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EPA OIG Compliance With 

Retention Incentive 

Regulations and Policies

Report No. 14-B-0246 May 2, 2014

U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL
Report Contributors: Leah Nikaidoh

Darren Schorer

Catherine B. Allen

Abbreviations

CFR Code of Federal Regulations

EPA U.S. Environmental Protection Agency

OIG Office of Inspector General

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EPA Inspector General 

1200 Pennsylvania Avenue, NW

Mailcode 2410T

Washington, DC 20460
 

 14-B-0246

May 2, 2014

Why We Did This Review

On August 27, 2013, a member 

of the U.S. Senate Committee 

on Environment and Public 

Works requested that the 

U.S. Environmental Protection 

Agency (EPA), Office of 

Inspector General (OIG), 

initiate work in connection with 

a fraud committed by John C. 

Beale, a former Senior Policy 

Advisor with the EPA’s Office of 

Air and Radiation. In particular, 

the committee member asked 

the OIG to determine EPA 

policies and processes that 

“facilitated” Beale’s fraud. 

Although the EPA authorized 

retention incentive pay to Beale 

until 2003, the agency 

continued to make retention 

incentive payments to him until 

2013.

This report addresses the 

following EPA theme:

 Embracing EPA as a high 

performing organization.

For further information, 

contact our public affairs office 

at (202) 566-2391.

The full report is at:

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

20140502-14-B-0246.pdf

EPA OIG Compliance With Retention Incentive 

Regulations and Policies 

 What We Found

The EPA OIG did not comply with Office of 

Personnel Management regulations or agency 

policies on retention incentive pay. From 2006 

through 2009, retention incentives were paid to 

two EPA OIG employees. The two EPA OIG 

employees received $64,204 in retention 

incentives with no documentation of annual 

recertification from 2008 through 2009.

The EPA OIG employees received unauthorized retention pay due to:

 Management confusion over the requirement for annual recertification of 

retention incentive pay.

 Evidence of the annual recertification not being retained.

 The agency’s human resource system lacking internal controls to track, 

notify and automatically discontinue retention incentive pay if not properly 

authorized.

 Recommendation and Planned Corrective Actions

We recommend that the Deputy Inspector General determine whether any 

additional evidence exists to justify a retention incentive. If unjustified, he 

Deputy Inspector General should refer the matter to the agency to initiate action 

to recover the unauthorized retention incentive amounts paid to EPA OIG

employees.

The Deputy Inspector General agreed with our recommendation. 

Unauthorized retention 

incentive payments

totaling $64,204 were 

made to EPA OIG

employees due to a lack 

of adequate internal 

controls and agency 

follow-up.

U.S. Environmental Protection Agency

Office of Inspector General

At a Glance
May 2, 2014

MEMORANDUM

SUBJECT: EPA OIG Compliance with Retention Incentive Regulations and Policies

Report No. 14-B-0246

FROM: Kevin Christensen, Acting Assistant Inspector General

Office of Audit

TO: Charles Sheehan, Deputy Inspector General

As part of our continuing work on internal controls as a result of the John C. Beale investigation, 

we initiated an audit of the U.S. Environmental Protection Agency’s (EPA’s) internal controls over 

retention incentives. During this review, we identified issues that impact the Office of the Inspector 

General (OIG) and require your immediate attention, and we are reporting this to you separately. 

Action Required

Please provide a written response to this report within 60 calendar days. You should include planned 

corrective actions and completion dates for the recommendation. Your response will be posted on the 

OIG’s public website, along with our memorandum commenting on your response. Your response 

should be provided as an Adobe PDF file that complies with the accessibility requirements of 

Section 508 of the Rehabilitation Act of 1973, as amended. The final response should not contain data 

that you do not want released to the public. If your response contains such data, you should identify the 

data for redaction or removal, along with corresponding justification. We will post this report to our 

website at http://www.epa.gov/oig.

If you or your staff have any questions regarding this report, please contact me at (202) 566-1007 or 

christensen.kevin@epa.gov; or Robert Adachi, Director, Forensic Audits, at (415) 947-4537 or 

adachi.robert@epa.gov. 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

OFFICE OF

INSPECTOR GENERAL
U.S. Environmental Protection Agency

Office of Inspector General

EPA OIG Compliance With 

Retention Incentive Regulations 

and Policies 

Report No. 14-B-0246

May 2, 2014
2

Reasons for Review

 Part of continuing work on internal controls of payroll and 

benefits.

 Review initiated on the U.S. Environmental Protection 

Agency’s (EPA’s) policies and procedures for paying retention 

incentives. 

14-B-0246
3

Scope and Methodology

 Performed fieldwork from October 31, 2013, to March 20, 2014.

 Conducted assignment in accordance with generally accepted 

government auditing standards issued by the Comptroller General 

of the United States.

 EPA personnel were covered in a separate report.

 Determined whether the EPA Office of Inspector General (OIG) paid 

employees retention incentives in accordance with federal 

regulations and EPA policy.

14-B-0246
4

Scope and Methodology (cont’d.)

 Obtained a listing of OIG employees who received retention 

incentives for calendar years 2006 through August 7, 2013.

 Reviewed retention incentive request forms, 

correspondence and SF-50s for each employee.

 Interviewed staff from the agency’s Shared Service Center. 

 Contacted the two EPA OIG supervisors and their 

employees who received retention incentives.

14-B-0246
5

Office of Personnel Management 

Regulations

 The Code of Federal Regulations (CFR), in 5 CFR 575: 

o Authorizes payment of incentive for employees:

• With unusually high or unique qualifications.

• Likely to leave in the absence of an incentive.

o Requires annual review of the determination to pay the incentive.

o Requires an authorized agency official to annually document in 

writing the determination to pay the incentive.

o Requires reduction/termination of the retention incentive 

authorization whenever conditions change.

14-B-0246
6

EPA/OIG Policies

 EPA’s Pay Administration Manual:

o Authorizes a 1-, 2- or 3-year retention incentive.

o Requires annual recertification using the EPA authorization form.

o Requires the human resources officer to provide notification in 

advance of the annual reauthorization date. 

o Requires termination if the employee is reassigned or promoted 

to a different position.

 Per EPA’s order on waivers, the employee is required to 

notify the supervisor and the human resources officer about 

overpayments.

 EPA OIG has no additional retention incentive policies. 

14-B-0246
7

Results

 We found that the EPA OIG did not fully comply with Office 

of Personnel Management regulations or EPA policy on 

retention incentive pay.

o No documentation of annual recertification identified for the 

last 2 years each employee received the retention incentive.

o One employee received retention incentive pay for 4 months 

beyond the promotion date.

 There are no EPA OIG employees currently receiving 

retention incentives.

14-B-0246
8

Uncertified Incentives

 We identified two EPA OIG employees who received retention incentives 

with no documentation of annual recertification from 2008 through 2009:

 No EPA OIG employee has received a retention incentive 

since 2009.

*Amounts were calculated using data provided by EPA and are subject to reconciliation with payroll records.

Uncertified

Incentive

Employee #1 (Retired) $16,098

Employee #2 48,106

EPA OIG Total* $64,204

14-B-0246
9

Uncertified Incentives (cont’d.)

 For both EPA OIG employees, retention incentives were 

properly reviewed and authorized for 2006 and 2007.

 No documentation is available to support either employee 

being authorized to receive retention incentives in 2008 and 

2009, as required by federal regulations and EPA policies. 

14-B-0246
10

Pay Beyond Promotion

 EPA OIG Employee #1 received incentive pay although 

his incentive should have been terminated because he 

was promoted.

o The EPA issued a debt notice to the employee and advised 

him about the agency’s waiver process. 

o The employee filed a waiver with the EPA’s Office of General 

Counsel Claims Officer. The Office of General Counsel 

reviewed the waiver and made a determination to partially 

reinstate incentive pay. 

 No further action is warranted for incentive pay received 

after promotion.

14-B-0246
11

How Did This Happen?

 Confusion over the requirement for an annual 

recertification.

 Evidence of the annual recertification was not retained, 

even though one supervisor stated that the annual 

recertifications were completed.

 The EPA’s human resources system lacks internal controls to 

track, notify and automatically discontinue the retention 

incentive if not authorized by an annual recertification. 

14-B-0246
12

Why Is This Important?

 Unauthorized retention payments were made to two EPA 

OIG employees:

o Employees #1 and #2 were paid a total of $64,204 without 

documentation supporting annual recertification.

o Employee #2 was overpaid by an additional $13,563 due to lack 

of timely termination.

 Review of the EPA’s internal controls related to retention 

incentives for agency employees identified similar issues.

14-B-0246
13

Recommendation

 We recommend that the EPA OIG Deputy Inspector General 

determine whether any additional evidence exists to justify 

retention incentive pay. If unjustified, the EPA OIG Deputy 

Inspector General should refer the matter to the agency to 

initiate action to recover the unauthorized retention incentive 

amounts paid to the EPA OIG employees. 

14-B-0246
14

Management Briefing

 We held an exit conference with the Deputy Inspector General 

on April 10, 2014, on the results of the review.

 The Deputy Inspector General agreed to take action to address 

the recommendation. 

14-B-0246
14-B-0246 15

Status of Recommendation 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

1 13 Determine whether any additional evidence 

exists to justify retention incentive pay. 

If unjustified, refer the matter to the agency to 

initiate action to recover the unauthorized 

retention incentive amounts paid to EPA OIG 

employees. 

.

O Deputy Inspector General $64

1 O = recommendation is open with agreed-to corrective actions pending 

C = recommendation is closed with all agreed-to actions completed 

U = recommendation is unresolved with resolution efforts in progress
14-B-0246 16

Appendix A

EPA OIG Distribution

Inspector General

Deputy Inspector General

Counsel to the Inspector General

Chief of Staff, Office of Inspector General

Deputy Assistant Inspector General for Congressional and Public Affairs