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                                     MISSION
        The mission of the Environmental Protection Agency
          is to protect human health and the environment.
 EPA's purpose is to ensure that:

 All Americans are protected from significant risks to human health and the environment where
 they live, learn, and work.

 National efforts to reduce environmental risk are based on the best available scientific information.

 Federal laws protecting human health and the environment are enforced fairly and effectively.

 Environmental protection is an integral consideration in U.S. policies concerning natural resources,
 human health, economic growth, energy, transportation, agriculture, industry, and international
 trade; and these factors are similarly considered in establishing environmental policy.

 All parts of society—communities, individuals, business, state and local governments, tribal
 governments—have access to accurate information sufficient to effectively participate in managing
 human health and environmental risks.

 Environmental protection contributes to making our communities and ecosystems diverse,
 sustainable, and economically productive.

 The United States plays a leadership role in working with other nations to protect the global
 environment.
                               STRATEGIC GOALS
                           September 2000 Strategic Plan
 1.  Clean Air

 2.  Clean and Safe Water

 3.  Safe Food
 4  Preventing Pollution and Reducing Risk in Communities, Homes, Workplaces, and Ecosystems

 5.  Better Waste Management, Restoration of Contaminated Waste Sites, and Emergency Response

 6.  Reduction of Global and Cross-Border Environmental Risks
 7.  Quality Environmental Information

 8.  Sound Science, Improved Understanding of Environmental Risk, and Greater Innovation to
    Address Environmental Problems

 9.  A Credible Deterrent to Pollution and Greater Compliance with the Law

10.  Effective Management


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                   MESSAGE FROM THE ADMINISTRATOR
   I am pleased to provide the Environmental Protection Agency's FY 2002 Annual Report,
which conveys a comprehensive view of the Agency's program and financial performance
over the past fiscal year. I believe that the Congress and the American public will find this
report helpful in assessing the Agency's success in protecting human health and the
environment and in using taxpayer dollars wisely and effectively in this pursuit.

   Much of the progress described in the report is a direct result of contributions by our
federal, state, local, and tribal partners. Under the Clean Air Act, EPA and its partners continue
to make important progress in reducing air pollution and protecting Americans—particularly
children, the elderly, and people with respiratory ailments—from airborne health risks.
Similarly, under the Clean Water Act and the Safe Drinking Water Act, the Agency and its
partners have helped to restore and protect watersheds and aquatic ecosystems and to move
us closer to our goal that all Americans have drinking water that is clean and safe to drink.
Continued Superfund site cleanup and the job training and employment opportunities
associated with Brownfields redevelopment have demonstrated the economic benefits of
environmental improvement.
   In the aftermath of the attacks of September 11, 2001, the anthrax outbreaks, and in light
of continuing terrorist threats, I am proud of this Agency's efforts to meet its homeland
security responsibilities, including improving our ability to respond to potential chemical and
biological incidents and to promote the safety of our  public water systems and of the
chemical industry. Our EPA Homeland Security Strategic  Plan, released in October, will guide
our efforts in the years  ahead. We look forward to working closely with the newly-created
Department of Homeland Security in meeting our shared homeland security responsibilities.

   Internationally, under EPA leadership, a renewed program along the United States-Mexico
border is taking shape to improve the quality of drinking water and the level of food safety,
particularly among young children. As an outgrowth of this summer's World Summit on
Sustainable Development in Johannesburg, South Africa,  EPA is leading the development of
children's environmental health indicators and efforts to reduce levels worldwide of indoor air
pollution and lead and  sulfur emissions from vehicle fuels.

   In FY 2002 EPA made significant progress toward  accomplishing the government-wide
reforms of the President's Management Agenda. The Agency continues to be a leader in the
area of e-government—modernizing and streamlining our administrative systems and actively
participating in  14 of the federal government's  e-gov projects to improve service efficiency
and expand public access. EPA is revising the Agency's Strategic Plan and structuring it around
fewer more outcome-oriented environmental goals that we feel will be more meaningful to
the public and Congress. EPA's efforts to integrate our Strategic Plan and environmental
performance with the Agency's budget process and workforce planning will enable us to
make more informed policy decisions and ensure that Americans' tax dollars are well spent.
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   In addition, the Agency is working to develop a comprehensive set of environmental
indicators, so that we can improve our understanding of current environmental conditions and
ensure that environmental policy is producing measurable improvements in the condition of
the environment. We will release the findings later this year in a draft report on the state of
the environment.
   As we look to the future, I want to thank the American people for their unwavering
support of environmental protection. It is to them that we are ultimately accountable, and I
know that by working together, we are certain to accomplish our goal of cleaner air, purer
water, and better protected land for ourselves and for generations that follow.
                                                                 Christine Todd Whitman
                                                                           Administrator
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             MESSAGE FROM THE CHIEF FINANCIAL OFFICER
   I am pleased to present to you EPA's Annual Report for FY 2002, a year in which the
Agency accomplished much in protecting the environment and human health, and in
managing public resources effectively and efficiently. This was a special year for all of us.
We sustained all of the Agency's ongoing environmental protection efforts for cleaner air,
purer water, and better protected land. At the same time, we were called upon to respond to
new and complex challenges, including follow-up to the September 11 attacks and to multiple
incidents of anthrax contamination. In FY 2002 EPA was also in the vanguard of support for
the government-wide reforms outlined in the President's Management Agenda.

   As a consolidated annual report, this document is designed to provide information about
EPA's performance—what the Agency planned to work on in the past year, and the results of
the work we did—along with our audited annual financial statements. We aim to produce a
report of useful information for the American people as well as for our partners and
stakeholders in state and tribal governments, other federal agencies, Congress and OMB,
industry, and the environmental community.

   This report itself exemplifies one of our most distinguished achievements. EPA has been
described as a leader among federal agencies for integrating our planning and budgeting
processes with information about our performance. Most recently, the Agency was honored
by the President as one of seven finalists government-wide for the President's Quality Award
for budget and performance integration. Thanks to the efforts of many across EPA, we have
achieved more rational approaches to planning and budgeting; clearer strategic direction for
the Agency; and annual reports that merit clean audit opinions and commendations for
transparency—all of which place EPA in the forefront of government reform.

   As always, we  welcome your suggestions for ways to make EPA's Annual Report for
FY 2003 more informative and interesting. We invite you to send comments by postal or
electronic mail to the addresses provided on the back cover of this Report.
   Thank you for your continuing interest in our work and your support for a clean
environment and good health for all Americans.
                                                                       Linda M. Combs
                                                                  Chief Financial Officer
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                         EPA'S FY 2002 ANNUAL REPORT

                                     CONTENTS

Mission Statement - Strategic Goals 	Inside Front Cover
Message from the Administrator 	Feature
Message from the  Chief Financial Officer 	Feature
Contents	i

SECTION I-Overview and Analysis 	1-1

SECTIONII-PerformanceResults 	H-l
   Goall: Clean Air 	II-l
   Goal 2: Clean and Safe Water 	11-15
   Goal 3: Safe Food 	11-31
   Goal 4: Preventing Pollution and Reducing Risks 	11-39
   Goal 5: Better Waste Management 	11-53
   Goal 6: Reduction of Global and Cross-Border Risks 	11-63
   Goal 7: Quality Environmental Information 	11-77
   Goal 8: Sound Science 	11-87
   Goal 9: Credible Deterrent and Greater Compliance 	11-99
   Goal 10:  Effective Management  	11-111

SECTION HI - Management Accomplishments and Challenges	III-l
   FY2002 Integrity Act Report 	III-2
   Major Management Challenges 	III-4
   FY 2002 Management's Report on Audits  	III-ll
   Key Management Challenges 	111-13

SECTION IV -FY 2002 Annual Financial Statements  	IV-1
   Chief Financial Officer's Analysis 	IV-1
   Principal Financial Statements 	IV-5
   OIG's Report on EPA's Financial Statements 	IV-67
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APPENDIX A - Comprehensive Listing ofFY2002 Program Evaluations 	A-l

APPENDIX B - Data Quality for Assessments of FY 2002 Performance 	B-l

APPENDIX C - EPA Organization Chart  	C-l

APPENDIX D -Acronyms and Abbreviations 	D-l

Public Access 	Inside Back Cover
Report Acquisition and Photo Credits  	Back Cover
    EPA's FY 2002 Annual Report                                                   umv.epa.gov/ocfo

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                               OVERVIEW AND ANALYSIS
INTRODUCTION

   The United States Environmental Protection
Agency (EPA) was established in 1970 to protect
human health and safeguard the environment.
Since that time the Agency has worked
continuously to ensure that the American people
have air that is safe to breathe, water that is clean
and safe to drink, and land that is protected
from toxic chemicals and other hazards.
Consistent with the Government Performance
and Results Act (GPRA), in 1997 EPA
established 10 long-term strategic goals that
identify the environmental results the Agency is
working to achieve and reflect the sound
financial and management practices it intends
to employ. These goals and the accompanying
statement of objectives and strategies to achieve
results constituted the Agency's first Strategic Plan
under GPRA. In 2000, when the Agency released
a revised Strategic Plan, the goals were modified
slightly. Each fiscal year, as required under GPRA,
the Agency develops an Annual Plan that
translates these long-term goals and objectives
into specific actions to be taken and resources to
be used during the year. EPA is accountable  to
the American people for making yearly
progress toward its annual and long-term goals
and is required to assess that progress and
report to Congress and the public. As a result,  at
the end of every fiscal year, the Agency develops
an Annual Report that describes the year's
programmatic and financial achievements.

   This Annual Report is intended to provide a
comprehensive assessment of the Agency's
fiscal  year (FY) 2002 progress in protecting
human health and the environment and in
using taxpayer dollars efficiently and effectively
to do so. The Agency's FY 2002 performance
results were achieved by using a mix of tools
and approaches and by adjusting strategies in
light of the performance assessments of
previous years' accomplishments. Throughout
the year EPA worked closely with its primary
partners—states, tribes and other federal
agencies—whose contributions were critical  to
many of the results described in the report.
    EPA's FY 2002 Annual Report contains four
main sections. First, this Overview and Analysis
is intended to provide a broad view of EPA's
performance and fiscal accountability over the
past year.* In discussing performance results,
the Overview focuses on environmental
achievements, particularly under EPA's Goals  1
through 6. The Overview also presents
approaches and tools the Agency is using to
improve managing  for results, discusses
significant factors that might affect future
Agency operations, and highlights EPA's
accomplishments in sound financial
management.
    Section II describes in greater detail the
results that EPA—working with its federal, state,
tribal, and local government partners—achieved
under each of the Agency's 10 goals. It also
presents progress in meeting the Annual
Performance Goals established in EPA's
FY 2002 Annual Plan  and longer-range strategic
goals and objectives identified in  EPA's 2000
Strategic Plan. Section III discusses major
management challenges EPA faced during the
year and presents the Agency's approaches and
accomplishments in addressing the challenges.
Finally, Section IV summarizes EPA's financial
activities and achievements and presents  the
Agency's annual financial statements, which
have been independently audited by EPA's
Inspector General.

PERFORMANCE RESULTS

    During FY 2002 EPA and its partners,
building on FY 2001  accomplishments, made
significant progress in protecting human health
and the environment. The sections below
highlight key environmental and program
' The Overview and Analysis also addresses requirements for a
 "Management's Discussion and Analysis" of the annual financial
 statements included in EPA's FY 2002 Annual Report. Because the
 FY 2002 Annual Report consolidates a number of specific reports, some
 required components of the "Management's Discussion and Analysis"
 are presented in greater detail elsewhere in this report. In particular,
 EPA's mission statement and long-range goals appear at the front of the
 report and an EPA organization chart is included as Appendix C. For a
 discussion of the Agency's performance goals, objectives, and results,
 refer to Section II. Management accomplishments and challenges are
 discussed in Section III. Financial statements, along with a discussion
 of systems, controls, and legal compliance, are presented in Section IV.
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    results, summarize the Agency's performance in
    meeting its FY 2002 performance goals, and
    discuss some of EPA's current performance
    issues and concerns.

    Environmental Accomplishments
       Clean Air: Under EPA's Clean Air goal, the
    Agency and its partners made significant
    progress in FY 2002 in reducing air pollution
    and protecting Americans—particularly children,
    the elderly, and people with respiratory
    ailments—from the health risks posed by air
    pollution. During FY 2002 EPA's state and tribal
    partners continued to work toward achieving or
    maintaining the National Ambient Air Quality
    Standards, and the Agency provided guidance,
    tools, and resources to help its partners meet their
    objectives. As a result, in FY 2002  more than
    19 million Americans live in geographic areas
    newly designated by EPA as achieving clean air.1
    In FY 2002 as EPA promulgated 13 new standards
    for toxic air pollutants, its state and tribal partners
    implemented standards for toxic pollutants that
    were already in place.2 In FY 2002 emissions of
    toxic air pollutants nationwide from stationary
    and mobile sources combined were reduced by
    an additional 1.5 percent, or 90,000 tons, from
    FY 2001 levels. This percentage represents a
    cumulative reduction of almost 33.8 percent, or
    about  2 million tons, from the 1993 baseline of
    6 million tons.3
       Power-generating utilities regulated under
    the market-based Acid Rain Program continue
    to achieve or exceed the required reductions
    for sulfur dioxide (SO2) and nitrogen oxide
    (NOx). Through FY 2001 SO2 emissions
    continued to decline from their high of
    17 million tons in 1980 to 10.6 million tons.
    NOx emissions were reduced by 2 million tons
    nationally during the same period.4

       Lastly, EPA issued emissions standards for
    several types of previously unregulated non-road
    engines and vehicles that contribute to ozone
    formation and/or particulate matter emissions, both
    which cause significant health concern. These
    standards apply to recreational vehicles, diesel
    marine engines, and large industrial spark-ignition
    engines. When the standards are fully
implemented, EPA expects an overall 72 percent
reduction in hydrocarbon emissions from such
engines, an 80 percent reduction in NOx
emissions, and a 56 percent reduction in
carbon monoxide emissions annually. These
controls will improve visibility in national parks
and wilderness areas and reduce exposure for
people who operate, work with, or are close to
these engines and vehicles. The annual human
health benefits of this rulemaking include
avoiding about 1,000 premature deaths,
preventing 1,000 hospital admissions, reducing
asthma attacks by 23,400, and preventing
200,000 days of lost work. In monetary terms,
EPA estimates these health benefits to be worth
roughly $8 billion per year when the standards
are fully implemented.5
   Clean and Safe Water: In FY 2002 EPA
continued its work to ensure that all Americans
have drinking water that is clean and safe to
drink; that the country's rivers, lakes, wetlands,
aquifers, and coastal and ocean waters are
healthy; and that watersheds and aquatic
ecosystems are restored and protected. During
FY 2002, 91  percent of Americans who
obtained their drinking water from community
water systems received drinking water that met
all EPA health standards.6
   EPA and its partners worked in FY 2002 to
increase the security of the Nation's drinking
water supplies and wastewater systems and
protect them from potential terrorist attacks.
Since November 2001 about 6,000 drinking
water and wastewater plant managers and
operators have received security training in
assessing the vulnerabilities of their water
supply systems, developing emergency and
response plans, and communicating risks to
communities. EPA expects that the drinking
water supplies of more than 120 million people,
or nearly half the population served by the
Nation's community water systems, will be more
secure as a result of the greater awareness
fostered by this FY 2002 training. Lastly, in
FY 2002 EPA developed a protocol for ensuring
the safe disposal of wastewater from the
cleanup of anthrax-contaminated sites.
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   Safe Food: Throughout FY 2002 EPA
worked to ensure that the Nation's food supply
is safe from risks posed by pesticide residues.
Through its pesticide registration program, EPA
made available to the agricultural community
alternatives to currently used pesticides posing
risks to human health and the environment. EPA
registered an alternative to methyl bromide,
9 organophosphate alternatives, 11 bio-pesticides,
and 4 conventional reduced-risk pesticides. The
Agency also completed its first-ever cumulative
risk assessment of a group of pesticides that
have a common mechanism of toxicity or a
common effect on the human body. This risk
assessment evaluated how much risk a group of
pesticides posed to human health by estimating
human exposure to the pesticides through food,
water, skin, and inhalation in residential and
public settings in this country. By continuing to
conduct cumulative risk assessments in FY 2003,
EPA will be able to determine whether the risks
posed by groups of similar pesticides meet the
current safety standard required by the Food
Quality Protection Act of 1996.
   Preventing Pollution and Reducing Risk
in Communities, Homes, Workplaces, and
Ecosystems: In  FY 2002 EPA continued its
work to reduce risk in communities, homes,
workplaces, and ecosystems. In FY 2002 the
Agency launched a national advertising
campaign coupled with a major outreach effort,
cosponsored by EPA and key medical,
consumer, and community organizations, to
protect the more than 15 million children who
are exposed to secondhand smoke in their
homes.  In addition, in FY 2002 the Agency,
working cooperatively with the chemical
industry, established the Voluntary Children's
Chemical Evaluation Program. Under this
program 35 chemical manufacturers and
10 consortia have volunteered to sponsor and
respond to risk assessments for 20 chemicals to
which children have a high likelihood of being
exposed. Further, during FY 2002 EPA, in
partnership with states, facilitated the safe
disposal of more than 10,000 transformers and
22,000  large capacitors containing a group of
toxic chemicals known as polychlorinated
biphenyls, or PCBs. Finally,  in FY 2002 nearly
1,000 hospitals across the country enrolled in
EPA's Hospitals for a Healthy Environment
program, which seeks to cut the waste
generated by hospital facilities in half and to
eliminate the use of mercury, a toxic chemical.

   Better Waste Management, Restoration
of Contaminated Waste Sites, and
Emergency Response: To better protect this
Nation's land, EPA continued to promote safe
waste management, clean up hazardous waste
sites, return abandoned or underutilized industrial
and commercial properties to productive use,
and respond rapidly and effectively to waste-
related accidents and emergencies. During
FY 2002 EPA's emergency response program
supported the environmental cleanup at the
World Trade Center (WTC) and the Pentagon.
EPA employees monitored these locations for
toxic and other air pollutants released from the
burning of building contents (particularly from
plastics and computers), assisted with waste
management, advised on cleanup and
decontamination, and provided information to
the public. At the WTC EPA was the federal lead
on environmental contamination. When
outbreaks of anthrax bioterrorism occurred
during October 2001, the Agency's response
personnel led the effort to clean up and
decontaminate six post offices in Florida and
four congressional office buildings in
Washington, DC. Success in this area depended
on counterterrorism research, planning, and
preparedness at the federal, state, and local levels.

   In FY 2002 the Agency exceeded its
performance goal of completing the cleanup of
40 Superfund sites by achieving "construction
completes" at 42 sites on the Superfund National
Priority List. In addition, the Brownfields
Program leveraged more than $4.8 billion in
public and private investments and resulted in
more than 21,000 jobs in cleanup, construction,
and redevelopment from 1995 through June
2002. The primary goal  of EPA's Brownfields
Program is to provide states, tribes, and local
governments with the tools and financial
assistance they need to assess, clean up, and
redevelop Brownfield properties. Since 1995,
3,807 properties have been assessed using
federal funds. The job training and development
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    demonstration pilots have trained more than
    1,200 participants, of whom more than 750 have
    obtained jobs.
       Reduction of Global and Cross-Border
    Environmental Risks: By working collabor-
    atively with other countries, international
    organizations, and U.S. federal agencies, EPA
    provided U.S.  leadership in addressing global
    environmental challenges. For example, EPA and
    the Government of Mexico—in cooperation with
    other federal agencies, the 10 states along the
    U.S.-Mexican border, and participating tribes—
    drafted a new "Border 2012" environmental
    program. This program will protect the
    environment and the 11.8 million people living
    near the border over the next 10 years by,
    among other things, providing potable drinking
    water and wastewater services, reducing the
    health and water quality risks posed by
    discarded tire  piles and exposure to pesticides,
    and addressing the high rates of asthma in
    children living near the border. Further, at the
    World Summit on Sustainable Development in
    Johannesburg, South Africa, in August and
    September 2002, EPA announced new global
    partnerships to develop children's environmental
    health indicators, reduce indoor air pollution,
    eliminate lead from gasoline, and reduce sulfur
    in vehicle fuels.
       A Credible Deterrent to Pollution and
    Greater Compliance with the Law: In
    FY 2002 EPA took significant actions to promote
    and monitor compliance with environmental
    laws as well as to enforce the laws as
    appropriate. During FY 2002 EPA helped small
    and medium-sized businesses, local govern-
    ments, and federal facilities to understand and to
    comply with their environmental regulatory
    obligations through 10 Internet-based
    Compliance Assistance Centers.
       During FY 2002 EPA concluded several
    enforcement settlements that significantly
    advanced environmental and human health
    protection. In  FY 2002 EPA's Enforcement and
    Compliance Assurance Program eliminated
    266 million pounds of pollution from the air,
    water, and land, and compelled violating
    companies to  invest $56.4 million in environ-
mental improvements. For example, EPA
reached a settlement to end the discharge of an
estimated 30 million gallons a year of untreated
wastewater contaminated with bacteria,
pathogens,  and other harmful pollutants into the
Baltimore harbor. Also during FY 2002 a judicial
action was concluded against a large brass fitting
company in Alabama for violations of the
Resource Conservation and Recovery Act. Illegal
treatment of hazardous waste foundry sand at the
facility resulted in lead-contaminated sand which
the company then donated to city and county
governments for use as fill on playgrounds and
ballfields. The  settlement will eliminate public
contact with the sand. Under another settlement
reached in  FY  2002, a  large energy utility in
New Jersey will spend $337 million to install
state-of-the-art pollution controls to reduce its
emissions of SO2 by 90 percent and NOx by more
than 80 percent, eliminating about 54,000 tons
of air pollutants per year.

Other Agency Accomplishments and the President's
Management Agenda (PMA)

   To successfully protect human health and the
environment, EPA recognizes that it must
develop and apply the best available science in
carrying out its programs, function effectively as
an organization, serve the public responsively,
and use its  resources wisely. For example, to
improve its understanding of environmental risk
as well as its ability to detect and address
emerging environmental problems, in FY 2002
the Agency produced a modeling framework for
estimating human exposure to pollutants through
multiple environmental media (e.g., air, water,
food) and multiple pathways. This framework
will help the Agency in assessing and managing
risks for a variety of pollutants, such as
pesticides and  toxic air pollutants and in
protecting children and other susceptible
subpopulations from harmful exposures. Further,
during FY 2002 EPA developed two innovative
computer software programs that allow industry
and state and local decision makers to apply the
best available science to (1) estimate the
potential environmental impact of chemical
process designs, and (2) evaluate the inhalation
impact of metal finishing facilities on workers
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and nearby residents. (Refer to Goal 8 for more
information.)

   In FY 2002 EPA also made significant
progress in ensuring that it has safe, healthy,
energy-efficient office facilities and laboratories
to support its work and employees. During
FY 2002 EPA completed the new state-of-the art
laboratory facilities in North Carolina and Kansas
that will enable the Agency to better address the
environmental scientific challenges of the 21st
century. In January 2002 EPA's Massachusetts
laboratory facility received a White House
"Closing the Circle Award" for its environmental
performance. Finally, EPA completed its
relocation to the newly renovated buildings in
the Federal Triangle complex in Washington,
DC. This project began in 1993 and involved the
design and renovation of 1.3 million square feet
to support the work of 5,500 EPA employees.
(Refer to Goal 10 for more information.)

   EPA's senior managers recognize that
managing the organization and its resources
effectively is key to achieving long-term
environ-mental results. The Agency's most
significant accomplishments in this area occurred
as it addressed the five areas identified in the
President's Management Agenda (PMA)7, the
Administration's strategy for improving the
management and performance of the federal
government. In FY 2002 the President's Office
of Management and Budget (OMB) credited EPA
for taking major steps forward in each of the
five areas. OMB's PMA scorecard8—used to rate
agencies on each initiative using a "score" of
red, yellow, or green—designated EPA's
progress as green in all five areas, marking EPA
as 1 of the 2 agencies out of the 24 CFO
agencies accomplishing this progress rating as of
September 30, 2002.

   Improved Financial Performance: This
area of the PMA calls for reducing erroneous
payments and ensuring that federal financial
systems produce accurate and timely information
to support operating, budget, and policy
decisions. EPA made significant progress in
FY 2002 in improving its financial performance
by reviewing internal controls to assess the
potential for making erroneous payments under
the State Revolving Funds managed by the
water program, submitting the final FY 2001
financial statements on time with clean audit
opinions, and issuing interim financial
statements on schedule. The Agency also made
great strides in the grants arena by issuing a
grants competition policy, appointing a senior
executive as the Agency Grants Competition
Advocate, establishing an internal web site to
facilitate implementation, and providing
training on the policy. EPA also made
significant progress in FY 2002 by correcting all
four of its current material weaknesses—
deficiencies  in program policies, guidance, or
procedures that might impair EPA's  ability to
achieve its mission—under the Federal
Managers Financial Integrity Act.
    Budget and Performance Integration:
This area focuses on linking resources to
performance, using program evaluation in
planning and budget decision-making,  and
improving accountability for performance. As
one of the few agencies with an integrated,
goal-based budget, EPA has long been a leader
in budget and performance integration consistent
with the PMA. In FY 2002 the Agency made
good progress addressing the PMA criteria for
this area, including developing a methodology to
include social costs in the Agency's revised
strategic plan. EPA's selection as a finalist for the
President's Quality Award in the area of budget
and performance integration distinguished the
Agency government-wide.

    Expanded Electronic Government: This
area seeks to make it easier for people to
receive high quality government services
through the Internet, while reducing the cost of
delivering those services. In FY 2002 EPA was
recognized by OMB as a model partner for its
work under 14 e-government projects that use
information technology to improve environmental
decision making, eliminate redundant activities
across multiple federal agencies, and achieve a
more seamless, citizen-centered provision of
services. EPA also was designated to be the
managing partner and lead agency for the
Online Rulemaking Initiative, which will make
the rulemaking process more transparent to
citizens and businesses.
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       Strategic Management of Human
    Capital: This area calls for ensuring that an
    agency's human capital strategy is aligned with its
    mission and organizational objectives. EPA uses its
    Human Resource Council, made up of senior
    managers from across the Agency, as a forum to
    discuss key human resource issues and provide
    direction for its human capital efforts. In FY 2002
    EPA launched a Senior Executive Service
    Candidate Development Program, hired a group
    of highly skilled and educated EPA interns, and
    provided grants competition training for current
    EPA employees, all aimed at improving and
    enhancing  EPA's human resources. The Agency
    also is aligning its human capital strategy with its
    revised Strategic Plan to help build the skills and
    competencies needed in its workforce to carry
    out the Agency's mission and to strengthen
    employee recruitment and retention.

        Competitive Sourcing:This area of the
    PMA focuses on achieving greater efficiencies in
    program administration and effective competition
    between public and private sources. EPA has
    embraced the President's competitive sourcing
    initiative and is committed to introducing more
    competition into the activities EPA performs. By
    doing so, the Agency can improve how it
    protects the environment and human health.
    Competitive sourcing provides EPA with an
    opportunity to take a fresh look at how the
    Agency conducts operations, to reevaluate what
    EPA does as well as how it is done, to generate
    greater value for the taxpayer, and to introduce
    efficiencies to business processes. In FY 2002
    the Agency completed all targeted conversions
    and 100 percent of the combined FY 2002/2003
    competitive sourcing goal. EPA also launched an
    Agency-wide competitive sourcing team to
    develop recommendations for a strategic and
    sustainable approach to competitive sourcing.
    The team's report will include an analysis of
    Agency-wide, cross-cutting functions and activities
    that can be bundled as possible candidates for
    further study and competition with the private
    sector as well as a proposed framework for
    conducting competitive sourcing at EPA.
Summary of Performance Data

   In FY 2002 EPA met 48 (83 percent) of the
Annual Performance Goals (APGs) for which
data are provided in this report. (EPA identified
71 APGs in its FY 2002 Annual Plan; however,
final results for 13 of these APGs are not
available until FY 2003 or later, and will be
discussed in future annual reports.) This reflects
an improvement over the total percentage of
goals met in FY 2001. The goal chapters in
Section II include charts that present EPA's
FY 2002 performance results and highlights of
4-year performance trends (FY 1999-FY 2002).

   During FY 2002 final performance results
data became available for six FY 2001 and two
FY 2000 APGs. For example, the Agency met
its FY 2001 goals for reducing greenhouse gas
emissions and consumption of ozone depleting
substances as well as SC> and NO emissions.
                      2        x
EPA can now report achievement of 46
(69 percent) of the 67 APGs for which it has
FY 2001 data. For FY 2000 EPA can now report
achievement of 58 (82 percent) of the 71 APGs
for which it has  performance data. Delays in
reporting cycles and targets set beyond the fiscal
year continue to affect three FY 2001 APGs,
two FY 2000 APGs, and four FY 1999 APGs.

Performance Issues and Concerns

   Despite the best efforts of EPA and its
partners, the Agency was not able to meet all
planned targets  for FY 2002. However, the
Agency does not expect the  shortfall in meeting
these APGs to compromise progress toward
achieving its long-range goals and strategic
objectives. For 4 of the 11 missed APGs, EPA
fell only slightly short of the targets and met the
cumulative goals.

   External factors contributed to seven of the
missed APGs. For example, EPA had anticipated
that 10 areas would be redesignated from non-
attainment to attainment of the ozone standard in
FY 2002, but fell considerably short of that goal.
Several states previously revocated for the
1-hour ozone standard decided not to redesignate
and instead wait for implementation guidance for
the new 8-hour ozone standard. As long as
issues remain concerning the move toward the
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more protective 8-hour ozone standard, states
are reluctant to request redesignation to the
current 1-hour ozone standard.

   EPA had anticipated that six areas would be
redesignated to attainment of PM standards, but
due to delays in the redesignation process for
one state and the failure of a second state to
submit a maintenance plan as scheduled, only
four areas were redesignated to attainment.
Despite these difficulties, EPA and states
continue to work together to ensure progress in
meeting the present ozone and PM standards
while facilitating a smooth transition as new
standards are implemented.
   In addition, under its goal to achieve
Credible Deterrent to Pollution and Greater
Compliance with the Law, EPA anticipated a
pollution reduction of 300 million pounds of
pollutants due to enforcement settlement
provisions,  an estimated target based on the
results of concluded enforcement actions from
previous years. In FY 2002 only 266 million
pounds of pollutants were reduced.  The Agency
does not establish quotas for the number of
enforcement cases to be pursued, and estimated
pollution reduction targets sometimes vary
widely from year to year. EPA greatly exceeded
the targets for pollution reduction in FY 2000
and FY 2001. The Agency continues to direct
enforcement actions to maximize compliance
and address environmental and human health
problems.
   One final example of external factors
contributing to performance shortfalls is the
Agency's leaking underground storage tank
(LUST) program, which oversees cleanup of
releases from underground storage  tanks
containing gasoline, other petroleum products,
or hazardous substances. In 2002 EPA and its
state partners completed 15,769 cleanups, for a
total of nearly 284,000 since 1987. The FY 2002
target of 22,000 cleanups was not met due to
the presence  at many sites of the contaminate
methyl tertiary butyl ether (MTBE),  a gasoline
additive, which has complicated cleanup and
resulted in longer-than-expected cleanup times
and higher-than-expected cleanup costs at LUST
sites. MTBE contamination also  led to the
reopening of previously closed sites in
12 states, thus deflecting resources from
completion of other cleanup sites.

   For some missed APGs, shortfalls cannot be
attributed to a single reason. For example, under
the Agency's Clean Water Goal, EPA missed its
target for issuing National Pollutant Discharge
Elimination System (NPDES) permits for major
point sources. NPDES permits help reduce or
eliminate discharges into the Nation's waters of
inadequately treated wastewater from municipal
and industrial facilities and of pollutants from
urban stormwater, combined sewer overflows,
and concentrated animal feeding operations. In
FY 2002 permits issued covered only 83 percent
of the targeted 90  percent of major point
sources. While EPA is making progress to
address the permit backlog, the missed target
can be attributed to a number of factors
including complexities associated with
integrating individual permits with watershed
and other planning processes.

   In summary, EPA and its partners did not
meet 10 of the 58 FY 2002  APGs for which
performance data  are currently available. These
APGs are associated with 7 of EPA's 10 strategic
goals. The Agency is considering the various
causes of these shortfalls—legal issues,
redirection or shortages of staff, continued
complexities in cleanup processes, technological
limitations, and other factors—as it adjusts APGs
and program strategies for FY 2003 and sets
priorities for 2004  and beyond. The performance
data charts in Section II  provide more complete
information on missed targets and discuss
Agency progress toward achievement of its
strategic goals and objectives.

IMPROVING RESULTS

   In FY 2002 EPA strengthened its ability to
achieve environmental results and measure its
performance. The Agency's Managing for
Improved Results  Steering Group, composed of
senior managers from across EPA, examined a
number of current management practices—
including priority-setting, planning and budgeting,
and performance tracking and reporting—with
an eye toward dramatically improving them. In
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    FY 2002 the group finalized a set of short- and
    long-term recommendations for improving EPA's
    results-based management processes. Many of
    the short-term recommendations were
    implemented in FY 2002 and have become the
    driving force behind development of EPA's
    FY 2004 budget and the 2003 revision of the
    Agency's Strategic Plan.
       For example, in FY 2002 EPA institutionalized
    a process for developing its annual funding
    request by analyzing the previous year's results
    and engaging partners and stakeholders to
    identify priority areas. This process focused on
    the Agency's ability to fulfill commitments set
    forth in its  Strategic Plan. It included a series  of
    meetings on each of the 10 strategic goals with
    the Deputy Administrator and Chief Financial
    Officer to examine the Agency's performance
    and identify areas where EPA is not achieving its
    intended results. Taken together, the
    recommendations that the Results Group
    developed in FY 2002 will improve the
    alignment of day-to-day activities with strategic
    goals and objectives; improve accountability
    between EPA's headquarters and regional offices;
    strengthen the  involvement of the Agency's
    10 regions, states, and tribes in EPA's planning
    and priority-setting processes; and build the
    capacity of Agency managers and staff in
    managing for results.

       In addition in FY 2002, 11 EPA programs,
    accounting for 20 percent of EPA's budget, were
    evaluated using the Administration's new
    Program Assessment Rating Tool (PART), which
    aims to identify opportunities for federal
    agencies to improve strategic  planning,
    management, and results of its programs. The
    results of PART analyses, which showed that
    some programs have insufficient data, reinforced
    the need for EPA to continue its progress in
    identifying outcome-based goals and measures to
    better link  its activities to actual improvements in
    health or ecosystem quality. In FY 2003 OMB
    plans to conduct PART reviews for another
    20 percent of the Agency's programs during the
    FY 2005 budget formulation process.
       As discussed below, in FY 2002 EPA
    strengthened other areas critical to its ability to
achieve long-term results: (1) collaborating with
its partners, (2) conducting and applying the
results of program evaluations, (3) tracking and
measuring performance, (4) addressing
environmental performance data issues, and
(5) anticipating future trends and issues.

Strengthening Partnerships

   Many of the FY 2002 advances in
environmental protection discussed in Section II
would not have been possible without strong
collaboration between EPA and its federal, state,
local, and tribal partners. EPA continues to
collaborate closely with states and tribes and is
committed to strengthening vital partnerships
with organizations such as the Environmental
Council of the States (EGOS) and the Tribal
Caucus. EPA envisions a stronger role for states
and tribes in its annual planning and budgeting
and has been striving to involve them early in
these processes. In FY 2002 EGOS and tribal
representatives participated in EPA's FY 2004
Annual Planning Meeting to present
recommendations for the Agency's FY 2004
budget priorities.  Similarly, during FY 2002 EPA
regional offices consulted with states and tribes
on overall EPA budget priorities and developing
regional budget initiatives.
   Apart from soliciting state input and
participation in its annual planning processes,
EPA worked closely with EGOS and other state
organizations in FY 2002 as it began to revise its
long-range Strategic Plan. In spring 2002 EPA
solicited state views on the greatest challenges
and opportunities in environmental and human
health protection that the Agency and the Nation
would likely face in the coming 5 to 10 years.
These views were taken into account as the
Agency developed options for a new strategic
goal framework. The Agency's managers  shared
these goal framework options with EGOS,
carefully considering the state feedback as they
developed their recommendations for EPA
Administrator Whitman. In July 2002, after the
Administrator announced a new five-goal
structure, EPA continued consulting with states to
help determine more precisely the desired
results to be achieved under each of the new
strategic goals. EPA will continue to consult
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extensively with states in completing the
2003 Strategic Plan and will carefully consider
state priorities and issues as it develops the
objectives, strategies, and approaches for
achieving the Agency's new strategic goals.

   EPA and several states, through an EGOS Ad
Hoc Committee, conducted a joint system
evaluation of the National Environmental
Performance Partnership System (NEPPS) during
FY 2002. The evaluation reviewed the
accomplishments of Performance Partnerships
and barriers to further improvement in results-
based partnering with states. Recommendations
from this evaluative process pull together and
build upon other Agency efforts such as the
Managing for Improved Results initiative,
Indicators project, and the new EPA Innovations
Strategy.  The Agency will work with selected
states in FY 2003 to model having the
Performance Partnership Agreement (PPA)
become the definitive operating agreement
between the Agency and a state. A
complementary effort to improve the value of
Performance Partnership Grants (PPGs) is also
underway with anticipated benefits in flexibility
and reduced transaction costs to be realized in
FY 2003 and beyond.
   During FY 2002 EPA also  continued to work
closely with tribal governments to identify
priorities, improve management of
environmental issues, and help develop the
capacity to carry out environmental programs in
Indian Country. For example, in FY 2002  EPA
developed a highly accessible database
containing environmental profiles of
300 federally recognized tribes. This new
database includes historical information, maps,
geographic dimensions, inventories of regulated
facilities,  governmental structure, descriptions of
wastewater and drinking water facilities, grant
activities, and the status of environmental
programs for each individual tribe. EPA also
developed resource materials useful to both the
tribes and the Agency in  managing tribal grants
and maintaining quality grant oversight. The
Agency worked closely with authorized tribes to
publish the brochure How Water Quality
Standards Protect Tribal Waters, an informative
tool for citizens, tribes, and other stakeholders.
   During FY 2002 EPA continued to
collaborate with other federal agencies on a
wide variety of programs with environmental
protection benefits. EPA developed and managed
the WTC Multi-Agency Database, which
provided decision makers from 13 government
and private partner organizations at the WTC
site with access to the results of environmental
monitoring. In FY 2002 the Agency also
developed a Compendium of Environmental
Programs, an interactive Web-enabled database
that catalogues and cross-references the environ-
mental programs of 29 federal departments and
agencies for use in their collaborative planning,
implementation, program evaluation, and
resource sharing.
   In FY 2002 EPA teamed with the
Department of the Army and the Department of
Defense Logistics Agency to  implement
alternatives to ozone-depleting halons used in
fire protection. EPA and its two Defense
Department partners also began jointly
investigating environmentally friendly options
for destroying stockpiles  of certain ozone-
depleting substances. Also, because of a strong
partnership between EPA and the U.S.  Forest
Service, the U.S. Fish and Wildlife Service, and
the Natural Resources Conservation Service, as
well as state and local governments in
Maryland, Pennsylvania, and Virginia, EPA
exceeded its commitment to reduce nonpoint
source pollution and restore  important forest
areas near local waterways and the Chesapeake
Bay. As a result EPA and its partners are ahead
of schedule to restore 2,010  miles of critical
riparian forest areas by 2010 and in FY 2003
will set new goals to extend  this restoration.
   Further, working with its  federal partners in
FY 2002, EPA was able to clean up five
Superfund sites at federally owned facilities. EPA
also entered into a partnership with the National
Oceanic and Atmospheric Administration to
promote coastal resource protection through
smart growth in coastal areas. This collaboration
provides developers, local governments,
infrastructure providers, and others with
information, technical assistance, and
recommendations regarding best practices to
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    minimize the detrimental environmental
    impacts of growth in these sensitive areas.

    Using Program Evaluation

       During FY 2002 EPA continued to build
    Agency-wide capability to effectively conduct
    program evaluations and analyses that inform
    management decisions, enhance organizational
    learning, promote innovation, and foster better
    environmental results. For example, in FY 2002
    EPA conducted an evaluation to assess how
    effectively the Agency's Clean Air Program is
    using its resources to build tribal capacity for
    addressing air quality in Indian Country. The
    evaluation noted the success that EPA has had
    since 1995 in increasing the number of tribes
    participating in the Clean Air Program, but also
    recognized the significant remaining need for
    support, expertise, and coordination in Indian
    Country. The evaluation led to 30 recommend-
    ations for improving EPA's approaches to
    addressing air problems in tribal lands. EPA
    began implementing many of the recommend-
    ations in FY 2002 before the evaluation was
    complete, and several more will be
    implemented over time.

        In an FY 2002 report, the General
    Accounting Office (GAO) recognized EPA's
    Compliance Assistance Program as one of five
    federal public information dissemination
    programs employing useful program evaluation
    strategies that could serve as a model for other
    federal agencies.9 GAO also found that EPA's
    Compliance Assistance Program is the only
    program that had developed an approach for
    measuring the long-term health and
    environmental outcomes or benefits resulting
    from its program. In many cases, the positive
    environmental effects of complying with
    environmental requirements could be seen
    relatively quickly. To continue to promote such
    program evaluation efforts and help foster
    environmental program evaluation as a  nationally
    recognized discipline, EPA launched a Web-
    based "gateway" in FY 2002, linking
    environmental program evaluation information
    within EPA and with information resources
    outside the Agency.10 In FY 2003 EPA will
    continue to add relevant information to this site,
specifically focusing on new developments
and new information from states, tribes, and
the academic community.

Improving Environmental Indicators and
Performance Measurement

   During FY 2002 EPA made significant
progress in developing and improving
environmental indicators and performance
measures to measure and assess the Agency's
results over the next several years. For example,
in FY 2002 EPA began work on an Agency-wide
Environmental Indicators Initiative. Environ-
mental indicators are measurements of
environmental conditions over time. Indicators
help measure the state of air, water, and land
resources; the pressures on them; and the
resulting effects on ecological and human health.
The purpose of the Environmental Indicators
Initiative is to improve the Agency's ability to
report on the status of and trends in
environmental conditions and their impacts on
human health and the Nation's natural resources.
As a first step, in FY 2002 EPA collected
currently available data and indicators and began
drafting  a report on the environment, which it
plans to release for public comment in FY 2003.

   In FY 2002 the Agency continued to
increase the environmental outcome orientation
of its annual performance goals and measures
(APGs and PMs) that are used to plan and budget
resources. EPA recognizes that to use its
resources wisely, it should measure the results it
is achieving with respect to environ-mental
protection in terms of outcomes such as cleaner
air and cleaner water. During FY 2002 the
Agency increased the percentage of
environmental outcome-oriented APGs tied to its
annual budget by 7 percentage points while
increasing the percentage of outcome-oriented
PMs by 11 percentage points.11 In addition, the
Agency streamlined its APGs and PMs by
consolidating two overlapping sets of goals and
measures into a single, more easily
understandable set for EPA's FY 2004 Annual
Plan and Budget.
   In FY 2002  the Agency also worked to
develop improved performance measures in a
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number of highly focused projects. For
example, during FY 2002 new draft measures
were developed for assessing the impact in
future years of the Agency's planned
implementation of provisions relevant to
international technical assistance in the
Stockholm Convention on Persistent Organic
Pollutants (POPs). In this case measures of
current activities, such as inventorying
stockpiles of POPs, were tied to the more
important externally reported measures of
POPs stockpiles collected and destroyed. When
appropriate, the Agency can use such external
measures for external communication as well
as management.
   Finally, during FY 2002, in an effort to
develop more useful measures, the Agency
selected several performance measurement
improvement projects to fund via an Agency-
wide competition. Two examples of these
projects include developing outcome PMs for
EPA's Brownfields Program and evaluating a
measure of the effects of harmful pesticides on
bird populations.

Improving Data Quality

   During FY 2002 the Agency continued to
improve its ability to detect and correct errors in
environmental data, standardize reporting, and
exchange and integrate electronic data and data
quality information among its federal, state, and
local data-sharing partners. In FY 2002 EPA
completed work on an internal set of
Information Quality Guidelines to help ensure
that the information the Agency provides to the
public is of the highest quality.12 These
guidelines were developed using an
electronically enhanced public participation
process, and they contain EPA's policy and
procedural guidance for maximizing the quality
of the information the Agency disseminates. The
guidelines also contain new Agency procedures
for individuals to seek and obtain correction of
information collected by EPA that might not
comply with these information guidelines. The
information contained in the Performance Data
Charts in Section II - Performance Results relative
to data quality references can be found in
Appendix B - Data Quality for Assessments of
FY 2002 Performance.

   This FY 2002 Annual Report is one of EPA's
first publicly released documents to apply the
guidelines to the data on which the Agency's
performance is being measured. The report
documents, to the extent possible, the quality
of the Agency's performance data; makes
transparent the methods of analysis and data
manipulation; and references data sources. Most
of this information is captured in Appendix B.
That appendix also explains how EPA's program
offices use well-established and robust Agency
policies and procedures to ensure data quality,
such as the quality system, peer review process,
Inspector General's audits, and other error
correction processes. Appendix B also discusses
the limitations of the performance data contained
in this report, as well as data lags in reporting
progress toward some FY 2002 goals.
   During FY 2002 EPA undertook several other
initiatives to improve the quality of its
environmental data. For example, EPA's Science
Advisory Board Executive Committee began
investigating commonly accepted means by
which the scientific community communicates
information, analyses, and findings. In addition,
EPA's Science Policy Council began work on
developing assessment factors for use in
reviewing the quality of data submitted to the
Agency by third parties. Lastly, EPA's National
Health and Environmental Effects Research
Laboratory developed and tested software to
capture, sort, store, and retrieve the wealth of
scientific data developed by EPA's research
organizations.

Considering Future Trends
   During FY 2002 EPA continued to look to the
future to identify potential new challenges and
opportunities for human health and
environmental protection. The Agency
recognizes that in addition to addressing long-
standing environmental protection issues, it must
try to anticipate and plan for future
developments. The future will be marked by
increased rates of change and greater uncertainty
about the responses of complex biological,
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    ecological, social, and political systems. EPA is
    exploring ways to keep pace with these
    developments by looking ahead to better
    understand potential threats, such as global
    warming. Further, the Agency and its partners
    increasingly recognize that many world
    developments are likely to present
    opportunities to further develop environmental
    protection efforts.

       Population growth and the way resources
    are consumed to sustain this growth are altering
    the earth in unprecedented ways. The earth's
    population now exceeds 6 billion. Over the next
    25 years this total will increase by nearly
    2 billion, largely in developing countries. By
    2025 an estimated 2.7 billion people will live in
    areas experiencing severe water scarcity,
    creating the potential for regional conflicts over
    water rights. In the United States, growth in the
    South and Southwest will pose water
    management problems such as substantial water
    and wastewater infrastructure maintenance,
    aquifer depletion, and surface water
    contamination. The expected unprecedented
    population growth will also affect the Agency's
    long-standing environmental concerns, such as
    air quality. Urbanization of undeveloped areas,
    for example, will likely increase demands for
    transportation, potentially leading to more
    vehicle miles traveled and increased emissions
    of pollutants.

       Today's world is on the edge of a far-
    reaching industrial transformation. A number of
    recent technological developments and advances
    will pose new issues for human health and
    environmental protection. Scientists have
    deciphered the human genome and the genomes
    of many other organisms, including rice, the
    food most consumed throughout the world. A
    number of patents have been filed for  a new
    type of technology where devices are built
    using single atoms and molecules; i.e.,
    nanotechnology. EPA may need to examine the
    impact that nanotechnology might have on
    human health and the environment and also to
    explore opportunities to foster more
    environmentally benign technologies that use
    fewer resources  and less energy. Production of
    industrial biotechnology products, such as
Pharmaceuticals raised as crop plants, is
growing and might present environmental and
human health protection issues. In the area of
research advances, scientists might soon be
able to ascertain whether current droughts are a
normal variation of the earth's weather patterns
or an increasingly likely phenomenon due to
the effects of climate change. To plan for the
future, EPA and its partners must consider these
and other technological  and  scientific advances
and the implications they hold for
environmental protection work.

    During FY 2002, as part of its strategic
planning work, EPA completed several efforts to
assist managers and  staff in adopting a longer-
range, futures perspective and in applying their
findings to planning activities. In May 2002
senior Agency managers met  to discuss
emerging issues in environmental protection.
The managers focused on two topics, fuel cells
and genomics, as examples of emerging
technologies with significant implications for
EPA's work.  In addition, the Agency has been
using the results of a Look-Out Panel, including
interviews with leaders and experts outside the
Agency on future challenges and opportunities
facing EPA. This panel will also inform the
development of EPA's 2003 Strategic Plan.

    The National Advisory Council for
Environmental Policy and Technology (NACEPT)
provides independent advice to the EPA
Administrator on a broad range of environmental
policy, technology, and management issues.
Earlier this year NACEPT completed a major
report The Environmental Future: Emerging
Challenges and Opportunitiesfor EPA.13
The report makes several overarching
recommendations related to planning: create an
ongoing scanning process that involves all major
parts of EPA; support the ongoing work of EPA's
Futures Network and provide additional training
on environmental scanning, scenario
development, and modeling; and incorporate
futures analysis into EPA's strategic planning.
EPA is considering how it will incorporate the
findings of this report into its  planning
processes. In addition to these planning-related
recommendations, there are more than
50 emerging challenges and opportunities.
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These represent important environmental
issues for the future that do not fit well with
EPA's traditional roles. The Agency will
encourage the programs and regions to
consider the emerging challenges and
opportunities identified in the report in their
long-term planning and use them as a starting
point for futures projects within their core work
areas. As a result, these programs should be
better prepared to respond to changing
environmental conditions.
   EPA intends to continue using innovative
approaches and sound science to investigate
complex interdisciplinary problems in
environmental protection and to address them in
its strategic planning. The Agency will need to
expand its efforts to achieve interagency and
international cooperation to address
environmental issues on a global scale and will
continue to rely on relationships with its federal,
state, local, and tribal government partners and
with its stakeholders to anticipate and address
future environmental challenges.

LOOKING AHEAD TO FY 2003

   Over the next year EPA expects to make
significant improvements in the use of
performance and results information to inform
the Agency's internal planning and decision
making and to communicate to the public the
environmental results it is achieving. During
FY 2003 many of the recommendations of the
Agency's Results Steering Group will be carried
out for both near-term improvements and more
far-reaching reforms to improve the way EPA
manages for results. In FY 2003 the Agency will
issue a revised Strategic Plan. Among other
improvements, the Plan will contain a  smaller set
of more environmentally focused strategic goals
and objectives. As recommended by the Results
Steering Group, the Plan will set clear directions
for the Agency, enable cross-Agency and cross-
program planning, accommodate EPA program
and regional office priority setting, and reflect
input from EPA partners and stakeholders.

   Finally, as mentioned earlier, in FY 2003
EPA plans to release a draft report on the
environment. This report will use available
national environmental indicators data to
describe the current status of environmental
conditions and human health concerns. It will
also address many of the public's frequently
asked questions on the environment, and will
reflect work being done by others, such as the
H. John Heinz III Center for Science,
Economics and the Environment, the EPA
Science Advisory Board, and the National
Research Council.

FINANCIAL ANALYSIS

    A central theme of the President's
Management Agenda is the need for greater
accountability in government. The financial
statements provided in Section IV are one
important aspect of Agency accountability in
that they provide a snapshot of EPA's financial
position at the end of the fiscal year. These
financial statements are prepared in accordance
with established federal accounting standards
and audited by EPA's Inspector General. In
addition to the financial statements, other views
of how the Agency spends its resources are
depicted in the discussion below.

EPA Resources: 1998 to 2002

    EPA's available resources from all
appropriations and aggregate spending are
depicted in the EPA Financial Trends chart.14
Budgetary Resources consist of  resources
available each fiscal year largely from three
sources: (1) yearly appropriations received from
Congress, (2) unspent appropriations from
previous years that the Agency has the authority
to use in subsequent fiscal years, and
(3) resources received from other sources such
as collections of federal receipts that remit to the
Agency and that the Agency may use for
specific purposes. Obligations reflect legal
authority and commitments to incur costs on the
part of the government. For example, an
obligation is recognized when the government
awards a contract or a grant. The actual payment
of the contract or grant may extend over several
years depending on the terms and conditions.
Outlays represent cash payments for goods and
services received. The Statement of Budgetary
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                       EPA Financial Trends
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FY 2002 Obligations by Goal
(Dollars in Millions)
Appropriations
State & Tribal
Assistance Grants
AllOther
Superfund
TOTAL
% of Total
G-1
233
355
0
588
6.22
G-2
3,241
649
0
3,890
41. 18
G-3
0
112
0
112
1.19
G-4
99
223
0
322
3.41
G-5
74
273
1,473
1,820
79.27
G-6
10
203
0
213
2.25
G-7
25
167
10
202
2.14
&8
0
301
3
304
3.22
G-9
70
363
18
451
4.77
G-10
0
376
52
428
4.53
Reim.
0
287
130
417
4.41
Other
0
700*
0
700
7.47
Total
3,752
4,009
1,686
9,447
100.00
NOTE: Actual costs are reflected in Section IV- Annual Financial Statements
" The $700 million represents an annual payment from the general revenue to the Hazardous Substance Superfund and transfers from other federal agencies.
drinking water programs. (See Section II, Goal
2, for more information on the SRFs.)

    Funding for both revolving funds is
awarded as grants to states and tribes, which
then make loans to municipalities and other
entities for construction of infrastructure
projects, purchases of land or conservation
easements, and implementation of other water
quality activities. Additional funds from state
match and leveraged bond proceeds expand
the capital available in the SRFs to address
priority water quality and public health needs,
while loan repayments and earnings ensure
funding for these activities  far into the future.
The flexibility and revolving nature of the SRFs
have provided states with a powerful tool to
apply needed funding toward their clean water
and drinking water infrastructure needs.

    Through FY 2002 CWSRFs have turned
$19.5 billion in federal capitalization grants into
more than $38.7 billion in assistance to
municipalities and other entities for wastewater
projects. In recent years CWSRFs have directed
about $4 billion in annual loan assistance to
wastewater projects. More than $200 million of
these funds are used each year to manage
polluted runoff, making the CWSRF an effective
tool in addressing nonpoint source problems.17
    In a similar fashion the newer DWSRFs have
turned $4.4 billion in federal capitalization grants
into more than $5.1 billion in loan assistance, of
which $1.3 billion was provided in assistance in
FY 2002 alone.18 States have also used more
than $694 million of their DWSRF grants to fund
other programs and activities that enhance water
system management and protect sources of
drinking water.

   The large dollar volume of these two grant
programs  is the reason that more than
43 percent of EPA's costs are incurred in
connection with its Clean and Safe Water Goal,
as depicted in the Major Grant Categories chart.
Other grant programs include categorical
assistance to states and tribes, consistent with
EPA's authorizing statutes, and research grants
to universities and other nonprofit institutions.

                          Drinking
                         Water SRF
                           16.3%
                   Superfund
                     3.8%
www. epa.gov/ocfo
                          Overview and Analysis
1-15

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    Homeland Security Spending
       EPA's actions in responding to
    homeland security concerns in the
    wake of September 11 are described in
    Section II. During FY 2002 the Agency
    obligated a total of $159.6 million19 for
    homeland security for the activities
    shown in the chart. Most of these
    resources have been devoted to
    Preparedness, which addresses many
    potential kinds of terrorism incidents.
    Response covers the immediate actions
    taken in response to the September 11
    and other attacks. Mitigation is action
    taken to reduce the risk and potential
    damage caused by future events, and
    Recovery constitutes actions to rebuild
    and otherwise return to normal.
            FY 2002 Homeland Security Obligations
                                      $3.5

                                      $3.0

                                      $2.5

                                   g   $2.0
                                   o
                                  m   $1.5

                                      $1.5

                                      $0.5

                                       $0
                                           Cumulative Superfund Trust Fund Cost Recoveries
                                                         FY 1997-FY 2002
$120
$100
g *80
_o
$40
$20
$0
	 ^B Recovery | | Mitigation | | Response | | Preparedness _
$110.3

—
—
$3«9
•
$9.9
$1.2 |







    Superfund Cost Recovery
       The Superfund Program was established
    under the Comprehensive Environmental
    Response, Compensation, and Liability Act
    (CERCLA) of 1980 (P.L. 96-510) to address
    public health and environmental threats from
    abandoned toxic waste dumps and releases of
    hazardous substances.  CERCLA was
    subsequently amended by the Superfund
    Amendments and Reauthorization Act (SARA)
    of 1986 (P.L. 99-499).
       Under CERCLA, Congress authorized the
    Superfund Program for 5 years (1981-1985)
    with funding of $1.6 billion and established the
I     I
I     I
    I     I    I
    I     I    I
    I     I    I
                                              1997   1998
1999   2000
 Fiscal Year
                      2001   2002
                                            Hazardous Substance Response Trust Fund,
                                            known as the Hazardous Substance Superfund
                                            (Trust Fund). Because of the long-term nature
                                            and expense of site cleanups, Congress
                                            reauthorized the Superfund Program by passing
                                            SARA. Under SARA the Superfund Program was
                                            authorized for an additional 5 years (1987-1991)
                                            and the Trust Fund's funding level was increased
                                            to $8.5 million. The Omnibus Budget
                                            Reconciliation Act, passed by Congress on
                                            November 5, 1990, extended the Superfund
                                            program for an additional 4 years (1992-1995)
                                            and increased the Trust Fund's funding level by
                                            $5.1 billion. Although the Superfund Program
                                            has not been reauthorized, the program
                                            continues to operate based on annual
                                            congressional appropriations.

                                               The Trust Fund was largely funded by
                                            excise taxes charged on crude oil and petroleum
                                            and on the sale or use of certain chemicals. Also,
                                            a corporate environmental tax (alternative
                                            minimum tax) was levied on corporations having
                                            a taxable annual income in excess of $2 million.
                                            The Trust Fund's other revenue sources include
                                            cost recoveries, fines and penalties, interest
                                            revenue from investments, and general revenue
                                            appropriated by Congress. Superfund cost
                                            recoveries represent amounts recovered by EPA
                                            through legal settlements with responsible
                                            parties for site clean up cost incurred by EPA.
                                            Tax revenues provided the Trust Fund with most
                                            of its funding until the Superfund's authority to
1-16
EPA's FY 2002 Annual Report
                 www. epa.gov/ocfo

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tax expired on December 31, 1995. With the
expiration of tax authority, current Trust Fund
revenue is composed of the other revenues
discussed above; appropriations from general
revenues make up the largest funding source in
this group.

   Cost recovery continues to be a major
revenue source of the Trust Fund. Cumulative
cost recovery receipts since the inception of the
program now total $3.1 billion.20

EPA Spending Related to Other Federal Agencies

   As published in the Treasury Department's
annual Statement of Receipts and Outlays, EPA's
net outlays are relatively small in relation to
those of other federal agencies and the federal
government as a whole. A comparison of EPA
with selected cabinet-level departments is
displayed.

Innovative Environmental Financing: The
Advantage of Public-Private Partnerships

   EPA leverages federal funds through several
innovative environmental financing efforts that
are mutually beneficial public-private
partnerships, such as the Environmental
Finance Program.

   The Environmental Finance Program uses
leveraging and partnerships to extend the reach
and impact of its activities. The program has
three closely related components that provide
financial outreach services to Agency
customers and the regulated community. First,
the Environmental Financial Advisory Board
(EFAB), a discretionary federally chartered
advisory committee, provides innovative ideas
and recommendations to the EPA Administrator
and EPA program offices on ways to lower
costs, increase investments, and promote
public-private partnerships with respect to
environmental and public health protection.
Second, the Environmental Finance Center
(EFC) Network, consisting of nine university-
based programs in eight EPA regions, delivers
targeted technical assistance and partners with
states, tribes, local governments, and the
private sector to address how to cover the costs
of meeting environmental standards. Through
FY 2002 the EFCs had worked in 46 states
delivering this assistance and sharing
information among interested parties and
throughout the network. (See Section II, Goal
10, for more information.) Third, the
Environmental Financing Information Network,
through its highly popular Web site and other
means, catalogues the work and
accomplishments of EFAB  and the EFC
Network and has provided full-text copies of
more than 50 EFAB documents, summaries of
over 350 environmental  financing tools, and
about 1,000 abstracts and case studies of
valuable environmental finance documents.
   $20
   $15

 CO
 | $10
 m


    $5
    $0
         EPA  COMMERCE STATE  INTERIOR  NASA   ENERGY

                         Departments
www. epa.gov/ocfo
                                             1-17

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    Notes:
     1.   Geographic Areas redesignated by EPA as in
         attainment of the NAAQS: Billings MTArea,
         Redesignated to Attainment for CO, 67 FR 7966,
         February 21,  2002. Denver-Boulder CO Area
         Redesignated to Attainment for CO, 66 FR
         64751, December 14, 2001. Great Falls Area
         MT Area Redesignated to Attainment for CO, 67
         FR 31143, May 9,  2002. Klamath Falls OR Area
         Redesignated to Attainment for CO, 66 FR
         48349,
         September 20, 2001. Lowell MA Area Redesignated
         to Attainment for CO, 67 FR7272,  February 19,
         2002. Medford OR Area Redesignated to
         Attainment for CO, 67 FR 48388, July 24, 2002.
         New York-N. New Jersey-Long Island NY Area
         Re designated to Attainment for CO, 67 FR 54574,
         August 23, 2002. New York-N. New Jersey-Long
         Island NY Area Redesignated to Attainment for
         CO, 67 FR 19337, April 19, 2002. Springfield MA
         Area Redesignated to Attainment for CO, 67 FR
         7272, February 19, 2002. Waltham MA Area
         Redesignated to Attainmentfor CO, 67 FR 7272,
         February 19, 2002. Worcester MA Area
         Redesignated to Attainmentfor CO, 67 FR 7272,
         February 19, 2002. Cincinnati-HamiltonKYArea
         Redesignated to Attainment for Ozone, 67 FR
         49600, July 31, 2002. Adams, Denver, and
         Boulder Counties; Denver Metropolitan Areas
         Redesignated to Attainment for PM-10, 67 FR
         58335, September 16, 2002. Mohave County
         (part); Bullhead City AZ Area Redesignated to
         Attainment for PM-10, 67 FR 43020, June 26,
         2002. Final and Gila Counties; PaysonAZArea
         Redesignated to Attainment for PM-10, 67 FR
         43013 June 26, 2002. Ramsey County; (part)MN
         Area Redesignated to A ttainmentfor PM-10,
         67 FR 48787, July 26, 2002. AQCR 238: Marathon
         County: Rothschild Sub-city Area, Rib Mountain,
         Weston WIArea Redesignated to Attainment for
         SO2, 67 FR 37328, May 29, 2002. Central Steptoe
         Valley NVArea Redesignated to Attainment for
         SO2, 67 FR 17939,  April 12, 2002.

     2.   Sources for standards for toxic pollutants
         already in place in FY 2002: Generic MACT:
         Carbon Black Production, Cyanide Chemicals
         Manufacturing, Ethylene Processes, and
         Spandex Production,  67 FR 39301, June 7,
         2002.  Large Appliances: (Surface Coating), 67
         FR 48253, July 23, 2002. Leather Finishing
         Operations, 67 FR 915510, February 27, 2002.
         Polyvinyl Chloride & Copolymers Production, 67
         FR 45885, July 9, 2002. Primary Copper, 67 FR
         40477, June 12, 2002.  Tire Manufacturing, 67
         FR 45598, July 9, 2002. Cellulose Production:
         Carboxymethylcellulose Production, Cellulose
         Ethers Production, Cellulose Food Casing
    Manufacturing, Cellophane Production,
    Methylcellulose Production, Rayon Production,
    65 FR 52166, August 28, 2000, and Signed:
    May 15, 2002. Petroleum Refineries: Catalytic
    Cracking, Catalytic Reforming & Sulfur Plant Units.
    67 FR 43244, April 11, 2002. Wet Formed
    Fiberglass Mat Production, 67 FR 17823,
    April 11, 2002.

3.   U.S. EPA, Emissions Modeling System for
    Hazardous Air Pollutants (August 2002).
    Available at http://www.epa.gov/scramOOl/
    tt22.htm.

4   U.S. EPA, Clean Air Markets-Progress and Results:
    The EPA Acid Rain Program 2001 Progress
    Report. Available at http://www.epa.gov/
    airmarkets/cmprpt/arpOl/index.html.

5.   U.S. EPA, EPA's Tier2/Gasoline SulfurFinal
    Rulemaking  (February 10, 2000) Regulatory
    Impact Analysis. Chapter VII: Benefit-Cost
    Analysis, EPA 420-R-99-023 (December 22, 1999).
    Available at http://www. epa. gov/otaq/regs/ld-
    hwy/tier-2/frm/ria/chvii.pdf. See also EPA's Heavy-
    Duty Engine and Vehicle Standards and Highway
    Diesel Fuel Sulfur Control Requirements
    (December 21, 2000), hapter VII: Benefit-Cost
    Analysis. Regulatory Impact Analysis
    EPA 420-R-00-026 (December 2000).  Available
    at http://www.epa.gov/otaq/regs/hd2007/frrn/ria-
    vii.pdf.

6.   U.S. EPA, Office of Ground Water and Drinking
    Water's Drinking Water Natonal Information
    Management System. Available at
    htp://www.epa.gov/OGWDW/dwsrf/dwnims.html.

7.   Office of Management and Budget, The Executive
    Office of the President, Federal Management, The
    President's Management Agenda. Available at
    http://www.whitehouse.gov/omb/budget/fy2002/
    pma index.html.

8.   Office of Management and Budget, The Executive
    Office of the  President, July 15, 2002, Executive
    Branch Management Scorecard, Agency
    Scorecard: U.S. EPA. Available at
    http: //www. whitehouse. gov/omb/budinte gration/
    scorecards/epa scorecard.html.

9.   General Accounting Office, Program Evaluation,
    Strategies for Assessing How Information
    Dissemination Contributes to Agency Goals,
    GAO-02-923  (September 2002).

10.  U.S. EPA, Evaluation Support, Evaluation of
    Environmental Programs. Available at
    http://www.epa.gov/evaluate/.
1-18
             IT
                                    www. epa.gov/ocfo

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 11.  U.S. EPA, Office of the Chief Financial Officer,
     Office of Planning, Analysis, and Accountability,
     Analysis Staff, internal analysis, Outcome
     Orientation According to the GAO Classification
     and the Hierarchy of Indicators (Hoi), (April 2002).

 12.  U.S. EPA, Office of Environment Information,
     Information Quality Guidelines. Available at
     http://www.epa.gov/oei/qualityguidelines/
     index, htm.

 13.  National Advisory Council for Environmental Policy
     and Technology, The Environmental Future:
     Emerging Challenges and Opportunities for EPA,
     EPA 100-R-02-001 (Washington, DC: U.S. EPA,
     Office of the Administrator, Office of Cooperative
     Environmental Management September 2002).
     Available at http://www.epa.gov/ocem.

 14.  Section IV, FY 1998 to FY 2002 Statement of
     Budgetary Resources.
15.  Section IV, FY 2002 Statement of Net Costs.

16.  U.S. EPA, Office of the Chief Financial Officer
    (OCFO), EPA's Integrated Financial Accounting
    System.

17.  U.S. EPA, Office of Water, Clean Water State
    Revolving Fund National Information
    Management System. Available at
    http://www.epa. gov/r5water/cwsrf.

18.  U.S. EPA, Office of Ground Water and Drinking
    Water's Drinking Water National Information
    Management System. Available at
    http://www.epa. gov/OGWDW/dwsrf/
    dwnims.html.

19.  U.S. EPA, OCFO, EPA's FY 2002 Budget
    Automation System.

20.  U.S. Department of the Treasury, FY 2002
    Superfund Trust Fund Financial Statements.
www. epa.gov/ocfo
                           Overview
                                                   1-19

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                                             This Page Intentionally Blank
1-20      EPA's FY 2002 Annual Report                                                                      www.epa.gov/ocfo

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Section II
Performance
Results

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                                  GOAL 1: CLEAN AIR
           air in                 community will be                              In
       particular, children, the elderly,                                            be
                     from the health                            air.           air
                 will                                         in
        as           life in                                     health      to
                                             directly on
PROGRESS TOWARD THE STRATEGIC GOAL
AND OBJECTIVES
   The Clean Air Act Amendments of 1990
(CAA) provide a nationwide framework for EPA
and its partners and stakeholders to reduce air
pollution through implementation of a variety
of regulatory, market-based, and voluntary
programs.1 The results since 1990 have been
impressive, not only because of the tons of
pollution reduced or prevented, but also
     SIX PRINCIPAL POLLUTANTS
            Ozone (O3)
       P articulate Matter (PM)
       Carbon Monoxide (CO)
       Nitrogen Dioxide (NO2)
       Sulfur Dioxide (SO2)
             Lead (Pb)
because the programs achieved the results
cost-effective manner, with the
monetized benefits far outweighing
the economic impacts. The extent of
the public health benefits also is
striking. EPA estimates that on a daily
basis the 1990 clean air programs, in
combination with the  results of the
1970 amendments to the Act, have
prevented 600 premature mortalities,
2,000 chronic illnesses, and 75,000
lost workdays.2
   To add to the substantial public
health benefits being achieved, EPA is
implementing programs that will
improve public  health in the future. For
example, mobile source programs, such as
in a
200
Tier 2 automobile standards and heavy-duty
engine and diesel fuel standards, will help a
significant number of additional areas meet the
National Ambient Air Quality Standards
(NAAQS) set to protect public health and
improve air quality throughout the country.3
These programs, when fully implemented, are
projected to result in a combined reduction, on
a daily basis, of about 30 premature deaths,
20 cases of chronic bronchitis,  and 5,600 lost
workdays.4
    EPA and its partners and stakeholders were
able to make steady progress toward the  Clean
Air Goal during a period of economic growth.
Since 1970 their combined efforts have reduced
aggregate emissions of the six principal pollutants
covered by the NAAQS by 25 percent.5 During
the same time period, the U.S. Gross Domestic
Product has  increased by 161 percent; energy
consumption, by 42 percent; and vehicle miles
traveled, by  149 percent.6


        of
                                161%
                                149%
                               Gross Domestic Product

                               Vehicle Miles Traveled


                               Energy Consumption

                               U.S. Population
                                        Aggregate Emissions
                                        (Six Principal Pollutants)
   1970 1980 1990^1995 1996 1997 1998 1999 2000 2001
                 Years
www. epa.gov/ocfo
                                   Performance Results
                                                      n-i

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                              Contiguous U.S. Contribution of Source Categories to Total
                                     Emissions For All Hazardous Air Pollutants
                               1990-1993   1999     2002      2003
                                                            2004
2007
       To date, federal rules covering stationary
    sources, vehicles, fuels, and engines have
    reduced air toxics by close to 34 percent from
    the 1993 baseline of 6 million tons.  EPA
    estimates that annual air toxics emissions from
    stationary sources are nearly 1.5 million tons
    less in FY 2002 than in 1993 as a result of
    implementation of Maximum Achievable
    Control Technology (MACT) standards and
    500,000 tons less than in 1993 as a result of
    implementation of federal mobile source rules.
    To further reduce air toxics emissions and risk,
    EPA will begin to focus increasingly on
    community-specific air toxics problems,
    working with partners and stakeholders to
    identify the risk reductions that matter most
    to local citizens. The National Air Toxics
    Assessment (NATA), published by EPA in
    FY 2002,  provides  a significant source of
    data to guide additional efforts on more
    community-based risk reduction activities
    for air toxics.7 NATA also supports the need
    to put in place an air toxics monitoring
    network that will provide key data to EPA
    and communities as they develop
    additional risk reduction strategies and
    programs.
                                                 In FY 2000 EPA's Acid Rain Program met its
                                              strategic objective for nitrogen oxides (NOx)
                                              under Title IV of the CAA (42 U.S.C. 7651-76610.
                                              The program now is on track to meet its 2010
                                              objective for sulfur dioxide (SO2), which sets a
                                              permanent cap on nationwide power plant SO2
                                              emissions. As a result of efforts by utilities
                                              covered under the Acid Rain Program, SO2
                                              emissions continued to decline from 17.5 million
                                              tons in 1980 (baseline) to 10.6 million tons
                                              through 2001, while NO  emissions were
                                              reduced by 2 million tons nationally.8
                                                    Reductions in SO, and NO, Emissions
                                               20
                                             ! 15H
                                            110-1
                                             in
                                             q
                                                  17.5
                                                             15.9
                                                                           Without Title IV
                                                                             With Title IV
                                                                                         18.7
vvimoui i me iv  „_„_.	'88
                                                          WO, Emissions      5.2
                                                                                 With Title IV
                                                                                         5.7
                                                1980   1985    1990   1995   2000  2005   2010
n-2
EPA's FY 2002 Annual Report
          www. epa.gov/ocfo

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                            Population of Counties With Air Quality Concentrations
                                          Above the NAAQS Levels
                                                                    (8-hour)
                                                                         133.1
                                 20     40      60     80     100    120
                                              Millions of People
                        140
   Utility, industry, transportation, and other
sources still emit more than 170 million tons of
pollution into the air each year in the United
States, and about 133 million people live in
counties where monitored air in 2001 was
unhealthy at times because of high levels of at
least one of the six principal pollutants for
which EPA has set NAAQS. The vast majority of
areas that experienced unhealthy air did so
because of one or both of two pollutants—
ozone and particulate matter (PM).9
   The Agency's strategies to address the most
persistent remaining challenges posed by air
pollution in the 21st century include a
combination of regulatory, market-based,
community-based, and voluntary  programs. In
general, EPA will carry out those components
of the strategies that address emissions from
whole industries or from source categories
such as power plants or motor vehicles, while
state, tribal, and local partners will focus on
area-specific problems. In implementing the
strategies, EPA will continue to set priorities
among activities based on health and
environmental risk and will seek cost-effective
and flexible solutions to reduce air emissions.
The Agency also will use an active consultative
process to identify solutions that best meet the
collective needs of its partners and
stakeholders.
   The indicators used in the Clean Air chapter
of EPA's draft report on the state of the
environment are particularly useful because
they focus on longer-term progress and
provide context for EPA's FY 2002 annual
performance results. The FY 2002 annual
performance information complements this
report and includes measures of the following:
•  Populations attaining the NAAQS, which are
   based on air quality concentrations.

•  Air toxics emission reductions, which are
   closely correlated to ambient air toxics
   concentrations.
•  SO2  and nitrogen dioxide emissions from
   utilities under the Acid Rain Program.

   To address the significant remaining
challenges, the  President proposed the multi-
pollutant Clear Skies legislation.10 If enacted,
the Clear Skies legislation will make
considerable advances in reducing power plant
emissions by requiring mandatory reductions of
SO2,  NOx, and mercury by an average of
70 percent from today's levels.11 EPA projects
that by 2020 human health benefits alone will
include  12,000 avoided premature deaths
annually and total more than $93 billion.
Early human health benefits are very significant,
including $40 billion in annual benefits by 2010,
and more than 6,000 avoided premature deaths.
Visibility benefits in national parks and

www. epa.gov/ocfo
                          Performance Results
                                              n-3

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         FY 2002 CLEAN AIR PROGRAM RESULTS

       •  SO2  emissions continued to decline from
         17.5 million tons in 1980 (baseline) to
         10.6 million tons through 2001 and NO
                             &              X
         emissions were reduced by 2 million tons
         nationally.

       •  EPA redesignated  17  areas,  with a
         combined population of over 19 million
         people, to attainment for the NAAQS.

       •  Air toxics emissions from stationary and
         mobile sources were reduced by 33.8 percent
         or 2.02 million tons from the 1993 baseline
         of 6.0 million tons.

       •  EPA promulgated  13 additional MACT
         standards that when fully implemented will
         reduce air toxics emissions by 20.8 thousand
         tons annually. EPA also proposed 13 MACT
         standards.
       Source:  Air Quality Subsystem; Findings and
             Required Elements Data System; and Census
             Bureau, Department of Commerce. See
             Appendix B.
    V	'

    wilderness areas are projected to be $3 billion
    annually.12 Additional information about Clear
    Skies, including legislative language and region-
    specific information about air quality and health
    benefits, is available at http://www.epa.gov/
    clearskies.

       As Congress considers the Clear Skies
    legislation, EPA and its state, tribal, and local
    partners will continue their progress toward
    attaining the NAAQS and maintaining air quality
    in areas that already meet the standards. EPA
    will develop implementation guidance for
    meeting the fine particulate (PM2 ) standard
    through expanding existing state, tribal, and
    local programs. EPA also will support states,
    tribes, and local governments in developing
    innovative,  voluntary programs that will help
    areas achieve early reductions in pollution in
    the transition from the 1-hour to the 8-hour
    ozone standard. EPA will continue to
    implement existing vehicle, engine, and fuel
    standards, as well as develop additional
    regulations for selected mobile sources. In
    FY 2003 EPA expects to propose standards for
heavy-duty, non-road diesel equipment—
including construction, mining, industrial,
agricultural, and airport equipment. The
resultant reduction in pollution will provide
important health benefits and emission
reductions similar to those of the recent on-
highway, heavy-duty diesel rule.

FY 2002 PERFORMANCE

   EPA, working with its state, local, and tribal
partners along with industry, small businesses,
and other federal agencies, made significant
progress in FY 2002 toward achieving the
Clean Air annual goals. EPA's partners
continued to carry out programs for achieving
or maintaining the NAAQS, while EPA provided
guidance, tools, and resources to help them
meet their objectives. EPA continued work on
MACT standards and issued mobile source
standards for vehicles, fuels, and engines.
When implemented, the standards will provide
reductions in health and environmental risks
from both air toxic and criteria pollutants. The
Agency's air toxics work contributes to progress
in addressing the management challenge in the
air toxics program (Refer to Section III,
"Management Accomplishments and
Challenges,"for further discussion). Lastly, EPA
expects utilities regulated under the  market-
based Acid Rain Program to achieve or exceed
the required reductions for SO2 and  NOx.
   Selected FY 2002 Clean Air accomplishments
that support ongoing EPA programs and
initiatives are highlighted below.

Market-based Programs
   EPA's Acid Rain Program, demonstrating the
new efficiencies possible through electronic data
management systems, implemented the On-line
Allowance Tracking System (OATS).13 The latest
innovation in air emissions trading, OATS is a
timesaving, system that enables participants in
the SO2 and NOx allowance trading markets to
record trades directly on the Internet instead of
submitting paper forms to EPA for processing.
EPA's tracking systems, which currently hold
allowances with a combined value of more than
$20 billion, record official SO, and NO
n-4
            FY
                                 www. epa.gov/ocfo

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allowance transfers under existing emission cap
and trade programs. Anyone anywhere in the
world can participate in the allowance trading
market, and hundreds of companies, brokers, and
individuals are already engaged in online trading.

Air Quality Index (AQI)

   EPA continued its strong leadership in
providing real-time AQI data to the public
through the AIRNow program. In FY 2002 the
AIRNow program expanded real-time ozone
data delivery from 38 to 43 states and increased
the number of air quality forecast cities from
165 to 235. AIRNow reaches millions of readers
and viewers through EPA's partnership with the
Weather Channel, USA Today, and CNN. EPA
also began receiving real-time PM2 5 data and
developed sample maps with the expectation of
using these data in future forecasting efforts. As
part of the PM2 5 effort, the program went from
no monitors reporting in FY 2001 to more than
170 at the end of FY 2002.14

   Across the country, EPA offices are reaching
out to state and local communities and tribes
with information about air quality allowing,
people to take action to reduce risks when poor
air quality is forecast. In New England,  EPA
implemented an intensive ozone outreach plan
during one of the hottest Northeast summers
ever. Smog alerts, based on predicted high
ozone levels, were provided to children's
camps, day care centers, school nurses, and
other interested persons. EPA posted the ozone
forecast map for the Northeast on the EPA web
                          site daily; targeted outreach to TV meteorologists,
                          letting them know where to obtain AQI for their
                          areas; and published the air quality forecast in
                          New England newspapers.15

                          Mobile Sources

                              In 2002 EPA set emissions standards for several
                          types of previously unregulated recreational
                          vehicles, diesel marine engines, and large
                          industrial spark-ignition engines. EPA expects that
                          the standards, when fully implemented in 2020,
                          will provide an overall 72 percent reduction in
                          hydrocarbon emissions, an 80 percent reduction
                          in NOx emissions, and a 56 percent reduction in
                          carbon monoxide. As a result of reducing
                          emissions of hydrocarbons and NOx, which
                          contribute to ozone and PM formation, these
                          controls will improve visibility in national parks
                          and wilderness areas and reduce exposure for
                          people who operate, work with, or are close to
                          these engines and vehicles. The human health
                          benefits of these standards include avoiding
                          about 1,000 premature deaths,  preventing 1,000
                          hospital admissions, reducing asthma attacks by
                          23,400, and preventing 200,000 days of lost
                          work. In dollars, EPA estimates these health
                          benefits to be worth roughly $8 billion in 2030.l6
                              EPA's voluntary Diesel Retrofit Program helps
                          state and local agencies to retrofit old, dirty
                          engines to make them run cleaner and to
                          develop model programs to reduce emissions
                          from idling engines. Diesel retrofit is a creative,
                          non-regulatory way to reduce pollution from the
                          existing fleet of engines that use diesel fuel.17
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                                                    Performance Results
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    The Diesel Retrofit Program, which began just
    over 2 years ago, currently has commitments
    from partners in industry, states, and local
    governments, as well as major fleet owners/
    operators, to retrofit over 87,000 diesel engines.
    These retrofits will result in the elimination of
    about 26,000 tons of NO and 12,000 tons of
            '              X       '
    PM. To date, 60 projects have been established
    in 22 states across the country with 20  new
    commitments in FY 2002 alone.

       EPA also issued the first certifications for
    engine families that complied with the Heavy-
    Duty Engine Consent Decree, which require
    engine manufacturers to meet the 2004 diesel
    engine standards by October 1, 2002.18 These
    engines met EPA emission limits that are about
    30 to 45 percent lower than previous  engines
    of the same model.

    Research Contributions

       Clean Air goal research provides a strong
    scientific basis for policy and regulatory decision
    making and explores emerging problem areas
    through a coordinated and comprehensive
    research program. Both EPA and its partners use
    the results of this peer-reviewed research in
    carrying out their programs.

       EPA described the biological mechanisms that
    may underlie the reported effects  of PM in the
    Utah Valley, where  exposure data were
    collected before and after the closing of a local
    steel mill and again after it was reopened. This
    report correlates, for the first time, pulmonary
    effects to PM health outcomes observed in
    epidemiological studies. This information will
    strengthen the scientific basis for the
    reassessment of the PM NAAQS.

       In FY 2002 EPA also provided  critical
    information to environmental decision makers on
    the effects of PM on humans believed to be
    most susceptible to adverse effects, such as the
    elderly and those with lung disease. For
    example, state-of-the-art methods  were used to
    measure the effects of exposure to concentrated
    ambient PM on various subpopulations of human
    volunteers and animals. These studies will help
    identify the components of PM producing
toxicity and other factors, such as existing
disease, that may affect toxicity.19
    In FY 2002 EPA published the peer-
reviewed report, "Health Assessment Document
for Diesel Engine Exhaust, "which documents the
public health implications of current exposure to
diesel engine exhaust and further supports
ongoing work in the areas of PM, particularly
diesel exhaust.20 The  report states that long-term
exposure to diesel engine exhaust is likely to be
a lung carcinogen hazard to humans, as well as
to have non-cancer effects on the respiratory
system. The report also pinpoints diesel exhaust
as a likely allergy and asthma trigger.

Program Evaluation
    Appendix A contains descriptions of program
evaluations completed in FY 2002 that support
the overall Clean Air Goal. No program
evaluations focused specifically on FY 2002
performance.

STATE, LOCAL, AND TRIBAL PARTNER
CONTRIBUTIONS
    State, tribes, and local agencies all play
crucial roles in working with EPA toward the
goal of cleaner air and contributed significantly
to achieving the Agency's FY 2002
accomplishments. These  EPA partners carry out
extensive program implementation activities,
including developing state implementation
plans (SIPs) and tribal implementation plans
(TIPs), permitting major and minor pollution
sources, monitoring air quality, providing
education and outreach, and carrying out
compliance and enforcement activities. The
EPA partners also identify and implement
innovative ways to help reduce health and
environmental risks in specific areas. Often
these innovations are the catalysts for similar
programs elsewhere. The contributions
described are just a few of the innovative, area-
specific approaches that EPA's partners initiated
in FY 2002.
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State and Local Partner Contributions

   The Hunts Point Cooperative Market in the
Bronx, New York, is the site of the first
operational anti-idling advanced electrification
project in the country. The Hunts Point Market,
in partnership with Sustainable South Bronx
and the New York Power Authority, installed
28 truck electrification bays during Fall 2002.
The Market delivers close to 80 percent of the
New York metropolitan area's produce and
40 percent of the region's meat. Each day, while
shipments are loaded and offloaded, hundreds of
diesel vehicles idle, creating exhaust fumes that
pose a serious health risk to the Hunts Point
residential community of about 9,000 people.
The truck/trailer anti-idling devices allow drivers
to power cab/sleeper compartment climate
control systems and appliances, as well as
refrigerated trailer units, without running their
engines. All idling emissions are eliminated while
the electrification system is in use, and local air
pollution impacts are traded off with emissions
from the regional power system. At full
operation, the 28 bays are expected to eliminate
over 15 tons of NO ,  2,000 tons of carbon dioxide,
and nearly a ton of toxic pollutants annually with
the potential to cut fuel costs by more than $3,000
and maintenance costs by more that $1,500
annually per vehicle.21
   In FY 2002 the City of Cleveland, Ohio, took
charge of and expanded the Cleveland Air
Toxics Pilot  Project begun by EPA to show
local, voluntary actions can play a significant
role in improving the environment and
protecting public health.22 Cleveland plans to
continue and expand many of the EPA projects,
including replacing dirty off-road diesel
equipment with cleaner diesel equipment,
developing a local toxic emissions inventory,
completing an anti-idling campaign for motor
vehicles, expanding industry agreements to the
entire auto refinishing and electroplating sectors,
and supporting an effort to reduce indoor air
pollution in city schools and to carry out a
smoke-free home pledge drive. The Regional
Transit Authority (RTA) is inaugurating 225 new
buses that will use ultra-low-sulfur diesel fuel.
The RTA already operates a number of environ-
mentally friendly vehicles—buses that use
compressed natural gas and rail cars that run on
electricity.23
   In Boston in FY 2002 over 200 school buses
will be fueled with ultra-low-sulfur diesel fuel.
Over half the buses will be fitted with special
pollution control devices that reduce emissions
of PM by 90 percent. As a follow-up,  EPA will
monitor air quality at the bus depot before and
after the retrofits to help quantify the local air
quality benefit of the project. New England
states have partnered with EPA to reduce PM
and other emissions from diesel vehicles through
retrofit efforts and anti-idling policies. As a result
of state and EPA efforts, several major
construction projects in New England will also
require the retrofitting of diesel construction
equipment to minimize emissions.
24
   In the Chicago metropolitan region, the
Clean Air Counts Campaign5" convened a diverse
group of stakeholders interested in working
together to create voluntary strategies for
attaining the NAAQS, while at the same time
achieving community development goals. The
Illinois EPA worked with the U.S. EPA to
quantify the emission reduction potential of
various strategies developed by stakeholders to
determine what voluntary actions were needed.
As a result of these efforts, 34 public and private
organizations and 7 communities across the
Chicago metropolitan area are implementing
voluntary, measurable emission and energy use
reduction programs. In FY 2002 the Campaign's
accomplishments included 7 gas can exchange
events throughout the metropolitan area,
reducing 4 tons/year of volatile organic
compounds (VOC); a lawn mower buyback
program exchanging 180 two- and four- stroke
mowers for rebates on electric and push
mowers, reducing 1.5 tons/year of VOC; and  a
locomotive idling project on 7 switchers, saving
16,000 gallons of fuel/year/locomotive, and
reducing 5 tons of NO/year/locomotive and
reducing 177 tons CO2/year/locomotive.25
   In FY 2002 the Texas Commission on
Environmental Quality and local environmental
groups established a voluntary program to
encourage early action to reduce levels of
urban smog. Early 8-hour air quality plans are
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                                              n-7

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    developed through a compact between local,
    state, and EPA officials for areas that are in
    attainment of the 1-hour ozone standard, but
    are close to or monitor levels in excess of the
    8-hour standard. The Early Action Compact
    plans, tailored to local needs and driven by
    local decisions, are designed to develop and
    implement control strategies, account for
    growth, and achieve and maintain the 8-hour
    ozone standard. This approach offers a way to
    achieve emission reductions earlier than required
    by EPA's expected 8-hour implementation
    rulemaking, while providing fail-safe provisions
    for the area to revert to the traditional SIP
    process if specific milestones are not met.26

    Tribal Contributions

       In FY 2002 tribes continued to increase their
    capacity for carrying out air pollution programs.
    One of the most significant accomplishments in
    the Clean Air goal was the establishment of the
    National Tribal Air Association (NTAA).27 NTAA's
    goals are to help tribes participate more
    effectively in air policy development and
    decision making, much like the State and
    Territorial Air Pollution Program Administrators
    (STAPPA) does for states and the Association of
    Local Air Pollution Control Officials (ALAPCO)
    does for local programs. NTAA will bring
    national representation to tribal air programs.

       While many tribes are only beginning basic
    air quality assessments, attending training,
    developing inventories, and conducting
    preliminary monitoring, others are beginning to
    develop more advanced air programs. Four
    tribes—the Mohegan, Pequot, St. Regis
    Mohawk, and Gila River—are working toward
    adopting TIPs, which are similar to SIPs. Another
    10 tribes have asked for and received eligibility
    determinations to implement parts of the CAA.
    In FY 2002 the Mohegan Tribe of southern
Connecticut submitted the country's first TIP.
Once approved by EPA, this TIP will represent
an important milestone in tribal air pollution
control program development.
   The Puyallup Tribe in the state of
Washington established a diesel retrofit project
for the tribe's school buses. Through this first-
time project, the Puyallup will install advanced
emission control technologies on about 20 to 30
buses in the fleet and will use ultra-low-sulfur
diesel fuel, thereby reducing particulate levels in
bus exhaust by more than 90 percent.28

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN

   Adjustments to the FY 2003 Annual
Performance Goals (APGs) under Goal 1, which
are documented in the FY 2004 President's
Budget,29 reflect FY 2002 performance. In
particular, in FY 2002 EPA missed targets for
several of the NAAQS APGs for different
reasons, ranging from uncertainty among some
states over how areas will be designated under
the revised 8-hour ozone standard and under the
new PM2 standard, to underestimating the time
states required to submit a redesignation request
and receive approval. An additional reason some
areas do not request redesignation is the loss of
federal funding from the Congestion and
Mitigation Air Quality Program. EPA and the
Department of Transportation are jointly working
on adjusting the funding formula to eliminate the
current disincentive to request redesignation.
   EPA will make adjustments to the FY 2003
targets where EPA and the states underestimated
the time required to complete and submit a
redesignation request and receive approval.
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   Goal  1: Clean Air
   FY 2002 Obligations (in thousands):
   EPATotal:               $9,447,202
   GoaM:                    $588,190
   Goal 1 Share of Total:          6.2%
ummary of FY 2002 Annual Performance

2
Goals 1 n 1 Goals
Met |2J Not Met

3
A description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
' ERA'S
FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 1 Costs:              $588,808
Goal 1 Share of Total:          7.4%
       Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
            Refer to page IV-10 of the Financial Statements for a consolidated statement of net cost by goal.
                Annual Performance Goals (APG) and Measures
                                   FY 1999-FY2002 Results
    Strategic Objective: Reduce the Risk to Human Health and the Environment By Protecting and Improving Air
   Quality SoThat AirThroughout the Country Meets National Clean Air Standards By 2005 for Carbon Monoxide,
     Sulfur Dioxide, Nitrogen Dioxide, and Lead; By 2012 for Ozone; and By 2018 for Particulate Matter (PM).To
  Accomplish This in Indian Country, the Tribes and EPA Will, By 2005, Have Developed the Infrastructure and Skills
   to Assess, Understand, and Control Air Quality and Protect Native Americans and Others From Unacceptable
                   Risks to Their Health, Environment, and Cultural Uses of Natural Resources.
                     FY2002 Cost (in thousands): $463,012 (78.6% of FY2002 Goal I Total Costs)

Progress Toward Strategic Objective: EPA, working with  its state, local, and tribal partners as well as industry, small businesses, and
other federal agencies, continues to make steady progress toward the National Ambient Air Quality Standards (NAAQS) objective.
Since 1970 aggregate emissions of the six principal pollutants tracked nationally have been cut 25%. These emission reductions are a
result of effective implementation of the Clean Air Act (CAA), as well as improvements in industrial technology, state and local initiatives,
and goodwill and voluntary efforts on the part of the general public. During this same time  period, the U.S. Gross Domestic Product
increased 161%,  energy consumption increased 42%, and vehicle miles traveled increased 149%. In spite of these impressive gains,
there is still considerable work to be done with  ozone and particulate matter as the 8-hour ozone and fine particulate (PM26) standards
are implemented. Voluntary programs will help areas achieve early reductions as they transition from the 1-hour to 8-hour  ozone
standard.  Implementation guidance will  also be developed for the PM26 standard. For carbon monoxide (CO), lead, and sulfur dioxide
(SO2), there are few areas not monitoring clean air.  For nitrogen dioxide (NO2), the country meets the standard.
APG 1       Reduce Ozone and Ozone Precursors

FY2002     Maintain healthy air quality for 41.7 million people living in monitored areas attaining
            the ozone standard; certify 10 areas of the remaining 55 nonattainment areas have
            attained the 1-hour NAAQS for ozone, thus increasing the number of people living in
            areas with healthy air by 2.5 million. Goal Not Met. ^-Corresponds with FY 2002
            NEPPS Core Performance Measure (CPM).

            Performance Measures
            -  Tons of VOCs Reduced from Mobile Sources.
            -  Tons of NO., Reduced from  Mobile Sources.
                  Planned

                   41.7 M
                  10 areas
                    2.5 M
                  1,755,000
                  1,319,000
 Actual

 41.7 M
 1area
 326,000
1,755,000
1,319,000
FY2001     Same Goal, different targets. Goal Not Met.
                   35.1 M
                     5
                    1.9M
 38.2M
 3 areas
  3.5 M
FY2000     Maintain healthy air quality for 33.4 million people living in 43 areas attaining the ozone
            standard. Goal Met.
                   33.4 M
 33.4 M
FY1999     Eight additional areas currently classified as non-attainment will have the 1-hour ozone             8       10areas
            standard revoked because they meet the old standard. Goal Met.

FY 2002 Result: EPA maintained healthy air quality for 41.7 million people living in monitored areas attaining the ozone standard and
certified 1 area of the remaining 55 nonattainment areas have attained the 1-hour NAAQS for ozone, thus increasing the number of
people living in areas with healthy air by 326,000.

The Cincinnati area is composed of two parts, Kentucky and Ohio. The  Kentucky part of the Cincinnati area was approved for
redesignation to attainment in FY 2002, but the final approval of the Ohio part (1,514,000 population) did not occur in FY 2002 as
originally planned. The Portland, Maine area (488,000) was expected to  redesignate but violated the  NAAQS in the summer of 2002 and

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                Performance Results
                                        H-9

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     now does not meet the requirement of 3 years of clean air quality data. The remaining areas targeted for redesignation to attainment
     were the areas previously revocated for the 1-hour ozone standard. The states with these areas have chosen not to redesignate and
     wait for the implementation guidance for the new 8-hour ozone standard. If a state redesignated the area for the 1 -hour standards, it would
     be required to have a maintenance plan for the area and would likely lose a portion of its Congestion and Mitigation Air Quality funding.
     APG2
       Reduce Particulate Matter
Planned
Actual
     FY2002     Maintain healthy air quality for 3.4 million people living in monitored areas attaining the
                 particulate matter (PM) standards;  increase by 3.7 million the number of people living in
                 areas with healthy air quality that have newly attained  the standard.
                 ^Corresponds with I	'Y 2002 NEPPS CPM.

                 Performance Measures
                 -  Areas redesignated to attainment.
                 -  Tons of PM-10 Reduced from Mobile Sources.
                 -  Tons of PMOC Reduced from Mobile Sources.
                                                                                               3.4 M
                                                                                               3.7 M
                                                                                              6 areas
                                                                                              23,000
                                                                                              17,250
              3,4 M
              2.7 M
             23,000
             17,250
     FY2001
       Same Goal, different targets. Goal Met
 1.276M
 60,000
1.189M
2.249 M
     FY2000
       Same Goal, different targets. Goal Met:
  1.2M
 60,000
     FY1999     Deploy particulate matter 2.5 ambient monitors including mass, continuous, speciation and
                 visibility resulting in a total of 1,500 monitoring sites.  Goal Met
                                                                                               1,500
     FY 2002 Result: EPA maintained healthy air quality for 3.4 million people living in monitored areas attaining the PM standards and
     increased by 2.7 million the number of people living in areas with healthy air quality that have newly attained the standard.

     EPA had expected six areas with a total population of 3.7 million to be redesignated to attainment for PM in FY 2002. Four areas were
     redesignated with a total population of 2.7 million. The status of the two additional areas is that (1) Aspen, Colorado redesignation will not
     be final until early FY 2003, and (2) Jackson  County (Medford), Oregon will not redesignate until FY 2004 because the state  did not
     submit the maintenance plan as scheduled.
     APG 3       PM Effects Research

     FY2002     Provide data on the health effects and exposure to particulate matter (PM) and provide
                 methods for assessing the exposure and toxicity of PM in healthy and potentially
                 susceptible subpopulations to strengthen the scientific basis for reassessment of the
                 NAAQS for PM.       Met,

                 Performance Measures
                                                                                              Planned
                    Report on the effects of concentrated ambient PM on humans and animals believed
                    most susceptible to adverse effects (e.g., elderly,  people with lung disease, or animal
                    models of such diseases).
                    Report on animal and clinical toxicology studies using Utah Valley particulate matter
                    (UVPM) to describe biological mechanisms that may underlie the reported
                    epidemiological effects  of UVPM.
             Actual
     FY2001     Same Goal, different targets.  Goal Not Met.

                 Performance Measures
                 -  Complete PM longitudinal panel study data collection and report exposure data.
                 -  Report on health effects of concentrated ambient PM in healthy animals and humans, in
                    asthmatic and elderly humans,  and in animal models of asthma and respiratory infection.
                 -  Final PM AQCD completed.
     FY2000     Same Goal, different targets. Goal Met.

                 Performance Measures
                 -  Hold CASAC Review of draft PM AQCD.
                 -  Longitudinal Panel Study on exposure of susceptible sub-populations to PM.
                 -  PM Monitoring Study Data.
                 -  Baltimore Study on Response of Elderly to PM.
                                                                                              9/30/00
                                                                                                 1
                                                                                              9/30/01
                                                                                                 1
     FY 1999     Identify and evaluate at least two plausible biological mechanisms by which PM causes death
                 and disease in humans. Goal Met:
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FY 2002 Result: To strengthen the scientific basis for reassessment of the NAAQS for PM, EPA provided data on the health effects of
and exposure to PM and provided methods for assessing the exposure and toxicity of PM in healthy and potentially susceptible
subpopulations. EPA has made significant progress in assessing the health effects of ambient PM. Through coordinated studies in the
field (retirement homes in Baltimore and Fresno) and in the laboratory evaluating human subjects and animal models, investigators
have ascertained that there are likely cardiovascular implications of PM exposure.
APG4
FY2002




Reduce CO, SO2, NO2, Lead
Maintain healthy air quality for 36.7 million people living in monitored areas attaining
the carbon monoxide (CO), sulfur dioxide (SO2), nitrogen dioxide (NO2), and lead
standards; increase by 16 million, the number of people living in areas with healthy air
quality that have newly attained the standard.
FY
Planned
36.7 M
16M



Actual





FY2001
Same Goal, different targets. Goal Not Met.
31.1 M
13.2M
36.3 M
FY2000
Same Goal, different targets. Goal
27.7 M
 1.1 M
27.7 U
3.41 M
FY 1999      Certify that 14 of the 58 estimated remaining nonattainment areas have achieved the NAAQS for
             carbon monoxide, sulfur dioxide, or lead. Goal Met
                                                                                          14
               13
FY 2002 Result: EPA maintained healthy air quality for 36.7 million people living in monitored areas attaining the CO, SO2, NO2, and
lead standards and increased by 16.5 million the number of people living in areas with healthy air quality that have newly attained the
standard. EPA exceeded its target of 8 redesignations by 4, and its population target by an additional 500,000 people.

 Strategic Objective: By 2020, Eliminate Unacceptable Risks of Cancer and Other Significant Health Problems From Air
    Toxic Emissions for at Least 95% of the Population, With Particular Attention to Children and Other Sensitive
 Subpopulations, and Substantially Reduce or Eliminate Adverse Effects on Our Natural Environment. By 2010, the
 Tribes and EPA Will Have the Information and Tools to Characterize and Assess Trends in AirToxics in Indian Country.
                      FY2002 Cost (in thousands): $105,133 (17.9%  of FY 2002 Goal I Total Costs)

Progress Toward Strategic Objective: EPA is on track to meeting this objective. When all the  Maximum Achievable Control
Technology (MACT) rules are fully implemented in addition to efforts by states and  industry, toxic emissions from large industrial
facilities will decrease by 1.7 million tons, or 63%.  EPA is making steady progress in reducing emissions and the associated health
risks from  air toxics by reducing toxic emissions from industrial sources and  reducing emissions from vehicles and engines through
new emission standards and cleaner-burning gasoline. EPA is also working extensively with the tribes to build  capacity. Through FY
2002 EPA  estimates, using the Emissions Modeling System for Hazardous Air Pollutants (EMS-HAP) modeling tool, air toxics
emissions  nationwide from stationary and mobile sources combined have been reduced by 33.5% from the adjusted 1993 levels.
(Based on updated inventory data in the  1996 National Toxics Inventory (NTI), EPA has adjusted the 1993 baseline to 6.0 million tons.)

EPA issued the Integrated Urban AirToxics Strategy in 1999 which identified the Hazardous Air Pollutants (HAPS) that pose the
greatest threat in the largest number of urban areas and the area source categories that emit these pollutants. In 2002, EPA published
the National AirToxics Assessment (NATA) that lays the groundwork for developing the state, local, and tribal  component of the overall
toxics strategy. NATA will help EPA, states, local areas, and communities address emissions issues that are of concern to a specific
area. EPA  is beginning to provide information  to states and communities through case examples, documents, web sites, and
workshops on tools to help them in conducting assessments  and identifying risk reduction strategies. This approach puts the tools  in
the hands  of communities who are then able to prioritize risk concerns locally. As tribal capacity increases, they too will begin to benefit
from the availability of these tools.
APG5
FY2002
FY2001
FY2000
FY1999
Reduce Air Toxic Emissions
Air toxics emissions nationwide from stationary and mobile sources combined will be
reduced by 5% from 2001 (for a cumulative reduction of 40% from the 1993 level of
4.3 million tons per year). Data Lag. FY
Air toxics emissions nationwide from stationary and mobile sources combined will be reduced
by 5% from 2000 (fora cumulative reduction of 35% from the 1993 level of 4.3 million tons
per year). Data Lag.
Air toxic emissions nationwide from both stationary and mobile sources combined will be
reduced by 3% from 1999 (for a cumulative reduction of 30% from the 1993 levels of
4.3 million tons). Data Lag.
Reduce air toxic emissions by 12% in FY 1999, resulting in cumulative reduction of 25%
from 1993 levels. Data Lag.
Planned
5%
5%
3%
12%
Actual
data
available
in 2004
data
available
in 2004
data
available
in 2004
data
available
in 2003
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     FY 2002 Result: Air toxics emissions nationwide from stationary (major and area) mobile sources are estimated to have been reduced
     by 1.5% or 90,000 tons from 2001, for a cumulative reduction of 33.5% or 2,028,000 tons from the adjusted 1993 level of 6.0 million tons.
     EPA expects that final estimated data for FY 2002 will be available in 2004 when the 2002 NTI is completed.

        Strategic Objective: By 2005, Reduce Ambient Nitrates and Total Nitrogen Deposition to 1990 Levels. By 2010,
                     Reduce Ambient Sulfates and Total Sulfur  Deposition By Up to 30% From 1990 Levels.
                            FY2002 Cost (in thousands): $20,663 (3.5% of FY2002 Goal I Total Costs)

     Progress Toward Strategic Objective: EPA's Acid Rain Program met its  strategic objective under Title IV of the CAA Amendments in
     FY 2000 for nitrogen oxide (NOX) emissions and is on track to meet  its 2010 objective for SO2, which sets a permanent cap on the total
     amount of SO2 that can be emitted by power plants nationwide. As a result of efforts by utilities covered under the Acid Rain Program,
     SO2 emissions continued to decline from 17.5 million tons in 1980 (baseline) to  10.6 million tons through 2001, while NOX emissions were
     reduced by 2 million tons nationally.
APG6
FY 2002



Reduce SO2 Emissions
Maintain or increase annual SO2 emission reduction of approximately 5 million tons
from the 1980 baseline. Keep annual emissions below level authorized by allowance
holdings and make progress toward achievement of Year 2010 SO2 emissions cap for
utilities. Data Lag.
Planned
5M



Actual
data
available
in 2003

     FY2001     Maintain annual reduction of approximately 5 million tons of SO2 emissions from utility sources
                 from 1980 baseline. Keep annual emissions below level authorized by allowance holdings and
                 make progress towards achievement of Year 2010 SO2 emissions cap. Goal Met.
                                                                                                5M
     FY2000     5 million tons of S02 emissions from utility sources will be reduced from the  1980 baseline.
                 Goal Met.
                                                                                                5M
     FY1999
       Maintain 4 million tons of SO emissions reduction from utility sources.  Goal Met.
  4M
     FY 2002 Result: EPA is on track to meet this goal. End-of-year 2002 data will be available in late 2003 to verify that an annual SO2
     emissions reduction of approximately 5 million tons from utility sources has been maintained or increased during 2002, making progress
     toward achievement of the year 2010 SO2 emission cap for utilities. (Annual progress in SO2 emission reductions under the Title IV Acid
     Rain Program is measured and reported on a calendar year, not fiscal year, basis.)

     FY 2001 Result Available in FY 2002: In calendar year 2001, SO2 emissions for all Title IV affected utility units totaled 10.63 million
     tons, representing an annual emission reduction of more than 6.5 million tons from the 1980 baseline. In  2001 SO2 emissions dropped by
     approximately 5%,  or 570,000 tons, from 2000 levels.

     APG7        Reduce NOX Emissions                                                                 Planned      Actual

     FY2002       Two  million tons of NOX from coal-fired utility sources will be reduced from levels that       2M         data
                  would have been emitted without implementation of Title IV of the Clean Air Act                      available
                  Amendments.  Data Lag.                                                                             in 2003
     FY2001     Two million tons of nitrogen oxides (NO)x from coal-fired utility sources will be reduced from levels
                 that would have been emitted without implementation of Title IV of the Clean Air Act Amendments.
                 Goal Met.
                                                                                                2M
              2M
     FY2000     Two million tons of NOX emissions from coal-fired utility sources will be reduced from the
                 levels before implementation of Title IV of the Clean Air Act Amendments. Goal Met.
                                                                                                2M
     FY1999
       Maintain 300,000 tons of NO reduction from coal-fired utility sources.  Goal Met.
300,000
420,000
     FY 2002 Result: EPA is on track toward this goal of maintaining or increasing the annual NOX emission reduction goal of 2 million tons
     from levels that would have been emitted without implementation of Title IV of the CAA Amendments.

     FY 2001 Result Available in FY 2002: Program achieved goal of reducing annual NOX emissions from coal-fired utility sources by
     2 million tons from levels that would have been emitted without implementation of Title IV of the CAA Amendments.
n-12
lil'A's FY 2002 Annual Report
       www. epa.gov/ocfo

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Notes:
 1.    Clean Air Act (42 U.S.C. 7401-76?lq); Clean Air
      Act Amendments, Title I (42 U.S.C. 7401-7514a);
      Clean Air Act Amendments, Title II (42 U.S.C.
      7521-7590); Clean Air Act Amendments, Title
      IV(42 U.S.C.  7651-766lf); Clean Air Act
      Amendments, Title IX (42 U.S.C. 7403-7404).

 2.    U.S. EPA, Office of Air and Radiation, Office of
      Policy, Planning and Evaluation, The Benefits
      and Costs of the Clean Air Act: 1970 to 1990
      EPA Report Congress, EPA-410-R-97-002
      (October 1997). See also U.S. EPA, Office of Air
      and Radiation, Office of Policy, The Benefits and
      Costs of the Clean Air Act: 1990 to 2010 EPA
      Report to Congress, EPA-410-R-99-001
      (November 1999).

 3.    U.S. EPA, National Ambient Air Quality Standards.
      Available at http://www.epa.gov/airs/criteria.html.

 4    U.S. EPA, Tier2/Gasoline SulfurFinal
      Rulemaking, EPA-420-R-99-023 (February 10,
      2000). U.S. EPA, Regulatory Impact Analysis,
      Chapter VII:  Benefit-Cost Analysis, EPA 420-R-99-
      023 (December 22, 1999). Available at
      http://www.epa.gov/otaq/regs/ld-hwy/tier-2/frm/
      ria/chvii.pdf. See also U.S. EPA, Heavy-Duty
      Engine and Vehicle Standards and Highway
      Diesel Fuel Sulfur Control Requirements
      (December 21, 2000) and U.S. EPA, Regulatory
      Impact Analysis, Chapter VII: Benefit-Cost
      Analysis, EPA-420-R-00-026 (December 2000).
      Available at http://www.epa.gov/otaq/regs/
      hd2007/frm/ria-vii.pdf.

 5.    U.S. EPA, Latest Findings on National Air Quality-.
      2001 Status and Trends Report (September 4,
      2002). Available at
      http://www.epa. gov/air/aqtrndO.

 6.    Ibid

 7.    U.S. EPA, National Air Toxics Assessment (May
      31, 2002). Available at http://www.epa.gov/ttn/
      atw/nata. Scientific Peer Review of the National-
      Scale Assessment. Available at
      http://www.epa.gov/ttn/atw/nata/peer.html.

 8.    U.S.  EPA, Latest Findings on National Air
      Quality: 2001 Status and Trends Report
      (September  4, 2002). Available at
      http://www.epa. gov/air/aqtmdOl.

 9.    Ibid

 10.   The White House, Office of the Press Secretary,
      President Announces Clear Skies & Global Climate
      Change Initiatives (February 14, 2002). Available
      at http://www.whitehouse.gov/news/releases/
      2002/02/20020214-5.html.
11.  Senate and House of Representatives, Clear Skies
    Legislation Act of 2002, S. 2815 Quly 29, 2002) and
    H.R. 5266 (July 26, 2002). Available at
    http://www.epa.gov/clearskies/bill.pdf.

12.  U.S. EPA, Human Health and Environmental
    Benefits Achieved by the Clear Skies Initiative
    (July 1, 2002). Available  at http://www.epa.gov/
    clearskies/CSIhealth env benefits7-01.ppt. U.S.
    EPA, Technical Addendum: Methodologies for
    the Benefit Analysis of the Clear Skies Initiative
    (September 2002). Available at
    http://www.epa.gov/clearskies/Tech adden.PDFl.

13.  U.S. EPA, Clean Air Markets Divisions, On-Line
    Allowance Transfer System (OATS). Available at
    http://www.epa.gov/airmarkt/transfer/.

14.  U. S. EPA, Office of Air Quality Planning &
    Standards, AIRNow. Available at
    http://www.epa. gov/aimow.

15.  U.S. EPA, New England, News Release, Poor Air
    Quality Predicted in  Southern  New England
    for Monday and Tuesday (July 29, 2002).
    Available at http://www.epa. gov/Regionl/pr/
    2002/iul/020734.html.

16.  U.S. EPA, Emission Standards for New Nonroad
    Engines—Large Industrial Spark-ignition
    Engines, Recreational Marine Diesel Engines,
    and Recreational Vehicles, EPA-420-F-02-037
    (September 2002). U.S. EPA, Regulatory
    Support Document, Chapter 10: Benefit-Cost
    Analysis, EPA-420-R-02-022. Available at
    http://www.epa.gov/otaq/regs/nonroad/2002/
    cleanrec-final.htm.

17.  U. S. EPA, Office of Transportation and Air Quality,
    Voluntary Diesel Retrofit Program. Available at
    http://www.epa. gov/otaq/retrofit.

18.  Caterpillar, Inc., Mack Trucks, Inc., Renault
    Vehicles Industries, Volvo Truck Corporation,
    Cummins Engine Company, Detroit Diesel
    Corporation, and Navistar  International
    Transportation Corporation, Heavy Duty Diesel
    Engine Consent Decree Documents
    (April 30, 1999). Available at
    http://www.epa.gov/compliance/civil/programs/
    caa/diesel/condec.html.

19.  A.J. Ohio, C. Kim, and R.B. Devlin, Concentrated
    Ambient Air Particles Induce Mild Pulmonary
    Inflammation in Healthy Human Volunteers, AmJ
    Respir Crit CarMed 162 (3 Pt 1, September
    2000): 981-988.

20.  U.S. EPA, Office of Research and Development,
    National Center for Environmental Assessment,
www. epa.gov/ocfo

                                                  n-13

-------
          Health Assessment Document for Diesel Engine
          Exhaust, EPA-600-8-90-057F (May 1, 2002).

      21.  TJ. Roskelley, NESCA UM GHG Case Study: The
          Hunts Point Truck/ Trailer Electrification Pilot
          Project (2QQY). Available at
          http://www.nescaum.org/Greenhouse/Private/
          HuntsPointGHGCase.doc.

      22.  U.S. EPA, Cleveland Air Toxics Pilot Project.
          Available at http://www.epa.gov/cleveland.

      23.  Greater Cleveland Regional Transit Authority, RTA
          Vehicles to Burn Ultra-low-sulfur Fuel in Clean Air
          Project, RTA News (May 1, 2002). Available at
          http://www. gcrta.org/
          pressreleaselist.asp?ristingid=328.

      24.  U.S. EPA, Region 1, Diesel Exhaust. Available at
          http: //www. epa. gov/ne/eco/diesel.

      25.  Clean Air Campaigns for Clean Air and
          Development in Metropolitan Chicago. Available
          at http://www.cleanaircounts.org.
26.   U.S. EPA, Region 6, Administrator Gregg A. Cooke
     endorsed the Early Action Compact (June 19, 2002,
     amended October 2002). Available at
     http://www.aacog.dst.tx.us/cap/
     062002 BAG Final.htm. U.S. EPA, Protocol for
     Early Action Compacts Designed to Achieve and
     Maintain the 8-hour Ozone Standard. Available at
     http://www.epa.gov/earthlr6/6pd/air/pd-l/
     compact amend.pdf.

27.   National Tribal Air Association and National Tribal
     Air Committee/Working Group, National Tribal
     Environmental Council. Available at
     http://www.ntec.org/NTAC.html.

28.   U.S. EPA, Office of Transportation and Air Quality,
     Voluntary Diesel Retrofit Program, Diesel Retrofit
     Calculator (Version 1.0.0). Available at
     http://www.epa.gov/otaq/retrofit/aqcreditcalc.htm.

29.   U.S. EPA, Fiscal Year 2004Justification of
     Appropriations Estimates for the Committee on
     Appropriations (January 31, 2003).
n-i4
              FY
                                      www. epa.gov/ocfo

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                          GOAL 2: CLEAN AND SAFE WATER
PROGRESS TOWARD THE STRATEGIC
GOAL AND OBJECTIVES

   The quality of the Nation's surface waters
and drinking water supplies has improved
dramatically in the 30 years since the Clean
Water Act (CWA) and the Safe Drinking Water
Act (SDWA) were enacted. However, despite
tangible improvements in the quality of the
Nation's waters, serious water pollution and
drinking water problems remain. With  respect to
drinking water, although 91 percent of the
population served by community water systems
received water that met all health-based
standards,1 states, tribes, and public water
systems will need increased implementation
assistance to meet the 2005 target of healthy
drinking water for 95 percent of the population.2
With respect to surface water quality, in FY 2001
states reported that more than 80 percent of
assessed waters in 510 watersheds met all water
quality standards. This is an increase from 501
watersheds in 1998, but it may not be at the rate
needed to meet the FY 2003 goal of 600
watersheds.3 In FY 2002 the Agency exceeded
its targets for pounds of pollution prevented
from entering waterways as a result of states and
EPA issuing National Permit Discharge
Elimination System (NPDES) permits, which
implement the effluent guidelines developed by
the Agency. Since FY 2000 state and EPA
programs have protected waterways from 13.5
million pounds of toxic pollutants, 715.7 million
pounds of conventional pollutants, and 1,200
million pounds of non-conventional pollutants.4
Despite these achievements, without improved
effectiveness of drinking water and clean water
programs, there is the risk of losing some  of the
water quality improvements achieved over the
past 30 years.

   A report on the state of the environment,
which EPA plans to release in draft during
FY 2003, features two of EPA's geographically-
based water programs, the Great Lakes and
Chesapeake Bay, that are setting the pace in
developing and using environmental indicators
to track the condition of these waters, to make
management decisions, to evaluate programs,
and to inform joint work with states, tribes, and
stakeholders on priorities and commitments. The
report includes indicators and descriptions of
available data and efforts under way to improve
the quality of data on drinking water safety, the
condition of recreational waters, the condition of
waters supporting fish and shellfish propagation,
and the overall condition of surface waters. The
report also uses  indicators presented in EPA's
FY2002 Coastal Condition Report, a ground-
breaking report that integrates a broad range of
data from a variety of sources into a coherent
picture of the environmental quality of the
Nation's coastal waters.5

FY 2002 PERFORMANCE

Drinking Water

   The first line of defense against consumers'
exposure to drinking water contaminants is
protecting their drinking water sources from
contamination. State and tribal community water
systems (CWSs)  completed assessments of more
than 7,700 drinking water sources in FY 2002,
exceeding the target of 6,000. In addition and of
particular note, 3,528 CWSs are implementing
source water protection programs.6 During
www. epa.gov/ocfo
                                            n-15

-------
                   (A
                   O
                       Types of Drinking Water State Revolving Fund (DWSRF) Projects:
                                    Dollars Loaned from 1997 to 2002

                       $5,500 - -

                       $5,000 -|-  $477.8
                                                                   Source
                                                                      5.3%
                                               Transmission
                                              and Distribution
                                                  32.3%
                                                                          Planning and
                                                                          Design Only
                                                                             0.6%
                     Source: Drinking Water National Information Management System; Project Category is a
                     percentage of Total Dollars of Assistance Provided; Cumulative from DWSRF inception in 1997
                     through June 30, 2002.



    FY 2002 drinking water systems completed
    1,253 infrastructure improvement projects,
    exceeding the target of 1,100. States also
    exceeded the FY 2002 goal of 2,400 by making
    more than 2,500 agreements with water systems
    for projects that help maintain or achieve
    systems' capacity to provide safe drinking
    water.7

       In FY 2002 EPA also strengthened the
    drinking water standard that protects consumers
    served by small community water systems (those
    serving a population of 10,000 or fewer) against
    dangerous microbes such as Cryptosporidium.
    Implementation of this new standard at all small
    public water systems by 2005 will result in the
    reduced likelihood of endemic illness from
    Cryptosporidium by an estimated 12,000 to
    41,000 cases annually.8 States and water systems
    are working to develop the technical and
    managerial capacity to address implementation
    assistance needs and to comply with drinking
    water regulations, especially rules for arsenic,
    microbes, disinfectants, and disinfection by-
    products.
                                                 The Agency and its state and tribal partners
                                              may not meet the national target to provide
                                              drinking water that meets all health-based
                                              standards in place as of 1994 to 95 percent of
                                              the population served by community water
                                              systems by 2005. Because implementing source
                                              water protection programs is not mandated
                                              under the Safe Drinking Water Act (SDWA), the
                                              achievement of national source water protection
                                              goals depends on states, tribes, and communities
                                              taking voluntary measures to implement
                                              contamination prevention programs.

                                              Recreational Waters and Fish Consumption

                                                 In FY 2002 EPA continued to provide states
                                              and tribes with tools and information to help
                                              them protect people from health risks associated
                                              with contaminated recreational waters and
                                              noncommercially caught fish. Jurisdictions
                                              provided information voluntarily on closings and
                                              advisories for more than 2,400 beaches,
                                              exceeding the target of 2,354 beaches.9 The
                                              Beaches Environmental Assessment and Coastal
                                              Health Act of 2000 (BEACH Act, PL  106-284)
                                              enacted in October 2000, requires EPA to
n-i6
EPA's FY 2002 Annual Report
www. epa.gov/ocfo

-------
      Reported Causes of Beach Closings
                or Advisories
                                   Other
                                   3.0%
                            Stormwater
                              Runoff
                              20.0%
  Sewer Line
Blockage/Break
     4%
   Publicly Owned
  Treatment Works
        1%
      Septic System
           3%
          Combined Sewer Overflow
                   3%
         Boat Discharge
    "          2%
Sanitary Sewer
  Overflow
     2%
 publish performance criteria for monitoring and
 assessment of all recreational waters adjacent to
 beaches and authorizes EPA to award grants to
 states and territories to develop beach
 monitoring and notification programs. EPA
 published this document in June 200210 and
 awarded grants to all 35 eligible states and
 territories. The Act also requires all coastal and
 Great Lakes states to adopt stronger water
 quality standards for their coastal recreation
 waters by April 2004. As of FY 2002, 17 states
 had taken the first step toward these stronger,
 consistent standards by adopting E. coli or
 enterococci criteria approved by EPA for all of
 their recreational waters.11
     In FY 2002, 28 percent of U.S. lake acres
 and 14 percent of U.S. river miles were covered
 by state and tribal fish consumption advisories,
 as compared to 23 percent of lake acres and
 9.8 percent of river miles in FY 2001.12 This
 steady increase in advisories over the last
 10 years is due to increased monitoring and use of
 risk-based methodologies for issuing advisories.
 EPA activities included technical assistance to states
 and tribes to enhance fish tissue monitoring and
 development of fish and shellfish consumption
 advisories, sponsoring a national forum for state,
tribal, and federal agencies on risk assessment
and risk communication, and development and
dissemination of outreach materials. In FY 2002
EPA completed the first phase of a 4-year
national screening-level study of contaminants in
fish tissue from 500 lakes and reservoirs in the
continental United States. Results of this effort
will help states  determine if further fish tissue
samples are needed in their decisions about
issuing consumption advisories for these
waters.13

Protecting and Restoring Surface Waters

   States reported in FY 2001 that nearly 40
percent of all assessed waters in the United
States did not meet water quality standards.
Pollution from nonpoint sources remains the
single largest reported cause of poor water
quality.14 In FY  2002, 25 states now have
approved new or revised water quality
standards, exceeding the target of 20. This is the
first time in 3 years that the Agency has met this
commitment.15 Twenty-two tribes have adopted
and EPA has approved new or revised standards,
reflecting continuing progress, but not meeting
the goal of 27.l6 A number of reasons have
contributed to slower than anticipated progress.
Most notable are two recent Supreme Court
decisions, Nevadav. Hicks, 533  U.S. 353,  121 S.
Ct. 2304 (2001)  and Atkinson Trading Company,
Inc. v. Shirley, 352 U.S. 645, 121 S. Ct. 1825
(2001). These two cases ruled on the jurisdiction
tribes have over non-members who reside
within a reservation. EPA had to reevaluate its
program authorization process to determine
what, if any, additional analysis was necessary to
support Treatment as a State decisions.
   EPA and states continued to increase the
annual pace of developing approved Total
Maximum Daily Loads (TMDLs), water quality
planning tools that consider all sources of water
pollution in a watershed and develop budgets to
bring the water bodies into attainment. States and
EPA completed 2,956 in FY 2002, which is more
than five times the number completed in
FY 1999.17 New effluent guidelines issued in
FY 2002 will clean up 5,000  miles of streams
impaired by abandoned coal mines,18 reduce
pollutants discharged by the iron and steel


 www. epa.gov/ocfo
                                                            Performance Results
                                                                              n-17

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                       Types of Projects Funded by the $38.7 Billion of the Clean Water
                                   State Revolving Funds (through 2002)
                                                   Sanitary Sewer
                                                     Overflows
                                                                $0.2
                                                                     $3.8
                                                            $7.2
                     Nonpoint Source
                       and Estuary
                          5%       /    Combined Sewer
                              Storm Water    Overflows
                                  1%          8%
                                                             ($.7 B not allocated)
-i- $40

-- $35

-- $30

-- $25

- - $20

-- $15

-- $10

--$5

--$0
                                                                                  ffl
                        Source: State Data for July 1, 2001, through June 30, 2002; Clean Water State Revolving
                        Fund National Information Management System, http://www.epa.gov/r5water/cwsrf



    industry by 1.4 million pounds per year
    beginning in FY 2005,19 and improve arid
    western watersheds by restoring land at active
    mines to pre-mining conditions upon closure.20 A
    new regulation for cooling water intake
    structures at about 120 facilities will significantly
    reduce the number of eggs, larvae, and small
    aquatic organisms that are pulled into cooling
    water systems and killed or injured and will
    virtually eliminate impacts on larger organisms
    over the next 20 years.21
       In FY 2002 the pace of initiating the funding of
    wastewater treatment projects has continued to
    increase under the Clean Water State Revolving
    Loan Fund (CWSRF), with 8,642 projects in place
    since the program began in 1987,  exceeding the
    target of 7,900. The CWSRF also provided
    $242 million to help manage nonpoint source
    pollution. EPA and states continue to work hard to
    issue current NPDES permits to protect water
    quality and human health. The backlog of major
    facilities has been reduced from 26 percent in
    1998 to 17 percent in September 2002, and the
    backlog of minor facilities from 48 percent in
    1998 to 25.5 percent in September 2002. States
    and EPA achieved 83 percent current permits for
                                              majors, falling short of the FY 2002 target of 90
                                              percent. However, states and EPA exceeded the
                                              minors target of 73 percent current permits by
                                              1.5 percent in FY 2002.22
                                                  Throughout the United States, EPA and states
                                              are facing backlogs, court challenges, and
                                              petitions to withdraw state program authorization.
                                              EPA will work with states and tribes to focus on
                                              core water programs to remedy significant
                                              problems and boost environmental performance
                                              in the following areas:

                                              •   Monitoring and assessment programs, with a
                                                  particular emphasis on the probabilistic
                                                  approach, to support water quality decision-
                                                  making.

                                              •   Assisting states and tribes to adopt water
                                                  quality standards that are appropriate for use
                                                  in developing TMDLs.

                                              •   Increasing the pace of TMDL development
                                                  and working with states to ensure
                                                  implementation of already approved TMDLs,
                                                  including targeting  CWA Section 319
                                                  nonpoint source funding.23
n-is
EPA's FY 2002 Annual Report
               www. epa.gov/ocfo

-------
•  Assisting states in adopting tools, such as the
   new Permitting for Environmental Results
   Initiative for prioritizing permits, to ensure that
   facilities required to have permits are covered
   by current effective permits.
•  Strengthening the drinking water
   implementation program to maintain
   effective state and tribal programs and to
   achieve the enhanced level of public health
   protection established in post-1998 drinking
   water rules.24

Geographically-based Results

   In FY 2002, 85,000 acres of submerged
aquatic vegetation were measured in the
Chesapeake Bay, exceeding the target of
78,000 acres.25 The Bay Program also exceeded
its commitment to restore riparian forest buffers,
which play an important role in providing habitat
and reducing pollutant loads from nonpoint
sources to local waterways and the  Bay.26 EPA's
Gulf of Mexico program reported that 3,197
acres of coastal and marine habitat were restored
or protected, exceeding the goal of 2,400 acres.
Restoration actions are being implemented in 37
coastal river and estuary segments in the Gulf,
exceeding the target of 14.27
                                              modest, annual goal for habitat acres protected
                                              and restored. The actual number of acres
                                              protected and restored by the NEPs may exceed
                                              that goal due to a number of factors, including
                                              unanticipated changes in federal funding levels
                                              for habitat protection and restoration at the state
                                              and local level, changes in NEPs' annual priorities
                                              that lead to enhanced protection and restoration
                                              efforts, growth in community interest and
                                              involvement in protection and restoration, and
                                              the enhanced capacity of NEPs and their
                                              partners to collect and report on data depicting
                                              protection and restoration achievements.

                                                  Residents of 21 percent of the 71,000 homes
                                              in Indian Country who did not have access to
                                              adequate sanitation now have adequate
                                              wastewater systems funded through the CWSRF
                                              Tribal set-aside.29 This number exceeds the
                                              FY 2002 goal of 19 percent of households and
                                              reflects the Agency's commitment to tribes. In
                                              FY 2002, 720,000 people who live in the
                                              U.S.-Mexico border area were protected from
                                              health risks through access to basic sanitation
                                              provided by funding that supported water and
                                              wastewater infrastructure.30 This number is less
                                              than the target of 790,000 additional people due
                                              to the extra time that was required to complete
                                              final planning and design to ensure the high
                                              quality of the projects.
                    Acres of Bay Grasses
             Potential Habitat (600,000 acres)

    100
    60
  E
  is
  I
40
    20
               Interim Goal (114,000 acres)
                                   !> Bay grass beds are
                                  < vital habitat for
                                    fish and crabs.
          No
         Surveys
         1979-83 >
                                         Improved water quality
                                         will promote Bay
                                         grass growth.
       * n indicates estimated additional acreage
    In 2002 the National Estuary Program (NEPs)
protected and restored more than 137,000 acres,
exceeding the target of 50,000 acres, and initiated
88 priority actions.28 EPA sets a realistic, but
           Wetlands
              In FY 2002 EPA and the U.S.
           Army Corps of Engineers issued a
           rule that clarified the definition of the
           term fill material to ensure consistent,
           fair, and environmentally effective
           implementation of the regulatory
           program under Section 404 of the
           CWA.31 This rule, together with other
           measures being taken to strengthen
           protection of wetlands, streams, and
           watersheds in Appalachia, will help
           achieve national consistency and
           reduce mining-related environmental
           impacts.
    In 2002 EPA also established a goal that two-
thirds of its Wetland Program Development
Grants to states, tribes, and local agencies under
Section 104(b)(3) of the CWA would be used to


www. epa.gov/ocfo
                                                                          Performance Results
                                                                                             H-19

-------
    fund three major challenges faced by EPA and its
    partners: (1) protecting vulnerable wetlands and
    other waters, including those no longer federally
    regulated because of the 2001 Supreme Court
    decision;32 (2) developing wetlands monitoring
    programs to establish baseline conditions and
    measure movement towards the national goal of
    improving the quality of the Nation's wetlands;
    and (3) improving compensatory mitigation in
    the CWA's Section 404 program.33

    Innovations

       In FY 2002 EPA and partners improved
    water quality management by using both
    traditional and innovative strategies, such as
    asset management, Environmental Management
    Systems (EMS), and electronic tools. EPA
    designated eight organizations around the
    country as EMS Local Resource Centers that will
    help local communities to adopt state-of-the-art
    management approaches that minimize
    environmental risks, reduce costs to taxpayers,
    and help citizens enjoy a cleaner and healthier
    environment.34 Fourteen local agencies that
    completed an EPA project to help them adopt
    EMSs were able to document cost savings,
    improved compliance, and greater efficiency as
    a result of adopting EMSs.35
       EPA also released its Water Quality Trading
    Policy and awarded the first grants under this
    policy that encourages states and tribes to imple-
    ment the requirements of the CWA in more
    flexible ways while reducing the cost of
    improving and maintaining the quality of the
    Nation's waters.36 Trading provides voluntary
    incentives for industrial and municipal facilities to
    go beyond technology requirements to achieve
    further progress toward water quality goals.

    Homeland Security

       EPA worked with states, tribes, local
    governments, and the private sector to take
    steps to secure the Nation's 168,000 public
    drinking water systems and 16,000 wastewater
    systems from terrorism by providing new tools,
    training, technical and financial assistance,
    information, and research and technology.37
    Since November 2001 about 6,000 drinking
water and wastewater plant managers and
operators have received training in security
issues including assessing vulnerabilities,
emergency response plans, and risk
communication. EPA expects that the work
supported by grants to drinking water systems
will provide an added level of protection for at
least 120 million people or nearly half the total
population served by community water systems.
Work through EPA grants to technical,
professional, and academic organizations also
helped protect 125 million people, or
58 percent of those who depend on centralized
wastewater treatment systems.38 EPA has also
developed a protocol for assuring the safe
disposal of wash-down water from the cleanup
of anthrax-contaminated sites at wastewater
treatment facilities.39

Research Contributions

   The SDWA Amendments of 1996  require EPA
to establish scientifically sound and cost-
effective drinking water regulations that protect
the health of both the general public  and
subpopulations that may be more sensitive to the
effects of contaminated drinking water.40 The
Agency's ability to accomplish this depends
upon the availability of adequate information and
methods to assess and control the risks posed by
contaminants. A critical area of research involves
the development of reliable and accurate
analytical methods to detect and enumerate
waterborne pathogens, particularly those on the
Contaminant Candidate List41 to be considered for
future regulation. These analytical methods
provide exposure data for use in risk
assessments and are essential for health effects
and treatability studies. In FY 2002 EPA
developed a method for calicivirus that was used
to investigate two waterborne outbreaks.42 This
method will enhance the quality and  sensitivity
of detection technologies for caliciviruses,
allowing EPA and states to start collecting data
on the occurrence of these pathogens in
drinking water. These data will also assist EPA in
making better regulatory decisions and helping
to safeguard the American public from harmful
drinking water contaminants.
n-20
            FY
                                  www. epa.gov/ocfo

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Program Evaluation

   An EPA evaluation, A Review of Statewide
Watershed Management Approaches, focused on
the experiences of eight states with different
models of statewide watershed management.
State managers identified benefits of using a
watershed model, including more and better
water quality monitoring data, better focused
water quality assessments and planning, more
efficient and equitable permitting programs,
improved coordination, and increased public
involvement.43 EPA is working to incorporate
these findings into its current strategies to
support state efforts to plan and manage on a
watershed basis.
   During FY 2002 EPA worked with the U.S.
Army Corps of Engineers and the Departments
of Agriculture, Commerce, Interior, and
Transportation to develop a National Wetlands
Mitigation Action Plan to be completed and
released in 2003. The action plan is intended to
ensure effective, scientifically-based decisions
about protecting and restoring wetlands and also
expand access to information on these activities.

STATE AND TRIBAL PARTNER
CONTRIBUTIONS

   EPA, states, and tribes all play crucial roles in
working toward the goal of clean and safe water.
Virtually all of the accomplishments described
above and those reported in the performance
data chart that follows represent the combined
efforts of EPA, state, and tribal programs.

State Contributions

   The CWA authorizes states to carry out or
EPA delegates responsibility to states to carry out
programs. In particular, states have the primary
responsibility to set water quality standards,
taking into account variations in hydrological and
geographic conditions and  the  social uses of
aquatic resources. The standards guide programs
in making surface waters healthier. Forty-four
states and one territory have delegated authority
for NPDES permitting and compliance and
enforcement.44 Fifty-three states and territories
have primary enforcement authority (primacy)
for drinking water regulations.45

   States contribute significant resources to
managing CWA and SDWA programs. Constraints
on state resources may impact states' abilities to
protect and restore surface waters and to
provide safe drinking water.

Tribal Contributions

   The CWA, as amended in 1987, allows tribes
to be treated as states to receive funding and
administer programs. In FY 2002, of
570 recognized tribes, 212 can receive funds to
administer one or more CWA programs, 70 can
receive nonpoint source funds, and 22 tribes
have CWA water quality standards.46 In FY 2002
the Agency worked closely with authorized
tribes to publish the brochure How Water Quality
Standards Protect Tribal Waters, an informative
tool for citizens, tribes, and other stakeholders to
learn about how the water quality standards
program relates to tribes.47

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN

   In FY 2003 the National Estuary Program
habitat performance measure will be lowered to
reflect that large parcels (more than 1 million
acres) have been restored or protected since the
beginning of the program in 1987. Continued
restoration will occur in smaller, more difficult to
manage parcels. In addition, the Chesapeake
Bay partners are ahead of schedule to restore
2,010 miles of riparian forest buffers by 2010
and will set new goals to expand buffer mileage
in 2003.
www. epa.gov/ocfo

                                            n-2i

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       Goal  2: Clean and  Safe Water
       FY 2002 Obligations (in thousands):
ummary of FY 2002 Annual Performance

7
Goals 1 j 1 Goals
Met I Not Met

2
A description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
' ERA'S
       EPATotal:
       Goal 2:
       Goal 2 Share of Total:
                     $9,447,202
                     $3,889,731
                                                                    FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 2 Costs:            $3,447,114
Goal 2 Share of Total:         43.1%
           Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
                 Refer to page IV-10 of the Financial Statements for a consolidated statement of net cost by goal.
                    Annual Performance Goals (APG) and  Measures
                                       FY 1999-FY2002 Results
       Strategic Objective: By 2005, Protect Human Health So That 95% of the Population Served by Community Water
         Systems Will Receive Water That Meets Drinking Water Standards, Consumption of Contaminated Fish and
         Shellfish Will Be Reduced, and Exposure to Microbial and Other Forms of Contamination in Waters Used for
                                               Recreation Will Be Reduced.
                        FY2002 Cost (in thousands): $1,071,099 (31.0% of FY 2002 Goal 2 Total Costs)

    Progress Toward Strategic Objective: EPA is on track to achieve this objective by 2005. The Agency has consistently met its drinking
    water goals, and the population that receives drinking water that meets all standards has been maintained, even as population increases
    and threats to drinking water sources pose new challenges.  States and water systems, however, face increasing capacity issues, which
    might hinder their ability to reach the target of 95% by 2005. EPA does not track consumption of fish and shellfish, but the Agency does
    continue to work with states, the Agency for Toxic Substances and Disease Registration, the Food  and Drug Administration, the  Centers
    for Disease Control and others to improve fish consumption advisories and to increase the quantity and quality of information about
    contaminated fish that is available to the public. Legislation enacted in 2001 requires states to strengthen water quality standards to
    protect against microbial contamination  in recreational waters. States  must update these standards  by April 2004, or EPA will  promulgate
    standards for them. Grants to states under the BEACH Act are providing increased funding for monitoring of coastal waters and public
    notification of closings or advisories. Better standards and more information will improve both the condition of and public knowledge
    about the condition of  recreational waters by 2005.

    APG 8      Safe Drinking Water                                                               Planned     Actual

    FY2002    91% of  the population served by community water  systems will receive drinking water      91%        91%
               meeting all health-based standards, up from 83% in 1994.  Goal Met.
               ^•Corresponds with FY 2002 NEPPS Core Performance Measure (CPM).
    FY2001     Same Goal, different targets.  Goal Met.

                Performance Measures
                -  Population served by community drinking water systems with no violations during the year of
                  any federally enforceable health-based standards that were in place by 1994.
                -  Population served by non-community, non-transient drinking water systems with no violations
                  during the year of any federally enforceable health-based standards that were in place by 1994.
                                                                                        91%
                                                                                        96%
                               91%

                               92%
    FY2000
      Same Goal. Goal Met
                    91%
91%


    FY1999     Same Goal, different targets. Goal Met
                                                                                        91%
                               91%
    FY 2002 Result: In FY 2002, 244 million people were served by community water systems meeting all health-based standards. This
    result is 91% of the 268 million people served by 53,437 community water systems in FY 2002.
    APG 9       Safe Drinking Water

    FY2002     85% of the population served by community water systems will receive drinking water
                meeting health-based standards promulgated in 1998. Data lag.
                ^•Corresponds with FY 2001 NEPPS Core Performance Measure (CPM).
                                                                                      Planned

                                                                                       85%
                              Actual

                               data
                             available
                              in 2003
    FY 2002 Result: Data Lag. FY 2002 end of year data will be available July 2003.
n-22
EPA's FY 2002 Annual Report
                         www. epa.gov/ocfo

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APG 10     Increase Information on Beaches

FY2002     Reduce exposure to contaminated recreation waters by increasing the information
            available to the public and decision-makers.

            Performance Measure
                                                                                     Planned
                                                                                                              Actual
               Beaches for which monitoring and closure data are available to the public at
               http://www.epa.gov/OST/beaches/ (cumulative).
                                                                                      2,354
                                                                                                              2,445
FY2001     Same Goal, different targets. Got
                                                                                      2,200
FY2000     Same Goal, different targets. Goal Met,

            Performance Measures
            -  Cumulative number of beaches for which monitoring and closure data are available at
               "beaches" web-page.
            -  Number of digitized maps on the web-page.
                                                                                       1,800

                                                                                       150
                                                                                                               1,981

                                                                                                                150
FY 2002 Result: Exposure to contaminated recreation waters was reduced as a result of use of monitoring and closure data on 2,455
beaches by the public and decision makers.
APG 11

FY 2002
Drinking Water Research                                                               Planned

Produce scientific reports to support the development of the next Contaminant
Candidate List (CCL) of chemicals and pathogens for potential regulatory action and
research. These reports will help ensure that future regulations address the contaminants
of greatest public health concern.

Performance Measure
                                                                                                              Actual
               Provide method(s) for CCL related pathogens in drinking water for use in the
               Unregulated Contaminant Monitoring Rule.
                                                                                     Journal
                                                                                      article
                                                                                                             Journal
                                                                                                              article
FY 2002 Result: EPA produced scientific reports to support the development of the next CCL of chemicals and pathogens for potential
regulatory action and research. These reports will help ensure that future regulations address the contaminants of greatest public health
concern. In addition, EPA developed an improved analytical detection method for an unregulated waterborne pathogen of public health
concern (calicivirus), which will allow the Agency and others to collect accurate national occurrence data on this important pathogen.
The use of this method and other FY 2002 research  products will provide critical data to support EPA's regulatory decision making
process for unregulated contaminants.

     Strategic Objective: By 2005, Increase By 175 the Number of Watersheds Where 80% or  More of Assessed
  Waters Meet Water Quality Standards, Including Standards That Support Healthy Aquatic Communities. (The 1998
                             Baseline is 501 Watersheds Out of a National Total of 2,262.)
                      FY2002 Cost (in thousands): $432,633 (12.6% of FY 2002 Goal 2 Total Costs)

Progress Toward Strategic Objective: No new data to report. EPA receives data from states every 2 years.  In FY 2001 EPA did not
meet the goal of 550 watersheds. The accomplishment of 510 watersheds represents progress, but results may not be  happening fast
enough to meet the target by 2005.
APG 12

FY2002
FY2001


FY2000



FY1999
Watershed Protection                                                                 Planned

By FY 2003, water quality will improve on a watershed basis such that 600 of the            600
Nation's 2,262 watersheds will have greater than 80% of assessed waters meeting all
water quality standards, up from 500 watersheds in 1998.  Data Lag.

Same Goal, different targets.  Goal Not Met,                                                  550

Environmental improvement projects will be underway in 350 high priority watersheds as a result    350
of implementing activities under the Clean Water Action Plan (CWAP). Goal Not Met.
            As part of CWAP, all states will be conducting or have completed unified watershed
            assessments, with support from EPA, to identify aquatic resources in greatest need
            of restoration or prevention activities. Goal Met,
                                                                                        50
 Actual

  data
available
 in 2003

   510

   324
                                                                                                    1:6
FY 2002 Result: This measure reflects states' biennial reporting under CWA 305(b), and is not intended to be reported until the FY 2003
reporting cycle.
www. epa.gov/ocfo
                                                                                   Performance Results
                                                                                                           n-23

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     APG13      State/Tribal Water Quality Standards                                                    Planned      Actual

     FY2002     Assure that states and tribes have effective, up-to-date water quality standards
                 programs adopted in accordance with the Water Quality Standards (WQSs) regulation
                 and the WQSs program priorities.  Goal Met,

                 Performance Measures:
                 -  States with new or revised WQSs that EPA has reviewed and approved or disapproved     20
                    and promulgated federal replacement standards.
                 -  Tribes with water quality standards adopted and approved (cumulative).                  27          S2

     FY2001     Same Goal, different targets. Goal Not Met                                                30states    21 states
                                                                                                       27 tribes

     FY2000     Same Goal, different targets. Goal Not Met.                                                15 states    35 states
                                                                                                       22 tribes

     FY 2002 Result: WQSs established under the Clean Water Act establish specific environmental goals for the Nation's waters. Having
     current, protective WQSs in place is an essential element of the national water program's water quality protection efforts. States and
     tribes continue to do significant work in this area. In FY 2002 EPA ensured that 25 states and 22 tribes have effective, up-to-date WQSs
     programs adopted in accordance with the WQSs regulation and the WQSs program priorities. Several tribes are at different stages in
     the process of adoption and approval of WQSs. A Supreme Court decision resulted in EPA revisiting its tribal program authorization
     process, which has delayed approval of any new tribal standards.

     APG14      Protecting and Enhancing Estuaries                                                    Planned      Actual

     FY2002     Restore and protect estuaries through  the implementation of Comprehensive Conservation
                 and Management Plans (CCMPs).  Goal  Met

                 Performance Measure
                 -  Acres of habitat restored and protected nationwide as part of the National Estuary      50,000      137,710
                    Program (annual).

     FY2001     Same Goal, different targets. Goal Met.

                 Performance Measure
                 -  Acres of habitat preserved, restored and/or created nationwide as part of the National          50,000       70,000
                    Estuary Program (cumulative).

     FY 2002 Result: EPA restored and protected more than 137,000 acres of estuary habitat through the implementation of CCMPs,
     significantly exceeding its  FY 2002 target. The National Estuary Program  (NEP) exceeded the goal due to one or more of the following
     factors: unanticipated changes in federal funding levels for habitat protection and restoration at the state and local levels; changes in the
     NEP's annual priorities that led to enhanced protection and restoration efforts, growth in community interest and involvement in
     protection and restoration; or the enhanced capability of estuary programs and their partners to collect and report on data depicting
     protection and restoration  achievements.

       Strategic Objective: By 2005, Reduce Pollutant Loadings From Key Point and Nonpoint Sources By at Least 11%
                      From 1992 Levels. Air Deposition of Key Pollutants Will Be Reduced to 1990 Levels.
                          FY2002 Cost (in thousands): $1,943,382 (56.4% of FY 2002 Goal 2 Total Costs)

     Progress Toward Strategic Objective: EPA continues to face a significant challenge in its ability to adequately document reductions in
     pollutant loadings. The amount of data available from many EPA programs is and will continue to be very limited. To help document
     loading reductions from permits that implement effluent guidelines and an overall loading reductions strategy, EPA is taking steps to
     determine the number of facilities in each major program. This information will greatly improve the Agency's ability to successfully model
     expected reductions and validate these models using the limited data  available.

     APG15      Reducing Industrial Pollutant Discharge                                                 Planned      Actual

     FY2002     Industrial discharges of pollutants to the Nation's waters will be significantly reduced
                 through implementation of effluent guidelines.   Goal Met

                 Performance Measures
                    Cumulative reduction in loadings for toxic pollutants for facilities subject to effluent  10.5 M Ibs
                    guidelines promulgated between 1992 and 2000, as compared to 1992 levels as
                    predicted by model projections.
                    Cumulative reduction in loadings for conventional pollutants for facilities subject     572 M Ibs
                    to effluent guidelines promulgated between 1992 and 2000, as compared to 1992
                    levels as predicted by model projections.
n-24      EFA's FY 2002 Annual Report                                                                            uww.epa.gov/ocfo

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               Cumulative reduction in loadings for non-conventional pollutants for facilities
               subject to effluent guidelines promulgated between  1992 and 2000,  as compared
               to 1992 levels as predicted by model projections.
                                                                                      1,007Mlbs
FY2001      Same Goal, different targets. Goal Met,

             Performance Measures
             -  Cumulative reduction in toxic-pollutant loadings by facilities subject to effluent guidelines
               promulgated between 1992 and 1999, as predicted by model projections.
             -  Reduction in loadings for conventional pollutants for facilities subject to effluent guidelines
               promulgated between 1992 and 2000, as compared to 1992 levels as predicted by model
               projections.
             -  Reduction in loadings for non-conventional pollutants for facilities subject to effluent
               guidelines promulgated between 1992 and 2000, as compared to 1992 levels as predicted
               by model projections.
                                                                                       9.8Mlbs
                                                                                      552.7Mlbs
                                                                                      935.6 Mlbs
FY2000
Same Goal, different targets. Goal Met,
             Performance Measures
               Cumulative reduction in toxic-pollutant loadings by facilities subject to effluent guidelines
               promulgated between 1992-1999, against 1992 levels (predicted by models).
               Cumulative reduction in conventional pollutant loadings by facilities subject to effluent
               guidelines promulgated between 1992-1999, against 1992 levels (predicted by models).
               Cumulative reduction in non-conventional pollutant loadings by facilities subject to effluent
               guidelines promulgated between 1992-1999, against 1992 levels (predicted by models).
                                                                                        4 Mlbs      4 Mlbs

                                                                                       385 Mlbs    4 73 Mlbs

                                                                                       260 Mlbs    136 Mlbs
FY 2002 Result: Industrial discharges of pollutants to the Nation's waters were significantly reduced through implementation of effluent
guidelines. A total of approximately 2 billion pounds of industrial discharges was eliminated.
APG 16      NPDES Permit Requirements

FY2002      Current national pollutant discharge elimination system (NPDES) permits reduce or
             eliminate discharges into the Nation's waters of (1) inadequately treated discharges
             from municipal and industrial facilities; and (2) pollutants from  urban stormwater,
             combined sewer overflow (CSO), and concentrated animal feeding operations (CAFOs).
                  Not Met,

             Performance Measures
                                                                                       Planned
           Actual
               Major point sources are covered by current permits.
               Minor point sources are covered by current permits.
                                                                                         90%
                                                                                         73%
            74,4%
FY2001
Same Goal, different targets. Goal Not Met,
             Performance Measures
             -  Major point sources are covered by current permits.
             -  Minor point sources are covered by current permits.
                                                                                         89%
                                                                                         66%
             75%
FY 2002 Result: EPA and states exceeded the minor point sources covered by current permits target by 1.5%. EPA and states
achieved 83% current permits for major point sources, falling short of the FY 2002 target of 90% due to state and regional capacity
issues as well as growing complexities of permits including the need to integrate individual permits with watershed and other planning
processes. Nevertheless, the Agency is making progress towards its goals and objectives as evidenced by the following: 94% of states
and territories had current storm water permits for all industrial activities, and 98% had current permits for construction sites more than
5 acres; 92% of approximately 900 CSO communities were covered by permits or other enforceable mechanisms consistent with the
1994 CSO Policy; and approximately 67% of states had current NPDES general permits for CAFOs or individual NPDES permits for all
CAFOs.

The Agency  has  launched a Permitting for Environmental Results Initiative to address the permit backlog and focus existing resources
on getting the most environmental results. This effort will work toward achieving an environmental focus in permit issuance, mutual
accountability for EPA and states, and developing permitting efficiencies.
APG 17      Clean Water State Revolving Fund: Annual Assistance

FY2002      700 projects funded by the Clean Water State Revolving Fund (CWSRF) will initiate
             operations, including 400 projects  providing secondary treatment, advanced treatment,
             CSO correction (treatment), and/or storm water treatment. Cumulatively, 7,900 CWSRF
             funded projects will have initiated operations since program  inception.  Goal Met,
                                                                                       Planned

                                                                                        7,900
           Actual

            8,642
FY2001
Same Goal, different targets. Goal Met.
7,200
www. epa.gov/ocfo
                                                                                     Performance Results
                                                                                                             n-25

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     FY2000     Another 2 million people will receive the benefits of secondary treatment of wastewater,             2M
                 for a total of 181 million people.  Goal Met,

     FY1999     Another 3.4 million people will receive the benefits of secondary treatment of wastewater,          3.4 M
                 for a total of 179 million. Goal Met.

     FY 2002 Result: Operations initiated through  projects funded by the CWSRF totaled 1,190, including 400 projects providing secondary
     treatment, advanced treatment, CSO correction (treatment), and/or storm water treatment. Cumulatively, 8,642 projects have initiated
     operations since program inception.

                          Prior Year Annual Performance Goals Without Corresponding FY 2002 Goals
                                    (Actual Performance Data Available in FY 2002 and Beyond)

                                                                                                         Planned     Actual

     FY 1999     By 2003: deliver support tools, such as watershed models, enabling resource planners                        target
                 to select consistent, appropriate watershed management solutions and alternative, less                       year is
                 costly wet-weather flow control technologies.                                                             FY2003
n-26      lil'A's FT 21102 Annual Report                                                                             uww.epa.gov/ocfo

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Notes:
 1.    Appendix B.

 2.    Ibid

 3.    Ibid

 4    Ibid

 5.    U.S. EPA, National Coastal Condition Report, EPA-
      620/R-01/005 (September 2001). Available at
      http://www.epa.gov/owow/oceans/nccr.

 6.    Information collected from EPA regions and
      housed in an internal EPA database. Contact the
      Drinking Water Protection Division at 202-564-
      3797.

 7.    The EPA Office of Ground Water and Drinking
      Water's Drinking Water National Information
      Management System (DWNIMS) is accessible only
      on the Internet at http://www.epa. gov/OGWDW/
      dwsrf/dwnims.html.

 8.    See Federal Register 67 (9, January 14, 2002): 1812.

 9.    Appendix B.

 10.   U.S. EPA, National Beach Guidance and Required
      Performance Criteria for Grants, EPA-823-02-
      004. Available at
      http://www.epa.gov/waterscience/beaches/grants.

 11.   U.S. EPA, Office of Water, Bacterial Water Quality
      Standards for Recreational Waters (Freshwater
      andMarine Waters), draft, EPA-B-02-003
      (Washington, DC: May 2002). U.S. EPA, Office of
      Water, Regulations and Standards Division,
      Ambient Water Quality Criteria for Bacteria—1986
      (Washington, DC: U.S. EPA, 1986).

 12.   U.S. EPA, Office of Water, Update: National Listing
      of Fish and Wildlife Advisories, EPA-823-F-02-007
      (Washington, DC: U.S. EPA, 2002). Available at
      http://www.epa.gov/waterscience/fish/advisories/
      factsheetpdf.

 13.   U.S. EPA, Office of Water, The National Study of
      Chemical Residues in Lake Fish Tissue, EPA-823-
      F01-028 (Washington, DC: U.S. EPA, 2001).

 14   U.S. EPA's National Water Quality Inventory-.
      2000 Report is accessible only on the Internet at
      http://www.epa.gov/305b/2000report/.

 15.   Appendix B.

 16.   Ibid

 17.   For national-level information on TMDLs
      completed to date, see the National Section
      303(d) List Fact Sheet, with information compiled
      by state and by region, on the EPA Total
      Maximum Daily Loads web page at
    http://oaspub.epa.gov/waters/national rept.control.
    Annual TMDL production numbers are available
    through EPA's Assessment and Watershed
    Protection Division.

18.  Preamble to final rule, 67 FR 3389, January 23,
    2002. Available at http://www.epa.gov/guide/
    coal/.

19.  Preamble to final rule, 67 FR 64216, October 17,
    2002. See also U.S. EPA, Development Document
    for Final Effluent Limitations Guidelines and
    Standards for the Iron and Steel Manufacturing
    Point Source Category, EPA-821-R-02-004.
    Available at http: //www. epa. gov/waterscience/
    ironsteel/.

20.  Preamble to final rule, 67 FR 3370 and 3381,
    January 23, 2002. Available at
    http://www.epa. gov/guide/coal/.

21.  Preamble to final rule, 66 FR 65262-5, 65279-80,
    65311-13, December 18, 2001. Available at
    http://www.epa.gov/fedrgstr/EPA-WATER/2001/
    December/Day-18/w28968.pdf. See also U.S.
    EPA, Economic Analysis of the Final Regulations
    Addressing Cooling Water Intake Structures for
    New Facilities, EPA-821-R-01-035 (November
    2001). Available at
    http://www.epa.gov/waterscience/3l6b/
    economics/economic.html.

22. U.S. EPA, Permit Compliance System Database—
    Backlog Tables (major facilities, minor facilities,
    minor facilities including non-storm water general
    permits), Backlog Trend Reports (national major
    facilities, national minor facilities, EPA only major
    facilities, EPA only minor facilities, state only major
    facilities, state only minor facilities, regional major
    facilities, regional minor facilities), Backlog
    Staleness Reports (major facilities, minor facilities),
    Monthly Backlog Report to Regions. Available
    (with password) at http://clients.limno. com/
    protected/pcscleanup.

    Backlog calculations from November 1998
    through December 2001 were made through
    sorting out all non-individual permits from PCS
    data with the exception of non-storm water major
    general permits and individual major storm
    permits and dividing the total number of these
    permits that have been expired 45 days or longer
    plus the total number of permits with no issuance
    data and/or no expiration date by the total
    number of active permits not sorted out as
    mentioned above. This number provides the
    backlog percentage. As of January 2002, permits
    were considered backlogged only if they had
    been expired 6 months or greater, up from
3

SB

O"
S!S
www. epa.gov/ocfo

                                                   n-27

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          45 days. Beginning in the September 2002
          backlog report, individual permits issued by
          EPA in authorized states were counted as EPA
          permits and not state permits. Beginning with
          the October 2002 backlog report, minor
          facilities covered by non-storm water general
          permits listed in the Permit Issuance
          Forecasting Tool are included in the definition
          of backlog.

      23.  U.S. EPA, Supplemental Guidelines for the Award
          of Section 319 Nonpoint Source Grants to States
          and Territories in FY2003 (August 2002).
          Available at http://www.epa.gov/owow/nps/
          Section319/319guide03.html.

      24.  40 CFR Part 141; 40 CFR Parts 136 to 149
          (Washington, DC: U.S. Government Printing
          Office, 2002).

      25.  Information on the SAV measure is available at
          http://www.chesapeakebay.net/
          status.cfm?sid=88&subiectarea=INDICATORS.

      26.  Information on the riparian forest buffer measure
          is available at
          http://www.chesapeakebay.net/
          status.cfm?sid=83&subiectarea=INDICATORS.

      27.  Information is available at
          http://www.epa. gov/gmpo.

      28.  Appendix B.

      29.  The 2000 Census reports that there are
          302,882 existing occupied American Indian
          homes; the Indian Health Service, Department of
          the Interior, reports that 123,277 homes require
          solid waste assistance (Sanitation Facilities
          Construction Program of the Indian Health Service,
          Public Law 86-121 Annual Report for 2000). A
          total of 41 percent of homes therefore require
          solid waste assistance. EPA has set a multiyear
          goal to reduce this percentage by 25 percent.
          EPA's Annual Performance Reports for 2000 and
          2001 document progress toward that goal.

      30.  Appendix B.

      31  Federal Register 67 (31, May 9, 2002): 129.
          Available at http://www.epa. gov/owow/wetlands/
          fillfinalhtml.

      32.  Solid Waste Agency of Northern Cook County v.
          U.S. Army Corps of Engineers, 531 U.S. 159
          (2001) can be found at http://www.epa.gov/
          owow/wetlands/swanccnav.html.

      33.  Memorandum from Robert H. Wayland to Water
          Division Directors and the Environmental Services
          Division Director of Region 3 (November 19, 2001).
34.  There is no specific publication to cite. EPA
    sent letters dated June 18, 2002, to each of the
    eight Local Resource Centers informing them of
    their selection. The funding to assist these Local
    Resource Centers is included in a cooperative
    agreement awarded to the Global Environment
    and Technology Foundation in July 2002.
    Additional information about each Local Resource
    Center can be found at
    http://www.epa.gov/ems or
    http://www.peercenter.net.

35.  Global Environment and Technology
    Foundation  (GETF), Final Report on Second
    EMS Initiative for Government Entities, prepared
    under Cooperative Agreement no. 828071-01-0
    awarded by the U.S. EPA (fall 2002). Available
    through the EPA Water Resource Center and
    online at http://www.peercenter.net
    or http://www.epa.gov/ems.

36.  Federal Register 67 (94,  May 15, 2002):34709-
    34710. Available at http://www.epa.gov/owow/
    watershed/trading/tradingpolicy.html.

37.  "Quarterly Monitoring  Report, Water Environment
    Federation, September 3, 2002, Grant No.
    829656" to Curt Baranowski, Project Officer,
    Office of Wastewater Management, U.S. EPA;
    "Quarterly Monitoring  Report, Association of
    Metropolitan Sewerage Agencies, September 30,
    2002, Grant No. 829595" to Curt Baranowski,
    Project Officer, Office of Wastewater
    Management, U.S. EPA.

38.  Information from periodic grantee reports
    required by regulation and provided to the
    Agency during FY 2002.  No quality assurance
    plan;  not publicly available; not peer-reviewed.

39.  U. S. EPA, Office of Ground Water and Drinking
    Water, Water Infrastructure Task Force, Draft
    Protocol for Discharging Decontaminated
    Anthrax Wastewater to POTWs (September
    2002.)

40.  Safe Drinking Water Act Amendments of 1996,
    Section 1412(b)(3).

41.  Safe Drinking Water Act Amendments of 1996,
    Section 1412(b)(l).

42.  A Waterborne Outbreak of Norwalk-like Virus
    among Snowmobilers? Wyoming, 2001, NERL-CI-
    MCEARD-02-039. Accepted for publication by
    Journal of Infectious Diseases, September 2002;
    not yet publicly available. Contact the National
    Exposure Research Laboratory, Microbiological and
    Chemical Exposure Assessment Research Division,
    513-569-7303.
n-28
             FY
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 43.   U.S. EPA, A Review of Statewide Watershed
      Management Approaches (April 2002). Available
      at http://www.epa.gov/owow/watershed/
      approaches fr.pdf.

 44.   U.S. EPA, StateNPDESProgram Status Table
      (December 16, 2002). Available at
      http://cfpub.epa.gov/npdes/statestats.cfm.

 45.   Contact the Drinking Water Protection Division at
      202-564-3797.
46.   Section 518 of the Clean Water Act, 33 U.S.C.
     § 1377. For further information on tribal water
     quality standards activities, contact the Standards
     and Health Protection Division at U.S. EPA,
     202-566-0400.

47.   EPA-823B-02-002 is available from the National
     Service Center for Environmental Publications,
     P.O. Box 42419, Cincinnati, OH 45242-2419
     (phone 800-490-9198, fax 513-489-8695).
                                                                                                                3
                                                                                                                C,
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                                             This Page Intentionally Blank



H-30     EPA's FY 2002 Annual Report                                                                       www.epa.gov/ocfo

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                                  GOAL 3: SAFE FOOD
PROGRESS TOWARD THE STRATEGIC GOAL
AND OBJECTIVES

   EPA continues to make progress toward its
long-term goals of protecting the Nation's food
supply, reducing risk from unsafe pesticide
residues, and eliminating the use on food of
pesticides that do not meet standards through
registration and reregistration of pesticides.
EPA sets limits, called tolerances, on the amount
of pesticides that may remain on foods. Tolerances
are set on the basis of risk assessments pursuant to
the Food Quality Protection Act (FQPA) of 1996}
Through tolerance reassessments, EPA ensures that
existing tolerances meet the FQPA standard of
reasonable certainty of no harm.2 Those that do
are either revoked or have additional risk mitiga-
tion measures added to them. EPA's
consideration of cumulative risk takes into
account exposure from all pesticides that have a
common mode of action, thereby adding
additional protection. The inclusion of aggregate
risk considerations in the risk assessments
provides further protection.3
   In FY 2002 EPA's strategy for reducing risks
from pesticide residues in foods included:
•  Reevaluating older, potentially higher-risk
   pesticides by using the best current scientific
   data and methods to determine what
   additional limits on each pesticide's use are
   needed to provide reasonable certainty of no
   harm, especially to children and other
   sensitive subpopulations. In FY  2002 EPA
   reevaluated 2,667 tolerances for older
   pesticides.
•  Accelerating EPA's review and registration of
   alternative pesticides that are less risky than
   those currently in use. In FY 2002 EPA
   registered 15 reduced-risk pesticides.
•  Using partnerships and other means to
   promote the adoption and use of lower-risk
   pest management methods. EPA continued or
   launched a variety of partnership efforts in
   FY 2002.
   A key element in meeting these objectives
and thus demonstrating performance results is
the availability of baseline data.  EPA, the
Florida State University, and the National
Pollution Prevention Roundtable worked
cooperatively in 2002 to identify data sets and
potential performance indicators and measures
in the challenging pollution prevention area.
Tribal program measures were another area of
continuing focus. This work builds on EPA's
and Florida State University's efforts to
inventory and describe environmental outcome
measures nationwide for federal agencies,
states, tribes, and local government entities.
The statute requires EPA to examine each
pesticide individually, unless there is a class of
pesticides with a common mechanism of
toxicity. The data sets and hazard and exposure
findings for the pesticides that are reviewed
cannot be aggregated into a  national baseline.
The program is continuing to analyze federal
and other data sets, as well as internal risk
assessment methodologies,  to explore options
to identify baseline data without posing
enormous data collection burdens and expense
on EPA's partners.
   The program is very science-oriented and
constantly works to incorporate the latest
scientific methodologies. Additional challenges
include addressing resource issues associated
with the expiration of the maintenance fee, the
timely receipt of stakeholder input, and the
need for more intensive risk assessment reviews
prompted by the incorporation of cumulative
and aggregate risk work.
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       The Agency has collaborated extensively
    with scientists from other federal agencies,
    academia, and the private sector, including
    members of the Federal Insecticide, Fungicide,
    and Rodenticide Act (FIFRA) Scientific Advisory
    Panel. These collaborative efforts involved the
    Agency's regulatory decision-making responsi-
    bilities and particularly complex work in the
    evolving field of biotechnology and new science
    policies for risk assessments. These efforts
    provide opportunities to review the Agency's
    processes, scientific methodologies, and in some
    cases assessments and to ensure transparency,  as
    required by the FQPA. Such a review conducted
    on certain biotechnology issues has led to the
    creation of a multi-agency, department-level work
    group to improve coordination and outreach to
    the agriculture industry.

    FY 2002 PERFORMANCE

    Reducing Agricultural Pesticide Risk

       Older registered pesticides might cause
    health problems such as birth defects, nerve
    damage, and cancer after long-term exposure. In
    addition, some pesticides might adversely affect
    indigenous populations of birds, fish, mammals,
    beneficial insects, and other sensitive species
    that are not targets for pesticide applications.
    Consequently, EPA seeks to eliminate or reduce
    human health and environmental risks by
    encouraging substitution of less risky pesticides
    for older chemicals that have the potential to
    cause these adverse effects.
       Reduced risk pesticides constituted an
    estimated 3.6 percent of all agricultural pesticide
    acre treatments in 1998. This increased to
    7.5 percent during the FY 2002 reporting period
    that used FY 2001 data, significantly exceeding
    EPA's original annual and long-term targets.
    However, two reduced risk pesticides—glysophate
    and s-metalachlor—account for about 50 percent
    of the pesticides used. The Agency anticipates
    that the growth rate of this measure, which
    depends on how quickly the agriculture and
    pesticide industries make the transition, might
    slow in the next year  or two. EPA encourages
    the switch to the use of safer pesticides through
    outreach programs, applicator training, and the
provision of grants for integrated pest
management and environmental stewardship
projects. The Agency reviews pesticides to
ensure that they meet the current health and
safety standards and provides incentives for the
registration and adoption of reduced risk
pesticides; however EPA has limited impact on
the adoption of these pesticides. This is due in
part to farmers' preference for using broad-
spectrum pesticides that tend to be cheaper and
easier to apply. It is, therefore,  difficult for the
Agency to predict with accuracy the extent of
adoption of reduced risk pesticides.

Reducing Use on Food of Pesticides Not Meeting
Health Standards

   EPA continued its ongoing comprehensive
reviews of pesticides initially registered before
November 1, 1984, to ensure their continued
safety. After a thorough review of the data, the
Agency issues a Reregistration  Eligibility
Decision (RED).  In cases where pesticides do
not meet health and environmental requirements,
EPA determines what changes are needed in the
allowable uses of the pesticides, including
canceling use or limiting use to certified
applicators. For pesticides that do meet the new
standards, the issuance of a RED makes the
products eligible for reregistration. By the end of
FY 2002, EPA completed review of 72.7 percent
of the 612 cases requiring reregistration. The
Agency did not meet the target of 76.4 percent
because of both the need to incorporate into the
process the cumulative risk assessment required
by the FQPA and the redirection of resources to
support the homeland security initiative on
anthrax contamination. The cumulative risk
assessment under the FQPA requires a more
intensive review and also requires that
pesticides having a common mode of action be
reviewed together.

   To further protect the Nation's food supply,
the FQPA set stricter safety standards for
pesticide residues in or on food and requires
EPA to reassess all existing tolerances by 2006
to ensure they meet the new safety standard of
"reasonable certainty of no harm." By the end of
FY 2002, the Agency had completed reassessment
of 66.9 percent of these tolerances,  including
n-32
            FY
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          100
           90
           80
           70
           60
           50
           40
           30
           20
           10
            0
               Tolerance Reassessments That Now Meet New Health Standards as of August 2002
             Organophosphates Carbamates  Organochlorines  Carcinogens
                                                           Others
                                                                      Total
             This graph shows the status of EPA's tolerance reassessment program by chemical class. As of
             August 5, 2002, EPA had reassessed 6,499 tolerances (66.9%).
about 65 percent of the organophosphates and
carcinogens that are among those pesticides
considered of highest risk. The reassessment of
these tolerances included an additional 198 of
the 893 tolerances on children's foods. In
FY 2002 EPA  met the second statutory deadline
set by FQPA for tolerance reassessment, and the
Agency is on  track to meet its long-term
objective to substantially eliminate pesticides that
do not meet the FQPA standard and to reduce
dietary risk to children.

   In FY 2002 EPA completed a total of
36 reregistration regulatory decisions, including
9 risk mitigation decisions on the most hazardous
organophosphates (OPs). EPA met the decision
deadlines set by the Natural Resources Defense
Council (NRDC) agreement for FY 2002 (five
completed in FY 2002) with one exception,
atrazine, for which an extension to 2003 has
been requested. These decisions were
completed after extensive public participation
and negotiations.4
   FQPA requires that EPA take into account the
cumulative effects of pesticide residues and
other substances that have a common mechanism
of toxicity when setting tolerances. EPA
completed and issued the preliminary
organophosphate cumulative risk assessment in
December 2001 and revised it in June 2002
based on stakeholder input. As a result, EPA met
the NRDC agreement deadline to issue a revised
risk assessment of the OPs by August 2002. This
methodology incorporated new standards and
represents a new way of analyzing data
regarding potential exposure to pesticides and
           REDUCING RISK THROUGH
            REGULATORY ACTIONS

   During FY 2002 EPA significantly reduced
   exposure to several organophosphate (OP)
   pesticides by completing regulatory actions
   such as issuance of Reregistration Eligibility
   Decisions (RED). OPs are older, widely used
   pesticides that are among the riskiest. Benefits
   derived  from this action  include reduced
   exposure, assumed reduced risk, and therefore
   improved protection of human health and the
   environment. The pesticides involved included
   azinphos-methyl,  diazinon,  dicrotophos,
   disulfoton,  fenamiphos, methamidophos,
   naled,  phosmet, and tetrachlorvinphos.
   Azinphos-methyl risk reduction measures
   were taken in 1999 to reduce dietary risk to
   children. Additional measures were taken in
   FY 2002 to further reduce risk to agricultural
   workers and the environment. For phosmet,
   which is used on orchard fruits, nuts, and other
   crops,  additional measures were identified to
   reduce risk to agricultural workers, including
   requiring personal protective equipment and
   enclosed cabs. Ecological risk  reduction
   measures included revising labels, limiting
   application amounts, prohibiting application
   during bloom, and canceling some uses.

www. epa.gov/ocfo
                          Performance Results
                                             H-33

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    the risks they might pose and is the result of
    rigorous scientific analysis and extensive public
    participation.

    Research Contributions

       In FY 2002 EPA produced exposure and
    effects data and models to support the August
    2006 assessment of current uses of pesticides
    (tolerance reassessment) required under the
    FQPA. This research was part of an ongoing
    collaborative effort with the National Institute of
    Environmental Health Sciences to study
    outcomes of developmental exposure to
    pesticides on the nervous, immune, and
    reproductive systems. These efforts have
    provided the Agency with a better understanding
    of the increased vulnerabilities of children to
    pesticide exposure through food consumption as
    well as during gestation. As a result, EPA can
    better determine the latent and/or persistent
    effects of developmental exposure to pesticides
    and compare the  sensitivities of different human
    systems to various pesticides. The data and
    models will also help EPA examine the critical
    factors influencing children's exposure to
    pesticides and fill important data gaps  to reduce
    uncertainties in future pesticide risk assessments.
    In addition, EPA developed a source-to-dose
    modeling framework that will advance the
    science of human exposure and dose assessment
    by describing the  routes, magnitude, and
    variability of human exposures and doses, as
    well as by characterizing the way people
    interact with their environment.

    STATE AND TRIBAL PARTNERSHIP
    CONTRIBUTIONS

    State Contributions

       Through grant agreements, and with
    guidance provided by EPA, the states enforce
    federal and state laws, maintain pesticide
    laboratory operations, train and certify
,3   commercial and private pesticide applicators,
I   and develop groundwater pesticide management
"|j   plans to protect groundwater from contamination.
£,   States play a pivotal role in ensuring that food
,|   use and other pesticides are used according to
                                         the label instructions, and that applicators who
                                         apply restricted use pesticides are adequately
                                         trained. In FY 2002 states submitted more than
                                         500 emergency exemption requests to EPA in
                                         response to emergency pest problems, each of
                                         which the Agency reviewed for compliance with
                                         FQPA health-based standards. Use of the
                                         emergency exemption process generates a
                                         savings in excess of $1 billion per year to the
                                         U.S. economy, according to estimates from the
                                         Inter-Regional Four (IR-4) program, which
                                         promotes increased availability of less risky
                                         pesticides for use on foods.

                                            EPA supports a state-led project providing
                                         training on pesticide safety for farmworkers and
                                         farm families by partnering with the Association
                                         of Farmworker Opportunity Programs,
                                         AmeriCorps, and 37 community-based
                                         organizations in 22 states. EPA also consults with
                                         the Association of American Pesticide Control
                                         Officials and shares information with the State
                                         FIFRA Issues Research and Evaluation Group, a
                                         network of state officials interested in federal/
                                         state co-regulation of pesticides. In FY  2002 EPA
                                         and California's Department of Pesticide
                                         Regulation Workshare Program conducted data
                                         review for IR-4 petitions, which has expedited
                                         federal and state minor use registrations and
                                         resulted in establishment of tolerances for many
                                         crop uses. Most fruits and vegetables are actually
                                         "minor use" crops, such as corn and peaches,
                                         and industry does not support the science to
                                         establish tolerances because it is costly.

                                         Tribal Contributions

                                            EPA continues to work closely with its tribal
                                         partners, including members of the Tribal
                                         Pesticide Program Council (TPPC) and others, to
                                         create risk assessment models that capture the
                                         chemical exposure opportunities that may
                                         uniquely attend traditional native American
                                         lifeways.  To support this endeavor, in FY 2002
                                         EPA launched a pilot project to create two new
                                         software  modules for the state-of-the-art risk
                                         assessment software—Lifeline. The tribes in the
                                         Nivalena consortium near Alaska's Lake Iliamna,
                                         and the Blackfeet Reservation in Montana are
                                         working with EPA to provide data to incorporate
                                         into the software that will model risks to those
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FY
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populations. The Tribal Medicine Project (TMP)
is another important tribal risk project supported
by EPA. The TMP sends teams of experts on
pesticide exposure risks and symptoms to Indian
country, where they encourage greater
community awareness of potential pesticide-
related hazards and train tribal health care
providers to identify, prevent, and treat toxic
exposure. There are about 40 tribes with
ongoing pesticide programs. Since tribes are
sovereign governments, there is an increase in
both human health and environmental protection
when a pesticide program is implemented,
where the need is identified. When a tribe
implements a continuing program, it commits to
a pesticide use compliance program plan, with
either direct enforcement under tribal code  or by
referral to EPA in the absence of a specific code.
ASSESSMENTS OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN
   As a result of exceeding FY 2002
performance, the Agency revised its FY 2003
targeted percentage of acre-treatments that used
reduced risk pesticides and will likely adjust the
2004 target. Because the Agency missed its
FY 2002 targets for Registration Eligibility
Decisions and Product Reregistrations, EPA
adjusted its FY 2003 targets and an adjustment to
FY 2004 targets  is likely.
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                                            n-35

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       Goal 3: Safe Food
       FY 2002 Obligations (in thousands):
       EPA Total:                $9,447,202
       Goal 3:                    $112,374
       Goal 3 Share of Total:          1.2%
Summary of FY 2002 Annual Performance
'

3
Goals 1 j 1 Goals
Met I Not Met

1
\ description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
ERA'S
                                                              FY 2002 Costs (in thousands):
                                                              EPA Total:               $7,998,422
                                                              Goal 3 Costs:              $128,817
                                                              Goal 3 Share of Total:           1.6%
           Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
                 Refer to page IV-10 of the Financial Statements for a consolidated statement of net cost by goal.
                     Annual Performance Goals  (APG) and Measures
                                       FY 1999-FY2002  Results
      Strategic Objective: By 2006, Reduce Public Health Risk From Pesticide Residues in Food From Pre-Food Quality
                                         Protection Act (FQPA) Levels (Pre-1996).
                          FY2002 Cost (in thousands): $47,093 (36.6% of FY 2002 Goal 3 Total Costs)

     Progress Toward Strategic Objective: Since 1996, the year FQPA was enacted, EPA has made substantial progress toward reducing
     risk from pesticide residues in food. More than 100 safer pesticides—those which pose less risk to human health and the environment
     than conventional chemical pesticides—have been  registered, substantially increasing the tools farmers have at their disposal to protect
     human health and the environment while ensuring productive agricultural yields. At the same time, use of pesticides that have the
     highest potential to cause cancer and neurotoxic effects has declined  by more than 15% based on survey data. The increasing number
     of safer pesticides on the market,  and the increasing number of acre-treatments using such pesticides, ensure that EPA is on track to
     meet its revised objective to reduce public health risk from pesticides  in food from pre-FQPA levels.
    APG 18      Decrease Risk from Agricultural Pesticides

    FY2002      Decrease adverse risk from agricultural uses from 1995 levels and assure that new
                pesticides that enter the market are safe for humans and the environment through ensuring
                that all registration actions are timely and comply with standards mandated by law.
                Goal Met.

                Performance Measure
                                                                                Planned
                  Register safer chemicals and biopesticides (cumulative).
                                                                                  105
            Actual

     FY2001     Same Goal, different targets. Goal Not Met.

                Performance Measure
                -  Register safer chemicals and biopesticides.
                                                                                   96

     FY2000     Decrease adverse risk from agricultural uses from 1995 levels and assure that new pesticides are
                safe by such actions as registering 6 new chemicals, 2,200 amendments, 600 me-toos, 200 new
                uses, 45 inerts, 375 special registrations, 225 tolerances and 13 reduced risk chemicals/
                biopesticides. Goal Met.
                                                                                   6
                                                                                 2,200
                                                                                  600
                                                                                  200
                                                                                   45
                                                                                  375
                                                                                  225
                                                                                   13
            3,069
            1,106

     FY 1999     Decrease adverse risk from agricultural pesticides from 1995 levels and assure new
                pesticides that enter the market are safe for humans and the environment. No Data.

     FY 2002 Result: In FY 2002 EPA continued to register pest control products, including "safer" pesticides, thus ensuring that growers have an
     adequate number of pest control options available to them.
    APG 19

2  FY2002
«
Reduce Use of Highly Toxic Pesticides

Detections of residues of carcinogenic and cholinesterase inhibiting neurotoxic
pesticides on foods eaten by children will have decreased by 15% (cumulative) from
their average 1994 to 1996 levels. Data Lag.
Planned

  15%
 Actual

  data
available
 in 2003
H-36     EPA's FY 2002 Annual Report
                                                                                      www. epa.gov/ocfo

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FY 2002 Result: Data lag. Data will be available for the FY 2003 Annual Report.
APG20       Reduced Risk Pesticides                                                                 Planned      Actual

FY2002      At least 1% of acre-treatments will use applications of reduced risk pesticides.                  1%         7,5%

FY 2002 Result: Targets for this annual goal were developed without the benefit of experience on their adoption by growers or the impact of
improvements in the registration process. The use of two herbicides—glyphosate and s-metalachlor— greatly exceeded expectations and
contributed to surpassing the target.

    Strategic Objective: By 2008, Use on Food of Current Pesticides That Do Not Meet the New Statutory Standard
                               of "Reasonable Certainty of No Harm"Will Be Eliminated.
                       FY2002 Cost (in thousands): $81,724 (63.4% of FY 2002 Goal 3 Total Costs)

Progress Toward Strategic Objective: EPA is well on the way to meeting the revised objective to substantially eliminate, by 2008, the
use on food of pesticides that do not meet the "reasonable certainty of no harm" standard of the FQPA. Since 1996, 66.9% of the 9,721
tolerances (legal pesticide residue levels on food) have been reassessed using the new standard. More than 72% of 612 reregistration
eligibility decisions have been completed. In particular, the risk of pesticides used on foods frequently eaten by children is decreasing, in
part through work conducted in EPA's tolerance reassessment program.

APG21       Reassess Pesticide Tolerances                                                            Planned      Actual

FY2002      By the end of 2002 EPA will reassess a cumulative 66% of the 9 J21 pesticide tolerances          66%
             required to be reassessed over 10 years.This includes 67% of the 893 tolerances                 67%
             having the greatest potential impact on dietary risks to children.

FY2001      Same Goal, different targets. Goal Not Met,                                                    40%         40%
                                                                                                      46%         44%

FY2000      EPA will reassess 20% of the existing 9,721 tolerances to ensure that they meet the statutory         1,250         121
             standard of "reasonable certainty of no harm." Goal Not Met.

FY1999      Under pesticide reregistration, EPA will reassess 19% (or 1,850) of the existing 9,700 tolerances      1,850        1,445
             (cumulative 33%) for pesticides food uses to meet the new statutory standards of "reasonable
             certainty of no harm." Goal Not Met.

FY 2002 Result: The Agency met its statutory and GPRA deadlines and targets for reassessing tolerances in FY 2002. (Tolerances in general
are  the major portion of the work, and the children's tolerances are a small subset.) Reassessing these tolerances helps ensure that pesticide
residues on foods are safe. EPA expects all  9,721 pesticide tolerances,  including the 893 tolerances of special concern to children, to be
reassessed by the statutory deadline, August 2006.

APG22       Review Pesticides'Active Ingredients                                                      Planned      Actual

FY2002      Assure that pesticides' active ingredients registered prior to 1984 and the products that
             contain them are reviewed to assure adequate protection for human health and the
             environment. Also consider the unique exposure scenarios such as subsistence
             lifestyles of Native Americans in regulatory decisions.

             Performance Measures
             -  Product Reregistration.                                                                  750         314
             -  Reregistration Eligibility Decisions (REDs) (cumulative).                                   76.4%       72.7%

FY 2002 Result: Cumulative risk assessment is a new area of science that requires extensive peer review and several iterations before
becoming final. The cumulative risk assessments themselves are a resource-intensive and time-consuming process. Also, in FY2002
funding was redirected to review and test pesticides for efficacy against anthrax. These factors delayed reregistration efforts. REDs are done
in tandem with the tolerance reassessments and all 612 REDs are on track to be completed by August 2006. Product re registrations are
generally completed 2 years after the RED is done. Therefore, the Agency is on track to complete product reregistrations by 2008. The total
number of REDs completed to date is 443; 169 remain to be done. The relationship of product registration to REDs is that one RED can
result in any numberof product registrations (from one to many). Fewer REDs completed will result in fewerfuture product registrations.
Because the Agency missed its FY 2002 targets for REDs and Product Reregistrations, EPA adjusted its FY 2003 targets and an adjustment
to FY 2004 targets is likely.

                         FY 2001 Annual Performance Goals (No Longer Reported for FY 2002)

Provide timely decisions to the pesticide industry on the registration of active ingredients for conventional pesticides including tolerance
setting, product registrations and inert ingredients.
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    Notes:
          Tolerances and Exemptions for Pesticide Chemical
          Residues, Food Quality Protection Act of 1996,
          sec. 408 [6a](a) Requirement for Tolerance or
          Exemptions.

          The new safety standard, provided in section
          408(b)(2)(A)(ii) of the FQPA, is a "reasonable
          certainty of no harm" standard for aggregate
          exposure using dietary residues and all other
          reliable exposure information.

          U.S. EPA, The Office of Pesticide Programs' Policy
          on Determination of the Appropriate FQPA Safety
          Factor(s) for Use in the Tolerance-Setting Process,
          draft document, 64 FR 48617 (Washington, DC:
          Office of Pesticide Programs, Office of Prevention,
          Pesticides, and Toxic Substances, May 10, 1999).
          Available at http://www.epa.gov/scipoly/sap/
          1999/may/lOxpoli.pdf.

          C.T Whitman, Directive on Implementation of
          EPA Obligations Under the Consent Decree in
          NRDCv. Whitman, March 19, 2001.
n-38     lU'A's FY 2002                                                                               www.epa.gov/ocfo

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        GOAL 4: PREVENTING POLLUTION AND REDUCING RISKS IN
         COMMUNITIES, HOMES, WORKPLACES, AND ECOSYSTEMS
PROGRESS TOWARD THE STRATEGIC GOAL
AND OBJECTIVES

   EPA is on track to meet most of its strategic
objectives toward its goal of ensuring cleaner
and safer environments by preventing pollution
before it occurs and reducing human and
ecosystem risks from pollutants that cannot be
eliminated at their source. EPA's work under this
goal spans six strategic objectives that follow a
risk identification, reduction, and elimination
progression:

•  Screening new and existing chemicals to
   identify potential for human and ecological
   risks.

•  Assessing environmental conditions on tribal
   lands to identify need for action.
•  Improving indoor air quality to rid homes,
   schools, and workplaces of indoor
   environmental pollutants and to reduce
   asthma incidents.
•  Reducing the incidence of childhood lead
   poisoning and human exposure to
   polychlorinated biphenyls (PCBs), dioxin,
   and asbestos, as well as other chemicals of
   concern.

•  Reducing pesticide risks to workers,
   consumers, and ecosystems.
•  Preventing, recycling, and reducing wastes
   and toxic chemicals.

   EPA's Chemical-Right-To-Know Program
focuses on providing the public with information
on the basic health and environmental effects of
the 2,800 highest production volume chemicals
in the United States. More than 300 companies
and 101 consortia have voluntarily accepted the
challenge to address the absence of and need
for screening-level data for more than
2,100 high-production-volume (HPV) chemicals
by 2005, with the remaining to be addressed by
international and government actions. In
FY 2002 EPA continued to make health and
environmental effects screening data publicly
available for more than 800 industrial and
commercial chemicals, making steady progress
toward its objective of screening existing
chemicals to identify potential human and
ecological hazards and risks.1 EPA also continued
its work to evaluate potential risk of 20 chemicals
to which children have a high likelihood of
exposure.2
   In connection with assessing conditions on
tribal lands, EPA's American Indian
Environmental Office (AIEO) has made
tremendous progress in developing an electronic
baseline assessment system used to access tribal
environmental information.3 In addition to
providing a picture of environmental conditions
in Indian Country, this baseline assessment
profile will provide indicators of the progress of
tribal environmental programs in contributing to
the Agency's strategic goals and objectives. EPA
deployed the Tribal Information Management
System (TIMS) as an Intranet application in
September 2001 and can now extract
environmental information tribe by tribe or by
using tribal boundaries. TIMS currently has
completed profiles for 300 tribes. In addition to
TIMS, AIEO has developed a GPRA performance
measure tracking system called the Tribal
Accountability Tracking System and a tracking
system for the General Assistance Program
(GAP) grants program.
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       In FY 2002 EPA continued to make progress
    toward its strategic objective of improving indoor
    air quality. By reducing the exposure of children
    with asthma to indoor environmental triggers and
    to secondhand smoke in their homes, EPA seeks
    to protect a particularly vulnerable sector of the
    population.4 EPA is also making progress in
    promoting the adoption of good indoor air
    quality management in schools and commercial
    buildings and in reducing the exposure of all
    Americans to elevated levels of radon in their
    homes.5

       EPA has made great strides in reducing the
    incidence of childhood lead poisoning through a
    combination of rulemaking, education, research,
    and partnerships. According to blood lead level
    data from the National Health and Nutrition
    Examination Survey for children
    1 to 5 years of age, the incidence of children
    with elevated blood lead levels dropped in the
    last decade.6 In addition, the geometric mean
    blood level for children ages 1 to 5 years
    decreased from 15 u/dL to 2 u/dL from 1980 to
    1999.
       EPA has made significant progress in
    reducing pesticide risks to workers, consumers,
    and ecosystems through a wide array of environ-
    mental programs. The Agency is ensuring that
    pesticides pose less risk to groundwater through
    careful management of pesticides with high
    leaching and persistence potential. EPA
    identified 31 such pesticides. Twenty-one of
    those pesticides were managed through
    FY 2002. The development and implementation
    of environmentally friendly model partnership
    pilot projects under the Strategic Agricultural
    Initiative, as well as Pesticide Environmental
    Stewardship strategies developed by voluntary
    partners, have encouraged a transition to safer
    pesticides. In a new measure for FY 2002, the
    Agency found that the use of pesticides that it
    considers safer increased to an estimated
    7.5 percent of all agricultural pesticide acre-
    treatments in 2001 based on data reported in
    FY 2002, an increase from 3.6 percent in 1998.

       EPA also made continued progress in
    achieving its 50 percent priority chemicals
    reduction target and in meeting the Municipal
    Solid Waste recycling goal.  In 2002 EPA
launched the Resource Conservation Challenge
(RCC), which targets 30 waste minimization
priority chemicals and urged all Americans to
join in conserving resources by reducing waste
and increasing recycling.7 The RCC is the
umbrella for initiatives that target waste
reduction and recycling. Through these
initiatives, EPA works directly with state and
local governments, businesses, industry, and the
public to reduce waste generation. In several
ways, states continue to be instrumental to
achievement of the national recycling goal.
States participate with EPA as WasteWise
partners and endorsers, implement EPA's
Comprehensive Procurement Guidelines by
purchasing goods made from recycled materials,
actively support America Recycles Day, and
provide training, support, and oversight for local
recycling programs. Other EPA programs such as
the Green Chemistry Challenge Awards, Design
for the Environment, Hospitals for a Healthy
Environment, and National Environmental
Performance Track are achieving significant
progress in reducing the amount of toxic
substances and waste released into the
environment. For example, EPA Region 2
Performance Track facilities have collectively
reduced the generation of hazardous waste in
their area by more than 20 million pounds
through process and design changes, equipment
upgrades, and  efficiency improvements.8

FY 2002 PERFORMANCE

Risk Identification

   Hazard identification is an essential initial
step in the risk-reduction process. In FY 2002
EPA's HPV Challenge Program continued to
provide health and environmental effects
screening data  for more than 800 industrial and
commercial chemicals. EPA's efforts in making
these data available on the Agency's HPV Web
site kept pace with the unprecedented volume
of data submitted by industry participants.9
   EPA also established the Voluntary Children's
Chemical Evaluation Program (VCCEP), under
which 35 chemical manufacturers and
10 consortia volunteered to develop risk
assessment and additional data for 20 chemicals
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to which children have a high likelihood of
exposure.10 In FY 2002 EPA and the American
Chemistry Council conducted a technical
workshop to assist industry in formulating and
reporting exposure information on chemicals
sponsored under the pilot program. In addition,
in FY 2002 the Toxicology for Excellence in
Risk Assessment (TERA) group, through a
cooperative agreement with EPA, solicited and
approved members for the peer review panel
that will convene to review submissions on
sponsored chemicals in FY 2003.

    The Agency also worked to identify risks
posed by endocrine disrupters—chemicals that
may cause adverse  effects in humans and
wildlife.  In FY 2002 EPA continued to move
forward with evaluation and validation of test
methods focused on identifying and assessing
potential endocrine-disrupting chemicals.

    In FY 2002 EPA electronically published
environmental profiles for all 565 federally
recognized tribes as part of the Tribal Baseline
Assessment Project.11 Of those profiles  331 are
complete, including history, maps, geographic
dimensions, inventories of regulated facilities,
governmental structure, descriptions of
wastewater and drinking water facilities, grant
activities, and status of environmental programs
for each tribe.

Risk Reduction and Elimination

    Where potential risks are identified, EPA
pursues three strategies for reducing or
eliminating them. The Agency's first choice is to
prevent risks from occurring in the first place by
eliminating pollution at the source. Second,
when pollution cannot be eliminated at the
source, EPA applies several risk reduction
strategies: education and outreach, partnership
and collaboration, regulation, and international
negotiation. Third, once wastes are produced,
there is still an opportunity for recycling or
reuse.12
    Part of the Agency's pollution prevention
efforts in FY 2002 was the public release of the
PBT (persistent bioaccumulative toxics)
Profiler,13 which received accolades from both
industry and environmentalists.14 In the brief
            CHEMICAL TERRORISM:
    INCREASING EMERGENCY PREPAREDNESS

   To prepare for catastrophes that might occur
   and to improve the Nation's incident response
   capabilities, EPA leads nine federal agencies,
   six  states,  member countries of the
   Organisation for Economic Co-operation and
   Development, and numerous other experts from
   private industry and other non-governmental
   organizations in developing Acute Exposure
   Guideline Levels (AEGLs) for chemicals in
   commerce.3 The AEGL values represent three
   tiers of health effects endpoints (discomfort,
   disability, and death) for five different exposure
   durations (10 and 30 minutes, 1, 4, and 8 hours)
   to  provide maximum flexibility  and
   applicability to chemical emergency planners
   and responders. To date the program has
   developed AEGLs for about 90 chemicals with
   Proposed, Interim, or Final status. The Agency
   continues to assess the remaining 300 extremely
   hazardous substances.13

   a U.S. EPA Office of Prevention, Pesticides, and Toxic
    Substances. Overview of the Acute Exposure
    Guideline Levels (AEGL) Program. June 2002.
   b U.S. EPA Acute Exposure Guideline Limits (AEGL)
    Tracking System, Office of Pollution Prevention and
    Toxics.
period of time between the PBT Profiler's public
release on September 25, 2002, and mid-
November 2002, industry conducted more than
3,750 chemical-specific PBT analyses.15
A component of EPA's Pollution Prevention
Assessment Framework, the PBT Profiler is a
screening-level tool that estimates persistence,
bioaccumulation, and fish chronic toxicity. Use
of this tool informs decision making at early
stages of new chemical development and
promotes the selection and application of safer
chemicals and processes, thus reducing
product development costs and increasing
pollution prevention benefits.

   In addition, EPA made substantial progress in
reducing potential health and environmental
risks posed by a number of chemicals already in
commerce. For example, in the case of
perfluorooctanyl sulfonate (PFOS) chemicals,
EPA followed up 3M's voluntary phase-out of
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                    CHALLENGES:
          KEY STRATEGY FOR REDUCING RISKS

      EPA's challenges to industry, academia, and
      others to seek new ways to reduce risk are
      increasingly effective. Pollution prevented
      by EPA's Green Chemistry Challenge Award
      winners reached new levels through the 2002
      award cycle.a Results included reduced
      quantity of hazardous chemicals and solvents
      in the environment through the adoption of
      safer  chemicals and  greener technologies.
      Since 1996 more  than 250 million pounds
      and 25 million gallons of hazardous solvents
      were  eliminated  and 2 billion gallons of
      water were saved.
      aU.S. Environmental Protection Agency, Green
       Chemistry. Office of Pollution Prevention and Toxics.
       Information available on the Internet:
       Onto: /Avww. epa. gov/opptintr/greenchemistrv).
    these chemicals with Toxic Substances Control
    Act (TSCA) Significant New Use Rules (SNURs)
    addressing 88 PFOS-related chemicals.16 The
    SNURs establish a 90-day notification process for
    companies interested in manufacturing or
    importing the listed chemicals for new uses
    other than those specifically excluded in the
    rules. The required notice provides EPA with
    the opportunity to evaluate the intended use
    and, if necessary, to prohibit or limit that use
    before it occurs.17
       The Design for the Environment (DfE)
    Program demonstrated the effectiveness of its
    best practices approach by helping auto body
    shops reduce emissions of and exposure to
    diisocyanates and other hazardous air
    pollutants.18 Diisocyanates are the leading cause
    of occupational asthma.19 In the past several
:,   years, DfE has conducted more than 50 best
    practices  site visits. Over 75 percent of visited
    shops show improved practices and better
:    protection of their workers and the neighboring
    community.20 To build on this success and reach
    out to the more than 50,000 auto body shops
u   across the country, DfE is conducting train-the-
7   trainer workshops for regional and state
^   technical  assistance providers in FYs 2002 and
1   2003.
   DfE also published two Cleaner Technologies
Substitutes Assessments on flexographic printing
inks and foam adhesives, which are spurring
adoption of cleaner formulations and the
innovation of even cleaner ones.21 For example,
prior to the Foam Adhesives Partnership,22 the
predominant solvent used in adhesive
formulations was methylene chloride, a
hazardous air pollutant and a suspected human
carcinogen. In part based on the DfE study, use
of methylene chloride in foam adhesives has
dropped by more than 80 percent (from
46 million pounds in 1997 to 8 million pounds in
2001). The DfE Program also formed a
partnership with the broader electronics industry
in FY 2002, at the industry's request, to begin a
life-cycle assessment of lead-free alternatives to
the traditional tin-lead solder now used in
virtually all electronic products.23
   The Environmental Leadership Program in
the National Parks Intermountain Region is a joint
venture between EPA and the National Park
Service of the Department of the Interior (DOI),
which won the 2002 Most Valuable Pollution
Prevention (MVP 2) Partnership Award from the
National Pollution Prevention Roundtable.24This
innovative partnership between EPA Region 8
and the National Park Service delivered pollution
prevention tools, training, and technical
assistance to 90 parks in the Intermountain
Region, including Rocky Mountain, Bryce
Canyon, and Grand Canyon National Parks.
Examples of the partnership's success include an
integrated solid waste management program that
saved the parks thousands of dollars while
setting up recycling centers in many locations;  a
hazard communication program that trained
3,000 employees on chemical preparedness; a
green purchasing program for environmentally
sound products; a clean-out manual on how to
remove, dispose of, and recycle unwanted
chemicals; and the first environmental
management system in the DOI based on EPA's
Performance Track program.25 Another
successful partnership was achieved between
the Department of Defense (DOD) and the
southeastern states' pollution prevention
programs. Two million dollars of DOD funds
were supplied to state partners to initiate
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pollution prevention (P2) research projects at
military facilities in FY 2002. This partnership
represents DOD's first effort to link P2 resources
in state universities to facilities in those states.26
   EPA will continue to conduct education and
outreach programs to inform and educate the
public about the health risks posed by poor
indoor air quality. In FY 2002 EPA launched a
national campaign to protect children from
secondhand smoke by motivating millions of
parents to pledge to keep their homes smoke-
free. It is estimated that 15 million children are
                            exposed on a
                            daily basis to
                            secondhand
                            smoke.27 The
                            Smoke-Free
                            Home Pledge
                            initiative includes
                            a national
                            advertising
                            campaign coupled
                            with a major
                            outreach effort
                            cosponsored by
                            EPA and key
medical, consumer, and community
organizations.28 In addition, mold continues to be
one of the highest concerns for people in their
indoor environments. In FY 2002 EPA released
current guidance to the public on mold in A Brief
Guide to Mold, Moisture, and Your Home29 The
guide, available at http://www.epa.gov/iaq/
molds/images/moldguide. pdf. provides
information and guidance to homeowners and
renters on how to clean up residential mold
problems and how to prevent mold growth.30
EPA also released the  report Healthy Buildings,
Healthy People: A  Vision for the 21st Century, a
cross-Agency effort that includes comments from
more than 300 stakeholders.31 The report focuses
on why human health indoors deserves the
scrutiny, concern, and action of policy makers. It
also provides information on actions and
strategies that can be  taken to protect people
indoors. EPA has already undertaken program
initiatives focusing on childhood asthma,
characterizing the effect of building and
consumer products for use in schools, creating
voluntary guidance for existing buildings, and
designing indoor air quality guidance that can be
applied by architects and engineers when
planning new schools and major renovations.32
   EPA's campaign to reduce the incidence of
childhood lead poisoning through regulatory
and extensive  outreach efforts has realized
significant results. The consolidation of 1999
National Health and Nutrition Examination
Survey data with 2000 data (made public in the
summer of 2002)  revealed that the incidence of
children with elevated blood lead levels dropped
during the 1990s.33 The median concentration of
lead in the blood of children 5 years old and
younger dropped from 15  micrograms per
deciliter (u/dL) between 1976 and 1980 to
1.9 u/dL in 1999,  a decline of 87 percent.
   In FY 2002 EPA also made significant
progress in promoting Integrated Pest
Management (IPM) in schools and day care
facilities, with the goal of reducing the risk of
both pesticides and pests to children. EPA grant
funding supported a partnership of 14 land grant
universities that aided in the development of
comprehensive IPM guidance documents, which
enabled state agencies to more efficiently
operate their IPM programs. Currently, 33 states
and more than 400 school districts have policies
and/or laws relating to the adoption of IPM in
schools. More than 1 million children attend
schools that use IPM according to the Monroe
Model, that has been replicated in several states,
such as Indiana, Alabama, Florida, Nevada,
California, and Arizona (including Navajo Nation/
Bureau of Indian Affairs Schools). The Monroe
Model is the IPM program developed for the
Monroe County, Indiana, school system. Monroe
County is a Pesticide Environmental Stewardship
Program (PESP) partner that received seed
funding from the PESP program through grants
with the National Foundation for IPM Education.
These schools report a 90 percent reduction in
pesticide applications, while at the same time
achieving a 90 percent reduction in pest problems
and a reduction in cost for pest management.
   EPA has targeted reduction and elimination
efforts for chemicals that persist, accumulate
through the food chain, and are toxic to humans



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                          Performance Results
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•-•It"
"3
or are environmental receptors (PBTs.) In
FY 2002 EPA launched the Hospitals for a
Healthy Environment (H2E) program, seeking to
eliminate use of mercury by hospitals and cut
waste generation in half. More than
1,000 facilities enrolled in the first year—five
times more than expected—prompting the
Agency to raise expectations for its FY 2003
and FY 2004 annual performance measure
targets.34 EPA is also targeting the reduction of
30 priority chemicals through hazardous waste
minimization. The National Waste Minimization
Voluntary Program, initiated in FY 2002 as part
of the RCC, is seeking industry partners to
eliminate or reduce the generation of priority
chemicals typically found in hazardous waste.
This effort would result in the generation of
less hazardous waste and a reduction in the
likelihood of exposures to toxic chemicals. The
Agency expects to have between 50 and 100
members enrolled by 2004 and expects to
continue the program beyond 2004.35
   Once wastes are produced, there is still an
opportunity to recycle or otherwise reuse them.
Data reported in FY 2002  reflect that the
2000 national Municipal Solid Waste (MSW)
recycling rate increased to 30 percent.36 This
figure reflects the diversion of 69.9 million tons
of MSW from the waste  stream and the
conservation of 159 million cubic yards of
landfill capacity.37 Reducing the amount of MSW
that goes to landfills by recycling saves
resources, such as the number of trees milled to
produce lumber and paper goods and the
amount of metals mined and tailings produced to
create new cans. At the  same time, by providing
feedstock, increased recycling enhances the
viability of the recycling and reuse industry, a
key segment of the Nation's manufacturing base.
Data compiled from 1997  through 1999 indicate
that recycling and reuse contribute more than
1.1 million jobs to the economy with a
$37 billion annual payroll and $236 billion in
gross annual sales.38

Research Contributions

   FY 2002  research focused on improving
EPA's understanding of health risks and reducing
community and wildlife exposures to
environmental stressors. EPA produced a report
for Agency use on ecological risk assessment
methods that shows the extent to which acutely
toxic effects  of pesticides and crop management
practices on  non-target birds can be used to
project health impacts on wildlife populations in
complex agricultural landscapes.39 EPA also
performed studies on the variability and value of
newly developed biological indicators in
determining  the endocrine-disrupting potential of
various pesticides. EPA's research on new
molecular biological indicators will help the
Agency detect and protect the public from
pesticides that induce genetic changes
characteristic of those caused by endocrine-
disrupting chemicals.

   EPA continued to move forward with
evaluation and validation of test methods for
identifying and assessing potential endocrine
disrupting chemicals. In FY 2002 EPA completed
and presented to one of its advisory committees,
the Endocrine Disruptor Methods Validation
Subcommittee, detailed review papers
summarizing what is known in the  literature for
13 assays.40 All 13 assays are in various stages of
pre-validation, optimization, and standardization.

STATE AND TRIBAL PARTNER
CONTRIBUTIONS

State Contributions

   States significantly contributed to achieving
EPA's goal to lower children's blood lead levels
and reduce childhood lead poisoning. Partnering
with 36 states,  EPA made substantial progress
toward its goal of establishing a national cadre of
trained and certified lead-based paint abatement
professionals.  By the end of FY 2002,  more than
4,000 workers were certified to employ EPA-
required and recommended work practices to
reduce the primary remaining source of
children's exposure to lead.41
   States have primary enforcement
responsibility for the Pesticides Certification and
Training programs as well as the Worker
Protection Program under the Federal Insecticide,
Fungicide, and Rodenticide Act, as amended.
The states' role is critical to the health and safety
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of applicators and workers who have the highest
degree of potential exposure to pesticides. The
Worker Protection Program has an enormous
scope, reaching more than 3.5 million workers at
over 560,000 workplaces.42

Tribal Contributions

   Through its Jobs Through Recycling program,
EPA partners with a number of nonprofit
organizations, including some in tribal nations, to
successfully demonstrate the ability of recycling
practices to create job and business opportunities.
EPA's high-visibility WasteWise program serves
as a vehicle for the Agency's 1,250 partners to
enhance, measure, and obtain recognition for
their proactive achievements in waste reduction
and recycling.43 WasteWise partners are diverse,
representing all sizes of businesses, government
agencies at all levels, tribal nations, and
nonprofit organizations. By showing cost savings
through waste reduction and recycling, partners
are protecting the environment while  enhancing
the economy both locally and nationally.
   In FY 2002 the Federal Geographic Data
Committee organized a Tribal Data Working
Group, an interagency effort to promote tribal
data coordination and compatibility throughout
the federal government in assessing
environmental conditions in Indian Country. EPA
also provided $52.5 million in Indian GAP grants
that will support the work of at least one person
in about 75 percent of all federally recognized
tribes or intertribal consortia in building
understanding about the environment and
helping to set tribal priorities. Creating a strong,
sustainable environment for the future based on
sound, quality information is an important
objective for EPA's tribal partners.

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN

   There are no changes to FY 2003 APGs
based on the results of FY 2002 performance.
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       Goal 4: Preventing Pollution
                    and Reducing Risks

       FY 2002 Obligations (in thousands):
                                                                    Summary of FY 2002 Annual Performance Goals
                                                                                      I Goals
                                                                                       Not Met
                               Data
                               Lags
                                                                 i description of the quality of the data used to measure EPA's
                                                                       performance can be found in Appendix B.
       EPA Total:
       Goal 4:
       Goal 4 Share of Total:
                           $9,447,202
                             $322,442
                                                                         FY 2002 Costs (in thousands):
EPA Total:                $7,998,422
Goal 4 Costs:               $309,196
Goal 4 Share of Total:          3.8%
           Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
                 Refer to page IV-10 of the Financial Statements for a consolidated statement of net cost by goal.
                     Annual Performance Goals (APG) and  Measures
                                       FY1999-FY 2002 Results
       Strategic Objective: By 2005, Public and Ecosystem Risk From Pesticides Will Be Reduced Through Migration to
         Lower-Risk Pesticides and Pesticide Management Practices, Improving Education of the Public and At Risk
                 Workers, and Forming "Pesticide Environmental Partnerships"With Pesticide User Groups.
                          FY2002 Cost (in thousands): $51,487 (16.7% of FY 2002 Goal 4 Total Costs)

     Progress Toward Strategic Objective: EPA continued to make significant progress toward fulfilling this objective in FY 2002 and is on
     target to achieve its goals through a wide array of environmental programs. EPA's Strategic Agricultural Initiative, in which states,
     academia, and grower groups develop and implement model agricultural partnership pilot projects, is providing a highly visible platform
     for environmentally friendly agricultural projects. In addition, the Pesticide Environmental Stewardship Program has approved
     120 strategies developed by voluntary partners in both agricultural and nonagricultural settings, which are made available to the public
     through EPA's Web site (http://www.epa.gov/oppbppd1/PESP/). EPA is also working to ensure that pesticides pose less risk to the
     Nation's groundwater through careful management of those pesticides with high leaching and persistence potential. In addition, EPA is
     working to reduce the risk of pesticides to human health and the environment, by registering safer pesticides (those registered through
     the Reduced Risk Initiative and biopesticides).
    APG 23

    FY 2002
           Agricultural Partnership
                  Planned
            Implementation of 10-15 additional model agricultural partnership projects that           10-15
            demonstrate and facilitate the adoption of farm management decisions and practices that
            provide growers with a "reasonable transition" away from the highest risk pesticides.
            Goal Met.

FY 2002 Result: EPA implemented 12 strategic agricultural projects.
Actual





          Strategic Objective: By 2007, Significantly Reduce the Incidence of Childhood Lead Poisoning and Reduce
            Risks Associated With Polychlorinated Biphenlys (PCBs), Mercury, Dioxin, and Other Toxic Chemicals
                                                  of National Concern.
                          FY2002 Cost (in thousands): $37,062 (12.0% of FY 2002 Goal 4 Total Costs)

     Progress Toward Strategic Objective: The Agency is making significant progress toward the objective of reducing the incidence of
     childhood lead poisoning, from approximately 900,000 children under 6 years of age to under 200,000 by 2007, through its regulatory
     and outreach efforts. The 1999 National Health and Nutrition Examination Survey (NHANES) data reveal that the median concentration
     of lead in the blood of children 5 years old and under dropped from 15 micrograms per deciliter (ug/dL) between 1976 and 1980 to
     1.9 ug/dL in 1999, a decline of 87%. However, even when  the 1999 NHANES data are combined with the 2000 NHANES data made
     public in the summer of 2002, there are insufficient numbers of observations in the samples to report an estimate of the number of
     children 5 years old and under with levels of 10 ug/dL in 1999/2000. This suggests that the number of such children nationally has been
     reduced dramatically from the early 1990s, though development of a reportable estimate must now wait at least until the 2001 NHANES
     data can be added to the combined sample. EPA's efforts, through state partnerships, contributed partly to this reduction through the
     certification of more than 4,500 workers to employ EPA-required and recommended lead-based paint abatement practices.

     Risk reduction efforts for other National Program Chemicals such as PCBs, mercury, asbestos, and dioxin continue to meet the mandates
     underTSCA and fulfill the commitments made in domestic and international agreements. Approximately 98,000 PCB-contaminated capacitors
     and approximately 53,000 PCB-contaminated transformers were disposed of in permitted facilities between 1996 and 2000,  continuing
     progress toward EPA's 2007 targets for PCB capacitors.
H-46     EPA's FY 2002 Annual Report
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APG 24      Lead Certification and Training of Lead Abatement                                      Planned     Actual

FY2002      Implement certification and training of lead abatement professionals.  Goal Met,

             Performance Measure
             -  Certified nationally (federally-administered and state-administered program).               4,000        4,574

FY 2002 Result: In FY 2002, 4,574 lead abatement officials were nationally certified. EPA exceeded its FY 2002 target for this measure as a result
of the response by lead-based paint abatement professionals to the Agency's and states' efforts to train and certify proficiency in lead-based paint
abatement techniques, which was greater than anticipated. Targets for future performance under this goal have been increased accordingly.

   Strategic Objective: By 2007, Prevent or Restrict Introduction into Commerce of Chemicals That Pose Risks to
       Workers, Consumers, or the Environment and Continue Screening and Evaluating Chemicals Already in
                                             Commerce for Potential Risk.
                       FY2002 Cost (in thousands): $77,788 (25.1% of FY 2002 Goal 4 Total Costs)

Progress Toward Strategic Objective: EPA is making progress toward this strategic  objective by safeguarding the entry of new
chemicals  into commerce and providing screening tools through the Agency's Pollution Prevention Assessment Framework. These tools
inform decision-making at early stages of new chemical development and promote the selection and application of safer chemicals and
processes, thus reducing product development costs and increasing pollution prevention benefits. EPA's  High Production Volume (HPV)
Challenge  Program  continued to provide health and environmental effects screening data for more than 800 industrial and commercial
chemicals—supplying input to hazard identification efforts (http://www.epa.gov/chemrtk/viewsrch.htm). More than  300 companies and
101 consortia have  accepted the voluntary challenge to address the absence of and need  for screening-level data for more than
2,100 of the 2,800 HPVs by 2005. Concurrently, EPA established the Voluntary Children's Chemical Evaluation Program  (VCCEP), under
which 35 chemical manufacturers volunteered to develop risk assessment and additional data needs for 20 chemicals to which children
have a  high likelihood of exposure. In addition, EPA reduced potential health and environmental risks associated with a number of
chemicals  already in commerce. For example, in the case of perfluorooctanyl sulfonate (PFOS) chemicals, EPA followed up industry's
voluntary phase-out of these chemicals with TSCA Significant New Use Rules (SNURs) addressing 88 PFOS-related chemicals.

APG 25       New Chemicals and Microorganisms Review                                              Planned      Actual

FY2002      Of the approximately 1,800 applications for new chemicals and microorganisms submitted      1,800
             by industry, ensure those marketed are safe for humans and the environment. Increase
             proportion of commercial chemicals that have undergone pre-manufacture notice review
             to signify they are properly managed and may be potential green alternatives to existing
             chemicals.  Goal  Met.

FY2001      Same Goal.  Goal Met                                                                     1,800       1,770*

FY2000      Same Goal.  Goal Met,                                                                    1,800         1,838

FY1999      Same Goal.  Goal Met                                                                    1,800        1,717*

FY 2002 Result: EPA reviewed all  1,943 Pre-manufacturing Notices (PMNs) received during FY 2002. At the end  of  2002, 21.5% of all
chemicals in commerce had been assessed for risks. Many of these chemicals also may  be "green" alternatives to existing chemicals in
commerce, thus reducing these chemicals' impact on human health and the environment.

*Note: While the actual number of chemicals for which PMNs were reviewed is lower than the target, the target was set to reflect EPA's
commitment to comply with statutorally-mandated 90-day  reviews of all  PMNs submitted in  1999 and 2001, which  it did. Under the Toxic
Substances Control  Act,  EPA does not control the pace at which companies submit PMNs for review, but it does control the pace at which it
completes  such reviews. Accordingly, the Agency has determined this performance goal to have been met.

APG 26       Chemical Right to Know Initiative                                                        Planned      Actual

FY2002      Provide information and analytical tools to the public for accessing the risk posed by
             toxic chemicals. Goal Met,

             Performance Measure
            -  Make screening quality health and environmental effects data publicly available            10% data       843
               for 2,800 HPV chemicals (cumulative).                                                   (280
                                                                                                  chemicals)

FY2001     EPA will make publicly available data from test plans submitted by industry or chemicals
            already in commerce. Goal Met,

            Performance Measure
             -  Through chemical testing program, obtain test data for high production volume chemicals           800
               on master testing list.

FY 2002 Result: In FY 2002 screening quality health and environmental effects data were made available for 843 HPV chemicals, vastly
exceeding EPA's annual goal. Companies voluntarily reported more than 30% of the total cumulative requirement (20% above the annual target).


www.epa.gov/ocfo                                                                                  Performance Results      n-47

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     *Note: While the actual number of chemicals for which test data were obtained was lower than the target, the target was set to reflect
     EPA's commitment to make publicly available all test data that it received from companies in 2001, which it did. Under the HPV Challenge
     voluntary program, EPA does not control the pace at which companies submit their test data, but it does control the pace at which such
     data are made public. Accordingly, the Agency determined this performance goal to have been met.

       Strategic Objective: By 2005,16 Million More Americans Than in 1994 Will LiveorWorkin Homes, Schools, or Office
                                               Buildings With Healthier Indoor Air.
                            FY2002 Cost (in thousands): $38,397 (12.4% of FY2002 Goal 4 Total Costs)

     Progress Toward Strategic Objective: In FY 2002 EPA continued to make progress in the areas of reducing the exposure of children with
     asthma to indoor environmental triggers, reducing all Americans' exposure to elevated levels of radon in their homes, reducing the exposure of
     children to secondhand smoke in their residences, and promoting the adoption of good indoor air quality management in schools and
     commercial buildings. While the data on which EPA evaluates its FY 2002 progress toward the objective are not yet available for 2002, the
     Agency is on track in meeting its goal for improving the indoor conditions for 16 million Americans in their homes, schools, and offices.
     APG 27      Healthier Residential Indoor Air

     FY2002      834,400 additional people will be living in healthier residential indoor environments.
                 Data Lag.
                                                                                             Planned

                                                                                             834,400
              Actual

               data
            available
             in 2003
     FY2001
       Same Goal. Goal Met,
 890,000
     FY2000
       Same Goal. Goal Met.
 890,000
     FY1999
       Same Goal, different targets. Goal Met,
 700,000
     FY 2002 Result: Based on feedback received to date, EPA is making progress in reducing radon exposure in homes. EPA will implement a
     survey to measure asthma and ETS results. These data will be available in late 2003 and will be reported on in the FY 2003 Annual Report. (Data
     sources: National Association of Home Builders Research Center Survey (January 2002); National Radon Residential Study 1989-1990, EPA402-R-
     92-011 (October 1992); National Radon Results: 1985-1999; IAQ Practices in Office Buildings Survey, OMB 2060-0436 (October2001).)
APG 28
FY2002
Healthier Indoor Air in Schools
1,228,500 students, faculty and staff will experience improved indoor air quality in
their schools. Data Lag.
Planned
1,228,500
Actual
data
available
in 2003
     FY2001
       Same Goal, different targets. Goal Met.
1,930,000
     FY2000
       Same Goal, different targets. Goal Met,
2,580,000   2,600,000
     FY2002 Result: EPA is on track to meet this APG. The number of schools adopting indoor air quality management plans, a key component of
     the Indoor Air Quality Tools for Schools kit, continued to increase in FY2002 based on feedback received to date. EPA will determine FY 2002
     performance in calendar year 2003 once final survey results become available.
                                                                                 Til Nun-Kcrvclrd task- Trend: FY i»»2	2000
       Strategic Objective: By 2005, Facilitate the Prevention, Reduction, and Recycling of Toxic Chemicals and Municipal
         Solid Wastes, Including Persistent, BioaccumulativeToxicants (PBTs). In Particular, Reduce By 20% the Actual
        (From 1992 Levels) and By 30% the Production-Adjusted (From 1998 Levels) Quantity of Toxic Release Inventory
      (TRI)-ReportedToxic Pollutants Which Are Released, Disposed of,Treated, or Combusted For Energy Recovery, Half
                                                   Through Source Reduction.
                             FY2002 Cost (in thousands): $46,623 (15.1% of FY2002 Goal 4 Total Costs)

     Progress Toward Strategic Objective: EPA is making progress toward this strategic objective. In September 2002 EPA launched its
     Resource Conservation Challenge, a major national effort inviting all Americans to join in
     conserving resources by reducing waste and increasing recycling. In the coming months,
     EPA will form partnerships, conduct an intense educational campaign, and demonstrate
     progress in conserving our natural resources through waste reduction and recycling. For the
     30 waste minimization priority chemicals tracked by EPA and included in the Challenge,
     there was a 44% reduction in the reported Toxics Release Inventory (TRI) volume generated
     between 1991 and 1998.This reduction, coupled with the ongoing efforts of the Resource
     Conservation Challenge, illustrates EPA's continued progress toward achieving its 50%
     source reduction objective by 2005. Through EPA's Green Chemistry Challenge Program,
     initiated in 1996, more than 250 million pounds and 25 million gallons of hazardous solvents
     were eliminated and 2 billion gallons of water were saved. Another major step toward source
     reduction has occurred through EPA's Hospitals fora Healthy Environment (H2E) program.
     Launched in FY 2002, the H2E program seeks to eliminate use of mercury by hospitals and
     cut waste generation in half; more than 330 partners representing more than 1,000 facilities
     enrolled in FY 2002, far surpassing the Agency's expectations.
                                                                            | 12

                                                                           §110
                                                                                 20% Reduction Target:
                                                                                  7.980,785,074
                                                                                 30% Reduction Target:
                                                                                  4,938,558,414
                                                                                 Projected-Actual IDS
                                                                                1992 1993 1994 1995  1996 1997 1998 1999 2000
                                                                                              Fiscal Year
n-4s
lil'A's IT 2002 Annual Report
        www. epa.gov/ocfo

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EPA's progress toward reduction of TRI pollutants is uncertain. The aggregate change in TRI non-recycled wastes since 1992 is
unknown due to a significant reporting error uncovered subsequent to the release of the 2000 TRI reporting data.  It is difficult to predict
with accuracy the number of pounds of pollutants released in any given year due to fluctuations in production, reporting system rules,
and estimation  methods. The long-term trend, however, is a continued reduction of pollutants released into the environment.
APG29
FY2002
FY2001
Toxic Release Inventory (TRI) Pollutants Released
The quantity of TRI pollutants released, disposed of, treated or combusted for energy
recovery in 2002 (normalized for changes in industrial production) will be reduced by
200 million pounds, or 2%, from 2001 . Data Lag.
The quantity of TRI pollutants released, disposed of, treated or combusted for energy recovery in
2001 (normalized for changes in industrial production) will be reduced by 200 million pounds, or
2%, from 2000. Data Lag.
Planned
-200 M
-200 M
Actual
data
available
in 2004
data
available
in 2003
FY2000      The quantity of TRI pollutants released, disposed of, treated or combusted for energy recovery,       -200 M
             (normalized for changes in industrial production) will be reduced by 200 million pounds, or 2%,
             from 1999 reporting levels.  Goal Met,

FY1999      The quantity of TRI pollutants released, treated, or combusted for energy recovery will               -200 M
             be reduced by 200 million pounds, or 2% from 1998 reporting levels. Goal Not Met.

FY 2002 Result: Data Lag. Data will be available in September 2004.

FY 2000 Result Available in FY 2002: EPA exceeded its target of a reduction of 200 million pounds of TRI pollutants released. An analysis
conducted using preliminary corrected data shows that actual non-recycled waste increased by just under 300 million pounds (2.9%) from
1999 to 2000, compared to the target of a 2% reduction. However, when the data are normalized to control for changes in production, a 2.3%
reduction is observed from 1999 to 2000.
APG30
FY2002



Municipal Solid Waste Source Reduction
Divert an additional 1% (for a cumulative total of 31% or 69 million tons) of municipal
solid waste from land filling and combustion, and maintain per capita generation of
Resource Conservation and Recovery Act (RCRA) municipal solid waste at 4.5 pounds
per day. Data Lag.
Planned
69 M
4.5 Ibs


Actual
data
available
in 2004

FY2001      Divert an additional 1 % (for a cumulative total of 30% or 67 million tons) of municipal solid waste      67M         data
             from land filling and combustion, and maintain per capita generation of RCRA municipal solid waste    4.3 Ibs      available
             at 4.3 pounds per day. Data Lag.                                                                       in 2003
FY2000      Divert an additional 1 % (for a cumulative total of 29% or 64 million tons) of municipal solid
             waste from land filling and combustion, and maintain per capita generation of RCRA
             municipal solid waste at 4.3 pounds per day. Goal Met,

FY 1999      Maintain levels (for a cumulative total of 28% or 62 million tons) of municipal solid
             waste diverted from land filing and combustion, and maintain per capita generation
             of RCRA municipal solid waste at 4.3 pounds per day. Goal Met.
    64M
   4.3 Ibs
    62 M
   4.3 Ibs
FY 2002 Result: Data Lag. Data will be available in December 2004.

FY 2000 Result Available in FY 2002: In FY 2000, 30.1%, or 69.9 million tons of municipal solid waste, was diverted from land filling
and combustion, and the per capita generation decreased to 4.5 pounds per day.

  Strategic Objective: By 2005, EPA Will Assist All Federally Recognized Tribes in Assessing the Condition of Their
   Environment, Help in Building Tribes'Capacity to Implement Environmental Management Programs, and Ensure
       That EPA is Implementing Programs in Indian Country Where Needed to Address Environmental Issues.
                      FY2002 Cost (in thousands): $57,839 (18.7% of FY 2002 Goal 4 Total Costs)

Progress Toward Strategic Objective: EPA is on track and making progress toward  this  strategic objective. Through FY 2002 the
Agency has collected baseline environmental information on 331 tribes, or 58% of tribes, exceeding its annual goal. In addition to
providing a picture of environmental conditions in Indian Country, the baseline assessment effort will provide indicators of the progress
of tribal environmental programs according to  Agency goals and objectives.
APG31      Tribal Environmental Baseline/Environmental Priority

FY2002     Baseline environmental information will be collected for 38% of tribes (covering 50%
            of Indian Country). Goal Met.

            Performance Measure
               Environmental assessments for tribes (cumulative).
  Planned
Actual
 217 tribes*
www. epa.gov/ocfo
Performance flesults
         n-49

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     FY2001      Same Goal, different targets.  Goal Met,                                                       193

     FY2000      16% of tribal environmental baseline information will be collected and 12 additional tribes            16%
                  (cumulative total of 57) will have tribal/EPA environmental agreements or identified                  12
                  environmental priorities.  Goal Not Met.

     FY1999      10% of tribal environmental baseline information will be collected and 10 additional tribes              10%
                  (cumulative total of 45) will have tribal/EPA environmental agreements or identified                    10
                  environmental priorities.  Goal Met.

     FY2002 Result: Underfederal environmental statutes, EPA is responsible forensuring human health and environmental protection in Indian
     Country. By the end of FY2002, EPA collected baseline environmental information for a cumulative total of 331 of 572 tribal entities.

     *Note: EPA collected baseline information for 331 tribes (58%) of the universe of 572 tribes, thereby exceeding the goal of 217 tribes (38%).

                          Prior Year Annual Performance Goals Without Corresponding FY 2002 Goals
                                    (Actual Performance Data Available in FY 2002 and Beyond)

                                                                                                         Planned      Actual

     FY2000      Administer federal programs and oversee state implementation of programs for                               target
                  lead-based paint abatement certification and  training in 50 states, to reduce exposure                         year is
                  to lead-based paint and ensure significant decreases in children's  blood levels by 2005.                      FY2005

     FY 1999      Complete the building of a lead-based paint abatement certification and training in 50                          target
                  states, to ensure significant decreases in children's blood lead levels by 2005 through                         year is
                  reduced exposure to lead-based paint.                                                                  FY2005
n-50      lil'A's FY 2IJ02 Annual Report                                                                            www.epa.gov/ocfo

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Notes:
 1.    U.S. EPA, Office of Pollution Prevention and
      Toxics, High Production Volume Challenge
      Program, HPV Commitment Tracking System.
      Available at http://www.epa. gov/chemrtk/
      viewsrch.htm.

 2.    U. S. EPA, Office of Office of Pollution Prevention
      and Toxics, Voluntary Children's Chemicals
      Evaluation Program (VCCEP) Commitment
      Tracking System.

 3.    U.S. EPA, American Indian Environmental Office,
      Tribal Information Management System Fact
      Sheet, EnviroMapper for Tribes. Available at
      http://www.epa.gov/envirofw/html/bia/
      tribal em background.html.

 4    Institute of Medicine, Clearing the Air: Asthma
      and Indoor Air Exposures (Washington, DC: The
      National Academy Press, 2000). Available at
      http://books.nap.edu/books/030906496l/html/
      Rl.html.
 5.    U.S. EPA, National Radon Results: 1985 to 1999
      (n.d.). Available at http://www.epa.gov/iedwebOO/
      radon/images/radonresults85-99. pdf.

 6.    Centers for Disease Control, National Center for
      Health Statistics, National Health and Nutrition
      Examination Survey: 1999-2002. Available at
      http://www.cdc.gov/nchs/nhanes.htm.

 7.    U.S. EPA, Resource Conservation Challenge
      (September 13, 2002). Available at
      http://www.epa.gov/epaoswer/osw/conserve/
      index.htm.

 8.    National Environmental Performance information
      and reports are posted on EPA's web site at http://
      www.epa. gov/performancetrack/particip/
      regions.htm#region .

 9.    U.S. EPA, Office of Pollution Prevention and
      Toxics, High Production Volume Challenge
      Program. Available at http://www.epa. gov/
      chemrtk/viewsrch.htm.

 10.   U. S. EPA, Office of Pollution Prevention and
      Toxics, EPA Voluntary Children's Chemicals
      Evaluation Program (VCCEP) Commitment
      Tracking System.

 11.   U.S. EPA, American Indian Environmental Office.

 12.   U.S. EPA, Office of Prevention, Pesticides, and
      Toxic Substances, Overview of the Acute Exposure
      Guideline Levels (AEGL) Program (June 2002).

 13.   U.S. EPA, Persistence, Bioaccumulative, and Toxic
      (PBT) Profiler,  Ver. 1.20. Developed by
      Environmental Science Center under contract to
    the U.S. EPA Office of Pollution Prevention and
    Toxics; computer resources donated by Syracuse
    Research Corporation. Last updated
    November 27, 2002. Available at
    http://www.epa. gov/oppt/pbtprofiler/ and
    http: //www. pbtprofiler. net/.

14  American Chemistry Council, Chlorine Chemistry
    Council, and Synthetic Organic Chemical
    Manufacturers Association, Industry Statement on
    EPA's PBT Profiler (September 26, 2002); news
    release: Environmental Defense Offers Support
    for New EPA Internet Tool (Washington, DC,
    September 25, 2002). Available at
    http://www.epa. gov.

15.  U.S. EPA, Persistence, Bioaccumulative, and Toxic
    (PBT) Profiler.

16.  Final Rules: 67 FR 11008, FRL-6823-6, March 11,
    2002; 67 FR 72854,  FRL-7279-1, December 9,
    2002.

17.  U.S. EPA, Office of Pollution Prevention and
    Toxics, Green Chemistry. Available at
    http://www.epa.gov/opptintr/greenchemistry/.

18.  U. S. EPA, Office of Pollution Prevention and
    Toxics, Breathing Easy: Ensuring Proper
    Ventilation of Paint Mixing Rooms in Auto
    Reflnish Shops, EPA744-F-02-008 (May 2002),
    Design for the Environment Results Tracking
    Files. Available only on the Internet. See also:
    U.S. EPA, Respiratory Protection Program for
    Auto Reflnish Shops, EPA 744-F-02-009 (May
    2002) and also Sample Respiratory Protection
    Program for Auto Reflnish Shops (EPA744-F-02-
    010). Available only on the Internet at
    http://www.epa. gov/dfe.

19.  J.A. Bernstein, Overview of Diisocyanate
    Occupational Asthma, Toxicology 111(103,
    1996): 181-9. Available at
    http://www.sciencedirect.com/science.

20.  U. S. EPA, Office of Pollution Prevention and
    Toxics, Design for the Environment Results
    Tracking Files.

21.  U.S. EPA, Office of Pollution Prevention and
    Toxics, Design for the Environment Program,
    Flexographic Ink Options: A Cleaner
    Technologies Substitutes Assessment,  EPA/744-R-
    02-001 A & B (February 2002). Available at
    http://www.epa.gov/dfe/pubs/flexo/ctsa/frontvl-
    apr02.pdf. FoamAdhesives-CTSA will be available
    late in 2002 on the Internet at
    http://www.epa.gov/dfe. Draft: Alternative
    Adhesives Project, Alternative Adhesives
www. epa.gov/ocfo

                                                   n-5i

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          Technologies: Foam Furniture and Bedding
          Industries (A Cleaner Technologies Substitutes
          Assessment (June 2002 Draft). Available for
          review at the Center for Clean Products and
          Clean Technology Web site at
          http://eerc.ra.utk.edu/ccpct/aapl.html.
      23.  U.S. EPA, Office of Pollution Prevention and
          Toxics, Design for the Environment, Lead-Free
          Solder Partnership, Assessing Life-Cycle Impacts in
          the Electronics Industry, EPA744-F-02-007
          (June 2002). Available at http://www.epa.gov/
          dfe/pubs/solder/solderfact.pdf.

      24.  National Pollution Prevention Roundtable, 2002
          MVP2 Award Ceremony, Washington, DC.
          Information available at
          http: //www.p2. org/p2week/appform. cfm.

      25.  U.S. EPA, Region 8, Greening the Federal
          Government, National Park Service Intermountain
          Region/EPA Region 8 Partnership Project.
          Information available at http://www.epa. gov/
          regionOS/conservation recycring/natlpk.html.

      26.  U.S. EPA, Region 4, Region 4-P2 Partnership,
          Resources no. 6 (July 2002). Available at
          http://wrrc.p2pays.org/DoDPartnership/
          ResourcesNo6.pdf.

      27.  Centers for Disease Control, Morbidity and
          Mortality Weekly Report 46
          (44, November 7, 1997). Available at
          http: //www. cdc. gov/mmwr/mmwr. html.

      28.  For example, the American Academy of
          Pediatrics, the Consumer Federation of America,
          and the National Association of Counties.

      29.  U.S. EPA, Office of Air and Radiation, Indoor-
          Environments Division, A Brief Guide to Mold,
          Moisture, and Your Home, EPA  402-K-02-003
          (July 2002). Available at http://www.epa.gov/iaq/
          molds/moldguide.html.

      30.  Ibid

      31.  U. S. EPA, Office of Air and Radiation, Healthy
          Buildings, Healthy People: A Vision for the 21st
          Century, EPA 402-K-01-003 (Washington, DC:
          U.S. EPA, October 2001). Available at
          http://www.epa.gov/iaq/hbhp/hbhptoc.html.

      32.  Ibid

      33.  Centers for Disease Control, National Center for
          Health Statistics, National Health andNutrition
          Examination Survey: 1999-2002. Available at
          http://www.cdc.gov/nchs/nhanes.htm.
34.   U.S. EPA, Office of Pollution Prevention and
     Toxics, Annual Performance Measure Tracking
     Files.

35.   U.S. EPA, Office of Solid Waste, Waste
     Minimization  Trends Report (1991-1998),
     EPA530-R-02-007 (Washington, DC, September
     17, 2002). Available at http://www.epa.gov/
     epaoswer/hazwaste/minimize/trends.htm.

36.   U.S. EPA, Office of Solid Waste and Emergency
     Response, Municipal Solid Waste in the United
     States, 2000 Facts and Figures, EPA530-S-02-
     001 (Washington, DC: U.S. EPA, June 2002).
     Available at http://www.epa.gov/epaoswer/non-
     hw/muncpl/msw99.htm.

37.   Office of the Federal Environmental Executive,
     Recycling . . . for the Future: Consider the
     Benefits (November 1998). Available at
     http://www.ofee.gov/pubs/pubs.htm.

38.   U.S. EPA, Jobs Through Recycling: Results of the
     National REI Study. Available at
     http://www.epa.gov/epaoswer/non-hw/recycle/
     itr/econ/rei-rw/result.htm. For complete report,
     see R.W. Beck, Inc., U.S. Recycling Economic
     Information Study (The National Recycling
     Coalition, July 2001). Available at
     http://www.epa.gov/epaoswer/non-hw/recycle/
     itr/econ/rei-rw/pdf/n report.pdf.

39.   N.H. Schumaker and R.S.  Bennett, Spatial
     Population Model for Assessing Risk of
     Pesticides to Bird Populations (Research Triangle
     Park, NC: U.S.  EPA, Office of Research and
     Development, National Health and Environmental
     Effects Research Laboratory, 2002).

40.   U.S. EPA, Endocrine Disrupter Screening Program
     Web site. Available at
     http://www.epa.gov/scipoly/oscpendo/.

41.   State records.

42.   Ibid

43.   U.S. EPA,  WasteWise: Preserving Resources,
     Preventing Waste (October 2002). Available at
     http://www.epa. gov/wastewise/.
n-52
              FY
                                     www. epa.gov/ocfo

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       GOAL 5: BETTER WASTE MANAGEMENT AND RESTORATION OF
        CONTAMINATED WASTE SITES, AND EMERGENCY RESPONSE
PROGRESS TOWARD THE STRATEGIC
GOAL AND OBJECTIVES

   EPA has made significant progress in
achieving the goal of better waste management,
restoration of contaminated sites, and emergency
response preparedness. With the help of
federal, state, tribal, and local partners, the
Agency has continued to clean up sites and has
ensured that facilities are managed according to
practices that prevent releases to the
environment. EPA and its partners have made
progress toward meeting strategic objectives in
Goal 5 for protecting human health and the
environment by performing, supporting,  and
overseeing cleanup operations and ensuring
protective and preventive facility management
practices.
   EPA has already met the FY 2005 target
(more than 375,000 sites) for the first objective
by reaching cleanup milestones at more than
389,000 sites. Success in exceeding the target  is
primarily due to the work of the Underground
Storage Tank (UST) Program, which had  initiated
or completed cleanup action at more than
384,000 releases by the end of FY 2002.: In
addition, the Brownfields Program has already
exceeded its FY 2005 target (of 1,500 sites) for
property assessments: 3,807 properties were
assessed from the beginning of the program in
1995 through June 2002.2 The Resource
Conservation and Recovery Act (RCRA, as
amended) Corrective Action Program is on target
to achieve FY 2005  intermediate cleanup goals,
signifying that adequately protective controls are
in place at these facilities to prevent any
unacceptable human exposures or migration of
contaminated groundwater. Through FY  2002,
1,018 facilities had adequate controls in place
for pathways of human exposure (compared to
the FY 2005 target of 1,630 facilities), and
876 facilities had adequate controls in place for
controlling migration of contaminated
groundwater (compared to the FY 2005 target of
1,200 facilities).3 Although 846 sites4 in the
Superfund Program had achieved construction
completion through FY 2002, it is unlikely that
the program will meet its FY 2005 target of
1,105 sites.

   It is unlikely that EPA will be able to validate
meeting the overall FY 2005 target for the
second objective, ensuring that more than
277,000 facilities are managed according to
practices that prevent releases to the
environment. The total includes  3,750 RCRA
municipal solid waste facilities with approved
controls, and the data for these facilities are
unavailable. The total also includes ensuring that
7,100 facilities are in compliance with the spill
prevention, control, and countermeasure
provision of the Oil Pollution Act. While
2,925 facilities5 are in compliance through
FY 2002, annual targets for confirming facility
compliance have been  reduced as resources are
shifted to address high demand for Agency
assistance in responding to or monitoring oil
spills. Otherwise, the UST Program, in
partnership with the states, has ensured that
213,000 facilities6 are in compliance with spill,
overfill, and corrosion protection requirements
through FY 2002, as compared to the FY 2005
target of 264,000. Finally, the RCRA Program,
working effectively in partnership with states,
tribes, and other stakeholders, has exceeded this
year's expectations in achieving permits or
approved controls  at 2,176 hazardous waste
management facilities7 through FY 2002, as
compared to the FY 2005 target  of 2,750.
www. epa.gov/ocfo
                                           n-53

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    FY 2002 PERFORMANCE

       The most significant accomplishment for
    EPA's emergency response program was the
    rapid and effective response to the anthrax
    bioterrorism incident on Capitol Hill. This
    catastrophe presented challenges due to the
    unique contaminant, the uncertainty of the
    response technology, and the time constraints
    and nature of the work of the legislative branch.
    EPA led the effort to clean up and decontaminate
    six post offices in Florida and four congressional
    office buildings in Washington, DC—the Ford,
    Longworth, Dirksen, and Hart office  buildings.
    The Agency's success in this area is  due to
    homeland security planning and preparedness
    activities at the state and  local levels in
    conjunction with federal activities.
       During FY 2002 the Superfund Program
    reduced health threats posed to 140,000 people
    who lived within 1 mile of the 42 sites that
    achieved construction completion. In addition,
    the Superfund Program cleaned up 800,000
    cubic yards of solid hazardous waste and
    provided alternative drinking water supplies to
    32,500 people at 6 sites.8  Coordination with state
    partners during the construction phase of these
    projects contributed to the achievement.

       Another important element is that federal
    agencies worked together to carry out cleanups
    at federal facilities. In conjunction with EPA's
    federal partners, in FY 2002 the Superfund
    Program was able to accomplish 5 of the
    42 construction completions at sites owned by
    federal agencies.9 Nationwide, thousands of
    federal facilities are contaminated with hazardous
    waste, unexploded ordnance, radioactive waste,
    fuels, and various of other toxic contaminants.
    These facilities include abandoned mines,
    nuclear weapons production plants,  fuel
    distribution areas, and landfills. As a result, cleanup
    remedies are varied and difficult to accomplish.
    For example, the Department of Energy's
    nuclear weapons production facility  in Hanford,
    Washington, is the size of Rhode Island, and
    cleanup estimates for the facility exceed 100 years.
       An important element of managing the
    Superfund Program is ensuring that potentially
    responsible parties (PRPs) perform cleanups or
                                                 SUPERFUND CLEANUP AND RESTORATION:
                                              DUPONT-NEWPORT SITE, NEWPORT, DELAWARE

                                               Cleanup efforts have resulted in more than
                                               9 acres of wetland areas being restored while
                                               creating an additional acre of wetland and
                                               wildlife habitat along the river. Two industrial
                                               landfills at the Dupont-Newport Site in New
                                               Castle County, Delaware were capped. The
                                               cleanup remedy included the removal of more
                                               than 70,000 cubic yards of contaminated soils
                                               and sediments and installation of groundwater
                                               treatment and containment systems. The former
                                               pigment-manufacturing facility was used  to
                                               manufacture a white zinc- and barium-based
                                               pigment called Lithopone, and much of the area
                                               was contaminated with  heavy metals  and
                                               chlorinated solvents from past operations and
                                               disposal practices Chttp://www.epa.gov/
                                               superfund/accomp/success/dupont.html).
                                             pay their fair share of cleanup costs. In FY 2002
                                             PRPs initiated 71 percent of new long-term
                                             cleanup actions at non-federal facility Superfund
                                             sites, exceeding the 70 percent annual goal. EPA
                                             also secured private party commitments for
                                             cleanup and cost recovery that exceeded
                                             $627 million. Of this amount, PRPs agreed to
                                             conduct more than $501 million in future
                                             cleanup work and to reimburse EPA for more
                                             than $126 million in past costs. Total private
                                             party commitments for cleanup and cost
                                             recovery since the inception of the program are
                                             valued at more than $20.6 billion—more than
                                             $16.9 billion in response settlements and about
                                             $3.7 billion in cost recovery settlements,10
                                             resulting in almost $8 in private party
n-54
GIWs IT 21)1)2 Annual Report
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                                    BROWNFIELDS HOUSING

  The Twin Cities Metropolitan Council Brownfields Pilot
  grant, awarded by EPA, has partnered with the Minnesota
  Environmental Initiative and Twin Cities Habitat for Humanity
  to perform environmental assessments on 10 Brownfields in
  Minneapolis and St. Paul,  Minnesota. This partnership is
  opening the door to reuse of the sites for affordable housing.
  As of April 2002, three energy-efficient single-family homes
  had been built on one property at Nebraska and Arkwright
  Streets in St. Paul by Habitat's WomenBuild project, which
  uses all-female volunteer crews. All of the Habitat homes will
  be built with energy-efficient r25  insulation in the walls and
  mechanical  ventilation  to maintain indoor air  quality
  Chttp://www.epa.gov/brownfields/pdf/ss  twin.pdf.)
commitments for cleanup and cost recovery for
every $1 spent on Superfund enforcement.11
   The Brownfields Program, one of EPA's most
successful public-private partnerships, has
awarded 437 pilot grants since its inception in
1995. These Brownfield pilots assessed
3,807 properties, leveraged more than
$4.8 billion in public and private investments,
and generated more than 21,000 jobs in cleanup,
construction, and redevelopment through the
third quarter of FY 2002.12

   In January 2002 the President signed the
Small Business Liability Relief and Brownfields
Revitalization Act. This law authorized up to
$250 million for financial assistance for
Brownfields revitalization and limited the liability
of certain prospective purchasers and contiguous
property owners. Spurred in part by the new
Brownfields law, the Agency and at least 20
other federal agencies have committed to the
2002 Brownfields Federal Partnership Action
Agenda to support Brownfields redevelopment
in communities throughout the United States.
The agenda also incorporates commitments from
federal agency participants to increase
coordination between Brownfields stakeholders
and promote Brownfields redevelopment.
   In FY 2002 EPA's waste management
programs worked in partnership with states and
the regulated community to ensure safe and
preventive facility management practices by:
•  Obtaining permits or approved controls at
   2,176 hazardous waste management
   facilities.13
•  Attaining compliance with spill prevention
   requirements at 2,925 oil facilities.14

•  Achieving 74 percent significant operational
   compliance with leak detection requirements
   and 81 percent significant operational
   compliance with spill, overfill, and corrosion
   protection requirements at UST facilities.15

Research Contributions

   In FY 2002 EPA completed evaluations of six
innovative technologies through the Superfund
Innovative Technology Evaluation program (SITE)
program (http://www. epa. gov/ORD/SITE/).  This
information will assist decision makers in
determining the most effective remediation
options for the cleanup of contaminated sites.
EPA also evaluated and produced reports on
several processes for treating methyl tertiary
butyl-ether (MTBE)-contaminated groundwater.
These reports provide site managers with the
appropriate performance data to assess the best
technologies for treating MTBE contamination.
EPA also produced reports on the short-term
effects of dredging and capping contaminated
sediments, comparing the advantages and
disadvantages of these cleanup strategies in
protecting ecological surroundings. The capping
reports evaluate the release of contaminated


www. epa.gov/ocfo
                          Performance Results
                                             H-55

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    sediments occurring during capping procedures
    through resuspension. The dredging report
    assesses the potential effects on aquatic receptors
    from dredging. These reports will be valuable
    tools for risk managers and risk assessors in
    evaluating the short-term risks associated with
    the implementation of dredging and capping
    remedies at contaminated sediment sites.

    Program Evaluation

       Appendix A contains descriptions of program
    evaluations completed in FY 2002 that support
    the overall Waste Management Goal. Two
    reports provide lessons learned from Agency
    activities following the September 11 attacks in
    New York and Washington, DC, and the anthrax
    incidents. Both reports conclude that overall the
    Agency did an excellent job responding to these
    unprecedented actions of terrorism and
    successfully carried out its mission to protect
    human health and the environment. The Agency
    has taken several actions to respond to report
    recommendations, including providing consistent
    training in incident management and
    communication for both senior managers and
    field personnel, hiring more On Scene
    Coordinators in each region for spill incidents
    and other emergencies, and purchasing uniform
    national equipment.

    STATE AND TRIBAL PARTNER
    CONTRIBUTIONS

       Although federal statutes govern the RCRA,
    Underground Storage Tanks, Emergency
    Preparedness, and Brownfields Programs, almost
    all of the issues addressed by these programs
    are unique to each state, tribe, or locality. For
    this reason, states, tribes, and local communities
    are the primary implementers of these programs
    and work in partnership with EPA. Even the
    Superfund Program, which EPA implements
    nationally,  relies on strong state, tribal, and local
    partnerships to ensure that its mission is
    achieved in the most effective and efficient
    manner.
                                        State Contributions

                                            Homeland security planning and
                                        preparedness efforts through the National
                                        Response Team and the Federal Response Plan
                                        have established effective coordination and
                                        communication systems and deterred creation of
                                        redundant systems. In addition, EPA's work with
                                        states, tribes, and communities has resulted in
                                        16 states implementing the risk management
                                        plan program and establishing partnerships with
                                        thousands of Local Emergency Planning
                                        Committees.
                                            Superfund has a strong and effective
                                        partnership with states to support its
                                        implementation. In FY 2002 EPA provided more
                                        than $75 million to states for conducting site-
                                        specific support functions such as assessment,
                                        and $18 million to support or enhance state
                                        program capabilities such as hiring staff with
                                        technical expertise.
                                            States implement cleanup and management
                                        programs for hazardous and solid waste
                                        management facilities and for USTs. States are
                                        also key players in implementing RCRA
                                        Corrective Action Program reforms, with
                                        accomplishments in piloting innovative
                                        approaches to cleanups, developing venues to
                                        showcase program success stories, and actively
                                        participating in Brownfields Program activities to
                                        further integrate these two programs.

                                            Since 1997 EPA has offered Superfund Core
                                        Program financial assistance and contract support
                                        for Voluntary Cleanup Program (VCP) and/or
                                        Targeted Brownfields Assessments (TBAs) to
                                        48 states and 2 tribes. EPA headquarters
                                        provided $25.5 million in FY 2002 for state and
                                        tribal voluntary cleanup programs and pre-
                                        remedial site assessment funding for EPA-, state-,
                                        and tribe-conducted Targeted Brownfields
                                        Assessment. These funds supported state and
                                        tribal VCPs, state TBAs, and TBAs conducted by
                                        EPA regional offices.

                                            The new Brownfields law amends
                                        section  128 to CERCLA and provides expanded
                                        authority for EPA to fund state and tribal
                                        response programs to capitalize revolving loan
n-56
FY
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funds and support insurance mechanisms. The
goals of this funding are to ensure that state and
tribal response programs include, or are working
to include, four statutory elements and a
required public record and to provide funding
for other activities, including TBAs, that enhance
the cleanup capacity of a state or tribal program.
In addition, the new law authorizes EPA to
perform TBAs itself with funding available to
carry out section 104 of CERCLA.

   The UST Program awarded $3.8 million to
fund 40 state and tribal UST field pilots. These
pilots will help communities turn petroleum-
contaminated land into clean, safe, productive
properties that will create jobs, yield higher
property values, and generate new revenue.
The program also provided $3.1 million in
funding for four MTBE cleanup pilots (Long
Island, NY,  Santa Monica, CA, Pascaoag, RI, and
Columbia, SC). In addition, the UST program
developed a Web-based toolbox to promote and
assist states in the use of performance-based
contracting to clean up releases from USTs. The
14 states currently using performance-based
contracting have reported that their cleanups
cost about half as much and took about half as
long to complete as compared to cleanups done
using the more traditional time and materials
contracts.

Tribal Contributions
   During FY 2002 EPA continued to work with
tribal waste program managers to develop waste
program expertise in tribes  and address the most
pressing needs on tribal lands. EPA provided
$775,000 as part of an interagency grant
program totaling about $2.2 million for closing
municipal solid waste open dumps in Indian
Country. Cumulatively, since 1999 the
Interagency Workgroup has provided more than
$6 million to 31 tribes resulting in the cleanup of
27 open dumps and conducts activities to
prevent future dumping of wastes in Indian
Country. EPA also provided $425,000 in tribal
grants for RCRA hazardous waste activities and
surveyed more than 175 tribes as an initial step
in developing an inventory of the RCRA
hazardous waste management needs of tribal lands.

   EPA provided more than $3.6 million in
grants to develop or enhance tribal UST and
Superfund Programs in FY 2002. The Agency
also supported involvement for 78 tribes at
Superfund sites through 27 cooperative
agreements. In FY 2002 EPA also provided
$450,000 to tribes through its Brownfields
assessment pilot grants.

ASSESSMENT OF IMPACTS  OF FY 2002
PERFORMANCE ON THE FY 2003 ANNUAL
PERFORMANCE PLAN

   Beginning in  FY 2003 the  Agency is starting
a 3-year planning cycle to identify and track
construction completion candidate sites. Early in
FY 2002 data were collected from project
managers in regional offices on the status of
candidate sites for construction completion
during FY 2002 through FY 2004. Future-year
targets for construction completions will be set
using this information.
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                                            n-57

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       Goal  5:  Better Waste Management
       FY 2002 Obligations (in thousands):
       EPATotal:               $9,447,202
       Goal 5:                  $1,820,344
       Goal 5 Share of Total:          19.3%
Summary of FY 2002 Annual Performance Goals
X

9
Goals 1 j 1 Goals
Met I Not Met

0
description of the quality of the data used to measur
performance can be found in Appendix B.
Data
Lags
e ERA'S
                                                            FY 2002 Costs (in thousands):
                                                            EPATotal:
                                                            Goal 5 Costs:
                                                            Goal 5 Share of Total:
         $7,998,422
         $1,929,151
           Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
                Refer to page IV-10 of the Financial Statements for a consolidated statement of net cost by goal.
                    Annual  Performance Goals (APG) and Measures
                                      FY1999-FY 2002 Results
      Strategic Objective: By 2005, EPA and Its Federal, State, Tribal and Local Partners Will Reduce or Control the Risk
         to Human Health and the Environment At More Than 374,000 Contaminated Superfund, RCRA, Underground
         Storage Tank (UST) and Brownfield Sites and Have the Planning and Preparedness Capabilities to Respond
             Successfully to All Known Emergencies to Reduce the Risk to Human Health and the Environment.
                       FY2002 Cost (in thousands): $1,690,421 (87.6% of FY 2002 Goal 5 Total Costs)

     Progress Toward Strategic Objective: Through FY 2002 EPA and its partners reduced or controlled the risks to human health and the
     environment at more than 389,000 contaminated sites. The FY 2005 objective target includes 384,000 leaking underground storage tank
     (LUST) cleanups initiated or completed, and through FY 2002, EPA initiated 384,000 LUST cleanups and completed approximately 284,000.
     The Agency also reduced or controlled the risks to human health and the environment at more than 840 Superfund sites, more than 800
     high-priority RCRA sites, and more than 3,800 Brownfields sites. EPA and its partners are also working to increase their capabilities to
     successfully respond to all known emergencies by FY 2005 to reduce the risk to human health and the environment.

     APG 32      Superfund Cleanups                                                              Planned     Actual

     FY2002      EPA and its partners will complete 40 Superfund cleanups (construction completions).          40         42
                47 construction completions were completed in  FY 2001. Goal Met.
     FY2001
Same Goal, different targets. Goal Not Met.
      75
 47
     FY2000
Same Goal, different targets. Goal Met.
      85

     FY1999     Same Goal, different targets. Goal Met.
                                                                                85

     FY 2002 Result: In FY 2002 EPA completed construction at 42 Superfund sites for a cumulative total of 846 sites where the Agency has
     reduced or controlled the risks to human health and the environment over the life of the program. FY2002 Superfund accomplishments in
     Indian Country include eight site assessments, provision of $2.4 million for capacity building, and tribal leadership or support in responding to
     28% of Superfund sites affecting Indian Country. The FY 2001 construction completion target was reduced for FY 2002 due to the constraints
     of large size and complexity of sites on construction completion.

     APG 33      Superfund Potentially Responsible Party Participation                                   Planned     Actual

     FY2002      Maximize all aspects of potentially responsible party (PRP) participation which includes        70%        71%
                maintaining PRP work at 70% of the new remedial construction starts at non-Federal
                Facility Superfund sites, and emphasize fairness in the settlement process. Goal Met.
     FY2001

-    FY2000
Same Goal. Goal Not Met.

Performance Measures
-  Ensure fairness by making orphan share offers at 100% of all eligible settlement negotiations
  for response work.
-  Provide finality for small contributors by entering into de minimis settlements and report the
  number of settlers.

Same Goal. Goal Not Met.
     70%


     100%

      18
     70%
 100% (orphan)
20 (de minimis)
67.3%


 100%

  15
 68%
 100%
H-58     EPA's FY 2002 Annual Report
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FY1999      Obtain PRP commitments for 70% of the work conducted at new construction starts at
             non-federal facility sites on the National Priority List (NPL) and emphasize fairness in the
             settlement process.  Goat Met
                                                                                        70%
               80%
FY 2002 Result: In FY 2002 the percentage of remedial construction starts initiated by responsible parties exceeded the target by 1%.
EPA determines the percentage of remedial construction starts conducted by responsible parties at non-federal facility Superfund sites
because it indicates the percentage of sites where cleanup is achieved using private party funding as opposed to the Superfund Trust
Fund. It also includes those construction starts performed  by EPA where the majority of funding comes from special accounts, and
majority is defined to mean that the funding contributed by responsible parties toward the total response cost to the special account
exceeds the amount contributed by the largest non-private entity.

APG 34      Superfund Cost Recovery                                                               Planned      Actual

FY2002      Ensure trust fund stewardship by getting PRPs to initiate or fund the work and recover    100%       100%
             costs from  PRPs when EPA expends trust fund monies. Address  cost recovery at all
             NPL and non-NPL sites with a statute of limitations on total past costs equal to or
             greater than $200,000.

FY2001      Same Goal.  Goal Not Met.                                                                 100%       97.8%
FY2000
Same Goal. Goal Not Met.
  100%

FY1999
Same Goal. Goal Met.
  100%
FY 2002 Result: Cost recovery was addressed at 204 National  Priority List (NPL) and non-NPL sites during FY 2002, of which 101 had
total past costs greater than or equal to $200,000 and potential  statute of limitations concerns. EPA's cost recovery activities are
important because they replenish the Superfund Trust Fund by  recovering EPA's past costs, making resources available for other
Superfund site cleanups. With respect to private parties, in  FY 2002 EPA secured cleanup and cost recovery commitments in excess of
$627 million (more than  $501 million for future cleanup and  $126 million for recovery of past costs).
APG 35      RCRA Corrective Actions

FY2002      172 (for a cumulative total of 995 or 58%) of high priority RCRA facilities will have
             human exposures (HE) controlled and 172 (for a cumulative total of 882 or 51%) of high
             priority RCRA facilities will have groundwater releases (GWR) controlled. Goal
                               two FY

FY2001      Same Goal. Goal Not Met.
                                                                                      Planned

                                                                                       172 HE
                                                                                      172 GWR
             Actual

             205 HE
            171
                                                                                       172HE      179HE
                                                                                      172GWR
FY2000
Same Goal. Goal Met.
 172 HE      191 HE
172 GWR
FY1999
Same Goal, different targets. Goal Met.
 83 HE      162 HE
45 GWR    188 GWR
FY 2002 Result: During FY2002 the Corrective Action Program achieved environmental indicators (Els) for human health protection and
groundwater migration Els at 205 and 171 facilities, respectively. This progress, combined with progress from previous years, allowed the
program to remain ahead of its cumulative goals by achieving cumulative totals of 1,018 facilities with human exposures controlled and 876
high priority RCRA facilities with groundwater releases controlled. The progress made toward achieving the two Els was facilitated by the
successful partnerships among EPA, states, and tribes.

APG 36       Leaking Underground Storage Tank Cleanups                                              Planned      Actual

FY2002      EPA and its  partners will complete 22,000 Leaking Underground StorageTank (LUST)          22,000      15,769
             cleanups for a cumulative total of approximately 290,000 cleanups since 1987.
                 Not                        FY            Core
FY2001      Same Goal, different targets. Goal Not Met.

FY2000      Same Goal. Goal Met
FY1999
Same Goal, different targets. Goal Met.
 21,000      19,074

 21,000      20,834

 22,000
FY2002 Result: During FY2002 EPA and its state partners completed 15,769 LUST cleanups for a total of nearly 284,000 since 1987. The
FY 2002 target of 22,000 LUST cleanups was not met for several reasons. Contributing factors include (1) the majority of states are
discovering new sites contaminated by MTBE, which is more complicated and costly to cleanup; (2) at least 12 states have already reopened
closed sites due to MTBE contamination, thus diverting resources from overseeing completion of cleanups; and (3) state programs are now
confronting cleanup of more complex sites in general.
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     APG37

     FY 2002
Brownfield Site Assessment Grants
Planned
EPA will  provide additional site assessment funding to 38 new communities, and to 38     3,100
existing communities, resulting in a cumulative total of 3,100 properties assessed, the     19,300
generation of 19,300 jobs, and the leveraging of $4.0 billion in cleanup and redevelopment $4.0 B
funds since 1995.  Goal  Met.
Actual

 3,807
21,737
     FY2001     Same Goal, different targets. Goal Met.
     FY2000     Same Goal, different targets. Goal Met.
                                                                                       2,500

                                                                                       12,000
                                                                                       $3.1B

                                                                                        1,900

                                                                                       4,900
                                                                                       $1.7B
     FY 1999     EPA will fund Brownfields site assessments in 100 more communities, thus reaching 300            100
                 communities by the end of 1999.  Goal Met.

     FY 2002 Result: Although fourth-quarter data will not be available until April 2003, EPA exceeded the FY 2002 targets for the
     Brownfields Program, as indicated by third-quarter data.  Since 1995 more than 3,800 properties have been assessed, more than 21,000
     jobs generated, and more than $4.8 billion in cleanup and redevelopment funds leveraged through Brownfields Program  activities. The
     program facilitates assessment and cleanup of abandoned or underutilized sites where actual or potential contamination and liability
     might be impeding development. It empowers states, communities, and other stakeholders in economic development to  work together in
     a timely manner to prevent, assess, safely clean up, and sustainably reuse Brownfields.
     APG38

     FY 2002
Superfund  Federal Facilities Compliance
Planned
Actual
Within 18 months after final listing on the NPL, EPA will make a final offer for an interagency
agreement (IAG) that is consistent with Agency policy and guidance at 100% of Federal
facility Superfund sites. Goal Met.

Performance Measures
                    Percentage of Federal facility NPL sites for which final offers are made that meet Agency
                    policy and guidance.
                    Percent of Federal facilities with final offers made within 18 months.
                                                                                       100%

                                                                                       100%
     FY2001
Same Goal. Goal Not Met.
  100%
  100%
  0%
  0%
     FY2000     Ensure compliance with Federal facility statutes and Comprehensive Environmental Response,
                 Compensation, and Liability Act (CERCLA) agreements and ensure completion of current NPL
                 CERCLAIAGs.

                 Performance Measures
                 -  Complete NPL lAGs.
                 -  Begin CERCLA Negotiations.
                                                                                         6
                                                                                         4
               2
                1
     FY 2002 Result: In FY 2002 there were two federal facility Superfund sites for which EPA could make a final offer for interagency agreements
     (lAGs) within 18 months of having listed the sites on the NPL. In both cases, the offer was made, resulting in the goal being met. Because of
     a dispute raised by the  Department of Defense (DOD) concerning EPA's authority to oversee cleanup after a remedy has been
     selected, negotiations to finalize these lAGs have stalled. Once the dispute with DOD is resolved,  the offers made by EPA should lead to
     signed lAGs at these sites.
     APG 39      Scientifically Defensible Decisions for Site Clean-up

     FY2002     Provide at least 6 innovative approaches that reduce human health and ecosystem
                 exposures from dense non-aqueous phase liquids (DNAPLs) and methyl-tertiary butyl ether
                 (MTBE) in soils and groundwater, and from oil and persistent organics in aquatic systems.
                      Met.

                 Performance Measure
                                                                                      Planned
             Actual
                 -  Deliver the Annual Superfund Innovation Technology Evaluation (SITE) Program Report
                    to Congress detailing 4-6 innovative approaches, their cost savings and future direction;
                    reports summarizing pilot scale evaluation of in-situ remedies for solvents.

     FY2001      Provide technical information to support scientifically defensible and cost-effective decisions
                 for cleanup of complex sites, hard-to-treat wastes, mining, oil spills near shorelines, and
                 Brownfields to reduce risk to human health and the environment. Goal Not Met.
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             Performance Measures
             -  Deliver the Annual SITE Program Report to Congress.                                        1           0

FY2000      Enhance scientifically defensible decisions for site cleanup by providing targeted research
             and technical support. Goal Not Met.

             Performance Measures
             -  Report of natural attenuation case studies of MTBE.                                            1           0
             -  Deliver the SITE report to Congress.                                                      9/30/00      1/30/131
             -  Report of key research on methods, models and factors relating to risk evaluation of             9/30/00      12/31/00
               dermal route of exposure.
             -  Review20 soil contaminants and develop screening levels.                                   9/30/00      9/30/00

FY 2002 Result: EPA made significant progress in providing information to site managers to determine the most effective methods/
technologies for cleaning up contaminated sites. The technologies evaluated through the SITE Program provide a range of innovative means
for remediation of contaminated soils including in situ chemical oxidation, bioremediation, steam heating, and electrokinetic extraction. EPA
also produced a report on the ecotoxicity soil screening levels for mammals, birds, soil plants, and soil biota that will provide a consistent
basis for making decisions on whether to conduct additional monitoring and risk assessments for various soil contaminants.

     Strategic Objective: By 2005, EPA and Its Federal, State,Tribal, and Local Partners Will EnsureThat MoreThan
         277,000 Facilities Are Managed According to the PracticesThat Prevent Releases to the Environment.
                        FY2002 Cost (in thousands): $238,730 (12.4% of FY2002 Goal 5 Total Costs)

Progress Toward Strategic Objective: Through FY 2002 EPA and its partners have been assured that more than 218,000 facilities are being
managed according to practices that prevent releases to the environment. The total includes 2,176 RCRA management facilities with
approved controls; 2,925 oil facilities in compliance with spill prevention, control, and countermeasure requirements of the Oil Pollution Act;
and 213,000 underground storage tank facilities in compliance with spill, overfill, and corrosion protection requirements.

APG40       RCRA Facility Standards and Compliance                                                  Planned      Actual

FY2002      75.8% of the hazardous waste management facilities will have approved controls in            75.8%        790%
             place to prevent dangerous releases to air, soil, and groundwater, representing an
             average increase of 39 additional facilities per year. Goal Met,
FY2001      Same Goal, different targets. Goal Met.

FY2000      Same Goal, different targets. Goal Met.                                                       67%        67%

FY1999      Same Goal, different targets. Goal Met.                                                       61%        61%

FY 2002 Result: EPA exceeded its goal of 75.8% by achieving 79.0% of hazardous waste management facilities having approved controls in
place to prevent dangerous releases to air, soil, and groundwater. The progress resulted from a focused effort and coordination with the
regions and states. This increased effort has been ongoing for the past few years.

APG41       Ensure WIPP Safety                                                                      Planned      Actual

FY2002      Certify that 6,000 55 gallon drums of radioactive waste (containing approximately 18,000        6,000
             curies) shipped by DOE to the Waste Isolation Pilot Plant are permanently disposed of
             safely and according to EPA standards. Goal Met,

FY 2002 Result: EPA substantially exceeded the goal of ensuring the safe characterization and disposal of drums of transuranic waste.16
In FY 2002 the Department of Energy disposed of the equivalent of 22,800 drums. To date, 35,070 drums have been shipped. Four percent of
the planned waste volume, based on the disposal of 860,000 drums, has been permanently disposed of safely and in accordance with EPA
standards.

                          FY 2001 Annual Performance Goals (No Longer Reported for FY 2002)

EPA and its state and tribal partners will achieve levels of 75% UST compliance with EPA/State leak detection requirements; and 96% UST
compliance with EPA/State December 22,  1998 requirements to upgrade, close or replace substandard tanks.

Continue to make formerly contaminated parcels of land available for residential, commercial, and industrial reuse by addressing liability
concerns through the issuance of comfort letters and Prospective Purchaser Agreements (PPAs).
www.epa.gov/ocfo                                                                                   Performance Results      n-6l

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    Notes:
      1.  U.S. EPA, Office of Underground Storage Tanks,
         FY 2002 End of Year Activity Report, Cliff
         Rothenstein, Director (December 23, 2002).
         Available at http://www.epa. gov/swerustl/cat/
         eoy02memo.pdf.

      2.  U.S. EPA, Brownfields Cleanup and
         Redevelopment, Brownfields Management System
         (June 2002).

      3.  U.S. EPA, RCRAInfo database, Corrective Action,
         Facility Information. Available at
         http://www.epa.gov/epaoswer/hazwaste/ca/
         facility.htm#Database. Facility information updated
         monthly at http://www.epa.gov/epaoswer/
         hazwaste/ca/facility/stofcra/sei.

      4  U.S. EPA, Superfund Information Systems, CERCLIS
         Hazardous Waste Sites, CERCLIS database.
         Available at http://www.epa.gov/superfund/sites/
         query/queryhtm/nplccll. htm.

      5.  Ibid

      6.  Although this number is not in the FY 2002
         End-of-Year Activity Report for the Office of
         Underground Storage Tanks (note 1, above), it is
         derived from data primarily found in that report
         and is based on the following calculations: There
         were 697,966 active  tanks at the  end of FY 2002.
         A facility number can be derived  from the tank
         number by dividing 697,966 by 2.65, which is the
         average number of tanks per facility. Thus,  there
         were 263,383 facilities at the end of FY 2002.
         Then, the number of facilities can be multiplied by
         the compliance rate of 81%, which results in the
         estimate of 213,000 facilities in compliance with
         spill, overfill, and  corrosion protection
         requirements.

      7.  U.S. EPA, RCRAInfo database, Hazardous Waste
         Facility Permitting Accomplishments. Available at
         http://www.epa.gov/epaoswer/hazwaste/permit/
         pgprarpt.htm and http://www.epa.gov/epaoswer/
         hazwaste/permit/charts/charts. pdf.
8.   U.S. EPA, Superfund Information Systems, CERCLIS
    database and U.S. Census 2000.

9.   U.S. EPA, Superfund Information Systems, CERCLIS
    database. The five federal facility sites are Fort
    Wainwright, Old Navy Dump/Manchester Lab,
    Brunswick Naval Air Station, Lone Star Army
    Ammunition Plant, and Sacramento Army Depot.

10.  U.S. EPA, Superfund Information Systems, CERCLIS
    database.

11.  U.S. EPA, Office of the Chief Financial Officer,
    Integrated Financial Management System.

12.  U.S. EPA, Brownfields Cleanup and
    Redevelopment, Brownfields Management System
    (June 2002).

13.  U.S. EPA, RCRAInfo database, Hazardous Waste
    Facility Permitting Accomplishments.

14.  U.S. EPA, Superfund Information Systems, CERCLIS
    database.

15.  U.S. EPA, Office of Underground Storage Tanks.

16.  The official, operating definition as taken from
    federal legislation is as follows: radioactive waste
    containing more than 100 nanocuries
    (3,700 becquerels) of alpha-emitting transuranic
    isotopes per gram of waste, with half-lives greater
    than 20 years, except for (1) high-level radioactive
    waste; (2) waste that the Secretary of Energy has
    determined, with the concurrence of the
    Administrator of the U.S. EPA, does not need the
    degree of isolation required by the 40 CFR Part
    191 disposal regulations; or (3) waste that the
    Nuclear Regulatory Commission has approved for
    disposal on a case-by-case basis in accordance with
    10 CFR Part 61.
n-62
              FY
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                      GOAL 6: REDUCTION OF GLOBAL AND
                    CROSS-BORDER ENVIRONMENTAL RISKS
       The United States will lead other nations in successful multilateral efforts to
      reduce significant risks to human health and ecosystems from climate change,
       stratospheric ozone depletion, and other hazards of international concern.
PROGRESS TOWARD THE STRATEGIC
GOAL AND OBJECTIVES

   EPA's domestic, bilateral, and multilateral
efforts protect and preserve human health and
the environment in the United States and around
the world. Since 1997 the Agency has made
significant progress in reducing risks to human
health and ecosystems by working to reduce
stratospheric ozone depletion, helping to slow
climate change through voluntary programs,
reducing and mitigating hazards on U.S. borders,
and taking action to reduce other hazards of
international concern.

   On the Mexican border, new and increased
regional participation will result in better health
and ecosystem protection. The governments of the
United States and Mexico, 10 border states in the
United States and Mexico, and 26 participating
tribes drafted a new Border 2012 environmental
program to protect the public health of
11.8 million inhabitants of the area and the
environment for the next 10 years. Border 2012
emphasizes a bottom-up approach, anticipating
that local decision making, priority setting, and
project implementation will better address
environmental issues in the border region
Chttp ://www. epa. gov/r6border).1
   EPA and state and local governments
succeeded in conducting both an international
exercise between sister cities on the border to
test the binational emergency response plan and
local binational security seminars on weapons of
mass destruction including biological and nuclear
exposures. EPA continues to evaluate environ-
mental needs and facilitate the construction of
environmental infrastructure with the Border
Environment Cooperation Commission (BECC)
and the North American Development Bank. As
of FY  2002, 67 BECC-certified projects had been
or were being built in the border area, ultimately
serving about 7.6 million border residents. About
720,000 residents along the Mexican border will
receive protection from health risks, beach
pollution, and damaged ecosystems as a result of
improved water and wastewater sanitation
systems funded in FY 2002.
   Contaminated sediments impair more than
2,000  miles, or 20 percent, of shoreline and are
a principal source of the polychlorinated
biphenyls (PCBs) and other persistent toxics
contributing to fish consumption  advisories
throughout the U.S.-Canadian Great Lakes. On
the Canadian border, contaminated sediments
and PCBs are the principal sources of Great
Lakes  fish and wildlife contamination. EPA and
its partners remediated almost 400,000 cubic
yards  of contaminated sediments in 2001,
bringing the 4-year cumulative total to 2.1 million
cubic  yards.2 Consequently, from 2001 actions
alone, 100,000 to 200,000 pounds of toxic
pollutants, which could adversely affect human
health, were physically removed from the




www. epa.gov/ocfo
                         Performance Results
n-63

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       1,000,000
              Volume of Sediment Remediated in U.S.
               Great Lakes Basin Beginning in 1997
                       937,850
                1997   1998   1999   2000   2001
                              Year

    environment. Such removal will lead to a more
    diverse and less contaminated community of
    small organisms at the base of the food chain.
    Over the long term, water quality will improve
    and fish will be less contaminated and safer to eat.

       Despite major reductions since the 1970s of
    PCB concentration levels in Great Lakes fish, this
    region is still well beyond the Health Protection
    Value (HPV) of 0.05 parts per million agreed
    upon by the Great Lakes states. The HPV is a
    level considered safe for even the most sensitive
    subpopulations, such as women and children, to
    eat unlimited fish. Although the overall trend
    continues to decline, indicating progress by EPA
in removing contaminants from the Great Lakes
ecosystem, concentrations of certain contaminants
in Lakes Erie and Superior fish are no longer
decreasing. Some contaminants such as
polybrominated diphenyl ethers, used in flame
retardants and often applied to textiles, have
been detected in Great Lakes fish at
exponentially increasing concentrations.3
   EPA continues to make adjustments
concerning the inexplicably low dissolved
oxygen levels in Lake Erie, which  have resulted
in an increasing "dead zone," despite U.S. and
Canadian success in achieving total phosphorus
targets. Success in phosphorus reduction should
have resulted in higher dissolved oxygen
concentrations because there should have been
less of the algae decomposition that removes
oxygen from the water. Instead, the dissolved
oxygen rate of decline  in 2001, reported in
2002, was among the most rapid in the past
decade. EPA convened 25 principal investigators
and cooperators in May 2002 to initiate a special
study of Lake Erie. More than  $1 million from
U.S.  and  Canadian federal and local agencies
and universities will be invested in the study
Chttp://www. epa.gov/glnpo/lakeerie/
eriedeadzone. html).




                    m
                    o
                    o.
                                   PCBs in Great Lakes Top Predator Fish*
                                                   Lake trout for all but Lake Erie, which is walleye
                                  Lake Michigan
                                                Lake Ontario
                                               _§	
                                 Lake Huron
                        1972 1974  1976 1978 1980  1982  1984 1986
                                                          1990  1992 1994 1996  1998 2000
H-64     EPA's FY 2002 Annual Report
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   EPA, working together with the U.S. Coast
Guard, the National Oceanic and Atmospheric
Administration, the Department of State, and
other interested parties, made a significant
breakthrough in FY 2002 in efforts to prevent
the introduction of invasive species into
navigable waterways. The introduction of
nonnative aquatic species through ship ballast
water has resulted in direct costs exceeding
$1 billion in the United States since 1989 and
has dramatically altered estuarine and marine
ecosystems across North America. International
negotiations continue, but the United States has
succeeded in convincing numerous other
governments around the world that an
international performance standard applicable to
ship ballast water discharges is the most
effective  means for preventing the transfer of
these harmful organisms. Although aquatic
species are introduced through other vectors,
such as hull fouling, ballast water is widely
recognized as the single largest vector
responsible for the transfer of aquatic species
across the globe.
   Climate change and depletion of the ozone
layer are  both important areas of focus for the
Agency. EPA is on target to achieve the strategic
objective to reduce U.S. greenhouse  gas (GHG)
emissions and slow climate change through
voluntary programs. In addition to the long-term
climate benefits, energy savings from
                              partnership programs leads to increased energy
                              system reliability and energy security, as well as
                              reduced energy costs to businesses and
                              consumers. Reductions in energy use lead to
                              corresponding reductions in emissions of carbon
                              dioxide (CO2), nitrogen oxide (NOx), sulfur
                              dioxide (SO2), and mercury, resulting in cleaner
                              air and water. Emissions of NOx were reduced
                              by 140,000 tons in 2001 alone *

                              FY 2002 PERFORMANCE

                                 EPA's international accomplishments in
                              FY 2002 were wide-ranging.  At the World
                              Summit on Sustainable Development (WSSD) in
                              Johannesburg, South Africa, in August-
                              September 2002, EPA and its partners announced
                              a goal to reduce by half, by 2015, the estimated
                              4.4 billion people worldwide who do not have
                              access to basic sanitation and announced
                              partnerships on cleaner fuels and vehicles
                              Chttp://www.johannesburgsummit.org).
                              International capacity efforts will lead to several
                              accomplishments: the reduction of 600,000 tons
                              of mobile source emissions in Russia;
                              25 countries in Africa committing to phaseout of
                              leaded gasoline by 2005; establishment of
                              environmental ministries in all 7 Central
                              American countries; small-scale efforts in East
                              Africa to train workers in accessing chemical
               o
                 ?
               o =
               o
               £ 
                 UJ
80

70

60

50

40

30

20

10

 0
                                    Overall Goals and Accomplishments
                                    for the Climate Protection Programs
                         • ^| Annual Achievements
                          |  | Annual Goals
                          1995
             1996
1997
2001
2002
                        1998   1999   2000
                         Fiscal Year
*Note: FY 2002 data are not official as shown in EPA Budget documents.




www. epa.gov/ocfo
                                                        Performance Results
                                                       H-65

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            EPA'S ON THE GROUND AT WSSD

                  The  Ubuntu Village was the
              '"^   central transportation and
                     logistics hub for the WSSD,
                     in which more than 22,000
                     people participated, includ-
                 ing more than 10,000 delegates,
             8,000 non-governmental organiz-
      ations, and representatives of civil society.
      EPA presented formal mini-courses on key
      sustainable development issues.  These
      practical  "how to" courses addressed
      environmental decision making, water
      resource  and watershed management,
      pesticide handling,  children's health, and
      partnerships.
    safety information via the Internet; and advances
    implementing the Stockholm Convention on
    persistent organic pollutants (POPs) worldwide,
    toward the goal to eliminate the use of 12 of the
    worst POPs chemicals (http://www.pops.int).

       In June 2002 a new cooperative agenda for
    children's environmental health in North America
    was adopted at the Council Session of the North
    American Commission on Environmental
    Cooperation. Through this agenda, the Council,
    representing the governments of the United
    States, Mexico, and Canada, agreed on
    17 concrete action items to address the priorities
    of asthma and respiratory disease, lead
    poisoning, and the effects of exposures to toxic
    chemicals, including pesticides. Priority actions
    identified in the cooperative agenda include
    strengthening the knowledge base through the
    development of indicators, research, risk
    assessment, and economic valuation for the long
    term and increased public outreach and
    education for the short term. Activities related to
    waterborne diseases might be added to the
    cooperative agenda in the future.

       Many of EPA's climate protection programs
    have resulted in substantial savings in energy
    use and energy costs in the United States that
    will be realized over the next decade. Because
    equipment promoted through EPA's climate
    change programs often lasts for decades or
    more, these investments will continue to deliver
environmental and economic benefits through
2012 and beyond. Based on a 2002 analysis of
actions that program partners have taken through
the end of 2001, consumers and businesses have
secured investments in energy-efficient
technologies exceeding $13 billion. After
accounting for these investments, consumers and
businesses are expected to save about
$70 billion cumulatively through 2012. In
FY 2001 reductions of GHGs totaled 65 million
metric tons of carbon equivalent and energy
consumption was reduced by an estimated
84 billion kilowatt hours. These programs
continue to be highly cost-effective approaches
for delivering environmental benefits across the
nation. Every dollar EPA spends on climate
change programs results in a reduction in GHG
emissions of 1 metric ton of carbon equivalent
(3.7 tons of CO2), savings for partners and
consumers of more than $75 per year on their
energy bills, the creation of more than $15 in
private sector investment, and the addition of
over $60 into the economy.5

   The projected increase in the use of
chlorofluorocarbons (CFCs) and halons—
powerful stratospheric ozone-depleting
substances (ODS)—in developing countries
could eliminate the benefits achieved in the
United States, in addition to posing serious
public health problems, such as increased skin
cancer, for populations worldwide. Through U.S.
payments to the Multilateral Fund over the past
10 years, EPA helped fund more than
3,900 projects that when fully implemented will
permanently eliminate more than 150,000 metric
tons of ODSs.6 EPA also concluded agreements
with developing countries to dismantle over
two-thirds of their CFG production capacity and
nearly all of their halon production capacity. In
FY 2002 the United States reduced methyl
bromide production and imports by 50 percent
from the 1991 baseline and listed 50 new
alternatives to ODSs through the Significant New
Alternatives Program.7 Finally, EPA expanded the
outreach of its SunWise School Program by
70 percent over the  2001 level with an
additional 223,000 students in a total of
4,800 schools. The SunWise School Program
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            FY
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                             ENVIRONMENTAL TECHNOLOGY AT WORK

   EPA's Clean Automotive Technology program made significant progress on the goal of increasing
   the fuel economy of motor vehicles by as much as 50 percent or more through hydraulic hybrid
   technology. Using EPA-developed technology, the Ford Motor Company announced its plans for "a
   demonstration fleet of E550 commercial vans for production prove-out of a promising hydraulic
   hybrid powertrain" and noted that a demonstration fleet will be put  into service in early 2004a.
   This initial commercial prove-out of EPA's hydraulic hybrid technology provides a 30 to 35 percent
   fuel economy improvement. This  action reflects Ford's commitment to its agreement with EPA "to
   invest to further develop this proprietary technology, with an aim toward putting a pilot fleet of
   vehicles  on the road by the end of the  decade." Research is  continuing on the goal for  a full
   hydraulic hybrid vehicle, which is expected to achieve fuel economy  improvement of more than
   100 percent13.
   Sources:
   a. "Ford Prepares Demonstration Fleet of Vans with Hydraulic Power Assist," Ford Motor Company, July 15, 2002.
   b. U.S. Environmental Protection Agency, "Ford Signs Agreement to Develop Technology to Improve Fuel Economy"
    (October 12, 2001).
educates children ages 5 to 12 on the risks
associated with ultraviolet and sun exposure.

Research Contribution

   In FY 2002 EPA examined the effects of
climate change on weather-related morbidity in
the United States at both the national and
regional levels. Specifically, the Agency issued a
report for external review that analyzed the
effects of inclement weather on accidents and
injuries and projected changes in incidence
associated with climate change. The report also
addressed the effects of extreme  heat on
emergency room visits and hospital admissions.
These data will help inform decision makers
about the extent to which adaptive responses
will have to be made to reduce the effects of
continued global warming.
   The Agency is also conducting research on
the effects of globally transmitted mercury.
Research findings suggest unanticipated changes
are occurring to mercury, which cycles globally
through the air after being released from coal-
fired facilities, at the poles and at high altitudes.8
For example, in the spring, when sunlight first
returns to the Arctic, elemental mercury
transforms into more water-soluble and
bioavailable reactive gaseous mercury (RGM),
which can enter the ecosystem through
snowmelt. Further evidence indicates that there
might be some transport of mercury from the
Arctic to the lower 48 states due to the polar
sunrise in the spring. Findings of research
conducted at high altitudes indicates that
elemental mercury, previously believed to
remain unreactive and innocuous during global
transport, is transforming into RGM, which is
being deposited over land and sea with such
biological consequences as increased mercury
levels in tuna, swordfish, and other fish.

Program Evaluation

   Appendix A contains descriptions of program
evaluations completed in FY 2002 that support
this goal.

STATE CONTRIBUTIONS

   Although many metropolitan areas have had
some form of commuter programs through the
years, the Commuter Choice Leadership Initiative
represents the first comprehensive national
standard of excellence for commuter benefits.
EPA partners with employers who agree to reduce
their employees' vehicle miles traveled during
commuting by offering incentives for them to
use alternative modes of transportation. FY 2002
represented the first full year of recruiting for
the Commuter Choice Partners program. By the
end of FY 2002, 1,300 employers had signed up
www. epa.gov/ocfo

                                             n-67

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                              COMMUTER CHOICE EMPLOYERS IN COLORADO"

      • Almost 20,000 fewer automobile commuting trips taken every single working day.

      • 3 million gallons of gasoline saved every year.

      • $4.7 million a year in gasoline costs saved  by employees.

      • 550 tons per year of noxious air pollutants taken out of Colorado air.

      • 24,000 tons of global warming pollution prevented.

      a Those values are estimates based on the COMMUTER Model, A EPA-, DOT- and industry-reviewed model that estimates
       changes in travel behavior. With the number of commuters from program data, the model gives an estimate of mode shift
       (changes in travel behavior), then the national average auto emissions savings values are applied.
    representing nearly 570,000 commuters.
    Commuter Choice Employers are located at over
    290 work sites in more than 25 states9
    Chttp ://www. commuterchoice. gov).

       The Agency continues to partner with states
    and Canada to achieve significant environmental
    progress  in addressing toxic chemicals. In
    FY 2002 government, industry, and non-
    governmental partners in the United States/
    Canadian Great Lakes Binational Toxics Strategy
    reported  large reductions in the worst toxic
    chemicals polluting the Great Lakes. For the first
    time, EPA can quantify that it has made
    substantial progress toward achieving the
    challenge goals set for 2006.
    In FY 2002 EPA worked with states, through
the Quicksilver Caucus, to resolve two difficult
mercury issues: how to meet mercury reduction
goals for specific water bodies where mercury
water pollution is caused primarily by air
deposition, and how to ensure safe stewardship
of mercury supplies and wastes. The Caucus is
also providing comments and counsel on EPA's
draft Mercury National Action Plan.

    In FY 2002 the Commission for
Environmental Cooperation (CEC) established the
Bio-diversity Conservation Working Group. This
is the first standing working group of the
Commission for Environmental Cooperation to
include non-governmental stakeholders in a
Progress Under United States/Canada Great Lakes Binational Toxics Strategy
Mercury

Polychlorinated biphenyl
(PCBs)

OtherToxic Chemicals

United States
Canada
United States
Canada
United States
Canada
over40%-50% use and release reduction
over 78% release reduction
30% (PCB transformers) and 1 0% (PCB capacitors) have
been disposed of
80% of high-level PCB wastes have been destroyed
75% reduction of hexachlorobenzene and 25% reduction of
benzo(a)pyrene
65% reduction of hexachlorobenzene and 45% reduction of
benzo(a)pyrene
Source: DS EPA, Great Lakes National Program Office and Environment Canada, Environmental Protection Branch. Great Lakes Binational Toxics Strategy Five-Year
Perspective. Mav 2002. http://www.epa.eov/alnpo/bns/reports/5YearPerspective/5Year.html

H-68         FY
                                  www. epa.gov/ocfo

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formal way, and it represents a new direction in      ASSESSMENT OF IMPACTS OF FY 2002
stakeholder involvement on the CEC. The           PERFORMANCE  ON FY 2003 ANNUAL
working group includes state/provincial and         PERFORMANCE  PLAN
federal government agencies, indigenous and
local communities, the academic community,            There are no changes to FY 2003 APGs
environmental non-governmental organizations,       based on the results of FY 2002 performance.
and the private sector. These stakeholders and
other interested groups will be included in the
processes of developing a Strategic Plan to
guide the Conservation of Bio-diversity Program,
promoting the implementation of Action Plans
and other activities, and reviewing the Strategic
Plan to ensure its continuing effectiveness.
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       Goal 6: Reduction of Global
                   and Cross-Border Risks

       FY 2002 Obligations (in thousands):
ummary of FY 2002 Annual Performance

1
Goals 1 /j 1 Goals
Met IrJ Not Met

3
A description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
' ERA'S
       EPATotal:
       Goal 6:
       Goal 6 Share of Total:
$9,447,202
  $212,569
                                              FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 6 Costs:              $242,958
Goal 6 Share of Total:          3.0%
           Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
                 Refer to page IV-10 of the Financial Statements for a consolidated statement of net cost by goal.
                    Annual Performance Goals (APG) and Measures
                                       FY 1999-FY2002 Results
       Strategic Objective: By 2005, Reduce Transboundary Threats to Human Health and Shared Ecosystems in North
          America, Including Marine and Arctic Environments, Consistent with Our Bilateral and Multilateral Treaty
                         Obligations in These Areas, As Well As Our Trust Responsibility to Tribes.
                         FY2002 Cost (in thousands): $62,807 (25.9% of FY 2002 Goal 6 Total Costs)

     Progress Toward Strategic Objective: EPA is on track to meet this objective.  EPA made significant progress in FY 2002 toward
     achieving this objective by reducing threats to human health and shared ecosystems along the Mexican and Canadian borders and
     marine waters. Improved water and wastewater services were provided along the Mexican  border through the Border Environmental
     Infrastructure Fund. Successful international exercises were conducted between  U.S.-Mexican border sister cities to test the binational
     emergency response plans,  and local binational security seminars on  weapons of mass destruction and bio and nuclear exposures
     were conducted to support homeland security. Along the  Canadian border EPA and its partners removed or contained more than
     400,000  cubic yards of contaminated sediments from the Great Lakes, substantially exceeding the 100,000-cubic yard target and
     bringing  the 4-year cumulative total to 2.1 million cubic yards. The removal or containment of contaminated sediments will over the longer
     term result in improved water quality and in fish which are less contaminated and  safer to eat. Negotiations that seek to manage the
     introduction of invasive species by ships globally took a major step forward, resulting in an agreement to establish an international
     standard to prevent introduction of invasive species through  ship's ballast water.
    APG 42      U.S.-Mexico Border Water/Wastewater Infrastructure

    FY2002     Increase the number of residents in the Mexico border area who are protected from
                health risks, beach pollution and damaged ecosystems from nonexistent and failing
                water and wastewater treatment infrastructure by providing improved water and
                wastewater service.  Goal Not Met.
                                                                 Planned
                              Actual




                Performance Measure
                -  Number of additional people in Mexico border area protected from health risks         790,000     720,000
                  because of adequate water and wastewater sanitation systems funded through
                  Border Environmental Infrastructure Fund.

     FY2001     Same Goal, different target.  Goal Met.                                                  600,000     576,405

     FY2000     Five additional water/wastewater projects along the Mexican border will be certified                5
                for design-construction for a cumulative total of 30 projects. Goal Met.

     FY 1999     One additional water/wastewater project along the Mexican border will be certified                 1
                for design construction.  Goal Met.

     FY 2002 Result: EPA's Mexico Border Program is working to increase public health and environmental benefits by directing funding to
     high-quality projects ready to proceed relatively quickly to construction. Progress has slowed somewhat from earlier projections due to
     the intensity and duration  of pre-project planning necessary for the development of such higher quality projects.  Residents numbering
     720,000 in the Mexican border area were protected from health risks, beach pollution, and damaged ecosystems from nonexistent and
     failing water and wastewater treatment infrastructure by providing improved water  and wastewater service.
    APG 43      Great Lakes: Ecosystem Assessment

    FY2002     Great Lakes ecosystem components will improve, including progress on fish
                contaminants, beach closures, air toxics, and trophic status. Goal Not Met.
                                                                 Planned
                              Actual
H-70     EPA's FY 2002 Annual Report
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            Performance Measures
            -  Long-term concentration trends of toxics (PCBs) in Great Lakes top predator fish.
            -  Long-term concentration trends of toxic chemicals in the air.
            -  Total phosphorus concentrations (long-term, ug/l) in the Lake Erie Central Basin.
                                                                                    declining    declining
                                                                                    declining    declining
                                                                                    improving
FY2001
Great Lakes ecosystem components will improve, including progress on fish
contaminants, beach closures, air toxics, and trophic status.  Goal Met

Performance Measures
            -  Concentration trends of toxics (PCBs) in Great Lakes top predator fish.
            -  Concentration trends of toxic chemicals  in the air.
            -  Trophic status and phosphorous concentrations in the Great Lakes.

FY2000     Measurable improvements in Great Lakes ecosystem components. Goal Met.

            Performance Measures
            -  Indicator indices.
            -  Model predictions for toxics reductions.
                                                                                     declining    uncertain
                                                                                     declining    declining
                                                                                    improving    improving
                                                                                        9
                                                                                        5
FY 2002 Result: EPA met targets for declining long-term concentration trends of toxics (PCBs) in Great Lakes top predator fish and
toxic chemicals in the air. By removing or containing contaminated sediments, 100,000 to 200,000 pounds of persistent toxics that could
affect human health will no longer be biologically available through the food chain. This decrease contributes to decreasing fish
contaminants and advances the goal of removing fish advisories.

There is currently scientific uncertainty over the cause of the regrowth of the Lake Erie dead zone. Nonpoint source control had
reduced nutrient levels in the  past (from agriculture and husbandry activities), but the zone is redeveloping without known cause. To
provide a better focus on the  dynamic changes to the Lake Erie ecosystem, the Agency, for FY 2003 and beyond, replaced the general
Great Lakes trophic status and phosphorus concentration measure with a measure for phosphorus concentration in the Lake Erie
central basin, specifying  a quantitative target.

FY 2001 Result Available in  FY 2002: Great Lakes ecosystem components improved, including progress on fish contaminants, beach
closures, air toxics, and trophic status.

  Strategic Objective: By 2010, U.S. Greenhouse Gas Emissions Will Be Substantially Reduced Through Programs
     and Policies That Also Lead to Reduced Costs to Consumers of Energy and  Reduced Emissions Leading to
    Cleaner Air and Water. In Addition,  EPA Will Carry Out Assessments and Analyses and Promote Education to
           Provide an Understanding of the Consequences of Global Change Needed for Decision Making.
                      FY 2002 Cost (in thousands): $146,171  (60.1%ofFY 2002 Goal 6 Total Costs)

Progress Toward Strategic Objective: EPA continues to make substantial  progress toward this objective. EPA's Climate  Protection
Programs (CPP) have substantially  reduced emissions of carbon dioxide (CO2) and other greenhouse gases (GHGs) such as methane
and perfluorocarbons (PFCs).  Since the mid-1990s these programs have reduced U.S. GHG emissions by more than 300 million metric
tons carbon equivalent (MMTCE), while also saving families and businesses an estimated $28 billion on energy bills (net of investments
in energy-efficient technologies) and deterring approximately 600,000 tons of smog-forming nitrogen oxide (NOX) from entering the air. In
FY 2002 EPA implemented new partnership programs aimed at reducing energy demand in the transportation sector.

Many of EPA's CCPs have locked in substantial energy and environmental benefits over the next decade. Since many of the
investments promoted through CPPs involve energy-efficient equipment with lifetimes of decades or more, the investments achieved
through 2002 will continue to deliver environmental and economic benefits through 2012 and beyond.  Based on investments made in
equipment due  to EPA's  programs through 2002, the Agency estimates that organizations and consumers across the country will net
savings of more than $70 billion and GHG emissions will be reduced by more than 500 MMTCE through 2012 (cumulative reductions
based on estimated 2002 achievements). These programs continue to be highly cost-effective approaches for delivering environmental
benefits across the country. For every dollar EPA  spends on its technology deployment programs, these programs reduce GHG
emissions by more than  1.0 metric ton of carbon equivalent (3.7 tons of CO2) and deliver more than $75 per year in energy bill savings.
This is based on a cumulative reduction since 1995.
APG 44     Reduce Greenhouse Gas Emissions                                                    Planned

FY2002     Greenhouse gas (GHG) emissions will be reduced from projected levels by approximately
            65.8 million metric tons of carbon equivalent (MMCTE) per year through EPA partnerships
            with businesses, schools, state and local governments, and other organizations thereby
            offsetting growth in GHG emissions  above 1990 levels by about 20 percent.  Data Lag,

            Performance Measures
                                                                                                 Actual
               Annual GHG Reductions-All EPA Programs.
               GHG Reductions from EPA's Buildings Sector Programs (ENERGY STAR).
               GHG Reductions from EPA's Industrial Efficiency/Waste Management Programs.
               GHG Reductions from EPA's Industrial Methane Outreach Programs.
               GHG Reductions from EPA's Industrial HFC/PFC Programs.
                                                                                      65.8
                                                                                      17.2
                                                                                       6.3
                                                                                      16.3
                                                                                      21.9
  data
available
 in 2003
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                                                                                   Performance Results
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                 -  GHG Reductions from EPA'sTransportation Programs.                                     2.1
                 -  GHG Reductions from EPA's State and Local Programs.                                    2.0

     FY2001      GHG emissions will be reduced from projected levels by approximately 66 MMTCE per year           66
                 through EPA partnerships with businesses, schools, state and local governments, and other
                 organizations thereby offsetting growth in greenhouse gas emissions above 1990 levels by
                 about 20%.  Goal Met.

     FY2000     GHG emissions  will be reduced from projected levels by more than 58 MMTCE per year through    58
                 EPA partnerships with businesses, schools, state and local governments, and other organizations
                 thereby offsetting growth in GHG emissions above 1990 levels by about 20%. Goal Met,

     FY1999     Reduce U.S. GHG emissions by 35 MMTCE per year through partnerships with businesses,        35           48
                 schools, state and local governments, and other organizations.  Goal Met

     FY 2002 Result: Data for  this performance  goal will be available in mid-2003. EPA is on track to meet this goal.


     FY 2001 Result Available in FY 2002: EPA's CPPs reduced  GHG emissions by 65 MMTCE in 2001. EPA estimates that due to investments
     made through the Agency's technology deployment programs, GHG emissions will be  reduced by more than 500 MMTCE through 2012.

     *Note: The annual target for this  goal was set at 65.8 MMTCE. Of that total, 6.2 MMTCE was for transportation programs. Within that
     6.2 MMTCE, approximately 4.2 MMTCE was for the Transportation  Partners Program that was zeroed out by  Congress. When these
     estimated reductions  are removed, the revised target for FY 2001 is 61.6 MMTCE.  Using the revised target, EPA met its goal.

     APG 45      Reduce Energy Consumption                                                          Planned     Actual

     FY2002     Reduce energy consumption from projected levels  by more than 85 billion kilowatt          85          data
                 hours,  contributing to over $10 billion in energy savings to consumers and businesses.               available
                 Data Lag.                                                                                          in 2003

     FY2001     Reduce energy consumption  from projected levels by more than 75 billion kilowatt hours,           75           84
                 contributing to over $9 billion in energy savings to consumers and businesses. Goal Met

     FY2000     Same Goal, different targets.  Goal Met,                                                      60           74

     FY 2002 Result: Data for  this performance  goal will be available in mid-2003. EPA  is currently on track to meet this goal.

     FY 2001 Result Available in FY 2002: EPA's CPPs reduced energy use by 84 billion kilowatt hours in 2001. EPA estimates that from
     investments made due to  EPA's technology deployment programs, businesses and  consumers across the country will realize energy bill
     savings of more than  $70  billion through 2012 (net of investment in energy-efficient  technologies).

       Strategic Objective: By 2005, Ozone Concentrations in the Stratosphere Will Have Stopped Declining and Slowly
           Begun the Process of  Recovery. In Addition, Public Education to Promote Behavior Change Will  Result in
             Reduced Risk to Human Health From Ultraviolet (UV) Overexposure, Particularly Among  Susceptible
                                               Subpopulations Such As Children.
                            FY 2002 Cost (in thousands): $ 14,802 (6.1%ofFY 2002 Goal 6 Total Costs)

     Progress Toward Strategic Objective: Although EPA and the United States have met all the requirements of  the Montreal Protocol to
     date, current understanding of  the protective stratospheric ozone layer indicates that the Agency's stated goal  will not be met by 2005.
     However, the latest quadrennial assessment of the state of the protective stratospheric ozone layer finds that  restraints on production of
     ozone-destroying chemicals such  as chlorofluorocarbons are having the intended effect. The concentration of  the prime offender,
     chlorine, is at or near a peak in the stratosphere. And an improved  scientific understanding of stratospheric ozone is reassuring
     scientists that the world has probably seen  the worst ozone loss.10

     The global average total column ozone amount for the  period 1997 to 2001  was approximately 3% below the pre-1980 average values.
     However, observations show that  the total combined effective abundance of ozone-depleting compounds continues to decline slowly
     from the peak that occurred in  1992 to 1994 in the troposphere (lower atmosphere). A return to pre-1980 total  column ozone amounts in
     the Antarctic is expected by the middle of this century.  The expected decrease in the amount of  stratospheric chlorine and  bromine over
     the next 50 years is predicted to lead to an  increase in  the global amount of total column ozone."

     EPA is also  making steady progress to reduce ultraviolet overexposure, particularly among children through its voluntary SunWise
     School Program. In 2002 alone, EPA directly reached 233,000 students in 4,800 schools, an increase of 70% since 2001.

     APG 46      Montreal  Protocol  Fund                                                               Planned     Actual

     FY2002     Provide assistance to at least 60 developing countries to facilitate emissions reductions     60           3)
                 and toward achieving the requirements of the Montreal  Protocol.      Not

     FY2001     Same Goal, different targets.  Goal Met,                                                      75

     FY2000     Same Goal, different targets.  Goal Met,                                                      50

n-72      EPA's FY 201)2 Annual Report                                                                           www.epa.gov/ocfo

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FY 2002 Result: EPA provided funding to 50 developing countries to facilitate emissions reductions and toward achieving the requirements of
the Montreal Protocol. The Multilateral Funds were awarded with priority given to those projects targeted toward the most harmful ozone
depletion substances. This resulted in not as many countries receiving funding from the Multilateral Fund, while still working toward the goal of
reducing the highest risk ozone depleting substances.

APG47      Restrict Domestic Consumption of Class II HCFCs                                         Planned     Actual

FY2002      Restrict domestic consumption of class II hydrochlorofluorocarbons (HCFCs) below           <15,240      data
            15,240 ozone depletion potential-weighted metric tons (OOP MTs) and restrict domestic        <60,000    available
            exempted production and import of newly produced class I chlorof luorocarbons (CFCs)                    in 2003
            and halons below 60,000 OOP MTs. Data Lag.
FY2001     Restrict domestic consumption of class II hydrochlorofluorocarbons (HCFCs) below 15,240
            ozone depletion potential-weighted metric tons (OOP MTs) and restrict domestic exempted
            production and import of newly produced class I chlorofluorocarbons (CFCs) and halons
            below 60,000 OOP MTs. Goal Met.
                                                                                    <15,240
                                                                                    <60,000
FY2000
Same Goal. Goal Met.
<15,240
<60,000
FY 1999     Same Goal, different target.  Goal Met,
                                                                                    <208,400    <208,400
                                                                                     <60,000     < 130,000
FY 2002 Result: Data for this performance goal will be available in mid-2003. EPA is currently on track to meet this goal.

FY 2001 Result Available  in FY 2002: EPA successfully reduced consumption, production, and import of ozone-depleting substances
in accordance with the U.S. obligations under the Montreal Protocol on Substances that Deplete the Ozone Layer and requirements of
the Clean Air Act by restricted domestic consumption of class II HCFCs below  15,240 OOP-weighted metric tonnes (OOP MTs) and
restricted domestic exempted production and  import of newly produced class I CFCs and halons below 60,000 OOP MTS.

 Strategic Objective: By 2006, Reduce the Risks to Ecosystems and Human Health, Particularly in Tribal and Other
  Subsistence-Based Communities, From Persistent, Bioaccumulative Toxicants (PBTs) and  Other Selected Toxins
                         Which Circulate in the Environment on Global and Regional Scales.
                        FY2002 Cost (in thousands): $6,037 (2.5% of FY 2002 Goal 6 Total Costs)

Progress Toward Strategic Objective: EPA  is on track to achieve this objective. Major progress was  made toward this strategic
objective when the United States signed the Stockholm Convention on Persistent Organic Pollutants (POPs) in May 2001. Countries
signing the convention committed to reduce and/or eliminate the production, use, and/or release of the 12 POPs of greatest concern to
the global community and established a mechanism to add further chemicals in the future. Toxics covered by the convention include
DDT, PCBs, and dioxins. EPA's capacity building efforts in FY 2002 led to dioxin inventories being conducted  in Jordan, Lebanon, Bruni,
Vietnam, and the Philippines, and PCB inventories in the Caribbean. Domestic, regional, and international activities were conducted in
FY 2002 to address mercury contamination. Mercury is known to circulate globally and accumulate in fish and is the cause of many U.S.
fish advisories. EPA is leading the development of a United Nations global mercury assessment, which may result in a treaty or other
global mechanism to reduce mercury risk.

   Strategic Objective: Through 2005, Integrate Environmental Protection With International Trade and Investment
 and Increase the Application of Cleaner and More Cost-Effective Environmental Practices and Technologies in the
       United States and Abroad to EnsureThat a Clean Environment and a Strong Economy go Hand-in-Hand.
                      FY2002 Cost  (in  thousands): $13,141 (5.4% of FY 2002 Goal 6 Total Costs)

Progress Toward Strategic Objective: EPA is on track to achieve this objective. At the World Summit on Sustainable Development,
EPA and its partners announced a goal by 2015 to reduce by half the estimated 4.4 billion people worldwide who do not have access to
basic sanitation,  and announced partnerships on cleaner fuels and vehicles. All seven  Central American countries—El Salvador,
Ecuador, Belize,  Panama, Honduras, Guatemala, and Costa Rica—now have environmental ministries. These successes and the
variety of projects described below will allow EPA to meet this objective.
APG48     Enhanced Institutional Capabilities

FY2002     Enhance environmental management and institutional capabilities in priority countries.


            Performance Measures
                                                                                    Planned
            Actual
               Assist in the development or implementation of improved environmental laws or
               regulations in priority countries.
               Increase the transfer of environmental best practices among the United States and
               its partner countries and build the capacity of developing countries to collect,
               analyze, or disseminate environmental data.
               Increase the capacity of programs in Africa or Latin America to address safe drinking
               water quality issues.
                                                                                       2
                                                                                    countries
                                                                                       3
                                                                                    countries

                                                                                       3
                                                                                    countries
               2
           countries
               3
           countries
           countries
www. epa.gov/ocfo
                                                                                  Performance Results
                                                                                                          n-73

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     FY2001      Same Goal, different targets.  Goal Met.

                  Performance Measures
                  -  Number of countries or localities (3) that have adopted new or strengthened environmental           3            3
                    laws and policies.
                  -  Number of organizations (3) that have increased environmental planning, analysis, and           3            3
                    enforcement capabilities.
                  -  Number of organizations (3) that have increased capabilities to generate and analyze             3            3
                    environmental data and other information.
                  -  Number of organizations (3) that have increased public outreach and participation.               3            4
                  -  Number of targeted sectors (3) that have adopted cleaner production practices.                  3            2
                  -  Number of cities (3) that have reduced mobile-source based ambient air pollution                3            3
                    concentrations.

     FY2000      Deliver 30 international training modules; implement 6 technical assistance/technology               30
                  dissemination projects; implement 5 cooperative policy development projects; and                   6
                  disseminate information products on  U.S. environmental technologies and techniques to             5
                  2,500 foreign customers.  Goal Met.                                                          2,500

     FY 2002 Result: FY 2002 efforts led to two countries committing to the phaseout of leaded gasoline and targeted countries in the
     Carribean and in Asia completing the first phases of commitments to the POP conventions with PCB inventories.

                              FY 2001 Annual Performance Goals (No Longer Reported for FY 2002)

     /Assess the consequences of global change (particularly climate change and climate variability) on human health and ecosystems.

     Assist 10 to 12 developing countries with economies in transition in developing strategies and actions for reducing emissions of
     greenhouse gases and enhancing carbon sequestration.

     Demonstrate technology for a 80 mpg mid-size family sedan that has low emissions and is safe, practical, and affordable.

     In close cooperation with the U.S. Department of Agriculture, identify and develop specific opportunities to sequester carbon in
     agricultural soils, forests, other vegetation and commercial products, with collateral benefits for productivity and the environment, with
     carbon removal potential of up to 25 MMTCE by 2010.

     Provide analysis, assessment, and reporting support to Administration officials, the Intergovernmental Panel on Climate Change, and the
     Framework Convention on Climate Change.

     Increase the number of children participating in the SunWise School Program  by 20%.
n-74      lil'A's FY 2002 Annual Report                                                                             www.epa.gov/ocfo

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Notes:

 1   U.S. EPA, U.S.-Mexico Border Program Office,
     Border 2012Program (2002). Available at
     http://www.epa. gov/r6border.html.

 2   U.S. EPA, Great Lakes National Program Office,
     2001 Sediment Remediation Report (Collier, June
     2002). Available at http://www.epa.gov/glnpo/
     glindicators/sediments/remediatea.html.

 3   J.M. Luross, M. Alaee, D.B. Sergeant, D.M. Whittle,
     and K.R. Solomon, Spatial and Temporal
     Distribution of Polybrominated Biphenyls in Lake
     Trout from the Great Lakes, Organobalogen
     Compounds 47  (2000):73-76. J.P. Hickey, S.M.
     Chernyak, LJ. Begnoche, and R.T. Quintal,
     Concentration Trends of Polybrominated Diphenyl
     Ethers (PBDEs) in Great Lakes Biota, U.S.
     Geological Survey abstract, presented in June
     2002.

 4   U.S. EPA, Office of Air and Radiation, Climate
     Protection Partnerships Division, Partnerships
     Changing the World: ENERGY STAR and Other
     Voluntary Programs, EPA 430-R-02-010
     (Washington,  DC, August 2002). 2001 Annual
     Report.

 5   Ibid
6   U.S. EPA, Ozone Depletion Rules & Regulations:
    Harmonizing the Clean Air Act & Montreal
    Protocol Methyl Bromide Phaseouts. Available at
    http: //www. epa. gov/ozone/mbr/harmoniz. html.

7   Federal Register Notices: Notice 16, 67 FR 13272
    (March 22, 2002); Direct Final Rule 67 FR 4185
    (January 29, 2002); Subsequent Final Rule No. 10,
    67 FR 44703 (July 22, 2002). All actions listed new
    alternatives and/or updated SNAP regulations.

8   S. Brooks, M. Goodsite, M.S. Landis, C.J. Lin,
    S.E.Lindberg, A. Richter, K.L. Scott, and R.K.
    Stevens, Dynamic Oxidation of Gaseous Mercury
    in the Arctic Troposphere at Polar Sunrise,
    Environ. Sci. Technol.  36 (2002): 1245-1246.

9   Information about the Commuter Choice Program
    is available at http: //www. commuterchoice. gov.

10  Ozone Depletion: A Brighter Outlook for Good
    Ozone, Science 297(5587, September 6,
    2002):l623-l625.

11  The Executive Summary of the "Scientific
    Assessment of Ozone Depletion: 2002" published
    July 2002 by the Scientific Assessment Panel of the
    Montreal Protocol on Substances that Deplete the
    Ozone Layer.
www. epa.gov/ocfo

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H-76     EPA's FY 2002 Annual Report                                                                      www.epa.gov/ocfo

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             GOAL 7 - QUALITY ENVIRONMENTAL INFORMATION
PROGRESS TOWARD THE STRATEGIC GOAL
AND OBJECTIVES

   EPA strives to provide the right information,
at the right time, in the right format, to the right
people. This means making quality environmental
and management information available to
decision makers for developing environmental
policies and priorities. It means making
environmental data publicly accessible to support
family and community involvement in environ-
mental developments. It means building the
necessary infrastructure to provide secure
information, reliable data, efficient and timely
access, and analytical information tools.

   EPA makes environmental information more
widely available through education, partnerships,
and other methods. In partnership with states
and others, the Agency is building a National
Environmental Information Exchange Network
(NEIEN) to effectively share information. To make
environmental information more accessible and
readily understood, EPA develops analytical tools,
such as its redesigned Internet Web site for
integrated access to environmental information
and the forthcoming report on the environment
reporting on the status of the Nation's environ-
mental conditions. The report, part of a multiyear
Environmental Indicators Initiative to provide
indicators of human health and environmental
conditions, will be a valuable tool for helping
to assess  the effectiveness of environmental
programs.

   EPA continues to improve the reliability,
capability, and security of its information infra-
structure. New Agency policies and procedures
for coordinated information system investment
and development ensure the best use of
Agency resources in managing information and
expanding access to it. EPA's substantial
progress in keeping pace with the evolving
challenges of information security has been
recognized by the Office of Management and
Budget (OMB) and the General Accounting
Office, as well as the Agency's Inspector
General. EPA made substantial progress in
meeting new information security challenges
and corrected a material weakness in inform-
ation security by implementing effective new
security controls. (Refer to Section III, "Manage-
ment Accomplishments and Challenges, "for
further discussion.)

FY 2002 PERFORMANCE

    EPA's information goals  and objectives are
in alignment with the President's Management
Agenda1 initiative to improve management of
and access to government information. The
Agency is actively involved in 14 of the federal
electronic government projects to better serve
citizens' needs and has been commended for
improvements in providing  electronic access to
information, strengthening information security,
and making results-based investments in
technology. EPA's environmental  e-government
initiatives include the NEIEN, electronic
reporting, and electronic dockets. In FY 2002
OMB designated EPA as the managing partner
and lead agency for the President's electronic
On-Line Rulemaking Initiative.

Availability of Quality Environmental Information

    In FY  2002 EPA continued to make progress
in improving access to quality information. The
Agency worked successfully with state and
tribal partners to further develop the building
blocks of the NEIEN. Using  Internet
technology, the NEIEN promotes more timely,
www. epa.gov/ocfo
                                            H-77

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    secure, cooperative data exchange among
    federal, state, tribal, and local governments;
    improves the delivery of government services to
    citizens; and reduces the business paperwork
    burden.  EPA awarded $25 million in NEIEN
    Grants to 44 states, 17 tribes, and 1 U.S. territory
    (Puerto Rico) to build NEIEN.
       EPA developed the Central Data Exchange
    (CDX), a NEIEN central reporting facility that
    provides users with faster access to reliable data.
    The CDX became fully operational in FY 2002
    and quickly became so popular that the
    number of state users (45) is now three times
    the Agency's goal for the first operational year.
    Including reporting industries, there are now
    more than 8,000 external CDX registered users,
    more than double the FY 2001 number. CDX
    currently processes information flows for the
    Toxics Release Inventory (TRI), Toxic
    Substances Control Act, Permit Compliance
    System Interim Data Exchange Format,
    Unregulated Contaminant Monitoring Rule, and
    National Emissions Inventory. EPA established
    a long-term, performance-based contract to
    efficiently support the CDX and other Agency
    data processing with state-of-the-art technical
    support. Through NEIEN and CDX, EPA
    integrated environmental information from
    state, federal, and EPA program systems;
    improved data accuracy; and supported better
    use and understanding of environmental
    information.
       In FY 2002 EPA enhanced the TRI program
    to reduce reporting burden,  improve data
    quality, and increase access  to data. One
    improvement was the first full release of EPA's
    new intelligent desktop software, TRI Made
    Easy (TRI-ME). TRI-ME assists facilities in
    understanding and completing their TRI
    reporting obligations. Facilities using TRI-ME to
    submit Reporting Year 2001 TRI reports
    numbered 10,799, representing 43 percent of
    all reporting facilities2 and exceeding an
    Agency target of 25 percent. Data that EPA
    collected on the prior, pilot version of TRI-ME
    indicate  that facilities that use TRI-ME for the
t;   first time reduce reporting burden by
1   25 percent and reduce errors by about
    50 percent.3 Ninety-two percent of TRI facilities
prepared and/or submitted Reporting Year 2001
TRI forms electronically in FY 2002, 7 percent
above the Agency's goal.4

   EPA collected and processed 110,000
chemical form submissions in FY 2002, as well
as 2,400 miscellaneous documents  from about
24,800 facilities.5 In FY 2002 the Agency
released the TRI data for 2000, which was the
first year of public information on persistent
bioaccumulative toxic (PBT) chemicals,
including dioxins, mercury, and polychlorinated
biphenyls.6 This PBT reporting provided the
public with more complete information on
toxic chemicals in their communities; in
particular, there were an additional 6,947 PBT
chemical reports from 3,543 facilities, 762 of
which had not reported in the previous year.7

   To help facilities prepare their first year of
reporting for lead and lead compounds with
the new lower reporting thresholds, EPA
produced and published a guidance document
on the new lead rule through a public notice
and comment process.8 The first TRI reports for
lead under the new thresholds were due on
July 1, 2002, and will be publicly available in
June 2003. These new lead reports will give
the public more complete  information on the
lead releases and waste management activities.

Better Understanding Through Increased Access

   In FY 2002, to support better access to and
understanding of environmental information,
EPA designed several tools to integrate and
interpret the information used to support
environmental decisions. EPA launched the
Environmental Indicators Initiative and
identified indicators for the first key product,  a
draft report on the Nation's environmental
conditions, which the Agency plans to release
in FY 2003 for public review.  The Agency is
identifying indicators of the condition of the
country's air, land, water, human health, and
ecosystems. In FY 2002 EPA identified, reviewed,
and analyzed more than 130 potential
environmental indicators and selected 80 to
include in the environmental report. The
Agency also established a new partnership with
the U.S. Department of Health and Human
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      INTEGRATED ACCESS TO LOCAL ENVIRONMENTAL INFORMATION THROUGH EPA'S WINDOW TO
                                       MY ENVIRONMENT

   In January 2002 EPA received an Excellence.gov award for Window to My  Environment as an
   innovative federal electronic government information service. EPA's Window to My Environment is
   a powerful Web-based tool that provides a wide range of federal, state, or local information about
   environmental conditions for any area in the United States specified by the user.  EPA provides this
   helpful information tool on its public Internet site at,  in partnership with federal, state and local
   government and other organizations.

   To get started, users can  access Window to  My Environment at http://www.epa.gov/enviro/wme
   and input a ZIP code or the name of a city/town and state. Features include:
   • An interactive map-shows  the location of regulated facilities, monitoring  sites,  water  bodies,
     population density,  perspective topographic views and more, with hotlinks to state and federal
     information about these items of interest.

   • Your Window-selected geographic statistics about the area of interest, including estimated
     population, county and urban area designations, local watersheds and water bodies, plus much
     more.

   • Your Environment-links to  information from federal, state, and local partners on  environmental
     issues such as air and water quality, watershed health, Superfund sites, fish  advisories, impaired
     waters, and local services working to protect the environment in the area.
Services to share environmental information on
the links between human health and
environmental exposure. The report on the
environment will be an important information
tool for understanding and analyzing
environmental issues and for evaluating
progress.9
    EPA also launched a redesigned Agency
Web site (http://www.epa.gov) that provides
enhanced features such as up-to-the-minute
coverage of EPA's responses to security threats,
gives users more direct access to topics, and
strengthens protection of sensitive information.
About 1.2  million people visit EPA's top-ranked
federal Web site each month for one-stop
access to environmental information, including
news, resources, applications, maps, tools, and
databases.10
    In FY 2002 EPA implemented its innovative
On-Line Rule-making system, which provides a
single point for businesses and the public to
access all available information on proposed
rule-makings. The new electronic access
effectively expands opportunities to participate
in the process of environmental decision making.
The Agency also developed and implemented
EDOCKET (http://www.epa.gov/EDOCKET).
another e-government initiative that supports
the President's Management Agenda.
EDOCKET combines eight electronic dockets
into one central system, providing a unified,
convenient way for the public to comment on
any regulatory or nonregulatory action
proposed by the Agency. EPA improved on-site
access to regulatory information by combining
docket centers from several locations into one
central site.

Infrastructure to Support Security and Quality

   In FY 2002 EPA improved and expanded its
information infrastructure to deliver reliable,
secure information. EPA systematically assesses
and manages risk by implementing effective
management and  security controls, including
risk assessments, analytical  reviews, automated
monitoring tools, and independent testing. EPA
assessed the security of 168 general support
systems and major applications. The
assessment confirmed the effectiveness of
security controls and provided the basis for
planning further improvements.11
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                                             n-79

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       EPA also implemented a virtual private
    network technology, one of the most effective
    security technologies available, for electronic
    information exchange with external business
    partners. In FY 2002 the Agency continued to
    support World Trade Center site monitoring
    activities through its Multi-Agency Environmental
    Monitoring Database, which also provides the
    public with a "clickable"  interactive map of all
    relevant monitoring locations.12 By the end of
    FY 2002 the database contained hundreds of
    thousands of records of environmental
    monitoring data collected by 13 federal, state,
    city, and private organizations at dozens of sites
    in the lower Manhattan area and its environs.13
       In FY 2002 EPA issued the Information
    Quality Guidelines to improve data quality and
    accountability for information provided to  the
    public.14 The guidelines,  developed using  an
    electronically enhanced public participation
    process, include Agency  procedures for
    ensuring information quality. They also outline
    how the public, particularly the business and
    scientific communities, can seek correction of
    information. The Agency also provided a user-
    friendly method for reporting and resolving
    data quality errors in all its publicly accessible
    data through the Integrated Error Correction
    Process.
       EPA is taking a comprehensive, systematic
    approach to improving information technology
    planning and investment.  In FY 2002 the Agency
    assessed management of its information
    technology investment to ensure compliance
    with federal guidance and requirements. It also
    took action to better coordinate investments,
    streamline authority for acquisitions, and formally
    establish a capital planning and investment
    control process. EPA started developing a
    complete investment portfolio aligned with the
    Agency's technology architecture, deploying
    the Information Technology Investment
    Portfolio System, and planning better alignment
    and efficiencies between information
    technology investment and other Agency
    management processes. In FY 2002 EPA
    established a baseline Agency-wide enterprise
architecture to guide system development and
conform with federal guidance.

Research Contributions

   In FY 2002 EPA submitted seven human
health assessments for Agency consensus
review. These assessments describe the
potential human health impacts of various
chemicals found in the environment. This
information is used for hazard identification
and dose-response evaluations in EPA and state
risk assessments, and it is available to the
public. Chemical toxicity data will also provide
EPA with valuable information that might
influence the development of the Agency's
regulatory standards and site cleanup decisions.
These assessments will be posted  on the
publicly available Integrated Risk Information
System.15

Program Evaluation

   Appendix A contains descriptions of
program evaluations completed in FY 2002 that
support the overall goal. No program
evaluations focused specifically on FY 2002
performance.

STATE/TRIBAL PARTNER CONTRIBUTIONS

   State and tribal governments are essential
partners in EPA's efforts to achieve its vision of
integrated access to comprehensive
environmental information. Accordingly,  the
Agency works closely with state and tribal
partners on all aspects of the NEIEN.

State Contributions

   EPA worked with states and tribes to
increase access to information needed to make
informed decisions by developing the NEIEN
to provide better environmental information for
decision making, improving data quality and
accuracy, ensuring the security of sensitive
data, avoiding data redundancy, and reducing
the burden on those who provide and those
who access information.
n-so
            FY
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Tribal Contributions

   EPA and the EPA Tribal Caucus worked
together to plan for achieving the tribes'
environmental information vision and priorities.
They outlined ongoing and planned tribal
information projects and actions for FY 2002
and FY 2003, and they agreed to review
progress and identify new initiatives annually.
In addition, the Agency awarded NEIEN Grants
to 17 tribes.

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN

   EPA increased its FY 2003 target for number
of states using the CDX because FY 2002
performance exceeded expectations.
www.epa.gov/ocfo                                                                             n-81

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       Goal 7: Quality Environmental
                   Information

       FY 2002 Obligations (in thousands):
       EPA Total:
       Goal?:
       Goal 7 Share of Total:
$9,447,202
  $202,090
                                                                   Summary of FY 2002 Annual Performance Goals
                                                         I Goals
                                                          Not Met
                             Data
                             Lags
                                    i description of the quality of the data used to measure EPA's
                                           performance can be found in Appendix B.
                                             FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 7 Costs:             $253,865
Goal 7 Share of Total:          3.2%
             Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
                  Refer to page IV-11 of the Financial Statements fora consolidated statement of net cost by goal.
                    Annual Performance  Goals (APG)  and  Measures
                                      FY1999-FY 2002 Results
      Strategic Objective: Through 2006, EPA Will Continue to Increase the Availability of Quality Health and Environmental
        InformationThrough Educational Services, Partnerships, and Other Methods Designed to Meet EPA's Major Data
      Needs, Make Data Sets More Compatible, Make Reporting and Exchange Methods More Efficient, and Foster Informed
                                                   Decision Making.
                          FY2002 Cost (in thousands): $87,636 (34.5% of FY2002 Goal 7 Total Costs)

    Progress Toward Strategic Objective: EPA continues to make progress toward this objective, and in FY 2002 improved access to
    environmental information by implementing new electronic reporting tools. These tools increase the Agency's capability to quickly provide
    current information and also integrate available environmental data used to support environmental decisions. Highlights include tripling
    external users of EPA's Central Data Exchange (CDX), increasing by 33% the number of unique facility records in the Federal Registry
    System, and expanding Window to My Environment to provide the public with a "one stop shop" for federal, state, and local government
    information on environmental conditions in theircommunities.
    APG 49      Enhanced Public Access

    FY2002      Improve public access to compliance and enforcement documents and data through
                multimedia data integration projects and other studies, analyses and communication/
                outreach activities. Goal Met.
                                                               Planned
                             Actual
                Performance Measure
                -  Make 90% of enforcement and compliance policies and guidances issued this
                  fiscal year available on the Internet within 30 days of issuance.
                                                                90%
                              100%




    FY2001      Same Goal, different targets. Goal Not Met.

                Performance Measures
                -  By the end of FY 2001, all ten EPA Regions will have an enforcement and compliance web site.     10
                -  Make 90% of enforcement and compliance policies and guidances issued this fiscal year         90%
                  available on the Internet within 30 days of issuance.
                -  By April 2001, make summaries of all significant cases available on the Internet.                100%
    FY2000      Same Goal, different targets.  Goal Met.

                Performance Measures
                -  Percent of OECA policy and guidance documents available on the Internet.                    90%
                -  Increase by 50% the number of states with direct access to Integrated Data for Enforcement    21 states
                  Analysis (IDEA).
                                                                            Not
                                                                         Available
                                                                           94%
                                                                         34 states
    FY 2002 Result: EPA was able to make all of the enforcement and compliance policies and guidances available to the public by posting them
    on the Agency's compliance and enforcement web site at http://www.epa.gov/oeca/index.html.

    APG 50      Process and Disseminate TRI Information                                           Planned     Actual

    FY2002     EPA will reduce reporting burden, improve data quality, lower program costs, and speed
                data publication by increasing the amount of Toxics Release Inventory (TRI) electronic          85%       92%
                reporting from 70 to 85%. Goal Met.
H-82     EPA's FY 2002 Annual Report
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FY2001      Process all submitted facility chemical release reports; publish annual summary of TRI data;
             provide improved information to the public about TRI chemicals; and maximize public access to
             TRI information. Goal Met,

             Performance Measures
             -   TRI Public Data Release.                                                               1 report     1 report
             -   Chemical submissions and revisions processed.                                            110,000     120,000

FY2000      Same Goal, different targets. Goal Met,

             Performance Measures
             -   TRI public data release.                                                                   1           1
             -   Form R's processed.                                                                   110,000     119,000
             -   TRIS database complete and report issued.                                               2/2001      on target

FY1999      Process 110,000 facility chemical release reports, publish the TRI Data Release Report, and        110,000     117,171
             provide improved information to the public about TRI chemicals, enhancing community
             right-to-know and efficiency processing information from industry. Goal Me/,

FY 2002 Result: In FY2002, 92% of the chemical submissions forTRI Reporting Year 2001 were submitted and/or prepared electronically. Many
facilities used EPA's new, expert software, TRI Made Easy (TRI-ME), thereby making the reporting process significantly easier, faster, and
mo re accurate.

APG51       Information Exchange Network                                                           Planned      Actual

FY2002      The Central Data Exchange, a key component of the environmental information                  15          45
             exchange network, will become fully operational and 15 states will be using it to send
             data to EPA thereby improving data consistency with participating states.     Met,

FY 2002 Result: By the end of FY 2002, 45 states were using CDX to send data to EPA, tripling the number of states originally anticipated.
The new users significantly increased the flow of data through CDX, speeding progress toward a fully functioning environmental information
exchange network.

   Strategic Objective: By 2006, EPA Will Provide Access to New Analytical or Interpretive Tools Beyond 2000 Levels
            So That the Public Can More Easily and Accurately Use and Interpret Environmental Information.
                        FY2002 Cost (in thousands): $31,932 (12.6% of FY 2002 Goal 7 Total Costs)

Progress Toward Strategic Objective: EPA is on track to achieve this objective, and in FY 2002 increased users' understanding of available
environmental data by integrating and  interpreting the many data sets and information sources that are used to support environmental
decisions. To support better understanding of environmental information and public health protection, EPA's Window to My Environment
became operational and now serves citizens across the country  with federal, state, and local environmental information that can be geared to
a specific geographic location. In addition, 100% of the publicly available facility data from EPA's national systems accessible on the EPA
web site is part of EPA's Integrated Error Correction Process. The Agency used an electronically enhanced public participation process to
develop federally required EPA Information Quality Guidelines.

APG52       Environmental Justice (EJ)                                                               Planned      Actual

FY2002      Ensure that EPA's policies, programs and activities address disproportionately exposed
             and under-represented population issues so that no segment suffers disproportionately
             from adverse health and environmental effects.     Met,

             Performance Measures
            -  Award 90 grants to organizations which address environmental problems in                  90          73
               communities disproportionately impacted by environmental hazards.
            -  Hold meetings with the National Environmental Justice Advisory Council (NEJAC), all
               stakeholders involved in the environmental justice dialogue, and communities                30          38
               disproportionately impacted by environmental hazards.

FY2001     Same Goal, different targets. Goal Met,

            Performance Measures
            -  Award 90 grants to organizations which address environmental problems in communities        90
               comprised primarily of low income and minority populations.
            -  Hold25 EPA-sponsoredpublic meetings where disproportionately impacted and                   25
               disadvantaged communities participate.
            -  Respond within 60 days to 75% of requests made to each Region and National Program            75%        >75%
               Manager to address complaints heard during public comment period at NEJAC public meetings.
            -  Conduct 18 NEJAC meetings and focused roundtables in local communities where                 18           13
               problems have been identified.



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                 -  Increase the number of demonstration projects established under the Federal Interagency       18           15
                    Working Group on EnvironmentalJustice.

     FY2000     Same Goal, different targets.  Goal Met,

                 Performance Measures
                 -  Number of EPA-sponsoredpublic meetings held where disproportionately disadvantaged            25          31
                    communities participate.
                 -  Number of grants awarded to low income, minority communities for addressing                    70          62
                    environmental problems.

     FY1999     Provide over 100 grants to assist communities with understanding and address EJ issues.             100          ICO
                 Goal Met.

     FY 2002 Result: EPA continued to work for equal environmental and health protection through access to information across the United States.
     EPA published environmental justice reports and sponsored community revitalization demonstration projects and intern training in community
     organizations. EPA also awarded grants, although it did not receive enough applications to meet the FY 2002 target (this also explains
     FY 2001 and FY 2000 results for the same performance measure). Although EPA did not receive enough applications to meet the FY2002
     target, it did award grants to all 73 eligible applicants.

     APG53      Data Quality                                                                            Planned     Actual

     FY2002     100% of the publicly available facility data from EPA's national systems accessible on           100%        100%
                 the EPA web site will be part of the Integrated Error Correction Process, reducing data
                 error. Goal Met,

     FY 2002 Result: Access to the Agency's Integrated Error Correction Process (IECP), a user-friendly method for reporting and resolving errors
     identified by the public, is now available by clicking on "Contact Us" on the EPA homepage. By offering easy access to IECP via the EPA web
     site and by providing direct links from more than a dozen databases and web sites, EPA is helping to reduce errors in the information it makes
     available to the public.

        Strategic Objective:Through 2006, EPA Will Continue to Improve the Reliability, Capability, and Security of EPA's
                                                    Information Infrastructure.
                            FY2002 Cost (in thousands): $134,297 (52.9% of FY2002 Goal 7 Total Costs)

     Progress Toward Strategic Objective: EPA is on track and making progress toward this objective. The Agency increased the security of
     environmental information on its acute infrastructure, financial, and mission critical environmental systems. Based on the assessment results,
     the Agency strengthened its information security program to ensure the integrity and availability of data and appropriate level of access to
     data. EPA supported the development of an additional strategy for homeland security by establishing a rigorous plan to prevent and respond
     to a terrorist attack.

     APG 54      Information Security                                                                    Planned     Actual

     FY2002     Complete risk assessments on the Agency's critical infrastructure systems, critical
                 financial systems, and mission critical environmental systems. Goal Met

                 Performance Measures
                 -  Critical infrastructure systems risk assessment findings will be formally documented          12
                    and transmitted to systems owners and managers in a formal Risk Assessment
                    document.
                 -  Critical financial systems risk assessment findings will be formally documented              13          13
                    and transmitted to systems owners and managers in a formal Risk Assessment
                    document.
                 -  Mission critical environmental systems risk assessment findings will be formally              5           5
                    documented and transmitted to system owners and managers in a formal Risk
                    Assessment document.

     FY2002 Result: EPA conducted formal risk assessments, including comprehensive testing, on 30 systems. The Agency also conducted base risk
     assessments on 168 general support systems and major applications. The risk assessments provide fuller knowledge about the threats to,
     and vulnerabilities of, the Agency's electronic systems, thereby allowing EPA to implement the best possible security measures and achieve
     a high degree of confidence in its security program.

                               FY 2001 Annual Performance Goals (No Longer Reported for FY 2002)

     Provide guidance for risk assessment to improve the scientific basis of environmental decision making.
n-84      lilWs IT 21)112 Annual Report                                                                           www.epa.gov/ocfo

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Notes:
 1.   Office of Management and Budget, The Executive
     Office of the President, Federal Management, The
     President's Management Agenda. Available at
     http://www.whitehouse.gov/omb/budget/fy2002/
     pma index.html.

 2.   U.S. EPA, EPCRA Reporting Center RY2001
     Production Statistics, as of September 27,  2002.
     Prepared by Titan, the EPA  contractor that runs
     the EPCRA Reporting Center. Available upon
     request to EPA.

 3.   Source for TRI-ME burden hours: C. Rice,
     Estimate of Burden Hours  for Economic Analyses
     of the Toxics Release Inventory Program,
     July 2002  Information Collection Request
     (Washington, DC: U.S. Environmental Protection
     Agency, Office of Environmental Information,
     June 10, 2002). Available at
     http://www.epa. gov/tri/lawsandregs/
     burden  hour memo.pdf. Source for error reduction:
     U.S. Environmental Protection Agency, Data Quality
     Impact of Pilot Version of TRI-ME (October 2002).
     Available upon request.

 4   U.S. EPA EPCRA Reporting Center.

 5.   Ibid

 6.   U.S. EPA, Office of Environmental Information,
     Toxics Release Inventory: Public Data Release
     Report,  EPA 260-R-02-003  (Washington, DC:
     U.S. Government Printing Office, August 2002).
     Available (with related materials) at
     http://www.epa.gov/tri/tridata/triOO/index.htm.

 7.   U.S. EPA, 2002 Toxics Release Inventory Data
     Release, Questions and Answers, Final
     (May 29, 2002). Available at
     http://www.epa.gov/tri/tridata/triOO/index.htm.
8.   U.S. EPA, Guidance for Reporting Releases and
    Other Waste Management Quantities of Toxic
    Chemicals: Lead and Lead Compounds, EPA
    260-B-01-027 (December 2001). Available at
    http://www.epa.gov/tri/guide docs/
    index.htm#chemical sp.

9.   U.S. EPA, Environmental Indicators Initiative.
    Information available at
    http://www.epa. gov/indicators.

10.  U.S. EPA, Office of Environmental Information,
    Information Access Division, U.S. EPA Web Site
    Statistics (September 2002).

11.  Office of Management and Budget, Guidance
   for Preparing and Submitting Security Plans of
    Action and Milestones, Memorandum 02-01
    (October 17, 2001). Memorandum for the
    heads of executive departments and agencies.

12.  Available at http://www.epa.gov/wtc/.

13.  U.S. EPA, EPA response to September 11.
    Information available at http://www.epa. gov/wtc/.
    See also Monitoring Summaries at
    http://www.epa.gov/WTC/summary.html. For
    New York City response,  see also
    EnviroMapper at http://www.epa. gov/wtc/em/.

14.  Available at http://www.epa. gov/oei/
    quality guidelines/index.htm.

15.  U.S. EPA, Office of Research and Development,
    National Center for Environmental Assessment,
    Integrated Risk Information System (IRIS).
    Available only through the Internet at
    http://www.epa. gov/iris/index.html.
www. epa.gov/ocfo

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         GOAL 8: SOUND SCIENCE, IMPROVED UNDERSTANDING OF
     ENVIRONMENTAL RISK, AND GREATER INNOVATION TO ADDRESS
                           ENVIRONMENTAL PROBLEMS
PROGRESS TOWARD THE STRATEGIC
GOAL AND OBJECTIVES

   EPA continued to address current and future
environmental challenges in FY 2002 by
developing the best available science and
adopting new and innovative approaches for
environmental protection. Specifically, the
Agency completed an analysis of acid deposition
trends in U.S. lakes and streams that provides
evidence of the success of current
environmental policies and contributes to the
scientific understanding needed to maintain and
restore these highly valued ecosystems.1 The
development of new methods to assess
pesticide-related health impacts in young
children similarly strengthens the Agency's
ability to effectively prevent and manage risks to
human health, particularly for those most
susceptible to the effects of environmental
contaminants.2 Improved methods for quantifying
mercury emissions from man-made  sources and
other research to reduce and prevent
environmental and human exposure to endocrine
disrupter chemicals (EDCs), mercury, and
biological agents will enhance EPA's ability to
anticipate and respond to environmental
challenges.3
   Environmental decision makers  also have
access to improved pollution prevention tools
and technologies, including software to evaluate
the inhalation impacts of metal finishing facilities
on workers and nearby residents and protocols
to verify the performance of new pollution
prevention technologies with applicability to
multiple economic sectors.4 In FY 2002 EPA
continued to encourage the use of expert review
and collaborative partnerships to ensure the
highest level of quality in its work. Building on
its scientific, economic, and regulatory research
and analysis activities, EPA is making
environmental protection more flexible,
efficient, and effective, while minimizing the
burden on the regulated community.

FY 2002 PERFORMANCE

Sound Science

   The American public, EPA, Congress, and the
research community have expressed growing
concern about the effects of acidic deposition on
the lakes and streams of the United States. Title
IV of the Clean Air Act Amendments sets target
reductions for sulfur and nitrogen emissions from
industrial sources as a means of reducing the
acidity of deposition and thereby improving the
biological condition of surface waters. In
FY 2002 EPA produced a report5 on trends in
acid deposition and the acidity of lakes and
streams in the Northeast, mid-Atlantic, and
upper Midwest regions of the United States.
The report provides evidence that acid
deposition controls are working. Researchers
found that all regions except the Blue Ridge
area have experienced significant declines in
sulfate concentrations in surface waters,
consistent with a decline in sulfate
precipitation. Nitrate  concentrations decreased
in two regions. The highest nitrate
concentrations were  found in the Adirondacks
and northern Appalachian plateau; however,
acid-neutralizing capacity increased in the
Adirondacks, northern Appalachian plateau,
and upper Midwest, and modest increases in
neutralizing capacity have reduced the  number
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    of acidic lakes and streams in some of these
    regions. For example, the number of acidic lakes
    in the upper Midwest fell from 251 to 80
    between 1985 and 2001. Acid-neutralizing
    capacity is a key indicator of recovery because
    it reflects the capacity of watersheds to buffer
    inputs of acidity. The National Acid
    Precipitation Assessment Program (NAPAP) will
    include the results of this analysis in its report
    to Congress and will be available at http://
    www.oar.noaa.gov/orgamzatioiVnapap.html.
       Another significant FY 2002 achievement
    involved the completion of a framework that
    provides the Agency with the necessary
    components to determine the routes, magnitude,
    and variability of human exposures to various
    multimedia pollutants (e.g., pesticides, air toxics,
    metals). Through the framework, EPA will
    advance the science of human exposure and
    dose assessment by helping to answer key
    questions regarding pollutants that pose
    significant risk to children and other susceptible
    subpopulations.  In response to recommendations
    from the Science Advisory Board (SAB),6 EPA
    also completed analyses of the National Human
    Exposure Assessment Survey,7 a program
    investigating critical information gaps about
    population-scale distributions of human
    exposures to contaminant mixtures. These
    analyses provide aggregate exposure data to
    evaluate many multimedia and media-specific
    risk management issues and to improve
    exposure methods and models.

       EPA developed two new protocols for use in
    the Agency's endocrine disrupters screening and
    testing program, which were authorized by the
    Food Quality Protection Act of 1996s and the
    Safe Drinking Water Act Amendments of 1996.9
    The protocols will help EPA identify areas in
    which technologies can be applied to reduce
    and/or prevent human and environmental
    exposure to endocrine disruptor chemicals. In
    addition, EPA improved methods for quantifying
    mercury emissions from manmade sources. In
    FY 2002 the Agency produced a report10
    Chttp ://www. epa. gov/appcdwww/aptb/EPA-600-
    R-01-109corrected.pdf. appendix:
    http://www.epa.gov/appcdwww/aptb/EPA-600-
    R-01-109A.pdf) on the parameters that affect
both the species of mercury in coal-fired utility
boiler flue gas and the performance of
promising mercury control technologies. This
report will be used to help plan future
research needed to outline, by December 2003,
the Maximum Achievable Control Technology
Requirements. This work supports EPA's
December 2000 decision to regulate mercury
emissions from coal-fired electric utility steam-
generating plants. Releasing about 43 tons of
mercury each year, coal-fired power plants are
the largest source of human-caused mercury
emissions in the United States. EPA has found
that there are cost-effective ways of controlling
mercury emissions from power plants.11
Technologies available today and technologies
expected to be available in the near future can
eliminate most of the mercury from utilities at a
cost far lower than 1 percent of utility industry
revenues.
   In the area of pollution prevention research,
EPA developed improved pollution prevention
tools, including (1) computer software that can
estimate the potential environmental impact of
chemical process designs, (2) a pest resistance
management framework to delay or prevent the
emergence of resistance in target insects to the
toxins in transgenic crops, and (3) software to
evaluate the inhalation impacts of metal finishing
facilities on workers and nearby residents.
Industry and  state and local decision makers
can use these tools to evaluate pollution
levels, impacts,  and costs of product, process,
or system redesigns that will in turn inform
decisions that better  protect human health and
the environment. In addition, EPA's
Environmental Technology Verification
program  completed 20 stakeholder-approved
and peer-reviewed testing protocols for
commercially ready environmental
technologies  in 6 categories (environmental
monitoring, air pollution control, drinking
water treatment, greenhouse gas reduction,
pollution prevention, and water quality
protection). EPA will use the protocols to
objectively evaluate a wide variety of
environmental technologies so that purchasers
and permitters will have an independent and
credible assessment of the technologies they are
buying or permitting. EPA is also developing
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outcome-oriented goals and performance
measures in these areas.

    In FY 2002 the SAB issued 17 reports
advising EPA on a broad range of scientific and
technical issues.12 One major report,
A Framework for Assessing and Reporting on
Ecological Conditions1^ (http://www.epa.gov/
sab/fiscalO 2. htm). provided guidance that
contributed to the Agency's design of its report
on the environment, which the Agency plans to
release in draft during FY 2003. The SAB
guidance highlighted EPA's emphasis on
measuring the impacts of Agency programs
through scientifically credible indicators, and on
protecting ecological resources. Other SAB peer-
reviewed reports addressed environmental
agents and cross-media issues, such as the
review of particulate matter Chttp ://www. epa. gov/
sab/f iscalO 2. htm) and the trichloroethylene health
risk assessment14 (http://www.epa.gov/sab/
fiscal03.htm). This last report will help EPA
address an environmental contaminant
affecting air, water, and multiple Superfund
sites and improve the Agency's approach to
several important areas in risk assessment, such
as protection of children and other vulnerable
populations, and cumulative risk.

    In FY 2002 the Regional Science and
Technology organizations provided field
sampling, analytical and data management
support, and quality assurance to Agency
programs nationwide and continued to expand
the number of Centers of Applied Science
(CASs). CASs support the development and
application of new and innovative technologies
by developing sampling, quality assurance, and
analytical methodologies. These methodologies
and technologies are shared both within EPA and
with the Agency's partners.  Some examples are
(1) developing polymerase chain reaction as an
analytical tool that would improve EPA's ability
to detect protozoan parasites and other target
organisms in drinking water and (2) developing
a qualitative method of compound identification
by X-ray diffraction, which, when combined
with chemical analysis, has been valuable in
determining the fate and transport of compounds
in the environment. Advances in compound
identification will help environmental decision
makers determine the most effective remedies at
Superfund sites and assess water quality impacts
from proposed or operating mineral resource
facilities.

Greater Innovation

   The Regional Geographic Initiative (RGI)
Program (http://www.epa.gov/regional/rgi.htm)
is one of the most effective tools to help EPA
regions achieve a balance between responding
to state and local needs and national priorities.15
In FY 2002 the 124 projects funded through the
RGI Program provided EPA with flexibility to
achieve environmental results by responding to
strategic regional, state, and local priorities.16
EPA fostered regional solutions to cross-
programmatic environmental problems,
promoted innovation, built partnerships,
developed holistic approaches and, of particular
significance, leveraged additional funds from
state, local, and non-governmental organization
sources. For example, Region 3's  "Livable
Neighborhoods for Philadelphia" project engages
citizens to promote the conservation of
municipal resources and initiate actions that will
result in increased neighborhood safety,
environmental and human health protection,
greening, and capacity building.17 Similarly,
Region 7's "Kansas City WildLands" project
involves citizen volunteers in conserving,

   FY 2002 Distribution of Regional Geographic
     Initiative Projects Across Agency Goals
              Pollution Prevention
                    22.0%
                   Better
              Waste Management
                    3.7%
Global
 3.0%

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                          Performance Results
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    restoring, and protecting remnant natural
    communities threatened by overgrowth of
    woody vegetation, invasive species, and the
    loss of ecological integrity.18
       In FY 2002 EPA also made significant
    progress toward incorporating innovative
    approaches to environmental management so
    that the Agency and its external partners can
    achieve greater and more cost-effective public
    health and environmental protection results. EPA
    produced new economic work products on
    environmental impacts related to specific air,
    water, and agricultural issues. Additional
    EPA-sponsored economic research studies begun
    in 2002 will improve Agency decision making in
    a lengthy list of specialized areas: children's
    health valuation, value of statistical life, water
    quality benefits valuation, cancer risk reduction
    benefits, host community compensation, and
    municipal solid waste landfills.
       In FY 2002 EPA's industry sector-based
    program Chttp://www. epa.gov/projectxl/
    2002state.htm) developed projects to help
    enhance performance in five U.S. industries:
    metal finishing, metal foundries and die casting,
    meat processing, shipbuilding and ship repair,
    and specialty-batch chemical production.19 Such
    projects included sector-specific EMS templates,
    compliance assistance guides, and proposed
    RCRA regulatory changes to  enhance waste
    recovery and reuse. Building on this program
    foundation, EPA will begin work with new
    industries to reduce regulatory and other barriers
    to improved environmental performance, while
    also providing tools and incentives to prompt
    many companies within each sector to develop
    environmental management  systems. EPA
    outreach activities for small businesses and smart
    growth also expanded. The Agency responded
    to more than 15,000 calls on the Small Business
    Ombudsman Hotline for assistance regarding
    environmental regulations, and reached more
    than 10,000 individuals and organizations with
    information on Brownfields redevelopment
    through conference presentations and
    distribution of printed materials.20
       EPA selected three state projects to be
    funded under its FY 2002 State Innovation Pilot
Grant Program Chttp://www. epa. gov/innovation/
stategrants/). Specifically, the Agency requested
projects that test innovative permitting
approaches using incentives to motivate
"beyond-compliance" environmental
performance, or that move whole sectors toward
improved environmental performance and could
show results in 2 to 3 years. EPA selected
projects from the Arizona Department of
Environmental Quality, the Delaware Depart-
ment of Natural Resources and Environmental
Control, and the Massachusetts Department of
Environmental Protection. These projects include
efforts to develop a Web-based system that will
simplify and expedite storm water permitting
and an innovative permitting approach  for auto
body repair shops that are facing new air quality
requirements. EPA has approved the final work
plan and made the award for Arizona—the time
line for results for the innovative storm water
permitting project is December 31, 2003. The
Massachusetts project, watershed-based
permitting in the Assabet River watershed, is in
final negotiation and the time lines are  not yet
final; however, based upon their pre-proposal
the Agency anticipates final results by March
2004. Similarly with the Delaware project, the
development of an innovative air permitting
program for the auto body sector, EPA is
negotiating the final agreement and anticipates
results by January 2005.
   In April 2002 EPA issued its innovation
strategy—"Innovating for Better Environmental
Results:  A Strategy to Guide the Next Generation
of Innovation at EPA" (http://www.epa.gov/
innovation/strategy/). This strategy reflects the
Agency's commitment to explore new and
creative ways of achieving cleaner air, purer
water, and better-protected land. This vision for
the future includes four primary elements:
(1) strengthen EPA's innovation partnerships with
states and tribes; (2) focus the Agency's
innovation efforts on four priority environmental
problems—smog, greenhouse gases, water
quality, and water infrastructure; (3) make full
use of technology, market-based incentives,
environmental management systems, and
measurable performance goals; and (4) make
EPA's culture and management systems more
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"innovation-friendly." EPA is tracking progress
under this strategy and issued its first progress
report in November 2002.

Program Evaluation

    In FY 2002 EPA completed the Directory
of Project Experiments and Results
Chttp://www. epa.gov/projectxl/01report.htm).
which summarizes progress in meeting
commitments and the unique issues and
challenges in achieving the innovations for 51
innovation pilots under Project XL (excellence
and Leadership). Each of the 51 projects has
made progress in meeting commitments outlined
in the formal Final Project Agreements. For the
19 projects that reported environmental progress
during the period 1997 to 2001, cumulative
environmental benefits accrued in a variety of
areas. For example, XL projects cumulatively
eliminated 28,319 tons of emissions of criteria
air pollutants (NOx, SOx, carbon monoxide,
particulate matter) and recycled 20,540 tons of
solid waste. The report includes the cumulative
and individual environmental results of projects
that reported environmental data for the period
1997 to 2001. The Agency uses these data to
determine opportunities for successful
innovations and lessons learned to be applied to
broader system change. For example, the results
from the International Paper project in Jay,
Maine, clarifies the application of new effluent
technologies and will inform EPA's future
rulemaking regarding chemical oxygen demand
and color at pulp and paper mills.
    In FY 2002 EPA also issued the report
Mid-Term Evaluation: Piloting Superior
Environmental Performance in Labs, which
presents lessons learned from the unique
approach to laboratory management being tested
by Project XL's New England  Labs innovation
pilot at Boston College, the University of
Massachusetts-Boston, and the University of
Vermont. The report explains the environmental
results of an approach that harmonizes
Occupational Safety and Health Administration
and Resource Conservation and Recovery Act
requirements by using performance-based
criteria for managing laboratory waste under an
Environmental Management Plan tailored to each
institution. EPA is considering how the results of
this evaluation should be incorporated into a
proposed rulemaking.

STATE AND TRIBAL PARTNER
CONTRIBUTIONS

State Contributions

   The Nation's 24 coastal states and Puerto
Rico are partnering with EPA's National Coastal
Assessment (NCA) Program to build the scientific
basis for representative cost-effective monitoring
of conditions and trends in the country's
estuaries. State participation is essential to the
success of the NCA Program to ensure that each
state's monitoring needs, as well as regional and
national needs, are met. The states' participation
throughout the process  provides important
feedback on the appropriateness of the NCA
Program for assessing their resources. This
EPA-state collaboration  has developed a
compatible probabilistic design and a common
set of survey indicators  that measure factors such
as water quality, sediment quality, and the
quality of living resources. Each participating
state employs this design and a set of core
indicators to conduct the survey and assess the
condition of its coastal resources. The
information from these  estimates can then be
aggregated to assess conditions at the regional,
biogeographical, and national levels. In
conducting this joint coastal monitoring and
assessment program, the coastal states and
Puerto Rico are providing about 50 percent of
total costs; EPA contributes the remaining half.
All of the participating states either are
evaluating or have already adopted for the long
term this new and cost-effective approach to
monitoring their coastal resources.

   Under EPA's innovation strategy, one of the
primary goals is to work more closely with states
to align Agency innovation priorities and look
for collaborative opportunities. In FY 2002 the
Environmental Results Program (ERP), an
innovation initiative developed by EPA and
Massachusetts, grew to include Rhode Island,
Florida, Maryland, Tennessee, and the District of
Columbia. The initiative seeks to cost-effectively
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    improve the environmental results of whole
    small business sectors through the use of linked
    regulatory tools. These tools educate small
    businesses about their environmental impacts
    and obligations, allow businesses to self-evaluate
    and certify compliance, and allow agencies to
    track environmental performance. ERP projects
    now cover several business sectors—printing,
    photo processing, dry cleaning, auto repair
    shops, auto salvage yards, auto body shops, and
underground storage tanks—in addition to the
cross-sector initiative for new industrial boilers.

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN
   There are no changes to FY 2003 APGs
based on results of FY 2002 performance.
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   Goal 8: Sound Science
   FY 2002 Obligations (in thousands):
ummary of FY 2002 Annual Performance

3
Goals 1 « 1 Goals
Met 1 U | Not Met

0
A description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
' ERA'S
   EPATotal:
   Goal 8:
   Goal 8 Share of Total:
$9,447,202
  $304,325
                                              FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 8 Costs:             $325,622
Goal 8 Share of Total:           4.1%
        Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
              Refer to page IV-11 of the Financial Statements fora consolidated statement of net cost by goal.
               Annual Performance Goals  (APG) and  Measures
                                  FY 1999-FY 2002  Results
   Strategic Objective: Provide the Scientific Understanding to Measure, Model, Maintain, and/or Restore, at Multiple
                   Spatial Scales, the Present and Future Integrity of Highly Valued Ecosystems.
                      FY2002 Cost (in thousands): $112,647 (34.6% of FY2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: In FY2002 EPA produced an analysis of data from streams and lakes in the Northeast, Mid-Atlantic,
and upper Midwest that provides evidence that controls on acid deposition, taken in response to the Clean Air Act (CAA) Amendments of
1990, are working. Determining the results of environmental management policies such as these will in turn increase EPA's ability to maintain
and restore the integrity and sustainability of highly valued ecosystems.
APG 55      Integrated Ecosystem Modeling

FY2002      Produce a report on trends in acid deposition and the acidity of lakes and streams to
            assess progress toward reducing the impacts of acid rain. Goal Met.
                                                                Planned     Actual

                                                                   1
FY 2002 Results: EPA produced a report on trends in acid deposition and the acidity of lakes and streams to assess progress toward
reducing the impacts of acid rain. This report analyzed some of the key mechanisms preventing recovery in critical regions of the United
States and will provide crucial information on the effectiveness of Title IV of the CAA Amendments of 1990. EPA will use the results in its
biennial report to Congress on the Acid Rain Program.

   Strategic Objective: Improve the Scientific Basis to Identify, Characterize, Assess, and Manage Environmental
   Hazards and Exposures That Pose the Greatest Health Risks to the American Public By Developing Models and
  Methodologies to Integrate Information About Exposures and Effects From Multiple Pathways.This Effort Includes
         Focusing on Risks Faced by Susceptible Populations, Such As People Differentiated By Life Stage
                          (e.g., Children and the Elderly) and Ethnic/Cultural Background.
                     FY2002 Cost (in thousands): $50,450 (15.5% of FY 2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: In FY 2002 EPA completed a framework for conducting risk assessments for a variety of
multimedia, multipathway pollutants of concern to the Agency. This framework will provide the Agency with a more complete
understanding of the relationships between sources, exposures, doses, and effects and will enable EPA to conduct more accurate and
reliable risk assessments. The Agency also continued to evaluate the exposures and effects of environmental contaminants  affecting
susceptible subpopulations and produced a series of reports on potential methods to assess pesticide-related health  impacts in young
children. These research efforts strengthened the  Agency's ability to effectively prevent and/or manage  risks to human health.
  Strategic Objective: Enhance EPA's Capabilities to Anticipate, Understand, and Respond to Future Environmental
     Development and Conduct Research in Areas That Combine Human Health and Ecological Considerations.
                     FY2002 Cost (in thousands): $50,345 (15.4% of FY 2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: FY 2002 research efforts yielded protocols for use in EPA's endocrine disrupter (EDC) screening and
testing program mandated under the Food Quality Protection Act and the Safe Drinking Water Act Amendments of 1996. EPA also examined
the application of various technologies to effectively reduce and/or prevent environmental and human exposure to EDCs. Additional research
focused on improving methods for quantifying mercury emissions from man-made sources,  as well as enhancing EPA's ability to mitigate and
prevent harm caused by biological agents. These research efforts help EPA anticipate and identify environmental changes before they affect
human health and the environment.

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           Strategic Objective: Provide Tools andTechnologies to Improve Environmental Systems Management While
         Continuing to Prevent and Control Pollution and Reduce Human Health and Ecological Risks Originating From
                                                    Multiple Economic Sectors.
                             FY2002 Cost (in thousands): $57,301 (17.6% of FY2002 Goal 8 Total Costs)

     Progress Toward Strategic Objective: In FY2002 EPA provided, to environmental decision makers, improved pollution prevention tools to
     estimate the potential environmental impact of chemical process designs, to delay resistance in target insects to toxins in transgenic crops,
     and to evaluate inhalation impacts of metal finishing facilities on workers and nearby residents. In addition, through the Environmental
     Technology Verification (ETV) program, EPA produced 20 protocols for verifying innovative environmental  technologies. These research
     efforts strengthen the ability of the Agency and its customers to prevent and/or mitigate risks to human health and the environment.
     APG56

     FY 2002
       Pollution Prevention (P2) Tools and Methodologies

       Improve P2 tools for the  industrial sector and other sectors by providing updated/new
       methods and approaches to help users simulate product, process or system redesign
       and evaluate resulting pollution levels, impacts and costs. Goal Met

       Performance Measures
Planned
Actual
                    Enhance the Waste Reduction Algorithm environmental impact assessment
                    tool  used to  design or retrofit chemical  processes with: (1) a better assessment
                    methodology, and (2) new features (costing).
                    Prepare a pest resistance management framework to prolong the effectiveness of
                    genetically-modified corn pesticide characteristics for the Office of Pesticide
                    Programs during product registration.
                    Provide a PC-based tool for use by EPA and the metal finishing  sector in evaluating
                    exposure and inhalation health risks to workers and residents living near metal
                    finishing facilities.
                                                                                             1 method    1 method
                                                                                             1 protocol   1 protocol
                                                                                             1 risk tool   1 risk tool
     FY 2002 Result: This APG provides tools that facilitate the use of preventative approaches to solve pollution problems posing the greatest
     risks to human health and the environment. Specifically, EPA improved P2 tools for the industrial sector and other sectors by providing
     updated/new methods and approaches to help users simulate product, process, or system  redesign and evaluate resulting pollution levels,
     impacts, and costs. EPA successfully completed a variety of independent tools,  including: (1) the Waste Reduction (WAR) Algorithm for
     process simulators, (2) the pest resistance management framework and genetically modified com, and (3) computer-based evaluation of
     exposure and risk in metal finishing facilities. These low cost and easy to use products will enable EPA,  regions, states, municipalities, and
     businesses to find cost-effective ways to reduce pollution at the source and potentially lead  to  improved environmental and human health.
     APG 57

     FY2002
       New Technologies

       Formalize generic testing protocols for technology performance verification,  and
       provide additional performance verifications of pollution prevention, control  and
       monitoring technologies in  all environmental  media.  Goal  Met,

       Performance Measure
Planned
Actual
     FY2001
       -  Complete 20 stakeholder approved and peer-reviewed test protocols in all environmental     20
          technology categories under Environmental Technology Verification (ETV), and provide
          them to testing organizations world-wide.

       Develop, evaluate, and deliver technologies and approaches that eliminate, minimize, or control
       high risk pollutants from multiple sectors. Emphasis will be placed on preventive approaches for
       industries and communities having difficulty meeting control/emission/effluent standards.  Goal Not Met.

       Performance Measure
                                                                                                                        20
     FY2000
       -  Deliver a Report to Congress on the status and effectiveness of the ETV Program during its
          first 5 years.

       Complete development of one or more computer-based tools which simulate product, process, or
       system design changes, and complete proof-of-process structure for one or more generic
       technologies (applicable to more than one environmental problem) to prevent or reduce pollution in
       chemicals and industrial processes.  Goal Met.

       Performance Measures
                    Complete development of PARIS II Software tool to design environmentally benign solvents,
                    and development and integration of WAR Algorithm into commercially available chemical
                    process simulator.
                    Complete Beta testing of a decision support tool for life-cycle analyses of municipal waste
                    management options.
                                                                                               9/30/00
                                                                                               9/30/00
     FY 2002 Result: EPA formalized generic testing protocols for technology performance verification, and provided additional performance
     verifications of pollution prevention, control, and monitoring technologies in all environmental media. EPA successfully completed 20
     stakeholder approved and peer-reviewed testing protocols for commercial-ready environmental technologies in six different categories
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(environmental monitoring, air pollution control, drinking water treatment, greenhouse gas reduction, pollution prevention, and water quality
protection). In addition, 30 verifications of commercial-ready environmental technologies were completed. These protocols and verifications
are intended to provide decision making advancements and facilitate understanding by purchasers, permitters, and vendors of a variety of
environmental technologies.

      Strategic Objective: Increase Partnership-Based Projects With Counties, Cities, States, Tribes, Resource
    Conservation Districts, and/or Bio-regions, Bringing Together Needed External and Internal Stakeholders, and
    Quantify theTangible and Sustainable Environmental Results of Integrated, Holistic, Partnership Approaches.
                       FY2002 Cost (in thousands): $12,556 (3.9% of FY2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: In FY 2002 under the Regional Geographic Initiatives Program, EPA supported projects that
focus resources on problems that are not being addressed, wholly or in part, by existing national environmental programs because of
their unique geographic or cross-media nature. Projects are accomplished by working in partnership with states, local governments, and
the private sector. All of the projects support one or more of EPA's environmental goals. EPA has analyzed possible methods of
identifying and quantifying the gains in environmental outcomes associated with the  projects and has linked each of the projects to the
Agency goal and objective it supports.

     Strategic Objective: Incorporate Innovative Approaches to Environmental Management into EPA Programs,
           So That EPA and  External  Partners Achieve Greater and More Cost-Effective Public Health and
                                              Environmental Protection.
                       FY 2002 Cost (in thousands): $35,741 (11% of FY 2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: In FY 2002 EPA made significant progress  toward incorporating innovative approaches to
environmental management so that the Agency and its external partners can achieve greater and  more cost-effective public health and
environmental protection results. EPA's industry sector-based programs surpassed environmental performance targets, while outreach
activities for small businesses and smart growth expanded.  EPA responded to more than  15,000 calls on the Small Business Ombudsman
Hotline and reached more than 10,000 individuals and organizations with  information on Brownfields redevelopment through conference
presentations and distribution of  printed materials. Through a successful competitive process, EPA awarded three Innovation Grants to
state agencies for the purpose of assisting the states in solving key environmental problems through innovative methods.

  Strategic Objective: Conduct Peer Reviews and Provide Other Guidance to Improve the Production and Use of the
                                       Science Underlying Agency Decisions.
                        FY2002 Cost (in thousands): $3,039 (.9% of FY2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: In FY 2002 the  EPA Science Advisory Board (SAB) completed 17 reports advising the Agency
on a broad range of scientific and technical issues. Four reports provided guidance  on protecting ecological resources. One report, A
Framework for Assessing and Reporting on Ecological Condition, provided guidance that EPA is using to design its forthcoming report
on the state of the environment. The SAB's guidance not only helped to heighten EPA's emphasis on measuring the impacts of Agency
programs through scientifically credible indicators, but also affected the Agency's plans to emphasize protection of ecological resources
in the forthcoming report.

   Strategic Objective: Demonstrate Regional Capability to Assist Environmental Decision Making By Assessing
     Environmental Conditions and Trends, Health and Ecological Risks, and the Environmental Effectiveness of
                                  Management Action in Priority Geographic Areas.
                       FY2002 Cost (in thousands): $3,543 (1.1% of FY 2002 Goal 8 Total Costs)

Progress Toward Strategic Objective: The Regional Science & Technology (RS&T) organizations support EPA's air, water, waste,  and
toxic substances programs by providing field sampling, analytical and data management support, and quality assurance to Agency
programs nationwide. Regions have developed special capabilities and expertise (Centers of Applied Science) based on unique
geographic and demographic issues. Centers have been designated in the areas of ambient air monitoring-environmental biology,
chemistry, and microbiology-and analytical pollution prevention methodologies. The RS&T organizations continue to strengthen their
operations by implementing  Corrective Action Plans in response to Laboratory Assessments of both internal  quality system  reviews and
external  technical systems audits (eight assessments completed). Quality assurance programs in  the EPA regions ensure the integrity
of environmental data by overseeing management of monitoring programs, approving data collection activity plans, and evaluating
monitoring and  laboratory  practices.

                     Prior Year Annual Performance Goals Without Corresponding FY 2002 Goals
                              (Actual Performance Data Available in FY 2002  and Beyond)

                                                                                                 Planned     Actual

FY 1999     Develop and verify innovative methods and models for assessing the susceptibilities of population              target
            to environmental agents, aimed at enhancing risk assessment and management strategies and               year is
            guidelines.                                                                                        FY2008
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                               FY 2001 Annual Performance Goals (No Longer Reported for FY 2002)

     Establish baseline conditions from which changes, and ultimately trends, in the ecological condition of the nation's estuaries can be
     confidently documented, and from which the results of environmental management policies can be evaluated at regional scales.

     EPA will implement significant improvements to core Agency functions identified as high environmental or economic impact identified
     during FY 2000 priority setting (Project excellence and Leadership—XL).


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Notes:
 1.   J.L.Stoddard, J.S. Kahl, F.A. Daviney, D.R. DeWalle,
     C.T. Driscoll, A.T. Herlihy, J.H. Kellogg, P.S.
     Murdoch, J.R. Webb, and K.E. Webster, Response of
     Surface Water Chemistry to the Clean Air Act
     Amendments of 1990 (Research Triangle Park, NC:
     U.S. EPA, Office of Research and Development,
     National Health Environmental Effects Research
     Laboratory, in clearance).

 2.   J. Buzzard, V. Moser, and S. Padilla, Comparison of
     the role of esterases in the differential age-related
     sensitivity to chlorpyrifos and methamidophos,
     Neurotoxicology 21 (2001):49-56.

 3.   U.S. EPA, Office of Research and Development,
     National Risk Management Research Laboratory,
     Control of Mercury Emissions From Coal-Fired
     Electric Utility Boilers: Interim Report, EPA-600/R-
     01-109 (Research Triangle Park, NC: U.S. EPA,
     Office of Research and Development, National
     Risk Management Research Laboratory, 2002).

 4   U.S. EPA, Office of Research and Development,
     National Center for Environmental Assessment,
     Metal Finishing Facility Risk Screening Tool
     (MFFRST): Technical Documentation and User's
     Guide, EPA/600/R-01/057 (Washington, DC: U.S.
     EPA, Office of Research  and Development,
     National Center for Environmental Assessment,
     2001). ORD's Environmental Technology
     Verification Program protocols are available only
     through the Internet at http://www.epa.gov/etv/
     verifications/protocols index.html.

 5.   J.L.Stoddard, J.S. Kahl, F.A. Daviney, D.R. DeWalle,
     C.T. Driscoll, A.T. Herlihy, J.H. Kellogg, P.S.
     Murdoch, J.R. Webb, and K.E. Webster.

 6.   U.S. EPA, Science Advisory Board, Integrated
     Human Exposure Committee, An SAB Advisory:
     The National Human Exposure Assessment Survey
     (NHEXAS) Pilot Studies,  EPA-SAB-IHEC-ADV-99-
     004 (Washington, DC: U.S. EPA, 1999).

 7.   L.J. Bonanno, N.C.G. Freeman, M. Greenberg, and
     PJ. Lioy, Multivariate Analysis on Levels of Selected
     Metals, Particulate Matter, VOC, and Household
     Characteristics and Activities from the Midwestern
     States NHEXAS, Appl. Occup. Environ. Hygiene
     16(9, 2001):859-874. C.A. Clayton, E. Pellizzari,
     and J. Quackenboss, National Human Exposure
     Assessment Survey: Analysis of Exposure Pathways
     and Routes for Arsenic and Lead in EPA Region 5,
     /. Expo. Anal. Environ. Epidemiol. 12(1, 2002),
     29-43. C.A. Clayton, E.D. Pellizzari, JJ.
     Quackenboss, and R.W Whitmore, Distributions,
     Associations, and Partial Aggregate Exposure of
     Pesticides and Polynuclear Aromatic
     Hhydrocarbons in the Minnesota Childrens
    Pesticide Exposure Study (MNCPES),/ Expo.
    Anal. Environ. Epidemiol, in press. D.E. Camann,
    D.L. Macintosh, Y. Pang, and P.B. Ryan, Analysis of
    Aggregate Exposure to Chlorpyrifos in the
    NHEXAS-Maryland Investigation, Environ. Health
    Perspect. 110(3, 2002):235-240. The National
    Human Exposure Assessment Survey (NHEXAS)
    database is available through EPA's Environmental
    Information Management System (EIMS) on the
    Human Exposure Database System (HEDS) web
    site at http://www.epa.gov/heds/.

8.   The Food Quality Protection Act of 1996, H.R.
    1627, Public Law 104-170.

9.   Safe Drinking Water Act Amendments of 1996,
    Public Law 104-182.

10.  U.S. EPA, Office of Research and Development,
    National Risk Management Research Laboratory,
    Control of Mercury Emissions from Coal-Fired
    Electric Utility Boilers: Interim Report, EPA-600/R-
    01-109 (Cincinnati, OH: U.S. EPA, Office of
    Research and Development, National Risk
    Management Research Laboratory, 2002). Available
    at http://www.epa. gov/appcdwww/aptb/.

11.  U.S. EPA, Office of Air and Radiation, The Mercury
    White Paper (2000). Available at
    http://www.epa.gov/ttncaaal/t3/meta/m22914.html.

12.  The SAB Report can be found on-line at
    http://www.epa.gov/sab. The reports advising EPA
    in the SAP are as follows:

    The Science to Achieve Results (STAR) Water and
    Watersheds Grants Program: An EPA Science
    Advisory Board Review, EPA-SAB-EPEC-02-001
    (2001).

    Water Quality and Pollution Prevention Multiyear
    Plans: An SAB Review, EPA-SAB-RSAC-02-003
    (2001).

    Review of the Office of Radiation and Indoor Air's
    Draft Methodology for Ranking Indoor Air Toxics,
    EPA-SAB-EHC/IHEC-02-004 (2001).

    Planning for Ecological Risk Assessment:
    Developing Management Objectives: An SAB
    Report, EPA-SAB-EPEC-02-005 (2002).

    Contaminant Candidate List Research Plan: An
    SAB Report, EPA-SAB-DWC-02-006 (2002).           g>

    FY2003 Presidential Science and Technology        f
    Budget Request for the Environmental Protection     o
    Agency: An SAB Review, EPA-SAB-RSAC-02-007       |
    (2002).                                          if
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         Interim Review of the Paniculate Matter (PM)
         Research Centers of the USEPA: An EPA Science
         Advisory Board Report, EPA-SAB-EC-02-008
         (2002).

         A Framework for Assessing and Reporting on
         Ecological Conditions, EPA-SAB-EPEC-02-009
         (2002).

         A Framework for Assessing and Reporting on
         Ecological Conditions: Executive Summary, EPA-
         SAB-EPEC-02-009a (2002).

         Overview of the Panel Formation Process at the
         Environmental Protection Agency Science
         Advisory Board, EPA-SAB-EC-02-010 (2002).

         Review of the Agency's Draft Continuous
         Monitoring Implementation Plan: A Review by the
         Clean Air Scientific Advisory Committee, EPA-
         SAB-CASAC-LTR-02-001 (2002).

         Review of the Southeastern Ecological Framework:
         An EPA Science Advisory Board Report, EPA-SAB-
         EPEC-LTR-02-002 (2002).

         Review of the Air Quality Criteria Document for
         Paniculate Matter-. Third External Review Draft,
         EPA 600/P-99/002aC & 002bC: A CASAC Review,
         EPA-SAB-CASAC-LTR-02-003 (2002).

         NATA—Evaluating the National-Scale Air Toxics
         Assessment 1996 Data: An SAB Advisory, EPA-
         SAB-EC-ADV-02-001  (2002).

         Review of the Agency's Draft Proposed
         Methodology for Paniculate Matter Risk Analysis
         for Selected Urban Areas: An Advisory by the
         Clean Air Scientific Advisory Committee, EPA-SAB-
         CASAC-ADV-02-002 (2002).

         Importance of Maintaining the Annual Pollution
         Abatement Cost and Expenditures (PACE) Survey,
         EPA-SAB-EEAC-COM-02-001 (2002).

         Industrial Ecology: A Commentary by the EPA
         Science Advisory Board, EPA-SAB-EEC-COM-02-
         002 (2002).

         EPA Science Advisory Board (SAB) Panel
         Formation Process: Immediate Steps to Improve
         Policies and Procedures—An SAB Commentary,
         EPA-SAB-EC-COM-02-003 (2002).
   Agency's Proposed Methodology for Measuring
   Coarse Paniculate Matter-. A CASAC Notification
   of a Consultation, EPA-SAB-CASAC-CON-02-001
   (2002).

   Market Incentives: A SAB Notification of a
   Consultation, EPA-SAB-EEAC-CON-02-002 (2002).

   A n Approach to Developing a Research Agenda
   for Environmental Economics: An SAB
   Consultation, EPA-SAB-EEAC-CON-02-003 (2002).

13. A Framework for Assessing and Reporting on
   Ecological Conditions, EPA-SAB-EPEC-02-009,
   (2002).

14. Review of the A ir Quality Criteria Document for
   Paniculate Matter. Third External Review Draft,
   EPA 600/P-99/002aC & 002bC: A CASAC Review,
   EPA-SAB-CASAC-LTR-02-003 (2002). Review of
   Draft Trichloroethylene Health Risk Assessment:
   Synthesis and Characterization: An SAB Report,
   EPA-SAB-EHC-03-002 (2002).

15. U.S. EPA, Office of Congressional and
   Intergovernmental Relations, Office of Regional
   Operations. Available at http:7/www.epa. gov/
   sab.html.

Id U.S. EPA, Office of Regional Operations,
   202-564-3100.

17. U.S. EPA, Region 3, Office of Policy and
   Management, 202-814-5200.

18. U.S. EPA, Region 7, Program Operations and
   Integration Staff, 913-551-7661.

19. U.S. EPA, Industry Sector Performance Program,
   2002. Available at http://www.epa.gov/sectors.

20. The figure of 10,000 individuals and organizations
   was arrived at through an internal analysis
   conducted by the Development, Community, and
   Environment Division of EPA's Office of Policy,
   Economics, and Innovation.
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            GOAL 9: A CREDIBLE DETERRENT TO POLLUTION AND
                     GREATER COMPLIANCE WITH THE LAW
           will ensure full compliance with      intended, to         human health
                                  and the environment.
PROGRESS TOWARD THE STRATEGIC
GOAL AND OBJECTIVES

   A vigorous enforcement and compliance
program remains a priority of EPA and is central
to achieving the Agency's mission of protecting
human health and the environment. Integral to
achieving this mission is ensuring compliance
with environmental laws on the part of the
regulated community. EPA focuses its efforts on
developing strategies that combine assistance,
incentives, and enforcement in order to mitigate
significant environmental risk and ensure
compliance. As a result of these strategies, the
regulated community corrects violations of
environmental law, returns to compliance, and
reduces the quantity of pollutants released into
the environment.
   EPA is improving the quality and accuracy of
enforcement and compliance data through the
design and implementation of the new
Integrated Compliance Information System
(ICIS). Already partially implemented, this
system will enhance the ability of the Agency
and states to identify and target inspections and
enforcement toward the most serious non-
compliance and address the most significant air,
water, and land pollution problems; and the most
significant human health risks.1
   EPA also continues to review and improve the
analyses of the compliance and environmental
data routinely collected through its monitoring,
compliance incentives, compliance assistance,
and enforcement programs. The effort is
designed to better evaluate the outcomes
achieved by ensuring compliance  with federal
environmental statutes. For FY 2002 EPA is
now able to better report the results of settled
enforcement cases in gallons of polluted
groundwater to be treated—2.8 billion, the
pounds of contaminated soils to be cleaned
up—503 million, and the acres of wetlands to be
protected—about 40,000.2

   EPA consistently exceeds its annual goals to
promote compliance within the regulated
community through voluntary compliance
incentive and assistance programs. Over the past
3 years, 5,421 facilities took advantage of
voluntary programs to identify, self-disclose, and
correct compliance violations. EPA is expanding
efforts to encourage disclosure by companies
suspected of having serious violations. In the
past 3 years, nearly 1.5 million entities have
received compliance assistance materials and
have visited EPA Compliance Assistance Centers
more than 1.6 million times.3

FY 2002 PERFORMANCE

   During FY 2002 EPA, along with state and
tribal partners, provided assistance to help
facilities comply with environmental laws,
completed agreements with companies to
conduct their own self-audits and correct
violations, and took civil and criminal
enforcement actions to address noncompliance
associated with serious environmental problems
and ensure fairness in the marketplace. In
FY 2002 approximately 157,000 pounds of
pollutants were reduced, treated, or properly
managed per enforcement workyear;
approximately $2.4 million of injunctive relief
was collected per enforcement workyear; and
approximately $34,000 was committed to
Supplemental Environmental Projects (SEPs) per
enforcement workyear.4

Enforcing the Law, Achieving Results

   EPA continues to focus its enforcement
efforts on resolving the worst environmental
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    problems and achieving environmental results
    by bringing the most egregious violators into
    compliance with environmental laws. Through
    these efforts, EPA seeks to maintain a level
    playing field for the Nation's industries by
    ensuring that no company secures a competitive
    advantage through noncompliance. When
    enforcement actions are necessary, the vast
    majority of civil enforcement actions require
    facilities to take direct action to correct illegal
    discharges of pollutants and/or change facility
    management and information practices, such as
    record keeping. The Agency does not, however,
    establish quotas for the number of enforcement
    cases to be pursued. The anticipated amounts of
    pollutants to be reduced during a fiscal year are
    estimates based on the results of concluded
    enforcement actions from previous years, and
    often vary dramatically from year to year. During
    FY 2002 the Agency secured 261  million pounds
    pollutants to be reduced through settled
    enforcement cases, falling short of its target of
    300 million pounds.
       In FY 2002 EPA  conducted 17,668 inspect-
    ions and 541 intensive civil compliance
    investigations to determine the compliance
    status of regulated facilities and to help deter
    facilities from lapsing into  noncompliance.5
    These inspections and investigations resulted
    in the identification  of a number of serious
    environmental violations, including, but not
    limited to, pollutant releases not  allowed by
    permit, illegal storage of hazardous waste, and
    the discharge of oil in harmful quantities into
    U.S. waters. Findings from a recent analysis of
    the effectiveness of  compliance inspections
    indicate  that 50 percent of  all stationary air and
    water inspections, pesticide and toxic chemical
    laboratory facility inspections, and lead-based
    paint building inspections  resulted in the
    identification of environmental violations.6 Ten
    percent of the inspections  prompted corrective
    action to immediately address environmental
    and human health risks from excessive air and
    water pollution.

       EPA calculates statistically valid compliance
    rates to determine the level of compliance for an
    entire population, not just for the  subset of
    inspected facilities.7  The Agency  analyzes
compliance across an entire regulatory
population, rather than assessing a subset of
inspected facilities in order to obtain a more
accurate picture of compliance patterns across
sectors and states. EPA uses analyses of
compliance trends to determine where the most
significant environmental problems are, and
where best to focus its resources. In FY 2002
EPA calculated statistically valid compliance rates
for the following areas: municipality compliance
with the nine minimum controls to prevent,
monitor, and control combined sewer overflows;
commercial facilities compliance with Clean Air
Maximum Achievable Control Technology
standards for ethylene oxide; municipality
compliance with biological oxygen demand and
total suspended solid permit limits; and
petroleum refining facilities compliance with
ammonia permit limits. EPA also calculated
statistically valid compliance rates from self-
reported data under the Clean Water Act for
compliance of municipalities with biological
oxygen demand and total suspended solids
permitted discharge limits, and compliance of oil
refineries with ammonia-N permitted discharge
limits. These inspection numbers include state
and local inspections as well as federal
inspections. The results will be available in the
second quarter of FY 2003.
    EPA's FY 2002 enforcement actions resulted
in the prevention and/or reduction of emissions
or discharges by an estimated 261 million
pounds of pollutants, the treatment of an
additional 503 million pounds of contaminated
soil and sediments, and 2.8 billion gallons of
contaminated groundwater to be treated. In
FY 2002, 37 percent of concluded  enforcement
actions directed improvements in the use or
handling of pollutants, such as changes in
industrial processes or storage and  disposal
practices. About 62  percent of actions directed
improvements in facility environmental
management practices, including testing, training,
and overall improvements to environmental
management systems. In FY 2002 polluters were
required to invest more than $3.9 billion in
injunctive relief (actions necessary to correct
violations), and to take additional steps to protect
the environment. The settlement of
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                            HOMELAND SECURITY ACCOMPLISHMENTS

   EPA's criminal enforcement program effectively responded to the terrorist events of September 11,
   2001.  Throughout FY 2002  EPA  provided crisis and  consequence management support—
   investigative, forensic, technical—to federal, state, county,  local, and tribal governments and training
   for homeland security related environmental, chemical, or biological incidents involving violations
   of environmental law. EPA supported federal security efforts at designated National Security Special
   Events  including the Superbowl and  the Winter Olympics. Agency investigative and technical
   forensic personnel participated in the  federal government's Capitol  Hill anthrax investigations in
   the Hart, Ford, Longworth, and Dirksen office buildings, and at the General Services Administration
   facility  in Springfield,  Virginia. EPA also provided personal protective equipment training to a
   number of major county sheriffs departments, and provided environmental threat identification and
    warning assistance to 95 Department of Justice Anti-terrorism Task Forces.                       .
enforcement cases often produces SEPs,
through which violators perform additional
environmentally beneficial projects beyond any
injunctive relief in exchange for a penalty
reduction. SEPs totaled $56.4 million in
FY 2002.8

   EPA addresses noncompliance with
enforcement actions appropriate to the violation.
Civil administrative and judicial actions and civil
referrals to the Department of Justice (DOJ),
civil judicial settlements, or criminal referrals to
DOJ serve as a deterrent for other potential
noncompliers, secure environmental benefits,
protect communities and the environment, and
ensure fairness to companies that invest in
compliance with environmental laws.  EPA
enforcement actions against noncomplying
facilities often result in outcomes such as
improvements in environmental management
practices by facilities, improved or enhanced
monitoring and reporting, special projects
benefitting the environment, and significant
reductions of pollutant discharges to the air,
water, or land.

   During FY 2002 EPA conducted a strong
criminal enforcement program, emphasizing
environmental results and effective partnerships
with federal, state, tribal, and local governments.
The criminal enforcement program focused on
investigations of knowing and willful violations
that pose a significant threat to human health and
the environment. The cases taken  provide an
effective deterrent by incorporating high fines,
restitution, and jail sentences. EPA helped
prosecute cases that resulted in 215 years of
incarceration and $62 million in fines and
restitution in FY 2002.9

   In FY 2002 EPA initiated 3,062 civil, judicial,
and administrative enforcement actions; opened
674 criminal investigations, 190 of which were
counterterrorism related; and referred
250 criminal cases to the DOJ, as illustrated by
the following significant civil and criminal
enforcement cases.10
   City of Baltimore Settlement: In
September 2002 the U.S. District Court entered a
consent decree to implement a settlement
between EPA and the city to end discharge of
untreated sewage. Consent Decree in United
States et al. v. Mayor and City of Baltimore, JFM
02 CV1524 (September 30, 2002). Because of
years of neglect, an estimated 30 million gallons
of untreated sewage was discharged annually,
contaminating Baltimore's water with bacteria,
pathogens, and other harmful pollutants.
Complaint in United States et al. v. Mayor and City
of Baltimore, JFM 02 CV1524. The city was
assessed a civil penalty of $600,000. The facility
improvements required under this enforcement
action will cost Baltimore about $940 million to
rehabilitate and repair pumping stations and
eliminate raw sewage discharge. Consent
Decree at Sections VI and VIII in United States et
al. v. Mayor and City of Baltimore, JFM 02
CV1524 (September 30, 2002). The city also
agreed to implement a SEP to design, install, and
operate a biological nutrient-reduction facility at
the city-owned Patapsco Wastewater Treatment
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    Plant that will improve the water quality of the
    Chesapeake Bay by significantly reducing the
    amount of nitrogen nutrient runoff entering the
    bay. Consent Decree at Section X in United States
    et al. v. Mayor and City of Baltimore, JFM 02
    CV1524 (September 30, 2002).

       PSEG Fossil LLC Settlement: In FY 2002
    EPA and the State of New Jersey concluded a
    major settlement with PSEG for violations of the
    Clean Air Act (CAA) at its coal-fired power plants
    in Jersey City and Hamilton, New Jersey. Consent
    Decree in United States etal. v. PSEG Fossil LLC,
    Civil Action No. 02-340 (JCL) (July 26, 2002)
    http://www.epa.gov/compliance/resources/
    cases/civil/caa/psegllc.html.  PSEG paid a
    $1.4 million civil penalty and will spend about
    $337 million to install  state-of-the-art pollution
    controls to reduce the emissions of sulfur
    dioxide (SO2) by 90 percent and reduce
    nitrogen oxides (NOX) more than 80 percent.
    These improvements will ultimately reduce
    36,000 tons of SO2 and 18,000 tons of NOX per
    year. Consent Decree at Sections IV and X in
    United States et al. v. PSEG Fossil LLC, Civil
    Action  No.  02-340 (JCL) (July 26, 2002). The
    company also agreed to three SEPs that will
    cost the company $6 million to (1) voluntarily
    reduce carbon dioxide emissions by 15 percent;
    (2) contribute to New Jersey's ongoing efforts to
    recover and use methane gas from landfills; and
    (3) develop ways to reduce and monitor
    mercury emissions from its plants. Consent
    Decree at Section VIII in United States et al. v.
    PSEG Fossil LLC, Civil Action No. 02-340 (JCL)
    (July 26, 2002).

       Lee Brass Settlement: EPA, the DOJ, and
    the State of Alabama  concluded a judicial
    action against Lee Brass Company, Inc., for
    violations of the Resource Conservation and
    Recovery Act (RCRA) that resulted in public
    exposure to excessive levels of lead. See
    http://www.epa.gov/Compliance/resources/
    cases/civil/rcra/leebrass.html: Consent Decree in
    United States etal. v. Lee Brass, Inc. Civil Action
    No. Ol-B-2422  (April  25, 2002). The lead-
    contaminated sand had been donated to county
    and city governments for use as fill on
    playgrounds and ballfields. Some lead levels
    were more than four times the 400 parts per
million exposure limit. Lead exposure is known
to have significant human health effects,
including developmental effects on children
(available at http://www.epa.gov/lead). It is
estimated that annually 0.5 million to 1 million
pounds of sand containing about 500 to 1,000
pounds of lead had been sent off-site. The
implementation of the settlement will reduce
thousands of pounds of lead releases to the
environment and eliminate public contact with
the sand. EPA also issued an emergency order
(imminent and substantial endangerment) to
address the assessment and potential cleanup of
the sand that had been sold or donated.
    Ashland, Incorporated Settlement:
Ashland Inc., in Covington, Kentucky, pled
guilty to criminal charges of negligent
endangerment under the CAA, and to submitting
a false certification to environmental regulators.
The CAA violations led to an explosion and fire
at a refinery that injured five persons,  one
severely. The agreement requires Ashland to
pay $3.5 million to the severely injured man and
to pay medical costs for him and his family. The
other four injured workers will receive
$10,000 each. Ashland has agreed to a
$3.5 million criminal fine and was required to
pay $50,000 to each fire department that
responded to the incident. Ashland must also
perform $3.7 million in upgrades to the pollution
control system at the refinery. United States v.
Ashland, Inc., U.S. District Court of Minnesota.
CR 02-152.

Increasing Compliance Through Assistance

    In FY 2002 EPA developed a wide range of
information tools and services to help  the
regulated facilities, industry sectors, trade
associations, compliance assistance providers,
and the public to understand environmental
compliance requirements. The Agency reached
589,566 entities in FY 2002 through compliance
assistance activities that resulted in process or
management changes that reduce emissions and
noncompliance.11
    In FY 2002 small and medium size
businesses, local governments, federal facilities,
and the public visited the 10 Internet-based
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Compliance Assistance Centers more than
676,000 times, an increase of 39 percent from
FY 2001. EPA created these Internet-based
centers to help small and medium-sized
businesses, local governments, and federal
facilities to understand and comply with
regulatory requirements. The 10 centers provide
information and assistance for local governments,
federal facilities, and the following industries:
printing, metal finishing, automotive services and
repair, agriculture, chemical manufacturers,
paints and coatings, transportation, and printed
wiring board manufacturers. In FY 2001 surveys
of center users, 74 percent of survey
respondents stated they had realized one or
more environmental improvements as a result of
center assistance, and 65 percent stated they had
realized a cost savings. Compliance Assistance
Center users will be surveyed again in
FY 2003.12
   EPA created an inventory of the Agency's
existing compliance assistance tools and guides
in FY 2002 to support the Business Compliance
One-Stop Initiative. EPA also created The National
Environmental Compliance Assistance
Clearinghouse Chttp://www.epa.gov/
clearinghouse), which is the repository for EPA's
compliance assistance tools and guides. The
clearinghouse, launched in FY 2001, is a Web-
based, searchable reference tool that provides
quick access to compliance assistance materials
and allows interaction with EPA, states, and other
compliance assistance providers. These
initiatives support a Presidential Management
Agenda reform for e-government.
   Compliance assistance is also provided
during EPA compliance inspections. In FY 2002
EPA conducted an assessment of about
4,000 inspections in 4 media programs and
found that compliance assistance was provided
during 76 percent of the inspections.13

Increasing Compliance Through Incentives
   In FY 2002 EPA's Audit and Self-Policing
Policy14 continued to  provide a significant
incentive for many regulated facilities to detect,
disclose, and correct environmental violations in
exchange for a waiver or significant reduction in
penalties.15 The benefit to the public from this
policy is that facilities come into compliance
quickly, fewer government resources are
expended to produce compliance, and emissions
are reduced or eliminated. In FY 2002 more than
252 companies used this EPA policy to report
and resolve violations at 1,467 facilities. Through
initiatives to use the policy to improve
environmental management at facilities, EPA
actively solicits companies or industry sectors.
   The Bakery Partnership Program (BPP),16
designed to ensure full compliance with
requirements protecting the ozone layer, was
initiated in FY 2002 with the participation of
43 companies owning 250 baking facilities. The
Compliance Assurance Program initiative,17 a
structured self-audit, was developed in
coordination with the largest trade association
representing the baking industry. The BPP
involved an audit of 250 baking facilities that
identified equipment releasing a refrigerant that
causes ozone depletion. A schedule of penalties
was established at the outset to ensure that
owners would be aware of the  penalties they
would face as a result of the program. More than
800 machines, some containing thousands of
pounds of refrigerant, now use non-ozone-
depleting refrigerant as a result of this
program.18 Companies completing conversions
before the start date of the initiative were
assured that no penalties would be assessed.
   EPA also promotes self-auditing  by regulated
facilities through developing audit protocols that
can be used as part of an Environmental
Management System (EMS).19 An EMS is a
continual cycle of planning, implementing,
reviewing, and improving the processes and
actions that an organization undertakes to meet
its business and environmental goals. The
Agency included EMS provisions in
90 settlements  of enforcement cases.20 EMSs
affected more than 95 facilities because many
recent settlements containing EMS provisions
require a company to use EMSs corporate-wide.
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    STATE AND TRIBAL PARTNER
    CONTRIBUTIONS

       As a result of delegation authority provided
    for by most statutes, state, tribal, and local
    governments bear much of the responsibility
    for ensuring the compliance of regulated
    facilities and other entities. Nationally, states
    conduct the majority of all federally related
    inspection and formal enforcement actions and
    provide most of the data retained in EPA's
    enforcement and compliance data systems.
    State, tribal, and local law enforcement
    agencies continue to contribute to EPA's
    cooperative law enforcement efforts by
    participating in 93 criminal task forces and law
    enforcement coordinating committees across the
    country. To help build the capacity of state, local,
    and tribal programs, EPA sponsors a number of
    training courses and assists with enforcement
    inspections. In the past 3 years, EPA conducted
    2,689 joint inspections with states, localities, and
    tribes.21 In FY 2002 EPA trained 7,439 state,
    local government, and tribal personnel in
    inspection and enforcement skills. The data
    provided by states and tribal partners adds to
    national enforcement and compliance enviro-
    nmental performance information, thereby
    allowing the Agency to more accurately track its
    environmental and human health benefits to the
    public.

       In addition to the responsibilities of state,
    tribal,  and local governments discussed above,
    EPA partners make other significant contributions
    to ensure compliance with the Nation's
    environmental laws. Partners provide important
    feedback during the biennial selection of
    national priorities. Groups that represent the
    interests of state program partners also work
    closely with EPA.22 These include such entities
    as the Environmental Council of the States
    (EGOS) and the National Association of Attorneys
General (NAAG), as well as media-specific
associations like the State and Territorial Air
Pollution Program Administrators/Association of
Local Air Pollution Officials, Association of State
and Interstate Water Pollution Control
Administrators, and Association of State and
Territorial Solid Waste Management Officials.
   Through rigorous competition EPA selected
16 projects out of a total of 220 proposals
submitted by states, tribes, and state universities
for the support of inspector training,
performance measurement, collaborative work
planning, and data management. The 16 selected
projects are part of an Agency funding program
to build and support state and tribal compliance
capabilities.23 The selected proposals totaled
$2.05 million for projects to be carried out
during FY 2003-2004. For example, the grant
awarded to the Colorado Department of Public
Health and Environment will supplement the use
of traditional output measures with measures that
assess the status and trends of regulatory
compliance and environmental improvements
resulting from enforcement and compliance
assistance activities.24 This will be a multimedia
(air, water, and waste) system. In FY 2002 EPA
began construction of a Web site to showcase
the products of grants awarded during the past
4 years hoping that others can use the results of
successful projects.

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON THE FY 2003  ANNUAL
PERFORMANCE PLAN

   For FY 2003 Goal 9 proposed two new
measures—environmental justice and public
access to enforcement policy guidance. These
two measures were formerly in Goal 7. One
target for environmental justice grants was
reduced due to performance results from
previous years.
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   Goal 9: A Credible Deterrent
               to Pollution

   FY 2002 Obligations (in thousands):
Summary of FY 2002 Annual Performance


7
Goals 1 j 1 Goals
Met I Not Met

0
A description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
' ERA'S
   EPATotal:
   Goal 9:
   Goal 9 Share of Total:
               $9,447,202
                 $451,345
                                                             FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 9 Costs:             $387,545
Goal 9 Share of Total:           4.8%
       Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
              Refer to page IV-11 of the Financial Statements fora consolidated statement of net cost by goal.
               Annual Performance Goals (APG) and Measures
                                  FY1999-FY 2002  Results
   Strategic Objective: EPA and Its State,Tribal, and Local Partners Will Improve the Environment and Protect Public
        Health By Increasing Compliance With Environmental LawsThrough a Strong Enforcement Presence.
                      FY2002 Cost (in thousands): $330,072 (85.2% of FY2002 Goal 9 Total Costs)

Progress Toward Strategic Objective: Over the last 3 fiscal years, EPA prevented an estimated 1.6 billion pounds of pollutants from entering
the air, waterways, and soil as a result of enforcement settlement provisions that require polluters to adopt better waste management
practices; maintain permit levels for emissions, effluent, and runoff; and improve record keeping. The majority of enforcement settlements
resolved in FY 2001 and FY 2002 required polluters to take decisive measures to reduce pollution, and change facility management and
information practices. Over the past 3 fiscal years, EPA conducted 1,633 criminal investigations,  1,569 civil investigations, and 55,603
inspections. EPA-assisted inspections and training courses improved both inspection capability nationwide and the quality of environmental
data collected by state and tribal regulators. EPA consistently meets its hazardous waste tracking responsibilities and homeland security
support responsibilities that reduce the likelihood of United States-initiated transboundary hazardous waste pollution, and improve America's
response and deterrence capability to combat domestic terrorism.
APG 58     Non-Compliance Reduction

FY2002     EPA will direct enforcement actions to maximize compliance and address environmental
           and human health problems; 75% of concluded enforcement actions will require
           environmental or human health  improvements such as pollutant reductions and/or changes
           in practices at facilities. Goal Not Met.

           Performance Measures
                                                                               Planned
                              Actual
           -  75% of concluded enforcement actions require physical action that result in pollutant
              reductions and/or changes in facility management or information practices.
           -  Millions of pounds of pollutants required to be reduced through enforcement actions
              settled this fiscal year.
           -  Develop and use valid compliance rates or other indicators of compliance for
              selected populations.
           -  Reduce by 2 percentage points overall the level of significant noncompliance
              recidivism among CAA, CWA, and RCRA programs from FY 2000 levels.
                                                                                 75%
                                                                                3COM
                               77%
                              261 M
                                                                            5 populations   5 pop.
                                                                                 2%
                               data
                             available
                            in FY 2003
FY2001
              Increase by 2% over FY 2000 levels the proportion of significant noncomplier facilities    2%
              under CAA, CWA, and RCRA which returned to compliance in less than 2 years.
              Produce report on the number of civil and criminal enforcement actions initiated
              and concluded.
Same Goal, different targets.  Goal Met.

Performance Measures
-   75% of concluded enforcement actions require pollutant reductions and/or changes in facility       75%
   management or information practices.
-   Estimated pounds of pollutants reduced.                                              350 M
                                                                                            data
                                                                                          available
                                                                                         in FY 2003

                                                                                            data
                                                                                          available
                                                                                         in FY 2003
                                                                                                       79%

                                                                                                       660M


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                                                                             Performance Results
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                     Increase or maintain existing compliance rates or other indicators of compliance for populations          5
                     with established baselines, or develop additional rates for newly selected populations.        populations
                     Reduce by 2 percentage points overall the level of significant non-compliance recidivism         2%
                     among the Clean Air Act (CAA), Clean Water Act (CWA), and Resource Conservation and
                     Recovery Act (RCRA) programs from FY 2000 levels.
                     Increase by 2% over FY 2000 levels the proportion of significant non-complier facilities under     2%
                     CAA, CWA, and RCRA which returned to compliance in less than 2 years.
                     Produce a report on the number of civil and criminal enforcement actions initiated and concluded.     1
                                                                                                              1,33%
     FY2000
       Same Goal, different targets.  Goal Met.

       Performance Measures
                  -   Percent of actions which require pollutant reductions.                                        35%
                  -   Estimated pounds of pollutants reduced (aggregate).                                         300M
                  -   Establish  statistically valid noncompliance rates or other indicators for selected environmental     5
                     problems.
                  -   Establish  a baseline to measure percentage of significant violators with reoccurring significant     1
                     violations within 2 years of returning to compliance.
                  -   Establish  a baseline to measure average length of time for significant violators to return to         1
                     compliance or enter enforceable plans/agreements.
                  -   Produce report on the number of civil and criminal enforcement actions initiated and concluded.    1
     FY 2002 Result: Currently, data are available for three of the six performance measures under this goal. Because the missed pollution
     reduction measure is a key element for determining goal status, the Agency was able to designate this APG as not met without data for
     the remaining three measures. The remaining performance data are expected to be available by February 2003.

     During 2002 the Agency achieved a level of 261 million pounds of pollutants to be reduced through enforcement,  falling short of its target
     of 300 million  pounds. Because the Agency does not establish quotas for the number of enforcement cases to be pursued, the
     anticipated pollution  reduction target is an estimate based on the results of concluded enforcement actions from  previous years, and
     frequently displays wide variation from year to year. Of enforcement settlements this fiscal year, 77% required polluters to take decisive
     measures to reduce  pollution and change facilities management and information practices around the country. EPA met its goal to
     develop statistically valid compliance rates for five new populations. The Agency uses these analyses of compliance trends  to determine
     where the most significant environmental problems are, and where best to focus its resources. In FY 2002 EPA calculated statistically
     valid compliance rates for the following areas: municipality compliance with nine minimum  controls to prevent, monitor, and control
     combined sewer overflows (CSOs); commercial facilities' compliance with Clean Air Act Maximum Achievable Control Technologies
     (MACTs) for ethylene oxide; municipality compliance with biological oxygen demand and total suspended solid permit limits;  and
     petroleum refining facilities' compliance with ammonia permit limits.

     FY 2001 Result Available in FY 2002: This performance  result has been updated to reflect information received after the FY 2001
     Annual Report date of publication.
     APG 59      Inspections/Investigations

     FY2002      EPA will conduct inspections, criminal investigations, and civil investigations targeted to
                  areas that pose risks to human health or the environment, display patterns of
                  non-compliance or include disproportionately exposed populations.  Goal Met,

                  Performance Measures
                    Number of EPA inspections conducted.
                    Number of criminal investigations.
                    Number of civil investigations.
                                                                                                Planned
                                                                                                 15,500
                                                                                                  400
                                                                                                  200
      Actual
        674
        541
     FY2001      Same Goal, different targets.  Goal Met

                  Unit Measures
                  -   Number of inspections.
                  -   Number of criminal investigations.
                  -   Number of civil investigations.
                                                                                                 17,000
                                                                                                  460
                                                                                                  250
     FY2000      Same Goal, different targets.  Goal Not Met.

                  Performance Measures
                  -   Number of EPA inspections.                                                               13,500
                  -   Number of civil investigations.                                                              150
                  -   Number of criminal investigations.                                                           500
                  -   Percent of inspections and investigations (civil and criminal) conducted at priority areas.         50%

     FY 1999      Deter non-compliance by maintaining levels of field presence and enforcement actions, particularly     15,000
                  in high risk areas and/or where populations are disproportionately exposed. In 1999, EPA will       2,600
                  conduct 15,000 inspections and undertake 2,600 enforcement actions. Goal Met,
                                                                                                             20,123
                                                                                                               060
                                                                                                               477
                                                                                                               15%
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FY 2002 Result: EPA greatly exceeded its performance goal to provide a credible deterrent to polluters through a strong enforcement
presence. In 2002 EPA exceeded performance targets for investigations and inspections,  performing 674 criminal and 541 civil
investigations, and 17,668 inspections. A strong enforcement presence in the field provides a strong incentive for industries and other
regulated entities to continue to comply with environmental laws, and ensures that polluters do not experience financial benefits from
persistent non-compliance.
APG60      Capacity Building

FY2002      Improve capacity of states,  localities and tribes to conduct enforcement and compliance
             assurance programs. EPA will provide training as well as assistance with state and tribal
             inspections to build capacity, including implementation of the inspector credentials
             program  for tribal law enforcement personnel. Goal Met

             Performance Measures
Planned
             -  Number of EPA training classes/seminars delivered to states, localities and tribes to
               build capacity.
             -  Conduct EPA-assisted  inspections to help build state program capacity.
             -  Provide tribal governments with 50 computer-based training (CBT) modules.
             -  Total number of state and local students trained.
             -  Train tribal personnel.
  200

  400
   50
 4,900
   95
Actual
 1,081
  116
 6,631
FY2001      Same Goal, different targets. Goal Met

             Performance Measures
             -  Number of EPA training classes/seminars delivered to states, localities and tribes to build        22O
               capacity.
             -  Conduct EPA-assisted inspections to help build state program capacity.                        150
             -  The National Enforcement Training Institute will provide tribal governments with 50               50
               computer-based modules.
             -  Total number of state and local students trained.                                            4,900
             -  The National Enforcement Training Institute will train tribal personnel.                          105
               128
FY2000      Same Goal, different targets. Goal Met,

             Performance Measures
             -  Number of EPA-assisted inspections to build capacity.
             -  Number of EPA training classes/seminars delivered to state/localities and tribes to build capacity.
   100
  200
FY 1999      Assist states and tribes with their enforcement and compliance assurance and incentive
             programs. EPA will provide specialized assistance and training, including 83 courses, to state
             and tribal officials to enhance the effectiveness of their programs.  Goal Met,
   83
FY 2002 Result: Capacity building efforts greatly assist EPA in meeting annual performance targets each year as the bulk of statutory
reporting requirements is delegated to state and tribal entities. Better understanding of environmental requirements and inspection
techniques improves the consistency of enforcement and compliance work, thereby improving the quality of environmental data
collected and reported. For FY2002,  the Agency collected training performance data from EPA regional offices, whereas in the past,
EPA headquarters training performance data were the only data collected. Therefore, performance for state, local, and tribal  capacity
building training is considerably above the planned performance target for FY 2002, and more accurately depicts the full spectrum of
EPA capacity building nationwide. Beginning in FY 2003,  EPA will track these performance measures internally.
APG 61       Quality Assurance

FY2002      Maintain and improve quality and accuracy of EPA's enforcement and compliance data to
             identify noncompliance and focus on human health and environmental problems. Goal

             Performance Measures
Planned
             -  Operate 14 information systems housing national enforcement and compliance
               assurance data with a minimum of 95% operational efficiency.
             -  Have Phase I  of the Integrated  Compliance Information System (ICIS) fully operational
               in March 2002.
  95%
Phase 1
Actual
      1
FY2001      Same Goal, different targets. Goal Met,

             Performance Measures
             -  Continue operation and maintenance/user support of 14 information systems housing national    95%
               enforcement and compliance assurance data with a minimum of 95% operational efficiency.
             -  Complete Phase I of Integrated Compliance Information System (ICIS) development          Phase 1
               (programming) and begin design of Phase II.
             -  Complete Quality Management Plan (QMP) project for additional data systems.                  3
             -  Complete detailed design (development of screens, prototypes) including a pilot NPDES          1
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                    permitting desk model for Permit Compliance System (PCS) system modernization.
                 -  Conduct four data analyses of environmental problems in Indian Country using the American      4           12
                    Indian Lands Environmental Support Project (AILESP) and the baseline assessment survey.

     FY 2002 Result: Data modernization efforts begun in previous fiscal years resulted in the implementation of the Integrated Compliance
     Information System (ICIS) in June 2002. ICIS will enhance environmental data analysis capabilities and allow for more informed decision-
     making for populations of the regulated community that emit a disproportionate share of pollution, or those regulated entities that
     persistently violate environmental laws and permits.
     APG62      International Enforcement

     FY2002     Ensure compliance with legal requirements for proper handling of hazardous waste
                 imports and exports.  Goal Met,

                 Performance Measure
                                                                                             Planned
           Actual
                    Evaluate 100% of the notices for transboundary movement of hazardous wastes,
                    ensuring their proper management in accordance with international agreements.
                                                                                              100%
            100%
     FY2001
       Same Goal. Goal Met,
100%
     FY2000     Same Goal, different targets. Goal Met

                 Performance Measure
                 -  Ensure compliance with legal requirements by assuring that hazardous waste exports from the
                    United States are properly handled (number of import and export notices filed and reviewed).
                                                                                               1,500
                                                                                                           158-4
     FY 2002 Result: In FY 2002 EPA met its goal to prevent transboundary discharge of hazardous waste from sources in the United
     States.

     APG 63      Homeland Security                                                                    Planned      Actual

     FY2002     EPA will provide direct investigative, forensic, and technical support to the Office of        100%        100%
                 Homeland Defense, FBI and/or other federal, state and  local law  enforcement agencies to
                 help detect and prevent, or respond to, terrorist-related environmental, biological
                 or chemical incidents. Goal Met.

     FY 2002 Result: EPA met its goal to  provide homeland security support to federal, state, and local entities in FY 2002.

          Strategic Objective: EPA and  Its State,Tribal, and Local Partners Will Promote the Regulated Communities'
                   Compliance With Environmental Requirements Through Voluntary Compliance Incentives
                                                   and Assistance Programs.
                           FY2002 Cost (in thousands): $57,473 (14.8% of FY 2002 Goal 9 Total Costs)

     Progress Towards Strategic Objective: EPA encourages regulated sectors to maintain compliance through a variety of incentive
     programs tailored for specific sectors that represent the greatest need due to past compliance patterns or for sectors that are highly
     motivated to improve their environmental performance. Initiatives undertaken this fiscal year provided enhanced ozone layer and
     watershed protection, among other environmental and human health benefits. The total number of facilities that voluntarily implement
     better self-monitoring of waste streams,  emissions, and runoff continues to increase as more members of the  regulated community
     respond to incentives to disclose environmental violations for reduced financial penalties. Over the past 3 fiscal years,  5,421 facilities
     participated in voluntary incentive programs to identify and correct violations at facilities around the country. These incentive programs
     expand the reach of EPA's regulatory efforts by increasing the total number of facilities monitored over and above the population of
     facilities that receive conventional enforcement inspections and investigations in a given fiscal year.
     APG 64      Compliance Incentives

     FY2002     Increase opportunities through new targeted sector initiatives for industries to voluntarily
                 self-disclose and correct violations on a corporate-wide basis.  Goal Met,

                 Performance Measure
                                                                                             Planned
           Actual
                    Facilities voluntarily self-disclose and correct violations with reduced or no penalty as
                    as a result of EPA self-disclosure policies.
                                                                                               500
            1,467
     FY2001
       Same Goal. Goal Met.
 500
     FY2000     Increase entities self-policing and self-correction of environmental problems through use of EPA
                 incentive policies: small business, small community and audit policies over FY 1997 levels.
                 Goal Met,

                 Performance Measure
                 -  Number of facilities that self-disclose potential violations.
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lil'A's IT 200* Annual Report
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FY 2002 Result: The number of facilities that participated in voluntary self-audit programs to monitor and assess compliance with
environmental requirements greatly exceeded initial performance targets by more than 400 facilities. Self-disclosure programs increase
the number of facilities in compliance at any given time through more frequent environmental monitoring that protects human health and
the environment from accidental release of excessive pollution and quick detection of permit and statutory violations. Voluntary
compliance incentive programs increase the frequency  of environmental monitoring at facilities, augmenting the total number of facilities
participating in environmental  protection efforts. These voluntary programs encourage facilities to disclose pollution violations and set
timetables for meeting legal requirements for maximum  pollution  release limits.

APG 65      Environmental Management Systems                                                    Planned      Actual

FY2002      Promote the use of Environmental Management Systems (EMS) to address known
             compliance and performance problems.  Goal  Met

             Performance Measure
             -  Increase EMS use by developing tools, such as training, best practice manuals, and       3           27
               other resources that encourage improved environmental performance.

FY2001      Same Goal, different target.  Goal Met                                                        3           10

FY 2002 Result: EPA exceeded this APG  through an increased emphasis on EMS outreach to the regulated community. The Agency
provided additional guidance on development of better management practices to protect the environment and initiated numerous site
visits to encourage application of EMSs within the regulated community. In FY 2002 EPA renewed its emphasis on encouraging
noncompliers to adopt better management practices through enforcement settlement agreements that require the adoption of EMSs at
facilities. EPA responded  to environmental  management problems at federal facilities by increasing assistance provided to these
regulated entities. Multiple EMS courses provided to states, regions, and federal facilities throughout  FY 2002 also contributed to
superior EMS performance.
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    Notes:

      1.  U.S. EPA, Office of Enforcement and Compliance
         Assurance, ICIS Phase I, implemented June 2002.
         Internal EPA database; non-enforcement sensitive
         data available to the public through the Freedom
         of Information Act (FOIA).

      2.  U.S. EPA, Office of Enforcement and Compliance
         Assurance, Case Conclusion Data Sheets (CCDS).
         Forms available at http: //www. epa. gov/
         compliance/resources/publicatines/.

      3.  The data in this paragraph were taken from the
         U.S. EPA, Office of Enforcement and Compliance
         Assurance, Measures of Success (MOS) Reports
         1999-2001. Copies of 2000 and 2001 available at
         http://www.epa.gov/compliance/planning/results/
         mos.html. FY1999 RECAP Measures of Success
         Report Management Report, signed April 12, 2000.

      4  U.S. EPA, Office of Enforcement and Compliance
         Assurance, Case Conclusion Data Sheets (CCDS).

      5.  U.S. EPA, Office of Enforcement and Compliance
         Assurance, Integrated Data for Enforcement
         Analysis (IDEA) database. Information for accessing
         non-enforcement sensitive data available at
         http://www.epa.gov/compliance/planning/data/
         multimedia/idea/users.html.

      6.  This information was collected manually through
         the U.S. EPA, Office of Enforcement and
         Compliance Assurance, Inspection Conclusion Data
         Sheets (ICDS). This information is internal to EPA
         and not currently accessible through a database or
         Web site.

      7.  U.S. EPA, Office of Enforcement and Compliance
         Assurance, National Performance Measures
         Strategy—Final Report for Public Distribution,
         signed February 1998.

      8.  U.S. EPA, Office of Enforcement and Compliance
         Assurance, Case Conclusion Data Sheets (CCDS).

      9.  U.S. EPA, Office of Enforcement and Compliance
         Assurance, ICIS Phase I.

      10. U.S. EPA, Office of Enforcement and Compliance
         Assurance, Integrated Data for Enforcement
         Analysis (IDEA) database.

      11. The information in this paragraph was collected
         from exit surveys completed by users of the
         National Compliance Assistance Centers found at
         http://www.assistancecenters.net/.

      12. Ibid
13.  This information was collected manually through
    the U.S. EPA, Office of Enforcement and
    Compliance Assurance, Inspection Conclusion Data
    Sheets (ICDS).

14.  U.S. EPA, EPA's Audit and Self-Policing Policy,
    Incentives for Self Policing: Discovery, Disclosure,
    Correction and Prevention of Violations (65 FR
    19,618; April 11, 2000).

15.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, Compliance Incentives & Auditing.
    Available at http://www.epa.gov/compliance/
    incentives/auditing/auditpolicy.html.

16.  The Bakery Partnership Program (BPP) was
    proposed on December 10, 2001, at 66 FR 63696;
    final promulgation was February 6, 2002, at 6? FR
    5586.

17.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, Compliance and Enforcement.
    Partnership and links to the Federal Register
    citations available at http://www.epa.gov/
    compliance/civil/pro grams/caa/bakery/index. html.

18.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, Compliance and Enforcement. Available
    at http://www.epa. gov/compliance/resources/
    policies/docket hcsearch.html and search for
    Docket EC-2001-007 for a listing of participating
    companies.

19.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, Environmental Management Systems.
    Information available at http://www.epa. gov/ems.

20.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, Case Conclusion Data Sheets (CCDS).

21.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, Integrated Data for Enforcement
    Analysis (IDEA) database.

22.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, State and Tribal Partner Contribution,
    65 FR 68786.

23.  U.S. EPA, Office of Enforcement and Compliance
    Assurance, State and Tribal Partner Contribution,
    67 FR 72184.

24  U.S. EPA, Office of Enforcement and Compliance
    Assurance, State and Tribal Assistance Grants
    #BG998474.
H-110         FY
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                        GOAL 10: EFFECTIVE MANAGEMENT
    KPA wiJJ
   ft
ill maintain til
•clivc internal
lighcsl cp.ia.IIty slandards for cnvironmenlal leadership
magemcnl     fiscal 'responsibility by           for results.
PROGRESS TOWARD THE STRATEGIC
GOAL AND OBJECTIVES

   EPA promotes effective management and
fiscal responsibility by focusing on services that
enable EPA program offices to make results-
based decisions and meet environmental
protection goals in a cost-effective manner. The
accomplishments highlighted in this chapter
demonstrate EPA's management abilities in
human resources, information technology,
financial management, procurement, and
accountability. They also highlight the Agency's
work to advance the President's Management
Agenda (PMA),1 and to protect human health and
the environment.

FY 2002 PERFORMANCE

   EPA's most significant management
accomplishments reflect strides in managing
human capital, streamlining business processes
and meeting customer needs, improving
financial performance, investing in infrastructure,
protecting children's health, and improving
management and program operations. The steps
taken under these initiatives are intended to
provide resources, technology, and financial
information directly to EPA program managers
for decision making purposes. As of
September 30, 2002, EPA was one of only two
federal agencies that received green progress
ratings from the Office of Management and
Budget (OMB) on all five of the PMA initiatives
tracked in the Executive Branch Management
Scorecard.2 In addition, EPA was selected as 1 of
the 7 finalists from 100 nominations government-
wide for the 2002 President's Quality Award
Program, for its accomplishments in Budget and
Performance Integration.
                                      Managing Human Capital

                                         EPA has set in motion a variety of human
                                      capital initiatives aimed at investing in its
                                      employees and addressing its hiring needs to
                                      ensure that the Agency has the skill base and the
                                      diversified workforce to accomplish its mission.
                                      EPA faces significant challenges in obtaining a
                                      workforce with the highly specialized skills and
                                      knowledge required to accomplish its work.
                                      Retirement projections for FY 2002 through
                                      FY 2007 indicate that 27 percent of the EPA
                                      workforce will be eligible to retire within the
                                      next 5 years—including 26 percent of the
                                      scientific-technical workforce and 54 percent of
                                      the Senior Executive Service (SES).3 EPA's human
                                      capital strategy,4 aligned with the  PMA goals,
                                      and several initiatives in FY 2002  were aimed at
                                      addressing the expected loss of talent at all
                                      levels of the Agency. EPA has submitted its Five-
                                      Year Restructuring Plan, which focuses on how
                                      the Agency is addressing the most critical
                                      workforce issues through realistic, creative
                                      approaches.5 The plan's strategies will provide
                                      for an EPA workforce that is innovative and
                                      skilled at applying the most productive ways to
                                      address significant environmental problems in a
                                      more cost-effective manner. To align human
                                      capital activities with the Agency's Strategic Plan
                                      revisions, EPA is developing a Workforce
                                      Planning System that links competencies to
                                      mission needs along core business lines.
                                      Specifically, in FY 2002 the Agency made
                                      significant progress in implementing the
                                      workforce development strategy,  which is a
                                      major component of the human capital strategy.
                                         EPA is making progress in implementing its
                                      human capital strategy by launching an SES
                                      Candidate Development Program, hiring its fifth
                                      class of EPA interns, developing programs for its
                                      workforce, and completing the first phase of a
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                                                                                 n-iii

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    Strategic Workforce Planning system. FY 2002
    accomplishments are highlighted below:

    •  Selection of 51 candidates from a pool of
       655 applicants for the Agency's SES
       Candidate Development Program. Candidates
       will undergo a rigorous 15- to 18-month
       developmental program that will prepare
       them for placement into future SES
       vacancies.
    •  Hiring of 41 interns as part of the EPA intern
       program. Since its inception in 1998, the
       program has selected a total of 152 interns,
       exceeding the Agency's original target of
       120 interns. EPA selected this diverse cadre
       of young people based on academic
       accomplishments, leadership potential,
       commitment to a career in public service,
       and interest in environmental issues. This
       new class and those that preceded it will
       help to prepare the Agency for the projected
       loss through retirement of its most senior
       people. This centrally funded program
       continues to receive senior management
       support.

    •  Implementation of programs geared toward
       better preparing the Agency's workforce for
       the challenges of the future. EPA's
       Management Development Program
       reestablished a curriculum of courses for
       Agency supervisors and managers. The
       Mid-level Development Program provides
       five courses that focus on building cross-
       cutting competencies and skills that all
       employees need to work effectively. About
       400 employees per year receive this
       training. The New Skills/New Options
       program supports administrative staff
       development through the use of structured
       self-assessments, career planning tools, and
       online learning.

    •  Implementation of the strategic workforce
       planning system. EPA highlighted public and
       private sector best practices; completed
       112 pilot office interviews; finalized the
       requirements analysis, line of business
       document, and competencies report; and
       submitted the Strategic Workforce Planning
       Methodology Options Report.
Streamlining Business Processes and Meeting
Customer Needs

   In FY 2002 EPA increased the services that it
offers electronically to its employees and
customers and provided greater accessibility to
grants information through electronic govern-
ment initiatives. These actions were taken in
direct response to the President's e-government
initiative as outlined in the PMA.

•  EPA expanded e-government opportunities
   by making grant opportunities available to
   prospective recipients electronically as well
   as by incorporating into its new Grants
   Competition Policy the requirement to use
   the Federal Business Opportunities
   (FedBizOpps) Web site for posting grant
   solicitations.6 EPA participated in work
   groups that defined standard data elements
   and format for grant solicitations. EPA also
   joined the Intergovernmental Online
   Registry, a system for handling funds
   transferred between agencies in interagency
   agreements  (lAGs). It is expected that this
   registry will  be used to order goods and
   services through lAGs.
•  In the area of acquisitions, EPA extended the
   use of electronic signatures, developed
   interfaces with current Agency-wide systems
   involved in the buying and paying process,
   and developed a business case for the
   replacement of the legacy small purchases
   system.

   EPA continued its use of performance-based
contracts that  allow the contractor flexibility to
propose innovative ways of achieving environ-
mental results with limited government inter-
vention. The Agency increased its percentage of
performance-based awards from 10 percent in
FY 2001 to 17 percent in FY 2002.7 Although
the goal of 20 percent was not achieved,
considerable efforts have been made to
negotiate individual performance-based work
assignments or task orders under existing
contracts. EPA plans to continue these efforts for
both existing  and new contracts in FY 2003.
   In support of the PMA Initiative for
competitive sourcing, the Agency has made
n-ii2
            FY
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substantial progress in implementing competitive
sourcing within EPA. The Agency identified
90 positions, or 100 percent of EPA's FY 2002/
2003 competitive sourcing goal, for competitive
review or conversion. The Agency directly
converted 36 positions to the private sector and
began reviews of 21 additional positions, thus
exceeding its FY 2002 goal. An interoffice team
was convened to develop a more strategic and
sustainable approach to competitive sourcing.
The team's focus will include identifying similar
functions across Agency program offices that can
be bundled for competitive review.

Improving Financial Performance

    EPA continues to strengthen its financial
management practices, as required by the PMA,
to enhance customers' confidence in the delivery
of the Agency's environmental results. In
FY  2002 EPA improved its  status score for
financial management on OMB's Executive
Branch Management Scorecard from red to
yellow in recognition  of significant progress.
FY  2002 accomplishments  are highlighted
below:
•   EPA corrected and resolved all four of its
    standing material weaknesses. This marks the
    first time in the Agency's 20-year history of
    complying with the Federal Managers
    Financial Integrity Act requirements that EPA
    will not report any material weaknesses.
    (Refer to Section III, "Management
    Accomplishments and Challenges, "forfurther
    discussion.)
•   Upgrading of software  applications, which
    resulted in improved quality and greater ease
    in generating financial statements. In
    FY 2002 the Agency  again received  a clean
    opinion for its FY 2002 financial statements
    and developed the capability to produce
    statements on a quarterly basis. This
    improvement will help meet accelerated
    year-end and periodic reporting
    requirements. In addition, EPA began
    development of a new  financial reporting
    approach involving business intelligence
    tools that will produce  real-time program
    information and help managers to make
   better business and program management
   decisions.

•  EPA is replacing its Integrated Financial
   Management System and related systems. In
   FY 2002 the Agency performed a strategic
   assessment of existing systems and their
   functions, current business processes, and
   potential business needs. Based on the
   assessment, EPA began developing
   requirements and architecture options for a
   comprehensive new system, including cost
   estimates for various commercial off-the-
   shelf software.

•  The Agency assessed its vulnerability to
   erroneous payments in response to OMB
   requirements and the PMA. EPA created a
   task force to review existing processes and
   controls over the Clean Water and Drinking
   Water State Revolving Funds. The task force
   found the occurrence of erroneous payments
   to be as low as 0.13 percent and
   0.04 percent for the respective funds and the
   controls to be excellent.  In addition, EPA's
   Office of the Inspector General found the
   Agency's controls to be effective in
   identifying and correcting duplicate
   payments.

•  EPA's new grant competition policy8 became
   effective on October 1, 2002. The policy
   directly supports the PMA initiative on
   financial management to implement an
   effective grant competition policy and
   strengthen grant oversight.9

Investing in EPA's Infrastructure

   In FY 2002 EPA completed 56 physical
security vulnerability risk assessments.10 As a
result, the Agency strengthened its perimeter,
entrances and exits, interior, and security
planning capabilities by increasing guard
services and procuring and installing perimeter
countermeasures, security equipment,  and
emergency communications systems.

   EPA completed state-of-the-art construction
projects at Research Triangle Park, North
Carolina, and the Region 7 office in Kansas City
that will better prepare the Agency and its
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                                            n-ii3

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;
:
: ;
--'
•
Aerial view of EPA's Campus at Research Triangle
Park, North Carolina. Photograph taken by "Flying
Fotos" in Chapel Hill, NC, on October 10,  2001.

employees to face the environmental scientific
challenges of the 21st century. The new EPA
campus at Research Triangle Park, the largest
facility ever designed and built by the Agency,
operates on an environmentally friendly, cost-
effective, and highly functional basis. The
facility provides state-of-the-art laboratories and
offices and represents EPA's commitment to
scientific excellence in the pursuit of human
health and environmental protection.

   The  Agency also completed its move into
the Federal Triangle complex, the new
headquarters for EPA. In conjunction with the
Department of Energy, EPA provided technical
advice to pilot laboratory partners from the
federal,  public, and private sectors by sharing
technical information and innovative whole-
laboratory designs for reducing energy and
water consumption and pollution as a result of
its experience at the Federal Triangle site.11

Protecting Children's Health
   Protecting children from environmental
threats remains a priority for EPA. In FY 2002
the Agency continued its efforts toward
developing knowledge about the relationship
between environmental factors and children's
health. These efforts include the issuance of a
second report on trends in measures reflecting
environmental factors that might affect the health
and well-being of children, an intra-agency
                                                     effort across programs to develop information on
                                                     children's exposure to environmental
                                                     contaminants, and the revision of EPA's cancer
                                                     risk assessment guidelines to include
                                                     consideration of children.

                                                        States play a critical role in protecting
                                                     children's health. EPA forged relationships with
                                                     the Environmental Council of the States (EGOS)
                                                     and the Association of State and Territorial
                                                     Health Officials (ASTHO). In FY 2002 ASTHO
                                                     convened a series of meetings of state health
                                                     and environment officials with the purpose of
                                                     developing a national action agenda to reduce
                                                     environmental triggers of childhood asthma. EPA
                                                     is also working with the National Conference of
                                                     State Legislatures, which launched an online
                                                     database of state children's environmental health
                                                     legislation, conducted a national workshop for
                                                     state legislators on children's environmental
                                                     health, and is developing a legislative guide that
                                                     explores policy options for states on children's
                                                     environmental  health issues.
                                                        EPA is supporting the American Academy of
                                                     Pediatrics, which recently conducted its third
                                                     workshop for chief pediatric residents on
                                                     children's environmental health. With EPA's
                                                     support, the American Nurses Association
   Discover the Rewards!

EPA  led a  multi-agency effort to celebrate
Children's Health Month in October 2002. For
information on topics and tips to discover the
rewards of  healthy children, check out EPA's
Web site at http://www.childrenshealth.gov.
H-114    EPA's FY 2002 Annual Report
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published three continuing education modules
on children's environmental health and
conducted children's environmental health
workshops at four meetings of professional
nursing organizations.
    In August-September 2002 EPA successfully
launched an international partnership on
children's environmental health indicator
development at the World Summit for
Sustainable Development in Johannesburg, South
Africa. The Commission for Environmental
Cooperation produced an agenda for action on
children's environmental health in the United
States, Mexico, and Canada and has started
implementing projects on risk assessment and
indicators. EPA sponsored a major conference on
children's environmental health in Southeast
Asia, generating interest in the subject from
policy makers, researchers, non-governmental
organizations, and health care professionals.

Improving Management and Program Operations

    In response to recommendations of EPA's
Office of the Inspector General (OIG), the
Agency undertook action that contributed to cost
savings, improvements in business practices, and
increased environmental results. The Agency
took action in the following areas:

•   At EPA's request, several communities
    implemented the OIG-recommended best
    practices and solutions to improve operations
    and reduce costs in resolving the combined
    sewer overflow discharges of untreated
    domestic, commercial, and industrial
    wastewater.12

•   Investigation of an environmental services
    company doing scientific testing for EPA
    resulted in the company's conviction for
    conspiring to alter scientific test data and its
    assessment of $18 million in criminal and
    civil fines and penalties.13
•   Completion of audits, evaluations, and the
    issuance of advice by the OIG resulted  in
    the recommendation of more than
    $35 million in savings, questioned costs, and
    improvements in EPA's programs and
    operational performance.14 For example, the
    OIG recommended that EPA develop
        OIG PROFILE OF PERFORMANCE
/" Questioned Costs/Savings (millions)            $35
/ Fines, Recoveries, Settlements (millions)          $20
/" Criminal, Civil, Administrative Actions            79
/ Environmental Program Actions/Improvements     29
/" Management Operational Actions Improvements    95
/ Recommendations (Environmental & Operational)  384
/ Customer Service Rating                     79%

Source: Inspector General Operations and Reporting System, and the OIG
Performance and Results Measurement System. All data originate from
audits and evaluations done in conformance with Professional Standards of
the Comptroller General, official records of legal and administrative proceed-
 ings, and direct independent surveys with OIG clients and stakeholders.
    regulations, qualification protocols, and risk-
    based targeting and apply them to control
    the open market trading of air emissions
    credits.15

 •   Ongoing investigative initiatives continued to
    uncover criminal activity in EPA's assistance
    agreements and contracts, laboratory fraud,
    and cyber fraud in partnership with other
    government agencies.
 •   The OIG also developed a Web-enabled
    interactive Compendium of Federal
    Environmental Programs, through the
    President's Council on Integrity and
    Efficiency, for more efficient program
    collaboration between federal environmental
    agencies.
    In FY 2002 the OIG improved its
 organizational planning and performance. The
 OIG issued its first Annual Performance Report
 as a best practice among the federal Inspector
 General community, for which it received high
 praise by the Mercatus Center. The OIG Web
 site, http://www.epa.gov/oig/earth. contains
 information on its Annual Performance Report,
 Semiannual Reports, Strategic Plan, and other
 reports and facts. In  addition, under the OIG
 statutory requirement for reporting on the
 Agency's Top Management Challenges, two new
 challenges were added: Air Toxics Program and
 Management of Biosolids. These challenges are
 described in Section III of this report,
 Management Accomplishments and Challenges.
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                                              n-ii5

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    Program Evaluations

       Appendix A contains descriptions of program
    evaluations completed in FY 2002 that support
    the overall Effective Management Goal.

    STATE AND TRIBAL PARTNER
    CONTRIBUTIONS

       Because much of the day-to-day work to
    protect human health and the environment is
    done by state and tribal governments through
    federally delegated programs, EPA invites early
    input from its regulatory partners when setting
    long-range priorities and evaluating progress. In
    FY 2002 the EGOS and tribal representatives
    participated in EPA's FY 2004 Annual  Planning
    Meeting to present recommendations  for
    consideration during development of the
    Agency's budget priorities. EPA regional offices,
    in turn, consulted with states and tribes on
    overall EPA budget priorities and the
    development of regional budget  initiatives. In
    spring 2002, as the Agency developed options
for a new strategic goal framework, it solicited
the state perspective on the greatest challenges
and opportunities in environmental and human
health protection that the Agency and the Nation
would likely face in the coming 5 to 10 years
and carefully considered the states' viewpoint as
EPA officials developed recommendations for
presentation to the Administrator. When the new
five-goal structure was announced, EPA
continued consulting with states to help
determine more precisely the desired results to
be achieved under each of the new strategic
goals. In FY 2003 EPA will continue to consult
extensively with states in completing its revised
Strategic Plan, due to the Congress and the
public by September 30, 2003.

ASSESSMENT OF IMPACTS OF FY 2002
PERFORMANCE ON FY 2003 ANNUAL
PERFORMANCE PLAN

   There are no changes to FY 2003 APGs
based on the results of FY 2002 performance.
H-116       F¥
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   Goal 10: Effective Management
   FY 2002 Obligations (in thousands):
ummary of FY 2002 Annual Performance

5
Goals 1 j 1 Goals
Met I Not Met

0
A description of the quality of the data used to measure
performance can be found in Appendix B.
Goals
Data
Lags
' ERA'S
   EPATotal:
   Goal 10:
   Goal 10 Share of Total:
               $9,447,202
                 $427,794
                                                             FY 2002 Costs (in thousands):
EPATotal:               $7,998,422
Goal 10 Costs:            $390,191
Goal 10 Share of Total:         4.9%
        Refer to page 1-13 of the Overview (Section I) for an explanation of difference between obligations and costs.
              Refer to page IV-11 of the Financial Statements fora consolidated statement of net cost by goal.
               Annual Performance Goals  (APG) and  Measures
                                  FY 1999-FY 2002 Results
           Strategic Objective: Provide Vision, National and International Leadership, Executive Direction,
                                     and Support for All Agency Programs.
                     FY2002 Cost (in thousands): $48,467 (12.4% of FY2002 Goal 10 Total Costs)

Progress Toward Strategic Objective: The Immediate Office of the Administrator and its regional counterparts provided the vision and
leadership needed to enable EPA to meet its commitments to protect public health and the environment. Vision and leadership, as well as
executive direction and policy oversight for all Agency programs are ongoing, evolving objectives. EPA continues its commitment to
protect children's health and will continue to direct resources toward the programs that reduce risks to children from a range of
environmental hazards. The Agency continues to work diligently to process all Title VII internal employment discrimination complaints and
will continue to administer and monitor the implementation of affirmative employment programs. Furthermore, EPA will continue to
manage special-emphasis programs designed to improve the representation, utilization, and retention of minorities, women, and persons
with disabilities in the Agency's workforce and monitor the external compliance, including Title VI of the Civil Rights Act of 1964, which
prohibits discrimination in programs and activities that receive financial assistance from EPA.
   Strategic Objective: Demonstrate Leadership in Managing for Results By Providing the Management Services,
   Administrative Policies, and Operations to Enable the Agency to Achieve Its Environmental Mission and to Meet
                           Its Fiduciary and Workforce Responsibilities and Mandates.
                    FY2002 Cost (in thousands): $60,921 (15.6% of FY 2002 Goal 10 Total Costs)

Progress Toward Strategic Objective: EPA's progress toward effective management and fiscal responsibilities is highlighted by quick
response to changing needs while maintaining the highest quality standards for resource stewardship and management, managing
changing needs for workforce  skills,  and keeping pace with new technology. EPA provided the management operations and customer
service needed to support Agency environmental  results.
APG 66     GPRA Implementation

FY2002     EPA strengthens goal-based decision making by developing and issuing timely planning
           and resource management products that meet customer needs. Goal Met.

           Performance Measures
              Agency's audited financial statements and Annual Report are submitted on time.
              Agency's audited financial statements receive an unqualified opinion and provide
              information that is useful and relevant to the Agency and external parties.
                                                                               Planned
                                                                                3/01/02
                                                                                  1
                              Actual
                              2/27/02
FY2001
Same Goal. Goal Met.
                   3/01/01      3/01/01
                  (timelines)    (timelines)
                  1 (opinion)    1 (opinion)
FY2000     100% of EPA's Government Performance Results Act (GPRA) implementation components
            (planning, budgeting, financial management, accountability, and program analysis) are completed
            on time and meet customer needs. Goal Not Met.
                                                                                 100%
                               85%


FY 1999     By the end of 1999, the Agency can plan and track performance against annual goals and
            capture 100% of costs through the new Planning, Budgeting, Analysis, and Accountability structure,
            based on modified budget and financial accounting systems, a new accountability process, and
            new cost accounting mechanisms. Goal Met.
                                                                                9/30/99
                              9/30/99
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     FY 2002 Result: EPA prepared and submitted, by the statutory due date of February 27, 2002, the FY 2001 financial statements and received
     a clean audit opinion from EPA's Office of the Inspector General (DIG). These statements, for the first time, included comparative schedules.
     In addition, the DIG did not cite any material weaknesses or recommend any additional corrective actions.

     APG67      GPRA Performance Measurement                                                        Planned      Actual

     FY2002      EPA continues improving how it measures progress in achieving its strategic objectives         2%         10%
                 and annual goals by increasing external performance goals and measures characterized
                 as outcomes by 2% in the FY 2003 Annual Performance Plan and Congressional
                 Justification compared to FY 2002.  Goal Met

     FY2001     Same Goal, different targets. Goal Met,                                                     4%         4%

     FY 2002 Result: EPA exceeded the goal of a 2-percentage-point increase in outcome-oriented Annual Performance Goals (APGs) and
     Performance Measures (PMs). In  FY 2002 EPA released the FY 2003 Annual Plan which included 49 APGs and 114  PMs that were
     subsequently classified as outcomes. The percentage of outcome-oriented APGs changed from 29% for FY 2002 to  36% for FY 2003
     (an increase of 7 percentage points), while the percentage of outcome PMs changed from 29% to 40% (an increase of 11 percentage points).
     If APGs and PMs are added together, outcomes increased by 10  percentage points—from 29% for FY 2002 to 39%  for FY 2003.

       Strategic Objective: Effectively Conduct Planning and Oversight for Building Operations and Provide Employees
          With a Quality Work Environment That Considers Safety, New Construction, and Repairs and That Promotes
                  Pollution Prevention Within EPA and With Our State,Tribal, Local, and Private Partnerships.
                          FY2002 Cost (in thousands): $227,568 (58.3% of FY 2002 Goal 10 Total Costs)

     Progress Toward Strategic Objective: The Agency has made strides in ensuring that all of its employees are provided a safe and
     energy-efficient work environment by either consolidating employees into a central location or building new facilities. EPA met its
     strategic objective by consolidating thousands of employees in a well-planned central location that offers greater efficiency, comfort, and
     safety and lower operating costs, while maintaining consistency with its environmental mission. With its new facilities, EPA has ensured
     that its buildings are as energy-efficient and sustainable as possible to serve as models of healthy workplaces with minimal
     environmental impacts. Through innovative technologies and holistic approaches to design, construction, renovation, and use, the
     Agency is "living its mission" by practicing sound environmental management.

     APG 68      Facilities Projects - Personnel                                                          Planned      Actual

     FY2002     EPA will ensure personnel are relocated to new space as scheduled.  Goal Met,

                 Performance Measure
                 -  Percentage of EPA  personnel consolidated into Headquarters complex.                  72%        72%

     FY2001     Same Goal, different targets. Goal Met.                                                     52%        ES%

     FY 2002 Result: EPA successfully  relocated 72% of its headquarters employees to quality work  environments that are safe and
     energy-efficient. This relocation was the conclusion of a 10-year effort by the Agency to improve the working conditions of employees in
     the Washington, DC area.

     APG 69      Facilities Projects - Construction                                                       Planned      Actual

     FY2002     EPA will ensure that all new and ongoing construction projects are progressing and
                 completed as scheduled.      Met.

                 Performance Measure
                 -   Percentage of complete build out of Customs and Connection Wing buildings.          100%

     FY2001     Same Goal, different targets.  Goal Met,

                 Performance Measures
                 -   Percentage of the new Research Triangle Park (RTF)  building construction completed.         100%        95%
                 -   Percentage of the Interstate Commerce Commission (ICC) building construction completed.     100%        100%

     FY2000     Same Goal, different targets.  Goal Met,

                 Performance Measures
                 -   Percentage of new RTF building construction completed.                                    80%
                 -   Percentage of the ICC construction completed.                                            80%
                 -   Percentage of EPA personnel consolidated into Headquarters complex.                        40%

     FY 1999     Complete at least 50% of construction of the consolidated research lab at RTF, North Carolina.      50%
                 Goal Met,
n-118     lil'A's 1"Y JJOOJ! Annual lie-port                                                                          www.epa.gov/ocfo

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             Continue renovation of the new consolidated Headquarters complex, completing 100%build           100%        90%
             out of the Ariel Rios north and Wilson Building, and 50% of the ICC, and moving                   50%        50%
             38% of EPA personnel from vacated spaces to the new consolidated complex.  Goal Met,          38%        31%

FY 2002 Result: Renovation and build-out of the final building in the Federal Triangle Complex were successfully completed. EPA's new
space houses the cafeteria, as well as additional offices and services. The historic space is in keeping with the Agency's goal to provide
a quality work environment that is safe and energy-efficient.

APG 70      Energy Reduction Technology                                                          Planned     Actual

FY2002      EPA will initiate a demonstration fuel cell at Ft. Meade Laboratory.      Not

             Performance Measures
             -  Percentage of fuel cell components  in place.                                            50%
             -  Percentage of structure  completed.                                                     100%         0%

FY2001      Same Goal. Goal Not Met,                                                                  10%         0%

FY 2002 Result: This project is a joint project involving EPA, the Department of Energy, the Department of Defense,  Siemens
Westinghouse, and  the electric utility industry. At the beginning of FY 2002, the project consortium concluded that the output of the
originally proposed fuel cell would not work properly with available standard-sized steam turbines, rendering the project economically
unfeasible. The Agency then attempted to reconfigure the fuel cell project and establish a new funding partnership. Since  adequate
funding could not be found, the project is being terminated.

    Strategic Objective: Provide Audit, Evaluation, and Investigative Products and Advisory Services  Resulting in
                                  Improved Environmental Quality and Human Health.
                      FY2002 Cost (in thousands): $53,235 (13.7% of FY2002 Goal 10 Total Costs)

Progress Toward Strategic Objective: The DIG made progress toward its objective by focusing on customer needs  and investing its
resources on evaluations of national environmental issues to identify improvements and solutions. The DIG is also providing advisory
assistance to the Agency on GPRA, accountability, and  data quality processes as well as promoting more collaborative approaches and
techniques.

APG 71      Audit and Advisory Services16                                                           Planned     Actual

FY2002      Improve environmental quality  and human health by recommending 50 improvements       50          100
             across Agency  environmental goals, identifying and  recommending solutions to reduce     15          18
             15 of the highest environmental risks,  and identifying 15 best environmental practices.       15          16
                 Met,

FY2001      Office of Audit provides independent audits, evaluations, and advisory services, responsive to
             customers and clients, leading to improved economy, efficiency and effectiveness in Agency
             business practices and attainment of its environment goals.  Goal Met,

             Performance Measures
             -  Potential monetary value of recommendations, questioned costs, savings and recoveries.       40M
             -  Examples  of Office of Inspector General (OIG) recommendations/advice or actions taken to      55
               improve the economy, efficiency, and effectiveness of business practices and environmental
               programs.
             -  Overall customer and stakeholder satisfaction with audit products and services (timeliness,      77%
               relevancy,  usefulness and responsiveness).

FY2000      Same Goal, different targets. Goal Met,                                                      64 M

                                                                                                      63
                                                                                               recommendations
                                                                                                     75%         '76%
                                                                                                  satisfaction

FY1999      In 1999, the OIG will provide objective, timely and independent auditing, consulting, and             15          24
             investigative services through such actions as completing 15 construction grant closeout audits.
             Goal Met.
FY 2002 Result: The OIG exceeded the targets for this goal. The OIG is continuing its pursuit of improved environmental outcomes by
focusing its product line on  national environmental problems, issues, and results; promoting  partnering relationships across
governmental entities; and investing in  additional follow-up to fully recognize the environmental  benefits of its work. During the year,  the
OIG reported more than $55 million in  combined potential costs savings and recoveries; conducted 79 criminal civil or administrative
www.epa.gov/ocfo                                                                                   Performance Results     n-119

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     actions preventing the loss of resources and program integrity; and identified more than 384 recommendations, best practices, or risks. The
     OIG also received a 79% client satisfaction rating on the quality, timeliness, and usefulness of its staff products.17

                               FY 2001 Annual Performance Goals (No Longer Reported for FY 2002)

     Evaluate the effectiveness of the Children's Valuation Handbook.




H-120     EPA's FY 2002 Annual Report                                                                             www.epa.gov/ocfo

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Notes:
 1.   Office of Management and Budget, The Executive
     Office of the President, Federal Management, The
     President's Management Agenda. Available at
     http://www.whitehouse.gov/omb/budget/fy2002/
     pma index.html.

 2.   Office of Management and Budget, Executive
     Office of the President. Executive Branch
     Management Scorecard, Agency Scorecard: U.S.
     EPA (July 15, 2002). Available at
     http: //www. whitehouse. gov/omb/budinte gration/
     scorecards/epa scorecard.html.

 3.   U.S. EPA, Office of Administration and Resources
     Management, Office of Human Resources and
     Organizational Services, EPA Personnel System data
     report (August 10, 2002).

 4   U.S. EPA, Office of Administration and Resources
     Management, Office of Human Resources and
     Organizational Services, Investing in Our People:
     EPA's Strategy for Human Capital 2001 through
     2003.

 5.   U.S. EPA, Office of Administration and Resources
     Management, Office of Human Resources and
     Organizational Services, EPA'sFive Year
     Restructuring Plan (May 2002).

 6.   U.S. EPA, Office of Administration and Resources
     Management, Office of Human Resources and
     Organizational Services, Policy for Competition in
     Assistance Agreements, EPA Order 5700.5
     (September 12, 2002).

 7.   U.S. EPA, Office of Administration and Resources
     Management, Office of Human Resources and
     Organizational Services, Office of Acquisition
     Management, internal tracking.
8.   U.S. EPA, Office of Administration and Resources
    Management, Office of Human Resources and
    Organizational Services, Policy for Competition in
    Assistance Agreements, EPA Order 5700.5
    (September 12, 2002).

9.   Ibid

10.  U.S. Marshall Service, Vulnerability Assessments at
    Federal Facilities (June 28,1995).

11.  Office of the President, Greening the Government
    Through Efficient Energy Management, Executive
    Order 13123 (1999).

12.  U.S. EPA, Office of the Inspector General, OIG
    Audit Report 2002 P 00012 (2002).

13.  U.S. EPA, Office of the Inspector General, OIG
    Semiannual Report to Congress October 1, 2001
    through March 31, 2002, EPA350-K-02-001.

14.  U.S. EPA, Office of the Inspector General.

15.  U.S. EPA. Office of the Inspector General, OIG
    Audit Report 2002 P 00019 (2002).

Id  The OIG uses an internal Performance Results and
    Measurement Database to categorize and
    accumulate performance results from its products
    and services designed to influence improvements
    in EPA's implementation of its environmental
    programs.

17.  U.S. EPA, Office of the Inspector General, Annual
    Performance Report. Available at
    http://www.epa.gov/oigearth/ereading room/
    Perfm5.pdf.
www. epa.gov/ocfo

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H-122    EPA's FY 2002 Annual Report                                                                     www.epa.gov/ocfo

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Section III
Management
Accomplishments
and Challenges

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      MANAGEMENT ACCOMPLISHMENTS AND CHALLENGES

FY 2002 Integrity Act Report	III-2
Major Management Challenges	III-4
FY 2002 Management's Report on Audits	 III-ll
Key Management Challenges	III-l 3

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            MANAGEMENT ACCOMPLISHMENTS AND CHALLENGES
   EPA senior managers are aware of the
complex management challenges the Agency
must address to achieve program results, and
they work diligently to identify strategies to
maintain integrity and strengthen the public's
confidence in the Agency. The President's
Management Agenda,1 an initiative to improve
management, performance, and accountability
government-wide, has placed additional
emphasis on effective program management. In
FY 2002 the Agency accelerated efforts to address
its most serious management problems and
corrected all four of its material weaknesses as
well as a number of its other management
challenges—deficiencies in program policies,
guidance, or procedures that might impair the
Agency's ability to achieve its mission.
   The Agency uses a  system of internal
program reviews, independent reviews, and
audits by the General Accounting Office (GAO)
and EPA's Office of the Inspector General (OIG);
program evaluations; and performance
measurements to ensure that program activities
are effectively carried out in accordance with
applicable laws and sound management policy
and provide reasonable assurance that Agency
resources are protected against fraud, waste,
abuse, and mismanagement. As a result EPA is
quick to identify and develop strategies to
address integrity weaknesses and major
management challenges.

   For some management problems the Agency
has put annual performance goals in place to
track progress. Three of the four material
weaknesses corrected in FY  2002 and six of the
nine additional management  challenges have
associated Government Performance and Results
Act (GPRA) annual performance goals and
measures. Although EPA does not have specific
GPRA goals or measures for all integrity
weaknesses and major management challenges,
the Agency's senior leadership monitors all
problems closely as discussed later in this
section.

   Section III provides a comprehensive
discussion of EPA's management and
performance challenges and its strategy to
resolve these issues. (The most significant of
these and their relevance to the achievement of
the Agency's mission are also addressed in the
Section II goal chapters.) This section also meets
the reporting requirements of the Federal
Managers Financial Integrity Act (Integrity Act);2
the Inspector General Act of 1978, as amended;3
and the Reports Consolidation Act of 2000,4 as
discussed below.

              FISCAL YEAR 2002
        ANNUAL ASSURANCE STATEMENT
   I am pleased to give an unqualified statement
   of assurance that the Agency's programs and
   resources are protected from fraud, waste,
   and mismanagement, based on EPA's annual
   self-assessments of the Agency's internal
   controls, management, and financial control
   systems.
                    Christine Todd Whitman
                             Administrator
   Under the Integrity Act all federal agencies
must submit an annual Integrity Act Report to the
President and Congress and provide reasonable
assurance that their policies, procedures, and
guidance are adequate to support the
achievement of their intended mission, goals,
and objectives. Agencies also must report
material weaknesses—those deficiencies found
to impair achievement of the agencies'
missions—and identify corrective action
strategies that have been developed and are
under way to remedy the problems. EPA senior
managers periodically report to the Administrator
on progress to address material weaknesses and
other less serious but important problems.

   The Inspector General Act of 1978,5 as
amended, requires federal agencies to report to
Congress twice a year on the status of efforts to
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         Management Accomplishments and Challenges     ffl-1

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    carry out corrective actions and reach final action
    on OIG audits. The Reports Consolidation Act of
    20006 gives agencies the authority to consolidate
    various management reports (including
    management's report on audits) into a single
    annual report. EPA managers have greatly
    improved the timeliness and effectiveness of
    their audit management practices, and since
    FY 1999 they have decreased by 58 percent the
    number of audits without final action 1 year after
    the management decision (from 72 in FY 1999
    to 23 in FY 2002).7
                                               As required by the Reports Consolidation Act
                                            of 2000, OIG's list of top management
                                            challenges facing the Agency, along with its
                                            assessment of EPA's progress in addressing these
                                            challenges, is included at the end of this section.
                                            OIG tiered the challenges to reflect its
                                            consideration of their significance and severity
                                            of impact on the Agency's mission. The
                                            Agency's response to the OIG statement is
                                            included as part of the discussion of corrective
                                            action strategies for integrity weaknesses and
                                            major management challenges.
                              FY 2002         11 .' \CT
       Since 1982 EPA has identified and reported
    49 material weaknesses and 18 financial
    nonconformances.8 By the end of FY 2002 the
    Agency had corrected all of these material
    weaknesses and financial nonconformances,
    closing the last four material weaknesses during
    FY 2002. EPA's record in correcting its
    management challenges has steadily improved
    over the past decade, and, for the first time in
    the 20-year history of the Integrity Act, EPA has
    no material weaknesses. The progress in
    correcting material weaknesses and financial
    nonconformances exemplifies EPA's strong
    commitment to improving integrity and
    accountability in all programs, organizations, and
    functions.
            20                        No
                                            Discrimination Complaints. The Agency's
                                            corrective action strategy and determination that
                                            these weaknesses had been resolved are
                                            discussed below.

                                            Material Weaknesses Corrected During FY 2002
       The four material weaknesses corrected in
    FY 2002 are National Pollutant Discharge
    Elimination System Permits, Construction Grants
    Closeout, Information System Security, and
    Backlog of Title VI (Civil Rights Act of 1964)
                                            1. Reduce the Backlog of National Pollutant
                                            Discharge Elimination System (NPDES)
                                            Permits9 (Goal 2): Based on Permit Compliance
                                            System (PCS) data in November 1998,
                                            26 percent  of permits for major facilities had not
                                            been reissued following expiration, and
                                            48 percent  of permits for minor facilities had not
                                            been reissued. In 1999 the Agency estimated
                                            that the backlog in EPA-issued major permits had
                                            tripled over the past 10 years; likewise, the
                                                    backlog in state-issued permits had
                                                    doubled over that time. Expired NPDES
                                                    permits might not reflect the most
                                                    recent applicable effluent guidelines,
                                                    water quality standards, or Total
                                                    Maximum Daily Loads,  posing a threat
                                                    to the environment. Without timely
                                                    issuance of high-quality permits,
                                                    necessary improvements in water
                                                    quality could be delayed. (FY1998-
                                                    2002 OIG management challenge—
                                                    tier 2 management challenge in 9/6/02
                                                    OIG memo to the Administrator on
                                                    EPA's Key Management Challenges,
                                            declared a material weakness FY 1998.)
                                               Corrective Action Strategy: Since the Agency
                                            identified this weakness in 1998, it has achieved
                                            56 percent of targeted reduction in the backlog
ffl-2
EPA's FY 2002 Annual Report
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of major point source permits and achieved
58 percent of targeted reduction in the backlog
for minor point source permits. EPA's
comprehensive strategy for improving the
NPDES permit program10 has resulted in
noteworthy progress, and it establishes a
management control framework for continued
improvement. EPA is deploying guidance and
tools designed to help regions and states
prioritize permits that have the greatest
environmental impact and to automate the permit
writing process.11 EPA believes it has addressed
the materiality of this issue and put the
management controls in place for continued
progress. EPA is supporting a number of efforts to
strengthen the NPDES Program: (1) two pilot
projects with states to develop systems to address
permits on a watershed basis, (2) an EPA/state
project to identify permit streamlining
opportunities, (3) expanded use of general permits
to address increases in the permitting universe, and
(4) ongoing permit quality reviews. (Also see
OIG's Key Management Challenges)
2. Construction Grants Closeout (Goal 2):
Without timely closeouts of construction grants,
millions of dollars in potentially ineligible
program costs cannot be recovered for use in
other high-priority state clean water projects.
(FY1992 OMB candidate material weakness,
declared an Agency weakness FY 1992, elevated
to a material weakness FY 1996.)

   Corrective Action Strategy: Since 1990 the
Agency has worked to accelerate the completion
and closeout of construction grants by annually
assessing the remaining workload in each
region, identifying the bottlenecks, and agreeing
on a closeout plan and follow-up actions to bring
the program to completion. Forty-seven states
and 8 regions have met the "success" criteria of
no more than 5 open grants per state and 10
open grants per region.12 The Agency-wide goal
for correcting this weakness is 100 open grants.
EPA has exceeded this goal with 84 open grants.
The remaining open grants are concentrated in a
few states  and will be closed out once the
grantees have exhausted all appeal mechanisms.
EPA will monitor the open grants closely through
mechanisms such as annual state work plans and
closeout strategies.
3. Information System Security (Goal 7):
EPA needs a centralized security program with
strong oversight processes to adequately
address risks and ensure that valuable informa-
tion technology resources and environmental
data are secure. (FY1997-2002 OIG major
management challenge—tier 2 management
challenge in 9/6/02 OIG memo to the
Administrator on EPA's Key Management
Challenges, FY2001 GAO major management
challenge, declared a material weakness FY 199 7
and an expanded material weakness FY2000.)
    Corrective Action Strategy: EPA has made
substantial progress in keeping pace with the
evolving challenges of information security. In
FY  2002 the Agency developed and began
implementing a comprehensive strategy to
systematically address security-related
deficiencies in accordance with the Government
Information Security Reform Act.13 This strategy
included initiating annual security risk
assessments for the Agency's systems, as well as
instituting regular monitoring and reporting of
system owners'  follow-up actions in response to
the assessments. EPA has completed risk
assessments for its critical applications and
systems and has implemented regular
evaluations of its security network and data,
network intrusion detection and monitoring
controls, and formal security plan reviews.
Recent reviews  conducted in FY 2002 show that
EPA has an improved information security
program that assesses, identifies, and mitigates
risks to the Agency's data and systems."Recent
network penetration tests validated that controls
successfully deter penetration attempts. To
improve on this performance, the Agency plans
to enhance its ability to monitor activities at the
subnetwork level to ensure deeper protection
and guard against possible unauthorized access
or internal exploitation.

    EPA plans to sustain improvements through
consistent security control implementation and
ongoing evaluation and regular testing to ensure
that the policies and procedures are effective.
The Agency's validation strategy15 employs a
variety of methods, processes, and mechanisms
to ensure EPA's  information security meets the
criteria of the best industry practices and
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          Management Accomplishments and Challenges     ffl-3

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    federal requirements. Validation methods
    include (1) comprehensive risk assessments of
    major applications and general support systems
    using the security self-assessment methodology
    published by the National Institute of Standards
    and Technology,16 (2) implementation of central
    automated monitoring for assessing compliance
    with security standards, and (3) internal and
    external network penetration testing. (Also see
    OIG's Key Management Challenges.)
    4. Backlog of Title VI (Civil Rights Act of
    1964)17 Discrimination Complaints
    (Goal 10): Title VI prohibits discrimination on
    the basis of race, color, or national origin by any
    entity that receives  federal financial assistance.
    By June 2001 the number of Title VI adminis-
    trative complaints that required an investigation
    or a jurisdictional determination by  EPA had
    reached 66. Regulations at 40 CFR Part 718
    require EPA to process complaints of
    discrimination  filed under the Civil Rights Act
                                             of 1964 within 180 days after acceptance of the
                                             complaint. EPA's program to investigate Title VI
                                             complaints did not meet regulatory deadlines
                                             for processing and investigating complaints.
                                             (Declared a material weakness in FY 2000.)

                                                Corrective Action Strategy: On June 1, 2001,
                                             the Administrator announced a comprehensive
                                             strategy for addressing the backlog and
                                             improving the Title VI program within 2 years.
                                             EPA formed a 13-member interoffice Task Force
                                             to eliminate the backlog.19 The Office of Civil
                                             Rights, which leads the Task Force,  also initiated
                                             new policies and procedures to prevent increases
                                             in the backlog. The backlog of 66 cases has been
                                             reduced by half. All remaining cases have been
                                             analyzed and preliminary determinations made as
                                             to how they should be  processed. There are no
                                             new cases in backlog status. EPA expects to
                                             eliminate the  backlog by July 2003 and validate
                                             the effectiveness of management controls to
                                             ensure timely resolution of new cases.


       Following are brief descriptions and
    summaries of activities planned in response to
    management challenges identified by GAO,
    OMB, OIG, or EPA itself. The Agency will
    continue to use the tools available under GPRA
    and other management statutes to assist in
    addressing these issues. Six of EPA's
    management challenges are being addressed as
    internal Agency weaknesses for which the
    Agency develops specific and measurable
    corrective actions and reports on progress to the
    Administrator.

    1. Protecting Critical Infrastructure from
    Non-traditional Attacks (Cross-Goal): EPA
    has the responsibility of helping to secure the
    Nation's drinking and wastewater infrastructure,
    of promoting security in the chemical industry
    and hazardous materials sector, and of
    responding to and recovering from biological,
    chemical, certain radiological, and other terrorist
    attacks. To achieve its goals, the Agency needs
    to apply technical, organizational, resource,
    training, and communication assets to complex
    issues with unprecedented dispatch. Success
                                             requires simultaneous attention to questions of
                                             threat, capabilities and deficiencies,
                                             preparedness, management and oversight, and
                                             efficiency and effectiveness. (FY2002 OIG
                                             major management challenge—tier 1
                                             management challenge in 9/6/02 OIG memo to
                                             the Administrator on EPA's Key Management
                                             Challenges.)
                                                Corrective Action Strategy: EPA has taken
                                             measures to respond to terrorist incidents and is
                                             taking steps to better prepare for, and respond
                                             to, future incidents based on lessons learned.
                                             The Agency carried out its mission and
                                             accomplished a remarkable achievement in
                                             responding to three national incidents during the
                                             same time period in response to the attacks on
                                             the World Trade Center and the Pentagon, and
                                             the cleanup of anthrax contamination in the
                                             Capitol Complex and other facilities around the
                                             country. One of these tasks, cleaning up anthrax
                                             contamination from the Capitol Hill Complex,
                                             defied the customary thinking that the cleanup
                                             of an anthrax-contaminated building was
                                             impossible.
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   Since the terrorist attacks of September 11,
2001, the federal government has taken action to
prepare and protect the public against terrorist
threats. The President created the Office of
Homeland Security (OHS) and recently signed
legislation creating a cabinet-level Department
of Homeland Security. The July 2002 National
Strategy for Homeland Security20 designated EPA
as the lead agency for protecting critical drinking
and wastewater infrastructure and promoting
security in the chemical industry and hazardous
materials sectors.  The November 2002 Reorgan-
ization Plan for the Department of Homeland
Security also identifies some areas where EPA
will coordinate efforts with the Department.

   In testimony before the  Senate Committee
on Environment and Public Works on
September 24, 2002,21 the EPA Administrator
described in detail the aggressive and effective
actions EPA has taken to build on existing
strengths to meet  new security challenges. EPA
worked to define  its role in homeland security
and to make decisions regarding where the
Agency should allocate existing and new
resources, authority, and personnel to ensure
the safety of human health and the
environment. The Agency conducted two
major reviews of lessons learned, one relating
to the incidents of September 11 and  the other
related to EPA's anthrax response. EPA used
objective outside sources to conduct extensive
interviews with Agency personnel, from front
line staff to senior managers, to examine what
EPA had learned from its response activities.

   EPA chairs the interagency National
Response Team (NRT), which has an excellent
track record for federal-state coordination. In
April 2002 the OHS asked the NRT to  be an
OHS work group providing interagency policy
coordination assistance on terrorist incident
preparedness and response. The NRT also
completed anthrax and World Trade Center and
Pentagon lessons learned documents for use by
member agencies, and developed anthrax
cleanup technical assistance documents for use
by planners and responders at all levels of
government.22
   EPA aggressively developed vulnerability
assessment tools for drinking water and
wastewater utilities, funded vulnerability
assessments at the Nation's 424 largest drinking
water facilities serving nearly half the
population, sped up establishment of a secure
Information Sharing and Analysis Center for the
water sector, provided threat information to
utilities as required under Public Law 107-188,23
and initiated high-priority water security research
projects. The Agency developed EPA's Threat
Warning System and Protective Measures,
including facility protective measures,
emergency preparedness and response
activities, and protection of facilities in the water
sectors and chemical industry.  EPA implemented
this system on September 10, 2002, when the
country went to "orange" threat status, and is
now revising the system in response to lessons
learned from this first implementation.
Implementation has included providing alerts
and protective information to members of the
water sectors and chemical industry.
   The lessons learned reports24 have generally
concluded that EPA responded successfully;
however, it can do better. In October 2002 the
Administrator announced EPA's Strategic Plan for
Homeland Security,25 which supports the
President's National Strategy for Homeland
Security26 and the efforts to be undertaken by
the new Department of Homeland Security. The
plan serves as a blueprint on how to enhance
EPA's ability to meet its homeland security
responsibilities. The activities and initiatives in
the plan represent an enhancement of EPA's
capabilities to detect, prepare for, prevent,
respond to, and recover from terrorist incidents.
As the federal government continues to address
the issue of protecting the Nation, the plan will
continue to be revised and improved. Some of
the activities identified in the plan might
eventually be carried out by the Department of
Homeland Security or other agencies. The
Federal Homeland Security Advisor commended
EPA for its Homeland Security Strategic Plan,
noting that it can serve as a model for other
departments and agencies.

   In context of the urgency and national
significance of addressing these infrastructure
issues, the Agency's activities  during the past
year have revealed significant management
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    strengths. (Also see OIG's Key Management
    Challenges)
    2. Working Relationship with the States
    (Cross-Goal):27 The National Environmental
    Performance Partnership System (NEPPS)
    established EPA-state working partnerships to
    accomplish complex environmental issues with
    scarce resources. One of the primary tools for
    implementing NEPPS, performance partnership
    grants (PPGs), allows states and tribes to
    combine multiple EPA grants into one. In
    implementing the NEPPS program, including
    PPGs, the following are required to fully
    integrate NEPPS  principles: leadership providing
    a clear direction and expectations, training and
    guidance, and goals and related performance
    measures to monitor and measure progress on
    achieving better environmental results.
    (FY1999-2001 GAO major management
    challenge; FY 2000-2002 OIG major
    management challenge—tier 2 management
    challenge in 9/6/02 OIG memo to the
    Administrator on EPA's Key Management
    Challenges.)

       Corrective Action Strategy: EPA works closely
    with states, tribes, other federal agencies, and
    other stakeholders to protect public health and
    the environment. Under NEPPS, the Agency
    committed to long-term collaboration with state
    agencies to improve EPA and state management
    of national environmental programs. NEPPS is a
    framework to build a result-based management
    system, focus on joint planning and priority
    setting, and use environmental indicators and
    outcome measures for accountability. Although
    EPA and states recognize that existing
    implementation approaches are no longer
    efficient and effective, they have not yet agreed
    on how states will have flexibility while being
    accountable for environmental results.
    For several years, EPA and the states have been
    implementing NEPPS with mixed results. As a
    result of an ongoing program evaluation
    conducted jointly with the states, EPA is
    developing an implementation plan that will
    address the implementation issues identified.
       Through NEPPS, the Agency is improving
    EPA-state partnerships by working with the
                                            states to establish priorities, improve
                                            performance measures, and promote results-
                                            based management under the Performance
                                            Partnership System. The Agency is also
                                            developing tools that state and EPA NEPPS
                                            negotiators can use to clarify the appropriate
                                            performance expectations. In addition EPA and
                                            the Environmental Council of the States (EGOS)
                                            have an active joint work group to address
                                            continuing implementation issues and work to
                                            identify and remove remaining barriers to
                                            effective implementation of the Performance
                                            Partnership System.

                                                In FY 2002 the Agency developed issue
                                            papers on performance partnerships that were
                                            discussed with Agency senior leaders, EGOS,
                                            and the performance partnership practitioner
                                            community. The Agency integrated NEPPS
                                            principles in its planning, budgeting, and
                                            accountability systems and has included NEPPS
                                            Core Performance Measures in EPA's Annual
                                            Report. EPA continued development of a NEPPS
                                            primer on policies and practices, revised its Web
                                            site to provide historical information and best
                                            management practices, organized a national
                                            training conference, and continued biannual
                                            reporting on the states' use and application of
                                            PPGs.28
                                                In FY 2003 EPA plans to meet with the states
                                            to identify a set of national, state, and regional
                                            priorities, in the context of NEPPS information
                                            from environmental indicators and performance
                                            work. The results will be incorporated into EPA's
                                            national strategic planning, budgeting, and
                                            accountability process in FY 2004. EPA and the
                                            states will also jointly review roles,
                                            responsibilities, and resources to improve
                                            efficiency and environmental impact. EPA will
                                            implement a communication strategy on the
                                            successes and benefits of the Performance
                                            Partnership System and recognize those who
                                            have made improvements. The Agency will
                                            continue a joint annual evaluation of
                                            performance partnership agreements and review
                                            recommendations from the PPG Task Force on
                                            mitigating conflicts between performance
                                            partnership principles and categorical grants
                                            guidance. (Also see OIG's Key Management
                                            Challenges.)
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3. Management of Biosolids (Cross-Goal):
EPA needs to implement a national biosolids
program and establish a strong enforcement
program to meet the Clean Water Act (CWA)
requirements to reduce environmental risks and
maximize the beneficial use of sewage sludge.29
(FY2002 tier 2 management challenge in 9/6/02
OIGmemo to the Administrator.)

    Corrective Action Strategy: EPA continues to
meet its statutory obligations under the CWA
pertaining to sewage sludge. Although there has
been concern as to the adequacy of the sewage
sludge rule, and there is a need for some
additional scientific research in this area, the
inclusive process EPA has launched will
adequately address those concerns. The Agency
requested that the National Research Council
(NRG) make a second evaluation of the biosolids
program, specifically of the scientific basis
supporting the CWA Part 503 rule.30The second
NRG report, issued in July 2002,31 concluded that
there was no documented scientific evidence
that EPA's Part 503 sewage sludge  standards
failed to protect public health. The NRG stated
that additional scientific work is needed to
reduce persistent uncertainty about the potential
for adverse human health effects from exposure
to biosolids that are applied to the land. The
Agency has set into motion a process for
developing a response to the NRC's
recommendations and the OIG's concerns. A
committee is being established to provide an
open process, including seeking public
comments on Agency plans. Following receipt
of these comments, EPA will publicly announce
its final plan for taking actions. The Agency
intends to complete this process by the end of
2003. As part of the process, the Agency will
seek public comment on its proposed
determination on whether to regulate additional
pollutants in biosolids as required by
section 405(d)(20)(C) of the CWA.32 EPA also
will publicly announce its final decision on
regulating additional pollutants under Part 503.

    In the meantime, the Agency will continue
to communicate information on applying
biosolids. The information will  include a brief
summary of additional research that is now
being conducted to reduce public uncertainty,
and that, if needed, will result in the
modification of the biosolids regulation or land
application practices. EPA has taken actions to
address biosolids violations and will continue
to address instances where biosolids pose an
immediate endangerment to human health or
the environment. Regions and states have the
flexibility and responsibility to address
situations where compliance assistance and
enforcement actions to address biosolids are
appropriate and necessary. EPA also developed
a Biosolids Data Management System (BDMS).33
Although the Agency has not undertaken or
completed all of the specific studies described in
the preamble to Part 503, it has undertaken a
variety of studies associated with biosolids
recycling that it believes to be very relevant
today and is undertaking new studies. In
addition, studies by others outside the Agency
have helped to resolve many of the issues of
concern discussed in the preamble. (Also see
OIG's Key Management Challenges.)
4. Challenges in Addressing Air Toxics
Program Phase 1 and Phase 2 Goals (Goal 1):
Because of budget constraints and new
guidelines established for processing regulation
packages, there have been delays in completing
the 10-year Maximum Achievable Control
Technology (MACT) standards and possible
delays in the residual risk program. (FY 2001
Agency weakness; FY2002 OIG tier 1
management challenge in 9/6/02 OIG memo to
the Administrator on EPA's Key Management
Challenges.)

   Corrective Action Strategy: EPA is developing
a comprehensive approach to air toxics and is
continuing to shift the emphasis from a
technology-based to a more risk-based program
using the National Air Toxics Assessment34
(NATA) to help set programs and guide
priorities. EPA published the NATA 1996
national-scale assessment in FY 2002, which
took into account peer review comments from
the Science Advisory Board (SAB).
   EPA has made significant progress in
reducing air toxics. Since  1990 air toxics have
been reduced by over 1.5 million tons per
year, a 34 percent reduction. Most of those
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    reductions are from major industrial sources
    and mobile sources. There will be even greater
    reductions as EPA completes the MACT
    program (technology-based standards for major
    stationary sources), implements mobile source
    standards (including non-road), and sets
    standards for area sources of air toxics. EPA has
    worked successfully to integrate the air toxics
    program, addressing risks from all sources of
    toxics—major, area, mobile, and indoor
    sources.
       Regarding the technology-based program,
    the Clean Air Act requires EPA to set standards
    for all major sources of air toxics. This is an
    ambitious requirement, and EPA has already set
    63 standards covering 105  source categories.
    While EPA is behind schedule on the remaining
    sources, it has now proposed all of the
    remaining 34 standards (covering 64 source
    categories) and will promulgate final standards
    for these sources no later than February 2004.35

       After implementing the technology-based
    program, EPA is to evaluate the remaining risks
    at these sources. EPA has begun this "residual
    risk" program and is currently assessing more
    than 1,000 sources in 20 different source
    categories. While the statutory requirements are
    extensive, EPA is working to streamline the
    program and focus on the most important
    sources of air toxics by updating health
    assessments on critical pollutants, using risk-
    assessment methodologies, and working
    cooperatively with industry to collect the best
    available data. The Agency is also developing
    exemption options for low-risk facilities and
    identifying economically feasible risk reduction
    options for sources with high risk impacts.
       Finally, EPA has been supporting states'
    toxics monitoring since 1987. EPA realized,
    however, the need for a consistent, national
    monitoring network to provide more information
    on ambient levels of toxics and overall trends.
    The SAB identified protocols for the monitoring
    program in March 2000. EPA also developed a
    strategy with state partners and has now initiated
    a 13-city national trends network for toxics. The
    final network will include 30 sites. EPA is also
    funding regional networks, which will include
    some mobile platforms, allowing measurement
                                            of some potential hot spots. Including all the
                                            state monitors, there are about 390 sites
                                            monitoring year-round and over 2,000 with some
                                            form of monitoring. (Also see OIG's Key
                                            Management Challenges.)

                                            5. Information Resources Management
                                            (IRM) and Data Quality and Environmental
                                            and Performance Information Management
                                            (Goal 7): Consistent, complete, and current data
                                            are needed to support full and effective
                                            information sharing, environmental monitoring,
                                            and enforcement. If EPA and the states apply
                                            different data definitions and sometimes collect
                                            and input different data, the result can be
                                            reporting of inconsistent, incomplete, or obsolete
                                            data. EPA needs to continue developing and
                                            implementing its information management
                                            strategy to address Agency information
                                            management challenges such as data gaps.
                                            (FY1998-2002 GAO major management
                                            challenge; FY 1998-2002 OIG major
                                            management challenge—tier 1 management
                                            challenge in  9/6/02 OIG memo to the
                                            Administrator on EPA's Key Management
                                            Challenges combining previous management
                                            challenge on IRM with Data Quality management
                                            challenge; IRM data management declared an
                                            Agency weakness FY 1994; scope of weakness
                                            expanded FY 2000, and target correction date
                                            extended to FY2004.)

                                               Corrective Action Strategy: EPA is working in
                                            partnership with the states to improve the
                                            management, comprehensiveness, consistency
                                            and reliability, and accuracy of its data. Better
                                            data management will reduce inefficiencies and
                                            support better assessment of environmental
                                            results and Agency priority-setting to protect
                                            human health and the environment. EPA has
                                            carried out a number of actions to improve data
                                            management practices. The Agency developed
                                            and approved six key environmental data
                                            standards,36 and in FY 2002 it completed four
                                            data standards while initiating work on additional
                                            standards. Meanwhile, EPA is working with states
                                            and EPA system and program managers to
                                            implement these data standards in major
                                            environmental systems. The Agency instituted
                                            an Integrated Error Correction Process37 and
                                            drafted a Data and Information Quality Strategic
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Plan to present recommendations for
improving the quality and management of
currently collected data. The Agency completed
guidance for the EPA Web site and is
developing guidance on administrative control
designations.  EPA is also revising its IRM
Strategic Plan and developing an Enterprise
Architecture to address the integration and
management of environmental data. Other
corrective actions under way include developing
a Strategic Information  Plan for addressing data
gaps, developing an Agency data architecture,
developing and putting in place appropriate data
management policies and procedures, and
improving data collection processes through the
use of the Central Data Exchange. EPA expects
to release for public  discussion this year the
State of the Environment Report on
environmental indicators. The Agency will
continue efforts to identify data needed to
manage programs and work with partners to
provide timely, accurate, and consistent data.
(Also see OIG's Key Management Challenges)
6. Linking Mission and Management (Goal 10):
EPA works with its regional offices and state and
federal partners to develop appropriate outcome
measures and accounting systems that track
environmental and human health results across
the Agency's goals. This information must then
become an integral part of senior management's
decision making process. (OIG major
management challenge for FY 2002—tier 1
management challenge in 9/6/02 OIG memo to
the Administrator on EPA's Key Management
Challenges combines FY2001 management
challenges on accountability and managerial
accounting.)

    Corrective Action Strategy: EPA has long
focused on improving the way it manages for
results and uses cost and performance
information in decision making. The Agency has
made substantial progress and achieved the
following results in FY 2002: (1) an increased
focus on performance and results as key criteria
for developing EPA's FY 2004 budget, (2) the
Administrator's decision to adopt fewer, more
outcome-oriented goals in EPA's revised Strategic
Plan, and (3)  successful efforts to establish
Business Objects as  the Agency's standard
financial reporting tool and expand the
Financial Data Warehouse to make more
information available to managers. EPA has
been recognized for its achievements in
integrating budget and performance.38The OIG
has identified important improvement
opportunities, and in FY 2003 EPA expects to
build on progress made as it completes the
revision of its Strategic Plan, implements the
recommendations of the Managing for
Improved Results Steering Group, and adopts
business intelligence tools  Agency-wide. In
FY 2003 EPA will continue to enhance its cost
accounting capabilities to strengthen the
linkages between resources and performance
in Agency program offices. (Also see OIG's Key
Management Challenges)
7. Employee Competencies/Human Capital
(Goal 10): To place the right people with the
appropriate skills where they are needed, EPA
must make human capital management an
integral part of its strategic and programmatic
approaches to accomplishing its mission. The
Agency needs to determine how human capital
actions can best help achieve goals, identify
milestones for key actions, and establish results-
oriented performance measures for human
capital initiatives. With its Human Capital
Strategic Plan in place, the Agency has a
blueprint for the initial and longer-term steps
needed to begin addressing this weakness.39
(FY 1998-2002 OIG major management
challenge—tier 1 management challenge in
9/6/02 OIG memo to the Administrator on EPA's
Key Management Challenges, FY 2000-2002
GAO major management challenge, declared an
internal Agency weakness FY 2000.)

   Corrective Action Strategy:  EPA has made
significant progress toward addressing this
weakness and meeting the objectives of the
President's Management Agenda initiative on
Strategic Management of Human Capital.
Ongoing efforts include aligning the Agency's
human capital planning activities with its
strategic planning and budgeting processes, as
well as continuing to implement EPA's Human
Capital Strategic Plan. The Agency is developing
a Workforce Planning System that will link
competencies to mission needs along core
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    business lines. In addition, EPA's Workforce
    Development Strategy (WDS) is a comprehensive
    program that focuses on training and development
    at all levels of the organization. As part of the
    WDS, the Agency developed and implemented a
    number of training programs: the New Skills and
    New Options Program for administrative staff
    with electronic learning accounts available to
    eligible employees; the Mid-Level Development
    Program, which introduces the SES core
    competencies to most EPA employees; and a
    management development program that includes
    supervisory and management training. In
    addition, EPA selected 51 participants for an SES
    Candidate Development Program. The Agency
    has established goal teams to set appropriate
    baselines to track advances in measuring results
    and programmatic benefits. The Agency is also
    working toward better alignment of its human
    capital strategy with annual performance goals/
    measures, strategic sub-objectives, and Agency
    activities. This effort will help the Agency
    develop human capital measures and set targets
    for environmental and programmatic outcomes
    and track its costs and economic impacts. (Also
    see OIG's Key Management Challenges.)
    8. Improved Management of Assistance
    Agreements (Goal 10): EPA needs to improve
    overall grants management by implementing a
    competitive award policy and process and by
    improving prioritization, oversight, and
    enforcement procedures. EPA needs to address
    problems repeatedly identified in audit reports
    concerning EPA's use of assistance agreements to
    accomplish its mission. (FY2002 OMB and OIG
    candidate material weakness; FY2000-2002 OIG
    major management challenge—tier 1
    management challenge in 9/6/02 OIG memo to
    the Administrator on EPA's Key Management
    Challenges; grants closeout and oversight of
    assistance agreements was declared a material
    weakness in FY1996, reported corrected in
    FY 1999 and redesignated as an internal Agency
    weakness; grants closeout was corrected in
    FY 2000; and improved management of
    assistance agreements was declared an internal
    Agency weakness in FY2000.)
       Corrective Action Strategy: During the past
    year the Agency has made significant progress
in strengthening its grants management. OMB
recognized this progress in its most recent
Executive Branch Scorecard.40 A major premise
underlying the OIG's recommendation and
OMB's concerns was the absence of a policy for
competing discretionary grant funds. EPA has
squarely addressed that issue by developing a
new grant competition policy, which went into
effect October 1, 2002.

   EPA also continues to make progress in
improving post-award management, as
evidenced by the high quality of the 2002 post-
award monitoring plans, the corrective actions
taken by headquarters and regional offices in
response to validation reviews, and the
development of a new consolidated post-award
monitoring policy.41

   EPA's strategies to improve grants
management are solidly based on the risk
involved. Each fiscal year,  EPA awards
approximately $3 billion in grants to support the
environmental programs of state and local
governments.42 These grants constitute more than
87 percent of the grant funds awarded by EPA
annually. The concerns raised by the OIG do not
demonstrate systemic mismanagement of these
funds. This means that the primary area of risk
involves other categories of grants that receive
relatively small amounts of money (e.g., grants
to nonprofit organizations, which receive about
6 percent of EPA's grant dollars each fiscal year).
EPA is appropriately managing that risk by
making cost-effective improvements to its
already extensive set of management controls,
including initiatives on post-award monitoring,
procurement oversight and environmental
results, recipient training and technical
assistance, and, most important, strategic
planning. These enhancements ensure that the
deficiencies the  OIG identified do not
significantly impair the accomplishment of the
Agency's mission, making  a material weakness
designation unwarranted.
   EPA believes that the actions taken in FY 2002
to address the existing Agency weakness have
strengthened EPA's grants management program
and does not recommend raising grants
management to  a material weakness. Neverthe-
m-10    EPA's FY 2002 Annual Report
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less, recent EPA validation reviews show that
further improvement is needed, a finding
supported by OIG audit reports. The Agency will
carry the existing Agency weakness into FY 2004
while the long-term strategic plan is implemented
and further improvements are made and validated.

9. Innovative Regulatory Programs (Goal 10):
EPA needs the flexibility to use innovative
approaches to address complex and intractable
environmental problems that warrant new and
more cost-effective approaches. In the absence
of specific legislative changes that would
provide the authority for EPA to allow states and
others to use innovative approaches, the Agency
needs to closely monitor the new approaches to
ensure they are more effective than the
traditional approaches. (FY2002 GAO major
management challenge.)

    Corrective Action Strategy: EPA continues
initiatives to fully support  and manage
innovations and address concerns about
flexibility. In April 2002 the EPA Administrator
released a new innovation strategy that had
resulted from an intensive 9-month task force
review of EPA's innovation efforts.43The strategy's
goals are being implemented through program and
regional commitments to specific actions that
have been documented and are being tracked by
the Agency's Innovation Action Council. EPA,
states, localities, industry, and nongovernmental
organizations have been developing, testing, and
implementing innovative approaches for more than
a decade. These efforts have produced a number
of successful innovations, such as the Brownfields
revitalization program.

   As is always the case when new
approaches or alternative ways are tried, some
projects did not meet expectations. EPA has
taken significant, concrete steps to establish
Agency-wide controls that result in better
priority setting, planning, and monitoring of
results. The Agency has several ongoing efforts to
evaluate and learn from particular innovations
that represent the best candidates for broader
application. EPA has nearly completed an effort
to evaluate pilot projects that seek to streamline
pollution prevention considerations and infuse
them into air permits, and the Agency is
beginning to evaluate several innovative
approaches to manage  hazardous wastes in
university labs. The new State Innovation
Grants program requires that states receiving
grants develop measures and performance
outcomes over the lifetime of their projects.44
                       FY 2002
   EPA continues to make progress in reducing
the number of audits without final corrective
action as well as strengthening its audit
management practices Agency-wide. In FY 2002
EPA was responsible for addressing the OIG's
recommendations and tracking follow-up
activities on 412 audits. During the fiscal year
the Agency achieved final action on 164 audits.45
   Following is a summary of the Agency's
audit management activities for FY 2002:
Final Corrective Action Taken: EPA completed
final corrective action on 24 performance audits
and 140 financial audits. Of the 140 financial
audits, the OIG questioned costs of more than
$22 million. After careful review, the OIG and
the Agency agreed to disallow $11 million of
these questioned costs. For this period, EPA
management and the OIG did not identify audits
for which resources could be better utilized (i.e.,
funds put to better use) based upon findings in a
performance audit.

Final Corrective Action Not Taken: As of
September 30, 2002, 118 audits were without
final action (excluding those audits with
management decisions under administrative
appeal by the grantee). Of these 118 audits,
EPA officials had not completed final action on
23 audits (20 percent) within 1 year after the
management decision.
Audits Awaiting Decision on Appeal: EPA
regulations allow grantees to appeal management
decisions on financial assistance audits that seek
monetary reimbursement from the recipient.
In the case of an appeal, EPA must not take
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    action to collect the account receivable until
    the Agency issues a decision on the appeal.
    As of September 30, 2002, 68 management
    decisions were in administrative appeal status.

    Audits Pending Final Corrective Action
    Beyond 1 Year: Because of the complexity of
    the issues, it often takes Agency management
    longer than 1 year after management decisions are
    reached with the OIG to complete corrective
    actions on audits. Beginning October 1, 2002,
    management will track 23 audits with outstanding
    corrective actions after the 1-year period.

       These audits are categorized by three types:
    program performance audits (14), assistance
    agreement audits (4), and single audits (5).
    These audits are discussed below by category
    and identified by title and responsible office.
    Additional information on these audits is
    available, upon request, from OCFO's Audit
    Management Team (202-564-3633).
       Audits of Program Performance: Final action
    for program performance audits occurs when all
    corrective actions have been implemented. This
    process might take longer than 1 year when
    corrections are complex and lengthy. These audits
    include audits of EPA's financial statements. EPA is
    tracking 14 audits in this category.
    Office of Prevention, Pesticides & Toxic
    Substances:
    101378    Pesticides Inerts
    304030    Pesticides Banned (follow-up)
    Office of Solid Waste and Emergency Response:
    P00007    RCRA Financial Assurances
    P00028    RCRA Corrective Actions
    S00007    EPA Actions Concerning Libby SF Site
    POOO11    Superfund Interagency Agreements
    Office of Enforcement & Compliance Assurance:
    POOO 18    Multimedia Enforcement
    P00019    Air Enforcement Stack Tests
    Office of Administration and Resource
    Management:
    P00029    Interagency Agreements Follow-up
    POOO 11    Superfund Interagency Agreements
Office of Environmental Information:
501240    PCIE Application Maintenance
Office of Water:
701142    Animal Waste Disposal Issues
701223    Mining Financial Assurance
Region 2:
P00001    Combined Sewer Overflows
   Audits of Assistance Agreements: Final action
for assistance agreement audits can take longer
than 1 year because the grantee may appeal,
refuse to repay, or be placed on a repayment
plan that spans several years. The Agency's
Audit Follow-Up Coordinators are tracking four
audits with financial or associated corrective
actions taking longer than 1 year to complete.
Region 3:
102023    Bath County Service Auth VA
Region 5:
100001    Sauget
103115    Galion, OH
104047    Indianapolis, IN 4
   Single Audits: Final action for single audits
occurs when non-monetary compliance actions
are completed.  This might take longer than 1
year to implement if the findings are complex or
the grantee does not have the resources to take
corrective action. Single audits are conducted of
nonprofit organizations, universities, and state
and local governments. EPA is tracking
completion of corrective action on five single
audits for the period beginning April 1, 2002.
Region 2:
300108    United States Virgin Islands
Region 5:
300047    Red Lake Band of Chippewa Indians
300048    Red Lake Band of Chippewa Indians
Region 9:
805053    Colorado River Indian Tribes, AZ
805059    Colorado River Indian Tribes, AZ
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DISALLOWED COSTS AND FUNDS PUT TO BETTER USE


Category
Audits with management decisions but without
final action at the beginning of FY 2002
Audits for which management decisions were
reached in FY 2002
Total audits pending final action during FY 2002
Final action taken during FY 2002:
(i) Recoveries
(a) Offsets
(b) Collection
(c) Value of Property
(d) Other
(ii) Write-offs
(iii) Reinstated Through Grantee Appeal
(iv) Value of recommendations completed
(v) Value of recommendations management
decided should/could not be completed
Audits without final action at end of FY 2002
Disallowed Cost
(Financial Audits)
Number

102

131
233
140










93
Value

$153,237,895

$7,015,479
$160,253,374
$10,434,962

$5,179,343
$1 ,795,202
$0

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    together national, regional, and program office
    indicator efforts to describe the condition of
    critical environmental areas and human health
    concerns. Perfecting this report will be a multi-
    year process, but preparing the report is a
    significant step forward. It will allow the Agency to
    inventory and report on existing indicators, identify
    data gaps, and develop plans to address the
    challenges in filling these gaps.47

       In response to the need for reliable cost
    information, the Office of the Chief Financial
    Officer (OCFO) has purchased a financial
    management business intelligence reporting tool
    for managerial cost accounting and reporting.
    OCFO will work with selected offices to define
    and develop program-specific and executive
    reports to help  managers analyze data to support
    resource decisions, manage costs,  and gauge
    program results.48 As the Agency implements
    cost accounting, its success will rely on how
    well EPA program offices (1) define their
    mission-critical activities; (2) identify data needs,
    determine whether such data exists and, if so,
    where it resides; (3) link information systems to
    optimize data usability and minimize data
    integrity concerns; and (4) technically design
    program-specific and executive cost reports
    using the new reporting tool. OCFO will need to
    work closely with each program office in these
    areas for its cost accounting solution to be
    successful Agency-wide.

       During the  past year, EPA examined options
    for improvements in its ability to manage for
    results and account for resources.  In June 2002,
    senior Agency leaders issued a draft report to
    the Administrator recommending specific
    changes in four areas: Planning, Performance
    Measurement, Accountability and Feedback, and
    the Agency's Capacity to Manage for Results.
    The steering group also suggested improve-
    ments for the 2004 budget process, and will
    develop a change strategy for memorandum of
    understanding agreements between national
    program managers and regions regarding annual
    work planning.49
       EPA has begun developing the process for
    linking costs to goals but must follow through by
    working with its regional offices and state and
federal partners to develop appropriate outcome
measures and accounting systems that track
environmental and human health results across
the Agency's goals. This information must then
become an integral part of senior management's
decision-making process.50

Information Resources Management and Data
Quality

   EPA faces a number of challenges with the
data it uses to make decisions and monitor
progress against environmental goals. Those
challenges cover a broad range of interrelated
activities including (1) using enterprise and data
architecture strategies to guide integration and
management of data; (2) implementing data
standards to facilitate data sharing; and
(3) establishing quality assurance practices to
improve the reliability, accuracy, and scientific
basis of environmental data, including data
derived from laboratories.51 EPA and most states
often  apply different data definitions supporting
their own information systems, and sometimes
collect and input different data resulting in
inconsistent, incomplete, and obsolete
consolidated national data.

   EPA acknowledges IRM data management as
an Agency-level weakness and has specifically
targeted various components for improvement.
However, developing a robust data management
program remains a complex and elusive effort,
and several areas still need to be completed.52
For example, the Agency has yet to implement a
1998,  agreed-upon, OIG recommendation to
formally revise its policies and procedures
supporting an Agency standards program.53 EPA
developed and formally approved seven data
standards; however, states will be allowed to
decide whether or not to adopt these standards.54
Data standards are a  fundamental component for
implementing EPA's National Environmental
Information Exchange Network and other
e-government initiatives.55 If EPA's exchange
network infrastructure is to work effectively, the
use of data standards should be a required
condition for receiving money under the
Exchange Grant Program.
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   EPA estimates that the first six standards will
not be implemented in major environmental
systems until the end of FY 2003.56 During the
interim, EPA is working with the Environmental
Council of States (EGOS) to identify and develop
additional data standards. However, past
experiences suggest that the overall process
needs to move forward in a more timely and
structured manner.57

   Data reliability is another major aspect of
data management that needs further attention.
Recent audits indicate systems used by EPA's
Enforcement, Superfund, and Water programs
have inconsistent, incomplete, and obsolete data.
For example, we are concerned that the system
EPA uses to manage its drinking water programs,
SDWIS-FED, is not well designed and imple-
mented.58 Also, data in two major Agency
systems contain significant error rates in crucial
data fields used to track environmental progress
on Government Performance and Results Act
(GPRA) goals and measures.59 For example, over
90 percent of the cases reviewed within EPA's
National Enforcement Docket System contained
errors.60
   The Agency has responded to data quality
concerns by instituting an Integrated Error
Correction Process, which provides a mechanism
for reporting and resolving errors identified by
the public on EPA Web sites.61 Last year, EPA
drafted a Data Quality Strategic Plan to prioritize
recommendations for improving the quality of
currently collected data, but the draft plan did not
address the long-recognized problem of data
gaps.62 EPA plans to issue its first Environmental
Indicators Report in 2002, which should help
identify gaps between existing and needed
environmental data.63
   Questionable analyses by laboratories raise
concerns about the effectiveness of environ-
mental decisions and lead to additional costs and
unnecessary delays when EPA has to identify
and assess the impact of the fraudulent data and
undertake additional sampling. In a June 1999
memorandum to the Acting Deputy
Administrator, the OIG suggested actions the
Agency could take to better identify data of
questionable quality. Ongoing lab fraud
investigations in FY 2002 indicate that despite
Agency efforts to ensure improved data quality,
manipulated data continues to be generated and
supplied to EPA.
   OIG reviews and investigations have
disclosed a disturbing trend in the number of
environmental laboratories that are providing
misleading and fraudulent data to the states for
monitoring the Nation's public water supplies.
For example, several current lab fraud
investigations involve severe manipulation of
data used to evaluate the compliance of public
water supplies with federal drinking water
standards. Many other EPA programs (e.g.,
Superfund, Resource Conservation and Recovery
Act, National Pollution Elimination and Discharge
System, air toxins, underground storage tanks,
and pesticides) have also been impacted by
laboratory fraud.64

   The Agency has conducted extensive
technical systems assessment audits at all  EPA
regional and research laboratories. In addition,
EPA has provided fraud detection and awareness
training and ethics training; studied electronic
methods for screening data; and issued guidance
discussing the level of quality assurance given
the intended use of data. These efforts should
help to improve the quality assurance systems
and documentation throughout the Agency's
environmental laboratories. However, until the
impact of these and any other recommended
actions is realized, EPA must continue to assess
and improve its controls over laboratory data
quality.65 In its mid-year Integrity Act report for
FY 2002, the Agency considered laboratory
quality to be an Agency weakness.66
   As a result of current shortcomings, EPA will
not have the foundation needed to share or
compare information, or to monitor environ-
mental activities in the near future. EPA's ability
to make environmental decisions, enforce
environmental laws and evaluate the outcomes
of its programs in terms of environmental
changes may continue to be limited by gaps and
inconsistencies in data quality. EPA needs to
continue to identify what data is necessary to
manage its programs and work with its partners
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    to capture and report timely, accurate, and
    consistent information.67
   Establish results-oriented performance
   measures.72
    Employee Competencies

       One of the Agency's greatest challenges is
    the development and implementation of a
    workforce planning strategy that links employee
    development to its goals. To achieve its
    environmental goals and objectives, EPA must
    have a competent, well-trained, and motivated
    workforce with the right mix of skills and
    experience, and a system for holding employees
    accountable for achieving strategic goals.68

       The General Accounting Office (GAO)
    reported that EPA needs to implement a
    workforce planning strategy to determine the
    skills and competencies essential for meeting
    current and future needs and improve employee
    training.69 A number of OIG reports also
    highlighted the need for improved training at
    EPA.70 Acknowledging that appropriate training
    is critical to ensuring the credibility of its actions,
    the Agency (1) fostered a series of management
    development programs; (2) established a
    contract to develop training for mid-level
    professionals and managers; and (3) initiated a
    contract to create a workforce planning model to
    identify skills needs and gaps, and target
    recruitment and retention for critical
    occupations.71
       GAO recently testified that EPA has made
    substantial progress in developing a strategy to
    manage its workforce, yet it also acknowledged
    that EPA still needs to integrate this strategy into
    its daily business practices.  In particular, EPA
    must:
    •  Specifically address how human capital
       activities will help achieve environmental
       goals.
    •  Identify milestones for completing actions to
       implement its human capital objectives.
    •  Further its commitment  to deploy the
       strategy by dedicating resources.
    •  Help regions and program offices develop
       specific technical training plans that link into
       the human capital strategic plan.
   The Agency recognized human capital as a
key Agency priority in its FY 2001 Strategic
Plan. In response to OIG and GAO
recommendations, EPA also began implementing
a Human Capital Strategic Plan. The plan calls
for identifying the skills needed in every
program unit by assessing future needs,
identifying skills gaps, and tying skill needs to
future budget requests. In calendar year 2003,
EPA plans to complete a model workforce
planning process and deploy a system that will
meet the Agency's competency-based workforce
planning needs.73
   While progress has been made and
additional work is planned, this area continues to
be a key challenge.  In a recent briefing, EPA
provided information to the OIG concluding that
staff has limited experience in non-traditional,
collaborative approaches to environmental
problem solving. Training is needed to develop
management skills to better focus on outcomes
and do business with EPA partners.74 The OIG
will continue to monitor the Agency's progress
in developing a system that ensures a well-
trained and motivated workforce with the right
mix of skills and experience. Implementation of
the Human Capital Strategic Plan is an Agency-
level weakness under the Federal Managers
Financial Integrity Act.75

EPA's Use of Assistance Agreements to Accomplish
Its Mission

   Assistance agreements constitute
approximately one-half of EPA's budget and are
the primary vehicles through which the Agency
delivers environmental and human health
protection.76 Thus, it is important that EPA and
the public receive the value for which the
Agency has paid.

   OIG audit work  has repeatedly identified
problems in this area. Recent OIG audits
reported that some EPA assistance recipients did
not have adequate financial and internal controls
to ensure federal funds were managed properly.
As a result, EPA had limited assurance that grant
funds were used in accordance with work plans
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and met negotiated environmental targets. For
example, an EPA Region 5 grantee could not
adequately account for over half of its $300,000
in EPA funds.77 Also, a Region 1 grantee had
submitted multiple financial status reports with
different ending balances, had excess federal
funds on hand, and could not support that it had
met the minimum cost-sharing requirement.78
Misuse of grant funds also resulted in the City of
Cleveland agreeing to settle a civil lawsuit
charging that its Air Pollution Control Program
improperly spent over $429,000 in grant funds.79

   Further, in May 2001, the OIG reported that
EPA did not have a policy for competitively
awarding $1.3 billion in discretionary assistance
funds and recommended such a policy be
developed. The Agency agreed and is drafting a
policy to address competition in the award of
discretionary assistance funds.80
   The Agency has taken several actions to
improve its oversight controls over assistance
agreements, including requiring additional
training for all project officers and issuing policy
on project officer and grant management
oversight roles and responsibilities.81 However,
recent reports and ongoing work indicate that
Agency efforts to improve assistance agreement
management are still not uniformly effective. In
March 2002 the OIG reported that the Agency
did not always measure whether assistance
agreements awarded as surveys, studies,
investigations, and special purpose grants
achieved results that contributed to protecting
human health and the environment.82 The OIG
reported that EPA lacked assurance that
$187 million spent by assistance agreement
recipients for procurements was used to obtain
the best products, at the best price, from the
most qualified firms.83
   Ongoing OIG work shows that some Agency
actions to address grant oversight weaknesses
have not been effective. For example, the
Office of Administration and Resources
Management developed post-award monitoring
policies, but these policies were not always
followed. On-site evaluations, and oversight and
baseline monitoring of assistance agreements by
grant  specialists were not sufficient to assure that
agreement recipients were complying with the
requirements of the grants and are appropriately
using EPA funds.84 In May 2002 OIG recom-
mended the Agency elevate this issue from an
Agency weakness to a material weakness under
the Integrity Act.85

Protecting Critical Infrastructure From Non-
Traditional Attacks

    In 2001 OIG reported that EPA had yet to
fulfill its responsibilities under Presidential
Decision Directive (PDD) 63 regarding the
development of a national framework for
protecting critical physical and cyber-based
infrastructures.86 In the past year the Agency
reported that it had made significant progress in
completing many of the tasks outlined in a draft
1998 plan to develop a National Infrastructure
Assurance Plan.87 However, the attacks of
September 11, 2001, greatly increased the scope
and priority of EPA's mission in protecting critical
infrastructure.
    The July 2002 National Strategy for
Homeland Security, issued by the Office of
Homeland Security, designates EPA as the  lead
agency for protecting critical infrastructure and
key assets in the water and chemical industry
and hazardous materials sectors.88 This
responsibility is consistent with the Agency's
traditional oversight role in water and
wastewater infrastructure security and the
cleanup of chemical, biological, and certain
radiological attacks; and as the primary regulator
of chemical facilities. Thus, EPA must be
prepared to fulfill crisis and consequence
management responsibilities in the wake of a
terrorist incident and it must be prepared to help
detect, prevent, protect against, respond to, and
recover from a terrorist attack  against the United
States.89Moreover, Public Law 107-188, the
Public Health Security and Bio-terrorism
Response Act, signed in June  2002, specifically
tasked EPA with funding and overseeing water
system vulnerability assessments and the
resulting response.90The Agency's infrastructure
protection needs have been further defined by
the lessons it learned from the World Trade
Center response and the cleanup of the anthrax-
contaminated buildings.91 These combined
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    challenges are identified and addressed in EPA's
    draft Strategic Plan for Homeland Security.
    Among the many infrastructure protection
    challenges contained in the plan are the
    following:

    •  To assist water and waste water utilities in
       every community in the United States to
       (1) access the best scientific information,
       training, and technical expertise on water
       security; (2) assess their utility's vulnerabili-
       ties to a possible attack; (3) take action to
       improve security; and (4) respond effectively
       and efficiently in the event that an incident
       occurs.92
    •  To develop a water utility security research
       plan and establish a technology verification
       program for water utility security as well as
       to evaluate promising technologies.93
    •  To support and develop the preparedness of
       state and local governments and private
       industry to respond to, recover from,  and
       continue operations following a terrorist
       attack. For example,  EPA will work with
       other agencies to ensure that building air
       protection guidance is produced and  widely
       disseminated, and that training on such
       guidance is available. EPA will also work
       with our partners in other federal agencies,
       academia, industry, and public health
       organizations to identify and conduct
       research on needed technologies, as
       appropriate.94
       To achieve the goals in EPA's  Strategic Plan,
    the Agency will need to  apply technical,
    organizational, resource,  training,  and
    communication assets to complex issues with
    unprecedented dispatch. Success will require
    simultaneous attention to questions of threat,
    capabilities and deficiencies,  preparedness,
    management and oversight, and efficiency and
    effectiveness. The OIG plans to address these
    issues in its multi-year oversight of the Agency's
    implementation of its homeland security plan in
    support of the Office of  Homeland Security.95
Challenges in Addressing Air Toxics Program Phase
1 and Phase 2 Goals

   Toxic air pollution remains one of the most
significant health and environmental problems in
the United States, causing cancer, neurological,
immunological, and other serious health
problems.96 Despite the potential for serious
harm, EPA is nearly 2 years behind in fulfilling
its statutory responsibilities for issuing all Phase
1 air toxics standards (also known as MACT
standards97)  by the November 2000 statutory
deadline.98 Of 174 air toxics categories that EPA
is required to regulate under the 1990 Clean Air
Act,99 EPA has issued MACT standards for about
86 categories.100The Agency's most recent
estimate for completing the Phase 1 MACT
standards is  2004.101 EPA's delay in issuing the
Phase 1 MACT standards was identified as an
Agency weakness in 2001.102

   Of even  more importance is that Phase 1  is
solely a technology-based approach to emissions
reductions, and may not provide acceptable
health protections from exposure to air toxics.103
EPA will assess the health risks of the 188 toxic
air pollutants in the second phase of the  two-
phased approach, known as the "residual risk"
phase.104 No Phase 2 residual risk standards have
been completed.105 The Science Advisory Board
has questioned EPA's early efforts at assessing
residual risks,106 including whether the Agency
might seek statutory relief from Phase 2.
The Phase 2 residual risk determinations are
expected to  be expensive and controversial
based on the limited amount of air toxics health
data  available and the projected costs of
compliance for industry.107 Although the Clean
Air Act listed 188 air toxics that EPA must
control, to date the Agency has focused largely
on 33 of the suspected worse air toxics
prevalent in urban areas.108 Significant data gaps
in our understanding of these 33 highest priority
air toxics still exist.109 Additionally, EPA has
limited health and ecological effects information,
exposure data, emissions data, source
characterization data, and ambient data on many
of the remaining 155 air toxics.110

   At the present time, the air toxics program
relies heavily on industry emissions data for its
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GPRA measures, some of which are generated
by using inferior emission estimation
techniques.111 The lack of a robust set of
ambient monitoring data on the quantity and
concentrations of air toxics is also a concern.112
The Agency estimates that mobile sources may
contribute half of all air toxics emissions,113 and
there is little health data  on the synergistic
impacts of exposures to  multiple air toxics, such
as the exposures that routinely occur in urban
areas—the types of exposures that some
scientists believe are the leading health impact
from air toxics.114
   EPA requested $118 million for all air toxics
activities for FY 2003, or about 20 percent of its
clean air budget.115 About one-third of the air
toxics budget goes to 112 state and local
agencies that have authority to implement
existing air toxics regulations, including
permitting and inspecting sources for air
toxics.116 EPA's goal is to eliminate the risks of
cancer and other significant health problems
from air toxics emissions for 95 percent of the
U.S. population by 2020.117 We will continue to
monitor the progress EPA makes in addressing
this important issue.118


TIER TWO

EPA's Working Relationship With the States

   According to EGOS, in FY 2001, the authority
to implement about 80 percent of the
environmental programs rested with the states,
which provided about 65 percent of the financial
resources to EPA's 35 percent. Accordingly, the
Agency relies to a great extent on the states for
environmental results, the data used to measure
performance against standards, and for
enforcement actions against violators. Yet, the
Agency and states have been unable to agree on
state flexibility and accountability issues.
Relations remain strained due to disagreements
over (1) respective roles and the extent of
federal oversight; (2) priorities and budgets; and
(3) results-oriented performance measures,
milestones, and data. EPA can improve its
working relationship with states by establishing a
structure to mutually set direction, establish
goals, provide training, oversee accomplish-
ments, and ensure accountability.119

   The National Environmental Performance
Partnership System (NEPPS) established EPA-state
working partnerships to address complex
environmental issues with scarce resources. One
of the primary tools for implementing NEPPS,
performance partnership grants (PPGs), allows
states and tribes to combine multiple EPA grants
into one.
   A series of OIG audits on regional and state
NEPPS program implementation (including PPGs)
reported that NEPPS principles were not well-
integrated into EPA because of the lack of
(1) leadership providing a clear direction and
expectations, (2) training and guidance, (3) trust in
NEPPS due to fear of change and losing control,
and (4) goals and related performance measures to
monitor and measure progress on achieving better
environmental results.120
   Since the OIG began reporting on NEPPS,
the Agency has been working to fulfill its
potential. To address the lack of leadership and
clear direction for NEPPS, the Agency formally
designated the Assistant Administrator for the
Office  of Congressional and Intergovernmental
Relations (OCIR) as the National Program
Manager for NEPPS. OCIR has developed a
strategy for NEPPS issues  and is developing tools
to promote better understanding of NEPPS and
clarify appropriate expectations.121
   The current Administrator has also expressed
a personal commitment to seeing NEPPS succeed
and expand by (1) requiring regular reports from
the Regional Administrators on how NEPPS is
working; and (2) asking the Assistant Administra-
tors, regions and states to jointly identify areas
where flexibility is available and encourage
testing new measures of program performance.
In addition, EPA and EGOS are working jointly to
remove remaining barriers to effective
implementation of NEPPS. The Agency also
solicited formal input from EGOS and the Tribal
Caucus on state and tribal priorities for the EPA
FY 2003 and 2004 annual planning and
budgeting process. This information will be
incorporated into EPA's strategic and annual
planning processes and will influence the
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    development of performance goals and targets
    under GPRA.122

       Although the Agency has taken some notable
    actions to improve EPA's working relationship
    with states, the OIG believes much remains to
    be done. For example, EPA and state managers
    continue struggling with ways of providing states
    flexibility to address their highest environmental
    priorities while implementing and reporting on
    core program requirements. In addition, EPA has
    not defined its performance measures and
    related milestones to monitor EPA and state
    progress toward accomplishing NEPPS and PPG
    goals. OIG is continuing to monitor the  Agency's
    progress in addressing this important issue.123

    EPA's Information Systems Security

       EPA's information systems collect, process,
    store, and disseminate vast amounts of information
    used to help make sound regulatory and program
    decisions. Therefore, it is essential that the Agency
    prevent intrusion and abuse of these systems  and
    protect the integrity of its data.

       Under the leadership of the Office of
    Environmental Information (OEI), EPA is working
    toward its goal to make information on its
    computer systems available, while protecting the
    confidentiality and integrity of its information.
    The Agency has substantially enhanced its
    Information Security Program through improved
    risk assessment and planning processes, major
    new technical and procedural controls, issuance
    of new policies, and initiation of a regular
    process of testing and evaluation.

       The dynamic nature of security, however,
    requires continued emphasis and vigilance.
    We believe the following actions are needed to
    protect the Agency's information and systems.
    •  Implement a formal incident response plan.
       OEI is trying to address this need through
       draft guidelines and a strong working
       relationship with the OIG's Computer Crimes
       Unit. Also, a contract to develop an  incident
       response capability will soon be awarded.
       Furthermore, an informal process has been
       agreed upon for timely referral of potential
incidents, coordination, securing of evidence,
and other vital actions.

Establish a robust quality assurance (QA)
program. Without regular, effective oversight
processes, EPA management will continue to
place unsubstantiated trust in its many
components to fully implement, practice, and
document security requirements. Moreover,
the public and Congress may continue to
question how well the Agency plans for and
protects its information resources. EPA's
decentralized organizational structure makes
it essential that OEI provide strong leader-
ship and oversight to ensure the
effectiveness of its entity-wide computer
security program. OEI has begun addressing
these responsibilities, but additional
resources are needed to fully develop and
implement QA processes Agency-wide.124
Implement an organizational structure under
which Information Security Officers (ISOs)
are accountable directly to the OEI. EPA's
decentralized Wide Area Network
infrastructure and its security procedures
create serious vulnerabilities. Since intrusion
detection sensors on the central network
cannot track subnetwork activity, subnetwork
security relies upon the expertise of
assigned ISOs. The experience and training
of the ISOs, as well as their methods of
obtaining information and providing security
maintenance vary greatly. Furthermore, OEI
has no direct supervisory relationship over
them since they report to and are evaluated
by the regional or program offices to which
they are assigned. This relationship makes it
is difficult for OEI to mandate Agency-wide
changes, deal with personnel issues and
inefficiencies, resolve security conflicts, or
detect and respond to security vulnerabilities
on a subnetwork level.125 In  its mid-year
Integrity Report for FY 2002, the Agency
considered information security to be a
material weakness.126
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Backlog of National Pollutant Discharge Elimination
System (NPDES) Permits

   The Clean Water Act specifies that NPDES
permits expire in 5 years.127 Permittees wishing
to continue discharging beyond that term must
apply for permit renewal at least 6 months prior
to the expiration date of their permit.128 If the
permitting authority receives a renewal
application but does not reissue the permit prior
to expiration, the permit may be
"administratively continued. "129
   Administratively continued,  or "backlogged,"
permits are a major concern because conditions
may have subsequently changed since the
original permit was issued, and new restrictions
on permits may now apply. However,
"backlogged" permits would not contain these
new terms and conditions, thereby delaying
potential environmental improvements to
waters.130
   The Agency recognizes that the backlog of
NPDES permits is a nationwide  problem and has
developed a corrective action plan.131 The plan
includes (1) using new technology to streamline
the permit development process, (2) providing
environmental assessments and permit assistance
to the states, and (3) communicating the
importance of this issue to the states and EPA
regional offices and receiving their firm
commitments to reduce the backlog.132
   Last year, EPA's goal was to reduce the
backlog of NPDES permits  for major facilities to
10 percent by the end of calendar year 2001
and to 10 percent for major and minor permits
by the end of calendar year 2004.133 As of
February 2002, only 18 states had met the
10 percent backlog goal for majors.134 During
FY 2002, EPA drafted a system for prioritizing
and reissuing backlogged permits to focus on
those with the most significant environmental
impact, but the Agency no  longer expects to
meet its 2004 goal.135 Corrective actions are not
expected to be completed until the end of
FY 2005.136
   The Agency realizes it needs to find new
ways of implementing the NPDES program or
the problem will increase.137 Accordingly, it is
considering several innovative solutions to
expedite permit renewal and prevent backlogs,
such as issuing general permits for a class of
similar facilities138 and using information
technology to expedite the entire permit
development process.139 It is also committing to
provide increased contractor capacity for state
permit issuance work.140

   This issue was identified as an Integrity Act
material weakness in 1998 and was reduced to
an Agency weakness at the end of FY 2002.141
OIG will continue monitoring EPA's progress in
addressing this important issue.142 Eliminating the
backlog and making the permit issuance process
more efficient will release resources for other
important activities.143

Management of Biosolids

   Approximately 6 million tons of sewage
sludge ("biosolids") are produced annually by
sewage treatment plants in the United States.144
With inadequate treatment these biosolids may
contain a wide variety of chemicals and
pathogens, the remains of the sewage treatment
process.145 The OIG believes that EPA (1) does
not know whether current regulations, when
adhered to, are protective of public health;146
(2) does not have an overall understanding of
the magnitude and quality of biosolids
production and disposal practices;147 and
(3) does not know if the enforcement and
compliance resources committed to managing
biosolids are adequate to ensure that the
regulations are adhered to.148

   EPA has not conducted the basic research
needed to determine the risk associated with
certain biosolids disposal  practices.149The
Agency has taken the position that biosolids
management is a low-risk activity.150 As a result,
EPA has failed to adhere to its commitment to
comprehensively assess the extent of the risk.151
EPA issued Part 503 of Title 40 of the Code of
Federal Regulations ("The Sludge Rule") to
govern the use and disposal of biosolids in
February 1993 under court order. When the
Agency issued the rule, it committed to
conducting a comprehensive  research program
to assess the risks associated with land
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          Management Accomplishments and Challenges    ffl-21

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    application of biosolids; however, it has not yet
    done so.152 In June 2002 the National Academy
    of Sciences (NAS) recommended additional
    research.153 EPA is currently studying those
    recommendations, and has committed to
    producing a research work plan by the end of
    2003, nearly 11 years after committing to do so.154
       EPA uses the Permit Compliance System
    (PCS) to manage water quality activities of point
    source dischargers such as sewage treatment
    plants, but the Office of Water (OW) has
    acknowledged that PCS is inadequate for
    managing biosolids.155 EPA is unable to answer
    basic questions such as how much biosolids is
    land-applied.156 As a result of this data gap, OW
    developed an independent system, the Biosolids
    Data Management System (BDMS), to track
    compliance with biosolids regulations.157 EPA is
    revising PCS, but has not yet decided whether to
    incorporate BDMS into this new version.
    According to OW,  "the ultimate usefulness of the
    BDMS on a national basis is likely dependent
    upon its adoption into PCS."158

       EPA has diverted compliance and
    enforcement resources away from this program.
The safety of biosolids land application depends
on the adherence to highly technical treatment
standards by land applicators across the country.
In a 2000 report OIG found inadequacies in
EPA's management and enforcement of the
biosolids program.159 In a status report on the
biosolids program published 2 years later, OIG
reported a further 44 percent reduction in full-
time equivalent (FTE) positions (from 18 to
10).l6°This is a particular concern because EPA
runs the biosolids program in 45 states.161
Adequate oversight of this program is critical for
ensuring regulatory compliance. To date, EPA
has not committed the resources needed to fulfill
its oversight responsibilities.

   In convening a  committee to study the NAS
recommendations EPA is beginning to address
these issues. Several issues remain unsettled and
the OIG is not convinced that the Agency is
directing adequate  resources to resolving these
concerns. OIG will  continue to monitor EPA's
progress in this area until these issues are
settled.162 In May 2002  the OIG recommended
this issue as an Agency weakness under the
Federal Managers Financial Integrity Act.163
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Notes:
 1.    Office of Management and Budget, The Executive
      Office of the President, Federal Management,
      The President's ManagementAgenda. Available at
      http://www.whitehouse.gov/omb/budget/fy2002/
      pma  index.html.

 2.    Federal Managers Financial Integrity Act of 1982,
      Public Law 97-255 (September 8,  1982).

 3.    Inspector General Act of 1978, as  amended,
      Public Law 100-504 (amended September 30,
      1988).

 4    Reports Consolidation Act of 2000, Public Law
      106-531, to amend Chapter  35 of Title 31, United
      States Code (January 24, 2000).

 5.    Inspector General Act of 1978, as  amended.

 6.    Reports Consolidation Act of 2000.

 7.    Information from internal database: Management
      Audit Tracking System.

 8.    Data compiled from EPA's Annual Integrity Act
      Reports, 1988 to present.

 9.    U.S. EPA, Office of Water, National Pollutant
      Discharge Elimination System (NPDES), Backlog
      Reduction. Available at http://cfpub.epa.gov/
      npdes/permitissuance/backlog.cfm.

 10.   U.S. EPA, Office of Water, Interim Framework to
      Ensure Issuance of Timely and High Quality
      NPDES Permits. Available at http://cfpub.epa.gov/
      npdes/home.cfm?program id=45.

 11.   Ibid

 12.   U.S. EPA internal reporting.

 13.   FY 2001 Defense Authorization Act, Public Law
      106-398, Title X, Subtitle G.

 14.   U.S. EPA internal documents, security-sensitive.
      Not available to public.

 15.   U.S. EPA, Office of Environmental Information,
      FY 2002 Assurance Letter (October 2002).

 16.   National Institute of Standards and Technology
      Computer Security Resources Center Web site at
      http://csrc.nist.gov/publications/nistpubs/
      index.html.

 17.   Title VI of the Civil Rights Act of 1964, as
      amended (42 O.S.C. section 2000d to 2000d-7).

 18.   Tide  VI implementing regulations  of
      40CFR7.115(c)(l).

 19.   U.S. EPA, National Senior Executive Service
      Meeting (May 2001).
20.  Office of Homeland Security, The National
    Strategy for Homeland Security. Available at
    http://www.whitehouse.gov/homeland/book/
    nat strat hls.pdf.

21.  U.S. EPA, Office of Congressional and
    Intergovernmental Relations, Congressional
    Hearings Held before the House and Senate
    Committee of EPA Officials—Status Report for
    2002 (September 24, 2002). Available at
    http://www.epa.gov/ocir/hearings/testimony/
    092402ctw.PDF.

22.  U.S. EPA internal reports: Observations and
    Lessons Learned from Anthrax Responses
    (February 2002); Observations and Lessons
    Learned from the World Trade Center and
    Pentagon Terrorist Attacks (February 2002), and
    Technical Assistance Documents for Anthrax
    Response (September 2002).

23.  Public Health Security and Bioterrorism
    Preparedness and Response Act of 2002.

24.  U.S. EPA internal report: Lessons Learned in the
    Aftermath of September 11, 2001
    (February 2002).

25.  U.S. EPA, EPA Newsroom, EPA Announces
    Homeland Security Strategic Plan, One of Many
    Efforts to Ensure Agency's Ability to Protect,
    Respond and Recover, news release
    (October 2, 2002). Available at
    http: //www. epa. gov/epahome/
    headline 100202.htm.

26.  Office of the  President, Office of Homeland
    Security. Available at http://www.whitehouse. gov/
    homeland/book/index.html.

27.  U.S. EPA, Office of Congressional and
    Intergovernmental Relations, Performance
    Partnership. Available at http://www.epa. gov/
    ocirpage/nepps/index. htm.

28.  U.S. EPA, Office of Congressional and
    Intergovernmental Relations, Performance
    Partnership Grants. Available at
    http: //www. epa. gov/ocirpa ge/nepps/
    pp grants.htm.

29.  Federal Water Pollution Control Act, as amended
    by the Clean  Water Act of 1977. Available at
    http://www.epa. gov/r5water/cwa.htm.

30.  Part 503 of the Clean Water Act, National
    Pollutant Discharge Elimination System (NPDES):
    Biosolids. Available at http://cfpub.epa.gov/npdes/
    home.cfm?program id=l6.
www. epa.gov/ocfo
          Management Accomplishments and Challenges     ffl-23

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      31.  National Research Council, Division on Earth and
          Life Studies, Board on Environmental Studies and
          Toxicology, Biosolids Applied to Land: Advancing
          Standards and Practices (2002). Available at
          http://www.nap.edu/catalog/10426.html.

      32.  Federal Water Pollution Control Act, as amended
          by the Clean Water Act of 1977, Section
          405(d)(20)(c), Disposal of Sewage Sludge.
          Available at
          http://www.epa. gov/r5water/cwa.htm.

      33.  U.S. EPA, Region 8, Biosolids Data Management
          System (BDMS). Available at http://www.epa.gov/
          region08/water/wastewater/biohome/bdms/
          bdms.htm.

      34.  U.S. EPA, National Air Toxics Assessment
          (May 31, 2002). Available at http://www.epa.gov/
          ttn/atw/nata. Scientific Peer Review of the
          National-Scale Assessment.  Available at
          http://www.epa.gov/ttn/atw/nata/peer.html.

      35.  U.S. EPA, National Ambient Air Quality
          Standards. Available at http://www.epa. gov/airs/
          criteria.html.

      36.  U.S. EPA, Environmental Data Registry. Available
          at http://www.epa.gov/edr/.

      37.  U.S. EPA, Central Data Exchange. Available at
          http://www.epa.gov/cdx/.

      38.  EPA selected as finalist for the 2002 Presidential
          Quality Award in Area of Budget and Performance
          Integration, news release. Available at
          http://www.whitehouse.gov/news/releases/2002/
          ll/20021125-2.html.

      39.  U.S. EPA, Investing in Our People: EPA's Strategy
          for Human Capital 2001 through 2003.

      40.  Office of Management and  Budget, Executive
          Office of the President, Executive Branch
          Management Scorecard. Agency Scorecard: U.S.
          EPA (September 30, 2002).  Available at
          http://www.whitehouse.gov/omb/budintegration/
          scorecards/epa scorecard.html.

      41.  EPA order 5700.6, December 2002.

      42.  U.S. EPA, EPA Grants Information and Control
          System (GIGS) database.

      43.  U.S. EPA, Innovating for Better Environmental
          Results: A Strategy to Guide the Next Generation
          of Innovation at EPA. Available at
          http://www.epa.gov/opei/strategy/.

      44.  U.S. EPA, Office of Policy, Economics, and
          Innovation, State Innovation Pilot Grant
    Program. Available at http://www.epa. gov/opei/
    state grants/index, htm.

45.  U.S. EPA, Management Audit Tracking System,
    internal EPA database.

46.  EPA Needs Better Integration of the National
    Environmental Performance Partnership System,
    2000-M-000828 (March 31, 2000), pp. 3-4.

47.  EPA Strategic Information Plan: A Framework
    fortheFuture (Washington, DC: U.S. EPA,
    July 29, 2002), p. 11.

48.  Office of the Chief Financial Officer, Office of the
    Comptroller, Business Objects Implementation
    Plan (September 2002), p. 3.

49.  Managing for Improved Results,
    recommendations for Linda Fisher, Deputy
    Administrator, and Linda Combs, Chief Financial
    Officer, Appendix 2 (November 2002).

50.  EPA's Progress in Using the Government
    Performance and Results Act to Manage for
    Results,  2001-B-000001 (June 13, 2001), pp. 1-2.

51.  Strategic Information Plan: A Framework for
    the Future, p. 8.

52.  Office of Water Data Integration Efforts,
    E1NWG6-15-0001-8100177 (June 22, 1998), p. 5.

53.  Subsequent to this report EPA has finalized its
    target architecture and recognized a standards
    program as a integral component.

54.  EPA Strategic Information Plan-. A Framework for
    the Future, p. 15.

55.  Ibid, p. 17.

56.  Data Standards: EPA Data Systems
    Implementation Progress Measurement Matrix
    (REI + Major Systems) (September 10, 2002).

57.  EPA Strategic Information Plan: A Framework for
    the Future, p. 15.

58.  Office of Water Data Integration Efforts, p. 8.

59.  Unreliable Data Affects Usability of DOCKET
    Information, 2002-P-00004 (January 18, 2002;
    Comprehensive Environmental Response,
    Compensation, and Liability Information System
    (CERCLIS) Data Quality, 2002-P-00016
    (September 30, 2002).

60.  Unreliable Data Affects Usability of DOCKET
    Information, p. 5.

6l.  EPA Strategic Information Plan: A Framework for
    theFuture, p. 15.
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 62.   OIG Comments to Data & Information Quality
      Strategic Plan (May 2001) and EPA Pre-Brief for
      the Quality and Information Council (May 24,
      2001).

 63.   EPA Strategic Information Plan: A Framework for
      the Future, p. 12.

 64.   Laboratory Fraud: Deterrence and Detection,
      memorandum to the Acting Deputy Administrator
      (June 25, 1999), pp. 1, 3.

 65.   Ibid., pp. 6-8.

 66.   Briefing Booklet: Senior Management Integrity
      Meeting with GAO, OMB, and OIG (June 11,
      2002), p. 1.

 67.   EPA Strategic Information Plan: A Framework for
      the Future, p. 28.

 68.   U.S. EPA, Fiscal Year 2001 Annual Report,
      Section I, Goal 10.

 69.   General Accounting Office, Observations onEPA's
      Efforts to Implement a Workforce Planning
      Strategy, GAO/T-RCED-00-129 (March 23, 2000).

 70.   Region 6 Supplemental Environmental Projects,
      2000-P-00014 (August 22, 2001); EPA Needs
      Better Integration of the National Performance
      Partnership System, 2000-M-000828 (March 31,
      2000).

 71.   Meeting with representatives from OHROS to
      discuss Human Capital Strategic Plan,
      August 1, 2002.

 72.   General Accounting Office, Observations on
      Elevating the Environmental Protection Agency
      to Cabinet Status, GAO-02-552T (March 21,
      2002), p. 6.

 73.   U.S. EPA, Fiscal Year 2001 Annual Report,
      Section I, Goal 10.

 74.   EPA Needs to More Actively Promote State Self
      Assessment of Environmental Programs,
      2003-P-00004 (December 27, 2002), p. 12.

 75.   U.S. EPA, Fiscal Year 2001 Annual Report,
      Section III, p. 10.

 76.   Additional Efforts Needed to Improve EPA's
      Oversight ofAssista nee Agreements,
      2002-P-00018 (September 30, 2002), p.  1.

 77.   Audit of Costs Claimed by Michigan Association
      of Conservation Districts, 2000-4-0059
      (September 7, 2000), pp. 1, 12.
78.  Grant Management Practices of Rhode Island
    Department of Environmental Management,
    2000-1-0416 (September 21, 2000), pp. ii-iii.

79.  Settlement Agreement and Release, United States
    v. City of Cleveland, Civil Action No. 1:98CV1951.

80.  EPA's Competitive Practices for Assistance
    Agreements, 2001-P-00008 (May 21, 2001)
    pp. ii, 2, 3.

81.  Additional Efforts Needed to Improve EPA's
    Oversight of 'Assistance Agreements, pp. 6-7.

82.  Surveys, Studies, Investigations, and Special
    Purpose Grants, 2002-P-00005 (March 21, 2002),
    p.i.

83.  Procurements Made by Assistance Agreement
    Recipients Should Be Competitive, 2002-P-00009
    (March 28, 2002), p. i.

84.  Additional Efforts Needed to Improve EPA's
    Oversight of Assistance Agreements, pp. 7-16.

85.  Fiscal 2002 Agency Weakness Candidates,
    memorandum from the Inspector General to the
    Chief Financial Officer (May 20, 2002).

86.  U.S. EPA, Office of the Inspector General,
    2001-P-00010, pp.  1, 4-8.

87.  Internal memorandum from Mehan to Chan re
    Completion of Activities Under Presidential
    Decision Directive (FDD) 63 in Relation to OIG
    2001-P-10 (October 25, 2001); undated internal
    memorandum from O'Connor & Horinko to Chan
    re Comments on the Office of Administration and
    Resources Management and Office of Solid Waste
    and Emergency Response's Response to OIG
    report Review of EPA's Adherence to Presidential
    Decision Directive (FDD 63) Requirements.

88.  Office of Homeland Security,  The National Strategy
    for Homeland Security (July 2002), p 32.

89.  U.S. EPA, Strategic Plan for Homeland Security
    (October 2002), pp. i-iii, 6, 9, 21. Available at
    http://www.epa.gov/epahome/
    headline 100202.htm.

90.  Public Health Security and Bio-terrorism Response
    Act, Public Law 107-188 (June 2002), Sec. 401.

91.  Internal working documents cross-walking lessons
    learned reports into Homeland Security action
    plans.

92.  U.S. EPA, Strategic Plan for Homeland Security,
    p.l.
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         Management Accomplishments and Challenges     ffl-25

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     93.  Ibid, p. 3.

     94.  Ibid, p. 9.

     95.  Summary statement supported by OIG Draft
          Multi-year Plan, Chapter 5.

     96.  U.S. EPA, Office of Air and Radiation, The Clean
          Air Act Amendments of 1990—Summary
          Materials (November 15, 1990); U.S. EPA, Control
          of Emissions of Hazardous A ir Pollutants from
          Mobile Sources: Response to Comments,
          EPA-420-R-00-024 (December 2000), p. 15;
          U.S. EPA, EPA FY 2003 Annual Plan, p. 1-3;
          U.S. EPA, Taking Toxics Out of the Air Progress
          in Setting "Maximum Achievable Control
          Technology" Standards Under the Clean Air Act,
          EPA-452/K-00-002 (August 2000).

     97.  United States Court of Appeals, District of
          Columbia Circuit, Case No. 97-1686, March 2,
          1999, Sierra Club and Natural Resources Defense
          Council, Petitioners v. EPA and Integrated Waste
          Services Association and Pharmaceutical
          Research and Manufacturers of America,
          Intervenors.

     98.  FY 2002 Integrity Act Annual Assurance Letter
          from Jeffrey R. Holmstead, Assistant Administrator
          for Office of Air and Radiation, to Christine Todd
          Whitman, Administrator, U.S. EPA, pp. 4-5; United
          States Court of Appeals,  District of Columbia
          Circuit, Case No. 02-1135 and consolidated cases
          (November 26, 2002), Sierra Club, Petitioners.
          EPA-SettlementAgree, pp. 1-13.

     99.  U.S. Environmental Protection Agency Workplan
          for the National Air Toxics Program and
          Integrated Air Toxics State/Local/Tribal Program
          Structure (September 2001), p.  2-1.

     100. Memorandum from Jeneva Craig, Office of Policy
          Analysis and Review, Office of Air and Radiation,
          to Office of the Inspector General re proposed
          BIN schedule for remaining MACTs
          (November 7, 2002).

     101. FY 2002 Integrity Act Annual Assurance Letter
          from Jeffrey R. Holmstead to Christine Todd
          Whitman, p. 4.

     102. Hid

     103. U.S. Environmental Protection Agency Workplan
          for the National Air Toxics Program and
          Integrated Air Toxics State/Local/Tribal Program
          Structure (September 2001), pp. 2-1, 2-2;
          Risk Assessment for Toxic Air Pollutants-.
          A Citizen's Guide, EPA-450-3-90-024
          (March 1999); and EPA Air Risk Information
    Support Center, Health Effects Notebook for
    Hazardous Air Pollutants (December 1994).

104. U.S. Environmental Protection Agency Workplan
    for the National Air Toxics Program and
    Integrated Air Toxics State/Local/Tribal Program
    Structure, p. 5; Evaluation Exposures to Toxic
    Air Pollutants: A Citizen's Guide, EPA-450/3-90-
    023 (March 1991). Available at
    http://www.epa.gov/air/tribal/workplanl7.pdf.

105. Status of the MACT and Residual Risk Programs,
    briefing by K.C. Hustvedt, Emissions Standards
    Division, Office  of Air Quality Planning and
    Standards, Office of Air and Radiation,  U.S. EPA
    (November 15, 2001). Available at
    http://www.4cleanair.org/members/committee/
    airtoxics/Hustvedt.pdf: Integrated Air Toxics
    Briefing for the OIG, Beth Craig, Deputy Assistant
    Administrator, Office of Air and Radiation, U.S. EPA
    (October 31, 2002).

106. Letter from Dr. Morton Lippman, Interim Chair,
    Science Advisory Board (SAB), to Carol M.
    Browner, (former) Administrator, U.S. EPA,
    EPA-SAB-EC-00-005 Quly 25, 2000), pp.  1-2;
    Executive Committee Commentary on Residual
    RiskProgram, EPA-SAB-EC-00-015 Quly 25,
    2000), pp. 1-4, 8-9; NATA—Evaluating the
    National Scale Air Toxics Assessment 1996 Data:
    An SAB Advisory, EPA-SAB-ED-ADV-02-001
    (December 2001); Workshop on the Benefits of
    Reductions in Exposure to Hazardous Air
    Pollutants: Developing Best Estimates of Dose-
    Response Functions, EPA-SAB-EC-WKSHP-02-001
    (January 2002).

107. Letter from S. William Becker, Executive Director,
    State and Territorial Air Pollution Program
    Administrators/Association of Local Air Pollution
    Control Officials (STAPPA/ALAPCO), to Timothy
    D. Backstrom, Air and Radiation Law Office, Office
    of General Counsel, U.S. EPA (September 24,
    2002), pp. 1-2; Natural Resources Defense
    Council, Inc. v. U.S. Environmental Protection
    Agency ("vinyl chloride" case), United States Court
    of Appeals, District of Columbia Circuit, July 28,
    1987; letter from the Environmental Council of
    the States (EGOS) to Christine Todd Whitman,
    Administrator, U.S. EPA (September 19, 2001),
    available at http://www.law.buffalo.edu/
    Academics/courses/640/materials/CAA 2 02.htm.

108. U.S. Environmental Protection Agency Workplan
    for the National Air Toxics Program and
    Integrated Air Toxics State/Local/Tribal Program
    Structure (September 2001), p. 2-2; National
    Scale Air Toxics Assessment Program: Overview—
m-26     EPA's FY 2002 Annual Report
                                     www. epa.gov/ocfo

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      The 33 Pollutants, available at
      http://www.epa.gov/ttn/atw/nata/34poll.html:
      The National Scale Air Toxics Assessment,
      available http://www.epa.gov/ttn/atw/nata/.

 109.  An SAB Advisory on the USEPA 's Draft Case Study
      Analysis of the Residual Risk of Secondary Lead
      Smelters, EPA-SAB-EC-ADV-00-005 (May 2000),
      pp. 2-3; U.S. Environmental Protection Agency
      Workplanfor the National Air Toxics Program
      and Integrated Air Toxics State/Local/Tribal
      Program Structure, September 2001, p. 2-8.

 110.  An SAB Advisory on the USEPA's Draft Case Study
      Analysis of the Residual Risk of Secondary Lead
      Smelters, pp. 2-3; U.S. Environmental Protection
      Agency Workplanfor the National Air Toxics
      Program and Integrated Air Toxics State/Local/
      Tribal Program Structure, pp. 2-15 to 3-12; EPA's
      August 31, 2000, FY 2002 GPRA Goal 1:  Clean
      Air, Objective 1.2: Reducing Air Toxics,
      Subobjective 1.2.1: Air Toxics, ORD
      Background, pp. 5-7; EPA Science Forum
      2000: Meeting the Challenges (abstracts,
      presentations, and proceedings);  2002 Air
      Toxics Implementation Workshop,
      April 9-11, 2002.

 111.  Discussion Paper for CASAC—Diesel Health
      Assessment Issues, NCEA-W-0634 (May 1999),
      pp. 10-15; Limitations in the 1996National-Scale
      Air Toxics Assessment, pp. 1-4, available at
      http: //www. epa. gov/ttn/atw/nata/natsalim. html:
      Introduction to AP-42, vol. I, 5th ed.
      (January 1995), pp. 1-5; Locating and Estimating
      Air Emissions from Sources of 1,3 Butadiene,
      EPA-454/R-96-008 (November 1996).

 112.  Air Toxics Monitoring Newsletter, a publication of
      the STAPPA/ALAPCO/USEPA Monitoring Steering
      Committee, January  2002,  pp. 1-2.

 113.  Control of Emissions of Hazardous Air
      Pollutants from Mobile Sources: Response to
      Comments, p.  14.

 114.  U.S. EPA, Risk Assessment Forum, Framework
      for Cumulative Risk Assessment (External
      Review Draft) (Washington, DC: U.S. EPA,
      April 23, 2002); FY 2002 Integrity Act Annual
      Assurance Letter from Jeffrey R. Holmstead to
      Christine Todd Whitman, p. 4.

 115.  EPA FY2003 Annual Plan, p. 1-7.

 116.  EPA FY2003 Annual Plan, p. 1-8; AIR: EPA and
      State Progress in Issuing Title VPermits,
      2002-P-00008 (March 29, 2002), pp. i,  45-48.
117. FY2002'FinalAnnual'PerformancePlan.
    Available at http://www.epa.gov/ocfo/budget/
    2002/2002final/01 lv.pdf.

118. EPA Office of Inspector General (OIG) Multi-Year
    Plan (Draft) (December 2002).

119. EPA's Progress Using the Government
    Performance and Results Act to Manage for
    Results, 2001-B-000001 (June 13, 2001).

120. Improving Region 5'sEnPPA/PPG Program,
    2000-P-00008 (February 29, 2000); EPA Needs
    Better Integration of the National Environmental
    Performance Partnership System, 2000-M-
    000828-000011 (March 31,  2000); Region 8
    Needs to Improve Its Performance Partnership
    Grant Program to Ensure Accountability and
    Improved Environmental Results, 1999-000209-
    R8-100302 (September 29, 1999); Region 4's
    Implementation and Oversight of Performance
    Partnership Grants, 1999-P-00216
    (September 27, 1999); Region 6 Oversight of
    Performance Partnership Grants, 1999-000208-
    R6-100282 (September 21,  1999).

121. Water Enforcement: State Enforcement of Clean
    Water Act Dischargers Can Be More Effective,
    2001-P-00013 (August 2001).

122. EPA Strategic Information Plan: A Framework for
    the Future (July 29, 2002).

123. EPA's Progress Using the Government
    Performance and Results Act to Manage for
    Results.

124. Government Information Security Reform Act:
    Status of EPA's Computer Security Program,
    2001-P-00016 (September 7, 2001), p.  21.

125. Briefing given to OEI (formerly OIRM): Improving
    Information Systems Security,  Recommendation 1
    (June 17, 1999).

126. Briefing Booklet: Senior Management Integrity
    Meeting with GAO, OMB, and OIG, p. 1.

127. U.S. EPA, Backlog Reduction: Overview. Available
    at http://cfpub.epa.gov/npdes/permitissuance/
    backlog.cfm: accessed December 23, 2002.

128. Ibid

129. Ibid

130. U.S. EPA, Fact Sheet—NPDES Permit Backlog
    Reduction, p. 1. Available at http://cfpub.epa.gov/
    npdes/permitissuance/reductiondocs.cfm:
    accessed December 23, 2002.
www. epa.gov/ocfo
         Management Accomplishments and Challenges     ffl-27

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      131. U.S. EPA, Office of Water, Office of Wastewater
          Management, Interim Framework to Ensure
          Issuance of Timely and High Quality NPDES
          Permits (Approaches for reducing the NPDES
          permit backlog) (July 28, 1999), available at
          http://cfpub.epa.gov/npdes/permitissuance/
          reductiondocs.cfm. accessed December 23, 2002;
          U.S. EPA, Fiscal Year 2001 Annual Report,
          p. 111-17, available at http://www.epa.gov/ocfopage/
          finstatement/2001ar/2001ar.htm#2001ar. accessed
          December 23, 2002.

      132. U.S. EPA, Fiscal Year 2001 Annual Report,
          p. 111-18.

      133. Ibid., p. III-3; Backlog Reduction Goals and
          Current Rates, available  at http://cfpub.epa.gov/
          npdes/permit issuance/goals.cfm. accessed
          December 23, 2002.

      134. A backlog status report that is updated every
          quarter is available at http://cfpub.epa. gov/
          npdes/permitissuance/backstat. cfm.

      135. U.S. EPA, Fiscal Year 2001 Annual Report,
          p. III-3.

      136. Ibid

      137. Ibid, p. m-18.

      138. U.S. EPA, Office of Water, Office of Wastewater
          Management, p. 2-2; U.S. EPA, Fiscal Year2001
          Annual Report, p. 111-18.

      139. U.S. EPA, Office of Water, Office of Wastewater
          Management, p. 5-4; U.S. EPA, Fiscal Year2001
          Annual Report, p. III-3.

      140. U.S. EPA, Office of Water, Office of Wastewater
          Management, p. 5-5.

      141. U.S. EPA, Fiscal Year 2001 Annual Report,
          p. III-3. Auditor's Note: The Agency has noted
          that it will report the NPDES permit backlog as
          corrected in the 2002 Annual Report and will
          continue to monitor this backlog as an Agency-
          level weakness. (U.S. EPA, Financial Management
          Five-Year Plan FY2002-FY200 7
          (September 2002), p. AI-13).

      142. U.S. EPA, Fiscal Year 2001 Annual Report,
          p. 111-18.
143. U.S. EPA, Financial Management Five-Year Plan
    FY2002-2007, p. AI-14; U.S. EPA, Fiscal Year
    2001 Annual Report, p. 111-18.

144. National Academy of Sciences, Sewage Sludge
    Standards Need New Scientific Basis. Available at
    http://www4.nas.edu/news.nsf/isbn/
    0309084865?OpenDocument.

145. Ibid

146. Biosolids Management and Enforcement, p. ii.

147. Ibid., p. 30.

148. Ibid, p. 18.

149. National Academy of Sciences.

150. Land Application of Biosolids, 2002-S-000004
    (March 28, 2002), p.  i.

151. Ibid, pii.

152. Ibid, p. 18.

153. National Academy of Sciences.

154. Letter from Tracy Mehan and Paul Oilman to EPA
    regions and State Commissioners (October 31,
    2002).

155. Biosolids Management and Enforcement,
    pp. 30, 44.

156. Ibid, p.ii.

157. Ibid, p. 20.

158. Memorandum from Office of Water responding to
    OIG's nomination of biosolids as a major
    management challenge (e-mail from Brigid Rapp
    of OCFO to Kwai Chan and Dan Engelberg,
    August 29, 2002), p.  2.

159. Biosolids Management and Enforcement, p. ii.

160. Land Application of Biosolids, p. i.

161. Ibid.

162. OIG Conclusion.

163. Memorandum from Nikki Tinsley to Linda Combs
    (May 20, 2002), p. 4.
m-28     EPA's FY 2002 Annual Report
                                    www. epa.gov/ocfo

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Section IV
FY 2002 Annual
Financial
Statements

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             FY 2002 ANNUAL FINANCIAL STATEMENTS

Chief Financial Officer's Analysis	 IV-1
Principal Financial Statements	 IV-5
OIG's Report on EPA's Financial Statements	IV-67

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                CHIEF FINANCIAL OFFICER'S ANALYSIS OF EPA'S
            FISCAL YEAR 2002 AND 2001 FINANCIAL STATEMENTS



   The Environmental Protection Agency (EPA) prepared the following Fiscal Year (FY) 2002
Financial Statements: Statement of Financial Position (Balance Sheet), Statement of Changes in Net
Position, Statement of Net Cost, Statement of Budgetary Resources, Statement of Financing, and
Statement of Custodial Activity. In  addition, we  prepared a Statement of Net Cost by Goal for each
of the Agency's 10 Strategic Goals.

   The Office of Inspector General (OIG) stated: "In our opinion, the consolidating financial
statements present fairly the consolidated and individual assets, liabilities, net position, net cost, net
cost by goal, changes in net position, reconciliation of net cost to budgetary obligations, and custodial
activity of the U.S. Environmental Protection Agency and its subsidiary funds, the Superfund Trust Fund
and All Other Appropriated  Funds, as of and for the years ended September 30,  2002 and 2001,  and
budgetary resources as of and for the year ended September 30, 2002, in accordance with generally
accepted accounting principles."

Report on Internal Controls

   The OIG's Audit Report on the EPA's Fiscal 2002 and 2001 Financial Statements did not identify
any material weaknesses.1 However, the Report cited seven reportable conditions. These reportable
conditions are summarized below, along with a short statement of the Agency's position with respect
to each of those items.

•  Documentation and Approval of Journal Vouchers-The OIG noted that the Agency did not
   always adequately document journal vouchers and standard vouchers prior to the transactions being
   entered into the Agency's Integrated Financial Management System (IFMS). The OIG ascertained
   that most of the entries appeared to be correct but was concerned about the vulnerability
   associated with executing transactions without proper documentation and supervisory review and
   approval.  The Office  of the Chief Financial Officer (OCFO) will issue a general reminder to the
   staff to fully document and support all entries to IFMS.

•  Reconciling Superfund State Cost Share Contracts-The OIG noted that improvement was
   needed in reconciling unearned revenue for State Superfund Contracts (SSC).  EPA did not reconcile
   the unearned revenue from SSC for FY 2002  because the Agency relied on its accounting system's
   internal controls and regional year-end adjustments to unearned revenue. As a result, the Agency
   could not ensure the accuracy of the SSC unearned revenue accounts, which totaled approximately
   $45 million.

   EPA agrees that improvement is needed. As a result of the audit findings and the subsequent
   reconciliation, the Agency was able to make on-top adjustments for most of the regional errors and
   reduce the overall variance to avoid a material misstatement of Unearned Advances. In the future,
   the Agency will calculate the SSC  revenue and perform a reconciliation at year end to validate the
   unearned revenue remaining after the regional SSC accruals have been posted. The OCFO will
   issue additional written guidance to the regions on how to calculate the accruals and increase their
   oversight.
1 A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively
 low level the risk that misstatement of amounts that would be material in relation to the financial statements being audited may occur and not be detected within
 a timely period by employees in the normal course of performing their assigned functions.


tvtvw.epa.gov/ocfo                                                     FY 2002 Annual Financial Statements     IV-1

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    •  Reconciliation of Deferred Cashouts-The OIG found that EPA regions did not periodically
       reconcile the uncollected receivables for Superfund cashouts to the general ledger liability
       accounts. Cashouts represent money that potentially responsible parties agree to pay EPA to fund
       future cleanup work at Superfund sites. The OCFO agrees with the need to prepare written
       guidance for reconciling uncollected cashout accounts and will issue written guidance for
       reconciliation.

    •  Integrated Grants Management System Security Plan Compliance with Federal
       Requirements-The OIG noted the Integrated Grants Management System (IGMS) Security Plan
       did not adequately describe the security requirements nor the controls used to protect the System
       and its data. The Office of Grants and Debarment agrees with the OIG's recommendation to revise
       the IGMS Security Plan to include requirements identified in the Joint Financial Management
       Improvement Program (JFMIP) standards for financial systems and the National Institute of
       Standards and Technology Standard 800-18.

    •  Automated Application Processing Controls-As part of the OIG's FY 2002 financial statement
       audit, the OIG evaluated the Agency's Integrated Financial Management System (IFMS)
       replacement activities and found that EPA has taken tangible steps to replace IFMS through the
       Financial Replacement System project. The OIG believes that EPA is moving in a credible fashion
       towards replacing IFMS and made no recommendations in this area at this time.

    •  Capitalization of Superfund Contractor-Held Property-The OIG recommended that the OCFO
       capitalize current Superfund site-specific contractor-held property costs meeting capitalization
       thresholds  and only remove property from the general Property, Plant, and Equipment accounts in
       accordance with Statement of Federal Financial Accounting Standards (SSFAS) No. 6, Accounting for
       Property, Plant, and Equipment. EPA agrees with the OIG's recommendation and will issue written
       guidance on capitalization criteria.

    •  Revenue Recognition on Cashouts-The OIG cited the Agency for not restating the FY 2001
       statements to properly characterize a $53 million on-top adjustment as unearned revenue from
       future costs or earned revenue from past costs. In response, EPA restated in the FY 2002
       statements its FY 2001 Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position,
       and Statement of Financing to correctly reflect the prior year's revenue and net position. The
       OCFO also has implemented additional internal controls to ensure that the Agency complies with
       financial reporting standards for reporting corrections of errors.

    Compliance with Laws and Regulations

    Noncompliance Issues with Federal Financial Management Improvement Act (FFMIA)

       The OIG identified no substantial noncompliance issues with FFMIA. However, they did note four
    other noncompliances.
    •  EPA did not comply with the Managerial Cost Accounting Standard-The OIG believed the
       OCFO did  not comply with the FFMIA concerning the SSFAS No. 4, "Managerial Cost Accounting
       Concepts and Standards for the Federal Government." While the OCFO agrees that improvements
       in cost accounting can be made, and has continued to take initiative as a federal leader in this area,
       we also believe that the Agency substantially complies with this Standard.

       The OIG recommends that the OCFO set a goal to provide EPA managers with useful and timely
       reports that present the full  costs  of their outputs and programs by the end of the fiscal year. The
       OIG also recommended that we change the Agency's cost accounting outputs so that they
       correspond to discrete products and services that the Agency produces. However, we believe that

IV-2     EPA's FY 2002 Annual Report                                                         www.epa.gov/ocfo

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   having the capability to provide information at the subobjective level is appropriate for defining
   "products and services" and that this information is useful to managers. The Agency is now moving
   from ten goals to five in the new Strategic Plan and will further evaluate what information EPA
   managers need under that new structure. The OCFO believes the new structure will provide more
   detailed accounting for Agency resources and programs. We also are continuing to enhance our
   management reporting tools and capabilities.

•  Reconciliation of intra-governmental transactions is not in compliance with Office of
   Management and Budget (OMB) and Treasury Financial Manual requirements-The OIG
   reported that EPA continues to experience difficulties in reconciling some of its intragovernmental
   assets and liabilities because some federal entities do not perform corresponding reconciliations.
   The OIG noted that this is a government-wide issue and they made no recommendations at this
   time. They encouraged EPA to continue their proactive efforts in reconciling the Agency's intra-
   governmental transactions in order to comply with federal financial reporting requirements. We
   appreciate the OIG's recognition of our efforts. The OCFO will continue to participate in
   government-wide initiatives to overcome the difficulties of reconciling intergovernmental
   transactions between agencies.

•  The Contract Payment System (CPS) is not in compliance with the Joint Financial
   Management Improvement Program system requirements-The OIG stated that during
   FY 2002 CPS was not in compliance with JFMIP mandatory system requirements because no report
   existed to reconcile the total number of dollars and transactions transferred daily between CPS and
   IFMS. Subsequent to the OIG review, OCFO staff modified the CPS reporting package to address
   the OIG's concerns.
•  The fiscal 1999 Remediation Plan to correct some FFMIA issues has not been completed-
   The OIG reported that EPA had not yet completed two key action items from the Office of Chief
   Financial Officer's 1999 Remediation Plan for achieving compliance with  FFMIA requirements. The
   OCFO is taking action to correct the remaining issues. Specifically, the OCFO will work with the
   Office of Administration and Resources Management to firm up milestone dates for establishing a
   security certification process for key personnel and will revise the  Remediation Plan to identify
   responsibility for the security certification process, set a target date for completion of the action,
   and provide a revised status report to OMB to disclose the changes made.

Compliance with the Food Quality Protection Act of 1996

   The OIG found that the Agency was not in compliance with the requirements of the Food Quality
Protection Act of 1996 (the Act) because it exceeded the amount of maintenance fees that could be
used for expedited processing. The Agency subsequently made adjustments to correct the
noncompliance and will closely monitor future amendments to the Act to  identify any potential
revisions that will affect compliance requirements.

Compliance with the Treasury Financial Manual

   The OIG found that the Agency does not prepare the SF 224 Statement of Transactions in
accordance with the Treasury Financial Manual. The OCFO concurs and has taken appropriate action
to develop, document, and implement procedures to ensure that the Agency's financial processes
relating to SF 224 reporting, reconciliation, and  maintenance of fund balances with Treasury are in line
with the Treasury Financial Manual.
tvtvw.epa.gov/ocfo                                                     FY 2002 Annual Financial Statements     IV-3

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    Progress in Correcting Previously Identified Problems

       OCFO management believes that audit followup is an integral part of good management and that
    corrective actions are essential to improving the effectiveness and efficiency of government
    operations. To resolve long-standing audit recommendations, the OCFO formed an Audit Followup
    Council in July 2000 to review progress on audit findings, discuss approaches to resolving audit issues,
    and provide coordination and support across the OCFO on audit related matters.

       As a result of the Council's efforts, the Agency has resolved several long-standing issues. During
    the audit of the FY 2001  financial statements, the OIG noted substantial progress in completing a
    number of corrective actions from prior years. In FY 2002 EPA completed corrective action for the
    interagency agreement invoice approval process by implementing an automated project officer
    notification. The Agency and the OIG are working to resolve three remaining issue areas from prior
    financial statements audits. Those areas are as follows:
    •  Automated Application Processing Controls for IFMS-The OIG acknowledges that the
       Agency plans to replace IFMS with a new automated accounting system. Until the Agency
       implements the new accounting system, the OIG states that they will continue to mention this area
       as a reportable condition.

    •  Financial System Security Plans-The OIG determined that two related corrective actions in
       EPA's Remediation Plan were incomplete. The Agency is taking corrective action.

    •  Managerial Cost Accounting Standards-The OIG no longer views this audit issue area as a
       substantial noncompliance because of Agency enhancements to its reporting capabilities and
       additional ongoing initiatives.
IV-4     EPA's FY 2002 Annual Report                                                          www.epa.gov/ocfo

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                                       CONTENTS
Financial Statements
   Consolidating Balance Sheet
   Consolidating Statement of Net Cost
   Consolidated Statement of Net Cost by Goal
   Consolidating Statement of Changes in Net Position
   Combined Statement of Budgetary Resources
   Consolidating Statement of Financing
   Consolidated Statement of Custodial Activity

Notes to Financial Statements
   Note  1.    Summary of Significant Accounting Policies
   Note  2.    Fund Balance  with Treasury
   Note  3.    Cash
   Note  4.    Investments
   Note  5.    Accounts Receivable
   Note  6.    Other Assets
   Note  7.    Loans Receivable, Net - Nonfederal
   Note  8.    Accounts Payable and Accrued Liabilities
   Note  9.    General Plant, Property, and Equipment
   Note  10.    Debt
   Note  11.    Custodial Liability
   Note  12.    Other Liabilities
   Note  13.    Leases
   Note  14.    Pensions and Other Actuarial Benefits
   Note  15.    Cashout Advances, Superfund
   Note  16.    Unexpended Appropriations
   Note  17.    Amounts Held by Treasury
   Note  18.    Commitments  and Contingencies
   Note  19.    Exchange Revenues, Statement of Net Cost
   Note  20.    Environmental Cleanup Costs
   Note  21.    Superfund State Credits
   Note  22.    Superfund Preauthorized Mixed Funding Agreements
   Note  23.    Income and Expenses from Other Appropriations
   Note  24.    Custodial Revenues and Accounts Receivable
   Note  25.    Statement of Budgetary Resources
   Note  26.    Recoveries and Permanently Not Available, Statement of Budgetary Resources
   Note  27.    Unobligated Balances Available
   Note  28.    Offsetting Receipts
   Note  29.    Statement of Financing
   Note  30.    Costs Not Assigned to Goals
   Note  31.    Transfers-in and out, Statement of Changes in Net Position
   Note  32.    Imputed Financing
   Note  33.    Payroll and Benefits Payable
   Note  34.    Other Adjustments, Statement of Changes in Net Position
   Note  35.    Nonexchange Revenue, Statement of Changes in Net Position
   Note  36.    Correction of Error in Revenue, Prior Year, Superfund
   Note  37.    Correction of Error in Contractor-held Property, Prior Years, Superfund

tvtvw.epa.gov/ocfo                                                     FY 2002 Annual Financial Statements     IV-5

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    Supplemental Information Requested by OMB

       Required Supplemental Information

                 Deferred Maintenance (Unaudited)
                 Intragovernmental Assets (Unaudited)
                 Intragovernmental Liabilities (Unaudited)
                 Intragovernmental Revenues and Costs (Unaudited)
                 Supplemental Statement of Budgetary Resources (Unaudited)
                 Working Capital Fund Supplemental Balance Sheet (Unaudited)
                 Working Capital Fund Supplemental  Statement of Net Cost (Unaudited)
                 Working Capital Fund Supplemental  Statement of Changes in Net Position (Unaudited)
                 Working Capital Fund Supplemental Statement of Budgetary Resources (Unaudited)
                 Working Capital Fund Supplemental Statement of Financing (Unaudited)

       Required Supplemental Stewardship Information

                 Annual Stewardship Information (Unaudited)
IV-6     EPA's FY 2002 Annual Report                                                          www.epa.gov/ocfo

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                                ENVIRONMENTAL  PROTECTION AGENCY
                                    CONSOLIDATING BALANCE SHEET
              AS OF SEPTEMBER 30, 2002 AND  2001 (Restated*See Notes36and37)
                                            (Dollars in Thousands)
Superfund
Trust Fund
FY 2002
Superfund
Trust Fund
FY 2001*
All
Others
FY 2002
All
Others
FY 2001
Combined
Totals
FY 2002
ASSETS
 Intragovernmental:
 Fund Balance with Treasury (Note 2)
 Investments (Note 4)
 Accounts Receivable, Net (Note 5)
 Other (Note 6)
 Total Intragovernmental

 Cash and Other Monetary Assets (Note 3)
 Accounts Receivable, Net (Note 5)
 Loans Receivables, Net - Nonfederal (Note 7)
 Property, Plant and Equipment, Net (Notes 9 and 37)
 Other (Note 6)
 Total Assets

LIABILITIES
 Intragovernmental
 Accounts Payable and Accrued Liabilities (Note 8)
 Debt Due to Treasury (Note 10)
 Custodial Liability (Note 11)
 Other (Note 12)

 Total Intragovernmental
 Accounts Payable and Accrued Liabilities (Note 8)
 Pensions and Other Actuarial Liabilities (Note 14)
 Environmental Cleanup Costs  (Note 20)
 Cashout Advances, Superfund  (Notes 15  and 36)
 Commitments and Contingencies (Note 18)
 Payroll and Benefits Payable (Note 33)
 Other (Notes 12 and 13)
 Total Liabilities

NET POSITION
 Unexpended Appropriations (Note 16)
 Cumulative Results of Operations (Notes 36  & 37)
 Total Net Position
 Total Liabilities  and Net Position
$ 32,229
3,309,975
33,309
4,520
$ 3,380,033
0
411,437
0
38,746
780
$ 3,830,996
$ 116,239
0
0
23,727
139,966
145,805
7,698
0
337,139
0
39,136
45,515
$ 715,259
$ 6,706
3,724,044
31,178
5,521
3,767,449
0
466,038
0
40,169
8,876
$ 4,282,534
$ 123,537
0
0
21,308
144,845
137,735
7,731
0
447,955
3,778
35,111
27,659
$ 804,814
$11,688,934
1,952,052
72,298
4,578
13,717,862
10
49,398
64,646
551,336
4,937
$14,388,189
$ 43,983
24,290
69,706
26,381
164,360
511,236
31,759
13,309
0
20
177,432
47,479
$ 945,595
$11
1,


13,





$13
$











$ I,
,272,374
778,818
69,977
4,386
125,555
0
75,027
75,552
526,893
1,128
,804,155
41,659
31,124
77,778
27,507
178,068
655,274
31,902
14,528
0
6,020
163,730
60,536
,110,058
$11,721,163
5,262,027
105,607
9,098
17,097,895
10
460,835
64,646
590,082
5,717
$18,219,185
$ 160,222
24,290
69,706
50,108
304,326
657,041
39,457
13,309
337,139
20
216,568
92,994
$ 1,660,854
$          0  $          0  $10,923,889  $10,358,961  $10,923,889
   3,115,737     3,477,720     2,518,705     2,335,136     5,634,442
   3,115,737     3,477,720   13,442,594   12,694,097   16,558,331
$  3,830,996  $  4,282,534  $14,388,189  $13,804,155  $18,219,185
* Cashout Advances; Property, Plant and Equipment, Net; and Cumulative Results of Operations, Superfund, are restated f or FY 2001.
                       The accompanying notes are an integral part of these statements.
www. epa.gov/ocfo
                                  FY 2002 Annual Financial Statements
                                                                     IV-7

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                               ENVIRONMENTAL PROTECTION AGENCY
                                  CONSOLIDATING BALANCE SHEET
                AS OF SEPTEMBER 30, 2002 AND 2001 (Restated*See Notes36and37)
                                         (Dollars in Thousands)
                                            Combined  Intra-agency  Intra-agency Consolidated Consolidated
                                               Totals  Elimination  Elimination       Totals       Totals
                                             FY 2001*     FY 2002     FY 2001     FY 2002     FY 2001*
ASSETS
Intragovernmental
Fund Balance With Treasury (Note 2)
Investments (Note 4)
Accounts Receivable, Net (Note 5)
Other (Note 6)
Total Intragovernmental
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Loans Receivable, Net - Nonfederal (Note 7)
Property, Plant and Equipment, Net (Note 9 and 37)
Other (Note 6)
Total Assets
LIABILITIES
Intragovernmental
Accounts Payable and Accrued Liabilities (Note 8)
Debt Due to Treasury (Note 10)
Custodial Liability (Note 11)
Other (Note 12)
Total Intragovernmental
Accounts Payable and Accrued Liabilities (Note 8)
Pensions and Other Actuarial Liabilities (Note 14)
Environmental Cleanup Costs (Note 20)
Cashout Advances, Superfund (Notes 15 and 36)
Commitments and Contingencies (Note 18)
Payroll and Benefits Payable (Note 33)
Other (Notes 12 and 13)
Total Liabilities
NET POSITION
Unexpended Appropriations (Note 16)
Cumulative Results of Operations (Notes 36 & 37)
Total Net Position
Total Liabilities and Net Position


$11,279,080 $
5,502,862
101,155
9,907
$16,893,004 $
0
541,065
75,552
567,062
10,006
$18,086,689 $


$ 165,196 $
31,124
77,778
48,815
$ 322,913 $
793,009
39,633
14,528
447,955
9,798
198,841
88,195
$ 1,914,872 $

$10,358,961 $
5,812,856
16,171,817
$18,086,689 $


0 $
0
(47,412)
(4,447)
(51,859) $
0
0
0
0
0
(51,859) $


(47,480) $
0
0
(4,379)
(51,859) $
0
0
0
0
0
0
0
(51,859) $

0 $
0
0
(51,859) $


0
0
(48,128)
(5,739)
(53,867)
0
0
0
0
0
(53,867)


(48,512)
0
0
(5,355)
(53,867)
0
0
0
0
0
0
0
(53,867)

0
0
0
(53,867)


$11,721,163
5,262,027
58,195
4,651
$17,046,036
10
460,835
64,646
590,082
5,717
$18,167,326


$ 112,742
24,290
69,706
45,729
$ 252,467
657,041
39,457
13,309
337,139
20
216,568
92,994
$ 1,608,995

$10,923,889
5,634,442
16,558,331
$18,167,326


$11,279,080
5,502,862
53,027
4,168
$16,839,137
0
541,065
75,552
567,062
10,006
$18,032,822


$ 116,684
31,124
77,778
43,460
$ 269,046
793,009
39,633
14,528
447,955
9,798
198,841
88,195
$ 1,861,005

$10,358,961
5,812,856
16,171,817
$18,032,822
    ' Cashout Advances; Property, Plant and Equipment, Net; and Cumulative Results of Operations, Superfund, are restated for FY 2001.
                       The accompanying notes are an integral part of these statements.
IV-8
EPA's FY 2002 Annual Report
www. epa.gov/ocfo

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                       ENVIRONMENTAL PROTECTION AGENCY
                      CONSOLIDATING STATEMENT OF NET COST
   FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001 (Restated*See Notes 36 and37)
                                 (Dollars in Thousands)

Costs
Intragovernmental
With the Public
Expenses from Other Appropriations (Note 23)
Total Costs (Note 37)
Less:
Earned Revenues, Federal (Note 19)
Earned Revenues, Nonfederal (Note 19)
Total Earned Revenues (Notes 19 and 36)
NET COST OF OPERATIONS
Superfund
Trust Fund
FY 2002
$ 348,980
1,209,338
114,297
$ 1,672,615
22,932
477,768
$ 500,700
$ 1,171,915
Superfund
Trust Fund
FY 2001*
$ 426,499
1,177,849
103,654
$ 1,708,002
435,141
$ 1,272,861
All
Others
FY 2002
$ 782,110
5,678,789
(114,297)
$ 6,346,602
104,318
24,927
$ 129,245
$ 6,217,357
All
Others
FY 2001*
$ 710,290
5,784,628
(103,654)
$ 6,391,264
77,933
$ 6,313,331
Combined
Totals
FY 2002
$ 1,131,090
6,888,127
0
$ 8,019,217
127,250
502,695
$ 629,945
$ 7,389,272
                       ENVIRONMENTAL PROTECTION AGENCY
                       CONSOLIDATED STATEMENT OF NET COST
   FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001 (Restated*See Notes 36and37)
                                 (Dollars in Thousands)

                                   Combined   Intra-agency  Intra-agency  Consolidated Consolidated
                                     Totals  Eliminations  Eliminations       Totals      Totals
                                   FY 2001*  FY 2002        FY 2001     FY 2002    FY 2001*
Costs
Intragovernmental
With the Public
Expenses from Other Appropriations (Note 23)
Total Costs (Note 37)
Less:
Earned Revenues, Federal (Note 19)
Earned Revenues, Nonfederal (Note 19)
Total Earned Revenues (Notes 19 and 36)
NET COST OF OPERATIONS

$ 1,136,789
6,962,477
0
$ 8,099,266


513,074
$ 7,586,192

$

$


$
$

(20,795) $
0
0
(20,795) $

(20,795)
0
(20,795)
0 $

(19,627)
0
0
(19,627)


(19,627)
0

$ 1,110,295 :
6,888,127
0
$ 7,998,422 :

106,455
502,695
$ 609,150
$ 7,389,272 :

£ 1,117,162
6,962,477
0
£ 8,079,639


493,447
£ 7,586,192
                 The accompanying notes are an integral part of these statements.
www. epa.gov/ocfo
FY 2002 Annual Financial Statements
                          IV-9

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                         ENVIRONMENTAL PROTECTION AGENCY
                    CONSOLIDATED STATEMENT OF NET COST BY GOAL
                       FOR THE YEAR ENDED SEPTEMBER 30, 2002
                                   (Dollars in Thousands)

COSTS
Intragovernmental ;
With the Public
Total Costs
Less:
Earned Revenue, Federal
Earned Revenue, Nonfederal
Total Earned Revenue (Note 19)
Management Cost Allocation
NET COST OF OPERATIONS ;
Clean
Air
$ 101,347 $
487,461
588,808
266
25
291
59,337
$ 647,854 $
Clean and
Safe Water
• 183,063 $
3,264,051
3,447,114
3,744
2,290
6,034
87,575
; 3,528,655 $
Safe
Food
37,022
91,795
128,817
109
14,960
15,069
26,585
140,333
Pollution
Prevention
$ 55,734
253,462
309,196
1,497
1,193
2,690
37,863
$ 344,369
Better Waste
Management
$ 440,640 $
1,488,511
1,929,151
92,691
473,739
566,430
143,513
$ 1,506,234 $
Global
Risks
36,020
206,938
242,958
4,081
586
4,667
16,636
254,927
                         ENVIRONMENTAL PROTECTION AGENCY
                    CONSOLIDATED STATEMENT OF NET COST BY GOAL
          FOR THE YEAR ENDED SEPTEMBER 30, 2001 (Restated*See Notes 36 and37)
                                   (Dollars in Thousands)

COSTS
Federal
With the Public
Total Costs (Note 37)
Less:
Earned Revenue (Note 36)
Total Earned Revenue (Note 19)
Management Cost Allocation
NET COST OF OPERATIONS
Clean
Air
$ 87,360 $
458,256
545,616
702
702

$ 610,872 $
Clean and
Safe Water
156,900 $
3,482,906
3,639,806
4,966
4,966

3,711,968 $
Safe Pollution Better Waste
Food Prevention Management*
30,210 $
77,687
107,897
17,051
17,051

124,503 $
41,065 $
236,933
277,998
1,545
1,545

318,520 $
465,452 $
1,441,486
1,906,938
457,649
457,649

1,553,091 $
Global
Risks
39,816
186,919
226,735
7,286
7,286

242,731
    Detailed descriptions of the above Goals are provided in EPA's FY 2002 Annual Report, Section II— Performance Results.

                    The accompanying notes are an integral part of these statements.
IV-10    EPA's FY 2002 Annual Report
www. epa.gov/ocfo

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                        ENVIRONMENTAL PROTECTION AGENCY
                  CONSOLIDATED STATEMENT OF NET COST BY GOAL
                     FOR THE YEAR ENDED SEPTEMBER  30,  2002
                                  (Dollars in Thousands)
Environ. Sound Credible Effective Not Assigned Consolidated
Info Science Deterrent Management to Goals** Totals
COSTS
Intragovernmental
With the Public
Total Costs
Less:
Earned Revenue, Federal
Earned Revenue, Nonfederal
Total Earned Revenue (Note 19)
Management Cost Allocation
NET COST OF OPERATIONS
$ 60,624 $ 62,030 $ 106,374 $ 23,393 $
193,241 263,592 281,171 366,798
253,865 325,622 387,545 390,191
130,237 800 234 (125,025)
154 84 914 3,300
130,391 884 1,148 (121,725)
28,089 30,408 81,910 (511,916)
$ 151,563 $ 355,146 $ 468,307 $ 0 $
4,048 $
(8,893)
(4,845)
(2,179)
5,450
3,271
0
(8,116) $
1,110,295
6,888,127
7,998,422
106,455
502,695
609,150
0
7,389,272
ENVIRONMENTAL PROTECTION AGENCY
CONSOLIDATED STATEMENT OF NET COST BY GOAL
FOR THE YEAR ENDED SEPTEMBER 30, 2001 (Restated^See Notes 36 and 37)
(Dollars in Thousands)
Environ. Sound Credible Effective Not Assigned Consolidated
Info Science Deterrent Management to Goals** Totals
COSTS
Federal
With the Public
Total Costs (Note 37)
Less:
Earned Revenue (Note 36)
Total Earned Revenue (Note 19)
Management Cost Allocation
NET COST OF OPERATIONS
$ 41,540 $ 58,804 $ 100,116 $ 66,461 $
126,154 290,056 299,021 424,036
167,694 348,860 399,137 490,497
324 706 786 4,330
2,335,136 10,358,961 786 10,358,961

$ (2,167,442) $ (2,654,016) $ 398,351 $ (2,512,379) $
29,438 $
(60,977)
(31,539)
(1,898)
(1,898)

(29,641) $
1,117,162
6,962,477
8,079,639
493,447
493,447

7,586,192
  'See Note 30.

      Detailed descriptions of the above Goals are provided in EPA's FY 2002 Annual Report, Section II- Performance Results.

                  The accompanying notes are an integral part of these statements.
www. epa.gov/ocfo
FY 2002 Annual Financial Statements    IV-11

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                          ENVIRONMENTAL PROTECTION AGENCY
                 CONSOLIDATING STATEMENT OF CHANGES IN NET POSITION
                        FOR THE YEAR ENDED SEPTEMBER 30, 2002
                                    (Dollars in Thousands)

Net Position - Beginning of Period,
restated (Notes 36 and 37)
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 31)
Other Adjustments (Note 34)
Appropriations Used
Nonexchange Revenue (Notes 17 and 35)
Transfers In/Out (Note 31)
Trust Fund Appropriations (Note 17)
Income from Other Appropriations (Note 23)
Total Budgetary Financing Sources
Other Financing Sources:
Transfers In/Out (Note 31)
Imputed Financing Sources (Note 32)
Total Other Financing Sources
Net Cost of Operations
Net Position - End of Period
Cumulative
Results of
Operations
Superfund
Trust Fund
$ 3,477,720


0
0
0
0
108,038
(103,448)
676,292
114,297
$ 795,179

47
14,706
$ 14,753
(1,171,915)
$ 3,115,737
Cumulative
Results of
Operations
All
Others
$ 2,335,136


0
0
0
6,784,295
260,111
63,672
(676,292)
(114,297)
$ 6,317,489

398
83,039
$ 83,437
(6,217,357)
$ 2,518,705
Unexpended
Appropriations
All
Others
$10,358,961


7,356,085
28,598
(35,460)
(6,784,295)
0
0
0
0
$ 564,928

0
0
$ 0
0
$10,923,889
Cumulative
Results of
Operations
Consolidated
Totals*
$ 5,812,856


0
0
0
6,784,295
368,149
(39,776)
0
0
$ 7,112,668

445
97,745
$ 98,190
(7,389,272)
$ 5,634,442
Unexpended
Appropriations
Consolidated
Totals*
$10,358,961


7,356,085
28,598
(35,460)
(6,784,295)
0
0
0
0
$ 564,928

0
0
$ 0
0
$10,923,889
                      * This statement does not have any intra-agency eliminations for FY 2002.

                    The accompanying notes are an integral part of these statements.
IV-12   EPA's FY 2002 Annual Report
www. epa.gov/ocfo

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                       ENVIRONMENTAL PROTECTION AGENCY
              CONSOLIDATING STATEMENT OF CHANGES IN NET POSITION
        FOR THE YEARS ENDED SEPTEMBER 30, 2001 (Restated*SeeNotes36and37)
                                (Dollars in Thousands)

Net Cost of Operations (Notes 36 and 37)
Financing Sources
(Other Than Exchange Revenues) :
Appropriations Used
Taxes & Non Exchange Interest (Note 1 7)
Other Non Exchange Revenue
Imputed Financing (Notes 32)
Trust Fund Appropriations (Note 17)
Transfers-In (Note 31)
Transfers-Out (Note 31)
Income from Other Appropriations (Note 23)
Net Change in Cumulative Results of Operations
Increases/Decreases in Unexpended Appropriations
Change in Net Position
Net Position - Beginning of Period
Prior Period Adjustment (Note 37)
Adjusted Net Position - Beginning of Period
Net Position - End of Period (Notes 36 and 37)
Superfund
Trust Fund
FY 2001*
$ 1,272,861


0
226,861
2,775
13,686
633,603
0
(127,927)
103,654
(420,209)
0
(420,209)
3,875,439
22,490
3,897,929
$ 3,477,720
All
Others
FY 2001
$ 6,313,331


6,867,762
276,346
11,878
77,855
(633,603)
62,861
0
(103,654)
246,114
239 122
485,236
12,208,861

12,208,861
$12,694,097
Combined Intra-agency
Totals Eliminations
FY 2001* FY 2001
$ 7,586,192 $


6,867,762
503,207
14,653
91,541
0
62,861
(127,927)
0
(174,095)
239,122
65,027
16,084,300
22,490
16,106,790
$16,171,817 $
0


0
0
0
0
0
(47,894)
47,894
0
0
0
0
0

0
0
Consolidated
Totals
FY 2001*
$ 7,586,192


6,867,762
503,207
14,653
91,541
0
14,967
(80,033)
0
(174,095)
239,122
65,027
16,084,300
22,490
16,106,790
$16,171,817
                 The accompanying notes are an integral part of these statements.
www. epa.gov/ocfo
FY 2002 Annual Financial Statements    IV-13

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                        ENVIRONMENTAL PROTECTION AGENCY
                   COMBINED STATEMENT OF BUDGETARY RESOURCES
                      FOR THE YEAR ENDED SEPTEMBER 30, 2002
                                  (Dollars in Thousands)

Budgetary Resources
Budget Authority:
Appropriations Received
Borrowing Authority
Net Transfers
Other
Unobligated Balances:
Beginning of Period
Net Transfers, Actual
Anticipated Transfers Balance
Spending Authority from Offsetting Collections:
Earned and Collected
Receivable from Federal Sources
Change in Unfilled Customer Orders
Advance Received
Without Advance from Federal Sources
Anticipated for Rest of Year
Transfers from Trust Funds
Total Spending Authority from Collections
Recoveries of Prior Year Obligations (Note 26)
Permanently Not Available (Note 26)
Total Budgetary Resources (Note 25)
Status of Budgetary Resources
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred (Note 25)
Unobligated Balances:
Apportioned (Note 27)
Exempt from Apportionment
Unobligated Balances Not Available (Note 27)
Total Status of Budgetary Resources
Relationship of Obligations to Outlays
Obligations Incurred, Net
Obligated Balances, Net - Beginning of Period
Accounts Receivable
Unfilled Customer Orders from Federal Sources
Undelivered Orders, Unpaid
Accounts Payable
Total Outlays (Note 25)
Disbursements
Collections
Less: Offsetting Receipts (Note 28)
Net Outlays
Superfund
Trust Fund
FY 2002


$ 0
0
1,329,490
0

714,321
0
0

193,835
3,523

(22,548)
1,749
0
0
$ 176,559
230,628
(2,000)
$ 2,448,998


$ 1,548,650
149,354
$ 1,698,004

726,589
0
24,405
$ 2,448,998

$ 1,290,817
2,108,696
3,694
66,448
(1,831,268)
(260,633)
$ 1,377,754
$ 1,549,041
(171,287)
(248,252)
$ 1,129,502
All
Others
FY 2002


$ 7,371,085
0
101,010
0

1,911,304
500
0

262,102
1,410

2,133
62,549
0
48,671
$ 376,865
89,440
(42,292)
$ 9,807,912


$ 7,514,054
248,610
$ 7,762,664

1,917,637
0
127,611
$ 9,807,912

$ 7,296,359
9,324,855
72,577
253,348
(9,277,925)
(656,652)
$ 7,012,562
$ 7,323,740
(311,178)
(687,650)
$ 6,324,912
Combined
Totals
FY 2002


$ 7,371,085
0
1,430,500
0

2,625,625
500
0

455,937
4,933

(20,415)
64,298
0
48,671
$ 553,424
320,068
(44,292)
$ 12,256,910


$ 9,062,704
397,964
$ 9,460,668

2,644,226
0
152,016
$ 12,256,910

$ 8,587,176
11,433,551
76,271
319,796
(11,109,193)
(917,285)
$ 8,390,316
$ 8,872,781
(482,465)
(935,902)
$ 7,454,414
                   The accompanying notes are an integral part of these statements.
IV-14    EPA's FY 2002 Annual Report
www. epa.gov/ocfo

-------
                              ENVIRONMENTAL PROTECTION AGENCY
                            CONSOLIDATING STATEMENT OF  FINANCING
                           FOR THE YEAR ENDED  SEPTEMBER  30,  2002
                                            (Dollars in Thousands)
Superfund
Trust Fund
FY 2002
All
Others
FY 2002
Consolidated
Totals*
FY 2002
Resources Used to Finance Activities:
 Budgetary Resources Obligated
    Obligations Incurred
    Less: Spending Authority from Offsetting
       Collections and Recoveries
    Obligations, Net of Offsetting Collections
    Less: Offsetting Receipts (Note 28)
    Net Obligations
 Other Resources
    Transfers In/Out without Reimbursement,
    Property (Note 31)
 Imputed Financing Sources (Note 32)
 Income from Other Appropriations (Note 23)
 Net Other Resources Used to Finance Activities

 Total Resources Used To Finance Activities

Resources  Used to Finance Items
Not Part of Net Cost of Operations
 Change in  Budgetary Resources Obligated
 Resources that Fund Prior Period Expenses (Note 29)
 Budgetary Offsetting Collections and Receipts
   that Do Not Affect Net Cost of Operations
 Credit Program Collections Increasing Loan
   Liabilities for Guarantees of Subsidy Allowances
 Offsetting Receipts Not Affecting Net Cost
 Resources that Finance Asset Acquisition
 Adjustments to Expenditure Transfers
   that Do Not Affect Net Cost

 Total Resources Used to Finance Items Not
 Part of the Net Cost of Operations

 Total Resources Used to Finance the Net
 Cost of Operations
$    1,698,004  $   7,762,664   $    9,460,668
                                            0
     (407,187)      (466,305)       (873,492)
$    1,290,817  $   7,296,359   $    8,587,176
     (248,252)      (687,650)       (935,902)
$    1,042,565  $   6,608,709   $    7,651,274
           47  $         (47)   $
        14,706         83,039
      114,297      (114,297)
             0
      248,252
       (6,587)

      (48,758)
   4,394
  11,358
(53,692)

  48,670
                       0
                  97,745
                       0
$     129,050  $     (31,305)   $       97,745
$    1,171,615  $   6,577,404   $    7,749,019
       64,738  $   (422,293)   $    (357,555)
       (1,590)           (399)          (1,989)
   4,394
 259,610
(60,279)
$     256,055  $   (411,962)   $    (155,907)
$    1,427,670  $   6,165,442   $    7,593,112
                          * This statement did not have any intra-agency eliminations for FY 2002.

                       The accompanying notes are an integral part of these statements.
www. epa.gov/ocfo
               FY 2002 Annual Financial Statements
                                                  IV-15

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                                  ENVIRONMENTAL PROTECTION AGENCY
                               CONSOLIDATING STATEMENT  OF FINANCING
                               FOR  THE  YEAR ENDED  SEPTEMBER 30, 2002
                                               (Dollars in Thousands)
                                                                   Superfund
                                                                   Trust Fund
                                                                     FY 2002
                          All
                       Others
                      FY 2002
          Consolidated
                Totals*
               FY 2002
    Components of Net Cost of Operations
    That Will Not Require or Generate
    Resources in the Current Period
      Components Requiring or Generating Resources in
       Future Periods
        Increase in Annual Leave Liability (Note 29)
        Increase in Environmental and Disposal Liability (Note 29)
        Up/Downward Reestimates of Subsidy Expense
        Increase in Public Exchange Revenue Receivable
        Increase in Workers Compensation Costs (Note 29)
        Total Components of Net Cost of Operations that
        Requires or Generates Resources in the Future
      Components Not Requiring/Generating Resources
        Depreciation and Amortization
        Revaluation of Assets or Liabilities
        Expenses Not Requiring Budgetary Resources
        Total Components of Net Cost of Operations
         that Will Not Require or Generate Resources

      Total Components of Net Cost of Operations
      That Will Not Require or Generate
      Resources in the Current Period

       Net Cost of Operations
            0  $
            0
            0
    (305,035)
            0
        7,854
            0
       41,426
       49,280  $
    (255,755)
     0   $            0
   578             578
  (371)           (371)
(2,422)       (307,457)
     0               0
$   (305,035)  $      (2,215)  $   (307,250)
27,022
     0
27,108
51,915
   34,876
        0
   68,534
 54,130   $      103,410
(203,840)
$    1,171,915  $    6,217,357  $   7,389,272
                             * This statement did not have any intra-agency eliminations for FY 2002.

                          The accompanying notes are an integral part of these statements.
IV-16    EPA's FY 2002 Annual Report
                                    www. epa.gov/ocfo

-------
                       ENVIRONMENTAL PROTECTION AGENCY
                      CONSOLIDATING STATEMENT OF FINANCING
       FOR THE YEAR ENDED SEPTEMBER 30, 2002 (Restated *See Notes 36 and37)
                                  (Dollars in Thousands)

Obligations and Nonbudgetary Resources
Obligations Incurred $
Less: Spending Authority from Offsetting Collections
Earned Reimbursements
Collected
Receivable from Federal Sources
Change in Unfilled Customer Orders
Transfers from Trust Funds
Recoveries of Prior Year Obligations
Imputed Financing for Cost Subsidies (Note 32)
Income from Other Appropriations (Note 23)
Transfers In/Out of Nonm on etary Assets
Exchange Revenue Not in the Entity's Budget (Note 36)
Total Obligations and Nonbudgetary Resources
Resources that Do Not Fund Net Cost of Operations
Change in Amount of Goods/Services Ordered But
Not Yet Provided - (Increases) /Decreases
Change in Unfilled Customer Orders, etc.
Costs Capitalized on the Balance Sheet
General Plant, Property, and Equipment (Note 37)
Purchases of Inventory
Adjustments to Costs Capitalized on the Balance Sheet
Collections that Decrease Credit Program Receivables or
Increase Program Liabilities
Adjustment for Trust Fund Outlays that Do Not Affect Net Cost
Total Resources that Do Not Fund Net Costs of Operations
Components of Costs that Do Not Require or Generate Resources
Depreciation and Amortization (Note 37)
Bad Debt Related to Uncollectible Receivables
Loss (Gain) on Disposition of Assets
Other Expenses Not Requiring Budgetary Resources
Total Costs That Do Not Require Resources
Financing Sources Yet to be Provided
Net Costs of Operations (Notes 36 and 37) $
Superfund
Trust Fund
FY 2001*

1,570,056


(311,271)
3,716
(41,203)
0
(196,644)
13,686
103,654
0
(128,757)
1,013,237


145,931
41,203

(12,530)

(40)

0
(47,894)
126,670

7,091
133,761
(9,426)
699
132,125
829
1,272,861
All
Others
FY 2001

$ 7,431,802


(227,827)
6,306
(36,273)
(46,178)
(76,814)
77,855
(103,654)
0
(2,072)
7,023,145


(117,998)
36,273

(74,092)
52
(4)

7,722
(587,424)
(735,471)

19,333
2,881
895
(5,686)
17,423
8,234
$ 6,313,331
Consolidated
Totals
FY 2001**

$ 9,001,858


(539,098)
10,022
(77,476)
(46,178)
(273,458)
91,541
0
0
(130,829)
8,036,382


27,933
77,476

(86,622)
52
(44)

7,722
(635,318)
(608,801)

26,424
136,642
(8,531)
(4,987)
149,548
9,063
$ 7,586,192
                    ** This statement did not have any intra-agency eliminations for FY 2001.

                 The accompanying notes are an integral part of these statements.
www. epa.gov/ocfo
FY 2002 Annual Financial Statements
                           IV-17

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                         ENVIRONMENTAL PROTECTION AGENCY
                   CONSOLIDATED STATEMENT OF CUSTODIAL ACTIVITY
                 FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
                                  (Dollars in Thousands)
                                                       FY 2002
FY 2001
Revenue Activity:
Sources of Collections:
Fines and Penalties
Other
Total Cash Collections
Accrual Adjustment
Total Custodial Revenue (Note 24)
Disposition of Collections:
Transferred to Others (General Fund)
Increases/Decreases in Amounts To Be Transferred
Total Disposition of Collections
Net Custodial Revenue Activity (Note 24)


$ 94,237
9 322
$ 103,559
(8,070)
$ 95,489

$ 103,818
(8,329)
$ 95,489
$ 0


$ 114,830
31,754
$ 146,584
(24,692)
$ 121,892

$ 147,045
(25,153)
$ 121,892
$ 0
                   The accompanying notes are an integral part of these statements.
IV-18    EPA's FY 2002 Annual Report
       www. epa.gov/ocfo

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                          ENVIRONMENTAL PROTECTION AGENCY
                             NOTES TO FINANCIAL STATEMENTS
                                    (Dollars in Thousands)


Note 1. Summary of Significant Accounting Policies

A. Basis of Presentation

    These consolidating financial statements have been prepared to report the financial position and
results of operations of the Environmental Protection Agency (Agency) for the Hazardous Substance
Superfund (Superfund) Trust Fund and All Other Funds, as required by the Chief Financial Officers Act
of 1990 and the Government Management Reform Act of 1994. The reports have been prepared from
the books and records of the Agency in accordance with "Form and Content for Agency Financial
Statements," specified by the Office of Management and Budget (OMB) in Bulletin 01-09, and the
Agency's accounting policies which are summarized in this note. In addition, to the guidance in
Bulletin 01-09, the Statement of Net Cost has been prepared by the EPA strategic goals. These
statements are therefore different from the financial reports also prepared by the Agency pursuant to
OMB directives that  are used to monitor and control the Agency's use of budgetary resources.

B. Reporting Entities

    The Environmental Protection Agency was created in 1970 by executive reorganization from
various components of other Federal agencies in order to better marshal and coordinate federal
pollution control efforts. The Agency is generally organized around the media and substances it
regulates—air, water, land, hazardous waste, pesticides, and toxic substances. For FY 2002 the
reporting entities are grouped as Hazardous Substance Superfund and All Other Funds.

Hazardous Substance Superfund
    In 1980 the Hazardous Substance Superfund, commonly referred to as the Superfund Trust Fund,
was established by the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA) to provide resources needed to respond to and clean up hazardous substance
emergencies and abandoned, uncontrolled hazardous waste sites. The Superfund Trust Fund financing
is shared by federal  and state governments as well as industry. The Agency allocates funds from its
appropriation to other federal agencies to carry out the Act. Risks to public health and the environment
at uncontrolled hazardous waste sites qualifying for the Agency's National Priorities List (NPL) are
reduced and addressed through a process involving site assessment and analysis and the design and
implementation of cleanup remedies. Throughout this process, cleanup activities maybe supported by
shorter term removal actions to reduce immediate risks. Removal actions may include removing
contaminated material from  the site, providing an alternative water supply to people living nearby,
and installing security measures. NPL cleanups and removals are conducted and financed by the
Agency, private parties, or other federal agencies. The Superfund Trust Fund includes the Treasury
collections and investment activity. The Superfund Trust Fund is accounted for under Treasury symbol
number 8145.
All Other Funds

    All Other Funds  include other Trust Fund appropriations, General Fund appropriations,
Revolving Funds, Special Funds, the Agency Budgetary Clearing accounts, Deposit Funds, General
Fund Receipt accounts, the  Environmental Services Special Fund Receipt Account, the
Miscellaneous Contributed Funds Trust Fund, and General Fund appropriations transferred from
other federal  agencies as authorized by the Economy Act of 1932. Trust Fund appropriations  are the

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    Leaking Underground Storage Tank (LUST) Trust Fund and the Oil Spill Response Trust Fund.
    General Fund appropriations are the State and Tribal Assistance Grants (STAG), Science and
    Technology (S&T), Environmental Programs  and Management (EPM), Office of Inspector General
    (IG), Buildings and Facilities (B&F), and Payment to the Hazardous Substance Superfund. General
    Fund appropriation activities that no longer receive current definite appropriations but have
    unexpended authority are the Asbestos Loan Program and Energy, Research and Development.
    Revolving Funds include the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) Revolving
    Fund, and Tolerance Revolving Fund which  receive no direct appropriations; however, they do
    collect fees from public industry as a source of reimbursement for the services provided. In
    addition to FIFRA and Tolerance, a Working  Capital Fund (WCF) was established and designated as
    a franchise fund to provide computer operations support and postage service for the Agency. A
    Special Fund was established to collect the Exxon Valdez settlement as a result of the Exxon Valdez
    oil spill. All Other Funds are as follows:

       The LUST Trust Fund was authorized by  the Superfund Amendments and Reauthorization Act of
    1986 (SARA) as amended by the Omnibus Budget Reconciliation Act of 1990. The LUST appropriation
    provides funding to respond to releases from  leaking underground petroleum tanks. The Agency
    oversees cleanup and enforcement programs  which are implemented by the states. Funds are allocated
    to the states through cooperative agreements  to clean up those sites posing the greatest threat to
    human health and environment. Funds are used for grants to non-state entities including Indian tribes
    under section 8001 of the Resource Conservation and Recovery Act. The program is financed by a
    one cent a gallon tax on motor fuels which will expire in 2005 and is accounted for under Treasury
    symbol number 8153.
       The Oil Spill Response Trust Fund was authorized by the Oil Pollution Act (OPA) of 1990. Monies
    were appropriated to the Oil Spill Response Trust Fund in 1993. The Agency is responsible for
    directing, monitoring, and providing technical assistance for major inland oil spill response activities.
    This involves setting oil prevention and response standards, initiating enforcement actions for
    compliance with OPA and Spill Prevention Control and Countermeasure requirements, and directing
    response actions when appropriate. The Agency carries out research to improve response actions to
    oil spills including research on the use of remediation techniques such as dispersants and
    bioremediation. Funding of oil spill cleanup actions is provided through the Department of
    Transportation under the Oil Spill Liability Trust Fund and reimbursable funding from other federal
    agencies. The Oil Spill Response Trust Fund is accounted for under Treasury symbol number 8221.
       The STAG appropriation provides funds for environmental programs and infrastructure assistance
    including capitalization grants for state revolving funds and performance partnership grants.
    Environmental programs and infrastructure supported are Clean and Safe Water; Capitalization grants
    for the Drinking Water State Revolving Funds; Clean Air; Direct grants for Water and Wastewater
    Infrastructure needs, Partnership grants to meet Health Standards, Protect Watersheds, Decrease
    Wetland Loss, and Address Agricultural and Urban Runoff and Storm Water; Better Waste Management;
    Preventing Pollution and Reducing Risk in Communities, Homes, Workplaces and Ecosystems; and
    Reduction of Global and Cross Border Environmental Risks. STAG is accounted for under Treasury
    symbol 0103.
       The S&T appropriation finances salaries; travel; science; technology; research and development
    activities including laboratory and center supplies; certain operating expenses; grants; contracts;
    intergovernmental agreements; and purchases of scientific equipment. These activities provide the
    scientific basis for the Agency's regulatory actions. In FY 2002 Superfund research costs were
    appropriated in Superfund and transferred to  S&T to allow for proper accounting of the costs.
    Scientific and technological activities for environmental issues include Clean Air; Clean and Safe Water;
    Americans Right to Know About Their Environment; Better Waste Management; Preventing Pollution

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and Reducing Risk in Communities, Homes, Workplaces, and Ecosystems; and Safe Food. The S&T
appropriation is accounted for under Treasury symbol 0107.

   The EPM appropriation includes funds for salaries, travel, contracts, grants, and cooperative
agreements for pollution abatement, control, and compliance activities and administrative activities of
the operating programs. Areas supported from this appropriation include Clean Air; Clean and Safe
Water; Preventing Pollution and Reducing Risk in Communities, Homes, Workplaces, and Ecosystems;
Better Waste Management, Restoration of Contaminated Waste Sites, and Emergency Response;
Reduction of Global and Cross Border Environmental Risks; Americans' Right to Know About Their
Environment; Sound Science; Improved Understanding of Environmental Risk; and Greater Innovation
to Address Environmental Problems; Credible Deterrent to Pollution and Greater Compliance with the
Law; and Effective Management. The Environmental Programs and Management appropriation is
accounted for under Treasury symbol 0108.

   The IG appropriation provides funds for audit and investigative functions to identify and
recommend corrective actions on management and administrative deficiencies that create the
conditions for existing or potential instances of fraud, waste and mismanagement. Additional funds for
audit and investigative activities associated with the Superfund Trust Fund and the LUST Trust Funds
are appropriated under those Trust Fund accounts and are transferred to the IG account. The audit
function provides contract, internal and performance, and financial and grant audit services. The IG
appropriation is accounted for under Treasury symbol 0112 and includes expenses incurred and
reimbursed from the appropriated trust funds being accounted for under Treasury symbols 8145 and
8153.
   The B&F appropriation provides for the construction, repair, improvement, extension, alteration,
and purchase of fixed equipment or facilities that are owned or used by the Agency. The B&F
appropriation is accounted for under Treasury symbol 0110.

   The Payment to the Hazardous Substance Superfund appropriation authorizes appropriations from
the General Fund of the  Treasury to finance activities conducted through Hazardous Substance
Superfund. Payment to the Hazardous Substance Superfund is accounted for under Treasury symbol
0250.
   The Asbestos Loan Program was authorized by the Asbestos School Hazard Abatement Act of 1986
to finance control of asbestos building materials in schools.  Funds have not been appropriated for this
Program since FY 1993.  For FY 1993 and FY 1992 the program was funded by a subsidy appropriated
from the General Fund for the actual cost of financing the loans, and by borrowing from Treasury for
the unsubsidized portion of the loan. The Program Fund disburses the subsidy to the Financing Fund
for increases in the  subsidy. The Financing Fund receives the subsidy payment, borrows from
Treasury, and collects the asbestos loans. The Asbestos Loan Program is accounted for under Treasury
symbol 0118 for the subsidy and administrative support, under Treasury symbol 4322 for loan
disbursements, loans receivable and loan collections on post FY 1991 loans, and under Treasury
symbol 2917 for pre FY  1992  loans receivable  and loan collections.

   The FIFRA Revolving Fund was authorized by the Federal Insecticide, Fungicide and Rodenticide
Act of 1972 as amended and as amended by the Food  Quality Protection Act of 1996. Fees are paid by
industry to offset costs of accelerated reregistration, expedited processing of pesticides, and
establishing tolerances for pesticide chemicals in or on food and animal feed. The FIFRA Revolving
Fund is accounted for under Treasury symbol number 4310.

   The Tolerance Revolving  Fund was authorized in  1963 for the deposit of tolerance fees. Fees
are paid by industry for federal services of pesticide chemicals in or on food and animal feed.
Effective January 2, 1997, fees collected are now being collected and deposited in the Reregistration
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    and Expedited Processing Revolving Fund (4310). The fees collected prior to this date are
    accounted for under Treasury symbol number 4311.

       The WCF includes two activities: computer support services and postage. WCF derives revenue
    from these activities based upon a fee for services. WCF's customers currently consist solely of
    Agency program offices. Accordingly, revenues generated by WCF and expenses recorded by the
    program offices for use of such services, along with the related advances/liabilities, are eliminated on
    consolidation. The WCF is accounted for under Treasury symbol 4565.
       The Exxon Valdez Settlement Fund has funds available to carry out authorized environmental
    restoration activities. Funding is derived from the collection of reimbursements under the Exxon Valdez
    settlement as a result of the oil spill. The Exxon Valdez Settlement fund is accounted for under
    Treasury symbol number 5297.
       Allocations and appropriations transferred to the Agency from other federal agencies include funds
    from the Appalachian Regional Commission and the Department of Commerce which provide
    economic assistance to state and local developmental activities, the Agency for International
    Development which provides assistance on environmental matters at international levels, and from the
    General Services Administration which provides funds for rental of buildings and operations, repairs,
    and maintenance of rental space. The transfer allocations are accounted for under Treasury
    symbols 0200, 1010, and 4542; and the appropriation transfers are accounted for under 0108.

       Clearing Accounts include the Budgetary suspense account, Unavailable Check Cancellations and
    Overpayments, and Undistributed IPAC Payments and Collections. Clearing accounts are accounted for
    under Treasury symbols  3875, 3880, and 3885.
       Deposit funds include Fees for Ocean Dumping; Nonconformance Penalties; Clean Air Allowance
    Auction and Sale; Advances without Orders; and Suspense and payroll deposits for Savings Bonds, and
    State and City Income Taxes Withheld. Deposit funds are accounted for under Treasury symbols 6050,
    6264, 6265, 6266, 6275, and 6500.
       General Fund Receipt Accounts include Hazardous Waste Permits; Miscellaneous Fines, Penalties
    and Forfeitures; General Fund Interest; Interest from Credit Reform Financing Accounts; Fees and
    Other Charges for Administrative and Professional Services; and Miscellaneous Recoveries and
    Refunds. General Fund Receipt accounts are accounted for under Treasury symbols 0895, 1099, 1435,
    1499, 3200, and 3220.
       The Environmental Services Receipt account was established for the deposit of fee receipts
    associated with environmental programs, including radon measurement proficiency ratings and training,
    motor vehicle engine certifications, and water pollution permits. Receipts in this special fund will be
    appropriated to the S&T and EPM appropriations to meet the expenses of the programs that generate the
    receipts. Environmental Services are unavailable receipts accounted for under Treasury symbol 5295.
       The Miscellaneous Contributed Funds Trust Fund includes gifts for pollution control programs
    that are usually designated for a specific use by the donor and deposits from pesticide registrants to
    cover the costs of petition hearings when such hearings result in unfavorable decisions to the
    petitioner.  Miscellaneous Contributed Funds Trust Fund is accounted for under Treasury symbol
    8741.

       The accompanying financial statements include the accounts of all funds described in this note.
    The expense allocation methodology is  a financial statement estimate that presents EPA's programs
    at full cost. Superfund may charge some costs  directly to the fund and charge the remainder of the
    costs to the All Other Funds in the Agency-wide appropriations. These amounts are presented as
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Expenses from Other Appropriations on the Statement of Net Cost and as Income from Other
Appropriations on the Statement of Changes in Net Position and the Statement of Financing.

    The Superfund Trust Fund is allocated to general support services costs (such as rent,
communications, utilities, mail operations, etc.) that were initially charged to the Agency's S&T and
EPM appropriations. During the year, these costs are allocated from the S&T and EPM appropriations to
the Superfund Trust Fund based on a ratio of direct labor hours, using budgeted or actual full-time
equivalent personnel charged to these appropriations, to the total of all direct labor hours. Agency
general support services cost charges to the Superfund Trust Fund may not exceed the ceilings
established in the Superfund Trust Fund appropriation. The related general support services costs
charged to the Superfund Trust Funds were $53.5 million for FY 2001 and $49.1 million for FY 2002.

C. Budgets and Budgetary Accounting

Superfund

    Congress adopts an annual appropriation amount to be available until expended for the Superfund
Trust Fund. A transfer account for the Superfund Trust Fund has been established for purposes of
carrying out the program activities. As the Agency disburses obligated amounts from the transfer
account, the Agency draws down monies from the Superfund Trust Fund at Treasury to cover the
amounts being disbursed.
All Other Funds

    Congress adopts an annual appropriation amount for the LUST Trust Fund and for the Oil Spill
Response Trust Fund to remain available until expended. A transfer account for the LUST Trust Fund
has been established  for purposes of carrying out the program activities. As the Agency disburses
obligated amounts from the transfer account, the Agency draws down monies from the LUST Trust
Fund at Treasury to cover the amounts being disbursed. The Agency draws down all the  appropriated
monies from the Treasury's Oil Spill Liability trust fund to the Oil Spill Response Trust Fund when
Congress adopts the appropriation amount. Congress adopts an annual appropriation for STAG,
Buildings and Facilities, and for Payments to the Hazardous Substance Superfund to be available until
expended; adopts annual appropriations for S&T, EPM and for the Office of the Inspector General to
be available for two fiscal years. When the appropriations for the General Funds are enacted, Treasury
issues a warrant to the respective appropriations. As the Agency disburses obligated amounts, the
balance of funds available to the appropriation is reduced at Treasury.

    The Asbestos Loan Program is a commercial activity financed by a combination from two sources:
one for the long term costs of the loans and another for the remaining non-subsidized portion of the
loans. Congress adapted a one year appropriation, available for obligation in the fiscal year for which
it was appropriated, to cover the estimated long term cost of the Asbestos loans. The long-term costs
are defined as the net present value of the estimated cash flows associated with the loans. The portion
of each loan disbursement that did not represent long term cost was financed under a permanent
indefinite borrowing authority established with the Treasury. A permanent indefinite appropriation is
available to finance the costs of subsidy re-estimates that occur after the year in which the loan was
disbursed.
    Funding of the FIFRA and the Tolerance Revolving Funds is provided by fees collected from
industry to offset costs incurred by the Agency in carrying out these programs. Each year the Agency
submits an apportionment request to OMB based on the anticipated collections of industry fees.
    Funding of the WCF is provided by fees collected from other Agency appropriations collected to
offset costs incurred for providing the Agency administrative support for computer support and
postage.

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       Funds transferred from other Federal agencies are funded by a non expenditure transfer of
    funds from the other Federal agencies. As the Agency disburses the obligated amounts, the balance
    of funding available to the appropriation is reduced at Treasury.

       Clearing accounts, deposit accounts, and receipt accounts receive no budget. The amounts are
    recorded to the Clearing and Deposit accounts pending further disposition. Amounts recorded to the
    Receipt accounts capture amounts receivable to or collected for the General Fund of the U.S. Treasury.

    D. Basis of Accounting

    Superfund and All Other Funds

       Transactions are recorded on an accrual accounting basis and on a budgetary basis (where budgets
    are issued). Under the accrual method, revenues are recognized when earned and expenses are
    recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary
    accounting facilitates compliance with legal constraints and controls over the use of federal funds. All
    interfund balances and transactions have been eliminated.

    E. Revenues and Other Financing Sources

    Superfund

       The Superfund program receives most of its funding through appropriations that may be used,
    within specific statutory limits, for operating and capital expenditures (primarily equipment).
    Additional  financing for the Superfund program is obtained through reimbursements from other federal
    agencies under Inter-Agency Agreements (lAGs), state cost share payments under Superfund State
    Contracts (SSCs), and settlement proceeds from Potentially Responsible Parties (PRPs), under CERCLA
    section 122(b)(3), placed in special accounts. Special accounts were previously limited to settlement
    amounts for future costs; however, beginning in FY 2001 cost recovery amounts received under
    CERCLA section 122(b)(3) settlements could be placed in special accounts. Cost recovery settlements
    that are not placed in special accounts continue to be deposited in the Superfund Trust Fund.

    All Other Funds
       The majority of All Other Funds appropriations receive funding needed to support programs
    through appropriations, which may be used, within statutory limits, for operating and capital
    expenditures. Under Credit Reform provisions, the Asbestos Loan Program received funding to support
    the subsidy cost of loans through appropriations which may be used with statutory limits. The Asbestos
    Direct Loan Financing fund, an off-budget fund, receives additional funding to support the outstanding
    loans through collections from the Program fund for the subsidized portion of the loan. The last year
    Congress provided appropriations to make new loans was 1993. The FIFRA and the Tolerance
    Revolving Funds receive funding, which is now deposited with the FIFRA Revolving Fund, through
    fees collected for services provided.  The FIFRA Revolving Fund  also receives interest on invested
    funds. The WCF receives revenue through fees collected for services provided to Agency program
    offices. Such revenue is eliminated with related Agency program expenses on Consolidation. The
    Exxon Valdez Settlement Fund received funding through reimbursements.
       Appropriations are recognized as Other Financing Sources when earned, i.e., when goods and
    services have been rendered without regard to payment of cash. Other revenues are recognized when
    earned, i.e., when services have been rendered.
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F. Funds with the Treasury

Superfund and All Other Funds
    The Agency does not maintain cash in commercial bank accounts. Cash receipts and disbursements
are handled by Treasury. The funds maintained with Treasury are Appropriated Funds, Revolving
Funds, and Trust Funds. These funds have balances available to pay current liabilities and finance
authorized purchase commitments. (See Note 2)

G. Investments in U.S. Government Securities

All  Other Funds
    Investments in U.S. Government securities are maintained by Treasury and are reported at
amortized cost net of unamortized discounts. Discounts are amortized over the term of the investments
and reported as interest income. No provision is made for unrealized gains or losses on these
securities because, in the majority of cases, they are held to maturity. (See Note 4)

H. Notes Receivable

Superfund
    The Agency records notes receivable at their face value and any accrued interest as of the date of
receipt. (See Note 6)

I. Marketable Equity Securities

    The Agency records marketable securities at cost as of the date of receipt. Marketable securities
are held by Treasury and reported at their cost value in the financial statements until sold. Currently
EPA does not hold any marketable securities.

J. Accounts Receivable and Interest Receivable (See Note 5)

Superfund

    The Comprehensive Environmental Response,  Compensation, and Liability Act (CERCLA) as
amended by the Superfund Amendments and Reauthorization Act (SARA) provides for the recovery of
costs from potentially responsible parties (PRPs). However, cost recovery expenditures  are expensed
when incurred since there is no assurance that these funds will be recovered.

    It is the Agency's policy to record accounts receivable from PRPs for Superfund site  response costs
when a consent decree, judgment, administrative order, or settlement is entered. These  agreements are
generally negotiated after site response costs have been incurred. It is the Agency's position that until
a consent decree or other form of settlement is obtained, the amount recoverable should not be
recorded.

    The Agency also records accounts receivable from states for a percentage of Superfund site
remedial action costs incurred by the Agency within those  states. As agreed to under Superfund State
Contracts (SSCs), cost sharing arrangements under SSCs may vary according to whether a site was
privately or publicly operated at the time of hazardous substance  disposal and whether  the Agency
response action was removal or remedial. SSC agreements are usually for 10% or 50% of site remedial
action costs. States may pay the full amount of their share in advance or incrementally throughout the
remedial action process. Allowances for uncollectible state cost share receivables have not been
recorded because the Agency has not had collection problems with these agreements.
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   All Other Funds
       The majority of receivables for All Other Funds represent interest receivable for Asbestos and
    FIFRA and both accounts receivable and interest receivable to the General Fund of the Treasury.

    K. Advances and Prepayments

    Superfund and All Other Funds

       Advances and prepayments represent funds advanced or prepaid to other entities both internal and
    external to the Agency for which a budgetary expenditure has not yet occurred. (See Note 6)

    L. Loans Receivable

   All Other Funds

       Loans are accounted for as receivables after funds have been disbursed. The amount of Asbestos
    Loan Program loans obligated but not disbursed is disclosed in Note 7. Loans receivable resulting from
    obligations on or before September 30, 1991, are reduced by the allowance for uncollectible loans.
    Loans receivable  resulting from loans obligated on or after October 1, 1991, are reduced by an
    allowance equal to the present value of the subsidy costs associated with these loans. The subsidy cost
    is calculated  based on the interest rate differential between the loans and Treasury borrowing, the
    estimated delinquencies and defaults net of recoveries offset by fees collected,  and other estimated
    cash flows associated with these loans.

    M. Appropriated Amounts Held by Treasury

    Superfund and All Other Funds
       For the Superfund and LUST Trust Funds, and for amounts appropriated to the Office of Inspector
    General from the Superfund and LUST Trust Funds, cash available to the Agency that is not needed
    immediately  for current disbursements remains in the respective Trust Funds managed by Treasury.
    (See Note 17)

    N. Property, Plant, and Equipment

    Superfund and All Other Funds
       The Fixed Assets Subsystem (FAS), implemented in FY 1997, maintains EPA's personal property,
    real property, and capital software records in accordance with Statement of Federal Financial
    Accounting Standards No. 6, "Accounting for Property, Plant and Equipment," (SFFAS No. 6). The FAS
    automatically generates depreciation entries monthly based on acquisition dates. Purchases of EPA-held
    and contractor-held personal  property are capitalized if valued at $25 thousand or more with an
    estimated useful life of at least two years. Prior to implementing FAS, depreciation was taken on a
    modified straight-line basis over a period of six years, depreciating 10% the first and sixth year and
    20% in years  two  through five. This modified straight-line method is still used for contractor-held
    property. All EPA-held personal property purchased before the implementation of FAS was assumed to
    have an estimated useful life of five years. New acquisitions of EPA-held personal property are
    depreciated using the straight-line method for specific assets with useful lives ranging from two to
    15  years.
       Superfund contractor-held property used as part of the remedy for site-specific response actions is
    capitalized in accordance with Agency's capitalization threshold. This property is part of the remedy at
    the site and eventually becomes part of the site itself. Once the response action has been completed
    and the remedy implemented, EPA will retain control of the property, e.g., pump and treat facility, for


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10 years or less, and will transfer its interest in the facility to the respective state for mandatory
operation and maintenance - usually 20 years or more. Consistent with EPA's 10 year retention period,
depreciation for this property will be based on a 10-year life. However, if any property is transferred
to a state in a year or less, this property will be charged to expense. If any property is sold prior to
EPA relinquishing interest, the proceeds from the sale of that property shall be  applied against contract
payments or refunded as required by the Federal Acquisition Regulations.

    In FY 1997 the EPA's Working Capital Fund, a revenue generating activity, implemented
requirements to capitalize software if the purchase price was $100,000 or more with an estimated
useful life of two years or more. In FY 2001 the Agency began capitalizing software for All Other
Funds whose acquisition value is $500,000 or more in accordance with the provisions of SFFAS
No. 10,  "Accounting for Internal Use Software." Software is depreciated using the straight-line method
over the specific assets' useful lives  ranging from two to ten years.

    Real property consists of land, buildings, and capital and leasehold improvements. Real property,
other than land, is capitalized when the value is $75 thousand or more. Land is capitalized regardless
of cost.  Buildings were valued at an estimated original cost basis and land was valued at fair market
value if purchased prior to FY 1997. Real property purchased during and after FY 1997 are valued at
actual costs. Depreciation for real property is calculated using the straight-line method over the
specific assets' useful lives ranging from 10 to 102 years. Leasehold improvements are amortized over
the lesser of their useful lives or the unexpired lease terms. Additions to property and improvements
not meeting the capitalization criteria, expenditures for minor alterations, and repairs and maintenance
are expensed as incurred. (See Note 9)

0. Liabilities

Superfund and All Other Funds

    Liabilities represent the amount of monies or other resources that are likely to be paid by the
Agency as the result of a transaction or event that has already occurred. However, no liability can be
paid by the Agency without an appropriation or other collection of revenue for services provided.
Liabilities for which an appropriation has not been enacted are classified as unfunded liabilities and
there is no certainty that the appropriations will be enacted. Liabilities of the Agency, arising from
other than contracts, can be abrogated by the Government acting in its sovereign capacity.

P. Borrowing Payable to the Treasury

All Other Funds
    Borrowing payable to Treasury results from loans from Treasury to fund the Asbestos direct loans
described in part B  and C of this note. Periodic principal payments are  made to Treasury based on the
collections of loans receivable.

Q. Interest Payable to Treasury

All Other Funds
    The Asbestos Loan Program makes periodic interest payments to Treasury based on its debt to
Treasury. At the end of FY 2001 and FY 2002 there was no outstanding interest payable to Treasury
since payment was  made through September 30.
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    R. Accrued Unfunded Annual Leave

    Superfund and All Other Funds
       Annual, sick, and other leave is expensed as taken during the fiscal year. Sick leave earned but not
    taken is not accrued as a liability. Annual leave earned but not taken as of the end of the fiscal year is
    accrued as an unfunded liability. Accrued unfunded annual leave is included in the Balance Sheet as a
    component of "Payroll and Benefits Payable." (See Note 33)

    S. Retirement Plan

    Superfund and All Other Funds
       There are two primary retirement systems for federal employees. Employees hired prior to January
    1, 1984, may participate in the Civil Service Retirement System (GSRS). On January 1, 1984, the
    Federal Employees Retirement System (FERS) went into effect pursuant to Public Law 99-335. Most
    employees hired after December 31, 1983,  are automatically covered by FERS and Social Security.
    Employees hired  prior to January 1, 1984, elected to either join FERS and Social Security or remain in
    GSRS. A primary feature of FERS is that it offers a savings plan to which the Agency automatically
    contributes  1 percent of pay and matches any employee contributions up to an additional 4 percent of
    pay. The Agency also contributes the employer's matching share for Social Security.

       With the issuance of SFFAS No.5, "Accounting for Liabilities of the Federal Government," (SFFAS
    No. 5) , which was effective for the FY 1997 financial statements, accounting and reporting standards
    were established for liabilities relating to the federal employee benefit programs (Retirement, Health
    Benefits, and Life Insurance). SFFAS No.  5 requires that the employing agencies recognize  the cost of
    pensions and other retirement benefits during their employees'  active years of service. SFFAS No. 5
    requires that the Office of Personnel Management, as administrator of the Civil Service Retirement and
    Federal Employees Retirement Systems, the Federal Employees Health Benefits Program, and the
    Federal Employees Group Life Insurance Program, provide EPA with the 'Cost Factors' to compute
    EPA's liability for each program.

    T. Prior Period Adjustments

       Prior period adjustments will be made in accordance with SFFAS No. 21, "Reporting Corrections of
    Errors and Changes in Accounting Principles," which is effective for FY 2002. EPA will make prior
    period adjustments for material errors as follows in accordance with SFFAS No. 21. Prior period
    adjustments will only be made for material  prior period errors to (1) the current period financial
    statements and (2) the prior period financial statements presented for comparison. Adjustments related
    to changes in accounting principles will only be made to the  current period financial statements, but
    not to prior period financial statements presented for comparison. (See Notes 36 and 37)
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Note 2. Fund Balances with Treasury
   Fund Balances with Treasury as of September 30, 2002 and 2001, consist of the following (in
thousands):
                                   FY2002
        FY2001
Entity Non-Entity
Assets Assets
Trust Funds:
Superfund
LUST
Oil Spill
Revolving Funds:
FIFRA/Tolerance
Working Capital
Appropriated
Other Fund Types
Total

$ 32.229 $
16,405
3,796

3,028
57,380
11,504,638
99,575
$11,717,051 $

0
0
0

0
0
0
4,112
4,112
Total

$ 32,229
16,405
3,796

3,028
57,380
11,504,638
103,687
$11,721,163
Entity Non-Entity
Assets Assets

$ 6,706 $
18,158
3,156

3,496
51,267
11,088,824
88,218
11,259,834 $

0
0
0

0
0
0
19,246
19,246
Total

$ 6,706
18,158
3,165

3,496
51,267
11,088,824
107,464
$ 11,279,080
   Entity fund balances include balances that are available to pay current liabilities and to finance
authorized purchase commitments. Also, Entity Assets, Other Fund Types consist of the Environmental
Services Receipt account. The Environmental Services Receipt account is a special fund receipt
account. Upon Congress appropriating the funds, EPA will use the receipts in the S&T and the EPM
appropriations.
   The non-entity Other Fund Type consist of clearing accounts and deposit funds. These funds are
awaiting documentation for the determination of proper accounting disposition.

   For FY 2002 the amounts on the financial statements are $2,828 thousand less than the balances on
Treasury's records. These differences consist mainly of unrecorded transactions from the last two
months of FY 2002 that will be recorded by the agency early in FY  2003. The differences for
Superfund and All Other Funds are $1,301 thousand and $1,527 thousand, respectively.

Note 3. Cash

   In All Others, as of September 30, 2002, Cash consisted of imprest funds totaling $10 thousand.
www. epa.gov/ocfo
FY 2002 Annual Financial Statements
                             IV-29

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    Note 4. Investments
       As of September 30, 2002 and 2001, investments consisted of the following:
                                                  Unamortized
                                                    (Premium)
                                              Cost     Discount
                                     Interest Investments,      Market
                                   Receivable          Net        Value
    SUPERFUND
    Intragovernmental Securities:
       Non-Marketable
    ALL OTHERS
    Intragovernmental Securities:
       Non-marketable
FY 2002  $ 3,234,352   $   (62,650)  $    12,973   $ 3,309,975  $  3,309,975

FY 2001  $ 3,630,186   $   (33,967)  $    59,891   $ 3,724,044  $  3,724,044
FY 2002  $ 1,892,769   $   (36,752)  $    22,531   $ 1,952,052  $  1,952,052

FY 2001  $ 1,703,909   $   (52,551)  $    22,358   $ 1,778,818  $  1,778,818
       CERCLA, as amended by SARA, authorizes EPA to recover monies to clean up Superfund sites from
    responsible parties (RP). Some RPs file for bankruptcy under Title 11 of the U.S. Code. In bankruptcy
    settlements, EPA is an unsecured creditor and is entitled to receive a percentage of the assets
    remaining after secured creditors have been satisfied. Some RPs satisfy their debts by issuing securities
    of the reorganized company. The Agency does not intend to exercise ownership rights to these
    securities and instead will convert these securities to cash as soon as practicable.

    Note  5. Accounts Receivable

       The Accounts Receivable for September 30, 2002 and 2001, consist of the following:

                                                      FY 2002                      FY 2001

Intragovernmental Assets:
Accounts & Interest Receivable
Total
Non-Federal Assets:
Unbilled Accounts Receivable
Accounts & Interest Receivable
Less: Allowance for Uncollectibles
Total
Superfund
$ 33,309
$ 33,309

$ 87,443
783,279
(459,285)
$ 411,437
All Others
$
$

$


$
72,298 $
72,298 $

2,210 $
101,392
(54,204)
49,398 $
Superfund
31,178
31,178

86,470
949,566
(569,998)
466,038
All Others
$
$

$


$
69,977
69,977

1,668
133,787
(60,428)
75,027
       The Allowance for Doubtful Accounts is determined on a specific identification basis as a result of
    a case-by-case review of receivables and a reserve on a percentage basis for those not specifically
    identified.
IV-30    EPA's FY 2002 Annual Report
                                                          www. epa.gov/ocfo

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Note 6. Other Assets
    For FY 2002 inventory and operating materials and supplies were included in Other Nonfederal
Assets. In FY 2001 these items were originally reported on a separate line.
    Other Assets for September  30,  2002, consist of the following:

Intragovernmental Assets:
Advances to Federal Agencies
Advances to Working Capital Fund
Advances for Postage
Total Intragovernmental Assets
Superfund
Trust Fund

$ 141 $
4,379
0
$ 4,520 $
All
Others

4,163
0
415
4,578
Combined
Totals

$ 4,304
4,379
415
$ 9,098
Nonfederal Assets:
 Travel Advances
 Letter of Credit Advances
 Grant Advances
 Other Advances
 Operating Materials and Supplies
 Inventory for Sale

Total Nonfederal Assets
(13)
   0
   0
793
   0
   0
780
(911) $
2,388
3,054
148
216
42
4,937 $
(924)
2,388
3,054
941
216
42
5,717
    Other Assets for September 30, 2001, consist of the following:

Intragovernmental Assets:
Advances to Federal Agencies
Advances to Working Capital Fund
Advances for Postage
Total Intragovernmental Assets
Nonfederal Assets:
Travel Advances
Letter of Credit Advances
Grant Advances
Other Advances
Bank Card Payments
Operating Materials and Supplies
Inventory for Sale
Bankruptcy Settlement*
Total Nonfederal Assets
Superfund
Trust Fund

$ 166 $
5,355
0
$ 5,521 $

$ 7 $
0
0
769
1
0
0
8,101
$ 8,878 $
All
Others

4,265 $
0
121
4,386 $

(854) $
315
1,322
92
0
252
1
0
1,128 $
Combined
Totals

4,431
5,355
121
9,907

(847)
315
1,322
861
1
252
1
8,101
10,006
' Bankruptcy Settlement: A promissory note in the amount of $8.1 million was issued to the Superfund in a bankruptcy
 settlement by Joy Global, Inc. The note was paid off in FY 2002.
www. epa.gov/ocfo
                               FY 2002 Annual Financial Statements
                                                                IV-31

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    Note 7. Loans Receivable, Net—Nonfederal

       Asbestos Loan Program loans disbursed from obligations made prior to FY 1992 are net of an
    allowance for estimated uncollectible loans, if an allowance was considered necessary. Loans
    disbursed from obligations made after FY 1991 are governed by the Federal Credit Reform Act. The
    Act mandates that the present value of the subsidy costs (i.e., interest rate differentials, interest
    subsidies, anticipated delinquencies, and defaults) associated with direct loans be recognized as an
    expense in the year the loan is made. The net present value of loans is the amount of the gross loan
    receivable less the present value of the subsidy.
       An analysis of loans receivable and the nature and amounts of the subsidy and administrative
    expenses associated entirely with Asbestos Loan Program loans as of September 30, 2002 and 2001, is
    provided in the following sections.
                                          FY 2002
                                                  FY 2001
                                                        Value of
                               Loans               Assets Related
                           Receivable,                    to Direct
                               Gross    Allowance*          Loans
                                          Loans
                                      Receivable,
                                           Gross   Allowance*
                                                        Value of
                                                    Assets Related
                                                        to Direct
                                                          Loans
    Direct Loans Obligated
    Prior to FY 1992
    Direct Loans Obligated
    After FY 1991
     Total
41,181
38,664
      0  $
41,181
49,683   $
0   $
(15,199)
              42,779     (16,910)
49,683
                           25,869
79,845  $ (15,199)  $
                64,646  $      92,462   $ (16,910)   $     75,552
    * Allowance for Pre-Credit Reform loans (Prior to FY 1992) is the Allowance for Estimated Uncollectible Loans and the
     Allowance for Post Credit Reform Loans (After FY 1991) is the Allowance for Subsidy Cost (present value).

        Subsidy Expenses for Post Credit Reform Loans:
Interest
Differential
Direct Loan Subsidy Expense - FY 2 002
Downward Subsidy Reestimate - FY 2002
FY 2002 Totals
Direct Loan Subsidy Expense - FY 2 001
$
$
$
$
115 $
(496) $
(381) $
1,227 $
Expected
Defaults
157 $
(816) $
(659) $
2,353
Fee
Offsets
0
0
0
0

$
$
$
$
Total
272
(1,312)
(1,040)
3,580
IV-32    EPA's FY 2002 Annual Report
                                                             www. epa.gov/ocfo

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Note 8. Accounts Payable and Accrued Liabilities

   The Accounts Payable and Accrued Liabilities, both federal and nonfederal, are current liabilities
consisting of the following amounts as of September 30, 2002:
Federal:

Accounts Payable to Other Federal Agencies
Liability for Allocation Transfers
Expenditure Transfers Payable to other EPA Funds
Accrued Liabilities, Federal
Total Federal Accounts Payable & Accrued
Liabilities
Nonfederal:
Accounts Payable, nonfederal
Advances Payable, nonfederal
Interest Payable
Grant Liabilities
Other Accrued Liabilities, nonfederal
Total nonfederal Accounts Payable & Accrued
Liabilities
The Accounts Payable and Accrued
following amounts as of September 30,
Federal:

Accounts Payable to other Federal Agencies
Liability for Allocation Transfers
Expenditure Transfers Payable to other EPA Funds
Accrued Liabilities, Federal
Total Federal Accounts Payable & Accrued
Liabilities
Nonfederal:
Accounts Payable, nonfederal
Advances Payable, nonfederal
Interest Payable
Grant Liabilities
Other Accrued Liabilities, nonfederal
Total Nonfederal Accounts Payable & Accrued
Superfund
Trust Fund
$ 4,964
20,017
45,701
45,577
$ 116,239


$ 43,344
14
333
14,590
87,524
$ 145,805

Liabilities, both
2001:
Superfund
Trust Fund
$ 759
20,163
44,887
57,728
$ 123,537


$ 39,746
5
126
16,921
80,937
$ 137,735
All Other
Funds
$ 620 $


43,363
$ 43,983 $


$ 74,260 $
3
1
348,474
88,498
$ 511,236 $

federal and nonfederal

All Other
Funds
$ 1,118 $


40,541
$ 41,659 $


$ 91,050 $
33

476,749
87,442
$ 655,274 $
Combined
Total
5,584
20,017
45,701
88,920
160,222


117,604
17
334
363,064
176,022
657,041

, consisted of the

Combined
Total
1,877
20,163
44,887
98,269
165,196


130,796
38
126
493,670
168,379
793,009
 Liabilities
www. epa.gov/ocfo
FY 2002 Annual Financial Statements
                               IV-33

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    Note 9. General Plant, Property, and Equipment

       Superfund property, plant and equipment, consists of personal property items held by contractors
    and the Agency. EPA also has property funded by various other Agency appropriations. The property
    funded by these appropriations are presented in the aggregate under "All Others" and consists of
    software; real, EPA-Held and Contractor-Held personal, and capitalized-leased property.

       As of September 30, 2002, Plant, Property, and Equipment consisted of the following:
                                       Superfund
All Others


EPA-Held Equipment $
Software
Contractor-Held Property:
Superfund Site-Specific
General
Land and Buildings
Capital Leases
Total $
As of September 30
see Note 37):



EPA-Held Equipment $
Software
Contractor-Held Property:
Superfund Site-Specific
General
Land and Buildings
Capital Leases
Total $
Note 10. Debt
The Debt consisted


All Others
Other Debt: Debt to Treasury
Classification of Debt:
Intragovernmental Debt
Total
Acquisition
Value
25,968
961

32,472
10,407
0
0
69,808
, 2001, Plant


Acquisition
Value
23,832
559

32,472
9,447
0
0
66,310

Accumulated
Depreciation
$ (15,245) $
(85)

(12,065)
(3,667)
0
0
$ (31,062) $
, Property, and

Superfund
Accumulated
Depreciation
$ (15,031) $
(5)

(8,818)
(2,287)
0
0
$ (26,141) $

Net Book
Value
10,723
876

20,407
6,740
0
0
38,746
Equipment


Net Book
Value
8,801
554

23,654
7,160
0
0
40,169

Acquisition
Value
$ 148,693
26,358

0
18,412
521,515
41,614
$ 756,592
consisted of


Acquisition
Value
$ 161,253
10,398

0
16,752
500,854
40,992
$ 730,249

Accumulated
Depreciation
$ (92,920) $
(2,520)

0
(9,689)
(85,238)
(14,889)
$ (205,256) $
the following (as

All Others
Accumulated
Depreciation
$ (105,484) $
(148)

0
(7,647)
(76,951)
(13,126)
$ (203,356) $

Net Book
Value
55,773
23,838

0
8,723
436,277
26,725
551,336
restated;


Net Book
Value
55,769
10,250

0
9,105
423,903
27,866
526,893

of the following as of September 30, 2002 and 2001:

Beginning
Balance
$ 31,124



FY 2002
Net
Borrowing
$ (6,834) $

$
$

Ending
Balance
24,290

24,290
24,290

Beginning
Balance
$ 37,922



FY 2001
Net
Borrowing
$ (6,798) $

$
$

Ending
Balance
31,124

31,124
31,124
IV-34    EPA's FY 2002 Annual Report
        www. epa.gov/ocfo

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Note 11. Custodial Liability

   Custodial Liability represents the amount of net accounts receivable that, when collected, will be
deposited to the General Fund of the Treasury. Included in the custodial liability are amounts for fines
and penalties, interest assessments, repayments of loans, and miscellaneous other accounts receivable.

Note 12.  Other Liabilities

   The Other Liabilities, both intragovernmental and nonfederal, for September 30, 2002, are as
follows:
                                            Covered by
Not Covered by
Other Liabilities - Intragovernmental
Superfund - Current
Employer Contributions & Payroll Taxes
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Resources Payable to Treasury
Superfund - Non-Current
Unfunded FECA Liability
Total Superfund
All Other - Current
Employer Contributions & Payroll Taxes
WCF Advances
Other Advances
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
All Other - Non-Current
Unfunded FECA Liability
Total All Other
Other Liabilities - Nonfederal
Superfund - Current
Unearned Advances, Nonfederal
Total Superfund
All Other - Current
Unearned Advances, Nonfederal
Deferred Credits
Liability for Deposit Funds, Nonfederal
All Other - Non-Current
Capital Lease Liability
Total All Other
Budgetary Resources
$ 3,169
2,470
16,618
30
0
0
$ 22,287

$ 13,883
4,379
1,435
(91)
2
371
0
$ 19,979
Covered by
Budgetary Resources
$ 45,515
$ 45,515

$ 6,569
0
4,181
0
$ 10,750
Budgetary Resources
0
0
0
0
0
1,440
$ 1,440

$ 0
0
0
0
0
0
6,402
$ 6,402
Not Covered by
Budgetary Resources
$ 0
$ 0

$ 0
0
0
36,729
$ 36,729
Total
$ 3,169
2,470
16,618
30
0
1,440
$ 23,727

$ 13,883
4,379
1,435
(91)
2
371
6,402
$ 26,381
Total
$ 45,515
$ 45,515

$ 6,569
0
4,181
36,729
$ 47,479
www. epa.gov/ocfo
 FY 2002 Annual Financial Statements
                                IV-35

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        The Other Liabilities, both intragovernmental and nonfederal, for September 30, 2001, are as
    follows:
    Other Liabilities - Intragovernmental
        Covered by
Budgetary Resources
     Not Covered by
Budgetary Resources
                                                                                                         Total
Superfund - Current
Employer Contributions & Payroll Taxes
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Resources Payable to Treasury
Superfund - Non-Current
Unfunded FECA Liability
Total Superfund
All Other - Current
Employer Contributions & Payroll Taxes
WCF Advances
Other Advances
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
All Other - Non-Current
Unfunded FECA Liability
Total All Other
Other Liabilities - Nonfederal
Superfund - Current
Unearned Advances, Nonfederal
Total Superfund
All Other - Current
Unearned Advances, Nonfederal
Deferred Credits
Liability for Deposit Funds, Nonfederal
All Other - Non-Current
Capital Lease Liability
Total All Other
$ 2,682
1,045
15,208
947
0
0
$ 19,882

$ 11,935
5,355
2,646
(85)
2
1,313
0
$ 21,166
Covered by
Budgetary Resources
$ 27,659
$ 27,659

$ 4,275
0
19,331
0
$ 23,606
$ 0
0
0
0
0
1,426
$ 1,426

$ 0
0
0
0
0
0
6,341
$ 6,341
Not Covered by
Budgetary Resources
$ 0
$ 0

$ 0
0

36,930
$ 36,930
$ 2,682
1,045
15,208
947
0
1,426
$ 21,308

$ 11,935
5,355
2,646
(85)
2
1,313
6,341
$ 27,507
Total
$ 27,659
$ 27,659

$ 4,275
0
19,331
36,930
$ 60,536
IV-36     EPA's FY 2002 Annual Report
                                                    www. epa.gov/ocfo

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Note 13. Leases
   The Capital Leases as of September 30, 2002 and 2001, consist of the following:

Capital Leases, All Other Funds:
     Summary of Assets Under Capital Lease:
         FY 2002
FY 2001
Real Property
Personal Property
Total
Accumulated Amortization
$
$
$
40,913
701
41,614
14,889
$
$
$
40,913
79
40,992
13,126
   EPA has three capital leases for land and buildings housing scientific laboratories and/or
computer facilities. All of these leases include a base rental charge and escalator clauses based
upon either rising operating costs and/or real estate taxes. The base operating costs are adjusted
annually according to escalators in the Consumer Price Indices published by the Bureau of Labor
Statistics (U.S. Department of Labor). EPA has one capital lease for a Xerox copier that expired in
FY 2002 and capital leases for seven shuttle buses terminating in FY 2007. The real property leases
terminate in fiscal years 2010, 2013, and 2025. The charges are expended out  of the Environmental
Programs and Management (EPM) appropriation. The total future minimum lease  payments of the
capital leases are listed below.
    Future Payments Due:
All Others
Fiscal Year
2003
2004
2005
2006
2007
After 5 Years
Total Future Minimum Lease Payments
Less: Imputed Interest
Net Capital Lease Liability
Liability Not Covered by Budgetary Resources (See Note 12)

$ 6,439
6,439
6,439
6,439
6,331
83,605
115,692
(78,963)
36,729
$ 36,729
Operating Leases:

   The General Services Administration (GSA) provides leased real property (land and buildings) as
office space for EPA employees. GSA charges a Standard Level Users Charge that approximates the
commercial rental rates for similar properties.

   EPA has five direct operating leases for land and buildings housing scientific laboratories and/or
computer facilities during FY 2002. Most of these leases include a base rental charge and escalator
clauses based upon either rising operating costs and/or real estate taxes. The base operating costs are
adjusted annually according to escalators in the Consumer Price Indices published by the Bureau of
Labor Statistics (U.S. Department of Labor). Two of these operating leases expired in FY 2002. Two of
these operating leases that were due to expire in FY 2002 were extended: one until FY 2004 and the
other on a  monthly basis. Two others expire in fiscal years 2017 and 2020. The fifth  lease that
www. epa.gov/ocfo
          FY 2002 Annual Financial Statements
                                        IV-37

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    expired in FY 2001 was extended until FY 2007. The charges are expended out of the EPM
    appropriation. The total minimum future costs of operating leases are listed below.
Fiscal Year
2002
2003
2004
2005
2006
Beyond 2006
Total Future Minimum Lease Payments
Superfund
$ 0
0
0
0
0
0
$ 0
All Others
$ 2,102
74
74
74
74
920
$ 3,318
Total Land
& Buildings
$ 2,102
74
74
74
74
920
$ 3,318
    Note 14. Pension and Other Actuarial Liabilities

       FFECA provides income and medical cost protection to covered federal civilian employees
    injured on the job, employees who have incurred a  work-related occupational disease, and
    beneficiaries of employees whose death is attributable to a job-related injury or occupational
    disease. Annually, EPA is allocated the portion of the long term FECA actuarial liability attributable to
    the entity. The liability is calculated to estimate the expected liability for death, disability, medical,
    and miscellaneous costs for approved compensation cases. The liability amounts and the
    calculation methodologies are provided by the Department of Labor.
       The FECA Actuarial Liability at September 30, 2002 and 2001, consisted of the following:
                                            FY2002
FY2001
Superfund All Others Superfund All Other
FECA Actuarial Liability
$ 7,698 $ 31,759 $ 7,731 $ 31,902
       The FY 2002 present value of these estimates was calculated using a discount rate of 5.2
    percent. The estimated future costs are recorded as an unfunded liability.
IV-38    EPA's FY 2002 Annual Report
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Note 15. Cashout Advances and Deferrals, Superfund

   Cashouts are funds received by EPA, a state, or another Potentially Responsible Party under the
terms of a settlement agreement (e.g., consent decree) to finance response action costs at a specified
Superfund site. Under CERCLA section 122(b)(3), cashout funds received by EPA are placed in site-
specific, interest bearing accounts known as special accounts and are used in accordance with the
terms of the settlement agreement. Funds placed in special accounts may be used without further
appropriation by Congress.

Note 16. Unexpended Appropriations

   As of September 30, 2002 and 2001, the Unexpended Appropriations consisted of the following
for All Other Funds:

Unexpended Appropriations:        FY 2002          FY 2001
Unobligated
Available
Unavailable
Undelivered Orders
Total
$ 1,725,016
52,896
9,145,977
$10,923,889
$ 1,635,071
64,930
8,658,960
$10,358,961
Note 17. Amounts Held by Treasury

   Amounts Held by Treasury for Future Appropriations consists of amounts held in trusteeship by
the U.S. Department of Treasury in the "Hazardous Substance Superfund Trust Fund" (Superfund)
and the "Leaking Underground Storage Tank Trust Fund" (LUST).

Superfund (Audited)

   Superfund is supported primarily by an environmental tax on corporations, cost recoveries of
funds spent to clean up hazardous waste sites, and fines and penalties. Prior to December 31, 1995,
the fund was also supported by other taxes on crude and petroleum and on the sale or use of
certain chemicals. The authority to assess those taxes and the environmental tax on corporations
also expired on December 31, 1995,  and has not been renewed by Congress.  It is not known if or
when such taxes will be reassessed in the future.
www.epa.gov/ocfo                                                  FY 2002 Annual Financial Statements    IV-39

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        The following reflects the Superfund Trust Fund maintained by the U.S. Department of Treasury
    as of September 30, 2002 and 2001. The  amounts contained in these  statements have been
    provided by the Treasury and are audited. Outlays represent amounts received by EPA's Superfund
    Trust Fund; such funds are eliminated on consolidation with the  Superfund Trust Fund maintained
    by Treasury.
SUPERFUND FY 2002
                                                     EPA
                       Treasury
                                                                                   Combined
Undistributed Balances
 Available for Investment
Total Undisbursed Balance
Interest Receivable
Investments, Net of Discounts
    Total Assets

Liabilities & Equity
Equity
    Total Liabilities and Equity

Receipts
 Corporate Environmental
 Cost Recoveries
 Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
    Total Receipts

Outlays
 Transfers to/from EPA, Net
 Transfers to CDC
    Total Outlays
Net Income
          0
   2,762,430
$  2,762,430
                                              $  2,762,430
                                              $  2,762,430
                                                1,329,490
                                              $  1,329,490
                                                                         1,876
                                                                        12,973
                                                                       534,572
                                                                  $    549,421
                         549,421
                         549,421
                                                                  $     7,466
                                                                      248,252
                                                                        1,444
                                                                      257,162
                                                                      676,292
                                                                      110,577
                                                                  $ 1,044,031
                    $(1,329,490)
                        (49,502)
                     (1,378,992)
                    $  (334,961)
                                               1,876
                                                                                        12,973
                                                                                     3,297,002
                                                                                  $  3,311,851
                                                                                     3,311,851
                                                                                     3,311,851
                                        $      7,466
                                            248,252
                                               1,444
                                            257,162
                                            676,292
                                            110,577
                                        $  1,044,031
                                                                                            0
                                                                                     (49,502)
                                                                                     (49,502)
                                                                                      994,529
IV-40    EPA's FY 2002 Annual Report
                                                   www. epa.gov/ocfo

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SUPERFUND FY 2001                             EPA            Treasury          Combined

Undistributed Balances
 Available for Investment                       $         0         $       768         $       768
Total Undisbursed Balance                                ??                   ??                   ??
Interest Receivable                                     0              59,891              59,891
Investments, Net of Discounts                       2,837,243              826,910            3,664,153

    Total Assets                             $  2,837,243         $    887,569         $  3,724,812

Liabilities & Equity
Equity                                     $  2,837,243         $    887,569         $  3,724,812
    Total Liability and Equity                    $  2,837,243         $    887,569         $  3,724,812
Receipts
 Petroleum-Imported                         $         0         $     2,471         $     2,471
 Petroleum-Domestic                                   0                 (12)                (12)
 Certain Chemicals                                     0                  32                  32
 Imported Substances                                   055
 Corporate Environmental                                0               3,861               3,861
 Cost Recoveries                                       0             202,132             202,132
 Fines & Penalties                            	0_               2,112               2,112
Total Revenue                                         0             210,601             210,601
Appropriations Received                                 0             633,603             633,603
Interest Income                              	0_             220,504             220,504
    Total Receipts                           	0_            1,064,708            1,064,708

Outlays
 Transfers to EPA                               1,227,360          (1,227,360)                   0
 Transfers to CDC                            	0_             (74,835)             (74,835)
    Total Outlays                               1,227,360          (1,302,195)             (74,835)
Net Income                                 $  1,227,360         $  (237,487)         $   989,873


LUST (Audited)

    LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In
FY 2002 there were no fund receipts from cost recoveries, and only $40 thousand in cost recoveries
were received in FY 2001. The following  represents LUST Trust Fund as maintained by the
U.S. Department of Treasury. The amounts contained in these statements have been provided by
Treasury and are audited. Outlays represent appropriations received by EPA's LUST Trust Fund; such
funds are eliminated on consolidation with the LUST Trust Fund maintained by Treasury.
www.epa.gov/ocfo                                                          FY 2002 Annual Financial Statements     IV-41

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    LUST FY 2002
EPA
Treasury
Combined
Undistributed Balances
Available for Investment
Total Undisbursed Balance
Interest Receivable
Investments, Net of Discounts
Total Assets
Liabilities & Equity
Equity
Total Liabilities and Equity
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Refund Gasoline Tax
Refund Diesel Tax
Refund Aviation Tax
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income

$ 0
0
0
80,875
$ 80,875

$ 80,875
$ 80,875

$ 0
0
0
0
0
0
0
0
0

72,912
72,912
$ 72,912

$ 12,232
12,232
22,531
1,848,646
$ 1,883,409

$ 1,883,409
$ 1,883,409

$ 173,351
13,199
474
(2,167)
(3,357)
(310)
181,190
67,563
248,753

(72,912)
(72,912)
$ 175,841

$ 12,232
12,232
22,531
1,929,521
$ 1,964,284

$ 1,964,284
$ 1,964,284

$ 173,351
13,199
474
(2,167)
(3,357)
(310)
181,190
67,563
248,753

0
0
$ 248,753
IV-42    EPA's FY 2002 Annual Report
                                        www. epa.gov/ocfo

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LUST FY 2001
EPA
Treasury
Combined
Undistributed Balances
Available for Investment
Total Undisbursed Balance
Interest Receivable
Investments, Net of Discounts
Total Assets
Liabilities & Equity
Equity
Total Liability and Equity
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Refund Gasoline Tax
Refund Diesel Tax
Refund Aviation Tax
Refund Aviation Fuel Tax
Cost Recovery
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to EPA
Total Outlays
Net Income

$ 0
0
0
83,460
$ 83,460

$ 83,460
$ 83,460

$ 0
0
0
0
0
0
0
0
0
0
0

74,617
74,617
$ 74,617

$ 12,211
12,211
22,358
1,673,000
$ 1,707,569

$ 1,707,569
$ 1,707,569

$ 167,408
16,114
582
(834)
(1,584)
(19)
(123)
40
181,584
94,802
276,386

(74,617)
(74,617)
$ 201,769

$ 12,211
12,211
22,358
1,756,460
$ 1,791,029

$ 1,791,029
$ 1,791,029

$ 167,408
16,114
582
(834)
(1,584)
(19)
(123)
40
181,584
94,802
276,386

0
0
$ 276,386
www. epa.gov/ocfo
                       FY 2002 Annual Financial Statements
                                         IV-43

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    Note 18. Commitments and Contingencies

       EPA may be a party in various administrative proceedings, legal actions, and claims brought by
    or against it. These include:

    •  Various  personnel actions, suits, or claims brought against the Agency by employees and others.
    •  Various  contract and assistance program claims brought against the Agency by vendors, grantees,
       and others.

    •  The legal recovery of Superfund costs incurred for pollution cleanup of specific sites, to include
       the collection of fines and penalties from responsible parties.

    •  Claims against recipients for improperly spent assistance funds which may be settled by a
       reduction of future EPA funding to the grantee or the provision of additional grantee matching
       funds.

    Superfund

       Under CERCLA Section 106(a), EPA issues administrative orders that require  parties to clean up
    contaminated sites. CERCLA Section 106(b) allows a party that has complied with such an order to
    petition EPA for reimbursement from the Fund of its reasonable costs of responding to the order, plus
    interest. To  be eligible for reimbursement, the party must demonstrate either that it was not a liable
    party under CERCLA Section 107(a) for the response action ordered, or that the Agency's selection of
    the response action was arbitrary and capricious or otherwise not in accordance with law.

       There are currently one CERCLA Section 106(b) administrative claim. If the claimant is successful,
    the total losses on the administrative and judicial claims could amount to approximately $17.8 million.
    The Environmental Appeals Board has not yet issued final decisions on the administrative claim;
    therefore, a definite estimate of the amount of the contingent loss cannot be made. The claimant's
    chance of success overall is characterized as reasonably possible.

    All Other

       There is one material claim which may be considered threatened litigation involving  all other
    appropriated funds of the Agency. If the claimant is successful, the total losses of the claim could
    amount to $82.8 million. The  claim is currently being evaluated by GSA contracting officials and their
    private sector claims consultant. The claimant's chance of success overall is characterized as reasonably
    possible.

    Judgement Fund

       In cases that are paid by the U.S. Treasury Judgement Fund, the Agency must recognize the full
    cost of a claim regardless of who is actually paying the claim. Until these claims are settled or a court
    judgement is assessed and the Judgement Fund is determined to be the appropriate  source for the
    payment, claims that are probable and estimable must be recognized as an expense and liability of the
    agency. For these cases, at the time of settlement or judgement, the liability will be reduced and an
    imputed financing source recognized. See Interpretation of Federal Financial Accounting  Standards
    No.  2, Accounting for Treasury Judgement Fund Transactions.

       As of September 30, 2002, there are no material claims pending in  the Treasury Judgement Fund.
IV-44    EPA's FY 2002 Annual Report                                                         www.epa.gov/ocfo

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Note 19. Exchange Revenues, Statement of Net Cost

    For FY 2002, the exchange revenues reported on the Statement of Net Cost are separated into
Federal and nonfederal portions. Exchange revenues were reported only in total for the FY 2001
Statement of Net Cost. Exchange revenues on the Statement of Net Cost include income from
services provided,  non-custodial interest revenue (with the exception of interest earned on trust
fund investments), and non-custodial miscellaneous earned revenue.

Note 20. Environmental Cleanup Costs

    The EPA has one site that requires clean up stemming from its activities. Costs amounting to
$20 thousand may be paid out of the Treasury Judgement Fund. (The $20 thousand represents the
lower end of a range estimate, of which the maximum of the range will total $200 thousand.) The
claimant's chance of success is characterized as probable.  EPA also holds title to a site in Edison, New
Jersey which was formerly an Army Depot. While EPA did not cause the contamination, the Agency
could potentially be liable for a portion of the cleanup costs. However, it is expected that the
Department of Defense and GSA will bear all or most of the cost of remediation.

Accrued Cleanup Cost

    The EPA has 14 sites that will require future cleanup associated with permanent closure and one
site with cleanup presently underway. The estimated costs will be approximately $13.4 million.  Since
the cleanup costs associated with permanent closure are not primarily recovered through user fees,
EPA has elected to recognize the estimated total cleanup cost as a liability and record changes to the
estimate in subsequent years.
    The FY 2002 estimate for unfunded cleanup costs increased by $1 million resulting from a Denver
facility move from an existing site to a newly renovated building at the Denver Federal Center. Of the
remaining $13.3 million in estimated cleanup costs, approximately $6 million represents the estimated
expense to close the current RTP facility. These costs will be incurred within the next year. The
remaining amount represents the future decontamination and decommissioning costs of EPA's other
research facilities. There was a net decrease of approximately $1.8 million  in funded cleanup costs
from FY 2001 to FY 2002. EPA could also be potentially liable for cleanup  costs, at  a GSA-leased site;
however, the amounts are not known.

Note 21.  Superfund State Credits

    Authorizing statutory language for Superfund and related federal regulations require states to enter
into Superfund State Contracts (SSCs) when EPA assumes the lead for a remedial action in their state.
The SSC defines the state's role in the remedial action and obtains the state's assurance that they will
share in the cost of the remedial  action. Under Superfund's authorizing statutory language, states will
provide EPA with a ten percent cost share for remedial action costs incurred at privately owned or
operated sites, and at least fifty percent of all response activities (i.e., removal, remedial planning,
remedial action, and enforcement) at publicly operated  sites. In some cases, states may use EPA
approved credits to reduce all or part of their cost share  requirement that would otherwise be borne
by the states. Credit is limited to state site-specific  expenses EPA has determined to  be reasonable,
documented, direct out-of-pocket expenditures of nonfederal funds for remedial action. Once EPA has
reviewed and approved a state's claim for credit, the state must first apply  the credit at the site where
it was earned. The  state may apply any excess/remaining  credit to another site when approved by
EPA. As of September 30, 2002, total remaining state credits have been estimated at $11.2 million. The
estimated ending credit balance on September 30, 2001  was $10.7 million.
www.epa.gov/ocfo                                                    FY 2002 Annual Financial Statements    IV-45

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    Note 22. Superfund Preauthorized Mixed Funding Agreements

       Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response
    actions at their sites with the understanding that EPA will reimburse the PRPs a certain percentage of
    their total response action costs. EPA's authority to enter into mixed funding agreements is provided
    under Section lll(a)(2) of the Comprehensive Environmental Response, Compensation, and Liability
    Act (CERCLA) of 1980. Under Section 122(b)(l) of CERCLA, as amended by the Superfund
    Amendments and Reauthorization Act (SARA) of 1986, a PRP may assert a claim against the Superfund
    Trust Fund for a portion of the costs they incurred while conducting a preauthorized response action
    agreed to under a mixed funding agreement. As of September 30, 2002, EPA had 15 outstanding
    preauthorized mixed funding agreements with obligations totaling $37.4 million. A liability is not
    recognized for these  amounts until all work has been  performed by the PRP and has been approved
    by EPA for payment.  Further, EPA will not disburse any funds under these agreements until the PRP's
    application, claim, and claims adjustment processes have been reviewed and approved by EPA.

    Note 23. Income and Expenses  from other Appropriations

       The Statement of Net Cost reports program costs that include the full costs of the program outputs
    and consist of the direct costs and all other costs that can be directly traced, assigned on a cause and
    effect basis, or reasonably allocated to program outputs.

       During Fiscal Years 2002 and 2001 EPA had one appropriation which funded a variety of
    programmatic and non-programmatic activities across the Agency, subject to statutory requirements.
    The EPM appropriation was created to fund personnel compensation and benefits, travel, procurement,
    and contract activities.

       All of the expenses from EPM were distributed among EPA's two Reporting Entities: Superfund and
    All Others. This distribution is calculated using a combination of specific identification of expenses to
    Reporting Entities and a weighted average that distributes expenses proportionately to total
    programmatic expenses.
       As illustrated below, this estimate does not impact the net effect of the Statement of Net Costs.

                                    FY2002                               FY2001

Superfund
All Others
Total
Income Expenses
From Other From Other
Appropriations Appropriations
$ 114,297 $ (114,297)
(114,297) 114,297
$ 0 $ 0
Income Expenses
Net From Other From Other
Effect Appropriations Appropriations
$ 0 $ 103,654 $ (103,654)
0 (103,654) 103,654
$ 0 $ 0 $ 0
Net
Effect
$ 0
0
$ 0
    Note 24. Custodial Revenues and Accounts Receivable
       EPA uses the accrual basis of accounting for the collection of fines, penalties, and miscellaneous
    receipts. Collectibility by EPA of the fines and penalties is based on the responsible parties'
    willingness and ability to pay.
IV-46    EPA's FY 2002 Annual Report                                                         www.epa.gov/ocfo

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                                                       FY2002
                              FY 2001
Fines, Penalties, and Other Misc Revenue (EPA)

Accounts Receivable for Fines, Penalties,
and Other Miscellaneous Receipts
 Accounts Receivable
 Less: Allowance for Doubtful Accounts

 Total
         $    95,489
         $   107,779
              39,383
         $    68,396
             121,892
        $    123,966
              46,186

        $     77,780
Note 25. Statement of Budgetary Resources

    Reconciliations of budgetary resources, obligations incurred, and outlays, as presented in the
audited Statements of Budgetary Resources, to amounts included in the Budget of the United States
Government for the years ended September 30, 2002 and 2001, are as follows:
FY2002
 Budgetary  Obligations
 Resources     Incurred      Outlays
SUPERFUND

Statement of Budgetary Resources
 Adjustments to Unliquidated Obligations,
 Unfilled Customer Orders, and Other

Budget of the United States Government

ALL OTHER
Statement of Budgetary Resources
 Less:  Funds Reported by Other Federal Entities
 Adjustments to Unliquidated Obligations,
 Unfilled Customer Orders, and Other

Budget of the United States Government
$ 2,448,998  $  1,698,004  $  1,377,754

    (17,463)      (17,463)       (1,313)
$ 2,431,535  $  1,680,541  $  1,376,441
$ 9,807,912  $  7,762,664  $  7,012,562
    (24,419)      (24,066)     (24,582)
          0
  (622)
(26)
$ 9,783,493  $  7,737,976  $  6,987,954
FY2001
 Budgetary  Obligations
 Resources     Incurred      Outlays
SUPERFUND
Statement of Budgetary Resources
 Adjustments to Unliquidated Obligations,
 Unfilled Customer Orders and Other

Budget of the United States Government

ALL OTHER
Statement of Budgetary Resources
 Less:  Funds Reported by Other Federal Entities
 Adjustments to Unliquidated Obligations,
 Unfilled Customer Orders and Other

Budget of the United States Government
$ 2,284,377  $  1,570,056  $  1,199,748

     (3,650)        13,813   	0
$ 2,280,727  $  1,583,869  $  1,199,748
$ 9,343,106  $  7,431,802   $  7,015,605
    (26,148)      (25,677)      (25,342)
     (5,229)
(5,229)
   0
$ 9,311,729  $  7,400,896  $  6,990,263
www. epa.gov/ocfo
                              FY 2002 Annual Financial Statements
                                              IV-47

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    Note 26. Recoveries and Permanently Not Available, Statement of Budgetary Resources

       Details of Recoveries of Prior Year Obligations and Permanently Not Available on the Statement
    of Budgetary Resources are represented by the following categories:
                                          FY2002
                 FY2001
SUPERFUND
Recoveries of Prior Year Obligations
Less: Rescinded Authority
Total
ALL OTHERS
Recoveries of Prior Year Obligations
Adjustments to Beginning Unobligated Balances
Less: Payments to Treasury
Rescinded Authority
Canceled Authority
Total

$ 230,628
(2,000)
$ 228,628

$ 89,440
0
(6,834)
(1,588)
(33,870)
$ 47,148

$ 196,644
0
$ 196,644

$ 76,815
0
(6,798)
(15,668)
(36,254)
$ 18,095
    Note 27. Unobligated Balances Available

       Availability of unobligated balances are shown comparatively for FY 2002 and FY 2001. The
    unexpired authority is available to be apportioned by the Office of Management and Budget for new
    obligations at the beginning of FY 2003. Expired authority is available for upward adjustments of
    obligations incurred as of the end of the fiscal year.
    ALL OTHERS
    Unexpired Unobligated Balance
    Authority Available for Apportionment
    Expired Unobligated Balance
       Total
                                          FY2002
                 FY2001
SUPERFUND
Unexpired Unobligated Balance
Authority Available for Apportionment
Expired Unobligated Balance
Total

$ 726,589
24,386
19
$ 750,994

$ 714,321
0
0
$ 714,321
$ 1,917,637    $ 1,791,475
      1,150             0
    126,461        119,829
$ 2,045,248    $ 1,911,304
IV-48    EPA's FY 2002 Annual Report
                                                www. epa.gov/ocfo

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Note 28. Offsetting Receipts

    Distributed offsetting receipts credited to the general fund, special fund or trust fund receipt
accounts offset gross outlays. For FY 2002 the following receipts were generated from these activities:
                                         FY2002
SUPERFUND
Trust Fund Recoveries
   Total

ALL OTHERS
Special Fund Environmental Service
Trust Fund Appropriation

   Total
$   248,252
     11,358
    676,292

$   687,650
Note 29. Statement of Financing

    Specific components requiring or generating resources in future periods and resources that fund
expenses recognized in prior periods are related to changes in liabilities not covered by budgetary
resources. For FY 2002 the following line items are reconciled to the increases or decreases in those
liabilities.

                                         Superfund     All Other   Combined
                                        Trust Fund        Funds        Total

Statement of Financing lines
Resources that fund expenses recognized
in prior periods
Increases in environmental liabilities
    Total

Increases (Decreases) in Liabilities
Not Covered by Budgetary Resources
and Reconciling Items
Unfunded Annual Leave Liability
Unfunded Contingent Liability
Unfunded Workers Compensation Liability
Actuarial Workers Compensation Liability
Subsidy Payable to Treasury
Unfund Clean-up Costs Liability
Negative subsidy entries
Subsidy re-estimate entries
    Total
  $    (1,590)  $

    	0_
  $    (1,590)  $
 (399)  $    (1,989)

   578          578
   179  $    (1,411)
         2,206  $
       (3,778)
           14
          (32)
            0
            0
            0
            0
 5,375  $
(6,000)
    61
 (143)
 (942)
   578
   616
   634
 7,581
(9,778)
    75
 (175)
 (942)
   578
   616
   634
  $    (1,590)  $
   179  $    (1,411)
Note 30. Costs Not Assigned to Goals

    FY 2002's Statement of Net Cost by Goal has -$4.8 million in gross costs not assigned to goals. This
amount is comprised of decreases of $6.0 million in unfunded contingent liabilities and $2.5 million in
bad debt expenses;  offset by increases of $2.0 million interest  on borrowing, $0.6 million in environ-
mental cleanup costs, $0.6 million in undistributed federal payroll-related costs, and $0.5 million in
other interest costs.
www. epa.gov/ocfo
                               FY 2002 Annual Financial Statements
                                            IV-49

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       For FY 2001 's Statement of Net Cost by Goal, -$31.5 million in gross costs were not assigned to
    goals. This amount was comprised of a decrease of $57.0 million to the year-end grant accruals;
    partially offset by $19.7 million in bad debt expense not assigned to goals, $2.4 million in interest on
    Treasury borrowing, $3.1 million in undistributed imputed costs, and $0.3 million in miscellaneous
    expenses.

    Note 31. Transfers-In and Out, Statement of Changes in Net Position

    Appropriation Transfers, In/Out:

       For FY 2002 the  Appropriation Transfers under Budgetary Financing Sources on the Statement of
    Changes in Net Position are comprised of nonexpenditure transfers which affect Unexpended
    Appropriations for non-invested appropriations. These amounts  are included in the Budget
    Authority, Net Transfers and Prior Year Unobligated Balance, Net Transfers lines on the Statement of
    Budgetary Resources. Detail of the Appropriation Transfers  on the Statement of Changes in Net
    Position and a  reconciliation with the Statement of Budgetary Resources follow:

           Fund/Type of Account                                        Superfund      All Other Funds
           GSA Building Fund                                       $          0       $       23,948
           EPM (from current year balances)                                        0                3,750
           EPM (from prior year balances)                                          0                 500
           STAG                                                	0        	400
            Total of Appropriation Transfers                             $          0               28,598
           Net Transfers to Invested Funds*                                   1,329,490        	72,912
           Total of Net Transfers on Statement of
           Budgetary Resources                                      $   1,329,490       $	101,510

           * Portion of transfers on Statement of Budgetary Resources that are not part of Appropriation transfers on Statement
           of Changes in Net Position

    Transfers In/Out Without Reimbursement, Budgetary:

       For FY 2002 Transfers In/Out under Budgetary Financing Sources on the Statement of Changes
    in Net Position are comprised of transfers to or from  other federal agencies and between EPA funds.
    These transfers affect Cumulative Results of Operations. A breakdown of the transfers-in and
    transfers-out, expenditure and nonexpenditure, follows:

           Type of Transfer/Funds                                       Superfund      All Other Funds
Transfers-in (out) , expenditure, Superfund to S&T fund
Transfers-in (out) , expenditure, Superfund to OIG fund
Transfers-out, nonexpenditure, from Superfund to other Federal agencies
Transfers-out, nonexpenditure, from Treasury trust fund to CDC
Transfers-in, nonexpenditure, Oil Spill
Transfer-in (out) adjustments, canceled funds
Total Transfers in (out) without Reimbursement, Budgetary
$ (36,891) :
(11,867)
(5,188)
(49,502)


$ (103,448)
$ 36,891
11,867


15,000
(86)
63,672
IV-50    EPA's FY 2002 Annual Report                                                            www.epa.gov/ocfo

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Transfers In/Out without Reimbursement, Other Financing Sources:

   For FY 2002, Transfers In(Out) without Reimbursement under Other Financing Sources on the
Statement of Changes in Net Position are comprised of 1) transfers of property, plant, and equipment
between EPA funds and 2) transfers of negative subsidy to a special receipt fund for the credit reform
funds. The amounts reported on the Statement of Changes in Net Position are as follows:
Type of Transfer/Fund
Transfer-in (out) of Property, Between Superfund and EPM
Transfer-out of FY 2002 Negative Subsidy, to be Paid in FY 2003
Adjustment to Transfer-out of FY 2001 Negative Subsidy, Paid out in
FY 2002 and Adjusted to Funded Expenses
Total Transfers in (out) Without Reimbursement, Budgetary

$
$
Superfund
47
47
All
$
$
Other Funds
(47)
(371)
816
398
   For FY 2001 the consolidated amounts shown as transfers-in on the Statement of Changes in Net
Position are comprised of transfers from other federal agencies in accordance with applicable
legislation. The consolidated amounts shown as transfers-out are nonexpenditure transfers to other
Hazardous Substance Superfund allocation agency funds, such as HHS and Labor. Elimination
transactions consist of intra-agency transfers between EPA funds.

Note  32. Imputed Financing

   In accordance with Statement of Federal Financial Accounting Standard No. 5 (Liabilities of the
Federal Government), federal agencies must recognize the portion of employees' pensions and other
retirement benefits to be paid by the Office of Personnel Management (OPM) trust funds. These
amounts are recorded as imputed  costs and imputed financing for the agency. Each year the OPM
provides federal agencies with cost factors to calculate these imputed costs and financing that apply to
the current year. These cost factors are multiplied by the current year's salaries or number of
employees, as applicable, to provide an estimate of the imputed financing that the OPM trust funds
will provide for each agency. The estimates for FY 2002 were $14.7 million and $83.0 million for
Superfund and All Other Funds, respectively. For FY 2001 the estimates were $13.4 million and
$76.5  million for Superfund and All Other Funds, respectively.

   In addition to the pension and retirement benefits described above,  EPA also records imputed costs
and financing for Treasury Judgement Fund payments on behalf of the agency. Entries are made in
accordance with the Interpretation of Federal Financial Accounting Standards No. 2, Accounting for
Treasury Judgement Fund Transactions. For FY 2002, no Judgement Fund payments were made on
EPA's  behalf. For FY 2001, entries for Judgement Fund payments totaled $0.3 million and $1.3 million
for Superfund and All Other Funds, respectively.
www.epa.gov/ocfo                                                   FY 2002 Annual Financial Statements    IV-51

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    Note 33. Payroll and Benefits Payable

       The amounts that relate to payroll and benefits payable to EPA employees for the years ending
    September 30, 2002 and 2001, are detailed in the following tables.
     FY 2002 Payroll and Benefits Payables
       Covered by
Budgetary Resources
    Not Covered by
Budgetary Resources
Total
Superfund - Current
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable, nonfederal (TSP)
Other Post-employment Benefits Payable
Accrued Unfunded Annual Leave
Total - Superfund - Current
All Other Funds - Current
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable, nonfederal (TSP)
Other Post-employment Benefits Payable
Accrued Funded Leave, WCF
Accrued Unfunded Annual Leave
Total - All Other Funds - Current

FY 2001 Payroll and Benefits Payables
Superfund - Current
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable, nonfederal (TSP)
Other Post-employment Benefits Payable
Accrued Unfunded Annual Leave
Total - All Other Funds - Current
All Other Funds - Current
Accrued Funded Payroll and Benefits
Withholdings Payable
Employer Contributions Payable, nonfederal (TSP)
Other Post-employment Benefits Payable
Accrued Funded Leave, WCF
Accrued Unfunded Annual Leave
Total - All Other Funds - Current

$ 9,146
6,897
443
3
0
$ 16,489

$ 41,309
30,233
1,943
29
320
0
$ 73,834
Covered by
Budgetary Resources

$ 8,361
5,935
372
3
0
$ 14,671

$ 37,099
26,410
1,645
33
320
0
$ 65,507

$ 0
0
0
0
22,647
$ 22,647

$ 0
0
0
0
0
103,598
$ 103,598
Not Covered by
Budgetary Resources

$ 0
0

0
20,440
$ 20,440

$ 0
0
0
0
0
98,223
$ 98,223

$ 9,146
6,897
443
3
22,647
$ 39,136

$ 41,309
30,233
1,943
29
320
103,598
$ 177,432

Total

$ 8,361
5,935
372
3
20,440
$ 35,111

$ 37,099
26,410
1,645
33
320
98,223
$ 163,730
IV-52    EPA's FY 2002 Annual Report
                                           www. epa.gov/ocfo

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Note 34. Other Adjustments, Statement of Changes in Net Position

   The Other Adjustments under Budgetary Financing Sources on the Statement of Changes in
Net Position are comprised of rescissions to appropriated funds and cancellations of funds that
expired on September 30, 1997. These amounts affected Unexpended Appropriations for All
Other Funds for FY 2002.

                         Rescissions to Appropriate Funds              $       1,588
                         Canceled Authority                                33,872

                         Total Other Adjustments                   $     35,460

Note 35. Nonexchange Revenue, Statement of Changes in Net Position

   The Nonexchange Revenue, Budgetary Financing Sources on the Statement of Changes in Net
Position for FY 2002 is comprised of the following items:
                                        Superfund Trust Fund       All Other Funds Combined Total
Interest on Trust Fund Investments
Tax Revenue, Net of Refunds
Fines and Penalties Revenue *
Special Receipt Fund Revenue
Total Nonexchange Revenue
$



$
110,577
7,466
(10,005)
0
108,038
$



$
67,563
181,190
0
11,358
260,111
$



$
178,140
188,656
(10,005)
11,358
368,149
 * Fines and penalties revenue included the following negative items: a $9,664 thousand write-off and $1,339 thousand allowance for
 uncollectible accounts.
Note 36. Correction of Error in Revenue, Prior Year, Superfund

   In FY 2001 in accordance with agency General Counsel opinions, EPA started placing both
past and future cost settlement amounts into site-specific accounts that could be used immediately
without a Congressional appropriation. (See also Note 15, Cashout Advances, Superfund.) In that
same fiscal year a material error was made in accruing revenue from the cashout advance
account. That error resulted in an overstatement of earned revenue of $53,256 thousand for
FY 2001 for Superfund. The applicable statements are restated in accordance with Statement of
Federal Financial Standards No. 21, Paragraphs 10 and 11.

   The FY 2001 Statements of Changes in Net Position and Financing are restated in the same
format as the FY 2001 EPA Audited Financial Statements. Because extensive format changes to
these statements were required in FY  2002 by OMB Bulletin No. 01-09, Form and Content of
Agency Financial Statements, these statements will not be comparative. The lines affected on the
FY 2001 Statement of Financing were  "Exchange Revenue not in the Entity's Budget" and "Net
Cost of Operations."
www.epa.gov/ocfo                                                    FY 2002 Annual Financial Statements    IV-53

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       The effect of the change on Earned Revenue, Net Cost of Operations, and Net Position,
    Superfund, for FY 2001  are as follows:
                                 Amount
                               on FY 2001
                               Statements
                     Revenue
                   Restatement
                     Increase/
                    (Decrease)
                       Property
                    Restatement
                   (See Note 37)
              Increase /(Decrease)
                 Restated
                  Amount
    Earned Revenue
    (applied to Strategic Goal
    of Better Waste Management)
    Net Cost of Operations
    Net Position
$  488,397
  1,220,769
  3,507,433
$   (53,256)
     53,256
   (53,256)
(1,164)
23,654
                  435,141
1,272,861
3,477,720
    Note 37. Correction of Error in Contractor-held Property, Prior Years, Superfund

       Prior to FY 2002 Superfund contractor-held property used on site-specific response actions were
    charged to expense in the period acquired. While some of this site-specific property was transferred
    to states for mandatory operation and maintenance, other items were held by EPA for a period in
    excess of two years. These items should have been capitalized and depreciated in accordance with
    federal accounting standards for property, plant, and equipment.

       The omission of these Superfund site-specific items resulted in material errors in prior years'
    statements from FY 1996 to FY 2001. In accordance with SFFAS No. 21, "Reporting Corrections of
    Errors and Changes in Accounting Principles", the FY  2001 statements presented have been restated.
    The effect on statements for fiscal years prior to FY 2001 is reported as a prior period adjustment
    increase of $22,490 thousand to FY 2001 's beginning net position. The effect on relevant statement
    lines for Superfund for the fiscal years 1996 to  2001 are presented below.
       The FY  2001 Statements of Changes in Net Position and Financing are restated in the same format
    as the FY 2001 EPA Audited Financial Statements. Because extensive format changes to these
    statements were required in FY 2002 by OMB Bulletin No. 01-09, Form and Content of Agency
    Financial Statements, these statements will not be comparative. The lines affected on the FY 2001
    Statement of Financing were "Costs Capitalized on the Balance Sheet-General Property, Plant, and
    Equipment", "Depreciation and Amortization", and "Net Cost of Operations."

    Effect on Property, Plant and Equipment, Net, Superfund:


FY Effect on Cost
1996 $
1997
1998
1999
2000
2001
1,359
8,410
4,129
6,040
8,334
4,224

Effect on
Depreciation
$ 68
815
1,053
1,540
2,306
3,060

Net Effect
$ 1,291
7,595
3,076
4,500
6,028
1,164

Cumulative
Effect
$ 1,291
8,886
11,962
16,462
22,490
23,654
Amount
Reported on
Statements
$ 8,735
6,485
6,560
13,407
13,581
16,515
Corrected
Balances
(FY 2001
Restated)
$ 10,026
15,371
18,522
29,869
36,071
40,169
IV-54    EPA's FY 2002 Annual Report
                                                         www. epa.gov/ocfo

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Effect on Total Costs*, Superfimd:

Fiscal Year
1996**
1997
1998
1999
2000**
2001

Amount Reported
on Statements
$ 1,542,925
1,489,086
1,505,963
1,744,559
1,644,516
1,709,166
Not Effect of
Error (from
previous table)
$ (1,291)
(7,595)
(3,076)
(4,500)
(6,028)
(1,164)

Corrections Balances
(FY 2001 Restated)
$ 1,541,634
1,481,491
1,502,887
1,740,059
1,638,488
1,708,002
Effect on Net Position,  Superfund:
Fiscal Year
1996**
1997
1998
1999
2000**
2001
Amount Reported
on Statements
$ 6,106,381
5,649,530
5,064,268
4,301,250
3,875,439
3,507,322
Cumulative
Effect of Error
(from previous table)
$ 1,291
8,886
11,962
16,462
22,490
23,654
Revenue
Restatement
(see Note 36)





$ (53,256)
Corrected
Balances
(FY 2001 restated)
$ 6,107,672
5,658,416
5,076,230
4,317,712
3,897,929
3,477,720
"Because of changes in OMB Form and Content Bulletin requirements, for FY 1996 and 1997 "Total Funded Costs" plus
"Unfunded Expenses "provided the closest comparison with later years' statements' "Total Costs." For years in which the Statement
of Net Cost by Goal was presented, the costs were applied to the Strategic Goal of "Better Waste Management."
**As restated on the following year's Audited Financial Statements.
www. epa.gov/ocfo
FY 2002 Annual Financial Statements
                                    IV-55

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                            ENVIRONMENTAL PROTECTION AGENCY
                           REQUIRED SUPPLEMENTAL INFORMATION
                                  AS OF SEPTEMBER 30, 2002
                                      (Dollars in Thousands)
                                           (Unaudited)
    Deferred Maintenance
       The EPA classifies tangible property, plant, and equipment as follows: 1) EPA-Held Equipment,
    2) Contractor-Held Equipment, 3) Land and Buildings, and, 4) Capital Leases. The condition assessment
    survey method of measuring deferred maintenance is utilized. The Agency adopts requirements or
    standards for acceptable operating condition in conformance with industry practices. No deferred
    maintenance was reported for any of the four categories.

    Intragovernmental Assets

       Intragovernmental amounts represent transactions between all federal departments and agencies
    and are reported by trading partner (entities that EPA did business with during FY 2002).
       EPA confirmed its investment balances with the Bureau of the Public Debt, Department of the
    Treasury. In addition, EPA sent out requests to trading partners to reconcile and confirm intra-
    governmental receivables and transfers. Responses or inquiries were received from the Department of
    Commerce, Department of the Treasury, Department of Housing and Urban Development, the Nuclear
    Regulatory Commission, the Tennessee Valley Authority, and the National Science Foundation.

    Trading                                                Accounts
    Partner                            Investments          Receivable              Other
    Code  Agency                 Superfund  All Other   Superfund  All Other Superfund  All Other
04
11
12
13
14
15
17
18
19
20
21
31
45

47
57
58
68
69
72
75

80

86

Government Printing Office $ 0 $ 0 ^
Executive Office of the President
Department of Agriculture
Department of Commerce
Department of Interior
Department of Justice
Department of the Navy 70
U. S. Postal Service 16
Department of State
Department of the Treasury 3,309,975 1,952,052
Department of the Army
Nuclear Regulatory Commission
Equal Employment
Opportunity Commission
General Services Administration
Department of the Air Force
Federal Emergency Management Agency
EPA (between Superfund and All Other)
Department of Transportation
Agency for International Development
Department of Health and
Human Services
National Aeronautics and
Space Administration
Department of Housing and
Urban Development
> 0

115

13,583
80
468


35
8,120
2


6
131





510




$ 0 $ 47 $
3
4
61 4
568
58


20
155
23
1
53

2
185
9,549
47,412 4,387
9,695
1,153

442

10

46
1,683


22
5


415
2,418








60








IV-56    EPA's FY 2002 Annual Report                                                       www.epa.gov/ocfo

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Trading
Partner
Code Agency
89
96
97
99
00
Total
Department of Energy
U.S. Army Corps of Engineers
U.S. Department of Defense
Treasury General Fund
Unassigned

Accounts
Investments Receivable
Superfund All Other Superfund
124
8
10,509

000
$3,309,975 $1,952,052 $ 33,309
All Other
399
1,344
60
371
274
$ 72,298
Other
Superfund All Other




24 (25)
$ 4,520 $ 4,578
Intragovernmental Liabilities

   EPA received a few requests for intragovernmental liabilities reconciliation from trading partners.
EPA was able to confirm balances with the National Science Foundation (49), the Department of
Commerce (13), the Department of Justice (15), the Office of Personnel Management (24), the Nuclear
Regulatory Commission (31), the Department of the Treasury (20), and the Department of Labor (16).
Trading
Partner
Accounts Payable
Accrued Liabilities
Other Liabilities
Code
03
04
12
13
14
15
16
17
18
19
20
21
24
31
36
45
47
49
57
58
59
64
68
69
72
75

80

86

89
93
95
Agency Superfund All Other
Library of Congress $ 0 $ 0
Government Printing Office
Department of Agriculture 84
Department of Commerce 889
Department of Interior 901
Department of Justice 617 58
Department of Labor 2,258
Department of the Navy 351
United States Postal Service
Department of State
Department of the Treasury
Department of the Army
Office of Personnel Management
U.S. Nuclear Regulatory Commission
Dept. of Veterans Affairs
EEOC
General Services Administration
National Science Foundation
Department of the Air Force
Federal Emergency Management Agency 15,317
Nat'l Foundation on Arts and Humanities
Tennessee Valley Authority
EPA (between Superfund and All Others) 45,742 27
Department of Transportation
Agency for International Development
Department of Health and
Human Services 16
National Aeronautics and
Space Administration
Department of Housing and
Urban Development
Department of Energy
Federal Mediation Service
Independent Agencies
Superfund
$ 13
60
877
947
3,566
4,183
147

2

44
27
47
2


4,473
6

21
12

1,711
4,128


3,431




378

5
All Other
$ 194
1,023
991
2,819
2,415
96
477
89
2
208
266

367
9
74
40
15,315
91

66

74

3,420
5

7,850

239


4,407
22
508
Superfund
$ 0

2,119

4
1,232
1,440
872
15


896
2,318



8,750

2,673














1,490
All Other
$ 0

(5)
187
90

6,402
47


372

10,163
20


(91)




36
4,379
17






827
164


www. epa.gov/ocfo
                              FY 2002 Annual Financial Statements
                                                            IV-57

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    Trading
    Partner
Accounts Payable
Accrued Liabilities
Other Liabilities
Code
96
97
99
00
Total
Agency
U.S. Army Corps of Engineers
Office of the Secretary of Defense
Treasury General Fund
Unassigned
Superfund All
4,613
(22)
$ 70,682 $
Other Superfund
438
13
620 5
21,191
49
237
[i 45,557
All Other
1,533
338
425
$ 43,363
Superfund All Other
5
1,044
851
18
$ 23,727
19
33
3,721
$ 26,381
       For All Other Funds' remaining intragovernmental liabilities, $24,290 thousand in Debt is assigned
    to the Department of the Treasury (trading partner Code 20), and $69,706 thousand in Custodial
    Liability is assigned to the Treasury General Fund (trading partner Code 99).

    Intragovernmental Revenues and Costs

       EPA's intragovernmental earned revenues are not reported by trading partners because they are
    below OMB's threshold of $500 million.
                                                          Superfund
                                     All Others
         Intragovernmental Earned Revenue
         Associated Costs to generate above Revenue
         (Budget Functional Classification 304)
                       22,932

                       22 932
                  104,318

                  104,318
IV-58    EPA's FY 2002 Annual Report
                                                   www. epa.gov/ocfo

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                      ENVIRONMENTAL PROTECTION AGENCY
                     REQUIRED SUPPLEMENTAL INFORMATION
               SUPPLEMENTAL STATEMENT OF BUDGETARY RESOURCES
                           AS OF SEPTEMBER 30, 2002
                              (Dollars in Thousands)
Environmental
Programs &
STAG Management
Budgetary Resources:
Budget Authority:
Appropriations Received $
Borrowing Authority
Net Transfers
Other
Unobligated Balances:
Beginning of Period
Net Transfers, Actual
Anticipated Transfers Balance
Spending Authority-Offsetting Collections:
Earned and Collected
Receivable from Federal Sources
Change in Unfilled Customer Orders
Advance Received
Without Advance from Federal Sources
Anticipated for Rest of Year
Transfers from Trust Funds
Total Spending Authority from Collections
Recoveries of Prior Year Obligations
Permanently Not Available
Total Budgetary Resources $
Status of Budgetary Resources:
Obligations Incurred:
Direct $
Reimbursable
Total Obligations Incurred $
Unobligated Balances:
Apportioned
Exempt from Apportionment
Unobligated Balances Not Available
Total Status of Budgetary Resources $
Relationship of Obligations to Outlays:
Obligations Incurred, Net $
Obligated Balances, Net - Beginning
Accounts Receivable
Unfilled Customer Orders-Federal Sources
Undelivered Orders ("
Accounts Payable
Total Outlays $
Disbursements $
Collections
Less: Offsetting Receipts
Net Outlays $


3,738,276
0
400
0

1,299,314
0
0

16,944
0

0
0
0
0
$16,944
62,743
0
5,117,677


3,751,750
0
3,751,750

1,365,927
0
0
5,117,677

3,672,063
7,917,132
0
0
7,886,623)
(349,388)
3,353,184
3,370,128
(16,944)
0
3,353,184


$ 2,093,511
0
3,750
0

306,938
500
0

66,735
6,161

166
59,663
0
0
$ 132,725
15,315
(27,868)
$ 2,524,871


$ 2,091,207
79,514
$ 2,170,721

249,695
0
104.455
$ 2,524,871

$ 2,022,681
783,265
15,680
179,292
(704,134)
(191,514)
$ 2,105,270
$ 2,172,171
(66,901)
0
$ 2,105,270
Science &
Technology


$ 788,397
0
0
0

200,941
0
0

7,823
(5,908)

475
1,610
0
36,891
$ 40,891
2,072
(6,533)
$1,025,768


$ 798,823
1,468
$ 800,291

203,607
0
21.870
$1,025,768

$ 757,328
492,591
41,803
10,575
(543,042)
(72,695)
$ 686,560
$ 731,059
(44,499)
0
$ 686,560
FIFRA


$ 0
0
0
0

1,917
0
0

17,802
0

(1)
0
0
0
$ 17,801
0
0
$ 19,718


$ 0
19,342
$ 19,342

376
0
0
$ 19,718

$ 1,541
1,547
0
0
(839)
(1,782)
$ 467
$ 18,267
(17,800)
o
$ 467
LUST
Trust Fund


$ 0
0
72,912
0

6,220
0
0

2
0

0
0
0
0
$ 2
1,032
0
$ 80,166


$ 76,939
0
$ 76,939

3,227
0
0
$ 80,166

$ 75,905
83,186
0
0
(74,673)
(7,146)
$ 77,272
$ 77,274
(2)
o
$ 77,272
All
Other


$ 750,901
0
23,948
0

95,974
0
0

152,796
1,157

1,493
1,276
0
11,780
$ 168,502
8,278
(7,891)
$1,039,712


$ 795,335
148,286
$ 943,621

94,805
0
1.286
$1,039,712

$ 766,841
47,134
15,094
63,481
(68,614)
(34,127)
$ 789,809
$ 954,841
(165,032)
(687.650)
$ 102,159
Total
All
Other


$ 7,371,085
0
101,010
0

1,911,304
500
0

262,102
1,410

2,133
62,549
0
48,671
$ 376,865
89,440
(42,292)
$ 9,807,912


$ 7,514,054
248,610
$ 7,762,664

1,917,637
0
127.611
$ 9,807,912

$ 7,296,359
9,324,855
72,577
253,348
(9,277,925)
(656,652)
$ 7,012,562
$ 7,323,740
(311,178)
(687.650)
$ 6,324,912
www. epa.gov/ocfo
FY 2002 Annual Financial Statements
                        IV-59

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                                ENVIRONMENTAL PROTECTION AGENCY
                              REQUIRED  SUPPLEMENTAL INFORMATION
                                        WORKING CAPITAL FUND
                                    SUPPLEMENTAL  BALANCE  SHEET
                                      AS OF SEPTEMBER  30, 2002
                                            (Dollars in Thousands)
                                             Unaudited
    ASSETS
     Intragovernmental
     Fund Balance With Treasury                    $    57,380
     Accounts Receivable, Net Federal                     10,754
     Other                                   	419
     Total Intragovernmental                      $    68,553

     General Property, Plant and Equipment, Net              11,746
     Other Nonfederal Assets                      	£3
     TotalAssets                               $    80,342
    LIABILITIES
     Intragovernmental
     Accounts Payable & Accrued Liabilities, Federal      $      1,978
     Other Federal Liabilities                            29,206
     Total Intragovernmental                       $     31,184

     Accounts Payable & Accrued Liabilities, Nonfederal         16,450
     Payroll and Benefits Payable Nonfederal           	1,683
     Other Nonfederal Liabilities
     Total Liabilities                             $     49,317
    NET POSITION
     Cumulative Results of Operations                $     31,025
     Total Net Position                                31.025
     Total Liabilities and Net Position                $     80,342
IV-60     EPA's FY 2002 Annual Report                                                               www.epa.gov/ocfo

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                         ENVIRONMENTAL PROTECTION AGENCY
                        REQUIRED SUPPLEMENTAL INFORMATION
                                WORKING CAPITAL FUND
                        SUPPLEMENTAL STATEMENT OF NET COST
                      FOR THE YEAR ENDED SEPTEMBER 30, 2002
                                   (Dollars in Thousands)

                              Unaudited
        COSTS:
        Intragovernmental        $     17,836
        With the Public              112,735
        Total Costs            $    130,571
        Less:
        Earned Revenues, Federal        131,178
        Earned Revenues, Nonfederal         (32)
        Total Earned Revenues     $    131,146
        Net Cost of Operations   $      (575)
                            ENVIRONMENTAL  PROTECTION AGENCY
                           REQUIRED SUPPLEMENTAL INFORMATION
                                    WORKING  CAPITAL FUND
                   SUPPLEMENTAL STATEMENT OF CHANGES IN NET POSITION
                          FOR THE YEAR ENDED  SEPTEMBER 30, 2002
                                       (Dollars in Thousands)

                                           Unaudited
        Net Position - Beginning of Period           $      28,708
        Prior Period Adjustments                  	0
        Beginning Balances, as adjusted            $      28,708

        Budgetary Financing Sources:
         Transfers In/Out                                0
         Other                             	0
        Total Budgetary Financing Sources           $          0

        Other Financing Sources:
         Transfers In/Out                                0
         Imputed Financing Sources                      1,742
         Other                             	0
        Total Other Financing Sources              $       1,742

        Net Cost of Operations                    	575
        Net Position - End of Period               $      31,025
www.epa.gov/ocfo                                                 FY 2002 Annual Financial Statements    IV-61

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                                   ENVIRONMENTAL PROTECTION AGENCY
                                  REQUIRED SUPPLEMENTAL INFORMATION
                                            WORKING CAPITAL FUND
                         SUPPLEMENTAL STATEMENT OF BUDGETARY RESOURCES
                                FOR THE YEAR ENDED SEPTEMBER 30,  2002
                                               (Dollars in Thousands)
            Budgetary Resources                                  Unaudited
             Budgetary Authority:
               Appropriations Received                              $           0
               Borrowing Authority                                             0
               Net Transfers                                                  0
               Other                                                        0
             Unobligated Balances:
               Beginning of Period                                        23,034
               Net Transfers, Actual                                             0
               Anticipated Transfers Balance                                      0
             Spending Authority from Offsetting Collections:
               Earned and Collected                                       130,822
               Receivable from Federal Sources                                 328
               Change in Unfilled Customer Orders
               Advance Received                                           1,621
               Without Advance from Federal Sources                            (699)
               Anticipated for Rest of Year                                        0
             Transfers from Trust Funds                               	0_
             Total Spending Authority from Offsetting Collections            $     132,072
             Recoveries of Prior Year Obligations                                2,415
             Permanently Not Available                                	0_
             Total Budgetary Resources                               $     157,521
            Status of Budgetary Resources
             Obligations Incurred:
               Reimbursable                                      $     130,359
             Unobligated Balances:
               Apportioned                                              27,162
               Exempt from Apportionment                                       0
             Unobligated Balances Not Available                         	0_
             Total Status of Budgetary Resources                        $     157,521
            Relationship of Obligations to Outlays
             Obligations Incurred, Net                               $     (4,128)
             Obligated Balances, Net - Beginning of Period                       28,232
             Accounts Receivable                                            114
             Unfilled Customer Orders from Federal Sources                        3,675
             Undelivered Orders                                         (14,993)
             Accounts Payable                                           (19,014)
             Total Outlays                                         $     (6,114)
               Disbursements                                     $     126,330
               Collections                                            (132,444)
               Less: Offsetting Receipts                               	0
             Net Outlays                                          $     (6,114)
IV-62    EPA's FY 2002 Annual Report                                                                   www.epa.gov/ocfo

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                                ENVIRONMENTAL PROTECTION  AGENCY
                               REQUIRED  SUPPLEMENTAL INFORMATION
                                          WORKING CAPITAL FUND
                              SUPPLEMENTAL STATEMENT OF FINANCING
                             FOR THE YEAR ENDED SEPTEMBER  30,  2002
                                             (Dollars in Thousands)
Resources Used to Finance Activities:
 Budgetary Resources Obligated
   Obligations Incurred
   Less: Spending Authority from Offsetting Collections and Recoveries
   Obligations Net of Offsetting Collections and Recoveries
   Less: Offsetting Receipts
   Net Obligations
 Other Resources
   Transfers In/Out Without Reimbursement, Property
   Imputed Financing Sources
   Other (+/-)
   Income from Other Appropriations
   Net Other Resources Used to Finance Activities
   Total Resources Used To Finance Activities
Resources Used to Finance Items Not Part of Net Cost of Operations
   Change in Budgetary Resources Obligated
   Resources that Fund Prior Period Expenses
   Budgetary Offsetting Collections and Receipts that Do Not
      Affect Net Cost of Operations
   Credit Program Collections Increasing Loan Liabilities for Guarantees of
      Subsidy Allowances
   Offsetting Receipts Not Affecting Net Cost of Operations
   Resources that Finance the Acquisition of Assets
   Other Resources or Adjustments to Net Obligated
      Resources that Do Not Affect Net Cost of Operations
   Total Resources Used to Finance Items Not Part of Net Cost of Operations
   Total Resources Used to Finance the Net Cost of Operations
Components  of the Net  Cost of Operations that Will Not Require or
Generate Resources  in the Current Period
 Components Requiring or Generating Resources in Future Periods
   Increase in Annual Leave Liability
   Increase in Environmental and Disposal Liability
   Upward/Downward Reestimates of Credit Subsidy Expense
   Increase in Exchange Revenue Receivable from the Public
   Increase in Workers Compensation Costs
   Total Components of Net Cost of Operations that Will
    Require or Generate Resources in Future Periods
 Components Not Requiring or Generating Resources
   Depreciation and Amortization
   Revaluation of Assets or Liabilities
   Other Expenses Not Requiring Budgetary Resources
   Total Components of Net Cost of Operations that Will
    Not Require or Generate Resources
   Total Components of Net Cost of Operations That Will Not
    Require or Generate Resources in the Current Period
 Net Cost of Operations
  Unaudited

$    130,359
    (134,487)
$     (4,128)
 	0
$     (4,128)

$           0
        1,742
            0
 	0
$       1,742
$     (2,386)

$       (597)
        (170)

            0

            0
            0
      (1,717)

 	0
$     (2,484)
$     (4,870)
            0

        4,326
            0
         (3D
        4,295

        4,295
        (575)
www. epa.gov/ocfo
 FY 2002 Annual Financial Statements
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                             ENVIRONMENTAL PROTECTION AGENCY
                     REQUIRED SUPPLEMENTAL STEWARDSHIP INFORMATION
                           FOR THE YEAR ENDED SEPTEMBER 30, 2002
                                       (Dollars in Thousands)

    INVESTMENT IN THE NATION'S RESEARCH AND DEVELOPMENT

       Public and private sector institutions have long been significant contributors to our Nation's
    environment and human health research agenda. The Environmental Protection Agency's (EPA) Office
    of Research and Development, however, is unique among scientific institutions in this country in
    combining research, analysis, and the integration of scientific information across the full spectrum of
    health and ecological issues and across both risk assessment and risk management. Science enables us
    to identify the most important sources of risk to human health and the environment, and by so doing,
    informs our priority-setting, ensures credibility for our policies, and guides our deployment of
    resources. It gives us the understanding and technologies we need to detect, abate, and avoid
    environmental problems. Science provides the crucial underpinning for EPA decisions and challenges
    us to apply the best available science and technical analysis to our environmental problems and to
    practice more integrated, efficient, and effective approaches to reducing environmental risks.
       Among the Agency's highest priorities are research programs that address  the effects of the
    environment on children's health, the potential risks of unregulated contaminants in drinking water, the
    health effects of air pollutants such as particulate matter, and the protection  of the Nation's ecosystems.
    For FY 2002 the full cost of the Agency's Research and Development activities totaled over
    $682.5 million. Below is a breakout of the expenses (dollars in thousands):

                                  FY 1998     FY 1999     FY 2000    FY 2001   FY 2002
        Programmatic Expenses      507,828     543,777     541,117     555,794    559,218
        Allocated Expenses         53,322      58,728      59,523      90,039    123,307

    INVESTMENT IN THE NATION'S INFRASTRUCTURE

       The Agency makes significant investments in the Nation's drinking water and clean water
    infrastructure. The investments are the result of three programs: the Construction Grants Program,
    which is being phased out, and two State Revolving Fund (SRF) programs.
       Construction Grants Program: During the 1970s and 1980s the Construction Grants Program
    was a source of federal funds,  providing more than $60 billion of direct grants for the construction of
    public wastewater treatment projects. These projects, which constituted a significant contribution to the
    Nation's water infrastructure, included sewage treatment plants, pumping stations and collection and
    intercept sewers, rehabilitation of sewer systems, and the control of combined sewer overflows. The
    construction grants led to the improvement of water quality in thousands of municipalities nationwide.
       Congress set 1990 as the last year that funds would be appropriated for Construction Grants.
    Projects funded in 1990 and prior will continue until completion. Beyond 1990 EPA shifted the focus
    of municipal financial assistance from grants to loans that are provided by SRFs.
       State Revolving Funds: EPA provides capital, in the form of capitalization grants, to state revolving
    funds which state governments use to make loans to individuals, businesses, and governmental entities
    for the construction of wastewater and drinking water treatment infrastructure. When the loans are repaid
    to the state revolving fund, the  collections are used to finance new loans for new construction projects.
    The capital is reused by the states and is not returned to the federal government.

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   The Agency also is appropriated funds to finance the construction of infrastructure outside the
SRFs. These are reported below as Other Infrastructure Grants.

   The Agency's expenses related to investments in the Nation's Water Infrastructure are outlined
below (dollars in thousands):
                                  FY 1998   FY 1999   FY 2000   FY 2001    FY 2002
     Construction Grants           444,817   414,528     55,766    63,344    149,841
     Clean Water SRF             1,109,017   925,744  1,564,894  1,548,270  1,389,048
     Safe Drinking Water SRF         94,936   387,429   588,116   728,921    708,528
     Other Infrastructure Grants     138,363   245,606   212,124   282,914    367,259
     Allocated Expenses           187,649   213,117   266,299   424,999    576,536

STEWARDSHIP  LAND

   The Agency acquires title to certain land and land rights under the authorities provided in CERCLA
section 104 (J) related to remedial cleanup sites. The land rights are in  the form of easements to allow
access to clean up sites or to restrict usage of remediated sites. In some instances, the Agency takes
title to the land during remediation and returns it to private ownership upon the completion of
cleanup. A site with "land acquired" may have more than one acquisition property. Sites are not
counted as a withdrawal until all acquired properties have been transferred.
   As of September 30, 2002, the Agency possesses the following land and land rights:

         Superfund Sites with Easements
         Beginning Balance                         29
         Additions                                   2
         Withdrawals                             	0_
         Ending Balance                           31

         Superfund Sites with Land Acquired
         Beginning Balance                         25
         Additions                                   1
         Withdrawals                                 2
         Ending Balance                            24

HUMAN CAPITAL

   Agencies are required to report expenses incurred to train the public with the intent of increasing
or maintaining the Nation's economic productive capacity. Training, public awareness, and research
fellowships are components of many of the Agency's programs and are effective in achieving the
Agency's mission of protecting public health and the environment, but the focus is on enhancing the
Nation's environmental, not economic, capacity.
   The Agency's expenses related to investments in the Human Capital are outlined below (dollars in
thousands):
                                  FY 1998    FY  1999    FY 2000    FY 2001    FY 2002
     Training and Awareness Grants   39,131      46,630     49,265     48,697     49,444
     Fellowships                    11,084      10,239      9,570     11,451       8,728
     Allocated Expenses             5,273      6,142      6,472       9,744     12,827


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           SUMMARY OF OIG'S AUDIT REPORT
                   Audit Report 2003-1-00045
          Full Electronic Version of Complete Audit Report
                  at http ://www. epa. gov/oigearth
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         INSPECTOR GENERAL'S REPORT ON EPA'S FISCAL 2002 AND 2001
                                  FINANCIAL STATEMENTS

    The Administrator
    U.S. Environmental Protection Agency
       We have audited the consolidating balance sheets of the U.S. Environmental Protection Agency
    (EPA, or the Agency) and its subsidiary funds, the Superfund Trust Fund (Superfund) and All Other
    Appropriated Funds (All Other), as of September 30, 2002 and 2001, and the related consolidating
    statements of net cost, changes in net position and financing, and consolidated statements of net cost
    by goal and custodial activity for the years then ended, and the related combined statement of
    budgetary resources  for the year ended September 30, 2002.  These financial statements are the
    responsibility of EPA's management.  Our responsibility is to express an opinion on these financial
    statements based upon our audit.

       We conducted our audit in accordance with generally accepted auditing standards; the standards
    applicable to financial statements contained in Government Auditing Standards, issued by the
    Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin
    01-02, Audit Requirements for Federal Financial Statements.  These standards require that we plan and
    perform the audit to obtain reasonable assurance about whether the financial statements are free of
    material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts
    and disclosures in the financial statements. An audit also includes assessing the  accounting principles
    used and significant estimates made by management, as well as evaluating the overall financial
    statement presentation. We believe that our audit provides a reasonable basis for our opinion.

       The financial statements include expenses of grantees, contractors, and other federal agencies.
    Our audit work pertaining to these expenses included testing only within EPA. Audits of grants,
    contracts, and interagency agreements performed at a later date may disclose questioned costs of an
    amount undeterminable at this time.  In addition, the United States Treasury collects and accounts for
    excise taxes that are deposited into the Superfund and Leaking Underground Storage Tank Trust
    Funds.1 The United States Treasury is also responsible for investing amounts not needed for current
    disbursements and transferring funds to EPA as authorized in legislation.  Since the United States
    Treasury, and not EPA, is responsible for these activities, our audit work did not cover these activities.

       The Office of Inspector General (OIG) is not independent with respect to amounts pertaining to its
    operations that are presented in the financial statements. The amounts included for the OIG are not
    material to EPA's financial statements. The OIG is organizationally independent with respect to all
    other assets of the Agency's activities.
       In our opinion, the consolidating financial statements present fairly the consolidated and individual
    assets, liabilities, net position, net cost by goal, changes in net position,  reconciliation of net cost to
    budgetary obligations, and custodial activity of the U.S. Environmental Protection Agency and its
    subsidiary funds, the Superfund Trust Fund and All  Other Appropriated Funds, as of and for the years
    ended September 30, 2002 and 2001, and budgetary resources as of and for the year ended
    September 30, 2002, in accordance with generally accepted accounting principles.
    1 The Leaking Underground Storage Tank Trust Fund is included in the All Other Appropriated Funds column of the financial statements.


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Review of EPA's Required Supplemental Stewardship Information, Required Supplemental
Information, and Management Discussion and Analysis

    We inquired of EPA's management as to their methods for preparing Required Supplemental
Stewardship Information (RSSI), Required Supplemental Information, and Management Discussion and
Analysis, and reviewed this information for consistency with the financial statements. However, our
audit was not designed to express an opinion and, accordingly, we do not express an opinion.
    We did not identify any material inconsistencies between the information presented in EPA's
financial statements and the information presented in EPA's RSSI, Required Supplemental Information,
and Management Discussion and Analysis. OMB Bulletin No. 01-09, Form and Content of Agency
Financial Statements, requires agencies to report, as Required Supplemental Information, their
intragovernmental assets and liabilities by federal trading partner.  We did find that, through no fault of
EPA, other federal agencies were unable to reconcile EPA's reported transactions with their records
(see Attachment 2 for additional details on this issue).


Evaluation of Internal Controls

    As defined by OMB, internal control, as it relates to the financial statements,  is a process, affected
by the Agency's management and other personnel, designed to provide reasonable assurance that the
following objectives are met:
       Reliability of financial reporting - Transactions are properly recorded, processed, and
       summarized to permit the timely and reliable preparation of the financial  statements and RSSI in
       accordance with generally accepted accounting principles; and assets are  safeguarded against
       loss from unauthorized acquisition, use, or disposition.

       Reliability of performance reporting - Transactions and other data that support reported
       performance measures are properly recorded, processed, and summarized to permit the
       preparation of performance information in accordance with criteria stated by management.
       Compliance with applicable laws and regulations - Transactions are  executed in
       accordance with laws governing the use of budget authority and other laws and regulations that
       could have a direct and material effect on the financial statements or RSSI; and any other laws,
       regulations, and government-wide policies identified by OMB.

    In planning and performing our audit, we considered EPA's internal controls over financial
reporting by obtaining an understanding of the Agency's internal controls, determined whether internal
controls had been placed in operation, assessed control risk, and performed tests of controls in order
to determine our auditing procedures for the purpose of expressing our opinion  on the financial
statements. We limited our internal control testing to those controls necessary to achieve the
objectives described in OMB Bulletin No. 01-02, Audit Requirements for Federal Financial Statements,
as supplemented by an OMB memorandum dated January 4, 2001, Revised Implementation Guidance
for the Federal Financial Management Improvement Act. We did not test all internal controls relevant
to operating objectives as broadly defined by the Federal Managers' Financial Integrity Act of 1982,
such as those controls relevant to ensuring efficient operations. The objective of our audit was not to
provide assurance on internal controls and, accordingly, we do not express an opinion on internal
controls.
    Our consideration of the internal controls over financial reporting would not  necessarily disclose all
matters in the internal control over financial reporting that might be reportable conditions.  Under
standards issued by the American Institute of Certified Public Accountants, reportable conditions are
matters coming to our attention relating to significant deficiencies  in the design or operation of the

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    internal control that, in our judgment, could adversely affect the Agency's ability to record, process,
    summarize, and report financial data consistent with the assertions by management in the financial
    statements. Material weaknesses are reportable conditions in which the design or operation of one or
    more of the internal control components does not reduce to a relatively low level the risk that
    misstatements in amounts that would be material in relation to the financial statements being audited
    may occur and not be detected within a timely period by employees in the normal course of
    performing their assigned functions. Because of inherent limitations in internal controls, misstatements,
    losses, or noncompliance may nevertheless occur and not be detected. We noted certain matters
    discussed below involving the internal control and its operation that we consider to be reportable
    conditions, although none of the reportable conditions is believed to be a material weakness.

       In addition, we considered EPA's internal control over the RSSI by obtaining an understanding of
    the Agency's internal controls, determined whether these internal controls had been placed in
    operation, assessed control risk, and performed tests of controls as required by OMB Bulletin
    No. 01-02. Our procedures were not designed to provide assurance on these internal controls and,
    accordingly, we do not express an opinion on such controls.

       Finally, with respect to internal controls related to performance measures presented in EPA's Fiscal
    Year 2002 Annual Report, Section 1, Overview and Analysis (which addresses requirements for a
    Management's Discussion and Analysis), we obtained an understanding of the design of significant
    internal controls relating to the existence and completeness assertions, as required by OMB
    Bulletin No. 01-02. Our procedures were not designed to provide assurance on internal control over
    reported performance measures and, accordingly, we do not express an opinion on such controls.

    Reportable Conditions

       Reportable conditions are internal control weakness matters coming to the auditor's attention that,
    in the auditor's judgment, should be communicated because they represent significant deficiencies in
    the design or operation of internal control that could adversely affect the  organization's ability to meet
    the OMB objectives for financial reporting discussed above.

       In evaluating the Agency's internal control structure, we identified seven reportable conditions, as
    follows:
          Documentation and Approval of Journal Vouchers

          EPA's Financial Reports and Analysis Branch did not always adequately document journal
          vouchers and standard vouchers prior to the transactions being entered into the Integrated
          Financial Management System (IFMS).  For example, of 447 transaction documents reviewed,
          39 did not have adequate backup to support entries, and 3 did not have appropriate signatures.
          After performing additional work we were able to determine that most of the entries appeared
          to be correct. However, we are concerned about the vulnerability associated with executing
          transactions without proper documentation and supervisory review and approval.  The review
          and approval process would reduce the potential for errors occurring.
          Reconciling Superfund State Cost Share Contracts

          EPA did not reconcile the unearned revenue from State Superfund Contracts for  FY 2002.
          When EPA assumes the lead for a Superfund site remedial action in a state, the State Superfund
          Contract clarifies EPA and state responsibilities.  EPA records unearned revenue when a state is
          billed for its share of the estimated remedial action costs on the site and recognizes earned
          revenue as it incurs costs. However, EPA's Financial Management Division did not reconcile
          the unearned revenue from State Superfund Contracts to the general ledger liability account -
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       Unearned Advances, Nonfederal. This was because EPA relied on its accounting system's
       internal controls and regional year-end adjustments to unearned revenue. As a result, EPA
       could not ensure the accuracy of the State Superfund Contract unearned revenue accounts.
       Additional work performed by the OIG enabled the Agency to post adjustments to reduce the
       variance.

       Reconciliation of Deferred Cashouts

       EPA did not properly reconcile  Superfund cashouts at the regional level. Cashouts represent
       money that potentially responsible parties agree to pay EPA for cleanups. We found that
       EPA's regions did not periodically reconcile the uncollected receivables for Superfund
       cashouts to the general ledger liability accounts Deferred  Cashouts Federal and Deferred
       Cashouts Nonfederal. This occurred because the Financial Management Division did not
       require the reconciliations or provide guidance. As a  result, the regional finance offices were
       not able to reconcile their deferred cashouts and could not ensure the accuracy of the
       accounts, which totaled approximately $44 million. While the combined net difference of
       the variances were  under $2 million, the  individual variances in the regional offices were
       significant and could result in a material misstatement if proper reconciliations are not
       performed.
       IGMS Security Plan Compliance with Federal Requirements

       The Integrated Grants Management System (IGMS) security plan did not adequately describe
       the security requirements or the controls used to protect the system and its data. The IGMS
       security plan reflected only 41 percent of the 140 elements required by the National Institute
       of Standards and Technology's (NIST) Special Publication  800-18. In addition, the IGMS
       security plan included only 50 percent of the 30 Core Financial System technical requirements
       mandated by the Joint Financial Management Improvement Program (JFMIP). The IGMS
       security plan was missing many key elements required by federal regulations because the
       Director for Grants and Debarment used EPA's Information Security Planning Guidance as a
       benchmark for developing the IGMS security plan. Management agreed that addressing NIST
       and JFMIP system requirements would significantly raise the bar for evaluating security plans.
       As such, management has established a schedule for addressing unmet requirements.

       Automated Application Processing Controls
       We continue  to be unable to assess the adequacy of the automated internal control structure
       as it relates to automated input, processing, and output controls for IFMS. IFMS applications
       have a direct and material impact on the  Agency's financial statements. Therefore, an
       assessment of each application's automated input, processing, and output controls, as well as
       compensating manual controls, is necessary to determine  the reliance we can place on the
       financial statements.
       Capitalization of Superfund Contractor-Held Property

       EPA did not capitalize and depreciate approximately $33.3 million in Superfund contractor-
       held  property in accordance with Statement of Federal Financial Accounting Standards
       (SFFAS) No. 6, Accounting For Property, Plant, and Equipment.  Instead, the Agency
       expensed all costs for contractor-held property used for Superfund site-specific projects. The
       Agency explained that it expensed property on these Superfund remediation sites because
       the property would remain at the site and not be useful on future sites due to  contamination.
       The $33.3 million cumulative amount included approximately $10.2 million for fiscal 2002
       and $23.1 million from prior years.  By expensing these costs, the Agency is understating the
       value of its property in the possession of contractors  and, therefore, the value  of general

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          Property, Plant, and Equipment. Subsequently, the Agency adjusted the financial statements
          to capitalize contractor-held property used for Superfund site-specific projects.

          Revenue Recognition on Cashouts
          The Financial Management Division overstated by $53 million a fiscal 2001 on-top financial
          statement adjustment for earned revenue from past costs in Superfund special accounts.  This
          overstatement also affected the fiscal 2002 Superfund financial statements by understating
          liabilities and overstating income. EPA did not restate the financial statements because it lacked
          adequate internal controls for reporting corrections of errors. As a result, EPA's fiscal 2001
          and 2002 financial statements would have  been materially misstated  without prompting by
          the OIG.
       Attachment 1 of the OIG's complete audit report describes each of the above reportable conditions
    in more detail and contains our recommendations on actions that should be taken to correct these
    conditions. We will also be reporting other less significant matters involving the internal control
    structure and its operation in a separate management letter.

    Comparison of EPA'S FMFIA Report with Our Evaluation of Internal Controls

       OMB Bulletin No. 01-02, Audit Requirements for Federal Financial Statements, requires us to
    compare material weaknesses disclosed during the audit with those material weaknesses reported in
    the Agency's Federal Managers' Financial Integrity  Act (FMFIA or Integrity Act) report that relate to the
    financial statements and identify material weaknesses disclosed by audit that were not reported  in the
    Agency's FMFIA report.  EPA reports on Integrity Act decisions in EPA's Fiscal Year 2002 Annual
    Report. For a discussion on Agency reported Integrity Act material weaknesses and corrective action
    strategy, please refer to EPA's Fiscal Year 2002 Annual Report, Section III, FY 2002 Management
    Accomplishments and Challenges.

       For reporting under FMFIA, material weaknesses are defined differently than they are for financial
    statement audit purposes.  OMB Circular A-123, Management Accountability and Control, defines a
    material weakness as a deficiency that the Agency head determines to be significant enough to be
    reported outside the Agency.

       For financial statement audit purposes, OMB defines material weaknesses  in internal control as
    reportable conditions in which the design or operation of the internal control does not reduce to a
    relatively low level the risk that errors, fraud, or noncompliance in amounts that would be material in
    relation to the financial statements or RSSI being audited, or material  to a performance measure or
    aggregation of related performance measures, may occur and not be detected within a timely period
    by employees in the normal course of performing their assigned functions.  Our audit did not
    disclose any material weakness that was not reported by the Agency as part of the Integrity Act
    process.

       The Agency did not report any material weaknesses for fiscal 2002 as part of the Integrity Act
    process.


    Tests of Compliance  with Laws and Regulations

       EPA management is responsible for complying with laws and regulations applicable to the
    Agency. As part of obtaining reasonable assurance about whether the Agency's financial statements
    are free of material misstatement, we  performed tests of its compliance with certain provisions of
    laws and regulations, noncompliance  with which  could have a direct and material effect on the
    determination of financial statement amounts, and certain other laws and  regulations specified in


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OMB Bulletin No. 01-02, Audit Requirements for Federal Financial Statements, as supplemented by
an OMB Memorandum dated January 4, 2001, Revised Implementation Guidance for the Federal
Financial Management Improvement Act. The OMB guidance requires that we evaluate compliance
with federal financial management system requirements, including the requirements referred to in
the Federal Financial Management Improvement Act (FFMIA) of 1996. We limited our tests of
compliance to these provisions and did not test compliance with all laws and regulations applicable
to EPA.

    Providing an opinion on compliance with certain provisions of laws and regulations was not an
objective of our audit and, accordingly,  we do not express such an opinion. There are a number of
ongoing investigations involving EPA's grantees and contractors that could disclose violations of laws
and regulations, but a determination about these cases has not been made.
    None of the noncompliances discussed below would result in material misstatements to the audited
financial statements.

Federal Financial Management Improvement Act Noncompliance

    Under FFMIA, we are required to  report whether the Agency's financial management systems
substantially comply with the federal financial management systems requirements, applicable federal
accounting standards, and the United  States Government Standard General Ledger at the transaction
level. OMB Bulletin No.  01-02, as supplemented by an OMB memorandum dated January 4, 2001,
Revised Implementation Guidance for the Federal Financial Management Improvement Act,
substantially changed the guidance for determining whether or not an Agency substantially complied
with the federal financial management systems requirements, applicable federal accounting standards,
and the United States Government Standard General Ledger at the transaction level. The document is
intended to focus Agency and auditor activities on the essential requirements of FFMIA.  The
document lists the specific requirements of FFMIA, as well as factors to consider in reviewing systems
and for determining substantial compliance with FFMIA. It also provides guidance to Agency heads
for developing corrective action plans to bring an Agency into compliance with FFMIA.  To meet the
FFMIA requirement, we performed tests of compliance with FFMIA section 803(a) requirements and
used the OMB guidance,  revised on January 4,  2001, for determining substantial noncompliance with
FFMIA.

    The results of our tests did not disclose any instances where the Agency's financial management
systems did not substantially comply with the applicable federal accounting standard.
    We recognize improvements the OCFO has made in cost accounting and believe that while there
are still noncompliance issues with cost  accounting, those noncompliances no longer meet OMB's
definition of substantial noncompliance. However, the Agency was not in compliance with Statement
of Federal Financial Accounting Standards No. 4 that requires EPA to provide full costs per output to
management in a timely fashion.

    We identified three other FFMIA noncompliances, related to reconciliation of intragovernmental
transactions, Contract Payment System compliance with JFMIP system requirements, and completion of
the fiscal 1999 FFMIA remediation plan.  However, these noncompliances do not meet the definition
of substantial noncompliance as described in OMB guidance.
    Our tests also disclosed two other instances of noncompliance with laws and regulations, related to
the Food Quality Protection Act of 1996 and the Treasury Financial Manual for preparation of SF 224
"Statement of Transactions."

    Attachment 2 of the OIG's complete audit  report provides additional details, as well as our
recommendations on actions that should be taken on these matters. We will also be reporting other

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    less significant matters involving compliance with laws and regulations in a separate management
    letter.
    Prior Audit Coverage
       During previous financial or financial-related audits, weaknesses that impacted our audit objectives
    were reported in the following areas:
    •   Complying with FFMIA requirements.
    •   Reconciliation and Reporting intragovernmental transactions, assets and liabilities by federal trading
       partner.
    •   Complying with SFFAS No. 4, including accounting for the cost to achieve goals and identifying
       and allocating indirect costs.
    •   Accounting for capitalized property.
    •   Recording accrued liabilities for grants.
    •   Interagency Agreement invoice approval process.
    •   Documenting EPA's IFMS.
    •   Complying with federal financial management system security requirements.
    •   Accounting for payments for grants funded from multiple appropriations.
    •   Documentation and approval of journal vouchers.
    •   Timely repayment of Asbestos Loan Debt to Treasury.
    •   Assessing automated application processing controls for the IFMS.
    •   Compliance of financial system security plans.
       Attachment 3 of the OIG's complete audit report, Status of Prior Audit Report Recommendations,
    summarizes the current status of corrective actions taken on prior audit report recommendations with
    corrective actions in process.
       The Chief Financial Officer,  as the Agency's Audit Follow-up Official, oversees EPA's follow-up on
    audit findings and recommendations, including resolution and implementation of corrective actions.
    For these prior audits, final action occurs when the Agency completes implementation of the
    corrective actions to remedy weaknesses identified in the audit.
       We acknowledge that many  actions and initiatives have been taken to resolve prior financial
    statement audit issues.  We also  recognize that the issues we have  reported are complex, and require
    extensive, long-term corrective actions and coordination by the Chief Financial Officer with various
    Assistant Administrators, Regional Administrators, and Office Directors before they can be completely
    resolved. A few issues have been unresolved for many years. The OIG will continue to work with
    the Office of Chief Financial Officer in helping to resolve all audit  issues resulting from our financial
    statement audits.
    Agency Comments and OIG Evaluation
       In a memorandum dated January 22, 2003, the Office of the Chief Financial Officer responded
    to our draft report. The OCFO generally concurred with our findings and is in the process of

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implementing corrective actions.  However, the OCFO did expand on comments in some areas to
reflect their view that they have made substantial improvements.

   The OCFO believes that they are complying with the Managerial Cost Accounting Standard by
preparing quarterly subobjective level reports, taking actions to execute the Agency's plan for
expanding cost information, and moving from 10 goals to 5 in the new Strategic Plan. We recognize
improvements that the Agency has made in the area of Cost Accounting and believe that the new plan
for expanding cost information will eventually provide manager's the cost information they need to
manage. However, we do not agree with OCFO that the subobjective level reports provide useful,
timely, and full cost information.

   The OCFO also stated that they developed a new process and report for reconciling the Contract
Payment System with IFMS that they believe satisfies the OIG's concerns. The OIG did not review the
new process and report because they were developed after we completed our work.

   The rationale for our conclusions and a summary of the Agency comments are included in the
appropriate sections of this report, and the Agency's complete response is included as Appendix II to
the complete audit.

   This report is intended solely for the information and use of the management of EPA, OMB, and
Congress, and is not intended to be and should not be used by anyone other than these specified
parties.
Paul C. Curtis
Assignment Manager
Financial Audit Division
Office of Inspector General
U.S. Environmental Protection Agency
January 22, 2003
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                                              APPENDIX A:
              COMPREHENSIVE  LISTING OF PROGRAM EVALUATIONS
    EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
            AND SCOPE
 Goal 1, Objectives 1 and 2

 Environmental Protection: The
 Federal Government Could Help
 Communities Better Plan for
 Transportation That Protects Air
 Quality

 As Congress begins the
 reauthorization of the surface
 transportation programs, it •will
 consider whether to continue or
 revise these initiatives. To help
 inform this work, the General
 Accounting Office (GAO)
 comments on (1) the impacts of
 surface transportation on air
 quality; (2) the benefits and limits
 of key federal surface
 transportation and clean air
 requirements  and programs
 designed to mitigate these impacts;
 and (3) 'ways  the federal
 government can use these
 requirements  and programs to
 further reduce these impacts.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
GAO had three key findings:
(1) air pollution from vehicle
emissions will continue to pose
health and environmental risks
to some communities, despite
new technology and emissions
limits; (2) federal laws and
programs linking transportation
to improved air quality have
helped targeted communities
control pollution but could be
more comprehensive; and
(3) planners have identified
additional ways the federal
government could help further
limit transportation impacts on
air quality, including financial
incentives, technical assistance,
and public outreach.
The program
recognizes the
importance of GAO's
findings and where
appropriate will
incorporate them into
program planning.
                        AUTHOR, REPORT
                      NUMBER, ISSUE DATE
                         AND WHERE TO
                         OBTAIN A COPY
Testimony before the
Committee on
Environment and
Public Works, U.S.
Senate

GAO-02-988T

July 30,  2002

Located  at:
http: //www. gao. gov
 Goal 1, Objective  1

 Consistency and Transparency
 in Determination of EPA's
 Anticipated Ozone Designations

 The purpose of this Office of the
 Inspector General (OIG) review
 •was to determine whether each of
 the EPA regional offices used a
 specific process, method, or
 approach for  obtaining stakeholder
 input for the 1-hour ozone
 designations;  •what process,
 method, or approach •was used for
 the preliminary analysis of the
 8-hour ozone designations; and the
 potential usefulness of the Multi-
 criteria Integrated  Resource
 Assessment (MIRA) decision
 approach.
The OIG found that the
guidance for the preliminary
8-hour ozone designations is
more comprehensive than the
approach EPA used in 1990,
•with respect to stakeholder
participation and in terms of
providing criteria that states
should consider if proposing
larger or smaller metropolitan
nonattainment boundaries. The
OIG, however, states that the
preliminary 8-hour ozone
guidance did not provide a
methodical process for the
regions and states to use when
considering the 11 criteria.
Without a consistent regional
approach, the ozone designa-
tions might not be fair or
equitable throughout the
Nation. The OIG recommends
that EPA use an approach
similar to the MIRA approach
used by Region 3 to address the
preliminary 8-hour ozone
designations, noting that this or
a similar multi-criteria approach
could be useful for all EPA
regions.
EPA's Office of Air
and Radiation (OAR)
stated in its response
to the draft report
that it does not agree
•with the recommen-
dation in the report
and maintains that
MIRA cannot be used
as the sole tool for
designating areas
under the Clean Air
Act. OAR believes
that the primary
approach for
assigning designa-
tions should be a
case-by-case consid-
eration and evalua-
tion of each area's
unique situation and
circumstances. OAR
completed its final
response to the
August 15, 2002,
report in October
2002.
U.S. EPA, Office of
the Inspector General

2002-S-00016

August 15, 2002

Located at:
http://www.epa.gov/
oigearth/
ereading room/
list901/Mira.Final.Q8-
15.pdf
www. epa.gov/ocfo
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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 1, Objective 1

      Air: Open Market Trading
      Program for Air Emissions
      Needs Strengthening

      The objectives of the OIG's
      program  evaluation were to
      determine (1) whether EPA's basis
      for proposing to approve selected
      air emissions open market trading
      (OMT) programs was adequate;
      (2) the extent of use of EPA-approved
      emissions quantification protocols
      and whether accurate, reliable data
      underlie  OMT trades in these
      programs; and (3) the extent of EPA
      and state  compliance assurance,
      enforcement, and oversight
      activities  relative to OMT trades.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The OIG made several
recommendations to the OAR
based on its review of OMT
programs in Michigan and New
Jersey, including that EPA:

•Develop and propose federal
  regulations for OMT pro-
  grams.

•Ensure that shutdown credits
  are not allowed to be traded
  in OMT programs.

• Require the use of EPA- and
  state-approved emissions
  quantification protocols prior
  to allowing trades to occur.

•Develop and require the use
  of a risk-based targeting
  approach for federal and state
  compliance assurance,
  enforcement, and oversight of
  OMT trades.
EPA provided
comments on the
draft report on
September 26, 2002.
EPA communicated
its final response
verbally to the IG
and a final written
response was sent to
the IG,  at the end of
January 2003.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
the Inspector General

2002-P-00019

September 30, 2002

Located at:
http://www.epa.gov/
oigearth/
ereading room/
omt.pdf
      Goal 1, Objectives 1 and 2

      Environmental Protection:
      Federal Incentives Could Help
      Promote Land Use That Protects
      Air and Water Quality

      Congress asked GAO to examine
      the extent to which local
      transportation planners, state air
      quality managers, and water quality
      officials consider the impacts of
      land use on the environment and to
      identify actions federal agencies
      can take to help these officials
      assess land use impacts.
In its report, GAO recommends
several key actions:

•EPA should target available
  financial incentives in ways
  that encourage transportation
  planners, environmental
  officials, and local decision
  makers to collaboratively
  consider the  impacts of
  transportation and land use on
  air quality and should take
  more action to educate the
  public and local decision
  makers about the air quality
  impacts of their transportation
  and land use decisions.

•Both EPA and the Department
  of Transportation should
  provide more access to
  technical tools, such as staff
  and user-friendly models that
  integrate transportation,
  environmental protection, and
  land use, and better market
  these tools to transportation
  and local decision makers.
The program
recognizes the
importance of GAO's
findings and where
appropriate will
incorporate them into
program planning.
General Accounting
Office

GAO-02-12

October 31,  2001

Located at:
http: //www. gao. gov
A-2
                                                                www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 1, Objectives 1 and 2

 Public Participation in
 Louisiana's Air Permitting
 Program and EPA Oversight

 At EPA's request, the OIG
 performed a review of the public
 participation process in Louisiana,
 which is covered by EPA Region 6.
 Specifically, the  OIG performed a
 review of the Louisiana Department
 of Environmental Quality's (LDEQ)
 Title V program. The review
 evaluated whether LDEQ allows for
 effective public participation in the
 implementation of its air permitting
 process and whether EPA Region 6
 provides effective oversight of
 LDEQ's air permitting program.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The OIG found that LDEQ
minimally met the public
participation requirements for air
permitting. However, the OIG
states that LDEQ's records were
often unorganized, incomplete,
missing, or inaccessible. In
addition, LDEQ did not clearly
define the role of its public
participation group;  as a result,
the public was unable to access,
or had difficulty accessing, key
records needed to effectively
review, evaluate, and comment
on facilities' proposed opera-
tions, thus hindering the public's
ability to effectively  comment on
proposed permits. The  OIG also
found that EPA Region 6 did not
perform adequate oversight of
LDEQ's public participation
activities. The OIG said that
Region 6 generally did not
review public comments  before
LDEQ issued permits because the
Region did not require LDEQ to
provide such comments to the
Region until after the permit had
been  issued. It also asserted that
Region 6 did not take a proactive
approach to oversight of public
participation issues or perform a
thorough on-site review at LDEQ.
By November 5, 2002,
EPA will have in
place an Action Plan
that responds to the
OIG report. In
addition, Region 6
will conduct an in-
depth program
review by the end of
December 2002.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
the Inspector General

01351-2002-P -00011

August 7, 2002

Located at:
http://www.epa.gov/
oigearth/
ereading room/
2002P00011.pdf
 Goal 1, Objectives 1 and 2

 Evaluation Report: EPA and State
 Progress in Issuing Title V
 Permits

 The objectives of this OIG evaluation
 •were to identify (1) factors delaying
 the issuance of Title V permits by
 selected state and local agencies
 and (2) practices contributing to
 more timely issuance of permits by
 selected state and local agencies.
The basic findings of this OIG
report are as follows: (1) lack
of state resources, complex EPA
regulations, and conflicting
priorities contributed to  permit
delays; (2) EPA oversight and
technical assistance had  limited
impact; and (3) management
support, partnerships, and site
visits contributed to more
timely issuance of Title V
permits.
In general, OAR
agreed with the
OIG's conclusion that
more could be done
to improve EPA and
state progress in
issuing Title V
permits. On July 11,
2002, EPA issued a
memorandum to the
OIG that responds to
the OIG's recommen-
dations and docu-
ments the OAR action
plan for implement-
ing the recommenda-
tions. OAR has
continued to support
the implementation
of state operating
permit programs, and
at the end of FY 2002
more than 14,000
sources (73 percent)
are operating under
Title V permits.
U.S. EPA, Office of
the Inspector General

2002-P-00008

March 29, 2002

Located at:
http://www.epa.gov/
oigearth/
ereading room/
TitleV.PDF
www. epa.gov/ocfo
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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                  AND SCOPE
      Goal 1, Objectives 1, 2, and 4

      Estimating the Public Health
      Benefits of Proposed Air
      Pollution Regulations

      In 2000 Congress directed EPA to
      have the National Academy of
      Sciences (NAS) conduct a study on
      health benefits analysis methodology
      and recommend to the Agency a
      common methodology to be
      followed in all future analyses.
      Specifically, the Committee was asked
      to do the following: (1) consider
      issues important in estimating the
      health-risk-reduction benefits of air
      pollution regulations, including the
      scientific data, risk assessment
      approaches, populations  affected,
      baseline used, assumptions, analysis
      of uncertainty, and identification of
      key indicators of exposure and
      population health status;  (2) critically
      review methods used for recent
      estimates of regulatory health benefits;
      (3) identify methods used by federal
      regulatory agencies and others,
      recommend standard good-practice
      guidelines and principles for
      estimating health benefits, and
      delineate the data-gathering required
      to better assess health benefits in the
      future; (4) identify approaches to
      estimating regulatory health benefits
      when relevant information is
      limited; and (5) 'where applicable,
      recommend areas for further
      research and monitoring.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The findings of the National
Research Council are centered
around the key methodological
issues in benefits analyses,
including (1) regulatory
options, boundaries, and
baselines; (2) exposure assess-
ment; (3) health outcomes;
(4) concentration-response
function; (5) analysis of
uncertainty; and (6) presenta-
tion of results. Overall, the
committee found that EPA has
generally used a reasonable
framework for conducting
health benefits analysis when
estimating the health benefits of
proposed air pollution control
regulations. In addition, the
committee made recommenda-
tions on how EPA's implemen-
tation of the steps could be
improved.
Although there is no
formal response to this
study, EPA is
encouraged by NAS's
affirmation of the
methodology that EPA
uses in its health
benefits analyses of air
pollution regulations.
Estimating the health
benefits of EPA's rules
is an important
component of the
Agency's air quality
management program,
and EPA continuously
•works  to ensure that it
uses the best available
methods to determine
how its actions •will
protect the American
public. The report
confirms that EPA is
doing a good job of
analyzing the benefits
of its regulations and
gives the Agency a
number of suggestions
on how to further
improve those
analyses. EPA will
study the recommend-
ations  and talk further
•with Academy
members as it works
to make its health
benefits analyses the
best possible.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
National Academies,
National Research
Council, Committee
on Estimating the
Health-Risk-Reduction
Benefits of Proposed
Air Pollution
Regulations and Board
on Environmental
Studies and
Toxicology

September 2002

Located at:
http://www.nap.edu/
books/0309086094/
html/
      Goal 1, Objectives 1, 2, and 4

      Tribal Air Capacity Evaluation

      The purpose of this evaluation
      •was to assess how effectively the
      program is using its resources to
      achieve the key objectives of
      building tribal capacity, addressing
      air quality problems, and
      providing the necessary tools.

      Contributors included numerous
      tribes across the United States;
      several tribal non-governmental
      organizations (the American
      Indian Science and Engineering
      Society, the Institute  for Tribal
      Environmental Professionals, and
      the National Tribal Environmental
      Council); and EPA headquarters,
      regional, and program office staff.
The evaluation findings focused
partly on the success the program
has had since  1995, increasing
the number of participating
tribes from 9 to 117, and partly
on the significant remaining
needs for support, expertise,
and coordination. The report
provided 30 recommendations
in the areas of building capac-
ity, guidance and policy
development,  resources, and
technical assistance.
Resource issues •were noted as
constraints, but not specifically
addressed.
Many of the
recommendations
•were being imple-
mented before the
evaluation was
complete, and several
more will be imple-
mented over time.
EPA's  Office of Air
and Radiation (OAR) is
also holding discus-
sions with regional
offices to ensure that
the appropriate
recommendations are
adopted. Most
recommendations
have been or •will be
adopted or incorpo-
rated into the program
in an ongoing manner.
Industrial Economics,
Incorporated, and
Ross & Associates

June 2002

Located at:
http://www. epa.gov/
oar/tribal/
announce .html
A-4
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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 1, Objectives 1, 2, and 4

 Memorandum Report: Clean Air
 Design Evaluation Results

 The purpose of this evaluation was
 to (1) identify and document the
 design of the Clean Air Program to
 achieve its Government
 Performance and Results Act
 (GPRA) goals; (2) identify any
 opportunities for improving the
 design of the program; and
 (3) recommend specific evaluations
 and audits to be conducted over a
 period of time  to evaluate EPA's
 success in meeting  Clean Air goals.
 FINDINGS OF THE EVALUATION     PLANNED RESPONSE
The OIG report presents
several broad findings: (1) EPA
might not be able to demon-
strate achievement of long-term
strategic goal under the current
GPRA structure; (2) outcome
information is available but not
used within the GPRA frame-
work for the Acid Rain Goal;
(3) EPA's Annual Performance
Report could be more focused
on environmental outcomes;
and (4) the role of enforcement
is not linked to the Clean Air
program.
EPA has made no
formal response to the
OIG report. OAR is
continuing to work on
demonstrating the link
between annual work
and long-term strategic
goals in various
documents. The work
under way to revise
the Agency's Strategic
Plan will provide the
key platform for
improving these
linkages.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
the Inspector General

2002-M-000013

April 23, 2002

Located at:
http://www.epa.gov/
oigearth/
ereading room/
AirEvalQ42302.pdf
 Goal 1, Objective 4

 Air Pollution: Emissions from
 Older Electricity Generating
 Units

 In May 2001 the administration
 issued National Energy Policy, a
 report that cited needs forecast by
 the Energy Information
 Administration for additional power
 plants over the next 20 years. In
 September 2001 the Committee on
 Environment and Public Works
 asked GAO to provide information
 on air emissions from future
 electricity generation. This report
 transmits information on emissions
 in 2000 (the most current data
 available at the time) from existing
 units that burned fossil fuel.
In this report, GAO identified
(1) the proportions of sulfur
dioxide, nitrogen oxides, and
carbon dioxide  emitted and
electricity generated by older
fossil-fuel units  (as a group)
relative to newer units (as a
group) in 2000, as well as the
locations and type of fuel burned
by units responsible for the
majority of the emissions, and
(2) the proportions of older
fossil-fuel units  that, in 2000,
emitted sulfur dioxide and
nitrogen oxides at rates above
the new source standards
applicable to newer units, the
location of these additional
emissions, and the type of fuel
burned by these units. GAO
analyzed data on air emissions
and electricity generation from
units with a generating capacity
greater than 15  megawatts. GAO
obtained these data from Platts/
RDI, a private vendor that
integrates data on air emissions
from EPA •with data on electricity
generation and  the age of
individual units from the  Energy
Information Administration.
Although these data were  the most
comprehensive available, they
might understate the total  emis-
sions from fossil-fuel units because
some units are not required to
report their emissions to regulatory
agencies. The units that did not
report emissions, however,
generated less than 1 percent of
the electricity from older units in
2000. Of the 1,396 operating older
units,  1,157 (83 percent) reported
emissions data in 2000.
There is no planned
response.
General Accounting
Office

GAO-02-709

June 12, 2002

Located at:
http: //www. gao. gov
www. epa.gov/ocfo
                                                                                A-5

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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 2, Objective 1

      Drinking Water: Key Aspects of
      EPA's Revolving Fund Program
      Needed to Be Strengthened

      The purpose of the evaluation •was
      to assess (1) the accuracy of EPA's
      assessment of drinking •water
      infrastructure needs; (2) EPA's
      efforts to monitor states'
      implementation of the Drinking
      Water State Revolving Fund
      (DWSRF) program; and (3) the
      extent to which states use the
      optional disadvantaged assistance
      provision in the  DWSRF program.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
GAO reported that (1) users of
the needs assessment cannot
get a sense of the estimate's
accuracy because EPA did not
calculate the level of precision
achieved; (2) EPA is not taking
full advantage of oversight tools
because it has not yet  finalized
and consistently applied
financial management  and other
program measures to assist in
the annual review of state
performance; (3) untimely and
inconsistent preparation of
program evaluation report
reviews has hampered the
Agency's ability to identify
common or recurring problems;
and (4) gaps in the financial
audit coverage and a limited
review of the completed audits
undermine EPA's ability to fully
assess the financial conditions
of state DWSRF programs.

GAO also noted that states
•were making limited use of the
disadvantaged assistance
provisions under the DWSRF,
but made no recommendations
in this area.
First, EPA has gone to
great lengths to ensure
accuracy in the surveys
by requiring extensive
documentation for
reported needs and
costs, conducting site
visits to small systems,
and performing quality
assurance reviews of
the responses to the
survey questionnaire.
With respect to the
second and third
findings, EPA has
finalized financial
measures and is
developing program
measures to assist in
program oversight and
is also working with
its regional offices to
address review
shortcomings identi-
fied by GAO. Finally,
the Office of Water is
•working with the
Inspector General to
initiate DWSRF audit
coverage and improve
interoffice  communica-
tion of results of
independent audit
quality reviews.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
General Accounting
Office

GAO-02-135

January 24, 2002

Located at:
http: //www. gao. gov
A-6
                                                                www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 2, Objectives 1, 2, and 3

 A Review of Statewide Watershed
 Management Approaches

 EPA's Office of Water (OW)
 conducted an evaluation of eight
 states'  experiences with different
 models of the statewide watershed
 management approach. The study
 focused on the impact of the
 •watershed approach on federal and
 state program management and
 coordination, public involvement,
 and the implementation of six core
 programs under the CWA and the
 Safe Drinking Water Act (SDWA).
 The evaluation approach consisted
 of discussion sessions with managers
 and staff in selected states, EPA
 regions, and state •watershed
 organizations.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The evaluation found that most
state managers •were positive
about their states' experience
with the •watershed approach
and identified specific benefits:
(1) an increase in the quality
and quantity of monitoring data,
(2) better-focused •water quality
assessments and  planning,
(3) more efficient and equitable
permitting programs,
(4) improved coordination and
integration of state •water
program functions and goals,
and (5) greater public involve-
ment in state water quality
program decision making. State
water quality monitoring and
National Pollutant Discharge
Elimination System (NPDES)
permitting programs are most
involved and have received the
greatest benefits  from a state-
wide watershed approach. States
identified several constraints,
however, to effective implemen-
tation of statewide watershed
approaches: (1) programmatic
requirements under the CWA
and SDWA can sometimes
conflict with states' efforts to
plan and implement core
programs on a basin or •water-
shed basis and (2) more EPA
involvement at the watershed
level •would enhance states'
•watershed efforts and provide
EPA with a better understanding
of local/basin issues.
EPA's OW plans to
integrate a number of
the study's recom-
mendations into its
current strategies and
planning documents.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
Water

April 2002

Located at:
http://www.epa.gov/
owow/watershed/
approaches  fr.pdf
www. epa.gov/ocfo
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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 2, Objective 2

      2002 National Estuary Program
      Implementation Review

      The purpose of this evaluation was
      to assess the progress made by 19
      of 28 National Estuary Programs in
      implementing their Comprehensive
      Conservation Management Plans
      developed under section 320 of the
      CWA. The findings are used to
      determine whether an estuary
      program is eligible for continued
      funding under CWA section 320.
      The next implementation  review
      for these estuary programs will take
      place in 2005.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The evaluation findings
identified one estuary program
that was required to respond to
substantial concerns raised by
EPA in order to be eligible for
continued funding under
section 320. The  other 18 estu-
ary programs were found to be
making substantial progress
implementing their manage-
ment plans and therefore  are
eligible for continued funding.
The review results are docu-
mented in letters to each of the
estuary programs and include
EPA's recognition of outstand-
ing achievements as well  as
identification of challenges each
program faces in its continued
efforts to implement manage-
ment plans to protect and
restore its estuary.
Some challenges are
common to most, if
not all, of the estuary
programs. For ex-
ample, most estuary
programs are strug-
gling with developing
a user-friendly system
to track their progress
in implementing their
management plans.
Another common
challenge is  finding
the  financial resources
needed to implement
the  numerous recom-
mended estuary
protection and
restoration action plans
contained in the
management plans. To
help the  estuary
programs address
common challenges
such as these, EPA
provides training and
technical assistance.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
Various headquarters
and regional NEP
Coordinators

The 2002 National
Estuary Program
Implementation
Review results are
documented in letters
addressed to each of
the estuary programs.
Copies of the letters
are kept on file in the
Coastal Management
Branch (CMB) of EPA.

Contact:
202-566-1240
      Goal 5 Objective 1

      Information Technology—
      Comprehensive Environmental
      Response, Compensation, and
      Liability Information System
      (CERCLIS) Data Quality Report

      The objective of this audit was to
      determine whether CERCLIS data
      for active and archived sites were
      accurate and reliable (timely,
      complete, and consistent).
This audit evaluated the accuracy,
completeness, timeliness, and
consistency of the data entered
into CERCLIS. The weaknesses
identified were caused by the
lack of an effective quality
assurance  process and adequate
internal controls over CERCLIS
data quality.

The report provided 11 recom-
mendations to improve controls
over CERCLIS data quality.
OSWER concurs with
the recommendations
contained in the audit.
Due to the extended
period of time since
the inception of this
audit, many of the
identified problems
have been corrected
or actions that would
address these recom-
mendations are under
•way.
U.S. EPA, Office of the
Inspector General

2002-P-00016

September 30, 2002

http://www.epa.gov/
oigearth/eroom.htm
      Goal 5, Objective  1

      Lessons Learned in the
      Aftermath of September 11, 2001

      Challenges Faced During the
      Environmental Protection
      Agency's Response to Anthrax
      and Recommendations for
      Enhancing Response Capabilities:
      A Lessons Learned Report

      The reports were commissioned so
      EPA could examine the  successes
      and shortfalls of technical and
      oversight activities following the
      responses to September 11 and the
      detection of anthrax contamination
      across the United  States and apply
      that knowledge to future responses.
These reports conclude that
overall the Agency did an
excellent job responding to
these unprecedented acts of
terrorism and successfully
carried out its mission to
protect human health and the
environment.

Recommendations were
provided in the reports to help
improve the Agency's response
to similar situations in the
future.
The Agency has
taken numerous key
actions to respond to
the recommendations
in the reports. In
addition, many
recommendations
•were incorporated
into the Agency's
Strategic Plan for
Homeland Security,
•which •was released
October 2, 2002.
U.S. EPA, Office of
Emergency and
Remedial Response

September  11 Report:
February 2002

Anthrax Report:
September  2002

Contact:

Barbara Grimm-
Crawford
202-566-0177

Helen DuTeau
703-603-8761
A-8
                                                               www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 5, Objective 1

 RCRA Hazardous Waste Delisting:
 The First 20 Years—Outcomes
 and Impacts of the Hazardous
 Waste Delisting Program Under
 the Resources Conservation and
 Recovery Act (RCRA)

 This evaluation describes the
 rationale for conducting a program
 evaluation, the results and outcomes
 of the  delisting program. This
 evaluation was undertaken as part
 of EPA's implementation of GPRA.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The delisting program distinctly
demonstrates a significant
economic impact: reductions in
deadweight loss to the economy
totaling over $100 million each
year. Continued efficiencies and
refinements  in the delisting
petition review process should
only improve those results. The
environmental  impacts are not
as clear, although EPA does not
have reason to suspect that
delisted •wastes are causing
environmental  problems.
None currently
identified.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
Solid Waste

EPA-530-R-02-014

June 2002

http://www.epa.gov/
epaoswer/hazwaste/
id/delist/index. htm
 Goal 5, Objective 1

 Superfund Mega-Sites

 The preliminary research was
 directed toward answering the
 following questions: (1) How does
 achievement of the new GPRA
 environmental indicators for
 Superfund affect management of
 mega-site cleanups? (2) What
 resources are being spent and have
 been spent? What criteria are used
 in determining when and how
 resources are to be spent? How
 effectively are resources being
 spent?  (3) What management
 practices have been used at
 mega-sites? Which management
 practices are best in efficiency,
 effectiveness, and cost?
The evaluation focused on two
draft Superfund Environmental
Indicators (Els). Els are specific
measures of program perfor-
mance used to assess progress
toward cleaning up a hazardous
•waste site. This review •was the
initial component of the OIG's
program evaluation of
Superfund mega-sites. The draft
Els, Human Exposure Under
Control and Contaminated
Groundwater Migration Under
Control, are measures of
interim progress of Superfund
program goals for all Superfund
sites, including mega-sites. In
general, the IG found that the
indicators meet the needs of
the program but gave specific
implementation
recommendations.
Many of the
recommendations
•were being imple-
mented before the
evaluation was
complete, and several
more will be imple-
mented over time.
Most recommenda-
tions have been or
will be adopted or
incorporated into the
program  in an
ongoing manner.
U.S. EPA, Office of the
Inspector General

2002-P-3

December 27, 2001

Contact:
202-566-2888
 Goal 5, Objective 2

 Underground Storage Tank
 Operation and Maintenance: An
 Assessment of Available Training
 and Outreach

 The purpose of the evaluation •was
 to determine the greatest training
 needs for underground storage tank
 (UST) inspectors,  owners, and
 facility operators,  and to recommend
 approaches  for meeting those
 training needs.
The evaluation identified a
number of training needs,
including a need for facility-
specific training/guidance,
training that can reach people
throughout the country, and
practical field experience  along
•with classroom training. The
report provided numerous
recommendations, with primary
emphasis on developing
computer-based training and
customized outreach/education
material.
Many of the
recommendations are
being implemented
or are being seriously
considered. EPA is
developing a state/
EPA •work group to
determine short-term
and long-term
training priorities.
This report •will serve
as a foundation for
the •work group's
discussions.
Industrial Economics,
Incorporated, and
Marasco Newton
Group, with assistance
from various EPA and
state inspectors and
program managers, as
•well as UST industry
contacts and trainers.

May 2002

Contact:
703-603-7141
www. epa.gov/ocfo
                                                                              A-9

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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 5, Objective 2

      Environmental Contamination—
      Many Uncertainties Affect the
      Progress of the Spring Valley
      Cleanup

      The purpose of this evaluation was
      to obtain information about the roles
      and responsibilities of the government
      entities involved in addressing
      Spring Valley, assess the progress of
      environmental restoration, and
      estimate the cost of cleanup.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The government entities
involved in the cleanup of
Spring Valley have formed an
active partnership to make
cleanup decisions. Continued
progress at the site •will depend
on this partnership.

The government entities have
identified and removed a large
number of hazards, but the
extent of remaining hazards is
unknown. The primary health
risks at Spring Valley are the
possibility of injury or death
from exploding or leaking
ordnance and containers of
chemical •warfare agents  and
potential long-term health
problems from exposure to
arsenic-contaminated soil.

The U.S. Army estimated that
the remaining cleanup activities
at Spring Valley •would cost
$71.7 million and take 5  years
to complete, but the reliability
of these estimates is uncertain.
The U.S. Army Corps
of Engineers is the
lead agency at the
site, and it is respon-
sible for addressing
the recommendations.

EPA •will continue to
support the partner-
ship and •work
closely with the U.S.
Army Corps of
Engineers and the
District of Columbia.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
General Accounting
Office

GAO-02-556

May 20, 2002

Located at:
http: //www. gao. gov
      Goal 5, Objective 2

      Chemical Safety: Emergency
      Response Community Views on
      the Adequacy of Federally
      Required Chemical Information

      The purpose of this GAO report
      •was to satisfy a mandate under
      Public Law 106-40 requiring GAO
      to report to Congress on the
      adequacy of chemical information
      required  to be submitted to local
      emergency response personnel to
      help them respond to chemical
      incidents, the adequacy of delivery of
      that information, and the level of
      compliance with the requirement to
      submit the information.
GAO found that local
responders in most of the
communities contacted believe
federal information required to
be reported under section
112(r) of the Clean Air Act and
Title III of the  Superfund
Amendments and Reauthoriza-
tion Act generally meets their
needs, but a few said that it
•was not adequate to help them
respond to chemical incidents;
representatives of national
organizations •were divided in
their opinions  on the adequacy
of the information. Both local
responders and national
organization representatives
made suggestions that they
believe •would  improve the
usefulness of the information.

Other than reporting recom-
mendations from survey
respondents, GAO did not
provide specific recommenda-
tions to EPA or Congress to
address any of its findings.
As noted, the report
generally finds that
EPA is succeeding in
its mission to provide
chemical hazard
information. The
report does not
contain specific GAO
recommendations for
Agency action. Some
recommendations
from members of the
public are contained
in the report, but
GAO does not
indicate which of
those recommenda-
tions are appropriate
for Agency action.
Nevertheless, EPA is
already acting on
some of those
recommendations to
the extent they are
consistent •with
Agency policies and
resources (e.g.,
electronic reporting
and availability of
chemical inventory
forms).
General Accounting
Office

GAO-02-799

July 2002

Located at:
http: //www. gao. gov
A-10
                                                                www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 6, Objective 1

 Great Lakes: EPA Needs to Define
 Organizational Responsibilities
 Better for Effective Oversight and
 Cleanup of Contaminated Areas

 Determination of EPA progress
 developing and implementing
 Remedial Action Plans (RAPs) and
 assessing effectiveness of EPA's RAP
 efforts.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
All of the Great Lakes "Areas of
Concern" have defined their
environmental problems and half
have selected measures to
address the problems; however,
none have been fully restored.
EPA is not effectively fulfilling its
Great Lakes Water Quality
Agreement responsibilities to
ensure that RAPs are developed
and implemented and has not
clearly delineated RAP oversight
responsibility. Oversight was
transferred from the Great Lakes
National Program Office
(GLNPO) to regional offices, and
resources were reduced.

GAO recommends that the EPA
Administrator (1) clarify which
office •within EPA is  responsible
for ensuring RAP implementation
and (2) identify actions, time
periods, and resources for EPA
to fulfill its RAP oversight
responsibilities.
On September 25, 2002,
EPA determined that
GLNPO would assume
overall program
management by
providing oversight,
coordination,  and
reporting on RAP
implementation.  EPA
proposes to identify
additional means of
enhancing RAP
progress, being
cognizant of existing
fiscal constraints,
Agency priorities and
requirements, and the
need to consult with
Great Lakes states.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
General Accounting
Office

GAO-02-563

May 2002

Located at:
http: //www. gao. gov
 Goal 6, Objective 1

 The Challenge to Restore and
 Protect the Largest Body of Fresh
 Water in the World

 Biennial assessment by the
 International Joint Commission (IJC)
 of progress of the governments of
 the United States  and Canada under
 the Great Lakes Water Quality
 Agreement (GLWQA).
The United States and Canada
should continue to make progress
under the GLWQA, particularly
on (1)  monitoring, assessing,
and reporting on the state of the
Great Lakes ecosystem;
(2) cleanup of contaminated
sediments; and (3) prevention
and control of alien aquatic
invasive species. The IJC report
also includes findings regarding
persistent, bioaccumulative toxic
(PBT) goals on discharge
reduction and  elimination,
persistent air toxics transport and
deposition, groundwater protec-
tion, aging nuclear power plants,
and other major GLWQA issues
where  EPA and Environment
Canada work cooperatively •with
the public and private sectors.
EPA's Great Lakes
National Program
Office •will draft a
formal U.S. Government
policy response to the
recommendations.
International Joint
Commission

September 2002

Located at:
http: //www. ijc.org/
iicweb-e.html
www. epa.gov/ocfo
                                                                             A-ll

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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 6, Objective 1

      2002 LakeWide Management
      Plans (LaMP) Updates

      Assessment of goals, progress to
      date, and next steps in restoration
      and protection of the Great Lakes.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
Progress has been made in the
past 2 years in areas such as
publication of fish advisories
and beach closures, decreased
toxics, and contaminated
sediment cleanup. Governmen-
tal partners on LaMP commit-
tees have identified and
prioritized "next steps" to
achieve  long-term goals,
including addressing exotic
species, restoring natural flow
to tributaries, continuing to
address  contaminated  sedi-
ments, and addressing air toxics
from outside the basin.
EPA will work with
state and local
partners to identify
additional means of
enhancing LaMP
progress, being
cognizant of existing
fiscal constraints and
Agency priorities and
requirements.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
LaMP Committees

April 2002

Located at:
http://www. epa.gov/
glnpo/gl2000/lamps/
index.html
      Goal 6, Objective 1

      Mining Ideas 2

      Evaluation of 106 GLNPO habitat
      projects totaling more than
      $17 million awarded 1992-2001.
The projects were to protect,
restore, inventory, assess,
classify, monitor, and study
more than 17 million acres of
the Great Lakes Basin. The
projects were supported by
650 federal, state, local, tribal,
non-governmental, and
academic partners.  Thus, for
about a dollar an acre, more
than 6,400 acres were protected
from a variety of threats; the
process of restoring more than
7,300 acres was begun; more
than 900 people volunteered
more  than 3,800 hours for
project activities; 1,250
schoolchildren and adults were
educated and informed about
Great  Lakes ecosystems, and
62 full- and part-time jobs were
created.
Response •will be
developed in early
2003.
U.S. EPA, Great Lakes
National Program
Office, Ecosystem
Team

EPA-905-R-02-006

September 2002

Located at:
http://www.epa.gov/
glnpo/
A-12
                                                                www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 6, Objective 5

 An Evaluation of EPA's Safe
 Drinking Water Program in
 Central America

 This evaluation looks at the four
 components of the Program that
 •were implemented in three
 countries—El Salvador, Nicaragua,
 and Honduras.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The Program led to improvements
in four main areas of drinking
water quality improvement. For
instance, it (1) helped improve
drinking water laboratories
technically and managerially and
(2) effectively demonstrated and
taught the use of an analytical
tool necessary for the national
water utility to collect and
analyze information needed to
make sound decisions regarding
existing plant operations and
priorities for plant improve-
ments.

Example of recommendation
regarding specific Program
components:  Additional support
should be provided to strengthen
the technical  capacity of key
drinking water analytical
laboratories and assist these
laboratories in achieving
accreditation for analyses of
critical importance to public
health.

Example of lessons learned
regarding  Program transferability:
Develop aid programs through
use of partnerships rather than
top-down approaches.
The implementation
of the recommenda-
tions related specifi-
cally to the Central
America Program •will
depend on available
funds and office
priorities and are to
be determined.

These lessons
learned are being
applied and •will be
applied to future
international water
programs.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
International Affairs,
•with consulting
support from
Industrial Economics,
Incorporated, Marasco
Newton Group, and
U.S. EPA, Office of
Policy, Economics,
and Innovation

December 2002

Contact:
Eric Marsh
202-566-2198
www. epa.gov/ocfo
                                                                              A-13

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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 7, Objective 1

      Regulatory Reform: Compliance
      Guide Requirement Has Had
      Little Effect on Agency Practices

      The purpose of this study was to
      examine the  implementation of
      section 212 of the Small Business
      Regulatory Enforcement Fairness Act
      (SBREFA) in  selected agencies, one
      of which was EPA.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The evaluation findings focused
on whether the agencies have
published small entity compli-
ance guides (SECGs) for each
covered rule published  in
selected years and described
how the agencies developed
the guides and made them
available to small entities
affected by the rules, focusing
on rules published during years
1999 and 2000.

Although GAO found that "EPA
had the narrowest view of the
scope of the Regulatory Flexibil-
ity Act (RFA) and section 212,"
EPA provided GAO with SECGs
for "three rules that appeared to
have been prepared in recogni-
tion of the compliance guide
requirement and meticulously
described how to satisfy the
rules' provisions."

GAO found that "there needs to
be greater clarity and consis-
tency with regard to how key
terms in the RFA are defined
and implemented." They also
stated that "changes are needed
•with regard to the requirements
in section 212."
GAO's recommendations
•were directed at
Congress; EPA does
not need to respond.

EPA found the report
to be mostly favorable
to the Agency.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
General Accounting
Office

GAO-02-172

December 2001

Located at:
http: //www. gao. gov
A-14
                                                               www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 7, Objective 2

 Evaluation of Laboratory Quality
 Systems and Practices

 The Quality Staff coordinated and
 led technical reviews of EPA's
 National Program Office and Office
 of Research and Development
 Laboratories. The purpose of the
 assessments was to document
 implementation of quality practices
 supporting the data used by the
 Agency to make programmatic
 decisions and determine management
 and staff awareness of the Agency's
 position on improper laboratory
 practices.
 FINDINGS OF THE EVALUATION     PLANNED RESPONSE
The technical reviews identified
(1) laboratory quality system and
performance •weaknesses that
produce inadequate-quality
analytical data, (2) inconsisten-
cies in practices used to promote
implementation, and perfor-
mance, and (3) lack of estab-
lished methods to detect and
deter misconduct in laboratories.

The findings identified
•weaknesses in the  laboratory
quality systems. In corrective
action, a •work group consisting
of both EPA and non-EPA
members developed a training
course, Tools to Detect Improper
Laboratory Practices, to assist
laboratory assessors in evaluating
laboratory systems and practices.
The training course •was pre-
sented for the first time in
July 2002 at the National
Environmental Laboratory
Accreditation Conference
(NELAC) annual conference, and
it •was repeated at the  Region 6
Annual Quality Assurance
Conference and the joint New
York and Pennsylvania
Environmental Laboratory
Association Conference. A
measurable outcome of this
evaluation and training is
evidenced in the NELAC stan-
dards, which now require ethics
programs for all accredited
laboratories.
The Quality Staff
continues to work
with the environmen-
tal laboratory commu-
nity, including the
industry trade associa-
tion, and the American
Council of Independent
Laboratories to  ensure
that laboratory
managers and staff
understand the
Agency's position on
laboratory Quality
Systems and their role
in deterring and
detecting improper
practices. The course
materials are to be
posted on the Quality
Web Site, and
additional training
sessions will be
conducted as needed.
This effort supports
the Goal 7 objective of
providing access to
tools for using environ-
mental information
and ensuring that the
environmental data
collected and used by
the Agency are  of the
appropriate quality for
their intended use.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
Final reports on the
technical reviews
•were issued in July
2002.  Corrective
actions resulting from
the evaluations •will
rest with each
laboratory's parent
organization.
Evaluations will be
summarized in a
capping report,
•which is expected by
December  2002.

Contact:
Nancy Wentworth
202-564-6830

Fred Siegelman
202-564-5173
www. epa.gov/ocfo
                                                                              A-15

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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 7, Objective 3

      Government Information
      Security Reform Act (GISRA)
      Annual Security Program
      Review

      The U.S. Environmental
      Protection Agency FY 2002
      Report to OMB on the
      Government Information
      Security Reform Act (GISRA)

      The purpose of this evaluation was
      to review the effectiveness of the
      Agency's security program  in
      accordance with requirements
      included in GISRA.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
This evaluation consists of two
separate but related efforts. The
first is an assessment conducted
by the Chief Information
Officer, in conjunction with
EPA's senior program officials,
of the Agency's 168 general
support systems and major
applications. Agency system
owners, using the Security Self-
Assessment for Information
Technology Systems methodol-
ogy developed by the National
Institute of Standards and
Technology, assessed the status
of security of the systems under
their control. Simultaneously,
the  OIG conducted an indepen-
dent evaluation of the Agency's
overall security program. This
assessment confirmed that the
Agency has continued to
improve its security program
and highlighted where re-
sources should be focused in
FY 2003 to ensure continued
progress.
The Agency is
developing a  compre-
hensive Agency
corrective action plan
in response to the
•weaknesses identified
in the self-assess-
ments. The Agency's
action plan will
consist of individual
plans of action with
milestones (POA&Ms)
prepared in accor-
dance with OMB
direction. The
POA&Ms will define
specific tasks, •when
the work •will begin,
when the task •will
end,  and resource
needs.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
Environmental
Information and Office
of the Inspector
General

2002-S-00017

September 16, 2002

Located at:
http://www.epa.gov/
oigearth/
ereading room/
gisrafinalv2. pdf
      Goal 8, Objective 7

      Project XL 2001 Comprehensive
      Report: Directory of Project
      Experiments and Results

      Summarizes objectives and results
      for 51 innovative pilot projects.
Each project has made progress
in meeting the commitments
outlined in the formal Final
Project Agreements. However,
each project faces unique issues
and challenges in achieving the
innovations.  The results are
based on data collected
between August and November
2001.
The Agency continues
to monitor and
address issues with
the individual
projects as appropri-
ate. The Agency
continues to seek
opportunities for
successful innova-
tions and lessons
learned to be applied
to broader system
change.
U.S. EPA, Office of
Policy, Economics
and Innovation

EPA-100-R-01-003

December 2001

Located at:
http://www. epa.gov/
proiectxl/
Olreport.htm
A-16
                                                               www. epa.gov/ocfo

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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 8, Objective 7

 Project in Excellence and
 Leadership: New England
 Universities' Laboratories

 Mid-Term Evaluation: Piloting
 Superior Environmental
 Performance in Labs

 Garners lessons learned from the
 unique approach to laboratory
 management being tested and
 highlights opportunities to improve
 the overall environmental
 performance of the universities for
 the remainder of the project period.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
It was clear that a heavy
investment of time and resources
had resulted in progress. At the
same time, there was some
frustration at the lack of
movement in distinct areas of
the universities' Environmental
Management Plans that would
lead to improved environmental
performance.

The primary lesson learned is
that universities'  environmental
health and safety staff, EPA, and
the states need to work within
the challenges of an academic
culture while also capitalizing
on the  benefits of an academic
culture. It is evident that it is
extremely challenging to
achieve the stated pollution
prevention goals within the
culture of research, with its
demands for chemical purity
and scientifically acceptable
protocols.
The Agency is
•working with the
states and universities
to address the
challenges faced in
implementing this
innovation pilot.

Also, the Agency is
reviewing the results
of this evaluation to
assess how the
lessons learned in
this pilot should be
incorporated into a
proposed rulemaking
being planned for
FY 2003 under the
RCRA.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
U.S. EPA, Office of
Policy, Economics,
and Innovation and
EPA-New England

September 2002

Located at:
http://www.epa.gov/
evaluate
 Goal 8, Objective 7

 Evaluation of the Environmental
 Justice Collaborative Model

 An evaluation of the Environmental
 Justice Collaborative Model currently
 being used in demonstration
 projects sponsored by the
 Interagency Working Group on
 Environmental Justice.
The Model provides an
important vehicle for the many
institutions that are seeking to
provide community assistance
but lack effective mechanisms
for doing so. Recognizing a
community's vision for redevel-
opment can enable service
providers to tailor their
programs and services to better
suit community needs and save
resources. Several of these
partnerships have faced  and
continue to face challenges in
using the Model. Cooperation
and coordination in support of
partnership efforts within and
among federal agencies  could
be enhanced. Much of the
success of these efforts can be
attributed to community,
regional non-governmental
organization, or government-
level individuals, •who pulled
together diverse groups.
The Federal Interagency
Working Group on
Environmental Justice
and the Office of
Environmental Justice
have used the results
described in the draft
report to make some
midcourse changes to
the criteria and
guidelines, which will
be used to review the
nomination proposals
for the Interagency
Working Group's
Environmental Justice
Revitalization Projects
in FY 2003.
Prepared for the
Federal Interagency
Working Group on
Environmental Justice
by U.S. EPA, Office of
Policy, Economics,
and Innovation

September 2002

(Draft for Public
Comment)

Located at:
http://www. epa.gov/
evaluate/DRAFT-
ETCM-Eval-
Rpt090402.pdf
www. epa.gov/ocfo
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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 8, Objective 7

      Democracy On-Line: An
      Evaluation of the National
      Dialogue on Public Involvement
      in EPA Decisions

      Resources for the Future evaluates
      the Dialogue as a case study of
      electronic public participation. It
      examines the dynamics of the
      participation process and how
      participants felt about  it. It describes
      the quality of communication when
      public participation moves from the
      meeting room to the computer
      screen. Finally, it looks at how
      participants and  EPA benefitted from
      the process.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
The evaluation found that the
online public participation, the
Dialogue, was highly success-
ful. The Dialogue turned  a
static  commenting process into
an interactive and dynamic
discussion.  It involved vastly
more  (and different) people
than had previously provided
input  in the Public Involvement
Policy. Unlike any other form
of public participation,  it
allowed people to participate as
much or as little as they •wanted
to without any sort of selection
process or agency control.
Many of the problems that
arose  during the Dialogue can
largely be addressed through
future changes in design,
software, and norms of partici-
pation. Others may be ad-
dressed through societal trends
in computer ownership, use,
and familiarity.
EPA agrees with
Resources for the
Future that like any
new format for
participation, online
dialogues need to
evolve through an
iterative process of
experimentation and
learning. The Agency
•will seek additional
opportunities to use
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
the approach as
appropriate.

Resources for the
Future

January 2002

Located at:
http: //www. rff. ore/
reports/PDF files/
democracvonline. pdf
      Goal 8, Objective 7

      Reinventing Environmental
      Regulation: Lessons from
      Project XL

      Resources for the Future's
      publication assesses the difficult
      negotiations needed to implement
      Project XL at a 3M tape
      manufacturing plant.
The book discusses the
conflicting goals of participants,
the influences of personality
and organizational culture, and
complications caused by
changes in 3M's external
business environment. The 3M
case  is compared with EPA
negotiations with Intel, Merck,
and Weyerhaeuser. Stressing the
need for continued innovation,
it suggests more successful
outcomes through clearer
definitions and expectations,
better communication, and a
negotiation process that keeps
pace with changes in the world
beyond.
The Agency continues
to assess lessons
learned about
developing successful
innovation projects.
The Agency contin-
ues to seek opportu-
nities for successful
innovations and ways
to apply lessons
learned to broader
system change.
Resources for the
Future

August 2002

Located at:
http: //www. rf f. ore/
A-18
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     EPA GOAL AND OBJECTIVE(S)
   COVERED BY EVALUATION, TITLE
             AND SCOPE
 Goal 8, Objective 7

 Environmental Protection:
 Overcoming Obstacles to
 Innovative State Regulatory
 Programs

 GAO identifies the major avenues
 that states have used to obtain
 EPA's approval of innovative
 approaches to environmental
 protection and the major obstacles
 that impede states from pursuing
 innovative approaches needing
 EPA's concurrence. The report also
 discusses EPA's recent efforts to
 facilitate innovative approaches to
 environmental protection.
 FINDINGS OF THE EVALUATION    PLANNED RESPONSE
Officials in most of the states
contacted stated that they faced
significant challenges before
they were in a position to
submit proposals to EPA,
including resistance from within
the state environmental agency
and a lack of adequate re-
sources to pursue innovative
approaches. But although
obstacles at the state level
played an important role,
environmental officials from
12 of the 15 states said that
federal obstacles—including the
need to comply with detailed
EPA regulations, policies, and
guidance, as •well as a per-
ceived cultural resistance to
change among EPA staff—were
more significant.
EPA has recognized
the need to improve
its strategy to encour-
age innovative
environmental ap-
proaches by states and
other entities. Toward
this end, the Agency
has (1) issued a broad-
based strategy on
Innovating for Better
Environmental Results
and (2) adopted the
recommendations of
an internal Task Force
on Improving EPA
Regulations, •which,
among other things,
advocates the consid-
eration of innovative
alternatives as  new
regulations are
developed.
                         AUTHOR, REPORT
                       NUMBER, ISSUE DATE
                          AND WHERE TO
                          OBTAIN A COPY
General Accounting
Office

GAO-02-268

January 2002

Located at:
http://www. gao. gov
 Goal 10, Objective 2

 Managing for Improved Results

 A steering group of EPA senior
 managers was convened to examine
 the Agency's current management
 practices—how EPA sets its priorities;
 plans and budgets; tracks,  measures,
 and reports on its performance; and
 uses performance and other
 information to adjust its strategies—
 •with an eye toward improvement.
The Steering Group recommended
that the Agency:

•Develop simplified strategic
 goals, focused on end results.

• Collaborate with states on
 developing out-year perfor-
 mance targets and multiyear
 strategies for achieving them.

• Commit to regional and goal-
 specific strategic plans.

•Build regional/state priorities
 into annual plan and budget
 before submission to OMB and
 Congress.

•Accelerate  improvements to
 performance measures.

•Streamline  the process for
 annual program guidance/
 Memorandums of Agreement
 (MOAs).

• Shift approach to accountability.

•Ramp-up support to national
 programs, regions, and states to
 build capacity for results-based
 management.
The Agency will begin
implementation in
FY 2003.
U.S. EPA, Office of the
Chief Financial Officer

Fall 2002

Contact:
Wendy Lubbe
202-564-3827
www. epa.gov/ocfo
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         EPA GOAL AND OBJECTIVE(S)
       COVERED BY EVALUATION, TITLE
                 AND SCOPE
      Goal 10, Objective 2

      EPA Clean Water and Drinking
      Water State Revolving Funds

      The purpose of this evaluation •was
      to review the processes and controls
      over State  Revolving Fund
      disbursements and determine
      whether any erroneous payments
      had occurred.
                                     FINDINGS OF THE EVALUATION    PLANNED RESPONSE
                                    The evaluation found controls
                                    to be effective and that based
                                    on audits and performance
                                    evaluation reviews, only
                                    isolated instances of erroneous
                                    payments have occurred in the
                                    two State Revolving Funds. For
                                    the Clean Water State Revolving
                                    Fund, the erroneous payment
                                    rate •was 0.13 percent; for the
                                    Drinking Water State Revolving
                                    Fund, the rate •was 0.04 percent.
                                    Actions to correct these
                                    erroneous payments have been
                                    completed or are under way.
                                 Recommendations are
                                 aimed toward
                                 ensuring that errone-
                                 ous payments are
                                 properly monitored
                                 and the erroneous
                                 payment rate remains
                                 low. Once the report
                                 is finalized, the Office
                                 of Water and the
                                 Office of the Chief
                                 Financial Officer will
                                 begin  implementation.
                                                         AUTHOR, REPORT
                                                       NUMBER, ISSUE DATE
                                                          AND WHERE TO
                                                          OBTAIN A COPY
                       U.S. EPA, Office of
                       the Chief Financial
                       Officer

                       Fall 2002

                       Contact:
                       Bob Cluck
                       202-564-4917
Goal 10, Objective 2

Management Oversight/
Validations Reviews

In FY 2001 EPA designated an
Agency •weakness entitled
"Improved Management of
Assistance Agreements," and in
response the Office of Grants and
Debarment (OGD) conducted
validation  reviews.
The evaluation reviews showed
that headquarters and regional
offices had made progress in
improving grants management;
however, the reviews found
that although post-award
monitoring is occurring, project
officers need to do a better job
of documenting monitoring in
the project file and proactively
identifying potential perfor-
mance issues. The reviews also
found that some offices had not
submitted their post-award
monitoring plans on time.
The OGD plans to
continue and expand
the Management
Oversight/Validation
Reviews in  FY 2003.
OGD is using the
results  of the FY 2002
reviews to develop a
long-term strategic
plan for grants
management. The
strategic plan •will
focus on enhancing
the skills of the grants
•workforce;  promoting
grant competition;
participating in
e-government initia-
tives and making
effective use of
information technol-
ogy; improving
resource management,
accountability, and
oversight; providing
technical assistance
and training to
nonprofit and tribal
recipients; developing
grant •work  plans that
address environmental
results; and strength-
ening the Agency's
internal evaluation
systems for grants
management.
                                                                                                   U.S. EPA, Office
                                                                                                   of Administration
                                                                                                   and Resources
                                                                                                   Management
                                                                                                   Martha Monell
                                                                                                   202-564-5387
A-20
                                                                                                   www. epa.gov/ocfo

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Data Quality for Assessments
of FY 2002 Performance

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                                     APPENDIX B:
                      DATA QUALITY FOR ASSESSMENTS OF
                              FY 2002 PERFORMANCE
Appendix B describes the quality of the data used to measure EPA's performance. For each of the 10 EPA
Strategic Goals, this appendix describes (1) the performance measures (PMs), (2) the database(s)
supporting the PMs, (3) the source of the database(s), (4) the quality of the data, (5) planned
improvements to the data or database(s), and (6) any material inadequacies.

                                    Goal 1: Clean Air

PERFORMANCE MEASURES: (Refer to Performance Data Chart pages II-9-IM1)
  • Total number of people who live in areas designated in attainment of the clean air standards for
    ozone, PM, CO, SO2, NO2, and Pb. (APG 1 & 4)
  • Additional people living in newly designated areas with demonstrated attainment of the ozone,
    PM, CO, SO2,  NO2, and Pb standards. (APG 1 & 2)
  • Total number of people living in areas with demonstrated attainment of the NO2 standard. (APG 4)
[Note: PM = particulate matter, PM-10 = particulate matter 10 micrometers or less in diameter,
PM-2.5 = particulate matter 2.5 micrometers or less in diameter CO = carbon monoxide,
SO2 = sulfur dioxide, NO2 = nitrogen dioxide, Pb = lead.]
Performance Database: The Air Quality Subsystem (AQS). AQS stores ambient air quality data used
to evaluate an area's air quality levels relative to the National Ambient Air Quality Standards
(NAAQS). The Findings and Required Elements Data System (FREDS). FREDS is used to track the
progress of states and regions in reviewing  and approving the required data elements of the State
Implementation Plans (SIPs). SIPs are clean air plans and define what actions a state will take to
improve the air quality in areas that do not  meet NAAQS.1 FY 2002 performance data are complete.
Data Source: AQS - State and local agency data from State and Local Air Monitoring Stations (SLAMS).
Population - Data from Census Bureau/Department of Commerce. FREDS - Data are provided by
EPA's regional offices.
Data Quality: AQS - The quality assurance (QA)/quality control (QC) of the national air monitoring
program has several major components: the Data Quality Objective (DQO) process, reference and
equivalent methods program,  EPA's National Performance Audit Program (NPAP), system audits,
and network reviews. To ensure quality data, the SLAMS are required to meet the following:
(1) each site must meet network design and  siting criteria; (2) each site must provide adequate QA
assessment, control, and corrective action functions according to minimum program requirements;
(3) all sampling methods and equipment must meet EPA reference or equivalent requirements;
(4) acceptable data validation and record-keeping procedures must be followed; and (5) data from
SLAMS must be summarized and reported annually to EPA. Finally, there are system audits that
regularly review the overall air quality data  collection activity for any needed changes or
corrections. FREDS - No formal QA/QC procedures. Populations - No additional QA/QC beyond
that done by the Census Bureau/Department of Commerce. The data included in AQS are based
on EPA performance specifications.  EPA has stringent QA/QC procedures in place that minimize
data limitations. Populations - No additional QA/QC beyond that done by the Census Bureau/
Department of Commerce. FREDS - Potential data limitations include incomplete or missing data
from EPA's regional offices.
Improvements: AQS - EPA recently completed the process of reengineering the AQS to make it a
more user-friendly, Windows-based system. As a result, air quality data will be more easily accessible

mvw.epa.gov/ocfo                                                                                B-l

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                                  Goal 1: Clean Air (continued)

    via the Internet. AQS has been enhanced to include data standards (e.g., latitude/longitude, chemical
    nomenclature) developed under the Agency's Reinventing Environmental Information (REI) Initiative.
    Material Inadequacy: There are no material inadequacies for these performance measures.

    PERFORMANCE MEASURES: (Refer to Performance Data Chart pages II-9-IM1)
      • Reduction in mobile source PM-10. (APG 2)
      • Reduction in mobile source PM-2.5. (APG 2)
      • Reduction in mobile source volatile organic compound (VOC) emissions. (APG 1)
      • Reduction in mobile source NOx emissions. (APG 1)
      • CO reduced from mobile sources. (APG 4)
    Performance Database: The Air Quality Subsystem (AQS). AQS stores ambient air quality data (used
    to evaluate an area's air quality levels relative to the NAAQS).2 FY 2002 performance data are
    complete for FY 2002.
    Data Source: AQS - State and local agency data from State and Local Air Monitoring Stations
    (SLAMS). Certain mobile source information is updated annually. Inputs are updated annually only
    if there is a rationale and a readily available source of annual data. Generally, Vehicle Miles
    Traveled (VMT), the mix of VMT by type of vehicle (Federal Highway Administration types),
    temperature, gasoline properties, and the designs of inspection/maintenance programs are updated
    each year. The age  mix of highway vehicles is updated using state registration data, thereby
    capturing the effect of fleet turnover. Emission factors for all mobile  sources and activity estimates
    for nonroad sources are changed only when the Office of Transportation and Air Quality requests
    that this be done  and is able to provide the new information in a timely manner. This new
    information includes new models such as MOBILE6 and the latest version of the nonroad model.
    Data Quality: AQS - The QA/QC of the national air monitoring program has several major
    components: the Data Quality Objective (DQO) process, the reference and equivalent methods
    program, EPA's National Performance Audit Program (NPAP), system audits, and network reviews.
    To ensure quality data, the SLAMS are  required to meet the following: (1) each site must meet
    network design and siting criteria; (2) each site must  provide adequate QA assessment, control,
    and corrective action functions according to minimum program requirements; (3) all sampling
    methods and equipment must meet EPA reference or equivalent requirements; (4) acceptable data
    validation and record-keeping procedures must be followed; and (5) data from SLAMS must be
    summarized and reported annually to EPA. Finally, there are system  audits that regularly review the
    overall  air quality data collection activity for any needed changes or  corrections.
    Any limitations of the inventory estimates for mobile  sources come from limitations in the
    modeled emission factors  (based on emission factor testing and models predicting overall fleet
    emission factors in grams per mile) and also in the estimated vehicle miles traveled for each
    vehicle class (derived from Department of Transportation data). For  nonroad emissions, the
    estimates come from a model using equipment populations, emission factors per hour or unit of
    work, and an estimate of usage. This nonroad emissions model accounts for more than 200 types
    of nonroad equipment. Any limitations in the input data will carry over into limitations in the
    emission inventory estimates.
    It is important to have the current and future year emission reduction estimates generated using
    consistent methods. The EPA Emission Trends report dated December 1997 has mobile source
    emission inventories for the 1995 base year as well as for years 2000, 2002,  2005, and 2007. The

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                               Goal 1: Clean Air (continued)

base year emissions in 1995 for mobile sources are 8,134,000 tons VOC; 70,947 tons CO;
11,998 tons NOx; 878,000 tons PM-10; and 659,000 tons PM. These data were used to predict the
emission reductions in the year 2000 and later.
Improvements: AQS - EPA recently completed the process of reengineering the AQS to make it a
more user-friendly, Windows-based system. As a result, air quality data will be more easily accessible
via the Internet. AQS has been enhanced to include data standards (e.g., latitude/longitude, chemical
nomenclature) developed under the Agency's Reinventing Environmental Information (REI) Initiative.
Material Inadequacy: There are no material inadequacies for these performance measures.

PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-11)
Combined stationary and mobile source reduction in air toxics emissions. (APG 5)
Performance Database: National Toxics Inventory (NTI).
Data Source: The NTI includes emission estimates from large industrial or point sources, smaller
stationary area sources, and mobile sources. The baseline NTI (for base years 1990-1993)  includes
emission estimates for 188 hazardous air pollutants from more than 900 stationary source
categories and from mobile sources. It is based on data collected during the development of
Maximum Achievable Control Technology (MACT) standards,  state and local data, Toxics Release
Inventory (TRI) data, and emissions estimates using accepted emission inventory methodologies.
Additional information on the development of the baseline NTI is available on the Internet at
http://www.epa.gov/ttn/chief/nti/index.html#nti. The baseline NTI contains county level
emissions data and cannot be used for modeling because it does not contain facility-specific data.
The 1996 and the 1999 NTI contain major point sources, area sources, and mobile source estimates
that are used as input to National Air Toxics Assessment (NATA) modeling. The 1996 and 1999 NTI
contain estimates of facility-specific hazardous air pollutants (HAP) emissions and their source-
specific parameters necessary for modeling such as location and facility characteristics (stack height,
exit velocity, temperature, etc.).
The primary source of data in the 1996 and 1999 NTI is state  and local air pollution control agencies
and tribes. These data vary in completeness, format, and quality. EPA evaluates these data and
supplements them with data gathered while developing MACT and residual risk standards, industry
data, and Toxics Release Inventory (TRI) data. Then EPA estimates emissions for approximately 30
area source categories such as wildfires and residential heating sources not included in the state,
local, and tribal data to produce a complete model-ready national inventory. Mobile source data are
developed using data provided by state and local agencies and tribes and onroad and nonroad models
developed by EPA's Office of Transportation and Air Quality. The draft 1996 and 1999 NTI undergo
extensive review by state and local agencies, tribes, industry, EPA, and the public.3
In the intervening years between updates of the NTI, the model EMS-HAP (Emissions Modeling
System for Hazardous Air Pollutants) is used to estimate annual emissions of air toxics. EMS-HAP is
an emissions processor that performs the steps needed to process an emission inventory for input
into the model. These steps include spatial allocation of area  and mobile source emissions from
the county level to the census tract level, and temporal allocation of annual emission rates to annually
averaged (i.e., same rate for every day of the year) 3-hour emission rates. In addition, EMS-HAP, a
model processor, can project future emissions by adjusting point, nonpoint, and mobile emission data
to account for growth and emission reductions resulting from  emission reduction scenarios.4
mvw.epa.gov/ocfo                                                                                  B-3

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                                   Goal 1: Clean Air (continued)

    Data Quality: The NTI is a database designed to house information from other primary sources. EPA
    performs extensive QA/QC activities to improve the quality of the emission inventory. EPA conducts
    a variety of internal activities to QC  the 1999 NTI data provided by other organizations, including
    (1) the use of an automated format QC tool to identify potential errors with data integrity, code
    values, and range checks; (2) use of geographic information system (GIS) tools to verify facility
    locations; and (3) content analysis by pollutant, source category, and facility to identify potential
    problems with emission estimates such as outliers, duplicate sites, duplicate emissions, coverage of a
    source category, etc. The content analysis includes a variety of comparative and statistical analyses.
    The comparative analyses help reviewers prioritize which source categories and pollutants to review
    in more detail based on comparisons using current inventory data and prior inventories. The statistical
    analyses help reviewers identify potential outliers  by providing the minimum, maximum, average,
    standard deviation, and selected percentile values based on current data. EPA is currently developing
    an automated QC content tool for data providers to use prior to submitting their data to EPA. After
    investigating errors identified using  the automated QC format tool and GIS tools, EPA follows specific
    guidance, available on the Internet Chttp://www.epa.gov/ttn/chief/emch/invent/qaaugmemo final.pdf).
    on augmenting missing data fields. The NTI database contains data fields that indicate if a field has
    been augmented and identifies the augmentation method.
    After performing the content analysis, EPA contacts data providers to reconcile potential errors. The
    draft NTI is posted for external review and includes a README file with instructions on review of
    data and submission of revisions, documentation, state-by-state modeling files with all modeled data
    fields, and summary files to assist in the review of the data. One of the summary files includes a
    comparison of point source data submitted by different organizations.
    During the external review of the data, state and local agencies, tribes, and industry provide external
    QA of the inventory. EPA evaluates  proposed revisions from external reviewers and prepares memos
    for individual reviewers documenting incorporation of revisions and explanations if revisions were not
    incorporated. All revisions are tracked in the database with the source of original data and sources of
    subsequent revision. The external QA and the internal QC of the inventory result in significant changes to
    the initial emissions estimates. Additional information on QA/QC of the NTI is documented in a paper
    titled QA/QC—An Integral Step in the Development of the 1999 National Emission Inventory for HAPs
    (Anne Pope et al.). Presented at the 2002 Emission Inventory Conference in Atlanta; available on the
    Internet at http://www.epa.gov/ttn/chief/conference/eill/qa/pope.pdf.
    EPA's Science Advisory Board (SAB) reviewed  the draft 1996 national-scale assessment, NATA, during
    2001. It was published in 2002. The review was generally supportive of the assessment purpose,
    methods, and presentation; the committee considers this  an important step toward a better
    understanding of air toxics. Many of the SAB comments related to possible improvements for future
    assessments (additional national-scale assessments are being planned for the base year 1999 and for
    every 3 years thereafter)  or raised technical issues that merit further investigation. In response to the
    technical issues, EPA plans to improve the modeling methodology and conduct additional analyses
    and studies per SAB recommendation. Also, as a result of the SAB meeting, industry provided
    revisions to the draft 1996 NTI, which were incorporated in the final inventory used for NATA
    modeling. EPA will follow up on all the issues  raised by  SAB and plans to publish a series of
    technical reports addressing the results of these investigations. Information on the scientific peer
    review of the national-scale assessment is available on the Internet at
    http://www.epa. eov/ttn/atw/nata/peer. html.
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                               Goal 1: Clean Air (continued)

Improvements: The 1996 and 1999 NTI are a significant improvement over the baseline 1993 NTI
because of the added facility-level detail (e.g., stack heights, latitude/longitude locations), making it
more useful for dispersion model input. Future inventories (2002 and later years) are expected to
improve significantly because of increased interest in the NTI by regulatory agencies, environmental
interests, and industry, and the greater potential for modeling and trend analysis. During the
development of the 1999 NTI, all primary data submitters and reviewers were required to submit
their data and revisions to EPA in a standardized format using the Agency's Central Data Exchange
(CDX). Information on  CDX is available  on the Internet at http://www.epa.gov/ttn/chief/nif/cdx.html.
Material Inadequacy: There are no material inadequacies for this performance measure.

PERFORMANCE MEASURES: (Refer to Performance Data Chart page 11-12)
  •  SO2 emissions reduction. (APG 6)
  •  NOx emissions reduction. (APG 7)
Performance Database: The following are the databases used to support the performance measures
in the Acid Rain Program: Emissions Tracking System (ETS), SO2 and NOX emissions collected by
Continuous Emission Monitoring Systems (GEMS), CASTNet for dry deposition, and National
Atmospheric Deposition Program (NADP) for wet deposition. Data are collected on a calendar year
basis. FY 2002 data will be available in mid-2003 and will be reported in the FY 2003 Annual Report.
Data Source: On a quarterly basis, ETS receives and processes hourly measurements of SO2, NOx,
volumetric flow,  CO2,  and other emission-related parameters from more than 2,500 fossil fuel-fired
utility units affected under the Title IV Acid Rain Program. For the 5-month ozone  season (May  1—
September 30), ETS receives and processes hourly NOx measurements from electric generation
units (EGUs) and certain large industrial combustion units affected under the Ozone Transport
Commission (OTC) NOx Budget Program, the NOx SIP Call, and/or the section 126  programs for
controlling regional transport of ozone in the eastern United States. In 2004 the initial  compliance
year for the NOx SIP Call, up to 2,000 units in as many as 20 states and the District of  Columbia
will report seasonal NO data to ETS. More than 900 units have been reporting these data since
1999 under the OTC NO*x Budget Program.
CASTNet measures particle and gas acidic deposition chemistry. Specifically, CASTNet measures
sulfate and nitrate dry deposition and meteorological information at approximately 70 active
monitoring sites. CASTNet is primarily an eastern, long-term dry deposition network funded,
operated,  and maintained by EPA's Office of Air and Radiation (OAR).
The NADP is a national long-term wet  deposition network that measures precipitation chemistry
and provides long-term geographic and temporal trends in concentration and deposition of major
cations and anions.  Specifically, NADP provides measurements of sulfate and nitrate wet
deposition at approximately 200 active monitoring sites. EPA, along with several other federal
agencies, states, and other private organizations, provides funding and support for NADP. The
Illinois State Water Survey, University of Illinois, maintains the NADP database.
Data Quality: Quality  assurance and quality control requirements dictate performing a series of
quality assurance tests  of CEMS's performance. For these tests, emissions data are collected under
highly structured, carefully designed testing conditions, which involve either high-quality standard
reference materials or multiple instruments performing simultaneous emission measurements. The
resulting data are screened and analyzed using a battery of statistical procedures, including one that
tests for systematic bias. If GEMS fails the bias test, indicating a potential for systematic  underestimation


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                                  Goal 1: Clean Air (continued)

    of emissions, either the problem must be identified and corrected or the data are adjusted to minimize
    the bias.
    In November 2001 CASTNet established a  Quality Assurance Project Plan (QAPP).5 The QAPP
    contains data quality objectives and quality control procedures for accuracy and precision.
    NADP has established data quality objectives and quality control procedures for accuracy,
    precision, and representativeness. The  intended use of these data  is to establish spatial and
    temporal trends in wet deposition and  precipitation chemistry. The NADP methods of determining
    wet deposition values have undergone extensive peer  review, handled  entirely by the NADP
    housed at the Illinois State Water Survey, University of Illinois. Assessments of changes in NADP
    methods are developed primarily through the academic community and reviewed through the
    technical literature process.
    The ETS provides instant feedback to the data sources  (e.g., the electrical utilities) to identify data
    reporting problems, format errors, and  inconsistencies.  EPA staff then conduct data quality  review
    on each quarterly ETS file. In addition,  states or EPA staff conduct random audits on selected
    sources' data submission.  The electronic data file QA checks are described in EPA's Quarterly
    Report Review Process.6
    Improvements: To improve the spatial resolution of the Network (CASTNet), additional
    monitoring sites are needed. However,  at this time EPA has no plans to  add sites.
    Material Inadequacy: There are no material inadequacies for these performance measures.

    PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-10)
    Report on the effects of concentrated ambient PM on humans and animals believed most susceptible
    to adverse effects (e.g., elderly, people with lung disease, or animal models of such diseases).
    (APG3)
    Performance Database: Program output; no internal tracking system.
    Data Source, Data Quality, Improvements, Material Inadequacy: Not applicable.

    PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-10)
    Report on animal and clinical toxicology studies using Utah Valley particulate matter (UVPM)  to
    describe biological mechanisms that may underlie the reported epidemiological effects of UVPM.
    (APG3)
    Performance Database: Program output; no internal tracking system.
    Data Source, Data Quality, Improvements, Material Inadequacy: Not applicable.


                                 Goal 2: Clean and Safe Water

    PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-23)
    Provide method(s) for CCL related pathogens in drinking water for use in  the Unregulated
    Contaminant Monitoring Rule. (APG 11)
    Performance Database: Program output; no internal tracking system.
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                        Goal 2: Clean and Safe Water (continued)

Data Source, Data Quality, Improvements, Material Inadequacy: Not applicable.

PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-22)
Percent of population served by community drinking water systems with no violations during the year
of any federally enforceable health-based standards that were in place by 1994 and population
served by community water systems providing drinking water meeting health-based standards
promulgated in or after 1998. (APG 8 & 9)
Performance Database: Safe Drinking Water Information System-Federal Version (SDWIS or SDWIS-
FED).
Data Source: Agencies with primacy for the Public Water Supply Supervision (PWSS) Program,
including states, EPA regional offices with direct implementation (DI) responsibility for states and
Indian tribes, and the Navajo Nation Indian Tribe (the Navajo Nation is expected to begin reporting
directly to EPA in FY 2003). Primacy agencies (states) collect the data from the regulated water
systems,  determine compliance, and report a subset of the data  to EPA (primarily inventory and
violations). EPA is the secondary user of these data. Water quality data from other collectors of data
(third parties) related to drinking water, such as source water or waste water discharge, are not used
in PWSS program measures. FY 2002 performance data are complete.
Data Quality: The analytical methods for drinking water sample analysis are specified in technical
guidance associated with each drinking water regulation. Laboratories must be certified by the
primacy agency (state) to analyze drinking water samples and are subject to periodic performance
audits by the state. The performance measures are based on data  reported by individual systems to
states, which supply the information to EPA through SDWIS. EPA then verifies and validates the data
for 10 to  12 states per year, according to the PWSS Data  Verification Protocol (Version 9.0, 1999).7 To
measure program performance, EPA aggregates the SDWIS data into a national statistic on overall
compliance with health-based drinking water standards. This statistic compares the total population
served by community water systems meeting all health-based standards to the total population served
by all public water systems (which includes non-community water systems).
SDWIS-FED has numerous edit checks built into the software to reject erroneous data. There are
quality assurance manuals for states and regions to follow to ensure data quality. The manuals
provide standard operating procedures for conducting  routine assessments of the quality of the
data, communication and follow-up actions to be conducted with the state to achieve timely
corrective action(s). EPA offers training to states on reporting requirements, data  entry, data
retrieval, and error correction. User and system documentation is produced with each software
release and is maintained on EPA's Web site. SDWIS-FED documentation includes data entry
instructions, data element dictionary application, Entity Relationship Diagrams, a user's manual,
and regulation-specific reporting requirements documents. System, user, and reporting
requirements documents can be found on the EPA Web site at http://www.epa.gov/safewater.
System and user documents are accessed via the database link, and specific rule reporting
requirements documents are accessed via the regulations, guidance, and policy documents link. In
addition, EPA provides specific error correction and reconciliation support through a troubleshooter's
guide, a system-generated summary with detailed reports that document the results of each data
submission, and an error code database for states to use  when they have questions on how to enter or
correct data. A user support hotline is available 5 days a week to answer questions and provide
technical assistance. At least one EPA staff person in each EPA regional office serves as the SDWIS-
FED Regional Data Management Coordinator to provide technical assistance and training to the states

mvw.epa.gov/ocfo                                                                                   B-7

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                            Goal 2: Clean and Safe Water (continued)

    on all aspects of information management and required reporting to EPA. State primacy agencies'
    information systems are audited on an average schedule of once every 3 years. EPA also completed a
    data reliability assessment (QA audit) of the 1996-1998 SDWIS-FED data in FY 2000. The Data
    Reliability Action Plan (DRAP, described below),8 completed in FY 2000, was developed to address
    deficiencies identified in the 1999 data reliability assessment. The action plan was implemented in
    2001  and continues to be implemented and revised as appropriate. The most recent revision was
    made in October 2002.
    EPA,  states, and stakeholders have expanded on the DRAP through the development of a more
    comprehensive OGWDW Information Strategy that tackles additional data quality problems.9
    Components of the OGWDW Information Strategy include (1) simplifying and/or standardizing
    regulatory reporting requirements where possible; (2) reevaluating EPA's philosophy of system edits;
    and (3) continuing to improve tools and processes for creating and transferring data to  EPA, such as
    incorporating newer technologies, and adapting the Agency's Enterprise Architecture Plan, to
    integrate data and the flow of data from reporting entities to EPA via a central data exchange (CDX)
    environment. The Information Strategy could be considered Phase II of the DRAP, and it  sets the
    direction for a comprehensive modernization of SDWIS over the next 3 to 5 years.
    Finally, individual data quality reviews are conducted by EPA and its contracted auditors on state
    primacy agencies' information systems.  The frequency of these  audits are conducted  between every
    2 to 4 years depending on the resources available and programmatic need in the region. Each state's
    overall  information system is evaluated with special emphasis on its compliance determinations
    (interpretation  and application of regulatory requirements, which includes designation  of
    violations) and data flow (primacy agency's compliance with record-keeping and reporting
    requirements to EPA).  Continuous data quality reviews include data quality estimates based  on the
    results of data verifications, timeliness  and completeness  of violation reporting, completeness of
    various required inventory data elements,  and completeness of reporting for specific rules.
    Currently SDWIS-FED  is an  "exceptions" database that focuses  exclusively on public water systems'
    noncompliance with drinking water regulations (health-based and program). Primacy states implement
    drinking water regulations with the support of the Public Water System Supervision (PWSS) grant
    program and determine whether  public water systems have violated maximum contaminant levels
    (MCLs), treatment technique requirements, consumer notification requirements, or monitoring and
    reporting requirements. Primacy agencies report those violations through SDWIS.
    Recent  state  data verification and other quality assurance  analyses indicate the most  significant data
    quality  problem is under-reporting to EPA of monitoring and health-based standards violations and
    inventory characteristics, such as  water sources and/or latitude/longitude for all sources. The most
    significant under-reporting occurs in monitoring violations. Even though these are not covered in the
    performance measure,  failures to monitor could mask treatment technique and MCL violations.  Such
    under-reporting of violations limits EPA's ability to precisely quantify the population served that are
    meeting health based standards. Currently, the program office is assessing the percentage of
    unreported health based violations and calculating adjustments to the performance data that might be
    required for future annual reports. The population data has been determined to be of high quality.
    The DRAP and the Information Strategy Plan address many of the underlying factors contributing to
    the data limitations. Additional options under consideration include the following:
      1. Increase the focus on state compliance determinations and reporting of complete, accurate, and
        timely violations data.
      2. Develop incentives to improve the accuracy, completeness, and timeliness of state reporting.

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                         Goal 2: Clean and Safe Water (continued)

  3.  Continue to analyze the quality of the data.
  4.  Require the reporting of parametric data (analytical results used to evaluate compliance with
     monitoring regulations and compliance with treatment techniques and maximum contaminant
     levels), monitoring schedules, and waiver information assigned to water systems by the state
     primacy agency. This information would allow compliance determinations to be made by EPA
     for quality assurance or state oversight purposes. Potential violation under reporting could be
     identified through the availability of this information and appropriate corrective actions
     implemented.
Improvements: With a newly developed information  strategy developed by EPA in partnership
with the states and major stakeholders, several improvements to SDWIS are under way. The DRAP
is an integral  part of the  OGWDW Strategic Information Plan, currently under development.
First, EPA will continue to work with states to implement the DRAP  (previously referenced), a
multi-step approach to improve the quality and reliability of data in  SDWIS-FED. The DRAP already
has improved the completeness, accuracy, timeliness, and consistency of the data in SDWIS-FED
through (1) training courses for SDWIS-FED data entry, error correction, and regulation-specific
compliance determination and reporting requirements; (2) specific DRAP analyses, follow-up
activities, and state-specific technical assistance; (3) increased number of data verifications
conducted each year; and (4) creation of various quality assurance reports to assist regions and
states in the identification and reconciliation of missing, incomplete, or conflicting data.
Second, more states will use SDWIS-STATE,10 a software information system jointly designed by states
and EPA, to support states as they implement the drinking water program. SDWIS-STATE is the
counterpart to EPA's federal drinking water information system, SDWIS-FED, and employs many of the
same edit criteria and enforces many of the mandatory data  elements. If the SDWIS-STATE system
is fully utilized by a state, the information it holds would meet EPA's minimum data  requirements.
SDWIS-STATE contains a utility that creates the necessary output to report to  SDWIS-FED, which aids
in easing the states' reporting burden to EPA and in the process minimizes data conversion errors and
improves data quality and accuracy. In addition, a Web-enabled version of SDWIS-STATE and a data
migration application that can be used by all states to process data for upload to SDWIS-FED are being
developed. EPA estimates that 40 states will be using SDWIS-STATE for data collections by FY 2004.
Third, EPA is  modifying  SDWIS-FED to (1) streamline its table structure, which simplifies updates
and retrievals, (2) minimize data entry options that result in  complex software and prevent
meaningful edit  criteria,  and (3) enforce compliance with permitted values and Agency data
standards through software edits, all of which will improve the accuracy of the data.
Fourth,  EPA has developed a  data warehouse system that is  optimized for analysis, data retrieval,
and data integration from other data sources like information from data verifications, sample data,
source water  quality data (e.g., U.S. Geological Survey  [USGS] data), and indicators from
inspections conducted at the water systems. It will improve the program's ability to use
information to make decisions and effectively manage the program.
Finally, EPA, in partnership with the states, is developing information  modules on other drinking
water programs: the Source Water Protection Program, the Underground Injection Control Program,
and the Drinking Water State Revolving Fund. These modules will be integrated with SDWIS to
provide a more comprehensive data set with which to assess the Nation's drinking water supplies, a
key component of the goal.
Material Inadequacy: There is no material inadequacy for this performance measure.
mvw.epa.gov/ocfo                                                                                   B-9

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                            Goal 2: Clean and Safe Water (continued)

    PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-25)
    Clean Water State Revolving Fund (CWSRF) projects that have initiated operations. (APG 17)
    Performance Database: Clean Water State Revolving Fund National Information Management System
    (NIMS).11 FY 2002 performance data are complete.
    Data Source: Data are reported to EPA headquarters by state regulatory agency personnel and EPA's
    regional staff.  Data are collected and reported once yearly. State data are maintained in NIMS using a
    standard Excel spreadsheet format.
    Data Quality: States receive data entry guidance from EPA headquarters in the form of annual
    memoranda. After the states enter data, EPA headquarters and its contractor compile the data. EPA
    headquarters and its regional office staff query the states as needed to ensure data quality and
    conformance with expected trends. Quality control measures verify that data are complete, data
    collected are consistent with data stored in NIMS, and data in NIMS are unique. The process of
    validating the  data takes several weeks.
    After discrepancies have been resolved and the data are  determined to be complete, EPA headquarters
    prepares a detailed analysis, which the regional offices  use during their yearly on-site reviews of each
    state program. In addition, independent auditors or the EPA Inspector General's office conduct  their
    own annual audits, at which time they evaluate each state's financial data quality. Finally, every other
    year, headquarters staff visit each regional office to examine files and to check data quality procedures.
    There are no known limitations in the performance data, which states submit voluntarily. Erroneous
    data can be introduced into the NIMS database by typographic or definitional error. Typographic
    errors are controlled or corrected through data testing performed by EPA and its contractor.
    Definitional errors due to varying interpretations of information requested for specific data fields have
    been virtually eliminated in the past 2 years through EPA headquarters' clarification of definitions.12
    It takes several weeks to quality-check the data and make them available for public use.
    Improvements: This system has been operative since  1996. It is updated annually, and data fields
    are changed or added as needed. The federal budget cycle demands that EPA set program
    performance targets 2 years in advance. The NIMS has effectively shown the success of the CWSRF
    program. The  NIMS shows that the number of projects being financed and built has exceeded the
    Agency's targets by an average of 12  percent per year.
    Material Inadequacy: There is no material inadequacy for this performance measure.

    PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-24)
    Acres of habitat restored and protected nationwide since 1987  as part of the National Estuary Program
    (NEP). (APG 14)
    Performance Database: Aggregate national and regional data for this measurement, as well as data
    submitted by the individual National Estuary Programs, are displayed numerically, graphically, and by
    habitat type in the Performance Indicators Visualization  and Outreach Tool (PIVOT).13 PIVOT
    highlights habitat loss, alteration, protection, and restoration in  an educational fashion with graphics
    and images that  reflect specific NEP reports. FY 2002 performance data are complete.
    Data Source:  NEP program documents such as annual work plans (which contain achievements made
    in the previous year) and annual progress reports are used, along with other implementation tracking
    materials, to document the number of acres of habitat restored and protected. EPA then aggregates


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                        Goal 2: Clean and Safe Water (continued)

the data for each NEP to arrive at a national total for the entire program. EPA conducts regular
reviews of NEP implementation to help ensure that information provided in these documents is as
accurate as possible and that progress reported is in fact being achieved.
Data Quality: Primary data are prepared by the staff of the NEP based on their own reports and from
data  supplied by other partnering agencies/organizations (that are responsible for implementing the
action resulting in habitat protection and restoration). The NEP staff are required to follow guidance
provided by EPA to prepare their reports and to verify the numbers they provided. EPA then confirms
that the national total accurately reflects the information submitted by each program. The Office of
Wetlands, Oceans and Watersheds has developed a standardized format for data reporting and
compilation and guidance with definitions for habitat protection, restoration activities, and habitat
categories.14
Current data limitations include information that may be reported inconsistently (based on different
interpretations of the protection and restoration definitions), acreage that maybe miscalculated or
misreported, and acreage that may be double-counted (same parcel may also be counted by
partnering/implementing agency or need to be replanted multiple years). In addition, although
measuring the (quantitative) number of acres of  habitat protected or restored provides an indicator
of on-the-ground progress made by NEPs, it does not necessarily correlate to an indication of the
overall health of that habitat (e.g., changes in ecological function).
Improvements: EPA is continuing to work with the NEPs and their partners to improve consistency
and accuracy of reporting.
Material Inadequacy: There is no material inadequacy for this performance measure.

PERFORMANCE MEASURE: (Refer to Performance Data Chart page 11-23)
Cumulative number of beaches for which monitoring and closure data are available. (APG 10)
Performance Database: National Health Protection Survey of Beaches Information Management
System.15 FY 2002 performance data are complete.
Data Source: Data are obtained from National Health Protection Survey of Beaches, which is a
voluntary collection of beach data along the coastal and Great Lake states and territories.  State and
local governments voluntarily provide  the information. The survey began in 1997 with information
on 1,021 beaches and now includes records on 2,445 beaches. The database includes fields
identifying the beaches for which monitoring and notification information is available. The
database also identifies those states that have received  a BEACH (Beaches  Environmental
Assessment and Coastal Health) Act grant. Information  is updated annually.
Data Quality: A standard survey form, approved  by OMB, is distributed to coastal and Great Lake
state and county environmental and public health beach program officials by mail in hard copy and is
available on the Internet for electronic submission. In 2001 survey respondents comprised
42%  county, 31% city, 12% state, 6% district, 4% region,  2% National park, 2% state park, 1% other.
When data are entered over the Internet by a state or local official, a password is issued to  ensure
the appropriate party is completing the survey. EPA reviews the survey responses to ensure the
information is complete, then follows up with the state or local government to obtain additional
information where needed. However, because the data are submitted voluntarily by state and local
officials, the Agency cannot verify the accuracy of the information provided.
mvw.epa.gov/ocfo                                                                                  B-ll

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                            Goal 2: Clean and Safe Water (continued)

    Participation in this survey and collection of data is voluntary, and information has not been collected
    on the universe of beaches. The voluntary response rate was 88% in 2001 (237 out of 269 contacted
    agencies responded). The number of beaches for which information was collected increased from
    1,021 in 1997 to 2,445 in 2001. Participation in the survey will become a mandatory condition for
    grants awarded under the BEACH Act program (described below); however, state and local
    governments are not required to apply for a grant.
    Improvements: With the passage of the BEACH Act of 2000, P.L. 106-284, the Agency is authorized
    to award grants to states to develop and implement monitoring and notification programs consistent
    with federal requirements. As the Agency awards these implementation grants, it will require
    standard program procedures, sampling and assessment methods, and data elements for reporting. To
    the extent that state governments apply for and receive these implementation grants, the amount,
    quality, and consistency of available data will improve. In addition, the BEACH Act requires the
    Agency to maintain a database of national coastal recreation water pollution occurrences. The Agency
    will fulfill this requirement by revising the current database to include this new information. In
    revising the database, the Agency has been investigating modes for electronic exchange of
    information and reducing the number of reporting requirements.
    Material Inadequacy: There is no material inadequacy for this performance measure.

    PERFORMANCE MEASURES: (Refer to Performance Data Chart page 11-25)
      • Major point sources are covered by current permits. (APG 16)
      • Minor point sources are covered by current permits. (APG 16)
    Performance Database: Permit Compliance System (PCS).16 FY 2002 performance data are complete.
    Data Source: EPA's regional offices and states enter data into PCS.
    Data Quality: PCS is the official repository of NPDES program data. The Office of Water (OW) uses
    PCS to determine the extent of the NPDES universe and the percentage of permits that have
    exceeded their expiration date (i.e., the percentage of permits that  are backlogged). States that
    have been delegated the  NPDES program are required to maintain  PCS. In cases where EPA
    remains the permitting authority, the region is responsible for maintenance of PCS. However, many
    states have developed their own systems to manage NPDES data. While these states are still
    required to input data into PCS, either through  direct entry or batch upload, their own systems
    often contain more complete and accurate programmatic data.
    OW has been working with states and regions on a PCS Clean-Up Project to ensure that the data in
    PCS provide an accurate representation of the NPDES universe and are reconciled with state system
    data. As part of the QA/QC process, OW generates monthly national and state-by-state reports listing
    key facility and outfall data elements appearing  in PCS for all active  permits. The data elements
    include permittee and facility name, facility address, issuance date, expiration date, application
    received date, effective date, Standard Industrial Classification (SIC) code, facility and outfall latitude/
    longitude, flow, etc. These reports are available  on a password-protected Web site17 maintained by an
    OW contractor. In addition to the actual data elements listed above, the site includes summary reports
    of missing and available data nationally and for every state.
    OW has been working with states and regions to identify and correct discrepancies between state and
    PCS data and to populate fields in PCS that are currently blank with existing state-level data provided
    by states. A contractor is available to provide states with support in the review, comparison, upload
    and entry of data. OW anticipates completion of the project during FY 2003.

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                        Goal 2: Clean and Safe Water (continued)

Improvements: The PCS Clean-Up project has resulted in significant changes to the PCS database.
OW has inactivated over 25% of the individual permits in PCS when states indicated that, according to
their own updated records, those permits were no longer or had never been active. Many of the
permits that were inactivated had been included as part of the NPDES permit backlog. OW has also
worked with states to populate many facility-level data fields that had been blank. While EPA has
progressed with the PCS Clean-Up, significant data gaps remain. Many minor permit records still do
not contain basic facility-level data such as address or latitude/longitude.
Material Inadequacy: Minor permit data elements remain poorly populated in PCS; however, there
is sufficient information upon which to base management decisions.

PERFORMANCE MEASURES: (Refer to Performance Data Chart page 11-24)
   •  Loading reductions of toxics by facilities subject to effluent guidelines promulgated between
     1992 and 2000, as predicted by model projection. (APG 15)
   •  Loading reductions of conventional pollutants by facilities subject to effluent guidelines
     promulgated between 1992 and 2000, as predicted by model projection. (APG 15)
   •  Loading reductions of non-conventional pollutants by facilities subject to effluent guidelines
     promulgated between 1992 and 2000, as predicted by model projection. (APG 15)
Performance Database: This measure is calculated using a spreadsheet18 that draws from several
data sources. An average  "per facility" value is assigned to each  permittee according to the
industrial type of the facility. Each region reports the actual number of permits issued in the past year
for each sector, typically drawn from PCS.19 Using both the average per facility value and the number
of permits issued, the spreadsheet then generates the value for the total pollutants reduced.
Data Sources: For direct dischargers subject to effluent guidelines, the average per facility value for
pollutant reduction is derived from the Technical Development Documents produced at the time of
the effluent guideline (ELG) rulemaking.20 TDDs are available for  Pulp & Paper, Pharmaceuticals,
Landfills, Industrial Waste Combustors, Centralized Waste Treatment, Transportation Equipment
Cleaning, Pesticide Manufacturing, Offshore Oil & Gas, Coastal Oil & Gas, Synthetic Based Drilling
Fluid, and Concentrated Animal Feeding Operations.
Data Quality: (For a discussion of the PCS  data that provide the number of permittees in each sector,
please see the discussion in the previous measure on backlog.) The Technical Development
Documents that provide pollutant data for each industrial sector are based on extensive research and
undergo public review and comment.
Improvements: (For a discussion of activities to improve PCS data, please see the discussion in the
previous measure on backlog.)
For other sources, such as POTWs, CSOs, and storm water, that were not included as of 2002, other
sector-specific modeling is being developed in order to more fully characterize the pollutant loading
reductions resulting from the entire NPDES program. For 2003 EPA added an estimation for CSOs
using a model21 that draws information from the Clean Water Needs Survey.22 EPA is also developing
a model,23 to estimate pollutant reductions from POTWs, both with and without pretreatment
programs. EPA expects that model to draw information from Discharge Monitoring Reports (DMRs)
contained in PCS, as well as other annual reports by POTWs to EPA and states, including information
about permitted Significant Industrial Users where there are pretreatment programs. In the future,
EPA also expects to develop a model to estimate pollutant reductions from storm water.
mvw.epa.gov/ocfo                                                                                 B-13

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                            Goal 2: Clean and Safe Water (continued)

    Material Inadequacy: There are no material inadequacies for these performance measures. There is
    sufficient information upon which to base management decisions.

    PERFORMANCE MEASURE:  (Refer to Performance Data Chart page 11-23)
    Watersheds that have greater than 80% of assessed waters meeting all water quality standards. (APG 12)
    Performance Database: The Watershed Assessment Tracking Environmental Results System
    (WATERS)24 is used to summarize water quality information at the watershed level. For purposes of
    this national summary, "watersheds" are equivalent to 8-digit hydrologic unit codes (HUCs), of which
    there are 2,262 nationwide.25 State CWA 305(b) data26 are submitted every 2 years and many states
    provide annual updates.27 Data to be used for the FY 2003 Annual Performance Report will include
    state submissions expected in the spring of 2002.28 510 eight-digit HUCs were reported with greater
    than 80% of assessed waters meeting all water quality standards in the 2000 305(b) report. FY 2001
    performance data are used to  assess FY 2002 performance; this is a biennial measure, and no new
    data were planned this year.
    Data Source: State CWA 305(b) reporting. The data used by the states to assess water quality and
    prepare their 305(b) reports include ambient monitoring results from multiple sources (state, USGS,
    volunteer, academic) as well as predictive tools like water quality models.29 States compile diverse
    data to support water quality assessments; EPA uses these data to present a snapshot of water quality
    as reported by the states, but does not use them to report trends in water quality. EPA's Office of
    Water and Office of Research and Development have established a monitoring and design team that
    is working with states on a 3- to 5-year project to recommend a design for a national probability-
    based monitoring network that could be used to provide both status and trends in water quality at a
    state and national level. Future data will be accompanied by quality assurance plans as part of the
    State's Assessment Methodology,30 and data coming into the OW database, Storage and Retrieval
    system (STORET), will have the necessary accompanying metadata.
    Data Quality: QA/QCProcedures: QA/QC of data  provided by states pursuant to individual state
    assessments (under 305(b)) is  dependent on individual state procedures. Numerous system-level
    checks are built into WATERS based upon the business rules associated with assessment information.31
    States are then given the opportunity to review the information in WATERS to ensure it accurately
    reflects the data that they submitted. Detailed data exchange guidance and training are also provided
    to the states. Sufficiency threshold for inclusion in this measure requires that 20% of stream miles in
    an 8-digit HUG be assessed. The OW Quality Management Plan (QMP) was approved in July 2001.32
    (QMPs need to be renewed every 5 years.)
    Data Quality Review: Numerous independent reports have cited that weaknesses in monitoring
    programs and the  reporting of monitoring data undermine EPA's ability to depict the condition of
    the Nation's waters and to support scientifically sound water program decisions. The most recent
    reports include the 1998 Report of the Federal Advisory Committee on the Total Maximum Daily
    Load (TMDL) Program,^ the March 15, 2000, General Accounting Office report,34 and the 2001
    National Academy of Sciences Report.35
    In response to these evaluations, EPA has been working with states and other stakeholders to
    improve (1) data coverage, so that state reports reflect the condition of all waters of the state; (2) data
    consistency to facilitate comparison and aggregation of state data to the national level; and
    (3) documentation so that data limitations and discrepancies are fully understood by data users. First,
    EPA enhanced two existing data management tools (STORET and the Assessment Database) that
    include documentation of data quality information.36 Second, EPA has developed a GIS tool called

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                         Goal 2: Clean and Safe Water (continued)

WATERS that integrates many databases including STORET, the Assessment database, and a new water
quality standards database. These integrated databases facilitate comparison and understanding of
differences among state standards, monitoring activities, and assessment results. Third, EPA and states
have developed a guidance document intended to facilitate increased consistency in monitoring
program design and the data and decision criteria used to support water quality assessments.37 And
fourth, OW and the regions have developed the Elements of a State Water Monitoring and Assessment
Program?9 which is currently under review by EPA's state partners. This guidance describes 10
elements that each state water