365 or nikaidoh. 1 eah@epa.gov.
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Incurred Cost Audit of Three EPA Cooperative Agreements
Awarded to National Tribal Environmental Council, Inc.
10-4-0067
Table of C
Chapters
1 Background 1
2 Independent Auditor's Report 2
3 Results of Examination - Review of Costs 4
Indirect Costs 4
Direct Allocation Method Used to Report Costs 7
Reconciliation of Outlays 9
Unsupported Personnel Costs 11
Inequitable Allocation of Employee Paid Leave 12
Procurement Did Not Comply with Standards 13
Other Costs 15
Reporting 17
Recommendations 19
4 Results of Examination - Programs Results 20
Recommendation 21
EPA Comments and OIG Analysis 21
Schedules
Schedules of Outlays and Results of Examination 22
1 Outlays and Results of Examination for Cooperative Agreement XA97913701 22
2 Outlays and Results of Examination for Cooperative Agreement XA83200101 24
3 Outlays and Results of Examination for Cooperative Agreement XA83376601 25
Status of Recommendations and Potential Monetary Benefits 26
Appendices
A Scope and Methodology 28
B Recipient's Response 29
C EPA Grants and Interagency Agreements Management Division Response.. 38
D EPA Region 9 Response 39
E Distribution 40
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10-4-0067
Chapter 1
Background
We audited three cooperative agreements awarded by the U.S. Environmental
Protection Agency (EPA) to the National Tribal Environmental Council, Inc.
(recipient). EPA awards for these agreements totaled $4,825,081. The recipient
is a nonprofit organization headquartered in Albuquerque, New Mexico. EPA
awarded agreement XA97913701 to the recipient to facilitate the participation of
Western Indian Tribes in the Western Regional Air Partnership (WRAP). It also
awarded two agreements (XA83200101 and XA83376601) for the continued
support of the National Tribal Air Association (NTAA) program. EPA awarded
all three agreements under the Clean Air Act.
Table 1-1 provides information about the authorized project periods and funds
awarded under each agreement:
Table 1-1: Schedule of Agreement Information
Agreement
No.
Award
Date
Total Project
Period Costs
Total
Outlays
Project Period
XA97913701
02/21/2002
$2,761,380
$2,416,877
03/01/2002-10/15/2009
XA83200101
09/28/2004
1,058,701
1,058,370
10/01/2004-09/30/2007
XA83376601
11/20/2007
1,005,000
111,198
10/01/2007-09/30/2010
Total
$4,825,081
$3,586,445
Sources: EPA assistance agreement award documents, expenditures the recipient reported
for agreement XA97913701, recipient final Financial Status Report (FSR) for agreement
XA83200101, and a quarterly FSR for agreement XA83376601, as of March 31, 2008. For
agreement XA97913701, the recipient provided the OIG with a report of incurred costs
through March 31, 2008. The recipient did not provide this report to EPA for review or
approval. We relied upon this report to perform our examination.
Throughout the report, we use the terms ineligible questioned costs and
unsupported questioned costs. Ineligible questioned costs are outlays that are
contrary to a provision of a law, regulation, agreement, or other documents
governing the expenditures of funds. Unsupported questioned costs are outlays
that are not supported by adequate documentation.
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10-4-0067
Chapter 2
Independent Auditor's Report
We examined total outlays by the recipient under the EPA agreements as shown
below:
Table 2-1: Total Outlays
Final Status Reports/Incurred Costs
Assistance
Agreement
Date
Submitted
Period
Ending
Total Outlays
XA97913701
01/07/2009
03/31/2008
$2,416,877
XA83200101
02/01/2008
09/30/2007
1,058,370
XA83376601
06/23/2008
03/31/2008
111,198
Total
$3,586,445
Sources: EPA assistance agreement award documents, expenditures the
recipient reported for agreement XA97913701, recipient final FSR for
agreement XA83200101, and a quarterly FSR for agreement XA83376601,
as of March 31, 2008. For agreement XA97913701, on January 7, 2009, the
recipient provided the OIG with an unsigned and undated report of incurred
costs through March 31, 2008. This was the most current incurred cost
information that the recipient could provide to us. Therefore, we relied upon
this report to perform our examination.
We examined the recipient's report of outlays covering the period of the
agreements' inception to March 31, 2008. Preparing these reports of outlays is
the recipient's responsibility. The Office of Inspector General's (OIG's)
responsibility is to determine whether the reported outlays are allowable in
accordance with the terms and conditions of the agreements and applicable EPA
regulations.
Our examination was conducted in accordance with the Government Auditing
Standards issued by the Comptroller General of the United States, and the
attestation standards established for the United States by the American Institute of
Certified Public Accountants. We also followed the guidelines and procedures
established in the OIG's General Project Management Handbook, dated May 8,
2008. We examined, on a test basis, evidence supporting the reported outlays,
and performed such other procedures as we considered necessary under the
circumstances. We believe that our examination provides a reasonable basis for
our opinion.
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10-4-0067
We questioned $2,802,222 of the $3,586,445 reported because the recipient
claimed unsupported costs of $2,768,490 and ineligible costs of $33,732 that did
not comply with the financial and program management standards of Title 40,
Code of Federal Regulations (CFR), Subpart B, Part 30.
In our opinion, with the exception of the questioned outlays discussed in the
preceding paragraph, the outlays 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, as of January 30, 2009. Details
of our examination are included in the Results of Examination and Schedule of
Outlays and Questioned Costs that follow.
feutet *K
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10-4-0067
Chapter 3
Results of Examination - Review of Costs
We questioned $2,802,222 of the $3,586,445 in outlays because the recipient
claimed ineligible costs of $33,732 and unsupported costs of $2,768,490. These
weaknesses and the resulting questioned costs are presented by agreement in
Table 3-1 and described in the following paragraphs. Details by agreement and
cost category are included in the Schedules of Outlays and Results of
Examination later in this report.
Table 3-1: Total Reported Outlays and Questioned Costs
Outlays
Outlays
Assistance
1 Total Reported
I Questioned as
I Questioned as
Agreement
Outlays
Ineligible
I Unsupported
XA 97913701
$2,416,877
$0
$2,012,300
XA 83200101
1,058,370
33,732
664,956
XA 83376601
111,198
0
91,234
Total
$3,586,445
$33,732
$2,768,490
Sources: Reported outlays from the recipient's FSRs and report of expenditures. Amounts
questioned based on OIG analysis.
Indirect Costs
The recipient reported total indirect costs of $562,845, for the three agreements in
our review. We questioned $507,661 as unsupported because the recipient:
• Did not have approved rates for the fiscal years reported
• Was late in submitting new proposals for indirect cost rates
• Did not comply with agreement conditions that stated indirect costs were
not allowable without approved indirect rates
• Included items of specifically unallowable costs
• Did not identify and segregate direct and indirect costs for Fiscal Year
(FY) 2002 through FY 2005
Table 3-2 shows the total reported and questioned costs by agreement; related
notes explain the basis for questioning these costs.
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10-4-0067
Table 3-2: Schedule of Indirect Questioned Costs
Agreement
Indirect
Costs
Reported
Unsupported
Questioned
Costs
Allowable
Costs
Note
XA 97913701
$299,659
$299,659
$ 0
1,2,3
XA 83200101
238,188
183,004
55,184
1,2,3,4
XA 83376601
24,998
24,998
0
1,3
Total
$562,845
$507,661
$55,184
Sources: Reported cost data from recipient's outlay reports. Unsupported,
questioned, and allowable cost information based on OIG analysis.
Indirect costs reported were determined to be unallowable and questioned for the
following reasons:
Note 1: Lack of Approved Rates. The recipient did not submit its final
indirect cost rate proposals for FYs 2002, 2003, 2006, 2007, and 2008.
The terms and conditions of these agreements required the recipient to submit its
indirect cost rate annually to its cognizant agency. The cognizant agency must
approve the rate before the recipient can draw any funds for indirect costs. Title 2
CFR Part 230, Appendix A, subparagraph E.2.c 1 requires nonprofits having a
previously established indirect cost rate to submit a new indirect cost proposal to
its cognizant agency within 6 months after the close of each fiscal year.
The recipient claimed indirect costs for FY 2004 through FY 2008 using various
indirect cost rates, but has only approved final indirect cost rates for FYs 2004
and 2005. The recipient did have a provisional approved rate for FY 2006;
however, it was required to submit for negotiation and approval a final rate for
that year. The recipient's fiscal year ends December 31 and all final indirect cost
rate proposals would be due by June 30 of the following year.
The recipient stated that the reason for the nonsubmission of indirect cost rate
proposals was a shortage in staff and delays in obtaining single audits with
audited financial statements. As of completion of our field work on January 30,
2009, the recipient had not submitted a proposal for a new rate.
Note 2: Noncompliance with Agreement Provisions. The recipient did
not comply with the provisions of its agreement to have an approved cost rate
before claiming indirect costs for agreements XA97913701 and XA83200101.
Agreement XA83376601 did not contain any conditions on indirect costs.
1 Title 2 CFR Part 230 was formerly Office of Management and Budget Circular A-122, Cost
Principles for Non-Profit Organizations. The Circular was relocated to 2 CFR Part 230 on August
31, 2005. Except for the reference numbers, the Circular did not change. All provisions in effect
prior to August 31, 2005, remain in effect.
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The recipient's agreement XA97913701 initial award budget prohibited indirect
costs. Amendment No. 6, terms and conditions, dated July 24, 2007, allowed for
indirect costs to be claimed, but the recipient should not claim for reimbursement
any indirect costs unless an indirect cost proposal is approved for the period in
which indirect costs are being claimed.
The award for agreement XA83200101, dated September 28, 2004, included a
condition that if the recipient does not have a previously established indirect cost
rate, it will submit one to EPA within 90 days of the effective date of the award.
Amendment No. 1 to the agreement, dated January 10, 2006, included a condition
that the recipient should not include indirect costs in payment requests until an
indirect cost rate is negotiated and signed.
Note 3: Time Reporting System Not in Compliance with Regulations.
Prior to January 16, 2006, the recipient did not provide employee timesheets that
report all actual direct and indirect activities of each employee, as required by
Title 2 CFR Part 230. Because the recipient did not comply with requirements
and labor costs are part of its allocation, we questioned as unsupported the
indirect cost pools and related base costs. See Unsupported Personnel Costs
below for further detail.
Note 4: Allowable Costs. The $55,184 of allowable costs for agreement
XA83200101 reflects the approved indirect cost rates for FYs 2004 and 2005,
applied to the allowable direct cost base. The allowable direct cost base is the
reported amount less audit adjustments for questioned labor, fringe benefits,
procurement related items, and other costs. We discuss each of these items in
other sections of this report. The allowable amount may need to be adjusted once
the recipient makes recommended adjustments to reported costs.
Recipient Response and OIG Analysis
In responding to the draft report (see Appendix B) the recipient provided a
historical perspective on its submission and EPA's action on indirect costs. The
recipient explained that it submitted an indirect cost rate proposal to EPA for FY
2001, but EPA never responded. The FY 2001 proposal used the direct allocation
methodology and proposed a rate of 41.79 percent. In lieu of an approved final
indirect cost rate, the recipient used the direct allocation method for program
support costs. The recipient stated that this was the understanding between it and
the EPA project officer for agreement XA97913701, and the approved budgets
reflected line items that included program support costs. We reviewed the
original grant budget and agree that, in lieu of identifying indirect costs in the
budget, the recipient included in "Other Costs" such items as rental space,
postage, audit services, and other types of costs that would be considered indirect.
However, we were unable to find any evidence to support the recipient's specific
statement regarding an understanding between it and the EPA project officer.
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The recipient provided information regarding the application of provisional
indirect cost rates for agreement XA83200101. The recipient stated for the first
two years of the agreement (2004 and 2005), the EPA grants office and project
officer approved indirect cost rates of 41 percent and 40 percent. However, our
review found that the provisional rate was only applied to FY 2005. In FY 2006,
EPA and the recipient negotiated a final indirect cost rate of 29 percent for FY
2004. This same rate was established as the provisional rate for FYs 2005 and
2006. At that juncture, the recipient applied the 29 percent provisional rate to FY
2006 costs; it thought that the 29 percent rate was not to be applied to the prior
two years (FYs 2004 and 2005), as these years had already been closed, and
EPA's project officer did not require the recipient to amend the prior years'
financial reports. In 2008, the recipient negotiated a final indirect cost rate of
43.6% for FY 2005. As part of its reconciliation process and resubmission of
final financial status reports (FSRs) for agreement XA83200101, the recipient
should apply the appropriate indirect cost rates for FYs 2004 and 2005. The
recipient will also need to apply the appropriate FY 2006 indirect cost rate, once it
has been prepared and submitted to EPA for approval.
The recipient agreed that final indirect cost rates were not established for FYs 2002
and 2003, and stated that to resolve this issue, it would submit indirect cost rate
proposals for each of those years to the National Business Center. The recipient
also agreed that it did not submit indirect cost rate proposals for FY 2006 through
FY 2008. The recipient cannot submit its proposals until it completes the related
single audit reports. The recipient discussed its ongoing efforts to complete this
work. We concur with the recipient's efforts. The recipient and EPA should agree
upon milestone dates for the completion of these audits.
Regarding time reporting issues, the recipient stated that it modified its employee
timesheets after January 2006 to account for the program activities and hours for
each employee. During our audit, we confirmed that this was correct. To comply
with Title 2 CFR Part 230, the recipient must review and amend timesheets prior
to that date. Staff turnover complicates this task; former employees are not
available to assist with this task. It may be possible to reconstruct timesheets for
an employee that was associated with a single program. However, it would be
difficult to reconstruct timesheets for any employee who was associated with
more than one program. While reconstructing the timesheets may be difficult, it
is required in order for the costs to be allowable.
Direct Allocation Method Used to Report Costs
The recipient reported indirect costs using the direct cost allocation method for
agreement XA97913701 from the start of the project period in March 2002 until
September 30, 2005. Under this method, the recipient charged indirect costs
directly to agreement XA97913701. Because the indirect cost rate agreements did
not disclose this method, the costs are unallowable for reimbursement. Therefore,
we question claimed directly allocated costs of $1,095,121 as unsupported.
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Title 2 CFR 230, Attachment A, Section E requires nonprofit organizations to
submit an indirect cost proposal to the cognizant organization for review. The
cognizant organization uses the proposal to negotiate the indirect cost rate. The
recipient's proposal indicated it would use the modified total direct cost method
for allocating indirect costs. The recipient certified in its 2005 indirect cost
proposal that it accounted for similar costs consistently, and the recipient
allocated these costs to grant agreements based upon a causal/beneficial
relationship. The recipient specifically certified that costs treated as indirect were
not claimed as direct costs.
Title 2 CFR 230, Attachment A, Section B. 1 states that a cost may not be assigned
to an award as a direct cost if any other cost incurred for the same purpose, in like
circumstances, has been allocated to an award as an indirect cost. While
reviewing the recipient's accounting records, we identified various categories of
costs that the recipient charged to agreement XA97913071 as direct costs (see
Table 3-3), but later identified in its 2005 indirect cost proposal as indirect costs.
The recipient stated that it charged indirect costs directly to agreement
XA97913701 because the agreement did not include a provision for charging
indirect costs. We confirmed that the agreement did not include an allowance for
indirect costs.
We therefore questioned $1,095,121 as unsupported for all direct costs reported
for agreement XA97913701 for FY 2002 through FY 2005, until the recipient
separates its directly allocated costs from its direct costs and has its method of
allocating costs presented as part of its indirect cost proposals.
Table 3-3: Indirect Costs Claimed as Direct
Cost Category
FY 2002
FY 2003
FY 2004
FY 2005
Total
Personnel
$61,792
$ 88,694
$ 142,627
$ 109,976
$ 403,089
Fringe Benefits and P/R Taxes
5,372
18,713
31,640
17,155
72,880
Contractual Services
82,416
24,255
23,998
40,045
170,714
Board Expense
-
-
-
10
10
Travel
46,028
67,110
81,781
59,643
254,562
Conferences and Meetings
125
7,583
5,623
1,458
14,789
Training and Development
1,171
655
1,275
3,101
Advertising
-
3,988
1,620
-
5,608
Supplies
4,244
3,738
6,206
622
14,810
General Expenses
6,091
19,233
15,143
8,695
49,162
Occupancy
20,032
30,206
38,988
5,329
94,555
Property Rent and Maintenance
1,784
3,611
3,165
-
8,560
Property
523
-
-
1,680
2,203
Other Income and Expenses
-
1,012
66
-
1,078
Total
$228,407
$269,314
$351,512
$245,888
$1,095,121
Sources: Reported cost data from recipient's outlay reports. Questioned and allowable cost
information based on OIG analysis.
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Recipient Response and OIG Analysis
In its response, the recipient explained that for agreement XA97913701, the EPA
project officer permitted the recipient to directly allocate charges to direct line
items. These directly allocated charges were often coded in separate line items as
"IDC" in its accounting system. This coding should aid in separating the indirect
costs from direct costs. The recipient will analyze the FY 2005 indirect cost
proposal and separate the directly allocated costs from direct costs. For FY 2002
through FY 2004, the recipient will conduct a similar analysis and document the
method of allocating costs to indirect cost proposals.
We concur with the recipient's plan to analyze costs for FY 2002 through FY
2004 and submit its proposals to EPA. Once EPA negotiates the indirect cost
rates, the recipient will need to submit revised FSRs to reflect any adjustments in
direct and indirect costs.
Reconciliation of Outlays
The recipient could reconcile and support costs reported for only one of the three
EPA agreements reviewed. Reported amounts for agreement XA83376601
agreed to accounting records without exception. The recipient could not reconcile
reported costs to its accounting records for the remaining two agreements. This
resulted in unsupported questioned costs of $24,899 for agreement XA83200101
and $196,152 for agreement XA97913701.
We discussed the reconciliation process with the recipient. Prior to FY 2007, an
outside accounting firm prepared the recipient's FSRs that were provided to EPA.
That accounting firm is now dissolved and the recipient's staff has no knowledge
of how these reports were prepared and reconciled to the accounting records. The
recipient began preparing its own reports beginning in FY 2007. Since then, the
recipient has made improvements in its financial management system.
Title 2 CFR 230, Appendix A, subparagraph A.2.g states that to be allowable,
costs must be adequately supported. In addition, Title 40 CFR 30.21(b)(1)
requires a recipient's financial management system to provide accurate, current,
and complete disclosure of financial results of each federally sponsored project.
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Table 3-4: Questioned Unreconciled Costs
Costs Supported
Unsupported
Reported
by Accounting
Questioned
Agreement |
Costs
Records
Costs
|Note
XA97913701
$2,416,877
$2,220,725
$196,152
1
XA83200101
1,058,370
1,033,471
24,899
2
XA83376601
111,198
111,198
0
Total
$3,586,445
$3,365,394
$221,051
3
Sources: Reported cost data from recipient's outlay reports. Questioned and allowable cost
information based on OIG analysis.
Note 1: Unsupported Journal Entry. The recipient recorded an accounting
entry totaling $196,152 under agreement XA97913701 for the period March 1,
2002, to December 31, 2002, which affected various general ledger accounts. The
December 31, 2002, entry represents expenditures incurred and recorded in the
previous system and carried forward to a new system. The recipient was unable
to provide any detail or supporting documentation regarding this entry.
Note 2: Unsupported Reported Costs. Our comparison of amounts
reported by the recipient to its accounting records show that $24,899 of costs is
unexplained.
Note 3: Misclassified Travel Costs. Included in the costs for agreement
XA97913701, the recipient allocated $5,553 in travel and meeting expenses
directly to the agreement that should have been included in the indirect costs
allocation pool.
Recipient Response and OIG Analysis
The recipient could not provide any documentation to explain or support the
unreconciled claimed costs of $196,152 for agreement XA97913701. During our
exit conference with the recipient, it indicated that it had transaction information
and could identify the breakdown of costs related to the $196,152. However, the
recipient has not provided this additional information for our review, so these
costs will remain questioned.
Regarding the $24,899 of unreconciled costs for agreement XA83200101, the
recipient stated that it could not fully respond to this issue because it needed
additional information from the auditors to reconcile these amounts. We
subsequently provided to the recipient our analysis. Based upon the information
provided, the recipient agreed with our finding and will perform further research
to support these costs.
For agreement XA97913701, the recipient agreed with our findings and stated it
would properly classify $5,553 in travel and meeting expenses to the indirect
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costs allocation pool once the change was approved by EPA. As part of audit
resolution, EPA must obtain documentation to verify that these adjustments were
made.
Unsupported Personnel Costs
The recipient did not maintain the required supporting documentation for distributing
its salary costs to agreements, as required by federal regulations. Accordingly, we
have questioned as unsupported $1,217,388 of reported salary costs.
The recipient allocated its personnel costs as follows:
Table 3-5: Questioned Personnel Costs
Time Period
XA97937901
XA93200101
XA83376601
Unsupported
Questioned
Costs
Note
2002 (10/01 - 12/31)
$61,792
$-
$-
$61,792
2003
88,694
-
-
88,694
2004
142,627
25,855
-
168,482
2005
147,058
125,164
-
272,222
2006 (01/01 -01/14)
6,861
6,444
-
13,305
Subtotal
$447,032
$ 157,463
$
$ 604,495
1
2006 (01/15- 12/31)
162,280
137,417
-
$ 299,697
2007
133,121
94,290
30,319
257,730
2008 (01/01 -03/31)
30,714
-
24,752
55,466
Subtotal
$326,115
$231,707
$55,071
$612,893
2
Total
$773,147
$389,170
$55,071
$ 1,217,388
Sources: Personnel costs from recipient's financial management system. Questioned costs based on
OIG analysis.
Title 2 CFR Part 230, Attachment B, paragraph 8.m requires that the distribution
of personnel costs to awards must be supported by personnel activity reports
except when a substitute system has been approved in writing by the cognizant
agency. These reports must reflect the distribution of activity for each employee
and be maintained for all staff (professionals and nonprofessionals) whose
compensation is charged, in whole or in part, directly to awards, as follows:
1. The reports must reflect an after-the-fact determination of the actual
activity of each employee and not be based on estimates.
2. Each report must account for the total activity for which employees are
compensated.
Note 1: Time Charged Based on Budgeted Amounts. For the period
October 1, 2002, through January 14, 2006, the recipient allocated $604,495 in
personnel costs to agreements based on budgeted percentages. We could not
verify the labor charges because the recipient's employees were not required to
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prepare labor activity reports (timesheets) that meet Title 2 CFR Part 230 labor
documentation requirements. Because the recipient could not support claimed
salary costs with proper documentation, we questioned the $604,495 of
expenditures.
Note 2: Actual Employee Timesheets Not Used to Allocate Costs.
For the period of January 15, 2006, through March 31, 2008, the recipient did
require employees to maintain timesheets that met the Title 2 CFR Part 230
requirements. However, the recipient did not always use activity reports to
allocate labor charges of $612,893 to agreements. Instead, the recipient allocated
salary costs to stay within the award budget. While some of the labor charges
may be allowable, it is the recipient's responsibility to review all labor costs and
charge them to the proper agreements. We did not determine how much of the
$612,893 would be allowable and questioned the $612,893 of expenditures.
Recipient Response and OIG Analysis
For the period prior to January 14, 2006, the recipient agreed that it did not follow
federal requirements to charge personnel costs based upon actual after-the-fact
costs and not on budgeted percentages. The recipient stated that it would be very
difficult to reconstruct these time charges due to employee turnover. The
recipient suggested that it could reconstruct timesheets by converting the allocated
percentages to hours, and then recording the hours for each employee on a revised
timesheet that can account for single- or multi-program activities. For those
employees who charged 100 percent of their time to one program/project, the
recipient's proposed method is acceptable. However, for those employees who
charged time to multiple activities, we do not agree with the recipient's proposed
method because it will not be accurate. As we reported, the recipient based the
allocations on budgeted amounts, and not on actual hours worked.
The recipient has been working to correct payroll charges and related employee
paid leave allocations in its accounting system for the period starting January 15,
2006. The recipient should continue its efforts to complete this work and provide
relevant documentation to EPA. The personnel costs will therefore remain
questioned until the recipient completes its analysis.
Inequitable Allocation of Employee Paid Leave
The recipient included the cost of employee paid absences with its allocation of
direct salary costs, contrary to its negotiated indirect cost rate agreement. The
FY 2004 indirect cost rate agreement states the costs of vacation, holiday, sick
leave, and other paid absences are to be included in the recipient's fringe benefit
rate and are not to be included in the direct cost of salaries and wages. Claims for
direct salaries and wages must exclude those amounts paid to employees for
periods when employees are not working.
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Our review of the recipient's timekeeping practice found that employees
identified paid absences on their biweekly time reports, but the recipient did not
identify them in its accounting records. The recipient's accounting treatment of
paid absence costs for those fiscal years that did not have an approved indirect
cost rate are consistent with the FY 2004 practice of not excluding them from
direct salary costs. According to the recipient's business manager, he continued
to follow the practice started before him of not excluding paid absences from
direct salary costs. Therefore, we could not determine whether the recipient was
over- or undercompensated for the cost of employee paid absences. As of the
completion of our field work on January 30, 2009, the recipient had not changed
its accounting treatment of allocating these costs to agreements.
Recipient Response and OIG Analysis
The recipient is working to correct its accounting records to ensure that it treats
paid absences as indirect expenses. We concur with the recipient's actions to
review employee leave and make adjustments as needed.
Procurement Did Not Comply with Standards
The recipient neither followed its procurement system nor complied with EPA's
procurement standards. When applying for grant assistance, the recipient certified
that it would comply with applicable requirements of federal laws, regulations,
and policies governing each grant. The procurement standards are codified in
Title 40 CFR 30.41 through 30.48. We found that the recipient (a) awarded
contracts without performing the cost or price analysis, and (b) did not provide
contract documents to support costs reported.
No Cost or Price Analysis
We questioned as unsupported contract costs of $190,533, allocated to agreement
XA97913701, because the recipient did not perform or document the required
cost or price analysis for sole-source contracts. EPA's procurement standards
(Title 40 CFR 30.45) require that recipients perform and document some type of
cost or price analysis for its procurements. We reviewed six contracts and found
that three were sole-source procurements. The recipient's files did not contain
any evidence of a cost or price review, as follows:
Table 3-6: Questioned Contract Costs - Lack of Cost or Price Analysis
Contractor
Unsupported
Questioned Costs
E.H. Pechan and Associates, Inc.
$ 64,759
Katahdin Consulting
50,102
Northern Arizona University
75,672
Total
$190,533
Sources: Contract costs obtained from the recipient's accounting records.
OIG amounts questioned based upon analysis.
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The recipient's contract files did not have evidence that it performed the required
cost or price analysis on each procurement action. The recipient outsourced its
financial management and contract administration, resulting in disorganized
records maintenance. The recipient now has all financial and contract documents
in its possession, but must review them to provide support for its procurement
action.
Regarding the Northern Arizona University contract, the recipient believed it did
not have to perform a cost or price analysis because it is a follow-on contract. As
discussed in its sole-source justification, authority and funding for tribal projects
under the WRAP program were transferred from the Western Governors'
Association to the recipient. This contract is a continuing project; the Association
originally procured the contract under a competitive process. However, Title 40
CFR 30.45 requires that every procurement shall have some form of cost or price
analysis. The recipient's WRAP Tribal Caucus Coordinator/Budget Analyst said
he would contact the Association to obtain background information on the
original procurement to assist him in preparing his cost analysis and justification
to support that the recipient received a fair and reasonable contract price.
Without a sufficient cost or price analysis, we cannot be assured that a fair and
reasonable price was obtained. Accordingly, we question the $190,533 as
unsupported.
Lack of Contract Documents to Support Costs
We questioned as unsupported contract costs of $14,815, allocated to agreement
XA97913701, because the recipient could not locate its procurement file for the
Bearhawk, Inc., contract. At the time of our field work, the recipient was unable
to provide a copy of the contract, the basis for contractor selection, or a cost and
price analysis. These documents are needed to ensure that the costs reported were
within the terms of the contract and a fair and reasonable price was obtained for
the procurement. The recipient now has all financial and contract documents in
its possession, but needs to review them to obtain support for its procurement
action. Accordingly, we question the $14,815 paid to the contractor until the
recipient can provide the supporting contract documentation.
Recipient Response and OIG Analysis
The recipient did not dispute that it did not prepare documentation to support that
cost or price analyses were performed for the questioned procurements. The
recipient provided background on the procurements and the basis for contractor
selections (see page 36). The recipient also confirmed that it could not find
supporting documentation for the Bearhawk contract. Therefore, the costs remain
questioned in the final report. The recipient discussed its steps to ensure that it
will conduct its future procurements in accordance with federal regulations and
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that required documentation will be maintained. During our audit, we reviewed
the recipient's accounting and financial management policies and found them to
be adequate for initiating, recording, and reporting financial transactions.
However, our testing found that these policies were not complied with.
Therefore, we continue to recommend that EPA review recipient procurement
records for a period of time, to ensure that the recipient's contract administration
system complies with its policies and federal regulations.
Costs
The recipient claimed various other direct costs that did not comply with federal
requirements. We found that the recipient:
Did not credit conference income to an agreement
Incorrectly allocated costs to agreements
Had no documentary evidence to support certain costs related to
advertising, general expenses, and travel/meeting expenses
Conference Reimbursement
The recipient has not credited agreement XA8320011 for revenue received to
offset the cost of the 2007 Northern Arizona University (University) conference,
which the recipient hosted jointly with the University. The University agreed that
the recipient would pay for costs incurred related to the conference, and after the
conference, the University would reimburse the recipient for its share. The
recipient reported $33,732 in expenditures under the agreement that were later
reimbursed by the University. However, the recipient did not properly credit the
agreement. Title 2 CFR Part 230, Appendix A. 5 requires recipients to credit
expenditures for funds received. Accordingly, we question $33,732 as ineligible.
Recipient Response and OIG Analysis
The recipient disagreed that it did not properly credit $33,732 in reimbursed
conference charges back to agreement XA8320011. The recipient provided
documentation showing a journal entry for $33,732 to support its claim that the
reimbursed conference charges were credited to the grant. However, during the
audit, we identified a total of nine journal entries related to this event. Through
our analysis of these journal entries and the affected accounts, we determined that,
ultimately, the recipient's general fund was credited and not the NTAA
agreement. To assist the recipient, we provided our analysis to the recipient for
its review. Until the recipient properly posts this credit to the agreement, it
remains questioned as ineligible.
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Incorrectly Allocated Costs to Agreements
The recipient reported $9,405 of ineligible costs incorrectly charged to agreement
XA97913701. The WRAP agreement is to provide funding to enable the
recipient to facilitate the participation of Western Indian Tribes in the partnership.
The recipient incorrectly charged activities related to the NTAA agreement to the
WRAP agreements. The recipient also claimed some indirect costs as direct costs
to the WRAP agreement. These costs are ineligible because they were not within
the scope of the agreement or were contrary to federal regulations.
Table 3-7: Questioned, Incorrectly Allocated Costs
Questionedl
Note
Expenses
Ineligible
Advertising
$ 832
1
General
3,020
2
Travel & meeting
5,553
3
Total Costs
$9,405
Sources: Costs obtained from the recipient's accounting records.
OIG amounts questioned based on analysis.
Note 1: Advertising Expenses. The recipient claimed $832 in advertising costs
related to the National Air Quality Annual Conference that it incorrectly allocated
to the WRAP agreement. The recipient should have charged these costs to the
NTAA agreements.
Note 2: General Expenses. The recipient incorrectly charged to the agreement
$3,020 for the NTAA newsletter.
Note 3: Travel and Meeting Expenses. In FYs 2006 and 2007, the recipient
inadvertently recorded $5,553 of indirect travel and meeting expenses directly to
the WRAP program. The business manager stated the recipient would make the
adjustment when it prepares its indirect cost rate proposals for those two years.
Title 2 CFRPart 230 Appendix A, subparagraph 4a states that costs are allocable
to a specific federal award if they are treated consistently with like costs under
similar circumstances. Since these costs were either charged to the incorrect
agreement or were not treated in a consistent manner, they are unallowable.
Recipient Response and OIG Analysis
The recipient agreed that it incorrectly allocated $9,405 of other costs to
agreement XA9793701 and will make adjustments, upon approval by EPA. As
part of audit resolution, EPA must obtain documentation from the recipient to
ensure that the recipient made these adjustments.
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Unsupported Rental Costs
The recipient allocated to the agreement rental charges of $1,200 representing
payments for the WRAP program field office that were not supported by any
documentation.
According to the recipient, it negotiated the home office rental and utility
payments with the WRAP program manager when it was negotiating the
employment compensation package. These costs are for the rental period July
through September 2006. There was no evidence in the program manager's
personnel file to support the amounts negotiated and the rationale for the amount
being reasonable, nor did the recipient provide us with invoices or a contractual
agreement. Title 2 CFR Appendix A, subparagraph 2.g requires that allowable
costs be adequately documented. At a minimum, we would expect to see a
written document containing the terms of the agreement, including the amount
and period covered by that agreement. We would also expect a written
explanation of how the amount of rent was determined.
We did not tabulate related utility payments, which the recipient also negotiated
separately, because of the small dollar value. Accordingly, we have questioned
the unsupported $1,200 for the period July 1, 2006, to September 30, 2006.
Recipient Response and OIG Comments
The recipient agreed that it could not find any documentation to support the basis
for the rental costs. The recipient proposes to complete a new Personnel Action
Form that would include the basis for office rent and utilities as part of the
employment agreement with the WRAP program manager. While this might
address future charges - provided that the recipient complies with all relevant
federal regulations - we will continue to question the unsupported rental costs.
Reporting
The recipient did not meet its reporting requirements as specified in the
agreements. The recipient's single audit reports were not completed and filed in a
timely manner with the Federal Audit Clearinghouse as required by the terms and
condition of the agreements. It also did not prepare and submit its Federal Cash
Transactions Report (FCTR) and/or FSR as required in the agreements and EPA
regulations.
Annual Single Audit Reports Not Completed in a Timely Manner
The most recent annual single audit filed was for the period ended December 31,
2005. That audit was not completed until January 17, 2007. However, the
recipient is required to submit its single audits 9 months after the end of the
recipient's fiscal year. The annual audits for 2006 and 2007 have not been
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completed and should have been submitted by September 30, 2007, and
September 30, 2008, respectively. Office of Management and Budget (OMB)
Circular A-133, Section 200 requires nonfederal recipients to have a single audit
performed when the recipient expends more than $500,000 in federal funds during
that year. Section 320 states that the audit will be completed and submitted
within 9 months of the end of the recipient's fiscal year. The recipient stated that
it was difficult to find a certified public accounting firm to perform an annual
audit for such a small entity. However, it now has contracted with an auditor and
the single audits have begun.
Financial Reports Not Prepared/Submitted in a Timely Manner
The recipient did not prepare and submit in a timely manner its FCTR and/or
FSR, as required by the terms and condition of the agreements. For agreement
XA83200101, it never prepared or submitted FCTRs even though it was required
to submit a FCTR annually within 15 days of the end of the year as per Title 40
CFR 30.52. When this agreement was completed on September 30, 2007, the
recipient was required to submit a final FSR within 90 days, or by December 31,
2007. The recipient did not prepare the final FSR until February 2008.
The recipient said it was unaware of requirements to prepare annual FCTRs, but
was aware of the requirement to submit FSRs sometime in 2007. According to
the recipient's business manager, the recipient hired him in mid-2006. Prior to his
employment, the recipient outsourced report preparation to a contractor. The
business manager did not know why the contractor did not prepare FCTRs.
Beginning in November 2007, he began preparing the financial reports. He
believes this will improve the timeliness of financial reporting.
When recipients do not submit financial reports in a timely manner, EPA may not
have sufficient information to make informed assessments of whether the
unexpended funds are adequate to complete all work or close out agreements in a
timely manner.
Recipient Comments and OIG Response
The recipient agreed with the findings and is in the process of getting its single
audits completed. Beginning in November 2007, the recipient revised its process
to ensure it complies with all reporting requirements. We concur with the actions
the recipient has taken and plans to take to address reporting issues. We will
continue to recommend that the recipient complete and submit its single audit
reports, and that EPA should monitor the recipient's progress toward the timely
completion and submission of all required reports.
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Recommendations
We recommend that EPA's Director of Grants and Interagency Agreements
Management Division and the EPA Regional Administrator, Region 9:
3-1 Disallow and recover the federal share of ineligible costs of $33,732, as
identified in Schedule 2 of this report.
3-2 Require the recipient to provide adequate support for the $2,768,490
questioned as unsupported, and disallow and recover any costs that the
recipient cannot support.
3-3 Direct the recipient to prepare indirect cost rate proposals for all fiscal
years where it does not have approved rates, and determine whether the
recipient has properly identified the direct and indirect costs and addressed
the issues described in the report, for the period March 1, 2002, to March
31, 2008.
3-4 Require the recipient to prepare and submit revised claims, once EPA has
made the disposition of questioned costs.
3-5 Require the recipient to:
a. discontinue its practice of allocating salary costs based on
budgeted percentages, and
b. reconstruct its allocation of salary costs by agreements based on
the actual time worked by employees as documented in their
biweekly activity reports.
3-6 Require the recipient to discontinue its practice of including the direct cost
of paid absence with salary costs and follow the accounting treatment of
those costs in accordance with its negotiated indirect cost rate agreement.
3-7 Review the recipient's contract documentation for a period of time to
determine whether the recipient has maintained an adequate contract
administration system in accordance with its policies and federal
regulations.
3-8 Require recipient to complete its annual single audits and submit them to
the Federal Audit Clearinghouse.
3-9 Review the recipient's progress toward the timely completion and
submission of required periodic financial reports.
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Chapter 4
Results of Examination - Program Results
The recipient's work plans describe activities and planned deliverables but not its
goals or objectives for participating in WRAP and NTAA. Without the goals and
objectives, the annual reports cannot include a comparison of accomplishments
with the goals and objectives for the period, as required by Title 40 CFR 30.51.
As a result, EPA cannot determine if the EPA funds provided to the recipient
achieved their intended purpose.
According to EPA's project officer training manual, the approved project work
plan is the basis for making an award, and the project officer uses it to manage
and evaluate performance under the agreement. The work plan must describe the
need for the project, its objectives, and the method to accomplish the objectives.
Title 40 CFR 30.51 requires the recipient to submit performance reports that
include a comparison of the actual accomplishments with the goals and objectives
established for the period.
EPA did not require the recipient to report on whether EPA-funded activities met
the goals or objectives of the agreement as EPA regulations require. Agreement
XA97913701 was for the continuation of the recipient's efforts to facilitate tribal
participation in WRAP. The work plan describes the different positions the
recipient's staff will hold within WRAP and the duties they would perform.
Similarly, the annual reports for 2005 through 2007 described the activities that
the recipient's staff accomplished in working with WRAP. In discussing
performance reports, Title 40 CFR 30.51 requires such reports from the recipient
to include a comparison of actual accomplishments with the goals and objectives
for the period. Since the WRAP work plan did not include any goals or
objectives, the performance report could not describe how the activities met the
goals or objectives.
Similarly, work plans for agreements XA83200101 and XA833376601 focused
on the goals and objectives of NTAA, not of the recipient.
Similar to the work plan, the performance report for agreement XA83200101
describes the activities that NTAA completed, but not the specific activities of the
recipient. The performance report does not discuss how the recipient's activities
contributed to the goals or what progress the recipient made in achieving the
goals. The performance report does not include a comparison of the recipient's
actual accomplishments with the goals and objectives of the recipient for the
period, as EPA regulations require.
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According to the EPA project officers, the recipient lacked a detailed work plan
because its work was dependent on the work of WRAP and NTAA. The recipient
has approximately 184 tribes that participate in NTAA and/or WRAP, and each
one has its own emphasis under these programs. It does not want to create a
specific work plan, so it can have the flexibility to address current issues.
The agreements' work plans need to identify the goals and objectives of the
recipient's activities for its work with WRAP and NTAA. This will facilitate the
recipient's preparation of performance reports that meet EPA regulations and
include a comparison of accomplishments with goals and objectives. EPA's
guidance for tribal general assistance program grants2 provides a template for
identifying the long-term and intermediate goals, commitments and outputs, and
deliverables. While the template contains some elements specific to the general
assistance program grants, it provides a format for presenting how activities and
deliverables will lead to grant outcomes, and how the outcomes will result in
overall goals.
Recommendation
We recommend that EPA's Grants and Interagency Agreements Management
Division, and the Regional Administrator, Region 9:
4-1 Work with the recipient to develop:
a. work plans that identify obj ectives for the recipient's activities to
support WRAP and NTAA, and
b. performance reports that include a comparison of accomplishments
with goals and objectives in the work plan.
EPA Comments and OIG Analysis
In responding to the draft report (see Appendices C and D), EPA's Grants and
Interagency Agreements Management Division and Region 9 concurred with the
recommendation. EPA officials should coordinate with the recipient to
implement the recommendation, including the establishment of milestone dates
for corrective action.
2 Additional information on the template for the Indian general assistance program can be found at
http://www.epa.gov/Indian/gap-wpf.htm.
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Schedules of Outlays and
Results of Examination
Schedule 1
Outlays and Results of Examination for
Cooperative Agreement XA97913701
Questioned
Outlays -
Description
Amount
Unsupported
Note
Personnel
$ 773,148
$ 773,148
1
Fringe Benefits
166,712
166,712
2
Travel
516,073
260,115
3
Contractual
405,455
317,591
4
Other Costs
255,830
195,075
5
Indirect Costs
299,659
299,659
6
Total
$2,416,877
$2,012,300
Sources: Total reported outlays and amounts claimed from the recipient's
report of expenditures for the period ended 3/31/2008. Amounts questioned
based on OIG analysis.
Note 1: We have questioned the $773,148 in personnel costs reported that are not
supported by adequate documentation. See discussion on Unsupported Personnel
Costs in Chapter 3. We have also questioned a portion of the same personnel costs
for additional reasons:
a. $403,089 of costs related to indirect costs incorrectly charged as direct
costs. See discussion on Indirect Costs Reported Using the Direct
Allocation Method in Chapter 3.
b $61,792 related to an unsupported journal entry. See discussion on
Unsupported Journal Entry in Chapter 3.
Note 2: The recipient's financial management system did not identify the dollar
amount of paid absences. We are therefore precluded from determining the
material effect of the improper accounting treatment of these costs. See discussion
on Inequitable Allocation of Employee Paid Leave in Chapter 3.
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Note 3: We questioned $260,115 of travel costs for the following reasons:
a. $254,562 of indirect costs reported as direct. See discussion on
Indirect Costs Reported Using the Direct Allocation Method in
Chapter 3.
b. $5,553 of costs directly allocated to the EPA grant that should have
been included in the indirect cost pool. See discussion on
Reconciliation of Outlays in Chapter 3.
Included in the $260,115 of indirect costs reported as direct costs are
$39,911 of costs not supported by source documentation. See discussion
on Unsupported Journal Entry in Chapter 3.
Note 4: We question $317,591 of contractual costs for the following reasons:
a. $112,243 of indirect costs reported using the direct allocation method,
as discussed in Chapter 3.
b. $ 205,348 of costs that did not comply with EPA's procurement
standards. See Procurements Did Not Comply with Standards in
Chapter 3.
Included in the $112,243 in note 4(a) is $61,625 of costs not supported by
source documentation. See discussion on Unsupported Journal Entry in
Chapter 3.
Note 5: We question $195,075 of other costs for the following reasons:
a. $193,875 of indirect costs reported using the direct allocation method.
b. $ 1,200 of rental costs incurred that were not supported by vendor
invoices or contractual agreement.
Included in the $193,875 in note 5(a) is $3,852 of advertising and general
expenses associated with another assistance agreement. See discussion on
Other Costs in Chapter 3.
Note 6: We have questioned the $299,659 of indirect costs because the recipient
does not have approved indirect cost rates. See discussion on Indirect Costs in
Chapter 3.
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Schedule 2
Outlays and Results of Examination for
Cooperative Agreement XA83200101
Questioned
Outlays -
Questioned
Outlays -
Description
Amount
Ineligible
Unsupported
Note
Personnel
$ 389,169
$389,169
1
Fringe Benefits
69,289
69,289
2
Travel
159,112
3,040
3
Contractual
1,804
Other Costs
200,808
$33,732
20,454
4
Indirect Costs
238,188
183,004
5
Total
$1,058,370
$33,732
$664,956
Sources: Total reported outlays and amounts claimed from the recipient's final FSR. Amounts
questioned based on OIG analysis.
Note 1: We have questioned $389,169 of personnel costs because of timesheet
reporting reasons as discussed in Unsupported Personnel Costs in Chapter 3.
Note 2: The recipient's financial management system did not identify the dollar
amount of paid absences. We are therefore precluded from determining the
material effect of the improper accounting treatment of these costs. See discussion
on Inequitable Allocation of Employee Paid Leave in Chapter 3.
Note 3: We have questioned travel costs of $3,040 because the recipient could not
reconcile its reported outlays to its financial management system. See discussion
on Reconciliation of Outlays in Chapter 3.
Note 4: We have questioned other costs of $33,372 as ineligible; this amount
represents revenue the recipient received that was not credited to the agreement.
We have questioned $20,454 as unsupported because the recipient could not
reconcile its reported outlays to its financial management system.
Note 5: We have questioned $183,004 of indirect costs because of the lack of an
approved indirect cost rate, as discussed in Indirect Costs in Chapter 3.
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Schedule 3
Outlays and Results of Examination for
Cooperative Agreement XA83376601
Questioned
Outlays -
Description
Amount
Unsupported
Note
Personnel
$55,071
$55,071
1
Fringe Benefits
11,165
11,165
2
Travel
11,504
Other Costs
8,460
Indirect Costs
24,998
24,998
3
Total
$111,198
$91,234
Sources: Total reported outlays and amounts claimed from the recipient's quarterly FSR
for the quarter ended 3/31/2008. Amounts questioned based on OIG analysis.
Note 1: We have questioned $55,071 of personnel costs for timesheet reporting
issues as discussed in Unsupported Personnel Costs in Chapter 3.
Note 2: The recipient's financial management system did not identify the dollar
amount of paid absences. We are therefore precluded from determining the
material effect of the improper accounting treatment of these costs. See discussion
on Inequitable Allocation of Employee Paid Leave in Chapter 3.
Note 3: We have questioned $24,998 of indirect costs because of the lack of an
approved indirect cost rate as discussed in Indirect Costs in Chapter 3.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed
Amount
Agreed To
Amount
3-1 19 Disallow and recover the federal share of ineligible
costs of $33,732, as identified in Schedule 2 of this
report.
3-2 19 Require the recipient to provide adequate support
for the $2,768,490 questioned as unsupported, and
disallow and recover any costs that the recipient
cannot support.
3_3 -|g Direct the recipient to prepare indirect cost rate
proposals for all fiscal years where it does not have
approved rates, and determine whether the
recipient has properly identified the direct and
indirect costs and addressed the issues described
in the report, for the period March 1, 2002 to March
31,2008.
3-4 19 Require the recipient to prepare and submit revised
claims, once EPA has made the disposition of
questioned costs.
3-5 19 Require the recipient to:
a) discontinue its practice of allocating salary
costs based on budgeted percentages, and
b) reconstruct its allocation of salary costs by
agreements based on the actual time worked
by employees as documented in their
biweekly activity reports.
3-6 19 Require the recipient to discontinue its practice of
including the direct cost of paid absence with salary
costs and follow the accounting treatment of those
costs in accordance with its negotiated indirect cost
rate agreement.
3-7 19 Review the recipient's contract documentation for a
period of time to determine whether the recipient
has maintained an adequate contract
administration system in accordance with its
policies and federal regulations.
3-8 19 Require recipient to complete its annual single
audits and submit them to the Federal Audit
Clearinghouse.
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
$34
$2,768
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RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed Agreed To
Amount Amount
3-9 19 Review the recipient's progress toward the timely
completion and submission of required periodic
financial reports.
4-1 21 Work with the recipient to develop:
a) work plans that identify objectives for the
recipient's activities to support WRAP and
NTAA, and
b) performance reports that include a
comparison of accomplishments with goals
and objectives in the work plan.
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
EPA Director of Grants and
Interagency Agreements
Management Division and
Regional Administrator,
Region 9
1 0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
Scope and Methodology
We performed our examination in accordance with the Government Auditing Standards issued
by the Comptroller General of the United States, and the attestation standards established by the
American Institute of Certified Public Accountants. We also followed the guidelines and
procedures established in the OIG's Project Management Handbook.
We conducted this examination to express an opinion on the reported outlays as of March 31,
2008, and determine whether the recipient complied with all applicable laws and regulations, as
well as with any special requirements under the agreements. We conducted our audit work from
October 28, 2008, through July 7, 2009.
In conducting our examination, we performed the following procedures:
• Interviewed EPA personnel and reviewed grant and project files to obtain background
information on the recipient and the agreements.
• Interviewed recipient personnel to understand the accounting system and the applicable
internal controls as they relate to the reported outlays.
• Reviewed the FY 2003 through FY 2005 single audit reports to identify issues that could
affect our examination.
• Reviewed the recipient's internal controls specifically related to our objectives.
• Performed tests of the internal controls to determine whether they were operating
effectively.
• Examined the reported outlays on a test basis to determine whether the outlays were
adequately supported and eligible for reimbursement under the terms and conditions of
the agreements and federal regulations and cost principles.
The OIG has not audited the recipient before. However, the Office of Grants and Debarment
reviewed the recipient's financial management system in 2006 and 2008, and we followed up on
the findings reported, which included the recipient claiming ineligible costs, charging costs to
wrong agreements, not filing various required reports, excessive cash draws, and not having
indirect cost rate proposals submitted to EPA.
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Appendix B
Recipient's Response
November 6, 2009
Janet Kasper, Director
Contract and Assistance Agreement Audits
Office of Inspector General
U.S. Environmental Protection Agency
Washington, D.C. 20460
Subject: Draft Attestation Report - National Tribal Environmental Council, Inc., Incurred
Cost Audit of Three EPA Cooperative Agreements
Dear Ms. Kasper:
Please find enclosed written comments in response to the findings and recommendations outlined
in the draft attestation report for the incurred cost audit for cooperative agreements
XA97913701, XA83200101, and XA83376601. Our comments focus on Chapter 3 of the draft
report, and are submitted in Microsoft Word format as required.
Thank you for allowing an extension of time to provide these comments. We appreciate your
patience and understanding.
Sincerely,
$0/ichJitz,^
Jerry Pardilla
Executive Director
Enclosure
cc: Bobby Shade, NTEC Business Manager
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Draft Attestation Report - National Tribal Environmental Council, Inc., Incurred Cost
Audit of EPA Cooperative Agreements XA97913701, XA83200101, XA83376601
National Tribal Environmental Council Inc. (NTEC) comments provided below will follow the
format outlined in Chapter 3 of the draft attestation report.
Indirect Costs
The finding was that $507,661 reported as indirect costs for the three agreements were
determined to be unallowable and questioned for several reasons defined in Notes 1, 2, and 3.
Note 1
Note 1 pertains to the lack of approved rates, and that NTEC did not submit final indirect cost
rate proposals for FYs 2002, 2003, 2006, 2007, and 2008. However, NTEC had approved final
indirect cost rates for FY 2004 and 2005, and a provisional rate for FY2006. NTEC does not
have an approved final indirect cost rate for FY 2006, 2007, and 2008. NTEC agrees with these
findings.
In review of NTEC's records, we offer a chronology to explain what occurred in FY 2002, 2003,
2004, 2005, and 2006.
NTEC submitted an indirect cost rate proposal to EPA for FY2001 but EPA never responded. A
copy of that proposal is attached. That FY 2001 proposal used the direct allocation methodology
and proposed a rate of 41.79 percent. In lieu of an approved final indirect cost rate, NTEC used
the direct allocation method for program support costs. This was the understanding between
NTEC and the EPA project officer for Agreement XA97913701, and the approved budgets
reflected line items that included program support costs.
Agreement XA83200101 was negotiated for a three-year cycle. The EPA grants office and
project officer approved indirect cost rates of 41 percent and 40 percent for the first two years.
And, after the provisional rate of 29 percent was established for FY2006, it was applied. The 41
percent awarded was consistent with the rate that NTEC proposed for FY2001. NTEC assumed
the 41 percent indirect cost rate was established for the first year, and that the rate of 40% was
established for the second year. The award documents and approved budgets reflected these
percentages.
NTEC received its first approved final indirect cost rate for FY2004, which was awarded
retroactively on July 31, 2006 by the U.S. Department of Interior National Business Center. The
approved final rate for FY 2004 was 29 percent, and the same percentage for a provisional rate
was established for FY 2005 and 2006. At that juncture, the 29 percent provisional rate was
applied to Agreement XA83200101 for its third year. It was our understanding that the 29
percent rate was not applied to the prior two years as they had already been closed. Moreover,
our project officer did not require us to amend the prior years financial reports.
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In preparation of the indirect cost rate proposal for FY 2005, we used the FY 2004 proposal for
reference. This proposal used the modified total direct cost method, and we noticed that the FY
2004 proposal submission contained an error. One subaward was substantially greater than
$25,000 and the amount in excess of $25,000 was not excluded from the direct base, as required
in the modified total direct cost method. This one factor would have increased the indirect cost
rate from 29 percent to 34.5 percent. We inquired about this matter with the National Business
Center, but the Indirect Cost Coordinator informed us that the National Business Center is
reluctant to re-negotiate once a final rate is established. This will become moot once we submit
and negotiate our final indirect cost rate for FY 2006.
The approved final indirect cost rate of 43.6 percent for FY 2005 was approved on December 29,
by the National Business Center.
For FY 2006, NTEC was authorized to use a provisional rate of 29 percent. The FY 2006 final
indirect cost rate proposal has not been submitted to the National Business Center due to the
single audit not being completed. Our auditor has taken an exceedingly long time to conduct his
work, but he is finally at the reporting stage and should complete his work in a few weeks. We
have a draft indirect cost rate proposal for FY 2006 already prepared using our IRS Form 990.
Once we receive the audited financial statements for 2006, we will reconcile the draft indirect
cost proposal with the 2006 audit and then immediately submit the proposal to the National
Business Center.
The FY 2007 and 2008 final indirect cost rate proposals have not been submitted to the National
Business Center due to the single audits not being completed. We have engaged another auditor
who will begin his work once the FY 2006 audit is final. The new auditor is motivated and
understands the importance in completing these audits expeditiously. The FY 2007 audit is
scheduled in late November 2009, and the FY 2008 audit is scheduled in December 2009.
Lastly, NTEC agrees that the final indirect cost rates were not established for FY 2002 and 2003,
but we are prepared to resolve this issue by submitting indirect cost rate proposals for each of
those years to the National Business Center.
Note 2
For Agreement XA97913701, we provided comments in Note 1 as to our understanding of the
timing and approval of the indirect cost rates. It was unclear from Amendment No. 6 whether
indirect costs could be claimed for any time period in which NTEC received an approved rate,
particularly FY 2004 to 2006, or if the amendment was applied only prospectively from July 24,
2007.
For Agreement XA83200101, we provided comments in Note 1 as to the indirect cost rates
specified in the award documents. NTEC applied those rates and EPA approved. NTEC has
since established final rates for FY 2004 and 2005, and a provisional rate for FY 2006 with the
National Business Center.
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NTEC understands the requirement to have approved indirect cost rates for the periods covered
by a cooperative agreement. We are striving to get our proposals completed and submitted timely
so that rates can be negotiated and approved by the National Business Center for inclusion in
each year's award documents for each cooperative agreement. We understand that final indirect
cost rate proposals are due at the National Business Center by June 30 each year as our fiscal
year is based on the calendar year.
The limiting factor has been completion of single audits. In Albuquerque, New Mexico, the field
of auditors who perform single audits for nonprofit organizations has been narrowing, and very
few CPA firms are undertaking such work. The last firm who performed our single audits was
Neff & Ricci, and once this firm stopped performing these audits for nonprofit organizations, we
were only able to retain the services of a sole practitioner CPA auditor. Our current auditor,
Michael Moore, has been methodical if not extremely cautious due to the OIG incurred expense
audit, and thus has taken an inordinate amount of time with our CY 2006 audit. We are anxious
to complete this 2006 audit and also to expedite the completion of the 2007 and 2008 audits. At
last, our current auditor is in the final reporting stage of our CY 2006 audit and it should be
completed by the end of November 2009. We are not satisfied with how long this has taken, and
to remedy this situation we have engaged a new auditor to complete the 2007 and 2008 audits.
Our new auditor estimates that each audit will be completed in about 4 weeks, which would be a
dramatic improvement. Our new auditor is ready to start and has been briefed about the priority
for expeditious work. Once these audits are completed, we will immediately submit our final
indirect cost rate proposals to the National Business Center. At this juncture, we have draft
proposals prepared based on the IRS Form 990s for FY 2007 and 2008. We will be able to
finalize our proposals once we reconcile each to reflect the audited financial statements.
Finally, our plan is to continue on with the CY 2009 audit so that our indirect cost proposal for
FY 2011 will be submitted to the National Business Center before June 30, 2010.
Note 3
NTEC modified its employee timesheets after January 2006 to account for the program activities
and hours for each employee. Prior to that date, in order to comply with Title 2 CFR Part 230,
NTEC would need to review and amend timesheets. There are complications to accomplish this
task due to staff turnover. Former employees are not available to assist with this task. It may be
possible to reconstruct timesheets for an employee that was associated with a single program.
However, it would be difficult to reconstruct timesheets for any employee who was associated
with more than one program.
Direct Allocation Method Used to Report Cost
In the Indirect Costs section above, we outlined the chronology and status of the indirect cost
rates. For Agreement XA97913701, NTEC was permitted by its EPA project officer to directly
allocate charges to direct line items. These directly allocated charges were often coded in
separate line items as "IDC" in our accounting system. This coding should aid in separating the
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indirect costs from direct costs. NTEC will analyze the FY 2005 indirect cost proposal and
separate the directly allocated costs from direct costs. For FYs 2002 to 2004, NTEC will
conduct a similar analysis and document the method of allocating costs to indirect cost
proposals.
Reconciliation of Outlays
The finding was that NTEC could reconcile and support costs for only Agreement XA83376601,
but that NTEC could not reconcile reported costs for XA97913701 and XA83200101. For
XA97913701, the unsupported questioned cost was $196,152. For XA83200101, the
unsupported questioned cost was $24,899.
Note 1
We have not been able to document the details of the general ledger entry pertaining to
XA97913701 made on December 31, 2002. We were unable to find sufficient details in our
electronic system, which required breaking the password code to gain entry into the electronic
files. We searched our hardcopy financial records. We had to retrieve our records from Iron
Mountain facilities in Albuquerque and re-inventory. The search for hardcopy documentation
was a major undertaking that required many hours of physical labor, staff time, and regular
follow-up, but we could not find sufficient documentation about the elements for the general
ledger entry. While our search was not fruitful, we retained all retrieved records as provided in
our Records Retention Policy.
We have had staffing changes since December 2002, and we tried to contact our former Office
Manager but we were unable to get a response. We also ran into a barrier with the accounting
firm mentioned in the findings narrative. The accounting firm that assisted the former Office
Manager with this entry is not available.
NTEC has undergone staffing changes in recent years and new managers have taken steps to
document transactions and maintain records. We have conducted training on records
management, and have emphasized adherence to our own Records Retention Policy.
Note 2
We are unable to provide a response to this finding, as we are uncertain as to the line items in
question or whether this was a cumulative amount or attributed to a specific year. More
information is needed to reconcile this amount. However, in the subsequent Agreement
XA83376601, NTEC has improved its recordkeeping and we have reconciled all costs.
Note 3
For Agreement XA97913701, NTEC will properly classify $5,553 in travel and meeting
expenses to the indirect costs allocation pool once approved by EPA to make the change. Our
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business manager has waited for completion of this audit and approval from EPA to make these
reclassifications.
Unsupported Personnel Costs
The finding was that NTEC did not maintain supporting documentation for distributing its salary
costs to agreements as required by federal regulations.
Note 1
Prior to January 14, 2006, NTEC required employees to record total hours worked for each pay
bi-weekly period, and NTEC allocated personnel costs based on budgeted percentages. We
understand this was not in compliance with Title 2 CFR Part 230. For compliance, NTEC would
need to review and amend timesheets to reflect actual activity for each employee during each pay
period. However, there would be difficulties to accomplish this task due to staff turnover.
Employees from that time period are no longer employed by NTEC, and thus are not available to
assist with this task. It may be possible to reconstruct timesheets for an employee that was
associated with a single program. However, it would be difficult to reconstruct timesheets for
any employee who was associated with more than one program. A possible method to
reconstruct these timesheets would be to convert the allocated percentages to hours, and then
record the hours for each employee on a revised timesheet that can account for single- or multi-
program activities. If this method is acceptable, we would make the appropriate changes.
Note 2
NTEC modified its employee timesheets after January 15, 2006 to account for the program
activities and hours for each employee. NTEC employees have been using detailed timesheets
since 2006, and improvements have been made in the timesheet format in each year since then.
NTEC has entered the actual hours as labor costs as indicated on timesheets for FY 2006 in the
accounting system, and NTEC has completed entries for actual hours as labor costs for
approximately 60 - 70 percent of the timesheets for FY 2007 and 2008.
The business manager is the only NTEC employee who makes entries in our QuickBooks
financial software, and the task for making retroactive changes is his responsibility. He began
work in 2006 at NTEC, and his focus on retroactive changes started with the time for which he
has direct knowledge. The business manager is performing these retroactive changes while he is
carrying out his duties for current and ongoing administrative tasks. This is a heavy
administrative burden.
For FY 2009 and 2010, NTEC has documented employee time and activities on timesheets that
meet the requirements specified in Title 2 CFR Part 230. We reviewed our Financial Handbook
and made revisions to ensure that we are properly accounting for and documenting employee
activities. Accordingly, we developed an improved timesheet to allow employees to document
their activities and hours on a bi-weekly basis. We have also trained employees how to use the
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new timesheets. We require directors and managers to oversee proper use of timesheets and to
approve timesheets for each payroll period. This procedure ensures that payroll matches the
activities and hours recorded on the timesheets.
Inequitable Allocation of Employee Paid Leave
NTEC did not exclude paid absences from direct salary costs for certain periods since FY 2004.
As stated in the audit findings, the FY 2004 indirect agreement certified that paid absences were
to be included in employee fringe benefits rate and not included in direct cost of salaries or
wages.
The FY 2004 final indirect cost agreement was approved retroactively in July 2006. The
accounting firm and NTEC staff who prepared and submitted that indirect proposal are no longer
associated with NTEC. By the time the agreement was approved in 2006, NTEC had hired a
new business manager. He was not briefed nor familiar with the element that specified paid
absences were to be treated as indirect costs. Likewise, new managers hired later were not aware
of the requirement.
During the course of this audit, NTEC learned of the requirement to treat paid absences as
indirect costs. The business manager has taken steps to revise the financial records to reflect this
requirement. His efforts began with the period for which he has direct knowledge, starting in
2006. At this time, the business manager has completed his adjustments for 2006. He has
completed approximately 60 - 70 percent of the entries for 2007 and 2008. Again, the business
manager is completing these tasks while performing his regular duties for current and ongoing
administrative tasks. His work will continue to revise the financial records for 2004 and 2005,
and through the present time, so that employee paid absences will be correctly treated and
recorded as indirect costs.
Procurement Did Not Comply with Standards
General Comment
NTEC management has taken measures to ensure that our procurement follows our own
organizational policies and applicable federal laws, regulations and policies. The NTEC
Financial Handbook was revised to clarify and strengthen policies and procedures, particularly
with regard to procurement. The revised financial handbook and applicable OMB Circulars and
CFRs have been provided to program directors and managers for guidance when obtaining goods
and professional services. The business manager is involved in all procurement and he provides
guidance during the process to ensure compliance and proper documentation.
No Cost or Price Analysis
NTEC did not explicitly prepare and document cost or price analyses for contracts awarded to
E.H. Pechan and Associates, Katahdin Consulting, and Northern Arizona University. For the
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contract that was ultimately awarded to E.H. Pechan, NTEC solicited bids through an RFP
process. Tribal representatives who were partners in the Western Regional Air Partnership were
integrally involved in the selection process. Pechan was selected based on its qualifications and
competitive costs in relation to other bids. For the Katahdin contract, no explicit cost analysis
was completed. The NTEC WRAP Tribal Co-Director selected the contractor based on his
knowledge of the WRAP project and requisite skills to work with Alaska Native Villages, and
for being based in Anchorage, Alaska. For communication and outreach services, the Katahdin
contract seemed reasonable and was a preferred option to hiring a part-time or full-time
employee. Moreover, the tribal partners in the Western Regional Air Partnership approved the
scope of work and contract costs for Katahdin, and provided oversight for the work that was
performed with and among Alaska Native Villages. As noted in the audit findings and notes,
NTEC continued the contract with Northern Arizona University as it was transferred from the
Western Governors' Association (WGA). We asked for documentation from WGA about its
selection of the Northern Arizona University and its Institute for Tribal Environmental
Professionals (ITEP), but our communication only yielded assurances that Northern Arizona
University ITEP was selected on the basis of its unique qualifications and strong performance
record in the field of air quality technical services and Indian Tribes. Like WGA, we sole-
sourced the ITEP contract because there was no other legitimate candidate to perform the work
with expertise and credibility with Indian Tribes in the Western United States. Additionally, the
WRAP tribal partners were satisfied with work performance, and continued to approve of their
work in annual workplans. We believe the ITEP rates and contract costs were reasonable, the
organization was uniquely qualified, and the contract was reviewed regularly and sanctioned by
the tribal partners in the Western Regional Air Partnership.
Lack of Contract Documents to Support Costs
We were unable to find supporting documentation for the Bearhawk contract. A search of vendor
records maintained in our onsite files was unsuccessful. All offsite records were retrieved from
Iron Mountain facilities and thoroughly searched. That search was also unsuccessful. We cannot
locate documents pertaining to the Bearhawk contract.
We have taken steps to collect, inventory, and maintain contract files and organizational records
as specified in our organizational Records Retention Policy. We have conducted training on this
policy and require managers and directors to safeguard all records, particularly contract and
financial records. We are striving to prevent the loss of any other records.
For use in administrative and program related duties, we distributed an electronic copy of our
Financial Handbook to directors and managers. Our financial handbook contains the Records
Retention Policy and guidance for Vendor Files and Required Documentation.
Other Costs
Conference Reimbursement
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The finding was that NTEC did not properly credit Agreement XA8320011 for a reimbursement
from Northern Arizona University (NAU) for conference expenses. In our records, we found
that NTEC credited this agreement on July 31, 2007 for a reimbursement of $33,731.97. The
transaction was Journal Entry 240. A record of this entry is attached.
Incorrectly Allocated Costs to Agreements
A total of $9,405 was incorrectly charged to Agreement XA97913701. As outlined in Notes 1, 2
and 3, these errors were for advertising expenses, general expenses, and travel and meeting
expenses. Subject to approval by EPA, we propose to make adjustments to the Agreements and
correctly allocate the costs.
Unsupported Rental Costs
The current managers at NTEC were not on staff when the WRAP Tribal Co-Director was hired.
We acknowledge the terms of the agreement, and have continued to provide for such rental costs.
However, we have not located the Personnel Action Form (NTEC's internal document, referred
to as PAF) that would have memorialized the agreement made by the former executive director
to pay rent for a satellite office for the Tribal Co-Director. If approved by EPA as a corrective
action, we will prepare a PAF to complete the employee record for the WRAP Tribal Co-
Director. The PAF will also contain an explanation of the basis for agreement to compensate for
office rent and utilities, and include all terms of the agreement.
Reporting
Annual Single Audit Report Not Completed Timely
NTEC agrees with the finding. We understand that we are required to complete and file our
single audit reports with the Federal Audit Clearinghouse nine months after the end of our fiscal
year. As we have commented in the Indirect Costs section above, we are striving to complete
our CY 2006, 2007 and 2008 single audits. Our auditor is nearing completion of the CY 2006
audit. We expect this audit to be completed by the end of November 2009. We have retained a
new auditor to expedite the completion of the CY 2007 and 2008 audits, which will start in late
November 2009. Our new auditor understands the importance for completing these audits
expeditiously as it pertains to compliance with OMB Circular A-133 but also to facilitate
completion of indirect cost rate proposals. For the CY 2009 audit, we plan to further engage our
new auditor after he completes the 2007 and 2008 audits.
Financial Reports Not Prepared/Submitted Timely
NTEC agrees with the finding. As noted in the audit comments, NTEC is no longer outsourcing
the preparation of FCTRs and FSRs reports. The business manager has assumed full
responsibility for preparation and completion of these reports, and has submitted past reports.
NTEC will strive to comply with the reporting requirements as specified in award documents in
agreements and also provided in relevant CFRs.
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Appendix C
EPA Grants and Interagency Agreements
Management Division Response
January 14, 2010
MEMORANDUM
SUBJECT: Response to Draft Attestation Report
National Tribal Environmental Council, Inc.
Incurred Cost Audit of Three EPA Cooperative Agreements
Assignment No. OA-FY08-0243
FROM: Denise Sirmons, Deputy Director/s/
Office of Grants and Debarment
TO: Janet Kasper, Director
Contract and Assistance Agreement Audits
Thank you for the opportunity to review and comment on the subject Office of Inspector General
(OIG) Draft Attestation Report (Report), dated August 31, 2009. You specifically requested that
EPA respond to the findings and recommendations in Chapter 4 of the Report.
Based on our review, we generally agree with the findings and recommendations in Chapter 4.
Consistent with Recommendation 4-1, we will work with Region 9 to ensure the development of
(a) work plans that identify goals and objectives for the recipient's activities to support the
Western Regional Air Partnership and the National Tribal Air Association, and (b) performance
reports that include a comparison of accomplishments with goals and objectives in the work
plan.
Our thanks again for the opportunity to comment on the draft Report. If you have any questions
concerning this matter, please contact me at 202-564-6771 or LaShaun Phillips, Audit Follow-up
Coordinator, at 202-564-0956.
cc: Leah Nikaidoh, OIG
Rich Henneckest
Denise Polk
LaShaun Phillips
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Appendix D
EPA Region 9 Response
ytw>
Z \
January 8, 2010
MEMORANDUM
SUBJECT: Attestation Report:
National Tribal Environmental Council, Inc., Incurred Cost Audit of Three EPA
Cooperative Agreements
Assignment No. OA-FY08-0243
Lorretta Barsamicm, Deputy Director, for
FROM: Nancy Lindsay /s/
Assistant Regional Administrator
Management and Technical Services Division (MTS-1)
TO: Janet Kasper
Contract and Assistance Agreement Audits
Thank you for the opportunity to review the Draft Attestation Report - National Tribal
Council, Inc., Incurred Cost Audit of Three EPA Cooperative Agreements, dated August 31,
2009. The Region has reviewed the report and has no significant comments on its factual
accuracy or recommendations. We agree with the recommendations in chapter and will work
with the recipient to develop (a) work plans that identify goals and objectives for the recipient's
activities to support the Western Regional Air Partnership and the National Tribal Air
Association, and (b) performance reports that include a comparison of accomplishments with
goals and objectives in the work plan.
Per EPA Order 2750, please let me know within 15 calendar days whether you find this
response acceptable. Should you or your staff have any comments, questions, or concerns,
please contact Rich Hennecke, Regional Audit Follow-up Coordinator at (415) 972-3760.
cc: Leah Nikaidoh, OIG
Rich Hennecke (MTS-4-2)
Veronica Adams (MTS-7)
Roy Ford (AIR-8)
bcc: LaShaun Phillips, GAD (3903)
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION 9
75 Hawthorne Street
San Francisco, CA 94105
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Appendix E
Distribution
Director, Grants and Interagency Agreements Management Division (Action Official)
Regional Administrator, Region 9 (Action Official)
Director, Office of Grants and Debarment
Agency Follow-up Official (the CFO)
Agency Audit Follow-up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Audit Follow-up Coordinator, Office of Grants and Debarment
Audit Follow-up Coordinator, Region 9
Public Affairs Office, Region 9
Executive Director, National Tribal Environmental Council, Inc.
Acting Inspector General
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