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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 2011
First Quarter Financial Statements
Report No. 11-2-0213
May 2, 2011
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Report Contributors: Paul Curtis
Robert L. Smith
Javier Negron
Guillermo Mejia
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
SFFAS Statement of Federal Financial Accounting Standards
USSGL United States Standard General Ledger
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIGJHotline@epa.gov write: EPA Inspector General Hotline
phone: 1-888-546-8740 1200 Pennsylvania Avenue NW
fax: 703-347-8330 Mailcode 8431P (Room N-4330)
online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
11-2-0213
May 2, 2011
Catalyst for 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) 2011 First Quarter
Financial Statements. We did
so to assist EPA in evaluating
whether its quarterly financial
statements were compiled
consistently with the Treasury
United States Standard General
Ledger Crosswalk, and to
identify significant fluctuations
in financial line item balances
from the previous year.
Agreed-Upon Procedures on EPA's Fiscal Year
2011 First Quarter Financial Statements
Background
Agencies submit unaudited
interim financial statements to
the Office of Management and
Budget 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.
The full report is at:
www.epa.qov/oiq/reports/20117
20110502-11-2-0213.pdf
What We Found
We performed certain agreed-upon procedures on the Agency's FY 2011 First
Quarter Financial Statements. We compared the statements with EPA's
crosswalk, recomputed them for mathematical accuracy, and compared them with
balances separately generated by us.
Below are the results of our performing the agreed-upon procedures:
• The financial statements generated by the Office of Inspector General
agreed with EPA's FY 2011 First Quarter Financial Statements for the
Consolidated Balance Sheet, Consolidated Statements of Net Cost, Net
Cost by Goal, Consolidating Statement of Changes in Net Position
(including Earmarked Funds), Combined Statement of Budgetary
Resources, and Statement of Custodial Activity.
• EPA's Financial Statement Preparation Guide for the 2011 financial
statements needed to be updated in two places.
• General ledger account discrepancies were identified in our comparison
of Treasury's financial statement crosswalk to the Agency's financial
statement crosswalk.
• No differences were identified during our comparison of Treasury's
Closing Instructions to EPA's Closing Instructions.
• EPA's Treasury Symbols were in compliance with Statement of Federal
Financial Accounting Standards 27.
• The on-top entry to record child agency balances agreed with the
support.
• The Agency properly reversed the FY 2010 on-tops in FY 2011.
• There were differences between the FY 2011 first quarter beginning
balances and FY 2010 ending balances.
• The elimination and consolidation entries appear reasonable and
complete.
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.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
May 2, 2011
MEMORANDUM
SUBJECT: Agreed-Upon Procedures on EPA's Fiscal Year 2011
First Quarter Financial Statements
Report No. 11-2-0213
FROM: Arthur A. Elkins Jr.
Inspector General
TO: Barbara Bennett
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 2011 First Quarter Financial
Statements. This report is provided solely to assist you in evaluating whether the Fiscal Year
2011 First Quarter Financial Statements were compiled in a manner 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 Paul Curtis at 202-566-2523 or
curtis.paul@epa.gov, or Bob Smith at 202-566-2531 or smith.robertl@epa.gov.
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Agreed-Upon Procedures on EPA's Fiscal Year 2011 11-2-0213
First 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 12/31/10 and 12/31/09 9
B Distribution 12
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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) 2011 First 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-13 6, Financial Reporting
Requirements, 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 are required to 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 2011 First 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 February 14 to May 2, 2011. We based our
procedures on EPA's first quarter financial statements and supporting schedules, general ledger
(GL) balances, and manual on-top adjustments.
11-2-0213
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Results of Agreed-Upon Procedures
Procedure 1:
Obtain EPA's first quarter financial statements, adjusted trial balance, on-top entries, and support
for the statements (including Earmarked Funds). Import the Report of GL Balance by Treasury
Symbol (RGLTS); 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 first 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 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 to verify the Agency's financial statement crosswalk and note
any differences.
Results of Procedure 1.a
We compared the Prosystem-generated adjusted trial balance based upon the Agency's
support to the Agency's adjusted trial balance. The Agency's adjusted trial balance for
the FY 2011 first quarter agreed with our Prosystem-adjusted trial balance amounts
except for immaterial rounding differences. 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, Consolidated Statement of Net Cost, and Net
Position). We did not note any differences.
11-2-0213
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Procedure 1.c
Enter the FYs 2011 and 2010 GL balances and on-top entries into Excel spreadsheets. Prepare
the Combined Statement of Budgetary Resources 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 2011 GL balances, Agency support, and on-top adjustment entries
into an Excel spreadsheet. We prepared and compared the OIG Combined Statement of
Budgetary Resources and Statement of Custodial Activity to the Agency's statements.
Statement of Custodial Activity:
The Agency's balances for the FY 2011 first quarter agreed with our amounts for this
statement except for immaterial rounding differences.
Combined Statement of Budgetary Resources:
The Agency's balances for the FY 2011 first quarter agreed with our amounts for this
statement except for immaterial rounding differences.
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, 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 from the RGLTS for Earmarked Funds, 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. We did not note
any differences.
Procedure 1.e
Compare the Agency's First Quarter Consolidated Statement of Net Cost by Goal to the
consolidated totals from the Consolidated Statement of Net Cost by Goal.
Results of Procedure 1.e
We compared the Agency's First 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.
11-2-0213
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Procedure 1.1
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 1.1
We mathematically verified the accuracy of the Consolidated All Other column in the
Agency's financial statements on the Consolidating Statement of Changes in Net Position
in the Agency's financial statements.
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
The Agency identified 12 fluctuations, and we also identified significant fluctuations in
the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, and
Statement of Budgetary Resources. Office of Inspector General- and Agency-identified
fluctuations are detailed in appendix A.
OMB 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."
Procedure 2
Obtain and compare EPA's Financial Statement Preparation Guide for the FY 2011 Financial
Statements to OMB Circular A-136 for compliance and note any differences.
Results of Procedure 2
We obtained and compared EPA's Financial Statement Preparation Guide to OMB
Circular A-136. We found that the Agency's Financial Statement Preparation Guide
needed to be updated for the items shown in table 1. These items have no impact on the
understandability of the guide and compliance with Circular A-136. After we brought this
issue to the attention of Agency, it updated the Financial Statement Preparation Guide.
Table 1: Issues identified upon review of Financial Statement Preparation Guide
Page No.
17
18
Section
5c
5c
Item
Figure 2
Adjustment Processing
Comment
No figure 2 is presented.
Line 5c should state, "(see 6a through 6i)"
Source: DIG analysis of EPA data and OMB requirements.
11-2-0213
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Procedure 3
Obtain and compare EPA's Financial Statement Crosswalk to Treasury's USSGL Crosswalk and
note any differences.
Results of Procedure 3
We obtained and compared Treasury's Financial Statement Crosswalk to the Agency's
Financial Statement Crosswalk for the FY 2011 first quarter and identified the following
discrepancies:
Balance Sheet:
• GL 5777 (USSGL 5790): Agency's crosswalk does not define it as Federal or Non-
Federal; Treasury defines USSGL 5790 as Federal.
Statement of Custodial Activity:
• GL 2970: Account appears in the Agency's crosswalk; not in the USSGL crosswalk.
Statement of Net Position:
• GL 3312 (SGL acct 3310): GL 3312 included in the Other section and not in Line 1
Beginning Balance.
• GL 5FNO, 5FN1, 5PNO, and 5PN1: Agency crosswalk shows the accounts as USSGL
accts 5990 and 5991. However USSGLS 5990 and 5991 are not shown in Treasury's
Statement of Changes in Net Position crosswalk.
The Agency stated that the Financial Statement Crosswalks will be updated to reflect:
> The Federal attribute for account 5777.
> Account 2970 is a legacy account. The Statement of Custodial Activity crosswalk
will be updated to remove this account.
> Account 3312 is a legacy account that is no longer used. The Statement of
Changes in Net Position crosswalk will be updated to remove account 3312 from
Line 15.
> The Statement of Changes in Net Position crosswalk will be updated to remove
5FNO, 5FN1, 5PNO, and 5PN1, since they are used for custodial activity only.
Procedure 4
Obtain and compare EPA's FY 2010 postclosing instructions to EPA's Year-End Account
Closing Table and Treasury's Closing Instructions and note any differences.
Results of Procedure 4
We obtained and compared EPA's FY 2010 postclosing instructions to EPA's Year-End
Account Closing Table and Treasury's Closing Instructions. We did not note any
differences.
11-2-0213
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Procedure 5
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 5
We obtained and compared EPA's identified Earmarked Treasury Symbols to SFFAS 27.
We found that EPA's Treasury Symbols are 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; Contributed Funds; and Leaking Underground Storage Tank Trust Fund.
Procedure 6
Obtain and compare FY 2011 and 2010 Child Trial Balances to the Child on-top entry.
Results of Procedure 6
We obtained and compared EPA's FYs 2011 and 2010 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 7
Compare the FY 2011 reversals to the FY 2010 on-top adjustments and EPA's Closing
Instructions to assess whether EPA followed its guidance.
Results of Procedure 7
We compared the FY 2011 reversals to the FY 2010 on-top adjustments and to EPA's
Closing Instructions to assess whether EPA followed its guidance. We found that the
Agency properly reversed the FY 2010 on-tops in FY 2011.
Procedure 8
Compare the RGLTS FY 2011 beginning balances to the FY 2010 ending balances and note any
differences.
Results of Procedure 8
We compared the RGLTS FY 2011 beginning balances to FY 2010 ending balances and
found that the following balances did not agree:
11-2-0213
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Table 2: Comparison of EPA's FY 2010 Postclosing Balances to EPA's FY 2011 Beginning Balances
General Ledger
Account
1190
1191
EPA OIG Balance 2010
Postclosing Balance
$8,262,002.03
$0.00
2011 Adjusted Agency
Beginning Balance
$1,975,776.45
$6,286,225.58
Difference
$6,286,225.58
($6,286,225.58)
Source: OIG analysis of EPA data.
The Agency stated that there is no impact on the FY2011 first quarter financial
statements since GL Accounts 1190 and 1191 crosswalk to the same line on the balance
sheet. The Agency will correct the difference for FY2011 second quarter reporting.
Procedure 9
Review elimination and consolidation entries prepared by the Reporting and Analysis Staff for
reasonableness and completeness.
Results of Procedure 9
We reviewed elimination and consolidation entries prepared by the Reporting and
Analysis Staff for reasonableness and completeness. The elimination and consolidation
entries appeared reasonable and complete.
11-2-0213
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Status of Recommendations and
Potential Monetary Benefits
POTENTIAL MONETARY
RECOMMENDATIONS BENEFITS (in $OOOs)
Planned
Rec. Page Completion Claimed Agreed-To
No. No. Subject Status1 Action Official Date Amount Amount
No recommendations
11-2-0213
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Appendix A
OIG-ldentified Significant Fluctuations
Between 12/31/10 and 12/31/09
(Dollars in thousands)
Notes for each table are as follows:
OIG-identified significant fluctuation also identified by EPA in the first quarter analysis reported to OMB.
2 OIG-identified significant fluctuation not identified by EPA in the first quarter analysis reported to OMB.
Consolidated Balance Sheet
ASSETS
Fund Balance With Treasury1
Investments1
Accounts Receivable, Net2
LIABILITIES
Accounts Payable & Accrued Liabilities1
NET POSITION
Unexpended Appropriations - Other Funds1
Cumulative Results of Operations - Earmarked
Funds2
FY2011
$16,196,867
$6,991,201
$400,833
$1,067,692
$15,025,415
$6,832,834
FY2010
$22,755,923
$7,935,049
$452,312
$807,008
$21,424,167
$8,087,251
Difference
($6,559,056)
($943,848)
($51 ,479)
$260,684
($6,398,752)
($1,254,417)
%
-28.82%
-1 1 .89%
-1 1 .38%
32.30%
-29.87%
-15.51%
Source: FY2011 Financial Statements provided by EPA.
Consolidated Statement of Net Cost
COSTS
Gross Costs1
Earned Revenue1
FY2011
$3,234,000
$157,585
FY2010
$2,527,518
$229,231
Difference
$706,482
($71 ,646)
%
27.95%
-31 .25%
Source: FY2011 Financial Statements provided by EPA.
11-2-0213
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Consolidated Statement of Changes in Net Position
CUMULATIVE RESULTS OF OPERATIONS:
Budgetary Financing Sources:
Appropriations Used2
Transfers In/Out2
BUDGETARY FINANCING SOURCES:
Appropriations Received2
Appropriations Used2
FY2011
Consolidated
Total
$2,647,650
$7,745
$4,328,531
($2,647,650)
FY2010
Consolidated
Total
$3,252,593
$818,379
$10,180,413
($3,252,593)
Difference
($604,943)
($810,634)
($5,851,882)
$604,943
%
-18.60%
-99.05%
-57.48%
-18.60%
Source: FY 2011 Financial Statements provided by EPA.
Consolidated Statement of Changes in Net Position—All Other Funds
CUMULATIVE RESULTS OF OPERATIONS:
Budgetary Financing Sources:
Appropriations Used2
Trust Fund Appropriations2
BUDGETARY FINANCING SOURCES:
Appropriations Received2
Appropriations Used2
FY2011
Consolidated
All Other
Funds
$2,647,650
$0
$4,328,531
($2,647,650)
FY2010
Consolidated
All Other
Funds
$3,252,593
($1,280,570)
$10,180,413
($3,252,593)
Difference
($604,943)
$1,280,570
($5,851,882)
$604,943
%
-18.60%
-100.00%
-57.48%
-18.60%
Source: FY 2011 Financial Statements provided by EPA.
Consolidated Statement of Changes in Net Position—Earmarked Funds
CUMULATIVE RESULTS OF OPERATIONS:
Budgetary Financing Sources:
Transfers In/Out2
Trust Fund Appropriations2
FY2011
Consolidated
Earmarked
Funds
($7,881)
$0
FY2010
Consolidated
Earmarked
Funds
$781,570
$1,280,570
Difference
($789,451)
($1,280,570)
%
-101.01%
-100.00%
Source: FY 2011 Financial Statements provided by EPA.
11-2-0213
10
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Combined Statement of Budgetary Resources
BUDGETARY RESOURCES:
Appropriation1
Collected1
Advance Received1
Anticipated for Rest of Year, Without Advances1
Nonexpenditure Transfers, Net, Anticipated and
Actuar
STATUS OF BUDGETARY RESOURCES:
Obligations Incurred:
Direct1
Apportioned1
Unobligated Balances Not Available2
CHANGE IN OBLIGATED BALANCE:
Unpaid Obligations, Brought Forward, October 12
Less: Uncollected Customer Payments from
Federal Sources, Brought Forward, October 12
Obligations Incurred, Net2
Less: Gross Outlays2
Unpaid Obligations2
NET OUTLAYS:
Net Outlays:
Gross Outlays2
Less: Offsetting Collections2
Less: Distributed Offsetting Receipts2
FY2011
$4,371,961
$156,474
$20,968
$510,525
$593,157
$1,250,741
$4,739,232
$4,241,481
$13,872,909
($439,956)
$1,346,903
($3,282,162)
$11,911,677
$3,282,162
($183,426)
$4,947
FY2010
$10,255,076
$447,668
$288,161
$267,267
$1,494,789
$2,582,016
$11,328,280
$2,521,111
$15,788,390
($573,824)
$2,648,860
($4,032,861)
$14,356,684
$4,032,861
($745,340)
($1,273,041)
Difference
($5,883,115)
($291,194)
($267,193)
$243,258
($901 ,632)
($1,331,275)
($6,589,048)
$1,720,370
($1,915,481)
$133,868
($1,301,957)
$750,699
($2,445,007)
($750,699)
$561,914
$1,277,988
%
-57.37%
-65.05%
-92.72%
91.02%
-60.32%
-51 .56%
-58.16%
68.24%
-12.13%
-23.33%
-49.15%
-18.61%
-17.03%
-18.61%
-75.39%
-100.39%
Source: FY 2011 Financial Statements provided by EPA.
11-2-0213
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Appendix B
Distribution
Chief Financial Officer
Deputy Chief Financial Officer
Director, Office of Financial Management, Office of the Chief Financial Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Director, Office of Financial Services, Office of the Chief Financial Officer
11-2-0213 12
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