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5 V"^i ^"7 S U.S. ENVIRONMENTAL PROTECTION AGENCY
% ahilfrfc / OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Audit of EPA's
Fiscal 2008 and 2007
Consolidated Financial Statements
Report No. 09-1-0026
November 14, 2008
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Abbreviations
CFC Cincinnati Finance Center
DFAS Defense Finance and Accounting Service
EPA U.S. Environmental Protection Agency
FFMIA Federal Financial Management Improvement Act
FFMSR Federal Financial Management System Requirements
FMFIA Federal Managers' Financial Integrity Act
GAO Government Accountability Office
IFMS Integrated Financial Management System
LVFC Las Vegas Finance Center
OCFO Office of the Chief Financial Officer
OFM Office of Financial Management
OGD Office of Grants and Debarment
OIG Office of Inspector General
OMB Office of Management and Budget
OTOP Office of Technology Operations and Planning
READ Registry of EPA Applications and Databases
RSSI Required Supplementary Stewardship Information
RTF Research Triangle Park
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-1-0026
November 14, 2008
Catalyst for Improving the Environment
Why We Did This Audit
We performed this audit in
accordance with the
Government Management
Reform Act, which requires the
U.S. Environmental Protection
Agency (EPA) to prepare, and
the Office of Inspector General
to audit, the Agency's financial
statements each year. Our
primary objectives were to
determine whether:
• EPA's consolidated financial
statements were fairly stated
in all material respects.
• EPA's internal controls over
financial reporting were in
place.
• EPA management complied
with applicable laws and
regulations.
Background
.
The requirement for audited
financial statements was
enacted to help bring about
improvements in agencies'
financial management
practices, systems, and controls
so that timely, reliable
information is available for
managing federal programs.
For further information, contact
our Office of Congressional and
Public Liaison at (202) 566-2391.
To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2009/
20081114-09-1-0026.pdf
Audit of EPA's Fiscal 2008 and 2007
Consolidated Financial Statements
EPA Receives Unqualified Opinion
We rendered an unqualified, or clean, opinion on EPA's Consolidated Financial
Statements for fiscal 2008 and 2007, meaning that they were fairly presented and
free of material misstatement.
Significant Deficiencies Noted
We noted the following eight significant deficiencies:
• EPA's oversight of payroll reconciliation needs improvement.
• Accrual was not properly calculated for federal unbilled receivables.
• EPA needs to reconcile Superfund State Contract funds and credits in the
general ledger to subsidiary accounts.
• EPA's review of unliquidated obligations for interagency agreements and
Headquarters-funded grants was incomplete.
• The Integrated Financial Management System Vendor Table was susceptible
to unauthorized changes and changes were not adequately documented.
• Improvement was needed in monitoring Superfund Special Account balances.
• The lack of a system implementation process contributed to financial
applications not complying with requirements.
• EPA did not properly account for capitalized software and related
accumulated depreciation.
Noncompliances With Laws and Regulations Noted
EPA was in noncompliance with regulations relating to:
• The Asbestos Loan Program (related to the Anti-Deficiency Act).
• Prompt payment of invoices (related to the Prompt Payment Act).
• Reconciling intragovernmental transactions (related to Treasury policy).
Agency Comments and Office of Inspector General Evaluation
In a memorandum received on November 12, 2008, from the Chief Financial
Officer, the Agency generally agreed with our findings and has implemented
some of our recommendations. The Agency also stated it does not agree with our
findings regarding the Asbestos Loan Anti-Deficiency Act violation, Prompt
Payment Act violation, or systems implementation process. The Agency also
believes it does adequate payroll reconciliations but agreed to work with the
Office of Inspector General to develop reconciliations.
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9 ^M \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
a WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 14, 2008
MEMORANDUM
SUBJECT: Audit of EPA's Fiscal 2008 and 2007 Consolidated Financial Statements
Report No. 09-1-0026
FROM: Paul C. Curtis
Director, Financial Statement Audits
TO: Lyons Gray
Chief Financial Officer
Attached is our audit report on the U.S. Environmental Protection Agency's (EPA's) fiscal 2008
and 2007 consolidated financial statements. We are reporting eight significant deficiencies.
We also identified an instance of noncompliance with the Anti-Deficiency Act, and a violation of
the Prompt Payment Act. Further, we identified a noncompliance with laws and regulations
related to reporting intragovernmental transactions. Attachment 3 contains the status of
recommendations related to significant deficiencies and noncompliances with laws and
regulations reported in prior years' reports. The significant deficiencies and noncompliances
included in Attachment 3 also apply for fiscal 2008.
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 $2,174,361.
This audit report represents the opinion of the Office of Inspector General, and the findings in
this report do not necessarily represent the final EPA position. EPA managers, in accordance
with established EPA audit resolution procedures, will make final determinations on the findings
in this audit report. Accordingly, the findings described in this audit report are not binding upon
EPA in any enforcement proceeding brought by EPA or the Department of Justice. We have no
objections to the further release of this report to the public. This report will be available at
http://epa.gov/oig/.
In accordance with EPA Manual 2750, Audit Management Process, you are required to provide
us with a written response to the final audit report within 90 days of the final report date. The
response should address all issues and recommendations contained in Attachments 1 and 2. For
corrective actions planned but not completed by the response date, reference to specific milestone
dates will assist us in deciding whether or not to close this report in our audit tracking system.
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Should you or your staff have any questions about the report, please contact me at
(202) 566-2523; or Melissa Heist, Assistant Inspector General for Audit, at (202) 566-0899.
Attachments
cc: See Appendix III, Distribution
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Audit of EPA's Fiscal 2008 and 2007 09-1 -0026
Consolidated Financial Statements
Table of Contents
Inspector General's Report on EPA's Fiscal 2008
and 2007 Consolidated Financial Statements
Review of EPA's Required Supplementary Stewardship Information,
Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis 2
Evaluation of Internal Controls 2
Tests of Compliance with Laws and Regulations 7
Prior Audit Coverage 9
Noteworthy Achievements 9
Agency Comments and OIG Evaluation 10
Attachments 11
1. Significant Deficiencies 11
EPA's Oversight of DFAS Payroll Reconciliation Needs Improvement 12
Accrual Not Properly Calculated for Federal Unbilled Receivables 15
EPA Needs to Reconcile Superfund State Contract Funds
and Credits in the General Ledger to Subsidiary Accounts 16
EPA's Review of Unliquidated Obligations for Interagency Agreements
and Headquarters-Funded Grants Was Incomplete 18
IFMS Vendor Table Susceptible to Unauthorized Changes and
Changes Were Not Adequately Documented 21
Improvement Needed in Monitoring Superfund Special Account Balances 23
Lack of System Implementation Process Contributed to
Financial Applications Not Complying with Requirements 24
EPA Did Not Properly Account for Capitalized Software and
Related Accumulated Depreciation 27
2. Compliance with Laws and Regulations 29
EPA's Asbestos Loan Program Violated the Anti-Deficiency Act 30
EPA Violated the Prompt Payment Act by Not Paying
Telecommunications Invoices Promptly 32
EPA Should Continue Efforts to Reconcile Intragovernmental Transactions.... 34
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Audit of EPA's Fiscal 2008 and 2007 09-1 -0026
Consolidated Financial Statements
3. Status of Prior Audit Report Recommendations 36
4. Status of Current Recommendations and Potential Monetary Benefits 38
Appendices 42
I. EPA's Fiscal 2008 and 2007 Consolidated Financial Statements 42
II. Agency's Response to Draft Report 112
III. Distribution 121
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09-1-0026
Inspector General's Report on EPA's Fiscal 2008
and 2007 Consolidated Financial Statements
The Administrator
U.S. Environmental Protection Agency
We have audited the consolidated balance sheet of the U.S. Environmental Protection Agency
(EPA, or the Agency) as of September 30, 2008 and 2007, and the related consolidated
statements of net cost, net cost by goal, changes in net position, and custodial activity; and the
combined statement of budgetary resources for the years then ended. These financial statements
are the responsibility of 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 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.
The financial statements include expenses of grantees, contractors, and other federal agencies.
Our audit work pertaining to these expenses included testing only within EPA. Audits of grants,
contracts, and interagency agreements performed at a later date may disclose questioned costs of
an amount undeterminable at this time. The U.S. Treasury collects and accounts for excise taxes
that are deposited into the Superfund and Leaking Underground Storage Tank Trust Funds. The
U.S. Treasury is also responsible for investing amounts not needed for current disbursements and
transferring funds to EPA as authorized in legislation. Since the U.S. Treasury, and not EPA, is
responsible for these activities, our audit work did not cover these activities.
The Office of Inspector General (OIG) is not independent with respect to amounts pertaining to
OIG operations that are presented in the financial statements. The amounts included for the OIG
are not material to EPA's financial statements. The OIG is organizationally independent with
respect to all other aspects of the Agency's activities.
In our opinion, the consolidated financial statements present fairly, including the accompanying
notes, in all material respects, the consolidated assets, liabilities, net position, net cost, net cost
by goal, changes in net position, custodial activity, and combined budgetary resources of EPA 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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09-1-0026
Review of EPA's Required Supplementary Stewardship Information,
Required Supplementary Information, Supplemental Information, and
Management's Discussion and Analysis
We inquired of EPA's management as to its methods for preparing Required Supplementary
Stewardship Information (RSSI), Required Supplementary Information, Supplemental
Information, and Management's Discussion and Analysis, and reviewed this information for
consistency with the financial statements. The Supplemental Information includes the unaudited
Superfund Trust Fund financial statements for fiscal 2008 and 2007, which are being presented
for additional analysis and are not a required part of the basic financial statements. Our audit
was not designed to express an opinion and, accordingly, we do not express an opinion on EPA's
RSSI, Required Supplementary Information, Supplemental Information, and Management's
Discussion and Analysis.
We did not identify any material inconsistencies between the information presented in EPA's
consolidated financial statements and the information presented in EPA's RSSI, Required
Supplementary Information, Supplemental Information, and Management's Discussion and
Analysis.
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 and RSSI 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 controls over financial
reporting by obtaining an understanding of the Agency's internal controls, determining whether
internal controls had 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 of 1982
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09-1-0026
(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 internal controls, misstatements, losses, or
noncompliance may nevertheless occur and not be detected. We noted certain matters discussed
below involving the internal control and its operation that we consider to be significant
deficiencies. None of the issues presented are considered by us to be a material weakness.
In addition, we considered EPA's internal control over the RSSI by obtaining an understanding
of the Agency's internal controls, determined whether these internal controls had been placed in
operation, assessed control risk, and performed tests of controls as required by OMB Bulletin
No. 07-04. Our procedures were not designed to provide assurance on these internal controls
and, accordingly, we do not express an opinion on such controls.
Significant Deficiencies
Significant deficiencies noted are summarized below and detailed in Attachment 1.
EPA's Oversight of Payroll Reconciliation Needs Improvement
EPA's Washington Finance Center performs bi-weekly and monthly reconciliations of
EPA's payroll and SF-224 transactions between PeoplePlus and the Defense Finance and
Accounting Service (DFAS), EPA's payroll service provider. However, the Agency does
not reconcile EPA's payroll to the amounts reported to Treasury on Form 941,
Employer's Quarterly Federal Tax Return. As a result, EPA did not detect errors in
wages and tax amounts DFAS reported to the Department of Treasury (Treasury). The
Treasury Financial Manual requires agencies to perform timely reconciliations, and
implement effective and efficient reconciliation processes. In addition to the
misreporting of wages and taxes, which could adversely impact EPA employees,
inadequate oversight, including not reconciling EPA's payroll with the amounts reported
to Treasury, could increase the risks of fraud, waste, and mismanagement of funds, and
impact the financial statements.
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09-1-0026
Accrual Not Properly Calculated for Federal Unbilled Receivables
EPA did not properly calculate the third quarter fiscal 2008 accrual for federal unbilled
receivables (unbilled accrual). Using EPA's third quarter unbilled accrual spreadsheet,
we calculated the accrual to be $28,542,223, which is $4,021,487 less than the
$32,563,710 amount entered in the Integrated Financial Management System (IFMS).
OMB Circular A-127, Policies and Standards for Financial Management Systems,
requires financial management systems to provide complete, reliable, consistent, timely
and useful financial management information on federal government operations. EPA
did not properly review the accrual to identify problems within the accrual calculation.
As a result, the $4 million error lead to a misstatement of the related assets and revenue in
the financial statements. The Agency determined not to make an adjustment for the error.
EPA Needs to Reconcile Superfund State Contract Funds and Credits in the
General Ledger to Subsidiary Accounts
EPA's Superfund State Contract Credits and unearned revenue did not agree with
supporting spreadsheets by significant amounts. The credits differed from supporting
spreadsheets by $5,383,760, and we found multiple errors in the unearned revenue
spreadsheets. Guidance from EPA's Office of Financial Management requires a
quarterly calculation and reconciliation of the Superfund State Contract spreadsheets to
the general ledger. However, Cincinnati Finance Center (CFC) finance personnel did not
reconcile the spreadsheets to the general ledger because they were not familiar with the
process, and they were not aware they needed to do the reconciliation. As a result, CFC
could not ensure the accuracy of the Superfund State Contract credit and unearned
revenue general ledger accounts or the amount reported in the financial statements, which
totaled approximately $14 million and $44 million, respectively, as of September 30,
2008.
EPA's Review of Unliquidated Obligations for Interagency Agreements and
Headquarters-Funded Grants Was Incomplete
EPA Office of Grants and Debarment's (OGD's) review of unliquidated obligations for
inactive Interagency Agreements and Headquarters-funded regional grants was
incomplete. OGD did not review all Interagency Agreements and Headquarters-funded
regional grants in the inactive obligations reports provided by the Office of the Chief
Financial Officer's (OCFO's) Office of Financial Management. Federal and Agency
guidance require unliquidated obligations to be reviewed annually. However, OGD did
not follow Agency guidance and use the inactive Interagency Agreements unliquidated
obligations report provided by the Office of Financial Management; instead, OGD
generated its own report based on the project period end date. In addition, OGD did not
review Headquarters-funded regional grants assigned to them because it believed these
grants were the responsibility of EPA's Regional Grant Management Offices. As a
result, the Agency had no assurance that the unliquidated obligations for Interagency
Agreements and grants were accurate and represented valid and viable obligations.
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09-1-0026
IFMS Vendor Table Susceptible to Unauthorized Changes and Changes
Were Not Adequately Documented
The IFMS Vendor Table was susceptible to employees making changes to vendor
payment information without detection. Further, CFC did not retain supporting
documentation for numerous Vendor Table changes made for 13 different vendors in
fiscal 2008. FMFIA specifies that agency heads must establish internal controls that
reasonably ensure that funds, property, and other assets are safeguarded against waste,
loss, unauthorized use, or misappropriation. Also, Government Accountability Office
(GAO) Standards for Internal Controls state that all transactions are to be clearly
documented, and that documentation should be properly managed, maintained, and
readily available for examination. The Vendor Table contains critical information (e.g.,
bank routing and account numbers) used to distribute payments to vendors, including
grantees. An individual exploiting this system weakness could divert vendor payments to
an unauthorized banking account without a supervisor or management official being
notified that the vendor payment information changed. As such, having internal control
processes to prevent or detect unauthorized changes, as well as documentation to support
changes, is essential to protecting EPA funds from possible misappropriation.
Improvement Needed in Monitoring Superfund Special Account Balances
CFC did not adequately monitor Superfund Special Account balances. EPA's Office of
Financial Management policy requires CFC to track all Special Account transactions and
balances. Because CFC did not adequately monitor the financial condition of special
accounts, we found $1,370,087 in special account drawdowns recorded in excess of the
balance of interest earned plus principal for some sites.
Lack of System Implementation Process Contributed to Financial
Applications Not Complying with Requirements
Ongoing instances of financial applications noncompliance with federal and EPA system
requirements persist at EPA finance centers. Reviews at EPA's three main finance
centers disclosed that financial applications were placed into operation without required
security controls implemented, key security documents developed, or the systems
assessed for compliance with Federal Financial Management System Requirements.
OMB stresses the importance of these required security tasks and documents because
they provide management with needed information to plan, budget, and put into service
risk mitigation strategies. The deficiencies occurred because OCFO system owners and
project managers had not completed an internal compliance review over this area and the
senior information official had not put into place an ongoing oversight process to ensure
implemented applications comply with prescribed systems requirements. Without such a
process, EPA cannot reasonably assure that these same types of problems will not persist.
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09-1-0026
EPA Did Not Properly Account for Capitalized Software and Related
Accumulated Depreciation
EPA did not properly account for Capitalized Software and the related depreciation,
resulting in misstatements of Capitalized Software (net of accumulated depreciation) and
depreciation expense. EPA accumulates software development costs until the software is
placed into service. For financial statement reporting purposes, accumulated software
development costs are reported on the same line as Capitalized Software costs. EPA
policy states that capitalized software is depreciated beginning when the software is
placed into service. During fiscal 2008, EPA had accumulated software development
costs of $212 million, of which $78 million was for software put into service in fiscal
2008. Of the $78 million, $61 million should have been placed in service in fiscal 2007
or earlier. We found that the Office of Environmental Information does not have
effective controls to determine when capitalized software is moved from the development
phase into service. As a result, depreciation expense for fiscal years 2007 and prior were
understated by amounts ranging from less than $1 million to over $5 million a year. The
impact for correcting the previous year's depreciation results in an overstatement of fiscal
2008 depreciation expense by $26 million.
Attachment 3 contains the status of recommendations related to significant deficiencies reported
in prior years' reports. The significant deficiencies included in Attachment 3 also apply for
fiscal 2008. We reported less significant matters regarding internal controls in the form of point
sheets during the course of the audit. We will not issue a separate management letter.
Comparison of EPA's FMFIA Report with Our Evaluation of Internal Controls
OMB Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, 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.
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 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 2008.
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09-1-0026
Tests of Compliance with Laws and Regulations
EPA management is responsible for complying with laws and regulations applicable to the
Agency. As part of obtaining reasonable assurance about whether the Agency's financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions of laws and regulations, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts, and certain other laws and
regulations specified in OMB Bulletin No. 07-04, Audit Requirements for Federal Financial
Statements. The OMB guidance requires that we evaluate compliance with federal financial
management system requirements, including the requirements referred to in the Federal Financial
Management Improvement Act of 1996 (FFMIA). We limited our tests of compliance to these
provisions and did not test compliance with all laws and regulations applicable to EPA.
Providing an opinion on compliance with certain provisions of laws and regulations was not an
objective of our audit and, accordingly, we do not express such an opinion. A number of
ongoing investigations involving EPA's grantees and contractors could disclose violations of
laws and regulations, but a determination about these cases has not been made.
Our tests of laws and regulations disclosed the following noncompliance issues, which are
discussed in further detail in Attachment 2.
EPA Asbestos Loan Program Violated the Anti-Deficiency Act
EPA violated the Anti-Deficiency Act when it recorded the upward subsidy re-estimate
for the Asbestos Loan Program without an approved apportionment letter from OMB.
According to the Anti-Deficiency Act, "an officer or employee of the United States
Government may not make or authorize an expenditure or obligation exceeding an
amount available in an appropriation or fund for the expenditure or obligation." OCFO's
Office of Budget authorized $32,530 to be entered into IFMS by the Las Vegas Finance
Center without the required apportionment letter. OCFO's Reporting and Analysis Staff
notified the Las Vegas Finance Center prior to the fiscal year end that an apportionment
letter would be needed. OCFO's Office of Budget did not get the apportionment letter or
an exemption from OMB prior to recording the upward subsidy estimate in IFMS. As a
result, the Agency incurred $32,530 before the amount was authorized and available. By
obligating funds in excess of appropriated amounts, the Agency created an anti-
deficiency situation in violation of the Anti-Deficiency Act.
EPA Violated the Prompt Payment Act by Not Paying Telecommunications
Invoices Promptly
EPA violated the Prompt Payment Act by not paying 20 fiscal 2008 telecommunications
invoices timely. EPA's Contracts Management Manual requires that obligating
documents be provided to the finance center timely. The Prompt Payment Act requires
payment of a properly received invoice within the payment terms of the invoice and/or
contract. If invoices are not paid by the due date, interest payments are to be paid starting
on the day after the due date and calculated through the payment date. According to the
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Research Triangle Park (RTF) Finance Center and the Office of Technology Operations
and Planning (OTOP), several factors caused the late payments: (1) RTF Finance Center
returned 3 invoices in April 2008 because OTOP did not process funding allocations;
(2) OTOP did not allocate funds and timely forward obligating documents for the
20 invoices to the RTF Finance Center; (3) the Project Officer did not promptly approve
and forward the 20 invoices for payment; and (4) RTF Finance Center did not follow up
with OTOP after it returned the invoices to determine when they should be paid. The late
payment of these 20 invoices, totaling $2,469,147, resulted in an estimated interest
charge of $42,509 due to the vendor.
EPA Should Continue Effort to Reconcile Intragovernmental Transactions
As of September 30, 2008, EPA reported $192 million in unreconciled differences with
46 trading partners for intragovernmental transactions. Of that amount, $55 million was
reported by Treasury to be material differences. The remaining $137 million represented
amounts reported for non-verifying agencies, accruals, timing differences, and other
agencies whose differences were not reported as material. According to the Treasury
Financial Manual, verifying agencies are those that are required to report in the
Governmentwide Financial Report System. These include the 24 major Chief Financial
Officers Act agencies and 11 other agencies material to the Financial Report of the
United States Government. Treasury policy requires verifying agencies to confirm and
reconcile intragovernmental transactions with their trading partners. Based on our review
of correspondence with other agencies, EPA had difficulty reconciling these differences
primarily because of differing accounting treatments and accrual methodologies between
federal agencies. EPA's inability to reconcile its intragovernmental transactions
contributes to a long-standing governmentwide problem that hinders the ability of GAO
to render an opinion on the Consolidated Financial Statements of the Federal
Government.
Federal Financial Management Improvement Act Noncompliance
Under FFMIA, we are required to report whether the Agency's financial management
systems substantially comply with the federal financial management systems
requirements, applicable federal accounting standards, and the United States Government
Standard General Ledger at the transaction level. An OMB memorandum dated
January 4, 2001, Revised Implementation Guidance for the Federal Financial
Management Improvement Act, lists the specific requirements of FFMIA, as well as
factors to consider in reviewing systems and for determining substantial compliance with
FFMIA. It also provides guidance to agency heads for developing corrective action plans
to bring an agency into compliance with FFMIA. To meet the FFMIA requirement, we
performed tests of compliance with FFMIA section 803(a) requirements and used the
OMB guidance, revised on January 4, 2001, for determining substantial noncompliance
with FFMIA.
The results of our tests did not disclose any instances where the Agency's financial
management systems did not substantially comply with FFMIA requirements.
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09-1-0026
We reported other less significant matters involving compliance with laws and regulations in
point sheets during the course of our audit. We will not be issuing a separate management letter.
Our audit work was also performed to meet the requirements in Title 42, U.S. Code, Section
961 l(k), with respect to the Hazardous Substance Superfund to conduct an annual audit of
payments, obligations, reimbursements, or other uses of the Fund. The significant deficiencies
reported above also relate to Superfund.
Prior Audit Coverage
During previous financial or financial-related audits, we reported weaknesses that impacted our
audit objectives in the following areas:
• Implementation of accounting processes for reclassification of receivables.
• Allowance for doubtful accounts calculation.
• Recording and accounting for accounts receivable.
• Federal and EPA information security applications for key applications.
• Access and security practices over critical information technology assets.
• Controls over the IFMS suspense table.
• Maintaining adequate documentation for obligation accounting adjustments.
• Payroll internal controls.
• Reconciling and reporting intragovernmental transactions, assets, and liabilities by
federal trading partner.
• Recording marketable securities.
• Assessing automated application processing controls for IFMS.
Attachment 3 summarizes the current status of corrective actions taken on prior audit report
recommendations.
Noteworthy Achievements
We identified the following noteworthy achievements during our audit of EPA's fiscal 2008
financial statements:
• EPA has made significant progress in reconciling intragovernmental reconciliations.
As of September 30, 2006, EPA's non treasury general fund differences had totaled
$826,697,883. This had been reduced by $634,067,380 as of September 30, 2008,
resulting in a difference of $192,630,503 as of September 30, 2008.
• EPA rescinded the Currently Not Collectable policy that was identified as a material
weakness in the fiscal 2007 financial statement audit report. EPA is now properly
reporting accounts receivable at their net realizable value.
• EPA consolidated its fiscal 2008 FMFIA guidance documents into a single,
comprehensive package with information and tools for reviewing internal controls over
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09-1-0026
programmatic and financial operations and reporting the results. The guidance enabled
EPA to consolidate its OMB Circular A-123 review of internal controls over financial
reporting and the Quality Assurance Reviews of financial operations in the regions and
finance centers into one coordinated effort.
• EPA has made progress on liquidating obligations on grants where the period of
performance has expired. The Agency stated that it freed up $32 million in funds in
expired grants and contracts for other high priority work in the Agency. In addition, the
Agency stated that more than $83 million has been redeployed within the Agency to date,
including $13 million liquidated during fiscal 2008. We also commend EPA for the
immediate action taken to complete the review of all Headquarters-funded regional grants
and Interagency Agreements based on our review of fiscal 2008 obligations.
• EPA has significantly improved maintaining adequate documentation for accounting
adjustments. During the fiscal 2007 audit, we found that EPA made adjustments to
transactions in IFMS without adequate and proper documentation. We did not identify
any unsupported accounting adjustment entries during the fiscal 2008 audit.
Agency Comments and OIG Evaluation
In a memorandum dated November 12, 2008, OCFO responded to our draft report.
The rationale for our conclusions and a summary of the Agency comments are included in
the appropriate sections of this report, and the Agency's complete response is included as
Appendix II to this report.
This report is intended solely for the information and use of the management of EPA, OMB, and
Congress, and is not intended to be and should not be used by anyone other than these specified
parties.
Paul C. Curtis
Director, Financial Statement Audits
Office of Inspector General
U.S. Environmental Protection Agency
November 14, 2008
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Attachment 1
Significant Deficiencies
Table of Contents
1 - EPA's Oversight of DFAS Payroll Reconciliation Needs Improvement 12
2 - Accrual Not Properly Calculated for Federal Unbilled Receivables 15
3 - EPA Needs to Reconcile Superfund State Contract Funds
and Credits in the General Ledger to Subsidiary Accounts 16
4 - EPA's Review of Unliquidated Obligations for Interagency Agreements
and Headquarters-Funded Grants Was Incomplete 18
5 - IFMS Vendor Table Susceptible to Unauthorized Changes and
Changes Were Not Adequately Documented 21
6 - Improvement Needed in Monitoring Superfund Special Account Balances 23
7 - Lack of System Implementation Process Contributed to
Financial Applications Not Complying with Requirements 24
8 - EPA Did Not Properly Account for Capitalized Software and
Related Accumulated Depreciation 27
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1 - EPA's Oversight of DFAS Payroll Reconciliation
Needs Improvement
EPA does not perform reconciliations of its records to the Form 941s, Employer's Quarterly
Federal Tax Return, or annual Form W-3, TransmittalofWage and Tax Statements, filed on
EPA's behalf by DFAS. EPA's Washington Finance Center performs bi-weekly and monthly
reconciliations of EPA's payroll and SF-224 transactions between PeoplePlus and DFAS, EPA's
payroll service provider. However, the Agency does not reconcile EPA's payroll to the amounts
reported to the Department of Treasury on Form 941. As a result, EPA did not detect errors in
wages and tax amounts DFAS reported to the Treasury. The Treasury Financial Manual requires
agencies to perform timely reconciliations, and implement effective and efficient reconciliation
processes. Internal Revenue Service Publication 15 (Circular E), Employer's Tax Guide,
requires employers to reconcile Form W-3 with the quarterly Form 941s to reduce discrepancies.
In addition to the misreporting of wages and taxes, which could adversely impact EPA
employees, inadequate reconciling could increase the risks of fraud, waste, and mismanagement
of funds, and impact the financial statements.
According to Internal Revenue Service Publication 15 (Circular E), all employers who pay
wages subject to income tax withholding or Social Security and Medicare taxes are required to
file quarterly a Form 941. To help reduce discrepancies, employers are responsible for
reconciling Form W-3 with the quarterly Form 941s. DFAS prepares its Form 941 to include
EPA and other federal agencies' payroll activities reported to Treasury.
We found that EPA wages and tax liabilities reported to the Internal Revenue Service during
calendar 2007 were inaccurate. EPA's tax liabilities were underpaid by $337,982. The Agency
did not perform a reconciliation of its records to the DFAS-prepared Form 941 for the first two
quarters of calendar 2008. We attempted reconciliations for the first two quarters of calendar
2008, and found differences that EPA could not readily explain.
Treasury Financial Manual, Volume 1, Part 2, Chapter 5100, Reconciling Fund Balance with
Treasury Accounts, discusses Treasury's reliance on monthly financial report data from all
federal agencies in order to meet its congressionally mandated central accounting and reporting
responsibilities. Reconciling accounts is a key internal control process; it assures the reliability
of EPA's receipt and disbursement data reported by agencies. Therefore, agencies must perform
timely reconciliations and implement effective and efficient reconciliation processes.
In addition, the Federal Acquisition Regulations (Subpart 37.5-Management Oversight of
Service Contracts) state that contracting officials should seek "best practices" techniques in
contract management and administration within their own contracting activities. Best practices
could include oversight or monthly progress reports to inform EPA management of potential
problems (differences).
EPA does perform bi-weekly and monthly reconciliations of EPA's payroll and SF-224
transactions between PeoplePlus and DFAS, but the Agency does not reconcile its payroll to the
amounts DFAS reports to the Department of Treasury on Form 941. DFAS personnel
acknowledged that they did not send the Internal Revenue Service enough funds for EPA and the
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information reported to Treasury for 2007 was inaccurate. DFAS may act as EPA's agent or
contractor serving as EPA's payroll provider, but fiduciary responsibility to ensure that payroll is
accurately reported rests with EPA. EPA is ultimately responsible for its payroll, the payment of
income tax withheld, and both the employer and employee portions of Social Security and
Medicare taxes. Good management practices and contract administration techniques should be
used regardless of the contracting method.
Inadequate oversight, including not reconciling EPA's payroll with the amounts reported to
Treasury, could:
• increase the risks of fraud, waste, and mismanagement of funds;
• impact the financial statements (i.e., payroll expenses not being properly stated); and
• affect EPA's ability to effectively monitor budget execution.
We believe oversight of DFAS' payroll reconciliation activities could lead to earlier detection of
differences between amounts reported to Treasury and EPA's general ledger. Because EPA does
not reconcile payroll records to DFAS' quarterly 941 submissions and the annual W-3, EPA has
no assurance that EPA's payroll and tax liabilities reported to the Treasury were accurate and
properly reflected in EPA's general ledger. EPA has expressed a willingness to perform the
reconciliations with OIG and DFAS assistance.
Recommendations
We recommend that the Office of the Chief Financial Officer:
1. Establish better oversight for payroll support services by:
a. Performing quarterly Form 941 reconciliations of payroll amounts recorded in
EPA's general ledger to wage and tax amounts reported by DFAS to ensure the
payroll amounts are properly reported to Treasury and properly recorded in EPA's
general ledger.
b. Reconciling the annual Form W-3 and related Form 941s to ensure consistency of
amounts with EPA's general ledger.
2. Reconcile EPA's 2007 and 2008 wage and tax liabilities to amounts reported by DFAS
on the quarterly Form 941s and the 2007 Form W-3, and ensure that any differences have
been resolved by corrected Forms 941s and W-3, including the posting of amounts in
EPA's general ledger.
Agency Comments and OIG Evaluation
The Agency did not agree with our findings or recommendations. The Agency disagreed that the
2007 data was incorrect by $337,000 and instead stated the difference was $2,800 for one
employee. The Agency did agree to work with DFAS and OIG to jointly develop a quarterly
taxable wage reconciliation report.
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As previously stated, we compared the 2007 W-2 data provided by DFAS to the quarterly
Form 941s and found a difference of $337,000 in taxes. This amount included not only federal
withholdings, but also Social Security and Medicare withholding amounts. The Agency's
amount of $2,800 reflects only a portion of the difference we found. The Agency did not include
in its analysis Social Security, Medicare, or a reconciliation to DFAS's list of W-2s amounts.
The OIG is willing to assist the Agency in arriving at a workable solution to ensure that payroll
records are properly reconciled and reported in the Agency's general ledger.
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2 - Accrual Not Properly Calculated for Federal Unbilled Receivables
EPA did not properly calculate the third quarter fiscal 2008 accrual for federal unbilled receivables
(unbilled accrual). Using EPA's third quarter unbilled accrual spreadsheet, we calculated the
accrual to be $28,542,223, which is $4,021,487 less than the $32,563,710 amount entered in IFMS.
OMB Circular A-127, Policies and Standards for Financial Management Systems, requires
financial management systems to provide complete, reliable, consistent, timely, and useful financial
management information on federal government operations. EPA did not properly review the
accrual to identify problems within the accrual calculation. As a result, the $4 million error led to a
misstatement of the related assets and revenue in the third quarter financial statements. The Agency
made the appropriate adjustments in the fourth quarter.
The following problems led to the inaccuracy of the third quarter unbilled accrual calculation:
• Site identification numbers were positioned in the wrong column (expenditure column)
on some lines of accounting.
• The formula used to summarize the accrual total was not mathematically correct because
it did not include all lines of accounting.
• The accrual amounts for each line were not summed correctly using the accrual
methodology (cumulative expenses, less billed amount, less stand alone collections, plus
accrued liabilities, equals unbilled accrual).
• Data on some accounting lines was misaligned. Difficulties in converting from Financial
Data Warehouse, to text, and then to Excel, and problems with sorting the spreadsheet
data may have contributed to the misalignment.
• Accrual calculations for some individual organization codes included credit balances
where the billed amount was greater than the expenses resulting in credit accrual balances.
Had EPA properly reviewed the accrual, it could have identified the problems within the accrual
calculation before entry of the third quarter unbilled accrual into IFMS.
Recommendation
3. We recommend that the Office of the Chief Financial Officer implement a review process
to verify the accuracy and reasonableness of each quarterly unbilled accrual before it is
entered into IFMS. Steps should include:
(a) Verifying that column amounts are properly calculated.
(b) Ensuring that the unbilled accrual column totals properly.
(c) Verifying that all data elements and fields are properly captured and aligned when
converting data from one application (e.g., text) to another (e.g., Excel).
(d) Researching those lines of accounting with unbilled accrual credit balances to determine
if the credit amounts should be excluded from the overall unbilled accrual calculation.
(e) Documenting evidence of the items reviewed.
Agency Comments and OIG Evaluation
The Agency agreed with our findings and recommendation.
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3 - EPA Needs to Reconcile Superfund State Contract Funds and
Credits in the General Ledger to Subsidiary Accounts
EPA's Superfund State Contract (SSC) credits and unearned revenue did not agree with
supporting spreadsheets by significant amounts. The credits differed from supporting
spreadsheets by $5,383,760, and we found multiple errors in the unearned revenue spreadsheets.
Guidance from EPA's Office of Financial Management requires a quarterly calculation and
reconciliation of the SSC spreadsheets to the general ledger. However, CFC finance personnel
did not reconcile the spreadsheets to the general ledger because they were not familiar with the
process, and they were not aware they needed to do the reconciliation. As a result, CFC could
not ensure the accuracy of the SSC credit and unearned revenue general ledger accounts or the
amount reported in the financial statements, which totaled approximately $14 million and $44
million, respectively, as of September 30, 2008.
Each region inputs its State credits in the SSC spreadsheet. The credits on the spreadsheet
totaled $19,717,360. The combination of the SSC general ledger accounts totaled $14,333,600.
CFC has not yet found the reason for the $5,383,760 variance.
When EPA assumes the lead for a Superfund site remedial action in a State, the SSC clarifies
EPA's and the State's responsibilities to complete the remedial action. EPA records a liability
(unearned revenue) when billing a State for its share of the estimated site costs. EPA recognizes
earned revenue as costs are incurred on the site.
CFC did not properly reconcile the calculated unearned revenue from SSCs to the general ledger.
Several factors contributed to the difficulty in completing the reconciliation:
• CFC prepared the fourth quarter SSC calculation spreadsheet with data recorded as of
August 31, 2008, instead of September 30, 2008 as required.
• The OIG identified an $879,484 variance between the amount of reimbursable expenses
in EPA Fund 5R1/TR1 included in the SSC calculation spreadsheet and those recorded in
the general ledger. However, CFC has not made corrections for the variances.
• CFC did not reconcile the billings from the SSC spreadsheet to the billings for SSCs
recorded in the general ledger.
The general ledger activity for SSC activity may include invalid transactions. We identified at
least $5.8 million in the general ledger in older EPA funds that could relate to billings that were
not collected or payments that were not billed, or may not be related to SSCs and thus distort the
general ledger balance.
According to Comptroller Policy Announcement No. 99-01, Recording and Tracking Work
Performed- Superfund State Credits, all State credits must be approved by the responsible
Financial Management Office and all State credits are subject to verification by audit by the
OIG. By accurately tracking and recording all approved credits site-specifically, the Agency is
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able to track the status of credit balances and accurately record the credit balances available in
the financial statements.
The Monthly/Quarterly Adjustment Guidance, issued on February 23, 2004, by OCFO's Office
of Financial Management (OFM), requires a quarterly review and reconciliation to verify the
SSC calculation spreadsheet detail totals to IFMS. The guidance also requires the fourth quarter
SSC revenue accrual to capture SSC agreements, billings, expenditures, and credits as of
September 30.
The Chief Financial Officers Act requires the Agency's Chief Financial Officer to develop and
maintain an integrated agency accounting and financial management system, including financial
reporting and internal controls, that provides for complete, reliable, consistent, and timely
information. EPA should have adequate internal controls to ensure that it performs annual
reconciliations of the SSC unearned revenue accounts. Without performing a proper
reconciliation, CFC could not ensure the accuracy of the SSC unearned revenue accounts. The
Agency also identified Superfund State Cost Shares as a significant deficiency during its review
of internal controls over financial reporting.
Recommendations
We recommend that the Office of the Chief Financial Officer:
4. Complete quarterly reconciliations of the SSC credits and unearned revenue to the
general ledger according to OFM guidance.
5. Research transactions in older funds, and eliminate invalid transactions.
6. Confer with regions to verify the regions' manual entries to the SSC spreadsheet agree
with the supporting documentation by site.
Agency Comments and OIG Evaluation
The Agency agreed with our findings and recommendations.
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4 - EPA's Review of Unliquidated Obligations for Interagency
Agreements and Headquarters-Funded Grants Was Incomplete
EPA's OGD review of unliquidated obligations for inactive Interagency Agreements and
Headquarters-funded regional grants was incomplete. OGD did not review all Interagency
Agreements and Headquarters-funded regional grants in the inactive obligations reports provided
by OCFO's OFM. Federal and Agency guidance require unliquidated obligations to be reviewed
annually. However, OGD did not follow Agency guidance and use the inactive Interagency
Agreements unliquidated obligations report provided by OFM; instead, OGD generated its own
report based on the project period end date. In addition, OGD did not review Headquarters-funded
regional grants assigned to them because it believed these grants were the responsibility of EPA's
Regional Grant Management Offices. As a result, the Agency had no assurance that the
unliquidated obligations for Interagency Agreements and grants were accurate and represented
valid and viable obligations.
GAO's Policy and Procedures Manual for Guidance of Federal Agencies, Title 7, Chapter 3,
requires each agency to review its unliquidated obligations at least once a year to reasonably
assure itself that all transactions meeting the criteria of legally valid obligations have been
included. In addition, EPA Comptroller Policy Announcement No. 96-04, Review of
Unliquidated Obligations, requires all responsible parties to conduct complete annual reviews of
all current and prior year unliquidated obligations to ensure that all recorded obligations are still
valid and viable. EPA's OFM is responsible for providing the reports of inactive unliquidated
obligations, which form the basis on which the unliquidated obligation reviews are conducted.
According to Policy Announcement No. 96-04:
• An inactive obligation is one in which there has been no activity for 6 months or more
(180 days).
• A valid obligation is one for which appropriated funds are still available for the purpose
and time period specified, and for which an actual need still exists within the life of the
appropriation.
• A viable obligation is one for which there still exists the means to meet the need.
We found that the Agency's fiscal 2008 annual review of unliquidated obligations for inactive
Interagency Agreements and grants was incomplete. Specifically:
• OGD did not complete its review of all 121 unliquidated obligation balances of inactive
Interagency Agreements from the inactive Interagency Agreements unliquidated
obligations report provided by OFM, which was based on inactive obligations (i.e.,
obligations with no activity for 180 days or more). Instead, OGD generated its own
report consisting of 79 Interagency Agreements based on the Interagency Agreements'
project period end dates.
• Of the 79 Interagency Agreements reviewed by OGD, only 33 were also on the report
provided by OFM, meaning 88 Interagency Agreements (totaling $5.6 million) assigned
to OGD by OFM were not reviewed.
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• Of the 79 Interagency Agreements reviewed, OGD did not follow up timely with Project
Officers on the status of 17 inactive Interagency Agreements, totaling $1.2 million, to
determine their validity before certifying completion of its annual unliquidated
obligation review.
• OGD did not review 86 Headquarters-funded regional grants, totaling $5.2 million, from
the report provided by OFM. OGD did not review the Headquarters-funded regional
grants because it believed these grants were the responsibility of EPA's Regional Grant
Management Offices. However, OGD did not inform either the Regional Grant
Management Offices or OFM that it was not reviewing these grants, and it did not
reassign these grants to the Regional Grant Management Offices to review during the
annual unliquidated obligation review.
EPA's Procedures and Technical Guidance for FY 2008 Unliquidated Obligations Review
names the responsible officials for reviewing inactive obligations. The annual guidance provides
specific procedures for OGD to follow during its review of grants and Interagency Agreements.
The reviewing official and Project Officers must analyze and discuss unliquidated obligations
that have been inactive for 6 months or more (180 days) and identify those which are not valid or
viable. Inactive Headquarters unliquidated grant and Interagency Agreement obligations must be
reviewed and certified by a responsible official. Two certifications are required - the FMFIA
Assurance Letter, due July 31, 2008; and the Review of Unliquidated Obligations Year-end
Certification, due October 9, 2008. The FMFIA Assurance Letter must include certification that
a review of unliquidated balances in grants and Interagency Agreements has been completed, and
appropriate actions taken to deobligate unneeded funds.
By not completing reviews of all inactive Interagency Agreements and grants, EPA has no
assurance that the unliquidated obligation balances for Interagency Agreements and grants,
which include Headquarters-funded regional grants, are accurate and represent valid and viable
obligations. Further, inadequate unliquidated obligation reviews could impact the financial
statements by not identifying unneeded funds that should be deobligated.
Recommendations
We recommend that the Director, Office of Grants and Debarment:
7. Complete the review of inactive Interagency Agreements and Headquarters-funded
regional grants that were not reviewed during the annual unliquidated obligations review,
to determine whether they are valid and viable obligations that should remain open.
8. Follow up with Project Officers on the status of the inactive Interagency Agreements that
were not resolved during the annual unliquidated obligation review process to determine
their validity.
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We recommend that the Office of the Chief Financial Officer:
9. Have OFM work with OGD to determine how to identify Headquarters-funded regional
grants for assignment to the Regional Grant Management Offices as part of the annual
unliquidated obligation review process.
Agency Comments and OIG Evaluation
We acknowledge EPA's noteworthy accomplishments in liquidating dollars on those grants
where the period of performance expired. However, we also stress the importance of reviewing
timely all inactive unliquidated obligations, not just those whose period of performance has
expired. This could increase the likelihood to identify obligations, which are not valid and
viable, and whose funds can be deobligated and put to better use. We commend the Agency for
the immediate action taken to complete the review of all Headquarters-funded regional grants
and Interagency Agreements, including following up with Project Officers on the status of
Interagency Agreements that were not resolved during the fiscal 2008 annual review of
unliquidated obligations. Because OGD has addressed Recommendations 7 and 8, no further
response or action is required
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5 - IFMS Vendor Table Susceptible to Unauthorized Changes and
Changes Were Not Adequately Documented
The IFMS Vendor Table was susceptible to employees making changes to vendor payment
information without detection. Further, CFC did not retain supporting documentation for
numerous Vendor Table changes made for 13 different vendors in fiscal 2008. FMFIA specifies
that agency heads must establish internal controls that reasonably ensure that funds, property,
and other assets are safeguarded against waste, loss, unauthorized use, or misappropriation.
Further, GAO Standards for Internal Controls state that all transactions are to be clearly
documented, and that documentation should be properly managed, maintained, and readily
available for examination. The Vendor Table contains critical information (e.g., bank routing
and account numbers) used to distribute payments to vendors, including grantees. An individual
exploiting this system weakness could divert vendor payments to an unauthorized banking
account without a supervisor or management official being notified that the vendor payment
information changed. As such, having internal control processes to prevent or detect
unauthorized changes, as well as documentation to support changes, is essential to protecting
EPA funds from possible misappropriation.
Our review disclosed that personnel with change authorization privileges to the Vendor Table
could make changes to this critical vendor payment information. When personnel made these
changes, the system did not notify the funds-certifying officer (the person approving the payment
to a vendor) or the worker's supervisor that this information was updated. This can result in
wrong or illegitimate changes being made. Upon bringing this matter to OCFO attention during
our review, OCFO took immediate action to address this system control weakness. OCFO put
into practice an automated system control and related standard operating procedures that
automatically notify a worker's supervisor of the worker's changes to the IFMS Vendor Table.
The standard operating procedures assign responsibility to supervisors to verify that changes
made to the Vendor Table are valid and necessary. Because OCFO took appropriate actions
during the course of our review, no recommendations are being made regarding this issue.
Regarding documentation, in our examination of 45 sample Vendor Table changes, we found
that CFC had made changes for 13 vendors but did not have or maintain supporting
documentation for the changes. The remaining 32 sample items, made by other finance centers,
had proper supporting documentation. The 13 unsupported changes included changes in vendor
names, addresses, and banking information. In some cases, the changes were made based on a
phone call. We believe that CFC should have created or maintained documentation as an
internal control to support the changes to the system. CFC stated that several sample items did
not have hard copy documentation because the accountant typically made changes while in
contact with a traveler/vendor to notify them that the bank rejected their payment. In addition,
the accountant made changes at the time of a call with the traveler/vendor and no paperwork was
involved. Some changes may have had supporting documentation, but since the documentation
contained personal identifiable information the accountant destroyed it after input into IFMS.
We believe that even though OCFO's OFM implemented an automated system control and
related Standard Operating Procedures to ensure all changes to the Vendor Table are legitimate,
Finance Centers should maintain documentation for changes to the vendor table information.
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Failure to document changes to the IFMS Vendor Table may raise questions about the validity
and integrity of the related information contained in IFMS.
Recommendation
10. We recommend that the Director, Cincinnati Finance Center, implement and maintain a
process to ensure that changes to IFMS Vendor Table information have supporting
documentation as an internal control and audit trail to ensure that vendor information is
verifiable.
Agency Comments and OIG Evaluation
The Agency agreed with our findings and has already implemented the recommendation. The
Agency indicated the finance centers no longer accept changes to a vendor's information over
the telephone, and now requires and maintains written documentation for all revisions.
Regarding the Vendor Table being susceptible to unauthorized changes, OCFO indicated that it
took further actions to review a sample of changes made to the vendor table between October
2007 and when OCFO put the new procedures in place, to ensure all Vendor Table changes are
valid and necessary. We believe the automated system control and related standard operating
procedures address the identified system control weakness. Because the Agency has already
implemented our recommendation, no further action or response is required.
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6 - Improvement Needed in Monitoring Superfund
Special Account Balances
CFC did not adequately monitor Superfund Special Account balances. EPA's OFM policy
requires CFC to track all Special Account transactions and balances. Because CFC did not
adequately monitor the financial condition of special accounts, we found $1,370,087 in special
account drawdowns recorded in excess of the balance of interest earned plus principal for some
sites.
Superfund authorizes EPA to retain and use funds received from Potentially Responsible Parties
in an agreement to carry out the response actions contemplated by those agreements. Interest
earned on Special Account balances accrues directly to the Special Account and may be used for
the response action at the site for which the Special Account was established. Interest earned by
a Special Account is used after the principal has been fully expended.
Resources Management Directives System, Chapter 15, Financial Management of Special
Accounts, requires CFC to monitor the cumulative status of special accounts receipts, accrued
interest, disbursements, unliquidated obligations, and available balances. However, CFC did not
adequately monitor the account balances in the Special Accounts Database. We identified
$1,370,087 in interest drawdowns recorded in IFMS that exceeded a site's balance of interest
earned, receipts, and disbursements in the Special Accounts Database.
The Chief Financial Officers Act requires the Agency's Chief Financial Officer to develop and
maintain an integrated agency accounting and financial management system, including financial
reporting and internal controls, that provides for complete, reliable, consistent, and timely
information. EPA should have adequate internal controls to ensure the accuracy of the Special
Account transactions and balances. Without verifying the accuracy of the Special Account
balances and interest drawdowns, CFC could not ensure the accuracy of the Special Account
Interest amount and could unintentionally use funds that were intended for use on other sites.
Recommendation
11. We recommend that Office of the Chief Financial Officer implement controls to monitor
and ensure the accuracy of Special Account balances and interest amounts recorded in
IFMS.
Agency Comments and OIG Evaluation
The Agency agreed with our findings and recommendation. The Agency corrected the
$1.3 million in overstated interest for the fiscal 2008 financial statements.
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7 - Lack of System Implementation Process Contributed to
Financial Applications Not Complying with Requirements
Ongoing instances of financial applications noncompliance with federal and EPA system
requirements persist at EPA finance centers. Reviews at EPA's three main finance centers
disclosed that financial applications were placed into operation without required security controls
implemented, key security documents developed, or the systems assessed for compliance with
Federal Financial Management System Requirements (FFMSR). OMB stresses the importance
of these required security tasks and documents because they provide management with needed
information to plan, budget, and put into service risk mitigation strategies. The deficiencies
occurred because OCFO system owners and project managers had not completed an internal
compliance review over this area and the senior information official had not put into place an
ongoing oversight process to ensure implemented applications comply with prescribed systems
requirements. Without such a process, EPA cannot reasonably assure that these same types of
problems will not persist.
OCFO indicated that it relies on EPA System Development Life Cycle Management policies and
procedures for ensuring an OCFO system complies with federal standards prior to putting the
system into service. As noted in Table 1, noncompliance with prescribed system requirements
continued to exist at each EPA finance center, even though a material weakness in this area was
disclosed during the fiscal 2007 audit cycle and other significant deficiencies were disclosed
previously.
Table 1: Summary of Financial Application Weaknesses at EPA Finance Centers
Finance Center
Las Vegas
Reporting
Period
2008
Cincinnati
Research Triangle Park
Source: OIG data analysis
2007
2004
Weakness Identified
Finance center internal review disclosed system
lacked a current security plan. System was not
assessed for compliance with FFMSR. The finance
center created Plans of Action and Milestones to
correct the weaknesses. (Significant Deficiency)
Systems lacked contingency and security plans,
authorization to operate, continuous monitoring, and
assessment for compliance with FFMSR. Server
room lacked physical security and environmental
controls. (Material Weakness)
Systems lacked contingency and security plans,
authorization to operate, continuous monitoring, patch
management processes, and assessment for
compliance with FFMSR. (Significant Deficiency)
Our research disclosed that within the past 5 years, OCFO only had one internal compliance
review of this area, which OCFO started in March 2008 and plans to complete in December
2008. However, OCFO could not provide us with a formal approved plan that outlines how the
review will be conducted, what tasks will be reviewed, or how the tasks will be reviewed.
Further, discussions with OCFO representatives disclosed that OCFO does not have an ongoing
oversight process to ensure that OCFO financial systems comply with all federal and EPA
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system requirements prior to putting a system into production or that they maintain compliance
throughout the system's product life cycle.
Subsequent to audit field work, OCFO indicated a planned reorganization would create the
Office of Technology Solutions, a central accountable unit over most of OCFO's financial
management systems. Management indicated that until the reorganization is finalized, the
functions for the unit would be included within the Office of Enterprise, Technology, and
Innovation. As such, we believe that OCFO should take additional steps to formally appoint
system development responsibilities to the Office of Enterprise, Technology, and Innovation and
limit which other OCFO organizational elements can perform system development duties. This
would help OCFO start to place more structure and consistency of compliance over its system
development activities.
Recommendations
We recommend that the Office of the Chief Financial Officer:
12. Complete a review of OCFO financial systems compliance with prescribed federal and
EPA system requirements and document the results.
13. Create and put into practice formal standard operating procedures to ensure that all
current and future financial management systems meet all federal and EPA system
requirements prior to being put into service and continue to meet these requirements
throughout their lifecycle.
14. Develop and implement a formal oversight process to ensure that all current and future
financial management systems meet all federal and EPA system requirements prior to
being put into service and continue to meet these requirements throughout their lifecycle.
The oversight process should be documented as a formal OCFO policy, assign
responsibility to Office of Program Management staff for conducting oversight reviews at
least annually, outline standards to be followed, and specify when the oversight process
will be reviewed to ensure that it is effective and achieving the desired results.
15. Formally assign the Office of Enterprise, Technology, and Innovation the specific
responsibilities for developing, implementing, and maintaining financial systems until the
Office of Technology Solutions is formed.
16. Formally prohibit any other organizational element within the OCFO from developing,
implementing, or maintaining OCFO financial or mixed financial systems.
Agency Comments and OIG Evaluation
OCFO generally agreed with our findings and recommendations and indicated that management
has approved a comprehensive list of areas to evaluate for compliance with systems
requirements. OCFO did not agree that the underlying cause of this weakness is due to the lack
of management reviews. We believe that compliance reviews are an integral part of a
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management control system that (1) informs management of areas that require more emphasis
and (2) creates a mechanism for holding personnel accountable for meeting prescribed
requirements. Although OCFO was aware of system compliance issues during previous audit
cycles, current audit work disclosed that OFCO did not complete a review to provide
management the necessary information to hold OCFO personnel accountable for meeting
requirements. Therefore, until management implements its review processes, OCFO will
continue to experience difficulties in ensuring that developed financial systems comply with
federal requirements.
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8 - EPA Did Not Properly Account for Capitalized Software and
Related Accumulated Depreciation
EPA did not properly account for Capitalized Software and the related depreciation, resulting in
misstatements of Capitalized Software (net of accumulated depreciation) and depreciation
expense. EPA accumulates software development costs until the software is placed into service.
For financial statement reporting purposes, accumulated software development costs are reported
on the same line as Capitalized Software costs. EPA policy states that capitalized software is
depreciated beginning when the software is placed into service. During fiscal 2008, EPA had
accumulated software development costs of $212 million, of which $78 million was for software
put into service in fiscal 2008. Of the $78 million, $61 million should have been placed in
service in fiscal 2007 or earlier. We found that the Office of Environmental Information does
not have effective controls to determine when capitalized software is moved from the
development phase into service. As a result, depreciation expense for fiscal years 2007 and prior
were understated by amounts ranging from less than $1 million to over $5 million a year. The
impact for correcting the previous year's depreciation results in an overstatement of fiscal 2008
depreciation expense by $26 million.
EPA amortizes capitalized software using the straight-line method over the asset's useful life.
Depreciation of capitalized software begins the day the software is moved from the development
stage to production. The Office of Environmental Information maintains information on Agency
software in its Registry of EPA Applications and Databases (READ). Information technology
system owners are responsible for updating READ. System owners updated READ in April
2008 and moved $48 million of software development costs into service. OCFO inadvertently
used the software acquisition date as the starting point for accumulating depreciation instead of
the date the software was placed into services. We found that $31 million of the $48 million
should have been placed in service prior to fiscal 2008. After bringing the misstatement to the
OCFO's attention, OCFO examined the remaining software development costs and identified an
additional $30 million that should have been placed in service. Of the $30 million identified by
OCFO, $26 million should have been placed in service prior to fiscal 2008. OCFO worked with
individual system owners to determine the proper capitalized software in service dates. The
OCFO properly adjusted the 2008 financial statements to reflect the net book value of
Capitalized Software.
Recommendations
We recommend that:
17. The Assistant Administrator, Office of Environmental Information, direct staff to develop
and implement a control process that will accurately and timely update the program and
regional records in READ.
18. The Office of the Chief Financial Officer use the READ production date as the date
software was placed in service, correct the date placed in service in the fixed assets
system, and implement internal controls to ensure the accuracy of its data entry.
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Agency Comments and OIG Evaluation
The Agency agreed with our findings and recommendations.
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Attachment 2
Compliance with Laws and Regulations
Table of Contents
9 - EPA's Asbestos Loan Program Violated the Anti-Deficiency Act 30
10 - EPA Violated the Prompt Payment Act by Not Paying
Telecommunications Invoices Promptly 32
11 - EPA Should Continue Efforts to Reconcile Intragovernmental Transactions 34
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9 - EPA's Asbestos Loan Program Violated
the Anti-Deficiency Act
EPA violated the Anti-Deficiency Act when it recorded the upward subsidy re-estimate for the
Asbestos Loan Program without an approved apportionment letter from OMB. According to the
Anti-Deficiency Act, "an officer or employee of the United States Government may not make or
authorize an expenditure or obligation exceeding an amount available in an appropriation or fund
for the expenditure or obligation." OMB Circular A-l 1, Section 185.17, states that an upward
reestimate needs to be apportioned immediately after the end of each fiscal year as long as any
loans are outstanding, unless a different plan is approved by OMB. OCFO's Office of Budget
authorized $32,530 to be entered into IFMS by the Las Vegas Finance Center (LVFC) without
the required apportionment letter. OCFO's Reporting and Analysis Staff notified LVFC prior to
the fiscal year end that an apportionment letter would be needed. OCFO's Office of Budget did
not get the apportionment letter or an exemption from OMB prior to recording the upward
subsidy estimate in IFMS. As a result, the Agency incurred $32,530 before the amount was
authorized and available. By obligating funds in excess of appropriated amounts, the Agency
created an anti-deficiency situation in violation of the Anti-Deficiency Act.
The Credit Reform Act of 1990 and federal accounting standards require that the subsidy cost
allowance for direct loans be re-estimated each year as of the date of the financial statements.
The subsidy cost allowance is the estimated long-term cost to the government of a loan
calculated on a net present value basis, excluding administrative costs. Any increase or decrease
in the subsidy cost allowance is recognized as a subsidy expense (or a reduction in subsidy
expense). The amount of a re-estimate for a particular fiscal year is to be recognized in its
succeeding fiscal year (e.g., the fiscal 2007 re-estimate is to be recognized in fiscal 2008). The
LVFC starts the re-estimate process by computing the re-estimate and then notifying the Office
of Budget of the amount needed for the apportionment. The Office of Budget prepares and sends
the apportionment letter to OMB and, upon receipt of OMB's approval, enters program codes
into IFMS that allow LVFC to enter the re-estimate. The Office of Budget stated that OMB
needs at least 1 month to prepare the apportionment letter.
LVFC did not initiate the fiscal 2007 re-estimate recognition until September 29, 2008, one day
before the end of the fiscal year. This did not leave enough time for OMB to prepare the
required apportionment letter. LVFC asked the Office of Budget to enter the authorization codes
even though OMB had not yet issued the apportionment letter. The Office of Budget then
entered the authorization codes and LVFC entered the re-estimate recognition. According to
OMB, "reestimates of the Asbestos Loan balance are not exempt from submitting an
apportionment as per OMB Circular A-l 1, Section 120.38. OMB made a conscious decision that
the Asbestos Loan Program would not be included under the automatic apportionment waiver.
OMB believes EPA needs to submit a reapportionment request to authorize this reestimate and
not back date it..."
According to OMB Circular A-l 1, Preparation, Submission and Execution of the Budget, the
incurring of obligations in excess of apportioned budgetary resources in a revolving fund is a
violation of the Anti-Deficiency Act, whether or not a fund has unapportioned budgetary
resources or non-budgetary assets greater than the amount apportioned. Further, once it is
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determined that there has been a violation of Title 31, U.S. Code, Section 1341(a), 1342, or
1517(a), the agency head "shall report immediately to the President and Congress all relevant
facts and a statement of actions taken."
Recommendations
We recommend that the EPA Administrator:
19. Report the Anti-Deficiency Act violation to the President through the OMB Director,
and to Congress and the Comptroller General as required.
We recommend that the Office of the Chief Financial Officer:
20. Obtain an apportionment letter for the $32,530 upward subsidy re-estimate from OMB.
21. Instruct the Program Offices and Office of Budget to develop operating procedures
defining roles and responsibilities for completing the estimating process to ensure EPA
has the proper authorization before entering information into IFMS.
22. Instruct the Office of Budget, LVFC, and Reporting and Analysis Staff to establish
milestones to ensure the subsidy re-estimate is completed and apportionment requested
from OMB at least 30 days prior to the end of the fiscal year.
Agency Comments and OIG Evaluation
The Agency does not agree that an Anti-Deficiency Act violation took place. The Agency
believes that the Federal Credit Reform Act of 1990 and OMB Circular A-l 1 allow for
permanent indefinite authority and automatic apportionment of re-estimates in credit financing
accounts.
The Agency is conducting an internal investigation and working with OMB to determine
whether a violation has occurred. Feedback from these sources will influence the Agency's
future course of action. The Agency did agree that proper procedures were not followed and
additional controls and training will be initiated.
We maintain that EPA violated the Anti-Deficiency Act when it recorded the upward subsidy
re-estimate for the Asbestos Loan Program without an approved apportionment letter from
OMB. In our opinion, re-estimates of the Asbestos Loan Program balance are not exempt from
submitting an apportionment as per OMB Circular A-l 1, Section 120.38, and that the Asbestos
Loan Program is not included in the automatic apportionment waiver.
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10 - EPA Violated the Prompt Payment Act
by Not Paying Telecommunications Invoices Promptly
EPA violated the Prompt Payment Act by not paying 20 fiscal 2008 invoices timely. EPA's
Contracts Management Manual requires that obligating documents be provided to the finance
center timely. The Prompt Payment Act requires payment of a properly received invoice within
the payment terms of the invoice and/or contract. If invoices are not paid by the due date,
interest payments are to be paid starting on the day after the due date and calculated through the
payment date. According to the RTF Finance Center and OTOP, several factors caused the late
payments: (1) RTF Finance Center returned 3 invoices in April 2008 because OTOP did not
process funding allocations; (2) OTOP did not allocate funds and timely forward obligating
documents for the 20 invoices to the RTF Finance Center; (3) the Project Officer did not
promptly approve and forward the 20 invoices for payment; and (4) RTF Finance Center did not
follow up with OTOP after it returned the invoices to determine when they should be paid. The
late payment of these 20 invoices, totaling $2,469,147, resulted in an estimated interest charge of
$42,509 due to the vendor.
OTOP acknowledged that the invoices should have been paid timely. OTOP did not submit the
obligating documents timely due to OTOP's allocation processes and priorities. OTOP allocates
funds to Working Capital Fund contracts as revenues are earned. The EPA Contracts
Management Manual requires obligating documents be provided to the finance center by the end
of the month in which expenses are incurred. OTOP did not process the obligating documents
for all 20 fiscal 2008 invoices according to policy. Our testing found that the RTF Finance
Center did not pay 11 out of the 20 payments until fiscal 2009.
The Prompt Payment Act states, "For the purpose of determining a payment due date and the
date on which interest will begin to accrue if a payment is late, an invoice shall be deemed to be
received ... for invoices electronically transmitted, the date a readable transmission is received."
RTF Finance Center did not pay these invoices for up to 8 months even though OTOP had them
electronically available on the bill date. That was a violation of the Prompt Payment Act, and
these invoices accrued interest penalties.
The RTF Finance Center does not consider invoices as being subject to the Prompt Payment Act
until they have reviewed and processed the invoices. Because the invoices were sent to the
Project Officer first and not the Finance Center, RTF Finance Center did not accrue or pay
interest because it did not believe the invoices met this criteria and therefore were not late. A
verbal agreement existed between the Working Capital Fund and the RTF Finance Center that
the invoices would first be sent to the Project Officer. RTF Finance Center management
acknowledged they made this agreement because the invoices could be up to 3,000 pages of
detailed billing information.
While the RTF Finance Center did not originally receive the invoices, the Prompt Payment Act
requires the Agency to calculate and pay interest on invoices paid late unless the invoices are
returned for not being proper. The Prompt Payment Act states, "When an invoice is determined
to be improper, the agency shall return the invoice as soon as practicable after receipt, but no
later than 7 days after receipt." None of the invoices were returned to the vendor or in any way
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marked as improper. In addition, there was no correspondence or documentation to the vendor
that the invoices were not sent to the correct address. By entering into a verbal agreement that
the invoice would be provided to the project officer, the Agency is causing harm to the
contractor when payments are not made timely. There is added harm because the verbal
agreement would also deprive the contractor of interest even though the contractor complied
with the Agency's directions on to who to direct the invoice.
After the Agency paid the aforementioned invoices, we noted an $18,000 overpayment on one
invoice due to a transposition error. After bringing this to the Agency's attention, EPA set up a
receivable for the difference.
Recommendations
We recommend that the Director, Office of Technology Operations and Planning:
23. Develop a control process that will timely allocate funding for all OTOP contracts.
24. Direct all OTOP Project Officers to promptly approve each invoice when received or
return the invoice to the vendor within 7 days of receipt through the finance center,
documenting why the invoice was deemed improper.
We recommend that the Director, RTF Finance Center:
25. Calculate and pay the interest due resulting from the late payments.
26. Direct all finance center personnel to review and obtain an understanding of the Prompt
Payment Act. RTF should establish a process to follow up on any invoices returned to
program offices for whatever reason so that issues on nonpaid invoices can be resolved
promptly.
Agency Comments and OIG Evaluation
The Agency believes that only 3 invoices were late and agreed to pay interest on those invoices.
The Agency does not agree that the other 17 invoices were late because the vendor did not
submit the invoices to the address in the contract. The Agency agreed to forward the matter to
the Office of General Counsel for its determination.
Our position is that the Agency violated the terms of the contract by instructing the contractors to
provide the invoices directly to the Project Officer. By following those directions, payments to
the contractors were significantly delayed. The Agency is further compounding the issue by
denying interest when the delay was caused by the Agency's actions.
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11 - EPA Should Continue Effort to Reconcile
Intragovernmental Transactions
As of September 30, 2008, EPA reported $192 million in unreconciled differences with 46
trading partners for intragovernmental transactions. Of that amount, $55 million was reported by
Treasury to be material differences. The remaining $137 million represented amounts reported
for non-verifying agencies, accruals, timing differences, and other agencies whose differences
were not reported as material. According to the Treasury Financial Manual, verifying agencies
are those that are required to report in the Governmentwide Financial Report System. These
include the 24 major Chief Financial Officers Act agencies and 11 other agencies material to the
Financial Report of the United States Government. Treasury policy requires verifying agencies
to confirm and reconcile intragovernmental transactions with their trading partners. Based on
our review of correspondence with other agencies, EPA had difficulty reconciling these
differences primarily because of differing accounting treatments and accrual methodologies
between federal agencies. EPA's inability to reconcile its intragovernmental transactions
contributes to a long-standing government-wide problem that hinders the ability of GAO to
render an opinion on the Consolidated Financial Statements of the Federal Government.
Treasury's fiscal 2008 fourth quarter Intragovernmental Activity Detail Report and Material
Differences Report showed the following material differences for EPA:
Table 2: Material Differences for Intragovernmental Transactions
Federal Agency
General Services Administration
General Services Administration
Department of Homeland Security
Department of Energy
Total
Difference
$9,237,753
$26,340,506
$12,216,493
$7,662,072
$55,456,824
Category of Difference
Advances to/From Other Agencies
Buy/Sell Costs/Revenue
Buy/Sell Costs/Revenue
Advances to/From Other Agencies
Source: OIG analysis
While the Agency has actively worked with its trading partners to reduce differences,
$55,456,824 in material differences continued to exist. Many of the differences resulted from
different accounting treatments and accrual methodologies used by EPA's trading partners.
According to EPA, other situations that contributed to the differences included (1) timing
differences in accruals with the General Services Administration, (2) difference in advances with
the Department of Homeland Security, and (3) differences in advances accounting with the
Department of Energy.
During fiscal 2008, EPA made significant efforts to reconcile its intragovernmental activity on a
quarterly basis with its partners and has been able to identify the causes of several differences.
However, unreconciled differences persist. According to GAO's Report on the Fiscal Year 2007
U.S. Government Financial Statements, the federal government's inability to adequately account
for and reconcile intragovernmental activity and balances between federal agencies is a major
impediment preventing GAO from rendering an opinion on the federal government's accrual
basis consolidated financial statements.
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Recommendation
We recommend that the Office of the Chief Financial Officer, though its Office of Financial
Services, continue to:
27. Work with other federal trading partners to help reconcile the Agency's
intragovernmental transactions and make appropriate adjustments to comply with federal
financial reporting requirements.
Agency Comments and OIG Evaluation
The Agency agreed with our findings and recommendation.
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Attachment 3
Status of Prior
Audit Report Recommendations
EPA's position is that "audit follow-up is an integral part of good management," and "corrective
action taken by management on resolved findings and recommendations is essential to improving
the effectiveness and efficiency of Government operations." The Chief Financial Officer is the
Agency Follow-up Official and is responsible for ensuring that corrective actions are
implemented. Beginning in the fourth quarter 2006 and continuing in subsequent second and
fourth quarters, OCFO includes a metric on audit follow-up actions in the Agency EPAStat
report. OCFO management regularly reviews these measures during OCFO's monthly Budget
and Performance Review meetings. In fiscal 2008, the Agency continued to strengthen its audit
follow-up process by developing a quality assurance plan to improve data quality in EPA's
Management Audit Tracking System.
The Agency has continued to make progress in completing corrective actions from prior years.
The status of issues from prior financial statement audits and other audits whose findings and
recommendations could have a material effect on financial statements and have corrective
actions in process are listed in the following tables.
Table 3: Significant Deficiencies - Corrective Actions in Process
Automated Application Processing Controls for IFMS
EPA has taken steps toward correcting this long-standing open issue. EPA awarded a new contract
to replace IFMS. The proposal calls for two releases over the next two-and-a-half 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.
• EPA Needs to Strengthen Financial Database Security Oversight and Monitor Compliance
EPA did not complete all of the corrective actions related to reviewing the effectiveness of its
follow-up procedures. EPA plans to complete this recommendation by the second quarter of fiscal
2009. We will plan to conduct follow-up during next year's audit.
Key Applications Do Not Meet Federal and EPA Information Security Requirements
The Agency has made significant progress in completing the agreed-to corrective actions but it still
needs to finalize the independent reviews and updated security plans. In addition, the Agency needs
to test the approved contingency plans.
Access and Security Practices Over Critical Information Technology Assets Need
Improvement
EPA established controls over visitor and general access to the server room and enhanced security
and environmental monitoring with improved technology. Additionally, the Agency developed
procedures to enhance its security practices. However, EPA needs to ensure these procedures are
fully implemented. In addition, EPA needs to complete an annual review of these procedures to
ensure they are effective and consistent with federal guidance.
EPA Needs to Improve Controls Over the IFMS Suspense Table
EPA completed all the recommendations made in the fiscal 2007 financial statement audit report.
However, we will follow up during the next fiscal year's Financial Statement Audit to test that the new
procedures enforce compliance with the established policy.
Source: OIG analysis
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Table 4: Compliance with Laws and Regulations - Corrective Actions in Process
EPA Needs to Improve Reconciliation of Differences with Trading Partners:
During fiscal 2008, EPA made significant efforts to reconcile its intragovernmental activity on a
quarterly basis with its partners and has been able to identify the causes of several differences.
However, as described in Attachment 2, Compliance with Laws and Regulations, there remain
significant amounts not reconciled with trading partners.
Source: OIG analysis
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Attachment 4
Status of Current Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed Agreed To
Amount Amount
13 Establish better oversight for payroll support
services by:
a. Performing quarterly Form 941 reconciliations
of payroll amounts recorded in EPA's general
ledger to wage and tax amounts reported by
DFAS to ensure the payroll amounts are
properly reported to Treasury and properly
recorded in EPA's general ledger.
b. Reconciling the annual Form W-3 and related
Form 941 s to ensure consistency of amounts
with EPA's general ledger.
13 Reconcile EPA's 2007 and 2008 wage and tax
liabilities to amounts reported by DFAS on the
quarterly Form 941s and the 2007 Form W-3, and
ensure that any differences have been resolved by
corrected Forms 941s and W-3, including the
posting of amounts in EPA's general ledger.
15 Implement a review process to verify the accuracy
and reasonableness of each quarterly unbilled
accrual before it is entered into IFMS. Steps
should include:
(a) Verifying that column amounts are properly
calculated.
(b) Ensuring that the unbilled accrual column
totals properly.
(c) Verifying that all data elements and fields are
properly captured and aligned when
converting data from one application
(e.g., text) to another (e.g., Excel).
(d) Researching those lines of accounting with
unbilled accrual credit balances to determine
if the credit amounts should be excluded
from the overall unbilled accrual calculation.
(e) Documenting evidence of the items reviewed.
17 Complete quarterly reconciliations of the SSC
credits and unearned revenue to the general ledger
according to OFM guidance.
17
Research transactions in older funds, and eliminate
invalid transactions.
17 Confer with regions to verify the regions' manual
entries to the SSC spreadsheet agree with the
supporting documentation by site.
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
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RECOMMENDATIONS
Rec.
No.
7
Page
No.
19
Subject Status1
Complete the review of inactive Interagency C
Agreements and Headquarters-funded regional
grants that were not reviewed during the annual
unliquidated obligations review, to determine
whether they are valid and viable obligations that
should remain open.
Planned
Completion
Action Official Date
Director, Office of 11/12/08
Grants and Debarment
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Claimed Agreed To
Amount Amount
$1,110.5 $1,110.5
8 19 Follow up with Project Officers on the status of the
inactive interagency Agreements that were not
resolved during the annual unliquidated obligation
review process to determine their validity.
9 20 Have OFM work with OGD to determine how to
identify Headquarters-funded regional grants for
assignment to the Regional Grant Management
Offices as part of the annual unliquidated obligation
review process.
10 22 Implement and maintain a process to ensure that
changes to IFMS Vendor Table information have
supporting documentation as an internal control
and audit trail to ensure that vendor information is
verifiable.
11 23 Implement controls to monitor and ensure the
accuracy of Special Account balances and interest
amounts recorded in IFMS.
12 25 Complete a review of OCFO financial systems
compliance with prescribed federal and EPA
system requirements and document the results.
13 25 Create and put into practice formal standard
operating procedures to ensure that all current and
future financial management systems meet all
federal and EPA system requirements prior to
being put into service and continue to meet these
requirements throughout their lifecycle.
14 25 Develop and implement a formal oversight process
to ensure that all current and future financial
management systems meet all federal and EPA
system requirements prior to being put into service
and continue to meet these requirements
throughout their lifecycle. The oversight process
should be documented as a formal OCFO policy,
assign responsibility to Office of Program
Management staff for conducting oversight reviews
at least annually, outline standards to be followed,
and specify when the oversight process will be
reviewed to ensure that it is effective and achieving
the desired results.
15 25 Formally assign the Office of Enterprise,
Technology, and Innovation the specific
responsibilities for developing, implementing, and
maintaining financial systems until the Office of
Technology Solutions is formed.
Director, Office of
Grants and Debarment
Office of the
Chief Financial Officer
Director,
Cincinnati Finance Center
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
11/12/08
11/12/08
11/12/08
Office of the
Chief Financial Officer
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RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in $OOOs)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed Agreed To
Amount Amount
16 25 Formally prohibit any other organizational element
within the OCFO from developing, implementing, or
maintaining OCFO financial or mixed financial
systems.
17 27 Direct staff to develop and implement a control
process that will accurately and timely update the
program and regional records in READ.
18 27 Use the READ production date as the date
software was placed in service, correct the date
placed in service in the fixed assets system, and
implement internal controls to ensure the accuracy
of their data entry.
19 31 Report the Anti-Deficiency Act violation to the
President through the OMB Director, and to
Congress and the Comptroller General as required.
20 31 Obtain an apportionment letter for the $32,530
upward subsidy re-estimate from OMB.
21 31 Instruct the Program Offices and Office of Budget
to develop operating procedures defining roles and
responsibilities for completing the estimating
process to ensure EPA has the proper
authorization before entering information into IFMS.
22 31 Instruct the Office of Budget, LVFC, and Reporting
and Analysis Staff to establish milestones to
ensure the subsidy re-estimate is completed and
apportionment requested from OMB at least
30 days prior to the end of the fiscal year.
23 33 Develop a control process that will timely allocate
funding for all OTOP contracts.
24 33 Direct all OTOP Project Officers to promptly approve U
each invoice when received or return the invoice to
the vendor within 7 days of receipt through the
finance center, documenting why the invoice was
deemed improper.
25 33 Calculate and pay the interest due resulting from U
the late payments.
26 33 Direct all finance center personnel to review and U
obtain an understanding of the Prompt Payment
Act. RTP should establish a process to follow up
on any invoices returned to program offices for
whatever reason so that issues on nonpaid
invoices can be resolved promptly.
27 35 Through its Office of Financial Services, continue to 0
work with other federal trading partners to help
reconcile the Agency's intragovernmental
transactions and make appropriate adjustments to
comply with federal financial reporting requirements.
Office of the
Chief Financial Officer
Assistant Administrator,
Office of Environmental
Information
Office of the
Chief Financial Officer
EPA Administrator
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Director, Office of
Technology Operations
and Planning
Director, Office of
Technology Operations
and Planning
Director,
RTP Finance Center
Director,
RTP Finance Center
Office of the
Chief Financial Officer
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POTENTIAL MONETARY
RECOMMENDATIONS BENEFITS (in $OOOs)
Planned
Rec. Page Completion Claimed Agreed To
No. No. Subject Status1 Action Official Date Amount Amount
Other potential monetary benefits achieved based
on adjustments made as a result of our audit:
. Unrecorded Accounts Receivable $2,870.6 $2,870.6
. Reduction in Allocation Transfer Payable $19,877.7 $19,877.7
• Receivable Issued for Overpayment $18.0 $18.0
Total Potential Monetary Benefits $23,876.8 $23,876.8
1 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
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Appendix I
EPA's Fiscal 2008 and 2007
Consolidated Financial Statements
SECTION III
ANNUAL FINANCIAL
STATEMENTS
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Principal Financial Statements
Financial Statements
1. Consolidated Balance Sheet
2. Consolidated Statement of Net Cost
3. Consolidated Statement of Net Cost by Goal
4. Consolidating Statement of Changes in Net Position
5. Combined Statement of Budgetary Resources
6. Statement of Custodial Activity
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Fund Balance with Treasury (FBWT)
Note 3. Cash and Other Monetary Assets
Note 4. Investments
Note 5. Accounts Receivable
Note 6. Other Assets
Note 7. Loans Receivable, Net - Non-Federal
Note 8. Accounts Payable and Accrued Liabilities
Note 9. General Property, Plant and Equipment (PP& E)
Note 10. Debt Due to Treasury
Note 11. Stewardship Land
Note 12. Custodial Liability
Note 13. Other Liabilities
Note 14. Leases
Note 15. Pensions and Other Actuarial Liabilities
Note 16. Cashout Advances, Superfund
Note 17. Unexpended Appropriations - Other Funds
Note 18. Amounts Held by Treasury
Note 19. Commitments and Contingencies
Note 20. Earmarked Funds
Note 21. Exchange Revenues, Statement of Net Cost
Note 22. Intragovernmental Costs and Exchange Revenue
Note 23. Cost of Stewardship Land
Note 24 Environmental Cleanup Costs
Note 25. State Credits
Note 26. Preauthorized Mixed Funding Agreements
Note 27. Custodial Revenues and Accounts Receivable
Note 28. Statement of Budgetary Resources
Note 29. Recoveries and Resources Not Available, Statement of Budgetary Resources
Note 30. Unobligated Balances Available
Note 31. Undelivered Orders at the End of the Period
Note 32. Offsetting Receipts
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09-1-0026
Notes to Financial Statements (continued)
Note 33. Transfers-In and Out, Statement of Changes in Net Position
Note 34. Imputed Financing Sources
Note 35. Payroll and Benefits Payable
Note 36. Other Adjustments, Statement of Changes in Net Position
Note 37. Nonexchange Revenue, Statement of Changes in Net Position
Note 38. Adjustment for Allocation Transfers
Note 39. Reconciliation of Net Cost of Operations to Budget (formerly the
Statement of Financing)
Note 40. Other - Statement of Net Position
Required Supplementary Information (Unaudited)
1. Deferred Maintenance and Stewardship Land
2. Supplemental Statement of Budgetary Resources
Required Supplementary Stewardship Information (Unaudited)
Supplemental Information and Other Reporting Requirements (Unaudited)
Superfund Financial Statements and Related Notes
44
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09-1-0026
Environmental Protection Agency
Consolidated Balance Sheet
As of September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
Investments (Notes 4 and 18)
Accounts Receivable, Net (Note 5)
Other (Note 6)
Total Intragovernmental
Cash and Other Monetary Assets (Note 3)
Accounts Receivable, Net (Note 5)
Loans Receivable, Net - Non-Federal (Note 7)
Property, Plant & Equipment, Net (Note 9)
Other (Note 6)
Total Assets
Stewardship PP& E (Note 11 )
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities (Note 8)
Debt Due to Treasury (Note 10)
Custodial Liability (Note 12)
Other (Note 13)
Total Intragovernmental
9,605,356 $
6,174,828
34,636
107,433
15,922,253
10
349,739
17,088
814,253
3,655
17,106,998 S
FY 2007
10,466,600
5,753,061
57,039
81,069
16,357,769
10
359,302
23,161
809,873
4,574
17,554,689
80,655
13,158
47,951
109,377
251,141 $
122,207
16,156
39,369
98,360
276,092
Accounts Payable & Accrued Liabilities (Note 8)
Pensions & Other Actuarial Liabilities (Note 15)
Environmental Cleanup Costs (Note 24)
Cashout Advances, SuperrUnd (Note 16)
Commitments & Contingencies (Notes 19 and 24)
Payroll & Benefits Payable (Note 35)
Other (Note 13)
Total Liabilities
NET POSITION
Unexpended Appropriations - Other Funds (Note 17)
Cumulative Results of Operations - Earmarked Funds (Note 20)
Cumulative Results of Operation - Other Funds
Total Net Position
Total Liabilities and Net Position
713,595
44,615
19,411
286,630
44
232,958
115,648
1,664,042
8,674,711
6,212,479
555,766
15,442,956
912,000
39,786
18,214
190,269
205,198
113,739
1,755,298
9,350,591
5,886,227
562,573
15,799,391
17,106,998 S
17,554,689
The accompanying notes are an integral part of these financial statements.
45
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09-1-0026
Environmental Protection Agency
Consolidated Statement of Net Cost
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008
FY 2007
COSTS
Gross Costs (Note 22)
Less:
Earned Revenue (Notes 21, 22)
NET COST OF OPERATIONS (Note 22)
8,675,411 $
634,201
9,263,304
550,098
8,041,210 $
8,713,206
The accompanying notes are an integral part of these financial statements.
46
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09-1-0026
Environmental Protection Agency
Consolidated Statement of Net Cost by Goal
For the Period Ending September 30, 2008
(Dollars in Thousands)
Clean Air
Costs:
Intragovemmental $ 181,467
With the Public $ 816,336
Total Costs (Note 22) 997,803
Less:
Earned Revenue, Federal $ 18,360
Earned Revenue, non-Federal _$ 2,043
Total Earned Revenue
(Notes 21 and 22) 20,403
NET COST OF
OPERATIONS (Note 22) $ 977,400
Clean & Safe
Water
$ 162,679
$ 3,334,953
3,497,632
Land
Preservation &
Restoration
$ 347,011
$ 1,654,205
2,001,216
Healthy
Communities &
Ecosystems
Compliance &
Environmental
Stewardship
7,615 $ 73,829
2,841 $ 460,055
10,456
533,884
281,767
1,126,764
1,408,531
22,710
39,407
62,117
176,376
593,853
770,229
5,540
1,801
7,341
3,487,176 S 1,467,332 S 1,346,414
762,888
Costs:
Intragovemmental
With the Public
Total Costs (Note 22)
Less:
Earned Revenue, Federal
Earned Revenue, non-Federal
Total Earned Revenue
(Notes2land 22)
NET COST OF
OPERATIONS (Note 22)
Consolidated
Totals
$ 1,149,300
$ 7,526,111
8,675,411
$ 128,054
$ 506,147
634,201
S 8,041,210
The accompanying notes are an integral part of these financial statements.
47
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Environmental Protection Agency
Consolidated Statement of Net Cost by Goal
For the Period Ending September 30, 2007
(Dollars in Thousands)
09-1-0026
Costs:
Intragovernmental
With the Public
Total Costs (Note 22)
Less:
Earned Revenue, Federal
Earned Revenue, non-Federal
Total Earned Revenue (Notes 21
and 22)
NET COST OF OPERATIONS
(Note 22)
Clean Air
185,389
818,753
1,004,142
18,591
Land Healthy Compliance &
Clean & Safe Preservation Communities & Environmental
Water & Restoration Ecosystems Stewardship
180,571
3,868,428
396,786
1,607,952
4,048,999
2,004,738
13,278
453,999
275,068
1,144,793
182,101
603,463
1,419,861
785,564
15,594
2,997
11,016
2,262
101,036
352,963
18,450
38,902
5,613
1,265
57,352
6,878
985,551 S 4,035,721 S 1,550,739 S
1,362,509 S
778,686
Costs:
Intragovernmental
With the Public
Total Costs (Note 22)
Less:
Earned Revenue, Federal
Earned Revenue, non-Federal
Total Earned Revenue (Notes 21
and 22)
NET COST OF OPERATIONS
(Note 22)
Consolidated
Totals
$ 1,219,915
$ 8,043,389
$ 9,263,304
$ 151,709
$ 398,389
$ 550,098
S 8,713,206
The accompanying notes are an integral part of these financial statements.
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09-1-0026
Environmental Protection Agency
Consolidating Statement of Changes in Net Position
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 37)
Nonexchange Revenue - Other (Note 37)
Transfers In/Out (Note 33)
Trust Fund Appropriations
Other (Note 40)
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 33)
Imputed Financing Sources (Note 34)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 33)
Other Adjustments (Note 36)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
The accompanying notes are an integral part of these financial statements
FY2008
Earmarked
Funds
5,886,227
5,886,227 S
241,873
204,115
(18,190)
984,974
19,878
1,432,650 S
20,933
20,933 S
(1,127,331)
326,252
6,212,479 S
-
-
-
-
-
-
6,212,479 S
FY 2008 All
Other Funds
562,573
! 562,573 3
7,743,276
-
-
37,151
(984,974)
-
! 6,795,453 3
28
111,591
! 111,619 3
(6,913,879)
(6,807)
! 555,766 3
9,350,591
9,350,591
7,197,712
(7,875)
(122,441)
(7,743,276)
(675,880)
8,674,711
9,230,477 S
FY2008
Consolidated
Total
6,448,800
i 6,448,800
7,743,276
241,873
204,115
18,961
-
19,878
i 8,228,103
28
132,524
i 132,552
(8,041,210)
319,445
i 6,768,245
9,350,591
9,350,591
7,197,712
(7,875)
(122,441)
(7,743,276)
(675,880)
8,674,711
15,442,956
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09-1-0026
Environmental Protection Agency
Consolidating Statement of Changes in Net Position
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Adjustment:
Change in Accounting Principle (Note 38)
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 37)
Nonexchange Revenue - Other (Note 37)
Transfers In/Out (Note 33)
Trust Fund Appropriations
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 33)
Imputed Financing Sources (Note 34)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Other Adjustments (Note 36)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
The accompanying notes are an integral part of these financial statements
FY2007
Earmarked
Funds
5,533,025
20,900
5,553,925 $
258,986
252,148
(25,686)
1,040,371
1,525,819 $
39
21,868
21,907 $
(1,215,424)
332,302
5,886,227 $
-
-
5,886,227 S
FY2007 All
Other Funds
575,846
; 575,846 $
8,367,123
43,491
(1,040,371)
; 7,370,243 $
525
113,741
; 114,266 $
(7,497,782)
(13,273)
; 562,573 $
10,299,640
10,299,640
7,422,635
(4,561)
(8,367,123)
(949,049)
9,350,591
9,913,164 S
FY 2007
Consolidated
Total
6,108,871
20,900
6,129,771
8,367,123
258,986
252,148
17,805
8,896,062
564
135,609
136,173
(8,713,206)
319,029
6,448,800
10,299,640
10,299,640
7,422,635
(4,561)
(8,367,123)
(949,049)
9,350,591
15,799,391
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09-1-0026
Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1: $ 3,541,387 $ 3,247,087
Adjustment to Unobligated Balance (Alloc Transfer Agencies) (Note 38) -_ 15,527
Adjusted Subtotal 3,541,387 3,262,614
Recoveries of Prior Year Unpaid Obligations (Note 29) 281,117 387,621
Budgetary Authority:
Appropriation 7,268,236 7,495,028
Borrowing Authority 34 29
Spending Authority from Offsetting Collections
Earned:
Collected 708,430 640,354
Change in Receivables from Federal Sources (22,170) (72,546)
Change in Unfilled Customer Orders:
Advance Received 77,880 (34,934)
Without Advance from Federal Sources 59,780 (625)
Expenditure Transfers from Trusts Funds 37,151 43,491
Total Spending Authority from Offsetting Collections 861,071 575,740
Nonexpenditure Transfers, Net, Anticipated and Actual (Note 33) 1,387,967 1,344,610
Temporarily Not Available Pursuant to Public Law (Note 29) (6,366)
Permanently Not Available (Note 29) (125,526) (7,333)
Total Budgetary Resources (Note 28) $ 13,207,920 $ 13,058,309
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct $ 9,035,912 $ 9,027,170
Reimbursable 620,128 489,752
Total Obligations Incurred (Note 28) 9,656,040 9,516,922
Unobligated Balances:
Apportioned (Note 30) 3,204,800 3,274,344
Total Unobligated Balances 3,204,800 3,274,344
Unobligated Balances Not Available (Note 30) 347,080 267,043
Total Status of Budgetary Resources $ 13,207,920 $ 13,058,309
The accompanying notes are an integral part of these financial statements
51
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09-1-0026
Environmental Protection Agency
Combined Statement of Budgetary Resources
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1 $ 9,873,207 $ 10,956,328
Adjustment to Unpaid Obligations (Alloc Transfer Agencies) (Note 38) -_ 7,215
Adjusted Total 9,873,207 10,963,543
Less: Uncollected Customer Payments from Federal Sources, Brought
Forward, October 1 (632,790) (712,239)
Total Unpaid Obligated Balance, Net 9,240,417 10,251,304
Obligations Incurred, Net (Note 28) 9,656,040 9,516,922
Less: Gross Outlays (Note 28) (9,880,035) (10,219,637)
Less: Recoveries of Prior Year Unpaid Obligations, Actual (Note 29) (281,117) (387,621)
Change in Uncollected Customer Payments from Federal Sources (33,457) 79,449
Total, Change in Obligated Balance 8,701,848 9,240,417
Obligated Balance, Net, End of Period:
Unpaid Obligations 9,368,094 9,873,207
Less: Uncollected Customer Payments from Federal Sources (666,246) (632,790)
Total, Unpaid Obligated Balance, Net, End of Period $ 8,701,848 $ 9,240,417
NET OUTLAYS
Net Outlays:
Gross Outlays (Note 28) $ 9,880,035 $ 10,219,637
Less: Offsetting Collections (Note 28) (827,616) (655,188)
Less: Distributed Offsetting Receipts (Notes 28 and 32) (1,118,429) (1,307,458)
Total, Net Outlays $ 7,933,990 $ 8,256,991
The accompanying notes are an integral part of these financial statements.
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Environmental Protection Agency
Statement of Custodial Activity
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties $ 126,283 $ 86,409
Other (13,733) (4,171)
Total Cash Collections $ 112,550 $ 82,238
Accrual Adjustment 8,107 7,092
Total Custodial Revenue (Note 27) $ 120,657 $ 89,330
Disposition of Collections:
Transferred to Others (General Fund) $ 112,695 $ 90,774
Increases/Decreases in Amounts to be Transferred 7,962 (1,444)
Total Disposition of Collections $ 120,657 $ 89,330
Net Custodial Revenue Activity (Note 27)
The accompanying notes are an integral part of these financial statements.
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Environmental Protection Agency
Notes to Financial Statements
(Dollars in Thousands)
Note 1. Summary of Significant Accounting Policies
A. Basis of Presentation
These accompanying financial statements have been prepared to report the financial position and
results of operations of the U. S. Environmental Protection Agency (EPA or Agency) as required
by the Chief Financial Officers Act of 1990 and the Government Management Reform Act of
1994. The reports have been prepared from the financial system and records of the Agency in
accordance with OMB Circular No. A-136, Financial Reporting Requirements, and the EPA's
accounting policies which are summarized in this note. In addition to the reports required by
OMB Circular No. A-136, the Statement of Net Cost has been prepared with cost segregated by
the Agency's strategic goals.
B. Reporting Entities
The EPA was created in 1970 by executive reorganization from various components of other
federal agencies 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.
For FY 2008, the accompanying financial statements are grouped and presented in a consolidated
basis for the Balance Sheet, and Statements of Net Cost, Changes in Net Position and Custodial
Activity and a combined basis for the Statement of Budgetary Resources. These financial
statements include the accounts of all funds described in this note by their respective Treasury
fund group.
General Fund Appropriations (Treasury Fund Groups 0000 - 3999)
a. State and Tribal Assistance Grants (STAG) Appropriation: The STAG appropriation,
Treasury fund group 0103, provides funds for environmental programs and infrastructure
assistance including capitalization grants for State revolving funds and performance partnership
grants. Environmental programs and infrastructure supported are: Clean and Safe Water;
capitalization grants for the Drinking Water State Revolving Funds; Clean Air; direct grants for
Water and Wastewater Infrastructure needs, partnership grants to meet Health Standards, Protect
Watersheds, Decrease Wetland Loss, and Address Agricultural and Urban Runoff and Storm
Water; Better Waste Management; Preventing Pollution and Reducing Risk in Communities,
Homes, Workplaces and Ecosystems; and Reduction of Global and Cross Border Environmental
Risks.
b. Science and Technology (S&T) Appropriation: The S&T appropriation, Treasury fund
group 0107, finances salaries, travel, science, technology, research and development activities
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09-1-0026
including laboratory supplies, certain operating expenses, grants, contracts, intergovernmental
agreements, and purchases of scientific equipment. These activities provide the scientific basis
for the Agency's regulatory actions. In FY 2008, Superfund research costs were appropriated in
Superfund and transferred to S&T to allow for proper accounting of the costs. Environmental
scientific and technological activities and programs include Clean Air; Clean and Safe Water;
Americans Right to Know about Their Environment; Better Waste Management; Preventing
Pollution and Reducing Risk in Communities, Homes, Workplaces, and Ecosystems; and Safe
Food.
c. Environmental Programs and Management (EPM) Appropriation: The EPM
appropriation, Treasury fund group 0108, includes funds for salaries, travel, contracts, grants,
and cooperative agreements for pollution abatement, control, and compliance activities and
administrative activities of the Agency's operating programs. Areas supported from this
appropriation include: Clean Air, Clean and Safe Water, Land Preservation and Restoration,
Healthy Communities and Ecosystems, and Compliance and Environmental Stewardship.
d. Buildings and Facilities Appropriation (B&F): The B&F appropriation, Treasury fund
group 0110, provides for the construction, repair, improvement, extension, alteration, and
purchase of fixed equipment or facilities that are owned or used by the EPA.
e. Office of Inspector General (OIG) Appropriation: The OIG appropriation, Treasury fund
group 0112, provides funds for audit and investigative functions to identify and recommend
corrective actions on management and administrative deficiencies that create the conditions for
existing or potential instances of fraud, waste and mismanagement. Additional funds for audit
and investigative activities associated with the Superfund and the LUST Trust Funds are
appropriated under those Trust Fund accounts and transferred to the Office of Inspector General
account. The audit function provides contract, internal controls and performance, and financial
and grant audit services. The appropriation includes expenses incurred and reimbursed from the
appropriated trust funds accounted for under Treasury fund group 8145 and 8153.
/ Payments to the Hazardous Substance Superfund Appropriation: The Payment to the
Hazardous Substance Superfund appropriation, Treasury fund group 0250, authorizes
appropriations from the General Fund of the Treasury to finance activities conducted through the
Hazardous Substance Superfund Program.
g. Payments to Leaking Underground Storage Tank Appropriation: The Payment to the
Leaking Underground Storage Tank appropriation, Treasury fund group 0251, authorizes
appropriations from the General Fund of the Treasury to finance activities conducted through the
Leaking Underground Storage Tank program.
h. Asbestos Loan Program: The Asbestos Loan Program is accounted for under Treasury fund
group 0118, Program Account, for interest subsidy and administrative support; under Treasury
fund group 4322, Financing Account, for loan disbursements, loans receivable and loan
collections on post-FY 1991 loans; and under Treasury fund group 2917 for pre-FY 1992 loans
receivable and loan collections.
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The Asbestos Loan Program was authorized by the Asbestos School Hazard Abatement Act of
1986 to finance control of asbestos building materials in schools. Funds have not been
appropriated for this Program since FY 1993. For FY 1993 and FY1992, the program was
funded by a subsidy appropriated from the General Fund for the actual cost of financing the
loans, and by borrowing from Treasury for the unsubsidized portion of the loan. The Program
Account 0118 disburses the subsidy to the Financing Fund for increases in the subsidy. The
Financing Account 4322 receives the subsidy payment, borrows from Treasury and collects the
asbestos loans.
i. Allocations and Appropriations Transferred to the Agency: The EPA receives allocations
or appropriations transferred from other federal agencies.
j. Treasury Clearing Accounts: The EPA Department of the Treasury Clearing Accounts
include: (1) the Budgetary Suspense Account, (2) the Unavailable Check Cancellations and
Overpayments Account, and (3) the Undistributed Intra-agency Payments and Collections
(IPAC) Account. These are accounted for under Treasury fund groups 3875, 3880 and 3885,
respectively.
k. General Fund Receipt Accounts: General Fund Receipt Accounts include: Hazardous Waste
Permits; Miscellaneous Fines, Penalties and Forfeitures; General Fund Interest; Interest from
Credit Reform Financing Accounts; Downward Re-estimates of Subsidies; Fees and Other
Charges for Administrative and Professional Services; and Miscellaneous Recoveries and
Refunds. These accounts are accounted for under Treasury fund groups 0895, 1099, 1435, 1499,
2753.3, 3200 and 3220, respectively.
/. Allocation of Budget Authority: EPA is an allocation budget transfer parent to five federal
agencies: Department of Interior, Department of Labor, Center for Disease Control, Department
of Commerce, and Federal Emergency Management Agency. EPA has an Interagency
Agreement or a Memorandum of Understanding (MOU) with each child agency to provide an
annual work plan and quarterly progress report containing an accounting of funds obligated in
each budget category within 15 days after the end of each quarter. This allows EPA to properly
report the financial activity. The allocation transfers are reported in the net cost of operations,
changes in net position, balance sheet and budgetary resources where activity is being performed
by the receiving Federal entity. In addition, EPA receives allocation transfers, as a child, from
the Bureau of Land Management.
Revolving Funds (Treasury Fund Group 4000 - 4999)
a. Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): The FIFRA Revolving Fund,
Treasury fund group 4310, was authorized by the FIFRA Act of 1972, as amended in 1988 and
as amended by the Food Quality Protection Act of 1996. Pesticide Maintenance fees are paid by
industry to offset the costs of pesticide re-registration and reassessment of tolerances for
pesticides used in or on food and animal feed, as required by law.
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09-1-0026
b. Tolerance Revolving Fund: The Tolerance Revolving Fund, Treasury fund group 4311, was
authorized in 1963 for the deposit of tolerance fees. Fees are paid by industry for federal services
to set pesticide chemical residue limits in or on food and animal feed. The fees collected prior to
January 2, 1997 were accounted for under this fund. Presently these fees are being deposited in
the FIFRA fund (see above).
c. Asbestos Loan Program: The Asbestos Loan Program is accounted for under Treasury fund
group 4322, Financing Account for loan disbursements, loans receivable and loan collections on
post-FY 1991 loans. Refer to General Fund Appropriations paragraph h. for details.
d. Working Capital Fund (WCF): The WCF, Treasury fund group, 4565, includes four
activities: computer support services, financial system services, employee relocation services,
and postage. The WCF derives revenue from these activities based upon a fee for services. The
WCF's customers currently consist primarily of Agency program offices and a small portion
from other federal agencies. Accordingly, those revenues generated by the WCF from services
provided to Agency program offices and expenses recorded by the program offices for use of
such services, along with the related advances/liabilities, are eliminated on consolidation of the
financial statements.
Special Funds (Treasury Fund Group 5000 - 5999)
a. Environmental Services Receipt Account: The Environmental Services Receipt Account
authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-549)," Treasury fund group
5295, was established for the deposit of fee receipts associated with environmental programs,
including radon measurement proficiency ratings and training, motor vehicle engine
certifications, and water pollution permits. Receipts in this special fund can only be appropriated
to the S&T and EPM appropriations to meet the expenses of the programs that generate the
receipts as authorized by Congress in the agency's appropriations bill.
b. Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund authorized by a 1992
act, "Making appropriations for the Department of Veterans Affairs and Housing and Urban
Development, and for sundry independent agencies, boards, commissions corporations, and
offices for the fiscal year ending September 30, 1993 (P.L. 102-389)," Treasury fund group
5297, has funds available to carry out authorized environmental restoration activities. Funding is
derived from the collection of reimbursements under the Exxon Valdez settlement as a result of
an oil spill.
c. Pesticide Registration Fund: The Pesticide Registration Fund authorized by a 2004 act,
"Consolidated Appropriations Act (P.L. 108-199)," Treasury fund group 5374, was authorized in
2004 for the expedited processing of certain registration petitions and associated establishment of
tolerances for pesticides to be used in or on food and animal feed. Fees covering these activities,
as authorized under the FIFRA Act of 1988, are to be paid by industry and deposited into this
fund group.
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Deposit Funds (Treasury Fund Group 6000 - 6999)
Deposits include: Fees for Ocean Dumping; Nonconformance Penalties; Clean Air Allowance
Auction and Sale; Advances without Orders; and Suspense and Payroll Deposits for Savings
Bonds, and State, City Income Taxes Withheld, and Other Federal Payroll Withholding
Allotments. These funds are accounted for under Treasury fund groups 6264, 6265, 6266, 6500,
6050, 6275, and 6276, respectively.
Trust Funds (Treasury Fund Group 8000 - 8999)
a. Superfund Trust Fund: In 1980, the Superfund Trust Fund, Treasury fund group 8145, was
established by the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA) to provide resources needed to respond to and clean up hazardous substance
emergencies and abandoned, uncontrolled hazardous waste sites. The Superfund Trust Fund
financing is shared by federal and state governments as well as industry. The EPA allocates
funds from its appropriation to other federal agencies to carry out CERCLA. Risks to public
health and the environment at uncontrolled hazardous waste sites qualifying for the Agency's
National Priorities List (NPL) are reduced and addressed through a process involving site
assessment and analysis and the design and implementation of cleanup remedies. NPL cleanups
and removals are conducted and financed by the EPA, private parties, or other federal agencies.
The Superfund Trust Fund includes Treasury's collections and investment activity.
b. Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust Fund, Treasury
fund group 8153, was authorized by the Superfund Amendments and Reauthorization Act of
1986 (SARA) as amended by the Omnibus Budget Reconciliation Act of 1990. The LUST
appropriation provides funding to respond to releases from leaking underground petroleum tanks.
The Agency oversees cleanup and enforcement programs which are implemented by the states.
Funds are allocated to the states through cooperative agreements to clean up those sites posing
the greatest threat to human health and the environment. Funds are used for grants to non-state
entities including Indian tribes under Section 8001 of the Resource Conservation and Recovery
Act. The program is financed by a one cent a gallon tax on motor fuels which will expire in
2011.
c. Oil Spill Response Trust Fund: The Oil Spill Response Trust Fund, Treasury fund group
8221, was authorized by the Oil Pollution Act of 1990 (OPA). Monies were appropriated to the
Oil Spill Response Trust Fund in 1993. The Agency is responsible for directing, monitoring and
providing technical assistance for major inland oil spill response activities. This involves setting
oil prevention and response standards, initiating enforcement actions for compliance with OPA
and Spill Prevention Control and Countermeasure requirements, and directing response actions
when appropriate. The Agency carries out research to improve response actions to oil spills
including research on the use of remediation techniques such as dispersants and bioremediation.
Funding for oil spill cleanup actions is provided through the Department of Transportation under
the Oil Spill Liability Trust Fund and reimbursable funding from other federal agencies.
d. Miscellaneous Contributed Funds Trust Fund: The Miscellaneous Contributed Funds Trust
Fund authorized in the Federal Water Pollution Control Act (Clean Water Act) as amended by
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(P.L. 92-500, The Federal Water Pollution Control Act Amendments of 1972), Treasury fund
group 8741, includes gifts for pollution control programs that are usually designated for a
specific use by donors and/or deposits from pesticide registrants to cover the costs of petition
hearings when such hearings result in unfavorable decisions to the petitioner.
C. Budgets and Budgetary Accounting
General Funds
Congress adopts an annual appropriation for STAG, B&F, and for Payments to the Hazardous
Substance Superfund to be available until expended, as well as annual appropriations for S&T,
EPM and for the OIG to be available for 2 fiscal years. When the appropriations for the General
Funds are enacted, Treasury issues a warrant to the respective appropriations. As the Agency
disburses obligated amounts, the balance of funds available to the appropriation is reduced at
Treasury.
The Asbestos Loan Program is a commercial activity financed from a combination of two
sources, one for the long term costs of the loans and another for the remaining non-subsidized
portion of the loans. Congress adopted a 1 year appropriation, available for obligation in the
fiscal year for which it was appropriated, to cover the estimated long term cost of the Asbestos
loans. The long term costs are defined as the net present value of the estimated cash flows
associated with the loans. The portion of each loan disbursement that did not represent long term
cost is financed under permanent indefinite borrowing authority established with the Treasury. A
permanent indefinite appropriation is available to finance the costs of subsidy re-estimates that
occur in subsequent years after the loans were disbursed.
Funds transferred from other federal agencies are funded by a non-expenditure transfer of funds
from the other federal agencies. As the Agency disburses the obligated amounts, the balance of
funding available to the appropriation is reduced at Treasury.
Clearing accounts and receipt accounts receive no appropriated funds. Amounts are recorded to
the clearing accounts pending further disposition. Amounts recorded to the receipt accounts
capture amounts collected for or payable to the Treasury General Fund.
Revolving Funds
Funding of the FIFRA and Pesticide Registration Funds is provided by fees collected from
industry to offset costs incurred by the Agency in carrying out these programs. Each year the
Agency submits an apportionment request to OMB based on the anticipated collections of
industry fees.
Funding of the WCF is provided by fees collected from other Agency appropriations and other
federal agencies to offset costs incurred for providing Agency administrative support for
computer and telecommunication services, financial system services, employee relocation
services, and postage.
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Special Funds
The Environmental Services Receipt Account obtains fees associated with environmental
programs that will be appropriated to the S&T and EPM appropriations.
Exxon Valdez uses funding collected from reimbursement from the Exxon Valdez settlement.
Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit accounts
pending further disposition. These are not EPA's funds.
Trust Funds
Congress adopts an annual appropriation amount for the Superfund, LUST and the Oil Spill
Response Trust Funds to remain available until expended. A transfer account for the Superfund
and LUST Trust Fund has been established for purposes of carrying out the program activities.
As the Agency disburses obligated amounts from the transfer account, the Agency draws down
monies from the Superfund and LUST Trust Fund at Treasury to cover the amounts being
disbursed. The Agency draws down all the appropriated monies from the Principal Fund of the
Oil Spill Liability Trust Fund when Congress adopts the appropriation amount.
D. Basis of Accounting
GAAP for Federal entities are the standards prescribed by the Federal Accounting Standards
Advisory Board (FASAB), which is the official standard-setting body for the Federal
government.
Transactions are recorded on an accrual accounting basis and on a budgetary basis (where
budgets are issued). 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.
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E. Revenues and Other Financing Sources
The following EPA policies and procedures to account for inflow of revenue and other financing
sources are in accordance with Statement of Federal Financial Accounting Standards (SFFAS)
No. 7, "Accounting for Revenues and Other Financing Sources."
The Superfund program receives most of its funding through appropriations that may be used,
within specific statutory limits, for operating and capital expenditures (primarily equipment).
Additional financing for the Superfund program is obtained through: reimbursements from other
federal agencies, state cost share payments under Superfund State Contracts (SSCs), and
settlement proceeds from Potentially Responsible Parties (PRPs) under CERCLA Section
122(b)(3) placed in special accounts. Special accounts were previously limited to settlement
amounts for future costs. However, beginning in FY 2001, cost recovery amounts received under
CERCLA Section 122 (b)(3) settlements could be placed in special accounts. Cost recovery
settlements that are not placed in special accounts continue to be deposited in the Trust Fund.
The majority of all other funds receive funding needed to support programs through
appropriations, which may be used, within statutory limits, for operating and capital
expenditures. However, under Credit Reform provisions, the Asbestos Loan Program received
funding to support the subsidy cost of loans through appropriations which may be used within
statutory limits. The Asbestos Direct Loan Financing fund 4322, an off-budget fund, receives
additional funding to support the outstanding loans through collections from the Program fund
0118 for the subsidized portion of the loan. The last year Congress provided appropriations to
make new loans was 1993.
The FIFRA and Pesticide Registration funds receive funding through fees collected for services
provided and interest on invested funds. The WCF receives revenue through fees collected for
services provided to Agency program offices. Such revenue is eliminated with related Agency
program expenses upon consolidation of the Agency's financial statements. The Exxon Valdez
Settlement Fund receives funding through reimbursements.
Appropriated funds are recognized as Other Financing Sources expended when goods and
services have been rendered without regard to payment of cash. Other revenues are recognized
when earned (i.e., when services have been rendered).
F. Funds with the Treasury
The Agency does not maintain cash in commercial bank accounts. Cash receipts and
disbursements are handled by Treasury. The major funds maintained with Treasury are
Appropriated Funds, Revolving Funds, Trust Funds, Special Funds, Deposit Funds, and Clearing
Accounts. These funds have balances available to pay current liabilities and finance authorized
obligations, as applicable.
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G. Investments in U.S. Government Securities
Investments in U.S. Government securities are maintained by Treasury and are reported at
amortized cost net of unamortized discounts. Discounts are amortized over the term of the
investments and reported as interest income. No provision is made for unrealized gains or losses
on these securities because, in the majority of cases, they are held to maturity (see Note 4).
H. Notes Receivable
The Agency records notes receivable at their face value and any accrued interest as of the date of
receipt.
I. Marketable Securities
The Agency records marketable securities at cost as of the date of receipt. Marketable securities
are held by Treasury and reported at their cost value in the financial statements until sold (see
Note 4).
J. Accounts Receivable and Interest Receivable
The majority of receivables for non-Superfund funds represent penalties and interest receivable
for general fund receipt accounts, unbilled intragovernmental reimbursements receivable,
allocations receivable from Superfund (eliminated in consolidated totals), and refunds receivable
for the STAG appropriation.
Superfund accounts receivable represent recovery of costs from PRPs as provided under
CERCLA as amended by SARA. However, cost recovery expenditures are expensed when
incurred since there is no assurance that these funds will be recovered (see Note 5).
The Agency records accounts receivable from PRPs for Superfund site response costs when a
consent decree, judgment, administrative order, or settlement is entered. These agreements are
generally negotiated after site response costs have been incurred. It is the Agency's position that
until a consent decree or other form of settlement is obtained, the amount recoverable should not
be recorded.
The Agency also records accounts receivable from states for a percentage of Superfund site
remedial action costs incurred by the Agency within those states. As agreed to under SSCs, cost
sharing arrangements may vary according to whether a site was privately or publicly operated at
the time of hazardous substance disposal and whether the Agency response action was removal
or remedial. SSC agreements are usually for 10 percent or 50 percent of site remedial action
costs, depending on who has the lead for the site (i.e., publicly or privately owned). States may
pay the full amount of their share in advance or incrementally throughout the remedial action
process.
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K. Advances and Prepayments
Advances and prepayments represent funds advanced or prepaid to other entities both internal
and external to the Agency for which a budgetary expenditure has not yet occurred.
L. Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. Loans receivable
resulting from obligations on or before September 30, 1991, are reduced by the allowance for
uncollectible loans. Loans receivable resulting from loans obligated on or after October 1, 1991,
are reduced by an allowance equal to the present value of the subsidy costs associated with these
loans. The subsidy cost is calculated based on the interest rate differential between the loans and
Treasury borrowing, the estimated delinquencies and defaults net of recoveries offset by fees
collected and other estimated cash flows associated with these loans.
M. Appropriated Amounts Held by Treasury
For the Superfund and LUST Trust Funds and for amounts appropriated from the Superfund
Trust Fund to the OIG, cash available to the Agency that is not needed immediately for current
disbursements remains in the respective Trust Funds managed by Treasury.
N. Property, Plant, and Equipment
EPA accounts for its personal and real property accounting records in accordance with SFFAS
No. 6, "Accounting for Property, Plant and Equipment." For EPA-held property, the Fixed
Assets Subsystem (FAS) automatically generates depreciation entries monthly based on
acquisition dates.
A purchase of EPA-held or contract personal property is capitalized if it is valued at $25
thousand or more and has an estimated useful life of at least 2 years. Prior to implementing FAS,
depreciation was taken on a modified straight-line basis over a period of 6 years depreciating 10
percent the first and sixth year, and 20 percent in years 2 through 5. This modified straight-line
method is still used for contract property; detailed records are maintained and accounted for in
contractor systems, not in FAS. All EPA-held personal property purchased before the
implementation of FAS was assumed to have an estimated useful life of 5 years. New
acquisitions of EPA-held personal property are depreciated using the straight-line method over
the specific asset's useful life, ranging from 2 to 15 years.
Personal property also consists of capital leases. To be defined as a capital lease, it must, at its
inception, have a lease term of two or more years and the lower of the fair value or present value
of the minimum lease payments must be $75 thousand or more. Capital leases may also contain
real property (therefore considered in the real property category as well), but these need to meet
an $85 thousand capitalization threshold. In addition, the lease must meet one of the following
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criteria: transfers ownership to EPA, contains a bargain purchase option, the lease term is equal
to 75 percent or more of the estimated service life, or the present value of the lease and other
minimum lease payments equal or exceed 90 percent of the fair value.
Superfund contract property used as part of the remedy for site-specific response actions is
capitalized in accordance with the Agency's capitalization threshold. This property is part of the
remedy at the site and eventually becomes part of the site itself. Once the response action has
been completed and the remedy implemented, EPA retains control of the property (i.e., pump
and treat facility) for 10 years or less, and transfers its interest in the facility to the respective
state for mandatory operation and maintenance - usually 20 years or more. Consistent with
EPA's 10 year retention period, depreciation for this property is based on a 10 year life.
However, if any property is transferred to a state in a year or less, this property is charged to
expense. If any property is sold prior to EPA relinquishing interest, the proceeds from the sale of
that property shall be applied against contract payments or refunded as required by the Federal
Acquisition Regulations.
An exception to the accounting of contract property includes equipment purchased by the
Working Capital Fund (WCF). This property is retained in FAS and depreciated utilizing the
straight-line method based upon the asset's acquisition date and useful life.
Real property consists of land, buildings, capital and leasehold improvements, as well as capital
leases. Real property, other than land, is capitalized when the value is $85 thousand or more.
Land is capitalized regardless of cost. Buildings were valued at an estimated original cost basis,
and land was valued at fair market value if purchased prior to FY 1997. Real property purchased
during and after FY 1997 is valued at actual cost. Depreciation for real property is calculated
using the straight-line method over the specific asset's useful life, ranging from 10 to 102 years.
Leasehold improvements are amortized over the lesser of their useful life or the unexpired lease
term. Additions to property and improvements not meeting the capitalization criteria,
expenditures for minor alterations, and repairs and maintenance are expensed as incurred.
Software for the WCF, a revenue generating activity, is capitalized if the purchase price was
$100 thousand or more with an estimated useful life of 2 years or more. All other funds
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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O. Liabilities
Liabilities represent the amount of monies or other resources that are likely to be paid by the
Agency as the result of a transaction or event that has already occurred. However, no liability can
be paid by the Agency without an appropriation or other collections. Liabilities for which an
appropriation has not been enacted are classified as unfunded liabilities and there is no certainty
that the appropriations will be enacted. Liabilities of the Agency arising from other than
contracts can be abrogated by the Government acting in its sovereign capacity.
P. Borrowing Payable to the Treasury
Borrowing payable to Treasury results from loans from Treasury to fund the Asbestos direct
loans described in part B. and C. of this note. Periodic principal payments are made to Treasury
based on the collections of loans receivable.
Q. Interest Payable to Treasury
The Asbestos Loan Program makes periodic interest payments to Treasury based on its debt. At
the end of FY 2007 and FY 2008, there was no outstanding interest payable to Treasury since
payment was made through September 30.
R. Accrued Unfunded Annual 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
Note 35 as a component of "Payroll and Benefits Payable."
S. Retirement Plan
There are two primary retirement systems for federal employees. Employees hired prior to
January 1, 1987, may participate in the Civil Service Retirement System (CSRS). On January 1,
1984, 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.
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
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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.
T. Prior Period Adjustments
Prior period adjustments will be made in accordance with SFFAS No. 21, "Reporting
Corrections of Errors and Changes in Accounting Principles." Specifically, prior period
adjustments will only be made for material prior period errors to: (1) the current period financial
statements, and (2) the prior period financial statements presented for comparison. Adjustments
related to changes in accounting principles will only be made to the current period financial
statements, but not to prior period financial statements presented for comparison.
Note 2. Fund Balance with Treasury (FBWT)
Fund Balances with Treasury as of September 30, 2008 and 2007, consist of the following:
Trust Funds:
Superfund
LUST
Oil Spill &Msc.
Revolving Funds:
FIFR/VTolerance
\Aforking Capital
Cr. Reform Rnan.
Appropriated
Other Fund Types
Total
Entity
Assets
45,596$
12,712
3,637
2,371
65,080
399
9,237,455
229,038
9,596,288 $
FY2008
Non-Entity
Assets
-$
-
-
_
-
-
-
9,068
9,068 $
Total
45,596 $
12,712
3,637
2,371
65,080
399
9,237,455
238,106
9,605,356 $
Entity
Assets
51,081 $
32,406
4,576
9,313
70,460
429
10,084,002
205,693
10,457,960 $
FY2007
Non-Entity
Assets
-$
-
-
_
-
-
-
8,640
8,640$
Total
51,081
32,406
4,576
9,313
70,460
429
10,084,002
214,333
10,466,600
Entity fund balances, except for special fund receipt accounts, are available to pay current
liabilities and to finance authorized purchase commitments (see Status of Fund Balances
below). Entity Assets for Other Fund Types consist of special purpose funds and special fund
receipt accounts, such as the Pesticide Registration funds and the Environmental Services receipt
account. The Non-Entity Assets for Other Fund Types consist of clearing accounts and deposit
funds, which are either awaiting documentation for the determination of proper disposition or
being held by EPA for other entities.
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Status of Fund Balances:
FY 2008
FY 2007
Unobligated Amounts in Fund Balances
Available for Obligation $3,204,800 $3,274,338
Unavailable for Obligation 339,319 267,042
Net Receivables from Invested Balances (2,861,933) (2,527,186)
Balances in Treasury Trust Fund (Note 18) 397 14,394
Obligated Balance not yet Disbursed 8,701,838 9,240,417
Non-Budgetary FBWT 220,935 197,595
Totals $9,605,356 $10,466,600
The funds available for obligation may be apportioned by the OMB for new obligations at the
beginning of the following fiscal year. Funds unavailable for obligation are mostly balances in
expired funds, which are available only for adjustments of existing obligations. For FY 2008 and
FY 2007 no differences existed between Treasury's accounts and EPA's statements for fund
balances with Treasury.
Note 3. Cash and Other Monetary Assets
For September 30, 2008 and September 30, 2007, cash consists of an imprest fund of $10
thousand.
Note 4. Investments
For September 30, 2008 and September 30, 2007 investments related to Superfund and LUST
consist of the following:
Cost
Amortized
(Premium)
Discount
Interest
Receivable
Investments,
Net
Market
Value
Intragovemmental
Non-Marketable FY2008 $ 6,057,258 $ (77,301)$ 40,269 $ 6,174,828 $ 6,174,828
Non-Marketable FY2007 $ 5,680,321 $ (29,431)$ 43,259 $ 5,753,061 $ 5,753,061
CERCLA, as amended by SARA, authorizes EPA to recover monies to clean up Superfund sites
from responsible parties (RPs). Some RPs file for bankruptcy under Title 11 of the U.S. Code.
In bankruptcy settlements, EPA is an unsecured creditor and is entitled to receive a percentage of
the assets remaining after secured creditors have been satisfied. Some RPs satisfy their debts by
issuing securities of the reorganized company. The Agency does not intend to exercise
ownership rights to these securities, and instead will convert them to cash as soon as practicable
(see Note 6). All investments in Treasury securities are earmarked funds (see Note 20).
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The Federal Government does not set aside assets to pay future benefits or other expenditures
associated with earmarked funds. The cash receipts collected from the public for an earmarked
fund are deposited in the U.S. Treasury, which uses the cash for general Government purposes.
Treasury securities are issued to EPA as evidence of its receipts. Treasury securities are an asset
to EPA and a liability to the U.S. Treasury. Because EPA and the U.S. Treasury are both parts
of the Government, these assets and liabilities offset each other from the standpoint of the
Government as a whole. For this reason, they do not represent an asset or liability in the U.S.
Government-wide financial statements.
Treasury securities provide EPA with authority to draw upon the U.S. Treasury to make future
benefit payments or other expenditures. When EPA requires redemption of these securities to
make expenditures, the Government finances those expenditures out of accumulated cash
balances, by raising taxes or other receipts, by borrowing from the public or repaying less debt,
or by curtailing other expenditures. This is the same way that the Government finances all other
expenditures.
Note 5. Accounts Receivable
The Accounts Receivable for September 30, 2008 and September 30, 2007 consist of the
following:
FY 2008 FY 2007
Intragovernmental Assets:
Accounts & Interest Receivable $ 34,636 $ 57,039
Total $ 34,636 $ 57,039
Non-Federal Assets:
Unbilled Accounts Receivable $ 113,359 $ 136,779
Accounts & Interest Receivable 1,188,670 992,575
Less: Allowance for Uncollectibles (952,290) (770,052)
Total $ 349,739 $ 359,302
The Allowance for Uncollectible Accounts is determined both on a specific identification basis,
as a result of a case-by-case review of receivables, and on a percentage basis for receivables not
specifically identified.
Note 6. Other Assets
Other Assets for September 30, 2008 and 2007 consist of the following:
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FY 2008
FY 2007
Intragovernmental Assets:
Advances to Federal Agencies $ 107,327 $ 80,940
Advances for Postage 106 129
Total Intragovernmental Assets $ 107,433 $ 81,069
135 $
88
-
2,934
159
339
-
3,655 $
106
9
116
3,699
160
246
238
4,574
Non-Federal Assets:
Travel Advances $
Letter of Credit Advances
Grant Advances
Other Advances
Operating Materials and Supplies
Inventory for Sale
Securities Received in Settlement of Debt
Total Non-Federal Assets $
Note 7. Loans Receivable, Net - Non-Federal
Asbestos Loan Program loans disbursed from obligations made prior to FY 1992 are net of
allowances for estimated uncollectible loans, if an allowance was considered necessary. Loans
disbursed from obligations made after FY 1991 are governed by the Federal Credit Reform Act,
which mandates that the present value of the subsidy costs (i.e., interest rate differentials, interest
subsidies, anticipated delinquencies, and defaults) associated with direct loans be recognized as
an expense in the year the loan is made. The net loan present value is the gross loan receivable
less the subsidy present value. The amounts as of September 30, 2008 and 2007 are as follows:
FY 2008
FY 2007
Direct Loans
Obligated Prior
to FY 1992
Loans
Receivable,
Gross
4,327 $
Allowance*
Value of
Assets
Related to
Direct Loans
Loans
Receivable,
Gross
Allowance*
4,327 $
7,435 $
Value of
Assets
Related to
Direct Loans
7,435
Direct Loans
Obligated After
FY1991
14,513
(1,752)
12,761
18,440
(2,714)
Total $ 18,840 $ (1,752) $ 17,088 $ 25,875 $ (2,714) $
15,726
23,161
* Allowance for Pre-Credit Reform loans (prior to FY 1992) is the Allowance for Estimated
Uncollectible Loans, and the Allowance for Post Credit Reform Loans (after FY 1991) is the
Allowance for Subsidy Cost (present value).
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The Agency has permanent indefinite borrowing authority to replenish the Asbestos Loan
account. During FY 2008, EPA calculated an Upward Subsidy Reestimate of $33 thousand to
utilize this replenishment. Budget authority was recorded and funds were expended for this.
However, as of September 30, 2008 EPA had not received from OMB the apportionment
authorizing this expenditure. The Agency is working with OMB and Legal Counsel to determine
if this is an Anti-Deficiency situation since it has indefinite borrowing authority. During this
review process, the EPA does not expect to receive the authorizing Apportionment Letter, and
the Upward Subsidy Reestimate is unfunded as of September 30, 2008.
Subsidy Expenses for Credit Reform Loans (reported on a cash basis):
Upward Subsidy Reestimate - FY 2008
Downward Subsidy Reestimate - FY 2008
FY 2008 Totals
Downward Subsidy Reestimate - FY 2007
FY 2007 Totals
$
$
$
$
$
Interest
Rate Re-
estimate
21 $
(22) $
(1) $
(17) $
(17)$
Technical Total
Re-estimate
estimate
12 $
(12) $
- $
(12) $
(12)$
33
(34)
(1)
(29)
(29)
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Schedule for Reconciling Subsidy Cost Allowance Balances
(Post-1991 Direct Loans)
FY 2008 FY 2007
Beginning balance of the subsidy cost allowance ($2,714) ($3,882)
Add: subsidy expense for direct loans disbursed during the
reporting years by component:
(a) Interest rate differential costs 0.00 0.00
(b) Default costs (net of recoveries) 0.00 0.00
(c) Fees and other collections 0.00 0.00
(d) Other subsidy costs 0.00 0.00
Total of the above subsidy expense components 0.00 0.00
Adjustments:
(a) Loan Modification: 0.00 0.00
(b) Fees received 0.00 0.00
(c) Foreclosed property acquired 0.00 0.00
(d) Loans written off 0.00 1.00
(e) Subsidy allowance amortization 981.00 1,167.00
(f) Other 0.00 0.00
Ending balance of the subsidy cost allowance before reestimates 981.00 1,168.00
Add or subtract subsidy reestimates by component:
(a) interest rate reestimate (21.00) 0.00 1/
(b) Technical/default reestimate 2.00 0.00 1/
Total of the above reestimate components (19.00) 0.00
Ending Balance of the subsidy cost allowance ($1,752) ($2,714)
1/ There is an immaterial difference that will be researched in FY 2009.
EPA has not disbursed Direct Loans since 1993.
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Note 8. Accounts Payable and Accrued Liabilities
The Accounts Payable and Accrued Liabilities are current liabilities and consist of the following
amounts as of September 30, 2008 and 2007.
FY 2008
2,811 $
-
77,844
80,655 $
FY 2008
114,712 $
24
7
413,981
184,871
713,595 $
FY 2007
2,611
19,878
99,718
122,207
FY 2007
114,082
16
7
601,034
196,861
912,000
Intragovernmental:
Accounts Payable to other Federal Agencies $
Liability for Allocation Transfers
Accrued Liabilities, Federal
Total Intragovernmental $
Non-Federal:
Accounts Payable, Non-Federal $
Advances Payable, Non-Federal
Interest Payable
Grant Liabilities
Other Accrued Liabilities, Non-Federal
Total Non-Federal $
Note 9. General Property, Plant, and Equipment (PP&E)
General property, plant, and equipment consist of software, real property, EPA and Contractor-
Held personal property, and capital leases.
As of September 30, 2008 and 2007, General Property, Plant, and Equipment consist of the
following:
EPA-Held Equipment
Software
Contractor Held Equip.
Land and Buildings
Capital Leases
Total
Acquisition
Value
238,051 $
307,883
63,132
595,597
47,505
FY 2008
Accumulated
Depreciation
(130,045) $
(93,925)
(28,417)
(154,986)
(30,542)
Net Book
Value
108,006$
213,958
34,715
440,61 1
16,963
Acquisition
Value
222,848 $
258,637
64,641
579,880
47,505
FY 2007
Accumulated
Depreciation
(119,605)$
(49,407)
(23,486)
(143,594)
(27,546)
Net Book
Value
103,243
209,230
41,155
436,286
19,959
1,252,168$
(437,915)$ 814,253$
1,173,511 $
(363,638) $ 809,873
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09-1-0026
Note 10. Debt Due to Treasury
The debt due to Treasury consists of borrowings to finance the asbestos loan program. The debt
to Treasury as of September 30, 2008 and 2007 is as follows:
All CHher Funds FY2008 FY2007
Beginning Net Ending Beginning Net Ending
Balance Borrowing Balance Balance Borrcwing Balance
Intragovernmental:
Debt to Treasury $ 16,156$ (2,998)$ 13,158$ 18,896$ (2,740)$ 16,156
Note 11. Stewardship Land
The Agency acquires title to certain land and land rights under the authorities provided in
Section 104 (J) CERCLA related to remedial clean-up sites. The land rights are in the form of
easements to allow access to clean-up sites or to restrict usage of remediated sites. In some
instances, the Agency takes title to the land during remediation and returns it to private
ownership upon the completion of clean-up. A site with "land acquired" may have more than one
acquisition property. Sites are not counted as a withdrawal until all acquired properties have
been transferred.
As of September 30, 2008 and 2007, the Agency possesses the following land and land rights:
FY 2008 FY 2007
Superfund Sites with
Easements
Beginning Balance 33 32
Additions 1 2
Withdrawals 2_ 1_
Ending Balance 32 33
Superfund Sites with
Land Acquired
Beginning Balance 32 31
Additions 2 1
Withdrawals 3
Ending Balance 31 32
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09-1-0026
Note 12. Custodial Liability
Custodial Liability represents the amount of net accounts receivable that, when collected, will be
deposited to the Treasury General Fund. Included in the custodial liability are amounts for fines
and penalties, interest assessments, repayments of loans, and miscellaneous other accounts
receivable. As of September 30, 2008 and 2007, custodial liability is $48 million and $39
million, respectively.
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2008:
Other Liabilities - Intragovernmental
Current
Employer Contributions & Payroll Taxes $
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Resources Payable to Treasury
Subsidy Payable to Treasury
Non-Current
Unfunded FECA Liability
Payable to Treasury Judgment Fund
Total Intragovernmental $
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal $
Liability for Deposit Funds, Non-Federal
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal $
Covered by
Budgetary
Resources
17,125
3,166
14,489
41,586
1,089
3
5
77,088
8,810
Not Covered
by Budgetary
Resources
77.463 $
9,914
22,000
31.914 $
230
29,520
Total
17,125
3,166
14,489
41,586
1,089
3
5
9,914
22,000
109.377
77,088
8,810
230
29,520
85.898 $
29.750 $
115.648
74
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09-1-0026
Other Liabilities consist of the following as of September 30, 2007:
Other Liabilities - Intragovernmental
Current
Employer Contributions & Payroll Taxes $
WCF Advances
Other Advances
Advances, HRSTF Cashout
Deferred HRSTF Cashout
Liability for Deposit Funds
Resources Payable to Treasury
Subsidy Payable to Treasury
Non-Current
Unfunded FECA Liability
Payable to Treasury Judgment Fund
Total Intragovernmental $
Covered by
Budgetary
Resources
13,632
1,779
11,040
40,063
609
(37)
138
34
Not Covered
by Budgetary
Resources
9,102
22,000
67.258 $.
31.102 $.
$
72,671
8,453
230
32,385
81.124 $.
32.615 $.
Total
13,632
1,779
11,040
40,063
609
(37)
138
34
9,102
22,000
98.360
72,671
8,453
230
32,385
113.739
Other Liabilities - Non-Federal
Current
Unearned Advances, Non-Federal
Liability for Deposit Funds, Non-Federal
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal $
Note 14. Leases
Capital Leases:
The Capital Leases:
Summary of Assets Under Capital Lease:
Real Property
Personal Property
Software License
Total
Accumulated Amortization
EPA has three capital leases for land and buildings housing scientific laboratories and/or
computer facilities. All of these leases include a base rental charge and escalator clauses based
upon either rising operating costs and/or real estate taxes. The base operating costs are adjusted
annually according to escalators in the Consumer Price Indices published by the Bureau of Labor
Statistics, U.S. Department of Labor. The real property leases terminate in FYs 2010, 2013, and
2025.
FY 2008
FY 2007
$
$
$
40,913
155
6,437
47,505
30,542
$
$
$
40,913
155
6,437
47,505
27,546
75
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09-1-0026
EPA has a capital lease expended out of the Working Capital Fund for a Microsoft Office
Software Suite. This lease will terminate in FY 2009.
During FY 2005, EPA entered into a capital lease for a Storage Area Network. The lease
terminates in FY 2009, and payments are expended from the EPM appropriation.
The total future minimum capital lease payments are listed below.
Future Payments Due:
Fiscal Year Capital Leases
2009 $ 6,295
2010 6,102
2011 5,714
2012 5,714
After 5 Years 53,487
Total Future Minimum Lease Payments $ 77,312
Less: Imputed Interest (47,792)
Net Capital Lease Liability $ 29,520
Liabilities not Covered by Budgetary Resources
(See Note 13) $ 29,520
Operating Leases:
The GSA provides leased real property (land and buildings) as office space for EPA employees.
GSA charges a Standard Level User Charge that approximates the commercial rental rates for
similar properties.
EPA has four current direct operating leases for land and buildings housing scientific
laboratories and/or computer facilities. The leases include a base rental charge and escalator
clauses based upon either rising operating costs and/or real estate taxes. The base operating costs
are adjusted annually according to escalators in the Consumer Price Indices published by the
Bureau of Labor Statistics. The leases expire in FY 2009, FY2010, 2017, and 2020. These
charges are expended from the EPM appropriation.
The total minimum future operating lease costs are listed below.
76
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09-1-0026
Operating Leases,
Land and Buildings
Fiscal Year
2009 $ 112
2010 97
2011 89
2012 89
Beyond 2012 600
Payments $ 987
Note 15. Pensions and Other Actuarial Liabilities
The Federal Employees' Compensation Act (FECA) provides income and medical cost
protection to covered Federal civilian employees injured on the job, employees who have
incurred a work-related occupational disease, and beneficiaries of employees whose death is
attributable to a job-related injury or occupational disease. Annually, EPA is allocated the
portion of the long term FECA actuarial liability attributable to the entity. The liability is
calculated to estimate the expected liability for death, disability, medical and miscellaneous costs
for approved compensation cases. The liability amounts and the calculation methodologies are
provided by the Department of Labor.
The FECA Actuarial Liability at September 30, 2008 and 2007, consists of the following:
FY 2008 FY 2007
FECA Actuarial Liability $ 44,615 $ 39,786
The FY 2008 present value of these estimated outflows is calculated using a discount rate of
4.368 percent in the first year, and 4.770 percent in the years thereafter. The estimated future
costs are recorded as an unfunded liability.
Note 16. Cashout Advances, Superfund
Cashouts are funds received by EPA, a state, or another PRP under the terms of a settlement
agreement (e.g., consent decree) to finance response action costs at a specified Superfund site.
Under CERCLA Section 122(b)(3), cashout funds received by EPA are placed in site-specific,
interest bearing accounts known as special accounts and are used for potential future work at
such sites in accordance with the terms of the settlement agreement. Funds placed in special
accounts may be disbursed to PRPs, to states that take responsibility for the site, or to other
Federal agencies to conduct or finance response actions in lieu of EPA without further
appropriation by Congress. As of September 30, 2008 and 2007, cashouts are $287 million and
$190 million, respectively.
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Note 17. Unexpended Appropriations - Other Funds
As of September 30, 2008 and 2007, the Unexpended Appropriations consist of the following:
Unexpended Appropriations: FY 2008 FY 2007
Unobligated
Available $ 1,520,587 $ 1,791,873
Unavailable 94,130 81,753
Undelivered Orders 7,059,994 7,476,965
Total $ 8,674,711 $ 9,350,591
Note 18. Amounts Held by Treasury
Amounts Held by Treasury for Future Appropriations consist of amounts held in trusteeship by
Treasury in the Superfund and LUST Trust Funds.
Superfund (Unaudited)
Superfund is supported primarily by general revenues, cost recoveries of funds spent to clean up
hazardous waste sites, interest income, and fines and penalties.
The following reflects the Superfund Trust Fund maintained by Treasury as of September 30,
2008 and 2007. The amounts contained in these notes have been provided by Treasury. As
indicated, a portion of the outlays represents amounts received by EPA's Superfund Trust Fund;
such funds are eliminated on consolidation with the Superfund Trust Fund maintained by
Treasury.
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09-1-0026
SUPERFUND FY 2008
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Receipts and Outlays
Equity
Total Liabilities and Equity
Receipts
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Transfer from CDC (recovery)
Total Outlays
Net Income
EPA
2,749,821
$ 2,749,821
$
$
$
2,749,821
2,749,821
$ 1,301,315
1,301,315
$ 1.301.315"
Treasury
$
2,894
2,894
11,533
164,878
$
$
$
$
$
179,305
179,305
179,305
89,975
2,850
92,825
984,974
114,340
$
$
1,192,139
(1,301,315)
1,905
(1,299,410)
$
(107,271)
Combined
$
2,894
2,894
11,533
2,914,699
$
$
$
$
$
2,929,126
2,929,126
2,929,126
89,975
2,850
92,825
984,974
114,340
$
$
1,192,139
1,905
1,905
$
1,194,044
In FY 2008, the EPA received an appropriation of $985 million for Superfund. Treasury's
Bureau of Public Debt (BPD), the manager of the Superfund Trust Fund assets, records a liability
to EPA for the amount of the appropriation. BPD does this to indicate those trust fund assets that
have been assigned for use and, therefore, are not available for appropriation. As of September
30, 2008 and 2007, the Treasury Trust Fund has a liability to EPA for previously appropriated
funds of $2,749.9 million and $2,466.8 million, respectively.
79
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SUPERFUNDFY2007
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Receipts and Outlays
Equity
Total Liabilities and Equity
Receipts
Corporate Environmental
Cost Recoveries
Fines & Penalties
Total Revenue
Appropriations Received
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Transfers from CDC (recovery)
Total Outlays
Net Income
EPA
09-1-0026
Treasury Combined
- $
1,538 $
1,538
2,466,812
1,538
12,795
272,244
1,538
12,795
2,739,056
$ 2,466,812 $ 286,577 $ 2,753,389
$
$
$
$
2,466,812 $
2,466,812 $
- $
-
-
-
-
-
- $
286
286
2
234
1
237
1,040
141
1,419
,577
,577
,602
,050
,063
,715
,371
,407
,493
$
$
$
$
2
2
1
1
,753
,753
2
234
1
237
,040
141
,389
,389
,602
,050
,063
,715
,371
,407
,419,493
$
$
1,316,114 $
- $
(1,316,114)$
1,370 $
1,370
1,316,114 (1,314,744)
1,370
$ 1,316,114 $ 104,749 $ 1,420,863
LUST (Unaudited)
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In FYs
2008 and 2007 there were no fund receipts from cost recoveries. The following represents the
LUST Trust Fund as maintained by Treasury. The amounts contained in these notes have been
provided by Treasury. Outlays represent appropriations received by EPA's LUST Trust Fund;
such funds are eliminated on consolidation with the LUST Trust Fund maintained by Treasury.
80
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09-1-0026
LUST FY 2008 EPA
- $
Undistributed Balances
Uninvested Fund Balance $
Total Undisbursed Balance
Interest Receivable
Investments, Net 112,068
Total Assets $ 112,068$
Liabilities & Equity
Equity $ 112,068$
Equity $ 112,068$
Receipts
Highway TF Tax $
Airport TF Tax
Inland TF Tax
Total Revenue
Interest Income
Total Receipts $
Outlays
Transfers to/from EPA, Net $ 105,816$
Total Outlays 105,816
Net Income $ 105,816$
- $
- $
Treasury Combined
(2,497) $
(2,497)
28,735
3,099,871
3,126,109$
3,126,109$'
(105,816)$
(105,816)
(2,497)
(2,497)
28,735
3,211,939
3,126,109$ 3,238,177
3,238,177
3,238,177
154,309$
16,240
213
170,762
127,346
154,309
16,240
213
170,762
127,346
298,108$ 298,108
192,292$ 298,108
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09-1-0026
LUSTFY2007 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance
Total Undisbursed Balance
Interest Receivable
Investments, Net
Total Assets
Liabilities & Equity
Equity
Equity
Receipts
Highway TF Tax
Airport TF Tax
Inland TF Tax
Refund Gasoline Tax
Refund Diesel Tax
Refund Aviation Fuel
Refund Aviation Tax
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
$
$
$
$
$
$
$
$
- $ 12,856$
12,856
30,465
80,252 2,890,497
80,252 $ 2,933,818 $
80,252 $ 2,933,818 $
80,252 $ 2,933,818 $
- $ 204,272$
23,528
457
(914)
(934)
(197)
(18)
226,194
117,579
- $ 343,773$
72,035 $ (72,035) $
72,035 (72,035)
72,035 $ 271,738 $
12,856
12,856
30,465
2,970,749
3,014,070
3,014,070
3,014,070
204,272
23,528
457
(914)
(934)
(197)
(18)
226,194
117,579
343,773
-
-
343,773
Note 19. Commitments and Contingencies
EPA may be a party in various administrative proceedings, legal actions and claims brought by
or against it. These include:
• Various personnel actions, suits, or claims brought against the Agency by employees and
others.
• Various contract and assistance program claims brought against the Agency by vendors,
grantees and others.
• The legal recovery of Superfund costs incurred for pollution cleanup of specific sites, to
include the collection of fines and penalties from responsible parties.
• Claims against recipients for improperly spent assistance funds which may be settled by a
reduction of future EPA funding to the grantee or the provision of additional grantee
matching funds.
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Superfund:
Under CERCLA Section 106(a), EPA issues administrative orders that require parties to clean up
contaminated sites. CERCLA Section 106(b) allows a party that has complied with such an order
to petition EPA for reimbursement from the fund of its reasonable costs of responding to the
order, plus interest. To be eligible for reimbursement, the party must demonstrate either that it
was not a liable party under CERCLA Section 107(a) for the response action ordered, or that the
Agency's selection of the response action was arbitrary and capricious or otherwise not in
accordance with law.
As of September 30, 2008, there are currently two CERCLA Section 106(b) administrative
claims. If the claimants are successful, the total losses on the claims could amount to
approximately $3.3 million. The Environmental Appeals Board has not yet issued final
decisions on any of the administrative claims; therefore, a definite estimate of the amount of the
contingent loss cannot be made. One claimant's chance of success is characterized as reasonably
possible and one ($2.5 million) is characterized as remote chance of success.
Judgment Fund:
In cases that are paid by the U.S. Treasury Judgment Fund, EPA must recognize the full cost of a
claim regardless of which entity is actually paying the claim. Until these claims are settled or a
court judgment is assessed and the Judgment Fund is determined to be the appropriate source for
the payment, claims that are probable and estimable must be recognized as an expense and
liability of the Agency. For these cases, at the time of settlement or judgment, the liability will
be reduced and an imputed financing source recognized. See Interpretation of Federal Financial
Accounting Standards No. 2, "Accounting for Treasury Judgment Fund Transactions."
As of September 30, 2008, there are no material claims pending in the Treasury's Judgment
Fund. However, EPA has a $22 million liability to the Treasury Judgment Fund for a payment
made by the Fund to settle a contract dispute claim.
Other Commitments:
EPA has a legal commitment under a non-cancellable agreement with the United Nations
Environment Program (UNEP). This agreement enables EPA to provide funding to the
Multilateral Fund for the Implementation of the Montreal Protocol. Future payments totaling
$9.5 million are scheduled to be processed in FY 2009 and FY 2010.
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Note 20. Earmarked Funds
09-1-0026
Balance Sheet as of September 30, 2008
ASSETS
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
Total Assets
Other Liabilities
Total Liabilities
Cumulative Results of Operations
Total Liabilities and Net Position
Statement of Changes in Net Cost For the Period
Ended September 30, 2008
Gross Program Costs
Less: Earned Revenues
Net Cost of Operations
Statement of Changes in Net Position for the Period
Ended September 30, 2008
Net Position, Beginning of Period
Nonexchange Revenue - Securities Investment
Nonexchange Revenue
Other Budgetary Financing Sources
Other Financing Sources
Net Cost of Operations
Change in Net Postion
Net Position End of Period
Environmental
Services
211,282 $
211,282 $
- $
- $
211,282 $
211,282 $
- $
- $
188,371 $
22,911
22,911 $
LUST
12,711
3,240,674
27
72
3,253,484
8,988
8,988
3,244,496
3,253,484
77,702
32
77,670
3,023,769
127,346
170,762
289
(77,670)
220,727
Superfund
45,596 $
2,926,233
317,773
89,409
3,379,011 $
624,299 $
624,299 $
2,754,712 $
3,379,011 $
1,530,979 $
502,177
1,028,802 $
Other
Earmarked
Funds
2,670,425 $
114,340
10,442
969,606
18,701
(1,028,802)
84,287" $
Total
Earmarked
Funds
23,765 $ 293,354
7,921 6,174,828
4,404 322,204
2,487 91,968
38,577 $ 6,882,354
36,588 $
36,588 $
669,875
669,875
1,989 $ 6,212,479
38,577 $ 6,882,354
73,284 $ 1,681,965
52,425 554,634
20,859 $
1,127,331
3,662 $
187
17,056
1,943
(20,859)
(1,673) $
5,886,227
241,873
204,115
986,662
20,933
(1,127,331)
326,252'
211,282 $ 3,244,496
1,989 $ 6,212,479
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09-1-0026
Environmental
Services
Balance Sheet as of September 30, 2007
ASSETS
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
Total Assets
Other Liabilities
Total Liabilities
Cumulative Results of Operations
Total Liabilities and Net Position
LUST
Superfund
Other
Earmarked
Funds
Total
Earmarked
Funds
Statement of Changes in Net Cost For the Period Ended
September 30, 2007
Gross Programs Costs
Less: Earned Revenues
Net Cost of Operations
76,242
(1.414)
1,497,010
377,904
18,662 $
Statement of Changes in Net Position for the Period Ended
September 30, 2007
Net Position, Beginning of Period $
Changes in Accounting Principle (Alloc Trans Agency) (Note 38)
Beginning Balance as Adjusted
Nonexchange Revenue - Securities Investment
Nonexchange Revenue - Other
Other Budgetary Financing Sources
Other Financing Sources
Net Cost of Operations
Change in Net Postion $
Net Position End of Period
165,723 $ 2,757,325
165,723
22,648
22,648 $
2,757,325
117,579
226,194
327
(77,656)
266,444
2,627,300
141,407
2,721
998,952
19,151
(1,119,106)
43,125 ' $
3,577
3,577
85 $
5,533,025
20,900
5,553,925
258,986
252,148
1,014,685
21,907
(1,215,424)
332,302 '
Earmarked funds are as follows:
Environmental Services Receipt Account: The Environmental Services Receipt Account
authorized by a 1990 act, "To amend the Clean Air Act (P.L. 101-549)," Treasury fund group
5295, was established for the deposit of fee receipts associated with environmental programs,
including radon measurement proficiency ratings and training, motor vehicle engine
certifications, and water pollution permits. Receipts in this special fund can only be appropriated
to the S&T and EPM appropriations to meet the expenses of the programs that generate the
receipts as authorized by Congress in the Agency's appropriations bill.
Leaking Underground Storage Tank (LUST) Trust Fund: The LUST Trust Fund, Treasury
fund group 8153, was authorized by the Superfund Amendments and Reauthorization Act of
1986 (SARA) as amended by the Omnibus Budget Reconciliation Act of 1990. The LUST
appropriation provides funding to respond to releases from leaking underground petroleum tanks.
The Agency oversees cleanup and enforcement programs which are implemented by the states.
Funds are allocated to the states through cooperative agreements to clean up those sites posing
the greatest threat to human health and the environment. Funds are used for grants to non-state
entities including Indian tribes under Section 8001 of the Resource Conservation and Recovery
85
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09-1-0026
Act. The program is financed by a one cent per gallon tax on motor fuels which will expire in
2011.
Superfund Trust Fund: In 1980, the Superfund Trust Fund, Treasury fund group 8145, was
established by CERCLA to provide resources to respond to and clean up hazardous substance
emergencies and abandoned, uncontrolled hazardous waste sites. The Superfund Trust Fund
financing is shared by federal and state governments as well as industry. The EPA allocates
funds from its appropriation to other Federal agencies to carry out CERCLA. Risks to public
health and the environment at uncontrolled hazardous waste sites qualifying for the Agency's
National Priorities List (NPL) are reduced and addressed through a process involving site
assessment and analysis and the design and implementation of cleanup remedies. NPL cleanups
and removals are conducted and financed by the EPA, private parties, or other Federal agencies.
The Superfund Trust Fund includes Treasury's collections, special account receipts from
settlement agreements, and investment activity.
Other Earmarked Funds:
Oil Spill Response Trust Fund: The Oil Spill Response Trust Fund, Treasury fund group 8221,
was authorized by the Oil Pollution Act of 1990 (OPA). Monies were appropriated to the Oil
Spill Response Trust Fund in 1993. The Agency is responsible for directing, monitoring and
providing technical assistance for major inland oil spill response activities. This involves setting
oil prevention and response standards, initiating enforcement actions for compliance with OPA
and Spill Prevention Control and Countermeasure requirements, and directing response actions
when appropriate. The Agency carries out research to improve response actions to oil spills
including research on the use of remediation techniques such as dispersants and bioremediation.
Funding for oil spill cleanup actions is provided through the Department of Transportation under
the Oil Spill Liability Trust Fund and reimbursable funding from other Federal agencies.
Miscellaneous Contributed Funds Trust Fund: The Miscellaneous Contributed Funds Trust
Fund authorized in the Federal Water Pollution Control Act (Clean Water Act) as amended P.L.
92-500 (The Federal Water Pollution Control Act Amendments of 1972), Treasury fund group
8741, includes gifts for pollution control programs that are usually designated for a specific use
by donors and/or deposits from pesticide registrants to cover the costs of petition hearings when
such hearings result in unfavorable decisions to the petitioner.
Pesticide Registration Fund: The Pesticide Registration Fund authorized by a 2004 Act,
"Consolidated Appropriations Act (P.L. 108-199)," Treasury fund group 5374, was authorized in
2004 for the expedited processing of certain registration petitions and associated establishment of
tolerances for pesticides to be used in or on food and animal feed. Fees covering these activities,
as authorized under the FIFRA Act of 1988, are to be paid by industry and deposited into this
fund group.
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Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): The FIFRA Revolving Fund,
Treasury fund group 4310, was authorized by the FIFRA Act of 1972, as amended in 1988 and
as amended by the Food Quality Protection Act of 1996. Pesticide maintenance fees are paid by
industry to offset the costs of pesticide reregi strati on and reassessment of tolerances for
pesticides used in or on food and animal feed, as required by law.
Tolerance Revolving Fund: The Tolerance Revolving Fund, Treasury fund group 4311, was
authorized in 1963 for the deposit of tolerance fees. Fees are paid by industry for Federal
services to set pesticide chemical residue limits in or on food and animal feed. The fees collected
prior to January 2, 1997 were accounted for under this fund. Presently these fees are being
deposited in the FIFRA fund.
Exxon Valdez Settlement Fund: The Exxon Valdez Settlement Fund authorized by a 1992 Act,
"Making appropriations for the Department of Veterans Affairs and Housing and Urban
Development, and for sundry independent agencies, boards, commissions, corporations, and
offices for the fiscal year ending September 30, 1993 (P.L. 102-389)," Treasury fund group
5297, has funds available to carry out authorized environmental restoration activities. Funding is
derived from the collection of reimbursements under the Exxon Valdez settlement as a result of
an oil spill.
Note 21. Exchange Revenues, Statement of Net Cost
Exchange revenues on the Statement of Net Cost include income from services provided, interest
revenue (with the exception of interest earned on trust fund investments), and miscellaneous
earned revenue. As of September 30, 2008 and 2007, exchange revenues are $634 million and
$550 million, respectively.
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Note 22. Intragovernmental Costs and Exchange Revenue
09-1-0026
FY 2008
Clean Air
Program Costs
Earned Revenue
NET COST
Clean & Safe Water
Program Costs
Earned Revenue
NET COST
Land Preservation &
Restoration
Program Costs
Earned Revenue
NET COST
Healthy Communities &
Ecosystems
Program Costs
Earned Revenue
NET COST
Compliance &
Environmental
Stewardship
Program Costs
Earned Revenue
NET COST
Total
Program Costs
Earned Revenue
NET COST
Intragovern-
mental
181,467
18,360
162,679
7,615
347,011
73,829
281,767
22,710
176,376
5,540
With the
Public
$ 816,336
2,043
TOTAL
997,803
20,403
163,107 $ 814,293 $ 977,400 $
FY 2007
Intragovern
mental
185,389 $
15,594
169,795 $
With the
Public
818,753 $
2,997
815,756 $
TOTAL
1,004,142
18,591
985,551
3,334,953
2,841
3,497,632
10,456
180,571 $ 3,868,428 $ 4,048,999
11,016 2,262 13,278
155,064 $ 3,332,112 $ 3,487,176 $ 169,555 $ 3,866,166 $ 4,035,721
$ 1,654,205
460,055
2,001,216
533,884
396,786 $ 1,607,952 $ 2,004,738
101,036 352,963 453,999
273,182 $ 1,194,150 $ 1,467,332 $ 295,750 $ 1,254,989 $ 1,550,739
$ 1,126,764
39,407
1,408,531
62,117
275,068 $ 1,144,793 $ 1,419,861
18,450 38,902 57,352
259,057 $ 1,087,357 $ 1,346,414 $ 256,618 $ 1,105,891 $ 1,362,509
593,853
1,801
770,229
7,341
182,101
5,613
603,463
1,265
785,564
6,878
170,836 $ 592,052 $ 762,888 $ 176,488 $ 602,198 $ 778,686
$ 1,149,300 $ 7,526,111 $ 8,675,411 $ 1,219,915 $ 8,043,389 $ 9,263,304
128,054 506,147 634,201 151,709 398,389 550,098
$ 7,645,000 $ 8,713,206
$ 1,021,246 $ 7,019,964 $ 8,041,210 $ 1,068,206
Intragovernmental costs relate to the source of the goods or services not the classification of the
related revenue.
Note 23. Cost of Stewardship Land
The costs related to the acquisition of stewardship land was approximately $2 million in FY
2008 and less than $150 thousand in FY 2007. These costs are included in the Statement of Net
Cost.
Note 24. Environmental Cleanup Costs
As of September 30, 2008, EPA has six sites that require clean up stemming from its activities.
Costs amounting to $269 thousand may be paid out of the Treasury Judgment Fund. Two
claimants' chance of success are characterized as probable and three as reasonably possible.
Additionally, EPA has one site ($80 thousand) characterized as having a remote chance of
success. EPA also holds title to a site in Edison, New Jersey which was formerly an Army Depot.
While EPA did not cause the contamination, the Agency could potentially be liable for a portion
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of the cleanup costs. However, it is expected that the Department of Defense and General
Services Administration will bear all or most of the cost of remediation. In addition, EPA has
two sites that have an unfunded environmental liability of $230 thousand.
Accrued Cleanup Cost:
The EPA has 16 sites that will require future clean up associated with permanent closure. The
estimated costs will be approximately $19 million. Since the cleanup costs associated with
permanent closure are not primarily recovered through user fees, EPA has elected to recognize
the estimated total cleanup cost as a liability and record changes to the estimate in subsequent
years.
The FY 2008 estimate for unfunded cleanup costs increased by $1.2 million from the FY 2007
estimate.
Note 25. State Credits
Authorizing statutory language for Superfund and related Federal regulations requires states to
enter into SSCs when EPA assumes the lead for a remedial action in their state. The SSC defines
the state's role in the remedial action and obtains the state's assurance that it will share in the
cost of the remedial action. Under Superfund's authorizing statutory language, states will
provide EPA with a 10 percent cost share for remedial action costs incurred at privately owned
or operated sites, and at least 50 percent of all response activities (i.e., removal, remedial
planning, remedial action, and enforcement) at publicly operated sites. In some cases, states may
use EPA-approved credits to reduce all or part of their cost share requirement that would
otherwise be borne by the states. Credit is limited to state site-specific expenses EPA has
determined to be reasonable, documented, direct out-of-pocket expenditures of non-Federal
funds for remedial action.
Once EPA has reviewed and approved a state's claim for credit, the state must first apply the
credit at the site where it was earned. The state may apply any excess/remaining credit to
another site when approved by EPA. As of September 30, 2008, the total remaining state credits
have been estimated at $15.3 million. The estimated ending credit balance on September 30,
2007 was $14.5 million.
Note 26. Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response
actions at their sites with the understanding that EPA will reimburse them a certain percentage of
their total response action costs. EPA's authority to enter into mixed funding agreements is
provided under CERCLA Section 11 l(a)(2). Under CERCLA Section 122(b)(l), as amended by
SARA, PRPs may assert a claim against the Superfund Trust Fund for a portion of the costs they
incurred while conducting a preauthorized response action agreed to under a mixed funding
agreement. As of September 30, 2008, EPA had 14 outstanding preauthorized mixed funding
agreements with obligations totaling $25 million. A liability is not recognized for these amounts
until all work has been performed by the PRP and has been approved by EPA for payment.
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Further, EPA will not disburse any funds under these agreements until the PRP's application,
claim, and claims adjustment processes have been reviewed and approved by EPA.
Note 2 7. Custodial Revenues and Accounts Receivable
Fines, Penalties and Other Miscellaneous Receipts
Accounts Receivable for Fines, Penalties and Other
Miscellaneous Receipts:
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Total
$
FY 2008
120,657
220,123
(171,966)
48,157
$
$
$
FY 2007
89,330
196,590
(156,401)
40,189
EPA uses the accrual basis of accounting for the collection of fines, penalties and miscellaneous
receipts. Collectibility by EPA of the fines and penalties is based on the RPs' willingness and
ability to pay.
Note 28. Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited
FY 2008 Statement of Budgetary Resources, will be reconciled to the amounts included in the
FY 2009 Budget of the United States Government when they become available. The Budget of
the United States Government with actual numbers for FY 2008 has not yet been published. We
expect it will be published by March 2009, and it will be available on the OMB website at
http://www.whitehouse.gov/. The actual amounts published for the year ended September 30,
2007 are included in EPA's FY 2008 financial statement disclosures.
FY 2007
Statement of Budgetary Resources
Adjustments to Undelivered Orders and
Other
Expired and Immaterial Funds*
Rounding Differences**
Reported in Budget of the U. S.
Government
Budgetary
Resources
"$ 13,058,309
3,780
(264,384)
(1,705)
Obligations
9,516,922
1,679
(1,520)
(1,081)
Offsetting
Receipts
1,307,458
Net Outlays
9,564,449
(458)
(1,449)
$ 12,796,000 $ 9,516,000 $ 1,307,000 $ 9,563,000
* Expired funds are not included in Budgetary Resources Available for Obligation and Total
New Obligations in the Budget Appendix (lines 23.90 and 10.00). Also, minor funds are not
included in the Budget Appendix.
** Balances are rounded to millions in the Budget Appendix.
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Note 29. Recoveries and Resources Not Available, Statement of Budgetary Resources
Recoveries of Prior Year Obligations, Temporarily Not Available, and Permanently Not
Available on the Statement of Budgetary Resources consist of the following amounts:
FY 2008 FY 2007
Recoveries of Prior Year Obligations-
downward adjustments of prior years'
obligations $ 281,117 $ 387,621
Temporarily Not Available-rescinded authority (6,366) -_
Permanently Not Available:
Payments to Treasury (3,032) (2,769)
Rescinded authority (117,284)
Canceled authority (5,210) (4,564)
Total Permanently Not Available $ (125,526) $ (7,333)
Note 30. Unobligated Balances Available
The unobligated balances available consist of the following as of September 30, 2008 and 2007.
Unobligated balances are a combination of two lines on the Statement of Budgetary Resources:
Apportioned, Unobligated Balances and Unobligated Balances Not Available. Unexpired
unobligated balances are available to be apportioned by the OMB for new obligations at the
beginning of the following fiscal year. The expired unobligated balances are only available for
upward adjustments of existing obligations.
FY 2008 FY 2007
Unexpired Unobligated Balance $ 3,205,306 $ 3,279,240
Expired Unobligated Balance 346,574 262,147
Total $ 3,551,880 $ 3,541,387
Note 31. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders at the end of the September 30, 2008 and
2007 are as follows:
FY 2008 FY 2007
Undelivered Orders $ 8,427,344 $ 8,714,675
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Note 32. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fund, or trust fund receipt
accounts offset gross outlays. For FYs 2008 and 2007, the following receipts were generated
from these activities:
FY 2008 FY 2007
Trust Fund Recoveries $ 89,995 $ 234,171
Special Fund Environmental Service 22,911 22,648
Downward Re-estimates of Subsidies - 29
Trust Fund Appropriation 984,974 1,040,372
Special Fund Receipt Account and Treasury
Miscellaneous Receipts and Clearing Accounts 20,549 10,238
Total $ 1,118,429 $ 1,307,458
Note 33. Transfers-In and Out, Statement of Changes in Net Position
Appropriation Transfers, In/Out:
For FYs 2008 and 2007, the Appropriation Transfers under Budgetary Financing Sources on the
Statement of Changes in Net Position are comprised of nonexpenditure transfers that affect
Unexpended Appropriations for non-invested appropriations. These amounts are included in the
Budget Authority, Net Transfers and Prior Year Unobligated Balance, Net Transfers lines on the
Statement of Budgetary Resources. Detail of the Appropriation Transfers on the Statement of
Changes in Net Position and reconciliation with the Statement of Budgetary Resources follow:
Transfers In/Out Without Reimbursement, Budgetary:
Fund/Type of Account FY 2008 FY 2007
U.S. Navy $ (7,875) $ -_
Total Appropriation Transfers (Other Funds) $ (7,875) -
Net Transfers from Invested Funds 1,389,902 1,344,610
Transfer to Another Agency (7,875)
Allocations Rescinded 5,940 -
Total of Net Transfers on Statement of
Budgetary Resources $ 1,387,967$ 1,344,610
For FYs 2008 and 2007, Transfers In/Out under Budgetary Financing Sources on the Statement
of Changes in Net Position consist of transfers to or from other Federal agencies and between
EPA funds. These transfers affect Cumulative Results of Operations. Detail of the transfers-in
and transfers-out, expenditure and nonexpenditure, follows:
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Type of Transfer/Funds
FY 2008
FY 2007
Earmark
Other
Funds
Earmark
Other
Funds
Transfers-in (out)
nonexpenditure, Earmark to
S&T and OIG funds $
Transfer-in nonexpenditure
recovery from CDC
Transfers-in, nonexpenditure,
Oil Spill
Transfer-in (out) cancelled
funds
Adjustment from Prior Year
Total Transfers in (out)
without Reimbursement,
Budgetary
(37,204) $
1,905
17,056
53
-
37,204 $ (43,491) $
1,370
15,734
(53)
701
43,491
-
-
-
$ (18,190) $ 37,151 $ (25,686) $
43,491
Transfers In/Out without Reimbursement, Other Financing Sources:
For FYs 2008 and 2007, Transfers In/Out without Reimbursement under Other Financing
Sources on the Statement of Changes in Net Position are comprised of negative subsidy to a
special receipt fund for the credit reform funds. The amounts reported on the Statement of
Changes in Net Position are as follows:
Type of Transfer/Funds
Transfers-in by allocation transfer
agency $
Transfers-in property
Transfers (out) of prior year negative
subsidy to be paid following year
Total Transfers in (out) without
Reimbursement, Budgetary $
FY 2008
FY 2007
Earmark
Other Funds
Earmark
- $
- $
39 $
28
- $
28 $
39$
Other Funds
530
(5)
525
Note 34. Imputed Financing Sources
In accordance with SFFAS No. 5, "Accounting for Liabilities of the Federal Government,"
Federal agencies must recognize the portion of employees' pensions and other retirement
benefits to be paid by the OPM trust funds. These amounts are recorded as imputed costs and
imputed financing for each agency. Each year the OPM provides Federal agencies with cost
factors to calculate these imputed costs and financing that apply to the current year. These cost
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factors are multiplied by the current year's salaries or number of employees, as applicable, to
provide an estimate of the imputed financing that the OPM trust funds will provide for each
agency. The estimates for FY 2008 were $130.1 million ($20.9 million from Earmark funds, and
$109.2 million from Other Funds). For FY 2007, the estimates were $133.3 million ($21.9
million from Earmark Funds, and $111.4 million from Other Funds).
In addition to the pension and retirement benefits described above, EPA also records imputed
costs and financing for Treasury Judgment Fund payments made on behalf of the Agency.
Entries are made in accordance with the Interpretation of Federal Financial Accounting
Standards No. 2, "Accounting for Treasury Judgment Fund Transactions." For FY 2008 entries
for Judgment Fund payments totaled $2.4 million (Other Funds). For FY 2007, entries for
Judgment Fund payments totaled $2.3 million (Other Funds).
The combined total of imputed financing costs for FY 2008 is $132.5 million and in FY 2007
was $135.6 million.
Note 35. Payroll and Benefits Payable
Payroll and benefits payable to EPA employees for the years ending September 30, 2008 and
2007, consist of the following:
FY 2008 Payroll & Benefits Payable Covered b* Not Covered Total
Budgetary by Budgetary
Resources Resources
Accrued Funded Payroll & Benefits $ 46,966 $ - $ 46,966
Withholdings Payable 30,659 - 30,659
Employer Contributions Payable-TSP 2,670 - 2,670
Accrued Unfunded Annual Leave -_ 152,663 152,663
Total - Current $ 80,295 $ 152,663 $ 232,958
FY 2007 Payroll & Benefits Payable
Accrued Funded Payroll & Benefits $ 30,957 $ - $ 30,957
Withholdings Payable 29,297 - 29,297
Employer Contributions Payable-TSP 2,101 - 2,101
Accrued Unfunded Annual Leave -_ 142,843 142,843
Total - Current $ 62,355 $ 142,843 $ 205,198
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Note 36. Other Adjustments, Statement of Changes in Net Position
The Other Adjustments under Budgetary Financing Sources on the Statement of Changes in Net
Position consist of rescissions to appropriated funds and cancellation of funds that expired 5
years earlier. These amounts affect Unexpended Appropriations.
Other Funds Other Funds
FY2008 FY 2007
Rescissions to General
Appropriations $ 117,284 $
Canceled General Authority 5,157 4,561
Total Other Adjustments $ 122,441 $ 4^561"
Note 37. Nonexchange Revenue, Statement of Changes in Net Position
The Nonexchange Revenue, Budgetary Financing Sources, on the Statement of Changes in Net
Position for FYs 2008 and 2007 consists of the following items:
Earmark Funds Earmark Funds
FY 2008 FY 2007
Investments $ 241,873 $ 258,986
Tax Revenue, Net of Refunds 170,762 228,796
Fines and Penalties Revenue 10,442 704
Special Receipt Fund Revenue 22,911 22,648
Revenue $ 445,988 $ 511,134
Note 38. Adjustment for Allocation Transfers
Beginning in FY 2007, the agency that transfers budget authority to another Federal entity must
report all budgetary and proprietary activity related to these transfers in its financial statements.
The cumulative effect of this activity is reported as a "Change in Accounting Principle" on the
Statement of Net Position ($20.9 million - Earmark Funds) and as an "Adjustment to
Unobligated Balance, Brought Forward" and an "Adjustment to Unpaid Obligations, Brought
Forward" on the Statement of Budgetary Resources. There was no adjustment necessary for FY
2008.
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Statement of Budgetary Resources
FY 2007
Beginning Balance:
Unobligated Balance, Brought Forward October 1 $ 3,247,087
Adjustment of Unobligated Balance (Allocation Transfer Agencies) 15,527
Adjusted Total Beginning Balance $ 3,262,614
Note 39. Reconciliation of Net Cost of Operations to Budget (formerly the Statement of
Financing)
FY 2008 FY 2007
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 9,656,040 $ 9,516,922
Less: Spending Authority from Offsetting Collections and Recoveries (1,142,189) (963,361)
Obligations, Net of Offsetting Collections $ 8,513,851 $ 8,553,561
Less: Offsetting Receipts (1,118,429) (1,307,458)
Net Obligations $ 7,395,422 $ 7,246,103
Other Resources
Transfers In/Out Without Reimbursement, Property $ - $ 530
Imputed Financing Sources 132,524 135,609
Net Other Resources Used to Finance Activities $ 132,524 $ 136,139
Total Resources Used To Finance Activities $ 7,527,946 $ 7,382,242
RESOURCES USED TO FINANCE ITEMS
NOT PART OF THE NET COST OF OPERATIONS:
Change in Budgetary Resources Obligated $ 415,809 $ 1,229,438
Resources that Fund Prior Periods Expenses (22)
Budgetary Offsetting Collections and Receipts that
Do Not Affect Net Cost of Operations:
Credit Program Collections Increasing Loan Liabilities for
Guarantees or Subsidy Allowances 3,985 3,979
Offsetting Receipts Not Affecting Net Cost 133,455 267,087
Resources that Finance Asset Acquistion (98,715) (113,393)
Total Resources Used to Finance Items Not Part of the Net Cost of Operations $ 454,512 $ 1,387,111
Total Resources Used to Finance the Net Cost of Operations $ 7,982,458 $ 8,769,353
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FY 2008 FY 2007
COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL
NOT REQUIRE OR GENERATE RESOURCES IN THE CURRENT PERIOD:
Components Requiring or Generating Resources in Future Periods:
Increase in Annual Leave Liability $ 9,807 $ 7,771
Increase in Environmental and Disposal Liability 1,197 8,073
Increase in Unfunded Contingencies 44
Upward/Downward Reestimates of Credit Subsidy Expense - 33
Increase in Public Exchange Revenue Receivables (132,904) (168,330)
Increase in Workers Compensation Costs 5,641 986
Other 59_ 420
Total Components of Net Cost of Operations that Require or
Generate Resources in Future Periods $ (116,156) $ (151,047)
Components Not Requiring/Generating Resources:
Depreciation and Amortization $ 88,586 $ 52,248
Expenses Not Requiring Budgetary Resources 86,322 42,652
Total Components of Net Cost that Will Not Require or Generate Resources $ 174,908 $ 94,900
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period $ 58,752 $ (56,147)
Net Cost of Operations $ 8,041,210 $ 8,713,206
Note 40. Other - Statement of Net Position
In FY 2008, EPA identified an error of $20 million in the Payable for Transfers of Currently
Invested Balances account. This balance was related to activity prior to FY 2001 involving the
allocation of budgetary authority to other federal agencies (parent/child relationship). This error
resulted in an overstatement of payables on the Balance Sheet and an understatement of
Cumulative Results of Operations. In addition, the budgetary resources were increased by this
amount. Since this amount is immaterial to the financial statements a prior period adjustment
was not recorded. To adjust the Cumulative Results of Operations, the $20 million was
recorded on the "Other" line on the Statement of Net Position.
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1.
Environmental Protection Agency
Required Supplementary Information
As of September 30, 2008
(Dollars in Thousands)
(Unaudited)
Deferred Maintenance
The EPA classifies tangible property, plant, and equipment as follows: (1) EPA-Held Equipment,
(2) Contractor-Held Equipment, (3) Land and Buildings, and, (4) Capital Leases. The condition
assessment survey method of measuring deferred maintenance is utilized. The Agency adopts
requirements or standards for acceptable operating condition in conformance with industry
practices. No deferred maintenance was reported for any of the four categories.
Stewardship Land
Stewardship land is acquired as contaminated sites in need of remediation and clean-up; thus the
quality of the land is far-below the standard for usable and manageable land. Easements on
stewardship lands are in good and usable condition but acquired in order to gain access to
contaminated sites.
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2.
Environmental Protection Agency
Required Supplementary Information
Supplemental Statement of Budgetary Resources (Unaudited)
As of September 30, 2008
(Dollars in Thousands)
BUDGETARY RESOURCE
Unobligated Balance Brought Forward, October 1
Recoveries of prior year unpaid obligations
Budgetary Authority:
Appropriation
Borrowing Authority
Spending Authority from Offsetting Collections:
Collected
Change in receivables from Federal sources
Advance received
Without advance from Federal source
Expenditure Transfers from trust funds
Nonexpenditure transers, net anticipated and actual
Temporarily not available pursuant to Public Law
Permanently not available
Total Budgetary Resources
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unbligated Balances:
Unobligated funds apportioned
Unobligated balance not available
Total Status of Budgetary Resources
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net
Unpaid obligations brought forward, October 1
Less: Uncollected customer payments from Federal
sources brought forward, October 1
Total unpaid obligation balance, net
Obligations incurred, net
Less: Gross outlays
Less: Recoveries of prior year unpaid obligations, actual
Change in uncollected customer payments from Federal
sources
Total
Obligated balance, net, end of period:
Unpaid obligations
Less: Uncollected customer payments from Federal
sources
Total, unpaid obligated balance, net, end of period
NET OUTLAYS
Gross outlays
Less: Offsetting collections
Less: Distributed Offsetting Receipts
Total, Net Outlays
$ 672,087 $
28,536
2,364,854
80,512
(24,331)
(3,311)
23,661
(41,098)
$ 3,100,910 $
$ 2,361,866 $
112,631
2,474,497
320,214
306,199
$ 3,100,910 $
$ 830,336 $
(447,386)
382,950
2,474,498
(2,382,395)
(28,536)
669
447,186
893,903
(446,717)
$ 447,186 $
$ 2,382,395 $
(77,200)
7,015 $
985
20,730
1,429
30,159 $
- $
23,529
23,529
6,630
30,159 $
2,295 $
2,295
23,529
(21,181)
(985)
3,658
3,658
3,658 $
21,181 $
(22,159)
6,272 $
3,424
39
12
107,492
(1,677)
115,562 $
108,231 $
32
108,263
7,299
115,562 $
93,531 $
93,531
108,263
(78,392)
(3,424)
119,978
119,978
119,978 $
78,392 $
(53)
221,937
6,047
772,129
4,844
(129)
3,890
7,838
25,718
(12,935)
1,029,339
793,930
8,908
802,838
191,973
34,528
1,029,339
506,362
(33,960)
472,402
802,838
(829,852)
(6,047)
(2,539)
436,802
473,301
(36,499)
436,802
829,852
(39,621)
$ 1,330,730 $
66,165
2,983,595
5,840
(7,875)
(51,544)
$ 4,326,911 $
$ 3,236,228 $
3,236,228
1,090,683
$ 4,326,911 $
$ 6,930,438 $
6,930,438
3,236,228
(3,767,034)
(66,165)
6,333,467
6,333,467
$ 6,333,467 $
$ 3,767,034 $
(5,840)
1,303,346 $
175,960
1,147,658
34
596,465
2,290
75,860
28,281
11,433
1,288,350
(4,689)
(19,949)
4,605,039 $
2,535,657 $
475,028
3,010,685
1,588,001
6,353
4,605,039 $
1,510,245 $
(151,444)
1,358,801
3,010,684
(2,801,181)
(175,960)
(31,587)
1,360,757
1,543,787
(183,030)
1,360,757 $
2,801,181 $
(682,743)
(1,118,429)
3,541,387
281,117
7,268,236
34
708,430
(22,170)
77,880
59,780
37,151
1,387,967
(6,366)
(125,526)
13,207,920
9,035,912
620,128
9,656,040
3,204,800
347,080
13,207,920
9,873,207
(632,790)
9,240,417
9,656,040
(9,880,035)
(281,117)
(33,457)
8,701,848
9,368,094
(666,246)
8,701,848
9,880,035
(827,616)
(1,118,429)
2,305,195 $
(978) $
790,231 $ 3,761,194 $ 1,000,009 $ 7,933,990
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Environmental Protection Agency
Required Supplementary Stewardship Information (Unaudited)
For the Year Ended September 30, 2008
(Dollars in Thousands)
INVESTMENT IN THE NATION'S RESEARCH AND DEVELOPMENT:
Public and private sector institutions have long been significant contributors to our nation's
environment and human health research agenda. EPA's Office of Research and Development,
however, is unique among scientific institutions in this country in combining research, analysis,
and the integration of scientific information across the full spectrum of health and ecological
issues and across the risk assessment and risk management paradigm. Research enables us to
identify the most important sources of risk to human health and the environment, and by so
doing, informs our priority-setting, ensures credibility for our policies, and guides our
deployment of resources. It gives us the understanding, the framework, and technologies we need
to detect, abate, and avoid environmental problems. Research also provides the crucial
underpinning(s) for EPA decision-making and challenges us to apply the best available science
and technical analysis to our environmental problems and to practice more integrated, efficient
and effective approaches to reducing environmental risks.
Among the Agency's highest priorities are research programs that address: the development of
alternative techniques for prioritizing chemicals for further testing through computational
toxicology; the provision of near-term, appropriate, affordable, reliable, tested, and effective
technologies and guidance for potential threats to homeland security; the potential risks and
effects of manufactured nanomaterials on human health and the environment; the impacts of
global change and providing information to policy makers to help them adapt to a changing
climate; the environmental effects on children's health; the potential risks of unregulated
contaminants in drinking water; the development of recreational water quality criteria; the health
effects of air pollutants such as parti culate matter; and the protection of the nation's ecosystems.
EPA also supports regulatory decision-making with chemical risk assessments.
For FY 2008, the full cost of the Agency's Research and Development activities totaled
approximately $701 million. Below is a breakout of the expenses (dollars in thousands):
FY 2004 FY 2005 FY 2006 FY2007 FY2008
Programmatic Expenses 581,323 628,467 630,438 624,088 597,080
Allocated Expenses 91,675 112,558 104,167 100,553 103,773
See Section II of the PAR for more detailed information on the results of the Agency's
investment in research and development. Each of EPA's strategic goals has a Science and
Research Objective.
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INVESTMENT IN THE NATION'S INFRASTRUCTURE (Non-Federal Physical Property)
The Agency makes significant investments in the nation's drinking water and clean water
infrastructure. The investments are the result of three programs: the Construction Grants
Program, which is being phased out and two State Revolving Fund (SRF) programs.
Construction Grants Program: During the 1970s and 1980s, the Construction Grants Program
was a source of Federal funds, providing more than $60 billion of direct grants for the
construction of public wastewater treatment projects. These projects, which constituted a
significant contribution to the nation's water infrastructure, included sewage treatment plants,
pumping stations, and collection and intercept sewers, rehabilitation of sewer systems, and the
control of combined sewer overflows. The construction grants led to the improvement of water
quality in thousands of municipalities nationwide.
Congress set 1990 as the last year that funds would be appropriated for Construction Grants.
Projects funded in 1990 and prior will continue until completion. After 1990, EPA shifted the
focus of municipal financial assistance from grants to loans that are provided by State Revolving
Funds.
State Revolving Funds: EPA provides capital, in the form of capitalization grants, to state
revolving funds which state governments use to make loans to individuals, businesses, and
governmental entities for the construction of wastewater and drinking water treatment
infrastructure. When the loans are repaid to the state revolving fund, the collections are used to
finance new loans for new construction projects. The capital is reused by the states and is not
returned to the Federal Government.
The Agency also is appropriated funds to finance the construction of infrastructure outside the
Revolving Funds. These are reported below as Other Infrastructure Grants.
The Agency's expenses related to investments in the nation's Water Infrastructure are outlined
below (dollars in thousands):
FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Construction Grants 48,948 21,148 39,193 9,975 11,517
Clean Water SRF 1,407,345 1,127,883 1,339,702 1,399,616 1,063,825
Safe Drinking Water SRF 802,629 715,060 910,032 962,903 816,038
Other Infrastructure Grants 341,767 385,226 411,023 381,481 388,555
Allocated Expenses 410,129 402,853 446,113 443,716 396,253
See the Goal 2 - Clean and Safe Water portion in Section II of the PAR for more detailed
information on the results of the Agency's investment in infrastructure.
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HUMAN CAPITAL
Agencies are required to report expenses incurred to train the public with the intent of increasing
or maintaining the nation's economic productive capacity. Training, public awareness, and
research fellowships are components of many of the Agency's programs and are effective in
achieving the Agency's mission of protecting public health and the environment, but the focus is
on enhancing the nation's environmental, not economic, capacity.
The Agency's expenses related to investments in the Human Capital are outlined below (dollars
in thousands):
FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Training and Awareness Grants 48,416 46,750 43,765 32,845 30,768
Fellowships 7,553 10,195 12,639 12,185 9,650
Allocated Expenses 8,826 10,199 9,320 7,255 7,025
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements (Unaudited)
Balance Sheet for Superfund Trust Fund
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008
FY 2007
ASSETS
Intragovern mental:
Fund Balance With Treasury (Note S1)
Investments
Accounts Receivable, Net
Other
Total Intragovernmental
Accounts Receivable, Net
Property, Plant & Equipment, Net
Other
Total Assets
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities
Other
Total Intragovernmental
Accounts Payable & Accrued Liabilities
Pensions & Other Actuarial Liabilities
Cashout Advances, Superfund (Note S2)
Payroll & Benefits Payable
Other
Total Liabilities
NET POSITION
Cumulative Results of Operations
Total Net Position
Total Liabilities and Net Position
45,596
2,926,233
17,832
21,116
3,010,777 $
299,941
67,542
751
3,379,011
$
$
$
52,639
50,448
103,087
141,049
7,921
286,630
40,902
44,710
624,299
2,754,712
2,754,712
51,081
2,751,850
16,955
14,927
2,834,813
312,874
70,601
1,030
3,219,318
89,239
46,182
135,421
139,607
6,889
190,269
35,914
40,793
548,893
2,670,425
2,670,425
3,379,011
3,219,318
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements (Unaudited)
Statement of Net Cost for Superfund Trust Fund
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
COSTS
Gross Costs $ 1,530,979 $ 1,497,010
Expenses from Other Appropriations (Note S5) 69,769 76,452
Total Costs 1,600,748 1,573,462
Less:
Earned Revenue 502,177 377,904
NET COST OF OPERATIONS $ 1,098,571 $ 1,195,558
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements (Unaudited)
Statement of Changes in Net Position for Superfund Trust Fund
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY2008
Cumulative
Results of
Operations
FY 2007
Cumulative
Results of
Operations
Net Position - Beginning of Period $ 2,670,425 $ 2,606,400
Adjustment:
Adjustment to Unobligated Balance (Alloc Transfer Agencies) (Note 38) -_ 20,900
Beginning Balances, as Adjusted $ 2,670,425 $ 2,627,300
Budgetary Financing Sources:
Nonexchange Revenue-Securities Investment 114,340 141,407
Nonexchange Revenue-Other 10,442 2,721
Transfers In/Out (35,246) (41,419)
Trust Fund Appropriations 984,974 1,040,371
Other (Note 40) 19,878
Income from Other Appropriations (Note S5) 69,769 76,452
Total Budgetary Financing Sources $ 1,164,157 $ 1,219,532
Other Financing Sources (Non-Exchange)
Transfers in/Out
Imputed Financing Sources
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations $ 2,754,712 $ 2,670,425
-
18,701
18,701 $
(1,098,571)
84,287
39
19,112
19,151
(1,195,558)
43,125
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements (Unaudited)
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008
FY 2007
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1 $
Adjustment to Unobligated Balance (Alloc Transfer Agcy) (Note 38)
Adjusted Subtotal
Recoveries of Prior Year Unpaid Obligations
Budgetary Authority:
Appropriation
Spending Authority from Offsetting Collections
Earned:
Collected
Change in Receivables from Federal Sources
Change in Unfilled Customer Orders:
Advance Received
Without Advance from Federal Sources
Total Spending Authority from Offsetting Collections
Nonexpenditure Transfers, Net, Anticipated and Actual
Temporarily Not Available Pursuant to Public Law
Permanently Not Available
Total Budgetary Resources $
1,245,311 $
1,245,311
168,480
1,088,388
15,527
1,103,915
127,261
37,205
390,753
(1,725)
43,493
227,367
(1,811)
74,038
4,476
467,542
1,288,349
(4,263)
(54)
3,202,570 $
(33,969)
29,999
221,586
1,272,575
-
(2)
2,768,828
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated Balances:
Apportioned
Total Unobligated Balances
Unobligated Balances Not Available
Total Status of Budgetary Resources (S6)
1,425,282
264,112
1,689,394
1,512,670
1,512,670
506
1,367,588
155,929
1,523,517
1,240,416
1,240,416
4,895
$ 3,202,570 $ 2,768,828
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements (Unaudited)
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2008 and 2007
(Dollars in Thousands)
FY 2008 FY 2007
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1 $ 1,361,335 $ 1,454,495
Adjustment to Unpaid Obligations (Alloc Transfer Agencies) (Note 38) -_ 7,215
Adjusted Total 1,361,335 1,461,710
Less: Uncollected Customer Payments from Federal Sources, Brought
Forward, October 1 (110,170) (81,983)
Total Unpaid Obligated Balance, Net 1,251,165 1,379,727
Obligations Incurred 1,689,394 1,523,517
Less: Gross Outlays (1,489,936) (1,496,631)
Less: Recoveries of Prior Year Unpaid Obligations, Actual (168,480) (127,261)
Change in Uncollected Customer Payments from Federal Sources (2,752) (28,187)
Total, Change in Obligated Balance 1,279,391 1,251,165
Obligated Balance, Net, End of Period:
Unpaid Obligations 1,392,312 1,361,335
Less: Uncollected Customer Payments from Federal Sources (112,921) (110,170)
Total, Unpaid Obligated Balance, Net, End of Period $ 1,279,391 $ 1,251,165
NET OUTLAYS
Net Outlays:
Gross Outlays (Note S6) $ 1,489,936 $ 1,496,631
Less: Offsetting Collections (Note S6) (464,790) (193,398)
Distributed Offsetting Receipts *(Note S6) (1,074,969) (1,274,542)
Total, Net Outlays (49,823) 28,691
"Offsetting receipts line includes the amount in 68X0250 (payment to trust fund) from Treasury.
The payment cannot be made directly through the trust fund but must go through a "pass-through" fund.
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Environmental Protection Agency
Supplemental Information and Other Reporting Requirements (Unaudited)
Related Notes to Superfund Trust Financial Statements
Note SI. Fund Balance with Treasury for Superfund Trust
Fund Balances with Treasury as of September 30, 2008 and 2007 consist of the following:
FY 2008 FY 2007
Fund Balance $ 45,596 $ 51,081
Fund balances are available to pay current liabilities and to finance authorized purchase
commitments (see Status of Fund Balances below).
Status of Fund Balances: FY 2008 FY 2007
Unobligated Amounts in Fund Balances:
Available for Obligation $ 1,512,670 $ 1,240,417
Unavailable for Obligations 506 4,895
Net Receivables from Invested Balances (2,749,864) (2,446,934)
Balances in Treasury Trust Fund 2,894 1,539
Obligated Balance not yet Disbursed 1,279,390 1,251,164
Totals $ 45,596 $ 51,081
The funds available for obligation may be apportioned by the OMB for new obligations at the
beginning of the following fiscal year. Funds unavailable for obligation are mostly balances in
expired funds, which are available only for adjustments of existing obligations.
Note S2. Cashout Advances, Superfund
Cashouts are funds received by EPA, a state, or another PRP under the terms of a settlement
agreement (e.g., consent decree) to finance response action costs at a specified Superfund site.
Under CERCLA Section 122(b)(3), cashout funds received by EPA are placed in site-specific,
interest bearing accounts known as special accounts and are used for potential future work at
such sites in accordance with the terms of the settlement agreement. Funds placed in special
accounts may be disbursed to PRPs, to states that take responsibility for the site, or to other
Federal agencies to conduct or finance response actions in lieu of EPA without further
appropriation by Congress. As of September 30, 2008 and 2007, cashouts are $287 million and
$190 million, respectively.
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Note S3. Superfund State Credits
Authorizing statutory language for Superfund and related Federal regulations require states to
enter into SSCs when EPA assumes the lead for a remedial action in their state. The SSC defines
the state's role in the remedial action and obtains the state's assurance that they will share in the
cost of the remedial action. Under Superfund's authorizing statutory language, states will
provide EPA with a 10 percent cost share for remedial action costs incurred at privately owned
or operated sites, and at least 50 percent of all response activities (i.e., removal, remedial
planning, remedial action, and enforcement) at publicly operated sites. In some cases, states may
use EPA approved credits to reduce all or part of their cost share requirement that would
otherwise be borne by the states. Credit is limited to state site-specific expenses EPA has
determined to be reasonable, documented, direct out-of-pocket expenditures of non-Federal
funds for remedial action.
Once EPA has reviewed and approved a state's claim for credit, the state must first apply the
credit at the site where it was earned. The state may apply any excess/remaining credit to
another site when approved by EPA. As of September 30, 2008, the total remaining state credits
have been estimated at $15.3 million. The estimated ending credit balance on September 30,
2007 was $14.5 million.
Note S4. Superfund Preauthorized Mixed Funding Agreements
Under Superfund preauthorized mixed funding agreements, PRPs agree to perform response
actions at their sites with the understanding that EPA will reimburse them a certain percentage of
their total response action costs. EPA's authority to enter into mixed funding agreements is
provided under CERCLA Section 11 l(a)(2). Under CERCLA Section 122(b)(l), as amended by
SARA, PRPs may assert a claim against the Superfund Trust Fund for a portion of the costs they
incurred while conducting a preauthorized response action agreed to under a mixed funding
agreement. As of September 30, 2008, EPA had 14 outstanding preauthorized mixed funding
agreements with obligations totaling $25 million. A liability is not recognized for these amounts
until all work has been performed by the PRP and has been approved by EPA for payment.
Further, EPA will not disburse any funds under these agreements until the PRP's application,
claim, and claims adjustment processes have been reviewed and approved by EPA.
Note S5. Income and Expenses from other Appropriations; General Support Services Charged
to Superfund
The Statement of Net Cost reports costs that represent the full costs of the program outputs.
These costs 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, the EPM appropriation funded a variety of programmatic and
non-programmatic activities across the Agency, subject to statutory requirements. This
appropriation was created to fund personnel compensation and benefits, travel, procurement, and
contract activities. This distribution is calculated using a combination of specific identification
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of expenses to Reporting Entities, and a weighted average that distributes expenses
proportionately to total programmatic expenses. As illustrated below, this estimate does not
impact the consolidated totals of the Statement of Net Cost or the Statement of Changes in Net
Position.
FY 2008
FY 2007
Superfund
All Others
Total
Income from
Other
Appropriations
69,769
(69,769)
- $
Expenses from
Other
Appropriations
(69,769) $
69,769
- $
Income from
Net Other
Effect Appropriations
- $ 76,452
(76,452)
- $
Expenses from
Other Net
Appropriations Effect
$ (76,452) $
76,452
$ - $ -
In addition, the related general support services costs allocated to the Superfund Trust Fund from
the S&T and EPM funds are $0.5 million for FY 2008 and $2.3 million for FY 2007.
Note S6. Statement of Budgetary Resources, Superfund
Budgetary resources, obligations incurred, and outlays, as presented in the audited FY 2007
Statement of Budgetary Resources, will be reconciled to the amounts included in the Budget of
the United States Government when they become available. The Budget of the United States
Government with actual numbers for FY 2008 has not yet been published. We expect it will be
published by March 2009, and it will be available on the OMB website at
http://www.whitehouse.gov/omb/budget/fy2010. The actual amounts published for the year
ended September 30, 2007 are included in EPA's FY 2008 financial statement disclosures.
Budgetary Offsetting
Resources Obligations Receipts Outlays
1,523,517
FY 2007
Statement of Budgetary Resources
Rounding Differences*
$ 2,768,828
(828)
483
1,274,542 $
(542)
1,303,233
(1,233)
Reported in Budget of the U. S. Government $ 2,768,000 S 1,524,000 S 1,274,000 S 1,302,000
Balances are rounded to millions in the Budget Appendix.
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Note S'7. Superfund Eliminations
The Superfund Trust Fund has intra-agency activities with other EPA funds which are eliminated
on the consolidated Balance Sheet and the Statement of Net Cost. These are listed below:
FY 2008 FY 2007
Advances $9,716 $5,817
Expenditure Transfers Payable $26,794 $30,948
Accrued Liabilities $3,704 $6,001
Expenses $28,718 $21,418
Transfers $37,151 $43,491
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Appendix
Agency's Response to Draft Report
11/12/2008
MEMORANDUM
SUBJECT: EPA's Response to the Office of Inspector General's Draft Audit Report,
Audit of EPA's Fiscal 2007 and 2008 Financial Statements
FROM: Lyons Gray (2710A) /s/
Chief Financial Officer
TO: Bill A. Roderick (2410T)
Deputy Inspector General
Fiscal Year 2008 marks another successful financial statements audit cycle for the U.S.
Environmental Protection Agency. This year, we broadened Agency partnerships with a focus
on strengthening fiscal integrity, enhancing core business operations, and contributing to
Agency-wide performance management systems. We are proud of the many accomplishments
and thank you for identifying additional areas for improvement in the Inspector General's
Report. The audit work performed will help guide EPA's work in these areas as well as shape
future financial management initiatives.
Our offices worked together to expand stakeholder engagement in fiscal stewardship
yielding significant results. Some of the achievements are presented in Attachment 1 along with
commitments and responses from responsible management officials. In addition, suggested
changes to the report are included in Attachment 2. Detailed corrective action plans will be
provided to you and your staff within 90-day s of the final audit report. Please let me know if you
have any questions, or your staff can contact Lorna McAllister, Director of the Office of
Financial Management regarding the audit.
Attachments
cc: Luis Luna, Assistant Administrator, Office of Administration and Resource Management
Molly O'Neil, Assistant Administrator, Office of Environmental Information
Susan Hazen, Deputy Assistant Administrator, Office of Administration and Resource
Management
Linda Travers, Deputy Assistant Administrator, Office of Environmental Information
Maryann Froehlich, Deputy Chief Financial Officer
James Newsom, Assistant Regional Administrator, Region 3
Melissa Heist, Assistant Inspector General
Paul Curtis, Director, Financial Statements Audits
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Attachment 1
EPA's Response to the Office of Inspector General's
Draft Fiscal 2007 and 2008 Financial Statements Audit Report
As demonstrated by the accomplishments listed below, the Agency maintains a strong and robust
financial management program.
• By streamlining its business processes, EPA successfully converted to the Department of the
Treasury's (Treasury's) new accounting system. One-third of business processes were
eliminated and a legacy server terminated. In addition to these operational efficiencies, EPA
helped the Federal government move one step closer to unified financial reporting.
• The Agency strengthened its financial data security by developing an event-driven control
that flags changes made to personal vendor information (170,000 changes made in FY 2008)
in the finance system. EPA also reduced user access to personally identifiable information
by 75 percent, re-certified users, and realigned security rights in the Agency's core financial
management system.
• EPA invested Superfund, Leaking Underground Storage Tank, and Federal Insecticide,
Fungicide, and Rodenticide Act Funds monies, and earned nearly $242 million in interest.
• Through its data integration effort, EPA linked the FEMA/EPA national response framework
with resource utilization, so that real-time costs are now available on-line to Agency
managers and decision makers on the front lines during an emergency event.
• The Agency freed up $32 million in funds unnecessarily tied up in expired grants and
contracts for other high priority work in the Agency.
• EPA paid 99.95 percent of its invoices on time - over 32,000 payments totaling $1.1 billion.
• EPA contributed to a government-wide initiative by doing its part in managing and reporting
business transactions with other agencies. In FY 2008, EPA reduced its balances on
Treasury's material differences report from $84.9 million to $55.4 million.
These actions demonstrate that EPA adheres to the highest standards for financial management.
We are confident that focused attention on some of the areas noted during the audit, in
conjunction with the launch of EPA's new accounting system, will advance the Agency's goals
of improving fiscal integrity and operational efficiency and result in better information for
decision making. Specific recommendations and corrective actions, unless indicated otherwise
in Attachment 2, will be provided within 90-day s of the final audit report.
EPA concurs with the Inspector General's assessment in the following areas:
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• Improve the timeliness in paying for telecommunications services; calculate and disburse any
interest resulting from previous late payments (Office of Technology Operations, Office of
Environmental Information; Office of Financial Services, Office of the Chief Financial
Officer)
• Improve the quarterly matching of revenues and expenses for State contributions provided
toward the clean-up of Superfund sites with the costs incurred (Office of Financial Services,
Office of the Chief Financial Officer)
• Establish a more effective accrual process for unbilled receivables (Office of Financial
Services, Office of the Chief Financial Officer)
• Maintain evidence that validates the need to change a vendor's information in the accounting
system (Office of Financial Services, Office of the Chief Financial Officer)
• Improve the calculation and review process of Superfund Special Accounts interest (Office
of Financial Services, Office of the Chief Financial Officer)
• Continue the progress made completing the open actions related to the new e-Relocation
program and associated physical and security requirements carried forward from a previous
audit (Office of Financial Services, Office of the Chief Financial Officer)
• Realize the tangible benefits of consolidating most current financial management systems
within one organizational unit, which includes standardizing documentation and compliance
with relevant requirements and controls (Office of Enterprise, Technology, and Innovation,
and the Office of Program Management in the Office of the Chief Financial Officer)
• Enhance the process for identifying and liquidating excess monies on grants and interagency
agreements (Office of Grants and Debarment, Office of Administration and Resources
Management)
• Review the software capitalization cycle and make improvements as necessary to ensure the
integrity of the capitalized balance and related depreciation (Office of Information
Collection, Office of Environmental Information; Office of Financial Services, Office of the
Chief Financial Officer)
• Evaluate other payroll reconciliation opportunities associated with the Agency's partnership
with the Defense Finance and Accounting Service, Internal Revenue Service, and Treasury
(Office of Financial Services, Office of the Chief Financial Officer)
• Continue successful measures in reconciling transactions with other Federal agencies (Office
of Financial Services, Office of the Chief Financial Officer)
The following areas may require more discussions between Agency leaders and the Inspector
General's staff to resolve differing opinions:
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Asbestos Loan Program Violated the Anti-Deficiency Act: The Agency is conducting an
internal review and working with the Office of Management and Budget to determine if a
technical violation has occurred, since permanent budget authority and the option for automatic
apportionment exist under statute and Federal guidelines. Feedback from these sources will
influence the Agency's future course of action. In the meantime, the Agency is working to
strengthen training and controls to ensure proper procedures and timelines are followed. (Office
of Budget and Office of Financial Services in the Office of the Chief Financial Officer)
Reimbursable Expenditures Exceeded Funds Collected from Non-Federal Entitles:
The Agency followed the FY 2008 Reimbursable Authority Guidance to ensure that collections
were received before proper authority was issued to spend these funds. In addition, spending
under these accounts is controlled by both the account and the overarching appropriation. Both
had more than adequate apportioned resources. Subsequent obligations were within the
apportioned levels, and charging corrections have been made. (Office of Budget, Office of the
Chief Financial Officer; and the Region 3 Assistant Regional Administrator's Office)
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Attachment 2
EPA's Response to the Office of Inspector General's
Draft Fiscal 2007 and 2008 Financial Statements Audit Report
Clarifying Details for Consideration in the Final Report
1. EPA's Oversight of Payroll Reconciliation Needs Improvements
The Agency performs reasonable and adequate oversight for payroll support services and
meets the Internal Revenue Service requirements under Circular E. The reconciliation is
comprehensive and also includes amounts paid by the Defense Finance and Accounting
Service. However, the Office of Financial Services will work with DFAS and the Inspector
General's staff to jointly develop a quarterly taxable wage reconciliation report instead of the
prescribed recommendations.
In addition, information obtained from Defense Finance and Accounting Service staff by the
Inspector General's staff regarding FY 2007 W-2 data was incorrect, and, as a result the
$337,000 difference in the audit report was in error. The correct difference was $2,800 for
one employee, which has since been resolved.
2. Accruals Were not Properly Calculated for Federal Unbilled Receivables
General Observation: There is a slight wording difference between the "At a Glance"
introduction and the report text.
As of the FY 2008 4th quarter, additional reviews were incorporated in the process.
3. EPA Needs to Improve Reconciliation of General Ledger Accounts to Detail
General Observation: Consider modifying the title of this issue to "EPA needs to better
reconcile Superfund State Contract dollars to the subsidiary account." The current
presentation suggests that there are reconciliation issues with all of EPA's general ledger
accounts, instead of this particular subset.
Incidentally, the Office of Financial Services evaluated the accrual amounts for the past four
years and compared the results to FY 2008. This assessment yielded no significant
fluctuations as comparable estimates averaging $36.1 million for the four previous years and
$35.9 million in FY 2008 provided a level of accounting confidence. In the future, those
transactions between 13 and 23 years old will also be evaluated to determine validity.
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4. EPA's Review of Unliquidated Obligations Was Incomplete
The language states that the Office of Grants and Debarment's review of unliquidated
obligations for inactive Interagency Agreements (IA) and grants was incomplete. While it
should have been done sooner, the Agency did review all of the Headquarters-funded grants
and lAs; there is no further review to be conducted/completed. The reviews confirmed that
the unliquidated obligation balances for all lAs and grants are accurate and represent valid
and viable obligations. The reviews further ensured that appropriate actions were taken to
deobligate unneeded funds.
In addition, the report does not take into account EPA's noteworthy accomplishments
liquidating dollars on those grants where the period of performance had expired. EPA
established stretch goals and a performance metric in FY 2006 designed to track progress
each year though FY 2009. To date, more than $83 million has been redeployed within the
Agency, including $13 million liquidated during FY 2008. Success in this area enabled EPA
to reduce the unliquidated obligation baseline from $85 million to $26 million. By the end of
FY 2008, EPA reduced the baseline to $13M, or 7.2% of total obligations. In addition, EPA
recovered $17 million of the $24 million lingering at agencies tasked many years ago through
lAs to do work on the Agency's behalf. This initiative was launched to limit audit exposure
associated with the new "parent/child" reporting requirements.
5. IFMS Vendor Table Susceptible to Unauthorized Changes and Changes Were Not
Adequately Documented
The Inspector General's staff identified a systems capability which allowed changes to a
vendor's information without formal detection or notification. Within weeks of the
discovery, the Office of Financial Management implemented a real-time auto-generated
email notification process to the users, their supervisor, and other appropriate officials. Since
then, there have been 2,832 notifications describing 162,070 changes to records for those
vendors supporting EPA. As an assurance covering any activity before launching the new
process in July 2008, a statistical random sample of 10,500 transactions, a 90 percent
confidence level (10.5 percent of the population) was reviewed, and the vendor table changes
were determined to be necessary and appropriate. This assurance was based on local
attestations by program offices, regions, and finance centers. Only one finance center
provided an attestation inconsistent with the guidance provided. As a result, the Inspector
General's verification yielded 13 of 45 unsupported transactions. The finance centers under
the direction of the Office of Financial Services no longer accept changes to a vendor's
information over the telephone and now require and maintain written documentation for all
revisions.
6. Improvement Needed in Monitoring Superfund Special Account Balances
EPA concurs with the finding and has corrected the $1.3 million in overstated interest. The
interest is presented accurately in the FY 2008 financial statements. Future interest year-end
draw downs will be monitored closely.
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7. Lack of Systems Implementation Process Contributed to Financial Applications not
Complying with Requirements
The CFO's Office acknowledges the need for improvements in this area. However, the
deficiencies identified were driven by issues unrelated to compliance reviews. For this
reason, please consider deleting any language that implies that compliance reviews impeded
following prescribed systems requirements. In addition, the Deputy CFO has approved a
comprehensive list of areas to evaluate for compliance with systems requirements.
A planned reorganization is intended to provide a central accountable unit over most CFO
financial management systems, applications, reporting capabilities, and overall lifecycle.
Until the reorganization is finalized, the organizational title for the CFO's systems group
remains as the Office of Enterprise, Technology, and Innovation.
8. EPA did not Properly Account for Capitalized Software and Related Accumulated
Depreciation
EPA suggests modifying the existing recommendation to "The Assistant Administrator,
Office of Environmental Information, will direct staff to develop and implement a control
process for Information Management Officers that will require them to ensure accurate and
timely updates to their program and regional records in the Registry of EPA Applications and
Databases."
In addition, please incorporate the following clarifications: 1) the Office of Financial
Services populates the Agency's accounting system for the software lifecycles changes, not
the Office of Financial Management; and 2) the cumulative adjusted depreciation is properly
reflected in the FY 2008 financial statements along with the accompanying footnote.
9. EPA's Asbestos Loan Program Violated the Anti-Deficiency Act
EPA does not agree that an Anti-Deficiency Act violation took place. The Federal Credit
Reform Act of 1990, section 504(f), authorizes increased re-estimated subsidy cost of direct
loans as permanent indefinite authority. The Office of Management and Budget, by Circular
A-ll, Section 120.83, permits automatic apportionment of such re-estimates in credit
financing accounts. Since there is a difference of opinion about the character of this
transaction, we have notified the Office of Management and Budget of this issue and are
currently conducting an internal review with EPA's Office of General Counsel. We await the
responses. Depending upon the findings of the review, we will take an appropriate course of
action.
Whatever the determination on the status of the Anti-deficiency Act issue, proper procedures
were not followed and additional controls and training are being initiated. To strengthen our
internal controls, routine briefings with staff within the Office of Budget will be conducted to
acquaint them with not just Anti-deficiency Act guidelines but also the more complex
requirements that they may encounter in day-to-day operations. The Asbestos Loan Program
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will be added to the Agency's annual close-out guidance, normally issued in February, to
ensure processing timelines are met before the end of each fiscal year.
The language in the report suggests that the Office of Management and Budget provided
comments on this issue. However, the Office of Budget staff has not received any comments
from them and request that the reference be edited accordingly.
10. Reimbursable Expenditures Exceeded Funds Collected from Non-Federal Entities
EPA does not agree that an Anti-Deficiency violation took place. Control of spending under
the Anti-Deficiency Act is at the (a) appropriation or (b) fund level [OMB Circular A-l 1,
Section 145.2]. Some of the Agency's spending involves reimbursable work, where
apportionment authority for both appropriated and reimbursable funds can apply and under
OMB Circular A-l 1, Section 20.13(b). This means EPA can use relevant appropriated
resources or the reimbursable collections. Both had more than adequate apportioned
resources, and subsequent obligations were within the apportioned levels, as allowable under
the Intergovernmental Cooperation Act (31 U.S.C. 6505). In addition, the Government
Accountability Office guidance (71 Comp. Gen. 224 (1992) states that collections (e.g., such
as from states for services requested) are considered as part of the direct appropriation, which
means any spending in excess of advanced collections are funded by the original
appropriation.
Region 3 followed the agency guidance for requesting reimbursable authority. Funds were
collected on October 10, 2006, and recorded in the accounting system prior to requesting
reimbursable authority for FY 2007. However payroll charging exceeded the original
estimates. Region 3 has corrected the payroll charges to not exceed the amount collected.
Note that payroll charging would not be stopped under EPA policy - rather corrections are
made after the fact - to ensure that salary is paid timely to employees.
11. EPA Violated the Prompt Payment Act by Not Paying Invoices Promptly
General Observation: Consider modifying the title of this issue to "EPA Violated the Prompt
Payment Act by Not Paying Telecommunication Invoices Promptly." The current
presentation suggests that the issue exists with all of EPA's payments, instead of this
particular subset.
All 20 invoices have been paid. EPA's records indicate that only 3 of these invoices are
subject to interest payments. EPA paid the remaining 17 invoices within the 30 day Prompt
Pay requirements based on the date received by the servicing finance center. Since the IG
questioned whether interest payments are due for the remaining 17 invoices, the Office of
Financial Services will consult with the Office of General Counsel to determine if future
actions are required.
12. EPA should Continue Effort to Reconcile Intra-governmental Transactions
EPA concurs and appreciates the OIG's acknowledgement of the Agency's progress to date.
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Responsible Managers:
Lorna M. McAllister /s/ 11/12/2008 Signature/Date
Lorna M. McAllister, Director, Office of Financial Management, OCFO
Raffael Stein /s/ 11/12/2008 Signature/Date
Raffael Stein, Deputy Director, Office of Financial Services, OCFO
David Bloom /s/11/12/2008 Signature/Date
David Bloom, Acting Director, Office of Enterprise, Technology, and Innovation, OCFO
Carol Terris /s/ 11/12/2008 Signature/Date
Carol Terris, Acting Director, Office of Budget, OCFO
Krista Mainess /s/ 11/12/2008 Signature/Date
Krista Mainess, Director, Office of Program Management, OCFO
Myra Galbreath /s/ 11/12/2008 Signature/Date
Myra Galbreath, Director, Office of Technology Operations and Planning, OEI
Andrew Battin /s/ 11/12/2008 Signature/Date
Andrew Battin, Acting Director, Office of Information Collection, OEI
Howard Corcoran /s/ 11/12/2008 Signature/Date
Howard Corcoran, Director, Office of Grants and Debarment, OARM
James Newsom /s/ 11/12/2008 Signature/Date
James Newsom, Assistant Regional Administrator, Region 3
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Appendix
Distribution
Office of the Administrator
Chief Financial Officer
Assistant Administrator for Administration and Resources Management
Assistant Administrator for Environmental Information
Agency Follow-up Official
Agency Follow-up Coordinator
Office of General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Director, Office of Grants and Debarment, Office of Administration and Resources Management
Director, Office of Policy and Resources Management, Office of Administration and
Resources Management
Director, Office of Administration, Office of Administration and Resources Management
Director, Office of Technology Operations and Planning, Office of Environmental Information
Director, Office of Budget, Office of the Chief Financial Officer
Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Office of Financial Services, Office of the Chief Financial Officer
Director, Research Triangle Park Finance Center, Office of the Chief Financial Officer
Director, Cincinnati Finance Center, Office of the Chief Financial Officer
Director, Las Vegas Finance Center, Office of the Chief Financial Officer
Director, Washington Finance Center, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Director, Financial Systems Staff, Office of the Chief Financial Officer
Director, Financial Policy and Planning Staff, Office of the Chief Financial Officer
Audit Follow-up Coordinator, Office of the Administrator
Audit Follow-up Coordinator, Office of the Chief Financial Officer
Audit Follow-up Coordinator, Office of Administration and Resources Management
Audit Follow-up Coordinator, Office of Solid Waste and Emergency Response
Audit Follow-up Coordinator, Office of Environmental Information
Audit Follow-up Coordinator, Office of Enforcement and Compliance Assurance
Audit Follow-up Coordinator, Office of Grants and Debarment
Deputy Inspector General
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