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Semiannual Report to Congress
April 1-September 30, 1995
Section 4 -- Fraud Prevention And Management Improvements
This section describes several activities of the Office of Inspector General to promote economy and efficiency and to prevent and detect fraud, waste, and abuse in the administration of EPA programs and operations. This section includes information required by statute, recommended by Senate report, or deemed appropriate by the Inspector General.
Review of Legislation and Regulations
Section 4(a)(2) of the Inspector General Act of 1978, as amended, directs the Office of Inspector General to review existing and proposed legislation and regulations relating to Agency programs and operations to determine their effect on economy and efficiency and the prevention and detection of fraud and abuse. During this semiannual period, we reviewed four legislative and 74 regulatory items. The most significant items reviewed are summarized below.
Proposed Clean Water Act
Section 520 of the proposed Clean Water Act, H.R. 961, provides for the creation of a Board of Audit Appeals. This board would review and decide contested audit determinations related to grant and contract awards.
We reviewed the proposed bill and expressed strong opposition to this provision. If implemented, we believe this Board of Audit Appeals would be costly and bureaucratic. We commented that the board is unnecessary and duplicates other time-tested procedures for settling disputes arising out of audits. For example, EPA has a streamlined appeals process for the soon to be closed out construction grants program, and the Federal Acquisition Regulation contains disputes provisions for contracts.
Superfund Reporting and Audit Requirements
As the Congress considers reauthorization, we recommended revision of certain sections of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), as amended by the Superfund Amendment and Reauthorization Act. First, we recommended reconsideration of the annual audit and reporting requirement of section 301 (h), which requires EPA to annually report its progress in implementing CERCLA and for the OIG to audit the report for reasonableness and accuracy. We pointed out that many sections of the current report could be eliminated because the information is available elsewhere, and recommended removing the audit requirement for the report because of the extensive auditing of the financial and performance aspects of Superfund.
We also recommended eliminating the audit requirements of section 111 (k) and allowing the OIG to use discretion in auditing Superfund. We commented that the annual audit of: the Trust Fund has been superseded by the annual requirements of the Chief Financial Officers Act; the audit of response claims is excessive because there have been few claims; a sample of cooperative agreements should be made discretionary; and the audit of remedial investigation/feasibility studies is too narrow because the program has moved more into the construction phase while streamlining the study phase.
Finally, we commented that the OIG's annual reporting requirement duplicates the semiannual reporting requirement of the IG Act.
Federal Acquisition Regulation (FAR) Revision on Continuing Payments to Suspect Contractors
While we generally agreed with the intent of this proposed revision to the FAR, which involved fraud remedies for civilian agencies pursuant to the Federal Acquisition Streamlining Act of 1994, we strongly disagreed that an Agency head should consider factors, such as the financial condition of the contractor, when determining whether to reduce or suspend payments for suspected fraudulent activities. In our view, if there is substantial evidence that a contractor's request for payment was based on fraud, an Agency head should take immediate action to suspend or reduce further payments.
Our comment was not adopted in the final rule published on September 26, 1995.
Draft Policy on Project Officer Roles and Responsibilities in the Administration of Grants and Cooperative Agreements
We reviewed the Agency's draft policy and expressed concern that the pre-application phase appeared to promote extensive interaction between the Project Officer (PO) and prospective recipient before determination that the award will be subject to competition. Although such interaction may be necessary when sole source awards are justified, we expressed concern that extensive interaction would be inappropriate if the award is competed. Since we believe that competitive awards should be made to the extent possible, we recommended that the document require POs to encourage competition and to document why a sole source award is justified.
We also recommended that POs be required to obtain or submit independent reviews of internal and external proposals over $500,000; ensure that the grantee takes action to correct deficiencies; and document decisions made about equipment disposition at closeout. Regarding recipient performance, we suggested that a statement be added that "egregious situations should be considered for suspension and debarment action."
The Agency revised the policy to our satisfaction.
Draft Implementation Order to Streamline Small Grants
We did not concur because the order did not clearly specify what is expected of grant recipients and how they will be held accountable. We recommended that the policy be revised to clarify payment policy, terms, and conditions; indicate the regulations and other documents applicable to each type of recipient; and require grantees to identify specific work objectives and expected outcomes and to provide a final report addressing the extent to which the objectives were achieved.
EPA Delegation 1-16: Agency Chief Financial Officer/Accounting, Budgeting And Other Financial Activities
We did not concur with the proposed delegation of authority to provide general accounting and fiscal services, and to establish, review and enforce internal control policies, standards and compliance guidelines because it did not redelegate authority to the Agency's Senior Resource Officials (SROs). The SROs have primary responsibility for sound financial management practices.
The Financial Management Division revised the delegation to address our primary concerns. In withdrawing our non-concurrence, we expressed concern that the Agency still has not clearly defined the knowledge, skills and abilities for selecting SROs.
Draft Flexiplace Program Guidance
We agreed that the Flexiplace program can be useful to the Agency and its employees, but only if there is a clear benefit to the Agency and adequate controls are in place to protect the integrity of the Agency's resources. Specifically, we recommended that the program be restricted only to those situations which would not impede a supervisor's ability to assure accomplishment of Agency work, respond to customer needs, and protect Agency resources and records. We also expressed serious concern over the increased opportunity for abuse in several areas. Accordingly, we recommended that the employee certify that his/her time reporting is accurate and that the supervisor certify that reasonable action has been taken to verify the information. We also recommended that the policy include a periodic Agency review of the Flexiplace program to assure that abuses are not occurring and that the work effort is not adversely impacted.
Suspension and Debarment Activities
EPA's policy is to do business only with contractors and assistance recipients who are honest and responsible. EPA enforces this policy by suspending or debarring contractors, assistance recipients, or individuals within those organizations, from further EPA contracts or assistance if there has been a conviction of, or civil judgment for:
commission of a fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public contract or subcontract;
violation of Federal or State antitrust statutes relating to the submission of offers;
commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making a false statement, or receiving stolen property; or
commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor or subcontractor.
A contractor may also be debarred for violating the terms of a Government contract or subcontract, such as willful failure to perform in accordance with the terms of one or more contracts, or a history of failure to perform, or of unsatisfactory performance on one or more contracts. A contractor may also be debarred for any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor. Thus, a contractor need not have committed fraud or been convicted of an offense to warrant being debarred. Debarments are to be for a period commensurate with the seriousness of the cause, but generally do not exceed 3 years.
The effectiveness of the suspension and debarment (S&D) program has been enhanced by regulations that provide all Federal agencies a uniform system for debarring contractors from receiving work funded by Federal grants, loans, or cooperative agreements. The system, required by Executive Order 12549, provides that a non-procurement debarment or suspension by one agency is effective in all agencies and requires the General Services Administration to publish monthly "Lists of Parties Excluded from Federal Procurement or Non-procurement Programs." Formerly, a non-procurement debarment was effective only in the programs administered by the debarring agency, and each agency maintained its own list. The EPA Suspension and Debarment Division in the Office of Grants and Debarment operates the S&D program at EPA. The OIG assists the EPA S&D program by providing information from audits, investigations, and engineering studies; and obtaining documents and evidence used in determining whether there is a cause for suspension or debarment. During this period, cases with direct OIG involvement led to 9 debarments, 7 suspensions, and two compliance agreements, a total of 18 actions.
The most significant are summarized below:
On July 3, 1995, EPA suspended James B. Speer, project manager of Olympic View Environmental Review Council (OVER-C), a non-profit organization and recipient of EPA Technical Assistant Grant funds. Also suspended for apparent involvement was Cassandra Wohlgethan, Speer's live-in girlfriend. Mr. Speer's sentencing is reported on page(36).
On July 3, 1995, EPA suspended William R. Maxon, Site Manager and Craig V. Wright, Site Foreman of Riedel Environmental Services, Inc. (RES) at the Sharon Steel Superfund Site. EPA's investigation substantiated that Maxon and other RES employees stole approximately $2,000 worth of copper from the site and that Maxon used RES equipment and employees to do personal work at his residence, charging the costs to the EPA contract.
On May 18, 1995, EPA debarred Brad's Asbestos Removal, Inc. (BAR) for a period of two years. Officers of BAR defrauded EPA by participating in a scheme whereby they and another individual caused to be submitted, under BAR's name, false claims to Fairbury, Nebraska, Public Schools, which received financial assistance from EPA under the Asbestos School Hazard Abatement Program.
On May 9, 1995, EPA entered into a four-year compliance agreement with previously debarred Steven Miller, Vice President of Ekotek, who ordered an employee to falsify a hazardous waste manifest and admitted to conspiring to violate the Clean Air Act, the Resource Conservation and Recovery Act and the Clean Water Act. As part of the agreement, Miller: Signed a "Declaration of Environmental Commitment" and a "Statement of Ethics" which committed him to a minimum of three ethics training courses; agreed not to engage in retaliatory behavior against any employee who cooperates with the Government; agreed to allow EPA S&D auditors access to any business in which he has waste disposal or handling responsibilities; committed to take at least three environmental training courses; agreed to cooperate with EPA S&D Division's performance of discretionary audits, at his owm expense, to confirm compliance with the Agreement; and committed to pollution prevention policies.
On April 24, 1995, EPA entered into a compliance agreement with Harry J. Kring, who was convicted of negligently violating the Clean Water Act and making a false statement to EPA. Mr. Kring agreed to several conditions, including voluntarily excluding himself from all Federal procurement or non-procurement programs for 18 months and to report to EPA anytime he changes employers, including changing positions with his employer, AT&T Reading. Mr. Kring's conviction was discussed in our September 30, 1994, semiannual report.
OIG Management Initiatives
Reinventing Offices of Inspector General
The EPA OIG has continued the process of reinvention by carefully examining the administrative functions and processes of our organization. We are particularly identifying administrative activities that are performed at more than one location with an emphasis on eliminating any unnecessary duplication. We have also examined all of our operational costs and expenses, looking for opportunities and alternatives for savings. As a result we are restructuring our Headquarters organization and functional responsibilities to accrue improved efficiency by reducing Headquarters staff and reassigning personnel to our core audit and investigative functions.
Also in response to other actions we previously identified as needed to bring our streamlining initiatives to fruition, OIG staff have begun conducting Team Effectiveness/Team Leadership seminars. These seminars are designed to help the OIG develop self-guided teams with a strong emphasis on customer service.
OIG Prepares To Expand In-House Training Capabilities
As part of our streamlining efforts, and capitalize on talents of our staff the OIG has established an academy of instructors to conduct in-house developed training. This training will be designed to meet the specific mission related needs of the OIG. Forty candidates from headquarters and field offices of audit, investigation, and management were identified. Fourteen of the candidates received on-site instructor training September 19-21, 1995. Also as part of the reinvention of our training program, we are providing cooperative training to EPA.
TRAINING
OIG Developed Courses
Statistical Sampling Training
This course was designed to provide guidelines for the use of statistical sampling in EPA audits. The emphasis is on instructions for auditors who need to carry out elementary sampling procedures in connection with their auditing activities, with some additional direction for those who encounter more difficult sampling problems and need references to more complete sources. This course was presented during this semiannual period in Washington, DC.
Ethics and Conflict of Interest
This program is designed to provide each participant with a better understanding of conflict-of-interest laws and EPA standards of conduct.
OIG Orientation for New Employees
An orientation session for new OIG employees was held at Headquarters in Washington D.C. June 13-15, 1995. The Inspector General provided opening remarks and, on the last day, the Deputy Inspector General spoke to the group. Each AIG and his managers presented an overview of their office. The objective of the orientation was to help new employees become familiar with the functions and organization of the OIG and quickly become part of the OIG team.
Investigative Techniques Training
During this semiannual period, 42 OIG special agents began an 80 hour course in investigative techniques at the Federal Law Enforcement Training Center (FLETC), Glynco, Georgia. The course included arrest techniques, firearms instruction, defensive tactics, a legal refresher, and CPR training.
The Brown Bag Institute of Learning
As part of our effort to do more in-house training, we continued a lunchtime training program called the Brown Bag Institute of Learning. This program, hosted by various OIG managers, features videotapes, case studies, discussions, and presentations by experts on subjects pertinent to OIG work.
During this reporting period, we presented "Changes to the Government Auditing Standards" for auditors, investigators, and managers. Patrick McNamee, Assistant Director, GAO's Accounting and Information Management Division, was the instructor/facilitator. Mr. McNamee focused his presentation on general, financial, and performance audit standards.
Basic Lotus Notes Concepts
This course was designed to provide the student with an understanding on how to navigate within the Lotus Notes workspace, compose and view documents in a database, and use Notes mail. The OIG is adopting Lotus Notes for management of correspondence.
President's Council on Integrity and Efficiency
Study of Federal Credit Management and Debt Collection
We participated in this effort which was led by the Department of Veterans Affairs OIG (VA-OIG). The Office of Management and Budget (OMB) requested this review to update and expand on a similar 1989 study of Federal credit management and debt collection issues. We assisted the VA-OIG in its review by providing statistical information on EPA's accounts receivable and summaries of the results of our audit work in the area. We also provided our ideas, as well as those of the staff of the EPA Chief Financial Officer, on ways to re-engineer and better carry out credit management activities. The final report on this review was issued to OMB July 31, 1995.
Information in the report is intended to foster further discussion at the policy-making levels of government on how to best collect amounts owed to the Federal government and on a special PCIE working group to develop draft standard performance measures for Federal Offices of Inspector General. The purpose of this ongoing project is to define output and outcome measures of OIG efficiency and effectiveness in relation to the recently published OIG Vision Statement and Strategies to Apply Reinvention Principles. OIGs also must develop and report on performance in relation to budgetary requests and strategic plans in compliance with the requirements of the Chief Financial Officers Act of 1990 and the Government Performance and Results Act of 1993.
Committee on Integrity and Management Improvement
The Committee on Integrity and Management Improvement (CIMI) was established in 1984 by EPA Order 1130.1 to coordinate the Agency's effort to minimize the opportunities for fraud, waste, and mismanagement in EPA programs and activities. CIMI strives to continually increase employee awareness and understanding of various Agency policies and procedures. The Committee is composed of senior EPA program and regional officials and is chaired by the Inspector General.
Employee Suitability Determinations and Security Clearances
Every position in the Federal Government is subject to suitability considerations. Personnel security investigations conducted by the Office of Personnel Management are the primary means for determining suitability for Federal employment. All employees must be investigated. A National Agency Check and Inquiries, which includes law enforcement checks, verification of claimed college degrees, and employment and reference checks, is the minimum investigation required. A more extensive investigation must be done for sensitive positions, which require access to national security information. Employees in sensitive positions must obtain a security clearance, which is an authorization for access based on a background investigation and a determination of trustworthiness. CIMI developed this bulletin to inform Agency employees of what factors affect suitability for Federal employment and to heighten awareness of the types of investigations required for EPA employment, particularly those for sensitive positions.
Public Service Recognition Week
To show appreciation for and recognize EPA employees, CIMI sponsored a series of events during the ninth annual Public Service Recognition Week. A special ceremony was held to honor the recipients of the EPA Employee Recognition Award for outstanding community service. Inspector General John Martin was master of ceremonies; Roger Johnson, Administrator of the General Services Administration was the keynote speaker; and various EPA employees provided musical entertainment. Following the ceremony, Administrator Carol Browner hosted a reception for the award winners.
Customer Satisfaction Questionnaire
During this period, CIMI issued its first customer opinion survey to determine whether the Committee is meeting its objective of increasing employee awareness and understanding of various Agency policies and procedures. Approximately 300 responses were analyzed. The information obtained helped to identify areas of interest to OIG employees and provided a measure of CIMI's effectiveness. Similar surveys will be issued periodically to obtain customer input.
Hotline Activities
The OIG Hotline opened 24 new cases and completed and closed 19 cases during the reporting period. Of the cases closed, 4 resulted in environmental, prosecutive, or administrative corrective action, while 15 did not require action. Cases that did not have immediate validity due to insufficient information may be used to identify trends or patterns of potentially vulnerable areas for future review. The Hotline office also referred 2,745 telephone callers to the appropriate program office, state agency, or other Federal agency for assistance.
The following are examples of corrective action taken as a result of information provided by the OIG Hotline.
A complainant alleged that an EPA employee failed to charge leave and used the Government travel card for personal expenses. An inquiry substantiated the allegations. The travel card was cancelled, the employee received a formal letter of reprimand, and was required to repay 124 hours of annual leave.
A complainant alleged that regional employees, who had been assigned government vehicles for official business, were using them primarily for commuting. A special review revealed that the allegation had merit. As a result, the Region was to (1) develop criteria for determining which employees need vehicles, and (2) conduct a determination of need on a semiannual basis.
A complainant alleged various environmental concerns, including spills from oil drums, erosion, and possible degradation of a wetland. The North Carolina Division of Land Resources required the company to clean up the environmental damage found.
Created December 23, 1996