&EPA
United States
Environmental Protection
Agency
Office Of The
Inspector General
(2421)
September 1999
Office Of The Inspector Genera!
Audit Plan
October 1, 1999 Through
September 30, 2000
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
SEP 23 1999
THE INSPECTOR GENERAL
MEMORANDUM
TO: The Administrator
Deputy Administrator
Assistant Administrators
Associate Administrators
Chief Financial Officer
General Counsel
Regional Administrators
It is my pleasure to present the Office of Inspector General's (OIG) FY 2000 Audit Plan.
We remain committed to helping EPA meet its strategic goals by focusing on environmental
results. Additionally, we will continue to expand our role as "agents of positive change" through
additional assistance and consultation services to improve EPA's capability and awareness in
performance management and accountability.
Again, as part of our audit planning process, we solicited Agency management officials'
input in identifying areas that may require audit presence or oversight or to identify areas on
potential or emerging problems requiring our involvement. We also conducted customer surveys
which provided valuable insight and guidance for more responsive products and services. This
ensures that we focus our work on the areas of the greatest potential for improving economy,
efficiency, and effectiveness in the delivery of Agency programs.
Planning is an ongoing process that requires constant monitoring and modification. As
circumstances or requirements change, we will revise our annual plan. Accordingly, we request
your views on the plan and continue to seek your suggestions on how the OIG can best meet your
needs in accomplishing the Agency's mission of delivering the best programs possible to protect
the environment and human health. We will be pleased to discuss this plan and any other ideas
with you and your representatives.
I
u.
Nikki L. Tinsley
Recycled/Recyclable. Printed with Vegetable Oil Based Inks on 100% Recycled Paper (40% Postconsumer)
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Table of Contents
Vision, Mission, and Values 1
Strategic Goals <.. 2
FY 2000 Outcomes 3
Annual Audit Plan 3
Use of Audit Resources 4
Audit Issue Areas and Coverage of EPA Strategic Goals 6
Audit Initiatives 7
Program Audits 7
Financial Audits of Assistance Agreements 19
Financial Audits of Contracts 23
Financial Statement Audits 25
Audit Advisory and Agency Assistance Services 26
Prospective Agency Improvements, Outputs, Outcomes and Environmental
Impacts from FY 2000 Audit Products .27
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Vision, Mission, and Values
Our Vision
The Office of Inspector General's vision is to be "agents of positive change" striving for
continuous improvement in EPA's management and program operations, and in our own
offices. We cannot achieve our vision by working alone. Therefore, we will work
cooperatively with others who are committed to protecting human health and
safeguarding the natural environment, always vigilant to maintaining our independent and
impartial perspective while serving as a helpful advisor. We will continue refining our
business processes and practices, and maintain our emphasis on reinventing our
organization to better serve our customers and clients.
Our Mission
The statutory mission of the Office of Inspector General (OIG) is to conduct and
supervise independent audits and investigations
of Agency programs and operations. The OIG
promotes economy, effectiveness, and efficiency
and deters and prevents fraud, waste, and
mismanagement hi Agency programs and
operations. The Inspector General keeps the
Administrator and Congress fully informed of
problems hi Agency programs and operations.
Our Values
1G?$ two baste roles:, ,
* Find and report on current problems and
• Foster good program management to .,
prevent future problems ' ' '• •
OIG values guide us in our day-to-day operations, express the standards and ideals we
strive to achieve and maintain in performing our mission. The Office of Inspector
General is committed to:
1. Quality, timely, cost-effective products and services that best satisfy customers'
diverse needs,
2. Personal integrity,
3. Leading by example,
4. Dignity, respect, fairness, honesty and courtesy, and
5. Honoring commitments.
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Strategic Goals
In December 1996 the OIG issued its Strategic Plan covering fiscal years 1997 through
2002. The Strategic Plan established three goals: (1) help EPA achieve its environmental
goals by improving the performance
OIG Strategic Goals:, . --
* Help EPA achieve its environmental goals
• Foster strong working relationships '
• Operate at the highest possible performance level
and integrity of EPA programs and
operations, by safeguarding and
protecting the Agency's resources, and
by clearly reporting the results of our
work; (2) foster strong working
relationships; and (3) operate at the
highest performance level. The goals
established hi this plan provide the
framework for the activities that we
propose to conduct as part of our Annual Audit Plan and Performance Plan. The Annual
Audit Plan serves as a catalyst for directing OIG resources to those areas which are the
most effective in helping us to carry out our mission and to achieve our vision and
strategic goals. The Annual Performance Plan serves as a link between our strategic
goals, annual goals, and annual budget
Overall, the OIG sees its mission as identifying not only
problems, but also solutions. Our mission effectiveness is
achieved by (1) focusing our activities on the right issues at
the right time, (2) performing the work professionally, and
(3) reporting the results of our work to achieve maximum
impact and encourage expeditious corrective action. * ConinnH11cat'OB
Keys to mission effectiveness
• Relevance "'
* Timeliness
« Credibility
Over the last several years, as part of our reengineering
efforts, in addition to providing the traditional audit services, .we have provided advisory
and agency assistance services at the request of Agency management. We will continue
to work in partnership with Agency program and management officials to improve the
economy, efficiency, effectiveness, and integrity of their programs and operations. We
are also working with state agencies and other EPA partners to properly implement major
assistance programs. With today's challenges of efficiently managing operations and
effectively dealing with the increasing pressure for controlling costs, we will continue to
pursue enhancements to our own, as well as the Agency's efficiency and effectiveness.
Toward fully achieving the concept of ONE OIG, the Office of Audit is incorporating law
enforcement and investigative concerns throughout its audit planning process, and is
expanding its joint participation with the OIG Office of Investigations on Agency
contract and assistance agreement issues to identify and reduce systemic risks and
vulnerabilities.
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FY 2000 Outcomes
Using our three strategic goals as a guide, we plan to achieve the following outcomes in
FY2000:
• Produce a work plan that focuses on EPA's 10 Strategic Goals, incorporating
input from the internal OIG organization, Agency management, Congress and
other stakeholders;
• Improve the quality, usability, and timeliness of our work products and services;
• Further foster a cooperative and productive atmosphere and working relationship
with Agency program management officials and other partners with common
goals to help them improve the delivery of environmental results; and
• Help EPA identify and resolve its Top Management Challenges and effectively
implement the Government Performance and Results Act.
1. Accountability
2. Environmental Data Information Systems
3. EPA Oversight of Enforcement Activities
4. Quality Assurance Plans
5. Backlog of National Pollutant Discharge
Elimination System Permits
6. Use of Inefficient Contract Types
7. Agency Relationship with Contractors
8. Oversight of Assistance Agreements
9. Resources to Enhance Employee Competencies
10. EPA's Automated Information Systems Security Plans
Annual Audit Plan
As part of its responsibility in accomplishing its mission, the Office of Audit prepares an
Annual Audit Plan each September outlining its annual strategy to implement the Office
of Inspector General Strategic Plan. The Plan focuses on increasing our efforts as
catalysts for change by providing our customers with independent and objective
information necessary to improve program delivery and promote the integrity and the
effectiveness of Agency programs and operations.
As part of our audit planning process, we contacted EPA senior and program managers to
seek their input in identifying areas that may require OIG presence or oversight or to
identify those areas where they believe we best can serve their needs. We maintain a
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continuing liaison with key congressional committees to identify areas of concern or
interest to members or their constituents, and to obtain their views on potential or
emerging problems requiring O1G involvement. We obtained ideas and suggestions from
a variety of sources including our staff members, prior audits by our staff and the-General
Accounting Office, and results of Federal Managers' Financial Integrity Act reviews. We
also surveyed our EPA customers to determine how we can improve the delivery of our
products and services to better meet their needs.
To maximize the impact of our work, we considered many factors in developing this plan
including:
statutory and regulatory requirements;
adequacy of internal control systems;
relatively new programs or functions;
management needs;
Federal participation hi terms of resources or regulatory authority;
prior audit history;
results of other evaluations;
availability of audit resources; and
customer needs and concerns.
The Plan incorporates suggestions received from Agency management which identified
areas for improved program operations and activities. The Plan culminates a combined
effort to identify potential auditable areas. These suggestions were examined and ranked
considering bom the Agency initiatives and mission, the OIG's responsibilities, and other
additional considerations and special concerns. We believe our audit efforts will provide
the necessary audit coverage that will ultimately contribute to improvements in the
Agency's most critical programs, organizations, functions, and activities. Our audits of
the Agency's programs will include more thorough evaluations of the management
control systems and use of risk-based assessments. We will focus more of our program
audits on improving the effectiveness of environmental programs and/or streamlining
processes so program operations can be completed more efficiently and economically.
Use of Audit Resources
For FY 2000, the Office of Audit expects to have 241 work years of effort available from
in-house resources, an 18 FTE reduction from the 259 level the OIG Audit Plan had in
FY 1999. The FTE reduction is mainly due to increased employee payroll costs and the
establishment of two new offices with within the OIG - Office of Planning, Analysis and
Results and Office of Evaluation. Some of the initial staffing for the two new offices will
come from existing Office of Audit FTE.
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Independent public accounting firms and technical support contractors provide additional
support to the Office of Audit. Audit services from other Federal agencies such as the
Department of Health and Human Services and the Defense Contract Audit Agency also
supplement our direct audit resources on a reimbursable basis. Other Federal agencies'
time is not included in our resource estimates.
Functional work areas
* Program audits
• Assistance Agreement audits
• Contract audits ..
* Financial Statement audits
• Audit Advisory & Agency Assistance Services ;,
To address the wide variety of EPA
programs and activities, we have grouped
our work into five functional areas:
Program Audits determine the extent to
which the desired results or benefits
envisioned by the Administration and
Congress are being achieved; review the
economy, efficiency and effectiveness of operations; determine the extent of compliance
with applicable laws and regulations; assist EPA in implementing the Results Act by
selectively verifying and validating performance measures, data, and results and by
reviewing the propriety of performance plans.
Assistance Agreement Audits are audits of EPA's State Revolving Fund program,
Performance Partnership Grants, interagency agreements and assistance agreements, all of
which provide assistance to state, local and tribal governments, universities and nonprofit
recipients and account for about half of EPA's budget. We will audit both the financial
and performance aspects, building on the Single Audit Act and focusing on resource-
intensive, high-risk programs.
Contract Audits are audits of EPA contractors' indirect cost proposals, preaward,
interim and final contracts cost submissions. These audits determine the eligibility,
allocability, and reasonableness of costs claimed by contractors and assure that EPA pays
only for what it requests and receives. The OIG has assumed audit cognizance of 10
major contractors and will monitor the contract universe to identify high-risk contractors.
In addition, the Defense Contract Audit Agency provides contract audit services, on a
reimbursable basis, at the majority of EPA's contractors.
Financial Statement Audits are reviews of the Agency's financial systems and
statements to ensure that its accounting information is accurate, reliable and useful, and
complies with applicable laws and regulations. Our objective is to assist EPA in making
improvements in the financial management processes and controls which will provide
better information for decisions promoting the greatest possible environmental results.
Audit Advisory and Agency Assistance Services are nontraditional services that we
offer to management. They offer a mix of products and services to give managers
information they need in a more expedient manner and to assist EPA management in
assessing and/or implementing control systems and processes.
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With the limited audit resources available, the Office of Audit can only accomplish a
portion of its total workload requirements. When establishing the sequence in which
audits will be performed, we consider the assignment's priority and resource availability
to assure that assignments are conducted in an efficient and effective manner. Final
allocation of the Office's resources reflects management needs; susceptibility of programs
and activities to fraud, waste, and abuse; significance of operations; congressional
interest; and prior audit history.
Audit Issue Areas and Coverage of EPA Strategic Goals
While the OIG has its own strategic plan, the planning of our work supports the goals,
objectives, and strategies outlined in EPA's Strategic Plan. The OIG has organized and
prioritized its F Y 2000 workload to ensure that audits and advisory and assistance
services help the Agency to reach its goals and objectives, pursue its strategies, and
monitor its success indicators.
Relationship Between Audit Issue Areas and Coverage of Agency Strategic Goals
Audit Issue Areas*
EPA Strategic Goals
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Audit Initiatives
The Plan demonstrates our sustained efforts to improve the efficiency and effectiveness of
Agency programs and operations and our cooperative efforts with Agency management to
help achieve desired program results. The Plan's audit initiatives as collectively identified
by Agency management and the OIG, when implemented, will contribute to the Agency's
long-term effectiveness and achievement of its mission.
Relationship of Planned Audit Products and Services to
AGENCY RESULTS
Means
ft Program Audits
ft Assistance
Agreement
Audits
•^Contract Audits
ftFinancial
Statement Audits
ftAdvisory and
Assistance
Services
Intermediate Output ->
Measures
• Questioned Costs
• Recommended Efficiencies
• Reports Issued
• Reports Resolved
• Agency Recoveries (from
prior periods)
• Legislative, Regulatory or
Policy Items Reviewed
• % of planned audits started
• % of audits completed
within plan
• % of EPA measures
verified/validated
• Number of Agency
workgroups/projects
Audit Outcome -*
Measures
1. Potential monetary value of
recommendations, questioned
costs, savings and recoveries
2. Examples of recommendations,
advice and actions leading to
improved business practices
and attainment of Agency goals.
3. Overall customer/client
satisfaction with audit products
and services
Program Audits
As discussed earlier, the Office of Audit provides audit and advisory services that: (1)
fulfill the mission of the Inspector General Act; (2) are highly responsive to the needs of
customers, clients, and stakeholders; (3) support the attainment of Agency Strategic
Goals; and (4) help the Agency resolve its top management challenges. In the program
audits area, we focus on "issue areas" based on relative risk, materiality, and importance
to EPA. "Issue areas" are highly important environmental programs to which we direct
our resources over a 3- to 5-year period. Our objective in establishing "issue areas" is to
provide EPA with a comprehensive, independent assessment of the programs to help EPA
better carry out its mission. For FY 2000 we have designated four "issue areas": water
quality, assistance agreements, better waste management, and enforcement and
compliance assurance. In addition, we will supplement our work hi the "issue areas" with
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other audits to provide balanced coverage of EPA's programs and operations. These
audits are included as Information Resources Management and Other Emerging Issues.
Water Quality
The Clean Water Act is the primary legislation addressing water quality programs. The
Act's goal is to restore and maintain the Nation's surface waters. Where attainable, the
Act seeks to restore water uses to fishable and swimmable. The Clean Water Act has
been up for reauthorization since 1994.
The Clean Water Act required a consistent national approach for maintaining, improving,
and protecting water quality while allowing states flexibility to implement their own
programs. To implement the Clean Water Act requirements, EPA developed a regulatory
approach which included: setting water quality standards, including the standards in the
discharge permits, and enforcing against violators. This approach has led to
improvements, but has not fiilly solved the water quality problems.
The Office of Water plans to continue to rely on the water quality standards to meet the
Clean Water Act requirements and to ensure that the gains in water quality made over the
last two decades are not lost. Also, Office of Water plans to continue supplementing this
approach with alternative techniques including:
• Implementing programs on a watershed basis;
• Using geographical targeting to involve all the stakeholders in characterizing
problems and in determining and implementing solutions, such as Great Lakes,
Chesapeake Bay, Gulf of Mexico and the National Estuary Program;
• Encouraging more advanced monitoring techniques; and
• Mixing enforcement with education, voluntary compliance, and volunteer efforts.
Goals
Our long-term goal is to provide audit and advisory services which provide Agency
program managers useful information to promote economy, efficiency, and effectiveness
of water quality programs, and to determine the extent to which desired results or benefits
envisioned by Congress are being achieved.
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Short-term goals are:
• Assist Agency personnel in developing meaningful EPA and state
performance measures for tracking progress in attaining the clean water
goal; and
• Conduct audits in the core program areas of environmental and pollution
standards, pollution control programs, monitoring, and reporting.
During FY 2000, our work will concentrate on three of the Agency goals which support
water related objectives: Clean and Safe Water (Goal 2), Preventing Pollution and
Restoring Risk in Communities, Homes, Workplaces and Ecosystems (Goal 4), and A
Credible Deterrent to Pollution and Greater Compliance with the Law (Goal 9).
Implementation Plans
In FY 2000, we plan to finish the following audits relating to water quality:
• Louisiana Water Quality Standards, Monitoring, and Reporting;
• EPA Water Quality Standards, Reporting, and Regional Oversight;
• Nonpoint Source Program and Grant Oversight; and
• Region 2's Implementation and Management of Combined Sewer
. Overflows.
We also plan to start the following audits in FY 2000:
• National Pollution Discharge Elimination System Enforcement;
• National Pollution Discharge Elimination System Sanitary Sewer
Overflows;
• Enforcement of National Pollution Discharge Elimination System Permits
in Region 4;
• Region 5's Upper Mississippi River Program;
• Monitoring for Water Quality; and
• Region 5's Coastal Environmental Management Program.
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Assistance Agreements
In its December 1996 Strategic Plan, the Office of Inspector General identified
Assistance Agreement Management as a priority environmental program. Many of
EPA's assistance agreements receive regular audit coverage as part of the single audit
process whereby state or local auditors or independent public accountants conduct an
annual audit of a recipient's costs and assistance programs. However, because of the
continuing large dollar amounts represented by assistance agreements in EPA's budget
and the importance of these agreements to overall mission accomplishment, the OIG will
focus its auditing to various aspects of assistance agreements. Also, since FY 1996 EPA
has included Grants Close Outs and Oversight of Assistance Agreements as a material
weakness in its Integrity Act Report to the President and Congress. .According to the
1998 Integrity Act Report, FY 2000 is the year that corrective action will be completed.
Over the past few years, the OIG has performed several audits of assistance agreements.
Many of the audits have shown the need for increased attention and oversight by EPA's
grants administration and program offices. However, most of the audits focused on
individual regions, programs, and entities. As a result, the Agency contends that the
conditions identified in the audit reports are isolated instances and thus do not apply to
the overall administration of EPA assistance agreements. Because of this contention, we
have determined that future audit efforts in this area should focus on specific issues
evaluated nationally. This approach will enable us to determine if there are systemic
problems with EPA's management of its assistance programs and work together with
Agency managers to identify solutions.
Goals
Our overall objective is to review both the financial and performance aspects of
assistance agreements awarded to various entities, not only to determine if systemic
problems exist in EPA's management and oversight of assistance agreements, but to
identify solutions. By performing work in this area, we will help the Agency to determine
if:
• The scope and goals of the assistance agreements are being achieved in
accordance with Government laws and regulations;
• Funds are being effectively managed;
• The Agency is receiving what it is paying for; and
• The program results contribute to achieving EPA's environmental mission.
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Implementation Plans
To achieve these goals, we plan to perform work in several major areas:
• Non-competitive Assistance Agreements;
• Directed Subcontracting;
• Product Accomplishment;
• Integrated Grants Management System Data Quality;
• EPA's oversight responsibilities;
• Litigation and Lobbying Costs;
• Equipment; and
• Interagency Agreements (lAGs).
Implementation Plans
In FY 2000, we plan to finish the following audits relating to assistance agreements:
• Review of Rhode Island's Grant Management; and
• Coordinating Science Planning and Grant Making.
We also plan to start the following audits in FY 2000:
• Directed Subcontracting;
• Noncompetitive Assistance Agreements;
• Litigation and Lobbying Costs; and
• Interagency Agreements.
Better Waste Management
Improper waste management threatens the health of people, endangers wildlife, and
harms vegetation and natural resources. Uncontrolled hazardous and toxic substances can
DIG FY 2000 Audit Plan IT
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migrate to ground water, surface water, and air. Consequently, such wastes can affect
streams, lakes, rivers, water supplies, and the air we breathe.
Goal 5 of EPA's Strategic Plan, "Better Waste Management, Restoration of
Contaminated Waste Sites, and Emergency Response," addresses the issue of better waste
management. Goal 5 states:
America's wastes will be stored, treated, and disposed of in ways that
prevent harm to people and to the natural environment. EPA will work to
clean up previously polluted sites restoring them to uses appropriate for
surrounding communities, and respond to and prevent waste-related or
industrial accidents.
A principal objective of this goal is to reduce or control the risks posed to human health
and the environment through better waste management and restoration of abandoned and
active waste sites. In partnership with states, tribal governments, the public, and other
stakeholders, EPA reduces and controls the risks at Superfund, Brownfields, Resource
Conservation and Recovery Act (RCRA), and Underground Storage Tank (UST) sites.
To achieve this objective, the Agency seeks to apply the fastest and most effective waste
management and cleanup methods that are available. In addition, the Agency tries to
involve the affected communities in the environmental decision making process. Finally,
the Agency also employs research and enforcement strategies to further reduce the risks
from exposures to hazardous waste.
Goal 5 includes both Superfund and RCRA issues. The OIG's December 1996 Strategic
Plan identifies both these programs as major areas where we will focus our work.
Goals
America's wastes need to be stored, treated, and disposed in ways that prevent harm to
people and to the environment. In our August 1999 Better Waste Management Issue
Area Plan for fiscal years 2000 and 2001, we identified six priority issue areas that we
will address during the two-year period starting in FY 2000:
• Productive Land Use and Reuse;
• Related Superfund and RCRA Program Overlap Concerns;
• State and Tribal Roles;
• Enforcement;
• Individual Site and Overall Program Management; and
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• Decision Making and Site Assessment.
By addressing these six priority areas, we intend to (1) determine the extent to which
desired results or benefits envisioned by Congress are achieved, (2) provide EPA-program
managers useful information to promote economy, efficiency, and effectiveness of both
programs, and (3) provide OIG auditors with an audit planning tool that sets the
framework for targeting individual audits.
Implementation Plans
In FY 2000, we plan to finish the following audits relating to better waste management:
• RCRA Financial Assurance Requirements;
• RCRA Hanford Hazardous Waste Storage Tanks;
• Government Performance Results Act under RCRA;
• Enforcement of RCRA Permits and Orders;
• RCRA Significant Non-Complier Identification and Enforcement;
• Lowry Landfill Superfund Site Remedy Review;
• EPA's Superfund Cost Recovery Actions;
• Region 2's Collection of Superfund Oversight Costs;
• Effectiveness of Containment Remedies in Region 4; and
• Interim Record of Decision — Petosky Manufacturing Company Superfund
Site.
We also plan to start the following audits in FY 2000:
• RCRA Paperwork Burden Reduction;
• Illegal Dumping of Hazardous Waste;
• RCRA Hazardous Waste Import/Export;
• Hazardous Waste Monitoring and Compliance of Region 2's Universities
and Colleges;
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• Unaddressed NPL-Caliber and Near NPL-Caliber Superfund Sites;
• Superfund State Contracts in Region 5;
• Oversight of State and Tribal Superfund Programs;
• Site Assessment for the National Priorities List;
• Superfund Post Construction Completion Management;
• Quality of GPRA Data in CERCLIS;
• Formerly Used Defense Sites;
• Recycling of Superfund Sites;
• Oversight of Superfund Cleanup Actions for the Hanford Site;
• Region 4's Implementation of Superfund Enforcement Reforms;
• Followup of Region 5's Billing and Collection of Accounts Receivable;
• EPA Assistance to State and Local Government on Mitigating the
Environmental and Human Health Effects of Urban Sprawl; and
• Followup Review of Superfund Brownfields Program: Potential for
Urban Revitalization.
Enforcement and Compliance Assurance
EPA's goal, as stated in its strategic plan, is to ensure full compliance with laws intended
to protect human health and the environment. Within the framework of this goal, EPA's
objectives are to:
• Identify and reduce significant noncompliance in high priority program areas,
while maintaining a strong enforcement presence in all regulatory program areas;
and
• Promote the regulated communities' voluntary compliance with environmental
requirements through compliance incentives and assistance programs.
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The Office of Enforcement and Compliance Assurance (OECA) plans to implement a
range of approaches to achieve the full compliance goal, including: (1) continuing a
traditional core enforcement program; (2) improving the Agency's ability to define high
priority portions of the regulated community and set challenging targets for improving
their compliance; (3) increasing the use of injunctive relief provisions and supplemental
environmental projects to achieve environmental restoration and cleanup; (4) working
with state, tribal, and local governments and other Federal agencies to promote
environmental protection; and (5) expanding current efforts to improve compliance
through incentives and assistance activities,
The Office of Audit's issue area plan provides a comprehensive approach for evaluating
the enforcement and compliance assurance program. When our planned work is fully
implemented, we will have evaluated:
• Enforcement activity at the regional and state levels in the major media programs
of air, water quality, and hazardous waste;
• Specific aspects of enforcement activities, such as the use of supplemental
environmental projects, multimedia enforcement, activities aimed at ensuring
Federal facilities are in compliance, and criminal and civil enforcement
coordination;
• Actual results of enforcement activities, including whether compliance with
injunctive relief requirements has been achieved and penalties have been
collected;
• The compliance assistance program, such as the compliance assistance centers and
other activities required under the Small Business Regulatory Enforcement
Fairness Act; and
• Whether the enforcement and compliance program's overall management systems
are functioning appropriately to meet the needs of Agency management under the
Government Performance and Results Act, in the areas of data management,
planning and accountability, and measuring environmental outcomes and
indicators.
Ggajs
During FY 2000, our planned audits will focus on three Agency goals: "A Credible
Deterrent to Pollution and Greater Compliance with the Law" (Goal 9); "Effective
Management" (Goal 10); and "Expansion of Americans' Right to Know about their
Environment" (Goal 7).
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Implementation Plans
In FY 2000, we plan to complete the following audits:
• Compliance with Regional Enforcement Agreements in Regions 2, 5,
and 6;
• Supplemental Environmental Projects;
• Government Performance and Results Act Implementation in OECA; and
• Multimedia Enforcement Activities.
In FY 2000, we plan to start the following audits:
• Actions to Improve OECA Data Management
• Compliance with State Enforcement Agreements; and
• Quality of the GPRA Data in the Enforcement DOCKET System.
Information Resources Management
A sound information resources management (IRM) infrastructure and efficient,
responsive information systems are critical to EPA's ability to achieve its environmental
mission. In response to OIG recommendations, the Agency originally declared
Information Systems Security Plans a Presidential-level weakness in its 1997 Integrity
Act Report. Audit work in this area supported the conclusion that the Agency's security
plans continued to be inadequate to protect EPA data and resources and security plans
were again reported as a weakness in the 1998 Integrity Act Report. The Agency relies
on its information systems to collect, process, store and disseminate vast amounts of
information which is used to safeguard and improve the environment The information
that EPA uses must be accurate, reliable and accessible to authorized users in order for
the Agency to meet its organizational goals. This information assists the Agency hi
making sound regulatory and program decisions.
EPA must manage its information resources to provide integrated information to the
public, businesses, educational, environmental and community-based organizations, other
Federal agencies and governmental entities. The public, management and numerous
other organizations are potential customers that use Agency information resources that
could impact human health and the environment
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Over the past couple of years we have addressed a number of high-level issues which
posed immediate threats to the security of Agency information systems, and the efficient
and effective use of Agency data and resources.
Goal
Our information resources program supports EPA's Strategic Plan Goal 10, "Effective
Management," by focusing on the reliability, and accuracy of the various information
systems, information, and the resulting financial statements.
Implementation Plans
In our continuing effort to assist the Agency in achieving its IRM go'als, we will complete
the following audits in FY 2000:
• IBM Mainframe Operating System Access Controls;
• EPA's Computer Security Program; and
• Dial-in Security for Region 8's Network.
In FY 2000, we plan to start the following audits:
• Quality of the GPRA Data in the Enforcement DOCKET System (This is
part of the Enforcement Issue Area); and
• Quality of the GPRA Data in CERCLIS. (This audit is part of the Better
Waste management Issue Area)
In addition, during FY 2000, we will update system information to develop a strategic
plan for auditing data quality hi those Agency information systems which support EPA's
10 Strategic Goals. We will also complete an assessment of an EPA contractor's general
and application ADP controls. Furthermore, we will participate in the Agency's efforts to
replace the Agency payroll system and Essential Data Quality Indicators workgroup.
EPA's Implementation of the Results Act
The Government Performance and Results Act (the Results Act) promotes a new focus on
results, accountability, service quality and customer satisfaction hi Federal agencies. The
Results Act links planning and budgeting with results. Strategic and annual performance
plans sets goals and specify measurements which are used to evaluate results. Members
of Congress have asked the OIGs to develop a Results Act review plan to examine agency
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performance plans, and verify selected data and accounting systems that support an
agency's performance reports.
Consistent with the IG Act, we have been actively promoting improvement of EPA
operations by overseeing effective implementation of the Results Act's provisions and
assisting Agency managers to institutionalize its principles into day-to-day operations.
The OIG first reported on EPA's implementation of the Results Act in 1996, but we have
been reporting on EPA data quality issues for several years.
Implementation Plans
In FY 2000 we will continue to assist EPA in evaluating the accomplishment of its goals,
and ensure the adequacy of accountability systems and development of meaningful
performance measures. Our audits will continue to selectively evaluate the accuracy,
adequacy, and reliability of data needed to measure performance and environmental
results from Agency operations, its grantees, and contractors. We will also continue to
review EPA's cost accounting procedures, processes, and systems to accumulate the costs
of carrying out each of its goals.
Additionally, we will develop new tools and approaches for integrating reviews of and
assistance for Agency Results Act implementation into its products and services. For
example, we will survey Agency data systems and sources for selected goals and
measures, and we will review selected performance measures identified in the FY 1999
Overview of EPA's Financial Statements.
Other Emerging Issues
The Office of Audit will also be conducting other audits to provide balanced coverage of
the Agency's programs and operations. These audits supplement our work in the various
"issue areas." Agency managers requested some of these assignments while others either
reflect our legislatively mandated work or we have identified as opportunities for
improving Agency programs and operations.
In FY 2000, we plan to finish the following audits in this area:
• Whistle Blower Protection at EPA;
• Greening EPA;
• Managing Printed Materials at EPA;
• Followup Review on the Narragansett Lab;
18 OIG FY 2000 Audit Plan
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• Followup Review on Pesticides;
• Region 3's Children's Health Initiative on the Asbestos Hazard Emergency
Response Act; and
• Air Enforcement — Stack Testing.
We also plan to start the following audits in FY 2000:
• Use of Synthetic Minor Source Classification in the Title V Operating
Permit Program;
• Puerto Rico Environmental Quality Board;
• Border XXI Program Issue Area Plan;
• Children's Health Risk Initiatives Program; and
• Pesticide Residue and Tolerance Setting.
Financial Audits of Assistance Agreements
EPA accomplishes a large part of its environmental mission through numerous assistance
programs awarded as grants and cooperative agreements to state, local and tribal
governments, universities, and nonprofit recipients. Today assistance programs account
for about half of the Agency's total budget.
During FY 2000 we will focus our work in the following areas: State Revolving Fund
(SRF) program, Performance Partnership Grants, and Superfund cooperative agreements.
Our overall objectives are to ensure that the scope and goals of the assistance agreements
are being achieved, funds are being effectively managed, and the Agency is receiving
what it is paying for.
As resources allow, we will audit other assistance agreements based on our continuing
risk assessment activities and on Agency and congressional requests.
OIGFY 2000 Audit Plan 19
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State Revolving Fund Program
The Water Quality Act of 1987 mandated the establishment of the State Revolving Fund
(SRF) program as a replacement to the construction grants program. The SRF program
has two primary objectives. First the SRF program provides financial assistance to state
governments in establishing a water pollution control revolving fund for constructing
municipal treatment works. Second, the SRF program provides financial assistance for
developing and implementing non-point source management programs and estuary
management plans. EPA awards capitalization grants to the states, which in turn make
low interest loans and other forms of financial assistance available to municipalities.
The very nature of EPA's involvement hi municipal wastewater treatment facilities is
changing from project management to a complex financing program in which EPA is in
partnership with the states. The importance of point source pollution and the high level
of SRF funding makes the SRF a critical program from an audit standpoint.
Goals
Our goals are to:
• Conduct independent and objective audits of the SRF program, promoting
economy, efficiency, and effectiveness;
• Work with SRF program managers to improve program operations and
effectiveness; and
• Be proactive and involved in the SRF program, review existing
procedures, and suggest improvements.
These goals support EPA's Strategic Plan Goal 10, "Effective Management," which seeks
to "establish a management infrastructure that will set and implement the highest quality
standards for effective internal management and fiscal responsibility." In addition, they
support EPA's Strategic Plan Goal 2, "Clean and Safe Water," which seeks to "protect
and improve our water resources."
Implementation Plans
We designed the following activities to implement a strategic approach to reach our
goals:
• Review Clean Water State Revolving Fund financial statement audits
available from the 41 states conducting these audits, and provide the
20 OIGFY 2000 Audit Plan
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program offices with information on the usability of this financial
information.
• Work with several states conducting audits to voluntarily improve-the
usability of the financial information.
• Conduct financial statement opinion audits, and reports on internal
controls and compliance in about one-third of the remaining 10 states.
We have been working with and will continue to work with Agency SRF coordinators to
improve program operations and effectiveness. When requested, we will continue to
assist EPA regional officials, as consultants, in their annual reviews of state SRF
operations.
Performance Partnerships Grants
A Performance Partnership Grant (PPG) is a multi-program grant made to a state or tribal
agency from funds allocated and otherwise available for a specific environmental
program. PPGs give the states and tribes the option to combine funds from two or more
grants so they have the flexibility to address their highest environmental priorities while
continuing to address core program commitments. PPGs are part of the National
Environmental Performance Partnership System (NEPPS). EPA designed NEPPS to:
give states a stronger role in priority setting; focus scarce resources on their highest
priorities; and tailor the amount and type of EPA oversight to an individual state's
performance. A state or tribe may implement NEPPS without a PPG.
As part of the Administration's program to "Reinvent Environmental Regulation,"
President Clinton announced Performance Partnership Grants on March 15,1995. PPGs
are a part of EPA's continuing effort to reinvent government and build state and tribal
environmental protection. The new system recognizes the vital role states play in
environmental protection and provides the flexibility states need to design strategies that
meet their own conditions and needs. PPGs encourage states and tribes to integrate
strategic goals such as pollution prevention and community-based environmental
protection into their program planning. Additionally, the Agency designed PPGs to
encourage improved environmental performance by linking program goals with program
outcomes, increase the use of environmental indicators and program performance
measures, and decrease reporting of outputs and activities. Performance measures,
negotiated between the region and each state or tribe, will gauge progress in meeting
agreed upon goals.
We have been working with the Agency in a partnership role to ensure that it has
developed proper policies and procedures for the NEPPS and related endeavors, (e.g.,
OIG FY 2000 Audit Plan 21
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Environmental Performance Agreements and PPGs). During the past year we have
actively participated in the Agency's NEPPS workgroups.
Goal
Our overall goal is to provide useful information to EPA program managers so they may
oversee the PPG and NEPPS programs effectively and efficiently to obtain improved
environmental results. Our performance partnership program supports EPA's Strategic
Plan Goal 10, "Effective Management," by focusing on accountability for internal
controls, and information. The PPG also supports various other EPA's Strategic Plan
Goals such as Goal 1, "Clean Air"; Goal 2, "Clean and Safe Water"; and Goal 4,
"Preventing Pollution and Reducing Risk in Communities, Homes Workplaces and
Ecosystems."
Implementation Plans
To meet our goal, we will continue to provide an early warning of problems and
suggestions for improvements to help PPG recipients achieve performance goals.
In FY 1999, all field divisions assisted the regions and the states in the implementation of
their Performance Partnership Grants. This includes performing short-term management
assessment reviews with regional management officials and reviewing regional
implementation and oversight of the Performance Partnership Grant Program.
Specifically, we plan to complete the following reviews in FY 2000:
• Management Assessment Reviews in Region 2; and
• Implementation and Oversight of Performance Partnership Grants
in Region 5.
Superfund Cooperative Agreements
The Superfund Amendments and Reauthorization Act requires the Office of Inspector
General to audit a sample of cooperative agreements with states carrying out response
clean-up actions. We perform financial and compliance audits of cooperative agreements
with states and political subdivisions. Some of our audits also review program
performance.
22 OIG FY 2000 Audit Plan
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Goals
Our overall goal is to improve the management of extramural resources through carefully
planned audits. Our audits of Superfund cooperative agreements support EPA's Strategic
Plan Goal 10, "Effective Management;" and EPA's Strategic Plan Goal 5, "Better Waste
Management, Restoration of Contaminated Waste Sites, and Emergency Response".
Implementation Plajns
We will continue our mandated coverage of selected cooperative agreements.
In FY 2000, we plan to conduct the following reviews relating to Superfund cooperative
agreements:
• A review of either the state of Ohio's or Wisconsin's Cooperative
Agreement in Region 5; and
• A review of the state of Delaware's Cooperative Agreement in Region 3.
• Financial Audits of Contracts
EPA gets much of its work done and produces many of its major products through
contracts. Without an effective contract function, EPA's mission of protecting human
health and the environment is threatened or impaired. The OIG is committed to assisting
EPA in ensuring that it pays only for the services and products it requests and receives.
Historically, the OIG has focused its financial contract audit resources on large-dollar,
Superfund contractors. However, more recently, we have broadened our focus to include
not only small Superfund contractors, but also non-Superfund contractors. We have
assisted EPA's and other Federal agencies' procurement functions in the award,
administration, and close out of contracts; provided assistance to the OIG's Office of
Investigations; and performed audits of contracts to prevent and detect fraud, waste and
abuse.
In 1999, the OIG established the position of Senior Audit Advisor to the Assistant
Inspector General for Audit in order to enhance our detection of fraudulent activity and
OIG proactive efforts to identify areas vulnerable to fraud. The Senior Audit Advisor
will (1) work closely with the Deputy Assistant Inspector General for Investigations to
provide expert and timely advice and assistance to the Assistant Inspectors General and
the Divisional Inspectors General to facilitate the exchange of information between
auditors and investigators, and (2) assist in operational planning for the Office of Audit
OIG FY 2000 Audit Plan 23
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and the Office of Investigations. The Senior Audit Advisor will be primarily responsible
for generating referrals of potentially fraudulent activity to the Office of Investigations,
developing proactive initiatives, and augmenting strategies to identify program
vulnerabilities.
Goals
The OIG's Office of Audit has three goals for its financial contract audit program:
• Support EPA's and other Federal agencies' procurement functions with
needed audits and advisory services to assist in the award, administration,
and close out of contracts;
• Provide the Office of Investigations with needed contract audit,
consulting, and accounting services to support its civil and criminal
investigations; and
• Prevent and detect instances of contract fraud, waste, and abuse.
Our financial contract audit program supports EPA's Strategic Plan Goal 10, "Effective
Management," by focusing on accountability for contract dollars.
Implementation Plans
Our financial contract audit program includes seven work functions:
• Audit cognizance at selected contractors;
• Support for Office of Investigations;
• Oversight of the DCAA contract audit program for EPA contracts;
• Advisory and assistance services for EPA and other Federal agency
procurement officials;
• Special request audits;
• Special self-initiated audits; and
• Support for OIG evaluation of EPA environmental work accomplished
through contracts.
While we plan to perform work in each of these seven functions during FY 2000, we will
24OIG FY 2000 Audit Plan
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emphasize two functions. Our primary emphasis will be on cognizance at selected EPA
contractors of importance to the Agency. At cognizant contractor locations, we can
perform the full range of contract audit services including forward pricing reviews,
incurred cost audits, system reviews, Cost Accounting Standards audits, and joint
Financial Monitoring Reviews with EPA's Office of Acquisition Management. Our other
most important functions will be to support the OIG Office of Investigations with needed
contract audit, consulting, and accounting services for its procurement-related
investigations and to support the efforts of the Senior Audit Advisor.
Financial Statement Audits
A major effort, encompassing all aspects of EPA activities, is our annual audit of the
Agency's financial statements required by the Government Management Reform Act.
During these audits, we test the accuracy of the EPA's financial statements, evaluate
controls, and determine whether the Agency has complied with applicable laws and
regulations. Our objective in performing these audits is to help EPA improve its financial
management processes, systems, and controls, in order to provide better decision-making
information. Accurate and timely financial information, including costs of the Agency's
various programs, is essential to ensuring EPA achieves the greatest possible
environmental results with the resources it has been provided. Our audit work will result
in reports on EPA's Agency-wide financial statements, as well as the financial statements
for the Working Capital Fund and the Pesticide Reregistration and Expedited Processing
Fund. During FY 2000, we will also continue to work with the Agency on its
implementation of new cost accounting procedures.
Goal
Our goal is to provide quality audit and advisory services that result in improvements in
the accuracy, timeliness, and reliability of Agency financial information, thereby,
allowing EPA's managers to direct the Agency's resources in ways that maximize
achievement of the Agency's mission. This is in line with EPA's Strategic Plan Goal 10,
"Effective Management," which seeks to establish a management infrastructure which
will set and implement the highest quality standards for effective internal management
and fiscal responsibility.
Implementation Plans
To implement these goals, we will:
• Perform financial statement audits that will assist the Agency in improving
OIG FY 2000 Audit Plan 25
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financial management processes, systems, and internal controls;
• Use the required audits of financial statements as a tool for identifying
areas for further analysis, and for helping management improve financial
management and program performance;
• Advise Agency managers on developing sound financial reporting
processes and systems that accumulate information on the cost of EPA's
programs and are integrated with systems containing program information;
and
• Participate in Agency work groups which examine ways to improve
Agency financial operations.
In FY 2000 we plan to complete the following financial statement audits:
• FY 1999 Agency-wide Financial Statements;
• FY 1999 Working Capital Fund Financial Statements; and
• FY 1999 Pesticide Reregistration and Expedited Processing Fund
Financial Statements.
We will also plan to start the FY 2000 audits of these same entities during the second half
of FY 2000.
Audit Advisory and Agency Assistance Services
We know that we can only achieve our mission by working closely and cooperatively
with Agency managers. To do this, we are committed to maintaining an open flow of
communication with EPA management.
In addition to traditional audits, we offer a mix of products and services to give managers
information and advice they need in a more expedient manner and to assist EPA
management in assessing and/or implementing control systems and processes. We are
committing significant resources to provide independent advisory, assistance, or other
services to EPA managers and their partners. Examples of advisory and assistance
services we can offer to program offices follow.
26 OIGFY 2000 Audit Plan
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Advisory Services
The Office of Audit can provide advisory services to assist management in improving
operations and assessing the best way to do business. Using this approach, we can advise
managers with independent assessments of programs, functions, and procedures. Such
reviews can be used in such areas as bench marking to identify best practices, business
reengineering, establishing and documenting performance measures. The services can be
customized to provide the type of information that is most useful to the requestor.
Assistance Services
We can also make staff members available to assist EPA managers in improving their
operations. For example, our auditors work with program staff in assessing the adequacy
of management controls used to operate Agency processes. Our auditors assist program
staff to assess business and financial statements risks, the controls that mitigate those
risks, and overall compliance with policies and procedures. Audit staff can be detailed to
assist EPA managers in a variety of activities such as establishing improved control and
accountability systems, strengthening performance measures and accomplishments
reporting, or developing systems to monitor program operations on a nationwide basis,
and developing programs to improve management competencies and provide training.
Based on our knowledge of the subject area, we can advise management of potential
problems and risks which need to be addressed in implementing new laws and
regulations. For example, we have historically assisted the Agency in drafting general
grant regulations and state revolving fund procedures. We will provide representatives to
address meetings or functions on agreed upon subjects. We are always ready to discuss
areas or items of interest where we can share information with or be of assistance to EPA.
Prospective Agency Improvements, Outputs, Outcomes
and Environmental impacts From FY 200O Audit Products
OIG audits are planned based on their anticipated value
toward influencing resolution of the Agency's top
management challenges, reducing risk, and improving
practices or outputs leading to attainment of EPA's
Strategic Goals. Below are examples of prospective EPA
outputs and outcomes potentially resulting from Agency
acceptance of currently planned F Y 2000 audit products.
Environmental impacts are logical extensions of actions creating a Nexus or uak Beiween oio Audit
. Products aid Environmental Impacts/Goals
taken on audit recommendations and advice as shown.
OIG FY 2000 Audit Plan 27
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Prospective Results by Audit Issue Area with Linkage to Agency Concerns
Agency |J'Top Mgmt
Goal{s)i[cha!lenge(s)
Q Increased number of water sheds protected or restored.
Q Percentage of population with clean and safe water
Q Inspections, administrative/compliance orders
Q Greater compliance/reduction in pollution/cleaner water
Q Number of reports of impaired water along the Mississippi River
Q Percentage of aquatic communities with healthy water
Q Number of states with approved water quality standards/consistent
adoption of Clean Water Act standards
2,6
2,9
9,2
2,9
2
2
1,8
3
3
1,8
1
1,2,4
1,2
Q Construction grant closeouts/deobligation of grant funds
Q Percentage of population with better treatment of water
Q Number and quality of pesticides re-registration for safety of foods
10
2
3
Q Quality and propriety of enforcement actions for timely and appropriate
site resolution
Q Number of site construction remedies to control risks to human health
and the environment
Q Better policies and actions in cleaning up Brownfields - reducing urban
sprawl
Q Better assessment and addressing of non NPL site actions
Q Better oversight of state and tribal cleanups to control risks
Q Improvement in EPA oversight and cleanup of Formerly Used Defense
Sites to reduce risks in schools and other living and working areas
Q Quality of information used for critical management and Congressional
decision making (GPRA)
Q Quality and propriety of RCRA inspections for reducing risks from
transboundary toxics
Q Improved cleanup for recycling and reuse of hazardous waste sites
Q Number of RCRA hazardous waste facilities, inspections and civil
referrals for improved level of RCRA compliance and corrective actions
that decrease in threat of exposure to the public
Q Number of NPL sites cleaned up for reduction of risk to public health
,-.; .. ;;, ,-- -»£ • . .— -•;
Agencv If Top Mtemt J
™ *• . f\ j • ™ t
Goal(s) |? Challenges
Jfc.M. -^. ,. $?f _.,.,>
5
5
5
5
5
5
5
5,10
5,6
5
5,9
5
3
3
3
3
3
3
3
1,2
3
3
3
3
28
OIGFY 2000 Audit Plan
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Q Integrity of data used to manage enforcement actions and
Congressional decision making -measures for 23 APGs (GPRA)
Q Better enforcement actions for better compliance (relationship of
enforcement and follow-up actions to ievel of compliance)
9,10
9
1,2,3
3
Agency >1-.Top Mgint
Gnal(s) -
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