I Office of Inspector General
Report of Audit
FISCAL 1992 FINANCIAL STATEMENT AUDIT
OF THE PESTICIDES REVOLVING FUNDS
E1EPL2-20-7001-3100265
June 30, 1993
4 Printed on Recycled Paper
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Inspector General Division
Conducting the Audit:
Region Covered:
Financial Audit Division
Washington, D.c.
Agencywide
Program Offices Involved:
Office of Administration and
Resources Management
Office of Prevention, Pesticides
and Toxic Substances
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
OFFICE OF
THE INSPECTOR GENERAL
June 30, 1993
MEMORANDUM
SUBJECT: Fiscal 1992 Financial Statement Audit of the FIFRA
and Tolerance Funds
Audit Report No. ElEPIj2-20-7p01-3100265
/ tj-
FROM: Kenneth A. Konz;^*^^ ^
Assistant Inspector General tfor Audit (A-109)
TO: Sallyanne Harper
Acting Chief Financial Officer (PM-208)
Victor J. Kimm
Acting Assistant Administrator for
Prevention, Pesticides and Toxic Substances (TS-788)
Attached is the audit report summarizing the results of our
audit of the fiscal 1992 financial statements of the FIFRA and
Tolerance Funds. The audit was performed in accordance with the
requirements of the Chief Financial Officers Act. The objectives
of the audit were to determine if the financial statements were
fairly presented, adequate internal controls were in place, and
the Agency complied with applicable provisions of laws and
regulations.
During this audit, we identified weaknesses in key
accounting controls and in the Agency's Integrated Financial
Management System. These weaknesses contributed to our being
unable to determine if the financial statements for the FIFRA and
Tolerance Funds were fairly presented. More importantly, without
adequate controls in place Agency managers cannot be assured that
financial records for these two funds contain reliable
information and that assets are safeguarded. We understand that
some of the weaknesses described in this report have also been
reported, along with corrective action plans, to the President as
a part of the annual Federal Managers' Financial Integrity Act
process. Continued high level attention will need to be devoted
to the financial management area if these weaknesses are to be
corrected.
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We also identified one noncompliance issue. The Agency has
not complied with the CFO Act requirement to perform biennial
reviews of fees. We believe a high priority should be placed on
performing such reviews since they could potentially identify
areas where fees could be increased resulting in additional
revenues for the Agency.
In accordance with EPA Order 2750, you are required to
provide this office a written response to the audit report within
90 days of the final audit report date. Since the
recommendations are addressed to two offices we are designating
the Acting Chief Financial Officer as the primary action
official. As such, the primary action official should take the
lead in coordinating the Agency's official response so that the
90 day timeframe is met. The Acting Assistant Administrator for
Prevention, Pesticides and Toxic Substances, as the secondary
action official, should coordinate with the primary action
official. For corrective actions planned but not completed by
the response date, reference to specific milestone dates will
assist us in closing the report. We have no objection to the
further release of this report to the public.
This audit report contains findings that describe problems
the Office of Inspector General (OIG) identified and corrective
actions the OIG recommends. This report represents the opinion
of the OIG. Final determinations on matters in this report will
be made by EPA managers in accordance with established EPA audit
resolution procedures. Accordingly, the findings described in
this report do not necessarily represent the final EPA position.
Should you or your staff have any questions concerning this
report, please contact Melissa Heist, Divisional Inspector
General, Financial Audit Division at 260-1479 or Michael Powers
of her staff at 260-1480.
Attachment
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EXECUTIVE SUMMARY
PURPOSE
The Chief Financial Officers Act of 1990 (CFO Act) was enacted in
order to bring about improvements in agency accounting systems,
financial management activities and internal controls. In order
to accomplish this objective, the Act calls for the preparation
of annual financial statements that are to be audited by the
Office of Inspector General or an independent external auditor
selected by the Inspector General.
The Environmental Protection Agency (EPA) was required by the CFO
Act to prepare financial statements covering its revolving funds,
trust funds and commercial activities beginning with fiscal 1991
activities. EPA management, however, requested and received a
waiver of the requirement to prepare financial statements
covering fiscal 1991. Therefore, fiscal 1992 was the first year
for which EPA prepared financial statements in accordance with
the requirements of the CFO Act.
To carry out our responsibilities under the CFO Act we audited
EPA's revolving funds and contracted with an independent public
accounting firm to audit EPA's trust funds and commercial
activity. This report contains the results of our audit of EPA's
fiscal 1992 financial statements for its two revolving funds:
the Reregistration and Expedited Processing Fund (FIFRA Fund) and
the Revolving Fund for Certification and Other Services
(Tolerance Fund). Our objective in carrying out this audit was
to express an opinion on whether the financial statements for the
FIFRA and Tolerance Funds are fairly presented. We also
determined whether EPA had in place internal controls to ensure
that: (1) transactions were properly recorded in order to permit
the preparation of reliable financial statements and to maintain
accountability over assets; (2) funds, property and other assets
were safeguarded against loss from unauthorized use or
disposition; and (3) transactions were executed in compliance
with applicable laws and regulations. In addition, we determined
whether EPA had complied with laws and regulations that would
either materially affect the financial statements or that we
considered to be significant.
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BACKGROUND
^
The FIFRA Fund was authorized in 1988 by amendments to the
Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). The
1988 amendments require EPA to complete, over approximately a
nine-year period, a reregistration review of each pesticide
product containing an active ingredient registered prior to
November 1, 1984. EPA is required to reregister these products
since they were originally registered when the approval standards
and test data requirements were less stringent than they are
today. To help support the cost of accelerated reregistration
and other provisions of the new law, the FIFRA amendments
authorize EPA to collect two types of fees; a one-time
reregistration fee for each active ingredient, and an annual
registration maintenance fee to be paid for each registered
product. Fees collected are deposited into the FIFRA Fund.
%
The Tolerance Fund was established by Congress in 1963 for the
deposit of fees collected for establishing tolerances for
residues of pesticide chemicals in or on raw agricultural
commodities. A tolerance is the maximum legal limit of a
pesticide residue on food commodities and animal feed.
Tolerances are established by EPA to prevent consumer exposure to
unsafe levels of pesticide residues. The Department of
Agriculture and the Food and Drug Administration are responsible
for enforcing adherence to these tolerance levels.
The Office of Pesticide Programs within the Office of Prevention,
Pesticides and Toxic Substances is responsible for reregistering
pesticide products and establishing tolerances.
RESULTS TN RRTKF
During past audits of the financial management area, we have
identified weaknesses in internal controls. Similarly, during
our audit of the fiscal 1992 FIFRA and Tolerance Fund Financial
Statements we again noted weaknesses in key internal accounting
controls. In addition, we identified weaknesses in EPA's
Integrated Financial Management System. These weaknesses
contributed to our not being able to determine if the financial
statements for the FIFRA and Tolerance Funds were fairly
presented. More importantly, without adequate controls in place
Agency managers cannot be assured that financial records for
these two funds contain reliable information and that assets are
safeguarded.
Specifically, we.were unable to determine the propriety of 25
adjustments totaling $181.3 million and $21.2 million,
respectively, made to the fiscal.1992 FIFRA and Tolerance Fund
general ledgers because they lacked supporting documentation.
Many of these adjustments also lacked evidence of supervisory
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approvals. Although there are legitimate reasons for making
adjustments, without adequate safeguards in place adjustments to
accounting records could also be used for illegitimate or
improper purposes, such as covering up defalcations, hiding
losses of assets, or masking errors.
We also found that at year end FIFRA accounts payable were
overstated by $135,620 and accrued liability adjustments were
understated by $663,635. Again, controls were not in place to
identify and correct these errors. Further, because the Agency's
property accountability system is not integrated with the
Agency's accounting system, we were unable to audit the FIFRA
property, plant and equipment balance of $574,000 included in the
fiscal 1992 FIFRA financial statements.
We also identified two other control weaknesses that did not
materially affect the financial statements, but could adversely
affect the entity's ability to properly record financial
transactions and safeguard assets. The Office of Pesticide
Programs did not conduct a complete review of its unliquidated
obligations. Thus, the office missed an opportunity to identify
FIFRA funds that could be deobligated and used to fund critical
activities associated with pesticide reregistration. The Agency
has stated additional resources will be needed in order to meet
the Congressionally imposed deadlines for reregistering
pesticides. We also found weaknesses in controls over property
located in the Office of Pesticide Programs.
In the area of compliance with laws and regulations, we found
that EPA complied with laws and regulations that could materially
affect the FIFRA and Tolerance Fund financial statements.
However, the Agency had not complied with the CFO Act requirement
to perform biennial reviews of its fees. For the Office of
Pesticide's tolerance setting activity, we estimated that during
fiscal 1992, EPA spent about $3.5 million to process tolerance
petitions for raw agricultural commodities while it collected
only $1.2 million in fees to cover its costs associated with this
activity. EPA has other fees programs. By performing the
required biennial reviews of fees, the Agency could potentially
identify other fees which could be increased resulting in
additional revenues for the Agency to use in carrying out its
programs.
Some of the weaknesses described in this report have also been
reported along with corrective action plans, to the President as
a part of the annual Federal Managers' Financial Integrity Act
process. Continued high level attention will need to be devoted
to the financial management area if these weaknesses are to be
corrected. Such high level attention is justified because
corrective action will result in not only more accurate timely
financial statements, but also more accurate timely financial
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information for Agency managers to use in managing their
programs. ,
SUMMARY OF AUDITORS* REPORT ON FINANCIAL STATEMENTS
We were unable to satisfy ourselves regarding the following FIFRA
and Tolerance Fund Financial Statement amounts. Therefore, we
disclaimed an opinion on the fiscal 1992 financial statements for
the two funds.
Accounts payable and accrued liabilities for the FIFRA Fund;
because adequate documentation was not available to support
year-end adjusting entries of $141,223. In addition,
documentation was not available to support 25 other
adjustments made to the FIFRA and Tolerance Funds totaling
$181.3 million and $21.2 million, respectively.
Property, plant, and equipment for the FIFRA Fund (stated at
$574,000 as of September 30, 1992); because the detail
maintained in the accounting records was not sufficient to
support the financial statement amounts.
Administrative expenses of the FIFRA and Tolerance Funds of
$22,811,000 and $3,532.,000, respectively; because we were
initially told by EPA management that these expenses funded
by agency-wide appropriations could not be included in the
financial statements.
Opening account balances for the FIFRA and Tolerance Funds;
since EPA was not required to and did not prepare financial
statements for the funds as of September 30, 1991.
SUMMARY OF AUDITORS* REPORT ON INTERNAL CONTROL
STRUCTURE
EPA's management is responsible for establishing and maintaining
an internal control structure. The objectives of our internal
control review were: (i) to determine our auditing procedures
for the purpose of expressing an opinion on the financial
statements, and (ii) to determine whether the internal control
structure provides management with reasonable, but not absolute
assurance that transactions are executed in compliance with
applicable laws and regulations, that assets are safeguarded, and
that transactions are properly recorded.
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MATERIAL WEAKNESSES
*
During our audit, we noted the following deficiencies in internal
controls in EPA's financial management that we consider to be
material weaknesses in relation to the financial statements of
the FIFRA and Tolerance Funds. A material weakness is a
reportable condition in which the design or operation of the
specific internal control procedures does not reduce to a
relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing
their assigned functions.
1. We Were Unable To Render An Opinion On The FIFRA and
Tolerance Fund Statements of Financial Position Because Material
Unsupported Adjustments Were Made to the General Ledger
Financial Management Division (FMD) personnel made 25 unsupported
adjustments totaling $181.3 million and $21.2 million,
respectively, to the FIFRA and Tolerance Fund general ledgers
during fiscal 1992. As a result, we were unable to determine if
the Statements of Financial Position for the two funds were
fairly presented. Further, without adequate support for these
material adjustments, Agency management also lacked assurance
that the financial records for these funds contained accurate
reliable information. Adjustments to the accounting records for
the FIFRA and Tolerance Funds were necessary due to weaknesses in
the Agency's accounting procedures and Integrated Financial
Management System (IFMS). Some of these adjustments were
necessary in order to correct errors in general ledger balances
that had occurred in prior years when FMD personnel did not have
the reports they needed to monitor the accuracy of transactions
entered into the Agency's accounting records. In addition, some
of the adjustments were necessary because the accounting
transaction codes used during the year to post transactions to
the general ledger were designed for appropriated, rather than
revolving funds. These adjustments and IFMS weaknesses not only
prevented us from being able to render an opinion on the
Statements of Financial Position for the FIFRA and Tolerance
Funds, but also contributed to delays in closing the Agency's
accounting records and preparing the financial statements. The
Agency's accounting records for fiscal 1992 were not closed until
December 1992 and preparation of the financial statements was not
completed until March 1993, six months after the close of the
fiscal year.
2. Some FIFRA Year-End Accounts Payable And Accrued Liability
Adjustments Were Incorrectly calculated Or Lacked Supporting
Documentation
The methods used by one finance office to compute year-end
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adjustments resulted in the overstatement of FIFRA accounts
payable by $135,620 and the understatement of FIFRA accrued
liabilities by $663,635. Accounting controls were not in place
to identify and correct these errors. In addition, another
finance office could not provide adequate documentation to
support year-end accounts payable and accrued liability adjusting
entries of $141,223 that were made to the FIFRA Fund. Without
support for these adjustments, we were unable to determine if
these amounts were fairly stated.
3. Property Purchased With FIFRA Funds Was Not Properly
Capitalized
Property purchased with FIFRA funds was not properly capitalized
in the Environmental Protection Agency's (Agency) accounting
records. This occurred because the process the Agency used to
capitalize property did not identify all property which should
have been capitalized, and program office personnel assigned
incorrect object class codes to obligating documents. In
addition, as the Agency has reported in its FMFIA reports, the
property accountability system is not integrated with the
Agency's accounting system. Since neither system contained
sufficient information to account for property we were unable to
audit the FIFRA property, plant and equipment balance of $574,000
included in the fiscal 1992 Statement of Financial Position for
the Fund.
REPORTABLE CONDITIONS
We also noted the following reportable conditions during our
audit. Reportable conditions are deficiencies in the design or
operation of the internal control structure that, in our
judgment, could adversely affect the entity's ability to ensure
that: (i) obligations and costs are in compliance with
applicable laws; (ii) funds, property, and other assets are
safeguarded against unauthorized use or disposition; and
(iii) transactions are properly recorded to permit the
preparation of reliable financial statements.
1. The Office of Pesticide Programs Did Not Perform A Complete
Review Of Unliquidated Obligations
During fiscal 1992, the Office of Pesticide Programs (OPP) did
not conduct a complete review of its unliquidated obligations.
When we looked at OPP's review of unliquidated obligations
maintained by two finance offices we found that OPP had not
reviewed any of the unliquidated obligations maintained by one
finance office, and only a portion of those maintained by the
other finance office. The reviews were not performed because a
low priority was placed on complying with this requirement.
During fiscal 1992, OPP had $345,588 of open FIFRA obligations
for which there was no activity in over a year. When there has
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been no activity in over a year on an obligation it is likely
that the obligation is no longer valid. By not performing the
required reviews of unliquidated obligations, OPP missed an
opportunity to identify no-year FIFRA funds that could be
deobligated and made available to fund other critical activities
associated with pesticides reregistration.
2. Improvements Are Needed In Controls Over Property Located In
The Office Of Pesticide Programs
We noted various weaknesses in controls over property located in
OPP. Required annual property inventories were not completed in
a timely manner, custodial officers did not prepare documentation
to support property transfers, and property was not always
recorded in the Agency's Personal Property Accountability System.
Without these key internal controls in place, management lacked
reasonable assurance that property purchased with OPP funds,
including FIFRA funds, was adequately safeguarded against loss
from unauthorized use or disposition.
SUMMARY OF AUDITORS' REPORT ON COMPLIANCE WITH
LAWS AND REGULATIONS
The results of our compliance testing for fiscal 1992 indicated
that for the items tested, EPA complied with those provisions of
laws and regulations which could have a material effect on the
financial statements. We did, however, identify one area of
noncompliance with laws and regulations that while not material
to the financial statements, still warrants disclosure due to its
significance.
We found that fees collected for processing tolerance petitions
for raw agricultural commodities did not cover EPA's costs
associated with the activity. In fiscal 1992, EPA collected
approximately $1.2 million in fees for processing such petitions.
During the same period, we estimated OPP's personnel costs
associated with processing the petitions to be about $3.0
million. In addition, we estimated the Agency's support costs
associated with processing these petitions to be another $486,460
resulting in a total cost of processing these petitions of about
$3.5 million.
The CFO Act which was enacted on November 15, 1990, requires
EPA's Chief Financial Officer: (1) to perform biennial reviews of
user fees and other charges for services EPA provides, and (2) to
make recommendations on revising these charges so that they will
reflect EPA's costs associated with providing these services.
EPA collects fees for not only its tolerance setting activity,
but other^activities as well, such as the processing of new
chemical pre-manufacture notices and the motor vehicle and engine
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compliance program. As of April 7, 1993, the date we completed
fieldwork, EPA had not performed any of the required reviews and
had thereby failed to make necessary revisions to fees charged so
that they would cover total program costs.
As required by OMB Bulletin 93-06, "Audit Requirements for
Federal Financial Statements," we compared EPA's Federal
Managers' Financial Integrity Act (FMFIA) report to our
evaluation of the internal control systems related to the FIFRA
and Tolerance Funds. For fiscal 1992., EPA reported IFMS as a
high risk area and a material weakness. EPA also reported as
material nonconformances the need to: (i) record adjustments to
the general ledger due to IFMS implementation, (ii) perform
comprehensive reconciliations between Treasury reports and IFMS,
(iii) update and strengthen policies and procedures to assure
reconciliation between property and accounting records, and (iv)
implement interfaces between IFMS and other administrative
systems. In addition to the weaknesses identified by EPA, during
our audit we identified two additional weaknesses that materially
affected the FIFRA and Tolerance Fund Financial Statements. We
found that material unsupported adjustments were recorded in
EPA's accounting records and an improper method was used by one
finance office to compute year-end accounts payable and accrued
liability adjusting entries.
RECOMMENDATIONS
To correct the various material weaknesses and reportable
conditions described in this report we recommend that the Chief
Financial Officer emphasize current guidance on preparing
adequate documentation to support financial transactions; revise
the Agency's capitalization policy; correct known errors in
accounting transaction codes; and revise the methodology used by
one finance office to"compute accounts payable and accrued
liabilities. In addition, we recommend that the Director of the
Office of Pesticide Programs perform the required reviews of
unliquidated obligations and ensure that internal controls are in
place and followed to safeguard and account for property. To
correct the noncompliance issue, we recommend that the Chief
Financial Officer conduct the required reviews of fees and take
the steps necessary to make the appropriate changes in fees
charged by EPA.
AGENCY COMMENTS AND OIG EVALUATION
In a memorandum dated June 28, 1993, the Acting Chief Financial
Officer responded to our draft report. In the response, the
Acting Chief Financial Officer generally concurred with the
report findings and many of the recommendations. To provide a
balanced understanding of the issues we have summarized the
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Agency's position in the appropriate locations throughout the
report and have included the complete response as Appendix I.
The only substantive area of disagreement concerned our
conclusion that the fees charged by EPA for processing raw
agricultural tolerance petitions need to be increased. In her
response, the Acting Chief Financial Officer agreed to perform a
study of the fees charged by EPA for raw agricultural tolerances;
however, she stated that a review of EPA's costs may not result
in an increase in the fees. We continue to believe that given
the enormity of the shortfall between fees collected and the cost
of processing petitions, a review of fees will result in an
increase in fees charged.
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TABLE OF CONTENTS
EXECUTIVE SUMMARY I i
PURPOSE i
BACKGROUND ii
RESULTS IN BRIEF ii
SUMMARY OF AUDITORS' REPORT ON FINANCIAL STATEMENTS.. iv
SUMMARY OF AUDITORS' REPORT ON INTERNAL CONTROL
STRUCTURE iv
SUMMARY OF AUDITORS' REPORT ON COMPLIANCE WITH
LAWS AND REGULATIONS vii
RECOMMENDATIONS viii
AGENCY COMMENTS AND OIG EVALUATION viii
INTRODUCTION 1
PURPOSE 1
BACKGROUND 2
SCOPE AND METHODOLOGY 3
PRIOR AUDIT COVERAGE 6
AUDITORS' REPORT ON FINANCIAL STATEMENTS 7
ANNUAL FINANCIAL STATEMENTS FOR FISCAL YEAR 1992 9
AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE 85
ATTACHMENT 1 - MATERIAL WEAKNESSES 91
1. WE WERE UNABLE TO RENDER AN OPINION ON THE
FIFRA AND TOLERANCE FUND STATEMENTS OF FINANCIAL
POSITION BECAUSE MATERIAL UNSUPPORTED ADJUSTMENTS
WERE MADE TO THE GENERAL LEDGER 91
2. FIFRA YEAR-END ACCOUNTS PAYABLE AND ACCRUED
LIABILITY ADJUSTMENTS WERE MATERIALLY
MISSTATED AND LACKED SUPPORTING DOCUMENTATION ... 99
3. PROPERTY PURCHASED WITH FIFRA FUNDS WAS NOT
PROPERLY CAPITALIZED 103
ATTACHMENT 2 - REPORTABLE CONDITIONS Ill
1. THE OFFICE OF PESTICIDE PROGRAMS DID NOT
PERFORM A COMPLETE REVIEW OF UNLIQUIDATED
OBLIGATIONS Ill
2. IMPROVEMENTS ARE NEEDED IN CONTROLS OVER PROPERTY
LOCATED IN THE OFFICE OF PESTICIDE PROGRAMS 113
ATTACHMENT 3 - SCHEDULE OF OPEN PRIOR AUDIT
REPORT FINDINGS 117
AUDITORS' REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS..119
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APPENDIXES
APPENDIX I: r AGENCY COMMENTS 125
APPENDIX II: GLOSSARY OF ACRONYMS 137
APPENDIX III: DISTRIBUTION 139
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INTRODUCTION
PURPOSE
The Chief Financial Officers Act of 1990 (the Act) was enacted in
order to bring about improvements in agency accounting systems,
financial management activities and internal controls. In order
to accomplish this objective, the Act calls for the preparation
of annual financial statements. The Environmental Protection
Agency (EPA) was required by the Act to prepare financial
statements covering its trust funds, revolving funds and
commercial activities beginning with fiscal 1991 activity. EPA
management, however, requested and received a waiver of the
requirement to prepare financial statements covering fiscal 1991
activities. Therefore, fiscal 1992 was the first year for which
EPA prepared financial statements in accordance with the
requirements of the Act.
The CFO Act also requires the Office of the Inspector General, or
an independent external auditor selected by the Inspector
General, to audit the financial statements. To carry out our
responsibilities under the CFO Act, we audited EPA's two
revolving funds, the Reregistration and Expedited Processing
Revolving Fund (FIFRA Fund) and the Revolving Fund for
Certification and Other Services (Tolerance Fund). We contracted
with an independent public accounting firm to audit EPA's trust
funds and commercial activity.
This report contains the results of our audit of the FIFRA and
Tolerance Funds as of and for the year ended September 30, 1992.
The financial statements were prepared by EPA's Financial
Management Division using guidance provided in Office of
Management and Budget"(OMB) Bulletin 93-02, "Form and Content of
Agency Financial Statements" which is considered a comprehensive
basis of accounting other than generally accepted accounting
principles. The financial statements are the responsibility of
EPA's management. Our responsibility was to express an opinion
on the financial statements based on our audit work.
The objectives of our audit work were to determine if:
(1) the financial statements are fairly presented;
(2) EPA management established an internal control structure
which provides reasonable assurance that:
transactions were properly recorded and accounted for
to permit the preparation of reliable financial
statements and to maintain accountability over assets,
funds, property, and other assets were safeguarded
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against loss from unauthorized use or disposition, and
transactions, including those related to obligations
and costs, were executed in compliance with: (a) laws
. and regulations that could have a direct and material
effect on the financial statements, and (b) any other
laws and regulations that the OMB or our office
identified as being significant to the audit; and
(3) EPA management complied with applicable laws and regulations
which, if not followed, could have a material effect on the
financial statements, including any other laws and
regulations that OMB or our office identified as being
significant to the audit.
BACKGROUND
FIFRA Fund
The Federal Insecticide, Fungicide and Rodenticide Act
Amendments, commonly referred to as FIFRA 88, mandate the
accelerated reregistration of all pesticide products registered
prior to November 1, 1984. Specifically, the law requires EPA to
complete a reregistration review of each pesticide product
containing an active ingredient registered prior to November 1,
1984. EPA is required to reregister these products since they
were originally registered when the standards for approval and
test data were less stringent than they are today.
In order to accelerate the reregistration process, Congress
authorized EPA to collect two types of fees; a one time
reregistration fee for each active ingredient, and an annual
registration maintenance fee to be paid for each registered
product. Fees collected are deposited into the FIFRA Fund.
Tolerance Fund
The Tolerance Fund was authorized in 1963 for the deposit of fees
collected by EPA for establishing tolerances for residues of
pesticide chemicals in or on raw agricultural commodities. The
Federal Food, Drug and Cosmetics Act authorizes EPA to promulgate
regulations to require companies to pay fees that will cover
EPA's costs for establishing tolerances for raw agricultural
commodities.
A tolerance is the maximum legal limit of a pesticide residue on
food commodities and animal feed. Tolerances are established by
EPA to prevent consumer exposure to unsafe levels of pesticide
residues. The Department of Agriculture and the Food and Drug
Administration are responsible for enforcing adherence to these
tolerance levels.
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The Office of Pesticide Programs within the Office of Prevention,
Pesticides and Toxic Substances is responsible for reregistering
pesticide products and establishing tolerances.
SCOPE AND METHODOLOGY
We performed our audit of the fiscal 1992 FIFRA and Tolerance
Fund Financial Statements in accordance with Government Auditing
Standards. issued by the Comptroller General of the United
States; and OMB Bulletin 93-06, "Audit Requirements for Federal
Financial Statements." Our audit fieldwork was performed from
March 31, 1992, through April 7, 1993.
Evaluation of Internal Controls and Compliance With Laws and
Regulations
In planning and performing our audit work, we obtained an
understanding of and tested relevant internal control policies
and procedures. We also assessed the level of control risk
relevant to all significant cycles, classes of transactions, or
account balances. The purpose of our internal control work was
to determine the audit procedures that we would need to perform
to render an opinion on the FIFRA and Tolerance Fund Financial
Statements. We also used the results of our internal control
work to determine whether the internal control structure provided
management with reasonable assurance that: (i) transactions were
executed in accordance with applicable laws and regulations; (ii)
funds, property and other assets were safeguarded against loss
from unauthorized use or disposition; and (iii) transactions were
properly recorded and accounted for to permit the preparation of
reliable financial reports and to maintain accountability over
assets.
As a part of our audit, we obtained an understanding of
management's process for evaluating and reporting on internal
control and accounting systems as required by the Federal
Managers7 Financial Integrity Act (FMFIA). In addition, as
required by OMB Bulletin 93-06, "Audit Requirements for Federal
Financial Statements," we compared the material weaknesses
reported in the Environmental Protection Agency's (Agency) FMFIA
report that relate to the financial statements under audit to the
material weaknesses found during our evaluation of EPA's internal
control system. We also tested compliance with provisions of
laws and regulations that either directly affect the FIFRA and
Tolerance Fund Financial Statements or that OMB or our office
considered significant to the audit.
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Audit Methodology
We selected statistical and nonstatistical samples from EPA's
detailed accounting records supporting various FIFRA and
Tolerance Fund Financial Statement accounts. We tested these
sample transactions to determine if they were adequately
supported by documentation and were recorded in accordance with
internal control policies and procedures and applicable laws and
regulations. We also reviewed other supporting documentation,
such as worksheets and schedules, that the Agency used in
preparing its financial statements.
The financial management records and supporting documentation we
reviewed were maintained by the National Contract Payment
Division at Research Triangle Park, the Financial Management
Center in Cincinnati; and the Office of Pesticide Programs,
Headquarters Accounting Operations Branch and Financial Reports
and Analysis Branch in Washington, D.C. To gain an understanding
of established internal control procedures we also interviewed
personnel in these offices.
To evaluate controls in place to safeguard assets, we interviewed
personnel in the Facilities Management and Services Division and
the Office of Pesticide Programs, both located in Washington,
D.C. We also reviewed property records for randomly selected
custodial areas within the Office of Pesticide Programs.
Reliance On the Work of Other Auditors
In addition to the audit work we performed, we relied on internal
control testing performed by Leonard G. Birnbaum and Company,
Certified Public Accountants, as part of its audit of EPA's
Financial Statements for the Superfund Trust Fund, Leaking
Underground Storage Tank Trust Fund and the Asbestos Loan Program
as of and for the year ended September 30, 1992. We reviewed the
firm's internal control audit work and concluded that we could
rely on it to augment our work. Accordingly, we have, where
appropriate, incorporated the firm's findings into our report.
The findings are reported in the firm's audit report that is
entitled Fiscal 1992 Financial .Statement Audit of the Superfund
Trust Fund, Leaking Underground Storage Tank Trust Fund and
Asbestos Loan Program.
We also relied on the results of an OIG Special Review of EPA's
1992 FMFIA Activity in order to obtain an understanding of
management's process for evaluating and reporting on internal
control and accounting systems. This special review was
performed to determine if the Agency's FMFIA process for fiscal
1992 was carried out in a reasonable and prudent manner. The
results of this special review are summarized in a report dated
February 19, 1993 (Audit Report No. E1RMG2-11-0052-340023). In
addition, we relied on a special review performed of electronic
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data processing (EDP) internal controls for selected pesticide
revolving fund information systems. The results of this special
review are summarized in Audit Report No. E1EPP2-15-7001-3400043
which was issued on March 31, 1993. Both of these special
reviews were conducted in accordance with provisions of Office of
Inspector General Manual Chapter 150, Special Reports, rather
than Government Audit standards.
Scope Limitations
The following factors limited the scope of our audit work:
We were unable to audit the FIFRA property, plant and
equipment balance because the detail maintained in the
accounting records was not sufficient to support the
financial statement amounts.
We did not perform audit procedures on the
administrative costs for the FIFRA and Tolerance Funds
because we were initially told by Agency personnel that
they would be unable to include these costs in their
financial statements.
We were unable to obtain sufficient documentation to
support adjustments made to EPA's accounting records
that materially affected the financial statements for
the FIFRA and Tolerance Funds.
EPA was not required to prepare financial statements
for the FIFRA and Tolerance Funds as of September 30,
1991. Accordingly, we did not audit the account
balances for the funds as of October 1, 1991.
As a result of these scope limitations, we were unable to perform
audit work sufficient to render an opinion on EPA's fiscal 1992
financial statements for the FIFRA and Tolerance Funds.
OMB Bulletin 93-06 contains audit requirements with respect to
the performance measures reported in the overview section of the
financial statements. Auditors are to obtain an understanding of
the internal control structure policies and procedures designed
to ensure that data that support the measures are properly
recorded and accounted for to permit the preparation of reliable
and complete performance information. Auditors are also required
to assess the risk that the controls in place would not prevent,
detect or correct a material misstatement of the information.
Our audit work in the area of performance measures was limited to
comparing the financial information included in the overview with
information contained in EPA's accounting records and making
inquiries of management regarding the presentation of the
overview.
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PRIOR AUDIT COVERAGE
/
In the past, annual audits have been performed of Superfund
obligations and disbursements. During these audits, weaknesses
that would impact our audit objectives have been reported in the
areas of financial reporting, accounting for and controlling
property, the lack of current accounting procedures and
unreconciled conversion data. During our audit we identified the
need for additional corrective actions in these areas. In many
cases EPA management has developed an action plan and corrective
actions are ongoing. Our Auditors' Report on Internal Control
Structure provides details on the results of our audit work in
each of these areas.
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AUDITORS* REPORT ON FINANCIAL ST;
>
The Administrator
U.S. Environmental Protection Agency:
We were charged with auditing the financial statements of the
Pesticides Reregistration and Expedited Processing Fund (FIFRA
Fund) and the Revolving Fund for Certification and Other Services
(Tolerance Fund), included in the Combining Statements of the
Trust Funds, Revolving Funds and Commercial Activities of the
Environmental Protection Agency (EPA) as of and for the year
ended September 30, 1992. These financial statements are the
responsibility of EPA's management.
We were unable to satisfy ourselves regarding the fiscal 1992
FIFRA Fund and Tolerance Fund financial statement amounts
discussed in the following paragraphs of this report. It was
impracticable to extend our procedures sufficiently to determine
the extent to which the FIFRA Fund and Tolerance Fund Financial
Statements as of and for the year ended September 30, 1992,
have been affected by these conditions.
We were unable to audit the FIFRA Fund property, plant and
equipment balance as of September 30, 1992 (stated at $574,000),
because the detail maintained in the accounting records was not
sufficient to support the financial statement amounts.
Adjustments, if any, to the property, plant and equipment balance
would affect all of the FIFRA Fund financial statements for the
year ended September 30, 1992.
We did not audit the administrative costs of $22,811,000 and
$3,532,000 for the FIFRA Fund and Tolerance Fund, respectively,
that were funded from other EPA appropriations. These costs are
recorded for financial statement purposes as income from overhead
allocation and as offsetting overhead expenses from allocation.
We did not audit these administrative costs funded from other EPA
appropriations because we were initially told by EPA management
that they would be unable to include these costs in the financial
statements.
We were unable to audit the accounts payable and accrued
liabilities for the FIFRA Fund because adequate documentation was
not available to support year-end adjusting entries of $141,223.
In addition, we were unable to audit 25 other adjustments made to
the FIFRA and Tolerance Funds totaling $181.3 million and $21.2
million respectively, because adequate supporting documentation
was not available.
Prior to October 1, 1991, EPA was not required to prepare
financial statements for the FIFRA and Tolerance Funds.
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Accordingly, the account balances of these funds as of September
30, 1991, have not been audited.
Because of the matters discussed above, the scope of our work was
not sufficient to enable us to express, and we do not express
opinions on the Financial Statements for EPA's FIFRA and
Tolerance Funds as of and for the year ended September 30, 1992.
The information presented in Management's Overview of EPA and
Overview of Trust Funds. Revolving Funds and Commercial
Activities is supplemental information required by Office of
Management and Budget (OMB) Bulletin 93-02 "Form and Content of
Agency Financial Statements," and we did not audit and do not
express an opinion on such information. However, we have applied
certain limited procedures to the financial information included
in the sections of the overview captioned "Pesticides
Reregistration and Expedited Processing Fund (FIFRA Fund)" and
"Revolving Fund for Certification and Other Services (Tolerance
Fund)." Our limited procedures consisted principally of
comparing the information with information contained in EPA's
accounting records and making inquiries of management regarding
the presentation of the overview.
This report is intended for the information of Congress, OMB, and
EPA management. This restriction is not intended to limit the
distribution of this report, which is a matter of public record.
Kenneth A. Konz
Assistant Inspector General for Audit
U.S. Environmental Protection Agency
April 7, 1993
-------
United States Office of Administration March 1993
Environmental Protection and Resources Management
Agency Washington, DC 20460
SEPA
Audited Annual
Statements for
Fiscal Year 1992
Superfund
Leaking Underground Storage Tank (LUST
Program
Pesticides Reregistration and Expedited
Processing Fund (RFRA Fund)
Revolving Fund for Certification and Other
Services (Tolerance Fund)
The Loan Portion of the Asbestos Loan and
Grant Program
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Contents
/
Message from the Administrator 3
Overview of EPA 5
Overview of Trust Funds, Revolving Funds 8
and Commercial Activities
Superfund 11
Program Description 11
Financial Perspective 12
Superfund by Activity 13
Superfund by Location 16
Program Results 19
Cleanup 19
Enforcement 22
Summary 24
Next Steps 25
Leaking Underground Storage Tank 26
(LUST) Program
Program Description 26
Financial Perspective 27
Program Results 28
Pesticides Reregistration and 30
Expedited Processing Fund (FIFRA Fund)
Program Description 30
Financial Perspective 32
Program Results 33
Revolving Fund for Certification and 34
Other Services (Tolerance Fund)
Program Description 34
Financial Perspective 35
Program Results 36
Asbestos Loan and Grant Program 37
Program Description 37
Financial Perspective 39
Program Results 40
Message from the Chief Financial Officer 41
Principal Financial Statements 43
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MESSAGE FROM THE ADMINISTRATOR
Environmental protection in America has undergone a profound
transformation. During the past 20 years a comprehensive set of
environmental legislation has been passed and implemented. The
Environmental Protection Agency has evolved into an agency
comprised of a skilled and diverse work force with significant
responsibilities for protecting the environment for future
generations.
As I begin my tenure at EPA, I believe that for the Agency to
succeed, it must continue to evolve. The next decade will be
one in which we will move from command and control, media-
specific regulation to alternative approaches oriented toward
pollution prevention, ecosystem protection and incentive based
policies. Additionally, we need to pursue programs that link the
goals of environmental protection and economic growth by
unleashing American ingenuity and creativity. One way to do this is to encourage the
creation of a new generation of improved environmental technology.
A major area where EPA is evolving is in managing the Agency's resources. EPA is
currently making a significant investment in this area. In addition to those employees whose
primary jobs are related to managing resources, many other employees throughout EPA have
the management of resources as an integral pan of their everyday duties. I am grateful for
the strides taken to date to improve resource management, but I believe it is fair to say that
we all feel we still have a long way to go in this area.
Consequently, one of my most important tasks is to build into EPA a far more rigorous
system of accountability for the management of our resources. I expect EPA to be a model
of efficiency and accountability, and I intend to make management integrity a cornerstone of
my administration. In this regard we have recently taken steps to increase accountability
and develop more comprehensive programs for allocating and accounting for the Agency's
resources.
I am establishing a new cadre of senior managers; these managers, known as Senior
Resource Officers, are responsible for all aspects of resource management in each
region and each assistant and associate administrator's office.
I intend to perform, for the first time in over a decade, a thorough review of all the
activities funded in the Agency's "base" so as to determine the best possible allocation
of Agency resources.
As a step in the direction of increased accountability and understanding of resource
allocation, I am pleased to present the Fiscal Year 1992 Annual Financial Statements for the
U.S. Environmental Protection Agency, our first set of annual financial statements prepared
under the Chief Financial Officers (CFO) Act. They include principal statements and
3
11
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footnotes for trust funds, revolving funds and commercial activities of EPA. In addition, for
each of the five funds reported on, there is an overview section which provides a description
of the program, a financial perspective of the program, and a discussion of program results
including performance measures.
Although the CFO Act has required that we only prepare financial statements for trust funds,
revolving funds and commercial activities, it is my intention to expand annual financial
statements in future years to include additional EPA programs. As we prepare future
financial statements, I anticipate that the Agency's performance measures as defined in this
report may shift to reflect new directions, priorities, and a better understanding of the impact
of resource allocations on environmental protection.
Preparing these statements has been extremely informative, providing us with useful
information about our programs and accounting systems and identifying areas where
improved systems, management controls, and accountability are needed. These statements,
presented at the beginning of my tenure at EPA, will be a benchmark from which
improvements in the management and accounting for resources entrusted to EPA can be
measured.
Carol M. Browner
4
12
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OVERVIEW OF EPA
Mission. Stated broadly, the job of the U. S.
Environmental Protection Agency is to
improve and preserve the quality of the
environment, both national and global. EPA
works to protect human health and the
natural resources on which all human
activity depends. America's continuing
growth and prosperity depend on its ability
to find effective, creative solutions to
environmental problems.
A Complex Growing Agency. When it was
formed in 1970, EPA employed 5,400
people. It had a budget of approximately $1
billion and was responsible for a handful of
major environmental laws. Today more
than 17,000 highly skilled, culturally diverse
people work for EPA; and the Agency has
a budget of approximately $7 billion
parceled out among programs implementing
16 major laws that Congress has passed to
protect the environment:
EPA Workyears
» The Clean Air Act
> The Clean Water Act
> The Safe Drinking Water Act
1 The Comprehensive Environmental
Response, Compensation and Liability
Act (CERCLA, or "Superfund")
The Emergency Planning and
Community Right-To-Know Act
The Resource Conservation and
Recovery Act
The Federal Insecticide, Fungicide, and
Rodenticide Act
The Toxic Substances Control Act
The Marine Protection, Research, and
Sanctuaries Act
The Uranium Mill Tailings Radiation
Control Act
The Indoor Radon Abatement Act
The Ocean Dumping Ban Act
The Coastal Zone Management Act
The Pollution Prevention Act
The Federal Facilities Compliance Act
The Oil Pollution Act
20,000-
16,000
12,000-1
8,000-1
4,000-1
SupcrAny
LUST
1986 1867 1968 1988 1990
1991
1982
5
13
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EPA Budgets
Excludes Construction Grants
5,000-
4,000-1
3,000-1
2^00-1
1,000
1986 1967 1968 1969 1990 1991 1992
New Problems and New Solutions. Many of
EPA's responsibilities originated in response
to a new generation of environmental
problems that surfaced in the 1980s. Most
notable is the whole range of global
environmental concerns: climate change,
stratospheric ozone depletion, rainforest
destruction, and acid rain. Also important
are such domestic issues as pollution
prevention, radon contamination of homes.
food safety, and pollution carried by run-off
from lawns, farms, and highways. In many
ways, these new problems are both more
widespread and more complex than those of
the past.
Moving into the 1990s, EPA is grappling
with the new agenda of environmental
problems in bold and creative ways. It is
supplementing traditional regulatory
programs with marker incentives and
voluntary actions. The Agency's managers
are trying to anticipate the environmental
needs of the next century and to develop
new policies and programs that will meet
those needs.
In the last four years, the Environmental
Protection Agency has experienced an
unprecedented amount of change. There has
been increased emphasis on risk to human
health and the ecology as one of the factors
in environmental protection decisions. Both
budget and workforce resources for the
Agency's environmental programs have
increased steadily. The largest of these
increases have come in the air, water,
hazardous waste, pesticides, enforcement
and multimedia programs.
Effective Resource Management. One of the
most significant areas of change in recent
years has been in the management of the
Agency's resources. As previously noted
this report is about FY 92, however in 1993
there are a number of key changes we have
made, and are presently making, under the
current administration such as: .
Increasing accountability by expanding
the role of the Senior Procurement
Officers to serve in newly created
positions as Senior Resource Officers
6
14
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responsible not only for procurement but
other aspects of financial resource
management as well.
Commitment to the diversification of the
Agency's workforce so as to have the
widest possible range of talent managing
our resources.
A commitment to additional funds in FY
93 to strengthen our Integrated Financial
Management System (IFMS) and in our
FY 94 budget have attached a high
priority to allocating funds to correct the
weaknesses identified in our FMFIA
reporting.
This is built on FY 92 and prior years
work, most notably:
Increased oversight of resources,
including currently conducting over
2,000 audits annually and preparing
additional special reports for Congress.
Revamped the budget process so that it
is organized around the strategic themes
and the new priorities of the Agency.
Reorganized the Office of
Administration and Resources
Management (OARM) to increase
accountability and control and to reflect
the changes brought about by the Chief
Financial Officers (CFO) Act.
Responded to new legislative
requirements for more sophisticated
accounting of resource use, and for more
timely payment of Agency obligations
including The Credit Reform Act of
1990 and The Prompt Payment Act.
Increased emphasis on effective contracts
management including substantially
increasing the resources devoted to that
effort.
Proceeded with plans to correct our
material weaknesses in financial
management as well as nonconformances
in our accounting system which were
reported in our FY 1992 Federal
Managers' Financial Integrity Act
(FMFIA) Repon to the President and
Congress.
Established a special council of senior
officials, known as the "Accountable
Officials Network", dedicated to
correcting on an Agencywide basis the
weaknesses identified in the annual
FMFIA Report.
Developed a new tracking system to
accelerate collection of the Agency's
largest account receivables.
Improved audit follow up and
implementation by issuing, in
conjunction with the General Accounting
Office and the Inspector General, an
early warning report of high priority
audits requiring EPA action.
Begun implementing the far reaching
financial reform requirements of the
CFO Act.
Of all of the changes in recent years, the
most important of these is likely the CFO
Act which has resulted in :
* The Agency's first Financial
Management Status Report and Five-
Year Plan.
The development of program
performance measures which are
discussed further in this report.
A re-examination of roles and
responsibilities of the Agency's resource
managers to increase accountability.
The preparation of this report which is
the Agency's first submission of annual
financial statements under the CFO Act.
7
15
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OVERVIEW OF TRUST FUNDS, REVOLVING FUNDS,
AND COMMERCIAL ACTIVITIES
The CFO Act of 1990 placed new
emphasis on financial management in
major federal agencies. One of the
major requirements of the Act is the
preparation of apnua] financial
statements for each of the Agency's
revolving and trust funds, and
commercial operations.
EPA's financial statements for FY
1992 include the following trust
funds, revolving funds, and
commercial activities:
EPA Obligations - FY 92
Total $7.0 billion
Non-tond (72%)
Fund (28%)
Superfund;
Leaking Underground Storage
Tank (LUST) Program;
the Loan Portion of the Asbestos
Loan and Grant Program;
the Pesticide Reregistration and
Expedited Processing Revolving
Fund (FIFRA Fund); and
the Revolving Fund for
Certification and Other Services
(Tolerance Fund).
Of these, Superfund is by far the
largest, as measured by monies spent
(obligations) and EPA workyears
used by the funds.
Under the CFO Act, financial
statements are required to reflect the
overall financial position of the
funds, as well as the results of the
operations of the funds and their
activities or operations. Detailed
financial information on EPA's trust
funds, revolving funds and
commercial activities is contained in
the Principal Statements section of
this report.
Fund Obligations - FY 92
Total $1.9 billion
RFRA(3*)
><3K)
LUST (4*)
Fund Workyears FY 92
Total approximately 4,000
Totaranoa(
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The first pan of the financial statements is this
overview prepared in accordance with OMB
guidance. It contains a separate section on
each of the five revolving fund, trust fund,
and commercial activity programs reported
on, including:
a description of each program,
a financial perspective of each program.
and
a discussion of program performance.
EPA's programs and activities not currently
covered by the CFO Act are not included in
the FY 1992 financial statements. The
Agency plans to expand annual financial
statements in future years to include additional
EPA programs. The Agency currently is
investigating options for tracking and
reporting additional program performance and
financial information in a manner that would
be useful to those interested in knowing more
about the results of EPA's programs.
The following paragraphs provide an overview
of the organization, management, and
authorizing legislation for each of the five
programs.
Trust Funds. A trust fund is a fund
established to account for receipts which are
held in trust for use in carrying out specific
purposes and programs in accordance with an
agreement or statute. Two of the EPA
programs covered by the CFO Act are trust
funds, and both are housed primarily in the
Office of Solid Waste and Emergency
Response. These programs, both of which
use trust fund revenues to finance the cost of
cleaning up contaminated sites, are:
the Superfund, and
the Leaking Underground Storage Tank
(LUST) Program.
The Office of Solid Waste and Emergency
Response (OSWER) is headed by an EPA
Assistant Administrator who is responsible for
the Agency's waste management programs.
The offices within OSWER are: Emergency
and Remedial Response (with responsibility
for Superfund and oil spills), Underground
Storage Tanks (with responsibility for LUST),
Solid Waste (with responsibility for the solid
and hazardous waste programs under the
Resource Conservation and Recovery Act),
and Waste Programs Enforcement (with
responsibility for enforcement for all of
OSWER's programs).
EPA has ten Regional offices which manage
the day to day operations of these two
programs. Over three quarters of the staff
responsible for carrying out the Superfund and
LUST programs reside in the Regions. The
Superfund and LUST programs are located in
the Regional Waste Management Divisions
(except in Regions 4 and 10 where the LUST
program is in the Water Division).
While OSWER and the Regional Waste
Management/Water Divisions have lead
responsibility for the Superfund and LUST
programs, these programs are supported by
staff in other Headquarters and Regional
offices. These offices charge administrative
and extramural expenses to both programs,
but primarily to Superfund.
In Headquarters, these support functions are
carried out primarily by the Offices of
Administration and Resources Management,
Enforcement, Inspector General and Research
and Development. In the Regions, support is
provided by staff from the Office of Planning
and Management and the Environmental
Services Division, as well as in other Federal
Agencies in the case of Superfund. Funding
for these efforts is supported through an
allocation of trust fund resources.
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17
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Revolving Funds. A revolving fund is a fund
authorized by specific provisions of law to
finance a continuing cycle of operations with
receipts derived from such operations
available in their entirety for use by the fund.
Two additional EPA programs covered by the
CFO Act are revolving funds and both of
these are housed primarily in the Office of
Prevention, Pesticides and Toxic Substances.
These programs are:
the Pesticides Reregistration and Expedited
Processing Fund (FIFRA Fund), and
the Revolving Fund for Certification and
Other Services (Tolerance Fund)
EPA is charged by Congress with the job of
regulating the use of pesticides and balancing
the risks and benefits posed by pesticide use.
The Agency regulates the use of pesticides
through its Office of Pesticide Programs
(OPP), within the Office of Prevention,
Pesticides and Toxic Substances (OPPTS).
OPP consists of seven divisions and a staff
office. Approximately $88 million and 805
FTEs (workyears) were expended in FY 1992
in OPP on pesticides regulation. Appropriated
and revolving funds are both utilized by OPP
in accomplishing its mission. The two
revolving funds which supplement
appropriated resources for OPP are: The
Pesticides Reregistration and Expedited
Processing Fund (FIFRA Fund) and The
Revolving Fund for Certification and Other
Services (Tolerance Fund).
The mission of EPA's pesticide program is to
serve the nation by safeguarding public health
and the environment from risks posed by
pesticides. The regulation of pesticides comes
under the authority of two laws - the Federal
Insecticide, Fungicide, and Rodenticide Act
(FIFRA) and the Federal Food, Drug and
Cosmetic Act (FFDCA). FIFRA gives EPA
the authority and responsibility for registering
pesticides for specified uses and the
reregistration of existing pesticides that were
registered prior to November 1, 1984.
Pesticide regulatory decisions are based
primarily on EPA's evaluation of the test data
provided by applicants. Tolerance residue
setting activities are authorized by FFDCA.
EPA's pesticide regulations cover
20,000 pesticide products
2,200 registrants
3,300 formulators
29,000 distributors and other
establishments
40,000 commercial pest control firms
1 million farms
90 million households
Commercial Activities. The CFO Act requires
reporting on programs performing substantial
commercial functions and specifically
identifies the making of loans as such an
activity. EPA is reporting on one
commercial activity which is administered
under the Office of Pollution Prevention and
Toxics (OPPT) within OPTS:
the Asbestos Loan and Grant Program
This overview covers the entire Asbestos Loan
and Grant Program. However, the loan
portion of the program is the only part that is
a commercial activity and is the only pan of
the program covered by the audited financial
statements. The Asbestos School Hazard
Abatement Act (ASHAA) of 1984 directed
EPA to create a loan and grant program to
financially assist Local Education Agencies
(LEAs) or school districts with asbestos
abatement projects in public and nonprofit
elementary and secondary schools. The Act
was subsequently reauthorized in 1990 for an
additional five years. The ASHAA loan and
grant program is administered in the Chemical
Management Division, Field Programs Branch
of OPPTS.
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18
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Superfund
The Superfund program is administered under
the Comprehensive Environmental Response,
Compensation and Liability Act of 1980
(CERCLA) primarily by the Office of Solid
Waste and Emergency Response (OSWER).
Program Description
The CERCLA (Superfund) was enacted on
December 11, 1980 to address public health
and environmental threats from spills of
hazardous materials and from sites
contaminated with hazardous substances. The
Superfund law established a comprehensive
program to identify and clean up these spills
and sites. EPA was authorized to use a trust
fund (the Hazardous Substance Superfund) to
pay for this work and to pursue recovery of
expenditures from parties responsible for the
contamination.
The law directs EPA to handle releases of
hazardous substances by either compelling
potentially responsible parties to respond or
conducting a removal or remedial action using
the Superfund. Removal actions are short-
term responses to an immediate threat posed
by the uncontrolled release of a hazardous
substance, such as from a transportation
accident or a fire. Remedial actions are long-
term, more permanent remedies taken at those
sites where the risk to human health and the
environment warrants placing the site on the
National Priorities List (NPL).
Cleaning up a Superfund site is a multi-stage
and multi-year process. While EPA continues
to seek ways to speed up site cleanups and
completions (such as through the use of
presumptive remedies), the work remains
complex especially when ground water must
be treated.
Prior to being placed on the NPL, EPA
conducts a preliminary assessment of the site.
Where warranted, this is followed by a site
investigation. Only five to eight percent of
the sites EPA evaluates are listed on the NPL
for long-term remedial cleanup. At the end
of FY 92 there were 1,275 sites on the NPL.
EPA also conducts removal actions at non-
NPL sites. Since 1980, over 3,200 short-
term removal actions have been started (400
in FY 1992 alone), with the majority at non-
NPL sites.
Once a site is listed on the NPL, EPA works
with the community around the site to plan
the long-term cleanup with a detailed study of
the site and an evaluation of cleanup options.
The planning process can take up to four
years with an average cost of $1.5 million
per site.
The actual cleanup (construction) work itself
averages S25 million per site. Because of the
high cost and limited Superfund resources,
EPA's enforcement program emphasizes
cleanup actions by responsible parties (RPs).
RPs currently fund cleanup at approximately
70% of NPL sites.
While the Superfund responsibilities cannot be
delegated, at some sites the State, local
government or Indian Tribe takes the lead in
managing the site cleanup. At other sites, the
State or local agency cooperates with EPA on
handling a site cleanup.
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Financial Perspective
In 1980, the Congress established in the
Department of the Treasury a trust fund
entitled the "Hazardous Substance Response
Trust Fund", which is now known as the
Hazardous Substance Superfund. Congress
also appropriated funding for five years
totalling $1.6 billion. As the long-term
nature and expense of site cleanup became
more evident, Congress reauthorized the
program in 1986 and the taxing authority
for an additional five years of EPA funding
totalling $8.5 billion. In 1990, Congress
extended taxing authority for an additional
three years adding S5.1 billion to EPA's
funding.
Superfund is funded primarily by taxes on
crude and petroleum, on the sale or use of
certain chemicals, and an environmental tax
on corporations. Other sources of funding
for Superfund include cleanup costs
recovered from responsible parties,
interest, fines and penalties paid by
individuals and entities who violate the
terms of the CERCLA provisions, and by
general revenues.
Parties responsible for
contaminating Superfund
NPL sites are
increasingly paying the
cost of cleanup, saving
the fund for those sites
where parties are unable
to contribute.
Responsible party
commitments to site
cleanup have exceeded
$1 billion in each of the
past three years. In FY
92 EPA achieved a
record value of
MBbrwofS
2,000-
1,800
1,200
800
400-I
settlements for response actions at NPL sites
of $1.3 billion.
Superfund program expenditure- through
FY 1992 are approximately seven and a half
billion dollars. In EPA's most r:cent report
to Congress, the Office of Solid Waste and
Emergency Response estimated the
remaining costs of cleaning up the 1,275
sites currently on the NPL to be $18 billion.
This estimate does not include the
responsible party contribution.
Superfund appropriations, obligations and
outlays have remained fairly constant from
1990 through 1992 as can be seen on the
financial trends chart.
In FY 1992, the Superfund program was
staffed by a total of 3,604 FTEs, and
Superfund obligations exceeded $1.7 billion.
Further analysis of these numbers is
provided in the following sections.
Superfund Financial Trends
Appreprtatttm
NetOuteya
FY90
12
20
FY91
FY92
-------
Superfund by Activity. The Agency has
identified four major components of the
Superfund program: Remedial Activities,
Removal Activities, Enforcement
Activities, and Other Activities. These
activities were identified based upon the
"Superfund Activity Code", which is the
accounting process the Agency uses to
identify Superfund activities with
accounting transactions. Each of these
components has various activities which are
identified below.
Remedial activities represent the long-term
response at a Superfund site and include the
Preliminary Analysis/Site Investigation
(PA/SI), Remedial Investigation/Feasibility
Study (RI/FS), Remedial Design (RD),
Remedial Action (RA), associated oversight
and laboratory analysis activities, and
remedial support and management.
Removal activities represent the short-term
response and stabilization of hazardous
substances and include the removal actions,
associated oversight and laboratory analysis
activities, expedited response actions,
Technical Assistance Team activities, and
removal support and management.
Enforcement activities represent the actions
the Agency takes in the recovery of
Superfund expenditures, settlement
negotiations with responsible parties, and
associated oversight.
Other activities represent activities of the
Agency in supporting the Superfund
program as a whole. These "Other"
activities cross the remedial, removal, and
enforcement program lines and are
associated with remedial, removal and
enforcement. "Other" activities include
Research and-Development, contract award
and management, financial management,
personnel activities, and rent and utility
costs.
The following charts provide a look at
Agency spending patterns for the current
fiscal year and the past three-year period.
The spending patterns are identified for both
obligations and disbursements. An
obligation represents a commitment to
procure and pay, and is funding for an
activity. Obligations are not the same as
actual cash disbursements. Disbursements
(outlays) represent cash payments for
products or services rendered. In general,
for any given fiscal year, obligations are an
indication of current and future activities
and disbursements are indicative of
completed activities.
13
21
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Superfund Obligations by Activity - FY 92
Total obligations $ 1.7 biiion
(51S)
OOwr (21%)
Enforcement (12%)
term removal actions each year to
control immediate threats, with over
2,000 of these completed by the end of
FY 1992. Removals account for
nearly 20% of the Superfund budget.
While enforcement represents the
smallest pan of the Superfund budget,
the resources invested there have a
large payoff. See Measures 6-9 and
the summary discussion which
follows.
Ramovit (16%)
Superfund Obligations by Activity.
Remedial activities account for more than
half of the Superfund budget. Remedial
Actions are taken at large sites requiring
complex cleanups. Nearly 60% of the sites
on the NFL nave had design or
construction for cleanup initiated, and most
contract dollars (78% in FY 1992) go for
cleanup.
The three-year trend chart indicates
the increase in remedial activities over
time as the program matures and more
sites move from the assessment and
study phases toward remediation. The
remaining three activities have maintained a
relatively constant level of obligations over
the last three years.
The "Other" category
represents all
infrastructure support
costs, including rent
and utilities, to both
cleanup and
enforcement as well as
funds for other offices
within EPA, such as
Research and
Development, and for
other Federal agencies
which support the
Superfund program.
The Superfund
program conducts a
large number of short-
Superfund Obligations by Activity Trends
zooo
i,eoo
1.200-1
FY90
FY91
14
22
-------
Superfund Disbursements by Activity - FY 92
Total disbursements 41.3 billion
(42%)
Other (29%)
uMiMU (13%)
(16%)
Superfund Disbursements by Activity. The
pie chan shows current year disbursements
by Superfund activity. Disbursements
represent the actual payment for services.
The type of expense (activity) will have an
impact on how quickly an obligation is
actually disbursed. For example, payroll
costs are obligated and disbursed at one
time. The same holds for travel. Contract
activities are obligated at one time.
However, the service may be performed
over a period of time. The mix of payroll,
travel, contracts, etc., will determine how
closely obligations and disbursements match.
Superfund Disbursements by Activity - Trends
EntarOTwnt
FYW
FYS8
15
23
-------
Superfund Staff by Location - FY 92
Total FTC's 3.604
(75%)
HO-AflOthars (18%)
HO-OSWER (10%)
Superfund by Location. Superfund
activity can be further broken down by
location. Obligations and disbursements
are displayed by Region, Headquarters
(HQ) - Office of Solid Waste and
Emergency Response (OSWER), and HQ -
All Others. Much of the operational
responsibility resides in the EPA regions.
HQ - OSWER represents the Office of
Emergency and Remedial Response and
Office of Waste
Programs Enforcement
here at headquarters.
HQ - All Others
represents all other
offices such as the
Office of Enforcement,
Office of Research and
Development, and other
offices which provide
support to the
Superfund program.
Superfund Staff by
Location. Since most
operational activity
occurs in the regions,
the largest numbers of
staff positions are
located in the regions.
Superfund Staff By Office - FY 92
Total FTEs 3,604
2JOO-
MOO-I
1JOO.I
1.000 )
500
OA OPPE OAR OW OOC ORO OARM OE OSWER
If
24
-------
Superfund Obligations by Location * FY 92
Total obByctions $1.7 billion
Regions (71%)
HO-AJI Others (10%)
HOOSWEP (20%)
Superfund Obligations by Location. The
pie chair shows the amount of obligations
by EPA regional offices and EPA
headquarters. .EPA headquarters is further
broken down between Headquarters
OSWER (Immediate Office - OSWER,
Office of Emergency and Remedial
Response, and Office of Waste Programs
Enforcement) and all other remaining non-
OSWER offices.
The bulk of the obligations
occur in the regions.
Agency strategy, in the
past few years, has been to
place more of the
operational responsibility
in the regions. As a
result, most obligations
occur in the regions. The
second largest pie slice is
HQ - OSWER. The third
slice, HQ - All Others
includes the Office of
Enforcement, Office of
Research & Development,
and other offices which
support the Superfund
program.
Superfund Obligations by Location Trends
2JXO-
1.000-1
1,200
FV90
FVtl
FY98
17
25
-------
Superfund Disbursements by Location FY 92
Total disbursements $ 1.3 billion
Raotara (64%)
HO-AIOthors (12%)
HO-OSWER (23%)
Superfund Disbursements by Location. The
pie chan shows current year disbursements
by Superfund activity. Current year
disbursements follow the same pattern as
current year obligations: Regional
disbursements are the largest; HQ -
OSWER disbursements are second; and HQ
- All Others are last. Disbursements
closely mirror obligations by location
except for the Regions. Disbursements
indicate completed activity while
obligations represent future activity. Since
a large portion of Superfund Remedial
activity is long-term and is conducted in the
Regions, all current year obligations will not
be disbursed in the same fiscal year.
Superfund Disbursements by Location Trends
FYW
FYW
FV92
18
26
-------
Program Results
The direct beneficiaries of the Superftind
are those people living in the vicinity of the
sites this cleanup program addresses.
Indirect beneficiaries include those living
further from the sites who might suffer
degradation of their groundwater, drinking
water, or air if these programs did not
alleviate the risk of contamination
before it became more widespread.
Early action to contain impacted areas
also lessens the potential liability of
parties responsible for the
contamination.
The net result of Superfund cleanup
work at sites on the NPL has been to
reduce risk from exposure to
hazardous waste for approximately 25
million people who live within a four
mile radius of these sites. For one
million of these people, the program
has eliminated threats posed by direct
contact with hazardous substances.
While we have no estimates of the
total numbers of people protected by
short-term removal actions at non-
NPL sites, EPA's preliminary data
shows that as of the end of FY 1992,
we have relocated over 54,000 people
living in the vicinity of NPL and non-
NPL sites and have supplied
alternative water to nearly 600,000
people at these sites.
EPA's performance measures for the
Superfund program for FY 1992 fall
into two categories: site cleanup
(measures 1-5) and enforcement/cost
recovery (measures 6-9).
Cleanup. For site cleanup we
measure not only the completion stage
but also the critical steps in the
cleanup process. Because the cleanup
process can take a number of yean, it is
important to look at the "pipeline" of
activities to get an accurate sense of
progress as is shown in "An Overview of
the Cleanup Stages".
The Remedial Proceas
An Overview of the Cleanup Stages.
Remedial Investigation (Rl)
An aaaaumam of tna MM* and axiam of eonumnafien
ino tiw aaaooaiad Mun and ""»«"«"»"'if naki
Feasibility Study (FS)
PW*
«a. teeatattg to IM MM avaaiaaon creana: vauajiy uneanakan
eoneuimmry wen ma Hi
Selection of Remedy
S«iM»notman)ma«iaJaaamaiiv*teraMMa. Thianap
Proposed Plan
(SsrrtSsi if* nmaoiai aaamauva Buiy to M cnosan tor SuoMimd
so* tno spams wny a ai ma pnfarrae aumaiMa. and nevs
lorpuMieeDimvni
Record of Decision (ROD)
Th» eflealnoen eeeunvnung O» baatgiound Momuinn on tn» u*
and wienfiing m* eneMn miMo? and new < wm*
Remedial Design (RD)
Prapanuien of tKftnieal ettm and spcofieatidna
lor impMiTwnwg tn* enotan nmMiai «n«mauv»
Remedial Action (RA)
ConKfwcuon or etntr wen n*euury to
rnpterrwnt m« mmMiai M«mauv»
Operation A Malnttnanet (O&M)
AoiviiM eonduave at a » n*' a r»»oon«» aaion occur*
10 antura tnai m* cManuo mtnods a/t *onung prep«ny and
to anaura aia ranwor eoniinw** ta M anaeav*
19
27
-------
Measure 1. Number of sites on the
National Priorities List (NFL) where
cleanup has started/total number of sites
on the NFL.
Activities which count under this measure
axe short-term removal actions and the
remedial investigation/feasibility study
which assesses the nature and extent of
contaminating at the Site and
analyzes cleanup alternatives so
that a remedy can be selected.
Results: In FY 1992 cleanup was
started at 35 sites.. Cumulative
performance to date is 1,219
cleanups begun/1,275 sites on the
NPL.
The number of cleanups started
declined in FT 1991 and 1992
relative to earlier years as the
Superfund program ' s emphasis has
shifted to the later stages of the
cleanup effort needed to complete
work at a site. Also, cleanup has ,
now begun at nearly all sites on
the NPL. The 56 remaining sites
have been evaluated for i
threat, even though cleanup action
has not yet begun.
Measure 2. The number of
non-NPL sites with hazardous
releases where EPA has begun a
cleanup action.
Sites with confirmed hazardous
releases, which do not score high
enough to be included on the NPL
or where an emergency exists, are
eligible for a short-term Superfund
removal action if they meet certain
regulatory criteria. This measure
counts the number of sites where a removal
action has started.
Results: In FY 1992 cleanup actions were
begun at 279 non-NPL sites, bringing the
total such actions since program inception to
2,029.
Types of Removal Actions
Drainage controls
Stabilization of terms, dikes, or impoundments; or
drainage or dosing of lagoons
Capping of contaminated soils or sludges
Use of chemicals or other materials to limit the spread of
a release or mitigate its effects
Excavation, consolidation, or removal of highly
contaminated soils from drainage or other areas
Removalofdrusu,barrels,tanks,orotherbulkcontainers
Containment, treatment, disposal, or incineration of
hazardous materials
Provision of an alternate water supply
Fences, warning signs, or other security or site control
precautions.
20
28
-------
Measure 3. The number of sites on the
NFL where a decision'has been made
about how to proceed with the cleanup of
at least a significant portion of the
site/the total number of sites on the NFL.
This measure counts the next significant
stage of cleanup for NPL sites following
the feasibility study - the signing of the
Record of Decision (ROD). The ROD
identifies the remedy that has been chosen
for remediating the site (or portion thereof)
and jaipiynjifjrpy the site problems, the
alternative remedies considered and the
public's involvement in the decision.
Large, complex sites often are addressed in
stages (e.g., cleaning up a drum storage
area on a different schedule than a landfill)
each with its own ROD. This measure
counts each site with at least one ROD but
that ROD may not address the entire site.
Results: Cleanup decisions were made for
1O9 sites in FY1992, resulting in a total to
date of 795 sites of the 1,275 sites on the
NPL.
Measure 4. Number of sites on the NFL
where Remedial Action has been
completed for at least a significant
portion of the site/the total number of
sites on the NFL.
This measure counts those NPL sites (or
portions thereof) which have progressed
through the Remedial Action phase. At
this stage the construction work to
implement the remedy is complete, and
EPA has conducted a final inspection to
determine that the remedy is functioning
properly and performing as designed.
As indicated above, a site may have more
than one Remedial Action.
Results: In FY1992, 61 sites (or significant
portions thereof) progressed through the
Remedial Action clean up phase. This
brings the total number of such sites to 235
of the 1,275 sites on the NPL.
Measure 5. The number of sites on the
NFL where cleanup construction is
completed/the total number of sites on the
NPL.
This measure counts the sites for which
EPA has declared cleanup construction
complete. Sites qualify for construction
completion when:
1) any necessary physical construction is
complete whether or not final cleanup
levels or other requirements have been
achieved;
2) EPA determines that the response action
does not involve construction; or
3) the site qualifies for deletion from the
NPL.
Results: During FY 1992, cleanup was
completed at 86 sites. Cumulative results
for the program to date are 149 sites with
cleanup construction completed of the 1,275
sites on the NPL.
21
29
-------
NPL Sites with Construction Complete
Cumulative sites to data
200,
180-1
120
40
8283648586678889900192
Enforcement. EPA's enforcement
program seeks to involve those responsible
for contaminating the Superfund site in its
cleanup and pursues cost recovery of
monies EPA expends from the trust fund.
Measure 6. The number of enforcement
actions EPA has taken at sites on the
NPL against the parties responsible for
contaminating the site/the total number
of sites on the NPL.
This measure counts the number of legal
actions EPA has taken to involve
responsible parties in site study and
cleanup. These actions include
administrative and judicial settlements,
injunctive referrals and administrative
orders for removal, site study, and
Remedial Design and Remedial Action
(RD/RA). It includes both those situations
where parties have voluntarily entered into
a settlement with EPA and those where
EPA uses its enforcement authority to
compel responsible parties to conduct work.
Results: During FY1992,118 enforcement
actions for site study and cleanup were
taken at 106 sites of the 1,275 sites on the
NPL. 90 of these actions -were settlements
for RD/RA (48 consent decrees and 42
unilateral administrative orders), and two
were injunctive referrals for RD/RA to the
Department of Justice.
Since the inception of the Superfund
program, EPA has achieved responsible
party (RP) commitments to site response at
679 sites (59%) of the 1,149 non-Federal
Facility sites on the NPL with an estimated
cumulative value of over $7 billion. In FY
1992, EPA achieved RP commitments to
response work at 106 (9%) of the 1,149
NPL sites. The estimated value of the FY
1992 RP NPL cleanup commitment is $1.3
billion.
Measure 7. The number of major
enforcement actions for recovery of
Superfund costs against parties
responsible for contaminating sites.
22
30
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The measure is a subset of number 6 and
counts any enforcement action (injunctive
referrals and settlements) which resulted in
recovering over $200,000 in past costs.
This measure will be expanded in FY 1993
to more accurately depict enforcement
activity at sites. At that time a
denominator will be added to show the
relationship to the total number of eligible
sites.
Results: In FY 1992, the Agency
referred 75 major (greater than
$200,000) cost recovery cases to
the Department of Justice. The
total value of past costs sought
through these referrals was $137
million.
Measure 8. The amount of
money EPA has collected from
parties responsible for
contaminating sites on the
NFL/the total amount achieved
in settlements and judicial
actions.
This measure totals the value "of
cost recoveries, penalties and
damages collected during the fiscal
year compared to the amount of
cost recoveries actually achieved
(assessed) in settlements and
judicial actions.
There is frequently a delay
between the date the settlement is
reached (the day cost recovery is
considered to be achieved) and the
date the funds are collected.
Because of the time required to
file the necessary documents with
the courts, delays of three months
and longer are not uncommon. As
a result, settlements reached in the
second half of one fiscal year are frequently
collected in the following year.
Results: In FY 1992 the Agency collected
over $185 million in cost recoveries and
reached settlements for the recovery of $250
million. Since the inception of the program,
the Agency has collected over $545 million
in cost recoveries. This represents 62% of
the total value of cost recovery settlements
reached by the program to date.
Cost Recoveries By Year
818283646586878869909192
Cost Recoveries Cumulative
ie($
1.000V
800
600 -I
400
200 -I
8162636466668788699091 92
23
31
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Measure 9. The amount of money
parties responsible for contaminating
Superfund sites have agreed to spend on
site cleanup/the total amount of money
spent by the Superfund on site cleanup.
This measure estimates the dollar value of
cleanups responsible parties have agreed to
perform at NFL and non-NPL sites. The
estimate is derived from the Remedial
Design, or where this is not available, from
the Record of Decision. This estimate is
then compared to the amount of funds
expended from the trust fund to provide an
order-of-magnitude contrast between EPA
expenditures for site response versus
private party expenditures for site response,
recognizing that the actual outlay of funds
takes place over several years. The
resulting ratio is a measure of cost
avoidance to the fund.
Results: In FY 1992 the Agency reached
227 settlements (NPL and non-NPL) for
responsible parry response worth an
estimated $1.45 billion. Response
settlements may be broken out as follows:
PRP Response Settlements
80618283846586876069908192
Remedial Design/Remedial Action
settlements- $1,301 million
- Consent decrees referred to the
Department of Justice - $819
million.
- unilateral adminL. jtive orders
- $482 million
Settlements for removal and site
evaluation- $150million.
When the value of FY 1992 response
settlements is added to the cost recovery
settlements achieved of $250 million, the
total ($1.7 billion) represents the amounts
for which private parties committed to pay
for site response. FY 1992 Superfund
obligations totaled $1.7 billion. Compared
to Superfund enforcement expenditures in FY
1992 ($198 million), these results represent
a ratio of $8.50 in settlements for each
dollar spent on enforcement.
Summary. The Superfund program
exceeded most of the internal goals the
Agency set for itself in FY 1992. From the
public's perspective the most significant
achievement was the accelerated pace of site
completions from only 63 since the
program's inception
through FY 1991 to 149 at
the end of FY 1992.
Moreover, the Agency is
on target to meet our
ToM ambitious goals of 200
sites by the end of FY
1993 and 650 by the year
2000.
RtVRA
The Superfund
enforcement program also
compiled an enviable
/ record in FY 1992.
Responsible parties
contributions now account
for a majority of the
Superfund cleanup work.
The value of responsible
24
32
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party settlements has risen dramatically in
the past few years due to EPA's enhanced
enforcement authorities and an
"enforcement first" policy.
Over the past two years EPA has reviewed
the Superfund program's progress and
made significant improvements which have
contributed to the above successes. Two
major studies in FY 1991 looked at ways to
speed up the pace of NFL cleanups,
evaluate risks and improve our contracting
practices.
Building on these studies, the Agency
undertook a Superfund revitalization
program which includes: consolidating
management accountability for this large
program, using a troubleshooting team to
quickly identify and resolve problems,
developing and piloting regional models to
speed site cleanups and completions,
reducing contract management costs, and
improving risk-based decision making.
These reforms are beginning to produce
results, as our FY 1992 numbers show.
We look forward to continued
improvements in FY 1993 as the programs
begun in FY 1991 and FY 1992 come into
full swing.
Next Steps. One critical area we will
continue to focus on is contracts
management. Since the Superfund program
is highly contract leveraged, an efficient
and effectively managed contracts program
is integral to Superfund's success. In FY
1991 the Agency developed a long-term
contracts strategy that projects Superfund's
needs over the next decade and redesigns
our portfolio of contracts to meet these. In
FY 1993 we will phase in new contracts,
most of which will be managed by the
Regional offices.
In FY 1993 we will continue our efforts to
reduce contracts management costs. The
share of our contracts cost devoted to
program management has decreased from
almost 30% in FY 1990 to 14% in FY
1992. We must ensure these management
costs stay reasonable.
EPA must also continue to address
weaknesses in our contracts program.
Although the Agency has contracted
substantially for policy and regulatory
development support, this has been done out
of necessity rather than choice. The Agency
would prefer to have this work done by
government employees. Due both to limits
in staff resources and to the availability of
contract funds, the Agency has contracted
out these activities.
EPA's efforts to convert base extramural
resources to Agency FTE to perform these
types of functions have thus far been
unsuccessful. In lieu of substituting Agency
staff for contractors to perform sensitive
work, we are instituting more stringent
Agency contracting procedures. However,
as long as we continue to use contractors to
handle such a large portion of the Superfund
work, we remain vulnerable to potential
problems.
25
33
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Leaking Underground Storage Tank (LUST) Program
The Leaking Underground Storage Tank
(LUST) program is administered under the
Resource Conservation and Recovery Act
primarily by the Office of Solid Waste and
Emergency Response.
Program Description
In 1984 the Resource Conservation and
Recovery Act was amended to give EPA the
authority to regulate underground tanks
storing petroleum products. In 1986
Congress set up a $500 million Leaking
Underground Storage Tank (LUST) Trust
Fund which is financed by a 1/10 of a cent
tax on the sale of motor fuels. In 1990 the
Trust Fund was reauthorized for 5 years
with no cap on funds collected. The Fund
is used to oversee cleanups by responsible
parties or to cleanup LUSTs where the
owner/operator cannot or will not do so, or
where no owner/operator can be found.
The U.S. has 5-7 million underground tanks
storing petroleum products. About 1.6
million of these are regulated by EPA; the
rest - mainly on farms and tanks at other
locations that contain heating oil for on-site
consumption - are exempt by law.
Underground storage tanks (USTs) are
found at gas and service stations,
convenience stores and non-marketer
locations such as bus depots and government
facilities. An estimated 15-25 % of regulated
tanks are leaking. Traks from USTs can
cause fires or explosions, and some leaks
contaminate groundwater.
Due to the large size of the regulated
universe, EPA has set up a decentralized
UST program. The Agency relies primarily
on States and localities to carry out the
underground storage tank program. EPA
has formal agreements with all States to
operate the UST program as EPA's agent
(including inspections and enforcement). At
the end of FY 1992, EPA had delegated
program authority to 10 States, granting
them formal approval to regulate USTs in
lieu of EPA.
26
34
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Financial Perspective
*
Since 1986, the Treasury managed LUST
Trust Fund has collected S856 million. Of
this amount, $329 million had been
appropriated to EPA through the end of FY
1992. Due to the decentralized nature of the
LUST program, EPA has awarded 82% of
these funds to the States.
In FY 1992, EPA had 95 FTE and $75
million to implement the LUST program.
OSWER had 62 FTE and $72 million to
support the LUST program. Approximately
30 FTE and several million dollars were
used by non-OSWER offices in
Headquarters and the Regions to support the
LUST program. 96% of the cleanups were
conducted by responsible parties with State
oversight.
The appropriated funds decreased by $10.2
million in FY 1991 compared to FY 1990
then increased by $10 million in FY 1992.
The obligations followed the same trend as
the appropriation. However, net outlays
LUST Projects - FY 92
Total EPA funding $63 mttton
State Managed (96%)
EPA Managed (4S
continued to increase from FY 1990 through
FY 1992. Since the LUST program is
funded by no-year appropriations,
obligations are funded by current year
appropriations and prior year unobligated
balances »
LUST Financial Trends
crt
1001
60H
60
40-1
20-1
Obflgrtoni
Approprtaflora
NctOuOays
FY90
FY91
FY82
27
35
-------
Program Results
The LUST program has initiated corrective
actions at over 129,000 sites as of the end of
FY 1992. These cleanup actions are
protecting hundreds of thousands of people
from the effects of leaking petroleum
storage tanks.
For the LUST program, the FY 1992
performance measures count the number of
sites with confirmed releases of petroleum
products, and the number of these where
cleanup is underway and the number where
it is completed.
Measure .1. The number of sites
nationwide where EPA and the States
have found a petroleum leak from an
underground storage tank.
cleanup has been initiated/the total
number of known sites with leaking tanks.
This measure counts those JST sites
where action has been initiate , remediate
or clean up the contamination. jd compares
that number to the universe of sites with
known releases. Cleanups may be initiated
by a State (with or without LUST trust fund
money) or by the responsible party.
Results: In FY 1992 the program initiated
actions at 49,000 sites. Cumulative
program to date: 129,000 cleanups initiated/
a total universe at the end of FY 1992 of
183,000 sites with confirmed releases.
This measure counts those sites where a
release has been identified and confirmed by
EPA or the designated State agency. It
represents the potential universe of sites for
cleanup by the LUST program. This
measure does not count tanks on farms and
at other locations
exempted by law from LUST National Corrective Action Activity
the LUST program. - -
Results: During FY
1992, 57,000 USTs
were added to the list of
sites with confirmed
releases. At the end of
the fiscal year there
were a total of 183,000
sites on this list.
Measure 2. The
number of sites with
petroleum leaks from
an underground
storage tank where
200 ,
160
120
80-1
40
90-1 2 3 4 01-1 2 3 4 82-1 2 3 4
28
36
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Measure 3. The number of sites with
petroleum leaks from an underground
storage tank that have been cleaned
up/the total number of known sites with
leaking tanks.
This measure counts those sites where the
State has determined that no further cleanup
is necessary, and compares this number to
the universe of sites with known releases.
The cleanup can be led by the State or the
responsible party and State cleanups may or
may not have used trust fund money.
Results: During FT 1992 cleanup was
completed of 29,000 LUST sites. Total to
date completions is 56,0001 an end of FY
universe of 183,000 sites with confirmed
releases.
that new tanks are properly installed and
that old ones are properly closed. Proper
tank installation and closure and careful
monitoring of tanks in use will
future problems with leaking underground
storage tanks.
The FY 1992 LUST data indicates a
continuing increase in the number of
confirmed releases from underground tanks.
This is not surprising as many tanks which
were installed 20 to 30 years ago are now
corroding and leaking. We anticipate that
the rate of confirmed releases will continue
at a rate of about 50,000 per year for the
next several years.
The numbers of cleanups
and
completed are also on the upswing, due to
the growth of State programs and EPA's
efforts to speed up site assessments and get
the cleanups underway quickly. EPA has
also worked with States to quicken the pace
of cleanups and make them as least costly as
possible.
Over the next several years, the LUST
program will focus on preventing releases.
As of FY 1993 the phase-in of release
detection requirements will apply to tanks
installed prior to 1980. In addition, the
program will expand its efforts to ensure
29
37
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Pesticides Reregistration and Expedited Processing Fund
(FIFRA Fund)
The Pesticides Reregistration and Expedited
Processing Fund (FEFRA Fund) is
administered under the Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA)
primarily by the Office of Prevention,
Pesticides and Toxic Substances
Program Description
As part of its authority to regulate
pesticides, EPA is responsible for
reregistering existing pesticides. The
FIFRA legislation, requiring the registration
of pesticide products, was originally passed
in 1947. Since then, health and
environmental standards have become more
stringent and scientific analysis techniques
are much more precise and sophisticated. In
the 1988 amendments to FIFRA (FIFRA'
88), Congress mandated the accelerated
reregistration of all products registered prior
to November 1, 1984. Reregistration is
required to be completed by 1997.
Congress authorized until 1997 the
collection of two kinds of fees to supplement
appropriated funds for the program - an
annual Maintenance Fee and a one time
Reregistration Fee. Maintenance fees are
assessed on registrants of pesticide products
and are structured to collect approximately
$14,000,000 per year. Reregistration fees
are assessed on the manufacturers of the
active ingredients in pesticide products and
are based on the manufacturer's share of the
market for the active ingredient. In fiscal
years 1992, 1993, and 1994, l/7th of
Maintenance Fees collected, up to
$2,000,000 each year, are to be used for the
expedited processing of old chemical and
amended registration applications. Fees are
deposited to the FEFRA Revolving Fund.
By statute, excess monies in the FIFRA
Fund may be invested. They do not have to
be earned prior to obligation as in the
Tolerance Revolving Fund. Waivers and/or
refunds are granted for minor use pesticides,
antimicrobial pesticides, and small
businesses.
The reregistration process is being
conducted through reviews of groupings of
similar active ingredients called cases.
There are five (5) major phases of
reregistration:
Phase 1 - Listing of Active
Ingredients. EPA publishes lists of
active ingredients and asks
registrants whether they intend to
seek reregistration. Completed in
FY 1989.
Phase 2 - Declaration of Intent and
Identification of Studies. Registrants
notify EPA if they intend to
reregister and identify missing
studies. Completed in FY 1990.
Phase 3 - Summarization of Studies.
Registrants submit required existing
studies. Completed in FY 1991.
30
38
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Phase 4 - EPA Review and Data
Call-Ins (DCIs). - EPA reviews the
studies, identifies and "calls-in"
missing studies by issuing a DCI. A
"DCT is a request to a pesticide
registrant for scientific data to assist
the Agency in determining the
pesticide's eligibility for
reregistration.
Phase 5 - Reregistration Decisions.
EPA reviews all studies and issues a
Reregistration Eligibility Document
(RED) for the active ingredient(s).
A "RED" is a determination by the
Agency whether products containing
a pesticide active ingredient are
eligible for reregistration. The
registrant complies with the RED by
submitting product specific data and
new labels. EPA reregisters or
cancels the product. Pesticide
products are reregistered, based on a
RED eligibility determination, when
it meets all label requirements. This
normally takes 14 to 20 months after
issuance of the RED.
31
39
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Perspective
RFRA Fund Receipts FY 92
Total Receipts $17.1 million
(95%)
Investment Earnings (5%)
During FY 1992, the Agency's obligations
charged against the FIFRA Fund for the cost
of the reregistration and expedited
processing programs were 264 FTEs and
$24.5 million. Of these amounts the Office
of Pesticide Programs funded approximately
221 FTEs and obligated SI6.3 million of
this cost.
Appropriated funds
are used in addition
to FIFRA revolving
funds. In FY 1992,
approximately $22.8
million in
appropriated funds
were obligated for
reregistration and
expedited processing
program activities.
million compared to the FY 1991 year-
end balance of $13.87 million.
The fund has two types of receipts: fee
collections and interest earned on
investments. Of the $17.1 million in
FY 1992 receipts, approximately 95%
was fee collections. Although the fund
balance and related investment earnings
continued to decrease from FY 1990
through FY 1992, the fee receipts
increased in FY 1992 after a decline in
FY 1991. Legislation in December
1991 changed the FIFRA fee cap which
resulted in increased Maintenance Fee
collections in FY 1992. Obligations
followed the same trend as fee receipts.
FIFRA Financial Trends
01$
The unobligated
balance in the fund
at the end of FY
1992 was $8.98
million. This is a
decrease of $4.89
40
30
20
10
ObBgMonc
FY90
FT 91
PY92
32
40
-------
Program Results
Measure 1. The number of Data-Call-ins
issued.
Results: The number of Data-Call-ins
(DO*) issued in FY1992 was 97 versus a
targe: of 91. EPA reviews the studies,
identifies and "calls-in" missing studies by
issuing a DO to a pesticide registrant to
obtain additional scientific data.
Measure 2. The number of Reregistration
Eligibility Documents (REDS) completed.
Results: The number of Reregistration
Eligibility Documents (REDS) completed was
15 versus a target of 16, an increase of 2
over FY 1991 when 13 were completed.
Measure 3.
reregistered.
The number of products
Results: In FY 1992,
41 products were
reregistered versus a
target of 100; the first
year products were
reregistered under
FIFRA' 88. In
addition, 165 products
were canceled through
the product
reregistration process.
FIFRA Fund Completions
200
FYflO
FY91
FY82
33
41
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Revolving Fund for Certification and Other Services
(Tolerance Fund)
The Revolving Fund for Certification and
Other Services (Tolerance Fund) is
administered under the Federal Food, Drug
and Cosmetic Act (FFDCA) primarily by
the Office of Prevention, Pesticides and
Toxic Substances (OPPTS).
Program Description
As part of its authority to regulate
pesticides, EPA is responsible for setting
"tolerances". If the pesticide is being
considered for use on a food or feed crop or
as a food or feed additive, the applicant
must petition EPA for establishment of a
tolerance (or exemption from a tolerance)
under authority of FFDCA. A tolerance is
the maximum legal limit of a pesticide
residue on food commodities and animal
feed. Tolerances are set at levels that
ensure that the public is protected from
unreasonable health risks posed by eating
foods that have been treated with pesticides
in accordance with label directions. The
tolerance program is a major pan of the
Agency's Food Safety goals.
In 1954, Congress authorized the
collection of fees for the establishment of
tolerances for raw agricultural commodities
(section 408 of FFDCA). Congress,
however, did not authorize the collection of
fees for food additive tolerances (section 409
of FFDCA). EPA, therefore, does not
collect fees for food additive tolerances.
The Agency also does not collect fees for
Agency-initiated actions such as the
revocation of tolerances for previously
canceled pesticides. Fees collected for
tolerances for raw agricultural commodities
were deposited to the U.S. Treasury General
Fund until 1963 when Congress established
the Tolerance Fund. Specific fees are
contained in 40 CFR 180.33 and range from
$3,075 to $54,175, depending on the type of
tolerance action requested. Waivers and/or
refunds are granted for minor use pesticides
submitted under the Inter-Regional Research
Project Number 4 (TR-4 Program), public
interest, such as reduced-risk pesticides, and
economic hardship. The fees are updated
annually based on the percentage change in
GS pay rates. Fees were increased 4.2% in
FY 1992. By statute, monies in the
Tolerance Fund may not be invested.
34
42
-------
Financial Perspective
Tolerance Fund Financial Trends
MMmeft
5-,
4-
3-
2-1
1-1
FundBalano*
Feaflacalpa
FY90
FY«1
PY92
During FY 1992, the Agency charges to the
Tolerance Fund for the cost of the tolerance
setting functions were $1.2 million.
Appropriated funds are used in addition to
revolving funds. In FY 1992,
approximately $3.5 million in appropriated
funds were obligated. The unobligated
balance in the revolving fund at the end of
FY 1992 was $3.76 million. This is an
increase of $10 thousand compared to the
FY 1991 year-end balance of $3.75 million.
The fund balance increased by $1 million in
FY 1991 compared to FY 1990. It
remained almost unchanged in FY 1992.
The fee receipts increased in FY 1991 and
declined in FY 1992 while obligations
declined in FY 1991 and increased in FY
1992.
35
43
-------
Program Results
Tolerance fees collected in FY 1992 were
approximately $1.2 million and "earnings"
in FY 1992 were approximately $1.1
million. Earnings represent the value of
petitions that are 80% or more completed.
Before EPA can use the tolerance fees in the
revolving fund, the work on a petition must
be at least 80% completed.
Measure 1. The number of permanent
tolerance petitions completed.
Results: The number of permanent
tolerance petitions completed for section 408
raw agricultural commodities and section
409 food additives was 62 compared to a
target of 50. This represents final
determinations by the Agency concerning
permanent tolerance petition requests for
allowable levels of pesticide residues on raw
agricultural commodities and in food
additives. This is an increase of 11
completions compared to the 51 in FY 1991.
The number of permanent tolerance petition
reviews ("cycles")
completed was 411
compared to a target of
275.
80-
Tolerance Completions
60-
40-
20-1
FY90
FY91
FY92
36
44
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Asbestos Loan and Grant Program
The Asbestos Loan and Grant Program is
administered under the Asbestos School
Hazard Abatement Act (ASHAA) primarily
by the Office of Prevention, Pesticides and
Toxic Substances (OPPTS).
Program Description
The Act envisions a three-step process.
First, EPA is to make applications available
to public and nonprofit schools for
completion and submission to their State
Governor (or the Governor's Designee).
Second, Governors (or Designees) are
responsible for collecting, reviewing, and
submitting applications to EPA. Third,
EPA receives and reviews all applications,
and makes offers of financial assistance
available on the basis of the applicant's
asbestos hazard and demonstrated financial
need. The reauthorized statute mandates
that awards of financial assistance must be
made by April 30 of each year for which
Congress appropriates funding for the loan
and grant program.
In making its award decisions, the ASHAA
legislation instructs EPA to generate its own
national priority list from applications
received. A ranking method is then
employed to sort all proposed abatement
projects into categories depending on certain
characteristics of the asbestos-containing
building materials (ACBM). Only projects
with friable ACBM and some degree of
damage are considered for financial
assistance. If the project has damaged
friable material, the ranking method next
establishes four 'categories based on the
degree of damage to the ACBM, and
whether the material is exposed or located in
an air plenum. The four categories are:
This overview covers the entire Asbestos
Loan and Grant Program. However, the
loan portion of the program is the only part
that is a commercial activity and is the only
part of the program covered by the audited
financial statements.
Priority One - Significantly damaged friable
surfacing material which is exposed and/or
located in an air plenum.
Priority Two - Friable asbestos-containing
materials which are exposed or in an air
plenum and are defined by an AHERA -
accredited person as one of the following:
Damaged or significantly damaged
thermal system insulation.
Damaged surfacing material.
Damaged or significantly damaged
miscellaneous material which has been
isolated to protect human health and the
environment.
Priority Three - Damaged or significantly
damaged friable miscellaneous material
which does not necessitate isolation but is
exposed and/or located in an air plenum.
Priority Four - Any damaged or significantly
damaged friable material which is not
exposed or located in an air plenum.
Since the inception of the program, only
projects within hazard categories one and
two were within reach for funding before
funds were expended.
While the condition of the asbestos-
containing materials determines the priority
for consideration of a project, financial need
controls whether an award is offered, the
37
45
-------
award amount, and the loan/grant
composition of the award. In accordance
with the statute, monies are not made
available to any applicant which has
sufficient resources available to support an
asbestos abatement program. Financial
indicators used in determining eligibility for
both private and public schools include
Budget Per Pupil and the burden of
abatement costs on an LEA's operating
budget
Assistance may take the form of either a
grant or an interest-free loan, or some
combination of both. Loans may include up
to 100% of abatement project costs and
grants may cover up to 50% of costs.
ASHAA does not require that EPA provide
recipients the total funding necessary to
complete an abatement project.
ASHAA Loan/Grant Program Summary FY 92
TOTAL
APPLICANTS
LEA»
Seta*
flmjMs
196S
1107
5095
6548
1986
371
1211
2389
1987 -I'
292
1030
1967
1987-2
340
1015
1769
1988*
328
986
1722
1989
1110
2383
4125
1990
863
1856
3352
1991
406
991
1611
1992
362
712
1211
COM
$535 JU
$211.6 U
$162.5 U
$177.9 U
$170.3 M
(367.7 U
$403.011
$2305 U
$198.7 U
TOTAL QUALIFIED
APPLICATIONS"
LEAi
Piqwu
Com
5(7
1632
2647
$186.6 M
241
644
1247
193.6 U
136
406
774
$41.4 U
201
489
820
$94.7 M
185
441
721
$79.0 U
662
1361
2093
$1212 M
633
1300
2065
$2612U
246
557
887
$134.6 U
209
389
616
$126.1 U
70TA1AWAHDEES
LEAs
PlGJMS
PubfcAtmtf
LoanAwitri
198
340
417
$45 U
173
295
421
$4711
133
366
663
$34 JU
35
56
66
$8U
103
187
226
$2UU
231
327
401
$45 M
129
168
206
$43.4 U
123
201
272
$46JU
$39JU(88%)
$5.2 U (12%)
$33 JU (74%)
$11JU(26%)
$41.4 U (88%)
$5JU (12%)
$34JU(73%)
$12.7 U (27%)
$29.1 U (85%)
$5.2 U (15%)
$24.6 U (72%)
$9.7 U (28%)
$7.4 U (93%)
$0.6 U (07%)
$4JU(54%)
$3.7 U (46%)
$19JU (68%)
$2JU (12%)
$15.4 U (66%)
$7.2U(32%)
$40JU(90%)
$4.4 U (10%)
$25.4 U (56%)
$19.6 U (44%)
$35 JU (82%)
$7JU (18%)
$29 JU (69%)
$13.6 U (31%)
$2UU(63%)
$17.1 U (37%)
$33JU(72%)
$I2JU (28%)
4.7 U
3J5U
2.5 M
0.5 U
2.0 U
4.0 U
128
198
261
$543 U
TOTAL
12!
213
293
$346.11
MM
2.4 U
$47JU(87%) $290JI
$6JU (13%) IS5.6I
$397 U (73%) $240.2*
$14JU (27%) $105.91
3.1 U
' Unfunart upfcaiicns tarn 1906 wtr» tf» enfr prepas eawdwtd tor 1987.1 »«wdi. Unfunded MCtattara ton 1987-2iNr»ltwenl|rpro
~ ACM liiaW*. damtgrt. cipostd (or in in w ptonum). »nd r«ll*a« tfx»» vpkuu dtwiwM to b* 'quattetf' altof EPA's Metrical ratww.
i eonadMid tar 1988 mwd*.
38
46
-------
Financial Perspective
Since 1985, the ASHAA Loan and Grant
Program has awarded $346.1 million for
asbestos abatement projects. Approximately
$240.2 million of these awards were for
twenty year loans. Since the reauthorized
statute extended the program for an
additional five years, it is expected that
Congress will continue to appropriate
funding for the program through 1995.
Implementation of the Federal Credit
Reform Act of 1990 changed the way the
Agency uses appropriated funds for asbestos
loans. Prior to Credit Reform, the total
amount of the loan was funded by the
appropriation. As of FY 1992, only the
subsidy portion of the loan (actual cost to
the government) is funded by the
appropriation. The balance is funded with
money which is borrowed from the Treasury
and repaid as EPA collects loan repayments.
In FY 1992, grant and loan awards totalled
to $54.5 million, an increase of $8.2 million
Asbestos Fund Financial Trends
50-,
Asbestos Fund Awards FY 92
Total awards $54.5 million
Loan* (73%)
Grants (27%)
over FY 1991 awards. Of the FY 1992
awards, 73% were loans and 27% were
grants.
30
20
10
Both loan obligations and loan repayment
collections continued to increase from FY
1990 through FY 1992. However, grant
obligations declined
by less than $1
million in FY 1991
then increased by
$2 million in FY
1992.
Lome
Grants
lout
Based on loan
disbursements and
collection history,
the Agency projects
collecting $9.4
million in loan
repayments during
FY 1993, and
$10.5 million in
FY 1994.
FT 00
FY91
PY«2
39
47
-------
Program Results
The purpose of the
ASHAA program is to
reduce risk to school
children and employees
posed by asbestos. By
funding financially
needy LEAs with the
most hazardous asbestos
abatement projects, the
program has
a significant amount of
exposure to asbestos
fibers in school
buildings.
EPA's performance
measures for the
ASHAA program
include two measures:
ASHAA Projects Awarded
Two rounds of awards in 1987
800-
600 -I
4OH
200 -I
1988 t980 1907 1
1990 1991 1992
Measure 1.
of ASHAA
projects.
Number
awarded
Results: In FY 1992,
the ASHAA program
funded 261 projects in
LEAS across the
country.
Measure
Elimination
Exposure Hours.
of
Results: When the
projects currently
funded are completed,
EPA estimates that 3.1
million exposure hours
will be eliminated per
week.
Asbestos Exposure Hours Eliminated per Week
* nan
1986 1988 1987 1988 1989 1990 1991 1992
40
48
-------
MESSAGE FROM TELE CHIEF FINANCIAL OFFICER
We at the United States Environmental Protection Agency (EPA) are pleased to submit our
fiscal year 1992 financial statements. This is the first set of financial statements produced by
the Agency based on requirements of the Chief Financial Officers (CFO) Act of 1990 and
OMB (Office of Management and Budget) Bulletin No. 93-02.
EPA has spent considerable resources and approximately two years in the development of
these statements. We are grateful to the hard work of those persons in financial management
and throughout EPA who developed the performance measures, the principal statements, and
other support efforts that made publishing these statements on schedule possible. We are
also indebted to the excellent guidance and support provided externally by OMB and the
General Accounting Office, and internally by the program offices, the Office of the Inspector
General and the Office of Planning, Policy and Evaluation
EPA's fiscal year 1992 financial statements cover the financial condition of five funds:
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.
The financial position and results of operations of the five funds are presented on a combined
basis in four financial statements and related footnotes:
The Statement of Financial Position discloses the funds' assets, liabilities, and net
position.
The Statement of Operations and Changes in Net Position reflects the results of the
funds' operations for the reporting period, including the changes in the funds' net
position from the end of the prior reporting period.
The Statement of Cash Flows reflects the funds' gross cash receipts and cash
payments.
The Statement of Budget and Actual Expenses reconciles total expenses from the
financial statements with budgetary information about the status of EPA's
appropriations reported to OMB.
The same records and accounts traditionally used to prepare our required reports to the
Department of the Treasury were used to prepare these statements. The footnotes provide
detailed information and are an integral pan of these statements. In addition, there are
combining statements for each individual fund. The statements should be read with the
understanding that the payments of all liabilities can, in most circumstances, be terminated
for the convenience of the government.
41
49
-------
,
position and the results of onin^^ * "* H* *""* ab°Ut EPA'S fuunci»1
noted, these finance amnS^^Sl* *"* ^ ^ ""= Adminisoaor has
an, effectively aUocate3" ^ "* '""'"*' enSU8 *« °»r
^
move ^ard our goa,
R. Holmfes
42
50
-------
Principal Financial Statements
Contents
Financial Statements
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Statement of Operations and Changes in Net Position
Statement of Budget and Actual Expenses
Notes to Financial Statements
Note 1. Summary of Significant Accounting Events
Note 2. Fund Balances with Treasury
Note 3. Investments - Federal
Note 4. Loans Receivable, Net Non-Federal
Note 5. Equipment - Net
Note 6. Debt - Federal
Note 7. Other Funded Liabilities - Federal
Note 8. Total Net Position
Note 9. Program or Operating Expenses
Note 10. Other Expenses
Note 11. Prior Period Adjustments
Note 12. Non-Operating Changes
Note 13. Subsequent Events
Schedules
Schedule of Financial Position by Fund Activity
Schedule of Operations and Changes in Net Position
Schedule of Cash Flow by Fund Activity
43
51
-------
EPA Trust Funds, Revolving Funds and Commercial Activities
Combined Statement of Financial Position
As of September 3Ofi 1992 (Dollars in Thousands)
Assets
Financial Resources:
Fund Balances With Treasury (Note 2) $ 105,370
Investments - Federal (Note 3) 15,243
Accounts Receivable, Federal 28,358
Accounts Receivable, Non-Federal (net of $5,926 allowance) 122,406
Loans Receivable, Net-Non-Federal (Note 4) 125,520
Appropriated Amounts Held by Treasury (Note 1) 3,048,182
Other - Federal (Note 7) 19,704
Non-Financial Resources:
Advances and Prepayments, Non-Federal 940
Property, Plant and Equipment, Net (Note 5) 16,752
Amounts Held by Treasury for Future Appropriations (Note 1) 1.917.506
Total Assets $5.399.981
Liabilities and Net Postion
Liabilities
Accounts Payable, Non-Federal $ 105,349
Accounts Payable, Federal 126,947
Accrued Payroll and Benefits 7,065
Deferred Revenue, Non-Fedaral 261,082
Deferred Revenue - Federal 14,929
Amounts Held By Treasury for Future Appropriations (Note 1) 1,917,506
Debt - Federal (Note 6) 1,318
Other Funded Liabilities - Federal (Note 7) 19,704
Accrued Leave - Unfunded 10.723
Total Liabilities 2,464,623
Net Position
Revolving Fund Balances 4,914
Trust Fund Balances 2,767,729
Commercial Activities 173,438
Less: Future Funding Requirements (10.723)
Total Net Position (Note 8) 2.935.358
Total Liabilities and Net Position $5.399.981
The accompanying notes are an integral part of these statements.
-------
EPA Trust Funds, Revolving Funds and Commercial Activities
Combined Statement of Operations and Changes in Net Position
For the Year Ended September 30, 1992
(Dollars in Thousands)
Revenues and Financing Sources
Appropriations Expensed $ 1,496,485
Revenues from Services To the Public 25,890
Interest and Penalties, Non-Federal 5,310
Income from Overhead Allocation 45,069
Fines, Penalties and Other Revenues 220,685
Less: Receipts Returned To Treasury (192.647)
Total Revenues and Financing Sources 1,600,792
Expenses
Program or Operating Expenses (Note 9) 1,520,378
Depreciation and Amortization 711
Bad Debts and Writeoffs 5,472
Overhead Expenses from Allocation 45,069
Other Expenses (Note 10) 9_
Total Expenses 1,571,639
Excess of Revenues and Financing Sources 29,153
Prior Period Adjustments (Note 11) 7.273
Excess of Revenues and Financing Sources 36,426
Plus: Unfunded Expenses 1.092
Excess of Revenues and Financing Sources $ 37.518
Changes in Net Position
Net Position, Beginning Balance $ 2,338,239
Excess of Revenues and Financing Sources 37,518
Non-Operating Changes (Note 12) 559.601
Net Position, Ending Balance $ 2.935.358
The accompanying notes are an integral part of these statements.
53
-------
EPA Trust Funds, Revolving Funds and Commercial Activities
Combined Statement of Cash Flows
For the Year Ended September 30, 1992
(Dollars in Thousands)
Cash Flows from Operating Activities:
Excess of Revenues and Financing Sources
Adjustments Affecting Cash Flow:
Appropriations Expensed
Decrease (Increase) in Accounts Receivable
Decrease (Increase) in Loans Receivable
Decrease (Increase) in Other Assets
Increase (Decrease) in Accounts Payable
Increase (Decrease) in Other Funded Liabilities
Depreciation and Amortization
Other Unfunded Expenses
Other Adjustments
Total Adjustments
Net Cash Provided (Used) by Operating Activities
Cash Flows from Investing Activities:
Proceeds from Sales of Investments
Purchase of Equipment
Net Cash Provided (Used) by Investing Activities
Cash Flows from Financing Activities:
Appropriations (Current Warrants)
Transfers of Cash from Others
Deduct:
Withdrawals
Transfers of Cash to Others
Net Appropriations
Borrowing from the Treasury
Net Cash Provided (Used) by Financing Activities
Net Cash Provided (Used) - Total
Fund Balances .with Treasury, Beginning
Fund Balances with Treasury, Ending
$ 36,426
(1,130,071)
(45,917)
(14,385)
(30,627)
(324,353)
157,652
711
1,092
602
(1,385,296)
(1,348,870)
6,638
1.150
7,788
80,500
1,348,952
(196)
(57.728)
1,371,528
1.318
1.372.846
31,764
73.606
$ 105.370
The accompanying notes are an integral part of these statements.
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EPA Trust Funds, Revolving Funds and Commercial Activities
Statement of Budget and Actual Expenses
For the Year Ended September 30, 1992
(Dollars in Thousands)
Budaet
Actual
Obliaations
Program Name
Superfund
LUST
FIFRA
Tolerance Fund
Asbestos Loan Program
Totals
Resources
$ 1,944,698
76,966
30,873
4,820
109.509
$ 2,166.866
Direct
$ 1,729,094
75,403
4,821
-
100.071
$ 1.909.389
Reimbursed
$ 10,156
-
17,071
1,104
.
$ 28.331
Expenses
$ 1,432,145
69,391
47,500
4,732
17.871
$ 1.571.639
Budget Reconciliation:
Total Expenses
Add:
Capital Acquisitions
Other Expended Budget Authority
Less:
Depreciation and Amortization
Unfunded Annual Leave Expense
Interest Expense
Bad Debt Expense
Accrued Expenditures
Less Reimbursements
Accrued Expenditures, Direct
Financial Statement Adjustment, not on SF-133
Overhead Expenses from Allocation, not on SF-133
Unreconciled Difference
Accrued Expenditures, Direct - per SF-133
$ 1,571,639
1,150
123,707
711
1,092
7
5.472
1,689,214
28.331
1,660,883
(12,816)
(45,069)
(13)
$ 1.602.985
The accompanying notes are an integral part of these statements.
55
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EPA Trust Funds, Revolving Funds and Commercial Activities
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies:
A. Basis of Presentation
These financial statements have been prepared to report the financial
position and results of operations of the Environmental Protection
Agency (EPA) for the Hazardous Substance Superfund (Superfund)
Trust Fund, Leaking Underground Storage Tank Trust (LUST) Fund,
Asbestos Loan Program (a commercial activity), Revolving Fund for
Certification and Other Services (Tolerance) and the Reregistration
and Expedited Processing (FIFRA) Revolving Fund, as required by the
Chief Financial Officers Act of 1990. The reports have been
prepared from the books and records of EPA in accordance with the
form and content for entity financial statements specified by the
Office of Management and Budget (OMB) in Bulletin 93-02 and
EPA's accounting policies which are summarized in this note. These
statements are therefore different from the financial reports also
prepared by EPA pursuant to OMB directives that are used to
monitor and control EPA's use of budgetary resources.
B. Reporting Entities
EPA was created in 1970 by executive reorganization from various
components of other Federal agencies in order to better marshal and
coordinate federal pollution control efforts. The Agency is generally
organized around the media and substances it regulates air, water,
land, hazardous waste, pesticides and toxic substances.
The Superfund Trust Fund was authorized by the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)
to respond to hazardous substance situations or sites which threaten
human health and the environment. The Superfund Amendments
and Reauthorization Act (SARA) increased funding and gave the
program new responsibilities and authorities. There are three basic
components to the Superfund program: site assessment and cleanup
activities; enforcement; and support. Support includes facilities and
management, research and development and other non-direct site
work. These components are integrated and coordinated to ensure
the wisest use of Superfund money in order to achieve the greatest
possible cleanup. The program is funded from monies appropriated
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from general fund tax collections, interest on investments, fines and
cost recoveries. As authorized by Congress, Superfund Trust Fund
appropriations include certain amounts that are transferred to other
Federal agencies for authorized activities in support of the Superfund
program. The uses of these transfer appropriations are not reported
in the Superfund Trust Fund financial statements. Rather, they are
reported by the specific agencies that receive the transfer amount.
The Superfund Trust Fund is accounted for under Treasury symbol
number 8145.
The LUST Trust Fund was authorized by the amendment of the
Resource Conservation arid Recovery Act (RCRA) in 1986 to
implement a comprehensive regulatory program for underground
storage tanks and to provide funds for responding to releases from
leaking underground petroleum tanks. EPA oversees cleanup and
enforcement programs which are implemented by the States. Funds
are allocated to the States through cooperative agreements to clean
up those sites posing the greatest threat to human health and
environment. The program is financed by a 0.1 cent a gallon tax on
motor fuels, and is accounted for under Treasury symbol number
8153.
The Asbestos Loan Program was authorized by the Federal Credit
Reform Act of 1990 to conduct the activities defined by the
Asbestos School Hazard Abatement Act to manage asbestos building
materials in schools. As required by the Federal Credit Reform Act,
this program records all cash flows to and from the Federal
government in a non-budgetary account for direct loans obligated in
1992. The 1992 program is funded by subsidy appropriated from
the General Fund for the actual cost of financing the loans and by
borrowings from Treasury for the unsubsidized portion of the loan.
All cash flows from the Federal government are maintained in a
budgetary liquidating account for loans obligated before 1992 and
collections on those loans are recorded in a General Fund receipt
account. Loans obligated before 1992 are funded by General Fund
appropriations. Under provisions of the Federal Credit Reform Act,
the balance of any money collected on loan repayments authorized
by the Asbestos School Hazard Abatement Act of 1986 must be
returned to the general revenue fund at Treasury. Accounting
activity for the Asbestos Loan Program is accounted for under the
4321, 0118, 4322 and 2917 Treasury symbols.
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The FIFRA Revolving Fund was authorized in 1988 by amendments
to the Federal Insecticide, Fungicide and Rodenticide Act. The 1988
amendments mandated the accelerated reregistration of all products
registered prior to November 1, 1984. Congress authorized the
collection of fees to supplement appropriated funds for reregistration
and to fund expedited processing of certain pesticides. FIFRA also
includes provisions for registration of new pesticides, monitoring the
distribution and use of pesticides, issuing civil or criminal penalties
of violations, establishing cooperative agreements with the states,
and certifying training programs for users of restricted chemicals.
Appropriated funds, however, pay for these activities. The FIFRA
Revolving Fund is accounted for under Treasury symbol number
4310.
The Tolerance Revolving Fund was authorized in 1963 for the
deposit of tolerance fees. A tolerance is the maximum legal limit of
a pesticide residue on food commodities and animal feed.
Tolerances are established by EPA to prevent consumer exposure to
unsafe levels of pesticide residues. In 1954, Congress authorized
the collection of fees for raw agricultural commodities. Fees were
deposited to the Treasury general fund until 1963 when Congress
established the Revolving Fund for Certification and Other Services
(Tolerance Revolving Fund). The Department of Agriculture and the
Food and Drug Administration are responsible for enforcing
adherence to these tolerance levels. Funding is provided for Federal
services in establishing tolerances for residues of pesticide chemicals
in or on raw agricultural commodities. The Tolerance Revolving Fund
is accounted for under Treasury symbol number 4311.
The accompanying combined financial statements include the
accounts of all funds described in this note. Each of the funds
included in the financial statements charge some administrative costs
directly to the fund and charge the remainder of the administrative
costs to Agencywide appropriations. The following is a list of all the
programs and the corresponding administrative costs funded by
Agencywide appropriations (unaudited): (Dollars in Thousands)
58
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Superfund $ 17,586
LUST 238
Asbestos 902
FIFRA 22,811
Tolerance 3.532
Total $ 45.069
These amounts are included in the Income from Overhead Allocation
and the Overhead Expenses from Allocation line items of the relevant
financial statements.
In addition, the Superfund and LUST Trust Funds are allocated
general support service costs (such as rent, communications,
utilities, mail operations, etc.) that were initially charged to the
Agency's Salaries and Expense (S & E) appropriation. During the
year, these costs are allocated from the S & E appropriation to the
Superfund and LUST Trust Funds based on a ratio of direct labor
hours, using budgeted or actual full-time equivalent personnel
charged to these appropriations, to the total of all direct labor hours.
Agency general support service costs charges to the Superfund and
LUST Trust Funds may not exceed the ceilings established in the
Superfund and LUST Trust Fund appropriations. The related general
support service costs charged to the Superfund and LUST Trust
Funds were $ 17.59 million and $ .24 million
for FY 92.
C. Budgets and Budgetary Accounting
Congress annually adopts an appropriation amount to be available
until expended for the Superfund Trust Fund and for the LUST Trust
Fund. Transfer accounts for each Trust Fund have been established
for the purpose of carrying out the program activities. As EPA
disburses obligated amounts from the transfer accounts, EPA draws
down monies from the Trust Funds at Treasury to cover the amounts
being disbursed.
The Asbestos Loan Program is a commercial activity financed by a
combination of two sources: one for the long term cost of the loan
and another for the remaining non-subsidized portion of the loan.
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Congress annually adopts a one year appropriation, available for
obligation in the fiscal year for which it is provided, to cover the
estimated long term cost of the Asbestos loans. The long term costs
are defined as the net present value of the estimated cash outflows
associated with the loans less the estimated cash inflows. The
portion of each loan disbursement that does not represent long term
cost is financed under a permanent indefinite borrowing authority
established with the Treasury. The annual appropriation bill limits
the amount of obligations that can be made for direct loans. A
permanent indefinite appropriation is available to finance the costs
of subsidy reestimates that occur after the year in which the loan is
disbursed.
Funding of the FIFRA Revolving Fund and the Tolerance Revolving
Fund is provided by fees collected from industry to offset costs
incurred by EPA in carrying out these programs. Each year EPA
submits an apportionment request to OMB based on the anticipated
collections of industry fees.
D. Basis of Accounting
Transactions are recorded on an accrual accounting basis and a
budgetary basis. Under the accrual method, revenues are recognized
when earned and expenses are recognized when a liability is
incurred, without regard to receipt or payment of cash. Budgetary
accounting facilitates compliance with legal constraints and controls
over the use of Federal funds. All interfund balances and
transactions have been eliminated.
E. Revenues and Other Financing Sources
The Superfund and LUST Trust Funds receive the majority of funding
needed to support the program through appropriations that may be
used, within statutory limits, for operating and capital expenditures
(primarily equipment). Additional financing for the Superfund Trust
Fund is obtained through reimbursements from potentially
responsible parties.
Under Credit Reform provisions, the Asbestos Loan Program receives
funding to support the subsidy cost of loans through appropriations
which may be used within statutory limits. The Asbestos Direct
Loan Financing fund, an off-budget fund, receives funding to support
60
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the loan disbursements through collections from the Program fund
for the subsidized portion of the loan and through borrowing from
Treasury for the non-subsidized portion. The Asbestos Direct Loan
Liquidating fund received funding to support the pre-Credit Reform
loans through appropriations.
The FIFRA and the Tolerance Revolving Funds receive funding
through fees collected for services provided. The FIFRA Revolving
Fund also receives interest on invested funds.
Appropriations are recognized as revenues at the time they are used
to pay program or administrative expenses. Appropriations expended
for property and equipment are recognized as expenses when the
asset is consumed in operations. Other revenues are recognized
when earned, i.e., when services have been rendered.
F. Funds with the Treasury
EPA maintains no cash in commercial bank accounts. Cash receipts
and disbursements are processed by the Treasury. The funds
maintained with the Treasury are appropriated funds, Revolving
Funds and Trust Funds. These funds nave balances available to pay
current liabilities and finance authorized purchase commitments.
G. Investments in U. S. Government Securities
Investments in U. S. Government securities are maintained by the
Treasury and are reported at amortized cost net of unamortized
discounts. Discounts are amortized into interest income over the
term of the investments. The FIFRA Revolving Fund holds the
investments to maturity, unless they are needed to finance
operations of the fund. No provision is made for unrealized gains or
losses on these securities because, in the majority of cases, they are
held to maturity.
H. Accounts Receivable
Both the Comprehensive Environmental Response, Compensation,
and Liability Act (CERCLA) and the Superfund Amendments and
Reauthorization Act (SARA) provide for cost recovery of funds. Cost
recovery expenditures are expensed when incurred because there is
no assurance that these funds will be recovered.
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It is EPA's policy to record accounts receivable from potentially
responsible parties (PRPs) for Superfund site cleanup costs, incurred
by EPA, when a consent decree, judgement, or other binding
agreement is reached. These agreements are often obtained after
site cleanup costs are incurred and often in subsequent accounting
periods. It is EPA's position that until a consent decree is obtained,
potential receivables are not measurable or probable for collection.
The allowance for uncollectible PRP accounts receivable is
determined on a specific identification basis as a result of a case-by-
case review of receivables at the regional level.
EPA also records accounts receivable from states for a portion of
Superfund site cleanup actions within those states. Cost sharing
arrangements vary according to whether a site was privately or
publicly operated at the time of hazardous substance disposal, and
whether the EPA response action was removal or remedial. State
costs share agreements are usually 10 to 50 percent of site cleanup
costs. States may pay the full amount of state cost shares in
advance, or in incremental amounts throughout the cleanup project
term. No allowances for uncollectible state cost share receivables
have been recorded, because EPA has not had collection problems
on these arrangements.
Other Receivables for FIFRA represents interest receivable.
A detail of non-federal accounts receivable at September 30, 1992
is as follows:
Total Suomrfund LUST Asbestos FIFRA
PRP receivable* (including *8O,92O »80,920
I of $6,681)
Allowance on PRP receivable* (5,926) (5,926)
State cost share receivable* 47,368 47,317 51
Other receivable* 44 4 _; 12 22
122.406 122.316 51, iS 22
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Accounts Receivable - federal result primarily from interagency
agreements for services performed and receivables from EPA funds
other than Trust or Revolving Funds or commercial activities.
Total Suoerfund Asbestos
Inter-agency agreements $ 2,695 2,695
Intra-agency receivables 25,000 5,600 19,400
Other 663 663 :
$28.358 8.958 19.400
I. Loans Receivable
Loans are accounted for as receivables after funds have been
disbursed. The amount of Asbestos Loan Program loans obligated
but not disbursed are disclosed in Note 4. No allowance for
uncollectible amounts has been established for loans obligated prior
to October 1, 1991, because there has never been a default, and a
review of outstanding amounts does not indicate a potential default.
Loans receivable resulting from loans obligated on or after October
1, 1991 are reduced by an allowance equal to the present value of
the subsidy costs associated with these loans. The subsidy cost is
calculated based on the interest rate differential between the loans
and Treasury borrowings, the estimated delinquencies and defaults
net of recoveries offset by fees collected and other estimated cash
flows associated with these loans.
J. Amounts Held by Treasury
For the Superfund and LUST Trust Funds, cash available to EPA that
is not needed immediately for current disbursements remains in the
respective Trust Funds at Treasury for Treasury to invest. At the
end of the fiscal year, approximately $2.97 billion of Superfund and
$81 million of LUST funds remained in the Trust Funds to meet
EPA's disbursement needs. These amounts are classified as
appropriated amounts held by Treasury in the accompanying
statement of financial position.
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Treasury also maintains and manages trust funds for (1) the
collection of taxes on crude and petroleum, sales or use taxes on
certain chemicals, and environmental taxes on corporations,
designated for the Superfund program, and (2) taxes on motor fuels
designated for the LUST program, that have not yet been
appropriated to EPA or to other Federal agencies. EPA has no
control over these balances. These balances, $1,344,292,000 and
$573,214,000 for the Superfund Trust Fund and LUST Trust Funds,
respectively, are classified as amounts held by Treasury for future
appropriations and offset by a corresponding liability on the
accompanying statement of financial position.
K. Property and Equipment
The land and buildings which EPA uses is provided by the General
Services Administration, which charges a Standard Level Users
Charge (SLUG) that approximates the commercial rental rates for
similar properties. Equipment purchases are capitalized at cost if the
initial acquisition cost is $5,000 or more. Equipment with an
acquisition cost of less that $5,000 is expensed when purchased.
Equipment is depreciated using a modified straight line method over
a period of six years depreciating ten percent the first and last year
and twenty percent in years two through five.
L. Liabilities
Liabilities represent the amount of monies or other resources that are
likely to be paid by EPA as the result of a transaction or event that
has already occurred. However, no liability can be paid by EPA
without an appropriation or other collection of revenue for services
provided. Liabilities for which an appropriation has not been enacted
are classified as unfunded liabilities and there is no certainty that the
appropriations will be enacted. Liabilities of EPA, arising from other
than contracts, can be abrogated by the Government acting in its
sovereign capacity.
M. Interagency Agreements
The Superfund Trust Fund contracts for a wide range of goods and
services through interagency agreements with other Federal
agencies. At September 30, 1992, the balance of Accounts Payable
- Federal of $126,947,000 represents interagency agreements
64
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payable. The balance of Accounts Receivable - Federal includes
$2,695,000 relating to interagency agreements.
N. Deferred Revenue
Deferred revenue represents amounts paid to EPA by states, for
state cost share arrangements, or by other entities, for site cleanup
costs or other services, in advance of EPA's performing the services.
Such amounts may be paid voluntarily or under protest. Deferred
revenue is to be recognized as the related services are incurred.
However, amounts paid in protest are held until the protest is
resolved.
Components of the September 30, 1992 deferred revenue are as
follows:
Total Superfund FIFRA Tolerance
Non-Federal:
State cost share $115,419 115,419
arrangements
Site cleanup costs 133,142 133,142
Other 12.521 : 8.917 3.604
$261.082 248.561 8.917 3.604
Federal:
Interagency $ 14.929 14.929 - -
agreements
O. Borrowings Payable to the Treasury
Borrowings payable to the Treasury result from loans from the
Treasury to fund the Asbestos direct loans described in part B of this
note. Periodic principal payments are made to Treasury based on the
collections of loans receivable.
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P. Interest Payable to Treasury
The Asbestos Loan Program makes periodic interest payments to
Treasury based on its debt to Treasury. At the end of the fiscal
year, there was no outstanding interest payable to Treasury because
payment was made on September 30.
Q. Contingencies
EPA is a party in various administrative proceedings, legal actions,
and claims brought by or against it. These include:
Various personnel actions, suits, or claims brought
against the Agency by employees and others.
Various contract and assistance program claims
brought against the Agency by vendors, grantees and
others.
The legal recovery of Superfund costs incurred for
pollution cleanup of specific sites, to include the
collection of fines and penalties from responsible
parties.
Claims against recipients for improperly spent
assistance funds which may be settled by a reduction
of future EPA funding to the grantee or the provision of
additional grantee matching funds.
These matters, affecting the Superfund Trust fund, range individually
up to several million dollars. If such claims are successfully asserted
against EPA, they could have a material impact on the Superfund
Trust Fund financial statements. Total losses on these administrative
claims and litigation could amount to approximately $18.7 million
and $5 million, respectively. The ultimate outcome of these claims
and litigation cannot presently be determined. Accordingly, no
provision for any liability that may result upon adjudication has been
recognized in the accompanying financial statements.
In the opinion of EPA's management and General Counsel, the
ultimate resolution of any legal actions still pending will not
materially affect EPA's operations or financial position.
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R. Annual, Sick and Other Leave
Annual leave is accrued as it is earned and the accrual is reduced as
leave is taken. Each year, the balance in the accrued annual leave
account is adjusted to reflect current pay rates. To the extent
current or prior year appropriations are not available to fund annual
leave earned but not taken, funding will be obtained from future
financing sources. Annual leave expense was $1,092,000 in FY
1992. Sick leave and other types of nonvested leave are expensed
as taken.
S. Retirement Plan
The majority of EPA's employees participate in the Civil Service
Retirement System (CSRS), to which EPA makes matching
contributions equal to 7 percent of pay.
On January 1, 1987, the Federal Employees Retirement System
(FERS) went into effect pursuant to Public Law 99-335. Most
employees hired after December 31,1983, are automatically covered
by FERS and Social Security. Employees hired prior to January 1,
1984 were allowed to either join FERS and Social Security or remain
in CSRS, A primary feature of FERS is that it offers a savings plan
to EPA employees which automatically contributes 1 percent of pay
and matches any employee contribution up to an additional 4 percent
of pay. For most employees hired since December 31, 1983, EPA
also contributes the employer's matching share for Social Security.
EPA does not report CSRS or FERS assets, accumulated plan
benefits, or unfunded liabilities, if any, applicable to its employees.
Reporting such amounts is the responsibility of-the Office of
Personnel Management. Such data is not allocated to individual
departments and agencies.
T. Comparative Data
Comparative data for the prior year has not been presented because
this is the first year for which EPA prepared financial statements. In
future years, comparative data will be presented in order to provide
an understanding of changes in the financial position and operations
of EPA's trust funds, revolving funds and commercial activities.
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Note 2. Fund Balances with Treasury:
(Dollars in Thousands)
The Treasury maintains EPA's fund accounts and processes all of
EPA's receipts and disbursements. The available balances are for
payment of EPA's obligations under its various programs. The
restricted balances pertain to expired appropriated authority and
are unavailable for future obligations.
Total Available Restricted
Trust Funds:
«n
Superfund $ 65,200 $ 65,200 $ -
LUST 6.471 6.471 -
Sub-Total $ 71.671 $ 71.671 $ -
Commercial Activities:
Asbestos Loan
Program $ 29.877 $ 20.439 $ 9.438
Revolving Funds:
FIFRA $ 65 $ 65 $ -
Tolerance 3.757 3.757 _^_
Sub-Total $ 3.822 S 3.822 $ -
Total $ 105.370 $ 95.932 $ 9.438
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Note 3. Investments - Federal:
(Dollars in Thousands)
The FIFRA Revolving Fund invests monies in Federal securities
that can be bought and sold on the open market. The cost of the
investments is recorded at face value less interest to be earned
over the term of the investment (unamortized discount).
Face Unamortized Investments,
Value Discount Net
Federal Marketable
Securities $ 15.285 $ 42 $ 15.243
Note 4. Loans Receivable, Net - Non-Federal:
(Dollars in Thousands)
Asbestos Loan Program loans disbursed from obligations
made prior to FY 1992 would be reported net of an
allowance for estimated uncollectible loans, if an allowance
was considered necessary. Loans disbursed from
obligations made after FY 1991 are governed by the
Federal Credit Reform Act. The Act mandates that the
present value of the subsidy costs (i.e., interest rate
differentials, interest subsidies, anticipated delinquencies,
and defaults) associated with direct loans be recognized as
an expense in the year the loan is made. The net present
value of loans is the amount of the gross loan receivable
less the present value of the subsidy.
An analysis of loans receivable and the nature and amounts
of the subsidy and administrative expenses associated with
the loans is provided in the following sections.
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Loans Obligated Prior to FY 1992:
Allowance for
Loans Estimated Loans
Receivable, Uncollectible Receivable,
Gross Loans Net
Asbestos Loan
Program $123,197 $ - $123,197
Loans Obligated After FY 1991:
Loans Allowance for Loans
Receivable, Subsidy Cost Receivable,
Gross (present value) Net
Asbestos Loan
Program $ 3.336 $ 1.013 $ 2.323
Total: $ 126.533 $ 1.013 $
Subsidy Expenses for Post-1991 Loans:
Current Year's Loans
Interest Expected Fee
Total Differential Defaults Offsets
Asbestos Loan Program $ 1.013 $ 1.013 $ ; $ ;
Administrative Expenses:
Charged Directly to the Asbestos Loan Program $ 1,333
Additional Administrative Support Expenses
Charged to Other Appropriations 902
Total $ 2.235
Other Information: $24 million for obligations established prior to
FY 1992 and $34.5 million for obligations established after FY
1991 remain unpaid. No expenses were incurred in FY 1992 for
subsidy reestimates.
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Note 5. Equipment - Net:
(Dollars in Thousands)
EPA capitalizes equipment purchases with a value of five thousand
dollars or more and an estimated useful life of at least 2 years. The
Agency depreciates all capitalized equipment on a modified straight-
line basis over a period of 6 years, depreciating 10 percent the first
and last years and 20 percent in years 2 through 5. The Revolving
and Trust Funds normally do not reflect purchases of property other
than equipment.
Schedule of Equipment by Fund:
Total Suoerfund LUST FIFRA
Acquisition
Value $54,404 $ 53,357 $ 129 $ 918
Accumulated
Depreciation 37.652 37.263 . 45 344
Net Book Value $16.752 $ 16.094 $ 84 $ 574
Note 6. Debt - Federal:
(Dollars in Thousands)
Under the provisions of the Federal Credit Reform Act, borrowings
from the Treasury represent the portion of loan disbursements not
subsidized by appropriated funds.
Beginning New Ending
Balance Borrowings Repayments Balance
Asbestos Loan Program $ ; $ 1.318 $ ; $ 1.318
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Note 7. Other - Federal Assets and Other Funded
Liabilities - Federal:
The Federal Credit Reform Act authorizes EPA to borrow $21 million
from the Treasury for the Asbestos Loan Program. Of that amount,
$19.7 million remains available for EPA use. This unused authority
is reflected in the Other - Federal category in the Asset section of the
statement of financial position, offset by other funded liabilities.
Note 8. Total Net Position:
(Dollars in Thousands)
The total net position of EPA's Trust and Revolving Funds
and commercial activities represents the financial position of
these funds after consideration of the net effects of
operations in the current year and the cumulative effects -of
all prior years. Appropriated/Subsidy Capital represents the
funding authority provided by Congress, net of interagency
transfers. Invested Capital represents the book value, net of
depreciation, of EPA resources invested in equipment.
Cumulative Results of Operations represents the cumulative
deficit or surplus from the funds' operations.
Total Suoerfund LUST A«be«to« FIFRA
Appropriated/
Subsidy Capital $7,436,966 $7,154,509 $234,551 $47,906 $ -
Invested Capital 16,752 16,094 84 - 574
Cumulative Result*
of Operations (4,507,637) (4,488,797) (148,712) 125,532 4,340
Future funding
requirements - non-
actuarial (10.7231 (10.723) : ; ;
Total Net
Position $2.935.358 $2.671.083 $ 85.923 $173.438 $4.914
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Note 9. Program or Operating Expenses:
(Dollars in Thousands)
Operating Expenses by Object Total Suoerfund
Classification:
(1) Personnel Services and Benefits $ 221,357 $ 201,285
(2) Travel and Transportation 10,798 10,064
(3) Rental, Communication and Utilities 29,434 26,831
(4) Printing and Reproduction 1,554 1,436
(5) Contractual Services 964,884 955,390
(6) Supplies and Materials 3,856 3,610
(7) Equipment not Capitalized 12,221 11,489
(8) Grants, Subsidies and Contributions 236,779 158,794
(9) Insurance Claims and Indemnities 15 15
(10) Accrued Expenses' 39.480 39.668
Total Expenses by Object Class $ 1.520.378 $ 1.408.582
"Accrued expenses are not recorded by object class in the
accounting system due to the volume of data entry required.
Accrued expenses are the net of the reversal of FY 91 accruals and
FY 92 accruals.
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LUST Asbestos FIFRA Tolerance
$ 4,558 $ 53 $ 14,261 $ 1,200
536 - 198
554 - 2,049
49 1 68
2,253 1,133 6,108
53 193
227 - 505
60,832 15,775 1,378
55 - (243) -
$ 69.117 $ 16.962 $ 24.517 $ 1.200
^^^^M^^^B ^^^^^K^i^^ ^^^^B-^£_^^^^_ ^^^Eaaaaa
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Note 10. Other Expenses:
(Dollars in Thousands)
As a matter of policy, EPA expenses discounts lost during the fiscal
year as interest expense. EPA pays Treasury interest on the Asbestos
loan borrowings. The Unfunded Leave Expense reflects leave earned
but not taken during the current fiscal year. Funding is to be provided
by future appropriations. By contrast, sick leave and other types of
leave are expensed as taken.
Total Superfund Asbestos
Discounts Lost $ 2 $ 2 $ -
Interest Paid to Treasury 2 z 2
Total $9. $2 $ 7
Note 11. Prior Period Adjustments:
(Dollars in Thousands)
Prior to FY 1992, interest earnings on investments for FIFRA were
included as part of unearned advances. Effective October 1, 1991,
these earnings were reclassified to Cumulative Results of Operations.
Reclassification of Interest Earnings - FIFRA Revolving Fund $ 3,699
In addition, unrecognized prior year earnings for reimbursable
work were recorded as an adjustment effective October 1,
1991.
Earnings on Reimbursable Activity - Superfund Trust Fund 3,574
Effective October 1, 1991, the Superfund and LUST Trust
Funds removed unreconciled and unidentified general ledger
balances resulting from the 1988 financial accounting system
conversion by recording adjustments to equity accounts.
Correction, system conversion errors - Superfund Trust Fund 26,044
Correction, system conversion errors LUST Trust Fund 4.704
$ 38.021
76
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Note 12. Non-Operating Changes:
(Dollars in Thousands)
The Non-Operating Changes resulted from funds transferred-in from
Treasury, funds collected and returned to Treasury, statement of
financial position ^classifications, and other non-operating increases
and decreases.
Total Suoerfund LUST Asbestos FIFRA
$642,483
8.384
650,867
91.266
$512,852
7.128
519,980
13.908
$75,000
75,000
69.154
$54,631 $ -
1.256 _;
55,887
8.008 196
$5.846 $47.879 $(196)
Increases:
Transfers-in
Other Increases
Total Increases
Total Decreases
Net Non-Operating
Changes $559.601 $506.072
Note 13. Subsequent Events:
During October 1992, the Agency received a 19% equity interest in the
reorganized Uniroyai Technology Company, consisting of 1.9 million shares
of stock, valued at approximately $6.9 million. This settlement transaction
was accepied in lieu of $27.3 million of costs incurred as a result of
Superfund actions at 20 sites. The Agency does not intend to exercise
ownership rights related to this stock, but instead will convert these
marketable equity securities to cash as soon as practicable. In prior similar
transactions, this has been accomplished in less than one year. The $27.3
million receivable from Uniroyai Technology Company was not accrued as of
September 30, 1992. The settlement of this receivable will be recorded as
a fiscal year 1993 transaction.
These matters, affecting the Superfund Trust fund, range individually up to
several million dollars. If such claims are successfully asserted against EPA,
they could have a material impact on the Superfund Trust Fund financial
statements. Total losses on these administrative claims and litigation could
amount to approximately $18.7 million and $5 million, respectively. The
ultimate outcome of these claims and litigation cannot presently be
determined. Accordingly, no provision for any liability that may result upon
adjudication has been recognized in the accompanying financial statements.
77
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EPA Trust Funds, Revolving Funds and Commercial Activities
Combining Statement of Financial Position
As of September 30, 1992 (Dollars in Thousands)
Assets
Financial Resources:
Fund Balances With Treasury (Note 2)
Investments - Federal (Note 3)
Accounts Receivable, Federal
Accounts Receivable, Non-Federal (Net of $5,926 allowance)
Loans Receivable, Net-Non-Federal (Note 4)
Appropriated Amounts Held by Treasury (Note 1)
Other - Federal (Note 7)
Non-Financial Resources:
Advances and Prepayments, Non-Federal
Property, Plant and Equipment, Net (Note 5)
Combined
Balances
$ 105,370
15,243
28,358
122,406
125,520
3,048,182
19,704
940
16,752
Total Assets
Liabilities and Net Position
$ 5.399.981
Superfund
Trust Fund
$ 65,200
8,958
122,315
2,967,460
678
16,094
Amounts Held By Treasury for Future Appropriations (Note 1) 1.917.506 1.344.292
4.524.997
Liabilities
Accounts Payable, Non-Federal
Accounts Payable, Federal
Accrued Payroll and Benefits
Deferred Revenue, Non-Federal
Deferred Revenue - Federal
105,349
126,947
7,065
261,082
14,929
Amounts Held by Treasury for Future Appropriations (Note 1) 1,917,506
Debt - Federal (Note 6)
Other Funded Liabilities - Federal (Note 7)
Accrued Leave - Unfunded
Total Liabilities
Net Position
Revolving Fund Balances
Trust Fund Balances
Commercial Activities
Less Future Funding Requirements
Total Net Position (Note 8)
Total Liabilities and Net Position
1,318
19,704
10.723
2,464,623
4,914
2,767,729
173,438
(10.723)
2.935.358
5.399.981
102,212
126,733
6,464
248,561
14,929
1,344,292
10.723
1,853,914
2,681,806
(10.723)
2.671.083
$ 4.524.997
The notes to the Combined financial statements are an integral part of these statements.
78
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LUST Asbestos FIFRA Tolerance
Trust Fund Commercial Activity Revolving Fund Revolving Fund
$ 6,471 $ 29,877 $ 65 3,757
15,243
19,400
51 12 28
125,520
80,722
19,704
247 - 15
84 - 574
573.214 - - :
660.789 194.513 15.925 3.757
1,503 53 1,428 153
5 - 209
144 - 457
8,917 3,604
573,214
1,318
19,704
574,866 21,075 11.011 3,757
4,914
85,923 -
173,438
85.923 173.438 4.914 =
$ 660.789 $ 194.513 $ 15.925 $ 3.757
79
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EPA Trust Funds, Revolving Funds and Commercial Activities
Combining Statement of Operations and Changes in Net Position
For the Year Ended September 30, 1992
(Dollars in Thousands)
Revenues and Financing Sources
Appropriations Expensed
Revenues from Services To the Public
Interest and Penalties, Non-Federal
Income From Overhead Allocation
Fines, Penalties and Other Revenues
Less: Receipts Returned to Treasury
Total Revenues and Financing Sources
Expenses
Program or Operating Expenses (Note 9)
Depreciation and Amortization
Bad Debts and Writeoffs
Overhead Expenses from Allocation
Other Expenses (Note 10)
Total Expenses
Excess of Revenues and Financing Sources
Prior Period Adjustments (Note 11)
Excess of Revenues and Financing Sources
Plus: Unfunded Expenses
Excess of Revenues and Financing Sources
Changes in Net Position
Net Position, Beginning Balance
Excess of Revenues and Financing Sources
Non-Operating Changes (Note 12)
Net Position, Ending Balance
Combined
Balances
$ 1,496,485
25,890
5,310
45,069
220,685
(192.647)
1,600,792
1,520,378
711
5,472
45,069
a
1,571,639
$ 2,338,239
37,518
559.601
$ 2.935.358
Super-fund
Trust Fund
$ 1,408,040
4,514
17,586
200,596
(184.639)
1,446,097
1,408,582
520
5,455
17,586
g
1,432.145
29,153
7.273
36,426
1 .092
37.518
13,952
3.574
17,526
1.092
$ 18.618
2,146,393
18,618
506.072
s 2.671.083
The notes to the Combined financial statements are an integral part of these statements.
30
-------
LUST Asbestos FIFRA Tolerance
Trust Fund Commercial Activity Revolving Fund Revolving Fund
$69,153 $19,292 $ $ .
24,690 1,200
13 783
238 902 22,811 3,532
20,089
: (8.008) - .
69,391 32,288 48,284 4,732
69,117 16,962 24,517 1,200
19 - 172
17 -
238 902 22,811 3,532
- 7 : _-
69,391 17.871 47,500 4,732
14,417 784
- - 3.699 -
14,417 4,483
4.483
80,077 111,142 627
14,417 4,483
5.846 47.879 (196)
$ 85.923 $ 173.438 $ 4.914 $
31
-------
EPA Trust Funds, Revolving Funds and Commercial Activities
Combining Statement of Cash Flows
For the Year Ended September 30, 1992
(Dollars in Thousands)
Combined Superfund
Balances Trust Fund
Cash Flows from Operating Activities:
Excess of Revenues and Financing Sources
Adjustments Affecting Cash Flow:
Appropriations Expensed
Decrease (Increase) in Accounts Receivable
Decrease (Increase) in Loans Receivable
Decrease (Increase) in Other Assets
Increase (Decrease) in Accounts Payable
Increase (Decrease) in Other Funded Liabilities
Depreciation and Amortization
Other Unfunded Expenses
Other Adjustments
Total Adjustments
Net Cash Provided (Used) by Operating Activities
Cash Flows from Investing Activities:
Proceeds from Sales of Investments
Purchase of Equipment
Net Cash Provided (Used) by 'investing Activities
Cash Rows from Financing Activities:
Appropriations (Current Warrants)
Transfers of Cash from Others
Deduct:
Withdrawals
Transfers of Cash to Others
Net Appropriations
Borrowing from the Treasury
Net Cash Provided (Used) by Financing Activities
Net Cash Provided (Used) - Total
Fund Balances with Treasury, Beginning
Fund Balances with Treasury, Ending
§ 36,426 $ 17,526
(1,130,071) (1,041,626)
(45,917) (45,595)
(14,385)
(30,627)
(324,353)
157,652
711
1,092
602
(13,605)
(326,868)
175,395
520
1,092
(1.719)
(1,385,296) (1,252,406)
(1,348,870) (1,234,880)
6,638
1.150
1.316
7,788
80,500
1,348,952
(196)
(57.728)
1,316
1,295,639
(49.720)
1,371,528 1,245,919
1.318 :_
1.372.846 1.245.919
31,764
73.606
12,355
52.845
s 105.370 $ 65.200
The notes to the combined financial statements are an integral part of these statements.
82
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LUST
Trust Fund
Asbestos
Commercial Activity
$ 14,417
FIFRA
Revolving Fund
$ 4,483
Tolerance
Revolving Fund
(69,153)
(290)
-
(223)
2,279
(153)
19
17
(67,504)
(67,504)
(47)
(19,292)
(5)
(14,385)
-
53
-
-
2.466
(31,163)
(16,746)
-
.
(27)
-
(16,799)
183
(17,584)
172
(162)
(34,217)
(29,734)
6,638
(119)
.
_
.
_
.
(6)
-
(6)
(6)
.
(47)
6,519
80,500
80,500
80.500
12,949
(6.478)
$ 6.471
53,313
(8.008)
45,305
1.318
46.623
29.877
(196)
(196)
(196)
(23,411)
23.476
(6)
3.763
$3.757
83
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84
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)RT ON INTERNAL CONTROL STRUCTURE
The Administrator
U.S. Environmental Protection Agency
We were charged with auditing the financial statements of the
Pesticides Reregistration and Expedited Processing Fund (FIFRA
Fund) and the Revolving Fund for Certification and Other Services
(Tolerance Fund) as of and for the year ended September 30, 1992.
We have issued our report thereon dated April 7, 1993, in which
we disclaimed an opinion on the financial statements for these
two funds.
In planning and performing our audit of the FIFRA and Tolerance
Funds, we considered the Environmental Protection Agency's (EPA)
internal control structure. The purposes of this consideration
were: (i) to determine our auditing procedures for the purpose
of expressing our opinion on the financial statements; and (ii)
to determine whether the internal control structure meets the
objectives identified in the following paragraph. Our
consideration of internal controls included obtaining an
understanding of the significant internal control structure
policies and procedures and assessing the level of control risk
relevant to all significant cycles, classes of transactions, or
account balances. For those significant internal control
structure policies and procedures that have been properly
designed and placed in operation, we performed tests to assess
more fully whether the controls are effective and working as
designed. In addition to the work we performed, we relied on
internal control testing performed by Leonard G. Birnbaum and
Company, Certified Public Accountants, as part of its audit of
EPA's financial statements for the Superfund Trust Fund, Leaking
Underground Storage Tank Trust Fund and the Asbestos Loan Program
as of and for the year ended September 30, 1992.
EPA's management is responsible for establishing and maintaining
an internal control structure. In fulfilling this
responsibility, estimates and judgements by management are
required to assess the expected benefits and related costs of
internal control structure policies and procedures. The
objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that:
(i) transactions, including obligations and costs, are executed
in compliance with laws and regulations that could have a direct
and material effect on the financial statements, and any other
laws and regulations that the Office of Management and Budget
(OMB) or our office have identified as being significant for
which compliance can be objectively measured and evaluated; (ii)
funds, property and other assets are safeguarded against loss
from unauthorized use or disposition; and (iii) transactions are
85
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properly recorded and accounted for to permit the preparation of
reliable financial reports in accordance with applicable
accounting policies and to maintain accountability over the
assets.
For purposes of this report, we have classified the significant
internal control structure policies and procedures into the
following categories:
Budget
Receipts
Property
Expenditures
Payroll
Financial Reporting
Investments
OMB Bulletin 93-06, "Audit Requirements for Federal Financial
Statements," contains certain requirements with respect to the
performance measurement information reported in the overview
section of the financial statements. Auditors are to obtain an
understanding of the internal control structure policies and
procedures designed to ensure that data that support the measures
are properly recorded and accounted for to permit the preparation
of reliable and complete performance information. Auditors are
also required to assess the risk that the controls in place would
not prevent, detect or correct a material misstatement of the
information. Our audit work in the area of performance measures
was limited to comparing the financial information included in
the overview with information contained in EPA's accounting
records and making inquiries of management regarding the
presentation of the overview.
MATERIAL WEAKNESSES
We noted the following matters involving the internal control
structure and its operation that we consider to be material
weaknesses under standards established by the American Institute
of Certified Public Accountants and OMB Bulletin 93-06. Material
weaknesses are reportable conditions in which the design or
operation of the specified internal control structure elements
does not reduce to a relatively low level, the risk that errors
or irregularities in amounts that would be material in relation
to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course
of performing their assigned functions.
86
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1. WE WERE UNABLE TO RENDER AN OPINION ON THE FIFRA AND
TOLERANCE FUND STATEMENTS OF FINANCIAL POSITION BECAUSE MATERIAL
UNSUPPORTED ADJUSTMENTS WERE MADE TO THE GENERAL LEDGER
Financial Management Division (FMD) personnel made 25 unsupported
adjustments totaling $181.3 million and $21.2 million,
respectively, to the FIFRA and Tolerance Fund general ledgers
during fiscal 1992. As a result, we were unable to determine if
the Statements of Financial Position for the two funds were
fairly presented. Further, without adequate support for these
material adjustments, Agency management also lacked assurance
that the financial records for these funds contained accurate
reliable information. Adjustments to the accounting records for
the FIFRA and Tolerance Funds were necessary due to weaknesses in
the Agency's accounting procedures and Integrated Financial
Management System (IFMS). Some of these adjustments were
necessary in order to correct errors in general ledger balances
that had occurred in prior years when FMD personnel did not have
the reports they needed to monitor the accuracy of transactions
entered into the Agency's accounting records. In addition, some
of the adjustments were necessary because the accounting
transaction codes used during the year to post transactions to
the general ledger were designed for appropriated, rather than
revolving funds. These adjustments and IFMS weaknesses not only
prevented us from being able to render an opinion on the
Statements of Financial Position for the FIFRA and Tolerance
Funds, but also contributed to delays in closing the Agency's
accounting records and preparing the financial statements. The
Agency's accounting records for fiscal 1992 were not closed until
December 1992 and preparation of the financial statements was not
completed until March 1993, six months after the close of the
fiscal year.
2. SOME FIFRA YEAR-END ACCOUNTS PAYABLE AND ACCRUED LIABILITY
ADJUSTMENTS WERE INCORRECTLY CALCULATED OR LACKED SUPPORTING
DOCUMENTATION
The methods used by one finance office to compute year-end
adjustments resulted in the overstatement of FIFRA accounts
payable by $135,620 and the understatement of FIFRA accrued
liabilities by $663,635. Accounting controls were not in place
to identify and correct these errors. In addition, another
finance office could not provide adequate documentation to
support year-end accounts payable and accrued liability adjusting
entries of $141,223 that were made to the FIFRA Fund. Without
support for these adjustments, we were unable to determine if
these amounts were fairly stated.
87
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3. PROPERTY PURCHASED WITH FIFRA FUNDS WAS NOT PROPERLY
CAPITALIZED ,
Property purchased with FIFRA funds was not properly capitalized
in the Agency's accounting records. This occurred because the
process the Agency used to capitalize property did not identify
all property which should have been capitalized, and program
office personnel assigned incorrect object class codes to
obligating documents. In addition, as the Agency has reported in
its Federal Managers Financial Integrity Act (FMFIA) reports, the
property accountability system is not integrated with the
Agency's accounting system. Since neither system contained
sufficient information to account for property, we were unable to
audit the FIFRA property, plant and equipment balance of $574,000
included in the fiscal 1992 Statement of Financial Position for
the fund.
Attachment 1 describes each of these material weaknesses in more
detail and includes the Environmental Protection Agency's
(Agency) actions to correct the weaknesses along with additional
corrective actions we are recommending.
REPORTABLE CONDITIONS
We also identified the following reportable conditions.
Reportable conditions involve matters coming to our attention
related to significant deficiencies in the design or operation of
the internal control structure that, in our judgement, could
adversely affect the entity's ability to ensure that the
objectives of the internal control structure, as previously
defined, are being achieved.
1. THE OFFICE OF PESTICIDE PROGRAMS DID NOT PERFORM A COMPLETE
REVIEW OF UNLIQUIDATED OBLIGATIONS
During fiscal 1992, the Office of Pesticide Programs (OPP) did
not conduct a complete review of its unliquidated obligations.
When we looked at OPP's review of unliquidated obligations
maintained by two finance offices we found that OPP had not
reviewed any of the unliquidated obligations maintained by one
finance office, and only a portion of those maintained by the
other finance office. The reviews were not performed because a
low priority was placed on complying with this requirement.
During fiscal 1992, OPP had $345,588 of open FIFRA obligations
for which there was no activity in over a year. When there has
been no activity in over a year on an obligation it is likely
that the obligation is no longer valid. By not performing the
required reviews of unliquidated obligations, OPP missed an
opportunity to identify no-year FIFRA funds that could be
deobligated and made available to fund other critical activities
associated with pesticides reregistration.
88
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2. IMPROVEMENTS ARE NEEDED IN CONTROLS OVER PROPERTY
LOCATED IN THE OFFICE OF PESTICIDE PROGRAMS
We also noted various weaknesses in controls over property
located in OPP. Required annual property inventories were not
completed in a timely manner, custodial officers did not prepare
documentation to support property transfers, and property was not
always recorded in the Agency's Personal Property Accountability
System. Without these key internal controls in place, management
lacked reasonable assurance that property purchased with OPP
funds, including FIFRA funds, was adequately safeguarded against
loss from unauthorized use or disposition.
Attachment 2 describes each of these reportable conditions in
more detail.
We will be reporting other less significant matters involving the
internal control structure and its operation in a separate
management letter addressed to the Comptroller and the Director
of the Office of Pesticide Programs.
UNCORRECTED SIGNIFICANT FINDINGS
AND RECOMMENDATIONS
As required by OMB Bulletin 93-06, attachment 3 presents the
status of known but uncorrected significant findings and
recommendations from prior audits that affect the current audit
objectives.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control
structure that might be reportable conditions or material
weaknesses as defined above. In addition, because of inherent
limitations in any internal control structure, errors or
irregularities may nevertheless occur and not be detected. Also,
projection of any evaluation of the structure to future periods
is subject to the risk that procedures may become inadequate
because of changes in conditions or that the effectiveness of the
design and operation of policies and procedures may deteriorate.
This report is intended for the information of Congress, OMB, and
EPA management. This restriction is not intended to limit the
distribution of this report, which is a matter of public record.
Kenneth A. Konz .
Assistant Inspector General for Audit
U.S. Environmental Protection Agency
April 7, 1993
89
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90
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ATTACHMENT 1
Page 1 of 19
MATERIAL WEAKNESSES
1. WE WERE UNABLE TO RENDER AN OPINION ON THE FIFRA AND
TOLERANCE FUND STATEMENTS OF FINANCIAL POSITION BECAUSE MATERIAL
UNSUPPORTED ADJUSTMENTS WERE MADE TO THE GENERAL LEDGER
Financial Management Division (FMD) personnel made 25 unsupported
adjustments totaling $181.3 million and $21.2 million,
respectively, to the FIFRA and Tolerance Fund general ledgers
during fiscal 1992. As a result, we were unable to determine if
the Statements of Financial Position for the two funds were
fairly presented. Further, without adequate support for these
material adjustments, Agency management also lacked assurance
that the financial records for these funds contained accurate
reliable information. Adjustments to the accounting records for
the FIFRA and Tolerance Funds were necessary due to weaknesses in
the Agency's accounting procedures and Integrated Financial
Management System (IFMS). Some of these adjustments were
necessary in order to correct errors in general ledger balances
that had occurred in prior years when FMD personnel did not have
the reports they needed to monitor the accuracy of transactions
entered into the Agency's accounting records. In addition, some
of the adjustments were necessary because the accounting
transaction codes used during the year to post transactions to
the general ledger were designed for appropriated, rather than
revolving funds. These adjustments and IFMS weaknesses not only
prevented us from being able to render an opinion on the
Statements of Financial Position for the FIFRA and Tolerance
Funds, but also contributed to delays in closing the Agency's
accounting records and preparing the financial statements. The
Agency's accounting records for fiscal 1992 were not closed until
December 1992 and preparation of the financial statements was not
completed until March 1993, six months after the close of the
fiscal year.
Financial System Reporting Weaknesses Hampered EPA's Ability To
Monitor The Accuracy Of Financial Transactions
During fiscal 1989, EPA converted to a new automated accounting
system, IFMS. IFMS had not been fully tested before
implementation and was not brought on-line in parallel with the
old system. As a result, numerous problems with the new system
surfaced. According to FMD personnel, one of the problems that
had a significant impact on the accuracy of the various general
ledger account balances was the lack of reports to monitor the
validity of transaction postings. This inability to review and
correct transactions led to material adjustments being made to
91
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ATTACHMENT 1
Page 2 of 19
the general ledger at fiscal year-end so that EPA's cash account
would agree with Treasury's records. These adjustments were
recorded in the Year-End Prepaid Adjustment Account. The Year-
End Prepaid Adjustment Account balance was then shown as a
negative asset on year-end financial reports submitted to
Treasury.
At the end of fiscal 1990, the balance in the Year-End Prepaid
Adjustment Account for the FIFRA Fund was a negative $19.7
million. In other words, EPA's records showed the Fund had a
cash balance of $19.7 million more than what Treasury's records
showed. This difference was significant since total assets for
this fund at the end of fiscal 1990 were only $11.6 million. At
the end of fiscal 1991, the balance in the account had been
reduced to a negative $16.8 million while total assets for the
fund were $29.2 million.
Material Unsupported Adjustments Were Made During The
Reconciliation Of The FIFRA Year-End Prepaid Adjustment Account
During fiscal 1992, FMD personnel attempted to reconcile the
negative $16.8 million beginning balance in the Year-End Prepaid
Adjustment Account. Thirteen adjusting vouchers were prepared
consisting of $20 million in debits that decreased the balance of
the account and $1.5 million in credits that increased the
balance of the account.
The only documentation for most of the vouchers was a short
explanation of the entry on the face of the voucher. For
example, one voucher which debited or decreased the prepaid
account by $17.6 million contained this explanation: "To adjust
general ledger proprietary accounts based on analysis of FY 89,
90 and 91 cash collections, interest collections and
disbursements for FIFRA, and to reclassify equity accounts." No
source documentation or analysis was available to support this
entry. Without adequate evidential matter, we could not verify
the validity of this $17.6 million adjustment.
Three of the thirteen adjusting vouchers prepared to reconcile
the Year-End Prepaid Adjustment Account involved corrections
related to payroll disbursements for fiscal years 1989 through
1991. Very limited documentation existed for these vouchers.
Documentation attached to the vouchers stated simply that the
adjustments were based on assumptions for prior years' activity
and were not fully supported. These payroll related entries
moved $846,213 from the FIFRA Year-End Prepaid Adjustment Account
to the Salaries and Expense Prepaid Adjustment Account. Again,
without sufficient evidence we were unable to verify the validity
of this adjustment.
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ATTACHMENT 1
Page 3 of 19
Four other adjusting vouchers totaling $2.8 million were prepared
by the Financial Reports and Analysis Branch (FRAB) and sent to
the Headquarters Accounting Operations Branch (HAOB) for input
into IFMS. These four vouchers also lacked adequate supporting
documentation. When we asked HAOB personnel about these four
vouchers, they could not explain the purpose of the entries or
the supporting documentation. They said the entries were made at
the recommendation of FRAB, which also supplied the supporting
documentation. HAOB personnel said they made the entries relying
on FRAB's assurance that the entries were proper. Based on the
supporting documentation provided, we could not determine if
these entries were proper.
At our request, FMD personnel made four attempts to recreate, as
a way of documenting, the process they went through to reconcile
the Year-End Prepaid Adjustment Account. The rationale they
eventually came up with to support several of the entries sounded
logical, but they were not able to provide us with adequate
support for the entries that they had made. Without this
supporting documentation, we could not determine if the
adjustments made were proper.
The Comptroller General's internal control standards require
written evidence of all pertinent aspects of transactions and
other significant events. These standards require transactions
to be clearly documented with supporting documentation readily
available for examination. EPA's internal policies contained in
Comptroller Policy Announcement No. 93-02 Policies for
Documenting Agency Financial Transactions, include similar
requirements. This policy requires that all financial
transactions, including standard and journal voucher transactions
be supported by adequate source documentation that is easily
accessible. Adequately documented is defined in the policy as
"an independent individual competent in accounting and possessing
reasonable knowledge of EPA's operations should be able to
examine the documentation and reach substantially the same
conclusions as the persons who made and/or approved the entry."
Easily accessible is defined as "the entry should contain
sufficient information to identify the supporting documentation,
and the documentation should be organized and filed in a manner
to facilitate its retrieval."
There are legitimate and necessary reasons for making adjustments
to accounting records, such as correcting errors, posting
accruals to recognize expenses and related liabilities, or
writing off assets which are no longer of value. However,
without adequate safeguards, adjustments to accounting records
could also be used for any number of illegitimate or improper
purposes, such as covering up defalcations, hiding losses of
93
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ATTACHMENT 1
Page,4 of 19
assets, or masking errors. Accordingly, it is essential to
establish internal controls which ensure that only legitimate,
authorized adjustments are made and that clear documentation is
maintained to explain their basis and purpose. Such
documentation allows for detection and systematic correction of
errors and documents that adjustments were made for a valid
purpose and were authorized and executed by personnel acting
within the scope of their authority. It also allows accounting
personnel to reconstruct what was done in the event that they
need to, for example if there is a turnover of personnel.
Additional Unsupported Adjustments Were Made During The Closing
Process
During the closing process, accounting personnel made additional
adjusting entries. Twelve adjusting entries totaling $167.6
million were made to the FIFRA Fund. Nine of the twelve entries
lacked supporting documentation; three of the nine stated only
that they were to "realign FY funding to agree with
reimbursables," and to "offset the effect closing will have on
FIFRA." In addition, five were not signed by the preparer, and
none contained indication of supervisory review. Having all
transactions clearly documented and properly authorized helps
ensure that only valid transactions and other events are entered.
EPA Comptroller Policy Announcement No. 91-03 Journal and
Standard Voucher Documentation, requires that all journal and
standard vouchers contain a description of the action taken, have
appropriate supporting documentation attached, and include dated
signatures and titles of both the originator and the supervisory
financial management officer or designee. FMD's fiscal 1992 year-
end closing memorandum to financial management officers also
stresses the importance of documentation being developed and
approved by appropriate supervisors for adjusting entries.
Many of these adjustments were required because Accounting
Transaction Codes used during the year to post transactions to
the general ledger were not tailored to accounting for revolving
funds. In addition, the Year-End Account Table in IFMS that was
used to close the general ledger contained errors. As a result,
budgetary and proprietary accounts were not correct and had to be
manually adjusted, increasing the potential for errors. Problems
with incorrect accounting transaction codes and year-end closing
tables had existed for a number of years, and had required
adjustments being made to the general ledger during the closing
process. However, no attempt had been made to correct those
errors. After adjustments were made and the books were closed,
we identified budgetary accounts that were misstated by $5.9 and
$4.8 million in the Tolerance Fund, and by $56.9 and $44.6
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million in the FIFRA Fund. When we asked about these balances,
we were told that they were "mistakes" that they thought had been
accounted for during the closing process. FMD personnel also
told us that other budgetary closing balances appeared to be
wrong.
Material Unsupported Adjustments Were Also Made To The Tolerance
Fund
During fiscal 1992, no adjustments were made to reconcile the
$41,300 balance in the Tolerance Fund's Year-End Prepaid
Adjustment Account. However, eight adjusting entries totaling
$21.2 million that affected other general ledger accounts were
made during the closing process. Again, there was no
documentation attached to these adjusting vouchers, and the brief
explanation on the vouchers was not sufficient to support the
entries made.
As an example, one voucher totalling $5.5 million stated only
that it was "to adjust GL (general ledger) for 5700/5220 based on
outlays" and for "account 2312 adj to equal letter from" the
Deputy Director, Program Management and Support Division, OPP.
The Deferred Revenue Account was adjusted by $507 on this
voucher. On the next sequential voucher that affected the
Tolerance Fund, the Deferred Revenue Account was again adjusted.
This time the account was adjusted by $298,153 after it had been
"reconciled" to the OPP's amount on the previous voucher. The
explanation given for this entry was only that it was "to correct
general ledger balances for unearned revenue per balance with
Treasury". Again, no documentation supporting this entry could
be found. Without.documentation to review for this and other
adjustments made, there was no way we, or Agency management,
could evaluate the validity of these adjustments.
To evaluate whether the Deferred Revenue Account was accurate
after these undocumented adjustments were made, we compared the
general ledger fund balance with the fund balance maintained by
OPP. OPP is the source of information on what has been "earned"
and what has been "transferred" out of this fund; two of the
three components that make up the fund balance (collections being
the third component). We found that at the end of fiscal 1991,
the general ledger balance of $3,722,068, was $29,409 less than
the program office balance of $3,751,477. At the end of fiscal
1992, taking into consideration an incorrect posting of the
fourth quarter expense transfer, the general ledger balance of
$3,716,143 was $128,248 more than the program office balance of
$3,587,895.
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In addition to the need to develop adequate documentation to
support adjustments made, we also believe that periodic
reconciliation of program office records and accounting records
would facilitate auditable balances in the general ledger and by
extension the financial statements. Further, it would help
ensure that program office personnel have accurate information to
use in managing their programs.
IFMS Reporting Weaknesses Delayed Financial Statement Preparation
EPA reported as a material weakness in its 1992 FMFIA report that
systems-related problems with IFMS impaired the Agency's ability
to provide complete, reliable, and timely data for Agency
decision making. One of the problems specifically identified in
the FMFIA report was the lack of adequate financial management
reports. IFMS does not automatically compile detail account
balance information into financial statement report formats.
Instead, IFMS assembles general ledger account balances at the
treasury symbol level. As a result, Agency personnel spent a
significant amount of time manually preparing spreadsheets to
summarize account balances at the treasury symbol level for
financial statement reporting purposes. Weaknesses in IFMS
reporting capabilities are discussed in more detail in the audit
report on the fiscal 1992 Financial statements for the Superfund
Trust Fund, Leaking Underground Storage Tank Trust Fund and
Asbestos Loan Program.
RECOMMENDATIONS
We recommend that the Chief Financial Officer direct the
Comptroller to:
1. Emphasize the need to adequately support all transactions and
document supervisory approval of transactions. Perform, as a
part of the annual FMFIA process, alternative management control
reviews to determine if transactions are being properly
documented.
2. Correct known errors in accounting transaction codes and the
automated year-end closing tables.
3. Ensure quarterly reconciliations are performed of the FIFRA
and Tolerance Fund general ledger balances and program office
records.
4. Complete reconciliations of the FIFRA and Tolerance Fund
Year-End Prepaid Adjustment Accounts.
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AGENCY COMMENTS AND PIG EVALUATION
The Acting Chief Financial Officer, in her response to our draft
report, agreed to take the corrective actions contained in
Recommendations 2,3 and 4. At a meeting on June 24, 1993, her
staff provided additional information on their planned corrective
actions related to Recommendation 3. They stated that, in
addition to performing a reconciliation of prior year FIFRA and
Tolerance Fund balances, they will also perform the periodic
reconciliations we have recommended. We have further clarified
this recommendation to state that the periodic reconciliations
should be performed quarterly.
In response to Recommendation 1, the Acting Chief Financial
Officer agreed that the Comptroller should emphasize the need for
financial management personnel to adequately support
transactions. She also stated that corrective action has been
taken on this part of the recommendation. She disagreed with the
need to perform an alternative management control review to
ensure that transactions are being properly documented stating
that this would duplicate work performed by the auditors. She
did, however, agree to focus attention on this area during
on-going quality assurance reviews. Reviewing this area as a
part of on-going quality assurance reviews would meet the intent
of our recommendation and would help ensure the accuracy and
reliability of EPA's financial records. We do not believe such a
review would duplicate our audit efforts since our audits cover
only EPA's trust funds, revolving funds and commercial activity,
or about one fourth of the Agency's financial resources.
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2. SOME FIFRA YEAR-END ACCOUNTS PAYABLE MID ACCRUED LIABILITY
ADJUSTMENTS WERE INCORRECTLY CALCULATED OR LACKED SUPPORTING
DOCUMENTATION
The methods used by one finance office to compute year-end
adjustments resulted in the overstatement of FIFRA accounts
payable by $135,620 and the understatement of FIFRA accrued
liabilities by $663,635. Accounting controls were not in place
to identify and correct these errors. In addition, another
finance office could not provide adequate documentation to
support year-end accounts payable and accrued liability adjusting
entries of $141,223 that were made to the FIFRA Fund. Without
support for these adjustments, we were unable to determine if
these amounts were fairly stated.
Use of Inappropriate Methodologies Resulted in Material
Misstatements of Accounts Payable and Accrued Liabilities
One finance office overstated its fiscal 1992 year-end accounts
payable adjusting entry of $261,518 by $135,620. Accounts
payable are obligations remaining unpaid at fiscal year-end for
which goods have been delivered or services performed, and for
which an invoice is on hand. This overstatement was the result
of the manner in which EPA's Contract Payment System allocates
costs on invoices which are received before year-end, but for
which the project officer's approval form has not been received.
In the sample we selected, the Contract Payment System charged
the invoiced amount against the first account number listed for~
the contract, and then continued to sequentially select
additional account numbers to charge until the invoiced amount
was covered. We reviewed actual payments made subsequent to the
end of the fiscal year and determined that the amount recorded at
fiscal year-end based on this methodology resulted in an
overstatement of $135,620. This overstatement of accounts
payable using this method indicates that this was not an accurate
way to predict which of the contract's account numbers would be
charged when an invoice was finalized for payment.
The same finance office also understated its fiscal 1992 year-end
accrued liability adjusting entry of $417,778 by $663,635.
Accrued liabilities are obligations for goods that have been
delivered or services performed, but for which an invoice has not
been received; This material understatement was also the result
of the methodology used by the finance office to calculate the
amount of the entry. According to personnel in the office, under
an informal agreement with the General Accounting Office (GAO)
dating back to 1988, the adjustment was calculated based on the
monthly average amount paid for each appropriation during the
year. That figure was then used as the adjusting entry for the
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appropriation. We reviewed payments made subsequent to the end
of the fiscal year and determined that the use of this
methodology resulted in a $663,635 understatement of accrued
liabilities.
Documentation to Support Material Adjustments Made bv One Finance
Office Was Not Maintained
Another finance office could not provide adequate documentation
to support year-end accounts payable and accrued liability
adjustments of $141,223. Personnel in the office told us that
they manually went through suspense files at year-end to
determine the amounts to record as accounts payable and accrued
liabilities. The only documentation prepared was an Accounts
Payable And Accrued Liabilities By Object Class matrix. This
matrix showed only the dollar values that were entered into the
accounting system. When we asked for the detail supporting the
entries, personnel in the office indicated that they were unaware
that the documentation that they had retained was not sufficient.
Comptroller Policy Announcement No. 91-03 requires that all
journal and standard vouchers have adequate supporting
documentation, and states that the documentation must be kept on
file for future use and verification. In addition, the Financial
Management Division's year-end guidance also requires finance
offices to develop and retain documentation for adjusting
entries. Unless adequate supporting documentation is maintained,
there is no way to verify the accuracy of the amounts recorded.
Consequently, we could not determine if the year-end adjusting
entries made were appropriate, or what their effect was on the
fiscal 1992 FIFRA Financial Statements.
RECOMMENDATION
We recommend that the Chief Financial Officer direct the
Director, Financial Management Division to work with the
Director, National Contract Payment Division to evaluate the
process used to compute year-end adjusting entries for accounts
payable and accrued liabilities and revise it to more accurately
estimate the entries. Consideration should be given to reviewing
payments made over several prior years to develop a more accurate
methodology.
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AGENCY COMMENTS AND PIG EVALUATION
In her response to the draft report, the Acting Chief Financial
Officer agreed to implement by September 30, 1993, a revised
methodology for computing year-end accounts payable and accrued
liabilities. This proposed corrective action satisfies the
intent of our recommendation. In our draft report we also
recommended that the Agency prepare entries to correct the errors
we identified in the accounts payable and accrued liabilities
accounts. Since the Acting Chief Financial Officer indicated
that these adjusting have been made we have dropped that
recommendation.
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3. PROPERTY PURCHASED WITH FIFRA FUNDS WAS NOT PROPERLY
CAPITALIZED
Property purchased with FIFRA funds was not properly capitalized
in the Agency's accounting records. This occurred because the
process the Agency used to capitalize property did not identify
all property which should have been capitalized, and program
office personnel assigned incorrect object class codes to
obligating documents. In addition, as the Agency has reported in
its annual FMFIA reports, the property accountability system is
not integrated with the Agency's accounting system. Since
neither system contained sufficient information to account for
property we were unable to audit the FIFRA property, plant and
equipment balance of $574,000 included in the fiscal 1992
Statement of Financial Position for the fund.
One of the stated purposes of the CFO Act is to provide complete,
reliable and consistent financial information for use in the
management and evaluation of Federal programs. When property is
not properly capitalized it affects the reliability and
consistency of financial information reported by the Agency.
Specifically, when property is not properly capitalized, assets
are understated on the financial statements for the life of the
property; and expenses are overstated in the year equipment was
purchased, and understated in following years. Although our
audit concentrated on property purchased with FIFRA funds, the
issues we identified also affect the capitalization of property
purchased using other Agency funds and appropriations.
Capitalization Process Was Time Consuming and Burdensome
The process FMD used to identify and capitalize property was time
consuming and burdensome, and did not result in the
capitalization of all property that should have been capitalized.
Each month, FMD extracted from the Agency's accounting system, a
report of disbursements made in the prior month that had been
assigned a major object class code of 3100 (Equipment). This
report was then sent to financial management offices for their
review. The finance offices were responsible for reviewing each
line item on the report greater than $5,000 to determine if the
item met the Agency's capitalization criteria; unit price greater
than $5,000 and useful life of two years or more. The finance
offices then provided FMD with a spreadsheet listing all of the
i%ems that met the capitalization criteria.
To determine if this method for capitalizing property was
effective,, we identified FIFRA funded equipment in the Agency's
property accountability system as of September 30, 1992, that was
valued at $5,000 and over. We then compared this listing of
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equipment to what had been capitalized in the accounting system.
We found that while approximately $425,450 had been capitalized,
an additional $213,300 of the items in the Personal Property
Accountability System (PPAS) that met the Agency's capitalization
criteria had not been capitalized.
Not All Property That Should Have Been Capitalized Was Identified
Property was not properly capitalized because Agency procedures
for identifying property for capitalization only considered items
recorded in major object class 3100 (Equipment) with a unit price
of $5,000 or more. This practice excluded property in other
major object classes which should have been capitalized; such as
property in the hands of contractors, automatic data processing
(ADP) software, and leasehold improvements. Other property was
not capitalized because some finance offices did not consider for
capitalization equipment purchased using more than one
appropriation or fund, nor did they identify component parts. In
addition, Agency procedures did not address placing mass
purchases of equipment, such as computers, into asset groups so
that they would be capitalized. The following paragraphs address
each of these situations in more detail.
Contractor Acquired Property
We found that property in the possession of contractors was
recorded under major object class 2500 (Other Contractual
Services) rather than 3100 (Equipment). As a result, this
property was not considered for capitalization. Property in the
hands of contractors, however, is no different than other
property bought with program funds. If it is not properly
capitalized, it affects the reliability and consistency of
financial information reported by the Agency.
ADP Software
The Agency records ADP software packages under major object class
2600 (Supplies and Materials). Again, because of object class
restrictions placed on the report generated to identify property
to be capitalized, ADP software valued at $5,000 or more is not
capitalized. In the first two years of the program, the Office
of Pesticide Programs spent approximately $159,298 in FIFRA funds
for Local Area: Network software alone, which was excluded from
capitalization due to current procedures. EPA's policy on
capitalization of equipment is based on GAO Title 2 guidelines,
and requires that all equipment with an initial acquisition cost
of $5,000,or more, and an estimated life of two years or greater,
be capitalized. This policy also specifically applies to ADP
software meeting the same criteria.
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Leasehold Improvements
Leasehold improvements are recorded in major object class 3200
(Land and Structures), and as a result are not considered for
capitalization. Leasehold improvements are defined in the
Agency's Resource Management Directive System, section 2590 part
IV, as the cost of improvements (including such improvements as
carpeting, space partitions, soundproofing of ceilings, walls and
alterations) which have an estimated useful life longer than one
year and are made to leased properties or to occupied properties
owned by another government agency. In our statistical sample of
fiscal 1992 disbursements, we found that removal and installation
of new carpeting costing approximately $33,000 was not
capitalized. EPA policy does not address capitalizing such
leasehold improvements. However, GAO Title 2 requires
capitalization of leasehold improvements, and OMB Bulletin 93-02
specifically requires that the value of leasehold improvements be
included in the Agency's financial statements.
Split-Funded Equipment
We also found that property acquired through split-funding was
not always capitalized. Split-funding is the purchase of items
from more than one appropriation or fund. At one finance office
property with a total unit price exceeding $5,000, but with
individual split-funded totals less than $5,000, was not being
considered for capitalization.
Component Parts
EPA policy regarding ..component parts is that if a part is
integral to the functioning of the main unit and does not have
the capacity to stand alone it should be capitalized. These
components are usually recorded under major object class 3100,
but since they typically cost less than $5,000, they are not
capitalized. When we visited one finance office, we discovered
that they had taken the basic policy described above, and had
modified it in such a way as to narrow it significantly. They
had redefined "and not have the capacity to stand alone" to mean
that the component could not be moved from one piece of equipment
to another. For example, we identified two "large tape backups"
with a unit price of $4,971 that were not capitalized because
they were less than $5,000, and because they theoretically could
be moved from one computer to another. The tape backups should
have been capitalized because they could not "stand alone".
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Asset Groups
In addition to procedural problems noted above, mass purchases of
furniture and ADP equipment and software were not placed in asset
groups for capitalization. Agency procedures did not cover asset
groups; however, we believe that they should be addressed because
of their material effect on the financial statements. By not
using asset groups for capitalizing large purchases, current
costs are distorted by charging to expense, large quantities of
items (such as the initial complement of equipment for an
office), that individually cost less, but collectively cost much
more than $5,000. To better match expenses with revenue and to
prevent a material misstatement in the financial statements such
items should be grouped in separate asset groups and capitalized.
This is in line with GAO Title 2 which states that "if current
costs would be distorted in a given period by charging to expense
a large quantity of items, such as the initial complement of
equipment of a building, that individually cost less but
collectively cost more than the $5,000 capitalization criterion,
such items shall be grouped in a separate asset group account.
(An example would be a substantial amount of purchased office
furniture or computers, involving many pieces that individually
cost less than $5,000)." One Federal agency we talked to has
adopted this practice because of the distortion it would cause in
the financial statements if this were not done. EPA should also
adopt this practice.
Several million dollars in FIFRA funds used for mass purchases of
ADP equipment and software were not capitalized because they did
not individually cost more than $5,000. A listing of funds spent
on ADP related equipment provided by the Office of Pesticide
Programs showed that from the inception of the FIFRA Fund in
fiscal 1989 through August 14, 1992, ADP related property
purchased with FIFRA funds totaled approximately $4.8 million.
Total FIFRA property- capitalized in the same period was only
$918,300. To include large purchases such as these in the
financial statements as expenses in the year they are acquired,
materially distorts those and subsequent statements.
Incorrect Assignment of Object Class Codes Contributed to
Capitalization Problems
In some instances, items eligible for capitalization were not
capitalized because object class codes were not accurately
assigned. Incorrectly assigned object class codes precluded some
items from being considered for capitalization because Agency
procedures only considered property in object class 3100 for
capitalization. The office requesting a procurement action is
responsible for assigning object class codes to obligating
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documents based on the description of the items purchased.
Personnel in the program offices were not always fully aware of
the proper classification to use when completing the obligating
documents. We compared object class codes in a random
statistical sample of disbursement documents at one finance
office to the Agency's definition of object class codes. Five of
the eight documents, valued at $118,00.0, had the wrong object
class code assigned.
IFMS and PPAS Are Not Integrated and Contain Inconsistent Data
The Agency has reported in its annual FMFIA reports that its
property accountability system is not integrated with the general
ledger. Neither system individually contains sufficient
information to account for property. As a result, the detailed
accounting records supporting the financial statement balance of
property were inadequate.
Our comparison of information in PPAS and IFMS showed the two
systems did not always include the same property. For example,
we identified 61 items of FIFRA funded equipment that had been
capitalized in IFMS between 1990 and 1992. All of these items
should have been recorded in PPAS, however, we found that 17 had
not been recorded. Further, during the same period 59 items were
recorded in PPAS that met the Agency's capitalization criteria
and should therefore have been capitalized in IFMS. We found
that 15 of these items had not been capitalized. In addition,
amounts recorded in the two systems seldom agreed. PPAS records
are based on amounts from obligating documents while IFMS records
are based on invoiced amounts, including adjustments for price
changes, freight and discounts. In comparing FIFRA property that
was recorded in both PPAS and IFMS during fiscals 1990 through
1992, we found that the property capitalized in IFMS was valued
at $468,576 while the value of the items recorded in PPAS was
only $425,450, or a difference in value of $43,126.
In March 1993, the Personal Property Quality Action Team (QAT)
was formed to develop a plan for correcting the Agency's property
problems. Participants in the QAT work group represent the
Financial Management Division, Facilities Management and Services
Division, Administrative Systems Division, Office of Acquisition
Management, and Research Triangle Park Financial Management
Office. Our review of the Quality Action Team's work to date
shows that they are addressing many of the issues discussed in
this report. Continued management attention to this area is
needed in order for the long-standing problems in the property
area to be. corrected.
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We understand that government accounting principles are currently
being developed by the Federal Accounting Standards Advisory
Board. Thus, in future years changes nay occur in the accounting
principles for property and equipment. However, the issues we
identified during our audit should be addressed since corrective
action in these areas will result in more complete, reliable and
consistent financial information on Agency programs.
RECOMMENDATIONS
We recommend that the Chief Financial Officer direct the
Director, Financial Management Division to:
1. Revise the Agency's capitalization policy to include more
detailed instructions for determining which Agency assets should
be capitalized. Specifically, the policy should contain guidance
on:
defining all object class codes which contain items which
could be capitalized,
identifying component parts including a listing of
standard items which qualify as components,
capitalizing split-funded purchases and purchases of
group assets, and
identifying and accounting for leasehold improvements.
2. Provide training to program office personnel on the proper
assignment of object class codes on obligating documents.
AGENCY COMMENTS AND PIG EVALUATION
The Acting Chief Financial Officer, in her response to the draft
report, agreed with the intent of recommendation 1. At a meeting
with her staff on June 24, 1993, they suggested that we revise
the recommendation to show the Director, Financial Management
Division as the official responsible for implementing the
corrective action rather the Property Quality Action Team. We
have made that change. The Agency's response to this corrective
action is not considered fully responsive since it does not
include a corrective action plan to address our recommendations,
but rather suggests that any specific recommendations be withheld
until the Quality Action Team has issued its report. We believe
that correcting these long-standing capitalization problems will
be an evolutionary process. As such, we do not see the value in
waiting for the Quality Action Team to issue its report before
the Agency's capitalization policies are revised to address known
problems. ,
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Regarding Recommendation 2, The Acting Chief Financial Officer
agreed to conduct the recommended training by December 31, 1993.
The planned corrective action for this recommendation is
considered fully responsive.
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REPORTABLE CONDITIONS
1. THE OFFICE OF PESTICIDE PROGRAMS DID NOT PERFORM A COMPLETE
REVIEW OF UNLIQUIDATED OBLIGATIONS
During fiscal 1992, the Office of Pesticide Programs (OPP) did
not conduct a complete review of its unliquidated obligations.
When we looked at OPP's review of unliquidated obligations
maintained by two finance offices we found that OPP had not
reviewed any of the unliquidated obligations maintained by one
finance office, and only a portion of those maintained by the
other finance office. The reviews were not performed because a
low priority was placed on complying with this requirement.
During fiscal 1992, OPP had $345,588 of open FIFRA obligations
for which there was no activity in over a year. When there has
been no activity in over a year on an obligation it is likely
that the obligation is no longer valid. By not performing the
required reviews of unliquidated obligations, OPP missed an
opportunity to identify no-year FIFRA funds that could be
deobligated and made available to fund other critical activities
associated with pesticides reregistration.
Treasury Financial Manual Bulletin No. 92-08 requires agencies to
review their unliquidated obligations before year-end to
reasonably assure that all, and only those, transactions meeting
the criteria of valid obligations have been properly recorded.
In addition, in a June 1992 memorandum, the Acting Chief
Financial Officer advised all EPA program offices, including OPP,
of their responsibility to complete a review of all unliquidated
obligations and to take action to cancel any invalid obligations
ajf ound.
Finance office personnel must rely on personnel in program
offices, such as OPP, to perform unliquidated obligation reviews
since these individuals are the most knowledgeable of what goods
and services have been ordered and delivered. We found, however,
that for obligations maintained by the Headquarters Accounting
Operations Branch, OPP did not review the unliquidated obligation
listing, despite a follow-up request in July 1992. For
unliquidated obligations maintained by the Cincinnati Financial
Management Center, the individual responsible for coordinating
OPP's response stated in her reply that she could only get four
of OPP's nine responsibility centers to respond to the request.
According to one finance office official, many program offices
put little or no effort into the annual unliquidated obligations
review process. This statement was confirmed by a memo from one
finance office to the Financial Reports and Analysis Branch.
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Personnel in the office stated that a majority of the responsible
program offices did not submit unliquidated obligation reviews by
the fiscal 1992 deadline. OPP was among them. Further, we were
told by personnel in another finance office that because of
problems the office has had with obtaining responses, it no
longer attempts to confirm unliquidated obligations with the
program offices. Instead, the finance office goes directly to
the appropriate contracting officer for verification of the
validity of the obligation.
To determine the extent of OPP unliquidated obligations that were
likely to be invalid, we obtained a report of those FIFRA funded
OPP obligations for which there was no activity during fiscal
1992. The report showed that during fiscal 1992 there were
$345,588 of such obligations. Of this total, $262,001
represented obligations maintained by the Cincinnati Financial
Management Center or the Headquarters Accounting Operations
Branch, the two finance offices that had indicated OPP had not
fully complied with their requests for reviews of unliquidated
obligations. When there has been no activity in over a year on
an unliquidated obligation, it is likely that the obligation is
invalid. If OPP had researched these unliquidated obligations
and found that they were no longer valid, the funds could have
been deobligated and used for other FIFRA activities.
RECOMMENDATION
We recommend that the Assistant Administrator for Prevention,
Pesticides and Toxic Substances direct the Director, Office of
Pesticide Programs to complete the annual review of unliquidated
obligations and provide in a timely manner the results of the
review to the appropriate finance office so that invalid
obligations can be deobligated.
AGENCY COMMENTS AND PIG EVALUATION
The Office of Pesticide Programs plans to complete the review of
its unliquidated obligations by July 30, 1993. The Office's
planned corrective actions satisfy the intent of our
recommendation.
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2. IMPROVEMENTS ARE NEEDED IN CONTROLS OVER PROPERTY LOCATED IN
THE OFFICE OF PESTICIDE PROGRAMS
We noted various weaknesses in controls over property located in
OPP. Required annual property inventories were not completed in
a timely manner, custodial officers did not prepare documentation
to support property transfers, and property was not always
recorded in PPAS. Without these key internal controls in place,
management lacked reasonable assurance that property purchased
with OPP funds, including FIFRA funds, was adequately safeguarded
against loss from unauthorized use or disposition.
Inventories Were Not Completed in a Timely Manner
OPP did not complete required annual inventories in a timely
manner. A low priority was placed on scheduling and completing
inventories. Appointments to perform inventories were repeatedly
rescheduled, creating a need to continually reshuffle subsequent
inventory schedules. In addition, because of inadequate controls
over property in the custodial areas, numerous staff hours were
required to reconcile inventory discrepancies. This further
contributed to delays in scheduled inventories. As of March
1993, 1 of the 8 OPP custodial areas had not completed
inventories that were initiated in July 1992. By not completing
the required annual property inventories, the office increased
the risk of waste, loss, unauthorized use and misappropriation of
its property.
Custodial Officers Did Not Adequately Perform Their Custodial
Duties
Custodial officers play a key role in ensuring accountability
over and security of property assigned to their custodial area.
These individuals are responsible for reporting all changes
affecting the status of that property, and preparing and
submitting to the property accountable officer documentation for
all property transactions in their custodial area. We found that
OPP custodial officers did not ensure that property transferred
in or out of their areas was supported by appropriate
documentation. The custodial officers also did not resolve
inventory discrepancies in a timely manner. The results of
inventories of two custodial areas that are discussed below
confirm that these activities were not always performed.
The July 1992 inventory in one OPP custodial area found that of
402 items recorded in PPAS for that area, 202 items valued at
$694,583 were unaccounted for at the time the inventory was
taken. It: was later discovered that 37 of the 202 had been
transferred out of the area and into other custodial areas
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ATTACHMENT 2
Page 4 of 6
without the required transfer documentation being executed. As
of March 1993, EPA's inventory contractor was continuing to work
with the custodial officer to reconcile property in the custodial
area with PPAS records. In another OPP custodial area, 61 out of
249 items identified during the inventory were not assigned to
that custodial area. Again, this condition resulted from
inadequate documentation of property transfers.
We also identified six items used by employees at home that had
been signed out on twenty-four hour property passes from 14 to 24
months before. As of March 1993, the six items had not been
returned. EPA procedures require employees to obtain a
memorandum signed by their division director for property that is
to be used at home on a long-term basis. The memorandum which is
to be initiated by the custodial officer must state the reasons
why the employee is being permitted to use the equipment at home.
Preparation of such a memorandum helps ensure that employees are
only permitted to use Government property at home when it is in
the best interests of the Government. For the six items we
identified, the required memorandum had not been prepared because
the custodial officer was not aware of the requirement to prepare
such a memorandum.
Property Was Not Always Recorded in the Property Accountability
System
We also found that documentation of property transactions was not
always forwarded to the Facilities Management and Services
Division (FMSD) for input into PPAS. In the two custodial area
inventories referred to above, 52 items valued at $140,742 were
found that were not recorded in PPAS. FMSD personnel stated that
this usually happens when property is delivered directly to the
end user. When this occurs receiving documents are not always
sent to the property accountable officer at the accountable
location. This circumvents controls established to ensure that
all property received has a record established in PPAS, a bar
code decal affixed and responsibility assigned to a custodian.
Increased Management Attention to the Property Area Is Needed
FMSD personnel told us that the problems we had noted in OPP were
prevalent throughout the Agency. They also told us that they
believed that these problems stemmed from the low priority
management gives to custodial officer duties. FMSD personnel
stated that in many offices these duties are assigned to the
secretary as an additional duty.
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ATTACHMENT 2
Page 5 of 6
Supervisory responsibility at all levels requires the
establishment and continuous enforcement of administrative
measures necessary to ensure adequate protection and use of all
Government property under their jurisdiction. Given the extent
of problems noted with custodial officers performing their
duties, we believe that OPP management should place a higher
priority on the property area.
RECOMMENDATIONS
We recommend that the Assistant Administrator for Prevention,
Pesticides and Toxic Substances:
1. Ensure the performance agreements of managers include a
critical job element covering managers' responsibilities for
properly safeguarding and accounting for property.
2. Schedule all custodial officers and alternates for refresher
training.
3. Work with the Facilities and Management Services Division to
establish internal control procedures to help ensure that
accountable property delivered directly to the end user is
reported to the property accountable officer for inclusion in
PPAS.
4. Perform an alternative management control review of property
controls as a part of the Office's annual Federal Managers'
Financial Integrity Act process.
AGENCY COMMENTS AND PIG EVALUATION
In the response to the draft report, the Office of Pesticide
Programs agreed with all of our recommendations and outlined a
number of corrective actions that they have initiated or
completed. Concerning Recommendation 4, the Office indicated at
a meeting on June 24, 1993, that they will complete the
recommended alternate management control review by September 30,
1994, rather than September 30, 1995, the date included in the
response to the draft report. The Office plans to use the
results of the alternate management control review to implement
Recommendation 3. We are concerned that this will delay any
corrective action on Recommendation 3 until at least fiscal 1995.
Therefore, we are recommending that personnel in the Office of
Pesticide Programs work with personnel in the Facilities and
Management Services Division to establish the control procedures
described in Recommendation 3 rather than wait until the
alternate'management control review is completed. We consider
the Office's response to the remaining recommendations to be
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ATTACHMENT 2
Page 6 of 6
responsive. We have revised Recommendation 1 to clarify the
actions that we believe the Office should take to ensure that
adequate controls are in place to safeguard and account for
property.
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ATTACHMENT 3
Page 1 of 2
Fiscal Year 1991 - Report On Financial Audit - Hazardous
substance Superfund (Audit Report Number PlSSFl-n-0026-2100660)
Finding
Property related physical inventories and walk-through
inspections were not performed and reconciliations to PPAS were
not performed.
Recommendation
Require the Assistant Administrator for Administration and
Resources Management to issue a policy requiring annual
certifications from the regional administrators that the annual
physical inventories, walk-through inspections, and reconcili-
ations to the PPAS have been performed.
Corrective Action
Obtain the missing annual inventory, inspection, and reconcili-
ation certifications.
Target Date
December 31, 1993
Status
Ongoing
Fiscal Year 1990 - Report On Financial Audit - Hazardous
Substance Superfund (Audit Report Number PlSFFO=ll-0032-1100385)
Finding
Procedures have not been updated since the implementation of the
IFMS.
Recommendation
Ensure that the Resources Management Directives System is fully
implemented and includes procedures and requirements for
recording and supporting transactions in the IFMS.
Corrective Action
Issue RMDS 2530.
Target Date
September 1992 (original), April 1994 (revised)
Status
Ongoing
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ATTACHMENT 3
Page 2 of 2
Fiscal Year 1989 - Report on Financial Audit - Hazardous
Substance Superfund (Audit Report Number P1SFF9-11-0032-0100492)
Finding
Data was not reconciled in the transfer from FMS to IFMS during
1989.
Recommendation
Verify that transactions and account balances brought forward
from the Financial Management System (FMS) to IFMS are correct,
complete, and reconciled. Documentation of the reconciliation
should be retained for audit.
Corrective Action
Adjust conversion errors and beginning balances.
Target Date
December 1989 (original), October 1993 (revised)
Status
Ongoing
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AUDITORS* REPORT ON COMPLIANCE WITH
' LAWS AND REGULATIONS
The Administrator
U.S. Environmental Protection Agency
We were charged with auditing the financial statements of the
Pesticides Reregistration and Expedited Processing Fund (FIFRA
Fund) and the Revolving Fund for Certification and Other Services
(Tolerance Fund) as of and for the year ended September 30, 1992.
We have issued our report thereon dated April 7, 1993, in which
we disclaimed an opinion on the financial statements for these
two funds.
Compliance with laws and regulations applicable to the FIFRA and
Tolerance Funds is the responsibility of the Environmental
Protection Agency's (EPA) management. As a part of obtaining
reasonable assurance about whether the financial statements were
free of material misstatements, we tested compliance with those
laws and regulations that either directly affect the financial
statements or that the Office of Management and Budget (OMB) or
our office considered significant to the audit. As a part of our
audit work, we also obtained an understanding of management's
process for evaluating and reporting on internal control and
accounting systems as required by the Federal Managers' Financial
Integrity Act (FMFIA). In addition, we compared the material
weaknesses reported in the Agency's FMFIA report that relate to
the financial statements under audit to the material weaknesses
found during the evaluation we conducted of the entity's internal
control system. Our objective was not to provide an opinion on
overall compliance with such provisions. Accordingly, we do not
express such an opinion.
COMPARISON OF EPA'8 FMFIA REPORT WITH OUR EVALUATION OF INTERNAL
CONTROLS
As required by OMB Bulletin 93-06, "Audit Requirements for
Federal Financial Statements," we compared EPA's FMFIA report to
our evaluation of the internal controls related to the FIFRA and
Tolerance Funds. To determine whether to report matters as
material weaknesses, we used the definition of material
weaknesses included in OMB Bulletin 93-06. According to the
bulletin, a material weakness in the internal control structure
is a reportable condition in which the design or operation of one
or more of the internal control structure elements does not
reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to
the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course
of performing their assigned functions. EPA, in its fiscal 1992
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FMFIA report, reported the Integrated Financial Management System
(IFMS) as a high risk area and a material weakness. EPA also
reported as nonconformances the need to: (i) record adjustments
to the general ledger due to IFMS implementation, (ii) perform
comprehensive reconciliations between Treasury reports and IFMS,
(iii) update and strengthen policies and procedures to assure
reconciliation between property and accounting records, and (iv)
implement interfaces between IFMS and other administrative
systems. In addition to the weaknesses identified by EPA, during
our audit we identified two additional weaknesses that materially
affected the FIFRA and Tolerance Fund Financial Statements. We
found that material unsupported adjustments were recorded in
EPA's accounting records for the FIFRA and Tolerance Funds, and
improper methods were used by one finance office to compute year-
end accounts payable and accrued liability adjusting entries for
the FIFRA Fund.
RESULTS OF COMPLIANCE TESTING
The results of our compliance tests for fiscal 1992 indicate that
for the items tested, EPA complied with those provisions of laws
and regulations which could have a material effect on the
financial statements. With respect to transactions not tested,
nothing came to our attention that caused us to believe that EPA
had not complied, in all material respects, with these
provisions. We did, however, identify the following area of
noncompliance with laws and regulations that while not material
to the financial statements, warrants disclosure due to its
significance.
TOLERANCE FEES COLLECTED DID NOT COVER EPA'8 COSTS
Fees collected for processing raw agricultural commodity
tolerance petitions .voider Section 408 of the Federal Food, Drug,
and Cosmetic Act did not cover EPA's costs of carrying out the
activity. In addition, reviews required by the Chief Financial
Officers Act (CFO Act) that would have identified this shortfall
were not performed. In fiscal 1992, EPA collected approximately
$1.2 million in fees for processing raw agricultural tolerance
petitions. During the same period, personnel compensation and
benefit costs of the Office of Pesticide Programs (OPP)
associated with processing these petitions, using information
from OPP's Time Accounting Information System and their
internally computed overhead cost factor, totaled about $3.0
million. Agency support costs, external to OPP, allocable to
processing raw agricultural tolerance petitions totaled another
$486,460; resulting in a total Agency cost for processing these
petitions of about $3.5 million.
The CFO Act of 1990, enacted on November 15, 1990, requires EPA's
Chief Financial Officer to perform a biennial review of user fees
and other charges for services it provides. As of April 7, 1993,
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the date we completed fieldwork, EPA had not made the required
review of the fees it collects for raw agricultural tolerances,
and had thereby failed to make necessary revisions to these fees
so that they would cover EPA's costs for processing these
petitions. In addition to not reviewing raw agricultural
tolerance fees, EPA had also not reviewed other user fees it
collects, nor had it established procedures that would ensure
that reviews of user fees would be completed when required. Of
two other user fees that EPA currently collects, the Pre-
Manufacture Notice fee is currently overdue for review, and the
Motor Vehicle and Engine Compliance Program fee is due for review
by August 1994.
EPA Is Allowed Bv Law To Set Tolerance Fees
The Tolerance Fund was established in 1963 by Public Law 88-136.
This law states that fees are to be paid for services in
connection with the establishment of pesticide tolerances for raw
agricultural commodities. The fees collected are to be deposited
into the Tolerance Fund and are to be used for salaries and
expenses necessary to carry out activities related to
establishing tolerances. Section 408(o) of the Federal Food,
Drug, and Cosmetic Act also authorizes the promulgation of
regulations to require the payment of fees that will in the
aggregate be sufficient to provide, equip, and maintain an
adequate service for establishing raw agricultural tolerances.
In 1984, EPA issued a proposed rule to establish procedures for
increasing raw agricultural tolerance petition fees. The fees
had last been increased in 1972, and EPA believed that inflation,
the rise in Federal employee salary and expenses, and the
increased complexity and cost of scientific reviews far exceeded
the fees charged. EPA's final rule promulgated in 1986, resulted
in two provisions for adjusting tolerance fees:
1) automatic annual adjustments based on Federal General
Schedule salary changes; or
2) periodic reviews of costs and fees.
The last EPA review of its costs for processing these petitions
was made in 1984. All adjustments to raw agricultural tolerance
fees since then have been based on Federal salary increases. The
fiscal 1992 fee, reflecting a 4.2 percent increase in Federal
salaries, went into effect on September 4, 1992. According to
the program office, fees have been increased by 27 percent since
1986 based on annual adjustments tied to Federal salary
increases. As discussed above, however, even with these
adjustments, fees collected only cover a portion of the cost of
processing raw agricultural tolerance petitions.
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Reviews Of Fees Required Bv The CFO Act Were Not Performed
f '
The CFO Act requires the Environmental Protection Agency's
(Agency) Chief Financial Officer to review, on a biennial basis,
charges imposed for services and things of value the Agency
provides to the public. It also requires the Chief Financial
Officer to make recommendations on revising charges to reflect
costs incurred in providing those services and things of value.
In addition to the raw agricultural tolerance fee, EPA also
collects other fees such as the Pre-Manufacture Notice fee and
the Motor Vehicle and Engine Program fee. Between November 15,
1990 when the CFO Act was passed, and the end of our audit
fieldwork, April 7, 1993, EPA had not performed any of the CFO
Act required reviews of fees. By performing the reviews, the
Agency could potentially identify other fees which could be
increased, resulting in additional revenues for the Agency.
In EPA's August 31, 1992, Financial Management Status Report and
Five-Year Plan to OMB, EPA's Chief Financial Officer stated that
a low priority had been assigned to the required biennial reviews
of user fees "due to resource shortages and the need to meet more
pressing CFO [Chief Financial Officer] requirements." Although
an Agency-wide CFO User Fees Workgroup was established in October
1992, it was disbanded in January 1993 pending direction from the
new administration. As of April 7, 1993, the workgroup was still
inactive. We believe that, given the substantial shortfall
between raw agricultural tolerance fees collected and the cost of
the program, it is essential that reviews of user fees such as
these be given a higher priority. Agency-wide workgroups such as
the one which had been established for user fees, provide an
opportunity to conduct these required reviews even during periods
of resource shortages.
Tolerance Fees Need To Be Increased To Cover EPA's Costs
EPA has historically used its base appropriation to supplement
raw agricultural tolerance activities rather than take steps to
make the fund self-supporting. According to program office
staff, after the fees were revised in 1986, OPP made a conscious
decision to consider only increases in personnel compensation and
benefit costs when tolerance fees were revised, even though the
Federal Food, Drug and Cosmetic Act states that fees collected
must be sufficient to provide, equip, and maintain an adequate
service for establishing pesticide tolerances. Given the
shortfall between fees being collected of about $1.2 million and
processing and administrative costs of about $3.5 million, it is
imperative that EPA conduct a comprehensive review of total raw
agricultural petition costs with a view toward determining how
much these fees should be raised. The work performed in
estimating, "total" tolerance program costs (of which raw
agricultural tolerance costs are a major portion), during the
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preparation of the fiscal 1992 financial statements, could
provide a good starting point for this review.
Raising fees charged to process raw agricultural tolerance
petitions could result in appropriated funds currently budgeted
to fund this activity, being budgeted for other OPP activities.
One such activity is the pesticide reregistration program. OPP
has stated that one of the reasons the program will not meet its
Congressionally imposed deadline for reregistering pesticide
products is the lack of sufficient resources.
RECOMMENDATIONS
We recommend that the Chief Financial Officer:
1. In coordination with the Director, Office of Pesticide
Programs, conduct a comprehensive review of the costs associated
with processing raw agricultural tolerance petitions to determine
how much fees should be raised, and take the necessary steps to
make appropriate changes in the fees charged.
2. Conduct the required biennial review of other Agency user
fees, and institute the necessary policies and procedures to
ensure that these reviews will be conducted in a timely manner in
the future.
AGENCY COMMENTS AND PIG EVALUATION
The Acting Chief Financial Officer, in her response to our draft
report, agreed to take the corrective actions contained in
Recommendation 1. She caveated her response however, by stating
that the cost study performed may not result in increased fees.
Given the enormity of the shortfall between fees collected and
the cost of processing petitions, we believe a review of EPA's
costs for processing raw agricultural tolerance petitions will
result in an increase in fees charged. The Chief Financial
Officer in her response also expressed a concern that this
finding did not clearly differentiate between raw agricultural
commodity tolerances and other types of tolerances processed by
EPA. She stated that this distinction is important because the
Federal Food, Drug, and Cosmetic Act only provides for collecting
fees for the establishment of raw agricultural tolerances. We
have revised the finding to more clearly distinguish this fact.
The Acting Chief Financial Officer generally agreed with
Recommendation 2. She stated that policies and procedures would
be established to ensure that these reviews are conducted;
however, she requested that our draft report be revised to
include more information on other Agency fees. We have added
this additional information to the report.
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This report is intended for the information of Congress, OMB, and
EPA management. This restriction is not intended to limit the
distribution of this report, which is a matter of public record.
Kenneth A. Konz
Assistant Inspector General for Audit
U.S. Environmental Protection Agency
April 7, 1993
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APPENDIX I
AGENCY COMMENTS
J»'«"'«>J,
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHWQTON, O.C. 20460
MIS 893
OFFCEOF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT:
FROM:
TO:
Draft Audi
Financial S
Fund
Report E1EPL2-
ent Audit of the
Sallyanne
Acting Assistant Administrator (PM-208)
Kenneth Konz
Assistant Inspector General for Audit (A-109)
As the Deputy Chief Financial Officer, I appreciate the
opportunity to comment on the draft report of the Agency's first
FIFRA and Tolerance funds financial statement audit performed in
accordance with the Chief Financial Officers' (CFO) Act.
Attached is the Agency's consolidated response to the
recommendations. We generally concur with the report findings
and many of the recommendations and, where appropriate, have
provided our corrective action plans with target dates for
completion.. -However, we have several editorial and factual
concerns which are identified in our response.
Also, in several instances we need additional information to
fully address the intent of the recommendation. He have
requested clarification from your staff and will provide
corrective action plans., if appropriate, when we respond to the
final report.
If you have any questions regarding our response, please
contact Jack Shipley, Acting Director of the Financial Management
Division at 260-5097.
Attachment
Printed on Recycled Pane
125
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APPENDIX I
cc: General Counsel, office of General Counsel (LE-130)
Comptroller (PM-225)
Director, Office of Acquisition Management (PM-214F)
Director, Office of Administration and Resources
Management, Cincinnati, OH
Director, Office of Administration and Resources
Management, RTP, NC (MD-20)
Director, Office of Information Resources
Management (PM-211)
Director, Office of Pesticide Programs (H-7501C)
Director, Budget Division (PM-225)
Director, contracts Management Division, RTP, NC (KD-33)
Director, Facilities Management and Services
Division (PM-21S)
Director, Financial Management Division (PM-226F)
Director, National Contracts Payment Division,
RTP, NC (MD-32)
Director, National Data Processing Division, RTP, NC (MD-34)
Director, Program Management and Support Division (H-7502C)
Director, Quality Assurance Staff (PM-215)
Chief, Policy and Special Projects Staff (H-7501C)
Chief, Security and Property Management Branch (PM-215)
Agency Followup Official (H-3304)
Audit Follow-up Coordinator ATTN: Program Operations Support
Staff (PM-208)
Carolyn Levine, Audit Liaison for the Office of
Administration and Resources Management (PM-208)
Joyce Hay, Audit Liaison for the Office of Prevention,
Pesticides and Toxic Substances (TS-788)
Regional Comptrollers I-X
Regional Financial Management Officers I-X
Financial Management Division Branch Chiefs
126
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APPENDIX I
be: Ron Bachand
Ken Wetzel
127
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APPENDIX I
Attachment Page l
RESPONSE TO RECOMMENDATIONS
DRAFT AUDIT REPORT E1EPL2-20-7001
FISCAL 1992 FINANCIAL STATEMENT AUDIT
OF THE FIFRA AND TOLERANCE FUNDS
The following represents the Office of Administration and
Resources Management (OARM) and the Office of Prevention,
Pesticides, and Toxic Substances (OPPTS) consolidated response to
recommendations in the draft audit report of Fiscal 1992
Financial Statement Audit of the FIFRA and Tolerance Funds. We
have grouped our comments and responses to the recommendations as
they appear in the report.
RECOMMENDATIONS /OARM RESPONSE
Auditors' Report on Internal Controls
l.o rinding: The auditors war* unable to reader aa opinion on
the rxrut and Tolerance Fund financial statements because
material unsupported adjustments were made to the general
ledger.
General CQc
We believe the wording for this finding is overstated and
consequently misleading. As indicated in pages ii and iii of the
report, there were other reasons for the disclaimer of opinion of
the financial statements besides the auditors ' questioning the
adequacy of documentation provided to support several adjusting
entries made to the general ledger. We believe the wording for
this finding should be revised to read as follows: Adjusting
entries were made to the general ledger without sufficient
documentation.
we would also like to point out that the report states that
the 1988 amendments to FIFRA "require EPA to complete, over a
nine-year period (by 1997), the reregistration review of each
pesticide product...1*. This statement is stronger than the
actual legislative language. The statutory goal is to complete
reregistration eligibility document (RED) decisions by 1997 with
product reregistration decisions following each RED by
approximately 14 months. Various time extensions in the
legislation could extend the RED time-frames several years beyond
1997 in special cases.
i.l Recommend that the Chief Financial officer direct the
Comptroller to emphasiie the need to adequately support all
transactions and document supervisory approval of
transactions. Perform, as a part of the annual federal
managers' Financial Integrity Act process, alternative
management control reviews to determine if transactions are
being .properly documented.
128
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APPENDIX I
Attachment Pag* 2
He agree with this recommendation and bav« Bat with our
accountants to reeaphasize the need for adequate docuaantation
and having *upervi*ory approval of accounting transaction*.
Sinca this araa will be reviewed as part of th« FY 93 Financial
Statamant audit, wa baliava that an altarnativa aanageaent
control review (AMCR) vould duplicata tha vork by tha auditors.
Hovavar, v* will focus attantion in this araa as part of our on-
going quality assuranc* raviavs.
1.2 Corraet kaova arrors la aeeouatiag traaaaetioa eodas aad tha
autoaatad yeajr-ead elosiag tablaa.
Ha agraa with tha intent of this racoaaandation. Ha hava a
thraa phaaa approach for addrasaing this racoaaandation. For tha
FY 93 cloaing procass, v* will corract arrors in tha year-end
tablas. For corractions ralatad to posting tha cumulative
accounts of currant yaar activitias to currant yaar not accounts,
we will rafar thasa itaas to tha Fadaral Financial Systaa (FFS)
Oaar Group for action. Ha baliava that this coursa of action is
tha aost cost affactiva sinca othar Fadaral usars ara having tha
saaa problaa.
For eorractions involving tha standard ganaral ladgar
requirements, va will dalay correcting thaa at this tiae. This
dalay is tha result of the Government-vide Standard General
Ledger Committee'a (SGLC) revising the general ledger
requirement*. The Coaaittee vill be aaking their recommendation*
in August, 1994. However, no data has been set for the
publication of the new general ledger requireaents. He will
revise our transaction code structure to comply with the new SGLC
requireaents and iaau* procedures for tha proper posting of the
entries.
Corrective ActIBB; Target Date
- Revise year-end cloaing tablas Sept. 30, 1993
- Request aasistanca froa the FFS User Sept. 30, 1993
Group on posting requiraaents
- Reviae transaction code structure to Dec. 31, 1994
comply with new SGLC requireaents and
iasue procedures for proper posting
1.3 insure periodic reconciliations are perforaed of tha FXFUk
aad Toleraaee Fuad general ledger belaaeee aad prograa
offiee record*.
He will complete reconciliation* of prior year balance* with
the prograa offices.
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APPENDIX I
Attachment Page 3
Corrective Action! Target Date
- Meet with program offices to discuss July 30, 1993
FIFRA and Tolerance Fund reconciliations
- Complete the reconciliation of FIFRA and Sept. 30, 1993
Tolerance Funds records with program offices
1.4 Recommend that FMD complete reconciliations of the rXTRA and
Toleraaee ruad Year-Bad Prepaid Adjustments Accounts.
We agree with this recommendation. We have substantially
completed the reconciliation for FY 1992. We plan to complete
all reconciliations and make the necessary adjusting entries by
September 30, 1993.
Corrective Action; Target Date
- Reconcile FY 1993 cash accounts on a Sept. 30, 1993
. monthly basis
- Identify remaining unbalanced items in Sept. 30, 1993
prepaid account for FYs 1992 and 1991
and make appropriate adjusting entries
- Analyze the status of the prepaid account Sept. 30, 1993
for FYs 1990 and 1989 and make appropriate
adjusting entries
2.0 rinding: rXFRA year-end accounts payable and accrued
liability adjustments were materially misstated aad lacked
supporting documentation.
2.1 Recommend that the Director, Financial Management Division
prepare aa audit adjustment to correct the year-end
adjusting entries in the aoeeunts payable and accrued
liability accounts. Also ensure that the reversal of the
origiaal adjusting entry is corrected so that the fiscal
19*3 figures will not be materially misstated.
We agree with this recommendation. We made the adjusting
entries in February 1993 and the final financial statements will
reflect these entries. The reversal of these entries has also
been completed.
2.2 Reoommend that the Director, Financial management Division
work with the Director, national Contract Payment Division
to evaluate the process used to complete year-end adjusting
entries for accounts payable and accrued liabilities and
revise it to more accurately estimate the entries, consider
reviewing payments made over several prior years to develop
a more accurate methodology.
130
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APPENDIX I
Attachment Page 4
We agree with this recommendation. We have identified
potential changes to our methodology which we will be discussing
with the QIC staff.
Corrective Action: Tarqret Date
- Meet with OIG staff on changes to July is, 1993
the methodology
- Implement changes to the methodology Sept. 30, 1993
3.0 rinding: Property purchased with FXFBA fund was not properly
capitalised.
3.1 Recommend that the chief Financial Officer direct the
Personal Property Quality Action Team to revise the Agency's
capitalisation policy to include more detailed instructions
for determining which Agency assets should be capitalised.
Specifically, the policy should contain guidance oni
o defining all object class cedes which contain items which
could be capitalised;
o identifying component parts including a listing of
standard items which qualify as components;
o capitalising split-funded purchases and purchases of group
assets, and;
o identifying and accounting for leasehold improvements.
We agree in principle with the intent of the recommendations
but disagree with the suggested specific actions. The Personal
Property Quality Action Team was formed to examine the problems
the Agency has with accounting for personal property and to
propose potential options for solving these problems. The QAT
was not chartered to develop detailed accounting policies and
procedures for personal property. The mission of the QAT is to
review EPA's current policies, procedures, and systems for
tracking and accounting for personal property. The QAT is to
develop options and recommendations that will result: in improved
reconciliations between IFNS and PPAS; improved methods for
capturing cost for additions and improvements; and accounting for
contractor held property. We suggest that any specific
recommendations be withheld until after the QAT has issued its
report. This would be consistent with the auditor's position in
the FY 92 Financial Statement Audit of Superfund, LUST, and
Asbestos Loan Program.
3.2 Direct the Director, Financial Management Division to
provide training to program office personnel on the proper
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assignment of object class codes en obligating documents.
We agree with this recommendation. The Financial Management
Division will be meeting with Office of Pesticide Programs (OPP)
to determine the type and duration of the training needed. In
the interim, OPP will issue a memorandum to the staff instructing
them to take more care in assigning object class codes.
Corrective Action; Target Date
- Identify training requirements for OPP Sept. 30, 1993
- Conduct training Dec. 31, 1993
4.0 rinding: The Office of Pesticide Programs did mot perform a
complete review of unliquidated obligations.
4.1 Recommend that the Director, Office of Pesticide Programs
require each division director to complete the annual review
of unliquidated obligations and provide in a timely manner
the results of the review to the appropriate finance office
eo that invalid obligations can be deobligated.
We agree with this recommendation. All OPP divisions are
scheduled to complete the review of 1993 unliquidated obligations
by July 30, 1993. OPPTS Senior Budget Officer's staff is
reviewing and coordinating this effort to ensure that the review
is accurate and complete. As of June 11, 1993, OPP has reviewed
$11.5 million in unliquidated obligations. OPP has identified
$11.4 million as being still valid obligations while $64.1
thousand has been submitted for deobligation.
Corrective Action; Target Date
- Complete unliquidated obligation review July 30, 1993
for FY 1993
5.0 Findings Improvements are needed in controls ever property
located in the Office of Pesticide Programs
5.1 Recommend that the Director, office of Pesticide Program
ensure that internal controls are in place and followed to
safeguard and account for property, including, performing annual
inventories and reconciling the results with PPAfl.
We agree with this recommendation. After consultation with
the QIC staff, we believe the correct number of OPP custodial
areas is 8. Further, the first paragraph on page 34 discusses a
custodial area with 402 items. This area contains the most items
of any area in EPA. Of the 202 items unaccounted for in the July
1992 inventory, 192 have been found. The remaining 10 are on a
survey list. The proper documentation has been prepared for the
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37 items transferred out of the area. The six items referred to
in the second paragraph have been found and returned to OPP and
the proper documentation (six month passes) have been prepared
where required. One of our divisions is in the process of
conducting a physical inventory of all AOP equipment within the
division and a Personal Property custody Card (EPA 1740-21) is
being prepared for each item. When the inventory is completed,
we will compare it with the Agency PPAS inventory and resolve any
discrepancies.
we will provide specific target dates in the final report.
3.2 Recommend that the Director, Office of Pesticide Program
schedule all custodial offieers and alternates for refresher
training.
We agree with this recommendation. We will contact FMSD to
determine the type of training available for custodial officers
and will provide a specific target date in the final report for
the training.
3.3 Recommend that the Director, Office of Pesticide Program
establish internal control procedures to help ensure that
accountable property delivered directly to the end user is
reported to the property accountable officer for inclusion in
PPAS.
See response to recommendation 5.4.
5.4 Recommend that the Director, office of Pesticide Program
perform an alternative management control review of property
controls as part of the office** annual Federal Managers'
financial Integrity Act process.
We agree with the recommendation 5.3 and 5.4. OPP
management places a high priority on property control and
accountability and believe management involvement will improve
the current system. After conducting the alternative management
control review, we will modify our internal controls procedures
to improve them, as appropriate.
Corrective Action; Target Date
- Conduct review of property (will be Sept. 30, 1995
added to the FKFIA 1994-1995 Management
control Plan)
Auditors' Report on Compliance with Laws and Regulations
c.o findingt Tolerance fees collected did not cover EPA's costs.
We agree with the auditors' recommendations that a cost
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study b« conducted. However, we have major concerns with the
wording of the recommendation and the description of the issue
used as the premise for the recommendation. Specifically, we do
not agree with the finding that "Tolerance fees collected did not
cover EPA's costs*.
The audit report language does not differentiate between
various tolerance program activities (raw agricultural commodity
tolerances, food additive tolerances, tolerance revocations,
inerts, etc) and the legal, programmatic, and practical aspects
of fees for each. For example, Congress has only authorized the
collection of fees for the establishment of tolerances for raw
agricultural commodities under Section 408 of the Federal Food,
Drug, and Cosmetic Act (FFDCA). Congress, however, has not
authorized the collection of fees for food additive tolerances
under Section 409 of FFDCA. We, therefore, do not collect for
food additive tolerances.
The statement on page 40 of the audit report that "Section
408(o) ... authorizes the promulgation of regulations to require
the payment of fees ... for establishing pesticide tolerances" is
misleading. The actual statutory language states "... for the
performance of ... functions under this section." This language
refers only to Section 408. We also do not charge fees for
tolerance revocations because it would be impractical to charge a
company to revoke its tolerance. We also have a waiver/refund
policy for various situations such as minor use pesticide
tolerances submitted under the IR-4 program and economic
hardship.
Fees have increased since 1986, based on annual adjustments
to Federal salary increases. In fact, the fees have increased by
over 27%. The report states that "personnel compensation and
benefit costs of OPP associated with processing the petitions
totaled about $3.0 Billon." The report is not clear how this
number was calculated or if it is referring to all tolerance
program costs or just the costs of processing Section 408
tolerances.
The major OPP activity in processing a petition is the
scientific review. Our internal Time Accounting Information
System (TAIS) captures such information and in 1992 approximately
20.88 FTEs were reported for Section 408 tolerance work. The
20.88 FTEs in 1992 is equal to approximately $1.3 million in
Salaries and Expense (SJ.E) costs which compares favorably to the
$1.4 millon in fees collected in 1992. OPP overhead for such
things as clerical, management, and administrative support, along
with nondirect cost such as leave and training, would need to be
reviewed and added to develop a total cost, if appropriate.
The statement on page 41 of the report that "OPP made a
conscious decision to cover only personnel compensation and
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Attachment Page 8
benefit costs with tolerances fees collected..." is not accurate.
When the new fee structure was developed in 1986, both salary and
expenses costs were used to develop the fees.
On page 41, the statements that "Raising fees charged to
process tolerance petitions could permit appropriated funds
currently used to fund this activity to be channeled to other
activities. One such activity is the pesticide reregistration
program ..." are inaccurate. OPP's appropriated budget,
specifically the Registration, Special Registration and
Tolerances Program Element is currently offset by fee
collections/earnings. Increased fees would not translate into
increased appropriated funds for Section 408 tolerance work or
other activities such as reregistration. Appropriated funds
would be offset by the amount of increased fees. In any case, we
could not use funds appropriated for tolerance work to be used
for reregistration work without Congressional approval.
C.I Recommend that the Chief financial Officer ia coordination
vita the Director, Office of Pesticide Programs, ooaduot a
comprehensive review of tolerance program costs to determine
how much tolerance fees should be raised, and take the
necessary steps to make appropriate changes in the fees
charged.
He agree with the recommendation with the understanding that
the study may not result in increased fees. He agree that a cost
study should be conducted in accordance with the CFO biennial
review requirement. A number of legal, programmatic, and policy
issues need to be explored in conjunction with the cost study.
The study may or may not show a need to increase fees. Further,
we will initiate., the cost study within ninety days after the CFO
issues the necessary guidance.
Corrective Action; Target Date
- Develop methodology for conducting review Oct. 31, 1993
- Complete review and submit to CFO Jan. 31, 1994
«.2 Recommend that the Chief Financial officer conduct the
required biennial review of other Agency user fees, and
institute the necessary policies aad procedures to ensure
that these reviews will be conducted in a timely manner ia
the future.
The draft report should be revised to provide the reader
with data on the other agency user fees that this recommendation
purports to address. However, we agree that we need to establish
policies and procedures to ensure these reviews are conducted;
our action.plan is presented below. He cannot provide specific
target dates for the last few milestones since we must obtain
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Attachment Page 9
additional clarification from Offica of. Management and Budget.
We plan to have specific dates in our final response.
Corrective Action; Target Date
- CFO will issue guidance to national July 31, 1993
program managers for the conduct of
biennial reviews for applicable user
fee programs
- Program offices will develop methodology Oct. 30, 1993
in consultation with CFO for conducting
their reviews
- CFO complete reviews of program To be determined
offices' methodology
- Program offices conduct review based on To be determined
approved methodology by CFO
- CFO evaluate the results of program To be determined
offices reviewed
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APPENDIX II
GLOSSARY OF ACRONYMS
ADP
Agency
CFO
CFO Act
EPA
FIFRA
FIFRA Fund
FIFRA 88
FMD
FMFIA
FMS
FMSD
FRAB
GAO
HAOB
IFMS
OMB
OPP
OPPTS
PPAS
QAT
Tolerance
Fund
Automatic Data Processing
Environmental Protection Agency
Chief Financial Officer
Chief Financial Officers Act of 1990
Environmental Protection Agency
Federal Insecticide, Fungicide, and Rodenticide
Act
Reregistration and Expedited Processing Fund
- 1988 Amendments to FIFRA
- Financial Management Division
- Federal Managers7 Financial Integrity Act
- Financial Management System
- Facilities Management and Services Division
- Financial Reports and Analysis Branch
-U.S. General Accounting Office
- Headquarters Accounting Operations Branch
- Integrated Financial Management System
-U.S. Office of Management and Budget
- Office of Pesticide Programs
- Office of Prevention, Pesticides and Toxic Substances
- Personal Property Accountability System
- Quality Action Team
- Revolving Fund for Certification and Other Services
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APPENDIX III
DISTRIBUTION
General Counsel, Office of General Counsel (LE-130)
Comptroller (PM-225)
Financial Management Officers, Cincinnati and Las Vegas
Director, Office of Acquisition Management (PM-214F)
Director, Office of Administration and Resources Management,
Cincinnati, OH
Director, Office of Administration and Resources Management,
RTP, NC (MD-20)
Director, Office of Information Resources Management (PM-211)
Director, Office of Pesticide Programs (H-7501C)
Director, Budget Division (PM-225)
Director, Contracts Management Division, RTP, NC (MD-33)
Director, Facilities Management and Services
Division (PM-215)
Director, Financial Management Division (PM-226F)
Director, National Contracts Payment Division,
RTP, NC (MD-32)
Director, National Data Processing Division, RTP, NC (MD-34)
Director, Program Management and Support Division (H-7502C)
Director, Quality Assurance Staff (PM-215)
Chief, Financial Compliance and Quality Assurance Staff (PM-226F)
Chief, Financial Reports and Analysis Branch (PM-226F)
Chief, Financial Systems Branch (PM-226F)
Chief, Fiscal Policies and Procedures Branch (PM-226F)
Chief, Headquarters Accounting Operations Branch (PM-226)
Chief, Policy and Special Projects Staff (H-7501C)
Chief, Security and Property Management Branch (PM-215)
Agency Followup Official (H-3304)
Audit Follow-up Coordinator ATTN: Program Operations Support
Staff (PM-208)
Carolyn Levine, Audit Liaison for the Office of Administration
and Resources Management (PM-208).
Joyce Hay, Audit Liaison for the Office of Prevention, Pesticides
and Toxic Substances (TS-788)
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