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Wells Band Council

Needs to Improve Its 

Accounting System to Comply 

With Federal Regulations

Report No. 14-2-0316 July 14, 2014

U.S. ENVIRONMENTAL PROTECTION AGENCY

AGENCY OFFICE OF INSPECTOR GENERAL
Report Contributors: David Kim

Leah Nikaidoh

Abbreviations

CFR Code of Federal Regulations

Council Wells Band Council

EPA U.S. Environmental Protection Agency

FFR Federal Financial Report

GAP General Assistance Program

OIG Office of Inspector General

OMB Office of Management and Budget

Cover photo: The Wells Band Council Environmental Program Office in Wells, Nevada.

(EPA OIG photo)

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EPA Inspector General 

1200 Pennsylvania Avenue, NW

Mailcode 2410T

Washington, DC 20460
 

14-2-0316

July 14, 2014

Why We Did This Review

The U.S. Environmental 

Protection Agency (EPA),

Region 9, requested assistance 

from the Office of Inspector 

General (OIG) due to concerns 

about the financial practices 

and internal controls of the 

Wells Band Council (Council). 

The financial practices and 

internal controls involved

equipment and travel costs, 

and timekeeping methods and 

procedures.

This report addresses 

the following EPA goal or 

cross-agency strategy:

 Working to make a visible 

difference in communities.

For further information,

contact our public affairs office 

at (202) 566-2391.

The full report is at:

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

20140714-14-2-0316.pdf

Wells Band Council Needs to Improve Its Accounting 

System to Comply With Federal Regulations

 What We Found

The Council did not timely submit Federal Financial 

Reports (FFRs) to support cash draws of $390,000, 

which were made by the Council under EPA grant

00T39801. By not submitting FFRs within the period 

reviewed under this engagement, the Council had not 

claimed any costs; therefore, we could not evaluate travel 

and equipment costs incurred under their EPA grant. 

The Council’s timekeeping methods and procedures were

not in compliance with the Code of Federal Regulations 

(CFR), through 2 CFR Part 225, Appendix B. The Council did not maintain 

personnel activity reports or equivalent documentation as required by the regulation.

The Council’s financial management system did not meet the standards established 

under 40 CFR § 31.20(b). The regulation requires that a grant recipient’s financial 

management system provide accurate, current and complete disclosure of financial 

results; compare actual expenditures with budgeted amounts; and relate financial 

information to performance or productivity data. The Council did not meet these 

requirements. 

As a result of the issues noted above, we questioned $390,000 drawn under the 

grant as unsupported.

 Recommendations 

We recommend that the Regional Administrator for EPA Region 9 recover $390,000 

drawn under the grant, unless the Council can provide adequate documentation to 

support eligible costs incurred under the grant. We also recommend that the 

Regional Administrator designate the Council a high risk grantee, as was previously 

recommended in the Council’s Office of Management and Budget Circular A-133 

audits.

 Agency and Auditee Response

EPA Region 9 program officials concurred with our findings and recommendations, 

and said they will work with the Council to resolve the findings. 

The Council generally agreed that its accounting system may not have met federal 

requirements. The Council submitted the required FFRs to Region 9 in March 2014, 

after the completion of our audit testing. The OIG has not reviewed these FFRs for 

compliance with federal regulations. The Council expressed concerns about being 

designated high risk and how this designation might impact their ability to obtain 

future federal grants.

U.S. Environmental Protection Agency

Office of Inspector General

At a Glance

The Wells Band 

Council’s accounting 

system did not 

comply with federal 

regulations, which 

resulted in $390,000 

of questioned costs 

and proposed highrisk designation for 

the grantee.
July 14, 2014

MEMORANDUM

SUBJECT: Wells Band Council Needs to Improve Its Accounting System to 

Comply With Federal Regulations

Report No. 14-2-0316

FROM: Arthur A. Elkins Jr. 

TO: Jared Blumenfeld, Regional Administrator 

Region 9

The attached attestation report represents the results of the Office of Inspector General’s (OIG’s) agreedupon procedures engagement. This report is intended solely for your information and use, and should 

not be used by those who have not agreed to the procedures or taken responsibility for the sufficiency of 

the procedures for their purposes. 

This report contains findings that the OIG identified and corrective actions that the OIG recommends. 

The report does not necessarily represent the final position of the U.S. Environmental Protection Agency 

(EPA). Managers at the EPA will make final determinations on matters in this report. 

Action Required

In accordance with EPA Manual 2750, you will need to provide your proposed final determination letter 

for our review and concurrence prior to issuing the final determination, since there are monetary 

findings in excess of $250,000. The proposed final determination is due to our office within 120 days of 

report issuance, or by November 12, 2014. To expedite the resolution process, please email an electronic 

version of your proposed management decision to adachi.robert@epa.gov.

Your staff should review the findings, recommendations and recipient’s response, and provide us 

documentation regarding the resolution of the findings. If the recipient is unable to provide adequate 

documentation to support the $390,000, the EPA should recover these costs accordingly.

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 or 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, along with corresponding 

justification. 

We will post this report to our website at http://www.epa.gov/oig. 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

THE INSPECTOR GENERAL
Wells Band Council Needs to Improve Its Accounting System 14-2-0316

to Comply With Federal Regulations 

Table of Contents

Independent Auditor’s Report on Applying Agreed-Upon Procedures................. 1

Introduction............................................................................................................... 3

Purpose................................................................................................................. 3

Background ........................................................................................................... 3

Prior Audits............................................................................................................ 3

Results of Agreed-Upon Procedures Engagement................................................. 5

Travel Costs .......................................................................................................... 5

Equipment Costs ................................................................................................... 5

Timekeeping Procedures....................................................................................... 6

Other Matters – Inadequate Accounting System .................................................... 7

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

Agency and Grantee Comments .............................................................................. 8

OIG Response ........................................................................................................... 9

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

Appendix

A Distribution ....................................................................................................... 11
14-2-0316 1

Independent Auditor’s Report on

Applying Agreed-Upon Procedures

In response to an August 14, 2013, request from the U.S. Environmental 

Protection Agency (EPA), Region 9, we applied the agreed-upon procedures to 

EPA grant 00T39801 awarded to the Wells Band Council of Wells, Nevada. 

We performed the procedures enumerated below, which were agreed to by the 

Office of Inspector General (OIG) and Region 9 on January 23, 2014. We 

performed these procedures solely to assist the region in determining: 

1. Whether the equipment and travel costs claimed under the EPA grant are 

reasonable, allocable and allowable in accordance with applicable laws, 

regulations and grant conditions.

2. Whether the timekeeping methods and procedures at the Wells Band 

Council are in compliance with applicable laws, regulations and grant 

conditions. 

The period under review for this agreed-upon procedure engagement was from 

October 1, 2010, through December 31, 2013. 

By receiving the grant award, the recipient has accepted responsibility for 

complying with the requirements of the Code of Federal Regulations (CFR), 

through 2 CFR Part 225; 40 CFR Part 31; 40 CFR Part 35, Subpart B; and the 

terms and conditions of the grant. 

We performed these agreed-upon procedures in accordance with the Government 

Auditing Standards issued by the Comptroller General of the United States, and 

the attestation standards established by the American Institute of Certified Public 

Accountants. The sufficiency of these procedures is solely the responsibility of 

Region 9. Consequently, we make no representation regarding the sufficiency of 

the procedures described below, either for the purpose for which this report has 

been requested or for any other purpose.

We conducted our audit work from February 4, 2014, through July 14, 2014. Our 

agreed-upon procedures included: 

1. Reviewing claimed travel and equipment costs and supporting documents 

to determine whether the costs are reasonable, allocable, and allowable in 

accordance with the applicable federal laws, regulations and grant 

conditions.

2. Quantifying any unreasonable, unsupported or unallowable travel and

equipment costs claimed. 
14-2-0316 2

3. Performing walk-throughs and interviews to obtain an understanding of 

the auditee’s policies and procedures for timekeeping and obtaining

written procedures. 

4. Reviewing a sample of payroll transactions, to ensure auditee compliance 

with its timekeeping procedures and federal laws and regulations. 

5. Quantifying unreasonable, unsupported or unallowable personnel costs 

claimed. 

Results of these procedures are presented in the following sections of this report.

We were not engaged to and did not perform an examination, the objective of 

which would be the expression of an opinion on management’s assertions. 

Accordingly, we do not express such an opinion. Had we performed additional 

procedures, other matters might have come to our attention that would have been 

reported to you.

This report is intended solely for the information and use of EPA. It is not 

intended to be, and should not be, used by anyone other than these specified 

parties.

Robert K. Adachi

Director of Forensic Audits

July 14, 2014
14-2-0316 3

Introduction

Purpose

On August 14, 2013, EPA Region 9, Communities and Ecosystems Division, 

requested assistance from the OIG due to concerns about grants awarded to 

certain tribes in Nevada, including the Wells Band Council (Council). After 

meeting with regional staff, it was decided that an agreed-upon procedures 

engagement would be performed to review equipment and travel costs claimed 

under EPA grant 00T39801, and evaluate the Council’s timekeeping procedures. 

Background

The Wells Band Council is the governing body within the Wells Colony located 

in Wells, Nevada. The Wells Colony is one of four separate colonies of the

Te-Moak Tribe of Western Shoshone Indians. 

EPA grant 00T39801 was awarded to the Council under the agency’s Indian 

Environmental General Assistance Program (GAP) on June 8, 2010. The grant 

period is from October 1, 2010, through September 30, 2014, and the total grant 

award amount is $532,334. The GAP grant provides financial assistance for the 

Council to plan, develop and establish an environmental protection program. 

Activities funded under the grant include community outreach, environmental 

education and workshops, community clean-ups, and coordination with federal 

agencies and other entities on environmental issues. 

Summary of EPA Grant 00T39801: 

Grant number Total award 

amount

Performance period Amount drawn as of 

December 31, 2013

00T39801 $532,334 10/1/10 – 09/30/14 $390,000

Source: EPA grant file and EPA compass data warehouse.

Prior Audits

On August 21, 2013, the OIG transmitted the Council’s fiscal year (FY) 2008, 2011

and 2012 Office of Management and Budget (OMB) Circular A-133 (single audit)

audit reports to EPA Region 9 for review and audit resolution. As a result of the 

single audit findings, the OIG recommended that the region recover $361,027 in

unsupported questioned costs. The OIG also recommended that the Council be 

considered high risk, in accordance with 40 CFR Part 31.12, and that appropriate 

grant restrictions be placed on the Council.
14-2-0316 4

Of the $361,027 questioned, $248,642 was for FYs 2011 and 2012, which fall within 

the period covered by EPA grant 00T39801. Resolution of these reports was 

suspended, pending the results of the agreed-upon procedures engagement.
14-2-0316 5

Results of Agreed-Upon 

Procedures Engagement

We could not review travel and equipment costs claimed under grant

00T39801, because the Wells Band Council had not submitted any Federal 

Financial Report (FFR) at the time of this engagement and had not yet claimed 

any costs under the grant. Timekeeping procedures at the Council were not in 

compliance with applicable regulations. Furthermore, we determined that the 

accounting system in place at the Council also was not in compliance with 

applicable regulations. As a result, we questioned as unsupported $390,000 in 

total cash draws made by the Council under the EPA grant.

Travel Costs

We could not determine whether travel costs claimed under grant 00T39801 were

reasonable, allocable and allowable in accordance with applicable federal laws, 

regulations and grant conditions due to following reasons:

1. At the time of this engagement, the Council had not yet submitted any 

FFRs. An FFR is an assertion from a grantee claiming how much of the 

federal grant fund was spent for grant purposes during the period covered 

by the FFR. Although the Council has drawn federal funds under grant 

00T39801, the Council had not yet claimed any travel costs by submitting 

an FFR. Therefore, we could not review claimed travel costs. 

2. The Council also could not identify total travel costs incurred under the 

EPA grant. The Council’s accounting system was coded to identify costs 

by only two categories—personnel costs and all other costs. The Council

could not readily provide accounting records of all travel costs incurred.

3. The Council did not provide adequate supporting documentation for the 

travel costs that it was able to identify. Many of the travel cost transactions 

were missing programmatic supporting documents showing the travel 

costs were incurred for grant purposes. 

Equipment Costs

We could not determine whether equipment costs claimed under grant 

00T39801 were reasonable, allocable and allowable in accordance with applicable 

federal laws, regulations and grant conditions due to following reasons: 

1. As discussed previously, at the time of this engagement the Council had 

not yet submitted any FFRs. Although the Council has drawn federal 

funds under grant 00T39801, the Council had not yet claimed any 
14-2-0316 6

equipment costs by submitting an FFR. Therefore, we could not review 

claimed equipment costs. 

2. The Council did not provide adequate procurement documents related to 

the equipment costs identified in the Council’s general ledger. The 

Council identified two equipment costs in its general ledger. However, the 

Council could not provide procurement documents for the two equipment 

purchases. The Council explained that the purchases were managed by an 

employee who was no longer with the Council, and that the employee did 

not make the procurement documents available before leaving.

Timekeeping Procedures

We determined that timekeeping methods and procedures implemented at the 

Council were not in compliance with 2 CFR Part 225, Appendix B, 8.h(4) and (5) 

regarding personnel activity reports or equivalent documentation. There was no 

personnel activity report or equivalent documentation at the Wells Band Council

as required by the regulation.

Title 2 CFR Part 225, Appendix B, 8.h(4) requires a distribution of employees’

salaries or wages to be supported by personnel activity reports or equivalent 

documentation when employees work on multiple activities or cost objectives.

Appendix B, 8.h(5) states that such personnel activity reports or equivalent 

documentation must meet the following standards:

(a) They must reflect an after-the-fact distribution of the actual activity of 

each employee.

(b) They must account for the total activity for which each employee is 

compensated.

(c) They must be prepared at least monthly and must coincide with one or 

more pay periods.

(d) They must be signed by the employee.

The Council’s Financial Management Policy also states:

Labor Distribution - All staff members will record their time on weekly time 

sheets. After supervisors approve these time sheets, Accounting will enter the 

labor distribution data into the Band's automated timekeeping module time 

sheets.

However, the Council did not have such a labor distribution system in place.

Council employees used timecards to punch in and out for the hours they worked. 

Each employee kept separate timecards for each project or department for which 
14-2-0316 7

they worked. The employees prepared separate bi-weekly timesheets for each of

their timecards. The timesheets were reviewed by supervisors then by the tribal

Chairwoman. Approved timesheets were then routed to the Council’s finance 

manager. The finance manager recorded the approved labor hours to the 

appropriate program, according to the timesheets. 

However, there was no personnel activity report or its equivalent that gave an 

account of the total distribution of the actual activity of each employee. As such, 

the Council cannot review employees’ distribution of labor hours in order to 

manage the workforce and ensure compliance with applicable regulations, laws 

and policies. Therefore, there was no assurance that the total hours are accounted 

for and claimed properly.

Other Matters – Inadequate Accounting System

The Council’s accounting system is inadequate and not in compliance with the 

provisions of 40 CFR Part 31.20. The Council’s accounting system did not

identify costs by categories other than personnel costs. All other types of expenses 

incurred (travel, supplies, equipment, etc.) are recorded simply as an expense 

without further categorization. Lack of cost categorization does not allow the 

Council to compare actual expenditures to budgeted amounts; or to match 

financial records to performance or productivity data, both of which are required 

under 40 CFR Part 31.20(b)(4). 

The lack of financial data that support performance or productivity data prevents 

the tracing of funds to a level of expenditures adequate to establish that such 

funds have not been used in violation of the restrictions and prohibitions of 

applicable statutes as required under 40 CFR Part 31.20(a)(2). Ultimately, the 

accounting system in place at the Council does not allow for accurate, current and 

complete disclosure of financial results as required under 40 CFR Part 

31.20(b)(1).

As a result of the Council’s inadequate accounting system, the Council had not 

filed any interim FFRs for EPA grant 00T39801 during the period under review. 

An annual submission of an FFR is an administrative grant condition. However, 

the lack of FFRs limited the EPA’s financial oversight of the grant. 

The Council submitted FFRs for the EPA grant in March 2014. Because the 

reports were submitted after initiation of fieldwork and not in time to be 

considered for review under this engagement, we did not review the FFRs 

submitted. However, we do have concerns about the validity of the FFRs 

submitted due to the unaddressed issue of the Council’s inadequate accounting 

system.
14-2-0316 8

Recommendations

We recommend that the Region 9 Regional Administrator:

1. Require the Council to provide adequate documentation to support the 

$390,000 in total cash draws made by the Council between October 1, 

2010, and December 31, 2013. If the Council is unable to provide 

adequate supporting documentation, the region should recover these costs 

accordingly. The amount of costs recovered as a result of the resolution of 

this report should be offset by any questioned costs recovered as part of 

the resolution of OIG Report No. 13-3-0350, Single Audit Reports for the 

Wells Band Council, August 21, 2013.

2. Complete the resolution of OIG Report No. 13-3-0350, in order to resolve 

$361,027 in questioned unsupported costs (of which $248,642 pertained to 

EPA grant 00T39801); and implement the recommendation to identify the 

Council as high risk, in accordance with 40 CFR Part 31.12, and place 

appropriate grant restrictions and grant conditions on the grantee.

Agency and Grantee Comments

The OIG presented the findings and recommendations of this engagement and 

received verbal comments from EPA Region 9 program officials on April 24, 

2014, and from the grantee on April 23, 2014. 

Region 9 program officials concurred with the findings and the recommendations

and said they will work with the Council to resolve the findings. 

A summary of the Council’s comments concerning the findings and 

recommendations follow:

1. The Council submitted three FFRs for EPA grant 00T39801 in

March 2014—one for each fiscal year covered by the grant. 

2. Regarding the travel cost supporting documents, the Council said it has all 

the programmatic documents and can provide them if necessary.

3. Regarding the procurement documents related to equipment costs, the 

Council said it can try to obtain the procurement documents if necessary.

4. The Council does conduct a monthly budget review. The Council prepares 

a monthly spreadsheet that shows the total amount of expenses incurred 

for the month and the accumulated total expense for the fiscal year, along 

with the budgeted amount for the year. However, the spreadsheet does not 

provide budget comparisons by cost categories.
14-2-0316 9

5. The Council noted that most key employees, including the Tribal 

Chairwoman and the finance director, were not employed by the Council 

during some of the period covered by the single audit reports. 

6. Regarding the finding of inadequate accounting system and the related 

recommendations, the Council recognized that it may not have been in 

compliance. The Council emphasized that it is already taking steps to 

ensure future compliance. However, the Council is also concerned that the 

high-risk designation might make it particularly difficult for the Council to 

obtain future federal grants.

OIG Response

We verified that the Council has submitted FFRs for the EPA grant. However, the

Council’s submission of FFRs and other comments did not resolve issues with the 

Council’s timekeeping procedures or the accounting system. Furthermore, 

although we did not review the FFRs submitted, we have concerns about the 

validity of the FFRs due to the unaddressed issue of the Council’s accounting 

system. Therefore, our findings and recommendations remain unchanged.
14-2-0316 10

Status of Recommendations and 

Potential Monetary Benefits

RECOMMENDATIONS

POTENTIAL MONETARY 

BENEFITS (in $000s)

Rec. 

No.

Page 

No. Subject Status1 Action Official

Planned 

Completion 

Date

Claimed 

Amount

Agreed To 

Amount

1 8 Require the Council to provide adequate 

documentation to support the $390,000 in total 

cash draws made by the Council between 

October 1, 2010, and December 31, 2013. If the 

Council is unable to provide adequate supporting 

documentation, the region should recover these 

costs accordingly. The amount of costs recovered 

as a result of the resolution of this report should be 

offset by any questioned costs recovered as part of 

the resolution of OIG Report No. 13-3-0350, Single 

Audit Reports for the Wells Band Council,

August 21, 2013.

U Region 9 

Regional Administrator

$390

2 8 Complete the resolution of OIG Report 

No. 13-3-0350, in order to resolve $361,027 in 

questioned unsupported costs (of which $248,642 

pertained to EPA grant 00T39801); and implement 

the recommendation to identify the Council as high 

risk, in accordance with 40 CFR Part 31.12, and 

place appropriate grant restrictions and grant 

conditions on the grantee.

U Region 9 

Regional Administrator

1 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.
14-2-0316 11

Appendix A

Distribution

Regional Administrator, Region 9

Agency Follow-Up Official (the CFO)

Agency Follow-Up Coordinator

Director, Grants and Interagency Agreements Management Division,

Office of Administration and Resources Management

Deputy Regional Administrator, Region 9

Director, Communities and Ecosystems Division, Region 9

Project Officer, EPA Grant 00T39801, Region 9

Grants Specialist, EPA Grant 00T39801, Region 9

Audit Follow-Up Coordinator, Region 9

Tribal Chairperson, Wells Band Council