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Early Warning Report:

Not Following Internal Controls 

Put Acquisitions at Risk

Report No. 15-P-0007 October 29, 2014

U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

U.S. Chemical Safety Board 
Report Contributors: Andrés Calderón

Michael D. Davis

Marcia Hirt-Reigeluth

Cara Lindsey

Gloria Taylor-Upshaw

Abbreviations

CAA Clean Air Act

CSB U.S. Chemical Safety and Hazard Investigation Board

EPA U.S. Environmental Protection Agency

FAR Federal Acquisition Regulation

IG Inspector General

OIG Office of Inspector General

OMB Office of Management and Budget

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15-P-0007

October 29, 2014

Why We Did This Review

The U.S. Environmental 

Protection Agency (EPA), 

Office of Inspector General 

(OIG), received a hotline 

complaint about a U.S. 

Chemical Safety and Hazard 

Investigation Board (CSB)

contract awarded for about

$1 million. In response to the 

complaint, the OIG initiated an 

audit to determine whether 

CSB effectively manages its 

contracts. The EPA Inspector 

General is also the Inspector 

General for CSB. While our 

audit work continues, this early 

warning report addresses 

issues of concern that we 

believe need immediate 

attention. 

This report addresses the 

following CSB goal:

 Preserve the public trust by 

maintaining and improving 

organizational excellence.

Send all inquiries to our public 

affairs office at (202) 566-2391

or visit www.epa.gov/oig.

The full report is at:

www.epa.gov/oig/reports/2014/ 

20141029-15-P-0007.pdf

Early Warning Report: Not Following Internal Controls 

Put Acquisitions at Risk

What We Found

CSB did not implement internal controls designed to 

ensure that acquisitions (interagency agreements, 

contracts and purchase orders) over $50,000 receive 

Board approval. In addition, CSB did not maintain 

records in its acquisition files. Our findings indicated 

the following:

 CSB had 14 acquisitions over $50,000 that did not obtain the required 

Board approval. In addition, we identified one contract that had

modifications totaling over $100,000 that were not Board approved.

 CSB did not record its market research actions for two contracts that 

totaled over $380,000. 

 CSB did not record its quality assurance surveillance plan actions for 

seven sampled contracts that totaled over $1.4 million.

By not following internal controls defined in Board orders, the CSB put funds at 

risk. In addition, by not recording its compliance with federal acquisition 

regulations, CSB acquisition files show limited evidence that the agency has 

awarded contracts that are the best value for the government and that the 

agency has received goods and services for which it paid.

Agency Positions

There were dissenting views within CSB. A management official stated, 

“...B[oard] O[rder] 028 has been removed from the CSB’s website, and the 

agency is currently reviewing the order to determine which provisions remain 

legally operative. Provisions of the Order requiring Board [‘]approval[‘] for the 

awarding of contracts, functions, other activities required by law, or other valid 

executive agency requirements, are not in force.” A Board member stated 

“...Board Order 28 can be modified but any modification would be subject to 

Board approval. Also, “...[u]nilateral invalidation of Board Order 28 not only 

touches contracting issues but also impacts the core issue of agency 

governance.”

CSB stated it registered all contracts over $150,000 in the Contractor 

Performance Assessment Reporting System database and developed forms for 

documenting market research and quality assurance. In addition, it stressed 

quality assurance surveillance in its contracting officer representative training 

held in June 2014.

U.S. Environmental Protection Agency

Office of Inspector General

At a Glance

Over $1.9 million in 

CSB acquisitions are 

at risk because the 

Board did not approve

the acquisitions.
October 29, 2014

The Honorable Rafael Moure-Eraso, Ph.D. 

Chairperson and Chief Executive Officer 

U.S. Chemical Safety and Hazard Investigation Board

2175 K Street, NW

Suite 400

Washington, D.C. 20037-1809

Dear Dr. Moure-Eraso:

The U.S. Environmental Protection Agency, Office of Inspector General, is conducting an audit to 

determine whether the U.S. Chemical Safety and Hazard Investigation Board (CSB) effectively manages

its contracts (Project No. OA-FY13-0300). This early warning report provides information obtained 

during preliminary research, when we identified internal controls, reviewed acquisition files and 

interviewed staff. While we continue our ongoing audit of CSB’s contract management, we believe the 

Board should immediately address the internal control issues discussed in this early warning report.

Sincerely,

Arthur A. Elkins Jr.

cc: Mr. Mark Griffon 

 Board Member, U.S. Chemical Safety and Hazard Investigation Board

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

THE INSPECTOR GENERAL
Early Warning Report: Not Following 15-P-0007

Internal Controls May Put Acquisitions at Risk 

Table of Contents

Purpose...................................................................................................................... 1

Background ............................................................................................................... 1

Audit Delays ....................................................................................................... 1

Federal Requirements ........................................................................................ 1

CSB Requirements............................................................................................. 2

Scope and Methodology........................................................................................... 3

Results of Review ..................................................................................................... 3

Conclusion ................................................................................................................ 4

Appendices

A CSB Response to OIG Discussion Document 

and OIG’s Evaluation ....................................................................................... 5

B Distribution ....................................................................................................... 8
15-P-0007 1

Purpose

The Office of Inspector General (OIG) received a hotline complaint about a U.S. 

Chemical Safety and Hazard Investigation Board (CSB) contract awarded for 

about $1 million. In response to the complaint, the OIG initiated an audit to 

determine whether CSB effectively manages its contracts.

Background

CSB is authorized by the Clean Air Act (CAA) Amendments of 1990 and 

established under U.S. Code (42 U.S. Code Section 7412(r)(6)); it began 

operating in 1998 as an independent federal government organization. Board 

members are presidentially appointed and confirmed by the U.S. Senate. Since 

fiscal year 2004, the Inspector General (IG) for the U.S. Environmental Protection 

Agency has also been the IG for CSB. The CAA (42 U.S. Code §7412(r)(6)(N)) 

provides an exemption for contracting that states: “The Board is authorized to 

establish such procedural and administrative rules as are necessary to the exercise 

of its functions and duties. The Board is authorized without regard to section 5 of 

title 41 [Advertising] to enter into contracts, leases, cooperative agreements or 

other transactions as may be necessary in the conduct of the duties and functions 

of the Board with any other agency, institution, or person.”

Audit Delays 

We notified CSB about the start of this project in June 2013; it proposed that the 

review start at the end of the fiscal year due to staff working on several highpriority projects. The IG granted an extension to September 2013; we notified the 

CSB that the project would resume in December 2013. In November 2013, prior

to the start of the project, CSB proposed that the review start the first week of 

February 2014 due to work on other audits and conflicts with vacations and 

competing priorities. The IG granted a second extension; no further delays were 

approved. We resumed this project in February 2014.

Federal Requirements 

Federal requirements and guidance address contracting processes and internal 

controls.

The Federal Acquisitions Regulation (FAR) Part 10: Market Research, states in 

Section 10.001 – Policy), that “(a) Agencies must— ...(2) Conduct market 

research appropriate to the circumstances—(i) Before developing new 

requirements documents for an acquisition by that agency; (ii) Before soliciting 

offers for acquisitions with an estimated value in excess of the simplified 

acquisition threshold;... (v) Before awarding a task or delivery order under an 

indefinite-delivery/indefinite-quantity (ID/IQ) contract (e.g., GWACs, MACs) for 

a noncommercial item in excess of the simplified acquisition threshold (10 United 
15-P-0007 2

States Code 2377(c)); and (vi) On an ongoing basis, take advantage (to the 

maximum extent practicable) of commercially available market research 

methods....”

The FAR Subpart 46.103: Contracting Office Responsibilities, states, 

“[c]ontracting offices are responsible for — (a) Receiving from the activity 

responsible for technical requirements any specifications for inspection, testing, 

and other contract quality requirements essential to ensure the integrity of the 

supplies or services (the activity responsible for technical requirements is 

responsible for prescribing contract quality requirements, such as inspection and 

testing requirements or, for service contracts, a quality assurance surveillance 

plan)....” 

The FAR Subpart 46.104: Contract Administration Office Responsibilities, states, 

“[w]hen a contract is assigned for administration to the contract administration 

office cognizant of the contractor’s plant, that office, unless specified otherwise, 

shall—... (c) Maintain, as part of the performance records of the contract, suitable 

records reflecting—(1) The nature of Government contract quality assurance 

actions, including, when appropriate, the number of observations made and the 

number and type of defects....”

The Office of Management and Budget (OMB) Circular A-123, Revised, 

Management’s Responsibility for Internal Control, Section 1 – Introduction, 

states, “[m]anagement is responsible for developing and maintaining effective 

internal control. Effective internal control provides assurance that significant 

weaknesses in the design or operation of internal control, that could adversely 

affect the agency’s ability to meet its objectives, would be prevented or detected 

in a timely manner.” It also states that, “[i]nternal Control — organization, 

policies and procedures — are tools to help program and financial managers 

achieve results and safeguard the integrity of their programs.” 

CSB Requirements 

CSB has internal procedures that govern the approvals of acquisitions as well as 

contracting processes. In response to our request for board orders governing CSB’s 

acquisition process, CSB provided the following orders. However, these orders were 

either not available to the public or removed from CSB’s website. Board Order 027, 

Roles, Responsibilities, and Standards of Conduct in Procurement Activities, Section 

6.a: Responsibilities - Board) states that:

... [t]he Board’s role in the procurement activities of the CSB consists 

of approving the allocation of funds for those contracts, interagency 

transfers, or other expenditures which exceed $50,000. The Board may 

exercise this approval authority in three ways:
15-P-0007 3

1) By approving the allocation of funds for an identified contract 

requirement, interagency transfer requirement, or other 

expenditure in advance as part of the CSB annual operating 

budget; or

2) By approving the allocation of funds for an identified contract 

requirement, interagency transfer requirement, or other 

expenditure as part of a supplement or amendment to the CSB 

annual operating budget; or

3) By approving the allocation of funds for a contract, interagency 

transfer, or other expenditure on an individual basis by a vote 

in accordance with Order 001.

Board Order 028, Executive and Administration Functions of the Board, Section 

6.b.1: Specific Authority - Use and Expenditure of Funds, states the Chairperson 

has the “[a]uthority to control the use and expenditure of funds, including the 

power to authorize and execute contracts and interagency transfers in an amount 

not to exceed $50,000.”

Scope and Methodology

At the start of our preliminary research, we obtained a list of CSB acquisitions 

awarded as of September 30, 2013. We performed a site visit to CSB’s 

headquarters in Washington, D.C., the week of March 31 through April 4, 2014. 

During our site visit, we obtained 150 acquisition files as of March 31, 2014. We 

reviewed a sample of seven contracts, held interviews, and held discussions with 

CSB staff that included contracting officers and their representatives. We 

reviewed FAR and OMB guidance for federal requirements. In addition, we 

reviewed CSB’s internal board orders to identify internal controls over CSB’s 

acquisition processes. We conducted this audit from February 2014 to August 

2014 in accordance with generally accepted government auditing standards issued 

by the Comptroller General of the United States. Those standards require that we 

plan and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our objective. 

Results of Review

In our preliminary research, we identified 14 CSB acquisitions (interagency 

agreements, contracts and purchase orders) over $50,000 that did not show the 

required Board approval. These awards totaled over $1.9 million. In addition, we 

identified one contract that had two modifications totaling over $100,000 that 

were not approved by the Board. We also found that, as part of our sample, CSB 

did not record its market research actions for two contracts (14 percent) that

totaled over $380,000 and quality assurance surveillance actions for seven 

contracts in our sample that totaled over $1.4 million.
15-P-0007 4

A management official stated “...Board approval was unnecessary for the [14] 

contracts identified...” and “...none of the contracts with option years obligated 

more than $50,000 per year.” In addition, management stated, “... [a]ll the 

contracts are within the Chairperson’s administrative authority to approve.” 

However, a Board member stated that “...[i]f there is a question about the roles of 

the Board and the Chairman as described in Board Order 28 then in accordance 

with the Department of Justice, Office of Legal Counsel opinion (Moss Opinion, 

June 26, 2000), the [‘]Board’s decision controls[’].” 

The Moss Opinion1referenced above by the Board member also states on page 

three: “To the extent the Board establishes such rules, the chairperson, as the 

Board’s administrative and executive officer, must put them into effect.” CSB 

stated it performed market research actions for the two contracts in our sample. 

However, the research information was not isolated and identified as such, nor 

documented in detail within the contracting office files. In addition, CSB stated it 

performed quality assurance surveillance actions, but did not document the 

actions in the files. We address a number of these statements in Appendix A.

We believe that not following internal controls as defined in CSB Board orders 

put funds at risk for misuse. Over $1.9 million in CSB acquisitions are at risk 

because the Board did not approve the acquisitions. Without recording its market 

research actions, CSB acquisition files show limited evidence that agency 

contracts are the best value for the government. By not recording its quality 

assurance surveillance actions, CSB acquisition files show limited evidence that 

the agency received the goods and services for which it paid over $1.4 million.

Conclusion

We believe that CSB should follow its internal controls, which were designed to 

ensure that acquisitions over $50,000 receive Board approval. In addition, CSB 

actions for market research and quality assurance are required to be maintained in 

its files to show that the agency has awarded contracts and monitored contractors

in accordance with federal acquisition regulations. 

A full OIG report containing recommendations will be issued at the completion of 

our audit.

 

1 Moss Opinion is attached to our website at http://www.epa.gov/oig.
15-P-0007 5

Appendix A

CSB Response to OIG Discussion Document 

and OIG’s Evaluation

The OIG met with CSB, on August 14, 2014, to discuss the issues identified in this report and to 

verify the factual accuracy of the findings. We also met with a Board member and incorporated 

excerpts from the Board member’s response in our report. CSB decided to provide a written 

response after our meeting. CSB summarized its response to the OIG early warning report in 

seven areas of concern. CSB believes that our report is factually incorrect and legally flawed, 

and its issuance is unwarranted. We reviewed each CSB area of concern, included their response 

summary, and noted our evaluation. CSB’s complete response is posted to our website at 

http://www.epa.gov/oig. The seven areas of concern and our comments on those concerns 

follow.

1. The IG report does not establish that even one dollar of federal funds was misspent, or that 

any monies were applied to other than lawful, required and routine (“housekeeping”) 

expenditures of the CSB.

OIG Evaluation: Disagree. While the report may not have identified 

misspent funds, it determined that the internal controls designed to safeguard 

against misspent funds were not implemented. Therefore, the risk for misspent 

funds was an urgent need that warranted CSB’s immediate action. The 

purpose of the early warning report was to convey significant time-critical 

issues to CSB management before the team completes work and develops a 

report to fully address the audit objectives. We consider CSB not following its 

internal control, requiring Board approval for acquisition over $50,000, to be a 

significant time-critical concern. We revised the wording in this report to 

address the appearance of misspending funds. 

2. Not one of the administrative or “housekeeping” contracts identified by the IG required Board 

approval, either as a matter of law, regulation, or prudent spending. (In some cases cited by 

the IG, e.g., approval of the CSB headquarters lease, the IG is factually mistaken -- the Board 

did participate in this decision regarding the lease). The entire IG report and its 

recommendations are based on a flawed board order that was found to have been improperly 

issued, and which has no effect on the appropriateness of required expenditures.

OIG Evaluation: Disagree. The OIG provided CSB with a list of 17 contracts 

we identified as needing Board approval. We reviewed CSB’s support for the 

lease contract and amounts that were approved by the Board. We also 

reviewed CSB’s detailed comments on simplified acquisitions as noted in the 

FAR. In turn, we adjusted identified contracts with limited evidence of market 

research from three to two. This early warning report does not have 

recommendations based on Board Orders 027 and 028. Also, from our review, 

the board orders do not address a distinction between administrative or 
15-P-0007 6

housekeeping contracts. If there is a flaw in the board orders, CSB should 

address the flaw and follow its internal controls. 

3. All the contracts cited by the IG were for goods or services approved by the Board in its 

annual budget submission to OMB and Congress.

OIG Evaluation: Disagree. Board Order 027 identifies three ways in which 

the Board can approve contracts. A budget justification, which is submitted to 

OMB and Congress, is not identified as a process for board approval of the 

acquisitions. 

4. The IG report, rather than criticize the CSB, should recognize the significant savings that the 

agency has achieved by bringing the contract function in house, which has also resulted in far 

better contract service.

OIG Evaluation: Disagree. The purpose of the early warning report was to 

convey significant, time-critical issues to CSB management before the team 

completes its work and develops a report to fully address the objectives. The 

OIG is reviewing whether CSB achieved significant savings in bringing the 

contract function in house and plans to address in the later report.

5. The IG’s other findings concerning the adequacy of market research conducted for small or

GSA schedule procurements, and/or the quality assurance documentation, are paperwork 

issues that do not go to the quality of the goods or services received or the prices paid under 

these contracts.

OIG Evaluation: Disagree. The OIG adjusted the wording in this early 

warning report to acknowledge that CSB’s contract files had limited evidence 

to support that it conducted market research and quality assurance 

surveillance actions. CSB’s having limited or no documentation led the OIG 

to believe that the required FAR procedures either were not followed or 

supported. We continue to request such documentation.

6. The CSB is using contract and order approval processes for “housekeeping” obligations which 

are based upon statute and regulation, and are fully consistent with the procedures used by our 

peer agencies -- the National Transportation Safety Board and the Defense Nuclear Facilities 

Safety Board.

OIG Evaluation: Disagree. The purpose of the early warning report was to 

convey significant, time-critical issues to CSB management before the team 

completes work and develop a report to fully address the objectives. We 

consider CSB not following its internal control requiring Board approval for 

acquisition over $50,000 to be significant.
15-P-0007 7

7. Nothing contained in the IG’s findings even remotely rises to the level of an “Early Warning 

Report.” There is absolutely no evidence that any money has been improperly obligated or 

expended.

OIG Evaluation: Disagree. The purpose of the early warning report was to 

convey significant, time-critical issues to CSB management before the team 

completes work and develop a report to fully address the objectives. We 

consider CSB not following its internal control requiring Board approval for 

acquisition over $50,000 to be significant and warrants an early warning 

report.
15-P-0007 8

Appendix B

Distribution

Chairperson and Chief Executive Officer, U.S. Chemical Safety and Hazard Investigation Board 

Board Member, U.S. Chemical Safety and Hazard Investigation Board

Managing Director, U.S. Chemical Safety and Hazard Investigation Board 

Deputy Managing Director, U.S. Chemical Safety and Hazard Investigation Board 

General Counsel, U.S. Chemical Safety and Hazard Investigation Board 

Finance Director, U.S. Chemical Safety and Hazard Investigation Board 

Communications Manager, U.S. Chemical Safety and Hazard Investigation Board 

Director of Administration and Audit Liaison, U.S. Chemical Safety and Hazard 

Investigation Board