U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Quick Reaction Report
Agreed-Upon Procedures
on EPA's Fiscal Year 2009
Second Quarter
Financial Statements
Report No. 09-2-0200
July 30, 2009
-------
Report Contributors: Paul Curtis
Meg Hiatt
Javier Negron
Demetrios Papakonstantinou
Lynda Taylor
Abbreviations
EPA U.S. Environmental Protection Agency
FY Fiscal Year
GL General Ledger
OCFO Office of the Chief Financial Officer
OIG Office of Inspector General
OMB Office of Management and Budget
RGLTS Report of General Ledger Balance by Treasury Symbol
SBR Statement of Budgetary Resources
SFFAS Statement of Federal Financial Accounting Standards
USSGL United States Standard General Ledger
-------
A
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-2-0200
July 30, 2009
Catalyst far Improving the Environment
Why We Performed These
Agreed-Upon Procedures
We performed agreed-upon
procedures on the U.S.
Environmental Protection
Agency (EPA) Fiscal Year
(FY) 2009 Second Quarter
Financial Statements. We did
so to assist EPA in evaluating
whether its quarterly Financial
Statements were compiled
consistent with the Treasury
United States Standard General
Ledger (USSGL) Crosswalk,
and to identify significant
fluctuations in financial line
item balances from the
previous year.
Background
.
Agencies submit unaudited
interim Financial Statements to
the Office of Management and
Budget (OMB) 21 days after
the end of each of the first three
quarters of the fiscal year.
Agencies should include
management's explanation of
significant variances in types or
amounts of assets, liabilities,
costs, revenues, obligations,
and outlays, along with the
submitted statements.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
To view the full report,
click on the following link:
www.epa.gov/oig/reports/2009/
20090730-09-2-0200.pdf
4
Agreed-Upon Procedures on EPA's Fiscal Year 2009
Second Quarter Financial Statements
What We Found
We performed certain agreed-upon procedures on the Agency's second quarter
FY 2009 Financial Statements. We compared the statements with EPA's
crosswalk, recomputed them for mathematical accuracy, and compared them with
balances separately generated by us, and concluded that the amounts agreed.
There was a difference between the FY 2009 Report of General Ledger Balance
by Treasury Symbol beginning balances and FY 2008 ending balances in general
ledger account 4201. The net difference of $43,627 was the result of account
4165 incorrectly closing to account 4201. The Agency stated it will make the
correction in the third quarter.
The agreed-upon procedures do not constitute an audit of the quarterly Financial
Statements or any part thereof, the objective of which would be the expression of
an opinion on the quarterly Financial Statements or any part thereof.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
July 30, 2009
MEMORANDUM
SUBJECT: Agreed-Upon Procedures on EPA's Fiscal Year 2009
Second Quarter Financial Statements
Report No. 09-2-0200
FROM: Paul C.Curtis
Director, Financial Statement Audits
TO: Maryann Froehlich
Acting Chief Financial Officer
The Office of Inspector General (OIG) of the U.S. Environmental Protection Agency (EPA)
conducted these Agreed-Upon Procedures on EPA's Fiscal Year 2009 second quarter Financial
Statements. This report is provided to you solely to assist you in evaluating whether the Fiscal
Year 2009 second quarter Financial Statements were compiled consistent with the Treasury
United States Standard General Ledger Crosswalk, and to identify significant fluctuations in
financial line balances from the previous year.
Our report is intended solely for your information and use and should not be used by those who
have not agreed to the procedures or taken responsibility for the sufficiency of the procedures for
their purposes. No written response to this report is required.
If you have any questions, please do not hesitate to contact me at 202-566-2523 or
curtis.paul@epa.gov, or Meg Hiatt at 513-487-2366 or hiatt.margaret@epa.gov.
-------
Agreed-Upon Procedures on EPA's Fiscal Year 2009 09-2-0200
Second Quarter Financial Statements
Table of Contents
Purpose 1
Background 1
Scope and Methodology 1
Results of Agreed-Upon Procedures 2
Status of Recommendations and Potential Monetary Benefits 8
Appendices
A OIG-ldentified Significant Fluctuations between 03/31/09 and 03/31/08 9
B Distribution 11
-------
09-2-0200
Purpose
We performed these agreed-upon procedures at the request of the Office of the Chief Financial
Officer (OCFO). We did so to assist the U.S. Environmental Protection Agency (EPA) in
evaluating whether its Fiscal Year (FY) 2009 Second Quarter Financial Statements were
compiled consistently with the Treasury United States Standard General Ledger (USSGL)
Crosswalk, and to identify significant fluctuations in financial line item balances from the
previous year.
Background
According to Office of Management and Budget (OMB) Circular A-136, interim unaudited
Financial Statements, without notes, are required on a quarterly basis. Agencies submit
unaudited interim Financial Statements to OMB 21 days after the end of each of the first three
quarters of the fiscal year. Agencies should include management's explanation of significant
variances in types or amounts of assets, liabilities, costs, revenues, obligations, and outlays,
along with the submitted statements.
Scope and Methodology
We performed certain agreed-upon procedures, enumerated below, on EPA's unaudited
consolidated FY 2009 Second Quarter Financial Statements, to assist the OCFO in evaluating
whether the quarterly Financial Statements were compiled consistently with Treasury's USSGL
Crosswalk and to identify significant fluctuations in financial line item balances from the
previous year.
The adequacy of these procedures is the OCFO's responsibility. Consequently, we make no
representation regarding the sufficiency of the procedures. The agreed-upon procedures do not
constitute an audit of the quarterly Financial Statements or any part thereof, the objective of
which would be the expression of an opinion on the quarterly Financial Statements or any part
thereof. Accordingly, we do not express such an opinion. Were we to perform additional
procedures, other matters might come to our attention that we would report to assist the OCFO.
This agreed-upon procedures engagement was conducted using applicable generally accepted
government auditing standards, which incorporate attestation standards issued by the American
Institute of Certified Public Accountants. These standards provide guidance for performing and
reporting the results of agreed-upon procedures.
We performed the agreed-upon procedures from April 21 to July 15, 2009. We based our
procedures on EPA's Second Quarter Financial Statements and supporting schedules, general
ledger (GL) balances, and manual on-top adjustments.
-------
09-2-0200
Results of Agreed-Upon Procedures
Procedure 1:
Obtain EPA's Second Quarter Financial Statements, adjusted trial balance, on-top entries, and
support for the statements (including Earmarked Funds). Import the Report of General Ledger
Balance by Treasury Symbol (RGLTS) and enter the Agency's on-top entries into ProSystem
and generate an adjusted trial balance, Consolidated Balance Sheet, Statement of Net Cost, and
Statement of Changes in Net Position.
Results of Procedure 1
We obtained the Agency's Second Quarter Financial Statements, adjusted trial balance,
on-top entries, and support for the statements (including Earmarked Funds and Child
Agency Trial Balances). We imported the RGLTS for the accounting period 0906, and
entered the Agency's on-top adjusting entries to beginning balances into ProSystem to
generate an adjusted trial balance, Consolidated Balance Sheet, Statement of Net Cost,
and Statement of Changes in Net Position.
Procedure 1.a
Compare the ProSystem generated adjusted trial balance based on the Agency's support to the
Agency's adjusted trial balance in order to verify the Agency's Financial Statement crosswalk
and note any differences.
Results of Procedure 1.a
We compared the ProSystem adjusted trial balance to the Agency's adjusted trial balance
and the amounts agreed. We verified that the statements complied with and are in
accordance with EPA's Crosswalk.
Procedure 1.b
Compare the ProSystem generated Financial Statements to EPA's Financial Statements and note
any differences.
Results of Procedure 1.b
We compared the ProSystem generated financial statements to EPA's Financial
Statements (Consolidated Balance Sheet, and Consolidated Statements of Net Cost and
Changes in Net Position). We found that the amounts agreed.
-------
09-2-0200
Procedure 1.c
Enter the FY 2009 and 2008 GL balances and on-top entries into Excel spreadsheets. Prepare
the Combined Statement of Budgetary Resources (SBR) and Statement of Custodial Activity and
compare to the Agency's statements and note any differences.
Results of Procedure 1.c
We entered the FY 2009 and 2008 GL balances and on-top adjustment entries into Excel
spreadsheets and compared the OIG prepared Combined SBR and Statement of Custodial
Activity to the Agency's statements.
Statement of Custodial A ctivity:
The Agency's balances for the second quarter FY 2009 agreed with our amounts for this
statement.
Combined SBR:
The Agency's balances for the second quarter FY 2009 agreed with our amounts for this
statement and we verified that issues identified during our first quarter review appear to
have been resolved by the Reporting and Analysis Staff.
Procedure 1.d
Extract GL ending balances for Earmarked Funds from the RGLTS using Interactive Data
Extraction Analysis and enter into ProSystem. Enter on-top entries and generate a Consolidated
Statement of Changes in Net Position for Earmarked Funds and compare to EPA's Consolidated
Statement of Changes in Net Position for Earmarked Funds.
Results of Procedure 1.d
We extracted the GL ending balances for Earmarked Funds from the RGLTS, generated a
Consolidated Statement of Changes in Net Position for Earmarked Funds, and compared
it to EPA's Statement of Changes in Net Position for Earmarked Funds. The balances
agreed.
Procedure 1.e
Compare the Agency's Second Quarter Consolidated Statement of Net Cost by Goal to the
consolidated totals from the Consolidated Statement of Net Cost.
Results of Procedure 1.e
We compared the Agency's Second Quarter Consolidated Statement of Net Cost by Goal
to the consolidated totals (total costs, total earned revenue, and net cost of operations)
from the Consolidated Statement of Net Cost. The amounts agreed.
-------
09-2-0200
Procedure 1.f
Mathematically verify accuracy of the Consolidated All Other column on the Consolidating
Statement of Changes in Net Position) in the Agency's Financial Statements.
Results of Procedure 1.f
We mathematically verified the accuracy of the All Other column in the Agency's
Financial Statements on the Consolidating Statement of Changes in Net Position.
Procedure 1.g
Identify significant fluctuations in balances by comparing current year balances to prior year
balances. (Criteria - Percentage change of 10 percent or more and dollar change exceeding
$50 million.)
Results of Procedure 1.g
We identified significant fluctuations in the Balance Sheet, Statement of Net Cost,
Statement of Changes in Net Position, and Statement of Budgetary Resources. OIG
identified the same fluctuations as the Agency as well as other fluctuations, which are
detailed in Appendix A.
OMB Circular A-136 states: The analysis should be only on the significant variances
between the current quarter and the same quarter from the prior year. Management has
discretion on what constitutes a significant variance. Management is to provide variances
for only the top three items with significant fluctuations. The Agency elected to identify
seven fluctuations and submit them to OMB as follows:
Balance Sheet
(1) The Agency reported to OMB that the $6.5 billion increase in Fund Balance With
Treasury is primarily due to the State and Tribal Assistance Grant program
contained in the American Recovery and Reinvestment Act of 2009 (Recovery
Act).
(2) The Agency reported to OMB that the $6.7 billion increase in Unexpended
Appropriations is primarily due to the State and Tribal Assistance Grant program
contained in the Recovery Act.
(3) The Agency reported to OMB that the $176 million decrease in Non-Federal
Accounts Payable and Accrued Liabilities is primarily due to a decrease in
Grantee Liability Accruals as a result of a lower statistical sample rate used in the
FY 2008 Fourth Quarter compared to the rate used in the FY 2007 Fourth
Quarter.
-------
09-2-0200
Statement of Budgetary Resources
(1) The Agency reported to OMB that the $8 billion increase in Appropriations is
primarily due to the $6.4 billion State and Tribal Assistance Grant program
contained in the Recovery Act.
(2) The Agency reported to OMB that the $7 billion increase in Apportioned
Unobligated Balance is primarily due to the State and Tribal Assistance Grant
program as well as the Superfund program contained in the Recovery Act.
(3) The Agency reported to OMB that the $227 million increase in Anticipated
Spending Authority for Rest of Year, Without Advances, is primarily due to the
Agency recording more Anticipated Reimbursable Authority by the FY 2009
Second Quarter to cover the rest of fiscal year compared to the FY 2008 Second
Quarter.
Statement of Net Cost
(1) The Agency reported to OMB that the decrease of $143 million in current year
Gross Costs is primarily due to a reduction in Grant expenses in FY 2009.
Procedure 2
Obtain and compare EPA's identified Earmarked Treasury Symbols to Federal Accounting
Standards Advisory Board Statement of Federal Financial Accounting Standards (SFFAS) 27,
Identifying and Reporting Earmarked Funds, for compliance.
Results of Procedure 2
We obtained and compared EPA's identified Earmarked Treasury Symbols to Federal
SFFAS 27. We found EPA's [Identified Earmarked] Treasury Symbols to be in
compliance with SFFAS 27. Earmarked Treasury Symbols consist of the following trust
funds: Hazardous Substance Superfund; Federal Insecticide, Fungicide, and Rodenticide
Act Fund; Revolving Fund for Certification and Other Services; Licenses and Other
Services; Environmental Services; Exxon Valdez Settlement Fund; Pesticide Registration
Improvement Act Fund; Oil Spill Response Fund; and Contributed Funds; as well as
Treasury Symbols established for the Recovery Act (Superfund and Leaking
Underground Storage Tank).
-------
09-2-0200
Procedure 3
Obtain and compare FY 2009 and 2008 Child Trial Balances to the Child on-top entry.
Results of Procedure 3
We obtained and compared EPA's FY 2009 and 2008 Child Trial Balances to the Child
on-top entry. We found that the on-top entry to record child agency balances agreed with
the support.
Procedure 4
Compare the FY 2009 reversals to the FY 2008 on-top adjustments and EPA's Closing
Instructions to assess if EPA followed its guidance.
Results of Procedure 4
We compared the FY 2009 reversals to the FY 2008 on-top adjustments and to EPA's
closing instructions to assess if EPA followed its guidance. We found that the Agency
reversed the FY 2008 on-tops properly in FY 2009.
Procedure 5
Compare the RGLTS FY 2009 beginning balances to the FY 2008 ending balances and note any
differences.
Results of Procedure 5
We compared the RGLTS FY 2009 beginning balances to FY 2008 ending balances and
found that the balances did not agree with general ledger account 4201 [Total Actual
Resources].
Table 1: Comparison of EPA's FY 2008 Post-Closing Instructions to EPA's Year End
Account Table and Treasury's Closing Instructions
General Ledger
Account
4201
EPA OIG Balance
2008 Post Closing
Balance
$9,036,407,848
2009 Adjusted
Agency Beginning
Balance
$9,036,451,475
Difference
($43,627)
Source: OIG analysis of EPA data.
The difference between the 2008 ending and 2009 beginning balances of $43,627 was the
result of errors in the year-end closing process. GL account 4165 incorrectly closed to
GL account 4201. The Agency explained that GL account 4165 was not closed to
GL account 4450 for year-end financial statements. The Agency had to force a closure to
GL account 4201 to ensure that beginning balances on line 1 of the SBR matched the
FY 2008 SBR lines 9 and 10. Overall, line 1 of the SBR will be off by $43,627 and
Line 10 by $43,627, offsetting each other to zero. The Agency stated that it corrected the
-------
09-2-0200
$43,627 in the third quarter. This general ledger account was identified in the first
quarter Agreed-Upon Procedures.
Procedure 6
Review elimination and consolidation entries prepared by the Reporting and Analysis Staff for
reasonableness and completeness.
Results of Procedure 6
We reviewed the second quarter FY 2009 elimination and consolidation entries prepared
by the Reporting and Analysis Staff for reasonable and completeness. The elimination
and consolidation entries appeared reasonable and complete.
-------
09-2-0200
Status of Recommendations and
Potential Monetary Benefits
POTENTIAL MONETARY
RECOMMENDATIONS BENEFITS (in SOOOs)
Planned
Rec. Page Completion Claimed Agreed To
No. No. Subject Status1 Action Official Date Amount Amount
No recommendations
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
-------
09-2-0200
Appendix A
OIG-ldentified Significant Fluctuations
between 03/31/09 and 03/31/08
(Dollars in Thousands)
Consolidated Balance Sheet:
FY 2009
FY 2008
Difference
%
ASSETS
Intragovernmental:
Fund Balance With Treasury
$19,657,573
$13,159,215
$6,498,358
49.38%
LIABILITIES
Accounts Payable and Accrued
Liabilities
Accounts Payable & Accrued
Liabilities
Cashout Advances, Superfund
$63,348
$683,683
$261,828
$135,828
$859,695
$187,368
($72,480)
($176,012)
$74,460
-53.36%
-20.74%
39.74%
Source: FY 2009 Financial Statements provided by EPA
Consolidated Statement of Changes in Net Position:
FY 2009
Consolidated
FY 2008
Consolidated
Difference
%
Budgetary Financing Sources:
Appropriations Received
Other Adjustments
$14,406,297
($10,000)
$7,197,711
($117,284)
$7,208,586
$107,284
100.15%
-91.47%
Source: FY 2009 Financial Statements provided by EPA
Consolidated Statement of Changes in Net Position - All Other Funds:
FY 2009
Consolidated
All Other Funds
FY 2008
Consolidated
All Other Funds
Difference
%
CUMULATIVE RESULTS OF OPERATIONS:
Net Position - Beginning of Period
Budgetary Financing Sources:
Trust Fund Appropriations
($1,139,345)
($984,974)
($154,371)
15.67%
BUDGETARY FINANCING SOURCES:
Appropriations Received
Other Adjustments
$14,406,297
($10,000)
$7,197,711
($117,284)
$7,208,586
$107,284
100.15%
-91.47%
Source: FY 2009 Financial Statements provided by EPA
-------
09-2-0200
Consolidated Statement of Changes in Net Position - Earmarked Funds:
FY 2009
Consolidated
Earmarked Funds
FY 2008
Consolidated
Earmarked Funds
Difference
%
CUMULATIVE RESULTS OF OPERATIONS:
Budgetary Financing Sources:
Trust Fund
Appropriations
$1,139,345
$984,974
$154,371
15.67%
Source: FY 2009 Financial Statements provided by EPA
Combined Statement of Budgetary Resources:
FY 2009
FY 2008
Difference
%
BUDGETARY RESOURCES:
Appropriation
Anticipated for Rest of Year,
Without Advances
Permanently Not Available
$15,277,062
$533,190
($11,000)
$7,268,792
$306,498
($117,284)
$8,008,270
$226,692
$106,284
110.17%
73.96%
-90.62%
STATUS OF BUDGETARY SOURCES:
Reimbursable
Apportioned
Unobligated Balances Not Available
Change in Obligated Balance
Obligations Incurred, Net
Net Outlays:
Less: Distributed Offsetting
Receipts
$222,881
$15,921,601
$1,231,517
$4,030,987
($1,199,325)
$172,690
$8,774,389
$381,712
$3,664,076
($1,027,402)
$50,191
$7,147,212
$849,805
$366,911
($171,923)
29.06%
81.46%
222.63%
10.01%
16.73%
Source: FY 2009 Financial Statements provided by EPA
10
-------
09-2-0200
Appendix B
Distribution
Acting Chief Financial Officer
Acting Deputy Chief Financial Officer
Acting Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Acting Director, Office of Financial Services, Office of the Chief Financial Officer
Acting Inspector General
11
------- |