U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

Early Warning Report: 

Internal Controls and 

Management Actions 

Concerning John C. Beale 

Pay Issues

Report No. 14-P-0036 December 11, 2013 

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Report Contributors: Robert Adachi 

 John Trefry 

 Jean Bloom 

 Leah Nikaidoh 

 Angela Bennett 

 Kevin Collins 

 Bill Spinazzola 

Abbreviations 

CIA Central Intelligence Agency 

EPA U.S. Environmental Protection Agency 

OAR Office of Air and Radiation 

OARM Office of Administration and Resources Management 

OGC Office of General Counsel 

OHR Office of Human Resources 

OIG Office of Inspector General 

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1-202-566-2391 

1-202-566-2599 

online: http://www.epa.gov/oig/hotline.htm online: http://www.epa.gov/oig/contact.html#Full_Info 

write: EPA Inspector General Hotline 

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write: EPA Inspector General 

1200 Pennsylvania Avenue, NW 

Mailcode 2410T 

Washington, DC 20460 Washington, DC 20460 
 

 

U.S. Environmental Protection Agency 14-P-0036 

Office of Inspector General December 11, 2013 

At a Glance 

Why We Did This Review 

John C. Beale, a former Senior 

Policy Advisor within the 

U.S. Environmental Protection 

Agency (EPA) Office of Air and 

Radiation, committed fraud 

against the EPA. The EPA 

Office of Inspector General 

(OIG) concluded it would need 

to determine conditions that 

may have allowed Mr. Beale’s 

actions to take place. On 

August 27, 2013, the Ranking 

Member of the Senate 

Committee on Environment and 

Public Works requested that 

the EPA OIG initiate work to 

determine “the agency’s 

policies and processes that 

facilitated Mr. Beale’s fraud.” 

This report addresses the 

following EPA theme: 

 Embracing EPA as a high 

performing organization. 

For further information, 

contact our public affairs office 

at (202) 566-2391. 

The full report is at: 

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

20131211-14-P-0036.pdf 

Early Warning Report: Internal Controls and 

Management Actions Concerning John C. Beale Pay 

Issues 

What We Found 

Internal controls that the EPA had in place did not The fraud committed 

identify and/or prevent abuses related to: by John C. Beale was
 

enabled by ineffective 

internal controls and a  Retention bonuses. 

lack of management  Pay in excess of statutory limits. attention.  Time and attendance. 

EPA management actions in dealing with Beale while he was working at the EPA 

enabled Beale’s fraud in areas related to internal control issues, and were 

influenced by Beale’s claims regarding his Central Intelligence Agency (CIA) 

status and retirement. Specifically: 

	 Agency managers did not take timely, effective action to address Beale’s 

retention bonus and pay in excess of statutory limits even though they 

were presented with these issues in July 2010. 

 Management believed that Beale’s pay issues were an administrative 

matter, and did not consider the matter a priority for them to address. 

 Agency management thought Beale had retired at the end of 2011, but 

Beale did not retire from the EPA until 2013. 

 The EPA’s internal controls over timekeeping facilitated Beale’s time and 

attendance abuses.

 Management Actions Taken 

The EPA Office of Administration and Resources Management and Office of the 

Chief Financial Officer identified internal control improvements that could be made 

to prevent and/or detect payroll and time and attendance issues, including: 

	 Modification to the time and attendance system to ensure managers 

approve individual employee timecards. 

	 Quarterly review of time and attendance records to confirm employees are 

entering and attesting their own time and determine whether someone 

other than the supervisor is approving the timecard. 

	 Quarterly review to determine whether an employee is receiving a 

retention bonus or has been paid over the statutory pay cap. 

The OIG has not verified the implementation and adequacy of the agency’s 

identified improvements. 
 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

December 11, 2013 

MEMORANDUM 

SUBJECT: Early Warning Report: Internal Controls and Management Actions Concerning 

John C. Beale Pay Issues 

Report No. 14-P-0036 

FROM: Arthur A. Elkins Jr. 

TO: Gina McCarthy, Administrator 

This is our early warning report, prepared by the Office of the Inspector General at the request of 

the Honorable David Vitter, Ranking Member, Committee on Environment, and Public Works, 

United States Senate. This report addresses three areas in which John C. Beale, the former Senior 

Policy Advisor for the U.S. Environmental Protection Agency’s (EPA) Office of Air and 

Radiation, defrauded the EPA: retention bonus, salary above federal statutory limits, and time 

and attendance. 

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 at 

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

adachi.robert@epa.gov. 
U S EPA U.S. EPA

Office of Inspector General

U.S. EPA 

Office of Inspector General

Internal Controls and Controls andManagement Actions ConcerningJohn C. Beale Pay Issues

December 11, 2013
Background

• John C. Beale committed fraud against the U.S.

Environmental Protection Agency (EPA).

• OIG concluded it needed to determine the condi

that may have contributed contributed to Mr. Beale’s actions actions

• August 27, 2013: Ranking Member of the Senate

Committee on Environment and Public Works m

request to review Beale matter.

• September 27, 2013: Beale pleaded guilty to the

government property and:

– Ordered to pay $886,186 in restitution to the EPA.

– Agreed to a forfeiture money judgment of $507,207.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Assignment Objective

• Determine Determine the agency's policies policies and pro

pro

that facilitated Beale's fraud.

• The assignment assignment was performed performed in acco

acco

with Generally Accepted Government A

Standards.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Scope of Report

• Report covers the policies and processe

facilitated Beale's fraud in connection w

– Retention bonuses.– Pay above statutory pay limits.

– Time and attendance.

• The Office of Inspector General’s (OIG’s

review included:

– Analysis of emails, payroll and personnel r

– Interviews with agency management and 

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Scope Limitation

• An EPA Office of General Counsel (OGC) staff

attorney involved with the Beale matter decl

be interviewed as part of this request as is re

under Section Section 6(a) of the Inspector Inspector General General A

• Declination does not represent the position o

• As a result of such information information or assistance assistance 

being provided to the Inspector General, we limited in our ability to determine OGC’s invo

in, knowledge of and actions rel t a ed to the B 

matter. (See slide 20 for extent of scope limit

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Summary of Results

• Internal controls that the EPA had in place did 

identify and/or prevent payroll issues related 

– Retention bonuses.– Pay in excess of statutory statutory limits.– Time and attendance.

• Agency management actions while Beale was 

at the EPA:

– Enabled Beale’s fraud in areas related to internal c

issues.

– Influenced by Beale’s “CIA [Central Intelligence Ag

status” and retirement.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Retention Bonus

Ineffective Ineffective Internal Internal Controls Controls• EPA’s payroll system does not have automate

controls controls in place to monitor monitor retention retention bonus

bonus

— The payroll system defaults to continue to pay re

pay unless stopped.

• The Office of Air and Radiation (OAR) did not 

process to ensure annual recertification of re

bonuses as required by Chapter 3 of EPA Pay

Administration Manual.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Agency Identified Corrective Measur

Regarding Retention Bonus *

• Will monitor retention bonuses paid – quarterly review through payro

• Performed internal control assessment – program and regional offices 

understand or follow the process:

– Prepared an HR Bulletin on retention bonus.

– Plans to update existing policy.

• Have reviewed annual retention incentive recertification process – an

were not performed timely by program and regional offices:

– Retention incentives are processed for one‐year increments and i 

not‐ to‐exceed date of one year, with a total three‐year limit.

– Annual certification.

– Semiannual Semiannual review for proper authorization authorization.

*Agency corrective measures have not been confirmed and evaluated 

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
—

—

Statutory Pay

Overridden Internal Controls• Automated controls to cap pay at statutory lim

manually bypassed to accommodate EPA Pay S

— Pay series SL is used for Senior Level positions positions.

• EPA coded Beale as a “C” employee:

— The “C” emp y lo ee code designates critical p ya posit

authorized by Office of Personnel Management that 

exceed statutory limit.

—

“C” code used to force the system to accept Beale’s 

— Once the amounts were entered, “C” code was not 

resulting in Beale exceeding statutory limits without 

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Agency Identified Corrective Measur

Regarding Statutory Pay *

• Review pay period reporting reporting to ensure

established statutory earning limitation 

exceeded.

• Monitor statutory pay limits – quarterly

review through through payroll payroll system to identi

identi

employees paid over the statutory pay 

* Agency corrective measures have not been confirmed and evaluated 

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Time and Attendance

Lack of Internal Controls• EPA’s timekeeping timekeeping system facilitated facilitated abuse

abuse

– Timekeeper can enter and verify time for any 

employee. Employees are not required to atte

accuracy of their time and attendance.

– Managers are allowed to “mass approve” gro

emp y lo ees in order to expedite p ya roll proces

• Timekeepers instructed to complete Beale

and attendance.

• OAR immediate office staff “mass approve

(including Beale) without any supervisory 

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Agency Identified Corrective Measur

Regarding Time and Attendance *

• Removed “approval all” button and will require man

approve each timecard i di n vidually.

• Initiated quarterly review of time and attendance re

confirm confirm employees employees are entering entering and attesting attesting their o

and required EPA offices to explain anomalies.

• Planned quarterly review of time and attendance rec

determine wh h et er someone other than supervisor 

approving the timecard – will require EPA office to ex

anomalies.

* Agency corrective measures have not been confirmed and evaluated 

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Agency Identified Identified Related Related Reviews Reviews

• The EPA Office of the Chief Financial Financial Office

Office

began internal control assessments in Nov

2013 and plans to conclude in February 20

Areas of review include:

– Executive payroll approvals.

– Employee departures and payroll.

– Parking and transit subsidy.

– Retention bonus.

*Agency reviews have not been confirmed and evaluated by the OIG.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Management Inaction on

Retention Retention Bonus and Statutory Statutory Pay

• EPA management management did not take timely, e

e

action to address Beale’s retention bon

pay in excess of statutory statutory limits.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Chronology of Retention Bonus and

Statutory Pay Issues

• June 2010: OIG identified Beale p ya roll discrepan

during annual financial statement audit. Made in

to the EPA Office of Administration and Resource

Management Management‐Office of Human Resources Resources (OARM

• June 2010: OARM‐OHR research determined tha

discrepancy resulted in Beale exceeding the stat

l b imit ecause of retention bonus pay.

• July 16, 2010: OARM‐OHR prepared document e

“John Beale Pay Issues” that discussed discussed his retent

retent

bonus and statutory pay issues. Document was p

to OAR on the same date.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
OARM‐OHR July 16, 2010,

Document Conclusions

• Retention Retention bonus first authorized authorized in 1991 and

recertified in 1992 and 1993.

• OAR submitted a new three‐year request in 2

re‐certifications or new requests were submibetween 1994 and 1999 or after 2000.

• Beale exceeded the Executive Level 1 statuto

limit in 2008 and 2009.

• If bonus continued through 2010, Beale's agg

pay would again exceed the statutory pay lim

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
OARM‐OHR July 16, 2010,

Document Recommendations

1. Confirm whether OAR had documentation to suppo

bonuses recei d ve by B l ea e.

2. Assist OAR in preparing a new request and affirmat

wanted bonuses bonuses to continue. continue.

3. Verify that Beale’s aggregate pay for 2008/2009 exc

pay cap, and when the 2010 pay cap will be exceede

4. Notify the agency's payroll office and OGC of issue a

information about the agency's waiver process, if ap

5. Notify Beale of the overpayment overpayment and provide provide emplo

emplo

waiver process, if applicable.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Chronology of Management Actions o

R t e ention Bonus

• January 12, 2011: Recommendation made by OGC to 

staff to stop retention bonus pay.

• January 17, 2011: Assistant Administrator for OAR re

by Assistant Assistant Administrator Administrator for OARM “to hold inform

inform

exchange” with Beale.

• April 2, 2012: Assistant Administrator for OAR confir

no actions taken on retention bonus due to advice o

Assistant Administrator for OARM.

• February February 5, 2013: Assistant Assistant Administrator Administrator for OAR ad

ad

Beale that retention bonus was cancelled.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Management Management Concern Concern About Pay Is

• Management Management believed believed that the pay issues we

– A human resource issue or administrative matter 

criminal matter.

– Being handled by OARM and OGC.

• The Assistant Administrator for OAR relied up

Assistant Administrator for OARM for guidan

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Impact of Unknown Unknown “CIA” Statu

• Early 2011: References began to surface that B

a CIA agent

– It was presumed that Beale was a CIA employee.– Management Management did not want to compromise compromise nation

nation

security or jeopardize Beale’s cover. This concern 

to override decision making on retention bonus a

issues.

– OARM did not confirm Beale’s CIA status.

• November 13, 2012: OGC contacted the EPA‐O

Homeland Security. *

* Timing and extent of OGC’s involvement is unknown due to scope limi

slide 5 for details).

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Beale Not Retired – Still on Payrol

• Beale’s supposed retirement delayed agen

action by the EPA because his “retirementsolved pay problems.

• Problem resurfaced when the agency foun

Beale had not retired and was still being presult of time and attendance issues:

– Timekeeper instructed to enter Beale’s time a

attendance.

– Mass approval of time – no supervisory appro

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
,

“Retirement” Timeline

• September 22, 2011: Beale retirement p y art held

Attendees included Assistant Administrator for O

• March 29, 2012: Assistant Administrator for OAR 

asked by OAR staff if Beale provided provided retirement retirement d

– Assistant Administrator for OAR wrote that she thoug

had retired.

• April 2, 2012: Assistant Administrator for OAR wa

notified that Beale had been paid through March 

2012, asked Assistant Administrator for OARM to

determine why Beale was still being paid.

• April 30, 2013: Beale officially retires.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
–

Future OIG Reports

• Future reports reports covering covering all of EPA will b

issued on:

– Retention bonuses.

– Pay above statutory pay limits.

– EPA’s vetting vetting process process for new employees employees.

– Travel.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Other Work to Be Performe

Performe

• Preliminary Preliminary research research initiated initiated on a revie

time and attendance issues within the E

• Scope of additional additional audit work will be

dependent upon results of preliminary

research.

U.S. ENVIRONMENTAL PROTECTION AGENCY OFFICE OF INSPECTOR GENERAL 
Appendix A 

EPA Distribution 

Administrator 

Deputy Administrator 

Office of the Administrator 

Chief of Staff 

Assistant Administrator, Office of Administration and Resources Management 

Assistant Administrator, Office of Air and Radiation 

Chief Financial Officer 

General Counsel 

Agency Follow-Up Coordinator 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for External Affairs and Environmental Information 

Principal Deputy Assistant Administrator, Office of Administration and Resources Management 

Deputy Assistant Administrator, Office of Air and Radiation 

Director, Office of Policy and Resources Management, Office of Administration and 

Resources Management 

Deputy Director, Office of Policy and Resources Management, Office of Administration and 

 Resources Management 

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

Audit Follow-Up Coordinator, Office of Air and Radiation 

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

Audit Follow-Up Coordinator, Office of General Counsel