' 'EPA-2G5-R-94-003
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Administration And
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FY 1994-1999
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| £% \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
I ? WASHINGTON, D.C. 20460
,Wf
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT:
FROM:
EPA's Financial Management Status Report and
Five-Year Plan, FY 1994-1999
Jonathan Z. Cannon 1
Assistant Administrator and j
Chief Financial Officer
TO:
See Addressees
I am. pleased to provide you with a copy of the Financial Management Status Report
and Five-Year Plan, FY 1994-1999 (Five-Year Plan). This document serves as a
compendium of the Agency's financial management accomplishments during FY 1994 and a
blueprint of its goals and initiatives for the next five years.
During the past two years, we have made great strides in developing this ongoing
plan. It offers not only a vision for the future of financial management within EPA, but also
establishes benchmarks, goals and specific milestones by which our progress can be
measured in future years. We have also expanded the scope of the plan to include not only
traditional accounting functions but all the resource management activities under the
supervision of the CFO.
The process of producing the Five-Year Plan provides the Agency with an excellent
opportunity to elevate, discuss and prioritize financial management issues. It initiates
important dialogue about these issues among regional and program managers, their financial
management staffs and the core resource management community.
Recycled/Recyclable
f~\ Printed with Soy/Canola Ink on paper that
Yl (_/ contains at least 50% recycled liber
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2
In developing the plan, we strove to establish the framework for integrating key
initiatives such as the CFO Act, the Government Performance and Results Act, National
Performance Review recommendations and the goals highlighted in the Agency's Strategic
Plan. I believe that the Five-Year Plan reflects the ideals of these initiatives, while
demonstrating our commitment to make financial management an integral part of the
processes that guide our program management and investment decisions.
Please review this document closely and share it with your staff. You may want to
note those activities that will affect your program operations or require direct participation
from you or your staff.
As the Agency's CFO, I look forward to working closely with you and your staff*
for the mutual goal of improved financial management at EPA. If you have any questions
about our Financial Management Status Report and Five-Year Plan, please contact' me^
at (202) 260-4600 or Jack Shipley, Director, Financial Management Division on
(202) 260-5097.
Attachment
cc: Sallyanne Harper (3101)
Kathryn Schmoll (3301)
Jack Shipley (3303F)
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List of Addressees
Regional Administrators
Assistant Administrators
Associate Administrators
Assistant Regional Administrators
Senior Resource Officials
Senior Budget Officers
OARM Office Directors
OARM Division Directors
Regional Comptrollers
Financial Management Officers
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MESSAGE FROM THE CHIEF FINANCIAL OFFICER
I am pleased to present the Environmental Protection Agency's Financial Management Status
Report and Five-Year Plan, FY 1994-1999 (Five-Year Plan). The plan, which builds on our previous
efforts, serves as a chronicle of the Agency's financial management accomplishments during FY 1994
and a blueprint of our goals and initiatives for the next five years. The plan takes financial
management far beyond the traditional core functions and operations and strives to introduce an
Agency-wide awareness of and momentum for financial management improvement.
The past year marked several dramatic events that underscore the importance of strong
financial management government-wide. First, many of the recommendations of the National
Performance Review (NPR) focused specifically on resource management. Second, with many new
Federal agency Chief Financial Officers (CFOs) confirmed, the CFO Council made a commitment to
provide stronger government-wide leadership for financial management. For the first time, the CFOs
and Deputy CFOs, who comprise the Council, have developed a strategic vision and clearly defined
goals. This vision statement and these goals have been very influential in the development of our
own Five-Year Plan. Third, Federal agencies, including EPA, invested heavily in reinvention and
streamlining initiatives, including many in financial management. These initiatives are key to the
Agency's overall financial management improvement effort.
Although these events are very significant, perhaps their greatest contribution is the message
they are sending to all federal employees - that government can change and that it can work better
and cost less. This plan is about those types of changes. The vision, goals and milestones listed in
the pages that follow articulate what we need to do at EPA to strengthen our financial management
practices and to ensure that the Agency accomplishes the maximum results possible with its resources.
This year's plan also reflects a renewed partnership between financial and program managers.
Just as financial management staffs can no longer afford to sit in solitary offices generating reports for
other accountants, program managers cannot ignore resource issues in order to achieve program goals
at all costs. The Five-Year Plan calls for financial management staffs to actively identify and meet
the needs of all their customers - in Congress, in central agencies and throughout EPA - by
providing them with the financial data they need to make informed resource and program management
decisions.
For their part, EPA program and regional offices are recognizing their critical role in the
Agency's resource management processes. They took the first important step by designating top
managers in every Agency office to serve as Senior Resource Officials (SROs). This cadre of key
program managers provides leadership and accountability for resource management functions.
Through the SROs, program and regional offices played a role in reviewing and developing this Five-
Year Plan.
EPA's Financial Management Status Report & Five-Year Flan
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<¦
As we move forward to implement this plan, we will rely on program and regional managers
to help us integrate and coordinate key management initiatives including the CFO Act, EPA's
Strategic Plan, new guidelines for the Federal Managers' Financial Integrity Act, provisions of the
Government Performance and Results Act and the recommendations of the NPR. Working in tandem
with program managers, financial management staffs can create the necessary financial information
and systems structure to ensure the most effective resource management program in the Federal
government.
We must view this Five-Year Plan as part of a continuing process; for its value will ultimately
be measured not in the course it sets but in the tangible results it helps us achieve. These
accomplishments will not always be easy, but they are within our reach if we have the courage to
change and the wisdom to work together.
lonathan 4.Cannon
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EPA's Financial Management Status Report & Five-Year Flan
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TABLE OF CONTENTS
Executive Summary . v
Chapter 1 - CFO's Conceptual Framework 1
Chapter 2 - Organization and Personnel 5
Chapter 3 - Accountability 13
Chapter 4 - Planning, Budget and Fiscal Processes 21
Chapter 5 - Working Capital Fund 27
Chapter 6 - Policies 31
Chapter 7 - Financial Management Operations 37
Chapter 8 - Systems 51
Chapter 9 - Contracts Administration 61
Chapter 10 - Administration of EPA Assistance Programs . . 67
Chapter 11 - Office of the Inspector General Activities 73
ATTACHMENTS
EPA Organizational Charts Attachment A
EPA Lexicon Attachment B
EPA Systems Information Attachment C
EPA's Financial Management Stains Report & Fire-Year Flan Page ID
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EXECUTIVE SUMMARY
INTRODUCTION
The Environmental Protection Agency's (EPA) FY 1994-1999 Financial Management Status Report--
and Five-Year Plan provides an overview of the Agency's recent accomplishments and articulates a
bold, long-range vision for the future of financial management at EPA. The plan consists of goals
and milestones which are divided into 11 chapters focusing on definitive financial management topics.
Milestones range from establishing employee training programs to expanding the scope of EPA's
annual financial statements.
Two major government-wide efforts have greatly influenced the development of this plan. The plan
reflects both the recommendations of the National Performance Review and the directions taken in the
Chief Financial Officers Council's government-wide vision statement and goals for financial
management. In addition, the plan incorporates the requirements of the CFO Act, the Government
Performance and Results Act (GPRA) and other legislative mandates. Each of these efforts
underscores the importance of strengthening financial management to increase the Agency's capacity
to meet program goals.
In the first chapter of the plan, the CFO provides a conceptual framework for the development and
implementation of the plan. The subsequent 10 chapters contain: a goal statement for the specific
topic the chapter addresses; a description of specific issues; the Agency's status in addressing the
issues; a discussion of planned activities; arid milestone charts. An organizational chart and a lexicon
explaining acronyms and EPA-specific terms are also included.
Since the plan no longer must conform with Office of Management and Budget's format, this year's
plan includes the full scope of the CFO's resource management authority. Chapters have been added
to the plan for contracts management and EPA's processes for budgeting and planning. Another new
chapter provides the Office of the Inspector General (OIG) with an opportunity to discuss its plans for
assisting the Agency. In addition, last year's asset management chapter has been divided into both a
policy chapter and a chapter on financial management operations.
The following section summarizes the contents of the 11 chapters included in this document.
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SUMMARY OF THE CFO'S CONCEPTUAL FRAMEWORK
Six general themes run throughout the CFO's vision for the future of financial management at EPA.
They are: 1) integrating financial management into the Agency decision making processes; 2)
providing an infrastructure of financial management information, systems, policies and services; 3)
recognizing stewardship responsibilities for both the environment and public resources; 4) ensuring
greater accountability; 5) emphasizing customer service; and 6) striving for continuous improvement.
These themes demonstrate EPA's continued commitment to strengthening financial management
functions in support of the Agency's overall goals. They provide guidance for the Agency in
developing policies and directing financial management operations during the next five years. These
themes also complement and support the Agency-wide strategic plan, the GPRA implementation
efforts and initiatives underway to streamline and reinvent agency-wide processes.
Each of these themes must be cultivated in order to develop a comprehensive financial management
program which will ensure more effective management of the Agency's resources and also support
attaining EPA's environmental goals. As stated previously, these themes were heavily influenced by
and are very compatible with the themes articulated in the CFO Council's government-wide vision
statement for financial management. In fact, EPA has adopted the same four goals that the CFO
Council is using to support the government-wide vision as the goals EPA will use in support of this
Five-Year Plan.
These goals are as follows: 1) provide leadership to promote the efficient management of government
resources and assets; 2) establish a framework to provide sound financial policies and services and
facilitate effective communication; 3) provide quality financial services to customers; and 4) produce
complete and useful financial information on EPA operations which fully supports financial and
performance reporting.
These goals are reflected in the concrete actions that are identified as milestones in the topic chapters
of the Five-Year Plan.
SUMMARY OF FUNCTIONAL FINANCIAL MANAGEMENT AREAS
Chapter 2: Organization and Personnel
Status: In FY 1994, EPA initiated a number of actions to strengthen the organization structure and
cultivate the potential of employees. The Agency:
Established a cadre of top management officials to serve as Senior Resource Officials who are
responsible for all resource management functions for their respective offices;
Increased the advisory role of the Resource Management Committee by expanding its scope to
a broader range of functions, including CFO Act implementation issues;
Created the Financial Management Career Development Committee to develop options for
strengthening employee training programs; and
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Distributed a listing of career development opportunities to Headquarters and regional office
financial management employees.
Planned: During the period of this plan, the Agency will make additional organizational changes and
continue to enhance employee training programs. EPA will:
Revise formal delegations of authority to reflect SRO roles and responsibilities;
Develop a recommended training matrix that lists courses and developmental activities
appropriate for every financial management position;
Develop a training evaluation program;
Streamline and reinvent appropriate financial management processes; and
Reorganize the Office of the Comptroller, if deemed appropriate, based on a review of study
results.
Chapter 3: Accountability
Status: During the past year, several actions were executed to strengthen accountability for financial
management functions throughout the Agency. Among these actions, EPA:
Conducted a pilot program of financial management performance measures to assess the
effectiveness of component offices in carrying-out financial management duties;
Accelerated the production of the Agency's audited annual financial statements by 90 days,
while improving the auditor's overall opinion of the statements;
Developed and introduced a new model for the Federal Managers' Financial Integrity Act
which will significantly reduce the reporting burden on Agency offices; and '
?
Installed new software to improve the efficiency of the Management Audit Tracking System. .
Planned: Within the period covered in this plan, the Agency will complete several actions to further
increase accountability for resource management functions. The Agency will:
Develop and implement the financial management performance measures agency-wide;
Expand the financial management performance measures beyond core accounting operations to
include measures for contracts and grants management as well as program office financial
management;
Implement a new quality assurance program to reflect current EPA accounting operations and
financial reporting conditions;
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Continue implementation of the new FMFIA program, including incorporation of Integrity
principles into program strategies and guidance;
Issue revised EPA Orders for Management Integrity and Audit Management; and
Develop tracking software for General Accounting Office reports.
Chapter 4: Planning. Budget and Fiscal Management
Status: In FY 1994, EPA initiated steps to direct the Agency budget and planning process toward a
more integrated approach with financial management. The Agency:
Issued The New Generation of Environmental Protection, an Agency-wide strategic plan for
FY 1995-1999; and
Developed the FY 1996 budget request around the strategic plan's broad environmental goals
topics.
Planned: During the period covered by this plan, additional actions will be implemented to integrate
key agency processes. EPA will:
Establish measurable program performance goals to support EPA's broad environmental goals
and to provide means for assessing success and evaluating progress;
Monitor expenditures and bridge budget and financial data to broad environmental goals;
Develop a "Stakeholders' Report" to provide executive-level information on the Agency
performance in achieving environmental goals; and
Implement options to strengthen EPA's budget development and execution.
Chapter 5: Working Capital Fund
Status: During FY 1994, the Agency has developed the framework for a working capital fund,
which will be used to support centrally-provided administrative services on a fee-for-service basis.
The Agency:
Established a Working Capital Fund Board, comprised of Agency managers, to oversee the
operations of the fund and recommend activities for inclusion;
Developed the first budget for the fund (FY 1996); and
Determined which activities will be included in the fund for the first phase.
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Planned: Within the period covered by this plan, EPA will take the necessary steps to introduce and
establish a working capital fund for all appropriate administrative services. The Agency will:
Conduct a prototype operation using costs of the National Data Processing Division and
metered mail to test WCF applications;
Implement working capital fund for selected administrative services; and
Develop processes for assessing efficiency and effectiveness of service delivery and customer
satisfaction.
Chapter 6: Policies:
Status: Policies were issued and guidance provided to the Agency about financial management
matters throughout FY 1994. Among its policy actions, the Agency:
Issued Policy Announcements for recording of imprest fund and travel advances and for
establishing a hierarchy of accounting standards for preparing accounting and financial
reports;
Piloted proposed policies, procedures and internal controls for a third party draft system; and
Issued numerous travel-related policies, such as the use of quick check-out, procedures for
making personal phone calls, phasing out Diners Club and implementing American Express as
the Government travel card program.
Planned: Financial management policy staffs will continue to provide guidance to the Agency
regarding accounting and procedural policies. Attention will be given to addressing the NPR
recommendations concerning streamlining operations and reducing regulatory burdens. During the
period covered by the plan, EPA will;
Implement EPA policies and procedures to correspond to new accounting standards issued by
the Federal Accounting Standards Advisory Board (FASAB);
Issue revised Superfund financial policies;
Implement policies, procedures and internal controls for a third party draft system; and
Develop, issue and implement policies and procedures to monitor and address requirements of
the Cash Management Improvement Act.
Chapter 7: Financial Management Operations
Status: Technological improvements and customer demands for better services impacted EPA's
management of its financial resources during FY 1994. The Agency:
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' Strengthened management controls to ensure more timely recording of receivables;
Developed a process for electronic receipt, approval, payment and storage of invoices using
v Electronic Commerce Interchange and Electronic Data Interchange;
Implemented the Federal Tax Refund Offset program for delinquent individual debt;
0- ~Expanded the use of private collection agencies to include Superfund debts;
Continued to improve the Agency's performance in responding to invoices, with 98.7 percent
of invoices being paid on time;
Increased the use of direct deposit for payroll checks, enrolling more than 92 percent of all
employees into direct deposit programs; and
Implemented the automatic teller machine program for travel advances.
Planned: Ensuring accountability while improving the delivery of financial management services to
customers will be the focus of improvements during the next five years. EPA will:
Install software to upgrade IFMS to address Superfund requirements;
Implement the commercial segment of the Federal Tax Offset program;
Develop future indirect cost rate computations as well as rates for all previous fiscal years;
Expand use of ECI/EDI beyond PC workstation pilot to all Agency invoices;
Issue new Superfund Cost Recovery Procedures Manual;
Expand the use of electronic funds transfer for making Agency payments;
Develop, test and implement an electronic time and attendance process;
Streamline and automate the travel process; and
Develop an effective interface between IFMS and the Asbestos Receivable Tracking System.
Chapter 8: Systems
Status: EPA made significant progress in addressing several long-term concerns with the Agency's
accounting system and how it interfaces with other financial systems in the past year. The Agency:
Upgraded the Integrated Financial Management System (IFMS) to increase the Agency's
capacity to provide timely, accurate and useful financial data;
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Provided users access to detailed Agency payroll data through a new subrelease of the
Management and Accounting Reporting System;
Conducted a successful pilot of an electronic invoice approval system which will serve as an
important component to a fully automated invoice system;
Integrated IFMS's interface with the Grants Information and Control Systems; and
Piloted Electronic Timesheet (ETS) to reduce the burden Superfund employees face in
completing timesheets.
Planned: Further improvements to expand and enhance the Agency's financial management systems
are planned during the period covered by this plan. The enhancements will improve the delivery of
financial services to customers and make data generated by the systems more accurate, timely and
useful for Agency management. EPA will:
Eliminate all uses of legacy systems;
Install IFMS module called "Fixed Assets" to improve automation in maintaining property
inventories;
Expand capacity of financial systems to track Agency costs;
Continue to identify user information needs and explore options for improving report
capabilities;
Enhance contract management through expanded development of the Integrated Contracts
Management System;
Review hardware and software needs to implement an automated invoice system for all
Agency invoices;
Develop and implement an electronic time and attendance process; and
Transfer the computing platform for the Superfund Cost Recovery Image Processing System
(SCRIPS).
Chapter 9: Contract Management
Status: The National Performance Review recommendations strongly encouraged changes to
government procurement processes. During FY 1994, the Agency implemented a number of actions
to improve contracts management. EPA:
Implemented programs using Electronic Commerce Interchange (ECI) and Electronic Data
Interchange (EDI) for the transfer of information; and
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Formed a number of workgroups to examine options for streamlining/reengineering contract
and procurement processes;
Planned: As recommendations are issued by the various working groups established during the past
year, the Agency anticipates making significant changes in the way it manages the contracts and
procurement processes. EPA will:
Expand the use of ECI and EDI;
Implement options to facilitate the contract award process;
Reengineer business practices to harness improvement opportunities generated by the use of
EDI and ECI;
Accelerate the contract close-out process; and
Transfer the responsibility for contractor property management and oversight from the
Facilities Management and Service Division to the Office of Acquisition Management.
Chapter 10: Assistance Programs
Status: Streamlining the administration of grants, interagency agreements and cooperative
agreements was the focus of improvements actions for assistance programs at EPA in FY 1994.
EPA:
Established a small grants re-engineering team to develop recommendations for awarding
small grants;
Developed a training course for all EPA project officers responsible for managing projects
funded under grants, cooperative agreements and interagency agreements; and
Conducted quality action team reviews of the grants process and of EPA/grantee
communications.
Planned: During the period covered by this plan, the Agency will continue its commitment to re-
engineering the processes for assistance programs in order to make them more responsive to
customers while maintaining appropriate internal controls. The Agency will complete the following
actions during the next five years:
Revise and publish in the Federal Register EPA's Part 30 Regulation;
Implement options for making state program grants more flexible;
Establish a project officers' certification requirement;
Issue policy stating Agency approach to open competition in the awarding of grants; and
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Implement recommendations of the grant quality action teams to improve the efficiency of the
process and enhance communications with grantees.
Chapter 11: Inspector General Activities
Status: Responding to the government-wide effort for a renewed OIG/Agency relationship, the
Office of the Inspector General (OIG) supported the Agency in making financial management
improvements in FY 1994. The OIG:
Identified improvement opportunities for EPA financial management in a March 31, 1994,
report of a joint OIG and Financial Management Division review; and
Accelerated its audit of EPA's FY 1993 annual financial statements, helping to increase the
timeliness of the report by 90 days.
Planned: The OIG will continue to provide the Agency with analytical information and advice in
support of financial management improvement efforts during the period covered by the plan. The
OIG will:
Monitor the Agency's progress in addressing issues identified in the joint review;
Participate on the Agency workgroup formulating strategies for developing program
performance measures; and
Expand the scope of the audit of the financial statements to cover all Agency programs.
CONCLUSION
The ultimate goal of this plan is to identify the actions necessary to create a partnership of financial
and program managers making informed programmatic and resource decisions in support of the
Agency's environmental mission.
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Page nr EPA's Financial Management Status Report & Five-Year Plan
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CHAPTER 1
CHIEF FINANCIAL OFFICER'S CONCEPTUAL FRAMEWORK
The Environmental Protection Agency's (EPA) FY 1994-1999 Financial Management Status Report
and Five-Year Plan provides an overview of the Agency's recent accomplishments and articulates a vision for
the future of financial management at EPA.
CFO'S MAJOR THEMES FOR FINANCIAL
MANAGEMENT
Within the basic context of "reinventing
government" and ensuring more rigorous
accountability, the first and foremost priority for
EPA's CFO is to position the Agency's financial
management organization, services and operations
to meet the challenges of the future. This
Financial Management Status Report and Five-
Year Plan serves as EPA's blueprint for addressing
these challenges and ensuring the most effective
and efficient use of Agency resource.
The plan reflects the government-wide attention
on financial management which was generated by
the recently issued government-wide vision
statement for financial management arid the
recommendations of the National Performance
Review (NPR). Many of the Agency actions
responding to the NPR are featured in the plan,
and the government-wide vision statement greatly
influenced the Agency's approach to this plan.
Six general themes run throughout the Agency
CFO's vision for the future of financial
management at EPA. These themes, which are
basically the same as last year, demonstrate EPA's
continued commitment to strengthening financial
management functions in support of the Agency's
overall goals. They provide guidance for the
Agency in developing policies and directing
financial management operations during the next
five years. These themes also complement and
support the Agency-wide strategic plan, the GPRA
implementation efforts and initiatives underway to
streamline and reinvent agency-wide processes.
The six themes are:
Integrating financial management into the
Agency's decision-making process.
Providing an infrastructure of financial
management information, policies, systems
and services that supports and enhances the
Agency's mission and programs.
Recognizing and exercising the Agency's
stewardship responsibilities both for the
environment and for public resources.
Ensuring credibility and instilling greater
Agency-wide accountability for financial
management.
Emphasizing customer service based on
customer needs.
Striving for continuous improvement by
setting goals, evaluating performance,
marking progress and continually pushing
forward to achieve excellence in meeting
customer needs.
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Integration
As outlined in EPA's strategic plan, financial
management must be linked in one comprehensive
process with strategic planning, budgeting and
program evaluation to optimize resource
utilization. In this context, financial management
encompasses broadly defined fiscal responsibilities
and operations and includes much more than
traditional accounting functions. It can be defined
as all resource management functions: accounting
operations, management integrity, contract
management, budget execution, preparation of
financial statements, financial systems development
and grants management. It needs to be considered
an integral part of the process that guides every
Agency's program management and investment
decisions. The CFO will need to work closely
with other Agency managers to accomplish the
Agency-wide cultural and operational changes
needed to achieve this integration.
Infrastructure
Financial management information, services and
systems must be designed to support the Agency's
program managers. The CFO must provide
program and regional managers with the tools they
need-financial systems, useful information, policy
guidance, training and technical assistance~to
effectively perform their financial management
responsibilities and to achieve the Agency's
environmental mission. Realizing this vision will
require that financial management become more
streamlined, efficient and effective.
Stewardship
All managers must strive to recognize their
stewardship responsibilities for both the
environment and public resources. When making
resource decisions, the Agency's senior managers
must weigh their commitment to achieving the
Agency's mission with their commitment to
financial and management integrity. While these
two roles sometimes appear to conflict, they are
compatible. They work in tandem to help the
Agency achieve its environmental mission while
complying with legislative and administrative
requirements. The CFO must act as an honest
broker, supporting program management
operations while ensuring that all resources are
managed appropriately.
Accountability
The CFO must communicate to the Agency's
senior and program managers the critical
importance of ensuring sound financial
management and management integrity in the
Agency's programs and operations. Further, the
CFO must ensure that all managers acknowledge
their responsibilities for financial and management
integrity within their own organizations,
recognizing that accountability is not an issue
pertaining only to the CFO's immediate
organization. Measuring the success of the
Agency in meeting its program and financial
management goals is critical to establishing fair
and effective accountability systems as well as to
identifying opportunities for addressing
deficiencies. Fulfilling this vision will require the
continued leadership of the CFO in management
forums and the personal involvement and
commitment of senior management.
Customer orientation
Employees at every level of the Agency must
recognize the importance of delivering their
products and/or services in a manner that meets or
exceeds the expectations of both internal and
external customers. While the CFO's staff fulfills
the function of serving as the Agency's honest
broker, it also must meet the needs of its
customers - senior, regional and program
managers - by providing them with the technical
assistance and information needed to achieve their
program goals.
Continuous Improvement
Improving financial management must be
recognized as a long-term iterative process; change
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EPA's Financial Management Status Report & Five-Year Plan
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in the federal bureaucracy comes slowly.
Enormous amounts of political will, management
commitment and hard work will be required to
fully achieve the ideals espoused within this
conceptual framework. In addition, changing
conditions such as technological advancements,
new legislation and efforts to "reinvent"
government will require the Agency to adjust and
sometimes redirect its efforts. However,
regardless of the conditions, management must
remain committed to setting goals, evaluating its
performance, marking its progress and continually
pushing forward to attain excellence. In addition
to benchmarking progress in the Five-Year Plan,
the CFO must provide constructive feedback and
information to program managers in support of
their efforts to improve internal resource
management.
CFO'S GOALS FOR FINANCIAL
MANAGEMENT
Each of these themes-integration, infrastructure,
balance, accountability and continuous
improvement-must be cultivated in order to
develop a comprehensive financial management
program which will ensure more effective
management of the Agency's resources and also
support attaining EPA's environmental goals. As
stated previously, these themes were heavily
influenced by and are very compatible with the
themes articulated in the CFO Council's
governmentwide vision statement for financial
management. In fact, EPA has adopted the same
four goals that the CFO Council is using to
support the government-wide vision as the goals
EPA will use in support of this Five-Year Plan.
These goals are as follows:
1) Provide leadership to promote the efficient
management of government resources and
assets.
2) Establish a framework to provide sound
financial policies and services and facilitate
effective communications.
3) Provide quality financial services to
customers.
4) Produce complete and useful financial
information on federal government
operations which fully supports financial
and performance reporting.
These goals are reflected in the concrete actions
that are identified in the report that follows.
FACTORS INFLUENCING FINANCIAL
MANAGEMENT
While the actions outlined in this plan will
significantly improve and strengthen financial
management at EPA, the CFO's ability to execute
these actions successfully depends on a number of
factors. First, EPA's financial management
improvement efforts must be coordinated with the
successful completion of more fundamental
financial management responsibilities, such as
producing paychecks, complying with legislative
reporting requirements, supporting Agency
travelers, maintaining core financial systems and
processing vendor claims. If the CFO's
organization fails to complete these functions, the
Agency cannot effectively operate. It is within the
context of balancing this heavy workload that
financial management improvements are being
pursued.
Second, although this plan articulates a bold
vision for the next five years, the CFO must
compete with other Agency priorities to maintain
adequate funding levels for improvement efforts in
an environment of declining resources. This is
particularly true for the outyears where no budget
framework has been developed yet.
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Third, the Agency continues to operate in an
environment of change. As implementation of the
GPRA matures, the CFO will need to coordinate
the improvements listed in this plan with the
initiatives pursued under GPRA, particularly in
overlapping areas such as performance measures.
In addition, the federal government as a whole
continues to grapple with many of the
recommendations of the NPR; some of which will
directly effect the Agency's financial management
operations.
Fourth, the interest and involvement of EPA's
program offices is key to making important and
lasting improvments to Agency financial
management processes. This five-year plan must
truly serve as an agency-wide strategy for resource
management. Program offices must work closely
with financial managers to articulate their needs
for services and information as well as accept
accountability for ensuring that their resources are
used wisely and appropriately.
CONCLUSION
EPA's Financial Management Status Report and
Five-Year Plan serves as a compendium of the
Agency's financial management accomplishments
during FY 1994 and a diagram of its goals and
initiatives for FYs 1995-1999. The Agency has
made great strides in developing this plan by
offering not only a vision for the future of
financial management within EPA, but also by
establishing benchmarks, goals and specific
milestones by which its progress can be measured
in future years. The ultimate goal of this plan is
to secure a partnership of financial and program
managers making informed programmatic and
resource decisions, and guiding the Agency to
achieve its environmental mission and meet its
fiduciary responsibilities.
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CHAPTER 2
ORGANIZATION AND PERSONNEL
Establishing a financial management community, comprised of qualified and motivated staff with clear
roles and responsibilities, is paramount to ensuring accountability for financial operations and fully achieving
the Agency's current and future goals.
PROVIDING STRONG FINANCIAL
MANAGEMENT LEADERSHIP
The Chief Financial Officers Act requires
agencies to establish organizational structures
capable of effectively administering financial
management programs while ensuring management
integrity and accountability. This has been, and
will continue to be, a top priority of EPA's
financial management program.
EPA Organizational Structure
The Environmental Protection Agency (EPA) is
organized into fifteen Headquarters Offices under
the direction of the Administrator, and the
Assistant and Associate Administrators, and into
ten Regional Offices under the direction of
Regional Administrators (see Attachment A, U.S.
EPA Organizational Chart). In addition, there are
52 EPA laboratories and field offices located
throughout the United States and its territories.
Headquarters Assistant and Associate
Administrators serve as national program managers
for one or more environmental programs or
administrative and management support areas.
Regional Offices, however, provide the full range
of environmental programs, services, and
administrative and management support-including
financial management-for the geographic locations
under their jurisdiction.
Chief Financial Officer (CFO)
EPA's designated CFO is the Assistant
Administrator (AA) for Administration and
Resources Management. Consistent with the CFO
Act, the CFO/AA is a Presidential appointee who
reports directly to the Administrator. The CFO
directs the Agency's resource and financial
management activities including budget
formulation and execution, contracts and grants
administration, and Agency-wide management
controls and audit follow-up.
Senior Resource Officials
To ensure;accountability for effective financial
management operations in every Headquarters and
regional office, a March 22, 1994, Administrator's
Order formally established the Agency's Senior
Resource Officials (SROs). The order holds the
SROs accountable for strengthening Agency-wide
fiscal resource management practices. The SROs
are responsible for overseeing improvement of
EPA's fiscal resource management responsibilities,
including acquisition, assistance, grants, budget
formulation and execution, program financial
management, audit resolution, property
management and management integrity.
In Headquarters, SROs are typically Deputy
Assistant Administrators in each program area,
while Assistant Regional Administrators (ARA)
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serve as SROs in the regional offices. The core
financial management functions in Headquarters
(i.e., payroll and disbursements, etc.) are under
the general supervision of the CFO, and in the ten
regional finance offices, these functions are under
the direct supervision of the ARA.
Status: In early FY 1994, EPA developed a
model for the Headquarters SRO roles and
responsibilities. The model defined the pertinent
CFO roles and responsibilities for Headquarters
SROs. The Regions performed similar efforts to
delineate the CFO roles and responsibilities of the
Assistant Regional Administrators. The order
establishing the SROs was the first step in
formalizing the CFO's relationship with these key
resource management officials.
Planned: The Delegation of Authority 1-16
"Agency Chief Financial Officer\Accounting,
Resource Management Committee
The Resource Management Committee, which is
comprised of SROs and key Office Directors in
OARM and chaired by the CFO, provides high
level leadership for the Agency's resource
management responsibilities. Monthly Committee
meetings ensure the continued involvement of
SROs in resource management matters. In
addition to providing SROs with periodic updates
on financial initiatives, the RMC presents SROs
with an opportunity to elevate their concerns
regarding resource management operations and
provide financial managers with input and advice.
The CFO consults with SROs on the
development of agendas for the RMC. While
SROs may provide resources for RMC
workgroups looking at specific issues, the CFO
Budgeting and Other Financial Management
Activities" will be revised to reflect the SRO
responsibilities and delegate decisions to the lowest
possible level. The objective of revising the
Delegations is to issue clearly stated Delegations
that define the CFO's role in overseeing financial
operations both within the CFO organizational
components and program SRO components of the
Agency.
The revised delegations will also require the
CFO to provide feedback to the Regional
Administrators (RAs) and the Assistant
Administrators (AAs) on their performance of
financial management functions within their
respective organizations. For information
concerning quantifiable measures that are currently
being developed to assess the performance of SRO
organizations, please see Chapter 3,
Accountability.
provides staffing for the Committee. OARM
managers periodically address RMC members on
options they may pursue or already have
underway, including such topics as reconciling
property systems, contract officers training
initiatives, routing of suspension and debarment
cases and breaking-up umbrella contracts.
STRENGTHENING FINANCIAL
MANAGEMENT CAREER DEVELOPMENT
To provide top quality financial management
services and programs, the Agency depends on a
diverse, skilled and motivated workforce. This
workforce consists of a wide range of
professionals, including accountants, financial
specialists, information system analysts, travel
voucher examiners, payroll clerks and clerical
Milestone
Target Date
Revise formal delegations of authority
12/94
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EPA's Financial Management Statin Report & Five-Year Plan
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staff. These professionals represent the Agency's
single most important financial resource.
For this reason, supporting an effective career
development program is vital not only to
encouraging and challenging financial management
employees but also to ensuring that the Agency's
workforce possesses die skills and knowledge
necessary to meet EPA's current and future
financial management needs. Training reflects a
partnership between the employee and the
organization. If executed properly, a training
program helps employees develop on a personal
level while the organization becomes more
productive.
Although EPA supports a number of training
initiatives on financial management functions,
many of these efforts must be better coordinated;
and the programs need to be more closely
evaluated to increase their effectiveness. As a
result, the Agency may not have yielded the
maximum benefit from its employee education and
training investments.
Status: In December 1993, the Agency formed
the Financial Management Career Development
Committee (FMCDC) to develop options for
strengthening employee training programs. The
Committee, which consists of both Headquarters
and regional financial managers, has developed a
workplan for reviewing ongoing training initiatives
and exploring strategies for meeting the Agency's
future financial management needs.
The FMCDC also released a listing of more than
130 educational opportunities to assist financial
management employees in making career
development choices. The listing includes the title
of training, a course description and a contact
source and phone number. Originally, the listing
was to be released as a calendar of upcoming
training opportunities. This concept will be
further explored by the FMCDC in an on-line
format.
Planned: By establishing the FMCDC, the
Agency committed to taking a much more in-depth
review of career development issues than was
envisioned when last year's plan was developed.
The recent activity by the CFO Council, an
interagency workgroup comprised of CFOs and
DCFOs, also has impacted die direction of EPA's
financial management training program. EPA
participates on the CFO Council's Human
Resource Committee, which reviews cross-cutting
financial management personnel issues. As a
result, many of last year's milestones either have
been delayed or are no longer being pursued. The
workplan developed by the FMCDC replaced all
previous plans and is reflected in the milestones
that follow.
Throughout the period of the plan, the Agency
will continue to review its financial management
training program and implement appropriate
improvements. Activities underway include
assessing current training programs; developing a
structured curriculum for financial management
employees; projecting future financial management
needs and developing strategies to meet them; and
exploring options for a financial management
certification program.
Reviewing current training
A system needs to be established to assess the
effectiveness of current training programs. By
evaluating the performance of courses and other
training opportunities, the Agency will be able to
make better educational investment decisions in the
future. In addition, for courses instructed by EPA
employees, an evaluation program will identify the
need for restructuring courses that do not achieve
their intended purpose.
Employees also need to be better informed about
training opportunities and encouraged to plan
developmental activities well in advance. The
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FMCDC plans to convert the listing of courses
into an on-line database that provides information
on upcoming training opportunities. The database
will have sorting capabilities that correspond to the
training matrix described below. Options are
being developed to make such a database user
friendly to every financial management employee
while requiring few resources to maintain.
The Committee also developed a publication on
careers in financial management at EPA to assist
employees and potential employees plan career
options. The publication identifies financial
management occupations and includes a personal
assessment questionnaire to assist individuals in
charting their career paths.
Milestone
Target Date
Distribute financial management career publication
10/94
Develop evaluation criteria for financial management training
2/95
Create database for storage of current financial management training
information/calendar
4/95
Refining financial management core
curriculum
Education and training requirements vary greatly
according to job functions and career level. The
FMCDC recognizes that these differences often
make choosing educational opportunities confusing
for the employee. For this reason, the FMCDC is
identifying appropriate training courses for
different types of financial management employees
at a variety of grade levels.
The development of this matrix will enable each
financial management employee to identify skills
and knowledge recommended for their position
along with courses or opportunities available to
help them develop those skills or obtain necessary
information. The matrix will be formatted along
career tracks and will be easy to use. While it
will not be possible to accommodate unique
personal needs, the matrix will provide an overall
structure for recommending training opportunities.
It will also encourage cross training in key
functional areas.
Milestone
Target Date
List current career tracks in traditional financial management functions
10/94
Compile position inventory of knowledge/skills requirements
12/94
Create matrix aligning the knowledge/skill analysis with potential
courses to build them by position and grade level
4/95
Develop additional courses, if necessary
FY 1996
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Addressing Program Office Staff
Training
Since the FMCDC is comprised of financial
managers in the Regions and Headquarters, the
membership does not include program office
representation. For this reason, a group similar to
Developing a finnnrinl managpmpnt
certification program
Whether certification programs should be
instituted for financial management functions is
one of the issues being considered by managers in
the financial management community throughout
the federal government. EPA is actively
participating
the FMCDC but comprised of representatives of
the program office SROs will be formed to
examine program office financial management
training heeds and develop an appropriate program
office matrix. The milestones listed below are
likely to change when that workgroup convenes
and establishes its own workplan.
on the CFO Council Human Resources Committee
that is reviewing government-wide options. In
addition, the FMCDC discussed at length whether
a certification program would be appropriate for
EPA employees. This decision has many financial
and organizational implications. While no firm
decisions have been nude, the Agency will
continue to weigh the benefit of such a program
and implement appropriate actions.
Milestone
Target Date
Evaluate appropriateness of EPA supporting a certification program
12/94
If deemed appropriate, select and develop certification .option .
4/95
If certification option is pursued, review implementation and
appropriateness of selected option
2/96
Milestone
Target Date
Establish program office training committee
4/95
List current career tracks for financial management positions in
program offices
12/95
Compile inventory of knowledge/skills for these positions
6/96
Create matrix aligning the knowledge/skill analysis with potential
courses to build them by position and grade level
9/96
Develop additional courses, if necessary
FY 1997
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Projecting future needs
EPA's training programs must recognize that
federal financial management operations are in a
period of great change, with requirements shifting
and growing rapidly. For this reason, the Agency
must take action to anticipate such changes and
take advantage of the opportunities they provide.
The FMCDC will work with the CFO Council,
OPM and internal organizations to project future
needs, develop strategies to meet these needs, and
reflect their impact on Agency education programs
in the training curriculum.
Milestone
Target Date
Work with organizations (CFO Council, OPM, etc.) to identify future
manpower needs for federal financial management
4/95
Develop action plan for ensuring emerging needs are met
6/95
Implement new courses if necessary
4/96
REVIEWING FMD'S ORGANIZATION
In previous Five-Year Plans, EPA indicated there
was a need to analyze the effectiveness of available
EPA resources, in particular those located in the
Agency's Financial Management Division (FMD),
to accomplish the workload associated with the
CFO legislative mandates and subsequent OMB
requirements. While the Congressional and
administrative requirements for financial
management have increased in recent years, the
Agency's financial management resources have
remained essentially the same. Although FMD has
met the requirements of the CFO Act to date, it
has done so largely by re-directing resources from
other financial management operations and
priorities. To continue operating in this manner
will compromise FMD's ability to perform its
critical, core financial management activities.
Status: To address this problem, the Comptroller
initiated a special review of the existing financial
management organization and core operations.
The review was designed to determine what
specific changes are required to take advantage of
new technology and re-engineering to improve
financial management operations and services and
to promote more efficient and effective use of the
Agency's resources. In addition, FMD initiated a
review of its four operations offices to identify
opportunities for improvements.
The first of the two reviews initiated by the
Comptroller is being conducted by a contractor.
The contractor will assist the Comptroller in
identifying capabilities that are critical to
enhancing FMD's productivity and meeting the
future needs of the organization and its customers.
The study approach is to improve FMD's
performance capability by considering all elements
of the organization: existing management
processes, resource levels, use of automation,
performance levels, and organizational structure.
Performance enhancement will focus on
developing a customer-driven strategy that will
determine what work gets done, how that work
gets done, and how high the quality of that work
will be. As a part of this study, the contractor
will recommend alternatives for streamlining and
improving the effectiveness of FMD's operations.
Data collection is well underway. More than 100
financial management staff were interviewed.
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The second review, which is being conducted by
FMD management and managers from the four
FMD operations offices, will identify and select
opportunities for streamlining and consolidating
operations and services. Initial screening Of FMD
processes has been completed, but final decisions
are contingent upon the recommendations made in
the contractor study.
Planned: The Agency plans to incorporate the
recommendations of both reviews into an FMD
CONDUCTING A FMD/OIG JOINT REVIEW
OF OPERATIONS
On September 27, 1993, the United States Senate
Committee on Environment and Public Works,
Subcommittee on Superfund, Recycling and Solid
Waste Management requested that the EPA's
Office of Inspector General (OIG) conduct a
comprehensive review of EPA's financial
management program with a specific emphasis on
the Superfund program. The subcommittee also
requested the hill cooperation of the Agency and
its participation in the review. The review was
performed as a joint, cooperative endeavor
between the OIG and EPA's Financial
Management Division (FMD).
The review was performed to provide a current
assessment of the Agency's financial management
program that: identifies the most important
financial management issues that present
challenges to EPA; determines the root causes for
the financial management issues; and recommends
initiatives to address these causes.
organizational improvement action plan. Since the
contractor's final report, which is expected by
October 1994, may impact final
streamlining/consolidation decisions, the managers
conducting the internal review will delay their
decisions until December 1994. Program office
and regional Office customers will be involved in
any decision regarding operations and services.
The Office of the Comptroller will issue its action
plan within a few months of the issuance of the
final reports.
Status: The OIG presented the preliminary results
of their review to die Subcommittee in January,
1994. The review team later utilized the results of
the review and prepared a final report for the
Agency, dated March 31, 1994. The report
outlines the OIG's assessment of financial
management in EPA and requires an Agency
response. The review identified the following
issues that concern financial management in EPA:
different perceptions and awareness of
financial management,
financial aspects of Superfund cost
recovery,
finance and reporting systems,
financial and accounting policies and
procedures
program financial management, and
financial management training and
qualifications.
These six issues contain 30 recommendations;
some of the recommendations request EPA to
continue actions already underway for improving
Milestone
Target Date
Complete contractor-assisted review of FMD organizational study
10/94
Evaluate and select streamlining/reinvention processes
12/94
Implement action plan
2/95
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financial management. The Agency's formal
response to this report, signed by the CFO on
August 10, 1994, indicates that many of the
recommendations were addressed in previous Five-
Year Plans.
Planned: The final responses to the
recommendations in the report will be tracked in
the Agency's audit follow-up program and closed
out as the corrective action milestones are
achieved.
Milestone
Target Date
Monitor action plan and assess follow-up effort
06/95
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CHAPTER 3
ACCOUNTABILITY
We envision institutionalizing various initiatives and management tools designed to provide the Agency
¦with a continuous objective and reliable assessment of how well its doing toward achieving its goals and
objectives. These tools provide the framework for initiating improvement actions.
IMPLEMENTING FINANCIAL MANAGE-
MENT PERFORMANCE MEASURES
The Chief Financial Officers (CFO) Act of 1990
established CFOs for all major federal Agencies.
Among the many CFO authorities and
responsibilities is a mandate to "develop and
maintain an integrated Agency accounting and
financial management system, including financial
reporting and internal controls which . . . provides
for. . . the systematic measurement of
performance"; (§902). The purpose of these
measures is to establish standards and goals to
determine how well the Agency's offices execute
the core financial and key program financial
management functions and identify opportunities
for improvement.
The major objectives of EPA's financial
management performance measurement program
are to assess the efficiency and effectiveness of
financial management services to customers and to
provide timely management information and early
warning to Agency managers on service areas
needing improvement.
Status: EPA has developed a thiee-tiered
measurement process; this process includes: Core
Financial Management Performance Measures,
Grants and Contracts Performance Measures, and
Program Financial Management Performance
Measures.
EPA planned and accomplished several
significant milestones towards establishing a
Financial Management Performance Measurement
Program in FY 1994. The Agency developed core
financial management measures which focus on
traditional comptroller functions such as
accounting functions, management integrity and
budget execution. The Agency initiated testing of
these measures in a pilot project in seven finance
offices conducted during FY 1994. While the
pilot program has provided valuable information
both about the measures and EPA's financial
operations, Agency management has extended the
pilot project to December 1994 to build broader
support for the program, monitor performance and
provide feedback to pilot sites.
During FY 1993-1994, Agency managers worked
with an inter-agency task force in developing
Government-wide financial management measures.
As required, EPA provides performance
measurement data to OMB semi-annually. The
Agency included many of these measures in the
Agency pilot program for core performance
measures.
Agency managers also developed new measures
in the grants and contracts management functions.
These measures will expand the core financial
management measures to encompass a broader
range of resource management functions. They
will be piloted during FY 1995.
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In the FY 1993-1997 Five-Year Plan, EPA
reported that it would develop program financial
management performance measures during FY
1994. This effort was delayed pending the
definition of roles and responsibilities for the
Agency's Senior Resource Officials (SROs).
Work is now underway.
Planned: In January 1995, the Agency will
implement the core financial management
performance measures Agency-wide. Offices will
report these measures semi-annually and will be
encouraged to develop additional core financial
management measures, as appropriate. The goal
is to refine the program to a set of measures that
managers find useful in evaluating and operating
their offices effectively and efficiently.
EPA will conduct an Agency-wide pilot to assess
the proposed grants, contracts and program
financial management performance measures.
During the period from January 1, 1995, through
September 30, 1995, EPA will appraise the
appropriateness of the pilot measures and make
necessary adjustments to ensure that EPA
implements appropriate measures for evaluating
the Agency's achievements.
The CFO will use all three tiers of financial
management performance measures to provide
feedback to the Regional Administrators and
Assistant Administrators on how well their offices
are performing financial management functions
within EPA. In addition, the CFO will solicit
input from field and program offices for improving
the CFO's operations and will institutionalize a
process of continuous improvement.
MILESTONE
TARGET DATE
Complete the core financial management pilot
12/94
Expand the core financial management performance measures to
include every finance office
1/95
Begin Agency-wide pilot program for new core measures, program
financial management, grants and contracts management measures
01/01/95
Implement all three types of financial management performance
measures agency-wide
10/95
Perform annual evaluation of the efficiency and effectiveness of
these measures and provide feedback to agency managers
FY 1995 - 1999
PREPARING ANNUAL FINANCIAL
STATEMENTS
Under the CFO Act, EPA is required to submit
annual audited financial statements to the Office of
Management and Budget (OMB) which conform to
OMB guidance. These statements accomplish two
critically important goals: strengthening Agency
accountability for sound financial management;
and providing accurate disclosure of programmatic
and financial information that enables decision-
makers to understand the implications of
budgetary, policy and program issues. EPA is
continually striving to improve the completeness,
reliability, timeliness, and usefulness of the
Agency's annual financial statements.
Status: As planned, EPA's Financial Management
Division (FMD) prepared and submitted the un-
audited FY 1993 financial statements to the Office
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EPA's Financial Management Status Report & Five-Year Plan
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of the Inspector General (OIG) in December,
1993. The financial statements conformed to the
requirements of the CFO Act and included all
applicable trust funds, revolving funds, and
commercial activities.
A review of the FY 1993 financial statement
preparation process revealed several positive
benefits. First, the Agency achieved a higher level
of discipline and adherence to government-wide
regulations required for accurate financial data.
The OIG has noted that the Agency's financial
reporting improved through the FY 1993 CFO
audit experience. Also, EPA received an
unqualified opinion on the Statements of Financial
Position and Cash Flow for the Oil Spill Fund.
Secondly, EPA has successfully "re-engineered"
the process by which we prepare financial
statements. The basic format of the financial
statements, the accompanying footnotes, and the
manual worksheets supporting the financial
statements have now been refined. This
refinement, and the regular, coordinated
communication and cooperation between the
responsible parties, allowed EPA to submit the
audited financial statements to OMB on April 1,
1994, an acceleration of three months over the
previous fiscal year.
Thirdly, the audit reports delineated specific
weaknesses in the financial statement preparation
process which EPA is correcting in order to assure
sound financial management practices. EPA
resolved one significant audit finding by correcting
erroneous figures resulting from the FY 1989
conversion process from EPA's previous
accounting system, the Financial Management
System, to the present system, the Integrated
Financial Management System.
Planned: EPA will prepare the annual CFO
financial statements for future years (FYs 1994 -
1999) in accordance with the provisions of the
CFO Act. Financial statements for FY 1994 will
be prepared by the CFO and submitted covering
all trust and revolving funds and commercial
activities which meet the OMB's criteria for
inclusion under the CFO Act. Beginning in FY
1996 (i.e., the FY 1995 financial statements), EPA
plans to prepare Agency-wide principal statements
and submit them to the OIG for audit.
EPA will continue to address financial
management issues raised in the annual audits to
achieve more favorable opinions on the financial
statements. Particularly, the Agency is
emphasizing improvements in the areas of accounts
receivable, property and equipment, accounts
payable, accrued liabilities, state cost share
revenue and grant payments to foster enhanced
reliability of the financial statements. EPA is
actively engaged in implementing corrective action
to resolve these concerns.
EPA will prepare and submit the FY 1994
audited financial statements to OMB by March 1,
1995. This represents a one month acceleration
over the FY 1993 submission. These statements
will be provided to the OIG by December 15,
1994.
FMD will continue to strive to expedite the
submission of the financial statements to the OIG
for audit. Experience garnered from the
preparation of the FY 1992 and FY 1993 financial
statements will facilitate these efforts. Also,
changes initiated by the U S Treasury to
streamline their reporting requirements and by
OMB to consolidate their requirements will assist
FMD in expediting the preparation of EPA
financial statements.
Future efforts to enhance the program
performance measures contained in the financial
statements will be directly related to the Agency's
implementation of the Government Performance
and Results Act. For additional information on
performance measures, refer to Chapter 4, EPA's
Planning, Budget and Fiscal Policies.
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MILESTONE
TARGET DATE
Prepare and submit annual financial statements of trust funds,
revolving funds, and commercial activities to 01G for audit.
12/94
Prepare and submit Agency-wide annual financial statements to
OIG for audit
12/95-99
Submit audited financial statements to OMB
3/95-99
Submit the CFO's analysis of the audited
financial statements
Annually by April 1
RESOLVING MATERIAL WEAKNESSES
AFFECTING FINANCIAL STATEMENTS
In our 1993 Federal Managers' Financial
Integrity Assurance Letter to the President, EPA
reported two material weaknesses which affect the
timeliness and accuracy of our financial
statements: 1) accounting system related problems,
and %) accounts receivable.
Statu?, The system related problems primarily
deal with technical shortfalls which impair EPA's
ability to provide complete and timely data, such
as inadequate project cost accounting, incomplete
interfaces with other administrative systems and
our continued reliance on old accounting systems
to perform certain functions. The Agency is on
schedule to resolve this material weakness by
September 1995. For further information
regarding these issues, please see Chapter 8,
Financial Systems.
The accounts receivable problems primarily deal
with inefficient accounting procedures, namely: 1)
the untimely recording of receivables because
finance offices do not receive documents timely
from originating offices, 2) technical shortfalls in
our accounting module for handling unique
Superfund requirements, and 3) insufficient
accounting guidance to properly account for
revenue resulting from state Superfund cleanup
activities. We are working with the Office of
Inspector General and EPA finance offices in
executing our corrective action plan to resolve this
weakness by September 1995. For further
information on accounts receivable issues, please
see Chapter 7, Financial Management Operations.
Also, EPA's Integrated Financial Management
System (IFMS) was placed in OMB's High Risk
List in 1990 because of data conversion errors,
inadequate ad-hoc reporting capabilities, and
deficiencies in our accounts receivable module.
Since that time, we have resolved these high-risk
issues and are working with OMB to remove
IFMS from the high-risk list and addressing
remaining issues through our corrective action plan
\ for our accounting system related material
weaknesses.
Planned: Planned actions to resolve material
weaknesses are contained in the two chapters of
this plan referenced above.
STRENGTHENING THE QUALITY
ASSURANCE PROGRAM
The Financial Management Division (FMD) is
enhancing its Quality Assurance Program (QAP)
by revising and updating the Financial Managers'
Quality Assurance Guide (Guide). The revisions
will reflect current EPA accounting operations and
financial reporting conditions. These upgrades
include the implementation of IFMS; an expansion
of statistical sampling as a quality control
technique for validating the integrity and reliability
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EPA's Financial Management Status Report & Fire-Year Plan
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of the financial processes and incorporation of new
and improved guidance on accounting and internal
control standards issued since the Guide was
originally distributed in 1987.
Status: The CFO Act emphasized the importance
of improving financial management by mandating
that agencies issue accurate financial information
from improved accounting systems and prepare
reliable, timely, and consistent financial
information for use by the Executive Branch and
Congress in making program and funding
decisions.
In the FY 1993-1997 Five-Year Plan, EPA
reported that the QAP revisions and upgrades
originally planned for FY 1993 would be
accomplished in FY 1994. We have successfully
met this commitment. Also, as planned, we will
implement an automated statistical sampling system
as part of the new QAP.
To enhance the QAP and help EPA obtain
unqualified audit opinions on its financial
statements, we developed the Financial Accounting
Statistical Tool (FAST). FAST will enable
Servicing Finance Office (SFO) staffs to
automatically select statistical samples of
transactions to test compliance with policies and
procedures and also test general ledger account
balances once the SFO specific general ledger is
operational during FY 1996. The increased
assurance of correct account balances will raise the
certainty that the financial statements are
accurately prepared and help us obtain an
unqualified opinion on our audited financial
statements. We will also use the FAST to prepare
the Prompt Pay Act Report and to report on the
Financial Management Performance Measures, as
discussed earlier in this chapter.
Planned: During FY 1996, we will prepare
consolidated agency-wide financial statements of
all FY 1995 appropriations, as required by CFO
Act. To ensure the propriety of the financial
statements, and obtain the unqualified audit
opinions, the QAP will be refocused to test general
ledger account balances for accuracy and
reliability. This new QAP will provide EPA
managers with the capability of conducting testing
centrally and in each SFO. The new Guide will be
issued in early FY 1995, in hard copy and
electronic formats.
FMD is currently working with the Electronic
Data Interchange (EDI) and Electronic Commerce
(EC) implementation teams to ensure the systems
have the requisite internal controls, and we plan to
conduct quality assurance reviews of the systems
once they are implemented. For more information
on EDI and EC, please see Chapter 7, Financial
Management Operations and Chapter 9, Contracts
Management.
FMD will also conduct a detailed evaluation of
our financial systems as required by OMB Circular
A-127 and as recommended by the National
Performance Review. This review will include the
inventory of accounting systems and the future
EDI and EC once they are operational.
MILESTONE
TARGET DATE
Conduct A-127 evaluation and develop action plans for full
compliance with requirements
12/94
Implement new Quality Assurance Program
10/94
Provide training to QA staff
12/94
Conduct oversight reviews of QA program and assure
implementation of corrective actions
FY 1995-1999
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REENGINEERING MANAGEMENT
INTEGRITY AND AUDIT MANAGEMENT
EPA is reinventing its management integrity and
audit management processes as part of the
Administration's government-wide National
Performance Review efforts. EPA plans to make
fundamental changes in the way it requires
management to carry out their responsibilities
under the Federal Managers' Financial Integrity
Act of 1982 (Integrity Act) and Inspector General
Act Amendments of 1988. The Agency will
streamline these existing processes to cut overly
prescriptive procedures, reduce unnecessary
internal reports and improve the flow of program
information for more effective management
decision-making. The ultimate goal is to
strengthen accountability by balancing EPA's
attention to good management with its focus on
achieving results.
Status: As a result of the Agency's effort to
reengineer its management integrity process,
milestones reported in last year's plan to
strengthen management integrity are no longer
relevant. Two milestones for strengthening audit
management were completed in December 1993:
version 3.1 of the Management Audit Tracking
System (MATS) was released; and procedures
were developed and utilized to monitor audit
follow-up activities for performance audits.
In developing a model for the new integrity
process, the Office of Administration and
Resources Management (OARM) ~ which has
National Program Manager responsibility for
management integrity ~ worked closely with
EPA's Office of Inspector General (OIG) staff,
who concurs with our approach and agrees that the
model preserves core Integrity Act requirements.
OARM also received support from the Office of
Management and Budget (OMB) and the General
Accounting Office (GAO), in addition to EPA's
Headquarters and Regional offices. In April 1994,
the Agency requested a waiver from OMB
Circular A-123 requirements to implement the
Integrity Act and received approval to eliminate
four paper-intensive processes that would simplify
reporting guidelines. In addition, EPA linked
management integrity with planning and budgeting
through the Agency's FY 1995-1999 Strategic Plan
and FY 1996 Budget Guidance that requires
managers to assess existing and emerging
vulnerabilities and to identify related resource
needs critical to the success of key program
strategies.
In streamlining our audit management program,
in December 1993, EPA implemented a new
release of its automated audit tracking system that
further increases reporting capabilities. This new
release was complemented by national training on
audit management. EPA also embarked on an
analysis of corrective actions tracking to ensure
full compliance with commitments made by
Agency managers. Additionally, the Agency
worked with the OIG to implement a strategic
approach regarding audits with lengthy outstanding
resolution. To improve management
responsiveness to GAO reports and
recommendations, the Agency formally delegated
internal processes in developing responses to
Congress. During the Spring 1994, the Agency
developed a system to monitor and track its
responses to GAO report recommendations which
improved the timeliness in responding to these
reports.
Planned: Throughout the period of this plan, the
Agency will continue to strengthen its management
integrity efforts through the implementation of
EPA's new integrity process. Additionally, the
Agency will recognize benefits in its audit
management program by simplifying audit
management processes and enhancing the
effectiveness and timeliness of Agency corrective
actions. Both efforts go to the heart of
management integrity ~ accountability for
improved program operations.
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Implementing EPA's New Integrity
Process
EPA's goal in reengineering the management
integrity process is to make best management
practices part of, not an overlay to, everyday
program planning, budgeting, and decision-
making. Now that the Agency has peeled off the
layers of administrative reporting, managers must
exercise their good judgement in identifying the
Agency's most pressing program priorities and
problems. To create a framework for sound
program management and prevention, managers
will perform four activities: assess the adequacy
and comprehensiveness of written strategies and
guidance for major programs; revise those
strategies and guidance to provide adequate
coverage and consistency with Agency-wide
management integrity principles; develop
administrative and program-specific integrity
principles for use Agency-wide; and develop a
systematic review strategy to assess the
effectiveness of strategies and guidance in
achieving program goals and safeguarding
resources. The Agency will carry out the
following milestones to establish this framework.
Milestone
Target Date
Managers Incorporate Management Integrity Principles Into
Program Strategies and Guidance
9/95
OARM Revises EPA Order 2560 on Management Integrity
1/95
Managers Develop FY 1995 Systematic Review Strategy
9/94
Agency Submits 1994 Integrity Act Report to President and
Congress
12/94
OARM Holds EPA Training Workshop
6/95
OARM Develops Administrative Integrity Principles for Use
Agency-wide
9/95
Managers Develop Program-Specific Integrity Principles for Use
Agency-wide
9/95
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Improving Audit Management
The Agency's Management Audit Tracking
Systems (MATS) will be enhanced to increase the
efficiency of the system, while, at the same time,
broaden user reporting options. EPA intends to
implement the recommendations of the Agency-
wide QAT on audit management by developing
good management practices and issuing a revised
EPA Order to streamline and simplify our audit
resolution and follow-up processes. The Agency
will carry out the following milestones to achieve
these improvements.
Milestone
Target, Date
OARM Creates Milestone System to Track OIG Performance Audit
Corrective Actions as Part of the MATS Version 3.2 Release
12/94
OARM Issues EPA's Order on Audit Management, Resolution and
Follow-up
3/95
OARM Implements System to Track Follow-up of GAO
Recommendations
5/95
OARM Issues Recommended "Good Audit Management Practices"
9/95
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CHAPTER 4
EPA'S PLANNING, BUDGET AND FISCAL MANAGEMENT
EPA managers are accountable for achieving program results using sound management practices and
fiscal responsibility. Therefore, they must provide and have access to information essential for monitoring
their budgets, planning and managing th eir program activities, exercising sound financial stewardship, and
preventing waste or fraud. To meet this need, Agency processes for planning, budgeting, fiscal management,
and program evaluation must be fully integrated and improved, consistent with the National Performance
Review, to more effectively serve the managers carrying out EPA'sprograms.
DEVLOPING INTEGRATED PLANNING,
BUDGETING, AND FISCAL MANAGEMENT
A dynamic agency like EPA requires a stable
process for priority-setting, decision-making, and
resource allocation. Specifically, it needs a
permanent planning, budgeting and management
framework that supports the Agency's long-term
directions and requirements, yet is also flexible
enough to accommodate changing priorities, and
initiatives. This need for stability in the Federal
management infrastructure also is emphasized in
Vice President Gore's National Performance
Review (NPR), which states that Government
financial systems should be the basic vehicle for
integrated budget, financial and program
information. This need also is recognized in
EPA's own internal NPR, which recommends that
the Agency's planning, budgeting, and financial
management processes be integrated into a single
process.
Consistent with the CFO Act, GPRA and NPR
recommendations, EPA is working to develop and
institutionalize an Agency-wide framework that
will assist managers to effectively manage for and
achieve environmental results by integrating
strategic planning, budgeting, fiscal management
and program evaluation processes and systems.
This-approach will:
guide the Agency's program and
investment decisions;
safeguard the integrity and effective
management of EPA programs,
information, and resources, and
meet mandates of GPRA, the CFO Act,
and the Federal Managers' Financial
Integrity Act of 1982.
This framework adopts the goals and indicators
being developed by EPA's National Environmental
Goals Project and interagency environmental
indicators groups; relies upon existing program-
based tracking systems to determine EPA's
progress in meeting its strategic and programmatic
goals; and reinforces EPA's Integrated Financial
Management System (IFMS) as the primary means
for providing information on the costs of meeting
those goals. The framework also emphasizes that
the accountability Federal employees have for
good management and financial practices is equally
as important as their responsibility to implement
programs and achieve results.
Status: EPA has developed a FY 1995-99 strategic
plan, The New Generation of Environmental
Protection, which lays out a long-term vision for
the environment and the Agency. It is a "big-
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picture" long-range plan, looking five years ahead
from a corporate perspective. The Plan identifies
the broad environmental goals, the national "Tier
I" goal topics being developed by the Goals
Project, that are the Agency's priorities in carrying
out its mission. It also describes in detail
preferred guiding principles - one of which,
"Reinventing EPA Management," stresses
management and financial integrity ~ for EPA
managers to employ in accomplishing those goals.
A future edition of the Plan will also identify
measurable indicators that EPA will use to assess
its progress in reaching the goals. The Plan, and
the goals and guiding principles it identifies, are
the foundation on which the Agency is building its
FY 1996 budget request.
Planned: EPA will update the Strategic Plan
annually to ensure that it continually gives
managers a sense of where to go with their
programs and how to get there, and to revise as
appropriate the goals, measures, and guiding
principles. The Plan will continue to be the
foundation on which the Agency builds its
budgets. EPA managers will use the Strategic
Plan as a starting point for developing or revising
their own strategic, performance, and tactical
plans. In these more detailed plans, they will
describe how they intend to carry out the goals
and principles outlined as follows:
set measurable program performance goals to
support the broad environmental goals being
developed by the Goals Project;
identify the guiding principle(s) to be used in
achieving the performance goals, and identify
other principles to be used (i.e., risk analysis).
plan for regular evaluations of their program
guidance and strategies to identify management
control weaknesses and other barriers
impeding performance goals; and
carry out activities needed to meet those
performance goals and to correct identified
weaknesses.
Because the Office of Administration and
Resources Management (OARM) and the Office of
Policy, Planning and Evaluation (OPPE) are
integrating EPA's planning, budget and fiscal
management processes, they have recognized the
need to clearly articulate new roles and
responsibilities for all Agency offices. Therefore,
they will hold a joint planning session in the Fall
1994 to first delineate roles between those two
organizations, and subsequently to define roles and
responsibilities of other offices in the process. As
the new integrated process unfolds, OARM and
OPPE will communi-cate the steps, timing and
responsibilities to:
the resource management community,
including the Senior Resource Officials and the
Agency's planning and budgeting staff; and
Agency managers, in correspondence such as
budget policy guidance and technical guidance.
By Earth Day 1995, the Goals Project will have
developed additional "tiers" of goals to support the
first tier of national environmental goal topics.
The second tier will serve as the more program-
specific performance goals. The third tier will be
a set of action targets which will serve as the basis
for managing the day-to-day activities necessary to
meet performance goals.
Managers will document their performance goals,
activities, and related performance measures in
annual performance plans, which will be part of
the Agency budget request, and will serve to meet
EPA's mandate for program performance plans
under GPRA. Managers will also begin applying
performance measures to determine their
environmental, program, and fiscal results in
attaining the goals. Ultimately, managers and
policy-makers will base their program and
resource decisions on these results.
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Milestone
Target Date
Clarify the planning and budget process and delineate roles and
responsibilities
Winter 1995
Update Plan to include results of Goals Project and other relevant changes
Earth Day 1995;
annually thereafter
ACHIEVING RESULTS THROUGH GOAL-
BASED BUDGETING
Status: Beginning with the FY 1996 budget
request, EPA is developing its budget organized
around the Strategic Plan's broad environmental
goal topics. Although these goal topics will not
become final until April 1995, they serve to
inform policy makers and the public of the
environmental results that EPA is striving to
achieve with the resources it is requesting. Rather
than request funding to conduct programs and
activities, EPA will begin to justify its budget
request based on measurable outcomes and results
of its programs. This goals-based budgeting also
allows EPA to consider applicable resource needs
to address weaknesses reported under the CFO and
Integrity Acts, as well as potential or emerging
hurdles, that impede success in achieving
environmental, programmatic, management or
fiscal goals.
Planned: During late FY 1994 and early FY
1995, OARM (OC) and OPPE will develop a
GPRA implementation plan which will lay out
specific milestones to ensure that EPA meets the
requirements for Agency-wide implementation of
GPRA by FY 1997 for FY 1999. In the CFO's
FY 1993-97 Five-Year Plan, this milestone was
reflected in the chapter on Audited Financial
Reporting, and was slated for completion by
December 1993. The development of the GPRA
plan was delayed because of the Agency's decision
to first develop a five-year Agency-wide Strategic
Plan, which was issued in July 1994. The FY
1999 performance plans and budget are to be
submitted to OMB by September 1997.
EPA will use its FY 1996 budget request
narratives as the basis for developing the annual
performance plans required for its GPRA pilot
programs. In these budget narratives/performance
plans, Agency managers identified the broad
environmental goal topics, performance goals, and
guiding principles they will employ for specific
programs and activities they want funded.
During budget execution, the Agency will begin
to monitor expenditures at the performance goal
levels and will link financial reporting to
performance goals and the resulting outcomes.
EPA will adapt its financial and program systems
and procedures to attribute program expenditures
and results to specific environmental goals, and to
measure progress toward those goals. First, EPA
will implement IFMS systems changes to provide
program managers with project cost information-
project cost accounting-to enable them to manage
their projects and programs more efficiently and
effectively. For additional information on project
cost accounting, please see Chapter 8, Financial
Systems.
EPA will explore other linkages of IFMS with
programmatic data systems as part of its overall
IRM strategic planning effort-the IRM Strategic
Plan is scheduled for release in late FY 1994. As
these capabilities evolve, EPA will put in place a
cycle, mandated by the GPRA, for setting
directions through the Agency-wide Strategic Plan,
executing the Plan with performance plans and
budgets, and providing feedback to the planning
process through performance reporting.
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Milestone
Target Date
Develop GPRA implementation strategy and plan
Fall 1994
Identify potential links between IFMS and program data systems as part of
the Agency's IRM strategic plan
Fall 1994
Begin Agency-wide use of IFMS-Project Cost Accounting System (PCAS)
10/95
REPORTING ON OUR PROGRESS IN
ACHIEVING RESULTS
Status: To report on its performance in realizing
the Strategic Plan and achieving environmental
results, and to consolidate multiple and duplicative
reporting requirements, EPA has decided to
develop an "executive-level" Stakeholders Report.
The Stakeholders Report will consolidate, at a
minimum, certain requirements under GPRA and
the CFO Act to eliminate multiple or overlapping
reporting wherever possible. The Stakeholder's
Report will outline the:
key tenets of the Strategic Plan with goals
and guiding principles;
status of performance measurement and
resource allocation for
performance goals set by program managers in
their annual performance plans; and
CFO's financial statements.
As EPA develops its capacity for program
performance reporting under the GPRA, it is
anticipated that the Agency will request a waiver
for this reporting under the CFO Act. The
Agency is assessing other reporting requirements,
such as the annual Integrity Act Report, to
determine whether their content is appropriate and
whether their timing allows for inclusion in the
Stakeholder's Report.
Planned: EPA will issue an executive-level
"Stakeholder's Report" beginning March 1995 and
every year thereafter.
Milestone
Target Date
Issue first Stakeholders Report integrating GPRA and CFO requirements
3/95
Issue FY 1995 Stakeholders Report, expanding content to consolidate other
requirements as appropriate
3/96; and annually
thereafter
IMPROVEMENTS TO EPA'S BUDGET
EXECUTION PROCESSES AND SYSTEMS
Status: Many of the "common sense" NPR
recommendations will, if implemented, simplify
and streamline budget execution across the Federal
government. These recommendations focus
primarily on reducing the number of appropriation
and apportionment restrictions each Agency must
adhere to. EPA is continuing to monitor OMB
and Congressional activities and to participate as
appropriate. However, the Agency is moving
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ahead with some of its own "reinvention"
initiatives that are within its own authority to
implement, since these improvements will simplify
its processes and improve the service the Agency
delivers to its customers.
Planned: EPA plans to improve its process of
delivering funding authority to Agency program
managers. In the first effort, a team is
determining whether the existing process for
issuing one-year allowances to EPA offices can be
extended to allow for two-year and no-year
funding. This would reduce time spent verifying
and reissuing carryover funds in the next Fiscal
year. A second team, to be formed after the first
team has completed its work, will streamline the
process for developing the Agency's Enacted
Operating Plan, which includes adjusting EPA's
proposed budget to incorporate Congressional
action on our request, and Administration
priorities.
Milestone
Target Date
Complete feasibility study and system testing for 2-year funds availability
8/94
Begin effort to streamline operating plan process
9/94
Implement system changes for FY 95/96 resources
10/94
1st allowances remain available into 2nd year
10/95
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Page 26 EPA's Financial Management Status Report & Fire-Year Plan
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CHAPTERS
WORKING CAPITAL FUND
In order to keep pace with the substantial demand for increased administrative services (one example
of which is the many new measures being taken to ensure financial management integrity and accountability
described in this document) resources must be used more efficiently. A Working Capital Fund (WCF) will do
this by providing services in a business-like manner, based on fee-for-service and increased customer
involvement, which will ensure funding is adequate and appropriate for customer needs (including providing
for future capital investment).
The Working Capital Fund (WCF) for admini-
strative services currently under development at
EPA is essentially a reinvention of the manner in
which funding and oversight will be provided for
these services. The fund will be used to provide
certain services which, consistent with enabling
legislation, can be provided most economically and
efficiently through centralized coordination,
direction and supervision. It offers the following
advantages:
Improves responsiveness of services by
ensuring that the customers have an active
voice in how fund service offerings are
planned and delivered, and have full
participation in decisions on the scope of
WCF offerings.
Maintains fiscal integrity, avoids
unplanned surpluses or deficits and makes
cash available for replacement of
capitalized equipment, and replenishment
of stocks, without fiscal year limitations of
annual appropriations.
Provides a consolidated budget for
centralized funding of common services
furnished to different
program/administrative offices.
Proposed authorizing language will permit the
Administrator to establish a WCF beginning in FY
1996 for operational expenses and equipment
necessary for the maintenance and operation of
such services as the Administrator, with the
approval of the Office of Management and Budget,
determines may be performed more economically
and efficiently on a fee-for-service basis. During
the past year, the development of the WCF has
progressed as outlined in the previous Five-Year
Plan.
BUILDING A STRUCTURE FOR THE WCF
Policy oversight for the operations of the fund is
provided by the Working Capital Fund Board,
which also recommends activities to be included in
the fund. The Board is primarily composed of
members from the Program Media Offices but also
includes representation from the Office of the
Inspector General, Program Support Offices and
the Regions. Day-to-day financial operations of
the Fund are managed by a full-time Fund
Manager who is responsible for directing
formulation and execution of the Fund's budget,
and generally advising and supporting the Board.
The WCF is composed of individual activities that
provide a group of like services. A manager is
assigned for each activity in the fund. These
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Activity Managers are responsible for assuring
orderly and business-like management of their
operations. They must also ensure that they
operate with the framework of laws and
regulations concerning Government expenditures in
general. Activity Managers will keep the Board
and Fund Manager advised on the status of their
ability to satisfy customer demand for their
services, minimize the cost of these services, and
project the need for changes in capacity.
Additionally, an external advisory group consisting
of WCF managers from other agencies has been
established to support and advise the Fund
Manager and the Board on an ad hoc basis.
The Fund will be operated in accordance with
generally accepted accounting practices and
principles. The Fund shall be reimbursed or
credited with payments, including advance
payments from applicable appropriations and funds
of the Agency, and other sources authorized by
law for supplies, materials, and services. Rates
will recover the full cost of operations including
all direct costs of operation, production overhead,
general and administrative expenses, equipment
depreciation, amortization of ADP software and
systems and an amount necessary to maintain a
reasonable operating reserve.
The net worth of the Fund shall consist of the
fair and reasonable value of inventories,
equipment, and other assets, pertaining to the
services to be provided by the Fund, less related
liabilities and unpaid obligations together with
any appropriations made for the purpose of
providing capital.
The fiscal integrity of the Fund shall be assured
through the use of annual audits and oversight by
the Working Capital Fund Board. The WCF and
its administration is subject to audits by or under
the direction and supervision of the Inspector
General.
Status: During FY 1994, the WCF Board was
established and met five times, focusing primarily
on: developing a charter for the Fund; determining
activities to be included in the Fund for the first
phase; and developing a Fund budget for FY
1996. A charter has been approved by the board,
and a FY 1996 budget submitted for the activities
selected for the first phase. A small work group
under the direction of the Working Capital Fund
Manager was established to advise and support the
Board in making their decisions. The external
advisory group, consisting of other agency WCF
managers and OMB, was established and provided
advice to the WCF Manager and the Board.
Planned: Throughout the period of the plan the
Board will continue to meet at least quarterly to
provide policy oversight to operations of the Fund
including recommending activities to be included
in the Fund. The WCF, which is a revolving
fund, will have financial statements prepared for
each year of operation beginning with FY 1996.
Milestone
Target Date
Board oversight meetings
Ongoing
Submit initial FY 96 WCF budget
9/94
Prepare initial WCF statements for audit
12/96
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CONDUCTING WCF OPERATIONS AND
ACTIVITIES
During FY 1995 all centralized administrative
activities and services will be evaluated to
determine whether they could be handled within
the WCF. The primary criteria for inclusion will
be activities for which moving to a fee-for-service
approach to funding will result in efficiencies and
cost savings to the Agency and taxpayers, and that
are not intrinsically of a policy or oversight
nature.
Activities that the Board determines are suitable
for the Fund will be costed and priced, and the
appropriate adjustments to the Agency's budget
will be made to reflect the activity costs in the
budgets of the Program Offices instead of OARM.
Those activities chosen for the WCF will be
reflected in funding changes in the IT 1996
budget. Each set of activities selected for the
WCF will undergo a year of "prototype" operation
to fine tune the process prior to actual WCF
operation. The prototype year of operation will be
FY 1995 for the activities funded in the FY 1996
budget.
Status: During FY 1994, two activities were
chosen by the Board for inclusion in the WCF
with funding to begin in FY 1996. The first of
these activities is the National Data Processing
Division which is headquartered at Research
Triangle Park, North Carolina. This operation,
which provides the Agency with support for
mainframe and desktop computing and all data and
voice communications, is a significant part of
OARM activities (representing about 40% of
OARM's budget excluding rent) and is an
excellent candidate for converting to fee-for-
service operations. The other activity chosen is
metered postage, which also is an ideal candidate
for fee-for-service under a WCF. Activity
Managers have been designated for both of these
activities.
Planned: During FY 1995, the National Data
Processing Division and metered postage will be
operated on a WCF Prototype basis. The
supporting cost accounting system will be
evaluated during this period and made operational
for actual WCF operations in FY 1996.
Remaining OARM activities will be evaluated for
inclusion in the Fund, and the Board will
determine which activities to include in FY 1997
and future years.
Milestone
Target Date
Develop comprehensive plan for Fund activities
6/95
Conduct initial Prototype operation
9/95
Evaluate/refine cost accounting system
9/95
Begin actual Fund operations
10/95
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USING PERFORMANCE MEASUREMENT
AND BENCHMARKING
A major goal of the WCF is to provide EPA
customers with appropriate administrative service
offerings to meet their needs and to minimize the
cost for delivering these services. To do this,
service performance measures (standards) must be
defined, monitored, analyzed and reported to EPA
customers for all major service offerings and
eventually benchmarked against other providers of
similar services. Because the WCF requires
detailed unit cost information for each service
offering associated with a WCF activity, trends
over time can be analyzed and costs can be
compared with other service providers.
Status: Measuring performance (and eventually
benchmarking) for activities included in the Fund
is an integral part of costing and pricing for all
service offerings of each WCF activity.
However, the major emphasis on determining how
to measure performance of Fund activities will
occur during the prototype year for those
activities. For the first set of activities, the
prototype year is FY 1995.
Planned: A key function of the Board will be to
review the efficiency and effectiveness of service
delivery, and determine overall customer
satisfaction with the service offerings for each
WCF activity. This will necessitate the
development of measures of performance,
customer satisfaction survey instruments, and
additionally (where appropriate) benchmarking
performance against other providers of similar
services. The Working Capital Fund Manager will
develop and submit to the Board a plan for
evaluating performance, accessing customer
satisfaction, and for benchmarking each activity by
the end of the first year of WCF operations.
Milestone
Target Date
Performance measurement plan for initial WCF activities
6/96
Benchmarking plan for initial WCF activities
9/96
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CHAPTER 6
POLICIES
Having comprehensive, user-friendly accounting and financial management policies and procedures
helps to ensure that the Agency's financial and budgetary resources are properly accounted for and managed.
UPDATING AND ISSUING ACCOUNTING
STANDARDS
EPA needs to revise its accounting policies and
procedures in order to reflect the enormous
changes in Federal accounting standards currently
taking place. Our ultimate goal is to have a clear
and comprehensive set of accounting policies and
procedures that can be accessed easily via
computer by all EPA personnel. Without such
guidance, transactions maybe improperly
accounted for leading to inaccurate and unreliable
financial reports and less than optimal management
decisions.
The Agency maintains all of its agency-wide
accounting policies and procedures in the
Resources Management Directives System
(RMDS), which is part of the Agency's overall
directive system. As the need to issue new or
revised policies and procedures arises, EPA issues
Comptroller Policy Announcements (PAs) or
Comptroller Transmittal Notices (TNs). These
single-issue policy documents are incorporated into
the RMDS at a later date. All of these policies
and procedures are available on the SAGE system,
which is an electronic bulletin board available to
all EPA offices having a local area network (LAN)
system.
The Office of Management and Budget (OMB),
the General Accounting Office (GAO), and the
Department of the Treasury jointly established the
Federal Accounting Standards Advisory Board
(FASAB) in November 1990. The Board's
purpose is to recommend accounting and financial
reporting standards for the Federal Government to
OMB, GAO, and Treasury for approval. The
approved standards then become Statements of
Federal Financial Accounting Standards (SFFASs)
which all Federal agencies must follow. During
FY 1994, three recommended standards were
adopted and issued as SFFASs.
Status: During FY 1994, EPA issued two new
Policy Announcement (Pas) that dealt specifically
with accounting policies and procedures issues.
The first PA focused on new procedures for
recording imprest fund and travel advances. The
second PA set forth the hierarchy of accounting
standards that EPA will use for preparing
accounting and financial reports. The Agency also
initiated development of three new Pas to address
the first three SFFASs issued during FY 1994.
These standards addressed Accounting for Selected
Assets and Liabilities, Accounting for Direct
Loans and Loan Guarantees, and Accounting for
Inventories and Related Supplies. We also issued
RMDS 2550A, Part II: Payroll, RMDS 2590, Part
IV: Object Class Codes, the IFMS Users Manual
and numerous travel-related policies, such as the
use of quick check-out, procedures for making
personal phone calls, phasing out Diners Club and
implementing American Express as the
Government travel card program.
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Currently, other policies addressing rebates
from American Express and Travel Management
Centers, conference planning, taxability of
extended temporary duty station benefits, Senior
Executive Service transportation, Department of
Justice administrative fees and IFMS security ~
are in various stages of completion and should be
issued shortly.
The FASAB is also developing a number of
additional accounting standards in order to comply
with a recommendation contained in the National
Performance Review (NPR) report. The NPR
recommended that the FASAB issue a
comprehensive set of financial and cost accounting
standards by March 1995. We expect that these
standards will have a major impact on the
Agency's current accounting policies and on our
accounting system (IFMS). We also expect that
accounting and finance staffs will need
considerable training in order to understand these
new requirements.
Planned: Over the next four years, EPA plans to
issue new accounting policies and procedures
required to implement the new accounting
standards being developed by FASAB. The
Agency policies staff will keep abreast of the
FASAB's work and provide comments on the
FASAB's exposure drafts and draft concept
statements. The Agency also plans to continue
updating its other accounting policies and
procedures. EPA expects to consolidate its
accounting policies and procedures in the
Accounting Policies section of the RMDS.
Detailed procedures for entering financial
transactions into EPA's accounting system, the
Integrated Financial Management System (IFMS),
are contained in the IFMS Users' Manual which
was recently issued with the implementation of
Version 5.IE.
Agency staff will continue to review new
technologies to improve and expand the
capabilities of the current SAGE system and
investigate new computer improvements such as
data base software and use of CD ROM
technology. This will provide instant distribution
of a wide variety of text and information.
Ultimately, we look to provide EPA with a model
link to the information superhighway which will
enable us to provide Agency-wide access to central
agency guidance and for the interactive sharing of
information electronically among agencies.
Milestone
Target date
Issue EPA Travel Manual
12/94
Complete Review of potential SAGE System Enhancements
12/94
Complete Investigation of SAGE Usage
6/95
Issue RMDS 2530 Accounting Policies
12/95
Complete Benchmarking Similar Government Bulletin Boards
12/95
Complete Investigation of System Info. Distr. Systems
6/96
Complete Installation of Expanded Search Capability
12/96
Issue Remaining RMDS 2540 Cash Management
12/96
Complete Test of Operating System
6/97
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(Continued)
Initiate New Operating System
FY 1998
Issue Remaining RMDS Chapters
FY 1998
Complete Assessment of New Operating System
FY 1998
Complete Refinements to Operating System
FY 1999
Complete Review of Potential New SAGE System Enhancements
FY 1999
Update Issued RMDS Chapters
Ongoing
Attend FASAB Meetings
Ongoing
Respond to FASAB Exposure Drafts and Draft Standards
Ongoing
Issue New Accounting Standards
Ongoing
IMPLEMENTING A THIRD PARTY DRAFT
SYSTEM
The Third Party Draft System (TPDS) is a
guaranteed expense payment system that is being
used by a number of Federal agencies to expedite
the handling of expense checks for selected small
purchase transactions.
In a typical TPDS, drafts are written by
authorized employees of an agency on a third
party's (contractor's) bank account. In the case of
EPA, the authorized employee, in most cases, a
cashier, writes checks for authorized small
purchases on the contractor's bank account. Each
day the contractor totals all of the checks cleared
at its bank and notifies EPA of the amount due.
EPA then immediately reimburses the third party
by a single payment using electronic funds transfer
(EFT).
The more significant advantages of the TPDS are
centralized control, reduced administrative costs,
improved internal controls, reduced imprest fund
cash balances, and no advance funding required by
the Agency. The charge per draft is offset by a
reduction in needed imprest fund cash and by
reductions in cash losses, audit time, prompt pay
penalties, personnel, etc. Also, since not all forms
of payment are accepted by all creditors of the
Government, TPDS provides the financial manager
with an additional cash management tool to use in
determining the most suitable payment mechanism.
Status: EPA conducted a TPDS pilot programm
in FY 1994. The pilot was designed to test
operations, review results and refine procedures.
Based on the evaluation of the pilot, the TPDS
draft policy is being revised for final
implementation.
Planned: Issue Comptroller Policy Announcement
implementing TPDS as another payment tool to all
SFOs, beginning in October 1994.
Milestone
Target Date
Issue policy on TPDS
10/94
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ADDRESSING SUPERFUND POLICIES AND
STANDARDS
To address the changing accounting environment,
the Agency plans to update Superfund financial
policies. The Financial Management Division is
taking a two-track approach to addressing
Superfund financial policy needs. The first track
addresses issues in the short-term. This track calls
for the development and issuance of Office of
Comptroller Policy Announcements. The second
track addresses issues in the long-term and
requires a revision of RMDS 2550-D, Superfund
Financial Management. Financial issues facing
Superfund include accounts receivable, Superfund
state contracts, site-specific accounting, Superfund
activity codes, operable unit accounting, and
accounting for audit adjustments.
The Superfund Reform Act (SRA) is scheduled
to be completed in 1994. SRA will change the
way Superfund does business. Financial policies
and procedures will need to keep current with new
accounting requirements. In addition, the Federal
Government is undergoing a cultural change
Milestone
Target Date
PA on Accounting for Audit Adjustments
10/94
RMDS Revision Phase I - Compete draft of Phase I chapters (Accounts
Receivable, Layoffs, Direct Charging of Superfund)
10/94
Green Border Review
10/94
Issue Phase I chapters
11/94
RMDS Revision Phase II - Complete drafts of
Phase II chapters (Account Numbers, Cashouts, Interagency Agreements)
1/95
Green Border Review
4/95
Issue Phase II chapters
5/95
RMDS Revision Phase III - Complete drafts of Phase III chapters (all
remaining chapters)
7/95
Green Border Review
9/95
Issue Phase in chapters
10/95
manifested in a number of activities - the National
Performance Review with its emphasis on
reinvention and cost accounting, CFOs' review of
user fees, and GPRA's requirement for linking
performance with finance.
Status: Policy Announcements will be issued in
September 1994 on Superfund State Contracts and
on Superfund Site-Specific Accounting. A draft
Policy Announcement on Accounting for Audit
Adjustments has been circulated and comments
received. Expected issuance date is October 1994.
Phase I 2550-D chapters have been drafted and
circulated for comment.
Planned: To address the changing accounting
environment, Superfund financial policies are
being updated. Financial issues facing Superfund
include accounts receivable, Superfund state
contracts, site-specific accounting, Superfund
activity codes, operable unit accounting, and
accounting for audit adjustments. We will follow
the two-track approach in addressing Superfund
financial policy needs.
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IMPLEMENTING CMIA
The Cash Management Improvement Act
(CMIA) was signed into law in October 1990,
with the intended purpose of ensuring greater
efficiency, effectiveness, and equity in the
intergovernmental transfer of Federal funds to
the States, the District of Columbia, and five
territories.
The main objective of CMIA is for all parties
to minimize the time elapsing between the
transfer of Federal funds to States and the
States' disbursement (liquidation) of those
funds for program purposes. Interest is to be
paid when the funds of one government entity
are used in lieu of the other's. Although
EPA's programs have been exempt from the
first year's implementation of CMIA, EPA has
been working on improving the Agency's
overall grants administration. These
improvements are documented in Chapter 10.
Status: Several EPA programs listed in the
Catalog of Federal Domestic Assistance
(CFDA) will be covered by CMIA during the
second year of implementation which began
July 1, 1994. Only three types of programs
are covered: Construction grants for one state,
one territory, and the District of Columbia;
Capitalization Grants (State Revolving Funds)
for 23 states and one territory; and the Toxic
Cleanup (Superfund) for two states. The
impact is expected to be minimal. Interim
procedures are being developed to cover these
programs.
EPA currently uses Treasury's Vendor
Express, an automated clearinghouse (ACH)
payment system for grant payments. Treasury
has confirmed that this payment system will
allow EPA to comply with each of five
available funding techniques that states may
elect to use in fvmding their programs covered
under CMIA. The Standard Application for
Payments (ASAP), a same-day payment,
recipient-initiated system is currently being
developed by Treasury. Implementation is
targeted for June 1995. EPA will be the first
Federal Agency to implement this fully
automated same-day payment process.
Planned: By July 1995, EPA will have the
necessary monitoring systems in place to
review the reasonableness of state interest
certifications for EPA's grant programs, as
required by the Act. However, for the few
programs that are covered earlier, as described
previously in this section, interim policies and
procedures will be issued. EPA will continue
to work closely with Treasury's FMS on the
implementation of CMIA, particularly with
regard to the development and implementation
of ASAP in the Agency. Developmental
milestones and Agency implementation will
continue to be driven by FMS' schedule.
Milestone
Target Date
Issue Informational Communications
Ongoing
Evaluate existing monitoring systems, including surveying other agencies
10/94
Complete systems development/ modification and testing
2/95
Issue CMIA implementation policies and procedures
4/95
Review and comment on Treasury/State agreements and guidance
Ongoing
Work with Treasury on the development and implementation of ASAP
6/95
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CHAPTER 7
FINANCIAL MANAGEMENT OPERATIONS
The invaluable daily accounting services provided by Financial Management Operations proves essential to
the successful implementation of milestones identified throughout the Five-Year Plan.
The following chapter outlines planned
enhancements to EPA's financial management
operations. Financial management operations
entail the daily functions carried out in financial
management offices throughout the Agency.
These functions include: executing payments for
contracts, grants, interagency agreements,
employee payroll and employee travel; processing
accounting transactions to update the Agency's
accounting system; collecting and maintaining
Superfund cost documentation and. conducting
many other activities which ensure the efficient
management of funds at EPA. While this chapter
addresses specific planned enhancements for
financial management operations, other chapters of
this Five-Year Plan focus on activities that will
ultimately be carried out or implemented by the
financial management offices (i.e., once several
of the policies outlined in Chapter 6 are issued,
they will be implemented by the financial
management offices).
MANAGING ACCOUNTS RECEIVABLE
When the Agency establishes an account
receiveable, it formally intitiates the process of
collecting monies owed by a party to the
Government. EPA has three major categories of
accounts receivable. At the end of FY 1993,
Superfund receivables constituted the largest
category (57 percent) of the Agency's outstanding
receivables. The second largest category (23
percent) covers long term receivables for loans
issued .to finance the . removal of asbestos from
schools throughout the country. The third major
category (20 percent) of receivables outstanding
represents non-Superfund fines and penalties,
Freedom of Information requests and
miscellaneous receivables for such items as vendor
overpayments.
During the 1989 conversion from the old
accounting system (FMS) to the Integrated
Financial Management System (IFMS), EPA
experienced significant problems with its accounts
receivable module. Problems included the
inability of IFMS to automatically process the
unique requirements of Superfund in computing
interest, penalties, and handling charges correctly;
and produce accurate and complete Treasury and
Management reports.
In addition, several of EPA's ten regional finance
offices continue to experience delays in recording
receivables in IFMS. Most of the delays occur
because Servicing Finance Offices are not
receiving Consent Decree documents from
Regional Counsels in a timely manner. Consent
Decrees represent environmental enforcement
actions by the Department of Justice on behalf of
EPA, which results in receivables in the form of
fines, penalties or cost recovery actions.
Current policy requires EPA's accounting offices
to record the receivable within three days of its
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effective date. In some instances, it is physically
impossible to deliver the Consent Decrees signed
by the Judge to the accounting office within this
three-day timeframe. The agency is reviewing its
policies in this area to determine more reasonable
timeframes and/or alternative procedures to ensure
timely accounting.
Another facet of the accounts receivable problem
is the appearance that EPA is not adequately
managing delinquencies. This appearance stems
from the fact that many of the agency's receivables
are classified as delinquent because the debtors are
in protracted legal action, in bankruptcy or in a
lengthy administrative appeals process. Under the
Debt Collection Act, receivables over 30 days old
are automatically classified as "delinquent"
regardless of legal status.
EPA's problems with accounts receivables were
reported as a material weakness in the agency's
1993 Integrity Act Report. Additionally, IFMS
accounts receivable module problems have been
reported as an accounting system non-conformance
and contributed to placing IFMS on the OMB high
risk list in 1990, where it remains.
Status: Since 1990, the Agency has initiated
several projects to improve its management of
accounts receivable such as the issuance of
comprehensive policies and procedures for the
management of receivables and the establishment
of an Interdisciplinary Task Force for oversight
reviews of accounts receivable management in
finance and program offices. These actions
resulted in significant improvements. While these
improvements were noted in the audit report of
EPA's FY 1993 financial statements, the report
also indicated that further improvement is
necessary.
During 1994, EPA continued to strengthen its
management controls to ensure more timely
recording of receivables and to accurately record
their delinquency status in IFMS. EPA is also
working to develop a new strategy between the
Office of the Comptroller, the enforcement
program offices and the Department of Justice
(DOJ) to address problems with the timely
recording of receivables. These controls will help
the CFO to evaluate the agency's management of
delinquencies.
The Agency no longer considers IFMS problems
to be appropriate for inclusion on OMB's High
Risk list and has initiated actions to request OMB
to remove it from the list. In FY 1994, the
Agency sucessfully completed the following
actions to improve IFMS performance and
management: implemented IFMS S.le software in
April 1994; completed accounts receivable training
in May 1994; and updated the IFMS User Manual
in May 1994.
Planned: EPA's will continue to improve the
management of its accounts receivable to ensure
more effective management of receivables.
Planned actions include using financial
management performance measures to track, report
and evaluate the agency's effectiveness in
managing receivables; updating applicable policies
and procedures to ensure timely accounting
practices; and strengthening management controls.
In addition, to more accurately explain the
"delinquent" status of receivables, aging reports
are being developed as part of the Schedule 09
requirements. The milestone date correcting this
problem in IFMS is January 1995.
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EPA's Financial Management Status Report & Five-Year Plan
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Milestone
Target Date
Implement IFMS aging reports
1/95
Implement IFMS Management Reports
1/95
Complete testing of IFMS accounts receivable enhancements
1/95
Install Superfund compound interest and installment receivable
functions
9/95
Conduct quality assurance reviews
Ongoing
MONITORING SUPERFUND ACCOUNTS
RECEIVABLES, COLLECTIONS, AND
INVESTMENTS
EPA maintains the accuracy and integrity of the
Superfund Trust Fund through sound accounts
receivable collections and investment practices.
Accounts Receivable are established, and the funds
are collected, invested timely and reconciled
among EPA Headquarters, Regions and the
Department of Treasury. This process allows the
agency to monitor what monies are to be received
or possibly refunded due to litigation. It also
provides a current estimate of dollars earned for
the Trust Fund and maximizes the fund's earning
potential through daily investments.
Status: Monitoring is performed through daily
reviews of collection transmissions ensuring all
pertinent supporting documentation is received.
Staff reconcile monthly reports from the
Department of Treasury with investment logs
maintained by FMD's Superfund Accounting
Branch along with other collection and investment
documentation. A month-end MARS report
monitors regional collection activity and
determines if all collections have been posted.
The Superfund Accounting Branch investigates all
identified discrepancies and takes corrective action.
Planned: The above mentioned monitoring
process will continue to be evaluated. If
applicable, advanced technology also will be used
to strengthen monitoring. The Agency plans to
implement hew Superfund financial policies and
procedures as they are issued. Please see Chapter
6, Financial Management Policies and Standards
for additional information regarding Superfund
financial policies.
Milestone
Target Date
Implement changes from accounting policies RMDS 2530
3/96
Implement remaining RMDS chapters
3/98
Implement new accounting standards
Ongoing
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APPLYING THE DEBT COLLECTION ACT
TO DELINQUENT RECEIVABLES
The Federal Claims Collection Act of 1966, as
amended by the Debt Collection Act of 1982, was
passed to increase the efficiency of Government-
wide efforts to collect debts. Specifically, the
Debt Collection Act provides Federal agencies
with additional methods to pursue and collect
debts. Through calendar year 1993, federal
agencies were given the option to implement
specific debt collection tools, e.g., federal salary
offsets. However, the Cash Management
Improvement Act Amendments of 1992, Public
Law 102-589, made it mandatory for all federal
agencies to refer delinquent individual debt to the .
Internal Revenue Service (IRS) for offset against
tax refunds beginning January 1, 1994. It also
mandates that commercial-corporate debt be
referred to the IRS beginning on January 1, 1995.
Until recently, the agency could only refer
delinquent debts to collection agencies or apply
administrative offsets with limited results. Over
the last three years, EPA's referrals to collection
agencies have occurred on a monthly basis using
General Service Administration Debt Collection
contracts. The Agency has referred delinquent
fines and penalties, Freedom of Information Act
requests, and payroll debts. Application of debt
collection methods specified in die Debt Collection
Act, will provide additional leverage to pursue
delinquent debt and increase collection efforts.
Two workgroups have been established to ensure
EPA complies with P.L. 102-589. One
workgroup, located in the Financial Management
Division (FMD) is responsible for implementing
the Federal Tax Refund Offset program and other
applicable debt collection tools. A second group
comprised of Superfund staff from the Office of
Waste Program Enforcement (OWPE), Office of
Enforcement (OE), Office of General Counsel
(OGC), Hazardous Waste Management Division
(HWMD), and FMD, has responsibility for
developing debt collection policy and guidelines
specific to the Superfund program.
Status: The FMD Workgroup interacts directly
with the Department of Treasury's Financial
Management Service (FMS) and Internal Revenue
Service (IRS) to meet implementation
requirements. Implementation of debt collection
required publication of EPA's debt collection
regulations in the Federal Register, establishment
of debtor due process rights, compliance with
Privacy Act requirements, and memorandums of
understanding (MOU's).
During November 1993, EPA selected 15
debtors for referral to the 1994 IRS Tax Refund
Offset program on a "pilot" basis. However,
before these debtors could be referred to the IRS
for offset, they were referred to Credit Bureau
Reporting and Federal Salary Offset programs
first, as required by IRS. Sending referrals to the
Federal Salary Offset program weeds out current
Federal employees from having debts that need to
be offset through the tax program, since the funds
could more easily be offset against their current
salaries.
Of the 15 debtors selected for the pilot, six were
referred to the Federal Salary Offset program.
The remaining nine debtors were referred to the
IRS on January 6, 1994, for certification and
offset through a conduit service provided by
Treasury's Financial Management Service.
Unfortunately, there have been no offsets to date
due to an ongoing legal debate between the IRS
and FMS regarding the propriety of EPA's, and
other agencies', debtor files transmitted to IRS
through the FMS conduit service. Until this issue
is resolved, the IRS will not process any offsets.
The Superfund workgroup was formed to
develop Superfund specific policy and procedures
using debt collection. Objectives coincide with
those of the FMD Workgroup. A legal
determination prepared by OGC on February 22,
1993, allows the Superfund program to use debt
collection tools; however, guidance defining
Superfund's authority and limitations of this
authority were required. As a result, the
workgroup recently completed a draft Superfund
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EPA's Financial Management Status Report ft Five-Year Plan
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policy and procedures directive. The draft was
sent out for comment on March 24, 1994. The
workgroup is currently revising the directive based
on the comments they received and plan to issue a
revised directive by September, 1994.
Planned: EPA is mandated to implement the
commercial segment of the Federal Tax Refund
Offset program by January 1, 1995. The agency
will continue to work with FMS and IRS to ensure
that implementation requirements for this program
are met in order to comply with the January 1 ?
date.
EPA will ensure that debt collection tools
currently being piloted are fully implemented for
Agency-wide use. To accomplish this, the RMDS
2540, Chapter 9, "Receivables and Billings" will
be revised, and user guidance for debt collection
will be prepared and issued. Further, the
Superfund Debt Collection Policy and Procedures
Directive needs revision.
Milestone
Target Date
Implement commercial segment of the Federal Tax Offset
Program
1/95
Issue Superfund Debt Collection Policy and Procedures Directive
1/95
Implement policy announcements on Audit Adjustments
3/95
Implement policy announcements on Site-specific accounting
3/95
Begin agency-wide use of IFMS-Project Cost Accounting System
to implement Goal-based Budgeting
10/95
Implement system changes for FY 1995/1996 to improve budget
execution process and systems
10/95
Implement Pilot Programs agency-wide
12/95
Implement policy announcements on Superfund contracts
12/95
Implement project cost policies
3/96
Implement changes from cash management RMDS-2540
3/97
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USING PRIVATE COLLECTION AGENCIES
As previously noted, the agency refers delinquent
debts to collection agencies. These referrals are
made on a monthly basis using the General Service
Administration Debt Collection contracts. The
agency refers delinquent fines and penalties,
Freedom of Information Act requests, and payroll
debts to contractors for collection.
Status: For the first time in FY 1994, EPA also
referred delinquent Superfund receivables. The
agency has been using private collection agencies
for three years and the contractors have recovered
a total of $106,000 over the period before
contingency fees, which nets to approximately
$89,500.
Planned: The agency will continue to explore
options for expanding the use of collection
agencies, but no further actions are planned at this
point in time.
Ensuring Annual Allocation
In FY 1993, the Annual Allocation Reporting
Process was implemented to allow the agency to
capture all Superfund site-related contract costs
consistently and accurately for the purposes of cost
recovery and external reporting. The Annual
Allocation Reporting Process is the means by
which non-site costs, including program
management, capital equipment, start-up and site-
support costs, associated with the contractors'
direct site work are redistributed to the appropriate
sites. Superfund contractors invoice site-specific
direct costs incurred while performing clean-up
work on sites. Currently there are 150 contracts
subject to annual allocation.
Status: To date, 45 contract reports are complete
with approximately $230 million dollars available
for cost recovery. There is a potential loss of
recovery of annual allocation costs for those
contracts where the annual allocation report has
not been completed.
Planned: The Agency plans to complete the
remaining contract reports. Once this backlog is
eliminated, a high priority will be to make
necessary resources available to complete the
allocation reports on an annual basis. EPA will
reevaluate the Annual Allocation Reporting
Process as resources allow.
Milestone
Target Date
Completion of backlog of Annual Allocation Reports (FY 1986-
1994)
9/95
Completion of FY 1993 Annual Allocation Reports
9/95
Beginning of Annual Allocation Reporting on an annual basis
(FY 1994 and forward)
9/96
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COMPUTING ANNUAL INDIRECT COST
RATE
The recovery of all costs incurred by Superfund
sites requires accumulating and identifying both
direct and indirect costs. Annual indirect cost
rates are computed linking the clean-up activity
(direct costs) with the level of benefits received
from the support activities (indirect costs). FY
1988 was the last year for which indirect cost rates
were issued. The FY 1988 rates are used as
provisional rates for all subsequent years in
determining indirect costs applicable to sites in
cost recovery cases. The cost recovery rule which
provides for full cost recovery, including those
indirect costs previously excluded under EPA's
conservative policy, is in the deliberative process.
ISSUING THE SUPERFUND COST
RECOVERY PROCEDURES MANUAL
The foundation of EPA's Superfund cost
recovery program rests with the ability to produce
complete documentation on related expenditures.
Providing proof of expenditure documentation is
the responsibility of EPA's financial management
offices in the ten EPA regional offices and
Headquarter's Financial Management Division.
Status: A need exists to establish agency-wide
guidelines and procedures to ensure adequate
controls for documenting Superfund charges. To
respond to this challenge, the Financial
Status: Rates using the more conservative method
are currently being developed for FY 1990-1993.
Data conversion problems have prevented a final
decision on the computation of FY 1989 rates.
Planned: Future rate computations will probably
be affected by either the cost recovery rule or
Superfund Reauthorization. The proposed cost
recovery rule would add recoverable costs
previously excluded to the indirect cost pool.
Superfund Reauthorization may result in a cap on
the amount of indirect costs the agency may
recover or affect indirect costs in other ways.
Either of these changes will require adjustments in
rate computations. The Agency will reevaluate
current methods as requirements change and
search for ways to enhance software and
technology to improve the computation process.
Management Division (FMD) is currently revising
and updating its procedures manual. FMD, in
collaboration with the Office of Enforcement and
Compliance Assurance, will jointly issue an
integrated Superfund Cost Recovery Procedures
Manual that will cover both financial and
programmatic procedures for documenting
Superfund costs. The final draft of the procedures
manual is currently being reviewed by
representatives from the headquarters, regional
finance/comptroller, program, and legal
communities.
Planned: The new procedures manual is expected
to be finalized and issued during the Fall of 1994.
Milestone
Target Date
Compute and review preliminary rates with (FY 1990-1993)
12/94
Issue audited rates (FY 1990-1993)
6/95
Compute and review FY 1994 rates
12/95
Issue audited FY 1994 rates
6/96
Compute rates for FY 1995 and forward annually
Ongoing
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Milestone
Target Date
Issue financial draft of manual
9/94
Issue completed manual
11/94
Implement change for Superfund policy guide 2550D
3/95
Update/revise manual
12/99
COMPLYING WITH THE PROMPT
PAYMENT ACT
Under the Prompt Payment Act, EPA is required
to pay its bills on time, pay interest penalties when
payments are late, and take discounts only when
payments are made within the discount period.
The Act's requirements apply to bills which have
been incurred in acquiring property and services
under contract and purchase orders. Payment will
be based on receipt of proper invoices and
satisfactory performance of contract terms.
Status: In FY 1993, EPA paid 98.2 percent of its
invoices which were subject to the Prompt
Payment Act on time. While the total number of
invoices subject to the Act continues to increase,
EPA again the number of invoices paid late by
29.8 percent and interest penalties paid by 22.2
percent. Through the second quarter of FY 1994,
EPA is paying 98.7 percent of its invoices on
time.
Planned: Planned actions discussed in other
chapters of the Five-Year Plan may have a direct
impact on prompt payment results. These planned
actions can be found in Chapter 2, Organization
and Personnel (improvements of EPA's financial
management training programs and efforts to
streamline/reinvent FMD processes) and in
Chapter 3, Accountability (implementation of the
financial management performance measures
program, introduction of the Agency's new quality
assurance program and issuance of a revised audit
management order).
EXPANDING THE USE OF DIRECT
DEPOSIT/ELECTRONIC FUNDS TRANSFER
Using electronic Fund Transfer (EFT) for
Agency payments offers management an important
tool for improving financial management. Because
of highly sophisticated technology, agencies are
strongly encouraged to pursue making electronic
payments in as many areas as possible, i.e.,
Federal salary and other payroll areas, payments to
other Federal agencies, payments to state and local
governments, and travel and vendor payments.
Both the Department of Treasury (DOT) and the
National Performance Review (NPR) strongly
endorse and encourage agencies to use electronic
payment methods. The NPR report specifically
encouraged agency heads to implement changes in
these areas. EPA will utilize this flexibility to
convert as many payments as possible to EFT over
the next several years.
Status: EPA has been successful this year in
efforts to continue improving the Agency's use of
Direct Deposit/EFT (DD/EFT) for salary
payments. In December 1993, a small agency-
wide DD/EFT Campaign Workgroup was
established to increase participation. The efforts
of the workgroup significantly helped the Agency
exceed its FY 1994 goal of 90 percent by reaching
a 92 percent participation rate in May, 1994.
In January 1994, EPA implemented the
Department of Treasury's Electronic Certification
System (ECS) to replace the manual payment of
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replacement checks to employees. One of the
major features of ECS is the ability to
issue/reissue payments directly via DD/EFT to an
employee's bank account. This feature has been
used quite extensively to reissue salary checks for
non-participating employees. Employees receive
the reissued check in their account within 2 days
rather than waiting between 5-7 days for a check
in the mail. Management hopes that employees
will convert to DD/EFT after experiencing the
convenience and safety of this process.
Planned: EPA will aggressively continue its
efforts to expand the use of electronic payments in
payroll related areas. We have contacted one state
government office to request their participation in
receiving electronic payments on a pilot basis.
Future plans include issuing final retirement and
separation checks via DD/EFT and expanding state
and local government participation. On August .
15, 1994, OMB issued its bulletin on DD/EFT.
The Agency will develop an appropriate
implementation stategy.
Milestone
Target Date
Send quarterly DD/EFT statistics to servicing finance and
personnel offices to encourage participation
Ongoing
Target non-DD/EFT employees
Ongoing
Implement GSA's advance salary payment process for DD/EFT,
if applicable
FY 1995
Begin pilot with one state government to receive DD/EFT
payments
1/95
Survey other state/city governments to determine feasibility of
making DD/EFT payments
3/95
Access pilot and implement DD/EFT payments for state/city
governments
5/95
Review feasibility of making garnishment payments via DD/EFT
FY 1995
Survey court authorities
FY 1996
Pilot payments to court authorities
FY 1996
Implement OMB Bulletin on DD/EFT
TBD
EXECUTING TRAVEL AND VENDOR
PAYMENTS USING DD/EFT
DD/EFT payments have been expanded in other
areas such as travel payments; vendor payments
and reimbursements to the imprest fund. In the
travel/vendor areas we continued our pilot
program to make electronic payments via the
Automated Clearing House (ACH) for travel
vouchers and the Bankcard Program.
Status: The agency expanded use of ACH to
make travel payments for several additional
regional finance offices. ACH is now used to
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make vendor payments for the third party draft
pilot. IFMS, 5.1e has provided EPA with the
capability to make ACH payments for all travel
and vendor payments. Before IFMS can be used
to make ACH payments, several modifications are
required to ensure security of the system. Until
then, pilot efforts using ACH will continue.
In the imprest fund area, improvements were
made in how funds are replenished. Using ECS
we now receive replenishments electronically.
This process has eliminated the receipt of 10-15
checks
weekly and decreased the receipt time for
replenishment funds from DOT.
Planned: The IFMS 5.1 e ACH payment module
is being studied to identify security issues which
must be resolved. Once they have been identified,
the system will be modified to allow use of the
ACH payment method. Once in place, the agency
will begin an aggressive use of ACH for employee
travel and identify vendors that will accept
payments electronically.
Milestone
Target Date
Test IFMS 5.1e ACH security module
9/94
Test IFMS 5. le ACH pre-notification (testing) module
10/94
Review and assess travel/
vendor ACH pilot program
12/94
Implement ACH payment process for travel reimbursement
payments
6/95
Assist in increasing contract invoicing
9/95
Implement ACH payment process for vendor payments
12/95
Implement full-scale Electronic Commerce (EC) purchasing
system (HQ only)
7/96
Implement EC purchasing system in the agency
1/98
Assist in increasing Electronic Data Interchange (EDI)
contracting
9/99
STREAMLINING/AUTOMATING THE
TRAVEL PROCESS
EPA's paper-driven travel process requires the
preparation of travel authorization forms and the
submission of travel vouchers. These manual
exercises represent a significant cost to the Agency
both in terms of efficiency and effectiveness of
travel program administration.
Status: Agency efforts have been made to convert
the paper process into an electronic format, i.e.,
electronic forms, automated advances, and direct
deposit payments. However, they lack an agency-
wide focus on developing a uniform way to
streamline/re-engineer the entire travel process and
take advantage of automation opportunities. As an
agency, EPA needs to harness the benefits of all
available electronic technologies and work towards
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a paperless travel authorization/voucher system.
This system should automate the entire process
from die origination of the travel authorization to
the point of payment, i.e., traveler's bank account
and/or contractors credit card.
In 1994, EPA's.headquarters servicing finance
office implemented, the Automated Teller Machine
(ATM) program for travel advances. The use of
ATMs reduced travel advance check requests by
98 percent and the amount of money needed in the
imprest fund by 40 percent. The cash balance on
hand was lowered from $50,000 to $30,000.
Planned: Streamlining and automating the travel
process will enhance the quality and timeliness of
the services provided to EPA travelers, as well as
provide greater efficiency in the management of
travel resources. Among the key features of an
automated travel system are the ability to link with
IFMS, provisions for electronic signatures,
capability to make electronic payments and storage
capacity to maintain the necessary travel data
required by the agency. System objectives will
improve the workflow and timeliness of the
process while reducing the agency's reliance on
paper-based travel forms.
Milestone
Target Date
Continue pilots on various phases of travel streamlining
Ongoing
Implement changes from EPA travel manual
3/95
Evaluate agency and paperless travel systems for compatibility
with EPA systems and policies
6/95
Establish an agency-wide workgroup (OIRM, FMD, FMO users)
to discuss requirements of a travel system
6/95
Develop a workplan to phase in various components of an
automated system
10/95
Establish new pilots to test electronic media
12/95
Obtain agency consensus on the best software/option to pursue
12/95
Streamline travel forms
1/96
Streamline travel policies and procedures, where appropriate
Ongoing
Develop necessary policies and procedures
10/96
Upgrade/purchase hardware and software
12/96
Test complete system
12/96
Implement the system
6/97
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DEVELOPING ELECTRONIC TIME AND
ATTENDANCE PROCESSES
One of the National Performance Review
recommendations that received Agency attention
was the development and implementation of a
totally Electronic Time and Attendance (TA)
Processes. The potential benefits include reduced
use of paper and significant reductions in the time
required to prepare, transmit and process this
information.
Status: EPA formed a Time and Attendance
Streamlining Workgroup. The workgroup
developed some short-term time and attendance
streamlining options that are being considered for
implementation within a year.
Planned: The workgroup's ultimate goal is to
develop or obtain from other sources an electronic
time and attendance system that would eliminate
all paper timecards and reduce the amount of data
entry required each pay period.
Milestone
Target Date
Review other automated systems
Ongoing
Pilot an exception T&A process
FY 1995
Pilot a LAN-based T&A for data entry by timekeepers
FY 1995
Pilot an expanded use of TAPP for data entry by timekeepers
FY 1995
Evaluate the pilots
9/95
Implement an advanced system developed from pilots
FY 1996
Implement an automated system
FY 1997
MANAGING THE SMALL PURCHASES
BANKCARD PROGRAM
In 1988, EPA implemented the Small Purchases
Bankcard Program which permits agency
employees to make small purchases with a VISA
charge card. The use of the card accelerated the
procurement process by decentralizing some small
purchases to local offices.
The agency continued to expand use of the small
purchases bankcard to a FY 1993 total of 715
cardholders, who made 19,423 purchases totaling
$6.9 million. The bankcard has resulted in more
efficient use of the agency's resources involved in
processing purchase orders and imprest fund
transactions for small purchases. Bankcards
enabled the agency to reduce the amount of funds
held by some petty cashiers and eliminated the
need to increase other imprest funds.
Status: EPA continues to download billing
information directly from the bank into a data base
which assists in the general audit of charges made
on bankcard. Monthly payments to the bank
continue electronically through the ACH process.
This process affords the agency a maximum time
in which to process the payment and ensures
proper credit to the agency account.
Planned: Currently there are bills in both houses
of Congress to streamline the procurement
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processes. What is proposed in these bills will
allow more freedom for purchases of $2,500 and
less comprising the majority of purchases under
bankcard. Once procurement reform becomes
law, there should be a significant increase in
cardholders and both the number and dollar
volume of monthly purchases. To maintain a high
level of efficiency in the bankcard payment
IMPLEMENTING THE FEDERAL CREDIT
REFORM ACT - ASBESTOS LOAN
PROGRAM
With the implementation of the Federal Credit
Reform Act of 1992, additional management and
accounting requirements were placed oh the
Agency's Asbestos Loan Program which IFMS
currently cannot accommodate, the Asbestos
Receivable Tracking System (ARTS) is currently
under development to: provide a subsidiary record
to IFMS that will assist in management and
accountability of loans; meet the requirements of
the Act; provide loan information and reports; and
interface with IFMS, eliminating duplicate data
entry.
process and continue to provide quality financial
advice and assistance to bankcard customers, EPA
must consider further automation enhancements
and new training initiatives. This, combined with
the addition of a second full-time person working
in the bankcard payment area, will ensure the high
quality of bankcard financial services our
customers expect.
Status: To-date, significant design and
programming efforts have been accomplished on
ARTS which allows the calculation of subsidy and
borrowing amounts for individual payments.
Billing features include generation of reminder
notices and bills for collection of loan installments.
Planned: The project is in a phase of redesign
and programming due to changes in criteria and
guidance of the Act regarding issues of collection
and repayment methodology by both OMB and
Treasury. These changes impact the requirements
for both internal and external reporting as well as
the future interface capability with IFMS.
Milestones have been adjusted to reflect the
current plan of action based on these ongoing
changes in guidance.
Milestone
Target Date
Revise bankcard financial training program and materials
1/95
Reassess automation efforts on bankcard
7/95
Implement automation enhancements
2/96
Expand staff in bankcard area, adding one FTE
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Milestone
Target Date
Identify IFMS Interface programmming requirements
11/94
Complete Phase I redesign and programming
12/94
Develop additional reporting requirements
1/95
Complete Phase II including IFMS interface
5/95
System fully operational Phase I and Phase II
6/95
Implement ARTS
7/95
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CHAPTER 8
FINANCIAL SYSTEMS
Good management requires financial and program managers to be accountable for program results
and proper control over government resources. Financial management must therefore provide information
essential for budgetary integrity, effective operating performance, stewardship and the prevention of fraud,
waste and abuse. To meet these needs, EPA's financial systems must process, track and provide complete,
reliable, timely and useful information on financial activity in the most cost effective and efficient manner.
ELIMINATING PREDECESSOR SYSTEMS
Although EPA's Integrated Financial
Management System (IFMS) was implemented in
1989, three predecessor systems remained which
performed certain ancillary functions, such as
funds management; reporting on budgetary,
payroll and historical data; and editing of certain
data. EPA's Acting Comptroller announced in a
March 1993 memorandum to Agency managers
that a key objective for Fiscal Year 1994 and 1995
was to eliminate all reliance on these legacy
systems (Financial Management System (FMS),
Resource Management Information System
(RMIS), and Automated Document Control
Register (ADCR)). Achieving this objective will
improve financial management in EPA by
eliminating vulnerability created by use of obsolete
and outdated systems; by reducing operations
costs; and by completing the integration of all
accounting, funds management and budgeting
activities within IFMS.
Status: During FY 1994 the Agency continued
both in-house and contractor supported activities to
eliminate these systems. Training was conducted
for current ADCR users to enable them to begin
using IFMS in lieu of ADCR beginning on
October 1, 1994. Modifications to the
Management and Accounting Reporting System
(MARS) were made to allow access to payroll
data. Work continued on the remaining steps
necessary to eliminate those systems.
Planned: During FY 1995, EPA plans to
eliminate all uses of its legacy systems. Several
major actions will be taken to accomplish that
goal, namely providing IFMS users access to EPA
historical (pre-1989) and budgetary data that has
been accessible only through FMS and giving
regional and Headquarters offices alternative
means for calculating Superfund layoffs.
Milestone
Target Date
Eliminate all uses of ADCR
10/94
Implement alternative historical and budgetary reporting systems
7/95
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MAXIMIZING BENEFITS FROM "OFF THE
SHELF" SOFTWARE
EPA was one of the first agencies to "buy into"
the "off-the-shelf software concept. EPA's IFMS
is based on a product called the Federal Financial
System (FFS) developed by American
Management Systems (AMS). As expected, when
any generic product is introduced into a complex
operating environment, EPA required AMS to
make some modifications and enhancements to
meet EPA-specific budgetary and organizational
requirements. However, these customized features
have not fundamentally altered EPA's reliance on
the basic FFS software.
Status: As of March 1994, IFMS has been in use
for five years as EPA's core accounting, budgeting
and financial management system. In April 1994,
EPA implemented it's first major upgrade of the
FFS software since 1989, although several
subreleases were installed over the years. EPA is
thus using the most current version of the FFS
software in the Federal government. During July
1994, EPA installed an IFMS subrelease to
facilitate elimination of the ADCR system and
improve budgetary processes.
Plans: EPA recently completed a feasibility cost-
benefit study that, among other things, examined
whether EPA should stay on its present course of
using the FFS software. The study affirmed that
approach. During the next five years, EPA can be
expected to install another major release of the
FFS software and to take advantage of
technological and software advances, where cost-
effective. In addition, on an annual, or more
frequent basis if necessary, the Agency will
implement subreleases to address new central
agency or legislative requirements. For example,
Treasury is requiring agencies to electronically
transmit certain General Ledger Account data to
them via a system called FACTS, and IFMS must
be modified to provide that electronic interface.
Milestone
Target Date
Major release of FFS software
As available and practical
Subreleases of software
Annually
STRENGTHENING INTERFACES AMONG
SYSTEMS
A major impediment to analyzing financial
operations in government agencies is the lack of
data consistency among different systems. As a
long term objective, EPA plans to provide,
wherever feasible, electronic links between IFMS
and the various administrative systems that contain
financial data. The CFO plans to continue to work
toward improving the ease with which Agency
financial data can be downloaded into other
databases for analytical purposes.
Status: EPA already integrated its financial
related systems effectively to reduce keypunching
costs and errors. It also developed an interface
with the Grants Information and Control System
(GICS) for Headquarters awarded assistance
agreements. A feature available through the
MARS reporting system is the ability to download
"flat files" of IFMS data to other systems, thus
greatly saving the resources of program and
administrative system managers and providing
much greater assurance of the completeness and
accuracy of the financial data that is captured in
these systems.
Planned: EPA plans to extend the GICS interface
to all grants and to work with the Superfund
Program on an interface with CERCLIS. EPA
also is developing guidance for future interfaces.
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Milestone
Target Date
Complete GICS Interface
9/94
Issue Guidance on IFMS interfaces
6/95
Implement CERCLIS interface
9/95
IMPROVING PROPERTY
ADMINISTRATION AND MANAGEMENT
EPA has had a longstanding inability to reconcile
the Agency's personal property tracking with the
financial management system. The deficiency has
been reported repeatedly in our own reviews under
FMFIA and by die Office of the Inspector
General.
Status: During FY 1993, EPA established a
Quality Action Team (QAT) to resolve the
reconciliation problem. After careful analysis, the
QAT recommended in FY 1994 that the most cost-
effective solution was to replace EPA's existing
Personal Property Accountability System (PPAS)
with the Fixed Assets Module available through
AMS. The strategy was to use an enhanced
version of Fixed Assets that was being installed at
the United States Geological Survey. AMS was
issued a task order to begin analysis of the steps
necessary to implement the Fixed Assets Module
in IFMS.
Planned: EPA will work with AMS during FY
1995 to prepare a subrelease of IFMS that will
include die Fixed Assets module. In addition,
MARS will be modified to be able to report on the
property data now available in MARS. The
Agency will conduct an extensive training program
for new users.
Milestone
Target Date
Testing of Fixed Assets Module
FY 1995
Begin use of Fixed Asset Module and Reports
FY 1996
EXPANDING SYSTEM CAPACITY TO
TRACK AGENCY COSTS
One of the obvious purposes of an accounting
system is to keep track of, and report on, costs
incurred against Agency appropriations and other
sources of funds. There are many ways those
costs can be classified, e.g., by source
appropriation, by allowance holder, by project,
etc. Currently, EPA is constrained in its ability to
classify costs and must implement expanded
account code capacity in all systems.
Status: EPA is now using two account code
structures to track Agency costs. One is the six
field, 41 character capacity structure that IFMS
uses. However, all other systems use the 10 digit
account number structure that originated with
EPA's predecessor accounting system, FMS.
During FY 1994, efforts were underway in all the
Agency systems containing financial data to
convert them to the IFMS structure. The goal of
these efforts is to provide consistency in structure
among the systems and to enable the Agency to
meet new requirements for tracking costs. In
addition, forms were revised to display the IFMS format.
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Planned: EPA's initial step in FY 1995 will be to
implement the IFMS structure in all systems and
relegate the 10 position, FMS-oriented structure,
PROVIDING PROJECT AND COST
ACCOUNTING
In conjunction with the account number project
mentioned above, EPA continues to explore
options to enable the Agency to track project
costs, rather than simply accounting information
that is of limited value to program managers. This
effort is motivated in part by a longstanding desire
of Agency managers to have this type of
information to manage their projects more
efficiently and effectively and, in part, by other
factors such as the need to meet the reporting
requirements of the Government Performance and
Results Act (GPRA - please see Chapter 4 for
more information). In addition, EPA is
developing a Working Capital Fund (please see
Chapter 5 for more information), and there is
growing interest in the Federal government to
assess the full costs of Agency programs.
to historical uses. Late in FY 19095, once FMS is
eliminated, and in subsequent years, the Agency
can begin using the IFMS capacity to track costs
by additional classifications.
Agencies require cost accounting capabilities for
these initiatives.
Status: During FY 1994, EPA conducted a
survey of Agency-wide requirements for project
and cost accounting. The study looked at both
needs for basic project accounting and at more
sophisticated cost accounting needs. Users were
involved throughout the process.
Planned: In the next year, the Agency will
develop and implement any system changes
necessary to meet identified project and cost
accounting requirements that cannot be met with
the existing version of FFS. EPA will also
develop and issue procedures for using project and
cost accounting within IFMS. In FY 1996,
program and administrative offices will be able to
use project and cost accounting in IFMS.
Milestone
Target Date
Implement system changes
7/95
Issue policies and procedures
8/95
Agency-wide use of Project and Cost accounting
10/95
Milestone
Target Date
Universal use of IFMS structure
10/94
Begin adding new information to fields
7/95
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IMPROVING REPORTING CAPABILITIES
EPA managers needs the ability to obtain various
financial reports on their operations to carry out
their programs. However, EPA encountered a
major obstacle when IFMS was implemented,
because it lacked an ad hoc reporting mechanism.
AMS included a reporting package, know as
"Reporter," with FFS, which EPA had anticipated
using as its general purpose reporting package.
Unfortunately, in EPA's computing environment,
Reporter had deleterious affects on system
performance and was not easily learned by users.
As a result, EPA was forced to develop its own ad
hoc reporter, known as the Management and
Accounting Reporting System (MARS).
Status: Reporter is used by a limited number of
Agency personnel in instances where both the staff
have the necessary expertise and the software
works more effectively than MARS. MARS has
met many, but clearly not all, of the needs of
IFMS users. Among its deficiencies is that it does
not allow access to all IFMS data elements and it
has certain technical limitations. A MARS
subrelease in August 1994 provided long-awaited
access to detailed Agency payroll data.
Planned: EPA does not plan to expand usage of
Reporter. For at least the next two fiscal years,
EPA will continue to maintain and upgrade
MARS, in order to respond to user needs.
However, during that period, the Agency will
evaluate whether MARS should undergo a major
upgrade to address inherent limitations in the
current software programming or whether an
alternative reporting package needs to be
developed or installed. For example, AMS
recently made a reporting package called RMS
available to FFS user agencies, and RMS performs
many of the functions for which MARS was
developed. Further, EPA will investigate optional
platforms for financial reporting.
We will also evaluate Agency needs for
Executive Information Systems and Decision
Support Systems and develop appropriate reporting
mechanisms to meet those needs. Related to this
effort is GPRA, which will require closer
coordination of financial reporting with
programmatic reporting of outcomes.
Milestone
Target Date
Install MARS Siibreleases
Annually thru FY 1996
Evaluate future reporting options
7/96
Implement next generation reporter
FY 1997
Implement GPRA Reporting
FY 1996
Evaluate EIS/DSS Needs
FY 1995
Phase-in EIS/DSS Capabilities
FY 1996-98
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IMPLEMENTING IMAGE PROCESSING
SYSTEMS
The proper storage and quick retrieval of records
is an ongoing challenge for any financial or
administrative office. Image processing, the
storage of "images" of records on disk, has
already been introduced as a means to efficiently
store and retrieve documents for Superfund cost
recovery cases (see below). Costs for image
processing continue to decline; standards are
stabilizing; and experience is accumulating in the
industry with integrating image processing with
data systems.
Status: The RTP Finance Office has initiated a
study to evaluate the feasibility of using image
processing to make their operations more efficient.
Planned: RTP Finance plans to pilot the
application during Fiscal Year 1995 and conduct
full-scale implementation during Fiscal Year 1996,
if the pilot is successful and funds are available for
additional imaging equipment. Based on the
results of the RTP pilot, image processing
applications may be extended to other financial
management processes.
Milestone
Target Date
Evaluate IBM's infrastructure study
9/94
Begin pilot application development
1/95
Complete pilot application
7/96
Complete equipment installation at RTP FMC
12/95
Fully implement at RTP FMC
6/96
Evaluate application for other offices
FY 1997
Implement where cost effective
FY 1998
USING ELECTRONIC INVOICE APPROVAL
Before making payments against contractor
invoices, the RTP Financial Management Office
must obtain project officer approval. Currently,
this is a paper-based process using the Project
Officer Invoice Approval Form, 2550-19T. Since
mail delivery can cause delays in the transmittal of
paperwork, receiving contract approvals via
electronic communication can expedite the
payment process. This hold promise for further
improving the Agency's compliance with teh
Prompt Payment Act.
Status: The RTP Finance Office previously
piloted an electronic invoice approval process.
The pilot was successful and well received by the
participating project officers. However, issues
concerning electronic signature standards
prevented the implementation of this initiative.
Those issues have essentially been resolved, and
the Agency is prepared to move ahead with the
effort again.
Plans: The RTP Finance Office will revisit the
pilot in light of currently available hardware and
software. Electronic Invoice Approval will be
implemented once a new pilot is conducted, and
the process is refined.
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Milestone
Target Date
Conduct analysis of available technology
FY 1995
Implement pilot
FY 1996
Full implementation
FY 1997
DOWNSIZING THE CPS APPLICATION TO
CLIENT/SERVER TECHNOLOGY
EPA relies on the Contract Payment System
(CPS), which is electronically interfaced with
IFMS, to process payments to contractors and to
maintain other data critical to efficient
management of the contract payment process. It is
currently maintained as a traditional mainframe
system, but may be a candidate for client/server
technology to reduce costs and improve ease of
use.
Status: The RTP Finance Office is initiating an
examination of "downsizing" CPS to client/server
technology.
Plans: Over the next five years, RTP Finance
will proceed with analysis and phasing in of client-
server technology. The results of RTP's
experience will impact decisions about use of
client-server applications for other financial
management requirements.
Milestone
Target Date
Perform technical and cost benefit analysis for downsizing
FY 1996
Procure client/server infrastructure
FY 1997
Begin phased downsizing
FY 1997
Revise interface with IFMS (IFMS to make payments)
FY 1998
Develop full implementation
FY 1999
REVIEWING EPA BUSINESS PRACTICES
AND "REENGINEERING" WHERE NEEDED
EPA's current business practices are based in
large part on technologies and procedures
developed in the past several decades. EPA has
adapted certain technological advances (e.g., PCs,
improved telecommunications, networking) into
existing processes without adequately evaluating
whether processes and organizational relationships
need to be changed. "Reengineering" of the
Agency's business practices may be appropriate to
make system operations more cost-effective and
better serve its clients.
Status:. During FY 1994, the Agency completed a
Feasibility Cost-Benefit Study to assess whether
the Agency should continue its current reliance on
IFMS as its core financial management system and
whether it should continue to follow the
development path articulated in the 1993 CFO
Five-Year Plan. The study affirmed EPA's usage
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of IFMS and its development plan, which is
updated annually to address new information and
changing conditions. The study also identified a
number of promising areas for reengineering.
Planned: The Agency plans to investigate further
the areas suggested in the Feasibility Cost-Benefit
Study, as well as any other areas of potential
change identified in the FMD Organizational
Review (please see Chapter 1 for more
information). The goal is not be to automate
existing processes but to reflect on the possible
uses of systems enhancements, new technology and
automation as the Agency reexamines its processes
and develops options for streamlining operations.
EPA will develop workplans and task groups to
carry out reengineering and streamlining efforts
and to make appropriate systems and related
procedural changes.
Milestone
Target Date
Evaluate Areas suggested for investigation
FY 1995
Initiate systems and procedural changes
FY 1996
Implement enhanced systems and procedures
FY 1997
PROVIDING SYSTEMS TRAINING AND
DOCUMENTATION
In order to fully benefit from the potential power
of financial systems to increase productivity and to
provide managers with the information they need
to manage their systems, users must be properly
trained in the use of the systems and current,
complete and readable user documentation must be
made available.
Status: During FY 1994, most of EPA's training
was directed toward current ADCR users.
Because ADCR was being eliminated, these
individuals were trained in the use of IFMS to
perform the same functions. Other general
courses were given on MARS and IFMS. When
EPA implemented the major new release of IFMS
in FY 1994, the agency distributed new IFMS user
documentation. It replaced inadequate guidance
that had been issued with the original IFMS
implementation in 1989.
Plans: Please see Chapter 2, "Organization and
Personnel" for more information on financial
management training improvement efforts.
IMPROVING SUPERFUND
DOCUMENTATION SYSTEMS
The Agency's Superfund process requires
additional systems beyond the accounting system.
These systems provide cost-recovery specific
capabilities to the Superfund cost recovery
community. The Financial Management Division
currently operates three such systems - SCORES
(Superfund Cost Organization and Recovery
Enhancement System), SCRIPS (Superfund Cost
Recovery Image Processing System), and ETS
(Electronic Timesheet). Briefly, SCORES is a
PC/LAN-based system and provides the Agency
"bill" for clean-up, i.e., SCORES presents a clear
and concise summary of Agency Superfund site
expenditures and transactions in a manner easily
understood by judges and attorneys. SCRIPS is an
AS/400 mini-computer-based system and provides
the supporting documentation, the paper, for the
site transactions. ETS provides an automated
approach to recording Superfund site effort by
reducing the barriers Superfund employees face in
completing their timesheets, i.e., ETS builds the
account number, performs all the math, and
ensures legibility.
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Status: SCRIPS and SCORES are installed in all
ten Regions. SCRIPS is also installed in three
Headquarters finance locations, Washington,
Research Triangle Park, and Cincinnati. GTS is
currently in pilot status and is scheduled to become
operational on October 1, 1994.
Planned: There are planned changes in the
Agency's cost recovery systems. The biggest
change, which also requires the largest dollar
commitment, is the SCRIPS platform move.
SCRIPS is changing its computing platform
because the basic software engineering will be
unsupported by the manufacturer and because the
Agency is phasing out its mini-computer
operations. The first priority for any funds will be
basic operation and maintenance. One basic
assumption is funding will be available to ensure
the cost recovery systems are maintained.
Milestone
Target Date
Operate and Maintain SCORES
Ongoing
Integrate SCORES with SCRIPS
9/96
Operate and Maintain SCRIPS
Ongoing
Change SCRIPS platform, moving from AS/400 mini-computer to
a PC/LAN system
9/95
SCRIPS/SCORES Integration
9/98
Implement ETS
10/94
Install additional user features for ETS
Ongoing
Analyze feasibility of automating entry of ETS information into
payroll system
9/96
ISSUING THE SUPERFUND "ORANGE
BOOK"
The "Orange Book" is a consolidation of
Superfund financial information which is
frequently requested by Superfund program and
enforcement offices, Congress, GAO, and the
general public. The book is compiled in-house
and is derived using MARS and Software Package
for Unique Reports (SPUR).
Status: The financial information being developed
is modeled on previous requests from our clients.
A decision has not been made as to how often the
"Orange Book" will be issued.
Planned: A first draft of the "Orange Book" is
expected by September, 1994. However, as much
of the financial information needed for Superfund
is historic, many of the reports now being
developed will have to be redone when SPUR is
no longer available. We envision the "Orange
Book" decreasing the need for running ad hoc
reports for individual requestors. As new
technology evolves, we will be looking for ways to
streamline the process for producing the "Orange
Book."
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CHAPTER 9
CONTRACTS MANAGEMENT
EPA relies heavily on contracting and purchasing to acquire goods and services needed to accomplish
the Agency's mission. Streamlining, simplifying, and improving how we process and manage our contracts
and purchase orders will enhance the quality and timeliness of service to our customers, as well as promote
greater efficiency in the management of a significant share of the Agency's financial resources.
CONDUCTING ELECTRONIC COMMERCE
(EQ/ELECTRONIC DATA INTERCHANGE
(EDI)
Throughout all of society, paper-driven processes
are being re-engineered to take advantage of
electronic technology. Federal Government
contracting and purchasing are processes heavily
encumbered by a seemingly never-ending flow of
paperwork, between and among: (1) Government
offices needing the goods or services; (2)
Government contracting/purchasing offices; and
(3) private sector parties wishing to sell their
goods/services to the Government.
Recognizing this, President Clinton signed an
Executive memorandum, dated October 26, 1993,
titled "Streamlining Procurement Through
Electronic Commerce", requiring Federal agencies
to implement the use of electronic commerce (EC),
including electronic data interchange (EDI), in
Federal purchasing as a means to simplify and
streamline the acquisition process.
"Electronic commerce" is the paper-less
exchange of business information using electronic
media, such as EDI, electronic mail and bulletin
boards, and other similar technologies.
"Electronic data interchange" is the computer-to-
computer exchange of routine business information
using a standard data format.
Examples of purchasing/acquisition information
that could effectively use EC and EDI are:
purchase requisitions (PR's) and supporting
documents; requests for proposals or quotations
(RFPs/RFQs); bids/proposals/quotes, responding
to the RFPs/RFQs; purchase orders/contracts
processed and awarded; invoices from contractors;
and payments.
The use of EC and EDI in Federal purchasing
should enhance customer service, reduce
acquisition lead time, increase competition among
private sector businesses (including small
businesses and other suppliers who find access to
bidding opportunities difficult under the current
system), and generally provide for more cost-
effective management of a significant portion of
the Government's resources (through lower prices
for goods and services).
The President's memo specifically targets Federal
small purchasing (not contracting) for EC
implementation, and sets forth the following four
milestones: (1) Define the architecture to be used
for a Government-wide EC acquisition system by
March 1994; (2) establish an initial EC capability
to allow for electronic exchange between the
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Federal Government and private suppliers of
RFQs, quotes, purchase orders, and notice of
awards, by September 1994; (3) expand these
capabilities to include electronic payments,
document interchange, and supporting data bases,
by July 1995; and (4) complete government-wide
EC implementation for appropriate Federal
purchasing, by January 1997. We have used the
last three milestones in the "Small Purchasing"
section below.
Status: The Office of Federal Procurement Policy
(OFPP) established the Electronic Commerce
Acquisition Team (ECAT) in early 1994 to meet
the first milestone above and, in the process,
develop a comprehensive plan for implementing
EC in Federal purchasing. The ECAT has
developed a proposed standard architecture to be
used Government-wide, and we are working
closely with them to attempt to meet the milestones
listed below in the "Small Purchasing" section.
In addition, the Office of Acquisition
Management (OAM) and Financial Management
Division (FMD) are using EC and EDI in several
contracting areas. OAM is currently conducting a
pilot program that will allow for electronic
transmission of an RFP for a proposed ADP
contract. If this pilot is successful, we intend to
expand its use to other types of contracts.
The Financial Management Center in RTP,
FMD, has been using EDI for approximately a
year to electronically receive invoices and make
payments for the Agency's PC workstation
contract on a pilot basis. They intend to begin
using this procedure shortly for other vendors and
contracts. See planned milestones below in the
"Contracting" section.
The upcoming Integrated Contract Management
System (ICMS) will also heavily use EC and EDI,
including interfaces with other Agency systems,
such as the Integrated Financial Management
System (IFMS), which will result in eliminating
many currently manual processes. For more
information concerning these systems, please see
Chapter 8, Financial Systems.
Planned: EPA intends to meet the EC milestones
set forth in the President's October 26, 1993
memo for the purchasing of supplies. This will
eventually involve implementing a new national
small purchasing system for the Agency.
In contracting, OAM's future plans depend on
the results of the pilot program for electronic RFP
transmission. If successful, the program will be
expanded and eventually subsumed by the ICMS
once the new system is implemented. FMD's
future EC plans are to process approximately 10
percent of the Agency's contract invoices by
September 30, 1994, and an additional 10 percent
per year through September 30, 1998. They
expect a sufficient number of vendors will be
willing to participate to enable them to achieve this
goal.
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Milestones for Small Purchasing
Target Date
Establish initial EC capability to enable Agency and private
suppliers to electronically exchange standardized RFQs, quotes, purchase
orders, and notice of awards - HQ only
9/94
Implement full-scale EC system that expands initial capabilities to include
electronic payments, document interchange, and supporting data bases
(HQ only)
7/95
Implement full-blown EC purchasing system in all Agency purchasing
offices
1/97
Milestones for Contracting
Target Date
Evaluation/analysis of results of electronic RFP pilot program
(RFP released electronically via Internet in August 1994)
10/94
Increase EDI contract invoicing and payments to reach a goal of 10
percent of total contract invoices
9/94
Increase EDI contract invoicing and payments by an additional 10
percent per year (goal of 50 percent by 9/30/98)
9/98
STREAMLINING CONTRACTS
MANAGEMENT PROCESSES
The Agency spends a significant portion of its
budget (in excess of $1 billion per year) obtaining
contractor support and purchasing goods and
services. All parties involved in acquisition and
purchasing agree there are too many detailed steps
and potentially redundant processes required to
obtain the needed goods and services. Once the
contract or purchase order has been processed and
awarded, there are additional steps needed to
manage and/or fund it. OAM recognizes the
existence of possible inefficiencies, and has formed
several task forces and workgroups to analyze
separate aspects of the contract award and
management processes, to attempt to identify areas
for re-engineering and streamlining. The primary
goal of these groups is to enhance EPA's ability to
achieve the Agency's mission by increased
efficiency in the procurement and contract
management processes, while freeing up resources
for other needs and improving the management of
financial resources spent on contract support.
Four specific areas are addressed here: (1) the
overall contract award process; (2) contract
management, particularly in the areas of work
assignment/delivery order issuance and how we
fund our contracts; (3) small purchase processing;
and (4) the administrative close-out process.
Contract award process
Status: A team of acquisition personnel, including
several senior procuring contracting officers and
EPA program managers, was formed in June 1994
to define, analyze, and review each major step in
the process of awarding a contract.
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Planned: The goal of this workgroup is to find
ways to shorten the steps in the process and avoid
obstacles along the way that tend to cause delays
in awarding a contract. The workgroup is
reviewing all contract award steps and procedures.
Milestone
Target Date
Complete review by workgroup
2/95
Issuance of report/recommendations
4/95
Contract Management
Status: Procurement Re-engineering Team was
formed in May 1994 by the Assistant
Administrator for OARM's Management
Committee to analyze contract management
streamlining issues. The team is comprised of
representatives from EPA program offices, the
Inspector General, General Counsel (OGC), the
Office of Comptroller (OC), and OAM. The two
main areas to be covered by this team are: work
assignment/delivery order issuance and the
contract funding process.
Planned: Since work assignments and delivery
orders are the principle mechanism used to order
services under the Agency's largest contracts, the
team intends to review how these contract vehicles
are processed and issued, and find ways to re-
engineer this process to reduce inefficiencies and
reduce lead time. They have completed their
review of the work assignment/delivery order
Small purchase processing
Status: Another workgroup comprised of OAM,
OC, OARM, and program office representatives
was formed in May 1994 to review and analyze
the entire small purchasing process.
processes. Their recommendations and report will
be issued by September 30, 1994.
The second area the re-engineering team is
addressing is the process by which Agency's
contracting budget is obligated through incremental
funding modifications on contracts. The re-
engineering team will build upon the
recommendations made by a workgroup comprised
of OAM, OC, OGC, Office of Grants and
Disbarment (OGD), and program office
representatives which completed a review of the
overall funding process May 1994. Among their
recommendations were: to reduce the number of
funding actions where possible, fully fund annual
contracts where possible, and centralize funding on
large mission contracts. The Procurement Re-
engineering Team has developed an
implementation plan based on the original
workgroup's recommendations (also forthcoming
in their report by September 30, 1994.
Planned: This workgroup is developing the new
purchasing system needed to meet the Electronic
Commerce goals and milestones (see "Electronic
Commerce (EC)/ Electronic Data Interchange
(EDI)" section). Developing this new system will
require re-engineering many of the current
Milestone
Target Date
Issuance of report/recommendations
9/94
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purchasing business processes. The workgroup
has completed their review of purchasing processes
and procedures, and they are currently working on
the identifying system requirements.
(Please see milestones under "Small Purchasing" in "Electronic Commerce (EC)/Electronic Data Interchange
(EDI)" section)
Milestone
Target Date
Issuance of report/recommendations
12/94
Administrative contract close-out process
Status: An area sorely in need of reengineering/
streamlining is closing out expired contracts.
Delays in closing out contracts ties up Agency
financial resources, both in terms of not being able
to deobligate and collect money owed to the
Government, and having to track these old open
obligations on our financial systems. An OAM
workgroup completed an analysis in mid-FY
STRENGTHENING PROPERTY OVERSIGHT
During FY 1994, the decision was made to
transfer management and oversight of
Government-owned property furnished to and used
by contractors, from the Facilities Management
and Services Division (FMSD) to OAM.
Relieving FMSD from managing this contract-
related property (Please see Chapter 8, Financial
Systems, for more information about all other
Agency property) should result in more efficient
management of Agency contract resources, better
accountability of these assets, and more accurate
and complete financial information (through
enhanced ability to value and depreciate this
1994, and reached the conclusion that we should
be closing out contracts quicker.
Planned: The workgroup set a goal of closing out
700 contracts by the end of FY 1994. As of the
end of the third quarter (June 30, 1994), 704
contracts had been closed out. The workgroup
will meet again in early FY 1995 to discuss further
possible streamlining measures.
property, as well as provide such data for the
Agency's financial statements).
Status: To date, all administrative steps required
to complete the transfer of property oversight have
been completed. OAM has obtained support
services at contractor sites for FY 1994-1995
through an Interagency Agreement with the
Defense Contract Management Command. All
appropriate contracting officials and contractors
have been notified, and approximately 165 active
EPA contracts have been administratively modified
to show the new Property Administrators. OAM
automated procurement systems have also been
modified to ensure that upcoming contracts will
Milestone
Target Date
Close out 700 contracts (initial goal)
9/94
Develop a plan for further streamlining
12/94
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properly reflect the new property administration
information. The Green Border Review was
completed in June 1994, and an associated
Procurement Policy Notice was issued in July
1994.
Planned: The administrative transfer of property
management has been accomplished. The next
planned milestone (see below) will be the initial
submission of property inventory data to FMD for
use in the Agency's FY 1994 financial statements.
OAM will periodically review the overall property
oversight functions performed to ensure effective
and efficient management practices are being
followed, and to determine if there might be ways
to enhance or improve the process.
Milestone
Target Date
Submit initial property inventory data to FMD
10/31/94
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CHAPTER 10
GRANTS AND ASSISTANCE
EPA accomplishes its environmental mission in large part through its numerous assistance programs
awarded as grants and cooperative agreements to State and local governments, colleges, universities, and
non-profit recipients to carry out a variety of environmental mandates. Grants and other assistance account
for approximately 50 percent of the Agency's total budget. It is through these extramural resources that EPA
accomplishes its environmental mission, particularly at the State level. In carrying out our fiduciary
responsibilities, it is essential for the Agency to manage and account for these dollars in an appropriate
manner.
REVISING OMB CIRCULAR A-110
OMB Circular A-110, "Uniform Administrative
Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and
Other Non-Profit Organizations," establishes broad
administrative requirements for Federally awarded
grants and assistance agreements with these types
of institutions. In November, 1993, OMB issued a
revised version of Circular A-110 and directed all
Federal agencies to adopt it. The Circular was
originally issued in 1976 and, except for a minor
revision in February, 1977, has not been revised
until now. To update the Circular, OMB
established an interagency task force to review
what changes were necessary. The taskforce
solicited suggestions for changes to the Circular
from universities, non-profits, and other interested
parties. EPA has been an active participant on
that taskforce. The proposed revised Circular
reflects the results of these efforts.
The three significant changes to the revised
Circular include: (a) a change in the definition of
equipment from the current useful life of more
than two years and acquisition cost of $5,000, (b)
a provision which authorizes Federal agencies to
waive most prior approval requirements, and (c)
an amendment which authorizes recipients to use
fair market value to determine whether unneeded
equipment must be reported to the Federal
Government. These changes are designed to
reduce the administrative burdens associated with
Federal programs.
Status: EPA is required to implement the new
requirements in FY 1994. To accomplish this,
EPA is currently revising its grant regulation
codified in 40 CFR Part 30- "General Regulation
For Assistance Programs For Other Than State and
Local Governments" to implement the changes to
OMB Circular A-l 10. EPA will publish these
revisions to Part 30 in September, 1994.
Planned: EPA will continue to participate in any
OMB-sponsored efforts to update/revise other
Circulars. The Agency will update its regulations
accordingly to implement any published revisions
to the Circulars.
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Milestone
Target Date
Revise and publish in the Federal Register EPA's Part 30
Regulation
10/94
CREATING MORE FLEXIBILITY IN EPA
STATE GRANT PROGRAMS
Current EPA State Grant Programs impose many
statutory/regulatory requirements on State
recipients resulting sometimes in burdensome
requirements for States to implement. Often such
requirements do not take into account State
concerns and needs in addressing particular
environmental mandates. To address this concern,
the President has issued Executive Orders 12875
and 12866 which urges Federal Agencies to
provide more flexibility to State, Local, and Tribal
governments to design solutions to environmental
problems without excessive federal
micromanagement. There is a very important
link between increased flexibility and improved
performance as States strive to meet their
environmental mission.
Status: EPA has proposed a State grant flexibility
initiative to test the effectiveness of State grant
programs. As part of the strategy for this
initiative, EPA media programs will work with
State Environmental Program Offices to identify
areas of needed flexibility and determine why/what
flexibility is needed and how it will improve
environmental protection and State program
performance without compromising accountability.
Planned: An Agency-wide workgroup will be
established to provide guidance on how to test and
evaluate options for increasing the flexibility of the
EPA grant program. It is envisioned that various
techniques will be tested through a series of pilot
programs. These awards are scheduled to be made
in FY 1996.
Milestone
Target Date
Establish Agency-wide steering committee
10/94
Award pilot projects to test the various flexibility techniques
9/95
Evaluate the results of the pilot projects and recommend options
for the future direction of EPA's grant program
9/96
CONDUCTING PO TRAINING PROGRAM
The Agency identified the need for a Project
Officers (PO) Training Program as a major
initiative in FY 1993. Toward that goal, the
Agency has expended significant resources in
developing a comprehensive PO training program
for EPA Project Officers who have responsibility
for managing projects funded under grants,
cooperative agreements, and inter-agency
agreements. The course is designed to familiarize
POs with the administrative requirements of grants
and other agreements; and in explaining their roles
and responsibilities as POs. After conducting
several pilot sessions in FY 1994, EPA completed
final development of the course material.
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Status: Completed final development of the
raining course for EPA Project Officers in March,
.994. Also completed two of the four "Train the
Trainer" sessions which are designed to train an
Agency core of PO facilitators.
STREAMLINING EPA'S PROCESSING OF
SMALL GRANT AWARDS
Nearly a third of all individual grant actions are
less than $50,000, and yet these awards constitute
'ess than one percent of EPA's grant award
dollars. These small awards have the same
administrative requirements and demand the same
amount of administrative attention as much larger
awards. EPA has received numerous complaints
from potential applicants concerning the time,
effort, and expense of applying for small awards.
Additionally, small awards require the same
amount of administrative resources in the program
and Grants Administrative office as do large
awards. EPA's goal is to re-engineer the current
process for awarding these grants by simplifying
Planned: The course will be required of all EPA
Project Officers who have responsibility for
managing projects under grants and other
assistance agreements. This will be the first step
in instituting a required training component as part
of a project officer certification program.
and streamlining operations without compromising
appropriate standards of accountability. In fact,
this is one of the 13 proposals OARM's
Reinvention Steering Committee has selected as re-
engineering projects.
Status: EPA has established a Small Grants Re-
engineering Team to develop creative
recommendations for awarding small grants more
efficiently. This team met in Washington during
July 12-14, 1994. The team developed both short
and long term suggestions for achieving a more
simplified/improved approach for handling small
grants and a rough implementation plan..
Planned: The next meeting will be on August 26,
1994, to review progress and discuss the next
steps.
Milestone
Target Date
Implement Short Term Approaches
12/94 1994
Implement Long Term Approaches
FYs 1995-96
Milestone
Target Date
Conduct four train the trainer courses
9/94
Distribute Project Officers'
manual to all EPA program offices
9/94
Complete training of all project officers
9/96
Establish project officers' certification requirement
12/96
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ISSUING POLICY ON COMPETITION
The Federal Grant and Cooperative Agreement
Act of 1977 does not "require" but only
"encourages" competition in selecting grant
applications for funding. There is however, a
need for a consistent Agency approach that
"encourages competition" where deemed
appropriate. The reason for promoting fair and
open competition in discretionary grant programs
is to identify and
DEVELOPING STRATEGY FOR
STREAMLINING GRANT CLOSEOUT
During the last ten years, the Agency has
experienced a dramatic increase in the number of
assistance awards as new grant programs are
established. In fact, the Agency's assistance
programs have increased from approximately 38 in
1984 to 63 in 1994. Unfortunately, Agency
resources have not also kept pace with this rapid
growth in assistance programs. The result has
been committing most of our resources on the
award end of the grants cycle at the expense of
actually closing out completed projects.
fund the best possible projects in meeting the
Agency's environmental mission.
Status: EPA's Grants Administration Division has
an effort underway to define, analyze, and review
the need for competition in all EPA assistance
programs.
Planned: GAD will develop a draft policy on
competition, solicit agency-wide comments, and
finalize the policy.
Status: Recognizing the importance of closing out
assistance agreements in order to deobligate money
owed to the Government and assess past
performance, the Agency has made grant closeout
one of its top priorities. The Agency will analyze
the current closeout workload and recommend a
strategy for expeditiously closing out the very old
agreements. GAD and OGC are working together
exploring various approaches to address this issue.
Planned: The Agency will complete its closeout
strategy by September 30, 1994, and establish
future performance measures for closing out
expired projects.
Milestone
Target Date
Develop strategy for closing out grants and other agreements
9/94
Establish action plan for meeting goal of closing out 50 percent of
completed grants and other agreements in FY 1995
9/94
Milestone
Target Date
Develop/implement EPA policy on competition
9/94
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STREAMLINING POST-AWARD GRANTS
ADMINISTRATION
EPA used an external focus group to review (he
Agency's grants management process and
recommend improvements. The Council of
Governmental Relations (COGR), an organization
consisting of research-oriented colleges and
universities, reviewed EPA's grants process in
Headquarters and issued their recommendations in
a report on July 23, 1993.
Status: To review the COGR recommendations,
GAD convened two Quality Action Teams
(QATs). One QAT focused on improvements to
the actual grants process itself. The second QAT
looked at ways to improve communications
between GAb and its clients. Both QATs
developed many suggestions for achieving greater
efficiency'and enhanced communications. OGD
has convened a workgroup to review and
implement recommendations received from the two
QATs
Planned: Analyze all of the QAT
recommendations (approximately SO in all) and
establish an implementation strategy.
Milestone
Target Date
Develop implementation strategy for COGR recommendations
12/94
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CHAPTER 11
INSPECTOR GENERAL ACTIVITIES
Assisting the Agency in developing the most appropriate organizational structure, financial systems
and operations necessary for EPA to carry out its mission in the most efficient and effective manner is a
critical role of the Office of the Inspector General. The OIG has been involved in working with the Agency to
improve financial management in a number of ways; including participating in Agency workgroups,
performing a financial management review jointly with Agency financial management personnel, and
completing the annual financial statement audits.
CONDUCTING A JOINT FINANCIAL
MANAGEMENT REVIEW
Based on a request from the Chairman and
Ranking Minority Member of the Subcommittee on
Superfiind, Recycling, and Solid Waste
Management of the Senate Committee on
Environment and Public Works, the OIG
performed a comprehensive review of EPA's
financial management program. Staff from EPA's
program and regional offices participated in this
team effort to identify the causes of EPA's
financial management concerns and to develop
cost-effective solutions (please also see Chapter 2:
Organization).
Status: The OIG issued its report on March 31,
1994. The single most important theme identified
during the review was that historically EPA has
not given financial management the attention it
needs. Specifically, the review identified the
following issues challenging financial management
at EPA: (1) different perceptions and awareness of
financial management, (2) financial aspects of
Superfund cost recovery, (3) finance and reporting
systems, (4) financial and accounting policies and
procedures, (5) program financial management,
and (6) financial management training and
qualifications. The OIG developed
recommendations addressing each of these issues
using suggestions and ideas formulated during the
review.
Planned: The OIG will continue to monitor the
Agency's efforts to address the concerns
highlighted above.
AUDITING EPA'S ANNUAL FINANCIAL
STATEMENTS
To comply with the requirements of the CFO Act
of 1990, the Agency is required to prepare annual
financial statements for all trust funds, revolving
funds and commercial actvities. The Office of the
Inspector General has responsibility for ensuring
that these financial statements are audited
according to accepted auditing standards (please
also see Chapter 3: Accountability).
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Status: The OIG issued its reports on EPA's
fiscal year 1993 financial statements on March 31,
1994. The scope of the financial statement audits
included evaluations and tests of internal controls
and compliance with applicable laws and
regulations, as well as tests to determine if the
financial statements were fairly presented.
The auditors reported that Agency financial
management personnel used experience gained last
year and better supporting documentation to
improve financial reporting. The auditors issued
an unqualified opinion on the Statements of
Financial Position and Cash Flow for the Oil Spill
Fund and qualified their opinion on the Statements
of Operation and Changes in Net Position and
Budget and Actual Expenses for the fund. The
auditors qualified their opinions on the Statements
of Financial Position covering the LUST Trust
Fund, FIFRA Fund and the Asbestos Loan
Program; and they disclaimed an opinion on the
Statements of Operations, Cash Flow and Budget
and Actual Expenses for these three entities. Tbey
disclaimed an opinion on the financial statements
for the Superfund Trust Fund and the Tolerance
Fund.
The auditors noted that additional improvements
are needed in the areas of financial reporting,
accounts receivable, property and equipment,
accounts payable, accrued liabilities, state cost
share revenue and grant payments. Further, the
auditors noted weaknesses existed in the system
used to track tolerance fees, and they reported that
further improvements were.needed in documenting
adjusting entries and reviewing unliquidated
obligations. During the audits, the OIG worked
with Agency financial management staff to
reconcile S30 million in unresolved data
conversion errors. The OIG is also currently
working with Agency staff to identify and correct
material errors in the tolerance fee tracking
system.
The OIG also performed audit work related to
the Superfund performance measures reported in
the overview section of the financial statements.
The objectives of the work, performed in several
regions, was to determine if the data was reliable.
In addition, since most of the information on
which the measures was based came from the
Comprehensive Environmental Response,
Compensation and Liability Information System
(CERCLIS), they assessed the adequacy of the
internal controls over CERCLIS data entry and
quality in the regions. In summary, they were
able to verify 91 percent of the reported
accomplishments they reviewed. They also
determined that the risk that material errors in the
CERCLIS data would occur and not be promptly
detected varied from low to moderate in the
regions audited.
Planned: The OIG will continue to support
EPA's efforts to improve financial management.
The Office will perform annual audits of EPA's
financial statements. The OIG will also assist the
Agency in correcting weaknesses identified during
its audits. Beginning in FY 1994, the OIG is
performing the financial statement audits solely
with OIG auditors rather than relying on
contractor support. During FY 1995, the OIG
plans to work with Agency managers to develop
meaningful, useful Agency-wide financial
statements. For FY 1996, the Office will expand
the scope of its financial audit work beyond the
Agency's trust funds, revolving funds and
commercial activities. To share lessons learned,
the OIG is participating in a President's Council
on Integrity and Efficiency Financial Statement
Working Group.
The OIG will also continue to work with the
Agency in developing meaningful, accurate cost
and performance measurement information for
tracking EPA's progress in meeting its
environmental goals. The OIG is participating in
the Agency workgroup developing environmental
goals and performance measures. In addition, the
OIG plans to assist the Agency in evaluating the
systems and processes that are in place or being
developed to accumulate performance measurement
data to assess whether adequate internal controls
are in place. They also plan to assist the Agency
Page 74
EPA's Financial Management Status Report & Five-Year Plan
-------
in its efforts to link budget, financial management,
cost and performance measurement information.
Finally, the OIG plans to perform audits of EPA's
performance measures to assess the reliability of
the data reported.
Milestone
Target Date
Complete audit of FY 1994 Financial Statements
3/95
Work with Agency managers to develop-a format for Agency-wide financial
statements
12/95
Expand audit of the FY 1996 financial statements beyond the Agency's trust
and revolving funds
3/97
Assist the Agency in developing appropriate performance measures for all
major program areas
Ongoing
EPA's Financial Management Stains Report & Ffre-Year Plan
Page 75
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Page 76 EPA'g Financial Management Status Report & Five-Year Plan
-------
ATTACHMENT A - ORGANIZATION CHARTS
1 0 Regional Offices
Office of Prevention
Pesticides and
Toxic Substances
Office of
International
Activities
Office of
General Counsel
Office of Policy
Planning &
Evaluation
Office of
Administration &
Resources Mgmt.
Office of Solid
Waste & Emergency
Response
Office of
Water
Office of
Research and
Development
Office of Enforce-
ment and Com-
pliance Assurance
Office of Air
and Radiation
Office of the
Inspector General
Administrator
EPA's Financial Management Status Report & Five-Year Plan
Attachment A - Page 1
-------
Office of the
Comptroller
10 Regional ARAs
Office of Human
Resources Mgmt.
Office of
Information
Resources Mgmt.
Deputy Chief
Financial Officer
Office of
Administration
Office of Grants
and Debarment
Office of
Acquisition
Management
OARM
RTP
OARM
Cincinnati
Assistant Administrator for Administration
& Resources Management
i
EPA's Financial Management Status Report & Five-Year Plan Attachment A - Page 2
-------
ATTACHMENT B - LEXICON
AA
Assistant Administrator
FACTS
Federal Agencies' Centralized
ACDR
Automated Document Control
Trial-Balance System
Register
FAD
Financial Audit Division
ACH
Automated Clearinghouse
FAS
Fixed Asset Subsystem of the
ADCR
Automated Document Contrtol
Federal Financial System
Register
FAST
Financial Accounting Statistical Tool
ADP
Automated Data Processing
FASAB
Federal Accounting Standards
AMS
American Management Systems, Inc.
Advisory Board
AO
Accountable Official
FEDTAX
Method of transmitting federal
ARA
Assistant Regional Administrator
income tax, medicare and social
ARTS
Asbestos Receivable Tracking
security information to the
System
Department of the Treasury
ASAP
Automated Standard Application for
FFS
Federal Financial Systems
Payments
FFSUG
Federal Financial Systems User
ATM
Automated Teller Machine
Group
CERCLA
Comprehensive Environmental
FMCDC
Financial Management Career
Response, Compensation and
Developmment Committee
Liability Act of 1980
FMD
Financial Management Division
CFDA
Catalog of Federal Domestic
FMS
Financial Management System
Assistance
(predecessor to IFMS)
TO
Chief Financial Officer
FMSD
Facilities Management and Services
CFO Act
Chief Financial Officers Act
Division
CIS
Contract Information System
FOIA
Freedom of Information Act
CFDA
Catalog of Federal Domestic
FY
Fiscal Year
Assistance
GAO
General Accounting Office
CMIA
Cash Management Improvement Act
GICS
Grants Information Control System
CPARS
Combined Payroll Redistribution and
GPRA
Government Performance and
Reporting System
Results Act
CPS
Contracts Payment System
GSA
Genera] Services Administration
DAA
Deputy Assistant Administrator
IDP
Individual Development Plan
DCFO
Deputy Chief Financial Officer
ICMS
Integrated Contract Management
DD
Direct Deposit
System
DDS
Decisiion Support Systems
IFMS
Integrated Financial Management
DOJ
Department of Justice
System
EC (ECQ
Electronic Commerce (Interchange)
IRS
Internal Revenue Service
ECS
Electronic Certification System
LUST
Leaking Underground Storage Tank
EDI
Electronic Data Interchange
MARS
Management and Reporting System
EFT
Electronic Funds Transfer
MATS
Management Audit Tracking System
EIS
Executive Information Systemd
MCC
Management Control Coordinator
EPA
United States Environmental
MOU
Memorandum of Understanding
Protection Agency
NPR
National Performance Review
EPAYS
EPA Payroll System
OAM
Office of Acquisition Management
EPA's Financial Management Status Report & Five-Year Plan
Attachment B - Page 1
-------
OARM
Office of Administration and
RMDS
Resources Management Directives
Resources Management (under the
System
direction of the CFO)
RMIS
Resource Management Information
OC
Office of the Comptroller
System
OGC
Office of the General Counsel
SAGE
Electronic bulletin board listing EPA
OGD
Offic eof Grants and Disbarment
financial management policies and
OIG
Office of the Inspector General
procedures including all RMDS
chapters, PAs and TNs
OMB
Office of Management and Budget
SCORES
Superfund Cost Recovery Image
OPPE
Office of Policy, Planning and
Processing System
Evaluation
SCRIPS
Superfund Cost Organization and
OPM
Office of Personnel Management
Recovery Enhancement System
PA
(Comptroller's) Policy
SBO
Senior Budget Officer
Announcement
SES
Senior Executive Service
PCIE
President's Council on Integrity and
SFFAS
Federal Financial Accounting
Efficiency
Standards
PMRS
Performance Management and
SFO
Servicing Finance Officers
Recognition System
SPUR
Software Package for Unique
PO
Project Officer
Reports
PPAS
Personal Property Accountability
SRA
Superfund Reform Act
System
SRO
Senior Resource Official
PR
Procurement Request
SSC
Superfund State Contract
QA
Quality Assurance
STARS
Strategic Targeted Activities for
QAP
Quality Assurance Program
Results System
QAT
Quality Action team
TN
(Comptroller's) Transmittal Notices
QC
Quality Control
TPDS
Third Party Draft System
RFP
Request For Proposals
TQM
Total Quality Management
RFQ
Request For Quotations
TRANCH
Quarterly grouping of loans based on
RITS
Retirement, Insurance, Transfer
Treasury interest rates
System
VAN
Value Added Network
RMC
Resource Management Committee
WCF
Working Capital Fund
RMD
Resource Management Division
EPA's Financial Management Status Report & Five-Year Plan
Attachment B - Page 2
-------
ATTACHMENT C - EPA SYSTEMS INFORMATION
EPA FINANCIAL AND MIXED SYSTEMS in FY 1994
"MIXED"
SYSTEMS
EPAYS
CPARS
ADCR
RMIS
APDS/CIS
* * * *
CPS
CORE FINANCIAL
SYSTEM
GICS **************
IFMS
General Ledger
Budget Execution/Funds Control
Budget Preparation
Accounts Payable/Disbursements
Accounts Receivable/Collections
Travel
Purchasing
Standard Reporting
PPAS
r
*
i*****************
FMS/SPUR
MARS
DIRECT LINK
***** DATA RE-ENTRY REQUIRED
EPA's Financial Management Status Report & Five-Year Plan
Attachment C - Page 1
-------
EPA FINANCIAL AND MIXED SYSTEMS in FY 1998
"MIXED" CORE FINANCIAL OUTPUTS
SYSTEMS SYSTEM
CPARS
CPS
EPAYS
GICS
Fixed
Assets
ICMS
EIS/DSS
MARS
FACTS
WORKING
CAPITAL
FUND
PERFORMANCE
MEASURES
FINANCIAL
STATEMENTS
IFMS
¦ General Ledger
¦ Budget Execution/Funds Control
¦ Budget Preparation
¦ Accounts Payable/Disbursements
¦ Accounts Receivable/Collections
¦ Travel
¦ Fixed Assets
¦ Purchasing
¦ Standard Reporting
¦ Project Cost Accounting
LEGEND DIRECT LINK
EPA's Financial Management Status Report & Five-Year Plan
Attachment C Page 2
-------
EPA FINANCIAL SYSTEMS INVENTORY
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EPA's Financial Management Status Report & Five-Year Plan
Attachment. C - Page 4
-------
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-------
EPA's Financial Management Status Report & Five-Year Plan Attachment C - Page 6
-------
FOR MORE INFORMATION ABOUT EPA'S FINANCIAL
MANAGEMENT PROGRAMS, PLEASE CONTACT:
U.S. Environmental Protection Agency
Financial Management Division
401 M Street, SW (3303F)
Washington, DC 20460
(202) 260-5097
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