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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Superfund Financial Activities at the Agency for Toxic Substances and Disease Registry for Fiscal Year 1995," (A-04-96-04575)

June 2, 1997

Complete Text of Report is available in PDF format (1 MB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This report provides the results of our audit of Superfund financial activities of the Agency for Toxic Substances and Disease Registry (ATSDR) during Fiscal Year (FY) 1995. We conducted our audit to comply with provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (the Act) . The Act requires the Inspector General of a Federal organization with Superfund responsibilities to audit all uses of the Superfund.

The ATSDR receives Superfund monies through interagency agreements with the Environmental Protection Agency (EPA) to carry out health related activities mandated by Superfund legislation. From October 1, 1994 through September 30, 1995, ATSDR’S obligations of Superfund monies totaled about $68.4 million and disbursements totaled about $62.1 million of funds obligated during and prior to that year.

The audit showed that ATSDR generally administered the fund in accordance with applicable laws and regulations. However, we noted that ATSDR needed to implement corrective actions in the following three areas.

-- The ATSDR did not document the reasonableness of $5,360,000 paid to the Centers for Disease Control and Prevention (CDC) for administrative and support services. Absent such documentation, ATSDR cannot assure that the Superfund is not being overcharged. We identified the absence of such documentation in last year’s audit and the Public Health Service (PHS) had agreed that CDC would have the documentation by February 1996. However, we found no evidence that this agreement was upheld.

We are recommending that ATSDR either (1) obtain documentation showing the reasonableness of charges for FY 1995 for administrative and support services from CDC or (2) assure that the Superfund is refunded payments for the charges that cannot be supported. We are also recommending that ATSDR not pay such charges in future years unless supporting documentation for them is provided. The documentation should include all records and reports necessary to ensure that charges are reasonable for the services actually provided, and that charges for the services were consistent with similar charges to CDC’S own programs.

In its response to a draft of our report, ATSDR expressed their belief that the FY 1995 charges for administrative and support services were reasonable. However, they concurred with our conclusion that these costs must be properly supported. The CDC is now in the process of developing a system to allocate indirect costs based on the services actually provided and document the bases for that allocation.

-- The ATSDR did not ensure that all grantees obtain independent audits as required under Part 74 of Title 45, Code of Federal Regulations (CFR) . Of the 65 grantees required to obtain audits of ATSDR grant expenditures in FY 1995, 5 did not submit reports. As a result, ATSDR has no assurance that Superfund monies claimed under grants totaling about $1.3 million were allowable and reasonable, or that the grantees had adequate controls to ensure compliance with applicable laws, regulations and guidelines.

A similar situation was discussed in our audit reports on ATSDR’S Superfund financial activities for FY 1992 and FY 1993, and PHS had agreed that procedures should be established to ensure audit reports were obtained from all Superfund grantees. Although a CDC official subsequently participated in a work group including several Department of Health and Human Services (HHS) components to study potential improvements to the systems currently used to assure receipt of independent audit reports, we found no evidence that this system had been improved.

We are recommending that ATSDR ensure that the five grantees submit the required audit reports on their Superfund expenditures as soon as possible. We are also recommending that ATSDR establish controls to ensure that all Superfund grantees submit the required audit reports.

The ATSDR cited its success in reducing the numbers of delinquent audit reports over recent years, and added that the 5 reports mentioned above had been obtained following our field work. However, ATSDR officials maintain that the problem of consistently obtaining audit reports on a timely basis is a departmental problem and that our recommendation should be restated to say that "the Department and the OIG establish controls. ..."

We strongly disagree with the contention that any problems with HHS’ centralized system for processing audit reports would relieve ATSDR of fulfilling its own responsibilities to ensure that its grantees are using Superfund monies in full accordance with applicable laws and regulations. Both the HHS and PHS Grants Administration Manuals clearly delineate the responsibility of Grant Officers to ensure that the required audits are performed and specify that responsibility for this function may not be delegated to other individuals or organization.

-- The ATSDR did not provide evidence that it had submitted a Minority Contractor Utilization Report, as required under its agreement with EPA. The ATSDR report was transmitted to the HHS Office of the Secretary on February 28, 1996, more than 2 months after the date it was due to EPA, but we found no evidence that the report was ever provided to EPA.

We are recommending that ATSDR establish adequate controls to ensure that annual Minority Contractor Utilization Reports are prepared on a timely basis, and that it submit copies of the reports to EPA at the same time they are transmitted to departmental headquarters for consolidation.

The ATSDR concurred with our recommendation and stated that the report for FY 1995 has been submitted to EPA.