1 U.S. ENVIRONMENTAL PROTECTION AGENCY
/ OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Fiscal Year 2008 and 2007
Financial Statements for the
Pesticides Reregistration and
Expedited Processing Fund
Report No. 09-1-0172
June 23, 2009
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Report Contributors:
Paul Curtis
Wanda Whitfield
Bill Samuel
Sabrina Berry
Diane Forrest
Robert Hairston
Ethel Lowery
Sheila May
Javier Negron
Christina Nelson
Demetrios Papakonstantinou
Lynda Taylor
Abbreviations
EPA U.S. Environmental Protection Agency
FIFRA Federal Insecticide, Fungicide, and Rodenticide Act
FIFRA Fund Pesticides Reregi strati on and Expedited Processing Fund
FMFIA Federal Managers' Financial Integrity Act
FQPA Food Quality Protection Act
IFMS Integrated Financial Management System
OIG Office of Inspector General
OMB Office of Management and Budget
OPP Office of Pesticide Programs
OPPIN Office of Pesticide Programs Information Network
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-1-0172
June 23, 2009
Catalyst for Improving the Environment
Why We Did This Audit
The Food Quality Protection
Act requires that we perform
an annual audit of the
Pesticides Reregistration and
Expedited Processing Fund
(known as the FIFRA Fund)
financial statements.
Background
The U.S. Environmental
Protection Agency (EPA) is
responsible for reassessing the
safety of older pesticide
registrations against modern
health and environmental
testing standards. To expedite
this reregistration process,
Congress authorized EPA to
collect fees from pesticide
manufacturers. The fees are
deposited into the FIFRA
Fund. Each year, the Agency
prepares financial statements
that present financial
information about the Fund,
along with information about
EPA's progress in
reregistering pesticides.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2009/
20090623-09-1-0172.pdf
Fiscal Year 2008 and 2007 Financial Statements
for the Pesticides Reregistration and Expedited
Processing Fund
Opinion
We rendered an unqualified, or clean, opinion on EPA's Pesticides Reregistration
and Expedited Processing Fund Financial Statements for Fiscal Years 2008 and
2007, meaning that they were fairly presented and free of material misstatement.
Internal Control Significant Deficiency Noted
We noted one significant deficiency in internal controls. The Office of Pesticide
Programs was unable to provide reliable information on reporting accomplishments
for reregistration and amendment actions under the FIFRA Program Performance
Measure Two. EPA is required to annually report on its pesticide performance
measures and goals.
Noncompliance With Laws and Regulations Noted
We tested compliance with those laws and regulations that could either materially
affect the FIFRA Fund financial statements, or that we considered significant to the
audit. The objective of our audit, including our tests of compliance with applicable
laws and regulations, was not to provide an opinion on overall compliance with
such provisions. Accordingly, we do not express such an opinion. However, we
did not identify any noncompliances that would result in a material misstatement to
the audited financial statements.
Agency Comments and Office of Inspector General Evaluation
In a memorandum received on May 20, 2009, from the Acting Assistant
Administrator for Prevention, Pesticides, and Toxic Substances and the Acting
Chief Financial Officer, the Agency agreed with our findings and
recommendations, and has begun corrective actions. We concur with the Agency's
corrective actions. In its response to the final report, the Office of Pesticide
Programs needs to clearly explain in detail its corrective actions for
Recommendation 2.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
June 23, 2009
MEMORANDUM
SUBJECT: Fiscal Year 2008 and 2007 Financial Statements for the Pesticides Reregi strati on
and Expedited Processing Fund
Report No. 09-1-0172
FROM: Paul C.Curtis ^ '
Director, Financial Statement Audits
TO: James J. Jones
Acting Assistant Administrator for Prevention,
Pesticides, and Toxic Substances
Maryann Froehlich
Acting Chief Financial Officer
This is our report on the audit of the U.S. Environmental Protection Agency's (EPA's) Fiscal
Year 2008 and 2007 financial statements for the Pesticide Reregi strati on and Expedited
Processing Fund, conducted by the EPA Office of Inspector General (OIG). This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determinations on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures.
The estimated cost of this report - calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time - is $171,671.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days. You should include a corrective actions plan for agreed upon
actions, including milestone dates. We have no objections to the future release of this report to
the public. The report will be available at http://www.epa.gov/oig.
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If you or your staff have any questions, please contact me at (202) 566-2523 or
Curtis.Paul@epa.gov. or Wanda Whitfield at (202) 566-2533 or Whitfield.Wanda@epa.gov.
Attachments
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Fiscal Year 2008 and 2007 Financial Statements for the 09-1 -0172
Pesticides Reregistration and Expedited Processing Fund
Table of Contents
Inspector General's Report on the
Fiscal Year 2008 and 2007 Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund
Opinion on the FIFRA Fund Financial Statements 1
Evaluation of Internal Controls 2
Tests of Compliance with Laws and Regulations 3
Management's Discussion and Analysis Section of the Financial Statements 4
Prior Audit Coverage 4
Noteworthy Achievements 5
Agency Comments and OIG Evaluation 5
Attachments
1 Significant Deficiency 6
Continued Improvements Needed in
Recording Reregistration and Amendment Actions 7
2 Status of Recommendations and Potential Monetary Benefits 10
Appendices
A Fiscal Year 2008 and 2007 FIFRA Financial Statements
B Agency's Response to Draft Report
C Distribution
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09-1-0172
Inspector General's Report on the
Fiscal Year 2008 and 2007 Financial Statements for the
Pesticides Reregistration and Expedited Processing Fund
The Administrator
U.S. Environmental Protection Agency
We have audited the Pesticides Reregistration and Expedited Processing Fund (known as the
FIFRA Fund) balance sheet as of September 30, 2008, and 2007, and the related statements of
net cost, changes in net position, and budgetary resources for the years then ended. These
financial statements are the responsibility of the U.S. Environmental Protection Agency's
(EPA's) management. Our responsibility is to express an opinion on these financial statements
based upon our audit.
We conducted our audit in accordance with U.S. generally accepted auditing standards; the
standards applicable to financial statements contained in Government Auditing Standards, issued
by the Comptroller General of the United States; and Office of Management and Budget (OMB)
Bulletin No. 07-04, Audit Requirements for Federal Financial Statements. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, including the accompanying notes, present fairly, in all
material respects, the assets, liabilities, net position, net cost, changes in net position, and
budgetary resources of the FIFRA Fund, as of and for the years ended September 30, 2008, and
2007, in conformity with accounting principles generally accepted in the United States of
America.
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09-1-0172
Evaluation of Internal Controls
As defined by OMB, internal control, as it relates to the financial statements, is a process,
affected by the Agency's management and other personnel, designed to provide reasonable
assurance that the following objectives are met:
Reliability of financial reporting - Transactions are properly recorded, processed, and
summarized to permit the preparation of the financial statements in accordance with
generally accepted accounting principles; and assets are safeguarded against loss from
unauthorized acquisition, use, or disposition.
Compliance with applicable laws, regulations, and government-wide policies -
Transactions are executed in accordance with laws governing the use of budget authority,
government-wide policies, laws identified by OMB, and other laws and regulations that
could have a direct and material effect on the financial statements.
In planning and performing our audit, we considered EPA's internal control over FIFRA
financial reporting by obtaining an understanding of the Agency's internal controls, determining
whether internal controls have been placed in operation, assessing control risk, and performing
tests of controls. We did this as a basis for designing our auditing procedures for the purpose of
expressing an opinion on the financial statements and to comply with OMB audit guidance, not
to express an opinion on internal control. Accordingly, we do not express an opinion on internal
control over financial reporting nor on management's assertion on internal controls included in
Management's Discussion and Analysis. We limited our internal control testing to those controls
necessary to achieve the objectives described in OMB Bulletin No. 07-04, Audit Requirements
for Federal Financial Statements. We did not test all internal controls relevant to operating
objectives as broadly defined by the Federal Managers' Financial Integrity Act (FMFIA), such as
those controls relevant to ensuring efficient operations. The objective of our audit was not to
provide assurance on internal controls and, accordingly, we do not express an opinion on internal
controls.
Our consideration of the internal controls over financial reporting would not necessarily disclose
all matters in the internal control over financial reporting that might be significant deficiencies.
Under standards issued by the American Institute of Certified Public Accountants, a significant
deficiency is a control deficiency, or combination of control deficiencies, that adversely affects
the Agency's ability to initiate, authorize, record, process, or report financial data reliably in
accordance with generally accepted accounting principles such that there is more than a remote
likelihood that a misstatement of the entity's financial statements that is more than
inconsequential will not be prevented or detected. A material weakness is a significant
deficiency, or combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the financial statements will not be prevented or
detected. Because of inherent limitations in any internal controls, misstatements, losses, or
noncompliance may nevertheless occur and not be detected.
We noted a matter discussed below involving the internal control and its operation that we
consider to be a significant deficiency but not a material weakness. In addition, as mentioned in
the Prior Audit Coverage section of this report, we will continue to disclose a significant
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09-1-0172
deficiency concerning the lack of system documentation that inhibits our ability to audit
Integrated Financial Management System (IFMS) application controls until the new system is in
place.
Significant Deficiency: Continued Improvements Needed in Recording
Reregistration and Amendment Actions
The Office of Pesticide Programs (OPP) was unable to provide reliable information on
accomplishments for reregi strati on and amendment actions under the FIFRA Program
Performance Measure Two. In our Fiscal Year 2007 report, we found that nine reregi strati on
and amendment actions were misclassified. OPP responded by taking corrective actions. While
the corrective actions reduced the frequency of misclassifications, we still found four errors and
believe continued improvement is needed in recording reregi strati on and amendment actions.
The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), as amended by the Food
Quality Protection Act (FQPA), requires EPA to annually report on its pesticide reregi strati on
performance measures and goals. Various errors in recording information for claimed
reregi strati on and amendment actions resulted in the inaccurate reporting of performance results.
As a result, the Agency could not be sure of its program accomplishments for this performance
measure for Fiscal Year 2008.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 07-04 requires us to compare material weaknesses disclosed during the audit
with those material weaknesses reported in the Agency's FMFIA report that relate to the
financial statements and identify material weaknesses disclosed by the audit that were not
reported in the Agency's FMFIA report.
For reporting under FMFIA, material weaknesses are defined differently than they are for
financial statement audit purposes. OMB Circular A-123, Management Accountability and
Control, defines a material weakness as a deficiency that the Agency head determines to be
significant enough to be reported outside the Agency.
For financial statement audit purposes, OMB Bulletin No. 07-04 defines material weaknesses in
internal control as a significant deficiency, or combination of significant deficiencies, that result
in a more than remote likelihood that a material misstatement of the financial statements will not
be prevented or detected.
The Agency did not report, and our audit did not detect, any material weaknesses for Fiscal Year
2008 impacting FIFRA.
Tests of Compliance with Laws and Regulations
As part of obtaining reasonable assurance about whether the Agency's financial statements are
free of material misstatement, we tested compliance with those laws and regulations that could
either materially affect the FIFRA financial statements, or that we considered significant to the
audit. The objective of our audit, including our tests of compliance with applicable laws and
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09-1-0172
regulations, was not to provide an opinion on overall compliance with such provisions.
Accordingly, we do not express such an opinion. We did not identify any noncompliances that
would result in a material misstatement to the audited financial statements.
Management's Discussion and Analysis Section of the
Financial Statements
Our audit work related to the information presented in the Management's Discussion and
Analysis of the Pesticide Program included comparing the overview information with
information in EPA's principal financial statements for consistency. No material inconsistencies
between the information presented in the two documents were identified.
We reviewed supporting documentation for the tolerance performance measure and the five
reregi strati on performance measures listed in the Management's Discussion and Analysis of the
Pesticide Program. We did not note any significant discrepancies in these measures, with the
exception of FIFRA Program Performance Measure Two. As discussed earlier, OPP was unable
to provide reliable information for this measure.
Prior Audit Coverage
During previous financial or financial-related audits, we reported the following significant
deficiencies:
• We could not assess the adequacy of IFMS automated controls.
• We found that OPP was unable to provide reliable information on the
accomplishments for reregi strati on and amendment actions under the FIFRA Program
Performance Measure Two.
EPA has taken steps toward correcting the long-standing issue regarding automated application
processing controls for IFMS. EPA awarded a new contract to replace IFMS. The proposal calls
for two releases over the next 2.5 years, with the first release occurring in the last quarter of
calendar 2009. However, until the new system is in place, a significant deficiency will exist
concerning the lack of system documentation that inhibits our ability to audit IFMS application
controls (Audit of EPA 's Fiscal 2008 and 2007 Consolidated Financial Statements, Audit Report
09-1-0026, issued November 14, 2008).
EPA began corrective action to improve the recording of reregi strati on and amendment actions.
During Fiscal Year 2008, OPP reviewed all reregi strati on and amendment actions claimed in
Fiscal Year 2007, and produced revised totals of the numbers of those actions and the cumulative
status of product reregi strati on actions. In its Pesticide Reregi strati on Performance Measures
and Goals report for Fiscal Year 2007, OPP disclosed our finding and its review of these actions,
and postponed reporting of Fiscal Year 2007 numbers until the Fiscal Year 2008 report. OPP
also assigned a staff person to verify accomplishments reported in the Office of Pesticide
Programs Information Network (OPPIN), and trained staff in how to close out reregi strati on
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actions {Fiscal Year 2007 and 2006 Financial Statements for the Pesticides Reregistration and
Expedited Processing Fund, Audit Report 08-1-0194, issued July 8, 2008).
Noteworthy Achievements
OPP took significant actions to address the significant deficiency on misclassifying reregistration
and amendment actions in our Fiscal Year 2007 report. These included reviewing all
reregistration and amendment actions claimed in Fiscal Year 2007 to make needed corrections,
assigning a staff person to verify information put in their information system, and training staff
in how to close out reregistration actions. Our test work showed a reduction in the error rate on
reregistrations and amendments from 11 percent in Fiscal Year 2007 to 4 percent in Fiscal Year
2008.
Agency Comments and OIG Evaluation
In a memorandum received on May 20, 2009, the Acting Assistant Administrator for Prevention,
Pesticides and Toxic Substances and the Acting Chief Financial Officer responded to our draft
report. The Agency agreed with our findings and recommendations, and has begun corrective
actions. The Agency's complete response is included in Appendix B to this report.
We agree with the Agency's proposed corrective actions. In its response to the final report,
OPP needs to clearly explain in detail its corrective actions for Recommendation 2.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
June 23, 2009
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Attachment 1
Significant Deficiency
Table of Contents
1 - Continued Improvements Needed in Recording Reregistration
and Amendment Actions 7
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Continued Improvements Needed in
Recording Reregistration and Amendment Actions
OPP was unable to provide reliable information on accomplishments for reregi strati on and
amendment actions under the FIFRA Program Performance Measure Two. In our Fiscal Year
2007 report, we found that nine reregi strati on and amendment actions were misclassified. OPP
responded by taking corrective actions. While the corrective actions reduced the frequency of
misclassifications, we still found four errors and believe continued improvement is needed in
recording reregi strati on and amendment actions. FIFRA, as amended by the FQPA, requires
EPA to annually report on its pesticide reregi strati on performance measures and goals. Various
errors in recording information for claimed reregi strati on and amendment actions resulted in the
inaccurate reporting of performance results. As a result, the Agency could not be sure of its
program accomplishments for this performance measure for Fiscal Year 2008.
We found errors with 4 of the 103 reregi strati on and amendment actions tested. Specifically, we
found that 1 out of 55 claimed reregi strati on actions was completed in Fiscal Year 2007. For 2
out of 48 claimed amendment actions, 1 was actually a reregi strati on action, and 1 action up for
suspension was mistakenly closed out in OPPIN, OPP's information system. The third
amendment action, which had not been completed, was erroneously included in the universe of
claimed actions. OPP personnel confirmed that the reregi strati on and amendment actions we
identified were misclassified.
FIFRA, as amended by the FQPA, requires EPA to annually report in the Federal Register on its
pesticide reregi strati on performance measures and goals. Specifically, Section 4(1) states:
... Such measures and goals shall include the number of products reregistered,
canceled, or amended, the status of reregistration ...
FIFRA Performance Measure Two states:
Number of products reregistered, canceled, or amended. Over 20,000 products
are or eventually will be subject to product reregistration. Many products,
however, contain more than one active ingredient. Since products are reassessed
separately for each active ingredient, EPA will conduct approximately 38,000
product reviews.
According to EPA's Strategic Plan, "measuring our performance is key to improving it." The
Government Accountability Office's Standards for Internal Control in the Federal Government
provide that".. .control activities help to ensure that all transactions are completely and
accurately recorded." The standards state that".. .all transactions and other significant events are
to be clearly documented, and the documentation should be readily available for examination...."
The standard also states that "qualified and continuous supervision is to be provided to ensure
that internal control objectives are achieved."
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OPP did not perform the product reregi strati on quarterly internal audits of Fiscal Year 2008
completed actions, included in its corrective action plan in response to our Fiscal Year 2007
report. Instead, OPP assigned one staff person from the Registration Division's Registration
Support Branch, instead of a team composed of staff from each of OPP's product registering
divisions, to review all completed actions to ensure OPPIN was updated properly. OPP
personnel identified several reasons for errors in claiming product reregi strati on actions. Three
errors were due to human error in recording information in OPPIN. The remaining error was due
to a mistake made by OPP staff while preparing the universe listing of actions completed in
Fiscal Year 2008.
During Fiscal Year 2008, OPP made significant efforts to improve the recording of reregi strati on
and amendment actions, as noted in the Prior Audit Coverage and Noteworthy Achievement
sections of this report. However, errors continued to exist. Because OPP provided unreliable
information, we were unable to assess the Agency's program accomplishments of reregi strati on
and amendment actions for FIFRA Program Performance Measure Two. We cannot be sure of
the extent of errors in the universe of reregi strati on and amendment actions; however, we did
note that the frequency of errors has declined since Fiscal Year 2007. As a result of the errors,
we cannot provide assurance that the claimed reregi strati on and amendment actions for Fiscal
Year 2008 and the cumulative status of product reregi strati on actions in the financial statements
are accurate. Furthermore, the Agency cannot be sure of its accomplishments for this
performance measure for Fiscal Year 2008. We believe that had OPP performed the product
reregi strati on quarterly audits as planned with the responsible offices involved, the errors in
recording reregi strati on and amendment actions may have been found and corrected.
Recommendations
We recommend that the Assistant Administrator for Prevention, Pesticides, and Toxic
Substances:
1. Review the entire universe of product reregi strati on and amendment actions claimed in
Fiscal Year 2008, and correct any errors found in the OPPIN system.
2. Conduct the internal audits of product reregi strati on and amendment actions completed
during Fiscal Year 2009, at least quarterly, to ensure reregi strati on and amendment
actions are accurately recorded in OPPIN; and ensure that any errors noted are corrected
in OPPIN and verified by management.
3. Use corrected figures for product reregi strati on and amendment actions in the Annual
Report on Reregi strati on Performance Measures and Goals for Fiscal Year 2008
published in the Federal Register. If the corrected figures are not available before
publication, disclose in the report that the Fiscal Year 2008 accomplishments for FIFRA
Program Performance Measure Two are inaccurate and corrected figures will be
published in the Fiscal Year 2009 Report.
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Agency Response and OIG Evaluation
The Agency agreed with our findings and recommendations, and has begun corrective actions.
The Agency's complete response is included in Appendix B to this report.
We agree with the Agency's proposed corrective actions. In its response to the final report,
OPP needs to clearly explain in detail its corrective actions for Recommendation 2.
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Attachment 2
Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Claimed Agreed To
Amount Amount
Review the entire universe of product reregistration
and amendment actions claimed in Fiscal Year
2008, and correct any errors found in the OPPIN
system.
Conduct the internal audits of product reregistration
and amendment actions completed during Fiscal
Year 2009, at least quarterly, to ensure
reregistration and amendment actions are
accurately recorded in OPPIN; and ensure that any
errors noted are corrected in OPPIN and verified by
management.
Use corrected figures for product reregistration and
amendment actions in the Annual Report on
Reregistration Performance Measures and Goals
for Fiscal Year 2008 published in the Federal
Register. If the corrected figures are not available
before publication, disclose in the report that the
Fiscal Year 2008 accomplishments for FIFRA
Program Performance Measure Two are inaccurate
and corrected figures will be published in the Fiscal
Year 2009 Report.
Assistant Administrator 12/31/09
for Prevention, Pesticides,
and Toxic Substances
Assistant Administrator 12/31/09
for Prevention, Pesticides,
and Toxic Substances
Assistant Administrator 12/31/09
for Prevention, Pesticides,
and Toxic Substances
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
10
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Appendix A
FYs 2008 and 2007 PESTICIDES REREGISTRATION
and EXPEDITED PROCESSING FUND (FIFRA)
FINANCIAL STATEMENTS
^ ' • z
JO [,_,
Q O
^ • • T
Produced by the U.S. Environmental Protection Agency
Office of the Chief Financial Officer
Office of Financial Management
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TABLE OF CONTENTS
Management's Discussion and Analysis 1
Principal Financial Statements 10
EPA's FY 2008 Annual FIFRA Financial Statements
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Management's Discussion and Analysis
EPA's FY 2008 Annual FIFRA Financial Statements
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Agency's Office of Pesticide Programs (OPP) was established pursuant to the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) to protect public health and the
environment. The law requires the Agency to balance public health and environmental concerns
with the expected economic benefits derived from pesticides. The guiding principles of the
pesticide program are to reduce risks from pesticides in food, the workplace, and other exposure
pathways and to prevent pollution by encouraging the use of new and safer pesticides.
In accordance with FIFRA and the Federal Food, Drug, and Cosmetic Act (FFDCA), the
pesticide program administers the Revolving Fund for Certification and Other Services
(Tolerance Fund) and the Pesticides Reregi strati on and Expedited Processing Fund (FIFRA
Fund). As of 1996, fees for both tolerance and reregi strati on are deposited to the FIFRA
account, which is available to the EPA without further appropriation.
Tolerance Program Description
As part of its authority to regulate pesticides, EPA is responsible for setting "tolerances."
If the pesticide is being considered for use on a food or feed crop or as a food or feed additive,
the applicant must petition EPA for establishment of a tolerance (or exemption from a tolerance)
under authority of the FFDCA. A tolerance is the maximum legal limit of a pesticide residue on
food commodities and animal feed. Tolerances are set at levels that ensure that the public is
protected from health risks posed by eating foods that have been treated with pesticides in
accordance with label directions.
In 1954, Congress authorized the collection of fees for the establishment of tolerances for
raw agricultural commodities (Section 408 of FFDCA). Congress, however, did not authorize
the collection of fees for food additive tolerances (Section 409 of FFDCA). EPA, therefore, does
not collect fees for food additive tolerances. The Agency also does not collect fees for Agency-
initiated actions such as the revocation of tolerances for previously canceled pesticides. Fees
collected from tolerances for raw agricultural commodities were deposited to the U.S. Treasury
General Fund until 1963 when Congress established the Tolerance Fund.
In 1996, pesticide reform legislation included provisions for additional fees to support
reregi strati on activities. Passage of the Food Quality Protection Act (FQPA) of 1996 requires
tolerances to be reassessed as part of the reregi strati on program. Effective January 1997, all fees
related to tolerance activities were deposited in the FIFRA Fund. With passage of the Pesticide
Registration Improvement Act (PRIA) of 2003 and the Pesticide Registration Improvement
Renewal Act in 2007, no additional tolerance petition fees will be deposited to the FIFRA Fund
through FY 2012.
EPA's FY 2008 Annual FIFRA Financial Statements
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Pesticide Reregistration Program Description
As part of its authority to regulate pesticides, EPA is responsible for re-registering
existing pesticides. The FIFRA legislation, requiring the registration of pesticide products, was
originally passed in 1947. Since then, health and environmental standards have become more
stringent and scientific analysis techniques much more precise and sophisticated. In the 1988
amendments to FIFRA (FIFRA '88), Congress mandated the accelerated reregi strati on of all
products registered prior to November 1, 1984. The amendments established a statutory goal of
completing reregi strati on eligibility decisions (REDs) by 1997. The legislation allows for
various time extensions which can extend the deadline by three years or more. The statutory
requirement for the completion of reregi strati on food-use (REDs) is 2006, in conjunction with
the new tolerance reassessment program. For the non-food-use active ingredient REDs, the
current legal deadline under PRIA for completion of reregi strati on is October 3, 2008.
Congress authorized the collection of two kinds of fees to supplement appropriated funds
to support reregi strati on program: an annual maintenance fee and a one-time reregi strati on fee.
Maintenance fees are assessed on registrants of pesticide products and were structured to collect
approximately $14 million per year. Reregistration fees are assessed on the manufacturers of the
active ingredients in pesticide products and are based on the manufacturer's share of the market
for the active ingredient. In fiscal years 1992 through 1999, approximately 14% of the
maintenance fees collected, up to $2 million each year, were used for the expedited processing of
old chemical and amended registration applications. Fees are deposited into the FIFRA
Revolving Fund. By statute, excess monies in the FIFRA Fund may be invested. Waivers
and/or refunds are granted for minor use pesticides, antimicrobial pesticides, and small
businesses.
In 1996, pesticide reform legislation included provisions for additional fees to support
reregi strati on activities. Passage of the FQPA of 1996 implemented the following changes in the
Pesticide Reregistration Program: reauthorized collection of maintenance fees through 2001 to
complete the review of older pesticides to ensure they meet current standards (increased annual
fees from $14 million to $16 million per year for 1998, 1999, and 2000 only) and required all
tolerances (over 9,700) to be reassessed by 2006. EPA's 2002 appropriations bill extended
authority to collect maintenance fees by one year for the amount of $17 million; and the FY 2003
appropriations extended the authority to collect fees again by one year in the amount of $21.5
million. Passage of PRIA in FY 2004 extended the authority to collect maintenance fees through
FY 2008 (with annual fee amounts at $26 million in FY 2004; $27 million in FY 2005-2006; $21
million in FY 2007; and $15 million in FY 2008). Passage of the Pesticide Registration
Improvement Renewal Act (commonly known as PRIA 2) on October 9, 2007 extended the
authority to collect maintenance fees through FY 2012 (with annual fee amounts at $22 million
each FY). PRIA 2 includes the provision for use of maintenance fees to offset the costs of
registration review beginning in FY 2008.
The reregi strati on process is being conducted through reviews of groupings of similar
active ingredients called cases. There are five major phases of reregi strati on:
4 Phase 1 - Listing of Active Ingredients. EPA publishes lists of active ingredients and
asks registrants whether they intend to seek reregi strati on. (Completed in FY 1989)
3 EPA's FY 2008 Annual FIFRA Financial Statements
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4 Phase 2 - Declaration of Intent and Identification of Studies. Registrants notify EPA if
they intend to reregister and identify missing studies. (Completed in FY 1990)
4 Phase 3 - Summarization of Studies. Registrants submit required existing studies.
(Completed in FY 1991)
4 Phase 4 - EPA Review and Data Call-Ins (DCIs). EPA reviews the studies, identifies and
"calls-in" missing studies by issuing a DCI. A "DCI" is a request to a pesticide registrant
for scientific data to assist the Agency in determining the pesticide's eligibility for
reregi strati on. (Completed in FY 1994)
4 Phase 5 - Reregi strati on Decisions. EPA reviews all studies and issues a Reregi strati on
Eligibility Decision (RED) for the active ingredient(s). A "RED" is a decision by the
Agency defining whether uses of a pesticide active ingredient are eligible or ineligible for
reregi strati on. The registrant complies with the RED by submitting product specific data
and new labels. EPA reregisters or cancels the product. Pesticide products are re-
registered, based on a RED, when it meets all label requirements. This normally takes 14
to 20 months after issuance of the RED.
Research Program Description
EPA's pesticides and toxics research program continues to examine risks resulting from
exposure to pesticides and toxic chemicals. The research is designed to support the Agency's
efforts to reduce current and future risks to the environment and to humans by preventing and/or
controlling the production of new chemicals and products of biotechnology that pose
unreasonable risk, as well as assessing and reducing the risks of chemicals and products of
biotechnology already in commerce. The research program's major goals are: (1) to provide
predictive tools to prioritize testing requirements; enhance interpretation of data to improve
human health and ecological risk assessments; and inform decision-making regarding high
priority pesticides and toxic substances; (2) to develop probabilistic risk assessments to protect
natural populations of birds, fish, other wildlife, and non-target plants; and (3) to provide the
tools necessary to make decisions related to products of biotechnology.
In providing research on methods, models, and data to support decision-making regarding
specific individual or classes of pesticides and toxic substances that are of high priority, the
program is developing:
• Predictive biomarkers, quantitative structure activity relationships, and alternative test
methods for prioritizing and screening chemicals for a number of adverse effects (e.g.,
neurotoxicity, reproductive toxicity) that will lead to a reduction in and more efficient use
of whole animals in toxicity testing; and
• Data and protocols on the impact of waste water treatment technologies on pesticides and
their products of transformation.
To support the development of probabilistic risk assessments to protect endangered
populations of birds, fish, other wildlife, and non-target plants from pesticides while making sure
farmers and communities have the pest control tools they need, this program has four key
research components:
• Extrapolation among wildlife species and exposure scenarios of concern;
4 EPA's FY 2008 Annual FIFRA Financial Statements
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• Population biology to improve population dynamics in spatially-explicit habitats;
• Models for assessing the relative risk of chemical and non-chemical stressors; and
• Models to define geographical regional/spatial scales for risk assessment.
Methods for characterization of population-level risks of toxic substances to aquatic life and
wildlife also are being developed as part of the Agency's long-term goal of developing
scientifically valid approaches for assessing spatially-explicit, population-level risks to wildlife
populations and non-target plants and plant communities from pesticides, toxic chemicals and
multiple stressors while advancing the development of probabilistic risk assessment.
Additionally, research to support decision-making related to products of biotechnology
includes:
• Development of methods to assess the potential allergenicity of genetically engineered
plants.
• Characterization of the environmental impact of genetically engineered plants and
developing methods to reduce them.
Enforcement and Compliance Assurance Program Description
The Pesticide Enforcement and Compliance Assurance Program focuses on pesticide
product and user compliance. These include problems relating to pesticide worker safety,
certification and training of applicators, ineffective antimicrobial products, food safety, adverse
effects, risks of pesticides to endangered species, pesticide containers and containment facilities,
and e-commerce and misuse. The enforcement and compliance assurance program provides
compliance assistance to the regulated community through its National Agriculture Compliance
Assistance Center, seminars, guidance documents, brochures, and other forms of communication
to ensure knowledge of and compliance with environmental laws.
EPA's grant support to states' and tribes' pesticide programs emphasizes its commitment
to maintaining a strong compliance and enforcement presence. Agency Cooperative Agreement
priorities for FY2008 - FY2010 include the enforcement of worker protection standards;
compliance monitoring and enforcement activities related to the newly promulgated pesticide
container and containment rules, and program performance reporting. Core program activities
include inspections of producing establishments; dealers/distributors/retailers; e-commerce;
imports and exports, and pesticide misuse. Additionally, through the Cooperative Agreement
resources we support inspector training and training for state/tribal senior managers, scientists,
and supervisors.
Highlights and Accomplishments
Tolerance Performance Measures
As mandated by PRIA 2, no Tolerance fees were collected and deposited to the FIFRA
Fund in FY 2008.
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Measure: Tolerance re-evaluations.
Results: The tolerance reassessment program was completed in FY 2007; therefore, no
further tolerance reassessment decisions were needed or completed in FY 2008. At the end of
FY 2007, EPA had completed 9,721 tolerance reassessment decisions, addressing 100% of the
9,721 tolerances that required reassessment.
Reresistration (FIFRA) Financial Perspective
During FY 2008, the Agency's obligations charged against the FIFRA Fund for the cost
of the reregi strati on programs and other authorized pesticide programs were $23.5 million and
136.9 workyears. Of these amounts, OPP obligated $22.0 million of this cost and funded the
136.9 workyears.
Appropriated funds are used in addition to FIFRA revolving funds. In FY 2008, the
Enacted Operating Plan included approximately $38.6 million in appropriated funds for
reregi strati on program activities. The unobligated balance in the Fund at the end of FY 2008
was $6.6 million.
The Fund has two types of receipts: fee collections and interest earned on investments.
Of the $22.1 million in FY 2008 receipts, approximately 99% were fee collections.
Reresistration Program (FIFRA) Performance Measures
The following measures support the program's strategic goals of Healthy Communities
and Ecosystems as contained in the FY 2008 President's budget.
Measure 1: Number of Reregistration Eligibility Documents (REDs) completed.
Results: In FY 2008, OPP completed 27 Reregistration Eligibility Decisions (REDs). Of the 613
chemical cases (representing approximately 1,150 pesticide active ingredients), that initially
were subject to reregistration, 384 cases have completed REDs. An additional 229
reregistration cases were voluntarily canceled before EPA invested significant resources in
developing REDs. 613 reregistration cases (100%) had completed the reregistration eligibility
decision making process by the end of FY 2008.
Measure 2: Number of products reregistered, canceled, or amended. Over 20,000
products are or eventually will be subject to product reregistration. Many products,
however, contain more than one active ingredient. Since products are reassessed
separately for each active ingredient, EPA will conduct approximately 38,000 product
reviews.
Results: Due to corrective actions to be taken in response to audit findings, Registration
Division's FY 2008product reregistration actions, product amendment actions, product
cancellation actions, and product suspension actions will all be reviewed again during FY 2009
(with the end of calendar year 2009 as the target completion date for this review). Currently, a
universe of over 21,350 products is undergoing or has completed product reregistration. The
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status of those products at the endofFY 2007 was as follows: 2,602 products had been
reregistered; 631 product registrations had been amended; 5,046products were cancelled; 6
products were suspended; and 13,066products had actions/decisions pending. The Agency's
goal in FY 2009 is to complete 1,250product reregistration actions.
Measure 3: Progress in Reducing the Number of Unreviewed, Required
Reregistration Studies.
Results: EPA made progress during FY 2008 in reducing the number of unreviewed
studies submitted by registrants in support of pesticides undergoing reregistration. During fiscal
year 2008, the Agency reduced by five percent the number of studies for List A pesticides
categorized as unreviewed, and reduced by almost three percent the number of such studies for
all pesticides. The Agency is exploring options for further categorizing reregistration studies
more precisely. (See Table 1.)
Table 1. Review Status of Studies Submitted for Pesticide Reregistration, End of FY 2008
Pesticide Reregistration
List, per FIFRA Section
4(c)(2)
List A
ListB
ListC
ListD
Total Lists A - D
Studies Reviewed (including Cited2)
+ Extraneous1
12,095 reviewed (includes 779 cited)
+ 663 extraneous = 12,758 (92%)
6,748 reviewed (includes 88 cited)
+ 1,081 extraneous = 7,829 (82%)
2,131 reviewed (includes 29 cited)
+ 351 extraneous = 2,482 (84%)
1,280 reviewed (includes 3 cited)
+ 136 extraneous = 1,416 (86%)
22,254 reviewed (includes 899 cited)
+ 2,231 extraneous = 24,485 (87.5%)
Studies Awaiting
Review
1,071 (8%)
1,738 (18%)
461 (16%)
228 (14%)
3,498 (12.5%)
Total Studies
Received
13,829
9,567
2,943
1,644
27,983 (100%)
Extraneous studies is a term used to classify those studies that are not needed because the guideline or data requirement has
been satisfied by other studies or has changed.
2 Cited studies is a term used to classify those studies that are referenced in REDs, RED bibliographies, or related science support
documents.
Measure 4: Number and Type of DCIs Issued to Support Product Reregistration by
Active Ingredient.
Results: The number and type of data requests or Data Call-In notices (DCIs) issued by
EPA under FIFRA section 3(c)(2)(B) to support product reregistration for pesticide active
ingredients included in FY 2008 REDs are shown in Table 2.
Table 2. Data Call-Ins (DCIs) to Support Product Reregistration for FY 2008 REDs
Case Name
Acrolein
Case No.
2005
Number of
Products
Covered by
the RED1
8
Number of
Product
Chemistry
Studies
Required2
31
Number of Acute Toxicology Studies
Required
6 (1 batch)
Number of
Efficacy
Studies
Required
0
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Case Name
Busan 77
Chloropicrin
Chromated Arsenicals (CCA)
Creosote/Coal Tar
Dazomet
Diiodomethyl-p-tolyl sulfone
(Amical 48)
Ethylene Oxide
Formaldehyde
HHT (Grotan)
Inorganic Thiosulfates
(Ammonium Thiosulfate)
Methyl Bromide
(soil fumigant uses)
Methyl Isothiocyanate
(MTC)
Methyldithiocarbamate Salts
(Metam Sodium/Metam
Potassium)
Naphthalene
Nicotine
(Cancellation)
Organic Esters of Phosphoric
Acid
Pentachlorophenol
d-Phenothrin (Sumithrin)
Prometon
Siduron
Sodium Fluoride
Case No.
3034
0040
0132
0139
2135
4009
2275
0556
3074
4057
0335
2405
2390
0022
2460
4122
2505
0426
2545
3130
3132
Number of
Products
Covered by
the RED1
149
74
21
14
22
9
26
9
17
1
73
2
55
9
1
2
6
195
52
19
7
Number of
Product
Chemistry
Studies
Required2
31
31
31
31
31
31
31
31
31
31
31
31
31
31
Not
Applicable
31
31
31
31
31
31
Number of Acute Toxicology Studies
Required3
Antimicrobial RED - Acute toxicity
batching has not been completed
Not Applicable
Antimicrobial RED - Acute toxicity
batching has not been completed
Antimicrobial RED - Acute toxicity
batching has not been completed
42 (2 batches/5 products not batched)
Antimicrobial RED - Acute toxicity
batching has not been completed
Not Applicable4
Antimicrobial RED - Acute toxicity
batching has not been completed
Antimicrobial RED - Acute toxicity
batching has not been completed
6(1 product not batched)
Not Applicable4
Antimicrobial RED - Acute toxicity
batching has not been completed
66 (6 batches/5 products not batched)
12 (1 batch/1 product not batched)
Not Applicable5
Antimicrobial RED - Acute toxicity
batching has not been completed
Antimicrobial RED - Acute toxicity
batching has not been completed
Acute toxicity batching has not been
completed
90 (10 batches/5 products not
batched)
54 (3 batches/6 products not batched)
Antimicrobial RED - Acute toxicity
batching has not been completed
Number of
Efficacy
Studies
Required
PDCI has
not been
completed
0
PDCI has
not been
completed
PDCI has
not been
completed
0
PDCI has
not been
completed
0
PDCI has
not been
completed
PDCI has
not been
completed
0
2
PDCI has
not been
completed
0
0
Not
Applicable
PDCI has
not been
completed
PDCI has
not been
completed
PDCI has
not been
completed
0
0
PDCI has
not been
completed
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Case Name
Sulfometuron Methyl
TBT-Containing Compounds
Tetramethrin
Triclosan (Irgasan)
Triforine
Case No.
3136
2620
2660
2340
2720
Total
Number of
Products
Covered by
the RED1
28
29
292
20
3
1,143
Number of
Product
Chemistry
Studies
Required2
31
31
31
31
31
Number of Acute Toxicology Studies
Required3
84 (7 batches/7 products not batched)
Antimicrobial RED - Acute toxicity
batching has not been completed
270 (17 batches/28 products not
batched)6
Antimicrobial RED - Acute toxicity
batching has not been completed
Acute toxicity batching has not been
completed
Number of
Efficacy
Studies
Required
0
PDCI has
not been
completed
6
PDCI has
not been
completed
0
Special Local Need (SLN) or Section 24(c) products are not included in the acute toxicity batching. These products
have a parent product; therefore, acute toxicity data do not need to be generated for these SLN or Section 24(c)
products.
1 The number of registered products containing a pesticide active ingredient can change over time. The product total
that appears in the RED document (counted when the RED is signed) may be different than the number of products
that EPA is tracking for product reregistration (counted later, when the RED is issued). This table reflects the final
number of products associated with each RED, as they are being tracked for product reregistration.
2 This column shows the number of product chemistry studies that are required for each product covered by the
RED.
3 In an effort to reduce the time, resources, and number of animals needed to fulfill acute toxicity data requirements,
EPA "batches" products that can be considered similar from an acute toxicity standpoint. For example, one batch
could contain five products. In this instance, if six acute toxicology studies usually were required per product, only
six studies (rather than 30 studies) would be required for the entire batch. Factors considered in the sorting process
include each product's active and inert ingredients (e.g., identity, percent composition, and biological activity), type
of formulation (e.g., emulsifiable concentrate, aerosol, wettable powder, granular, etc.), and labeling (e.g., signal
word, use classification, precautionary labeling, etc.). The Agency does not describe batched products as
"substantially similar," because all products within a batch may not be considered chemically similar or have
identical use patterns. (Note: FIFRA Section 24(c) or Special Local Need (SLN) registrations are not included in
acute toxicity batchings because they are supported by a valid parent product (Section 3) registration.)
4 Acute toxicity data are not required for the chloropicrin, ethylene oxide, and methyl bromide PDCIs; these
chemicals are highly toxic and toxicity categories are already established for all products.
5 The Nicotine RED is a cancellation; therefore, neither a PDCI nor acute toxicity data are required.
6 A majority of the tetramethrin products also contain MGK-264, PBO, and Pyrethrins as active ingredients. These
products were included in the acute toxicity batching for the MGK-264, PBO, and Pyrethrins REDs, issued in FY
2006. The registrants of these products would either submit or cite acute toxicity data according to the acute toxicity
batchings in those REDs. If the acute toxicity data are acceptable, the data will support the product for all of the
active ingredients (MGK-264, PBO, Pyrethrins and Tetramethrin). Therefore, only 138 products that contain
Tetramethrin as an active ingredient are included in the acute toxicity batching for FY 2008.
Measure 5: Future Schedule for Reregistrations.
The last REDs were completed in FY 2008, therefore there are no remaining candidates
for future decisions.
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PRINCIPAL
FINANCIAL STATEMENTS
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TABLE OF CONTENTS
Financial Statements
Balance Sheet 12
Statement of Net Cost 13
Statement of Changes in Net Position 14
Statement of Budgetary Resources 15
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies 16
Note 2. Fund Balance with Treasury 19
Note 3. Investments 19
Note 4. Other Assets - Advances to Working Capital Fund 19
Note 5. General Property, Plant and Equipment 19
Note 6. Other Liabilities 20
Note 7. Payroll and Benefits Payable, non-Federal 20
Note 8. Income and Expenses from Other Appropriations 21
Note 9. Exchange Revenues, Statement of Net Cost 23
Note 10. Intragovernmental Costs and Revenue 23
Note 11. Reconciliation of Net Cost of Operations to Budget (formerly the
Statement of Financing) 24
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Environmental Protection Agency
FIFRA
Balance Sheet
As of September 30, 2008 and 2007
(Dollars in Thousands)
09-1-0172
ASSETS
Intragovernmental
Fund Balance With Treasury (Note 2)
Investments (3)
Other (Note 4)
Total hTtragovermnental
General Property, Plant and Equipment (Note 5)
Total Assets
FY2008
2,342
7,921
1_
10,264
88
10,352
FY2007
9,284
100
9,384
9,384
Intragovernmental
Accounts Payable & Accrued Liabilities
Other (Note 6)
Total Intragovernmental
Accounts Payable & Accrued Liabilities
Payroll & Benefits Payable (Note 7)
Other (Note 6)
Total Liabilities
NET POSITION
Cumulative Results of Operations
Total Net Position
Total Liabilities and Net Position
135
192
327
5 15
2, 171
10,137
13,150
(2,798)
(2,798)
10,352
$ 250
199
$ 449
212
3,121
8,708
$ 12,490
(3,106)
(3,106)
9,384
The accompanying notes are an integral part of these statements.
12
EPA's FY 2008 Annual FIFRA Financial Statements
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Environmental Protection Agency
FIFRA
Statement of Net Cost
For the Years Ended September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
COSTS
Gross Cost (Note 10) $ 21,696 $ 22,641
Expenses from Other Appropriations (Note 8) 51,227 52,042
Total Costs $ 72,923 $ 74,683
Less:
Earned Revenues, (Notes 9 and 10) $ 20,554 $ 21,376
NET COST OF OPERATIONS (Note 10)
The accompanying notes are an integral part of these statements.
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Environmental Protection Agency
FIFRA
Statement of Changes in Net Position
For the Years Ended September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
Net Position-Beginning of Period $ (3,106) $ (3,381)
Budgetary Financing Sources:
Nonexchange Revenue - Securities Investment 177
Income from Other Appropriations (Note 8) 51,227 52,042
Total Budgetary Financing Sources $ 51,404 $ 52,042
Other Financing Sources:
Imputed Financing Sources 1,273 1,540
Total Other Financing Sources $ 1,273 $ 1,540
Net Cost of Operations (52,369) (53,307)
Net Change 308 275
Net Position - End of Period $ (2,798) $ (3,106)
The accompanying notes are an integral part of these statements.
14 EPA's FY 2008 Annual FIFRA Financial Statements
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Environmental Protection Agency
FIFRA
Statement of Budgetary Resources
For the Years Ended September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1: $ 6,986 $ 5,616
Recoveries of Prior Year Unpaid Obligations 985 828
Spending Authority from Offsetting Collections:
Earned:
Collected 20,730 21,389
Change in Unfilled Customer Orders:
Advance Received 1,429 631
Total Budgetary Resources $ 30,130 $ 28,464
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Reimbursable $ 23,529 $ 21,478
Total Obligations Incurred 23,529 21,478
Unobligated Balances:
Apportioned 6,601 6,986
Total Status of Budgetary Resources $ 30,130 $ 28,464
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1 $ 2,296 $ 2,427
Total Unpaid Obligated Balance, Net 2,296 2,427
Obligations Incurred, Net 23,529 21,478
Less: Gross Outlays (21,181) (20,781)
Less: Recoveries of Prior Year Unpaid Obligations (985) (828)
Total, Change in Obligated Balance 3,659 2,296
Obligated Balance, Net, End of Period:
Unpaid Obligations 3,659 2,296
Total, Unpaid Obligated Balance, Net, End of Period $ 3,659 $ 2,296
NET OUTLAYS
Net Outlays:
Gross Outlays $ 21,181 $ 20,781
Less: Offsetting Collections (22,159) (22,020)
Total, Net Outlays $ (978)
The accompanying notes are an integral part of these statements.
15 EPA's FY 2008 Annual FIFRA Financial Statements
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Environmental Protection Agency
FIFRA
Notes to Financial Statements
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies:
A. Basis of Presentation
These financial statements have been prepared to report the financial position and results of
operations of the Environmental Protection Agency (EPA) for the Reregi strati on and Expedited
Processing (FIFRA) Revolving Fund as required by the Chief Financial Officers Act of 1990.
The reports have been prepared from the books and records of EPA in accordance with Financial
Reporting Requirements, Office of Management and Budget (OMB) Circular A-136 and EPA's
accounting policies which are summarized in this note. These statements are therefore different
from the financial reports also prepared by EPA pursuant to OMB directives that are used to
monitor and control EPA's use of budgetary resources.
B. Reporting Entity
EPA was created in 1970 by executive reorganization from various components of other Federal
agencies in order to better marshal and coordinate Federal pollution control efforts. The Agency
is generally organized around the media and substances it regulates — air, water, land, hazardous
waste, pesticides and toxic substances.
The FIFRA Revolving Fund was authorized in 1988 by amendments to the Federal Insecticide,
Fungicide and Rodenticide Act (FIFRA). The 1988 amendments mandated the accelerated re-
registration of all products registered prior to November 1, 1984. Congress authorized the
collection of maintenance fees to supplement appropriations to fund re-registration and to fund
expedited processing of pesticides. Maintenance fees are assessed on registrants of pesticide
products. FIFRA also includes provisions for the registration of new pesticides (funded in part
from the PRIA or Pesticide Registration Fund), monitoring the distribution and use of pesticides,
issuing civil or criminal penalties for violations, establishing cooperative agreements with the
states, and certifying training programs for users of restricted chemicals. Appropriated funds,
with the exception of partial funding of registration from Pesticide Registration Service Fees in
the Pesticide Registration Fund, pay for these activities. The FIFRA Revolving Fund is
accounted for under Treasury symbol number 68X4310.
FIFRA may charge some administrative costs directly to the fund and charge the remainder of
the administrative costs to Agency-wide appropriations. Costs funded by Agency-wide
appropriations for FYs 2008 and 2007 were $51,227 thousand and $52,042 thousand,
respectively. These amounts are included as Income from Other Appropriations on the
Statements of Changes in Net Position and as Expenses from Other Appropriations on the
Statement of Net Cost.
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C. Budgets and Budgetary Accounting
Funding of the FIFRA Revolving Fund is provided by fees collected from industry to offset costs
incurred by EPA in carrying out these programs. Each year EPA submits an apportionment
request to OMB based on the anticipated collections of industry fees.
D. Basis of Accounting
Transactions are recorded on an accrual accounting basis and a budgetary basis. Under the
accrual method, revenues are recognized when earned and expenses are recognized when a
liability is incurred, without regard to receipt or payment of cash. Budgetary accounting
facilitates compliance with legal constraints and controls over the use of Federal funds. All
interfund balances and transactions have been eliminated.
E. Revenues and Other Financing Sources
EPA's 2002 appropriations bill extended authority to collect maintenance fees by one year in the
amount of $17 million and the FY 2003 appropriations extended the authority to collect fees
again by one year in the amount of $21.5 million. Passage of the Pesticide Registration
Improvement Act (PRIA) in 2004 extended the authority to collect maintenance fees through FY
2008 (with annual fee amounts at $26 million in FY 2004; $27 million in FY 2005-2006; $21
million in FY 2007; and $15 million in FY 2008). Passage of the Pesticide Registration
Improvement Renewal Act (commonly referred to as PRIA II) in 2007 extended the authority to
collect maintenance fees through FY 2012 (with annual fee amounts set at $22 million each year
from 2008-2012). For FYs 2008 and 2007, the FIFRA Revolving Fund received funding from
maintenance fees collected on existing registered pesticide products and from interest collected
on investments in U.S. Government securities. For FYs 2008 and 2007, revenues were
recognized from fee collections to the extent that expenses are incurred during the fiscal year.
F. Funds with the Treasury
FIFRA deposits receipts and processes disbursements through its operating account maintained
at the U.S. Department of Treasury. Cash funds in excess of immediate needs, are invested in
U.S. Government securities.
G. General Property, Plant and Equipment
General property, plant and equipment for FIFRA consists of software (in development). All
funds (except for the Working Capital Fund) capitalize software if those investments are
considered Capital Planning and Investment Control (CPIC) or CPIC Lite systems with the
provisions of SFFAS No. 10, "Accounting for Internal Use Software." Once software enters the
production life cycle phase, it is depreciated using the straight-line method over the specific
asset's useful life ranging from 2 to 10 years.
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H. Investments in U. S. Government Securities
Investments in U. S. Government securities are maintained by Treasury (Bureau of Public Debt)
and are reported at amortized cost net of unamortized discounts. Discounts are amortized over
the term of the investments and reported as interest income. FIFRA holds the investments to
maturity, unless needed to finance operations of the fund. No provision is made for unrealized
gains or losses on these securities because, in the majority of cases, they are held to maturity.
I. Accounts Receivable and Interest Receivable
FIFRA receivables are mainly for interest receivable on investments.
J. Liabilities
Liabilities represent the amount of monies or other resources that are likely to be paid by EPA as
the result of a transaction or event that has already occurred. However, no liability can be paid
by EPA without an appropriation or other collection of revenue for services provided. Liabilities
for which an appropriation has not been enacted are classified as unfunded liabilities and there is
no certainty that the appropriations will be enacted. For FIFRA, liabilities are liquidated from
fee receipts and interest earnings, since FIFRA receives no appropriation. Liabilities of EPA,
arising from other than contracts, can be abrogated by the Government acting in its sovereign
capacity.
K. Annual, Sick and Other Leave
Annual, sick and other leave is expensed as taken during the fiscal year. Sick leave earned but
not taken is not accrued as a liability. Annual leave earned but not taken as of the end of the
fiscal year is accrued as an unfunded liability. Accrued unfunded annual leave is included in the
Balance Sheet as a component of "Payroll and Benefits Payable."
L. Retirement Plan
There are two primary retirement systems for Federal employees. Employees hired prior to
January 1, 1984, may participate in the Civil Service Retirement System (CSRS). On January 1,
1987, the Federal Employees Retirement System (FERS) went into effect pursuant to Public Law
99-335. Most employees hired after December 31, 1983, are automatically covered by FERS
and Social Security. Employees hired prior to January 1, 1984, elected to either join FERS and
Social Security or remain in CSRS.
A primary feature of FERS is that it offers a savings plan to which the Agency automatically
contributes one percent of pay and matches any employee contributions up to an additional four
percent of pay. The Agency also contributes the employer's matching share for Social Security.
18 EPA's FY 2008 Annual FIFRA Financial Statements
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With the issuance of SFFAS No. 5, "Accounting for Liabilities of the Federal Government,"
accounting and reporting standards were established for liabilities relating to the Federal
employee benefit programs (Retirement, Health Benefits, and Life Insurance). SFFAS No. 5
requires that the employing agencies recognize the cost of pensions and other retirement benefits
during their employees' active years of service. SFFAS No. 5 requires that the Office of
Personnel Management (OPM), as administrator of the CSRS and FERS, the Federal Employees
Health Benefits Program, and the Federal Employees Group Life Insurance Program, provide
Federal agencies with the actuarial cost factors to compute the liability for each program.
Note 2. Fund Balance with Treasury:
FY 2008 FY 2007
Revolving Funds: Entity Assets $ 2,342 $ 9,284
Note 3. Investments
At the end of FY 2008, EPA invested $7.9 million in Government Account Series (GAS) Market
Based Bills at the Bureau of Public Debt. In FY 2007, EPA did not invest at year-end and
allowed all investments to mature.
Note 4. Other Assets -Advances to Working Capital Fund
FIFRA advances funds to the EPA's Working Capital Fund to pay for computer, postage, and
other administrative support services. As of September 30, 2008 and 2007, funds advanced that
will be applied to future costs as incurred were one thousand and $100 thousand, respectively.
Note 5. General Property, Plant and Equipment
In FY 2008, FIFRA incurred $88 thousand in costs related to the development of information
technology software associated with the "Pesticide Registration Improvement System".
19 EPA's FY 2008 Annual FIFRA Financial Statements
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Note 6. Other Liabilities
For FYs 2008 and 2007, the Payroll and Benefits Payable, non-Federal, are presented on a
separate line of the Balance Sheet and in a separate footnote (see Note 7 below).
FY 2008 FY 2007
Other Intragovernmental Liabilities - Covered by
Budgetary Resources
Employer Contributions - Payroll $ 192 $ 199
Total $ 192 $ 199
Other Non-Federal Liabilities - Covered by
Budgetary Resources
Advances from Non-Federal Entities $ 10,137 8,708
Total $ 10,137 8,708
Note 7. Payroll and Benefits Payable, non-Federal:
FY 2008 FY 2007
Covered by Budgetary Resources
Accrued Payroll Payable to Employees $ 526 $ 359
Withholdings Payable 342 427
Thrift Savings Plan Benefits Payable 30 31
Total $ 898 $ 817~
Not Covered by Budgetary Resources
Unfunded Annual Leave Liability $ 1,273 $ 2,304
At various periods throughout FYs 2008 and 2007, employees with their associated payroll costs
were transferred from the FIFRA fund to the Environmental Programs and Management (EPM)
appropriation. (See graph in Note 8 below showing trend of hours charged per month to the
FIFRA fund for FYs 2008 and 2007.) These employees were transferred in order to keep
FIFRA's obligations and disbursements within budgetary and cash limits. When resources
became available, the employees charging to FIFRA increased in order to utilize resources as
much as possible. The Agency expects that the practice of transferring employees when
FIFRA's resources are low, and restoring employees when funds become available, will continue
throughout FY 2008 and probably beyond that period.
20 EPA's FY 2008 Annual FIFRA Financial Statements
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This process has led to variations between the year-end liabilities for FYs 2008 and 2007. The
liabilities covered by budgetary resources (both intragovernmental and non-Federal) represent
unpaid payroll and benefits at year-end. At the end of FY 2008, 156 employees were charging
all or part of their salary and benefits to FIFRA compared to 54 employees for the end of FY
2007. As of September 30, 2008 these liabilities were $192 thousand and $898 thousand for
employer contributions and accrued funded payroll and benefits, as compared to FY 2007's
balances of $199 thousand and $817 thousand, respectively.
In contrast, the unfunded annual leave liability is a longer term liability than the funded
liabilities. At various periods throughout FYs 2008 and 2007, approximately 229 and 319
employees, respectively, in total have been under FIFRA's accountability. During the last pay
period of FY 2008, the number of employees transferred from FIFRA to EPM was not
significant; therefore, the liability was computed based on 156 employees charged to FIFRA
during pay period 26. Both the September 30, 2008 and 2007 liability balances for unfunded
annual leave were accrued to cover the employees charged to FIFRA at the end of the fiscal year
for a total of $1,273 thousand and $2,304 thousand, respectively.
Note 8. Income and Expenses from Other Appropriations:
The Statement of Net Cost reports program costs that include the full costs of the program
outputs and consist of the direct costs and all other costs that can be directly traced, assigned on a
cause and effect basis, or reasonably allocated to program outputs.
During FYs 2008 and 2007, EPA had two appropriations which funded a variety of
programmatic and non-programmatic activities across the Agency, subject to statutory
requirements. The EPM appropriation was created to fund personnel compensation and benefits,
travel, procurement, and contract activities. Transfers of employees from FIFRA to EPM at
various times during these years (see Note 7 above) resulted in an increase in payroll expenses in
EPM, and these costs financed by EPM are reflected as an increase in the Expenses from Other
Appropriations on the Statement of Net Cost. The increased financing from EPM is reported on
the Statement of Changes in Net Position as Income from Other Appropriations.
In terms of hours charged to FIFRA each month, the transfers of employees and their associated
costs during FYs 2008 and 2007 are shown below. Note that a decrease in hours charged to
FIFRA normally signifies an increase in EPM's payroll costs, and vice versa. In addition,
Pesticide was separated from FIFRA starting with FY 2004 and Pesticide has its own set of
financial statements.
21 EPA's FY 2008 Annual FIFRA Financial Statements
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0
FIFRA Payroll Hours Per Month
y
/
Month
EPM costs related to FIFRA are allocated based on specific EPM program codes which have
been designated for Pesticide activities. As illustrated below, there is no impact on FIFRA's
Statement of Net Position.
Income From Other
Appropriations
FY2008 $ 51,227 $
FY2007 $ 52,042 $
Expenses From Other Net
Appropriations Effect
51,227 $ 0_
52,042 $ 0
22
EPA's FY 2008 Annual FIFRA Financial Statements
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Note 9. Exchange Revenues, Statement of Net Cost
For FYs 2008 and 2007, the exchange revenues reported on the Statement of Net Cost include
both Federal and non-Federal amounts.
Note 10. Intragovernmental Costs and Exchange Revenue
FY 2008 FY 2007
COSTS:
Intragovernmental $ 6,572 $ 7,028
With the Public 15,124 15,613
Expenses from Other Appropriations 51,227 52,042
Total Costs $ 72,923 $ 74,683
REVENUE:
Intragovernmental $ - $ 602
With the Public 20,554 20,774
Total Revenue $ 20,554 $ 21,376
NET COST OF OPERATIONS $ 52,369 $ 53,307
Intragovernmental costs relate to the source of the goods or services not the classification of the
related revenue.
23 EPA's FY 2008 Annual FIFRA Financial Statements
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Note 11. Reconciliation of Net Cost of Operations to Budget (formerly the Statement of
Financing)
FY 2008
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 23,529 $
Less: Spending Authority from Offsetting
Collections and Recoveries (23,144)
Obligations, Net of Offsetting Collections $ 385 $"
Other Resources
Imputed Financing Sources $ 1,273 $
Income from Other Appropriations (Note 8) 51,227
Net Other Resources Used to Finance Activities $ 52,500 $
Total Resources Used To Finance Activities $ 52,885 $
RESOURCES USED TO FINANCE ITEMS
NOT PART OF NET COST OF OPERATIONS
Change in Budgetary Resources Obligated for Goods $ 427 $
Resources that Fund Prior Period Expenses (1,032)
Resources that Finance Asset Acquisition (88)
Total Resources Used to Finance Items Not Part of the Net Cost of Operations $ (693) $
Total Resources Used to Finance the Net
Cost of Operations $ 52,192 $
COMPONENTS OF NET COST OF OPERATIONS
THAT WILL NOT REQUIRE OR GENERATE
RESOURCES IN THE CURRENT PERIOD
Components Requiring or Generating Resources in Future Periods:
Other 177
Total components of Net Cost of Operations that Require or Generate
Resources in Future Periods 177
Net Cost of Operations $ 52,369 $
FY 2007
21,478
(22,848)
(1,370)
1,540
52,042
53,582
52,212
1,510
(415)
1,095
53,307
53,307
24
EPA's FY 2008 Annual FIFRA Financial Statements
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Appendix B
Agency's Response to Draft Report
May 20, 2009
MEMORANDUM
SUBJECT: OPP Response to Draft Audit Report: Fiscal Year 2008 and 2007 Financial
Statements for the Pesticides Reregistration and Expedited Processing Fund
FROM: James J. Jones, Acting Assistant Administrator /s/
for Prevention, Pesticides and Toxic Substances
Maryann B. Froehlich /s/
Acting Chief Financial Officer
TO: Paul C. Curtis, Director
Financial Statement Audits (2422T)
Thank you for the opportunity to respond to the May 7, 2009, Audit Report: Fiscal Year
2008 and 2007 Financial Statements for the Pesticides Reregistration and Expedited Processing
Fund. We appreciate the Office of Inspector General's (OIG) careful evaluation of the Office of
Pesticide Program's (OPP) financial statements for 2007 and 2008.
We concur with the OIG's general conclusions that our financial statements are fairly
presented and free of material misstatement. We appreciate the OIG's efforts in helping us to
evaluate our program, and your suggestions concerning how to improve our tracking of the
effectiveness of our program. Protection of human health and the environment from
unreasonable adverse effects of pesticides is a responsibility we take very seriously and we
welcome OIG's input on our work.
The audit report noted one significant deficiency in internal controls and made three
recommendations. Those recommendations and our response follow.
Recommendation 1-1: Review the entire universe of reregi strati on and amendment actions
claimed in fiscal year 2008, and correct any errors found in the OPPIN system.
Response: An internal audit team, comprised of staff in the affected registering divisions, will
review the actions according to the following procedure: (1) review the product jackets for
documentation of reregistrations and amendments; and (2) review OPPIN to ensure the actions
were properly coded and accurate information entered. The Audit Team's kick off meeting took
place February 24, 2009. OPP is reviewing all the product reregi strati on and amendment actions
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that were reported during fiscal year 2008 and will correct any errors found. We expect to
complete this task by December 31, 2009.
Recommendation 1-2: Conduct the internal audits of product reregi strati on and amendment
actions completed during Fiscal Year 2009, at least quarterly, to ensure reregi strati on and
amendment actions are accurately recorded in OPPIN; and ensure that any errors noted are
corrected in OPPIN and verified by management.
Response: OPP will conduct an internal audit of Fiscal Year 2009 actions. We currently have a
staff member in the Registration Support Branch who reviews the actions when copies of letters
completing the actions are sent to her. The audit team, comprised of staff from all branches of
the registering divisions, will also review the actions according to the same procedure used for
the 2008 audit. Any errors found will be given to the appropriate Branch Chief for correction.
As an additional measure to ensure that OPP is accurately reporting the actions completed for
FY 2009, RD will maintain both paper and electronic copies of the documentation for
reregi strati on and amendments; one in hard copy and placed in file drawers, and the other
scanned into an electronic filing system.
Recommendation 1-3: Use corrected figures for product reregi strati on and amendment actions
in the Annual Report on Reregi strati on Performance Measures and Goals for Fiscal Year 2008
published in the Federal Register. If the corrected figures are not available before publication,
disclose in the report that the Fiscal Year 2008 accomplishments for FIFRA Program
Performance Measure Two are inaccurate and corrected figures will be published in the Fiscal
Year 2009 Report.
Response: The 2008 Pesticide Reregi strati on Performance Measures and Goals Report was
signed on May 1, 2009, and has been published in the Federal Register. It contains the following
language:
3. Product reregistration actions and universe in FY 2008.In response to 2009 findings
by EPA's Office of the Inspector General resulting from the annual FIFRA Financial
Statements Audit, the EPA Office of Pesticide Programs (OPP) is reviewing product
reregistration actions completed in FY 2008 and will make any needed corrections. OPP
expects to complete this review by December 31, 2009. In next year's Performance
Measures and Goals Federal Register notice reporting on actions completed in FY 2009,
the Agency plans to provide numbers of product reregistration actions completed in FY
2008 and in FY 2009.
Again, we appreciate the OIG's working with OPP to improve the effectiveness of our
programs. If you have any questions concerning our responses you may contact Marty Monell,
Deputy Director, Office of Pesticide Programs on 703 305-7090, or Doug Weik, Acting Chief,
Financial Management and Planning Branch, OPP on 703-305-6926.
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Appendix C
Distribution
Office of the Administrator
Acting Chief Financial Officer
Agency Follow-up Official (the CFO)
Acting Deputy Chief Financial Officer
Agency Follow-up Coordinator
Acting General Counsel
Acting Assistant Administrator for Prevention, Pesticides, and Toxic Substances
Acting Assistant Administrator for Administration and Resources Management
Acting Associate Administrator for Congressional and Intergovernmental Relations
Acting Associate Administrator for Public Affairs
Director, Office of Pesticide Programs, Office of Prevention, Pesticides, and Toxic Substances
Deputy Director, Office of Pesticide Programs, Office of Prevention, Pesticides, and Toxic
Substances
Director, Biopesticides and Pollution Prevention Division, Office of Prevention, Pesticides, and
Toxic Substances
Director, Special Review and Reregi strati on Division, Office of Prevention, Pesticides, and
Toxic Substances
Director, Registration Division, Office of Prevention, Pesticides, and Toxic Substances
Director, Antimicrobials Division, Office of Prevention, Pesticides, and Toxic Substances
Director, Information Technology and Resources Management Division, Office of Prevention,
Pesticides, and Toxic Substances
Director, Office of Human Resources, Office of Administration and Resources Management
Acting Director, Office of Financial Management, Office of the Chief Financial Officer
Acting Director, Office of Financial Services, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Acting Director, Financial Policy and Planning Staff, Office of the Chief Financial Officer
Director, Research Triangle Park Finance Center
Director, Cincinnati Finance Center
Director, Las Vegas Finance Center
Acting Staff Director, Payroll Management and Outreach Staff, Office of Financial Services,
Office of the Chief Financial Officer
Staff Director, Accountability and Control Staff, Office of Financial Services, Office of the Chief
Financial Officer
Audit Follow-up Coordinator, Office of the Chief Financial Officer
Audit Follow-up Coordinator, Office of Prevention, Pesticides, and Toxic Substances
Audit Follow-up Coordinator, Office of Administration and Resources Management
Acting Inspector General
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