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Interim Audit of Cooperative Agreement Number CR818689 Clark Atlanta University

Executive Summary

#5100526

PURPOSE

At the request of the Environmental Protection Agency (EPA), Office of Research and Development (ORD), we performed an interim audit of Cooperative Agreement No. CR818689 (CA), awarded to Clark Atlanta University (CAU) to establish the Center for Environmental Policy, Education, and Research (CEPER). CAU proposed to create CEPER under a congressional earmark of EPA's Superfund appropriation. ORD expressed concerns related to the progress of CEPER and CAU's use of CA funds.

Audit objectives included:

An evaluation of CEPER progress and accomplishments;

An assessment of CAU compliance with CA terms and applicable laws and regulations; and

A determination of the allowability of costs claimed.

BACKGROUND

CAU proposed to create CEPER under a congressional earmark of EPA's Fiscal Year (FY) 1991 Superfund appropriation. Subsequent earmarks continued funding for CEPER in FYs 1992, 1993, and 1995. Superfund appropriation language for the FYs 1991 and 1992 earmarks funded "Superfund research" at CAU while appropriations for FYs 1993 and 1995 earmarks funded the CAU "Hazardous Substance Research Center." In 1994, there was no earmark for CEPER but EPA included CEPER in its Superfund base budget in order to increase its research support of minority institutions. As of the end of FY 1994, CAU had received over $10.7 million of earmark and base funding for CEPER.

EPA provided the funding for CEPER to CAU with a noncompetitively awarded CA. EPA awarded the CA to CAU on September 23, 1991. The CA had a five-year project period (October 1991 - September 1996) and the following purpose:

Center for Environmental Policy, Education, and Research (CEPER) - Develop a sustainable environmental center conducting multi-disciplinary educational and research programs, leading to the enhancement of environmental policy, scientific, and socioeconomic knowledge.

EPA awarded the CA under the statutory authority of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 311(d), which authorizes hazardous substance research and education grants to institutions of higher learning and nonprofit organizations.

ORD's Office of Exploratory Research (recently reorganized under the National Center for Environmental Research and Quality Assurance) approved the award of the CA and was responsible for technical review of CAU's proposal for CEPER. EPA's Grants Administration Division (GAD) issued the CA and was responsible for administrative review of CAU's Application for Federal Assistance. EPA staff in ORD served as the EPA Project Officer (PO) for the CA and were responsible for the EPA's management and oversight of the CA.

RESULTS IN BRIEF

CAU had not adequately managed the CA and EPA funds provided for CEPER. Almost four years after award of the CA and the expenditure of millions of dollars of EPA funds, CAU has not formally and physically established CEPER as required in the CA and the 1991 CEPER workplan. CEPER activities, at the time of our review, consisted of a multitude of expenditures for equipment and salaries with no cohesive organization, direction, and oversight to ensure that CEPER was properly established, funds were effectively utilized for CEPER projects, and CEPER's goals and objectives, as set forth in the CA and related 1991 and 1993 CEPER workplans, were being progressively accomplished. Specifically, CAU had not: (1) properly designated a Center Director, administrative offices, and related staff for CEPER; (2) established an advisory board to plan, advise, and monitor CEPER projects; (3) established an external peer review process and obtained an EPA approved Quality Assurance (QA) plan to ensure the quality of CEPER projects and research results; (4) adequately involved the EPA PO in CEPER projects and related expenditures; (5) ensured that CEPER projects directly related to hazardous waste policy, education and research; and (6) effectively managed and controlled CEPER funding and equipment purchased. As a result, CEPER objectives were not accomplished, research of questionable value or outside the scope of the CA was funded, special conditions of the CA were not complied with, and we identified $3,673,041 in costs claimed by CAU for the first two years of CEPER as ineligible or unsupported.

PRINCIPAL FINDINGS

CEPER NOT PROPERLY ESTABLISHED

CAU had not established CEPER as proposed in the CA. CEPER had no formal or physical structure and operated under the complete control of CAU top management. As a result, millions of dollars in EPA funds had been expended without proper control and oversight to ensure that CEPER was properly established and funds were effectively utilized to accomplish the goals and objectives of the CA and the 1991 CEPER workplan. In our opinion, the 1991 CEPER workplan did not properly establish the scope of work for CEPER within the purposes of the CA and the underlying authorizing statute - CERCLA, 311(d), Hazardous Substance Research Centers. As a result, many CEPER projects were inappropriate for funding under the CA.

COOPERATIVE AGREEMENT MISMANAGED

The CA was substantially mismanaged by CAU because CAU management: (1) bypassed CAU's controls and requirements related to CEPER procurements, contracts, and disbursements; (2) disregarded CA special conditions and EPA regulations related to control, oversight, and monitoring of CEPER projects, equipment, and costs; and (3) inadequately budgeted, tracked, and accounted for the use of CA funds. CAU's noncompliance with special conditions and regulations related to submission of progress and financial reports to EPA and EPA PO involvement in project development/approval and advisory board meetings precluded effective EPA oversight of CEPER. We concluded that these deficiencies represented serious weaknesses in CAU's control over CEPER and costs charged to the CA.

ALLOWABILITY OF COSTS NOT ENSURED

CAU did not properly fulfill its responsibility under the CA to establish and maintain an adequate system of controls over CA funds and property and ensure costs claimed were allowable and adequately supported. As a result, material weaknesses were identified in CAU's controls and $3,673,041 of $5,132,757 of costs claimed by CAU for the first CA budget period were determined to be unallowable or unsupported.

RECOMMENDATIONS

EPA needs to require CAU to properly establish CEPER as proposed, review and revise CEPER workplans to ensure CA funds are effectively utilized within the scope of the CA and CERCLA 311(d), and implement adequate controls and oversight for CEPER projects, property, and expenditures. In addition, EPA should take appropriate action to recover the costs questioned as unallowable or unsupported.

AGENCY RESPONSE

GAD and ORD did not comment on the draft report, dated July 31, 1995.

CAU RESPONSE

We sent CAU a draft report, dated July 31, 1995, to which they responded by letter, dated September 21, 1995. We also met with CAU officials on three occasions after the issuance of the draft report in order to discuss our respective positions on the issues reported. This final report represents the OIG's position on the audit issues after careful consideration of CAU's position.

Because of the length and organization of CAU's response, we did not attach a complete copy of the response to this report. Where appropriate, we have inserted summaries of the significant disagreements presented in CAU's response along with our evaluation of CAU's comments. CAU's complete response to the draft report's findings and recommendations are available upon request from the Office of Inspector General.

CAU generally disagreed with the report's findings. CAU agreed with the Chapter 2 and 3 recommendations but disagreed with the Chapter 4 recommendations. CAU asserted that their costs claimed were proper and allowable.

CAU indicated that their purpose for seeking and obtaining a congressional earmark for CEPER was to develop environmental research, education, and policy analysis programs to be housed in CAU's newly constructed Research Center for Science and Technology building. CAU indicated that CEPER has made significant progress towards a sustainable multi-disciplinary environmental research, education, and policy analysis center that meets EPA's Superfund needs. CAU maintained that the infrastructure foundation for a sustainable center has been overwhelmingly achieved. CAU asserted that nobody ever questions the need for infrastructure development at majority institutions and that EPA officials understood and approved of CEPER's focus on infrastructure development.

CAU maintained that CEPER does have a formal/physical structure and that CAU has established one of the largest bases for environmental research, education, and policy among higher education institutions in the country.

CAU indicated that the only difference between CEPER and EPA's five competitively-awarded Hazardous Substance Research Centers was that CEPER is comprehensive and encompasses several projects in the areas of research, education, policy analysis, technology transfer, and outreach.

CAU questioned the scope and methodology of the audit. CAU maintained that all pertinent records were not reviewed, records and information reviewed were misunderstood, inappropriate criteria was applied, and prejudiced conclusions were formed.

OIG EVALUATION OF CAU COMMENTS

Based on the records and information provided by CAU during the audit, we continue to conclude that CEPER was not physically or formally established at CAU. Instead of establishing CEPER, CAU expended CA funds on a multitude of expenditures that represented a CAU agenda that was unrelated to Superfund and the mission of CEPER. That agenda featured generalized infrastructure development, generalized educational support, and generalized outreach support. The benefit of such an agenda to EPA and the Superfund program in a time of scarce EPA resources is questionable.

Although our audit was conducted during the fourth year of CEPER and CAU indicated that the infrastructure development of CEPER was largely complete, we found that several critical components of any center (e.g. advisory board, external peer review process, Center Director, QA plan, and individual project budgets) had not yet been established or implemented by CAU. Also, because CAU has serious internal control weaknesses that need to be addressed through the Single Audit process, we believe that CAU's management of the CA funds was inadequate.

We did not find CAU's comments to be supported by their records. Although we made numerous record requests during the audit, including issuing a Demand Letter for all project records, CAU's comments allude to records which they believe we have not seen. Since our audit is complete, we advised CAU to provide such documentation to the EPA action official for consideration in resolution of the audit report.

Created December 3, 1996

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