EPA 205-R-93-003
 £EPA

United Stales
Environmental Protection
Agency
Administration And
Resources Management
(PM-226B)
EPA 205-R-93-003
August 1993
Financial Management Sta
Report And Five-Year Plan


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                         TABLE OF CONTENTS
LOCATION OF CHAPTERS


 Executive Summary	  iii


 Chapter 1 - CFO's Conceptual Framework	  1


 Chapter 2 - Financial Management Organization	5


 Chapter 3 - Accountability Standards	  13


 Chapter 4 - Financial Management Personnel	  21


 Chapter 5 - Financial Systems	  27


 Chapter 6 - Management Integrity	  39


 Chapter 7 - Asset Management	  49


 Chapter 8 - Audited Financial Reporting	  67


 Chapter 9 - Administration of EPA Assistance Programs	  75


SUMMARY OF ATTACHMENTS


 EPA Organizational Charts	 Attachment A


 Financial and Administrative Systems	 Attachment B


 Financial Management Systems Inventory	 Attachment C


 Hierarchy of Management Information	 Attachment D


 EPA Lexicon	 Attachment E
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                             EXECUTIVE SUMMARY
                                      INTRODUCTION

       The FY 1993 - 1997 Financial Management Status Report and Five-Year Plan provides the
Environmental Protection Agency (EPA) with an opportunity to: articulate a bold, long-range vision
for financial management; and begin developing a strategy, complete with goals and milestones, that
will serve as a roadmap for  achieving that vision. The initiatives set forth in this plan range from a
full-fledged organizational review of EPA's financial management framework and technology, to the
integration of financial management into the strategic planning, budgeting and program evaluation
process that guides the Agency's program management and investment decisions.

       The Five-Year Plan was developed  against the backdrop of unprecedented Agency and
government-wide focus on improving financial management, as  well as top management's
commitment to strengthen accountability and financial management practices throughout EPA.  The
Plan focuses on the opportunity to integrate the implementation of key pieces of Congressional
legislation (e.g., the CFO Act, the Government Performance and Results Act and the Federal
Managers'  Financial Integrity Act).  This will enable EPA to provide clear and comprehensive
financial, budget and program management  information in support of sound, fact-based public policy
decisions in the environmental arena.

       With this mandate,  EPA's Chief Financial Officer (CFO) has developed a Five-Year Plan that
embraces the initiatives already underway to improve  financial management, while challenging the
Agency to position itself for the resource management demands  of the next century. The intentions of
the Plan are to:

•      Develop a comprehensive financial management program which will enhance EPA's ability to
       attain its environmental goals through more effective resource management; and

•      Insure that the American public and Congress have access to specific information on EPA's
       financial stewardship and on the effectiveness  and efficiency of the Agency's programs  in
       improving the quality of the Nation's environment.

       Following the guidance provided by the Office of Management and Budget, EPA's Five-Year
Plan is divided into nine chapters.  In the first chapter, the CFO provides a conceptual framework for
the development and implementation of the Plan.  The subsequent chapters focus on eight specific
financial management functional areas within financial management. Each of these chapters contains:
a general goal statement; a status report; a discussion of planned activities; and milestone charts.  A
lexicon explaining all acronyms and EPA-specific terms as well  as several other attachments are also
included.
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                           CFO'S CONCEPTUAL FRAMEWORK

       The CFO envisioned five key themes which guided the development of the blueprint for
meeting the future challenges of financial management.  These themes—integration, infrastructure,
balance, accountability and continuous improvement-must be cultivated in order to develop a
comprehensive financial management program which will ensure more effective management of the
Agency's resources and also will support attaining EPA's environmental goals. With this conceptual
framework of financial management in mind, the CFO has established five key long-range goals for
EPA's financial management operations.  The goals are as follows:

1.     Establish Agency-wide accountability for financial management operations and activities.

2.     Provide complete, reliable, timely and useful financial information and services to Agency
       managers, central agencies and the Congress.

3.     Cultivate program and regional partnerships to effectively and efficiently manage resources in
       support of Agency goals.

4.     Support an integrated approach to Agency-wide  strategic planning, budgeting, financial
       accounting and program evaluation.

5.     Define future skill needs and establish a strategy for recruitment and training of financial
       management personnel.

       The experiences EPA has gained during the past year have provided opportunities to identify
and plan for the initiatives and activities needed to fulfill the requirements of the CFO Act and to
meet these goals.  Those plans are detailed in the eight prescribed chapters of the status report and
five-year plan.
            SUMMARY OF FUNCTIONAL FINANCIAL MANAGEMENT AREAS

Financial Management Organization

Status:  In FY 1993, EPA initiated a number of organizational actions designed to strengthen
Agency-wide financial management. The Agency accomplished the following:

•      Reorganized the Office of Administration and Resources Management to recognize the
       importance of key management functions and financial integrity to the successful operation of
       the Agency;

•      Established two councils under the Administrator-the Senior Leadership Council and the
       Resource Management Committee—to focus Agency-wide senior management attention on
       improving resources management and accountability; and

•      Held an Agency-wide "CFO Planning Session" as an initial step to engage program and
       regional managers in CFO financial management initiatives.


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Planned:  In the period covered by the Plan, the Agency anticipates additional actions to strengthen
EPA's financial management organization. EPA will:

•      Use the Senior Leadership Council to address the Agency's material weaknesses as identified
       in the Integrity Act Report to the President and Congress;

•      Revise the Delegations of Authority to clarify the CFO's oversight authority over Agency-
       wide financial management operations and strengthen that authority by establishing financial
       management performance measures and  reporting procedures;

•      Establish an internal CFO Advisory Council to provide advice to the CFO and other senior
       managers  on financial management operations, and to address cross-cutting financial
       management issues such as program performance measures and financial management
       performance reporting; and

•      Conduct broad-based reviews of the existing financial management organization and core
       operations, and develop action plans to position the Agency to meet the financial management
       needs of the next century.

Accountability Standards

Status: The Agency has begun the process of defining expectations for financial management
performance and developing appropriate measures  to assess achievement. In FY 1993, the Agency:

•      Revised and updated several aspects of its  accounting and policy procedures, including
       requirements for documenting financial transactions and reconciling accounts receivable;

•      Assisted OMB in developing government-wide financial management performance measures
       through the CFO Council's Operations Group; and

•      Developed initial financial management performance measures which will serve as a basis for
       assessing the strengths and weaknesses of core financial management operations as well as of
       key CFO-related activities performed in  each of the program and regional offices.

Planned:  In the next few years, the Agency will lay the foundation for establishing appropriate
accountability standards for EPA's financial management.  The Five-Year Plan indicates that the
Agency will:

•      Develop and implement a strategy to consolidate and revise existing accounting policies and
       procedures and issue them in the Resources Management Directives System;

•      Implement OMB's government-wide performance measures for financial management, and
       continue to identify and refine appropriate measures to gauge financial management
       performance Agency-wide; and
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•      Issue a revised Quality Assurance (QA) Manual to: reflect current QA procedures; increase
       the use of statistical sampling as a quality control technique; and reflect the Agency's
       approach to Total Quality Management.

Financial Management Personnel

Status:  The Agency completed a number of actions in FY 1993 to develop the skills and meet the
training needs of financial management personnel. Under the direction of the CFO,  staff have:

•      Reviewed performance agreements of financial management personnel and integrated language
       to strengthen accountability for financial management functions;

•      Developed a core curriculum for financial management personnel to guide employees in the
       development of their training plans; and

•      Provided employees with hands-on experience using financial systems and guidance to
       implement several key processes including timekeeping, travel reimbursements, tracking of
       interagency agreements, and Superfund accounting policies.

Planned:  The Agency must work to cultivate a financial management staff that can  fulfill the
financial management needs of the Agency, both now and in the future.  To develop staff to meet the
challenges of the next century, EPA will:

•      Continue to refine its financial management training curriculum to address employee needs in
       the full scope  of financial management functions, including clerical, professional  and
       managerial;

•      Coordinate ongoing training initiatives, establish standard programs for training conducted in
       multiple sites, evaluate existing training programs and issue a calendar listing training
       opportunities for financial management employees; and

•      Initiate a certification and recognition program tying related financial management training to
       organizational objectives and employee skill enhancements.

Financial Systems

Status:  EPA's financial management system includes one integrated accounting and budget system,
an integrated personnel/payroll system, two ad hoc reporting systems, and  six management
information systems which feed or contain limited financial data.  In FY 1993, EPA completed
several key activities related to improvements in IFMS and the financial systems arena.  Major
accomplishments include:

•      Completing the development of the IFMS Strategic Plan and Master Work Plan;

•      Implementing two releases of IFMS to streamline the payment certification process and to
       correct our long standing problems with accounts receivable interest, handling and penalty
       charges;
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•      Developed and implemented a comprehensive financial systems training plan and provided
       training to more than 300 users at various regional sites in IFMS (Data Entry and Using
       IFMS Tables), ADCR (New User Training) and MARS (New User and Refresher training);

•      Formed a dedicated IFMS 5. le project team to manage the implementation of the latest
       release of EPA's off-the-shelf financial system.  The team has been able to make a significant
       impact on keeping the project in focus and staying within the project plan; and

•      Developed project plans and initiated efforts to eliminate legacy systems.  Progress has been
       made for ADCR elimination with a pilot group selected for conversion to IFMS in FY 1994.
       Training plans and training materials have been developed for this effort.

Planned:  In the next five years, EPA hopes to meet all CFO requirements and other legislative
mandates pertaining to the performance of EPA's automated financial systems. The Agency will:

•      Eliminate reliance on predecessor systems-the Financial Management System, the Automated
       Document Control Register and the Resources Management Information System;

•      Expand the capacity of financial information systems to  provide better tracking and reporting
       of program costs and closer linkages with program performance information;

•      Electronically bridge the Integrated Financial Management System  (IFMS) with other Agency
       financial and administrative systems to eliminate duplicative data entry and inconsistent
       application of terms;

•      Maximize benefits of "off-the-shelf" software by coordinating development efforts closely
       with other federal agencies; and

•      Review EPA's current business practices in the context of financial systems and begin systems
       re-engineering to improve efficiency, effectiveness and service delivery.

Management Integrity

Status:  The Agency completed several actions to streamline and strengthen audit management and
Integrity Act implementation during FY 1993. EPA  has:

•      Reorganized the Resource Management Division to more effectively execute functions related
       to both the Office of the Inspector General (OIG) and General Accounting Office audit
       management and for Integrity Act implementation;

•      Implemented steps to link Integrity Act implementation with planning and budgeting cycles;

•      Created a Financial Audit Division within the Office of the Inspector General to address the
       Chief Financial Officers Act requirement concerning audits of EPA's financial statements; and

•      Conducted quality  action team reviews of both audit management and Integrity Act
       implementation to review processes and develop recommendations for improved performance.


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Planned:  Following through on recommendations of the two quality action teams, the Agency plans
to initiate a number of actions designed to strengthen the management integrity functions, make the
processes more effective and focus attention on correcting systemic weaknesses.  EPA will:

•     Refer appropriate financial management issues to the Accountable Officials—a group of senior
       career officials accountable for correcting the material weaknesses in the Agency's annual
       Integrity Act  reports;

•     Streamline and combine Integrity Act requirements and automate the reporting process to
       reduce the documentation burden of identifying and monitoring weaknesses; and

•     Mandate stronger linkages between planning, budget and management  integrity to ensure
       investment in correcting Agency management weaknesses.

Asset Management

Status:  EPA has placed a high priority on asset management.  Among its significant improvements
in FY 1993,  EPA has:
                                    «
•     Implemented  recommendations of an EPA task force on accounts receivable, which included
       issuing of Office of the Comptroller policies, improving Headquarters/region communications,
       and strengthening internal controls;

•     Established a task force, which included representation from the Office of the General
       Counsel, to review debt collection documentation, prepare correspondence advising debtors of
       upcoming collection activity, and ensure that regulations are published in the Federal
       Register;

•     Reduced the number of invoices paid late by 29.2 % and interest penalties by 5.4 %;

•     Converted payment of cash incentive awards to electronic fund transfer for those employees
       receiving salary checks by DD/EFT;

•     Expanded the use of the small purchases bankcard program to accelerate the procurement
       process and reduce the amount of money handled by petty cashiers; and

•     Supported a quality action team (QAT) effort to review the tracking and accounting of Agency
       property. The QAT recommended implementation of a single fully integrated fixed asset sub-
       system.

Planned:  As outlined in the Plan, the Agency will continue to expand programs in asset management
in order to maximize financial resources and safeguard Agency property.  EPA will:

•     Install an automated accounts receivable module into the IFMS to improve the management of
       accounts receivable;
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       Participate in the Federal Salary Offset and the Federal Tax Refund Offset programs to
       recover outstanding debts owed to EPA;

       Test and implement a third party draft system to improve the Agency's cash management;

       Implement a select statistical sampling process to enhance the Agency's quality assurance
       efforts and improve the quality of prompt pay data;

       Continue to aggressively identify and pursue options for using electronic funds transfer;

       Automate tracking of third party billings and payments to manage significantly increasing
       workloads;

       Implement an integrated fixed  asset sub-system for property management;  and

       Implement an automated system to assist with information and reporting requirements of the
       Federal Credit Reform Act.
Audited Financial Reporting

Status:  EPA prepared and submitted FY 1992 financial statements for the following trust and
revolving funds and commercial activities: Superfund; Leaking Underground Storage Tank (LUST);
Pesticides Reregistration and Expedited Processing Fund (FIFRA Fund); Revolving Fund for
Certification and Other Services (Tolerance Fund); and the Loan Portion of the Asbestos Loan and
Grant Program.  As part of this effort, EPA:

•      Prepared initial performance measures and other program information for incorporation into
       the Overview section of the report;

•      Supported and responded to the audits of the five CFO-covered funds;  and

•      Evaluated the process and explored options for improving the timeliness and accuracy of
       future financial statements.

Planned:  Based on a review of this year's process for developing the financial statements, EPA
believes that it can improve both the timeliness and quality of the financial statements in the next few
years.  The Agency has committed to:

•      Accelerate its schedule for the preparation of FY 1993 financial statements;

•      Continue to explore options for streamlining the preparation of the financial statements and
       building in quality assessment measures to document the accuracy  of the financial statement
       data;

•      Refine procedures and enhance systems used to produce the audited financial statements;
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•      Continue to work with the Office of Policy, Planning and Evaluation, and program and
       regional offices in developing outcome measures reflecting program results and
       accomplishments;

•      Respond, as appropriate, to audits which will be accelerated by the OIG; and

•      Prepare and submit to the OIG Agency-wide principal financial statements beginning in FY
       1996 (i.e., the FY 1995 financial statements);

Administration of EPA Assistance Programs

Status: Improvements to EPA's grants administration process in FY 1993 has  strengthened the grants
management function.  EPA has:

•      Elevated the grants administration function to office-level status;

•      Conducted training for State and local officials regarding various grant  and cooperative
       agreement requirements;

•      Participated in and provided support to the State Capacity Task Force which issued
       recommendations to the Administrator on how to augment State capacity to respond to
       environmental mandates;

•      Strengthened controls over grants administration, including issuing new policies such as grant
       versus contract determination, timely awards and closeout; and

•      Developed several new grant training programs.

Planned:  Several grants management initiatives currently underway should be  accomplished in the
next few years, while other activities are in development. During the five-year period covered under
the Plan, EPA will:

•      Streamline EPA's Grants Process;

•      Conduct grants administration training for EPA grants project officers;

•      Update EPA grants policies to reflect emerging issues and anticipated OMB revisions to key
       circulars;

•      Evaluate State efforts in conducting risk assessments to set the stage for establishing a multi-
       media assistance program; and

•      Review possible options to give States more flexibility in implementing their assistance
       programs, such as allowing States to "pool" their media-specific funds.
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                                CONCLUSION

      EPA's 1993 Financial Management Status Report and Five-Year Plan serves
as a compendium of the Agency's financial management accomplishments during
FY  1993 and a diagram of its goals and initiatives for FYs 1994 - 1997.  The
Agency has made great strides in developing this plan by offering not only a vision
for  the future of financial management within EPA, but also by establishing
benchmarks, goals and specific milestones by which its progress can be measured
in future years.

      The plan takes financial management far beyond the traditional core
functions and operations, and strives to introduce an Agency-wide awareness of
and momentum for financial management improvement. The plan is a beginning; it
provides the underpinnings for future plans in what will be an  evolutionary process.
The ultimate goal  is to secure a partnership of financial and program managers
making informed programmatic and resource decisions, and guiding the Agency to
achieve its  environmental mission and meet its fiduciary responsibilities.
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                                     CHAPTER 1
                THE  CFO'S CONCEPTUAL FRAMEWORK
       The Environmental Protection Agency's (EPA) FY1993-1997Financial Management Status
Report and Five-Year Plan has been developed against a backdrop of unprecedented Agency and
government-wide focus on improving financial management practices.  Among the key factors
influencing EPA's current financial management priorities and out-year plans are: the preparation of
EPA's first audited annual financial statements under the Chief Financial Officers (CFO) Act; the
increasing Congressional scrutiny of EPA's management practices; the efforts of the National
Performance Review Teams; the management improvement initiatives of Administrator Carol Browner;
and the recent enactment of the Government Performance and Results  Act.
CFO'S THEMES FOR FINANCIAL
MANAGEMENT

   Within the basic context of "reinventing
government" and ensuring more rigorous
accountability, the first and foremost priority for
EPA's CFO is to position the Agency's financial
management organization,  services and
operations to meet the challenges of the future.
The CFO envisioned five key themes which
guided the development of the conceptual
framework and blueprint for  meeting the future
challenges of financial management.  These
themes, which follow, are  interwoven throughout
the plan.

•  Integrating financial management into the
   Agency's decision-making process.

•  Providing an infrastructure of financial
   management information,  systems and
   services that supports and enhances the
   Agency's mission and programs.
•  Achieving an Agency-wide balance between
   stewardship for the environment and
   stewardship for public resources.

•  Instilling greater Agency-wide accountability
   for financial management.

•  Striving for continuous improvement by
   setting goals, evaluating performance,
   marking progress and continually pushing
   forward to  achieve excellence.

Integration

   The first step in positioning the Agency's
financial management organization, services and
operations to meet the challenges of the future
requires an Agency-wide shift in the way
financial management is perceived.  Financial
management can no longer be thought of as an
isolated accounting and payment function.
Instead, financial management must become
recognized in  its broader perspective—as an
interconnected set of management operations,
services and tools through which  the Agency
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obtains, manages and accounts for its fiscal
resources in order to achieve its environmental
mission.

   This broader perspective of financial
management encompasses Agency-wide fiscal
responsibilities and operations, and requires that
financial  management become an integral part of
the process that guides the Agency's program
management and investment decisions.  Financial
management personnel and environmental
program  managers must work in partnership to
achieve EPA's mission.  In addition, financial
management must be linked in one
comprehensive process with strategic planning,
budgeting and program evaluation to optimize
resource  utilization. This integration will
require Agency-wide cultural and operational
changes.

Infrastructure

   Financial management information, services
and systems must be designed to support the
Agency's program managers.  The CFO must
provide program and regional managers with the
tools they need—financial systems, useful
information, policy guidance,  training and
technical assistance—to effectively perform their
financial  management responsibilities and to
achieve the Agency's environmental mission.
Realizing this vision will require that financial
management become more streamlined, efficient,
effective  and customer oriented.
   All managers must strive to balance their
stewardship for the environment with their
stewardship for public resources.  When making
resource decisions, the Agency's senior
managers must balance their commitment to
achieving the Agency's mission with their
commitment to financial and management
integrity. Both commitments are critical to
success.  Certainly over the long term, the
Agency's ability to achieve its environmental
                          mission requires the execution of its programs in
                          a manner that complies with applicable
                          legislative and administrative requirements.

                             Similarly, financial managers must recognize
                          their dual roles of providing services to the
                          Agency's program managers and serving as
                          stewards of public resources-roles which
                          sometimes conflict. While the CFO's staff must
                          fulfill the function of serving as the Agency's
                          honest broker, it also must meet the needs of its
                          customers—senior and program managers—by
                          providing them with the technical  assistance and
                          information needed to achieve their program
                          goals within applicable legal and administrative
                          guidelines.

                          Accountability

                             The CFO must communicate to the Agency's
                          senior and program managers the  critical
                          importance of ensuring sound financial
                          management and management integrity in the
                          Agency's programs and operations. Further, the
                          CFO must ensure that all managers acknowledge
                          their responsibilities for financial and
                          management integrity within their own
                          organizations, recognizing that accountability is
                          not an issue pertaining only to the CFO's
                          immediate organization.  Fulfilling this vision
                          will require the continued leadership of the CFO
                          in management forums and the personal
                          involvement and commitment of senior
                          management.

                          Continuous Improvement

                             Improving financial management must be
                          recognized as a long-term iterative process;
                          change in the federal bureaucracy comes slowly.
                          Enormous amounts of political will, management
                          commitment and hard work will be required to
                          fully achieve the ideals espoused within this
                          conceptual framework.  In addition, changing
                          conditions such as technological advancements,
                          new legislation and efforts to "reinvent"
                          government will require the Agency to adjust
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and sometimes redirect its efforts.  However,
regardless of the conditions, management must
remain committed to setting goals, evaluating its
performance, marking its progress and
continually pushing forward to attain excellence.
The five-year plan offers a baseline and a
scorecard for tracking that progress.

CFO'S GOALS FOR FINANCIAL
MANAGEMENT

   Each of these themes-integration,
infrastructure, balance, accountability and
continuous improvement—must be cultivated in
order to develop a comprehensive financial
management program which will ensure more
effective management of the Agency's resources
and also support attaining EPA's environmental
goals.  With this conceptual framework of
financial management in mind, the CFO has
established five key long-range goals for EPA's
financial management operations.  The goals are
as follows:

1. Establish Agency-wide accountability for
   financial management operations and
   activities.

2. Provide complete, reliable, timely  and useful
   financial information  and services to Agency
   managers, central agencies and  the Congress.

3. Cultivate program and regional partnerships
   to effectively and efficiently manage
   resources in support of Agency goals.

4. Support an integrated approach  to Agency-
   wide strategic planning, budgeting, financial
   accounting and program evaluation.

5. Define future skill needs and  establish a
   strategy for recruitment and training of
   financial management personnel.

   The experiences EPA has gained during the
past year have provided  opportunities to identify
and plan for the initiatives and activities needed
to fulfill the requirements of the CFO Act and to
meet these goals.  Those plans are detailed in the
eight prescribed chapters of this status report and
five-year plan.

FACTORS INFLUENCING  FINANCIAL
MANAGEMENT IMPROVEMENT

   Meeting the CFO Act requirements alone,
however, is not sufficient.  The CFO also must
take a broader look at the emerging management
trends and initiatives in order to develop long-
range plans and make prudent investment
decisions in these times of increasing fiscal
constraint.  For example, the CFO's plans for
working with Agency managers to develop
program performance information must consider
the future program performance measures
requirements of the Government Performance
and Results Act (GPRA).  Although the
implementation plans for GPRA are not yet
final, the CFO has developed this five-year plan
anticipating the need to closely link the Agency's
implementation of the CFO Act and GPRA—to
avoid duplication of effort or working at cross-
purposes.

   The CFO's plan also reflects Administrator
Browner's declared intentions to build a far
more rigorous system of accountability for the
management of the Agency's resources. The
Administrator already has demonstrated her
commitment to accountability  and management
integrity by establishing a cadre of senior
managers—Senior Resource Officials—who are
responsible for all aspects of resource
management within their respective regional and
Headquarters offices.   In addition, the
Administrator has established a permanent
executive-level council to serve as an oversight
and decision-making body for EPA's
management integrity and resource management
responsibilities.

   EPA's 1993 Financial Management Status
Report and Five-Year Plan reflects these factors
and initiatives, however, the impact of even
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more financial management improvement
initiatives, such as the National Performance
Review and the internal agency reviews, were
not available in time to be incorporated into the
1993 planning process. The CFO anticipates
factoring the specific effects of these initiatives
and GPRA into the Agency's next five-year
financial  management plan.

CONCLUSION

   EPA's 1993 Financial  Management Status
Report and Five-Year Plan serves as a
compendium of the Agency's financial
management accomplishments during FY 1993
and a diagram of its goals and initiatives for FYs
1994 -  1997.  The Agency has made great
strides  in developing this plan by offering not
only a vision for the future of financial
                          management within EPA, but also by
                          establishing benchmarks, goals and specific
                          milestones by which its progress can be
                          measured in future years.

                             The plan takes financial management far
                          beyond the traditional core functions and
                          operations, and strives to introduce an Agency-
                          wide awareness of and momentum for financial
                          management improvement.  The plan is a
                          beginning; it provides the underpinnings for
                          future plans in what will be an evolutionary
                          process.  The ultimate goal is to secure a
                          partnership of financial and program managers
                          making informed programmatic and resource
                          decisions, and guiding the Agency to achieve its
                          environmental mission and meet its fiduciary
                          responsibilities.
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                                     CHAPTER 2
             FINANCIAL MANAGEMENT ORGANIZATION
       A principal intent of the Chief Financial Officers (CFO) Act is to establish financial
management organizations that will facilitate financial management improvements and accountability.
EPA must accomplish this through: the leadership and influence of the CFO; partnerships with other
Agency organizations and managers; and more effective and efficient financial management
operations.
              A. STATUS OF FINANCIAL MANAGEMENT ORGANIZATION
LEADERSHIP AND INFLUENCE OF THE
CFO

CFO Organizational Plan

   The Environmental Protection Agency (EPA)
is organized into fifteen Headquarters Offices
under the direction of the Administrator, and the
Assistant and Associate Administrators, and into
ten Regional Offices under the direction of
Regional Administrators (see Attachment A,
U.S. EPA Organizational Chart). In addition,
there are 52 EPA laboratories and field offices
located throughout the United States and its
territories.

   Headquarters Assistant and Associate
Administrators serve as national program
managers for one or more environmental
programs or administrative and management
support areas.  Regional Offices, however,
provide the full range of environmental
programs, services, and administrative and
management support—including financial
management—for the geographic locations under
their jurisdiction.

   EPA's designated CFO is the Assistant
Administrator (AA) for Administration and
Resources Management. Consistent with the
CFO Act, the CFO/AA is a Presidential
appointee who reports directly to the
Administrator.  The CFO has responsibility for
managing the Agency's financial management
activities including budget formulation and
execution, management of contract and grants
administration,  and Agency-wide management
controls and audit follow-up. In addition, the
CFO serves as the Agency's senior information
resources and human resources management
official.

   In FY 1993, EPA's Office of Administration
and Resources Management (OARM) re-
organized to  improve the management and
accountability of the Agency's complex
contracts, grants and financial management
activities. Since the AA for OARM also serves
as EPA's CFO, the OARM re-organization
dictated modifications to EPA's CFO
Organizational Plan.  The revised plan was
submitted to the Office of Management and
Budget (OMB)  for approval in July 1993.

   Key to the OARM re-organization was the
establishment of the Deputy Assistant
Administrator (DAA) for Finance and
Acquisition, who also serves as EPA's Deputy
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CFO (see Attachment A, OARM Organizational
Chart).  This is a change from EPA's previous
organizational structure in which the Comptroller
served as the Deputy CFO (DCFO). The new
DAA/DCFO structure was designed to:

•  Raise the visibility and devote more
   structured management attention to financial
   management and acquisition;

•  Recognize the importance of key management
   functions and financial integrity to the
   successful operation of the Agency;

•  Develop strong programs which ensure that
   the Agency will conduct itself with high
   business, government and ethical standards;
   and

•  Provide strong oversight to the full spectrum
   of the Agency's fiscal responsibilities.

   Establishing the DCFO position at the DAA
level provides the DCFO with increased
authority and effectiveness to work with EPA's
program and regional offices in providing
direction, management and oversight of the
Agency's financial  management personnel,
activities and operations.  In addition, EPA is
working to strengthen the effectiveness of the
Agency's financial  management personnel,
activities and operations through a variety of
initiatives, including:

•  The development and implementation of an
   Agency-wide organizational financial
   management performance measures process
   (see pages 15 -  17);

•  The development of model language for
   critical job elements, position descriptions  and
   skills factors for financial management
   personnel (see page 21); and

•  The development of a financial management
   core training curriculum, which will provide
   appropriate training to all of the Agency's
                             senior managers, as well as to financial
                             management staff and managers (see pages
                             23- 25).

                             Because the CFO does not have direct line
                          authority over financial management personnel in
                          the Program and Regional offices, the CFO must
                          establish a strong partnership role in working
                          with these staff and managers to ensure good
                          Agency-wide financial management practices.  In
                          addition to networking at the various staff and
                          management levels, EPA's strategy for achieving
                          more effective Agency-wide financial
                          management requires the focused attention and
                          support of senior managers  on key financial  and
                          resource management issues.

                          Senior Management Attention on Financial
                          Management

                             EPA Administrator Carol Browner has
                          identified the effective management of the
                          Agency's resources as one of the key priorities
                          of her administration.  During FY 1993,  the
                          Administrator has taken a number of actions to
                          focus Agency-wide senior management attention
                          on improving resources management and
                          accountability, as envisioned by the CFO Act.
                          The  Administrator's actions include
                          establishment of two new senior management
                          councils:

                          •  The Senior Leadership  Council (SLC) - a
                             permanent council, comprised of the
                             Agency's senior political and career
                             managers, that provides  advice and counsel to
                             the Administrator on a broad range of
                             management issues.  The SLC meets
                             quarterly or  more frequently upon request of
                             the Administrator.

                             Two Agency-wide initiatives under the direct
                             supervision and guidance of the SLC are of
                             critical importance to the successful
                             implementation  of the CFO Act and the
                             implementation  of the Government
                             Performance and Results Act (GPRA)--the
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   Environmental Goals Project and STARS II.
   These collaborative efforts are designed to
   provide EPA with the capability to report
   program performance information in terms of
   environmental results, consistent with the
   requirements of both the CFO Act and the
   GPRA.  Both of these initiatives are discussed
   more fully in Chapter 7, "Audited Financial
   Reporting" (see pages 71 - 72).

•  The Resource Management Committee - a
   committee of senior managers  charged with
   strengthening Agency-wide resource
   management practices, including procurement
   and contracts management,  grants
   management, and program financial
   management.  The Resource Management
   Committee is chaired by the CFO.
   Committee members are representatives of
   the Senior Resource Officials (SROs), a cadre
   of senior managers recently designated to be
   responsible for all aspects of fiscal resources
   management in their respective regional and
   headquarters office.

   The Resource Management Committee will
provide high level leadership for the Agency's
overall resource management responsibilities,
including programmatic financial  management
issues. To  ensure the continued involvement of
the SROs in appropriate financial management
concerns, the CFO will provide them with
periodic updates on financial management
initiatives.  At the operational level, the CFO
Advisory Council (see page 9) will provide
advice to the CFO and other senior managers on
overall financial management operations and
related CFO issues.

Revised Delegations of Authority to the CFO

   In October of 1991, EPA's Administrator
signed the Agency's initial Delegations of
Authority to the CFO.  These delegations
granted the CFO certain personnel authorities
over the Agency's key regional and program
managers who have responsibility for financial
management functions within their organizations.

   For regional financial managers—the Assistant
Regional Administrators—the Delegations
formalized an existing relationship with the CFO
and the responsibilities for financial management
functions that those managers traditionally have
performed.  For the Headquarters program
office financial managers~the Senior Budget
Officers (SBOs)--the Delegations represented a
significant departure from their previous working
relationship with the CFO.  Further, this
relationship was not consistent with the varied
roles, responsibilities and organizational
placement of the SBOs.  For the program
offices, revised Delegations of Authority were
needed to establish appropriate accountability for
financial management at a higher level of
authority-the Assistant Administrators.

PARTNERSHIPS WITH OTHER AGENCY
ORGANIZATIONS AND MANAGERS

CFO Implementation Task Force

   During FY 1993, EPA's CFO Implementation
Task Force continued to provide oversight for
implementation of the  CFO Act, including the
preparation of the Agency's first audited
financial statements and the first CFO's Annual
Report. With the completion of these activities
in FY  1993, the Task Force is concluding its
work of guiding the Agency in the initial
implementation of the  CFO Act requirements.
Prior to disbanding in early FY 1994, the Task
Force will prepare a report summarizing the
CFO implementation accomplishments, and
providing recommendations on next steps for the
future CFO Advisory Council (see page 9).

CFO Planning Session

   In April 1993, EPA held its first agency-wide
gathering concerning the CFO Act~the CFO
Orientation and Planning Session.  More than
125 Regional and Headquarters staff and
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managers participated in the two-day session
which provided:  1) an orientation and update on
CFO Act implementation at EPA; and 2)
presentations and discussions on key CFO Five-
Year Plan issues such as financial management
accountability and program performance
measures.

   The CFO Orientation and  Planning Session
was a first step in the CFO's strategy for
engaging program and regional managers in
financial management initiatives.  Two
immediate outcomes of the Orientation and
Planning Session were:

•  The establishment of an FY 1994 financial
   management performance  measures pilot
   program to report on financial  management
   operations not addressed by the OMB
   required measures; and
                          •  Monthly teleconferences between
                             Headquarters Financial Management Division
                             managers and financial managers in the
                             Agency's ten Regional Offices to strengthen
                             communications and provide a forum for
                             addressing cross-cutting financial management
                             issues.

                             In addition, the Planning Session provided an
                          opportunity to secure the participation of
                          regional and program managers in the
                          development of the CFO's Five-Year Plan.  As
                          follow-up to the Planning Session, the CFO will
                          transmit the Financial Management Status Report
                          and Five-Year Plan to  the Agency's senior
                          managers, as well as to program and regional
                          financial management staff and managers.
                          Distribution of the plan will serve as an initial
                          step to communicate the CFO's goals and
                          expectations for financial management to the
                          Agency's staff and managers.
              B.  PLANS FOR FINANCIAL MANAGEMENT ORGANIZATION
LEADERSHIP AND INFLUENCE OF THE
CFO

Senior Management Attention on Financial
Management

   As the Chair of the Resource Management
Committee, the CFO will continue to provide
leadership to ensure that the Agency's senior
managers focus attention on critical financial
management issues. Specific actions planned
include defining the responsibilities and functions
of the Senior Resource Officials (SROs) and
examining the linkages between the SROs' duties
and responsibilities and the performance of
CFO-related functions in the regional and
program offices.

   In addition, the CFO will bring pertinent
financial management and related issues to the
attention of the SLC.  For example, the SLC
                          will provide oversight for two Agency-wide
                          initiatives—the Environmental Goals Project and
                          the STARS II Project-that are integral to
                          successfully meeting the goals of both the CFO
                          Act and the GPRA.  These and other
                          management/programmatic initiatives will
                          present an opportunity to integrate key pieces of
                          legislation so that EPA has a coherent, integrated
                          strategic and program planning, budgeting,
                          program evaluation and financial accounting
                          process that allows senior managers and policy
                          officials to  make informed, fact-based decisions
                          in the environmental arena.  (For additional
                          information on the Environmental Goals Project
                          and STARS II, see Chapter 8, "Audited
                          Financial Reporting," pages 71 - 72.)

                          Clarify Delegations of Authority to the CFO

                             As noted above, efforts to work with program
                          financial managers—SBOs—during the  past year
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revealed a need to clarify key elements of the
Delegations of Authority.  The objective of the
CFO Implementation Task Force in revising the
Delegations is to  issue a clearly stated policy that
defines the CFO's role in overseeing  financial
operations both within the CFO organization and
within other organizational components of the
Agency.

   The revised delegations require the CFO to
provide feedback to the Regional Administrators
(for their regional offices) and the Deputy
Administrator (for Headquarters offices) on the
performance of financial management within the
Agency's various component organizations.
This feedback will be based on mutually
accepted financial management performance
measures and standards for EPA's Headquarters
and regional offices.  The revised delegations are
scheduled to be issued in mid FY 1994.  The
financial management performance measures will
be piloted in FY  1994, and are scheduled for
Agency-wide implementation in FY 1995.
                   MILESTONES FOR DELEGATIONS OF AUTHORITY
MILESTONE
Conduct review and concurrence of Delegations
Issue Final Delegation
EXPECTED
COMPLETION DATE
2/94
3/94
PARTNERSHIPS WITH OTHER AGENCY
ORGANIZATIONS AND MANAGERS

CFO Advisory Council

   In FY 1994, EPA plans to establish an
internal CFO Advisory Council to provide
advice to the CFO and other senior managers on
financial management operations and related
CFO issues. The purpose of the Council will be
to forge a partnership with the operational
program and regional financial management
communities and to address cross-cutting
financial management issues such as program
performance measures and financial management
performance reporting.

   The Council will assist the CFO to identify
ways to strengthen the "dotted line "  authority
between the CFO and the regional and program
offices; to develop and provide complete,
reliable, timely and useful financial management
information to Agency managers; and to enhance
the CFO's financial management operations and
infrastructure.

   Proposed tasks for the Council include the
following:

•  Provide guidance on the development and
   implementation of the CFO's Five-Year Plan;

•  Strengthen financial management
   accountability through the institutionalization
   of financial management performance
   measures and reporting;

•  Develop a prototype structure for performing
   financial management functions within
   program offices;

•  Develop an Agency-wide recruitment and
   training strategy to ensure the appropriate mix
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   of knowledge, skills and abilities for key
   financial management staff and managers;

   Delineate and define the financial
   management information needs of program
   and regional managers; and

   Advise the CFO on linking planning and
   program performance information with
   budget and financial management data.
                             EPA expects to establish the CFO Advisory
                          Council in mid-FY 1994.  One of the Council's
                          first tasks will be to develop its charter and
                          action plan for FYs 1994 and 1995.  The CFO
                          anticipates that the Council will be instrumental
                          in evaluating the organization and operations,
                          and improving the effectiveness of Agency-wide
                          financial management.
                      MILESTONES FOR CFO ADVISORY COUNCIL
MILESTONE
Establish CFO Advisory Council
Develop Charter and Action Plan
Provide guidance for 5-Year Plan
EXPECTED
COMPLETION DATE
3/94
6/94
9/94
Financial Management Performance Measures

   The objective of EPA's financial management
performance measures process is to establish
standards and goals to measure how well the
Agency's various Headquarters and regional
offices are performing key financial management
functions. Regional and Headquarters' program
financial operations are not under the direct
supervision of the CFO; however, the CFO has
the authority to  measure how well financial
management activities are being conducted in
these offices.  Organizational performance will
be measured against these established standards
and improvement plans will be initiated where
organizations are not meeting the standards.
(For additional information on financial
management performance standards, see Chapter
3, "Accountability Standards," pages 15 and 17.)
                          MORE EFFECTIVE AND EFFICIENT
                          FINANCIAL MANAGEMENT
                          OPERATIONS

                          Analyze the Effectiveness of Existing Financial
                          Management Organization and Resources

                             In its 1992 Five-Year Plan, EPA indicated
                          there was a need to analyze the effectiveness of
                          available EPA resources to accomplish the
                          workload associated with the CFO legislative
                          mandates and subsequent OMB requirements.
                          While the Congressional and administrative
                          requirements for financial management have
                          increased in recent years, the Agency's financial
                          management resources have remained essentially
                          the same.  Although EPA has met the
                          requirements of the CFO Act to date, it has done
                          so largely by re-directing resources from other
                          financial management operations and priorities.
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   To continue operating in this manner will
compromise EPA's ability to perform its critical,
core financial management activities.  To
address this problem, in FY 1994, the CFO will
undertake several reviews of the existing
financial  management organization and core
operations.  These reviews will be designed to
determine what specific changes are required to
take advantage of new technology and re-
engineering to improve financial management
operations and services and promote more
efficient and effective use of the Agency's
resources.  Specific plans include the  following:

•  Conduct a special review of EPA's financial
   management operations in cooperation with
   the Agency's OIG;

•  Initiate an internal review of EPA's financial
   management operations centers to identify
   opportunities for streamlining and
   consolidating operations and services;

•  Enlist the assistance of a consultant to review
   the central financial management
   organization—the Financial Management
   Division (FMD)—and to provide impartial
   recommendations on technological,
   operational, functional and staffing changes
   needed to ensure the future effectiveness and
   efficiency of the FMD; and

•  Develop implementation plans to address the
   recommendations of the National
   Performance Review and EPA's internal
   financial management review.

   The results of these reviews and subsequent
action plans will be incorporated into the 1994
status report and five-year plan.
       MILESTONES FOR REVIEW OF FINANCIAL MANAGEMENT OPERATIONS
MILESTONE
Complete CFO/OIG review of financial
management
Develop follow-up action plan
Complete internal financial operations review
Develop follow-up action plan
Receive recommendations report from
consultant
Develop follow-up action plan
EXPECTED
COMPLETION DATE
12/93
3/94
3/94
4/94
6/94
9/94
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                                      CHAPTERS
                       ACCOUNTABILITY STANDARDS
       To define the expectations for financial management in EPA, and to enable an objective and
reliable assessment of the achievement of these expectations, EPA needs clear, comprehensive and
consistent accounting standards and financial management performance measures.

                     A. STATUS OF ACCOUNTABILITY STANDARDS
ACCOUNTING STANDARDS

Financial Policies and Procedures

   All of EPA's financial management guidance,
including its accounting policies and procedures,
are contained in the Resources Management
Directives System (RMDS), which is part of the
Agency's overall directives system.  As the need
to issue new or revised financial management
guidance arises, EPA issues Comptroller Policy
Announcements (PAs) or Comptroller
Transmittal Notices (TNs).  These single-issue
policy documents then are incorporated into the
RMDS at a later date.  In order to improve the
availability of the Agency's RMDS guidance, all
issued RMDS chapters,  as well as PAs and TNs
issued since  1987, are available on an electronic
bulletin board known as FMD SAGE. This on-
line,  local-area system is available Agency-wide.

   In FY 1993,  EPA revised and updated several
aspects of its accounting policies and procedures,
including requirements for adequately
documenting Agency financial transactions and
reconciling accounts receivable.  In addition, the
Agency issued 23 Comptroller Transmittal
Notices on a variety of financial management
issues.  Following these policies and procedures
will greatly improve the reliability of the
Agency's accounting data.  For example,
transactions recorded in the Integrated Financial
Management System (IFMS) will be adequately
documented and will agree with the
documentation referenced.  In addition, the
Agency's accounts receivable will reconcile with
the detailed records.

Superfund Policies Update

   An area of particular interest in financial
policies is the updating of RMDS 2550-D,
Financial Management of Superfund.  RMDS
2550-D contains all Superfund specific financial
management and accounting policy for the
Agency. Since Superfund is unique in its cost
accounting requirements, these policies must be
current and complete to ensure effective financial
management practices of the Superfund program.

   EPA also is updating its Superfund guidance
documents for other Federal agencies and for
States.   In keeping with the partnership theme,
other Federal agencies and States play a key role
in Superfund. These financial guidance
documents will assist those organizations in
practicing sound financial management for the
Superfund program and will assist the Agency in
its cost recovery efforts.

   Because of the unique cost accounting
requirements of Superfund, addressing emerging
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issues is an important aspect of EPA's financial
policies. Although most of the Agency's
Superfund financial policies were developed after
the 1987 reauthorization, the  Superfund program
has continued to evolve significantly.  As a
result of this evolution, many new issues have
not been explicitly addressed  and other areas
need more detailed explanations.  These issues
include cashouts, receipt of stock from
bankruptcies, cost documentation (the
documentation requirements have changed),  site
accounting, and other cost accounting practices.
In order to meet its goal of sound financial
management, the Agency plans to identify and
address these emerging issues in a timely fashion
by issuing the appropriate policy  and guidance.

Superfund Cost Accounting

Indirect Cost Rate: The initial indirect cost
rates for fiscal years 1983 through 1988 were
based on a study by the accounting firm of Ernst
& Whinney  (now Ernst & Young).  In
implementing the methodology, EPA made
conservative policy decisions  to exclude certain
costs from the indirect cost pools, and made
other decisions  which significantly limited
recovery of certain indirect costs.  Selection of
this indirect cost allocation methodology was not
based on the premise that those indirect costs
were not recoverable, but rather was based on a
consideration of efficient administration of this
methodology by the Agency's previous financial
management system (FMS).

   In June of 1989, EPA made the decision  to
change the indirect cost rate methodology to a
full cost recovery methodology. The  Agency
determined that the approach  for making this
change would be to propose a federal  regulation
establishing a full cost recovery methodology.
In November 1990, EPA completed its process
of developing the regulation package and
submitted it to the Office of Management and
Budget (OMB).  In July 1992, OMB released the
regulation, and it was published for comment in
the Federal Register in August  1992.
                              The principal methodology change is the
                           provision for full cost recovery, including those
                           indirect costs previously excluded under EPA's
                           conservative policy. Under the rule, all indirect
                           costs would be recoverable at sites associated
                           with viable responsible parties. It is the
                           Agency's intention to make the cost recovery
                           rule rates (full cost approach) effective
                           retroactively for cost recovery actions initiated
                           after the regulation is established.  The final rule
                           is scheduled to be issued February 1994.

                           Annual Allocation: The purpose of the Annual
                           Allocation Reporting Process is to enable the
                           Agency to capture all Superfund site-related
                           costs consistently and accurately for purposes  of
                           cost recovery and external  reporting.  Superfund
                           site contractors invoice site-specific direct costs
                           incurred in performing cleanup work at sites on
                           an ongoing basis.  The Annual Allocation
                           Reporting Process is the means by which
                           administrative and other non-site costs associated
                           with the contractors' direct site work are
                           redistributed to the appropriate sites.

                              The process requires contractors to follow  a
                           sound and documented methodology for
                           allocating certain non-site costs to sites and to
                           submit an annual allocation report.  EPA's role
                           is to prescribe a standard allocation
                           methodology, to assist contractors in report
                           preparation, to review contractor reports for
                           completeness and accuracy, and to process
                           completed reports for inclusion in cost recovery
                           efforts.   The annual allocation process has
                           multiple steps which require several months to
                           complete. During the entire process, FMD
                           tracks the progress on each contract using an
                           internal database and manages the process by
                           dealing  with project officers, contracting officers
                           and contractors to ensure that the process  is
                           successful.

                              Since the Annual Allocation project entered
                           its implementation phase in FY 1993,
                           approximately 30 out of 150 reports have been
                           completed and the process  for another 60
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contracts has been started. The expected
recovery from these 150 reports is $700 million.
Once the remaining 120 reports are completed,
the backlog will be eliminated. The reports will
then be completed on an annual basis.

Federal Accounting Standards Advisory Board

   During fiscal year 1993, the Federal
Accounting Standards Advisory Board  (FASAB)
issued two accounting standards exposure drafts,
and a draft concept statement on the objectives
of federal financial reporting.  The first exposure
draft pertained to accounting for direct loans and
loan guarantees under the Credit Reform Act of
1990.  The second exposure draft contained
accounting requirements for inventories held for
operations or for resale to others.  Generally, the
standard requires that inventories be valued at
cost, except when circumstances indicate that
they should be valued at a lower amount.

   While EPA does have a loan program (the
Asbestos Loan Program) and maintains
inventories for its operations, neither proposed
accounting standard will have  much of an impact
on EPA. The primary reason for this is that
neither item is material to EPA's overall
operations.  In addition, the loan program has
never had a default, and Agency accounting
policies for inventories  are generally in
agreement with the FASAB's recommended
accounting requirements.

   EPA provided extensive comments on the
FASAB's first draft concept statement on the
objectives of federal financial reporting,
expressing the need for FASAB to develop a
conceptual framework before it begins
developing detailed accounting standards.  A
conceptual framework answers, or at least raises,
fundamental questions such as: 1) who are the
intended and/or expected users? and 2) what are
their expected information needs?  Answers to
these and similar questions are critical to
providing the foundation for the development of
detailed accounting standards.
   FINANCIAL MANAGEMENT
   PERFORMANCE MEASURES

      EPA assisted OMB in developing
   government-wide financial management
   performance measures through active
   participation in the CFO Council Operations
   Group's effort. Reporting on these mandatory
   measures is scheduled to began in late FY 1993.

      In addition, as part of EPA's overall strategy
   to improve financial management,  the CFO has
   initiated a project to implement additional,
   objective financial management performance
   measures to gauge how well financial
   management is carried out within EPA. The
   purpose of this initiative is to establish
   performance measures and standards to evaluate
   the core financial management operations
   administered by the CFO as well as to evaluate
   key CFO-related activities performed in the
   program and regional offices.

      The performance measures and standards will
   provide the CFO and Agency managers with a
   basis for assessing the strengths and weaknesses
   of EPA's financial  management.  The
   performance results of the Agency's financial
   activities measured against these standards also
   will provide the CFO with feedback on how well
   the CFO's  staff is meeting the financial
   requirements  of its customers and  other
   stakeholders.  Several pilots for using these
   measures will be implemented in FY 1994.

   QUALITY ASSURANCE PROGRAM

      EPA implemented its current Quality
   Assurance  (QA) Program in 1986.  The primary
   focus was to implement an efficient, continuous
   process for evaluating financial managers'
   compliance with management control standards
   and with appropriate accounting principles and
   standards, as  prescribed by OMB and the
   General Accounting Office  (GAO). The
   framework and procedural guidance for
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implementing and maintaining the program is
contained in the Agency's QA Guide.

   EPA had planned to revise the QA Guide in
FY 1993 in order to:  reflect  changes in EPA
operations resulting from the  1989
implementation of IFMS; expand the use of
                           statistical sampling as a quality control technique
                           for validating the integrity and reliability of the
                           financial processes; and to reflect the Agency's
                           philosophy and approach to Total Quality
                           Management. Due to other priorities, these
                           revisions to the QA program  were delayed until
                           FY 1994.
                     B.  PLANS FOR ACCOUNTABILITY STANDARDS
ACCOUNTING STANDARDS

   EPA's goal is to have relevant,
comprehensive, understandable, and up-to-date
written accounting and financial reporting
policies and procedures that are accessible to all
Agency financial management personnel.
Having such accounting  and financial reporting
policies and procedures in place will help to
ensure that the Agency's financial transactions
are properly recorded and  reported.  As a result,
the Agency will be able  to provide consistent,
reliable, timely and useful financial information
to Congress, the President, Agency managers,
and the general public for  evaluating EPA's
programs and performance.

   Revising the Agency's accounting and
financial reporting policies and procedures  is an
ongoing task.  As new accounting and financial
reporting requirements emerge—either  from new
legislation, central agency  directives and
requirements, or changes in EPA's operations
and financial management  information needs—
EPA develops and issues Comptroller  PAs  or
Comptroller TNs.  These PAs and TNs are
single-issue policy documents which are
subsequently integrated into the Agency's
RMDS.

   EPA expects to consolidate and revise its
existing accounting policies and procedures, as
appropriate, and issue them in the Accounting
Policies section of the RMDS.  Among the
                           functional areas being addressed by the updated
                           directives are payroll, accounting,  Superfund and
                           cash management. Detailed procedures for
                           entering financial transactions into IFMS will be
                           contained in the IFMS Users' Manual. This
                           manual is currently being developed and will be
                           issued when EPA installs version 5.1e of IFMS
                           in the spring of 1994.  Both the RMDS and the
                           IFMS User Manual will be updated as needed.

                             Additionally, the Agency will issue the
                           remaining 31 unissued RMDS chapters, and
                           revise as appropriate those 86 chapters that
                           already have been issued. Development and
                           issuance of the unissued RMDS chapters is a
                           long-term effort, since many of the directives
                           deal with complex subjects and require
                           considerable coordination among the various
                           EPA offices involved.  Also, all new  directives
                           and revisions to existing directives must go
                           through an Agency-wide review and approval
                           process.

                           Superfund Policy

                             As indicated previously, the Agency
                           anticipates implementing its full cost recovery of
                           indirect costs after the final  rule is issued.  The
                           issuance is scheduled for February  1994.  In
                           addition, the backlog of 120 contracts must still
                           be completed under the Annual Allocation
                           project. Sixty  of these have been initiated.
                           When the entire backlog is addressed, new
                           reports will be addressed on an annual basis.
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FASAB

   Finally, as part of EPA's ongoing
government-wide effort to stay abreast of
emerging policy issues and to influence their
policy and process, EPA intends to remain an
active
                          participant on interagency workgroups.  For
                          example, the Agency will continue to keep
                          current on the FASAB's work and provide
                          comments on their exposure drafts and draft
                          concept statements.
                     MILESTONES FOR ACCOUNTING STANDARDS
MILESTONE
Issue Payroll Directive, RMDS 2550A, Part II
(7 chapters)
Issue IFMS Users Handbook
Issue Revised EPA Travel Manual
Issue RMDS 2530 Accounting Policies (8
chapters)
Issue Revised Superfund Directive, RMDS
2550D
Issue Remaining RMDS 2540 Cash
Management (11 chapters)
Issue Remaining RMDS Chapters
Update issued RMDS Chapters
Attend FASAB Meetings
Respond to FASAB exposure drafts and draft
standards
Implement New Accounting Requirements
EXPECTED
COMPLETION DATE
9/93
3/94
9/94
12/94
12/94
12/95
12/96
Ongoing
Ongoing
Ongoing
Ongoing
FINANCIAL MANAGEMENT
PERFORMANCE MEASURES

   The objective of EPA's financial management
performance measures process is to establish
standards and goals to measure how well the
Agency is performing key financial management
functions within the CFO's organization as well
as within other Headquarters offices and regional
offices.  Regional and program financial
                          operations are not under the direct supervision of
                          the CFO; however, the CFO does have the
                          authority to measure and provide feedback on
                          how well financial management activities are
                          being conducted in those offices. This
                          measurement of organizational financial
                          management performance will be gauged against
                          established objective standards, and improvement
                          plans will be initiated where organizations are
                          not meeting those standards.
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   EPA's action plan for implementing financial
management performance measures is designed
to build consensus from the staff and managerial
levels on what needs to be measured, what the
goal or standard should be, and how information
should be collected and validated.  The program
will also feature improvement strategies and
goals for meeting customer expectations. The
strategy includes developing a four-tiered
comprehensive measurement process.

•  Implement the external  OMB Government-
   wide efficiency measures to provide a
   composite indicator of EPA's basic financial
   management performance.  These measures
   will apply to the  CFO's organization and the
   field  finance offices.

•  Develop additional indicators of internal
   efficiency and quality which are applicable to
   the CFO's organization as well as field and
   Headquarters financial offices.

•  Develop agency-wide indicators for other
   financial management performance areas,
   applicable to program and finance offices in
                             Headquarters and the regions.

                          • Encourage all offices to develop additional
                             internal financial management measures
                             which office managers may find useful in
                             operating their offices effectively and
                             efficiently.

                             The CFO will develop a periodic reporting
                          process measuring performance against
                          standards. Using these reports, the CFO will
                          provide feedback to the heads of each office and
                          to the Deputy Administrator on how well
                          financial  management is being conducted in
                          EPA.

                             The CFO also will solicit input from field and
                          program  offices for improving the CFO's
                          operations and will institutionalize a continuing
                          improvement process as a result of this
                          measurement strategy.  Additionally, the Deputy
                          Administrator and the Regional Administrators
                          will use the CFO's feedback on organizational
                          financial  management performance in
                          formulating their performance appraisals of
                          senior managers under their supervision.
                     MILESTONES FOR PERFORMANCE MEASURES
MILESTONE
Implement OMB Government-wide Measures
Develop internal measures for core operations
Conduct pilots for internal measures
Address issues to implement internal measures
Agency-wide
Develop program financial management
performance measures
Implement Agency-wide financial management
performance measures and reporting
Monitor and provide feedback on financial
management performance and improvement
EXPECTED
COMPLETION DATE
10/93
10/93
3/94
6/94
9/94
10/94
Ongoing
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QUALITY ASSURANCE PROGRAM

    During FY 1994, EPA plans to expand the
scope of its QA Program to encompass the
establishment and monitoring of financial
management organizational performance
measures and standards as part of its
implementation of the CFO Act. The QA
program will also be revamped to: reflect
changes in EPA operations resulting from the
implementation of an upgraded IFMS; expand
the use of statistical sampling as a quality control
technique for validating the integrity and
reliability of its financial processes; and to
reflect the Agency's philosophy and approach to
Total Quality Management.

    Essential elements of the initial QA program
guidance are still applicable. However, important
aspects of the program need to be refined and
updated in order to:

•  Reflect new requirements imposed by the
   CFO Act, with particular emphasis on the
   requirement for  annual audited financial
   statements;
•  Incorporate changes in the Agency's
   management control event cycles resulting
   from system and policy changes; and

•  Identify opportunities for performing QA
   reviews in a more efficient manner.

    The goal of the quality assurance initiative is
to  update the Agency's QA Program to reflect
changes in EPA's financial operations and to
ensure compliance with the objectives of the
CFO Act.  Specific objectives of the initiative
include the following:

•  Achieve and maintain effective control
   systems as an  ongoing function of
   management;

•  Provide a framework  for monitoring the
   success of EPA's financial organizations in
   achieving financial management performance
   goals;

•  Implement improved quality control
   procedures and techniques.
                  MILESTONES FOR IMPROVED QUALITY ASSURANCE
MILESTONE
Develop internal core financial measures
Implement automated statistical sampling
system
Issue revised Financial Managers ' Quality
Assurance Guide
EXPECTED
COMPLETION DATE
10/93
6/94
9/94
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                                     CHAPTER 4
                FINANCIAL MANAGEMENT PERSONNEL
       Highly skilled financial management personnel are essential for accomplishing the
fundamental reforms called for in the Chief Financial Officers (CFO) Act. EPA needs to be able to
hire the best qualified financial management personnel, train them well, and provide a work
environment that challenges and rewards them appropriately.
                A. STATUS OF FINANCIAL MANAGEMENT PERSONNEL
CFO PERSONNEL WORKGROUP

   In FY 1992, EPA's CFO Implementation
Task Force established a Personnel Workgroup,
comprised of Headquarters and Regional
financial and human resources management staff
and representatives from the Office of the
Inspector General (OIG).  The workgroup was
tasked to develop and execute short-term  action
plans for implementing the personnel
requirements of the CFO Act.

   The CFO implemented a number of
workgroup recommendations in FY 1993. In
general, these recommendations were designed
to: strengthen accountability for financial
management functions; and develop training and
awareness programs.

   The following is a list of summary
accomplishments in these areas:

Financial Management Accountability

• Implemented procedures specifying financial
   management criteria in merit promotion
   announcements and position descriptions for
   all newly filled Assistant Regional
   Administrators—the Senior Executive Service
   (SES) financial managers in the Agency's 10
   regional offices.

•  Updated the Agency's Performance
   Management and Recognition System (PMRS)
   to include model financial management
   performance agreement language for all
   GM-13 through GM-15 supervisors and
   managers.

•  Included mandatory financial management
   performance standards for the FY 1994
   performance agreements of regional SES
   financial managers.

Core Training and Awareness Programs

•  Developed a core training curriculum for
   financial management personnel working in
   the Agency's central finance office—the
   Financial Management Division (FMD).  The
   curriculum was endorsed by FMD
   management, which recommended that
   employees review and follow curriculum
   recommendations in the development of their
   Individual Development Plans (IDPs).  An
   IDP outlines an employee's goals for
   expanding his/her knowledge and skills, while
   identifying training and developmental
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   opportunities to help the employee achieve
   those goals.  IDPs are required for all FMD
   employees.

•  Developed new employee orientation courses
   targeted at various levels of staff and
   managers within the Agency, ranging from all
   new GS employees to new Presidential
   appointees and career SES managers.
   Agency staff presented the first courses for
   new employees in June and August 1993, and
   conducted the initial SES training during July
   1993.

Systems and Operational Training

•  Conducted hands-on training to improve
   knowledge of and skills on various automated
   systems and software packages related to
   EPA's Integrated Financial  Management
   System (IFMS).  For example,  Agency-wide
   financial management staff were provided
   training on use of the Management and
   Reporting System (MARS), the Automated
   Document Control Register (ADCR), and
   IFMS.

•  Addressed ongoing needs for Agency-wide
   training in several financial management
   functions, such as:  managing bankcard log
   sheets and reconciling accounts; completing
   travel forms; preparing and managing time
   and attendance forms; and establishing
   interagency agreements and tracking their
   expenses and disbursements/reimbursements.

Superfand-related Training

•  Conducted a session for EPA and Department
   of Justice representatives on EPA Cost
                             Recovery and Finance Procedures.  Session
                             leaders described financial procedures and
                             cost documentation and recovery processes.

                          • Implemented hands-on training using the
                             Superfund Cost Recovery Image Processing
                             System (SCRIPS) and the Superfund Cost
                             Organization and Recovery Enhancement
                             System (SCORES).

                          • Provided an overview of Superfund, and
                             Superfund Response Agreements and
                             Enforcement Actions, including policies and
                             procedures for procurement and closeout of
                             Cooperative Agreements.

                          • Held the Annual Superfund Financial
                             Management Technical Workshop to
                             disseminate information and discuss current
                             critical issues requiring attention.

                             As a "next step" to these FY 1993
                          accountability and training initiatives, EPA has
                          established a long-range goal of developing a
                          human resources program that will nurture and
                          support a workforce capable of addressing the
                          Agency's current and future financial
                          management personnel needs. Recognizing the
                          multifaceted nature of financial management, the
                          CFO is dedicated to recruiting and training a
                          diverse staff with a broad range of knowledge,
                          skills and abilities. In addition, the Agency must
                          ensure that those engaged in financial
                          management—staff and managers throughout
                          EPA~have the aptitude, flexibility and training
                          needed to meet the constantly changing and
                          growing challenges of managing the Agency's
                          financial resources.
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                 B. PLANS FOR FINANCIAL MANAGEMENT PERSONNEL
   While the Agency has made progress in
promoting training opportunities for financial
management personnel—for example, the
establishment of FMD's core training
curriculum—much work still remains.  Training
opportunities and requirements need to be more
readily identified for staff and more closely
monitored by management.  Training courses
developed and delivered by EPA staff and
managers also need to be evaluated to determine
if the expected outcomes have been achieved
(i.e.,  does IFMS training reduce number of
erroneous data entries?).

   EPA's plans for financial management
personnel include activities that not only address
the Agency's current financial management
staffing needs but also will position the Agency
to be  an effective organization in the future.
The plans focus on the following areas:
identifying  and standardizing financial
management training; establishing evaluation
criteria for  financial management training; and
establishing a financial  management certification
program.

Financial Management  Training

   Throughout the period of the plan, the
Agency will continue to review its financial
management training program. An Agency-wide
training calendar will be developed to provide
financial management staff with an easy-to-
access guide to financial management training
opportunities. The calendar, which will be
updated periodically, will project training dates
for a  full year to allow long-term planning. The
calendar will list courses on financial
management-related topics offered  by: the EPA
Institute, FMD, regional offices, and other
federal agencies.

   The calendar  will include specialized training
opportunities. For example,  several Superfund
Accounting courses currently are planned for a
variety of EPA financial management audiences.
These include courses to: ensure consistent
approaches across regional offices for site
accounting and appropriate use of ZZ accounts;
provide information on what is included in
Annual  and Historic Allocation reports and how
to include them in cost recovery  packages;
discuss  the proper completion  of Superfund
timesheets, using the correct site identification
numbers and describing account structures; and
describe site invoicing guidance including proper
site accounting to project officers.

   The publication of an Agency-wide EPA
financial management training  calendar will help
to identify training areas which may require
closer coordination among Headquarters and
regional offices. For example, time and
attendance training is provided in several
locations, but the courses have not been
evaluated to ensure that they cover the same
material or provide similar instruction. The
Agency will review ongoing and multi-site
training programs to  ensure a more consistent,
standardized approach.

   In addition, EPA needs to avoid a duplication
of effort in the development and  implementation
of financial management training courses
provided in the Agency's various offices
nationwide. Better coordination between
Headquarters and regional offices may be
necessary to: standardize the types of training
courses being provided; ensure consistency in
the training materials used and the information
being communicated;  and eliminate any
unnecessary duplication of effort such as  "re-
creating" already existing courses, developing
new courses and updating curriculums.

Evaluation Criteria for Financial Management
Training

   When EPA trains an employee, it makes an
investment in that employee.  As a result, the
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Agency has a legitimate reason to expect better
performance. Training programs, therefore,
need to be evaluated based on their efficacy to
improve employee performance.

   In FY 1994, EPA will develop criteria for
evaluating targeted financial management
training programs.  The criteria will be closely
tied to  the objectives of the training courses.
For example, time and attendance training may
                          be evaluated on the basis of improvement
                          observed between pre-training and post-training
                          performance.  Evaluations also will help to
                          assess which types of training (e.g., instructor
                          training versus self-paced training) yield greater
                          benefits.  Training programs that do not result in
                          improved performance will be revamped, and
                          successful programs will serve as models for
                          new training in other  functional areas.
          IMPROVING FINANCIAL MANAGEMENT TRAINING COORDINATION
MILESTONE
Develop and publish training calendar
Establish evaluation criteria for targeted
training programs
Evaluate and update new employee orientation
programs
Develop action plan to identify and eliminate
inconsistencies between training programs
Provide feedback to employees participating in
core curriculum courses
EXPECTED
COMPLETION DATE
3/94
6/94
6/94
7/94
10/94
Financial Management Certification Program

   To ensure that the Agency is able to meet the
financial management demands of the future,
efforts to develop the personnel capacity to meet
those demands need to intensify. As part of the
independent review of EPA financial
management operations discussed in Chapter 2,
"Financial Management Organization," the
independent management consultant will be
requested to: assist the CFO to assess the
Agency's financial management personnel needs
for the year 2000 and beyond;  evaluate EPA's
current personnel structure against those needs;
and recommend actions the Agency could take to
improve potential performance in the next
                           century. In addition, EPA will review the
                           training and certification efforts of other federal
                           agencies (e.g, the Department of Energy).
                           Based on these reviews, EPA will develop
                           appropriate long-term training and certification
                           strategies.

                             Through certification and  recognition
                           programs,  the Agency hopes to build a culture of
                           continuous improvement and personal growth
                           where employees clearly identify the relationship
                           between self-development and job performance
                           and pursue both equally.  The certification
                           program will be designed to motivate financial
                           staff to acquire the financial management skills
                           needed to support the Agency's financial
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management infrastructure. It also will provide
them with a common body of knowledge of
finance and federal accounting procedures.

   The two key components to EPA's financial
management certification program will be
achievement and recognition.  Employees need
to know that if they acquire skills relevant to
organization goals, they will be recognized.
      The certification program will initially follow
   the core curriculum developed for finance
   personnel. The core curriculum will be refined
   as EPA's financial management organization
   matures and becomes future-focused.  Every
   employee involved in financial management in
   the Agency will be encouraged to participate in
   courses at appropriate levels.
 ESTABLISHING A FINANCIAL MANAGEMENT CERTIFICATION PROGRAM TO HELP
                       MEET FUTURE ORGANIZATIONAL NEEDS
MILESTONE
Evaluate findings and recommended actions of
the independent review of financial
management operations
Institute financial management certification
program
Develop and issue strategy for meeting the
long-term needs of the EPA "future
organization"
EXPECTED
COMPLETION DATE
11/94
1/95
1/96
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                                      CHAPTERS
                              FINANCIAL SYSTEMS
       Good management requires that financial and program managers be accountable for program
results and proper control over government resources.  Financial management must therefore provide
information essential for budgetary integrity, effective operating performance, stewardship, and
prevention of fraud, waste and abuse.  To meet these needs, EPA's financial systems must process,
track and provide complete, reliable, timely and useful information on financial activity in the most
cost effective and efficient manner.

                          A.  STATUS OF FINANCIAL SYSTEMS
   The Chief Financial Officers (CFO) Act
requires EPA and other agencies to:  1)
eliminate obsolete or inefficient financial
management systems; 2) provide complete,
reliable, timely and useful financial information
to decision-makers; 3) report costs and measure
performance; and 4) integrate financial and
mixed systems. In addition to the explicit CFO
requirements, EPA must also be prepared to:
respond to new legislation which would
necessitate modifications to the Agency's
Integrated Financial Management System
(IFMS); keep pace with technological changes so
that IFMS does not become obsolete and that
EPA can capitalize on new technologies or
software efficiencies; and ensure that the
Agency's workforce is effectively trained in
IFMS operations.

   This chapter of EPA's five year plan
describes the Agency's strategies for meeting the
CFO Act and other legislative mandates affecting
EPA's systems.  Following OMB's guidance, the
discussion of financial systems information is
divided into the following sections:

I.  Baseline of financial  and mixed systems.
II.  Future target for financial and mixed
    systems.

III. Projects required to move from the baseline
    to the target.

BASELINE OF FINANCIAL AND MIXED
SYSTEMS

   This section of the plan summarizes the
current status of EPA's financial and mixed
systems.  Attachment B Exhibit I provides a
schematic of these systems.  EPA's baseline
includes one integrated accounting and budget
system, an integrated personnel/payroll system,
two ad hoc reporting systems, and six
management information systems which feed or
contain limited financial data. The six mixed
systems are as follows:  the Contracts Payment
System; the Personal Property Accountability
System; the Grants Information  Controls System;
the Automated Procurement Document System;
the Contract Information System; and the
Integrated Contract Management System.

•  Integrated Financial Management System
   (IFMS) - IFMS is EPA's integrated
   accounting and budget system, which
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performs core functions for general ledger,
budget preparation, budget execution/funds
control,  accounts payable, accounts receivable,
purchasing, travel and standard reporting. IFMS
was implemented in 1989, and has since been
enhanced through several sub-releases.

•  Financial Management  System (FMS) -
   FMS is EPA's predecessor accounting system
   and is still maintained in order to access both
   historical data for ad hoc accounting reports
   (via software known as SPUR) and payroll
   information.  FMS also augments IFMS for
   certain accounting and data editing functions,
   and exchanges data electronically with IFMS.
   As discussed below,  EPA is taking steps to
   eliminate FMS and replace these functions in
   IFMS and MARS.

•  EPA Payroll System (EPAYS) - EPAYS is
   the Agency's integrated personnel and payroll
   system.  EPAYS sends data electronically to
   IFMS, via FMS.

•  Combined Payroll Redistribution and
   Reporting System (CPARS) - EPAYS sends
   summarized payroll accounting data to  IFMS
   via an interfacing system called CPARS.
   CPARS also provides an automated process
   for making payroll adjustments.

•  Management and Accounting Reporting
   System (MARS) - MARS provides ad hoc
   reporting against data contained in IFMS.

•  Contracts Payment  System (CPS) - CPS
   supports EPA's contract payment function.
   Contract obligations and invoices are
   recorded in CPS. EPA also uses CPS to
   schedule and transmit contract payment to
   Treasury. CPS obligation  and disbursement
   data are electronically posted to IFMS daily.

•  Automated Document Control Register
   (ADCR) - ADCR supports program office
   funds management through the commitment
   (i.e., reservation) of appropriated funds.
                            ADCR also allows the electronic recording of
                            travel obligations and transfers commitment
                            data to IFMS.  As discussed later, ADCR
                            functions are slated to be incorporated into
                            IFMS.

                          • Resources Management Information
                            System (RMIS) - RMIS supports the budget
                            formulation functions.  RMIS transfers budget
                            preparation data to IFMS. As discussed later,
                            RMIS functions are slated to be incorporated
                            into IFMS.

                          • Personal Property Accountability System
                            (PPAS) - PPAS maintains inventory database
                            of EPA personal property valued at $1,000 or
                            more.  This system currently does not have
                            an automated interface with IFMS, but
                            options are  being considered to either
                            interface PPAS with IFMS, or use an IFMS
                            module to perform functions now in PPAS.

                          • Grants Information Control System (GICS)
                            - GICS maintains a database of Agency
                            grants, assistance programs and loans. This
                            system currently interfaces electronically with
                            IFMS for Headquarters grants; EPA plans to
                            expand that interface to include all Agency
                            grants in the future.

                          • Automated Procurement Document System
                            (APDS) and Contract Information System
                            (CIS) - APDS and CIS are related systems
                            that perform contracts document preparation
                            and recording of current and historical
                            contracts data, respectively.  Plans are being
                            developed to replace APDS and CIS with the
                            Integrated  Contract Management System
                            (ICMS),  which  will have  the capability to
                            exchange financial data on contracts between
                            itself and IFMS.

                          • Superfund  Cost Recovery Image Processing
                            System (SCRIPS) AND Superfund Cost
                            Organization and Recovery Enhancement
                            System (SCORES) - SCRIPS and SCORES
                            are systems used by the finance offices in the
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   documentation of Superfund site costs.
   SCRIPS is an imaging system which stores
   Superfund site documents.  SCORES is a PC-
   based networked database system used to
   generate Superfund site costs in an easy-to-
   read manner.  SCORES downloads Superfund
   site transactions on a monthly basis from the
   Agency's accounting system.

   In FY 1993, EPA completed several key
activities related to improvements in IFMS and
the financial systems  arena.  Major
accomplishments include:

•  Completed the development of the IFMS
   Strategic Plan and Master Work Plan;

•  Implemented two releases of IFMS to
   streamline the payment certification process
   and to correct our long standing problems
   with accounts receivable  interest, handling
   and penalty charges.
   Developed and implemented a comprehensive
   financial systems training plan.  More than
   300 users were provided training at various
   regional sites in IFMS (Data Entry and Using
   IFMS Tables), ADCR (New User Training)
   and MARS (New User and Refresher
   training);

   Formed a dedicated IFMS 5.1e project team
   to manage the implementation of the latest
   release of EPA's off the shelf financial
   system.  The team has been able to make a
   significant impact on keeping the project in
   focus and staying within the project plan;

   Developed project plans and initiated efforts
   to eliminate legacy systems.  Progress has
   been made for ADCR elimination with a pilot
   group selected for conversion to IFMS in FY
   1994. Training plans and training materials
   have been  developed for this effort.
                          B.  PLANS FOR FINANCIAL SYSTEMS
FUTURE TARGET FOR FINANCIAL AND
MIXED SYSTEMS

   EPA has been charged with carrying out
numerous  laws to protect the Nation's
environment.  Under these authorities,  EPA
conducts research, enforces regulations, provides
information to the public, and awards assistance
to State and local governments, educational
institutions and other organizations.  The CFO
Act increases the emphasis on effective financial
management of the funds appropriated to  EPA to
carry out these functions.

   In order to effectively manage EPA's funds
and meet its environmental objectives, Agency
managers must have consistent, reliable, timely
and useful financial information.  Since ADP
technology now provides greater access to
various types of information, EPA's financial
systems strategies are intended to use that
technology to comply with CFO requirements
and to meet the primary information needs of its
managers to successfully direct their programs.

   Over the next five years, EPA plans to meet
the CFO requirements by:

1) Eliminating all reliance on the components of
   its Integrated Financial Management System
   (IFMS) that are based on the previous
   accounting system;

2) Creating system capacity to track agency
   project costs and to link them with program
   performance information;
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3) Electronically linking IFMS with Agency
   "mixed" systems for the efficient and accurate
   exchange of data; and

4) Developing reporting capabilities that will
   enable staff and managers to readily obtain
   information at a level that is consistent with
   their roles and functions in their EPA
   component organizations.

   EPA also will upgrade IFMS as needed to
meet internal and external requirements, and will
provide a continuing program of training to all
levels of staff on the use and operations of
IFMS.

   Detailed below are a number of aggressive
projects that define EPA's strategies for reaching
these objectives over the next five years.  An
important consideration to keep in mind is that
these projects are planned and initiated in a time
of continued uncertainty, as technology continues
to change rapidly and is often obsolete within
five years.  New external and internal
requirements may cause the Agency to change
direction or priorities.  Certainly with major
initiatives ongoing to "reinvent" government,
there will be additional changes or requirements
not currently anticipated.  And, finally,
continued fiscal constraints may delay the
Agency's implementation of these plans.

   As an overall strategy for operating in this
environment, EPA must ensure that its staff is
well-trained and well aware of the evolving
technologies and management concepts. EPA's
current vendor for  its core financial software is
American Management Systems, Inc.  (AMS).
As long as the Agency uses the AMS  off-the-
shelf software-Federal Financial  Systems (FFS)-
-it must maintain an effective presence in the
Federal Financial Systems User Group (FFSUG)
to help guide future releases  of that software.
Also, through EPA's Systems Management
Group and Executive Management Group, which
provide oversight to the Agency's financial
systems, the Agency can ensure that the
                          priorities set are those most needed to attain
                          EPA's overall programmatic missions while
                          meeting the requirements of the CFO Act, the
                          Federal  Managers' Financial Integrity Act
                          (Integrity Act) and other pertinent legislation.

                             Exhibit II reflects the Agency's current vision
                          of IFMS as of 1997.  In that vision, FMS,
                          SPUR, ADCR,  RMIS, APDS,  and CIS have
                          been eliminated. PPAS may also be eliminated
                          if the IFMS Fixed Assets Module is adopted in
                          its place.  The functions currently performed by
                          those systems will be carried out in a more
                          complete and robust IFMS, EPAYS and MARS.
                          In addition, IFMS will have enhanced electronic
                          interfaces with Agency administrative and
                          "mixed" systems (e.g., GICS, ICMS) that
                          include  financial data to provide a complete
                          picture of programmatic activities.
                          PROJECTS REQUIRED TO MOVE FROM
                          BASELINE TO TARGET

                          Objective: Maximizing Benefits from "Off-the-
                          Shelf" Software. EPA was one of the first
                          agencies to "buy into," the "off-the-shelf
                          software concept. EPA's IFMS is based on a
                          product called the Federal Financial System
                          (FFS), developed by American Management
                          Systems (AMS). As expected when any  generic
                          product is introduced into a complex operating
                          environment, EPA has required AMS to  make
                          some modifications and enhancements to meet
                          EPA-specific budgetary and organizational
                          requirements.  However,  these customizations
                          have not fundamentally altered EPA's reliance
                          on the base, off-the-shelf software.

                             EPA's  initial focus, during the first four years
                          of IFMS operations, was  on overcoming a
                          number of performance and data integrity
                          problems encountered when IFMS was
                          implemented in March 1989.  Subsequently,
                          efforts have been directed at developing, testing
                          and implementing several sub-releases necessary
                          to meet critical EPA functional requirements and
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new legislative requirements.  By mid-FY 1994,
the CFO will have implemented a major release
of IFMS that will bring EPA current with the
latest FFS software.

   EPA will continue to analyze and address
internal user needs of IFMS.  However, another
goal for the next four years is to become a major
player in determining the direction of future FFS
development, for example, developing the
capacity for FFS to produce automated financial
statements as required by the CFO Act and
OMB Bulletin 93-02.  The Agency's strategy to
reach that goal is to ensure greater participation
in the FFS User Group.
   Clearly, if the benefits of off-the-shelf
software are to be maximized for Federal users,
all user agencies must work closely together to
define the enhancements to be made to the FFS
software.  In addition, as new legislative, OMB
or Treasury requirements (including automated
transmission of agency data to the central
agencies) are issued, the user agencies must
ensure that AMS provides modifications timely
and effectively in order to ensure compliance at
minimum  cost to the government.  This effort is
a subset of OMB's overall strategic efforts to
reduce system costs by encouraging use of off-
the-shelf core financial systems.
                        MILESTONES TO PARTICIPATE IN FFSUG
MILESTONE
Increase participation in FFSUG
EXPECTED
COMPLETION DATE
Ongoing
Objective: Elimination of Predecessor
Systems.  EPA's Acting Comptroller announced
in a March 1993 memorandum to Agency
managers that a key objective for FY 1994 and
FY 1995 is to eliminate all reliance on
predecessor systems (FMS, RMIS, ADCR).
The goal is to ensure that the ancillary functions
now performed by those systems are successfully
implemented  in IFMS.  As part of the strategy
for achieving that objective, EPA workgroups
have identified discrete actions that must be
taken to ensure a successful transition.

   The workgroups consist of members from the
finance, budget,  information resources
management and program communities. In
addition, contractual assistance was obtained in
FY 1993 to perform the necessary analysis and
software coding, and to provide other needed
support.  The CFO also issued a survey letter to
the FMS user community asking them to identify
and report on any additional or specialized uses
of FMS. To minimize impact on the user
community, the CFO will work with user offices
to ensure that acceptable alternatives to the
existing FMS, RMIS and ADCR functions are
provided through IFMS or other means.

   Achieving this objective will improve
financial management in EPA by reducing
system support costs; by eliminating
vulnerability created by use of obsolete and
outdated systems; and by completing the
integration of all accounting, funds management
and budgeting activities within IFMS.
                      EPA's Financial Management Status Report & Five-Year Plan
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                       MILESTONES FOR FMS/RMIS ELIMINATION
MILESTONE
Conduct requirements analysis for historical
data and payroll data
Complete cost/benefit and options analysis
Design system changes
Develop system coding
Complete system testing
Complete implementation
EXPECTED
COMPLETION DATE
10/93
2/94
5/94
7/94
11/94
12/94
                         MILESTONES FOR ADCR ELIMINATION
MILESTONE
Conduct pilot using IFMS
Train all Agency users on IFMS
Replace all ADCR uses with IFMS
EXPECTED
COMPLETION DATE
9/94
9/94
10/94
Objective: Improving Interfaces with "Mixed"
and Administrative Systems.  A major
impediment in analyzing the financial operations
of government agencies is the lack of data
consistency among different systems.  This
government-wide problem is encountered by
analysts and managers at the regional and  .
headquarters office level, as well as in oversight
offices within the central agencies (e.g., OMB
and Treasury).  There are several sources  of
these discrepancies, including: 1) duplicate data
entry, where keying errors can occur; and 2)
lack of standard data definitions for financial
management data elements.

   As a long term objective, EPA plans to
provide, wherever feasible, electronic links
between IFMS and the various "mixed"  and
                          administrative systems that contain financial
                          data.  In addition, EPA will work with the
                          central agencies in coordinating efforts to ensure
                          standard data definitions government-wide and
                          within EPA.  IFMS will remain the "official"
                          Agency system for requisite central agency,
                          Congressional and CFO reports, but there will
                          be greater assurance that the financial
                          information contained in "mixed" or
                          administrative systems is accurate.

                             In conjunction with the "Meeting Agency
                          Financial Information Needs"  objective described
                          below (see page 36), the CFO will work toward
                          improving the ease with which Agency financial
                          data can be downloaded into other databases for
                          analytical purposes, ensuring at the same time
                          that proper security over the data is maintained.
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                         MILESTONES TO BRIDGE EPA SYSTEMS
MILESTONE
Implement GICS interface for all grants
Implement PPAs interface (if not moved to
IFMS)
Coordinate ICMS Interface
EXPECTED
COMPLETION DATE
9/94
9/95
3/98
Objective: Expanded Systems Capacity for
Tracking Agency Costs.  EPA currently relies
on a 10 position account number  for tracking
EPA expenditures against its appropriated and
other funds. This 10 position number is a series
of fields that include information on
appropriations, programs,  allowance holders,
and cost data.  That account number structure is
no longer adequate to meet Agency needs.

   For example, the Comptroller's Office has
almost reached the point where it no longer can
track new appropriations.  It is running out of
codes to track  expenditures on Superfund sites,
and it is unable to meet the increasing demands
for better cost accounting of the Agency's
programs and  initiatives.  With increased
emphasis on performance measures under the
CFO Act and the Government Performance  and
Results Act (GPRA), the ability to associate
financial information with  the Agency's
programs and  accomplishments becomes more
critical.
   IFMS currently has the capacity to use 41
characters in 6 discrete fields.  However, the
other financial related systems (e.g., EPAYS,
CPS, GICS) with which IFMS interacts can only
process the 10 digit account number at this time.
The objective is to increase the capacity of other
systems so that EPA can begin using up to 41
characters, as needed, to meet financial
information requirements.

   The account code strategy begins with
identifying each of the Agency systems that use
the 10 digit account number in order to avoid
adversely affecting any current users of Agency
financial data.  The CFO also will work with
program and administrative offices  to define
which positions are restricted for use in EPA's
budget execution activities and which may have
optional uses.  Additional efforts include
marketing activities to gain wide acceptance of
the need for these changes and related efforts
underway to revise policies, procedures and
forms to align them with the new structure.
                      EPA's Financial Management Status Report & Five-Year Plan
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                     MILESTONES TO EXPAND SYSTEMS CAPACITY
MILESTONE
Complete ADP impact analysis
Define new account code positions
Revise policies, procedures and forms
Design system changes
Develop system coding
Complete system testing
Implement new account code structure
EXPECTED
COMPLETION DATE
9/93
12/93
10/94
2/94
5/94
9/94
10/94
Objective:  Installing Project Cost Accounting
(PCAS). Building on the aforementioned project
to expand the Agency's account number
capacity, EPA is also exploring options to enable
the Agency to track project costs, rather than
simply accounting information that is of limited
value to program managers. This effort is
motivated in part by a longstanding desire of
Agency managers to have this  type of
information to manage their projects more
efficiently and effectively and, in part, by other
factors such as plans to establish a Working
                          Capital Fund, and reporting requirements of the
                          CFO Act and the recently enacted GPRA.  In
                          addition to enhanced project cost tracking
                          capabilities that will be possible with the
                          expanded account number, there is a project cost
                          accounting module (PCAS) available in FFS that
                          EPA will consider installing.  The Agency  will
                          explore other options as well.  This  enhancement
                          to IFMS will be coordinated with the Working
                          Capital Fund initiative (see page 38) and other
                          projects that will require improved project cost
                          accounting.
               MILESTONES TO INSTALL PROJECT COST ACCOUNTING
MILESTONE
Conduct requirements analysis
Evaluate options; select approach
Develop and implement system changes
Develop and issue procedures
EXPECTED
COMPLETION DATE
3/94
9/94
3/95
3/95
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Objective: Meeting Agency Financial
Reporting Needs.  EPA encountered a major
obstacle to the use of IFMS when it was
implemented because of a lack of an ad hoc
reporting mechanism.  AMS includes a reporting
package, known as  "Reporter," with FFS, which
EPA had anticipated using. Unfortunately, in
EPA's computing environment, Reporter had
deleterious affects on system performance and
was not easily learned by users.  As a result,
EPA was forced to  develop its own ad hoc
reporter, known as  the Management and
Accounting Reporting System (MARS).   MARS
has met many of the needs of IFMS users,
although it does not allow access to all IFMS
data elements and it has certain technical
limitations.

   The Agency's long-term objective is to
enhance MARS, and to develop other ancillary
reporting mechanisms, that will improve the
reporting of financial  information.  The end
result will be reporting mechanisms that are easy
to use throughout the  Agency and that  can
provide different levels of summary data to meet
the needs of various levels of Agency
management and classes of users. In addition,
as participants in the FFSUG, EPA will work
towards enhancements of FFS that will enable
the preparation of annual financial (principal)
statements to be automated, or achieved with
minimal manual intervention.
   MILESTONES TO ADD MARS PAYROLL DATA AND TECHNICAL IMPROVEMENTS
MILESTONE
Design systems changes
Develop system coding
Complete system testing
Implement MARS sub-release
EXPECTED
COMPLETION DATE
9/93
12/93
2/94
3/94
Objective: Improving Contracts Financial
Management.  EPA's contracts management
practices have been the subject of recent
Inspector General, GAO and Congressional
reviews.  The Agency already has taken a
number of actions to improve contracts
management.  In the systems area, EPA's Office
of Acquisition Management is using two out-
dated and inadequate systems-APDS  and CIS~to
assist in the administrative and financial
management of EPA's contract activities.
   EPA has initiated a project to upgrade its
contracts management systems as one of several
steps toward more effective contracts
management.  The new system is the Integrated
Contracts Management System (ICMS), which
will interface with IFMS.  The prototype for
ICMS will be delivered in early FY 1994.
Although other interim milestones must be
determined, EPA's goal is to begin the Agency-
wide phase-in of ICMS by mid-FY 1998.
                     EPA's Financial Management Status Report & Five-Year Plan
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                MILESTONES FOR IMPROVING CONTRACTS SYSTEMS
MILESTONE
Delivery of prototype system
Phase in delivery of full ICMS
EXPECTED
COMPLETION DATE
12/93
3/98
Objective: Implementing Electronic Data
Interchange (EDI) Within EPA's Financial
Community.  EPA has made modifications to its
Contract Payment System (CPS) to support the
receipt of contract invoices through EDI and,
once proper Agency approvals are made, to
make payment to the vendor through the
Automated Clearing House (ACH).  The benefits
to EPA are the elimination of costly and time
consuming re-keying of data, and  greater
opportunities to take advantage of cost-effective
discounts offered by vendors.  For vendors, EDI
speeds transmission of invoices to EPA, provides
efficiencies through ACH payment and  gives
                         them access to better information on payment
                         status.

                            EPA placed its first vendor on EDI in August
                         of 1993 and is working with a number of other
                         vendors for subsequent EDI implementation.
                         The Agency also plans to improve
                         communications with vendors through
                         procurement of technology known as a Value
                         Added Network (VAN).  VAN will permit EPA
                         to provide supplemental payment-related
                         information to vendors who submit contract
                         invoices through EDI.
                        MILESTONES FOR IMPLEMENTING EDI
MILESTONE
Begin EDI Implementation
Procure VAN services
Begin 10% per year increase of EDI invoicing
EXPECTED
COMPLETION DATE
8/93
6/94
9/98
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Objective: More Cost Effective Administrative
Services Through a Working Capital Fund
(WCF)

A feasibility study completed in FY 1991
suggested that a WCF would be of significant
benefit to EPA in acquiring and encouraging cost
effective use of resources for certain support
accounts and administrative services.  Operations
would be more business like as each Agency
recipient of the services or goods covered by a
WCF would be charged according to the services
used or the equipment purchased.  A WCF
increases accountability through increased
involvement of service users in decisions
affecting WCF services, and through the
preparation of financial statements and
performance measures for the fund.  Automated
data processing and telecommunications, major
consumers of  Agency resources, may be one of
the first candidates to be included in the
prototype WCF.
                    MILESTONES FOR A WORKING CAPITAL FUND
MILESTONE
Complete systems design for WCF
Test prototype WCF
Implement WCF Agency-wide
EXPECTED
COMPLETION DATE
9/94
9/95
10/95 - Ongoing
Objective:  Upgrade SCRIPS and SCORES,
when necessary.  As the Agency modifies and
upgrades IFMS and other systems, and as
improvements in technology occur, SCRIPS and
SCORES will continue to be upgraded.
Currently, SCRIPS is based upon the AS/400
mini-computer platform.  While meeting the
Agency's needs, the technology will no longer
be supported by the Agency during FY  1995.
Because of the phase-out of AS/400  support,
SCRIPS must migrate to another platform. The
Agency currently has a PC-based imaging
system, which SCRIPS will probably use.
SCORES is currently on the Novell-token ring,
and no platform changes are foreseeable.

   The ultimate goal is the integration of
SCRIPS and SCORES into one cost-recovery
system. The current process of SCRIPS and
SCORES is cumbersome, but is working well.
When integrated, SCRIPS and SCORES will
provide an on-screen capability to produce and
reconcile cost recovery packages. This on-
screen capability will provide for a potential
"paperless" cost recovery package.
                             UPGRADE SCRIPS AND SCORE$
MILESTONE
Change SCRIPS Platform
Integrate SCRIPS and SCORES
EXPECTED
COMPLETION DATE
10/94
10/95
                      EPA's Financial Management Status Report & Five-Year Plan
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Objective: Reviewing EPA Business Practices
and "Re-engineering" Where Needed.  EPA's
current business practices are based in large part
on technologies and practices developed in the
past several decades. EPA has adapted certain
technological advances (e.g., PCs, improved
telecommunications, networking) into existing
processes  without adequately evaluating whether
processes  and organizational  relationships need
to be changed to make the most effective use of
these advances.  "Re-engineering" of the
Agency's  business practices may be appropriate
to make system operations more cost-effective
and better serve its clients.

   As a beginning step, in FY 1994, the CFO is
re-examining the feasibility and cost benefit
                          studies that accompanied the Agency's original
                          decision to acquire off-the-shelf software, and is
                          revising those studies as appropriate. IFMS
                          system requirements will be updated.

                             In the FY 1995 to FY 1997 period, EPA will
                          form an interdisciplinary group to evaluate the
                          Agency's current processes in light of new
                          business practices and currently available
                          technologies and recommend changes, in
                          addition to the specific projects described above,
                          necessary to optimize the application of available
                          knowledge.  The team  will develop a plan for
                          implementing  any changes approved by EPA's
                          senior management.
                  MILESTONES FOR REVIEWING CURRENT PRACTICES
MILESTONE
Re-examine IFMS cost benefit studies
Establish workgroup to evaluate business
practices and available technologies
EXPECTED
COMPLETION DATE
9/94
9/95
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                                       CHAPTER 6
                          MANAGEMENT INTEGRITY
        Taxpayers expect that the Environmental Protection Agency (EPA) will: accomplish its
missions, goals and objectives efficiently and effectively; comply with laws, regulations and policies;
safeguard its funds, property and other resources against fraud, waste or abuse; accurately account
for its revenues and expenditures; and hold its executives and managers accountable for their
performance.  While these are entirely reasonable expectations, the Agency sometimes has failed to
meet them, because of inadequate management controls.

                        A.  STATUS  OF MANAGEMENT INTEGRITY
   Fiscal Year 1993 has been a year of
 significant change for the Agency's management
 integrity program as EPA, like all Federal
 agencies, gained new senior leadership.
 Administrator Carol Browner outlined her
 priorities for management integrity soon after
 her arrival, stating that "management integrity
 will be the cornerstone of [her] administration,"
 with emphasis on sound management,
 accountability, and discipline.  During her short
 time at EPA's helm,  she already has overseen a
 number of changes affecting management
 integrity.

   Notably,  the Agency reorganized three of its
 Headquarters offices  to more fully comply with
 requirements of the Federal Managers' Financial
 Integrity Act of 1982 (Integrity Act), the Chief
 Financial Officers (CFO) Act of 1990, the
 Inspector General (IG) Act Amendments of
 1988, OMB Circular A-123, Internal Control
 Systems, and OMB Circular A-50, Audit
 Follow-up:

 • The Office of Administration and
   Resources Management's (OARM)
   Resource Management Division (RMD)~
   which has National Program Manager
   responsibility for management integrity-
   created separate branches for
implementation of: the Integrity Act and
OMB Circular A-123; and audit
management responsibilities required by
the IG Act Amendments and OMB
Circular A-50. This reorganization
redirected staff resources and permitted
more focused attention on critical
management control and audit management
issues.

EPA transferred its General Accounting
Office (GAO) liaison activities from the
Office of Policy, Planning and Evaluation
to OARM-RMD, which already had
responsibility for Office of Inspector
General (OIG) audit follow-up activities.
This change will provide stronger
accountability for  audit management in the
Agency.

To address  Section 304 of the Chief
Financial Officers Act, concerning
Financial Audits of the EPA's financial
statements,  EPA created the Financial
Audit Division (FAD) within its Office of
Inspector General  (OIG). FAD is
responsible for the audit of EPA's
financial statements.
                      EPA's Financial Management Status Report tt Five-Year Plan
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   This improved focus on management integrity
issues has enabled EPA to identify four primary
management integrity goals for the coming
years.  These include:

•  Streamlining and strengthening processes,
   requirements, and guidance of the Integrity
   Act and audit management;

•  Linking the management integrity
   processes with the Agency's strategic
   planning and budgeting processes;

•  Strengthening the Agency's review process
   for ensuring effectiveness of the controls
   which safeguard EPA programs and
   soundness of EPA audited financial
   statements; and

•  Correcting EPA's systemic problems, such
   as material weaknesses and areas of
   concern included on OMB's High Risk
   List.

These goals are consistent with, and include, the
planned actions that EPA reported  in its FY
1992 CFO Five-Year Plan.

STREAMLINING AND STRENGTHENING
MANAGEMENT INTEGRITY

   Managers  across the Federal Government
perceive management integrity requirements as
tedious and separate from their day-to-day
responsibilities.  Generally, managers at EPA
are no exception and openly have expressed their
frustration with the amount of paperwork,
complex requirements, and confusing guidance
associated with implementation of the Integrity
Act. Many Agency managers have noted
improvements over the past years,  but indicate
that progress  remains to be made.  As a result,
during FY 1993, EPA continued its efforts to
strengthen Agency-wide management  control and
audit management systems so that managers will
want to use these processes as a routine part of
their daily work and management practices.
                          Implementation of the Integrity Act

                             In August 1992, EPA's Deputy Administrator
                          commissioned a Quality Action Team (QAT) to
                          develop recommendations for improving the
                          Agency's implementation of the Integrity Act.
                          The QAT focused on streamlining and
                          strengthening EPA's Integrity Act process,
                          improving guidance and training, and garnering
                          management buy-in.  In FY 1993, the QAT
                          completed its work and developed a number of
                          recommendations to streamline and improve the
                          management integrity process.

                             EPA already has implemented those
                          recommendations which do not require field
                          testing, such as improving the quarterly
                          Management Control Coordinator (MCC)
                          meetings; updating and distributing the MCC
                          contact list every six months; coordinating with
                          the OIG to ensure support of good Integrity Act
                          practices; and referring ideas to integrate budget
                          and Integrity Act processes to  the Accountable
                          Officials (AO)--senior career officials responsible
                          for correcting material weaknesses, material non-
                          conformances, and high risk areas in their
                          programs and operations. In addition, EPA is
                          currently piloting a new tracking  report, the
                          Quarterly Progress Update, which combines the
                          Corrective Action Tracking System reports and
                          the Executive Summaries of Material Weaknesses
                          into one report.

                          Audit Management

                             The OIG conducted four special reviews of
                          the Agency's audit follow-up program in
                          September 1989, August 1990, March 1991, and
                          September 1991.  As a result of the OIG special
                          reviews, EPA reported audit follow-up as a
                          material weakness in  its annual Integrity reports
                          to the President and Congress.  The reviews
                          resulted in a total of 27 recommendations for
                          EPA to adopt. To date,  EPA  has implemented
                          22 of the 27 audit follow-up recommendations.
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EPA's Financial Management Status Report & Rye-Year Plan

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   Over the past four years, the Agency has
implemented a number of important
improvements to the audit follow-up program.
EPA has:  instituted an automated system for
tracking audits and corrective actions;
established a network of responsible audit
management officials in Headquarters and
regional offices;  developed  a quality assurance
program that includes on-site reviews for
validating data integrity; and reorganized the
Resource Management  Division to bring a
sharper focus to  audit management.  The Agency
continued to strengthen its audit management
program by taking a number of significant
actions in FY 1993.

•  EPA hosted a national training session on
   audit management to provide the Agency's
   audit follow-up community with guidance and
   instruction on effective audit resolution and
   follow-up on corrective actions.  In addition,
   EPA focused  top management attention on
   audit issues by developing the Agency Report
   on Significant Audits.  This monthly report
   pinpoints the most sensitive and highly visible
   audits and reviews underway as  well  as those
   in resolution and follow-up stages, capturing
   both the OIG and GAO data.

•  EPA issued a modified version of the
   Management Audit Tracking System (MATS)
   which converted the data base to a more
   efficient local area network accessible to  the
   25 audit follow-up coordinators throughout
   the country.  The Agency also established
   practices to reconcile discrepancies in the
   audit resolution data as reported in the OIG's
   Audit  Tracking System and MATS.

•  EPA created an Agency-wide Audit
   Management QAT to identify procedural
   changes that will result in an audit resolution
   process that is timely and fair to all involved,
   and will pinpoint management accountability
   for follow-up.
   As a result of these steps, in the 1993
Integrity Act report, EPA plans to downgrade
the audit follow-up program weakness from a
material to an internal agency weakness.  EPA
will continue to track audit follow-up until all
corrective actions have been completed and final
validation reflects that the weakness has been
completely corrected.

LINKING MANAGEMENT INTEGRITY
WITH PLANNING AND BUDGETING

    Historically, OMB Circular A-ll,
"Preparation and Submission of Budget
Estimates," has required Federal agencies to
identify funding levels for high risk areas.
However, growing Congressional scrutiny of
Federal agency management practices and
program operations have underscored the need to
link management integrity  with planning and
budgeting. Internal discussions of budget
priorities must include consideration of those
material weaknesses and high risk areas for
which resources are necessary to ensure
correction.  Without strong linkage to
institutional budget and planning processes,
Agency compliance with the Integrity Act has
been problematic.

   In July 1992, OMB initiated efforts to
overhaul and revamp its management integrity
policy guidance by meeting with 22 of the CFO
Federal agencies, including EPA. Motivated by
agencies' comments for a changed and more
meaningful integrity process, OMB drafted
revisions to Circulars A-123 and A-50 that
underscored management accountability for
identifying emerging weaknesses, directing
sufficient resources and taking prompt action to
correct the problems.  OMB urged the
integration of agency integrity, budgeting and
planning processes to secure up-front and
ongoing top management attention to integrity
issues and bottom-line results.
                      EPA's Financial Management Stains Report & Five-Year Plan
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   In FY 1993, EPA developed a methodology
to assess the relative risk of each of its material
weaknesses to provide decision-makers with a
sense of priority in applying the Agency's
limited resources to more effective solutions.  In
addition, the Agency's AOs identified the
alignment of the Agency's Integrity process with
budgeting and planning as one of their four FY
1993 goals.

   During the FYs 1994 and 1995 budget
processes, the EPA Administrator took
significant steps to link funding decisions with
actions needed to correct material weaknesses.
The FY 1994 Budget Technical Call Memo
requested Agency-wide data on resources
targeted for management integrity.  More
notably still, Administrator Browner tasked her
senior managers to provide information on funds
directed to fixing material weaknesses during the
FY 1994 Budget Passback. The Administrator
also has provided this information, as well as
noting EPA's progress in strengthening contracts
management and overall resource management,
in recent congressional testimony.

STRENGTHENING THE AGENCY'S
INTEGRITY ACT REVIEW PROCESS

   The Integrity Act requires Federal managers
to not only establish management controls, but to
evaluate them on a regular basis. EPA's OIG
has noted in its special reviews of the Agency's
implementation of the Integrity Act that
"improvements  are needed to ensure that FMFIA
(Integrity Act) evaluative reviews are effectively
planned and properly conducted."

Internal Agency Reviews

   To address the OIG's repeated findings that
EPA's  Integrity Act reviews are flawed, the
Agency has issued interim guidance for
reviewing the effectiveness of controls.  This
guidance includes specific requirements for the
frequency and timing of reviews for "assessable
units at all risk levels."  EPA has formed an
                           intra-agency workgroup to restructure the
                           vulnerability assessment process, using a
                           recommendation from the Integrity QAT as a
                           launching point, and to develop definitive
                           guidance for reviewing the effectiveness of
                           controls.

                             It is EPA policy that MCCs are to play an
                           active  role in performing quality assurance of
                           management control documents, such as
                           Management Control Reviews and Alternative
                           Management Control Reviews, to ensure that
                           they meet established criteria and requirements.
                           EPA reinforced this policy in training for MCCs
                           conducted in June 1993.  The Agency has been
                           promoting this  policy for many years in its
                           written guidance as well.

                           Office of the Inspector General Audits and
                           Reviews

                             The OIG reviewed the adequacy of
                           management control systems and compliance
                           with various statutes and regulations affecting the
                           Agency as a whole.  The OIG also has completed
                           audits  of the Integrity Act implementation in
                           several regions. The objective of these audits
                           was to determine if regions have effectively
                           administered their management control programs
                           to ensure that EPA has complied with the
                           Integrity Act.

                             These audits disclosed that Agency
                           management may not have:  1) developed  proper
                           Management Control Plans to schedule the
                           necessary Management Control Reviews; 2)
                           established controls over all program and
                           administrative functions; 3) identified high risks
                           areas and taken appropriate corrective action;
                           and adequately trained staff in Integrity Act
                           requirements.  During the course of the audits,
                           the regions gained a better understanding of the
                           Integrity process, which should lead to more
                           effective management control programs.

                             In addition to the management control
                           reviews, following Section 304(3) of the CFO
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Act, the OIG conducted the audits of EPA's FY
1992 financial statements for its trust funds,
revolving funds and commercial activities.

Other Required OIG Management Control
Review Directives

   During FY 1993, the OIG carried out the
following activities assigned to the OIG in EPA
Resources Management Directive 2560 - Internal
Control:

•  Providing technical assistance in EPA's
   effort to evaluate and improve
   management controls;

•  Performing audits and reviews of
   management control documentation and
   systems to determine whether they meet
   the appropriate guidelines;

•  Recommending improvements to
   management control practices and
   procedures as a result of audits and
   reviews;

•  Reporting to the Administrator each year
   whether the Agency's implementation of
   the Integrity Act  is  being carried out in a
   reasonable and prudent manner; and

•  Investigating and reporting any instances
   of illegal  conduct, wrongdoing, or fraud in
   accordance with this directive.
CORRECTING EPA'S SYSTEMIC
WEAKNESSES

   EPA recognized the need for increased
attention to and monitoring of progress that
Agency managers are making in eliminating
systemic weaknesses.  In FY 1992, EPA created
the Accountable Officials (AO) Network,
mentioned earlier, to ensure ongoing consistent
top management attention to progress in
correcting material weaknesses and to early
warning reports of emerging vulnerabilities. In
line with the Agency's four primary management
integrity goals, the AO Network developed
similar goals during 1993: correcting material
weaknesses and non-conformances; aligning
Integrity Act weaknesses with budgeting and
planning; anticipating emerging issues; and
strengthening the Integrity Act process.

   Recently, the AOs reaffirmed fixing material
weaknesses as their primary function. In June
1993, they reported on the status of correcting
weaknesses scheduled for completion in 1993.
In addition, they devised a risk-ranking
methodology to determine how to  apply EPA's
limited resources to the outstanding 23 material
weaknesses.

   To strengthen the Integrity Act process, EPA:
developed an executive summary of the QAT
recommendations; briefed the AOs on the final
recommendations; elicited AO volunteers for
field testing; requested  AO staff to act as
consultants for the implementation process; and
requested the AOs to "adopt a recommendation"
to oversee in  the implementation phase.
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                       B.  PLANS FOR MANAGEMENT INTEGRITY
STREAMLINING AND STRENGTHENING
MANAGEMENT INTEGRITY

Implementation of the Integrity Act

   The Agency has developed a multi-year plan
for field-testing and implementing the QAT
recommendations for streamlining and
strengthening the Integrity process and
requirements.  Major recommendations that EPA
will test-pilot and implement include the
following:

•  Automate EPA's Integrity Process. This
   Agency-wide automation effort goes beyond
   tracking and correction of weaknesses to
   encompass all facets of EPA's Integrity
   process, such as guidance  and procedures,
   documentation of controls  managers have
   implemented, and reviews to test the
   effectiveness of those controls. As a result,
   EPA's integrity data system will  afford  a
   meaningful  tool in management decision-
   making.

•  Combine Integrity Requirements.  By
   combining related requirements-such as
   documentation of controls  (event cycle
   documentation) and the schedule  of reviews
   for testing controls (Management Control
   Plan)-the QAT believes that managers will
   be able to better understand their
   responsibilities and how requirements are
   linked. This recommendation also eliminates
   cumbersome and often duplicative reporting.

•  Develop a Management Control
   Coordinator (MCC) Certification Program.
   This program will elevate the stature of
   individuals managing and coordinating the
   Integrity process across EPA and ensure a
   uniformly qualified  cadre of professionals to
   perform those responsibilities.
                          •  Hold a National Management Integrity
                             Conference. A national conference would
                             focus Agency attention on the importance of
                             management integrity and provide a forum
                             for EPA managers and MCCs to discuss
                             Integrity issues and recognize significant
                             accomplishments.

                          •  Develop a Long-Term Training Strategy.
                             EPA managers  have demanded training on
                             their responsibilities under the Integrity Act,
                             and a strategy to address this need is
                             essential.

                          •  Publicize Success  Stories.  A forum for
                             success stories  will empower managers
                             throughout the  Agency and help eliminate the
                             stigma associated with Integrity Act
                             requirements.

                          •  Integrate the Budget and Management
                             Integrity Process.  By linking planning,
                             budgeting, and  management integrity
                             processes, managers will focus increased
                             attention and adequately invest in correcting
                             Agency material weaknesses. This integration
                             is essential to strengthening management
                             integrity as one of EPA's institutional
                             decision-making processes.

                          Audit Management

                          •  Refine the Management Audit Tracking
                             System.  EPA  will continue to refine MATS
                             to make it easier for Agency offices to report
                             the status of audit resolution and follow-up.
                             In addition, the report generation capability of
                             the system is being strengthened  to give
                             Agency offices increased flexibility in
                             developing reports for top management and
                             using MATS as an effective management tool
                             for tracking and monitoring audit status.
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•  Implement Revised EPA Order 2750 -
   Management of EPA Audit Reports and
   Follow-up Actions.  After the Agency-wide
   QAT on Audit Management recommends
   revisions to EPA Order 2750, RMD will
   incorporate the revisions and coordinate  the
   implementation of the new order. EPA
   management has  requested the QAT to make
   recommendations ensuring that high priority
   is given to audit issues and that audit
   management is consistently implemented
   throughout the Agency.  In addition, the new
   order will include specific provisions to
   improve the accuracy and reliability of data
   reported to Congress semiannually on EPA's
   audit activities.

•  Monitor Completion of Performance Audit
   Recommendations. To improve the
   Agency's effectiveness in implementing
   actions committed to in management
   decisions, EPA will develop procedures  to
   more closely monitor follow-up activities for
   performance audits.
•  Strengthen Completion of Corrective
   Actions Recommended by GAO.  In FY
   1993, EPA linked GAO liaison activities with
   audit management to provide stronger
   accountability for implementation of GAO's
   recommendations.  OARM staff will track
   implementation of report recommendations
   regularly. These procedures will emphasize
   that the completion of corrective actions be
   fully documented, and that action officials
   personally certify that the actions taken
   actually remedied the problem identified in
   the final  audit report.

•  Develop  Tracking  System for GAO Audit
   Recommendations. OARM will develop a
   tracking system to monitor implementation of
   GAO report recommendations. The system
   will clearly identify issues requiring program
   attention, milestones and completion dates.
   The tracking process will focus senior
   manager's attention on areas  of concern. The
   computerized system will be  direct, simple
   and provide meaningful information to
   programs.
              MILESTONES FOR STRENGTHENING AUDIT MANAGEMENT
MILESTONE
Release new version of MATS
Prepare procedures to initiate monitoring of
audit follow-up activities for performance
audits
Issue green border concurrence package on
revised EPA Order concerning management of
EPA audit reports and follow-up actions
Prepare options paper for tracking
implementation of GAO recommendations
EXPECTED
COMPLETION DATE
12/93
12/93
1/94
3/94
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LINKING MANAGEMENT INTEGRITY
WITH PLANNING AND BUDGETING

   Building on initial steps already taken, EPA is
proceeding to carry out the following
fundamental  elements of its strategy to link
Agency-wide integrity, budgeting and planning
processes. In the FY 1995 President's Budget
Request, EPA requested Headquarters and
Regional Offices to identify FY 1994 and 1995
resources devoted to correcting existing material
weaknesses and high risk areas.  During the FY
1995 budget process, the Administrator will
review these resources to ensure that the Agency
is directing sufficient resources to correct its
material weaknesses.

STRENGTHENING THE AGENCY'S
INTEGRITY ACT REVIEW PROCESS

Internal Agency Reviews

•  Agency Vulnerability Assessment
   Workgroup.  EPA's vulnerability assessment
   workgroup is scheduled to complete its work
   during FY 1994.  The workgroup will create
   a new Vulnerability Assessment tool with
   statistical internal reliability and validity.

•  MCC Certification Program.  In 1994, the
   Agency plans to establish  an MCC
   certification program, mentioned above, to
   provide a stronger foundation for ensuring
   Agency-wide compliance and consistency in
   implementing the Integrity Act.

OIG Audits and Reviews

•  Accelerated Completion of Audits.  As EPA
   accelerates its production of CFO financial
   statements, the OIG  will accelerate
   completion of the audits.  Each audit is
   required by Government Auditing Standards
   to review and report on management controls
   and disclose any material weaknesses noted.
   The CFO will work  with program offices to
                             strengthen management controls of the
                             program systems that are the source of
                             program performance data reported in the
                             Agency's annual financial statements.

                          •  Quality Assurance Reviews.  Within the
                             OIG, the Analysis and Evaluation staff is
                             responsible for conducting quality assurance
                             reviews which assure compliance with
                             professional audit standards. FAD's financial
                             statement audits and other reports are subject
                             to OIG quality assurance reviews.

                          CORRECTING EPA's SYSTEMIC
                          WEAKNESSES

                             EPA's AO Network is proceeding to carry
                          out its four goals:

                          •  Fixing  Material Weaknesses and Non-
                             conformances.  This entails improving the
                             identification of agency-level weaknesses and
                             material weaknesses and non-conformances,
                             assessing the effectiveness of milestones for
                             correcting weaknesses, establishing criteria
                             for removing or reducing weaknesses, and
                             developing a validation process to test the
                             effectiveness of corrective actions.

                          •  Aligning Integrity Act Weaknesses with
                             Budgeting and  Planning.  In  addition to
                             integrating the Integrity Act, budgeting,  and
                             strategic planning calendars, the Agency will
                             hold media and/or multi-media
                             hearings/briefings,  disseminate current data to
                             the Senior Budget Officials, brief the
                             Administrator for a programmatic review,
                             and meet with the Director of the Strategic
                             Planning and Management Division, in the
                             Office of Policy, Planning and Evaluation.

                          •  Anticipating Emerging Issues.  The Agency
                             will emphasize the importance of a culture for
                             surfacing problems and will organize focus
                             groups for various levels of management on:
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1)  Indicators of potential problems;
2)  Processes for surfacing weaknesses; and
3)  Processes for reducing functions and/or
    reallocating resources.

EPA plans to develop a guide for managers
for identifying early warning issues.
Strengthening the Integrity Act Process.
The AOs will be involved in overseeing the
implementation of efforts to streamline and
improve management integrity throughout the
Agency.
         MILESTONES TO IMPROVE INTEGRITY ACT IMPLEMENTATION
MILESTONE
Hold four meetings of the Accountable
Officials Network
Develop prototype system to automate EPA's
integrity process
Develop a Management Controls Coordinator
Certification Program
Develop National Training Policy for Integrity
Hold a national management integrity
conference
Develop standard management integrity training
curriculum
Implement Agency-wide automated integrity
system
EXPECTED
COMPLETION DATE
9/94
9/94
9/94
9/94
1/95
6/95
6/96
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                                       CHAPTER?
                              ASSET MANAGEMENT
       The Environmental Protection Agency is committed to managing its financial assets effectively
to ensure the efficient use of its resources.  The Agency's goal is to have an asset management
program that: ensures efficient collection of debts owed to the Agency; processing of payments and
collections in a timely manner and through electronic means; cost-effective management of assets from
acquisition to disposal; and effective administration of loan programs to avoid losses.

                          A.  STATUS OF ASSET  MANAGEMENT
MANAGING RECEIVABLES -
COLLECTION OF DEBT

Accounts Receivable

   During the 1989 conversion from the old
accounting system  (FMS) to the new Integrated
Financial Management System (IFMS),  EPA
experienced significant problems with its
accounts receivable module.  Problems included
the inability of IFMS to automatically perform
the following functions:  (1) compute interest,
penalties and handling charges correctly; (2)
produce accurate dunning letters; and (3)
produce accurate and complete Treasury and
Management reports.

   In addition to the IFMS problems handling
accounts receivable, several of EPA's ten
regional finance offices continue to experience
delays in recording receivables in IFMS.  Most
of the delays occur because Servicing Finance
Offices are not receiving Consent Decree
documentation from Regional  Counsels in a
timely manner. Consent Decrees represent
environmental enforcement actions by the
Department of Justice (DOJ) on behalf of EPA,
which result in receivables to EPA in the form
of fines, penalties or cost recovery actions.

   Current policy requires EPA's accounting
offices to record the receivable within three days
of its effective date. In some instances, it is
physically impossible to deliver the Consent
Decrees signed by the Judge to the accounting
office within this three day time frame.  The
Agency is reviewing its policies in this area to
determine more reasonable time frames and/or
alternative procedures  to ensure timely
accounting.

   Another facet of the accounts receivable
problem is the appearance that EPA is not
managing delinquencies.  This appearance stems
from the  fact that many of the Agency's
receivables are classified as delinquent because
the debtors are in protracted legal action, in
bankruptcy,  or in a lengthy administrative
appeals process.  Under the Debt Collection Act,
receivables over 30 days old are automatically
classified as  "delinquent"  regardless of legal
status.  To compound  the problem, financial
reports on the status of EPA's receivables do  not
provide accurate and reliable data with which to
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judge how well the Agency is managing its
delinquencies; the milestone date for correcting
this problem in IFMS is FY 1994.

   EPA's problems with accounts receivables
were reported as a material weakness in the
Agency's 1992 Integrity Act Report.
Additionally, IFMS accounts receivable module
problems have been reported as an accounting
system non-conformance and contributed to
placing IFMS  on the OMB High Risk list in
1990, where it still remains.

   Since 1990, the Agency has initiated several
projects designed to resolve the receivables
accounting system  and related financial
management problems.  First, in 1990 the
Comptroller issued comprehensive policies and
procedures governing the accounting and
management of receivables. Secondly, in 1991
the Deputy Administrator established an
Interdisciplinary Task Force to perform
oversight reviews of all  regional finance and
program offices to determine compliance with
policies and procedures  governing receivables.

   During 1993 the Task Force completed its
review of the regional accounting offices and
continued to institutionalize improvements in the
communication links among programs, regional
counsels and finance offices to ensure the timely
recording and management of receivables. The
June 30, 1993 audit report on FY 1992 financial
statements showed improvements in the
recording of Superfund receivables; the  1991
audit sample revealed that about 40% of
receivables were recorded timely whereas the
1992 audit reported that about 75%  were
recorded timely.

   During 1993, EPA strengthened  its
management controls to ensure more timely
recording of receivables and to accurately record
their delinquency status  in IFMS. These
controls  will help the CFO to evaluate the
Agency's management of delinquencies.  In
addition, in May 1993,  IFMS enhancements
                          were installed providing the capability to:  1)
                          perform debt servicing automatically, including
                          the computation of interest, penalties, and
                          handling charges; and 2) produce accurate
                          dunning letters.

                          Use of Private Sector Collection Agencies

                             As  a part of its asset management program,
                          EPA will continue to refer delinquent debts to
                          collection agencies on a monthly basis, using the
                          General Service Administration Debt Collection
                          contracts.  The Agency refers delinquent
                          Freedom of Information Act requests, civil
                          penalties, travel advance and payroll debts to the
                          contractors for collection. Although EPA has
                          been using private collection agencies for two
                          years,  the contractors have recovered just more
                          than $92,000, before fees, from more than
                          $900,000 in principal amount referred by the
                          Agency.

                              In FY 1994 EPA plans to expand the use of
                          private sector collection agencies to include
                          Superfund debts. The use of collection agencies
                          is expected to be more beneficial to EPA once
                          Superfund debts are  made part of the program.

                          Implementation  of Debt Collection Act Tools to
                          Collect Delinquent Debt

                             The "Federal Claims Collection Act of
                           1966," as amended by the "Debt Collection Act
                          of 1982," was passed to increase the efficiency
                          of government-wide  efforts to collect debts owed
                          the U.S. Government, and to provide additional
                          procedures or "tools" to collect those debts.
                          Until a short time ago, Federal agencies could
                           "voluntarily"  implement debt collection tools,
                          e.g., collection  agencies, credit bureaus,  etc.
                          However, the "Cash Management Improvement
                          Act Amendments of 1992," Public Law 102-589,
                          passed during Fall 1992, requires all Federal
                          agencies to refer delinquent debt to the Internal
                          Revenue Service (IRS) for offset against
                          individual tax refunds, beginning January 1,
                           1994.  In addition, commercial debt must be
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referred to the IRS beginning on January 1,
1995.

   The CFO established a workgroup to ensure
that EPA complies with P.L.  102-589. The
workgroup is responsible for the implementation
of the Tax Refund Offset Program and the
implementation of all other debt collection tools
and programs as required. The workgroup is
required to work directly with the Department of
the Treasury, Financial Management Service
(FMS) to ensure that EPA meets all of its
implementation requirements set forth by FMS
and/or IRS, e.g.,  publish Agency regulations in
the Federal Register, prepare  memorandums of
understanding (MOUs) and systems testing.  The
workgroup is also responsible for preparing all
policy and procedures for each tool
implemented.

   A major portion of the work required to
implement debt collection tools involves the
preparation of legal documents.  Consequently,
the workgroup has worked closely with its
Office of General Counsel (OGC) members to
ensure that:  EPA's debt collection regulations
are published in the Federal Register: debtors'
due process rights are defined and established;
Privacy Act/Routine Use requirements are met;
and MOUs are reviewed and approved.

   A second workgoup comprised of various
EPA staff from program offices, OGC and the
CFO's office is currently developing policy and
guidelines necessary to implement the use of
debt collection tools within the Superfund
program.  A legal determination prepared by
OGC, dated February 22, 1993, provides
Superfund with the legal authority to use debt
collection tools to pursue delinquent debt.
However,  the workgroup must prepare policies
•which explain its authority to  use debt collection
tools and the limitations of such authority.
Guidance will also be prepared by the
workgroup which defines the  steps to be  taken
when making a determination that a Superfund
debt truly  exists and how to build a strong
record to support this determination.

   The workgroup is preparing a model demand
letter that will advise a debtor that if he/she fails
to respond to a demand for payment, the matter
will be referred to  a debt collection agency,
credit bureaus, for tax offset, etc., for
collection.  The workgroup is also developing
criteria and guidelines which will support how
and when an accounts receivable can be
established.

Recognition of State Cost Share Revenue Earned

   The recent audit of the EPA financial
statements revealed that EPA has not been
appropriately recognizing the revenue for the
work being performed on Superfund State
Contracts (SSCs).  Whenever EPA has the  lead
for a Superfund remedial action, the State's role
in this action is described in  a SSC.  The SSC is
a joint, legally binding agreement that ensures
State involvement as mandated under Section
121 of CERCLA, and obtains State assurances
required under Section 104 of the
Comprehensive Environmental Response,
Compensation and  Liability Act (CERCLA)
prior to the start of the remedial action. Under
this agreement, the State must share response
action costs.

   Under the  SSC agreements, EPA must
receive the funds from the State before EPA
funds can be disbursed.  This amount is
recognized as an advance and is recorded in the
advance account  as deferred  revenue.  As EPA
performs the cleanup, it "earns" the revenue.
The proper accounting is to reduce the advance
account and recognize the revenue.

   EPA does not have an Agency policy and
procedure to ensure proper handling of the
advances for the SSCs nor the proper recording
of the advances and revenues in the Integrated
Financial Management System (IFMS).  The
current balance in the State Cost Share revenue
account must be  analyzed to  determine the
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correct balance and recognize revenue for work
already performed.  In order to correct this
problem, a task force of Headquarters and
regional personnel will review the different
methods of handling the SSC advances and
earned revenues and draft the policies and
procedures that will be used by the Agency.
The Task force will also review the balance of
the deferred revenue account and determine the
correct balance for the deferred revenue account
and amounts to be recorded as earned revenue.

CASH MANAGEMENT - PROCESSING OF
PAYMENTS

Cash Management Improvement Act (CMIA)

   The Cash Management Improvement Act
(CMIA) was signed into law in October 1990.
Formerly known as the State/Federal Equity
Program, CMIA culminates more than seven
years of effort by both the States and the Federal
Government to improve cash management
practices.  The purpose of CMIA is to ensure
greater efficiency, effectiveness, and equity in
the intergovernmental transfer of Federal funds
to the States, the District of Columbia, and five
territories.

   The main objective of CMIA is for all parties
to minimize the time elapsing between the
transfer of Federal funds to States and the States'
disbursements  (liquidation) of those funds for
program purposes. Interest is to be paid when
the funds of one government entity are used in
lieu of the other's. In other words, when a
Federal agency is late  in making a grant payment
to a State, and the State must use State funds to
finance the program, the Federal agency will
owe interest on that amount until the payment is
received by the State.  Likewise, if a State draws
down Federal funds before they are needed for
program payments, then the State would owe
interest to the Federal  Government for use of the
excess funds.

   EPA's grant programs that are listed in the
                          Catalog of Federal Domestic Assistance (CFDA)
                          are below the dollar thresholds for coverage of
                          major Federal Assistance Programs by CMIA.
                          No states have elected to include any EPA grant
                          programs by lowering the threshold limits.

                             Although EPA's programs have been exempt
                          from the first year's implementation of CMIA,
                          EPA has been working on improving its overall
                          grants administration.  Through a Total Quality
                          Management (TQM) effort, revised grants
                          policies and procedures for continuing program
                          grants were developed and implemented.  These
                          changes will help accelerate the grant award
                          process and will help preclude, for the most
                          part, States from having to use their own funds
                          until reimbursed by EPA, notwithstanding
                          delayed Congressional appropriation and OMB
                          apportionments.

                             EPA expects that its programs listed in the
                          CFDA and covered by CMIA will remain below
                          States' thresholds for major Federal Assistance
                          Programs through June 30,  1995.  Therefore,
                          EPA does not expect to be subject to the
                          provisions of CMIA before July 1,  1995, unless:
                          a program would have such increased funding
                          that would exceed the threshold; a State reduces
                          its overall threshold for all programs that would
                          subsequently include EPA; or the Department of
                          Treasury determines that EPA programs should
                          be covered.

                             EPA continues to maintain a close working
                          relationship with Treasury's FMS and actively
                          participated on various workgroups and task
                          forces concerning CMIA. EPA is working with
                          Treasury staff regarding the development of the
                          new Automated Standard Application for
                          Payments (ASAP) System.  It is a same-day
                          payment, recipient initiated system. When
                          implemented, the recipient (grantee) will initiate
                          an on-line request to drawdown funds and the
                          Federal program agency will approve or reject
                          the request. If approved, a disbursement will be
                          made to the requestor, either through a Fedwire
                          or an automated clearinghouse payment system,
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whichever meets the delivery time requirements
of the payment request most economically.
   Treasury currently expects to have ASAP
available in October 1994.  EPA has agreed to
be the first Federal Agency to implement this
fully automated same-day payment process.

Third Party Draft System

   The Third Party Draft System (TPDS)  is a
guaranteed expense payment system that is being
used by a number of Federal agencies to
expedite the handling of expense checks for
selected small purchase transactions. TPDS
soon will be expanded government-wide;
General Services Administration recently issued
a TPDS statement of work with a projected
implementation date of November  1993.

   In a typical TPDS,  drafts are written by
authorized employees of an agency on a third
party's (contractor's) bank account.  In the case
of EPA, an imprest fund cashier will write
checks for authorized small purchases on the
contractor's bank account.  The contractor, on a
daily basis, totals all of the checks cleared at its
bank and notifies EPA of the amount due. EPA
then immediately reimburses the third party by a
single payment using electronic funds transfer
(EFT).

   The more significant advantages of TPDSs
are centralized control, reduced administrative
costs, improved  internal controls, reduced
imprest fund  cash balances, and no advance
funding required by the Agency. Although the
charge per draft  is greater than an EFT
(excluding Fedwire), the cost is offset by a
reduction in imprest fund cash, cash losses, audit
time, prompt pay penalties, personnel, etc. In
addition, since EFT is not appropriate for all
creditors of the Government, TPDS provides the
financial manager with an additional cash
management tool to use when determining which
payment mechanism best fits the situation.

   EPA drafted an Agency directive which sets
forth the proposed policies, procedures, and
internal controls for operation of TPDS.  The
draft directive was distributed to potential EPA
test sites.  Each potential pilot region formed a
committee to review its Imprest Fund operations
to determine the impact and potential benefits to
be derived if a TPDS is implemented.  Region
10 has been selected to be the pilot for TPDS
and steps are underway to begin the test.

   EPA is actively participating in the CFO
Council's Asset Management Sub-committee's
Cash Management Workgroup on third party
drafts.  Recommendations  of the Sub-committee
will be presented to  the Treasury's FMS.

Prompt Payment

   In FY 1992, EPA paid  97.4% of its invoices
that are subject to the Prompt Payment Act on
time.  While the total number of invoices subject
to the Act increased in FY 1993, the number of
invoices paid late  decreased by 29.2% and
interest penalties paid decreased by 5.4%.  EPA
also reduced the number of early payments from
24 to one.  Through the  third quarter of FY
1993, EPA is paying 97.9% of its payments on
time.

   OMB Circular  A-125 requires agencies to
have a statistically valid  Quality Control (QC)
system in place to assure the accuracy of its
prompt pay report.  Since EPA's present Quality
Assurance program  (QA) does not require
statistical sampling to verify the accuracy of its
prompt pay report, OMB rated the Agency's QC
system as  "poor". In July 1993, EPA provided
OMB with additional information relating to the
effectiveness of its present QA program and the
Agency's plans to implement statistically valid
sampling beginning  in FY 1995.  With this
assurance, OMB changed EPA's QC rating from
"poor" to  "planning."

Direct Deposit/Electronic Funds Transfer

   Over the last four years EPA has consistently
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worked to improve the Agency's use of Direct
Deposit/Electronic Funds Transfers (DD/EFT)
for various types of payments (salary/payroll
related, travel/vendor payments, interagency
payments). Use of DD/EFT improved the
Agency's cash management controls and
minimized staff time spent researching inquiries
on checks that have been reported as lost, stolen
or mutilated.

   For example, since 1991 EPA has
successfully converted several  interagency
payments to DD/EFT.  In  1991, EPA began
using the Retirement, Insurance, Transfer
System (RITS) to make bi-weekly payments to
the Office of Personnel Management (OPM) for
retirement, health and life insurance.  In 1992,
the FEDTAX System was implemented to make
payments to IRS for federal taxes,  social security
taxes and medicare.

   For several years, EPA's primary method for
salary/allotment payments has been DD/EFT.
EPA currently has an 88 % participation rate in
the DD/EFT program and  continues to work
towards obtaining the goal of a 90%
participation rate.  While the Agency's primary
method for salary/allotment payments is
DD/EFT, cash incentive awards continued to be
issued via check.

   The practice of distributing award checks in
the office continued to create an onerous burden
for EPA's administrative personnel and the
Department of Treasury.  In October  1992 the
Agency converted the payment of cash incentive
awards to be consistent with the method of
payment of the employee's salary (DD/EFT to
the bank or check to the home address).

   EPA will continue its efforts to convert
payroll related payments to DD/EFT.
Specifically, payments to state and local
governments for state and city taxes, child
support, alimony  and tax levies will be
reviewed.
                             In the area of travel and vendor payments
                          EPA continued its pilot program to make travel
                          reimbursements and one large vendor payment
                          (Bankcard Program) using the Automated
                          Clearing House (ACH) process. In February
                          1994 the Agency's accounting system will be
                          modified to include the ability to make EFT
                          payments to Agency travelers and vendors.

                          Small Purchases Bankcard Program

                             In  1988, the Environmental Protection
                          Agency implemented the Small  Purchases
                          Bankcard Program, which allows Headquarters
                          and field offices to make small  purchases with a
                          VISA charge card. The use of the charge card
                          accelerates the procurement process by
                          decentralizing some of the small purchases to the
                          local offices.

                             The Agency has continued to expand the use
                          of the small purchases bankcard since 1988 to a
                          FY 1992 total of 550 cardholders making 18,335
                          purchases totaling $5.6 million. The bankcard
                          has resulted in more efficient use of the
                          Agency's resources that are available for
                          processing purchase orders and of imprest fund
                          transactions for small purchases. Through the
                          use of the bankcard, the Agency has been able to
                          reduce the amount of funds held by some petty
                          cashiers and eliminate the need to increase other
                          imprest funds.

                             EPA has started to download the billing
                          information directly from the bank into a
                          database which is  used to assist in the general
                          audit of the charges made on the bankcard.
                          Reports can be generated to identify questionable
                          purchases, frequently used businesses,  purchases
                          within specific dollar limits and other audit
                          scenarios.  The Agency makes  monthly
                          payments to the bank electronically through the
                          ACH process. Using ACH gives the Agency the
                          maximum amount of time to  process the
                          payment and ensures proper credit to the
                          Agency's account.
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MANAGEMENT OF OTHER ASSETS
elements.
Property

   Since 1983, EPA has reported a material non-
conformance in its annual Integrity Act Report to
the President, recognizing the need for
reconciliation between its Personal Property
Accountability System (PPAS) and the Agency's
accounting system~the Integrated Financial
Management System (IFMS).  In addition to the
reconciliation issue, there are  several areas
where the Agency is not in compliance with
requirements for both physical and accounting
control of property.

   Currently, financial accounting for personal
property which meets the capitalization threshold
($5000 and expected life exceeding two years) is
accomplished by a coordinated effort between
the CFO's Financial Management Division
(FMD) and the fourteen Servicing Finance
Offices (SFOs).  The SFOs record capitalization
entries in IFMS based on a review of monthly
equipment payments.

   Physical accounting is managed by the CFO's
Facilities Management and Services Division
(FMSD) in coordination with the Agency's
Property Management Officers who enter data in
PPAS.  Since Agency property information
resides in both PPAS and IFMS, a reconciliation
between the two systems must be performed.
This reconciliation has proven to be burdensome
and inaccurate. It takes approximately 40 hours
a month to execute this reconciliation, which is
performed by employees who are assigned to
other principal duties.

   Internal audits have shown that there are
some property items in PPAS that are not in
IFMS and vice versa.  Even more troublesome,
is the inability to specifically track an item from
one system to the other. This inability is due to
a variety of reasons, including the inherent
difference in acquisition values between the two
systems and the absence of key common  data
   In response to the difficulties in reconciling
PPAS and IFMS, the CFO established a Quality
Action Team (QAT) in March 1993.  The QAT
is comprised of representatives from all divisions
within the CFO's office which are involved in
financial and physical accounting for personal
property.

   Using the tools of Total Quality Management
the QAT identified a problem statement, a
mission statement and a set of goals for the
team. A detailed flow chart of the current
personal property process was used to identify
the weaknesses in the current process. The QAT
used the list of weaknesses along with Inspector
General audit reports to prepare a requirements
analysis for a property system.

   The QAT studied several options and, from
this study, reached a unanimous decision to
recommend implementing a single fully
integrated fixed asset subsystem in IFMS. This
would be accomplished by installing an enhanced
version of the Federal Financial System's (FFS)
Fixed Asset Subsystem (FAS) in IFMS.
Adoption of this enhanced version of the system,
with limited modification, will meet  all the
requirements listed by the QAT in its
requirements analysis,  and will result in the
elimination of PPAS  and current PPAS/IFMS
reconciliation problems.

ADMINISTRATION OF LOAN PROGRAMS

Federal Credit Reform  Act - Asbestos Loan
Program

   EPA's Asbestos Loan Program is subject to
the requirements of the 1990 Federal Credit
Reform Act.  The Credit Reform Act requires
tracking and accounting for each loan at discreet
"tranche" levels, based on the prevailing rates
prescribed by Treasury. The Agency's
accounting system, IFMS, does  not have the
capability to account for and report
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disbursements and collections on each loan to
determine the interest costs of the borrowings
and the interest earnings on the collections.

   A basic PC application used for tracking
loans issued prior the Credit Reform Act is
being revised to accommodate the requirements
of the Act.  The Asbestos Receivable Tracking
System (ARTS) will be redesigned and
programmed to satisfy Credit Reform
requirements by segregating each disbursement
and collection transaction into tranches that
reflect  prevailing interest rates paid on
borrowings and earned on collections.

   Due to Federal  Credit Reform requirements,
a single application is necessary because the Act
requires different loan types to be tracked
separately (i.e., loans under Credit Reform or
                           liquidating loans prior to the Act).  The new
                           system must calculate the funded subsidy portion
                           and the Treasury borrowed portion of each loan
                           disbursement and provide cumulative internal
                           and external reporting information for
                           management of loans under the Act.  The
                           redesign and programming effort is proceeding
                           satisfactorily with some elements of the
                           application currently in use.

                              The guidance of the Federal Credit Reform
                           Act is still in the formative stages, causing some
                           concerns and impact on current and future
                           programming requirements.  EPA anticipates the
                           need to make adjustments and reprogrammings
                           to incorporate future guidance, however, full
                           implementation of ARTS is projected for
                           September 1994.
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                         B. PLANS FOR ASSET MANAGEMENT
MANAGING RECEIVABLES -
COLLECTION OF DEBT

Accounts Receivable

   EPA's plans to improve the management of
its accounts receivable is designed to ensure
more effective management of receivables and to
minimize the risk of mismanagement through the
following actions:
The use of financial management performance
measures  to track, report and evaluate the
Agency's effectiveness in managing
receivables;

The installation of an efficient accounts
receivable accounting module in IFMS;

Updating  applicable policies and procedures
to ensure  timely accounting practices;  and

Strengthening of management controls.
                      MILESTONES FOR ACCOUNTS RECEIVABLE
MILESTONE
Implement OMB financial management
performance standards
Update Superfund policies and procedures -
RMDS 2550-D (see Chapter 3, "Accountability
Standards")
Implement IFMS Reports:
Aging Report
Supplemental Report
Install IFMS enhancements
Install Superfund requirements
Complete testing of IFMS accounts receivable
enhancements
Complete training on accounts receivable
process
Conduct quality assurance reviews
EXPECTED
COMPLETION DATE
9/93
12/93
12/93
6/94
2/94
3/95
6/94
8/94
Ongoing
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Use of Debt Collection Act Tools to Collect
Delinquent Debt

   EPA is mandated by P.L. 102-589 to
implement the Federal Tax Refund Offset,
Federal Salary Offset, and Credit Bureau
Reporting Programs by January 1, 1994. These
tools and programs will provide EPA with
options currently not available to pursue
delinquent debt that may otherwise remain
uncollected and/or be written-off.

   EPA currently has two debt collection tools in
place, debt collection agencies and administrative
offsets, which have been used infrequently and
with limited success. Expanding the use of debt
collection tools will enable EPA to become more
                          aggressive and visible when pursuing delinquent
                          debt.  In addition, the Superfund Cost Recovery
                          Program could benefit by using the
                          "commercial" aspect of the Federal Tax Refund
                          Offset Program to recover delinquent corporate
                          debt.

                             EPA's Credit Bureau Reporting Program is
                          scheduled for implementation by September
                          1993.  The Federal Salary Offset and the Federal
                          Tax Refund Offset Programs are projected to be
                          fully implemented by January 1994. Completion
                          of the Agency's Superfund collection policy and
                          guidelines are EPA targeted for  January 1994, to
                          enable the Agency to implement the commercial
                          aspect of the Federal Tax Refund Offset
                          Program by January 1995.
                          MILESTONES FOR DEBT COLLECTION
MILESTONE
Implement Credit Bureau Reporting Program
Implement Federal Salary Offset Program
Implement Federal Tax Refund Offset Program
Complete Superfund collection policy and
guidelines
Implement the Federal Tax Refund Offset
Program
EXPECTED
COMPLETION DATE
9/93
1/94
1/94
1/94
1/95
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Recognition of State Cost Share Revenue Earned

   EPA must develop procedures for calculating
Superfund State Cost Shares to properly
recognize earned revenue as cleanup services are
being performed.  The deferred state cost share
revenue account also must be analyzed to
determine the proper balance with any
recognized  revenue to be transferred to the
earned revenue account.

   Currently, EPA does  not have a detailed
accounting  record of the deferred revenue
account by  cost share agreement.  There is also
no EPA policy or procedure currently available
to calculate state cost share revenue obtained
from SSCs while ensuring their timely posting to
EPA's IFMS.  Also connected to this issue is the
need for EPA to develop policies and procedures
for SSC revenue advances not received until
after a site cleanup.

   By the end of FY 1993, the CFO will form a
task force, which will develop policies and
procedures for calculating State Cost Shares to
recognize earned revenue as cleanup services are
performed.  EPA will also analyze the deferred
revenue account and determine the proper
balance by April 1, 1994.
                    MILESTONES FOR STATE COST SHARE REVENUE
MILESTONE
Establish State Cost Share Revenue Task Force
Complete analysis and determine proper
balance of deferred revenue account
EXPECTED
COMPLETION DATE
9/93
4/94
CASH MANAGEMENT - PROCESSING OF
PAYMENTS

Cash Management Improvement Act (CMIA)

   Since no EPA grant programs are currently
subject to the CMIA requirements, the Agency
does not expect to implement CMIA until July
1995, at the earliest.  At that time EPA will
have the necessary monitoring systems in place
to review the reasonableness of state interest
certifications for EPA's grant programs, as
required by the Act.

   States are responsible for all recordkeeping
and certification of interest liabilities both to the
States and to Treasury. Federal agencies are
responsible only for reviewing the States'
interest settlement reports for reasonableness.
EPA will employ the latest available Treasury
disbursing mechanisms in transferring funds to
States in order to comply with the funding
techniques to be agreed upon in the
State/Treasury Agreements and work closely
with Treasury in finalizing State/Treasury
Agreements involving EPA programs.

   EPA currently uses Treasury's Vendor
Express, an automated clearinghouse (ACH)
payment system for grant payments. Treasury
has confirmed that this payment system will
allow EPA to comply with each of five available
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funding techniques that states may elect to use in
funding their programs covered under CMIA,
should EPA grant programs be subject to CMIA
in the future.

   EPA will continue to work closely with
Treasury's FMS on the implementation of
CMIA, particularly with regard to the
development and implementation of ASAP in the
Agency.  Developmental milestones and Agency
implementation will be driven by FMS's
schedule. In the interim, EPA will continue to
use the current ACH Vendor Express payment
system.

   The Agency will develop and implement a
monitoring system to  review the reasonableness
of state interest certifications for EPA programs
along with the relative policies and procedures.
Because EPA  does not expect to implement
CMIA before July 1,  1995,  as a prudent use of
                          time and resources, the Agency will develop its
                          monitoring system after the successful
                          monitoring systems implemented by agencies
                          already under CMIA. New policies for the
                          improvement of grants management will
                          continue to be developed and implemented.
                          However, the main focus of CMIA
                          implementation will be to insure that payment
                          systems and personnel comply  with CMIA
                          requirements up front in order  to minimize any
                          interest charges.

                            EPA has developed and continues to develop
                          a number of grants policies to improve its grants
                          management, which include policies on closeout,
                          indirect costs and grant versus  contract.  The
                          Grants Administration Division established a
                          Customer Relations Council to better
                          communicate all grants issues at a working level
                          throughout the Agency.  CMIA issues will be
                          communicated through this council.
               MILESTONES FOR CASH MANAGEMENT IMPROVEMENT
MILESTONE
Issue informational communications
Evaluate existing monitoring systems, including
surveying other agencies
Complete systems development/modification
and testing
Issue CMIA implementation policies and
procedures
Review and comment on Treasury/State
agreements
EXPECTED
COMPLETION DATE
Ongoing
10/94
2/95
4/95
Ongoing
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Third Party Draft System
vendor support for TPDS.
   EPA is continually striving to improve the
Agency's cash management.  TPDS is an
effective cash management tool which will
further this initiative. EPA's goal is to achieve
Agency-wide implementation of TPDS in FY
1994.

   Prior to full implementation of TPDS, a pilot
test will be conducted in one or more regional
finance offices. The pilot will put the policies,
procedures, and internal controls proposed in the
draft guidance, to a practical test  and gauge
   The Agency-wide implementation of TPDS in
FY 1994 will consist of three phases. Phase 1,
testing, will consist of:  site selection of the
pilot(s); training of personnel; testing of TPDS
operations; reviewing results; and refining
operating procedures.  Phase 2, refining, will
incorporate testing of any revised operating
procedures, and issuing a policy announcement
of the final TPDS policy. Phase 3,
implementation, will involve training of
appropriate personnel and Agency-wide
implementation of TPDS.
                  MILESTONES FOR A THIRD PARTY DRAFT SYSTEM
MILESTONE
Training of test site personnel
Begin Phase 1 test
Review Phase 1 test results
Refine operating procedures
Conclude Phase 2 test
Review Phase 2 results
Finalize TPDS operating procedures
Announce TPDS policy and issue final
operating procedures
Begin Agency-wide implementation of TPDS
EXPECTED
COMPLETION DATE
9/93
10/93
1/94
2/94
3/94
4/94
5/94
6/94
7/94
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Prompt Pay

   Currently, EPA lacks both the ability to select
statistically valid samples of transactions and an
independent process to verify the data submitted
on the OMB Prompt Payment Report.  EPA will
use contractor support to obtain a statistical
sample process to address the Prompt Payment
Act requirement for independently verifying the
data.  The sampling process will improve the
Agency's rating by OMB on the quality of
prompt pay data, by providing  an independent
                          verification process.  The process also will
                          provide the CFO with a tool to select statistically
                          valid samples for transaction testing in other
                          quality assurance and quality control reviews.

                             Plans are also in place to have the Agency's
                          Integrated Financial Management System (IFMS)
                          generate the Prompt Payment Report beginning
                          in FY 1994.  This step should further improve
                          the quality control of Prompt Pay data and of
                          asset management.
                MILESTONES FOR PROMPT PAYMENT IMPROVEMENTS
MILESTONE
Obtain contractor support to establish a
statistical sampling process
Secure independent verification of prompt
payment data
Generate IFMS prompt payment reports
EXPECTED
COMPLETION DATE
9/93
5/94
9/94
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Direct Deposit/Electronic Funds Transfer

   EPA will aggressively continue its efforts to
convert salary and other types of payroll related
payments (i.e., state/city taxes, child support and
alimony payments, etc.), travel and vendor
payments to EFT over the next year.
             MILESTONES FOR SALARY/PAYROLL RELATED PAYMENTS
MILESTONE
Send quarterly DD/EFT statistics to Servicing
Finance and Personnel Office to encourage
participation
Survey State/city governments and courts to
determine feasibility of making DD/EFT
payments
Target non-DD employees for DD/EFT
campaign
Convert feasible government and court
payments to DD/EFT
Review GSA's proposal to issue DD/EFT
payments in advance of check issuance date
Implement OMB Bulletin on EFT
EXPECTED
COMPLETION DATE
Ongoing (quarterly)
10/93
11/93
11/93
12/93
1/94
                   MILESTONES FOR TRAVEL/VENDOR PAYMENTS
MILESTONE
Implement ATM program for travel advances
Implement IFMS version 5.1e
Review and assess pilot program
Implement EFT/DD payment process for travel
reimbursement payments
Implement payment process for vendor
programs
EXPECTED
COMPLETION DATE
9/93
2/94
4/94
10/94
12/94
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                     MILESTONES FOR INTERAGENCY PAYMENTS
MILESTONE
Implement Electronic Certification System for
voucher preparation, certification, transmission,
and verification of payment schedules.
EXPECTED
COMPLETION DATE
10/94
Small Purchases Bankcard Program

EPA plans to continue to  expand the use of the
small purchase bankcard.  The increased volume
of bankcard purchases will compel the Agency to
expand the use of automation to process
payments to the bank. The Agency currently
                         has automated the receipt of billing from the
                         bank and uses the data to perform some audit
                         functions.  In order to ensure the timely payment
                         of the bills, the Agency needs to develop other
                         ways of using the data to facilitate payment of
                         bills and tracking of disputed purchases.
             MILESTONES FOR SMALL PURCHASE BANKCARD PROGRAM
MILESTONE
Develop D-base program to track cardholder
transactions for payment
Develop D-base program to track disputes of
prompt payment data
Automate dispute forms report
EXPECTED
COMPLETION DATE
9/93
10/93
12/93
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MANAGEMENT OF OTHER ASSETS

Property

   The objective of the Property QAT is to
recommend a solution for solving the inability to
reconcile IFMS and PPAS property data.  The
QAT has recommended that the Agency
implement a financial and physical accounting
process that is fully integrated.  Details of this
process, and a detailed study of the current
process, was the subject of the  QAT's first
deliverable presented  to EPA senior management
in July 1993. Once the decision on the
recommendation has been made, the QAT will
prepare its next, and final, deliverable-a
management and implementation plan.  The
timeline for developing policies and procedures,
performing the necessary training, and actual
implementation of the system will be determined
in this deliverable.

  The QAT also intends to work closely with
Government-wide efforts to improve personal
property accounting.  Such groups include the
Asset Management Committee's Personal
Property Subcommittee, and the Federal
Accounting Standards Advisory Board's
Investment Project.  Both of these groups will
provide insight to the direction that the QAT
should take.
                     MILESTONES FOR PROPERTY MANAGEMENT
MILESTONE
Determine decision on QAT recommendations
Develop detailed implementation strategy
Develop and issue revised policies and
procedures effective with implementation of
system
Provide necessary training
Implement integrated property system
EXPECTED
COMPLETION DATE
11/93
3/94
TEA
TEA
TEA
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ADMINISTRATION OF LOAN PROGRAMS

Federal Credit Reform Act - Asbestos Loan
Program

   With the completion of ARTS in FY 1994,
EPA expects to establish a single data base that
is subsidiary to the IFMS General Ledger and
will achieve the following:

•  Assist in the tracking of agreements and loan
   management;

•  Fulfill the requirements of the Credit Reform
   Act;
                          •  Provide information and reports to internal
                             and external users;  and

                          •  Provide interface capability to update IFMS
                             eliminating data entry duplication.

                             Currently portions of ARTS are being used to
                          determine the amounts of subsidy and borrowing
                          and grant necessary for issuing partial
                          disbursements of an Assistance Agreement that is
                          subject to the Credit Reform Act.  Another
                          feature currently used  in production, on a limited
                          basis, is the billing module which enables
                          reminder notices and bills for collections to be
                          generated as loans installments mature.
                                 MILESTONES FOR ARTS
MILESTONE
Complete ARTS redesign and reprogramming
Develop additional Reporting Requirements
Interface ARTS with IFMS
Implement ARTS
EXPECTED
COMPLETION DATE
12/93
3/94
8/94
9/94
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                                      CHAPTERS
                    AUDITED FINANCIAL REPORTING
       Audited financial statements prepared under the Chief Financial Officer (CFO) Act are a
systematic means of accomplishing two critically important goals:  strengthening Agency
accountability for sound financial management practices; and providing accurate disclosure of
programmatic and financial information that enables decision-makers to understand the implications
of budgetary, policy and program issues.
                   A. STATUS OF AUDITED FINANCIAL REPORTING
ANNUAL FINANCIAL STATEMENTS

   EPA prepared and submitted the FY 1992
financial statements in a timely fashion pursuant
to the requirements of the CFO Act of 1990.
The financial statements adhered to the
provisions of the Office of Management and
Budget (OMB) Bulletin 93-02, "Form and
Content of Agency Financial Statements", and
included the following trust funds,  revolving
funds, and commercial activities:

• Superfund;

• Leaking Underground Storage Tank (LUST)
   Program;

• Pesticides Reregistration and Expedited
   Processing Fund (FIFRA Fund);

• Revolving Fund for Certification and Other
   Services (Tolerance Fund); and

• The Loan Portion of the Asbestos  Loan and
   Grant Program.

   In July 1993, EPA's financial management
and Inspector General  (IG) staff held  a post-audit
evaluation meeting to review the benefits and
identify the problems associated with the
preparation of the FY 1992 financial statements
and came to several positive conclusions.  One
of the most important benefits was the discipline
imposed by the review and audit process.  The
results provided the Agency with a clear
indication of the current soundness of its internal
control, financial management, and accounting
practices and established a baseline from which
EPA can make future improvements.

  In addition, close contact with auditors and
program offices contributed to the Agency's
refinement of the reporting process to keep
Congress, the public, and oversight authorities
fully informed of the financial condition of EPA.
Also, regular communication and cooperation
between the responsible parties, through
scheduled meetings and coordinated
communications, enabled EPA to prepare the
financial statements as required by OMB and the
CFO Act. These benefits have set the stage for
greater teamwork for financial management
throughout EPA and for meeting the goals of the
CFO legislation.

  EPA identified several other benefits derived
from the initial preparation and submission of
FY  1992 financial statements which will not only
improve the Agency's processes, but also
strengthen its accountability.  First, the basic
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format of the financial statements, the
accompanying footnotes, and the manual
worksheets supporting the financial statements
now have been developed.  EPA anticipates that
this process will not be nearly as time-
consuming  in future years.

   Second,  the audit reports delineated specific
weaknesses in the financial  statement preparation
process, which EPA is correcting in order to
assure sound financial management practices.
Third, EPA now has a better understanding of
the roles and responsibilities required to ensure a
more effective process for preparing financial
statements under the CFO Act.

   The evaluation process also revealed one
major impediment to the preparation of the
financial statements-EPA had to prepare the
financial statements manually due to the inability
of the Integrated Financial Management Systems
(IFMS)  to produce the reports in the format
required by OMB's guidance.  In addition,
difficulties  were encountered in interpreting
OMB Bulletin 93-02, since  the Standard General
Ledger does not conform to the U.S. Standard
General Ledger. Close communication with
OMB was required to resolve the disparities.

Accelerated Submission of Financial Statements

    OMB has issued guidance requiring all CFO
agencies to accelerate the preparation of audited
financial statements in FY 1994.  EPA is
accelerating its schedule to  produce audited
financial statements by April 1, 1994. Since the
OMB due date is March 1,  1994, a request for a
waiver is planned.

Audits of FY 1992 Financial Statements

   The required  audits of the FY 1992 financial
statements were performed  in accordance with
the requirements of OMB Bulletin 93-06, "Audit
Requirements for Federal Financial Statements".
The scope of the audits included evaluations and
tests of internal controls and EPA's compliance
                           with applicable laws and regulations.  The audits
                           also included a determination of whether the
                           information in the Principal Statements, Notes to
                           the Principal Statements and the Combining
                           Statement was consistent with information
                           presented in the Overview  Section of the
                           financial statements.  The audits, which were
                           completed by June 30, 1993, identified a number
                           of improvements in EPA's financial systems and
                           accounting practices that are needed so that
                           financial statement preparation can be
                           accelerated  and more complete and accurate
                           reports can  be produced.

                             The auditors qualified their opinion on the
                           Statements of Financial Position covering the
                           Lust Trust Fund and the Asbestos Loan
                           Program; and disclaimed an opinion on the
                           Statements of Operation, Cash Flow and Budget
                           and Actual Expenses for the Lust Trust Fund
                           and the Asbestos Loan Program. They
                           disclaimed opinions on the financial statements
                           for the Superfund Trust Fund and the FIFRA
                           and Tolerance Funds.

                             The auditors noted that  improvements are
                           needed in the recording of accounts receivable,
                           property and equipment, state cost share
                           revenue, accounts payable  and accrued liabilities.
                           Further, the auditors identified weaknesses in the
                           supporting documentation maintained for
                           material adjustments, and they found that some
                           unliquidated obligations had not been reviewed.

                             In the area of program performance
                           measures, the OIG currently has audit work
                           underway to examine the Agency's Superfund
                           performance measures.  The objective of this
                           audit work is to assess the  adequacy of the
                           Agency's systems and controls related to the
                           reporting of Superfund performance
                           measurement information.

                           Program Performance Information

                             Before beginning work  on FY 1993 program
                           performance measures, EPA evaluated the
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EPA's Financial Management Status Report & Fire-Year Plan

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process for developing program performance
measures for FY 1992.  Program performance
measures were cited in the financial statement's
Overview in the section "Program Results."
Since this section is closely related to two other
parts of the report's Overview, "Program
Description" and "Financial Perspective," all
three sections were evaluated.

   The first step in evaluating the program
performance measures process and related
sections of the Overview was to reflect on the
positive aspects of the FY  1992 submission.
The early planning, development of a workgroup
and coordination were cited as the most positive
aspects of the process.  Timely submission of the
program performance measures by the
responsible program offices was also a key
factor in the success of the FY 1992 effort,
enabling the Administrator to submit a complete
unaudited financial statement package to OMB
on March 31, 1993.

   A discussion of the "special review" of
Superfund program performance measures,
conducted by the OIG, also was included in the
evaluation of the program performance measures
process.  Using this report, EPA will be able to
identify the weaknesses in the Superfund's
existing CFO program performance measures
and in the systems used to track the information
used for these measures.

   The final step in the evaluation process
focused on  the lessons learned in FY 1992.
Improved coordination of the three sections of
the Overview was discussed  The Agency  is
concentrating on improving both the program
performance measures and financial analysis of
the programs.  Special attention will be given to
coordinating these measures and linking them
with the program descriptions so that the
"Overview  of the Reporting Entity" will be more
cohesive.  To meet this need, EPA expanded its
Program Performance Measures Workgroup for
FY 1993 to include a broader range of
participation by budget and financial analysts for
the pertinent programs, and has further defined
the roles and responsibilities of each office.

   In addition, the workgroup established
milestones for the preparation of the FY  1993
program performance information, with a goal
of meeting the accelerated submission of FY
1993 audited financial statements to OMB by
April 1,  1994.  The most critical problem
identified in meeting this accelerated schedule is
that the Agency's program management
information system—Strategic Targeted Activities
for Results (STARS)-may not have final FY
1993 program data until late November.
Existing STARS procedures need to be amended,
changing current deadlines for  entering final
fiscal year information.  While the Agency is
striving to meet the accelerated schedule, normal
business practices may  impede its reaching this
goal  for the FY 1993 audited financial
statements.

   For FY 1993, one new program, the Oil
Spills Trust Fund, will  be added to EPA's
financial statements.  The program office has
formulated several program performance
measures for the fund.  The Agency envisions
little change in the FY  1993 performance
measures for those program areas which  were
included in the FY 1992 financial statements.
However, the Agency is beginning efforts to
move in the direction of establishing more
meaningful and verifiable measures of program
achievement which will reflect the environmental
results of EPA activities.

   Current program performance measures
information comes largely from STARS.  An
enhanced version of this system-STARS Il-is
currently being developed.  STARS II  will
support the development and reporting of
measurable environmental goals. This new
system is discussed in further detail in the plans
for program performance measures (see page
72).
                      EPA's Financial Management SUtus Report ft Fire-Year Plan
                                       Page 69

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   Until STARS II is operational, EPA will
continue to rely on the existing STARS system
as a source of data for program performance
measures. For FYs 1993 - 1997, the emphasis
will be on: analyzing and modifying the current
program performance measures; including more
                          detailed information on the existing measures, as
                          it becomes available; and increasing the level of
                          financial analysis related to the  program
                          performance measures and other programmatic
                          information that is included in the financial
                          statements.
                   B. PLANS FOR AUDITED FINANCIAL STATEMENTS
ANNUAL FINANCIAL STATEMENTS

   EPA will prepare the annual CFO financial
statements for future years (FYs 1994 - 1997) in
accordance with the provisions of the CFO Act.
This includes adhering to the provisions of OMB
Bulletin 93-02,  participating in Federal
Accounting Standards Advisory Board (FASAB)
activities, and adhering to supplementary policies
regarding financial statements.

   CFO financial statements for FY  1993 and
FY 1994 will be prepared and submitted
covering all trust and revolving funds and
commercial activities which meet the criteria for
inclusion under the CFO Act. Beginning in FY
1996 (i.e., the FY  1995 financial statements)
EPA plans to prepare Agency-wide principal
statements and submit them to the OIG for audit.
Principal statements will continue to be prepared
in a manual fashion until such time that IFMS
has the capability to produce automated financial
statements.

    The process of completing the financial
statements will  be a coordinated effort through
regularly scheduled meetings and structured
communications with relevant parties,
particularly the OIG and independent auditors.
This will ensure timely and accurate completion
of the financial  statements.

Accelerated Submission of Financial Statements

   OMB has  accelerated the submission date for
audited financial statements from June 30 to
March 1 of each year.  EPA has  accelerated the
                          preparation of its FY 1993 audited financial
                          statements to meet an April 1,  1994 target date.
                          The Agency anticipates meeting the March 1
                          deadline with its FY 1994 statements, which will
                          be submitted in FY 1995.

                             Meeting these accelerated deadlines will pose
                          a challenge to EPA.  With the  continued
                          requirements of Treasury's year-end reports,
                          new systems and procedures must be refined to
                          facilitate the accelerated preparation and
                          submission of financial statements. The
                          experience garnered from the submission of the
                          FY 1992 and FY 1993  financial statements
                          provides a foundation that will assist the Agency
                          to meet the accelerated deadlines.

                             The implementation of the Department of the
                          Treasury's Federal Agencies' Centralized Trial-
                          Balance System (FACTS) project also may
                          influence EPA's ability to accelerate the
                          submission of CFO required financial
                          statements.  The FACTS project includes the
                          potential requirement for government entities to
                          provide the Treasury with a magnetic tape of
                          their fiscal year general ledger(s) in lieu of the
                          SF-220 series.  Depending upon the final
                          Treasury's requirements, less resources may be
                          needed to  fulfill the requirements for year-end
                          reporting.

                          Audited Financial Statements

                             As  the Agency accelerates its production of
                          CFO financial statements, the OIG also will
                          accelerate completion of the audits.  The OIG is
                          taking a number of steps to achieve this goal,
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including starting the audits earlier and
performing some of the audit testing before
fiscal year-end.  In addition, the OIG has created
a new division whose staff is responsible for
performing and overseeing the financial
statement audits. Having a dedicated staff to
perform the audits will eliminate much of the
learning curve the OIG faced when conducting
the audit of the FY 1992 financial statements,
the first financial statements EPA prepared in
response to the CFO Act requirements.

   To improve the usefulness of the required
audits, the OIG is working and will continue to
work with OMB, the General Accounting Office
(GAO) and the Internal Revenue Service (IRS) to
obtain audit assurances on financial statement
line items that are not controlled by EPA, such
as the trust fund balances which are maintained
by Treasury and tax revenues which are
collected by IRS.

   New performance audits in those program
areas where financial statements are required
under CFO will include program performance
measures in the scope of the  audit.  These steps
are designed to meet the requirements of OMB
Bulletin 93-06.
                 MILESTONES FOR AUDITED FINANCIAL STATEMENTS
MILESTONE
Prepare and submit annual financial statements
to OIG for previous fiscal year
Issue audit reports on above financial
statements
Prepare and submit Agency-wide principal
statements to OIG
EXPECTED
COMPLETION DATE
Annually each December
4/1/94, then
Annually each March
Annually each December
beginning 12/95
Program Performance Information

   EPA will continue to evaluate and improve
program performance measures for future year
activities (FY 1994 - 1997).  These
improvements will require the continued
coordination of EPA's various program offices
covered by the CFO Act, the Office of Policy,
Planning and Evaluation, and the CFO's finance
and budget staff.

   During FYs  1994 - 1997, the Agency will
evolve toward reporting performance measures,
along with associated costs if available, which
link to higher level environmental results or
outcome measures.  This will be achieved
through improved cost accounting information
(see "Project Cost Accounting," page 34) and
through the Agency's efforts to establish an
environmental  results program performance
measurement system.

   EPA has two Agency-wide initiatives
underway that  are integral to successfully
meeting the goals of both the CFO Act and the
Government Performance and Results Act
(GPRA).  Although these projects-the
Environmental Goals Project and the STARS II
Project—were initiated independent of the CFO
and GPRA legislation, the CFO is working
closely with these efforts to ensure that both will
meet the pertinent legislative requirements.
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The Environmental Goals Project

   EPA's Environmental Goals Project was
established in FY 1992 for the purpose of
developing a set of measurable environmental
goals that will provide strategic direction for the
Agency's long-term efforts to address modern
environmental problems.  Once goals are set,
they provide clear direction for the design of
effective, efficient government and private
programs to fulfill national priorities.

   The Agency has begun a process for
developing national environmental goals. The
goal development process—if it includes
participation of the broad range of government
agencies with environmental responsibilities,
private stakeholders in environmental policy, and
the public—is an opportunity to build national
consensus on environmental priorities. The
Environmental Goals Project is designed to
ensure that the goals developed by EPA will
reflect this broad consensus on what the Nation
must achieve to sustain the quality of its
environment and the prosperity of its people.

   As part  of this process, the Agency hopes to
identify the potential roles of EPA and other
organizations in achieving each goal. In the next
several months, the  Agency will invite Federal,
state and local government agencies, the
Congress, private stakeholders and the public to
contribute to the development of measurable
environmental goals for the Nation.  In addition,
EPA is developing strategic and programmatic
goals that will guide the Agency's efforts to
meet its statutory objectives, perform its
programmatic responsibilities and  support the
Agency's efforts to attain success  in meeting  the
national environmental goals.

Revamping STARS  - (Strategic Targeted
Activities for Results System)

   Also, in FY 1992, EPA initiated a project to
revamp its  existing performance measurement
system-STARS-which measures and reports
program accomplishments at the activity or
                          output level. The new system will be designed
                          to:

                          • Align the Agency's strategic planning,
                             budgeting, program evaluation and financial
                             accounting processes by using program
                             performance and financial information to feed
                             back into the annual planning and budgeting
                             cycles;

                          • Enable the Agency to report on its programs
                             and accomplishments in terms of
                             environmental results; and

                          • Meet the Agency's CFO Act and GPRA
                             program performance reporting requirements.

                             STARS II is based on a pyramid concept for
                          aligning program measures and data to ensure
                          that managers at all levels receive information
                          that is consistent with their role or function in
                          the organization (see Attachement C,  "Hierarchy
                          of Management Information").  The base or
                          foundation of the pyramid—Activity Manager-
                          will contain activity-level information needed by
                          managers of individual programs.  The second
                          tier-Strategy Manager-will contain the multi-
                          year strategies and information which guides
                          EPA's program activities.  At this level, the
                          system will cluster activities which relate to a
                          common programmatic goal. The final layer--
                          Goals—will contain both national environmental
                          goals and specific environmental program goals
                          which support attaining the national goals.

                             Currently EPA has  several workgroups
                          underway which are studying various aspects of
                          the overall STARS II model, including: linking
                          financial data with program performance
                          information; and linking program activities
                          (outputs) to higher level environmental goals
                          (outcomes). The workgroups also are
                          conducting  case studies to better understand the
                          implications and requirements of the applied
                          model. The STARS II implementation team will
                          present its recommended implementation strategy
                          for STARS II to senior management  in early  FY
                           1994.
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MILESTONES FOR PERFORMANCE MEASURES
MILESTONE
Develop combined STARS II and GPRA
Implementation Plan
Complete FY 1994 pilots testing specific
aspects of the STARS II model
Expand STARS II/GPRA pilot programs
Implement PCAS module in IFMS
EXPECTED
COMPLETION DATE
12/93
9/94
9/95 - 9/97
9/95
 EPA's Financial Management Status Report & Five-Year Plan
Page 73

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                                      CHAPTER 9
          ADMINISTRATION OF EPA GRANTS PROGRAMS
       The Federal Government should simplify its regulatory requirements for Federal grant
programs (grants and cooperative agreements)  administered by state and local governments,
colleges and universities, and non-profit organizations, and should provide managers with
incentives to streamline and improve administrative operations.   The Environmental
Protection Agency  (EPA) mil take further actions to improve the Agency's communications
and overall working relationship with its grantees.
                  A.  STATUS OF COMMUNICATION WITH GRANTEES
OFFICE OF MANAGEMENT AND BUDGET
CIRCULARS

   The OMB guidance for developing the
Financial Management Status Report and Five-
Year Plan requires Federal Agencies to ensure
that provisions of the Office  of Management and
Budget (OMB) Circulars affecting grants and
cooperative agreements are included in Agency
regulations.  In particular, the guidance asks that
the Chief Financial Officer (CFO) ensure that
provisions of the OMB Circulars are included in
Agency regulations,  as appropriate.

   EPA has implemented all of the appropriate
Circulars in its regulations governing grants
management.  Currently, however, OMB has
plans to revise some of the grants management
Circulars and is considering  other actions which
would impact these Circulars. Below is a brief
description of the changes OMB is
contemplating:

   Single Audit Circulars (A-128 and A-133) -
   The President's Council on Integrity and
Efficiency (PCIE) and the General
Accounting Office (GAO) are currently
evaluating the Single Audit area.  While the
focus of the reviews is on A-128 (audit
requirements for State, local governments,
and Federally recognized Indian tribes),  the
results of these evaluations may also affect
audits required under Circular A-133 (audit
requirements for institutions of higher
education and other nonprofits).

In addition, the Single Audit Clearinghouse in
the Department of Commerce  has expanded
its role to include tracking audits required by
A-133, and will conduct desk  reviews of
audit reports  as they are received.

Cost Principles -  OMB revised the cost
principles for institutions of higher education
and other nonprofit groups (Circular A-21) in
1992, to curb abuses in educational institution
practices involving indirect costs in
government-funded research.  In January
1993, the new Administration rescinded  that
revision to Circular A-21.  OMB is currently
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                                   Page 75

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   reviewing the Federal Government's policies
   and practices in awarding research grants,
   cooperative agreements,  and contracts to
   universities, including policies for funding
   overhead costs. When OMB publishes the
   final revisions  to A-21, EPA will implement
   the new requirements.

   OMB also is reviewing the need to change the
   cost principles for State and local
   governments (A-87) and the cost principles
   for nonprofit organizations (A-122).  They
   expect to complete the revisions to A-122 in
   1993.

   Administrative Requirements - OMB
   established  a multi-Agency Task Force to
   revise the Common Rule, which contains the
   administrative  requirements for State and
   local governments, based on changes to OMB
   Circular A-102.  OMB anticipates issuing the
   revised circular and Common Rule in 1994.

   OMB also established a multi-Agency Task
   Force to revise A-110, the Circular detailing
   the administrative requirements for
   universities and other nonprofits. OMB
   expects to issue any changes to A-110 in
   1994.

   Training on OMB Circulars -  EPA conducts
   various training courses for its State and  local
   government recipients which incorporate the
   various grant and  cooperative agreement
   administrative  requirements contained in  these
   Circulars.  Some examples of this would be
   the Superfund  Response  Agreements Seminar
   and Superfund Procurement Training
   provided for States, local governments, arid
   Indian Tribes in the Superfund Program.

STATE CAPACITY TASK FORCE

   In 1992, the Deputy Administrator established
a State Capacity Task Force to identify  ways in
which States can augment their capacity to
administer EPA's environmental programs.  The
                           Task Force continued its work in 1993,
                           exploring ways EPA can streamline its grants
                           process. The Task Force is comprised of EPA
                           staff, State environmental program directors, and
                           representatives from State environmental
                           organizations (such as the Association of State
                           and Interstate Water Pollution Control
                           Administrators).

                              The Task Force has focused on four areas,
                           supported by four teams comprised of EPA and
                           State officials:

                           •  Improving State/EPA relations;

                           •  Encouraging alternative financing
                              mechanisms;

                           •  Investing in State management infrastructure;
                              and

                           •  Streamlining the grants assistance process.

                              In June 1993, the Task Force issued a final
                           report to the Administrator defining the issues
                           and recommending solutions.  The
                           recommendations of the Task  Force envision a
                           long-term change process, motivated by
                           continuous improvement.  The recommendations
                           set forth a policy framework to enhance State
                           capacity; specific implementation actions will
                           subsequently give tangible expression to each
                           recommendation.  The recommendations
                           concerning streamlining the grants assistance
                           process focused on providing States the
                           flexibility to use alternative funding methods and
                           reduce administrative requirements.

                           IMPROVING GRANTS MANAGEMENT

                              During FY 1993, EPA developed a 3-year
                           action plan to strengthen management controls
                           and improve EPA's grants practices.  Some of
                           actions completed include:

                           •  Developed new policies, such as grant versus
                              contract determination, timely award of
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EPA's Financial Management Status Report & Five-Year Plan

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   Continuing Environmental Grants, and
   closeout;

   Established a Grants Customer Relations
   Council for bringing important grants issues
   to the attention of EPA Headquarters program
   staffs;

   Developed a three-day basic grants training
   course for EPA Grants administrative
   personnel;
•  Developed introductory grants training
   courses for new employees and new SES and
   Presidential appointees; and

•  Drafted a training course on the
   administrative requirements for EPA Grants
   Project Officers and conducted three pilot
   sessions.

   The Agency also has started an effort to
review ways to streamline the EPA grants
process.
                  B.  PLANS FOR COMMUNICATION WITH GRANTEES
OMB CIRCULARS

   Circulars A-128 and A-133.  When the
results of the President's Council on Integrity
and Efficiency (PCIE) and GAO reports are
released, EPA will evaluate them to determine
any impact on EPA's management of single
audits.  The Agency also will participate in any
Task Force OMB may convene to implement the
recommendations in the two reports.

   In addition, EPA will make appropriate
changes to its Single Audit process, based on
any changes Commerce makes to the Single
Audit Clearinghouse.

   Revised Cost Principles Circulars.  EPA
commented on the proposed revisions to A-21
and A-87.  When these revisions are final, the
Agency will make any necessary  changes to its
regulations.

   Revised Administrative Circulars.  EPA has
been an active participant on the OMB Task
Force revising A-102 and the Common Rule.
When OMB finalizes both the Circular and  the
Common Rule, EPA will publish its
implementing regulation (40 CFR Part 31) in the
Federal Register.
   EPA has also participated on the OMB Task
Force which is revising A-l 10. When the
changes to the Circular are final, the Agency
will make the necessary changes to our
implementing regulations (40 CFR Parts 30 and
33) and publish the regulations in the Federal
Register.

STATE CAPACITY

   In FY 1993, EPA provided seed money for a
demonstration program in Colorado and
Vermont to begin initiating multi-media projects
based on the State's risk assessments.  In FY
1994, the Agency will evaluate the success of
the comparative risk demonstration projects in
these States.  The results of this analysis will
help set the stage for establishing a multi-media
program for States.

   In FY 1994 and 1995,  EPA will continue to
look for ways of giving States more flexibility.
The Agency will review the possibilities of using
alternative funding techniques, such as allowing
States to "pool" their media-specific funds and
deciding where to use the funds based on each
State's greatest need.

   In FY 1994 and FY 1995, EPA plans to
develop statutory language to establish a new
                      EPA's Financial Management Status Report & Fire-Year Flan
                                       Page 77

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provision for States. This new provision will
reduce the administrative burdens on States,
where possible, and allow the States greater
autonomy to make the environmental decisions
within the State. The Agency plans to propose
this statutory provision in the FY 1996 budget.

IMPROVING GRANTS ADMINISTRATION

   In FY 1994 and 1995, EPA will continue to
work on streamlining the grants process  by
reviewing ways to reduce the administrative
burdens for small grants (under $50,000).  The
                          Agency will use the results to determine where it
                          can improve and/or streamline administrative
                          management of all awards regardless of size.

                             During FY 1994, EPA will complete the
                          development of a training course began in FY
                          1993 for Project Officers assigned to grants,
                          cooperative agreements, and Inter agency
                          Agreements.  By the end of FY 1996, all EPA
                          grant Project Officers will have been trained in
                          their administrative roles and responsibilities
                          under these agreements.
                       ADMINISTRATION OF GRANTS PROGRAMS
MILESTONE
Develop a training program for project officers
of grants, cooperative agreements and
interagency agreements
Propose statutory language to give States
greater funding flexibility in grants
Identify and implement options for reducing the
administrative burden of small grants
Complete training of all project officers
EXPECTED
COMPLETION DATE
10/93
9/94
9/95
9/96
Page?*
EPA's Financial Management Status Report & Ffre-Year Plan

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 ATTACHMENT A - ORGANIZATIONAL CHARTS
                   U.S. Environmental Protection Agency
Office of
Administrative
Law Judges
Office of Civil
Rights
Office of Small
and
Disadvantaged
Business Utilization
Science
Advisory Board

Office of
Cooperative
Environmental
Management
Executive Support
Office
Executive
Secretariat
Pollution
Prevention
Policy Staff
Environmental
Appeals
Board

                                       ADMINISTRATOR

                                    DEPUTY ADMINISTRATOR
Assistant Administrator
 for Administration and
Resources Management
Assistant Administrator
       for
    Enforcement
 Assistant Administrator
        for
  International Activities
  Inspector General
 Assistant Administrator
  lor Air and Radiation
Assistant Administrator for
      Prevention,
  Pesticides, and Toxic
      Substances
                                                                 Associate Administrator for
                                                                   Regional Operations &
                                                                    State/Local Relations
                                            Associate Administrator for
                                            Communications, Education
                                                & Public Affairs
                                                                  Associate Administrator for
                                                                      Congressional &
                                                                     Legislative Affairs
  General Counsel
Assistant Administrator
for Policy, Planning and
     Evaluation
Assistant Administrator
  lor Research and
    Development
 Assistant Administrator
        lor
       Water
    Assistant Administrator
     lor Solid Waste and
     Emergency Response
             EPA's ffereiil
                          Report & Fire-Yew Ftan

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               Office of Administration and Resources Management
                                            Assistant Administrator for
                                               Administration and
                                              Resources Management
                                            and Chief Financial Officer
                                       Deputy Assistant
                                        Administrator
                                       for Management
                                       & Administration
                          Office of
                         Information
                          Resources
                         Management
       Office of
    Management and
     Administration,
         RTF
    Office of
Management and
 Administration,
   Cincinnati
                               Deputy Assistant
                                Administrator
                                for Finance &
                                 Acquisition
                       Office of
                    Human Resources
                      Management
                                                           Program and Policy
                                                           Coordination Office
Office of the
Comptroller
                                                 Employee
                                              Participation &
                                              Communications
                                                 Division
                                             Executive Resources
                                             & Special Programs
                                                  Division
                                                                          Budget
                                                                         Division
                                                Financial
                                               Management
                                                 Division
                                                Resource
                                              Management
                                                Division
                                              Field Operations,
                                                Evaluation &
                                              Support Services
                                                  Division
  Office of
 Acquisition
Management
                                                                                  Office of Grants
                                                                                   & Debarment
                                                                                         Grants
                                                                                      Administration
                                                                                         Division
                                                                                       Debarment &
                                                                                        Suspension
                                                                                         Division
Attaching A-Page 2
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     ATTACHMENT B - FINANCIAL & ADMINISTRATIVE SYSTEMS
                        EXHIBIT I

          U.S. ENVIRONMENTAL PROTECTION AGENCY

       BASELINE OF FINANCIAL AND ADMINISTRATIVE SYSTEMS
ADMINISTRATIVE
    SYSTEMS
                CORE FINANCIAL
                   SYSTEMS
BPAYS/CPARS

ADCR

RMB

CPS

GIGS

PPAS

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LEGEND
DIRECT LINK   ****** DATA RE-ENTRY REQUIRED
                 KPA'g noncal MnugMMt Slatn Report ft fto-Yew Pin
                                   AtfachmntB-P^el

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                        EXHIBIT n
          U.S. ENVIRONMENTAL PROTECTION AGENCY
           TARGET FOR FINANCIAL AND MIXED SYSTEMS
                         BYFY1997
ADMINISTRATIVE
   SYSTEMS
                 CORE FINANCIAL
                    SYSTEMS
BPAYS/CPARS
CPS

OICS

HAS*

WJPmMI
KMS
* PPASuttirbeialeg






IFN
General Ledger
Budget Execution/1
Budget Preparation
Afwiitnfa PavftWft/T
IS
'unds Control
^oKitroAm^nta
^KVWIJIIU JT tHJ */UjM\/IM~rMav*f*.*fvm m i^« »»»
Accounts Receivable/Collections
Travel
Purchasing
Project/Cost
Reporting^EIS/DSS



| MARS
Legend
  DIRECT LINK
EPA'i Rural SU
                              eport * FircHYcw Pb»

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   ATTACHMENT C -  FINANCIAL MANAGEMENT SYSTEMS INVENTORY
                          FINANCIAL MANA9IMENT IVITBMt INVBNfOtY
                         N  N
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                         N  M
                               AIM
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                          IPA'tPli

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                                                     FINANCIAL MANAGEMENT IYITEMI INVENTOBT
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OPERATIONAL
OPERATIONAL
OPERATIONAL
OPERATIONAL
OPERATIONAL
OPERATIONAL
OPERATIONAL
OPERATIONAL
E D
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           O  N   trial f   '   I .  .   II .•iiithg.am jiai^ n ii|iilh|        K                           DEVELOPMENT T              MOMT    / /
          "c  T   ---••.- — •-'.,-• •^-•—f-r	^1i-JI-Ja-'—-—         "• ~ *T'"1                -~-~-*«-~"l  IT              —~.^-   ^-._
           O  N   PtirHiiiani«iiHhil»fc»^*««fcrltMI                   OT                           OPERATIONAL  U              «Mt/M   MOUH
PPAfl       I  N   Mill  ti   I ij WBPAfirni Ifii^tj                       PPDf                        OPERATIONAL  T              MOWM   WOWfl
           O  N   niilJiifi'i'nii fciliiMtiiidilliii •lii|iilh|                 tt                           OPERATIONAL  E      >Mi     tlOWn
          (UNO)                (M)                                               (U)                    (M)       (IT)       d«      0*       (Ml     Oil
                  D-PRge2                                EPA'i FlMKial States Report ft FircHYear Ptu

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into*  o»
 FIAMT <••
FINANCIAL MANAOKMBNT iYITBMI INYBNTOBY

                                 m

                                          k(
                                                                                                                                    FMtltOFMt
                                                                                                                                     ADP DM*
                                                                                                                                     M ADPM
ADCK
          N N  N
                                                                NA
                                                                          C  NOTAm. A
                                                                                                MVIADAIAI.K
ATM
          NUN    T  NA  Ntf
                                                    NA
                          D  NOTAm.  N
COWL
                                                                                                                                     O MM/I*
          N N  N    T  NA
                                                                NA
CTAM
          N N N
                                                                NA
                                                               T NOTAm.  A
                                                                                                           MVIADABAI
                                                                                                                                     C  MOM*
          N N N
                       NA
                                                                NA
                                                                          T  NOTAITL M
                                                                                                           MVBAMBAI
                                                                                                                                     C  MOM*
 PATi
          N N N
                       NA
                                                                                               » MVB ADABVU, VMM, VOCW
          N N N
                       NA
                                                                NA
                                                                          D  NOTAm. N
                                                                                                           MV»i I  Hit mm
                                                                                                                                     O MOM*
OKI
          N T N
                                                                NA
                                                                          A  NDTAPfL M
                                                                                                           • MVI ADAMS
                                                                                                                                     C  MOM*
          N N N
                                                                NA
                                                                          t  NOTAm. M
                                                                                                                                     T  MOM*
          T T T
                       NA
                                                                NA
                                                                          T  nJULT
                                                                                                           i MVI ADABAB
                                                                                                                                     C  M/M/W
          N N N
                       NA
                                                                NA
                                                                          C  NOTAm A
                                                                                                           >MV>ADABAf
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          T T  N
                       NA
                                                                NA
                                                                          A  NOTAm. N
                                                                                                    PCAi
                                                                                                               krocw
          N N N    T  NA

                                                                NA
                                                                          C  NOTAm. M
                                                                                                          ••(COMU
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                                                                                i Report A Kve-Ycv Fbi

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ATTACHMENT D - HIERARCHY OF MANAGEMENT INFORMATION
       An we achieving
   environmental results?
        At what cost?
      Are we promoting
    behavioral changes?
        At what cost?
  An we completing key
           activities?
An we making productive
   use of our resources?
             Tier I Goal


             Tier II Goal
              Manager
                 r   /        \
                 /T
        Strategy
        Manager /   MUtTr-YEAK STRATEGIES
Activity
Manager
ACTIVITIES


Program managers' measurement
PCS |

STORET 1

CERCLIS)

AIRS

and
I

Information databases
GIGS

1

EMAP

| etc.

                                          Report & Fire-Year
                                                            :D-P*gel

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                           ATTACHMENT E - LEXICON
AA          Assistant Administrator               FAS
ACDR       Automated Document Control
             Register                            FASAB
ACH        Automated Clearinghouse
ADCR       Automated Document Contrtol         FEDTAX
             Register
ADP        Automated Data Processing
AMS        American Management Systems, Inc.
AO          Accountable Official                 FFS
AFDS        Automated Procurement Document     FFSUG
             System
ARA        Assistant Regional Administrator       FMD
ARTS        Asbestos Receivable Tracking          FMS
             System
ASAP        Automated Standard Application for     FMSD
             Payments
ATM        Automated Teller Machine            FY
CERCLA    Comprehensive Environmental         GAO
             Response, Compensation and          GICS
             Liability Act of 1980                 GS
CFDA       Catalog of Federal Domestic           GM
             Assistance                          GPRA
CFO        Chief Financial Officer
CFO Act     Chief Financial Officers Act           GSA
CIS         Contract Information System           IDP
CMIA       Cash Management Improvement Act    ICMS
CPARS      Combined Payroll Redistribution and
             Reporting System                    IFMS
CPS         Contracts Payment System
DAA        Deputy Assistant Administrator        IRS
DCFO       Deputy Chief Financial Officer        LUST
DD          Direct Deposit                      MARS
DOJ        Department of Justice                 MCC
ECS         Electronic Certification System
EDI         Electronic Data Interchange            MOU
EFT         Electronic Funds Transfer             NPR
EPA        United States Environmental           OARM
             Protection Agency
EPAYS      EPA Payroll System
FACTS      Federal Agencies' Centralized          OGC
             Trial-Balance System                 OIG
FAD        Financial Audit Division              OMB
Fixed Asset Subsystem of the
Federal Financial System
Federal Accounting Standards
Advisory Board
Method of transmitting federal
income tax, medicare and social
security information to the
Department of the Treasury
Federal Financial Systems
Federal Financial Systems User
Group
Financial Management Division
Financial Management System
(predecessor to IFMS)
Facilities Management and Services
Division
Fiscal Year
General Accounting Office
Grants Information Control System
General Schedule
General Managerial
Government Performance and
Results Act
General Services Administration
Individual Development Plan
Integrated Contract Management
System
Integrated Financial Management
System
Internal Revenue Service
Leaking Underground Storage Tank
Management and Reporting System
Management Control
Coordinator
Memorandum of Understanding
National Performance Review
Office of Administration and
Resources Management (under  the
direction of the CFO)
Office of the General Counsel
Office of the Inspector General
Office of Management and Budget
                        EPA's Financial Management Status Report ft Fire-Tear Plan

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OPM         Office of Personnel Management       SCORES
PA           (Comptroller's) Policy
              Announcement                       SCRIPS
PCIE         President's Council on Integrity and
              Efficiency                           SBO
PMRS        Performance Management and         SES
              Recognition System                   SFO
PPAS         Personal Property Accountability       SLC
              System                             SPUR
QA           Quality Assurance
QAT         Quality Action team                  SRO
QC           Quality Control                      SSC
KITS         Retirement, Insurance, Transfer        STARS
              System
RMD         Resource Management Division        TN
RMDS        Resources Management Directives      TPDS
              System                             TQM
RMIS         Resource Management Information     TRANCH
              System
SAGE         Electronic bulletin board listing EPA    VAN
              financial management policies and      WCF
              procedures including all RMDS
              chapters, PAs and TNs
                                 Superfund Cost Recovery Image
                                 Processing System
                                 Superfund Cost Organization and
                                 Recovery Enhancement System
                                 Senior Budget Officer
                                 Senior Executive Service
                                 Servicing Finance Officers
                                 Senior Leadership Council
                                 Software Package for Unique
                                 Reports
                                 Senior Resource Official
                                 Superfund State Contract
                                 Strategic Targeted Activities for
                                 Results System
                                 (Comptroller's) Transmittal Notices
                                 Third Party Draft System
                                 Total Quality Management
                                 Quarterly grouping of loans based on
                                 Treasury interest rates
                                 Value Added Network
                                 Working Capital Fund
    Attachment - Page 2
EPA's Financial Status Report & Fire-Year Flaa

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