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And another one bites the dust: EPA nominee withdraws over grant fraud scrutiny/conflict of interest

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By Michelle Malkin  •  March 25, 2009 04:33 PM

This is beginning to get repetitious. Just in from the EPA, another Obama nominee is bailing out over scrutiny of his past:

EPA Statement on Jon Cannon
Release date: 03/25/2009

Contact Information: Betsaida Alcantara, 202-564-1692 / alcantara.betsaida@epa.gov or Brendan Gilfillan, 202-564-2081 / gilfillan.brendan@epa.gov

(Washington, D.C. – March 25, 2009) Jon Cannon, nominee for Deputy U.S. Environmental Protection Agency Administrator, released the following statement:

“Today I am voluntarily removing my name from consideration to be Deputy Administrator of the Environmental Protection Agency. It has come to my attention that America’s Clean Water Foundation, where I once served on the board of directors, has become the subject of scrutiny. While my service on the board of that now-dissolved organization is not the subject of the scrutiny, I believe the energy and environmental challenges facing our nation are too great to delay confirmation for this position, and I do not wish to present any distraction to the agency.”

EPA Administrator Lisa P. Jackson said: “I’m disappointed that Jon Cannon will be unable to serve as Deputy Administrator, and I thank him for his many years of dedication to the EPA. The administration will move quickly to identify a new candidate who can help us carry out our mission to preserve environmental sustainability and create green jobs as we transition the nation to a clean energy economy.”

(Hat tip: Daniel G.)

There are no news stories up yet from the MSM on the scandal Cannon is referring to, but I found this EPA report from 2007 on how the America’s Clean Water Foundation mishandled three huge government grants totaling nearlly $26 million:

The Foundation did not comply with the financial and program management standards and the procurement standards promulgated in Title 40 Code of Federal Regulations (CFR), Part 30. Specifically, the Foundation (1) could not provide support for any of its general journal entries; (2) included duplicate transactions in its accounting system; (3) recorded labor charged to EPA grants incorrectly; (4) could not support the recorded indirect costs; (5) claimed unallowable preaward costs; (6) recorded EPA cash draws inaccurately; (7) did not submit required indirect cost proposals to EPA; (8) did not complete the required single audits for fiscal years ended June 30, 2003, June 30, 2004, and June 30, 2005; and (9) did not submit a Federal Cash Transactions Report when required.

The Foundation’s procurement practices and procedures did not comply with the grant regulations. The Foundation awarded sole source contracts without performing the cost/price analysis required by Title 40 CFR 30.45. It also awarded a contract to a member of its Board of Directors, contrary to the conflict of interest provisions at Title 40 CFR 30.42, and reimbursed a contractor for billings above contractual ceilings. Because the Foundation did not adequately document its costs and did not comply with the EPA regulations, we questioned the Federal share claimed of $25,372,590.

The America’s Clean Water Foundation disappeared soon after the discovery of financial shenanigans:

While performing the single audit for the year ended June 30, 2004, RAFFA, the Foundation’s accounting firm, discovered accounting irregularities and a potential embezzlement of funds.

The Foundation’s president and the managing partner of RAFFA met with EPA officials to report these irregularities. As a result of this meeting, EPA, on July 18, 2005, changed the Foundation’s method of grant payments from “Advance” to “Reimbursement.” EPA officials stated they took this action because the circumstances described indicated a breakdown in internal controls. They also stated that EPA would not process any new grant awards or amendments to existing grants until the Foundation demonstrated it had complied with EPA’s standards for financial management systems in Title 40 CFR 30.21(b).

In a November 8, 2005, letter, EPA informed the Foundation that payment for grant costs incurred for contract ACWF-OFAER-01-05 awarded to Environmental Management Solutions, LLC (now Validus Services, LLC) would not be approved because the Foundation did not comply with EPA procurement requirements. In response, the Foundation provided information on the OFAER contract procurement and requested a deviation from the regulations. EPA deferred action on the Foundation’s request for deviation to allow the Foundation additional time to provide the required cost review documentation. On July 11, 2006, EPA denied the Foundation’s request for deviation because (1) the required documentation was not submitted and (2) the OIG indicated in a memorandum report2 that costs incurred under the contract were not reasonable or allowable. EPA requested that the $5.6 million it reimbursed the Foundation under the contract be returned.

In a July 14, 2006, letter, the Foundation’s attorney notified EPA that the Foundation was formally dissolved. The letter stated that all members of the Board of Directors had resigned, the Foundation filed dissolution papers with the District of Columbia, and it no longer had any employees or an office location. The stated reason for the dissolution was the lack of program funding; the Foundation could no longer operate effectively or respond to Agency inquiries. The letter indicated that Foundation records and files had been moved to a storage facility in Standardsville, Virginia, that access to the records can be arranged, and that the Foundation retained its right to initiate and maintain claims.

But, you know, this is all just a “distraction.”

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