U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Should Strengthen 

Internal Controls over 

Interagency Agreement 

Unliquidated Obligations 

 Report No. 09-P-0086 

 January 26, 2009 
Report Contributors: Paul Curtis 

Meg Hiatt 

 Bob Evans

 Kevin Ross

 Alfred Falciani

 Carol Kwok

 Demetrios Papakonstantinou 

 Sheree James 

Javier Negron 

Abbreviations 

CFC Cincinnati Finance Center 

EMS Extramural Management Specialist 

EPA U.S. Environmental Protection Agency 

FY Fiscal Year 

IA Interagency Agreement 

IFMS Integrated Financial Management System 

IGMS Integrated Grants Management System 

GIAMD Grants and Interagency Agreements Management Division 

GICS Grants Information and Control System 

GMO Grants Management Office 

HHS U.S. Department of Health and Human Services 

OCFO Office of the Chief Financial Officer 

OGD Office of Grants and Debarment 

OIG Office of Inspector General 

PO Project Officer 

RMDS Resource Management Directive System 
U.S. Environmental Protection Agency 09-P-0086 

January 26, 2009 Office of Inspector General 

At a Glance
 

Catalyst for Improving the Environment 

Why We Did This Review 

The purpose of this audit was 

to evaluate the U.S. 

Environmental Protection 

Agency’s (EPA’s) process for 

reviewing unliquidated 

interagency agreement (IA) 

obligations, deobligating funds, 

and closing IAs. The 

objectives of our review were 

to determine: (1) whether EPA 

has adequate controls in place 

to identify and deobligate 

unneeded IA funds, and (2) the 

amount of obligations under 

IAs that could potentially be 

deobligated. 

Background 

An IA is a written agreement 

between federal agencies in 

which one agency provides 

goods or services to another 

agency on a reimbursable basis. 

It is EPA’s policy to close all 

IAs within 270 days after the 

project period expires. As part 

of close-out, unliquidated 

obligations should be 

deobligated so that the funds 

can be used for other purposes. 

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: 

www.epa.gov/oig/reports/2009/ 

20090126-09-P-0086.pdf 

EPA Should Strengthen Internal Controls over 

Interagency Agreement Unliquidated Obligations

 What We Found 

EPA has not closed out IAs that have at least $4.2 million of unneeded funds that 

should be deobligated. Further, EPA had deobligated an additional $2.3 million 

between January 7, 2008, and April 25, 2008, as a result of our audit. These funds 

could be used for other environmental projects. 

Controls for identifying funds for deobligations were not always effective. We 

found that EPA Project Officers, the Grants and Interagency Agreements 

Management Division, and Grants Management Offices did not effectively monitor 

IAs to ensure they were closed out timely and unneeded funds were deobligated. 

The annual unliquidated obligation review was not effective and did not identify 

funds that should have been deobligated and used for other environmental purposes. 

Project Officers cited various reasons for untimely close-out of IAs, including 

unfamiliarity with close-out procedures and difficulties working with other agencies. 

What We Recommend 

We are making various recommendations to the Office of Administration and 

Resources Management. They include: 

•	 Deobligating the remaining $4.2 million in IA unliquidated obligations, and 

ensuring these IAs and those with $2.3 million already deobligated are closed 

out. 

•	 Ensuring EPA Order 1610 is consistently followed. 

•	 Ensuring program offices develop performance measures involving IA 

management for Project Officer performance standards. 

•	 Ensure the IA data in the Grants Information and Control System and 

Integrated Grants Management System are reconciled. 

We also recommend that the Chief Financial Officer reformat the unliquidated 

obligation report and require forwarding of the report to Project Officers. 

In general, the Agency agreed with the report's findings and recommendations and is 

in the process of establishing procedures that, when implemented, should adequately 

address the findings. 
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

January 26, 2009 

MEMORANDUM 

SUBJECT:	 EPA Should Strengthen Internal Controls over Interagency Agreement 

Unliquidated Obligations 

Report No. 09-P-0086 

FROM: Melissa M. Heist 

Assistant Inspector General for Audit 

TO:	 Susan B. Hazen 

Acting Assistant Administrator for Administration and Resources Management 

 Maryann Froehlich 

Acting Chief Financial Officer 

This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the 

U.S. Environmental Protection Agency (EPA). This report contains findings that describe the 

problems the OIG has identified and corrective actions the OIG recommends. This report 

represents the opinion 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 $374,414. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 90 calendar days. You should include a corrective actions plan for agreed upon 

actions, including milestone dates. We have no objections to the further release of this report to 

the public. This report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact Paul Curtis at (202) 

566-2523 or curtis.paul@epa.gov, or Meg Hiatt at (513) 487-2366 or hiatt.margaret@epa.gov. 
EPA Should Strengthen Internal Controls over 09-P-0086 

Interagency Agreement Unliquidated Obligations 

Table of Contents 

Chapters 

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

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

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

 Noteworthy Achievements.............................................................................. 2 

 Scope and Methodology................................................................................. 4 

2 Funds No Longer Needed Remain Obligated ..................................................... 5 

Monitoring of IAs Needs Improvement ........................................................... 5 

Untimely Close-out ............................................................................. 6 

Difficulties with Other Agencies ......................................................... 7 

Lack of Performance Standards ........................................................ 8 

Inconsistent Data ............................................................................... 8 

Conflicting Guidance........................................................................... 9 

Review Process for Unliquidated Obligations Needs Improvement ............... 10 

Recommendations ......................................................................................... 11 

Agency Response and OIG Evaluation.......................................................... 12 

Status of Recommendations and Potential Monetary Benefits................................. 14 

Appendices 

A Details on Scope and Methodology..................................................................... 16 

B EPA Order 1610 Timeline of Close-out Activities for IAs .................................. 18 

C Obligations on Sampled IAs................................................................................. 19 

D Agency Response to Draft Report....................................................................... 21 

E Distribution ............................................................................................................ 26 

09-P-0086 

Chapter 1

Introduction 

Purpose 

The purpose of this audit was to evaluate the U.S. Environmental Protection 

Agency’s (EPA’s) process for reviewing unliquidated interagency agreement (IA) 

obligations, deobligating funds, and closing IAs. The objectives of our review 

were to determine: 

1. Whether EPA has adequate controls in place to identify and deobligate 

unneeded IA funds. 

2. The amount of obligations under IAs that could potentially be deobligated. 

Background 

An IA is a written agreement between federal agencies in which one agency 

provides goods or services to another agency on a reimbursable basis. EPA has 

entered into many such agreements that obligate EPA to pay other agencies. 

Several EPA offices are involved in the administration and financial management 

of IAs: 

•	 The National Policy Training and Compliance Division, under the Office 

of Grants and Debarment (OGD) within the Office of Administration and 

Resources Management, is responsible for developing and implementing 

Agency-wide administrative policy and procedures for IAs. This includes 

training for IA Project Officers (POs). In coordination with the Office of 

the Chief Financial Officer (OCFO), this division is responsible for 

establishing and maintaining systems for financial management, internal 

control, and reporting for all IAs. Interagency Agreement Specialists 

within Regional Grants Management Offices (GMOs) and the 

Headquarters Grants and Interagency Agreements Management Division 

(GIAMD) serve as EPA’s administrative contacts with other federal 

agencies. They review and approve the administrative portion of the IA 

funding and prepare the EPA IA agreement on Form 1610 and any formal 

amendments. Regional GMOs and GIAMD also monitor the IA for 

compliance with administrative conditions, help the PO resolve 

performance problems, and close out the agreement after all the terms and 

conditions are fulfilled. 

•	 Cincinnati Finance Center (CFC), a component of OCFO, is the central 

servicing finance office for all EPA IAs. CFC disburses funds to other 

agencies and records the disbursements in accounting records. CFC is 

also responsible for recording amendments to deobligate funds and 

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verifying that the IA balance is correct. Further, CFC assists POs in 

reconciling billing differences with other agencies. 

•	 EPA POs, within EPA’s programs, provide technical and managerial 

oversight of IAs. They are responsible for assuring that EPA quality 

assurance requirements are met by other agencies for the goods and 

services provided to EPA. For disbursement agreements, the PO ensures 

that EPA receives goods and services from the other agency in accordance 

with the agreements. The PO approves invoices received from the other 

agency. POs are responsible for notifying OCFO/CFC at least quarterly in 

writing or electronically on the project status. The PO is also responsible 

for notifying OCFO/CFC of the final project cost in writing when the 

project expires. POs should also maintain all supporting documentation 

for costs claimed, and ensure compliance with the IA’s terms and 

conditions. 

It is EPA’s policy to close out IAs within 270 days after the project period ends. 

EPA considers an IA administratively closed when, after the period of 

performance expires, the PO verifies the completion of all work and payment of 

all invoices. After all work is completed and all the bills are paid, CFC 

deobligates the remaining funds. 

Noteworthy Achievements 

During the audit period, we identified the following noteworthy achievements 

related to the management of IA extramural agreements1

: 

•	 GIAMD has made a concerted effort to close out the backlog of expired 

IAs so that unneeded funds can be deobligated. GIAMD stated that it 

closed 596 IAs during Fiscal Year (FY) 2007, and 590 in FY 2008, and 

69 in FY 2009, as of January 13, 2009. 

•	 OGD issued IA Policy Issuance 08-02 on February 29, 2008, which limits 

the project period duration for new IA awards. This guidance establishes: 

(1) a limit on the total length of all of the project periods of an IA; and 

(2) criteria for determining when new awards, rather than amendments, 

must be used to fund additional work. The policy limits the total length of 

the project period of IAs to 7 years unless there is a specific regulatory or 

statutory authorization for a longer project period or a signed waiver from 

the Director, OGD, or a designee. The policy further states that no-cost 

amendments, incremental funding amendments, and supplemental funding 

amendments may not be used to add additional activities to an IA if the 

additional activities are unrelated to the original scope of work. In such 

cases, EPA must fund the additional activities through a new IA. 

1

 Extramural agreements include contracts, grants and cooperative agreements, and IAs. 

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•	 EPA has increased its effort to deobligate unused Superfund funds. The 

Office of Solid Waste and Emergency Response’s Office of Superfund 

Remediation and Technology Innovation has scrutinized open Superfund 

obligations on IAs over 2 years old as part of its annual work planning. 

During the planning meeting, Headquarters and regional Office of 

Superfund Remediation and Technology Innovation officials review the 

Superfund unliquidated obligations to determine the amount that should be 

deobligated during the year. 

•	 The Office of Research and Development employs Extramural 

Management Specialists (EMSs). These specialists are an integral part of 

the post-award monitoring process for IAs (as well as for contracts, grants, 

and cooperative agreements). The EMS coordinates efforts among POs, 

GMOs, and CFC, and facilitates the IA administrative process, including 

deobligating funds and closing out IAs. An EMS in the Office of 

Research and Development stated that employing the specialists ensures 

that IAs are closed out and funds are deobligated timely because the EMS 

continually monitors IAs. The Office of Air and Radiation employs Grant 

Coordinators who serve similar functions as the EMSs. The Grant 

Coordinators are responsible for monitoring the close-out of IAs and 

following their standard operating procedures that are derived from EPA 

Order 1610. Other offices should consider employing specialists to 

improve their post-award management duties, including timely IA closeout and deobligating unneeded funds. 

•	 In FY 2006, OGD separated the IA class from its 4-day basic grants class. 

OGD now provides a full day of IA training that addresses specific topics 

such as cost review, determining a bona fide need, severability of funds, 

and assisted acquisition. This class is now being further enhanced to 

cover Office of Federal Procurement Policy guidance requirements for 

grants and IAs issued by the Office of Management and Budget on June 6, 

2008. 

•	 In the third quarter of FY 2008, EPA added measures on unliquidated 

obligations and close-out for IAs to the “Grants Management Performance 

Measures Reports.” These quarterly reports are provided to the Junior 

Resource Official, Senior Resource Official, and GMO community for 

management review. 

•	 The Las Vegas Finance Center, which is responsible for processing all 

EPA grants, sends a reminder notice (notification letter) requesting a final 

financial status report from the grant recipient after the project period of a 

grant expires. We believe sending out such a reminder notice to the EPA 

POs prior to the period of performance expiring would be useful in closing 

out IAs timely. 

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•	 OGD issued EPA Order 1610 in October 2006, which established the 

Agency’s first comprehensive policy for closing out IAs. 

Scope and Methodology 

We conducted this audit 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 audit objectives. We believe that the evidence obtained 

provided a reasonable basis for our findings and conclusions based on our audit 

objectives. 

After excluding certain items from the universe as discussed in Appendix A, we 

selected a statistical sample of 62 IAs using monetary unit sampling from the 

population. The sample included IAs with $23 million in unliquidated 

obligations, which represented 69 percent of our target universe. We also 

interviewed POs, grants specialists, Budget and Finance Officers, and other EPA 

officials to determine their roles in closing out IAs, deobligating funds, and 

reviewing unliquidated obligations; and to identify funds that should be 

deobligated. We conducted the audit from January 4 through April 25, 2008. 

Appendix A contains a more extensive discussion on our scope and methodology. 

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Chapter 2

Funds No Longer Needed Remain Obligated 

EPA has not closed out IAs that have at least $4.2 million of unneeded funds that 

should have been deobligated. Further, EPA had deobligated an additional 

$2.3 million between January 7 and April 25, 2008, as a result of our audit. These 

funds could be used for other environmental projects. EPA Order 1610 requires 

that IAs be closed within 270 days after the project period ends and any remaining 

funds be deobligated. We found that POs, GIAMD, and GMOs did not 

effectively monitor IAs to ensure they were timely closed out and unneeded funds 

were deobligated. Also, the annual unliquidated obligation review was not 

effective and did not identify funds that should have been deobligated and used 

for other environmental purposes. POs cited various reasons for untimely closeout of IAs, including unfamiliarity with close-out procedures and difficulties 

working with other agencies. 

Monitoring of IAs Needs Improvement 

POs, GIAMD, and GMOs did not effectively monitor IAs to ensure timely closeout so that unneeded funds were deobligated and used for other environmental 

projects. EPA Order 1610 requires that IAs be closed within 270 days after the 

project period ends and any remaining funds be deobligated. See Appendix B for 

further details on the close-out process as defined by EPA Order 1610. 

As of January 7, 2008, EPA had 318 agreements, with obligations totaling 

$33,276,951, where there was no reported activity in the last year, or the period of 

performance end date was greater than 270 days old. We selected a statistical 

sample of 62 IAs totaling $23 million, using monetary unit sampling from the 

population. As of April 25, 2008, we identified $4.2 million of unneeded funds 

that should have been deobligated. An additional $2.3 million was deobligated by 

EPA between January 7 and April 25, 2008, as a result of our audit. 

For 18 of the 62 IAs reviewed, the POs did not initiate close-out and the GMOs 

did not notify the POs that the project period ending dates had elapsed. 

Consequently, the IAs remained open beyond the project period ending dates. 

Several POs said they did not effectively monitor IAs because they were 

unfamiliar with the IA close-out procedures, and often waited for GIAMD to 

initiate close-out. Other factors included difficulties with other agencies, lack of 

performance standards, inconsistent data, and conflicting guidance. Details 

follow. 

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Untimely Close-out 

POs did not effectively monitor funds obligated under IAs. We found that funds 

remained obligated on 26 IAs after the period of performance had expired. For 

example, we found one Superfund IA, with the U.S. Coast Guard under the 

Department of Homeland Security, where the project period ended on 

September 30, 2001, with a remaining unliquidated obligation amount of 

$1.6 million. On October 26, 2005, more than 4 years after the project period 

ended, the Coast Guard told CFC that $1.5 million could be deobligated and the 

remaining $100,000 would be billed. On October 27, 2005, CFC sent an e-mail to 

the PO and GIAMD to initiate deobligating the $1.5 million. However, as of 

April 25, 2008, the entire $1.6 million unliquidated obligation balance remained 

recorded, and no amounts had been deobligated. As a result, the Superfund funds 

remained obligated more than 6 years after the project period ended and were 

unavailable for other uses. 

GMOs do not always send a reminder letter to the recipient and PO on the closeout requirement and to begin close-out procedures. EPA Order 1610 states: 

If the EPA Project Officer has not initiated close out procedures, 

within 60 calendar days after the project period has expired, the 

GMO [GIAMD] will begin close out procedures. The GMO 

[GIAMD] will contact the OCFO/CFC to determine the balance of 

funds on an IA and to find out if there are any outstanding bills 

waiting to be processed. Within 90 calendar days after the project 

period has expired, the GMO [GIAMD] will send an electronic 

close out notification to the EPA Project Officer requesting the final 

report or product(s), whether the OCFO/CFC balance is correct, 

and whether the EPA Project Officer concurs in the close out of the 

IA. The EPA Project Officer must respond to the GMO [GIAMD] 

within 120 calendar days after the project period has expired. 

We found that POs often wait to hear from GMOs to initiate close-out, and that 

GMOs do not always contact the PO. 

GMOs do not always notify the other agency that it is going to initiate close-out 

of the IA and deobligate the remaining funds. According to EPA Order 1610, 

when the performance end date is greater than 180 days and the obligated amount 

is greater than $500, the IA specialist should send a decrease amendment to the 

other agency. The decrease amendment notifies the other Agency that EPA 

considers the project complete and intends to close out the IA. By serving notice 

to other agencies, EPA can stimulate them to take action to complete the IA 

projects and submit final bills. For example, funds are obligated annually under 

one IA for access to a U.S. Department of Health and Human Services (HHS) 

Information Collection Request Review and Approval System. As of April 25, 

2008, a total of $250,000 was obligated on the IA for 2 years’ access to the 

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system. We found that even though HHS had not billed for this access, EPA 

continued to obligate additional funds. The PO was not aware HHS had not billed 

EPA. As a result of our audit, the PO contacted HHS and the $250,000 will be 

billed by and paid to HHS. 

Difficulties with Other Agencies 

EPA has not been able to reduce IA unliquidated obligations because of 

difficulties with billings from other agencies. We found that other agencies were 

inconsistent and untimely in billing EPA, or experienced significant delays in 

receiving invoices from grantees and contractors. These delays kept EPA from 

timely closing out some IAs. We found that other agencies use IA funds to award 

sub-agreements (e.g., grants, contracts, IAs, cooperative agreements, etc.). In 

some of these cases, the EPA IA project period did not coincide with the other 

agency’s sub-agreement. For example, for an IA with HHS, the project period 

expired October 1, 2006, with an unliquidated obligation amount of $224,689. As 

of April 25, 2008, the unliquidated obligation amount had not changed. 

According to the PO, HHS used the IA funds to award contracts to States with 

project periods that exceeded the IA, allowing States up to 4 years after the award 

to bill HHS. The PO said this caused billing and close-out delays. 

EPA does not enforce the specific billing instructions indicated on IAs. On the IA 

form, requests for payments must be submitted monthly, quarterly, or upon 

completion of work if they are not marked as advances. We found an instance 

where another agency did not bill in accordance with the IA terms. An IA with 

the Department of Homeland Security stipulated that the Department should bill 

EPA quarterly. Also, the Funding Authorization document stated: “Upon 

completion of scope of work, the recipient other Federal agency will submit a bill 

with detailed records of expenditures. The Agency must submit a bill within 

60 days following the disaster response completion date.” The period of 

performance was from August 30, 2005, to September 30, 2006. The Department 

of Homeland Security billed EPA just three times over the period of performance 

(August 2006, March 2007, and May 2007). The remaining unliquidated 

obligation of $793,792 was not closed out until April 2008. 

Other Agencies do not bill timely. According to a PO for a Department of Energy 

IA, that Department does not bill timely. The Department of Energy sporadically 

submitted four bills during the 21⁄2-year project period. It took more than 2 years 

after the IA expired to close out the IA. The PO said he tried to get the 

Department of Energy to submit the final bill after the project period expired 

without any success. It was not until the PO asked the grant specialist to close out 

the IA that the Department of Energy submitted its final bill, in December 2007. 

The IA and related unliquidated obligation of $125,597 were closed out on 

February 27, 2008. 

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Lack of Performance Standards 

Program managers are not consistent in establishing and measuring PO 

performance standards in accordance with OGD instructions. The OGD has 

instructed program management to add performance measures concerning IAs to 

the POs’ performance evaluations. In a January 17, 2008, memo regarding the 

management of IAs under the Performance Appraisal and Recognition System, 

the OGD stated: “...Senior Resource Officials should ensure that IA 

responsibilities are referenced, as appropriate, in 2008 PO Performance 

Agreements.” 

Also, the Superfund 120-Day Study report recommended: “For IAs, grants, and 

contracts, OARM (Office of Administration and Resources Management) should 

establish appropriate close-out performance measures and send quarterly reports 

to Senior Resource Officials with outstanding closeouts, including the amount of 

outstanding dollars.” 

For 13 of our 62 sampled agreements, the POs stated they did not have any 

performance standards concerning IAs. Other POs provided specific standards 

relating to IAs, such as: 

•	 Initiate, negotiate, and manage grants and/or IAs to achieve Agency 

strategic goals and to ensure compliance with Agency grant management 

requirements, policies, federal rules, and all applicable regulations. 

•	 Ensure that the other agency receives the goods or services specified in the 

agreement, prepare and forward a copy of the final property/equipment 

inventory and disposition recommendation to the property management 

office; and initiate appropriate close-out by preparing a written IA closeout request for submission to the Grants Information and Analysis Branch. 

While the January 17, 2008, memo provided guidance to Senior Resource 

Officials, IA responsibilities have yet to be incorporated into all POs’ 

performance standards. GIAMD has incorporated the following performance 

standards for grant personnel: 

By 9/30/08, reduces GIAMD grants and/or interagency agreements 

close-out backlog as follows: 

o	 90% of grants ending in FY 07 are closed; and 

o	 99% of grants ending prior to FY 07 are closed 

Inconsistent Data 

There is inaccurate information in the Integrated Grants Management System 

(IGMS) that is a result of problems in migrating data from the older Grants 

Information and Control System (GICS). This causes problems with the 

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Integrated Financial Management System (IFMS) as well because data in IFMS 

does not coincide with data in IGMS. After the migration to IGMS, some IAs 

retained an open status in IGMS even though they had been closed in GICS. 

Therefore, POs were unaware that some IAs remained open. Other POs do not 

use IGMS at all. 

A Senior Management Analyst in GIAMD stated: 

IGMS data for IAs is not so accurate. IGMS data for IAs is 

preceded by GICS IA data. Some of the IAs closed out in GICS were 

not properly transferred to IGMS. There were dual GICS and IA 

systems operating in FY 2007. During the period when the dual 

systems were operating any IAs closed should have been done in 

IGMS and GICS to properly close the IA. IGMS was to be the new 

grants system and GICS would be discontinued. Therefore, if an IA 

was closed in GICS when the dual systems were operating it should 

have been closed-out to both systems, which was not done. 

Data in IGMS does not always coincide with data in IFMS. The Grants 

Management Council agreed that the Agency should explore integrating IA data 

between the IFMS and IGMS, which will help expedite making decisions on 

“who owns” an IA. 

Conflicting Guidance 

EPA has conflicting policies/guidance for closing out IAs. As a result, POs are 

unclear of their responsibilities. For example, EPA Order 1610 states that IAs 

must be closed out within 270 days, while the IA Reference Library states IAs 

should be closed out within 180 days. The Resource Management Directive 

System (RMDS) states the GMO will contact the PO before the project expires or 

when the IA has had no activity for 6 months or more, while the IA Reference 

Library states the PO will contact the GMO if all bills are paid and the project is 

complete. Ten PO interviewees said they either were unclear as to who was to 

initiate close-out or were unfamiliar with the close-out procedures. Table 2-1 

shows examples of discrepancies: 

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Table 2-1: Discrepancies in IA Close-out Guidance 

Event 

Notification to 

begin close-out 

EPA Order 1610 

IAs should be 

closed out within 

270 calendar days 

IA Library 

IAs should be 

closed out within 

180 calendar days 

RMDS 2550C 

Project Officer 

Manual V6 

Prior to Project 

Period 

Expiration, or 

when there 

has been no 

activity for 

6 months 

PO should contact 

the GMO to close 

out if all bills are 

paid and project is 

complete 

GMO sends 

memoranda of 

notification that 

close-out 

procedures will 

begin to POs 

90 days prior to the 

project expiration date, 

the GMO will send a 

"Reminder Letter" to 

the recipient and the 

Project Officer 

reminding them of the 

closeout requirements 

Sources: EPA Order 1610, IA Reference Library, RMDS 2550c, Project Officer Manual 

Review Process for Unliquidated Obligations Needs Improvement 

EPA has not effectively reviewed unliquidated obligations on inactive IAs to 

identify unneeded funds. Those funds could be deobligated and used for other 

environmental projects. OCFO Policy Announcement 96-04 requires GIAMD 

and Senior Resource Officials to review the inactive IA unliquidated obligation 

report, and certify the review was completed and appropriate deobligations were 

made. We found that many of the POs were not involved in the review process, 

and that only IAs with expired periods of performance were reviewed, regardless 

of inactivity. As a result, the IA unliquidated obligation review process was not 

effective because it did not result in identifying unneeded funds. 

OCFO Policy Announcement 96-04, Review of Unliquidated Obligations, 

instructs OCFO’s Financial Management Division to distribute Headquarters IA 

reports to the Grants Administration Division (now GIAMD) and regional IA 

reports to Senior Resource Officials. The reports identify inactive IAs (no 

payment or obligation activity in 6 months or more) with remaining unliquidated 

obligation amounts. 

EPA did not identify and deobligate all unneeded IA funds because EPA did not 

effectively use the unliquidated obligation review. We found a number of reasons 

why the IA unliquidated obligation review process was not completely effective: 

•	 Not all POs receive the annual OCFO IA unliquidated obligation report 

and subsequently participate in the unliquidated obligation review for 

inactive IAs. Thirty-nine POs said they do not receive the IA unliquidated 

obligation reports and are not involved in the unliquidated obligation 

review for inactive IAs. For example, an Office of Water IA with HHS 

had a project period of October 1, 2005, through September 30, 2007, and 

an unliquidated obligation balance of $208,167. We found that no work 

was ever performed or bills submitted during the project period. 

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Subsequently, on March 3, 2008, the entire amount of $208,167 was 

deobligated and the IA was closed out. The PO was not contacted during 

the unliquidated obligation review to determine the validity and necessity 

of the unliquidated obligation amount. The PO said if he were contacted 

during the project period as part of the review, he would have said the 

funds could have been deobligated sooner and used for other 

environmental projects. 

•	 IAs with current periods of performance that have had no activity in 

180 days or more are not being reviewed. GMO staff in Regions 5 and 9 

said IAs listed on the unliquidated obligation report with a current period 

of performance are coded as active and are not reviewed to determine the 

validity and necessity of the unliquidated obligation amount. 

•	 The unliquidated obligation report is not formatted properly because it 

lists obligations by line of accounting, not by IA number. This method 

may require multiple programs to review different unliquidated obligation 

amounts for the same multi-funded IA. Therefore, results of each review 

may not be coordinated and provided to the reviewing official to arrive at 

one consolidated deobligation amount for the IA. 

Recommendations 

We recommend that the Assistant Administrator for the Office of Administration 

and Resources Management: 

2-1 Direct GIAMD and GMOs to: 

(a) Work with the POs to prepare decrease amendments to deobligate 

the remaining $4.2 million in IA unliquidated obligations 

identified during our audit and initiate close-out action. 

(b)	 Ensure the IAs with $2.3 million deobligated during the audit are 

closed out. 

2-2 Direct OGD to ensure EPA Order 1610 is consistently followed, which 

includes: 

(a) GMOs notifying the PO that the IA is expiring before the project 

period ends. 

(b)	 POs initiating close-out of the project once a project is complete 

and all applicable costs have been billed or paid. 

(c) GMOs initiating close-out of the IA if the PO has not done so after 

the end of the IA project period. 

(d) GMOs sending close-out notices to the other agencies, the PO, and 

CFC for IAs where the project period end date is greater than 

270 days old. 

11 
09-P-0086 

2-3 Direct OGD to work with other agencies on developing standard billing 

practices. 

2-4 Direct OGD to work with the GMOs and POs to ensure compliance with 

the existing deobligation and close-out procedures under EPA Order 1610. 

When other agencies do not respond within 90 days to the decrease 

amendments, have GIAMD/GMOs send the decrease amendment to CFC 

and instruct it to deobligate the remaining funds and administratively and 

financially close out the IAs. 

2-5 Follow through with program offices to ensure they develop performance 

measures that are incorporated into PO performance standards which hold 

the PO accountable for their performance in monitoring and timely closing 

out IAs. 

2-6 Ensure the IA data in GICS and IGMS are reconciled. 

We recommend that the Chief Financial Officer: 

2-7 Develop procedures that ensure compliance with OCFO Policy 

Announcement 96-04 and require all POs responsible for managing and 

closing out IAs to participate in the unliquidated obligation review and 

determine the validity and necessity of all inactive IAs for current and 

expired project periods. 

2-8 Reformat the unliquidated obligation report in order of IA number and 

require that GIAMD and GMOs forward the report to the PO of record 

and his/her supervisor, so a single review of the entire unliquidated 

obligation amount can be performed. 

Agency Response and OIG Evaluation 

EPA agreed with the majority of our recommendations and its proposed 

corrective actions should address our recommendations. The Agency 

reported that, as of November 24, 2008, the Agency had deobligated more 

than $320,000 of the $4.2 million and closed out 6 of 14 combined 

agreements. The Agency is in the process of issuing interim procedures to 

implement the Office of Federal Procurement Policy guidance on 

interagency acquisitions. These procedures will help ensure that IAs 

involving the use of other agencies contracts are in the best interest of the 

government. The Agency also decided to move to IA Shared Service 

Centers to enhance the efficiency and effectiveness of the IA process. 

In its response to the draft report, EPA provided further clarification on the 

following issues noted: 

12 
09-P-0086 

•	 EPA stated that EPA Order 1610 provides a cradle-to-grave 

framework for IA close-out. The OIG concurs that EPA Order 

1610 does provide an adequate framework if followed, and if there 

is no other conflicting guidance. 

•	 The Office of Administration and Resources Management requested 

that the OIG revise this recommendation to require OGD to work 

with GMOs and POs to ensure compliance with the existing 

deobligation and close-out procedures under EPA Order 1610. We 

concur and revised the language in the final report. 

•	 OGD is currently developing the Grants Data Mart and will ensure that 

IGMS is updated with information that is currently in GICS but not in 

IGMS. We concur with this action plan. 

•	 OCFO developed a standard IA report that enables offices to pull real-time 

inactive unliquidated obligation information. The document transaction 

number in these reports provides the IA number. We concur with this 

action. 

The full text of the Agency response is in Appendix D. 

13 
09-P-0086 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. Page Completion Claimed Agreed To 

No. No. Subject Status1 Action Official Date Amount Amount 

2-1 11 Direct GIAMD and GMOs to: 

(a) Work with the POs to prepare decrease O

amendments to deobligate the remaining 

$4.2 million in IA unliquidated obligations 

identified during our audit and initiate 

close-out action. 

(b) Ensure the IAs with $2.3 million deobligated C

during the audit are closed out. 

2-2 11 Direct OGD to ensure EPA Order 1610 is 

consistently followed, which includes: 

(a) GMOs notify the PO that the IA is expiring O

before the project period ends. 

(b) POs initiating close-out of the project once a O

project is complete and all applicable costs 

have been billed or paid. 

(c) GMOs initiating close-out of the IA if the PO O

has not done so after the end of the IA project 

period. 

(d) GMOs sending close-out notices to the other O

agencies, the PO, and CFC for IAs where the 

project period end date is greater than 

270 days old. 

2-3 12 Direct OGD to consult with other agencies on O 

developing standard billing practices. 

2-4 12 Direct OGD to work with the GMOs and POs to O 

ensure compliance with the existing deobligation 

and close-out procedures under EPA Order 1610. 

When other agencies do not respond within 

90 days to the decrease amendments, have 

GIAMD/GMOs send the decrease amendment to 

CFC and instruct it to deobligate the remaining 

funds and administratively and financially close out 

the IAs. 

2-5 12 Follow through with program offices to ensure they O 

develop performance measures that are 

incorporated into PO performance standards which 

hold the PO accountable for their performance in 

monitoring and timely closing out IAs. 

2-6 12 Ensure the IA data in GICS and IGMS are O 

reconciled. 

Assistant Administrator,
 

Office of Administration and 

Resources Management
 

Assistant Administrator,
 

Office of Administration and 

Resources Management
 

Assistant Administrator,
 

Office of Administration and 

Resources Management
 

Assistant Administrator,
 

Office of Administration and 

Resources Management
 

Assistant Administrator,
 

Office of Administration and 

Resources Management
 

Assistant Administrator,
 

Office of Administration and 

Resources Management
 

 $4,200 $4,200 Ongoing 

 $2,300 $2,300 11/24/08 

Ongoing 

Ongoing 

Ongoing 

3/31/09 

6/30/09 

Ongoing 

9/09 

6/30/09 

14 
Rec. 

No. 

2-7 

2-8 

Page 

No.

12 

12 

RECOMMENDATIONS 

 Subject Status1 

Develop procedures that ensure compliance with 

OCFO Policy Announcement 96-04 and require all 

POs responsible for managing and closing out IAs 

to participate in the unliquidated obligation review 

and determine the validity and necessity of all 

inactive IAs for current and expired project periods. 

O 

Reformat the unliquidated obligation report in order 

of IA number and require that GIAMD and GMOs 

forward the report to the PO of record and his/her 

supervisor, so a single review of the entire 

unliquidated obligation amount can be performed. 

O 

Action Official 

Chief Financial Officer 

Chief Financial Officer 

Planned 

Completion 

Date 

6/30/09 

4/4/09 

09-P-0086 

POTENTIAL MONETARY 

BENEFITS (in $000s) 

Claimed 

Amount 

Agreed To 

Amount 

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 

15 
09-P-0086 

Appendix A 

Details on Scope and Methodology 

We reviewed laws and regulations pertaining to IAs, such as the Economy Act. We reviewed 

EPA policies and guidance, such as EPA Order 1610, No Cost Amendments, Processing Invoices 

and Close out of Interagency Agreements. We reviewed Policy Announcement 96-04, Review of 

Unliquidated Obligations, issued by OCFO. We also reviewed IA guidance posted on the 

“Grants” intranet Website and the IA Reference Library Website. 

We conducted interviews with officials from GIAMD and OCFO. We also interviewed program 

officials from the Office of Research and Development in Las Vegas, and the Region 8 

Superfund office, to obtain an understanding of their policies and practices for monitoring and 

deobligating unneeded IA funds. We did not review the internal controls over EPA’s IFMS or 

the Interagency Document On-Line Tracking System from which we obtained information, but 

relied on the internal control evaluation conducted during the audit of EPA’s FY 2007 financial 

statements. 

We obtained the universe of open obligations for IAs, which CFC extracted from the Interagency 

Document On-Line Tracking System, as of January 7, 2008. The report obtained from CFC 

identified 1,388 open obligations totaling $496,998,575. We determined the population by 

removing: (1) IAs with current periods of performance and activity within the past 180 days; 

(2) IAs with periods of performance ending less than 270 days prior to January 7, 2008; and 

(3) IAs with the periods of performance start date less than a year. This population resulted in 

318 IAs totaling $33.3 million in open obligations. 

We pulled a statistical sample of 62 IAs, totaling $23 million, using monetary unit sampling 

from the $33.3 million of open obligations. The list of sampled IAs is in Appendix C. We 

obtained the financial copies of the IAs from CFC to determine periods of performance, amounts 

obligated, names of project officers, names of grants specialists, and names of the other agencies. 

In addition, we reviewed the descriptions of the goods and services provided to EPA. We also 

reviewed any available correspondence and work plans provided in the IA files. We developed a 

questionnaire to use in contacting project officers, and other grants, finance, and program 

officials. The objectives of our questionnaire were to determine whether EPA has adequate 

controls in place to identify and deobligate unneeded IA funds and the amount of obligations 

under IAs that could potentially be deobligated. We interviewed POs, grant specialists, budget 

and finance officers, and other EPA officials to determine their roles in closing out IAs, 

deobligating funds, and reviewing unliquidated obligations; and to identify funds that should be 

deobligated. 

Internal Control Structure 

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

objectives. This included EPA’s polices and procedures for administering and managing the 

deobligation and close-out of IAs, and for reviewing IA unliquidated obligations. We examined 

EPA’s FY 2007 Federal Managers’ Financial Integrity Act Annual Assurance Letters issued by 

16 
09-P-0086 

the Regional Administrators and the Assistant Administrators for the various EPA program 

offices. For 2007, the Agency did not report any material weaknesses related to IAs. In 

addition, we examined EPA's A-123 Review to identify any weaknesses related to unliquidated 

obligations under IAs. EPA identified no material weaknesses in its A-123 review of internal 

controls. The Agency identified six significant deficiencies, but none related to unliquidated 

obligations for IAs. 

Prior Audit Coverage 

We researched prior EPA OIG, Government Accountability Office, and other reports related to 

IAs. We reviewed an EPA report, Superfund: Building on the Past, Looking to the Future 

(commonly known as the 120-Day Study), issued April 22, 2004. We noted five pertinent EPA 

OIG reports, as listed in Table A-1: 

Table A-1: Prior EPA OIG Reports Related to IAs 

Report No. Title Date 

2000-P-000004-R5-000329 Timely Deobligation of Interagency Agreement Funds December 10, 1999 

2000-P-0029 Follow-up on Headquarters Interagency Agreements September 29, 2000 

2001-P-00011 Superfund Interagency Agreements June 22, 2001 

2007-P-00011 Interagency Agreements to Use Other Agencies’ 

Contracts Need Additional Oversight 

March 27, 2007 

2007-P-00021 EPA Can Improve Its Managing of Superfund Interagency 

Agreements with U.S. Army Corps of Engineers 

April 30, 2007 

Source: OIG analysis 

17 
09-P-0086 

Appendix B 

EPA Order 1610 Timeline of 

Close-out Activities for IAs 

Event Procedure 

IA Project Period 

Expires 

EPA POs must contact the GMO to initiate close-out of an IA if they know that a 

project is complete and that all costs have been billed and paid. 

60 Days After Project 

Period Expires 

The GMO begins close-out procedures if the EPA PO has not initiated. The 

GMO contacts OCFO/CFC to determine the balance of funds on an IA and to 

find out if there are any outstanding bills waiting to be processed. 

90 Days After Project 

Period Expires 

The GMO sends an electronic close-out notification to the PO requesting the 

final report or product(s), whether the CFC balance is correct, and whether the 

PO concurs in the close-out of the IA. 

Within 120 Days After 

the Project Period 

Expires 

PO responds to the GMO’s request. 

Within 180 Days After 

the Project Period 

Expires 

Remaining balance of $500 or less: GMO issues a close-out letter to the other 

Agency and a copy to the CFC and the PO. The CFC automatically deobligates 

any remaining funds. 

Remaining balance over $500: GMO prepares a decrease amendment to close 

out the IA, obtains Award Official’s signature, and sends the decrease 

amendment to the other Agency for acceptance. 

90 Days After 

Notifying the Other 

Agency 

Upon receipt of the signed decrease amendment, the GMO sends a copy to the 

CFC and EPA PO. The CFC deobligates remaining funds. 

If the GMO does not receive a response to the decrease amendment, it 

contacts the CFC electronically to obtain the current balance of the IA. If the 

balance has not changed and there are not any outstanding financial issues, it 

sends the CFC the decrease amendment, with a memorandum explaining that 

the other agency failed to sign the decrease amendment. The CFC deobligates 

the remaining funds. The GMO considers IA administratively and financially 

closed out. 

If the other agency notifies the GMO in writing of any discrepancies in the 

balance of the decrease amendment, the GMO notifies the CFC and PO for 

resolution. The CFC and PO must work with the other agency to reconcile the 

differences. The reconciliation might require the GMO to reissue the decrease 

amendment with the reconciled balance. The GMO sends the revised decrease 

amendment and a copy to the CFC and PO. The CFC deobligates the 

reconciled balance. 

Within 270 Days After 

the Project Period 

Expires 

The IA is administratively and financially closed out. 

Source: EPA Order 1610 

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09-P-0086 

Appendix C 

Obligations on Sampled IAs 

IA No. Location 

Period of 

Performance 

End Date 

Obligation 

Amount 

Unliquidated 

Obligation 

Amount as of 

01/07/08 

Deobligated 

from 01/07/08 

to 04/25/08 

Amount That 

Should Be 

Deobligated 

(as of 

04/25/08) Cause(s) 

DW69922101 HQ OSWER 09/30/01 $2,000,000 $1,594,850 $0 $1,481,9252

 1 

DW19955248 R9 OW 02/28/02 21,219,244 953,676 0 953,676 5 

DW96933601 HQ OARM 08/30/06 2,200,000 846,547 0 0 5 

DW70946000 R4 OW 09/30/06 1,000,000 793,793 793,793 0 2, 4 

DW96942093 R2 OSWER 01/15/09 6,207,156 6,207,156 0 0 5 

DW13849601 HQ OSWER 09/30/03 754,000 26,507 0 26,507 1 ,4, 5 

DW69922041 HQ OSWER 09/30/06 115,000 115,000 0 0 2, 4 

DW75957552 R10 OW 09/30/07 208,167 208,167 208,167 0 5 

DW70945996 R4 OW 06/30/06 16,000,000 327,900 0 0 4 

DW75955615 R9 OW 12/31/08 635,600 444,000 0 0 5 

DW75832901 HQ OIG 09/30/04 129,000 93,4053

 69,731 0 1 

DW49995201 HQ OA 05/31/05 68,973 66,066 66,066 0 1, 5 

DW89983801 HQ OAR 09/30/06 270,000 45,798 0 45,798 1, 2, 4, 5 

DW13789901 HQ OSWER 09/30/07 1,010,000 100,946 0 100,946 1, 5 

DW14897801 HQ OSWER 09/30/05 5,174,999 158,279 0 158,279 1, 4, 5 

DW70946056 R4 OW 09/30/05 3,000 821 821 0 1, 4 

DW70945995 R4OW 03/31/06 700,000 253,681 253,681 0 1, 4 

DW89946010 R4 OW 10/31/10 51,061 17,864 0 17,864 

DW03954801 R8 OECA 09/30/08 684,718 98,001 0 0 3, 5 

DW12922405 HQ OPPTS 09/30/08 100,000 100,000 0 0 1, 2, 3, 4, 

5 

DW13921975 HQ OSWER 09/30/10 1,050,003 1,050,003 0 0 5 

DW13948136 R5 GLNPO 09/30/10 642,937 642,937 0 0 2, 5 

DW14922068 HQ OSWER 06/30/09 400,000 400,000 0 0 

DW14953939 R8 OSWER 09/30/08 400,000 400,000 0 0 3, 5 

DW14921598 HQ ORD 03/31/09 360,000 311,067 0 0 5 

DW14950447 R6 OSWER 12/31/10 53,864 53,864 0 0 

DW14944226 R3 OSWER 01/01/11 100,000 100,000 0 0 5 

DW14922304 HQ OW 12/20/09 50,000 50,000 0 0 3, 5 

DW15945958 R4 OEA 09/30/08 100,000 26,460 0 0 5 

DW16922030 HQ OSWER 09/30/07 140,000 67,500 0 67,500 1, 4, 5 

DW21912901 HQ OAR 12/31/06 2,433,979 46,290 0 46,290 5 

DW47948022 R5 GLNPO 12/31/06 1,250,000 247,955 0 247,955 1, 2, 5 

DW47945853 R4 OPM 12/31/06 3,073,338 49,212 0 0 

DW47948051 R5 OSWER 03/29/08 707,000 43,118 0 43,118 1, 3, 5 

DW64922217 RTP OPPTS 01/31/08 200,000 200,000 0 0 5 

DW69989901 HQ OSWER 09/30/06 1,900,000 395,936 0 395,936 2, 5 

DW69922463 HQ OAR 09/30/07 29,000 29,000 0 0 2, 3 

2

 This amount was recommended as a partial deobligation in 2005, pending final close-out.
 3

 This IA unliquidated obligation amount as of 01/07/08 includes the amount of $23,675 deobligated on 10/03/07. 

19 
09-P-0086 

IA No. Location 

Period of 

Performance 

End Date 

Obligation 

Amount 

Unliquidated 

Obligation 

Amount as of 

01/07/08 

Deobligated 

from 01/07/08 

to 04/25/08 

Amount That 

Should Be 

Deobligated 

(as of 

04/25/08) Cause(s) 

DW70921868 HQ OSWER 09/30/05 $396,000 $68,991 $0 $0 2 

DW75955725 R9 OW 12/31/09 1,154,600 1,154,600 0 0 2, 5 

DW75955726 R9 OW 12/31/09 344,500 344,500 0 0 2, 5 

DW75921732 HQ OSWER 09/30/05 2,200,000 23,571 0 0 2 

DW75922294 HQ OSWER 09/30/06 2,000,000 323,569 0 0 2 

DW75961101 HQ OARM 09/30/06 2,272,476 218,202 218,202 0 1, 3, 5 

DW75905601 HQ OPPTS 10/01/06 1,150,000 224,689 0 0 2, 3, 5 

DW75948098 R5 OW 12/31/07 1,121,300 100,000 0 0 5 

DW75955684 R9 OW 12/31/08 1,525,000 262,000 0 0 1, 2, 5 

DW75955703 R9 OW 12/31/09 120,000 120,000 0 0 5 

DW75955626 R9 OW 12/31/08 266,500 266,500 0 0 2, 5 

DW75922398 HQ OEI 09/30/08 185,000 185,000 0 0 1, 2, 3, 5 

DW89964801 HQ OSWER 07/31/06 600,000 122,805 122,805 0 1, 5 

DW89921578 HQ ORD 09/30/06 383,536 125,597 125,597 0 2 

DW89922320 HQ OW 06/30/11 260,000 260,000 0 0 5 

DW96954001 HQ OW 03/31/07 3,889,000 398,269 398,269 0 3, 5 

DW96950473 R6 OSWER 09/30/07 3,290,000 415,077 0 415,077 

DW96940290 R1 OSWER 12/31/08 900,000 500,656 0 0 

DW96945989 R4 WMD 07/31/10 563,000 539,811 0 0 

DW96945877 R4 WMD 12/31/05 3,430,000 223,753 0 223,753 5 

DW96947580 R5 OSWER 12/31/07 37,097,000 282,444 0 0 1, 5 

DW96941780 R2 OSWER 12/31/08 350,000 34,832 0 TBD4 3 

DW96941991 R2 OSWER 12/31/08 1,300,000 121,266 0 TBD 3 

DW96946034 R4 WMD 09/30/10 250,000 250,000 0 0 

DW96942095 R2 OSWER 06/30/10 50,000 50,000 0 0 3 

Total $137,192,186 $23,181,934 $2,257,132 $4,224,624 

Source: OIG analysis 

Cause Legend: 

Reference Description of Cause

 1 Ineffective monitoring of IAs 

2 Difficulties with other agencies 

3 Lack of performance standards 

4 Conflicting guidance 

5 Ineffective unliquidated obligation review process 

4

 Some portion of the amount should be deobligated in FY 2008. EPA cannot determine how much will be 

deobligated since it will have to discuss it with the other agency to make a final decision. 

20 
09-P-0086 

Appendix D 

Agency Response to Draft Report 

November 24, 2009 

MEMORANDUM 

SUBJECT:	 Response to Draft Audit Report 

EPA Should Strengthen Internal Controls over 

Interagency Agreement Unliquidated Obligations 

Project No. 2008-18 

FROM: Luis A. Luna 

Assistant Administrator 

Office of Administration and Resources Management 

Lyons Gray 

Chief Financial Officer 

TO: Paul C. Curtis 

Director, Financial Statement Audits 

Thank you for the opportunity to respond to the subject Office of Inspector General (OIG) Draft 

Audit Report (Report). The Report evaluates EPA’s internal controls for reviewing unliquidated 

interagency agreement (IA) obligations, deobligating funds and closing IAs. 

We recognize the importance of having an effective process for managing IAs so that unneeded 

IA funds are deobligated promptly and allocated to other high priority environmental projects. 

We appreciate the Report’s description of noteworthy Agency achievements in this area. We 

suggest adding to the final Report three other significant accomplishments: 

•	 The issuance of EPA Order 1610 in October 2006, which established the Agency’s first 

comprehensive policy for closing out IAs. 

•	 The recent issuance of interim procedures to implement the Office of Federal Procurement 

Policy guidance on interagency acquisitions. These procedures will help ensure that IAs 

involving the use of other agencies’ contracts are in the best interest of the government. 

•	 The Agency’s recent decision to move to IA Shared Service Centers. Centralizing the 

management of IAs will enhance the efficiency and effectiveness of the IA process. 

We generally agree with the Report findings concerning the need to strengthen internal controls 

over IA unliquidated obligations. The Report contains seven recommendations for improving 

21 
09-P-0086 

EPA’s management of IA unliquidated obligations, five of which are directed to the Office of 

Administration and Resources Management (OARM) and two of which are directed to the Office 

of the Chief Financial Officer (OCFO). The Agency’s response to those recommendations is 

provided below. 

Recommendation 2-1: Direct the Grants and Interagency Agreement Management 

Division (GIAMD) and Grants Management Offices (GMOs) to: 

(a) Work with the Project Officers (POs) to prepare decrease amendments to deobligate 

the remaining $ 4.2 million in IA unliquidated obligations identified during the audit 

and initiate close-out action. 

(b) Ensure that IAs with $2.3 million deobligated during the audit are closed out. 

Response: OARM agrees with this recommendation. The Office of Grants and Debarment (OGD), in 

coordination with the responsible Grants Management Offices (GMOs), has deobligated to date more 

than $320,000 of the $4.2 million of IA unliquidated obligations, and has closed out 6 of the combined 

14 agreements. OGD has also ensured that all of the IAs, totaling $2.3 million and deobligated during 

the audit, were closed out. OGD will continue to work with the responsible Project Officers (POs) and 

the other agencies to deobligate the remainder of the $4.2 million and to closeout the agreements as 

soon as possible. 

Recommendation 2-2: Direct the Office of Grants and Debarment (OGD) to develop a 

comprehensive policy for closing out IAs that includes: 

(a) GMOs notifying the PO that the IA is expiring before the project period ends. 

(b) POs initiating close-out of the project once a project is complete and all applicable costs 

have been billed or paid. 

(c) GMOs initiating close-out of the IA if the PO has not done so, so many days after the 

end of the IA project period. 

(d) GMOs sending close-out notices to other agencies, the PO, and the Cincinnati Finance 

Center (CFC) where the project period end date is greater than 270 days old. 

(e) Receiving billings of IA expenses from other agencies on a quarterly basis. 

Response: OARM disagrees with the suggestion that EPA does not have in place a 

comprehensive policy for closing out IAs. EPA Order 1610 provides a cradle-to-grave 

framework for IA closeout, including the elements contained in recommendations 2-2 (b)-(d). 

OARM, however, agrees with the OIG that providing POs advance notice of the approaching 

expiration of an IA project will expedite the close out process. Accordingly, OGD will 

implement recommendation 2-2(a) by developing an electronic advance notification requirement. 

The notification will alert POs that their IAs will expire within one month and describe the 

required steps for closing out the agreement. OGD anticipates having the advance notification 

process in place by no later than March 31, 2009. 

OARM agrees with the underlying intent of recommendation 2-2(e) to further timely billing by 

other federal agencies, but believes that the suggestion to receive billings on a quarterly basis 

needs further exploration. There are a number of factors that must be carefully considered. They 

22 
09-P-0086 

include EPA’s lack of control over the billing practices of other agencies, potential adverse 

effects on the performance of critical programmatic work, and the fact that the other agency 

billing practices are influenced by disparate billing procedures of contractors and grantees 

working under IAs. 

OARM and OCFO will consult with other federal agencies and EPA Headquarters and Regional 

Offices on this issue. Based on the results of that consultation, OGD will develop, by June 30, 

2009, guidance on improving the timeliness of IA billings and include the guidance in the 

Agency’s IA Manual. 

Recommendation 2-3: Direct OGD to perform a review to determine the status [of] all 

existing IAs with unliquidated balances where the project period end date is greater than 

180 days old. When other agencies do not respond within 90 days to the decrease 

amendments, have GIAMD/GMOs send the decrease amendment to CFC and instruct it to 

deobligate the remaining funds and administratively and financially close out the IAs. 

Response: The procedures described in this recommendation basically track the 

deobligation/closeout process of EPA Order 1610. Accordingly, OARM requests that the OIG 

revise this recommendation to require OGD to work with GMOs and POs to ensure compliance 

with the existing deobligation and closeout procedures under EPA Order 1610. The Order 

explicitly requires EPA to review existing funds-out IAs with project periods that have been 

expired for more than 180 days for deobligation and closeout and send decrease amendments to 

the other agency. If the other agency does not respond within 90 days to a decrease amendment, 

the Order calls for EPA to pursue deobligation and closeout automatically, except where there 

are outstanding financial issues or changes in the agreement balance. OARM believes these 

limited exceptions are appropriate to reduce the risk of premature liquidation of valid 

obligations. 

Recommendation 2-4: Follow through with program offices to ensure they develop 

performance measures that are incorporated into PO performance standards and hold the 

PO accountable for their performance monitoring and timely closing out IAs. 

OARM agrees with this recommendation. By memo dated September 5, 2008, OGD requested 

Senior Resource Officials to ensure that IA responsibilities are referenced, as appropriate, in 

Fiscal Year (FY) 2009 PO performance agreements. OGD will build on that memo by 

convening a cross-Agency workgroup to develop by September 2009, specific IA performance 

measures for FY 2010 agreements. 

23 
09-P-0086 

Recommendation 2-5: Reconcile the IA data in the Grants Information Control System 

and the Integrated Grants Management System. 

OARM believes that this recommendation is unnecessary. OGD is currently in the process of 

decommissioning the Grants Information and Control System (GICS). One step in that process 

is to ensure that Integrated Grants Management System (IGMS) is updated with information that 

is currently in GICS but not in IGMS. This will ensure that IGMS reflects comprehensive IA 

information. By June 30, 2009, the Grants Data Mart, which draws information directly from 

IGMS, will replace GICS as the reporting tool for IAs. 

Recommendation 2-6: Develop procedures that ensure compliance with OCFO Policy 

Announcement 96-04 and require all Project Officers responsible for managing and closing 

out IAs to participate in the unliquidated obligation review and determine the validity and 

necessity of all inactive IAs for current and expired project periods. 

Response: OCFO and OARM agree with this recommendation. OGD will implement it by 

revising the Agency’s IA manual by June 30, 2009 to: 1) highlight the importance of achieving 

the objectives of Policy Announcement 96-04; 2) make clear that GMOs and POs have the 

primary responsibility for completing IA unliquidated obligation reviews and closing out IAs; 

and 3) include procedures for PO involvement in the unliquidated obligation review process. 

Through the FY 2008 Management Integrity (FMFIA) process, OCFO raised the level of 

accountability for the unliquidated obligations to the Assistant Administrators and Regional 

Administrators. OCFO will continue this emphasis in the FY 2009 FMFIA process. Also, in 

keeping with the plan to eliminate free-standing policies, OCFO will incorporate the Policy 

Announcement 96-04 review requirements into the RMDS Administrative Control of 

Appropriated Funds (Funds Control Manual) chapter when it is updated. 

Recommendation 2-7: Reformat the unliquidated obligation report in order of IA number 

and require that GIAMD and GMOs forward the report to the PO of record and his/her 

supervisor, so a single review of the entire unliquidated obligation amount can be 

performed. 

Response: As noted in the FY 2008 Review of Unliquidated Obligations guidance memo (April 

4, 2008), OCFO developed a standard IA ORBIT report that enables offices to pull real-time 

inactive unliquidated obligation information. The document transaction number in these reports 

provides the IA number. The report can be sorted by Responsible Program Implementation 

Office or transaction number. OCFO will assist OGD as needed to ensure they have the most 

useful sort. OGD will be responsible for distributing the report to POs. 

Thank you again for the opportunity to comment on the draft Report. We look forward to 

receiving your final Report. If you have any questions concerning our comments, please contact 

Howard Corcoran or Lorna McAllister. 

cc: Senior Resource Officials 

24 
09-P-0086 

Melissa Heist 

Junior Resource Officials 

 Grants Management Officers 

Howard Corcoran 

 Denise Benjamin Sirmons 

 Sandra Waugh-Williams

 Jeanne Conklin 

Francis Roth 

Kathie Herrin 

 Lorna McAllister 

Susan Dax 

Raffael Stein 

Melvin Visnick 

 Jim Wood 

Jeff Marsala 

25 
09-P-0086 

Appendix E 

Distribution 

Office of the Administrator 

Acting Assistant Administrator, Office of Administration and Resources Management 

Acting Chief Financial Officer 

Director, Office of Grants and Debarment 

Director, Office of Policy and Resources Management, Office of Grants and Debarment 

Deputy Director, Office of Grants and Debarment 

Acting Deputy Chief Financial Officer 

Acting Division Director, National Policy, Training and Compliance Division, Office of Grants 

and Debarment 

Acting Director, Office of Financial Services, Office of the Chief Financial Officer 

Acting Director, Office of Financial Management, Office of the Chief Financial Officer 

Agency Follow-up Official (the Chief Financial Officer) 

Agency Follow-up Coordinator 

Acting General Counsel 

Acting Associate Administrator, Office of Congressional and Intergovernmental Relations 

Acting Associate Administrator, Office of Public Affairs 

Audit Follow-up Coordinator, Office of the Chief Financial Officer 

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

Deputy Inspector General 

26