U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

National Association of State 

Departments of Agriculture 

Research Foundation Needs to 

Comply With Certain 

Federal Requirements and 

EPA Award Conditions to 

Ensure the Success of Pesticide 

Safety Education Programs 

Report No. 14-P-0131 March 10, 2014 

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about the EPA OIG.
 

 

Report Contributors: Angela Bennett 

 Philip Cleveland

 Bill Spinazzola 

Abbreviations 

ACH Automated Clearing House 

CFR Code of Federal Regulations 

EPA U.S. Environmental Protection Agency 

FFR Federal Financial Report 

FY Fiscal Year 

MTDC Modified Total Direct Costs 

NASDA National Association of State Departments of Agriculture 

NASDARF National Association of State Departments of Agriculture Research Foundation 

NBC National Business Center 

OGD Office of Grants and Debarment 

OIG Office of Inspector General 

OMB Office of Management and Budget 

SF Standard Form 

Cover photo: Pesticide being applied to a field. (EPA photo) 

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us through one of the following methods: contact us through one of the following methods:
 

email: OIG_Hotline@epa.gov email: OIG_WEBCOMMENTS@epa.gov 

phone: 1-888-546-8740 phone: 1-202-566-2391 

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write:	 EPA Inspector General Hotline write: EPA Inspector General 

1200 Pennsylvania Avenue, NW 1200 Pennsylvania Avenue, NW 

Mailcode 2431T Mailcode 2410T 

Washington, DC 20460
 Washington, DC 20460 
 

 

 

U.S. Environmental Protection Agency 14-P-0131 

Office of Inspector General March 10, 2014 

At a Glance
 

Why We Did This Review 

The U.S. Environmental 

Protection Agency (EPA) 

Office of Inspector General 

(OIG) reviewed the funds 

drawn by the National 

Association of State 

Departments of Agriculture 

Research Foundation 

(NASDARF) 

under EPA Cooperative 

Agreement No. 83456201. 

The award provided 

$3.6 million to: 

 Evaluate and improve 

existing pesticide safety 

training programs and 

materials. 

 Identify areas in the program 

where additional pesticide 

safety education is needed. 

The purpose of our 

examination was to determine 

whether costs incurred were 

allowable in accordance with 

federal requirements and the 

agreement and whether 

NASDARF conducted 

procurements in accordance 

with federal regulations and 

the agreement. 

This report addresses the 

following EPA themes: 

 Embracing EPA as a high 

performing organization. 

 Taking action on toxics 

and chemical safety. 

For further information, 

contact our public affairs office 

at (202) 566-2391. 

The full report is at: 

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

20140310-14-P-0131.pdf 

National Association of State Departments of Agriculture 

Research Foundation Needs to Comply With Certain 

Federal Requirements and EPA Award Conditions to Ensure 

the Success of Pesticide Safety Education Programs 

What We Found 

NASDARF’s financial management system did not We questioned meet certain federal requirements and conditions of $571,626 of potentially the EPA award. Specifically, NASDARF incorrectly unallowable costs. 

calculated and applied indirect cost rates, reported 

outlays for indirect costs in excess of recorded expenses, and drew funds that 

exceeded its cash needs. As a result, we questioned $275,650. 

NASDARF did not document its procurement selection process or provide 

documentation to support any cost or price analysis performed on its project 

management subcontract as required by the Code of Federal Regulations 

(CFR) in 40 CFR Part 30. NASDARF did not determine the reasonableness of 

costs for two subgrants as required by conditions of the award. In addition, 

NASDARF’s written procurement policy lacked procedures to ensure 

compliance with 40 CFR Part 30. As a result, we questioned $295,976. 

The OIG also identified an unresolved issue pertaining to potentially 

unallowable costs of $118,324 drawn under a prior EPA award. The costs, 

recorded as a refundable advance, represent funds received as of year-end but 

not yet earned. 

Recommendations and Responses 

We recommend that the EPA disallow and recover $571,626 pertaining to the 

financial management and procurement issues. We also recommend that the 

EPA require NASDARF to recalculate its indirect cost rates to be consistent 

with 2 CFR Part 230 and establish controls to ensure that its financial 

management and procurement systems comply with federal requirements and 

conditions of the award. Further, we recommend that certain special conditions 

be included for all active and future EPA awards until NASDARF meets all 

applicable federal financial and procurement requirements. For the $118,324 of 

potentially unallowable costs, the EPA should review and recover costs 

determined to be unallowable. NASDARF generally did not agree with the OIG 

findings and recommendations. The EPA agreed with the OIG 

recommendations and stated it would work with NASDARF to resolve the 

issues. 

 Noteworthy Achievements 

In response to OIG finding outlines, NASDARF modified its subcontract for 

project management services and its written procurement procedures to include 

OIG-recommended requirements pertaining to 40 CFR Part 30. 
 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

March 10, 2014 

MEMORANDUM 

SUBJECT: National Association of State Departments of Agriculture Research Foundation 

Needs to Comply With Certain Federal Requirements and EPA Award Conditions to 

Ensure the Success of Pesticide Safety Education Programs

 Report No. 14-P-0131 

FROM: Arthur A. Elkins Jr. 

TO: Howard Corcoran, Director 

Office of Grants and Debarment 

 Office of Administration and Resources Management 

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. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide us your proposed management 

decision on the findings and recommendations contained in this report before you formally complete 

resolution with the recipient. Your proposed management decision is due in 120 days, or on July 8, 2014. 

To expedite the resolution process, please also email an electronic version of your management decision 

to adachi.robert@epa.gov. 

Your response will be posted on the OIG’s public website, along with our memorandum commenting on 

your response. Your response should be provided as an Adobe PDF file that complies with the 

accessibility requirements of Section 508 of the Rehabilitation Act of 1973, as amended. The final 

response should not contain data that you do not want to be released to the public; if your response 

contains such data, you should identify the data for redaction or removal. This report will be available 

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

If you or your staff have any questions regarding this report, please contact Richard Eyermann, 

acting Assistant Inspector General for Audit, at (202) 566-0565 or eyermann.richard@epa.gov; or 

Robert Adachi, Product Line Director, at (415) 947-4537 or adachi.robert@epa.gov. 
 

 

National Association of State Departments of Agriculture 14-P-0131 

Research Foundation Needs to Comply With Certain 

Federal Requirements and EPA Award Conditions to Ensure 

the Success of Pesticide Safety Education Programs 

Table of Contents 

Chapters 

1 Independent Accountant’s Report.................................................................... 1

 2 Introduction ........................................................................................................ 4 

Purpose ...................................................................................................... 4 

Background ................................................................................................ 4 

 Noteworthy Achievements .......................................................................... 5 

 NASDARF and EPA Responses ................................................................. 5 

3 Results of Examination ..................................................................................... 6
 

Recommendation ....................................................................................... 7 

NASDARF and EPA Responses ................................................................ 7 

OIG Comments ........................................................................................... 7 

4 Financial Management System Did Not Meet Certain 

 Federal Requirements ....................................................................................... 8
 

Indirect Cost Rates Were Calculated and Applied Incorrectly..................... 8 

Reported Costs Exceeded Amounts Recorded in General Ledger ............. 10 

Accepted Cash Management Practices Not Followed ................................ 11 

Conclusion .................................................................................................. 14 

Recommendations ..................................................................................... 15 

NASDARF Response ................................................................................. 15 

EPA Response ........................................................................................... 17 

OIG Comments .......................................................................................... 17 

5 Procurements Did Not Meet Federal Requirements or 

 Agreement Conditions....................................................................................... 19
 

Sole-Source Procurement Not Justified; Cost or Price Analysis 

Not Conducted ..................................................................................... 19 

Subgrant Procurements Did Not Comply With Administrative Condition .... 20 

Written Procurement Policy Does Not Include Required Procedures ......... 21 

Conclusion .................................................................................................. 22 

Recommendation ....................................................................................... 23 

NASDARF Response ................................................................................. 23 

EPA Response ........................................................................................... 24 

OIG Comments .......................................................................................... 24 

6 Other Unresolved Issue..................................................................................... 25
 

Recommendation ....................................................................................... 26 

NASDARF Response ................................................................................. 26 

EPA Response ........................................................................................... 26 

OIG Comments .......................................................................................... 26 

-continued-
National Association of State Departments of Agriculture 14-P-0131 

Research Foundation Needs to Comply With Certain 

Federal Requirements and EPA Award Conditions to Ensure 

the Success of Pesticide Safety Education Programs 

Status of Recommendations and Potential Monetary Benefits.............................. 27 

Appendices 

A NASDARF’s Comments on Draft Report and OIG Responses ...................... 28
 

B EPA’s Comments on Draft Report ................................................................... 39 

C Distribution ......................................................................................................... 43 
 

 

Chapter 1

Independent Accountant’s Report 

As part of our oversight of assistance agreement awards made by the 

U.S. Environmental Protection Agency (EPA), the Office of Inspector General (OIG) 

examined the costs claimed under Cooperative Agreement No. 83456201 awarded to 

the National Association of State Departments of Agriculture Research Foundation 

(NASDARF). The OIG conducted the examination to determine whether the costs 

incurred were allowable under federal regulations and conditions of the award, and 

whether procurements were conducted in accordance with federal regulations. The 

applicable federal requirements found in the Code of Federal Regulations (CFR) 

include: 

 Title 2 CFR Part 230, Cost Principles for Non-Profit Organizations. 

 Title 40 CFR Part 30, Uniform Administrative Requirements for Grants 

and Agreements with Institutions of Higher Education, Hospitals, and 

Other Non-Profit Organizations. 

By accepting funding provided through the agreement, NASDARF has responsibility 

for complying with these requirements. Our responsibility is to express an opinion on 

NASDARF’s compliance based on our examination. 

We conducted our examination in accordance with generally accepted government 

auditing standards issued by the Comptroller General of the United States. We also 

utilized the attestation standards established by the American Institute of Certified 

Public Accountants. We examined, on a test basis, evidence supporting NASDARF’s 

assertion contained in its interim Federal Financial Report (FFR) for the period ending 

January 24, 2013, and performed other procedures as we considered necessary. 

We believe that our examination provides a reasonable basis for our opinion. 

We interviewed EPA personnel from the Office of Grants and Debarment and the 

Office of Pesticide Programs in headquarters, Washington, D.C. We obtained an 

understanding of the agreement and gathered information concerning NASDARF’s 

performance. Specifically, we reviewed NASDARF’s request for proposal to determine 

the objectives of the agreement and project deliverables. We also gathered information 

on criteria relevant to the agreement and reviewed applicable federal requirements, 

including 2 CFR Part 230 and 40 CFR Part 30. 

On January 10, 2013, we conducted an entrance conference with NASDARF. 

We returned to NASDARF’s office in Washington, D.C., the week of January 22, 

2013, to conduct interviews and obtain documentation to address our objectives. 

14-P-0131 1 
 

To determine whether the costs incurred by NASDARF were allowable under 

40 CFR Part 30 and conditions of the agreement, we: 

	 Conducted interviews to obtain an understanding of the accounting 

system, applicable internal controls, and practices followed to administer 

the agreement. 

	 Reviewed single audit reports for fiscal years (FYs) 2010 through 2012 to 

identify issues that may have an impact on our examination. 

	 Reviewed internal controls related to the assignment objectives and 

performed tests to determine whether the controls are in place and 

operating effectively. 

	 Reviewed compliance with laws, regulations and the terms and conditions 

of the agreement. 

	 Examined reported outlays on a test basis to determine whether the outlays 

were adequately supported and eligible for reimbursement under the 

conditions of the agreement and federal requirements. 

	 Identified required deliverables and determined whether they were 

submitted to and accepted by the EPA. 

To determine whether NASDARF conducted its procurements in accordance with 

40 CFR Part 30, we: 

	 Conducted interviews to obtain an understanding of how NASDARF 

procured subcontracts and subgrants. 

	 Obtained and reviewed written procurement and contract administration 

policies and procedures to determine whether they included federal 

requirements. 

	 Obtained and reviewed supporting documentation for the award of the 

sole-source subcontract for project management services to ensure 

compliance with relevant criteria. 

	 Obtained and reviewed supporting documentation for a judgmental sample 

of three of eight subgrant and subcontract awards to ensure compliance 

with relevant criteria. The sample represented 81% ($289,943 of 

$357,995) of the total subgrant and subcontract costs. 

We also reviewed project costs and NASDARF’s drawdown of EPA funds. 

Specifically, we performed the following steps: 

	 Obtained, reviewed and reconciled NASDARF’s interim FFR for the 

period ending January 24, 2013. 

	 Discussed the FFR preparation with NASDARF to ensure the FFR was 

prepared in accordance with applicable laws, regulations, and terms and 

conditions of the cooperative agreement. 

	 Reviewed NASDARF’s drawdown procedures, obtained a draw history, 

and selected a judgmental sample of three of the 15 draws to determine 

whether the draws were reasonable and properly supported. The sample 

14-P-0131 2 
 

 

represented 24% ($350,000 of $1,460,000) of total draws as of December 

6, 2012. We reviewed supporting invoices, payment documents and 

associated accounting system entries to determine whether the 

expenditures were allocable and allowable under 40 CFR Part 30 and the 

agreement. 

	 Obtained and analyzed monthly bank statements to determine compliance 

with cash management requirements as described in the administrative 

conditions of the agreement and under federal regulation. 

We conducted our examination from January 10, 2013 through November 4, 

2013. Our examination disclosed material noncompliance and internal control 

weaknesses with financial management and procurement. In particular, 

NASDARF’s: 

	 Financial management system pertaining to cash draws and project costs 

does not meet the requirements of the agreement or 2 CFR Part 230 and 

40 CFR Part 30. Chapter 4 of this report includes a discussion of the 

noncompliance. 

	 Subcontract procurement of its project manager was not documented and 

did not include cost and price analysis as required by the agreement or 

40 CFR Part 30. In addition, the subgrant procurements examined did not 

comply with the agreement’s administrative condition no. 4(a). Chapter 5 

of this report presents more details on these conditions. 

Unless NASDARF can demonstrate compliance with all applicable requirements, 

we recommend that the EPA disallow and recover $492,817 of reported costs and 

$78,809 in excess cash draws. 

In our opinion, because of the effect of the issues described above, the costs 

claimed do not meet, in all material respects, the requirements of 2 CFR Part 230 

and 40 CFR Part 30, or the conditions of the agreement for the period ended 

December 31, 2012. 

Robert K. Adachi 

Director for Forensic Audits 

March 10, 2014 

14-P-0131 3 
 

Chapter 2

Introduction 

Purpose 

The OIG conducted this examination to determine whether NASDARF complied 

with federal requirements and the conditions of EPA Agreement No. 83456201. 

Our objectives were to determine whether: 

 Costs incurred by NASDARF were allowable in accordance with federal 

requirements and conditions of the agreement. 

 NASDARF followed applicable regulations and conditions of the agreement in 

its procurement of subcontracts and subgrants. 

Background 

The National Association of State Departments of Agriculture (NASDA) is a nonprofit, 

nonpartisan association of public officials comprised of executive heads from 50 state 

departments of agriculture, as well as executives from the U.S. territories of Puerto 

Rico, Guam, American Samoa and the U.S. Virgin Islands. NASDA’s mission is to 

support and promote the American agricultural industry through the development, 

implementation and communication of sound public policy programs. NASDA 

organized NASDARF to design and implement educational programs relating to 

farming and other agricultural activities, and to help state and local government develop 

government programs relating to agricultural activities. 

The EPA awarded Agreement No. 83456201 to NASDARF on March 24, 2010. The 

award provided $3.6 million to support national and international pesticide safety 

education programs designed to reduce the pesticide exposure of agricultural workers 

and pesticide applicators. Pesticide safety education projects not only target workers 

and applicators, but also growers, healthcare providers, and pesticide producers and 

retailers. The purpose of the award was to evaluate and improve existing pesticide 

safety training programs and materials, and identify areas within the programs where 

additional pesticide safety education is needed. 

The EPA awarded the funds based on the authorities provided by: 

	 The Federal Insecticide, Fungicide, and Rodenticide Act, Section 20, 

which authorizes the agency to issue assistance agreements for research, 

development, monitoring, public education, training, demonstrations and 

studies concerning pesticide-related matters. 

14-P-0131 4 
 

	 The National Environmental Policy Act, Section 102(2)(F), which 

recognizes the worldwide and long-range character of environmental 

problems; and, where consistent with U.S. foreign policy, lends 

appropriate support to programs designed to maximize international 

cooperation in anticipating and preventing a decline in the world 

environment. 

The budget and project period for Agreement No. 83456201 is April 5, 2010, 

through April 6, 2015. This agreement is a continuation of work started under 

NASDARF’s previous EPA Agreement No. 83235401. 

Although NASDARF is not required to submit a standard form (SF) 425 FFR 

until the agreement is completed, NASDARF prepared an interim FFR at the 

OIG’s request. The interim FFR, dated January 24, 2013, covered the period 

April 5, 2010 through December 31, 2012. The FFR included a federal share of 

outlays totaling $1,398,210, cash receipts of $1,460,000 and cash on hand of 

$78,809. 

Noteworthy Achievements 

On June 19, 2013, the OIG issued finding outlines to NASDARF. The outlines 

expressed concern that NASDARF’s project management subcontract did not 

include 40 CFR §30.48(c)(1) and (d) requirements pertaining to breach of contract 

remedies and access to records. The finding outlines included a recommendation 

that NASDARF revise the subcontract to include these requirements. In response, 

NASDARF stated that it had modified the subcontract to reflect the requested 

adjustments. The OIG reviewed the revised subcontract and confirmed the 

provisions were included. NASDARDF also revised its written procurement 

procedures to include OIG-recommended requirements pertaining to 

40 CFR Part 30. 

NASDARF and EPA Responses 

OIG received comments from NASDARF and the EPA concerning the OIG’s 

draft report issued on November 5, 2013. NASDARF also provided supplemental 

documentation to support some comments. Due to the various types and volume 

of documents provided, the OIG did not include NASDARF’s additional 

documentation in this report, but the information is available upon request. 

We held an exit conference with NASDARF on February 12, 2014 to discuss their 

response to the draft report and the impact on our final report. NASDARF 

continued to disagree with our findings. 

The OIG did not hold an exit conference with EPA. Rather EPA requested that 

the OIG proceed with issuing the audit report so they can begin working with 

NASDARF to resolve the findings. 

14-P-0131 5 
 

 

 

 

 

 

 

 

Chapter 3

Results of Examination 

NASDARF’s procurement practices, methods for determining and claiming 

indirect costs, and drawdown practices for EPA Agreement No. 83456201 did not 

comply with certain federal requirements or agreement conditions. As shown in 

table 1, we questioned $571,626 of reported costs. 

Table 1: Costs reported and questioned for EPA Agreement No. 83456201 

Cost element Reported Questioned Note 

Travel $ 382,417 

Supplies 24,618 

Contractual 611,287 295,976 (2) 

Other 183,047 

Indirect costs 196,841 196,841 (3) 

 Subtotal (1) $1,398,210 $492,817 

Drawdown amounts $1,460,000 78,809 (4)

 Total $571,626 

 Source: OIG-generated table. 

Note 1: Represents the amount reported (including expenditures and unliquidated 

obligations) on the interim SF 425 FFR prepared by NASDARF and provided to 

the OIG on January 24, 2013. 

Note 2: Contractual costs totaling $295,976 were questioned, including: 

	 Costs of $151,484 for Ramsey Consulting because NASDARF did not 

perform a cost or price analysis, justify the use of a sole source, or 

document the basis for the award cost or price of the sole-source award. 

Chapter 5 of this report discusses this issue in detail. 

	 Costs of $144,492 ($44,492 for University of Florida and $100,000 for 

CropLife Latin America), because NASDARF did not comply with 

agreement condition 5a(4) pertaining to the procurement of subgrants. 

The agreement condition requires that the recipient determine the 

reasonableness of proposed subgrant costs. NASDARF was unable to 

provide documentation that the costs were reasonable. Chapter 5 of this 

report discusses this issue in detail. 

Note 3: We questioned $196,841 of indirect costs because NASDARF did not 

comply with the requirements of its indirect cost rate agreements when 

calculating an indirect cost rate and applying the rate to the allocation base for the 

agreement. The amount questioned also includes a negative amount of $12,896 

14-P-0131 6 
 

for costs related to two unsupported adjustments to indirect costs. Chapter 4 of 

this report discusses these issues in detail. 

Note 4: We questioned the cash-on-hand balance of $78,809, which NASDARF 

reported on its interim SF 425, because NASDARF maintained excessive cash 

balances under the agreement and did not use the funds in a timely manner. This 

amount represents the difference in expenditures and receipts. Chapter 4 of this 

report discusses the issue in detail. 

Recommendation 

We recommend that the Director of the Office of Grants and Debarment: 

1.	 Disallow and recover $571,626 of questioned costs. If NASDARF 

provides documentation that meets appropriate federal requirements or 

demonstrates the fairness and reasonableness of the subcontract and 

subgrant costs, the amount to be recovered may be adjusted accordingly. 

NASDARF and EPA Responses 

NASDARF generally disagreed with our findings and provided a detailed 

response to the issues presented in Notes 2, 3, and 4 above. However, NASDARF 

did not provide a response to recommendation 1 or the recommendations 

contained in chapters 4 and 5. The OIG included a discussion of NASDARF’s 

responses to Notes 2, 3, and 4 and OIG comments in the applicable chapters of 

this report. NASDARF’s complete written response and additional OIG 

comments are included in appendix A. 

The EPA agreed with recommendation 1 and stated it will: 

1.	 Provide NASDARF the opportunity to submit documentation to substantiate the 

questioned costs. 

2.	 Review the documentation and take necessary corrective action, including recovery 

of all or part of the questioned subcontract and indirect costs as well as funds drawn. 

3.	 Work with NASDARF to implement corrective actions to comply with federal 

requirements on assuring the reasonableness of sub-grant, sub-contracts, indirect 

costs and drawdown amounts. 

The EPA’s complete written response is included in appendix B. 

OIG Comments 

The OIG agrees with EPA’s intended corrective actions for recommendation 1. However, 

because the EPA did not provide specific planned completion dates for the corrective 

actions, the OIG considers the status of the recommendation unresolved. 

14-P-0131 7 
 

Chapter 4

Financial Management System Did Not Meet 

Certain Federal Requirements 

NASDARF’s financial management system did not meet certain federal 

regulations and agreement conditions. Specifically, NASDARF: 

 Did not calculate and apply indirect cost rates correctly. 

 Reported outlays for indirect costs in excess of recorded expenses in the 

general ledger. 

 Drew down funds that exceeded cash needs. 

These conditions occurred because NASDARF did not have controls in place 

to ensure compliance with federal regulations and agreement conditions. 

In calculating indirect cost rates, NASDARF was not aware initially of 

2 CFR Part 230 requirements to exclude subgrants and subcontracts in excess of 

$25,000. NASDARF later interpreted the requirements erroneously and only 

excluded amounts for subgrants but not subcontracts. For the reported outlays, 

NASDARF lacked controls to ensure the recording of adjustments in the general 

ledger. Lastly, NASDARF’s written procedures for drawdowns did not 

incorporate cash-management requirements as described in the administrative 

conditions of the agreement or under federal regulations. 

As described in chapter 3, we questioned $196,841 of indirect costs and $78,809 

related to the excessive cash draws. 

Indirect Cost Rates Were Calculated and Applied Incorrectly 

NASDARF did not calculate indirect cost rates in accordance with the 

requirements of its approved indirect cost rate agreements. Additionally, 

NASDARF did not apply the rates to the appropriate allocation base when 

reporting costs under the agreement. 

The U.S. Department of the Interior’s National Business Center (NBC) negotiates 

indirect cost rates for the EPA. The indirect rate agreement between NASDARF 

and the NBC for the fiscal year ending June 30, 2011, states that the allocation 

base for the indirect rate should be total direct costs less capital expenditures 

(i.e., the portion of subgrants or subcontracts in excess of the first $25,000 and 

pass-through funds). This is consistent with 2 CFR Part 230, Appendix A, 

paragraph D.3.f., which references modified total direct costs (MTDC) and states, 

in part: 

Indirect costs shall be distributed to applicable sponsored awards 

and other benefiting activities within each major function on the 

14-P-0131 8 
 

basis of MTDC. MTDC consists of all salaries and wages, fringe 

benefits, materials and supplies, services, travel, and subgrants and 

subcontracts up to the first $25,000 of each subgrant or subcontract 

(regardless of the period covered by the subgrant or subcontract). 

Calculation of Indirect Cost Rate 

When calculating the allocation base for FY 2011, NASDARF did not exclude 

any subgrant or subcontract amounts. Subcontracts and subgrants in the allocation 

base for the EPA agreement amounted to $306,563. The OIG’s analysis revealed 

that four subcontractors or subgrantors received payments that exceeded the 

$25,000 limit. NASDARF should have excluded the excess payments totaling 

$86,399 from the allocation base. 

We do not know the effect that this condition has on the indirect cost rate. The 

allocation base consisted of costs from five programs. Our review included only 

the costs in the base for the EPA agreement. We did not determine whether 

NASDARF should have deleted any costs from the other four programs. We 

reviewed the indirect rate calculation for FY 2011 because, at the time of our 

audit, this was the latest year for which NASDARF had an approved final indirect 

cost rate. 

Application of Indirect Cost Rate 

When applying the indirect cost rate to total costs incurred for the EPA 

agreement, NASDARF excluded $66,758 for subgrant and subcontract payments 

that exceeded $25,000. We reviewed subgrant and subcontract payments and 

determined that $286,453 should have been excluded—an increase of $219,695 

over the excluded amount. 

Initially, NASDARF was not aware of the requirement to exclude amounts in 

excess of $25,000. Later, NASDARF misinterpreted the requirements and did not 

exclude amounts for the subcontract that it awarded for project management. 

NASDARF stated it did not consider the project manager to be the same as other 

awards. NASDARF also stated that in order for the award to be financially viable, 

it would need to apply indirect cost rates to the full amount of fees paid. 

NASDARF reported $196,841 of indirect costs under the agreement. We 

questioned the full amount because NASDARF did not calculate and apply the 

rates in accordance with the provisions of its negotiated indirect cost rate 

agreements. To ensure that its indirect cost rates result in an equitable allocation 

of costs, NASDARF should: 

	 Recalculate indirect cost rates after excluding subgrant and subcontract 

amounts in excess of $25,000, or request the NBC to amend its indirect 

cost rate agreements to include an equitable allocation base. 

14-P-0131 9 
 

 

 

 Submit revised indirect cost rates to the NBC for approval. 

 Claim indirect costs using the revised approved rates. 

Reported Costs Exceeded Amounts Recorded in General Ledger 

NASDARF was unable to support adjustments made to recorded expenses when 

preparing its FFR. Total outlays reported on the interim FFR were $1,398,210. 

The reported costs exceeded amounts recorded in the general ledger by $4,123. 

NASDARF stated the difference was attributable to three adjustments related to 

indirect costs. NASDARF provided adequate support for unrecorded indirect 

costs of $17,019. However, we did not receive sufficient support for the two 

remaining adjustments. NASDARF stated it had not recorded the amounts in the 

general ledger as expenditures. 

One negative adjustment of $5,183 was to reduce indirect expenses for the 

amount of the CropLife Latin America contract, which exceeded $25,000. The 

remaining negative adjustment of $7,713 was a decrease to FY 2011 indirect costs 

for the difference between the billing and final indirect cost rates. Documents that 

NASDARF provided to support these two adjustments consisted of two summary 

accounting reports with handwritten notes in the margin. Supporting documents 

that show how the amounts were determined were not included. 

The requirements of 40 CFR §30.21(b)(7) state that recipients’ financial 

management systems shall provide accounting records, including cost accounting 

records that are supported by source documentation. In addition, 2 CFR Part 230, 

Appendix A, paragraph A.2g, states that to be allowable under an award, costs 

must be “adequately” documented. As a result, we questioned the two negative 

adjustments totaling $12,896. Table 2 shows NASDARF’s reconciliation of the 

FFR to the general ledger. 

Table 2: Reconciliation of FFR to the general ledger 

Amounts 

Comparison 

FFR line 10g (total federal share) $ 1,398,210 

General ledger report 1,394,087

 Difference $ 4,123 

Explanation 

Unrecorded indirect costs for December 2012 $ 17,019 

Adjustment to indirect cost for CropLife contract 

exceeding $25,000 ($ 5,183) 

Unrecorded adjustment to FY 2011 indirect costs (7,713) 

Subtotal adjustments (12,896)

 Difference $ 4,123 

Source: Based on information provided by NASDARF. 

14-P-0131 10 
 

Accepted Cash Management Practices Not Followed 

NASDARF did not follow accepted cash management practices when drawing 

down EPA funds. This resulted in funds being held for excessive periods, 

unnecessary funds drawn, and funds drawn and used for expenses incurred under 

non-EPA programs. As of December 6, 2012, NASDARF made 15 draws totaling 

$1,460,000. Our review of three of the 15 draws showed that NASDARF: 

 Expended funds from 21 to 125 days after drawing the funds. 

 Maintained an average cash balance of $147,029 during the period of 

July 2010 through February 2013. 

 Used EPA funds to pay expenditures for five other non-EPA programs. 

This occurred because NASDARF’s written drawdown policy does not include 

requirements to minimize the time elapsing between drawing funds and making 

expenditures, as required by the agreement and 40 CFR §30.22(a) and (b). 

In chapter 3 of this report, we questioned $78,809 of excess funds drawn as of the 

interim FFR for the period ending January 24, 2013. This amount is reported as 

cash on hand (line 10c) and represents the excess of cash receipts over cash 

disbursements. NASDARF did not earn interest on the excess cash funds drawn. 

Agreement administrative condition 4(a) states: 

By accepting this agreement for the electronic method of payment 

through the Automated Clearing House (ACH) network using the 

EPA-ACH payment system, the recipient agrees to request funds 

based on the recipient’s immediate disbursement requirements by 

presenting an EPA-ACH Payment Request to your EPA Servicing 

Finance Office. Further, failure on the part of the recipient to 

comply with the above conditions may cause the recipient to be 

placed on the reimbursement payment method. 

Title 40 CFR §30.22(a) states, in part: 

Payment methods shall minimize the time elapsing between the 

transfer of funds from the United States Treasury and the issuance 

or redemption of checks, warrants, or payment by other means by 

the recipients. 

Title 40 CFR §30.22(b) states, in part: 

Cash advances to a recipient organization shall be limited to the 

minimum amounts needed and be timed to be in accordance with 

the actual, immediate cash requirements of the recipient 

organization in carrying out the purpose of the approved program 

14-P-0131 11 
 

 

 

 

 

or project. The timing and amount of cash advances shall be as 

close as is administratively feasible to the actual disbursements by 

the recipient organization for direct program or project costs and 

the proportionate share of any allowable indirect costs. 

Funds Held for Excessive Periods 

NASDARF drew funds in advance of expenditures and held the funds for 

excessive periods. We selected and reviewed supporting documentation for three 

of the 15 draws. As shown in table 3, NASDARF did not begin to expend funds 

for 21 to 125 days after the funds were drawn. In addition, the number of days 

between the draw and the last payment ranged from 110 to 230 days. 

Table 3: Number of days to expend drawdowns 

Draw date 

First 

payment 

Days to first 

payment 

Last 

payment 

Days to last 

payment 

7/21/2010 8/11/2010 21 3/8/2011 230 

7/21/2011 8/22/2011 32 11/08/2011 110 

7/12/2012 11/14/2012 125 1/22/2013 194

 Source: NASDARF drawdown requests and supporting documents. 

We noted a fourth draw made on April 22, 2013, for $249,000. In response to our 

request for supporting documentation for the funds drawn, NASDARF replied 

that the $249,000 represents expenditures that it expects to incur in April, May 

and June 2013. NASDARF provided the OIG with a listing of the expected 

expenditures for that 3-month period, which totaled $248,585. Since the 

information provided represents expected expenditures, we were unable to 

determine if the information refers to the number of days to expend the draw or if 

the draw was appropriate. 

Excessive Cash Balances Maintained 

NASDARF maintained excessive cash balances in its EPA bank account. We 

reviewed bank statements for the period beginning with the first EPA draw of 

funds in July 2010 through February 2013. We summarized deposits, checks and 

other debits, transfers in, and transfers out. We utilized the summary to compute 

an average cash balance for each month and fiscal year, and for the agreement 

period July 2010 through February 2013 (32 months). We found that NASDARF 

maintained large cash balances during the entire period. As shown in table 4, the 

average cash balance by year ranged from a low of $43,472 in FY 2011 to a high 

of $263,164 in FY 2012. 

14-P-0131 12 
 

 

 

 

 

 

Table 4: Average cash balance 

Fiscal year 

Average cash 

balance 

Lowest 

balance 

Highest 

balance 

2011 $119,900 $43,472 $233,651 

2012 $185,748 $108,060 $263,164 

2013 $129,642 $66,380 $175,409

 Source: OIG calculations using NASDARF bank statements. 

Funds Used for Other Purposes 

NASDARF used EPA funds to cover expenditures under other non-EPA 

programs. Our review of NASDARF’s bank statements showed numerous 

transfers of funds from the EPA bank account to five other NASDARF bank 

accounts, including accounts for: 

 NASDA. 

 Agricultural Quality Inspection Services. 

 Midwestern Association of State Departments of Agriculture. 

 Northeastern Association of State Departments of Agriculture. 

 Western Association of State Departments of Agriculture. 

NASDARF stated it used the EPA funds to pay expenses incurred on other 

non-EPA programs. This occurred because of delays in receiving funds from 

other entities, delays due to the availability of funds by the bank, and problems 

with NASDARF’s bill-paying service. Table 5 summarizes transfers to and from 

the EPA bank account. 

Table 5: Transfers to and from the EPA account 

FY 2010 (April–June 2010) 

Transfers out 

0 

Transfers in 

0 

FY 2011 (July 2010–June 2011) $ 35,371 $126,753 

FY 2012 (July 2011–June 2012) 244,951 11,698 

FY 2013 (July 2012–June 2013) 53,855 0 

 Source: NASDARF monthly bank statements. 

Accounting Policy Manual Does Not Include Required Procedures 

NASDARF’s draft accounting policy manual dated June 30, 2011, Internal 

Control Memo, includes procedures for drawing federal funds. However, the 

procedures only indicate who requests the draws and states that the automated 

accounting software be used to summarize and analyze documentation. There 

were no written procedures to minimize the time between transfer of funds from 

the U.S. Treasury and payment by the recipient for program purposes, as required 

by the agreement and federal regulations. 

14-P-0131 13 
 

Title 40 CFR §30.21(b)(5) states, in part: 

(b) Recipients’ financial management systems shall provide for the 

following. 

(5) Written procedures to minimize the time elapsing between 

the transfer of funds to the recipient from the U.S. Treasury 

and the issuance or redemption of checks, warrants or 

payments by other means for program purposes by the 

recipient. 

Conclusion 

Based on the findings above, NASDARF’s financial management system did not 

meet certain federal requirements contained in the agreement. The recipient’s 

written policies and procedures do not include the necessary guidance to ensure 

compliance with 40 CFR Part 30. We have no assurance that costs are fair and 

reasonable when NASDARF calculates indirect costs and rates incorrectly, does 

not reconcile reported costs to its general ledger, withdraws excessive cash, and 

holds funds for a long period of time. 

To address the financial management issues identified, NASDARF should 

establish controls to ensure indirect costs are calculated and applied consistent 

with the requirements found in 2 CFR Part 230. NASDARF should also ensure 

that costs are recorded and supported by adequate source documentation as 

required by 40 CFR §30.21(b)(7), and ensure that drawdowns are consistent with 

the requirements contained in 40 CFR §30.21(b)(5) and §30.22(a) and (b). 

The EPA should also impose special conditions on all current and future awards 

of EPA funds as outlined in 40 CFR Part 30 and 40 CFR §30.14, Special Award 

Conditions, which states: 

If an applicant or recipient: has a history of poor performance, is 

not financially stable, has a management system that does not meet 

the standards prescribed in Circular A-110; has not conformed to 

the terms and conditions of a previous award; or is not otherwise 

responsible, EPA may impose additional requirements as needed, 

provided that such applicant or recipient is notified in writing as to: 

the nature of the additional requirements, the reason why the 

additional requirements are being imposed, the nature of the 

corrective action needed, the time allowed for completing the 

corrective actions, and the method for requesting reconsideration 

of the additional requirements imposed. Any special conditions 

shall be promptly removed once the conditions that prompted them 

have been corrected. 

14-P-0131 14 
 

The special conditions should include: (a) payment on a reimbursement basis; and 

(b) EPA review and approval of reimbursement requests prior to payment. 

Recommendations 

We recommend that the Director of the Office of Grants and Debarment: 

2.	 Require NASDARF to: 

a. Recalculate its indirect cost rate for FY 2011, excluding subgrant 

and subcontract amounts in excess of $25,000; and submit to the 

NBC for approval, or ask the NBC to amend, the indirect cost rate 

agreements to include an equitable allocation base. 

b.	 Claim indirect costs using the recalculated approved rates. 

3. Require NASDARF to calculate its indirect cost rates for years beyond 

FY 2011 by excluding subgrant and subcontract amounts in excess of 

$25,000; or to be in accordance with any revised indirect cost rate 

agreement. 

4.	 Require the following special conditions be included for all current and 

future awards until the EPA determines that NASDARF has met all 

applicable federal financial requirements: 

a. Payment on a reimbursement basis. 

b. Review and approval of reimbursement requests, including all 

supporting documentation, prior to payment. 

NASDARF Response 

NASDARF generally did not agree with the OIG findings and recommendations 

and provided the following comments. 

Did not calculate and apply indirect cost rates correctly: NASDARF responded 

that it is fully informed of 2 CFR Part 230 requirements and at no time was under 

the impression, nor did they execute any activities under the illusion, that indirect 

costs could be charged on subgrants and subcontracts in excess of $25,000. 

Further, NASDARF stated that the OIG’s charge relates specifically to Ms. Carol 

(Ramsay) Black’s misclassification as a “subcontractor,” when in fact, Ms. Black 

is a contracted employee/consultant under Ramsay Consulting, LLC. As a 

contracted employee, Ms. Black is not subject to the rule of a subcontract under 2 

CFR Part 230. 

NASDARF also responded that the OIG listed Ramsay Consulting LLC, 

Richard Herrett, Marla Stein Associates, and CropLife Latin America as 

subcontractors/subgrantors receiving payments in excess of $25,000. Ramsay 

14-P-0131 15 
 

Consulting, LLC and Mr. Herrett served as project managers for the grant and are 

therefore considered direct salary. Irrespective of the classification, Mr. Herrett 

was not paid under this current agreement. Marla Stein Associates received 

$21,143 under Cooperative Agreement 83456201 and the remaining invoices 

were charged under a prior agreement. 

NASDARF stated it is awaiting the EPA grants office’s opinion before making 

any decisions in regard to reapplying for indirect rates. 

NASDARF lacked controls to ensure the recoding of adjustment in the general 

ledger: NASDARF disagreed with the OIG’s finding that it lacked controls to 

ensure the recording of adjustments in the general ledger. NASDARF stated that 

the nature of any indirect rate application results in regular adjustments when 

rates change and new payments are made for subgrants. NASDARF’s goal is to 

obtain a correct cumulative total in the indirect allocation, not an unrealistic 

expectation of an unchanging allocation each month. Assessing these values at 

interim periods over the life of the grant only offers a snapshot at that specific 

time. NASDARF also provided a revised SF 425 as of October 31, 2013, and 

supporting general ledger through October 2013. 

NASDARF’s written procedures for drawdown did not incorporate cashmanagement requirements described in the administrative conditions of the 

agreement or under federal regulations: NASDARF responded it had changed 

both personnel and policy within the last year to ensure cash management 

practices are line with grant requirements. NASDARF’s updated policy now 

reads: 

Drawdowns related to the EPA agreement are initiated by the 

Director of Finance based on anticipated short-term expenses as 

reported and documented by the Project Director. Drawdowns are 

typically made after expenses are paid but may be made a week in 

advance in anticipation of large vendor/subgrant disbursements. 

NASDARF also stated that it is aware of OIG’s position claiming funds are 

available within 3 business days; however, recent technical difficulties with the 

ASAP website make it extremely challenging for NASDARF management to 

operate with a 3-day window for distributing funds. 

NASDARF used EPA funds to cover expenditures under other non-EPA 

programs: NASDARF stated that the OIG’s assertion that it used EPA funds for 

expenditures for other non-EPA programs is incorrect. NASDASRF stated that it 

transfers funds from the NASDARF checking account to other NASDA-affiliated 

accounts only after NASDARF earned the funds through indirect allocations or 

reimbursement for direct expenses. 

14-P-0131 16 
 

 

EPA Response 

The EPA agreed with the OIG’s recommendations and provided the following 

comments. 

Recommendation 2: The Office of Grants and Debarment (OGD) will provide 

NASDARF the opportunity to clarify its position and properly support its indirect 

rate and require NASDARF to amend the rate where appropriate. OGD will 

review NASDARF’s support and coordinate with the U.S. Department of the 

Interior’s NBC to review and amend the indirect cost rate agreement as needed, 

then require NASDARF to adjust claimed costs according to the revised 

agreement. 

Recommendation 3: Where necessary, OGD will require NASDARF to 

recalculate its indirect costs rates to be in compliance with 2 CFR Part 230 and 

coordinate with NBC to revise NASDARF’s rates. OGD will then require 

NASDARF to adjust claimed costs according to any revised indirect cost rate 

agreements. 

Recommendation 4: OGD will place NASDARF on reimbursement for its active 

assistance agreements. The agency will require NASDARF to provide supporting 

documents for costs incurred for the agency’s review prior to releasing funds for 

payment. NASDARF will remain on reimbursement status until it has demonstrated 

to the agency that its financial management of EPA agreements meets applicable 

federal requirements for drawing grant funds. 

OIG Comments 

The OIG did not agree with NASDARF’s comments. The OIG’s responds to them 

as follows. 

Did Not Calculate and Apply Indirect Cost Rates Correctly: In its response, 

NASDARF states that Ms. Black’s position should be treated as direct salary. The 

OIG disagrees with this position. Under 2 CFR Part 230, Appendix B.8, 

compensation for personal services includes services provided by the 

organization’s employees. Since Ms. Black is not an employee, her position cannot 

be treated as a direct salary. There is no disagreement that Ms. Black is a 

contractor. However, based on further review of 2 CFR Part 230, the OIG believes 

that clarification is needed about the relationships discussed (i.e., grants-subgrants, 

contracts-subcontracts, and whether the requirement applies to the Ramsey 

contract). NASDARF’s relationship with Ramsey is not the typical grant-subgrant 

relationship; rather, it is a grant-contract relationship. We recommend that the EPA 

seek clarification on whether this type of relationship is subject to the $25,000 

requirement. This would also apply to the services provided by Mr. Herrett. 

14-P-0131 17 
 

 

NASDARF’s comment that the costs for Mr. Herrett and Ms. Stein were not 

claimed under this agreement is correct. However, the costs were included in the 

allocation base when computing the FY 2011 indirect cost rate. NASDARF used 

the FY 2011 rate to claim indirect costs under this agreement. Therefore, these 

costs should be limited to the $25,000. 

NASDARF Lacked Controls to Ensure the Recoding of Adjustment in the 

General Ledger: The OIG based its finding on the fact that the general ledger did 

not support the outlays reported on the interim FFR. The OIG acknowledges the 

adjustments of indirect costs as NASDARF discussed. However, outlays reported 

on the FFR should be adequately supported as required by 40 CFR §30.21(b)(7). 

Although NASDARF provided a revised SF 425 and general ledger, it did not 

provide any additional documentation to support the two adjustments reported 

under the interim FFR. As a result, the OIG continues to question the costs as 

unsupported. 

NASDARF’s Written Procedures for Drawdown Did Not Incorporate CashManagement Requirements Described in the Administrative Conditions of the 

Agreement or Under Federal Regulations: The OIG acknowledges that NASDARF 

revised its procedures. However, the procedures do not indicate that drawdowns 

should be made as close as administratively feasible to the actual disbursements 

and be timed in accordance with the actual, immediate cash requirements. The OIG 

does not consider this acceptable, and continues to maintain that NASDARF can 

get funds from the EPA within 3 days or less. 

NASDARF Used EPA Funds to Cover Expenditures Under Other Non-EPA 

Programs: The OIG disagrees with NASDARF that it did not use EPA funds for 

expenditures for non-EPA programs. The OIG’s cash flow analysis, conducted 

using NASDARF’s bank statements, showed that NASDARF moved funds 

between EPA’s programs and others. Most of the transfers out were to the NASDA 

account, which, as discussed in NASDARF’s response above, could be for 

reimbursement for indirect expenses. However, there were significant deposits to 

and from the EPA account from other agencies. There were also smaller transfers 

out from the EPA account to other associations within the state departments of 

agriculture. Federal Regulations at Title 40 CFR 30.21(b)(3) require that recipients’ 

financial management systems shall assure that funds are used solely for authorized 

purposes. 

The OIG agrees with EPA’s intended corrective actions for recommendations 2, 3, 

and 4. However, because the EPA did not provide specific planned completion 

dates for the corrective actions, the OIG considers the status of the 

recommendations unresolved. 

14-P-0131 18 
 

Chapter 5

Procurements Did Not Meet Federal Requirements 

or Agreement Conditions 

NASDARF’s procurement practices for subcontracts and subgrants did not 

comply with federal requirements or agreement conditions. In particular, 

NASDARF did not: 

	 Provide documentation to support the sole-source procurement process 

used for its project management subcontract, or conduct a cost or price 

analysis as required by 40 CFR Part 30 and NASDARF’s own 

procurement policy. 

 Comply with agreement administrative condition 15.a.(4) for subgrants 

awarded to the University of Florida and CropLife Latin America. 

 Include provisions required by 40 CFR Part 30 in its written procurement 

policy. 

These conditions occurred because of NASDARF’s lack of knowledge or a lack 

of understanding about agreement conditions and federal requirements. 

Additionally, NASDARF’s written policies and procedures provided inadequate 

guidance for subcontract and subgrant awards. As shown in chapter 3, we 

questioned $295,976 that NASDARF incurred and reported for three awards. 

Table 6 details the subcontract and subgrant awards questioned. 

Table 6: Subcontract and subgrant costs questioned 

Cost element 

Reported and 

questioned 

Project management subcontract $151,484 

University of Florida subgrant 44,492 

CropLife Latin America subgrant 100,000

 Total $295,976 

Source: NASDARF’s reported costs. 

Sole-Source Procurement Not Justified; Cost or Price Analysis 

Not Conducted 

When awarding a subcontract for project management, NASDARF did not 

promote open and free competition, perform a cost or price analysis, document 

the basis for the award cost or price, or properly document its procurement 

practices. NASDARF signed the subcontract on February 26, 2009. The 

subcontract provided project management services at an hourly rate of $90. 

The hourly rate included salary of $74.50 and indirect costs of $15.50. 

14-P-0131 19 
 

As of January 2013, NASDARF had incurred and reported $151,484 for this 

subcontract. 

Requirements listed under 40 CFR §30.43 state that all procurement transactions 

be conducted in a manner to provide, to the maximum extent practical, open and 

free competition. In addition, 40 CFR §30.45 requires that some form of cost or 

price analysis be made and documented in the procurement files in connection 

with every procurement action. According to 40 CFR §30.46, procurement 

records and files for purchases in excess of the small purchase threshold must 

include at least the basis for contractor selection, justification for lack of 

competition when competitive bids or offers are not obtained, and the basis for 

award cost or price. 

NASDARF’s own written procurement policy for purchases exceeding $25,000 

requires that a cost analysis be conducted and documented in conjunction with 

every purchase. Justification for the lack of competition should also be 

documented if competitive bids or offers are not obtained. 

NASDARF initially informed us that it did not solicit proposals for project 

managers from other subcontractors. A subcontractor was selected based on 

NASDARF’s experiences and NASDARF’s discussion with other knowledgeable 

personnel, including EPA staff. We asked NASDARF to provide justification for 

the lack of competition, the use of a sole source, the basis for contractor selection, 

the basis for the award price, and its cost or price analysis for the subcontract. 

NASDARF was unable to provide any of the required documents or provide 

evidence that it had performed any of the required steps. NASDARF stated that 

most of their procurement actions for this subcontract were verbal and were not 

documented. 

Subgrant Procurements Did Not Comply With Administrative 

Condition 

NASDARF did not comply with administrative condition 15.a.(4) in the award of 

subgrants to the University of Florida and to CropLife Latin America. 

Administrative condition 15.a.(4) required NASDARF to determine whether 

proposed subgrant costs are reasonable. NASDARF’s analysis of proposed costs 

for these two awards was insufficient and lacked numerous support items that 

should be included when determining the reasonableness of costs. 

University of Florida Agreement 

NASDARF made an $88,984 award to the University of Florida on May 25, 2010. 

The purpose of the award was to identify the potential risks of pesticide drift from 

agricultural operations, develop good-neighbor practices for minimizing risks, and 

disseminate educational material on drift and good-neighbor practices. 

14-P-0131 20 
 

 

 

NASDARF agreed to pay $44,492 upon the execution of the award, with the 

remaining 50 percent due upon receipt of a first-year interim report. As of 

January 2013, NASDARF had incurred and reported $44,492 for the subgrant 

under the previous EPA Agreement No. 83235401, and the remaining amount of 

$44,492 is reported under EPA Agreement No. 83456201. 

We asked NASDARF to provide documentation of its review of the 

reasonableness of proposed costs for the award. In response, NASDARF stated 

that the costs were reasonable. NASDARF did not submit any comparisons of 

price quotes, market prices or other benchmarks to support its determination of 

reasonableness. In addition, NASDARF did not submit any documentation 

indicating that it had evaluated each element of cost. 

CropLife Latin America Agreement 

NASDARF made an award to CropLife Latin America for a project in Costa Rica. 

Dated January 31, 2011, the agreement included total project costs of $204,307 

over a 3-year period. NASDARF’s share of the total was $100,000. As of 

January 2013, NASDARF had incurred and reported the full $100,000. 

We asked NASDARF for documentation of its review of the reasonableness of 

costs for the award. In response, NASDARF provided a document that described 

its review of the proposed amount. The analysis did not demonstrate that the 

proposed costs were reasonable. NASDARF stated that the cost of the project 

compared favorably to the cost of other EPA projects. NASDARF stated that the 

cost of the other EPA projects was $30,000. However, NASDARF did not name 

the other EPA projects, provide any supporting documents or other market prices, 

or provide benchmarks to support the reasonableness of the costs. NASDARF 

also stated that the project would be substantially more expensive if another entity 

conducted the project, but NASDARF did not provide any supporting 

documentation for this statement. 

Written Procurement Policy Does Not Include Required Procedures 

We reviewed NASDARF’s written procurement policy to determine whether the 

policy included provisions required by 40 CFR Part 30. The policy contained 

several required procurement practices but lacked other requirements. 

NASDARF’s policy was implemented in FY 2010 and applies to purchases 

exceeding $25,000. The policy: 

 Prohibits conflicts of interest. 

 Includes provisions for conducting and documenting a cost analysis in 

conjunction with every procurement. 

 Requires justification for lack of competition if competitive bids or offers 

are not obtained. 

14-P-0131 21 
 

 

 Requires procurements to be conducted to maximize opportunities, 

increase quality and reduce the cost of the purchase. 

 Requires justification for the award of a contract to an entity other than the 

low bidder. 

However, the NASDARF policy did not include the following requirements from 

40 CFR Part 30, which requires solicitations to include: 

 A clear statement on all requirements that the bidder or offeror should 

fulfill for the bid or offer to be evaluated (§30.43). 

 A clear and accurate description of the technical requirements 

(§30.44(a)(3)(i)). 

 Requirements that the bidder/offeror must fulfill all other factors to be 

used in evaluating bids or proposals (§30.44(a)(3)(ii)). 

	 Contracts be awarded only to responsible contractors who possess the 

potential ability to perform successfully under the terms and conditions of 

the proposed procurement (§30.44(d)). 

	 Procurement records and files for purchases in excess of the small 

purchase threshold also include the basis for contractor selection (§30.46). 

Conclusion 

NASDARF’s procurements did not follow its own procurement policy, comply 

with federal requirements or meet all conditions of the agreement. When 

recipients do not justify sole-source procurements or complete the required cost or 

price analysis, the OIG has no assurance that costs are fair and reasonable. Since 

NASDARF did not document its decisions at the time of the procurement, it did 

not comply with federal requirements. Consideration of NASDARF’s after-thefact explanations and documentation is at the discretion of EPA management and 

would require a formal deviation from agency policy in accordance with 

40 CFR §30.4, Deviations. This regulation states: 

The Office of Management and Budget (OMB) may grant 

exceptions for classes of grants or recipients subject to the 

requirements of Circular A–110 when exceptions are not 

prohibited by statute. However, in the interest of maximum 

uniformity, exceptions from the requirements of Circular A–110 

shall be permitted only in unusual circumstances. EPA may apply 

more restrictive requirements to a class of recipients when 

approved by OMB. EPA may apply less restrictive requirements 

when awarding small awards, except for those requirements which 

are statutory. Exceptions on a case-by-case basis may also be made 

by EPA. 

14-P-0131 22 
 

Recommendation 

We recommend that the Director of the Office of Grants and Debarment: 

5.	 Require NASDARF to establish controls for future awards in order 

to ensure: 

a.	 Documentation is maintained in procurement files to justify 

sole-source procurements and to ensure compliance with 

40 CFR§30.46. 

b.	 Compliance with 40 CFR §30.45 by conducting a cost or price 

analysis to determine reasonableness of costs. 

c.	 Compliance with administrative conditions of the award by 

determining and documenting the reasonableness of subgrant costs. 

NASDARF Response 

NASDARF generally did not agree with the OIG findings and recommendations 

and provided the following comments. 

Sole-Source Procurement Not Justified, Cost or Price Analysis Not Conducted: 

NASDARF responded that, as provided in previous communications with the 

OIG, both NASDARF and the EPA engaged several individuals for consideration 

to replace Mr. Richard Herrett as the NASDARF Project Manager. However, due 

to the unique skill-set and expertise required to adequately fill the NASDARF 

Project Manager position, only a finite number of individuals met the 

qualifications needed for consideration. One of the candidates, Mr. Roger 

Flashinski, under consideration for the Project Manager position, provided a 

statement confirming that he was not able to accept the position due to timing 

considerations and his position with another university did not allow for the same 

accommodations as Ms. Black. Additionally, NASDARF addressed the 

reasonableness of pay and provided comparison data to current positions similar 

in scope and demands. 

Cost or Price Analysis Not Conducted: NASDARF did not agree with the OIG 

findings and recommendations and restated its assessment of “reasonableness of 

costs” for the University of Florida project. NASDARF stated that the rates in the 

proposal are reasonable and fall within typical rates for editing. Further, the 

pesticide-related subject matter is technical and requires a skilled editor. 

NADARF also included analysis of the various cost elements. 

Similar to the University of Florida subgrant, NASDARF stated that it provided 

sufficient documentation to demonstrate “reasonableness of costs” for the 

CropLife Latin America project. NASDARF also included further discussion of 

the various cost elements and comparisons to other state pesticide safety 

education programs. 

14-P-0131 23 
 

 

EPA Response 

The EPA agreed with the OIG’s recommendations and stated that OGD will 

require NASDARF to comply with the requirements of 40 CFR Part 30 and 

administrative conditions with respect to documenting the justification of solesource procurements and performing an adequate cost or price analyses for 

procurements and subawards to determine the reasonableness of cost. 

OIG Comments 

The OIG acknowledges NASDARF’s discussion regarding the cost-price analysis 

and reasonableness of costs associated with the Ramsey contract and the subgrants. 

However, since NASDARF did not document the analysis at the time of the 

procurement, it did not comply with federal requirements. Consideration of 

NASDARF’s after-the-fact explanations and documentation is at the discretion of 

EPA management and would require a formal deviation from agency policy in 

accordance with 40 CFR §30.4, Deviations. 

The OIG agrees with EPA’s intended corrective actions for recommendation 5. 

However, because the EPA did not provide specific planned completion dates for 

the corrective actions, the OIG considers the status of the recommendation 

unresolved. 

14-P-0131 24 
 

 

Chapter 6

Other Unresolved Issue 

During our review of NASDA’s single audit report for FY 2012, the OIG learned 

of an unresolved issue pertaining to a prior EPA agreement. Specifically, 

NASDARF reported and drew funds of $118,324 for potentially unallowable 

costs under EPA Agreement No. 83235401. Per the single audit report, the costs 

were recorded as a refundable advance and represent funds received as of 

year-end but not yet earned. NASDARF initially considered the costs (incurred in 

2006 and 2007) as unallowable and did not report them. NASDARF later reported 

the costs to the EPA as part of the closeout of the agreement in 2011. Although 

the EPA closed the agreement, NASDARF stated that the agency never made a 

determination on the allowability of the costs. NASDARF will recognize these 

funds as revenue once accepted by the EPA. 

We followed up with EPA personnel in the Office of Pesticide Programs and 

OGD, and found that staff were unaware of the issue. Personnel in both offices 

stated they had no knowledge of the potentially unallowable costs. However, staff 

said they would discuss the issue with personnel associated with the previous 

agreement and obtain more information. As a result, we questioned the $118,324 

pending review and approval by EPA. 

Although the agreement is closed, the EPA can recover funds if the funds are 

determined to be unallowable. Title 40 CFR §30.72(a) states the closeout of an 

award does not affect, in part, the following: 

 The right of EPA to disallow costs and recover funds on the basis of a 

later audit or other review. 

 The obligation of the recipient to return any funds due as a result of later 

refunds, corrections or other transactions. 

 Audit requirements (§30.26). 

In addition, 40 CFR §30.73(a) states: 

Any funds paid to a recipient in excess of the amount to which the 

recipient is finally determined to be entitled under the terms and 

conditions of the award constitute a debt to the Federal 

Government. If not paid within a reasonable period after the 

demand for payment, EPA may reduce the debt by paragraph (a) 

(1), (2) or (3) of this section. 

(1) Making an administrative offset against other requests 

for reimbursements. 

14-P-0131 25 
 

 

 

(2) Withholding advance payments otherwise due to the 

recipient. 

(3) Taking other action permitted by statute. 

Recommendation 

We recommend that the Director of the Office of Grants and Debarment: 

6.	 Determine the allowability of the $118,324 in costs incurred under prior 

EPA Agreement No. 83235401 and recover any costs determined to be 

unallowable. 

NASDARF Response 

NASDARF responded that the EPA had officially closed the grant and released 

the funds. NASDARF also provided a copy of the close-out letter. 

EPA Response 

The EPA responded to the recommendation stating that OGD and the Office of 

Chemical Safety and Pollution Prevention will require NASDARF to submit 

documentation for the costs in question incurred in 2007 under Agreement No. 

83235401 to determine whether they are allowable under the agreement. EPA also 

responded it will review the documentation and take necessary corrective action, 

including the recovery of costs as appropriate if they are determined to be 

unallowable. 

OIG Comments 

The OIG acknowledges that the EPA closed the grant and released the funds. 

However, based on NASDARF’s comments to the OIG and the single audit report 

for FY 2012, allowability of the costs remains at issue. 

The OIG agrees with EPA’s intended corrective actions for recommendation 6. 

However, because the EPA did not provide specific planned completion dates for 

the corrective actions, the OIG considers the status of the recommendation 

unresolved. 

14-P-0131 26 
 

 

 

 

 

 

 

 

 

 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed-To 

Amount 

1 

2 

3 

4 

5 

6 

7 

15 

15 

15 

23 

26 

Disallow and recover $571,626 of questioned 

costs. If NASDARF provides documentation that 

meets appropriate federal requirements or 

demonstrates the fairness and reasonableness of 

the subcontract and subgrant costs, the amount to 

be recovered may be adjusted accordingly. 

Require NASDARF to: 

a. Recalculate its indirect cost rate for FY 2011, 

excluding subgrant and subcontract amounts 

in excess of $25,000; and submit to the NBC 

for approval, or ask the NBC to amend, the 

indirect cost rate agreements to include an 

equitable allocation base. 

b. Claim indirect costs using the recalculated 

approved rates 

Require NASDARF to calculate its indirect cost 

rates for years beyond FY 2011 by excluding 

subgrant and subcontract amounts in excess of 

$25,000; or to be in accordance with any revised 

indirect cost rate agreement. 

Require the following special conditions be 

included for all current and future awards until the 

EPA determines that NASDARF has met all 

applicable federal financial requirements: 

a. Payment on a reimbursement basis. 

b. Review and approval of reimbursement 

requests, including all supporting 

documentation, prior to payment. 

Require NASDARF to establish controls for future 

awards in order to ensure: 

a. Documentation is maintained in procurement 

files to justify sole-source procurements and 

to ensure compliance with 40 CFR§30.46. 

b. Compliance with 40 CFR §30.45 by 

conducting a cost or price analysis to 

determine reasonableness of costs. 

c. Compliance with administrative conditions of 

the award by determining and documenting 

the reasonableness of subgrant costs. 

Determine the allowability of the $118,324 in costs 

incurred under prior EPA Agreement No. 83235401 

and recover any costs determined to be 

unallowable. 

U 

U 

U 

U 

U 

U 

Director, Office of 

 Grants and Debarment 

Director, Office of 

 Grants and Debarment 

Director, Office of 

 Grants and Debarment 

Director, Office of 

 Grants and Debarment 

Director, Office of 

 Grants and Debarment 

Director, Office of 

 Grants and Debarment 

$572 

$118 

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

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

U = recommendation is unresolved with resolution efforts in progress 

14-P-0131 27 

1 
 

             

       

   

     

     

Appendix A 

NASDARF’s Comments on Draft Report 

and OIG Responses 

National Association of State Departments of Agriculture

4350 North Fairfax Drive

Suite 910

Arlington, VA 22203

Tel: 202‐296‐9680 | Fax: 703‐880‐0509

www.nasda.org

December 19, 2013 

Ms. Angela Bennett 

US EPA Region 4 

Office of Inspector General 

61 Forsyth Street, S.W. 

Mailcode: 12T26 

Atlanta, GA 30303-8960 

RE: Office of Inspector General’s Draft Report on Examination of NASDARF’s 

Cooperative Agreement No. 83456201 

Dear Ms. Bennett: 

Thank you for the opportunity to provide comments and additional information on the Office of 

Inspector General’s (OIG) draft examination on the National Association of State Departments of 

Agriculture Research Foundation’s (NASDARF) cooperative agreement with the Environmental 

Protection Agency (No. 83456201). 

In an effort to provide a complete and accurate response to OIG’s inquires under Project No. OAFY13-0140, NASDARF has personally met with OIG management on several occasions, fully 

complied with all of OIG’s requests for information and supporting documentation over several 

months, and met with EPA’s Office of Pesticide Programs (OPP) representatives to discuss and 

provide informed responses to OIG’s draft examination. In addition to the specific responses below, 

we are providing the attached documentation for your review (Attachments A-U). 

We value OIG’s role and mission, and we appreciate any opportunity to increase NASDARF 

efficiencies in our cooperative agreement with EPA. Please see our responses to OIG findings 

below. 

OIG Charge: Financial Management Systems did not Meet Certain Federal Requirements 

In Chapter 4 of the OIG draft examination, OIG made the following charges: 

14-P-0131 28 
 

 

NASDARF’s financial management system did not meet certain federal regulations 

and agreement conditions. Specifically, NASDARF: 

 Did not calculate and apply indirect cost rates correctly. 

 Reported outlays for indirect costs in excess of recorded expenses in the 

general ledger. 

 Drew down funds that exceeded cash needs.
 

These conditions occurred because NASDARF did not have controls in place to 

ensure compliance with federal regulations and agreement conditions. In calculating 

indirect cost rates, NASDARF was not aware initially of 2 CFR Part 230 

requirements to exclude subgrants and subcontracts in excess of $25,000. NASDARF 

later interpreted the requirements erroneously and only excluded amounts for 

subgrants, but not subcontracts. For the reported outlays, NASDARF lacked controls 

to ensure the recording of adjustments in the general ledger. Lastly, NASDARF’s 

written procedures for drawdowns did not incorporate cash-management 

requirements as described in the administrative conditions of the agreement or under 

federal regulations. 

NASDARF Response to Chapter 4 Charge: Did not calculate and apply indirect cost 

rates correctly: 

NASDARF is fully informed of 2 CFR Part 230 requirements to exclude subgrants and subcontracts 

in excess of $25,000, and at no time was NASDARF under the impression, nor did NASDARF 

execute any activities under the illusion, that indirect costs could be charged on subgrants and 

subcontracts in excess of $25,000. 

OIG’s charge relates specifically to Ms. Carol (Ramsay) Black’s misclassification as a 

“subcontractor,” when in fact, Ms. Black is a contracted employee/consultant under Ramsay 

Consulting, LLC. NASDARF maintains a long standing relationship with Ms. Black in her capacity 

as a contract employee, and Ms. Black’s correct classification as a contracted employee is not 

subject to the rule of a subcontract under 2 CFR Part 230. 

As provided in previous communications with OIG, both NASDARF and EPA engaged several 

individuals for consideration to replace Mr. Richard Herrett as the NASDARF Project Manager. 

However, due to the unique skill-set and expertise required to adequately fill the NASDARF Project 

Manager position, only a finite number of individuals met the qualifications needed for 

consideration. Subsequently, both EPA and NASDARF identified Ms. Black as the most qualified 

employee candidate during the recruitment process to replace Mr. Herrett, who had indicated his 

desire to retire. However, in order to hire Ms. Black and allow her to retain her faculty position at 

Washington State University, it was necessary for Ms. Black to serve in a “consultant/employment” 

capacity. To this end, NASDARF made a budgetary request in March 2011 to move $520,000 from 

the Salary budget category into the Contractual category. 

Since Ms. Black serves as an agent for NASDARF and the project manager for cooperative 

agreement No. 83456201, her position should be treated as direct salary. NASDARF recognizes 

Ms. Black’s hourly expenses should be budgeted as salary per the original budget. NASDARF will 

request that the budget is returned to its original classifications. 

14-P-0131 29 
 

 

Ms. Black is perceived by all project partners, stakeholders, and EPA as being an agent of 

NASDARF. Her expertise is largely responsible for the high level of quality work and numerous 

deliverables this Cooperative Agreement has produced, and EPA, NASDA, and the stakeholder 

community hold her in high regard. OIG and NASDARF may disagree on Ms. Black’s position and 

the Ramsay Consulting, LLC contract. Given this potential disagreement, NASDARF maintains the 

indirect cost rule was applied consistently across each and every other subgrant and subcontract, 

including those in question with University of Florida, CropLife Latin America, and Texas A&M 

University. 

In addition, OIG listed Ramsay Consulting LLC, Richard Herrett, Marla Stein Associates, and 

CropLife Latin America as subcontractors/subgrantors receiving payments in excess of $25,000. 

Ramsay Consulting, LLC and Mr. Herrett served as project managers for the grant and are therefore 

considered direct salary. Irrespective of the classification, Mr. Herrett was not paid under this 

current agreement. Marla Stein Associates received $21,143 under Cooperative Agreement X8-

83456201; these expenses are as follows: printing Handler Verification cards (second payment of 

$11,950 from June 2010), a thumb drive ($163 in Sept 2012) and publication design for a PPE 

document ($9,030 in May 2013). The remaining invoices were charged under a prior agreement 

(Attachments A-H). 

As OIG noted in its discussion of adjustments to the indirect allocation, indirect costs were not 

ultimately charged on the $10,093 over $25,000 paid to CropLife Latin America. 

NASDARF applies for their indirect rate annually. The rate is approved by the National Business 

Center (NBC). This results in a revised Final indirect rate and a new Provisional indirect rate. The 

Final indirect rate is received long after the close of the NASDARF fiscal year and almost always 

requires adjustment to prior years (Attachment I). 

NASDARF is awaiting the EPA grants office’s opinion before making any decisions in regards to 

reapplying for indirect rates. Indirect rates were calculated with guidance from EPA and the NBC, 

which considered all programs currently undertaken by NASDA and NASDARF. This arduous 

process takes resources away from program goals and would more than likely result in no material 

adjustments. 

OIG Response 1: In its response, NASDARF states that Ms. Black’s position should be 

treated as direct salary. The OIG disagrees with this position. Under 2 CFR 230, 

Appendix B.8, compensation for personal services includes services provided by the 

organization’s employees. Since Ms. Black is not an employee, her position cannot be 

treated as a direct salary. There is no disagreement that Ms. Black is a contractor. However, 

based on further review of 2 CFR Part 230, the OIG believes that clarification is needed 

about the relationships discussed (i.e., grants-subgrants, contracts-subcontracts, and whether 

the requirement applies to the Ramsey contract). NASDARF’s relationship with Ramsey is 

not the typical grant-subgrant relationship; rather, it is a grant-contract relationship. We 

recommend that the EPA seek clarification on whether this type of relationship is subject to 

the $25,000 requirement. This would also apply to Mr. Herrett. 

14-P-0131 30 
 

NASDARF Response to Chapter 4 Charge: NASDARF lacked controls to ensure the 

recording of adjustments in the general ledger: 

NASDARF disagrees with OIG’s statement that NASDARF lacked “controls to ensure the 

recording of adjustments in the general ledger.” The nature of any indirect rate application results 

in regular adjustments when rates change and new payments are made for subgrants. NASDARF’s 

goal is to obtain a correct cumulative total in the indirect allocation, not an unrealistic expectation of 

an unchanging allocation each month. Assessing these values at interim periods over the life of the 

grant only offers a snapshot at that specific time. Attachment J includes the general ledger through 

October 2013 and Attachment K is a revised SF425 as of October 31, 2013, which provide greater 

context of the grant during a dynamic, interim period. Attachment L reflects the indirect rates over 

the life of the grant. 

OIG Response 2: The OIG based its finding on the fact that the general ledger did not 

support the outlays reported on the interim FFR. The OIG acknowledges the adjustments of 

indirect costs as NASDARF discussed; however, outlays reported on the FFR should be 

adequately supported as required by 40 CFR §30.21(b)(7). NASDARF did not provide any 

additional documentation to support the two adjustments reported under the interim FFR. 

As a result, the OIG continues to question the costs as unsupported. 

NASDARF Response to Chapter 4 Charge: NASDARF’s written procedures for 

drawdowns did not incorporate cash-management requirements described in the 

administrative conditions of the agreement or under federal regulations: 

NASDARF has changed both personnel and policy within the last year to insure cash management 

practices are in line with grant requirements. According to the revised SF425, as of October 31, 

2013, EPA owed NASDARF $125,319.20 in direct expenses and indirect allocations (Attachment 

M). This money was drawn down in November per NASDARF’s updated policy, which now reads: 

“Drawdowns related to the EPA agreement are initiated by the Director of Finance based on 

anticipated short-term expenses as reported and documented by the Project Director. 

Drawdowns are typically made after expenses are paid but may be made a week in advance 

in anticipation of large vendor/subgrant disbursements.” 

NASDARF is aware of OIG’s position claiming funds are available within 3 business days; 

however, recent technical difficulties with the ASAP website make it extremely challenging for 

NASDARF management to operate with a 3-day window for distributing funds. 

OIG Response 3: The OIG acknowledges that NASDARF revised its procedures; however, 

the procedures do not indicate that drawdowns should be made as close as administratively 

feasible to the actual disbursements and be timed in accordance with the actual, immediate 

cash requirements. The OIG does not consider this acceptable, and continues to maintain that 

NASDARF can get funds from the EPA within 3 days or less. 

14-P-0131 31 
 

NASDARF Response to Chapter 4 Charge: NASDARF used EPA funds to cover 

expenditures under other non-EPA programs: 

OIG’s assertion that NASDARF used EPA funds for expenditures for other non-EPA programs is 

incorrect. Funds were transferred from the NASDARF checking account to other NASDA 

affiliated accounts only after NASDARF earned the funds through indirect allocations or 

reimbursement for direct expenses. NASDARF is unclear how OIG’s assumption was generated, 

and NASDARF is highly concerned OIG did not adequately develop an understanding of 

NASDARF’s revenue recognition and cash management procedures when reaching this conclusion. 

NASDARF welcomes additional information and explanation on how OIG developed this finding. 

OIG Response 4: The OIG disagrees with NASDARF that it did not use EPA funds for 

expenditures for non-EPA programs. The OIG’s cash flow analysis, conducted using 

NASDARF’s bank statements, showed that NASDARF moved funds between the EPA’s 

programs and others. Most of the transfers out were to the NASDA account, which, as 

discussed in the response above, could be for reimbursement for indirect expenses. 

However, there were significant deposits to and from the EPA account from other agencies. 

There were also smaller transfers out from the EPA account to other associations within the 

state departments of agriculture. Title 40 CFR 30.21(b)(3) requires that recipients’ financial 

management systems shall assure that funds are used solely for authorized purposes. 

OIG Charge: Procurements did not meet Federal Requirements or Agreement Conditions 

In Chapter 5 of the OIG draft examination, OIG made the following charges: 

NASDARF’s procurement practices for subcontracts and subgrants did not comply 

with federal requirements or agreement conditions. In particular, NASDARF did 

not: 

	 Provide documentation to support the sole-source procurement process used 

for its project management subcontract, or conduct a cost or price analysis 

as required by 40 CFR Part 30 and NASDARF’s own procurement policy. 

 Comply with agreement administrative condition no. 15.a.(4) for subgrants 

awarded to the University of Florida and CropLife Latin America. 

 Include provisions required by 40 CFR Part 30 in its written procurement 

policy. 

These conditions occurred because of NASDARF’s lack of knowledge or a lack of 

understanding about agreement conditions and federal requirements. Additionally, 

NASDARF’s written policies and procedures provided inadequate guidance for 

subcontract and subgrant awards. As shown in chapter 3, we questioned $295,976 

that NASDARF incurred and reported for three awards. – not explicitly addressed. 

14-P-0131 32 
 

 

 

NASDARF Response to Chapter 5 Charge: Sole-Source Procurement Not Justified; 

Cost or Price Analysis Not Conducted: 

As stated above, Ms. Black is a contracted employee/consultant under Ramsay Consulting, LLC. 

NASDARF maintains a long standing relationship with Ms. Black in her capacity as a contract 

employee, and Ms. Black’s correct classification as a contracted employee is not subject to the rule 

of a subcontract. This was an employee hiring decision for which both NASDARF and EPA Office 

of Pesticide Programs (“OPP”) participated. 

As provided in previous communications with OIG, both NASDARF and EPA engaged several 

individuals for consideration to replace Mr. Richard Herrett as the NASDARF Project Manager. 

However, due to the unique skill-set and expertise required to adequately fill the NASDARF Project 

Manager position, only a finite number of individuals met the qualifications needed for 

consideration. One of the candidates, Mr. Roger Flashinski, under consideration for the Project 

Manager position provided a statement confirming he was not able to accept the position due to 

timing considerations and his position with another university did not allow for the same 

accommodations as Ms. Black (Attachment N). 

In response to the issue of reasonableness of pay, the project manager position requires a skill set 

similar to those of a government employee program manager or branch chief. NASDARF's project 

manager is responsible for overseeing multiple programs areas, including: applicator certification, 

worker protection handler education and support for health care providers. A qualified project 

manager must have demonstrated extensive national leadership and be highly respected in pesticide 

applicator education and regulation arena. The manager must be well-established within the wide 

network of national stakeholders and be well-respected within the EPA Office of Pesticide 

Programs. They must have demonstrated success in coalition leadership, conference management, 

project development & coordination, and manage a highly respected pesticide safety 

education/regulatory program. 

NASDARF based Ms. Black’s hourly compensation on similar positions located in the Washington, 

DC and Seattle, WA areas. Furthermore, NASDARF discussed Ms. Black’s pay level with EPA 

OPP, which subsequently agreed on appropriateness of Ms. Black’s pay level. Current positions 

similar in scope and demands include: 

	 National Program Leader for IR-4 and PMP at USDA National Institute for Food and 

Agriculture (NIFA) (Monte P. Johnson). Mr. Johnson provides national leadership for state 

and federal activities aimed at developing a greater understanding of the toxicological 

consequences of human exposure to pesticides and the effects of pesticide residues in foods 

and the environment. Prior to assuming this position with USDA, Mr. Johnson was the 

University of Kentucky pesticide education specialist. Current rank: GS-15 and salary: 

$148,510 (or $71.40/hour), not including benefits. 

	 USDA Plant Systems Protection Program Leader (Mary Purcell-Miramontes). Ms. PurcellMiramontes leads and directs Agriculture & Food Research Initiative (AFRI) competitive 

grant programs on Insects and Nematodes in Plant Systems and co-chairs the Colony 

Collapse Disorder Steering Committee and Program Leader for the Pesticide Safety 

Education Program. Current rank: GS-15 and salary: $140,259 (or $67.43/hour), not 

including benefits. 

14-P-0131 33 
 

	 Branch Chief Worker Safety Division for US Environmental Protection Agency (Kevin 

Keaney). Mr. Keaney works for OPP’s Field and External Affairs Division and manages 

regional and state coordination and assistance for applicator certification, worker protection, 

health incidents, and health care providers, including communication and outreach activities. 

Current rank: GS-15 and salary: $155,500 (or $74.52/hour), not including benefits. 

	 USDA NIFA Office of the Director, Program and Analysis Officer (William J. Hoffman). 

Mr. Hoffman participates in programming, policy development and interpretation, 

development and updating of NIFA’s guidelines, COOP plans, and resources. Current rank: 

GS-14 and salary: $126,251 (or $60.70/hour), not including benefits. 

Cost basis for GS Pay Scale for positions in Seattle, WA and Washington, DC: 

 GS 14 -- $65.53 per hour + 37% benefit rate = $89.78 

 GS 15 – 74.51 per hour + 22.78% benefit rate = $91.48 (actual benefit rate for EPA GS15 is 

22.78%) 

Ms. Black’s contract with NASDA states the $90.00/hour includes a base pay rate of $74.50 per 

hour and $15.50 per hour overhead expenses for the contractor. The base rate would actually be 

higher had Ms. Black been a salaried employee for NASDARF. The employee benefits rate at 

NASDA for retirement, health, and dental is 24.5%. The benefit rate for federal employees ranges 

from 23-37%. Ms. Black’s rate for benefits is currently 20%. 

OIG Response 5: The OIG acknowledges the NASDARF’s discussion regarding the selection 

of Ms. Ramsey. However, since NASDARF did not document its decisions at the time of the 

procurement, it did not comply with federal requirements. Consideration of NASDARF’s afterthe-fact explanations and documentation is at the discretion of EPA management and would 

require a formal deviation from agency policy in accordance with 40 CFR §30.4, Deviations. 

NASDARF Response to Chapter 5 Charge: Cost or Price Analysis Not Conducted: 

NASDARF restates its assessment of “reasonableness of costs” for the UFL project. We disagree 

with OIG finding our assessment did not measure a prudent person’s assessment. The rates in the 

proposal are reasonable and fall within typical rates for editing as referenced by the Editorial 

Freelancers’ Association (http://www.the-efa.org/res/rates.php), ProComm (Attachment O) and 

HOW Design (http://www.howdesign.com/design-business/pricing/hourly-rates). The pesticiderelated subject matter (air sampling, data analysis) is technical and requires a skilled editor. 

Presentation development includes content development, graphic design and multimedia animation 

and is priced similarly. Narration includes the voice over narration, plus insertion and 

synchronization with the base media (PowerPoint or video). Using our collective experience on the 

amount of time to produce publications and current market prices, the below description is accurate: 

Cost Analysis: 

	 OTHER $13,000 – publication and postage way under budget: 

o	 When looking at expenses for curriculum development, web design, print design, 

presentation design, which includes technical experts, editors, designers, professional 

14-P-0131 34 
 

narration, total costs are reasonable and anticipate an outlay for publication and 

presentation design to be over $2,500. 

 Editors $1,000 – range in per/hour fees: 800-1600 words per hour. $50-125/hour 

depending on level of content expertise required. 

 Publication Designers $1,000 - $45-125 per page – anticipate 10 pages 

 Presentation development – 40 hours at $45-100/hour 

 Professional narration $500 - $500 per completed hour (prep, narrate, edit) 

o Printing/mailing costs for follow-up survey and color-brochures are reasonable 

 Follow-up survey mailed to each school district (3,928 copies) – print $4,000 

($1/copy), send and return envelopes $800 = $4,800 

 Tri-fold color brochure – estimate 4,000 copies at $1 each - $4,000 

o Postage ($1.20/envelope) = $4,714 per mailing 

 SALARIES and WAGES $13,547: 

o	 Personnel: this project is receiving more commitment of time than what was sought in 

the budget 

 0.04 FTE equates to 83 hours or just over two-weeks time for a lead coordinator 

and assistant coordinator. This project will incur many more hours than 

estimated. It is anticipated that a time commitment of 0.25 FTE would be more 

appropriate. The base salary is $145,000 for the Extension Specialist (GS15 

equivalent) and $116,250 (GS13 equivalent) for the Assistant position. These are 

equitable salary ranges for senior university extension personnel when compared 

to federal employee pay scales. 

 Benefits are listed at 27.8% which covers health insurance premiums, dental, life 

insurance premiums and Florida Retirement System Pension Plan and Investment 

Plan. 

	 TRAVEL $9,360: Travel: meets state requirements for per diem and least expensive travel 

options; believe this is under-budgeted for anticipated expenses 

o	 Estimate 2 interstate trips for 2 people (airfare, per diem) = $1,200 per trip x 4 = $4,800 

o	 Estimate 6 interstate trips for 2 people (mileage, per diem) = $440 per trip x 12 = $5,280 

Similar to the University of Florida subgrant, NASDARF provided sufficient documentation to 

demonstrate “reasonableness of costs” for the CropLife Latin America, Costa Rica project. We 

refer OIG and EPA to our original response. CropLife Latin American project effort continues 

EPA’s presence in supporting Central American pesticide safety education programs (El Salvador, 

Honduras, Costa Rica, Nicaragua) (Attachment P and Q). 

There is significant financial benefit with partners providing matching expenses: FLNC & their 

partners will provide financial and substantial in-kind support, CLLA will provide $50,000 and will 

provide oversight and accountability reporting for the program. 

Personnel: CLLA and FLNC will provide personnel with expertise in implementing pesticide safety 

train-the trainer programs and coordinating diverse stakeholder coalitions; expect to have additional 

expert support from: Costa Rica Ministries of Agriculture, Labor, Environment, and Health; 

pesticide manufacturers industry; University of Costa Rica; International Labor Organization; 

Instituto Nacional de Aprendizaje (national training organization); Cooperativa de Productores de 

Leche Dos Pinos (milk producers association); and other agricultural producer cooperatives. 

14-P-0131 35 
 

 

The reach of the outreach program includes farmers, managing applicators, pesticide handlers, 

dealers, and field workers. 

The project would be substantially more expensive if another entity conducted it because another 

entity would need to expend time and resources to develop the strong connections with a broad 

group of stakeholders and an understanding of the needs of pesticide applicators and other people 

involved in pesticide sales, use, and disposal. Having the experience from other Latin American 

countries is invaluable. 

To augment the response, we provide the following information: 

The one-year report (June 2004-2005) and budget from the 2003 CropLife Honduras project shows 

a very similar scope of work, budgetary items and budgeting levels. The one-year budget which 

trained over 8,000 people was nearly $48,000 (Salaries: $14,000, Supplies/Training Aids: $2,100, 

Equipment: $4,800, Printed Materials: $4,600, Marketing/Communication: $ 2,000, and Travel 

$18,800) (Attachment R). 

NASDARF also compared what EPA/USDA typically provides to each well-established U.S. state 

certified applicator education program ($30,000 base funds + additional funds based on the number 

of certified applicators, requires 100% matching funds from the state); the proposed annual cost of 

the Costa Rica effort (approx. $33,333 per year from NASDARF with matching funds from CLLA 

and FLNC, as well as substantial in-kind support) and the proposed implementation costs appear 

reasonable. Below are samples of four states from each region of the United States for the USDA 

Budget year FY2008. The on the next page table indicates the total annual support level provided 

by the EPA/USDA Funding and State Match. This total excludes agent and specialist salaries, 

benefits and operations. The last column indicates the percentage of the total operating budget 

supported by EPA/USDA. The Costa Rica project fits well within this range (Attachments S and 

T). 

14-P-0131 36 
 

  

   

       

       

       

State Pesticide Safety Education Programs (PSEP) Note: these are 

established programs. Source: Data from USDA base-support in FY2008 

allocation; funding originated from EPA 

approx. % 

of total 

PSEP 

operations 

State USDA 

Funding

 University 

Match Total 

Southern Region 

University of Georgia $42,668 $42,668 $85,336 100% 

University of Arkansas $34,107 $34,107 $68,214 50% 

Oklahoma State University $38,164 $38,164 $76,328 25% 

North Carolina State University $48,766 $48,766 $97,532 40% 

North Central Region 

Iowa State University $47,142 $47,142 $94,284 20% 

Kansas State University $32,696 $32,696 $65,392 100% 

Michigan State University $39,701 $39,701 $79,402 100% 

North Dakota State University $29,841 $29,841 $59,682 25% 

Northeast Region 

Virginia Polytechnic Institute & State 

University $28,925 $28,925 $57,850 15% 

University of Massachusetts $19,166 $19,166 $38,332 35% 

University of Maine $18,003 $18,003 $36,006 33% 

Pennsylvania State University $47,169 $47,169 $94,338 15% 

Western Region 

Colorado State University $26,798 $26,798 $53,596 45% 

University of Alaska $16,898 $16,898 $33,796 75% 

University of Wyoming $33,474 $33,474 $66,948 100% 

Washington State University $43,083 $43,083 $86,166 15% 

NASDARF also directs OIG to the Office of Grants and Debarment opinion related to the 

procurement procedures for the University of Florida and CropLife Latin America awards, given 

the controls already in place for awards of this type. 

OIG Response 6: The OIG acknowledges NASDARF’s discussion regarding the cost-price 

analysis and reasonableness of costs associated with the subgrants. However, since 

NASDARF did not document the analysis at the time of the procurement, it did not comply 

with federal requirements. Consideration of NASDARF’s after-the-fact explanations and 

documentation is at the discretion of EPA management and would require a formal deviation 

from agency policy in accordance with 40 CFR §30.4, Deviations. 

OIG Charge: Other Unresolved Issue 

In Chapter 6 of the OIG draft examination, OIG made the following charges: 

During our review of NASDA’s single-audit report for FY 2012, the OIG learned of an 

unresolved issue pertaining to a prior EPA agreement. Specifically, NASDARF reported and 

14-P-0131 37 
 

drew funds of $118,324 for potentially unallowable costs under EPA Agreement No. 

83235401. Per the single-audit report, the costs were recorded as a refundable advance and 

represent funds received as of year-end but not yet earned. NASDARF initially considered 

the costs (incurred in 2006 and 2007) as unallowable and did not report them. NASDARF 

later reported the costs to the EPA as part of the closeout of the agreement in 2011. 

Although the EPA closed the agreement, NASDARF stated that the agency never made a 

determination on the allowability of the costs. NASDARF will recognize these funds as 

revenue once accepted by the EPA. 

NASDARF Response to Chapter 6: 

NASDARF has attached the letter officially closing this grant and funds have been released 

(Attachment U). 

OIG Response 7: The OIG acknowledges that EPA closed the grant and released the funds. 

However, based on NASDARF’s comments to the OIG and the single audit report for 

FY 2012, allowability of the costs remains at issue. On this basis, the OIG continues to 

question the cost. The EPA should review and determine the allowability of the costs and 

recover any determined to be unallowable. 

Conclusion 

NASDARF appreciates OIG’s efforts and in response to these OIG findings, NASDARF modified 

our subcontract for project management services and updated our written procurement procedures 

to include OIG-recommended requirements pertaining to 40 CFR Part 30. 

NASDARF is pleased to partner with EPA in providing these timely, lifesaving programs to 

pesticide applicators around the U.S. and Central America. NASDARF will continue to work with 

the Office of Pesticide Programs and the Office of Grants and Debarment to achieve the goals of the 

program while maintaining a commitment to excellence. 

We appreciate any opportunity to increase NASDARF efficiencies in our cooperative agreement 

with EPA. We stand ready to work with our federal partners and OIG to continue to improve these 

processes. Please let us know if you have any questions or would like to discuss further. 

Sincerely, 

Stephen Haterius 

Chief Executive Officer, NASDA 

14-P-0131 38 
 

Appendix B 

EPA’s Comments on Draft Report 

OFFICE OF 

ADMINISTRATION 

 AND RESOURCES 

MANAGEMENT 

December 20, 2013 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

MEMORANDUM 

SUBJECT:	 Response to Office of Inspector General Draft Report, Project No. OA-FY13-0140 

titled, “ National Association of State Departments of Agriculture Research 

Foundation (NASDARF) did not comply with certain Federal requirements and EPA 

award conditions”, dated November 5, 2013 

FROM: Kysha Holliday 

Deputy Director, NPTCD 

TO: Robert K. Adachi. 

Director of Forensic Audits 

Office of the Inspector General 

Thank you for the opportunity to respond to the issues and recommendations in the subject draft 

audit report. Attached is a summary of the Office of Grants and Debarment’s (OGD) and the Office 

of Chemical Safety and Pollution Prevention’s (OCSPP) overall position regarding each report 

recommendation. 

AGENCY’S OVERALL POSITION 

OGD and OCSPP generally agree with the Inspector General’s findings that NASDARF did not 

comply with certain requirements of 40 CFR Part 30, 2 CFR Part 230, or its award conditions. 

As described below, OGD and OCSPP agree with Recommendations 1 through 6. 

14-P-0131 39 
 

AGENCY’S RESPONSE TO REPORT RECOMMENDATIONS 

Agreements 

No. 

Recommendation Intended Corrective Action(s) Estimated 

Completion by FY 

1 Disallow and recover $571,626 of 

questioned costs. If NASDARF 

provides documentation that 

meets appropriate federal 

requirements or demonstrates the 

fairness and reasonableness of 

the subcontract and subgrant costs, 

the amount to be recovered may be 

adjusted accordingly. 

1. OGD will provide NASDARF the 

opportunity to submit documentation to 

substantiate the questioned costs. OGD 

will review the documentation and take 

necessary corrective action, including 

the recovery of all or part of the 

questioned subcontract and indirect 

costs as well as funds drawn. OGD will 

work with NASDARF to implement 

corrective actions to comply with 

federal requirements on assuring the 

reasonableness of sub-grants, subcontracts, indirect costs and drawdown 

amounts. 

Within 180 days of 

OIG issuing their 

final report or as 

soon as practicable 

2 Require NASDARF to: 

a. Recalculate its indirect cost rate 

for FY 2011, excluding sub-grant 

and subcontract amounts in 

excess of $25,000; and submit to 

the NBC for approval, or ask the 

NBC to amend, the indirect 

cost rate agreements to include an 

equitable allocation base. 

b. Claim indirect costs using the 

recalculated approved rates. 

2. OGD will provide NASDARF the 

opportunity to clarify its position and 

properly support its indirect rate and 

require NASDARF to amend the rate 

where appropriate. OGD will review 

NASDARF’s support and coordinate 

with DOI-NBC to review and amend the 

ICR agreement as needed, then require 

NASDARF to adjust claimed costs 

according to the revised agreement. 

Within 180 days of 

OIG issuing their 

final report or as 

soon as practicable 

3 Require NASDARF to calculate its 

indirect cost rates for years beyond 

FY 2011 by excluding subgrant 

and subcontract amounts in excess 

of $25,000; or to be in accordance 

with any revised indirect cost rate 

agreement. 

3. Where necessary, OGD will require 

NASDARF to recalculate their indirect 

costs rates to be in compliance with 2 

CFR 230 and coordinate with DOI-NBC 

to revise NASDARF’s rates. OGD will 

then require NASDARF to adjust 

claimed costs according to any revised 

ICR agreements. 

tbd 

14-P-0131 40 
 

 

 

No. Recommendation Intended Corrective Action(s) Estimated 

Completion by FY 

4 Require the following special 

conditions be included for all 

current and future EPA 

awards until the EPA 

determines that NASDARF 

has met all applicable federal 

financial requirements: 

a. Payment on a 

reimbursement basis. 

b. Review and approval of 

reimbursement requests, 

including all supporting 

documentation, prior to 

payment. 

4. OGD will place NASDARF on 

reimbursement for their active assistance 

agreements. The Agency will require 

NASDARF to provide supporting documents 

for costs incurred for the Agency’s review 

prior to releasing funds for payment. 

NASDARF will remain on reimbursement 

status until they have demonstrated to the 

Agency that their financial management of 

EPA agreements meets applicable federal 

requirements for drawing grant funds. 

Within 180 days of 

OIG issuing their 

final report or as 

soon as practicable 

(ongoing) 

5 Require NASDARF to 

establish controls for future 

awards in order to ensure: 

a. Documentation is 

maintained in procurement 

files to justify sole-source 

procurements and to 

ensure compliance with 40 

CFR §30.46. 

b. Compliance with 40 CFR 

§30.45 by conducting 

a cost or price analysis to 

determine reasonableness of 

costs. 

c. Compliance with 

administrative conditions of 

the award by determining and 

documenting the 

reasonableness of subgrant 

costs. 

5. OGD will require NASDARF to comply 

with the requirements of 40 CFR 30 and 

administrative conditions with respect to 

documenting the justification of sole source 

procurements and performing an adequate 

cost or price analyses for procurements and 

sub awards to determine the reasonableness 

of cost. 

Within 180 days of 

OIG issuing their 

final report or as 

soon as practicable 

6 Determine the allowability of 

$118,324 of costs 

incurred under prior EPA 

Agreement No. 83235401 and 

recover any costs determined 

to be unallowable. 

6. OGD and OCSPP will require NASDARF 

to submit documentation for the costs in 

question incurred in 2007 under grant No. 

83235401 to determine if they are allowable 

under the agreement. OGD and OCSPP will 

review the documentation and take necessary 

corrective action, including the recovery of 

costs as appropriate if they are determined to 

be unallowed. 

14-P-0131 41 
 

 

OGD and OCSPP have a valued relationship with NASDARF and an obligation to manage 

grants in accordance with federal fiduciary and stewardship standards. The Agency fully intends 

to take the necessary corrective actions and work with NASDARF to resolve the findings of the 

OIG audit once formally issued. 

CONTACT INFORMATION 

If you have any questions regarding this response, please contact Kysha Holliday, Deputy 

Director of NPTCD at (202)564-1639 or Joe Lucia (202) 564-5378. 

cc: 

Arthur A. Elkins Jr., Inspector General 

Angela Bennett, Project Manager, Office of the Inspector General 

Howard Corcoran, Office of Grants and Debarment 

Carolyn Schroeder, OCSPP, OPP-FEAD 

Deborah Hartman, OCSPP, OPP-FEAD 

Kevin Keaney, OCSPP, OPP-FEAD 

Jill Young, GIAMD 

Denise Polk, Director NPTCD 

Barbara Proctor, GIAMD-AAO 

Kristen Arel, GIAMD 

Bernadette Dunn, OCFO 

bcc: none 

14-P-0131 42 
 

Appendix C 

Distribution 

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

Agency Follow-Up Official (the CFO) 

Agency Follow-Up Coordinator 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for External Affairs and Environmental Education 

Director, Grants and Interagency Agreements Management Division, Office of Administration 

and Resources Management 

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

Audit Follow-Up Coordinator, Office of Grants and Debarment, Office of Administration 

and Resources Management 

14-P-0131 43