OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Needs to Strengthen 

Oversight of 

Government Furnished Property 

Report No. 2006-P-00035 

September 19, 2006 
Report Contributors: Nancy Dao 

Iantha Maness 

John Trefry 

Abbreviations 

DCMA Defense Contract Management Agency 

EPA U.S. Environmental Protection Agency 

FAR Federal Acquisition Regulation 

GFP Government Furnished Property 

OAM Office of Acquisition Management 

OIG Office of Inspector General 
U.S. Environmental Protection Agency 2006-P-00035

Office of Inspector General September 19, 2006

At a Glance 


Catalyst for Improving the Environment 

Why We Did This Review 

We conducted this audit to 

assess the effectiveness of the 

U.S. Environmental Protection 

Agency’s (EPA’s) 

management of Government 

furnished property (GFP). 

We specifically sought to 

determine whether EPA 

properly manages GFP. 

Background 

As of September 30, 2005, 

EPA’s contractor-supplied 

records indicated about 

$110 million in EPA-provided 

GFP for 153 contracts. Of this 

amount, about $70 million 

was for items costing $25,000 

or more. EPA can either 

perform GFP property 

administration functions itself 

or have the functions 

performed by the Defense 

Contract Management Agency 

(DCMA) through an 

interagency agreement. 

For further information, 

contact our Office of 

Congressional and Public 

Liaison at (202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2006/ 

20060919-2006-P-00035.pdf 

EPA Needs to Strengthen Oversight of 

Government Furnished Property 

What We Found 

EPA’s Office of Acquisition Management (OAM) needs to improve its 

management and administrative controls over GFP. OAM did not have accurate 

and reliable records to indicate: 

• Which contractors had received EPA-provided GFP, 

• The dollar value of the GFP provided, or 

• Whether contractors had performed the required annual inventories. 

OAM also needs to improve the administration of its interagency agreement with 

DCMA. OAM did not have accurate records of contracts with GFP to compare 

against the DCMA listing of contracts that DCMA was overseeing. As a result, 

some contracts with GFP were not being administered by either OAM or DCMA, 

and OAM had paid DCMA to administer GFP for some contracts that did not have 

any GFP. These conditions generally occurred due to outdated policies and 

procedures that did not assign specific responsibility for GFP property 

administration. Improved management controls will enable EPA to better manage 

its $110 million of GFP provided to contractors and reduce GFP vulnerability to 

loss. 

What We Recommend 

OAM agreed to strengthen its policies and procedures, as well as its administration 

of the interagency agreement with DCMA, and initiated corrective actions while 

our audit was in progress. We recommend that the Assistant Administrator for 

Administration and Resources Management ensure OAM completes current 

efforts to update policies and procedures regarding management of GFP, including 

the need to maintain accurate records and properly administer interagency 

agreements with DCMA. The Assistant Administrator’s response indicated 

general agreement with our report and concurrence with our recommendation. 
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

 WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

September 19, 2006 

MEMORANDUM 

SUBJECT: EPA Needs to Strengthen Oversight of Government Furnished Property 

Report No. 2006-P-00035 

TO: Luis A. Luna 

 Assistant Administrator 

 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 

The estimated cost of this report – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time – is $116,760. 

Action Required 

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

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

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

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

If you or your staff have any questions regarding this report, please contact me at 202-566-0847 

or roderick.bill@epa.gov, or Carl Jannetti, the Product Line Director for Contract Audits, at 

215-814-5800 or jannetti.carl@epa.gov. 

Sincerely, 

Bill A. Roderick 

Acting Inspector General 
EPA Needs to Strengthen Oversight of Government Furnished Property 

Table of Contents 

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

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

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

Results of Review .................................................................................................. 1 

OAM Records Inaccurate and Unreliable ...................................................... 2 

Interagency Agreement with DCMA Needs Improved Administration ............ 3 

Corrective Actions Taken ..................................................................................... 4 

Recommendation .................................................................................................. 4 

Agency Response and OIG Comment ................................................................. 4 

Status of Recommendations and Potential Monetary Benefits ......................... 6 

Appendices 

A Details on Scope and Methodology ......................................................... 7

B Full Text of Agency Response.................................................................. 8 

C Distribution................................................................................................. 10 
Purpose 

The U.S. Environmental Protection Agency (EPA) often uses contractors to accomplish its 

environmental goals. In most cases, contractors supply the equipment needed to complete their 

contracts. However, there are instances in which EPA provides the equipment – known as 

Government furnished property (GFP) – to the contractors. Our objective was to determine 

whether EPA properly manages GFP. 

Background 

As of September 30, 2005, contractor-supplied records indicated that about $110 million in EPAprovided GFP was in the possession of 153 contractors. Of this amount, about $70 million was 

for property items costing $25,000 or more, including such items as trace analyzers, remote 

sensors, and geo-probe systems. Much of the property costing under $25,000 is expendable and 

includes small appliances, clamps, shop vacuums, and respirators. EPA’s Office of Acquisition 

Management (OAM), within the Office of Administration and Resources Management, is 

responsible for managing GFP. 

Federal Acquisition Regulation (FAR), Part 45, Government Property, prescribes the policies 

and procedures for providing and managing GFP. Contractors are responsible for the GFP in 

their possession, and for maintaining adequate systems to inventory, control, protect, and 

maintain it. EPA’s Contracts Management Manual, Chapter 45, Government Property, requires 

contracting officers to perform property administration functions for contracts for which EPA 

provides GFP. Contracting officers have discretion to perform these functions themselves or 

have them performed by the Defense Contract Management Agency (DCMA). In August 1993, 

EPA entered into an interagency agreement with DCMA to administer GFP in the possession of 

EPA contractors. 

Scope and Methodology 

We performed this audit from November 2005 through March 2006, in accordance with 

Government Auditing Standards issued by the Comptroller General of the United States. 

Our audit included site visits to OAM headquarters, where we met with management and staff 

responsible for the oversight and control of GFP. Further details on our scope and methodology, 

including our scope limitations and review of internal controls structure, are in Appendix A. 

Results of Review 

OAM needs to improve its management and administrative controls of GFP. OAM did not have 

accurate and reliable records to indicate: 

• Which contractors had received EPA-provided GFP, 

• The dollar value of the GFP provided, or 

• Whether contractors had performed the required annual inventories. 

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OAM also needs to improve the administration of its interagency agreement with DCMA. OAM 

did not have accurate records of contracts with GFP to compare against the DCMA listing of 

contracts that DCMA was overseeing. As a result, some contracts with GFP were not being 

administered by either OAM or DCMA, and OAM had paid DCMA to administer GFP for some 

contracts that did not have any GFP provided. These conditions generally occurred due to 

outdated policies and procedures that did not assign specific responsibility for GFP property 

administration. Improved management controls will enable EPA to better manage its 

$110 million of GFP provided to contractors and reduce GFP vulnerability to loss. 

OAM Records Inaccurate and Unreliable 

EPA did not maintain information indicating which of its contracts had GFP. EPA’s Contracts 

Management Manual requires contracting officers to maintain a Contract Property Management 

Database that lists each GFP item and the amount of contractor-held property for each contract. 

OAM’s Contract Property Management Database should be updated whenever there is activity 

that affects property management, such as the award of a contract that provides property, receipt 

of an annual property report, or delegation of property administration to DCMA. Each 

September, contractors are required to prepare an annual inventory report for each contract to 

update the amount of GFP in their possession. This report is to be used by contracting officers in 

updating the Contract Property Management Database, as well as for EPA’s financial statements. 

OAM is not required to request annual reports from all of its contractors. Rather, OAM 

contracting officers are required to request annual property reports only for contracts that contain 

a property clause (FAR 52.245-5 or EPA Acquisition Regulation 1552.245-73d). Since EPA 

does not maintain the Contract Property Management Database required by the manual to verify 

the amounts of GFP with contractors, OAM uses the inventory reports it receives from 

contractors to identify the contractors with GFP and the dollar value of the GFP they possess. 

As of September 30, 2005, EPA reported it had over 870 active contracts, and estimated about 

650 were cost-type contracts with property clauses requiring the contractor to submit inventory 

reports. The OAM property officer indicated that he asked EPA’s contracting officers to obtain 

inventory reports for all 650 contracts, but only received reports for about 400 contracts. OAM 

did not determine whether the remaining 250 contracts had GFP. Therefore, OAM’s inventory 

reports indicating that $110 million in GFP had been provided under 153 contracts only took into 

account potential GFP under 400 active contracts, not all 650 contracts with the property clauses. 

As a result, OAM does not have reliable information showing contracts with GFP, the amount 

and type of GFP provided to each contractor, the condition of the GFP, and whether OAM or 

DCMA was performing property administration. 

In January 2006, to better determine the number of contracts with GFP, we requested that OAM 

ask its contracting officers to identify all active contracts under their purview with GFP. At that 

time, there were only about 770 active contracts, and OAM’s contracting officers indicated 138 

had GFP. Nine of those were contracts that had been awarded prior to September 30, 2005, but 

had not been included in the 153 contracts previously reported to have GFP. Neither the survey 

of contracting officers nor OAM’s inventory reports provide information regarding the amount 

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of GFP expended, added to contracts, provided with new contract awards, or applicable to 

contracts closed that year. As a result, OAM cannot determine or report which contracts have 

GFP as well as the amount and condition of the GFP. This data is essential for accurate 

reporting of contractor-held property in EPA’s financial statements. 

Interagency Agreement with DCMA Needs Improved Administration 

OAM did not have accurate records to compare against the DCMA listing of contracts that 

DCMA was overseeing. Contractors are responsible and accountable for GFP in their 

possession. This includes keeping the Government’s official records of GFP. These 

responsibilities dictate that contractors maintain internal control systems to record receipt of 

equipment and its use, perform annual inventories, reconcile physical inventories to an entity’s 

inventory records, and investigate lost or damaged items. 

According to EPA’s Contracts Management Manual, property administration functions to be 

performed by EPA are to include: 

• Reviewing property control systems and procedures, such as property management, 

acquisition, receiving, identification, records, movement, storage, physical 

inventories, consumption, utilization, maintenance, subcontractor control, disposition, 

and contract closeout. 

• Reviewing, approving, or withholding approval of a contractor's GFP management 

procedures. 

• Investigating reports of lost, damaged, or destroyed GFP. 

• Reviewing inventory schedules and monitoring disposal of excess GFP. 

OAM contracting officers are to either review and approve each contractor’s property 

management systems or delegate that responsibility to DCMA under interagency agreements that 

have been issued since 1993. OAM contracting officers are required to perform risk assessments 

as the basis for delegating the responsibility to DCMA, and contracts with significant dollar 

values of GFP or that are higher risk should be delegated to DCMA. 

While OAM’s records indicated 153 contracts provided GFP, DCMA’s separate records 

indicated it was administering GFP on 120 EPA contracts. Our comparison of the records 

disclosed that only 61 of EPA’s 153 GFP contracts were being administered by DCMA 

according to DCMA records. For the remaining 92 contracts not on the DCMA list (153 minus 

61), several contracting officers indicated they believed a DCMA or OAM property officer was 

administering the GFP. However, we found that none of those 92 had been delegated to DCMA 

responsibility, and subsequent discussions with OAM’s property officer indicated he also was 

not administering the GFP for these contracts. Further, OAM’s property officer could not 

provide a list of contracts for which he performed property administration. 

Further analysis of the 120 contracts for which DCMA performed property administration under 

EPA’s interagency agreement disclosed that 40 of the contractors had not submitted annual 

property reports to EPA. As a result, OAM did not know whether these contractors had GFP. 

Also, 19 of the contracts on DCMA’s list had no GFP, according to EPA’s records. A 

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subsequent review of DCMA billings to EPA for Fiscal Year 2005 disclosed that EPA paid 

approximately $10,000 to DCMA to administer GFP on contracts with no GFP. Discussions 

with contracting officers for five contracts indicated that the risk assessments required by EPA 

policy had not been performed before delegating these contracts to DCMA. 

Corrective Actions Taken 

OAM needs to revise its policies and procedures to address the issues we encountered. 

OAM has agreed to strengthen its policies and procedures, as well as its administration of the 

interagency agreement with DCMA, and initiated corrective actions while our review was in 

progress. Revisions to the Contracts Management Manual are in process, and OAM estimates 

the revisions will be completed by December 2006. OAM agrees its current system of 

summarizing inventory reports received on an annual basis is ineffective, and plans to require 

creation of a database that will provide a quarterly listing of all contracts with GFP. OAM has 

identified all of the contracts being administered by DCMA that do not have GFP and initiated 

action to remove them from DCMA’s purview. This action should prevent EPA from making 

future payments to DCMA for administering contracts without GFP. OAM created a risk 

assessment checklist to document the decision-making process of whether the property 

administration should be performed by it own staff or delegated to DCMA. In lieu of these 

corrective actions already being initiated by OAM, we are not making any recommendations 

other than to complete corrective efforts already in process. We also suggest that OAM discuss 

the status of these initiatives in its Fiscal Year 2007 Financial Management Integrity report. 

Recommendation 

1. We recommend that the Assistant Administrator for Administration and Resources 

Management ensure OAM completes current efforts to: 

• update policies and procedures regarding GFP management; and 

• maintain accurate records and properly administer interagency agreements with 

DCMA. 

Agency Response and OIG Comment 

OAM stated it will develop additional procedures to ensure that contractors submit the required 

annual summary property reports on a timely basis, and will follow up with any contractors that 

do not respond. OAM said it expects to complete its Fiscal Year 2006 followup efforts by 

December 31, 2006. OAM said it will also take action to maintain and periodically update a 

listing of active contracts that have GFP, noting it has been doing this on a manual basis so far. 

OAM indicated automating this listing should be completed by approximately March 31, 2007. 

OAM agreed that its property records are not accurate and need to be improved. Over the past 

year, OAM said it has been working hard to improve in this area. OAM now has a Contract 

Property Coordinator who performs a risk assessment on each contract that may potentially have 

GFP, to determine whether the property administration function should be delegated to DCMA. 

The Contract Property Coordinator is working with DCMA to close/rescind delegations on 

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contracts that do not have property, and ensure that DCMA is delegated administration over 

contracts that have significant GFP. OAM said these efforts will (1) allow OAM to reconcile its 

property records with those of DCMA, which will eliminate one area of concern for the OIG, and 

(2) provide an accurate database and internal control that will help OAM determine which 

contracts need property reviews by DCMA. This will significantly help OAM in managing the 

interagency agreement properly. OAM said the Contract Property Coordinator is also working to 

determine the level of property administration needed for contracts that have GFP but were not 

delegated to DCMA because of their low risk level. 

OAM said it expects to complete the reconciliation of its records with DCMA and have an 

automated, accurate database for use in determining the contracts that need property reviews by 

March 31, 2007. Determining the level of property administration needed for contracts not 

delegated to DCMA is an ongoing process, which OAM said it will continue to perform as 

needed. 

The Agency’s response indicates a commitment to improve its administration of GFP. The 

corrective actions taken and planned should improve the administration of GFP that EPA 

provides to its contractors. 

The full text of the Agency’s response is in Appendix B. 

5 
Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

1 4 Ensure OAM completes current efforts to: O Assistant Administrator for 03/31/07 $20* $20* 

• update policies and procedures regarding Administration and 

GFP management; and Resources Management 

• maintain accurate records and properly 

administer interagency agreements with

DCMA 

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

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

U = recommendation is undecided with resolution efforts in progress 

* This amount represents $10,000 a year for 2 years for the recurring potential monetary benefits 

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Appendix A 

Details on Scope and Methodology 

To determine whether EPA provided and managed GFP in accordance with applicable 

regulations and requirements, we reviewed the FAR, EPA Acquisition Regulations, EPA’s 

Contracts Management Manual, and applicable EPA FAR deviations. We interviewed personnel 

in OAM headquarters, contracting officers, and the Contract Property Coordinator to ascertain 

the processes used to oversee and manage GFP. We compared EPA’s documented processes to 

its actual practices for GFP and discussed significant differences with OAM personnel. 

We reviewed the 2005 annual GFP inventory reports received from contractors, Contract 

Property Database spreadsheets, and Financial Data Warehouse information. We reviewed the 

December 2005 survey of contracting officers performed by OAM, which OAM performed to 

determine whether its property records were complete. We analyzed the lists of contracts EPA 

delegated to DCMA for property administration, and the contracts for which EPA performed the 

administration of GFP. We also reviewed DCMA billings submitted to EPA in Fiscal Year 

2005, and interviewed a sample of contracting officers about their property management 

practices. 

We are not aware of any prior reports specifically related to this report’s review objective. 

Limitations 

Our scope was limited to evaluating whether OAM properly manages GFP in the possession of 

contractors. We did not determine whether the Agency acquires or disposes of GFP in 

accordance with FAR, because EPA did not properly maintain its Contracts Property 

Management Database. The information, which OAM is required to enter into the database, was 

critical to achieving the audit objective of whether EPA properly approved contractor requests 

for acquiring or disposing of GFP. Thus, we were not able to review that issue. 

Internal Control Structure 

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

objective. This included EPA’s and DCMA’s procedures for administering the GFP for 

contracts under the control of both agencies. As part of this review, we examined EPA’s Fiscal 

Year 2005 Federal Managers’ Financial Integrity Act Annual Assurance Letters issued to the 

EPA Administrator for the Office of Administration and Resources Management. We did not 

identify any internal Agency reviews addressing GFP. 

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Appendix B 

Full Text of Agency Response 

MEMORANDUM 

SUBJECT: Response to Draft Audit Report: EPA Needs to Strengthen Oversight of 

Government-Furnished Property (GFP) 

FROM: Luis A. Luna 

 Assistant Administrator 

TO: Carl A. Jannetti 

 Director, Contract Audits 

Thank you for the opportunity to submit comments on the draft report entitled “EPA 

Needs to Strengthen Oversight of Government-Furnished Property.” We are in general 

agreement with the draft report. We concur with your recommendations, and offer the following 

comments: 

Recommendation: We recommend that the Assistant Administrator for Administration 

and Resources Management ensure OAM complete current efforts to review and update 

policies and procedures regarding management. 

Response: We concur. OAM will develop additional procedures to ensure that contractors submit 

the required annual summary property reports on a timely basis, and will follow up with any 

contractors that do not respond. We expect to complete our FY 2006 follow-up efforts by 

December 31, 2006. OAM will also take action to maintain and periodically update a listing of 

active contracts that have GFP. We have been doing this on a manual basis so far. Automating 

this listing should be completed by approximately March 31, 2007. 

Recommendation: We recommend that the Assistant Administrator for Administration 

and Resources Management ensure OAM complete current efforts to maintain accurate 

records and properly administer interagency agreements with the Defense Contract 

Management Agency (DCMA). 

Response: We agree that our property records are not accurate, and need to be improved. Over 

the past year, OAM has been working hard to improve in this area. We now have a Contract 

Property Coordinator (CPC) who performs a risk assessment on each contract that may 

potentially have GFP, to determine whether the property administration function should be 

8 
delegated to DCMA. The CPC is working with DCMA to close/rescind delegations on contracts 

that do not have property, and ensure that DCMA is delegated administration over contracts that 

have significant GFP. These efforts will: (1) allow OAM to reconcile its property records with 

those of DCMA, which will eliminate one area of concern for the OIG; and (2) provide an 

accurate data base and internal control that will help OAM determine which contracts need 

property reviews by DCMA. This will significantly help us in managing the interagency 

agreement properly. The CPC is also working to determine the level of property administration 

needed for contracts that have GFP, but were not delegated to DCMA because of their low risk 

level. 

 We expect to complete the reconciliation of our records with DCMA, and have an 

automated, accurate data base for use in determining the contracts that need property reviews, by 

March 31, 2007. Determining the level of property administration needed for contracts not 

delegated to DCMA is an ongoing process, which we will continue to perform as needed. 

 OAM will continue its current efforts to improve the oversight of Government-furnished 

property (GFP). We look forward to receiving the final report, and we will respond with a plan 

of action that addresses your recommendations in more detail at that point. 

Should you have any questions, please to contact Kerrie O’Hagan, Division Director of 

the Policy, Training, and Oversight Division in the Office of Acquisition Management, at (202) 

564-4479. 

cc: John Gherardini 

Kerrie O’Hagan 

 John Oliver 

 Michael Richardson 

 John Trefry 

9 
Appendix C 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Agency Followup Official 

Agency Followup Coordinator 

Audit Followup Coordinator, Office of Administration and Resources Management 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Acting Inspector General 

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