U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Audit of EPA's
Fiscal 2009 and 2008 (Restated)
Consolidated Financial Statements
Report No. 10-1-0029
November 16, 2009
-------
Abbreviations
BPD Bureau of Public Debt
CTS Customer Technology Solution
DOJ Department of Justice
EPA U.S. Environmental Protection Agency
FFMIA Federal Financial Management Improvement Act
FMFIA Federal Managers' Financial Integrity Act
GAO Government Accountability Office
IFMS Integrated Financial Management System
LEO Legal Enforcement Office
LUST Leaking Underground Storage Tank
LVFC Las Vegas Finance Center
MATS Management Audit Tracking System
OARM Office of Administration and Resources Management
OCFO Office of the Chief Financial Officer
OEI Office of Environmental Information
OIG Office of Inspector General
OMB Office of Management and Budget
ORC Office of Regional Counsel
ORD Office of Research and Development
RMDS Resources Management Directive Systems
RPO Regional Program Office
RSSI Required Supplementary Stewardship Information
SSC Superfund State Contract
SFO Servicing Finance Office
SFFAS Statement of Federal Financial Accounting Standards
ULO Unliquidated Obligation
YACT Year End Closing Table
-------
U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
10-1-0029
November 16, 2009
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,
Public Affairs and Management
at (202) 566-2391.
To view the full report, click on the
I following link:
www.epa.qov/oiq/reports/2010/
20091116-10-1-0029.pdf
Audit of EPA's Fiscal 2009 and 2008 (Restated)
Consolidated Financial Statements
EPA Receives an Unqualified Opinion
We rendered an unqualified opinion on EPA's Consolidated Financial
Statements for fiscal 2009 and 2008 (restated), meaning that they were fairly
presented and free of material misstatement.
Internal Control Material Weakness, Significant Deficiencies Noted
We noted the following three material weaknesses:
• EPA understated accounts receivable for fiscal 2008.
• EPA understated unearned revenue.
• Improvement is needed in billing costs and reconciling unearned
revenue for Superfund State Contract costs.
We also noted the following eight significant deficiencies:
• EPA misstated uncollectible debt and other related accounts.
• EPA needs to improve billing and accounting for accounts receivable.
• Headquarters property items were not inventoried.
• EPA should improve its financial statement preparation process.
• Unneeded funds were not deobligated timely.
• Improvement is needed in managing data system's user accounts.
• Las Vegas Finance Center needs improved physical access controls.
• Customer Technology Solutions equipment needs improved planning.
Noncompliance With Laws and Regulations Noted
We noted one noncompliance issue, involving EPA's need to continue efforts to
reconcile intra-governmental transactions.
Agency Comments and Office of Inspector General Evaluation
In a memorandum dated November 12, 2009, from the Chief Financial Officer,
the Agency recognized the issues raised and indicated it will take corrective
actions.
-------
V *V
'
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
November 16, 2009
MEMORANDUM
SUBJECT: Audit of EPA's Fiscal 2009 and 2008 (Restated)
Consolidated Financial Statements
Report No. 10-1-0029
FROM: Paul C. Curtis
Director, Financial Statement Audits
TO: Barbara J. Bennett
Chief Financial Officer
Craig Hooks
Assistant Administrator for Administration and Resources Management
Attached is our report on the U.S. Environmental Protection Agency's (EPA's) fiscal 2009 and
2008 (restated) consolidated financial statements. We are reporting three material weaknesses
and eight significant deficiencies. We also identified an instance of noncompliance with laws
and regulations related to reporting intra-governmental transactions. Attachment 3 contains the
status of recommendations related to the material weaknesses, 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 2009.
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 $2,240,000.
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://www.epa.gov/oig.
-------
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar 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.
Should you or your staff have any questions about the report, please contact me at (202) 566-2523;
or Melissa Heist, Assistant Inspector General, Office of Audit, at (202) 566-0899.
Attachments
cc: See Appendix III, Distribution
-------
-------
Audit of EPA's Fiscal 2009 and 2008 (Restated) 10-1 -0029
Consolidated Financial Statements
Table of Contents
Inspector General's Report on EPA's Fiscal 2009
and 2008 (Restated) Consolidated Financial Statements 1
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
Agency Comments and OIG Evaluation 9
Attachments 10
1. Internal Control Material Weaknesses and Significant Deficiencies 10
EPA Understated Accounts Receivable for Fiscal 2008 11
EPA Understated Unearned Revenue 13
Improvement Needed in Billing Costs and Reconciling
Unearned Revenue for Superfund State Contract Costs 15
EPA Misstated Uncollectible Debt and Other Related Accounts 18
EPA Needs to Improve Billing and Accounting for Accounts Receivable 19
Headquarters Property Items Not Inventoried 24
EPA Should Improve Its Financial Statement Preparation Process 25
Unneeded Funds Not Deobligated Timely 27
Integrated Financial Management System User
Account Management Needs Improvement 30
Las Vegas Finance Center Needs Improved Physical Access Controls 33
Customer Technology Solutions Equipment Needs
Improved Security Planning 35
-------
Audit of EPA's Fiscal 2009 and 2008 (Restated) 10-1 -0029
Consolidated Financial Statements
2. Compliance with Laws and Regulations 37
EPA Should Continue Efforts to Reconcile Intra-governmental Transactions... 38
3. Status of Prior Audit Report Recommendations 40
4. Status of Current Recommendations and Potential Monetary Benefits 42
Appendices 46
I. EPA's Fiscal 2009 and 2008 (restated) Consolidated Financial Statements.... 46
II. Agency's Response to Draft Report 121
III. Distribution 137
-------
10-1-0029
Inspector General's Report on EPA's Fiscal 2009 and
2008 (Restated) 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, 2009 and 2008 (restated), 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, as amended August 25,
2008. These standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material mis statements. 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 Agency has restated its financial statements for fiscal 2008 due to material errors in
accounting for accounts receivable and unearned revenue. EPA found that six settlement
agreements totaling $150.9 million should have been recorded as receivables and revenue in
fiscal 2008. EPA also found that a revised fiscal 2003 policy for recognizing revenue was not
properly implemented and led to a cumulative $95.4 million understatement of cashout advances
and overstatement of revenue. As a result, EPA determined that it needed to restate the fiscal
2008 financial statements in order to properly reflect accounts receivable, unearned revenue, and
related accounts. The Agency restated the fiscal 2008 financial statements to reflect an increase
in the net book value of receivables of $150.9 million and unearned revenue of $95.4 million,
and made corresponding adjustments to other related accounts. Due to the material errors found
in accounting for accounts receivable, unearned revenue and other related accounts, our report on
EPA's fiscal 2008 financial statements, issued on November 14, 2008, is not to be relied upon.
That report is replaced by this report on the restated fiscal 2008 financial statements. We
reported the internal control deficiencies that resulted in the material errors as material
weaknesses in the Internal Control section of this report.
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
1
-------
10-1-0029
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, 2009 and 2008 as restated, in conformity with
accounting principles generally accepted in the United States of America.
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 2009 and 2008 (restated), which are being
presented for additional analysis and are not a required part of the basic financial statements.
However, 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
-------
10-1-0029
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 as amended August 25, 2008. We did not test all internal
controls relevant to operating objectives as broadly defined by the Federal Managers' Financial
Integrity Act of 1982 (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, of which three are considered to be material weaknesses.
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, as amended August 25, 2008. Our procedures were not designed to provide
assurance on these internal controls and, accordingly, we do not express an opinion on such
controls.
-------
10-1-0029
Material Weaknesses
Material weaknesses noted are summarized below and detailed in Attachment 1.
EPA Understated Accounts Receivable for Fiscal 2008
EPA materially understated the fiscal 2008 accounts receivables by not recording
approximately $151 million in receivables. EPA's Servicing Finance Office was not
aware of legal documents supporting six receivables until the end of fiscal 2009.
Regional Legal Enforcement Offices, Offices of Regional Counsel, and Regional
Program Offices did not inform the Servicing Finance Office of the multi-party
settlements in time to record the receivables in the financial system in fiscal 2008. The
receivables were related to a bankruptcy settlement in which the responsible party was
implementing a Plan of Reorganization. EPA policies and procedures require regional
offices to provide the Servicing Finance Office with legal documentation supporting
accounts receivable, and the Servicing Finance Office to routinely communicate with
regional offices to ensure receivables are recorded timely. EPA subsequently recorded
the receivables in the financial system during fiscal 2009. EPA restated its 2008 financial
statements to reflect proper balances in fiscal 2008.
EPA Understated Unearned Revenue
EPA expended more than $97.7 million in Superfund special accounts against the wrong
fund code, incorrectly reducing EPA's liability for advances and recognizing revenue not
earned. The Office of the Chief Financial Officer's (OCFO's) Superfund Special
Account Guidance ".. .establishes financial management guidance for classifying special
account proceeds applicable to Superfund Cash-Out settlements in fund code TR2
(Non-Federal Special Accounts Unearned Revenue), and Superfund amounts received for
past cost settlements in fund code TR2B (Special Accounts Earned Revenue)...." EPA
deposited receipts for past costs in fund code TR2B but did not reclassify related
obligations from TR2 to TR2B. The receipts remained recorded in TR2B, yet EPA
recorded expenditures against the obligations in fund code TR2, which incorrectly
reduced liabilities and increased earned revenue. EPA recorded the adjustment to restate
fiscal 2007 and prior, and restated the fiscal 2008 financial statements.
Improvement Needed in Billing Costs and Reconciling Unearned Revenue for
Superfund State Contract Costs
EPA did not properly review the calculations used to reconcile unearned revenue for
Superfund State Contract costs. We found numerous errors and omissions on the
spreadsheets, including what appeared to be unbilled amounts of $3.9 million.
Subsequently, we determined that data was missing from the calculations which reduced
the unbilled amount to $877,853. In addition, we found, and EPA has reported to us, that
the schedules used to compute unearned revenue contained numerous errors and
omissions in information provided by regional offices. Cincinnati Finance Center
personnel informed us that they do not perform a review of the schedules; instead, they
rely on the regional offices to provide accurate information and auditor review. EPA
could not reconcile the Superfund State Contract unearned revenue to the corresponding
general ledger account. By not reconciling or reviewing the schedules provided by the
4
-------
10-1-0029
regions, there is no assurance of the accuracy of the amounts to bill in these funds. The
lack of an effective review of the schedules has led to errors and omissions in the
calculations that directly impact the balance in the Superfund State Contract unearned
revenue account and the Agency's financial statements.
Significant Deficiencies
Significant deficiencies noted are summarized below and detailed in Attachment 1.
EPA Misstated Uncollectible Debt and Other Related Accounts
EPA general ledger account, Expense Uncollectible Debt, Other Finances (Uncollectible
Debt Expense), was misstated by reflecting a credit balance in the account. Uncollectible
Debt Expense is a debit balance account. A credit balance in this account indicates there is
a misstatement. We found that the misstatement occurred because of how accounts
receivable and its related allowance accounts were moved from expiring Treasury funds to
current Treasury funds. EPA moved the balances from the expiring funds without properly
reviewing the entries to ensure that there would not be a net impact on current Treasury
funds. As a result, uncollectible expense and accounts related to the postings were
misstated in EPA's financial statements. After we informed EPA of the incorrect credit
balance, EPA recorded an adjustment for the amount identified in our review.
EPA Needs to Improve Billing and Accounting for Accounts Receivable
EPA understated the fiscal 2009 fourth quarter accrual for federal unbilled accounts
receivable by $1,237,468, due to its spreadsheet improperly containing credit balances
because the unbilled calculation included credits for reimbursable expenditures, refunds,
and billings that should not have been included. Further, we identified errors in EPA's
accounting and recording for 57 accounts receivables in the financial system that
occurred because EPA did not consistently follow policies and procedures. Those
accounting and recording errors affect the reliability and integrity of the financial
statements and the information used to manage the receivables.
Headquarters Property Items Not Inventoried
EPA did not conduct a physical inventory of 1,804 items of accountable personal
property at EPA Headquarters in fiscal 2009 as required by EPA's Personal Property and
Procedures Manual. EPA did not inventory all Headquarters accountable property
because it did not develop procedures to adequately account for the replacement of
thousands of personal computers resulting from EPA implementing a new desktop
service provider. Because EPA did not inventory these 1,804 property items, it was not
exercising proper control over $6.3 million of accountable personal property, of which
$2.3 million was capitalized property.
EPA Should Improve Its Financial Statement Preparation Process
Review of EPA's preparation process for its fiscal 2009 draft financial statements
disclosed: (a) four out-of-balance adjusting entries, (b) an ineffective review process,
(c) lack of guidance relating to general ledgers and normal debit/credit balances of
5
-------
10-1-0029
accounts, (d) inconsistent recording of on-top adjustments to the financial statements, and
(e) outdated financial statement preparation and closing entry guidance. According to
EPA guidance, on-top adjustments are for those journal entries that could not be entered
into the Integrated Financial Management System (IFMS) by the closing of the reporting
period but that should be part of the end-of-period statements. Outdated policies and
chart of accounts caused ineffective preparation of financial support and statements,
which could lead to materially misstated financial statements.
Unneeded Funds Not Deobligated Timely
EPA did not deobligate unneeded funds, totaling $1.9 million, identified during the fiscal
2009 annual review of unliquidated obligations (ULO). Federal and Agency guidance
require ULOs to be reviewed annually, and EPA requires responsible offices to review
inactive ULOs and take appropriate action to deobligate unneeded funds. However, EPA
did not take timely actions to notify the appropriate offices to deobligate the unneeded
funds. As a result, EPA has no assurance that ULOs are accurate and represent valid and
viable obligations, and that obligated funds are being used efficiently.
Integrated Financial Management System User Account Management Needs
Improvement
EPA needs to improve internal controls over IFMS users' accounts to: (a) ensure users
cannot process financial transactions that could result in theft of funds, (b) establish user
accounts consistent with the authorizing official's approval, and (c) terminate users'
system access when no longer needed. Federal financial management system
requirements state financial applications must comply with the security standards
published by the National Institute of Standards and Technology. Those standards
prescribe the mandatory security controls needed to protect IFMS. The weaknesses noted
occurred because management guidance for these areas is outdated or does not exist.
Further, management had not defined which financial management functions should be
separated, nor had it performed required reviews to ensure user accounts were established
correctly or deactivated when employees no longer needed them. As a result, users could
(1) potentially process financial transactions and redirect funds to unauthorized bank
accounts, (2) receive access to perform functions that are not authorized by management,
and (3) potentially access the IFMS system after they have departed EPA.
Las Vegas Finance Center Needs Improved Physical Access Controls
The Las Vegas Finance Center's (LVFC's) server room and other key areas are
susceptible to unauthorized access by personnel not a part of LVFC. The LVFC areas are
protected by an access control system. However, the system operator - the Office of
Research and Development (ORD) - does not administer the system in a manner that
allows LVFC to monitor access to its area. In particular, ORD had not obtained
authorization from the LVFC Director to grant access to key areas to non-LVFC
personnel. ORD also had neither provided the LVFC reports detailing who has access to
their areas nor performed the required semiannual review of access rights required by
ORD procedures. As a result, ORD granted personnel access to sensitive LVFC areas
without proper authorization.
-------
10-1-0029
Customer Technology Solutions Equipment Needs Improved Security Planning
On November 16, 2009, the OIG issued an audit report noting that EPA lacked a process
to routinely test Customer Technology Solution equipment for known vulnerabilities and
to correct identified threats. Further, EPA placed Customer Technology Solution
equipment into production without assessing the risk the equipment posed upon the
Agency's network and authorized the equipment for operation. OMB requires federal
agencies to create a security plan for each general support system and ensure the plan
complies with guidance issued by the National Institute of Standards and Technology.
Both performing vulnerability management reviews and preparing critical security
documents are needed to fulfill this requirement. The weaknesses noted existed because
EPA undertook an aggressive schedule to install over 11,500 computers at 18 locations
across the United States, and management focused attention on problems as they arose
rather than developing a plan.
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
2009 and should be included in considering EPA's significant deficiencies for fiscal 2009. We
reported less significant matters regarding internal controls in the form of position papers 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 as amended
August 25, 2008, requires us to compare material weaknesses disclosed during the audit with
those material weaknesses reported in the Agency's FMFIA report that relate to the financial
statements and identify material weaknesses disclosed by the audit that were not reported in the
Agency's FMFIA report.
For financial statement audit and financial reporting purposes, OMB 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 reported that no material weaknesses had been found in the design or operation of
internal controls over financial reporting as of June 30, 2009. We identified material weaknesses
with the Agency's reporting of accounts receivable and unearned revenue accruals and earned
revenue. Details concerning our findings on the material weaknesses and other significant
deficiencies can be found in Attachment 1.
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
-------
10-1-0029
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, as amended August 25, 2008. 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.
EPA Should Continue Efforts to Reconcile Intra-governmental Transactions
Our tests of laws and regulations disclosed the following noncompliance issue. As of
September 30, 2009, EPA reported $183 million in unreconciled differences for intra-
governmental transactions with 47 trading partners. Of that amount, the Department of
the Treasury reported $51 million as material differences. The remaining $132 million
represented amounts reported for non-verifying agencies, accruals, timing differences,
and immaterial differences. Based on our review of correspondence with other agencies,
EPA had difficulty reconciling these differences as required by Treasury policy primarily
because of differing accounting treatments and accrual methodologies between federal
agencies. EPA's inability to reconcile its intra-governmental transactions contributes to a
long-standing, government-wide problem that hinders the ability of the Government
Accountability Office (GAO) to render an opinion on the Consolidated Financial
Statements of the Federal Government. Further details on this noncompliance issue are
in Attachment 2.
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. To meet the FFMIA requirement, we
performed tests of compliance with FFMIA section 803(a) requirements. The results of
our tests did not disclose any instances where the Agency's financial management
systems did not substantially comply with FFMIA requirements.
We reported other less significant matters involving compliance with laws and regulations in
position papers 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 Trust Fund to conduct an annual
audit of payments, obligations, reimbursements, or other uses of the Fund. The material
weaknesses and significant deficiencies reported above also relate to Superfund.
-------
10-1-0029
Prior Audit Coverage
During previous financial or financial-related audits, we reported weaknesses that impacted our
audit objectives in the following areas:
• Oversight of Defense Finance and Accounting Service and Payroll reconciliation
• Accruals for Federal Unbilled Receivables
• Reconciling Superfund State Contract account to subsidiary ledger
• ULO review for interagency agreements
• Documentation for IFMS Vendor Table changes
• Monitoring Superfund Special Account Balances
• System Implementation Processes
• Capitalized Software
• Reporting Anti-Deficiency Act violations
• Prompt Payment Act violations
• Accounts Receivable and allowance for doubtful accounts
• Reconciling and reporting intra-governmental transactions, assets, and liabilities by
federal trading partner
• Information Security Requirements on Key Applications
• Access and Security Practices over Information Technology Assets
• Controls over IFMS Suspense Table
• Assessing automated application processing controls for IFMS
• Maintaining adequate documentation for obligation accounting adjustments
Attachment 3, Status of Prior Audit Report Recommendations, summarizes the current status of
corrective actions taken on prior audit report recommendations.
Agency Comments and OIG Evaluation
In a memorandum dated November 12, 2009, 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 16,2009
-------
10-1-0029
Attachment 1
Internal Control Material Weaknesses and
Significant Deficiencies
Table of Contents
1 - EPA Understated Accounts Receivable for Fiscal 2008 11
2 - EPA Understated Unearned Revenue 13
3 - Improvement Needed in Billing Costs and Reconciling
Unearned Revenue for Superfund State Contact Costs 15
4 - EPA Misstated Uncollectible Debt and Other Related Accounts 18
5 - EPA Needs to Improve Billing and Accounting for Accounts Receivable 19
6 - Headquarters Property Items Not Inventoried 24
7 - EPA Should Improve Its Financial Statement Preparation Process 25
8- Unneeded Funds Not Deobligated Timely 27
9 - Integrated Financial Management System
User Account Management Needs Improvement 30
10 - Las Vegas Finance Center Needs Improved Physical Access Controls 33
11 - Customer Technology Solutions Equipment Needs
Improved Security Planning 35
10
-------
10-1-0029
1 - EPA Understated Accounts Receivable for Fiscal 2008
EPA materially understated the fiscal 2008 accounts receivables by not recording approximately
$151 million in receivables. EPA's Servicing Finance Office (SFO) was not aware of legal
documents supporting six receivables until the end of fiscal 2009. Regional Legal Enforcement
Offices (LEOs), Offices of Regional Counsel (ORCs), and Regional Program Offices (RPOs) did
not inform the SFO of the multi-party settlements in time to record the receivables in the
financial system in fiscal 2008. The receivables were related to a bankruptcy settlement in which
the responsible party was implementing a Plan of Reorganization. EPA policies and procedures
require regional offices to provide the SFO with legal documentation supporting accounts
receivable, and the SFO to routinely communicate with regional offices to ensure receivables are
recorded timely. EPA subsequently recorded the receivables in the financial system during fiscal
2009.
Statutory Superfund accounts receivable arise when a court enters a judgment or the Agency
enters into settlement agreements pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (known as Superfund). The SFO received a June 2009
court order involving numerous Superfund sites and multiple settling parties. The SFO recorded
the receivables for this and other related settlements, totaling $297 million, in fiscal 2009.
However, the SFO identified additional settlements related to the responsible party that were
effective in fiscal 2008. The SFO researched the Public Access to Court Electronic Records
service system and requested a list of related settlements from the Department of Justice (DOJ).
The SFO discovered additional receivables for the same settlement totaling $151 million that
should have been recorded during fiscal 2008.
Resources Management Directive Systems (RMDS) 2550D, Chapter 14, requires the ORCs,
RPOs, and LEOs to forward copies of all entered Superfund consent decrees and judgments to
the SFO within 3 working days of receipt from the DOJ or the court. RMDS 2540, Chapter 9,
requires the responsible EPA office to forward a copy of the action document to the SFO within
5 days of determining the debt owed to the Agency. EPA's Office of the Comptroller
Transmittal No. 00-05: Reporting and Tracking Superfund Accounts Receivable states SFOs
must maintain routine communications with the ORCs, RPOs, and LEOs to record accounts
receivables timely. The SFO should review all available information sources to identify
potential accounts receivable and work to obtain accounts receivable documentation.
The SFO stated that the multi-party bankruptcy settlement was not on the DOJ debt assessed
report because DOJ will not record a bankruptcy settlement until it receives a collection on the
settlement. The SFO stated the program office determined the settlements were not in the
Integrated Compliance Information System and recently decided to enter the information to
ensure accurate reporting of settlements for fiscal 2009. One RPO believed the multi-party
settlements did not establish an obligation to pay the Agency. Another regional attorney was
unaware that the office should inform the SFO of settlements. Because the multi-party
settlement was part of a bankruptcy proceeding, some offices were unclear as to when to notify
the SFO - after the settlement or after bankruptcy.
11
-------
10-1-0029
ORC, RPOs, and LEOs are required to forward copies of settlement agreements and other source
documentation establishing amounts due to EPA. If the SFO does not receive these documents
timely, the data reflected in the financial system for the fiscal year is inaccurate. EPA offices
should work together to ensure that accounts receivable are properly recorded within the fiscal
year in which they become valid.
The Agency restated its 2008 financial statements to reflect proper balances in fiscal 2008.
Recommendations
We recommend that the Office of the Chief Financial Officer:
1. Develop a process to communicate routinely with the regional offices on a monthly or
quarterly basis to identify any settlements not recorded on the DOJ debt assessed report
or recorded within the Integrated Compliance Information System. Also, work with the
offices to agree on a process that would include forwarding of settlement documents
within the required time period.
2. Re-inform and train LEOs, ORCs, and RPOs on the requirement to timely send
settlements to the finance center so the receivables can be recorded. Also work to
establish and implement a process to ensure that the SFO is aware of settlements by the
end of the fiscal year to ensure that current year financial statements include accounts
receivable for the current year.
Agency Comments and OIG Evaluation
OCFO agreed with our findings and recommendations.
12
-------
10-1-0029
2 - EPA Understated Unearned Revenue
EPA expended more than $97.7 million in Superfund special accounts against the wrong fund
code, incorrectly reducing EPA's liability for advances and recognizing revenue not earned.
OCFO's Superfund Special Account Guidance ".. .establishes financial management guidance
for classifying special account proceeds applicable to Superfund Cash-Out settlements in fund
code TR2 (Non-Federal Special Accounts Unearned Revenue), and Superfund amounts received
for past cost settlements in fund code TR2B (Special Accounts Earned Revenue)...." EPA
deposited receipts for past costs in fund code TR2B but did not reclassify related obligations
from TR2 to TR2B. The receipts remained recorded in TR2B, yet EPA recorded expenditures
against the obligations in fund code TR2, which incorrectly reduced liabilities and increased
earned revenue. EPA recorded the adjustments to restate fiscal 2007 and prior, and restated the
fiscal 2008 financial statements.
During our review of general ledger account 2317 (Advances, HRSTF, Cash-Out settlements,
N/F), we found that 78 special accounts had negative balances in fund code TR2. The negative
balances indicated the Agency overdrew the special account for those sites for fund code TR2.
Statement of Federal Financial Accounting Standard^o. 1 states: "When advance fees or
payments are received, such as for large scale, long term projects, revenue should not be
recognized until costs are incurred from providing the goods and services .... An increase in
cash and an increase in liabilities, such as 'unearned revenue,' should be recorded when the cash
is received...."
EPA established different reimbursable fund codes to record cash receipts and disbursements
under Special Accounts to comply with the standard and recognize revenue when earned. OCFO
published Superfund Special Account Guidance, dated July 16, 2002, to provide "accounting
procedures for recording and tracking special account funds." This guidance established the
scenarios under which to use the two fund codes:
TR2 Non-Federal Special Accounts Unearned Revenue. Represents amounts
received under a non-federal Cash-Out settlement (principal only, excludes late
payment interest). This pertains to collections related to non-federal settlement
amounts for costs to be incurred (work to be performed) in the future.
TR2B Special Accounts Earned Revenue. Represents amounts for Past Cost
collections, late payment interest collections from PRPs (principal responsible
parties), and interest revenue earned on special account collections that have not
been disbursed. This pertains to collections related to settlement amounts for
costs previously incurred.
EPA expended more TR2 funds than it received. EPA moved the collections for the sites from
TR2 to TR2B to record the funds as reimbursement for past costs and recognized earned
revenue. EPA left the related obligations in TR2 and, when EPA recorded expenditures, they
were against TR2 when the receipts were recorded in TR2B. The result was that revenue was
double counted and unearned revenue understated.
13
-------
10-1-0029
EPA established the fund codes needed to record the Special Accounts properly in fiscal 2002.
However, it did not have management reports that effectively identified negative balances in the
fund codes. EPA can currently generate Special Account reports by fund code. These reports
are readily assessable, and identify the fund code balances by site. EPA management was not
aware of the negative amounts in the individual funds codes for the sites, since overall site
balances remained positive.
The Special Account Balances by Fund Code Report indicated that EPA expended $97.7 million
more than it collected in fund code TR2 as of September 30, 2009. EPA should have expended
that amount from fund code TR2B. The net effect at September 30, 2009, was that EPA's
liability for Cash-Out settlements advances remained underreported by $97.7 million. EPA
overreported earned revenue by that same amount.
We reported our findings to the Agency and the OCFO determined the net effect of the
accounting error. OCFO determined it needed to record a prior period adjustment for fiscal 2007
and restate the fiscal 2008 financial statements to correct the error. To correct the accounting
error, OCFO recorded an entry increasing EPA's liability for advances by $97,675,708 and
decreasing its earned revenue by that amount. The Agency recorded the adjustment to restate
fiscal 2007 and prior, and restated the fiscal 2008 financial statements. The correction in the
financial statements (all in fund code TR2) was:
Account Description Debit Credit
2317 ADVANCES, HRSTF CASH-OUT SETTLEMENTSS,N/F $97,675,708
4222 UNFILLED CUSTOMER ORDERS COLL $97,675,708
4252 REIMB EARNED - COLLECTED $97,675,708
522P EARNED REVENUE PUBLIC EXCH $2,227,678
7401 SF SPEC ACCT FY08 RESTATEMENT $1,835,442
7400 SF SPEC ACCT PRE FY08 RESTATE $93,612,588
Recommendations
We recommend that the Office of the Chief Financial Officer, in conjunction with the Regional
Financial Management Offices and the Office of Budget:
3. Prepare the accounting entry to account correctly for the special account expenditures at
the site level.
4. Work with Regional Comptrollers to correctly account for the improperly expended
funds at the site level.
5. Develop controls over Special Accounts so that, for each site, the fund codes collected
are the fund codes spent.
Agency Comments and OIG Evaluation
OCFO agreed with our findings and recommendations.
14
-------
10-1-0029
3 - Improvement Needed in Billing Costs and Reconciling
Unearned Revenue for Superfund State Contract Costs
EPA did not properly review the calculations used to reconcile unearned revenue for Superfund
State Contract (SSC) costs. We found numerous errors and omissions on the spreadsheets,
including what appeared to be unbilled amounts of $3.9 million. Subsequently, we determined
that data was missing from the calculations that reduced the unbilled amount. In addition, we
found, and EPA has reported to us, that the schedules used to compute unearned revenue
contained numerous errors and omissions in information provided by regional offices.
Cincinnati Finance Center personnel informed us that they do not perform a review of the
schedules; instead, they rely on the regional offices to provide accurate information and auditor
review. EPA could not reconcile the SSC unearned revenue to the corresponding general ledger
account. By not reconciling or reviewing the schedules provided by the regions, there is no
assurance of the accuracy of the amounts to bill in these funds. The lack of an effective review
of the schedules has led to errors and omissions in the calculations that directly impact the
balance in the SSC unearned revenue account and the Agency's financial statements.
SSC Accrual Calculation Contained Numerous Errors and Omissions
Based on our review of the fiscal 2009 third and fourth quarter SSC accrual calculations, we
found that sites were excluded from the calculation, EPA used incorrect State cost share
percentages, billings were not correctly entered, site were incorrectly classified as closed, and
credits were improperly stated. Our test work identified the following 13 errors and omissions,
totaling $5,053,298 out of $16,671,052 tested:
• One site totaling $40,000 was not included in the fiscal 2009 fourth quarter accrual
calculation.
• For nine sites, a total of $733,027 in State credits was recorded as amounts to bill.
• For one site, $293,133 of amounts billed was not included in the calculation.
• For one site, $3.6 million of State credits were not included in the calculation.
• For one site, data in the accrual calculation did not reconcile to the general ledger account
for unearned revenue for SSCs by $376,587.
The Cincinnati Finance Center responded that the regions were responsible for new sites and
other data included in the calculations. They were not aware of why sites were not included or
of the errors in the calculations. Our inquiries of several regional financial management offices
regarding the calculations showed that the calculations included various errors, omissions, and
misstatements. These included credits where there should be none, inclusion of closed sites,
misstatement of data, closed site accruals, over/under statement of costs, inaccurate billable
amounts, billing caps not considered, incorrect percentages, and missing credits. We found
$3.9 million listed as unbilled but subsequently was determined to be offset by credits that were
erroneously omitted from the calculations. We found $887,583 where costs incurred exceeded
prior billings and therefore should be billed. The consistency of errors and omissions found in
the 79 out of 478 sites examined indicates that there could be significant undetected errors and
omissions in the remaining sites.
15
-------
10-1-0029
SSC Costs Not Properly Billed
According to Title 40, Code of Federal Regulations, Part 35, Subpart O, SSC sites remain valid
until EPA and the State have satisfied the cost share requirement. The State share is a guarantee
payment from the State based on a percentage of the site costs incurred by EPA. An SSC site is
closed when all SSC collections and expenditures have been made. It is the EPA regions'
responsibility to verify the data used to calculate the States share of costs, funds collected, and
costs expended before classifying a SSC site as closed.
We reviewed the fiscal 2009 fourth quarter SSC calculations for closed sites and discovered that
the SSC billings and disbursements did not agree to the State share amount. For closed sites, the
disbursements, billings, and State share should agree without exception. Region 3, 4, 5, and 7
did not correctly bill $887,583 on 19 closed sites.
SSC Unearned Revenues Need to Be Reconciled
According to the Chief Financial Officers Act, an agency must have a financial management
system that provides complete, reliable, consistent, and timely information.
EPA recorded about 37 transactions in non-SSC funds between February 1986 and October 1999
that should have been moved to the current SSC expenditure funds in general ledger account
2312 (Unearned Advances, Non-Federal). By not reconciling, there is no assurance of the
accuracy of the amounts to bill in these funds or the SSC unearned revenue account, which
totaled approximately $45 million as of September 30, 2009. Because the SSC spreadsheet
cannot be reconciled to the general ledger 2312, we examined the older activity in the account.
We identified $6.8 million in general ledger account 2312 that represents prior fiscal year SSC
fund transactions. We provided the Agency with a listing of prior year transactions that we
believe may include invalid transactions, such as billings not collected, disbursements not billed,
unsupported journal voucher entries, duplicate collections, and non-related SSC activity.
According to EPA guidance, Superfund State Contact Spreadsheet Purpose and Column
Descriptions, Headquarters should use the calculated unearned revenue from the SSC
spreadsheet for assessing whether on-top adjustments or further analysis of general ledger
account 2312 is needed. However, since it is not known if the amount in the SSC spreadsheet or
the amount in the general ledger account is correct, no on-tops have been made for general
ledger account 2312 for SSC-related activity. To comply with the Chief Financial Officers Act,
EPA must ensure that its financial accounting system has complete and reliable information.
16
-------
10-1-0029
Recommendations
We recommend that the Office of the Chief Financial Officer:
6. Direct the Superfund regional offices to verify that closed sites identified in the SSC
spreadsheet meet the closed site criteria and the SSC site billings and disbursements data
in the SSC spreadsheet are accurate.
7. Have its Office of Financial Policy and Planning Staff work with regional comptrollers
and Superfund program personnel to research transactions in older funds and eliminate
invalid transactions.
8. Establish a review process for reconciling Superfund site costs to ensure that data and
calculations used are consistent and properly supported.
9. Direct the regional offices to bill the States for costs incurred where necessary, including
the $887,583 amount identified.
Agency Comments and OIG Evaluation
OCFO generally agreed with our findings and recommendations.
17
-------
10-1-0029
4 - EPA Misstated Uncollectible Debt and Other Related Accounts
EPA's general ledger (GL) account, Expense Uncollectible Debt, Other Finances (Uncollectible
Debt Expense), was misstated by reflecting a credit balance in the account. Uncollectible Debt
Expense is a debit balance account. A credit balance in this account indicates there is a
misstatement. We found that the mis statement occurred because of how accounts receivable and
its related allowance accounts were moved from expiring Treasury funds to current Treasury
funds. EPA moved the balances from the expiring funds without properly reviewing the entries to
ensure that there would not be a net impact on current treasury funds. As a result, uncollectible
expense and accounts related to the postings were misstated in EPA's financial statements. After
we informed EPA of the incorrect credit balance, EPA recorded an adjustment for the amount
identified in our review.
EPA uses standard vouchers to record accounting events that occur on a recurring basis and have
predetermined debit(s) and credit(s) in accordance with EPA Comptroller Policy 93-02, Policies
for Documenting Agency Financial Transactions. The Standard General Ledger and Treasury
Account require expense accounts to have a debit balance.
EPA recorded several transactions resulting in a $5.8 million credit balance in Uncollectible
Debt Expense. The entries incorrectly reduced EPA's general ledger accounts Uncollectible
Debt Expense and 2980 (Custodial Liability). EPA recorded these entries because in its year-end
closing instructions the Office of Financial Management required the SFOs to move accounts
receivable and related allowance for doubtful accounts in expiring funds to fund 3200
(Collection of Receivable from Cancelled Account). In doing so, the entries caused an incorrect
credit balance in the general ledger account Uncollectible Debt Expense.
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. If EPA had properly
reviewed the account for the effect of the adjusting entries, then EPA could have noticed the net
impact on current treasury funds.
Recommendations
We recommend that the Office of the Chief Financial Officer:
10. Create a receivable billing document matrix to reflect a proper accounting model to
record standard voucher adjustments and the movement of accounts from expiring or
cancelled appropriations. Also, review the net impact of adjusting entries prior to issuing
an accounting model to ensure account balances are proper.
11. Review its accounting model provided to SFOs for net impact to expenses and revenues
from prior periods to ensure that financial statements are not misstated.
Agency Comments and OIG Evaluation
OCFO agreed with our findings and recommendations.
18
-------
10-1-0029
5 - EPA Needs to Improve Billing and Accounting for
Accounts Receivable
EPA understated the fiscal 2009 fourth quarter accrual for federal unbilled accounts receivable
by $1,237,468, due to its spreadsheet improperly containing credit balances because the unbilled
calculation included credits for reimbursable expenditures, refunds, and billings that should not
have been included. Further, we identified errors in EPA's accounting and recording for 57
accounts receivables in the financial system that occurred because EPA did not consistently
follow policies and procedures. Those accounting and recording errors affect the reliability and
integrity of the financial statements and the information used to manage the receivables.
Federal Unbilled Accounts Receivable Understated
EPA understated the fiscal 2009 fourth quarter accrual for federal unbilled accounts receivable.
EPA's unbilled accounts receivable spreadsheet for the quarter improperly contained $1,237,468
in credit balances because the unbilled calculation included unjustified credits for reimbursable
expenditures, refunds, and billings; and EPA did not thoroughly review the calculation. OMB
Circular A-127, Policies and Standards for Financial Management Systems, requires federal
financial management systems to provide complete, reliable, consistent, timely, and useful
financial management information. The credit balances led to a $1,237,468 understatement of
the unbilled accounts receivable and related revenue in the financial statements.
EPA quarterly calculates federal unbilled accounts receivable and the related revenue. The
unbilled accounts receivable consists of reimbursable expenditures EPA has incurred but has not
yet billed to other agencies for services performed under reimbursable interagency agreements.
The unbilled accounts receivable are assets that should carry a normal debit balance; there should
not be credit balances in the calculation. The credits offset debit entries and reduce the normal
debit balance in unbilled accounts receivable.
The following problems led to the inaccuracy of the fourth quarter accrual calculation:
• EPA charged reimbursable expenses against expired and/or deobligated prior year funds;
EPA is unable to bill and collect these costs from other federal agencies.
• Unprocessed refunds are due to other federal agencies.
• Billings greater than incurred expenses.
Had EPA properly reviewed the unbilled accounts receivable, it could have identified,
researched, and resolved the credit balances within the calculation before entry of the fourth
quarter data into IFMS.
Errors Identified in Accounting for Accounts Receivables
We identified errors in EPA's accounting and recording for 57 accounts receivables in the
financial system. Errors included (a) untimely recording of receivables, (b) incorrectly recording
federal receipts, (c) improperly recording interest on debts assessed, (d) incorrectly calculating
the allowance for doubtful accounts, (e) inadequate pursuit of collection efforts, and (f) improper
19
-------
10-1-0029
reporting of status codes. These errors occurred because EPA did not consistently follow
policies and procedures. Federal accounting standards and EPA policies require finance offices
to accurately and timely record transactions, communicate with regional offices, and monitor
debt. The errors noted affect the reliability and integrity of accounts receivable on the financial
statements and the information used to manage these receivables.
Receivables generally reflect the billing of responsible parties who owe EPA money for
Superfund clean-ups or for goods and services provided. GAO's Standards for Internal Control
in the Federal Government require accurate and timely recording of transactions and events.
EPA's Office of the Comptroller Transmittal No. 00-05: Reporting and Tracking Superfund
Accounts Receivable, requires SFOs to maintain routine communications with the RPO, ORC,
and Regional LEO to ensure that accounts receivable can be recorded as early as possible. We
identified the following errors.
• ORCs, RPOs, and LEOs did not forward to the EPA Finance Office legal documents and
supporting documentation for 35 receivables, totaling $42,754,197, within the timeframes
stated in EPA's guidance. EPA's RMDS 2550D, Chapter 14, requires the ORCs, RPOs,
and LEOs to forward to the SFO copies of all entered Superfund consent decrees and
judgments within 3 working days of receipt from the DOJ or the court. RMDS 2540,
Chapter 9, requires the responsible EPA office to forward a copy of the action document
for non-Superfund receivables to the SFO within 5 days of determining the debt owed to
the Agency. As noted, SFOs must maintain routine communications with the ORCs,
RPOs, and LEOs to record accounts receivables timely. The SFO should review all
available information sources to identify potential accounts receivable and be more
proactive in efforts to obtain accounts receivable documentation. Untimely receipt of
accounts receivable source documentation delays recording of accounts receivable in the
financial management system and understates those receivables. EPA subsequently
recorded the receivables in the financial system during fiscal 2009.
• EPA did not adequately pursue collection efforts for two accounts receivables with a
combined outstanding balance of $6,451. The debts, which had no documented
collection efforts since 2007, have been outstanding for 1,993 to 2,974 days. The debts
were coded as "delinquent - in dunning cycle." The receivable file folders did not
contain any dunning notices. RMDS 2550D-14, Chapter 14, states that the SFO should
monitor the status of delinquent debts and adjust the overdue status code accordingly as
status changes. RMDS 2540, Chapter 9, states that 30 days following the last demand
letter the finance center "must review the debt to determine whether every reasonable
effort has been used to collect it." If deemed uncollectible, the SFO should send the debt
to the Department of the Treasury for collection or to the EPA Claims Officer for write-
off. If EPA increased its review of older debts for collection, the financial statements
would accurately reflect the general ledger accounts for the allowance for doubtful
account and write-offs. Promptly writing off uncollectable accounts reduces
administrative monitoring costs.
• EPA did not correctly record a federal accounts receivable and related interest for a
Superfund site. In June 2009, the regional office notified EPA that settling federal agencies
20
-------
10-1-0029
were required to pay EPA $4,865,424, but EPA recorded the amount in the financial system
as a non-federal receivable. EPA explained that the consent decree was complex and
included multiple responsible parties, and the amount due to EPA and individual responsible
parties was unclear. Statement of Federal Financial Accounting Standards (SFFAS) No. 1
requires separate accounting and reporting for federal and non-federal receivables. GAO's
standards require accurate and timely recording of transactions and events. Classifying a
federal receivable and interest as non-federal misstates related accounts receivable and
interest and revenue, and improperly reflects interest due from the responsible parties. EPA
subsequently corrected these errors during fiscal 2009.
• EPA did not correctly record the interest for four accounts receivable totaling $655,016
included on the DOJ Debt Assessed Report. GAO's standards require accurate and
timely recording of transactions and events. RMDS 2540, Chapter 9, requires the
financial system to determine the interest rate and interest days, and calculate simple
interest on the outstanding balance. EPA did not properly reconcile accounts receivables
on the debt-assessed report to receivables recorded in the financial system to ensure all
debts (e.g., principal, interest) were recorded in the correct general ledger accounts in the
financial system. EPA misclassified interest as principal. As a result, EPA will
improperly charge excess interest to the responsible parties. Charging excess interest is a
violation of the regulation, which stipulates that only simple interest will accrue on
principal balances.
• EPA incorrectly calculated the allowance for doubtful accounts for two quarters. The
calculations contained errors for 12 accounts receivables. EPA calculated the allowance
for doubtful accounts on each of these receivables using individual lines of accounting
and differing methods versus using one method for the entire receivable balance. In
doing so, EPA overstated the allowance for these receivables by $14,761. EPA should
use one calculation method per receivable balance to estimate a receivable's
collectability. RMDS 2540-09-T1 states that each SFO must make a determination of
what method or methods it will use at the beginning of each fiscal year. In addition, it
should document in writing the specific methodology used to determine the allowance for
doubtful accounts. SFFAS No. 1 states: "... allowances for receivables should be viewed
in the context of the overall risk of the receivables being assessed." EPA said the
accounts receivable with multiple fund codes show up as separate lines in the financial
system and did not realize the two lines of coding were for one receivable. EPA used the
percentage analysis method for balances less than $20,000 rather than applying the
specific identification method to the total receivable balance. Calculating the allowance
for the receivables using both methods within each receivable led to an overstatement of
the allowance for doubtful accounts and corresponding understatement in net receivables
on the financial statements. After we informed EPA of the error, EPA adjusted the
allowance amounts by the differences identified in our review.
• EPA incorrectly reported the status codes for three accounts receivables in the financial
management system. The status codes recorded in the financial system placed collection
responsibility on EPA, while supporting documentation in the receivable files indicated
EPA had turned the debts over to DOJ for collection or write-off. EPA incorrectly
21
-------
10-1-0029
recorded two receivables with the status code '01" for "Non-Delinquent - Due > 1 Year."
The file indicated that, in both cases, EPA carries a lien on the property. The liens
provide EPA with the right to collect the proceeds of the sale of the properties. We
believe status code "19" for "Uncollectible with Liens" would be more applicable to
these receivables. EPA recorded the third remaining receivable with a status code "96"
for "Debt Referred to EPA Claims Officer (less than $100,000)." The amount of the debt
was $118,341, which is greater than the limit for the status code. We believe status code
"14" for "Debts Sent to DOJ for Compromise or Write-Off would be more applicable to
this receivable. RMDS 2550D, Chapter 14, states that the finance center should monitor
the status of delinquent debt and adjust the overdue status code for each accounts
receivable as status changes. The guidance further states SFOs should refer to DOJ for
collection statutory Superfund accounts receivables arising under judicial or
administrative orders. Accurate status codes give EPA management an accurate picture
of delinquent accounts receivables.
Recommendations
We recommend that the Office of the Chief Financial Officer:
12. Research and resolve the $1,237,468 of unbilled accounts receivable credit balances to
ensure the accuracy of future quarterly unbilled accounts receivable before they are
entered into IFMS.
13. Work with other federal agencies to resolve each credit balance to ensure the exclusion of
credit amounts from future unbilled accounts receivable calculations.
14. Work with RPOs, ORCs, and LEOs to obtain legal documentation sooner so receivables
are recorded timely. Institute a process to review DOJ tracking mechanisms for the status
of consent decrees and judgments.
15. Establish a supervisory review process to ensure procedures are being followed, and
interest and federal receivables are properly recorded.
16. Establish a process to review the allowance calculation for errors, including proper
application of calculation methods.
17. Develop a process to review and update receivable status code updates in the financial
system quarterly.
Agency Comments and OIG Evaluation
OCFO did not agree with our recommendation to research and resolve the $1,237,468 of unbilled
accounts receivable credit balances before they are entered into IFMS or to work with other
agencies to resolve credit balances. OCFO believes there are valid reasons why the credits that
are left the report should be included in the overall calculation. OCFO did not provide any valid
reasons to support why credit balances should be in the report. We still believe the credits need
22
-------
10-1-0029
to be researched to determine the nature of the credits. They should have no impact on the
accrual. Working with other agencies on these matters could help the Agency address intra-
governmental reconciling differences. OCFO generally agreed with our other findings and
recommendations.
23
-------
10-1-0029
6 - Headquarters Property Items Not Inventoried
EPA did not conduct a physical inventory of 1,804 items of accountable personal property at
EPA Headquarters in fiscal 2009 as required by EPA's Personal Property and Procedures
Manual. EPA did not inventory all Headquarters accountable property because it did not
develop procedures to adequately account for the replacement of thousands of personal
computers resulting from EPA implementing a new desktop service provider. Because EPA did
not inventory these 1,804 property items, it was not exercising proper control over $6.3 million
of accountable personal property, of which $2.3 million was capitalized property.
During fiscal 2009, EPA began using a new Working Capital Fund service - Computer
Technology Solutions (CIS) - to provide and coordinate all information technology end user
support and services for Headquarters program offices. Under CIS, the Agency is replacing
thousands of computers, including periphery items, for EPA's Headquarters program offices and
their sites located across the country. The CTS contract required this replacement to take place
during fiscal 2009. The CTS rapid replacement of computers heavily impacted the Headquarters
Accountability Area and out-paced EPA's efforts to adequately update Agency property records.
The Facilities Management Services Division is responsible for administering the EPA Personal
Property Management Program. EPA's Personal Property and Procedures Manual, Section
3.7.7, states that physical inventories of accountable personal property must be completed
annually. EPA defines accountable personal property "as non-expendable personal property with
an acquisition cost of $5,000 or greater, EPA-leased personal property, or property identified as a
sensitive item." The fiscal 2009 Headquarters Annual Physical Inventory Certification showed
7,973 accountable personal property items. However, only 6,169 of the items were inventoried,
leaving 1,804 not inventoried. The acquisition cost of the 1,804 items not inventoried was about
$6.3 million, with capitalized items accounting for $2.3 million of the total. EPA's not
conducting inventories of this large number of items compromised its property control system
and can lead to the loss or misappropriation of Agency assets.
Recommendation
We recommend that the Assistant Administrator, Office of Administration and Resources
Management:
18. Require the Director, Facilities Management and Services Division, to promptly conduct
an inventory of the 1,804 Headquarters Accountable Property items not inventoried in
fiscal 2009.
Agency Comments and OIG Evaluation
OCFO agreed with our findings and recommendation.
24
-------
10-1-0029
7 - EPA Should Improve Its Financial Statement Preparation Process
Review of EPA's preparation process for its fiscal 2009 draft financial statements disclosed:
• Four out-of-balance adjusting entries.
• An ineffective review process.
• Lack of guidance relating to general ledgers and normal debit/credit balances of
accounts.
• Inconsistent recording of on-top adjustments to the financial statements.
• Outdated financial statement preparation and closing entry guidance.
According to EPA guidance, on-top adjustments are for those journal entries that could not be
entered into IFMS by the closing of the reporting period but that should be part of the end-of-
period statements. Statement adjustments must be made as needed. Outdated policies and chart
of accounts caused ineffective preparation of financial support and statements, which could lead
to materially misstated financial statements.
EPA Comptroller Policy 93-02, Policies for Documenting Agency Financial Transactions states
"entries must be self-balancing by fiscal year and appropriation." EPA Comptroller Policy
03-11, Preparing EPA 's Interim and Annual Audited Financial Statements states "The OCFO
primary responsibility in preparing the financial statements is to coordinate, establish, and
maintain policies and procedures for accounting and related reporting essential to the financial
integrity and efficient management of the Agency, and establish, maintain, and monitor EPA
financial controls."
During our analysis of the fourth quarter on-top adjustments, we identified four one-sided on-top
adjustments. The on-top adjustments should have equal debits and credit balances within the
respective funds. In the case of the four one-sided on-top adjustments, they either have a debit or
credit balance because the Agency posted the corresponding entry to a different fund. The
Agency reviewed and approved these entries. The entries were:
Entry
82
83
88
89
Fund
8153
8196
8145
8195
Description
To consolidate balances
LUST from BPD.
To consolidate balances
LUST from BPD.
To consolidate balances
for Superfund from BPD.
To consolidate balances
for Superfund from BPD.
Debits
$3,583,728,202
$200,000,000
$4,780,855,901
$600,000,000
Credits
($3,597,428,202)
($186,300,000)
($4,809,855,901)
$571,000,000
Difference
($13,700,000)
$13,700,000
($29,000,000)
$29,000,000
Fund Description: 8153: Leaking Underground Storage Tank
8196: American Recovery and Reinvestment Act- Leaking Underground Storage Tank
8145: Superfund
8195: American Recovery and Reinvestment Act-Superfund
Abbreviations: BPD: Bureau of Public Debt
LUST: Leaking Underground Storage Tank
Source: Fourth quarter On-top Adjustment Spreadsheet prepared by the Agency.
25
-------
10-1-0029
In the review of the Agency's Financial Statement Preparation Guide, the fiscal 2008 closing
entries, and the fiscal 2009 general ledger accounts, we found that:
• The guide does not explain changing on-top entries into journal vouchers and/or standard
vouchers.
• The Year End Closing Table (YACT) referred to in the guide needs to be updated for
new accounts and for the year end closing process. For example, in fiscal 2008, general
ledger account 4165 (Allocation of Authority - Anticipated) incorrectly closed to
account 4201 (Total Actual Resources) instead of account 4450 (Authority Available for
Apportionment), according to the YACT table.
• The general ledger matrix on the EPA OCFO Intranet Website has not been updated
since 2005. Since 2005, EPA has created additional general ledger accounts that do not
have guidance on what are "normal" (i.e., debit/credit) general ledger balances, and the
Agency no longer documents when general ledgers are not used.
Creating one-sided adjustments and having an ineffective review process and outdated policies
and procedures could lead EPA to prepare materially misstated financial statements.
Recommendations
We recommend that the Office of the Chief Financial Officer:
19. Implement an effective review process for all on-top adjustments to ensure that individual
entries within funds will balance (debits/credits) properly.
20. Update the Financial Statement Preparation Guide to contain guidance or instructions
for changing on-top adjustments to either journal vouchers and/or standard vouchers.
21. Update the YACT and the general ledger matrix to identify current fiscal year general
ledger accounts and their related closing activity.
Agency Comments and OIG Evaluation
OCFO did not agree with our finding regarding one-sided on-top adjustments. OCFO believes
the on-top adjustments are clearly labeled and there was no negative impact on the financial
statements. We agree that the end result of the multiple one-sided entries did not negatively
impact the financial statements. However, we do not believe it is good practice to prepare and
enter one-sided entries at any time in the financial statement preparation process. Entries to any
set of accounts or fund should balance at all times in conformity with the basics of double-entry
bookkeeping. OCFO generally agreed with our remaining findings and recommendations.
26
-------
10-1-0029
8 - Unneeded Funds Not Deobligated Timely
EPA did not deobligate unneeded funds, totaling $1.9 million identified during the fiscal 2009
annual review of unliquidated obligations (ULOs). Federal and Agency guidance require ULOs
to be reviewed annually, and EPA requires responsible offices to review inactive ULOs and take
appropriate action to deobligate unneeded funds. However, EPA did not take timely actions to
notify appropriate offices to deobligate unneeded funds. As a result, EPA has no assurance that
ULOs are accurate and represent valid and viable obligations and that obligated funds are being
used efficiently.
GAO's Policy and Procedures Manual for Guidance of Federal Agencies, Title 7, Chapter 3,
requires each agency to review its ULOs 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
ULOs to ensure that all recorded obligations are still valid and viable. 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 a means to meet the need.
EPA's Procedures and Technical Guidance for FY 2009 Unliquidated Obligations Review
names the responsible officials for reviewing inactive obligations. All responsible officials must
certify that their office/region completed their inactive obligations review and took the necessary
actions to deobligate the funds. Two certifications are required - the FMFIA Assurance Letter
(due August 14, 2009) and the Review of Unliquidated Obligations Year-end Certification (due
October 9, 2009). The Assurance Letter must include certification that the review of assigned
unliquidated obligations has been completed and the necessary action taken to deobligate
unneeded funds. The year-end certification certifies that each office has deobligated unneeded
funds.
We found that the Agency identified unneeded funds, totaling $1.9 million, during the fiscal
2009 annual ULO review, which remained open as of September 30, 2009. Specifically:
• During our analysis of the Agency's ULO certifications, we found that several regions
and Headquarters' program offices identified inactive ULOs for deobligation totaling
$1.7 million. However, timely action was not taken to deobligate the funds before the
October 9, 2009 certification.
27
-------
10-1-0029
Year-end
Certifications
Allowance Holder and
Responsible Planning
and Implementation
Office Certifications
Total
Region/Program Offices
• Regions 1
• Region 5
• Region 7
• Region 8
• Region 10
• Office of International Affairs
• Office of the Chief Financial Officer
• Office of General Counsel
• Office of Prevention, Pesticides, and
Toxic Substances
• Office of Water
• Office of Enforcement and Compliance
Assurance
• Region 6
• Office of Prevention, Pesticides, and
Toxic Substances
• Office of Research and Development
No. of
Offices
11
3
Funds for
Deobligation
$1,509,366
$245,934
$1,755,300
Source: OIG analysis.
• In July 2008, the Office of Air and Radiation's Stratospheric Protection Division, in the
Office of Atmospheric Programs, identified $58,414 in miscellaneous unneeded funds for
deobligation. However, the Office of Air and Radiation did not inform the Office of
Administration and Resources Management (OARM) to take necessary action to
deobligate the unneeded funds. The Stratospheric Protection Division acknowledged in
July 2008 that the funds were old but did not expressly authorize OARM to deobligate
the funds. After inquiries by the OIG regarding these unneeded funds, the Stratospheric
Protection Division identified an additional $32,877 in unneeded Miscellaneous and
Contract funds for deobligation. On October 14, 2009, the Stratospheric Protection
Division formally notified OARM to take the necessary actions to deobligate the
unneeded funds, totaling $91,291.
• The Office of Environmental Information had not reviewed 29 inactive Miscellaneous
Obligations assigned to Headquarters' Allowance Holder 55, totaling $86,250, because it
was not aware that these obligations had become its responsibility. OARM was initially
responsible for reviewing these ULOs before Allowance Holder 55 was eliminated in the
departmental reorganization 10 years ago. As part of the reorganization, the Office of
Environmental Information was established and assigned responsibility for the remaining
Miscellaneous Obligations under Allowance Holder 55. Office of Environmental
Information personnel stated they were unaware of the transfer of responsibility for
reviewing these ULOs until the OIG brought it to their attention. On October 23, 2009,
the Office of Environmental Information formally requested OARM to deobligate these
funds.
28
-------
10-1-0029
• In June 2009, the Office of Prevention, Pesticides, and Toxic Substances' Office of
Pesticides Program identified $4,434 in unneeded miscellaneous ULOs, and requested
that an OARM Contracting Officer authorize deobligation of these funds. The
Contracting Officer did not respond timely to the Office of Pesticides Program's request.
However, after the OIG's inquiry, the Contracting Officer responded on October 20,
2009, and authorized the Office of Pesticides Program to deobligate the funds.
By not taking timely and appropriate action to deobligate unneeded funds, EPA has no assurance
that the ULOs are accurate and represent valid and viable obligations affecting the financial
statements. Further, inadequate ULO reviews could affect the financial statements by not
identifying unneeded funds that should be deobligated. The deobligation of these funds would
allow for more effective utilization of resources for other environmental purposes.
Recommendations
We recommend that the Office of Chief Financial Officer:
22. Have the appropriate EPA Finance Center deobligate or confirm the deobligation of
unneeded funds identified during the fiscal 2009 ULO review.
23. Have the Director, Reporting and Analysis Staff, follow-up with the appropriate EPA
Finance Center to confirm the amount of funds to be deobligated before yearend.
Agency Comments and OIG Evaluation
OCFO agreed with our findings and recommendations.
29
-------
10-1-0029
9 - Integrated Financial Management System
User Account Management Needs Improvement
EPA needs to improve internal controls over IFMS users' accounts to:
• Ensure users cannot process financial transactions that could result in theft of funds,
• Establish user accounts consistent with the authorizing official's approval, and
• Terminate users' system access when no longer needed.
Federal financial management system requirements state financial applications must comply with
the security standards published by the National Institute of Standards and Technology. Those
standards prescribe the mandatory security controls needed to protect IFMS. The weaknesses
noted occurred because management guidance for these areas is outdated or does not exist.
Further, management had not defined which financial management functions should be
separated, nor had it performed required reviews to ensure user accounts were established
correctly or deactivated when employees no longer need them. As a result, users could
(1) potentially process financial transaction and redirect funds to unauthorized bank accounts,
(2) receive access to perform functions that are not authorized by management, and
(3) potentially access the IFMS system even after they have departed EPA.
Separation of Duties Not Monitored by IFMS Security Administrator nor Defined
The IFMS Security Administrator did not perform user security reviews to ensure that separation
of duty requirements were met as required by OCFO policy. The IFMS Security Administrator
indicated that OCFO relies solely on the IFMS coordinators and authorizing officials to make the
determination of what functions should be separated. In addition, OCFO management had not
established a policy that identified what functions associated with financial management systems
are required to be separated. Without such a policy, the OCFO IFMS Security Administrator did
not have a basis for making the determination on separation duties requirements. We found 39
users who had the access to perform Accounts Payable, Vendor Bank information, Purchasing,
and Vendor Master File functions as a part of their IFMS role. Lack of documented policies that
clearly define incompatible functions and associated processes to ensure that proper separation of
duties are enforced within applications can lead to individuals being able to perpetrate and
conceal irregularities.
Access Provided Did Not Match Access Requested by Authorizing Officials
EPA granted roles to IFMS users that did not match the access requested by the authorizing
official. OCFO staff indicated this occurred in some cases because access requestors do not
complete the form appropriately but rather provide comments describing the access they are
requesting. These comments can be misinterpreted by the IFMS Security Administrator. The
Security Administrator can subsequently grant access that can either be too restrictive or not
restrictive enough. Additionally, the input of the access rights by the Security Administrator is a
manual process subject to inputting errors that will not be caught without a control in place to
detect errors. The Security Administrator had provided access for 38 users that did not match the
access requested by the authorizing officials.
30
-------
10-1-0029
Access to IFMS Not Removed for Departed Employees
EPA had not removed access to IFMS for employees who had left the Agency. Subsequent to
our notifying OCFO of this issue, OCFO staff showed us that these users' accounts were
disabled within the Resource Access Control Facility. To gain access to IFMS, a user must have
access to both the Resource Access Control Facility and IFMS. However, OCFO could not
provide evidence that the user accounts were disabled prior to the notice we provided. Even if
the access rights to the Resource Access Control Facility had been removed, there was a
breakdown in controls. Security is intended to be implemented in layers in case one control
breaks down. Removing user access should be linked to Human Resources and applied through
the same process to ensure that when a user is disabled on one system the user will also be
disabled for all other systems at the same time. This condition occurred because the current
process relies entirely on the IFMS coordinator manually requesting the Security Administrator
to disable the account. There is no automated process that ties EPA's Human Resources system
to the other systems and disables user accounts for terminated personnel as a fail safe. Lack of
a process to ensure that terminated users' accounts are always deactivated can lead to
unauthorized users gaining access to EPA records.
Recommendations
We recommend that the Office of the Chief Financial Officer:
24. Develop and implement an OCFO policy that formally defines the incompatible functions
associated with the financial management processes EPA performs related to all of EPA's
financial management systems.
25. Develop and implement a detective control that the IFMS Security Administrator can use
on at least a monthly basis to identify and remove a user's access rights that allow a user
to perform incompatible functions within IFMS.
26. Update the Request Database to identify and alert the requestor of incompatible
functions.
27. Ensure that all new financial management systems (including the IFMS replacement
system) and those undergoing upgrades include a system requirement that the fielded
system include an automated control to enforce separation of duties.
28. Update the formal standard operating procedures for the IFMS Security Administrator
requiring that the Security Administrator return all incomplete forms to the requestor and
that the Security Administrator assist the requestor in completing the form correctly prior
to granting access.
29. Develop and implement a detective control to identify and correct instances where the
access rights within IFMS do not match the rights requested on at least a monthly basis.
31
-------
10-1-0029
30. Develop and implement a detective control by performing comparative analysis on at
least a monthly basis of the terminated personnel within the Human Resources system to
the active users within the IFMS application to identify and disable active users who no
longer work for the Agency.
31. Develop and implement an OCFO policy for all financial management systems to link the
user administration process to Human Resources data as a fail safe to ensure that all
transferred/terminated personnel's financial management system user accounts are
disabled in a timely manner.
32. Ensure that all new financial management systems (including the IFMS replacement
system) and those undergoing upgrades include a system requirement that the fielded
systems have an automated control in place to provide a fail safe that links to the Human
Resources data to identify and disable terminated/transferred personnel in the system in a
timely manner.
Agency Comments and OIG Evaluation
OCFO agreed with the findings and recommendations and indicated that it plans to have the
corrective actions completed by December 30, 2010.
32
-------
10-1-0029
10 - Las Vegas Finance Center Needs Improved
Physical Access Controls
LVFC's server room and other key areas are susceptible to unauthorized access by personnel
not part of LVFC. The LVFC areas are protected by an access control system. However, the
system operator -ORD - does not administer the system in a manner that allows LVFC to
monitor access to its area. In particular, ORD had not obtained authorization from the LVFC
Director to grant access to key areas to non-LVFC personnel. ORD also had neither provided
the LVFC reports detailing who has access to their areas nor performed the required semiannual
review of access rights required by ORD procedures. As a result, ORD granted personnel access
to sensitive LVFC areas without proper authorization.
ORD did not perform its responsibilities associated with managing and administering the
computer-controlled card access system supporting all of the EPA buildings in Las Vegas,
Nevada. The Standard Operating Procedure for Management/Control of Access to
Environmental Protection Agency Buildings in Las Vegas, NV, dated February 17, 2004, requires
ORD's Environmental Sciences Division Programs Operations Staff to:
• Grant access to EPA Las Vegas facilities based on the fully completed submission of an
employee data sheet form LV-172 with all appropriate signatures.
• Perform semiannual reviews of all access provided.
• Perform a review of the signatures on the LV-172 whenever the access requirements of a
staff member changes.
The ORD personnel now responsible for this function work within ORD's Office of Science
Information Management. We found that ORD:
• Did not grant access based on appropriately approved and completed LV-172 forms. Our
review of access to a small sample of doors for which the LVFC Director was a required
approving official disclosed personnel with access whose forms were not approved by the
LVFC Director.
• Did not fully complete the LV-172 forms we reviewed.
• Did not perform the required semiannual reviews of the card access provided. ORD
indicated that the only review performed was back in 2004, and even for that review it
could not provide evidence that the review was performed or that any corrective actions
were taken based on the review.
In addition to not performing the responsibilities identified above, ORD has not been providing
the necessary information to the various EPA organizations serviced by the card access system to
allow them to monitor and review the access to their space. Radiation and Indoor Environments,
Human Resources, and LVFC all indicated that ORD has not provided them with the information
necessary to validate personnel who have access to their space. To enable each organization to
properly monitor and review the access to their space, ORD needs to provide the following
standard reports to each organization on a monthly basis:
33
-------
10-1-0029
• A report showing all of the access groups in Las Vegas that lists for each group (1) each
of the doors the group can access and (2) the days of the week and times that the group
can access each of the doors.
• A report showing all of the access groups in Las Vegas that lists all of the users, their
associated Card ID, and the expiration date of the access for each of the users for each
group.
• For reviewing the logged history of users' access, a report that shows the: (1) criteria
used for the creation of the report, (2) date and time of the access attempt, (3) action
taken by the device, (4) location/site, (5) door, (6) user name, and (7) card ID.
Additionally, ORD needs to be responsive to each organization's special requests for reports and
provide them in a timely manner.
During subsequent communications with ORD, it indicated that it planned to negotiate the
transfer of the responsibility for the maintenance and oversight of the portion of the card access
system relied upon by the other offices within Las Vegas to one of these other offices.
Due to the number of EPA offices responsible for developing and implementing procedures for
managing facility access, we plan to issue a separate report addressing this issue. In this separate
report, we plan to recommend that the appropriate offices:
• Develop and implement procedures to ensure that all organizations are provided with the
information necessary to monitor and review the access to their space until offices
receive responsibility for oversight and maintenance of the card access system.
• Develop and implement a formal procedure that ensures each organization supported by
the card access system performs a review of the logs and access reports provided by ORD
associated with their space to look for anomalies on at least a monthly basis.
• Develop and implement a formal procedure that ensures each organization supported by
the card access system verifies on at least an annual basis that all users associated with
their space still need their current access to perform their assigned responsibilities.
Agency Comments and OIG Evaluation
ORD agreed with the findings. ORD agreed with one of the recommendations but did not
believe it should have responsibility for the other two. ORD stated it plans to transfer oversight
and maintenance responsibility for the card access system to one of the other EPA offices located
in Las Vegas no later than March 31, 2010. ORD does not believe it should have responsibility
for developing and implementing procedures that ensure EPA offices within Las Vegas perform
their oversight responsibilities. We plan to issue a separate report that will address
recommendations to the appropriate offices.
34
-------
10-1-0029
11 - Customer Technology Solutions Equipment Needs
Improved Security Planning
On November 16, 2009, the OIG issued an audit report (Improved Security Planning Needed for
the Customer Technology Solutions Program, Report No. 10-P-0028) noting that EPA lacked a
process to routinely test CTS equipment for known vulnerabilities and to correct identified
threats. Further, EPA placed CTS equipment into production without assessing the risk the
equipment posed upon the Agency's network and authorized the equipment for operation. OMB
requires federal agencies to create a security plan for each general support system and ensure the
plan complies with guidance issued by the National Institute of Standards and Technology. Both
performing vulnerability management reviews and preparing critical security documents are
needed to fulfill this requirement. The weaknesses noted existed because EPA undertook an
aggressive schedule to install over 11,500 computers at 18 locations across the United States, and
management focused attention on problems as they arose rather than developing a plan.
Given the widespread use of CTS equipment throughout the Agency, thousands of potentially
unmonitored computers reside on EPA's network. These unmonitored computers could serve as
gateways to providing unauthorized access to the Agency's network. As such, EPA lacked
processes to identify these threats or the capability to lessen their impact. We recommended in
Report No. 10-P-0028 that EPA:
• Develop and implement a vulnerability testing and remediation process for CTS
equipment consistent with existing EPA security policies and procedures.
• Issue a memorandum to Agency Senior Information Officials requiring their program
office to conduct vulnerability testing of CTS equipment until a formal vulnerability
testing and management process with CTS has been established.
• Require CTS to remediate the issues identified in a timely manner and provide evidence
to the initiating Senior Information Officer of the completion of the corrective actions
necessary to remediate the issues identified until a formal vulnerability testing and
management process with CTS has been established.
• Ensure all key actions outlined in the November 9, 2009, CTS authorization to operate
are completed by the defined milestone dates.
Agency Comments and OIG Evaluation
Management did not agree they needed to implement a vulnerability testing program for the CTS
equipment. Management indicated the CTS contractor is already performing quarterly
vulnerability testing and is in the process of reviewing its processes in an effort to establish roles
and responsibilities for local Information Security Officers. Management did not believe it
needed to issue a memorandum to the Senior Information Officials requiring them to conduct
vulnerability testing as an interim measure. Management indicated they issued a memorandum
to the Agency Senior Information Officials in August 2009 reminding them of their
responsibility to conduct vulnerability testing.
Although management believes EPA offices are conducting vulnerability testing of CTS
equipment, our research and interviews disclosed that EPA offices are not conducting
35
-------
10-1-0029
vulnerability testing of the CIS equipment and the offices are not aware that a vulnerability
testing process is in place. Therefore, management should take steps to ensure a vulnerability
management framework is in place to protect the Agency's network from commonly known
threats. Although management issued a memorandum to the Senior Information Officials in
August 2009 reminding them of their duties for conducting vulnerability testing, this
memorandum emphasized the need to conduct vulnerability testing over equipment the
respective Senior Information Official oversees. Since the Senior Information Officials do not
oversee CIS equipment, it is incumbent upon management to reissue guidance to the Senior
Information Officials so they understand the scope of their responsibilities for vulnerability
testing includes testing CTS equipment.
On November 9, 2009, management signed a conditional authorization to operate for the CTS
equipment. This conditional authorization outlined key security tasks the CTS contractor must
complete and we modified the report recommendations accordingly.
36
-------
10-1-0029
Attachment 2
Compliance with Laws and Regulations
Table of Contents
12 - EPA Should Continue Efforts to Reconcile Intra-governmental Transactions 38
37
-------
10-1-0029
12 - EPA Should Continue Efforts to Reconcile
Intra-governmental Transactions
As of September 30, 2009, EPA reported $183 million in unreconciled differences for intra-
governmental transactions with 47 trading partners. Of that amount, the Department of the
Treasury reported $51 million as material differences. The remaining $132 million represented
amounts reported for non-verifying agencies, accruals, timing differences, and immaterial
differences. Based on our review of correspondence with other agencies, EPA had difficulty
reconciling these differences as required by Treasury policy primarily because of differing
accounting treatments and accrual methodologies between federal agencies. EPA's inability to
reconcile its intra-governmental 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.
According to the Treasury Financial Manual, verifying agencies are those required to report in
the government-wide 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. Any agency not required is a non-verifying agency. Treasury policy requires
verifying agencies to confirm and reconcile intra-governmental transactions with their trading
partners.
Treasury's fiscal 2009 fourth quarter Intra-governmental Activity Detail Report and Material
Differences Report showed the following material differences for EPA:
Federal Agency Difference Category of Difference
Department of State $6,831,146 Accounts Receivable/Payable
Department of the Treasury 22,290, 111 Accounts Receivable/Payable
Department of the Treasury 6,999,520 Advances to/from Other Agencies
Tennessee Valley Authority 1,767,350 Buy/Sell Costs/Revenue
Department of Homeland Security 12.916.322 Buy/Sell Costs/Revenue
Total $ 50,804,449
While the Agency has actively worked with its trading partners to reduce differences,
$50,804,449 material differences continued to exist. Most of the differences resulted from
confirmed reporting amounts between EPA and the Department of Treasury and Department of
Homeland Security. According to EPA, other situations that contributed to the differences
included (1) timing differences between EPA and the Department of State, (2) differences in
advances with Treasury, and (3) expenses with the Tennessee Valley Authority for which EPA
has no reciprocal billing activity.
During fiscal 2009, EPA continued to make significant improvements in its intra-governmental
activity with its partners, and identified the causes of several differences. However,
unreconciled differences persist, and according to GAO's Report on the Fiscal Year 2008 U.S.
Government Financial Statements, the Federal Government's inability to adequately account for
and reconcile intra-governmental 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.
38
-------
10-1-0029
Recommendation
We recommend that the Office of the Chief Financial Officer:
33. Have its Office of Financial Services continue to reconcile EPA's intra-governmental
transactions and make appropriate adjustments to comply with federal financial reporting
requirements.
Agency Comments and OIG Evaluation
OCFO agreed with our finding and recommendation.
39
-------
10-1-0029
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. During FY 2009, the Agency continued to strengthen its audit-follow-up process
by implementing its plan to improve and assure the quality of data in EPA's Management Audit
Tracking System (MATS). As part of this effort, during FY 2009 the Office of the Chief
Financial Officer has secured contractor support to conduct on-site reviews of offices' MATS
data and supporting documentation. The first of these reviews, with EPA's Office of Air and
Radiation, was completed in September, 2009; additional reviews will be conducted in FY 2010.
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.
Significant Deficiencies - Corrective Actions in Process
Automated Application Processing Controls for IFMS
EPA has taken additional steps towards correcting this open issue by replacing IFMS with a new
financial system. EPA's contract with CGI Federal, Inc is moving forward. The anticipated "go live"
date for the new EPA Financial System is the first quarter of FY 2012. Since the new system has not
been implemented, a reportable condition will continue to exist concerning the lack of system
documentation that inhibits our ability to audit IFMS application controls. Therefore, the deficiency will
continue to exist until the new system is implemented.
• EPA Needs to Strengthen Financial Database Security Oversight and Monitor Compliance
EPA did not complete all corrective actions related to reviewing the effectiveness of its follow-up
procedures. The critical patch reports being shared and monitored as a part of the process were
limited to Microsoft patches, but need to include all all other operating Systems and databases used
by the Agency. EPA has also not escalated critical patch issues identified to appropriate
management for immediate resolution or agreed to a course of action and time frame to effectively
mitigate the identified vulnerability. EPA has not provided a date it expects to complete these
remaining corrective actions.
Key Applications Do Not Meet Federal and EPA Information Security Requirements
EPA has made significant progress in completing the agreed corrective actions but it still needs to
complete functional testing of all key components of the approved BRAINS and mLINQS contingency
plans. EPA has not provided an estimated milestone date on when they plan to complete this
remaining corrective action.
40
-------
10-1-0029
Significant Deficiencies - Corrective Actions in Process
Access and Security Practices Over Critical Information Technology Assets Need
Improvement
EPA has made significant progress in completing the agreed corrective actions. However, it still
needs to develop and implement a formal standard operating procedure to conduct verification and
validation of the implementation and effectiveness of the standard operating procedures. EPA also
still needs to implement the monthly Vulnerability Scanning. EPA plans to implement a formal
process to conduct the verification and validation by January 29, 2010. EPA has not provided an
estimated milestone date for when they plan to implement the monthly vulnerability scanning.
EPA Needs to Reconcile Superfund State Contract Funds and Credits in the General Ledger to
Subsidiary Accounts
During FY 2009, the Agency did prepare a reconciliation of the general ledger to the Superfund State
Contract spreadsheet. However, as described in Attachment 1, Significant Deficiencies, EPA still
needs to investigate some older general ledger transactions to determine their effect on an
unexplained variance of $376,586.88 found during the FY2009 reconciliation.
Improvement Needed in Monitoring Superfund Special Account Balances
The Agency has made improvements in the monitoring of special account balances and interest
drawdowns. However, as described in Attachment 1, EPA did not monitor all special accounts in the
special account interest drawdown calculation resulting in interest drawdowns in excess of interest
earned for some special accounts.
• Lack of System Implementation Process Contributed to Financial Applications Not Complying
with Requirements
The Agency has made some progress towards implementing the agreed corrective actions, but still
needs to complete some of the corrective actions. They need to complete a review of OCFO
financial systems compliance with prescribed federal and EPA system requirements and document
the results. They also need to create and put into practice formal standard operating procedures and
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 life cycle. The Agency indicated they planned to complete the
corrective actions by September 30, 2010.
Source: OIG analysis
Compliance with Laws and Regulations - Corrective Actions in Process
EPA Needs to Improve Reconciliation of Differences with Trading Partners:
The Agency has actively worked with its trading partners to reduce unreconciled differences.
However, as described in Attachment 2, EPA reported $183 million in unreconciled differences for
intra-governmental transactions with 47 trading partners.
Source: OIG analysis
41
-------
10-1-0029
Attachment 4
Status of Current Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Planned
Completion
Action Official Date
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Claimed Agreed To
Amount Amount
12 Develop a process to communicate routinely with
the regional offices on a monthly or quarterly basis
to identify any settlements not recorded on the DOJ
debt assessed report or recorded within the
Integrated Compliance Information System. Also,
work with the offices to agree on a process that
would include forwarding of settlement documents
within the required time period.
12 Re-inform and train LEOs, ORCs, and RPOs on
the requirement to timely send settlements to the
finance center so the receivables can be recorded.
Also work to establish and implement a process to
ensure that the SFO is aware of settlements by the
end of the fiscal year to ensure that current year
financial statements include accounts receivable
for the current year.
14 In conjunction with the Regional Financial
Management Offices and the Office of Budget,
prepare the accounting entry to account correctly
for the special account expenditures at the site
level.
14 In conjunction with the Regional Financial
Management Offices and the Office of Budget,
work with Regional Comptrollers to correctly
account for the improperly expended funds at the
site level.
14 In conjunction with the Regional Financial
Management Offices and the Office of Budget,
develop controls over Special Accounts so that, for
each site, the fund codes collected are the fund
codes spent.
17 Direct the Superfund regional offices to verify that
closed sites identified in the SSC spreadsheet
meet the closed site criteria and the SSC site
billings and disbursements data in the SSC
spreadsheet are accurate.
17 Have its Office of Financial Policy and Planning
Staff work with regional comptrollers and
Superfund program personnel to research
transactions in older funds and eliminate invalid
transactions.
17 Establish a review process for reconciling
Superfund site costs to ensure that data and
calculations used are consistent and properly
supported.
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
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
42
-------
10-1-0029
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed Agreed To
Amount Amount
9 17
10 18
11 18
12 22
13 22
14 22
15 22
16 22
17 22
18 24
19 26
20 26
21 26
Direct the regional offices to bill the States for costs 0
incurred where necessary, including the $887,583
amount identified.
Create a receivable billing document matrix to 0
reflect a proper accounting model to recorded
standard voucher adjustments and the movement
of accounts from expiring or cancelled
appropriations. Also, review the net impact of
adjusting entries prior to issuing an accounting
model to ensure account balances are proper.
Review its accounting model provided to SFOs for 0
net impact to expenses and revenues from prior
periods to ensure that financial statements are not
misstated.
Research and resolve the $1,237,468 of unbilled 0
accounts receivable credit balances to ensure the
accuracy of future quarterly unbilled accounts
receivable before they are entered into IFMS.
Work with other federal agencies to resolve each U
credit balance to ensure the exclusion of credit
amounts from future unbilled accounts receivable
calculations.
Work with RPOs, ORCs, and LEOs to obtain legal 0
documentation sooner so receivables are recorded
timely. Institute a process to review DOJ tracking
mechanisms for the status of consent decrees and
judgments.
Establish a supervisory review process to ensure 0
procedures are being followed, and interest and
federal receivables are properly recorded.
Establish a process to review the allowance 0
calculation for errors, including proper application
of calculation methods.
Develop a process to review and update receivable 0
status code updates in the financial system
quarterly.
Require the Director, Facilities Management and
Services Division, to promptly conduct an inventory
of the 1,804 Headquarters Accountable Property
items not inventoried in fiscal 2009.
Implement an effective review process for all on-
top adjustments to ensure that individual entries
within funds will balance (debits/credits) properly.
Update the Financial Statement Preparation Guide
to contain guidance or instructions for changing on-
top adjustments to either journal vouchers and/or
standard vouchers.
Update the YACT and the general ledger matrix to
identify current fiscal year general ledger accounts
and their related closing activity.
0
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
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Assistant Administrator,
Office of Administration and
Resources Management
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
06/2010
$700
$700
43
-------
10-1-0029
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed Agreed To
Amount Amount
22 29 Have the appropriate EPA Finance Center
deobligate or confirm the deobligation of unneeded
funds identified during the fiscal 2009 ULO review.
23 29 Have the Director, Reporting and Analysis Staff,
follow-up with the appropriate EPA Finance Center
to confirm the amount of funds to be deobligated
before yearend.
24 31 Develop and implement an OCFO policy that
formally defines the incompatible functions
associated with the financial management
processes EPA performs related to all of EPA's
financial management systems.
25 31 Develop and implement a detective control that the
IFMS Security Administrator can use on at least a
monthly basis to identify and remove a user's
access rights that allow a user to perform
incompatible functions within IFMS.
26 31 Update the Request Database to identify and alert
the requestor of incompatible functions.
27 31 Ensure that all new financial management systems
(including the IFMS replacement system) and
those undergoing upgrades include a system
requirement that the fielded system include an
automated control to enforce separation of duties.
28 31 Update the formal standard operating procedures
for the IFMS Security Administrator requiring that
the Security Administrator return all incomplete
forms to the requestor and that the Security
Administrator assist the requestor in completing the
form correctly prior to granting access.
29 31 Develop and implement a detective control to
identify and correct instances where the access
rights within IFMS do not match the rights
requested on at least a monthly basis.
30 32 Develop and implement a detective control by
performing comparative analysis on at least a
monthly basis of the terminated personnel within
the Human Resources system to the active users
within the IFMS application to identify and disable
active users who no longer work for the Agency.
31 32 Develop and implement an OCFO policy for all
financial management systems to link the user
administration process to Human Resources data
as a fail safe to ensure that all
transferred/terminated personnel's financial
management system user accounts are disabled in
a timely manner.
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
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
Office of the
Chief Financial Officer
$1,941
$1,941
12/2010
44
-------
10-1-0029
POTENTIAL MONETARY
RECOMMENDATIONS BENEFITS (in SOOOs)
Planned
Rec. Page Completion Claimed Agreed To
No. No. Subject Status1 Action Official Date Amount Amount
32 32 Ensure that all new financial management systems 0 Officeofthe
(including the IFMS replacement system) and Chief Financial Officer
those undergoing upgrades include a system
requirement that the fielded systems have an
automated control in place to provide a fail safe
that links to the Human Resources data to identify
and disable terminated/transferred personnel in the
system in a timely manner.
33 39 Have its Office of Financial Services continue to 0 Officeofthe
reconcile EPA's intra-governmental transactions Chief Financial Officer
and make appropriate adjustments to comply with
federal financial reporting requirements.
Other potential monetary benefits achieved based
on adjustments made as a result of our audit:
Increase in unbilled oversight billings C Officeofthe $213 $213
Chief Financial Officer
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
45
-------
10-1-0029
Appendix I
EPA's Fiscal 2009 and 2008 (Restated)
Consolidated Financial Statements
SECTION III
ANNUAL FINANCIAL
STATEMENTS
46
-------
10-1-0029
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, Net
Note 6. Other Assets
Note 7. Loans Receivable, Net
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. FECA Actuarial Liabilities
Note 16. Cashout Advances, Superfund
Note 17. Unexpended Appropriations - Other Funds
Note 18. Commitments and Contingencies
Note 19. Earmarked Funds
Note 20. Exchange Revenues, Statement of Net Cost
Note 21. Intragovernmental Costs and Exchange Revenue
Note 22. Cost of Stewardship Land
Note 23 Environmental Cleanup Costs
Note 24. State Credits
Note 25. Preauthorized Mixed Funding Agreements
Note 26. Custodial Revenues and Accounts Receivable
Note 27. Reconciliation of President's Budget to Statement of Budgetary Resources
47
-------
10-1-0029
Notes to Financial Statements (continued)
Note 28. Recoveries and Resources Not Available, Statement of Budgetary Resources
Note 29. Unobligated Balances Available
Note 30. Undelivered Orders at the End of the Period
Note 31. Offsetting Receipts
Note 32. Transfers-In and Out, Statement of Changes in Net Position
Note 33. Imputed Financing
Note 34. Payroll and Benefits Payable
Note 35. Other Adjustments, Statement of Changes in Net Position
Note 36. Non-exchange Revenue, Statement of Changes in Net Position
Note 37. Reconciliation of Net Cost of Operations to Budget
Note 38. Restatements
Note 39. Amounts Held By Treasury (Unaudited)
Required Supplementary Information (Unaudited)
1. Deferred Maintenance
2. Stewardship Land
3. Supplemental Statement of Budgetary Resources
Required Supplementary Stewardship Information (Unaudited)
Supplemental Information and Other Reporting Requirements (Unaudited)
Superfund Financial Statements and Related Notes
48
-------
10-1-0029
Environmental Protection Agency
Consolidated Balance Sheets
As of September 30, 2009 and 2008 (Restated)
(Dollars in Thousands)
FY 2009
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note 2)
Investments (Notes 4)
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
Accounts Payable & Accrued Liabilities (Note 8)
Pensions & Other Actuarial Liabilities (Note 15)
Environmental Cleanup Costs (Note 23)
Cashout Advances, Superfund (Note 16)
Commitments & Contingencies (Notes 18)
Payroll & Benefits Payable (Note 34)
Other (Note 13)
Total Liabilities
NET POSITION
Unexpended Appropriations - Other Funds (Note 17)
Cumulative Results of Operations - Earmarked Funds (Note 19)
Cumulative Results of Operation - Other Funds
Total Net Position
Total Liabilities and Net Position
15,557,917
6,879,948
39,362
214,831
22,692,058
10
817,844
11,645
852,488
2,228
24,376,273 S
76,054
9,983
71,200
140,645
297,882
865,764
44,122
19,494
572,412
4,573
250,617
115,918
2,170,782
14,536,347
7,086,476
582,668
22,205,491
Restated
FY 2008
9,605,356
6,174,828
34,636
107,433
15,922,253
10
500,592
17,088
814,253
3,655
17,257,851
80,655
13,158
47,951
109,377
251,141
713,595
44,615
19,411
489,430
44
232,958
115,649
1,866,843
8,674,711
6,160,531
555,766
15,391,008
24,376,273 S
17,257,851
The accompanying notes are an integral part of these financial statements.
49
-------
10-1-0029
Environmental Protection Agency
Consolidated Statements of Net Cost
For the Periods Ending September 30, 2009 and 2008 (Restated)
(Dollars in Thousands)
FY 2009
COSTS
Gross Costs (Note 21)
Less:
Earned Revenue (Notes 20, 21)
NET COST OF OPERATIONS (Note 21)
3,920,963 $
773,612
8,147,351 $
Restated
FY 2008
8,675,411
675,865
7,999,546
The accompanying notes are an integral part of these financial statements.
50
-------
Environmental Protection Agency
Consolidated Statements of Net Cost by Goal
For the Period Ending September 30, 2009
(Dollars in Thousands)
10-1-0029
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Note
20&21)
NET COST OF
OPERATIONS (Note 21)
Costs:
Intragovernmental
With the Public
Total Costs
Less:
Earned Revenue, Federal
Earned Revenue, non Federal
Total Earned Revenue (Note
19)
NET COST OF
OPERATIONS
Healthy
Clean & Safe Land Preservation Communities &
Clean Air Water & Restoration Ecosystems
$ 187,484 $ 191,558 $ 386,549 $ 271,028
874,787 3,236,903 1,821,301 1,134,155
1,062,271 3,428,461 2,207,850 1,405,183
15,455 4,758 101,767 20,047
3,036 3,208 580,119 42,267
18,491 7,966 681,886 62,314
$ 1,043,780 $ 3,420,495 $ 1,525,964 $ 1,342,869
Consolidated
Totals
$ 1,244,279
$ 7,676,684
8,920,963
$ 146,098
$ 627,514
773,612
$ 8,147,351
Compliance &
Environmental
Stewardship
S 207,660
609,538
817,198
4,071
(1,116)
2,955
$ 814,243
The accompanying notes are an integral part of these financial statements.
51
-------
10-1-0029
Environmental Protection Agency
Consolidated Statements of Net Cost by Goal
For the Period Ending September 30, 2008 (Restated)
(Dollars in Thousands)
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non-Federal
Total Earned Revenue (Notes 20
&21)
NET COST OF OPERATIONS
(Note 22)
Clean Air
$ 181,467
816,336
997,803
18,360
2,043
20,403
Clean & Safe
Water
$ 162,679
3,334,953
3,497,632
7,615
2,841
10,456
Restated Land
Preservation &
Restoration
$ 347,011
1,654,205
2,001,216
73,829
501,719
575,548
Healthy
Communities &
Ecosystems
$ 281,767
1,126,764
1,408,531
22,710
39,407
62,117
Compliance &
Environmental
Stewardship
$ 176,376
593,853
770,229
5,540
1,801
7,341
S 977,400 S 3,487,176 S 1,425,668 S
1,346,414 S
762,888
Costs:
Intragovernmental
With the Public
Total Costs (Note 21)
Less:
Earned Revenue, Federal
Earned Revenue, non-Federal
Total Earned Revenue (Notes 20
&21)
NET COST OF OPERATIONS
(Note 21)
Consolidated
Totals
$ 1,149,300
$ 7,526,111
$ 8,675,411
128,054
547,811
675,865
S 7,999,546
The accompanying notes are an integral part of these financial statements.
52
-------
10-1-0029
Environmental Protection Agency
Consolidating Statements of Changes in Net Position
For the Period Ending September 30, 2009
(Dollars in Thousands)
Cumulative Results of Operations:
Net Position - Beginning of Period
Adjustment:
(a) Changes in Accounting Principles
(b) Correction of Errors
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Other Adjustments
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 36)
Nonexchange Revenue - Other (Note 36)
Transfers In/Out (Note 32)
Trust Fund Appropriations
Other
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 32)
Imputed Financing Sources (Note 33)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Adjustment:
(a) Changes in Account Principles
(b) Corrections of Errors
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 32)
Other Adjustments (Note 35)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
FY 2009
Earmarked
Funds
6,160,531
FY 2009 All
Other Funds
555,766
FY 2009
Consolidated
Total
6,716,297
6,160,531 $
176,168
188,245
(39,705)
1,747,911
2,072,619 $
(84)
28,975
28,891 $
(1,175,565)
925,945
7,086,476 $
555,766 $
8,504,157
57,392
(1,747,911)
6,813,638 $
694
184,356
185,050 $
(6,971,786)
26,902
582,668 $
6,716,297
8,504,157
176,168
188,245
17,687
8,886,257
610
213,331
213,941
(8,147,351)
952,847
7,669,144
8,674,710
8,674,710
14,406,298
(10,953)
(29,551)
(8,504,157)
5,861,637
14,536,347
8,674,710
7,086,476 S 15,119,015 S
8,674,710
14,406,298
(10,953)
(29,551)
(8,504,157)
5,861,637
14,536,347
22,205,491~
The accompanying notes are an integral part of these financial statements.
53
-------
Environmental Protection Agency
Consolidating Statements of Changes in Net Position
For the Periods Ending September 30, 2008 (Restated)
(Dollars in Thousands)
10-1-0029
Cumulative Results of Operations:
Net Position - Beginning of Period
Adjustment:
(a) Changes in Account Principles
(b) Corrections of Errors
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Other Adjustments
Appropriations Used
Nonexchange Revenue - Securities Investment (Note 36)
Nonexchange Revenue - Other (Note 36)
Transfers In/Out (Note 32)
Trust Fund Appropriations
Other
Total Budgetary Financing Sources
Other Financing Sources (Non-Exchange)
Transfers In/Out (Note 32)
Imputed Financing Sources (Note 33)
Total Other Financing Sources
Net Cost of Operations
Net Change
Cumulative Results of Operations
Unexpended Appropriations:
Net Position - Beginning of Period
Adjustment:
(b) Corrections of Errors
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Appropriations Received
Appropriations Transferred In/Out (Note 32)
Other Adjustments (Note 35)
Appropriations Used
Total Budgetary Financing Sources
Total Unexpended Appropriations
TOTAL NET POSITION
Restated FY
2008
Earmarked
Funds
5,886,227
(93,613)
5,792,614 $
;
241,873
204,115
(18,190)
984,974
19,878
1,432,650 $
_
20,934
20,934 $
(1,085,667)
367,917
6,160,531 $
-
- $
-
-
-
-
_
6,160,531 S
FY 2008
All Other
Funds
562,573
-
562,573 $
7,743,276
-
-
37,151
(984,974)
6,795,453 $
28
111,591
111,619 $
(6,913,879)
(6,807)
555,766 $
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
Restated
FY 2008
Consolidated
Total
6,448,800
(93,613)
6,355,187
7,743,276
241,873
204,115
18,961
-
19,878
8,228,103
28
132,525
132,553
(7,999,546)
361,110
6,716,297
9,350,591
9,350,591
7,197,712
(7,875)
(122,441)
(7,743,276)
(675,880)
8,674,711
15,391,008
The accompanying notes are an integral part of these financial statements.
54
-------
10-1-0029
Environmental Protection Agency
Combined Statements of Budgetary Resources
For the Periods Ending September 30, 2009 and 2008 (Restated)
(Dollars in Thousands)
Restated
FY2009 FY2008
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1: $ 3,551,880 $ 3,541,387
Adjustment to Unobligated Balance (Alloc Transfer Agencies) - -
Adjusted Subtotal 3,551,880 3,541,387
Recoveries of Prior Year Unpaid Obligations (Note 28) 220,329 281,117
Budgetary Authority:
Appropriation 15,276,374 7,268,236
Borrowing Authority 5 34
Contract Authority
Spending Authority from Offsetting Collections
Earned:
Collected 631,378 706,594
Change in Receivables from Federal Sources 2,884 (22,170)
Change in Unfilled Customer Orders:
Advance Received 29,183 79,716
Without Advance from Federal Sources (93,701) 59,780
Anticipated for Rest of Year, Without Advances
Previously Unavailable
Expenditure Transfers from Trusts Funds 57,392 37,151
Total Spending Authority from Offsetting Collections 627,136 861,071
Nonexpenditure Transfers, Net, Anticipated and Actual (Note 32) 1,371,077 1,387,967
Temporarily Not Available Pursuant to Public Law (Note 28) - (6,366)
Permanently Not Available (Note 28) (32,732) (125,526)
Total Budgetary Resources (Note 27) $ 21,014,069 $ 13,207,920
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct $ 16,740,272 $ 9,035,912
Reimbursable 570,775 620,128
Total Obligations Incurred (Note 27) 17,311,047 9,656,040
Unobligated Balances:
Apportioned (Note 29) 3,440,829 3,204,800
Exempt from Apportionment - -
Total Unobligated Balances 3,440,829 3,204,800
Unobligated Balances Not Available (Note 29) 262,193 347,080
Total Status of Budgetary Resources $ 21,014,069 $ 13,207,920
The accompanying notes are an integral part of these financial statements.
55
-------
10-1-0029
Environmental Protection Agency
Combined Statements of Budgetary Resources
For the Periods Ending September 30, 2009 and 2008 (Restated)
(Dollars in Thousands)
Restated
FY 2009 FY 2008
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1 $ 9,368,094 $ 9,873,207
Adjustment to Unpaid Obligations (Alloc Transfer Agencies) -
Adjusted Total 9,368,094 9,873,207
Less: Uncollected Customer Payments from Federal Sources, Brought
Forward, October 1 (666,246) (632,790)
Total Unpaid Obligated Balance, Net 8,701,848 9,240,417
Obligations Incurred, Net (Note 27) 17,311,047 9,656,040
Less: Gross Outlays (Note 27) (10,670,422) (9,880,035)
Obligated Balance Transferred, Net:
Actual Transfers, Unpaid Obligations
Actual Transfers, Uncollected Customer Payments from Federal Sources -_ -_
Total Unpaid Obligated Balance Transferred, Net
Less: Recoveries of Prior Year Unpaid Obligations, Actual (Note 28) (220,329) (281,117)
Change in Uncollected Customer Payments from Federal Sources 92,421 (33,457)
Total, Change in Obligated Balance 15,214,565 8,701,848
Obligated Balance, Net, End of Period:
Unpaid Obligations 15,788,389 9,368,094
Less: Uncollected Customer Payments from Federal Sources (573,824) (666,246)
Total, Unpaid Obligated Balance, Net, End of Period $ 15,214,565 $ 8,701,848
NET OUTLAYS
Net Outlays:
Gross Outlays (Note 27) $ 10,670,422 $ 9,880,035
Less: Offsetting Collections (Note 27) (719,558) (827,616)
Less: Distributed Offsetting Receipts (Notes 27 and 31) (1,884,134) (1,118,429)
Total, Net Outlays $ 8,066,730 $ 7,933,990
The accompanying notes are an integral part of these financial statements.
56
-------
10-1-0029
Environmental Protection Agency
Statements of Custodial Activity
For the Periods Ending September 30, 2009 and 2008 (Restated)
(Dollars in Thousands)
Restated
FY2009 FY2008
Revenue Activity:
Sources of Cash Collections:
Fines and Penalties $ 101,613 $ 126,283
Other (14,079) (13,733)
Total Cash Collections $ 87,534 $ 112,550
Accrual Adjustment 16,390 8,107
Total Custodial Revenue (Note 26) $ 103,924 $ 120,657
Disposition of Collections:
Transferred to Others (General Fund) $ 87,520 $ 112,695
Increases/Decreases in Amounts to be Transferred 16,404 7,962
Total Disposition of Collections $ 103,924 $ 120,657
Net Custodial Revenue Activity (Note 26) $ - $ -
The accompanying notes are an integral part of these financial statements.
57
-------
10-1-0029
Environmental Protection Agency
Notes to the Financial Statements
Fiscal Year Ended September 30, 2009 and 2008 (Restated)
(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 Office of Management and Budget (OMB) Circular No. A-
136, Financial Reporting Requirements, and the EPA 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 2009, 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.
1. 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
58
-------
10-1-0029
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 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 2009, 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.
59
-------
10-1-0029
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.
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 FY 1992, 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
60
-------
10-1-0029
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.
2. 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.
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.
61
-------
10-1-0029
3. Special Funds (Treasury Fund Group 5000 - 5999)
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.
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.
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.
4. 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.
5. 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
62
-------
10-1-0029
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 (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.
63
-------
10-1-0029
C. Budgets and Budgetary Accounting
1. 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.
2. 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.
64
-------
10-1-0029
3. 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.
4. Deposit Funds
Deposit accounts receive no appropriated funds. Amounts are recorded to the deposit
accounts pending further disposition. These are not EPA's funds.
5. 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.
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."
65
-------
10-1-0029
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.
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
66
-------
10-1-0029
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.
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.
67
-------
10-1-0029
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 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.
68
-------
10-1-0029
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 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.
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.
69
-------
10-1-0029
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.
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 34 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 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 and Restatements
Prior period adjustments, if any, are 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
70
-------
10-1-0029
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.
For detailed information on the restatements made to the FY 2008 financial statements, refer
to Note 38 Restatements.
U. Recovery Act Funds
On February 17, 2009, President Obama signed the American Recovery and Reinvestment
Act of 2009 (Recovery Act). The Act was enacted to create jobs in the United States,
encourage technical advances, assist in modernizing the nation's infrastructure, and enhance
energy independence. The EPA was charged with the task of distributing funds to invest in
various projects aimed at creating advances in science, health, and environmental protection
that will provide long-term economic benefits.
The EPA manages $7.2 billion in Recovery Act funded projects and programs that will help
achieve these goals, offer resources to help other "green" agencies, and administer
environmental laws that will govern Recovery activities. As of September 30, 2009, the EPA
has paid out $304 million, obligated $7.1 billion, and has $106 million available. The EPA
has committed to focusing on the following areas: Reduced Diesel Emissions, Superfund
Hazardous Waste Cleanup, Cleaner Underground Storage Tank Sites, Revitalized
Neighborhoods from Brownfields and Cleaner Water and Drinking Water Infrastructures.
The vast majority of the contracts awarded under the Recovery Act will be done by using
competitive contracts. EPA is committed fully to ensuring transparency and accountability
throughout the Agency in spending Recovery Act funds in accordance with OMB guidance.
EPA has set up a Stimulus Steering Committee that meets weekly to review and report on the
status of the distribution of the Recovery Act Funds to ensure transparency and efficiency.
EPA has also developed a Stewardship Plan which is an Agency-level risk mitigation plan
that sets out the Agency's Recovery Act risk assessment, internal controls and monitoring
activities. The Stewardship Plan is divided into seven functional areas: grants, interagency
agreements, contracts, human capital/payroll, budget execution, performance reporting and
financial reporting. The Stewardship Plan was developed around Government Accountability
Office (GAO) standards for internal control. Under each functional area, risks are assessed
and related control, communication and monitoring activities are identified for each impacted
program. The Plan is a dynamic document and will be updated as new OMB guidance is
issued or additional risks are uncovered.
EPA has the three-year EPM treasury symbol 689/10108 that is under the Recovery Act.
EPA's two-year EPM treasury symbol 689/00108 is a "regular" program. Recovery fund
groups are the following: 0113, 0102, 0249, 8195, and 8196.
71
-------
10-1-0029
Note 2. Fund Balance with Treasury (FBWT)
Fund Balances with Treasury as of September 30, 2009 and 2008, consist of the following:
Entity
Assets
62,631 J
25,169
2,441
7,153
80,293
390
15,122,481
247,877
15,548,435 3
FY2009
Non-Entity
Assets
1 tt1
> - $
-
-
-
-
-
9,482
i 9,482 $
Total
62,631
25,169
2,441
7,153
80,293
390
15,122,481
257359
15,557,917
Trust Funds:
Superfund
LUST
Oil Spill &Msc.
Revolving Funds:
HFRA/Tokrance
Working Capital
Cr. Reform Finan
Appropriated
Other Fund Types
Total
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.
Entity
Assets
45,5% $
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
Status of Fund Balances:
FY 2009
FY2008
Unobligated Amounts in Fund Balances
Available for Obligation $3,440,831 $3,204,800
Unavailable for Obligation 262,971 339,319
Net Receivables from Invested Balances (3,583,119) (2,861,933)
Balances in Treasury Trust Fund (Note 39) (18,334) 397
Obligated Balance not yet Disbursed 15,214,555 8,701,838
Non-Budgetary FBWT 241,013 220,935
Totals $15,557,917 $9,605,356
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
72
-------
10-1-0029
balances in expired funds, which are available only for adjustments of existing obligations.
For FY 2009 and FY 2008 no differences existed between Treasury's accounts and EPA's
statements for fund balances with Treasury.
Note 3. Cash and Other Monetary Assets
As of September 30, 2009 and 2008, the balance in the imprest fund was $10 thousand.
Note 4. Investments
As of September 30, 2009 and 2008 investments related to Superfund and LUST consist of
the following:
Amortized
(Premium)
Discount
Interest
Receivable
Investments,
Net
Market
Value
Cost
Intragovemnieiital
Non-Marketable FY2Q09 $ 6,611,708 $ (195,777)$ 42,463 $ 6,879,948 $ 6,879,948
Non-Marketable FY2Q08 $ 6,057,258 $ (77,301)$ 40,269 $ 6,174,828 $ 6,174,828
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 19).
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.
73
-------
10-1-0029
Note 5. Accounts Receivable, Net
The Accounts Receivable as of September 30, 2009 and 2008 (restated) consist of the
following:
Restated
FY 2009 FY 2008
Intragovernmental:
Accounts & Interest Receivable $ 39,362 $ 34,636
Total $ 39,362 $ 34,636
Non-Federal:
Unbilled Accounts Receivable $ 137,593 $ 113,359
Accounts & Interest Receivable 1,376,831 1,339,523
Less: Allowance for Uncollectibles (696,580) (952,290)
Total $ 817,844 $ 500,592
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 as of September 30, 2009 and 2008 consist of the following:
FY 2009 FY2008
Intragovernmental:
Advances to Federal Agencies $ 214,654 $ 107,327
Advances for Postage 177 106
Total $ 214,831~$ 107,433
No n-Federal:
Travel Advances $ (183)$ 135
Letter of Credit Advances 8 88
Other Advances 2,146 2,934
Operating Materials and Supplies 147 159
Inventory for Sale 110 339
Total $ 2,228 $ 3,655
74
-------
10-1-0029
Note 7. Loans Receivable, Net
Loans Receivable consists of Asbestos Loan Program loans disbursed from obligations made
prior to FY 1992 and are presented 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, 2009 and 2008 are as follows:
FY2009
FY2008
Value of
Loans Assets Related Loans
Receivable, to Direct Receivable,
Gross Allowance* Loans Gross Allowance*
Direct Loans
Obligated Prior $ $ _ $ $ $ _ $
to FY 1992
Value of
Assets Related
to Direct
Loans
4,327
Direct Loans
Obligated After 10,590
FY 1991
(948) 9,642
14,513
(1,752)
12,761
Total
12,593 S
(948) S
11,645 S
18,840 S
(1,752) S
17,088
* 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).
During FY 2008, EPA made a payment within the U.S. Treasury for the Asbestos Loan
Program based on an upward re-estimate of $33 thousand for increased loan financing costs.
It was believed that the payment only consisted of "interest" costs and, as such, an automatic
apportionment, per OMB Circular A-l 1, Section 120.83, was deemed appropriate.
However, approximately one third ($12 thousand) of the $33 thousand re-estimate was for
increased "subsidy" costs which requires an approved apportionment by OMB before any
payment could be made. Therefore, the payment resulted in a minor technical Anti-
deficiency Act (ADA) violation. On October 13, 2009, EPA transmitted, as required by
OMB Circular A-l 1, Section 145, written notifications to the (1) President, (2) President of
the Senate, (3) Speaker of the House of Representatives, (4) Comptroller General, and (5) the
Director of OMB. EPA will continue to work with OMB and Treasury on resolution of this
ADA violation.
75
-------
Subsidy Expenses for Credit Reform Loans (reported on a cash basis):
10-1-0029
Interest
Rate Technical
Re-estimate Re-estimate
Upward Subsidy Reestimate - FY 2009 $
Downward Subsidy Reestimate - FY 2009 $
FY 2009 Totals $
Upward Subsidy Reestimate - FY 2008 $
Downward Subsidy Reestimate - FY 2008 $
FY 2008 Totals $
Total
- $
(3)$
(3)$
21 $
(22) $
(1)$
- $
(2)$
(2)$
12 $
(12)$
0$
(5)
(5)
33
(34)
(1)
Schedule for Reconciling Subsidy Cost Allowance Balances
(Post-1991 Direct Loans)
FY 2009
FY 2008
Beginning balance of the subsidy cost allowance
Adjustments:
Loans written off
Subsidy allowance amortization
Ending balance of the subsidy cost allowance before reestimates
Add or subtract subsidy reestimates by component:
(a) interest rate reestimate
(b) Technical/default reestimate
Total of the above reestimate components
Ending Balance of the subsidy cost allowance
EPA has not disbursed Direct Loans since 1993.
$ (1,752) $ (2,714)
1
752
753
36
15
51
981
981
(21)
2
(19)
(948) $ (1,752)
76
-------
10-1-0029
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, 2009 and 2008.
FY 2009
FY 2008
Intragovernmental :
Accounts Payable
Accrued Liabilities
Total
Non-Federal:
Accounts Payable
Advances Payable
Interest Payable
Grant Liabilities
Other Accrued Liabilities
Total
$
$
$
$
2,230
73,824
76,054
FY 2009
116,799
9
6
521,188
227,762
865,764
$ 2,811
77,844
$ 80,655
FY 2008
$ 114,712
24
7
413,981
184,871
$ 713,595
Note 9. General Property, Plant, and Equipment, Net
General property, plant, and equipment (PP&E) consist
of software, real property, EPA
and
contractor-held personal property, and capital leases.
As of September 30, 2009 and
following:
Acquisition
Value
EPA-Held $ 246,999 $
Equipment
Software 373,964
Contractor Held 79,855
Equip.
Land and Buildings 607,131
Capital Leases 41,068
Total S 1,349,017 S
2008, General PP&E consist of the
FY2009
Accumulated Net Book
Depreciation Value
(138,385)$ 108,614$
(118,115) 255,849
(47,207) 32,648
(166,316) 440,815
(26,506) 14,562
(496,529) S 852,488 S
Acquisition
Value
238,051 $
307,883
63,132
595,597
47,505
1,252,168 S
FY2008
Accumulated Net Book
Depreciation
(130,045)$
(93,925)
(28,417)
(154,986)
(30,542)
(437,915) S
Value
108,006
213,958
34,715
440,611
16,963
814,253
77
-------
10-1-0029
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, 2009 and 2008 is as follows:
MOher Funds IY20Q9 FY2008
Beguiling Net Ending Beguiling Net Ending
Balance Bomming Balance Balance B)iraving Balance
Intragoremmental:
EetttoTreasury $ 13,158$ (3,175)$ 9,983$ 1^156$ (2,998)$ 13,158
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, 2009 and 2008, the Agency possesses the following land and land
rights:
FY 2009 FY 2008
Superfund Sites with
Easements
Beginning Balance 32 33
Additions 2 1
Withdrawals 1_ 2_
Ending Balance 33 32
Superfund Sites with Land
Acquired
Beginning Balance 31 32
Additions 0 2
Withdrawals 1 3
Ending Balance 30 31
78
-------
10-1-0029
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, 2009 and 2008, custodial liability is
approximately $71 million and $48 million, respectively.
Note 13. Other Liabilities
Other Liabilities consist of the following as of September 30, 2009:
Covered by
Budgetary
Resources
Not Covered
by
Budgetary
Resources
Total
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 $
Liability for Deposit Funds
Non-Current
Other Liabilities
Capital Lease Liability
Total Non-Federal $
19,875
960
60,043
27,642
54
108.577 $
79,490 $
8,330
230
27,868
19,875
960
60,043
27,642
3
54
10,068
22,000
32.068 $
10,068
22,000
140.645
79,490
8,330
230
27,868
87.820 $
28.098
115.918
79
-------
10-1-0029
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
Liability for Deposit Funds
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 $
Liability for Deposit Funds
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
77,089
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
77,089
8,810
230
29,520
85,899 $
29,750 $
115,649
80
-------
10-1-0029
Note 14. Leases
Capital Leases:
The value of assets held under Capital Leases as of September 30, 2009 and 2008 are as
follows:
FY 2009 FY2008
Summary of Assets Under Capital Lease:
Real Property $ 40,913 $ 40,913
Personal Property 155 155
Software License - 6,437
Total $ 41,068 $ 47,505
Accumulated Amortization $ 26,506 $ 30,542
EPA has three capital leases for land and buildings housing scientific laboratories and
computer facilities. All of these leases include a base rental charge and escalation 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
FY2010, 2013, and 2025.
The total future minimum capital lease payments are listed below.
Future Payments Due:
Fiscal Year Capital Leases
2010 $ 6,101
2011 5,714
2012 5,714
2013 5,714
2014 4,215
Beyond 2014 43,559
Total Future Minimum Lease Payments $ 71,017
Less: Imputed Interest (43,149)
Net Capital Lease Liability $ 27,868
Liabilities not Covered by Budgetary Resources
(See Note 13) $ 27,868
81
-------
10-1-0029
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 computer facilities. The leases include a base rental charge and escalation
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 2010, 2017, and 2020. These
charges are expended from the EPM appropriation.
The total minimum future operating lease costs are listed below:
Operating Leases,
Land and Buildings
Fiscal Year
2010 $ 92
2011 89
2012 89
2013 89
2014 89
Beyond 2014 374
Payments $ 822
Note 15. FECA 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 as of September 30, 2009 and 2008, was $44.1 million and
$44.6 million, respectively. The FY 2009 present value of these estimated outflows is
calculated using a discount rate of 4.223 percent in the first year, and 4.715 percent in the
years thereafter. The estimated future costs are recorded as an unfunded liability.
82
-------
10-1-0029
Note 16. Cashout Advances, Superfund
Cashout advances 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, 2009 and 2008, cashouts are
approximately $572 million and $489 million as restated, respectively.
Note 17. Unexpended Appropriations — Other Funds
As of September 30, 2009 and 2008, the Unexpended Appropriations consist of the
following:
Unexpended Appropriations: FY 2009 FY 2008
Unobligated
Available $ 1,652,461 $ 1,520,587
Unavailable 70,053 94,130
Undelivered Orders 12,813,833 7,059,994
Total $ 14,536,347 $ 8,674,711
Note 18. 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.
As of September 30, 2009 and 2008 total accrued liabilities for commitments and potential
loss contingencies is $4.57 million and $44 thousand, respectively. Further discussion of the
cases and claims that give rise to this accrued liability are discussed immediately below.
83
-------
10-1-0029
Litigation Claims and Assessments
There are currently three legal claims which have been asserted against the EPA pursuant to
the Federal Tort Claims and Fair Labor Standards Acts. For two of these claims, losses have
been deemed probable, and the unfavorable outcome is estimated to be approximately $2.2
million. EPA has accrued this amount as of September 30, 2009. The maximum amount of
exposure under these two claims could range as much as $10 million in the aggregate.
Additionally, the potential loss due to the third claim has been deemed to be reasonably
possible, and it has been estimated that this could result in an unfavorable outcome of
between $50 and $150 thousand.
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, 2009, there is currently one CERCLA Section 106(b) administrative
claims which has been asserted and for which an unfavorable outcome has been deemed
probable. It is estimated that the potential loss could be approximately $2.37 million and this
amount has been accrued as of September 30, 2009.
Other Commitments
EPA has a commitment to fund the Unites States Government's payment to the Commission
of the North American Agreement on Environmental Cooperation Between the Governments
of Canada, the Government of the United Mexican States, and the Government of the United
States of America (commonly referred to as CEC). According to the terms of the agreement,
each government pays an equal share to cover the operating costs of the CEC. For the
periods ended September 30, 2009 and 2008, EPA paid $3 million for each of these periods
to the CEC. A payment of $3 million will be made in FY 2010, subject to the availability of
funds.
EPA has a legal commitment under a non-cancellable agreement, subject to the availability
of funds, 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 have been deemed reasonably possible and
are anticipated to be paid in FY 2010.
84
-------
Note 19. Earmarked Funds
10-1-0029
Environmental LUST
Balance Sheet as of September 30, 2009 Services
Assets
Fund Balance with Treasury 3
Investments
Accounts Receivable, Net
Other Assets
Total Assets
Other Liabilities 3
Total Liabilities 3
Cumulative Results of Operations 3
Total Liabilities and Net Position 3
Statement of Changes in Net Cost for the
Period Ended September 30, 2009
Gross Program Costs 3
Less: Earned Revenues
Net Cost of Operations 3
Statement of Changes in Net Position for the
Period ended September 30, 2009
Net Position, Beginning of Period $
Nonexchange Revenue- Securities Investment:
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Change End of Period
Superfund
Other Earmarked Total Earmarked
Funds Funds
231,821
231,821
1
1
231,820
231,821
-
_
he
211,282
t:
20,538
20,538
$
$
$
$
$
$
$
$
$
25,169
3,422,610
217
3,447,996
1 1 ,693
1 1 ,693
3,436,303
3,447,996
98,901
79
98,822
3,244,497
124,088
169,186
(3,000)
354
(98,822)
191,806
62,631 $
3,457,338
769,531
104,735
4,394,236 "
977,700 $
977,700 $'
3,416,536 $
4,394,236 $
$ 1,672,246 $
615,577
$ 1,056,669 $
2,702,763 $
52,065
(1,479)
1,693,519
26,338
(1,056,669)
713,774 ' $'
25,650 $
4,157
4,827
34,635
32,817 $
32,817 $"
1,817 $
34,634 $
75,485
55,411
20,074 $
231,820 $ 3,436,303 $ 3,416,537 $
1,989 $
15
17,687
2,199
(20,074)
(173) $|
1,816 $"
345,271
6,879,948
773,688
109,780
8,108,687
1,022,211
1,022,211
7,086,476
8,108,687
1,846,632
671,067
1,175,565
6,160,531
176,168
188,245
1,708,206
28,891
(1,175,565)
925,945 '
7,086,476 '
85
-------
10-1-0029
Balance sheet as of September 30, 2008
Assets
Fund Balance with Treasury
Investments
Accounts Receivable, Net
Other Assets
Other 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
Total Assets
Total Liabilities
Enviorn mental
Services
211,282
211,282
211,282
211,282
Net Cost of Operations
LUST
12,711
3,240,675
27
72
3,253,485
8,988
3,244,497
3,253,485
77,702
32
Restated
Superfund
45,596
2,926,233
468,626
89,408
3,529,863
827,100
827,100
1,530,979
543,841
Other
Earmarked
Funds
23,765
7,921
4,404
2,487
38,577
36,588
36,588
73,284
52,425
77,670 $
987,138
20,859
Restated
Total
Earmarked
Funds
293,354
6,174,829
473,057
91,967
7,033,207
872,676
872,676
2,702,763 $
3,529,863 $
1,989 $
38,577 $
6,160,531
7,033,207
1,681,965
596,298
1,085,667
Statement of Changes in Net Position for the
Period ended September 30, 2008
Net Position, Beginning of Period
Prior Period Adjustment
Net Position, Adjusted
Nonexchange Revenue- Securities Investments
Nonexchange Revenue
Other Budgetary Finance Sources
Other Financing Sources
Net Cost of Operations
Change in Net Position
Net Change End of Period
188,371
188,371
22,911
3,023,769
3,023,769
127,346
170,762
1
289
(77,670)
22,911 $ 220,728
2,670,425
(93.6131
2,576,812
114,340
10,442
969,606
18,701
(987,138)
125,951
3,662
3,662
187
17,056
1,943
(20,859)
5,886,227
(93.6131
5,792,614
241,873
204,115
986,663
20,933
(1,085,667)
(1,673) $
367,917
211,282 $ 3,244,497 $ 2,702,763 $
1,989 $ 6,160,531
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
86
-------
10-1-0029
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 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.
87
-------
10-1-0029
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.
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 20. Exchange Revenues, Statement of Net Cost
Exchange, or earned 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, 2009 and 2008, exchange revenues
are $773.6 million and $675.9 million, as restated, respectively.
88
-------
10-1-0029
Note 21. Intragovernmental Costs and Exchange Revenue
FY 2009 FY 2008
intragovern- With the intragovern- With the
mental Public TOTAL mental Public TOTAL
Clean Air
Program Costs $ 187,484 $ 874,787 $ 1,062,271 $ 181,467 $ 816,336 $ 997,803
Earned Revenue 15,455 3,036 18,491 18,360 2,043 20,403
NET COST $ 172,029 $ 871,751 $ 1,043,780 $ 163,107 $ 814,293 $ 977,400
Clean & Safe Water
Program Costs $ 191,558 3,236,903 $ 3,428,461 $ 162,679 3,334,953 $ 3,497,632
Earned Revenue 4,758 3,208 7,966 7,615 2,841 10,456
NET COST $ 186,800 $ 3,233,695 $ 3,420,495 $ 155,064 $ 3,332,112 $ 3,487,176
Land Preservation &
Restoration
Program Costs $ 386,549 $ 1,821,301 $ 2,207,850 $ 347,011 $ 1,654,205 $ 2,001,216
Earned Revenue 101,767 580,119 681,886 73,829 501,719 575,548
NET COST $ 284,782 $ 1,241,182 $ 1,525,964 $ 273,182 $ 1,152,486 $ 1,425,668
Healthy Communities
& Ecosystems
Program Costs $ 271,028 $ 1,134,155 $ 1,405,183 $ 281,767 $ 1,126,764 $ 1,408,531
Earned Revenue 20,047 42,267 62,314 22,710 39,407 62,117
NET COST $ 250,981 $ 1,091,888 $ 1,342,869 $ 259,057 $ 1,087,357 $ 1,346,414
Compliance &
Environmental
Stewardship
Program Costs $ 207,660 $ 609,538 $ 817,198 $ 176,376 $ 593,853 $ 770,229
Earned Revenue 4,071 (1,116) 2,955 5,540 1,801 7,341
NET COST $ 203,589 $ 610,654 $ 814,243 $ 170,836 $ 592,052 $ 762,888
Total
Program Costs $ 1,244,279 $ 7,676,684 $ 8,920,963 $ 1,149,300 $ 7,526,111 $ 8,675,411
Earned Revenue 146,098 627,514 773,612 128,054 547,811 675,865
NET COST $ 1,098,181 $ 7,049,170 $ 8,147,351 $ 1,021,246 $ 6,978,300 $ 7,999,546
Intragovernmental costs relate to the source of the goods or services not the classification of
the related revenue.
89
-------
10-1-0029
Note 22. Cost of Stewardship Land
The costs related to the acquisition of stewardship land was approximately $323 thousand
and $2 million for September 30, 2009 and 2008, respectively. These costs are included in
the Statement of Net Cost.
Note 23. Environmental Cleanup Costs
As of September 30, 2009, EPA has one site that requires clean up stemming from its
activities. For sites that had previously been listed, it was determined by EPA's Office of
General Counsel to discontinue reporting the potential environmental liabilities for the
following reasons: (1) although EPA has been put on notice that it is subject to a
contribution claim under CERCLA, no direct demand for compensation has been made to
EPA; (2) any demand against EPA will be resolved only after the Superfund cleanup work is
completed, which may be years in the future; and (3) there was no legal activity on these
matters in FY2009, and none are expected in FY2010. During FY2009, costs amounting to
approximately $53 thousand was paid out by the Treasury Judgment Fund for another site,
and no further action is warranted.
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 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. EPA owns
two sites that have an unfunded environmental liability of $230 thousand.
Accrued Cleanup Cost:
EPA has 15 sites that will require permanent closure, and EPA is responsible to fund the
environmental cleanup of those sites. As of September 30, 2009 and 2008, the estimated
costs for site cleanup are $19.49 million and $19.41 million, respectively. 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.
Note 24. State Credits
Authorizing statutory language for Superfund and related Federal regulations requires states
to enter into Superfund State Credits (SSC) 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
90
-------
10-1-0029
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, 2009 and 2008, the total remaining
state credits have been estimated at $21.9 million and $15.3 million, respectively.
Note 25. 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, 2009, EPA had 9
outstanding preauthorized mixed funding agreements with obligations totaling $19.9 million.
As of September 30, 2008, EPA had 14 for $25.2 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 26. Custodial Revenues and Accounts Receivable
FY 2009 FY 2008
Fines, Penalties and Other Miscellaneous Receipts $ 103,924 $ 120,657
Accounts Receivable for Fines, Penalties and Other
Miscellaneous Receipts:
Accounts Receivable $ 238,957 $ 220,123
Less: Allowance for Uncollectible Accounts (174,411) (171,966)
Total $ 64,546 $ 48,157
EPA uses the accrual basis of accounting for the collection of fines, penalties and
miscellaneous receipts. Collectability by EPA of the fines and penalties is based on the RPs'
willingness and ability to pay.
91
-------
10-1-0029
Note 27. Reconciliation of President's Budget to the Statement of Budgetary Resources
Budgetary resources, obligations incurred and outlays, as presented in the audited
FY 2009 Statement of Budgetary Resources, will be reconciled to the amounts included in
the FY 2010 Budget of the United States Government when they become available. The
Budget of the United States Government with actual numbers for FY 2009 has not yet been
published. We expect it will be published by March 2010, and it will be available on the
OMB website at http://www.whitehouse.gov/. The actual amounts published for the year
ended September 30, 2008 are listed immediately below:
FY2008
Budgetary
Resources
Statement of Budgetary Resources
Adjustments to Undelivered Orders and
Other
Expired and Immaterial Funds*
Rounding Differences**
Reported in Budget of the U. S.
Government
13,207,920
Obligations
9,656,040
Offsetting
Receipts
1,118,429
Net Outlays
9,052,419
2,134
(423,487)
(2,567)
1,357
(76,113)
(1,284)
-
-
(429)
1,535
(7)
53
12,784,000 $
9,580,000 $ 1,118,000 $
9,054,000
* 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.
Note 28. 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 for
September 30, 2009 and 2008:
FY 2009
FY 2008
Recoveries of Prior Year Obligations -
Downward adjustments of prior years' obligations
Temporarily Not Available - Rescinded Authority
Permanently Not Available:
Payments to Treasury
Rescinded Authority
Cancelled Authority
Total Permanently Not Available
$ 220,329
(3,180)
(10,000)
(19.552)
(32,732)
$ 281,117
(6,366)
(3,032)
(117,284)
(5.210)
(125,526)
92
-------
10-1-0029
Note 29. Unobligated Balances Available
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. The unobligated balances
available consist of the following as of September 30, 2009 and 2008.
FY2009 FY2008
Unexpired Unobligated Balance $ 3,452,750 $ 3,205,306
Expired Unobligated Balance 250,272 346,574
Total $ 3,703,022 $ 3,551,880
Note 30. Undelivered Orders at the End of the Period
Budgetary resources obligated for undelivered orders at September 30, 2009 and 2008 are
$14.69 billion and $8.43 billion, respectively.
Note 31. Offsetting Receipts
Distributed offsetting receipts credited to the general fund, special fund, or trust fund receipt
accounts offset gross outlays. For FY 2009 and 2008, the following receipts were generated
from these activities:
FY2009 FY2008
Trust Fund Recoveries $ 96,782 $ 89,995
Special Fund Environmental Service 20,539 22,911
Downward Re-estimates of Subsidies 5
Trust Fund Appropriation 1,747,911 984,974
Special Fund Receipt Account and Treasury
Miscellaneous Receipts and Clearing Accounts 18,897 20,549
Total $ 1,884,134 $ 1,118,429
Note 32. Transfers-In and Out, Statement of Changes in Net Position
Appropriation Transfers, In/Out:
For FY 2009 and 2008, the Appropriation Transfers under Budgetary Financing Sources on
93
-------
10-1-0029
the Statement of Changes in Net Position are comprised of non-expenditure 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 follows for September 30, 2009 and 2008:
Transfers In/Out Without Reimbursement, Budgetary:
Fund/Type of Account FY 2009 FY 2008
U.S. Navy $ (8,000)$ (7,875)
Small Business Administration (2,953) -_
Total Appropriation Transfers (Other Funds) $ (10,953) (7,875)
Net Transfers from Invested Funds 1,3 82,030 1,3 89,902
Transfer to Another Agency (10,953) (7,875)
Allocations Rescinded - 5,940
Total of Net Transfers on Statement of
Budgetary Resources $ 1,371,077 $ 1,387,967
For FY 2009 and 2008, 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 for September 30,
2009 and 2008:
94
-------
10-1-0029
Type of Transfer/Funds
FY 2009
FY 2008
Earmark
Other
Funds
Earmark
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
Total Transfers in (out)
without Reimbursement,
Budgetary
(57,392) $ 57,392 $ (37,204) $
1,905
$ (39,705) $ 57,392 $ (18,190) $
Other
Funds
37,204
17,687
17,056
53
(53)
37,151
Transfers In/Out without Reimbursement, Other Financing Sources:
For FY 2009 and 2008, 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 for September 30, 2009 and 2008:
95
-------
10-1-0029
Type of Transfer/Funds FY 2009 FY 2008
Earmark Other Funds Earmark Other Funds
Transfers-in by allocation transfer
agency $ 84 $ - $ - $
Transfers-in property 46
Transfers (out) of prior year
negative subsidy to be paid
following year - (740) - 28_
Total Transfers in (out) without
Reimbursement, Budgetary $ 84 $ (694) $ - $ 28
Note 33. Imputed Financing
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 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 2009 were $197.8 million ($25.1 million
from Earmarked funds, and $172.7 million from Other Funds). For FY 2008, the estimates
were $132.5 million ($20.9 million from Earmarked Funds, and $111.6 million from Other
Funds).
SFFAS No. 4, "Managerial Cost Accounting Standards and Concepts" and SFFAS No. 30,
"Inter-Entity Cost Implementation," requires Federal agencies to recognize the costs of goods
and services received from other Federal entities that are not fully reimbursed, if material.
EPA estimates imputed costs for inter-entity transactions that are not at full cost and records
imputed costs and financing for these unreimbursed costs subject to materiality. EPA applies
its Headquarters General and Administrative indirect cost rate to expenses incurred for inter-
entity transactions for which other Federal agencies did not include indirect costs to estimate
the amount of unreimbursed (i.e., imputed) costs. For FY 2009 total imputed costs were
$11.7 million ($3.8 million from Earmark funds, and $7.9 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 2009
96
-------
10-1-0029
entries for Judgment Fund payments totaled $3.7 million (Other Funds). For FY 2008,
entries for Judgment Fund payments totaled $2.4 million (Other Funds).
The combined total of imputed financing sources for FY 2009 and FY 2008 is $213.3 million
and $132.5 million, respectively.
Note 34. Payroll and Benefits Payable
Payroll and benefits payable to EPA employees for the years ending September 30, 2009 and
2008, consist of the following:
FY 2009 Payroll & Benefits Payable
Accrued Funded Payroll & Benefits
Withholdings Payable
Employer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
FY 2008 Payroll & Benefits Payable
Accrued Funded Payroll & Benefits
Withholdings Payable
Employer Contributions Payable-TSP
Accrued Unfunded Annual Leave
Total - Current
Covered by Not Covered
Budgetary by Budgetary
Resources Resources
Total
57,004 $
31,307
3,177
-
91,488 $
46,966 $
30,659
2,670
-
80,295 $
- $ 57,004
31,307
3,177
159,129 159,129
159,129 $ 250,617
- $ 46,966
30,659
2,670
152,663 152,663
152,663 $ 232,958
Note 35. 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.
97
-------
10-1-0029
Rescissions to General
Appropriations
Cancelled General Authority
Total Other Adjustments
Other Funds
FY2009
$ 29,551 $
$ 29,551 $"
Other Funds
FY2008
117,284
5,157
122,441
Note 36. Nonexchange Revenue, Statement of Changes in Net Position
The Nonexchange Revenue, Budgetary Financing Sources, on the Statement of Changes in
Net Position as of September 30, 2009 and 2008 consists of the following items:
Earmark Funds Earmark Funds
Interest on Trust Fund $
Tax Revenue, Net of Refunds
Fines and Penalties Revenue
Special Receipt Fund Revenue
Total Nonexchange Revenue $
FY2009
176,168 $
169,186
(1,479)
20,538
364,413 $
FY2008
241,873
170,762
10,442
22,911
445,988
98
-------
10-1-0029
Note 37. Reconciliation of Net Cost of Operations to Budget
Restated
FY 2009 FY 2008
RESOURCES USED TO FINANCE ACTIVITIES:
Budgetary Resources Obligated
Obligations Incurred $ 17,311,047 $ 9,656,040
Less: Spending Authority from Offsetting Collections and Recoveries (847,465) (1,142,189)
Obligations, Net of Offsetting Collections $ 16,463,582 $ 8,513,851
Less: Offsetting Receipts (1,884,134) (1,118,429)
Net Obligations $ 14,579,448 $ 7,395,422
Other Resources
Transfers In/Out Without Reimbursement, Property $ 656 $
Imputed Financing Sources 213,331 132,525
Income from Other Appropriations -__ -_
Net Other Resources Used to Finance Activities $ 213,987 $ 132,525
Total Resources Used To Finance Activities $ 14,793,435 $ 7,527,947
RESOURCES USED TO FINANCE ITEMS
NOT PART OF THE NET COST OF OPERATIONS:
Change in Budgetary Resources Obligated $ (6,440,873) $ 417,645
Resources that Fund Prior Periods Expenses (381) (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 3,943 3,985
Offsetting Receipts Not Affecting Net Cost 136,222 133,455
Resources that Finance Asset Acquistion (138,030) (98,715)
Adjustments to Expenditure Transfers
that Do Not Affect Net Cost -_ -_
Total Resources Used to Finance Items Not Part of the Net Cost of Operations $ (6,439,119) $ 456,348
Total Resources Used to Finance the Net Cost of Operations $ 8,354,316 $ 7,984,295
99
-------
10-1-0029
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
Increase in Environmental and Disposal Liability
Increase in Unfunded Contingencies
Upward/Downward Reestimates of Credit Subsidy Expense
Increase in Public Exchange Revenue Receivables
Increase in Workers Compensation Costs
Other
Total Components of Net Cost of Operations that Require or
Generate Resources in Future Periods
Components Not Requiring/Generating Resources:
Depreciation and Amortization
Revaluation of Assets and Liabilities
Expenses Not Requiring Budgetary Resources
Total Components of Net Cost that Will Not Require or Generate Resources
Total Components of Net Cost of Operations That Will Not Require or
Generate Resources in the Current Period
Net Cost of Operations
FY 2009
$ 6,461 $
83
4,529
(337,008)
(3,232)
$ (329,167) $
$ 71,550 $
50,652
$ 122,202 $
$ (206,965) $
Restated
FY 2008
9,807
1,197
44
(176,404)
5,641
59
(159,656)
88,586
86,321
174,907
15,251
8,147,351 $ 7,999,546
Note 38. Restatements
EPA has discovered two accounting errors that have resulted in material misstatements of
EPA's financial statements issued for the periods from FY 2002 through FY 2008. As a
consequence, EPA is correcting the errors by restating its consolidated balance sheet as of
September 30, 2008 and its consolidated statements of net cost and net cost by goal for the
period ended September 30, 2008. In addition, EPA is reflecting the cumulative effect of the
errors attributable to fiscal years prior to FY 2008 as an adjustment to the beginning balance
of cumulative results of operations in the statement of changes in net position for the period
ended September 30, 2008.
The first error involves "special accounts", EPA is authorized by section 122(b) (3) of the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to
use funds it collects under this authority to perform site clean-up actions in accordance with
settlement agreement (e.g., consent decrees). EPA is authorized to retain these funds in
interest-earning, site-specific special accounts, which are subaccounts of the EPA Hazardous
Substance Superfund Trust Fund.
For some site clean-up projects, EPA, at a given point in time, will not have as yet incurred
costs ("future costs"), whereas for others it will have already incurred costs ("prior costs").
100
-------
10-1-0029
Before October 1, 2002, EPA's policy was to defer revenue recognition for both types of
projects until such time as clean-up costs were actually incurred. Since, for prior cost
projects, work is in progress, the policy of deferring all revenue for these projects was
incorrect.
As a remedy, EPA, effective on October 1, 2002, implemented a revised policy for revenue
recognition involving prior cost projects. For prior-cost projects, EPA's revised policy was
to recognize revenue upon the collection of settlement-related funds. EPA, however, did not
properly implement the revised policy and, as a result, revenue was overstated and cashout
advances for superfund was understated by $95.4 million through September 30, 2008.
After discovering the error, EPA recorded a financial statement adjustment to correct for the
cumulative effect of the error within the FY 2009 financial statements, and management
directed its Regional Offices to make corrections at the detailed transaction level during the
first quarter of FY 2010.
The second error involves judgments entered by courts against private sector companies.
Pursuant to its mission and regulations, EPA pursues litigation against companies that have
been deemed to have polluted or contaminated the environment. When these cases are
settled or decided in the Government's favor, settlement agreements are executed with the
offending companies. Upon being notified of a settlement agreement, it is EPA policy to
record a receivable as of the date of the settlement agreement.
During FY 2009, EPA discovered eight settlement agreements in the total amount of $150.9
million that should have been recorded as receivables and revenue in FY 2008. This error
has resulted in an understatement of accounts receivable of $150.9 million; revenue of $43.5
million and advances from the public of $107.3 million.
After discovering the error, EPA recorded a financial statement adjustment to correct for the
cumulative effect of the error within the FY 2009 financial statements, and management
recorded the account receivable and strengthened its internal controls to require that Regional
Counsels certify that all closed settlements are recorded in appropriate tracking systems.
The effect of the restatement is as follows:
101
-------
10-1-0029
Consolidated Balance Sheet
Accounts Receivable, Net
Total Assets
Cashout Advances, Superfund (see Note 16)
Total Liabilities
Cumulative Results of Operations - Earmarked
Funds
Total Net Position
Consolidated Statement of Net Cost
Earned Revenue
Total Net Cost of Operations
Consolidated Statement of Net Cost by Goal
Land Preservation & Restoration:
Total Earned Revenue
Net Cost of Operations
Consolidated Totals:
Total Earned Revenue
Net Cost of Operations
Consolidated Statement of Changes in Net
Position
Cumulative Results of Operations:
Total:
Beginning Balance
Net Cost of Operations
Ending Balance
Earmarked Funds:
Beginning Balance
Net Cost of Operations
Ending Balance
Combined Statement of Budgetary Resources
Spending Authority from Offsetting Collections:
Earned:
Collected
Change in Unfilled Customer Orders:
Advance Received
FY 2008,
as Previously
Reported
349,739
17,106,998
286,630
1,664,042
6,212,479
15,442,956
634,201
8,041,210
533,884
1,467,332
634,201
8,041,210
6,448,800
(8,041,210)
6,768,245
5,886,227
(1,127,331)
6,212,479
708,430
77,880
Adjustment
150,853
150,853
202,801
202,801
(51,948)
(51,948)
41,664
(41,664)
41,664
(41,664)
41,664
(41,664)
(93,613)
41,664
(51,948)
(93,613)
41,664
(51,948)
(1,836)
1,836
FY 2008,
as Restated
500,592
17,257,851
489,430
1,866,843
6,160,531
15,391,008
675,865
7,999,546
575,548
1,425,668
675,865
7,999,546
6,355,187
(7,999,546)
6,716,297
5,792,614
(1,085,667)
6,160,531
706,594
79,716
102
-------
10-1-0029
Note 39. Amounts Held by Treasury (UNAUDITED)
Amounts held by Treasury for future appropriations consist of amounts held in trusteeship by
Treasury in the Superfund and LUST Trust Funds.
Superfund
Superfund is supported 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,
2009 and 2008. 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.
SUPERFUND FY 2009
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
Treasury
Combined
3,277,721
$ 3,277,721
$
$
$"
3,277,721
3,277,721
$
$
$
$
$
$
$
(7,975)
(7,975)
19,624
159,991
171,640
171,640
171,640
96,782
1,374
98,156
1,747,911
52,064
1,898,131
$
$
$
$
$
$
$
(7,975)
(7,975)
19,624
3,437,712
3,449,361
3,449,361
3,449,361
96,782
1,374
98,156
1,747,911
52,064
1,898,131
$ 1,905,845 $ (1,905,845) $
1,905,845
$ 1.905.845"
(1,905,845)
$ (7.7147 $'
1.898.131
103
-------
10-1-0029
In FY 2009, the EPA received an appropriation of $1.75 billion 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, 2009 and 2008, the Treasury Trust Fund has a liability to EPA for
previously appropriated funds of $3.28 billion and $2.75 billion, respectively.
EPA
- $
2,749,821
Treasury
2,894 $
2,894
11,533
164,878
Combined
2,894
2,894
11,533
2,914,699
$ 2,749,821 $ 179,305 $ 2,929,126
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
Transfers from CDC (recovery)
Total Outlays
Net Income
LUST
LUST is supported primarily by a sales tax on motor fuels to clean up LUST waste sites. In
FY 2009 and 2008, 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.
$
$
$
2,
749
2.749
,821
,821
-
-
$
$
$
1
1
79
79
89
2
92
984
$
$
$
$
1,
1,
1,
301
301
,31
,31
-
-
5
-
5
301,315
$
$
$
1
1,1
14
92
(1,301
1
,305
,305
,975
,850
,825
,974
,340
,139
,315)
,905
$
$
$
$
$
$
(1,299,410)
$
(107,271)
$
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
104
-------
10-1-0029
LUST FY 2009
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
Total Revenue
Interest Income
Total Receipts
Outlays
Transfers to/from EPA, Net
Total Outlays
Net Income
EPA
Treasury
Combined
$
$'
- $
305,445
305,445 $
305,445 $
305,445 $
- $
- $
312,577$
312,577
312,577 $
(10,359) $
(10,359)
22,838
3,094,325
3,106,804$
3,106,804$
3,106,804$
159,719$
9,454
13
169,186
124,087
293,273 $
(10,359)
(10,359)
22,838
3,399,770
3,412,249
3,412,249
3,412,249
159,719
9,454
13
169,186
124,087
293,273
(312,577)$
(312,577)
(19,304) $
293,273
105
-------
10-1-0029
LUST FY 2008 EPA Treasury Combined
Undistributed Balances
Uninvested Fund Balance $ -_ $ (2,497) $ (2,497)
Total Undisbursed Balance - (2,497) (2,497)
Interest Receivable - 28,735 28,735
Investments, Net 112,068 3,099,871 3,211,939
Total Assets $ 112,068$ 3,126,109$ 3,238,177
Liabilities & Equity
Equity
Equity
Receipts
Highway TF Tax $ - $ 154,309$ 154,309
Airport TF Tax - 16,240 16,240
Inland TF Tax - 213_ 213_
Total Revenue - 170,762 170,762
Interest Income -_ 127,346 127,346
Total Receipts $ - $ 298,108 $ 298,108
Outlays
Transfers to/from EPA, Net $ 105,816 $ (105,816) $ -_
Total Outlays 105,816 (105,816) -_
Net Income $ 105,816 $ 192,292 $ 298,108
$
$
112,068$
112,068$
3,126,109 $
3,126,109 $
3,238,177
3,238,177
106
-------
10-1-0029
Environmental Protection Agency
Required Supplementary Information
As of September 30, 2009
(Dollars in Thousands)
(Unaudited)
1. 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.
2. 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.
107
-------
10-1-0029
Environmental Protection Agency
Required Supplementary Information
As of September 30, 2009
(Dollars in Thousands)
(Unaudited)
3. Supplemental Combined Statement of Budgetary Resources
For the Period Ending September 30, 2009
BUDGETARY RESOURCE EPM FIFRA LUST S&T
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
Permanently not available
Total Budgetary Resources
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated 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 $ 2,374,209 $ 3,136 $ 98,881 $ 829,447
STAG
OTHER
TOTAL
626,416$
22,107
2,392,079
86,713
1,632
8,879
(114,443)
21,000
60,500
(11,803)
3,093,080 $
2,423,049 $
73,998
2,497,047
387,774
208,259
3,093,080 $
893,902 $
(446,717)
447,185
2,497,047
(2,490,801)
(22,108)
112,811
544,134
878,040
(333,906)
544,134$
2,490,801 $
(116,592)
6,630 $
315
23,713
(1,936)
28,722 $
-$
24,560
24,560
4,163
28,723 $
3,659 $
3,659
24,560
(24,914)
(316)
2,990
2,990
-
2,990 $
24,914$
(21,778)
7,299 $
1,497
200,000
118
(2)
112,577
321,489 $
308,295 $
79
308,374
13,114
32-1 ,488 $
119,978$
119,978
308,374
(98,997)
(1,496)
327,859
327,859
-
327,859 $
98,997 $
(116)
226,500 $
8,860
790,051
9,797
(125)
2,849
1,360
26,417
(6,250)
1,059,459 $
822,326 $
6,526
828,852
193,278
37,329
1059,459 $
473,301 $
(36,499)
436,802
828,852
(869,999)
(8,860)
254
387,049
423,294
(36,245)
387,049 $
869,999 $
(40,552)
1,090,683$
62,560
9,376,464
3,368
(71,453)
(10,000)
10,451,622 $
9,315,822$
9,315,822
1,135,800
10,451,622 $
6,333,467 $
6,333,467
9,315,822
(3,449,797)
(62,560)
12,136,932
12,136,932
-
12,136,932$
3,449,797 $
(3,368)
1,594,352$
124,990
2,517,780
5
507,669
1,377
19,393
19,382
9,975
1,269,453
(4,679)
6,059,697 $
3,870,780$
465,612
4,336,392
1,706,700
16,605
6,059,697 $
1,543,787$
(183,030)
1,360,757
4,336,392
(3,735,914)
(124,989)
(20,644)
1,815,602
2,019,275
(203,673)
1,815,602$
3,735,914$
(537,152)
3,551,880
220,329
15,276,374
5
631,378
2,884
29,183
(93,701)
57,392
1,371,077
(32,732)
21,014,069
16,740,272
570,775
17,311,047
3,440,829
262,193
21,014,069
9,368,094
(666,246)
8,701,848
17,311,047
(10,670,422)
(220,329)
92,421
15,214,565
15,788,389
(573,824)
15,214,565
10,670,422
(719,558)
(1,884,134)
3,446,429 $ 3,198,762
8,066,730
108
-------
10-1-0029
Environmental Protection Agency
Required Supplemental Stewardship Information
For the Year Ended September 30, 2009
(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 environmental effects on children's health; 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 potential risks of unregulated contaminants in drinking water; the development of
recreational water quality criteria; the health effects of air pollutants such as particulate
matter; the protection of the nation's ecosystems; and the provision of near-term, appropriate,
affordable, reliable, tested, and effective technologies and guidance for potential threats to
homeland security. EPA also supports regulatory decision-making with chemical risk
assessments.
For FY 2009, the full cost of the Agency's Research and Development activities totaled over
$720M. Below is a breakout of the expenses (dollars in thousands):
FY 2005 FY 2006 FY2007 FY2008 FY2009
Programmatic Expenses $628,467 $630,438 $624,088 $597,080 $600,552
Allocated Expenses $112,558 $104,167 $100,553 $103,773 $119,630
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.
109
-------
10-1-0029
INVESTMENT IN THE NATION'S INFRASTRUCTURE
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 2005 FY 2006 FY 2007 FY 2008 FY 2009
Construction Grants $21,148 $39,193 $9,975 $11,517 $30,950
Clean Water SRF $1,127,883$1,339,702 $1,399,616$1,063,825 $835,446
Safe Drinking Water SRF $715,060 $910,032 $962,903 $816,038 $906,803
Other Infrastructure Grants $385,226 $411,023 $381,481 $388,555 $306,366
Allocated Expenses $402,853 $446,113 $443,716 $396,253 $414,249
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.
110
-------
10-1-0029
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 2005 FY 2006 FY 2007 FY 2008 FY 2009
Training and Awareness Grants $46,750 $43,765 $32,845 $30,768 $37,981
Fellowships $10,195 $12,639 $12,185 $9,650 $6,818
Allocated Expenses $10,199 $9,320 $7,255 $7,025 $8,924
111
-------
10-1-0029
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Balance Sheet for Superfund Trust Fund
For the Periods Ending September 30, 2009 and 2008
(Dollars in Thousands)
(Unaudited)
FY2009
ASSETS
Intragovernmental:
Fund Balance With Treasury (Note SI)
Investments
Accounts Receivable, Net
Other
Total Intragovernmental
Accounts Receivable, Net
Property, Plant & Equipment, Net
Other
Total Assets
62,631
3,457,338
20,694
23,100
3,563,763
748,838
81,216
419
Restated
FY2008
45,596
2,926,233
17,832
21,116
3,010,777
450,794
67,541
751
4,394,236 $
3,529,863
LIABILITIES
Intragovernmental:
Accounts Payable and Accrued Liabilities
Custodial Liability
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
47,787
187
76,051
124,025
183,477
7,829
572,412
44,604
45,353
977,700 $
3,416,536
3,416,536
52,639
50,448
103,087
141,049
7,922
489,430
40,902
44,710
827,100
2,702,763
2,702,763
4,394,236 $
3,529,863
The accompanying notes are an integral part of these financial statements.
112
-------
10-1-0029
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Net Cost for Superfund Trust Fund
For the Periods Ending September 30, 2009 and 2008
(Dollars in Thousands)
(Unaudited)
Restated
FY 2009 FY 2008
COSTS
Gross Costs $ 1,672,246 $ 1,530,979
Expenses from Other Appropriations (Note S5) 130,931 69,769
Total Costs 1,803,177 1,600,748
Less:
Earned Revenue 615,577 543,842
NET COST OF OPERATIONS $ 1,187,600 $ 1,056,906
The accompanying notes are an integral part of these financial statements.
113
-------
10-1-0029
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Changes in Net Position for Superfund Trust Fund
For the Periods Ending September 30, 2009 and 2008
(Dollars in Thousands)
(Unaudited)
Cumulative Results of Operations:
Net Position - Beginning of Period
Adjustment:
(b) Correction of Errors
Beginning Balances, as Adjusted
Budgetary Financing Sources:
Other Adjustments
Appropriations Used
Nonexchange Revenue - Securities Investment
Nonexchange Revenue - Other
Transfers In/Out
Trust Fund Appropriations
Other
Income from Other Appropriations (Note S5)
Total Budgetary Financing Sources
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
FY2009
Earmarked
Funds
2,702,763
2,702,763
52,065
(1,479)
(54,393)
1,747,911
130,931
1,875,035
(84)
26,422
26,338
(1,187,600)
713,773
3,416,536
Restated
FY2008
Earmarked
Funds
2,670,425
(93,613)
2,576,812
114,340
10,441
(35,246)
984,974
19,878
69,769
1,164,156
18,701
18,701
(1,056,906)
125,951
2,702,763
The accompanying notes are an integral part of these financial statements.
114
-------
10-1-0029
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2009 and 2008
(Dollars in Thousands)
(Unaudited)
FY 2009
BUDGETARY RESOURCES
Unobligated Balance, Brought Forward, October 1:
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
1,513,176
118,278
636,392
292,403
1,401
12,032
4,574
310,410
1,269,453
Restated
FY 2008
1,245,311
168,480
37,205
388,917
(1,725)
75,873
4,476
467,541
1,288,350
(4,263)
(54)
3,847,709 $
.,202,570
STATUS OF BUDGETARY RESOURCES
Obligations Incurred:
Direct
Reimbursable
Total Obligations Incurred
Unobligated Balances:
Apportioned
Exempt from Apportionment
Total Unobligated Balances
Unobligated Balances Not Available
Total Status of Budgetary Resources (Note S6)
1,996,048 $
246,297
2,242,345
1,593,443
1,593,443
11,921
3,847,709 $
1,425,282
264,112
1,689,394
1,512,670
1,512,670
506
3,202,570
The accompanying notes are an integral part of these financial statements.
115
-------
10-1-0029
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Statement of Budgetary Resources for Superfund Trust Fund
For the Periods Ending September 30, 2009 and 2008
(Dollars in Thousands)
(Unaudited)
Restated
FY 2009 FY 2008
CHANGE IN OBLIGATED BALANCE
Obligated Balance, Net:
Unpaid Obligations, Brought Forward, October 1 $ 1,392,311 $ 1,361,334
Adjusted Total 1,392,311 1,361,334
Less: Uncollected Customer Payments from Federal Sources, Brought
Forward, October 1 (112,921) (110,170)
Total Unpaid Obligated Balance, Net 1,279,390 1,251,164
Obligations Incurred, Net 2,242,345 1,689,394
Less: Gross Outlays (1,654,470) (1,489,936)
Obligated Balance Transferred, Net:
Actual Transfers, Unpaid Obligations
Actual Transfers, Uncollected Customer Payments from Federal Sources -_ -_
Total Unpaid Obligated Balance Transferred, Net
Less: Recoveries of Prior Year Unpaid Obligations, Actual (118,278) (168,480)
Change in Uncollected Customer Payments from Federal Sources (5,975) (2,752)
Total, Change in Obligated Balance 1,743,012 1,279,390
Obligated Balance, Net, End of Period:
Unpaid Obligations 1,861,908 1,392,311
Less: Uncollected Customer Payments from Federal Sources (118,896) (112,921)
Total, Unpaid Obligated Balance, Net, End of Period $ 1,743,012 $ 1,279,390
NET OUTLAYS
Net Outlays:
Gross Outlays (Note S6) $ 1,654,470 $ 1,489,936
Less: Offsetting Collections (Note S6) (304,434) (464,790)
Less: Distributed Offsetting Receipts* (Notes S6) (1,244,694) (1,074,969)
Total, Net Outlays $ 105,342 $ (49,823)
*Offsetting receipts line includes the amount in 68X0250 (payment to trust fond) from Treasury
The payment cannot be made directly through the trust fund, but must go through a "pass-through" fond
The accompanying notes are an integral part of these financial statements.
116
-------
10-1-0029
Environmental Protection Agency
Supplemental Information and Other Reporting Requirements
Related Notes to Superfund Trust Financial Statements
For the Periods Ending September 30, 2009 and 2008
(Dollars in Thousands)
(Unaudited)
Note SI. Fund Balance with Treasury for Superfund Trust
Fund Balances with Treasury for the Super Fund as of September 30, 2009 and 2008 is
$62.63 million and $45.6 million, respectively. 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 2009 FY 2008
Unobligated Amounts in Fund Balances:
Available for Obligation $ 1,593,443 $ 1,512,670
Unavailable for Obligations 11,824 463
Net Receivables from Invested Balances (3,277,674) (2,749,821)
Balances in Treasury Trust Fund (7,975) 2,894
Obligated Balance not yet Disbursed 1,743,013 1,279,390
Totals $ 62,631 $ 45,596
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
Cashout Advances 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, 2009 and 2008, cashout
advances are $572 million and $489 million as restated, respectively.
117
-------
10-1-0029
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, 2009, the total remaining state
credits have been estimated at $21.9 million. The estimated ending credit balance on
September 30, 2008 was $15.3 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, 2009 and 2008, EPA had 9
outstanding preauthorized mixed funding agreements with obligations totaling $19.9 million
and $25.2 million respectively. 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 2009 and 2008, the EPM appropriation funded a variety of programmatic and
non-programmatic activities across the Agency, subject to statutory requirements. This
118
-------
10-1-0029
appropriation was created to fund personnel compensation and benefits, travel, procurement,
and contract activities. This distribution is calculated using a combination of specific
identification 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.
Superfund
All Others
Total
FY 2009
FY 2008
Income from
Other
Appropriations
130,931
(130,931)
Expenses from
Other
Appropriations
(130,931) $
130,931
Net
Effect
-
-
- $ - $ -
Income from
Other
Appropriations
69,769
(69,769)
Expenses from
Other
Appropriations
(69,769) $
69,769
Net
Effect
-
-
- $ - $
In addition, the related general support services costs allocated to the Superfund Trust Fund
from the S&T and EPM funds are $234 thousand for FY 2009 and $500 thousand for FY
2008.
Note S6. Reconciliation of the Statement of Budgetary Resources to the President's Budget
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 2009 has not yet been published. We expect
it will be published by March 2010, 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, 2008 are included in EPA's FY 2009 financial statement disclosures.
Budgetary Offsetting
Resources Obligations Receipts Outlays
$ 3,202,570 1,689,394 1,074,969 $ 1,025,146
FY 2008
Statement of Budgetary Resources
Rounding Differences*
(570)
(394)
31
1,854
Reported in Budget of the U. S. Government $ 3,202,000 S 1,689,000 S 1,075,000 S
* Balances are rounded to millions in the Budget Appendix.
1,027,000
119
-------
10-1-0029
Note S7. 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 2009 FY 2008
Advances $14,327 $9,716
Expenditure Transfers Payable $25,189 $26,794
Accrued Liabilities $2,991 $3,704
Expenses $29,100 $28,718
Transfers $54,392 $37,151
120
-------
10-1-0029
Appendix II
Agency's Response to Draft Report
11/12/2009
MEMORANDUM
SUBJECT: Audit of EPA's Fiscal 2009 and 2008 (Restated)
Consolidated Financial Statements
FROM: Barbara J. Bennett (2710A) /s/
Chief Financial Officer
TO: Bill A. Roderick (2410T)
Deputy Inspector General
Fiscal Year 2009 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 draft Inspector General's
Audit Report. The audit work performed will help shape future financial management
initiatives.
Our offices worked together to expand stakeholder involvement, thereby engaging all
parts of the Agency in fiscal stewardship yielding significant results. Attached are the Agency's
responses to this audit report. Detailed corrective action plans will be provided to you and your
staff within 90-days of the issuance of the final audit report. Please let me know if you have any
questions, or your staff can contact Stefan Silzer, Acting Director, Office of Financial
Management on 202-564-5389 regarding the audit.
Attachments
cc:
Craig E. Hooks, Assistant Administrator, Office of Administration and Resource Management
Gina McCarthy, Assistant Administrator, Office of Air and Radiation
Linda Travers, Acting Assistant Administrator, Office of Environmental Information
Steve Owens, Assistant Administrator, Office of Prevention, Pesticides and Toxic Substances
Lek Kadeli, Acting Assistant Administrator, Office of Research and Development
Susan B. Hazen, Principal Deputy Assistant Administrator, Office of Administration and
Resource Management
121
-------
10-1-0029
Mike Flynn, Acting Deputy Assistant Administrator, Office of Environmental Information
Maryann Froehlich, Deputy Chief Financial Officer
Melissa Heist, Assistant Inspector General
Margaret Schneider, Director, Office of Administration and Policy Office of Enforcement and
Compliance Assurance
Mark Badalamente, Deputy Director, Office of Administration and Policy Office of Enforcement
and Compliance Assurance
Jack Puzak, Director, Office of Science Information Management
Larry Reiter, Director, National Exposure Research Laboratory
Dan Heggem, Acting Director, Environmental Sciences Division
Jed Harrison, Director, Radiation & Indoor Environment
Johnny Davis, Acting Director, Enterprise Desktop Solutions Division
Paul Curtis, Director, Financial Statements Audits
Dany Lavergne, Director, Las Vegas Finance Center
Jim Wood, Director, Cincinnati Finance Office
Sheron Johnson, Director, Human Resources Staff: Team Vegas
Dennisses Valdes, Director, Environmental Response Team - West
Richard Bennett, Staff Director, Reporting and Analysis Staff
Jeanne Conklin, Staff Director, Financial Policy and Planning Staff
Eva Ripollone, Staff Director, Applications Management Staff
122
-------
10-1-0029
Attachment 1
Response to Draft Audit of EPA's Fiscal 2009 and 2008 (Restated)
Consolidated Financial Statements
1 - EPA Understated Accounts Receivable for Fiscal 2008
Recommendations
We recommend that the Office of the Chief Financial Officer:
1. Develop a process to communicate routinely with the regional offices on a monthly or
quarterly basis to identify any settlements not recorded on the Department of Justice
(DOJ) debt assessed report or recorded within the Integrated Compliance Information
System. Also, work with the offices to agree on a process that would include forwarding
of settlement documents within the required time period.
Response: (Concur)
The Cincinnati Finance Center (CFC) communicates with regional offices and DOJ on a
daily basis. As settlement documents are identified, the regions are contacted to request
that the documentation be sent to CFC. In addition to the DOJ debt assessed report, CFC
will utilize the DOJ 30-day tracking reports more extensively. As stated in the position
paper, there were additional complexities that prevented this particular bankruptcy
settlement from being forwarded to CFC or entered into the other Agency tracking
systems. CFC staff will reiterate to the Regional Bankruptcy Coordinators that any
bankruptcy settlement also needs to be sent to CFC so that an appropriate accounts
receivable is established.
2. Re-inform and train Legal Enforcement Offices (LEOs), Office of Regional Counsels
(ORCs), and Regional Program Offices (RPOs) on the requirement to timely send
settlements to the finance center so the receivables can be recorded. Also work to
establish and implement a process to ensure that the Servicing Finance Office (SFO) is
aware of settlements by the end of the fiscal year to ensure that current year financial
statements include accounts receivable for the current year.
Response: (Concur)
CFC provides training relating to accounts receivables whenever possible. For example,
CFC provided accounts receivable training at the Superfund conference. In light of this
particular bankruptcy issue, the topic was added to the National Bankruptcy Conference
where CFC staff presented the Agency's position on the proper recording of a
bankruptcy. Office of Site Remediation Enforcement (OSRE) is working on a
Bankruptcy Guidance document to be disseminated to the regional offices outlining roles
and responsibilities for each office within the process. CFC will continue to provide
training, not only on an individual basis, but during regional visits, conferences, etc. and
will continue to use any tools available to search for orders not readily sent to CFC.
123
-------
10-1-0029
2 - EPA Understated Unearned Revenue
Recommendations
We recommend that the Office of the Chief Financial Officer, in conjunction with the Regional
Financial Management Offices and the Office of Budget:
3. Prepare the accounting entry to account correctly for the special account expenditures at
the site level.
Response: (Concur)
A vast majority ($93.6 million) of these corrections relate to transactions between fiscal
years 2003 and 2007. Therefore, a separate accounting model will need to be developed
so that the proper general ledger accounts are impacted. The Office of Financial Services
(OFS) will work with the Office of Financial Management (OFM) to develop an
appropriate accounting model to record the transactions in IFMS. In addition, regional
budget and/or finance personnel will need to be part of the correction process since
reimbursable authority must be requested on a site by site basis for these transactions.
4. Work with Regional Comptrollers to correctly account for the improperly expended
funds at the site level.
Response: (Concur)
The response for this recommendation is addressed with the response to recommendation
3, above. Since the majority of these transactions ($93.6 million) occurred between fiscal
years 2003 and 2007 an accounting model will need to be created to properly record these
corrections.
5. Develop controls over Special Accounts so that, for each site, the fund codes collected
are the fund codes spent.
Response: (Concur)
OCFO will work with Regional Comptrollers to establish adequate controls over Special
Accounts even though the control resides with their offices. The Regional Comptroller
Offices work with the various regional program offices to provide funding for contracts,
lAs, grants, etc. The control over which fund code is available for a particular site
resides at the level where the request for reimbursable authority would occur.
OCFO's OFS will monitor special account fund code usage. The primary control for
ensuring the proper fund codes are requested and used resides with the region requesting
to use the funds.
3- Improvement Needed in Billing Costs and Reconciling Unearned Revenue for
124
-------
10-1-0029
Superfund State Contract Costs
Recommendations
We recommend that the Office of the Chief Financial Officer:
6. Direct the Superfund regional offices to verify that closed sites identified in the SSC
spreadsheet meet the closed site criteria and the SSC site billings and disbursements data
in the SSC spreadsheet are accurate.
Response: (Concur)
Based on existing guidance the applicable regions are responsible for identifying if a site
should be open or closed. The regions are directly involved with the SSC negotiations
and are in the best position to determine if a site should be closed. OFS relies on the
regional expertise in this area. OCFO will reiterate regional responsibilities regarding
site status.
7. Have its Office of Financial Policy and Planning Staff work with regional comptrollers
and Superfund program personnel to research transactions in older funds and eliminate
invalid transactions.
Response: (Concur)
The Financial Policy and Planning Staff (FPPS) in coordination with the Reporting and
Analysis Staff (RAS) and the Program Costing Staff (PCS) will work with Regional
Comptrollers and Superfund Program personnel to research transactions in older funds
and eliminate invalid transactions. We plan to have the corrective action completed by
September 30, 2010.
8. Establish a review process for reconciling Superfund site costs to ensure that data and
calculations used are consistent and properly supported.
Response: (Concur)
OFS took over responsibility for entering data onto the SSC spreadsheets in the fourth
quarter of fiscal 2008. OFS relied on the audited spreadsheets to that point and relied on
the data as presented at that time. OFS has a process for verifying the data it added
starting in the fourth quarter of fiscal 2008 forward. Based on vulnerabilities identified
during the audit, OFS will strengthen review/verification controls.
9. Direct the regional offices to bill the States for costs incurred where necessary, including
the $887,583 amount identified.
Response: (Concur)
OFS agrees with the intent of this recommendation for accurate billing.
125
-------
10-1-0029
4 - EPA Misstated Uncollectible Debt and Other Related Accounts
Recommendations
We recommend that the Office of the Chief Financial Officer:
10. Create a receivable billing document matrix to reflect a proper accounting model to
record standard voucher adjustments and the movement of accounts from expiring or
cancelled appropriations. Also, review the net impact of adjusting entries prior to issuing
an accounting model to ensure account balances are proper.
Response: (Concur)
OFM will review the current accounting model and revise it as appropriate to properly
record adjustments for the movement of accounts from expiring or cancelled
appropriations. OFM will review the net impact of entries prior to issuing the accounting
model by June 30, 2010.
11. Review its accounting model provided to SFOs for net impact to expenses and revenues
from prior periods to ensure that financial statements are not misstated.
Response: (Concur)
OFM will review its accounting model provided to SFOs for net impact to expenses and
revenues from prior periods to ensure that financial statements are not misstated.
5 - EPA Needs to Improve Billing and Accounting for Accounts Receivable
Recommendations
We recommend that the Office of the Chief Financial Officer:
12. Research and resolve the $1,237,468 of unbilled accounts receivable credit balances to
ensure the accuracy of future quarterly unbilled accounts receivable before they are
entered into IFMS.
Response: (Do not concur)
In calculating the reimbursable accrual, we consider all activity related to non-advance
federal reimbursable agreements to be part of the accrual. CFC did research the credits
which were part of the reimbursable accrual for the 4th quarter. Credits were excluded
from the accrual report if they were not valid or if the offset was in an expired year.
There are valid reasons why the credits left on the report ($1.2 million) should be
included in the overall accrual calculation. Major components include:
• $144K relates to the National Oil Agreement, which includes dozens of Org codes
126
-------
10-1-0029
related to that one agreement. Not including these credits would overstate the accrual
for this agreement. The majority of the oil credits are due to the indirect costs which
are billed and collected at the site level, but distributed at the non-site level.
• Over $682K related to two agreements in which there are multiple Org codes. The
credit lines offset the unbilled expenses against another Org code. By eliminating
these Org codes with credits, it would overstate the overall accrual for those
agreements.
• Over $129K relate to FEMA agreements in which the mission assignments have not
been closed. We are not refunding this until the mission assignments are closed,
which will confirm there are no trailing costs.
13. Work with other federal agencies to resolve each credit balance to ensure the exclusion of
credit amounts from future unbilled accounts receivable calculations.
Response: (Do not concur)
While we do agree that if a credit can be resolved/refunded, it should, and CFC will strive
to monitor and clear credits whenever possible, we disagree that they should be removed
from the accrual calculation. There was not a problem with the calculation itself, and
credits should be included in this calculation unless identified as invalid. While CFC
works closely with other Federal Agencies regarding reimbursable agreements, there is no
reason to seek assistance with the credits on the accrual report.
14. Work with RPOs, ORCs, and LEOs to obtain legal documentation sooner so receivables
are recorded timely. Institute a process to review DOJ tracking mechanisms for the status
of consent decrees and judgments.
Response: (Concur)
CFC works closely with the regions and DOJ, and has instituted the use of many tools to
assist with identifying and tracking finalized orders. CFC has a process that has been
identified and supported by Agency policy. This recommendation is similar to
recommendations in the Draft Fines & Penalties Report; hence, additional information
will be outlined in the response to the Fines & Penalties Report, which encompasses all
Offices involved in the Accounts Receivable process
15. Establish a supervisory review process to ensure procedures are being followed, and
interest and federal receivables are properly recorded.
Response: (Concur)
CFC has procedures in place for how to treat interest lines and federal receivables. These
procedures will be reviewed with staff during staff meetings and/or performance reviews
to ensure there is a clear understanding of the proper treatment of these types of
receivables.
127
-------
10-1-0029
16. Establish a process to review the allowance calculation for errors, including proper
application of calculation methods.
Response: (Concur)
CFC will add this review to the quarterly allowance calculation to ensure multiple lines
of a debt are recorded with the same allowance method.
17. Develop a process to review and update receivable status code updates in the financial
system quarterly.
Response: (Concur)
While CFC does review and follow up on delinquent debt, especially the large dollar
debt, they will also ensure that the smaller dollar delinquent debt is followed up on and
resolved as well.
The Office of Inspector General (OIG) report has some factual errors and does not
accurately characterize what happened
Page 1 - "in the letter to the Administrator, it references that eight settlement agreements
were not entered." It should state six settlement agreements were not entered.
Page 4 - "Program Offices did not inform the Servicing Finance Office of the multi-party
settlements in time to record the receivables in the financial system in fiscal 2009". It
should state fiscal year 2008.
Page 5 - "we identified errors in EPA's accounting and recording for 57 accounts
receivables in the financial system." It should reference that 37 of the 57 accounts
receivables were entered correctly though not within the timeframe listed in Agency
policy.
6 - Headquarters Property Items Not Inventoried
Recommendation
We recommend that the Assistant Administrator, Office of Administration and Resources
Management:
18. Require the Director, Facilities Management and Services Division, to promptly conduct
an inventory of the 1,804 Headquarters Accountable Property items not inventoried in
fiscal 2009.
Response: (Concur)
Deployment has been completed for the CIS computers; all Agency property replaced
during the life of the project will not be released for disposal until January 31, 2010.
128
-------
10-1-0029
The speed and volume of deployment has presented challenges from a property inventory
perspective. Despite best efforts of both offices, the property Team was not able to
maintain timely and accurate tracking of the replaced Agency property. There have been
instituted appropriate controls to resolve the identified property management concerns.
The Property Team has developed a plan to locate all of the missing equipment, in
particular the 23 missing capitalized pieces. There will be an inventory done where the
Property Team will perform a wall-to-wall inventory; during which every office, cubicle,
storage room, and conference room will be inventoried. The warehouses in Landover and
the V Street location will also be subject to the comprehensive inventory process.
The Property Team will prepare a message to be issued to all Property Management
Officers as well as the Headquarters Custodial Officers to request a complete inventory of
all equipment replaced at Headquarters as part of the CTS project. At the conclusion of
these activities, the Property Team will conduct a complete reconciliation process and any
outstanding items of personal property will be tracked and accounted for in IFMS and FAS.
7 - EPA Should Improve Its Financial Statement Preparation Process
We recommend that the Office of the Chief Financial Officer:
19. Implement an effective review process for all on-top adjustments to ensure that individual
entries within funds will balance (debits/credits) properly.
Response: (Do Not Concur)
OFM/RAS disagrees with the recommendation. In our response to Observation #1 below,
we described our handling of the on-top adjustments, and that the entries did not result in
an out of balance condition.
OIG Observation #1: "During our analysis of the fourth quarter on-top adjustments, we
identified four one sided on-top adjustments. The on-top adjustment should have equal
debits and credit balances. In the case of the four one sided on-tops adjustments, they
either have a debit or credit balance. The Agency reviewed and approved these entries."
RAS Response: RAS clearly labeled on the explanation line on the ontop adjustment
forms in question that the debit/credit differences are reconciled on the next pages, thus,
ensuring that there is no negative impact on the financial statements. The Bureau of
Public Debt consolidates the activities of the Superfund program and the Recovery Act
Superfund program in a single trial balance. This is also the case for the Leaking
Underground Storage Tank (LUST) program and the Recovery Act LUST program.
However, EPA separately records the activities of the Superfund and Recovery Act
Superfund programs as well as the LUST and Recovery Act LUST programs in four
separate trial balances for transparency. To reiterate, in handling this unique situation,
RAS processed four separate ontop adjustments; i.e., one adjustment for the Superfund
program and one adjustment for the Recovery Act Superfund program as well as one
129
-------
10-1-0029
adjustment for the LUST program and one adjustment for the Recovery Act LUST
program and cross referenced and reconciled the debit/credit differences. RAS prepared
similar entries in the FY 2009 2nd and 3rd quarters, and did not receive OIG feedback via
the Agreed Upon procedures that there were issues.
20. Update the Financial Statement Preparation Guide to contain guidance or instructions
for changing on-top adjustments to either journal vouchers and/or standard vouchers.
Response: (Concur)
OFM/RAS addressed this recommendation in an e-mail message on October 23, 2009,
and agreed with OIG's suggestion to attach its internal checklist as an appendix to the
Financial Statement Preparation Guide. RAS had not changed its routine for Ontop
Adjustments. RAS has been processing Journal Vouchers (TV's), Standard Voucher(s) or
Ontop Adjustments over the years as needed in accordance with an internal checklist,
"OFM Tasks Impacting FY 2009 Financial Statements Quarter."
21. Update the YACT and the general ledger matrix to identify current fiscal year general
ledger accounts and their related closing activity.
Response: (Concur)
OFM concurs with the intent of having up-to-date matrixes. The YACT table is currently
updated on an annual basis. OFM/RAS will continue this practice. OFM/RAS annually
downloads the General Ledger Account (GLAC) Table into an Excel file that contains
the latest general ledger account updates and crosswalks EPA accounts with the U.S.
Standard General Ledger accounts. This user-friendly tool allows the user to sort, filter
the data, or create Excel pivot tables for additional analysis. The example that the OIG
cited in their write-up was already addressed by RAS in the Agreed Upon Procedures
during the year.
Annually, OFM/RAS has provided OIG staff with a download of the GLAC Table which
contains the latest General Ledger account updates and crosswalks EPA accounts with
the U.S. Standard General Ledger accounts. On May 7, 2009, OFM provided OIG, with
the latest download of the GLAC table. Noteworthy, the download of the GLAC table
into an Excel file is a user-friendly tool which allows the user to sort, filter the data, or
create Excel pivot tables for additional analysis. Once again, annually this process is
evaluated by KPMG in their A-123 Review to ensure its timeliness and correctness.
OFM will post the updated matrix on the OCFO intranet.
130
-------
10-1-0029
8 - Unneeded Funds Not Deobligated Timely
Recommendations
We recommend that the Office of Chief Financial Officer:
22. Have the appropriate EPA Finance Center deobligate or confirm the deobligation of
unneeded funds identified during the fiscal 2009 ULO review.
Response: (Concur)
OFM/RAS will confirm with the appropriate Finance Center that it processed all
deobligation requests that it has received.
23. Have the Director, Reporting and Analysis Staff, follow-up with the appropriate EPA
Finance Center to confirm the amount of funds to be deobligated before yearend
Response: (Concur)
While OCFO agrees with the intent of the recommendation to deobligate unneeded funds,
it will continue to use its current year-end certification process to identify unneeded funds
that were not deobligated.
The Office of Inspector General (OIG) report has some factual errors and does not
accurately characterize what happened.
The OIG report indicates that the Stratospheric Protection Division identified in July
2009 $58,414 in miscellaneous unneeded funds for deobligation, but that the
Stratospheric Protection Division did not inform the Office of Administration and
Resources Management (OARM) to take the necessary action to deobligate the unneeded
funds. Actually, in an e-mail dated July 24, 2008, the Stratospheric Protection Division
asked its OAM contracting officers to deobligate a number of unliquidated obligations
that totaled approximately $130,000. The $58,414, in miscellaneous unneeded funds of
interest to the OIG, was a subset of the transactions that the Stratospheric Protection
Division requested to have deobligated on July 24, 2008.
As part of our annual review of unliquidated obligations in 2009, we found that our
original e-mail request of July 24, 2008 was not completed. In examining our original e-
mail request of July 24, 2008, we can see that the request could be misinterpreted — that
the e-mail request was not crystal clear. In the future, when we request that unliquidated
obligations be deobligated, we will make our communications crystal clear, and we will
follow-up with OARM to ensure that our requests are completed.
131
-------
10-1-0029
9 - Integrated Financial Management System User Account Management Needs
Improvement
Recommendations:
We recommend that the Office of the Chief Financial Officer:
24. Develop and implement an OCFO policy that formally defines the incompatible
functions associated with the financial management processes EPA performs related to
all of EPA's financial management systems.
Response (Concur) The Office of Technology Solutions concurs with all
recommendations. The Office of Technology Solutions in coordination with the FPPS
will develop and implement a policy regarding the segregation of duties. Based on this
policy the Applications Management Staff will develop and implement detective
controls to enforce the integrity of the internal control environment regarding user
account management in the IFMS. We plan to have the corrective action completed by
December 30, 2010.
25. Develop and implement a detective control that the IFMS Security Administrator can
use on at least a monthly basis to identify and remove a user's access rights that allow a
user to perform incompatible functions within IFMS. Response (Concur) - see 24
above
26. Update the Request Database to identify and alert the requestor of incompatible
functions. Response (Concur)-see 24 above
27. Ensure that all new financial management systems (including the IFMS replacement
system) and those undergoing upgrades include a system requirement that the fielded
system include an automated control to enforce separation of duties. Response
(Concur) - see 24 above
28. Update the formal standard operating procedures for the IFMS Security Administrator
requiring that the Security Administrator return all incomplete forms to the requestor
and that the Security Administrator assist the requestor in completing the form correctly
prior to granting access. Response (Concur) - see 24 above
29. Develop and implement a detective control to identify and correct instances where the
access rights within IFMS do not match the rights requested on at least a monthly basis.
Response (Concur) - see 24 above
30. Develop and implement a detective control by performing comparative analysis on at
least a monthly basis of the terminated personnel within the Human Resources system
to the active users within the IFMS application to identify and disable active users who
no longer work for the Agency. Response (Concur) - see 24 above
132
-------
10-1-0029
31. Develop and implement an OCFO policy for all financial management systems to link
the user administration process to Human Resources data as a fail safe to ensure that all
transferred/terminated personnel's financial management system user accounts are
disabled in a timely manner. Response (Concur) - see 24 above
32. Ensure that all new financial management systems (including the IFMS replacement
system) and those undergoing upgrades include a system requirement that the fielded
systems have an automated control in place to provide a fail safe that links to the
Human Resources data to identify and disable terminated/transferred personnel in the
system in a timely manner. Response (Concur) - see 24 above
10 - Las Vegas Finance Center Needs Improved Physical Access Controls
Recommendations
We recommend that the Assistant Administrator for Research and Development:
33. Develop and implement procedures to ensure that all organizations are provided with
the information necessary to monitor and review the access to their space both if and
when the transfer takes place as well as in the interim until the transfer takes place,
including:
a. Providing electronic copies of the following reports to the director of each
organization supported by the system on a monthly basis to enable them to
monitor and review the access to their space.
i. A Standard Report showing all of the access groups in Las Vegas that
lists for each group:
1. Each of the doors the group can access, and
2. The days of the week and times that the group can access each of
the doors.
ii. A Standard Report showing all of the access groups in Las Vegas that
lists all of the users, their associated Card ID, and the expiration date of
the access for each of the users for each group.
iii. For reviewing the logged history of users' access, a standard report that
shows the: (1) criteria used for the creation of the report, (2) date and
time of the access attempt, (3) action taken by the device, (4)
location/site, (5) door, (6) user name, and (7) card ID.
b. Providing, upon request, the reports as requested by the organizations in a timely
manner (within 2 working days) for special situations.
Response (Concur)
ORD will work collaboratively with other AA-ships to appropriately redistribute physical
security responsibilities. Given this information, we believe that the most prudent course
of action would be for the AA-ships occupying the La Plaza facilities to have their own
physical access system, Physical Security Program, and supporting policies and
133
-------
10-1-0029
procedures.
During the recent Las Vegas EPA Director's meeting held on October 22, 2009, the La
Plaza EPA offices agreed to implement a physical access system for La Plaza and are
working on the technical requirements with the vendor. Barring any unforeseen
complications, the non-ORD offices are expected to be off the ORD system no later than
March 31, 2010. To address Recommendation 33, in the interim, ORD/OSIM will update
the current standard operating procedures (SOP) to provide electronic reports allowing
each organization to monitor and review access to their space until an independent card
access system is implemented, and responsibility for this function transfers to the
responsible organization. Expected completion date is December 18, 2009.
34. Develop and implement a formal procedure that ensures each organization supported by
the system performs a review of the logs and access reports provided by ORD
associated with their space to look for anomalies on at least a monthly basis. Response
(Do Not Concur)
35. Develop and implement a formal procedure that ensures each organization supported by
the system verifies on at least an annual basis that all users associated with their space
still need their current access to perform their assigned responsibilities. Response (Do
Not Concur)
The appropriate course of action for Recommendations 34 and 35 will require more
discussions between the Agency leaders and the OIG staff. We do not believe it is
appropriate or prudent for ORD to have oversight responsibility for La Plaza AA-ships
given that ORD will not have the authority or the responsibility for the La Plaza Physical
Security Program.
11 - Customer Technology Solutions Equipment Needs Improved Security Planning
Given the widespread use of CTS equipment throughout the Agency, thousands of potentially
unmonitored computers reside on EPA's network. These unmonitored computers could serve as
gateways to providing unauthorized access to the Agency's network. As such, EPA lacked
processes to identify these threats or the capability to lessen their impact. We plan to
recommend in a separate report that EPA:
A. Develop and implement a vulnerability testing and remediation process for CTS
equipment consistent with existing EPA security policies and procedures.
Response: (Do Not Concur)
In accordance with the Agency Network Security Policy, CTS conducts regular vulnerability
testing and remediation on its assets at least once a quarter. Additional annual vulnerability
134
-------
10-1-0029
testing and remediation is completed via its annual assessment activity. CIS is however, in
the process of reviewing its vulnerability testing and remediation process to in an effort to
establish roles and responsibilities for local Information Security Officers (ISO) to ensure
their ability to management vulnerability testing and remediation independently as we have
identified this area as a potential area of interest.
B. Issue a memorandum to Agency Senior Information Officials requiring their program
office to conduct vulnerability testing of CIS equipment until a formal vulnerability testing
and management process with CIS has been established.
Response: (Do Not Concur)
The Senior Agency Information Security Officer (SAISO) has issued a memorandum to the
Agency Senior Information Officials (SIO) reminded them and the staffs of the NIST
requirements for vulnerability testing and remediation. We understand that this
memorandum did not address the recommendation to conduct vulnerability testing and
remediation on a monthly basis vs. quarterly as identified in NIST SP 800-123. This
recommendation is being considered by the Agency Information Security Program Work
Group.
C. Require CTS to remediate the issues identified in a timely manner and provide evidence to
the initiating Senior Information Officer of the completion of the corrective actions necessary
to remediate the issues identified until a formal vulnerability testing and management process
with CTS has been established.
Response: (Concur)
CTS Zone Representatives shall conduct a quarterly review with each Primary Information
Security Officer (ISO) demonstrating the evidence of the timely corrective actions taken to
remediate identified vulnerability from our testing and remediation activities.
D. Ensure that all CTS security documents have been developed and approved by the
appropriate EPA officials.
Response: (Do Not Concur)
All CTS security documents have been developed and approved by the appropriate EPA
officials. A copy of the entire Certification & Accreditation (C&A) package has been
provided to the OIG as requested. Additionally, copies of the security documentation
produced prior to deployment are being provided to demonstrate the level of risk assessed
prior to deployment.
12 - EPA Should Continue Efforts to Reconcile Intra-governmental Transactions
Recommendation
We recommend that the Office of the Chief Financial Officer:
135
-------
10-1-0029
36. Have its Office of Financial Services continue to reconcile EPA's intra-governmental
transactions and make appropriate adjustments to comply with federal financial reporting
requirements.
Response: (Concur)
The Cincinnati Finance Center will continue to work with trading partners to reconcile
balances and make appropriate adjustments to comply with Federal financial reporting
requirements.
Responsible Managers:
Signature/Date
Stefan Silzer , Acting Director, Office of Financial Management, OCFO
Signature/Date
Raffael Stein, Acting Director, Office of Financial Services, OCFO
Signature/Date
Kathy O'Brien, Acting Director, Office of Technology Solutions, OCFO
Signature/Date
David Bloom, Director, Office of Budget, OCFO
Signature/Date
Patrice Kortuem, Deputy Director, Office of Resources and Information Management, OCFO
Signature/Date
Lek Kadeli, Acting Assistant Administrator, Office of Research and Development
Vaughn Noga, Acting Director, Office of Technology Operations and Planning
Office of Environmental Information
Signature/Date
Signature/Date
Craig Hooks, Assistant Administrator, Office of Administration and Resource Management
136
-------
10-1-0029
Appendix
Distribution
Chief Financial Officer
Assistant Administrator for Administration and Resources Management
Acting Assistant Administrator for Environmental Information
Acting Assistant Administrator for Research and Development
Director, Office of Science Information Management, Office of Research and Development
Director, Office of Policy and Resources Management, Office of Administration and
Resources Management
Director, Office of Administration, Office of Administration and Resources Management
Acting Director, Office of Technology Operations and Planning, Office of Environmental
Information
Director, Office of Budget, Office of the Chief Financial Officer
Acting Director, Office of Financial Management, Office of the Chief Financial Officer
Acting Director, Office of Financial Services, Office of the Chief Financial Officer
Director, 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
Acting Director, Office of Planning, Analysis, and Accountability, Office of the Chief Financial
Officer
Director, Reporting and Analysis Staff, Office of the Chief Financial Officer
Acting Director, Office of Technology Solutions, Office of the Chief Financial Officer
Director, Financial Policy and Planning Staff, Office of the Chief Financial Officer
Acting Director, Payroll Management and Outreach Staff, Office of the Chief Financial Officer
Director, Accountability and Control Staff, Office of the Chief Financial Officer
Agency Audit Follow-up Coordinator
Agency Follow-up Official
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 Administration, Office of Administration and Resources
Management
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
Audit Follow-up Coordinator, Office of the Administrator
Audit Follow-up Coordinator, Offices of Financial Management and Financial Services
General Counsel
Acting Inspector General
137
------- |