«Audit Report Consumer Federation of America Foundation - Costs Claimed Under EPA Cooperative Agreements CX825612-01, CX825837-01, X828814-01, ...»
Brobeck determined that these rates were reasonable based on Mr. Kroll’s special expertise, and on Mr. Brobeck’s knowledge of the hourly rates charged by accounting firms for similar work, and considering in addition the benefits (e.g., in quality control) of engaging a recognized international accounting firm such as RSM McGladrey.
In light of the foregoing, we believe that the price/cost analysis conducted by Foundation in connection with its engagement of Sonenthal & Overall and RSM McGladrey met the requirements set forth in 40 CFR §30.46. To be sure, the Foundation did not prepare a contemporaneous memoranda or other formal written materials explicitly designed to record its cost or price analysis. This omission has been (or will soon be) corrected, placing the Foundation in compliance with 40 CFR §§30.45 and 30.46 with respect to these engagements. Furthermore, the preparation of a contemporaneous price/cost analysis memorandum is now required by the CFA procurement manual and has become standard organizational practice.
Even if the Foundation failed to comply with the documentation requirements of 40 CFR §§30.45 and 30.46 in a timely manner, its tardiness should not be the basis of a disallowance of costs. For its engagement of Sonenthal & Overall and RSM McGladrey, the Foundation sought competitive quotations, analyzed prices and costs, and on that basis contracted for and received high quality services at reasonable prices.
With respect to the DAR allegation that the Foundation "paid its attorneys and consultants in excess of the maximum daily rate prescribe for Level 4 of the Executive Service (i.e., $62.50 per hour)": The EPA regulation on which the DAR relies - 40 CFR §30.27(b) - applies only to "salar[ies] (excluding overhead) paid to individual consultants retained by a recipient’s contractors or subcontractors." The limitation is not applicable to "contracts with firms." The Foundation did not retain "individual consultants" to provide legal and accounting services; it retained a law firm (Sonenthal & Overall) and an accounting firm (RSM McGladrey). It is obvious therefore that the salary limitation set forth in 40 CFR §30.27 does not apply to those engagements. In terms of cost allowability, the only question is whether the costs incurred by the Foundation for legal and accounting services were reasonable, allocable to the CAs and allowable under OMB Circular A-122. As discussion above clearly demonstrates, the hourly rates paid by the Foundation to Sonenthal & Overall and RSM McGladrey were reasonable. The DAR suggests no other basis on which these costs can be questioned.
[F] The Foundation failed to ensure that contracts under the cooperative agreements included all provisions required under 40 CFR §30.48.
The Foundation admits that not all of its contracts under the CAs contained all the standard contract clauses required under Section 30.48 of the EPA Uniform Regulation, 40 CFR §30.48. However, we note that [i] EPA was not prejudiced in any manner by these omissions, and [ii] our new manual on "Procurement Procedures for Federal Funds" requires that henceforth the standard contract clauses be included in all our procurement contracts.
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Given the size of the typical subaward, and the basis for payment, the final program report and request for disbursement submitted by the sub-recipient was the substantial equivalent of a final financial status report, and that a separate "final financial status report" labeled as such would have been a needless additional burden and expense, and would provide the recipient no additional information.
The typical subaward under the EPA CAs was between $2,000 and $5,000, made to a CFA state or local affiliate. Each subaward was intended to finance a discrete activity, with easily measurable results, whose total cost could be established at the outset with reasonable certainty. To establish total cost, we reviewed the proposed budget in detail prior to the commitment of funds in order to verify that the proposed costs were reasonable and that there was little risk of subsequent change.
After an initial payment, further payment was contingent on the successful completion of the activity and submission of the final program report. If the activity was not completed as contemplated, no further payment was made - even if the subrecipient had incurred "allowable costs."
Based on these three key elements - a discrete activity with fixed costs and easily measurable programmatic results; a detailed up-front budget analysis; and payment upon completion of easily established milestones - these small subawards are fixed-obligation subawards, rather than cost reimbursable subawards. As fixedobligation subawards, from an audit standpoint, it is unnecessary - indeed wasteful
- to require the sub-recipient to track and report its actual subaward costs - as would be the case with a fixed-price procurement contract. Accordingly, we believe that, with respect to these fixed obligation subawards, the requirement that subrecipients submit a "final financial report" is inapplicable.
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As demonstrated in the legal memorandum prepared by Sonenthal & Overall PC, and submitted with this response, there is no requirement in the EPA Uniform Regulation, in the any of the CAs, or in official EPA policies or procedures, that require a recipient to "competitively solicit and award sub-agreements."
On the contrary, the Uniform Regulation actually prohibits EPA from applying the requirement to the Foundation. It provides that EPA may not, by policy or by contract, impose requirements on its recipients that are not set forth in the Uniform Regulation, or are inconsistent with its provisions, without obtaining a special deviation from the agency (for case-by-case deviations) or from the Office of Management and Budget (for class deviations), or unless specifically required by Federal statute or Executive Order. We are not aware that any deviation regarding competition for subawards applicable to the Foundation has been approved by either EPA or OMB, and the DAR provides no reference to any such deviation. If no such deviation exists, EPA enforcement of a sub-award competition requirement against the Foundation would be a violation of EPA’s own regulations.
Furthermore, even if there were a formal EPA "policy" requiring competition of sub-awards, and that policy did not violate the EPA Uniform Regulation (i.e., OMB had approved a class deviation as required by 40 CFR §§30.1 and 30.4) that "policy" could not be binding against the Foundation, because it was not incorporated into (or even referenced) in any of the Foundation’s CAs, and the Foundation did not otherwise agree to abide by its terms. In fact, the Foundation had no notice of the existence of the "policy" or of its alleged applicability to the CAs.
Therefore, to enforce the "policy" against the Foundation would be a denial of due process of law, especially if that enforcement were to result in a disallowance of costs.
Finally, one of the principal reasons that EPA solicited CFA’s (and, later, the Foundation’s) participation in the IAQ, Radon PSA and ETS campaigns was the relationship between CFA (and, later, the Foundation) and CFA’s many state and local members and affiliates. In fact, it is clear that EPA expected the Foundation to implement certain CA programs primarily through its members and affiliates. Under the circumstances, it is fair to say that the Foundation was authorized by the CAs to make sub-awards to its members and affiliates. The "full and fair competition" of sub-awards that (according to the DAR) is required by EPA "policy," would have been as inconsistent with EPA’s expectations as it would have been with the requirements of the EPA Uniform Regulation.
As noted in our response in Part 9[A], there is no provision in the EPA Uniform Requirements mandating of "full and fair competition" in the award of subawards. Therefore, as noted above, any EPA "policy" purporting to require such competition would amount to an "additional requirement" in violation of the Uniform Regulation, unless a class deviation endorsing that "policy" has been approved by the Office of Management and Budget. To our knowledge, no such class deviation has been approved. Furthermore, to our knowledge, the EPA "policy" was never publicly announced or otherwise communicated to the Foundation - in particular, there is no mention of it in any of the CAs. Accordingly, even if the "policy" exists and (notwithstanding the limitation impose by 40 CFR §30.1) it is legally enforceable, it cannot be enforced against the Foundation.
Also as noted, EPA expected the Foundation to direct sub-awards primarily to its members and affiliates. Thus, "full and fair competition" of sub-awards would have been inconsistent with EPA’s expectations and with the explicit requirements of the CAs.
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V. PERFORMANCE REPORTS
performance reports provided to EPA project officers. In fact, the Foundation exceeded the reporting requirements in many respects by submitting more frequent reports than were mandated by the specific CAs.
The nature of the Foundation’s relationship with EPA project officers meant that we were in regular contact with the project officers. We communicated regularly through day-to-day e-mails, phone calls, and specialized reports provided upon request. Project officers were well-informed of our progress through this regular communication and, at least monthly, could see that we drawing down funds to pay for our efforts on a reimbursement basis. At no point during the Foundation’s work on any cooperative agreement, has an EPA project officer ever indicated that the Foundation failed to produce reporting documents in violation of the terms of a CA.
Each project officer received, on a monthly basis, a copy of the Job Cost Activity Report that summarized the budget versus actual financial activity under each CA, in addition to frequent phone calls and emails providing updates of the Foundation’s work on particular projects. The Job Cost Activity Reports showed that activity had taken place and showed when and how it had been paid for (on a reimbursement basis). They also showed under which line item the activity had taken place. Samples are attached.
Copies of written performance reports issued for each cooperative agreement
are included in the attachments:
X824939-01 Radon IAQ (requiring Annual Reports and a Final Report) The project officer received a monthly report on the activity of the Radon Fix-It Program. Copies of these monthly reports for the five-year project period are attached. The Foundation also submitted annual reports for the Radon Fix-It Program for the project period.
The Foundation submitted reports on the state and local outreach component of this agreement. Mid-term reports are available for 1996-1997 and 1997-1998.
Annual reports on the state and local outreach results were submitted for each year of the project period. Copies are attached as Attachment #12.
outreach executed under this cooperative agreement for 1998-1999, 1999-2000, and 2000-2001. Copies of these performance reports are in Attachment #12.
Finally, the Foundation submitted final financial and technical reports for this CA and copies of these are in Attachment #13.
X829178-01 Radon IAQ2 (requiring quarterly, mid-year, annual, and final reports) The Foundation submitted monthly Radon Fix-It program reports from the beginning of the project period until September 2003, when the program was shifted to the National Safety Council. Annual Reports for the Radon Fix-It Program are available for the two years the program was operative under this CA. Copies of these reports are included as Attachment #14.
The Foundation submitted semiannual and annual performance reports on the state and local outreach program for the year in which state and local outreach was executed. An annual report also summarized the results of the Foundation’s national outreach. Copies of these reports are included in Attachment #15.
A final technical and financial report is not due for this agreement until November 2004.