Costs Claimed by the North Carolina Rural Economic Development Center, Inc., Und

The discussion draft concluded that EPA should recover all costs incurred ($1,192,500) under the grant. Both the NCREDC and Region 4 disagreed with the discussion draft findings. In its September 11, 2009, response, the NCREDC stated that the findings resulted from a misunderstanding about the manner in which costs were allocated to multiple funding sources, and from differences in its interpretations of regulations regarding federal grant administration. The NCREDC believes it spent EPA funds in an appropriate manner on a project of significance for the people of North Carolina. At the time of the initial grant award, Region 4 was notified of the various funding sources and the estimated total costs of the Water 2030 Initiative. Region 4 recognized that the original grant application described the project as “North Carolina Water 2030” and that Grant No. X96418405 should have been awarded to include all funds associated with the complete project, including state funding sources. The region believes that the grant should have been awarded to include all funds associated with the complete project, reflecting the entire cost of $2,204,031, of which EPA was to pay $1,192,500. In addition, Region 4 asserted that the $178,556 of questioned indirect costs would be eligible direct costs if the grantee executed a budget revision to remove the indirect costs and claim additional subcontract costs. According to Region 4, the EPA project officer and EPA grants specialist contacted the grantee to reopen and revise the grant to address the concerns identified in the discussion draft report. On December 3, 2009, Region 4 reopened the grant and amended it to reflect full project cost of $2,204,031, minus indirect costs, and extended the budget/project period from December 31, 2007, to December 31, 2010. On September 14, 2011, we issued a draft report to the NCREDC and Region 4. The draft report stated that the NCREDC did not comply with 2 CFR Part 230 with respect to financial management. Specifically, the NCREDC did not properly allocate direct costs between state and federal funding sources. The draft report concluded that EPA should recover all costs incurred ($1,192,500) under the grant. Both the NCREDC and Region 4 disagreed with the draft report findings. We received responses to our draft report from the NCREDC and Region 4. Each commenter disagreed with our audit findings and corresponding recommendations, and in some cases, disagreed with each other. However, neither party provided any information that would cause the OIG to change its audit findings and recommendations.