U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Does Not Always 

Receive Adjustment Vouchers 

from Contractors 

 Report No. 10-P-0075 

 March 8, 2010 
 

Report Contributors: Michael Petscavage 

 Doug LaTessa 

 Denise Darasaw 

 Marcia Hirt-Reigeluth

 Kevin Lawrence 

Abbreviations 

CO Contracting Officers 

DCAA Defense Contract Audit Agency 

EPA U.S. Environmental Protection Agency 

FACO Financial Administrative Contracting Officer 

FAR Federal Acquisition Regulation 

FY Fiscal Year 

MATS Management Audit Tracking System 

OAM Office of Acquisition Management 

OIG Office of Inspector General 

PO Project Officer 
 

 

 

 

U.S. Environmental Protection Agency 10-P-0075 

March 8, 2010 Office of Inspector General 

At a Glance 

Catalyst for Improving the Environment 

Why We Did This Audit	 EPA Does Not Always Receive 

We conducted this audit to Adjustment Vouchers from Contractors

determine whether the U.S. 

Environmental Protection 

Agency (EPA) is timely 

receiving adjustment vouchers 

and credits from contractors 

based on sustained Defense 

Contract Audit Agency 

(DCAA) audit results. 

Background 

DCAA performs audits of 

final indirect cost rate 

proposals that impact EPA 

contracts. After negotiations 

with the contractor, EPA 

establishes final indirect cost 

rate agreements. Once the 

final indirect cost rate 

agreement is established, 

contractors are required to 

submit adjustment vouchers to 

EPA within 60 days of the 

agreement date. These 

vouchers adjust contractor 

billings for the differences 

between billed indirect costs 

and the indirect costs resulting 

from the application of the 

negotiated indirect costs rates 

for the period specified. 

For further information, 

contact our Office of 

Congressional, Public Affairs 

and Management at 

(202) 566-2391. 

To view the full report, 

click on the following link: 

What We Found 

EPA does not always receive adjustment vouchers from contractors for 

final negotiated indirect cost rates. The final indirect cost rate agreements 

provide the contractor 60 days to submit a voucher for any billing 

adjustments. For 17 of the 20 DCAA audit reports in our sample, EPA did 

not timely receive an adjustment voucher on at least one or more EPA 

contracts. The 20 audit reports impacted 52 EPA contracts, for which EPA 

did not receive adjustment vouchers for 33. Seven adjustment vouchers 

were received late. The only nine vouchers that were received timely all 

involved EPA owing the contractor money. 

EPA does not have an effective system to ensure required adjustment 

vouchers are received. As a result, EPA allowed contractors to keep 

government funds and provided them with interest-free loans in those cases 

where the contractor owed EPA money. In some cases, contractors kept 

money owed the government for years. For example, one contractor that did 

not submit adjustment vouchers during the life of two 4-year contracts owed 

the government $207,494. As a result of our review, EPA received a credit 

of $4,713 from one contractor and $263,193 from another contractor, for a 

total of $267,906. 

What We Recommend 

We recommend that the Assistant Administrator for Administration and 

Resources Management require its Office of Acquisition Management to 

track receipt of adjustment vouchers and monies owed EPA for final 

negotiated indirect cost rates. We also made recommendations to identify 

agreements where adjustments have not been made, require financial 

administrative contracting officers to provide needed information to 

contracting officers, and increase contracting officer and projects officer 

awareness of their responsibilities related to indirect cost rate agreements 

and adjustment vouchers. EPA agreed with our recommendations or took 

alternate corrective actions that we considered satisfactory. 

www.epa.gov/oig/reports/2010/ 

20100308-10-P-0075.pdf 
 

 

 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

March 8, 2010 

MEMORANDUM 

SUBJECT:	 EPA Does Not Always Receive Adjustment Vouchers from Contractors

 Report No. 10-P-0075 

FROM: Melissa M. Heist 

Assistant Inspector General for Audit 

TO:	 Craig E. Hooks, Assistant Administrator 

 Office of Administration and Resources Management 

This is our report on the U.S. Environmental Protection Agency’s (EPA’s) practice of not always 

receiving adjustment vouchers from contractors. This report contains findings that describe the 

problems the EPA Office of Inspector General (OIG) identified and corrective actions the OIG 

recommends. This report represents the position of the OIG and does not necessarily represent 

the final EPA position. Final determinations on matters in this report will be made by EPA 

managers in accordance with established audit resolution procedures. 

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 $398,166. 

Action Required 

In responding to the draft report, the Agency provided corrective action plans for addressing all 

recommendations. Therefore, a response to the final report is not required. The Agency should 

track in the Management Audit Tracking System those recommendations not yet implemented. 

We have no objections to the further release of this report to the public. The report will be 

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

If you or your staff have any questions, please contact me at 202-566-0899 or 

heist.melissa@epa.gov; or Janet Kasper, Product Line Director, at 312-886-3059 or 

kasper.janet@epa.gov. 
 

 

 

 

 

 

EPA Does Not Always Receive 10-P-0075 

Adjustment Vouchers from Contractors 

Table of Contents 

Chapters 

1 Introduction ....................................................................................................... 1 

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

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

 Scope and Methodology.............................................................................. 1 

2 EPA Not Always Receiving Adjustment Vouchers from Contractors ........... 3 

EPA and OMB Policy Requires Submission and Tracking of 

Adjustment Vouchers ........................................................................... 3 

Contractors Not Timely Submitting Adjustment Vouchers........................... 4 

Process for Distributing Indirect Cost Rate Agreements and 

Receiving Adjustment Vouchers Not Effective ..................................... 5 

Lack of Timeliness Allows Contractors to Keep Government Funds........... 7 

Conclusion................................................................................................... 8 

 Recommendations ...................................................................................... 8 

Agency Comments and OIG Evaluation...................................................... 9 

Status of Recommendations and Potential Monetary Benefits.............................. 10 

Appendices 

A Agency Response .............................................................................................. 11 

B Distribution ......................................................................................................... 13 
 

 

10-P-0075 

Chapter 1

Introduction 

Purpose 

The U.S. Environmental Protection Agency’s (EPA) Office of Inspector General 

(OIG) conducted this audit to determine whether EPA is timely receiving 

adjustment vouchers and credits from contractors based on sustained Defense 

Contract Audit Agency (DCAA) audit report results. 

Background 

EPA uses contracts to aid in accomplishing its mission. According to the Fiscal 

Year (FY) 2008 Acquisition Activity Report, EPA obligated over $1.5 billion in 

contracts during that fiscal year. At the request of EPA’s Office of Acquisition 

Management (OAM), DCAA performs audits of final indirect cost rate proposals 

that impact EPA contracts to determine whether costs incurred are allocable, 

reasonable, and allowable in accordance with the Federal Acquisition Regulation 

(FAR) and contract terms. For contractors other than educational institutions and 

nonprofit organizations, DCAA is normally the responsible government audit 

agency. In FY 2008, EPA requested 282 DCAA audits and received and 

processed 163 DCAA audit reports. For this same period, DCAA questioned over 

$3.2 million of claimed costs as unallocable, unreasonable, or unallowable per 

FAR and/or contract terms. 

In accordance with the allowable cost and payment clause at FAR 52.216-7, the 

contractor must submit to the contracting officer (CO) and cognizant auditor a 

final indirect cost rate proposal. Each contractor must submit an adequate 

proposal within the 6-month period following the expiration of each of its fiscal 

years. DCAA issues the audit reports to OAM and EPA financial administrative 

contracting officers (FACOs) review the results. After negotiations with the 

contractor, the FACOs establish final indirect cost rate agreements. Once the 

final indirect cost rate agreement is established, contractors are required to submit 

adjustment vouchers to EPA within 60 days of the agreement date. These 

vouchers adjust contractor billings for the differences between billed indirect 

costs and the indirect costs resulting from the application of the negotiated 

indirect costs rates for the period specified. 

Scope and Methodology 

We performed this audit from February to December 2009 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 

1 
 10-P-0075 

the audit to obtain sufficient, appropriate evidence to provide a reasonable basis 

for our findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

According to OIG’s DCAA Monitoring Application Database, in FY 2008, there 

were 39 DCAA audits closed that contained questioned costs totaling $4,978,843. 

We reviewed 20 of the 39 DCAA audit reports. We stratified the universe by 

high dollar and low dollar audits with high dollar audits representing questioned 

costs greater than $100,000. We conducted a 100-percent review of the six high 

dollar audits and selected an additional 14 audits for review. 

Our work encompassed reviewing contracts located in EPA Headquarters in 

Washington, DC, as well as the EPA regional offices that had contracts in our 

sample (Regions 2, 3, 4, 7, and 8). We requested the Agency to provide us copies 

of adjustment vouchers and checks to verify that payments had been made. If 

adjustment vouchers had not been received, we requested the Agency to provide a 

written explanation why. Additionally, we reviewed the Financial Data 

Warehouse to determine whether vouchers were paid for the selected contracts in 

our sample. We interviewed COs and project officers (PO) from Headquarters; 

the five regions noted; Research Triangle Park, North Carolina; and Cincinnati, 

Ohio. We also interviewed the FACO Team Leader, the EPA Audit Program 

Manager for DCAA Monitoring, the Acting OAM Policy Director, and two OAM 

Service Center Managers. There were no previous audits of EPA’s resolution of 

DCAA reports. 

Internal Control Structure 

In planning and performing our audit, we reviewed management controls related 

to our objective. Specifically, we examined EPA’s Acquisition Handbook, the 

EPA Acquisition Regulation, and other guidelines that outline EPA’s controls and 

monitoring procedures for addressing the audit resolution process. We reviewed 

quality assurance plans from each program operating division, as well as OAM’s 

review of the quality assurance plans. OAM Divisions as well as regional 

contracting offices are empowered to develop their own quality assurance plans, 

which set forth their program to ensure their acquisition products and processes 

are of high quality and comply with applicable statutes as well as federal and 

Agency regulations and policies. 

We reviewed documents EPA completed in compliance with the Federal 

Managers’ Financial Integrity Act. This included a review of the Office of 

Administration and Resources Management’s FY 2008 Federal Managers’ 

Financial Integrity Act Assurance Letter. EPA did not identify internal control 

weaknesses related to the audit’s objectives. 

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 10-P-0075 

Chapter 2

EPA Not Always Receiving Adjustment Vouchers 

from Contractors 

EPA did not always receive adjustment vouchers from contractors for final 

negotiated indirect cost rates. In accordance with EPA policy, contractors are to 

submit adjustment vouchers within 60 days of signing the indirect rate agreement. 

For 17 of the 20 DCAA audit reports in our sample, EPA did not timely receive 

corresponding adjustment vouchers on at least one or more EPA contracts 

impacted by each DCAA audit. The 20 audit reports impacted 52 EPA contracts, 

for which EPA did not receive adjustment vouchers for 33. This occurred 

because EPA does not have an effective process for distributing indirect cost rate 

agreements and receiving adjustment vouchers. As a result, EPA allowed 

contractors to keep government funds and provided them with an interest-free 

loan in those cases where the contractor owed EPA money, sometimes for years. 

For example, one contractor that did not submit adjustment vouchers during the 

life of two 4-year contracts owed the government $207,494. As a result of our 

review, EPA received a credit of $4,713 from one contractor and $263,193 from another 

contractor, for a total of $267,906. 

EPA and OMB Policy Requires Submission and Tracking of 

Adjustment Vouchers 

EPA’s Acquisition Handbook requires that indirect cost rate agreements identify 

the timeframe within which contractors must submit adjustment vouchers to 

implement the rates established. According to the policy, the indirect rate 

agreements are to state that the contractor has 60 days from the date of the 

agreement to submit a voucher for any billing adjustments. 

EPA’s Acquisition Handbook establishes procedures and identifies the roles and 

responsibilities of EPA staff when processing indirect cost rate agreements. 

FACOs are responsible for distributing indirect rate agreements to both 

contractors and COs. COs are responsible for ensuring POs receive a copy of the 

indirect cost rate agreement, and POs are responsible for notifying COs if they do 

not receive the adjustment voucher within 60 days of the signed agreement. The 

CO is responsible for follow-up action with the contractor once informed that the 

adjustment voucher has not been received. 

EPA Manual 2750 outlines the EPA audit management process and contains 

policies for resolving audit recommendations, including those involving funds 

owed to EPA. To support the audit management process, EPA established a 

Management Audit Tracking System (MATS). Reports from MATS help the CO 

and office’s Audit Follow-up Coordinator monitor the status of corrective actions, 

3 
 

 

 

 

10-P-0075 

monies owed the Agency, and recommended efficiencies to which the action 

official agreed. 

Office of Management and Budget Circular A-50 provides procedures for 

executive agencies when considering reports by Inspectors General, other 

executive branch audit organizations, etc. In order to ensure effective recovery 

action, A-50 requires agencies to establish accounting and collection controls for 

amounts due to the government. 

Contractors Not Timely Submitting Adjustment Vouchers 

EPA often did not receive contractor adjustment vouchers for final negotiated 

indirect cost rates within the 60-day EPA requirement. For 17 of the 20 audit 

reports in our sample, EPA did not timely receive corresponding adjustment 

vouchers on at least one or more EPA contracts. The 20 DCAA audits in our 

sample impacted 52 EPA contracts, and for 33 of those contracts the contractor 

did not submit an adjustment voucher, as shown in Figure 2-1. For seven other 

contracts in our sample, the contractor submitted the adjustment vouchers after 

the 60-day timeframe. For all nine contracts where adjustment vouchers were 

submitted within the 60-day timeframe, EPA owed the contractor money. EPA 

did not require adjustment vouchers for the remaining three contracts for various 

reasons, such as the final negotiated indirect cost rate exceeding the ceiling rate 

included in the contract. 

 Figure 2-1: Receipt of Adjustment Vouchers 

Receipt of Adjustment Vouchers 

Number of Contracts 

35 

30 

25 

20 

15 

10 

5 

0 

Received On-Time Received Late Not Received Not Required 

Source: OIG analysis of EPA data. 

One contractor with two contracts in our sample did not submit the required 

adjustment vouchers for either of the contracts for 2 consecutive years. The final 

indirect cost rate agreements for both years clearly stated the contractor was 

required to submit a voucher that adjusted for the difference between billed 

4 
 

 

10-P-0075 

indirect costs and the indirect costs resulting from application of the negotiated 

final indirect cost rates within 60 days. EPA has paid the contractor a total of 

$127 million over the life of the contracts. Even small changes in indirect rates 

on such large contracts could result in thousands of taxpayer dollars owed to EPA. 

For another contract, a contractor provided services to EPA on three separate task 

orders. The final indirect cost rate agreement was signed in March 2008 and was 

for the period April 1, 2003, through March 31, 2004. The contractor submitted 

adjustment vouchers within 60 days. However, the vouchers were submitted for 

the period through October 5, 2003, rather than through the March 31, 2004, date 

as established in the final indirect cost rate agreement. After the OIG notified 

EPA of this, the contractor submitted supplemental invoices covering the entire 

period of the indirect cost rate agreement, resulting in credits to EPA for two task 

orders for over $4,700. 

Process for Distributing Indirect Cost Rate Agreements and 

Receiving Adjustment Vouchers Not Effective 

EPA does not have an effective process for distributing indirect cost rate 

agreements and receiving adjustment vouchers. Specifically, (1) EPA does not 

track the receipt of adjustment vouchers required to be submitted by contractors, 

(2) COs and POs do not always receive indirect rate cost agreements, (3) some 

COs and POs were unaware of their responsibilities related to indirect cost rate 

agreements, and (4) some COs wait until the entire contract period of 

performance expires before ensuring receipt of adjustment vouchers. 

EPA Does Not Track Receipt of Adjustment Vouchers 

EPA does not track the receipt of adjustment vouchers in MATS. During 2008, 

EPA tracked audit report resolution in MATS, but closed the audit reports in 

MATS after it executed a final indirect rate agreement. EPA did not track the 

subsequent receipt of the corresponding adjustment vouchers related to the 

indirect rate agreements. In 2009, EPA began using a different system to track 

audit report resolution, but this system also is not used to track receipt of 

adjustment vouchers. Further, EPA does not have any other internal controls to 

track the receipt of adjustment vouchers, including assigning responsibility for 

tracking to any one group or person. Because of the lack of any tracking system 

and internal controls, EPA is relying on contractors to submit adjustment 

vouchers and identify the amount of money owed to either EPA or the contractor. 

COs and POs Not Always Receiving Indirect Cost Rate Agreements 

FACOs do not always provide COs with the indirect cost rate agreements 

necessary to administer the contracts for which they are responsible. Of the 

14 COs interviewed, 3 said they never received the indirect cost rate agreement. 

In one case, the EPA FACO issued a unilateral indirect cost rate agreement. Due 

5 
 10-P-0075 

to an oversight, the FACO never provided the agreement to the contractor or 

EPA’s contracting officers. While this case was an oversight, FACOs do not 

identify the impacted contracts in the indirect cost rate agreement and do not 

always proactively identify the COs that should receive the indirect cost rate 

agreement. Instead, the FACOs post the indirect rate agreement on an EPA 

software system that can be accessed by COs or they provide the rate agreement 

to the head of each contracting office (region, Research Triangle Park, etc.). The 

Office of Administration and Resources Management’s Financial Analysis and 

Oversight Service Center staff told us it is difficult for them to identify the current 

CO because of turnover and changes in the CO responsible for each contract. 

Likewise, 10 of 14 POs we interviewed said the COs did not provide them the 

indirect cost rate agreement as required by the EPA Acquisition Handbook. COs 

did not provide the POs the rate agreement because they were not aware of this 

requirement or because they did not receive the rate agreement from the FACO. 

In some cases, the POs were only made aware of the existence of the indirect cost 

rate agreement when the contractor submitted the adjustment voucher. POs are 

not aware that adjustment vouchers are due if they do not receive a copy of the 

indirect cost rate agreement. 

COs and POs Not Always Aware of Their Responsibilities 

COs and POs were not always aware of their responsibilities regarding indirect 

cost rate agreements and adjustment vouchers. Seven of 13 COs interviewed 

were not familiar with requirements of the EPA Acquisition Handbook regarding 

their responsibilities for indirect cost rate agreements and adjustment vouchers. 

Six COs were not aware that they were required to provide a copy of the indirect 

cost rate agreement to the PO. Five COs were not aware that they should contact 

the contractor after receiving notification from the PO that the adjustment voucher 

had not been received. Also, 10 of 14 POs interviewed were not familiar with 

their responsibilities. Seven POs did not know that the contractor should submit 

an adjustment voucher within 60 days of the date of the indirect cost rate 

agreement. Further, seven POs did not know that if the adjustment voucher is not 

received they must inform the CO. 

Adjustment Vouchers Not Submitted until Contract Close-Out 

For some contracts in our sample, the contractor did not submit adjustment 

vouchers until after the contract had expired. For example, one contractor had 

two contracts for which indirect cost rate agreements were signed in 2005, 2006, 

2007, and 2008 but adjustment vouchers for these years were not submitted until 

2008, after the contract’s period of performance had expired. All of the final 

indirect cost rate agreements clearly stated that the adjustment vouchers were due 

within 60 days. 

6 
 

 

 

10-P-0075 

Some EPA COs indicated that it is their practice to wait until the end of the 

contract and process indirect rate agreement changes as part of contract close-out. 

However, EPA’s experience with another contractor highlights the consequences 

of waiting until contract close-out – by the time the final indirect cost rate 

agreement was signed the contractor no longer had contracts with EPA, the 

president of the company had retired, and the business no longer existed. 

Additionally, the contractor has been nonresponsive to inquiries from EPA and 

EPA staff indicated that obtaining an adjustment voucher would be difficult under 

the circumstances. 

Lack of Timeliness Allows Contractors to Keep Government Funds 

By not ensuring that adjustment vouchers are received in a timely manner, EPA is 

allowing contractors to keep government funds and providing them with an 

interest-free loan when the contractor owes EPA money. For example, in 2007, 

EPA and one of its contractors signed indirect cost rate agreements for the periods 

November 1996 through October 2000 and November 2000 through October 

2003. After the OIG asked EPA whether the contractor had submitted the 

adjustment voucher, EPA reminded the contractor that adjustment vouchers were 

needed. The contractor subsequently submitted a credit voucher to EPA in 

September 2009 acknowledging that it owed EPA over $263,000. Also, as noted 

previously, our notifying EPA of a contractor submitting an incorrect adjustment 

voucher resulted in $4,700 in credits to EPA. 

In another case, one of EPA’s contractors did not submit adjustment vouchers for 

two contracts to EPA until 2008, after the contract’s period of performance had 

expired. From 2001 through 2006, EPA paid the contractor a total of $20,150,583 

under the two contracts. As shown in Tables 2-1 and 2-2, one contractor that did 

not submit adjustment vouchers during the life of two 4-year contracts owed the 

government $207,494. These funds could have been used to conduct other work. 

Table 2-1: Example of Interest-Free Loan to Contractor for Contract #1 

Fiscal 

Year 

Date of Indirect 

Cost Rate 

Agreement 

Date 

Adjustment 

Voucher Due 

Date Contractor 

Submitted 

Adjustment 

Voucher 

Amount Due 

to EPA 

2002 4/18/05 6/17/05 9/24/08 $30,039 

2003 12/28/06 2/26/07 9/24/08 $45,655 

2004 9/6/07 11/05/07 9/24/08 $13,234 

2005 6/26/08 8/25/08 9/24/08 $56,692 

Total $145,620 

Source: OIG analysis of EPA data. 

7 
 

 

10-P-0075 

Table 2-2: Example of Interest-Free Loan to Contractor for Contract #2 

Fiscal 

Year 

Date of Indirect 

Cost Rate 

Agreement 

Date 

Adjustment 

Voucher Due 

Date Contractor 

Submitted 

Adjustment 

Voucher 

Amount Due 

to EPA 

2002 4/18/05 6/17/05 10/15/08 $11,768 

2003 12/28/06 2/26/07 10/15/08 $22,866 

2004 9/6/07 11/05/07 10/15/08 $4,250 

2005 6/26/08 8/25/08 10/15/08 $22,990 

Total $61,874 

Source: OIG analysis of EPA data. 

Conclusion 

EPA needs to increase management and staff awareness of their responsibilities 

for ensuring that contractors submit adjustment vouchers timely. The submission 

of adjustment vouchers resulting from negotiating final indirect cost rates with 

contractors helps ensure that EPA pays, and contractors receive, a fair price for 

services rendered to the government. Systemic breakdowns in EPA’s 

management of this process have resulted in contractors unnecessarily keeping 

taxpayer dollars for years. 

Recommendations 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

2-1 Track receipt of adjustment vouchers and monies owed EPA for final 

negotiated indirect cost rates in accordance with Office of Management 

and Budget Circular A-50. 

2-2 Identify all final indirect cost rate agreements where adjustment vouchers 

have not been submitted and track them to ensure receipt. 

2-3 Require FACOs to identify all contracts impacted and list those contracts 

in the final indirect cost rate agreements. 

2-4 Require FACOs to provide the final indirect cost rate agreement directly 

to the COs for contracts impacted by the agreement. 

2-5 Increase COs’ and POs’ awareness of their responsibilities for processing 

and managing indirect cost rate agreements and adjustment vouchers 

through discussions and presentations at meetings and conferences on 

contract management, as well as through articles in OAM’s quarterly 

newsletter on current policy initiatives. 

8 
 10-P-0075 

Agency Comments and OIG Evaluation 

The Agency’s response sufficiently addressed all our recommendations. 

EPA agreed with recommendations 2-1, 2-2, 2-3, and 2-5, and provided milestone 

dates for completion of the following actions: 

•	 Establish a process to ensure that adjustment vouchers and monies owed 

EPA are tracked (March 31, 2010); 

•	 Publish an article in the next Hot Tips to raise awareness for enhanced CO 

oversight (March 31, 2010); 

•	 List prime contracts in indirect cost rate agreements, and incorporate a 

statement in the final indirect cost rate agreements identifying that the 

purpose of the agreement is to establish indirect rates applicable to all 

prime contracts and subcontracts that the vendor holds with EPA 

(February 1, 2010); and 

•	 Increase knowledge of COs’ and POs’ awareness by making presentations 

at upcoming contractor forums (Spring 2010) and EPA’s annual 

Acquisition Conference. 

EPA did not provide a milestone date in its written response for recommendation 

2-2, but later provided a milestone of March 31, 2010, in separate correspondence. 

In response to recommendation 2-4, EPA stated that as of October 1, 2009, the 

FACOs are required to distribute negotiated indirect cost rate agreements to all 

affected OAM Service Center Managers and Regional Contracting Officer 

Supervisors. At the exit conference, EPA stated that these staff members will 

distribute the negotiated indirect cost rate agreements to COs. This practice meets 

the intent of our recommendation. 

As a result of our review, EPA received a credit of $4,713 from one contractor 

and $263,193 from another contractor, for a total of $267,906. 

9 
 

 

 

 

 

 

 

 

 

 

10-P-0075 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

2-1 8 Track receipt of adjustment vouchers and monies 

owed EPA for final negotiated indirect cost rates in 

accordance with Office of Management and Budget 

Circular A-50. 

O Assistant Administrator for 

Administration and 

Resources Management 

3/31/2010 

2-2 8 Identify all final indirect cost rate agreements where 

adjustment vouchers have not been submitted and 

track them to ensure receipt. 

O Assistant Administrator for 

Administration and 

Resources Management 

3/31/2010 

2-3 8 Require FACOs to identify all contracts impacted 

and list those contracts in the final indirect cost rate 

C Assistant Administrator for 

Administration and 

2/1/2010 

agreements. Resources Management 

2-4 8 Require FACOs to provide the final indirect cost 

rate agreement directly to the COs for contracts 

impacted by the agreement. 

C Assistant Administrator for 

Administration and 

Resources Management 

10/1/2009 

2-5 8 Increase COs’ and POs’ awareness of their 

responsibilities for processing and managing 

indirect cost rate agreements and adjustment 

vouchers through discussions and presentations at 

meetings and conferences on contract 

management, as well as through articles in OAM’s 

quarterly newsletter on current policy initiatives. 

O Assistant Administrator for 

Administration and 

Resources Management 

6/30/2010 

- - NOTE: As a result of our review, EPA received a Assistant Administrator for $267.9 $267.9 

credit of $4,713 from one contractor and $263,193 Administration and 

from another contractor, for a total of $267,906. Resources Management 

1 O = 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 

10 
 

 

 

10-P-0075 

Appendix A 

Agency Response 

MEMORANDUM 

SUBJECT: EPA Does Not Always Receive Adjustment Vouchers from Contractors 

Project Number No. OA-FY09-0808 

FROM: Craig E. Hooks 

 Assistant Administrator 

TO: Melissa M. Heist 

Assistant Inspector General for Audit 

We appreciate the opportunity to comment on the draft report entitled, “EPA Does Not 

Always Receive Adjustment Vouchers from Contractors,” dated December 16, 2009. Our 

comments on the report and recommendations are below: 

Specific Recommendations and Responses: 

Recommendation 2-1 – We recommend that the Assistant Administrator (AA) for the 

Office of Administration and Resources Management (OARM) track receipt of adjustment 

vouchers and monies owed EPA for final negotiated indirect cost rates in accordance with 

OMB Circular A-50. 

Response – OAM concurs with this recommendation. OAM will establish a process to ensure 

that adjustment vouches and monies owed to EPA are tracked effective March 31, 2010. 

Recommendation 2-2 - We recommend that the Assistant Administrator (AA) for the 

Office of Administration and Resources Management (OARM) identify all final indirect 

cost rate agreements where adjustment vouches have not been submitted and track them to 

ensure receipt. 

Response – OAM concurs with this recommendation. The Contracting Officers (COs) will 

review all final indirect cost rate agreements and determine which vouchers have not been 

submitted and track them to ensure receipt. OAM will also include an article in the next Policy 

Hot Tips (see response to Recommendation 2-5) to raise awareness for enhanced COs oversight. 

Policy Hot Tips article will be issued by March 31, 2010. 

Recommendation 2-3- We recommend that the Assistant Administrator (AA) for the Office 

of Administration and Resources Management (OARM) require FACOs to identify all 

contracts impacted and list those contracts in the final indirect cost rate agreements. 

11 
 10-P-0075 

Response – We concur with this recommendation. The Financial Administrative Contracting 

Officers (FACOs) will list the prime contracts in the indirect cost rate agreements. In addition, 

the FACOs will incorporate a statement identifying that the purpose of the agreement is to 

establish indirect rates which will apply to all of the prime contracts and subcontracts which the 

vendor holds with EPA. This change will be implemented for all indirect cost rate agreements 

issued on or after February 1, 2010. 

Recommendation 2-4 – We recommend that the Assistant Administrator (AA) for the 

Office of Administration and Resources Management (OARM) require FACOs to provide 

the final indirect costs rate agreement directly to the Cos for contracts impacted by the 

agreement. 

Response – We agree that it is important that the final indirect cost rate agreement is provided to 

the COs for contracts impacted by the agreement. We, however, do not agree that the FACOs 

should be required to provide them directly to the COs. Instead, we believe that our current rate 

agreement process meets this requirement. Effective October 1, 2009, the FACOs are required 

to distribute negotiated indirect cost rate agreements to all affected OAM Service Center 

Managers and Regional Contracting Officer Supervisors. Since contract staff assignments 

fluctuate on a regular basis, this ensures that the agreements will be distributed to the current 

contracting personnel who are managing the contracts. By submitting the rate agreements to the 

managers and supervisors, there is increased continuity and visibility in the process. 

Recommendation 2-5 – We recommend that the Assistant Administrator (AA) for the 

Office of Administration and Resources Management (OARM) increase COs’ and POs’ 

awareness of their responsibilities for processing and managing indirect cost rate 

agreements and adjustment vouchers through discussions and presentations at meetings 

and conferences on contract management, as well as through articles in OAM’s quarterly 

newsletter on current policy initiatives. 

Response – OAM concurs with this recommendation. This topic will also be presented at the 

Spring 2010 contractor forum in San Francisco, CA, and the annual Project Officer/Contracting 

Officer (POCO) and Acquisition conference, Travel funds permitting. OAM will also include 

information with respect to this topic in the next “Policy Hot Tips”. The article will discuss the 

roles and responsibilities of the Contractors, Contracting Officers Representatives (CORs), 

Contract Specialists (CSs), and COs; as well as the importance of processing adjustment 

vouchers in a timely manner. 

If you have any questions regarding this response, please contact me at (202) 564-4600 or 

John Gheradini at (202) 564-4310. 

12 
 10-P-0075 

Appendix B 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Acting Director for Acquisition Management, Office of Administration and 

 Resources Management 

Agency Follow-up Official (the CFO) 

Agency Follow-up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Audit Follow-up Coordinator, Office of Administration and Resources Management 

Acting Inspector General 

13