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MESSAGE FROM THE CHIEF FINANCIAL OFFICER
I am pleased to present the Environmental Protection Agency's
Financial Management Status Report and Five-Year Plan, FY 1994-1999
(Five-Year Plan). The plan, which builds on our previous efforts, serves
as a chronicle of the Agency's financial management accomplishments
during FY 1994 and a blueprint of our goals and initiatives for the next
five 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 past year marked several dramatic events that underscore the
importance of strong financial management government-wide. First, many
of the recommendations of the National Performance Review (NPR)
focused specifically on resource management. Second, with many new
Federal agency Chief Financial Officers (CFOs) confirmed, the CFO
Council made a commitment to provide stronger government-wide
leadership for financial management. For the first time, the CFOs and
Deputy CFOs, who comprise the Council, have developed a strategic
vision and clearly defined goals. This vision statement and these goals
have been very influential in the development of our own Five-Year Plan.
Third, Federal agencies, including EPA, invested heavily in reinvention
and streamlining initiatives, including many in financial management.
These initiatives are key to the Agency's financial management
improvement effort.
Although these events are very significant, perhaps their greatest
contribution is the message they are sending to all federal employees ~ that
government can change and that it can work better and cost less. This
plan is about those types of changes. The vision, goals and milestones
listed in the pages that follow articulate what we need to do at EPA to
strengthen our financial management practices and to ensure that the
Agency accomplishes the maximum results possible with its resources.
This year's plan also reflects a renewed partnership between financial
and program managers. Just as financial management staffs can no longer
EPA's Financial Management Status Report & Five-Year Plan Page 1
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afford to sit in solitary offices generating reports for other accountants,
program managers cannot ignore resource issues in order to achieve
program goals at all costs. The Five-Year Plan calls for financial
management staffs to actively identify and meet the needs of all their
customers -- in Congress, in central agencies and throughout EPA -- by
providing them with the financial data they need to make informed
resource and program management decisions.
For their part, EPA program and regional offices are recognizing their
critical role in the Agency's resource management processes. They took
the first important step by designating top managers hi every Agency office
to serve as Senior Resource Officials (SROs). This cadre of key program
managers provides leadership and accountability for resource management
functions. Through the SROs, program and regional offices played a role
in reviewing and developing this Five-Year Plan.
As we move forward to implement this plan, we will rely on program
and regional managers to help us integrate and coordinate key management
initiatives including the CFO Act, EPA's Strategic Plan, new guidelines for
the Federal Managers' Financial Integrity Act, provisions of the
Government Performance and Results Act and the recommendations of the
NPR. Working in tandem with program managers, financial management
staffs can create the necessary financial information and systems structure
to ensure the most effective resource management program in the Federal
government.
We must view this Five-Year Plan as part of a continuing process; for
its value will ultimately be measured not in the course it sets but in the
tangible results it helps us achieve. These accomplishments will not always
be easy, but they are within our reach if we have the courage to change
and the wisdom to work together.
I
nathan Z. Cannon
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SUMMARY OF FINANCIAL MANAGEMENT STATUS
REPORT AND FIVE-YEAR PLAN, 1994-1999
INTRODUCTION
The Environmental Protection Agency's (EPA) FY 1994-1999
Financial Management Status Report and Five-Year Plan provides an
overview of the Agency's recent accomplishments and articulates a bold,
long-range vision for the future of financial management at EPA. The
plan consists of goals and milestones which are divided into 11 chapters
focusing on definitive financial management topics. Milestones range
from establishing employee training programs to expanding the scope of
EPA's annual financial statements.
Two major government-wide efforts have greatly influenced the
development of this plan. The plan reflects both the recommendations
of the National Performance Review and the directions taken in the
Chief Financial Officers Council's government-wide vision statement
and goals for financial management. In addition, the plan incorporates
the requirements of the CFO Act, the Government Performance and
Results Act (GPRA) and other legislative mandates. Each of these
efforts underscores the importance of strengthening financial
management to increase the Agency's capacity to meet program goals.
In the first chapter of the plan, the CFO provides a conceptual
framework for the development and implementation of the plan. The
subsequent 10 chapters contain: a goal statement for the specific topic
the chapter addresses; a description of specific issues; the Agency's
status in addressing the issues; a discussion of planned activities; and
milestone charts. An organizational chart and a lexicon explaining
acronyms and EPA-specific terms are also included.
Since the plan no longer must conform with Office of Management
and Budget's format, this year's plan includes the full scope of the
CFO's resource management authority. Chapters have been added to
the plan for contracts management and EPA's processes for budgeting
and planning. Another new chapter provides the Office of the Inspector
EPA's Financial Management Status Report & Five-Year Plan Page 3
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General (OIG) with an opportunity to discuss its plans for assisting the
Agency. In addition, last year's asset management chapter is divided
into two new chapters: policies and financial management operations.
Each of the 11 chapters are summarized as follows:
CHAPTER 1: CFO'S CONCEPTUAL FRAMEWORK
Six general themes run throughout the CFO's vision for the future of
financial management at EPA. They are: 1) integrating financial
management into the Agency decision making processes; 2) providing an
infrastructure of financial management information, systems, policies
and services; 3) recognizing stewardship responsibilities for both the
environment and public resources; 4) ensuring greater accountability; 5)
emphasizing customer service; and 6) striving for continuous
improvement.
These themes demonstrate EPA's continued commitment to
strengthening financial management functions in support of the Agency's
overall goals. They provide guidance for the Agency in developing
policies and directing financial management operations during the next
five years. These themes also complement and support the Agency-
wide strategic plan, the GPRA implementation efforts and initiatives
underway to streamline and reinvent agency-wide processes.
Each of these themes 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. As stated previously, these
themes were heavily influenced by and are very compatible with the
themes articulated in the CFO Council's government-wide vision
statement for financial management. In fact, EPA has adopted the same
four goals that the CFO Council is using to support the government-
wide vision as the goals EPA will use in support of this Five-Year Plan.
These goals are as follows: 1) provide leadership to promote the
efficient management of government resources and assets; 2) establish a
framework to provide sound financial policies and services and facilitate
effective communication; 3) provide quality financial services to
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customers; and 4) produce complete and useful financial information on
EPA operations which fully supports financial and performance
reporting.
These goals are reflected in the concrete actions that are identified as
milestones in the topic chapters of the Five-Year Plan.
CHAPTER 2: ORGANIZATION AND PERSONNEL
Establishing a financial management community, comprised of
qualified and motivated staff with clear roles and responsibilities, is
paramount to ensuring accountability for financial operations and fully
achieving the Agency's current and future goals.
Status: In FY 1994, EPA initiated a number of actions to strengthen
the organization structure and cultivate the potential of employees. The
Agency:
• Established a cadre of top management officials to serve as
Senior Resource Officials who are responsible for all resource
management functions for their respective offices;
• Increased the advisory role of the Resource Management
Committee by expanding its scope to a broader range of
functions, including CFO Act implementation issues;
• Created the Financial Management Career Development
Committee to develop options for strengthening employee
training programs; and
• Distributed a listing of career development opportunities to
Headquarters and regional office financial management
employees.
Planned: During the period of this plan, the Agency will make
additional organizational changes and continue to enhance employee
training programs. EPA will:
EPA's Financial Management Status Report & Five-Year Plan Page 5
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• Revise formal delegations of authority to reflect SRO roles and
responsibilities;
• Develop a recommended training matrix that lists courses and
developmental activities appropriate for every financial
management position;
• Develop a training evaluation program;
• Streamline and reinvent appropriate financial management
processes; and
• Reorganize the Office of the Comptroller, if deemed
appropriate, based on a review of study results.
CHAPTER 3: ACCOUNTABILITY
The Agency encourages the use of various initiatives and
management tools to provide EPA managers with a continuous objective
and reliable assessment of how well their organizations are achieving
Agency financial management goals and objectives. These tools provide
the framework and incentive for initiating improvement actions.
Status: During the past year, several actions were executed to
strengthen accountability for financial management functions throughout
the Agency. Among these actions, EPA:
• Conducted a pilot program of financial management
performance measures to assess the effectiveness of component
offices in carrying-out financial management duties;
• Accelerated the production of the Agency's audited annual
financial statements by 90 days, while improving the auditor's
overall opinion of the statements;
• Developed and introduced a new model for the Federal
Managers' Financial Integrity Act which will significantly
reduce the reporting burden on Agency offices; and
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• Installed new software to improve the efficiency of the
Management Audit Tracking System.
Planned: Within the period covered in this plan, the Agency will
complete several actions to further increase accountability for resource
management functions. The Agency will:
• Develop and implement the financial management performance
measures agency-wide;
• Expand the financial management performance measures
beyond core accounting operations to include measures for
contracts and grants management as well as program office
financial management;
• Implement a new quality assurance program to reflect current
EPA accounting operations and financial reporting conditions;
• Continue implementation of the new FMFIA program,
including incorporation of Integrity principles into program
strategies and guidance;
• Issue revised EPA Orders for Management Integrity and Audit
Management; and
• Develop tracking software for General Accounting Office
reports.
CHAPTER 4: PLANNING, BUDGET AND FISCAL
MANAGEMENT
EPA managers are accountable for achieving program results using
sound management practices and fiscal responsibility. Therefore, they
must provide and have access to information essential for monitoring
their budgets, planning and managing their program activities,
exercising sound financial stewardship, and preventing waste or fraud.
To meet this need, Agency processes for planning, budgeting, fiscal
management, and program evaluation must be fully integrated and
improved to more effectively serve Agency program managers.
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Status: In FY 1994, EPA initiated steps to direct the Agency budget
and planning process toward a more integrated approach with financial
management. The Agency:
• Issued The New Generation of Environmental Protection, an
Agency-wide strategic plan for FY 1995-1999; and
• Developed the FY 1996 budget request around the strategic
plan's broad environmental goals topics.
Planned: During the period covered by this plan, additional actions
will be implemented to integrate key agency processes. EPA will:
• Establish measurable program performance goals to support
EPA's broad environmental goals and to provide means for
assessing success and evaluating progress;
• Monitor expenditures and bridge budget and financial data to
broad environmental goals;
• Develop a "Stakeholders' Report" to provide executive-level
information on the Agency performance in achieving
environmental goals; and
• Implement options to strengthen EPA's budget development and
execution.
CHAPTERS: WORKING CAPITAL FUND
In order to keep pace with the substantial demand for increased
administrative services, resources must be used more efficiently. A
Working Capital Fund (WCF) will help the Agency accomplish this goal
by providing services in a business-like manner, based on fee-for-service
and increased customer involvement, which will ensure funding is
adequate and appropriate to meet customer needs.
Status: During FY 1994, the Agency has developed the framework for
a working capital fund, which will be used to support centrally-provided
administrative services on a fee-for-service basis. The Agency:
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• Established a Working Capital Fund Board, comprised of
Agency managers, to oversee the operations of the fund and
recommend activities for inclusion;
• Developed the first budget for the fund (FY 1996); and
• Determined which activities will be included in the fund for the
first phase.
Planned: Within the period covered by this plan, EPA will take the
necessary steps to introduce and establish a working capital fund for all
appropriate administrative services. The Agency will:
• Conduct a prototype operation using costs of the National Data
Processing Division and metered mail to test WCF applications;
• Implement working capital fund for selected administrative
services; and
• Develop processes for assessing efficiency and effectiveness of
service delivery and customer satisfaction.
CHAPTER 6: POLICIES:
Having comprehensive, user-friendly accounting and financial
management policies and procedures helps to ensure that the Agency's
financial and budgetary resources are properly accounted for and
managed.
Status: Policies were issued and guidance provided to the Agency
about financial management matters throughout FY 1994. Among its
policy actions, the Agency:
• Issued Policy Announcements for recording of imprest fund and
travel advances and for establishing a hierarchy of accounting
standards for preparing accounting and financial reports;
• Piloted proposed policies, procedures and internal controls for a
third party draft system; and
EPA's Financial Management Status Report & Five-Year Plan Page 9
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• Issued numerous travel-related policies, such as the use of
quick check-out, procedures for making personal phone calls,
phasing out Diners Club and implementing American Express
as the Government travel card program.
Planned: Financial management policy staffs will continue to provide
guidance to the Agency regarding accounting and procedural policies.
Attention will be given to addressing the NPR recommendations
concerning streamlining operations and reducing regulatory burdens.
During the period covered by the plan, EPA will:
• Implement EPA policies and procedures to correspond to new
accounting standards issued by the Federal Accounting
Standards Advisory Board (FASAB);
• Issue revised Superfund financial policies;
• Implement policies, procedures and internal controls for a third
party draft system; and
• Develop, issue and implement policies and procedures to
monitor and address requirements of the Cash Management
Improvement Act.
CHAPTER 7: FINANCIAL MANAGEMENT OPERATIONS
The daily accounting services provided by Financial Management
Operations Offices provide essential services and information to the
Agency. These include the payment and collection of funds as well as
the management of other resources. In addition, these offices often
carry out the policies and programs described throughout the Five-Year
Plan.
Status: Technological improvements and customer demands for better
services impacted EPA's management of its financial resources during
FY 1994. The Agency:
• Strengthened management controls to ensure more timely
recording of receivables;
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• Developed a process for electronic receipt, approval, payment
and storage of invoices using Electronic Commerce Interchange
and Electronic Data Interchange;
• Implemented the Federal Tax Refund Offset program for
delinquent individual debt;
• Expanded the use of private collection agencies to include
Superfund debts;
• Continued to improve the Agency's performance in responding
to invoices, with 98.7 percent of invoices being paid on time;
• Increased the use of direct deposit for payroll checks, enrolling
more than 92 percent of all employees into direct deposit
programs; and
• Implemented the automatic teller machine program for travel
advances.
Planned: Ensuring accountability while improving the delivery of
financial management services to customers will be the focus of
improvements during the next five years. EPA will:
• Install software to upgrade IFMS to address Superfund
requirements;
• Implement the commercial segment of the Federal Tax Offset
program;
• Develop future indirect cost rate computations as well as rates
for all previous fiscal years;
• Expand use of ECI/EDI beyond PC workstation pilot to all
Agency invoices;
• Issue new Superfund Cost Recovery Procedures Manual;
• Expand the use of electronic funds transfer for making Agency
payments;
EPA's Financial Management Status Report & Five-Year Plan Page 11
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• Develop, test and implement an electronic time and attendance
process;
• Streamline and automate the travel process; and
• Develop an effective interface between IFMS and the Asbestos
Receivable Tracking System.
CHAPTERS: SYSTEMS
Good management requires financial and program managers to be
accountable for program results and proper control over government
resources. For this reason, financial managers must provide information
essential for budgetary integrity, effective operating performance,
stewardship and the 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.
Status: EPA made significant progress in addressing several long-term
concerns with the Agency's accounting system and how it interfaces
with other financial systems in the past year. The Agency:
• Upgraded the Integrated Financial Management System (IFMS)
to increase the Agency's capacity to provide timely, accurate
and useful financial data;
• Provided users access to detailed Agency payroll data through a
new subrelease of the Management and Accounting Reporting
System;
• Conducted a successful pilot of an electronic invoice approval
system which will serve as an important component to a fully
automated invoice system;
• Integrated IFMS's interface with the Grants Information and
Control Systems; and
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• Piloted Electronic Timesheet (ETS) to reduce the burden
Superfund employees face in completing timesheets.
Planned: Further improvements to expand and enhance the Agency's
financial management systems are planned during the period covered by
this plan. The enhancements will improve the delivery of financial
services to customers and make data generated by the systems more
accurate, timely and useful for Agency management. EPA will:
• Eliminate all uses of legacy systems;
• Install IFMS module called "Fixed Assets" to improve
automation in maintaining property inventories;
• Expand capacity of financial systems to track Agency costs;
• Continue to identify user information needs and explore options
for improving report capabilities;
• Enhance contract management through expanded development
of the Integrated Contracts Management System;
• Review hardware and software needs to implement an
automated invoice system for all Agency invoices;
• Develop and implement an electronic time and attendance
process; and
• Transfer the computing platform for the Superfund Cost
Recovery Image Processing System (SCRIPS).
CHAPTER 9: CONTRACT MANAGEMENT
EPA relies heavily on contracting and purchasing to acquire goods
and services needed to accomplish the Agency's mission. Streamlining,
simplifying, and improving how the Agency processes and manages its
contracts and purchase orders will enhance the quality and timeliness of
service to customers, while promoting greater efficiency in the
management of a significant share of the Agency's resources.
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Status: The National Performance Review recommendations strongly
encouraged changes to government procurement processes. During FY
1994, the Agency implemented a number of actions to move in that
direction. EPA:
• Implemented programs using Electronic Commerce Interchange
(ECI) and Electronic Data Interchange (EDI) for the transfer of
information; and
• Formed a number of workgroups to examine options for
streamlining/reengineering contract and procurement processes;
Planned: As recommendations are issued by the various working
groups established during the past year, the Agency anticipates making
significant changes in the way it manages the contracts and procurement
processes. EPA will:
• Expand the use of ECI and EDI;
• Implement options to facilitate the contract award process;
• Reengineer business practices to harness improvement
opportunities generated by the use of EDI and ECI;
• Accelerate the contract close-out process; and
• Transfer the responsibility for contractor property management
and oversight from the Facilities Management and Service
Division to the Office of Acquisition Management.
CHAPTER 10: ASSISTANCE PROGRAMS
EPA accomplishes its environmental mission in large part through its
numerous assistance programs awarded as grants and cooperative
agreements to State and local governments, colleges, universities, and
non-profit recipients to carry out a variety of environmental mandates.
Grants and other assistance account for approximately 50 percent of the
Agency's total budget and are critical to achieving EPA's environmental
mission, particularly at the State level.
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Status: Streamlining the administration of grants, interagency
agreements and cooperative agreements was the focus of improvements
actions for assistance programs at EPA in FY 1994. EPA:
• Established a small grants re-engineering team to develop
recommendations for awarding small grants;
• Developed a training course for all EPA project officers
responsible for managing projects funded under grants,
cooperative agreements and interagency agreements; and
• Conducted quality action team reviews of the grants process
and of EPA/grantee communications.
Planned: During the period covered by this plan, the Agency will
continue its commitment to re-engineering the processes for assistance
programs in order to make them more responsive to customers while
maintaining appropriate internal controls. The Agency will complete the
following actions during the next five years:
• Revise and publish in the Federal Register EPA's Part 30
Regulation;
• Implement options for making state program grants more
flexible;
• Establish a project officers' certification requirement;
• Issue policy stating Agency approach to open competition in the
awarding of grants; and
• Implement recommendations of the grant quality action teams to
improve the efficiency of the process and enhance
communications with grantees.
CHAPTER 11: INSPECTOR GENERAL ACTIVITIES
Assisting the Agency in developing the most appropriate
organizational structure, financial systems and operations necessary for
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EPA to carry out its mission in the most efficient and effective manner
is a critical role of the Office of the Inspector General.
Status: Responding to the government-wide effort for a renewed
OIG/Agency relationship, the Office of the Inspector General (OIG)
supported the Agency in making financial management improvements hi
FY 1994. The OIG:
• Identified improvement opportunities for EPA financial
management in a March 31, 1994, report of a joint OIG and
Financial Management Division review; and
• Accelerated its audit of EPA's FY 1993 annual financial
statements, helping to increase the timeliness of the report by
90 days.
Planned: The OIG will continue to provide the Agency with analytical
information and advice in support of financial management improvement
efforts during the period covered by the plan. The OIG will:
• Monitor the Agency's progress hi addressing issues identified in
the joint review;
• Participate on the Agency workgroup formulating strategies for
developing program performance measures; and
• Expand the scope of the audit of the financial statements to
cover all Agency programs.
CONCLUSION
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 hi future years. The ultimate goal
of this plan is to identify the actions necessary to create a partnership of
financial and program managers making informed programmatic and
resource decisions in support of the Agency's environmental mission.
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FOR A COPY OF EPA'S FINANCIAL
MANAGEMENT STATUS REPORT AND
FIVE-YEAR PLAN, PLEASE CONTACT:
U.S. Environmental Protection Agency
Financial Management Division
401 M Street, SW (3303F)
Washington, DC 20460
(202) 260-5097
US. GOVERNMENT PRIWTrN'G OFFICS: 1994-515-003 1302/01054
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